PNC Bank 2008 Annual Report Download - page 74

Not all elements of interest rate, market and credit risk are addressed through the use of financial or other derivatives, and such
instruments may be ineffective for their intended purposes due to unanticipated market characteristics, among other reasons.
The following tables provide the notional or contractual amounts and estimated net fair value of financial derivatives used for risk
management and designated as accounting hedges as well as free-standing derivatives at December 31, 2008 and 2007. Weighted-
average interest rates presented are based on contractual terms, if fixed, or the implied forward yield curve at each respective date,
if floating.
Financial Derivatives – 2008
December 31, 2008 - dollars in millions
Notional/
Contractual
Amount
Estimated
Net
Fair Value
Weighted
Average
Maturity
Weighted-
Average Interest
Rates
Paid Received
Accounting Hedges
Interest rate risk management
Asset rate conversion
Interest rate swaps (a)
Receive fixed $ 5,618 $ 527 3 yrs. 2.18% 4.76%
Liability rate conversion
Interest rate swaps (a)
Receive fixed 9,888 888 3 yrs. 7 mos. 2.27% 4.73%
Total interest rate risk management 15,506 1,415
Total accounting hedges (b) $ 15,506 $1,415
Free-Standing Derivatives
Customer-related
Interest rate
Swaps (c) $ 97,337 $ (161) 4 yrs. 9 mos. 3.08% 3.07%
Caps/floors
Sold (c) 3,878 (12) 4 yrs. 4 mos. NM NM
Purchased 2,410 8 2 yrs. 10 mos. NM NM
Futures 8,878 1 yr. 1 mo. NM NM
Foreign exchange (c) 8,877 (3) 5 mos. NM NM
Equity 984 (4) 1 yr. NM NM
Swaptions 3,058 160 13 yrs. 2 mos. NM NM
Other 335 12 3 yrs. 3 mos. NM NM
Total customer-related 125,757 —
Residential mortgage servicing rights 52,980 109 5 yrs. 10 mos. NM NM
Other risk management and proprietary
Interest rate
Swaps (d) 24,481 667 3 yrs. 3.93% 2.70%
Caps/floors
Sold 514 1 yr. 4 mos. NM NM
Purchased 280 1 4 yrs. 7 mos. NM NM
Futures 8,359 8 mos. NM NM
Foreign exchange 95 4 mos. NM NM
Credit derivatives 2,937 205 13 yrs. 8 mos. NM NM
Risk participation agreements 3,290 3 yrs. 1 mo. NM NM
Commitments related to mortgage-related assets (c) 18,853 (12) 1 mo. NM NM
Options
Swaptions 276 17 10 yrs. 11 mos. NM NM
Other (e) 438 44 NM NM NM
Total other risk management and proprietary 59,523 922
Total free-standing derivatives $238,260 $1,031
(a) The floating rate portion of interest rate contracts is based on money-market indices. As a percent of notional amount, 55% were based on 1-month LIBOR and 45% on 3-month
LIBOR.
(b) Fair value amount includes net accrued interest receivable of $147 million.
(c) The increases in the negative fair values from December 31, 2007 to December 31, 2008 for interest rate contracts, foreign exchange and commitments related to mortgage-related
assets were due to the changes in fair values of the existing contracts along with new contracts entered into during 2008.
(d) Due to the adoption of SFAS 159 as of January 1, 2008, we discontinued hedge accounting for our commercial mortgage banking pay-fixed interest rate swaps; therefore, the fair
value of these are now reported in this category.
(e) Relates to PNC’s obligation to help fund certain BlackRock LTIP programs. Additional information regarding the BlackRock/MLIM transaction and our BlackRock LTIP shares
obligation is included in Note 2 Acquisitions and Divestitures included in the Notes to Consolidated Financial Statements in Item 8 of this Report.
NM Not meaningful
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