PNC Bank 2008 Annual Report Download - page 89

N OTES TO C ONSOLIDATED F INANCIAL S TATEMENTS
T HE PNC F INANCIAL S ERVICES G ROUP ,I NC .
B USINESS
PNC is one of the largest diversified financial services
companies in the United States and is headquartered in
Pittsburgh, Pennsylvania.
As described in Note 2 Acquisitions and Divestitures, on
December 31, 2008, PNC acquired National City Corporation
(“National City”), which increased our assets to a total of
$291 billion and expanded our total consolidated deposits to
$193 billion.
Prior to the acquisition, PNC had businesses engaged in retail
banking, corporate and institutional banking, asset
management, and global investment servicing, providing
many of its products and services nationally and others in
PNC’s primary geographic markets located in Pennsylvania,
New Jersey, Washington DC, Maryland, Virginia, Ohio,
Kentucky and Delaware. PNC also provided certain
investment servicing internationally.
National City’s primary businesses prior to its acquisition by
PNC included commercial and retail banking, mortgage
financing and servicing, consumer finance and asset
management, operating through an extensive network in Ohio,
Florida, Illinois, Indiana, Kentucky, Michigan, Missouri,
Pennsylvania and Wisconsin. National City also conducted
selected consumer lending businesses and other financial
services on a nationwide basis.
PNC is now in the process of integrating the business and
operations of National City with those of PNC.
N
OTE 1A CCOUNTING P OLICIES
B ASIS OF F INANCIAL S TATEMENT P RESENTATION
Our consolidated financial statements include the accounts of
the parent company and its subsidiaries, most of which are
wholly owned, and certain partnership interests and variable
interest entities.
On December 31, 2008, we acquired National City. Our
Consolidated Balance Sheet as of December 31, 2008 and
other consolidated information presented as of that date in the
Consolidated Financial Statements includes the impact of
National City. See Note 2 Acquisition and Divestitures for
additional information.
We prepared these consolidated financial statements in
accordance with accounting principles generally accepted in
the United States of America (“generally accepted accounting
principles” or “GAAP”). We have eliminated intercompany
accounts and transactions. We have also reclassified certain
prior year amounts to conform with the 2008 presentation.
These reclassifications did not have a material impact on our
consolidated financial condition or results of operations.
Subsequent to the issuance of our 2006 Annual Report on
Form 10-K, we determined that the Consolidated Statement of
Cash Flows for the year ended December 31, 2006 should be
restated. The cash flows related to the 2006 issuance of
perpetual trust securities totaling $489 million had previously
been classified within the “Operating Activities” section of the
Consolidated Statement of Cash Flows. We concluded that
such cash flows should have been classified within the
“Financing Activities” section of the Consolidated Statement
of Cash Flows and, accordingly, restated these amounts in
Amendment No. 1 thereto on Form 10-K/A dated February 4,
2008. The Consolidated Statement of Cash Flows included in
these Consolidated Financial Statements reflects this
restatement.
U SE OF E STIMATES
We prepare the consolidated financial statements using
financial information available at the time, which requires us
to make estimates and assumptions that affect the amounts
reported. Our most significant estimates pertain to our
allowance for loan and lease losses, impaired loans, fair value
measurements and revenue recognition. Actual results may
differ from the estimates and the differences may be material
to the consolidated financial statements.
B USINESS C OMBINATIONS
We record the net assets of companies that we acquire at their
estimated fair value at the date of acquisition and we include
the results of operations of the acquired companies in our
consolidated income statement from the date of acquisition.
We recognize as goodwill the excess of the acquisition price
over the estimated fair value of the net assets acquired. The
excess of the estimated fair value of net assets acquired over
the acquisition price is allocated on a pro rata basis to reduce
the fair value of intangibles and non-current assets acquired.
S UBSIDIARY S TOCK T RANSACTIONS
We recognize as income, when appropriate, any gain from the
sale or issuance by subsidiaries of their stock to third parties.
The gain is the difference between our basis in the stock and
the increase in the book value per share of the subsidiaries’
equity and is recorded in noninterest income in the
Consolidated Income Statement. We provide applicable taxes
on the gain.
S PECIAL P URPOSES E NTITIES
Special purpose entities (“SPEs”) are defined as legal entities
structured for a particular purpose. We use special purpose
entities in various legal forms to conduct normal business
activities. We review the structure and activities of special
purpose entities for possible consolidation under the guidance
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