PNC Bank 2009 Annual Report Download - page 109

• The remaining discounts on loans of $5.1 billion will
be accreted to net interest income using the constant
effective yield method over the weighted average life
of the loans, estimated to be between two and three
years. The weighted average lives could vary
depending on prepayments, revised estimated cash
flows and other related factors. Of the remaining $5.1
billion of discounts at December 31, 2009, $3.5
billion relates to loans accounted for under FASB
ASC 310-30, and $1.6 billion relates to other
acquired loans.
• The remaining premiums on interest-earning time
deposits of $1.0 billion at December 31, 2009, will be
amortized over the weighted average life of the
deposits of approximately one year using the constant
effective yield method.
• The remaining discounts on borrowed funds of $1.2
billion at December 31, 2009, will be accreted over
the weighted average life of the borrowings of
approximately 7 years using the constant effective
yield method.
S TERLING F INANCIAL C ORPORATION
On April 4, 2008, we acquired Lancaster, Pennsylvania-based
Sterling Financial Corporation (Sterling). Sterling shareholders
received an aggregate of approximately 4.6 million shares of
PNC common stock and $224 million of cash.
J.J.B. H
ILLIARD , W.L.L YONS , LLC
On March 31, 2008, we sold J.J.B. Hilliard, W.L. Lyons, LLC
(Hilliard Lyons), a Louisville, Kentucky-based wholly-owned
subsidiary of PNC and a full-service brokerage and financial
services provider, to Houchens Industries, Inc. We recognized
an after-tax gain of $23 million in 2008 in connection with
this divestiture.
Y ARDVILLE N ATIONAL B ANCORP
We acquired Hamilton, New Jersey-based Yardville National
Bancorp (Yardville) in October 2007. Yardville shareholders
received an aggregate of approximately 3.4 million shares of
PNC common stock and $156 million in cash. Total
consideration paid was approximately $399 million in stock
and cash.
M ERCANTILE B ANKSHARES C ORPORATION
We acquired Mercantile Bankshares Corporation (Mercantile)
in March 2007. Mercantile shareholders received an aggregate
of approximately 53 million shares of PNC common stock and
$2.1 billion in cash. Total consideration paid was
approximately $5.9 billion in stock and cash.
N OTE 3V ARIABLE I NTEREST E NTITIES
We are involved with various entities in the normal course of
business that were deemed to be VIEs. We consolidated
certain VIEs as of December 31, 2009 and 2008 for which we
were determined to be the primary beneficiary.
Consolidated VIEs – PNC Is Primary Beneficiary
In millions
Aggregate
Assets
Aggregate
Liabilities
Tax credit investments (a)
December 31, 2009 $1,933 $ 808
December 31, 2008 $1,690 $ 921
Credit Risk Transfer Transaction
December 31, 2009 $ 860 $ 860
December 31, 2008 $1,070 $1,070
(a) Amounts reported primarily represent investments in low income housing projects.
We hold significant variable interests in VIEs that have not
been consolidated because we are not considered the primary
beneficiary. Information on these VIEs follows:
Non-Consolidated VIEs – Significant Variable Interests
In millions
Aggregate
Assets
Aggregate
Liabilities
PNC Risk
of Loss
December 31, 2009
Market Street $3,698 $3,718 $6,155(a)
Tax credit investments (b) (c) 1,786 1,156 743
Collateralized debt obligations 23 2
Total $5,507 $4,874 $6,900
December 31, 2008
Market Street $4,916 $5,010 $6,965(a)
Tax credit investments (b) (c) 1,517 1,041 811
Collateralized debt obligations 20 2
Total $6,453 $6,051 $7,778
(a) PNC’s risk of loss consists of off-balance sheet liquidity commitments to Market
Street of $5.6 billion and other credit enhancements of $.6 billion at December 31,
2009. The comparable amounts were $6.4 billion and $.6 billion at December 31,
2008.
(b) Amounts reported primarily represent investments in low income housing projects.
(c) Aggregate assets and aggregate liabilities represent estimated balances due to
limited availability of financial information associated with certain acquired
National City partnerships.
M
ARKET S TREET
Market Street is a multi-seller asset-backed commercial paper
conduit that is owned by an independent third party. Market
Street’s activities primarily involve purchasing assets or
making loans secured by interests in pools of receivables from
US corporations that desire access to the commercial paper
market. Market Street funds the purchases of assets or loans
by issuing commercial paper which has been rated A1/P1/F1
by Standard & Poor’s, Moody’s, and Fitch, respectively, and
is supported by pool-specific credit enhancements, liquidity
facilities and program-level credit enhancement. Generally,
Market Street mitigates its potential interest rate risk by
entering into agreements with its borrowers that reflect
interest rates based upon its weighted average commercial
paper cost of funds. During 2008 and 2009, Market Street met
all of its funding needs through the issuance of commercial
paper.
PNC Bank, N.A. provides certain administrative services, the
program-level credit enhancement and all of the liquidity
105