PNC Bank 2009 Annual Report Download - page 127
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validated to external sources, including yield curves, implied
volatility or other market related data. Changes in fair value
due to instrument-specific credit risk for 2009 and 2008 were
not material.
At December 31, 2009, structured resale agreements with an
aggregate fair value of $1.0 billion were included in federal
funds sold and resale agreements on our Consolidated Balance
Sheet. The aggregate outstanding principal balance at
December 31, 2009 was $925 million. The comparable
amounts at December 31, 2008 were $1.1 billion and $980
million, respectively. Interest income on structured resale
agreements is reported on the Consolidated Income Statement
in other interest income.
BlackRock Series C Preferred Stock
Effective February 27, 2009, we elected to account for the
2.9 million shares of the BlackRock Series C Preferred Stock
received in a stock exchange with BlackRock at fair value.
The Series C Preferred Stock will serve as an economic hedge
of the BlackRock LTIP liability that is accounted for as a
derivative.
The fair value of the Series C Preferred Stock is determined
using a third-party modeling approach, which includes both
observable and unobservable inputs. This approach considers
expectations of a default/liquidation event and the use of
liquidity discounts based on our inability to sell the security at
a fair, open market price in a timely manner. Although
dividends are equal to those paid on BlackRock common
shares and other preferred series, significant transfer
restrictions exist on our Series C shares for any purpose other
than to satisfy the LTIP obligation. The BlackRock Series C
Preferred Stock is classified as Level 3. The aggregate fair
value at December 31, 2009 was $486 million.
The changes in fair value included in noninterest income for items for which we elected the fair value option follow.
Fair Value Option – Changes in Fair Value (a)
Gains (Losses)
Year Ended December 31 - in millions 2009 2008
Assets
Customer resale agreements $ (26) $69
Commercial mortgage loans held for sale (68) (251)
Residential mortgage loans held for sale 405
Residential mortgage loans—portfolio 1
BlackRock Series C Preferred Stock 275
(a) The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.
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