PNC Bank 2009 Annual Report Download - page 48

any other class or series of PNC’s capital stock, (v) the
purchase of fractional interests in shares of PNC capital stock
pursuant to the conversion or exchange provisions of such
stock or the security being converted or exchanged or (vi) any
stock dividends paid by PNC where the dividend stock is the
same stock as that on which the dividend is being paid.
PNC Bank, N.A. has contractually committed to Trust I that if
full dividends are not paid in a dividend period on the Trust I
Securities, LLC Preferred Securities or any other parity equity
securities issued by the LLC, neither PNC Bank, N.A. nor its
subsidiaries will declare or pay dividends or other
distributions with respect to, or redeem, purchase or acquire or
make a liquidation payment with respect to, any of its equity
capital securities during the next succeeding period (other than
to holders of the LLC Preferred Securities and any parity
equity securities issued by the LLC) except: (i) in the case of
dividends payable to subsidiaries of PNC Bank, N.A., to PNC
Bank, N.A. or another wholly-owned subsidiary of PNC Bank,
N.A. or (ii) in the case of dividends payable to persons that are
not subsidiaries of PNC Bank, N.A., to such persons only if,
(A) in the case of a cash dividend, PNC has first irrevocably
committed to contribute amounts at least equal to such cash
dividend or (B) in the case of in-kind dividends payable by
PNC REIT Corp., PNC has committed to purchase such
in-kind dividend from the applicable PNC REIT Corp. holders
in exchange for a cash payment representing the market value
of such in-kind dividend, and PNC has committed to
contribute such in-kind dividend to PNC Bank, N.A.
PNC Capital Trust E Trust Preferred Securities
In February 2008, PNC Capital Trust E issued $450 million of
7.75% Trust Preferred Securities due March 15, 2068 (the
Trust E Securities). PNC Capital Trust E’s only assets are
$450 million of 7.75% Junior Subordinated Notes due
March 15, 2068 and issued by PNC (the JSNs). The Trust E
Securities are fully and unconditionally guaranteed by PNC.
We may, at our option, redeem the JSNs at 100% of their
principal amount on or after March 15, 2013.
In connection with the closing of the Trust E Securities sale,
we agreed that, if we have given notice of our election to defer
interest payments on the JSNs or a related deferral period is
continuing, then PNC would be subject during such period to
restrictions on dividends and other provisions protecting the
status of the JSN debenture holder similar to or in some ways
more restrictive than those potentially imposed under the
Exchange Agreements with Trust II and Trust III, as described
above. PNC Capital Trusts C and D have similar protective
provisions with respect to $500 million in principal amount of
junior subordinated debentures. Also, in connection with the
closing of the Trust E Securities sale, we entered into a
replacement capital covenant, a copy of which was attached as
Exhibit 99.1 to PNC’s Form 8-K filed on February 13, 2008
and which is described in Note 14 Capital Securities of
Subsidiary Trusts in Item 8 of this Report.
Acquired Entity Trust Preferred Securities
As a result of the National City acquisition, we assumed
obligations with respect to $2.4 billion in principal amount of
junior subordinated debentures issued by the acquired entity.
As a result of the Mercantile, Yardville and Sterling
acquisitions, we assumed obligations with respect to $158
million in principal amount of junior subordinated debentures
issued by the acquired entities. Under the terms of these
debentures, if there is an event of default under the debentures
or PNC exercises its right to defer payments on the related
trust preferred securities issued by the statutory trusts or there
is a default under PNC’s guarantee of such payment
obligations, PNC would be subject during the period of such
default or deferral to restrictions on dividends and other
provisions protecting the status of the debenture holders
similar to or in some ways more restrictive than those
potentially imposed under the Exchange Agreements with
Trust II and Trust III, as described above.
We are subject to replacement capital covenants (RCCs) with
respect to four tranches of junior subordinated debentures
inherited from National City, copies of which RCCs were
attached, respectively, as Exhibit 99.2 to the National City
Form 8-K filed on February 4, 2008 and Exhibit 99.1 to the
National City Forms 8-K filed on November 9, 2006, May 25,
2007 and August 30, 2007. See Note 14 Capital Securities of
Subsidiary Trusts. Similarly, we are subject to a replacement
capital covenant with respect to our Series L Preferred Stock,
a copy of which was attached as Exhibit 99.1 to National
City’s Form 8-K filed on February 4, 2008. See Note 19
Equity in Item 8 of this Report.
F
AIR V ALUE M EASUREMENTS A ND F AIR
V ALUE O PTION
In addition to the following, see Note 8 Fair Value in the
Notes To Consolidated Financial Statements under Part II,
Item 8 of this Report for further information regarding fair
value. New GAAP was issued in 2009 for estimating fair
values when the volume and level of activity for the asset or
liability have significantly decreased. It also provides
guidance on identifying circumstances that indicate a
transaction is not orderly. As permitted, PNC adopted this
guidance effective January 1, 2009.
Assets and liabilities measured at fair value on a recurring
basis, including instruments for which PNC has elected the
fair value option, are summarized below. As prescribed by
GAAP, the assets and liabilities acquired from National City
on December 31, 2008 are excluded from the following
disclosures as of that date, but are included as of and for the
year ended December 31, 2009.
At December 31, 2009, assets recorded at fair value
represented 23% of total assets and fair value liabilities
represented 2% of total liabilities compared with 13% of total
assets and 2% of total liabilities as of December 31, 2008.
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