PNC Bank 2010 Annual Report Download - page 51
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Please find page 51 of the 2010 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Dodd-Frank requires the Federal Reserve Board to establish
capital requirements that would, among other things, eliminate
the Tier 1 treatment of trust preferred securities following a
phase-in period expected to begin in 2013. Accordingly, PNC
will evaluate its alternatives, including the potential for early
redemption of some or all of its trust preferred securities,
based on such considerations it may consider relevant,
including dividend rates, the specifics of the future capital
requirements, capital market conditions and other factors.
PNC is also subject to replacement capital covenants with
respect to certain of its trust preferred securities as discussed
in Note 13 Capital Securities of Subsidiary Trusts and
Perpetual Trust Securities in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
Our Tier 1 common capital ratio was 9.8% at December 31,
2010, an increase of 380 basis points compared with 6.0% at
December 31, 2009. Our Tier 1 risk-based capital ratio
increased 70 basis points to 12.1% at December 31, 2010 from
11.4% at December 31, 2009. Increases in both ratios were
attributable to retention of earnings in 2010, the first quarter
2010 equity offering, the third quarter 2010 sale of GIS, and
lower risk-weighted assets. The increases in the Tier 1 risk-
based capital ratio noted above were offset by the impact of
the $7.6 billion first quarter 2010 redemption of the Series N
(TARP) Preferred Stock. See Note 18 Equity in the Notes To
Consolidated Financial Statements in Item 8 of this Report for
additional information regarding the Series N Preferred Stock
redemption.
At December 31, 2010, PNC Bank, N.A., our domestic bank
subsidiary, was considered “well capitalized” based on US
regulatory capital ratio requirements. To qualify as “well-
capitalized”, regulators currently require banks to maintain
capital ratios of at least 6% for tier 1 risk-based, 10% for total
risk-based, and 5% for leverage. See the Supervision And
Regulation section of Item 1 of this Report and Note 21
Regulatory Matters in the Notes To Consolidated Financial
Statements in Item 8 of this Report for additional information.
We believe PNC Bank, N.A. will continue to meet these
requirements during 2011.
The access to, and cost of, funding for new business initiatives
including acquisitions, the ability to engage in expanded
business activities, the ability to pay dividends, the level of
deposit insurance costs, and the level and nature of regulatory
oversight depend, in part, on a financial institution’s capital
strength.
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ALANCE
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RRANGEMENTS
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We engage in a variety of activities that involve
unconsolidated entities or that are otherwise not reflected in
our Consolidated Balance Sheet that are generally referred to
as “off-balance sheet arrangements.” Additional information
on these types of activities is included in the following
sections of this Report:
• Commitments, including contractual obligations and
other commitments, included within the Risk
Management section of this Financial Review,
• Note 3 Loan Sale and Servicing Activities and
Variable Interest Entities in the Notes To
Consolidated Financial Statements included in Item 8
of this Report,
• Note 13 Capital Securities of Subsidiary Trusts and
Perpetual Trust Securities in the Notes To
Consolidated Financial Statements included in Item 8
of this Report, and
• Note 23 Commitments and Guarantees in the Notes
To Consolidated Financial Statements included in
Item 8 of this Report.
On January 1, 2010, we adopted ASU 2009-17 –
Consolidations (Topic 810) – Improvements to Financial
Reporting by Enterprises Involved with Variable Interest
Entities. This guidance removes the scope exception for
qualifying special-purpose entities, contains new criteria for
determining the primary beneficiary of a variable interest
entity (VIE) and increases the frequency of required
reassessments to determine whether an entity is the primary
beneficiary of a VIE. VIEs are assessed for consolidation
under Topic 810 when we hold variable interests in these
entities. PNC consolidates VIEs when we are deemed to be
the primary beneficiary. The primary beneficiary of a VIE is
determined to be the party that meets both of the following
criteria: (1) has the power to make decisions that most
significantly affect the economic performance of the VIE and
(2) has the obligation to absorb losses or the right to receive
benefits that in either case could potentially be significant to
the VIE. Effective January 1, 2010, we consolidated Market
Street, a credit card securitization trust, and certain Low
Income Housing Tax Credit (LIHTC) investments. We
recorded consolidated assets of $4.2 billion, consolidated
liabilities of $4.2 billion, and an after-tax cumulative effect
adjustment to retained earnings of $92 million upon adoption.
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