PNC Bank 2010 Annual Report Download - page 87
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Please find page 87 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.Parent Company Liquidity – Sources
The principal source of parent company liquidity is the
dividends it receives from its subsidiary bank, which may be
impacted by the following:
• Bank-level capital needs,
• Laws and regulations,
• Corporate policies,
• Contractual restrictions, and
• Other factors.
The amount available for dividend payments by PNC Bank,
N.A. to the parent company without prior regulatory approval
was approximately $1.1 billion at December 31, 2010. There
are statutory and regulatory limitations on the ability of
national banks to pay dividends or make other capital
distributions or to extend credit to the parent company or its
non-bank subsidiaries. See Note 21 Regulatory Matters in the
Notes To Consolidated Financial Statements in Item 8 of this
Report for a further discussion of these limitations. Dividends
may also be impacted by the bank’s capital needs and by
contractual restrictions. We provide additional information on
certain contractual restrictions under the “PNC Capital Trust E
Trust Preferred Securities” and “Acquired Entity Trust
Preferred Securities” sections of the Off-Balance Sheet
Arrangements And Variable Interest Entities section of this
Financial Review and 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.
In addition to dividends from PNC Bank, N.A., other sources
of parent company liquidity include cash and short-term
investments, as well as dividends and loan repayments from
other subsidiaries and dividends or distributions from equity
investments. As of December 31, 2010, the parent company
had approximately $7.2 billion in funds available from its cash
and short-term investments.
We can also generate liquidity for the parent company and
PNC’s non-bank subsidiaries through the issuance of debt
securities and equity securities, including certain capital
securities, in public or private markets and commercial paper.
We have effective shelf registration statements pursuant to
which we can issue additional debt and equity securities,
including certain hybrid capital instruments. Total senior and
subordinated debt and hybrid capital instruments increased to
$17.3 billion at December 31, 2010 from $14.9 billion at
December 31, 2009 due to net year-to-date issuances.
PNC Funding Corp issued the following securities in 2010:
• $1 billion of senior notes issued February 8, 2010 and
due February 2015. Interest is paid semiannually at a
fixed rate of 3.625%,
• $1 billion of senior notes issued February 8, 2010 and
due February 2020. Interest is paid semiannually at a
fixed rate of 5.125%,
• $500 million of senior notes issued May 19, 2010 and
due May 2014. Interest is paid semiannually at a
fixed rate of 3.00%, and
• $750 million of senior notes issued August 11, 2010
and due August 2020. Interest is paid semiannually at
a fixed rate of 4.375%.
The parent company, through its subsidiary PNC Funding
Corp, has the ability to offer up to $3.0 billion of commercial
paper to provide additional liquidity. As of December 31,
2010, there were no issuances outstanding under this program.
During the first quarter of 2010 we raised $3.4 billion in new
common equity through the issuance of 63.9 million shares of
common stock in an underwritten offering of $54 per share.
As further described in the Business Segments Review section
of this Item 7, BlackRock completed a secondary offering of
its common stock in November 2010, including 7.5 million
shares of its common stock offered by PNC at a per share
price of $163.00. This transaction resulted in net proceeds to
PNC of $1.2 billion and a pretax gain of $160 million during
the fourth quarter of 2010.
Note 18 Equity in the Notes To Consolidated Financial
Statements in Item 8 of this Report describes the
December 31, 2008 issuance of 75,792 shares of our Fixed
Rate Cumulative Perpetual Preferred Shares, Series N (Series
N Preferred Stock), related issuance discount and the issuance
of a related common stock warrant to the US Treasury under
the TARP Capital Purchase Program. In addition, Note 18
describes our February 2010 redemption of the Series N
Preferred Stock, the acceleration of the accretion of the
remaining issuance discount on the Series N Preferred Stock
in the first quarter of 2010, and the exchange by the US
Treasury of the TARP warrant into warrants sold by the US
Treasury in a secondary public offering. These common stock
warrants will expire December 31, 2018.
Status of Credit Ratings
The cost and availability of short- and long-term funding, as
well as collateral requirements for certain derivative
instruments, is influenced by debt ratings.
In general, rating agencies base their ratings on many
quantitative and qualitative factors, including capital
adequacy, liquidity, asset quality, business mix, level and
quality of earnings, and the current legislative and regulatory
environment, including implied government support. In
addition, rating agencies themselves have been subject to
scrutiny arising from the financial crisis and could make or be
required to make substantial changes to their ratings policies
and practices, particularly in response to legislative and
regulatory changes, including as a result of provisions in
Dodd-Frank. Potential changes in the legislative and
regulatory environment and the timing of those changes could
impact our ratings, which as noted above, could impact our
liquidity and financial condition. A decrease, or potential
decrease, in credit ratings could impact access to the capital
markets and/or increase the cost of debt, and thereby
adversely affect liquidity and financial condition.
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