PNC Bank 2011 Annual Report Download - page 184

A summary of all nonvested, cash-payable restricted share
unit activity follows:
Nonvested Cash-Payable Restricted Share Units –
Rollforward
In thousands
Nonvested
Cash-
Payable
Restricted
Share
Units
Aggregate
Intrinsic
Value
Outstanding at December 31, 2010 1,112
Granted 525
Vested (547)
Forfeited (38)
Outstanding at December 31, 2011 1,052 $60,688
The total of all share-based liability awards paid out during
2011, 2010 and 2009 was approximately $34 million, $9
million and $2 million, respectively.
E
MPLOYEE S TOCK P URCHASE P LAN
As of December 31, 2011, our ESPP had approximately
1.5 million shares available for issuance. Full-time employees
with six months and part-time employees with 12 months of
continuous employment with a participating PNC entity are
eligible to participate in the ESPP at the commencement of the
next six-month offering period. Eligible participants may
purchase our common stock at 95% of the fair market value
on the last day of each six-month offering period. No charge
to earnings is recorded with respect to the ESPP.
Employee Stock Purchase Plan – Summary
Year ended December 31 Shares Issued Purchase Price Per Share
2011 165,408 $56.63 and $54.79
2010 147,177 53.68 and 57.68
2009 158,536 36.87 and 50.15
B LACK R OCK LTIP AND E XCHANGE A GREEMENTS
BlackRock adopted the 2002 LTIP program to help attract and
retain qualified professionals. At that time, PNC agreed to
transfer up to 4 million shares of BlackRock common stock to
partially fund a portion of the 2002 LTIP program and future
LTIP programs approved by BlackRock’s board of directors,
subject to certain conditions and limitations. As of
December 31, 2010, approximately 1.1 million shares of
BlackRock common stock had been transferred by PNC and
distributed to LTIP participants in connection with the 2002
LTIP program.
In 2007, BlackRock also granted awards under an LTIP
program. BlackRock achieved the earnings performance goals
required by these awards and the awards vested on
September 29, 2011. On that date, PNC transferred
approximately 1.3 million shares of BlackRock Series C
Preferred Stock to BlackRock to satisfy a portion of our LTIP
obligation. Upon transfer, Other assets and Other liabilities on
our Consolidated Balance Sheet were reduced by $172
million, representing the fair value of the shares transferred.
At December 31, 2011, approximately 1.5 million shares of
BlackRock Series C Preferred Stock were available to fund a
portion of awards under future BlackRock LTIP programs.
As previously reported, PNC entered into an Exchange
Agreement with BlackRock on December 26, 2008. Also on
December 26, 2008, BlackRock entered into an Exchange
Agreement with Merrill Lynch in anticipation of the
consummation of the merger of Bank of America Corporation
and Merrill Lynch that occurred on January 1, 2009. The PNC
and Merrill Lynch Exchange Agreements restructured PNC’s
and Merrill Lynch’s respective ownership of BlackRock
common and preferred equity. The transactions that resulted
from our agreement restructured PNC’s ownership of
BlackRock equity without altering, to any meaningful extent,
PNC’s economic interest in BlackRock. PNC continues to be
subject to the limitations on its voting rights in its existing
agreements with BlackRock.
The exchange contemplated by these agreements was
completed on February 27, 2009. On that date, PNC’s
obligation to deliver its BlackRock common shares to
BlackRock under LTIP programs was also replaced with an
obligation to deliver shares of BlackRock’s Series C Preferred
Stock as part of the exchange agreement. PNC acquired
2.9 million shares of Series C Preferred Stock from
BlackRock in exchange for common shares.
PNC’s noninterest income in 2009 included a pretax gain of
$98 million related to our BlackRock LTIP shares obligation.
This gain represented the mark-to-market adjustment related
to our remaining BlackRock LTIP common shares obligation
and resulted from the decrease in the market value of
BlackRock common shares in 2009 prior to the February 27,
2009 exchange.
PNC accounts for its BlackRock Series C Preferred Stock at
fair value, which offsets the impact of marking-to-market the
obligation to deliver these shares to BlackRock. The fair value
of the BlackRock Series C Preferred Stock is included on our
Consolidated Balance Sheet in the caption Other assets.
Additional information regarding the valuation of the
BlackRock Series C Preferred Stock is included in Note 8 Fair
Value.
N OTE 16 F INANCIAL D ERIVATIVES
We use derivative financial instruments (derivatives)
primarily to help manage exposure to interest rate, market and
credit risk and reduce the effects that changes in interest rates
may have on net income, fair value of assets and liabilities,
and cash flows. We also enter into derivatives with customers
to facilitate their risk management activities.
The PNC Financial Services Group, Inc. – Form 10-K 175