PNC Bank 2011 Annual Report Download - page 39

C APITAL AND L IQUIDITY A CTIONS
Our ability to take certain capital actions, including plans to pay
or increase common stock dividends or to repurchase shares
under current or future programs, is subject to the results of the
supervisory assessment of capital adequacy undertaken by the
Board of Governors of the Federal Reserve System (Federal
Reserve) and our primary bank regulators as part of the
Comprehensive Capital Analysis and Review (CCAR) process.
This capital adequacy assessment is based on a review of a
comprehensive capital plan submitted to the Federal Reserve. In
connection with the annual review process for 2012 (2012
CCAR), PNC filed its capital plan with the Federal Reserve on
January 9, 2012. PNC expects to receive its results under the
2012 CCAR from the Federal Reserve by the end of the first
quarter 2012. For additional information concerning the CCAR
process and the factors the Federal Reserve takes into
consideration in evaluating capital plans, see Item 1 Business –
Supervision and Regulation of this Report.
A summary of 2011 capital and liquidity actions follows.
On April 7, 2011, consistent with our capital plan submitted to
the Federal Reserve earlier in 2011, our Board of Directors
approved an increase to PNC’s quarterly common stock
dividend from $.10 per common share to $.35 per common
share. That capital plan also included plans to repurchase,
during the remainder of 2011, up to $500 million of common
stock in open market or privately negotiated transactions
under our existing share repurchase program; however, we
placed those plans on hold pending regulatory approval for the
RBC Bank (USA) acquisition and did not repurchase any PNC
common shares under the program during 2011. As noted
above, 2012 capital actions, including dividends and
repurchase plans, are subject to the results of the 2012 CCAR
review process. The discussion of capital within the
Consolidated Balance Sheet Review section of this Item 7
includes additional information regarding our common stock
repurchase program.
After entering into the acquisition agreement for RBC Bank
(USA) in June 2011, we submitted an updated capital plan
reflecting the proposed acquisition of RBC Bank (USA) to the
Federal Reserve for review and approval. We announced on
November 29, 2011, that PNC had been notified that the
Federal Reserve had no objections to the proposed revisions to
the capital actions submitted by PNC as they pertain to the
acquisition of RBC Bank (USA). Accordingly, we do not plan
to issue any shares of PNC common stock as part of the
consideration payable to the seller at closing. On
December 27, 2011 we announced that the Federal Reserve
approved our acquisition of RBC Bank (USA) and that the
OCC approved the merger of RBC Bank (USA) with and into
PNC Bank, N.A., which is planned to occur immediately
following PNC’s acquisition of RBC Bank (USA). The
closing of these transactions is scheduled for March 2012,
subject to remaining customary closing conditions.
On July 27, 2011, we issued one million depositary shares,
each representing a 1/100th interest in a share of our
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred
Stock, Series O, in an underwritten public offering resulting in
gross proceeds of $1 billion to us before commissions and
expenses. We intend to use the net proceeds from this offering
for general corporate purposes, including funding for the
pending RBC Bank (USA) acquisition.
On September 19, 2011, PNC Funding Corp issued $1.25
billion of senior notes due September 2016. Interest is paid
semi-annually at a fixed rate of 2.70%. The offering resulted
in gross proceeds to us before offering related expenses of
$1.24 billion. We intend to use the net proceeds from this
offering for general corporate purposes, including funding for
the pending RBC Bank (USA) acquisition.
On November 15, 2011, we redeemed $750 million of trust
preferred securities issued by National City Capital Trust II
with a current distribution rate of 6.625% and an original
scheduled maturity date of November 15, 2036. The
redemption price was $25 per trust preferred security plus any
accrued and unpaid distributions to the redemption date of
November 15, 2011. The redemption resulted in a noncash
charge for the unamortized discount of $198 million in the
fourth quarter of 2011.
R ECENT M ARKET AND I NDUSTRY D EVELOPMENTS
There have been numerous legislative and regulatory
developments and dramatic changes in the competitive
landscape of our industry over the last several years.
The United States and other governments have undertaken
major reform of the regulation of the financial services
industry, including engaging in new efforts to impose
requirements designed to strengthen the stability of the
financial system and protect consumers and investors from
financial abuse. We expect to face further increased regulation
of our industry as a result of current and future initiatives
intended to provide economic stimulus, financial market
stability and enhanced regulation of financial services
companies and to enhance the liquidity and solvency of
financial institutions and markets. We also expect in many
cases more intense scrutiny from our bank supervisors in the
examination process and more aggressive enforcement of
regulations on both the federal and state levels. Compliance
with new regulations will increase our costs and reduce our
revenue. Some new regulations may limit our ability to pursue
certain desirable business opportunities.
The Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank), enacted in July 2010, mandates
the most wide-ranging overhaul of financial industry
regulation in decades. Many parts of the law are now in effect
and others are now in the implementation stage, which is
likely to continue for several years.
30 The PNC Financial Services Group, Inc. – Form 10-K