PNC Bank 2012 Annual Report Download - page 120

In addition to the customer deposit base, which has
historically provided the single largest source of relatively
stable and low-cost funding, the bank also obtains liquidity
through the issuance of traditional forms of funding including
long-term debt (senior notes and subordinated debt and FHLB
advances) and short-term borrowings (Federal funds
purchased, securities sold under repurchase agreements,
commercial paper issuances, and other short-term
borrowings).
PNC Bank, N.A. is authorized by its board to offer up to $20
billion in senior and subordinated unsecured debt obligations with
maturities of more than nine months. Through December 31,
2012, PNC Bank, N.A. had issued $10.4 billion of debt under this
program, including the following during 2012:
• $100 million of senior bank notes issued March 8,
2012 and due April 8, 2015. Interest is paid semi-
annually at a fixed rate of 1.07%,
• $1.0 billion of senior extendible floating rate bank
notes issued June 20, 2012 with an initial maturity
date of July 20, 2013, subject to the holder’s monthly
option to extend, and a final maturity date of June 20,
2014. Interest is paid at the 3-month LIBOR rate,
reset quarterly, plus a spread of 22.5 basis points,
which spread is subject to four potential one basis
point increases in the event of certain extensions of
maturity by the holder,
• $900 million of senior extendible floating rate bank
notes issued to an affiliate on June 27, 2012 with an
initial maturity date of July 27, 2013, subject to the
holder’s monthly option to extend, and a final
maturity date of April 27, 2014. Interest is paid at the
3-month LIBOR rate, reset quarterly, plus a spread of
22.5 basis points,
• $500 million of senior extendible floating rate bank
notes issued to an affiliate on June 27, 2012 with an
initial maturity date of July 27, 2013, subject to the
holder’s monthly option to extend, and a final
maturity date of January 27, 2014. Interest is paid at
the 3-month LIBOR rate, reset quarterly, plus a
spread of 22.5 basis points, and
• $1.0 billion of subordinated notes issued October 22,
2012 and due November 1, 2022. Interest is paid
semi-annually at a fixed rate of 2.70%.
See Capital and Liquidity Actions in the Executive Summary
section of this Item 7 for additional information regarding our
2013 issuances under this program, which totaled $1.8 billion.
Total senior and subordinated debt increased to $7.6 billion at
December 31, 2012 from $4.1 billion at December 31, 2011
due to issuances.
PNC Bank, N.A. is a member of the FHLB-Pittsburgh and as
such has access to advances from FHLB-Pittsburgh secured
generally by residential mortgage and other mortgage-related
loans. At December 31, 2012, our unused secured borrowing
capacity was $10.5 billion with FHLB-Pittsburgh. Total
FHLB borrowings increased to $9.4 billion at December 31,
2012 from $7.0 billion at December 31, 2011 due to $13.5
billion in new borrowings partially offset by $11.0 billion in
maturities.
PNC Bank, N.A. has the ability to offer up to $10.0 billion of
its commercial paper to provide additional liquidity. As of
December 31, 2012, there was $2.4 billion outstanding under
this program. Commercial paper on our Consolidated Balance
Sheet also includes $6.1 billion of commercial paper issued by
Market Street Funding LLC, a consolidated VIE.
PNC Bank, N.A. can also borrow from the Federal Reserve
Bank of Cleveland’s (Federal Reserve Bank) discount window
to meet short-term liquidity requirements. The Federal
Reserve Bank, however, is not viewed as the primary means
of funding our routine business activities, but rather as a
potential source of liquidity in a stressed environment or
during a market disruption. These potential borrowings are
secured by securities and commercial loans. At December 31,
2012, our unused secured borrowing capacity was $28.6
billion with the Federal Reserve Bank.
Parent Company Liquidity – Uses
Obligations requiring the use of liquidity can generally be
characterized as either contractual or discretionary. The parent
company’s contractual obligations consist primarily of debt
service related to parent company borrowings and funding
non-bank affiliates. As of December 31, 2012, there were
approximately $300 million of parent company borrowings
with maturities of less than one year.
Additionally, the parent company maintains adequate liquidity
to fund discretionary activities such as paying dividends to
PNC shareholders, share repurchases, and acquisitions. See
the Parent Company Liquidity – Sources section below. In
March 2012, we used approximately $3.6 billion of parent
company cash to acquire both RBC Bank (USA) and a credit
card portfolio from RBC Bank (Georgia), National
Association. Additionally, in June 2012, we used $1.4 billion
of parent company cash to purchase senior extendible floating
rate bank notes issued by PNC Bank, N.A noted above.
See Supervision and Regulation in Item 1 of this Report for
information regarding the Federal Reserve’s CCAR process,
including its impact on our ability to take certain capital
actions, including plans to pay or increase common stock
dividends, reinstate or increase common stock repurchase
programs, or redeem preferred stock or other regulatory
capital instruments.
See Capital and Liquidity Actions in the Executive Summary
section of this Item 7 for additional information regarding our
2012 and 2013 capital activities.
The PNC Financial Services Group, Inc. – Form 10-K 101