PNC Bank 2013 Annual Report Download - page 107

senior notes) and due five years or more from their date of
issue (in the case of subordinated notes). The $25 billion of
notes authorized to be issued and outstanding at any one time
includes notes issued by PNC Bank, N.A. prior to January 16,
2014 and those notes PNC Bank, N.A. has acquired through
the acquisition of other banks, in each case for so long as such
notes remain outstanding. The terms of the new program do
not affect any of the bank notes issued prior to January 16,
2014.
See Note 27 Subsequent Events in the Notes To Consolidated
Financial Statements in Item 8 of this Report for information
on the issuance of senior notes of $750 million and $1.0
billion on January 28, 2014.
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 loans, other mortgage-
related loans and commercial mortgage-backed securities. At
December 31, 2013, our unused secured borrowing capacity
was $9.2 billion with FHLB-Pittsburgh. Total FHLB
borrowings increased to $12.9 billion at December 31, 2013
from $9.4 billion at December 31, 2012 due to $16.4 billion of
new issuances offset by $12.9 billion in calls and maturities.
The FHLB-Pittsburgh also periodically provides standby
letters of credit on behalf of PNC Bank, N.A. to secure certain
public deposits. PNC Bank, N.A. began using standby letters
of credit issued by the FHLB-Pittsburgh in response to
anticipated regulatory changes to strengthen the liquidity
requirements for large banks. If the FHLB-Pittsburgh is
required to make payment for a beneficiary’s draw, the
payment amount is converted into a collateralized advance to
PNC Bank, N.A. At December 31, 2013, standby letters of
credit issued on our behalf by the FHLB-Pittsburgh totaled
$6.2 billion. There were no standby letters of credit issued on
our behalf by the FHLB-Pittsburgh at December 31, 2012.
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, 2013, there was $5.0 billion outstanding under
this program. During the fourth quarter of 2013, PNC
finalized the wind down of Market Street Funding LLC
(“Market Street”), a multi-seller asset-backed commercial
paper conduit administered by PNC Bank, N.A. As part of the
wind down process, the commitments and outstanding loans
of Market Street were assigned to PNC Bank, N.A., which
will fund these commitments and loans by utilizing its
diversified funding sources. In conjunction with the
assignment of commitments and loans the associated liquidity
facilities were terminated along with the program-level credit
enhancement provided to Market Street. At December 31,
2013, Market Street’s commercial paper was repaid in full.
The wind down did not have a material impact to PNC’s
financial condition or results of operation.
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 commercial loans. At December 31, 2013, our
unused secured borrowing capacity was $19.5 billion with the
Federal Reserve Bank.
P ARENT C OMPANY L IQUIDITY –U SES
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, 2013, there were
approximately $1.4 billion 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.
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, as well as for information on new
qualitative and quantitative liquidity risk management
standards proposed by the U.S. banking agencies.
During 2013, the parent company used cash for the following:
• On March 14, 2013, we used $1.4 billion of parent
company cash to purchase senior extendible floating
rate bank notes issued by PNC Bank, N.A,
• On March 19, 2013, PNC announced the redemption
completed on April 19, 2013 of depositary shares
representing interests in PNC’s 9.875% Fixed-To-
Floating Rate Non-Cumulative Preferred Stock,
Series L. Each depositary share represents a 1/4,000th
interest in a share of the Series L Preferred Stock. All
6,000,000 depositary shares outstanding were
redeemed, as well as all 1,500 shares of Series L
Preferred Stock underlying such depositary shares,
resulting in a net outflow of $150 million,
• On April 23, 2013, we completed the redemption of
the $15 million of trust preferred securities issued by
Yardville Capital Trust VI, originally called on
March 22, 2013,
• On May 23, 2013, we completed the redemption of
the $30 million of trust preferred securities issued by
Fidelity Capital Trust III, originally called on April 8,
2013,
The PNC Financial Services Group, Inc. – Form 10-K 89