PNC Bank 2014 Annual Report Download - page 106

Total senior and subordinated debt of PNC Bank increased to
$17.5 billion at December 31, 2014 from $14.6 billion at
December 31, 2013 due to the following activity in the period.
Table 43: PNC Bank Senior and Subordinated Debt
In billions 2014
January 1 $14.6
Issuances 10.7
Calls and maturities (8.0)
Other .2
December 31 $17.5
On February 6, 2015, PNC Bank issued $600 million of
floating rate senior notes with a maturity date of January 26,
2017 to an affiliate. Interest is payable at the 3-month LIBOR
rate, reset quarterly, plus a spread of .30%, on
January 26, April 26, July 26 and October 26 of each year,
beginning on April 26, 2015. These floating rate notes were
subsequently purchased by PNC. See the Parent Company
Liquidity – Uses portion of this Liquidity Risk Management
section for further detail.
See Note 25 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 February 23, 2015.
PNC Bank 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, 2014, our unused secured borrowing capacity
was $13.9 billion with FHLB-Pittsburgh. Total FHLB
borrowings increased to $20.0 billion at December 31, 2014
from $12.9 billion at December 31, 2013 due to the following
activity in the period.
Table 44: FHLB Borrowings
In billions 2014
January 1 $12.9
Issuances 15.7
Calls and maturities (8.6)
December 31 $20.0
The FHLB-Pittsburgh also periodically provides standby
letters of credit on behalf of PNC Bank to secure certain
public deposits. PNC Bank began using standby letters of
credit issued by the FHLB-Pittsburgh in response to the
regulatory liquidity standards finalized during 2014. 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. At both December 31,
2014 and December 31, 2013, standby letters of credit issued
on our behalf by the FHLB-Pittsburgh totaled $6.2 billion.
PNC Bank has the ability to offer up to $10.0 billion of its
commercial paper to provide additional liquidity. As of
December 31, 2014, 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. As part of the wind
down process, the commitments and outstanding loans of
Market Street were assigned to PNC Bank, 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. The wind down did not have a
material impact to PNC’s financial condition or results of
operations.
PNC Bank 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, 2014, our unused secured
borrowing capacity was $15.6 billion with the Federal Reserve
Bank.
Parent Company Liquidity
As of December 31, 2014, available parent company liquidity
totaled $7.1 billion. Parent company liquidity is primarily held
in short-term investments, the terms of which provide for the
availability of cash in 31 days or less. Investments with longer
durations may also be acquired, but if so, the related
maturities are aligned with scheduled cash needs, such as the
maturity of parent company debt obligations.
Parent Company Liquidity – Uses
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, 2014, there were approximately $2.5 billion of
parent company borrowings with contractual 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 Capital and Liquidity Actions in the Executive Summary
section of this Item 7 for information on our 2014 capital plan
that was accepted by the Federal Reserve, which included
certain share repurchases that are described in more detail in
the Capital portion of the Consolidated Balance Sheet Review
section in this Item 7 and the dividend increase described
below.
88 The PNC Financial Services Group, Inc. – Form 10-K