PNC Bank 2014 Annual Report Download - page 107

On April 3, 2014, consistent with our 2014 capital plan, our
Board of Directors approved an increase to PNC’s quarterly
common stock dividend from 44 cents per common share to
48 cents per common share beginning with the May 5, 2014
dividend payment.
In connection with the 2015 CCAR, PNC submitted its 2015
capital plan, as approved by its Board of Directors, to the
Federal Reserve in January 2015. PNC expects to receive the
Federal Reserve’s response (either a non-objection or
objection) to the capital plan submitted as part of the 2015
CCAR in March 2015.
See the Supervision and Regulation section in Item 1 of this
Report for additional information regarding the Federal
Reserve’s CCAR process and the factors the Federal Reserve
takes into consideration in evaluating capital plans, qualitative
and quantitative liquidity risk management standards proposed
by the U.S. banking agencies, and final rules issued by the
Federal Reserve that make certain modifications to the Federal
Reserve’s capital planning and stress testing rules.
See Table 42 for information on affiliate purchases of notes
issued by PNC Bank during 2014.
On February 6, 2015, PNC used $600 million of parent
company/non-bank subsidiary cash to purchase floating rate
senior notes that were issued by PNC Bank to an affiliate on
that same date.
Parent Company Liquidity – Sources
The principal source of parent company liquidity is the
dividends it receives from its subsidiary bank, which may be
impacted by the following:
• Bank-level capital needs,
• Laws and regulations,
• Corporate policies,
• Contractual restrictions, and
• Other factors.
There are statutory and regulatory limitations on the ability of
national banks to pay dividends or make other capital
distributions or to extend credit to the parent company or its
non-bank subsidiaries. The amount available for dividend
payments by PNC Bank to the parent company without prior
regulatory approval was approximately $1.5 billion at
December 31, 2014. See Note 20 Regulatory Matters in the
Notes To Consolidated Financial Statements in Item 8 of this
Report for a further discussion of these limitations. We
provide additional information on certain contractual
restrictions in Note 12 Capital Securities of a Subsidiary Trust
and Perpetual Trust Securities in the Notes To Consolidated
Financial Statements in Item 8 of this Report.
In addition to dividends from PNC Bank, other sources of
parent company liquidity include cash and investments, as
well as dividends and loan repayments from other subsidiaries
and dividends or distributions from equity investments.
We can also generate liquidity for the parent company and
PNC’s non-bank subsidiaries through the issuance of debt and
equity securities, including certain capital instruments, in
public or private markets and commercial paper. We have an
effective shelf registration statement pursuant to which we can
issue additional debt, equity and other capital instruments.
During 2014, we issued the following parent company debt
under our shelf registration statement:
• $750 million of subordinated notes with a maturity
date of April 29, 2024. Interest is payable semi-
annually, at a fixed rate of 3.90%, on April 29 and
October 29 of each year, beginning on October 29,
2014.
Total parent company senior and subordinated debt and hybrid
capital instruments decreased to $10.1 billion at December 31,
2014 from $10.7 billion at December 31, 2013 due to the
following activity in the period.
Table 45: Parent Company Senior and Subordinated Debt
and Hybrid Capital Instruments
In billions 2014
January 1 $10.7
Issuances .8
Maturities (1.4)
December 31 $10.1
On October 16, 2014, the parent company established a $5.0
billion commercial paper program to provide additional
liquidity. As of December 31, 2014, there were no issuances
outstanding under this program. Following the establishment
of this parent company program, PNC Funding Corp
terminated its $3.0 billion commercial paper program.
Note 17 Equity in the Notes To Consolidated Financial
Statements in Item 8 of this Report describes the 16,885,192
warrants outstanding, each to purchase one share of PNC
common stock at an exercise price of $67.33 per share. These
warrants were sold by the U.S. Treasury in a secondary public
offering in May 2010 after the U.S. Treasury exchanged its
TARP Warrant. These warrants will expire December 31,
2018, and are considered in the calculation of diluted earnings
per common share in Note 16 Earnings Per Share in the Notes
To Consolidated Financial Statements in Item 8 of this Report.
Status of Credit Ratings
The cost and availability of short-term and long-term funding,
as well as collateral requirements for certain derivative
instruments, is influenced by PNC’s debt ratings.
In general, rating agencies base their ratings on many
quantitative and qualitative factors, including capital
adequacy, liquidity, asset quality, business mix, level and
quality of earnings, and the current legislative and regulatory
environment, including implied government support. In
The PNC Financial Services Group, Inc. – Form 10-K 89