PNC Bank 2015 Annual Report Download - page 142

Credit Card Securitization Trust
We were the sponsor of several credit card securitizations
facilitated through a trust. This bankruptcy-remote SPE was
established to purchase credit card receivables from the
sponsor and to issue and sell asset-backed securities created
by it to independent third-parties. The SPE was financed
primarily through the sale of these asset-backed securities.
These transactions were originally structured to provide
liquidity and to afford favorable capital treatment.
Our continuing involvement in these securitization
transactions consisted primarily of holding certain retained
interests and acting as the primary servicer. We consolidated
the SPE as we were deemed the primary beneficiary of the
entity based upon our level of continuing involvement. Our
role as primary servicer gave us the power to direct the
activities of the SPE that most significantly affect its
economic performance and our holding of retained interests
gave us the obligation to absorb expected losses, or the ability
to receive residual returns that could be potentially significant
to the SPE. The underlying assets of the consolidated SPE
were restricted only for payment of the beneficial interests
issued by the SPE. Additionally, creditors of the SPE have no
direct recourse to PNC.
During 2012, the last series issued by the SPE, Series 2007-1,
matured. At December 31, 2015, we continued to consolidate
this SPE as we were the primary beneficiary of the SPE
through our holding of seller’s interest and our role as the
primary servicer.
Tax Credit Investments
We make certain equity investments in various tax credit
limited partnerships or limited liability companies (LLCs).
The purpose of these investments is to achieve a satisfactory
return on capital and to assist us in achieving goals associated
with the Community Reinvestment Act.
Also, we are a national syndicator of affordable housing
equity. In these syndication transactions, we create funds in
which our subsidiaries are the general partner or managing
member and sell limited partnership or non-managing member
interests to third parties. In some cases PNC may also
purchase a limited partnership or non-managing member
interest in the fund. The purpose of this business is to generate
income from the syndication of these funds, generate servicing
fees by managing the funds, and earn tax credits to reduce our
tax liability. General partner or managing member activities
include identifying, evaluating, structuring, negotiating, and
closing the fund investments in operating limited partnerships
or LLCs, as well as oversight of the ongoing operations of the
fund portfolio.
Typically, the general partner or managing member will be the
party that has the right to make decisions that will most
significantly impact the economic performance of the entity.
However, certain partnership or LLC agreements provide the
limited partner or non-managing member the ability to remove
the general partner or managing member without cause. This
results in the limited partner or non-managing member being
the party that has the right to make decisions that will most
significantly impact the economic performance of the entity.
The primary sources of benefits for these investments are the
tax credits and passive losses which reduce our tax liability.
We have consolidated investments in which we have the
power to direct the activities that most significantly impact the
entity’s performance, and have an obligation to absorb
expected losses or receive benefits that could be potentially
significant. The assets are primarily included in Equity
investments and Other assets on our Consolidated Balance
Sheet with the liabilities classified in Other borrowed funds,
Accrued expenses, and Other liabilities and the third-party
investors’ interests included in the Equity section as
Noncontrolling interests. Neither creditors nor equity investors
in these investments have any recourse to our general credit.
The consolidated assets and liabilities of these investments are
provided in Table 52.
The following table provides a summary of non-consolidated
VIEs with which we have significant continuing involvement
but are not the primary beneficiary. We do not consider our
continuing involvement to be significant when it relates to a
VIE where we only invest in securities issued by the VIE and
were not involved in the design of the VIE or where no
transfers have occurred between PNC and the VIE. We have
excluded certain transactions with non-consolidated VIEs
from the balances presented in Table 53 where we have
determined that our continuing involvement is not significant.
124 The PNC Financial Services Group, Inc. – Form 10-K