PNC Bank 2015 Annual Report Download - page 188

The following table presents the contractual rates and maturity
dates of our FHLB borrowings, bank notes, senior debt and
subordinated debt as of December 31, 2015.
Table 95: FHLB Borrowings, Bank Notes, Senior Debt and
Subordinated Debt
December 31, 2015 – Dollars
in millions Carrying Value Stated Rate Maturity
FHLB (a) $20,108 zero-6.50% 2016-2030
Bank notes and
senior debt
Bank notes $16,033 zero-3.30% 2016-2043
Senior debt 5,265 2.70%-6.70% 2016-2022
Total bank notes and
senior debt $21,298
Subordinated debt
Junior $ 205 .98% 2028
Other 8,351 .82%-6.88% 2016-2025
Total subordinated debt $ 8,556
(a) FHLB borrowings are generally collateralized by residential mortgage loans, other
mortgage-related loans and commercial mortgage-backed securities.
In the table above, the carrying values for bank notes, senior
debt and subordinated debt include basis adjustments of $36
million, $175 million and $246 million, respectively, related
to fair value accounting hedges as of December 31, 2015.
Also included in borrowed funds are repurchase agreements.
See Note 21 Commitments and Guarantees for additional
information on those agreements. Additionally, certain
borrowings are reported at fair value. Refer to Note 7 Fair
Value for more information on those borrowings.
Junior Subordinated Debentures
PNC Capital Trust C, a wholly-owned finance subsidiary of
PNC, owns junior subordinated debentures issued by PNC
with a carrying value of $205 million. In June 1998, PNC
Capital Trust C issued $200 million of trust preferred
securities which bear interest at an annual rate of 3 month
LIBOR plus 57 basis points. The trust preferred securities are
due June 1, 2028 and are currently redeemable by PNC
Capital Trust C at par. At December 31, 2015, the interest rate
in effect was .98%. This carrying value and related net
discounts of $1 million comprise the $206 million principal
amount of junior subordinated debentures associated with
$200 million of trust preferred securities that were issued by
the Trust. In accordance with GAAP, the financial statements
of the Trust are not included in PNC’s consolidated financial
statements.
The obligations of PNC, as the parent of the Trust, when taken
collectively, are the equivalent of a full and unconditional
guarantee of the obligations of the Trust under the terms of the
trust preferred securities. Such guarantee is subordinate in
right of payment in the same manner as other junior
subordinated debt. There are certain restrictions on PNC’s
overall ability to obtain funds from its subsidiaries. For
additional disclosure on these funding restrictions, see Note 19
Regulatory Matters. PNC and PNC Bank are also subject to
restrictions on dividends and other provisions potentially
imposed by the REIT preferred securities, including under the
Exchange Agreement with PNC Preferred Funding Trust II, as
described in Note 16 Equity.
PNC is subject to certain restrictions, including restrictions on
dividend payments, in connection with the outstanding junior
subordinated debentures. Generally, if there is (i) an event of
default under the debenture, (ii) PNC elects to defer interest
on the debenture, (iii) PNC exercises its right to defer
payments on the related trust preferred securities, or (iv) there
is a default under PNC’s guarantee of such payment
obligations, then PNC would be subject during the period of
such default or deferral to restrictions on dividends and other
provisions protecting the status of the debenture holders
similar to or in some ways more restrictive than those
potentially imposed under the Exchange Agreement with PNC
Preferred Funding Trust II, as described in Note 16 Equity.
N OTE 12 E MPLOYEE B ENEFIT P LANS
Pension and Postretirement Plans
We have a noncontributory, qualified defined benefit pension
plan covering eligible employees. Benefits are determined
using a cash balance formula where earnings credits are a
percentage of eligible compensation. Earnings credit
percentages for those employees who were plan participants
on December 31, 2009 are frozen at the level earned to that
point. Earnings credits for all employees who become
participants on or after January 1, 2010 are a flat 3% of
eligible compensation. All plan participants earn interest on
their cash balances based on 30-year Treasury securities rates
with those who were participants at December 31, 2009
earning a minimum rate. New participants on or after
January 1, 2010 are not subject to the minimum rate. Any
pension contributions to the plan are based on an actuarially
determined amount necessary to fund total benefits payable to
plan participants. In February 2015, PNC made a voluntary
contribution of $200 million to the qualified pension plan.
We also maintain nonqualified supplemental retirement plans
for certain employees and provide certain health care and life
insurance benefits for qualifying retired employees
(postretirement benefits) through various plans. PNC reserves
the right to terminate or make changes to these plans at any
time. The nonqualified pension plan is unfunded. In
November of 2015, PNC established a voluntary employee
beneficiary association (VEBA) to partially fund
postretirement medical and life insurance benefit obligations.
PNC made a contribution of $200 million to the VEBA in
December 2015.
170 The PNC Financial Services Group, Inc. – Form 10-K