PNC Bank 2001 Annual Report Download - page 34

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32
REGIONAL COMMUNITY BANKING
Year ended December 31
Taxable-equivalent basis
Dollars in millions 2001 2000
INCOME STATEMENT
Net interest income $1,466 $1,414
Other noninterest income 679 608
Net securities
g
ains 86 11
T
otal revenue 2,231 2,033
Provision for credit losses 50 45
Noninterest ex
p
ense 1,099 1,071
Vehicle leasin
g
135
Asset im
p
airment and severance costs 13
Pretax earnin
g
s934 917
Income taxes 338 327
Earnin
g
s$596 $590
AVERAGE BALANCE
S
HEET
Loans
Consumer
Home equity $6,293 $5,419
Indirect automobile 814 1,215
Other consumer 835 897
Total consumer 7,942 7,531
Residential mortgage 7,912 11,619
Commercial 3,557 3,649
Vehicle leasing 1,901 1,322
Other 133 144
Total loans 21,445 24,265
Securities available for sale 10,241 5,539
Loans held for sale 1,293 1,297
Assigned assets and other assets 7,306 7,857
Total assets $40,285 $38,958
Deposits
Noninterest-bearing demand $4,571 $4,548
Interest-bearing demand 5,713 5,428
Money market 12,162 10,253
Total transaction deposits 22,446 20,229
Savings 1,870 1,992
Certificates 11,906 13,745
Total deposits 36,222 35,966
Other liabilities 1,345 363
Assigned capital 2,718 2,629
Total funds $40,285 $38,958
P
ERFORMANCE
R
ATIO
S
Return on assigned capital 22% 22%
Noninterest income to total revenue 34 30
Efficiency 54 51
Regional Community Banking provides deposit, branch-based
brokerage, electronic banking and credit products and services
to retail customers as well as deposit, credit, treasury
management and capital markets products and services to
small businesses primarily within PNC’s geographic region.
Regional Community Banking’s strategic focus is on
driving sustainable revenue growth, aggressively managing
the revenue/expense relationship and improving the
risk/return dynamic of this business. Regional Community
Banking utilizes knowledge-based marketing capabilities to
analyze customer demographic information, transaction
patterns and delivery preferences to develop customized
banking packages focused on improving customer
satisfaction and profitability.
Regional Community Banking has also invested heavily
in building a sales culture and infrastructure while improving
efficiency. Capital investments have been strategically
directed towards the expansion of multi-channel distribution,
consistent with customer preferences, as well as the delivery
of relevant customer information to all distribution channels.
In the fourth quarter of 2001, the Corporation made the
decision to discontinue its vehicle leasing business. This
portfolio is expected to mature over a period of
approximately five years. Costs incurred in 2001 to exit this
business and additions to reserves related to insured residual
value exposures totaled $135 million. See Strategic
Repositioning and Critical Accounting Policies and
Judgments in the Risk Factors section of this Financial
Review for additional information. Also, pretax charges of
$13 million were incurred for asset impairment and
severance costs related to other strategic initiatives.
Regional Community Banking earnings were $596 million
in 2001 compared with $590 million in 2000.
Total revenue increased 10% to $2.231 billion for 2001.
Excluding net securities gains from both periods, revenue
increased 6% in the period-to-period comparison primarily
due to higher consumer transaction deposit activity in 2001,
gains on sales of residential mortgage loans and sales of
student loans in repayment.
The provision for credit losses for 2001 was $50 million
compared with $45 million for 2000. See Critical Accounting
Policies and Judgments in the Risk Factors section and
Credit Risk in the Risk Management section of this Financial
Review for additional information.
Total loans decreased in the comparison primarily due to
the reduction of residential mortgage loans resulting from
sales and securitizations and the continued downsizing of the
indirect automobile lending portfolio. Securities available for
sale increased in the year-to-year comparison due to the
retention of interests from the securitization of residential
mortgage loans combined with net securities purchases for
balance sheet and interest rate risk management activities.
Transaction deposits grew 11% on average in the
comparison primarily driven by an increase in money market
deposits that resulted from targeted consumer marketing
initiatives to add new accounts and retain existing customers
as higher cost certificates of deposit were de-emphasized.