PNC Bank 2005 Annual Report Download - page 50

50
Commitments
The following tables set forth contractual obligations and various commitments representing required and potential cash outflows
as of December 31, 2005.
Contractual Obligations Payment Due By Period
December 31, 2005 - in millions Total
Less than
one year
One to three
years
Four to five
years After five years
Remaining contractual maturities of time deposits $16,361 $11,204 $3,153 $422 $1,582
Borrowed funds 16,897 10,132 1,629 1,624 3,512
Minimum annual rentals on noncancellable leases 998 152 255 197 394
Nonqualified pension and post retirement benefits 299 30 60 63 146
Purchase obligations (a) 374 143 130 50 51
Total contractual cash obligations $34,929 $21,661 $5,227 $2,356 $5,685
(a) Includes purchase obligations for goods and services covered by noncancellable contracts and contracts including cancellation fees.
Other Commitments (a) Total Amount Of Commitment Expiration By Period
December 31, 2005 - in millions
Amounts
Committed
Less than
one year
One to three
years
Four to five
years After five years
Loan commitments $40,178 $14,288 $16,649 $8,906 $335
Standby letters of credit 4,197 2,216 1,302 642 37
Other commitments (b) 5,262 4,009 1,080 169 4
Total commitments $49,637 $20,513 $19,031 $9,717 $376
(a) Other commitments are funding commitments that could potentially require performance in the event of demands by third parties or contingent events. Loan
commitments are reported net of participations, assignments and syndications.
(b) Includes standby bond repurchase agreements, liquidity facilities commitments and equity funding commitments related to equity management and
affordable housing as well as BlackRock’ s investment commitments, an obligation under an acquired management contract and purchase price contingencies
related to the SSRM acquisition.
MARKET RISK MANAGEMENT OVERVIEW
Market risk is the risk of a loss in earnings or economic value
due to adverse movements in market factors such as interest
rates, credit spreads, foreign exchange rates, and equity prices.
We are exposed to market risk primarily by our involvement
in the following activities, among others:
• Traditional banking activities of taking deposits and
extending loans,
• Private equity and other investments and activities
whose economic values are directly impacted by
market factors, and
• Trading in fixed income products, equities,
derivatives, and foreign exchange, as a result of
customer activities, underwriting, and proprietary
trading.
We have established enterprise-wide policies and
methodologies to identify, measure, monitor, and report
market risk. Market Risk Management provides independent
oversight by monitoring compliance with these limits and
guidelines, and reporting significant risks in the business to
the Risk Committee of the Board.
MARKET RISK MANAGEMENT – INTEREST RATE RISK
Interest rate risk results primarily from our traditional banking
activities of gathering deposits and extending loans. Many
factors, including economic and financial conditions, movements
in interest rates, and consumer preferences, affect the difference
between the interest that we earn on assets and the interest that
we pay on liabilities. Because of repricing term mismatches
and embedded options inherent in certain of these products,
changes in market interest rates not only affect expected near-
term earnings, but the economic values of these assets and
liabilities as well.
ALM centrally manages interest rate risk subject to interest
rate risk limits and certain policies approved by the Asset and
Liability Committee (“ALCO”) and the Risk Committee of the
Board.
Sensitivity results and market interest rate benchmarks for the
years ended December 31, 2005 and December 31, 2004
follow: