PNC Bank 2005 Annual Report Download - page 61

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Futures and forward contracts - Contracts in which the buyer
agrees to purchase and the seller agrees to deliver a specific
financial instrument at a predetermined price or yield. May be
settled either in cash or by delivery of the underlying financial
instrument.
GAAP - Accounting principles generally accepted in the
United States of America.
Interest rate floors and caps - Interest rate protection
instruments that involve payment from the seller to the buyer of
an interest differential, which represents the difference between
a short-term rate (e.g., three-month LIBOR) and an agreed-
upon rate (the strike rate) applied to a notional principal
amount.
Interest rate swap contracts - Contracts that are entered into
primarily as an asset/liability management strategy to reduce
interest rate risk. Interest rate swap contracts are exchanges of
interest rate payments, such as fixed-rate payments for floating-
rate payments, based on notional principal amounts.
Leverage ratio - Tier 1 risk-based capital divided by adjusted
average total assets.
Net interest margin - Annualized taxable-equivalent net interest
income divided by average earning assets.
Nondiscretionary assets under adminis tration - Assets we hold
for our customers/clients in a non-discretionary, custodial
capacity. We do not include these assets on our Consolidated
Balance Sheet.
Noninterest income to total revenue - Noninterest income
divided by the sum of net interest income and noninterest
income.
Nonperforming assets - Nonperforming assets include
nonaccrual loans, troubled debt restructured loans, nonaccrual
loans held for sale, and foreclosed assets and other assets.
Interest income does not accrue on assets classified as
nonperforming.
Nonperforming loans - Nonperforming loans include loans to
commercial, lease financing, consumer, commercial real estate
and residential mortgage customers as well as troubled debt
restructured loans. Nonperforming loans do not include
nonaccrual loans held for sale or foreclosed and other assets.
Interest income does not accrue on loans classified as
nonperforming.
Notional amount - A number of currency units, shares, or other
units specified in a derivatives contract.
Operating leverage - The period to period percentage change in
total revenue less the percentage change in noninterest expense.
A positive percentage indicates that revenue growth exceeded
expense growth (i.e., positive operating leverage) while a
negative percentage implies expense growth exceeded revenue
growth (i.e., negative operating leverage).
Options - Contracts that grant the purchaser, for a premium
payment, the right, but not the obligation, to either purchase or
sell the associated financial instrument at a set price during a
period or at a specified date in the future.
Recovery - Cash proceeds received on a loan that had
previously been charged off. The amount received is credited to
the allowance for loan and lease losses.
Return on average capital - Annualized net income divided by
average capital.
Return on average assets - Annualized net income divided by
average assets.
Return on average common equity - Annualized net income
divided by average common shareholders’ equity.
Risk-weighted assets - Primarily computed by the assignment
of specific risk-weights (as defined by The Board of Governors
of the Federal Reserve System) to assets and off-balance sheet
instruments.
Securitization - The process of legally transforming financial
assets into securities.
Swaptions - Contracts that grant the purchaser, for a premium
payment, the right, but not the obligation, to enter into an
interest rate swap agreement during a period or at a specified
date in the future.
Tangible common capital ratio - Common shareholders’ equity
less goodwill and other intangible assets (excluding mortgage
servicing rights) divided by assets less goodwill and other
intangible assets (excluding mortgage servicing rights).
Taxable-equivalent interest - The interest income earned on
certain assets is completely or partially exempt from federal
income tax. As such, these tax-exempt instruments typically
yield lower returns than a taxable investment. To provide more
meaningful comparisons of yields and margins for all interest-
earning assets, the interest income earned on tax-exempt assets
is increased to make it fully equivalent to interest income on
other taxable investments. This adjustment is not permitted
under GAAP on the Consolidated Income Statement.