PNC Bank 2006 Annual Report Download - page 40

of a $1.4 billion increase in Federal funds sold and resale
agreements and a $.6 billion increase in other short-term
investments.
C APITAL A ND F UNDING S OURCES
Details Of Funding Sources
December 31 - in millions 2006 2005
Deposits
Money market $28,580 $24,462
Demand 16,833 17,157
Retail certificates of deposit 14,725 13,010
Savings 1,864 2,295
Other time 1,326 1,313
Time deposits in foreign offices 2,973 2,038
Total deposits 66,301 60,275
Borrowed funds
Federal funds purchased 2,711 4,128
Repurchase agreements 2,051 1,691
Bank notes and senior debt 3,633 3,875
Subordinated debt 3,962 4,469
Others 2,671 2,734
Total borrowed funds 15,028 16,897
Total $81,329 $77,172
Various seasonal and other factors impact our period-end
deposit balances whereas average balances (discussed under
the Balance Sheet Highlights section of this Item 7 above) are
normally more indicative of underlying business trends.
The increase in deposits as of December 31, 2006 was driven
primarily by the impact of higher money market and
certificates of deposit balances. In addition to growth in retail
deposit balances, growth in deposits from commercial
mortgage loan servicing activities also contributed to the
increase compared with the prior year-end.
The decline in borrowed funds compared with the balance at
December 31, 2005 reflected a decrease in federal funds
purchased, maturities of $2.0 billion of bank notes and senior
debt during 2006, a decline in subordinated debt in connection
with our December 2006 redemption of $453 million of
Capital Securities, and the deconsolidation of BlackRock’s
$250 million of convertible debentures. These factors were
partially offset by the issuance of $1.5 billion of senior debt
during the fourth quarter of 2006 and the issuance of $500
million of bank notes in June 2006.
Capital
We manage our capital position by making adjustments to our
balance sheet size and composition, issuing debt and equity
instruments, making treasury stock transactions, maintaining
dividend policies and retaining earnings.
The increase of $2.2 billion in total shareholders’ equity at
December 31, 2006 compared with December 31, 2005
reflected the impact of 2006 net income on retained earnings
and an increase in capital surplus in connection with the
BlackRock/MLIM transaction.
Common shares outstanding were 293 million at
December 31, 2006 and December 31, 2005.
During 2006, we purchased 5 million common shares at a total
cost of $354 million under our current common stock
repurchase program, which offset net share issuances related
to various employee stock-based compensation plans and the
exercise of employee stock options and other share issuances.
Our current program, which was authorized as of February 16,
2005, permits us to purchase up to 20 million shares on the
open market or in privately negotiated transactions and will
remain in effect until fully utilized or until modified,
superseded or terminated. As of December 31, 2006,
remaining availability for purchases under this program was
14.5 million shares. The extent and timing of additional share
repurchases under this program will depend on a number of
factors including, among others, market and general economic
conditions, economic and regulatory capital considerations,
alternative uses of capital, regulatory limitations resulting
from merger activity, and the potential impact on our credit
rating. We expect to continue to be active in share
repurchases.
See “Mercantile Bankshares Acquisition” in the Executive
Summary section of this Item 7 regarding our plans to issue
PNC common stock and cash in connection with this pending
acquisition. Also, our Liquidity Risk Management discussion
in this Item 7 has further details on first quarter 2007 debt
issuances related to funding the cash portion of this
transaction.
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