PNC Bank 2007 Annual Report Download - page 57

Commitments
The following tables set forth contractual obligations and various other commitments representing required and potential cash
outflows as of December 31, 2007.
Contractual Obligations Payment Due By Period
December 31, 2007 - in millions Total
Less than
one year
One to three
years
Four to five
years
After five
years
Remaining contractual maturities of time deposits $26,402 $22,500 $2,443 $349 $1,110
Borrowed funds 30,931 18,309 6,967 1,282 4,373
Minimum annual rentals on noncancellable leases 1,239 172 296 233 538
Nonqualified pension and post-retirement benefits 314 32 67 66 149
Purchase obligations (a) 441 103 179 90 69
Total contractual cash obligations (b) $59,327 $41,116 $9,952 $2,020 $6,239
(a) Includes purchase obligations for goods and services covered by noncancellable contracts and contracts including cancellation fees.
(b) Excludes amounts related to our adoption of FIN 48 due to the uncertainty in terms of timing and amount of future cash outflows. Note 19 Income Taxes in our
Notes To Consolidated Financial Statements in Item 8 of this Report includes additional information regarding our adoption of FIN 48 in 2007.
Other Commitments (a) Total
Amounts
Committed
Amount Of Commitment Expiration By Period
December 31, 2007 - in millions
Less than
one year
One to three
years
Four to five
years
After five
years
Loan commitments $53,347 $20,401 $21,886 $10,128 $932
Standby letters of credit (b) 4,761 2,427 1,317 862 155
Other commitments (c) 473 108 64 259 42
Total commitments $58,581 $22,936 $23,267 $11,249 $1,129
(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 $1.8 billion of standby letters of credit that support remarketing programs for customers’ variable rate demand notes.
(c) Includes private equity funding commitments related to equity management, low income housing projects and other investments.
M
ARKET R ISK M ANAGEMENT O VERVIEW
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 Joint Risk Committee of the Board.
M ARKET R ISK M ANAGEMENT –I NTEREST R ATE R ISK
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 and the level of our
noninterest-bearing funding sources. Due to the 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 also the economic values of
these assets and liabilities.
Asset and Liability Management centrally manages interest
rate risk within limits and guidelines set forth in our risk
management policies approved by the Asset and Liability
Committee and the Risk Committee of the Board.
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