PNC Bank 2007 Annual Report Download - page 65

represented 23% of total assets as of both dates. The increase
in total securities compared with December 31, 2005 was
primarily due to higher balances of mortgage-backed and
commercial mortgage-backed securities, which more than
offset the decline in US Treasury and government agencies
securities.
At December 31, 2006, the securities available for sale
balance included a net unrealized loss of $142 million, which
represented the difference between fair value and amortized
cost. The comparable amount at December 31, 2005 was a net
unrealized loss of $370 million. The impact on bond prices of
increases in interest rates during 2005 was reflected in the net
unrealized loss position at December 31, 2005. The expected
weighted-average life of securities available for sale was 3
years and 8 months at December 31, 2006 compared with 4
years and 1 month at December 31, 2005.
Equity Investments
The increase in equity investments from $1.3 billion at
December 31, 2005 to $5.3 billion at December 31, 2006
reflected BlackRock reported as an equity investment at
December 31, 2006. BlackRock’s assets and liabilities were
consolidated on our Consolidated Balance Sheet at
December 31, 2005.
Loans Held For Sale
Education loans held for sale totaled $1.3 billion at
December 31, 2006, and $1.9 billion at December 31, 2005
and represented the majority of our loans held for sale at each
date. Gains on sales of education loans totaled $33 million for
2006 and $19 million for 2005. These gains are reflected in
the other noninterest income line item in our Consolidated
Income Statement.
Asset Quality
Nonperforming assets were $171 million at December 31,
2006, a decrease of $44 million from December 31, 2005.
Nonperforming loans declined $43 million in the comparison.
The ratio of nonperforming assets to total loans and foreclosed
assets was .34% at December 31, 2006 compared with .42% at
December 31, 2005. The allowance for loan and lease losses
was $560 million and represented 1.12% of total loans and
381% of nonperforming loans at December 31, 2006. The
comparable amounts were $596 million, 1.21% and 314%,
respectively, at December 31, 2005.
Funding Sources
Total funding sources were $81.3 billion at December 31,
2006 and $77.2 billion at December 31, 2005. The $4.1 billion
increase in total funding sources was comprised of a $6.0
billion increase in total deposits partially offset by a $1.9
billion decrease in total borrowed funds.
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 issuances of $1.5 billion of senior debt and
$500 million of bank notes in 2006.
Shareholders’ Equity
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. Regulatory capital ratios at
December 31, 2006 were 9.3% for leverage, 10.4% for tier 1
risk-based and 13.5% for total risk-based capital. At
December 31, 2005, the regulatory capital ratios were 7.2%
for leverage, 8.3% for tier 1 risk-based and 12.1% for total
risk-based capital.
Glossary of Terms
Accounting/administration net fund assets - Net domestic and
foreign fund investment assets for which we provide
accounting and administration services. We do not include
these assets on our Consolidated Balance Sheet.
Adjusted average total assets - Primarily comprised of total
average quarterly (or annual) assets plus (less) unrealized
losses (gains) on available-for-sale debt securities, less
goodwill and certain other intangible assets (net of eligible
deferred taxes).
Annualized - Adjusted to reflect a full year of activity.
Assets under management - Assets over which we have sole or
shared investment authority for our customers/clients. We do
not include these assets on our Consolidated Balance Sheet.
Basis point - One hundredth of a percentage point.
Charge-off - Process of removing a loan or portion of a loan
from our balance sheet because it is considered uncollectible.
We also record a charge-off when a loan is transferred to held
for sale by reducing the carrying amount by the allowance for
loan losses associated with such loan or if the market value is
less than its carrying amount.
Common shareholders’ equity to total assets - Common
shareholders' equity divided by total assets. Common
shareholders' equity equals total shareholders' equity less the
liquidation value of preferred stock.
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