PNC Bank 2014 Annual Report Download - page 64

See the Liquidity Risk Management portion of the Risk Management section of this Item 7 for additional information regarding our
2014 capital and liquidity activities.
Total deposits increased $11.3 billion at December 31, 2014 compared with December 31, 2013 due to strong growth in demand
and money market, partially offset by lower retail certificates of deposit. Interest-bearing deposits represented 68% of total
deposits at both December 31, 2014 and December 31, 2013. Total borrowed funds increased $10.7 billion since December 31,
2013 as higher Federal Home Loan Bank borrowings and issuances of bank notes and senior debt and subordinated debt were
partially offset by a decline in federal funds purchased and repurchase agreements.
Capital
Table 17: Shareholders’ Equity
Dollars in millions
December 31
2014
December 31
2013
Change
$%
Shareholders’ equity
Preferred stock (a)
Common stock $ 2,705 $ 2,698 $ 7 –%
Capital surplus – preferred stock 3,946 3,941 5 –%
Capital surplus – common stock and other 12,627 12,416 211 2%
Retained earnings 26,200 23,251 2,949 13%
Accumulated other comprehensive income 503 436 67 15%
Common stock held in treasury at cost (1,430) (408) (1,022) (250)%
Total shareholders’ equity $44,551 $42,334 $ 2,217 5%
(a) Par value less than $.5 million at each date.
We manage our funding and capital positions by making
adjustments to our balance sheet size and composition, issuing
debt, equity or other capital instruments, executing treasury
stock transactions and capital redemptions, managing dividend
policies and retaining earnings.
The increase in total shareholders’ equity compared to the
prior year end reflected an increase in retained earnings,
partially offset by share repurchases of $1.2 billion under
PNC’s existing common stock repurchase authorization. The
increase in retained earnings was driven by net income of $4.2
billion, reduced by $1.2 billion of common and preferred
dividends declared. Accumulated other comprehensive
income increased slightly as the impact of market interest
rates and credit spreads on securities available for sale and
derivatives that are part of cash flow hedging strategies were
mostly offset by the impact of pension and other
postretirement benefit plan adjustments. Common shares
outstanding were 523 million at December 31, 2014 and
533 million at December 31, 2013.
Our current common stock repurchase program authorization
permits us to purchase up to 25 million shares of PNC common
stock on the open market or in privately negotiated transactions.
This program will remain in effect until fully utilized or until
modified, superseded or terminated. The extent and timing of
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, the potential impact
on our credit ratings, contractual and regulatory limitations, and
the results of the supervisory assessment of capital adequacy
and capital planning processes undertaken by the Federal
Reserve and our primary bank regulators as part of the CCAR
process. The Federal Reserve accepted our 2014 capital plan
and did not object to our proposed capital actions. The capital
plan included share repurchase programs of up to $1.5 billion
for the four quarter period beginning in the second quarter of
2014 under PNC’s existing common stock repurchase
authorization. These programs include repurchases of up to
$200 million to mitigate the financial impact of employee
benefit plan transactions. Under the capital plan authorization,
PNC repurchased 2.6 million common shares for $223 million
in the second quarter of 2014, 4.2 million common shares for
$360 million in the third quarter of 2014 and 6.1 million
common shares for $524 million in the fourth quarter of 2014.
Under the “de minimis” safe harbor of the Federal Reserve’s
capital plan rule, PNC may make limited repurchases of
common stock or other capital distributions in amounts that
exceed the amounts included in its most recently approved
capital plan, provided that, among other things, such
distributions do not exceed, in the aggregate, 1% of PNC’s Tier
1 capital and the Federal Reserve does not object to the
additional repurchases or distributions. Under this “de minimis”
safe harbor, PNC repurchased $50 million of common shares to
mitigate the financial impact of employee benefit plan
transactions in the first quarter of 2014. See the Supervision and
Regulation section of Item 1 Business in this Report for further
information concerning the CCAR process and the factors the
Federal Reserve takes into consideration in its evaluation of
capital plans and the Capital and Liquidity Actions portion of
the Executive Summary section of this Item 7 for the impact of
the Federal Reserve’s current supervisory assessment of the
capital adequacy program.
46 The PNC Financial Services Group, Inc. – Form 10-K