PNC Reports Full Year 2008 Net Income of $882 Million Including Acquisition Costs or $1.3 Billion Excluding Costs Related to Acquisitions
Fourth quarter net loss was $248 million including acquisition costs or net income of $132 million excluding costs related to acquisitions
Capital, liquidity and loan loss reserve coverage strengthened
PITTSBURGH, Feb. 3 /PRNewswire-FirstCall/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported 2008 net income of $882 million, or $2.46 per diluted share, compared with 2007 net income of $1.47 billion, or $4.35 per diluted share. PNC reported a net loss of $248 million, or $.77 per diluted share, for the fourth quarter of 2008 compared with net income of $178 million in the fourth quarter of 2007, or $.52 per diluted share. PNC acquired National City Corporation on December 31, 2008.
Net income for 2008 would have been $1.30 billion, or $3.68 per diluted share, and 2007 net income would have been $1.57 billion, or $4.65 per diluted share, excluding integration costs. Integration costs, which included conforming provisions for credit losses for acquisitions, primarily National City, were $422 million after tax for full year 2008 and $380 million after tax for the fourth quarter of 2008. Net income excluding integration costs would have been $132 million, or $.32 per diluted share, for the fourth quarter of 2008 and $228 million, or $.67 per diluted share, for the fourth quarter of 2007.
"PNC successfully executed its business strategies in 2008 and delivered solid results during a time of unprecedented markets and a weakening economy," said James E. Rohr, chairman and chief executive officer. "During the year we strengthened our capital, liquidity and loan loss reserve coverage. The acquisition of National City provided us with a unique opportunity to grow our franchise, doubling our assets and customers. Our two-year integration plan is underway, and we believe our combined company should begin to deliver significant shareholder value."
PNC's consolidated balance sheet and financial ratios as of December 31, 2008 reflect the acquisition of National City on that date. The average consolidated balance sheet was not impacted by the National City acquisition. PNC's consolidated income statement for full year and fourth quarter 2008 does not include operating results of National City.
HIGHLIGHTS
-- As of December 31, 2008 PNC had total assets of $291 billion, total
loans of $175 billion and total deposits of $193 billion, reflecting the
acquisition of National City on that date.
-- PNC significantly strengthened capital. The estimated tier 1 risk-based
capital ratio was 9.7 percent at December 31, 2008 compared with 6.8
percent at December 31, 2007. PNC issued $7.6 billion of preferred stock
and a common stock warrant to the U.S. Department of the Treasury under
the TARP Capital Purchase Program on December 31, 2008 which qualified
as tier 1 capital. The combination of National City with PNC would have
resulted in a tier 1 risk-based capital ratio exceeding the 6 percent
"well-capitalized" requirement on December 31, 2008 even
without giving effect to the capital issuance under the TARP Program.
-- PNC's estimated tangible common equity ratio was 2.8 percent at
December 31, 2008 and excluding accumulated other comprehensive loss
would have been 4.1 percent at year end. PNC's tangible common
equity ratio is expected to be less sensitive to the impact of widening
credit spreads on accumulated other comprehensive loss primarily due to
the composition of the securities available for sale portfolio acquired
from National City and a substantially higher level of common equity in
the combined company.
-- PNC maintained a strong liquidity position and continued to generate
deposits. The loan to deposit ratio was 91 percent at December 31, 2008,
reflecting the acquisition of National City. Average deposits for the
fourth quarter increased 8 percent compared with the fourth quarter of
2007 and 3 percent compared with the linked quarter.
-- Credit quality migration reflected a rapidly weakening economy, but
remained manageable as PNC was able to maintain a strong capital
position and generate positive operating leverage. The allowance for
loan and lease losses increased to $3.9 billion at December 31, 2008
from $1.1 billion at September 30, 2008 primarily as a result of the
National City acquisition. The year end ratio of allowance for loan and
lease losses to total loans was strengthened to 2.23 percent compared
with 1.40 percent at September 30, 2008.
-- Average loans for the fourth quarter of 2008 increased 12 percent over
fourth quarter 2007 and 3 percent compared with the third quarter of
2008. During the fourth quarter PNC originated approximately $9 billion
in new loans and commitments.
-- PNC is committed to supporting the objectives of the Emergency Economic
Stabilization Act. To that end, PNC is continuing to make credit
available to qualified borrowers including enhanced calling efforts on
small businesses and corporations, promotions offered with special
financing rates and responding to increased loan demand for first
mortgages. PNC has reaffirmed and renewed loans and lines of credit,
focused on early identification of loan modification candidates and is
working closely where appropriate with customers who are experiencing
financial hardship to set up new repayment schedules, loan modifications
and forbearance programs. PNC plans to enhance these efforts over time
to improve the effectiveness of its broad-reaching initiatives.
-- Investment securities were $43.5 billion at December 31, 2008, or 15
percent of total assets. The portfolio was primarily comprised of
well-diversified, high quality securities with U.S. government agency
residential mortgage-backed securities representing 53 percent of the
portfolio. Of the remaining portfolio, 80 percent of the securities had
AAA-equivalent ratings.
-- PNC created positive operating leverage for the year of 4 percent, or
$351 million. Total revenue for 2008 grew 7 percent compared with 2007,
driven by growth in net interest income, and exceeded year-over-year
noninterest expense growth of 3 percent.
-- With the acquisition of National City, PNC's retail banks now serve
over 6 million consumer and business customers. Comprehensive two-year
integration plans are being implemented with a goal of eliminating $1.2
billion of annualized expenses, including the reduction of approximately
5,800 positions across the combined 59,595 employee base by 2011. The
first regional branch conversion is planned for the second half of 2009.
CONSOLIDATED REVENUE REVIEW
PNC's consolidated income statement for full year and fourth quarter 2008 does not include operating results of National City, which was acquired on December 31, 2008. The income statement impact from the acquisition of National City included in fourth quarter 2008 results was limited to a conforming provision for credit losses of $504 million and other integration costs in noninterest expense.
Net interest income totaled $992 million for the fourth quarter of 2008, an increase of 25 percent compared with $793 million for fourth quarter 2007 and a decrease of 1 percent compared with $1.00 billion for the linked quarter. The net interest margin was 3.37 percent for the fourth quarter of 2008 compared with 2.96 percent in the year ago quarter and 3.46 percent in the third quarter of 2008. The increase in net interest income in the year-over-year comparison was primarily due to the benefit of declining interest rates on PNC's liability sensitive balance sheet and higher average earning assets. The decrease in the linked quarter comparison was primarily from a lower yield on loans largely resulting from the rapid decline in short-term rates and the effect on variable rate loan repricing.
Noninterest income was $684 million for the fourth quarter of 2008 compared with $834 million for the fourth quarter of 2007 and $654 million linked quarter. The 2008 quarters were negatively impacted by unprecedented market conditions.
Fund servicing revenue for the fourth quarter of 2008 decreased $24 million compared with the third quarter of 2008 mainly due to declines in asset values. Asset management revenue decreased $83 million in the comparison with the third quarter of 2008 and was primarily impacted by lower earnings from BlackRock. Corporate service fees decreased $41 million in the linked quarter comparison primarily as a result of a $35 million impairment charge on commercial mortgage servicing rights due to the effect of lower interest rates. Fourth quarter 2008 net securities losses were $172 million and third quarter 2008 losses were $74 million, primarily resulting from other-than-temporary impairment charges on securities, while a net gain of $177 million was recognized on the mark to market of PNC's BlackRock LTIP shares obligation for the fourth quarter compared with a net charge of $51 million in the third quarter included in other noninterest income.
Noninterest income decreased $150 million compared with the prior year fourth quarter primarily due to impairment charges on securities, the negative effect of declines in asset values on fee revenue, lower earnings from BlackRock and lower consumer service fees largely due to the impact of the sale of Hilliard Lyons, partially offset by the benefit of the positive mark to market of PNC's BlackRock LTIP shares obligation compared with a net charge in the fourth quarter of 2007.
CONSOLIDATED EXPENSE REVIEW
Noninterest expense for the fourth quarter of 2008 was $1.13 billion compared with $1.21 billion in the prior year fourth quarter and $1.14 billion for the third quarter of 2008. The 7 percent decrease compared with the fourth quarter of 2007 mainly resulted from the sale of Hilliard Lyons and the effect of cost synergies from acquisitions. Noninterest expense compared with the linked quarter declined 1 percent primarily due to lower incentive compensation partially offset by higher integration costs, including those related to the National City acquisition.
CONSOLIDATED AVERAGE BALANCE SHEET REVIEW
Average assets were $143 billion for the fourth quarter of 2008 compared with $135 billion for the year ago quarter and $143 billion for the third quarter 2008. The increase compared with the fourth quarter of 2007 was due to growth in loans and securities and the impact of acquisitions. The National City acquisition closed on December 31, 2008 and had no impact on average balances.
Average loans were $75.4 billion for the quarter and increased $8.3 billion, or 12 percent, compared with the year-earlier fourth quarter and $2.1 billion, or 3 percent, compared with the third quarter of 2008. The increase in average loans compared with the fourth quarter of 2007 was primarily a result of higher commercial loans, acquisitions and the transfer of education loans previously held for sale to the loan portfolio during the first quarter of 2008. The increase compared with the linked quarter was largely due to growth in commercial and consumer loans.
Average investment securities for the fourth quarter of 2008 were $35.5 billion, an increase of $6.3 billion, or 22 percent, compared with the fourth quarter of 2007 and an increase of $1.7 billion, or 5 percent, compared with the third quarter of 2008. The increase over the prior year fourth quarter was primarily due to the addition of residential mortgage-backed, state and municipal, and commercial mortgage-backed securities as part of the company's balance sheet management activities. The increase in securities compared with the linked quarter primarily resulted from purchases of U.S. government agency residential mortgage-backed securities.
Average loans held for sale were $1.9 billion for the fourth quarter of 2008, a decrease of $1.5 billion compared with the fourth quarter of 2007 and a decrease of $.2 billion compared with the third quarter of 2008. The decline from fourth quarter 2007 was primarily due to the transfer of $1.8 billion of education loans previously held for sale to the loan portfolio during the first quarter of 2008.
Average deposits of $87.5 billion for the fourth quarter of 2008 grew $6.7 billion, or 8 percent, compared with the fourth quarter of 2007 and $2.5 billion, or 3 percent, compared with the linked quarter. Average deposits increased from the prior year fourth quarter as a result of acquisitions and growth in money market and time deposits. In the linked quarter comparison, the increase was due to continued growth in retail money market deposits, demand and other non-interest bearing deposits, other time deposits, retail certificates and interest-bearing demand deposits. The increases in both comparisons were somewhat offset by declines in time deposits in foreign offices.
Average borrowed funds for the fourth quarter of 2008 were $30.0 billion, an increase of $1.4 billion, or 5 percent, compared with the fourth quarter of 2007 and a decrease of $2.2 billion, or 7 percent, compared with the third quarter of 2008. The increase over fourth quarter 2007 was due to new borrowings to fund earning asset growth. The decrease in the linked quarter comparison was primarily due to declines in federal funds purchased and repurchase agreements and debt maturities during the quarter.
CONSOLIDATED YEAR END BALANCE SHEET REVIEW
Total assets were $291 billion at December 31, 2008 compared with $139 billion at December 31, 2007 and $146 billion at September 30, 2008. The consolidated balance sheet included National City's assets and liabilities substantially at fair value as of December 31, 2008. The acquisition added approximately $134 billion of assets, including $100 billion of loans, after giving effect to purchase accounting adjustments, eliminations and reclassifications.
Loans were $175 billion at December 31, 2008 compared with $68.3 billion at December 31, 2007 and $75.2 billion at September 30, 2008. The core loan portfolio was $148 billion at December 31, 2008 and consisted of 64 percent commercial loans and 36 percent consumer loans. As of December 31, 2008 loans totaling $27.5 billion were designated as a distressed loan portfolio that included residential real estate development loans, cross-border leases, brokered home equity loans and certain residential real estate loans. The majority of the distressed loans were from acquisitions, primarily National City. Loans held for sale were $4.4 billion at December 31, 2008 compared with $3.9 billion at December 31, 2007 and $1.9 billion at September 30, 2008. The acquisition of National City added approximately $2.2 billion of loans held for sale, primarily 1-4 family conforming residential mortgages. Approximately $1.8 billion of education loans previously held for sale were transferred to the loan portfolio during the first quarter of 2008.
Investment securities totaled $43.5 billion at December 31, 2008, including $13.3 billion of primarily U.S. government agency residential mortgage-backed securities from the National City acquisition, compared with $30.2 billion at December 31, 2007 and $31.0 billion at September 30, 2008. At December 31, 2008 net unrealized pretax losses on securities available for sale increased to $5.4 billion compared with $3.6 billion at September 30, 2008 as a result of further declines in fair value due to the impact of widening credit spreads. Net unrealized losses in the securities available for sale portfolio are included in shareholders' equity as accumulated other comprehensive loss, net of tax. The net unrealized losses did not reflect credit quality concerns of any significance with the underlying assets which represented an overall well-diversified, high quality portfolio. U.S. government agency residential mortgage-backed securities represented 53 percent of the investment securities portfolio at December 31, 2008. PNC's tangible common equity ratio is expected to be less sensitive to the impact of widening credit spreads on accumulated other comprehensive loss primarily due to the composition of the securities available for sale portfolio acquired from National City and a substantially higher level of common equity in the combined company.
Deposits were $193 billion at December 31, 2008, including $104 billion from the National City acquisition, compared with $82.7 billion at December 31, 2007 and $85.0 billion at September 30, 2008. Interest-bearing deposits represented 81 percent of total deposits at December 31, 2008 compared with 77 percent at September 30, 2008. The change in deposit composition reflected the higher proportion of certificates of deposit and other interest-bearing deposits associated with National City. Borrowed funds were $52.2 billion at December 31, 2008 compared with $30.9 billion at December 31, 2007 and $32.1 billion at September 30, 2008. Borrowed funds at December 31, 2008 included $18.2 billion of National City obligations and $2.9 billion of senior notes guaranteed by the FDIC under the Temporary Liquidity Guarantee Program that were issued during the fourth quarter of 2008.
PNC's tier 1 risk-based capital ratio was an estimated 9.7 percent at December 31, 2008 compared with 6.8 percent at December 31, 2007 and 8.2 percent at September 30, 2008. The increase in the ratio from December 31, 2007 included the issuance of tier 1 eligible securities during the first half of 2008 totaling $1.3 billion, including REIT preferred, noncumulative perpetual preferred, and trust preferred securities. Additionally, $7.6 billion of preferred stock and a common stock warrant was issued to the Department of the Treasury under the TARP Capital Purchase Program on December 31, 2008. Tier 1 risk-based capital further increased as a result of $5.6 billion of common stock issued in the National City acquisition and PNC's assumption of $2.6 billion of tier 1 qualifying capital securities previously issued by National City. These increases in capital were partially offset by the deduction of higher acquisition-related intangible assets. The positive effect on the tier 1 ratio of the net increase in capital was somewhat offset by an increase in risk-weighted assets primarily related to acquisitions, including National City.
The increase in the tier 1 risk-based capital ratio from September 30, 2008 was primarily due to the TARP Capital Purchase Program issuance and the net increase in capital resulting from the National City acquisition. As of December 31, 2008 the combination of National City with PNC would have resulted in a tier 1 risk-based capital ratio exceeding the 6 percent "well-capitalized" requirement even without giving effect to the capital issuance under the TARP Program which qualified as tier 1 capital.
The company did not actively engage in share repurchase activity during 2008. In January 2009, the PNC board of directors declared a quarterly common stock cash dividend of 66 cents per share consistent with the previous quarter.
ASSET QUALITY REVIEW
PNC increased the allowance for loan and lease losses during the fourth quarter to $3.9 billion at December 31, 2008 compared with $.8 billion at December 31, 2007 and $1.1 billion at September 30, 2008. The increases were primarily due to a $2.2 billion allowance acquired from National City, $504 million conforming credit allowance adjustment for differences between the PNC and National City reserve estimation methodologies, and legacy PNC provision for credit losses in excess of net charge-offs. These reserves do not include $7.4 billion of fair value adjustments on $19.3 billion of impaired loans acquired from National City on December 31, 2008. The allowance for loan and lease losses to total loans was 2.23 percent at year end compared with 1.21 percent at December 31, 2007 and 1.40 percent at September 30, 2008.
Asset quality migrated at an accelerated pace in the very challenging credit environment but remained manageable as PNC was able to cover a substantial portion of the increased provision for credit losses through positive operating leverage and also maintain a strong capital position. The provision for credit losses for the fourth quarter of 2008 totaled $990 million and included the $504 million conforming provision for credit losses related to the National City acquisition and $486 million legacy PNC provision. The provision for credit losses was $188 million in the fourth quarter of 2007 and $190 million in the third quarter of 2008. The increase in the legacy PNC provision was largely attributable to general credit quality migration, including residential real estate development and commercial real estate exposure, and growth in total credit exposure.
Net charge-offs for the fourth quarter of 2008 were $207 million, or 1.09 percent of average loans, compared with net charge-offs of $83 million, or .49 percent, for the fourth quarter of 2007 and net charge-offs of $122 million, or .66 percent, for the third quarter of 2008. The increase in net charge-offs in both comparisons was primarily due to commercial and commercial real estate loans and in the prior year quarter comparison home equity consumer loans.
Nonperforming assets were $2.2 billion at December 31, 2008, including $722 million from the National City acquisition, compared to $495 million a year ago and $875 million at September 30, 2008. The increases aside from National City primarily resulted from higher nonaccrual commercial loans and commercial real estate projects including residential real estate development loans. Nonperforming assets to total assets were .74 percent at December 31, 2008 compared with .36 percent at December 31, 2007 and .60 percent at September 30, 2008. The allowance for loan and lease losses to nonperforming loans was 236 percent at December 31, 2008, 183 percent at December 31, 2007 and 125 percent at September 30, 2008.
BUSINESS SEGMENT RESULTS
PNC business segment information does not include any impact from the National City acquisition on December 31, 2008 unless specifically stated.
Retail Banking
For the full year 2008, Retail Banking earned $429 million compared with $876 million for 2007. The decline in earnings over the prior year was primarily driven by increases in the provision for credit losses and noninterest expense. Retail Banking earned $15 million for the fourth quarter of 2008 compared with $211 million for the prior year fourth quarter and $79 million in the prior quarter. The decline from the prior year quarter resulted from an increase in the provision for credit losses, a decrease in revenue and higher noninterest expense. The decline from the linked quarter was primarily due to an increase in the provision for credit losses. For the 2008 periods, revenue was negatively impacted by a lower interest credit attributed to deposits in the declining rate environment and was not reflective of the solid growth in customers and deposits.
Retail Banking overview:
-- Net new consumer and business checking relationships grew by 72,000 in
2008 compared with 32,000 a year earlier, excluding relationships added
from acquisitions.
-- Average deposit balances increased $4.7 billion, or 8 percent, over the
previous year fourth quarter and $1.8 billion, or 3 percent, compared
with the linked quarter. The increases over the prior periods were
primarily the result of growth in money market deposits. The prior year
comparison also benefitted from acquisitions. The deposit strategy of
Retail Banking is to remain disciplined on pricing while targeting
specific products and markets for growth.
-- Average loan balances increased $3.6 billion, or 10 percent, over the
year-ago quarter and 1 percent from the linked quarter. Growth over the
prior year quarter primarily resulted from acquisitions and the transfer
of education loans from held for sale to the loan portfolio during the
first quarter of 2008. In the linked quarter comparison higher education
loans more than offset declines in the commercial and commercial real
estate loan portfolio.
-- Net interest income for the fourth quarter of 2008 declined $40 million,
or 7 percent, compared with the fourth quarter of 2007 and increased $9
million, or 2 percent, compared with the linked quarter. The decrease
from the prior year quarter reflected the negative impact of a lower
interest credit attributed to deposits in the declining rate environment
partially offset by benefits from acquisitions.
-- Noninterest income for the quarter declined $25 million, or 6 percent,
compared with the prior year fourth quarter and decreased $13 million,
or 3 percent, compared with the third quarter of 2008. The declines in
both periods were primarily driven by lower asset management fees as a
result of lower values in the equity markets. The decrease in the prior
year quarter comparison was partially offset by a combined 7 percent
increase in service charges on deposits, brokerage fees, and consumer
service fees. The prior year quarter comparison was also impacted by
gains on sales of education loans and other gains in the fourth quarter
of 2007.
-- Noninterest expense for the fourth quarter increased $47 million, or 9
percent, compared with the prior year fourth quarter and decreased $9
million, or 2 percent, from the linked quarter. The increase over the
prior year quarter was attributable to the impact of acquisitions,
continued investments in the business and expense directly associated
with fee income-related activities.
-- Provision for credit losses was $262 million for the fourth quarter of
2008 compared with $70 million in the prior year quarter and $156
million in the linked quarter. The increases in the provision reflected
the deteriorating economic environment which resulted in higher
commercial and consumer loan net charge-offs and continued credit
migration in commercial and consumer loan portfolios.
-- PNC Retail Banking had 1,148 branches and an ATM network of 4,041
machines at December 31, 2008. Combined with National City those totals
grew to 2,589 branches and an ATM network of 6,232 machines, giving PNC
one of the largest distribution networks among U.S. banks.
-- Assets under management on a combined basis with National City were $110
billion at December 31, 2008. Of that total, PNC Retail Banking had
assets under management of $57 billion at December 31, 2008 compared
with $69 billion at December 31, 2007 and $64 billion at September 30,
2008. Declines in assets under management primarily resulted from the
negative impact of market conditions on asset values.
Corporate & Institutional Banking
Corporate & Institutional Banking earned $225 million in 2008 compared with $432 million in 2007. While results were strong for all sectors except real estate, overall earnings declined compared with the prior year primarily driven by an increase in the provision for credit losses and by higher valuation losses on commercial mortgage loans held for sale, net of hedges. Earnings were $17 million in the fourth quarter of 2008 compared with $91 million in the fourth quarter of 2007 and $72 million in the third quarter of 2008. Both comparisons were impacted by a higher provision for credit losses which more than offset increases in revenue and in the linked quarter comparison lower noninterest expense.
Corporate & Institutional Banking overview:
-- Net interest income for the fourth quarter of 2008 grew $55 million, or
23 percent, compared with the fourth quarter of 2007 and $38 million, or
15 percent, compared with the third quarter of 2008. The increases were
due to loan growth and, in the prior year quarter comparison, as a
result of acquisitions and higher interest on loans held for sale.
-- Corporate service fees were $118 million in the fourth quarter of 2008
compared with $137 million in the fourth quarter of 2007 and $159
million in the third quarter of 2008. The fourth quarter of 2008
included a $35 million impairment charge on commercial mortgage
servicing rights due to the effect of lower interest rates.
-- Other noninterest income increased $10 million compared with the fourth
quarter of 2007 and increased $86 million in the linked quarter
comparison. Gains on commercial mortgage loans held for sale, net of
hedges were $16 million in the fourth quarter of 2008 compared with a
loss of $75 million in the third quarter of 2008 and a loss of $19
million in the prior year quarter.
-- Noninterest expense was essentially flat compared with the fourth
quarter of 2007 as lower incentive compensation associated with fee
income activities offset investments in growth initiatives. Compared
with the third quarter of 2008, noninterest expense decreased $15
million, or 6 percent, primarily due to lower incentive compensation.
-- Provision for credit losses was $214 million in the fourth quarter of
2008 compared with $69 million in the fourth quarter of 2007 and $31
million in the prior quarter. The provision for the fourth quarter of
2008 reflected the impact of both accelerated credit quality migration
and growth in total credit exposure.
-- Average loan balances increased $5.8 billion, or 25 percent, from the
prior year fourth quarter and $2.1 billion, or 8 percent, compared with
the third quarter of 2008. The increases were due to higher utilization
of credit facilities, organic loan growth from new and existing clients
and acquisitions in the prior year quarter comparison.
-- Average deposit balances for the quarter increased $1.2 billion, or 8
percent, compared with the fourth quarter of 2007 and $.8 billion, or 5
percent, compared with the linked quarter. The increase over the fourth
quarter of 2007 resulted primarily from higher time and money market
deposits. The increase over the third quarter of 2008 was mainly due to
higher demand deposits related to treasury management and higher
commercial mortgage servicing deposits.
-- The commercial mortgage servicing portfolio on a combined basis with
National City was $286 billion at December 31, 2008. Of that total, PNC
Corporate & Institutional Banking commercial mortgage servicing
portfolio was $249 billion compared with $243 billion at December 31,
2007 and $247 billion at September 30, 2008. Servicing portfolio
additions have been modest since the third quarter of 2007 due to the
declining volumes in the commercial mortgage securitization market.
Global Investment Servicing
Global Investment Servicing earned $122 million in 2008 compared with $128 million in 2007. Results for 2008 were negatively impacted by declines in asset values and fund redemptions as a result of severe deterioration of the financial markets during the fourth quarter. Global Investment Servicing earned $25 million for the fourth quarter of 2008 compared with $32 million for the fourth quarter of 2007 and $34 million for the third quarter of 2008. Servicing revenue decreased $1 million from the fourth quarter of 2007 and $21 million, or 9 percent, from the linked quarter. Servicing revenue was negatively impacted by declines in equity market values. In the comparison with the prior year quarter, these declines were partially offset by the acquisitions of Albridge Solutions Inc. and Coates Analytics, LP in December 2007 and opportunities the market provided for securities lending activities. Operating expense increased $7 million, or 4 percent, from the year ago quarter and decreased $13 million, or 7 percent, compared with the linked quarter. The increase over the fourth quarter of 2007 was largely due to investments in technology, a larger employee base to support business growth and costs related to the acquisitions. The decrease in the linked quarter comparison resulted from cost reduction initiatives to lower operating expense in tandem with the revenue slowdown associated with volatile global markets.
Global Investment Servicing provided accounting/administration services for $839 billion of net fund assets and provided custody services for $379 billion of fund assets as of December 31, 2008 compared with $990 billion and $500 billion, respectively, at December 31, 2007 and $907 billion and $415 billion, respectively, at September 30, 2008. The decrease in assets serviced in both comparisons was due to declines in asset values and fund outflows resulting from market conditions particularly in the fourth quarter of 2008. Total fund assets serviced by Global Investment Servicing were $2.0 trillion at December 31, 2008 compared with asset servicing levels of $2.5 trillion at December 31, 2007 and $2.3 trillion at September 30, 2008.
Other, including BlackRock
The "Other, including BlackRock" category, for the purposes of this release, includes earnings and gains or losses related to PNC's equity interest in BlackRock and those related to Hilliard Lyons prior to its sale, asset and liability management activities including net securities gains or losses and certain trading activities, equity management activities, provision for credit losses for conforming credit allowance adjustments related to acquisitions, other integration costs, differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles (GAAP), corporate overhead and intercompany eliminations.
PNC recorded earnings of $106 million in "Other, including BlackRock" for 2008 compared with $31 million in 2007. Other for 2008 included $422 million of after-tax integration costs, including conforming provisions for credit losses, primarily related to National City, compared with $99 million of after-tax integration costs in 2007, and higher market-related impairments and proprietary trading losses. These items were more than offset by higher net interest income and a net gain on the mark to market of PNC's BlackRock LTIP shares obligation compared to a loss in 2007.
For the fourth quarter of 2008 PNC recorded a loss of $305 million for Other compared with a loss of $156 million in the fourth quarter of 2007 and earnings of $63 million in the third quarter of 2008. The decrease in the linked quarter comparison was primarily due to the conforming provision and higher other integration costs in the fourth quarter of 2008 partially offset by a net gain on the mark to market of PNC's BlackRock LTIP shares obligation compared with a loss in the third quarter of 2008. The net loss in the year-over-year quarter comparison increased mainly as a result of the higher conforming provision and other integration costs and higher market-related impairments partially offset by a net gain on the mark to market of PNC's BlackRock LTIP shares obligation compared to a loss in the fourth quarter of 2007 and higher net interest income.
BlackRock business segment earnings included in the "Other, including BlackRock" category were $207 million for 2008 compared with $253 million in 2007, and $22 million for the fourth quarter of 2008, $77 million for the fourth quarter of 2007 and $56 million for the third quarter of 2008.
CONFERENCE CALL AND SUPPLEMENTAL FINANCIAL INFORMATION
PNC Chairman and Chief Executive Officer James E. Rohr and Chief Financial Officer Richard J. Johnson will hold a conference call for investors today at 9:00 a.m. Eastern Time regarding the topics addressed in this news release and the related financial supplement. Investors should call five to 10 minutes before the start of the conference call at 800-990-2718 or 706-643-0187 (international). The related financial supplement and presentation slides to accompany the conference call remarks may be found at www.pnc.com/investorevents. A taped replay of the call will be available for one week at 800-642-1687 or 706-645-9291 (international), conference ID 79677068.
In addition, Internet access to the call (listen only) and to PNC's fourth quarter and full year 2008 earnings release, supplemental financial information and presentation slides will be available at www.pnc.com/investorevents. A replay of the webcast will be available on PNC's Web site for 30 days.
The PNC Financial Services Group, Inc. (www.pnc.com) is one of the nation's largest diversified financial services organizations providing retail and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We make statements in this news release and in the conference call regarding this news release, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other matters regarding or affecting PNC that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "will," "project" and other similar words and expressions.
Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance.
Our forward-looking statements are subject to the following principal risks and uncertainties. We provide greater detail regarding some of these factors in our Form 10-K for the year ended December 31, 2007 and our 2008 Form 10-Qs, including in the Risk Factors and Risk Management sections of those reports, and in our other SEC reports. Our forward-looking statements may also be subject to other risks and uncertainties, including those that we may discuss elsewhere in this news release or in our filings with the SEC, accessible on the SEC's website at www.sec.gov and on or through our corporate website at www.pnc.com/secfilings. We have included these web addresses as inactive textual references only. Information on these websites is not part of this document.
-- Our businesses and financial results are affected by business and
economic conditions, both generally and specifically in the principal
markets in which we operate. In particular, our businesses and financial
results may be impacted by:
-- Changes in interest rates and valuations in the debt, equity and
other financial markets.
-- Disruptions in the liquidity and other functioning of financial
markets, including such disruptions in the markets for real estate
and other assets commonly securing financial products.
-- Actions by the Federal Reserve and other government agencies,
including those that impact money supply and market interest rates.
-- Changes in our customers', suppliers' and other
counterparties' performance in general and their
creditworthiness in particular.
-- Changes in customer preferences and behavior, whether as a result of
changing business and economic conditions or other factors.
-- Changes resulting from the Emergency Economic Stabilization Act of
2008, and other legislative and regulatory developments in response
to the current economic and financial situation, including
conditions imposed as a result of our participation in the Capital
Purchase Program.
-- A continuation of recent turbulence in significant portions of the U.S.
and global financial markets, particularly if it worsens, could impact
our performance, both directly by affecting our revenues and the value
of our assets and liabilities and indirectly by affecting our
counterparties and the economy generally.
-- Our business and financial performance could be impacted as the
financial industry restructures in the current environment, both by
changes in the creditworthiness and performance of our counterparties
and by changes in the competitive landscape.
-- Given current economic and financial market conditions, our
forward-looking financial statements are subject to the risk that these
conditions will be substantially different than we are currently
expecting. These statements are based on our current expectations that
interest rates will remain low through 2009 with continued wide market
credit spreads, and our view that national economic trends currently
point to a continuation of severe recessionary conditions in 2009
followed by a subdued recovery.
-- Our operating results are affected by our liability to provide shares of
BlackRock common stock to help fund certain BlackRock long-term
incentive plan ("LTIP") programs, as our LTIP liability is
adjusted quarterly ("marked-to-market") based on changes in
BlackRock's common stock price and the number of remaining
committed shares, and we recognize gain or loss on such shares at such
times as shares are transferred for payouts under the LTIP programs.
-- Legal and regulatory developments could have an impact on our ability to
operate our businesses or our financial condition or results of
operations or our competitive position or reputation. Reputational
impacts, in turn, could affect matters such as business generation and
retention, our ability to attract and retain management, liquidity and
funding. These legal and regulatory developments could include: (a) the
unfavorable resolution of legal proceedings or regulatory and other
governmental inquiries; (b) increased litigation risk from recent
regulatory and other governmental developments; (c) the results of the
regulatory examination process, our failure to satisfy the requirements
of agreements with governmental agencies, and regulators' future
use of supervisory and enforcement tools; (d) legislative and
regulatory reforms, including changes to laws and regulations involving
tax, pension, education lending, the protection of confidential customer
information, and other aspects of the financial institution industry;
and (e) changes in accounting policies and principles.
-- Our issuance of securities to the United States Treasury may limit our
ability to return capital to our shareholders and is dilutive to our
common shares. If we are unable previously to redeem the shares, the
dividend rate increases substantially after five years.
-- Our business and operating results are affected by our ability to
identify and effectively manage risks inherent in our businesses,
including, where appropriate, through the effective use of third-party
insurance, derivatives and capital management techniques.
-- The adequacy of our intellectual property protection, and the extent of
any costs associated with obtaining rights in intellectual property
claimed by others, can impact our business and operating results.
-- Our ability to anticipate and respond to technological changes can have
an impact on our ability to respond to customer needs and to meet
competitive demands.
-- Our ability to implement our business initiatives and strategies could
affect our financial performance over the next several years.
-- Competition can have an impact on customer acquisition, growth and
retention, as well as on our credit spreads and product pricing, which
can affect market share, deposits and revenues.
-- Our business and operating results can also be affected by widespread
natural disasters, terrorist activities or international hostilities,
either as a result of the impact on the economy and capital and other
financial markets generally or on us or on our customers, suppliers or
other counterparties specifically.
-- Also, risks and uncertainties that could affect the results anticipated
in forward-looking statements or from historical performance relating to
our equity interest in BlackRock, Inc. are discussed in more detail in
BlackRock's filings with the SEC, including in the Risk Factors
sections of BlackRock's reports. BlackRock's SEC filings are
accessible on the SEC's website and on or through BlackRock's
website at www.blackrock.com. This material is referenced for
informational purposes only and should not be deemed to constitute a
part of this document.
In addition, our recent acquisition of National City Corporation ("National City") presents us with a number of risks and uncertainties related both to the acquisition transaction itself and to the integration of the acquired businesses into PNC. These risks and uncertainties include the following:
-- The transaction may be substantially more expensive to complete
(including the required divestitures and the integration of National
City's businesses) and the anticipated benefits, including
anticipated cost savings and strategic gains, may be significantly
harder or take longer to achieve than expected or may not be achieved in
their entirety as a result of unexpected factors or events.
-- Our ability to achieve anticipated results from this transaction is
dependent on the state going forward of the economic and financial
markets, which have been under significant stress recently.
Specifically, we may incur more credit losses from National City's
loan portfolio than expected. Other issues related to achieving
anticipated financial results include the possibility that deposit
attrition or attrition in key client, partner and other relationships
may be greater than expected.
-- Litigation and governmental investigations currently pending against
National City, as well as others that may be filed or commenced as a
result of this transaction or otherwise, could impact the timing or
realization of anticipated benefits to PNC or otherwise adversely impact
our financial results.
-- Our ability to achieve anticipated results is also dependent on our
ability to bring National City's systems, operating models, and
controls into conformity with ours and to do so on our planned time
schedule. The integration of National City's business and
operations into PNC, which will include conversion of National
City's different systems and procedures, may take longer than
anticipated or be more costly than anticipated or have unanticipated
adverse results relating to National City's or PNC's existing
businesses. PNC's ability to integrate National City successfully
may be adversely affected by the fact that this transaction will result
in PNC entering several markets where PNC did not previously have any
meaningful retail presence.
In addition to the National City transaction, we grow our business from time to time by acquiring other financial services companies. Acquisitions in general present us with risks, in addition to those presented by the nature of the business acquired, similar to some or all of those described above relating to the National City acquisition.
[TABULAR MATERIAL FOLLOWS]
The PNC Financial Services Group, Inc. Consolidated Financial Highlights
(Unaudited)
Page 14
FINANCIAL RESULTS Three months ended Year ended
Dollars in
millions, except
per share data Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2008 2008 2007 2008 2007
Revenue
Net interest
income $992 $1,000 $793 $3,823 $2,915
Noninterest
income 684 654 834 3,367 3,790
Total revenue $1,676 $1,654 $1,627 $7,190 $6,705
Provision for
credit losses $990(a) $190 $188 $1,517(a) $315
Noninterest
expense $1,131 $1,142 $1,213 $4,430 $4,296
Net income (loss) $(248) $248 $178 $882 $1,467
Diluted earnings
(loss) per
common share $(.77) $.71 $.52 $2.46 $4.35
Cash dividends
declared per
common share $.66 $.66 $.63 $2.61 $2.44
SELECTED RATIOS
Net interest
margin (b) 3.37% 3.46% 2.96% 3.37% 3.00%
Noninterest
income to total
revenue ( c ) 41 40 51 47 57
Efficiency (d) 67 69 75 62 64
Return on:
Average tangible
common
shareholders'
equity (29.14)% 20.88% 10.63% 17.70% 21.80%
Average common
shareholders'
equity (8.77) 7.13 4.78 6.28 10.53
Average assets (.69) .69 .52 .62 1.19
Certain prior period amounts included in these Consolidated Financial
Highlights have been reclassified to conform with the current period
presentation.
(a) Includes a $504 million conforming provision for credit losses
related to the National City acquisition.
(b) Calculated as annualized taxable-equivalent net interest income
divided by average earning assets. The interest income earned on
certain earning assets is completely or partially exempt from
federal income tax. As such, these tax-exempt instruments
typically yield lower returns than taxable investments. To provide
more meaningful comparisons of margins for all earning assets, we
use net interest income on a taxable-equivalent basis in
calculating net interest margin by increasing the interest income
earned on tax-exempt assets to make it fully equivalent to
interest income earned on taxable investments. This adjustment is
not permitted under GAAP in the Consolidated Income Statement.
The taxable-equivalent adjustments to net interest income for the
three months ended December 31, 2008, September 30, 2008 and
December 31, 2007 were $8 million, $9 million, and $7 million,
respectively. The taxable-equivalent adjustment to net interest
income for the years ended December 31, 2008 and December 31, 2007
were $36 million and $27 million, respectively.
( c ) Calculated as noninterest income divided by the sum of net interest
income and noninterest income.
(d) Calculated as noninterest expense divided by the sum of net
interest income and noninterest income.
BUSINESS SEGMENT
EARNINGS (e) (f) Three months ended Year ended
In millions Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2008 2008 2007 2008 2007
Retail Banking (g) $15 $79 $211 $429 $876
Corporate &
Institutional
Banking 17 72 91 225 432
Global Investment
Servicing 25 34 32 122 128
Other, including
BlackRock
(f) (g)(h) (305) 63 (156) 106 31
Total
consolidated
net income
(loss) $(248) $248 $178 $882 $1,467
(e) Our business segment information is presented based on our
Management accounting practices and management structure at year-
end 2008. We refine our methodologies from time to time as our
management accounting practices are enhanced and our businesses
and management structure change.
(f) We consider BlackRock to be a separate reportable business segment
but have combined its results with Other for this presentation.
Our 2008 Annual Report on Form 10-K will provide additional
business segment disclosures for BlackRock.
(g) Amounts for the applicable periods presented reflect the
reclassification of the results of Hilliard Lyons, which we sold
on March 31, 2008, and the gain on such sale from Retail Banking
to "Other, including BlackRock."
(h) The $504 million conforming provision for credit losses related
to the National City acquisition was included in this segment for
the fourth quarter and full year 2008.
The PNC Financial Services Group, Inc. Consolidated Financial Highlights
(Unaudited)
Page 15
RECONCILIATIONS OF "AS REPORTED" (GAAP) NET INCOME AND DILUTED
EPS TO "AS ADJUSTED" AMOUNTS
In millions, except per share data
THREE MONTHS ENDED December 31, 2008 September 30, 2008
Adjust- Dil- Adjust- Dil-
ments, Net uted ments, Net uted
Pretax Income EPS Pretax Income EPS
Net income (loss),
as reported $(248) $(.77) $248 $.71
Adjustments:
Conforming provision
for credit losses -
National City $504 328 .94
Other integration
costs 81 52 .15 $14 9 .02
Net income, as adjusted $132 $.32 $257 $.73
December 31, 2007
Adjust- Dil-
ments, Net uted
Pretax Income EPS
Net income, as reported $178 $.52
Adjustments:
Integration costs $79(a) 50 .15
Net income, as adjusted $228 $.67
YEAR ENDED December 31, 2008 December 31, 2007
Adjust- Dil- Adjust- Dil-
ments, Net uted ments, Net uted
Pretax Income EPS Pretax Income EPS
Net income, as reported $882 $2.46 $1,467 $4.35
Adjustments:
Conforming provision for
credit losses - National
City $504 328 .95
Other integration costs 145(b) 94 .27 $151(a) 99 .30
Net income, as adjusted $1,304 $3.68 $1,566 $4.65
This table and the table below represent reconciliations of certain "As
Reported" (GAAP) amounts to "As Adjusted" amounts for certain specified
items related to acquisitions, TARP issuance, and AOCL, respectively.
We have provided these adjusted amounts and reconciliations so that
investors, analysts, regulators and others will be better able to
evaluate the impact of these respective items on our results and
capital ratios for and as of the periods presented. We believe that
information as adjusted for the impact of the specified items may be
useful due to the extent to which these items are not indicative of our
ongoing operations. Adjusted information supplements our results as
reported in accordance with GAAP and should not be viewed in isolation
from, or as a substitute for, our GAAP results. Our 2007 Form 10-K and
2008 Form 10-Qs provide additional information regarding integration
costs.
(a) Includes the $45 million conforming provision for credit losses
related to the Yardville acquisition.
(b) Includes the $23 million conforming provision for credit losses
related to the Sterling acquisition.
RECONCILIATIONS OF "AS REPORTED" TO
"AS ADJUSTED" CAPITAL RATIOS ( c )
In millions, except percentages
Tier 1 risk-based
capital ratio
December 31
2008
Tier 1 risk-based
capital $24,328
Less: TARP issuance 7,579
Tier 1 risk-based
capital less TARP
issuance $16,749
Risk weighted assets
(assume no decrease
in assets without
TARP issuance) $250,819
Tier 1 risk-based
capital ratio as
reported 9.7%
Less: TARP issuance 3.0
Tier 1 risk-based
capital ratio as
adjusted 6.7%
Tangible common equity
ratio (d)
December 31 September 30 December 31
2008 2008 2007
Common shareholders'
equity $17,490 $13,712 $14,847
Add back: accumulated
other comprehensive
loss (AOCL) 3,949 2,230 147
Common shareholders'
equity, excluding AOCL $21,439 $15,942 $14,994
Goodwill and other
intangible assets, net
of deferred taxes $9,737 $8,812 $8,734
Total assets $291,081 $145,610 $138,920
Add back: AOCL assets 3,282 2,107 (30)
Total assets,
excluding AOCL $294,363 $147,717 $138,890
Tangible common equity
ratio, as reported 2.8% 3.6% 4.7%
Add back: AOCL assets 1.3 1.5 .10
Tangible common equity
ratio, as adjusted 4.1% 5.1% 4.8%
( c ) The ratios as of December 31, 2008 are estimated.
(d) See definition in note (e), page 16.
The PNC Financial Services Group, Inc. Consolidated Financial Highlights
(Unaudited)
Page 16
December 31 September 30 December 31
2008 (a) 2008 2007
BALANCE SHEET DATA
Dollars in millions,
except per share data
Assets $291,081 $145,610 $138,920
Loans, net of unearned
income 175,489 75,184 68,319
Allowance for loan and
lease losses 3,917 1,053 830
Investment securities 43,473 31,031 30,225
Loans held for sale 4,366 1,922 3,927
Goodwill 8,868 8,829 8,405
Equity investments 8,554 6,735 6,045
Deposits 192,865 84,984 82,696
Borrowed funds 52,240 32,139 30,931
Shareholders' equity 25,422 14,218 14,854
Common shareholders'
equity 17,490 13,712 14,847
Book value per common
share 39.44 39.44 43.60
Common shares outstanding
(millions) 443 348 341
Loans to deposits 91% 88% 83%
ASSETS ADMINISTERED (billions)
Managed $110 $64 $74
Nondiscretionary 125 105 112
FUND ASSETS SERVICED (billions)
Accounting/administration
net assets $839 $907 $990
Custody assets 379 415 500
CAPITAL RATIOS (b)
Tier 1 risk-based ( c ) 9.7% 8.2% 6.8%
Total risk-based 13.5 11.9 10.3
Leverage (d) 17.6 7.2 6.2
Tangible common equity (e) 2.8 3.6 4.7
Tangible common equity,
excluding the impact of
accumulated other
comprehensive loss (e) 4.1 5.1 4.8
SELECTED STATISTICS
Period-end employees 59,595 28,129 28,320
Branches 2,589 1,142 1,109
ATMs 6,232 4,018 3,900
Residential mortgage
servicing portfolio
(billions) $187
Commercial mortgage
servicing portfolio
(billions) $286 $247 $243
ASSET QUALITY RATIOS
Nonperforming loans to
total loans .95% 1.12% .66%
Nonperforming assets to
total loans and
foreclosed assets 1.23 1.16 .72
Nonperforming assets to
total assets .74 .60 .36
Net charge-offs to
average loans (for the
three months ended) 1.09 .66 .49
Allowance for loan and
lease losses to total
loans 2.23 1.40 1.21
Allowance for loan and
lease losses to
nonperforming loans 236 125 183
(a) Information as of December 31, 2008 includes the impact of
National City Corporation, which we acquired as of that date.
(b) The ratios as of December 31, 2008 are estimated.
( c ) See page 15 for a reconciliation of the Tier 1 risk-based capital
ratio to the Tier 1 risk-based capital ratio excluding the impact
of the TARP issuance at December 31, 2008.
(d) The leverage ratio is calculated as Tier 1 risk-based capital
divided by adjusted average total assets. The leverage ratio at
December 31, 2008 reflected the favorable impact on Tier 1 risk-
based capital from the issuance of securities under TARP and the
issuance of PNC common stock in connection with the National City
acquisition, both of which occurred on December 31, 2008. In
addition, the ratio as of that date did not reflect any impact of
National City on PNC's adjusted average total assets.
(e) Period-end common shareholders' equity less goodwill and other
intangible assets net of eligible deferred taxes (excluding
mortgage servicing rights) divided by period-end assets less
goodwill and other intangible assets net of eligible deferred
taxes (excluding mortgage servicing rights). As of March 31,
2008, deferred taxes on taxable combinations were added to
eligible deferred income taxes for non-taxable combinations that
are used in the calculation of the tangible common equity ratio.
See page 15 for a reconciliation of tangible common equity to
tangible common equity excluding the impact of accumulated other
comprehensive loss.
The PNC Financial Services Group, Inc. Consolidated Financial
Highlights
(Unaudited)
Page 17
IMPACT OF NATIONAL CITY ACQUISITION
CONSOLIDATING BALANCE SHEET
In millions
At December 31, 2008
PNC Eliminations
Excluding Purchase and PNC
National National Account- Reclassific- As
City (a) City ing (b) ations ( c )Reported
Assets
Cash and due from
banks $2,327 $2,144 $4,471
Federal funds sold
and resale
agreements 1,721 7,335 $(7,200) 1,856
Trading securities 691 1,040 $(6) 1,725
Other short-term
investments 7,669 8,145 70 15,884
Loans held for sale 2,181 3,220 (3) (1,032) 4,366
Investment
securities 30,146 13,133 194 43,473
Loans, net of
unearned
income 75,830 108,077 (9,398) 980 175,489
Allowance for
loan and
lease losses (1,343) (4,856) 2,282 (3,917)
Net loans 74,487 103,221 (7,116) 980 171,572
Goodwill 8,868 2,999 (2,999) 8,868
Equity investments 6,494 1,564 451 45 8,554
Other 22,789 10,268 (649) (2,096) 30,312
Total assets $157,373 $153,069 $(10,128) $(9,233) $291,081
Liabilities
Deposits
Noninterest-
bearing $21,238 $15,910 $37,148
Interest-
bearing 67,988 85,799 $1,930 155,717
Total deposits 89,226 101,709 1,930 192,865
Borrowed funds
Federal funds
purchased and
repurchase
agreements 8,852 3,486 15 $(7,200) 5,153
Federal Home
Loan Bank
borrowings 9,202 8,997 (304) 17,895
Bank notes and
senior debt 6,784 4,429 (256) 10,957
Subordinated debt 5,642 7,062 (1,496) 11,208
Other 3,540 3,090 (354) 751 7,027
Total borrowed
funds 34,020 27,064 (2,395) (6,449) 52,240
Allowance for
unfunded loan
commitments and
letters of credit 116 74 154 344
Accrued expenses 2,235 596 (1,814) 2,932 3,949
Other 9,716 10,042 (8) (5,715) 14,035
Total
liabilities 135,313 139,485 (2,133) (9,232) 263,433
Minority and
noncontrolling
interests in
consolidated
entities 2,074 152 2,226
Shareholders'
Equity
Preferred stock (d)
Common stock 1,787 9,709 (9,235) 2,261
Capital surplus -
preferred stock 7,768 150 7,918
Capital surplus -
common stock and
other 3,198 10,675 (5,544) (1) 8,328
Retained earnings 11,779 (6,621) 6,303 11,461
Accumulated other
comprehensive
income (loss) (3,949) (331) 331 (3,949)
Common stock held
in treasury (597) (597)
Total
shareholders'
equity 19,986 13,432 (7,995) (1) 25,422
Total
liabilities,
minority and
noncontrolling
interests,
and
shareholders'
equity $157,373 $153,069 $(10,128) $(9,233) $291,081
(a) Includes $7.6 billion related to the issuance to the US Treasury
under the US Treasury's Troubled Asset Relief Program ("TARP") on
December 31, 2008 of (1) Fixed Rate Cumulative Perpetual Preferred
Stock, Series N, and (2) a warrant for the US Treasury to purchase
PNC common stock.
(b) Includes conforming provision for credit losses.
( c ) Includes elimination of intercompany funding and capital
transactions, redesignation of loans held for sale to loans held
for investment, and other reclassifications.
(d) Par value less than $.5 million.
SOURCE PNC Financial Services Group, Inc.
Released February 3, 2009