[PNC LOGO] THE PNC FINANCIAL SERVICES GROUP, INC. FINANCIAL SUPPLEMENT (UNAUDITED) FIRST QUARTER 2003 THE PNC FINANCIAL SERVICES GROUP, INC. FINANCIAL SUPPLEMENT (UNAUDITED) FIRST QUARTER 2003
Page ------------ Consolidated Statement of Income 1 Consolidated Balance Sheet 2 Capital and Asset Quality Ratios 2 Results of Businesses Summary 3 Banking Businesses Regional Community Banking 4 Wholesale Banking Corporate Banking 5 PNC Real Estate Finance 6 PNC Business Credit 7 PNC Advisors 8 Asset Management and Processing Businesses BlackRock 9 PFPC 10 Details of Net Interest Income and Net Interest Margin 11 Details of Noninterest Income and Noninterest Expense 12 Consolidated Average Balance Sheet 13 Details of Loans and Loans Held for Sale 14 Allowances For Credit Losses And Unfunded Loan Commitments And Letters of Credit 15 Details of Nonperforming Assets 16-17 Glossary of Terms 18 Business Definitions 20
The information contained in this Financial Supplement is preliminary and based on data available at the time of the presentation. It speaks only as of the particular date or dates included in the accompanying pages. The PNC Financial Services Group, Inc. ("Corporation") does not undertake an obligation to, and disclaims any duty to, correct or update any of the information provided. The Corporation's future financial performance is subject to risks and uncertainties as described in its SEC filings. Certain prior period amounts included in this Financial Supplement have been reclassified to conform to the current period presentation. In addition, amounts included in this Financial Supplement are presented on a continuing operations basis, unless otherwise noted. THE PNC FINANCIAL SERVICES GROUP, INC. Page 1 CONSOLIDATED STATEMENT OF INCOME (Unaudited)
March 31 December 31 September 30 June 30 March 31 For the three months ended - in millions, except per share data 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST INCOME Loans and fees on loans $507 $540 $567 $588 $599 Securities 143 150 140 149 177 Loans held for sale 12 18 24 41 52 Other 30 33 38 26 30 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest income 692 741 769 804 858 - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST EXPENSE Deposits 132 149 162 172 176 Borrowed funds 57 68 79 77 92 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest expense 189 217 241 249 268 - ------------------------------------------------------------------------------------------------------------------------------------ Net interest income 503 524 528 555 590 Provision for credit losses 36 65 73 89 82 - ------------------------------------------------------------------------------------------------------------------------------------ Net interest income less provision for credit losses 467 459 455 466 508 - ------------------------------------------------------------------------------------------------------------------------------------ NONINTEREST INCOME Asset management 207 202 200 230 221 Fund servicing 193 194 193 217 212 Service charges on deposits 57 61 57 55 54 Brokerage 41 44 41 55 55 Consumer services 59 61 62 61 55 Corporate services 116 151 108 149 118 Equity management (4) (14) (22) (13) (2) Net securities gains 56 1 68 16 4 Other 70 66 64 100 73 - ------------------------------------------------------------------------------------------------------------------------------------ Total noninterest income 795 766 771 870 790 - ------------------------------------------------------------------------------------------------------------------------------------ NONINTEREST EXPENSE Staff expense 438 408 422 441 430 Net occupancy 90 62 64 59 58 Equipment 69 68 68 67 68 Marketing 15 11 14 13 13 Distributions on capital securities 14 14 15 14 15 Other 230 228 207 245 223 - ------------------------------------------------------------------------------------------------------------------------------------ Total noninterest expense 856 791 790 839 807 - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before minority interest and income taxes 406 434 436 497 491 Minority interest in income of consolidated entities 11 11 4 12 10 Income taxes 133 145 147 165 164 - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 262 278 285 320 317 Income (loss) from discontinued operations (less applicable income tax benefit of $9) (16) - ------------------------------------------------------------------------------------------------------------------------------------ Net income $262 $262 $285 $320 $317 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS PER COMMON SHARE From continuing operations Basic $.93 $.97 $1.00 $1.13 $1.12 Diluted $.92 $.97 $1.00 $1.12 $1.11 From net income Basic $.93 $.92 $1.00 $1.13 $1.12 Diluted $.92 $.92 $1.00 $1.12 $1.11 - ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE COMMON SHARES OUTSTANDING Basic 283 284 284 283 283 Diluted 284 286 285 285 285 ====================================================================================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 2 CONSOLIDATED BALANCE SHEET (Unaudited)
March 31 December 31 September 30 June 30 March 31 In millions, except par value 2003 2002 2002 2002 2002 - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $3,626 $3,201 $3,403 $2,839 $2,786 Federal funds sold 1,913 1,847 3,031 1,100 710 Other short-term investments 2,012 1,811 1,730 1,795 1,395 Loans held for sale 1,702 1,607 1,989 2,441 3,648 Securities 14,973 13,763 12,536 12,313 11,092 Loans, net of unearned income of $1,018, $1,075, $1,108, $1,104 and $1,136 35,245 35,450 35,917 37,684 38,539 Allowance for credit losses (680) (673) (648) (654) (613) - --------------------------------------------------------------------------------------------------------------------------------- Net loans 34,565 34,777 35,269 37,030 37,926 Goodwill 2,356 2,313 2,313 2,314 2,315 Other intangible assets 330 333 337 342 344 Other 7,142 6,725 7,051 6,739 6,447 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $68,619 $66,377 $67,659 $66,913 $66,663 ================================================================================================================================= LIABILITIES Deposits Noninterest-bearing $11,263 $9,538 $10,130 $9,227 $8,686 Interest-bearing 35,818 35,444 34,830 35,200 36,224 - --------------------------------------------------------------------------------------------------------------------------------- Total deposits 47,081 44,982 44,960 44,427 44,910 Borrowed funds Federal funds purchased 34 38 35 37 34 Repurchase agreements 1,082 814 988 971 827 Bank notes and senior debt 3,850 4,400 4,962 5,434 5,480 Federal Home Loan Bank borrowings 1,146 1,256 1,270 1,277 1,787 Subordinated debt 2,234 2,423 2,423 2,332 2,275 Other borrowed funds 188 185 269 429 585 - --------------------------------------------------------------------------------------------------------------------------------- Total borrowed funds 8,534 9,116 9,947 10,480 10,988 Allowance for unfunded loan commitments and letters of credit 77 84 79 73 99 Accrued expenses 2,023 2,046 2,077 1,865 1,575 Other 3,020 2,172 2,776 2,620 2,081 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 60,735 58,400 59,839 59,465 59,653 - --------------------------------------------------------------------------------------------------------------------------------- Minority interest 244 270 255 210 183 Mandatorily redeemable capital securities of subsidiary trusts 848 848 848 848 848 SHAREHOLDERS' EQUITY Preferred stock 1 Common stock - $5 par value Authorized 800 shares, issued 353 shares 1,764 1,764 1,764 1,764 1,764 Capital surplus 1,102 1,101 1,103 1,102 1,090 Retained earnings 7,311 7,187 7,062 6,913 6,730 Deferred benefit expense (28) (9) (11) (13) (15) Accumulated other comprehensive income (loss) 293 321 325 170 (30) Common stock held in treasury at cost: 71, 68, 69, 69 and 69 shares (3,650) (3,505) (3,526) (3,546) (3,561) - --------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 6,792 6,859 6,717 6,390 5,979 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities, minority interest, capital securities and shareholders' equity $68,619 $66,377 $67,659 $66,913 $66,663 ================================================================================================================================= CAPITAL RATIOS Tier I risk-based (a) 8.6% 8.8% 8.8% 8.2% 7.7% Total risk-based (a) 12.2 12.5 12.5 12.0 11.7 Leverage (a) 8.0 8.1 7.8 7.4 6.9 Shareholders' equity to total assets 9.90 10.33 9.93 9.55 8.97 Common shareholders' equity to total assets 9.89 10.32 9.91 9.53 8.95 ASSET QUALITY RATIOS Nonperforming assets to total loans, loans held for sale and foreclosed assets 1.10% 1.13% 1.08% 1.25% 1.04% Nonperforming loans to total loans .95 .87 .75 .86 .65 Allowance for credit losses to total loans 1.93 1.90 1.80 1.74 1.59 Allowance for credit losses to nonperforming loans 203 218 239 201 244 Net charge-offs to average loans (For the three months ended) .42 .39 .79 .78 .43 =================================================================================================================================
(a) Estimated for March 31, 2003. THE PNC FINANCIAL SERVICES GROUP, INC. Page 3 RESULTS OF BUSINESSES - SUMMARY (Unaudited) (a) Three months ended - dollars in millions
March 31 December 31 September 30 June 30 March 31 EARNINGS (LOSS) 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------------------ Banking Businesses Regional Community Banking $152 $152 $192 $176 $177 Wholesale Banking Corporate Banking 42 33 30 54 33 PNC Real Estate Finance 16 23 19 26 22 PNC Business Credit 14 28 8 2 2 - ------------------------------------------------------------------------------------------------------------------------ Total wholesale banking 72 84 57 82 57 PNC Advisors 16 13 20 31 33 - ------------------------------------------------------------------------------------------------------------------------ Total banking businesses 240 249 269 289 267 - ------------------------------------------------------------------------------------------------------------------------ Asset management and processing businesses BlackRock 35 34 33 35 31 PFPC 12 8 19 21 17 - ------------------------------------------------------------------------------------------------------------------------ Total asset management and processing businesses 47 42 52 56 48 - ------------------------------------------------------------------------------------------------------------------------ Total business earnings 287 291 321 345 315 Other (25) (13) (36) (25) 2 - ------------------------------------------------------------------------------------------------------------------------ Results from continuing operations 262 278 285 320 317 - ------------------------------------------------------------------------------------------------------------------------ Discontinued operations (16) - ------------------------------------------------------------------------------------------------------------------------ Total consolidated $262 $262 $285 $320 $317 ========================================================================================================================
March 31 December 31 September 30 June 30 March 31 REVENUE (b) 2003 2002 2002 2002 2002 - -------------------------------------------------------------------------------------------------------------------------------- Banking Businesses Regional Community Banking $518 $511 $577 $543 $551 Wholesale Banking Corporate Banking 189 198 177 217 194 PNC Real Estate Finance 56 58 55 65 51 PNC Business Credit 44 49 43 45 45 - -------------------------------------------------------------------------------------------------------------------------------- Total wholesale banking 289 305 275 327 290 PNC Advisors 147 150 150 171 183 - -------------------------------------------------------------------------------------------------------------------------------- Total banking businesses 954 966 1,002 1,041 1,024 - -------------------------------------------------------------------------------------------------------------------------------- Asset management and processing businesses BlackRock 143 137 137 157 146 PFPC 193 195 192 217 213 - -------------------------------------------------------------------------------------------------------------------------------- Total asset management and processing businesses 336 332 329 374 359 - -------------------------------------------------------------------------------------------------------------------------------- Total business revenue 1,290 1,298 1,331 1,415 1,383 Other 11 (5) (28) 13 - -------------------------------------------------------------------------------------------------------------------------------- Total consolidated $1,301 $1,293 $1,303 $1,428 $1,383 ================================================================================================================================
(a) See "Review of Businesses" within the Financial Review section of the Corporation's 2002 Annual Report to Shareholders for additional information regarding presentation of results for the Corporation's major businesses. The Corporation's line of business information is based on management information systems, assumptions and methodologies that are under review on an ongoing basis. (b) Business revenue is presented on a taxable-equivalent basis except for BlackRock and PFPC, which are presented on a book (GAAP) basis. A reconciliation of total consolidated revenue on a book basis to total consolidated revenue on a taxable-equivalent basis is as follows (in millions):
March 31 December 31 September 30 June 30 March 31 2003 2002 2002 2002 2002 ------------------------------------------------------------------- Total consolidated revenue, book (GAAP) basis $1,298 $1,290 $1,299 $1,425 $1,380 Taxable-equivalent adjustment 3 3 4 3 3 ------------------------------------------------------------------- Total consolidated revenue, taxable-equivalent basis $1,301 $1,293 $1,303 $1,428 $1,383 ===================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 4 REGIONAL COMMUNITY BANKING (Unaudited)
Three months ended Taxable-equivalent basis March 31 December 31 September 30 June 30 March 31 Dollars in millions 2003 2002 2002 2002 2002 - --------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Net interest income $317 $331 $337 $357 $384 Other noninterest income 163 180 174 171 164 Net securities gains 38 66 15 3 - --------------------------------------------------------------------------------------------------------------------------------- Total revenue 518 511 577 543 551 Provision for credit losses 8 15 14 11 12 Noninterest expense 278 264 268 263 266 - --------------------------------------------------------------------------------------------------------------------------------- Pretax earnings 232 232 295 269 273 Income taxes 80 80 103 93 96 - --------------------------------------------------------------------------------------------------------------------------------- Earnings $152 $152 $192 $176 $177 ================================================================================================================================= AVERAGE BALANCE SHEET Loans Consumer Home equity $7,675 $7,395 $7,236 $7,031 $6,733 Indirect 438 458 508 567 633 Other consumer 546 582 610 641 697 - --------------------------------------------------------------------------------------------------------------------------------- Total consumer 8,659 8,435 8,354 8,239 8,063 Residential mortgage 3,276 3,146 3,801 4,422 5,096 Commercial 3,939 3,857 3,479 3,547 3,511 Vehicle leasing 1,336 1,464 1,606 1,752 1,895 Other 117 115 118 121 122 - --------------------------------------------------------------------------------------------------------------------------------- Total loans 17,327 17,017 17,358 18,081 18,687 Securities 12,504 11,982 10,216 10,165 12,206 Education and other loans held for sale 1,197 1,215 1,181 1,397 1,488 Assigned assets and other assets 7,961 8,661 10,433 9,446 6,368 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $38,989 $38,875 $39,188 $39,089 $38,749 ================================================================================================================================= Deposits Noninterest-bearing demand $5,264 $5,242 $5,063 $4,996 $4,879 Interest-bearing demand 6,112 6,191 5,990 5,993 6,053 Money market 12,361 12,184 12,293 12,348 12,292 - --------------------------------------------------------------------------------------------------------------------------------- Total transaction deposits 23,737 23,617 23,346 23,337 23,224 Savings 1,976 1,950 1,978 1,996 1,924 Certificates 9,360 9,653 10,016 10,209 10,310 - --------------------------------------------------------------------------------------------------------------------------------- Total deposits 35,073 35,220 35,340 35,542 35,458 Other liabilities 1,285 1,035 1,204 911 675 Assigned capital 2,631 2,620 2,644 2,636 2,616 - --------------------------------------------------------------------------------------------------------------------------------- Total funds $38,989 $38,875 $39,188 $39,089 $38,749 ================================================================================================================================= PERFORMANCE RATIOS Return on assigned capital 23% 23% 29% 27% 27% Noninterest income to total revenue 39 35 42 34 30 Efficiency 54 52 46 48 48 ================================================================================================================================= OTHER INFORMATION (a) Total nonperforming assets $86 $82 $65 $65 $59 Vehicle leasing outstandings, net of unearned income $1,239 $1,386 $1,511 $1,661 $1,805 Net charge-offs $13 $15 $17 $12 $12 Net gains on loans held for sale $1 $10 $3 $9 $1 Average FTEs 9,404 9,610 9,721 9,598 9,699 ATMs 3,594 3,550 3,450 3,350 3,300 Branches 713 714 714 713 714 Financial consultants 674 645 626 650 580 Business banking centers 193 193 188 158 140 Checking relationships 1,555,000 1,542,000 1,538,000 1,494,000 1,465,000 Online banking users 647,287 606,752 563,471 508,608 466,213 Deposit households using online banking 38.6% 36.6% 34.7% 32.6% 30.8% =================================================================================================================================
(a) Presented as of period-end, except for net charge-offs, net gains on loans held for sale and average full-time equivalent employees (FTEs). THE PNC FINANCIAL SERVICES GROUP, INC. Page 5 WHOLESALE BANKING - CORPORATE BANKING (Unaudited)
Three months ended Taxable-equivalent basis March 31 December 31 September 30 June 30 March 31 Dollars in millions 2003 2002 2002 2002 2002 - -------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Net interest income $76 $78 $88 $88 $95 Noninterest income 113 120 89 129 99 - -------------------------------------------------------------------------------------------------------------------- Total revenue 189 198 177 217 194 Provision for credit losses 15 64 44 49 46 Noninterest expense 109 87 89 86 97 - -------------------------------------------------------------------------------------------------------------------- Pretax earnings 65 47 44 82 51 Income taxes 23 14 14 28 18 - -------------------------------------------------------------------------------------------------------------------- Earnings $42 $33 $30 $54 $33 ==================================================================================================================== AVERAGE BALANCE SHEET Loans $8,604 $8,821 $9,468 $9,701 $9,930 Loans held for sale 291 464 804 1,717 2,519 Other assets 2,755 3,133 3,065 2,873 2,768 - -------------------------------------------------------------------------------------------------------------------- Total assets $11,650 $12,418 $13,337 $14,291 $15,217 ==================================================================================================================== Deposits $5,097 $4,906 $4,746 $4,600 $4,475 Assigned funds and other liabilities 5,679 6,581 7,589 8,620 9,601 Assigned capital 874 931 1,002 1,071 1,141 - -------------------------------------------------------------------------------------------------------------------- Total funds $11,650 $12,418 $13,337 $14,291 $15,217 ==================================================================================================================== PERFORMANCE RATIOS Return on assigned capital 19% 14% 12% 20% 12% Noninterest income to total revenue 60 61 50 59 51 Efficiency 58 44 50 40 50 ==================================================================================================================== OTHER INFORMATION (a) Total nonperforming assets $166 $187 $158 $261 $191 Net charge-offs $18 $15 $51 $55 $16 Average FTEs 1,971 2,109 2,086 2,092 2,206 INSTITUTIONAL LENDING REPOSITIONING Loans held for sale Credit exposure $315 $564 $964 $1,822 $3,519 Outstandings $155 $245 $415 $920 $1,714 Exit portfolio Credit exposure $349 $413 $611 $1,178 $1,945 Outstandings $4 $12 $12 $113 Net gains on loans held for sale $17 $55 $21 $50 $29 ====================================================================================================================
(a) Presented as of period-end, except for net charge-offs, net gains on loans held for sale and average full-time equivalent employees (FTEs). THE PNC FINANCIAL SERVICES GROUP, INC. Page 6 WHOLESALE BANKING - PNC REAL ESTATE FINANCE (Unaudited)
Three months ended Taxable-equivalent basis March 31 December 31 September 30 June 30 March 31 Dollars in millions except as noted 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Net interest income $28 $30 $27 $30 $30 Noninterest income Commercial mortgage banking 19 19 14 14 18 Other 9 9 14 21 3 - ------------------------------------------------------------------------------------------------------------------------------- Total noninterest income 28 28 28 35 21 - ------------------------------------------------------------------------------------------------------------------------------- Total revenue 56 58 55 65 51 Provision for credit losses 8 (3) (2) (5) Noninterest expense 38 41 45 38 36 - ------------------------------------------------------------------------------------------------------------------------------- Pretax earnings 10 20 12 27 20 Minority interest benefit (2) Income tax (benefit) expense (6) (3) (5) 1 (2) - ------------------------------------------------------------------------------------------------------------------------------- Earnings $16 $23 $19 $26 $22 =============================================================================================================================== AVERAGE BALANCE SHEET Loans Commercial real estate $2,052 $2,167 $2,279 $2,245 $2,228 Commercial - real estate related 1,397 1,463 1,407 1,462 1,555 - ------------------------------------------------------------------------------------------------------------------------------- Total loans 3,449 3,630 3,686 3,707 3,783 Commercial mortgages held for sale 315 327 193 246 318 Other loans held for sale 53 94 106 155 211 Other assets 950 970 907 881 862 - ------------------------------------------------------------------------------------------------------------------------------- Total assets $4,767 $5,021 $4,892 $4,989 $5,174 =============================================================================================================================== Deposits $950 $892 $789 $699 $617 Assigned funds and other liabilities 3,454 3,746 3,714 3,893 4,158 Assigned capital 363 383 389 397 399 - ------------------------------------------------------------------------------------------------------------------------------- Total funds $4,767 $5,021 $4,892 $4,989 $5,174 =============================================================================================================================== PERFORMANCE RATIOS Return on assigned capital 18% 24% 19% 26% 22% Noninterest income to total revenue 50 48 51 54 41 Efficiency 68 71 82 58 71 =============================================================================================================================== OTHER INFORMATION (a) Total nonperforming assets $12 $2 $3 $6 $12 Net (recoveries) charge-offs $(1) $(5) Average FTEs 770 780 788 795 792 Commercial mortgage servicing portfolio (b) $75 $74 $74 $71 $69 Gains on sales of commercial mortgages (c) $9 $11 $5 $5 $8 INSTITUTIONAL LENDING REPOSITIONING Loans held for sale Credit exposure $19 $49 $68 $124 $320 Outstandings $19 $44 $55 $105 $234 Exit portfolio Credit exposure $25 $25 $25 $25 $25 Outstandings $5 $4 $13 $6 Net gains (losses) on loans held for sale $1 $(3) $12 $(6) ===============================================================================================================================
(a) Presented as of period-end, except for net (recoveries) charge-offs, net gains (losses) on loans held for sale and average full-time equivalent employees (FTEs). (b) In billions. (c) Included in "commercial mortgage banking" in the income statement above. THE PNC FINANCIAL SERVICES GROUP, INC. Page 7 WHOLESALE BANKING - PNC BUSINESS CREDIT (Unaudited)
Three months ended Taxable-equivalent basis March 31 December 31 September 30 June 30 March 31 Dollars in millions 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Net interest income $32 $33 $35 $33 $33 Noninterest income 12 16 8 12 12 - ------------------------------------------------------------------------------------------------------------------------------- Total revenue 44 49 43 45 45 Provision for credit losses 7 (8) 15 29 28 Noninterest expense 14 12 14 13 14 - ------------------------------------------------------------------------------------------------------------------------------- Pretax earnings 23 45 14 3 3 Income tax expense 9 17 6 1 1 - ------------------------------------------------------------------------------------------------------------------------------- Earnings $14 $28 $8 $2 $2 =============================================================================================================================== AVERAGE BALANCE SHEET Loans $3,381 $3,490 $3,524 $3,641 $3,484 Loans held for sale 18 23 71 86 92 Other assets 229 225 219 251 241 - ------------------------------------------------------------------------------------------------------------------------------- Total assets $3,628 $3,738 $3,814 $3,978 $3,817 =============================================================================================================================== Deposits $82 $102 $88 $78 $68 Assigned funds and other liabilities 3,309 3,392 3,476 3,643 3,500 Assigned capital 237 244 250 257 249 - ------------------------------------------------------------------------------------------------------------------------------- Total funds $3,628 $3,738 $3,814 $3,978 $3,817 =============================================================================================================================== PERFORMANCE RATIOS Return on assigned capital 24% 46% 13% 3% 3% Noninterest income to total revenue 27 33 19 27 27 Efficiency 32 24 33 29 31 =============================================================================================================================== OTHER INFORMATION (a) Total nonperforming assets $139 $142 $179 $164 $172 Net charge-offs $5 $6 $4 $5 $17 NBOC put option liability $49 $57 $78 $86 $107 NBOC put option valuation income (b) $6 $9 $4 $10 $5 Marketing locations 24 23 23 24 23 Average FTEs 250 249 249 248 217 INSTITUTIONAL LENDING REPOSITIONING Loans held for sale Credit exposure $10 $13 $46 $73 $35 Outstandings $7 $9 $25 $41 $27 Net gains (losses) on loans held for sale $(3) $(4) $(7) ===============================================================================================================================
(a) Presented as of period-end, except for net charge-offs, net gains (losses) on loans held for sale and average full-time equivalent employees (FTEs). (b) Included in noninterest income. THE PNC FINANCIAL SERVICES GROUP, INC. Page 8 PNC ADVISORS (Unaudited)
Three months ended Taxable-equivalent basis March 31 December 31 September 30 June 30 March 31 Dollars in millions except as noted 2003 2002 2002 2002 2002 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Net interest income $21 $24 $24 $26 $26 Noninterest income Investment management and trust 76 76 76 90 92 Brokerage 26 29 29 34 39 Other 24 21 21 21 26 - ----------------------------------------------------------------------------------------------------------------------------------- Total noninterest income 126 126 126 145 157 - ----------------------------------------------------------------------------------------------------------------------------------- Total revenue 147 150 150 171 183 Provision for credit losses 1 2 1 Noninterest expense 122 129 116 122 130 - ----------------------------------------------------------------------------------------------------------------------------------- Pretax earnings 25 20 32 48 53 Income taxes 9 7 12 17 20 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings $16 $13 $20 $31 $33 =================================================================================================================================== AVERAGE BALANCE SHEET Loans Consumer $1,280 $1,264 $1,251 $1,226 $1,170 Residential mortgage 327 394 464 535 613 Commercial 439 439 433 495 475 Other 284 276 314 341 349 - ----------------------------------------------------------------------------------------------------------------------------------- Total loans 2,330 2,373 2,462 2,597 2,607 Other assets 540 417 410 419 435 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $2,870 $2,790 $2,872 $3,016 $3,042 =================================================================================================================================== Deposits $2,085 $2,016 $1,955 $2,000 $2,058 Assigned funds and other liabilities 263 243 406 495 455 Assigned capital 522 531 511 521 529 - ----------------------------------------------------------------------------------------------------------------------------------- Total funds $2,870 $2,790 $2,872 $3,016 $3,042 =================================================================================================================================== PERFORMANCE RATIOS Return on assigned capital 12% 10% 16% 24% 25% Noninterest income to total revenue 86 84 84 85 86 Efficiency 83 86 77 71 71 =================================================================================================================================== ASSETS UNDER MANAGEMENT (a) Personal investment management and trust $40 $41 $40 $45 $48 Institutional trust 9 9 10 11 12 - ----------------------------------------------------------------------------------------------------------------------------------- Total $49 $50 $50 $56 $60 - ----------------------------------------------------------------------------------------------------------------------------------- Asset Type Equity $25 $26 $26 $31 $36 Fixed income 16 17 17 18 17 Liquidity 8 7 7 7 7 - ----------------------------------------------------------------------------------------------------------------------------------- Total $49 $50 $50 $56 $60 =================================================================================================================================== OTHER INFORMATION (b) Total nonperforming assets $5 $5 $4 $4 $4 Net charge-offs $1 $2 $1 Brokerage assets administered (In billions) $31 $32 $31 $33 $29 Full service brokerage offices 102 106 108 109 113 Financial consultants 585 615 621 644 669 Margin loans $247 $260 $257 $297 $301 Average FTEs 3,290 3,317 3,319 3,347 3,421 ===================================================================================================================================
(a) In billions; excludes brokerage assets administered. (b) Presented as of period-end, except for net charge-offs and average full-time equivalent employees (FTEs). THE PNC FINANCIAL SERVICES GROUP, INC. Page 9 BLACKROCK (Unaudited)
Three months ended March 31 December 31 September 30 June 30 March 31 Dollars in millions except as noted 2003 2002 2002 2002 2002 - ----------------------------------------------------------------------------------------------------------- INCOME STATEMENT Investment advisory and administrative fees $127 $122 $122 $144 $132 Other income 16 15 15 13 14 - ----------------------------------------------------------------------------------------------------------- Total revenue 143 137 137 157 146 Operating expense 81 74 74 90 83 Fund administration and servicing costs 8 8 8 12 13 - ----------------------------------------------------------------------------------------------------------- Total expense 89 82 82 102 96 - ----------------------------------------------------------------------------------------------------------- Operating income 54 55 55 55 50 Nonoperating income 3 2 1 4 3 - ----------------------------------------------------------------------------------------------------------- Pretax earnings 57 57 56 59 53 Income taxes 22 23 23 24 22 - ----------------------------------------------------------------------------------------------------------- Earnings $35 $34 $33 $35 $31 =========================================================================================================== PERIOD-END BALANCE SHEET Goodwill and other intangible assets $183 $183 $181 $181 $181 Other assets 653 681 609 553 486 - ----------------------------------------------------------------------------------------------------------- Total assets $836 $864 $790 $734 $667 =========================================================================================================== Liabilities $168 $229 $194 $173 $144 Stockholders' equity 668 635 596 561 523 - ----------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $836 $864 $790 $734 $667 =========================================================================================================== PERFORMANCE DATA Return on equity 22% 22% 23% 25% 25% Operating margin (a) 40 43 43 38 38 Diluted earnings per share $.54 $.52 $.51 $.53 $.48 =========================================================================================================== ASSETS UNDER MANAGEMENT (in billions) Separate accounts Fixed income $168 $157 $146 $141 $124 Liquidity 6 6 5 6 5 Liquidity - securities lending 6 6 6 6 10 Equity 9 10 8 10 9 Alternative investment products 6 5 6 5 6 - ----------------------------------------------------------------------------------------------------------- Total separate accounts 195 184 171 168 154 Mutual funds (b) Fixed income 20 19 19 17 16 Liquidity 56 66 52 59 60 Equity 3 4 4 6 8 - ----------------------------------------------------------------------------------------------------------- Total mutual funds 79 89 75 82 84 - ----------------------------------------------------------------------------------------------------------- Total assets under management $274 $273 $246 $250 $238 =========================================================================================================== OTHER INFORMATION Average FTEs 872 867 848 800 774 ===========================================================================================================
(a) Calculated as operating income divided by total revenue less fund administration and servicing costs. A reconciliation of this presentation to operating margin calculated on a GAAP basis (operating income divided by total revenue) follows in millions: Operating income $54 $55 $55 $55 $50 -------------------------------------------------------- Total revenue $143 $137 $137 $157 $146 Less fund administration and servicing costs 8 8 8 12 13 -------------------------------------------------------- Revenue used for operating margin calculation, as reported $135 $129 $129 $145 $133 Operating margin, as reported 40% 43% 43% 38% 38% Operating margin, GAAP basis 38% 40% 40% 35% 34% - -----------------------------------------------------------------------------------------------------------
PNC believes that operating margin, as reported, is an effective indicator of management's ability to effectively employ BlackRock's resources. Fund administration and servicing costs have been excluded from the operating margin calculation because these costs are a fixed, asset-based expense which can fluctuate based on the discretion of a third party. (b) Includes BlackRock Funds, BlackRock Provident Institutional Funds, BlackRock Closed End Funds, Short Term Investment Funds and BlackRock Global Funds. THE PNC FINANCIAL SERVICES GROUP, INC. Page 10 PFPC (Unaudited)
Three months ended March 31 December 31 September 30 June 30 March 31 Dollars in millions except as noted 2003 2002 2002 2002 2002 - --------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT Fund servicing revenue $193 $195 $192 $217 $213 Operating expense 162 168 164 167 170 (Accretion)/amortization of other intangibles, net (4) (5) (4) (5) (5) - --------------------------------------------------------------------------------------------------------------------------------- Operating income 35 32 32 55 48 Nonoperating income (a) 2 2 2 2 4 Debt financing 17 21 22 22 23 Adjustment to facilities consolidation charge (19) - --------------------------------------------------------------------------------------------------------------------------------- Pretax earnings 20 13 31 35 29 Income taxes 8 5 12 14 12 - --------------------------------------------------------------------------------------------------------------------------------- Earnings $12 $8 $19 $21 $17 ================================================================================================================================= AVERAGE BALANCE SHEET Goodwill and other intangible assets $1,025 $1,022 $1,025 $1,030 $1,036 Other assets 840 857 868 902 812 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $1,865 $1,879 $1,893 $1,932 $1,848 ================================================================================================================================= Assigned funds and other liabilities $1,657 $1,671 $1,685 $1,724 $1,640 Assigned capital 208 208 208 208 208 - --------------------------------------------------------------------------------------------------------------------------------- Total funds $1,865 $1,879 $1,893 $1,932 $1,848 ================================================================================================================================= PERFORMANCE RATIOS Return on assigned capital 23% 15% 36% 40% 33% Operating margin (b) 18 16 27 25 23 ================================================================================================================================= SERVICING STATISTICS Accounting/administration net assets (c) Domestic $542 $481 $464 $485 $520 Foreign (d) 31 29 25 28 23 - --------------------------------------------------------------------------------------------------------------------------------- Total $573 $510 $489 $513 $543 ================================================================================================================================= Custody assets (c) $347 $336 $311 $323 $339 Shareholder accounts (in millions) 48 51 52 51 49 ================================================================================================================================= OTHER INFORMATION Average FTEs 5,437 5,538 5,772 5,979 6,046 =================================================================================================================================
(a) Net of nonoperating expense. (b) Operating income divided by total (fund servicing) revenue. For the quarter ended September 30, 2002, operating margin is computed as the sum of operating income and adjustment to facilities consolidation charge divided by total revenue. (c) In billions. (d) Represents net assets serviced offshore. THE PNC FINANCIAL SERVICES GROUP, INC. Page 11 DETAILS OF NET INTEREST INCOME AND NET INTEREST MARGIN (Unaudited) Taxable-equivalent basis
Quarter ended ---------------------------------------------------------------- NET INTEREST INCOME March 31 December 31 September 30 June 30 March 31 In millions 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------- Interest income Loans and fees on loans $509 $542 $570 $591 $601 Securities 144 150 141 149 178 Loans held for sale 12 18 24 41 52 Other 30 34 38 26 30 - ------------------------------------------------------------------------------------------------------------- Total interest income 695 744 773 807 861 - ------------------------------------------------------------------------------------------------------------- Interest expense Deposits 132 149 162 172 176 Borrowed funds 57 68 79 77 92 - ------------------------------------------------------------------------------------------------------------- Total interest expense 189 217 241 249 268 - ------------------------------------------------------------------------------------------------------------- Net interest income (a) $506 $527 $532 $558 $593 ============================================================================================================= Lending revenue to total revenue (b) 22% 27% 22% 24% 22%
Quarter ended -------------------------------------------------------------------- NET INTEREST MARGIN March 31 December 31 September 30 June 30 March 31 2003 2002 2002 2002 2002 - ---------------------------------------------------------------------------------------------------------------- Average yields/rates Yield on earning assets Loans and fees on loans 5.82% 6.03% 6.13% 6.20% 6.28% Securities 4.41 4.67 5.10 5.39 5.47 Loans held for sale 2.65 3.48 4.43 5.07 4.85 Other 3.05 3.68 3.47 3.07 6.38 Total yield on earning assets 5.17 5.45 5.64 5.78 5.99 Rate on interest-bearing liabilities Deposits 1.51 1.68 1.84 1.92 1.97 Borrowed funds 2.63 2.93 3.16 2.83 2.80 Total rate on interest-bearing liabilities 1.73 1.94 2.13 2.13 2.19 - ---------------------------------------------------------------------------------------------------------------- Interest rate spread 3.44 3.51 3.51 3.65 3.80 Impact of noninterest-bearing sources .32 .36 .37 .34 .32 - ---------------------------------------------------------------------------------------------------------------- Net interest margin 3.76% 3.87% 3.88% 3.99% 4.12% ================================================================================================================
(a) A reconciliation of net interest income as reported in the Consolidated Statement of Income to net interest income on a taxable-equivalent basis follows:
Quarter ended ----------------------------------------------------------------- In millions March 31 December 31 September 30 June 30 March 31 2003 2002 2002 2002 2002 ----------------------------------------------------------------- Net interest income, GAAP basis $503 $524 $528 $555 $590 Taxable-equivalent adjustment 3 3 4 3 3 ----------------------------------------------------------------- Net interest income, taxable-equivalent basis $506 $527 $532 $558 $593
(b) The lending revenue to total revenue ratio is the sum of net interest income and noninterest income from loans, loans held for sale and related noninterest-earning assets and noninterest-bearing liabilities attributable to the lending function divided by the sum of consolidated net interest income and noninterest income. For the quarters ended March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, this ratio had previously been reported by using taxable-equivalent net interest income. The ratios for those quarters have been restated to conform to the current period presentation. THE PNC FINANCIAL SERVICES GROUP, INC. Page 12 DETAILS OF NONINTEREST INCOME AND NONINTEREST EXPENSE (Unaudited) In millions
Quarter ended ------------------------------------------------------------------------------ NONINTEREST INCOME March 31 December 31 September 30 June 30 March 31 2003 2002 2002 2002 2002 - --------------------------------------------------------------------------------------------------------------------------------- Asset management $207 $202 $200 $230 $221 Fund servicing 193 194 193 217 212 Service charges on deposits 57 61 57 55 54 Brokerage 41 44 41 55 55 Consumer services 59 61 62 61 55 Corporate services 116 151 108 149 118 Equity management (4) (14) (22) (13) (2) Net securities gains 56 1 68 16 4 Other 70 66 64 100 73 - --------------------------------------------------------------------------------------------------------------------------------- Total noninterest income $795 $766 $771 $870 $790 ================================================================================================================================= Net gains on institutional loans held for sale (included in "Corporate services" above) $15 $52 $17 $55 $23 Noninterest income to total revenue (a) 61% 59% 59% 61% 57%
Quarter ended ---------------------------------------------------------------------- NONINTEREST EXPENSE March 31 December 31 September 30 June 30 March 31 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------------------ Staff expense $438 $408 $422 $441 $430 Net occupancy 90 62 64 59 58 Equipment 69 68 68 67 68 Marketing 15 11 14 13 13 Distributions on capital securities 14 14 15 14 15 Other 230 228 207 245 223 - ------------------------------------------------------------------------------------------------------------------------ Total noninterest expense $856 $791 $790 $839 $807 ======================================================================================================================== Legal and consulting fees related to regulatory compliance and legal proceedings (included in "Other" above) $2 $10 $8 $2 $10 Efficiency (b) 66% 61% 61% 59% 58% ========================================================================================================================
(a) Calculated as total noninterest income divided by the sum of net interest income and noninterest income. For the quarters ended March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, the ratio had previously been reported by using taxable-equivalent net interest income. The ratios for those quarters have been restated to conform to the current period presentation. (b) The efficiency ratio for all periods presented is computed as noninterest expense divided by the sum of net interest income and noninterest income. For the quarters ended March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, the efficiency ratio had previously been reported by excluding amortization expense and distributions on capital securities from the calculation and had used taxable-equivalent net interest income. The efficiency ratios for those quarters have been restated to conform to the current period presentation. THE PNC FINANCIAL SERVICES GROUP, INC. Page 13 CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited)
March 31 December 31 September 30 June 30 March 31 Three months ended - in millions 2003 2002 2002 2002 2002 - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Interest-earning assets Loans held for sale $1,782 $1,985 $2,125 $3,235 $4,276 Securities 13,078 12,852 11,108 11,035 13,011 Loans, net of unearned income Commercial 15,050 15,426 15,698 16,311 16,264 Commercial real estate 2,265 2,382 2,501 2,470 2,452 Consumer 9,974 9,739 9,649 9,509 9,278 Residential mortgage 3,619 3,554 4,296 4,979 5,756 Lease financing 3,909 4,000 4,124 4,244 4,327 Other 363 356 419 402 394 - --------------------------------------------------------------------------------------------------------------------------------- Total loans, net of unearned income 35,180 35,457 36,687 37,915 38,471 Other 3,958 3,631 4,322 3,457 1,867 - --------------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 53,998 53,925 54,242 55,642 57,625 Allowance for credit losses (682) (655) (665) (625) (567) Other noninterest-earning assets 12,639 12,572 12,281 11,443 11,171 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $65,955 $65,842 $65,858 $66,460 $68,229 ================================================================================================================================= LIABILITIES, MINORITY INTEREST, CAPITAL SECURITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities Interest-bearing deposits Demand and money market $22,826 $22,395 $21,994 $22,147 $21,802 Savings 2,058 2,020 2,050 2,067 1,994 Retail certificates of deposit 9,638 9,977 10,347 10,518 10,608 Other time 350 312 307 948 827 Deposits in foreign offices 497 370 299 243 867 - --------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 35,369 35,074 34,997 35,923 36,098 Borrowed funds 8,702 9,045 9,826 10,862 13,172 - --------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 44,071 44,119 44,823 46,785 49,270 Demand and other noninterest-bearing deposits 9,017 9,030 8,665 8,406 8,288 Allowance for unfunded loan commitments and letters of credit 84 79 73 98 70 Accrued expenses and other liabilities 4,928 4,829 4,754 4,027 3,675 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 58,100 58,057 58,315 59,316 61,303 Minority interest 251 261 218 192 177 Mandatorily redeemable capital securities of subsidiary trusts 848 848 848 848 848 Shareholders' equity 6,756 6,676 6,477 6,104 5,901 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities, minority interest, capital securities and shareholders' equity $65,955 $65,842 $65,858 $66,460 $68,229 ================================================================================================================================= Supplemental average balance sheet information - ---------------------------------------------- Federal funds sold $1,813 $1,426 $2,212 $1,532 $80 - --------------------------------------------------------------------------------------------------------------------------------- Interest-bearing deposits $35,369 $35,074 $34,997 $35,923 $36,098 Demand and other noninterest-bearing deposits 9,017 9,030 8,665 8,406 8,288 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL DEPOSITS $44,386 $44,104 $43,662 $44,329 $44,386 - --------------------------------------------------------------------------------------------------------------------------------- Interest-bearing demand and money market deposits $22,826 $22,395 $21,994 $22,147 $21,802 Demand and other noninterest-bearing deposits 9,017 9,030 8,665 8,406 8,288 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL TRANSACTION DEPOSITS $31,843 $31,425 $30,659 $30,553 $30,090 - --------------------------------------------------------------------------------------------------------------------------------- Common Shareholders' Equity $6,746 $6,666 $6,467 $6,094 $5,891 - ---------------------------------------------------------------------------------------------------------------------------------
THE PNC FINANCIAL SERVICES GROUP, INC. Page 14 DETAILS OF LOANS AND LOANS HELD FOR SALE (Unaudited) LOANS
March 31 December 31 September 30 June 30 March 31 Period ended-in millions 2003 2002 2002 2002 2002 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Manufacturing $3,685 $3,454 $3,726 $3,838 $4,066 Retail/wholesale 4,147 4,161 4,247 4,333 4,368 Service providers 1,978 1,906 1,986 2,016 2,131 Real estate related 1,441 1,481 1,554 1,583 1,664 Financial services 1,255 1,218 1,252 1,326 1,289 Communications 110 124 115 110 111 Health care 422 458 450 471 487 Other 2,035 2,185 2,042 2,548 2,362 - ---------------------------------------------------------------------------------------------------------------------------------- Total commercial 15,073 14,987 15,372 16,225 16,478 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial real estate Mortgage 492 517 516 546 561 Real estate project 1,749 1,750 1,958 1,963 1,891 - ---------------------------------------------------------------------------------------------------------------------------------- Total commercial real estate 2,241 2,267 2,474 2,509 2,452 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Home equity 8,435 8,108 7,905 7,654 7,358 Automobile 476 484 540 607 683 Other 1,209 1,262 1,283 1,325 1,346 - ---------------------------------------------------------------------------------------------------------------------------------- Total consumer 10,120 9,854 9,728 9,586 9,387 - ---------------------------------------------------------------------------------------------------------------------------------- Residential mortgage 3,627 3,921 3,829 4,750 5,420 Lease financing Vehicles 1,346 1,521 1,676 1,859 2,039 Equipment 3,500 3,560 3,537 3,422 3,432 - ---------------------------------------------------------------------------------------------------------------------------------- Total lease financing 4,846 5,081 5,213 5,281 5,471 - ---------------------------------------------------------------------------------------------------------------------------------- Other 356 415 409 437 467 Unearned income (1,018) (1,075) (1,108) (1,104) (1,136) - ---------------------------------------------------------------------------------------------------------------------------------- Total, net of unearned income $35,245 $35,450 $35,917 $37,684 $38,539 ================================================================================================================================== WHOLESALE LENDING STATISTICS Portfolio composition-total exposure Investment grade equivalent or better 52% 53% Non-investment grade-secured lending 24 24 Non-investment grade 24 23 - ---------------------------------------------------------------------------------- Total 100% 100% - ---------------------------------------------------------------------------------- Client relationships >$50 million-total exposure $13,618 $13,758 Client relationships >$50 million-customers 149 143 ================================================================================================================================== CONSUMER LOAN STATISTICS(a) Net charge-offs to loans .24% .24% .31% .22% .19% ==================================================================================================================================
LOANS HELD FOR SALE
March 31 December 31 September 30 June 30 March 31 Period ended - in millions 2003 2002 2002 2002 2002 - -------------------------------------------------------------------------------------------------------------------- Institutional lending repositioning $181 $298 $495 $1,066 $1,975 Education loans 1,243 1,035 1,225 1,123 1,532 Other 278 274 269 252 141 - -------------------------------------------------------------------------------------------------------------------- Total $1,702 $1,607 $1,989 $2,441 $3,648 ====================================================================================================================
INSTITUTIONAL LENDING REPOSITIONING
March 31 December 31 September 30 June 30 March 31 Period ended - in millions 2003 2002 2002 2002 2002 - ----------------------------------------------------------------------------------------------------------- Loans held for sale Credit exposure $344 $626 $1,078 $2,019 $3,874 Outstandings 181 298 495 1,066 1,975 Exit portfolio Credit exposure 374 438 636 1,203 1,970 Outstandings 9 4 25 18 113 ===========================================================================================================
(a) Includes consumer, residential mortgage and vehicle leasing. THE PNC FINANCIAL SERVICES GROUP, INC. Page 15 ALLOWANCES FOR CREDIT LOSSES AND UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT (Unaudited) CHANGE IN ALLOWANCE FOR CREDIT LOSSES
March 31 December 31 September 30 June 30 March 31 Three months ended - in millions 2003 2002 2002 2002 2002 - ------------------------------------------------------------------------------------------------------------------------------ Beginning balance $673 $648 $654 $613 $560 Charge-offs Commercial (32) (27) (62) (66) (39) Commercial real estate (1) (2) Consumer (10) (10) (10) (10) (10) Residential mortgage (3) (1) (1) Lease financing (8) (5) (10) (5) (5) - ------------------------------------------------------------------------------------------------------------------------------ Total charge-offs (50) (43) (85) (82) (57) Recoveries Commercial 10 3 9 4 10 Commercial real estate 1 Consumer 3 3 3 4 4 Residential mortgage 1 Lease financing 1 1 1 - ------------------------------------------------------------------------------------------------------------------------------ Total recoveries 14 8 12 8 16 Net charge-offs Commercial (22) (24) (53) (62) (29) Commercial real estate (2) Consumer (7) (7) (7) (6) (6) Residential mortgage (3) (1) Lease financing (7) (4) (10) (5) (4) - ------------------------------------------------------------------------------------------------------------------------------ Total net charge-offs (36) (35) (73) (74) (41) Provision for credit losses 36 65 73 89 82 Acquired allowance (NBOC acquisition) 41 Net change in allowance for unfunded loan commitments and letters of credit 7 (5) (6) 26 (29) - ------------------------------------------------------------------------------------------------------------------------------ Ending balance $680 $673 $648 $654 $613 ==============================================================================================================================
CHANGE IN ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
March 31 December 31 September 30 June 30 March 31 Three months ended - in millions 2003 2002 2002 2002 2002 - ----------------------------------------------------------------------------------------------------------------------- Beginning Balance $84 $79 $73 $99 $70 Net change in allowance for unfunded loan commitments and letters of credit (7) 5 6 (26) 29 - ----------------------------------------------------------------------------------------------------------------------- Ending Balance $77 $84 $79 $73 $99 =======================================================================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 16 DETAILS OF NONPERFORMING ASSETS (Unaudited) NONPERFORMING ASSETS BY TYPE
March 31 December 31 September 30 June 30 March 31 Period ended - in millions 2003 2002 2002 2002 2002 - ---------------------------------------------------------------------------------------------------------------------------------- Nonaccrual loans Commercial $250 $226 $232 $285 $225 Commercial real estate 13 7 5 3 5 Consumer 11 11 12 11 2 Residential mortgage 7 7 5 6 6 Lease financing 51 57 15 18 13 - ---------------------------------------------------------------------------------------------------------------------------------- Total nonaccrual loans 332 308 269 323 251 Troubled debt restructured loan 3 1 2 2 - ---------------------------------------------------------------------------------------------------------------------------------- Total nonperforming loans 335 309 271 325 251 Nonperforming loans held for sale (a) 61 97 125 162 175 Foreclosed and other assets Commercial real estate 1 Residential mortgage 6 6 6 5 3 Other 6 6 7 8 8 - ---------------------------------------------------------------------------------------------------------------------------------- Total foreclosed and other assets 12 12 13 13 12 - ---------------------------------------------------------------------------------------------------------------------------------- Total nonperforming assets (b) $408 $418 $409 $500 $438 - ---------------------------------------------------------------------------------------------------------------------------------- Nonperforming loans to total loans .95% .87% .75% .86% .65% Nonperforming assets to total loans, loans held for sale and foreclosed assets 1.10 1.13 1.08 1.25 1.04 Nonperforming assets to total assets .59 .63 .60 .75 .66 ================================================================================================================================== (a) Includes troubled debt restructured loans held for sale $12 $17 $11 (b) Excludes equity management assets carried at estimated fair value (March 31, 2003, December 31, 2002 and September 30, 2002 amounts include troubled debt restructured assets of $3 million, $12 million and $13 million, respectively) $30 $40 $42 $29 $18
CHANGE IN NONPERFORMING ASSETS
Three months March 31, 2003 - in millions ended - ------------------------------------------------------------- Beginning of period $418 Transferred from accrual 111 Returned to performing (1) Principal reductions and payoffs (55) Asset sales (18) Charge-offs and valuation adjustments (47) - ------------------------------------------------------------- March 31 $408 =============================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 17 DETAILS OF NONPERFORMING ASSETS (Unaudited) NONPERFORMING ASSETS BY BUSINESS
March 31 December 31 September 30 June 30 March 31 Period ended - in millions 2003 2002 2002 2002 2002 - ---------------------------------------------------------------------------------------------------------------- REGIONAL COMMUNITY BANKING - -------------------------- Nonperforming loans $76 $72 $56 $56 $52 Foreclosed and other assets 10 10 9 9 7 ------------------------------------------------------------------ Total $86 $82 $65 $65 $59 ------------------------------------------------------------------ WHOLESALE BANKING-CORPORATE BANKING - ----------------------------------- Nonperforming loans $114 $104 $57 $126 $62 Nonperforming loans held for sale 52 83 99 133 127 Foreclosed and other assets 2 2 2 ------------------------------------------------------------------ Total $166 $187 $158 $261 $191 ------------------------------------------------------------------ WHOLESALE BANKING-PNC REAL ESTATE FINANCE - ----------------------------------------- Nonperforming loans $10 $2 $3 $3 $5 Nonperforming loans held for sale 2 3 6 Foreclosed and other assets 1 ------------------------------------------------------------------ Total $12 $2 $3 $6 $12 ------------------------------------------------------------------ WHOLESALE BANKING-PNC BUSINESS CREDIT - ------------------------------------- Nonperforming loans $130 $126 $151 $136 $128 Nonperforming loans held for sale 7 14 26 26 42 Foreclosed and other assets 2 2 2 2 2 ------------------------------------------------------------------ Total $139 $142 $179 $164 $172 ------------------------------------------------------------------ PNC ADVISORS - ------------ Nonperforming loans $5 $5 $4 $4 $4 ------------------------------------------------------------------ Total $5 $5 $4 $4 $4 ------------------------------------------------------------------ CONSOLIDATED TOTALS - ------------------- Nonperforming loans $335 $309 $271 $325 $251 Nonperforming loans held for sale 61 97 125 162 175 Foreclosed and other assets 12 12 13 13 12 ------------------------------------------------------------------ Total $408 $418 $409 $500 $438 ==================================================================
LARGEST NONPERFORMING ASSETS AT MARCH 31, 2003 - IN MILLIONS
PNC Corporate Banking PNC Business Credit - ------------------------------------------------------------------------------------------------------------------------------------ Ranking Outstandings Industry Outstandings Industry Outstandings Industry - ------------------------------------------------------------------------------------------------------------------------------------ 1 $68 Retail/Wholesale $44 Service Provider $68 Retail Wholesale 2 44 Service Provider 20 Manufacturing 16 Manufacturing 3 20 Manufacturing 12 Manufacturing 8 Manufacturing 4 16 Manufacturing 11 Finance 7 Manufacturing 5 12 Manufacturing 9 Communications 7 Manufacturing 6 11 Finance 8 Manufacturing 4 Manufacturing 7 9 Communications 7 Manufacturing 4 Retail/Wholesale 8 8 Manufacturing 4 Manufacturing 4 Service Provider 9 8 Construction 4 Communications 3 Manufacturing 10 8 Manufacturing 4 Service Provider 3 Manufacturing - ------------------------------------------------------------------------------------------------------------------------------------ Total $204 $123 $124 - ------------------------------------------------------------------------------------------------------------------------------------ As a percent of nonperforming assets 50% 74% 89% ====================================================================================================================================
Page 18 GLOSSARY OF TERMS Accounting/administration net assets - Domestic and foreign assets for which PNC provides accounting and administrative services. Annualized - Adjusted to reflect a full year of activity. Assets under management - Assets held by PNC in a fiduciary capacity for customers/clients. These assets are not included on PNC's balance sheet. Assigned capital - Economic capital assignments based on management's assessment of inherent risks and equity levels at independent companies providing similar products and services in order to present the financial results of each business as if each business operated on a stand-alone basis. Charge-off - Process of removing a loan or portion of a loan from a bank's balance sheet because the loan is considered uncollectible. A charge-off also is recorded when a loan is transferred to held for sale and the loan's market value is less than its carrying amount. This difference is a charge-off. Common shareholders' equity to total assets - Common shareholders' equity divided by total assets. Common shareholders' equity equals total shareholders' equity less preferred stock and the portion of capital surplus and retained interest related to the preferred stock. Custody assets - Assets held on behalf of a customer under a safekeeping arrangement and that are not reported on PNC's balance sheet. Assets held in custody accounts at other institutions on behalf of PNC are included in the appropriate asset categories as if held in the physical custody of PNC. Discontinued operations - A discontinued operation is a component of an enterprise that, pursuant to a single plan, is disposed of substantially in its entirety. The component represents a separate major line of business and can be distinguished operationally and for financial reporting purposes. During 2000, PNC entered an agreement to sell its residential mortgage banking business and the sale closed in the first quarter of 2001. Final settlement of all issues in dispute with the buyer in connection with the sale occurred in January 2003 and was reflected in fourth quarter 2002 results. Efficiency ratio - Noninterest expense divided by the sum of net interest income and noninterest income. Institutional lending repositioning - A strategic action to build a more diverse and valuable business mix designed to create shareholder value over time by reducing lending leverage and improving the risk/return characteristics of the banking business. Leverage ratio - Tier I risk-based capital divided by adjusted average total assets. Net interest margin - Annualized taxable-equivalent net interest income divided by average earning assets. Noninterest income to total revenue - Total noninterest income divided by total revenue. Total noninterest income includes asset management, fund servicing, service charges on deposits, brokerage, consumer services, corporate services, equity management, net securities gains (losses) and other noninterest income. Total revenue includes total noninterest income plus net interest income. Nonperforming assets - Nonperforming assets include nonaccrual loans, troubled debt restructurings, nonaccrual loans held for sale and foreclosed assets. Nonperforming loans - Nonperforming loans include loans to commercial, lease financing, consumer, commercial real estate and residential mortgage customers as well as troubled debt restructured loans. Nonperforming loans do not include nonaccrual loans held for sale or foreclosed assets. Operating margin - Operating income divided by total revenue. Return on assigned capital - Annualized net income divided by assigned capital. Page 19 Return on average assets - Annualized earnings divided by average assets. Earnings can be from net income or continuing operations, as indicated in PNC's disclosures. Return on average equity - Annualized earnings divided by average shareholders' equity. Earnings can be from net income or continuing operations, as indicated in PNC's disclosures. Securitization - The process by which financial assets are transformed into securities. Shareholders' equity to total assets - Total shareholders' equity divided by total assets. Taxable-equivalent interest - The interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than a taxable investment. In order to provide accurate comparisons of yields and margins for all earning assets, the interest income earned on tax-exempt assets is increased to make them fully equivalent to other taxable interest income investments. Tier I risk-based capital - Tier I capital equals: total shareholders' equity, plus trust preferred capital securities, plus certain minority interest that are held by others; less goodwill and certain intangible assets, less equity investments in nonfinancial companies and less net unrealized holding losses on available-for-sale equity securities. Net unrealized holding gains on available-for-sale equity securities, net unrealized holding gains (losses) on available-for-sale debt securities and net unrealized holding gains (losses) on cash flow hedge derivatives are excluded from total shareholders' equity for Tier I capital purposes. Total risk-based capital - Tier I risk-based capital plus qualifying senior and subordinated debt, other minority interest not qualified as Tier 1, and the allowance for credit losses, subject to certain limitations. Total deposits - The sum of total transaction deposits, savings accounts, certificates of deposit, other time deposits and deposits in foreign offices. Total transaction deposits - The sum of noninterest-bearing demand deposits, interest-bearing demand deposits and money market accounts. Page 20 Business Definitions - - Regional Community Banking provides deposit, lending, cash management and investment services to two million consumer and small business customers within PNC's geographic footprint. - - Wholesale Banking includes the results for Corporate Banking, PNC Real Estate Finance and PNC Business Credit. - Corporate Banking provides credit, equipment leasing, treasury management and capital markets products and services to mid-sized corporations, government entities and selectively to large corporations primarily within PNC's geographic region. Treasury management activities, which include cash and investment management, receivables management, disbursement services and global trade services; capital markets products, which include foreign exchange, derivatives trading and loan syndications; and equipment leasing products are offered through Corporate Banking and sold by several businesses across the Corporation. - PNC Real Estate Finance specializes in financial solutions for the acquisition, development, permanent financing and operation of commercial real estate nationally. PNC Real Estate Finance offers treasury and investment management, access to the capital markets, commercial mortgage loan servicing and other products and services to clients that develop, own, manage, or invest in commercial real estate. PNC's commercial real estate financial services platform provides processing services through Midland Loan Services, Inc., a leading third-party provider of loan servicing and technology to the commercial real estate finance industry. Columbia Housing Partners, LP is a national syndicator of affordable housing equity. - PNC Business Credit provides asset-based lending, treasury management and capital markets products and services to middle market customers nationally. PNC Business Credit's lending services include loans secured by accounts receivable, inventory, machinery and equipment, and other collateral, and its customers include manufacturing, wholesale, distribution, retailing and service industry companies. - - PNC Advisors provides a full range of tailored investment, trust and banking products and services to affluent individuals and families, including full-service brokerage through J.J.B. Hilliard, W.L.Lyons, Inc. and investment consulting and trust services to the ultra-affluent through Hawthorn. PNC Advisors also serves as investment manager and trustee for employee benefit plans and charitable and endowment assets and provides defined contribution plan services and investment options through its Vested Interest(R) product. - - BlackRock is one of the largest publicly traded investment management firms in the United States. BlackRock manages assets on behalf of institutions and individuals worldwide through a variety of fixed income, liquidity and equity mutual funds, separate accounts and alternative investment products. Mutual funds include the flagship fund families, BlackRock Funds and BlackRock Provident Institutional Funds. In addition, BlackRock provides risk management and investment system services to institutional investors under the BlackRock Solutions(R) brand name. - - PFPC is the largest full-service mutual fund transfer agent and second largest provider of mutual fund accounting and administration services in the United States, offering a wide range of fund services to the investment management industry. PFPC also provides processing solutions to the international marketplace through its Ireland and Luxembourg operations.