Exhibit 99.1
[PNC LOGO]
THE PNC FINANCIAL SERVICES GROUP, INC.
FINANCIAL SUPPLEMENT (UNAUDITED)
SECOND QUARTER 2003
THE PNC FINANCIAL SERVICES GROUP, INC.
FINANCIAL SUPPLEMENT (UNAUDITED)
SECOND QUARTER 2003
Page
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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 July 21, 2003. It speaks only as of the particular date or
dates included in the accompanying pages. PNC 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.
Average full-time equivalent employee (FTE) statistics as disclosed in this
Financial Supplement by business reflect staff directly employed by the
respective business and exclude corporate and shared services employees.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 1
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
June 30 March 31 December 31 September 30 June 30
For the three months ended - in millions, except per share data 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans and fees on loans $495 $507 $540 $567 $588
Securities 155 143 150 140 149
Loans held for sale 15 12 18 24 41
Other 27 30 33 38 26
- -----------------------------------------------------------------------------------------------------------------------------
Total interest income 692 692 741 769 804
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INTEREST EXPENSE
Deposits 117 132 149 162 172
Borrowed funds 54 57 68 79 77
- -----------------------------------------------------------------------------------------------------------------------------
Total interest expense 171 189 217 241 249
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income 521 503 524 528 555
Provision for credit losses 57 36 65 73 89
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income less provision for credit losses 464 467 459 455 466
- -----------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Asset management 209 207 202 200 230
Fund servicing 188 193 194 193 217
Service charges on deposits 60 57 61 57 55
Brokerage 46 41 44 41 55
Consumer services 64 59 61 62 61
Corporate services 114 116 151 108 149
Equity management (17) (4) (14) (22) (13)
Net securities gains 26 56 1 68 16
Other 86 70 66 64 100
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 776 795 766 771 870
- -----------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Staff expense 446 438 408 422 441
Net occupancy 64 90 62 64 59
Equipment 69 69 68 68 67
Marketing 18 15 11 14 13
Distributions on capital securities 14 14 14 15 14
Other 324 230 228 207 245
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 935 856 791 790 839
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before minority
interest and income taxes 305 406 434 436 497
Minority interest in income of consolidated entities 13 11 11 4 12
Income taxes 108 133 145 147 165
- -----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 184 262 278 285 320
Income (loss) from discontinued operations (less
applicable income tax benefit of $9) (16)
- -----------------------------------------------------------------------------------------------------------------------------
Net income $184 $262 $262 $285 $320
- -----------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
From continuing operations
Basic $.65 $.93 $.97 $1.00 $1.13
Diluted $.65 $.92 $.97 $1.00 $1.12
From net income
Basic $.65 $.93 $.92 $1.00 $1.13
Diluted $.65 $.92 $.92 $1.00 $1.12
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING
Basic 281 283 284 284 283
Diluted 282 284 286 285 285
=============================================================================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 2
CONSOLIDATED BALANCE SHEET (Unaudited)
June 30 March 31 December 31 September 30 June 30
In millions, except par value 2003 2003 2002 2002 2002
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ASSETS
Cash and due from banks $3,797 $3,626 $3,201 $3,403 $2,839
Federal funds sold 850 1,913 1,847 3,031 1,100
Other short-term investments 1,554 2,012 1,811 1,730 1,795
Loans held for sale 1,475 1,702 1,607 1,989 2,441
Securities 16,017 14,973 13,763 12,536 12,313
Loans, net of unearned income of $1,018, $1,018, $1,075, $1,108,
and $1,104 34,534 35,245 35,450 35,917 37,684
Allowance for credit losses (673) (680) (673) (648) (654)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loans 33,861 34,565 34,777 35,269 37,030
Goodwill 2,356 2,356 2,313 2,313 2,314
Other intangible assets 316 330 333 337 342
Other 7,036 7,142 6,725 7,051 6,739
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Total assets $67,262 $68,619 $66,377 $67,659 $66,913
====================================================================================================================================
LIABILITIES
Deposits
Noninterest-bearing $13,368 $12,460 $10,563 $10,844 $9,798
Interest-bearing 33,326 34,621 34,419 34,116 34,629
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Total deposits 46,694 47,081 44,982 44,960 44,427
Borrowed funds
Federal funds purchased 36 34 38 35 37
Repurchase agreements 1,015 1,082 814 988 971
Bank notes and senior debt 3,306 3,850 4,400 4,962 5,434
Federal Home Loan Bank borrowings 1,134 1,146 1,256 1,270 1,277
Subordinated debt 2,260 2,234 2,423 2,423 2,332
Other borrowed funds 152 188 185 269 429
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Total borrowed funds 7,903 8,534 9,116 9,947 10,480
Allowance for unfunded loan commitments
and letters of credit 78 77 84 79 73
Accrued expenses 2,269 2,023 2,046 2,077 1,865
Other 2,435 3,020 2,172 2,776 2,620
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Total liabilities 59,379 60,735 58,400 59,839 59,465
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Minority interest 261 244 270 255 210
Mandatorily redeemable capital securities of
subsidiary trusts 848 848 848 848 848
SHAREHOLDERS' EQUITY
Preferred stock
Common stock - $5 par value
Authorized 800 shares, issued 353 shares 1,764 1,764 1,764 1,764 1,764
Capital surplus 1,100 1,102 1,101 1,103 1,102
Retained earnings 7,358 7,311 7,187 7,062 6,913
Deferred benefit expense (27) (28) (9) (11) (13)
Accumulated other comprehensive income 306 293 321 325 170
Common stock held in treasury at cost: 73, 71, 68, 69,
and 69 shares (3,727) (3,650) (3,505) (3,526) (3,546)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 6,774 6,792 6,859 6,717 6,390
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Total liabilities, minority interest, capital securities
and shareholders' equity $67,262 $68,619 $66,377 $67,659 $66,913
====================================================================================================================================
CAPITAL RATIOS
Tier 1 Risk-based(a) 8.9% 8.7% 8.8% 8.8% 8.2%
Total Risk-based(a) 12.3 12.3 12.5 12.5 12.0
Leverage(a) 8.1 8.0 8.1 7.8 7.4
Shareholders' equity to total assets 10.07 9.90 10.33 9.93 9.55
Common shareholders' equity to total assets 10.06 9.89 10.32 9.91 9.53
ASSET QUALITY RATIOS
Nonperforming assets to total loans,
loans held for sale and foreclosed assets 1.12% 1.10% 1.13% 1.08% 1.25%
Nonperforming loans to total loans .95 .95 .87 .75 .86
Allowance for credit losses to total loans 1.95 1.93 1.90 1.80 1.74
Allowance for credit losses to nonperforming loans 206 203 218 239 201
Net charge-offs to average loans (For the three months ended) .73 .42 .39 .79 .78
====================================================================================================================================
(a) Estimated for June 30, 2003.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 3
RESULTS OF BUSINESSES - SUMMARY (Unaudited)(a)
Three months ended - dollars in millions
June 30 March 31 December 31 September 30 June 30
EARNINGS (LOSS) 2003 2003 2002 2002 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Banking Businesses
Regional Community Banking $159 $152 $152 $192 $176
Wholesale Banking
Corporate Banking 33 42 33 30 54
PNC Real Estate Finance 24 16 23 19 26
PNC Business Credit 6 14 28 8 2
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Total wholesale banking 63 72 84 57 82
PNC Advisors 20 16 13 20 31
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Total banking businesses 242 240 249 269 289
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Asset management and processing businesses
BlackRock 39 35 34 33 35
PFPC 15 12 8 19 21
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Total asset management and processing
businesses 54 47 42 52 56
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Total business earnings 296 287 291 321 345
Other (112) (25) (13) (36) (25)
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Results from continuing operations 184 262 278 285 320
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Discontinued operations (16)
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Total consolidated $184 $262 $262 $285 $320
====================================================================================================================================
June 30 March 31 December 31 September 30 June 30
REVENUE(b) 2003 2003 2002 2002 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Banking Businesses
Regional Community Banking $537 $518 $511 $577 $543
Wholesale Banking
Corporate Banking 159 189 198 177 217
PNC Real Estate Finance 62 56 58 55 65
PNC Business Credit 46 44 49 43 45
- ------------------------------------------------------------------------------------------------------------------------------------
Total wholesale banking 267 289 305 275 327
PNC Advisors 154 147 150 150 171
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Total banking businesses 958 954 966 1,002 1,041
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Asset management and processing businesses
BlackRock 144 143 137 137 157
PFPC 187 193 195 192 217
- ------------------------------------------------------------------------------------------------------------------------------------
Total asset management and processing
businesses 331 336 332 329 374
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Total business revenue 1,289 1,290 1,298 1,331 1,415
Other 10 11 (5) (28) 13
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Total consolidated $1,299 $1,301 $1,293 $1,303 $1,428
====================================================================================================================================
(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):
June 30 March 31 December 31 September 30 June 30
2003 2003 2002 2002 2002
------------------------------------------------------------------
Total consolidated revenue, book (GAAP) basis $1,297 $1,298 $1,290 $1,299 $1,425
Taxable-equivalent adjustment 2 3 3 4 3
------------------------------------------------------------------
Total consolidated revenue, taxable-equivalent basis $1,299 $1,301 $1,293 $1,303 $1,428
==================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 4
REGIONAL COMMUNITY BANKING (Unaudited)
Three months ended
Taxable-equivalent basis June 30 March 31 December 31 September 30 June 30
Dollars in millions 2003 2003 2002 2002 2002
- ----------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Net interest income $334 $317 $331 $337 $357
Other noninterest income 181 163 180 174 171
Net securities gains 22 38 66 15
- ----------------------------------------------------------------------------------------------------------------------------
Total revenue 537 518 511 577 543
Provision for credit losses 13 8 15 14 11
Noninterest expense 282 278 264 268 263
- ----------------------------------------------------------------------------------------------------------------------------
Pretax earnings 242 232 232 295 269
Income taxes 83 80 80 103 93
- ----------------------------------------------------------------------------------------------------------------------------
Earnings $159 $152 $152 $192 $176
============================================================================================================================
AVERAGE BALANCE SHEET
Loans
Consumer
Home equity $8,047 $7,675 $7,395 $7,236 $7,031
Indirect 468 438 458 508 567
Other consumer 516 546 582 610 641
- ----------------------------------------------------------------------------------------------------------------------------
Total consumer 9,031 8,659 8,435 8,354 8,239
Residential mortgage 2,970 3,276 3,146 3,801 4,422
Commercial 4,001 3,939 3,857 3,479 3,547
Vehicle leasing 1,177 1,336 1,464 1,606 1,752
Other 117 117 115 118 121
- ----------------------------------------------------------------------------------------------------------------------------
Total loans 17,296 17,327 17,017 17,358 18,081
Securities 14,211 12,504 11,982 10,216 10,165
Education and other loans held for sale 1,197 1,197 1,215 1,181 1,397
Assigned assets and other assets 5,731 7,961 8,661 10,433 9,446
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $38,435 $38,989 $38,875 $39,188 $39,089
============================================================================================================================
Deposits
Noninterest-bearing demand $5,471 $5,264 $5,242 $5,063 $4,996
Interest-bearing demand 6,136 6,112 6,191 5,990 5,993
Money market 12,407 12,361 12,184 12,293 12,348
- ----------------------------------------------------------------------------------------------------------------------------
Total transaction deposits 24,014 23,737 23,617 23,346 23,337
Savings 2,046 1,976 1,950 1,978 1,996
Certificates 8,666 9,360 9,653 10,016 10,209
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 34,726 35,073 35,220 35,340 35,542
Other liabilities 1,112 1,285 1,035 1,204 911
Assigned capital 2,597 2,631 2,620 2,644 2,636
- ----------------------------------------------------------------------------------------------------------------------------
Total funds $38,435 $38,989 $38,875 $39,188 $39,089
============================================================================================================================
PERFORMANCE RATIOS
Return on assigned capital 25% 23% 23% 29% 27%
Noninterest income to total revenue 38 39 35 42 34
Efficiency 53 54 52 46 48
============================================================================================================================
OTHER INFORMATION(a)
Total nonperforming assets $75 $86 $82 $65 $65
Vehicle leasing outstandings, net
of unearned income $1,048 $1,239 $1,386 $1,511 $1,661
Net charge-offs $13 $13 $15 $17 $12
Gains on sales of education loans $7 $1 $10 $3 $9
Average FTEs 9,447 9,404 9,610 9,721 9,598
ATMs 3,660 3,594 3,550 3,450 3,350
Branches 713 713 714 714 713
Financial consultants 693 674 645 626 650
Business banking centers 193 193 193 188 158
Checking relationships 1,575,000 1,555,000 1,542,000 1,538,000 1,494,000
Online banking users 684,134 647,287 606,752 563,471 508,608
Deposit households using online banking 40.2% 38.6% 36.6% 34.7% 32.6%
============================================================================================================================
(a) Presented as of period-end, except for net charge-offs, net gains on loans
held for sale and average FTEs.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 5
WHOLESALE BANKING - CORPORATE BANKING (Unaudited)
Three months ended
Taxable-equivalent basis June 30 March 31 December 31 September 30 June 30
Dollars in millions 2003 2003 2002 2002 2002
- ---------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Net interest income $71 $76 $78 $88 $88
Noninterest income 88 113 120 89 129
- ---------------------------------------------------------------------------------------------------------------------------
Total revenue 159 189 198 177 217
Provision for credit losses 25 15 64 44 49
Noninterest expense 84 109 87 89 86
- ---------------------------------------------------------------------------------------------------------------------------
Pretax earnings 50 65 47 44 82
Income taxes 17 23 14 14 28
- ---------------------------------------------------------------------------------------------------------------------------
Earnings $33 $42 $33 $30 $54
===========================================================================================================================
AVERAGE BALANCE SHEET
Loans $8,262 $8,604 $8,821 $9,468 $9,701
Loans held for sale 196 291 464 804 1,717
Other assets 2,896 2,755 3,133 3,065 2,873
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $11,354 $11,650 $12,418 $13,337 $14,291
===========================================================================================================================
Deposits $4,990 $5,097 $4,906 $4,746 $4,600
Assigned funds and other liabilities 5,512 5,679 6,581 7,589 8,620
Assigned capital 852 874 931 1,002 1,071
- ---------------------------------------------------------------------------------------------------------------------------
Total funds $11,354 $11,650 $12,418 $13,337 $14,291
===========================================================================================================================
PERFORMANCE RATIOS
Return on assigned capital 16% 19% 14% 12% 20%
Noninterest income to total revenue 55 60 61 50 59
Efficiency 53 58 44 50 40
===========================================================================================================================
OTHER INFORMATION(a)
Consolidated revenue from
treasury management(b) $86 $89 $86 $87 $86
Total nonperforming assets $176 $166 $187 $158 $261
Net charge-offs $42 $18 $15 $51 $55
Average FTEs 1,888 1,971 2,109 2,086 2,092
INSTITUTIONAL LENDING REPOSITIONING
Loans held for sale
Credit exposure $173 $315 $564 $964 $1,822
Outstandings $101 $155 $245 $415 $920
Exit portfolio
Credit exposure $251 $349 $413 $611 $1,178
Outstandings $11 $4 $12 $12
Net gains on loans held for sale(c) $13 $17 $55 $21 $50
===========================================================================================================================
(a) Presented as of period-end, except for consolidated revenue from
treasury management, net charge-offs, net gains on loans held for
sale and average FTEs.
(b) Treasury management products offered through Corporate Banking are
sold by several businesses across PNC and related revenue net of
expense is included in the results of those businesses.
(c) Included in noninterest income above.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 6
WHOLESALE BANKING - PNC REAL ESTATE FINANCE (Unaudited)
Three months ended
Taxable-equivalent basis June 30 March 31 December 31 September 30 June 30
Dollars in millions except as noted 2003 2003 2002 2002 2002
- ----------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Net interest income $28 $28 $30 $27 $30
Noninterest income
Net commercial mortgage banking
Net gains on loan sales 13 10 12 5 5
Servicing and other fees, net of amortization 8 11 10 10 10
Other 13 7 6 13 20
- ----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 34 28 28 28 35
- ----------------------------------------------------------------------------------------------------------------------------
Total revenue 62 56 58 55 65
Provision for credit losses (1) 8 (3) (2)
Noninterest expense 44 38 41 45 38
- ----------------------------------------------------------------------------------------------------------------------------
Pretax earnings 19 10 20 12 27
Minority interest benefit (2) (2)
Income tax (benefit) (3) (6) (3) (5) 1
- ----------------------------------------------------------------------------------------------------------------------------
Earnings $24 $16 $23 $19 $26
============================================================================================================================
AVERAGE BALANCE SHEET
Loans
Commercial real estate $1,953 $2,052 $2,167 $2,279 $2,245
Commercial - real estate related 1,438 1,397 1,463 1,407 1,462
- ----------------------------------------------------------------------------------------------------------------------------
Total loans 3,391 3,449 3,630 3,686 3,707
Commercial mortgages held for sale 373 315 327 193 246
Other loans held for sale 37 53 94 106 155
Other assets 964 950 970 907 881
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $4,765 $4,767 $5,021 $4,892 $4,989
============================================================================================================================
Deposits $1,044 $950 $892 $789 $699
Assigned funds and other liabilities 3,368 3,454 3,746 3,714 3,893
Assigned capital 353 363 383 389 397
- ----------------------------------------------------------------------------------------------------------------------------
Total funds $4,765 $4,767 $5,021 $4,892 $4,989
============================================================================================================================
PERFORMANCE RATIOS
Return on assigned capital 27% 18% 24% 19% 26%
Noninterest income to total revenue 55 50 48 51 54
Efficiency 71 68 71 82 58
============================================================================================================================
OTHER INFORMATION(a)
Total nonperforming assets $3 $12 $2 $3 $6
Net (recoveries) charge-offs $2 $(1)
Average FTEs 747 770 780 788 795
Commercial mortgage servicing portfolio(b) $79 $75 $74 $74 $71
Net carrying amount of commercial mortgage
servicing rights $199 $201 $201 $201 $200
INSTITUTIONAL LENDING REPOSITIONING
Loans held for sale
Credit exposure $16 $19 $49 $68 $124
Outstandings $16 $19 $44 $55 $105
Exit portfolio
Credit exposure $25 $25 $25 $25
Outstandings $5 $4 $13 $6
Net gains (losses) on loans held for sale(c) $1 $(3) $12
============================================================================================================================
(a) Presented as of period-end, except for net (recoveries) charge-offs, net
gains (losses) on loans held for sale and average FTEs.
(b) In billions.
(c) Included in noninterest income - other above.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 7
WHOLESALE BANKING - PNC BUSINESS CREDIT (Unaudited)
Three months ended
Taxable-equivalent basis June 30 March 31 December 31 September 30 June 30
Dollars in millions 2003 2003 2002 2002 2002
- ---------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Net interest income $34 $32 $33 $35 $33
Noninterest income 12 12 16 8 12
- ---------------------------------------------------------------------------------------------------------------------------
Total revenue 46 44 49 43 45
Provision for credit losses 21 7 (8) 15 29
Noninterest expense 15 14 12 14 13
- ---------------------------------------------------------------------------------------------------------------------------
Pretax earnings 10 23 45 14 3
Income taxes 4 9 17 6 1
- ---------------------------------------------------------------------------------------------------------------------------
Earnings $6 $14 $28 $8 $2
===========================================================================================================================
AVERAGE BALANCE SHEET
Loans $3,528 $3,381 $3,490 $3,524 $3,641
Loans held for sale 24 18 23 71 86
Other assets 225 229 225 219 251
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $3,777 $3,628 $3,738 $3,814 $3,978
===========================================================================================================================
Deposits $106 $82 $102 $88 $78
Assigned funds and other liabilities 3,428 3,309 3,392 3,476 3,643
Assigned capital 243 237 244 250 257
- ---------------------------------------------------------------------------------------------------------------------------
Total funds $3,777 $3,628 $3,738 $3,814 $3,978
===========================================================================================================================
PERFORMANCE RATIOS
Return on assigned capital 10% 24% 46% 13% 3%
Noninterest income to total revenue 26 27 33 19 27
Efficiency 33 32 24 33 29
===========================================================================================================================
OTHER INFORMATION(a)
Total nonperforming assets $145 $139 $142 $179 $164
Net charge-offs $6 $5 $6 $4 $5
NBOC put option liability $43 $49 $57 $78 $86
NBOC put option valuation income(b) $1 $6 $9 $4 $10
Marketing locations 24 24 23 23 24
Average FTEs 249 250 249 249 248
INSTITUTIONAL LENDING REPOSITIONING
Loans held for sale
Credit exposure $10 $10 $13 $46 $73
Outstandings $9 $7 $9 $25 $41
Net gains (losses) on loans held for sale(b) $2 $(3) $(4) $(7)
===========================================================================================================================
(a) Presented as of period-end, except for net charge-offs, net gains (losses)
on loans held for sale and average FTEs.
(b) Included in noninterest income above.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 8
PNC ADVISORS (Unaudited)
Three months ended
Taxable-equivalent basis June 30 March 31 December 31 September 30 June 30
Dollars in millions except as noted 2003 2003 2002 2002 2002
- --------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Net interest income $21 $21 $24 $24 $26
Noninterest income
Investment management and trust 78 76 76 76 90
Brokerage 31 26 29 29 34
Other 24 24 21 21 21
- --------------------------------------------------------------------------------------------------------------------------
Total noninterest income 133 126 126 126 145
- --------------------------------------------------------------------------------------------------------------------------
Total revenue 154 147 150 150 171
Provision for credit losses 1 1 2 1
Noninterest expense 121 122 129 116 122
- --------------------------------------------------------------------------------------------------------------------------
Pretax earnings 32 25 20 32 48
Income taxes 12 9 7 12 17
- --------------------------------------------------------------------------------------------------------------------------
Earnings $20 $16 $13 $20 $31
===========================================================================================================================
AVERAGE BALANCE SHEET
Loans
Consumer $1,284 $1,280 $1,264 $1,251 $1,226
Residential mortgage 263 327 394 464 535
Commercial 435 439 439 433 495
Other 286 284 276 314 341
- --------------------------------------------------------------------------------------------------------------------------
Total loans 2,268 2,330 2,373 2,462 2,597
Other assets 588 540 417 410 419
- --------------------------------------------------------------------------------------------------------------------------
Total assets $2,856 $2,870 $2,790 $2,872 $3,016
===========================================================================================================================
Deposits $2,077 $2,085 $2,016 $1,955 $2,000
Assigned funds and other liabilities 255 263 243 406 495
Assigned capital 524 522 531 511 521
- --------------------------------------------------------------------------------------------------------------------------
Total funds $2,856 $2,870 $2,790 $2,872 $3,016
===========================================================================================================================
PERFORMANCE RATIOS
Return on assigned capital 15% 12% 10% 16% 24%
Noninterest income to total revenue 86 86 84 84 85
Efficiency 79 83 86 77 71
===========================================================================================================================
ASSETS UNDER MANAGEMENT(a)
Personal investment management and trust $42 $40 $41 $40 $45
Institutional trust 9 9 9 10 11
- --------------------------------------------------------------------------------------------------------------------------
Total $51 $49 $50 $50 $56
- --------------------------------------------------------------------------------------------------------------------------
Asset Type
Equity $28 $25 $26 $26 $31
Fixed income 16 16 17 17 18
Liquidity 7 8 7 7 7
- --------------------------------------------------------------------------------------------------------------------------
Total $51 $49 $50 $50 $56
===========================================================================================================================
OTHER INFORMATION
Total nonperforming assets $5 $5 $5 $4 $4
Brokerage assets administered (in billions) $34 $31 $32 $31 $33
Full service brokerage offices 99 102 106 108 109
Financial consultants 577 585 615 621 644
Margin loans $253 $247 $260 $257 $297
Average FTEs 3,118 3,226 3,326 3,320 3,347
===========================================================================================================================
(a) In billions; excludes brokerage assets administered.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 9
BLACKROCK (Unaudited)
Three months ended June 30 March 31 December 31 September 30 June 30
Dollars in millions except as noted 2003 2003 2002 2002 2002
- ----------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Investment advisory and
administrative fees $128 $127 $122 $122 $144
Other income 16 16 15 15 13
- ----------------------------------------------------------------------------------------------------------------------------
Total revenue 144 143 137 137 157
Operating expense 81 81 74 74 90
Fund administration
and servicing costs 8 8 8 8 12
- ----------------------------------------------------------------------------------------------------------------------------
Total expense 89 89 82 82 102
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 55 54 55 55 55
Nonoperating income 8 3 2 1 4
- ----------------------------------------------------------------------------------------------------------------------------
Pretax earnings 63 57 57 56 59
Income taxes 24 22 23 23 24
- ----------------------------------------------------------------------------------------------------------------------------
Earnings $39 $35 $34 $33 $35
============================================================================================================================
PERIOD-END BALANCE SHEET
Goodwill and other intangible assets $192 $183 $183 $181 $181
Other assets 709 653 681 609 553
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $901 $836 $864 $790 $734
============================================================================================================================
Liabilities $192 $168 $229 $194 $173
Stockholders' equity 709 668 635 596 561
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $901 $836 $864 $790 $734
============================================================================================================================
PERFORMANCE DATA
Return on equity 23% 22% 22% 23% 25%
Operating margin(a) 40 40 43 43 38
Diluted earnings per share $.58 $.54 $.52 $.51 $.53
============================================================================================================================
ASSETS UNDER MANAGEMENT (in billions)
Separate accounts
Fixed income $175 $168 $157 $146 $141
Liquidity 5 6 6 5 6
Liquidity - securities lending 8 6 6 6 6
Equity 9 9 10 8 10
Alternative investment products 6 6 5 6 5
- ----------------------------------------------------------------------------------------------------------------------------
Total separate accounts 203 195 184 171 168
Mutual funds(b)
Fixed income 22 20 19 19 17
Liquidity 58 56 66 52 59
Equity 3 3 4 4 6
- ----------------------------------------------------------------------------------------------------------------------------
Total mutual funds 83 79 89 75 82
- ----------------------------------------------------------------------------------------------------------------------------
Total assets under management $286 $274 $273 $246 $250
============================================================================================================================
OTHER INFORMATION
Average FTEs 943 944 938 918 869
============================================================================================================================
(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 $55 $54 $55 $55 $55
========================================================================
Total revenue $144 $143 $137 $137 $157
Less fund administration and servicing costs 8 8 8 8 12
------------------------------------------------------------------------
Revenue used for operating margin calculation,
as reported $136 $135 $129 $129 $145
========================================================================
Operating margin, as reported 40% 40% 43% 43% 38%
Operating margin, GAAP basis 38% 38% 40% 40% 35%
========================================================================
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 Series.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 10
PFPC (Unaudited)
Three months ended June 30 March 31 December 31 September 30 June 30
Dollars in millions except as noted 2003 2003 2002 2002 2002
- ----------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
Fund servicing revenue $187 $193 $195 $192 $217
Operating expense 151 162 168 164 167
(Accretion)/amortization of
other intangibles, net (4) (4) (5) (4) (5)
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 40 35 32 32 55
Nonoperating income(a) 2 2 2 2 2
Debt financing 18 17 21 22 22
Adjustment to facilities consolidation charge (19)
- ----------------------------------------------------------------------------------------------------------------------------
Pretax earnings 24 20 13 31 35
Income taxes 9 8 5 12 14
- ----------------------------------------------------------------------------------------------------------------------------
Earnings $15 $12 $8 $19 $21
============================================================================================================================
AVERAGE BALANCE SHEET
Goodwill and other intangible assets $1,055 $1,025 $1,022 $1,025 $1,030
Other assets 836 840 857 868 902
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $1,891 $1,865 $1,879 $1,893 $1,932
============================================================================================================================
Assigned funds and other liabilities $1,683 $1,657 $1,671 $1,685 $1,724
Assigned capital 208 208 208 208 208
- ----------------------------------------------------------------------------------------------------------------------------
Total funds $1,891 $1,865 $1,879 $1,893 $1,932
============================================================================================================================
PERFORMANCE RATIOS
Return on assigned capital 29% 23% 15% 36% 40%
Operating margin(b) 21 18 16 27 25
============================================================================================================================
SERVICING STATISTICS
Accounting/administration net assets(c)
Domestic $583 $542 $481 $464 $485
Foreign(d) 35 31 29 25 28
- ----------------------------------------------------------------------------------------------------------------------------
Total $618 $573 $510 $489 $513
============================================================================================================================
Custody assets(c) $371 $347 $336 $311 $323
Shareholder accounts (in millions) 48 48 51 52 51
============================================================================================================================
OTHER INFORMATION
Average FTEs 5,328 5,437 5,538 5,772 5,979
============================================================================================================================
(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 of $19
million divided by total revenue, consistent with the approach used for
this computation in 2001 when the facilities consolidation charge was
originally recorded. The operating margin for the quarter ended September
30, 2002 without this adjustment was 17%.
(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 June 30 March 31 December 31 September 30 June 30
In millions 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income
Loans and fees on loans $497 $509 $542 $570 $591
Securities 155 144 150 141 149
Loans held for sale 15 12 18 24 41
Other 27 30 34 38 26
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income 694 695 744 773 807
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense
Deposits 117 132 149 162 172
Borrowed funds 54 57 68 79 77
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 171 189 217 241 249
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income(a) $523 $506 $527 $532 $558
===================================================================================================================================
Lending revenue to total revenue(b) 23% 22% 27% 22% 24%
Quarter ended
---------------------------------------------------------------------
NET INTEREST MARGIN June 30 March 31 December 31 September 30 June 30
2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Average yields/rates
Yield on earning assets
Loans and fees on loans 5.67% 5.82% 6.03% 6.13% 6.20%
Securities 4.21 4.41 4.67 5.10 5.39
Loans held for sale 3.45 2.65 3.48 4.43 5.07
Other 5.55 3.05 3.68 3.47 3.07
Total yield on earning assets 5.19 5.17 5.45 5.64 5.78
Rate on interest-bearing liabilities
Deposits 1.40 1.56 1.73 1.88 1.95
Borrowed funds 2.46 2.63 2.93 3.16 2.83
Total rate on interest-bearing
liabilities 1.61 1.77 1.98 2.16 2.16
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.58 3.40 3.47 3.48 3.62
Impact of noninterest-bearing sources .33 .36 .40 .40 .37
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest margin 3.91% 3.76% 3.87% 3.88% 3.99%
===================================================================================================================================
(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 June 30 March 31 December 31 September 30 June 30
2003 2003 2002 2002 2002
--------------------------------------------------------------------
Net interest income, GAAP basis $521 $503 $524 $528 $555
Taxable-equivalent adjustment 2 3 3 4 3
--------------------------------------------------------------------
Net interest income, taxable-equivalent basis $523 $506 $527 $532 $558
====================================================================
(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.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 12
DETAILS OF NONINTEREST INCOME AND NONINTEREST EXPENSE (Unaudited)
In millions
Quarter ended
----------------------------------------------------------------------------------
NONINTEREST INCOME June 30 March 31 December 31 September 30 June 30
2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Asset management $209 $207 $202 $200 $230
Fund servicing 188 193 194 193 217
Service charges on deposits 60 57 61 57 55
Brokerage 46 41 44 41 55
Consumer services 64 59 61 62 61
Corporate services 114 116 151 108 149
Equity management (17) (4) (14) (22) (13)
Net securities gains 26 56 1 68 16
Other 86 70 66 64 100
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income $776 $795 $766 $771 $870
===================================================================================================================================
Net gains on institutional loans held
for sale (included in "Corporate
Services" above) $15 $15 $52 $17 $55
Noninterest income to total revenue(a) 60% 61% 59% 59 % 61%
Quarter ended
----------------------------------------------------------------------------------
NONINTEREST EXPENSE June 30 March 31 December 31 September 30 June 30
2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Staff expense $446 $438 $408 $422 $441
Net occupancy 64 90 62 64 59
Equipment 69 69 68 68 67
Marketing 18 15 11 14 13
Distributions on capital securities 14 14 14 15 14
Other 324 230 228 207 245
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $935 $856 $791 $790 $839
===================================================================================================================================
Legal and consulting fees related to
regulatory compliance and certain legal
proceedings (included in "Other"
above)(b) $5 $2 $10 $8 $2
Costs incurred under DOJ agreement
(included in "Other" above)(b) $115
Efficiency(c) 72% 66% 61% 61 % 59%
===================================================================================================================================
(a) Calculated as total noninterest income divided by the sum of net interest
income and noninterest income.
(b) See "Agreement with Department of Justice" in the Corporation's July 21,
2003 second quarter 2003 earnings press release for further information
regarding amounts for the quarter ended June 30, 2003.
(c) The efficiency ratio for all periods presented is computed as noninterest
expense divided by the sum of net interest income and noninterest income.
THE PNC FINANCIAL SERVICES GROUP, INC. Page 13
CONSOLIDATED AVERAGE BALANCE SHEET (Unaudited)
June 30 March 31 December 31 September 30 June 30
Three months ended - in millions 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Interest-earning assets
Loans held for sale $1,754 $1,782 $1,985 $2,125 $3,235
Securities 14,672 13,078 12,852 11,108 11,035
Loans, net of unearned income
Commercial 14,965 15,050 15,426 15,698 16,311
Commercial real estate 2,169 2,265 2,382 2,501 2,470
Consumer 10,346 9,974 9,739 9,649 9,509
Residential mortgage 3,244 3,619 3,554 4,296 4,979
Lease financing 3,767 3,909 4,000 4,124 4,244
Other 360 363 356 419 402
- -----------------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income 34,851 35,180 35,457 36,687 37,915
Other 1,979 3,958 3,631 4,322 3,457
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 53,256 53,998 53,925 54,242 55,642
Allowance for credit losses (671) (682) (655) (665) (625)
Other noninterest-earning assets 12,980 12,639 12,572 12,281 11,443
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $65,565 $65,955 $65,842 $65,858 $66,460
===================================================================================================================================
LIABILITIES, MINORITY INTEREST, CAPITAL SECURITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits
Demand and money market $22,141 $22,073 $21,713 $21,376 $21,625
Savings 2,131 2,058 2,020 2,050 2,067
Retail certificates of deposit 8,892 9,638 9,977 10,347 10,518
Other time 269 265 269 269 910
Deposits in foreign offices 220 206 192 215 223
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 33,653 34,240 34,171 34,257 35,343
Borrowed funds 8,701 8,702 9,045 9,826 10,862
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 42,354 42,942 43,216 44,083 46,205
Demand and other noninterest-bearing deposits 10,278 10,146 9,933 9,405 8,986
Allowance for unfunded loan commitments
and letters of credit 77 84 79 73 98
Accrued expenses and other liabilities 4,980 4,928 4,829 4,754 4,027
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 57,689 58,100 58,057 58,315 59,316
Minority interest 252 251 261 218 192
Mandatorily redeemable capital securities
of subsidiary trusts 848 848 848 848 848
Shareholders' equity 6,776 6,756 6,676 6,477 6,104
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority interest, capital
securities and shareholders' equity $65,565 $65,955 $65,842 $65,858 $66,460
===================================================================================================================================
SUPPLEMENTAL AVERAGE BALANCE SHEET INFORMATION
- ----------------------------------------------
Federal funds sold $116 $1,813 $1,426 $2,212 $1,532
- -----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits $33,653 $34,240 $34,171 $34,257 $35,343
Demand and other noninterest-bearing deposits 10,278 10,146 9,933 9,405 8,986
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits $43,931 $44,386 $44,104 $43,662 $44,329
- -----------------------------------------------------------------------------------------------------------------------------------
Interest-bearing demand and money market deposits $22,141 $22,073 $21,713 $21,376 $21,625
Demand and other noninterest-bearing deposits 10,278 10,146 9,933 9,405 8,986
- -----------------------------------------------------------------------------------------------------------------------------------
Total transaction deposits $32,419 $32,219 $31,646 $30,781 $30,611
- -----------------------------------------------------------------------------------------------------------------------------------
Common shareholders' equity $6,767 $6,746 $6,666 $6,467 $6,094
- -----------------------------------------------------------------------------------------------------------------------------------
THE PNC FINANCIAL SERVICES GROUP, INC. Page 14
DETAILS OF LOANS AND LOANS HELD FOR SALE (Unaudited)
LOANS
June 30 March 31 December 31 September 30 June 30
Period ended-in millions 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial
Retail/wholesale $4,109 $4,147 $4,161 $4,247 $4,333
Manufacturing 3,591 3,685 3,454 3,726 3,838
Service providers 1,936 1,978 1,906 1,986 2,016
Real estate related 1,479 1,441 1,481 1,554 1,583
Financial services 1,274 1,255 1,218 1,252 1,326
Communications 78 110 124 115 110
Health care 407 422 458 450 471
Other 1,919 2,035 2,185 2,042 2,548
- -----------------------------------------------------------------------------------------------------------------------------------
Total commercial 14,793 15,073 14,987 15,372 16,225
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial real estate
Real estate project 1,563 1,749 1,750 1,958 1,963
Mortgage 464 492 517 516 546
- -----------------------------------------------------------------------------------------------------------------------------------
Total commercial real estate 2,027 2,241 2,267 2,474 2,509
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer
Home equity 8,876 8,435 8,108 7,905 7,654
Automobile 509 476 484 540 607
Other 1,166 1,209 1,262 1,283 1,325
- -----------------------------------------------------------------------------------------------------------------------------------
Total consumer 10,551 10,120 9,854 9,728 9,586
- -----------------------------------------------------------------------------------------------------------------------------------
Residential mortgage 3,114 3,627 3,921 3,829 4,750
Lease financing
Equipment 3,580 3,500 3,560 3,537 3,422
Vehicles 1,130 1,346 1,521 1,676 1,859
- -----------------------------------------------------------------------------------------------------------------------------------
Total lease financing 4,710 4,846 5,081 5,213 5,281
- -----------------------------------------------------------------------------------------------------------------------------------
Other 357 356 415 409 437
Unearned income (1,018) (1,018) (1,075) (1,108) (1,104)
- -----------------------------------------------------------------------------------------------------------------------------------
Total, net of unearned income $34,534 $35,245 $35,450 $35,917 $37,684
===================================================================================================================================
WHOLESALE LENDING STATISTICS
Portfolio composition-total exposure
Investment grade equivalent or better 53% 51% 52%
Non-investment grade-secured lending 24 25 24
Non-investment grade 23 24 24
- ---------------------------------------------------------------------------------------------------
Total 100% 100% 100%
- ---------------------------------------------------------------------------------------------------
Client relationships >$50 million-total exposure $12,852 $13,086 $13,392
Client relationships >$50 million-customers 143 145 140
===================================================================================================================================
CONSUMER LOAN STATISTICS(a)
Net charge-offs to loans .27% .24% .24% .31% .22%
===================================================================================================================================
LOANS HELD FOR SALE
June 30 March 31 December 31 September 30 June 30
Period ended - in millions 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional lending repositioning $126 $181 $298 $495 $1,066
Education loans 1,059 1,243 1,035 1,225 1,123
Other 290 278 274 269 252
- -----------------------------------------------------------------------------------------------------------------------------------
Total $1,475 $1,702 $1,607 $1,989 $2,441
===================================================================================================================================
INSTITUTIONAL LENDING REPOSITIONING
June 30 March 31 December 31 September 30 June 30
Period ended - in millions 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Loans held for sale
Credit exposure $199 $344 $626 $1,078 $2,019
Outstandings 126 181 298 495 1,066
Exit portfolio
Credit exposure 251 374 438 636 1,203
Outstandings 11 9 4 25 18
===================================================================================================================================
(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
June 30 March 31 December 31 September 30 June 30
Three months ended - in millions 2003 2003 2002 2002 2002
- ---------------------------------------------------------------------------------------------------------------------------
Beginning balance $680 $673 $648 $654 $613
Charge-offs
Commercial (27) (32) (27) (62) (66)
Commercial real estate (2) (1)
Consumer (10) (10) (10) (10) (10)
Residential mortgage (1) (3) (1)
Lease financing (29) (8) (5) (10) (5)
- ---------------------------------------------------------------------------------------------------------------------------
Total charge-offs (69) (50) (43) (85) (82)
Recoveries
Commercial 2 10 3 9 4
Commercial real estate 1
Consumer 3 3 3 3 4
Residential mortgage
Lease financing 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------
Total recoveries 6 14 8 12 8
Net charge-offs
Commercial (25) (22) (24) (53) (62)
Commercial real estate (2)
Consumer (7) (7) (7) (7) (6)
Residential mortgage (1) (3) (1)
Lease financing (28) (7) (4) (10) (5)
- ---------------------------------------------------------------------------------------------------------------------------
Total net charge-offs (63) (36) (35) (73) (74)
Provision for credit losses 57 36 65 73 89
Net change in allowance for unfunded loan
commitments and letters of credit (1) 7 (5) (6) 26
- ---------------------------------------------------------------------------------------------------------------------------
Ending balance $673 $680 $673 $648 $654
===========================================================================================================================
CHANGE IN ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
June 30 March 31 December 31 September 30 June 30
Three months ended - in millions 2003 2003 2002 2002 2002
- ---------------------------------------------------------------------------------------------------------------------------
Beginning balance $77 $84 $79 $73 $99
Net change in allowance for unfunded
loan commitments and letters of credit 1 (7) 5 6 (26)
- ---------------------------------------------------------------------------------------------------------------------------
Ending balance $78 $77 $84 $79 $73
===========================================================================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 16
DETAILS OF NONPERFORMING ASSETS (Unaudited)
NONPERFORMING ASSETS BY TYPE
June 30 March 31 December 31 September 30 June 30
Period ended - in millions 2003 2003 2002 2002 2002
- --------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans
Commercial $296 $252 $226 $232 $285
Commercial real estate 6 13 7 5 3
Consumer 11 11 11 12 11
Residential mortgage 7 7 7 5 6
Lease financing 6 51 57 15 18
- --------------------------------------------------------------------------------------------------------------------------------
Total nonaccrual loans 326 334 308 269 323
Troubled debt restructured loan 1 1 1 2 2
- --------------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 327 335 309 271 325
Nonperforming loans held for sale(a) 45 61 97 125 162
Foreclosed and other assets
Lease 19
Residential mortgage 7 6 6 6 5
Other 6 6 6 7 8
- --------------------------------------------------------------------------------------------------------------------------------
Total foreclosed and other assets 32 12 12 13 13
- --------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets(b) $404 $408 $418 $409 $500
- --------------------------------------------------------------------------------------------------------------------------------
Nonperforming loans to total loans .95% .95% .87% .75 % .86%
Nonperforming assets to total loans, loans held
for sale and foreclosed assets 1.12 1.10 1.13 1.08 1.25
Nonperforming assets to total assets .60 .59 .63 .60 .75
================================================================================================================================
(a) Includes troubled debt restructured loans held
for sale $11 $12 $17 $11
(b) Excludes equity management assets carried at
estimated fair value (June 30, 2003, March 31,
2003, December 31, 2002 and September 30, 2002
amounts include troubled debt restructured assets of
$3 million, $3 million $12 million and $13 million,
respective $39 $30 $40 $42 $29
CHANGE IN NONPERFORMING ASSETS
Three months Six months
June 30, 2003 - in millions ended ended
- -------------------------------------------------------------------------------------------
Beginning of period $408 $418
Transferred from accrual 168 279
Returned to performing (2) (3)
Principal reductions and payoffs (103) (158)
Asset sales (14) (32)
Charge-offs and valuation adjustments (53) (100)
- -------------------------------------------------------------------------------------------
June 30 $404 $404
===========================================================================================
THE PNC FINANCIAL SERVICES GROUP, INC. Page 17
DETAILS OF NONPERFORMING ASSETS (Unaudited)
NONPERFORMING ASSETS BY BUSINESS
June 30 March 31 December 31 September 30 June 30
Period ended - in millions 2003 2003 2002 2002 2002
- -----------------------------------------------------------------------------------------------------------------------------------
REGIONAL COMMUNITY BANKING
- --------------------------
Nonperforming loans $65 $76 $72 $56 $56
Foreclosed and other assets 10 10 10 9 9
-----------------------------------------------------------------------------
Total $75 $86 $82 $65 $65
-----------------------------------------------------------------------------
WHOLESALE BANKING-CORPORATE BANKING
- -----------------------------------
Nonperforming loans $121 $114 $104 $57 $126
Nonperforming loans held for sale 36 52 83 99 133
Foreclosed and other assets 19 2 2
-----------------------------------------------------------------------------
Total $176 $166 $187 $158 $261
-----------------------------------------------------------------------------
WHOLESALE BANKING-PNC REAL ESTATE FINANCE
- -----------------------------------------
Nonperforming loans $1 $10 $2 $3 $3
Nonperforming loans held for sale 2 3
Foreclosed and other assets 2
-----------------------------------------------------------------------------
Total $3 $12 $2 $3 $6
-----------------------------------------------------------------------------
WHOLESALE BANKING-PNC BUSINESS CREDIT
- -------------------------------------
Nonperforming loans $135 $130 $126 $151 $136
Nonperforming loans held for sale 9 7 14 26 26
Foreclosed and other assets 1 2 2 2 2
-----------------------------------------------------------------------------
Total $145 $139 $142 $179 $164
-----------------------------------------------------------------------------
PNC ADVISORS
- ------------
Nonperforming loans $5 $5 $5 $4 $4
-----------------------------------------------------------------------------
Total $5 $5 $5 $4 $4
-----------------------------------------------------------------------------
CONSOLIDATED TOTALS
- -------------------
Nonperforming loans $327 $335 $309 $271 $325
Nonperforming loans held for sale 45 61 97 125 162
Foreclosed and other assets 32 12 12 13 13
-----------------------------------------------------------------------------
Total $404 $408 $418 $409 $500
=============================================================================
LARGEST NONPERFORMING ASSETS AT JUNE 30, 2003 - IN MILLIONS (a)
PNC Corporate Banking PNC Business Credit
- -----------------------------------------------------------------------------------------------------------------------------------
Ranking Outstandings Industry Outstandings Industry Outstandings Industry
- -----------------------------------------------------------------------------------------------------------------------------------
1 $64 Retail/Wholesale $47 Manufacturing $64 Retail/Wholesale
2 47 Manufacturing 19 Service Provider 21 Service Provider
3 21 Service Provider 17 Manufacturing 8 Manufacturing
4 19 Service Provider 11 Manufacturing 7 Manufacturing
5 17 Manufacturing 10 Finance 7 Service Provider
6 11 Manufacturing 8 Manufacturing 7 Manufacturing
7 10 Finance 7 Manufacturing 5 Manufacturing
8 8 Manufacturing 7 Manufacturing 5 Retail/Wholesale
9 8 Manufacturing 5 Manufacturing 5 Retail/Wholesale
10 7 Manufacturing 4 Manufacturing 4 Service Provider
- -----------------------------------------------------------------------------------------------------------------------------------
Total $212 $135 $133
- -----------------------------------------------------------------------------------------------------------------------------------
As a percent of nonperforming assets
52% 77% 92%
===================================================================================================================================
(a) Amounts are not net of allowance for credit losses, if applicable.
Page 18
GLOSSARY OF TERMS
Accounting/administration net assets - Net domestic and foreign fund assets for
which PNC provides accounting and administration services. These assets are not
included on PNC's balance sheet.
Adjusted average total assets - Primarily comprised of total average quarterly
assets plus (less) unrealized losses (gains) on available-for-sale debt
securities, less goodwill and certain other intangible assets.
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, to the extent practicable, the
financial results of each business as if the 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 clients under safekeeping
arrangements. Such assets 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.
Earning assets - Assets that generate income, which include: short-term
investments; loans held for sale; loans, net of unearned income; securities;
federal funds sold and certain other assets.
Efficiency ratio - Noninterest expense divided by the sum of net interest income
and noninterest income.
Institutional lending repositioning - A 2001 PNC strategic action taken 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 1 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 restructured loans, nonaccrual loans held for sale, foreclosed assets and
other assets.
Page 19
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 and other assets.
Operating margin - Operating income divided by total revenue.
Return on assigned capital - Annualized net income divided by assigned capital.
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.
Risk-weighted assets - Primarily computed by the assignment of specific
risk-weights, as defined by The Board of Governors of the Federal Reserve
System, to assets and off-balance sheet instruments.
Securitization - The process by which financial assets are legally 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 1 risk-based capital - Tier 1 capital equals: total shareholders' equity,
plus trust preferred capital securities, plus certain minority interests 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.
Tier 1 risk-based capital ratio - Tier 1 risk-based capital divided by
risk-weighted assets.
Total assets serviced - Domestic and foreign assets for which PNC provides
mutual fund related services. These assets are not included on PNC's balance
sheet.
Total deposits - The sum of total transaction deposits, savings accounts,
certificates of deposit, other time deposits and deposits in foreign offices.
Total risk-based capital - Tier 1 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 risk-based capital ratio - Total risk-based capital divided by
risk-weighted assets.
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 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. PNC MultiFamily Capital is a
national provider of financial services for the multi-family housing
industry, particularly affordable senior and healthcare housing.
- 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. PNC
Advisors provides services to individuals and corporations primarily within
PNC's geographic footprint.
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.