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 ---------- 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 - ----------------------------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 59,379 60,735 58,400 59,839 59,465 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total wholesale banking 63 72 84 57 82 PNC Advisors 20 16 13 20 31 - ------------------------------------------------------------------------------------------------------------------------------------ Total banking businesses 242 240 249 269 289 - ------------------------------------------------------------------------------------------------------------------------------------ Asset management and processing businesses BlackRock 39 35 34 33 35 PFPC 15 12 8 19 21 - ------------------------------------------------------------------------------------------------------------------------------------ Total asset management and processing businesses 54 47 42 52 56 - ------------------------------------------------------------------------------------------------------------------------------------ Total business earnings 296 287 291 321 345 Other (112) (25) (13) (36) (25) - ------------------------------------------------------------------------------------------------------------------------------------ Results from continuing operations 184 262 278 285 320 - ------------------------------------------------------------------------------------------------------------------------------------ Discontinued operations (16) - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total banking businesses 958 954 966 1,002 1,041 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total business revenue 1,289 1,290 1,298 1,331 1,415 Other 10 11 (5) (28) 13 - ------------------------------------------------------------------------------------------------------------------------------------ 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.