Filed by The PNC Financial Services Group, Inc.

Pursuant to Rule 425 under the Securities Act of 1933 and

deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934

 

Subject Company: Riggs National Corporation

Commission File No. 000-09756

 

On April 21, 2005, The PNC Financial Services Group, Inc. (“PNC”) issued the attached press release and supplementary information announcing its earnings and business results for the quarter ended March 31, 2005.

 

 


 

LOGO

 

CONTACTS:

 

MEDIA:

Brian E. Goerke

(412) 762-4550

corporate.communications@pnc.com

 

INVESTORS:

William H. Callihan

(412) 762-8257

investor.relations@pnc.com

 

PNC REPORTS FIRST QUARTER EARNINGS OF $354 MILLION

 

PITTSBURGH, April 21, 2005 – The PNC Financial Services Group, Inc. (NYSE: PNC) today reported first quarter 2005 earnings of $354 million, or $1.24 per diluted share. Earnings a year ago were $328 million, or $1.15 per diluted share, and earnings for the fourth quarter of 2004 were $307 million, or $1.08 per diluted share. Earnings for the first quarter of 2005 included a previously announced benefit of $45 million, or $0.16 per diluted share, arising from the reversal of deferred tax liabilities related to the transfer of PNC’s ownership of BlackRock from PNC Bank, N.A. to our intermediate bank holding company. Earnings for the first quarter of 2004 included an after-tax gain of $22 million, or $0.08 per diluted share, related to the sale of the corporation’s modified coinsurance contracts.

 

“We are encouraged by our performance in the first quarter,” said James E. Rohr, chairman and chief executive officer. “ We outperformed expectations due to strong customer and balance sheet growth, further improvements in asset quality and consistent discipline regarding balance sheet and risk management. We expect to accelerate this momentum as we implement our company-wide initiative to make dramatic improvements in our efficiency.”

 

HIGHLIGHTS

 

    Average loan balances increased $5.1 billion, or 13 percent, over the first quarter of 2004. The increase resulted from higher demand across commercial and consumer loan products.

 

    Average total deposits increased $6.0 billion, or 13 percent, compared with a year ago, as our relationship-based strategy resulted in higher certificates of deposit and money market account balances, as well as higher noninterest bearing deposits. Time deposits increased as a result of higher Eurodollar borrowings.

 

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LOGO

 

 


PNC Reports First Quarter Earnings Of $354 Million – Page 2

 

    Noninterest income, which is primarily fee-based revenue, increased to $973 million for the quarter, 8 percent higher than the fourth quarter of 2004, and represented 66 percent of total revenue. The increase was driven primarily by strong performance at BlackRock, including its successful acquisition of SSRM Holdings, Inc.

 

    Noninterest expense was relatively unchanged compared with the sequential quarter excluding BlackRock’s total expense of $184 million in the first quarter of 2005 and $132 million in the fourth quarter of 2004. BlackRock’s expenses increased in the first quarter of 2005 primarily as a result of the SSRM acquisition.

 

    Taxable-equivalent net interest income of $512 million increased $3 million compared with the sequential quarter despite seasonal factors.

 

    Asset quality continued to improve.

 

Return on average common equity was 19.17 percent for the quarter compared with 18.84 percent a year ago and 16.71 percent in the fourth quarter of 2004.

 

The Consolidated Financial Highlights accompanying this news release include a reconciliation of total earnings for all business segments to consolidated earnings and a reconciliation of net interest income as reported under generally accepted accounting principles (GAAP) to taxable-equivalent net interest income.

 

BUSINESS SEGMENT RESULTS

 

Banking Businesses

 

Regional Community Banking

 

Regional Community Banking earned $121 million for the quarter compared with $102 million a year ago and $143 million for the fourth quarter of 2004. The 19 percent increase over the first quarter of 2004 was driven by continued customer and balance sheet growth, reduced noninterest expenses and a lower provision for credit losses. The reduced earnings compared with the fourth quarter of 2004 resulted from decreased noninterest income due to lower gains on sales of education loans and other assets as well as reduced seasonal consumer fee activity. The sequential quarter comparison was also impacted by lower taxable-equivalent net interest income from the lower number of days in the first quarter and seasonal declines in small business checking balances.

 

Regional Community Banking results in the first quarter were highlighted by:

 

    Consumer and small business checking relationships grew by a net 20,000 compared with December 2004. Total checking relationships of 1.76 million increased 5 percent over the past year. Penetration rates for consumer online banking and online bill payment, which are keys to customer retention, also continued to improve, to 47 percent and 8 percent respectively.

 

    Average loan balances increased $.3 billion over the previous quarter, and average loan balances increased $2.6 billion, or 16 percent over the past year.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 3

 

    Customer response to competitive interest rate offers, particularly in our fast-growing New Jersey market, resulted in growth in average certificates of deposit over both prior periods and in average money market accounts over the sequential quarter contributing to a $.3 billion increase in deposits over the prior quarter and a $1.7 billion increase over a year ago. While average interest rates paid on deposits increased over the prior periods, the earnings potential of deposits increased in the rising interest rate environment.

 

    Noninterest expenses declined $13 million compared with the first quarter of 2004. Noninterest expenses were relatively unchanged compared with last year’s first quarter excluding $10 million in conversion-related and other non-recurring costs associated with the United National acquisition in the first quarter of 2004. This strong expense control has been a focus while the Regional Community Bank continued to invest in customer-facing staff. Concurrent reductions in administrative and support functions resulted in a decrease of more than 200 employees compared with the prior quarter.

 

Wholesale Banking

 

Wholesale Banking earned $110 million in the first quarter, compared with $122 million for the same period a year ago and $108 million for the fourth quarter of 2004. The lower earnings compared with a year ago reflected a $26 million decrease in net gains on institutional loans held for sale and a lower negative provision for credit losses, which more than offset higher taxable-equivalent net interest income. The higher earnings compared with the sequential quarter resulted primarily from lower noninterest expense and a lower provision for credit losses partially offset by lower taxable-equivalent net interest income and lower net gains on sales of commercial mortgages.

 

Wholesale Banking results in the first quarter were highlighted by:

 

    Average loan balances increased $.4 billion, or 2 percent, over the previous quarter and $1.3 billion, or 8 percent, over a year ago.

 

    Average deposits increased $2.0 billion, or 30 percent, compared with the year-earlier period. The increase was driven by sales of treasury management products, a larger commercial mortgage servicing portfolio and strong liquidity positions within our customer base.

 

    Taxable-equivalent net interest income decreased $7 million compared with the prior quarter despite higher loan and deposit balances due to the negative impact of lower loan fees in the comparison and the cost of funding the potential tax exposure on the cross-border leasing portfolio in the first quarter of 2005.

 

    Noninterest expense decreased $14 million compared with the sequential quarter and increased 3 percent over the prior year due to disciplined expense management.

 

    Asset quality continued to improve. Nonperforming assets at March 31, 2005 declined 50 percent compared with March 31, 2004 and 8 percent compared with December 31, 2004. The benefit of the negative provision declined compared with the first quarter of 2004 due to loan growth.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 4

 

    Noninterest income decreased compared with a year ago primarily due to the $26 million reduction in gains on institutional loans held for sale. Strong revenue growth from several product areas compared with a year ago partially offset the lower gains: Capital markets revenues increased 31 percent, treasury management revenues increased 10 percent and Midland Loan Services revenue increased 20 percent.

 

PNC Advisors

 

PNC Advisors earned $28 million for the first quarter of 2005 compared with $31 million a year ago and $24 million for the fourth quarter of 2004. Earnings in the first quarter of 2004 included a $7 million after-tax gain from the sale of certain investment consulting activities from the Hawthorn unit. Excluding the effect of the Hawthorn gain, the 17 percent increase in earnings compared with both prior periods resulted primarily from disciplined expense control and improved operating leverage. Average loans outstanding at PNC Advisors increased 10 percent and average deposits increased 11 percent compared with the first quarter of 2004. These increases reflected the success of our local, relationship-based sales initiatives.

 

Assets under management at PNC Advisors totaled $49 billion at March 31, 2005 compared with $48 billion at March 31, 2004 and $50 billion at December 31, 2004.

 

Asset Management and Processing Businesses

 

BlackRock

 

BlackRock earned $47 million for the quarter compared with $55 million a year ago and $50 million for the fourth quarter of 2004. The lower earnings compared with both prior periods were due to one-time expenses of $9 million and on-going expenses associated with the SSRM acquisition partially offset by higher advisory fees driven by a growing base of assets under management. Earnings for the first quarter of 2005 and the fourth quarter of 2004 included $14 million and $13 million of LTIP expenses, respectively. Earnings for the fourth quarter of 2004 included a $10 million income tax benefit resulting from a favorable preliminary finding of an audit related to New York City income taxes, and earnings for the first quarter of 2004 included a $9 million income tax benefit resulting from resolving a State of New York tax audit. Total revenue increased 37 percent compared with the first quarter of 2004.

 

Assets under management at BlackRock increased to $391 billion at March 31, 2005 compared with $342 billion at December 31, 2004 primarily due to the SSRM acquisition and new business.

 

BlackRock is approximately 70 percent owned by PNC and is consolidated into PNC’s financial statements. Accordingly, approximately 30 percent of BlackRock’s earnings are recognized as minority interest expense in the Corporation’s consolidated income statement and are reflected on a separate line in the Business Earnings table in the Consolidated Financial Highlights.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 5

 

PFPC

 

PFPC earned a record $23 million for the quarter compared with $16 million a year ago and $20 million for the fourth quarter of 2004, increasing 44 percent and 15 percent, respectively. Earnings for the first quarter of 2005 reflected a $6 million after-tax gain related to the resolution of a client contract dispute, as well as a $5 million after-tax charge related to prepayment of intercompany debt. The higher earnings compared with the year earlier period were attributable to disciplined expense control and improved operating leverage, as well as strong performance from fund accounting, custody and print mailing services, due in part to BlackRock’s acquisition of SSRM. This performance was reflected in an 8 percent increase in fund servicing revenue compared with the first quarter of 2004. Earnings for the first quarter of 2004 also included the benefit from the accretion of a discounted client contract liability, which ended in the second quarter of 2004.

 

PFPC provided accounting/administration services for $745 billion of net fund assets and provided custody services for $462 billion of fund assets at March 31, 2005. Increases in these statistics over a year ago reflected new business, asset inflows from existing customers and equity market appreciation. Total fund assets serviced by PFPC were $1.8 trillion at March 31, 2005 compared with $1.7 trillion a year earlier.

 

“Other”

 

The “Other” category includes asset and liability management activities, related net securities gains or losses, equity management activities, differences between business segment performance reporting and financial statement (GAAP) reporting, corporate overhead and intercompany eliminations. Earnings of $39 million were reported in “Other” for the quarter compared with earnings of $18 million a year ago and a net loss of $23 million last quarter. The increase from fourth quarter 2004 reflected the impact of the benefit of $45 million arising from the deferred tax liability reversal related to the transfer of PNC’s ownership in BlackRock, an increase of $23 million in equity management gains and higher net interest income on the investment portfolio, partially offset by $9 million in net securities losses in the current period compared with $10 million in net securities gains in the prior period. The increase from first quarter 2004 reflected the impact of the benefit of the deferred tax liability reversal related to the transfer of PNC’s ownership in BlackRock and higher equity management gains, partially offset by net securities losses in the current period compared with $15 million in net securities gains in the prior period. First quarter 2004 included an after-tax gain of $22 million on the sale of the corporation’s modified coinsurance contracts.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 6

 

CONSOLIDATED REVENUE REVIEW

 

Taxable-equivalent net interest income totaled $512 million for the quarter compared with $497 million a year ago and $509 million in the fourth quarter of 2004. The increase over the sequential quarter resulted from higher income associated with increased interest-earning assets partially offset by seasonal factors, including the lower number of days in the first quarter and declines in small business checking balances. The increase compared with the first quarter of 2004 resulted from higher income associated with increased interest-earning assets partially offset by higher costs of deposits as the corporation sought to add funding in anticipation of rising interest rates. The net interest margin in the first quarter was 3.02 percent compared with 3.30 percent a year ago and 3.12 percent last quarter. The decrease in net interest margin compared with the fourth quarter of 2004 resulted from higher average balances in the trading account, which carry lower average spreads. The decrease compared with the first quarter of 2004 resulted from decreased interest-rate spreads resulting from our relationship-based deposit strategy as well as higher balances in the trading account.

 

Noninterest income totaled $973 million for the first quarter compared with $911 million a year ago and $904 million last quarter. The increases reflected higher asset management fees attributable in part to the SSRM acquisition as well as higher equity management gains and stronger trading results. These factors were partially offset in the sequential quarter comparison by lower gains on sales of education loans and other assets, seasonally lower service charges on deposits and net securities losses in the current period compared with net securities gains in the prior period. In the comparison with the first quarter of 2004, the increase was partially offset by lower net gains on institutional loans held for sale and net securities losses in the current period compared with net securities gains in the prior quarter.

 

CONSOLIDATED EXPENSE REVIEW

 

Noninterest expense totaled $999 million for the quarter compared with $895 million a year ago and $949 million for the sequential quarter. Excluding BlackRock’s total expense of $184 million in the first quarter of 2005, $132 million in the fourth quarter of 2004 and $112 million in the first quarter of 2004, noninterest expense increased 4 percent over the year-earlier period and was relatively unchanged compared with the sequential quarter. The increase over a year ago was driven by increased sales incentives and the increased impact of expensing stock options. The increase in expense at BlackRock was largely attributable to the SSRM acquisition.

 

CONSOLIDATED BALANCE SHEET REVIEW

 

Total assets were $83.4 billion at March 31, 2005 compared with $74.1 billion a year ago and $79.7 billion at December 31, 2004. The increases in assets compared with both prior periods reflected increases in loan and securities balances.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 7

 

Average total loans of $44.0 billion for the quarter increased $5.1 billion over a year ago and $.9 billion over the sequential quarter. The increases were driven by continued improvements in market loan demand as well as increased targeted sales efforts across our banking businesses.

 

Average total securities balances for the quarter increased $.8 billion compared with the previous quarter as the corporation took advantage of short-term investing opportunities.

 

Average total trading assets increased $1.6 billion compared with the previous quarter as the corporation took advantage of market opportunities.

 

Average deposits of $53.4 billion for the quarter increased $6.0 billion over a year ago and $1.4 billion over the sequential quarter. The increases were driven primarily by higher certificates of deposit, money market accounts and, in the comparison with the first quarter of 2004, noninterest bearing deposit balances, as well as higher Eurodollar holdings.

 

During the first quarter of 2005, the Corporation repurchased .5 million common shares at an average cost of $52.54 per share. The pending acquisition of Riggs National Corporation, as well as BlackRock’s acquisition of SSRM, restricted share repurchases. The pending Riggs acquisition will continue to cause us to restrict share repurchases over the next several quarters.

 

ASSET QUALITY REVIEW

 

Overall asset quality improved further due to our continued focus on lending that meets prudent risk-reward parameters. The provision for credit losses for the quarter was $8 million compared with $12 million a year ago and $19 million for the sequential quarter. The decrease in the provision despite growth in loan balances compared with both prior periods was attributable to continued improvement in asset quality.

 

Net charge-offs were $12 million for the quarter compared with $62 million a year ago and $14 million last quarter. The decrease in net charge-offs versus a year ago was primarily attributable to overall improvements in asset quality and a change in the charge-off policy related to smaller nonperforming commercial loans in the first quarter of 2004.

 

CONFERENCE CALL AND SUPPLEMENTARY FINANCIAL INFORMATION

 

PNC Chairman and Chief Executive Officer James E. Rohr and Vice Chairman and Chief Financial Officer William S. Demchak will hold a conference call for investors today at 10:00 a.m. Eastern Time regarding the topics addressed in this release and the related financial supplement. Investors should call five to 10 minutes before the start of the conference call at 800-990-2718 (domestic) or 706-643-0187 (international). A taped replay of the call will be available for one week at 800-642-1687 (domestic) and 706-645-9291 (international); enter conference ID 5171728.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 8

 

In addition, internet access to the call (listen-only) and to PNC’s first quarter 2005 earnings release and supplementary financial information will be available on PNC’s website at www.pnc.com under “For Investors.” A replay of the webcast will be available on PNC’s website for 30 days.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

We make statements in this news release and in the conference call regarding this news release, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other matters regarding or affecting PNC that are forward-looking statements. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions.

 

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance.

 

In addition to factors that we have disclosed in our 2004 Annual Report on Form 10-K and in other SEC reports (accessible on the SEC’s website at www.sec.gov and on or through PNC’s corporate website at www.pnc.com) and those that we may discuss elsewhere in this news release, PNC’s forward-looking statements are subject to, among others, the following risks and uncertainties, which could cause actual results or future events to differ materially from those that we anticipated in our forward-looking statements or from our historical performance:

 

    Changes in political, economic or industry conditions, the interest rate environment, or the financial and capital markets (including as a result of actions of the Federal Reserve Board affecting interest rates, the money supply, or otherwise reflecting changes in monetary policy), which could affect: (a) credit quality and the extent of our credit losses; (b) the extent of funding of our unfunded loan commitments and letters of credit; (c) our allowances for loan and lease losses and unfunded loan commitments and letters of credit; (d) demand for our credit or fee-based products and services; (e) our net interest income; (f) the value of assets under management and assets serviced, of private equity investments, of other debt and equity investments, of loans held for sale, or of other on-balance sheet or off-balance sheet assets; or (g) the availability and terms of funding necessary to meet our liquidity needs;

 

    The impact on us of legal and regulatory developments, including the following: (a) the resolution of legal proceedings or regulatory and other governmental inquiries; (b) increased litigation risk from recent regulatory and other governmental developments; (c) the results of the regulatory examination process, our failure to satisfy the requirements of agreements with governmental agencies, and regulators’ future use of supervisory and enforcement tools; (d) legislative and regulatory reforms, including changes to tax laws; and (e) changes in accounting policies and principles, with the impact of any such developments possibly affecting our ability to operate our businesses or our financial condition or results of operations or our reputation, which in turn could have an impact on such matters as business generation and retention, our ability to attract and retain management, liquidity and funding;

 

    The impact on us of changes in the nature or extent of our competition;

 

    The introduction, withdrawal, success and timing of our business initiatives and strategies;

 

    Customer acceptance of our products and services, and our customers’ borrowing, repayment, investment and deposit practices;

 

    The impact on us of changes in the extent of customer or counterparty delinquencies, bankruptcies or defaults, which could affect, among other things, credit and asset quality risk and our provision for credit losses;

 

    The ability to identify and effectively manage risks inherent in our businesses;

 

    How we choose to redeploy available capital, including the extent and timing of any share repurchases and acquisitions or other investments in our businesses;

 

    The impact, extent and timing of technological changes, the adequacy of intellectual property protection, and costs associated with obtaining rights in intellectual property claimed by others;

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 9

 

    The timing and pricing of any sales of loans or other financial assets held for sale;

 

    Our ability to obtain desirable levels of insurance and to successfully submit claims under applicable insurance policies;

 

    The relative and absolute investment performance of assets under management;

 

    The extent of terrorist activities and international hostilities, increases or continuations of which may adversely affect the economy and financial and capital markets generally or us specifically; and

 

    Issues related to the completion of our pending acquisition of Riggs National Corporation and the integration of the remaining Riggs businesses into PNC, including the following:

 

    Completion of the transaction is dependent on, among other things, receipt of stockholder and regulatory approvals and regulatory waivers, the timing of which cannot be predicted with precision at this point and which may not be received at all;

 

    Successful completion of the transaction and our ability to realize the benefits that we anticipate from the acquisition also depend on the nature of any future developments with respect to Riggs’ regulatory and legal issues, the ability to comply with the terms of all current or future requirements (including any related action plan) resulting from these issues, and the extent of future costs and expenses arising as a result of these issues, including the impact of increased litigation risk and any claims for indemnification or advancement of costs;

 

    Riggs’ regulatory and legal issues may cause reputational harm to PNC following the acquisition and integration of its business into ours;

 

    The transaction may be materially more expensive to complete than anticipated as a result of unexpected factors or events;

 

    The integration into PNC of the Riggs business and operations that we acquire, which will include conversion of Riggs’ different systems and procedures, may take longer or be more costly than anticipated and may have unanticipated adverse results relating to Riggs’ or PNC’s existing businesses;

 

    It may take longer than expected to realize the anticipated cost savings of the acquisition, and the anticipated cost savings may not be achieved in their entirety; and

 

    The anticipated strategic and other benefits of the acquisition to PNC are dependent in part on the future performance of Riggs’ business, and we can provide no assurance as to actual future results, which could be affected by various factors, including the risks and uncertainties generally related to the performance of PNC’s and Riggs’ businesses (with respect to Riggs, you may review Riggs’ SEC reports, which are accessible on the SEC’s website at www.sec.gov) or due to factors related to the acquisition of Riggs and the process of integrating Riggs’ business at closing into PNC.

 

In addition to the pending Riggs acquisition, we grow our business from time to time by acquiring other financial services companies. Other acquisitions generally present similar risks to those described above relating to the Riggs transaction. We could also be prevented from pursuing attractive acquisition opportunities due to regulatory restraints.

 

You can find additional information on the foregoing risks and uncertainties and additional factors that could affect results anticipated in our forward-looking statements or from our historical performance in the reports that we file with the SEC. You can access our SEC reports on the SEC’s website at www.sec.gov or on or through our corporate website at www.pnc.com.

 

Also, BlackRock’s SEC reports (accessible on the SEC’s website or on or through BlackRock’s website at www.blackrock.com) discuss in more detail those risks and uncertainties that involve BlackRock that could affect the results anticipated in forward-looking statements or from historical performance. You may review the BlackRock SEC reports for a more detailed discussion of those risks and uncertainties and additional factors as they may affect BlackRock.

 

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PNC Reports First Quarter Earnings Of $354 Million – Page 10

 

The PNC Financial Services Group, Inc. (PNC) and Riggs National Corporation (Riggs) have filed with the United States Securities and Exchange Commission (SEC) a proxy statement/prospectus and will file other relevant documents concerning the merger of Riggs with and into PNC (Merger). We urge investors to read the proxy statement/prospectus and any other documents to be filed with the SEC in connection with the Merger or incorporated by reference in the proxy statement/prospectus, because they will contain important information. Investors will be able to obtain these documents free of charge at the SEC’s website (www.sec.gov). In addition, documents filed with the SEC by PNC will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Riggs will be available free of charge from www.riggsbank.com.

 

The directors, executive officers, and certain other members of management of Riggs may be soliciting proxies in favor of the Merger from its shareholders. For information about these directors, executive officers, and members of management, shareholders are asked to refer to Riggs’s most recent annual meeting proxy statement, which is available at the web addresses provided in the preceding paragraph.

 

The PNC Financial Services Group, Inc. is one of the nation’s largest diversified financial services organizations, providing consumer and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.

 

[TABULAR MATERIAL FOLLOWS]


Consolidated Financial Highlights

 

The PNC Financial Services Group, Inc.    Page 11

 

     For the three months ended

 

Dollars in millions, except per share data

Unaudited


   March 31
2005


    December 31
2004


    March 31
2004


 

FINANCIAL PERFORMANCE

                        

Revenue

                        

Net interest income (taxable-equivalent basis) (a)

   $ 512     $ 509     $ 497  

Noninterest income

     973       904       911  
    


 


 


Total revenue

   $ 1,485     $ 1,413     $ 1,408  
    


 


 


Net income

   $ 354     $ 307     $ 328  
    


 


 


Diluted earnings per common share

   $ 1.24     $ 1.08     $ 1.15  
    


 


 


Cash dividends declared per common share

   $ .50     $ .50     $ .50  

SELECTED RATIOS

                        

Net interest margin

     3.02  %     3.12  %     3.30  %

Noninterest income to total revenue (b)

     66       64       65  

Efficiency (c)

     68       67       64  

Return on

                        

Average common shareholders’ equity

     19.17  %     16.71  %     18.84  %

Average assets

     1.72       1.55       1.81  

 

Certain prior period amounts included in these Consolidated Financial Highlights have been reclassified to conform to the current period presentation.


(a) The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than a taxable investment. To provide more meaningful comparisons of yields and margins for all earning assets, we have increased the interest income earned on tax-exempt assets to make them fully equivalent to other taxable interest income investments.

 

The following is a reconciliation of net interest income as reported in the Consolidated Statement of Income to net interest income on a taxable-equivalent basis (in millions):

 

     For the three months ended

     March 31
2005


   December 31
2004


   March 31
2004


Net interest income, GAAP basis

   $ 506    $ 503    $ 494

Taxable-equivalent adjustment

     6      6      3
    

  

  

Net interest income, taxable-equivalent basis

   $ 512    $ 509    $ 497
    

  

  

 

(b) Calculated as total noninterest income divided by the sum of net interest income and noninterest income.
(c) Calculated as noninterest expense divided by the sum of net interest income and noninterest income.


Consolidated Financial Highlights

 

The PNC Financial Services Group, Inc.    Page 12

 

     For the three months ended

 

In millions

Unaudited


   March 31
2005


    December 31
2004


    March 31
2004


 

BUSINESS EARNINGS

                        

Banking businesses

                        

Regional Community Banking

   $ 121     $ 143     $ 102  

Wholesale Banking

     110       108       122  

PNC Advisors

     28       24       31  
    


 


 


Total banking businesses

     259       275       255  
    


 


 


Asset management and processing businesses

                        

BlackRock

     47       50       55  

PFPC

     23       20       16  
    


 


 


Total asset management and processing businesses

     70       70       71  
    


 


 


Total business segment earnings

     329       345       326  

Minority interest in income of BlackRock

     (14 )     (15 )     (16 )

Other

     39       (23 )     18  
    


 


 


Total consolidated

   $ 354     $ 307     $ 328  
    


 


 


Dollars in millions, except per share data

Unaudited


   March 31
2005


    December 31
2004


    March 31
2004


 

BALANCE SHEET DATA

                        

Assets

   $ 83,359     $ 79,723     $ 74,115  

Earning assets

     69,155       65,055       61,344  

Loans, net of unearned income

     44,674       43,495       39,451  

Allowance for loan and lease losses

     600       607       604  

Securities

     18,449       16,761       16,941  

Loans held for sale

     2,067       1,670       1,548  

Deposits

     55,169       53,269       48,125  

Borrowed funds

     14,514       11,964       13,722  

Allowance for unfunded loan commitments and letters of credit

     78       75       91  

Shareholders’ equity

     7,579       7,473       7,230  

Common shareholders’ equity

     7,571       7,465       7,221  

Book value per common share

     26.78       26.41       25.61  

Common shares outstanding (millions)

     283       283       282  

Loans to deposits

     81 %     82 %     82 %

ASSETS UNDER MANAGEMENT (billions)

   $ 432     $ 383     $ 361  

FUND ASSETS SERVICED (billions)

                        

Accounting/administration net assets

   $ 745     $ 721     $ 669  

Custody assets

     462       451       411  

CAPITAL RATIOS

                        

Tier 1 Risk-based (a)

     8.7 %     9.0 %     9.1 %

Total Risk-based (a)

     12.5       13.0       13.1  

Leverage (a)

     7.3       7.6       7.7  

Tangible common (b)

     5.3       5.7       5.8  

Shareholders’ equity to total assets

     9.09       9.37       9.76  

Common shareholders’ equity to total assets

     9.08       9.36       9.74  

ASSET QUALITY RATIOS

                        

Nonperforming assets to total loans, loans held for sale and foreclosed assets

     .35 %     .39 %     .56 %

Nonperforming loans to loans

     .29       .33       .46  

Net charge-offs to average loans (for the three months ended)

     .11       .13       .64  

Allowance for loan and lease losses to loans

     1.34       1.40       1.53  

Allowance for loan and lease losses to nonperforming loans

     458       424       330  

(a) Estimated for March 31, 2005.
(b) Common shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets less goodwill and other intangible assets (excluding mortgage servicing rights).


LOGO

 

THE PNC FINANCIAL SERVICES GROUP, INC.

 

FINANCIAL SUPPLEMENT

FIRST QUARTER 2005

UNAUDITED


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2005

UNAUDITED

 

     Page

Consolidated Income Statement

   1

Consolidated Balance Sheet

   2

Capital and Asset Quality Ratios

   2

Results of Businesses

    

Summary and Reconciliation to Total Consolidated Results

   3

Banking Businesses

    

Regional Community Banking

   4

Wholesale Banking

   5

PNC Advisors

   6-7

Asset Management and Processing Businesses

    

BlackRock

   8

PFPC

   9

Details of Net Interest Income, Net Interest Margin and Trading Revenue

   10

Details of Noninterest Income, Noninterest Expense and Effective Tax Rate

   11

Average Consolidated Balance Sheet

   12-13

Details of Loans and Lending Statistics

   14

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit and Net Unfunded Commitments

   15

Details of Nonperforming Assets

   16-17

Glossary of Terms

   18-20

Business Segment Products and Services

   21

 

The information contained in this Financial Supplement is preliminary, unaudited and based on data available at April 21, 2005. We have reclassified certain prior period amounts included in this Financial Supplement to be consistent with the current period presentation. This information speaks only as of the particular date or dates included in the schedules. We do not undertake any obligation to, and disclaim any duty to, correct or update any of the information provided in this Financial Supplement. Our future financial performance is subject to risks and uncertainties as described in our SEC filings.

 

The average full-time equivalent employee (FTE) statistics disclosed in this Financial Supplement for each business segment reflect staff directly employed by the respective business segment and exclude corporate and shared services employees.

 

The PNC Financial Services Group, Inc. (PNC) and Riggs National Corporation (Riggs) have filed with the United States Securities and Exchange Commission (SEC) a proxy statement/prospectus and will file other relevant documents concerning the merger of Riggs with and into PNC (Merger). We urge investors to read the proxy statement/prospectus and any other documents to be filed with the SEC in connection with the Merger or incorporated by reference in the proxy statement/prospectus, because they will contain important information. Investors will be able to obtain these documents free of charge at the SEC’s website (www.sec.gov). In addition, documents filed with the SEC by PNC will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Riggs will be available free of charge from www.riggsbank.com.

 

The directors, executive officers, and certain other members of management of Riggs may be soliciting proxies in favor of the Merger from its shareholders. For information about these directors, executive officers, and members of management, shareholders are asked to refer to Riggs’ most recent annual meeting proxy statement, which is available at the web addresses provided in the preceding paragraph.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 1

 

Consolidated Income Statement (Unaudited)

 

For the three months ended - in millions, except per share data


   March 31
2005


    December 31
2004


   September 30
2004


    June 30
2004


   March 31
2004


Interest Income

                                    

Loans and fees on loans

   $ 578     $ 547    $ 516     $ 490    $ 490

Securities available for sale and held to maturity

     173       154      139       130      145

Other

     53       42      30       38      31
    


 

  


 

  

Total interest income

     804       743      685       658      666
    


 

  


 

  

Interest Expense

                                    

Deposits

     182       152      121       107      104

Borrowed funds

     116       88      73       70      68
    


 

  


 

  

Total interest expense

     298       240      194       177      172
    


 

  


 

  

Net interest income

     506       503      491       481      494

Provision for credit losses

     8       19      13       8      12
    


 

  


 

  

Net interest income less provision for credit losses

     498       484      478       473      482
    


 

  


 

  

Noninterest Income

                                    

Asset management

     314       256      239       252      253

Fund servicing

     220       209      204       200      204

Service charges on deposits

     59       65      65       63      59

Brokerage

     55       53      52       56      58

Consumer services

     66       68      66       67      63

Corporate services

     107       120      100       128      125

Equity management gains

     32       9      16       35      7

Net securities gains (losses)

     (9 )     10      16       14      15

Other

     129       114      80       95      127
    


 

  


 

  

Total noninterest income

     973       904      838       910      911
    


 

  


 

  

Noninterest Expense

                                    

Compensation

     479       452      500       414      389

Employee benefits

     83       82      76       77      74

Net occupancy

     73       64      68       67      68

Equipment

     74       74      72       70      74

Marketing

     20       24      19       24      20

Other

     270       253      246       258      270
    


 

  


 

  

Total noninterest expense

     999       949      981       910      895
    


 

  


 

  

Income before minority and noncontrolling interests and income taxes

     472       439      335       473      498

Minority and noncontrolling interests in income (loss) of consolidated entities

     6       5      (13 )     11      7

Income taxes

     112       127      90       158      163
    


 

  


 

  

Net income

   $ 354     $ 307    $ 258     $ 304    $ 328
    


 

  


 

  

Earnings Per Common Share

                                    

Basic

   $ 1.26     $ 1.09    $ .92     $ 1.08    $ 1.16

Diluted

   $ 1.24     $ 1.08    $ .91     $ 1.07    $ 1.15
    


 

  


 

  

Average Common Shares Outstanding

                                    

Basic

     281       281      281       281      282

Diluted

     284       283      283       283      284
    


 

  


 

  


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 2

 

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Assets

                                        

Cash and due from banks

   $ 2,908     $ 3,230     $ 3,005     $ 3,065     $ 2,787  

Federal funds sold and resale agreements

     1,252       1,635       1,154       1,096       1,979  

Other short-term investments, including trading securities

     2,354       1,848       1,801       1,335       1,243  

Loans held for sale

     2,067       1,670       1,582       1,457       1,548  

Securities available for sale and held to maturity

     18,449       16,761       16,824       14,954       16,941  

Loans, net of unearned income of $872, $902, $931, $923 and $980

     44,674       43,495       42,480       40,835       39,451  

Allowance for loan and lease losses

     (600 )     (607 )     (581 )     (593 )     (604 )
    


 


 


 


 


Net loans

     44,074       42,888       41,899       40,242       38,847  

Goodwill

     2,976       3,001       3,007       2,978       2,975  

Other intangible assets

     613       354       348       351       341  

Other

     8,666       8,336       7,678       7,641       7,454  
    


 


 


 


 


Total assets

   $ 83,359     $ 79,723     $ 77,298     $ 73,119     $ 74,115  
    


 


 


 


 


Liabilities

                                        

Deposits

                                        

Noninterest-bearing

   $ 12,808     $ 12,915     $ 12,461     $ 12,246     $ 11,879  

Interest-bearing

     42,361       40,354       38,701       37,748       36,246  
    


 


 


 


 


Total deposits

     55,169       53,269       51,162       49,994       48,125  

Borrowed funds

                                        

Federal funds purchased

     995       219       2,008       1,069       2,648  

Repurchase agreements

     2,077       1,376       1,595       1,163       1,279  

Bank notes and senior debt

     3,662       2,383       2,997       2,796       2,829  

Subordinated debt

     3,988       4,050       3,569       3,510       3,837  

Commercial paper

     2,381       2,251       1,805       1,743       1,934  

Other borrowed funds

     1,411       1,685       945       656       1,195  
    


 


 


 


 


Total borrowed funds

     14,514       11,964       12,919       10,937       13,722  

Allowance for unfunded loan commitments and letters of credit

     78       75       96       84       91  

Accrued expenses

     2,288       2,406       2,402       2,221       2,313  

Other

     3,199       4,032       2,908       2,400       2,216  
    


 


 


 


 


Total liabilities

     75,248       71,746       69,487       65,636       66,467  
    


 


 


 


 


Minority and noncontrolling interests in consolidated entities

     532       504       499       419       418  

Shareholders’ Equity

                                        

Preferred stock (a)

                                        

Common stock - $5 par value

                                        

Authorized 800 shares, issued 353 shares

     1,764       1,764       1,764       1,764       1,764  

Capital surplus

     1,275       1,265       1,246       1,235       1,209  

Retained earnings

     8,485       8,273       8,107       7,991       7,829  

Deferred compensation expense

     (42 )     (51 )     (52 )     (54 )     (27 )

Accumulated other comprehensive (loss) income

     (175 )     (54 )     (25 )     (139 )     180  

Common stock held in treasury at cost: 70, 70, 70, 71 and 71 shares

     (3,728 )     (3,724 )     (3,728 )     (3,733 )     (3,725 )
    


 


 


 


 


Total shareholders’ equity

     7,579       7,473       7,312       7,064       7,230  
    


 


 


 


 


Total liabilities, minority and noncontrolling interests, and shareholders’ equity

   $ 83,359     $ 79,723     $ 77,298     $ 73,119     $ 74,115  
    


 


 


 


 


CAPITAL RATIOS

                                        

Tier 1 Risk-based (b)

     8.7 %     9.0 %     9.0 %     9.1 %     9.1 %

Total Risk-based (b)

     12.5       13.0       12.5       12.9       13.1  

Leverage (b)

     7.3       7.6       7.7       7.7       7.7  

Tangible common

     5.3       5.7       5.6       5.6       5.8  

Shareholders’ equity to total assets

     9.09       9.37       9.46       9.66       9.76  

Common shareholders’ equity to total assets

     9.08       9.36       9.45       9.65       9.74  

ASSET QUALITY RATIOS

                                        

Nonperforming assets to total loans, loans held for sale and foreclosed assets

     .35 %     .39 %     .42 %     .49 %     .56 %

Nonperforming loans to loans

     .29       .33       .35       .41       .46  

Net charge-offs to average loans (For the three months ended)

     .11       .13       .12       .26       .64  

Allowance for loan and lease losses to loans

     1.34       1.40       1.37       1.45       1.53  

Allowance for loan and lease losses to nonperforming loans

     458       424       393       351       330  
    


 


 


 


 



(a) Less than $.5 million at each date.
(b) Estimated for March 31, 2005.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 3

 

Results of Businesses - Summary and Reconciliation to Total Consolidated Results (Unaudited) (a)

 

Three months ended – dollars in millions

 

Earnings      


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Banking businesses

                                        

Regional Community Banking

   $ 121     $ 143     $ 134     $ 125     $ 102  

Wholesale Banking

     110       108       100       113       122  

PNC Advisors

     28       24       24       27       31  
    


 


 


 


 


Total banking businesses

     259       275       258       265       255  
    


 


 


 


 


Asset management and processing businesses

                                        

BlackRock (b)

     47       50       (10 )     48       55  

PFPC

     23       20       17       17       16  
    


 


 


 


 


Total asset management and processing businesses

     70       70       7       65       71  
    


 


 


 


 


Total business segment earnings

     329       345       265       330       326  

Minority interest in (income) loss of BlackRock

     (14 )     (15 )     3       (14 )     (16 )

Other

     39       (23 )     (10 )     (12 )     18  
    


 


 


 


 


Total consolidated earnings

   $ 354     $ 307     $ 258     $ 304     $ 328  
    


 


 


 


 


Revenue (c)      


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Banking businesses

                                        

Regional Community Banking

   $ 506     $ 536     $ 525     $ 511     $ 501  

Wholesale Banking

     312       333       299       322       317  

PNC Advisors

     156       154       151       154       170  
    


 


 


 


 


Total banking businesses

     974       1,023       975       987       988  
    


 


 


 


 


Asset management and processing businesses

                                        

BlackRock

     250       188       171       184       182  

PFPC

     230       209       203       199       203  
    


 


 


 


 


Total asset management and processing businesses

     480       397       374       383       385  
    


 


 


 


 


Total business segment revenue

     1,454       1,420       1,349       1,370       1,373  

Other

     31       (7 )     (13 )     25       35  
    


 


 


 


 


Total consolidated revenue

   $ 1,485     $ 1,413     $ 1,336     $ 1,395     $ 1,408  
    


 


 


 


 



(a) See the Review of Businesses section of Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2004 (2004 Form 10-K) for additional information regarding presentation of results for our business segments. Our business segment information is presented based on our management accounting practices and our management structure. We refine our methodologies from time to time as our management accounting practices are enhanced and our businesses change.
(b) BlackRock results for the third quarter of 2004 reflect a $57 million after-tax impact for BlackRock’s 2002 Long-Term Retention and Incentive Plan (LTIP) charge. Our 2004 Form 10-K has additional information on the LTIP and related charges under Note 22 Stock-Based Compensation Plans in the Notes To Consolidated Financial Statements.
(c) Business segment revenue is presented on a taxable-equivalent basis except for BlackRock and PFPC. BlackRock began reporting revenue on a taxable-equivalent basis in the third quarter of 2004. BlackRock for all other periods and PFPC for all periods is presented on a book (GAAP) basis. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than a taxable investment. To provide more meaningful comparisons of yields and margins for all earning assets, we have increased the interest income earned on tax-exempt assets to make them fully equivalent to other taxable interest income investments. The following is a reconciliation of total consolidated revenue on a book (GAAP) basis to total consolidated revenue on a taxable-equivalent basis (in millions):

 

     March 31
2005


   December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


Total consolidated revenue, book (GAAP) basis

   $ 1,479    $ 1,407    $ 1,329    $ 1,391    $ 1,405

Taxable-equivalent adjustment

     6      6      7      4      3
    

  

  

  

  

Total consolidated revenue, taxable-equivalent basis

   $ 1,485    $ 1,413    $ 1,336    $ 1,395    $ 1,408
    

  

  

  

  

 

Reconciliation of Total Banking Businesses Earnings

              
Three months ended-dollars in millions    March 31
2005


    March 31
2004


Total banking businesses earnings, as reported

   $ 259     $ 255

Less: net gains on institutional loans held for sale, net of tax

     1       19
    


 

Total banking businesses earnings, as adjusted

   $ 258     $ 236

Increase in total banking businesses earnings, as reported

     2 %      

Increase in total banking businesses earnings, as adjusted

     9 %      
    


     

 

We believe that total banking businesses earnings, as adjusted, provides useful information to investors. Net gains on institutional loans held for sale have declined significantly compared with the first quarter of 2004 as the related remaining institutional lending held for sale loan portfolio has declined from $61 million at March 31, 2004 to $2 million at March 31, 2005. In addition, the assets and underlying relationships reflected in this portfolio are not included in our ongoing business strategy for Wholesale Banking.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 4

 

Regional Community Banking (Unaudited) (a)

 

Three months ended

Taxable-equivalent basis (a)      

Dollars in millions


   March 31
2005


    December 31
2004


    September 30
2004


   

June 30

2004


    March 31
2004


 

INCOME STATEMENT

                                        

Net interest income

   $ 341     $ 345     $ 342     $ 340     $ 333  

Noninterest income

                                        

Service charges on deposits

     57       62       63       60       57  

Investment products

     28       27       27       29       29  

Other

     80       102       93       82       82  
    


 


 


 


 


Total noninterest income

     165       191       183       171       168  
    


 


 


 


 


Total revenue

     506       536       525       511       501  

Provision for credit losses

     14       14       13       6       29  

Noninterest expense

                                        

Compensation and employee benefits

     128       136       132       130       136  

Net occupancy and equipment

     66       63       66       66       68  

Other

     105       98       102       111       108  
    


 


 


 


 


Total noninterest expense

     299       297       300       307       312  
    


 


 


 


 


Pretax earnings

     193       225       212       198       160  

Income taxes

     72       82       78       73       58  
    


 


 


 


 


Earnings

   $ 121     $ 143     $ 134     $ 125     $ 102  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Loans

                                        

Consumer

                                        

Home equity

   $ 11,863     $ 11,652     $ 11,283     $ 10,734     $ 9,478  

Indirect

     892       881       879       836       774  

Other consumer

     405       464       514       533       682  
    


 


 


 


 


Total consumer

     13,160       12,997       12,676       12,103       10,934  

Commercial

     4,372       4,220       4,113       3,943       3,901  

Floor plan

     1,013       961       929       1,037       947  

Residential mortgage

     677       708       737       776       813  

Other

     26       26       25       24       28  
    


 


 


 


 


Total loans

     19,248       18,912       18,480       17,883       16,623  

Goodwill

     991       1,000       1,005       1,005       994  

Loans held for sale

     1,345       1,221       1,238       1,156       1,115  

Other assets

     1,386       1,443       1,447       1,587       2,060  
    


 


 


 


 


Total assets

   $ 22,970     $ 22,576     $ 22,170     $ 21,631     $ 20,792  
    


 


 


 


 


Deposits

                                        

Noninterest-bearing demand

   $ 6,715     $ 6,883     $ 6,712     $ 6,464     $ 6,248  

Interest-bearing demand

     6,996       7,098       6,937       6,916       6,916  

Money market

     12,046       11,937       12,112       12,465       12,356  
    


 


 


 


 


Total transaction deposits

     25,757       25,918       25,761       25,845       25,520  

Savings

     2,724       2,727       2,659       2,548       2,508  

Certificates of deposit

     9,833       9,363       8,775       8,421       8,565  
    


 


 


 


 


Total deposits

     38,314       38,008       37,195       36,814       36,593  

Other liabilities

     132       164       185       223       432  

Capital

     2,447       2,420       2,375       2,364       2,362  
    


 


 


 


 


Total funds

   $ 40,893     $ 40,592     $ 39,755     $ 39,401     $ 39,387  
    


 


 


 


 


PERFORMANCE RATIOS

                                        

Return on capital

     20 %     24 %     22 %     21 %     17 %

Noninterest income to total revenue

     33       36       35       33       34  

Efficiency

     59       55       57       60       62  
    


 


 


 


 


OTHER INFORMATION (b)

                                        

Total nonperforming assets (c)

   $ 84     $ 91     $ 85     $ 81     $ 75  

Net charge-offs (c)

   $ 14     $ 11     $ 10     $ 10     $ 32  

Annualized net charge-off ratio (c)

     .29 %     .23 %     .22 %     .22 %     .77 %

Home equity portfolio credit statistics:

                                        

% of first lien positions

     51 %     51 %     51 %     51 %     50 %

Weighted average loan-to-value ratios

     71 %     71 %     71 %     71 %     72 %

Weighted average FICO scores

     716       716       717       717       713  

Loans 90 days past due

     .20 %     .22 %     .22 %     .20 %     .23 %

Gains on sales of education loans (d)

   $ 1     $ 13     $ 15     $ 2          

Average FTE staff

     9,886       10,109       10,251       10,254       10,379  

ATMs

     3,610       3,581       3,555       3,528       3,486  

Branches

     770       774       774       775       769  

Consumer and small business checking relationships

     1,761,000       1,741,000       1,732,000       1,700,000       1,679,000  

Consumer DDA households using online banking

     743,000       711,000       690,000       663,000       637,000  

% of consumer DDA households using online banking

     47 %     45 %     44 %     43 %     42 %

Consumer DDA households using online bill payment

     131,000       112,000       108,000       112,000       102,000  

% of consumer DDA households using online

                                        

bill payment

     8 %     7 %     7 %     7 %     7 %

Small business deposits

                                        

Noninterest-bearing

   $ 4,086     $ 4,203     $ 4,067     $ 3,908     $ 3,756  

Interest-bearing

     1,556       1,764       1,574       1,515       1,651  

Money market

     2,630       2,836       2,788       2,707       2,510  

Certificates of deposit

     352       318       304       300       324  
    


 


 


 


 



(a) See Notes (a) and (c) on page 3.
(b) Presented as of period-end, except for net charge-offs, annualized net charge-off ratio, home equity portfolio weighted average statistics, gains on sales of education loans, average FTEs and small business deposits.
(c) See Note (a) on page 16.
(d) Included in “Other noninterest income” above.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 5

 

Wholesale Banking (Unaudited) (a)

 

Three months ended

Taxable-equivalent basis (a)

Dollars in millions except as noted


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

INCOME STATEMENT

                                        

Net interest income

   $ 176     $ 183     $ 180     $ 171     $ 164  

Noninterest income

                                        

Net commercial mortgage banking

                                        

Net gains on loan sales

     9       20       6       14       10  

Servicing and other fees, net of amortization

     14       12       12       12       11  

Net gains on institutional loans held for sale

     2       2       5       17       28  

Other

     111       116       96       108       104  
    


 


 


 


 


Noninterest income

     136       150       119       151       153  
    


 


 


 


 


Total revenue

     312       333       299       322       317  

Provision for credit losses

     (4 )     9       1       8       (13 )

Noninterest expense

     167       181       166       162       162  
    


 


 


 


 


Pretax earnings

     149       143       132       152       168  

Noncontrolling interests in income of consolidated entities

     (11 )     (11 )     (12 )     (10 )     (10 )

Income taxes

     50       46       44       49       56  
    


 


 


 


 


Earnings

   $ 110     $ 108     $ 100     $ 113     $ 122  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Loans

                                        

Corporate banking (b)

   $ 10,417     $ 10,139     $ 9,776     $ 9,669     $ 9,875  

Commercial real estate

     1,807       1,824       1,902       1,934       1,665  

Commercial - real estate related

     1,782       1,743       1,704       1,465       1,585  

PNC Business Credit

     4,050       3,976       3,838       3,788       3,608  
    


 


 


 


 


Total loans (b)

     18,056       17,682       17,220       16,856       16,733  

Loans held for sale

     598       555       349       493       484  

Other assets

     5,430       4,514       4,010       4,640       4,630  
    


 


 


 


 


Total assets

   $ 24,084     $ 22,751     $ 21,579     $ 21,989     $ 21,847  
    


 


 


 


 


Deposits

   $ 8,683     $ 8,536     $ 7,882     $ 6,981     $ 6,694  

Commercial paper

     2,127       1,954       1,679       1,815       2,111  

Other liabilities

     3,777       3,395       2,944       3,583       3,725  

Capital

     1,692       1,590       1,586       1,659       1,854  
    


 


 


 


 


Total funds

   $ 16,279     $ 15,475     $ 14,091     $ 14,038     $ 14,384  
    


 


 


 


 


PERFORMANCE RATIOS

                                        

Return on capital

     26 %     27 %     25 %     27 %     26 %

Noninterest income to total revenue

     44       45       40       47       48  

Efficiency

     54       54       56       50       51  
    


 


 


 


 


COMMERCIAL MORTGAGE

                                        

SERVICING PORTFOLIO (in billions)

                                        

Beginning of period

   $ 98     $ 93     $ 89     $ 86     $ 83  

Acquisitions/additions

     14       12       11       11       7  

Repayments/transfers

     (7 )     (7 )     (7 )     (8 )     (4 )
    


 


 


 


 


End of period

   $ 105     $ 98     $ 93     $ 89     $ 86  
    


 


 


 


 


OTHER INFORMATION

                                        

Consolidated revenue from:

                                        

Treasury Management

   $ 97     $ 99     $ 95     $ 91     $ 88  

Capital Markets

   $ 42     $ 44     $ 27     $ 37     $ 32  

Midland Loan Services

   $ 30     $ 27     $ 30     $ 26     $ 25  

Equipment Leasing

   $ 18     $ 21     $ 21     $ 21     $ 21  

Total loans (c)

   $ 18,595     $ 17,959     $ 17,650     $ 17,171     $ 16,728  

Total nonperforming assets (c)

   $ 65     $ 71     $ 82     $ 110     $ 131  

Net charge-offs

   $ (2 )   $ 3             $ 16     $ 30  

Average FTE staff

     3,128       3,129       3,098       3,074       3,038  

Net carrying amount of commercial mortgage servicing rights (c)

   $ 258     $ 242     $ 229     $ 226     $ 211  
    


 


 


 


 



(a) See Notes (a) and (c) on page 3.
(b) Includes Market Street Funding Corporation. See Supplemental Average Balance Sheet Information on page 12.
(c) Presented as of period-end.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 6

 

PNC Advisors (Unaudited) (a)

 

Three months ended

Taxable-equivalent basis (a)

Dollars in millions except as noted


  

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

INCOME STATEMENT

                                        

Net interest income

   $ 28     $ 28     $ 29     $ 27     $ 27  

Noninterest income

                                        

Investment management and trust

     81       79       77       79       81  

Brokerage

     28       28       25       28       30  

Other

     19       19       20       20       32  
    


 


 


 


 


Total noninterest income

     128       126       122       127       143  
    


 


 


 


 


Total revenue

     156       154       151       154       170  

Provision for credit losses

             (1 )     1       (2 )     1  

Noninterest expense

     112       117       112       114       120  
    


 


 


 


 


Pretax earnings

     44       38       38       42       49  

Income taxes

     16       14       14       15       18  
    


 


 


 


 


Earnings

   $ 28     $ 24     $ 24     $ 27     $ 31  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Loans

                                        

Consumer

   $ 1,676     $ 1,640     $ 1,568     $ 1,475     $ 1,386  

Residential mortgage

     100       109       118       137       154  

Commercial

     425       384       412       417       415  

Other

     277       285       293       303       292  
    


 


 


 


 


Total loans

     2,478       2,418       2,391       2,332       2,247  

Other assets

     401       420       393       405       413  
    


 


 


 


 


Total assets

   $ 2,879     $ 2,838     $ 2,784     $ 2,737     $ 2,660  
    


 


 


 


 


Deposits

   $ 2,435     $ 2,314     $ 2,252     $ 2,298     $ 2,189  

Other liabilities

     276       299       276       272       268  

Capital

     301       297       305       301       325  
    


 


 


 


 


Total funds

   $ 3,012     $ 2,910     $ 2,833     $ 2,871     $ 2,782  
    


 


 


 


 


PERFORMANCE RATIOS (b)

                                        

Return on capital

     38 %     32 %     31 %     36 %     38 %

Noninterest income to total revenue

     82       82       81       82       84  
    


 


 


 


 


ASSETS UNDER ADMINISTRATION (in billions) (c) (d)

                                        

Assets under management

                                        

Personal

   $ 40     $ 41     $ 39     $ 40     $ 39  

Institutional

     9       9       9       9       9  
    


 


 


 


 


Total

   $ 49     $ 50     $ 48     $ 49     $ 48  
    


 


 


 


 


Asset Type

                                        

Equity

   $ 30     $ 30     $ 28     $ 29     $ 28  

Fixed income

     13       14       14       14       14  

Liquidity/Other

     6       6       6       6       6  
    


 


 


 


 


Total

   $ 49     $ 50     $ 48     $ 49     $ 48  
    


 


 


 


 


Nondiscretionary assets under administration

                                        

Personal

   $ 29     $ 29     $ 27     $ 27     $ 29  

Institutional

     63       64       64       64       65  
    


 


 


 


 


Total

   $ 92     $ 93     $ 91     $ 91     $ 94  
    


 


 


 


 


Asset Type

                                        

Equity

   $ 32     $ 32     $ 31     $ 32     $ 33  

Fixed income

     32       33       32       33       34  

Liquidity/Other

     28       28       28       26       27  
    


 


 


 


 


Total

   $ 92     $ 93     $ 91     $ 91     $ 94  
    


 


 


 


 


OTHER INFORMATION (d)

                                        

Total nonperforming assets

   $ 9     $ 9     $ 10     $ 10     $ 11  

Brokerage assets administered (in billions)

   $ 24     $ 25     $ 23     $ 23     $ 24  

Full service brokerage offices

     73       75       75       75       76  

Financial consultants

     432       436       435       436       444  

Margin loans

   $ 249     $ 254     $ 267     $ 268     $ 270  

Average FTE staff

     2,816       2,806       2,791       2,787       2,804  
    


 


 


 


 



(a) See Notes (a) and (c) on page 3.
(b) See page 7 for information regarding efficiency ratios.
(c) Excludes brokerage assets administered.
(d) Presented as of period-end, except for average FTE staff.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 7

 

PNC Advisors (Unaudited)

 

Efficiency ratios

 

     For the quarter ended

 
    

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

Efficiency, GAAP basis (a)

   72 %   76 %   74 %   74 %   71 %

Efficiency, as adjusted (b)

   63 %   68 %   66 %   64 %   61 %

(a) Calculated as noninterest expense divided by the sum of net interest income and noninterest income.
(b) Calculated by excluding the impact of brokerage firm activities included within the PNC Advisors business segment. Brokerage firm activities excluded are the principal activities of Hilliard Lyons on a management reporting basis, including client-related brokerage and trading, investment banking and investment management. Industry-wide efficiency measures for brokerage firms and asset management firms differ significantly due primarily to the highly variable compensation structure of brokerage firms. We believe the disclosure of an efficiency ratio for PNC Advisors excluding the impact of these brokerage firm activities is meaningful for investors as it provides a more relevant basis of comparison with other asset management firms.

 

Reconciliation of GAAP amounts with amounts used in the calculation of adjusted efficiency ratio:

 

     For the quarter ended

Dollars in millions


  

March 31

2005


  

December 31

2004


  

September 30

2004


  

June 30

2004


  

March 31

2004


Revenue, GAAP basis

   $ 156    $ 154    $ 151    $ 154    $ 170

Less: brokerage firm activities

     51      53      47      52      55
    

  

  

  

  

Revenue, as adjusted

   $ 105    $ 101    $ 104    $ 102    $ 115

Noninterest expense, GAAP basis

   $ 112    $ 117    $ 112    $ 114    $ 120

Less: brokerage firm activities

     46      47      44      48      50
    

  

  

  

  

Noninterest expense, as adjusted

   $ 66    $ 70    $ 68    $ 66    $ 70

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 8

 

BlackRock (Unaudited) (a)

 

Three months ended

Taxable-equivalent basis (a)

Dollars in millions except as noted      


  

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

INCOME STATEMENT

                                        

Investment advisory and administration fees

   $ 212     $ 163     $ 148     $ 162     $ 160  

Other income

     38       25       23       22       22  
    


 


 


 


 


Total revenue

     250       188       171       184       182  

Operating expense

     161       112       94       113       104  

Operating expense - LTIP charge

     14       13       91                  

Fund administration and servicing costs

     9       7       9       8       8  
    


 


 


 


 


Total expense

     184       132       194       121       112  
    


 


 


 


 


Operating income (loss)

     66       56       (23 )     63       70  

Nonoperating income

     8       8       7       15       6  
    


 


 


 


 


Pretax earnings (loss)

     74       64       (16 )     78       76  

Minority interest

             1               4          

Income taxes

     27       13       (6 )     26       21  
    


 


 


 


 


Earnings (loss)

   $ 47     $ 50     $ (10 )   $ 48     $ 55  
    


 


 


 


 


PERIOD-END BALANCE SHEET

                                        

Goodwill and other intangible assets

   $ 444     $ 184     $ 184     $ 186     $ 186  

Other assets

     1,050       961       893       780       723  
    


 


 


 


 


Total assets

   $ 1,494     $ 1,145     $ 1,077     $ 966     $ 909  
    


 


 


 


 


Liabilities and minority interest

   $ 648     $ 377     $ 342     $ 211     $ 186  

Stockholders’ equity

     846       768       735       755       723  
    


 


 


 


 


Total liabilities and stockholders’ equity

   $ 1,494     $ 1,145     $ 1,077     $ 966     $ 909  
    


 


 


 


 


PERFORMANCE DATA

                                        

Return on equity

     23 %     26 %     (5 )%     26 %     31 %

Operating margin (b)

     38       38       32       36       41  

Diluted earnings (loss) per share

   $ .70     $ .75     $ (.15 )   $ .73     $ .84  
    


 


 


 


 


ASSETS UNDER MANAGEMENT (in billions) (period end)

                                        

Separate accounts

                                        

Fixed income

   $ 240     $ 216     $ 211     $ 200     $ 202  

Liquidity

     7       7       8       7       6  

Liquidity - securities lending

     7       7       9       9       9  

Equity

     19       10       8       9       9  

Alternative investment products

     19       8       7       6       6  
    


 


 


 


 


Total separate accounts

     292       248       243       231       232  

Mutual funds (c)

                                        

Fixed income

     25       25       24       24       25  

Liquidity

     60       64       51       50       59  

Equity

     14       5       5       5       5  
    


 


 


 


 


Total mutual funds

     99       94       80       79       89  
    


 


 


 


 


Total assets under management

   $ 391     $ 342     $ 323     $ 310     $ 321  
    


 


 


 


 


OTHER INFORMATION

                                        

Average FTE staff

     1,320       1,062       1,063       984       947  
    


 


 


 


 



(a) See Notes (a) and (c) on page 3.
(b) Calculated as operating income, adjusted for the LTIP charges, SSRM acquisition costs, and appreciation on Rabbi trust assets related to BlackRock’s deferred compensation plans, divided by total revenue less reimbursable property management compensation and fund administration and servicing costs. The following is a reconciliation of this presentation to operating margin calculated on a GAAP basis (operating income divided by total revenue) in millions:
   
   

Operating (loss) income, GAAP basis

   $ 66     $ 56     $ (23 )   $ 63     $ 70  

Add back: LTIP charge

     14       13       91                  

Less: portion of LTIP to be funded by BlackRock

     (2 )     (2 )     (17 )                

Add back: SSRM acquisition costs

     9                                  

Add back: appreciation on Rabbi trust assets

     2       2               1       1  
    


 


 


 


 


Operating income, as adjusted

   $ 89     $ 69     $ 51     $ 64     $ 71  
    


 


 


 


 


Total revenue, GAAP basis

   $ 250     $ 188     $ 171     $ 184     $ 182  

Less: reimbursable property management compensation

     4                                  

Less: fund administration and servicing costs

     9       7       9       8       8  
    


 


 


 


 


Revenue used for operating margin calculation, as reported

   $ 237     $ 181     $ 162     $ 176     $ 174  
    


 


 


 


 


Operating margin, GAAP basis

     26 %     30 %     (13 )%     34 %     38 %

Operating margin, as adjusted

     38 %     38 %     32 %     36 %     41 %

 

We believe that operating margin, as adjusted, is a more relevant indicator of management’s ability to effectively employ BlackRock’s resources. The portion of the LTIP charges associated with awards to be met with the contribution of shares of BlackRock stock by PNC has been excluded from operating income because, exclusive of impact related to LTIP participants’ option to put awarded shares to BlackRock, this non-cash charge will not impact BlackRock’s book value. Appreciation on Rabbi trust assets related to BlackRock’s deferred compensation plans has been excluded because investment performance of these assets has a nominal impact on net income. Reimbursable property management compensation represents compensation and benefits paid to certain BlackRock Realty Advisors, Inc. (“Realty”) personnel. These employees are retained on Realty’s payroll when properties are acquired by Realty’s clients. The related compensation and benefits are fully reimbursed by Realty’s clients and have been excluded from operating margin, as adjusted, because they bear no economic cost to BlackRock. We have excluded fund administration and servicing costs 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.

 

(c) Includes BlackRock Funds, BlackRock Liquidity Funds, BlackRock Closed End Funds, Short Term Investment Fund and BlackRock Global Series Funds.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 9

 

PFPC (Unaudited) (a)

 

Three months ended

Dollars in millions except as noted


  

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

INCOME STATEMENT

                                        

Fund servicing revenue

   $ 220     $ 209     $ 203     $ 199     $ 203  

Other revenue

     10                                  
    


 


 


 


 


Total revenue

     230       209       203       199       203  

Operating expense

     173       160       158       158       167  

Amortization (accretion) of other intangibles, net

     3       4       3       (1 )     (3 )
    


 


 


 


 


Operating income

     54       45       42       42       39  

Nonoperating income (b)

                     1               2  

Debt financing

     8       12       14       14       14  

Debt prepayment penalty

     8                                  
    


 


 


 


 


Pretax earnings

     38       33       29       28       27  

Income taxes

     15       13       12       11       11  
    


 


 


 


 


Earnings

   $ 23     $ 20     $ 17     $ 17     $ 16  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Goodwill and other intangible assets

   $ 1,014     $ 1,017     $ 1,021     $ 1,024     $ 1,027  

Other assets

     1,250       1,069       1,052       1,054       952  
    


 


 


 


 


Total assets

   $ 2,264     $ 2,086     $ 2,073     $ 2,078     $ 1,979  
    


 


 


 


 


Debt financing

   $ 1,049     $ 1,067     $ 1,102     $ 1,137     $ 1,163  

Other liabilities

     952       756       711       681       550  

Capital

     263       263       260       260       266  
    


 


 


 


 


Total funds

   $ 2,264     $ 2,086     $ 2,073     $ 2,078     $ 1,979  
    


 


 


 


 


PERFORMANCE RATIOS

                                        

Return on capital

     35 %     30 %     26 %     26 %     23 %

Operating margin (c)

     23       22       21       21       19  
    


 


 


 


 


SERVICING STATISTICS (at period end)

                                        

Accounting/administration net fund assets (in billions)

 

Domestic

   $ 680     $ 660     $ 609     $ 612     $ 621  

Foreign (d)

     65       61       58       53       48  
    


 


 


 


 


Total

   $ 745     $ 721     $ 667     $ 665     $ 669  
    


 


 


 


 


Asset type

                                        

Money market

   $ 340     $ 341     $ 322     $ 326     $ 337  

Equity

     245       230       203       200       198  

Fixed income

     107       101       97       94       95  

Other

     53       49       45       45       39  
    


 


 


 


 


Total

   $ 745     $ 721     $ 667     $ 665     $ 669  
    


 


 


 


 


Custody fund assets (in billions)

   $ 462     $ 451     $ 418     $ 416     $ 411  
    


 


 


 


 


Shareholder accounts (in millions)

                                        

Transfer agency

     20       21       21       21       22  

Subaccounting

     39       36       34       34       33  
    


 


 


 


 


Total

     59       57       55       55       55  
    


 


 


 


 


OTHER INFORMATION

                                        

Average FTE staff

     4,833       4,659       4,614       4,816       4,910  
    


 


 


 


 



(a) See Note (a) on page 3.
(b) Net of nonoperating expense.
(c) Operating income divided by total revenue.
(d) Represents net assets serviced offshore.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 10

 

Details of Net Interest Income, Net Interest Margin and Trading Revenue (Unaudited)

 

Taxable-equivalent basis

 

     For the quarter ended

 

Net Interest Income

In millions


  

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

Interest income

                                        

Loans and fees on loans

   $ 580     $ 549     $ 518     $ 491     $ 492  

Securities available for sale and held to maturity

     174       155       141       131       146  

Other

     56       45       33       40       31  
    


 


 


 


 


Total interest income

     810       749       692       662       669  
    


 


 


 


 


Interest expense

                                        

Deposits

     182       152       121       107       104  

Borrowed funds

     116       88       73       70       68  
    


 


 


 


 


Total interest expense

     298       240       194       177       172  
    


 


 


 


 


Net interest income (a)

   $ 512     $ 509     $ 498     $ 485     $ 497  
    


 


 


 


 


     For the quarter ended

 

Net Interest Margin


  

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

Average yields/rates

                                        

Yield on interest-earning assets

                                        

Loans and fees on loans

     5.30 %     5.04 %     4.89 %     4.89 %     5.05 %

Securities available for sale and held to maturity

     4.13       3.85       3.67       3.33       3.57  

Other

     3.14       3.25       2.89       3.07       2.54  

Total yield on interest-earning assets

     4.79       4.59       4.44       4.34       4.44  

Rate on interest-bearing liabilities

                                        

Deposits

     1.80       1.52       1.27       1.15       1.16  

Borrowed funds

     3.09       2.76       2.45       2.21       2.07  

Total rate on interest-bearing liabilities

     2.15       1.82       1.55       1.42       1.40  
    


 


 


 


 


Interest rate spread

     2.64       2.77       2.89       2.92       3.04  

Impact of noninterest-bearing sources

     .38       .35       .30       .26       .26  
    


 


 


 


 


Net interest margin

     3.02 %     3.12 %     3.19 %     3.18 %     3.30 %
    


 


 


 


 


     For the quarter ended

 

Trading Revenue

In millions


  

March 31

2005


   

December 31

2004


   

September 30

2004


   

June 30

2004


   

March 31

2004


 

Net interest income

   $ 2     $ 4     $ 3     $ 4     $ 2  

Other noninterest income

     50       44       16       30       23  
    


 


 


 


 


Total trading revenue

   $ 52     $ 48     $ 19     $ 34     $ 25  
    


 


 


 


 


Securities underwriting and trading

   $ 6     $ 23     $ 11     $ 16     $ 10  

Foreign exchange

     8       9       8       7       7  

Financial derivatives

     38       16               11       8  
    


 


 


 


 


Total trading revenue

   $ 52     $ 48     $ 19     $ 34     $ 25  
    


 


 


 


 



(a) The following is a reconciliation of net interest income as reported in the Consolidated Income Statement to net interest income on a taxable-equivalent basis:

 

     For the quarter ended

In millions


  

March 31

2005


  

December 31

2004


  

September 30

2004


  

June 30

2004


  

March 31

2004


Net interest income, GAAP basis

   $ 506    $ 503    $ 491    $ 481    $ 494

Taxable-equivalent adjustment

     6      6      7      4      3
    

  

  

  

  

Net interest income, taxable-equivalent basis

   $ 512    $ 509    $ 498    $ 485    $ 497
    

  

  

  

  

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 11

 

Details of Noninterest Income, Noninterest Expense and Effective Tax Rate (Unaudited)

In millions

 

     For the quarter ended

 

Noninterest Income      


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Asset management

   $ 314     $ 256     $ 239     $ 252     $ 253  

Fund servicing

     220       209       204       200       204  

Service charges on deposits

     59       65       65       63       59  

Brokerage

     55       53       52       56       58  

Consumer services

     66       68       66       67       63  

Corporate services

     107       120       100       128       125  

Equity management gains

     32       9       16       35       7  

Net securities gains (losses)

     (9 )     10       16       14       15  

Other (a)

     129       114       80       95       127  
    


 


 


 


 


Total noninterest income

   $ 973     $ 904     $ 838     $ 910     $ 911  
    


 


 


 


 


Included in “Corporate services” above

                                        

Net gains on institutional loans held for sale

   $ 2     $ 2     $ 5     $ 17     $ 28  

Net gains on sales of commercial mortgages

   $ 9     $ 20     $ 6     $ 14     $ 10  

Included in “Other” above

                                        

Gains on sales of education loans

   $ 1     $ 13     $ 15     $ 2          

Noninterest income to total revenue

     66 %     64 %     63 %     65 %     65 %
     For the quarter ended

 

Noninterest Expense      


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Compensation

   $ 479     $ 452     $ 500     $ 414     $ 389  

Employee benefits

     83       82       76       77       74  

Net occupancy

     73       64       68       67       68  

Equipment

     74       74       72       70       74  

Marketing

     20       24       19       24       20  

Other

     270       253       246       258       270  
    


 


 


 


 


Total noninterest expense (b)

   $ 999     $ 949     $ 981     $ 910     $ 895  
    


 


 


 


 


Efficiency

     68 %     67 %     74 %     65 %     64 %

Bank efficiency (c)

     63 %     64 %     65 %     63 %     60 %
    


 


 


 


 


Effective tax rate (d)

     23.7 %     28.9 %     26.9 %     33.4 %     32.7 %
    


 


 


 


 



(a) “Other” also includes the “Other noninterest income” component of trading revenue. See page 10.
(b) The quarters ended March 31, 2005, December 31, 2004 and September 30, 2004 included $15 million, $14 million and $96 million, respectively, of charges related to the BlackRock LTIP. First quarter 2005 charges are comprised of $15 million of compensation expense. Fourth quarter 2004 charges are comprised of $13 million of compensation expense and $1 million of “Other” noninterest expense. Third quarter 2004 charges are comprised of $89 million of compensation expense, $2 million of employee benefits expense and $5 million of “Other” noninterest expense. See our 2004 Form 10-K for further information on the BlackRock LTIP.
(c) The bank efficiency ratio represents the consolidated efficiency ratio excluding the effect of BlackRock and PFPC.
(d) The first quarter 2004 effective tax rate reflects a $9 million benefit associated with the resolution of an audit performed by New York State on BlackRock’s state income tax returns filed from 1998 through 2001.

 

The third quarter 2004 effective tax rate reflects a $14 million reduction in income tax expense following our determination that we no longer require an income tax reserve related to bank-owned life insurance. See our third quarter 2004 Quarterly Report on Form 10-Q for additional information.

 

The fourth quarter 2004 effective tax rate reflects a $10 million income tax benefit resulting from the release of reserves allocated to BlackRock’s New York City tax liability due to the receipt of a favorable preliminary audit finding for the tax years 1998 through 2000.

 

The first quarter 2005 effective tax rate reflects the $45 million impact of the reversal of certain deferred tax liabilities in connection with the transfer of our ownership interest in BlackRock from PNC Bank, National Association to our intermediate bank holding company, PNC Bancorp, Inc. See Note 31 Subsequent Events in the Notes To Consolidated Financial Statements in our 2004 Form 10-K for additional information.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 12

 

Average Consolidated Balance Sheet (Unaudited)

 

Three months ended - in millions      


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Assets

                                        

Interest-earning assets

                                        

Securities available for sale and held to maturity

                                        

Securities available for sale

                                        

U.S. Treasury and government agencies/corporations

   $ 6,897     $ 6,895     $ 6,288     $ 6,654     $ 6,432  

Other debt

     9,631       8,846       8,667       8,624       9,293  

State and municipal

     172       175       216       225       264  

Corporate stocks and other

     172       188       201       259       282  
    


 


 


 


 


Total securities available for sale

     16,872       16,104       15,372       15,762       16,271  

Securities held to maturity

             1       2       2       2  
    


 


 


 


 


Total securities available for sale and held to maturity

     16,872       16,105       15,374       15,764       16,273  

Loans, net of unearned income

                                        

Commercial

     17,935       17,312       16,915       16,445       15,827  

Commercial real estate

     2,015       2,080       2,120       2,100       2,249  

Consumer

     15,641       15,280       14,673       13,968       12,719  

Residential mortgage

     4,855       4,683       4,354       3,622       3,492  

Lease financing

     3,041       3,216       3,182       3,437       4,050  

Other

     495       502       507       497       517  
    


 


 


 


 


Total loans, net of unearned income

     43,982       43,073       41,751       40,069       38,854  

Loans held for sale

     1,941       1,771       1,578       1,636       1,560  

Federal funds sold and resale agreements

     2,249       1,274       1,283       1,896       2,235  

Other

     2,937       2,302       1,746       1,551       1,162  
    


 


 


 


 


Total interest-earning assets

     67,981       64,525       61,732       60,916       60,084  

Noninterest-earning assets

                                        

Allowance for loan and lease losses

     (611 )     (582 )     (593 )     (603 )     (653 )

Cash and due from banks

     2,987       3,038       2,851       2,793       2,895  

Other assets

     13,005       11,791       11,372       10,762       10,697  
    


 


 


 


 


Total assets

   $ 83,362     $ 78,772     $ 75,362     $ 73,868     $ 73,023  
    


 


 


 


 


Supplemental Average Balance Sheet Information                                         

Loans excluding conduit

   $ 41,871     $ 41,121     $ 40,074     $ 38,257     $ 36,747  

Market Street Funding Corporation conduit

     2,111       1,952       1,677       1,812       2,107  
    


 


 


 


 


Total loans

   $ 43,982     $ 43,073     $ 41,751     $ 40,069     $ 38,854  
    


 


 


 


 


Trading Assets

                                        

Securities (a)

   $ 1,883     $ 1,348     $ 1,003     $ 740     $ 385  

Resale agreements (b)

     1,249       184       155       142       185  

Financial derivatives (c)

     679       668       604       541       608  
    


 


 


 


 


Total trading assets

   $ 3,811     $ 2,200     $ 1,762     $ 1,423     $ 1,178  
    


 


 


 


 



(a) Included in “Other interest-earning assets” above.
(b) Included in “Federal funds sold and resale agreements” above.
(c) Included in “Other noninterest-earning assets” above.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 13

 

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

Three months ended - in millions      


   March 31
2005


   December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


Liabilities, Minority and Noncontrolling Interests, and Shareholders’ Equity

                                  

Interest-bearing liabilities

                                  

Interest-bearing deposits

                                  

Money market

   $ 16,562    $ 16,328    $ 15,916    $ 16,027    $ 15,581

Demand

     7,965      7,999      7,857      7,878      7,873

Savings

     2,831      2,819      2,730      2,595      2,590

Retail certificates of deposit

     10,296      9,761      9,100      8,650      8,780

Other time

     902      892      825      680      343

Time deposits in foreign offices

     2,373      1,628      1,561      1,485      806
    

  

  

  

  

Total interest-bearing deposits

     40,929      39,427      37,989      37,315      35,973

Borrowed funds

                                  

Federal funds purchased

     1,659      1,676      1,940      2,303      1,912

Repurchase agreements

     2,306      1,906      1,158      1,508      1,157

Bank notes and senior debt

     2,663      2,535      2,709      2,752      2,752

Subordinated debt

     3,911      3,476      3,411      3,545      3,593

Commercial paper

     2,344      1,947      1,679      1,815      2,111

Other borrowed funds

     2,159      1,070      858      633      1,622
    

  

  

  

  

Total borrowed funds

     15,042      12,610      11,755      12,556      13,147
    

  

  

  

  

Total interest-bearing liabilities

     55,971      52,037      49,744      49,871      49,120

Noninterest-bearing liabilities, minority and noncontrolling interests, and shareholders’ equity

                                  

Demand and other noninterest-bearing deposits

     12,432      12,539      12,477      11,681      11,350

Allowance for unfunded loan commitments and letters of credit

     76      96      84      90      90

Accrued expenses and other liabilities

     6,856      6,283      5,470      4,773      5,020

Minority and noncontrolling interests in consolidated entities

     527      501      466      419      434

Shareholders’ equity

     7,500      7,316      7,121      7,034      7,009
    

  

  

  

  

Total liabilities, minority and noncontrolling interests, and shareholders’ equity

   $ 83,362    $ 78,772    $ 75,362    $ 73,868    $ 73,023
    

  

  

  

  

Supplemental Average Balance Sheet Information

                                  

Interest-bearing deposits

   $ 40,929    $ 39,427    $ 37,989    $ 37,315    $ 35,973

Demand and other noninterest-bearing deposits

     12,432      12,539      12,477      11,681      11,350
    

  

  

  

  

Total deposits

   $ 53,361    $ 51,966    $ 50,466    $ 48,996    $ 47,323
    

  

  

  

  

Transaction deposits

   $ 36,959    $ 36,866    $ 36,250    $ 35,586    $ 34,804
    

  

  

  

  

Common shareholders’ equity

   $ 7,492    $ 7,308    $ 7,113    $ 7,026    $ 7,000
    

  

  

  

  

Trading Liabilities

                                  

Securities sold short (a)

   $ 1,610    $ 539    $ 402    $ 254    $ 277

Repurchase agreements and other borrowings (b)

     1,185      479      302      127      86

Financial derivatives (c)

     519      526      492      423      559
    

  

  

  

  

Total trading liabilities

   $ 3,314    $ 1,544    $ 1,196    $ 804    $ 922
    

  

  

  

  


(a) Included in “Other borrowed funds” and “Accrued expenses and other liabilities” above.
(b) Included in “Repurchase agreements” and “Other borrowed funds” above.
(c) Included in “Accrued expenses and other liabilities” above.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 14

 

Details of Loans and Lending Statistics (Unaudited)

 

Loans

 

Period ended - in millions


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Commercial

                                        

Retail/wholesale

   $ 5,236     $ 4,961     $ 4,739     $ 4,580     $ 4,370  

Manufacturing

     4,327       3,944       3,870       3,861       3,759  

Other service providers

     1,820       1,787       1,648       1,571       1,631  

Real estate related

     2,179       2,104       2,096       2,029       1,862  

Financial services

     1,308       1,145       1,274       1,262       1,126  

Health care

     560       560       527       516       495  

Other

     3,043       2,937       2,961       2,894       2,758  
    


 


 


 


 


Total commercial

     18,473       17,438       17,115       16,713       16,001  
    


 


 


 


 


Commercial real estate

                                        

Real estate projects

     1,404       1,460       1,513       1,530       1,521  

Mortgage

     521       520       527       575       534  
    


 


 


 


 


Total commercial real estate

     1,925       1,980       2,040       2,105       2,055  
    


 


 


 


 


Equipment lease financing

     3,719       3,907       3,949       3,818       3,859  
    


 


 


 


 


Total commercial lending

     24,117       23,325       23,104       22,636       21,915  
    


 


 


 


 


Consumer

                                        

Home equity

     12,968       12,734       12,377       11,946       11,160  

Automobile

     854       836       842       825       762  

Other

     1,953       2,036       1,684       1,676       1,597  
    


 


 


 


 


Total consumer

     15,775       15,606       14,903       14,447       13,519  
    


 


 


 


 


Residential mortgage

     5,007       4,772       4,672       3,906       3,537  

Vehicle lease financing

     158       189       228       285       968  

Other

     489       505       504       484       492  

Unearned income

     (872 )     (902 )     (931 )     (923 )     (980 )
    


 


 


 


 


Total, net of unearned income

   $ 44,674     $ 43,495     $ 42,480     $ 40,835     $ 39,451  
    


 


 


 


 


Supplemental Loan Information

                                        

Loans excluding conduit

   $ 42,479     $ 41,243     $ 40,676     $ 39,094     $ 37,519  

Market Street Funding Corporation conduit

     2,195       2,252       1,804       1,741       1,932  
    


 


 


 


 


Total loans

   $ 44,674     $ 43,495     $ 42,480     $ 40,835     $ 39,451  
    


 


 


 


 


 

     March 31
2005


    March 31
2004


 

Commercial Lending Exposure (a)(b)

            

Investment grade or equivalent

            

$50 million or greater

   16 %   16 %

$25 million to < $50 million

   16 %   15 %

< $25 million

   15 %   16 %

Non-investment grade

            

$50 million or greater

   2 %   2 %

$25 million to < $50 million

   11 %   11 %

<$25 million

   40 %   40 %
    

 

Total

   100 %   100 %
    

 


(a) These statistics exclude the loans of Market Street Funding Corporation. The facilities extended by Market Street represent pools of granular obligations, structured to avoid excessive concentration of credit risk such that they attract an investment grade rating.
(b) Exposure represents the sum of all loans, leases, commitments and letters of credit.

 

Consumer Loan Statistic (c)

 

Net charge-offs to average loans

   .14 %   .16 %   .19 %   .20 %   .21 %

(c) Includes consumer, residential mortgage and vehicle leasing. During the second quarter of 2004, we sold our consumer vehicle leasing business.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 15

 

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit and

Net Unfunded Commitments (Unaudited)

 

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions      


   March 31
2005


    December
31 2004


    September
30 2004


    June
30
2004


    March 31
2004


 

Beginning balance

   $ 607     $ 581     $ 593     $ 604     $ 632  

Charge-offs

                                        

Commercial

     (12 )     (15 )     (13 )     (26 )     (59 )

Commercial real estate

                                     (2 )

Consumer

     (10 )     (11 )     (10 )     (11 )     (11 )

Residential mortgage

                     (2 )             (1 )

Lease financing

             (1 )     (1 )     (1 )     (2 )
    


 


 


 


 


Total charge-offs (a)

     (22 )     (27 )     (26 )     (38 )     (75 )

Recoveries

                                        

Commercial

     6       9       9       5       8  

Commercial real estate

                             1          

Consumer

     4       3       3       3       3  

Residential mortgage

                                     1  

Lease financing

             1       1       3       1  
    


 


 


 


 


Total recoveries

     10       13       13       12       13  

Net charge-offs

                                        

Commercial

     (6 )     (6 )     (4 )     (21 )     (51 )

Commercial real estate

                             1       (2 )

Consumer

     (6 )     (8 )     (7 )     (8 )     (8 )

Residential mortgage

                     (2 )                

Lease financing

                             2       (1 )
    


 


 


 


 


Total net charge-offs

     (12 )     (14 )     (13 )     (26 )     (62 )

Provision for credit losses

     8       19       13       8       12  
    


 


 


 


 


Acquired allowance (United National)

                                     22  

Net change in allowance for unfunded loan commitments and letters of credit

     (3 )     21       (12 )     7          
    


 


 


 


 


Ending balance

   $ 600     $ 607     $ 581     $ 593     $ 604  
    


 


 


 


 



(a) See Note (a) on page 16.

 

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions      


   March
31 2005


   December
31 2004


    September
30 2004


   June 30
2004


    March
31 2004


Beginning balance

   $ 75    $ 96     $ 84    $ 91     $ 91

Net change in allowance for unfunded loan commitments and letters of credit

     3      (21 )     12      (7 )      
    

  


 

  


 

Ending balance

   $ 78    $ 75     $ 96    $ 84     $ 91
    

  


 

  


 

 

Net Unfunded Commitments

 

                                    

In millions      


   March
31 2005


   December
31 2004


    September
30 2004


   June 30
2004


    March
31 2004


Net unfunded commitments

   $ 30,326    $ 30,306     $ 28,867    $ 28,510     $ 27,266
    

  


 

  


 


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 16

 

Details of Nonperforming Assets (Unaudited)

 

Nonperforming Assets by Type

 

Period ended - in millions      


   March 31
2005


    December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


 

Nonaccrual loans

                                        

Commercial (a)

   $ 83     $ 89     $ 96     $ 119     $ 132  

Commercial real estate

     11       14       10       3       3  

Consumer

     13       11       12       11       10  

Residential mortgage

     19       21       23       23       26  

Lease financing

     5       5       7       13       12  
    


 


 


 


 


Total nonaccrual loans

     131       140       148       169       183  

Troubled debt restructured loan

             3                          
    


 


 


 


 


Total nonperforming loans

     131       143       148       169       183  

Nonperforming loans held for sale (b)

     2       3       2       4       4  

Foreclosed and other assets

                                        

Lease financing

     13       14       16       17       17  

Residential mortgage

     11       10       11       11       13  

Other

     5       5       7       8       12  
    


 


 


 


 


Total foreclosed and other assets

     29       29       34       36       42  
    


 


 


 


 


Total nonperforming assets (c)

   $ 162     $ 175     $ 184     $ 209     $ 229  
    


 


 


 


 


Nonperforming loans to total loans

     .29 %     .33 %     .35 %     .41 %     .46 %

Nonperforming assets to total loans, loans held for sale and foreclosed assets

     .35       .39       .42       .49       .56  

Nonperforming assets to total assets

     .19       .22       .24       .29       .31  
    


 


 


 


 



                                        

(a)    During the first quarter of 2004, we changed our policy for recognizing charge-offs on smaller nonperforming commercial loans. This change resulted in the recognition of an additional $24 million of gross charge-offs for the first quarter of 2004.

       

(b)    Includes troubled debt restructured loans held for sale.

      

  $ 2     $ 2     $ 2     $ 3  

(c)    Excludes equity management assets carried at estimated fair value (March 31, 2005, December 31, 2004, September 30, 2004, June 30, 2004 and March 31, 2004 amounts include troubled debt restructured assets of $10 million, $11 million, $10 million, $10 million and $11 million, respectively).

   $ 33     $ 32     $ 29     $ 32     $ 29  

 

Change in Nonperforming Assets

 

In millions      


   Three months
ended


 

January 1, 2005

   $ 175  

Transferred from accrual

     32  

Returned to performing

     (5 )

Principal reductions and payoffs

     (25 )

Asset sales

     (4 )

Charge-offs and valuation adjustments

     (11 )
    


March 31, 2005

   $ 162  
    



THE PNC FINANCIAL SERVICES GROUP, INC.   Page 17

 

Details of Nonperforming Assets (Unaudited) (Continued)

 

Nonperforming Assets by Business

 

Period ended - in millions      


   March 31
2005


   December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


Regional Community Banking                                   

Nonperforming loans

   $ 74    $ 80    $ 74    $ 70    $ 64

Foreclosed and other assets

     10      11      11      11      11
    

  

  

  

  

Total

   $ 84    $ 91    $ 85    $ 81    $ 75
    

  

  

  

  

Wholesale Banking                                   

Nonperforming loans

   $ 46    $ 51    $ 60    $ 85    $ 102

Nonperforming loans held for sale

     2      3      2      4      4

Foreclosed and other assets

     17      17      20      21      25
    

  

  

  

  

Total

   $ 65    $ 71    $ 82    $ 110    $ 131
    

  

  

  

  

PNC Advisors                                   

Nonperforming loans

   $ 9    $ 9    $ 10    $ 9    $ 11

Foreclosed and other assets

                          1       
    

  

  

  

  

Total

   $ 9    $ 9    $ 10    $ 10    $ 11
    

  

  

  

  

Other (a)                                   

Nonperforming loans

   $ 2    $ 3    $ 4    $ 5    $ 6

Foreclosed and other assets

     2      1      3      3      6
    

  

  

  

  

Total

   $ 4    $ 4    $ 7    $ 8    $ 12
    

  

  

  

  

Consolidated Totals                                   

Nonperforming loans (b)

   $ 131    $ 143    $ 148    $ 169    $ 183

Nonperforming loans held for sale

     2      3      2      4      4

Foreclosed and other assets

     29      29      34      36      42
    

  

  

  

  

Total

   $ 162    $ 175    $ 184    $ 209    $ 229
    

  

  

  

  

 

Largest Nonperforming Assets at March 31, 2005 - in millions (c)

 

Ranking  


   Outstandings

 

Industry  


1

   $ 13   Air Transportation

2

     10   Fabricated Metal Manufacturing

3

     8   Wholesalers Nondurable Other

4

     7   Individuals

5

     7   Real Estate Lessors

6

     5   Plastic and Mineral Manufacturing

7

     3   Machinery Manufacturing

8

     3   Other Transportation

9

     3   Paper and Wood Product Manufacturing

10

     2   Machinery Manufacturing
    

   

Total

   $ 61    
    

   

 

       

As a percent of nonperforming assets

             38 %    

(a) Represents residential mortgages related to PNC’s asset and liability management function.
(b) See Note (a) on page 16.
(c) Amounts shown are not net of related allowance for loan and lease losses, if applicable.


    Page 18

 

Glossary of Terms

 

Accounting/administration net fund assets - Net domestic and foreign fund investment assets for which we provide accounting and administration services. We do not include these assets on our Consolidated Balance Sheet.

 

Adjusted average total assets - Primarily comprised of total average quarterly (or annual) 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 over which we have sole or shared investment authority for our customers/clients. We do not include these assets on our Consolidated Balance Sheet.

 

Capital - Represents the amount of resources that a business segment should hold to guard against potentially large losses that could cause insolvency. It is based on a measurement of economic risk, as opposed to risk as defined by regulatory bodies or generally accepted accounting principles. The economic capital measurement process involves converting a risk distribution to the capital that is required to support the risk, consistent with an institution’s target credit rating. As such, economic risk serves as a “common currency” of risk that allows an institution to compare different risks on a similar 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.

 

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 - All investment assets held on behalf of clients under safekeeping arrangements. We do not include these assets on our Consolidated Balance Sheet. Investment assets held in custody at other institutions on our behalf are included in the appropriate asset categories on the Consolidated Balance Sheet as if physically held by us.

 

Derivatives - Financial contracts whose value is derived from publicly traded securities, interest rates, currency exchange rates or market indices. Derivatives cover a wide assortment of financial contracts, including forward contracts, futures, options and swaps.

 

Earning assets - Assets that generate income, which include: short-term investments; loans held for sale; loans, net of unearned income; securities; federal funds sold; resale agreements; and certain other assets.

 

Economic value of equity (“EVE”) - The present value of the expected cash flows of our existing assets less the present value of the expected cash flows of our existing liabilities, plus the present value of the net cash flows of our existing off-balance sheet positions.

 

Effective duration - A measurement, expressed in years, that, when multiplied by a change in interest rates, would approximate the percentage change in value of on- and off-balance sheet positions.

 

Efficiency - Noninterest expense divided by the sum of net interest income and noninterest income.


    Page 19

 

Funds transfer pricing - A management accounting methodology designed to recognize the net interest income effects of sources and uses of funds provided by the assets and liabilities of business segments. These assets and liabilities are assigned funding rates that represent the interest cost for us to raise/invest funds with similar maturity and repricing structures, using the least-cost funding sources available.

 

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.

 

Nondiscretionary assets under administration - Assets we hold for our customers/clients in a non-discretionary, custodial capacity. We do not include these assets on our Consolidated Balance Sheet.

 

Noninterest income to total revenue - - Total noninterest income divided by total revenue. 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. Interest income does not accrue on assets classified as nonperforming.

 

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. Interest income does not accrue on loans classified as nonperforming.

 

Recovery - Cash proceeds received on a loan that had previously been charged off. The amount received is credited to the allowance for loan and lease losses.

 

Return on capital - Annualized net income divided by average capital.

 

Return on average assets - Annualized net income divided by average assets.

 

Return on average common equity - Annualized net income divided by average common shareholders’ equity.

 

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 of legally transforming financial assets into securities.

 

Shareholders’ equity to total assets - Period-end total shareholders’ equity divided by total period-end assets.

 

Tangible common capital ratio - Common shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets less goodwill and other intangible assets (excluding mortgage servicing rights).

 

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. To provide more meaningful 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 1 capital purposes.


    Page 20

 

Tier 1 risk-based capital ratio - Tier 1 risk-based capital divided by period-end risk-weighted assets.

 

Total fund assets serviced - Total domestic and foreign fund investment assets for which we provide related processing services. We do not include these assets on our Consolidated 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 loan and lease losses, subject to certain limitations.

 

Total risk-based capital ratio - Total risk-based capital divided by period-end risk-weighted assets.

 

Transaction deposits - The sum of money market and interest-bearing demand deposits and demand and other noninterest-bearing deposits.

 

Yield curve (shape of the yield curve, flat yield curve) - A graph showing the relationship between the yields on financial instruments or market indices of the same credit quality with different maturities. For example, a “normal” or “positive” yield curve exists when long-term bonds have higher yields than short-term bonds. A “flat” yield curve exists when yields are the same for short-term and long-term bonds. A “steep” yield curve exists when yields on long-term bonds are significantly higher than on short-term bonds.


    Page 21

 

Business Segment Products and Services

 

Regional Community Banking provides deposit, lending, and cash management services, and investment services through PNC Investments, LLC, to 2.2 million consumer and small business customers within PNC’s primary geographic footprint.

 

Wholesale Banking provides lending, treasury management, capital markets-related products and services, and commercial loan servicing to mid-sized corporations, government entities and selectively to large corporations. Lending products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting, and global trade services. Capital markets products include foreign exchange, derivatives, loan syndications and securities underwriting and distribution. Wholesale Banking provides products and services generally within PNC’s primary geographic markets and provides certain products and services nationally.

 

PNC Advisors provides a broad range of tailored investment, trust and private banking products and services to affluent individuals and families, including services to the ultra-affluent through its Hawthorn unit and full-service brokerage through J.J.B. Hilliard, W.L. Lyons, Inc. PNC Advisors also serves as investment manager and trustee for employee benefit plans and charitable and endowment assets and provides nondiscretionary defined contribution plan services and investment options through its Vested Interest® product. PNC Advisors provides services to individuals and corporations primarily within PNC’s primary geographic markets.

 

BlackRock is one of the largest publicly traded investment management firms in the United States. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquidity and alternative investment products. Mutual funds include the flagship fund families, BlackRock Funds and BlackRock Liquidity Funds (formerly BlackRock Provident Institutional Funds). In addition, BlackRock provides risk management, investment system outsourcing and financial advisory services to a growing number of institutional investors.

 

PFPC is among the largest providers of mutual fund transfer agency and accounting and administration services in the United States, offering a wide range of fund processing services to the investment management industry and providing processing solutions to the international marketplace through its Ireland and Luxembourg operations.