Exhibit 99.1

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2010

(UNAUDITED)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2010

(UNAUDITED)

 

     Page

Consolidated Results:

  

Income Statement

   1

Balance Sheet

   2

Capital Ratios

   2

Average Balance Sheet

   3-4

Net Interest Margin

   5

Loans and Loans Held for Sale

   6

Accretion

   7

Accruing Loans Past Due

   8

Allowances for Credit Losses

   9

Net Unfunded Commitments

   9

Nonperforming Assets

   10-11

Business Segment Results:

  

Business Segment Descriptions

   12

Summary of Earnings and Revenue

   13

Period-end Employees

   13

Retail Banking

   14-15

Corporate & Institutional Banking

   16

Asset Management Group

   17

Residential Mortgage Banking

   18

Distressed Assets Portfolio

   19

Glossary of Terms

   20-23

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on April 22, 2010. We have reclassified certain prior period amounts 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 United States Securities and Exchange Commission (“SEC”) filings.

BUSINESS

PNC is one of the largest diversified financial services companies in the United States and is headquartered in Pittsburgh, Pennsylvania. PNC has businesses engaged in retail banking, corporate and institutional banking, asset management, residential mortgage banking and global investment servicing, providing many of its products and services nationally and others in PNC’s primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and Wisconsin. PNC also provides certain investment servicing internationally.

PENDING SALE OF PNC GLOBAL INVESTMENT SERVICING

On February 2, 2010, we entered into a definitive agreement to sell PNC Global Investment Servicing Inc. (GIS), a leading provider of processing, technology and business intelligence services to asset managers, broker-dealers and financial advisors worldwide, for $2.3 billion in cash. We currently anticipate closing the transaction in the third quarter of 2010. Completion of the transaction is subject to regulatory approvals and certain other closing conditions. Results of operations of GIS are presented as income from discontinued operations, net of income taxes, on our Consolidated Income Statement for all periods presented. As a result of its pending sale, GIS is no longer a reportable business segment.


THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Income Statement (Unaudited)

 

     Three months ended  

In millions, except per share data

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

Interest Income

          

Loans

   $ 2,160      $ 2,160      $ 2,091      $ 2,203      $ 2,465   

Investment securities

     623        643        684        672        689   

Other

     122        136        113        125        105   
                                        

Total interest income

     2,905        2,939        2,888        3,000        3,259   
                                        

Interest Expense

          

Deposits

     281        334        387        474        546   

Borrowed funds

     245        259        277        333        393   
                                        

Total interest expense

     526        593        664        807        939   
                                        

Net interest income

     2,379        2,346        2,224        2,193        2,320   
                                        

Noninterest Income

          

Asset management

     259        219        242        208        189   

Consumer services

     296        315        330        329        316   

Corporate services

     268        260        252        264        245   

Residential mortgage

     147        107        207        245        431   

Service charges on deposits

     200        236        248        242        224   

Net gains on sales of securities

     90        144        168        182        56   

Net other-than-temporary impairments

     (116     (144     (129     (155     (149

Gain on BlackRock/BGI transaction (a)

       1,076         

Other

     240        327        311        295        54   
                                        

Total noninterest income

     1,384        2,540        1,629        1,610        1,366   
                                        

Total revenue

     3,763        4,886        3,853        3,803        3,686   

Provision For Credit Losses

     751        1,049        914        1,087        880   

Noninterest Expense

          

Personnel

     956        969        1,068        1,086        996   

Occupancy

     187        180        172        182        179   

Equipment

     172        173        170        174        178   

Marketing

     50        59        58        59        57   

Other

     748        828        746        991        748   
                                        

Total noninterest expense

     2,113        2,209        2,214        2,492        2,158   
                                        

Income from continuing operations before income taxes and noncontrolling interests

     899        1,628        725        224        648   

Income taxes

     251        525        185        29        128   
                                        

Income from continuing operations before noncontrolling interests

     648        1,103        540        195        520   

Income from discontinued operations (net of income taxes of $14, $32, $11, $6, and $5)

     23        4        19        12        10   
                                        

Net income

     671        1,107        559        207        530   
                                        

Less: Net income (loss) attributable to noncontrolling interests

     (5     (37     (20     9        4   

Preferred stock dividends

     93        119        99        119        51   

Preferred stock discount accretion

     250        14        13        14        15   
                                        

Net income attributable to common shareholders

   $ 333      $ 1,011      $ 467      $ 65      $ 460   
                                        

Basic Earnings Per Common Share

          

Continuing operations

   $ .62      $ 2.18      $ .97      $ .11      $ 1.02   

Discontinued operations

     .05        .01        .04        .03        .02   
                                        

Net income

   $ .67      $ 2.19      $ 1.01      $ .14      $ 1.04   

Diluted Earnings Per Common Share

          

Continuing operations

   $ .61      $ 2.16      $ .96      $ .11      $ 1.01   

Discontinued operations

     .05        .01        .04        .03        .02   
                                        

Net income

   $ .66      $ 2.17      $ 1.00      $ .14      $ 1.03   

Average Common Shares Outstanding

          

Basic

     498        460        460        451        443   

Diluted

     500        462        461        453        444   
                                        

Efficiency

     56     45     57     66     59

Noninterest income to total revenue

     37     52     42     42     37

Effective tax rate (b)

     27.9     32.2     25.5     12.9     19.8

 

(a) The after-tax impact to net income was $687 million for the fourth quarter of 2009. The earnings per diluted share impact was $1.49 for the fourth quarter of 2009. BlackRock/BGI transaction refers to BlackRock’s acquisition of Barclays Global Investors in exchange for cash and BlackRock common and participating preferred stock on December 1, 2009.
(b) The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. The higher effective tax rate for the fourth quarter of 2009 resulted from the gain on the BlackRock/BGI transaction.

 

Page 1


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

Assets

          

Cash and due from banks (a)

   $ 3,563      $ 4,288      $ 3,426      $ 3,797      $ 3,576   

Federal funds sold and resale agreements (b)

     1,367        2,390        2,427        1,814        1,554   

Trading securities

     1,595        2,124        2,075        1,925        1,087   

Interest-earning deposits with banks (a)

     607        4,488        1,129        10,190        14,783   

Loans held for sale (b)

     2,691        2,539        3,509        4,662        4,045   

Investment securities (a)

     57,606        56,027        54,413        49,969        46,253   

Loans (a) (b)

     157,266        157,543        160,608        165,009        171,373   

Allowance for loan and lease losses (a)

     (5,319     (5,072     (4,810     (4,569     (4,299
                                        

Net loans

     151,947        152,471        155,798        160,440        167,074   

Goodwill

     9,425        9,505        9,286        9,206        8,855   

Other intangible assets

     3,289        3,404        3,448        3,684        3,323   

Equity investments (a)

     10,256        10,254        8,684        8,168        8,215   

Other (a) (b)

     23,050        22,373        27,212        25,899        27,657   
                                        

Total assets

   $ 265,396      $ 269,863      $ 271,407      $ 279,754      $ 286,422   
                                        

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 43,122      $ 44,384      $ 43,025      $ 41,806      $ 40,610   

Interest-bearing

     139,401        142,538        140,784        148,633        154,025   
                                        

Total deposits

     182,523        186,922        183,809        190,439        194,635   

Borrowed funds

          

Federal funds purchased and repurchase agreements

     5,511        3,998        3,996        3,921        4,789   

Federal Home Loan Bank borrowings

     8,700        10,761        11,953        14,777        16,985   

Bank notes and senior debt

     12,638        12,362        12,424        13,292        13,828   

Subordinated debt

     10,001        9,907        10,501        10,383        10,694   

Other (a)

     5,611        2,233        3,036        2,308        2,163   
                                        

Total borrowed funds

     42,461        39,261        41,910        44,681        48,459   

Allowance for unfunded loan commitments and letters of credit

     252        296        324        319        328   

Accrued expenses (a)

     2,939        3,590        3,592        3,651        3,340   

Other (a)

     7,787        7,227        10,109        11,197        11,004   
                                        

Total liabilities

     235,962        237,296        239,744        250,287        257,766   
                                        

Equity

          

Preferred stock (c)

          

Common stock - $5 par value
Authorized 800 shares, issued 535, 471, 469, 468, and 452 shares

     2,676        2,354        2,348        2,342        2,261   

Capital surplus - preferred stock

     645        7,974        7,960        7,947        7,933   

Capital surplus - common stock and other

     11,945        8,945        8,860        8,783        8,284   

Retained earnings

     13,340        13,144        12,179        11,758        11,738   

Accumulated other comprehensive loss

     (1,288     (1,962     (1,947     (3,101     (3,289

Common stock held in treasury at cost: 9, 9, 8, 7, and 7 shares

     (500     (513     (472     (435     (450
                                        

Total shareholders’ equity

     26,818        29,942        28,928        27,294        26,477   

Noncontrolling interests

     2,616        2,625        2,735        2,173        2,179   
                                        

Total equity

     29,434        32,567        31,663        29,467        28,656   
                                        

Total liabilities and equity

   $ 265,396      $ 269,863      $ 271,407      $ 279,754      $ 286,422   
                                        

Capital Ratios

          

Tier 1 risk-based (d)

     9.9     11.4     10.9     10.5     10.0

Tier 1 common (d)

     7.6        6.0        5.5        5.3        4.9   

Total risk-based (d)

     13.4        15.0        14.5        14.1        13.6   

Leverage (d)

     8.9        10.1        9.6        9.1        8.9   

Common shareholders’ equity to assets

     10.0        8.2        7.7        6.9        6.5   

 

(a) Amounts include consolidated variable interest entities. Some March 31, 2010 amounts include consolidated variable interest entities that we consolidated effective January 1, 2010 based on guidance in ASU 2009-17, Consolidations. Our first quarter 2010 Form 10-Q will include additional information regarding these Consolidated Balance Sheet line items.
(b) Amounts include items for which PNC has elected the fair value option. Our first quarter 2010 Form 10-Q will include additional information regarding these Consolidated Balance Sheet line items.
(c) Par value less than $.5 million at each date.
(d) The ratio as of March 31, 2010 is estimated.

 

Page 2


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Average Consolidated Balance Sheet (Unaudited)

 

     Three months ended  

In millions

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

Assets

          

Interest-earning assets:

          

Investment securities

          

Securities available for sale

          

Residential mortgage-backed

          

Agency

   $ 21,926      $ 22,663      $ 20,838      $ 21,007      $ 23,065   

Non-agency

     10,213        10,788        11,553        12,520        13,140   

Commercial mortgage-backed

     5,357        5,053        5,052        4,624        4,252   

Asset-backed

     1,992        1,927        1,911        1,985        2,031   

US Treasury and government agencies

     7,493        6,403        6,026        4,185        1,222   

State and municipal

     1,365        1,346        1,367        1,366        1,334   

Other debt

     1,874        1,948        1,647        1,012        684   

Corporate stocks and other

     457        362        388        386        457   
                                        

Total securities available for sale

     50,677        50,490        48,782        47,085        46,185   

Securities held to maturity (a)

     5,935        5,014        4,286        3,860        3,402   
                                        

Total investment securities

     56,612        55,504        53,068        50,945        49,587   

Loans

          

Commercial

     55,464        55,633        58,457        63,570        67,232   

Commercial real estate

     22,423        23,592        24,491        25,418        25,622   

Equipment lease financing

     6,131        6,164        6,045        6,191        6,406   

Consumer

     55,349        52,911        52,066        51,878        52,618   

Residential mortgage

     19,397        19,891        20,847        21,831        21,921   
                                        

Total loans

     158,764        158,191        161,906        168,888        173,799   

Loans held for sale

     2,476        2,949        3,696        4,757        4,521   

Federal funds sold and resale agreements

     1,669        1,700        2,417        1,726        1,610   

Other

     7,471        12,654        14,607        16,870        14,728   
                                        

Total interest-earning assets

     226,992        230,998        235,694        243,186        244,245   

Noninterest-earning assets:

          

Allowance for loan and lease losses

     (5,136     (4,517     (4,264     (4,385     (4,095

Cash and due from banks

     3,735        3,657        3,547        3,558        3,832   

Other

     41,557        41,740        39,071        38,496        36,870   
                                        

Total assets

   $ 267,148      $ 271,878      $ 274,048      $ 280,855      $ 280,852   
                                        

 

(a) Primarily consists of commercial mortgage-backed and asset-backed securities.

 

Page 3


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

     Three months ended

In millions

   March 31
2010
   December 31
2009
   September 30
2009
   June 30
2009
   March 31
2009

Liabilities and Equity

              

Interest-bearing liabilities:

              

Interest-bearing deposits

              

Money market

   $ 57,923    $ 56,298    $ 56,662    $ 55,464    $ 52,828

Demand

     24,672      24,223      23,874      23,629      22,156

Savings

     6,623      6,381      6,652      6,678      6,266

Retail certificates of deposit

     47,162      49,645      53,468      57,357      57,970

Other time

     1,039      1,389      2,841      5,259      10,670

Time deposits in foreign offices

     3,034      4,013      3,356      3,348      3,832
                                  

Total interest-bearing deposits

     140,453      141,949      146,853      151,735      153,722

Borrowed funds

              

Federal funds purchased and repurchase agreements

     4,344      4,046      4,422      4,283      5,016

Federal Home Loan Bank borrowings

     9,603      10,880      12,996      15,818      17,097

Bank notes and senior debt

     12,616      12,327      12,542      13,688      13,384

Subordinated debt

     9,769      9,879      10,214      10,239      10,439

Other

     5,934      2,448      2,806      2,170      1,944
                                  

Total borrowed funds

     42,266      39,580      42,980      46,198      47,880
                                  

Total interest-bearing liabilities

     182,719      181,529      189,833      197,933      201,602

Noninterest-bearing liabilities and equity:

              

Demand and other noninterest-bearing deposits

     42,631      44,325      41,816      40,965      38,489

Allowance for unfunded loan commitments and letters of credit

     295      324      319      328      344

Accrued expenses and other liabilities

     10,401      13,353      11,489      11,990      11,872

Equity

     31,102      32,347      30,591      29,639      28,545
                                  

Total liabilities and equity

   $ 267,148    $ 271,878    $ 274,048    $ 280,855    $ 280,852
                                  

Supplemental Average Balance Sheet Information (Unaudited)

Deposits and Common Shareholders’ Equity

 

Interest-bearing deposits

   $ 140,453    $ 141,949    $ 146,853    $ 151,735    $ 153,722

Demand and other noninterest-bearing deposits

     42,631      44,325      41,816      40,965      38,489
                                  

Total deposits

   $ 183,084    $ 186,274    $ 188,669    $ 192,700    $ 192,211

Transaction deposits

   $ 125,226    $ 124,846    $ 122,352    $ 120,058    $ 113,473

Common shareholders’ equity

   $ 24,764    $ 21,726    $ 20,391    $ 19,527    $ 18,405

 

Page 4


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Net Interest Margin (Unaudited)

 

     Three months ended  
     March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

Net Interest Margin (a)

          

Average yields/rates

          

Yield on interest-earning assets

          

Loans

   5.50   5.42   5.12   5.22   5.72

Investment securities

   4.44      4.67      5.20      5.32      5.59   

Other

   4.26      3.17      2.18      2.14      2.10   

Total yield on interest-earning assets

   5.17      5.07      4.88      4.94      5.38   

Rate on interest-bearing liabilities

          

Deposits

   .81      .93      1.04      1.25      1.44   

Borrowed funds

   2.33      2.60      2.57      2.97      3.42   

Total rate on interest-bearing liabilities

   1.16      1.30      1.39      1.65      1.91   
                              

Interest rate spread

   4.01      3.77      3.49      3.29      3.47   

Impact of noninterest-bearing sources

   .23      .28      .27      .31      .34   
                              

Net interest margin

   4.24   4.05   3.76   3.60   3.81
                              

 

(a) Calculated as annualized taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all earning assets in calculating net interest margins, in this table we use net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended March 31, 2010, December 31, 2009, September 30, 2009, June 30, 2009, and March 31, 2009 were $18 million, $18 million, $16 million, $16 million, and $15 million, respectively.

 

Page 5


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Loans (Unaudited)

 

In millions

   March 31
2010
   December 31
2009
   September 30
2009
   June 30
2009
   March 31
2009

Commercial

              

Retail/wholesale

   $ 9,557    $ 9,515    $ 9,404    $ 10,141    $ 11,226

Manufacturing

     9,863      9,880      10,639      11,595      12,796

Other service providers

     8,528      8,256      8,364      8,491      8,674

Real estate related (a)

     7,379      7,403      7,854      8,346      8,926

Financial services

     4,654      3,874      4,422      5,078      5,050

Health care

     2,998      2,970      2,888      3,045      3,079

Other

     11,724      12,920      13,357      13,898      15,446
                                  

Total commercial

     54,703      54,818      56,928      60,594      65,197
                                  

Commercial real estate

              

Real estate projects

     14,535      15,582      16,112      16,542      16,830

Commercial mortgage

     7,415      7,549      7,952      8,323      8,590
                                  

Total commercial real estate

     21,950      23,131      24,064      24,865      25,420
                                  

Equipment lease financing

     6,111      6,202      6,283      6,092      6,300
                                  

TOTAL COMMERCIAL LENDING

     82,764      84,151      87,275      91,551      96,917
                                  

Consumer

              

Home equity

              

Lines of credit

     24,040      24,236      24,272      24,373      24,112

Installment

     11,390      11,711      12,098      12,346      12,934

Education

     8,320      7,468      6,370      5,340      5,127

Automobile

     2,206      2,013      1,988      1,784      1,737

Credit card and other unsecured lines of credit

     4,962      3,536      3,533      3,261      3,148

Other

     4,316      4,618      4,614      4,833      4,910
                                  

Total consumer

     55,234      53,582      52,875      51,937      51,968
                                  

Residential real estate

              

Residential mortgage

     17,599      18,190      18,469      19,342      19,661

Residential construction

     1,669      1,620      1,989      2,179      2,827
                                  

Total residential real estate

     19,268      19,810      20,458      21,521      22,488
                                  

TOTAL CONSUMER LENDING

     74,502      73,392      73,333      73,458      74,456
                                  

Total (b)

   $ 157,266    $ 157,543    $ 160,608    $ 165,009    $ 171,373
                                  

(a)    Includes loans to customers in the real estate and construction industries.

(b)    Includes purchased impaired loans related to National City

   $ 9,673    $ 10,287    $ 11,064    $ 12,289    $ 12,560

Details of Loans Held for Sale (Unaudited)

 

In millions

   March 31
2010
   December 31
2009
   September 30
2009
   June 30
2009
   March 31
2009

Commercial mortgage

   $ 1,316    $ 1,301    $ 1,810    $ 1,531    $ 1,648

Residential mortgage

     1,158      1,012      1,552      2,886      2,244

Other

     217      226      147      245      153
                                  

Total

   $ 2,691    $ 2,539    $ 3,509    $ 4,662    $ 4,045
                                  

 

Page 6


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Purchase Accounting Accretion and Accretable Interest (Unaudited)

VALUATION OF FASB ASC 310-30 (AICPA SOP 03-3) PURCHASED IMPAIRED LOANS

 

     December 31, 2008     December 31, 2009     March 31, 2010  

Dollars in billions

   Balance     Net Investment     Balance     Net Investment     Balance     Net Investment  

Commercial and commercial real estate loans:

            

Unpaid principal balance

   $ 6.3        $ 3.5        $ 2.9     

Purchased impaired mark

     (3.4       (1.3       (1.0  
                              

Recorded investment

     2.9          2.2          1.9     

Allowance for loan losses

     —            (.2       (.3  
                              

Net investment

     2.9      46     2.0      57     1.6      55

Consumer and residential mortgage loans:

            

Unpaid principal balance

     15.6          11.7          10.6     

Purchased impaired mark

     (5.8       (3.6       (2.8  
                              

Recorded investment

     9.8          8.1          7.8     

Allowance for loan losses

     —            (.3       (.3  
                              

Net investment

     9.8      63     7.8      67     7.5      71
                              

Total FASB ASC 310-30 purchased impaired loans:

            

Unpaid principal balance

     21.9          15.2          13.5     

Purchased impaired mark

     (9.2       (4.9       (3.8  
                              

Recorded investment

     12.7          10.3          9.7     

Allowance for loan losses

     —            (.5       (.6 ) (a)   
                              

Net investment

   $ 12.7      58   $ 9.8      64   $ 9.1      67
                                          

PURCHASE ACCOUNTING ACCRETION

 

     Three months ended  

In millions

   March 31
2009
    June 30
2009
    September 30
2009
    December 31
2009
    March 31
2010
 

Non-impaired loans

   $ 322      $ 168      $ 172      $ 111      $ 112   

Impaired loans

     257        220        193        244        265   

Reversal of contractual interest on impaired loans

     (223     (194     (167     (168     (134
                                        

Net impaired loans

     34        26        26        76        131   

Securities

     31        41        25        21        11   

Deposits

     312        264        231        189        167   

Borrowings

     (85     (52     (58     (55     (56
                                        

Total

   $ 614      $ 447      $ 396      $ 342      $ 365   
                                        

Cash received in excess of recorded investment from sales or payoffs of impaired commercial loans (cash recoveries)

     $ 39      $ 11      $ 154      $ 75   

ACCRETABLE NET INTEREST

 

In billions

   December 31
2008
    December 31
2009
    March 31
2010
 

Non-impaired loans

   $ 2.4      $ 1.6      $ 1.5   

Impaired loans (b)

     3.7        3.5        3.6   
                        

Total loans (gross)

     6.1        5.1        5.1   

Securities

     .2        .1        .1   

Deposits

     2.1        1.0        .9   

Borrowings

     (1.5     (1.2     (1.2
                        

Total

   $ 6.9      $ 5.0      $ 4.9   
                        

ACCRETABLE NET INTEREST - PURCHASED IMPAIRED LOANS

 

In billions

      

December 31, 2009

   $ 3.5   

Accretion

     (.3

Cash recoveries

     (.1

Net reclass to accretable difference and other activity

     .5   
        

March 31, 2010

   $ 3.6   
        

In billions

      

December 31, 2008

   $ 3.7   

Accretion

     (1.2

Cash recoveries

     (.3

Net reclass to accretable difference and other activity

     1.4   
        

March 31, 2010

   $ 3.6   
        

 

(a) Additional impairment reserves of $.6 billion do not recognize the incremental accretable yield of $1.4 billion related to certain purchased impaired loans with improving estimated cash flows. This income will be recognized over time.
(b) Adjustments to accretable net interest include purchase accounting accretion, reclassifications from non-accretable to accretable interest as a result of increases in estimated cash flows, and reductions in the accretable amount as a result of the identification of additional purchased impaired loans as of the National City acquisition close date of December 31, 2008.

 

Page 7


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Accruing Loans Past Due (Unaudited)

Accruing Loans Past Due 30 To 89 Days (a)

 

     Amount    Percent of Total Outstandings  

Dollars in millions

   March 31
2010
   Dec. 31
2009
   Sept. 30
2009
   June 30
2009
   March 31
2009
   March 31
2010
    Dec. 31
2009
    Sept. 30
2009
    June 30
2009
    March 31
2009
 

Commercial

   $ 571    $ 684    $ 633    $ 640    $ 741    1.05   1.26   1.13   1.07   1.16

Commercial real estate

     859      666      743      654      398    4.19      3.10      3.34      2.85      1.70   

Equipment lease financing

     130      128      50      52      69    2.13      2.06      .80      .85      1.10   

Consumer

     440      438      444      401      421    .85      .87      .90      .83      .87   

Residential real estate

     464      472      510      448      507    3.14      3.12      3.29      2.83      3.01   
                                             

Total (b)

   $ 2,464    $ 2,388    $ 2,380    $ 2,195    $ 2,136    1.67   1.62   1.59   1.44   1.34
                                                                 
Accruing Loans Past Due 90 Days Or More (a)   
     Amount    Percent of Total Outstandings  

Dollars in millions

   March 31
2010
   Dec. 31
2009
   Sept. 30
2009
   June 30
2009
   March 31
2009
   March 31
2010
    Dec. 31
2009
    Sept. 30
2009
    June 30
2009
    March 31
2009
 

Commercial

   $ 197    $ 188    $ 196    $ 153    $ 80    .36   .35   .35   .26   .12

Commercial real estate

     106      150      184      104      61    .52      .70      .83      .45      .26   

Equipment lease financing

     6      6      3      6       .10      .10      .05      .10     

Consumer

     248      226      216      198      183    .48      .45      .44      .41      .38   

Residential real estate

     284      314      276      582      177    1.92      2.07      1.78      3.68      1.05   
                                             

Total (c)

   $ 841    $ 884    $ 875    $ 1,043    $ 501    .57   .60   .59   .68   .32
                                                                 

 

(a) Excludes loans that are government insured/guaranteed, primarily residential mortgages.
(b) Excludes purchased impaired loans acquired from National City totaling $.6 billion at March 31, 2010, $0.8 billion at December 31, 2009, $0.8 billion at September 30, 2009, $1.1 billion at June 30, 2009, and $1.2 billion at March 31, 2009. These loans are excluded as they were recorded at estimated fair value when acquired and are currently considered performing loans due to the accretion of interest in purchase accounting.
(c) Excludes purchased impaired loans acquired from National City totaling $2.5 billion at March 31, 2010, $2.7 billion at December 31, 2009, $3.0 billion at September 30, 2009, $2.9 billion at June 30, 2009, and $2.2 billion at March 31, 2009. These loans are excluded as they were recorded at estimated fair value when acquired and are currently considered performing loans due to the accretion of interest in purchase accounting.

 

Page 8


THE PNC FINANCIAL SERVICES GROUP, INC.

 

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
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

Beginning balance

   $ 5,072      $ 4,810      $ 4,569      $ 4,299      $ 3,917   

Charge-offs:

          

Commercial

     (273     (380     (323     (364     (209

Commercial real estate

     (238     (260     (20     (124     (106

Equipment lease financing

     (36     (34     (42     (50     (23

Consumer

     (242     (267     (257     (289     (148

Residential real estate

     (38     (83     (96     (54     (26
                                        

Total charge-offs

     (827     (1,024     (738     (881     (512

Recoveries:

          

Commercial

     65        87        42        36        16   

Commercial real estate

     33        15        8        10        5   

Equipment lease financing

     12        10        7        5        5   

Consumer

     26        27        23        28        27   

Residential real estate

       50        8        7        28   
                                        

Total recoveries

     136        189        88        86        81   

Net charge-offs:

          

Commercial

     (208     (293     (281     (328     (193

Commercial real estate

     (205     (245     (12     (114     (101

Equipment lease financing

     (24     (24     (35     (45     (18

Consumer

     (216     (240     (234     (261     (121

Residential real estate

     (38     (33     (88     (47     2   
                                        

Total net charge-offs

     (691     (835     (650     (795     (431

Provision for credit losses

     751        1,049        914        1,087        880   

Acquired allowance adjustments (a)

     2        20        (18     (31     (83

Adoption of ASU 2009-17, Consolidations

     141           

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

     44        28        (5     9        16   
                                        

Ending balance

   $ 5,319      $ 5,072      $ 4,810      $ 4,569      $ 4,299   
                                        

Supplemental Information

          

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

     1.77     2.09     1.59     1.89     1.01

Allowance for loan and lease losses to total loans

     3.38        3.22        2.99        2.77        2.51   

Commercial lending net charge-offs

   $ (437   $ (562   $ (328   $ (487   $ (312

Consumer lending net charge-offs

     (254     (273     (322     (308     (119
                                        

Total net charge-offs

   $ (691   $ (835   $ (650   $ (795   $ (431

Net charge-offs to average loans

          

Commercial lending

     2.11     2.61     1.46     2.05     1.27

Consumer lending

     1.38        1.49        1.75        1.68        .65   

 

(a) Related to our December 31, 2008 National City acquisition.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions

   March 31
2010
    December 31
2009
    September 30
2009
   June 30
2009
    March 31
2009
 

Beginning balance

   $ 296      $ 324      $ 319    $ 328      $ 344   

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

     (44     (28     5      (9     (16
                                       

Ending balance

   $ 252      $ 296      $ 324    $ 319      $ 328   
                                       

Net Unfunded Commitments

 

In millions

   March 31
2010
   December 31
2009
   September 30
2009
   June 30
2009
   March 31
2009

Net unfunded commitments

   $ 99,179    $ 100,795    $ 102,669    $ 103,058    $ 102,821
                                  

 

Page 9


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

Nonperforming loans

          

Commercial

          

Retail/wholesale

   $ 246      $ 231      $ 219      $ 171      $ 149   

Manufacturing

     341        423        387        410        334   

Other service providers

     527        394        348        243        224   

Real estate related (a)

     460        419        396        322        226   

Financial services

     77        117        200        58        58   

Health care

     48        41        48        89        104   

Other

     134        181        232        157        119   
                                        

Total commercial

     1,833        1,806        1,830        1,450        1,214   
                                        

Commercial real estate

          

Real estate projects

     1,797        1,754        1,637        1,426        1,012   

Commercial mortgage

     419        386        235        230        200   
                                        

Total commercial real estate

     2,216        2,140        1,872        1,656        1,212   
                                        

Equipment lease financing

     123        130        164        120        121   
                                        

TOTAL COMMERCIAL LENDING

     4,172        4,076        3,866        3,226        2,547   
                                        

Consumer

          

Home equity

     337        356        207        164        75   

Other

     35        36        25        34        24   
                                        

Total consumer

     372        392        232        198        99   

Residential real estate

          

Residential mortgage

     968        955        790        663        299   

Residential construction

     249        248        238        69        15   
                                        

Total residential real estate

     1,217        1,203        1,028        732        314   
                                        

TOTAL CONSUMER LENDING

     1,589        1,595        1,260        930        413   
                                        

Total nonperforming loans (b) (c) (d)

     5,761        5,671        5,126        4,156        2,960   
                                        

Foreclosed and other assets

          

Commercial lending

     328        266        145        113        93   

Consumer lending

     451        379        373        387        465   
                                        

Total foreclosed and other assets

     779        645        518        500        558   
                                        

Total nonperforming assets

   $ 6,540      $ 6,316      $ 5,644      $ 4,656      $ 3,518   
                                        

Nonperforming loans to total loans

     3.66     3.60     3.19     2.52     1.73

Nonperforming assets to total loans and foreclosed and other assets

     4.14        3.99        3.50        2.81        2.05   

Nonperforming assets to total assets

     2.46        2.34        2.08        1.66        1.23   

Allowance for loan and lease losses to nonperforming loans

     92        89        94        110        145   

 

(a) Includes loans related to customers in the real estate and construction industries.
(b) Loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties where we do not receive adequate compensation are considered troubled debt restructurings (TDRs). TDRs typically result from our loss mitigation activities and could include rate reductions, principal forgiveness, forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. Total nonperforming loans include TDRs of $385 million at March 31, 2010 and $440 million at December 31, 2009.
(c) TDRs returned to performing (accrual) status totaled $217 million at March 31, 2010 and are excluded from nonperforming loans. These loans have demonstrated a period of at least six months of performance under the modified terms.
(d) Credit cards and certain small business and consumer credit agreements whose terms have been modified totaled $279 million at March 31, 2010 and are excluded from nonperforming loans. Our policy is generally to exempt these loans from being placed on nonaccrual status as permitted by regulatory guidance as these loans are directly charged off in the period that they become 180 days past due.

 

Page 10


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Nonperforming Assets (Unaudited) (Continued)

 

Change in Nonperforming Assets

 

In millions

      

January 1, 2010

     $ 6,316   

Transferred in

     1,774   

Charge-offs/valuation adjustments

     (620

Principal activity including payoffs

     (278

Returned to performing - TDRs

     (217

Returned to performing - Other

     (170

Sales

     (265
        

March 31, 2010

   $ 6,540   
        

Largest Individual Nonperforming Assets at March 31, 2010 (a)

 

In millions

         

Ranking

   Outstandings   

Industry

1    $ 32    Real Estate
2      32    Real Estate
3      30    Real Estate
4      28    Real Estate
5      25    Real Estate
6      25    Real Estate
7      24    Finance Companies
8      24    Real Estate
9      24    Real Estate
10      23    Real Estate
         
Total    $ 267   
         

 

As a percent of total nonperforming assets    4     
           

 

(a) Amounts shown are not net of related allowance for loan and lease losses, if applicable.

 

Page 11


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Business Segment Descriptions (Unaudited)

Retail Banking provides deposit, lending, brokerage, trust, investment management, and cash management services to consumer and small business customers within our primary geographic markets. Our customers are serviced through our branch network, call centers and the internet. The branch network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and Wisconsin.

Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and services to mid-sized corporations, government and not-for-profit 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-related products and services include foreign exchange, derivatives, loan syndications, mergers and acquisitions advisory and related services to middle-market companies, our multi-seller conduit, securities underwriting, and securities sales and trading. Corporate & Institutional Banking also provides commercial loan servicing, and real estate advisory and technology solutions for the commercial real estate finance industry. Corporate & Institutional Banking provides products and services generally within our primary geographic markets, with certain products and services offered nationally.

Asset Management Group includes personal wealth management for high net worth and ultra high net worth clients and institutional asset management. Wealth management products and services include financial planning, customized investment management, private banking, tailored credit solutions and trust management and administration for individuals and their families. Institutional asset management provides investment management, custody, and retirement planning services. The institutional clients include corporations, foundations and unions and charitable endowments located primarily in our geographic footprint.

Residential Mortgage Banking directly originates primarily first lien residential mortgage loans on a nationwide basis with a significant presence within the retail banking footprint and also originates loans through joint venture partners. Mortgage loans represent loans collateralized by one-to-four-family residential real estate and are made to borrowers in good credit standing. These loans are typically underwritten to government agency and/or third party standards, and sold, servicing retained, to primary mortgage conduits Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Home Loan Banks and third-party investors, or are securitized and issued under the Government National Mortgage Association (Ginnie Mae) program. The mortgage servicing operation performs all functions related to servicing first mortgage loans for various investors. Certain loans originated through our joint ventures are serviced by a joint venture partner.

BlackRock is the largest publicly traded investment management firm in the world. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, multi-asset class, alternative and cash management separate accounts and funds. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services globally to a broad base of clients. At March 31, 2010, our share of BlackRock’s earnings was approximately 23%.

Distressed Assets Portfolio includes commercial residential development loans, cross-border leases, consumer brokered home equity loans, retail mortgages, non-prime mortgages, and residential construction loans. These loans require special servicing and management oversight given current market conditions. The majority of these loans are from acquisitions, primarily National City.

 

Page 12


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Summary of Business Segment Earnings and Revenue (Unaudited) (a) (b)

 

     Three months ended  

In millions

Earnings (Loss)

   March 31
2010
   December 31
2009
    September 30
2009
   June 30
2009
    March 31
2009
 

Retail Banking

   $ 24    $ (25   $ 50    $ 61      $ 50   

Corporate & Institutional Banking

     360      415        309      107        359   

Asset Management Group

     39      23        35      8        39   

Residential Mortgage Banking

     82      25        91      92        227   

Distressed Assets Portfolio

     72      (88     14      155        3   

Other, including BlackRock (b) (c) (d)

     71      753        41      (228     (158
                                      

Earnings from continuing operations before noncontrolling interests

   $ 648    $ 1,103      $ 540    $ 195      $ 520   
                                      

Revenue

                            

Retail Banking

   $ 1,360    $ 1,379      $ 1,434    $ 1,467      $ 1,441   

Corporate & Institutional Banking

     1,248      1,377        1,316      1,283        1,290   

Asset Management Group

     228      218        225      226        250   

Residential Mortgage Banking

     237      176        292      332        528   

Distressed Assets Portfolio

     337      221        254      334        344   

Other, including BlackRock (b) (c) (d)

     353      1,515        332      161        (167
                                      

Revenue from continuing operations

   $ 3,763    $ 4,886      $ 3,853    $ 3,803      $ 3,686   
                                      

 

(a) Our business 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 business and management structure change. Certain prior period amounts have been reclassified to reflect current methodologies and our current business and management structure. As a result of its pending sale, GIS is no longer a reportable business segment. Amounts are presented on a continuing operations basis and exclude the earnings and revenue attributable to GIS.
(b) We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our first quarter 2010 Form 10-Q will include additional information regarding BlackRock.
(c) Includes earnings and gains or losses related to PNC’s equity interest in BlackRock, integration costs, asset and liability management activities including net securities gains or losses, other than temporary impairment of debt securities and certain trading activities, equity management activities, exited businesses, differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles (GAAP), corporate overhead and intercompany eliminations.
(d) The $1.076 billion gain ($687 million after-tax) related to BlackRock’s acquisition of BGI was included in this business segment for the fourth quarter of 2009.

 

      March 31
2010
   December 31
2009
   September 30
2009
   June 30
2009
   March 31
2009

Period-end Employees

              

Full-time employees

              

Retail Banking

   21,522    21,416    21,644    22,102    22,468

Corporate & Institutional Banking

   3,760    3,746    3,861    4,038    4,169

Asset Management Group

   2,986    2,960    3,067    3,150    3,210

Residential Mortgage Banking

   3,340    3,267    3,606    3,693    3,596

Distressed Assets Portfolio

   178    175    157    131    110

Other

              

Operations & Technology

   9,284    9,275    9,400    9,350    9,406

Staff Services and Other (e)

   9,043    8,922    8,794    8,898    8,899
                        

Total Other

   18,327    18,197    18,194    18,248    18,305
                        

Total full-time employees

   50,113    49,761    50,529    51,362    51,858
                        

Retail Banking part-time employees

   4,798    4,737    4,859    5,199    5,375

Other part-time employees

   1,187    1,322    1,520    1,509    1,562
                        

Total part-time employees

   5,985    6,059    6,379    6,708    6,937
                        

Total

   56,098    55,820    56,908    58,070    58,795
                        

The period-end employee statistics reflect staff directly employed by the respective business and exclude operations, technology and staff services employees.

 

(e) Includes employees of GIS.

 

Page 13


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Retail Banking (Unaudited) (a)

 

     Three months ended  

Dollars in millions

   March 31
2010 (b) (c)
    December 31
2009 (b)
    September 30
2009 (b)
    June 30
2009
    March 31
2009
 

INCOME STATEMENT

          

Net interest income

   $ 871      $ 833      $ 865      $ 903      $ 921   

Noninterest income

          

Service charges on deposits

     195        229        244        237        220   

Brokerage

     53        59        63        62        61   

Consumer services

     209        224        227        227        208   

Other

     32        34        35        38        31   
                                        

Total noninterest income

     489        546        569        564        520   
                                        

Total revenue

     1,360        1,379        1,434        1,467        1,441   

Provision for credit losses

     340        409        313        304        304   

Noninterest expense

     975        1,011        1,040        1,065        1,053   
                                        

Pretax earnings (loss)

     45        (41     81        98        84   

Income taxes (benefit)

     21        (16     31        37        34   
                                        

Earnings (loss)

   $ 24      $ (25   $ 50      $ 61      $ 50   
                                        

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

          

Home equity

   $ 26,824      $ 27,109      $ 27,379      $ 27,493      $ 27,638   

Indirect

     3,973        3,998        3,989        4,040        4,120   

Education

     8,060        6,656        5,742        5,199        4,882   

Credit cards

     4,079        2,503        2,174        2,162        2,112   

Other

     1,790        1,789        1,785        1,731        1,860   
                                        

Total consumer

     44,726        42,055        41,069        40,625        40,612   

Commercial and commercial real estate

     11,487        11,766        12,166        12,550        12,755   

Floor plan

     1,296        1,136        1,059        1,371        1,495   

Residential mortgage

     1,800        1,899        1,995        2,114        2,252   
                                        

Total loans

     59,309        56,856        56,289        56,660        57,114   

Goodwill and other intangible assets

     5,935        5,882        5,894        5,784        5,807   

Other assets

     2,722        2,697        2,870        2,733        2,699   
                                        

Total assets

   $ 67,966      $ 65,435      $ 65,053      $ 65,177      $ 65,620   
                                        

Deposits

          

Noninterest-bearing demand

   $ 16,776      $ 16,516      $ 16,482      $ 16,408      $ 15,819   

Interest-bearing demand

     19,212        18,446        18,435        18,639        17,900   

Money market

     39,699        39,374        39,753        39,608        38,831   
                                        

Total transaction deposits

     75,687        74,336        74,670        74,655        72,550   

Savings

     6,552        6,577        6,731        6,767        6,360   

Certificates of deposit

     45,614        48,338        52,189        55,798        56,355   
                                        

Total deposits

     127,853        129,251        133,590        137,220        135,265   

Other liabilities

     1,671        27        55        39        82   

Capital

     8,195        8,301        8,523        8,789        8,376   
                                        

Total liabilities and equity

   $ 137,719      $ 137,579      $ 142,168      $ 146,048      $ 143,723   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     1     (1 ) %      2     3     2

Noninterest income to total revenue

     36        40        40        38        36   

Efficiency

     72        73        73        73        73   

 

(a) See note (a) on page 13.
(b) Information as of and for the three months ended March 31, 2010, December 31, 2009 and September 30, 2009 reflects the impact of the required divestiture of 61 branches that was completed by early September 2009.
(c) Information as of March 31, 2010 reflects the impact of the consolidation in our financial statements for the securitized portfolio of approximately $1.6 billion of credit card loans as of January 1, 2010.

 

Page 14


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Retail Banking (Unaudited) (Continued)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2010 (a)
    December 31
2009 (a)
    September 30
2009 (a)
    June 30
2009
    March 31
2009
 

OTHER INFORMATION (b)

          

Credit-related statistics: (c)

          

Commercial nonperforming assets

   $ 324      $ 324      $ 311      $ 246      $ 194   

Consumer nonperforming assets

     276        284        191        156        87   
                                        

Total nonperforming assets

   $ 600      $ 608      $ 502      $ 402      $ 281   
                                        

Impaired loans (d)

   $ 1,013      $ 1,056      $ 1,161      $ 1,266      $ 1,269   
                                        

Commercial lending net charge-offs

   $ 96      $ 173      $ 69      $ 90      $ 83   

Credit card lending net charge-offs (on balance sheet)

     96        57        53        50        49   

Consumer lending (excluding credit card) net charge-offs

     108        109        112        106        75   
                                        

Total net charge-offs

   $ 300      $ 339      $ 234      $ 246      $ 207   
                                        

Commercial lending annualized net charge-off ratio

     3.05     5.32     2.07     2.59     2.36

Credit card lending annualized net charge-off ratio (on balance sheet)

     9.54     9.03     9.67     9.28     9.41

Consumer lending (excluding credit card) annualized net charge-off ratio

     1.03     1.04     1.09     1.05     .75
                                        

Total annualized net charge-off ratio

     2.05     2.37     1.65     1.74     1.47
                                        

Home equity portfolio credit statistics:

          

% of first lien positions (e)

     34     35     35     35     35

Weighted average loan-to-value ratios (e)

     73     74     74     74     74

Weighted average FICO scores (f)

     725        727        727        728        727   

Annualized net charge-off ratio

     .70     .90     .97     .80     .34

Loans 30 - 89 days past due

     .74     .78     .75     .70     .73

Loans 90 days past due

     .85     .76     .73     .72     .67
                                        

Other statistics:

          

ATMs

     6,467        6,473        6,463        6,474        6,402   

Branches (g)

     2,461        2,513        2,554        2,607        2,586   
                                        

Customer-related statistics (h):

          

Retail Banking checking relationships

     5,037,000        5,042,000        5,040,000        5,148,000        5,134,000   

Retail online banking active customers

     2,782,000        2,743,000        2,682,000        2,676,000        2,636,000   

Retail online bill payment active customers

     826,000        780,000        753,000        744,000        726,000   
                                        

Brokerage statistics:

          

Financial consultants (i)

     722        704        655        658        658   

Full service brokerage offices

     41        40        42        42        43   

Brokerage account assets (billions)

   $ 33      $ 32      $ 30      $ 28      $ 26   

 

(a) Information as of and for the three months ended March 31, 2010, December 31, 2009 and September 30, 2009 reflects the impact of the required divestiture of 61 branches that was completed by early September 2009.
(b) Presented as of period-end, except for net charge-offs and annualized net charge-off ratios, which are for the three months ended.
(c) Information as of March 31, 2010 reflects the impact of the consolidation in our financial statements for the securitized portfolio of approximately $1.6 billion of credit card loans as of January 1, 2010.
(d) Recorded investment of purchased impaired loans related to National City, adjusted to reflect additional loan impairments effective December 31, 2008.
(e) Includes loans from acquired portfolios for which lien position and loan-to-value information is not available.
(f) Represents the most recent FICO scores we have on file.
(g) Excludes certain satellite branches that provide limited products and/or services.
(h) Amounts for 2010 and 2009 include the impact of National City prior to the completion of all application system conversions. These amounts may be refined subsequent to system conversions.
(i) Financial consultants provide services in full service brokerage offices and PNC traditional branches.

 

Page 15


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Corporate & Institutional Banking (Unaudited) (a)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2010 (g)
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

INCOME STATEMENT

          

Net interest income

   $ 877      $ 1,009      $ 915      $ 886      $ 1,023   

Noninterest income

          

Corporate service fees

     242        235        226        236        218   

Other

     129        133        175        161        49   
                                        

Noninterest income

     371        368        401        397        267   
                                        

Total revenue

     1,248        1,377        1,316        1,283        1,290   

Provision for credit losses

     236        283        384        649        287   

Noninterest expense

     445        444        459        467        430   
                                        

Pretax earnings

     567        650        473        167        573   

Income taxes

     207        235        164        60        214   
                                        

Earnings

   $ 360      $ 415      $ 309      $ 107      $ 359   
                                        

AVERAGE BALANCE SHEET

          

Loans

          

Commercial

   $ 34,024      $ 33,481      $ 35,785      $ 38,835      $ 41,709   

Commercial real estate

     17,961        18,747        18,918        19,667        19,460   

Commercial - real estate related

     3,128        3,328        3,622        3,884        4,267   

Asset-based lending

     5,940        6,051        5,918        6,401        7,021   

Equipment lease financing

     5,318        5,368        5,260        5,380        5,554   
                                        

Total loans

     66,371        66,975        69,503        74,167        78,011   

Goodwill and other intangible assets

     3,795        3,736        3,704        3,512        3,376   

Loans held for sale

     1,410        1,534        1,578        1,893        1,714   

Other assets

     7,940        7,395        6,460        7,332        8,029   
                                        

Total assets

   $ 79,516      $ 79,640      $ 81,245      $ 86,904      $ 91,130   
                                        

Deposits

          

Noninterest-bearing demand

   $ 22,271      $ 23,484      $ 20,392      $ 18,732      $ 17,108   

Money market

     12,253        10,573        10,714        9,514        7,949   

Other

     7,610        8,728        8,009        7,501        7,391   
                                        

Total deposits

     42,134        42,785        39,115        35,747        32,448   

Other liabilities

     10,870        8,408        8,363        9,701        10,024   

Capital

     7,633        7,916        7,922        7,816        7,690   
                                        

Total liabilities and equity

   $ 60,637      $ 59,109      $ 55,400      $ 53,264      $ 50,162   
                                        

PERFORMANCE RATIOS

        

Return on average capital

     19     21     15     5     19

Noninterest income to total revenue

     30        27        30        32        21   

Efficiency

     36        32        35        37        33   
                                        

COMMERCIAL MORTGAGE

          

SERVICING PORTFOLIO (in billions)

          

Beginning of period

   $ 287      $ 275      $ 269      $ 269      $ 270   

Acquisitions/additions

     8        19        15        11        5   

Repayments/transfers

     (13     (7     (9     (11     (6
                                        

End of period

   $ 282      $ 287      $ 275      $ 269      $ 269   
                                        

OTHER INFORMATION

          

Consolidated revenue from: (b)

          

Treasury Management

   $ 298      $ 296      $ 281      $ 284      $ 276   

Capital Markets

   $ 164      $ 187      $ 155      $ 148      $ 43   

Commercial mortgage loans held for sale (c)

   $ 27      $ 67      $ 53      $ 63      $ 22   

Commercial mortgage loan servicing (d)

     88        66        66        76        72   
                                        

Total commercial mortgage banking activities

   $ 115      $ 133      $ 119      $ 139      $ 94   

Total loans (e)

   $ 65,076      $ 66,206      $ 68,352      $ 71,077      $ 75,886   

Credit-related statistics:

          

Nonperforming assets (e)

   $ 3,343      $ 3,167      $ 2,992      $ 2,317      $ 1,862   

Impaired loans (e) (f)

   $ 1,033      $ 1,075      $ 1,482      $ 1,601      $ 1,757   

Net charge-offs

   $ 271      $ 341      $ 222      $ 322      $ 167   

Net carrying amount of commercial mortgage servicing rights (e)

   $ 921      $ 921      $ 897      $ 895      $ 874   

 

(a) See note (a) on page 13.
(b) Represents consolidated PNC amounts.
(c) Includes valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, origination fees, gains on sale of loans held for sale and net interest income on loans held for sale.
(d) Includes net interest income and noninterest income from loan servicing and ancillary services.
(e) Presented as of period end.
(f) Recorded investment of purchased impaired loans related to National City, adjusted to reflect additional loan impairments effective December 31, 2008.
(g) Information as of March 31, 2010 reflects the impact of the consolidation in our financial statements of Market Street Funding LLC effective January 1, 2010. Also, includes $1.6 billion of loans, net of eliminations, and $2.8 billion of commercial paper borrowings included in Other liabilities.

 

Page 16


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Asset Management Group (Unaudited) (a)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

INCOME STATEMENT

          

Net interest income

   $ 64      $ 67      $ 70      $ 75      $ 96   

Noninterest income

     164        151        155        151        154   
                                        

Total revenue

     228        218        225        226        250   

Provision for credit losses

     9        25        9        46        17   

Noninterest expense

     157        155        162        167        170   
                                        

Pretax earnings

     62        38        54        13        63   

Income taxes

     23        15        19        5        24   
                                        

Earnings

   $ 39      $ 23      $ 35      $ 8      $ 39   
                                        

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

   $ 3,994      $ 4,044      $ 3,997      $ 3,936      $ 3,851   

Commercial and commercial real estate

     1,504        1,520        1,601        1,714        1,761   

Residential mortgage

     963        1,000        1,046        1,114        1,153   
                                        

Total loans

     6,461        6,564        6,644        6,764        6,765   

Goodwill and other intangible assets

     415        416        418        390        404   

Other assets

     241        221        219        273        288   
                                        

Total assets

   $ 7,117      $ 7,201      $ 7,281      $ 7,427      $ 7,457   
                                        

Deposits

          

Noninterest-bearing demand

   $ 1,228      $ 1,126      $ 993      $ 988      $ 1,260   

Interest-bearing demand

     1,699        1,674        1,544        1,563        1,544   

Money market

     3,217        3,134        3,154        3,217        3,330   
                                        

Total transaction deposits

     6,144        5,934        5,691        5,768        6,134   

Certificates of deposit and other

     818        918        1,013        1,088        1,289   
                                        

Total deposits

     6,962        6,852        6,704        6,856        7,423   

Other liabilities

     119        122        106        104        117   

Capital

     553        531        612        580        576   
                                        

Total liabilities and equity

   $ 7,634      $ 7,505      $ 7,422      $ 7,540      $ 8,116   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     29     17     23     6     27

Noninterest income to total revenue

     72        69        69        67        62   

Efficiency

     69        71        72        74        68   
                                        

OTHER INFORMATION

          

Total nonperforming assets (b)

   $ 139      $ 155      $ 129      $ 108      $ 68   

Impaired loans (b) (c)

   $ 191      $ 198      $ 206      $ 221      $ 223   

Total net charge-offs

   $ 4      $ 22      $ 9      $ 21      $ 11   

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

          

Personal

   $ 96      $ 94      $ 93      $ 88      $ 85   

Institutional

     113        111        124        134        131   
                                        

Total

   $ 209      $ 205      $ 217      $ 222      $ 216   
                                        

Asset Type

          

Equity

   $ 104      $ 100      $ 98      $ 88      $ 79   

Fixed income

     59        58        56        57        57   

Liquidity/Other

     46        47        63        77        80   
                                        

Total

   $ 209      $ 205      $ 217      $ 222      $ 216   
                                        

Discretionary assets under management

          
          

Personal

   $ 69      $ 67      $ 66      $ 62      $ 59   

Institutional

     36        36        38        36        37   
                                        

Total

   $ 105      $ 103      $ 104      $ 98      $ 96   
                                        

Asset Type

          

Equity

   $ 51      $ 49      $ 47      $ 42      $ 38   

Fixed income

     35        34        34        32        32   

Liquidity/Other

     19        20        23        24        26   
                                        

Total

   $ 105      $ 103      $ 104      $ 98      $ 96   
                                        

Nondiscretionary assets under administration

          
          

Personal

   $ 27      $ 27      $ 27      $ 26      $ 26   

Institutional

     77        75        86        98        94   
                                        

Total

   $ 104      $ 102      $ 113      $ 124      $ 120   
                                        

Asset Type

          

Equity

   $ 53      $ 51      $ 51      $ 46      $ 41   

Fixed income

     24        24        22        25        25   

Liquidity/Other

     27        27        40        53        54   
                                        

Total

   $ 104      $ 102      $ 113      $ 124      $ 120   
                                        

 

(a) See note (a) on page 13.
(b) As of period-end.
(c) Recorded investment of purchased impaired loans related to National City, adjusted to reflect additional loan impairments effective December 31, 2008.
(d) Excludes brokerage account assets.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

Residential Mortgage Banking (Unaudited) (a)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

INCOME STATEMENT

          

Net interest income

   $ 80      $ 71      $ 83      $ 87      $ 91   

Noninterest income

          

Loan servicing revenue

          

Servicing fees

     69        51        70        42        59   

Net MSR hedging gains

     46        35        60        58        202   

Loan sales revenue

     39        26        83        151        175   

Other

     3        (7     (4     (6     1   
                                        

Total noninterest income

     157        105        209        245        437   
                                        

Total revenue

     237        176        292        332        528   

Provision for (recoveries of) credit losses

     (16     (7     4        8        (9

Noninterest expense

     124        142        141        176        173   
                                        

Pretax earnings

     129        41        147        148        364   

Income taxes

     47        16        56        56        137   
                                        

Earnings

   $ 82      $ 25      $ 91      $ 92      $ 227   
                                        

AVERAGE BALANCE SHEET

          

Portfolio loans

   $ 2,820      $ 2,479      $ 2,071      $ 1,834      $ 1,430   

Loans held for sale

     974        1,333        2,042        2,766        2,693   

Mortgage servicing rights (MSR)

     1,264        1,236        1,443        1,343        1,164   

Other assets

     3,797        3,761        3,483        2,648        1,932   
                                        

Total assets

   $ 8,855      $ 8,809      $ 9,039      $ 8,591      $ 7,219   
                                        

Deposits

   $ 3,602      $ 3,628      $ 4,076      $ 4,741      $ 4,101   

Borrowings and other liabilities

     2,279        3,110        3,811        2,672        2,080   

Capital

     1,781        1,471        1,411        1,282        1,271   
                                        

Total liabilities and equity

   $ 7,662      $ 8,209      $ 9,298      $ 8,695      $ 7,452   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     19     7     26     29     72

Efficiency

     52     81     48     53     33
                                        

OTHER INFORMATION

          

Servicing portfolio for others (in billions) (b)

   $ 141      $ 145      $ 158      $ 161      $ 168   

Fixed rate

     89     88     88     87     87

Adjustable rate/balloon

     11     12     12     13     13

Weighted average interest rate

     5.79     5.82     5.89     5.94     5.99

MSR capitalized value (in billions)

   $ 1.3      $ 1.3      $ 1.3      $ 1.5      $ 1.0   

MSR capitalization value (in basis points)

     90        91        81        90        62   

Weighted average servicing fee (in basis points)

     30        30        30        30        30   

Loan origination volume (in billions)

   $ 2.0      $ 2.3      $ 3.6      $ 6.4      $ 6.9   

Percentage of originations represented by:

          

Agency and government programs

     98     96     97     98     97

Refinance volume

     73     59     59     74     83

Total nonperforming assets (b)

   $ 418      $ 370      $ 343      $ 285      $ 267   

Impaired loans (b) (c)

   $ 298      $ 369      $ 412      $ 531      $ 533   

 

(a) See note (a) on page 13.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to National City, adjusted to reflect additional loan impairments effective December 31, 2008.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

Distressed Assets Portfolio (Unaudited) (a)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2010
    December 31
2009
    September 30
2009
    June 30
2009
    March 31
2009
 

INCOME STATEMENT

          

Net interest income

   $ 338      $ 218      $ 235      $ 295      $ 331   

Noninterest income

     (1     3        19        39        13   
                                        

Total revenue

     337        221        254        334        344   

Provision for credit losses

     165        314        168        30        259   

Noninterest expense

     58        49        62        55        80   
                                        

Pretax earnings (loss)

     114        (142     24        249        5   

Income taxes (benefit)

     42        (54     10        94        2   
                                        

Earnings (loss)

   $ 72      $ (88   $ 14      $ 155      $ 3   
                                        

AVERAGE BALANCE SHEET

          

Commercial lending:

          

Commercial

   $ 115      $ 106      $ 136      $ 182      $ 198   

Commercial real estate:

          

Real estate projects

     2,404        2,641        3,007        3,331        3,526   

Commercial mortgage

     80        65        117        112        93   

Equipment lease financing

     803        800        793        819        858   
                                        

Total commercial lending

     3,402        3,612        4,053        4,444        4,675   

Consumer lending:

          

Consumer:

          

Home equity lines of credit

     4,533        4,615        4,887        5,016        5,297   

Home equity installment loans

     2,015        2,060        1,877        2,052        2,553   

Other consumer

     25        23        13        15        10   
                                        

Total consumer

     6,573        6,698        6,777        7,083        7,860   

Residential real estate:

          

Residential mortgage

     7,717        7,974        8,744        8,983        9,231   

Residential construction

     473        600        842        1,401        1,541   
                                        

Total residential real estate

     8,190        8,574        9,586        10,384        10,772   
                                        

Total consumer lending

     14,763        15,272        16,363        17,467        18,632   
                                        

Total portfolio loans

     18,165        18,884        20,416        21,911        23,307   

Other assets

     1,342        1,633        1,901        1,867        1,509   
                                        

Total assets

   $ 19,507      $ 20,517      $ 22,317      $ 23,778      $ 24,816   
                                        

Deposits

   $ 85      $ 29      $ 32      $ 49      $ 45   

Other liabilities

     55        70        85        109        107   

Capital

     1,353        1,568        1,540        1,619        1,570   
                                        

Total liabilities and equity

   $ 1,493      $ 1,667      $ 1,657      $ 1,777      $ 1,722   
                                        

OTHER INFORMATION

          

Nonperforming assets (b)

   $ 1,777      $ 1,787      $ 1,473      $ 1,391      $ 933   

Impaired loans (b) (c)

   $ 7,124      $ 7,577      $ 7,803      $ 8,670      $ 8,778   

Net charge-offs

   $ 111      $ 121      $ 175      $ 197      $ 51   

Net charge-offs (for three months ended) as a percentage of period-end portfolio loans (annualized)

     2.48     2.54     3.40     3.61     .89

LOANS (in billions) (b)

          

Commercial:

          

Residential development

   $ 2.6      $ 2.6      $ 3.2      $ 3.6      $ 3.5   

Cross-border leases

     .8        .8        .8        .8        .8   

Consumer:

          

Brokered home equity

     6.3        6.4        6.6        6.9        7.1   

Retail mortgages

     5.1        5.2        5.4        5.8        6.4   

Non-prime mortgages

     1.7        1.7        1.7        1.9        2.0   

Residential construction

     1.6        1.8        2.0        2.2        2.4   
                                        

Total

   $ 18.1      $ 18.5      $ 19.7      $ 21.2      $ 22.2   
                                        

 

(a) See note (a) on page 13.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to National City, adjusted to reflect additional loan impairments effective December 31, 2008.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

Glossary of Terms

Accretable net interest - The excess of cash flows expected to be collected on a purchased impaired loan over the carrying value of the loan. The accretable net interest is recognized into interest income over the remaining life of the loan using the constant effective yield method.

Accretable yield - The excess of a loan’s cash flows expected to be collected over the carrying value of the loan. The accretable yield is recognized in interest income over the remaining life of the loan using the constant effective yield method.

Adjusted average total assets - Primarily comprised of total average quarterly (or annual) assets plus (less) unrealized losses (gains) on investment securities, less goodwill and certain other intangible assets (net of eligible deferred taxes).

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.

Basis point - One hundredth of a percentage point.

Cash recoveries – Cash recoveries used in the context of purchased impaired loans represent cash payments from customers that exceeded the recorded investment of the designated impaired loan.

Charge-off - Process of removing a loan or portion of a loan from our balance sheet because it is considered uncollectible. We also record a charge-off when a loan is transferred to held for sale by reducing the loan carrying amount to the fair value of the loan, if fair value is less than carrying amount.

Client-related noninterest income – Total noninterest income included on our Consolidated Income Statement less amounts for net gains (losses) on sales of securities, net other-than-temporary impairments, and other noninterest income.

Common shareholders’ equity to total assets - Common shareholders’ equity divided by total assets. Common shareholders’ equity equals total shareholders’ equity less the liquidation value of preferred stock.

Credit spread - The difference in yield between debt issues of similar maturity. The excess of yield attributable to credit spread is often used as a measure of relative creditworthiness, with a reduction in the credit spread reflecting an improvement in the borrower’s perceived creditworthiness.

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 but not limited to forward contracts, futures, options and swaps.

Duration of equity - An estimate of the rate sensitivity of our economic value of equity. A negative duration of equity is associated with asset sensitivity (i.e., positioned for rising interest rates), while a positive value implies liability sensitivity (i.e., positioned for declining interest rates). For example, if the duration of equity is +1.5 years, the economic value of equity declines by 1.5% for each 100 basis point increase in interest rates.

Earning assets - Assets that generate income, which include: Federal funds sold; resale agreements; trading securities; interest-earning deposits with banks; other short-term investments; loans held for sale; loans; investment securities; and certain other assets.

Economic 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. The economic capital measurement process involves converting a risk distribution to the capital that is required to support the risk, consistent with our target credit rating. As such, economic risk serves as a “common currency” of risk that allows us to compare different risks on a similar basis.

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.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

Efficiency - Noninterest expense divided by the sum of net interest income (GAAP basis) and noninterest income.

Fair value - The price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date using the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants.

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 a business segment. We assign these balances LIBOR-based funding rates at origination that represent the interest cost for us to raise/invest funds with similar maturity and repricing structures.

Futures and forward contracts - Contracts in which the buyer agrees to purchase and the seller agrees to deliver a specific financial instrument at a predetermined price or yield. May be settled either in cash or by delivery of the underlying financial instrument.

GAAP - Accounting principles generally accepted in the United States of America.

Investment securities - Collectively, securities available for sale and securities held to maturity.

Leverage ratio - Tier 1 risk-based capital divided by adjusted average total assets.

LIBOR - Acronym for London InterBank Offered Rate. LIBOR is the average interest rate charged when banks in the London wholesale money market (or interbank market) borrow unsecured funds from each other. LIBOR rates are used as a benchmark for interest rates on a global basis.

Net interest income from loans and deposits - A management accounting assessment, using funds transfer pricing methodology, of the net interest contribution from loans and deposits.

Net interest margin - Annualized taxable-equivalent net interest income divided by average earning assets.

Nonaccretable difference - Contractually required payments receivable on a purchased impaired loan in excess of the cash flows expected to be collected.

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 - Noninterest income divided by the sum of net interest income (GAAP basis) and noninterest income.

Nonperforming assets - Nonperforming assets include nonaccrual loans, troubled debt restructured loans, foreclosed assets and other assets. We do not accrue interest income on assets classified as nonperforming.

Nonperforming loans - Nonperforming loans include loans to commercial, commercial real estate, equipment lease financing, consumer, and residential mortgage customers and construction customers as well as troubled debt restructured loans. Nonperforming loans do not include loans held for sale or foreclosed and other assets. We do not accrue interest income on loans classified as nonperforming.

Notional amount - A number of currency units, shares, or other units specified in a derivatives contract.

Operating leverage - The period to period dollar or percentage change in total revenue (GAAP basis) less the dollar or percentage change in noninterest expense. A positive variance indicates that revenue growth exceeded expense growth (i.e., positive operating leverage) while a negative variance implies expense growth exceeded revenue growth (i.e., negative operating leverage).

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

Other-than-temporary impairment (OTTI) - When the fair value of a security is less than its amortized cost basis, an assessment is performed to determine whether the impairment is other-than-temporary. If we intend to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, an other-than-temporary impairment is considered to have occurred. In such cases, an other-than-temporary impairment is recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Further, if we do not expect to recover the entire amortized cost of the security, an other-than-temporary impairment is considered to have occurred. However for debt securities, if we do not intend to sell the security and it is not more likely than not that we will be required to sell the security before its recovery, the other-than-temporary loss is separated into (a) the amount representing the credit loss, and (b) the amount related to all other factors. The other-than-temporary impairment related to credit losses is recognized in earnings while the amount related to all other factors is recognized in other comprehensive income, net of tax.

Pretax, pre-provision earnings - Total revenue less noninterest expense.

Purchase accounting accretion - Accretion of the discounts and premiums on acquired assets and liabilities. The purchase accounting accretion is recognized in net interest income over the weighted average life of the financial instruments using the constant effective yield method.

Purchased impaired loans - Acquired loans determined to be credit impaired under FASB ASC 310-30 (AICPA SOP 03-3). Loans are determined to be impaired if there is evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected.

Recorded investment - The initial investment of a purchased impaired loan plus interest accretion and less any cash payments and writedowns to date. The recorded investment excludes any valuation allowance which is included in our allowance for loan and lease losses.

Recovery - - Cash proceeds received on a loan that we had previously charged off. We credit the amount received to the allowance for loan and lease losses.

Residential development loans - Project-specific loans to commercial customers for the construction or development of residential real estate including land, single family homes, condominiums and other residential properties. This would exclude loans to commercial customers where proceeds are for general corporate purposes whether or not such facilities are secured.

Residential mortgage servicing rights hedge gains / (losses), net - We have elected to measure acquired or originated residential mortgage servicing rights (MSRs) at fair value under GAAP. We employ a risk management strategy designed to protect the economic value of MSRs from changes in interest rates. This strategy utilizes securities and a portfolio of derivative instruments to hedge changes in the fair value of MSRs arising from changes in interest rates. These financial instruments are expected to have changes in fair value which are negatively correlated to the change in fair value of the MSR portfolio. Net MSR hedge gains/ (losses) represent the change in the fair value of MSRs, exclusive of changes due to time decay and payoffs, combined with the change in the fair value of the associated derivative instruments.

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

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

Return on average common shareholders’ equity - Annualized net income less preferred stock dividends, including preferred stock discount accretion, divided by average common shareholders’ equity.

Risk-weighted assets - 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.

Servicing rights - An intangible asset or liability created by an obligation to service assets for others. Typical servicing rights include the right to receive a fee for collecting and forwarding payments on loans and related taxes and insurance premiums held in escrow.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

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 taxable investments. To provide more meaningful comparisons of yields and margins for all interest-earning assets, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margins by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on other taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.

Tier 1 common capital - Tier 1 risk-based capital, less preferred equity, less trust preferred capital securities, and less noncontrolling interests.

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

Tier 1 risk-based capital - Total shareholders’ equity, plus trust preferred capital securities, plus certain noncontrolling interests that are held by others; less goodwill and certain other intangible assets (net of eligible deferred taxes relating to taxable and nontaxable combinations), less equity investments in nonfinancial companies less ineligible servicing assets 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 risk-based capital purposes.

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

Total equity – Total shareholders’ equity plus noncontrolling interests.

Total risk-based capital - Tier 1 risk-based capital plus qualifying subordinated debt and trust preferred securities, other noncontrolling interest not qualified as Tier 1, eligible gains on available for sale equity securities 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.

Troubled debt restructuring – A restructuring of a loan whereby the lender for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that the lender would not otherwise consider or for which the lender would not be adequately compensated.

Watchlist - A list of criticized loans, credit exposure or other assets compiled for internal monitoring purposes. We define criticized exposure for this purpose as exposure with an internal risk rating of other assets especially mentioned, substandard, doubtful or loss.

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. An “inverted” or “negative” yield curve exists when short-term bonds have higher yields than long-term bonds.

 

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