Exhibit 99.1

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2010

(UNAUDITED)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 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   

Nonperforming Assets

     7-8   

Accruing Loans Past Due

     9   

Purchase Accounting Accretion

     10   

Allowances for Credit Losses

     11   

Net Unfunded Commitments

     11   
Business Segment Results:   

Descriptions

     12   

Income 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 January 20, 2011. We have reclassified certain prior period amounts to be consistent with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. 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, and residential mortgage banking, 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 products and services internationally.

SALE OF PNC GLOBAL INVESTMENT SERVICING

On July 1, 2010, we sold 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 pursuant to a definitive agreement entered into on February 2, 2010. The third quarter 2010 pretax gain related to this sale was $639 million, or $328 million after taxes. Results of operations of GIS, including the related after-tax gain on sale in the third quarter of 2010, totaled $373 million for 2010 and are presented as income from discontinued operations, net of income taxes, on our Consolidated Income Statement for all periods presented. Once we entered into the sales agreement, GIS was no longer a reportable business segment.

BLACKROCK SECONDARY COMMON STOCK OFFERING

During November 2010, BlackRock, Inc. (BlackRock) completed a secondary offering of 58.7 million shares of its common stock at a price per share of $163.00. Of the shares offered, 51.2 million common shares were offered by another BlackRock shareholder and 7.5 million common shares were offered by PNC. We recognized a pretax gain of $160 million in noninterest income during the fourth quarter of 2010 related to our sale of shares of BlackRock stock in this offering. The after-tax impact of this transaction was $102 million for the fourth quarter and full year 2010. The earnings per diluted share impact was $.19 for the fourth quarter and full year 2010. Although we elected to adjust our stake in BlackRock, we continue to consider our investment in BlackRock a key component of our diversified revenue strategy.


THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Income Statement (Unaudited)

 

    Three months ended     Year ended  

In millions, except per share data

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

Interest Income

             

Loans

  $ 1,962      $ 1,996      $ 2,158      $ 2,160      $ 2,160      $ 8,276      $ 8,919   

Investment securities

    602        592        572        623        643        2,389        2,688   

Other

    107        113        143        122        136        485        479   
                                                       

Total interest income

    2,671        2,701        2,873        2,905        2,939        11,150        12,086   
                                                       

Interest Expense

             

Deposits

    205        233        244        281        334        963        1,741   

Borrowed funds

    265        253        194        245        259        957        1,262   
                                                       

Total interest expense

    470        486        438        526        593        1,920        3,003   
                                                       

Net interest income

    2,201        2,215        2,435        2,379        2,346        9,230        9,083   
                                                       

Noninterest Income

             

Asset management

    303        249        243        259        219        1,054        858   

Consumer services

    322        328        315        296        315        1,261        1,290   

Corporate services

    370        183        261        268        260        1,082        1,021   

Residential mortgage

    157        216        179        147        107        699        990   

Service charges on deposits

    132        164        209        200        236        705        950   

Net gains on sales of securities

    68        121        147        90        144        426        550   

Net other-than-temporary impairments

    (44     (71     (94     (116     (144     (325     (577

Gains on BlackRock transactions (a)

    160              1,076        160        1,076   

Other

    234        193        217        240        327        884        987   
                                                       

Total noninterest income

    1,702        1,383        1,477        1,384        2,540        5,946        7,145   
                                                       

Total revenue

    3,903        3,598        3,912        3,763        4,886        15,176        16,228   

Provision For Credit Losses

    442        486        823        751        1,049        2,502        3,930   

Noninterest Expense

             

Personnel

    1,032        959        959        956        969        3,906        4,119   

Occupancy

    194        177        172        187        180        730        713   

Equipment

    176        152        168        172        173        668        695   

Marketing

    70        81        65        50        59        266        233   

Other

    868        789        638        748        828        3,043        3,313   
                                                       

Total noninterest expense

    2,340        2,158        2,002        2,113        2,209        8,613        9,073   
                                                       

Income from continuing operations before income taxes and noncontrolling interests

    1,121        954        1,087        899        1,628        4,061        3,225   

Income taxes

    301        179        306        251        525        1,037        867   
                                                       

Income from continuing operations before noncontrolling interests

    820        775        781        648        1,103        3,024        2,358   

Income from discontinued operations (net of income taxes of zero, $311, $13, $14, $32, $338, and $54) (b)

      328        22        23        4        373        45   
                                                       

Net income

    820        1,103        803        671        1,107        3,397        2,403   
                                                       

Less:  Net income (loss) attributable to noncontrolling interests

    (3     2        (9     (5     (37     (15     (44

Preferred stock dividends

    24        4        25        93        119        146        388   

Preferred stock discount accretion and redemptions

    1        3        1        250        14        255        56   
                                                       

Net income attributable to common shareholders

  $ 798      $ 1,094      $ 786      $ 333      $ 1,011      $ 3,011      $ 2,003   
                                                       

Basic Earnings Per Common Share

             

Continuing operations

  $ 1.52      $ 1.45      $ 1.45      $ .62      $ 2.18      $ 5.08      $ 4.30   

Discontinued operations

      .63        .04        .05        .01        .72        .10   
                                                       

Net income

  $ 1.52      $ 2.08      $ 1.49      $ .67      $ 2.19      $ 5.80      $ 4.40   

Diluted Earnings Per Common Share

             

Continuing operations

  $ 1.50      $ 1.45      $ 1.43      $ .61      $ 2.16      $ 5.02      $ 4.26   

Discontinued operations

      .62        .04        .05        .01        .72        .10   
                                                       

Net income

  $ 1.50      $ 2.07      $ 1.47      $ .66      $ 2.17      $ 5.74      $ 4.36   

Average Common Shares Outstanding

             

Basic

    524        523        524        498        460        517        454   

Diluted

    526        526        527        500        462        520        455   
                                                       

Efficiency

    60     60     51     56     45     57     56

Noninterest income to total revenue

    44     38     38     37     52     39     44

Effective tax rate (c)

    26.9     18.8     28.2     27.9     32.2     25.5     26.9
                                                       

 

(a) See “BlackRock Secondary Common Stock Offering” on the table of contents page of this Financial Supplement regarding our fourth quarter 2010 gain on the sale of a portion of our shares of BlackRock stock. On December 1, 2009, BlackRock acquired Barclays Global Investors in exchange for cash and BlackRock common and participating preferred stock. The after-tax impact of the increase in BlackRock’s equity resulting from the value of BlackRock shares issued in connection with this transaction to our net income was $687 million for the fourth quarter and full year 2009. The earnings per diluted share impact was $1.49 for the fourth quarter of 2009 and $1.51 million for full year 2009.
(b) Includes results of operations for GIS through June 30, 2010 and the related after-tax gain on sale. We sold GIS effective July 1, 2010, resulting in a gain of $639 million, or $328 million after taxes, recognized during the third quarter of 2010. The earnings per diluted share impact of the gain on sale was $.62 for the third quarter of 2010 and $.63 for full year 2010.
(c) 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 lower effective tax rate for the third quarter of 2010 was primarily the result of receiving a favorable IRS letter ruling in July 2010 that resolved a prior tax position and resulted in a tax benefit of $89 million. 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

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

Assets

          

Cash and due from banks (a)

   $ 3,297      $ 3,724      $ 3,558      $ 3,563      $ 4,288   

Federal funds sold and resale agreements (b)

     3,704        2,094        2,209        1,367        2,390   

Trading securities

     1,826        955        882        1,595        2,124   

Interest-earning deposits with banks (a)

     1,610        415        5,028        607        4,488   

Loans held for sale (b)

     3,492        3,275        2,756        2,691        2,539   

Investment securities (a)

     64,262        63,461        53,717        57,606        56,027   

Loans (a) (b)

     150,595        150,127        154,342        157,266        157,543   

Allowance for loan and lease losses (a)

     (4,887     (5,231     (5,336     (5,319     (5,072
                                        

Net loans

     145,708        144,896        149,006        151,947        152,471   

Goodwill

     8,149        8,166        9,410        9,425        9,505   

Other intangible assets

     2,604        2,352        2,728        3,289        3,404   

Equity investments (a)

     9,220        10,137        10,159        10,256        10,254   

Other (a) (b)

     20,412        20,658        22,242        23,050        22,373   
                                        

Total assets

   $ 264,284      $ 260,133      $ 261,695      $ 265,396      $ 269,863   
                                        

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 50,019      $ 46,065      $ 44,312      $ 43,122      $ 44,384   

Interest-bearing

     133,371        133,118        134,487        139,401        142,538   
                                        

Total deposits

     183,390        179,183        178,799        182,523        186,922   

Borrowed funds

          

Federal funds purchased and repurchase agreements

     4,144        4,661        3,690        5,511        3,998   

Federal Home Loan Bank borrowings

     6,043        7,106        8,119        8,700        10,761   

Bank notes and senior debt

     12,904        13,508        12,617        12,638        12,362   

Subordinated debt

     9,842        10,023        10,184        10,001        9,907   

Other (a)

     6,555        4,465        5,817        5,611        2,233   
                                        

Total borrowed funds

     39,488        39,763        40,427        42,461        39,261   

Allowance for unfunded loan commitments and letters of credit

     188        193        218        252        296   

Accrued expenses (a)

     3,188        3,134        2,757        2,939        3,590   

Other (a)

     5,192        5,194        8,504        7,787        7,227   
                                        

Total liabilities

     231,446        227,467        230,705        235,962        237,296   
                                        

Equity

          

Preferred stock (c)

          

Common stock - $5 par value

          

Authorized 800 shares, issued 536, 536, 535, 535, and 471 shares

     2,682        2,680        2,678        2,676        2,354   

Capital surplus - preferred stock

     647        646        646        645        7,974   

Capital surplus - common stock and other

     12,057        12,008        11,979        11,945        8,945   

Retained earnings

     15,859        15,114        14,073        13,340        13,144   

Accumulated other comprehensive income (loss)

     (431     146        (442     (1,288     (1,962

Common stock held in treasury at cost: 10, 10, 10, 9, and 9 shares

     (572     (552     (557     (500     (513
                                        

Total shareholders’ equity

     30,242        30,042        28,377        26,818        29,942   

Noncontrolling interests

     2,596        2,624        2,613        2,616        2,625   
                                        

Total equity

     32,838        32,666        30,990        29,434        32,567   
                                        

Total liabilities and equity

   $ 264,284      $ 260,133      $ 261,695      $ 265,396      $ 269,863   
                                        

Capital Ratios

          

Tier 1 common (d)

     9.8     9.6     8.3     7.9     6.0

Tier 1 risk-based (d)

     12.1        11.9        10.7        10.3        11.4   

Total risk-based (d)

     15.6        15.6        14.3        13.9        15.0   

Leverage (d)

     10.3        9.9        9.1        8.8        10.1   

Common shareholders’ equity to assets

     11.2        11.3        10.6        10.0        8.2   
                                        

 

(a) Amounts include consolidated variable interest entities. Some 2010 amounts include consolidated variable interest entities that we consolidated effective January 1, 2010 based on guidance in ASC 810, Consolidation. Our 2010 Form 10-K will include additional information regarding these items. Also includes our equity interest in BlackRock under Equity investments.
(b) Amounts include assets for which PNC has elected the fair value option. Our third quarter 2010 Form 10-Q included, and our 2010 Form 10-K will include, additional information regarding these items.
(c) Par value less than $.5 million at each date.
(d) The ratio as of December 31, 2010 is estimated.

 

Page 2


THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited)

 

    Three months ended     Year ended  

In millions

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

Assets

             

Interest-earning assets:

             

Investment securities

             

Securities available for sale

             

Residential mortgage-backed

             

Agency

  $ 28,457      $ 22,916      $ 20,382      $ 21,926      $ 22,663      $ 23,437      $ 21,889   

Non-agency

    8,495        8,917        9,358        10,213        10,788        9,240        11,993   

Commercial mortgage-backed

    3,325        3,100        2,962        5,357        5,053        3,679        4,748   

Asset-backed

    2,824        2,436        1,695        1,992        1,927        2,240        1,963   

US Treasury and government agencies

    6,250        7,758        8,708        7,493        6,403        7,549        4,477   

State and municipal

    1,732        1,323        1,356        1,365        1,346        1,445        1,354   

Other debt

    3,618        3,092        2,526        1,874        1,948        2,783        1,327   

Corporate stocks and other

    418        472        446        457        362        448        398   
                                                       

Total securities available for sale

    55,119        50,014        47,433        50,677        50,490        50,821        48,149   

Securities held to maturity

             

Commercial mortgage-backed

    4,311        4,130        4,264        2,110        2,006        3,711        1,990   

Asset-backed

    2,849        3,435        3,697        3,665        2,849        3,409        2,085   

Other

    10        9        21        160        159        49        71   
                                                       

Total securities held to maturity

    7,170        7,574        7,982        5,935        5,014        7,169        4,146   
                                                       

Total investment securities

    62,289        57,588        55,415        56,612        55,504        57,990        52,295   

Loans

             

Commercial

    54,065        53,502        54,349        55,464        55,633        54,339        61,183   

Commercial real estate

    18,555        19,847        20,963        22,423        23,592        20,435        24,775   

Equipment lease financing

    6,375        6,514        6,080        6,131        6,164        6,276        6,201   

Consumer

    54,741        55,036        54,939        55,349        52,911        55,015        52,368   

Residential mortgage

    16,145        16,766        18,576        19,397        19,891        17,709        21,116   
                                                       

Total loans

    149,881        151,665        154,907        158,764        158,191        153,774        165,643   

Loans held for sale

    3,331        3,021        2,646        2,476        2,949        2,871        3,976   

Federal funds sold and resale agreements

    2,130        1,602        2,193        1,669        1,700        1,899        1,865   

Other

    6,164        9,801        9,419        7,471        12,654        8,215        14,708   
                                                       

Total interest-earning assets

    223,795        223,677        224,580        226,992        230,998        224,749        238,487   

Noninterest-earning assets:

             

Allowance for loan and lease losses

    (5,039     (5,290     (5,113     (5,136     (4,517     (5,144     (4,316

Cash and due from banks

    3,516        3,436        3,595        3,735        3,657        3,569        3,648   

Other

    41,286        42,756        41,304        41,557        41,740        41,728        39,057   
                                                       

Total assets

  $ 263,558      $ 264,579      $ 264,366      $ 267,148      $ 271,878      $ 264,902      $ 276,876   
                                                       

 

Page 3


THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

 

    Three months ended     Year ended  

In millions

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

Liabilities and Equity

             

Interest-bearing liabilities:

             

Interest-bearing deposits

             

Money market

  $ 58,436      $ 58,016      $ 58,679      $ 57,923      $ 56,298      $ 58,264      $ 55,326   

Demand

    25,388        25,078        24,953        24,672        24,223        25,025        23,477   

Savings

    7,221        7,092        7,075        6,623        6,381        7,005        6,495   

Retail certificates of deposit

    39,201        41,724        43,745        47,162        49,645        42,933        54,584   

Other time

    598        740        881        1,039        1,389        813        5,009   

Time deposits in foreign offices

    2,799        2,650        2,661        3,034        4,013        2,785        3,637   
                                                       

Total interest-bearing deposits

    133,643        135,300        137,994        140,453        141,949        136,825        148,528   

Borrowed funds

             

Federal funds purchased and repurchase agreements

    4,552        4,179        4,159        4,344        4,046        4,309        4,439   

Federal Home Loan Bank borrowings

    6,168        7,680        8,575        9,603        10,880        7,996        14,177   

Bank notes and senior debt

    13,073        12,799        12,666        12,616        12,327        12,790        12,981   

Subordinated debt

    9,490        9,569        9,764        9,769        9,879        9,647        10,191   

Other

    4,947        4,886        6,005        5,934        2,448        5,438        2,345   
                                                       

Total borrowed funds

    38,230        39,113        41,169        42,266        39,580        40,180        44,133   
                                                       

Total interest-bearing liabilities

    171,873        174,413        179,163        182,719        181,529        177,005        192,661   

Noninterest-bearing liabilities and equity:

             

Noninterest-bearing deposits

    47,998        45,306        44,308        42,631        44,325        45,076        41,416   

Allowance for unfunded loan commitments and letters of credit

    193        218        251        295        324        239        328   

Accrued expenses and other liabilities

    10,506        12,687        10,446        10,401        13,353        11,015        12,179   

Equity

    32,988        31,955        30,198        31,102        32,347        31,567        30,292   
                                                       

Total liabilities and equity

  $ 263,558      $ 264,579      $ 264,366      $ 267,148      $ 271,878      $ 264,902      $ 276,876   
                                                       

Supplemental Average Balance Sheet Information (Unaudited)

  

Deposits and Common Shareholders’ Equity

             

Interest-bearing deposits

  $ 133,643      $ 135,300      $ 137,994      $ 140,453      $ 141,949      $ 136,825      $ 148,528   

Noninterest-bearing deposits

    47,998        45,306        44,308        42,631        44,325        45,076        41,416   
                                                       

Total deposits

  $ 181,641      $ 180,606      $ 182,302      $ 183,084      $ 186,274      $ 181,901      $ 189,944   

Transaction deposits

  $ 131,822      $ 128,400      $ 127,940      $ 125,226      $ 124,846      $ 128,365      $ 120,219   

Common shareholders’ equity

  $ 29,729      $ 28,755      $ 27,054      $ 24,764      $ 21,726      $ 27,545      $ 20,022   
                                                       

 

Page 4


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Net Interest Margin (Unaudited) (a)

 

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

Average yields/rates

          

Yield on interest-earning assets

          

Loans

     5.21     5.24     5.58     5.50     5.42

Investment securities

     3.91        4.15        4.17        4.44        4.67   

Other

     3.61        3.15        3.98        4.26        3.17   

Total yield on interest-earning assets

     4.76        4.82        5.13        5.17        5.07   

Rate on interest-bearing liabilities

          

Deposits

     .61        .68        .71        .81        .93   

Borrowed funds

     2.74        2.56        1.88        2.33        2.60   

Total rate on interest-bearing liabilities

     1.08        1.10        .98        1.16        1.30   
                                        

Interest rate spread

     3.68        3.72        4.15        4.01        3.77   

Impact of noninterest-bearing sources

     .25        .24        .20        .23        .28   
                                        

Net interest margin (b)

     3.93     3.96     4.35     4.24     4.05
                                        

 

     Year ended  
     December 31
2010
    December 31
2009
 

Average yields/rates

    

Yield on interest-earning assets

    

Loans

     5.42     5.41

Investment securities

     4.16        5.18   

Other

     3.74        2.37   

Total yield on interest-earning assets

     5.00        5.10   

Rate on interest-bearing liabilities

    

Deposits

     .70        1.17   

Borrowed funds

     2.39        2.93   

Total rate on interest-bearing liabilities

     1.09        1.58   
                

Interest rate spread

     3.91        3.52   

Impact of noninterest-bearing sources

     .23        .30   
                

Net interest margin (b)

     4.14     3.82
                

 

(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 December 31, 2010, September 30, 2010, June 30, 2010, March 31, 2010, and December 31, 2009 were $22 million, $22 million, $19 million, $18 million, and $18 million, respectively. The taxable-equivalent adjustments to net interest income for the year ended December 31, 2010 and December 31, 2009 were $81 million and $65 million, respectively.
(b) A reconciliation of net interest margin to provision-adjusted net interest margin follows. We believe that provision-adjusted net interest margin, a non-GAAP measure, is useful as a tool to help evaluate the amount of credit related risk associated with interest-earning assets.

 

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

Net interest margin, as reported

     3.93     3.96     4.35     4.24     4.05

Less: provision adjustment

     .78        .86        1.47        1.34        1.80   
                                        

Provision-adjusted net interest margin

     3.15     3.10     2.88     2.90     2.25
                                        

 

     Year ended  
     December 31
2010
    December 31
2009
 

Net interest margin, as reported

     4.14     3.82

Less: provision adjustment

     1.11        1.65   
                

Provision-adjusted net interest margin

     3.03     2.17
                

The adjustment represents annualized provision for credit losses divided by average interest-earning assets.

 

Page 5


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Loans (Unaudited)

 

In millions

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

Commercial

              

Retail/wholesale

   $ 9,901       $ 9,752       $ 9,576       $ 9,557       $ 9,515   

Manufacturing

     9,334         9,519         9,728         9,863         9,880   

Service providers

     8,866         8,747         8,289         8,528         8,256   

Real estate related (a)

     7,500         7,398         7,269         7,379         7,403   

Financial services

     4,573         3,773         4,302         4,654         3,874   

Health care

     3,481         3,169         3,099         2,998         2,970   

Other

     11,522         10,830         11,969         11,724         12,920   
                                            

Total commercial

     55,177         53,188         54,232         54,703         54,818   
                                            

Commercial real estate

              

Real estate projects

     12,211         13,021         13,914         14,535         15,582   

Commercial mortgage

     5,723         6,070         6,450         7,415         7,549   
                                            

Total commercial real estate

     17,934         19,091         20,364         21,950         23,131   
                                            

Equipment lease financing

     6,393         6,408         6,630         6,111         6,202   
                                            

TOTAL COMMERCIAL LENDING

     79,504         78,687         81,226         82,764         84,151   
                                            

Consumer

              

Home equity

              

Lines of credit

     23,473         23,770         23,901         24,040         24,236   

Installment

     10,753         10,815         11,060         11,390         11,711   

Education

     9,196         8,819         8,867         8,320         7,468   

Automobile

     2,983         2,863         2,697         2,206         2,013   

Credit card

     3,920         3,883         3,967         4,012         2,569   

Other

     4,767         4,806         4,787         5,266         5,585   
                                            

Total consumer

     55,092         54,956         55,279         55,234         53,582   
                                            

Residential real estate

              

Residential mortgage

     15,292         15,708         16,618         17,599         18,190   

Residential construction

     707         776         1,219         1,669         1,620   
                                            

Total residential real estate

     15,999         16,484         17,837         19,268         19,810   
                                            

TOTAL CONSUMER LENDING

     71,091         71,440         73,116         74,502         73,392   
                                            

Total (b)

   $ 150,595       $ 150,127       $ 154,342       $ 157,266       $ 157,543   
                                            

 

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

       

(b)    Includes purchased impaired loans related to National City:

   $ 7,780       $ 8,130       $ 9,127       $ 9,673       $ 10,287   

Details of Loans Held for Sale (Unaudited)

 

In millions

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

Commercial mortgage

   $ 1,207       $ 1,381       $ 1,239       $ 1,316       $ 1,301   

Residential mortgage

     1,890         1,786         1,336         1,158         1,012   

Other

     395         108         181         217         226   
                                            

Total

   $ 3,492       $ 3,275       $ 2,756       $ 2,691       $ 2,539   
                                            

 

Page 6


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions

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

Nonperforming loans

         

Commercial

         

Retail/wholesale

  $ 197      $ 219      $ 242      $ 246      $ 231   

Manufacturing

    250        266        312        341        423   

Real estate related (a)

    263        338        405        460        419   

Financial services

    16        36        60        77        117   

Health care

    50        59        55        48        41   

Other

    477        612        619        661        575   
                                       

Total commercial

    1,253        1,530        1,693        1,833        1,806   
                                       

Commercial real estate

         

Real estate projects

    1,422        1,562        1,661        1,797        1,754   

Commercial mortgage

    413        427        420        419        386   
                                       

Total commercial real estate

    1,835        1,989        2,081        2,216        2,140   
                                       

Equipment lease financing

    77        104        114        123        130   
                                       

TOTAL COMMERCIAL LENDING

    3,165        3,623        3,888        4,172        4,076   
                                       

Consumer

         

Home equity

    448        406        405        337        356   

Other

    35        38        25        35        36   
                                       

Total consumer

    483        444        430        372        392   

Residential real estate

         

Residential mortgage

    764        727        713        968        955   

Residential construction

    54        42        79        249        248   
                                       

Total residential real estate

    818        769        792        1,217        1,203   
                                       

TOTAL CONSUMER LENDING

    1,301        1,213        1,222        1,589        1,595   
                                       

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

    4,466        4,836        5,110        5,761        5,671   
                                       

Foreclosed and other assets

         

Commercial lending

    353        366        293        328        266   

Consumer lending

    482        467        501        451        379   
                                       

Total foreclosed and other assets

    835        833        794        779        645   
                                       

Total nonperforming assets

  $ 5,301      $ 5,669      $ 5,904      $ 6,540      $ 6,316   
                                       

Nonperforming loans to total loans

    2.97     3.22     3.31     3.66     3.60

Nonperforming assets to total loans and foreclosed and other assets

    3.50        3.76        3.81        4.14        3.99   

Nonperforming assets to total assets

    2.01        2.18        2.26        2.46        2.34   

Allowance for loan and lease losses to nonperforming loans (e) (f)

    109        108        104        92        89   
                                       

 

(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 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 $768 million at December 31, 2010, $595 million at September 30, 2010, $500 million at June 30, 2010, $385 million at March 31, 2010, and $440 million at December 31, 2009. Purchased impaired loans are excluded from TDRs.
(c) TDRs returned to performing (accrual) status totaled $543 million at December 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 $331 million at December 31, 2010 and are TDRs. However, since our policy is to exempt these loans from being placed on nonaccrual status as permitted by regulatory guidance as generally these loans are directly charged off in the period that they become 180 days past due, these loans are excluded from nonperforming loans.
(e) Nonperforming loans do not include purchased impaired loans or loans held for sale.
(f) The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans. See page 10, note (a).

 

Page 7


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited) (Continued)

 

Change in Nonperforming Assets

 

In millions

  January 1, 2010 -
December 31, 2010
    October 1, 2010 -
December 31, 2010
    July 1, 2010 -
September 30, 2010
    April 1, 2010 -
June 30, 2010
    January 1, 2010 -
March 31, 2010
 

Beginning balance

  $ 6,316      $ 5,669      $ 5,904      $ 6,540      $ 6,316   

Transferred in

    5,279        1,125        1,369        1,011        1,774   

Charge-offs/valuation adjustments

    (2,071     (467     (452     (532     (620

Principal activity including payoffs

    (1,316     (377     (365     (296     (278

Asset sales and transfers to held for sale

    (1,446     (410     (351     (420     (265

Returned to performing - TDRs

    (543     (118     (96     (112     (217

Returned to performing - Other

    (918     (121     (340     (287     (170
                                       

Ending balance

  $ 5,301      $ 5,301      $ 5,669      $ 5,904      $ 6,540   
                                       

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

 

In millions      

Ranking

  Outstandings    

Industry

 
  1   $ 35      Accommodation and Food Services  
  2     29      Real Estate and Rental and Leasing  
  3     23      Construction  
  4     23      Real Estate and Rental and Leasing  
  5     23      Real Estate and Rental and Leasing  
  6     22      Real Estate and Rental and Leasing  
  7     21      Real Estate and Rental and Leasing  
  8     20      Real Estate and Rental and Leasing  
  9     19      Information  
  10     19      Real Estate and Rental and Leasing  
             
  Total   $ 234       
             
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 8


THE PNC FINANCIAL SERVICES GROUP, INC.

Accruing Loans Past Due (Unaudited)

 

Accruing Loans Past Due 30 To 89 Days (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

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

Commercial

   $ 353       $ 293       $ 501       $ 622       $ 684         .64     .55     .93     1.15     1.26

Commercial real estate

     190         353         535         859         666         1.13        1.97        2.81        4.19        3.10   

Equipment lease financing

     39         10         21         97         128         .61        .16        .32        1.59        2.06   

Consumer

     444         430         419         440         438         .86        .83        .81        .85        .87   

Residential real estate

     333         347         392         464         472         2.68        2.70        2.92        3.14        3.12   
                                                       

Total

   $ 1,359       $ 1,433       $ 1,868       $ 2,482       $ 2,388         .95        1.01        1.29        1.68        1.62   
                                                                                     

Accruing Loans Past Due 90 Days Or More (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

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

Commercial

   $ 69       $ 90       $ 110       $ 201       $ 188         .13     .17     .20     .37     .35

Commercial real estate

     43         58         83         111         150         .26        .32        .44        .54        .70   

Equipment lease financing

     1         4         4         2         6         .02        .06        .06        .03        .10   

Consumer

     269         270         225         248         226         .52        .52        .43        .48        .45   

Residential real estate

     160         179         177         284         314         1.50        1.60        1.51        1.92        2.07   
                                                       

Total

   $ 542       $ 601       $ 599       $ 846       $ 884         .39        .43        .42        .57        .60   
                                                                                     

Accruing Loans Past Due 30 To 59 Days (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

   Dec. 31
2010
     Dec. 31
2009
     Dec. 31
2010
    Dec. 31
2009
 

Commercial

   $ 257       $ 488         .47     .90

Commercial real estate

     128         461         .76        2.14   

Equipment lease financing

     37         106         .58        1.71   

Consumer

     293         283         .56        .57   

Residential real estate

     226         308         1.80        2.01   
                      

Total

   $ 941       $ 1,646         .66        1.12   
                                  

Accruing Loans Past Due 60 To 89 Days (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

   Dec. 31
2010
     Dec. 31
2009
     Dec. 31
2010
    Dec. 31
2009
 

Commercial

   $ 96       $ 195         .17     .36

Commercial real estate

     62         204         .37        .95   

Equipment lease financing

     2         22         .03        .35   

Consumer

     151         157         .29        .31   

Residential real estate

     107         164         .85        1.09   
                      

Total

   $ 418       $ 742         .29        .50   
                                  

 

(a) Excludes loans that are government insured/guaranteed, primarily residential mortgages, and purchased impaired loans.

 

Page 9


THE PNC FINANCIAL SERVICES GROUP, INC.

Purchase Accounting Accretion and Accretable Interest (Unaudited)

 

VALUATION OF PURCHASED IMPAIRED LOANS

 

    December 31, 2008     December 31, 2009     September 30, 2010     December 31, 2010  

Dollars in billions

  Balance     Net Investment     Balance     Net Investment     Balance     Net Investment     Balance     Net Investment  

Commercial and commercial real estate loans:

               

Unpaid principal balance

  $ 6.3        $ 3.5        $ 2.2        $ 1.8     

Purchased impaired mark

    (3.4       (1.3       (.7       (.4  
                                       

Recorded investment

    2.9          2.2          1.5          1.4     

Allowance for loan losses

        (.2       (.3       (.3  
                                       

Net investment

    2.9        46     2.0        57     1.2        55     1.1        61

Consumer and residential mortgage loans:

               

Unpaid principal balance

    15.6          11.7          8.4          7.9     

Purchased impaired mark

    (5.8       (3.6       (1.8       (1.5  
                                       

Recorded investment

    9.8          8.1          6.6          6.4     

Allowance for loan losses

        (.3       (.6       (.6  
                                       

Net investment

    9.8        63     7.8        67     6.0        71     5.8        73
                                       

Total purchased impaired loans:

               

Unpaid principal balance

    21.9          15.2          10.6          9.7     

Purchased impaired mark

    (9.2       (4.9       (2.5       (1.9  
                                       

Recorded investment

    12.7          10.3          8.1          7.8     

Allowance for loan losses

        (.5       (.9       (.9 )(a)   
                                       

Net investment

  $ 12.7        58   $ 9.8        64   $ 7.2        68   $ 6.9        71
                                                               

PURCHASE ACCOUNTING ACCRETION

 

    Three months ended     Years Ended  

In millions

  December 31
2009
    September 30
2010
    December 31
2010
    December 31
2009
    December 31
2010
 

Non-impaired loans

  $ 111      $ 70      $ 73      $ 773      $ 366   

Impaired loans

    244        187        175        914        885   

Reversal of contractual interest on impaired loans

    (168     (138     (121     (752     (529
                                       

Net impaired loans

    76        49        54        162        356   

Securities

    21        15        15        118        54   

Deposits

    189        122        112        996        545   

Borrowings

    (55     (42     (43     (250     (155
                                       

Total

  $ 342      $ 214      $ 211      $ 1,799      $ 1,166   
                                       

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

  $ 154      $ 111      $ 133      $ 204      $ 483   

REMAINING PURCHASE ACCOUNTING ACCRETION

 

In billions

   December 31
2008
    December 31
2009
    September 30
2010
    December 31
2010
 

Non-impaired loans

   $ 2.4      $ 1.6      $ 1.3      $ 1.2   

Impaired loans (b)

     3.7        3.5        2.3        2.2   
                                

Total loans (gross)

     6.1        5.1        3.6        3.4   

Securities

     .2        .1        .1        .1   

Deposits

     2.1        1.0        .6        .5   

Borrowings

     (1.5     (1.2     (1.1     (1.1
                                

Total

   $ 6.9      $ 5.0      $ 3.2      $ 2.9   
                                

ACCRETABLE NET INTEREST - PURCHASED IMPAIRED LOANS

 

In billions

   

In billions

   

In billions

 

October 1, 2010

   $ 2.3     

January 1, 2010

   $ 3.5     

January 1, 2009

   $ 3.7   

Accretion

     (.2  

Accretion

     (.9  

Accretion

     (1.8

Cash recoveries

     (.2  

Cash recoveries

     (.5  

Cash recoveries

     (.7 )(a) 

Net reclass to accretable difference and other activity

     .3     

Net reclass to accretable difference and other activity

     .1     

Net reclass to accretable difference and other activity

     1.0 (a) 
                              

December 31, 2010

   $ 2.2     

December 31, 2010

   $ 2.2     

December 31, 2010

   $ 2.2   
                              

 

(a) Impairment reserves of $.9 billion at December 31, 2010 reflect impaired loans with further credit quality deterioration since acquisition. This deterioration was more than offset by cash received to date in excess of recorded investment of $.7 billion and the net reclassification to accretable net interest, to be recognized over time, of $1.0 billion.
(b) Adjustments include purchase accounting accretion, reclassifications from non-accretable to accretable net 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 10


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

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

Beginning balance

   $ 5,231      $ 5,336      $ 5,319      $ 5,072      $ 4,810   

Charge-offs:

          

Commercial

     (331     (310     (313     (273     (380

Commercial real estate

     (181     (102     (149     (238     (260

Equipment lease financing

     (29     (12     (43     (36     (34

Consumer

     (259     (285     (283     (242     (267

Residential real estate

     (124     (47     (197     (38     (83
                                        

Total charge-offs

     (924     (756     (985     (827     (1,024

Recoveries:

          

Commercial

     71        80        78        65        87   

Commercial real estate

     20        14        10        33        15   

Equipment lease financing

     18        13        13        12        10   

Consumer

     25        28        31        26        27   

Residential real estate

     (1     7        13          50   
                                        

Total recoveries

     133        142        145        136        189   

Net charge-offs:

          

Commercial

     (260     (230     (235     (208     (293

Commercial real estate

     (161     (88     (139     (205     (245

Equipment lease financing

     (11     1        (30     (24     (24

Consumer

     (234     (257     (252     (216     (240

Residential real estate

     (125     (40     (184     (38     (33
                                        

Total net charge-offs

     (791     (614     (840     (691     (835

Provision for credit losses

     442        486        823        751        1,049   

Acquired allowance adjustments (a)

       (2       2        20   

Adoption of ASU 2009-17, Consolidations

           141     

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

     5        25        34        44        28   
                                        

Ending balance

   $ 4,887      $ 5,231      $ 5,336      $ 5,319      $ 5,072   
                                        

Supplemental Information

          

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

     2.09     1.61     2.18     1.77     2.09

Allowance for loan and lease losses to total loans

     3.25        3.48        3.46        3.38        3.22   

Commercial lending net charge-offs

   $ (432   $ (317   $ (404   $ (437   $ (562

Consumer lending net charge-offs

     (359     (297     (436     (254     (273
                                        

Total net charge-offs

   $ (791   $ (614   $ (840   $ (691   $ (835

Net charge-offs to average loans

          

Commercial lending

     2.17     1.57     1.99     2.11     2.61

Consumer lending

     2.01        1.64        2.38        1.38        1.49   
                                        

 

(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

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

Beginning balance

   $ 193      $ 218      $ 252      $ 296      $ 324   

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

     (5     (25     (34     (44     (28
                                        

Ending balance

   $ 188      $ 193      $ 218      $ 252      $ 296   
                                        

Net Unfunded Commitments

 

  

In millions

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

Net unfunded commitments

   $ 95,805      $ 97,147      $ 95,775      $ 96,363      $ 100,795   
                                        

 

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 internationally.

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 majority or minority owned affiliates. Mortgage loans represent loans collateralized by one-to-four-family residential real estate. 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 mortgage loans—primarily those in first lien position—for various investors and for loans owned by PNC. Certain loans originated through majority or minority owned affiliates are serviced by others.

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.

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, including iShares®, the global product leader in exchange traded funds. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services globally to a broad base of clients. At December 31, 2010, our share of BlackRock’s earnings was 19%.

 

Page 12


THE PNC FINANCIAL SERVICES GROUP, INC.

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

 

    Three months ended     Year ended  

In millions

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

Income (Loss)

             

Retail Banking

  $ 43      $ (7   $ 80      $ 24      $ (25   $ 140      $ 136   

Corporate & Institutional Banking

    540        427        443        360        415        1,770        1,190   

Asset Management Group

    29        44        28        40        23        141        105   

Residential Mortgage Banking

    3        98        92        82        25        275        435   

Distressed Assets Portfolio

    (72     17        (81     72        (88     (64     84   

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

    277        196        219        70        753        762        408   
                                                       

Income from continuing operations before noncontrolling interests

  $ 820      $ 775      $ 781      $ 648      $ 1,103      $ 3,024      $ 2,358   
                                                       

Revenue

             

Retail Banking

  $ 1,275      $ 1,355      $ 1,387      $ 1,359      $ 1,379      $ 5,376      $ 5,721   

Corporate & Institutional Banking

    1,371        1,070        1,219        1,248        1,377        4,908        5,266   

Asset Management Group

    225        217        219        229        218        890        919   

Residential Mortgage Banking

    229        285        255        234        176        1,003        1,328   

Distressed Assets Portfolio

    198        244        346        337        221        1,125        1,153   

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

    605        427        486        356        1,515        1,874        1,841   
                                                       

Revenue from continuing operations

  $ 3,903      $ 3,598      $ 3,912      $ 3,763      $ 4,886      $ 15,176      $ 16,228   
                                                       

 

(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. Amounts are presented on a continuing operations basis and therefore exclude the earnings and revenue attributable to GIS, including the gain on the sale of GIS, which closed July 1, 2010.
(b) We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our 2010 Form 10-K 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) Amounts for the fourth quarter and full year 2010 include the $160 million gain ($102 million after taxes) related to our gain on the sale of a portion of our shares of BlackRock stock as part of BlackRock’s November 2010 secondary offering of common stock and amounts for the fourth quarter and full year 2009 include the $1.076 billion gain ($687 million after taxes) related to BlackRock’s December 1, 2009 acquisition of BGI. PNC sold 7.5 million shares of BlackRock common stock in the November 2010 transaction.

 

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

Period-end Employees

         

Full-time employees

         

Retail Banking

    20,925        21,203        21,380        21,522        21,416   

Corporate & Institutional Banking

    3,756        3,660        3,601        3,760        3,746   

Asset Management Group

    3,001        2,971        2,960        2,995        2,969   

Residential Mortgage Banking

    3,539        3,339        3,348        3,340        3,267   

Distressed Assets Portfolio

    167        170        179        178        175   

Other

         

Operations & Technology

    8,712        8,689        8,949        9,259        9,249   

Staff Services and Other (e)

    4,717        4,588        9,073        9,059        8,939   
                                       

Total Other

    13,429        13,277        18,022        18,318        18,188   
                                       

Total full-time employees

    44,817        44,620        49,490        50,113        49,761   
                                       

Retail Banking part-time employees

    4,965        4,799        4,790        4,798        4,737   

Other part-time employees

    987        974        1,104        1,187        1,322   
                                       

Total part-time employees

    5,952        5,773        5,894        5,985        6,059   
                                       

Total

    50,769        50,393        55,384        56,098        55,820   
                                       

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 totaling 4,528 at June 30, 2010; 4,573 at March 31, 2010; and 4,450 at December 31, 2009. We sold GIS effective July 1, 2010.

 

Page 13


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (a)

 

    Three months ended     Year ended  

Dollars in millions

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

INCOME STATEMENT

             

Net interest income

  $ 825      $ 858      $ 879      $ 871      $ 833      $ 3,433      $ 3,522   

Noninterest income

             

Service charges on deposits

    125        157        204        195        229        681        930   

Brokerage

    51        53        55        53        59        212        245   

Consumer services

    239        242        223        208        224        912        886   

Other

    35        45        26        32        34        138        138   
                                                       

Total noninterest income

    450        497        508        488        546        1,943        2,199   
                                                       

Total revenue

    1,275        1,355        1,387        1,359        1,379        5,376        5,721   

Provision for credit losses

    157        327        280        339        409        1,103        1,330   

Noninterest expense

    1,047        1,038        994        975        1,011        4,054        4,169   
                                                       

Pretax earnings (loss)

    71        (10     113        45        (41     219        222   

Income taxes (benefit)

    28        (3     33        21        (16     79        86   
                                                       

Earnings (loss)

  $ 43      $ (7   $ 80      $ 24      $ (25   $ 140      $ 136   
                                                       

AVERAGE BALANCE SHEET

             

Loans

             

Consumer

             

Home equity

  $ 26,189      $ 26,289      $ 26,510      $ 26,821      $ 27,107      $ 26,450      $ 27,403   

Indirect

    4,013        3,962        3,944        3,973        3,998        3,973        4,036   

Education

    8,758        8,817        8,342        8,060        6,656        8,497        5,625   

Credit cards

    3,827        3,901        3,948        4,079        2,503        3,938        2,239   

Other

    1,840        1,805        1,776        1,793        1,790        1,804        1,791   
                                                       

Total consumer

    44,627        44,774        44,520        44,726        42,054        44,662        41,094   

Commercial and commercial real estate

    10,928        11,118        11,307        11,487        11,766        11,208        12,306   

Floor plan

    1,482        1,267        1,299        1,296        1,137        1,336        1,264   

Residential mortgage

    1,390        1,528        1,683        1,800        1,899        1,599        2,064   
                                                       

Total loans

    58,427        58,687        58,809        59,309        56,856        58,805        56,728   

Goodwill and other intangible assets

    5,803        5,837        5,872        5,935        5,882        5,861        5,842   

Other assets

    1,738        2,070        2,913        2,722        2,697        2,358        2,750   
                                                       

Total assets

  $ 65,968      $ 66,594      $ 67,594      $ 67,966      $ 65,435      $ 67,024      $ 65,320   
                                                       

Deposits

             

Noninterest-bearing demand

  $ 17,723      $ 17,144      $ 17,240      $ 16,776      $ 16,516      $ 17,223      $ 16,308   

Interest-bearing demand

    20,140        19,767        19,977        19,212        18,446        19,776        18,357   

Money market

    40,362        40,148        40,283        39,699        39,374        40,125        39,394   
                                                       

Total transaction deposits

    78,225        77,059        77,500        75,687        74,336        77,124        74,059   

Savings

    7,155        7,029        7,006        6,552        6,577        6,938        6,610   

Certificates of deposit

    37,949        40,378        42,313        45,614        48,338        41,539        53,145   
                                                       

Total deposits

    123,329        124,466        126,819        127,853        129,251        125,601        133,814   

Other liabilities

    1,106        1,463        1,673        1,671        27        1,477        51   

Capital

    7,967        8,043        8,326        8,195        8,301        8,132        8,497   
                                                       

Total liabilities and equity

  $ 132,402      $ 133,972      $ 136,818      $ 137,719      $ 137,579      $ 135,210      $ 142,362   
                                                       

PERFORMANCE RATIOS

             

Return on average capital

    2     —       4     1     (1 )%      2     2

Return on average assets

    .26        (.04     .47        .14        (.15     .21        .21   

Noninterest income to total revenue

    35        37        37        36        40        36        38   

Efficiency

    82        77        72        72        73        75        73   
                                                       

 

(a) See note (a) on page 13.
(b) Information for 2010 reflects the impact of the consolidation in our financial statements for the securitized portfolio of approximately $1.6 billion of credit card loans effective January 1, 2010.
(c) PNC completed the required divestiture of 61 branches in early September 2009. Amounts for periods prior to the divestiture included the impact of those branches.

 

Page 14


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

 

    Three months ended     Year ended  

Dollars in millions, except as noted

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

OTHER INFORMATION (b)

             

Credit-related statistics:

             

Commercial nonperforming assets

  $ 297      $ 262      $ 297      $ 324      $ 324       

Consumer nonperforming assets (c)

    422        400        336        276        284       
                                           

Total nonperforming assets

  $ 719      $ 662      $ 633      $ 600      $ 608       
                                           

Impaired loans (d)

  $ 895      $ 939      $ 974      $ 1,013      $ 1,056       
                                           

Commercial lending net charge-offs

  $ 49      $ 85      $ 100      $ 96      $ 173      $ 330      $ 415   

Credit card lending net charge-offs (c)

    68        63        89        96        57        316        209   

Consumer lending (excluding credit card) net charge-offs

    108        99        109        108        109        424        402   
                                                       

Total net charge-offs

  $ 225      $ 247      $ 298      $ 300      $ 339      $ 1,070      $ 1,026   
                                                       

Commercial lending annualized net charge-off ratio

    1.57     2.72     3.18     3.05     5.32     2.63     3.06

Credit card lending annualized net charge-off ratio (c)

    7.05     6.41     9.04     9.54     9.03     8.02     9.33

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

    1.02     .93     1.03     1.03     1.04     1.00     .98
                                                       

Total annualized net charge-off ratio

    1.53     1.67     2.03     2.05     2.37     1.82     1.81
                                                       

Home equity portfolio credit statistics:

             

% of first lien positions (e)

    36     35     35     34     35    

Weighted average loan-to-value ratios (e)

    73     73     73     73     74    

Weighted average FICO scores (f)

    726        725        727        725        727       

Annualized net charge-off ratio

    .97     .90     1.01     .70     .90     .90     .75

Loans 30 - 89 days past due

    .79     .79     .74     .74     .78    

Loans 90 days past due

    1.02     .94     .91     .85     .76    
                                           

Other statistics:

             

ATMs

    6,673        6,626        6,539        6,467        6,473       

Branches (g)

    2,470        2,461        2,458        2,461        2,513       
                                           

Customer-related statistics:

             

Retail Banking checking relationships (h)

    5,465,000        5,438,000        5,389,000        5,379,000        5,390,000       

Retail online banking active customers

    3,057,000        2,968,000        2,774,000        2,782,000        2,743,000       

Retail online bill payment active customers

    977,000        942,000        870,000        826,000        780,000       
                                           

Brokerage statistics:

             

Financial consultants (i)

    694        713        711        722        704       

Full service brokerage offices

    34        40        41        41        40       

Brokerage account assets (billions)

  $ 33      $ 31      $ 31      $ 33      $ 32       
                                                       

 

(a) PNC completed the required divestiture of 61 branches in early September 2009. Amounts for periods prior to the divestiture included the impact of those branches.
(b) Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three months and year ended, respectively.
(c) Information for 2010 reflects the impact of the consolidation in our financial statements for the securitized portfolio of approximately $1.6 billion of credit card loans effective January 1, 2010. In addition, the declines as of September 30, 2010 in credit card lending net charge-offs and the credit card lending annualized net charge-off ratio were primarily due to the alignment of charge-off policies within the consolidated portfolio post-conversion.
(d) Recorded investment of purchased impaired loans related to acquisitions.
(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) Retail checking relationships for prior periods have been adjusted to be consistent with the current period presentation. The prior amounts were refined subsequent to the completion of application system conversion activities related to the National City acquisition.
(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     Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

             

Net interest income

  $ 912      $ 833      $ 923      $ 877      $ 1,009      $ 3,545      $ 3,833   

Noninterest income

             

Corporate service fees

    334        148        237        242        235        961        915   

Other

    125        89        59        129        133        402        518   
                                                       

Noninterest income

    459        237        296        371        368        1,363        1,433   
                                                       

Total revenue

    1,371        1,070        1,219        1,248        1,377        4,908        5,266   

Provision for (recoveries of) credit losses

    18        (48     97        236        283        303        1,603   

Noninterest expense

    505        446        421        445        444        1,817        1,800   
                                                       

Pretax earnings

    848        672        701        567        650        2,788        1,863   

Income taxes

    308        245        258        207        235        1,018        673   
                                                       

Earnings

  $ 540      $ 427      $ 443      $ 360      $ 415      $ 1,770      $ 1,190   
                                                       

AVERAGE BALANCE SHEET

             

Loans

             

Commercial

  $ 31,819      $ 32,119      $ 32,937      $ 34,024      $ 33,481      $ 32,717      $ 37,426   

Commercial real estate

    15,035        15,897        17,008        17,961        18,747        16,466        19,195   

Commercial - real estate related

    3,254        3,021        2,901        3,128        3,328        3,076        3,772   

Asset-based lending

    6,893        6,362        6,065        5,940        6,051        6,318        6,344   

Equipment lease financing

    5,603        5,747        5,262        5,318        5,368        5,484        5,390   
                                                       

Total loans

    62,604        63,146        64,173        66,371        66,975        64,061        72,127   

Goodwill and other intangible assets

    3,449        3,553        3,660        3,795        3,736        3,613        3,583   

Loans held for sale

    1,644        1,427        1,408        1,410        1,534        1,473        1,679   

Other assets

    8,890        8,726        7,711        7,940        7,395        8,320        7,300   
                                                       

Total assets

  $ 76,587      $ 76,852      $ 76,952      $ 79,516      $ 79,640      $ 77,467      $ 84,689   
                                                       

Deposits

             

Noninterest-bearing demand

  $ 27,544      $ 25,259      $ 23,715      $ 22,271      $ 23,484      $ 24,713      $ 19,948   

Money market

    11,880        12,105        12,380        12,253        10,573        12,153        9,697   

Other

    6,632        6,833        6,856        7,610        8,728        6,980        7,911   
                                                       

Total deposits

    46,056        44,197        42,951        42,134        42,785        43,846        37,556   

Other liabilities

    13,155        12,937        10,797        10,870        8,408        11,949        9,118   

Capital

    7,613        7,237        7,913        7,633        7,916        7,598        7,837   
                                                       

Total liabilities and equity

  $ 66,824      $ 64,371      $ 61,661      $ 60,637      $ 59,109      $ 63,393      $ 54,511   
                                                       

PERFORMANCE RATIOS

             

Return on average capital

    28     23     22     19     21     23     15

Return on average assets

    2.80        2.20        2.31        1.84        2.07        2.28        1.41   

Noninterest income to total revenue

    33        22        24        30        27        28        27   

Efficiency

    37        42        35        36        32        37        34   
                                                       

COMMERCIAL MORTGAGE

             

SERVICING PORTFOLIO (in billions)

             

Beginning of period

  $ 263      $ 265      $ 282      $ 287      $ 275      $ 287      $ 270   

Acquisitions/additions

    12        8        7        8        19        35        50   

Repayments/transfers

    (9     (10     (24     (13     (7     (56     (33
                                                       

End of period

  $ 266      $ 263      $ 265      $ 282      $ 287      $ 266      $ 287   
                                                       

OTHER INFORMATION

             

Consolidated revenue from: (b)

             

Treasury Management

  $ 306      $ 319      $ 302      $ 298      $ 296      $ 1,225      $ 1,137   

Capital Markets

  $ 207      $ 119      $ 128      $ 164      $ 187      $ 618      $ 533   

Commercial mortgage loans held for sale (c)

  $ 9      $ 24      ($ 2   $ 27      $ 67      $ 58      $ 205   

Commercial mortgage loan servicing (d)

    107        (40     49        88        66        204        280   
                                                       

Total commercial mortgage banking activities

  $ 116      $ (16   $ 47      $ 115      $ 133      $ 262      $ 485   

Total loans (e)

  $ 63,609      $ 62,388      $ 63,910      $ 65,076      $ 66,206       

Credit-related statistics:

             

Nonperforming assets (e)

  $ 2,594      $ 3,064      $ 3,103      $ 3,343      $ 3,167       

Impaired loans (e) (f)

  $ 714      $ 890      $ 923      $ 1,033      $ 1,075       

Net charge-offs

  $ 349      $ 211      $ 243      $ 271      $ 341      $ 1,074      $ 1,052   

Net carrying amount of commercial mortgage servicing rights (e)

  $ 665      $ 616      $ 722      $ 921      $ 921       
                                                       

 

(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, and commercial MSR valuations.
(e) Presented as of period end.
(f) Recorded investment of purchased impaired loans related to acquisitions.
(g) Reflects the impact of consolidating Market Street Funding LLC in our financial statements effective January 1, 2010 which for the year ended December 31, 2010 included $1.5 billion of loans, net of eliminations, and $2.6 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     Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

             

Net interest income

  $ 66      $ 67      $ 65      $ 65      $ 67      $ 263      $ 308   

Noninterest income

    159        150        154        164        151        627        611   
                                                       

Total revenue

    225        217        219        229        218        890        919   

Provision for (recoveries of) credit losses

    9        (12     14        9        25        20        97   

Noninterest expense

    170        160        160        157        155        647        654   
                                                       

Pretax earnings

    46        69        45        63        38        223        168   

Income taxes

    17        25        17        23        15        82        63   
                                                       

Earnings

  $ 29      $ 44      $ 28      $ 40      $ 23      $ 141      $ 105   
                                                       

AVERAGE BALANCE SHEET

             

Loans

             

Consumer

  $ 4,084      $ 4,021      $ 4,004      $ 3,994      $ 4,044      $ 4,026      $ 3,957   

Commercial and commercial real estate

    1,499        1,520        1,491        1,496        1,511        1,501        1,639   

Residential mortgage

    723        802        915        964        1,000        850        1,078   
                                                       

Total loans

    6,306        6,343        6,410        6,454        6,555        6,377        6,674   

Goodwill and other intangible assets

    384        394        403        415        416        399        407   

Other assets

    271        235        248        227        209        246        239   
                                                       

Total assets

  $ 6,961      $ 6,972      $ 7,061      $ 7,096      $ 7,180      $ 7,022      $ 7,320   
                                                       

Deposits

             

Noninterest-bearing demand

  $ 1,432      $ 1,364      $ 1,268      $ 1,229      $ 1,127      $ 1,324      $ 1,091   

Interest-bearing demand

    2,033        1,869        1,735        1,699        1,674        1,835        1,582   

Money market

    3,393        3,258        3,261        3,217        3,134        3,283        3,208   
                                                       

Total transaction deposits

    6,858        6,491        6,264        6,145        5,935        6,442        5,881   

Certificates of deposit and other

    694        715        769        818        918        748        1,076   
                                                       

Total deposits

    7,552        7,206        7,033        6,963        6,853        7,190        6,957   

Other liabilities

    74        80        92        111        114        89        104   

Capital

    502        512        567        553        531        534        569   
                                                       

Total liabilities and equity

  $ 8,128      $ 7,798      $ 7,692      $ 7,627      $ 7,498      $ 7,813      $ 7,630   
                                                       

PERFORMANCE RATIOS

             

Return on average capital

    23     34     20     29     17     26     18

Return on average assets

    1.65        2.50        1.59        2.29        1.27        2.01        1.43   

Noninterest income to total revenue

    71        69        70        72        69        70        66   

Efficiency

    76        74        73        69        71        73        71   
                                                       

OTHER INFORMATION

             

Total nonperforming assets (b)

  $ 90      $ 102      $ 114      $ 139      $ 155       

Impaired loans (b) (c)

  $ 146      $ 155      $ 182      $ 191      $ 198       

Total net charge-offs

  $ 21      $ 1      $ 16      $ 4      $ 22      $ 42      $ 63   

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

             

Personal

  $ 99      $ 95      $ 92      $ 96      $ 94       

Institutional

    113        111        107        113        111       
                                           

Total

  $ 212      $ 206      $ 199      $ 209      $ 205       
                                           

Asset Type

             

Equity

  $ 115      $ 107      $ 98      $ 104      $ 100       

Fixed income

    63        66        64        59        58       

Liquidity/Other

    34        33        37        46        47       
                                           

Total

  $ 212      $ 206      $ 199      $ 209      $ 205       
                                           

Discretionary assets under management

             

Personal

  $ 69      $ 67      $ 65      $ 69      $ 67       

Institutional

    39        38        34        36        36       
                                           

Total

  $ 108      $ 105      $ 99      $ 105      $ 103       
                                           

Asset Type

             

Equity

  $ 55      $ 51      $ 46      $ 51      $ 49       

Fixed income

    36        38        36        35        34       

Liquidity/Other

    17        16        17        19        20       
                                           

Total

  $ 108      $ 105      $ 99      $ 105      $ 103       
                                           

Nondiscretionary assets under administration

             

Personal

  $ 30      $ 28      $ 27      $ 27      $ 27       

Institutional

    74        73        73        77        75       
                                           

Total

  $ 104      $ 101      $ 100      $ 104      $ 102       
                                           

Asset Type

             

Equity

  $ 60      $ 56      $ 52      $ 53      $ 51       

Fixed income

    27        28        28        24        24       

Liquidity/Other

    17        17        20        27        27       
                                           

Total

  $ 104      $ 101      $ 100      $ 104      $ 102       
                                                       

 

(a) See note (a) on page 13.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to acquisitions.
(d) Excludes brokerage account assets.

 

Page 17


THE PNC FINANCIAL SERVICES GROUP, INC.

Residential Mortgage Banking (Unaudited) (a)

 

    Three months ended     Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

             

Net interest income

  $ 61      $ 53      $ 73      $ 80      $ 71      $ 267      $ 332   

Noninterest income

             

Loan servicing revenue

             

Servicing fees

    46        61        66        69        51        242        222   

Net MSR hedging gains

    47        86        66        46        35        245        355   

Loan sales revenue

    66        77        49        39        26        231        435   

Other

    9        8        1          (7     18        (16
                                                       

Total noninterest income

    168        232        182        154        105        736        996   
                                                       

Total revenue

    229        285        255        234        176        1,003        1,328   

Provision for (recoveries of) credit losses

    8        21        (8     (16     (7     5        (4

Noninterest expense

    216        119        109        121        142        565        632   
                                                       

Pretax earnings

    5        145        154        129        41        433        700   

Income taxes

    2        47        62        47        16        158        265   
                                                       

Earnings

  $ 3      $ 98      $ 92      $ 82      $ 25      $ 275      $ 435   
                                                       

AVERAGE BALANCE SHEET

             

Portfolio loans

  $ 2,667      $ 2,572      $ 2,540      $ 2,820      $ 2,479      $ 2,649      $ 1,957   

Loans held for sale

    1,731        1,427        1,148        974        1,333        1,322        2,204   

Mortgage servicing rights (MSR)

    863        863        1,084        1,264        1,236        1,017        1,297   

Other assets

    5,008        4,302        3,914        3,797        3,761        4,259        2,962   
                                                       

Total assets

  $ 10,269      $ 9,164      $ 8,686      $ 8,855      $ 8,809      $ 9,247      $ 8,420   
                                                       

Deposits

  $ 2,089      $ 2,108      $ 3,088      $ 3,602      $ 3,628      $ 2,716      $ 4,135   

Borrowings and other liabilities

    3,444        2,740        2,817        2,279        3,110        2,823        2,924   

Capital

    842        880        1,309        1,781        1,471        1,200        1,359   
                                                       

Total liabilities and equity

  $ 6,375      $ 5,728      $ 7,214      $ 7,662      $ 8,209      $ 6,739      $ 8,418   
                                                       

PERFORMANCE RATIOS

             

Return on average capital

    1     44     28     19     7     23     32

Return on average assets

    .12        4.24        4.25        3.76        1.13        2.97        5.17   

Noninterest income to total revenue

    73        81        71        66        60        73        75   

Efficiency

    94        42        43        52        81        56        48   
                                                       

OTHER INFORMATION

             

Servicing portfolio for others (in billions) (b)

  $ 125      $ 131      $ 137      $ 141      $ 145       

Fixed rate

    89     89     89     89     88    

Adjustable rate/balloon

    11     11     11     11     12    

Weighted average interest rate

    5.62     5.69     5.74     5.79     5.82    

MSR capitalized value (in billions)

  $ 1.0      $ .8      $ 1.0      $ 1.3      $ 1.3       

MSR capitalization value (in basis points)

    82        60        71        90        91       

Weighted average servicing fee (in basis points)

    30        30        30        30        30       

Loan origination volume (in billions)

  $ 3.5      $ 2.7      $ 2.3      $ 2.0      $ 2.3      $ 10.5      $ 19.1   

Percentage of originations represented by:

             

Agency and government programs

    99     99     99     98     96     99     97

Refinance volume

    83     76     58     73     59     74     72

Total nonperforming assets (b)

  $ 349      $ 327      $ 326      $ 418      $ 370       

Impaired loans (b) (c)

  $ 161      $ 173      $ 168      $ 298      $ 369       
                                                       

 

(a) See note (a) on page 13.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to acquisitions.

 

Page 18


THE PNC FINANCIAL SERVICES GROUP, INC.

Distressed Assets Portfolio (Unaudited) (a)

 

     Three months ended     Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

              

Net interest income

   $ 253      $ 279      $ 347      $ 338      $ 218      $ 1,217      $ 1,079   

Noninterest income

     (55     (35     (1     (1     3        (92     74   
                                                        

Total revenue

     198        244        346        337        221        1,125        1,153   

Provision for credit losses

     231        176        404        165        314        976        771   

Noninterest expense

     81        46        65        58        49        250        246   
                                                        

Pretax earnings (loss)

     (114     22        (123     114        (142     (101     136   

Income taxes (benefit)

     (42     5        (42     42        (54     (37     52   
                                                        

Earnings (loss)

   $ (72   $ 17      $ (81   $ 72      $ (88   $ (64   $ 84   
                                                        

AVERAGE BALANCE SHEET

              

Commercial lending:

              

Commercial/Commercial real estate

   $ 1,840      $ 2,088      $ 2,442      $ 2,599      $ 2,812      $ 2,240      $ 3,384   

Equipment lease financing

     759        753        807        803        800        781        818   
                                                        

Total commercial lending

     2,599        2,841        3,249        3,402        3,612        3,021        4,202   
                                                        

Consumer lending:

              

Consumer

     5,903        6,144        6,350        6,573        6,698        6,240        7,101   

Residential real estate

     6,845        7,205        8,120        8,190        8,574        7,585        9,813   
                                                        

Total consumer lending

     12,748        13,349        14,470        14,763        15,272        13,825        16,914   
                                                        

Total loans

     15,347        16,190        17,719        18,165        18,884        16,846        21,116   

Other assets

     15        555        797        1,342        1,633        671        1,728   
                                                        

Total assets

   $ 15,362      $ 16,745      $ 18,516      $ 19,507      $ 20,517      $ 17,517      $ 22,844   
                                                        

Deposits

     $ 2      $ 180      $ 85      $ 29      $ 64      $ 39   

Other liabilities

   $ 109        102        77        55        70        90        92   

Capital

     1,231        1,187        1,514        1,353        1,568        1,321        1,574   
                                                        

Total liabilities and equity

   $ 1,340      $ 1,291      $ 1,771      $ 1,493      $ 1,667      $ 1,475      $ 1,705   
                                                        

PERFORMANCE RATIOS

              

Return on average capital

     (23 )%      6     (21 )%      22     (22 )%      (5 )%      5

Return on average assets

     (1.86     .40        (1.75     1.50        (1.70     (.37     .37   
                                                        

OTHER INFORMATION

              

Nonperforming assets (b)

   $ 1,243      $ 1,218      $ 1,436      $ 1,777      $ 1,787       

Impaired loans (b) (c)

   $ 5,879      $ 6,001      $ 6,867      $ 7,124      $ 7,577       

Net charge-offs

   $ 183      $ 107      $ 276      $ 111      $ 121      $ 677      $ 544   

Annualized net charge-off ratio

     4.73     2.62     6.25     2.48     2.54     4.02     2.58

LOANS (in billions) (b)

              

Commercial lending:

              

Commercial / Commercial real estate

   $ 1,684      $ 1,911      $ 2,282      $ 2,641      $ 2,561       

Equipment lease financing

     764        757        757        806        805       
                                            

Total commercial lending

     2,448        2,668        3,039        3,447        3,366       
                                            

Consumer lending:

              

Consumer

     5,769        6,011        6,323        6,511        6,673       

Residential real estate

     6,564        7,014        7,911        8,105        8,467       
                                            

Total consumer lending

     12,333        13,025        14,234        14,616        15,140       
                                            

Total loans

   $ 14,781      $ 15,693      $ 17,273      $ 18,063      $ 18,506       
                                                        

 

(a) See note (a) on page 13.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to acquisitions.

 

Page 19


THE PNC FINANCIAL SERVICES GROUP, INC.

Glossary of Terms

Accretable net interest (Accretable yield) - 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.

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 from portfolio holdings 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.

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 changes in 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; 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.

Efficiency - Noninterest expense divided by total revenue.

 

Page 20


THE PNC FINANCIAL SERVICES GROUP, INC.

 

Fair value - The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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.

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

Nonperforming loans - Loans for which we do not accrue interest income. 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. Nonperforming loans do not include purchased impaired loans as we are currently accreting interest income over the expected life of the loans.

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

 

Page 21


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 from continuing operations - Total revenue less noninterest expense, both from continuing operations.

Provision-adjusted net interest margin - Net interest margin less the ratio of the annualized provision for credit losses to average interest-earning assets.

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 securities and 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 and redemptions, 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 interest-bearing money market deposits, interest-bearing demand deposits, and 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.

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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