Exhibit 99.1

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2011

(UNAUDITED)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2011

(UNAUDITED)

 

     Page  

Consolidated Results:

  

Income Statement

     1   

Balance Sheet

     2   

Capital Ratios

     2   

Average Balance Sheet

     3-4   

Net Interest Margin and Selected Income Statement Information

     5   

Loans, Loans Held for Sale and Net Unfunded Commitments

     6   

Allowances for Credit Losses

     7   

Purchase Accounting Accretion

     8   

Nonperforming Assets and Troubled Debt Restructurings

     9-10   

Accruing Loans Past Due

     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 April 21, 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.

QUARTERLY COMMON STOCK DIVIDEND INCREASE

In April 2011, the PNC Board of Directors declared a quarterly cash dividend on common stock of 35 cents per share, an increase of 25 cents per share, or 250%, from the prior quarterly dividend of 10 cents per share. The increased dividend is payable May 5, 2011 to shareholders of record at the close of business on April 18, 2011.

BUSINESS SEGMENT CAPITAL ALLOCATIONS

Effective January 1, 2011, we revised certain capital allocations among our business segments including, as appropriate, amounts for prior periods included in this Financial Supplement.

Capital is intended to cover unexpected losses and is assigned to the banking and servicing businesses using PNC’s risk-based economic capital model. Prior to January 1, 2011, we assigned capital equal to 6% of funds to the Retail Banking business segment to reflect the capital required for well-capitalized domestic banks and to approximate market comparables for this business. Beginning January 1, 2011, this 6% allocation methodology was replaced with an economic capital allocation methodology. We have also made other capital modeling updates involving technical enhancements to result in more precise capital calculations.

In addition, effective January 1, 2011, we began allocating additional capital to our business segments for goodwill using a methodology consistent with how goodwill is allocated to the business segments.

PNC’s total capital did not change as a result of these adjustments for any periods presented. In addition, the reallocation of goodwill had no impact on PNC’s BlackRock reportable business segment reflecting our equity interest in BlackRock, Inc.


THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Income Statement (Unaudited)

 

     Three months ended  

In millions, except per share data

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Interest Income

          

Loans

   $ 1,884      $ 1,962      $ 1,996      $ 2,158      $ 2,160   

Investment securities

     578        602        592        572        623   

Other

     121        107        113        143        122   
                                        

Total interest income

     2,583        2,671        2,701        2,873        2,905   
                                        

Interest Expense

          

Deposits

     182        205        233        244        281   

Borrowed funds

     225        265        253        194        245   
                                        

Total interest expense

     407        470        486        438        526   
                                        

Net interest income

     2,176        2,201        2,215        2,435        2,379   
                                        

Noninterest Income

          

Asset management

     263        303        249        243        259   

Consumer services

     311        322        328        315        296   

Corporate services

     217        370        183        261        268   

Residential mortgage

     195        157        216        179        147   

Service charges on deposits

     123        132        164        209        200   

Net gains on sales of securities

     37        68        121        147        90   

Net other-than-temporary impairments

     (34     (44     (71     (94     (116

Gain on BlackRock transaction (a)

       160         

Other

     343        234        193        217        240   
                                        

Total noninterest income

     1,455        1,702        1,383        1,477        1,384   
                                        

Total revenue

     3,631        3,903        3,598        3,912        3,763   

Provision For Credit Losses

     421        442        486        823        751   

Noninterest Expense

          

Personnel

     989        1,032        959        959        956   

Occupancy

     193        194        177        172        187   

Equipment

     167        176        152        168        172   

Marketing

     40        70        81        65        50   

Other

     681        868        789        638        748   
                                        

Total noninterest expense

     2,070        2,340        2,158        2,002        2,113   
                                        

Income from continuing operations before income taxes and noncontrolling interests

     1,140        1,121        954        1,087        899   

Income taxes

     308        301        179        306        251   
                                        

Income from continuing operations before noncontrolling interests

     832        820        775        781        648   

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

         328        22        23   
                                        

Net income

     832        820        1,103        803        671   
                                        

Less: Net income (loss) attributable to noncontrolling interests

     (5     (3     2        (9     (5

Preferred stock dividends

     4        24        4        25        93   

Preferred stock discount accretion and redemptions

       1        3        1        250   
                                        

Net income attributable to common shareholders

   $ 833      $ 798      $ 1,094      $ 786      $ 333   
                                        

Basic Earnings Per Common Share

          

Continuing operations

   $ 1.59      $ 1.52      $ 1.45      $ 1.45      $ .62   

Discontinued operations

         .63        .04        .05   
                                        

Net income

   $ 1.59      $ 1.52      $ 2.08      $ 1.49      $ .67   

Diluted Earnings Per Common Share

          

Continuing operations

   $ 1.57      $ 1.50      $ 1.45      $ 1.43      $ .61   

Discontinued operations

         .62        .04        .05   
                                        

Net income

   $ 1.57      $ 1.50      $ 2.07      $ 1.47      $ .66   

Average Common Shares Outstanding

          

Basic

     524        524        523        524        498   

Diluted

     526        526        526        527        500   
                                        

Efficiency

     57     60     60     51     56

Noninterest income to total revenue

     40     44     38     38     37

Effective tax rate (c)

     27.0     26.9     18.8     28.2     27.9
                                        

 

(a) Amount represents 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 common stock offering. Our 2010 Annual Report on Form 10-K (2010 Form 10-K) includes additional information regarding this transaction.
(b) Includes results of operations for PNC Global Investment Servicing Inc. (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. Our 2010 Form 10-K includes additional information regarding our sale of GIS.
(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.

 

Page 1


THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Assets

          

Cash and due from banks (a)

   $ 3,389      $ 3,297      $ 3,724      $ 3,558      $ 3,563   

Federal funds sold and resale agreements (b)

     2,240        3,704        2,094        2,209        1,367   

Trading securities

     2,254        1,826        955        882        1,595   

Interest-earning deposits with banks (a)

     1,359        1,610        415        5,028        607   

Loans held for sale (b)

     2,980        3,492        3,275        2,756        2,691   

Investment securities (a)

     60,992        64,262        63,461        53,717        57,606   

Loans (a) (b)

     149,387        150,595        150,127        154,342        157,266   

Allowance for loan and lease losses (a)

     (4,759     (4,887     (5,231     (5,336     (5,319
                                        

Net loans

     144,628        145,708        144,896        149,006        151,947   

Goodwill

     8,146        8,149        8,166        9,410        9,425   

Other intangible assets

     2,618        2,604        2,352        2,728        3,289   

Equity investments (a)

     9,595        9,220        10,137        10,159        10,256   

Other (a) (b)

     21,177        20,412        20,658        22,242        23,050   
                                        

Total assets

   $ 259,378      $ 264,284      $ 260,133      $ 261,695      $ 265,396   
                                        

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 48,707      $ 50,019      $ 46,065      $ 44,312      $ 43,122   

Interest-bearing

     133,283        133,371        133,118        134,487        139,401   
                                        

Total deposits

     181,990        183,390        179,183        178,799        182,523   

Borrowed funds

          

Federal funds purchased and repurchase agreements

     4,079        4,144        4,661        3,690        5,511   

Federal Home Loan Bank borrowings

     5,020        6,043        7,106        8,119        8,700   

Bank notes and senior debt

     11,324        12,904        13,508        12,617        12,638   

Subordinated debt

     9,310        9,842        10,023        10,184        10,001   

Other (a)

     5,263        6,555        4,465        5,817        5,611   
                                        

Total borrowed funds

     34,996        39,488        39,763        40,427        42,461   

Allowance for unfunded loan commitments and letters of credit

     204        188        193        218        252   

Accrued expenses (a)

     3,078        3,188        3,134        2,757        2,939   

Other (a)

     5,393        5,192        5,194        8,504        7,787   
                                        

Total liabilities

     225,661        231,446        227,467        230,705        235,962   
                                        

Equity

          

Preferred stock (c)

          

Common stock - $5 par value
Authorized 800 shares, issued 536, 536, 536, 535, and 535 shares

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

Capital surplus - preferred stock

     647        647        646        646        645   

Capital surplus - common stock and other

     12,056        12,057        12,008        11,979        11,945   

Retained earnings

     16,640        15,859        15,114        14,073        13,340   

Accumulated other comprehensive income (loss)

     (309     (431     146        (442     (1,288

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

     (584     (572     (552     (557     (500
                                        

Total shareholders’ equity

     31,132        30,242        30,042        28,377        26,818   

Noncontrolling interests

     2,585        2,596        2,624        2,613        2,616   
                                        

Total equity

     33,717        32,838        32,666        30,990        29,434   
                                        

Total liabilities and equity

   $ 259,378      $ 264,284      $ 260,133      $ 261,695      $ 265,396   
                                        

Capital Ratios

          

Tier 1 common (d)

     10.3     9.8     9.6     8.3     7.9

Tier 1 risk-based (d)

     12.6        12.1        11.9        10.7        10.3   

Total risk-based (d)

     16.2        15.6        15.6        14.3        13.9   

Leverage (d)

     10.6        10.2        9.9        9.1        8.8   

Common shareholders’ equity to assets

     11.8        11.2        11.3        10.6        10.0   
                                        

 

(a) Amounts include consolidated variable interest entities. Our 2010 Form 10-K included, and first quarter 2011 Form 10-Q 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 2010 Form 10-K included, and first quarter 2011 Form 10-Q will include, additional information regarding these items.
(c) Par value less than $.5 million at each date.
(d) The ratio as of March 31, 2011 is estimated.

 

Page 2


THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited)

 

     Three months ended  

In millions

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Assets

          

Interest-earning assets:

          

Investment securities

          

Securities available for sale

          

Residential mortgage-backed

          

Agency

   $ 29,134      $ 28,457      $ 22,916      $ 20,382      $ 21,926   

Non-agency

     8,057        8,495        8,917        9,358        10,213   

Commercial mortgage-backed

     3,298        3,325        3,100        2,962        5,357   

Asset-backed

     2,757        2,824        2,436        1,695        1,992   

US Treasury and government agencies

     5,682        6,250        7,758        8,708        7,493   

State and municipal

     2,081        1,732        1,323        1,356        1,365   

Other debt

     3,994        3,618        3,092        2,526        1,874   

Corporate stocks and other

     443        418        472        446        457   
                                        

Total securities available for sale

     55,446        55,119        50,014        47,433        50,677   

Securities held to maturity

          

Commercial mortgage-backed

     4,239        4,311        4,130        4,264        2,110   

Asset-backed

     2,463        2,849        3,435        3,697        3,665   

Other

     9        10        9        21        160   
                                        

Total securities held to maturity

     6,711        7,170        7,574        7,982        5,935   
                                        

Total investment securities

     62,157        62,289        57,588        55,415        56,612   

Loans

          

Commercial

     56,300        54,065        53,502        54,349        55,464   

Commercial real estate

     17,545        18,555        19,847        20,963        22,423   

Equipment lease financing

     6,307        6,375        6,514        6,080        6,131   

Consumer

     54,460        54,741        55,036        54,939        55,349   

Residential real estate

     15,518        16,145        16,766        18,576        19,397   
                                        

Total loans

     150,130        149,881        151,665        154,907        158,764   

Loans held for sale

     3,193        3,331        3,021        2,646        2,476   

Federal funds sold and resale agreements

     2,813        2,130        1,602        2,193        1,669   

Other

     5,802        6,164        9,801        9,419        7,471   
                                        

Total interest-earning assets

     224,095        223,795        223,677        224,580        226,992   

Noninterest-earning assets:

          

Allowance for loan and lease losses

     (4,835     (5,039     (5,290     (5,113     (5,136

Cash and due from banks

     3,393        3,516        3,436        3,595        3,735   

Other

     39,901        41,286        42,756        41,304        41,557   
                                        

Total assets

   $ 262,554      $ 263,558      $ 264,579      $ 264,366      $ 267,148   
                                        

 

Page 3


THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

     Three months ended  

In millions

   March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Liabilities and Equity

              

Interest-bearing liabilities:

              

Interest-bearing deposits

              

Money market

   $ 58,556       $ 58,436       $ 58,016       $ 58,679       $ 57,923   

Demand

     26,313         25,388         25,078         24,953         24,672   

Savings

     7,656         7,221         7,092         7,075         6,623   

Retail certificates of deposit

     36,509         39,201         41,724         43,745         47,162   

Other time

     515         598         740         881         1,039   

Time deposits in foreign offices

     3,452         2,799         2,650         2,661         3,034   
                                            

Total interest-bearing deposits

     133,001         133,643         135,300         137,994         140,453   

Borrowed funds

              

Federal funds purchased and repurchase agreements

     6,376         4,552         4,179         4,159         4,344   

Federal Home Loan Bank borrowings

     5,088         6,168         7,680         8,575         9,603   

Bank notes and senior debt

     11,745         13,073         12,799         12,666         12,616   

Subordinated debt

     9,353         9,490         9,569         9,764         9,769   

Other

     5,847         4,947         4,886         6,005         5,934   
                                            

Total borrowed funds

     38,409         38,230         39,113         41,169         42,266   
                                            

Total interest-bearing liabilities

     171,410         171,873         174,413         179,163         182,719   

Noninterest-bearing liabilities and equity:

              

Noninterest-bearing deposits

     47,755         47,998         45,306         44,308         42,631   

Allowance for unfunded loan commitments and letters of credit

     188         193         218         251         295   

Accrued expenses and other liabilities

     9,771         10,506         12,687         10,446         10,401   

Equity

     33,430         32,988         31,955         30,198         31,102   
                                            

Total liabilities and equity

   $ 262,554       $ 263,558       $ 264,579       $ 264,366       $ 267,148   
                                            

Supplemental Average Balance Sheet Information (Unaudited)

  

Deposits and Common Shareholders’ Equity

              

Interest-bearing deposits

   $ 133,001       $ 133,643       $ 135,300       $ 137,994       $ 140,453   

Noninterest-bearing deposits

     47,755         47,998         45,306         44,308         42,631   
                                            

Total deposits

   $ 180,756       $ 181,641       $ 180,606       $ 182,302       $ 183,084   

Transaction deposits

   $ 132,624       $ 131,822       $ 128,400       $ 127,940       $ 125,226   

Common shareholders’ equity

   $ 30,193       $ 29,729       $ 28,755       $ 27,054       $ 24,764   
                                            

 

Page 4


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Net Interest Margin (Unaudited) (a)

 

     Three months ended  
     March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Average yields/rates

          

Yield on interest-earning assets

          

Loans

     5.09     5.21     5.24     5.58     5.50

Investment securities

     3.76        3.91        4.15        4.17        4.44   

Other

     4.16        3.61        3.15        3.98        4.26   

Total yield on interest-earning assets

     4.67        4.76        4.82        5.13        5.17   

Rate on interest-bearing liabilities

          

Deposits

     .55        .61        .68        .71        .81   

Borrowed funds

     2.35        2.74        2.56        1.88        2.33   

Total rate on interest-bearing liabilities

     .95        1.08        1.10        .98        1.16   
                                        

Interest rate spread

     3.72        3.68        3.72        4.15        4.01   

Impact of noninterest-bearing sources

     .22        .25        .24        .20        .23   
                                        

Net interest margin (b)

     3.94     3.93     3.96     4.35     4.24
                                        

 

(a) Calculated as annualized taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all earning assets in calculating net interest margins, in this table we use net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended March 31, 2011, December 31, 2010, September 30, 2010, June 30, 2010, and March 31, 2010 were $24 million, $22 million, $22 million, $19 million, and $18 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  
     March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Net interest margin, as reported

     3.94     3.93     3.96     4.35     4.24

Less: provision adjustment

     .76        .78        .86        1.47        1.34   
                                        

Provision-adjusted net interest margin

     3.18     3.15     3.10     2.88     2.90
                                        

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

Selected Consolidated Income Statement Information (Unaudited)

 

     Three months ended  

In millions

   March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Income from Continuing Operations before Income Taxes

              

Integration costs

      $ 78       $ 96       $ 100       $ 113   

Income from Discontinued Operations, Net of Income Taxes

              

Gain on sale of GIS

         $ 328         

Net Income Attributable to Common Shareholders

              

TARP preferred stock accelerated discount accretion (c)

               $ 250   

 

(c) Represents accelerated accretion of the remaining issuance discount on redemption of the TARP preferred stock in February 2010. This resulted in a $.50 reduction to diluted earnings per share for the first quarter of 2010.

 

Page 5


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Loans (Unaudited)

 

In millions

   March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Commercial

              

Retail/wholesale

   $ 10,665       $ 9,901       $ 9,752       $ 9,576       $ 9,557   

Manufacturing

     9,805         9,334         9,519         9,728         9,863   

Service providers

     8,690         8,866         8,747         8,289         8,528   

Real estate related (a)

     8,040         7,500         7,398         7,269         7,379   

Financial services

     5,034         4,573         3,773         4,302         4,654   

Health care

     3,839         3,481         3,169         3,099         2,998   

Other

     10,529         11,522         10,830         11,969         11,724   
                                            

Total commercial

     56,602         55,177         53,188         54,232         54,703   
                                            

Commercial real estate

              

Real estate projects

     11,581         12,211         13,021         13,914         14,535   

Commercial mortgage

     5,552         5,723         6,070         6,450         7,415   
                                            

Total commercial real estate

     17,133         17,934         19,091         20,364         21,950   
                                            

Equipment lease financing

     6,215         6,393         6,408         6,630         6,111   
                                            

TOTAL COMMERCIAL LENDING

     79,950         79,504         78,687         81,226         82,764   
                                            

Consumer

              

Home equity

              

Lines of credit

     23,001         23,473         23,770         23,901         24,040   

Installment

     10,655         10,753         10,815         11,060         11,390   

Residential real estate

              

Residential mortgage

     14,602         15,292         15,708         16,618         17,599   

Residential construction

     731         707         776         1,219         1,669   

Credit card

     3,707         3,920         3,883         3,967         4,012   

Other consumer

              

Education

     9,041         9,196         8,819         8,867         8,320   

Automobile

     3,156         2,983         2,863         2,697         2,206   

Other

     4,544         4,767         4,806         4,787         5,266   
                                            

TOTAL CONSUMER LENDING

     69,437         71,091         71,440         73,116         74,502   
                                            

Total (b)

   $ 149,387       $ 150,595       $ 150,127       $ 154,342       $ 157,266   
                                            

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

  

           

(b) Includes purchased impaired loans:

   $ 7,522       $ 7,780       $ 8,130       $ 9,127       $ 9,673   
Details of Loans Held for Sale (Unaudited)               

In millions

   March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Commercial mortgage

   $ 1,047       $ 1,207       $ 1,381       $ 1,239       $ 1,316   

Residential mortgage

     1,840         1,890         1,786         1,336         1,158   

Other

     93         395         108         181         217   
                                            

Total

   $ 2,980       $ 3,492       $ 3,275       $ 2,756       $ 2,691   
                                            
Net Unfunded Commitments (Unaudited)               

In millions

   March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Net unfunded commitments

   $ 96,781       $ 95,805       $ 97,147       $ 95,775       $ 96,363   
                                            

 

Page 6


THE PNC FINANCIAL SERVICES GROUP, INC.

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit (Unaudited)

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Beginning balance

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

Charge-offs:

          

Commercial

     (179     (331     (310     (313     (273

Commercial real estate

     (158     (181     (102     (149     (238

Equipment lease financing

     (14     (29     (12     (43     (36

Residential real estate

     (58     (124     (47     (197     (38

Home equity

     (140     (124     (160     (131     (73

Credit card

     (74     (73     (67     (95     (100

Other consumer

     (51     (62     (58     (57     (69
                                        

Total charge-offs

     (674     (924     (756     (985     (827

Recoveries:

          

Commercial

     80        71        80        78        65   

Commercial real estate

     14        20        14        10        33   

Equipment lease financing

     9        18        13        13        12   

Residential real estate

     1        (1     7        13     

Home equity

     10        9        10        12        10   

Credit card

     6        5        5        5        5   

Other consumer

     21        11        13        14        11   
                                        

Total recoveries

     141        133        142        145        136   

Net charge-offs (recoveries):

          

Commercial

     (99     (260     (230     (235     (208

Commercial real estate

     (144     (161     (88     (139     (205

Equipment lease financing

     (5     (11     1        (30     (24

Residential real estate

     (57     (125     (40     (184     (38

Home equity

     (130     (115     (150     (119     (63

Credit card

     (68     (68     (62     (90     (95

Other consumer

     (30     (51     (45     (43     (58
                                        

Total net charge-offs

     (533     (791     (614     (840     (691

Provision for credit losses

     421        442        486        823        751   

Adoption of ASU 2009-17, Consolidations

             141   

Acquired allowance adjustments

         (2       2   

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

     (16     5        25        34        44   
                                        

Ending balance

   $ 4,759      $ 4,887      $ 5,231      $ 5,336      $ 5,319   
                                        

Supplemental Information

          

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

     1.44     2.09     1.61     2.18     1.77

Allowance for loan and lease losses to total loans

     3.19        3.25        3.48        3.46        3.38   

Commercial lending net charge-offs

   $ (248   $ (432   $ (317   $ (404   $ (437

Consumer lending net charge-offs

     (285     (359     (297     (436     (254
                                        

Total net charge-offs

   $ (533   $ (791   $ (614   $ (840   $ (691

Net charge-offs to average loans

          

Commercial lending

     1.25     2.17     1.57     1.99     2.11

Consumer lending

     1.65        2.01        1.64        2.38        1.38   
                                        
Change in Allowance for Unfunded Loan Commitments and Letters of Credit         

Three months ended - in millions

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Beginning balance

   $ 188      $ 193      $ 218      $ 252      $ 296   

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

     16        (5     (25     (34     (44
                                        

Ending balance

   $ 204      $ 188      $ 193      $ 218      $ 252   
                                        

 

Page 7


THE PNC FINANCIAL SERVICES GROUP, INC.

Purchase Accounting Accretion and Accretable Interest (Unaudited)

VALUATION OF PURCHASED IMPAIRED LOANS

 

     March 31, 2011     December 31, 2010  

Dollars in billions

   Balance     Net
Investment
    Balance     Net
Investment
 

Commercial and commercial real estate loans:

        

Unpaid principal balance

   $ 1.6        $ 1.8     

Purchased impaired mark

     (.3       (.4  
                    

Recorded investment

     1.3          1.4     

Allowance for loan losses

     (.3       (.3  
                    

Net investment

     1.0        63     1.1        61

Consumer and residential mortgage loans:

        

Unpaid principal balance

     7.6          7.9     

Purchased impaired mark

     (1.4       (1.5  
                    

Recorded investment

     6.2          6.4     

Allowance for loan losses

     (.6       (.6  
                    

Net investment

     5.6        74     5.8        73
                    

Total purchased impaired loans:

        

Unpaid principal balance

     9.2          9.7     

Purchased impaired mark

     (1.7       (1.9  
                    

Recorded investment

     7.5          7.8     

Allowance for loan losses

     (.9 ) (a)        (.9  
                    

Net investment

   $ 6.6        72   $ 6.9        71
                                

PURCHASE ACCOUNTING ACCRETION

 

     Three months ended  

In millions

   March 31
2011
    December 31
2010
    March 31
2010
 

Non-impaired loans

   $ 68      $ 73      $ 112   

Impaired loans

     160        175        265   

Reversal of contractual interest on impaired loans

     (106     (121     (134
                        

Net impaired loans

     54        54        131   

Securities

     9        15        11   

Deposits

     100        112        167   

Borrowings

     (31     (43     (56
                        

Total

   $ 200      $ 211      $ 365   
                        

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

   $ 81      $ 133      $ 75   

REMAINING PURCHASE ACCOUNTING ACCRETION

 

In billions

   March 31
2011
    December 31
2010
 

Non-impaired loans

   $ 1.1      $ 1.2   

Impaired loans

     2.2        2.2   
                

Total loans (gross)

     3.3        3.4   

Securities

     .2        .1   

Deposits

     .4        .5   

Borrowings

     (1.0     (1.1
                

Total

   $ 2.9      $ 2.9   
                

ACCRETABLE NET INTEREST - PURCHASED IMPAIRED LOANS

 

In billions

        

In billions

      

January 1, 2011

   $ 2.2     

January 1, 2009

   $ 3.7   

Accretion

     (.2  

Accretion

     (2.0

Cash recoveries

     (.1  

Cash recoveries

     (.8 ) (a) 

Net reclass to accretable difference and other activity

     .3     

Net reclass to accretable difference and other activity

     1.3   (a) 
                   

March 31, 2011

   $ 2.2     

March 31, 2011

   $ 2.2   
                   

 

(a) Impairment reserves of $.9 billion at March 31, 2011 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 $.8 billion and the net reclassification to accretable net interest, to be recognized over time, of $1.3 billion.

 

Page 8


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Nonperforming loans, including TDRs (a)

          

Commercial

          

Retail/wholesale

   $ 180      $ 197      $ 219      $ 242      $ 246   

Manufacturing

     213        250        266        312        341   

Real estate related (b)

     277        263        338        405        460   

Financial services

     27        16        36        60        77   

Health care

     46        50        59        55        48   

Other industries

     460        477        612        619        661   
                                        

Total commercial

     1,203        1,253        1,530        1,693        1,833   
                                        

Commercial real estate

          

Real estate projects

     1,468        1,422        1,562        1,661        1,797   

Commercial mortgage

     416        413        427        420        419   
                                        

Total commercial real estate

     1,884        1,835        1,989        2,081        2,216   
                                        

Equipment lease financing

     41        77        104        114        123   
                                        

TOTAL COMMERCIAL LENDING

     3,128        3,165        3,623        3,888        4,172   
                                        

Consumer (c)

          

Home equity

     464        448        406        405        337   

Residential real estate

          

Residential mortgage

     726        764        727        713        968   

Residential construction

     46        54        42        79        249   

Other consumer

     29        35        38        25        35   
                                        

TOTAL CONSUMER LENDING

     1,265        1,301        1,213        1,222        1,589   
                                        

Total nonperforming loans (d)

     4,393        4,466        4,836        5,110        5,761   
                                        

OREO and foreclosed assets

          

Other real estate owned (OREO)

     802        767        736        748        734   

Foreclosed and other assets

     63        68        97        46        45   
                                        

OREO and foreclosed assets

     865        835        833        794        779   
                                        

Total nonperforming assets

   $ 5,258      $ 5,301      $ 5,669      $ 5,904      $ 6,540   
                                        

Nonperforming loans to total loans

     2.94     2.97     3.22     3.31     3.66

Nonperforming assets to total loans, OREO and foreclosed assets

     3.50        3.50        3.76        3.81        4.14   

Nonperforming assets to total assets

     2.03        2.01        2.18        2.26        2.46   

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

     108        109        108        104        92   
                                        

 

(a) See analysis of troubled debt restructurings (TDRs) on page 10.
(b) Includes loans related to customers in the real estate and construction industries.
(c) Excludes most consumer loans and lines of credit, not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.
(d) Nonperforming loans do not include purchased impaired loans or loans held for sale.
(e) The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans. See page 8, note (a).

 

Page 9


THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets and Troubled Debt Restructurings (Unaudited)

Change in Nonperforming Assets

 

In millions

   January 1, 2011 -
March 31, 2011
    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

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

Transferred in

     1,143        1,125        1,369        1,011        1,774   

Charge-offs/valuation adjustments

     (390     (467     (452     (532     (620

Principal activity including payoffs

     (380     (377     (365     (296     (278

Asset sales and transfers to held for sale

     (178     (410     (351     (420     (265

Returned to performing - TDRs

     (104     (118     (96     (112     (217

Returned to performing - Other

     (134     (121     (340     (287     (170
                                        

Ending balance

   $ 5,258      $ 5,301      $ 5,669      $ 5,904      $ 6,540   
                                        

Largest Individual Nonperforming Assets at March 31, 2011 (a)

 

In millions

Ranking

   Outstandings     

Industry

1

   $ 33       Accommodation & Food Svcs

2

     25       Construction

3

     24       Real Estate Rental & Leasing

4

     23       Real Estate Rental & Leasing

5

     21       Real Estate Rental & Leasing

6

     21       Real Estate Rental & Leasing

7

     20       Accommodation & Food Svcs

8

     20       Real Estate Rental & Leasing

9

     19       Real Estate Rental & Leasing

10

     18       Real Estate Rental & Leasing
           

Total

   $ 224      
           

As a percent of total nonperforming assets 4%

 

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

Troubled Debt Restructurings by Type

 

In millions

   March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Commercial

   $ 260       $ 236       $ 108       $ 54       $ 33   

Consumer

     1,575         1,422         1,226         1,065         848   
                                            

Total

   $ 1,835       $ 1,658       $ 1,334       $ 1,119       $ 881   
                                            

Nonperforming

     882         784         595         500         385   

Accrual (a)

     639         543         424         329         217   

Credit card (b)

     314         331         315         290         279   
                                            

Total

   $ 1,835       $ 1,658       $ 1,334       $ 1,119       $ 881   
                                            

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. Purchased impaired loans are excluded from TDRs.

 

(a) Accruing loans have demonstrated a period of at least six months of performance under the modified terms and are excluded from nonperforming loans.

 

(b) Credit cards and certain small business and consumer credit agreements whose terms have been modified 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.

 

Page 10


THE PNC FINANCIAL SERVICES GROUP, INC.

Accruing Loans Past Due (Unaudited)

Accruing Loans Past Due 30 to 59 Days (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

   Mar. 31
2011
     Dec. 31
2010
     Mar. 31
2011
    Dec. 31
2010
 

Commercial

   $ 208       $ 251         .37     .45

Commercial real estate

     315         128         1.84        .71   

Equipment lease financing

     72         37         1.16        .58   

Residential real estate

     205         226         1.34        1.41   

Home equity

     146         159         .43        .47   

Credit card

     41         46         1.11        1.17   

Other consumer

     60         95         .36        .56   
                      

Total

   $ 1,047       $ 942         .70        .62   
                                  

Accruing Loans Past Due 60 to 89 Days (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

   Mar. 31
2011
     Dec. 31
2010
     Mar. 31
2011
    Dec. 31
2010
 

Commercial

   $ 56       $ 92         .10     .17

Commercial real estate

     65         62         .38        .35   

Equipment lease financing

     5         2         .08        .03   

Residential real estate

     91         107         .59        .67   

Home equity

     96         91         .29        .26   

Credit card

     25         32         .67        .82   

Other consumer

     25         32         .15        .19   
                      

Total

   $ 363       $ 418         .24        .28   
                                  

Accruing Loans Past Due 90 Days or More (a)

 

     Amount      Percent of Outstandings  

Dollars in millions

   Mar. 31
2011
     Dec. 31
2010
     Mar. 31
2011
    Dec. 31
2010
 

Commercial

   $ 49       $ 59         .09     .11

Commercial real estate

     6         43         .04        .24   

Equipment lease financing

     —           1         —          .02   

Residential real estate

     174         160         1.13        1.00   

Home equity

     165         174         .49        .51   

Credit card

     65         77         1.75        1.96   

Other consumer

     27         28         .16        .16   
                      

Total

   $ 486       $ 542         .33        .36   
                                  

 

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

 

Page 11


THE PNC FINANCIAL SERVICES GROUP, INC.

Business Segment Descriptions (Unaudited)

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

Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and services to mid-sized corporations, government and not-for-profit entities, and selectively to large corporations. Lending products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting, and global trade services. Capital markets-related products and services include foreign exchange, derivatives, loan syndications, mergers and acquisitions advisory and related services to middle-market companies, our multi-seller conduit, securities underwriting, and securities sales and trading. Corporate & Institutional Banking also provides commercial loan servicing, and real estate advisory and technology solutions for the commercial real estate finance industry. Corporate & Institutional Banking provides products and services generally within our primary geographic markets, with certain products and services offered nationally and 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, unions, municipalities, non-profits, foundations and 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 secondary mortgage conduits Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal Home Loan Banks and third-party investors, or are securitized and issued under the Government National Mortgage Association (GNMA) 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 sold to 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. We obtained the majority of these loans through acquisitions of other companies.

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 March 31, 2011, our economic interest in BlackRock was 20%.

 

Page 12


THE PNC FINANCIAL SERVICES GROUP, INC.

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

 

     Three months ended  

In millions

Income (Loss)

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

Retail Banking

   $ (18   $ 44      $ (4   $ 80      $ 24   

Corporate & Institutional Banking

     432        543        435        448        368   

Asset Management Group

     43        28        43        27        39   

Residential Mortgage Banking

     71        3        97        91        78   

Distressed Assets Portfolio

     25        (71     20        (79     73   

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

     279        273        184        214        66   
                                        

Income from continuing operations before noncontrolling interests

   $ 832      $ 820      $ 775      $ 781      $ 648   
                                        

Revenue

                              

Retail Banking

   $ 1,247      $ 1,278      $ 1,360      $ 1,389      $ 1,359   

Corporate & Institutional Banking

     1,098        1,376        1,083        1,230        1,261   

Asset Management Group

     222        224        216        217        227   

Residential Mortgage Banking

     258        228        284        252        228   

Distressed Assets Portfolio

     245        200        248        358        330   

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

     561        597        407        466        358   
                                        

Revenue from continuing operations

   $ 3,631      $ 3,903      $ 3,598      $ 3,912      $ 3,763   
                                        

 

(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. See Business Segment Capital Allocations on the Table of Contents page of this Report. Amounts are presented on a continuing operations basis and therefore exclude the earnings and revenue attributable to GIS, which we sold effective 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 first quarter 2011 Form 10-Q will include additional information regarding BlackRock.
(c) Includes earnings and gains or losses related to PNC’s equity interest in BlackRock, integration costs, asset and liability management activities including net securities gains or losses, other than temporary impairment of debt securities and certain trading activities, equity management activities, exited businesses, differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles (GAAP), corporate overhead and intercompany eliminations.
(d) Amount for the fourth quarter of 2010 includes 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 common stock offering.

 

Period-end Employees    March 31
2011
     December 31
2010
     September 30
2010
     June 30
2010
     March 31
2010
 

Full-time employees

              

Retail Banking

     20,932         20,925         21,203         21,380         21,522   

Corporate & Institutional Banking

     3,761         3,756         3,660         3,601         3,760   

Asset Management Group

     3,042         3,001         2,975         2,964         2,999   

Residential Mortgage Banking

     3,682         3,539         3,339         3,348         3,340   

Distressed Assets Portfolio

     127         152         155         169         178   

Other

              

Operations & Technology

     8,787         8,727         8,704         8,959         9,259   

Staff Services and Other (e)

     4,855         4,717         4,584         9,069         9,055   
                                            

Total Other

     13,642         13,444         13,288         18,028         18,314   
                                            

Total full-time employees

     45,186         44,817         44,620         49,490         50,113   
                                            

Retail Banking part-time employees

     4,981         4,965         4,799         4,790         4,798   

Other part-time employees

     959         987         974         1,104         1,187   
                                            

Total part-time employees

     5,940         5,952         5,773         5,894         5,985   
                                            

Total

     51,126         50,769         50,393         55,384         56,098   
                                            

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

 

(e) Includes GIS employees totaling 4,528 at June 30, 2010 and 4,573 at March 31, 2010. We sold GIS effective July 1, 2010.

 

Page 13


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (a)

 

     Three months ended  

Dollars in millions

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

INCOME STATEMENT

          

Net interest income

   $ 818      $ 826      $ 861      $ 879      $ 869   

Noninterest income

          

Service charges on deposits

     117        125        157        204        195   

Brokerage

     53        52        53        55        53   

Consumer services

     228        239        242        223        208   

Other

     31        36        47        28        34   
                                        

Total noninterest income

     429        452        499        510        490   
                                        

Total revenue

     1,247        1,278        1,360        1,389        1,359   

Provision for credit losses

     276        157        327        280        339   

Noninterest expense

     1,001        1,048        1,039        994        975   
                                        

Pretax earnings (loss)

     (30     73        (6     115        45   

Income taxes (benefit)

     (12     29        (2     35        21   
                                        

Earnings (loss)

   $ (18   $ 44      $ (4   $ 80      $ 24   
                                        

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

          

Home equity

   $ 26,064      $ 26,189      $ 26,289      $ 26,510      $ 26,821   

Indirect auto

     2,400        2,318        2,170        2,005        1,893   

Indirect other

     1,612        1,695        1,792        1,939        2,080   

Education

     9,101        8,758        8,817        8,342        8,060   

Credit cards

     3,731        3,827        3,901        3,948        4,079   

Other

     1,823        1,840        1,805        1,776        1,793   
                                        

Total consumer

     44,731        44,627        44,774        44,520        44,726   

Commercial and commercial real estate

     10,786        10,897        11,086        11,275        11,455   

Floor plan

     1,572        1,482        1,267        1,299        1,296   

Residential mortgage

     1,287        1,389        1,528        1,683        1,801   
                                        

Total loans

     58,376        58,395        58,655        58,777        59,278   

Goodwill and other intangible assets

     5,769        5,803        5,837        5,873        5,934   

Other assets

     2,524        2,180        2,511        3,354        3,142   
                                        

Total assets

   $ 66,669      $ 66,378      $ 67,003      $ 68,004      $ 68,354   
                                        

Deposits

          

Noninterest-bearing demand

   $ 18,102      $ 17,723      $ 17,144      $ 17,240      $ 16,776   

Interest-bearing demand

     20,920        20,140        19,767        19,977        19,212   

Money market

     40,382        40,362        40,148        40,283        39,699   
                                        

Total transaction deposits

     79,404        78,225        77,059        77,500        75,687   

Savings

     7,573        7,155        7,029        7,006        6,552   

Certificates of deposit

     35,364        37,949        40,378        42,313        45,614   
                                        

Total deposits

     122,341        123,329        124,466        126,819        127,853   

Other liabilities

     1,147        1,087        1,444        1,656        1,652   

Capital

     8,048        8,323        8,582        8,538        8,310   
                                        

Total liabilities and equity

   $ 131,536      $ 132,739      $ 134,492      $ 137,013      $ 137,815   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     (1 ) %      2     —       4     1

Return on average assets

     (.11     .26        (.02     .47        .14   

Noninterest income to total revenue

     34        35        37        37        36   

Efficiency

     80        82        76        72        72   
                                        

 

(a) See note (a) on page 13.

 

Page 14


THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

OTHER INFORMATION (a)

          

Credit-related statistics:

          

Commercial nonperforming assets

   $ 301      $ 297      $ 262      $ 297      $ 324   

Consumer nonperforming assets

     409        422        400        336        276   
                                        

Total nonperforming assets

   $ 710      $ 719      $ 662      $ 633      $ 600   
                                        

Impaired loans (b)

   $ 869      $ 895      $ 939      $ 974      $ 1,013   
                                        

Commercial lending net charge-offs

   $ 67      $ 49      $ 85      $ 100      $ 96   

Credit card lending net charge-offs (c)

     68        68        63        89        96   

Consumer lending (excluding credit card) net charge-offs

     122        108        99        109        108   
                                        

Total net charge-offs

   $ 257      $ 225      $ 247      $ 298      $ 300   
                                        

Commercial lending annualized net charge-off ratio

     2.20     1.57     2.73     3.19     3.05

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

     7.39     7.05     6.41     9.04     9.54

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

     1.17     1.02     .93     1.03     1.03
                                        

Total annualized net charge-off ratio

     1.79     1.53     1.67     2.03     2.05
                                        

Home equity portfolio credit statistics:

          

% of first lien positions (d)

     36     36     35     35     34

Weighted average loan-to-value ratios (d)

     73     73     73     73     73

Weighted average FICO scores (e)

     731        726        725        727        725   

Annualized net charge-off ratio

     1.28     .97     .90     1.01     .70

Loans 30 - 59 days past due

     .47     .49     .49     .45     .44

Loans 60 - 89 days past due

     .31     .30     .30     .29     .30

Loans 90 days past due

     .99     1.02     .94     .91     .85
                                        

Other statistics:

          

ATMs

     6,660        6,673        6,626        6,539        6,467   

Branches (f)

     2,446        2,470        2,461        2,458        2,461   
                                        

Customer-related statistics:

          

Retail Banking checking relationships

     5,521,000        5,465,000        5,438,000        5,389,000        5,379,000   

Retail online banking active customers

     3,226,000        3,057,000        2,968,000        2,774,000        2,782,000   

Retail online bill payment active customers

     1,029,000        977,000        942,000        870,000        826,000   
                                        

Brokerage statistics:

          

Financial consultants (g)

     700        694        713        711        722   

Full service brokerage offices

     34        34        40        41        41   

Brokerage account assets (billions)

   $ 34      $ 33      $ 31      $ 31      $ 33   
                                        

 

(a) Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three months ended.
(b) Recorded investment of purchased impaired loans related to acquisitions.
(c) The decline for the three months ended September 30, 2010 was primarily due to the alignment of charge-off policies within the consolidated portfolio post-conversion.
(d) Includes loans from acquired portfolios for which lien position and loan-to-value information is not available.
(e) Represents the most recent FICO scores we have on file.
(f) Excludes certain satellite branches that provide limited products and/or services.
(g) Financial consultants provide services in full service brokerage offices and PNC traditional branches.

 

Page 15


THE PNC FINANCIAL SERVICES GROUP, INC.

Corporate & Institutional Banking (Unaudited) (a)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

INCOME STATEMENT

          

Net interest income

   $ 799      $ 917      $ 846      $ 934      $ 890   

Noninterest income

          

Corporate service fees

     187        334        148        237        242   

Other

     112        125        89        59        129   
                                        

Noninterest income

     299        459        237        296        371   
                                        

Total revenue

     1,098        1,376        1,083        1,230        1,261   

Provision for (recoveries of) credit losses

     (30     18        (48     97        236   

Noninterest expense

     445        506        447        422        446   
                                        

Pretax earnings

     683        852        684        711        579   

Income taxes

     251        309        249        263        211   
                                        

Earnings

   $ 432      $ 543      $ 435      $ 448      $ 368   
                                        

AVERAGE BALANCE SHEET

          

Loans

          

Commercial

   $ 33,194      $ 31,895      $ 32,195      $ 33,006      $ 34,081   

Commercial real estate

     14,347        15,035        15,897        17,010        17,961   

Commercial - real estate related

     3,463        3,254        3,021        2,901        3,128   

Asset-based lending

     7,370        6,893        6,362        6,066        5,940   

Equipment lease financing

     5,540        5,605        5,750        5,265        5,320   
                                        

Total loans

     63,914        62,682        63,225        64,248        66,430   

Goodwill and other intangible assets

     3,484        3,449        3,553        3,660        3,795   

Loans held for sale

     1,341        1,644        1,427        1,409        1,410   

Other assets

     8,241        8,890        8,725        7,712        7,940   
                                        

Total assets

   $ 76,980      $ 76,665      $ 76,930      $ 77,029      $ 79,575   
                                        

Deposits

          

Noninterest-bearing demand

   $ 27,843      $ 27,544      $ 25,259      $ 23,715      $ 22,271   

Money market

     12,131        11,880        12,105        12,380        12,253   

Other

     6,057        6,632        6,833        6,856        7,610   
                                        

Total deposits

     46,031        46,056        44,197        42,951        42,134   

Other liabilities

     12,205        13,155        12,936        10,797        10,871   

Capital

     7,858        8,073        8,487        9,002        8,800   
                                        

Total liabilities and equity

   $ 66,094      $ 67,284      $ 65,620      $ 62,750      $ 61,805   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     22     27     20     20     17

Return on average assets

     2.28        2.81        2.24        2.33        1.88   

Noninterest income to total revenue

     27        33        22        24        29   

Efficiency

     41        37        41        34        35   
                                        

COMMERCIAL MORTGAGE SERVICING PORTFOLIO (in billions)

          

Beginning of period

   $ 266      $ 263      $ 265      $ 282      $ 287   

Acquisitions/additions

     10        12        8        7        8   

Repayments/transfers

     (10     (9     (10     (24     (13
                                        

End of period

   $ 266      $ 266      $ 263      $ 265      $ 282   
                                        

OTHER INFORMATION

          

Consolidated revenue from: (b)

          

Treasury Management

   $ 301      $ 305      $ 320      $ 299      $ 296   

Capital Markets

   $ 139      $ 205      $ 116      $ 124      $ 161   

Commercial mortgage loans held for sale (c)

   $ 29      $ 9      $ 24      $ (2   $ 27   

Commercial mortgage loan servicing (d)

     12        107        (40     49        88   
                                        

Total commercial mortgage banking activities

   $ 41      $ 116      $ (16   $ 47      $ 115   

Total loans (e)

   $ 64,364      $ 63,688      $ 62,466      $ 63,990      $ 65,137   

Net carrying amount of commercial mortgage servicing rights (e)

   $ 645      $ 665      $ 616      $ 722      $ 921   

Credit-related statistics:

          

Nonperforming assets (e)

   $ 2,574      $ 2,594      $ 3,064      $ 3,103      $ 3,343   

Impaired loans (e) (f)

   $ 659      $ 714      $ 890      $ 923      $ 1,033   

Net charge-offs

   $ 153      $ 349      $ 211      $ 243      $ 271   
                                        

 

(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.

 

Page 16


THE PNC FINANCIAL SERVICES GROUP, INC.

Asset Management Group (Unaudited) (a)

 

     Three months ended  

Dollars in millions, except as noted

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

INCOME STATEMENT

          

Net interest income

   $ 60      $ 65      $ 66      $ 62      $ 63   

Noninterest income

     162        159        150        155        164   
                                        

Total revenue

     222        224        216        217        227   

Provision for (recoveries of) credit losses

     (6     9        (12     14        9   

Noninterest expense

     160        171        160        160        156   
                                        

Pretax earnings

     68        44        68        43        62   

Income taxes

     25        16        25        16        23   
                                        

Earnings

   $ 43      $ 28      $ 43      $ 27      $ 39   
                                        

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

   $ 4,054      $ 4,083      $ 4,020      $ 4,003      $ 3,993   

Commercial and commercial real estate

     1,503        1,426        1,447        1,422        1,442   

Residential mortgage

     715        723        802        915        963   
                                        

Total loans

     6,272        6,232        6,269        6,340        6,398   

Goodwill and other intangible assets

     374        384        394        403        415   

Other assets

     272        271        236        249        228   
                                        

Total assets

   $ 6,918      $ 6,887      $ 6,899      $ 6,992      $ 7,041   
                                        

Deposits

          

Noninterest-bearing demand

   $ 1,162      $ 1,432      $ 1,364      $ 1,268      $ 1,228   

Interest-bearing demand

     2,291        2,033        1,869        1,735        1,699   

Money market

     3,597        3,393        3,258        3,261        3,217   
                                        

Total transaction deposits

     7,050        6,858        6,491        6,264        6,144   

Certificates of deposit and other

     677        694        714        769        818   
                                        

Total deposits

     7,727        7,552        7,205        7,033        6,962   

Other liabilities

     70        74        81        92        112   

Capital

     344        380        413        398        418   
                                        

Total liabilities and equity

   $ 8,141      $ 8,006      $ 7,699      $ 7,523      $ 7,492   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     51     29     41     27     38

Return on average assets

     2.52        1.61        2.47        1.55        2.25   

Noninterest income to total revenue

     73        71        69        71        72   

Efficiency

     72        76        74        74        69   
                                        

OTHER INFORMATION

          

Total nonperforming assets (b)

   $ 74      $ 90      $ 102      $ 114      $ 139   

Impaired loans (b) (c)

   $ 143      $ 146      $ 155      $ 182      $ 191   

Total net charge-offs (recoveries)

   $ (11   $ 21      $ 1      $ 16      $ 4   

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

 

       

Personal

   $ 102      $ 99      $ 95      $ 92      $ 96   

Institutional

     117        113        111        107        113   
                                        

Total

   $ 219      $ 212      $ 206      $ 199      $ 209   
                                        

Asset Type

          

Equity

   $ 120      $ 115      $ 107      $ 98      $ 104   

Fixed income

     64        63        66        64        59   

Liquidity/Other

     35        34        33        37        46   
                                        

Total

   $ 219      $ 212      $ 206      $ 199      $ 209   
                                        

Discretionary assets under management

          

Personal

   $ 71      $ 69      $ 67      $ 65      $ 69   

Institutional

     39        39        38        34        36   
                                        

Total

   $ 110      $ 108      $ 105      $ 99      $ 105   
                                        

Asset Type

          

Equity

   $ 57      $ 55      $ 51      $ 46      $ 51   

Fixed income

     36        36        38        36        35   

Liquidity/Other

     17        17        16        17        19   
                                        

Total

   $ 110      $ 108      $ 105      $ 99      $ 105   
                                        

Nondiscretionary assets under administration

          

Personal

   $ 31      $ 30      $ 28      $ 27      $ 27   

Institutional

     78        74        73        73        77   
                                        

Total

   $ 109      $ 104      $ 101      $ 100      $ 104   
                                        

Asset Type

          

Equity

   $ 63      $ 60      $ 56      $ 52      $ 53   

Fixed income

     28        27        28        28        24   

Liquidity/Other

     18        17        17        20        27   
                                        

Total

   $ 109      $ 104      $ 101      $ 100      $ 104   
                                        

 

(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  

Dollars in millions, except as noted

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

INCOME STATEMENT

          

Net interest income

   $ 56      $ 60      $ 52      $ 70      $ 74   

Noninterest income

          

Loan servicing revenue

          

Servicing fees

     50        46        61        66        69   

Net MSR hedging gains

     64        47        86        66        46   

Loan sales revenue

     84        66        77        49        39   

Other

     4        9        8        1     
                                        

Total noninterest income

     202        168        232        182        154   
                                        

Total revenue

     258        228        284        252        228   

Provision for (recoveries of) credit losses

     8        8        21        (8     (16

Noninterest expense

     137        215        119        109        120   
                                        

Pretax earnings

     113        5        144        151        124   

Income taxes

     42        2        47        60        46   
                                        

Earnings

   $ 71      $ 3      $ 97      $ 91      $ 78   
                                        

AVERAGE BALANCE SHEET

          

Portfolio loans

   $ 2,734      $ 2,667      $ 2,572      $ 2,540      $ 2,820   

Loans held for sale

     1,802        1,731        1,427        1,148        974   

Mortgage servicing rights (MSR)

     1,048        863        863        1,084        1,264   

Other assets

     6,035        5,008        4,302        3,914        3,797   
                                        

Total assets

   $ 11,619      $ 10,269      $ 9,164      $ 8,686      $ 8,855   
                                        

Deposits

   $ 1,587      $ 2,089      $ 2,108      $ 3,088      $ 3,602   

Borrowings and other liabilities

     4,144        3,444        2,740        2,817        2,279   

Capital

     729        745        767        977        1,195   
                                        

Total liabilities and equity

   $ 6,460      $ 6,278      $ 5,615      $ 6,882      $ 7,076   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     39     2     50     37     26

Return on average assets

     2.48        .12        4.20        4.20        3.57   

Noninterest income to total revenue

     78        74        82        72        68   

Efficiency

     53        94        42        43        53   
                                        

RESIDENTIAL MORTGAGE SERVICING PORTFOLIO (in billions)

          

Beginning of period

   $ 125      $ 131      $ 137      $ 141      $ 145   

Acquisitions

     5           

Additions

     3        3        3        2        2   

Repayments/transfers

     (6     (9     (9     (6     (6
                                        

End of period

     127        125        131        137        141   
                                        

Servicing portfolio statistics: (b)

          

Fixed rate

     90     89     89     89     89

Adjustable rate/balloon

     10     11     11     11     11

Weighted average interest rate

     5.53     5.62     5.69     5.74     5.79

MSR capitalized value (in billions)

   $ 1.1      $ 1.0      $ .8      $ 1.0      $ 1.3   

MSR capitalization value (in basis points)

     88        82        60        71        90   

Weighted average servicing fee (in basis points)

     30        30        30        30        30   
                                        

OTHER INFORMATION

          

Loan origination volume (in billions)

   $ 3.2      $ 3.5      $ 2.7      $ 2.3      $ 2.0   

Percentage of originations represented by:

          

Agency and government programs

     100     99     99     99     98

Refinance volume

     85     83     76     58     73

Total nonperforming assets (b)

   $ 395      $ 349      $ 327      $ 326      $ 418   

Impaired loans (b) (c)

   $ 158      $ 161      $ 173      $ 168      $ 298   
                                        

 

(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  

Dollars in millions

   March 31
2011
    December 31
2010
    September 30
2010
    June 30
2010
    March 31
2010
 

INCOME STATEMENT

          

Net interest income

   $ 236      $ 256      $ 283      $ 348      $ 342   

Noninterest income

     9        (56     (35     10        (12
                                        

Total revenue

     245        200        248        358        330   

Provision for credit losses

     152        231        176        404        165   

Noninterest expense

     53        81        46        75        48   
                                        

Pretax earnings (loss)

     40        (112     26        (121     117   

Income taxes (benefit)

     15        (41     6        (42     44   
                                        

Earnings (loss)

   $ 25      $ (71   $ 20      $ (79   $ 73   
                                        

AVERAGE BALANCE SHEET

          

Commercial lending:

          

Commercial/Commercial real estate

   $ 1,582      $ 1,840      $ 2,088      $ 2,442      $ 2,599   

Equipment lease financing

     757        759        753        807        803   
                                        

Total commercial lending

     2,339        2,599        2,841        3,249        3,402   
                                        

Consumer lending:

          

Consumer

     5,559        5,903        6,144        6,350        6,573   

Residential real estate

     6,332        6,845        7,205        8,120        8,190   
                                        

Total consumer lending

     11,891        12,748        13,349        14,470        14,763   
                                        

Total loans

     14,230        15,347        16,190        17,719        18,165   

Other assets (d)

     (129     15        555        797        1,342   
                                        

Total assets

   $ 14,101      $ 15,362      $ 16,745      $ 18,516      $ 19,507   
                                        

Deposits

       $ 2      $ 180      $ 85   

Other liabilities

   $ 159      $ 109        102        77        55   

Capital

     1,371        1,476        1,605        1,671        1,734   
                                        

Total liabilities and equity

   $ 1,530      $ 1,585      $ 1,709      $ 1,928      $ 1,874   
                                        

PERFORMANCE RATIOS

          

Return on average capital

     7     (19 )%      5     (19 )%      17

Return on average assets

     .72        (1.83     .47        (1.71     1.52   
                                        

OTHER INFORMATION

          

Nonperforming assets (b)

   $ 1,209      $ 1,243      $ 1,218      $ 1,436      $ 1,777   

Impaired loans (b) (c)

   $ 5,685      $ 5,879      $ 6,001      $ 6,867      $ 7,124   

Net charge-offs

   $ 123      $ 183      $ 107      $ 276      $ 111   

Annualized net charge-off ratio

     3.51     4.73     2.62     6.25     2.48

LOANS (in billions) (b)

          

Commercial lending:

          

Commercial/Commercial real estate

   $ 1,474      $ 1,684      $ 1,911      $ 2,282      $ 2,641   

Equipment lease financing

     695        764        757        757        806   
                                        

Total commercial lending

     2,169        2,448        2,668        3,039        3,447   
                                        

Consumer lending:

          

Consumer

     5,381        5,769        6,011        6,323        6,511   

Residential real estate

     6,325        6,564        7,014        7,911        8,105   
                                        

Total consumer lending

     11,706        12,333        13,025        14,234        14,616   
                                        

Total loans

   $ 13,875      $ 14,781      $ 15,693      $ 17,273      $ 18,063   
                                        

 

(a) See note (a) on page 13.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to acquisitions.
(d) Other assets were negative in the first quarter of 2011 due to a decline in deferred taxes and an increase in loan reserve.

 

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.

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.

 

Page 20


THE PNC FINANCIAL SERVICES GROUP, INC.

 

FICO score - A credit bureau-based industry standard score created by Fair Isaac Co. which predicts the likelihood of borrower default. We use FICO scores both in underwriting and assessing credit risk in our consumer lending portfolio. Lower FICO scores indicate likely higher risk of default, while higher FICO scores indicate likely lower risk of default. FICO scores are updated on a periodic basis.

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.

Loan-to-value ratio (LTV) - A calculation of a loan’s collateral coverage that is used both in underwriting and assessing credit risk in our lending portfolio. LTV is the sum total of loan obligations secured by collateral divided by the market value of that same collateral. Market values of the collateral are based on an independent valuation of the collateral. For example, an LTV of less than 90% is better secured and has less credit risk than an LTV of greater than or equal to 90%. Our real estate market values are updated on an annual basis but may be updated more frequently for select loans.

Loss Given Default (LGD) - An estimate of recovery based on collateral type, collateral value, loan exposure, or the guarantor(s) quality and guaranty type (full or partial). Each loan has its own LGD. The LGD risk rating measures the percentage of exposure of a specific credit obligation that we expect to lose if default occurs. LGD is net of recovery, through either liquidation of collateral or deficiency judgments rendered from foreclosure or bankruptcy proceedings. The LGD rating is updated with the same frequency as the borrower’s PD rating, and should be done more frequently than the PD if the collateral values and amounts change often.

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 non-accrual loans, certain non-accrual troubled debt restructured loans, OREO and foreclosed 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 (including loans and lines of credit secured by residential real estate), and residential real estate (including mortgages and construction) customers as well as certain non-accrual troubled debt restructured loans. Nonperforming loans do not include loans held for sale or OREO and foreclosed 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.

 

Page 21


THE PNC FINANCIAL SERVICES GROUP, INC.

 

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).

Other real estate owned (OREO) - Foreclosed assets taken in settlement of troubled loans through surrender or foreclosure. Foreclosed assets include all assets received in full or partial satisfaction of a loan and include real and personal property, equity interests in corporations, partnerships, joint ventures, and beneficial interests in trusts. Premises that are no longer used in operations may also be included in real estate owned.

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.

Probability of Default (PD) - An internal risk rating that indicates the likelihood that a credit obligor will enter into default status.

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.

 

Page 22


THE PNC FINANCIAL SERVICES GROUP, INC.

 

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.

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.

 

Page 23