Exhibit 99.1

 

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2012

(Unaudited)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2012

(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 & Valuation for Purchased Impaired Loans

     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   

Non-Strategic 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 18, 2012. 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, Illinois, Maryland, Indiana, North Carolina, Florida, Kentucky, Washington, D.C., Alabama, Delaware, Georgia, Virginia, Missouri, Wisconsin and South Carolina. PNC also provides certain products and services internationally.

QUARTERLY COMMON STOCK DIVIDEND INCREASE

In April 2012, the PNC Board of Directors declared a quarterly cash dividend on the common stock of 40 cents per share, an increase of 5 cents per share, or 14 percent, from the prior quarterly dividend of 35 cents per share. The increased dividend is payable to shareholders of record at the close of business April 17, 2012 and the payment date is May 5, 2012.

ACQUISITION OF RBC BANK (USA)

On March 2, 2012, PNC acquired RBC Bank (USA), the US retail banking subsidiary of Royal Bank of Canada, with more than 400 branches in North Carolina, Florida, Alabama, Georgia, Virginia, and South Carolina. As part of the acquisition, PNC also purchased a credit card portfolio from RBC Bank (Georgia), National Association. PNC paid $3.6 billion in cash as consideration for the acquisition. The transaction added approximately $18 billion of deposits and $15 billion of loans to PNC’s Consolidated Balance Sheet.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 1

 

Consolidated Income Statement (Unaudited)

 

     Three months ended  

In millions, except per share data

   March 31
2012
    December 31
2011
    September 30
2011
    June 30
2011
    March 31
2011
 

Interest Income

          

Loans

   $ 1,951      $ 1,902      $ 1,904      $ 1,905      $ 1,884   

Investment securities

     526        523        511        549        578   

Other

     120        109        115        93        121   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     2,597        2,534        2,530        2,547        2,583   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest Expense

          

Deposits

     103        139        167        180        182   

Borrowed funds

     203        196        188        217        225   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     306        335        355        397        407   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     2,291        2,199        2,175        2,150        2,176   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest Income

          

Asset management

     284        250        287        288        263   

Consumer services

     264        269        330        333        311   

Corporate services

     232        266        187        228        217   

Residential mortgage

     230        157        198        163        195   

Service charges on deposits

     127        140        140        131        123   

Net gains on sales of securities

     57        62        68        82        37   

Net other-than-temporary impairments

     (38     (44     (35     (39     (34

Other

     285        250        194        266        343   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     1,441        1,350        1,369        1,452        1,455   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     3,732        3,549        3,544        3,602        3,631   

Provision For Credit Losses

     185        190        261        280        421   

Noninterest Expense

          

Personnel

     1,111        1,052        949        976        989   

Occupancy

     190        198        171        176        193   

Equipment

     175        177        159        158        167   

Marketing

     68        74        72        63        40   

Other (a) (b)

     911        1,218        789        803        681   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     2,455        2,719        2,140        2,176        2,070   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes and noncontrolling interests

     1,092        640        1,143        1,146        1,140   

Income taxes

     281        147        309        234        308   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     811        493        834        912        832   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less: Net income (loss) attributable to noncontrolling interests

     6        17        4        (1     (5

Preferred stock dividends and discount accretion

     39        25        4        25        4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders

   $ 766      $ 451      $ 826      $ 888      $ 833   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Common Share

          

Basic

   $ 1.45      $ .86      $ 1.57      $ 1.69      $ 1.59   

Diluted

   $ 1.44      $ .85      $ 1.55      $ 1.67      $ 1.57   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average Common Shares Outstanding

          

Basic

     526        524        524        524        524   

Diluted

     529        526        526        527        526   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency

     66     77     60     60     57

Noninterest income to total revenue

     39     38     39     40     40

Effective tax rate (c)

     25.7     23.0     27.0     20.4     27.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The after-tax amounts below were calculated using a marginal federal income tax rate of 35% and include applicable income tax adjustments.

 

(a) Other noninterest expense for the three months ended December 31, 2011 included a $198 million noncash charge ($129 million after taxes) for the unamortized discount related to the redemption of $750 million of trust preferred securities. The impact on diluted earnings per share was $.24 for the three months ended December 31, 2011.
(b) Includes $240 million ($156 million after taxes) for the three months ended December 31, 2011 for residential mortgage foreclosure-related expenses, primarily as a result of ongoing governmental matters. The impact on diluted earnings per share was $.30 for the three months ended December 31, 2011.
(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 second quarter of 2011 was primarily attributable to a $54 million benefit related to the reversal of deferred tax liabilities.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 2

 

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value

   March 31
2012
    December 31
2011
    September 30
2011
    June 30
2011
    March 31
2011
 

Assets

          

Cash and due from banks (a)

   $ 4,162      $ 4,105      $ 3,982      $ 3,865      $ 3,389   

Federal funds sold and resale agreements (b)

     1,371        2,205        1,806        2,357        2,240   

Trading securities

     2,639        2,513        2,960        2,075        2,254   

Interest-earning deposits with banks (a)

     2,084        1,169        2,773        4,508        1,359   

Loans held for sale (b)

     2,456        2,936        2,491        2,679        2,980   

Investment securities (a)

     64,554        60,634        62,105        59,414        60,992   

Loans (a) (b)

     176,214        159,014        154,543        150,319        149,387   

Allowance for loan and lease losses (a)

     (4,196     (4,347     (4,507     (4,627     (4,759
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans

     172,018        154,667        150,036        145,692        144,628   

Goodwill

     9,169        8,285        8,207        8,182        8,146   

Other intangible assets

     2,019        1,859        1,949        2,412        2,618   

Equity investments (a) (c)

     10,352        10,134        9,915        9,776        9,595   

Other (a) (b)

     25,059        22,698        23,246        22,157        21,177   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 295,883      $ 271,205      $ 269,470      $ 263,117      $ 259,378   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 62,463      $ 59,048      $ 55,180      $ 52,683      $ 48,707   

Interest-bearing

     143,664        128,918        132,552        129,208        133,283   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     206,127        187,966        187,732        181,891        181,990   

Borrowed funds

          

Federal funds purchased and repurchase agreements

     4,832        2,984        3,105        3,812        4,079   

Federal Home Loan Bank borrowings

     8,957        6,967        5,015        5,022        5,020   

Bank notes and senior debt

     12,065        11,793        11,990        10,526        11,324   

Subordinated debt

     8,221        8,321        9,564        9,358        9,310   

Other (a)

     8,464        6,639        5,428        6,458        5,263   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowed funds

     42,539        36,704        35,102        35,176        34,996   

Allowance for unfunded loan commitments and letters of credit

     243        240        217        202        204   

Accrued expenses (a)

     3,607        4,175        3,587        3,502        3,078   

Other (a)

     5,131        4,874        5,590        7,473        5,393   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     257,647        233,959        232,228        228,244        225,661   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

          

Preferred stock (d)

          

Common stock - $5 par value

          

Authorized 800 shares, issued 537, 537, 536, 536, and 536 shares

     2,685        2,683        2,682        2,682        2,682   

Capital surplus - preferred stock

     1,638        1,637        1,636        648        647   

Capital surplus - common stock and other

     12,074        12,072        12,054        12,025        12,056   

Retained earnings

     18,834        18,253        17,985        17,344        16,640   

Accumulated other comprehensive income (loss)

     281        (105     397        69        (309

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

     (467     (487     (535     (533     (584
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     35,045        34,053        34,219        32,235        31,132   

Noncontrolling interests

     3,191        3,193        3,023        2,638        2,585   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     38,236        37,246        37,242        34,873        33,717   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 295,883      $ 271,205      $ 269,470      $ 263,117      $ 259,378   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital Ratios

          

Tier 1 common (e)

     9.3     10.3     10.5     10.5     10.3

Tier 1 risk-based (e)

     11.4        12.6        13.1        12.8        12.6   

Total risk-based (e)

     14.4        15.8        16.5        16.2        16.2   

Leverage (e)

     10.5        11.1        11.4        11.0        10.6   

Common shareholders’ equity to assets

     11.3        12.0        12.1        12.0        11.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts include consolidated variable interest entities. Our 2011 Form 10-K as amended by amendment no. 1 thereto included, and first quarter 2012 Form 10-Q will include, additional information regarding these items.
(b) Amounts include assets for which PNC has elected the fair value option. Our 2011 Form 10-K as amended by amendment no. 1 thereto included, and first quarter 2012 Form 10-Q will include, additional information regarding these items.
(c) Amounts include our equity interest in BlackRock.
(d) Par value less than $.5 million at each date.
(e) The ratio as of March 31, 2012 is estimated.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 3

 

Average Consolidated Balance Sheet (Unaudited) (a)

 

     Three months ended  

In millions

   March 31
2012
    December 31
2011
    September 30
2011
    June 30
2011
    March 31
2011
 

Assets

          

Interest-earning assets:

          

Investment securities

          

Securities available for sale

          

Residential mortgage-backed

          

Agency

   $ 27,031      $ 25,691      $ 22,822      $ 25,993      $ 29,134   

Non-agency

     6,577        6,859        7,135        7,618        8,057   

Commercial mortgage-backed

     3,774        3,640        3,623        3,278        3,298   

Asset-backed

     4,329        3,832        3,817        3,185        2,757   

US Treasury and government agencies

     3,123        3,376        3,699        4,505        5,682   

State and municipal

     1,770        1,767        1,929        2,234        2,081   

Other debt

     2,996        2,731        3,113        3,578        3,994   

Corporate stocks and other

     347        446        449        376        443   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available for sale

     49,947        48,342        46,587        50,767        55,446   

Securities held to maturity

          

Residential mortgage-backed

     4,576        4,658        3,840        1,130     

Commercial mortgage-backed

     4,635        4,794        4,520        4,215        4,239   

Asset-backed

     1,170        1,353        1,863        2,276        2,463   

State and municipal

     671        670        389        8        8   

Other

     584        584        489        150        1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities held to maturity

     11,636        12,059        11,101        7,779        6,711   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment securities

     61,583        60,401        57,688        58,546        62,157   

Loans

          

Commercial

     69,286        63,483        59,951        57,932        56,300   

Commercial real estate

     16,818        16,413        16,347        16,779        17,545   

Equipment lease financing

     6,377        6,233        6,150        6,189        6,307   

Consumer

     57,148        55,556        54,632        54,014        54,460   

Residential real estate

     14,927        14,474        14,717        15,001        15,518   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

     164,556        156,159        151,797        149,915        150,130   

Loans held for sale

     2,910        2,673        2,497        2,719        3,193   

Federal funds sold and resale agreements

     1,821        2,035        2,030        2,321        2,813   

Other

     6,864        7,138        10,060        7,241        5,802   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-earning assets

     237,734        228,406        224,072        220,742        224,095   

Noninterest-earning assets:

          

Allowance for loan and lease losses

     (4,314     (4,472     (4,592     (4,728     (4,835

Cash and due from banks

     3,777        3,883        3,544        3,433        3,393   

Other

     44,345        42,905        43,827        41,659        39,901   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 281,542      $ 270,722      $ 266,851      $ 261,106      $ 262,554   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Calculated using average daily balances.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 4

 

Average Consolidated Balance Sheet (Unaudited) (Continued) (a)

 

     Three months ended  

In millions

   March 31
2012
     December 31
2011
     September 30
2011
     June 30
2011
     March 31
2011
 

Liabilities and Equity

              

Interest-bearing liabilities:

              

Interest-bearing deposits

              

Money market

   $ 61,162       $ 58,897       $ 59,009       $ 58,594       $ 58,556   

Demand

     31,599         29,338         27,654         26,912         26,313   

Savings

     9,183         8,545         8,305         8,222         7,656   

Retail certificates of deposit

     29,011         30,888         33,607         35,098         36,509   

Time deposits in foreign offices and other time

     3,238         2,869         2,191         2,250         3,967   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits

     134,193         130,537         130,766         131,076         133,001   

Borrowed funds

              

Federal funds purchased and repurchase agreements

     4,551         3,714         3,685         4,138         6,376   

Federal Home Loan Bank borrowings

     8,967         6,090         5,015         5,021         5,088   

Bank notes and senior debt

     11,138         11,463         10,480         11,132         11,745   

Subordinated debt

     7,719         8,463         8,982         8,981         9,353   

Other

     7,837         5,935         5,736         5,713         5,847   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total borrowed funds

     40,212         35,665         33,898         34,985         38,409   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total interest-bearing liabilities

     174,405         166,202         164,664         166,061         171,410   

Noninterest-bearing liabilities and equity:

              

Noninterest-bearing deposits

     57,900         55,946         53,300         49,720         47,755   

Allowance for unfunded loan commitments and letters of credit

     240         217         202         204         188   

Accrued expenses and other liabilities

     11,186         11,132         12,478         10,747         9,771   

Equity

     37,811         37,225         36,207         34,374         33,430   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities and equity

   $ 281,542       $ 270,722       $ 266,851       $ 261,106       $ 262,554   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)    Calculated using average daily balances.

 

Supplemental Average Balance Sheet Information (Unaudited)

 

       

  

Deposits and Common Shareholders’ Equity               

Interest-bearing deposits

   $ 134,193       $ 130,537       $ 130,766       $ 131,076       $ 133,001   

Noninterest-bearing deposits

     57,900         55,946         53,300         49,720         47,755   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total deposits

   $ 192,093       $ 186,483       $ 184,066       $ 180,796       $ 180,756   

Transaction deposits

   $ 150,661       $ 144,181       $ 139,963       $ 135,226       $ 132,624   

Common shareholders’ equity

   $ 32,981       $ 32,552       $ 32,124       $ 31,101       $ 30,193   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 5

 

Details of Net Interest Margin (Unaudited) (a)

 

     Three months ended  
     March 31
2012
    December 31
2011
    September 30
2011
    June 30
2011
    March 31
2011
 

Average yields/rates

          

Yield on interest-earning assets

          

Loans

          

Commercial

     4.51     4.66     4.86     4.88     5.04

Commercial real estate

     5.19        5.33        5.25        5.51        4.63   

Equipment lease financing

     4.74        4.84        5.11        4.86        5.00   

Consumer

     4.78        4.81        4.82        4.94        4.99   

Residential real estate

     5.59        5.35        5.90        6.22        6.15   

Total loans

     4.78        4.85        5.00        5.11        5.09   

Investment securities

     3.47        3.51        3.59        3.80        3.76   

Other

     4.17        3.68        3.14        3.04        4.16   

Total yield on interest-earning assets

     4.41        4.44        4.52        4.64        4.67   

Rate on interest-bearing liabilities

          

Interest-bearing deposits

          

Money market

     .23        .25        .31        .34        .35   

Demand

     .04        .05        .08        .10        .10   

Savings

     .10        .16        .19        .19        .19   

Retail certificates of deposit

     .80        1.16        1.26        1.32        1.28   

Time deposits in foreign offices and other time

     .49        .53        .72        .75        .54   

Total interest-bearing deposits

     .31        .42        .51        .55        .55   

Borrowed funds

     2.01        2.17        2.20        2.46        2.35   

Total rate on interest-bearing liabilities

     .70        .80        .86        .95        .95   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest rate spread

     3.71        3.64        3.66        3.69        3.72   

Impact of noninterest-bearing sources

     .19        .22        .23        .24        .22   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin

     3.90     3.86     3.89     3.93     3.94
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(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 generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011, and March 31, 2011, were $31 million, $28 million, $27 million, $25 million, and $24 million, respectively.

 

Total and Core Net Interest Income (Unaudited)

 

               

  

     Three months ended  

In millions

   March 31
2012 
    December 31
2011
    September 30
2011
    June 30
2011
    March 31
2011
 

Total net interest income

   $ 2,291     $ 2,199     $ 2,175     $ 2,150     $ 2,176   

Purchase accounting accretion (a)

     263       256       292       290       281   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core net interest income (a)

   $ 2,028     $ 1,943     $ 1,883     $ 1,860     $ 1,895   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(a)    We believe that core net interest income and purchase accounting accretion are useful in evaluating the components of net interest income.

 

Selected Consolidated Income Statement Information (Unaudited)

 

        

  

     Three months ended  

In millions

   March 31
2012
    December 31
2011
    September 30
2011
    June 30
2011
    March 31
2011
 

Noninterest Expense

          

Noncash charge for the unamortized discount related to redemption of trust preferred securities

     $ 198         

Expenses for residential mortgage foreclosure-related matters

   $ 38      $ 240      $ 63      $ 16      $ 5   

Integration costs

   $ 145      $ 28      $ 8      $ 5      $ 1   

Income Taxes

          

Benefit related to reversal of deferred tax liabilities (a)

         $ 54     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Represents tax benefit recognized within Income taxes on our Consolidated Income Statement.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 6

 

Details of Loans (Unaudited)

 

In millions

   March 31
2012
     December 31
2011
     September 30
2011
     June 30
2011
     March 31
2011
 

Commercial

              

Retail/wholesale trade

   $ 12,983       $ 11,539       $ 11,287       $ 10,952       $ 10,665   

Manufacturing

     12,684         11,453         10,980         10,426         9,805   

Service providers

     11,215         9,717         9,326         8,984         8,690   

Real estate related (a)

     10,091         8,488         8,073         7,515         7,533   

Financial services

     8,273         6,646         5,676         5,206         5,034   

Health care

     5,695         5,068         4,668         4,115         3,839   

Other industries

     14,574         12,783         12,240         11,422         11,036   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     75,515         65,694         62,250         58,620         56,602   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial real estate

              

Real estate projects

     12,589         10,640         10,936         11,086         11,581   

Commercial mortgage

     5,945         5,564         5,477         5,233         5,552   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     18,534         16,204         16,413         16,319         17,133   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equipment lease financing

     6,594         6,416         6,186         6,210         6,215   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial lending

     100,643         88,314         84,849         81,149         79,950   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consumer

              

Home equity

              

Lines of credit

     24,668         22,491         22,677         22,838         23,001   

Installment

     11,076         10,598         10,486         10,541         10,655   

Credit card

     4,089         3,976         3,785         3,754         3,707   

Other consumer

              

Education

     9,246         9,582         9,154         8,816         9,041   

Automobile

     5,794         5,181         4,447         3,705         3,156   

Other

     4,486         4,403         4,490         4,534         4,544   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     59,359         56,231         55,039         54,188         54,104   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Residential real estate

              

Residential mortgage

     15,287         13,885         14,022         14,302         14,602   

Residential construction

     925         584         633         680         731   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total residential real estate

     16,212         14,469         14,655         14,982         15,333   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer lending

     75,571         70,700         69,694         69,170         69,437   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans (b)

   $ 176,214       $ 159,014       $ 154,543       $ 150,319       $ 149,387   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

              

(b)    Includes purchased impaired loans:

   $ 8,421       $ 6,667       $ 6,927       $ 7,256       $ 7,522   

Details of Loans Held for Sale (Unaudited)

 

In millions

   March 31
2012
     December 31
2011
     September 30
2011
     June 30
2011
     March 31
2011
 

Commercial mortgage

   $ 1,014       $ 1,294       $ 1,081       $ 1,226       $ 1,047   

Residential mortgage

     1,387         1,522         1,353         1,351         1,840   

Other

     55         120         57         102         93   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,456       $ 2,936       $ 2,491       $ 2,679       $ 2,980   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Unfunded Commitments (Unaudited)

 

In millions

   March 31
2012
     December 31
2011
     September 30
2011
     June 30
2011
     March 31
2011
 

Net unfunded commitments

   $ 112,454       $ 103,271       $ 103,236       $ 99,791       $ 96,781   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 7

 

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

Change in Allowance for Loan and Lease Losses

 

     March 31     December 31     September 30     June 30     March 31  

Three months ended - in millions

   2012     2011     2011     2011     2011  

Beginning balance

   $ 4,347      $ 4,507      $ 4,627      $ 4,759      $ 4,887   

Charge-offs:

          

Commercial

     (111     (143     (193     (185     (179

Commercial real estate

     (84     (90     (92     (124     (158

Equipment lease financing

     (5     (7     (3     (11     (14

Home equity

     (131     (109     (123     (112     (140

Residential real estate

     (30     (32     (20     (43     (58

Credit card

     (55     (50     (51     (60     (74

Other consumer

     (51     (51     (42     (49     (51
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total charge-offs

     (467     (482     (524     (584     (674

Recoveries:

          

Commercial

     72        76        78        98        80   

Commercial real estate

     23        40        25        26        14   

Equipment lease financing

     9        13        13        15        9   

Home equity

     13        11        16        11        10   

Residential real estate

     (1     1        8        1        1   

Credit card

     5        5        6        6        6   

Other consumer

     13        9        13        13        21   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recoveries

     134        155        159        170        141   

Net (charge-offs) recoveries:

          

Commercial

     (39     (67     (115     (87     (99

Commercial real estate

     (61     (50     (67     (98     (144

Equipment lease financing

     4        6        10        4        (5

Home equity

     (118     (98     (107     (101     (130

Residential real estate

     (31     (31     (12     (42     (57

Credit card

     (50     (45     (45     (54     (68

Other consumer

     (38     (42     (29     (36     (30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

     (333     (327     (365     (414     (533

Provision for credit losses

     185        190        261        280        421   

Other

         (1    

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

     (3     (23     (15     2        (16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 4,196      $ 4,347      $ 4,507      $ 4,627      $ 4,759   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Information

          

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

     .81     .83     .95     1.11     1.44

Allowance for loan and lease losses to total loans

     2.38        2.73        2.92        3.08        3.19   

Commercial lending net charge-offs

   $ (96   $ (111   $ (172   $ (181   $ (248

Consumer lending net charge-offs

     (237     (216     (193     (233     (285
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

   $ (333   $ (327   $ (365   $ (414   $ (533

Net charge-offs to average loans

          

Commercial lending

     .42     .51     .83     .90     1.25

Consumer lending

     1.32        1.22        1.10        1.35        1.65   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

     March 31      December 31      September 30      June 30     March 31  

Three months ended - in millions

   2012      2011      2011      2011     2011  

Beginning balance

   $ 240       $ 217       $ 202       $ 204      $ 188   

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

     3         23         15         (2     16   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Ending balance

   $ 243       $ 240       $ 217       $ 202      $ 204   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 8

 

Purchase Accounting, Accretion and Valuation for Purchased Impaired Loans (Unaudited)

RBC Acquired Loan Portfolio on March 2, 2012

 

    Purchased Impaired     Other Purchased Loans (a)  

In millions

  Fair Value     Outstanding
Balance
    Net Investment     Fair Value     Outstanding
Balance (b)
    Net Investment  

Commercial

  $ 446      $ 746        60   $ 6,002      $ 6,328        95

Commercial Real Estate

    481        836        58        2,067        2,310        89   

Equipment Lease Financing

          86        92        93   

Consumer

    151        215        70        3,203        3,731        86   

Residential Real Estate

    896        1,214        74        1,168        1,202        97   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,974      $ 3,011        66   $ 12,526      $ 13,663        92
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Other purchased loans includes revolving loans that are excluded from the purchased impaired loans.
(b) The difference between total outstanding balance and total fair value will be accreted into net interest income on a constant effective yield over the life of the loans unless future credit events cause the loans to be placed on nonaccrual.

Accretion - Purchased Impaired Loans

 

     Three months ended  

In millions

   March 31
2012 (a)
    December 31
2011 (b)
    March 31
2011 (b)
 

Impaired loans

      

Scheduled accretion

   $ 158      $ 154      $ 160   

Reversal of contractual interest on impaired loans

     (97     (102     (106
  

 

 

   

 

 

   

 

 

 

Scheduled accretion net of contractual interest

     61        52        54   

Excess cash recoveries

     40        61        81   
  

 

 

   

 

 

   

 

 

 

Total impaired loans

   $ 101      $ 113      $ 135   
  

 

 

   

 

 

   

 

 

 

 

(a) Represents National City and RBC acquisitions.
(b) Represents National City acquisition.

Accretable Net Interest - Purchased Impaired Loans

 

In billions

      

January 1, 2012

   $ 2.1  

Addition due to RBC acquisition on March 2, 2012

     .6  

Accretion

     (.2

Excess cash recoveries

  

Net reclassifications to accretable from non-accretable and other activity

  
  

 

 

 

March 31, 2012 (a)

   $ 2.5  
  

 

 

 

In billions

      

January 1, 2011

   $ 2.2  

Accretion

     (.2

Excess cash recoveries

     (.1

Net reclassifications to accretable from non-accretable and other activity

     .3  
  

 

 

 

March 31, 2011

   $ 2.2  
  

 

 

 
 

 

(a) As of March 31, 2012, we estimate that the reversal of contractual interest on purchased impaired loans will total approximately $1.5 billion in future periods, of which $250 million was associated with loans purchased in the RBC acquisition. This will offset the total net accretable in future interest income of $2.5 billion on purchased impaired loans.

Valuation of Purchased Impaired Loans

 

    March 31, 2012 (a)     December 31, 2011 (b)  

Dollars in billions

  Balance     Net Investment     Balance     Net Investment  

Commercial and commercial real estate loans:

       

Unpaid principal balance

  $ 2.4        $ 1.0     

Purchased impaired mark

    (.7       (.1  
 

 

 

     

 

 

   

Recorded investment

    1.7          .9     

Allowance for loan losses

    (.2       (.2  
 

 

 

     

 

 

   

Net investment

    1.5        63     .7        70
 

 

 

     

 

 

   

Consumer and residential mortgage loans:

       

Unpaid principal balance

    7.7          6.5     

Purchased impaired mark

    (1.0       (.7  
 

 

 

     

 

 

   

Recorded investment

    6.7          5.8     

Allowance for loan losses

    (.8       (.8  
 

 

 

     

 

 

   

Net investment

    5.9        77     5.0        77
 

 

 

     

 

 

   

Total purchased impaired loans:

       

Unpaid principal balance

    10.1          7.5     

Purchased impaired mark

    (1.7       (0.8  
 

 

 

     

 

 

   

Recorded investment

    8.4          6.7     

Allowance for loan losses

    (1.0       (1.0  
 

 

 

     

 

 

   

Net investment

  $ 7.4        73   $ 5.7        76
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Represents National City and RBC acquisitions.
(b) Represents National City acquisition.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 9

 

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

     March 31     December 31     September 30     June 30     March 31  

In millions

   2012     2011     2011     2011     2011  

Nonperforming loans, including TDRs (a)

          

Commercial lending

          

Commercial

          

Retail/wholesale trade

   $ 108      $ 109      $ 117      $ 148      $ 180   

Manufacturing

     107        117        149        160        213   

Service providers

     149        147        198        189        214   

Real estate related (b)

     232        252        256        261        253   

Financial services

     20        36        31        18        27   

Health care

     23        29        39        38        46   

Other industries

     200        209        204        233        270   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

     839        899        994        1,047        1,203   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial real estate

          

Real estate projects

     977        1,051        1,115        1,289        1,468   

Commercial mortgage

     274        294        310        378        416   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

     1,251        1,345        1,425        1,667        1,884   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equipment lease financing

     21        22        30        35        41   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     2,111        2,266        2,449        2,749        3,128   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer lending (c)

          

Home equity (d)

     685        529        484        421        464   

Residential real estate

          

Residential mortgage (e)

     741        685        676        630        641   

Residential construction

     44        41        46        36        46   

Credit card (f)

     12        8        7        8     

Other consumer

     45        31        30        26        29   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer lending

     1,527        1,294        1,243        1,121        1,180   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming loans (g)

     3,638        3,560        3,692        3,870        4,308   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OREO and foreclosed assets

          

Other real estate owned (OREO) (h)

     749        561        553        546        569   

Foreclosed and other assets

     31        35        53        65        63   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total OREO and foreclosed assets

     780        596        606        611        632   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 4,418      $ 4,156      $ 4,298      $ 4,481      $ 4,940   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonperforming loans to total loans

     2.06     2.24     2.39     2.57     2.88

Nonperforming assets to total loans, OREO and foreclosed assets

     2.50        2.60        2.77        2.97        3.29   

Nonperforming assets to total assets

     1.49        1.53        1.59        1.70        1.90   

Allowance for loan and lease losses to nonperforming loans (g) (i)

     115        122        122        120        110   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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) In March 2012, we adopted a policy stating that Home equity loans past due 90 days or more would be placed on nonaccrual status. Prior policy required that these loans be past due 180 days before being placed on nonaccrual status.
(e) Nonperforming residential mortgage excludes loans of $55 million, $61 million, $68 million, $85 million, and $85 million accounted for under the fair value option as of March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011 and March 31, 2011, respectively.
(f) Effective in the second quarter 2011, the commercial nonaccrual policy was applied to certain small business credit card balances. This change resulted in loans being placed on nonaccrual status when they become 90 days or more past due. We continue to charge off these loans at 180 days past due.
(g) Nonperforming loans do not include government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.
(h) Other real estate owned excludes $252 million, $280 million, $256 million, $273 million, and $233 million at March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011, and March 31, 2011, respectively, related to residential real estate that was acquired by us upon foreclosure of serviced loans because they are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
(i) The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 10

 

Details of Nonperforming Assets and Troubled Debt Restructurings (Unaudited)

Change in Nonperforming Assets

 

In millions

  January 1, 2012-
March 31, 2012
    October 1, 2011-
December 31, 2011
    July 1, 2011-
September 30, 2011
    April 1, 2011-
June 30, 2011
    January 1, 2011-
March 31, 2011
 

Beginning balance

  $  4,156      $ 4,298      $ 4,481      $ 4,940      $ 5,123   

New nonperforming assets

    1,243        854        925        843        1,003   

Charge-offs and valuation adjustments

    (236     (221     (286     (323     (390

Principal activity, including paydowns and payoffs

    (414     (506     (471     (603     (380

Asset sales and transfers to loans held for sale

    (146     (152     (155     (128     (178

Returned to performing status

    (185     (117     (196     (248     (238
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 4,418      $  4,156      $ 4,298      $ 4,481      $ 4,940   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Largest Individual Nonperforming Assets at March 31, 2012 (a)

 

In millions

           

Ranking

   Outstandings     

Industry

1    $ 45      

Real Estate Rental and Leasing

2      45      

Real Estate Rental and Leasing

3      27      

Accommodation and Food Services

4      23      

Real Estate Rental and Leasing

5      21      

Real Estate Rental and Leasing

6      20      

Construction

7      20      

Construction

8      20      

Accommodation and Food Services

9      19      

Real Estate Rental and Leasing

10      17      

Real Estate Rental and Leasing

 

  

 

 

    

 

Total    $ 257      

 

  

 

 

    

 

As a percent of total nonperforming assets 6%

 

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

Summary of Troubled Debt Restructurings

 

january 31,2012 january 31,2012 january 31,2012 january 31,2012 january 31,2012
    March 31     December 31     September 30     June 30     March 31  

In millions

  2012     2011     2011     2011     2011  

Total commercial lending

  $ 412      $ 405      $ 396      $ 305      $ 260   

Total consumer lending

    1,821        1,798        1,751        1,614        1,575   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total TDRs

  $ 2,233      $ 2,203      $ 2,147      $ 1,919      $ 1,835   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonperforming

  $ 1,095      $ 1,141      $ 1,062      $ 845      $ 882   

Accruing (a)

    865        771        780        752        639   

Credit card (b)

    273        291        305        322        314   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total TDRs

  $ 2,233      $ 2,203      $ 2,147      $ 1,919      $ 1,835   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties are considered troubled debt restructurings (TDRs). TDRs typically result from our loss mitigation activities and include rate reductions, principal forgiveness, postponement/reduction of scheduled amortization, and extensions, which are intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Certain consumer government insured or guaranteed loans which were evaluated for TDR consideration, loans held for sale, loans accounted for under the fair value option, and pooled purchased impaired loans are not classified as TDRs.

 

(a) Accruing loans have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans.
(b) Includes credit cards and certain small business and consumer credit agreements whose terms have been restructured 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.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 11

 

Accruing Loans Past Due (Unaudited)

Accruing Loans Past Due 30 to 59 Days (a)

 

     Amount      Percent of Total Outstandings  
     Mar. 31      Dec. 31      Sept. 30      Jun. 30      Mar. 31      Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31  

Dollars in millions

   2012      2011      2011      2011      2011      2012     2011     2011     2011     2011  

Commercial

   $ 195       $ 122       $ 163       $ 149       $ 208         .26     .19     .26     .25     .37

Commercial real estate

     144         96         84         98         315         .78        .59        .51        .60        1.84   

Equipment lease financing

     25         22         9         9         72         .38        .34        .15        .14        1.16   

Home equity

     174         173         177         141         146         .49        .52        .53        .42        .43   

Residential real estate

                         

Non government insured

     233         180         198         201         205         1.44        1.24        1.35        1.34        1.34   

Government insured

     122         122         121         123         122         .75        .84        .83        .82        .80   

Credit card

     34         38         39         39         41         .83        .96        1.03        1.04        1.11   

Other consumer

                         

Non government insured

     50         58         55         51         60         .26        .30        .30        .30        .36   

Government insured

     171         207         161         134         123         .88        1.08        .89        .79        .73   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 1,148       $ 1,018       $ 1,007       $ 945       $ 1,292         .65        .64        .65        .63        .86   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Accruing Loans Past Due 60 to 89 Days (a)

 

 

     Amount      Percent of Total Outstandings  
     Mar. 31      Dec. 31      Sept. 30      Jun. 30      Mar. 31      Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31  

Dollars in millions

   2012      2011      2011      2011      2011      2012     2011     2011     2011     2011  

Commercial

   $ 53       $ 47       $ 54       $ 75       $ 56         .07     .07     .09     .13     .10

Commercial real estate

     44         35         25         71         65         .24        .22        .15        .44        .38   

Equipment lease financing

     2         5         4         2         5         .03        .08        .06        .03        .08   

Home equity

     103         114         101         91         96         .29        .34        .30        .27        .29   

Residential real estate

                         

Non government insured

     79         72         81         68         91         .22        .50        .55        .45        .59   

Government insured

     100         104         110         119         131         .62        .72        .75        .80        .85   

Credit card

     24         25         26         23         25         .59        .63        .69        .61        .67   

Other consumer

                         

Non government insured

     20         21         22         20         25         .10        .11        .12        .12        .15   

Government insured

     98         124         121         84         82         .50        .65        .67        .49        .49   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 523       $ 547       $ 544       $ 553       $ 576         .30        .34        .35        .37        .39   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Accruing Loans Past Due 90 Days or More (a)

 

 

     Amount      Percent of Total Outstandings  
     Mar. 31      Dec. 31      Sept. 30      Jun. 30      Mar. 31      Mar. 31     Dec. 31     Sept. 30     Jun. 30     Mar. 31  

Dollars in millions

   2012      2011      2011      2011      2011      2012     2011     2011     2011     2011  

Commercial

   $ 28       $ 49       $ 34       $ 42       $ 49         .04     .07     .05     .08     .09

Commercial real estate

     5         6         13         12         6         .03        .04        .08        .07        .04   

Equipment lease financing

     5            2         1            .08          .03        .02     

Home equity (b)

        221         206         182         165           .67        .62        .55        .49   

Residential real estate

                         

Non government insured

     153         152         137         145         174         .94        1.05        .93        .97        1.13   

Government insured

     2,012         2,129         1,998         1,926         1,903         12.41        14.71        13.63        12.85        12.41   

Credit card

     47         48         45         45         65         1.15        1.21        1.19        1.20        1.75   

Other consumer

                         

Non government insured

     21         23         23         21         27         .11        .12        .13        .12        .16   

Government insured

     351         345         310         272         256         1.80        1.80        1.71        1.60        1.53   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 2,622       $ 2,973       $ 2,768       $ 2,646       $ 2,645         1.49        1.87        1.79        1.76        1.77   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Excludes loans held for sale and purchased impaired loans.
(b) In March 2012, we adopted a policy stating that Home equity loans past due 90 days or more would be placed on nonaccrual status. Prior policy required that these loans be past due 180 days before being placed on nonaccrual status.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 12

 

Business Segment Descriptions (Unaudited)

Retail Banking provides deposit, lending, brokerage, 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 online banking channels. The branch network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, North Carolina, Florida, Kentucky, Washington, D.C., Alabama, Delaware, Georgia, Virginia, Missouri, Wisconsin, and South Carolina.

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 and retirement 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 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 owned affiliates are sold to others.

Non-Strategic Assets Portfolio (formerly, 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. We obtained the majority of these non-strategic assets through acquisitions of other companies, and most of these assets fall outside of our core business strategy.

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. BlackRock provides diversified investment management services to institutional clients, intermediary and individual investors through various investment vehicles. Investment management services primarily consist of the management of equity, fixed income, multi-asset class, alternative investment and cash management products. BlackRock offers its investment products in a variety of vehicles, including open-end and closed-end mutual funds, iShares® exchange-traded funds (“ETFs”), collective investment trusts and separate accounts. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services to a broad base of clients. Financial markets advisory services include valuation services relating to illiquid securities, dispositions and workout assignments (including long-term portfolio liquidation assignments), risk management and strategic planning and execution. At March 31, 2012, our economic interest in BlackRock was 21%.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 13

 

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

 

     Three months ended  

In millions

   March 31
2012
     December 31
2011
    September 30
2011
     June 30
2011
     March 31
2011
 

Income (Loss)

             

Retail Banking

   $ 50       $ (28   $ 33       $ 44       $ (18

Corporate & Institutional Banking

     470         576        419         448         432   

Asset Management Group

     28         17        33         48         43   

Residential Mortgage Banking

     61         (61     22         55         71   

Non-Strategic Assets Portfolio

     71         (2     93         84         25   

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

     131         (9     234         233         279   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Net income (f)

   $ 811       $ 493      $ 834       $ 912       $ 832   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Revenue

             

Retail Banking

   $ 1,285       $ 1,241      $ 1,283       $ 1,271       $ 1,247   

Corporate & Institutional Banking

     1,226         1,271        1,120         1,180         1,098   

Asset Management Group

     231         222        217         226         222   

Residential Mortgage Banking

     292         219        252         219         258   

Non-Strategic Assets Portfolio

     198         207        238         270         245   

Other, including BlackRock (b) (c)

     500         389        434         436         561   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total revenue

   $ 3,732       $ 3,549      $ 3,544       $ 3,602       $ 3,631   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

(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.
(b) We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our first quarter 2012 Form 10-Q will include additional information regarding BlackRock.
(c) Includes earnings and gains or losses related to PNC’s equity interest in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as gains or losses related to BlackRock transactions, integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, alternative investments, including private equity, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments, and differences between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments’ results exclude their portion of net income attributable to noncontrolling interests.
(d) Amounts for the three months ended December 31, 2011 include a $198 million noncash charge ($129 million after taxes) for the unamortized discount related to redemption of $750 million of trust preferred securities.
(e) Includes expenses of $145 million, $28 million, $8 million, $5 million, and $1 million ($94 million, $18 million, $5 million, $3 million and zero after taxes, respectively) for the three months ended March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011 and March 31, 2011 for integration costs.
(f) Includes expenses of $38 million, $240 million, $63 million, $16 million, and $5 million ($24 million, $156 million, $41 million, $11 million and $4 million after taxes, respectively) for the three months ended March 31, 2012, December 31, 2011, September 30, 2011, June 30, 2011 and March 31, 2011 for residential mortgage foreclosure-related expenses, primarily as a result of ongoing governmental matters. These amounts have been allocated among the following: Residential Mortgage Banking, Non-Strategic Assets Portfolio, and Other.

 

     March 31
2012
     December 31
2011
     September 30
2011
     June 30
2011
     March 31
2011
 

Period End Employees (a)

              

Full-time employees

              

Retail Banking

     23,583         21,056         21,058         21,044         20,932   

Corporate & Institutional Banking

     4,639         4,364         4,340         3,864         3,761   

Asset Management Group

     3,158         3,109         3,072         3,053         3,042   

Residential Mortgage Banking

     4,055         3,718         3,646         3,688         3,682   

Non-Strategic Assets Portfolio

     229         116         114         121         127   

Other

              

Operations & Technology

     9,548         8,933         8,807         8,724         8,644   

Staff Services and Other

     5,234         4,644         4,639         5,021         4,998   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Other

     14,782         13,577         13,446         13,745         13,642   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total full-time employees

     50,446         45,940         45,676         45,515         45,186   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail Banking part-time employees

     5,265         5,083         5,103         5,112         4,981   

Other part-time employees

     894         868         913         1,216         959   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total part-time employees

     6,159         5,951         6,016         6,328         5,940   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total (b)

     56,605         51,891         51,692         51,843         51,126   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) The period end employee statistics for the businesses reflect staff directly employed by the respective business, and exclude operations, technology and staff services employees that may perform services for the business.
(b) The increase in the total number of employees is primarily driven by the acquisition of RBC Bank (USA) during the first quarter of 2012.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 14

 

Retail Banking (Unaudited) (a)

 

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

Dollars in millions

   2012     2011     2011     2011     2011  

INCOME STATEMENT

          

Net interest income

   $ 895      $ 832      $ 820      $ 810      $ 818   

Noninterest income

          

Service charges on deposits

     121        135        133        125        117   

Brokerage

     45        48        48        52        53   

Consumer services

     191        195        251        253        228   

Other

     33        31        31        31        31   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     390        409        463        461        429   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     1,285        1,241        1,283        1,271        1,247   

Provision for credit losses

     135        229        206        180        276   

Noninterest expense

     1,070        1,056        1,025        1,021        1,001   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax earnings (loss)

     80        (44     52        70        (30

Income taxes (benefit)

     30        (16     19        26        (12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss)

   $ 50      $ (28   $ 33      $ 44      $ (18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

          

Home equity

   $ 26,591      $ 25,776      $ 25,756      $ 25,906      $ 26,064   

Indirect auto

     4,433        3,872        3,308        2,756        2,400   

Indirect other

     1,282        1,355        1,432        1,519        1,612   

Education

     9,440        9,302        9,124        8,881        9,101   

Credit cards

     3,928        3,805        3,733        3,680        3,731   

Other

     2,072        1,957        1,874        1,809        1,823   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer

     47,746        46,067        45,227        44,551        44,731   

Commercial and commercial real estate

     10,682        10,369        10,482        10,636        10,786   

Floor plan

     1,663        1,452        1,304        1,473        1,572   

Residential mortgage

     1,031        1,092        1,150        1,196        1,287   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

     61,122        58,980        58,163        57,856        58,376   

Goodwill and other intangible assets

     5,888        5,735        5,748        5,750        5,769   

Other assets

     2,699        2,455        2,247        2,151        2,525   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 69,709      $ 67,170      $ 66,158      $ 65,757      $ 66,670   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

          

Noninterest-bearing demand

   $ 18,764      $ 18,105      $ 18,081      $ 18,443      $ 18,103   

Interest-bearing demand

     25,707        23,583        22,381        21,869        20,921   

Money market

     43,601        41,638        41,191        40,776        40,387   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transaction deposits

     88,072        83,326        81,653        81,088        79,411   

Savings

     9,077        8,450        8,218        8,140        7,573   

Certificates of deposit

     28,150        29,998        32,664        34,060        35,365   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     125,299        121,774        122,535        123,288        122,349   

Other liabilities

     629        758        786        765        1,147   

Capital

     8,328        8,152        8,223        8,246        8,048   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 134,256      $ 130,684      $ 131,544      $ 132,299      $ 131,544   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PERFORMANCE RATIOS

          

Return on average capital

     2     (1 )%      2     2     (1 )% 

Return on average assets

     .29        (.17     .20        .27        (.11

Noninterest income to total revenue

     30        33        36        36        34   

Efficiency

     83        85        80        80        80   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) See note (a) on page 13.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 15

 

Retail Banking (Unaudited) (Continued)

 

 

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

Dollars in millions, except as noted

   2012     2011     2011     2011     2011  

OTHER INFORMATION (a)

          

Credit-related statistics:

          

Commercial nonperforming assets

   $ 315      $ 336      $ 330      $ 301      $ 301   

Consumer nonperforming assets

     650        513        454        403        409   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 965      $ 849      $ 784      $ 704      $ 710   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Purchased impaired loans (b)

   $ 903      $ 757      $ 786      $ 826      $ 869   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial lending net charge-offs

   $ 28      $ 48      $ 39      $ 65      $ 67   

Credit card lending net charge-offs

     50        44        45        54        68   

Consumer lending (excluding credit card) net charge-offs

     113        103        98        104        122   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

   $ 191      $ 195      $ 182      $ 223      $ 257   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial lending annualized net charge-off ratio

     .91     1.61     1.31     2.15     2.20

Credit card lending annualized net charge-off ratio

     5.12     4.59     4.78     5.89     7.39

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

     1.01     .94     .91     .99     1.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total annualized net charge-off ratio

     1.26     1.31     1.24     1.55     1.79
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Home equity portfolio credit statistics: (c)

          

% of first lien positions at origination (d)

     37     39     38     37     36

Weighted average loan-to-value ratios (LTVs) (d)

     81     72     72     73     73

Weighted average updated FICO scores (e)

     739        743        743        743        731   

Annualized net charge-off ratio

     1.11     1.01     1.02     1.00     1.31

Loans 30 - 59 days past due

     .56     .58     .58     .48     .47

Loans 60 - 89 days past due

     .35     .38     .32     .30     .31

Loans 90 days past due (f)

     1.24     1.22     1.12     1.02     .99
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other statistics:

          

ATMs

     7,220        6,806        6,754        6,734        6,660   

Branches (g)

     2,900        2,511        2,469        2,459        2,446   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Customer-related statistics: (in thousands)

          

Retail Banking checking relationships

     6,278        5,761        5,722        5,627        5,521   

Retail online banking active customers

     3,823        3,519        3,479        3,354        3,226   

Retail online bill payment active customers

     1,161        1,105        1,079        1,045        1,029   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Brokerage statistics:

          

Financial consultants (h)

     693        686        703        712        700   

Full service brokerage offices

     38        38        37        37        34   

Brokerage account assets (billions)

   $ 37      $ 34      $ 33      $ 35      $ 35   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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) Lien position, LTV, FICO and delinquency statistics are based upon balances and other data that exclude the impact of accounting for acquired loans.
(d) Updated LTV is reported for March 31, 2012. For previous quarters, lien positions and LTV are based upon data from loan origination. Original LTV excludes certain acquired portfolio loans where this data is not available.
(e) Represents FICO scores that are updated monthly for home equity lines and quarterly for the home equity installment loans.
(f) Includes non-accrual loans.
(g) Excludes satellite offices (e.g., drive-ups, electronic branches, retirement centers) that provide limited products and/or services.
(h) Financial consultants provide services in full service brokerage offices and traditional bank branches.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 16

 

Corporate & Institutional Banking (Unaudited) (a)

 

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

Dollars in millions, except as noted

   2012     2011     2011     2011     2011  

INCOME STATEMENT

          

Net interest income

   $ 896      $ 904      $ 866      $ 848      $ 799   

Noninterest income

          

Corporate service fees

     202        230        153        197        187   

Other

     128        137        101        135        112   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income

     330        367        254        332        299   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     1,226        1,271        1,120        1,180        1,098   

Provision for credit losses (benefit)

     19        (136     11        31        (30

Noninterest expense

     463        494        448        443        445   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax earnings

     744        913        661        706        683   

Income taxes

     274        337        242        258        251   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings

   $ 470      $ 576      $ 419      $ 448      $ 432   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AVERAGE BALANCE SHEET

          

Loans

          

Commercial

   $ 42,919      $ 38,709      $ 36,353      $ 34,673      $ 33,194   

Commercial real estate

     14,388        13,903        13,670        13,839        14,347   

Commercial - real estate related

     4,971        4,463        3,741        3,494        3,463   

Asset-based lending

     9,266        8,893        8,472        7,961        7,370   

Equipment lease financing

     5,706        5,529        5,457        5,483        5,540   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

     77,250        71,497        67,693        65,450        63,914   

Goodwill and other intangible assets

     3,442        3,291        3,391        3,456        3,484   

Loans held for sale

     1,244        1,271        1,186        1,229        1,341   

Other assets

     10,960        10,111        9,629        8,877        8,241   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 92,896      $ 86,170      $ 81,899      $ 79,012      $ 76,980   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

          

Noninterest-bearing demand

   $ 37,225      $ 35,770      $ 32,631      $ 29,504      $ 27,843   

Money market

     13,872        13,385        13,522        12,643        12,131   

Other

     5,372        5,617        5,781        5,149        6,057   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     56,469        54,772        51,934        47,296        46,031   

Other liabilities

     15,987        14,095        14,094        12,871        12,205   

Capital

     8,537        8,256        7,992        7,928        7,858   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 80,993      $ 77,123      $ 74,020      $ 68,095      $ 66,094   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PERFORMANCE RATIOS

          

Return on average capital

     22     28     21     23     22

Return on average assets

     2.03        2.65        2.03        2.27        2.28   

Noninterest income to total revenue

     27        29        23        28        27   

Efficiency

     38        39        40        38        41   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

COMMERCIAL MORTGAGE SERVICING PORTFOLIO (in billions)

          

Beginning of period

   $ 267      $ 267      $ 268      $ 266      $ 266   

Acquisitions/additions

     10        12        8        13        10   

Repayments/transfers

     (9     (12     (9     (11     (10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period

   $ 268      $ 267      $ 267      $ 268      $ 266   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER INFORMATION

          

Consolidated revenue from: (b)

          

Treasury Management

   $ 311      $ 296      $ 298      $ 292      $ 301   

Capital Markets

   $ 156      $ 160      $ 158      $ 165      $ 139   

Commercial mortgage loans held for sale (c)

   $ 13      $ 38      $ 23      $ 23      $ 29   

Commercial mortgage loan servicing income, net of amortization (d)

     25        48        32        29        47   

Commercial mortgage servicing rights (impairment)/recovery (e)

     5        —          (82     (40     (35
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial mortgage banking activities

   $ 43      $ 86      $ (27   $ 12      $ 41   

Total loans (f)

   $ 84,329      $ 73,417      $ 70,307      $ 66,142      $ 64,368   

Net carrying amount of commercial mortgage servicing rights (f)

   $ 428      $ 468      $ 482      $ 592      $ 645   

Credit-related statistics:

          

Nonperforming assets (f)

   $ 1,776      $ 1,889      $ 2,033      $ 2,260      $ 2,574   

Purchased impaired loans (f) (g)

   $ 1,177      $ 404      $ 472      $ 603      $ 659   

Net charge-offs

   $ 43      $ 43      $ 94      $ 85      $ 153   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) See note (a) on page 13.
(b) Represents consolidated PNC amounts. Our first quarter 2012 10-Q will include additional information regarding these items.
(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, net of commercial mortgage servicing rights amortization. Commercial mortgage servicing rights (impairment)/recovery is shown separately.
(e) See note (a) on page 1.
(f) Presented as of period end.
(g) Recorded investment of purchased impaired loans related to acquisitions.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 17

 

Asset Management Group (Unaudited) (a)

 

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

Dollars in millions, except as noted

   2012     2011     2011     2011     2011  

INCOME STATEMENT

          

Net interest income

   $ 63      $ 61      $ 58      $ 59      $ 60   

Noninterest income

     168        161        159        167        162   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     231        222        217        226        222   

Provision for credit losses (benefit)

     10        10        (10     (18     (6

Noninterest expense

     176        184        175        168        160   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax earnings

     45        28        52        76        68   

Income taxes

     17        11        19        28        25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings

   $ 28      $ 17      $ 33      $ 48      $ 43   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

   $ 4,183      $ 4,173      $ 4,134      $ 4,068      $ 4,054   

Commercial and commercial real estate

     1,126        1,193        1,223        1,289        1,503   

Residential mortgage

     692        696        705        711        715   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

     6,001        6,062        6,062        6,068        6,272   

Goodwill and other intangible assets

     345        349        356        365        374   

Other assets

     220        233        246        220        271   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,566      $ 6,644      $ 6,664      $ 6,653      $ 6,917   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

          

Noninterest-bearing demand

   $ 1,575      $ 1,305      $ 1,307      $ 1,061      $ 1,161   

Interest-bearing demand

     2,637        2,529        2,315        2,309        2,291   

Money market

     3,651        3,625        3,591        3,548        3,591   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transaction deposits

     7,863        7,459        7,213        6,918        7,043   

CDs/IRAs/savings deposits

     549        587        620        645        676   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     8,412        8,046        7,833        7,563        7,719   

Other liabilities

     71        78        76        71        69   

Capital

     347        355        345        353        344   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 8,830      $ 8,479      $ 8,254      $ 7,987      $ 8,132   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PERFORMANCE RATIOS

          

Return on average capital

     32     19     38     55     51

Return on average assets

     1.72        1.02        1.96        2.89        2.52   

Noninterest income to total revenue

     73        73        73        74        73   

Efficiency

     76        83        81        74        72   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER INFORMATION

          

Total nonperforming assets (b)

   $ 73      $ 60      $ 69      $ 69      $ 74   

Purchased impaired loans (b) (c)

   $ 126      $ 127      $ 134      $ 135      $ 143   

Total net charge-offs (recoveries)

   $ 2      $ 6      $ 5      $ —        $ (11

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

          

Personal

   $ 104      $ 100      $ 95      $ 102      $ 102   

Institutional

     115        110        107        117        117   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 219      $ 210      $ 202      $ 219      $ 219   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset Type

          

Equity

   $ 119      $ 111      $ 104      $ 121      $ 120   

Fixed income

     66        66        66        65        64   

Liquidity/Other

     34        33        32        33        35   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 219      $ 210      $ 202      $ 219      $ 219   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Discretionary assets under management

          

Personal

   $ 73      $ 69      $ 65      $ 70      $ 71   

Institutional

     39        38        38        39        39   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 112      $ 107      $ 103      $ 109      $ 110   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset Type

          

Equity

   $ 58      $ 53      $ 49      $ 56      $ 57   

Fixed income

     38        38        38        37        36   

Liquidity/Other

     16        16        16        16        17   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 112      $ 107      $ 103      $ 109      $ 110   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nondiscretionary assets under administration

          

Personal

   $ 31      $ 31      $ 30      $ 32      $ 31   

Institutional

     76        72        69        78        78   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 107      $ 103      $ 99      $ 110      $ 109   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset Type

          

Equity

   $ 61      $ 58      $ 55      $ 65      $ 63   

Fixed income

     28        28        28        28        28   

Liquidity/Other

     18        17        16        17        18   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 107      $ 103      $ 99      $ 110      $ 109   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 18

 

Residential Mortgage Banking (Unaudited) (a)

 

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

Dollars in millions, except as noted

   2012     2011     2011     2011     2011  

INCOME STATEMENT

          

Net interest income

   $ 51      $ 52      $ 46      $ 47      $ 56   

Noninterest income

          

Loan servicing revenue

          

Servicing fees

     56        53        60        63        50   

Net MSR hedging gains

     71        35        69        52        64   

Loan sales revenue

     109        74        72        52        84   

Other

     5        5        5        5        4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     241        167        206        172        202   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     292        219        252        219        258   

Provision for credit losses (benefit)

     (7     (10     15        (8     8   

Noninterest expense

     203        317        203        140        137   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax earnings (loss)

     96        (88     34        87        113   

Income taxes (benefit)

     35        (27     12        32        42   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss)

   $ 61      $ (61   $ 22      $ 55      $ 71   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AVERAGE BALANCE SHEET

          

Portfolio loans

   $ 2,922      $ 2,868      $ 2,777      $ 2,703      $ 2,734   

Loans held for sale

     1,675        1,409        1,301        1,464        1,802   

Mortgage servicing rights (MSR)

     645        701        851        1,027        1,048   

Other assets

     6,747        6,786        5,948        5,628        6,035   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 11,989      $ 11,764      $ 10,877      $ 10,822      $ 11,619   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

   $ 1,662      $ 1,756      $ 1,785      $ 1,569      $ 1,587   

Borrowings and other liabilities

     4,353        4,324        3,788        3,253        4,144   

Capital

     832        832        694        667        729   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 6,847      $ 6,912      $ 6,267      $ 5,489      $ 6,460   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PERFORMANCE RATIOS

          

Return on average capital

     29     (29 )%      13     33     39

Return on average assets

     2.05        (2.06     .80        2.04        2.48   

Noninterest income to total revenue

     83        76        82        79        78   

Efficiency

     70        145        81        64        53   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

RESIDENTIAL MORTGAGE SERVICING PORTFOLIO - THIRD-PARTY (in billions)

          

Beginning of period

   $ 118      $ 121      $ 125      $ 127      $ 125   

Acquisitions

     7        1            5   

Additions

     4        3        2        4        3   

Repayments/transfers

     (8     (7     (6     (6     (6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period

   $ 121      $ 118      $ 121      $ 125      $ 127   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Servicing portfolio - third-party statistics: (b)

          

Fixed rate

     91     90     90     90     90

Adjustable rate/balloon

     9     10     10     10     10

Weighted-average interest rate

     5.26     5.38     5.44     5.49     5.53

MSR capitalized value (in billions)

   $ .7      $ .7      $ .7      $ 1.0      $ 1.1   

MSR capitalization value (in basis points)

     60        54        56        80        88   

Weighted-average servicing fee (in basis points)

     29        29        29        29        30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER INFORMATION

          

Loan origination volume (in billions)

   $ 3.4      $ 3.0      $ 2.6      $ 2.6      $ 3.2   

Percentage of originations represented by:

          

Agency and government programs

     100     100     100     100     100

Refinance volume

     82     79     69     68     85

Total nonperforming assets (b)

   $ 80      $ 76      $ 77      $ 65      $ 78   

Purchased impaired loans (b) (c)

   $ 100      $ 112      $ 132      $ 141      $ 158   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 19

 

Non-Strategic Assets Portfolio (Unaudited) (a)

 

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

Dollars in millions

   2012     2011     2011     2011     2011  

INCOME STATEMENT

          

Net interest income

   $ 217      $ 192      $ 228      $ 257      $ 236   

Noninterest income

     (19     15        10        13        9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     198        207        238        270        245   

Provision for credit losses

     18        88        45        81        152   

Noninterest expense

     68        119        47        56        53   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax earnings

     112        —          146        133        40   

Income taxes

     41        2        53        49        15   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss)

   $ 71      $ (2   $ 93      $ 84      $ 25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

AVERAGE BALANCE SHEET

          

Commercial Lending:

          

Commercial/Commercial real estate

   $ 1,004      $ 1,030      $ 1,143      $ 1,363      $ 1,582   

Lease financing

     670        703        691        697        757   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     1,674        1,733        1,834        2,060        2,339   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer Lending:

          

Consumer

     4,849        5,006        5,167        5,301        5,559   

Residential real estate

     6,046        5,937        6,116        6,265        6,332   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer lending

     10,895        10,943        11,283        11,566        11,891   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total portfolio loans

     12,569        12,676        13,117        13,626        14,230   

Other assets (b)

     (445     (368     (402     (256     (109
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 12,124      $ 12,308      $ 12,715      $ 13,370      $ 14,121   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits and other liabilities

   $ 177      $ 85      $ 76      $ 137      $ 159   

Capital

     1,176        1,213        1,273        1,422        1,371   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 1,353      $ 1,298      $ 1,349      $ 1,559      $ 1,530   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PERFORMANCE RATIOS

          

Return on average capital

     24     (1 )%      29     24     7

Return on average assets

     2.36        (.06     2.90        2.52        .72   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER INFORMATION

          

Nonperforming assets (c)

   $ 1,249      $ 1,024      $ 1,064      $ 1,087      $ 1,208   

Purchased impaired loans (c) (d)

   $ 6,097      $ 5,251      $ 5,390      $ 5,543      $ 5,685   

Net charge-offs

   $ 91      $ 77      $ 74      $ 96      $ 123   

Annualized net charge-off ratio

     2.91     2.41     2.24     2.83     3.51

LOANS (c)

          

Commercial Lending:

          

Commercial/Commercial real estate

   $ 1,104      $ 976      $ 1,077      $ 1,222      $ 1,474   

Lease financing

     671        670        701        701        695   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     1,775        1,646        1,778        1,923        2,169   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer Lending:

          

Consumer

     4,751        4,930        5,066        5,240        5,381   

Residential real estate

     6,693        5,840        6,065        6,250        6,325   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer lending

     11,444        10,770        11,131        11,490        11,706   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans

   $ 13,219      $ 12,416      $ 12,909      $ 13,413      $ 13,875   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) See note (a) on page 13.
(b) Other assets were negative in the first quarter 2012 and each 2011 quarter due to the allowance for loan and lease losses.
(c) As of period end.
(d) Recorded investment of purchased impaired loans related to acquisitions.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 20

 

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.

Carrying value of purchased impaired loans - The net value on the balance sheet which represents the recorded investment less any valuation allowance.

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.

Commercial mortgage banking activities - Includes commercial mortgage servicing, originating commercial mortgages for sale and related hedging activities. Commercial mortgage banking activities revenue includes commercial mortgage servicing (including net interest income and noninterest income from loan servicing and ancillary services, net of commercial mortgage servicing rights amortization, and commercial mortgage servicing rights valuations), and revenue derived from commercial mortgage loans intended for sale and related hedges (including loan origination fees, net interest income, valuation adjustments and gains or losses on sales).

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.

Core net interest income - Total net interest income less purchase accounting accretion.

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 or business segment should hold to guard against potentially large losses that could cause insolvency and is based on a measurement of economic risk. 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.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 21

 

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.

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. PNC’s product set includes loans priced using LIBOR as a benchmark.

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%.

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.

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, foreclosed and other assets. We do not accrue interest income on assets classified as nonperforming.

Nonperforming loans - Loans for which we do not accrue interest income. Nonperforming loans include loans to commercial, commercial real estate, equipment lease financing, consumer (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.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 22

 

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).

Options - Contracts that grant the purchaser, for a premium payment, the right, but not the obligation, to either purchase or sell the associated financial instrument at a set price during a specified period or at a specified date in the future.

Other real estate owned (OREO) and foreclosed assets - 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 other 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.

Parent company liquidity coverage - Liquid assets divided by funding obligations within a two year period.

Pretax earnings - Income from continuing operations before income taxes and noncontrolling interests.

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.

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. Accretion for purchased impaired loans includes any cash recoveries received in excess of the recorded investment.

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.


THE PNC FINANCIAL SERVICES GROUP, INC.   Page 23

 

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

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

Risk-weighted assets - Computed by the assignment of specific risk-weights (as defined by the Board of Governors of the Federal Reserve System) to assets and off-balance sheet instruments.

Securitization - The process of legally transforming financial assets into securities.

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

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 (TDR) - A loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.

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.