Exhibit 99.1

 

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2012

(Unaudited)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2012

(UNAUDITED)

 

     Page  

Consolidated Results:

  

Income Statement

     1   

Balance Sheet

     2   

Capital Ratios

     2   

Average Balance Sheet

     3-4   

Net Interest Margin

     5   

Total and Core Net Interest Income

     6   

Per Share Related Information

     7   

Selected Income Statement Information

     7   

Loans, Loans Held for Sale, and Net Unfunded Commitments

     8   

Allowances for Credit Losses

     9   

Purchase Accounting Accretion and Valuation of Purchased Impaired Loans

     10   

Nonperforming Assets and Troubled Debt Restructurings

     11-12   

Accruing Loans Past Due

     13   

Business Segment Results:

  

Descriptions

     14   

Period End Employees

     14   

Income and Revenue

     15   

Retail Banking

     16-17   

Corporate & Institutional Banking

     18   

Asset Management Group

     19   

Residential Mortgage Banking

     20   

Non-Strategic Assets Portfolio

     21   

Glossary of Terms

     22-25   

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on January 17, 2013. 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., Delaware, Alabama, Virginia, Georgia, Missouri, Wisconsin, and South Carolina. PNC also provides certain products and services internationally.

ACQUISITION AND DIVESTITURE ACTIVITY

On March 2, 2012, PNC acquired 100% of the issued and outstanding common stock of 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. The transaction added approximately $18 billion of deposits and $15 billion of loans to PNC’s Consolidated Balance Sheet. In addition, we sold the Smartstreet business unit which was acquired by PNC as part of the RBC Bank (USA) acquisition to Union Bank, N.A., resulting in a small gain and release of $46 million of goodwill and $13 million of core deposit intangibles.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 1

 

Consolidated Income Statement (Unaudited)

 

    Three months ended         Year ended  

In millions, except per share data

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

Interest Income

               

Loans

  $ 2,094     $ 2,076     $ 2,163     $ 1,951     $ 1,902       $ 8,284     $ 7,595  

Investment securities

    478       504       527       526       523         2,035       2,161  

Other

    99       90       106       120       109         415       438  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total interest income

    2,671       2,670       2,796       2,597       2,534         10,734       10,194  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Interest Expense

               

Deposits

    97       103       83       103       139         386       668  

Borrowed funds

    150       168       187       203       196         708       826  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total interest expense

    247       271       270       306       335         1,094       1,494  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Net interest income

    2,424       2,399       2,526       2,291       2,199         9,640       8,700  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Noninterest Income

               

Asset management

    302       305       278       284       250         1,169       1,088  

Consumer services

    294       288       290       264       269         1,136       1,243  

Corporate services

    349       295       290       232       266         1,166       898  

Residential mortgage (a) (b)

           227       (173     230       157         284       713  

Service charges on deposits

    150       152       144       127       140         573       534  

Net gains on sales of securities

    45       40       62       57       62         204       249  

Net other-than-temporary impairments

    (15     (24     (34     (38     (44       (111     (152

Other (c)

    520       406       240       285       250         1,451       1,053  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total noninterest income

    1,645       1,689       1,097       1,441       1,350         5,872       5,626  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total revenue

    4,069       4,088       3,623       3,732       3,549         15,512       14,326  

Provision For Credit Losses

    318       228       256       185       190         987       1,152  

Noninterest Expense

               

Personnel

    1,216       1,171       1,119       1,111       1,052         4,617       3,966  

Occupancy

    226       212       199       190       198         827       738  

Equipment

    194       185       181       175       177         735       661  

Marketing

    70       74       67       68       74         279       249  

Other (d)

    1,123       1,008       1,082       911       1,218         4,124       3,491  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total noninterest expense (e)

    2,829       2,650       2,648       2,455       2,719         10,582       9,105  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Income before income taxes and noncontrolling interests

    922       1,210       719       1,092       640         3,943       4,069  

Income taxes

    203       285       173       281       147         942       998  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Net income

    719       925       546       811       493         3,001       3,071  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Less: Net income (loss) attributable to noncontrolling interests

    1       (14     (5     6       17         (12     15  

Preferred stock dividends and discount accretion

    54       63       25       39       25         181       58  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Net income attributable to common shareholders

  $ 664     $ 876     $ 526     $ 766     $ 451       $ 2,832     $ 2,998  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Earnings Per Common Share

               

Basic

  $ 1.26     $ 1.66     $ 1.00     $ 1.45     $ .86       $ 5.36     $ 5.70  

Diluted

  $ 1.24     $ 1.64     $ .98     $ 1.44     $ .85       $ 5.30     $ 5.64  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Average Common Shares Outstanding

               

Basic

    526       526       527       526       524         526       524  

Diluted

    528       529       530       529       526         529       526  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Efficiency

    70     65     73     66     77       68     64

Noninterest income to total revenue

    40     41     30     39     38       38     39

Effective tax rate (f)

    22.0     23.6     24.1     25.7     23.0       23.9     24.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

For additional information regarding footnotes (b) through (e) below, refer to Selected Consolidated Income Statement Information on page 7.

 

(a) Residential mortgage income for the three months ended December 31, 2012 was less than $.5 million.
(b) Includes provision for residential mortgage repurchase obligations.
(c) Includes gains on sales of Visa Class B common shares.
(d) Includes expenses for residential mortgage foreclosure-related matters, the goodwill impairment charge for the Residential Mortgage Banking segment and noncash charges for unamortized discounts related to redemption of trust preferred securities.
(e) Includes integration costs.
(f) 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 PNC FINANCIAL SERVICES GROUP, INC.    Page 2

 

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value

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

Assets

          

Cash and due from banks (a)

   $ 5,220     $ 4,284     $ 4,136     $ 4,162     $ 4,105  

Federal funds sold and resale agreements (b)

     1,463       1,724       1,646       1,371       2,205  

Trading securities

     2,096       2,664       2,121       2,639       2,513  

Interest-earning deposits with banks (a)

     3,984       2,321       3,995       2,084       1,169  

Loans held for sale (b)

     3,693       2,737       3,333       2,456       2,936  

Investment securities (a)

     61,406       62,814       61,937       64,554       60,634  

Loans (a) (b)

     185,856       181,864       180,425       176,214       159,014  

Allowance for loan and lease losses (a)

     (4,036     (4,039     (4,156     (4,196     (4,347
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans

     181,820       177,825       176,269       172,018       154,667  

Goodwill

     9,072       9,163       9,158       9,169       8,285  

Other intangible assets

     1,797       1,778       1,804       2,019       1,859  

Equity investments (a) (c)

     10,877       10,846       10,617       10,352       10,134  

Other (a) (b)

     23,679       24,647       24,559       25,059       22,698  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 305,107     $ 300,803     $ 299,575     $ 295,883     $ 271,205  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 69,980     $ 64,484     $ 64,476     $ 62,463     $ 59,048  

Interest-bearing

     143,162       141,779       142,447       143,664       128,918  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     213,142       206,263       206,923       206,127       187,966  

Borrowed funds

          

Federal funds purchased and repurchase agreements

     3,327       3,877       4,166       4,832       2,984  

Federal Home Loan Bank borrowings

     9,437       9,942       10,440       8,957       6,967  

Bank notes and senior debt

     10,429       9,960       10,185       12,065       11,793  

Subordinated debt

     7,299       6,754       7,593       8,221       8,321  

Commercial paper (a)

     8,453       10,731       9,469       6,870       4,271  

Other (a)

     1,962       1,840       1,836       1,594       2,368  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowed funds

     40,907       43,104       43,689       42,539       36,704  

Allowance for unfunded loan commitments and letters of credit

     250       239       224       243       240  

Accrued expenses (a)

     4,449       4,015       3,428       3,607       4,175  

Other (a)

     4,594       5,380       5,097       5,131       4,874  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     263,342       259,001       259,361       257,647       233,959  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

          

Preferred stock (d)

          

Common stock - $5 par value

          

Authorized 800 shares, issued 538, 538, 537, 537, and 537 shares

     2,690       2,689       2,687       2,685       2,683  

Capital surplus - preferred stock

     3,590       3,559       3,120       1,638       1,637  

Capital surplus - common stock and other

     12,193       12,149       12,098       12,074       12,072  

Retained earnings

     20,265       19,813       19,149       18,834       18,253  

Accumulated other comprehensive income (loss)

     834       991       402       281       (105

Common stock held in treasury at cost: 10, 9, 8, 9, and 10 shares

     (569     (518     (451     (467     (487
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     39,003       38,683       37,005       35,045       34,053  

Noncontrolling interests

     2,762       3,119       3,209       3,191       3,193  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     41,765       41,802       40,214       38,236       37,246  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 305,107     $ 300,803     $ 299,575     $ 295,883     $ 271,205  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital Ratios

          

Tier 1 common (e)

     9.6      9.5      9.3      9.3      10.3 

Tier 1 risk-based (e)

     11.7       11.7       11.4       11.4       12.6  

Total risk-based (e)

     14.7       14.5       14.2       14.4       15.8  

Leverage (e)

     10.4       10.4       10.1       10.5       11.1  

Common shareholders’ equity to assets

     11.6        11.7       11.3       11.3       12.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts include consolidated variable interest entities. Our 2012 Form 10-Qs included, and our 2012 Form 10-K will include, additional information regarding these items.
(b) Amounts include assets for which PNC has elected the fair value option. Our 2012 Form 10-Qs included, and our 2012 Form 10-K 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 ratios as of December 31, 2012 are estimated.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 3

 

Average Consolidated Balance Sheet (Unaudited) (a)

 

     Three months ended          Year ended  

In millions

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

Assets

                 

Interest-earning assets:

                 

Investment securities

                 

Securities available for sale

                 

Residential mortgage-backed

                 

Agency

   $ 25,552     $ 26,546     $ 26,968     $ 27,031     $ 25,691        $ 26,522     $ 25,892  

Non-agency

     6,245       6,490       6,716       6,577       6,859          6,506       7,413  

Commercial mortgage-backed

     3,674       3,720       3,561       3,774       3,640          3,682       3,461  

Asset-backed

     5,643       5,525       5,401       4,329       3,832          5,227       3,402  

US Treasury and government agencies

     2,746       2,516       2,549       3,123       3,376          2,733       4,308  

State and municipal

     2,034       1,972       1,902       1,770       1,767          1,920       2,002  

Other debt

     2,860       3,045       3,178       2,996       2,731          3,019       3,350  

Corporate stocks and other

     346       390       317       347       446          350       428  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

Total securities available for sale

     49,100       50,204       50,592       49,947       48,342          49,959       50,256  

Securities held to maturity

                 

Residential mortgage-backed

     4,377       4,480       4,259       4,576       4,658          4,423       2,424  

Commercial mortgage-backed

     3,967       4,180       4,376       4,635       4,794          4,288       4,444  

Asset-backed

     702       825       874       1,170       1,353          892       1,985  

US Treasury and government agencies

     229       227       225       223       221          226       87  

State and municipal

     664       671       671       671       670          670       271  

Other

     355       357       359       361       363          358       221  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

Total securities held to maturity

     10,294       10,740       10,764       11,636       12,059          10,857       9,432  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

Total investment securities

     59,394       60,944       61,356       61,583       60,401          60,816       59,688  

Loans

                 

Commercial

     80,876       79,250       77,131       69,286       63,483          76,654       59,437  

Commercial real estate

     18,678       18,514       18,440       16,818       16,413          18,115       16,767  

Equipment lease financing

     6,956       6,774       6,586       6,377       6,233          6,674       6,219  

Consumer

     61,430       60,570       59,832       57,148       55,556          59,752       54,669  

Residential real estate

     15,257       15,575       15,932       14,927       14,474          15,423       14,924  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

Total loans

     183,197       180,683       177,921       164,556       156,159          176,618       152,016  

Loans held for sale

     3,025       2,956       3,016       2,910       2,673          2,977       2,768  

Federal funds sold and resale agreements

     1,290       1,601       1,666       1,821       2,035          1,594       2,297  

Other

     6,737       6,422       6,173       6,864       7,138          6,549       7,571  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

Total interest-earning assets

     253,643       252,606       250,132       237,734       228,406          248,554       224,340  

Noninterest-earning assets:

                 

Allowance for loan and lease losses

     (3,987     (4,152     (4,176     (4,314     (4,472        (4,157     (4,656

Cash and due from banks

     4,126       3,907       3,694       3,777       3,883          3,877       3,565  

Other

     48,349       47,781       46,501       44,345       42,905          46,751       42,086  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

Total assets

   $ 302,131     $ 300,142     $ 296,151     $ 281,542     $ 270,722        $ 295,025     $ 265,335  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Calculated using average daily balances.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 4

 

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

 

     Three months ended           Year ended  

In millions

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

Liabilities and Equity

                       

Interest-bearing liabilities:

                       

Interest-bearing deposits

                       

Money market

   $ 67,997      $ 67,628      $ 66,902      $ 61,162      $ 58,897         $ 65,933      $ 58,765  

Demand

     36,619        34,733        34,388        31,599        29,338           34,342        27,563  

Savings

     10,190        10,066        10,008        9,183        8,545           9,863        8,185  

Retail certificates of deposit

     24,394        25,695        27,373        29,011        30,888           26,609        34,009  

Time deposits in foreign offices and other time

     2,740        3,230        3,577        3,238        2,869           3,195        2,815  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

Total interest-bearing deposits

     141,940        141,352        142,248        134,193        130,537           139,942        131,337  

Borrowed funds

                       

Federal funds purchased and repurchase agreements

     4,023        4,659        4,937        4,551        3,714           4,542        4,469  

Federal Home Loan Bank borrowings

     8,877        10,626        10,238        8,967        6,090           9,678        5,305  

Bank notes and senior debt

     9,702        9,657        10,618        11,138        11,463           10,275        11,202  

Subordinated debt

     6,668        6,408        7,293        7,719        8,463           7,019        8,942  

Commercial paper

     9,069        10,518        8,229        5,684        3,527           8,383        3,234  

Other

     1,961        1,868        1,809        2,153        2,408           1,947        2,574  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

Total borrowed funds

     40,300        43,736        43,124        40,212        35,665           41,844        35,726  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

Total interest-bearing liabilities

     182,240        185,088        185,372        174,405        166,202           181,786        167,063  

Noninterest-bearing liabilities and equity:

                       

Noninterest-bearing deposits

     65,527        62,483        60,478        57,900        55,946           61,610        51,707  

Allowance for unfunded loan commitments and letters of credit

     239        225        243        240        217           237        203  

Accrued expenses and other liabilities

     12,237        11,590        10,375        11,186        11,132           11,350        11,040  

Equity

     41,888        40,756        39,683        37,811        37,225           40,042        35,322  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

Total liabilities and equity

   $ 302,131      $ 300,142      $ 296,151      $ 281,542      $ 270,722         $ 295,025      $ 265,335  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

 

(a)    Calculated using average daily balances.

 

Supplemental Average Balance Sheet Information (Unaudited)

 

Deposits and Common Shareholders’ Equity

       

  

  

        

Interest-bearing deposits

   $ 141,940      $ 141,352      $ 142,248      $ 134,193      $ 130,537         $ 139,942      $ 131,337  

Noninterest-bearing deposits

     65,527        62,483        60,478        57,900        55,946           61,610        51,707  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

Total deposits

   $ 207,467      $ 203,835      $ 202,726      $ 192,093      $ 186,483         $ 201,552      $ 183,044  

Transaction deposits

   $ 170,143      $ 164,844      $ 161,768      $ 150,661      $ 144,181         $ 161,885      $ 138,035  

Common shareholders’ equity

   $ 35,296      $ 34,323      $ 33,648      $ 32,981      $ 32,552         $ 34,066      $ 31,501  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 5

 

Details of Net Interest Margin (Unaudited) (a)

 

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

Average yields/rates

                 

Yield on interest-earning assets

                 

Investment securities

                 

Securities available for sale

                 

Residential mortgage-backed

                 

Agency

    2.94     3.03     3.17     3.14     3.11         3.07 %     3.45

Non-agency

    5.39       5.08       5.63       5.38       5.44            5.38       5.31  

Commercial mortgage-backed

    3.81       4.29       4.41       4.42       4.43            4.24       4.57  

Asset-backed

    1.93       2.09       1.91       2.24       2.39            2.03       2.47  

US Treasury and government agencies

    1.76       2.08       2.33       1.80       2.61            2.01       2.65  

State and municipal

    4.66       4.62       4.63       5.13       4.58            4.74       4.55  

Other debt

    2.91       2.85       2.56       2.55       2.75            2.72       2.60  

Corporate stocks and other

    .24       .12       .11       .03       .04           

Total securities available for sale

    3.19       3.27       3.40       3.38       3.46            3.31       3.63  

Securities held to maturity

                 

Residential mortgage-backed

    3.34       3.50       3.70       3.58       3.39            3.53       3.42  

Commercial mortgage-backed

    4.50       4.46       4.56       4.62       4.57            4.55       4.95  

Asset-backed

    1.76       2.61       1.83       1.68       1.98            1.91       2.17  

US Treasury and government agencies

    3.82       3.81       3.79       3.79       3.81            3.98       3.45  

State and municipal

    4.23       4.18       4.20       4.18       4.19            4.18       4.43  

Other

    2.89       2.82       2.89       2.83       2.88            2.79       3.17  

Total securities held to maturity

    3.73       3.83       3.90       3.82       3.74            3.82       3.90  

Total investment securities

    3.28       3.37       3.49       3.47       3.51            3.40       3.67  
 

Loans

                 

Commercial

    4.16       4.30       4.75       4.51       4.66            4.50       4.92  

Commercial real estate

    5.57       5.26       5.78       5.19       5.33            5.55       5.24  

Equipment lease financing

    4.26       4.45       4.96       4.74       4.84            4.60       4.97  

Consumer

    4.68       4.63       4.67       4.78       4.81            4.69       4.89  

Residential real estate

    5.36       5.18       5.44       5.59       5.35            5.39       5.92  

Total loans

    4.58       4.59       4.90       4.78       4.85            4.75       5.04  
 

Loans held for sale

    5.34       4.34       6.00       6.89       5.96            5.64       6.97  

Federal funds sold and resale agreements

    1.04       1.22       1.45       1.58       1.48            1.38       1.44  

Other

    3.24       3.27       3.62       3.71       3.45            3.45       2.83  

Total yield on interest-earning assets

    4.24       4.24       4.51       4.41       4.44            4.38       4.59  
 

Rate on interest-bearing liabilities

                 

Interest-bearing deposits

                 

Money market

    .19       .21       .21       .23       .25            .21       .31  

Demand

    .04       .04       .04       .04       .05            .04       .08  

Savings

    .09       .09       .10       .10       .16            .09       .18  

Retail certificates of deposit

    .89       .90       .57       .80       1.16            .79       1.26  

Time deposits in foreign offices and other time

    .45       .38       .49       .49       .53            .47       .64  

Total interest-bearing deposits

    .27       .29       .24       .31       .42            .28       .51  
 

Borrowed funds

                 

Federal funds purchased and repurchase agreements

    .20       .19       .21       .22       .15            .22       .16  

Federal Home Loan Bank borrowings

    .70       .69       .74       .80       .93            .74       1.00  

Bank notes and senior debt

    2.07       2.16       2.30       2.48       2.11            2.30       2.25  

Subordinated debt

    3.57       4.71       4.77       5.09       4.91            4.56       5.10  

Commercial paper

    .28       .28       .26       .26       .28            .27       .28  

Other

    2.78       2.43       2.25       2.05       1.87            2.41       1.90  

Total borrowed funds

    1.46       1.53       1.72       2.01       2.17            1.69       2.31  

Total rate on interest-bearing liabilities

    .54       .58       .58       .70       .80            .60       .89  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Interest rate spread

    3.70       3.66       3.93       3.71       3.64            3.78       3.70  

Impact of noninterest-bearing sources

    .15       .16       .15       .19       .22            .16       .22  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Net interest margin

    3.85     3.82     4.08     3.90     3.86         3.94     3.92
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

 

(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 December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012, and December 31, 2011, were $42 million, $36 million, $35 million, $31 million, and $28 million, respectively. The taxable-equivalent adjustments to net interest income for the year ended December 31, 2012 and December 31, 2011 were $144 million and $104 million, respectively.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 6

 

Total and Core Net Interest Income (Unaudited)

Total and Core Net Interest Income

 

     Three months ended          Year ended  

In millions

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

Core net interest income (a)

   $ 2,151     $ 2,154     $ 2,183     $ 2,028     $ 1,943          $ 8,516     $ 7,581  

Purchase accounting accretion (a)

     273       245       343       263       256            1,124       1,119  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total net interest income

   $ 2,424     $ 2,399     $ 2,526     $ 2,291     $ 2,199          $ 9,640     $ 8,700  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

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

 

Details of Net Interest Margin (b)

 

        

  

     Three months ended          Year ended  

In millions

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

Average yields/rates

                   

Yield on interest earning assets

                   

Total investment securities

     3.28     3.37     3.49     3.47     3.51          3.40     3.67

Total loans

     4.58       4.59       4.90       4.78       4.85            4.75       5.04  

Other

     3.56       3.26       3.95       4.17       3.68            3.74       3.48  

Total yield on interest earning assets

     4.24       4.24       4.51       4.41       4.44            4.38       4.59  

Rate on interest-bearing liabilities

                   

Total interest-bearing deposits

     .27       .29       .24       .31       .42            .28       .51  

Total borrowed funds

     1.46       1.53       1.72       2.01       2.17            1.69       2.31  

Total rate on interest-bearing liabilities

     .54       .58       .58       .70       .80            .60       .89  

Interest rate spread

     3.70       3.66       3.93       3.71       3.64            3.78       3.70  

Impact of noninterest-bearing sources

     .15       .16       .15       .19       .22            .16       .22  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Net interest margin

     3.85     3.82     4.08     3.90     3.86          3.94     3.92
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

(b)    See note (a) on page 5.

 

Details of Core Net Interest Margin (c)

 

       

  

     Three months ended          Year ended  

In millions

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

Average yields/rates

                   

Yield on interest earning assets

                   

Total investment securities

     3.17     3.27     3.37     3.41     3.43          3.30     3.59

Total loans

     4.02       4.09       4.25       4.32       4.37            4.20       4.52  

Other

     3.35       3.11       3.73       3.65       3.68            3.46       3.25  

Total yield on interest earning assets

     3.80       3.85       4.01       4.05       4.09            3.95       4.21  

Rate on interest-bearing liabilities

                   

Total interest-bearing deposits

     .31       .34       .39       .54       .65            .39       .78  

Total borrowed funds

     1.23       1.31       1.50       1.76       1.90            1.46       2.03  

Total rate on interest-bearing liabilities

     .52       .57       .64       .81       .93            .63       1.04  

Interest rate spread

     3.28       3.28       3.37       3.24       3.16            3.32       3.17  

Impact of noninterest-bearing sources

     .15       .16       .15       .19       .22            .16       .22  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Core net interest margin

     3.43       3.44       3.52       3.43       3.38            3.48       3.39  

Purchase accounting accretion impact on net interest margin

     .42       .38       .56       .47       .48            .46       .53  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Net interest margin

     3.85     3.82     4.08     3.90     3.86          3.94     3.92
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

(c)    We believe that core net interest margin, a non-GAAP measure, is useful as a tool to help evaluate the impact of purchase accounting accretion on net interest margin. The adjustment represents annualized purchase accounting accretion divided by average interest-earning assets.

         


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 7

 

Per Share Related Information (Unaudited)

 

     Three months ended           Year ended  

In millions, except per share data

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

Basic

                      

Net income

   $ 719      $ 925     $ 546     $ 811      $ 493           $ 3,001     $ 3,071  

Less:

                      

Net income (loss) attributable to noncontrolling interests

     1        (14     (5     6        17             (12     15  

Preferred stock dividends and discount accretion and redemptions

     54        63       25       39        25             181       58  

Dividends and undistributed earnings allocated to nonvested restricted shares

     4        5       1       4        2             14       12  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

         

 

 

   

 

 

 

Net income attributable to basic common shares

   $ 660      $ 871     $ 525     $ 762      $ 449           $ 2,818     $ 2,986  

Basic weighted-average common shares outstanding

     526        526       527       526        524             526       524  

Basic earnings per common share

   $ 1.26      $ 1.66     $ 1.00     $ 1.45      $ .86           $ 5.36     $ 5.70  
 

Diluted

                      

Net income attributable to basic common shares

   $ 660      $ 871     $ 525     $ 762      $ 449           $ 2,818     $ 2,986  

Less: BlackRock common stock equivalents

     4        3       4       3        3             14       19  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

         

 

 

   

 

 

 

Net income attributable to diluted common shares

   $ 656      $ 868     $ 521     $ 759      $ 446           $ 2,804     $ 2,967  

Basic weighted-average common shares outstanding

     526        526       527       526        524             526       524  

Dilutive potential common shares

     2        3       3       3        2             3       2  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

         

 

 

   

 

 

 

Diluted weighted-average common shares outstanding

     528        529       530       529        526             529       526  

Diluted earnings per common share

   $ 1.24      $ 1.64     $ .98     $ 1.44      $ .85           $ 5.30     $ 5.64  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

         

 

 

   

 

 

 

Selected Consolidated Income Statement Information (Unaudited)

 

     Three months ended           Year ended  

In millions, except per share data

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

Noninterest Income

                         

Provision for residential mortgage repurchase obligations (Pre-tax)

   $ 254      $ 37      $ 438      $ 32      $ 36           $ 761      $ 102  

Impact on diluted earnings per share (a)

     .31        .05        .54        .04        .04             .93        .13  

Gain on sale of Visa Class B common shares (Pre-tax)

   $ 130      $ 137                    $ 267     

Impact on diluted earnings per share (a)

     .16        .17                      .33     

Noninterest Expense

                         

Goodwill impairment charge for

                         

Residential Mortgage Banking segment
(Pre-tax)

   $ 45                       $ 45     

Impact on diluted earnings per share (a)

     .08                         .08     

Expenses for residential mortgage foreclosure-related matters
(Pre-tax)

   $ 91      $ 53      $ 43      $ 38      $ 240           $ 225      $ 324  

Impact on diluted earnings per share (a)

     .11        .06        .05        .05        .30             .28        .40  

Noncash charges for unamortized discounts related to redemption of trust preferred securities (Pre-tax)

   $ 70      $ 95      $ 130         $ 198           $ 295      $ 198  

Impact on diluted earnings per share (a)

     .09        .12        .16           .24             .36        .24  

Integration costs (Pre-tax)

   $ 35      $ 35      $ 52      $ 145      $ 28           $ 267      $ 42  

Impact on diluted earnings per share (a)

     .04        .04        .06        .18        .04             .33        .05  

Income Taxes

                         

Benefit related to reversal of deferred tax liabilities (b)

                          $ 54  

Impact on diluted earnings per share (a)

                            .07  

 

(a) In calculating impact on diluted earnings per share in the table above, after-tax amounts for the income statement items were calculated using a statutory federal income tax rate of 35%, excluding the goodwill impairment charge which was considered nondeductible for income tax purposes.
(b) Represents tax benefit recognized within Income taxes on our Consolidated Income Statement.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 8

 

Details of Loans (Unaudited)

 

In millions

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

Commercial

              

Retail/wholesale trade

   $ 13,801      $ 13,381      $ 13,434      $ 12,983      $ 11,539  

Manufacturing

     13,856        13,498        13,442        12,684        11,453  

Service providers

     12,095        11,822        11,875        11,215        9,717  

Real estate related (a)

     10,616        10,208        10,051        10,091        8,488  

Financial services

     9,026        9,136        9,397        8,273        6,646  

Health care

     7,267        6,652        6,240        5,695        5,068  

Other industries

     16,379        14,971        14,462        14,574        12,783  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     83,040        79,668        78,901        75,515        65,694  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial real estate

              

Real estate projects

     12,347        12,801        12,837        12,589        10,640  

Commercial mortgage

     6,308        5,808        5,643        5,945        5,564  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     18,655        18,609        18,480        18,534        16,204  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equipment lease financing

     7,247        6,923        6,764        6,594        6,416  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial lending

     108,942        105,200        104,145        100,643        88,314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consumer

              

Home equity

              

Lines of credit

     23,576        24,007        24,360        24,668        22,491  

Installment

     12,344        11,871        11,478        11,076        10,598  

Credit card

     4,303        4,135        4,123        4,089        3,976  

Other consumer

              

Education

     8,238        8,415        8,807        9,246        9,582  

Automobile

     8,708        8,328        7,166        5,794        5,181  

Other

     4,505        4,525        4,523        4,486        4,403  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     61,674        61,281        60,457        59,359        56,231  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Residential real estate

              

Residential mortgage

     14,430        14,505        14,927        15,287        13,885  

Residential construction

     810        878        896        925        584  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total residential real estate

     15,240        15,383        15,823        16,212        14,469  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer lending

     76,914        76,664        76,280        75,571        70,700  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans (b)

   $ 185,856      $ 181,864      $ 180,425      $ 176,214      $ 159,014  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

       

(b)    Includes purchased impaired loans:

   $ 7,406      $ 7,749      $ 8,083      $ 8,421      $ 6,667  

 

Details of Loans Held for Sale (Unaudited)

  

In millions

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

Commercial mortgage

   $ 1,392      $ 1,183      $ 1,021      $ 1,014      $ 1,294  

Residential mortgage

     2,220        1,477        1,939        1,387        1,522  

Other

     81        77        373        55        120  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,693      $ 2,737      $ 3,333      $ 2,456      $ 2,936  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Net Unfunded Commitments (Unaudited)

  

In millions

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

Net unfunded commitments

   $ 120,592      $ 118,285      $ 113,636      $ 112,454      $ 103,271  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 9

 

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

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions

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

Beginning balance

   $ 4,039     $ 4,156     $ 4,196     $ 4,347     $ 4,507  

Charge-offs:

          

Commercial

     (126     (114     (123     (111     (143

Commercial real estate

     (72     (83     (75     (84     (90

Equipment lease financing

     (4     (2     (5     (5     (7

Home equity (a)

     (141     (167     (121     (131     (109

Residential real estate (a)

     (18     (25     (37     (30     (32

Credit card (a)

     (43     (47     (55     (55     (50

Other consumer (a)

     (56     (43     (46     (51     (51
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total charge-offs (b)

     (460     (481     (462     (467     (482

Recoveries:

          

Commercial

     77       76       75       72       76  

Commercial real estate

     29       34       29       23       40  

Equipment lease financing

     8       7       6       9       13  

Home equity

     15       16       17       13       11  

Residential real estate

       (1     1       (1     1  

Credit card

     9       6       6       5       5  

Other consumer

     12       12       13       13       9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recoveries

     150       150       147       134       155  

Net (charge-offs) recoveries:

          

Commercial

     (49     (38     (48     (39     (67

Commercial real estate

     (43     (49     (46     (61     (50

Equipment lease financing

     4       5       1       4       6  

Home equity

     (126     (151     (104     (118     (98

Residential real estate

     (18     (26     (36     (31     (31

Credit card

     (34     (41     (49     (50     (45

Other consumer

     (44     (31     (33     (38     (42
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

     (310     (331     (315     (333     (327

Provision for credit losses

     318       228       256       185       190  

Other

       1        

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

     (11     (15     19       (3     (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 4,036     $ 4,039     $ 4,156     $ 4,196     $ 4,347  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Information

          

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

     .67     .73     .71     .81     .83

Allowance for loan and lease losses to total loans

     2.17        2.22        2.30        2.38        2.73   

Commercial lending net charge-offs

   $ (88   $ (82   $ (93   $ (96   $ (111

Consumer lending net charge-offs

     (222     (249     (222     (237     (216
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

   $ (310   $ (331   $ (315   $ (333   $ (327

Net charge-offs to average loans

          

Commercial lending

     .33     .31     .37     .42     .51

Consumer lending

     1.15        1.30        1.18        1.32        1.22   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Pursuant to regulatory guidance issued in the third quarter of 2012, additional consumer charge-offs of $45.2 million and $82.9 million have been taken as of December 31, 2012 and September 30, 2012, respectively, related to changes in treatment of certain loans where borrowers have been discharged from personal liability under bankruptcy protection where no formal reaffirmation of the loan obligation was provided by the borrower. Such loans have been classified as troubled debt restructurings (TDRs) and have been measured at fair value of the collateral less costs to sell.
(b) Pursuant to regulatory guidance, the Company will adopt a policy in the first quarter of 2013, subsequent to operationalizing related procedures, to charge-off a portion of certain second-lien consumer loans (residential mortgage and home equity lines of credit) where the first lien is delinquent. If this policy had been in effect as of December 31, 2012 there would have been an estimated cumulative charge-off of approximately $125 million. The risk of loss associated with these loans has been considered in the determination of our Allowance for Loan and Lease Losses (ALLL) at December 31, 2012.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions

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

Beginning balance

   $ 239      $ 224      $ 243     $ 240      $ 217  

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

     11        15        (19     3        23  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Ending balance

   $ 250      $ 239      $ 224     $ 243      $ 240  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 10

 

Purchase Accounting Accretion and Valuation of Purchased Impaired Loans (Unaudited)

Accretion - Purchased Impaired Loans

 

     Three months ended     Year ended  

In millions

   December 31
2012 (a)
    September 30
2012 (a)
    December 31
2011 (b)
    December 31
2012 (a)
    December 31
2011 (b)
 

Impaired loans

          

Scheduled accretion

   $ 160     $ 175     $ 154     $ 671     $ 666  

Reversal of contractual interest on impaired loans

     (93     (103     (102     (404     (395
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Scheduled accretion net of contractual interest

     67       72       52       267       271  

Excess cash recoveries

     45       21       61       157       254  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

   $ 112     $ 93     $ 113     $ 424     $ 525  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

Accretable Net Interest - Purchased Impaired Loans

 

In millions

                         

October 1, 2012

  $ 2,264     January 1, 2012   $ 2,109     January 1, 2011   $ 2,185  
    Addition due to RBC (USA) acquisition on March 2, 2012     587      

Accretion

    (160   Accretion     (671   Accretion     (666

Excess cash recoveries

    (45   Excess cash recoveries     (157   Excess cash recoveries     (254

Net reclassifications to accretable from non-accretable and other activity

    107     Net reclassifications to accretable from non-accretable and other activity     298     Net reclassifications to accretable from non-accretable and other activity     844  
 

 

 

     

 

 

     

 

 

 

December 31, 2012 (a)

  $ 2,166     December 31, 2012   $ 2,166     December 31, 2011   $ 2,109  
 

 

 

     

 

 

     

 

 

 

 

(a) As of December 31, 2012, we estimate that the reversal of contractual interest on purchased impaired loans will total approximately $1.2 billion in future periods.

This will offset the total net accretable interest in future interest income of $2.2 billion on purchased impaired loans.

Valuation of Purchased Impaired Loans

 

     December 31, 2012 (a)     September 30, 2012 (a)     December 31, 2011 (b)  

Dollars in millions

   Balance     Net
Investment
    Balance     Net
Investment
    Balance     Net
Investment
 

Commercial and commercial real estate loans:

            

Unpaid principal balance

   $ 1,680       $ 1,937       $ 988    

Purchased impaired mark

     (431       (535       (136  
  

 

 

     

 

 

     

 

 

   

Recorded investment

     1,249         1,402         852    

Allowance for loan losses

     (239       (229       (229  
  

 

 

     

 

 

     

 

 

   

Net investment

     1,010       60     1,173       61     623       63
  

 

 

     

 

 

     

 

 

   

Consumer and residential mortgage loans:

            

Unpaid principal balance

     6,639         6,976         6,533    

Purchased impaired mark

     (482       (629       (718  
  

 

 

     

 

 

     

 

 

   

Recorded investment

     6,157         6,347         5,815    

Allowance for loan losses

     (858       (839       (769  
  

 

 

     

 

 

     

 

 

   

Net investment

     5,299       80     5,508       79     5,046       77
  

 

 

     

 

 

     

 

 

   

Total purchased impaired loans:

            

Unpaid principal balance

     8,319         8,913         7,521    

Purchased impaired mark

     (913       (1,164       (854  
  

 

 

     

 

 

     

 

 

   

Recorded investment

     7,406         7,749         6,667    

Allowance for loan losses

     (1,097       (1,068       (998  
  

 

 

     

 

 

     

 

 

   

Net investment

   $ 6,309       76   $ 6,681       75   $ 5,669       75
  

 

 

     

 

 

     

 

 

   

 

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


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 11

 

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions

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

Nonperforming loans, including TDRs (a)

          

Commercial lending

          

Commercial

          

Retail/wholesale trade

   $ 61     $ 88     $ 110     $ 108     $ 109  

Manufacturing

     73       104       141       107       117  

Service providers

     124       144       145       149       147  

Real estate related (b)

     178       236       214       232       252  

Financial services

     9       13       15       20       36  

Health care

     25       26       22       23       29  

Other industries

     120       138       144       200       209  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

     590       749       791       839       899  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial real estate

          

Real estate projects

     654       802       924       977       1,051  

Commercial mortgage

     153       198       218       274       294  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

     807       1,000       1,142       1,251       1,345  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equipment lease financing

     13       15       19       21       22  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     1,410       1,764       1,952       2,111       2,266  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer lending (c)

          

Home equity (d)

     951       818       722       685       529  

Residential real estate

          

Residential mortgage (e)

     824       766       707       684       685  

Residential construction

     21       24       32       44       41  

Credit card (f)

     5       5       6       12       8  

Other consumer

     43       37       39       45       31  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer lending (g)

     1,844       1,650       1,506       1,470       1,294  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming loans (h)

     3,254       3,414       3,458       3,581       3,560  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OREO and foreclosed assets

          

Other real estate owned (OREO) (i)

     507       578       670       749       561  

Foreclosed and other assets

     33       29       48       31       35  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total OREO and foreclosed assets

     540       607       718       780       596  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 3,794     $ 4,021     $ 4,176     $ 4,361     $ 4,156  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonperforming loans to total loans

     1.75     1.88     1.92     2.03     2.24

Nonperforming assets to total loans, OREO and foreclosed assets

     2.04        2.20        2.31        2.46        2.60   

Nonperforming assets to total assets

     1.24        1.34        1.39        1.47        1.53   

Allowance for loan and lease losses to nonperforming loans (h) (j)

     124       118       120       117       122  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) See analysis of troubled debt restructurings (TDRs) on page 12.
(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 the first quarter of 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 $69 million, $61 million, $55 million, $55 million, and $61 million accounted for under the fair value option as of December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012 and December 31, 2011, respectively.
(f) Effective in the second quarter of 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) Pursuant to regulatory guidance issued in the third quarter of 2012, nonperforming consumer loans, primarily home equity and residential mortgage, increased $199 million and $112 million in the fourth and third quarters of 2012, respectively, related to changes in treatment of certain loans classified as TDRs, net of charge-offs, resulting from bankruptcy where no formal reaffirmation was provided by the borrower and therefore a concession has been granted based upon discharge from personal liability. Charge-offs have been taken where the fair value less costs to sell the collateral was less than the recorded investment of the loan and were $45.2 million and $82.9 million, respectively. As of December 31, 2012, there were $285.5 million of these loans, of which 76% were current.
(h) Nonperforming loans exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.
(i) OREO excludes $380 million, $363 million, $262 million, $252 million, and $280 million at December 31, 2012, September 30, 2012, June 30, 2012, March 31, 2012 and December 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).
(j) The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 12

 

Details of Nonperforming Assets and Troubled Debt Restructurings (Unaudited)

Change in Nonperforming Assets

 

     October 1, 2012 -     July 1, 2012 -     April 1, 2012 -     January 1, 2012 -     October 1, 2011 -  

In millions

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

Beginning balance

   $ 4,021     $ 4,176     $ 4,361     $ 4,156     $ 4,298  

New nonperforming assets

     804       861       797       1,186       854  

Charge-offs and valuation adjustments

     (297     (392     (293     (236     (221

Principal activity, including paydowns and payoffs

     (532     (438     (428     (414     (506

Asset sales and transfers to loans held for sale

     (134     (162     (168     (146     (152

Returned to performing status

     (68     (24     (93     (185     (117
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 3,794     $ 4,021     $ 4,176     $ 4,361     $ 4,156  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

In millions

Ranking

   Outstandings     

Industry

1    $ 38      Real Estate, Rental and Leasing
2      34      Real Estate, Rental and Leasing
3      17      Real Estate, Rental and Leasing
4      14      Utilities
5      14      Real Estate, Rental and Leasing
6      12      Other Real Estate Owned
7      12      Real Estate, Rental and Leasing
8      12      Construction
9      12      Real Estate, Rental and Leasing
10      11      Residential Mortgage
  

 

 

    
Total    $ 176     
  

 

 

    

As a percent of total nonperforming assets 5%

 

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

Summary of Troubled Debt Restructurings

 

In millions

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

Total commercial lending

   $ 541      $ 556      $ 483      $ 412      $ 405  

Total consumer lending (a)

     2,318        2,019        1,836        1,821        1,798  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total TDRs

   $ 2,859      $ 2,575      $ 2,319      $ 2,233      $ 2,203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Nonperforming

   $ 1,589      $ 1,383      $ 1,189      $ 1,095      $ 1,141  

Accruing (b)

     1,037        950        878        865        771  

Credit card (c)

     233        242        252        273        291  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total TDRs

   $ 2,859      $ 2,575      $ 2,319      $ 2,233      $ 2,203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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) Pursuant to regulatory guidance issued in the third quarter of 2012, additional troubled debt restructurings related to changes in treatment of certain loans of $245.7 million and $154.8 million in the fourth and third quarters of 2012, respectively, net of charge-offs, resulting from bankruptcy where no formal reaffirmation was provided by the borrower and therefore a concession has been granted based upon discharge from personal liability were added to the consumer lending population. The additional TDR population increased nonperforming loans by $199 million and $112 million, respectively. Charge-offs have been taken where the fair value less costs to sell the collateral was less than the recorded investment of the loan and were $45.2 million and $82.9 million, respectively. As of December 31, 2012, there were $285.5 million of these loans, of which 76% were current.
(b) Accruing loans have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans.
(c) 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 13

 

Accruing Loans Past Due (Unaudited)

Accruing Loans Past Due 30 to 59 Days (a)

 

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

Dollars in millions

   2012      2012      2012      2012      2011      2012     2012     2012     2012     2011  

Commercial

   $ 115      $ 141      $ 130      $ 195      $ 122        .14     .18     .16     .26     .19

Commercial real estate

     100        91        123        144        96        .54       .49       .67       .78       .59  

Equipment lease financing

     17        8        5        25        22        .23       .12       .07       .38       .34  

Home equity (b)

     117        130        124        127        173        .33       .36       .35       .36       .52  

Residential real estate

                         

Non government insured (c)

     151        147        148        198        180        .99       .96       .94       1.22       1.24  

Government insured

     127        127        123        122        122        .83       .80       .78       .75       .84  

Credit card

     34        31        33        34        38        .79       .75       .80       .83       .96  

Other consumer

                         

Non government insured

     65        54        43        50        58        .30       .25       .21       .26       .30  

Government insured

     193        154        164        171        207        .90       .72       .80       .88       1.08  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 919      $ 883      $ 893      $ 1,066      $ 1,018        .49       .49       .49       .60       .64  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accruing Loans Past Due 60 to 89 Days (a)

 

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

Dollars in millions

   2012      2012      2012      2012      2011      2012     2012     2012     2012     2011  

Commercial

   $ 55      $ 92      $ 65      $ 53      $ 47        .07     .12     .08     .07     .07

Commercial real estate

     57        66        105        44        35        .31       .35       .57       .24       .22  

Equipment lease financing

     1        5        2        2        5        .01       .07       .03       .03       .08  

Home equity (b)

     58        69        68        79        114        .16       .19       .19       .22       .34  

Residential real estate

                         

Non government insured (c)

     49        52        52        56        72        .32       .34       .33       .35       .50  

Government insured

     97        94        91        100        104        .64       .59       .58       .62       .72  

Credit card

     23        20        22        24        25        .53       .48       .53       .59       .63  

Other consumer

                         

Non government insured

     21        23        16        20        21        .10       .11       .08       .10       .11  

Government insured

     110        121        113        98        124        .51       .57       .55       .50       .65  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 471      $ 542      $ 534      $ 476      $ 547        .25       .30       .30       .27       .34  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accruing Loans Past Due 90 Days or More (a)

 

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

Dollars in millions

   2012      2012      2012      2012      2011      2012     2012     2012     2012     2011  

Commercial

   $ 42      $ 41      $ 34      $ 28      $ 49        .05     .05     .04     .04     .07

Commercial real estate

     15        36        16        5        6        .08       .19       .09       .03       .04  

Equipment lease financing

     2        1        1        5           .03       .01       .01       .08    

Home equity (b)(d)

                 221                .67  

Residential real estate

                         

Non government insured (c)

     46        97        104        116        152        .30       .63       .66       .72       1.05  

Government insured

     1,855        1,896        1,925        2,012        2,129        12.17       11.98       12.17       12.41       14.71  

Credit card

     36        32        38        47        48        .84       .77       .92       1.15       1.21  

Other consumer

                         

Non government insured

     18        18        17        21        23        .08       .08       .08       .11       .12  

Government insured

     337        335        348        351        345        1.57       1.58       1.70       1.80       1.80  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 2,351      $ 2,456      $ 2,483      $ 2,585      $ 2,973        1.26       1.35       1.38       1.47       1.87  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Excludes loans held for sale and purchased impaired loans.
(b) The Home equity amounts as of March 31, 2012 were reduced by $47 million and $24 million for the Accruing Loans Past Due 30 to 59 Days and 60 to 89 Days respectively, to correct for immaterial amounts. Prior periods have not been adjusted.
(c) The Residential real estate amounts as of March 31, 2012 were reduced by $24 million, $17 million and $24 million for the Accruing Loans Past Due 30 to 59 Days, 60 to 89 Days and 90 Days or More respectively, to correct for immaterial amounts. Prior periods have not been adjusted.
(d) In the first quarter of 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 14

 

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., Delaware, Alabama, Virginia, Georgia, 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 administration services. The institutional clients include corporations, unions, municipalities, non-profits, foundations and endowments, primarily located 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 a consumer portfolio of mainly residential mortgage and brokered home equity loans and a small commercial loan and lease portfolio. We obtained a significant portion of these non-strategic assets through acquisitions of other companies.

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 December 31, 2012, our economic interest in BlackRock was 22%.

Period End Employees

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

Full-time employees

              

Retail Banking

     23,331        23,403        23,388        23,583        21,056  

Other full-time employees (a)

     27,616        27,512        27,060        26,863        24,884  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total full-time employees

     50,947        50,915        50,448        50,446        45,940  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Part-time employees

              

Retail Banking

     4,563        4,740        4,970        5,265        5,083  

Other part-time employees (a)

     775        879        1,215        894        868  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total part-time employees

     5,338        5,619        6,185        6,159        5,951  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total (b)

     56,285        56,534        56,633        56,605        51,891  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Includes period end employees for all businesses other than Retail Banking and includes operations, technology and staff services employees other than staff directly employed by Retail Banking.
(b) The increase in the total number of employees at March 31, 2012 is primarily driven by the acquisition of RBC Bank (USA) during the first quarter of 2012.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 15

 

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

 

      Three months ended          Year ended  

In millions

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

Income (Loss)

                     

Retail Banking (c)

   $ 121     $ 192      $ 136     $ 147      $ 62          $ 596     $ 371  

Corporate & Institutional Banking

     649       607        577       495        597            2,328       1,940  

Asset Management Group

     34       37        38       36        25            145       168  

Residential Mortgage Banking (d)

     (192     36        (213     61        (61          (308     89  

Non-Strategic Assets Portfolio

     59       40        67       71        (2          237       200  

Other, including BlackRock (b) (e) (f)

     48       13        (59     1        (128          3       303  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Net income (g)

   $ 719     $ 925      $ 546     $ 811      $ 493          $ 3,001     $ 3,071  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Revenue

                     

Retail Banking (c)

   $ 1,677     $ 1,664      $ 1,551     $ 1,436      $ 1,383          $ 6,328     $ 5,579  

Corporate & Institutional Banking

     1,576       1,416        1,439       1,266        1,306            5,697       4,775  

Asset Management Group

     247       243        240       243        234            973       929  

Residential Mortgage Banking (d)

     58       284        (109     293        220            526       952  

Non-Strategic Assets Portfolio

     218       204        223       198        207            843       960  

Other, including BlackRock (b) (e)

     293       277        279       296        199            1,145       1,131  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Total revenue

   $ 4,069     $ 4,088      $ 3,623     $ 3,732      $ 3,549          $ 15,512     $ 14,326  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

 

(a) Our business information is presented based on our internal management reporting practices. We periodically refine our internal methodologies as management reporting practices are enhanced. During the second quarter of 2012, enhancements were made to the funds transfer pricing methodology. Retrospective application of our new funds transfer pricing methodology has been made to the prior period reportable business segment results and disclosures to create comparability to the current period presentation, which we believe is more meaningful to readers of our financial statements. During the third quarter of 2012, enhancements were made to certain assumptions used to estimate our total ALLL and provision. The estimated impact as of the beginning of the third quarter 2012 was approximately an increase of $41 million and a decrease of $55 million to the provision for credit losses of Retail Banking and Corporate & Institutional Banking, respectively.
(b) We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our 2012 Form 10-K will include additional information regarding BlackRock.
(c) Includes gains on sales of a portion of Visa Class B common shares in the third and fourth quarters of 2012. For more information, refer to Selected Consolidated Income Statement Information on page 7.
(d) Includes provisions for residential mortgage repurchase obligations. For more information, refer to Selected Consolidated Income Statement Information on page 7.
(e) 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.
(f) Includes amounts for integration costs and noncash charges for unamortized discounts related to redemption of trust preferred securities. For more information, refer to Selected Consolidated Income Statement Information on page 7.
(g) Includes expenses for residential mortgage foreclosure-related matters. For 2011, these expenses have been allocated among the following: Residential Mortgage Banking, Non-Strategic Assets Portfolio and Other. For 2012, these expenses were only allocated to Residential Mortgage Banking. For more information, refer to Selected Consolidated Income Statement Information on page 7.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 16

 

Retail Banking (Unaudited) (a)

 

    Three months ended         Year ended  

Dollars in millions

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

INCOME STATEMENT

                 

Net interest income

  $ 1,081      $ 1,076      $ 1,114      $ 1,045      $ 972       $ 4,316      $ 3,806  

Noninterest income

                 

Service charges on deposits

    143       146       137       121       135         547       510  

Brokerage

    48       47       49       45       48         189       201  

Consumer services

    220       214       213       191       195         838       927  

Other

    185       181       38       34       33         438       135  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total noninterest income

    596       588       437       391       411         2,012       1,773  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total revenue

    1,677       1,664       1,551       1,436       1,383         6,328       5,579  

Provision for credit losses

    280       220       165       135       229         800       891  

Noninterest expense

    1,206       1,140       1,171       1,069       1,056         4,586       4,103  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Pretax earnings

    191       304       215       232       98         942       585  

Income taxes

    70       112       79       85       36         346       214  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Earnings

  $ 121      $ 192      $ 136      $ 147      $ 62       $ 596      $ 371  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                 

Loans

                 

Consumer

                 

Home equity

  $ 28,920      $ 28,881      $ 28,761      $ 26,759      $ 25,890       $ 28,321      $ 25,972  

Indirect auto

    6,718       5,654       5,042       4,439       3,878         5,467       3,094  

Indirect other

    1,063       1,133       1,211       1,292       1,368         1,174       1,491  

Education

    8,370       8,611       9,100       9,440       9,302         8,878       9,103  

Credit cards

    4,138       4,108       4,075       3,928       3,805         4,063       3,738  

Other

    2,145       2,068       2,004       1,888       1,824         2,039       1,750  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total consumer

    51,354       50,455       50,193       47,746       46,067         49,942       45,148  

Commercial and commercial real estate

    11,266       11,360       11,445       10,682       10,369         11,198       10,567  

Floor plan

    1,915       1,769       1,803       1,663       1,452         1,788       1,450  

Residential mortgage

    862       918       972       1,031       1,092         946       1,180  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total loans

    65,397       64,502       64,413       61,122       58,980         63,874       58,345  

Goodwill and other intangible assets

    6,174       6,199       6,228       5,888       5,735         6,123       5,751  

Other assets

    2,565       2,589       2,452       2,699       2,455         2,576       2,352  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total assets

  $ 74,136      $ 73,290      $ 73,093      $ 69,709      $ 67,170       $ 72,573      $ 66,448  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Deposits

                 

Noninterest-bearing demand

  $ 20,900      $ 20,660      $ 20,381      $ 18,764      $ 18,105       $ 20,179      $ 18,183  

Interest-bearing demand

    29,526       28,506       28,265       25,707       23,583         28,007       22,196  

Money market

    47,859       47,557       47,271       43,601       41,638         46,578       41,002  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total transaction deposits

    98,285       96,723       95,917       88,072       83,326         94,764       81,381  

Savings

    10,068       9,954       9,900       9,077       8,450         9,751       8,098  

Certificates of deposit

    23,531       24,746       26,468       28,150       29,998         25,715       33,006  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total deposits

    131,884       131,423       132,285       125,299       121,774         130,230       122,485  

Other liabilities

    285       255       190       629       758         340       855  

Capital

    9,051       9,034       8,455       8,328       8,152         8,747       8,168  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total liabilities and equity

  $ 141,220      $ 140,712      $ 140,930      $ 134,256      $ 130,684       $ 139,317      $ 131,508  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

PERFORMANCE RATIOS

                 

Return on average capital

    5     8     6     7     3       7     5

Return on average assets

    .65       1.04       .75       .85       .37         .82       .56  

Noninterest income to total revenue

    36       35       28       27       30         32       32  

Efficiency

    72       69       75       74       76         72       74  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

 

(a) See note (a) on page 15.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 17

 

Retail Banking (Unaudited) (Continued)

 

     Three months ended     Year ended  

Dollars in millions, except as noted

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

OTHER INFORMATION (a)

        .             

Credit-related statistics:

               

Commercial nonperforming assets

  $ 245     $ 266     $ 275     $ 315     $ 336      

Consumer nonperforming assets

    902       799       685       650       513      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total nonperforming assets

  $ 1,147     $ 1,065     $ 960     $ 965     $ 849      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Purchased impaired loans (b)

  $ 819     $ 852     $ 886     $ 903     $ 757      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Commercial lending net charge-offs

  $ 34     $ 19     $ 38     $ 28     $ 48     $ 119     $ 219  

Credit card lending net charge-offs

    35       40       49       50       44       174       211  

Consumer lending (excluding credit card) net charge-offs

    148       160       100       113       103       521       427  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

  $ 217     $ 219     $ 187     $ 191     $ 195     $ 814     $ 857  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial lending annualized net charge-off ratio

    1.03     .58     1.15     .91     1.61     .92     1.82

Credit card lending annualized net charge-off ratio

    3.36     3.87     4.84     5.12     4.59     4.28     5.64

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

    1.22     1.35     .85     1.01     .94     1.11     1.00
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total annualized net charge-off ratio

    1.32     1.35     1.17     1.26     1.31     1.27     1.47
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Home equity portfolio credit statistics: (c)

               

% of first lien positions at origination

    42     41     39     37     39    

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

    81     80     78     81     72    

Weighted-average updated FICO scores (e)

    742       742       742       739       743      

Annualized net charge-off ratio

    1.35     1.58     .92     1.11     1.01     1.22     1.09

Loans 30 - 59 days past due

    .52     .51     .54     .56     .58    

Loans 60 - 89 days past due

    .33     .33     .33     .35     .38    

Loans 90 days past due (f)

    1.22     1.24     1.24     1.24     1.22    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Other statistics:

               

ATMs

    7,282       7,261       7,206       7,220       6,806      

Branches (g)

    2,881       2,887       2,888       2,900       2,511      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Customer-related statistics: (in thousands)

               

Retail Banking checking relationships

    6,475       6,451       6,349       6,278       5,761      

Retail online banking active customers

    4,227       4,117       3,953       3,823       3,519      

Retail online bill payment active customers

    1,236       1,219       1,189       1,161       1,105      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Brokerage statistics:

               

Financial consultants (h)

    636       655       684       693       686      

Full service brokerage offices

    41       42       40       38       38      

Brokerage account assets (billions)

  $ 38     $ 38     $ 36     $ 37     $ 34      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

(a) Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three months ended and year ended, respectively.
(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 each quarterly period within 2012. For previous quarters, LTV is 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 18

 

Corporate & Institutional Banking (Unaudited) (a)

 

     Three months ended         Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

                  

Net interest income

   $ 1,057      $ 1,019      $ 1,085      $ 938      $ 943         $ 4,099      $ 3,538  

Noninterest income

                  

Corporate service fees

     324       258       248       200       226           1,030       752  

Other

     195       139       106       128       137           568       485  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Noninterest income

     519       397       354       328       363           1,598       1,237  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total revenue

     1,576       1,416       1,439       1,266       1,306           5,697       4,775  

Provision for credit losses (benefit)

     9       (61     33       19       (136           (124

Noninterest expense

     549       520       496       463       495           2,028       1,832  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Pretax earnings

     1,018       957       910       784       947           3,669       3,067  

Income taxes

     369       350       333       289       350           1,341       1,127  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Earnings

   $ 649      $ 607      $ 577      $ 495      $ 597         $ 2,328      $ 1,940  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                  

Loans

                  

Commercial

   $ 51,081      $ 50,636      $ 49,087      $ 42,919      $ 38,709         $ 48,444      $ 35,764  

Commercial real estate

     16,517       16,226       15,928       14,388       13,903           15,768       13,938  

Commercial - real estate related

     6,562       6,008       5,545       4,971       4,463           5,774       3,782  

Asset-based lending

     10,893       10,406       9,755       9,266       8,893           10,083       8,171  

Equipment lease financing

     6,272       6,095       5,911       5,706       5,529           5,997       5,506  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total loans

     91,325       89,371       86,226       77,250       71,497           86,066       67,161  

Goodwill and other intangible assets

     3,724       3,707       3,749       3,442       3,291           3,656       3,405  

Loans held for sale

     1,190       1,263       1,190       1,244       1,271           1,222       1,257  

Other assets

     12,842       12,582       11,670       10,960       10,111           12,018       9,220  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total assets

   $ 109,081      $ 106,923      $ 102,835      $ 92,896      $ 86,170         $ 102,962      $ 81,043  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Deposits

                  

Noninterest-bearing demand

   $ 40,607      $ 37,685      $ 37,813      $ 37,225      $ 35,770         $ 38,337      $ 31,462  

Money market

     16,500       16,237       15,734       13,872       13,385           15,590       12,925  

Other

     6,842       6,277       5,933       5,372       5,617           6,108       5,651  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total deposits

     63,949       60,199       59,480       56,469       54,772           60,035       50,038  

Other liabilities

     19,107       19,201       17,551       15,987       14,095           17,969       13,323  

Capital

     9,787       9,937       8,815       8,537       8,256           9,272       8,010  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total liabilities and equity

   $ 92,843      $ 89,337      $ 85,846      $ 80,993      $ 77,123         $ 87,276      $ 71,371  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

PERFORMANCE RATIOS

                  

Return on average capital

     26     24     26     23     29         25     24

Return on average assets

     2.37       2.26       2.26       2.14       2.75           2.26       2.39  

Noninterest income to total revenue

     33       28       25       26       28           28       26  

Efficiency

     35       37       34       37       38           36       38  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

COMMERCIAL MORTGAGE SERVICING PORTFOLIO (in billions)

                  

Beginning of period

   $ 265      $ 264      $ 268      $ 267      $ 267         $ 267      $ 266  

Acquisitions/additions

     35       12       7       10       12           64       43  

Repayments/transfers

     (18     (11     (11     (9     (12         (49     (42
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

End of period

   $ 282      $ 265      $ 264      $ 268      $ 267         $ 282      $ 267  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

OTHER INFORMATION

                  

Consolidated revenue from: (b)

                  

Treasury Management (c)

   $ 337      $ 346      $ 354      $ 343      $ 323         $ 1,380      $ 1,266  

Capital Markets (d)

   $ 228      $ 175      $ 151      $ 156      $ 160         $ 710      $ 622  

Commercial mortgage loans held for sale (e)

   $ 44      $ 13      $ 34      $ 13      $ 38         $ 104      $ 113  

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

     57       55       53       30       55           195       180  

Commercial mortgage servicing rights recovery/(impairment), net of economic hedge

     16       16       (6     5       —              31       (157
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

Total commercial mortgage banking activities

   $ 117      $ 84      $ 81      $ 48      $ 93         $ 330      $ 136  

Total loans (g)

   $ 93,721      $ 90,099      $ 88,810      $ 84,329      $ 73,417          

Net carrying amount of commercial mortgage servicing rights (g)

   $ 420      $ 402      $ 398      $ 428      $ 468          

Credit-related statistics:

                  

Nonperforming assets (g)

   $ 1,181      $ 1,500      $ 1,686      $ 1,776      $ 1,889          

Purchased impaired loans (g) (h)

   $ 875      $ 990      $ 1,088      $ 1,177      $ 404          

Net charge-offs

   $ 34      $ 35      $ 30      $ 43      $ 43         $ 142      $ 375  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

 

 

(a) See note (a) on page 15.
(b) Represents consolidated PNC amounts. Our 2012 Form 10-K will include additional information regarding these items.
(c) Includes amounts reported in net interest income and corporate service fees.
(d) Includes amounts reported in net interest income, corporate service fees and other noninterest income.
(e) 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.
(f) Includes net interest income and noninterest income from loan servicing and ancillary services, net of commercial mortgage servicing rights amortization and a direct write-down of commercial mortgage servicing rights of $24 million recognized in the first quarter of 2012. Commercial mortgage servicing rights recovery/(impairment), net of economic hedge is shown separately.
(g) Presented as of period end.
(h) Recorded investment of purchased impaired loans related to acquisitions.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 19

 

Asset Management Group (Unaudited) (a)

 

     Three months ended          Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

                   

Net interest income

   $ 74      $ 73      $ 75      $ 75      $ 73          $ 297      $ 280  

Noninterest income

     173       170       165       168       161            676       649  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total revenue

     247       243       240       243       234            973       929  

Provision for credit losses (benefit)

     (2     4       (1     10       10            11       (24

Noninterest expense

     195       180       181       176       184            732       687  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Pretax earnings

     54       59       60       57       40            230       266  

Income taxes

     20       22       22       21       15            85       98  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Earnings

   $ 34      $ 37      $ 38      $ 36      $ 25          $ 145      $ 168  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                   

Loans

                   

Consumer

   $ 4,671      $ 4,486      $ 4,321      $ 4,183      $ 4,173          $ 4,416      $ 4,108  

Commercial and commercial real estate

     1,021       1,060       1,098       1,126       1,193            1,076       1,301  

Residential mortgage

     706       687       692       692       696            695       706  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total loans

     6,398       6,233       6,111       6,001       6,062            6,187       6,115  

Goodwill and other intangible assets

     315       324       333       345       349            329       361  

Other assets

     226       214       215       220       233            219       243  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total assets

   $ 6,939      $ 6,771      $ 6,659      $ 6,566      $ 6,644          $ 6,735      $ 6,719  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Deposits

                   

Noninterest-bearing demand

   $ 1,573      $ 1,336      $ 1,362      $ 1,575      $ 1,305          $ 1,462      $ 1,209  

Interest-bearing demand

     3,009       2,662       2,674       2,637       2,529            2,746       2,361  

Money market

     3,562       3,466       3,535       3,651       3,625            3,553       3,589  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total transaction deposits

     8,144       7,464       7,571       7,863       7,459            7,761       7,159  

CDs/IRAs/savings deposits

     461       465       490       549       587            491       632  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total deposits

     8,605       7,929       8,061       8,412       8,046            8,252       7,791  

Other liabilities

     65       68       68       71       78            68       74  

Capital

     481       464       463       347       355            439       349  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total liabilities and equity

   $ 9,151      $ 8,461      $ 8,592      $ 8,830      $ 8,479          $ 8,759      $ 8,214  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

PERFORMANCE RATIOS

                   

Return on average capital

     28     32     33     42     28          33     48

Return on average assets

     1.95       2.17       2.30       2.21       1.49            2.15       2.50  

Noninterest income to total revenue

     70       70       69       69       69            69       70  

Efficiency

     79       74       75       72       79            75       74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

OTHER INFORMATION

                   

Total nonperforming assets (b)

   $ 69      $ 61      $ 67      $ 73      $ 60           

Purchased impaired loans (b) (c)

   $ 109      $ 118      $ 122      $ 126      $ 127           

Total net charge-offs (recoveries)

   $ 2      $ (1   $ 3      $ 2      $ 6          $ 6      $ —     
 

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

                   

Personal

   $ 107      $ 106      $ 102      $ 104      $ 100           

Institutional

     117       116       112       115       110           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total

   $ 224      $ 222      $ 214      $ 219      $ 210           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Asset Type

                   

Equity

   $ 120      $ 120      $ 116      $ 119      $ 111           

Fixed income

     69       68       66       66       66           

Liquidity/Other

     35       34       32       34       33           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total

   $ 224      $ 222      $ 214      $ 219      $ 210           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Discretionary assets under management

                   

Personal

   $ 73      $ 73      $ 71      $ 73      $ 69           

Institutional

     39       39       38       39       38           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total

   $ 112      $ 112      $ 109      $ 112      $ 107           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Asset Type

                   

Equity

   $ 56      $ 57      $ 56      $ 58      $ 53           

Fixed income

     39       39       38       38       38           

Liquidity/Other

     17       16       15       16       16           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total

   $ 112      $ 112      $ 109      $ 112      $ 107           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Nondiscretionary assets under administration

                   

Personal

   $ 34      $ 33      $ 31      $ 31      $ 31           

Institutional

     78       77       74       76       72           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total

   $ 112      $ 110      $ 105      $ 107      $ 103           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Asset Type

                   

Equity

   $ 64      $ 63      $ 60      $ 61      $ 58           

Fixed income

     30       29       28       28       28           

Liquidity/Other

     18       18       17       18       17           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total

   $ 112      $ 110      $ 105      $ 107      $ 103           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

(a) See note (a) on page 15.
(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 20

 

Residential Mortgage Banking (Unaudited) (a)

 

     Three months ended           Year ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

                   

Net interest income

   $ 53     $ 52     $ 53     $ 51     $ 52          $ 209     $ 201  

Noninterest income

                   

Loan servicing revenue

                   

Servicing fees

     48       49       52       56       53            205       226  

Net MSR hedging gains

     2       7       39       71       35            119       220  

Loan sales revenue

                   

Provision for residential mortgage repurchase obligations

     (254     (37     (438     (32     (36          (761     (102

Loan sales revenue

     213       216       177       141       110            747       384  

Other

     (4     (3     8       6       6            7       23  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total noninterest income

     5       232       (162     242       168            317       751  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total revenue

     58       284       (109     293       220            526       952  

Provision for credit losses (benefit)

     2       2       (2     (7     (10          (5     5  

Noninterest expense

     333       226       230       203       317            992       797  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Pretax earnings (loss)

     (277     56       (337     97       (87          (461     150  

Income taxes (benefit)

     (85     20       (124     36       (26          (153     61  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Earnings (loss)

   $ (192   $ 36     $ (213   $ 61     $ (61        $ (308   $ 89  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                   

Portfolio loans

   $ 2,559     $ 2,648     $ 2,751     $ 2,922     $ 2,868          $ 2,719     $ 2,771  

Loans held for sale

     1,832       1,694       1,830       1,675       1,409            1,758       1,492  

Mortgage servicing rights (MSR)

     620       599       665       645       701            632       905  

Other assets

     6,120       6,560       6,255       6,747       6,786            6,420       6,102  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total assets

   $ 11,131     $ 11,501     $ 11,501     $ 11,989     $ 11,764          $ 11,529     $ 11,270  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Deposits

   $ 3,286     $ 3,492     $ 1,783     $ 1,662     $ 1,756          $ 2,560     $ 1,675  

Borrowings and other liabilities

     3,729       4,198       4,067       4,353       4,324            4,086       3,877  

Capital

     1,830       1,488       1,157       832       832            1,329       731  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total liabilities and equity

   $ 8,845     $ 9,178     $ 7,007     $ 6,847     $ 6,912          $ 7,975     $ 6,283  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

PERFORMANCE RATIOS

                   

Return on average capital

     (42 )%      10     (74 )%      29     (29 )%           (23 )%      12

Return on average assets

     (6.86     1.25       (7.45     2.05       (2.06          (2.67     .79  

Noninterest income to total revenue

     9       82       149       83       76            60       79  

Efficiency

     574       80       (211     69       144            189       84  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

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

                   

Beginning of period

   $ 119     $ 116     $ 121     $ 118     $ 121          $ 118     $ 125  

Acquisitions

     6       8         7       1            21       6  

Additions

     4       4       2       4       3            14       12  

Repayments/transfers

     (10     (9     (7     (8     (7          (34     (25
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

End of period

   $ 119     $ 119     $ 116     $ 121     $ 118          $ 119     $ 118  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Servicing portfolio - third-party statistics: (b)

                   

Fixed rate

     92     91     91     91     90         

Adjustable rate/balloon

     8     9     9     9     10         

Weighted-average interest rate

     4.94     5.06     5.21     5.26     5.38         

MSR capitalized value (in billions)

   $ .7     $ .6     $ .6     $ .7     $ .7           

MSR capitalization value (in basis points)

     54       50       50       60       54           

Weighted-average servicing fee (in basis points)

     28       29       29       29       29           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

RESIDENTIAL MORTGAGE REPURCHASE RESERVE

                   

Beginning of period

   $ 421     $ 462     $ 101     $ 83     $ 85          $ 83     $ 144  

Provision

     254       37       438       32       36            761       102  

RBC Bank (USA) acquisition

           26              26    

Losses - loan repurchases and settlements

     (61     (78     (77     (40     (38          (256     (163
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

End of period

   $ 614     $ 421     $ 462     $ 101     $ 83          $ 614     $ 83  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

OTHER INFORMATION

                   

Loan origination volume (in billions)

   $ 4.4     $ 3.8     $ 3.6     $ 3.4     $ 3.0          $ 15.2     $ 11.4  

Percentage of originations represented by:

                   

Agency and government programs

     100     100     100     100     100          100     100

Refinance volume

     80     74     72     82     79          77     76

Total nonperforming assets (b)

   $ 134     $ 82     $ 78     $ 80     $ 76           

Purchased impaired loans (b) (c)

   $ 38     $ 69     $ 84     $ 100     $ 112           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

(a) See note (a) on page 15.
(b) As of period end.
(c) Recorded investment of purchased impaired loans related to acquisitions.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 21

 

Non-Strategic Assets Portfolio (Unaudited) (a)

 

     Three months ended         Year ended  

Dollars in millions

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

INCOME STATEMENT

                 

Net interest income

  $ 197     $ 195     $ 221     $ 217     $ 192       $ 830     $ 913  

Noninterest income

    21       9       2       (19     15         13       47  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total revenue

    218       204       223       198       207         843       960  

Provision for credit losses

    52       61       50       18       88         181       366  

Noninterest expense

    73       79       67       68       119         287       275  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Pretax earnings

    93       64       106       112       —            375       319  

Income taxes

    34       24       39       41       2         138       119  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Earnings (loss)

  $ 59     $ 40     $ 67     $ 71     $ (2     $ 237     $ 200  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                 

Commercial Lending:

                 

Commercial/Commercial real estate

  $ 720     $ 846     $ 1,008     $ 1,004     $ 1,030       $ 894     $ 1,277  

Lease financing

    684       678       675       670       703         677       712  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total commercial lending

    1,404       1,524       1,683       1,674       1,733         1,571       1,989  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Consumer Lending:

                 

Home equity

    4,325       4,498       4,668       4,849       5,006         4,584       5,257  

Residential real estate

    6,130       6,328       6,534       6,046       5,937         6,259       6,161  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total consumer lending

    10,455       10,826       11,202       10,895       10,943         10,843       11,418  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total portfolio loans

    11,859       12,350       12,885       12,569       12,676         12,414       13,407  

Other assets (b)

    (481     (333     (195     (445     (368       (364     (288
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total assets

  $ 11,378     $ 12,017     $ 12,690     $ 12,124     $ 12,308       $ 12,050     $ 13,119  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Deposits and other liabilities

  $ 186     $ 189     $ 180     $ 177     $ 85       $ 183     $ 111  

Capital

    1,188       1,278       1,311       1,176       1,213         1,238       1,319  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

Total liabilities and equity

  $ 1,374     $ 1,467     $ 1,491     $ 1,353     $ 1,298       $ 1,421     $ 1,430  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

PERFORMANCE RATIOS

                 

Return on average capital

    20     12     21     24     (1 )%        19     15

Return on average assets

    2.06       1.32       2.12       2.36       (.06       1.97       1.52  

Noninterest income to total revenue

    10       4       1       (10     7         2       5  

Efficiency

    33       39       30       34       57         34       29  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

 

OTHER INFORMATION

                 

Nonperforming assets (c)

  $ 999     $ 1,056     $ 1,120     $ 1,192     $ 1,024        

Purchased impaired loans (c) (d)

  $ 5,547     $ 5,702     $ 5,889     $ 6,097     $ 5,251        

Net charge-offs

  $ 60     $ 65     $ 83     $ 91     $ 77       $ 299     $ 370  

Annualized net charge-off ratio

    2.01     2.09     2.59     2.91     2.41       2.41     2.76
 

LOANS (c)

                 

Commercial Lending:

                 

Commercial/Commercial real estate

  $ 665     $ 795     $ 945     $ 1,104     $ 976        

Lease financing

    686       680       677       671       670        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Total commercial lending

    1,351       1,475       1,622       1,775       1,646        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Consumer Lending:

                 

Home equity

    4,237       4,408       4,575       4,751       4,930        

Residential real estate

    6,093       6,272       6,475       6,693       5,840        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Total consumer lending

    10,330       10,680       11,050       11,444       10,770        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Total loans

  $ 11,681     $ 12,155     $ 12,672     $ 13,219     $ 12,416        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

(a) See note (a) on page 15.
(b) Other assets were negative in all periods presented due to the allowance for loan and lease losses.
(c) As of period end.
(d) Recorded investment of purchased impaired loans related to acquisitions.


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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 23

 

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 loss, net 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 nonperforming loans, TDRs, and OREO and foreclosed assets, but exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under fair value option and purchased impaired loans. 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, home equity, residential real estate, credit card and other consumer customers as well as TDRs which have not returned to performing status. Nonperforming loans exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans. Nonperforming loans exclude 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 24

 

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 primarily through deed-in-lieu of foreclosure or foreclosure. Foreclosed assets include real and personal property, equity interests in corporations, partnerships, and limited liability companies.

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 - Total revenue less noninterest expense.

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 (purchased impaired loans) - 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.

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 25

 

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

Return on average common shareholders’ equity - Annualized net income attributable to common shareholders 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.