Exhibit 99.1

 

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2013

(Unaudited)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2013

(UNAUDITED)

 

                 Page               

Consolidated Results:

  

Income Statement

     1   

Balance Sheet

     2   

Capital Ratios

     2   

Average Balance Sheet

     3-4   

Details of Net Interest Margin

     5   

Total and Core Net Interest Income and Net Interest Margin

     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, Accretable Yield 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 April 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, as well as other products and services 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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 1

 

Consolidated Income Statement (Unaudited)

    Three months ended  
In millions, except per share data   March 31
2013
    December 31
2012
    September 30
2012
    June 30
2012
    March 31
2012
 

Interest Income

         

Loans

  $     2,029      $ 2,094      $     2,076      $     2,163      $     1,951   

Investment securities

    470        478        504        527        526   

Other

    112        99        90        106        120   

Total interest income

    2,611        2,671        2,670        2,796        2,597   

Interest Expense

         

Deposits

    93        97        103        83        103   

Borrowed funds

    129        150        168        187        203   

Total interest expense

    222        247        271        270        306   

Net interest income

    2,389        2,424        2,399        2,526        2,291   

Noninterest Income

         

Asset management

    308        302        305        278        284   

Consumer services

    296        294        288        290        264   

Corporate services

    277        349        295        290        232   

Residential mortgage (a) (b)

    234        -       227        (173)        230   

Service charges on deposits

    136        150        152        144        127   

Net gains on sales of securities

    14        45        40        62        57   

Net other-than-temporary impairments

    (10)        (15)        (24)        (34)        (38)   

Other (c)

    311        520        406        240        285   

Total noninterest income

    1,566        1,645        1,689        1,097        1,441   

Total revenue

    3,955        4,069        4,088        3,623        3,732   

Provision For Credit Losses

    236        318        228        256        185   

Noninterest Expense

         

Personnel

    1,169        1,216        1,171        1,119        1,111   

Occupancy

    211        226        212        199        190   

Equipment

    183        194        185        181        175   

Marketing

    45        70        74        67        68   

Other (d)

    787        1,123        1,008        1,082        911   

Total noninterest expense (e)

    2,395        2,829        2,650        2,648        2,455   

Income before income taxes and noncontrolling interests

    1,324        922        1,210        719        1,092   

Income taxes

    320        203        285        173        281   

Net income

    1,004        719        925        546        811   

Less: Net income (loss) attributable to noncontrolling interests

    (9)        1        (14)        (5)        6   

Preferred stock dividends and discount accretion

    75        54        63        25        39   

Net income attributable to common shareholders

  $ 938      $ 664      $ 876      $ 526      $ 766   

Earnings Per Common Share

         

Basic

  $ 1.78      $ 1.26      $ 1.66      $ 1.00      $ 1.45   

Diluted

  $ 1.76      $ 1.24      $ 1.64      $ .98      $ 1.44   

Average Common Shares Outstanding

         

Basic

    526        526        526        527        526   

Diluted

    528        528        529        530        529   

Efficiency

    61     70     65     73     66

Noninterest income to total revenue

    40     40     41     30     39

Effective tax rate (f)

    24.2     22.0     23.6     24.1     25.7

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   March 31
2013
    December 31
2012
    September 30
2012
   

June 30

2012

    March 31
2012
 

Assets

         

Cash and due from banks (a)

  $ 3,948      $ 5,220      $ 4,284      $ 4,136      $ 4,162   

Federal funds sold and resale agreements (b)

    1,274        1,463        1,724        1,646        1,371   

Trading securities

    2,243        2,096        2,664        2,121        2,639   

Interest-earning deposits with banks (a)

    1,541        3,984        2,321        3,995        2,084   

Loans held for sale (b)

    3,295        3,693        2,737        3,333        2,456   

Investment securities (a)

    59,361        61,406        62,814        61,937        64,554   

Loans (a) (b)

    186,504        185,856        181,864        180,425        176,214   

Allowance for loan and lease losses (a)

    (3,828)        (4,036)        (4,039)        (4,156)        (4,196)   

Net loans

    182,676        181,820        177,825        176,269        172,018   

Goodwill

    9,075        9,072        9,163        9,158        9,169   

Other intangible assets

    1,921        1,797        1,778        1,804        2,019   

Equity investments (a) (c)

    11,008        10,877        10,846        10,617        10,352   

Other (a) (b)

    24,470        23,679        24,647        24,559        25,059   

Total assets

  $ 300,812      $ 305,107      $ 300,803      $ 299,575      $ 295,883   

Liabilities

         

Deposits

         

Noninterest-bearing

  $ 64,652      $ 69,980      $ 64,484      $ 64,476      $ 62,463   

Interest-bearing

    146,968        143,162        141,779        142,447        143,664   

Total deposits

    211,620        213,142        206,263        206,923        206,127   

Borrowed funds

         

Federal funds purchased and repurchase agreements

    4,000        3,327        3,877        4,166        4,832   

Federal Home Loan Bank borrowings

    5,483        9,437        9,942        10,440        8,957   

Bank notes and senior debt

    10,918        10,429        9,960        10,185        12,065   

Subordinated debt

    7,996        7,299        6,754        7,593        8,221   

Commercial paper (a)

    6,953        8,453        10,731        9,469        6,870   

Other (a)

    2,297        1,962        1,840        1,836        1,594   

Total borrowed funds

    37,647        40,907        43,104        43,689        42,539   

Allowance for unfunded loan commitments and letters of credit

    238        250        239        224        243   

Accrued expenses (a)

    4,181        4,449        4,015        3,428        3,607   

Other (a)

    5,048        4,594        5,380        5,097        5,131   

Total liabilities

    258,734        263,342        259,001        259,361        257,647   

Equity

         

Preferred stock (d)

         

Common stock - $5 par value

         

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

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

Capital surplus - preferred stock

    3,591        3,590        3,559        3,120        1,638   

Capital surplus - common stock and other

    12,174        12,193        12,149        12,098        12,074   

Retained earnings

    20,993        20,265        19,813        19,149        18,834   

Accumulated other comprehensive income (loss)

    767        834        991        402        281   

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

    (552)        (569)        (518)        (451)        (467)   

Total shareholders’ equity

    39,663        39,003        38,683        37,005        35,045   

Noncontrolling interests

    2,415        2,762        3,119        3,209        3,191   

Total equity

    42,078        41,765        41,802        40,214        38,236   

Total liabilities and equity

  $     300,812      $     305,107      $     300,803      $     299,575      $     295,883   

Capital Ratios

         

Tier 1 common (e)

    9.8     9.6     9.5     9.3     9.3

Tier 1 risk-based (e)

    11.7        11.6        11.7        11.4        11.4   

Total risk-based (e)

    14.9        14.7        14.5        14.2        14.4   

Leverage (e)

    10.4        10.4        10.4        10.1        10.5   

Common shareholders’ equity to assets

    12.0        11.6        11.7        11.3        11.3   

 

(a) Amounts include consolidated variable interest entities. Our 2012 Form 10-K included, and first quarter 2013 Form 10-Q will include, additional information regarding these items.
(b) Amounts include assets for which PNC has elected the fair value option. Our 2012 Form 10-K included, and first quarter 2013 Form 10-Q will include, additional information regarding these items.
(c) Amounts include our equity interest in BlackRock.
(d) Par value less than $.5 million at each date.
(e) The ratio as of March 31, 2013 is estimated.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 3

 

Average Consolidated Balance Sheet (Unaudited) (a)

 

    Three months ended  
In millions  

March 31

2013

    December 31
2012
    September 30
2012
   

June 30

2012

   

March 31

2012

 

Assets

         

Interest-earning assets:

         

Investment securities

         

Securities available for sale

         

Residential mortgage-backed

         

Agency

  $       25,168      $       25,552      $       26,546      $ 26,968      $ 27,031   

Non-agency

    6,025        6,245        6,490        6,716        6,577   

Commercial mortgage-backed

    3,745        3,674        3,720        3,561        3,774   

Asset-backed

    5,731        5,643        5,525        5,401        4,329   

U.S. Treasury and government agencies

    2,715        2,746        2,516        2,549        3,123   

State and municipal

    2,189        2,034        1,972        1,902        1,770   

Other debt

    2,649        2,860        3,045        3,178        2,996   

Corporate stocks and other

    368        346        390        317        347   

Total securities available for sale

    48,590        49,100        50,204        50,592        49,947   

Securities held to maturity

         

Residential mortgage-backed

    4,146        4,377        4,480        4,259        4,576   

Commercial mortgage-backed

    3,747        3,967        4,180        4,376        4,635   

Asset-backed

    826        702        825        874        1,170   

U.S. Treasury and government agencies

    231        229        227        225        223   

State and municipal

    639        664        671        671        671   

Other

    352        355        357        359        361   

Total securities held to maturity

    9,941        10,294        10,740        10,764        11,636   

Total investment securities

    58,531        59,394        60,944        61,356        61,583   

Loans

         

Commercial

    83,476        80,876        79,250        77,131        69,286   

Commercial real estate

    18,850        18,678        18,514        18,440        16,818   

Equipment lease financing

    7,241        6,956        6,774        6,586        6,377   

Consumer

    61,411        61,430        60,570        59,832        57,148   

Residential real estate

    15,121        15,257        15,575        15,932        14,927   

Total loans

    186,099        183,197        180,683        177,921        164,556   

Loans held for sale

    3,279        3,025        2,956        3,016        2,910   

Federal funds sold and resale agreements

    1,176        1,290        1,601        1,666        1,821   

Other

    7,095        6,737        6,422        6,173        6,864   

Total interest-earning assets

    256,180        253,643        252,606        250,132        237,734   

Noninterest-earning assets:

         

Allowance for loan and lease losses

    (3,937)        (3,987)        (4,152)        (4,176)        (4,314)   

Cash and due from banks

    4,055        4,126        3,907        3,694        3,777   

Other

    47,147        48,349        47,781        46,501        44,345   

Total assets

  $       303,445      $       302,131      $       300,142      $       296,151      $       281,542   
(a) Calculated using average daily balances.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 4
Average Consolidated Balance Sheet (Unaudited) (Continued) (a)

 

     Three months ended  
In millions    March 31
2013
     December 31
2012
     September 30
2012
    

June 30

2012

     March 31
2012
 

Liabilities and Equity

              

Interest-bearing liabilities:

              

Interest-bearing deposits

              

Money market

   $       69,003       $       67,997       $       67,628       $       66,902       $       61,162   

Demand

     39,372         36,619         34,733         34,388         31,599   

Savings

     10,671         10,190         10,066         10,008         9,183   

Retail certificates of deposit

     23,488         24,394         25,695         27,373         29,011   

Time deposits in foreign offices and other time

     2,267         2,740         3,230         3,577         3,238   
   

Total interest-bearing deposits

     144,801         141,940         141,352         142,248         134,193   

Borrowed funds

              

Federal funds purchased and repurchase agreements

     4,328         4,023         4,659         4,937         4,551   

Federal Home Loan Bank borrowings

     7,657         8,877         10,626         10,238         8,967   

Bank notes and senior debt

     10,469         9,702         9,657         10,618         11,138   

Subordinated debt

     7,249         6,668         6,408         7,293         7,719   

Commercial paper

     7,967         9,069         10,518         8,229         5,684   

Other

     2,057         1,961         1,868         1,809         2,153   
   

Total borrowed funds

     39,727         40,300         43,736         43,124         40,212   
   

Total interest-bearing liabilities

     184,528         182,240         185,088         185,372         174,405   

Noninterest-bearing liabilities and equity:

              

Noninterest-bearing deposits

     64,850         65,527         62,483         60,478         57,900   

Allowance for unfunded loan commitments and letters of credit

     249         239         225         243         240   

Accrued expenses and other liabilities

     11,891         12,237         11,590         10,375         11,186   

Equity

     41,927         41,888         40,756         39,683         37,811   
   

Total liabilities and equity

   $ 303,445       $ 302,131       $ 300,142       $ 296,151       $ 281,542   

(a)    Calculated using average daily balances.

       

Supplemental Average Balance Sheet Information (Unaudited)

  

           

Deposits and Common Shareholders’ Equity

              

Interest-bearing deposits

   $ 144,801       $ 141,940       $ 141,352       $ 142,248       $ 134,193   

Noninterest-bearing deposits

     64,850         65,527         62,483         60,478         57,900   
   

Total deposits

   $ 209,651       $ 207,467       $ 203,835       $ 202,726       $ 192,093   

Transaction deposits

   $ 173,225       $ 170,143       $ 164,844       $ 161,768       $ 150,661   

Common shareholders’ equity

   $ 35,628       $ 35,296       $ 34,323       $ 33,648       $ 32,981   


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 5
Details of Net Interest Margin (Unaudited) (a)   

 

    Three months ended  
    

March 31

2013

   

December 31

2012

    September 30
2012
   

June 30

2012

    March 31
2012
 

Average yields/rates

         

Yield on interest-earning assets

         

Investment securities

         

Securities available for sale

         

Residential mortgage-backed

         

Agency

    2.90     2.94     3.03     3.17     3.14

Non-agency

    5.40        5.39        5.08        5.63        5.38   

Commercial mortgage-backed

    4.02        3.81        4.29        4.41        4.42   

Asset-backed

    1.92        1.93        2.09        1.91        2.24   

U.S. Treasury and government agencies

    1.65        1.76        2.08        2.33        1.80   

State and municipal

    4.93        4.66        4.62        4.63        5.13   

Other debt

    2.58        2.91        2.85        2.56        2.55   

Corporate stocks and other

    .12        .24        .12        .11        .03   

Total securities available for sale

    3.16        3.19        3.27        3.40        3.38   

Securities held to maturity

         

Residential mortgage-backed

    3.44        3.34        3.50        3.70        3.58   

Commercial mortgage-backed

    4.71        4.50        4.46        4.56        4.62   

Asset-backed

    1.80        1.76        2.61        1.83        1.68   

U.S. Treasury and government agencies

    3.77        3.82        3.81        3.79        3.79   

State and municipal

    4.23        4.23        4.18        4.20        4.18   

Other

    2.82        2.89        2.82        2.89        2.83   

Total securities held to maturity

    3.82        3.73        3.83        3.90        3.82   

Total investment securities

    3.27        3.28        3.37        3.49        3.47   

Loans

         

Commercial

    4.03        4.16        4.30        4.75        4.51   

Commercial real estate

    5.05        5.57        5.26        5.78        5.19   

Equipment lease financing

    4.05        4.26        4.45        4.96        4.74   

Consumer

    4.67        4.68        4.63        4.67        4.78   

Residential real estate

    5.29        5.36        5.18        5.44        5.59   

Total loans

    4.45        4.58        4.59        4.90        4.78   

Loans held for sale

    6.49        5.34        4.34        6.00        6.89   

Federal funds sold and resale agreements

    .74        1.04        1.22        1.45        1.58   

Other

    3.25        3.24        3.27        3.62        3.71   

Total yield on interest-earning assets

    4.15        4.24        4.24        4.51        4.41   

Rate on interest-bearing liabilities

         

Interest-bearing deposits

         

Money market

    .19        .19        .21        .21        .23   

Demand

    .04        .04        .04        .04        .04   

Savings

    .10        .09        .09        .10        .10   

Retail certificates of deposit

    .85        .89        .90        .57        .80   

Time deposits in foreign offices and other time

    .61        .45        .38        .49        .49   

Total interest-bearing deposits

    .26        .27        .29        .24        .31   

Borrowed funds

         

Federal funds purchased and repurchase agreements

    .16        .20        .19        .21        .22   

Federal Home Loan Bank borrowings

    .61        .70        .69        .74        .80   

Bank notes and senior debt

    1.83        2.07        2.16        2.30        2.48   

Subordinated debt

    2.83        3.57        4.71        4.77        5.09   

Commercial paper

    .25        .28        .28        .26        .26   

Other

    2.28        2.78        2.43        2.25        2.05   

Total borrowed funds

    1.30        1.46        1.53        1.72        2.01   

Total rate on interest-bearing liabilities

    .48        .54        .58        .58        .70   
   

Interest rate spread

    3.67        3.70        3.66        3.93        3.71   

Impact of noninterest-bearing sources

    .14        .15        .16        .15        .19   
   

Net interest margin

    3.81     3.85     3.82     4.08     3.90
   
(a)

Calculated as annualized taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all earning assets in calculating net interest margins, in this table we use net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012 and March 31, 2012, were $40 million, $42 million, $36 million, $35 million and $31 million, respectively.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 6

Total and Core Net Interest Income and Net Interest Margin  (Unaudited)

  

 

Total and Core Net Interest Income   

 

     Three months ended  
In millions   

March 31

2013

    

December 31

2012

     September 30
2012
    

June 30

2012

     March 31
2012
 

Core net interest income (a)

   $       2,140       $       2,151       $       2,154       $       2,183       $       2,028   

Purchase accounting accretion (a)

     249         273         245         343         263   
   

Total net interest income

   $ 2,389       $ 2,424       $ 2,399       $ 2,526       $ 2,291   
   

 

(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  
In millions   

March 31

2013

    

December 31

2012

    

September 30

2012

    

June 30

2012

     March 31
2012
 

Average yields/rates

              

Yield on interest earning assets

              

Total investment securities

     3.27      3.28      3.37      3.49      3.47

Total loans

     4.45         4.58         4.59         4.90         4.78   

Other

     3.91         3.56         3.26         3.95         4.17   

Total yield on interest earning assets

     4.15         4.24         4.24         4.51         4.41   

Rate on interest-bearing liabilities

              

Total interest-bearing deposits

     .26         .27         .29         .24         .31   

Total borrowed funds

     1.30         1.46         1.53         1.72         2.01   

Total rate on interest-bearing liabilities

     .48         .54         .58         .58         .70   

Interest rate spread

     3.67         3.70         3.66         3.93         3.71   

Impact of noninterest-bearing sources

     .14         .15         .16         .15         .19   
   

Net interest margin

     3.81      3.85      3.82      4.08      3.90
   

(b)    See note (a) on page 5.

       

Details of Core Net Interest Margin (c)               
     Three months ended  
In millions    March 31
2013
     December 31
2012
    

September 30

2012

     June 30
2012
     March 31
2012
 

Average yields/rates

              

Yield on interest earning assets

              

Total investment securities

     3.21      3.17      3.27      3.37      3.41

Total loans

     3.96         4.02         4.09         4.25         4.32   

Other

     3.22         3.35         3.11         3.73         3.65   

Total yield on interest earning assets

     3.75         3.80         3.85         4.01         4.05   

Rate on interest-bearing liabilities

              

Total interest-bearing deposits

     .29         .31         .34         .39         .54   

Total borrowed funds

     1.09         1.23         1.31         1.50         1.76   

Total rate on interest-bearing liabilities

     .46         .52         .57         .64         .81   

Interest rate spread

     3.29         3.28         3.28         3.37         3.24   

Impact of noninterest-bearing sources

     .14         .15         .16         .15         .19   
   

Core net interest margin

     3.43         3.43         3.44         3.52         3.43   

Purchase accounting accretion impact on net interest margin

     .38         .42         .38         .56         .47   
   

Net interest margin

     3.81      3.85      3.82      4.08      3.90
   

 

(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  
       March 31      December 31      September 30      June 30      March 31  
In millions, except per share data    2013      2012      2012      2012      2012  

Basic

              

Net income

   $ 1,004       $ 719       $ 925       $ 546       $ 811   

Less:

              

Net income (loss) attributable to noncontrolling interests

     (9)         1         (14)         (5)         6   

Preferred stock dividends and discount accretion and redemptions

     75         54         63         25         39   

Dividends and undistributed earnings allocated to nonvested restricted shares

     4         4         5         1         4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to basic common shares

   $ 934       $ 660       $ 871       $ 525       $ 762   

Basic weighted-average common shares outstanding

     526         526         526         527         526   

Basic earnings per common share

   $ 1.78       $ 1.26       $ 1.66       $ 1.00       $ 1.45   

Diluted

              

Net income attributable to basic common shares

   $ 934       $ 660       $ 871       $ 525       $ 762   

Less: BlackRock common stock equivalents

     5         4         3         4         3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to diluted common shares

   $ 929       $ 656       $ 868       $ 521       $ 759   

Basic weighted-average common shares outstanding

     526         526         526         527         526   

Dilutive potential common shares

     2         2         3         3         3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted-average common shares outstanding

     528         528         529         530         529   

Diluted earnings per common share

   $ 1.76       $ 1.24       $ 1.64       $ .98       $ 1.44   
Selected Consolidated Income Statement Information (Unaudited)   
     Three months ended  
       March 31      December 31      September 30      June 30      March 31  
In millions, except per share data    2013      2012      2012      2012      2012  

Noninterest Income

              

Provision for residential mortgage repurchase obligations (Pre-tax)

   $ (4)       $ (254)       $ (37)       $ (438)       $ (32)   

Impact on diluted earnings per share (a)

     (.00)         (.31)         (.05)         (.54)         (.04)   

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

      $ 130       $ 137         

Impact on diluted earnings per share (a)

        .16         .17         

Noninterest Expense

              

Goodwill impairment charge for Residential Mortgage Banking segment (Pre-tax)

      $ 45            

Impact on diluted earnings per share (a)

        (.08)            

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

   $ 15       $ 91       $ 53       $ 43       $ 38   

Impact on diluted earnings per share (a)

     (.02)         (.11)         (.06)         (.05)         (.05)   

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

      $ 70       $ 95       $ 130      

Impact on diluted earnings per share (a)

        (.09)         (.12)         (.16)      

Integration costs (Pre-tax)

      $ 35       $ 35       $ 52       $ 145   

Impact on diluted earnings per share (a)

        (.04)         (.04)         (.06)         (.18)   

 

(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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 8
Details of Loans (Unaudited)   

 

     March 31      December 31      September 30      June 30      March 31  
In millions    2013      2012      2012      2012      2012  

Commercial

              

Retail/wholesale trade

   $ 14,109       $ 13,801       $ 13,381       $ 13,434       $ 12,983   

Manufacturing

     14,139         13,856         13,498         13,442         12,684   

Service providers

     12,568         12,095         11,822         11,875         11,215   

Real estate related (a)

     10,274         10,616         10,208         10,051         10,091   

Financial services (b)

     9,679         9,026         9,136         9,397         8,273   

Health care

     7,392         7,267         6,652         6,240         5,695   

Other industries

     16,124         16,379         14,971         14,462         14,574   

Total commercial

     84,285         83,040         79,668         78,901         75,515   

Commercial real estate

              

Real estate projects (c)

     12,596         12,347         12,801         12,837         12,589   

Commercial mortgage

     6,183         6,308         5,808         5,643         5,945   

Total commercial real estate

     18,779         18,655         18,609         18,480         18,534   

Equipment lease financing

     7,240         7,247         6,923         6,764         6,594   

Total commercial lending

     110,304         108,942         105,200         104,145         100,643   

Consumer

              

Home equity

              

Lines of credit

     23,029         23,576         24,007         24,360         24,668   

Installment

     13,001         12,344         11,871         11,478         11,076   

Credit card

     4,081         4,303         4,135         4,123         4,089   

Other consumer

              

Education

     8,048         8,238         8,415         8,807         9,246   

Automobile

     8,716         8,708         8,328         7,166         5,794   

Other

     4,340         4,505         4,525         4,523         4,486   

Total consumer

     61,215         61,674         61,281         60,457         59,359   

Residential real estate

              

Residential mortgage

     14,217         14,430         14,505         14,927         15,287   

Residential construction

     768         810         878         896         925   

Total residential real estate

     14,985         15,240         15,383         15,823         16,212   

Total consumer lending

     76,200         76,914         76,664         76,280         75,571   

Total loans (d)

   $ 186,504       $ 185,856       $ 181,864       $ 180,425       $ 176,214   

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

       

(b)    Includes loans issued to a Financing Special Purpose Entity which holds receivables from other industries within Commercial Lending.

       

(c)    Includes both construction loans and intermediate financing for projects.

       

(d)    Includes purchased impaired loans:

   $ 7,073       $ 7,406       $ 7,749       $ 8,083       $ 8,421   

Details of Loans Held for Sale (Unaudited)

  

     March 31      December 31      September 30      June 30      March 31  
In millions    2013      2012      2012      2012      2012  

Commercial mortgage

   $ 895       $ 1,392       $ 1,183       $ 1,021       $ 1,014   

Residential mortgage

     2,331         2,220         1,477         1,939         1,387   

Other

     69         81         77         373         55   

Total

   $ 3,295       $ 3,693       $ 2,737       $ 3,333       $ 2,456   
Net Unfunded Commitments (Unaudited)   
     March 31      December 31      September 30      June 30      March 31  
In millions    2013      2012      2012      2012      2012  

Net unfunded commitments

   $     121,812       $     120,592       $     118,285       $     113,636       $     112,454   


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

 

     March 31     December 31     September 30             June 30     March 31  
Three months ended - in millions    2013     2012     2012     2012     2012  

Beginning balance

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

Charge-offs:

          

Commercial

     (114)        (126)        (114)        (123)        (111)   

Commercial real estate

     (86)        (72)        (83)        (75)        (84)   

Equipment lease financing

     (3)        (4)        (2)        (5)        (5)   

Home equity (a)

     (194)        (141)        (167)        (121)        (131)   

Residential real estate (a)

     (79)        (18)        (25)        (37)        (30)   

Credit card (a)

     (50)        (43)        (47)        (55)        (55)   

Other consumer (a)

     (43)        (56)        (43)        (46)        (51)   

Total charge-offs (b)

     (569)        (460)        (481)        (462)        (467)   

Recoveries:

          

Commercial

     63        77        76        75        72   

Commercial real estate

     13        29        34        29        23   

Equipment lease financing

     6        8        7        6        9   

Home equity

     13        15        16        17        13   

Residential real estate

     (1)          (1)        1        (1)   

Credit card

     5        9        6        6        5   

Other consumer

     14        12        12        13        13   

Total recoveries

     113        150        150        147        134   

Net (charge-offs) recoveries:

          

Commercial

     (51)        (49)        (38)        (48)        (39)   

Commercial real estate

     (73)        (43)        (49)        (46)        (61)   

Equipment lease financing

     3        4        5        1        4   

Home equity

     (181)        (126)        (151)        (104)        (118)   

Residential real estate

     (80)        (18)        (26)        (36)        (31)   

Credit card

     (45)        (34)        (41)        (49)        (50)   

Other consumer

     (29)        (44)        (31)        (33)        (38)   

Total net charge-offs

     (456)        (310)        (331)        (315)        (333)   

Provision for credit losses

     236        318        228        256        185   

Other

         1       

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

     12        (11)        (15)        19        (3)   

Ending balance

   $ 3,828      $ 4,036      $ 4,039      $ 4,156      $ 4,196   

Supplemental Information

          

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

     .99     .67     .73     .71     .81

Allowance for loan and lease losses to total loans

     2.05        2.17        2.22        2.30        2.38   

Commercial lending net charge-offs

   $ (121)      $ (88)      $ (82)      $ (93)      $ (96)   

Consumer lending net charge-offs

     (335)        (222)        (249)        (222)        (237)   

Total net charge-offs

   $ (456)      $ (310)      $ (331)      $ (315)      $ (333)   

Net charge-offs to average loans

          

Commercial lending

     .45     .33     .31     .37     .42

Consumer lending

     1.78        1.15        1.30        1.18        1.32   
(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 affirmation of the loan obligation was provided by the borrower. Such loans have been classified as troubled debt restructurings (TDRs) and have been reported based upon fair value of the collateral less costs to sell.
(b) Pursuant to alignment with interagency guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, additional charge-offs of $134 million have been taken. Excluding the impact of these additional charge-offs, annualized net charge-offs to average loans for the first quarter 2013 was 0.70%.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

     March 31      December 31      September 30                  June 30      March 31  
Three months ended - in millions    2013      2012      2012      2012      2012  

Beginning balance

   $ 250       $ 239       $ 224       $ 243       $ 240   

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

     (12)         11         15         (19)         3   

Ending balance

   $ 238       $ 250       $ 239       $ 224       $ 243   


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 10

 

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

Accretion - Purchased Impaired Loans

 

     Three months ended  
     March 31      December 31      March 31  
In millions    2013      2012      2012  

Impaired loans

        

Scheduled accretion

   $ 157           $ 160       $ 158   

Reversal of contractual interest on impaired loans

     (85)         (93)         (97)   

Scheduled accretion net of contractual interest

     72         67         61   

Excess cash recoveries

     50         45         40   

Total impaired loans

   $ 122           $ 112       $ 101   

Purchased Impaired Loans - Accretable Yield

 

In millions

  

    

In millions

  

January 1, 2013

   $     2,166        

January 1, 2012

   $     2,109   
       

Addition due to RBC Bank (USA) acquisition on March 2, 2012

     587   

Scheduled accretion

     (157)        

Scheduled accretion

     (158)   

Excess cash recoveries

     (50)        

Excess cash recoveries

     (40)   

Net reclassifications to accretable from non-accretable and other activity (a)

     213        

Net reclassifications to accretable from non-accretable and other activity

     (29)   

 

      

 

 

March 31, 2013 (b)

   $     2,172        

March 31, 2012

   $     2,469   

 

 

(a) Over 48 percent of the net reclassifications were driven by the commercial portfolio. Approximately half of the commercial portfolio impact related to excess cash recoveries recognized during the period, with the remaining due to improvements of cash expected to be collected on both RBC Bank (USA) and National City loans in future periods. The remaining net reclassifications were due to future cash flow changes in the consumer portfolio.

(b) As of March 31, 2013, 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

 

     March 31, 2013     

December 31, 2012

 
Dollars in millions    Balance      Net Investment          Balance    Net Investment  

Commercial and commercial real estate loans:

           

Unpaid principal balance

   $         1,465          $      1,680   

Purchased impaired mark

     (386)          (431)   
  

 

 

       

 

  

Recorded investment

     1,079          1,249   

Allowance for loan losses

     (198)          (239)   
  

 

 

       

 

  

Net investment

     881         60%       1,010      60%   
  

 

 

       

 

  

Consumer and residential mortgage loans:

           

Unpaid principal balance

     6,359          6,639   

Purchased impaired mark

     (365)          (482)   
  

 

 

       

 

  

Recorded investment

     5,994          6,157   

Allowance for loan losses

     (911)          (858)   
  

 

 

       

 

  

Net investment

     5,083         80%       5,299      80%   
  

 

 

       

 

  

Total purchased impaired loans:

           

Unpaid principal balance

     7,824          8,319   

Purchased impaired mark

     (751)          (913)   
  

 

 

       

 

  

Recorded investment

     7,073          7,406   

Allowance for loan losses

     (1,109)          (1,097)   
  

 

 

       

 

  

Net investment

   $ 5,964         76%       $6,309      76%   


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 11

 

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

     March 31     December 31     September 30     June 30     March 31  
In millions    2013     2012     2012     2012     2012  

Nonperforming loans, including TDRs (a)

          

Commercial lending

          

Commercial

          

Retail/wholesale trade

   $ 62      $ 61      $ 88      $ 110      $ 108   

Manufacturing

     75        73        104        141        107   

Service providers

     112        124        144        145        149   

Real estate related (b)

     161        178        236        214        232   

Financial services

     13        9        13        15        20   

Health care

     21        25        26        22        23   

Other industries

     98        120        138        144        200   

Total commercial

     542        590        749        791        839   

Commercial real estate

          

Real estate projects

     606        654        802        924        977   

Commercial mortgage

     138        153        198        218        274   

Total commercial real estate

     744        807        1,000        1,142        1,251   

Equipment lease financing

     9        13        15        19        21   

Total commercial lending

     1,295        1,410        1,764        1,952        2,111   

Consumer lending (c)

          

Home equity (d)

     1,088        951        818        722        685   

Residential real estate

          

Residential mortgage (d) (e)

     952        824        766        707        684   

Residential construction

     13        21        24        32        44   

Credit card

     6        5        5        6        12   

Other consumer (d)

     68        43        37        39        45   

Total consumer lending (f)

     2,127        1,844        1,650        1,506        1,470   

Total nonperforming loans (g)

     3,422        3,254        3,414        3,458        3,581   

OREO and foreclosed assets

          

Other real estate owned (OREO) (h)

     472        507        578        670        749   

Foreclosed and other assets

     33        33        29        48        31   

Total OREO and foreclosed assets

     505        540        607        718        780   

Total nonperforming assets

   $     3,927      $     3,794      $     4,021      $     4,176      $     4,361   

Nonperforming loans to total loans

     1.83     1.75     1.88     1.92     2.03

Nonperforming assets to total loans, OREO and foreclosed assets

     2.10        2.04        2.20        2.31        2.46   

Nonperforming assets to total assets

     1.31        1.24        1.34        1.39        1.47   

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

     112        124        118        120        117   

 

(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) Pursuant to alignment with interagency guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, nonperforming home equity loans increased $214 million, nonperforming residential mortgage loans increased $187 million and nonperforming other consumer loans increased $25 million. Charge-offs have been taken on these loans where the fair value less costs to sell the collateral was less than the recorded investment of the loan and were $134 million.

 

(e) Nonperforming residential mortgage excludes loans of $123 million, $69 million, $61 million, $55 million and $55 million accounted for under the fair value option as of March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012 and March 31, 2012, respectively.

 

(f) 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.

 

(g) 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.

 

(h) OREO excludes $383 million, $380 million, $363 million, $262 million and $252 million at March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012 and March 31, 2012, respectively, related to residential real estate that was acquired by us upon foreclosure of serviced loans because they are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).

 

(i) The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 12

 

Details of Nonperforming Assets and Troubled Debt Restructurings (Unaudited)

Change in Nonperforming Assets

 

In millions   January 1, 2013 -
March 31, 2013
    October 1, 2012 -
  December 31, 2012
    July 1, 2012 -
  September 30, 2012
    April 1, 2012 -
June 30, 2012
    January 1, 2012 -
March 31, 2012
 

Beginning balance

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

New nonperforming assets

    1,032        804        861        797        1,186   

Charge-offs and valuation adjustments

    (343)        (297)        (392)        (293)        (236)   

Principal activity, including paydowns and payoffs

    (258)        (532)        (438)        (428)        (414)   

Asset sales and transfers to loans held for sale

    (114)        (134)        (162)        (168)        (146)   

Returned to performing status

    (184)        (68)        (24)        (93)        (185)   

Ending balance

  $ 3,927      $ 3,794      $ 4,021      $ 4,176      $ 4,361   

Largest Individual Nonperforming Assets at March 31, 2013 (a)

 

 

In millions
Ranking     

 

Outstandings

       Industry

1

     $ 37                 Real Estate, Rental and Leasing

2

       34                 Real Estate, Rental and Leasing

3

       19                 Real Estate, Rental and Leasing

4

       17                 Real Estate, Rental and Leasing

5

       16                 Construction

6

       14                 Real Estate, Rental and Leasing

7

       12                 Other Real Estate Owned

8

       11                 Real Estate, Rental and Leasing

9

       11                 Other Industries

10

       11                 Other Industries

 

Total

     $ 182                  

 

As a percent of total nonperforming assets 4%

 

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

Summary of Troubled Debt Restructurings

 

    March 31     December 31     September 30     June 30     March 31  
In millions   2013     2012     2012     2012     2012  

Total commercial lending

  $ 610      $ 541      $ 556      $ 483      $ 412   

Total consumer lending (a)

    2,231        2,318        2,019        1,836        1,821   

Total TDRs

  $ 2,841      $                 2,859      $                 2,575      $                 2,319      $                 2,233   

Nonperforming

  $                 1,517      $ 1,589      $ 1,383      $ 1,189      $ 1,095   

Accruing (b)

    1,103        1,037        950        878        865   

Credit card (c)

    221        233        242        252        273   

Total TDRs

  $ 2,841      $ 2,859      $ 2,575      $ 2,319      $ 2,233   

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.
(b) Accruing loans have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans. Loans where borrowers have been discharged from bankruptcy and have not formally reaffirmed their loan obligation are generally not returned to accrual status.

 

(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) (b)

 

     Amount         Percent of Total Outstandings  
Dollars in millions            Mar. 31
2013
     Dec. 31
2012
     Sept. 30
2012
     Jun. 30
2012
    

Mar. 31

2012

        Mar. 31
2013
    Dec. 31
2012
    Sept. 30
2012
    Jun. 30
2012
    Mar. 31
2012
 

Commercial

   $ 163       $ 115       $ 141       $ 130       $      195         .19     .14     .18     .16     .26

Commercial real estate

     111         100         91         123       144         .59        .54        .49        .67        .78   

Equipment lease financing

     34         17         8         5       25         .47        .23        .12        .07        .38   

Home equity

     86         117         130         124       127         .24        .33        .36        .35        .36   

Residential real estate

                            

Non government insured

     145         151         147         148       198         .97        .99        .96        .94        1.22   

Government insured

     114         127         127         123       122         .76        .83        .80        .78        .75   

Credit card

     30         34         31         33       34         .74        .79        .75        .80        .83   

Other consumer

                            

Non government insured

     49         65         54         43       50         .23        .30        .25        .21        .26   

Government insured

     162         193         154         164       171         .77        .90        .72        .80        .88   

Total

   $   894       $   919       $   883       $   893       $    1,066         .48        .49        .49        .49        .60   

Accruing Loans Past Due 60 to 89 Days (a) (b)

  

     Amount         Percent of Total Outstandings  
Dollars in millions          Mar. 31
2013
     Dec. 31
2012
     Sept. 30
2012
     Jun. 30
2012
     Mar. 31
2012
        Mar. 31
2013
    Dec. 31
2012
    Sept. 30
2012
    Jun. 30
2012
    Mar. 31
2012
 

Commercial

   $ 35       $ 55       $ 92       $ 65       $        53         .04     .07     .12     .08     .07

Commercial real estate

     36         57         66         105       44         .19        .31        .35        .57        .24   

Equipment lease financing

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

Home equity

     33         58         69         68       79         .09        .16        .19        .19        .22   

Residential real estate

                            

Non government insured

     41         49         52         52       56         .27        .32        .34        .33        .35   

Government insured

     86         97         94         91       100         .57        .64        .59        .58        .62   

Credit card

     20         23         20         22       24         .49        .53        .48        .53        .59   

Other consumer

                            

Non government insured

     15         21         23         16       20         .07        .10        .11        .08        .10   

Government insured

     86         110         121         113       98         .41        .51        .57        .55        .50   

Total

   $   353       $   471       $   542       $ 534       $      476         .19        .25        .30        .30        .27   

Accruing Loans Past Due 90 Days or More (a) (b)

  

     Amount         Percent of Total Outstandings  
Dollars in millions          Mar. 31
2013
     Dec. 31
2012
     Sept. 30
2012
     Jun. 30
2012
     Mar. 31
2012
        Mar. 31
2013
    Dec. 31
2012
    Sept. 30
2012
    Jun. 30
2012
    Mar. 31
2012
 

Commercial

   $ 27       $ 42       $ 41       $ 34       $         28         .03     .05     .05     .04     .04

Commercial real estate

     3         15         36         16       5         .02        .08        .19        .09        .03   

Equipment lease financing

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

Residential real estate

                            

Non government insured

     59         46         97         104       116         .39        .30        .63        .66        .72   

Government insured

     1,458         1,855         1,896         1,925       2,012         9.73        12.17        11.98        12.17        12.41   

Credit card

     35         36         32         38       47         .86        .84        .77        .92        1.15   

Other consumer

                            

Non government insured

     13         18         18         17       21         .06        .08        .08        .08        .11   

Government insured

     311         337         335         348       351         1.47        1.57        1.58        1.70        1.80   

Total

   $   1,906       $   2,351       $   2,456       $   2,483       $    2,585         1.02        1.26        1.35        1.38        1.47   
(a) Excludes loans held for sale and purchased impaired loans.
(b) Pursuant to alignment with interagency guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, accruing consumer loans past due 30 - 59 days decreased $44 million, accruing consumer loans past due 60 - 89 days decreased $36 million and accruing consumer loans past due 90 days or more decreased $315 million, of which, $295 million related to residential real estate government insured loans. As part of this alignment, these loans were moved into 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, online banking and mobile 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 investment 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. 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 of 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 loan applications are brokered by majority owned affiliates to others.

Non-Strategic 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. We hold an equity investment in BlackRock, which is a key component of our diversified revenue strategy. BlackRock is a publicly traded company, and additional information regarding its business is available in its filings with the Securities and Exchange Commission (SEC). At March 31, 2013, our economic interest in BlackRock was 22%.

Period End Employees

 

                                         
         March 31
2013
     December 31
2012
     September 30
2012
     June 30
2012
     March 31
2012
 

Full-time employees

              

Retail Banking

     22,985         23,331         23,403         23,388         23,583   

Other full-time employees (a)

     27,957         27,616         27,512         27,060         26,863   

Total full-time employees

     50,942         50,947         50,915         50,448         50,446   

Part-time employees

              

Retail Banking

     4,496         4,563         4,740         4,970         5,265   

Other part-time employees (a)

     734         775         879         1,215         894   

Total part-time employees

     5,230         5,338         5,619         6,185         6,159   

Total

     56,172         56,285         56,534         56,633         56,605   

 

(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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 15

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

  

 

     Three months ended  

In millions

Income (Loss)

       March 31
2013
     December 31
2012
     September 30
2012
             June 30
2012
         March 31
2012
 

Retail Banking (c)

   $ 120         $ 121         $ 192       $ 136       $ 147   

Corporate & Institutional Banking

     541         649         607         577         495   

Asset Management Group

     43         34         37         38         36   

Residential Mortgage Banking (d) (e)

     45         (192)         36         (213)         61   

Non-Strategic Assets Portfolio

     79         59         40         67         71   

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

     176         48         13         (59)         1   
   

Net income

   $ 1,004         $ 719         $ 925       $ 546       $ 811   
   

Revenue

              
   

Retail Banking (c)

   $ 1,483         $ 1,677         $ 1,664       $ 1,551       $ 1,436   

Corporate & Institutional Banking

     1,341         1,576         1,416         1,439         1,266   

Asset Management Group

     255         247         243         240         243   

Residential Mortgage Banking (d)

     291         58         284         (109)         293   

Non-Strategic Assets Portfolio

     219         218         204         223         198   

Other, including BlackRock (b) (f)

     366         293         277         279         296   
   

Total revenue

   $ 3,955         $ 4,069         $ 4,088       $ 3,623       $ 3,732   
   

 

(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 first quarter 2013 Form 10-Q 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 expenses for residential mortgage foreclosure-related matters. For more information, refer to Selected Consolidated Income Statement Information on page 7.

 

(f) 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, private equity investments, 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.

 

(g) 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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 16

 

Retail Banking (Unaudited) (a)

    Three months ended  
Dollars in millions  

March 31

2013

   

December 31

2012

   

September 30

2012

   

June 30

2012

    March 31
2012
 

INCOME STATEMENT

         

Net interest income

    $         1,049      $ 1,081      $ 1,076      $ 1,114      $ 1,045   

Noninterest income

         

Service charges on deposits

    129        143        146        137        121   

Brokerage

    52        48        47        49        45   

Consumer services

    216        220        214        213        191   

Other

    37        185        181        38        34   

Total noninterest income

    434        596        588        437        391   

Total revenue

    1,483        1,677        1,664        1,551        1,436   

Provision for credit losses

    162        280        220        165        135   

Noninterest expense

    1,131        1,206        1,140        1,171        1,069   

Pretax earnings

    190        191        304        215        232   

Income taxes

    70        70        112        79        85   

Earnings

  $ 120      $ 121      $ 192      $ 136      $ 147   

AVERAGE BALANCE SHEET

         

Loans

         

Consumer

         

Home equity

  $ 28,913      $ 28,920      $ 28,881      $ 28,761      $ 26,759   

Indirect auto

    7,006        6,718        5,654        5,042        4,439   

Indirect other

    1,000        1,063        1,133        1,211        1,292   

Education

    8,220        8,370        8,611        9,100        9,440   

Credit cards

    4,108        4,138        4,108        4,075        3,928   

Other

    2,141        2,145        2,068        2,004        1,888   

Total consumer

    51,388        51,354        50,455        50,193        47,746   

Commercial and commercial real estate

    11,290        11,266        11,360        11,445        10,682   

Floor plan

    2,014        1,915        1,769        1,803        1,663   

Residential mortgage

    811        862        918        972        1,031   

Total loans

    65,503        65,397        64,502        64,413        61,122   

Goodwill and other intangible assets

    6,148        6,174        6,199        6,228        5,888   

Other assets

    2,465        2,565        2,589        2,452        2,699   

Total assets

  $ 74,116      $ 74,136      $ 73,290      $ 73,093      $ 69,709   

Deposits

         

Noninterest-bearing demand

  $ 20,744      $ 20,900      $ 20,660      $ 20,381      $ 18,764   

Interest-bearing demand

    31,183        29,526        28,506        28,265        25,707   

Money market

    48,291        47,859        47,557        47,271        43,601   

Total transaction deposits

    100,218        98,285        96,723        95,917        88,072   

Savings

    10,537        10,068        9,954        9,900        9,077   

Certificates of deposit

    22,683        23,531        24,746        26,468        28,150   

Total deposits

    133,438        131,884        131,423        132,285        125,299   

Other liabilities

    273        285        255        190        629   

Capital

    9,058        9,051        9,034        8,455        8,328   

Total liabilities and equity

  $ 142,769      $ 141,220      $ 140,712      $ 140,930      $ 134,256   

PERFORMANCE RATIOS

         

Return on average capital

    5     5     8     6     7

Return on average assets

    .66        .65        1.04        .75        .85   

Noninterest income to total revenue

    29        36        35        28        27   

Efficiency

    76        72        69        75        74   
(a) See note (a) on page 15.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 17

Retail Banking (Unaudited) (Continued)

  

 

    Three months ended  
Dollars in millions, except as noted           March 31
2013
    December 31
2012
    September 30
2012
            June 30
2012
   

        March 31

2012

 

OTHER INFORMATION (a)

        .       

Credit-related statistics:

         

Commercial nonperforming assets

      $ 230          $ 245          $ 266          $ 275          $ 315   

Consumer nonperforming assets

    1,050        902        799        685        650   

Total nonperforming assets

      $ 1,280          $ 1,147          $ 1,065          $ 960          $ 965   

Purchased impaired loans (b)

      $ 788          $ 819          $ 852          $ 886          $ 903   

Commercial lending net charge-offs

      $ 37          $ 34          $ 19          $ 38          $ 28   

Credit card lending net charge-offs

    45        35        40        49        50   

Consumer lending (excluding credit card) net charge-offs

    168        148        160        100        113   

Total net charge-offs

      $ 250          $ 217          $ 219          $ 187          $ 191   

Commercial lending annualized net charge-off ratio

    1.13     1.03     .58     1.15     .91

Credit card lending annualized net charge-off ratio

    4.44     3.36     3.87     4.84     5.12

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

    1.42     1.22     1.35     .85     1.01

Total annualized net charge-off ratio (g)

    1.55     1.32     1.35     1.17     1.26

Home equity portfolio credit statistics: (c)

         

% of first lien positions at origination (d)

    48     42     41     39     37

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

    85     81     80     78     81

Weighted-average updated FICO scores (f)

    743        742        742        742        739   

Annualized net charge-off ratio (g)

    1.97     1.35     1.58     .92     1.11

Delinquency data: (h)

         

Loans 30 - 59 days past due

    .44     .52     .51     .54     .56

Loans 60 - 89 days past due

    .24     .33     .33     .33     .35

Loans 90 days past due

    .99     1.22     1.24     1.24     1.24

Other statistics:

         

ATMs

    7,303        7,282        7,261        7,206        7,220   

Branches (i)

    2,856        2,881        2,887        2,888        2,900   

Customer-related statistics: (in thousands)

         

Retail Banking checking relationships

    6,534        6,475        6,451        6,349        6,278   

Retail online banking active customers

    4,234        4,227        4,117        3,953        3,823   

Retail online bill payment active customers

    1,260        1,236        1,219        1,189        1,161   

Brokerage statistics:

         

Financial consultants (j)

    611        636        655        684        693   

Full service brokerage offices

    39        41        42        40        38   

Brokerage account assets (billions)

      $ 39          $ 38          $ 38          $ 36          $ 37   

 

(a) Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three months ended.
(b) Recorded investment of purchased impaired loans related to acquisitions.
(c) Lien position, LTV and FICO statistics are based upon customer balances.
(d) Lien position and LTV calculation at March 31, 2013 reflect the use of revised assumptions where data is missing.
(e) LTV statistics are based upon current information.
(f) Represents FICO scores that are updated at least quarterly.
(g) Ratio for the three months ended March 31, 2013 includes additional consumer charge-offs taken as a result of alignment with interagency guidance on practices for loans and lines of credit we implemented in the first quarter of 2013.
(h) Delinquency data includes nonaccrual loans. Amounts as of March 31, 2013 are based upon recorded investment; previous quarters’ amounts are based upon unpaid principal balances.
(i) Excludes satellite offices (e.g., drive-ups, electronic branches and retirement centers) that provide limited products and/or services.
(j) 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  
Dollars in millions, except as noted   

March 31

2013

   

December 31

2012

   

September 30

2012

   

June 30

2012

   

March 31

2012

 

INCOME STATEMENT

          

Net interest income

   $         956      $       1,057      $       1,019      $         1,085      $         938   

Noninterest income

          

Corporate service fees

     246        324        258        248        200   

Other

     139        195        139        106        128   

Noninterest income

     385        519        397        354        328   

Total revenue

     1,341        1,576        1,416        1,439        1,266   

Provision for credit losses (benefit)

     14        9        (61)        33        19   

Noninterest expense

     480        549        520        496        463   

Pretax earnings

     847        1,018        957        910        784   

Income taxes

     306        369        350        333        289   

Earnings

   $ 541      $ 649      $ 607      $ 577      $ 495   

AVERAGE BALANCE SHEET

          

Loans

          

Commercial

   $ 52,893      $ 51,081      $ 50,636      $ 49,087      $ 42,919   

Commercial real estate

     16,876        16,517        16,226        15,928        14,388   

Commercial - real estate related

     6,826        6,562        6,008        5,545        4,971   

Asset-based lending

     11,181        10,893        10,406        9,755        9,266   

Equipment lease financing

     6,552        6,272        6,095        5,911        5,706   

Total loans

     94,328        91,325        89,371        86,226        77,250   

Goodwill and other intangible assets

     3,752        3,724        3,707        3,749        3,442   

Loans held for sale

     1,236        1,190        1,263        1,190        1,244   

Other assets

     12,355        12,842        12,582        11,670        10,960   

Total assets

   $ 111,671      $ 109,081      $ 106,923      $ 102,835      $ 92,896   

Deposits

          

Noninterest-bearing demand

   $ 40,572      $ 40,607      $ 37,685      $ 37,813      $ 37,225   

Money market

     17,023        16,500        16,237        15,734        13,872   

Other

     6,979        6,842        6,277        5,933        5,372   

Total deposits

     64,574        63,949        60,199        59,480        56,469   

Other liabilities

     18,779        19,107        19,201        17,551        15,987   

Capital

     9,588        9,787        9,937        8,815        8,537   

Total liabilities and equity

   $ 92,941      $ 92,843      $ 89,337      $ 85,846      $ 80,993   

PERFORMANCE RATIOS

          

Return on average capital

     23     26     24     26     23

Return on average assets

     1.96        2.37        2.26        2.26        2.14   

Noninterest income to total revenue

     29        33        28        25        26   

Efficiency

     36        35        37        34        37   

COMMERCIAL MORTGAGE SERVICING PORTFOLIO (in billions)

          

Beginning of period

   $ 282      $ 265      $ 264      $ 268      $ 267   

Acquisitions/additions

     21        35        12        7        10   

Repayments/transfers

     (13)        (18)        (11)        (11)        (9)   

End of period

   $ 290      $ 282      $ 265      $ 264      $ 268   

OTHER INFORMATION

          

Consolidated revenue from: (b)

          

Treasury Management (c)

   $ 329      $ 337      $ 346      $ 354      $ 343   

Capital Markets (d)

   $ 131      $ 228      $ 175      $ 151      $ 156   

Commercial mortgage loans held for sale (e)

   $ 38      $ 44      $ 13      $ 34      $ 13   

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

     53        57        55        53        30   

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

     11        16        16        (6)        5   

Total commercial mortgage banking activities

   $ 102      $ 117      $ 84      $ 81      $ 48   

Total loans (g)

   $ 94,843      $ 93,721      $ 90,099      $ 88,810      $ 84,329   

Net carrying amount of commercial mortgage servicing rights (g)

   $ 452      $ 420      $ 402      $ 398      $ 428   

Credit-related statistics:

          

Nonperforming assets (g)

   $ 1,082      $ 1,181      $ 1,500      $ 1,686      $ 1,776   

Purchased impaired loans (g) (h)

   $ 768      $ 875      $ 990      $ 1,088      $ 1,177   

Net charge-offs

   $ 58      $ 34      $ 35      $ 30      $ 43   
(a)  See note (a) on page 15.
(b)  Represents consolidated PNC amounts. Our first quarter 2013 10-Q 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 (impairment)/recovery, 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  
Dollars in millions, except as noted    March 31
2013
    December 31
2012
   

September 30

2012

   

June 30

2012

    March 31
2012
 

INCOME STATEMENT

          

Net interest income

   $         73      $ 74      $ 73      $           75      $           75   

Noninterest income

     182        173        170        165        168   

Total revenue

     255        247        243        240        243   

Provision for credit losses (benefit)

     5        (2)        4        (1)        10   

Noninterest expense

     183        195        180        181        176   

Pretax earnings

     67        54        59        60        57   

Income taxes

     24        20        22        22        21   

Earnings

   $ 43      $ 34      $ 37      $ 38      $ 36   

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

   $ 4,793      $ 4,671      $ 4,486      $ 4,321      $ 4,183   

Commercial and commercial real estate

     1,037        1,021        1,060        1,098        1,126   

Residential mortgage

     772        706        687        692        692   

Total loans

     6,602        6,398        6,233        6,111        6,001   

Goodwill and other intangible assets

     306        315        324        333        345   

Other assets

     223        226        214        215        220   

Total assets

   $ 7,131      $ 6,939      $ 6,771      $ 6,659      $ 6,566   

Deposits

          

Noninterest-bearing demand

   $ 1,331      $ 1,573      $ 1,336      $ 1,362      $ 1,575   

Interest-bearing demand

     3,616        3,009        2,662        2,674        2,637   

Money market

     3,841        3,562        3,466        3,535        3,651   

Total transaction deposits

     8,788        8,144        7,464        7,571        7,863   

CDs/IRAs/savings deposits

     454        461        465        490        549   

Total deposits

     9,242        8,605        7,929        8,061        8,412   

Other liabilities

     60        65        68        68        71   

Capital

     474        481        464        463        347   

Total liabilities and equity

   $ 9,776      $ 9,151      $ 8,461      $ 8,592      $ 8,830   

PERFORMANCE RATIOS

          

Return on average capital

     37     28     32     33     42

Return on average assets

     2.45        1.95        2.17        2.30        2.21   

Noninterest income to total revenue

     71        70        70        69        69   

Efficiency

     72        79        74        75        72   

OTHER INFORMATION

          

Total nonperforming assets (b)

   $ 65      $ 69      $ 61      $ 67      $ 73   

Purchased impaired loans (b) (c)

   $ 105      $ 109      $ 118      $ 122      $ 126   

Total net charge-offs (recoveries)

   $ 3      $ 2      $ (1)      $ 3      $ 2   

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

          

Personal

   $ 112      $ 107      $ 106      $ 102      $ 104   

Institutional

     124        117        116        112        115   

Total

   $ 236      $ 224      $ 222      $ 214      $ 219   

Asset Type

          

Equity

   $ 130      $ 120      $ 120      $ 116      $ 119   

Fixed income

     70        69        68        66        66   

Liquidity/Other

     36        35        34        32        34   

Total

   $ 236      $ 224      $ 222      $ 214      $ 219   

Discretionary assets under management

          

Personal

   $ 77      $ 73      $ 73      $ 71      $ 73   

Institutional

     41        39        39        38        39   

Total

   $ 118      $ 112      $ 112      $ 109      $ 112   

Asset Type

          

Equity

   $ 62      $ 56      $ 57      $ 56      $ 58   

Fixed income

     39        39        39        38        38   

Liquidity/Other

     17        17        16        15        16   

Total

   $ 118      $ 112      $ 112      $ 109      $ 112   

Nondiscretionary assets under administration

          

Personal

   $ 35      $ 34      $ 33      $ 31      $ 31   

Institutional

     83        78        77        74        76   

Total

   $ 118      $ 112      $ 110      $ 105      $ 107   

Asset Type

          

Equity

   $ 68      $ 64      $ 63      $ 60      $ 61   

Fixed income

     31        30        29        28        28   

Liquidity/Other

     19        18        18        17        18   

Total

   $ 118      $ 112      $ 110      $ 105      $ 107   
(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  
Dollars in millions, except as noted  

    March 31

2013

   

December 31

2012

   

September 30

2012

          June 30
2012
          March 31
2012
 

INCOME STATEMENT

         

Net interest income

  $ 48      $ 53      $ 52      $ 53      $ 51   

Noninterest income

         

Loan servicing revenue

         

Servicing fees

    41        48        49        52        56   

Net MSR hedging gains

    37        2        7        39        71   

Loan sales revenue

         

Provision for residential mortgage repurchase obligations

    (4     (254     (37     (438     (32

Loan sales revenue

    172        213        216        177        141   

Other

    (3     (4     (3     8        6   

Total noninterest income

    243        5        232        (162     242   

Total revenue

    291        58        284        (109     293   

Provision for credit losses (benefit)

    20        2        2        (2     (7

Noninterest expense

    200        333        226        230        203   

Pretax earnings (loss)

    71        (277     56        (337     97   

Income taxes (benefit)

    26        (85     20        (124     36   

Earnings (loss)

  $ 45      $ (192   $ 36      $ (213   $ 61   

AVERAGE BALANCE SHEET

         

Portfolio loans

  $ 2,553      $ 2,559      $ 2,648      $ 2,751      $ 2,922   

Loans held for sale

    2,038        1,832        1,694        1,830        1,675   

Mortgage servicing rights (MSR)

    764        620        599        665        645   

Other assets

    5,448        6,120        6,560        6,255        6,747   

Total assets

  $ 10,803      $ 11,131      $ 11,501      $ 11,501      $ 11,989   

Deposits

  $ 3,106      $ 3,286      $ 3,492      $ 1,783      $ 1,662   

Borrowings and other liabilities

    3,487        3,729        4,198        4,067        4,353   

Capital

    1,752        1,830        1,488        1,157        832   

Total liabilities and equity

  $ 8,345      $ 8,845      $ 9,178      $ 7,007      $ 6,847   

PERFORMANCE RATIOS

         

Return on average capital

    10     (42 )%      10     (74 )%      29

Return on average assets

    1.69        (6.86     1.25        (7.45     2.05   

Noninterest income to total revenue

    84        9        82        149        83   

Efficiency

    69        574        80        (211     69   

RESIDENTIAL MORTGAGE SERVICING

PORTFOLIO - THIRD-PARTY (in billions)

         

Beginning of period

  $ 119      $ 119      $ 116      $ 121      $ 118   

Acquisitions

    6        6        8          7   

Additions

    4        4        4        2        4   

Repayments/transfers

    (9     (10     (9     (7     (8

End of period

  $ 120      $ 119      $ 119      $ 116      $ 121   

Servicing portfolio - third-party statistics: (b)

         

Fixed rate

    92     92     91     91     91

Adjustable rate/balloon

    8     8     9     9     9

Weighted-average interest rate

    4.80     4.94     5.06     5.21     5.26

MSR capitalized value (in billions)

  $ .8      $ .7      $ .6      $ .6      $ .7   

MSR capitalization value (in basis points)

    65        54        50        50        60   

Weighted-average servicing fee (in basis points)

    28        28        29        29        29   

RESIDENTIAL MORTGAGE

REPURCHASE RESERVE

         

Beginning of period

  $ 614      $ 421      $ 462      $ 101      $ 83   

Provision

    4        254        37        438        32   

RBC Bank (USA) acquisition

            26   

Losses - loan repurchases and settlements

    (96     (61     (78     (77     (40

End of period

  $ 522      $ 614      $ 421      $ 462      $ 101   

OTHER INFORMATION

         

Loan origination volume (in billions)

  $ 4.2      $ 4.4      $ 3.8      $ 3.6      $ 3.4   

Loan sale margin percentage

    4.07     4.87     5.68     4.89     4.17

Percentage of originations represented by:

         

Agency and government programs

    100     100     100     100     100

Refinance volume

    81     80     74     72     82

Total nonperforming assets (b)

  $ 236      $ 134      $ 82      $ 78      $ 80   

Purchased impaired loans (b) (c)

  $ 24      $ 38      $ 69      $ 84      $ 100   
(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  
Dollars in millions   March 31
2013
    December 31
2012
    September 30
2012
    June 30
2012
    March 31
2012
 

INCOME STATEMENT

         

Net interest income

  $ 203      $ 197      $ 195      $ 221      $ 217   

Noninterest income

    16        21        9        2        (19

Total revenue

    219        218        204        223        198   

Provision for credit losses

    42        52        61        50        18   

Noninterest expense

    52        73        79        67        68   

Pretax earnings

    125        93        64        106        112   

Income taxes

    46        34        24        39        41   

Earnings

  $ 79      $ 59      $ 40      $ 67      $ 71   

AVERAGE BALANCE SHEET

         

Commercial Lending:

         

Commercial/Commercial real estate

  $ 537      $ 720      $ 846      $ 1,008      $ 1,004   

Lease financing

    688        684        678        675        670   

Total commercial lending

    1,225        1,404        1,524        1,683        1,674   

Consumer Lending:

         

Home equity

    4,158        4,325        4,498        4,668        4,849   

Residential real estate

    5,938        6,130        6,328        6,534        6,046   

Total consumer lending

    10,096        10,455        10,826        11,202        10,895   

Total portfolio loans

    11,321        11,859        12,350        12,885        12,569   

Other assets (b)

    (586     (481     (333     (195     (445

Total assets

  $     10,735      $ 11,378      $ 12,017      $ 12,690      $ 12,124   

Deposits and other liabilities

  $ 168      $ 186      $ 189      $ 180      $ 177   

Capital

    1,094        1,188        1,278        1,311        1,176   

Total liabilities and equity

  $ 1,262      $ 1,374      $ 1,467      $ 1,491      $ 1,353   

PERFORMANCE RATIOS

         

Return on average capital

    29     20     12     21     24

Return on average assets

    2.98        2.06        1.32        2.12        2.36   

Noninterest income to total revenue

    7        10        4        1        (10

Efficiency

    24        33        39        30        34   

OTHER INFORMATION

         

Nonperforming assets (c)

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

Purchased impaired loans (c) (d)

  $ 5,372      $ 5,547      $ 5,702      $ 5,889      $ 6,097   

Net charge-offs

  $ 87      $ 60      $ 65      $ 83      $ 91   

Annualized net charge-off ratio

    3.12     2.01     2.09     2.59     2.91

LOANS (c)

         

Commercial Lending:

         

Commercial/Commercial real estate

  $ 493      $ 665      $ 795      $ 945      $ 1,104   

Lease financing

    690        686        680        677        671   

Total commercial lending

    1,183        1,351        1,475        1,622        1,775   

Consumer Lending:

         

Home equity

    4,209        4,237        4,408        4,575        4,751   

Residential real estate

    5,880        6,093        6,272        6,475        6,693   

Total consumer lending

    10,089        10,330        10,680        11,050        11,444   

Total loans

  $ 11,272      $ 11,681      $ 12,155      $ 12,672      $ 13,219   
(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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 22

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.