Exhibit 99.1

 

 

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

THIRD QUARTER 2013

(Unaudited)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

THIRD 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 Noninterest Income 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

     18-19   

Asset Management Group

     20   

Residential Mortgage Banking

     21   

Non-Strategic Assets Portfolio

     22   

Glossary of Terms

     23-27   

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on October 16, 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              Nine months ended  

In millions, except per share data

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

Interest Income

                     

Loans

   $ 1,933      $ 1,955      $ 2,029      $ 2,094      $ 2,076             $ 5,917      $ 6,190   

Investment securities

     423        422        470        478        504               1,315        1,557   

Other

     92        92        112        99        90               296        316   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total interest income

     2,448        2,469        2,611        2,671        2,670               7,528        8,063   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Interest Expense

                     

Deposits

     84        86        93        97        103               263        289   

Borrowed funds

     130        125        129        150        168               384        558   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total interest expense

     214        211        222        247        271               647        847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Net interest income

     2,234        2,258        2,389        2,424        2,399               6,881        7,216   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Noninterest Income

                     

Asset management

     330        340        308        302        305               978        867   

Consumer services

     316        314        296        294        288               926        842   

Corporate services (a)

     306        326        277        349        295               909        817   

Residential mortgage (b) (c)

     199        167        234        —         227               600        284   

Service charges on deposits

     156        147        136        150        152               439        423   

Net gains on sales of securities

     21        61        14        45        40               96        159   

Net other-than-temporary impairments

     (2     (4     (10     (15     (24            (16     (96

Other (d)

     360        455        311        520        406               1,126        931   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total noninterest income

     1,686        1,806        1,566        1,645        1,689               5,058        4,227   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total revenue

     3,920        4,064        3,955        4,069        4,088               11,939        11,443   

Provision For Credit Losses

     137        157        236        318        228               530        669   

Noninterest Expense

                     

Personnel

     1,181        1,186        1,169        1,216        1,171               3,536        3,401   

Occupancy

     205        206        211        226        212               622        601   

Equipment

     194        189        183        194        185               566        541   

Marketing

     68        67        45        70        74               180        209   

Other

     776        787        787        1,123        1,008               2,350        3,001   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total noninterest expense

     2,424        2,435        2,395        2,829        2,650               7,254        7,753   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Income before income taxes and noncontrolling interests

     1,359        1,472        1,324        922        1,210               4,155        3,021   

Income taxes

     320        349        320        203        285               989        739   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Net income

     1,039        1,123        1,004        719        925               3,166        2,282   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Less: Net income (loss) attributable to noncontrolling interests

     2        1        (9     1        (14            (6     (13

Preferred stock dividends and discount accretion and redemptions

     71        53        75        54        63               199        127   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Net income attributable to common shareholders

   $ 966      $ 1,069      $ 938      $ 664      $ 876           $ 2,973      $ 2,168   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Earnings Per Common Share

                     

Basic

   $ 1.82      $ 2.02      $ 1.78      $ 1.26      $ 1.66             $ 5.61      $ 4.10   

Diluted

   $ 1.79      $ 1.99      $ 1.76      $ 1.24      $ 1.64             $ 5.55      $ 4.06   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Average Common Shares Outstanding

                     

Basic

     529        528        526        526        526               528        526   

Diluted

     534        531        528        528        529               531        529   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Efficiency

     62     60     61     70     65            61     68

Noninterest income to total revenue

     43     44     40     40     41            42     37

Effective tax rate (e)

     23.5     23.7     24.2     22.0     23.6            23.8     24.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

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

 

(a) Includes commercial mortgage servicing rights valuation adjustments, net of economic hedge.
(b) Residential mortgage income for the three months ended December 31, 2012 was less than $.5 million.
(c) Includes benefit/provisions for residential mortgage repurchase obligations.
(d) Includes gains on sales of Visa Class B common shares and credit valuations related to customer initiated hedging activities.
(e) 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

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

Assets

          

Cash and due from banks (a)

   $ 4,908      $ 4,051      $ 3,948      $ 5,220      $ 4,284   

Federal funds sold and resale agreements (b)

     911        1,613        1,274        1,463        1,724   

Trading securities

     1,603        2,109        2,243        2,096        2,664   

Interest-earning deposits with banks (a)

     8,047        3,797        1,541        3,984        2,321   

Loans held for sale (b)

     2,399        3,814        3,295        3,693        2,737   

Investment securities (a)

     57,260        57,449        59,361        61,406        62,814   

Loans (a) (b)

     192,856        189,775        186,504        185,856        181,864   

Allowance for loan and lease losses (a)

     (3,691     (3,772     (3,828     (4,036     (4,039
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans

     189,165        186,003        182,676        181,820        177,825   

Goodwill

     9,074        9,075        9,075        9,072        9,163   

Other intangible assets

     2,194        2,153        1,921        1,797        1,778   

Equity investments (a) (c)

     10,303        10,054        11,008        10,877        10,846   

Other (a) (b)

     22,733        24,297        24,470        23,679        24,647   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 308,597      $ 304,415      $ 300,812      $ 305,107      $ 300,803   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 68,747      $ 66,708      $ 64,652      $ 69,980      $ 64,484   

Interest-bearing

     147,327        145,571        146,968        143,162        141,779   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     216,074        212,279        211,620        213,142        206,263   

Borrowed funds

          

Federal funds purchased and repurchase agreements

     3,165        4,303        4,000        3,327        3,877   

Federal Home Loan Bank borrowings

     8,479        8,481        5,483        9,437        9,942   

Bank notes and senior debt

     11,924        11,177        10,918        10,429        9,960   

Subordinated debt

     7,829        7,113        7,996        7,299        6,754   

Commercial paper (a)

     6,994        6,400        6,953        8,453        10,731   

Other (a) (b)

     1,882        2,390        2,297        1,962        1,840   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowed funds

     40,273        39,864        37,647        40,907        43,104   

Allowance for unfunded loan commitments and letters of credit

     235        242        238        250        239   

Accrued expenses (a)

     4,673        4,057        4,181        4,449        4,015   

Other (a)

     4,522        6,032        5,048        4,594        5,380   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     265,777        262,474        258,734        263,342        259,001   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

          

Preferred stock (d)

          

Common stock - $5 par value

          

Authorized 800 shares, issued 539, 539, 538, 538, and 538 shares

     2,695        2,693        2,690        2,690        2,689   

Capital surplus - preferred stock

     3,940        3,939        3,591        3,590        3,559   

Capital surplus - common stock and other

     12,310        12,234        12,174        12,193        12,149   

Retained earnings

     22,561        21,828        20,993        20,265        19,813   

Accumulated other comprehensive income (loss)

     47        45        767        834        991   

Common stock held in treasury at cost: 7, 8, 9, 10, and 9 shares

     (423     (453     (552     (569     (518
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     41,130        40,286        39,663        39,003        38,683   

Noncontrolling interests

     1,690        1,655        2,415        2,762        3,119   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     42,820        41,941        42,078        41,765        41,802   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 308,597      $ 304,415      $ 300,812      $ 305,107      $ 300,803   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital Ratios

          

Basel 1 Ratios

          

Tier 1 common (e)

     10.4     10.1     9.8     9.6     9.5

Tier 1 risk-based (e)

     12.3        12.0        11.6        11.6        11.7   

Total risk-based (e)

     15.7        15.2        14.9        14.7        14.5   

Leverage (e)

     11.1        10.9        10.4        10.4        10.4   

Common shareholders’ equity to assets

     12.1        11.9        12.0        11.6        11.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Amounts include consolidated variable interest entities. Our first and second quarter 2013 Form 10-Qs included, and third quarter 2013 Form 10-Q will include, additional information regarding these items.
(b) Amounts include assets and liabilities for which PNC has elected the fair value option. Our first and second quarter 2013 Form 10-Qs included, and third 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 September 30, 2013 is estimated.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 3

 

Average Consolidated Balance Sheet (Unaudited) (a)

 

     Three months ended              Nine months ended  

In millions

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

Assets

                     

Interest-earning assets:

                     

Investment securities

                     

Securities available for sale

                     

Residential mortgage-backed

                     

Agency

   $ 23,674      $ 24,339      $ 25,168      $ 25,552      $ 26,546             $ 24,388      $ 26,847   

Non-agency

     5,862        5,889        6,025        6,245        6,490               5,925        6,594   

Commercial mortgage-backed

     4,349        3,855        3,745        3,674        3,720               3,985        3,685   

Asset-backed

     5,962        5,919        5,731        5,643        5,525               5,872        5,087   

U.S. Treasury and government agencies

     2,013        2,074        2,715        2,746        2,516               2,265        2,729   

State and municipal

     2,354        2,182        2,189        2,034        1,972               2,242        1,882   

Other debt

     2,630        2,728        2,649        2,860        3,045               2,669        3,073   

Corporate stocks and other

     339        304        368        346        390               337        351   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total securities available for sale

     47,183        47,290        48,590        49,100        50,204               47,683        50,248   

Securities held to maturity

                     

Residential mortgage-backed

     3,794        3,833        4,146        4,377        4,480               3,923        4,438   

Commercial mortgage-backed

     3,276        3,521        3,747        3,967        4,180               3,513        4,396   

Asset-backed

     1,064        978        826        702        825               957        956   

U.S. Treasury and government agencies

     236        233        231        229        227               233        225   

State and municipal

     658        640        639        664        671               646        671   

Other

     346        349        352        355        357               349        359   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total securities held to maturity

     9,374        9,554        9,941        10,294        10,740               9,621        11,045   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total investment securities

     56,557        56,844        58,531        59,394        60,944               57,304        61,293   

Loans

                     

Commercial

     86,456        86,015        83,476        80,876        79,250               85,326        75,237   

Commercial real estate

     19,558        18,860        18,850        18,678        18,514               19,092        17,927   

Equipment lease financing

     7,296        7,350        7,241        6,956        6,774               7,296        6,580   

Consumer

     62,277        61,587        61,411        61,430        60,570               61,761        59,188   

Residential real estate

     14,918        14,794        15,121        15,257        15,575               14,944        15,478   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total loans

     190,505        188,606        186,099        183,197        180,683               188,419        174,410   

Loans held for sale

     3,071        3,072        3,279        3,025        2,956               3,140        2,961   

Federal funds sold and resale agreements

     664        1,141        1,176        1,290        1,601               992        1,696   

Other

     8,809        6,439        7,095        6,737        6,422               7,474        6,485   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total interest-earning assets

     259,606        256,102        256,180        253,643        252,606               257,329        246,845   

Noninterest-earning assets:

                     

Allowance for loan and lease losses

     (3,761     (3,821     (3,937     (3,987     (4,152            (3,839     (4,214

Cash and due from banks

     3,984        3,869        4,055        4,126        3,907               3,969        3,793   

Other

     43,479        45,877        47,147        48,349        47,781               45,467        46,215   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total assets

   $ 303,308      $ 302,027      $ 303,445      $ 302,131      $ 300,142             $ 302,926      $ 292,639   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

 

(a) Calculated using average daily balances.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 4

 

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

 

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

In millions

   2013      2013      2013      2012      2012           2013      2012  

Liabilities and Equity

                        

Interest-bearing liabilities:

                        

Interest-bearing deposits

                        

Money market

   $ 70,557       $ 69,123       $ 69,003       $ 67,997       $ 67,628           $ 69,567       $ 65,240   

Demand

     39,866         40,172         39,372         36,619         34,733             39,805         33,577   

Savings

     11,007         11,124         10,671         10,190         10,066             10,935         9,754   

Retail certificates of deposit

     21,859         22,641         23,488         24,394         25,695             22,657         27,353   

Time deposits in foreign offices and other time

     1,804         2,164         2,267         2,740         3,230             2,077         3,348   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total interest-bearing deposits

     145,093         145,224         144,801         141,940         141,352             145,041         139,272   

Borrowed funds

                        

Federal funds purchased and repurchase agreements

     2,967         4,132         4,328         4,023         4,659             3,804         4,716   

Federal Home Loan Bank borrowings

     8,208         7,218         7,657         8,877         10,626             7,697         9,946   

Bank notes and senior debt

     11,256         10,886         10,469         9,702         9,657             10,873         10,468   

Subordinated debt

     7,334         7,003         7,249         6,668         6,408             7,196         7,137   

Commercial paper

     7,109         7,263         7,967         9,069         10,518             7,443         8,152   

Other

     1,792         2,099         2,057         1,961         1,868             1,981         1,943   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total borrowed funds

     38,666         38,601         39,727         40,300         43,736             38,994         42,362   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total interest-bearing liabilities

     183,759         183,825         184,528         182,240         185,088             184,035         181,634   

Noninterest-bearing liabilities and equity:

                        

Noninterest-bearing deposits

     66,834         64,749         64,850         65,527         62,483             65,485         60,295   

Allowance for unfunded loan commitments and letters of credit

     242         238         249         239         225             243         236   

Accrued expenses and other liabilities

     10,372         10,929         11,891         12,237         11,590             11,058         11,052   

Equity

     42,101         42,286         41,927         41,888         40,756             42,105         39,422   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total liabilities and equity

   $ 303,308       $ 302,027       $ 303,445       $ 302,131       $ 300,142           $ 302,926       $ 292,639   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

 

(a)    Calculated using average daily balances.

       

Supplemental Average Balance Sheet Information (Unaudited)

 

  

Deposits and Common Shareholders’ Equity

                        

Interest-bearing deposits

   $ 145,093       $ 145,224       $ 144,801       $ 141,940       $ 141,352           $ 145,041       $ 139,272   

Noninterest-bearing deposits

     66,834         64,749         64,850         65,527         62,483             65,485         60,295   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 

Total deposits

   $ 211,927       $ 209,973       $ 209,651       $ 207,467       $ 203,835           $ 210,526       $ 199,567   

Transaction deposits

   $ 177,257       $ 174,044       $ 173,225       $ 170,143       $ 164,844           $ 174,857       $ 159,112   

Common shareholders’ equity

   $ 36,483       $ 36,310       $ 35,628       $ 35,296       $ 34,323           $ 36,144       $ 33,654   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 5

 

Details of Net Interest Margin (Unaudited) (a)

 

     Three months ended          Nine months ended  
     September 30     June 30     March 31     December 31     September 30           September 30     September 30  
     2013     2013     2013     2012     2012           2013     2012  

Average yields/rates

                   

Yield on interest-earning assets

                   

Investment securities

                   

Securities available for sale

                   

Residential mortgage-backed

                   

Agency

     2.36     2.50     2.90     2.94     3.03          2.59     3.11

Non-agency

     5.70        5.51        5.40        5.39        5.08             5.54        5.37   

Commercial mortgage-backed

     3.82        4.00        4.02        3.81        4.29             3.94        4.37   

Asset-backed

     1.87        1.80        1.92        1.93        2.09             1.86        2.07   

U.S. Treasury and government agencies

     1.90        1.37        1.65        1.76        2.08             1.64        2.05   

State and municipal

     4.24        4.48        4.93        4.66        4.62             4.30        4.78   

Other debt

     2.38        2.39        2.58        2.91        2.85             2.45        2.65   

Corporate stocks and other

     .12        .14        .12        .24        .12             .12        .09   

Total securities available for sale

     2.91        2.93        3.16        3.19        3.27             2.99        3.35   

Securities held to maturity

                   

Residential mortgage-backed

     3.92        3.26        3.44        3.34        3.50             3.54        3.59   

Commercial mortgage-backed

     4.29        4.34        4.71        4.50        4.46             4.46        4.55   

Asset-backed

     1.59        1.74        1.80        1.76        2.61             1.70        1.99   

U.S. Treasury and government agencies

     3.81        3.80        3.77        3.82        3.81             3.79        3.79   

State and municipal

     5.55        4.27        4.23        4.23        4.18             5.55        4.19   

Other

     2.90        2.89        2.82        2.89        2.82             2.87        2.84   

Total securities held to maturity

     3.86        3.57        3.82        3.73        3.83             3.81        3.85   

Total investment securities

     3.06        3.04        3.27        3.28        3.37             3.13        3.44   

Loans

                   

Commercial

     3.62        3.71        4.03        4.16        4.30             3.78        4.52   

Commercial real estate

     4.64        4.84        5.05        5.57        5.26             4.84        5.42   

Equipment lease financing

     3.75        4.41        4.05        4.26        4.45             4.07        4.71   

Consumer

     4.31        4.40        4.67        4.68        4.63             4.46        4.69   

Residential real estate

     5.00        5.13        5.29        5.36        5.18             5.14        5.40   

Total loans

     4.06        4.19        4.45        4.58        4.59             4.23        4.76   

Loans held for sale

     5.34        4.22        6.49        5.34        4.34             5.37        5.73   

Federal funds sold and resale agreements

     1.10        .61        .74        1.04        1.22             .77        1.43   

Other

     2.26        3.66        3.25        3.24        3.27             2.97        3.53   

Total yield on interest-earning assets

     3.79        3.91        4.15        4.24        4.24             3.95        4.39   

Rate on interest-bearing liabilities

                 

Interest-bearing deposits

                   

Money market

     .18        .18        .19        .19        .21             .18        .21   

Demand

     .05        .05        .04        .04        .04             .05        .04   

Savings

     .10        .10        .10        .09        .09             .10        .10   

Retail certificates of deposit

     .79        .82        .85        .89        .90             .82        .76   

Time deposits in foreign offices and other time

     .22        .43        .61        .45        .38             .43        .45   

Total interest-bearing deposits

     .23        .24        .26        .27        .29             .24        .28   

Borrowed funds

                   

Federal funds purchased and repurchase agreements

     .15        .14        .16        .20        .19             .15        .21   

Federal Home Loan Bank borrowings

     .48        .53        .61        .70        .69             .54        .74   

Bank notes and senior debt

     1.71        1.71        1.83        2.07        2.16             1.74        2.32   

Subordinated debt

     2.89        2.78        2.83        3.57        4.71             2.84        4.87   

Commercial paper

     .22        .22        .25        .28        .28             .23        .27   

Other

     2.91        2.62        2.28        2.78        2.43             2.59        2.23   

Total borrowed funds

     1.33        1.28        1.30        1.46        1.53             1.31        1.74   

Total rate on interest-bearing liabilities

     .46        .46        .48        .54        .58             .47        .62   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Interest rate spread

     3.33        3.45        3.67        3.70        3.66             3.48        3.77   

Impact of noninterest-bearing sources

     .14        .13        .14        .15        .16             .14        .16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Net interest margin

     3.47     3.58     3.81     3.85     3.82          3.62     3.93
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

(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 September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, were $43 million, $40 million, $40 million, $42 million and $36 million, respectively. The taxable-equivalent adjustments to net interest income for the nine months ended September 30, 2013 and September 30, 2012 were $123 million and $102 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          Nine months ended  
     September 30     June 30     March 31     December 31     September 30           September 30     September 30  

In millions

   2013     2013     2013     2012     2012           2013     2012  

Core net interest income (a)

   $ 2,035      $ 2,054      $ 2,140      $ 2,151      $ 2,154           $ 6,229      $ 6,365   

Total purchase accounting accretion (a)(b)

     199        204        249        273        245             652        851   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total net interest income

   $ 2,234      $ 2,258      $ 2,389      $ 2,424      $ 2,399           $ 6,881      $ 7,216   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

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

(b)    Total purchase accounting accretion includes purchase accounting accretion on purchased impaired loans. Refer to the Accretion-Purchased Impaired Loans table on page 10 for details.

        

        

 

Details of Net Interest Margin (c)

 

  

     Three months ended          Nine months ended  

In millions

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

Average yields/rates

                   

Yield on interest earning assets

                   

Total investment securities

     3.06     3.04     3.27     3.28     3.37          3.13     3.44

Total loans

     4.06        4.19        4.45        4.58        4.59             4.23        4.76   

Other

     2.96        3.50        3.91        3.56        3.26             3.43        3.80   

Total yield on interest earning assets

     3.79        3.91        4.15        4.24        4.24             3.95        4.39   
 

Rate on interest-bearing liabilities

                   

Total interest-bearing deposits

     .23        .24        .26        .27        .29             .24        .28   

Total borrowed funds

     1.33        1.28        1.30        1.46        1.53             1.31        1.74   

Total rate on interest-bearing liabilities

     .46        .46        .48        .54        .58             .47        .62   
 

Interest rate spread

     3.33        3.45        3.67        3.70        3.66             3.48        3.77   

Impact of noninterest-bearing sources

     .14        .13        .14        .15        .16             .14        .16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Net interest margin

     3.47     3.58     3.81     3.85     3.82          3.62     3.93
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

(c)    See note (a) on page 5.

 

Details of Core Net Interest Margin (d)

 

       

  

     Three months ended          Nine months ended  

In millions

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

Average yields/rates

                   

Yield on interest earning assets

                   

Total investment securities

     2.96     2.95     3.21     3.17     3.27          3.05     3.34

Total loans

     3.68        3.77        3.96        4.02        4.09             3.80        4.22   

Other

     2.74        3.69        3.22        3.35        3.11             3.18        3.50   

Total yield on interest earning assets

     3.48        3.58        3.75        3.80        3.85             3.60        3.97   
 

Rate on interest-bearing liabilities

                   

Total interest-bearing deposits

     .26        .27        .29        .31        .34             .27        .42   

Total borrowed funds

     1.18        1.12        1.09        1.23        1.31             1.13        1.51   

Total rate on interest-bearing liabilities

     .45        .45        .46        .52        .57             .46        .67   

Interest rate spread

     3.03        3.13        3.29        3.28        3.28             3.14        3.30   

Impact of noninterest-bearing sources

     .14        .13        .14        .15        .16             .14        .16   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Core net interest margin

     3.17        3.26        3.43        3.43        3.44             3.28        3.46   

Purchase accounting accretion impact on net interest margin

     .30        .32        .38        .42        .38             .34        .47   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Net interest margin

     3.47     3.58     3.81     3.85     3.82          3.62     3.93
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

(d) 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. To calculate core net interest margin, each calculated margin in the table has been adjusted by 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          Nine months ended  

In millions, except per share data

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

Basic

                      

Net income

   $ 1,039       $ 1,123       $ 1,004      $ 719       $ 925           $ 3,166      $ 2,282   

Less:

                      

Net income (loss) attributable to noncontrolling interests

     2         1         (9     1         (14          (6     (13

Preferred stock dividends and discount accretion and redemptions

     71         53         75        54         63             199        127   

Dividends and undistributed earnings allocated to nonvested restricted shares

     4         5         4        4         5             13        10   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Net income attributable to basic common shares

   $ 962       $ 1,064       $ 934      $ 660       $ 871           $ 2,960      $ 2,158   

Basic weighted-average common shares outstanding

     529         528         526        526         526             528        526   

Basic earnings per common share

   $ 1.82       $ 2.02       $ 1.78      $ 1.26       $ 1.66           $ 5.61      $ 4.10   
 

Diluted

                      

Net income attributable to basic common shares

   $ 962       $ 1,064       $ 934      $ 660       $ 871           $ 2,960      $ 2,158   

Less: Impact of BlackRock earnings per share dilution

     4         4         5        4         3             13        10   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Net income attributable to diluted common shares

   $ 958       $ 1,060       $ 929      $ 656       $ 868           $ 2,947      $ 2,148   

Basic weighted-average common shares outstanding

     529         528         526        526         526             528        526   

Dilutive potential common shares

     5         3         2        2         3             3        3   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Diluted weighted-average common shares outstanding

     534         531         528        528         529             531        529   

Diluted earnings per common share

   $ 1.79       $ 1.99       $ 1.76      $ 1.24       $ 1.64           $ 5.55      $ 4.06   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

        

 

 

   

 

 

 

Selected Noninterest Income Information (Unaudited)

 

     Three months ended          Nine months ended  

In millions, except per share data

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

Increase (Decrease) to Noninterest Income and Impact on Diluted Earnings per Share

                   

Commercial mortgage servicing rights recovery, net of economic hedge (Pre-tax)

   $ 18      $ 44      $ 11      $ 16      $ 16           $ 73      $ 15   

Impact on diluted earnings per share (a)

     .02        .05        .01        .02        .02             .09        .02   
 

Benefit / (provision) for residential mortgage repurchase obligations (Pre-tax)

   $ 6      $ (73   $ (4   $ (254   $ (37        $ (71   $ (507

Impact on diluted earnings per share (a)

     .01        (.09     (.00     (.31     (.05          (.09     (.62
 

Net gains on sales of securities (Pre-tax)

   $ 21      $ 61      $ 14      $ 45      $ 40           $ 96      $ 159   

Impact on diluted earnings per share (a)

     .02        .08        .02        .06        .05             .12        .20   
 

Gains on sales of Visa Class B common shares (Pre-tax)

   $ 85      $ 83        $ 130      $ 137           $ 168        137   

Impact on diluted earnings per share (a)

     .10        .10          .16        .17             .21        .17   
 

Credit valuations related to customer initiated hedging activities (Pre-tax)

   $ (1   $ 39      $ 2      $ 17      $ 18           $ 40      $ (10

Impact on diluted earnings per share (a)

     (.00     .05        .00        .02        .02             .05        (.01
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

(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%.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 8

 

Details of Loans (Unaudited)

 

In millions

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

Commercial

              

Retail/wholesale trade

   $ 15,178       $ 15,192       $ 14,784       $ 14,353       $ 14,062   

Manufacturing

     15,406         15,525         15,349         14,841         14,554   

Service providers

     12,973         13,267         13,057         12,606         12,330   

Real estate related (a)

     10,554         10,248         10,274         10,616         10,208   

Financial services

     5,685         5,326         4,740         4,356         4,320   

Health care

     8,266         8,228         7,912         7,763         7,152   

Other industries

     18,928         19,144         18,169         18,505         17,042   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial (b)

     86,990         86,930         84,285         83,040         79,668   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial real estate

              

Real estate projects (c)

     13,036         12,636         12,596         12,347         12,801   

Commercial mortgage

     7,095         6,355         6,183         6,308         5,808   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     20,131         18,991         18,779         18,655         18,609   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equipment lease financing

     7,314         7,349         7,240         7,247         6,923   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial lending

     114,435         113,270         110,304         108,942         105,200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consumer

              

Home equity

              

Lines of credit

     22,043         22,559         23,029         23,576         24,007   

Installment

     14,548         13,857         13,001         12,344         11,871   

Credit card

     4,242         4,135         4,081         4,303         4,135   

Other consumer

              

Education

     7,711         7,814         8,048         8,238         8,415   

Automobile

     10,259         9,066         8,716         8,708         8,328   

Other

     4,226         4,297         4,340         4,505         4,525   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     63,029         61,728         61,215         61,674         61,281   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Residential real estate

              

Residential mortgage

     14,709         14,051         14,217         14,430         14,505   

Residential construction

     683         726         768         810         878   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total residential real estate

     15,392         14,777         14,985         15,240         15,383   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer lending

     78,421         76,505         76,200         76,914         76,664   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans (d)

   $ 192,856       $ 189,775       $ 186,504       $ 185,856       $ 181,864   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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

       

(b)    During the third quarter of 2013, PNC revised its policy to classify loans initiated through a Special Purpose Entity (SPE) to be reported based upon the nature of the sponsor of the SPE instead of reported based upon the nature of the SPE itself. This resulted in a reclassification of loans amounting to $5.5 billion, $4.9 billion, $4.7 billion and $4.8 billion at June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 2012, respectively, that were previously classified as Financial Services to other categories within Commercial Lending.

           

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

       

(d)    Includes purchased impaired loans:

   $ 6,398       $ 6,778       $ 7,073       $ 7,406       $ 7,749   

Details of Loans Held for Sale (Unaudited)

 

In millions

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

Commercial mortgage

   $ 785       $ 1,072       $ 895       $ 1,392       $ 1,183   

Residential mortgage

     1,613         2,353         2,331         2,220         1,477   

Other

     1         389         69         81         77   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,399       $ 3,814       $ 3,295       $ 3,693       $ 2,737   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Net Unfunded Commitments (Unaudited)

 

  

In millions

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

Net unfunded commitments

   $ 126,577       $ 124,142       $ 121,812       $ 120,592       $ 118,285   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 9

 

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

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions

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

Beginning balance

   $ 3,772      $ 3,828      $ 4,036      $ 4,039      $ 4,156   

Gross charge-offs:

          

Commercial

     (113     (81     (114     (126     (114

Commercial real estate

     (42     (51     (86     (72     (83

Equipment lease financing

     (2     (1     (3     (4     (2

Home equity (a)

     (86     (92     (194     (141     (167

Residential real estate (a)

     (9     (43     (79     (18     (25

Credit card (a)

     (41     (45     (50     (43     (47

Other consumer (a)

     (47     (43     (43     (56     (43
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross charge-offs (b)

     (340     (356     (569     (460     (481

Recoveries:

          

Commercial

     54        66        63        77        76   

Commercial real estate

     24        33        13        29        34   

Equipment lease financing

     3        4        6        8        7   

Home equity

     18        24        13        15        16   

Residential real estate

     (2     1        (1       (1

Credit card

     6        6        5        9        6   

Other consumer

     13        14        14        12        12   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recoveries

     116        148        113        150        150   

Net (charge-offs) recoveries:

          

Commercial

     (59     (15     (51     (49     (38

Commercial real estate

     (18     (18     (73     (43     (49

Equipment lease financing

     1        3        3        4        5   

Home equity

     (68     (68     (181     (126     (151

Residential real estate

     (11     (42     (80     (18     (26

Credit card

     (35     (39     (45     (34     (41

Other consumer

     (34     (29     (29     (44     (31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

     (224     (208     (456     (310     (331

Provision for credit losses

     137        157        236        318        228   

Other

     (1     (1         1   

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

     7        (4     12        (11     (15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 3,691      $ 3,772      $ 3,828      $ 4,036      $ 4,039   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Information

          

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

     .47     .44     .99     .67     .73

Allowance for loan and lease losses to total loans

     1.91        1.99        2.05        2.17        2.22   

Commercial lending net charge-offs

   $ (76   $ (30   $ (121   $ (88   $ (82

Consumer lending net charge-offs

     (148     (178     (335     (222     (249
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net charge-offs

   $ (224   $ (208   $ (456   $ (310   $ (331

Net charge-offs to average loans

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial lending

     .27     .11     .45     .33     .31

Consumer lending

     .76        .93        1.78        1.15        1.30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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

 

  

Three months ended - in millions

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

Beginning balance

   $ 242      $ 238      $ 250      $ 239      $ 224   

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

     (7     4        (12     11        15   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 235      $ 242      $ 238      $ 250      $ 239   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


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     Nine months ended  

In millions

   September 30
2013
    June 30
2013
    September 30
2012
    September 30
2013
    September 30
2012
 

Impaired loans

          

Scheduled accretion

   $ 145      $ 150      $ 175      $ 452      $ 511   

Reversal of contractual interest on impaired loans

     (82     (83     (103     (250     (311
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Scheduled accretion net of contractual interest

     63        67        72        202        200   

Excess cash recoveries

     26        11        21        87        112   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

   $ 89      $ 78      $ 93      $ 289      $ 312   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Purchased Impaired Loans - Accretable Yield

 

In millions

        

In millions

      

July 1, 2013

   $ 2,164     

January 1, 2013

   $ 2,166   

Scheduled accretion

     (145  

Scheduled accretion

     (452

Excess cash recoveries

     (26  

Excess cash recoveries

     (87

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

     191     

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

     557   
  

 

 

      

 

 

 

September 30, 2013 (b)

   $ 2,184     

September 30, 2013 (b)

   $ 2,184   
  

 

 

      

 

 

 

 

(a) Approximately 64% and 60% of the net reclassifications for the third quarter and first nine months of 2013, respectively, were driven by the consumer portfolio and were 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 predominantly due to future cash flow changes in the commercial portfolio.
(b) As of September 30, 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

 

     September 30, 2013     June 30, 2013     December 31, 2012  

Dollars in millions

   Balance     Net Investment     Balance     Net Investment     Balance     Net Investment  

Commercial and commercial real estate loans:

            

Unpaid principal balance

   $ 1,071        $ 1,299        $ 1,680     

Purchased impaired mark

     (289       (331       (431  
  

 

 

     

 

 

     

 

 

   

Recorded investment

     782          968          1,249     

Allowance for loan losses

     (154       (183       (239  
  

 

 

     

 

 

     

 

 

   

Net investment

     628        59     785        60     1,010        60
  

 

 

     

 

 

     

 

 

   

Consumer and residential mortgage loans:

            

Unpaid principal balance

     5,805          6,095          6,639     

Purchased impaired mark

     (189       (285       (482  
  

 

 

     

 

 

     

 

 

   

Recorded investment

     5,616          5,810          6,157     

Allowance for loan losses

     (907       (934       (858  
  

 

 

     

 

 

     

 

 

   

Net investment

     4,709        81     4,876        80     5,299        80
  

 

 

     

 

 

     

 

 

   

Total purchased impaired loans:

            

Unpaid principal balance

     6,876          7,394          8,319     

Purchased impaired mark

     (478       (616       (913  
  

 

 

     

 

 

     

 

 

   

Recorded investment

     6,398          6,778          7,406     

Allowance for loan losses

     (1,061       (1,117       (1,097  
  

 

 

     

 

 

     

 

 

   

Net investment

   $ 5,337        78   $ 5,661        77   $ 6,309        76
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 11

 

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions

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

Nonperforming loans, including TDRs (a)

          

Commercial lending

          

Commercial

          

Retail/wholesale trade

   $ 72      $ 63      $ 62      $ 61      $ 88   

Manufacturing

     61        62        75        73        104   

Service providers

     109        110        112        124        144   

Real estate related (b)

     142        163        161        178        236   

Financial services

     11        14        13        9        13   

Health care

     26        24        21        25        26   

Other industries

     77        85        98        120        138   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

     498        521        542        590        749   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial real estate

          

Real estate projects

     493        516        606        654        802   

Commercial mortgage

     105        123        138        153        198   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

     598        639        744        807        1,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equipment lease financing

     6        7        9        13        15   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial lending

     1,102        1,167        1,295        1,410        1,764   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer lending (c)

          

Home equity (d)

     1,137        1,131        1,088        951        818   

Residential real estate

          

Residential mortgage (d)

     891        947        952        824        766   

Residential construction

     11        15        13        21        24   

Credit card

     4        4        6        5        5   

Other consumer (d)

     61        57        68        43        37   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer lending (e)

     2,104        2,154        2,127        1,844        1,650   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming loans (f)

     3,206        3,321        3,422        3,254        3,414   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OREO and foreclosed assets

          

Other real estate owned (OREO) (g)

     403        432        472        507        578   

Foreclosed and other assets

     13        25        33        33        29   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total OREO and foreclosed assets

     416        457        505        540        607   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets

   $ 3,622      $ 3,778      $ 3,927      $ 3,794      $ 4,021   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonperforming loans to total loans

     1.66     1.75     1.83     1.75     1.88

Nonperforming assets to total loans, OREO and foreclosed assets

     1.87        1.99        2.10        2.04        2.20   

Nonperforming assets to total assets

     1.17        1.24        1.31        1.24        1.34   

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

     115        114        112        124        118   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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) 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.
(f) 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.
(g) OREO excludes $264 million, $311 million, $383 million, $380 million and $363 million at September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012 and September 30, 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).
(h) 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

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

Beginning balance

   $ 3,778      $ 3,927      $ 3,794      $ 4,021      $ 4,176   

New nonperforming assets

     824        773        1,032        804        861   

Charge-offs and valuation adjustments

     (220     (216     (343     (297     (392

Principal activity, including paydowns and payoffs

     (289     (328     (258     (532     (438

Asset sales and transfers to loans held for sale

     (117     (146     (114     (134     (162

Returned to performing status

     (354     (232     (184     (68     (24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 3,622      $ 3,778      $ 3,927      $ 3,794      $ 4,021   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Largest Individual Nonperforming Assets at September 30, 2013 (a)

 

In millions

Ranking

   Outstandings     

Industry

1    $ 36      

Real Estate, Rental and Leasing

2      30      

Real Estate, Rental and Leasing

3      16      

Real Estate, Rental and Leasing

4      13      

Real Estate, Rental and Leasing

5      12      

Wholesale Trade

6      11      

Other Services

7      10      

Real Estate, Rental and Leasing

8      9      

Construction

9      8      

Other Real Estate Owned

10      8      

Real Estate, Rental and Leasing

  

 

 

    
Total    $ 153      
  

 

 

    
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

 

In millions

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

Total consumer lending (a)

   $ 2,221       $ 2,243       $ 2,231       $ 2,318       $ 2,019   

Total commercial lending

     581         599         610         541         556   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total TDRs

   $ 2,802       $ 2,842       $ 2,841       $ 2,859       $ 2,575   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Nonperforming

   $ 1,451       $ 1,531       $ 1,517       $ 1,589       $ 1,383   

Accruing (b)

     1,178         1,103         1,103         1,037         950   

Credit card (c)

     173         208         221         233         242   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total TDRs

   $ 2,802       $ 2,842       $ 2,841       $ 2,859       $ 2,575   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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 current 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

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

Commercial

   $ 73       $ 85       $ 163       $ 115       $ 141         .08     .10     .19     .14     .18

Commercial real estate

     54         66         111         100         91         .27        .35        .59        .54        .49   

Equipment lease financing

     6         2         34         17         8         .08        .03        .47        .23        .12   

Home equity

     88         76         86         117         130         .24        .21        .24        .33        .36   

Residential real estate

                         

Non government insured

     118         120         145         151         147         .77        .81        .97        .99        .96   

Government insured

     109         110         114         127         127         .71        .74        .76        .83        .80   

Credit card

     30         27         30         34         31         .71        .65        .74        .79        .75   

Other consumer

                         

Non government insured

     56         52         49         65         54         .25        .25        .23        .30        .25   

Government insured

     170         148         162         193         154         .77        .70        .77        .90        .72   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 704       $ 686       $ 894       $ 919       $ 883         .37        .36        .48        .49        .49   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

  

 
     Amount      Percent of Total Outstandings  

Dollars in millions

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

Commercial

   $ 37       $ 53       $ 35       $ 55       $ 92         .04     .06     .04     .07     .12

Commercial real estate

     31         22         36         57         66         .15        .12        .19        .31        .35   

Equipment lease financing

     1         4         1         1         5         .01        .05        .01        .01        .07   

Home equity

     32         29         33         58         69         .09        .08        .09        .16        .19   

Residential real estate

                         

Non government insured

     31         29         41         49         52         .20        .20        .27        .32        .34   

Government insured

     57         79         86         97         94         .37        .53        .57        .64        .59   

Credit card

     19         19         20         23         20         .45        .46        .49        .53        .48   

Other consumer

                         

Non government insured

     18         14         15         21         23         .08        .07        .07        .10        .11   

Government insured

     106         100         86         110         121         .48        .47        .41        .51        .57   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 332       $ 349       $ 353       $ 471       $ 542         .17        .18        .19        .25        .30   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

 

 
     Amount      Percent of Total Outstandings  

Dollars in millions

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

Commercial

   $ 33       $ 31       $ 27       $ 42       $ 41         .04     .04     .03     .05     .05

Commercial real estate

     3            3         15         36         .01          .02        .08        .19   

Equipment lease financing

     2               2         1         .03            .03        .01   

Residential real estate

                         

Non government insured

     35         50         59         46         97         .23        .34        .39        .30        .63   

Government insured

     1,187         1,326         1,458         1,855         1,896         7.71        8.97        9.73        12.17        11.98   

Credit card

     31         33         35         36         32         .73        .80        .86        .84        .77   

Other consumer

                         

Non government insured

     13         12         13         18         18         .06        .06        .06        .08        .08   

Government insured

     329         310         311         337         335         1.48        1.46        1.47        1.57        1.58   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

            

Total

   $ 1,633       $ 1,762       $ 1,906       $ 2,351       $ 2,456         .85        .93        1.02        1.26        1.35   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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, ATMs, 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 September 30, 2013, our economic interest in BlackRock was 22%.

Period End Employees

 

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

Full-time employees

              

Retail Banking

     22,192         22,476         22,985         23,331         23,403   

Other full-time employees (a)

     27,973         27,975         27,957         27,616         27,512   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total full-time employees

     50,165         50,451         50,942         50,947         50,915   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Part-time employees

              

Retail Banking

     4,194         4,394         4,496         4,563         4,740   

Other part-time employees (a)

     575         935         734         775         879   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total part-time employees

     4,769         5,329         5,230         5,338         5,619   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     54,934         55,780         56,172         56,285         56,534   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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              Nine months ended  

In millions

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

Income (Loss)

                         

Retail Banking (c)

   $ 165       $ 158       $ 120       $ 121      $ 192             $ 443       $ 475   

Corporate & Institutional Banking

     542         612         541         649        607               1,695         1,679   

Asset Management Group

     47         36         43         34        37               126         111   

Residential Mortgage Banking (d)

     28         20         45         (192     36               93         (116

Non-Strategic Assets Portfolio

     121         60         79         59        40               260         178   

Other, including BlackRock (b) (e)

     136         237         176         48        13               549         (45
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

          

 

 

    

 

 

 

Net income

   $ 1,039       $ 1,123       $ 1,004       $ 719      $ 925             $ 3,166       $ 2,282   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

          

 

 

    

 

 

 

Revenue

                       

Retail Banking (c)

   $ 1,563       $ 1,554       $ 1,483       $ 1,677      $ 1,664             $ 4,600       $ 4,651   

Corporate & Institutional Banking

     1,356         1,420         1,341         1,576        1,416               4,117         4,121   

Asset Management Group

     262         254         255         247        243               771         726   

Residential Mortgage Banking (d)

     254         228         291         58        284               773         468   

Non-Strategic Assets Portfolio

     181         175         219         218        204               575         625   

Other, including BlackRock (b) (e)

     304         433         366         293        277               1,103         852   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

          

 

 

    

 

 

 

Total revenue

   $ 3,920       $ 4,064       $ 3,955       $ 4,069      $ 4,088             $ 11,939       $ 11,443   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

          

 

 

    

 

 

 

 

(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 third quarter of 2012, enhancements were made to certain assumptions used to estimate our total Allowance for Loan and Lease Losses (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 third 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 second quarters of 2013 and the fourth and third quarters of 2012. For more information, refer to Selected Noninterest Income Information on page 7.
(d) Includes benefit/provisions for residential mortgage repurchase obligations. For more information, refer to Selected Noninterest Income Information on page 7.
(e) Includes earnings and gains or losses related to PNC’s equity interest in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as gains or losses related to BlackRock transactions, integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, 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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 16

 

Retail Banking (Unaudited) (a)

 

     Three months ended              Nine months ended  

Dollars in millions

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

INCOME STATEMENT

                     

Net interest income

   $ 1,006      $ 1,012      $ 1,049      $ 1,081      $ 1,076             $ 3,067      $ 3,235   

Noninterest income

                     

Service charges on deposits

     149        141        129        143        146               419        404   

Brokerage

     57        58        52        48        47               167        141   

Consumer services

     234        229        216        220        214               679        618   

Other

     117        114        37        185        181               268        253   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total noninterest income

     557        542        434        596        588               1,533        1,416   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total revenue

     1,563        1,554        1,483        1,677        1,664               4,600        4,651   

Provision for credit losses

     152        148        162        280        220               462        520   

Noninterest expense

     1,151        1,156        1,131        1,206        1,140               3,438        3,380   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Pretax earnings

     260        250        190        191        304               700        751   

Income taxes

     95        92        70        70        112               257        276   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Earnings

   $ 165      $ 158      $ 120      $ 121      $ 192             $ 443      $ 475   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                     

Loans

                     

Consumer

                     

Home equity

   $ 29,477      $ 29,212      $ 28,913      $ 28,920      $ 28,881             $ 29,203      $ 28,136   

Indirect auto

     7,971        7,314        7,006        6,718        5,654               7,434        5,047   

Indirect other

     877        939        1,000        1,063        1,133               938        1,212   

Education

     7,818        7,982        8,220        8,370        8,611               8,005        9,049   

Credit cards

     4,148        4,061        4,108        4,138        4,108               4,106        4,037   

Other

     2,152        2,141        2,141        2,145        2,068               2,145        1,987   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total consumer

     52,443        51,649        51,388        51,354        50,455               51,831        49,468   

Commercial and commercial real estate

     11,299        11,345        11,290        11,266        11,360               11,311        11,176   

Floor plan

     1,931        2,048        2,014        1,915        1,769               1,997        1,745   

Residential mortgage

     715        767        811        862        918               764        974   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total loans

     66,388        65,809        65,503        65,397        64,502               65,903        63,363   

Goodwill and other intangible assets

     6,105        6,127        6,148        6,174        6,199               6,127        6,105   

Other assets

     2,722        2,580        2,465        2,565        2,589               2,590        2,580   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total assets

   $ 75,215      $ 74,516      $ 74,116      $ 74,136      $ 73,290             $ 74,620      $ 72,048   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Deposits

                     

Noninterest-bearing demand

   $ 21,349      $ 21,187      $ 20,744      $ 20,900      $ 20,660             $ 21,096      $ 19,938   

Interest-bearing demand

     31,748        32,004        31,183        29,526        28,506               31,647        27,496   

Money market

     48,939        48,645        48,291        47,859        47,557               48,628        46,148   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total transaction deposits

     102,036        101,836        100,218        98,285        96,723               101,371        93,582   

Savings

     10,900        10,997        10,537        10,068        9,954               10,812        9,645   

Certificates of deposit

     21,050        21,823        22,683        23,531        24,746               21,846        26,448   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total deposits

     133,986        134,656        133,438        131,884        131,423               134,029        129,675   

Other liabilities

     364        343        273        285        255               327        358   

Allocated capital

     8,838        8,876        9,058        9,051        9,034               8,923        8,607   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total liabilities and equity

   $ 143,188      $ 143,875      $ 142,769      $ 141,220      $ 140,712             $ 143,279      $ 138,640   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

PERFORMANCE RATIOS

                     

Return on average allocated capital

     7     7     5     5     8            7     7

Return on average assets

     .87        .85        .66        .65        1.04               .79        .88   

Noninterest income to total revenue

     36        35        29        36        35               33        30   

Efficiency

     74        74        76        72        69               75        73   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

 

(a) See note (a) on page 15.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 17

 

Retail Banking (Unaudited) (Continued)

 

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

Dollars in millions, except as noted

   2013     2013     2013     2012     2012           2013     2012  

OTHER INFORMATION (a)

         .                

Credit-related statistics:

                   

Commercial nonperforming assets

   $ 212     $ 222      $ 230      $ 245      $ 266            

Consumer nonperforming assets

     1,074       1,068        1,050        902        799            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total nonperforming assets

   $ 1,286     $ 1,290      $ 1,280      $ 1,147      $ 1,065            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Purchased impaired loans (b)

   $ 718      $ 750      $ 788      $ 819      $ 852            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Commercial lending net charge-offs

   $ 17      $ 22      $ 37      $ 34      $ 19           $ 76      $ 85   

Credit card lending net charge-offs

     35        39        45        35        40             119        139   

Consumer lending (excluding credit card) net charge-offs

     91        91        168        148        160             350        373   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total net charge-offs

   $ 143      $ 152      $ 250      $ 217      $ 219           $ 545      $ 597   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Commercial lending annualized net charge-off ratio

     .51     .66     1.13     1.03     .58          .76     .88

Credit card lending annualized net charge-off ratio

     3.35     3.85     4.44     3.36     3.87          3.87     4.60

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

     .74     .75     1.42     1.22     1.35          .97     1.07
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total annualized net charge-off ratio (g)

     .85     .93     1.55     1.32     1.35          1.11     1.26
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Home equity portfolio credit statistics: (c)

                   

% of first lien positions at origination (d)

     52     50     48     42     41         

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

     83     85     85     81     80         

Weighted-average updated FICO
scores (f)

     745        745        743        742        742            

Annualized net charge-off ratio (g)

     .75     .82     1.97     1.35     1.58          1.17     1.21

Delinquency data: (h)

                   

Loans 30 - 59 days past due

     .22     .20     .23     .42     .25         

Loans 60 - 89 days past due

     .09     .08     .10     .22     .15         
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total accruing loans past due

     .32     .28     .33     .64     .40         
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Nonperforming loans

     3.13     3.12     3.01     2.64     2.28         
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Other statistics:

                   

ATMs

     7,441        7,335        7,303        7,282        7,261            

Branches (i)

     2,724        2,780        2,856        2,881        2,887            

Brokerage account assets (billions)

   $ 40      $ 39      $ 39      $ 38      $ 38            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Customer-related statistics: (in thousands)

                   

Retail Banking checking relationships

     6,658        6,589        6,534        6,475        6,451            

Retail online banking active customers

     4,534        4,271        4,234        4,227        4,117            

Retail online bill payment active customers

     1,285        1,270        1,260        1,236        1,219            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

 

 

(a) Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three and nine months ended, respectively.
(b) Recorded investment of purchased impaired loans related to acquisitions.
(c) Lien position, LTV and FICO statistics are based upon customer balances.
(d) Lien positions and LTV calculations at September 30, 2013, June 30, 2013 and 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) Ratios for the three months ended March 31, 2013 and nine months ended September 30, 2013 include 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) Data based upon recorded investment. Past due amounts exclude purchased impaired loans, even if contractually past due, as we are currently accreting interest income over the expected life of the loans. In the first quarter of 2012, we adopted a policy stating that Home equity loans past due 90 days or more would be placed on nonaccrual status.
(i) Excludes satellite offices (e.g., drive-ups, electronic branches and retirement centers) that provide limited products and/or services.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 18

 

Corporate & Institutional Banking (Unaudited) (a)

 

     Three months ended          Nine months ended  

Dollars in millions

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

INCOME STATEMENT

                   

Net interest income

   $ 945      $ 943      $ 956      $ 1,057      $ 1,019           $ 2,844      $ 3,042   

Noninterest income

                   

Corporate service fees

     277        297        246        324        258             820        706   

Other

     134        180        139        195        139             453        373   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Noninterest income

     411        477        385        519        397             1,273        1,079   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total revenue

     1,356        1,420        1,341        1,576        1,416             4,117        4,121   

Provision for credit losses (benefit)

     30        (40     14        9        (61          4        (9

Noninterest expense

     495        499        480        549        520             1,474        1,479   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Pretax earnings

     831        961        847        1,018        957             2,639        2,651   

Income taxes

     289        349        306        369        350             944        972   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Earnings

   $ 542      $ 612      $ 541      $ 649      $ 607           $ 1,695      $ 1,679   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                   

Loans

                   

Commercial

   $ 72,753      $ 72,202      $ 69,817      $ 67,444      $ 65,909           $ 71,601      $ 62,150   

Commercial real estate

     17,830        17,002        16,876        16,517        16,226             17,240        15,516   

Equipment lease financing

     6,610        6,655        6,552        6,272        6,095             6,606        5,904   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total commercial lending

     97,193        95,859        93,245        90,233        88,230             95,447        83,570   

Consumer

     801        876        1,083        1,092        1,141             919        731   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total loans

     97,994        96,735        94,328        91,325        89,371             96,366        84,301   

Goodwill and other intangible assets

     3,848        3,775        3,752        3,724        3,707             3,792        3,633   

Loans held for sale

     975        968        1,236        1,190        1,263             1,058        1,233   

Other assets

     9,750        10,729        12,355        12,842        12,582             10,936        11,740   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total assets

   $ 112,567      $ 112,207      $ 111,671      $ 109,081      $ 106,923           $ 112,152      $ 100,907   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Deposits

                   

Noninterest-bearing demand

   $ 42,053      $ 39,910      $ 40,572      $ 40,607      $ 37,685           $ 40,850      $ 37,575   

Money market

     18,099        16,932        17,023        16,500        16,237             17,355        15,284   

Other

     6,992        6,914        6,979        6,842        6,277             6,962        5,862   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total deposits

     67,144        63,756        64,574        63,949        60,199             65,167        58,721   

Other liabilities

     13,932        17,059        18,779        19,107        19,201             16,572        17,586   

Allocated capital

     9,489        9,495        9,588        9,787        9,937             9,524        9,100   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total liabilities and equity

   $ 90,565      $ 90,310      $ 92,941      $ 92,843      $ 89,337           $ 91,263      $ 85,407   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

PERFORMANCE RATIOS

                   

Return on average allocated capital

     23     26     23     26     24          24     25

Return on average assets

     1.91        2.19        1.96        2.37        2.26             2.02        2.22   

Noninterest income to total revenue

     30        34        29        33        28             31        26   

Efficiency

     37        35        36        35        37             36        36   

 

(a) See note (a) on page 15.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 19

 

Corporate & Institutional Banking (Unaudited) (Continued) (a)

 

    Three months ended             Nine months ended  

Dollars in millions, except as noted

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

COMMERCIAL MORTGAGE SERVICING PORTFOLIO (in billions)

                   

Beginning of period

  $ 294      $ 290      $ 282      $ 265      $ 264            $ 282     $ 267   

Acquisitions/additions

    18       18        21        35        12              57       29   

Repayments/transfers

    (14 )     (14     (13     (18     (11           (41 )     (31
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

   

 

 

 

End of period

  $ 298      $ 294      $ 290      $ 282      $ 265            $ 298      $ 265   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

   

 

 

 

OTHER INFORMATION

                   

Consolidated revenue from: (b)

                   

Treasury Management (c)

  $ 309      $ 313      $ 329      $ 337      $ 346            $ 951      $ 1,043   

Capital Markets (d)

  $ 175      $ 196      $ 131      $ 228      $ 175            $ 502      $ 482   

Commercial mortgage loans held for sale (e)

  $ 27      $ 31      $ 38      $ 44      $ 13            $ 96     $ 60   

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

    60        53        53        57        55              166       138   

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

    18        44        11        16        16              73       15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

   

 

 

 

Total commercial mortgage banking activities

  $ 105      $ 128      $ 102      $ 117      $ 84          $ 335      $ 213   

Average Loans (by C&IB business)

                   

Corporate Banking

  $ 50,844      $ 50,678      $ 49,241      $ 47,522      $ 47,091            $ 50,260      $ 44,079   

Real Estate

    22,622        21,361        20,790        19,861        18,749              21,597        17,933   

Business Credit

    11,726        11,611        11,181        10,893        10,406              11,508        9,811   

Equipment Finance

    10,035        10,034        9,811        9,438        9,214              9,961        8,899   

Other

    2,767        3,051        3,305        3,611        3,911              3,040        3,579   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

   

 

 

 

Total average loans

    97,994        96,735        94,328        91,325        89,371              96,366        84,301   

Total loans (g)

  $ 99,337      $ 97,708      $ 94,843      $ 93,721      $ 90,099              99,337        90,099   

Net carrying amount of commercial mortgage servicing rights (g)

  $ 541      $ 525      $ 452      $ 420      $ 402             

Credit-related statistics:

                   

Nonperforming assets (g)

  $ 949      $ 999      $ 1,082      $ 1,181      $ 1,500             

Purchased impaired loans (g) (h)

  $ 600      $ 708      $ 768      $ 875      $ 990             

Net charge-offs (recoveries)

  $ 56      $ (19   $ 58      $ 34      $ 35            $ 95      $ 108   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

 

   

 

 

 

 

(a) See note (a) on page 15.
(b) Represents consolidated PNC amounts. Our third 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 20

 

Asset Management Group (Unaudited) (a)

 

     Three months ended              Nine months ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

                     

Net interest income

   $ 74      $ 70      $ 73      $ 74      $ 73             $ 217      $ 223   

Noninterest income

     188        184        182        173        170               554        503   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total revenue

     262        254        255        247        243               771        726   

Provision for credit losses (benefit)

     (4     1        5        (2     4               2        13   

Noninterest expense

     192        195        183        195        180               570        537   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Pretax earnings

     74        58        67        54        59               199        176   

Income taxes

     27        22        24        20        22               73        65   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Earnings

   $ 47      $ 36      $ 43      $ 34      $ 37             $ 126      $ 111   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                     

Loans

                     

Consumer

   $ 5,107      $ 4,947      $ 4,793      $ 4,671      $ 4,486             $ 4,950      $ 4,330   

Commercial and commercial real estate

     1,049        1,042        1,037        1,021        1,060               1,043        1,095   

Residential mortgage

     784        772        772        706        687               776        691   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total loans

     6,940        6,761        6,602        6,398        6,233               6,769        6,116   

Goodwill and other intangible assets

     289        298        306        315        324               297        334   

Other assets

     216        230        223        226        214               223        216   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total assets

   $ 7,445      $ 7,289      $ 7,131      $ 6,939      $ 6,771             $ 7,289      $ 6,666   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Deposits

                     

Noninterest-bearing demand

   $ 1,220      $ 1,249      $ 1,331      $ 1,573      $ 1,336             $ 1,266      $ 1,424   

Interest-bearing demand

     3,329        3,475        3,616        3,009        2,662               3,472        2,658   

Money market

     3,693        3,722        3,841        3,562        3,466               3,752        3,550   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total transaction deposits

     8,242        8,446        8,788        8,144        7,464               8,490        7,632   

CDs/IRAs/savings deposits

     431        441        454        461        465               442        501   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total deposits

     8,673        8,887        9,242        8,605        7,929               8,932        8,133   

Other liabilities

     62        58        60        65        68               60        69   

Allocated capital

     464        457        474        481        464               465        425   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total liabilities and equity

   $ 9,199      $ 9,402      $ 9,776      $ 9,151      $ 8,461             $ 9,457      $ 8,627   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

PERFORMANCE RATIOS

                   

Return on average allocated capital

     40     32     37     28     32            36     35

Return on average assets

     2.50        1.98        2.45        1.95        2.17               2.31        2.22   

Noninterest income to total revenue

     72        72        71        70        70               72        69   

Efficiency

     73        77        72        79        74               74        74   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

OTHER INFORMATION

                     

Total nonperforming assets (b)

   $ 68     $ 69      $ 65      $ 69      $ 61              

Purchased impaired loans (b) (c)

   $ 100      $ 102      $ 105      $ 109      $ 118              

Total net charge-offs (recoveries)

   $ (7   $ 2      $ 3      $ 2      $ (1          $ (2   $ 4   
 

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

                     

Personal

   $ 106     $ 112      $ 112      $ 107      $ 106              

Institutional

     131       121        124        117        116              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Total

   $ 237     $ 233      $ 236      $ 224      $ 222              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Asset Type

                     

Equity

   $ 132     $ 130      $ 130      $ 120      $ 120              

Fixed income

     70       70        70        69        68              

Liquidity/Other

     35       33        36        35        34              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Total

   $ 237     $ 233      $ 236      $ 224      $ 222              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Discretionary assets under management

                     

Personal

   $ 80     $ 78      $ 77      $ 73      $ 73              

Institutional

     42       39        41        39        39              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Total

   $ 122     $ 117      $ 118      $ 112      $ 112              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Asset Type

                     

Equity

   $ 65     $ 62      $ 62      $ 56      $ 57              

Fixed income

     40       39        39        39        39              

Liquidity/Other

     17       16        17        17        16              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Total

   $ 122     $ 117      $ 118      $ 112      $ 112              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Nondiscretionary assets under administration

                     

Personal

   $ 26     $ 34      $ 35      $ 34      $ 33              

Institutional

     89       82        83        78        77              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Total

   $ 115     $ 116      $ 118      $ 112      $ 110              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Asset Type

                     

Equity

   $ 67     $ 68      $ 68      $ 64      $ 63              

Fixed income

     30       31        31        30        29              

Liquidity/Other

     18       17        19        18        18              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

Total

   $ 115     $ 116      $ 118      $ 112      $ 110              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

(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 21

 

Residential Mortgage Banking (Unaudited) (a)

 

     Three months ended              Nine months ended  

Dollars in millions, except as noted

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

INCOME STATEMENT

                     

Net interest income

   $ 46      $ 51      $ 48      $ 53      $ 52             $ 145      $ 156   

Noninterest income

                     

Loan servicing revenue

                     

Servicing fees

     40        37        41        48        49               118        157   

Net MSR hedging gains

     57        26        37        2        7               120        117   

Loan sales revenue

                     

Benefit / (provision) for residential mortgage repurchase obligations

     6        (73     (4     (254     (37            (71     (507

Loan sales revenue

     108        190        172        213        216               470        534   

Other

     (3     (3     (3     (4     (3            (9     11   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total noninterest income

     208        177        243        5        232               628        312   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total revenue

     254        228        291        58        284               773        468   

Provision for credit losses (benefit)

     —         4        20        2        2               24        (7

Noninterest expense

     210        192        200        333        226               602        659   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Pretax earnings (loss)

     44        32        71        (277     56               147        (184

Income taxes (benefit)

     16        12        26        (85     20               54        (68
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Earnings (loss)

   $ 28      $ 20      $ 45      $ (192   $ 36             $ 93      $ (116
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                     

Portfolio loans

   $ 2,334      $ 2,403      $ 2,553      $ 2,559      $ 2,648             $ 2,429      $ 2,773   

Loans held for sale

     2,104        2,106        2,038        1,832        1,694               2,083        1,733   

Mortgage servicing rights (MSR)

     1,068        849        764        620        599               895        636   

Other assets

     3,811        5,049        5,448        6,120        6,560               4,763        6,521   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total assets

   $ 9,317      $ 10,407      $ 10,803      $ 11,131      $ 11,501             $ 10,170      $ 11,663   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Deposits

   $ 2,936      $ 3,260      $ 3,106      $ 3,286      $ 3,492             $ 3,100      $ 2,317   

Borrowings and other liabilities

     2,316        3,216        3,487        3,729        4,198               3,002        4,206   

Allocated capital

     1,470        1,492        1,752        1,830        1,488               1,571        1,160   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Total liabilities and equity

   $ 6,722      $ 7,968      $ 8,345      $ 8,845      $ 9,178             $ 7,673      $ 7,683   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

PERFORMANCE RATIOS

                     

Return on average allocated capital

     8     5     10     (42 )%      10            8     (13 )% 

Return on average assets

     1.19        .77        1.69        (6.86     1.25               1.22        (1.33

Noninterest income to total revenue

     82        78        84        9        82               81        67   

Efficiency

     83        84        69        574        80               78        141   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

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

                     

Beginning of period

   $ 116      $ 120      $ 119      $ 119      $ 116             $ 119      $ 118   

Acquisitions

     2          6        6        8               8        15   

Additions

     4        4        4        4        4               12        10   

Repayments/transfers

     (7     (8     (9     (10     (9            (24     (24
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

End of period

   $ 115      $ 116      $ 120      $ 119      $ 119             $ 115      $ 119   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

Servicing portfolio - third-party statistics: (b)

                     

Fixed rate

     92     92     92     92     91           

Adjustable rate/balloon

     8     8     8     8     9           

Weighted-average interest rate

     4.63     4.72     4.80     4.94     5.06           

MSR capitalized value (in billions)

   $ 1.1      $ 1.0      $ .8      $ .7      $ .6              

MSR capitalization value (in basis points)

     90        84        65        54        50              

Weighted-average servicing fee (in basis points)

     28        28        28        28        29              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

            

RESIDENTIAL MORTGAGE REPURCHASE RESERVE

                     

Beginning of period

   $ 523      $ 522      $ 614      $ 421      $ 462             $ 614      $ 83   

(Benefit) / Provision

     (6     73        4        254        37               71        507   

RBC Bank (USA) acquisition

                        26   

Losses - loan repurchases and settlements

     (46     (72     (96     (61     (78            (214     (195
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

End of period

   $ 471      $ 523      $ 522      $ 614      $ 421             $ 471      $ 421   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

OTHER INFORMATION

                     

Loan origination volume (in billions)

   $ 3.7      $ 4.7      $ 4.2      $ 4.4      $ 3.8             $ 12.6      $ 10.8   

Loan sale margin percentage

     2.92     4.04     4.07     4.87     5.68            3.72     4.94

Percentage of originations represented by:

                     

Agency and government programs

     99     100     100     100     100            100     100

Purchase volume (c)

     38     28     19     20     26            28     24

Refinance volume

     62     72     81     80     74            72     76

Total nonperforming
assets (b)

   $ 205     $ 220      $ 236      $ 134      $ 82              

Purchased impaired
loans (b) (d)

   $ (2   $ 8      $ 24      $ 38      $ 69              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

 

 

   

 

 

 

 

(a) See note (a) on page 15.
(b) As of period end.
(c) Mortgages with borrowers as part of residential real estate purchase transactions.
(d) Recorded investment of purchased impaired loans related to acquisitions.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 22

 

Non-Strategic Assets Portfolio (Unaudited) (a)

 

     Three months ended          Nine months ended  

Dollars in millions

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

INCOME STATEMENT

                   

Net interest income

   $ 161      $ 164      $ 203      $ 197      $ 195           $ 528      $ 633   

Noninterest income

     20        11        16        21        9             47        (8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total revenue

     181        175        219        218        204             575        625   

Provision for credit losses (benefit)

     (43     39        42        52        61             38        129   

Noninterest expense

     33        41        52        73        79             126        214   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Pretax earnings

     191        95        125        93        64             411        282   

Income taxes

     70        35        46        34        24             151        104   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Earnings

   $ 121      $ 60      $ 79      $ 59      $ 40           $ 260      $ 178   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

AVERAGE BALANCE SHEET

                   

Commercial Lending:

                   

Commercial/Commercial real estate

   $ 319      $ 437      $ 537      $ 720      $ 846           $ 430      $ 952   

Lease financing

     686        694        688        684        678             689        674   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total commercial lending

     1,005        1,131        1,225        1,404        1,524             1,119        1,626   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Consumer Lending:

                   

Home equity

     3,935        4,122        4,158        4,325        4,498             4,071        4,671   

Residential real estate

     5,496        5,709        5,938        6,130        6,328             5,713        6,303   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total consumer lending

     9,431        9,831        10,096        10,455        10,826             9,784        10,974   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total portfolio loans

     10,436        10,962        11,321        11,859        12,350             10,903        12,600   

Other assets (b)

     (735     (672     (586     (481     (333          (665     (324
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total assets

   $ 9,701      $ 10,290      $ 10,735      $ 11,378      $ 12,017           $ 10,238      $ 12,276   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Deposits and other liabilities

   $ 261      $ 275      $ 168      $ 186      $ 189           $ 235      $ 182   

Allocated capital

     1,076        1,113        1,094        1,188        1,278             1,094        1,255   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

Total liabilities and equity

   $ 1,337      $ 1,388      $ 1,262      $ 1,374      $ 1,467           $ 1,329      $ 1,437   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

PERFORMANCE RATIOS

                   

Return on average allocated capital

     45     22     29     20     12          32     19

Return on average assets

     4.95        2.34        2.98        2.06        1.32             3.40        1.94   

Noninterest income to total revenue

     11        6        7        10        4             8        (1

Efficiency

     18        23        24        33        39             22        34   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

OTHER INFORMATION

                   

Nonperforming assets (c)

   $ 863     $ 935      $ 999      $ 999      $ 1,056            

Purchased impaired loans (c) (d)

   $ 4,966      $ 5,193      $ 5,372      $ 5,547      $ 5,702            

Net charge-offs

   $ 23      $ 53      $ 87      $ 60      $ 65           $ 163      $ 239   

Annualized net charge-off ratio

     .87     1.94     3.12     2.01     2.09          2.00     2.53

LOANS (c)

                   

Commercial Lending:

                   

Commercial/Commercial real estate

   $ 270      $ 388      $ 493      $ 665      $ 795            

Lease financing

     675        696        690        686        680            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total commercial lending

     945        1,084        1,183        1,351        1,475            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Consumer Lending:

                   

Home equity

     3,844        4,029        4,209        4,237        4,408            

Residential real estate

     5,434        5,659        5,880        6,093        6,272            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total consumer lending

     9,278        9,688        10,089        10,330        10,680            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

          

Total loans

   $ 10,223      $ 10,772      $ 11,272      $ 11,681      $ 12,155            
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

        

 

 

   

 

 

 

 

(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 23

 

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).

Allocated capital - Capital which is allocated to our business segments using our risk-based economic capital model, including consideration of the goodwill at those business segments as well as the diversification of risk among the business segments.

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.

Basel I Tier 1 common capital - Basel I Tier 1 risk-based capital, less preferred equity, less trust preferred capital securities, and less noncontrolling interests.

Basel I Tier 1 common capital ratio - Basel I Tier 1 common capital divided by period-end Basel I risk-weighted assets.

Basel I Leverage ratio - Basel I Tier 1 risk-based capital divided by adjusted average total assets.

Basel I 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 Basel I Tier 1 risk-based capital purposes.

Basel I Tier 1 risk-based capital ratio - Basel I Tier 1 risk-based capital divided by period-end Basel I risk-weighted assets.

Basel I Total risk-based capital - Basel I Tier 1 risk-based capital plus qualifying subordinated debt and trust preferred securities, other noncontrolling interests not qualified as Basel I Tier 1, eligible gains on available for sale equity securities and the allowance for loan and lease losses, subject to certain limitations.

Basel I Total risk-based capital ratio - Basel I Total risk-based capital divided by period-end Basel I risk-weighted assets.

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 revenue derived from 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 net of economic hedge), 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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 24

 

Core net interest income - Core net interest income is 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 increases 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.

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.

Impaired loans - Loans are determined to be impaired when, based on current information and events, it is probable that all contractually required payments will not be collected. Impaired loans include commercial nonperforming loans and consumer and commercial TDRs, regardless of nonperforming status. Excluded from impaired loans are nonperforming leases, loans held for sale, loans accounted for under the fair value option, smaller balance homogenous type loans and purchased impaired loans.

Investment securities - Collectively, securities available for sale and securities held to maturity.

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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 25

 

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, a LTV of less than 90% is better secured and has less credit risk than a 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.

Nonaccrual loans - Loans for which we do not accrue interest income. Nonaccrual loans include nonperforming loans, in addition to loans accounted for under fair value option and loans accounted for as held for sale for which full collection of contractual principal and/or interest is not probable.

Nondiscretionary assets under administration - Assets we hold for our customers/clients in a nondiscretionary, custodial capacity. We do not include these assets on our Consolidated Balance Sheet.

Nonperforming assets - Nonperforming assets include nonperforming loans and OREO and foreclosed assets, but exclude certain government insured or guaranteed loans for which we expect to collect substantially all principal and interest, loans held for sale, loans accounted for under the fair value option and purchased impaired loans. We do not accrue interest income on assets classified as nonperforming.

Nonperforming loans - Loans accounted for at amortized cost 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 for which we expect to collect substantially all principal and interest, 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.

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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 26

 

Pretax earnings - Income before income taxes and noncontrolling interests.

Pretax, pre-provision earnings - Total revenue less noninterest expense.

Primary client relationship - A corporate banking client relationship with annual revenue generation of $10,000 to $50,000 or more, and for Asset Management Group, a client relationship with annual revenue generation of $10,000 or more.

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.

Return on average allocated capital - Annualized net income divided by average allocated capital. This measure is used at the business segment level.

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.

Total equity - Total shareholders’ equity plus noncontrolling interests.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 27

 

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.