Exhibit 99.1

 

LOGO

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2014

(Unaudited)


THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FIRST QUARTER 2014

(UNAUDITED)

 

                 Page               

Consolidated Results:

  

Income Statement

     1   

Balance Sheet

     2   

Capital Ratios

     3   

Selected Noninterest Income Information

     3   

Average Balance Sheet

     4-5   

Details of Net Interest Margin

     6   

Total and Core Net Interest Income and Net Interest Margin

     7   

Per Share Related Information

     8   

Impact to 2013 Periods from Adoption of ASU 2014-01 (Low Income Housing Tax Credits)

     8   

Loans, Loans Held for Sale and Net Unfunded Commitments

     9   

Allowances for Credit Losses

     10   

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

     11   

Nonperforming Assets and Troubled Debt Restructurings

     12-13   

Accruing Loans Past Due

     14   

Business Segment Results:

  

Descriptions

     15   

Period End Employees

     15   

Income and Revenue

     16   

Retail Banking

     17-18   

Corporate & Institutional Banking

     19-20   

Asset Management Group

     21   

Residential Mortgage Banking

     22   

Non-Strategic Assets Portfolio

     23   

Glossary of Terms

     24-28   

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on April 16, 2014. 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, Missouri, Georgia, Wisconsin and South Carolina. PNC also provides certain products and services internationally.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 1

 

Consolidated Income Statement (Unaudited)

 

     Three months ended  
In millions, except per share data    March 31
2014
    December 31
2013
    September 30
2013
    June 30
2013
    March 31
2013
 

Interest Income

          

Loans

   $     1,899     $     1,949     $     1,933     $     1,955     $     2,029  

Investment securities

     427       434       423       422       470  

Other

     84       96       92       92       112  

Total interest income

     2,410       2,479       2,448       2,469       2,611  

Interest Expense

          

Deposits

     78       81       84       86       93  

Borrowed funds

     137       132       130       125       129  

Total interest expense

     215       213       214       211       222  

Net interest income

     2,195       2,266       2,234       2,258       2,389  

Noninterest Income

          

Asset management

     364       364       330       340       308  

Consumer services

     290       327       316       314       296  

Corporate services (a)

     301       301       306       326       277  

Residential mortgage (b)

     161       271       199       167       234  

Service charges on deposits

     147       158       156       147       136  

Net gains on sales of securities

     10       3       21       61       14  

Net other-than-temporary impairments (c)

     (2     -       (2     (4     (10

Other (d)

     311       383       360       455       311  

Total noninterest income

     1,582       1,807       1,686       1,806       1,566  

Total revenue

     3,777       4,073       3,920       4,064       3,955  

Provision For Credit Losses

     94       113       137       157       236  

Noninterest Expense

          

Personnel

     1,080       1,207       1,181       1,186       1,169  

Occupancy

     218       211       205       206       211  

Equipment

     201       197       194       189       183  

Marketing

     52       66       68       67       45  

Other (e)

     713       833       746       757       760  

Total noninterest expense

     2,264       2,514       2,394       2,405       2,368  

Income before income taxes and noncontrolling interests

     1,419       1,446       1,389        1,502       1,351  

Income taxes (e)

     359       372       361       387       356  

Net income

     1,060       1,074       1,028       1,115       995  

Less: Net income (loss) attributable to noncontrolling
interests (e)

     (2     13       2       4       (8

Preferred stock dividends and discount accretion and redemptions

     70       50       71       53       75  

Net income attributable to common shareholders

   $ 992     $ 1,011     $ 955     $ 1,058     $ 928  

Earnings Per Common Share

          

Basic

   $ 1.86     $ 1.90     $ 1.80     $ 2.00     $ 1.76  

Diluted

   $ 1.82     $ 1.87     $ 1.77     $ 1.98     $ 1.74  

Average Common Shares Outstanding

          

Basic

     532       530       529       528       526  

Diluted

     539       535       534       531       528  

Efficiency

     60     62     61     59     60

Noninterest income to total revenue

     42     44     43     44     40

Effective tax rate (f)

     25.3     25.7     26.0     25.8     26.4

For additional information regarding footnotes (a), (b) and (d) below, refer to Selected Noninterest Income Statement Information on page 3.

 

(a) Includes commercial mortgage servicing rights valuation adjustments, net of economic hedge.

 

(b) Includes benefit/provisions for residential mortgage repurchase obligations.

 

(c) Net other-than-temporary impairments for the three months ended December 31, 2013 was less than $.5 million.

 

(d) Includes gains on sales of Visa Class B common shares and credit valuations related to customer initiated hedging activities.

 

(e) Prior period amounts have been updated to reflect first quarter 2014 adoption of Accounting Standards Update (ASU) 2014-01 related to low income housing tax credits.

 

(f) The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 2

 

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value    March 31
2014
    December 31
2013
    September 30
2013
   

June 30

2013

    March 31
2013
 

Assets

          

Cash and due from banks (a)

   $ 4,723     $ 4,043     $ 4,908     $ 4,051     $ 3,948  

Federal funds sold and resale agreements (b)

     1,143       1,986       911       1,613       1,274  

Trading securities

     2,381       3,073       1,603       2,109       2,243  

Interest-earning deposits with banks (a) (c)

     14,877       12,135       8,047       3,797       1,541  

Loans held for sale (b)

     2,102       2,255       2,399       3,814       3,295  

Investment securities (a)

     58,644       60,294       57,260       57,449       59,361  

Loans (a) (b)

     198,242       195,613       192,856       189,775       186,504  

Allowance for loan and lease losses (a)

     (3,530     (3,609     (3,691     (3,772     (3,828

Net loans

     194,712       192,004       189,165       186,003       182,676  

Goodwill

     9,074       9,074       9,074       9,075       9,075  

Other intangible assets

     2,115       2,216       2,194       2,153       1,921  

Equity investments (a) (d) (e)

     10,337       10,560       10,178       9,945       10,914  

Other (a) (b)

     23,315       22,552       22,733       24,297       24,470  

Total assets

   $ 323,423     $ 320,192     $ 308,472     $ 304,306     $ 300,718  

Liabilities

          

Deposits

          

Noninterest-bearing

   $ 70,063     $ 70,306     $ 68,747     $ 66,708     $ 64,652  

Interest-bearing

         152,319           150,625           147,327           145,571           146,968  

Total deposits

     222,382       220,931       216,074       212,279       211,620  

Borrowed funds

          

Federal funds purchased and repurchase agreements

     3,233       4,289       3,165       4,303       4,000  

Federal Home Loan Bank borrowings

     13,911       12,912       8,479       8,481       5,483  

Bank notes and senior debt

     13,861       12,603       11,924       11,177       10,918  

Subordinated debt

     8,289       8,244       7,829       7,113       7,996  

Commercial paper (a)

     4,923       4,997       6,994       6,400       6,953  

Other (a) (b)

     2,589       3,060       1,882       2,390       2,297  

Total borrowed funds

     46,806       46,105       40,273       39,864       37,647  

Allowance for unfunded loan commitments and letters of credit

     228       242       235       242       238  

Accrued expenses (a) (e)

     4,808       4,690       4,621       4,012       4,141  

Other (a)

     4,281       4,187       4,522       6,032       5,048  

Total liabilities

     278,505       276,155       265,725       262,429       258,694  

Equity

          

Preferred stock (f)

          

Common stock - $5 par value

          

Authorized 800 shares, issued 540, 540, 539, 539, and 538 shares

     2,700       2,698       2,695       2,693       2,690  

Capital surplus - preferred stock

     3,943       3,941       3,940       3,939       3,591  

Capital surplus - common stock and other

     12,394       12,416       12,310       12,234       12,174  

Retained earnings (e)

     24,010       23,251       22,474       21,752       20,928  

Accumulated other comprehensive income (loss)

     656       436       47       45       767  

Common stock held in treasury at cost: 6, 7, 7, 8 and 9 shares

     (382     (408     (423     (453     (552

Total shareholders’ equity

     43,321       42,334       41,043       40,210       39,598  

Noncontrolling interests (e)

     1,597       1,703       1,704       1,667       2,426  

Total equity

     44,918       44,037       42,747       41,877       42,024  

Total liabilities and equity

   $ 323,423     $ 320,192     $ 308,472     $ 304,306     $ 300,718  

 

(a) Amounts include consolidated variable interest entities. Our 2013 Form 10-K included, and our first quarter 2014 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 2013 Form 10-K included, and our first quarter 2014 Form 10-Q will include, additional information regarding these items.
(c) Amounts include balances held with the Federal Reserve Bank of Cleveland of $14.5 billion, $11.7 billion, $7.6 billion, $3.3 billion and $1.1 billion as of March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, respectively.
(d) Amounts include our equity interest in BlackRock.
(e) Prior period amounts have been updated to reflect first quarter 2014 adoption of ASU 2014-01 related to low income housing tax credits.
(f) Par value less than $.5 million at each date.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 3

 

Capital Ratios (Unaudited)

 

      March 31
2014
    December 31
2013
    September 30
2013
    June 30
2013
    March 31
2013
 

Transitional Basel III (a) (b) (c)

          

Common equity Tier 1 (d)

     10.8     N/A        N/A        N/A        N/A   

Tier 1 risk-based

     12.5        N/A        N/A        N/A        N/A   

Total capital risk-based

     15.7        N/A        N/A        N/A        N/A   

Leverage

     11.1        N/A        N/A        N/A        N/A   

Basel 1 Ratios (e)

          

Tier 1 common

     N/A        10.5     10.3     10.1     9.8 %

Tier 1 risk-based

     N/A        12.4       12.3       12.0       11.6  

Total risk-based

     N/A        15.8       15.6       15.2       14.9  

Leverage

     N/A        11.1       11.1       10.9       10.4  

Common shareholders’ equity to assets

     12.2       12.0       12.0       11.9       12.0  

 

(a)    The ratios as of March 31, 2014 are estimated.

       

(b)    Calculated using the regulatory capital methodology applicable to PNC during 2014.

       

(c)    See Capital Ratios discussion in the Banking Regulation and Supervision section of Item 1 Business in our 2013 Form 10-K.

       

(d)    The Basel III common equity Tier 1 capital ratio was previously referred to as the Basel III Tier 1 common capital ratio.

       

(e)    Ratios for the 2013 periods have not been updated to reflect the first quarter 2014 adoption of ASU 2014-01 related to low income housing tax credits.

       

Selected Noninterest Income Information (Unaudited)   
     Three months ended  
In millions, except per share data    March 31
2014
    December 31
2013
    September 30
2013
    June 30
2013
    March 31
2013
 

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

          

Commercial mortgage servicing rights valuation, net of economic hedge

          

Pretax

   $ 11     $ (5   $ 18     $ 44     $ 11  

After-tax

   $ 7      $ (3   $ 11     $ 29     $ 7  

Impact on diluted earnings per share (a)

   $ .01     $ (.01   $ .02     $ .05     $ .01  

Benefit / (provision) for residential mortgage repurchase obligations

          

Pretax

   $ 19     $ 124     $ 6     $ (73   $ (4

After-tax

   $ 12     $ 81     $ 4     $ (48   $ (2

Impact on diluted earnings per share (a)

   $ .02     $ .15     $ .01     $ (.09   $ (.00

Net gains on sales of securities

          

Pretax

   $ 10     $ 3     $ 21     $ 61     $ 14  

After-tax

   $ 7     $ 2     $ 13     $ 40     $ 9  

Impact on diluted earnings per share (a)

   $ .01     $ .00      $ .02     $ .08     $ .02  

Gains on sales of Visa Class B common shares

          

Pretax

   $ 62       $ 85     $ 83    

After-tax

   $ 40       $ 55     $ 54    

Impact on diluted earnings per share (a)

   $ .07       $ .10     $ .10    

Credit valuations related to customer-related derivatives activities

          

Pretax

   $ (14   $ 16     $ (1   $ 39     $ 2  

After-tax

   $ (9   $ 11     $ -     $ 25     $ 1  

Impact on diluted earnings per share (a)

   $ (.02   $ .02     $ (.00   $ .05     $ .00   

 

(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 4

 

Average Consolidated Balance Sheet (Unaudited) (a)

 

     Three months ended  
In millions   

March 31

2014

   

December 31

2013

   

September 30

2013

   

June 30

2013

   

March 31

2013

 

Assets

          

Interest-earning assets:

          

Investment securities

          

Securities available for sale

          

Residential mortgage-backed

          

Agency

   $ 21,823     $ 22,327     $ 23,674     $ 24,339     $ 25,168  

Non-agency

     5,375       5,539       5,862       5,889       6,025  

Commercial mortgage-backed

     4,474       4,460       4,349       3,855       3,745  

Asset-backed

     5,593       5,814       5,962       5,919       5,731  

U.S. Treasury and government agencies

     4,169       2,507       2,013       2,074       2,715  

State and municipal

     2,652       2,275       2,354       2,182       2,189  

Other debt

     2,505       2,523       2,630       2,728       2,649  

Corporate stocks and other

     409       359       339       304       368  

Total securities available for sale

     47,000       45,804       47,183       47,290       48,590  

Securities held to maturity

          

Residential mortgage-backed

     5,995       5,726       3,794       3,833       4,146  

Commercial mortgage-backed

     2,748       3,153       3,276       3,521       3,747  

Asset-backed

     1,004       1,047       1,064       978       826  

U.S. Treasury and government agencies

     240       238       236       233       231  

State and municipal

     1,055       1,056       658       640       639  

Other

     337       341       346       349       352  

Total securities held to maturity

     11,379       11,561       9,374       9,554       9,941  

Total investment securities

     58,379       57,365       56,557       56,844       58,531  

Loans

          

Commercial

     89,517       88,185       86,456       86,015       83,476  

Commercial real estate

     21,652       20,587       19,558       18,860       18,850  

Equipment lease financing

     7,470       7,428       7,296       7,350       7,241  

Consumer

     63,093       63,203       62,277       61,587       61,411  

Residential real estate

     14,849       15,180       14,918       14,794       15,121  

Total loans

     196,581       194,583       190,505       188,606       186,099  

Interest-earning deposits with banks

     12,157       10,455       4,626       2,063       2,410  

Loans held for sale

     1,949       2,225       3,071       3,072       3,279  

Federal funds sold and resale agreements

     1,416       864       664       1,141       1,176  

Other

     5,296       4,993       4,183       4,376       4,685  

Total interest-earning assets

     275,778       270,485       259,606       256,102       256,180  

Noninterest-earning assets:

          

Allowance for loan and lease losses

     (3,591     (3,667     (3,761     (3,821     (3,937

Cash and due from banks

     3,890       3,904       3,984       3,869       4,055  

Other

     43,485       43,346       43,371       45,783       47,068  

Total assets

   $ 319,562     $ 314,068     $ 303,200     $ 301,933     $ 303,366  
(a)   Calculated using average daily balances.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 5
Average Consolidated Balance Sheet (Unaudited) (Continued) (a)   

 

     Three months ended  
In millions   

March 31

2014

    

December 31

2013

    

September 30

2013

    

June 30

2013

    

March 31

2013

 

Liabilities and Equity

              

Interest-bearing liabilities:

              

Interest-bearing deposits

              

Money market

   $       74,034      $       73,534      $       70,557      $       69,123      $       69,003  

Demand

     42,635        41,151        39,866        40,172        39,372  

Savings

     11,408        11,010        11,007        11,124        10,671  

Retail certificates of deposit

     20,538        21,138        21,859        22,641        23,488  

Time deposits in foreign offices and other time

     2,069        2,013        1,804        2,164        2,267  

Total interest-bearing deposits

     150,684        148,846        145,093        145,224        144,801  

Borrowed funds

              

Federal funds purchased and repurchase agreements

     4,250        4,120        2,967        4,132        4,328  

Federal Home Loan Bank borrowings

     13,100        11,348        8,208        7,218        7,657  

Bank notes and senior debt

     13,327        12,252        11,256        10,886        10,469  

Subordinated debt

     8,040        7,900        7,334        7,003        7,249  

Commercial paper

     4,931        5,297        7,109        7,263        7,967  

Other

     2,740        2,156        1,792        2,099        2,057  

Total borrowed funds

     46,388        43,073        38,666        38,601        39,727  

Total interest-bearing liabilities

     197,072        191,919        183,759        183,825        184,528  

Noninterest-bearing liabilities and equity:

              

Noninterest-bearing deposits

     67,679        68,193        66,834        64,749        64,850  

Allowance for unfunded loan commitments and letters of credit

     241        236        242        238        249  

Accrued expenses and other liabilities

     10,123        10,622        10,327        10,890        11,858  

Equity

     44,447        43,098        42,038        42,231        41,881  

Total liabilities and equity

   $ 319,562      $ 314,068      $ 303,200      $ 301,933      $ 303,366  

(a)    Calculated using average daily balances.

       

Supplemental Average Balance Sheet Information (Unaudited)

  

Deposits and Common Shareholders’ Equity

  

        

Interest-bearing deposits

   $ 150,684      $ 148,846      $ 145,093      $ 145,224      $ 144,801  

Noninterest-bearing deposits

     67,679        68,193        66,834        64,749        64,850  

Total deposits

   $ 218,363      $ 217,039      $ 211,927      $ 209,973      $ 209,651  

Transaction deposits

   $ 184,348      $ 182,878      $ 177,257      $ 174,044      $ 173,225  

Common shareholders’ equity

   $ 38,838      $ 37,455      $ 36,406      $ 36,244      $ 35,573  


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 6
Details of Net Interest Margin (Unaudited) (a)   

 

     Three months ended  
      March 31
2014
    December 31
2013
    September 30
2013
    June 30
2013
    March 31
2013
 

Average yields/rates

          

Yield on interest-earning assets

          

Investment securities

          

Securities available for sale

          

Residential mortgage-backed

          

Agency

     2.61     2.68     2.36     2.50     2.90

Non-agency

     4.91       5.14       5.70       5.51       5.40  

Commercial mortgage-backed

     3.81       3.83       3.82       4.00       4.02  

Asset-backed

     1.79       1.92       1.87       1.80       1.92  

U.S. Treasury and government agencies

     1.30       1.36       1.90       1.37       1.65  

State and municipal

     4.78       4.31       4.24       4.48       4.93  

Other debt

     2.39       2.30       2.38       2.39       2.58  

Corporate stocks and other

     .10       .15       .12       .14       .12  

Total securities available for sale

     2.86       2.96       2.91       2.93       3.16  

Securities held to maturity

          

Residential mortgage-backed

     3.55       3.42       3.92       3.26       3.44  

Commercial mortgage-backed

     4.09       4.28       4.29       4.34       4.71  

Asset-backed

     1.51       1.57       1.59       1.74       1.80  

U.S. Treasury and government agencies

     3.77       3.82       3.81       3.80       3.77  

State and municipal

     5.61       5.65       5.55       4.27       4.23  

Other

     3.00       4.20       2.90       2.89       2.82  

Total securities held to maturity

     3.68       3.72       3.86       3.57       3.82  

Total investment securities

     3.02       3.11       3.06       3.04       3.27  

Loans

          

Commercial

     3.50       3.53       3.62       3.71       4.03  

Commercial real estate

     4.20       4.50       4.64       4.84       5.05  

Equipment lease financing

     3.64       3.74       3.75       4.41       4.05  

Consumer

     4.26       4.29       4.31       4.40       4.67  

Residential real estate

     5.09       5.18       5.00       5.13       5.29  

Total loans

     3.95       4.02       4.06       4.19       4.45  

Interest-earning deposits with banks

     .23       .26       .22       .28       .25  

Loans held for sale

     4.71       5.40       5.34       4.22       6.49  

Federal funds sold and resale agreements

     .32       .79       1.10       .61       .74  

Other

     4.02       4.51       4.54       5.26       4.79  

Total yield on interest-earning assets

     3.58       3.69       3.79       3.91       4.15  

Rate on interest-bearing liabilities

          

Interest-bearing deposits

          

Money market

     .17       .18       .18       .18       .19  

Demand

     .05       .05       .05       .05       .04  

Savings

     .08       .08       .10       .10       .10  

Retail certificates of deposit

     .75       .76       .79       .82       .85  

Time deposits in foreign offices and other time

     .18       .17       .22       .43       .61  

Total interest-bearing deposits

     .21       .22       .23       .24       .26  

Borrowed funds

          

Federal funds purchased and repurchase agreements

     .11       .14       .15       .14       .16  

Federal Home Loan Bank borrowings

     .50       .48       .48       .53       .61  

Bank notes and senior debt

     1.49       1.51       1.71       1.71       1.83  

Subordinated debt

     2.54       2.63       2.89       2.78       2.83  

Commercial paper

     .28       .26       .22       .22       .25  

Other

     2.20       2.44       2.91       2.62       2.28  

Total borrowed funds

     1.18       1.21       1.33       1.28       1.30  

Total rate on interest-bearing liabilities

     .44       .44       .46       .46       .48  

Interest rate spread

     3.14       3.25       3.33       3.45       3.67  

Impact of noninterest-bearing sources

     .12       .13       .14       .13       .14  

Net interest margin

     3.26     3.38     3.47     3.58     3.81
(a) Calculated as annualized taxable-equivalent net interest income divided by average earning assets. The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all earning assets in calculating net interest margins, in this table we use net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, were $46 million, $45 million, $43 million, $40 million and $40 million, respectively.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 7
Total and Core Net Interest Income and Net Interest Margin (Unaudited)   

 

Total and Core Net Interest Income

 

    Three months ended  
In millions  

March 31

2014

    December 31
2013
   

September 30

2013

   

June 30

2013

    March 31
2013
 

Core net interest income (a)

  $     2,032      $     2,075      $     2,035      $     2,054      $     2,140  

Total purchase accounting accretion (a) (b)

    163       191       199       204       249  

Total net interest income

  $ 2,195      $ 2,266      $ 2,234      $ 2,258      $ 2,389  

(a)    We believe that core net interest income, a non-GAAP measure, 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 11 for details.

        

        

Details of Net Interest Margin (c)   
    Three months ended  
In millions  

March 31

2014

   

December 31

2013

   

September 30

2013

   

June 30

2013

   

March 31

2013

 

Average yields/rates

         

Yield on interest earning assets

         

Total investment securities

    3.02     3.11     3.06     3.04     3.27

Total loans

    3.95       4.02       4.06       4.19       4.45  

Other

    1.62       2.05       2.96       3.50       3.91  

Total yield on interest earning assets

    3.58       3.69       3.79       3.91       4.15  

Rate on interest-bearing liabilities

         

Total interest-bearing deposits

    .21       .22       .23       .24       .26  

Total borrowed funds

    1.18       1.21       1.33       1.28       1.30  

Total rate on interest-bearing liabilities

    .44       .44       .46       .46       .48  

Interest rate spread

    3.14       3.25       3.33       3.45       3.67  

Impact of noninterest-bearing sources

    .12       .13       .14       .13       .14  

Net interest margin

    3.26     3.38     3.47     3.58     3.81

(c)    See note (a) on page 6.

         
Details of Core Net Interest Margin (d)   
    Three months ended  
In millions  

March 31

2014

   

December 31

2013

   

September 30

2013

   

June 30

2013

   

March 31

2013

 

Average yields/rates

         

Yield on interest earning assets

         

Total investment securities

    2.96     3.02     2.96     2.95     3.21

Total loans

    3.62       3.65       3.68       3.77       3.96  

Other

    1.64       1.99       2.74       3.69       3.22  

Total yield on interest earning assets

    3.33       3.40       3.48       3.58       3.75  

Rate on interest-bearing liabilities

         

Total interest-bearing deposits

    .23       .24       .26       .27       .29  

Total borrowed funds

    1.04       1.06       1.18       1.12       1.09  

Total rate on interest-bearing liabilities

    .43       .43       .45       .45       .46  

Interest rate spread

    2.90       2.97       3.03       3.13       3.29  

Impact of noninterest-bearing sources

    .12       .13       .14       .13       .14  

Core net interest margin

    3.02       3.10       3.17       3.26       3.43  

Purchase accounting accretion impact on net interest margin

    .24       .28       .30       .32       .38  

Net interest margin

    3.26     3.38     3.47     3.58     3.81

(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 8
Per Share Related Information (Unaudited)   

 

 

     Three months ended  
In millions, except per share data   

March 31

2014

   

December 31

2013

    

September 30

2013

    

June 30

2013

    

March 31

2013

 

Basic

             

Net income

   $ 1,060     $ 1,074      $ 1,028      $ 1,115      $ 995  

Less:

             

Net income (loss) attributable to noncontrolling interests

     (2     13        2        4        (8

Preferred stock dividends and discount accretion and redemptions

     70       50        71        53        75  

Dividends and undistributed earnings allocated to nonvested restricted shares

     3       5        4        5        4  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to basic common shares

   $ 989     $ 1,006      $ 951      $ 1,053      $ 924  

Basic weighted-average common shares outstanding

     532       530        529        528        526  

Basic earnings per common share

   $ 1.86     $ 1.90      $ 1.80      $ 2.00      $ 1.76  

Diluted

             

Net income attributable to basic common shares

   $ 989     $ 1,006      $ 951      $ 1,053      $ 924  

Less: Impact of BlackRock earnings per share dilution

     6       5        4        4        5  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to diluted common shares

   $ 983     $ 1,001      $ 947      $ 1,049      $ 919  

Basic weighted-average common shares outstanding

     532       530        529        528        526  

Dilutive potential common shares

     7       5        5        3        2  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted-average common shares outstanding

     539       535        534        531        528  

Diluted earnings per common share

   $ 1.82     $ 1.87      $ 1.77      $ 1.98      $ 1.74  

Impact to 2013 Periods from Adoption of ASU 2014-01 (Low Income Housing Tax Credits) (Unaudited) (a)

Income Statement

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

Noninterest Expense

        

Previously reported

   $ 2,547     $ 2,424     $ 2,435     $ 2,395  

Adjustment from adoption of ASU 2014-01

     (33     (30     (30     (27

Revised

   $ 2,514     $ 2,394     $ 2,405     $ 2,368  

Net Income

        

Previously reported

   $ 1,061     $ 1,039     $ 1,123     $ 1,004  

Adjustment from adoption of ASU 2014-01

     13       (11     (8     (9

Revised

   $ 1,074     $ 1,028     $ 1,115     $ 995  

Diluted Earnings per Share

        

Previously reported

   $ 1.85     $ 1.79     $ 1.99     $ 1.76  

Adjustment from adoption of ASU 2014-01

     .02       (.02     (.01     (.02

Revised

   $ 1.87     $ 1.77     $ 1.98     $ 1.74  

Efficiency

        

Previously reported

     63     62     60     61

Adjustment from adoption of ASU 2014-01

     (1     (1     (1     (1

Revised

     62     61     59     60

Effective Tax Rate

        

Previously reported

     24.9     23.5     23.7     24.2

Adjustment from adoption of ASU 2014-01

     .8       2.5       2.1       2.2  

Revised

     25.7     26.0     25.8     26.4
Balance Sheet         
        
In millions   

December 31

2013

   

September 30

2013

   

June 30

2013

   

March 31

2013

 

Retained Earnings

        

Previously reported

   $ 23,325     $ 22,561     $ 21,828     $ 20,993  

Adjustment from adoption of ASU 2014-01

     (74     (87     (76     (65

Revised

   $ 23,251     $ 22,474     $ 21,752     $ 20,928  

(a)    We adopted the guidance in ASU 2014-01, Investments - Equity Method and Joint Ventures (Topic 323): Accounting For Investments in Qualified Affordable Housing Projects in the first quarter of 2014. Retrospective application is required.

        


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 9
Details of Loans (Unaudited)   

 

In millions   

March 31

2014

    

December 31

2013

    

September 30

2013

    

June 30

2013

    

March 31

2013

 

Commercial

              

Retail/wholesale trade

   $ 16,157      $ 15,530      $ 15,178      $ 15,192      $ 14,784  

Manufacturing

     17,185        16,208        15,406        15,525        15,349  

Service providers

     13,576        13,052        12,973        13,267        13,057  

Real estate related (a)

     10,856        10,729        10,554        10,248        10,274  

Financial services (b)

     4,720        4,927        5,177        5,326        4,740  

Health care

     8,836        8,690        8,266        8,228        7,912  

Other industries (b)

     19,771        19,242        19,436        19,144        18,169  

Total commercial (c)

     91,101        88,378        86,990        86,930        84,285  

Commercial real estate

              

Real estate projects (d)

     14,268        13,613        13,036        12,636        12,596  

Commercial mortgage

     7,883        7,578        7,095        6,355        6,183  

Total commercial real estate

     22,151        21,191        20,131        18,991        18,779  

Equipment lease financing

     7,521        7,576        7,314        7,349        7,240  

Total commercial lending

     120,773        117,145        114,435        113,270        110,304  

Consumer

              

Home equity

              

Lines of credit

     21,277        21,696        22,043        22,559        23,029  

Installment

     14,595        14,751        14,548        13,857        13,001  

Credit card

     4,309        4,425        4,242        4,135        4,081  

Other consumer

              

Education

     7,360        7,534        7,711        7,814        8,048  

Automobile

     10,906        10,827        10,259        9,066        8,716  

Other

     4,216        4,170        4,226        4,297        4,340  

Total consumer

     62,663        63,403        63,029        61,728        61,215  

Residential real estate

              

Residential mortgage

     14,179        14,418        14,709        14,051        14,217  

Residential construction

     627        647        683        726        768  

Total residential real estate

     14,806        15,065        15,392        14,777        14,985  

Total consumer lending

     77,469        78,468        78,421        76,505        76,200  

Total loans (e)

   $     198,242      $     195,613      $     192,856      $     189,775      $     186,504  

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

       

(b)    Total commercial loans as of December 31, 2013 in the table above reflects a reclassification between Financial services and Other industries related to the wind down of Market Street Funding LLC. The corresponding loan balances as of September 30, 2013 were also reclassified to conform to the December 2013 presentation. There was no impact to periods prior to September 30, 2013.

         

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

         

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

       

(e)    Includes purchased impaired loans:

   $ 5,824      $ 6,106      $ 6,398      $ 6,778      $ 7,073  
Details of Loans Held for Sale (Unaudited)   
In millions    March 31
2014
     December 31
2013
     September 30
2013
     June 30
2013
     March 31
2013
 

Commercial mortgage

   $ 732      $ 867      $ 785      $ 1,072      $ 895  

Residential mortgage

     1,088        1,356        1,613        2,353        2,331  

Other

     282        32        1        389        69  

Total

   $ 2,102      $ 2,255      $ 2,399      $ 3,814      $ 3,295  
Net Unfunded Commitments (Unaudited)   
In millions   

March 31

2014

    

December 31

2013

    

September 30

2013

    

June 30

2013

    

March 31

2013

 

Net unfunded commitments

   $ 129,644       $ 129,870      $ 126,577      $ 124,142      $ 121,812  


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 10

 

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

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions    March 31
2014
   

December 31

2013

   

September 30

2013

    June 30
2013
    March 31
2013
 

Beginning balance

   $ 3,609     $ 3,691     $ 3,772     $ 3,828     $ 4,036  

Gross charge-offs:

          

Commercial

     (85     (87     (113     (81     (114

Commercial real estate

     (18     (24     (42     (51     (86

Equipment lease financing

     (2     (2     (2     (1     (3

Home equity

     (95     (114     (86     (92     (194

Residential real estate

     (8     (2     (9     (43     (79

Credit card

     (43     (42     (41     (45     (50

Other consumer

     (49     (52     (47     (43     (43

Total gross charge-offs (a)

     (300     (323     (340     (356     (569

Recoveries:

          

Commercial

     51       65       54       66       63  

Commercial real estate

     20       23       24       33       13  

Equipment lease financing

     3       3       3       4       6  

Home equity

     19       18       18       24       13  

Residential real estate

     (1     6       (2     1       (1

Credit card

     5       5       6       6       5  

Other consumer

     17       14       13       14       14  

Total recoveries

     114       134       116       148       113  

Net (charge-offs) recoveries:

          

Commercial

     (34     (22     (59     (15     (51

Commercial real estate

     2       (1     (18     (18     (73

Equipment lease financing

     1       1       1       3       3  

Home equity

     (76     (96     (68     (68     (181

Residential real estate

     (9     4       (11     (42     (80

Credit card

     (38     (37     (35     (39     (45

Other consumer

     (32     (38     (34     (29     (29

Total net charge-offs

     (186     (189     (224     (208     (456

Provision for credit losses

     94       113       137       157       236  

Other

     (1     1       (1     (1  

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

     14       (7     7       (4     12  

Ending balance

   $ 3,530     $ 3,609     $ 3,691     $ 3,772     $ 3,828  

Supplemental Information

          

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

     .38     .39     .47     .44     .99

Allowance for loan and lease losses to total loans

     1.78       1.84       1.91       1.99       2.05  

Commercial lending net charge-offs

   $ (31   $ (22   $ (76   $ (30   $ (121

Consumer lending net charge-offs

     (155     (167     (148     (178     (335

Total net charge-offs

   $ (186   $ (189   $ (224   $ (208   $ (456

Net charge-offs to average loans

          

Commercial lending

     .11     .08     .27     .11     .45

Consumer lending

     .81       .85       .76       .93       1.78  
(a) 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 were taken. Excluding the impact of these additional charge-offs, annualized net charge-offs to average loans for the first quarter of 2013 was 0.70%.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions   

March 31

2014

   

December 31

2013

    

September 30

2013

   

June 30

2013

    

March 31

2013

 

Beginning balance

   $ 242     $ 235      $         242     $ 238      $ 250  

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

     (14     7        (7     4        (12

Ending balance

   $ 228     $ 242      $ 235     $ 242      $ 238  


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 11

 

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

Accretion - Purchased Impaired Loans

 

     Three months ended  
In millions   

    March 31

2014

   

December 31

2013

   

    March 31

2013

 

Impaired loans

      

Scheduled accretion

       $ 125         $ 128         $ 157  

Reversal of contractual interest on impaired loans

     (68     (64     (85

Scheduled accretion net of contractual interest

     57       64       72  

Excess cash recoveries

     29       28       50  

Total impaired loans

       $ 86         $ 92         $ 122  

Purchased Impaired Loans - Accretable Yield

 

In millions                           

January 1, 2014

   $     2,055        January 1, 2013    $     2,166  

Scheduled accretion

     (125      Scheduled accretion      (157

Excess cash recoveries

     (29      Excess cash recoveries      (50

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

     87           Net reclassifications to accretable from non-accretable and other activity (a)      213  

March 31, 2014 (b)

   $ 1,988          March 31, 2013    $ 2,172  

(a)    95% and 52% of the net reclassifications for the quarters ended March 31, 2014 and 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 March 31, 2014, we estimate that the reversal of contractual interest on purchased impaired loans will total approximately $1.1 billion in future periods. This will offset the total net accretable interest in future interest income of $2.0 billion on purchased impaired loans.

        

Valuation of Purchased Impaired Loans

 

     March 31, 2014           December 31, 2013  
Dollars in millions     Balance     Net Investment                Balance     Net Investment      

Commercial and commercial real estate loans:

            

Outstanding balance

   $     799           $     937    

Purchased impaired mark

     (230           (264  
  

 

 

         

 

 

   

Recorded investment

     569             673    

Allowance for loan losses

     (123           (133  
  

 

 

         

 

 

   

Net investment

     446       56%             540       58%    
  

 

 

         

 

 

   

Consumer and residential mortgage loans:

            

Outstanding balance

     5,345             5,548    

Purchased impaired mark

     (90           (115  
  

 

 

         

 

 

   

Recorded investment

     5,255             5,433    

Allowance for loan losses

     (825           (871  
  

 

 

         

 

 

   

Net investment

     4,430       83%             4,562       82%    
  

 

 

         

 

 

   

Total purchased impaired loans:

            

Outstanding balance

     6,144             6,485    

Purchased impaired mark

     (320           (379  
  

 

 

         

 

 

   

Recorded investment

     5,824             6,106    

Allowance for loan losses

     (948           (1,004  
  

 

 

         

 

 

   

Net investment

   $ 4,876       79%             $ 5,102       79%    


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 12

 

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions   

March 31

2014

   

December 31

2013

   

September 30

2013

   

June 30

2013

   

March 31

2013

 

Nonperforming loans, including TDRs (a)

          

Commercial lending

          

Commercial

          

Retail/wholesale trade

   $ 49     $ 57     $ 72     $ 63     $ 62  

Manufacturing

     63       58       61       62       75  

Service providers

     90       108       109       110       112  

Real estate related (b)

     122       124       142       163       161  

Financial services

     5       7       11       14       13  

Health care

     17       19       26       24       21  

Other industries

     91       84       77       85       98  

Total commercial

     437       457       498       521       542  

Commercial real estate

          

Real estate projects

     401       436       493       516       606  

Commercial mortgage

     79       82       105       123       138  

Total commercial real estate

     480       518       598       639       744  

Equipment lease financing

     6       5       6       7       9  

Total commercial lending

     923       980       1,102       1,167       1,295  

Consumer lending (c)

          

Home equity (d)

     1,117       1,139       1,137       1,131       1,088  

Residential real estate

          

Residential mortgage (d)

     829       890       891       947       952  

Residential construction

     13       14       11       15       13  

Credit card

     4       4       4       4       6  

Other consumer (d)

     61       61       61       57       68  

Total consumer lending

     2,024       2,108       2,104       2,154       2,127  

Total nonperforming loans (e)

     2,947       3,088       3,206       3,321       3,422  

OREO and foreclosed assets

          

Other real estate owned (OREO) (f)

     343       360       403       432       472  

Foreclosed and other assets

     14       9       13       25       33  

Total OREO and foreclosed assets

     357       369       416       457       505  

Total nonperforming assets

   $     3,304     $     3,457     $     3,622     $     3,778     $     3,927  

Nonperforming loans to total loans

     1.49     1.58     1.66     1.75     1.83

Nonperforming assets to total loans, OREO and foreclosed assets

     1.66       1.76       1.87       1.99       2.10  

Nonperforming assets to total assets

     1.02       1.08       1.17       1.24       1.31  

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

     120       117       115       114       112  

 

(a) See analysis of troubled debt restructurings (TDRs) on page 13.

 

(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 were taken on these loans where the fair value less costs to sell the collateral was less than the recorded investment of the loan and were $134 million.

 

(e) Nonperforming loans exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.

 

(f) OREO excludes $238 million, $245 million, $264 million, $311 million and $383 million at March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013 and March 31, 2013, respectively, related to residential real estate that was acquired by us upon foreclosure of serviced loans as they are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or guaranteed by the department of Housing and Urban Development.

 

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


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 13

 

Details of Nonperforming Assets and Troubled Debt Restructurings (Unaudited)

Change in Nonperforming Assets (a)

 

In millions    January 1, 2014 -
March 31, 2014
    October 1, 2013 -
December 31, 2013
    July 1, 2013 -
September 30, 2013
    April 1, 2013 -
June 30, 2013
    January 1, 2013 -
March 31, 2013
 

Beginning balance

   $             3,457     $             3,622     $             3,778     $             3,927     $             3,794  

New nonperforming assets

     633       836       863       773       1,032  

Charge-offs and valuation adjustments

     (152     (223     (220     (216     (343

Principal activity, including paydowns and payoffs

     (323     (556     (483     (328     (258

Asset sales and transfers to loans held for sale

     (85     (115     (117     (146     (114

Returned to performing status

     (226     (107     (199     (232     (184

Ending balance

   $ 3,304     $ 3,457     $ 3,622     $ 3,778     $ 3,927  

 

(a) In the third and fourth quarters of 2013, amounts related to (i) New nonperforming assets, (ii) Principal activity, including paydowns and payoffs, and (iii) Returned to performing status were misstated. The original reported amounts for third quarter 2013 were (i) $824 million, (ii) ($289) million, and (iii) ($354) million respectively and for the fourth quarter 2013 (i) $714 million, (ii) ($141) million and (iii) ($400) million respectively. These updates did not impact the beginning or ending nonperforming asset balances and are corrected in the table.

Largest Individual Nonperforming Assets at March 31, 2014 (a)

 

In millions
Ranking   

 

Outstandings

     Industry

1

   $ 35               Real Estate, Rental and Leasing

2

     20               Manufacturing

3

     19               Mining, Quarrying, and Oil and Gas

4

     15               Real Estate, Rental and Leasing

5

     15               Construction

6

     13               Real Estate, Rental and Leasing

7

     11               Other Services

8

     11               Real Estate, Rental and Leasing

9

     10               Real Estate, Rental and Leasing

10

     8               Construction

 

Total

   $ 157                

As a percent of total nonperforming assets 5%

 

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

Summary of Troubled Debt Restructurings

 

In millions    March 31
2014
    

December 31

2013

     September 30
2013
    

June 30

2013

    

March 31

2013

 

Total consumer lending

   $ 2,134      $ 2,161      $ 2,221      $ 2,243      $ 2,231  

Total commercial lending

     579        578        581        599        610  

Total TDRs

   $             2,713      $             2,739      $             2,802      $             2,842      $             2,841  

Nonperforming

   $ 1,405      $ 1,511      $ 1,451      $ 1,531      $ 1,517  

Accruing (a)

     1,151        1,062        1,178        1,103        1,103  

Credit card

     157        166        173        208        221  

Total TDRs

   $ 2,713      $ 2,739      $ 2,802      $ 2,842      $ 2,841  

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

 

(a) Accruing loans have demonstrated a period of at least six months of 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.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 14
Accruing Loans Past Due (Unaudited)   

 

Accruing Loans Past Due 30 to 59 Days (a) (b)

 

     Amount         Percent of Total Outstandings  
Dollars in millions   

        Mar. 31

2014

    

Dec. 31

2013

    

Sept. 30

2013

    

Jun. 30

2013

    

Mar. 31

2013

        Mar. 31
2014
    Dec. 31
2013
    Sept. 30
2013
    Jun. 30
2013
    Mar. 31
2013
 

Commercial

   $ 93      $ 81      $ 73      $ 85      $    163         .10     .09     .08     .10     .19

Commercial real estate

     35        54        54        66      111         .16       .25       .27       .35       .59  

Equipment lease financing

     17        31        6        2      34         .23       .41       .08       .03       .47  

Home equity

     76        86        88        76      86         .21       .24       .24       .21       .24  

Residential real estate

                            

Non government insured

     101        112        118        120      145         .68       .74       .77       .81       .97  

Government insured

     82        105        109        110      114         .55       .70       .71       .74       .76  

Credit card

     26        29        30        27      30         .60       .66       .71       .65       .74  

Other consumer

                            

Non government insured

     51        62        56        52      49         .23       .28       .25       .25       .23  

Government insured

     149        154        170        148      162         .66       .68       .77       .70       .77  

Total

   $ 630      $ 714      $ 704      $ 686      $    894         .32       .37       .37       .36       .48  

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

  

     Amount         Percent of Total Outstandings  
Dollars in millions          Mar. 31
2014
     Dec. 31
2013
     Sept. 30
2013
     Jun. 30
2013
     Mar. 31
2013
        Mar. 31
2014
    Dec. 31
2013
    Sept. 30
2013
    Jun. 30
2013
    Mar. 31
2013
 

Commercial

   $ 20      $ 20      $ 37      $ 53      $        35         .02     .02     .04     .06     .04

Commercial real estate

     25        11        31        22      36         .11       .05       .15       .12       .19  

Equipment lease financing

        2        1        4      1           .03       .01       .05       .01  

Home equity

     32        34        32        29      33         .09       .09       .09       .08       .09  

Residential real estate

                            

Non government insured

     27        30        31        29      41         .18       .20       .20       .20       .27  

Government insured

     43        57        57        79      86         .29       .38       .37       .53       .57  

Credit card

     19        19        19        19      20         .44       .43       .45       .46       .49  

Other consumer

                            

Non government insured

     16        18        18        14      15         .07       .08       .08       .07       .07  

Government insured

     104        94        106        100      86         .46       .42       .48       .47       .41  

Total

   $ 286      $ 285      $ 332      $ 349      $      353         .14       .15       .17       .18       .19  

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

 

     Amount         Percent of Total Outstandings  
Dollars in millions          Mar. 31
2014
     Dec. 31
2013
     Sept. 30
2013
     Jun. 30
2013
     Mar. 31
2013
        Mar. 31
2014
    Dec. 31
2013
    Sept. 30
2013
    Jun. 30
2013
    Mar. 31
2013
 

Commercial

   $ 28      $ 42      $ 33      $ 31      $         27         .03     .05     .04     .04     .03

Commercial real estate

        2        3         3           .01       .01         .02  

Equipment lease financing

           2                     .03      

Residential real estate

                            

Non government insured

     30        35        35        50      59         .20       .23       .23       .34       .39  

Government insured

     924        1,025        1,187        1,326      1,458         6.24       6.80       7.71       8.97       9.73  

Credit card

     31        34        31        33      35         .72       .77       .73       .80       .86  

Other consumer

                            

Non government insured

     13        14        13        12      13         .06       .06       .06       .06       .06  

Government insured

     284        339        329        310      311         1.26       1.50       1.48       1.46       1.47  

Total

   $   1,310      $   1,491      $   1,633      $   1,762      $  1,906         .66       .76       .85       .93       1.02  
(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 15
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, Missouri, Georgia, Wisconsin and South Carolina.

Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and services to mid-sized and large corporations, government and not-for-profit entities. 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, securities, loan syndications and mergers and acquisitions advisory and related services to middle-market companies. We also provide commercial loan servicing, and real estate advisory and technology solutions, for the commercial real estate finance industry. Products and services are generally provided 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 administration 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 first lien residential mortgage loans on a nationwide basis with a significant presence within the retail banking footprint, and 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 FNMA, FHLMC, Federal Home Loan Banks and third-party investors, or are securitized and issued under the 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.

Non-Strategic Assets Portfolio includes a consumer portfolio of mainly residential mortgage and brokered home equity loans and lines of credit 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 investors and individual investors through various investment vehicles. Investment management services primarily consist of the management of equity, fixed income, multi-asset class, alternative investment and cash management products. BlackRock offers its investment products in a variety of vehicles, including open-end and closed-end mutual funds, iShares® exchange-traded funds (ETFs), collective investment trusts and separate accounts. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services to a broad base of clients. Financial markets advisory services include valuation services relating to illiquid securities, dispositions and workout assignments (including long-term portfolio liquidation assignments), risk management and strategic planning and execution. We hold an equity investment in BlackRock, which is a key component of our diversified revenue strategy. BlackRock is a publicly traded company, and additional information regarding its business is available in its filings with the Securities and Exchange Commission (SEC). At March 31, 2014, our economic interest in BlackRock was 22%.

Period End Employees

 

                                         
    

March 31

2014

    

December 31

2013

    

September 30

2013

    

June 30

2013

    

March 31

2013

 

Full-time employees

              

Retail Banking

     22,104        22,226        22,192        22,476        22,985  

Other full-time employees (a)

     27,740        27,695        27,973        27,975        27,957  

Total full-time employees

     49,844        49,921        50,165        50,451        50,942  

Part-time employees

              

Retail Banking

     3,761        4,030        4,194        4,394        4,496  

Other part-time employees (a)

     510        482        575        935        734  

Total part-time employees

     4,271        4,512        4,769        5,329        5,230  

Total

     54,115        54,433        54,934        55,780        56,172  

 

(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 16
Summary of Business Segment Income and Revenue (Unaudited) (a) (b)   

 

     Three months ended  

In millions

Income (Loss)

  

March 31

2014

   

December 31

2013

    

September 30

2013

    

June 30

2013

    

March 31

2013

 

Retail Banking (c)

       $ 158         $ 107          $ 165          $ 158          $ 120  

Corporate & Institutional Banking

     523       569        542        612        541  

Asset Management Group

     37       36        47        36        43  

Residential Mortgage Banking (d)

     (4     55        28        20        45  

Non-Strategic Assets Portfolio

     110       118        121        60        79  

Other, including BlackRock (b) (e)

     236       189        125        229        167  

Net income

       $ 1,060         $ 1,074          $ 1,028          $ 1,115      $ 995  

Revenue

                                           

Retail Banking (c)

       $ 1,494         $ 1,500          $ 1,563          $ 1,554          $ 1,483  

Corporate & Institutional Banking

     1,298       1,389        1,356        1,420        1,341  

Asset Management Group

     270       269        262        254        255  

Residential Mortgage Banking (d)

     206       327        254        228        291  

Non-Strategic Assets Portfolio

     148       167        181        175        219  

Other, including BlackRock (b) (e)

     361       421        304        433        366  

Total revenue

       $     3,777         $     4,073          $     3,920          $     4,064          $     3,955  

 

(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.

 

(b) We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our first quarter 2014 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 first quarter of 2014 and the second and third quarters of 2013. For more information, refer to Selected Noninterest Income Information on page 3.

 

(d) Includes benefit/provision for residential mortgage repurchase obligations. For more information, refer to Selected Noninterest Income Information on page 3.

 

(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 17

 

Retail Banking (Unaudited) (a)

 

     Three months ended  
Dollars in millions    March 31
2014
   

December 31

2013

   

September 30

2013

   

June 30

2013

    March 31
2013
 

INCOME STATEMENT

          

Net interest income

   $ 980      $ 1,012      $ 1,006      $ 1,012      $ 1,049  

Noninterest income

          

Service charges on deposits

     140       151       149       141       129  

Brokerage

     55       57       57       58       52  

Consumer services

     218       256       234       229       216  

Other

     101       24       117       114       37  

Total noninterest income

     514       488       557       542       434  

Total revenue

     1,494       1,500       1,563       1,554       1,483  

Provision for credit losses

     145       195       152       148       162  

Noninterest expense

     1,100       1,138       1,151       1,156       1,131  

Pretax earnings

     249       167       260       250       190  

Income taxes

     91       60       95       92       70  

Earnings

   $ 158      $ 107      $ 165      $ 158      $ 120  

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

          

Home equity

   $ 29,317      $ 29,588      $ 29,477      $ 29,212      $ 28,913  

Indirect auto

     8,994       8,671       7,971       7,314       7,006  

Indirect other

     777       822       877       939       1,000  

Education

     7,547       7,680       7,818       7,982       8,220  

Credit cards

     4,271       4,250       4,148       4,061       4,108  

Other

     2,137       2,157       2,152       2,141       2,141  

Total consumer

     53,043       53,168       52,443       51,649       51,388  

Commercial and commercial real estate

     11,051       11,131       11,299       11,345       11,290  

Floor plan

     2,373       2,226       1,931       2,048       2,014  

Residential mortgage

     647       676       715       767       811  

Total loans

     67,114       67,201       66,388       65,809       65,503  

Goodwill and other intangible assets

     6,062       6,083       6,105       6,127       6,148  

Other assets

     2,744       2,730       2,722       2,580       2,465  

Total assets

   $ 75,920      $ 76,014      $ 75,215      $ 74,516      $ 74,116  

Deposits

          

Noninterest-bearing demand

   $ 21,359      $ 21,699      $ 21,349      $ 21,187      $ 20,744  

Interest-bearing demand

     33,490       32,298       31,748       32,004       31,183  

Money market

     49,484       49,250       48,939       48,645       48,291  

Total transaction deposits

     104,333       103,247       102,036       101,836       100,218  

Savings

     11,288       10,901       10,900       10,997       10,537  

Certificates of deposit

     19,882       20,425       21,050       21,823       22,683  

Total deposits

     135,503       134,573       133,986       134,656       133,438  

Other liabilities

     398       369       364       343       273  

Total liabilities

   $     135,901      $     134,942      $     134,350      $     134,999      $     133,711  

PERFORMANCE RATIOS

          

Return on average assets

     .84     .56     .87     .85     .66

Noninterest income to total revenue

     34       33       36       35       29  

Efficiency

     74       76       74       74       76  
(a) See note (a) on page 16.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 18

 

Retail Banking (Unaudited) (Continued)

 

    Three months ended  
Dollars in millions, except as noted  

March 31

2014

   

December 31

2013

   

September 30

2013

   

        June 30

2013

   

        March 31

2013

 

OTHER INFORMATION (a)

        .       

Credit-related statistics:

         

Commercial nonperforming assets

      $     172         $ 208         $ 212         $ 222         $ 230  

Consumer nonperforming assets

    1,059       1,077       1,074       1,068       1,050  

Total nonperforming assets

      $     1,231         $ 1,285         $     1,286         $     1,290         $     1,280  

Purchased impaired loans (b)

      $     663         $     692         $ 718         $ 750         $ 788  

Commercial lending net charge-offs

      $ 20         $ 13         $ 17         $ 22         $ 37  

Credit card lending net charge-offs

    37       37       35       39       45  

Consumer lending (excluding credit card) net charge-offs

    88       118       91       91       168  

Total net charge-offs

      $ 145         $ 168         $ 143         $ 152         $ 250  

Commercial lending annualized net charge-off ratio

    .60     .39     .51     .66     1.13

Credit card lending annualized net charge-off ratio

    3.51     3.45     3.35     3.85     4.44

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

    .72     .94     .74     .75     1.42

Total annualized net charge-off ratio (c)

    .88     .99     .85     .93     1.55

Home equity portfolio credit statistics: (d)

         

% of first lien positions at origination (e)

    53     52     52     50     48

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

    79     81     83     85     85

Weighted-average updated FICO scores (g)

    745       745       745       745       743  

Annualized net charge-off ratio (d)

    .75     1.06     .75     .82     1.97

Delinquency data: (h)

         

Loans 30 - 59 days past due

    .21     .20     .22     .20     .23

Loans 60 - 89 days past due

    .08     .09     .09     .08     .10

Total accruing loans past due

    .29     .29     .32     .28     .33

Nonperforming loans

    3.12     3.15     3.13     3.12     3.01

Other statistics:

         

ATMs

    8,001       7,445       7,441       7,335       7,303  

Branches (i)

    2,703       2,714       2,724       2,780       2,856  

Brokerage account assets (billions)

      $     41         $     41         $     40         $     39         $     39  

Customer-related statistics: (in thousands)

         

Non-branch deposit transactions (j)

    31     30     27     23     20

Digital Consumer Customers (k)

    43     40     38     37     37

 

(a) Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three months ended.
(b) Recorded investment of purchased impaired loans related to acquisitions.
(c) Ratios for the three months ended March 31, 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.
(d) Lien position, LTV and FICO statistics are based upon customer balances.
(e) Lien positions and LTV calculations at March 31, 2014 reflect the use of revised assumptions where data is missing.
(f) LTV statistics are based upon current information.
(g) Represents FICO scores that are updated at least quarterly.
(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.
(j) Percentage of total deposit transactions processed at an ATM or through our mobile banking application.
(k) Represents consumer checking relationships that process the majority of their transactions through non-branch channels.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 19

 

Corporate & Institutional Banking (Unaudited) (a)

 

     Three months ended  
Dollars in millions    March 31
2014
   

December 31

2013

   

September 30

2013

   

June 30

2013

    March 31
2013
 

INCOME STATEMENT

          

Net interest income

   $         934      $         960     $         945      $         943      $       956  

Noninterest income

          

Corporate service fees

     268       277       277       297       246  

Other

     96       152       134       180       139  

Noninterest income

     364       429       411       477       385  

Total revenue

     1,298       1,389       1,356       1,420       1,341  

Provision for credit losses (benefit)

     (13     (29     30       (40     14  

Noninterest expense

     488       525       495       499       480  

Pretax earnings

     823       893       831       961       847  

Income taxes

     300       324       289       349       306  

Earnings

   $ 523      $ 569     $ 542      $ 612      $ 541  

AVERAGE BALANCE SHEET

          

Loans

          

Commercial

   $ 75,506      $ 74,199     $ 72,753      $ 72,202      $ 69,817  

Commercial real estate

     20,039       18,938       17,830       17,002       16,876  

Equipment lease financing

     6,789       6,749       6,610       6,655       6,552  

Total commercial lending

     102,334       99,886       97,193       95,859       93,245  

Consumer

     1,125       1,032       801       876       1,083  

Total loans

     103,459       100,918       97,994       96,735       94,328  

Goodwill and other intangible assets

     3,826       3,841       3,848       3,775       3,752  

Loans held for sale

     894       893       975       968       1,236  

Other assets

     9,758       9,746       9,750       10,729       12,355  

Total assets

   $ 117,937      $ 115,398     $ 112,567      $ 112,207      $ 111,671  

Deposits

          

Noninterest-bearing demand

   $ 42,772      $ 43,482     $ 42,053      $ 39,910      $ 40,572  

Money market

     20,678       20,579       18,099       16,932       17,023  

Other

     7,531       7,609       6,992       6,914       6,979  

Total deposits

     70,981       71,670       67,144       63,756       64,574  

Other liabilities

     7,476       8,207       13,932       17,059       18,779  

Total liabilities

   $ 78,457      $ 79,877     $ 81,076      $ 80,815      $ 83,353  

PERFORMANCE RATIOS

          

Return on average assets

     1.80     1.96     1.91     2.19     1.96

Noninterest income to total revenue

     28       31       30       34       29  

Efficiency

     38       38       37       35       36  

(a) See note (a) on page 16.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 20

 

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

 

     Three months ended  
Dollars in millions, except as noted    March 31
2014
    December 31
2013
    September 30
2013
    June 30
2013
    March 31
2013
 

COMMERCIAL MORTGAGE SERVICING PORTFOLIO - SERVICED FOR THIRD PARTIES (in billions)

          

Beginning of period

   $       308     $       298     $       294     $       290     $       282  

Acquisitions/additions

     23       26       18       18       21  

Repayments/transfers

     (18     (16     (14     (14     (13

End of period

   $ 313     $ 308     $ 298     $ 294     $ 290  

OTHER INFORMATION

          

Consolidated revenue from: (b)

          

Treasury Management (c)

   $ 311     $ 309     $ 309     $ 313     $ 329  

Capital Markets (d)

   $ 157     $ 220     $ 175     $ 196     $ 131  

Commercial mortgage loans held for sale (e)

   $ 19     $ 37     $ 27     $ 31     $ 38  

Commercial mortgage loan servicing income (f)

     55       60       60       53       53  

Commercial mortgage servicing rights valuation, net of economic hedge (g)

     11       (5     18       44       11  

Total commercial mortgage banking activities

   $ 85     $ 92     $ 105     $ 128     $ 102  

Average Loans (by C&IB business)

          

Corporate Banking

   $ 52,253     $ 51,689     $ 50,844     $ 50,678     $ 49,241  

Real Estate

     26,003       24,333       22,622       21,361       20,790  

Business Credit

     12,534       12,182       11,726       11,611       11,181  

Equipment Finance

     10,210       10,095       10,035       10,034       9,811  

Other

     2,459       2,619       2,767       3,051       3,305  

Total average loans

     103,459       100,918       97,994       96,735       94,328  

Total loans (h)

   $ 105,398     $ 101,773     $ 99,337     $ 97,708     $ 94,843  

Net carrying amount of commercial mortgage servicing rights (h)

   $ 529     $ 549     $ 541     $ 525     $ 452  

Credit-related statistics:

          

Nonperforming assets (h)

   $ 786     $ 804     $ 949     $ 999     $ 1,082  

Purchased impaired loans (h) (i)

   $ 428     $ 515     $ 600     $ 708     $ 768  

Net charge-offs (recoveries)

   $ 2     $ 10     $ 56     $ (19   $ 58  
(a) See note (a) on page 16.
(b) Represents consolidated PNC amounts. Our first quarter 2014 Form 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 other noninterest income for valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, origination fees, and 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, primarily in corporate services fees, from loan servicing and ancillary services, net of changes in fair value on commercial mortgage servicing rights due to time and payoffs for first quarter 2014 and net of commercial mortgage servicing rights amortization for 2013 periods. Commercial mortgage servicing rights valuation, net of economic hedge is shown separately.
(g) Includes amounts reported in corporate service fees.
(h) Presented as of period end.
(i) Recorded investment of purchased impaired loans related to acquisitions.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 21

 

Asset Management Group (Unaudited) (a)

 

     Three months ended  
Dollars in millions, except as noted   

March 31

2014

   

December 31

2013

   

September 30

2013

   

June 30

2013

    March 31
2013
 

INCOME STATEMENT

          

Net interest income

   $ 71      $ 71      $ 74      $ 70      $ 73  

Noninterest income

     199       198       188       184       182  

Total revenue

     270       269       262       254       255  

Provision for credit losses (benefit)

     12       8       (4     1       5  

Noninterest expense

     199       204       192       195       183  

Pretax earnings

     59       57       74       58       67  

Income taxes

     22       21       27       22       24  

Earnings

   $ 37      $ 36      $ 47      $ 36      $ 43  

AVERAGE BALANCE SHEET

          

Loans

          

Consumer

   $ 5,311      $ 5,248      $ 5,107      $ 4,947      $ 4,793  

Commercial and commercial real estate

     1,023       1,057       1,049       1,042       1,037  

Residential mortgage

     771       778       784       772       772  

Total loans

     7,105       7,083       6,940       6,761       6,602  

Goodwill and other intangible assets

     272       281       289       298       306  

Other assets

     222       230       216       230       223  

Total assets

   $ 7,599      $ 7,594      $ 7,445      $ 7,289      $ 7,131  

Deposits

          

Noninterest-bearing demand

   $ 1,338      $ 1,442      $ 1,220      $ 1,249      $ 1,331  

Interest-bearing demand

     3,893       3,547       3,329       3,475       3,616  

Money market

     3,889       3,760       3,693       3,722       3,841  

Total transaction deposits

     9,120       8,749       8,242       8,446       8,788  

CDs/IRAs/savings deposits

     436       427       431       441       454  

Total deposits

     9,556       9,176       8,673       8,887       9,242  

Other liabilities

     53       61       62       58       60  

Total liabilities

   $ 9,609      $ 9,237      $ 8,735      $ 8,945      $ 9,302  

PERFORMANCE RATIOS

          

Return on average assets

     1.97     1.88     2.50     1.98     2.45 %

Noninterest income to total revenue

     74       74       72       72       71  

Efficiency

     74       76       73       77       72  

OTHER INFORMATION

          

Total nonperforming assets (b)

   $ 80      $ 75      $ 68      $ 69      $ 65  

Purchased impaired loans (b) (c)

   $ 96      $ 99      $ 100      $ 102      $ 105  

Total net charge-offs (recoveries)

   $ 1      $ 3      $ (7   $ 2      $ 3  

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

          

Personal

   $ 112      $ 111      $ 106      $ 112      $ 112  

Institutional

     143       136       131       121       124  

Total

   $ 255      $ 247      $ 237      $ 233      $ 236  

Asset Type

          

Equity

   $ 145      $ 142      $ 132      $ 130      $ 130  

Fixed income

     66       70       70       70       70  

Liquidity/Other

     44       35       35       33       36  

Total

   $ 255      $ 247      $ 237      $ 233      $ 236  

Discretionary assets under management

          

Personal

   $ 84      $ 83      $ 80      $ 78      $ 77  

Institutional

     46       44       42       39       41  

Total

   $ 130      $ 127      $ 122      $ 117      $ 118  

Asset Type

          

Equity

   $ 71      $ 70      $ 65      $ 62      $ 62  

Fixed income

     34       39       40       39       39  

Liquidity/Other

     25       18       17       16       17  

Total

   $ 130      $ 127      $ 122      $ 117      $ 118  

Nondiscretionary assets under administration

          

Personal

   $ 28      $ 28      $ 26      $ 34      $ 35  

Institutional

     97       92       89       82       83  

Total

   $ 125      $ 120      $ 115      $ 116      $ 118  

Asset Type

          

Equity

   $ 74      $ 72      $ 67      $ 68      $ 68  

Fixed income

     32       31       30       31       31  

Liquidity/Other

     19       17       18       17       19  

Total

   $ 125      $ 120      $ 115      $ 116      $ 118  
(a) See note (a) on page 16.
(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 22

 

Residential Mortgage Banking (Unaudited) (a)

 

     Three months ended  
Dollars in millions, except as noted   

        March 31

2014

   

December 31

2013

   

September 30

2013

   

        June 30

2013

   

        March 31

2013

 

INCOME STATEMENT

          

Net interest income

   $ 40     $ 49     $ 46     $ 51     $ 48  

Noninterest income

          

Loan servicing revenue

          

Servicing fees

     61       56       40       37       41  

Net MSR hedging gains / (losses)

     (1     1       57       26       37  

Loan sales revenue

          

Benefit / (provision) for residential mortgage repurchase obligations

     19       124       6       (73     (4

Loan sales revenue

     88       98       108       190       172  

Other

     (1     (1     (3     (3     (3

Total noninterest income

     166       278       208       177       243  

Total revenue

     206       327       254       228       291  

Provision for credit losses (benefit)

     (1     (3     —         4       20  

Noninterest expense

     213       243       210       192       200  

Pretax earnings (loss)

     (6     87       44       32       71  

Income taxes (benefit)

     (2     32       16       12       26  

Earnings (loss)

   $ (4   $ 55     $ 28     $ 20     $ 45  

AVERAGE BALANCE SHEET

          

Portfolio loans

   $ 2,036     $ 2,219     $ 2,334     $ 2,403     $ 2,553  

Loans held for sale

     1,068       1,340       2,104       2,106       2,038  

Mortgage servicing rights (MSR)

     1,073       1,066       1,068       849       764  

Other assets

     4,600       4,458       3,811       5,049       5,448  

Total assets

   $ 8,777     $ 9,083     $ 9,317     $ 10,407     $ 10,803  

Deposits

   $ 2,100     $ 2,388     $ 2,936     $ 3,260     $ 3,106  

Borrowings and other liabilities

     3,464       3,553       2,316       3,216       3,487  

Total liabilities

   $ 5,564     $ 5,941     $ 5,252     $ 6,476     $ 6,593  

PERFORMANCE RATIOS

          

Return on average assets

     (.18 )%      2.40     1.19     .77     1.69

Noninterest income to total revenue

     81       85       82       78       84  

Efficiency

     103       74       83       84       69  

RESIDENTIAL MORTGAGE SERVICING PORTFOLIO - SERVICED FOR THIRD PARTIES (in billions)

          

Beginning of period

   $ 114     $ 115     $ 116     $ 120     $ 119  

Acquisitions

     2       2       2         6  

Additions

     2       3       4       4       4  

Repayments/transfers

     (4     (6     (7     (8     (9

End of period

   $ 114     $ 114     $ 115     $ 116     $ 120  

Servicing portfolio - third-party statistics: (b)

          

Fixed rate

     94     93     92     92     92

Adjustable rate/balloon

     6     7     8     8     8

Weighted-average interest rate

     4.56     4.59     4.63     4.72     4.80

MSR capitalized value (in billions)

   $ 1.1     $ 1.1     $ 1.1     $ 1.0     $ .8  

MSR capitalization value (in basis points)

     92       95       90       84       65  

Weighted-average servicing fee (in basis points)

     28       28       28       28       28  

RESIDENTIAL MORTGAGE REPURCHASE RESERVE

          

Beginning of period

   $ 131     $ 471     $ 523     $ 522     $ 614  

(Benefit) / Provision

     (19     (124     (6     73       4  

Agency settlements

       (191      

Losses - loan repurchases

     (9     (25     (46     (72     (96

End of period

   $ 103     $ 131     $ 471     $ 523     $ 522  

OTHER INFORMATION

          

Loan origination volume (in billions)

   $ 1.9     $ 2.5     $ 3.7     $ 4.7     $ 4.2  

Loan sale margin percentage

     4.53     3.96     2.92     4.04     4.07

Percentage of originations represented by:

          

Agency and government programs

     99     99     99     100     100

Purchase volume (c)

     37     41     38     28     19

Refinance volume

     63     59     62     72     81

Total nonperforming assets (b)

   $ 173     $ 189     $ 205     $ 220     $ 236  
(a) See note (a) on page 16.
(b) As of period end.
(c) Mortgages with borrowers as part of residential real estate purchase transactions.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 23

 

Non-Strategic Assets Portfolio (Unaudited) (a)

 

     Three months ended  
Dollars in millions   

March 31

2014

   

December 31

2013

   

September 30

2013

   

June 30

2013

   

March 31

2013

 

INCOME STATEMENT

          

Net interest income

   $ 142     $ 161     $ 161     $ 164     $ 203  

Noninterest income

     6       6       20       11       16  

Total revenue

     148       167       181       175       219  

Provision for credit losses (benefit)

     (52     (59     (43     39       42  

Noninterest expense

     26       39       33       41       52  

Pretax earnings

     174       187       191       95       125  

Income taxes

     64       69       70       35       46  

Earnings

   $ 110     $ 118     $ 121     $ 60     $ 79  

AVERAGE BALANCE SHEET

          

Commercial Lending:

          

Commercial/Commercial real estate

   $ 220     $ 246     $ 319     $ 437     $ 537  

Lease financing

     681       678       686       694       688  

Total commercial lending

     901       924       1,005       1,131       1,225  

Consumer Lending:

          

Home equity

     3,625       3,764       3,935       4,122       4,158  

Residential real estate

     5,104       5,312       5,496       5,709       5,938  

Total consumer lending

     8,729       9,076       9,431       9,831       10,096  

Total portfolio loans

     9,630       10,000       10,436       10,962       11,321  

Other assets (b)

     (741     (757     (735     (672     (586

Total assets

   $ 8,889     $ 9,243     $ 9,701     $ 10,290     $ 10,735  

Deposits and other liabilities

   $ 231     $ 236     $ 261     $ 275     $ 168  

Total liabilities

   $ 231     $ 236     $ 261     $ 275     $ 168  

PERFORMANCE RATIOS

          

Return on average assets

     5.02     5.06     4.95     2.34     2.98

Noninterest income to total revenue

     4       4       11       6       7  

Efficiency

     18       23       18       23       24  

OTHER INFORMATION

          

Nonperforming assets (c)

   $ 798     $ 834     $ 863     $ 935     $ 999  

Purchased impaired loans (c) (d)

   $ 4,654     $ 4,797     $ 4,966     $ 5,193     $ 5,372  

Net charge-offs

   $ 31     $ 9     $ 23     $ 53     $ 87  

Annualized net charge-off ratio

     1.31     .36     .87     1.94     3.12

LOANS (c)

          

Commercial Lending:

          

Commercial/Commercial real estate

   $ 201     $ 236     $ 270     $ 388     $ 493  

Lease financing

     683       680       675       696       690  

Total commercial lending

     884       916       945       1,084       1,183  

Consumer Lending:

          

Home equity

     3,554       3,692       3,844       4,029       4,209  

Residential real estate

     5,092       5,267       5,434       5,659       5,880  

Total consumer lending

     8,646       8,959       9,278       9,688       10,089  

Total loans

   $ 9,530     $ 9,875     $ 10,223     $ 10,772     $ 11,272  
(a) See note (a) on page 16.
(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 24

Glossary Of Terms

Accretable net interest (Accretable yield) - The excess of cash flows expected to be collected on a purchased impaired loan over the carrying value of the loan. The accretable net interest is recognized into interest income over the remaining life of the loan using the constant effective yield method.

Adjusted average total assets - Primarily comprised of total average quarterly (or annual) assets plus (less) unrealized losses (gains) on investment securities, less goodwill and certain other intangible assets (net of eligible deferred taxes).

Annualized - Adjusted to reflect a full year of activity.

Assets under management - Assets over which we have sole or shared investment authority for our customers/clients. We do not include these assets on our Consolidated Balance Sheet.

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, primarily in corporate services fees, from loan servicing and ancillary services, net of changes in fair value on commercial mortgage servicing rights due to time and pay offs (net of commercial mortgage servicing rights amortization for 2013 and prior periods), 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 25

 

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.

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.

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%.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 26

 

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.

Pretax earnings - Income before income taxes and noncontrolling interests.

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


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 27

 

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 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.

Transaction deposits - The sum of interest-bearing money market deposits, interest-bearing demand deposits, and noninterest-bearing deposits.


THE PNC FINANCIAL SERVICES GROUP, INC.    Page 28

 

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.