Exhibit 99.1

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2010

(UNAUDITED)

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THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT

FOURTH QUARTER AND FULL YEAR 2010

(UNAUDITED)

 

		Page
Consolidated Results:
Income Statement			1
Balance Sheet			2
Capital Ratios			2
Average Balance Sheet			3-4
Net Interest Margin			5
Loans and Loans Held for Sale			6
Nonperforming Assets			7-8
Accruing Loans Past Due			9
Purchase Accounting Accretion			10
Allowances for Credit Losses			11
Net Unfunded Commitments			11
Business Segment Results:
Descriptions			12
Income and Revenue			13
Period-end Employees			13
Retail Banking			14-15
Corporate & Institutional Banking			16
Asset Management Group			17
Residential Mortgage Banking			18
Distressed Assets Portfolio			19
Glossary of Terms			20-23

The information contained in this Financial Supplement is preliminary, unaudited and based on data available on January 20, 2011. We have reclassified certain prior period amounts to be consistent with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. This information speaks only as of the particular date or dates included in the schedules. We do not undertake any obligation to, and disclaim any duty to, correct or update any of the information provided in this Financial Supplement. Our future financial performance is subject to risks and uncertainties as described in our United States Securities and Exchange Commission (SEC) filings.

BUSINESS

PNC is one of the largest diversified financial services companies in the United States and is headquartered in Pittsburgh, Pennsylvania. PNC has businesses engaged in retail banking, corporate and institutional banking, asset management, and residential mortgage banking, providing many of its products and services nationally and others in PNC's primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and Wisconsin. PNC also provides certain products and services internationally.

SALE OF PNC GLOBAL INVESTMENT SERVICING

On July 1, 2010, we sold PNC Global Investment Servicing Inc. (GIS), a leading provider of processing, technology and business intelligence services to asset managers, broker-dealers and financial advisors worldwide, for $2.3 billion in cash pursuant to a definitive agreement entered into on February 2, 2010. The third quarter 2010 pretax gain related to this sale was $639 million, or $328 million after taxes. Results of operations of GIS, including the related after-tax gain on sale in the third quarter of 2010, totaled $373 million for 2010 and are presented as income from discontinued operations, net of income taxes, on our Consolidated Income Statement for all periods presented. Once we entered into the sales agreement, GIS was no longer a reportable business segment.

BLACKROCK SECONDARY COMMON STOCK OFFERING

During November 2010, BlackRock, Inc. (BlackRock) completed a secondary offering of 58.7 million shares of its common stock at a price per share of $163.00. Of the shares offered, 51.2 million common shares were offered by another BlackRock shareholder and 7.5 million common shares were offered by PNC. We recognized a pretax gain of $160 million in noninterest income during the fourth quarter of 2010 related to our sale of shares of BlackRock stock in this offering. The after-tax impact of this transaction was $102 million for the fourth quarter and full year 2010. The earnings per diluted share impact was $.19 for the fourth quarter and full year 2010. Although we elected to adjust our stake in BlackRock, we continue to consider our investment in BlackRock a key component of our diversified revenue strategy.

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THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Income Statement (Unaudited)

 

		Three months ended																				Year ended
In millions, except per share data		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
Interest Income
Loans		$	1,962			$	1,996			$	2,158			$	2,160			$	2,160			$	8,276			$	8,919
Investment securities			602				592				572				623				643				2,389				2,688
Other			107				113				143				122				136				485				479
Total interest income			2,671				2,701				2,873				2,905				2,939				11,150				12,086
Interest Expense
Deposits			205				233				244				281				334				963				1,741
Borrowed funds			265				253				194				245				259				957				1,262
Total interest expense			470				486				438				526				593				1,920				3,003
Net interest income			2,201				2,215				2,435				2,379				2,346				9,230				9,083
Noninterest Income
Asset management			303				249				243				259				219				1,054				858
Consumer services			322				328				315				296				315				1,261				1,290
Corporate services			370				183				261				268				260				1,082				1,021
Residential mortgage			157				216				179				147				107				699				990
Service charges on deposits			132				164				209				200				236				705				950
Net gains on sales of securities			68				121				147				90				144				426				550
Net other-than-temporary impairments			(44	)			(71	)			(94	)			(116	)			(144	)			(325	)			(577	)
Gains on BlackRock transactions (a)			160																1,076				160				1,076
Other			234				193				217				240				327				884				987
Total noninterest income			1,702				1,383				1,477				1,384				2,540				5,946				7,145
Total revenue			3,903				3,598				3,912				3,763				4,886				15,176				16,228
Provision For Credit Losses			442				486				823				751				1,049				2,502				3,930
Noninterest Expense
Personnel			1,032				959				959				956				969				3,906				4,119
Occupancy			194				177				172				187				180				730				713
Equipment			176				152				168				172				173				668				695
Marketing			70				81				65				50				59				266				233
Other			868				789				638				748				828				3,043				3,313
Total noninterest expense			2,340				2,158				2,002				2,113				2,209				8,613				9,073
Income from continuing operations before income taxes and noncontrolling interests			1,121				954				1,087				899				1,628				4,061				3,225
Income taxes			301				179				306				251				525				1,037				867
Income from continuing operations before noncontrolling interests			820				775				781				648				1,103				3,024				2,358
Income from discontinued operations (net of income taxes of zero, $311, $13, $14, $32, $338, and $54) (b)							328				22				23				4				373				45
Net income			820				1,103				803				671				1,107				3,397				2,403
Less:  Net income (loss) attributable to noncontrolling interests			(3	)			2				(9	)			(5	)			(37	)			(15	)			(44	)
Preferred stock dividends			24				4				25				93				119				146				388
Preferred stock discount accretion and redemptions			1				3				1				250				14				255				56
Net income attributable to common shareholders		$	798			$	1,094			$	786			$	333			$	1,011			$	3,011			$	2,003
Basic Earnings Per Common Share
Continuing operations		$	1.52			$	1.45			$	1.45			$	.62			$	2.18			$	5.08			$	4.30
Discontinued operations							.63				.04				.05				.01				.72				.10
Net income		$	1.52			$	2.08			$	1.49			$	.67			$	2.19			$	5.80			$	4.40
Diluted Earnings Per Common Share
Continuing operations		$	1.50			$	1.45			$	1.43			$	.61			$	2.16			$	5.02			$	4.26
Discontinued operations							.62				.04				.05				.01				.72				.10
Net income		$	1.50			$	2.07			$	1.47			$	.66			$	2.17			$	5.74			$	4.36
Average Common Shares Outstanding
Basic			524				523				524				498				460				517				454
Diluted			526				526				527				500				462				520				455
Efficiency			60	%			60	%			51	%			56	%			45	%			57	%			56	%
Noninterest income to total revenue			44	%			38	%			38	%			37	%			52	%			39	%			44	%
Effective tax rate (c)			26.9	%			18.8	%			28.2	%			27.9	%			32.2	%			25.5	%			26.9	%

 

(a)

See “BlackRock Secondary Common Stock Offering” on the table of contents page of this Financial Supplement regarding our fourth quarter 2010 gain on the sale of a portion of our shares of BlackRock stock. On December 1, 2009, BlackRock acquired Barclays Global Investors in exchange for cash and BlackRock common and participating preferred stock. The after-tax impact of the increase in BlackRock’s equity resulting from the value of BlackRock shares issued in connection with this transaction to our net income was $687 million for the fourth quarter and full year 2009. The earnings per diluted share impact was $1.49 for the fourth quarter of 2009 and $1.51 million for full year 2009.

(b)

Includes results of operations for GIS through June 30, 2010 and the related after-tax gain on sale. We sold GIS effective July 1, 2010, resulting in a gain of $639 million, or $328 million after taxes, recognized during the third quarter of 2010. The earnings per diluted share impact of the gain on sale was $.62 for the third quarter of 2010 and $.63 for full year 2010.

(c)

The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. The lower effective tax rate for the third quarter of 2010 was primarily the result of receiving a favorable IRS letter ruling in July 2010 that resolved a prior tax position and resulted in a tax benefit of $89 million. The higher effective tax rate for the fourth quarter of 2009 resulted from the gain on the BlackRock/BGI transaction.

 

Page 1

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THE PNC FINANCIAL SERVICES GROUP, INC.

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Assets
Cash and due from banks (a)		$	3,297			$	3,724			$	3,558			$	3,563			$	4,288
Federal funds sold and resale agreements (b)			3,704				2,094				2,209				1,367				2,390
Trading securities			1,826				955				882				1,595				2,124
Interest-earning deposits with banks (a)			1,610				415				5,028				607				4,488
Loans held for sale (b)			3,492				3,275				2,756				2,691				2,539
Investment securities (a)			64,262				63,461				53,717				57,606				56,027
Loans (a) (b)			150,595				150,127				154,342				157,266				157,543
Allowance for loan and lease losses (a)			(4,887	)			(5,231	)			(5,336	)			(5,319	)			(5,072	)
Net loans			145,708				144,896				149,006				151,947				152,471
Goodwill			8,149				8,166				9,410				9,425				9,505
Other intangible assets			2,604				2,352				2,728				3,289				3,404
Equity investments (a)			9,220				10,137				10,159				10,256				10,254
Other (a) (b)			20,412				20,658				22,242				23,050				22,373
Total assets		$	264,284			$	260,133			$	261,695			$	265,396			$	269,863
Liabilities
Deposits
Noninterest-bearing		$	50,019			$	46,065			$	44,312			$	43,122			$	44,384
Interest-bearing			133,371				133,118				134,487				139,401				142,538
Total deposits			183,390				179,183				178,799				182,523				186,922
Borrowed funds
Federal funds purchased and repurchase agreements			4,144				4,661				3,690				5,511				3,998
Federal Home Loan Bank borrowings			6,043				7,106				8,119				8,700				10,761
Bank notes and senior debt			12,904				13,508				12,617				12,638				12,362
Subordinated debt			9,842				10,023				10,184				10,001				9,907
Other (a)			6,555				4,465				5,817				5,611				2,233
Total borrowed funds			39,488				39,763				40,427				42,461				39,261
Allowance for unfunded loan commitments and letters of credit			188				193				218				252				296
Accrued expenses (a)			3,188				3,134				2,757				2,939				3,590
Other (a)			5,192				5,194				8,504				7,787				7,227
Total liabilities			231,446				227,467				230,705				235,962				237,296
Equity
Preferred stock (c)
Common stock - $5 par value
Authorized 800 shares, issued 536, 536, 535, 535, and 471 shares			2,682				2,680				2,678				2,676				2,354
Capital surplus - preferred stock			647				646				646				645				7,974
Capital surplus - common stock and other			12,057				12,008				11,979				11,945				8,945
Retained earnings			15,859				15,114				14,073				13,340				13,144
Accumulated other comprehensive income (loss)			(431	)			146				(442	)			(1,288	)			(1,962	)
Common stock held in treasury at cost: 10, 10, 10, 9, and 9 shares			(572	)			(552	)			(557	)			(500	)			(513	)
Total shareholders’ equity			30,242				30,042				28,377				26,818				29,942
Noncontrolling interests			2,596				2,624				2,613				2,616				2,625
Total equity			32,838				32,666				30,990				29,434				32,567
Total liabilities and equity		$	264,284			$	260,133			$	261,695			$	265,396			$	269,863
Capital Ratios
Tier 1 common (d)			9.8	%			9.6	%			8.3	%			7.9	%			6.0	%
Tier 1 risk-based (d)			12.1				11.9				10.7				10.3				11.4
Total risk-based (d)			15.6				15.6				14.3				13.9				15.0
Leverage (d)			10.3				9.9				9.1				8.8				10.1
Common shareholders’ equity to assets			11.2				11.3				10.6				10.0				8.2

 

(a)

Amounts include consolidated variable interest entities. Some 2010 amounts include consolidated variable interest entities that we consolidated effective January 1, 2010 based on guidance in ASC 810, Consolidation. Our 2010 Form 10-K will include additional information regarding these items. Also includes our equity interest in BlackRock under Equity investments.

(b)	Amounts include assets for which PNC has elected the fair value option. Our third quarter 2010 Form 10-Q included, and our 2010 Form 10-K will include, additional information regarding these items.

(c)	Par value less than $.5 million at each date.

(d)	The ratio as of December 31, 2010 is estimated.

 

Page 2

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THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited)

 

		Three months ended																				Year ended
In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
Assets
Interest-earning assets:
Investment securities
Securities available for sale
Residential mortgage-backed
Agency		$	28,457			$	22,916			$	20,382			$	21,926			$	22,663			$	23,437			$	21,889
Non-agency			8,495				8,917				9,358				10,213				10,788				9,240				11,993
Commercial mortgage-backed			3,325				3,100				2,962				5,357				5,053				3,679				4,748
Asset-backed			2,824				2,436				1,695				1,992				1,927				2,240				1,963
US Treasury and government agencies			6,250				7,758				8,708				7,493				6,403				7,549				4,477
State and municipal			1,732				1,323				1,356				1,365				1,346				1,445				1,354
Other debt			3,618				3,092				2,526				1,874				1,948				2,783				1,327
Corporate stocks and other			418				472				446				457				362				448				398
Total securities available for sale			55,119				50,014				47,433				50,677				50,490				50,821				48,149
Securities held to maturity
Commercial mortgage-backed			4,311				4,130				4,264				2,110				2,006				3,711				1,990
Asset-backed			2,849				3,435				3,697				3,665				2,849				3,409				2,085
Other			10				9				21				160				159				49				71
Total securities held to maturity			7,170				7,574				7,982				5,935				5,014				7,169				4,146
Total investment securities			62,289				57,588				55,415				56,612				55,504				57,990				52,295
Loans
Commercial			54,065				53,502				54,349				55,464				55,633				54,339				61,183
Commercial real estate			18,555				19,847				20,963				22,423				23,592				20,435				24,775
Equipment lease financing			6,375				6,514				6,080				6,131				6,164				6,276				6,201
Consumer			54,741				55,036				54,939				55,349				52,911				55,015				52,368
Residential mortgage			16,145				16,766				18,576				19,397				19,891				17,709				21,116
Total loans			149,881				151,665				154,907				158,764				158,191				153,774				165,643
Loans held for sale			3,331				3,021				2,646				2,476				2,949				2,871				3,976
Federal funds sold and resale agreements			2,130				1,602				2,193				1,669				1,700				1,899				1,865
Other			6,164				9,801				9,419				7,471				12,654				8,215				14,708
Total interest-earning assets			223,795				223,677				224,580				226,992				230,998				224,749				238,487
Noninterest-earning assets:
Allowance for loan and lease losses			(5,039	)			(5,290	)			(5,113	)			(5,136	)			(4,517	)			(5,144	)			(4,316	)
Cash and due from banks			3,516				3,436				3,595				3,735				3,657				3,569				3,648
Other			41,286				42,756				41,304				41,557				41,740				41,728				39,057
Total assets		$	263,558			$	264,579			$	264,366			$	267,148			$	271,878			$	264,902			$	276,876

 

Page 3

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THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

 

		Three months ended																				Year ended
In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
Liabilities and Equity
Interest-bearing liabilities:
Interest-bearing deposits
Money market		$	58,436			$	58,016			$	58,679			$	57,923			$	56,298			$	58,264			$	55,326
Demand			25,388				25,078				24,953				24,672				24,223				25,025				23,477
Savings			7,221				7,092				7,075				6,623				6,381				7,005				6,495
Retail certificates of deposit			39,201				41,724				43,745				47,162				49,645				42,933				54,584
Other time			598				740				881				1,039				1,389				813				5,009
Time deposits in foreign offices			2,799				2,650				2,661				3,034				4,013				2,785				3,637
Total interest-bearing deposits			133,643				135,300				137,994				140,453				141,949				136,825				148,528
Borrowed funds
Federal funds purchased and repurchase agreements			4,552				4,179				4,159				4,344				4,046				4,309				4,439
Federal Home Loan Bank borrowings			6,168				7,680				8,575				9,603				10,880				7,996				14,177
Bank notes and senior debt			13,073				12,799				12,666				12,616				12,327				12,790				12,981
Subordinated debt			9,490				9,569				9,764				9,769				9,879				9,647				10,191
Other			4,947				4,886				6,005				5,934				2,448				5,438				2,345
Total borrowed funds			38,230				39,113				41,169				42,266				39,580				40,180				44,133
Total interest-bearing liabilities			171,873				174,413				179,163				182,719				181,529				177,005				192,661
Noninterest-bearing liabilities and equity:
Noninterest-bearing deposits			47,998				45,306				44,308				42,631				44,325				45,076				41,416
Allowance for unfunded loan commitments and letters of credit			193				218				251				295				324				239				328
Accrued expenses and other liabilities			10,506				12,687				10,446				10,401				13,353				11,015				12,179
Equity			32,988				31,955				30,198				31,102				32,347				31,567				30,292
Total liabilities and equity		$	263,558			$	264,579			$	264,366			$	267,148			$	271,878			$	264,902			$	276,876
Supplemental Average Balance Sheet Information (Unaudited)
Deposits and Common Shareholders’ Equity
Interest-bearing deposits		$	133,643			$	135,300			$	137,994			$	140,453			$	141,949			$	136,825			$	148,528
Noninterest-bearing deposits			47,998				45,306				44,308				42,631				44,325				45,076				41,416
Total deposits		$	181,641			$	180,606			$	182,302			$	183,084			$	186,274			$	181,901			$	189,944
Transaction deposits		$	131,822			$	128,400			$	127,940			$	125,226			$	124,846			$	128,365			$	120,219
Common shareholders’ equity		$	29,729			$	28,755			$	27,054			$	24,764			$	21,726			$	27,545			$	20,022

 

Page 4

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THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Net Interest Margin (Unaudited) (a)

 

		Three months ended
		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Average yields/rates
Yield on interest-earning assets
Loans			5.21	%			5.24	%			5.58	%			5.50	%			5.42	%
Investment securities			3.91				4.15				4.17				4.44				4.67
Other			3.61				3.15				3.98				4.26				3.17
Total yield on interest-earning assets			4.76				4.82				5.13				5.17				5.07
Rate on interest-bearing liabilities
Deposits			.61				.68				.71				.81				.93
Borrowed funds			2.74				2.56				1.88				2.33				2.60
Total rate on interest-bearing liabilities			1.08				1.10				.98				1.16				1.30
Interest rate spread			3.68				3.72				4.15				4.01				3.77
Impact of noninterest-bearing sources			.25				.24				.20				.23				.28
Net interest margin (b)			3.93	%			3.96	%			4.35	%			4.24	%			4.05	%

 

		Year ended
		December 31 2010				December 31 2009
Average yields/rates
Yield on interest-earning assets
Loans			5.42	%			5.41	%
Investment securities			4.16				5.18
Other			3.74				2.37
Total yield on interest-earning assets			5.00				5.10
Rate on interest-bearing liabilities
Deposits			.70				1.17
Borrowed funds			2.39				2.93
Total rate on interest-bearing liabilities			1.09				1.58
Interest rate spread			3.91				3.52
Impact of noninterest-bearing sources			.23				.30
Net interest margin (b)			4.14	%			3.82	%

 

(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 GAAP in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended December 31, 2010, September 30, 2010, June 30, 2010, March 31, 2010, and December 31, 2009 were $22 million, $22 million, $19 million, $18 million, and $18 million, respectively. The taxable-equivalent adjustments to net interest income for the year ended December 31, 2010 and December 31, 2009 were $81 million and $65 million, respectively.

(b)	A reconciliation of net interest margin to provision-adjusted net interest margin follows. We believe that provision-adjusted net interest margin, a non-GAAP measure, is useful as a tool to help evaluate the amount of credit related risk associated with interest-earning assets.

 

		Three months ended
		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Net interest margin, as reported			3.93	%			3.96	%			4.35	%			4.24	%			4.05	%
Less: provision adjustment			.78				.86				1.47				1.34				1.80
Provision-adjusted net interest margin			3.15	%			3.10	%			2.88	%			2.90	%			2.25	%

 

		Year ended
		December 31 2010				December 31 2009
Net interest margin, as reported			4.14	%			3.82	%
Less: provision adjustment			1.11				1.65
Provision-adjusted net interest margin			3.03	%			2.17	%

The adjustment represents annualized provision for credit losses divided by average interest-earning assets.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Loans (Unaudited)

 

In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Commercial
Retail/wholesale		$	9,901			$	9,752			$	9,576			$	9,557			$	9,515
Manufacturing			9,334				9,519				9,728				9,863				9,880
Service providers			8,866				8,747				8,289				8,528				8,256
Real estate related (a)			7,500				7,398				7,269				7,379				7,403
Financial services			4,573				3,773				4,302				4,654				3,874
Health care			3,481				3,169				3,099				2,998				2,970
Other			11,522				10,830				11,969				11,724				12,920
Total commercial			55,177				53,188				54,232				54,703				54,818
Commercial real estate
Real estate projects			12,211				13,021				13,914				14,535				15,582
Commercial mortgage			5,723				6,070				6,450				7,415				7,549
Total commercial real estate			17,934				19,091				20,364				21,950				23,131
Equipment lease financing			6,393				6,408				6,630				6,111				6,202
TOTAL COMMERCIAL LENDING			79,504				78,687				81,226				82,764				84,151
Consumer
Home equity
Lines of credit			23,473				23,770				23,901				24,040				24,236
Installment			10,753				10,815				11,060				11,390				11,711
Education			9,196				8,819				8,867				8,320				7,468
Automobile			2,983				2,863				2,697				2,206				2,013
Credit card			3,920				3,883				3,967				4,012				2,569
Other			4,767				4,806				4,787				5,266				5,585
Total consumer			55,092				54,956				55,279				55,234				53,582
Residential real estate
Residential mortgage			15,292				15,708				16,618				17,599				18,190
Residential construction			707				776				1,219				1,669				1,620
Total residential real estate			15,999				16,484				17,837				19,268				19,810
TOTAL CONSUMER LENDING			71,091				71,440				73,116				74,502				73,392
Total (b)		$	150,595			$	150,127			$	154,342			$	157,266			$	157,543
(a)    Includes loans to customers in the real estate and construction industries.
(b)    Includes purchased impaired loans related to National City:		$	7,780			$	8,130			$	9,127			$	9,673			$	10,287

Details of Loans Held for Sale (Unaudited)

 

In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Commercial mortgage		$	1,207			$	1,381			$	1,239			$	1,316			$	1,301
Residential mortgage			1,890				1,786				1,336				1,158				1,012
Other			395				108				181				217				226
Total		$	3,492			$	3,275			$	2,756			$	2,691			$	2,539

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited)

Nonperforming Assets by Type

 

In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Nonperforming loans
Commercial
Retail/wholesale		$	197			$	219			$	242			$	246			$	231
Manufacturing			250				266				312				341				423
Real estate related (a)			263				338				405				460				419
Financial services			16				36				60				77				117
Health care			50				59				55				48				41
Other			477				612				619				661				575
Total commercial			1,253				1,530				1,693				1,833				1,806
Commercial real estate
Real estate projects			1,422				1,562				1,661				1,797				1,754
Commercial mortgage			413				427				420				419				386
Total commercial real estate			1,835				1,989				2,081				2,216				2,140
Equipment lease financing			77				104				114				123				130
TOTAL COMMERCIAL LENDING			3,165				3,623				3,888				4,172				4,076
Consumer
Home equity			448				406				405				337				356
Other			35				38				25				35				36
Total consumer			483				444				430				372				392
Residential real estate
Residential mortgage			764				727				713				968				955
Residential construction			54				42				79				249				248
Total residential real estate			818				769				792				1,217				1,203
TOTAL CONSUMER LENDING			1,301				1,213				1,222				1,589				1,595
Total nonperforming loans (b) (c) (d) (e)			4,466				4,836				5,110				5,761				5,671
Foreclosed and other assets
Commercial lending			353				366				293				328				266
Consumer lending			482				467				501				451				379
Total foreclosed and other assets			835				833				794				779				645
Total nonperforming assets		$	5,301			$	5,669			$	5,904			$	6,540			$	6,316
Nonperforming loans to total loans			2.97	%			3.22	%			3.31	%			3.66	%			3.60	%
Nonperforming assets to total loans and foreclosed and other assets			3.50				3.76				3.81				4.14				3.99
Nonperforming assets to total assets			2.01				2.18				2.26				2.46				2.34
Allowance for loan and lease losses to nonperforming loans (e) (f)			109				108				104				92				89

 

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

(b)

Loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties are considered troubled debt restructurings (TDRs). TDRs typically result from our loss mitigation activities and could include rate reductions, principal forgiveness, forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. Total nonperforming loans include TDRs of $768 million at December 31, 2010, $595 million at September 30, 2010, $500 million at June 30, 2010, $385 million at March 31, 2010, and $440 million at December 31, 2009. Purchased impaired loans are excluded from TDRs.

(c)	TDRs returned to performing (accrual) status totaled $543 million at December 31, 2010 and are excluded from nonperforming loans. These loans have demonstrated a period of at least six months of performance under the modified terms.

(d)

Credit cards and certain small business and consumer credit agreements whose terms have been modified totaled $331 million at December 31, 2010 and are TDRs. However, since our policy is to exempt these loans from being placed on nonaccrual status as permitted by regulatory guidance as generally these loans are directly charged off in the period that they become 180 days past due, these loans are excluded from nonperforming loans.

(e)	Nonperforming loans do not include purchased impaired loans or loans held for sale.

(f)	The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans. See page 10, note (a).

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Details of Nonperforming Assets (Unaudited) (Continued)

 

Change in Nonperforming Assets

 

In millions		January 1, 2010 - December 31, 2010				October 1, 2010 - December 31, 2010				July 1, 2010 - September 30, 2010				April 1, 2010 - June 30, 2010				January 1, 2010 - March 31, 2010
Beginning balance		$	6,316			$	5,669			$	5,904			$	6,540			$	6,316
Transferred in			5,279				1,125				1,369				1,011				1,774
Charge-offs/valuation adjustments			(2,071	)			(467	)			(452	)			(532	)			(620	)
Principal activity including payoffs			(1,316	)			(377	)			(365	)			(296	)			(278	)
Asset sales and transfers to held for sale			(1,446	)			(410	)			(351	)			(420	)			(265	)
Returned to performing - TDRs			(543	)			(118	)			(96	)			(112	)			(217	)
Returned to performing - Other			(918	)			(121	)			(340	)			(287	)			(170	)
Ending balance		$	5,301			$	5,301			$	5,669			$	5,904			$	6,540

Largest Individual Nonperforming Assets at December 31, 2010 (a)

 

In millions
Ranking				Outstandings				Industry
		1		$	35			Accommodation and Food Services
		2			29			Real Estate and Rental and Leasing
		3			23			Construction
		4			23			Real Estate and Rental and Leasing
		5			23			Real Estate and Rental and Leasing
		6			22			Real Estate and Rental and Leasing
		7			21			Real Estate and Rental and Leasing
		8			20			Real Estate and Rental and Leasing
		9			19			Information
		10			19			Real Estate and Rental and Leasing
		Total		$	234
As a percent of total nonperforming assets											4%

 

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

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Accruing Loans Past Due (Unaudited)

 

Accruing Loans Past Due 30 To 89 Days (a)

 

		Amount																				Percent of Outstandings
Dollars in millions		Dec. 31 2010				Sept. 30 2010				June 30 2010				March 31 2010				Dec. 31 2009				Dec. 31 2010				Sept. 30 2010				June 30 2010				March 31 2010				Dec. 31 2009
Commercial		$	353			$	293			$	501			$	622			$	684				.64	%			.55	%			.93	%			1.15	%			1.26	%
Commercial real estate			190				353				535				859				666				1.13				1.97				2.81				4.19				3.10
Equipment lease financing			39				10				21				97				128				.61				.16				.32				1.59				2.06
Consumer			444				430				419				440				438				.86				.83				.81				.85				.87
Residential real estate			333				347				392				464				472				2.68				2.70				2.92				3.14				3.12
Total		$	1,359			$	1,433			$	1,868			$	2,482			$	2,388				.95				1.01				1.29				1.68				1.62

Accruing Loans Past Due 90 Days Or More (a)

 

		Amount																				Percent of Outstandings
Dollars in millions		Dec. 31 2010				Sept. 30 2010				June 30 2010				March 31 2010				Dec. 31 2009				Dec. 31 2010				Sept. 30 2010				June 30 2010				March 31 2010				Dec. 31 2009
Commercial		$	69			$	90			$	110			$	201			$	188				.13	%			.17	%			.20	%			.37	%			.35	%
Commercial real estate			43				58				83				111				150				.26				.32				.44				.54				.70
Equipment lease financing			1				4				4				2				6				.02				.06				.06				.03				.10
Consumer			269				270				225				248				226				.52				.52				.43				.48				.45
Residential real estate			160				179				177				284				314				1.50				1.60				1.51				1.92				2.07
Total		$	542			$	601			$	599			$	846			$	884				.39				.43				.42				.57				.60

Accruing Loans Past Due 30 To 59 Days (a)

 

		Amount								Percent of Outstandings
Dollars in millions		Dec. 31 2010				Dec. 31 2009				Dec. 31 2010				Dec. 31 2009
Commercial		$	257			$	488				.47	%			.90	%
Commercial real estate			128				461				.76				2.14
Equipment lease financing			37				106				.58				1.71
Consumer			293				283				.56				.57
Residential real estate			226				308				1.80				2.01
Total		$	941			$	1,646				.66				1.12

Accruing Loans Past Due 60 To 89 Days (a)

 

		Amount								Percent of Outstandings
Dollars in millions		Dec. 31 2010				Dec. 31 2009				Dec. 31 2010				Dec. 31 2009
Commercial		$	96			$	195				.17	%			.36	%
Commercial real estate			62				204				.37				.95
Equipment lease financing			2				22				.03				.35
Consumer			151				157				.29				.31
Residential real estate			107				164				.85				1.09
Total		$	418			$	742				.29				.50

 

(a)	Excludes loans that are government insured/guaranteed, primarily residential mortgages, and purchased impaired loans.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Purchase Accounting Accretion and Accretable Interest (Unaudited)

 

VALUATION OF PURCHASED IMPAIRED LOANS

 

		December 31, 2008								December 31, 2009								September 30, 2010								December 31, 2010
Dollars in billions		Balance				Net Investment				Balance				Net Investment				Balance				Net Investment				Balance				Net Investment
Commercial and commercial real estate loans:
Unpaid principal balance		$	6.3							$	3.5							$	2.2							$	1.8
Purchased impaired mark			(3.4	)							(1.3	)							(.7	)							(.4	)
Recorded investment			2.9								2.2								1.5								1.4
Allowance for loan losses											(.2	)							(.3	)							(.3	)
Net investment			2.9				46	%			2.0				57	%			1.2				55	%			1.1				61	%
Consumer and residential mortgage loans:
Unpaid principal balance			15.6								11.7								8.4								7.9
Purchased impaired mark			(5.8	)							(3.6	)							(1.8	)							(1.5	)
Recorded investment			9.8								8.1								6.6								6.4
Allowance for loan losses											(.3	)							(.6	)							(.6	)
Net investment			9.8				63	%			7.8				67	%			6.0				71	%			5.8				73	%
Total purchased impaired loans:
Unpaid principal balance			21.9								15.2								10.6								9.7
Purchased impaired mark			(9.2	)							(4.9	)							(2.5	)							(1.9	)
Recorded investment			12.7								10.3								8.1								7.8
Allowance for loan losses											(.5	)							(.9	)							(.9	)(a)
Net investment		$	12.7				58	%		$	9.8				64	%		$	7.2				68	%		$	6.9				71	%

PURCHASE ACCOUNTING ACCRETION

 

		Three months ended												Years Ended
In millions		December 31 2009				September 30 2010				December 31 2010				December 31 2009				December 31 2010
Non-impaired loans		$	111			$	70			$	73			$	773			$	366
Impaired loans			244				187				175				914				885
Reversal of contractual interest on impaired loans			(168	)			(138	)			(121	)			(752	)			(529	)
Net impaired loans			76				49				54				162				356
Securities			21				15				15				118				54
Deposits			189				122				112				996				545
Borrowings			(55	)			(42	)			(43	)			(250	)			(155	)
Total		$	342			$	214			$	211			$	1,799			$	1,166
Cash received in excess of recorded investment from sales or payoffs of impaired commercial loans (cash recoveries)		$	154			$	111			$	133			$	204			$	483

REMAINING PURCHASE ACCOUNTING ACCRETION

 

In billions		December 31 2008				December 31 2009				September 30 2010				December 31 2010
Non-impaired loans		$	2.4			$	1.6			$	1.3			$	1.2
Impaired loans (b)			3.7				3.5				2.3				2.2
Total loans (gross)			6.1				5.1				3.6				3.4
Securities			.2				.1				.1				.1
Deposits			2.1				1.0				.6				.5
Borrowings			(1.5	)			(1.2	)			(1.1	)			(1.1	)
Total		$	6.9			$	5.0			$	3.2			$	2.9

ACCRETABLE NET INTEREST - PURCHASED IMPAIRED LOANS

 

In billions						In billions						In billions
October 1, 2010		$	2.3			January 1, 2010		$	3.5			January 1, 2009		$	3.7
Accretion			(.2	)		Accretion			(.9	)		Accretion			(1.8	)
Cash recoveries			(.2	)		Cash recoveries			(.5	)		Cash recoveries			(.7	)(a)
Net reclass to accretable difference and other activity			.3			Net reclass to accretable difference and other activity			.1			Net reclass to accretable difference and other activity			1.0	(a)
December 31, 2010		$	2.2			December 31, 2010		$	2.2			December 31, 2010		$	2.2

 

(a)

Impairment reserves of $.9 billion at December 31, 2010 reflect impaired loans with further credit quality deterioration since acquisition. This deterioration was more than offset by cash received to date in excess of recorded investment of $.7 billion and the net reclassification to accretable net interest, to be recognized over time, of $1.0 billion.

(b)

Adjustments include purchase accounting accretion, reclassifications from non-accretable to accretable net interest as a result of increases in estimated cash flows, and reductions in the accretable amount as a result of the identification of additional purchased impaired loans as of the National City acquisition close date of December 31, 2008.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit, and

Net Unfunded Commitments (Unaudited)

 

Change in Allowance for Loan and Lease Losses

 

Three months ended - in millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Beginning balance		$	5,231			$	5,336			$	5,319			$	5,072			$	4,810
Charge-offs:
Commercial			(331	)			(310	)			(313	)			(273	)			(380	)
Commercial real estate			(181	)			(102	)			(149	)			(238	)			(260	)
Equipment lease financing			(29	)			(12	)			(43	)			(36	)			(34	)
Consumer			(259	)			(285	)			(283	)			(242	)			(267	)
Residential real estate			(124	)			(47	)			(197	)			(38	)			(83	)
Total charge-offs			(924	)			(756	)			(985	)			(827	)			(1,024	)
Recoveries:
Commercial			71				80				78				65				87
Commercial real estate			20				14				10				33				15
Equipment lease financing			18				13				13				12				10
Consumer			25				28				31				26				27
Residential real estate			(1	)			7				13								50
Total recoveries			133				142				145				136				189
Net charge-offs:
Commercial			(260	)			(230	)			(235	)			(208	)			(293	)
Commercial real estate			(161	)			(88	)			(139	)			(205	)			(245	)
Equipment lease financing			(11	)			1				(30	)			(24	)			(24	)
Consumer			(234	)			(257	)			(252	)			(216	)			(240	)
Residential real estate			(125	)			(40	)			(184	)			(38	)			(33	)
Total net charge-offs			(791	)			(614	)			(840	)			(691	)			(835	)
Provision for credit losses			442				486				823				751				1,049
Acquired allowance adjustments (a)							(2	)							2				20
Adoption of ASU 2009-17, Consolidations															141
Net change in allowance for unfunded loan commitments and letters of credit			5				25				34				44				28
Ending balance		$	4,887			$	5,231			$	5,336			$	5,319			$	5,072
Supplemental Information
Net charge-offs to average loans (for the three months ended) (annualized)			2.09	%			1.61	%			2.18	%			1.77	%			2.09	%
Allowance for loan and lease losses to total loans			3.25				3.48				3.46				3.38				3.22
Commercial lending net charge-offs		$	(432	)		$	(317	)		$	(404	)		$	(437	)		$	(562	)
Consumer lending net charge-offs			(359	)			(297	)			(436	)			(254	)			(273	)
Total net charge-offs		$	(791	)		$	(614	)		$	(840	)		$	(691	)		$	(835	)
Net charge-offs to average loans
Commercial lending			2.17	%			1.57	%			1.99	%			2.11	%			2.61	%
Consumer lending			2.01				1.64				2.38				1.38				1.49

 

(a)	Related to our December 31, 2008 National City acquisition.

Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

Three months ended - in millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Beginning balance		$	193			$	218			$	252			$	296			$	324
Net change in allowance for unfunded loan commitments and letters of credit			(5	)			(25	)			(34	)			(44	)			(28	)
Ending balance		$	188			$	193			$	218			$	252			$	296
Net Unfunded Commitments
In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Net unfunded commitments		$	95,805			$	97,147			$	95,775			$	96,363			$	100,795

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Business Segment Descriptions (Unaudited)

Retail Banking provides deposit, lending, brokerage, trust, investment management, and cash management services to consumer and small business customers within our primary geographic markets. Our customers are serviced through our branch network, call centers and the internet. The branch network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and Wisconsin.

Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and services to mid-sized corporations, government and not-for-profit entities, and selectively to large corporations. Lending products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting, and global trade services. Capital markets-related products and services include foreign exchange, derivatives, loan syndications, mergers and acquisitions advisory and related services to middle-market companies, our multi-seller conduit, securities underwriting, and securities sales and trading. Corporate & Institutional Banking also provides commercial loan servicing, and real estate advisory and technology solutions for the commercial real estate finance industry. Corporate & Institutional Banking provides products and services generally within our primary geographic markets, with certain products and services offered internationally.

Asset Management Group includes personal wealth management for high net worth and ultra high net worth clients and institutional asset management. Wealth management products and services include financial planning, customized investment management, private banking, tailored credit solutions and trust management and administration for individuals and their families. Institutional asset management provides investment management, custody, and retirement planning services. The institutional clients include corporations, foundations and unions and charitable endowments located primarily in our geographic footprint.

Residential Mortgage Banking directly originates primarily first lien residential mortgage loans on a nationwide basis with a significant presence within the retail banking footprint and also originates loans through majority or minority 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 primary mortgage conduits Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Home Loan Banks and third-party investors, or are securitized and issued under the Government National Mortgage Association (Ginnie Mae) program. The mortgage servicing operation performs all functions related to servicing mortgage loans—primarily those in first lien position—for various investors and for loans owned by PNC. Certain loans originated through majority or minority owned affiliates are serviced by others.

Distressed Assets Portfolio includes commercial residential development loans, cross-border leases, consumer brokered home equity loans, retail mortgages, non-prime mortgages, and residential construction loans. These loans require special servicing and management oversight given current market conditions. The majority of these loans are from acquisitions.

BlackRock is the largest publicly traded investment management firm in the world. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, multi-asset class, alternative and cash management separate accounts and funds, including iShares^®, the global product leader in exchange traded funds. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services globally to a broad base of clients. At December 31, 2010, our share of BlackRock’s earnings was 19%.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

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

 

		Three months ended																				Year ended
In millions		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
Income (Loss)
Retail Banking		$	43			$	(7	)		$	80			$	24			$	(25	)		$	140			$	136
Corporate & Institutional Banking			540				427				443				360				415				1,770				1,190
Asset Management Group			29				44				28				40				23				141				105
Residential Mortgage Banking			3				98				92				82				25				275				435
Distressed Assets Portfolio			(72	)			17				(81	)			72				(88	)			(64	)			84
Other, including BlackRock (b) (c) (d)			277				196				219				70				753				762				408
Income from continuing operations before noncontrolling interests		$	820			$	775			$	781			$	648			$	1,103			$	3,024			$	2,358
Revenue
Retail Banking		$	1,275			$	1,355			$	1,387			$	1,359			$	1,379			$	5,376			$	5,721
Corporate & Institutional Banking			1,371				1,070				1,219				1,248				1,377				4,908				5,266
Asset Management Group			225				217				219				229				218				890				919
Residential Mortgage Banking			229				285				255				234				176				1,003				1,328
Distressed Assets Portfolio			198				244				346				337				221				1,125				1,153
Other, including BlackRock (b) (c) (d)			605				427				486				356				1,515				1,874				1,841
Revenue from continuing operations		$	3,903			$	3,598			$	3,912			$	3,763			$	4,886			$	15,176			$	16,228

 

(a)

Our business information is presented based on our management accounting practices and our management structure. We refine our methodologies from time to time as our management accounting practices are enhanced and our business and management structure change. Certain prior period amounts have been reclassified to reflect current methodologies and our current business and management structure. Amounts are presented on a continuing operations basis and therefore exclude the earnings and revenue attributable to GIS, including the gain on the sale of GIS, which closed July 1, 2010.

(b)	We consider BlackRock to be a separate reportable business segment but have combined its results with Other for this presentation. Our 2010 Form 10-K will include additional information regarding BlackRock.

(c)

Includes earnings and gains or losses related to PNC’s equity interest in BlackRock, integration costs, asset and liability management activities including net securities gains or losses, other than temporary impairment of debt securities and certain trading activities, equity management activities, exited businesses, differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles (GAAP), corporate overhead and intercompany eliminations.

(d)

Amounts for the fourth quarter and full year 2010 include the $160 million gain ($102 million after taxes) related to our gain on the sale of a portion of our shares of BlackRock stock as part of BlackRock’s November 2010 secondary offering of common stock and amounts for the fourth quarter and full year 2009 include the $1.076 billion gain ($687 million after taxes) related to BlackRock’s December 1, 2009 acquisition of BGI. PNC sold 7.5 million shares of BlackRock common stock in the November 2010 transaction.

 

		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009
Period-end Employees
Full-time employees
Retail Banking			20,925				21,203				21,380				21,522				21,416
Corporate & Institutional Banking			3,756				3,660				3,601				3,760				3,746
Asset Management Group			3,001				2,971				2,960				2,995				2,969
Residential Mortgage Banking			3,539				3,339				3,348				3,340				3,267
Distressed Assets Portfolio			167				170				179				178				175
Other
Operations & Technology			8,712				8,689				8,949				9,259				9,249
Staff Services and Other (e)			4,717				4,588				9,073				9,059				8,939
Total Other			13,429				13,277				18,022				18,318				18,188
Total full-time employees			44,817				44,620				49,490				50,113				49,761
Retail Banking part-time employees			4,965				4,799				4,790				4,798				4,737
Other part-time employees			987				974				1,104				1,187				1,322
Total part-time employees			5,952				5,773				5,894				5,985				6,059
Total			50,769				50,393				55,384				56,098				55,820

The period end employee statistics reflect staff directly employed by the respective business and exclude operations, technology and staff services employees.

 

(e)	Includes employees of GIS totaling 4,528 at June 30, 2010; 4,573 at March 31, 2010; and 4,450 at December 31, 2009. We sold GIS effective July 1, 2010.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (a)

 

		Three months ended																				Year ended
Dollars in millions		December 31 2010 (b)				September 30 2010 (b)				June 30 2010 (b)				March 31 2010 (b)				December 31 2009				December 31 2010 (b)				December 31 2009 (c)
INCOME STATEMENT
Net interest income		$	825			$	858			$	879			$	871			$	833			$	3,433			$	3,522
Noninterest income
Service charges on deposits			125				157				204				195				229				681				930
Brokerage			51				53				55				53				59				212				245
Consumer services			239				242				223				208				224				912				886
Other			35				45				26				32				34				138				138
Total noninterest income			450				497				508				488				546				1,943				2,199
Total revenue			1,275				1,355				1,387				1,359				1,379				5,376				5,721
Provision for credit losses			157				327				280				339				409				1,103				1,330
Noninterest expense			1,047				1,038				994				975				1,011				4,054				4,169
Pretax earnings (loss)			71				(10	)			113				45				(41	)			219				222
Income taxes (benefit)			28				(3	)			33				21				(16	)			79				86
Earnings (loss)		$	43			$	(7	)		$	80			$	24			$	(25	)		$	140			$	136
AVERAGE BALANCE SHEET
Loans
Consumer
Home equity		$	26,189			$	26,289			$	26,510			$	26,821			$	27,107			$	26,450			$	27,403
Indirect			4,013				3,962				3,944				3,973				3,998				3,973				4,036
Education			8,758				8,817				8,342				8,060				6,656				8,497				5,625
Credit cards			3,827				3,901				3,948				4,079				2,503				3,938				2,239
Other			1,840				1,805				1,776				1,793				1,790				1,804				1,791
Total consumer			44,627				44,774				44,520				44,726				42,054				44,662				41,094
Commercial and commercial real estate			10,928				11,118				11,307				11,487				11,766				11,208				12,306
Floor plan			1,482				1,267				1,299				1,296				1,137				1,336				1,264
Residential mortgage			1,390				1,528				1,683				1,800				1,899				1,599				2,064
Total loans			58,427				58,687				58,809				59,309				56,856				58,805				56,728
Goodwill and other intangible assets			5,803				5,837				5,872				5,935				5,882				5,861				5,842
Other assets			1,738				2,070				2,913				2,722				2,697				2,358				2,750
Total assets		$	65,968			$	66,594			$	67,594			$	67,966			$	65,435			$	67,024			$	65,320
Deposits
Noninterest-bearing demand		$	17,723			$	17,144			$	17,240			$	16,776			$	16,516			$	17,223			$	16,308
Interest-bearing demand			20,140				19,767				19,977				19,212				18,446				19,776				18,357
Money market			40,362				40,148				40,283				39,699				39,374				40,125				39,394
Total transaction deposits			78,225				77,059				77,500				75,687				74,336				77,124				74,059
Savings			7,155				7,029				7,006				6,552				6,577				6,938				6,610
Certificates of deposit			37,949				40,378				42,313				45,614				48,338				41,539				53,145
Total deposits			123,329				124,466				126,819				127,853				129,251				125,601				133,814
Other liabilities			1,106				1,463				1,673				1,671				27				1,477				51
Capital			7,967				8,043				8,326				8,195				8,301				8,132				8,497
Total liabilities and equity		$	132,402			$	133,972			$	136,818			$	137,719			$	137,579			$	135,210			$	142,362
PERFORMANCE RATIOS
Return on average capital			2	%			—	%			4	%			1	%			(1	)%			2	%			2	%
Return on average assets			.26				(.04	)			.47				.14				(.15	)			.21				.21
Noninterest income to total revenue			35				37				37				36				40				36				38
Efficiency			82				77				72				72				73				75				73

 

(a)	See note (a) on page 13.

(b)	Information for 2010 reflects the impact of the consolidation in our financial statements for the securitized portfolio of approximately $1.6 billion of credit card loans effective January 1, 2010.

(c)	PNC completed the required divestiture of 61 branches in early September 2009. Amounts for periods prior to the divestiture included the impact of those branches.

 

Page 14

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THE PNC FINANCIAL SERVICES GROUP, INC.

Retail Banking (Unaudited) (Continued)

 

 

		Three months ended																				Year ended
Dollars in millions, except as noted		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009 (a)
OTHER INFORMATION (b)
Credit-related statistics:
Commercial nonperforming assets		$	297			$	262			$	297			$	324			$	324
Consumer nonperforming assets (c)			422				400				336				276				284
Total nonperforming assets		$	719			$	662			$	633			$	600			$	608
Impaired loans (d)		$	895			$	939			$	974			$	1,013			$	1,056
Commercial lending net charge-offs		$	49			$	85			$	100			$	96			$	173			$	330			$	415
Credit card lending net charge-offs (c)			68				63				89				96				57				316				209
Consumer lending (excluding credit card) net charge-offs			108				99				109				108				109				424				402
Total net charge-offs		$	225			$	247			$	298			$	300			$	339			$	1,070			$	1,026
Commercial lending annualized net charge-off ratio			1.57	%			2.72	%			3.18	%			3.05	%			5.32	%			2.63	%			3.06	%
Credit card lending annualized net charge-off ratio (c)			7.05	%			6.41	%			9.04	%			9.54	%			9.03	%			8.02	%			9.33	%
Consumer lending (excluding credit card) annualized net charge-off ratio			1.02	%			.93	%			1.03	%			1.03	%			1.04	%			1.00	%			.98	%
Total annualized net charge-off ratio			1.53	%			1.67	%			2.03	%			2.05	%			2.37	%			1.82	%			1.81	%
Home equity portfolio credit statistics:
% of first lien positions (e)			36	%			35	%			35	%			34	%			35	%
Weighted average loan-to-value ratios (e)			73	%			73	%			73	%			73	%			74	%
Weighted average FICO scores (f)			726				725				727				725				727
Annualized net charge-off ratio			.97	%			.90	%			1.01	%			.70	%			.90	%			.90	%			.75	%
Loans 30 - 89 days past due			.79	%			.79	%			.74	%			.74	%			.78	%
Loans 90 days past due			1.02	%			.94	%			.91	%			.85	%			.76	%
Other statistics:
ATMs			6,673				6,626				6,539				6,467				6,473
Branches (g)			2,470				2,461				2,458				2,461				2,513
Customer-related statistics:
Retail Banking checking relationships (h)			5,465,000				5,438,000				5,389,000				5,379,000				5,390,000
Retail online banking active customers			3,057,000				2,968,000				2,774,000				2,782,000				2,743,000
Retail online bill payment active customers			977,000				942,000				870,000				826,000				780,000
Brokerage statistics:
Financial consultants (i)			694				713				711				722				704
Full service brokerage offices			34				40				41				41				40
Brokerage account assets (billions)		$	33			$	31			$	31			$	33			$	32

 

(a)	PNC completed the required divestiture of 61 branches in early September 2009. Amounts for periods prior to the divestiture included the impact of those branches.

(b)	Presented as of period end, except for net charge-offs and annualized net charge-off ratios, which are for the three months and year ended, respectively.

(c)

Information for 2010 reflects the impact of the consolidation in our financial statements for the securitized portfolio of approximately $1.6 billion of credit card loans effective January 1, 2010. In addition, the declines as of September 30, 2010 in credit card lending net charge-offs and the credit card lending annualized net charge-off ratio were primarily due to the alignment of charge-off policies within the consolidated portfolio post-conversion.

(d)	Recorded investment of purchased impaired loans related to acquisitions.

(e)	Includes loans from acquired portfolios for which lien position and loan-to-value information is not available.

(f)	Represents the most recent FICO scores we have on file.

(g)	Excludes certain satellite branches that provide limited products and/or services.

(h)	Retail checking relationships for prior periods have been adjusted to be consistent with the current period presentation. The prior amounts were refined subsequent to the completion of application system conversion activities related to the National City acquisition.

(i)	Financial consultants provide services in full service brokerage offices and PNC traditional branches.

 

Page 15

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THE PNC FINANCIAL SERVICES GROUP, INC.

Corporate & Institutional Banking (Unaudited) (a)

 

		Three months ended																				Year ended
Dollars in millions, except as noted		December 31 2010 (g)				September 30 2010 (g)				June 30 2010 (g)				March 31 2010 (g)				December 31 2009				December 31 2010 (g)				December 31 2009
INCOME STATEMENT
Net interest income		$	912			$	833			$	923			$	877			$	1,009			$	3,545			$	3,833
Noninterest income
Corporate service fees			334				148				237				242				235				961				915
Other			125				89				59				129				133				402				518
Noninterest income			459				237				296				371				368				1,363				1,433
Total revenue			1,371				1,070				1,219				1,248				1,377				4,908				5,266
Provision for (recoveries of) credit losses			18				(48	)			97				236				283				303				1,603
Noninterest expense			505				446				421				445				444				1,817				1,800
Pretax earnings			848				672				701				567				650				2,788				1,863
Income taxes			308				245				258				207				235				1,018				673
Earnings		$	540			$	427			$	443			$	360			$	415			$	1,770			$	1,190
AVERAGE BALANCE SHEET
Loans
Commercial		$	31,819			$	32,119			$	32,937			$	34,024			$	33,481			$	32,717			$	37,426
Commercial real estate			15,035				15,897				17,008				17,961				18,747				16,466				19,195
Commercial - real estate related			3,254				3,021				2,901				3,128				3,328				3,076				3,772
Asset-based lending			6,893				6,362				6,065				5,940				6,051				6,318				6,344
Equipment lease financing			5,603				5,747				5,262				5,318				5,368				5,484				5,390
Total loans			62,604				63,146				64,173				66,371				66,975				64,061				72,127
Goodwill and other intangible assets			3,449				3,553				3,660				3,795				3,736				3,613				3,583
Loans held for sale			1,644				1,427				1,408				1,410				1,534				1,473				1,679
Other assets			8,890				8,726				7,711				7,940				7,395				8,320				7,300
Total assets		$	76,587			$	76,852			$	76,952			$	79,516			$	79,640			$	77,467			$	84,689
Deposits
Noninterest-bearing demand		$	27,544			$	25,259			$	23,715			$	22,271			$	23,484			$	24,713			$	19,948
Money market			11,880				12,105				12,380				12,253				10,573				12,153				9,697
Other			6,632				6,833				6,856				7,610				8,728				6,980				7,911
Total deposits			46,056				44,197				42,951				42,134				42,785				43,846				37,556
Other liabilities			13,155				12,937				10,797				10,870				8,408				11,949				9,118
Capital			7,613				7,237				7,913				7,633				7,916				7,598				7,837
Total liabilities and equity		$	66,824			$	64,371			$	61,661			$	60,637			$	59,109			$	63,393			$	54,511
PERFORMANCE RATIOS
Return on average capital			28	%			23	%			22	%			19	%			21	%			23	%			15	%
Return on average assets			2.80				2.20				2.31				1.84				2.07				2.28				1.41
Noninterest income to total revenue			33				22				24				30				27				28				27
Efficiency			37				42				35				36				32				37				34
COMMERCIAL MORTGAGE
SERVICING PORTFOLIO (in billions)
Beginning of period		$	263			$	265			$	282			$	287			$	275			$	287			$	270
Acquisitions/additions			12				8				7				8				19				35				50
Repayments/transfers			(9	)			(10	)			(24	)			(13	)			(7	)			(56	)			(33	)
End of period		$	266			$	263			$	265			$	282			$	287			$	266			$	287
OTHER INFORMATION
Consolidated revenue from: (b)
Treasury Management		$	306			$	319			$	302			$	298			$	296			$	1,225			$	1,137
Capital Markets		$	207			$	119			$	128			$	164			$	187			$	618			$	533
Commercial mortgage loans held for sale (c)		$	9			$	24			($	2	)		$	27			$	67			$	58			$	205
Commercial mortgage loan servicing (d)			107				(40	)			49				88				66				204				280
Total commercial mortgage banking activities		$	116			$	(16	)		$	47			$	115			$	133			$	262			$	485
Total loans (e)		$	63,609			$	62,388			$	63,910			$	65,076			$	66,206
Credit-related statistics:
Nonperforming assets (e)		$	2,594			$	3,064			$	3,103			$	3,343			$	3,167
Impaired loans (e) (f)		$	714			$	890			$	923			$	1,033			$	1,075
Net charge-offs		$	349			$	211			$	243			$	271			$	341			$	1,074			$	1,052
Net carrying amount of commercial mortgage servicing rights (e)		$	665			$	616			$	722			$	921			$	921

 

(a)	See note (a) on page 13.

(b)	Represents consolidated PNC amounts.

(c)	Includes valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, origination fees, gains on sale of loans held for sale and net interest income on loans held for sale.

(d)	Includes net interest income and noninterest income from loan servicing and ancillary services, and commercial MSR valuations.

(e)	Presented as of period end.

(f)	Recorded investment of purchased impaired loans related to acquisitions.

(g)	Reflects the impact of consolidating Market Street Funding LLC in our financial statements effective January 1, 2010 which for the year ended December 31, 2010 included $1.5 billion of loans, net of eliminations, and $2.6 billion of commercial paper borrowings included in Other Liabilities.

 

Page 16

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THE PNC FINANCIAL SERVICES GROUP, INC.

Asset Management Group (Unaudited) (a)

 

		Three months ended																				Year ended
Dollars in millions, except as noted		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
INCOME STATEMENT
Net interest income		$	66			$	67			$	65			$	65			$	67			$	263			$	308
Noninterest income			159				150				154				164				151				627				611
Total revenue			225				217				219				229				218				890				919
Provision for (recoveries of) credit losses			9				(12	)			14				9				25				20				97
Noninterest expense			170				160				160				157				155				647				654
Pretax earnings			46				69				45				63				38				223				168
Income taxes			17				25				17				23				15				82				63
Earnings		$	29			$	44			$	28			$	40			$	23			$	141			$	105
AVERAGE BALANCE SHEET
Loans
Consumer		$	4,084			$	4,021			$	4,004			$	3,994			$	4,044			$	4,026			$	3,957
Commercial and commercial real estate			1,499				1,520				1,491				1,496				1,511				1,501				1,639
Residential mortgage			723				802				915				964				1,000				850				1,078
Total loans			6,306				6,343				6,410				6,454				6,555				6,377				6,674
Goodwill and other intangible assets			384				394				403				415				416				399				407
Other assets			271				235				248				227				209				246				239
Total assets		$	6,961			$	6,972			$	7,061			$	7,096			$	7,180			$	7,022			$	7,320
Deposits
Noninterest-bearing demand		$	1,432			$	1,364			$	1,268			$	1,229			$	1,127			$	1,324			$	1,091
Interest-bearing demand			2,033				1,869				1,735				1,699				1,674				1,835				1,582
Money market			3,393				3,258				3,261				3,217				3,134				3,283				3,208
Total transaction deposits			6,858				6,491				6,264				6,145				5,935				6,442				5,881
Certificates of deposit and other			694				715				769				818				918				748				1,076
Total deposits			7,552				7,206				7,033				6,963				6,853				7,190				6,957
Other liabilities			74				80				92				111				114				89				104
Capital			502				512				567				553				531				534				569
Total liabilities and equity		$	8,128			$	7,798			$	7,692			$	7,627			$	7,498			$	7,813			$	7,630
PERFORMANCE RATIOS
Return on average capital			23	%			34	%			20	%			29	%			17	%			26	%			18	%
Return on average assets			1.65				2.50				1.59				2.29				1.27				2.01				1.43
Noninterest income to total revenue			71				69				70				72				69				70				66
Efficiency			76				74				73				69				71				73				71
OTHER INFORMATION
Total nonperforming assets (b)		$	90			$	102			$	114			$	139			$	155
Impaired loans (b) (c)		$	146			$	155			$	182			$	191			$	198
Total net charge-offs		$	21			$	1			$	16			$	4			$	22			$	42			$	63
ASSETS UNDER ADMINISTRATION (in billions) (b) (d)
Personal		$	99			$	95			$	92			$	96			$	94
Institutional			113				111				107				113				111
Total		$	212			$	206			$	199			$	209			$	205
Asset Type
Equity		$	115			$	107			$	98			$	104			$	100
Fixed income			63				66				64				59				58
Liquidity/Other			34				33				37				46				47
Total		$	212			$	206			$	199			$	209			$	205
Discretionary assets under management
Personal		$	69			$	67			$	65			$	69			$	67
Institutional			39				38				34				36				36
Total		$	108			$	105			$	99			$	105			$	103
Asset Type
Equity		$	55			$	51			$	46			$	51			$	49
Fixed income			36				38				36				35				34
Liquidity/Other			17				16				17				19				20
Total		$	108			$	105			$	99			$	105			$	103
Nondiscretionary assets under administration
Personal		$	30			$	28			$	27			$	27			$	27
Institutional			74				73				73				77				75
Total		$	104			$	101			$	100			$	104			$	102
Asset Type
Equity		$	60			$	56			$	52			$	53			$	51
Fixed income			27				28				28				24				24
Liquidity/Other			17				17				20				27				27
Total		$	104			$	101			$	100			$	104			$	102

 

(a)	See note (a) on page 13.

(b)	As of period end.

(c)	Recorded investment of purchased impaired loans related to acquisitions.

(d)	Excludes brokerage account assets.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Residential Mortgage Banking (Unaudited) (a)

 

		Three months ended																				Year ended
Dollars in millions, except as noted		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
INCOME STATEMENT
Net interest income		$	61			$	53			$	73			$	80			$	71			$	267			$	332
Noninterest income
Loan servicing revenue
Servicing fees			46				61				66				69				51				242				222
Net MSR hedging gains			47				86				66				46				35				245				355
Loan sales revenue			66				77				49				39				26				231				435
Other			9				8				1								(7	)			18				(16	)
Total noninterest income			168				232				182				154				105				736				996
Total revenue			229				285				255				234				176				1,003				1,328
Provision for (recoveries of) credit losses			8				21				(8	)			(16	)			(7	)			5				(4	)
Noninterest expense			216				119				109				121				142				565				632
Pretax earnings			5				145				154				129				41				433				700
Income taxes			2				47				62				47				16				158				265
Earnings		$	3			$	98			$	92			$	82			$	25			$	275			$	435
AVERAGE BALANCE SHEET
Portfolio loans		$	2,667			$	2,572			$	2,540			$	2,820			$	2,479			$	2,649			$	1,957
Loans held for sale			1,731				1,427				1,148				974				1,333				1,322				2,204
Mortgage servicing rights (MSR)			863				863				1,084				1,264				1,236				1,017				1,297
Other assets			5,008				4,302				3,914				3,797				3,761				4,259				2,962
Total assets		$	10,269			$	9,164			$	8,686			$	8,855			$	8,809			$	9,247			$	8,420
Deposits		$	2,089			$	2,108			$	3,088			$	3,602			$	3,628			$	2,716			$	4,135
Borrowings and other liabilities			3,444				2,740				2,817				2,279				3,110				2,823				2,924
Capital			842				880				1,309				1,781				1,471				1,200				1,359
Total liabilities and equity		$	6,375			$	5,728			$	7,214			$	7,662			$	8,209			$	6,739			$	8,418
PERFORMANCE RATIOS
Return on average capital			1	%			44	%			28	%			19	%			7	%			23	%			32	%
Return on average assets			.12				4.24				4.25				3.76				1.13				2.97				5.17
Noninterest income to total revenue			73				81				71				66				60				73				75
Efficiency			94				42				43				52				81				56				48
OTHER INFORMATION
Servicing portfolio for others (in billions) (b)		$	125			$	131			$	137			$	141			$	145
Fixed rate			89	%			89	%			89	%			89	%			88	%
Adjustable rate/balloon			11	%			11	%			11	%			11	%			12	%
Weighted average interest rate			5.62	%			5.69	%			5.74	%			5.79	%			5.82	%
MSR capitalized value (in billions)		$	1.0			$	.8			$	1.0			$	1.3			$	1.3
MSR capitalization value (in basis points)			82				60				71				90				91
Weighted average servicing fee (in basis points)			30				30				30				30				30
Loan origination volume (in billions)		$	3.5			$	2.7			$	2.3			$	2.0			$	2.3			$	10.5			$	19.1
Percentage of originations represented by:
Agency and government programs			99	%			99	%			99	%			98	%			96	%			99	%			97	%
Refinance volume			83	%			76	%			58	%			73	%			59	%			74	%			72	%
Total nonperforming assets (b)		$	349			$	327			$	326			$	418			$	370
Impaired loans (b) (c)		$	161			$	173			$	168			$	298			$	369

 

(a)	See note (a) on page 13.

(b)	As of period end.

(c)	Recorded investment of purchased impaired loans related to acquisitions.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Distressed Assets Portfolio (Unaudited) (a)

 

		Three months ended																				Year ended
Dollars in millions, except as noted		December 31 2010				September 30 2010				June 30 2010				March 31 2010				December 31 2009				December 31 2010				December 31 2009
INCOME STATEMENT
Net interest income		$	253			$	279			$	347			$	338			$	218			$	1,217			$	1,079
Noninterest income			(55	)			(35	)			(1	)			(1	)			3				(92	)			74
Total revenue			198				244				346				337				221				1,125				1,153
Provision for credit losses			231				176				404				165				314				976				771
Noninterest expense			81				46				65				58				49				250				246
Pretax earnings (loss)			(114	)			22				(123	)			114				(142	)			(101	)			136
Income taxes (benefit)			(42	)			5				(42	)			42				(54	)			(37	)			52
Earnings (loss)		$	(72	)		$	17			$	(81	)		$	72			$	(88	)		$	(64	)		$	84
AVERAGE BALANCE SHEET
Commercial lending:
Commercial/Commercial real estate		$	1,840			$	2,088			$	2,442			$	2,599			$	2,812			$	2,240			$	3,384
Equipment lease financing			759				753				807				803				800				781				818
Total commercial lending			2,599				2,841				3,249				3,402				3,612				3,021				4,202
Consumer lending:
Consumer			5,903				6,144				6,350				6,573				6,698				6,240				7,101
Residential real estate			6,845				7,205				8,120				8,190				8,574				7,585				9,813
Total consumer lending			12,748				13,349				14,470				14,763				15,272				13,825				16,914
Total loans			15,347				16,190				17,719				18,165				18,884				16,846				21,116
Other assets			15				555				797				1,342				1,633				671				1,728
Total assets		$	15,362			$	16,745			$	18,516			$	19,507			$	20,517			$	17,517			$	22,844
Deposits						$	2			$	180			$	85			$	29			$	64			$	39
Other liabilities		$	109				102				77				55				70				90				92
Capital			1,231				1,187				1,514				1,353				1,568				1,321				1,574
Total liabilities and equity		$	1,340			$	1,291			$	1,771			$	1,493			$	1,667			$	1,475			$	1,705
PERFORMANCE RATIOS
Return on average capital			(23	)%			6	%			(21	)%			22	%			(22	)%			(5	)%			5	%
Return on average assets			(1.86	)			.40				(1.75	)			1.50				(1.70	)			(.37	)			.37
OTHER INFORMATION
Nonperforming assets (b)		$	1,243			$	1,218			$	1,436			$	1,777			$	1,787
Impaired loans (b) (c)		$	5,879			$	6,001			$	6,867			$	7,124			$	7,577
Net charge-offs		$	183			$	107			$	276			$	111			$	121			$	677			$	544
Annualized net charge-off ratio			4.73	%			2.62	%			6.25	%			2.48	%			2.54	%			4.02	%			2.58	%
LOANS (in billions) (b)
Commercial lending:
Commercial / Commercial real estate		$	1,684			$	1,911			$	2,282			$	2,641			$	2,561
Equipment lease financing			764				757				757				806				805
Total commercial lending			2,448				2,668				3,039				3,447				3,366
Consumer lending:
Consumer			5,769				6,011				6,323				6,511				6,673
Residential real estate			6,564				7,014				7,911				8,105				8,467
Total consumer lending			12,333				13,025				14,234				14,616				15,140
Total loans		$	14,781			$	15,693			$	17,273			$	18,063			$	18,506

 

(a)	See note (a) on page 13.

(b)	As of period end.

(c)	Recorded investment of purchased impaired loans related to acquisitions.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

Glossary of Terms

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

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

Annualized - Adjusted to reflect a full year of activity.

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

Basis point - One hundredth of a percentage point.

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.

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.

Credit spread - The difference in yield between debt issues of similar maturity. The excess of yield attributable to credit spread is often used as a measure of relative creditworthiness, with a reduction in the credit spread reflecting an improvement in the borrower’s perceived creditworthiness.

Derivatives - Financial contracts whose value is derived from changes in publicly traded securities, interest rates, currency exchange rates or market indices. Derivatives cover a wide assortment of financial contracts, including but not limited to forward contracts, futures, options and swaps.

Duration of equity - An estimate of the rate sensitivity of our economic value of equity. A negative duration of equity is associated with asset sensitivity (i.e., positioned for rising interest rates), while a positive value implies liability sensitivity (i.e., positioned for declining interest rates). For example, if the duration of equity is +1.5 years, the economic value of equity declines by 1.5% for each 100 basis point increase in interest rates.

Earning assets - Assets that generate income, which include: Federal funds sold; resale agreements; trading securities; interest-earning deposits with banks; loans held for sale; loans; investment securities; and certain other assets.

Economic capital - Represents the amount of resources that a business segment should hold to guard against potentially large losses that could cause insolvency. It is based on a measurement of economic risk, as opposed to risk as defined by regulatory bodies. The economic capital measurement process involves converting a risk distribution to the capital that is required to support the risk, consistent with our target credit rating. As such, economic risk serves as a “common currency” of risk that allows us to compare different risks on a similar basis.

Effective duration - A measurement, expressed in years, that, when multiplied by a change in interest rates, would approximate the percentage change in value of on- and off- balance sheet positions.

Efficiency - Noninterest expense divided by total revenue.

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

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.

Funds transfer pricing - A management accounting methodology designed to recognize the net interest income effects of sources and uses of funds provided by the assets and liabilities of a business segment. We assign these balances LIBOR-based funding rates at origination that represent the interest cost for us to raise/invest funds with similar maturity and repricing structures.

Futures and forward contracts - Contracts in which the buyer agrees to purchase and the seller agrees to deliver a specific financial instrument at a predetermined price or yield. May be settled either in cash or by delivery of the underlying financial instrument.

GAAP - Accounting principles generally accepted in the United States of America.

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

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

LIBOR - Acronym for London InterBank Offered Rate. LIBOR is the average interest rate charged when banks in the London wholesale money market (or interbank market) borrow unsecured funds from each other. LIBOR rates are used as a benchmark for interest rates on a global basis.

Net interest income from loans and deposits - A management accounting assessment, using funds transfer pricing methodology, of the net interest contribution from loans and deposits.

Net interest margin - Annualized taxable-equivalent net interest income divided by average earning assets.

Nonaccretable difference - Contractually required payments receivable on a purchased impaired loan in excess of the cash flows expected to be collected.

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

Nonperforming assets - Nonperforming assets include nonaccrual loans, certain troubled debt restructured loans, foreclosed assets and other assets. We do not accrue interest income on assets classified as nonperforming.

Nonperforming loans - Loans for which we do not accrue interest income. Nonperforming loans include loans to commercial, commercial real estate, equipment lease financing, consumer, and residential mortgage customers and construction customers as well as troubled debt restructured loans. Nonperforming loans do not include loans held for sale or foreclosed and other assets. Nonperforming loans do not include purchased impaired loans as we are currently accreting interest income over the expected life of the loans.

Notional amount - A number of currency units, shares, or other units specified in a derivative contract.

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).

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

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.

Pretax, pre-provision earnings from continuing operations - Total revenue less noninterest expense, both from continuing operations.

Provision-adjusted net interest margin - Net interest margin less the ratio of the annualized provision for credit losses to average interest-earning assets.

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.

Purchased impaired loans - Acquired loans determined to be credit impaired under FASB ASC 310-30 (AICPA SOP 03-3). Loans are determined to be impaired if there is evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected.

Recorded investment - The initial investment of a purchased impaired loan plus interest accretion and less any cash payments and writedowns to date. The recorded investment excludes any valuation allowance which is included in our allowance for loan and lease losses.

Recovery - Cash proceeds received on a loan that we had previously charged off. We credit the amount received to the allowance for loan and lease losses.

Residential development loans - Project-specific loans to commercial customers for the construction or development of residential real estate including land, single family homes, condominiums and other residential properties. This would exclude loans to commercial customers where proceeds are for general corporate purposes whether or not such facilities are secured.

Residential mortgage servicing rights hedge gains / (losses), net - We have elected to measure acquired or originated residential mortgage servicing rights (MSRs) at fair value under GAAP. We employ a risk management strategy designed to protect the economic value of MSRs from changes in interest rates. This strategy utilizes securities and a portfolio of derivative instruments to hedge changes in the fair value of MSRs arising from changes in interest rates. These financial instruments are expected to have changes in fair value which are negatively correlated to the change in fair value of the MSR portfolio. Net MSR hedge gains/ (losses) represent the change in the fair value of MSRs, exclusive of changes due to time decay and payoffs, combined with the change in the fair value of the associated securities and derivative instruments.

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

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

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

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

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

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

 

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THE PNC FINANCIAL SERVICES GROUP, INC.

 

Taxable-equivalent interest - The interest income earned on certain assets is completely or partially exempt from Federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all interest-earning assets, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margins by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on other taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.

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

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

Tier 1 risk-based capital - Total shareholders’ equity, plus trust preferred capital securities, plus certain noncontrolling interests that are held by others; less goodwill and certain other intangible assets (net of eligible deferred taxes relating to taxable and nontaxable combinations), less equity investments in nonfinancial companies less ineligible servicing assets and less net unrealized holding losses on available for sale equity securities. Net unrealized holding gains on available for sale equity securities, net unrealized holding gains (losses) on available for sale debt securities and net unrealized holding gains (losses) on cash flow hedge derivatives are excluded from total shareholders’ equity for Tier 1 risk-based capital purposes.

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

Total equity - Total shareholders’ equity plus noncontrolling interests.

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

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

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

Troubled debt restructuring - A restructuring of a loan whereby the lender for economic or legal reasons related to the borrower’s financial difficulties grants a concession to the borrower that the lender would not otherwise consider.

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.

 

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