Change in Allowance for Loan and Lease Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended - in millions
|
|
December 31
2007
|
|
|
September 30
2007
|
|
|
June 30
2007
|
|
|
March 31
2007
|
|
|
December 31
2006
|
|
|
Beginning balance
|
|
$
|
717
|
|
|
$
|
703
|
|
|
$
|
690
|
|
|
$
|
560
|
|
|
$
|
566
|
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
(60
|
)
|
|
|
(38
|
)
|
|
|
(27
|
)
|
|
|
(31
|
)
|
|
|
(23
|
)
|
|
Commercial real estate
|
|
|
(12
|
)
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
Equipment lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
Consumer
|
|
|
(24
|
)
|
|
|
(17
|
)
|
|
|
(15
|
)
|
|
|
(17
|
)
|
|
|
(15
|
)
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs
|
|
|
(96
|
)
|
|
|
(58
|
)
|
|
|
(43
|
)
|
|
|
(48
|
)
|
|
|
(54
|
)
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
10
|
|
|
|
5
|
|
|
|
8
|
|
|
|
7
|
|
|
|
3
|
|
|
Commercial real estate
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
Equipment lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
Consumer
|
|
|
3
|
|
|
|
4
|
|
|
|
2
|
|
|
|
5
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
13
|
|
|
|
9
|
|
|
|
11
|
|
|
|
12
|
|
|
|
9
|
|
|
Net charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
(50
|
)
|
|
|
(33
|
)
|
|
|
(19
|
)
|
|
|
(24
|
)
|
|
|
(20
|
)
|
|
Commercial real estate
|
|
|
(12
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment lease financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
Consumer
|
|
|
(21
|
)
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
(12
|
)
|
|
|
(11
|
)
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs
|
|
|
(83
|
)
|
|
|
(49
|
)
|
|
|
(32
|
)
|
|
|
(36
|
)
|
|
|
(45
|
)
|
|
Provision for credit losses
|
|
|
188
|
|
|
|
65
|
|
|
|
54
|
|
|
|
8
|
|
|
|
42
|
|
|
Acquired allowance (a)
|
|
|
15
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
142
|
|
|
|
|
|
|
Net change in allowance for unfunded loan commitments and letters of credit
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
16
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
830
|
|
|
$
|
717
|
|
|
$
|
703
|
|
|
$
|
690
|
|
|
$
|
560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amount for the fourth quarter of 2007 related to Yardville and amounts for the first and second
quarters of 2007 related to Mercantile.
|
|
|
|
|
|
|
|
|
|
Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lending net charge-offs (b)
|
|
$
|
(62
|
)
|
|
$
|
(36
|
)
|
|
$
|
(19
|
)
|
|
$
|
(24
|
)
|
|
$
|
(33
|
)
|
|
Consumer lending net charge-offs (c)
|
|
|
(21
|
)
|
|
|
(13
|
)
|
|
|
(13
|
)
|
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs
|
|
$
|
(83
|
)
|
|
$
|
(49
|
)
|
|
$
|
(32
|
)
|
|
$
|
(36
|
)
|
|
$
|
(45
|
)
|
|
Net charge-offs to average loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lending
|
|
|
.63
|
%
|
|
|
.38
|
%
|
|
|
.21
|
%
|
|
|
.33
|
%
|
|
|
.49
|
%
|
|
Consumer lending
|
|
|
.30
|
|
|
|
.19
|
|
|
|
.20
|
|
|
|
.20
|
|
|
|
.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Includes commercial, commercial real estate and equipment lease financing.
|
|
(c)
|
Includes consumer and residential mortgage.
|
Change in Allowance for
Unfunded Loan Commitments and Letters of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended - in millions
|
|
December 31
2007
|
|
September 30
2007
|
|
June 30
2007
|
|
March 31
2007
|
|
|
December 31
2006
|
|
Beginning balance
|
|
$
|
127
|
|
$
|
125
|
|
$
|
121
|
|
$
|
120
|
|
|
$
|
117
|
|
Acquired allowance - Mercantile
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
Net change in allowance for unfunded loan commitments and letters of credit
|
|
|
7
|
|
|
2
|
|
|
4
|
|
|
(16
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
134
|
|
$
|
127
|
|
$
|
125
|
|
$
|
121
|
|
|
$
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
December 31
2007
|
|
September 30
2007
|
|
June 30
2007
|
|
March 31
2007
|
|
|
December 31
2006
|
|
Net Unfunded Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unfunded commitments
|
|
$
|
53,365
|
|
$
|
52,590
|
|
$
|
50,678
|
|
$
|
49,263
|
|
|
$
|
44,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page 16
THE PNC FINANCIAL SERVICES GROUP, INC.
Details of Nonperforming Assets
(Unaudited)
Nonperforming Assets by Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended - in millions
|
|
December 31
2007
|
|
|
September 30
2007
|
|
|
June 30
2007
|
|
|
March 31
2007
|
|
|
December 31
2006
|
|
|
Nonaccrual loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
193
|
|
|
$
|
144
|
|
|
$
|
126
|
|
|
$
|
121
|
|
|
$
|
109
|
|
|
Commercial real estate
|
|
|
212
|
|
|
|
75
|
|
|
|
62
|
|
|
|
25
|
|
|
|
12
|
|
|
Consumer
|
|
|
17
|
|
|
|
15
|
|
|
|
14
|
|
|
|
14
|
|
|
|
13
|
|
|
Residential mortgage
|
|
|
10
|
|
|
|
10
|
|
|
|
14
|
|
|
|
16
|
|
|
|
12
|
|
|
Equipment lease financing
|
|
|
3
|
|
|
|
3
|
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
435
|
|
|
|
247
|
|
|
|
218
|
|
|
|
178
|
|
|
|
147
|
|
|
Restructured loans
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
437
|
|
|
|
247
|
|
|
|
218
|
|
|
|
178
|
|
|
|
147
|
|
|
Foreclosed and other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
16
|
|
|
|
16
|
|
|
|
12
|
|
|
|
11
|
|
|
|
10
|
|
|
Equipment lease financing
|
|
|
11
|
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
|
12
|
|
|
Other
|
|
|
14
|
|
|
|
11
|
|
|
|
4
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed and other assets
|
|
|
41
|
|
|
|
39
|
|
|
|
28
|
|
|
|
26
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets (a) (b)
|
|
$
|
478
|
|
|
$
|
286
|
|
|
$
|
246
|
|
|
$
|
204
|
|
|
$
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans
|
|
|
.64
|
%
|
|
|
.38
|
%
|
|
|
.34
|
%
|
|
|
.28
|
%
|
|
|
.29
|
%
|
|
Nonperforming assets to total loans and foreclosed assets
|
|
|
.70
|
|
|
|
.43
|
|
|
|
.38
|
|
|
|
.32
|
|
|
|
.34
|
|
|
Nonperforming assets to total assets
|
|
|
.34
|
|
|
|
.22
|
|
|
|
.20
|
|
|
|
.17
|
|
|
|
.17
|
|
|
Net charge-offs to average loans (For the three months ended)
|
|
|
.49
|
|
|
|
.30
|
|
|
|
.20
|
|
|
|
.27
|
|
|
|
.36
|
|
|
Allowance for loan and lease losses to loans
|
|
|
1.21
|
|
|
|
1.09
|
|
|
|
1.09
|
|
|
|
1.10
|
|
|
|
1.12
|
|
|
Allowance for loan and lease losses to nonperforming loans
|
|
|
190
|
|
|
|
290
|
|
|
|
322
|
|
|
|
388
|
|
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Excludes equity management assets carried at estimated fair value (amounts include troubled debt restructured
assets of $4 million at September 30, 2007, June 30, 2007, March 31, 2007 and December 31, 2006):
|
|
$
|
4
|
|
|
$
|
12
|
|
|
$
|
13
|
|
|
$
|
15
|
|
|
$
|
11
|
|
|
(b) Excludes loans held for sale carried at lower of cost or market value, related to the Mercantile and Yardville
acquisitions:
|
|
$
|
25
|
|
|
$
|
7
|
|
|
$
|
17
|
|
|
$
|
18
|
|
|
|
|
|
Change in Nonperforming Assets
|
|
|
|
|
|
|
In millions
|
|
Year ended
|
|
|
January 1, 2007
|
|
$
|
171
|
|
|
Transferred in
|
|
|
649
|
|
|
Acquired - Mercantile and Yardville
|
|
|
37
|
|
|
Asset sales
|
|
|
(10
|
)
|
|
Returned to performing
|
|
|
(23
|
)
|
|
Charge-offs and valuation adjustments
|
|
|
(167
|
)
|
|
Principal activity including payoffs
|
|
|
(179
|
)
|
|
|
|
|
|
|
|
December 31, 2007
|
|
$
|
478
|
|
|
|
|
|
|
|
Page 17
THE PNC FINANCIAL SERVICES GROUP, INC.
Details of Nonperforming Assets
(Unaudited) (Continued)
Nonperforming Assets by Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period ended - in millions
|
|
December 31
2007
|
|
September 30
2007
|
|
June 30
2007
|
|
March 31
2007
|
|
December 31
2006
|
|
Retail Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
$
|
215
|
|
$
|
127
|
|
$
|
130
|
|
$
|
114
|
|
$
|
96
|
|
Foreclosed and other assets
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|
9
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
225
|
|
$
|
137
|
|
$
|
140
|
|
$
|
123
|
|
$
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & Institutional Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
$
|
222
|
|
$
|
119
|
|
$
|
87
|
|
$
|
64
|
|
$
|
50
|
|
Foreclosed and other assets
|
|
|
21
|
|
|
22
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
243
|
|
$
|
141
|
|
$
|
100
|
|
$
|
77
|
|
$
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
|
|
|
$
|
1
|
|
$
|
1
|
|
|
|
|
$
|
1
|
|
Foreclosed and other assets
|
|
$
|
10
|
|
|
7
|
|
|
5
|
|
$
|
4
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10
|
|
$
|
8
|
|
$
|
6
|
|
$
|
4
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans
|
|
$
|
437
|
|
$
|
247
|
|
$
|
218
|
|
$
|
178
|
|
$
|
147
|
|
Foreclosed and other assets
|
|
|
41
|
|
|
39
|
|
|
28
|
|
|
26
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (b)
|
|
$
|
478
|
|
$
|
286
|
|
$
|
246
|
|
$
|
204
|
|
$
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Amounts include residential mortgages related to PNC’s Asset & Liability management function.
|
Largest Individual Nonperforming Assets at December 31, 2007 - in millions
(b)
|
|
|
|
|
|
|
|
|
Ranking
|
|
Outstandings
|
|
|
Industry
|
|
1
|
|
$
|
20
|
|
|
Specialty Trade Contractors
|
|
2
|
|
|
14
|
|
|
Credit Intermediation And Related Activities
|
|
3
|
|
|
13
|
|
|
Heavy And Civil Engineering Construction
|
|
4
|
|
|
13
|
|
|
Heavy And Civil Engineering Construction
|
|
5
|
|
|
13
|
|
|
Construction Of Buildings
|
|
6
|
|
|
12
|
|
|
Construction Of Buildings
|
|
7
|
|
|
12
|
|
|
Specialty Trade Contractors
|
|
8
|
|
|
12
|
|
|
Construction Of Buildings
|
|
9
|
|
|
11
|
|
|
Air Transportation
|
|
10
|
|
|
10
|
|
|
Heavy And Civil Engineering Construction
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percent of total nonperforming assets
|
|
|
|
|
27
|
%
|
|
|
|
(b)
|
Amounts shown are not net of related allowance for loan and lease losses, if applicable.
|
Page 18
Glossary of Terms
Accounting/administration net fund assets
—Net domestic and foreign fund investment assets for which we provide accounting and administration services. We do not include these assets on our Consolidated Balance Sheet.
Adjusted average total assets
—Primarily comprised of total average quarterly (or annual) assets plus (less) unrealized losses (gains) on
available-for-sale debt 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.
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 to held for sale by reducing the carrying amount by the allowance for loan losses associated with such loan or if the market value is less than its 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.
Custody assets
—Investment assets held on behalf of clients under safekeeping arrangements. We do not include these assets on our Consolidated Balance Sheet.
Investment assets held in custody at other institutions on our behalf are included in the appropriate asset categories on the Consolidated Balance Sheet as if physically held by us.
Derivatives
—Financial contracts whose value is derived from publicly traded securities, interest rates, currency exchange rates or market indices. Derivatives cover a wide assortment of financial
contracts, including 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; other short-term investments, including trading securities; loans held for sale; loans, net of unearned income; 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.
Page 19
Glossary of Terms (continued)
Efficiency
—Noninterest expense divided by the sum of net interest income (GAAP basis) and noninterest income.
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.
Leverage ratio
—Tier 1 risk-based capital divided by adjusted average total assets.
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.
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.
Noninterest income to total revenue
—Noninterest income divided by the sum of net interest income
(GAAP basis) and noninterest income.
Nonperforming assets
—Nonperforming assets include nonaccrual loans, troubled debt restructured loans,
foreclosed assets and other assets. We do not accrue interest income on assets classified as nonperforming.
Nonperforming loans
—Nonperforming
loans include loans to commercial, commercial real estate, equipment lease financing, consumer, and residential mortgage customers as well as troubled debt restructured loans. Nonperforming loans do not include loans held for sale or foreclosed and
other assets. We do not accrue interest income on loans classified as nonperforming.
Notional amount
— A number of currency units, shares, or
other units specified in a derivatives contract.
Operating leverage
—The period to period percentage change in total revenue (GAAP basis) less
the percentage change in noninterest expense. A positive percentage indicates that revenue growth exceeded expense growth (
i.e.,
positive operating leverage) while a negative percentage implies expense growth exceeded revenue growth
(
i.e.,
negative operating leverage).
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.
Return on average capital
—Annualized net income divided by average capital.
Return on average assets
—Annualized net income divided by average assets.
Return on average common equity
—Annualized net income divided by average common shareholders’ equity.
Risk-weighted assets
—Primarily 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.
Page 20
Glossary of Terms (continued)
Tangible common equity ratio
—Period-end common shareholders’ equity less goodwill and other intangible assets (net of eligible deferred taxes), and excluding loan servicing rights, divided by
period-end assets less goodwill and other intangible assets (net of eligible deferred taxes), and excluding loan servicing rights.
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 also provide revenue 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 other
taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.
Tier 1 risk-based capital
—Tier 1
risk-based capital equals: total shareholders’ equity, plus trust preferred capital securities, plus certain minority interests that are held by others; less goodwill and certain other intangible assets (net of eligible deferred taxes), less
equity investments in nonfinancial companies 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 fund assets serviced
—Total domestic and offshore fund investment assets for which we provide related processing services. We do not include these
assets on our Consolidated Balance Sheet.
Total return swap
—A non-traditional swap where one party agrees to pay the other the “total
return” of a defined underlying asset (
e.g
., a loan), usually in return for receiving a stream of LIBOR-based cash flows. The total returns of the asset, including interest and any default shortfall, are passed through to the
counterparty. The counterparty is therefore assuming the credit and economic risk of the underlying asset.
Total risk-based capital
—Tier 1
risk-based capital plus qualifying subordinated debt and trust preferred securities, other minority interest not qualified as Tier 1, 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 money market and interest-bearing demand deposits and demand and other noninterest-bearing deposits.
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.
Page 21
Business Segment Products and Services
Retail Banking
provides deposit, lending, brokerage, trust, investment management, and cash management services to approximately 2.9 million consumer and small business customers within our primary
geographic markets. Our customers are serviced through over 1,100 offices in our branch network, the call center located in Pittsburgh, and the Internet –
www.pncbank.com
. The branch network is located primarily in Pennsylvania, New
Jersey, Washington, D.C., Maryland, Virginia, Ohio, Kentucky and Delaware. Brokerage services are provided through PNC Investments, LLC, and J.J.B. Hilliard, W.L. Lyons, Inc. (“Hilliard Lyons”). On November 15, 2007, PNC entered into
a definitive agreement to sell Hilliard Lyons to Houchens Industries, Inc. The transaction is expected to result in an after-tax gain of approximately $50 million and be completed in the first half of 2008 subject to regulatory and certain other
required approvals.
Retail Banking also serves as investment manager and trustee for employee benefit plans and charitable and endowment assets and
provides nondiscretionary defined contribution plan services. These services are provided to individuals and corporations primarily within our primary geographic markets.
Corporate & Institutional Banking
provides lending, treasury management, and capital markets-related products and services to mid-sized corporations, government 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,
securities underwriting, and securities sales and trading. Corporate & Institutional Banking also provides commercial loan servicing, 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 provided nationally.
BlackRock
is one of the world’s largest publicly traded investment management firms. The firm
manages assets on behalf of institutions and individuals worldwide through a variety of equity, fixed income, cash management and alternative investment products. In addition, BlackRock provides BlackRock Solutions
®
investment system, risk management, and financial advisory services to a growing number of institutional investors. The firm has a major presence in key global markets, including the United States, Europe, Asia,
Australia and the Middle East. At December 31, 2007, PNC’s ownership interest in BlackRock was approximately 33.5%.
PFPC
is a
leading full service provider of processing, technology and business solutions for the global investment industry. Securities services include custody, securities lending, and accounting and administration for funds registered under the 1940 Act and
alternative investments. Investor services include transfer agency, managed accounts, subaccounting, and distribution.
On December 7, 2007, PFPC
acquired Lawrenceville, New Jersey-based Albridge Solutions Inc., a provider of portfolio accounting and enterprise wealth management services. Also on December 7, 2007, PFPC acquired Coates Analytics, LP, a provider of Web-based analytics
tools that help asset managers identify wholesaler territories and financial advisor targets, promote products in the marketplace and strengthen competitive intelligence.
PFPC serviced $2.5 trillion in total assets and 72 million shareholder accounts as of December 31, 2007 both domestically and internationally through its Ireland and Luxembourg operations.
Page 22
Appendix to Financial Supplement
The PNC Financial Services Group, Inc.
Adjusted Condensed Consolidated Income Statement Reconciliations
(Unaudited) (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2007
|
|
PNC
|
|
|
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (b)
|
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
2,915
|
|
|
|
|
|
$
|
2,915
|
|
Provision for credit losses
|
|
|
315
|
|
$
|
(45
|
)
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
2,600
|
|
|
45
|
|
|
|
2,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
784
|
|
|
4
|
|
|
|
788
|
|
Other
|
|
|
3,006
|
|
|
127
|
|
|
|
3,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
3,790
|
|
|
131
|
|
|
|
3,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
2,140
|
|
|
(37
|
)
|
|
|
2,103
|
|
Other
|
|
|
2,156
|
|
|
(147
|
)
|
|
|
2,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
4,296
|
|
|
(184
|
)
|
|
|
4,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,094
|
|
|
360
|
|
|
|
2,454
|
|
Income taxes
|
|
|
627
|
|
|
125
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,467
|
|
$
|
235
|
|
|
$
|
1,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
These adjusted condensed consolidated income statement reconciliations are provided for informational purposes only and reflect historical condensed consolidated financial
information of PNC (1) with amounts adjusted for the impact of certain specified items and (2) as if we had recorded our investment in BlackRock on the equity method for all periods presented, in each case, as appropriate, adjusted for the
tax impact. These reconciliations are from the reported GAAP amounts shown on page 2 of the Financial Supplement to the corresponding adjusted amounts shown on page 3 of the Financial Supplement. We have provided these adjusted amounts and
reconciliations so that investors, analysts, regulators and others will be better able to evaluate the impact of these items on our results for these periods, in addition to providing a basis of comparability for the impact of the BlackRock
deconsolidation given the magnitude of the impact of the deconsolidation on various components of our income statement. We believe that information as adjusted for the impact of the specified items may be useful due to the extent to which these
items are not indicative of our ongoing operations as the result of our management activities. Integration costs can vary significantly from period to period depending on whether or not we have any such transaction pending or in process and
depending on the nature of the transaction. Our BlackRock LTIP shares obligation results from an agreement entered into in 2002 and predominantly reflects the market price of BlackRock stock at specified times. We have provided information adjusted
for the impact of the third quarter 2006 gain on the BlackRock/MLIM transaction due to the magnitude of that transaction, and have provided information adjusted for the impact of the third quarter 2006 securities portfolio rebalancing and mortgage
loan portfolio repositioning losses due to the nature of those transactions.
|
Our payment services business issues and
acquires credit and debit card transactions through Visa U.S.A. Inc. card association or its affiliates (“Visa”). In October 2007, Visa completed a restructuring and issued shares of Visa Inc. common stock to its financial institution
members in contemplation of its initial public offering (“IPO”) currently anticipated in the first quarter of 2008 (the “Visa Reorganization”). As part of the Visa Reorganization, we received our proportionate share of a class of
Visa Inc. common stock allocated to the U.S. members. Visa expects that a portion of these shares will be redeemed for cash out of the proceeds of the IPO. The U.S. members are obligated to indemnify Visa for judgments and settlements related to
specified litigation. Visa will set aside a portion of the proceeds from the IPO in an escrow account for the benefit of the U.S. member financial institutions to fund the expenses of the litigation as well as the members’ proportionate share
of any judgments or settlements that may arise out of the litigation. In accordance with GAAP, we recorded a liability and operating expense totaling $82 million before taxes in the fourth quarter of 2007 representing our estimate of the fair value
of our indemnification obligation for potential losses arising from this litigation. Our estimate is based on publicly available information and other information made available to all of the affected Visa members and does not reflect any direct
knowledge of the relative strengths and weaknesses of the litigation still pending or the status of any on-going settlement discussions. We believe that the IPO will be completed and cash will be available through the escrow to satisfy litigation
settlements. In addition, based on estimates provided by Visa regarding its planned IPO, we believe that our ownership interest in Visa has a value significantly in excess of our indemnification liability. Our Visa shares will not generally be
transferable until they can be converted into shares of the publicly traded class of stock, which cannot happen until the later of three years after the IPO or settlement of all of the specified litigation.
Adjusted information supplements our results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, our
GAAP results. Our 2006 Form 10-K includes additional information regarding our accounting for the BlackRock/MLIM transaction and the BlackRock LTIP shares obligation. Our 2007 Form 10-Qs provide additional information regarding integration costs.
The absence of other adjustments is not intended to imply that there could not have been other similar types of adjustments, but any such adjustments would not have been similar in magnitude to the amount of the adjustments shown.
|
(b)
|
Includes the impact of the following items on a pretax basis: $151 million of acquisition integration costs, $127 million net loss related to our BlackRock LTIP shares obligation,
and $82 million of Visa indemnification costs.
|
Page A1
Appendix to Financial Supplement (Continued)
The PNC Financial Services Group, Inc.
Adjusted Condensed Consolidated Income Statement Reconciliations
(Unaudited) (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock
|
|
|
|
|
|
|
For the year ended December 31, 2006
|
|
PNC
|
|
|
|
|
Deconsolidation and
|
|
|
BlackRock
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (b)
|
|
|
Other Adjustments
|
|
|
Equity Method (c)
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
2,245
|
|
|
|
|
|
$
|
(10
|
)
|
|
|
|
|
$
|
2,235
|
|
Provision for credit losses
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
2,121
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
2,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
1,420
|
|
$
|
10
|
|
|
|
(1,036
|
)
|
|
$
|
144
|
|
|
538
|
|
Other
|
|
|
4,907
|
|
|
(1,822
|
)
|
|
|
(51
|
)
|
|
|
|
|
|
3,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
6,327
|
|
|
(1,812
|
)
|
|
|
(1,087
|
)
|
|
|
144
|
|
|
3,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
2,432
|
|
|
(44
|
)
|
|
|
(523
|
)
|
|
|
|
|
|
1,865
|
|
Other
|
|
|
2,011
|
|
|
(47
|
)
|
|
|
(242
|
)
|
|
|
|
|
|
1,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
4,443
|
|
|
(91
|
)
|
|
|
(765
|
)
|
|
|
|
|
|
3,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and income taxes
|
|
|
4,005
|
|
|
(1,721
|
)
|
|
|
(332
|
)
|
|
|
144
|
|
|
2,096
|
|
Minority interest in income of BlackRock
|
|
|
47
|
|
|
18
|
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
Income taxes
|
|
|
1,363
|
|
|
(658
|
)
|
|
|
(130
|
)
|
|
|
7
|
|
|
582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,595
|
|
$
|
(1,081
|
)
|
|
$
|
(137
|
)
|
|
$
|
137
|
|
$
|
1,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See note (a) on page A1.
|
|
(b)
|
Includes the impact of the following items, all on a pretax basis: $2,078 million gain on BlackRock/MLIM transaction, $196 million securities portfolio rebalancing loss, $101
million of BlackRock/MLIM transaction integration costs, $48 million mortgage loan portfolio repositioning loss, and $12 million net loss related to our BlackRock LTIP shares obligation.
|
|
(c)
|
BlackRock investment revenue represents PNC’s ownership interest in earnings of BlackRock excluding pretax BlackRock/MLIM transaction integration costs totaling $101 million.
The income taxes amount represents additional income taxes recorded by PNC related to BlackRock earnings.
|
Page A2
Appendix to Financial Supplement (Continued)
The PNC Financial Services Group, Inc.
Adjusted Condensed Consolidated Income Statement Reconciliations
(Unaudited) (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended December 31, 2007
|
|
PNC
|
|
|
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (b)
|
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
793
|
|
|
|
|
|
$
|
793
|
|
Provision for credit losses
|
|
|
188
|
|
$
|
(45
|
)
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
605
|
|
|
45
|
|
|
|
650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
225
|
|
|
(1
|
)
|
|
|
224
|
|
Other
|
|
|
609
|
|
|
128
|
|
|
|
737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
834
|
|
|
127
|
|
|
|
961
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
553
|
|
|
(10
|
)
|
|
|
543
|
|
Other
|
|
|
660
|
|
|
(107
|
)
|
|
|
553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
1,213
|
|
|
(117
|
)
|
|
|
1,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
226
|
|
|
289
|
|
|
|
515
|
|
Income taxes
|
|
|
48
|
|
|
102
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
178
|
|
$
|
187
|
|
|
$
|
365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2007
|
|
PNC
|
|
|
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (c)
|
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
761
|
|
|
|
|
|
$
|
761
|
|
Provision for credit losses
|
|
|
65
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
696
|
|
|
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
204
|
|
$
|
2
|
|
|
|
206
|
|
Other
|
|
|
786
|
|
|
50
|
|
|
|
836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
990
|
|
|
52
|
|
|
|
1,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
553
|
|
|
(16
|
)
|
|
|
537
|
|
Other
|
|
|
546
|
|
|
(25
|
)
|
|
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
1,099
|
|
|
(41
|
)
|
|
|
1,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
587
|
|
|
93
|
|
|
|
680
|
|
Income taxes
|
|
|
180
|
|
|
31
|
|
|
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
407
|
|
$
|
62
|
|
|
$
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See note (a) on page A1.
|
|
(b)
|
Includes the impact of the following items on a pretax basis: $128 million net loss related to our BlackRock LTIP shares obligation, $82 million of Visa indemnification costs, and
$79 million of acquisition integration costs.
|
|
(c)
|
Includes the impact of the following items on a pretax basis: $50 million net loss related to our BlackRock LTIP shares obligation and $43 million of acquisition integration costs.
|
Page A3
Appendix to Financial Supplement (Continued)
The PNC Financial Services Group, Inc.
Adjusted Condensed Consolidated Income Statement Reconciliations
(Unaudited) (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2007
|
|
PNC
|
|
|
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (b)
|
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
738
|
|
|
|
|
|
$
|
738
|
|
Provision for credit losses
|
|
|
54
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
684
|
|
|
|
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
190
|
|
$
|
1
|
|
|
|
191
|
|
Other
|
|
|
785
|
|
|
1
|
|
|
|
786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
975
|
|
|
2
|
|
|
|
977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
544
|
|
|
(9
|
)
|
|
|
535
|
|
Other
|
|
|
496
|
|
|
(6
|
)
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
1,040
|
|
|
(15
|
)
|
|
|
1,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
619
|
|
|
17
|
|
|
|
636
|
|
Income taxes
|
|
|
196
|
|
|
6
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
423
|
|
$
|
11
|
|
|
$
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2007
|
|
PNC
|
|
|
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (c)
|
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
623
|
|
|
|
|
|
$
|
623
|
|
Provision for credit losses
|
|
|
8
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
615
|
|
|
|
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
165
|
|
$
|
2
|
|
|
|
167
|
|
Other
|
|
|
826
|
|
|
(52
|
)
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
991
|
|
|
(50
|
)
|
|
|
941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
490
|
|
|
(2
|
)
|
|
|
488
|
|
Other
|
|
|
454
|
|
|
(9
|
)
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
944
|
|
|
(11
|
)
|
|
|
933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
662
|
|
|
(39
|
)
|
|
|
623
|
|
Income taxes
|
|
|
203
|
|
|
(14
|
)
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
459
|
|
$
|
(25
|
)
|
|
$
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See note (a) on page A1.
|
|
(b)
|
Includes the impact of the following items on a pretax basis: $16 million of acquisition integration costs and $1 million net loss related to our BlackRock LTIP shares obligation.
|
|
(c)
|
Includes the impact of the following items on a pretax basis: $52 million net gain related to our BlackRock LTIP shares obligation and $13 million of acquisition integration costs.
|
Page A4
Appendix to Financial Supplement (Continued)
The PNC Financial Services Group, Inc.
Adjusted Condensed Consolidated Income Statement Reconciliations
(Unaudited) (a)
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended December 31, 2006
|
|
PNC
|
|
|
|
PNC
|
|
In millions
|
|
As Reported
|
|
Adjustments (b)
|
|
As Adjusted
|
|
Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
566
|
|
|
|
|
$
|
566
|
|
Provision for credit losses
|
|
|
42
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income less provision for credit losses
|
|
|
524
|
|
|
|
|
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
Asset management
|
|
|
149
|
|
$
|
10
|
|
|
159
|
|
Other
|
|
|
820
|
|
|
12
|
|
|
832
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
969
|
|
|
22
|
|
|
991
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
497
|
|
|
|
|
|
497
|
|
Other
|
|
|
472
|
|
|
|
|
|
472
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
969
|
|
|
|
|
|
969
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
524
|
|
|
22
|
|
|
546
|
|
Income taxes
|
|
|
148
|
|
|
7
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
376
|
|
$
|
15
|
|
$
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
See note (a) on page A1.
|
|
(b)
|
Includes the impact of the following items on a pretax basis: $12 million net loss related to our BlackRock LTIP shares obligation and $10 million of BlackRock/MLIM transaction
integration costs.
|
Page A5
|
The PNC
Financial Services Group, Inc.
Fourth
Quarter 2007
Earnings Conference Call
January 17, 2008
|
|
This
presentation contains forward-looking statements regarding our outlook or expectations relating to PNC’s future business, operations, financial
condition, financial performance and asset quality. Forward-looking statements are
necessarily subject to numerous assumptions, risks and
uncertainties, which change over
time.
The forward-looking statements in this presentation are qualified by the
factors affecting forward-looking statements identified in the more detailed
Cautionary
Statement
included
in
the
Appendix,
which
is
included
in
the
version
of
the
presentation
materials
posted
on
our
corporate
website
at
www.pnc.com/investorevents.
We
provide
greater
detail
regarding
these
factors
in
our
2006
Form
10-K,
including
in
the
Risk
Factors
and
Risk
Management sections, and in our third quarter 2007 Form 10-Q and other SEC reports (accessible
on the SEC’s website at www.sec.gov and on or
through our corporate website at
www.pnc.com/secfilings).
Future events or circumstances may change our outlook or
expectations and may also affect the nature of the assumptions, risks and uncertainties
to which our forward-looking statements are subject. The forward-looking statements
in this presentation speak only as of the date of this
presentation.
We
do
not
assume
any
duty
and
do
not
undertake
to
update
those
statements.
In this presentation, we will sometimes refer to adjusted results to help illustrate the impact of
the deconsolidation of BlackRock near the end of
third quarter 2006 and the impact of
certain types of items. Adjusted results reflect, as applicable, the following types of adjustments: (1) 2006
and
earlier
periods
reflect
the
impact
of
the
deconsolidation
of
BlackRock
by
adjusting
as
if
we
had
recorded
our
BlackRock
investment
on
the
equity
method prior to its deconsolidation; (2) adjusting 2006 to exclude the impact of the third
quarter 2006 gain on the BlackRock/MLIM transaction and
losses
on
the
repositioning
of
PNC’s
securities
and
mortgage
loan
portfolios;
(3)
adjusting
fourth
quarter
2006
and
the
2007
periods
to
exclude
the
net
mark-to-market
adjustments
on
PNC’s
remaining
BlackRock
LTIP
shares
obligation
and,
as
applicable,
the
gain
PNC
recognized
in
first
quarter
2007
in
connection
with
the
company’s
transfer
of
BlackRock
shares
to
satisfy
a
portion
of
its
BlackRock
LTIP
shares
obligation;
(4)
adjusting
all
2007 and 2006 periods to exclude, as applicable, integration costs related to acquisitions and to
the BlackRock/MLIM transaction; (5) adjusting
2007
periods,
as
applicable,
for
the
fourth
quarter
2007
Visa
litigation
charge;
and
(6)
adjusting,
as
appropriate,
for
the
tax
impact
of
these
adjustments. We have provided these adjusted amounts and reconciliations so that investors,
analysts, regulators and others will be better able to
evaluate the impact of these
items on our results for the periods presented, in addition to providing a basis of comparability for the impact of the
BlackRock
deconsolidation
given
the
magnitude
of
the
impact
of
deconsolidation
on
various
components
of
our
income
statement
and
balance
sheet.
We
believe
that
information
as
adjusted
for
the
impact
of
the
specified
items
may
be
useful
due
to
the
extent
to
which
these
items
are
not
indicative
of our ongoing operations as the result of our management activities on those operations.
While we have not provided other adjustments for the
periods
discussed,
this
is
not
intended
to
imply
that
there
could
not
have
been
other
similar
types
of
adjustments,
but
any
such
adjustments
would
not have been similar in magnitude to the amount of the adjustments shown. In certain
discussions, we may also provide revenue information 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. We believe this adjustment may be useful when comparing yields and
margins for all earning assets.
This presentation may also include a discussion of other
non-GAAP financial measures, which, to the extent not so qualified therein or in the
Appendix, is qualified by GAAP reconciliation information available on our corporate website at
www.pnc.com under “About PNC–Investor Relations.”
Cautionary Statement
Regarding Forward-Looking
Information and Adjusted Information
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|
Strong organic
client growth
Expenses well-contained
Solid business segment results in an uncertain time
Asset quality migrating, as expected, and at a manageable pace
Well-positioned balance sheet
Successful Mercantile integration
Unprecedented market volatility impacts 4Q07 results
2008 -
Focus on maximizing the franchise
2007 Performance Leaves PNC
Well-Positioned for the Future
Execution Results in a Good Year Despite a Difficult Environment
|
|
Key
Take-Aways
Executing on Our Strategy Delivers
Differentiated Results
Delivered solid results with diverse revenue streams in a
period of extreme market volatility
Continued to create positive operating leverage on a full
year adjusted basis
²
Maintained a moderate risk profile and balance sheet
flexibility
(1)
Adjusted fourth quarter 2007 and full year 2007 earnings are reconciled to GAAP earnings in the
Appendix.
(2)
GAAP basis operating leverage for the full year 2007 period was negative primarily due to the
impact of the 2006 gain from the
BlackRock/MLIM transaction and is reconciled in the
Appendix.
2007
4Q07
$5.05
$1.07
Adjusted diluted EPS
¹
$4.35
$0.52
Reported diluted EPS
|
|
$7
$6
$5
$4
$3
$2
$1
$0
+10%
+34%
+25%
+18%
Growing High Quality, Diverse
Revenue Streams
Total Revenue Growth
(1)
Adjusted amounts are reconciled to GAAP amounts in the Appendix.
(2)
Unadjusted 2006 mix: noninterest income 74%, deposit net interest income 16%, loan net
interest income 10%.
Unadjusted 2007 mix: noninterest income 56%, deposit net
interest income 27%, loan net interest income 17%.
(3)
Unadjusted % change: total revenue (22%), noninterest income (40%), deposit net interest income
34%, loan net interest income 24%.
2007 vs 2006
1,3
2006 Mix
2006 Mix
Adjusted Revenue Mix for the Year Ended
1,2
2007 Mix
2007 Mix
Noninterest
Income
62%
Deposit NII
23%
Loan NII
15%
Noninterest
Income
57%
Deposit NII
27%
Loan NII
16%
|
|
$0
$1
$2
$3
$4
$5
$6
$7
Revenue
+9%
Creating Positive Operating Leverage
Growing Revenues Faster Than Expenses
Adjusted Revenue
(as reported
$5.5 billion, $6.3 billion, $8.6 billion, $6.7 billion for 2004,
2005, 2006, 2007, respectively)
Adjusted Noninterest
Expense
(as reported $3.7 billion, $4.3 billion, $4.4 billion, $4.3 billion for 2004, 2005, 2006, 2007,
respectively)
Adjusted Net Income
(as reported $1.2 billion, $1.3 billion, $2.6 billion, $1.5 billion for 2004, 2005, 2006, 2007,
respectively)
$1.2
$1.3
$1.5
(1)
As reported: revenue 24%, expense 9%, operating leverage 15%, net income 47%.
(2)
As reported: revenue (22%), expense (3%), operating leverage (19%), net income (43%).
(3)
Adjusted amounts are reconciled to GAAP amounts in the Appendix.
2004
2005
2006
Expense
+7%
Net Income
+12%
Compound Annual Growth
(2004-2006, as adjusted)
1,3
Revenue
+18%
Expense
+15%
Net Income
+12%
2006-2007
As adjusted
2,3
Operating
Leverage
+2%
Operating
Leverage
+3%
$1.7
2007
|
|
Maintaining a
Moderate Risk Profile
Credit decisions driven by
risk-adjusted returns
Minimal exposure to
subprime mortgages, high-
yield bridge and leveraged
finance loans
Relatively low commercial
real estate exposure
Highly granular portfolio
Credit quality migrating at
a manageable pace
Asset Quality
Active balance sheet
management style
Duration of equity of 2.1
years
Very liquid balance sheet
Low loans to deposits ratio
with a low cost deposit
base
Relatively large securities
book
High fee income to total
revenue
Interest Rate Risk
Shift to Tier 1 capital
benchmark
Earnings growth creates
capital flexibility
Dividends
Share repurchase, where
appropriate
Access to capital markets
Capital Management
|
|
Cautionary
Statement Regarding
Forward-Looking Information
Appendix
We
make
statements
in
this
presentation,
and
we
may
from
time
to
time
make
other
statements,
regarding
our
outlook
or
expectations
for
earnings, revenues, expenses and/or other matters regarding or affecting PNC that are
forward-looking statements within the meaning of the
Private
Securities
Litigation
Reform
Act.
Forward-looking
statements
are
typically
identified
by
words
such
as
“believe,”
“expect,”
“anticipate,”
“intend,”
“outlook,”
“estimate,”
“forecast,”
“will,”
“project”
and other similar words and expressions.
Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which
change over time. Forward-looking statements
speak only as of the date they
are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because
forward-looking
statements
are
subject
to
assumptions
and
uncertainties,
actual
results
or
future
events
could
differ,
possibly
materially,
from
those that we anticipated in our forward-looking statements, and future results could differ
materially from our historical performance.
Our forward-looking statements are
subject to the following principal risks and uncertainties. We provide greater detail regarding some of these
factors in our Form 10-K for the year ended December 31, 2006, including in the Risk Factors
and Risk Management sections of that report, and in
our third quarter 2007 Form
10-Q and other SEC reports. Our forward-looking statements may also be subject to other risks and uncertainties,
including those that we may discuss elsewhere in this presentation or in our filings with the SEC,
accessible on the SEC’s website at www.sec.gov
and on or through our corporate
website at www.pnc.com/secfilings.
•Our businesses and financial results are
affected by business and economic conditions, both generally and specifically in the principal markets in
which we operate. In particular, our businesses and financial results may be impacted
by:
•Changes
in
interest
rates
and
valuations
in
the
debt,
equity
and
other
financial
markets.
•Disruptions in the liquidity and other functioning of financial markets, including such
disruptions in the markets for real estate and other
assets commonly securing financial
products.
•Actions by the Federal Reserve and other government agencies, including
those that impact money supply and market interest rates.
•Changes in our
customers’, suppliers’
and other counterparties’
performance in general and their creditworthiness in particular.
•Changes in customer preferences and behavior, whether as a result of changing business and
economic conditions or other factors.
•A continuation of recent turbulence in
significant portions of the global financial markets could impact our performance, both directly by affecting
our revenues and the value of our assets and liabilities and indirectly by affecting the economy
generally.
•Our operating results are affected by our liability to provide shares
of BlackRock common stock to help fund certain BlackRock long-term incentive
plan
(“LTIP”) programs, as our LTIP liability is adjusted quarterly (“marked-to-market”) based on changes in BlackRock’s common stock price and
the number of remaining committed shares, and we recognize gain or loss on such shares at such
times as shares are transferred for payouts
under the LTIP programs.
•Competition can have an impact on customer acquisition, growth and retention, as well as on
our credit spreads and product pricing, which can
affect market share, deposits and
revenues.
•Our ability to implement our business initiatives and strategies
could affect our financial performance over the next several years.
|
|
•Legal
and regulatory developments could have an impact on our ability to operate our businesses or our financial condition or results of operations
or our competitive position or reputation. Reputational impacts, in turn, could affect
matters such as business generation and retention, our ability
to
attract
and
retain
management,
liquidity,
and
funding.
These
legal
and
regulatory
developments
could
include:
(a)
the
unfavorable
resolution
of legal proceedings or regulatory and other governmental inquiries; (b) increased litigation
risk from recent regulatory and other governmental
developments;
(c)
the
results
of
the
regulatory
examination
process,
our
failure
to
satisfy
the
requirements
of
agreements
with
governmental
agencies, and regulators’
future use of supervisory and enforcement tools; (d) legislative and regulatory reforms,
including changes to laws and
regulations
involving
tax,
pension,
education
lending,
and
the
protection
of
confidential
customer
information;
and
(e)
changes
in
accounting
policies and principles.
•Our business and operating results are affected by our ability to identify and effectively
manage risks inherent in our businesses, including, where
appropriate, through the
effective use of third-party insurance, derivatives, and capital management techniques.
•Our ability to anticipate and respond to technological changes can have an impact on our
ability to respond to customer needs and to meet
competitive demands.
•The adequacy of our intellectual property protection, and the extent of any costs associated
with obtaining rights in intellectual property claimed
by others, can impact our
business and operating results.
•Our business and operating results can also be
affected by widespread natural disasters, terrorist activities or international hostilities, either as a
result
of
the
impact
on
the
economy
and
capital
and
other
financial
markets
generally
or
on
us
or
on
our
customers,
suppliers
or
other
counterparties specifically.
•Also, risks and uncertainties that could affect the results anticipated in
forward-looking statements or from historical performance relating to our
equity
interest in BlackRock, Inc. are discussed in more detail in BlackRock’s filings with the SEC, including in the Risk Factors sections of
BlackRock’s reports. BlackRock’s SEC filings are accessible on the SEC’s
website and on or through BlackRock’s website at
www.blackrock.com
.
We
grow
our
business
from
time
to
time
by
acquiring
other
financial
services
companies,
including
our
pending
Sterling
Financial
Corporation
(“Sterling”)
acquisition.
Acquisitions
in
general
present
us
with
risks
in
addition
to
those
presented
by
the
nature
of
the
business
acquired.
In
particular, acquisitions may be substantially more expensive to complete (including as a result of
costs incurred in connection with the integration
of
the
acquired
company)
and
the
anticipated
benefits
(including
anticipated
cost
savings
and
strategic
gains)
may
be
significantly
harder
or
take
longer to achieve than expected. In some cases, acquisitions involve our entry into new
businesses or new geographic or other markets, and these
situations
also
present
risks
resulting
from
our
inexperience
in
these
new
areas.
As
a
regulated
financial
institution,
our
pursuit
of
attractive
acquisition opportunities could be negatively impacted due to regulatory delays or other regulatory
issues. Regulatory and/or legal issues related to
the pre-acquisition
operations of an acquired business may cause reputational harm to PNC following the acquisition and integration of the acquired
business into ours and may result in additional future costs arising as a result of those
issues.
Any annualized, proforma, estimated, third party or consensus numbers in this
presentation are used for illustrative or comparative purposes only
and may not reflect
actual results. Any consensus earnings estimates are calculated based on the earnings projections made by analysts who cover
that company. The analysts’
opinions, estimates or forecasts (and therefore the consensus earnings estimates) are theirs
alone, are not those of
PNC or its management, and may not reflect PNC’s,
Sterling’s or other company’s actual or anticipated results.
Cautionary
Statement Regarding
Forward-Looking Information
(continued)
Appendix
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|
The PNC
Financial Services Group, Inc. and Sterling Financial Corporation (“Sterling”) will be filing a proxy
statement/prospectus
and
other
relevant
documents
concerning
the
merger
with
the
United
States
Securities
and
Exchange
Commission
(the
“SEC”).
WE
URGE
INVESTORS
TO
READ
THE
PROXY STATEMENT/PROSPECTUS
AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE MERGER OR
INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION.
Investors will be able to obtain these documents free of charge at the SEC’s web site at
http://www.sec.gov. In
addition, documents filed with the SEC by The PNC
Financial Services Group, Inc. will be available free of charge
from Shareholder
Relations at (800) 843-2206. Documents filed with the SEC by Sterling will be available free of
charge from Sterling by contacting Shareholder Relations at (877) 248-6420.
The directors, executive officers, and certain other members of management and employees of
Sterling are
participants in the solicitation of proxies in favor of the merger from
the shareholders of Sterling. Information
about the directors and executive
officers of Sterling is included in the proxy statement for its May 8, 2007
annual
meeting of shareholders, which was filed with the SEC on April 2, 2007. Additional information regarding
the
interests
of
such
participants
will
be
included
in
the
proxy
statement/prospectus
and
the
other
relevant
documents filed with the SEC when they become available.
Additional Information About The PNC/Sterling
Financial Corporation Transaction
Appendix
|
|
Non-GAAP
to GAAP
Reconcilement
Earnings Summary
Appendix
THREE MONTHS ENDED
In millions, except per share data
Adjustments,
Net
Diluted
Adjustments,
Net
Diluted
Adjustments,
Net
Diluted
Pretax
Income
EPS
Pretax
Income
EPS
Pretax
Income
EPS
Net income, as reported
$178
$0.52
$407
$1.19
$376
$1.27
Adjustments:
BlackRock LTIP (a)
$128
84
.24
$50
32
.09
$12
7
.02
Visa indemnification (b)
82
53
.16
Integration costs (c)
79
50
.15
43
30
.09
10
8
.03
Net income, as adjusted
$365
$1.07
$469
$1.37
$391
$1.32
YEAR ENDED
Adjustments,
Net
Diluted
Adjustments,
Net
Diluted
In millions, except per share data
Pretax
Income
EPS
Pretax
Income
EPS
Net income, as reported
$1,467
$4.35
$2,595
$8.73
Adjustments:
BlackRock LTIP (a)
$127
83
.24
$12
7
.02
Visa indemnification (b)
82
53
.16
Integration costs (c)
151
99
.30
101
47
.16
Gain on BlackRock/MLIM transaction (d)
(2,078)
(1,293)
(4.36)
Securities portfolio rebalancing loss (d)
196
127
.43
Mortgage loan portfolio repositioning loss (d)
48
31
.10
Net income, as adjusted
$1,702
$5.05
$1,514
$5.08
(d) Included in noninterest income on a pretax basis.
December 31, 2006
(b)
Our
payment
services
business
issues
and
acquires
credit
and
debit
card
transactions
through
Visa
U.S.A.
Inc.
card
association
or
its
affiliates
(“Visa”).
In
October
2007,
Visa
completed
a
restructuring
and
issued
shares
of
Visa
Inc.
common
stock
to
its
financial
institution
members
in
contemplation
of
its
initial
public
offering
(“IPO”)
currently
anticipated
in
the
first
quarter
of
2008
(the
“Visa
Reorganization”).
As
part
of
the
Visa
Reorganization,
we
received
our
proportionate
share
of
a
class
of
Visa
Inc.
common
stock
allocated
to
the
U.S.
members.
Visa
expects
that
a
portion
of
these
shares
will
be
redeemed
for
cash
out
of
the
proceeds
of
the
IPO.
The
U.S.
members
are
obligated
to
indemnify
Visa
for
judgments
and
settlements
related
to
specified
litigation.
Visa
will
set
aside
a
portion
of
the
proceeds
from
the
IPO
in
an
escrow
account
for the benefit of the U.S. member financial institutions to fund the expenses of the litigation as
well as the members' proportionate share of any judgments or settlements that may arise out of the litigation.
December 31, 2007
September 30, 2007
December 31, 2006
December 31, 2007
(a)
Includes
the
impact
of
the
gain
recognized
in
connection
with
PNC's
transfer
of
BlackRock
shares
to
satisfy
a
portion
of
our
BlackRock
LTIP
shares
obligation
and
the
net
mark-to-market
adjustment
on
our
remaining BlackRock LTIP shares obligation, as applicable.
In
accordance
with
GAAP,
we
recorded
a
liability
and
operating
expense
totaling
$82
million
before
taxes
in
the
fourth
quarter
of
2007
representing
our
estimate
of
the
fair
value
of
our
indemnification
obligation
for
potential
losses
arising
from
this
litigation.
Our
estimate
is
based
on
publicly
available
information
and
other
information
made
available
to
all
of
the
affected
Visa
members
and
does
not
reflect
any
direct
knowledge
of
the
relative
strengths
and
weaknesses
of
the
litigation
still
pending
or
the
status
of
any
on-going
settlement
discussions.
We
believe
that
the
IPO
will
be
completed
and
cash
will
be
available
through
the
escrow
to
satisfy
litigation
settlements.
In
addition,
based
on
estimates
provided
by
Visa
regarding
its
planned
IPO,
we
believe
that
our
ownership
interest
in
Visa
has
a
value
significantly
in
excess
of
our
indemnification
liability.
Our
Visa
shares
will
not
generally
be
transferable
until
they
can
be
converted
into
shares
of
the
publicly
traded
class
of
stock,
which
cannot
happen
until
the
later
of
three
years
after
the
IPO
or
settlement
of all of the specified litigation.
(c)
In
addition
to
integration
costs
related
to
recent
or
pending
PNC
acquisitions
reflected
in
the
2007
periods,
the
first
three
quarters
of
2007
and
all
2006
periods
include
BlackRock/MLIM
integration
costs.
BlackRock/MLIM
integration
costs
recognized
by
PNC
in
the
first
three
quarters
of
2007
and
the
fourth
quarter
of
2006
were
included
in
noninterest
income
as
a
negative
component
of
the
"Asset
management"
line
item, which includes the impact of our equity earnings from our investment in BlackRock. For the
first nine months of 2006, BlackRock/MLIM transaction integration costs were included in noninterest expense.
|
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Non-GAAP
to GAAP
Reconcilement
Income Statement Summary –
For the year ended
Appendix
Year ended
In millions
As Reported
Adjustments
As Adjusted (a)
As Reported
Adjustments
As Adjusted (b)
Net interest income
$2,915
$2,915
$2,245
($10)
$2,235
Net interest income:
% Change As
Reported
% Change As
Adjusted
Loans
1,110
1,110
895
(10)
885
24%
25%
Deposits
1,805
1,805
1,350
1,350
34%
34%
Noninterest
Income
3,790
$131
3,921
6,327
(2,755)
3,572
(40%)
10%
Total revenue
6,705
131
6,836
8,572
(2,765)
5,807
(22%)
18%
Loan net interest income as a % of total revenue
16.6%
16.2%
10.4%
15.2%
Deposit net interest income as a % of total revenue
26.9%
26.4%
15.7%
23.2%
Noninterest
income as a % of total revenue
56.5%
57.4%
73.8%
61.5%
Provision for credit losses
315
(45)
270
124
124
Noninterest
income
3,790
131
3,921
6,327
(2,755)
3,572
Noninterest
expense
4,296
(184)
4,112
4,443
(856)
3,587
(3%)
15%
Income before minority interest
and income taxes
2,094
360
2,454
4,005
(1,909)
2,096
Minority interest in income
of BlackRock
47
(47)
Income taxes
627
125
752
1,363
(781)
582
Net income
$1,467
$235
$1,702
$2,595
($1,081)
$1,514
(43%)
12%
Operating Leverage -
Year Ended
As Reported
As Adjusted
Total revenue
(22%)
18%
Noninterest expense
(3%)
15%
Operating leverage
(19%)
3%
(a)
Amounts
adjusted
to
exclude
the
impact
of
the
following
pretax
items:
(1)
the
gain
of
$83
million
recognized
in
connection
with
PNC's
transfer
of
BlackRock
shares
to
satisfy
a
portion
of
our
BlackRock
LTIP
shares
obligation,
(2)
the
net
mark-to-market
adjustment
totaling
$210
million
on
our
remaining
BlackRock
LTIP
shares
obligation,
(3)
acquisition
integration
costs
totaling
$151 million, and (4) Visa indemnification charge of $82 million. The net tax impact of these items
is reflected in the adjustment to income taxes.
(b)
Amounts
adjusted
to
exclude
the
impact
of
the
following
pretax
items:
$2,078
million
gain
on
BlackRock/MLIM
transaction,
$196
million
securities
portfolio
rebalancing
loss,
$101
million
of
BlackRock/MLIM
transaction
integration
costs,
$48
million
mortgage
loan
portfolio
repositioning
loss,
and
$12
million
net
loss
related
to
our
BlackRock
LTIP
shares
obligation.
The
net
tax
impact of these items is reflected in the adjustment to income taxes.
2006 to 2007 Change
December 31, 2007
December 31, 2006
|
|
Non-GAAP
to GAAP
Reconcilement
Income Statement Summary –
For the three months ended
Appendix
For the three months ended December 31, 2007
PNC
PNC
In millions
As Reported
Adjustments (a)
As Adjusted
Reported
Adjusted
Net interest income
$793
$793
Loan net interest income
304
304
3%
3%
Deposit net interest income
489
489
5%
5%
Provision for credit losses
188
($45)
143
Net interest income less provision for credit losses
605
(45)
650
Asset management
225
(1)
224
Other
609
128
737
Total noninterest
income
834
127
961
(16%)
(8%)
Compensation and benefits
553
(10)
543
Other
660
(107)
553
Total noninterest
expense
1,213
(117)
1,096
10%
4%
Income before income taxes
226
289
515
Income taxes
48
102
150
Net income
$178
$187
$365
(56%)
(22%)
For the three months ended September 30, 2007
PNC
PNC
In millions
As Reported
Adjustments (b)
As Adjusted
Net interest income
$761
$761
Loan net interest income
294
294
Deposit net interest income
467
467
Provision for credit losses
65
65
Net interest income less provision for credit losses
696
696
Asset management
204
$2
206
Other
786
50
836
Total noninterest
income
990
52
1,042
Compensation and benefits
553
(16)
537
Other
546
(25)
521
Total noninterest expense
1,099
(41)
1,058
Income before income taxes
587
93
680
Income taxes
180
31
211
Net income
$407
$62
$469
% Change vs. Sept 30, 2007
(a)
Amounts
adjusted
to
exclude
the
impact
of
the
following
items
on
a
pretax
basis:
$128
million
net
loss
related
to
our
BlackRock/LTIP
shares
obligation,
$82
million
Visa indemnification charge, and $79 million of acquisition integration costs. The net tax
impact of these items is reflected in the adjustment to income taxes.
(b)
Amounts
adjusted
to
exclude
the
impact
of
the
following
items
on
a
pretax
basis:
$50
million
net
loss
related
to
our
BlackRock/LTIP
shares
obligation
and
$43
million
of acquisition integration costs. The net tax impact of these items is reflected in the
adjustment to income taxes.
|
|
Non-GAAP
to GAAP
Reconcilement
Income Statement Summary –
2004 to 2007
Appendix
For the year ended December 31, 2007
PNC
PNC
In millions
As Reported
Adjustments (a)
As Adjusted
Net interest income
$2,915
$2,915
Provision for credit losses
315
$(45)
270
Noninterest income
3,790
131
3,921
Noninterest expense
4,296
(184)
4,112
Income before income taxes
2,094
360
2,454
Income taxes
627
125
752
Net income
$1,467
$235
$1,702
BlackRock
For the year ended December 31, 2006
PNC
Deconsolidation and
BlackRock
PNC
In millions
As Reported
Adjustments (a)
Other Adjustments
Equity Method
As Adjusted
Net interest income
$2,245
$(10)
$2,235
Provision for credit losses
124
124
Noninterest income
6,327
$(1,812)
(1,087)
$144
3,572
Noninterest expense
4,443
(91)
(765)
3,587
Income before minority interest and income taxes
4,005
(1,721)
(332)
144
2,096
Minority interest in income of BlackRock
47
18
(65)
Income taxes
1,363
(658)
(130)
7
582
Net income
$2,595
$(1,081)
$(137)
$137
$1,514
(a)
Includes
the
impact
of
the
following
pretax
items:
$2,078
million
gain
on
BlackRock/MLIM
transaction,
$196
million
securities
portfolio
rebalancing
loss,
$101
million
of
BlackRock/MLIM
transaction
integration
costs,
$48
million
mortgage
loan
portfolio
repositioning
loss,
and
$12
million
net
loss
related
to
our
BlackRock
LTIP
shares
obligation. The net tax impact of these items is reflected in the adjustment to income
taxes.
(a)
Amounts
adjusted
to
exclude
the
impact
of
the
following
pretax
items:
(1)
the
gain
of
$83
million
recognized
in
connection
with
PNC's
transfer
of
BlackRock
shares
to
satisfy
a
portion
of
our
BlackRock
LTIP
shares
obligation,
(2)
the
net
mark-to-market
adjustment
totaling
$210
million
on
our
remaining
BlackRock
LTIP
shares
obligation,
(3)
acquisition
integration
costs
totaling
$151
million,
and
(4)
Visa
indemnification
charge
of
$82
million.
The
net
tax
impact
of
these
items
is
reflected
in
the
adjustment
to income taxes.
|
|
Non-GAAP
to GAAP
Reconcilement
Income Statement Summary –
2004 to 2007 (continued)
Appendix
For the year ended December 31, 2005
BlackRock
PNC
Deconsolidation and
BlackRock
PNC
In millions
As Reported
Other Adjustments
Equity Method
As Adjusted
Net interest income
$2,154
$(12)
$2,142
Provision for credit losses
21
21
Noninterest income
4,173
(1,214)
$163
3,122
Noninterest expense
4,306
(853)
3,453
Income before minority interest and income taxes
2,000
(373)
163
1,790
Minority interest in income of BlackRock
71
(71)
Income taxes
604
(150)
11
465
Net income
$1,325
$(152)
$152
$1,325
For the year ended December 31, 2004
BlackRock
PNC
Deconsolidation and
BlackRock
PNC
In millions
As Reported
Other Adjustments
Equity Method
As Adjusted
Net interest income
$1,969
$(14)
$1,955
Provision for credit losses
52
52
Noninterest income
3,572
(745)
$101
2,928
Noninterest expense
3,712
(564)
3,148
Income before minority interest and income taxes
1,777
(195)
101
1,683
Minority interest in income of BlackRock
42
(42)
Income taxes
538
(59)
7
486
Net income
$1,197
$(94)
$94
$1,197
|
|
Non-GAAP
to GAAP
Reconcilement
Income Statement Summary –
2004 to 2007 (continued)
Appendix
% Change
In millions
2004
2005
2006
2007
2004-2006 CAGR
2006-2007
Adjusted net interest income
$1,955
$2,142
$2,235
$2,915
Adjusted noninterest income
2,928
3,122
3,572
3,921
Adjusted total revenue
4,883
5,264
5,807
6,836
9%
18%
Adjusted noninterest expense
3,148
3,453
3,587
4,112
7%
15%
Adjusted net income
1,197
1,325
1,514
1,702
12%
12%
Adjusted operating leverage
2%
3%
% Change
In millions
2004
2005
2006
2007
2004-2006 CAGR
2006-2007
Net interest income, as reported
$1,969
$2,154
$2,245
$2,915
Noninterest income, as reported
3,572
4,173
6,327
3,790
Total revenue, as reported
5,541
6,327
8,572
6,705
24%
(22%)
Noninterest expense, as reported
3,712
4,306
4,443
4,296
9%
(3%)
Net income, as reported
1,197
1,325
2,595
1,467
47%
(43%)
Operating leverage, as reported
15%
(19%)
For the year ended December 31, as adjusted
For the year ended December 31, as reported
|
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