Form 425
Table of Contents

 

Filed by The PNC Financial Services Group, Inc.

Pursuant to Rule 425 under the Securities Act of 1933 and

deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934

 

Subject Company: Riggs National Corporation

Commission File No. 000-09756

 

On January 21, 2005, The PNC Financial Services Group, Inc. (“PNC”) issued the attached press release and supplementary information announcing its earnings and business for the quarter ended December 31, 2004.

 


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LOGO

 

CONTACTS:

 

MEDIA:

Brian E. Goerke

(412) 762-4550

corporate.communications@pnc.com

 

INVESTORS:

William H. Callihan

(412) 762-8257

investor.relations@pnc.com

 

PNC REPORTS FOURTH QUARTER EARNINGS OF $307 MILLION

Full Year Earnings Increase 20 Percent to $1.2 Billion

 

PITTSBURGH, January 21, 2005 – The PNC Financial Services Group, Inc. (NYSE: PNC) today reported fourth quarter 2004 earnings of $307 million, or $1.08 per diluted share. Earnings a year ago were $274 million, or $0.98 per diluted share, and earnings for the third quarter were $258 million, or $0.91 per diluted share. For the full year 2004, earnings totaled $1.2 billion, an increase of 20 percent compared with 2003, or $4.21 per diluted share.

 

“PNC had an excellent year in 2004,” said James E. Rohr, chairman and chief executive officer. “We made important strides: our focus on customers resulted in strong growth in loans, deposits, assets under management and fund assets serviced. Asset quality improved over the course of the year and we continued to strengthen our approach to balance sheet management. We believe this progress has PNC well positioned for the future.”

 

HIGHLIGHTS

 

  Average loan balances for the fourth quarter increased $6.3 billion, or 17 percent, over last year, and 3 percent over last quarter. The increases were driven by higher home equity and other secured loan balances.

 

  Average deposit balances for the fourth quarter increased $7.1 billion, or 16 percent, compared with the fourth quarter of 2003. Additional customer relationships drove the increase.

 

  Quarterly taxable-equivalent net interest income increased $21 million compared with the fourth quarter of 2003 primarily due to higher loan balances. The increase in net interest income was achieved despite a 26 basis points decline in the net interest margin compared with the fourth quarter of 2003.

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 2

 

  Noninterest income, which accounted for 64 percent of consolidated revenue in 2004, increased 9 percent, to $3.6 billion, compared with 2003. The increase was driven by higher asset management and brokerage fees and by equity management gains compared with equity management losses in 2003.

 

  Overall asset quality remained strong. The ratio of nonperforming loans to total loans decreased to .33 percent at December 31, 2004 from .73 percent at December 31, 2003.

 

Return on average common equity was 16.71 percent for the quarter and 16.82 percent for the year compared with 16.67 percent in the fourth quarter of 2003 and 15.06 percent for full year 2003.

 

The Consolidated Financial Highlights accompanying this news release include a reconciliation of total earnings for all business segments to consolidated earnings and a reconciliation of net interest income as reported under generally accepted accounting principles (GAAP) to taxable-equivalent net interest income.

 

BUSINESS SEGMENT RESULTS

 

Banking Businesses

 

Regional Community Banking

 

Regional Community Banking earned $143 million for the quarter compared with $127 million a year ago, a 13 percent increase, and $134 million for the third quarter. The increases over both periods were attributable to a growing customer base and corresponding growth in loans and deposits. Additionally, earnings grew compared with last quarter primarily due to an increase in noninterest income arising from higher seasonal revenues from debit cards and merchant processing business as well as gains from branch asset sales. Noninterest expenses were relatively flat compared with the prior quarter.

 

Full year 2004 earnings increased $27 million, to $504 million. Gains in customer relationships, loans and deposits contributed to a 10 percent increase in revenue. The revenue increase was partially offset by a 10 percent increase in noninterest expense and a $22 million increase in the segment’s provision for credit losses primarily related to loan growth. The increase in noninterest expenses was primarily driven by expansion of our branch network and sales force and increased marketing activities. The United National acquisition also contributed to the increases in revenue and expenses.

 

Regional Community Banking results in the fourth quarter and 2004 were highlighted by:

 

  Checking customer relationships increased 8 percent, to 1.7 million, over a year ago, driven by continued improvements in customer acquisition and retention and the acquisition of United National.

 

  Business banking relationships grew 13 percent and drove accelerated growth in loans and deposits. Additional sales staff, including increased business banking customer calling efforts by branch managers, drove this increase.

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 3

 

  Average deposit balances for the fourth quarter of 2004 increased 2 percent from the prior quarter, driven by a 7 percent increase in certificates of deposit.

 

  Average loans grew 2 percent compared with last quarter, driven by continued strength in sales of home equity and business banking loan products. Average loans increased $4.5 billion, or 32 percent, compared with 2003 as a result of stronger consumer and small business loan demand and the United National acquisition.

 

  We continued efforts to optimize our branch network. During the year, we opened six stand-alone and 13 in-store branches, and acquired 47 branches from United National. These additions to the branch network coupled with the consolidation and sale of certain branches increased the network total to 774 branches.

 

Wholesale Banking

 

Wholesale Banking earned $108 million in the fourth quarter, compared with $117 million for the same period a year ago and $100 million for the third quarter. The lower earnings compared with a year ago resulted from lower net gains on institutional loans held for sale and higher compensation expense associated with business growth initiatives. These factors were partially offset by increased taxable-equivalent net interest income that resulted from increases in loans and deposits. The higher earnings compared with last quarter resulted from increased net gains from sales of commercial mortgage loans and higher capital markets fees partially offset by increased noninterest expense and a higher provision for credit losses. Full year 2004 earnings increased $52 million, to $443 million. This increase was driven by lower provision for credit losses resulting from improved asset quality, and an increase in taxable-equivalent net interest income resulting from higher average deposit balances. These factors were partially offset by higher staff expense and lower net gains on institutional loans held for sale.

 

Wholesale Banking results in the fourth quarter and 2004 were highlighted by:

 

  Total loans outstanding at December 31, 2004 increased $1.5 billion, or 9 percent, compared with December 31, 2003. The increase was driven by net new business.

 

  Average deposits for the fourth quarter increased 29 percent compared with the prior year. The increase was driven by a larger commercial mortgage servicing portfolio, sales of treasury management products and strong liquidity positions within our customer base.

 

  Asset quality remained strong. Nonperforming assets at December 31, 2004 declined 69 percent compared with December 31, 2003.

 

  Capital markets product revenues of $140 million increased $21 million, or 18 percent, compared with 2003. The increase was driven by customer-related trading activity and loan syndication fees.

 

  Midland Loan Services produced record revenues of $108 million, an increase of $12 million, or 12 percent, compared with 2003 due to an 18 percent increase in the portfolio serviced from December 31, 2003 to December 31, 2004.

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 4

 

PNC Advisors

 

PNC Advisors’ earnings totaled $24 million for the fourth quarter of 2004 compared with $20 million a year ago and $24 million for the third quarter. The increase in earnings compared with a year ago was primarily due to lower noninterest expenses. Full year 2004 earnings were $106 million compared with $89 million in 2003. The increase reflected a $7 million after-tax gain from the sale of certain Hawthorn investment consulting activities, comparatively stronger equity markets, increased loan and deposit balances and lower noninterest expense partially offset by the loss of earnings from the sold Hawthorn activities.

 

Assets under management at PNC Advisors totaled $50 billion at December 31, 2004 compared with $53 billion at December 31, 2003 and $48 billion at September 30, 2004. The decrease in assets under management compared with a year ago reflected the impact of the Hawthorn transaction partially offset by market appreciation.

 

Asset Management and Processing Businesses

 

BlackRock

 

BlackRock earned $50 million for the quarter compared with $41 million a year ago and a loss of $10 million for the third quarter. Third quarter earnings included a $57 million after-tax charge related to the 2002 BlackRock Long-Term Retention and Incentive Plan (LTIP). Fourth quarter earnings included an $8 million after-tax charge related to the LTIP as well as a $10 million income tax benefit resulting from the release of reserves allocated to BlackRock’s New York City tax liability due to the receipt of a favorable preliminary audit finding for the tax years 1998 through 2000. Full year 2004 earnings were $143 million compared with $155 million in 2003. The decreased earnings in 2004 reflected a 20 percent increase in advisory fees driven by a growing base of assets under management as well as a total of $18 million in tax benefits recorded in the first and fourth quarters of 2004, more than offset by $65 million after-tax in LTIP-related charges.

 

Assets under management at BlackRock increased to $342 billion at December 31, 2004 compared with $323 billion last quarter due to new business and market appreciation.

 

BlackRock is approximately 71 percent owned by PNC and is consolidated into PNC’s financial statements. Accordingly, approximately 29 percent of BlackRock’s earnings are recognized as minority interest expense in the Corporation’s consolidated income statement and are reflected on a separate line in the Business Segment Earnings table in the Consolidated Financial Highlights.

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 5

 

PFPC

 

PFPC earned $20 million for the quarter compared with $18 million a year ago and $17 million for the third quarter. The improved earnings reflect higher fund servicing revenue and reduced intercompany debt financing costs partially offset by the elimination of accretion of a discounted client contract liability compared with the fourth quarter of 2003. Full year 2004 earnings totaled $70 million, a 9 percent increase over 2003 that was driven by increased fund servicing revenue, reduced financing costs on intercompany debt and acquisition and divestiture activity. These benefits were partially offset by increased expenses resulting primarily from the end of accretion of a discounted client contract liability.

 

PFPC provided accounting/administration services for $721 billion of net fund investment assets and provided custody services for $451 billion of fund investment assets at December 31, 2004. Increases in these statistics over a year ago reflected net new business, asset inflows from existing customers and equity market appreciation. Total fund assets serviced by PFPC were $1.8 trillion at December 31, 2004 compared with $1.6 trillion a year earlier.

 

“Other”

 

The “Other” category includes asset and liability management activities, related net securities gains, equity management activities, differences between business segment performance reporting and financial statement (GAAP) reporting, corporate overhead and intercompany eliminations. A net loss of $23 million was reported in “Other” for the quarter compared with a net loss of $9 million a year ago and $10 million last quarter. The higher loss compared with a year ago reflected lower net interest income related to asset and liability management activities and the reversal of reserves related to the vehicle leasing business during the fourth quarter of 2003. The higher loss compared with last quarter reflects lower equity management gains and higher compensation costs partially offset by improved trading results and a previously announced $6 million after-tax gain from the settlement of claims related to the 2001 PAGIC transactions.

 

CONSOLIDATED REVENUE REVIEW

 

Taxable-equivalent net interest income totaled $509 million for the quarter compared with $488 million a year ago and $498 million last quarter. The increases over both prior periods resulted from higher income associated with increased average loan and securities balances partially offset by higher average funding balances and rates. Full year 2004 taxable-equivalent net interest income totaled $1.989 billion compared with $2.006 billion in 2003. Increased income from a higher base of earning assets was more than offset by loan margin compression; lower revenue from the vehicle leasing business, which was sold during 2004; and a lack of revenue from the discontinued reinsurance business. The net interest margin in the fourth quarter was 3.12 percent compared with 3.38 percent a year ago and 3.19 percent last quarter. The decrease

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 6

 

in net interest margin compared with the third quarter resulted from higher average interest rates paid on interest-bearing deposits, particularly money market accounts, and on borrowed funds. The higher rates on deposits resulted from marketing efforts to increase the customer base and deposit balances. The decrease in net interest margin compared with the fourth quarter of 2003 resulted from lower loan yields and higher interest-bearing deposit balances.

 

Noninterest income totaled $904 million for the fourth quarter compared with $861 million a year ago and $838 million last quarter. The increases reflected higher asset management and fund servicing fees, higher gains on sales of commercial mortgages and higher capital markets fees. Full year noninterest income totaled $3.563 billion compared with $3.257 billion in 2003. The increase was primarily driven by increased asset management and fund servicing fees, equity management gains in 2004 compared with equity management losses in 2003, increased brokerage revenue in 2004 and a gain related to the sale of modified coinsurance contracts during the first quarter of 2004. These factors were partially offset by lower net securities gains in 2004.

 

CONSOLIDATED EXPENSE REVIEW

 

Noninterest expense totaled $949 million for the quarter compared with $858 million a year ago and $981 million for the sequential quarter. The increase compared with a year ago resulted primarily from increased compensation expense, in part related to the United National acquisition. The decrease compared with last quarter resulted primarily from the higher charge related to the BlackRock LTIP incurred in the third quarter and a net $9 million settlement benefit partially offset by increased other incentive compensation expense. Full year 2004 noninterest expense totaled $3.735 billion compared with $3.476 billion in 2003. The increase in expenses resulted primarily from the LTIP charges, higher other compensation expense and the acquisition of United National. The increases more than offset the impact of expenses totaling $120 million in 2003 recognized in connection with the agreement with the Department of Justice. Ongoing expense initiatives resulted in a $15 million benefit for the fourth quarter compared with the fourth quarter of 2003, while full-year 2004 expense savings totaled $87 million more than in 2003.

 

CONSOLIDATED BALANCE SHEET REVIEW

 

Total assets were $79.7 billion at December 31, 2004 compared with $68.2 billion a year ago and $77.3 billion at September 30, 2004. The increase in assets compared with the third quarter resulted primarily from higher loan balances, while the increase compared with a year ago resulted primarily from increased loan and securities balances.

 

Average total loans of $43.1 billion for the quarter increased $6.3 billion over a year ago and $1.3 billion over the sequential quarter. The increases were driven in particular by higher average home equity

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 7

 

and secured business loan balances. In addition, the increase compared with a year ago reflected the impact of the United National acquisition and the purchase of approximately $660 million of home equity loans, both of which occurred during the first quarter of 2004.

 

Average securities balances for the quarter increased $731 million compared with last quarter primarily due to higher balances of government agency securities.

 

During the fourth quarter of 2004, the Corporation repurchased 0.2 million common shares at an average cost of $56.11. The pending acquisition of Riggs National Corporation and BlackRock’s pending acquisition of SSRM Holdings, Inc. restricted share repurchases and will continue to do so over the next several quarters as we seek to maintain our relatively strong capital position.

 

ASSET QUALITY REVIEW

 

Overall asset quality remained strong due to our continued focus on lending that meets prudent risk-reward parameters. The provision for credit losses for the quarter was $19 million compared with $34 million a year ago and $13 million for the sequential quarter. The decrease in the provision compared with a year ago was attributable to the marked improvement in overall asset quality, while the increase compared with last quarter was attributable to growth in the loan portfolio.

 

Net charge-offs were $14 million for the quarter compared with $49 million a year ago and $13 million last quarter. The decrease in net charge-offs versus a year ago was primarily attributable to overall improvements in asset quality.

 

SUBSEQUENT EVENT

 

On January 18, 2005, PNC’s ownership in BlackRock was transferred from PNC Bank, N.A. to PNC Bancorp, Inc., our intermediate bank holding company. The transfer was effected primarily to give BlackRock more operating flexibility in anticipation of its pending acquisition of SSRM Holdings, Inc., particularly with respect to SSRM’s real estate activities. As a result of the transfer and the fact that BlackRock files a separate consolidated federal income tax return, certain deferred tax liabilities recorded by PNC will be reversed in the first quarter of 2005 in accordance with SFAS 109. This will increase earnings by $45 million, or approximately $0.16 per share, in the first quarter of 2005.

 

CONFERENCE CALL AND SUPPLEMENTARY FINANCIAL INFORMATION

 

PNC Chairman and Chief Executive Officer James E. Rohr and Vice Chairman and Chief Financial Officer William S. Demchak will hold a conference call for investors today at 10:00 a.m. Eastern Time regarding the topics addressed in this release and the related financial supplement. Investors should call five to 10 minutes before the start of the conference call at 800-990-2718 (domestic) or 706-643-0187 (international). A taped replay of the call will be available for one week at 800-642-1687 (domestic) and 706-645-9291 (international); enter conference ID 3011136.

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 8

 

In addition, internet access to the call (listen-only) and to PNC’s fourth quarter 2004 earnings release and supplementary financial information will be available on PNC’s website at www.pnc.com under “For Investors.” A replay of the webcast will be available on PNC’s website for 30 days.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

We make statements in this news release and in the conference call regarding this news release, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses, capital levels, asset quality or other future financial or business performance, strategies or expectations, or the impact of legal, regulatory or supervisory matters on our business operations or performance that are forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “believe,” “feel,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “position,” “target,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “objective,” “plan,” “aspiration,” “outcome,” “continue,” “remain,” “maintain,” “seek,” “strive,” “trend,” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Our 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. 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.

 

The factors that we have previously disclosed in our SEC reports and the following risks and uncertainties, among others, could cause actual results or future events to differ materially from those that we anticipated in our forward-looking statements or from our historical performance: (1) changes in political, economic or industry conditions, the interest rate environment or financial and capital markets (including as a result of actions of the Federal Reserve Board affecting interest rates or the money supply or otherwise reflecting changes in monetary policy), which could affect: (a) credit quality and the extent of our credit losses; (b) the extent of funding of our unfunded loan commitments and letters of credit; (c) our allowances for loan and lease losses and unfunded loan commitments and letters of credit; (d) demand for our credit or fee-based products and services; (e) our net interest income; (f) the value of assets under management and assets serviced, of private equity investments, of other debt and equity investments, of loans held for sale, or of other on-balance sheet or off-balance sheet assets or liabilities; or (g) the availability and terms of funding necessary to meet our liquidity needs; (2) the impact on us of legal and regulatory developments (including the following: (a) the 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 tax laws; and (e) changes in accounting policies and principles), with the impact of any such developments possibly affecting our ability to operate our businesses or our financial condition or results of operations or our reputation, which in turn could have an impact on such matters as business generation and retention, our ability to attract and retain management, liquidity and funding; (3) the impact on us of changes in the nature or extent of our competition; (4) the introduction, withdrawal, success and timing of our business initiatives and strategies; (5) customer acceptance of our products and services, and our customers’ borrowing, repayment, investment and deposit practices; (6) the impact on us of changes in the extent of customer or counterparty delinquencies, bankruptcies or defaults, which could affect, among other things, credit and asset quality risk and our provision for credit losses; (7) the ability to identify and effectively manage risks inherent in our business; (8) how we choose to redeploy available capital, including the extent and timing of any share repurchases and acquisitions or other investments in our businesses; (9) the impact, extent and timing of technological changes, the adequacy of intellectual property protection, and costs associated with obtaining rights in intellectual property claimed by others; (10) the timing and pricing of any sales of loans or other financial assets held for sale; (11) our ability to obtain desirable levels of insurance, and whether or not insurance coverage for claims by PNC is denied; (12) the relative and absolute investment performance of assets under management; and (13) the extent of terrorist activities and international hostilities, increases or continuations of which may adversely affect the economy and financial and capital markets generally or us specifically.

 

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PNC Reports Fourth Quarter Earnings of $307 million – Page 9

 

In addition, our forward-looking statements are also subject to risks and uncertainties related to our pending acquisition of Riggs National Corporation and the expected consequences of the integration of the remaining Riggs businesses at closing into PNC, including the following: (a) completion of the transaction is dependent on, among other things, receipt of stockholder and regulatory approvals, and we cannot at this point predict with precision when those approvals may be obtained or if they will be received at all; (b) successful completion of the transaction and our ability to realize the benefits that we anticipate from the acquisition also depend on the nature of any future developments with respect to Riggs’ regulatory issues, the ability to comply with the terms of all current or future regulatory requirements (including any related action plan) resulting from these issues, and the extent of future costs and expenses arising as a result of these issues, including the impact of increased litigation risk and any claims for indemnification or advancement of costs; (c) the transaction may be materially more expensive to complete than we anticipate as a result of unexpected factors or events; (d) the integration into PNC of the Riggs business and operations that we acquire, which will include conversion of Riggs’ different systems and procedures, may take longer than we anticipate, may be more costly than we anticipate, or may have unanticipated adverse results relating to Riggs’ or PNC’s existing businesses; (e) it may take longer than we expect to realize the anticipated cost savings of the acquisition, and those anticipated cost savings may not be achieved or may not be achieved in their entirety; and (f) the anticipated strategic and other benefits of the acquisition to us are dependent in part on the future performance of Riggs’ business, and there can be no assurance as to actual future results, which could be impacted by various factors, including the risks and uncertainties generally related to the performance of PNC’s and Riggs’ businesses (with respect to Riggs, see Riggs’ SEC reports, which are accessible on the SEC’s website at www.sec.gov) or due to factors related to the acquisition of Riggs and the process of integrating Riggs’ business at closing into ours.

 

Other mergers, acquisitions, restructurings, divestitures, business alliances or similar transactions, including our completed acquisitions of United National Bancorp and the loan origination business of Aviation Finance Group, LLC and our pending acquisition of SSRM Holdings Inc., will also be subject to similar risks and uncertainties related to our ability to realize expected cost savings or revenue enhancements or to implement integration and strategic plans and, in the case of SSRM Holdings Inc., related to our successful completion of the transaction.

 

In addition, risks and uncertainties that could affect the results anticipated in forward-looking statements or from historical performance that involve BlackRock are discussed in more detail and additional factors are identified in BlackRock’s SEC reports, accessible on the SEC’s website or on BlackRock’s website at www.blackrock.com.

 

You can find additional information on the foregoing risks and uncertainties and additional factors that could affect results anticipated in our forward-looking statements or from our historical performance in the reports that we file with the SEC. You can access our SEC reports on the SEC’s website at www.sec.gov or on or through our corporate website at www.pnc.com.

 

The PNC Financial Services Group, Inc. (PNC) and Riggs National Corporation (Riggs) have filed with the United States Securities and Exchange Commission (SEC) a proxy statement/prospectus and will file other relevant documents concerning the merger of Riggs with and into PNC (Merger). 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 website (www.sec.gov). In addition, documents filed with the SEC by PNC will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Riggs will be available free of charge from www.riggsbank.com.

 

The directors, executive officers, and certain other members of management of Riggs may be soliciting proxies in favor of the Merger from its shareholders. For information about these directors, executive officers, and members of management, shareholders are asked to refer to Riggs’s most recent annual meeting proxy statement, which is available at the web addresses provided in the preceding paragraph.

 

The PNC Financial Services Group, Inc. is one of the nation’s largest diversified financial services organizations, providing consumer and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.

 

[TABULAR MATERIAL FOLLOWS]

 

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Consolidated Financial Highlights

 

The PNC Financial Services Group, Inc.

 

     For the three months ended

    For the year ended

 

Dollars in millions, except per share data

Unaudited


   December 31
2004


    September 30
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

FINANCIAL PERFORMANCE

                                        

Revenue

                                        

Net interest income (taxable-equivalent basis) (a)

   $ 509     $ 498     $ 488     $ 1,989     $ 2,006  

Noninterest income

     904       838       861       3,563       3,257  
    


 


 


 


 


Total revenue

   $ 1,413     $ 1,336     $ 1,349     $ 5,552     $ 5,263  
    


 


 


 


 


Income before cumulative effect of accounting change

   $ 307     $ 258     $ 302     $ 1,197     $ 1,029  

Cumulative effect of accounting change

                     (28 )             (28 )
    


 


 


 


 


Net income

   $ 307     $ 258     $ 274     $ 1,197     $ 1,001  
    


 


 


 


 


Diluted earnings (loss) per common share

                                        

Before cumulative effect of accounting change

   $ 1.08     $ .91     $ 1.08     $ 4.21     $ 3.65  

Cumulative effect of accounting change

                     (.10 )             (.10 )
    


 


 


 


 


Net income

   $ 1.08     $ .91     $ .98     $ 4.21     $ 3.55  
    


 


 


 


 


Cash dividends declared per common share

   $ .50     $ .50     $ .50     $ 2.00     $ 1.94  
    


 


 


 


 


SELECTED RATIOS

                                        

Before cumulative effect of accounting change

                                        

Net interest margin

     3.12 %     3.19 %     3.38 %     3.22 %     3.64 %

Noninterest income to total revenue (b)

     64       63       64       64       62  

Efficiency (c)

     67       74       64       68       66  

From net income

                                        

Return on

                                        

Average common shareholders’ equity

     16.71 %     14.42 %     16.67 %     16.82 %     15.06 %

Average assets

     1.55       1.36       1.57       1.59       1.49  
                                          

Certain prior period amounts included in these Consolidated Financial Highlights have been reclassified to conform to the current period presentation.

 

(a) 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 a taxable investment. In order to provide accurate comparisons of yields and margins for all earning assets, we have increased the interest income earned on tax-exempt assets to make them fully equivalent to other taxable interest income investments.

 

The following is a reconciliation of net interest income as reported in the Consolidated Statement of Income to net interest income on a taxable-equivalent basis (in millions):

 

     For the three months ended

   For the year ended

     December 31
2004


   September 30
2004


   December 31
2003


   December 31
2004


   December 31
2003


Net interest income, GAAP basis

   $ 503    $ 491    $ 485    $ 1,969    $ 1,996

Taxable-equivalent adjustment

     6      7      3      20      10
    

  

  

  

  

Net interest income, taxable-equivalent basis

   $ 509    $ 498    $ 488    $ 1,989    $ 2,006
    

  

  

  

  

 

(b) Calculated as total noninterest income divided by the sum of net interest income and noninterest income.
(c) Calculated as noninterest expense divided by the sum of net interest income and noninterest income.

 


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Consolidated Financial Highlights

 

The PNC Financial Services Group, Inc.

 

     For the three months ended

    For the year ended

 

In millions

Unaudited


   December 31
2004


    September 30
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

BUSINESS EARNINGS

                                        

Banking businesses

                                        

Regional Community Banking

   $ 143     $ 134     $ 127     $ 504     $ 477  

Wholesale Banking

     108       100       117       443       391  

PNC Advisors

     24       24       20       106       89  
    


 


 


 


 


Total banking businesses

     275       258       264       1,053       957  
    


 


 


 


 


Asset management and processing businesses

                                        

BlackRock (a)

     50       (10 )     41       143       155  

PFPC

     20       17       18       70       64  
    


 


 


 


 


Total asset management and processing businesses

     70       7       59       213       219  
    


 


 


 


 


Total business segment earnings

     345       265       323       1,266       1,176  

Minority interest in (income) loss of BlackRock

     (15 )     3       (12 )     (42 )     (47 )

Other

     (23 )     (10 )     (9 )     (27 )     (100 )
    


 


 


 


 


Results before cumulative effect of accounting change

     307       258       302       1,197       1,029  

Cumulative effect of accounting change

                     (28 )             (28 )
    


 


 


 


 


Total consolidated

   $ 307     $ 258     $ 274     $ 1,197     $ 1,001  
    


 


 


 


 


 

Dollars in millions, except per share data

Unaudited


   December 31
2004


    September 30
2004


    December 31
2003


 

BALANCE SHEET DATA

                        

Assets

   $ 79,723     $ 77,298     $ 68,168  

Earning assets

     65,055       63,867       56,243  

Loans, net of unearned income

     43,495       42,480       36,303  

Allowance for loan and lease losses

     607       581       632  

Securities

     16,761       16,824       15,690  

Loans held for sale

     1,670       1,582       1,400  

Deposits

     53,269       51,162       45,241  

Borrowed funds

     11,964       12,919       11,453  

Allowance for unfunded loan commitments and letters of credit

     75       96       91  

Shareholders’ equity

     7,473       7,312       6,645  

Common shareholders’ equity

     7,465       7,304       6,636  

Book value per common share

     26.41       25.89       23.97  

Common shares outstanding (millions)

     283       283       277  

Loans to deposits

     82 %     83 %     80 %

ASSETS UNDER MANAGEMENT (billions)(b)

   $ 383     $ 362     $ 354  

NONDISCRETIONARY ASSETS UNDER ADMINISTRATION (billions)(b)

   $ 93     $ 91     $ 87  

FUND ASSETS SERVICED (billions)

                        

Accounting/administration net assets

   $ 721     $ 667     $ 654  

Custody assets

     451       418       401  

CAPITAL RATIOS

                        

Tier 1 Risk-based (c)

     9.0 %     9.0 %     9.5 %

Total Risk-based (c)

     13.0       12.5       13.8  

Leverage (c)

     7.6       7.7       8.2  

Tangible common (d)

     5.7       5.6       6.3  

Shareholders’ equity to total assets

     9.37       9.46       9.75  

Common shareholders’ equity to total assets

     9.36       9.45       9.73  

ASSET QUALITY RATIOS

                        

Nonperforming assets to loans, loans held for sale and foreclosed assets

     .39 %     .42 %     .87 %

Nonperforming loans to loans

     .33       .35       .73  

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

     .13       .12       .53  

Allowance for loan and lease losses to loans

     1.40       1.37       1.74  

Allowance for loan and lease losses to nonperforming loans

     424       393       238  

(a) BlackRock results for the three months ended September 30, 2004 reflected a $57 million after-tax impact related to the BlackRock 2002 Long-Term Retention and Incentive Plan (LTIP) charge. The after-tax impact of the LTIP charge for the three months and year ended December 31, 2004 was $8 million and $65 million, respectively.
(b) Balances at December 31, 2004 and September 30, 2004 reflect the first quarter 2004 sale of certain activities of the investment consulting business of PNC Advisor’s Hawthorn unit and the expected reduction of approximately $5.9 billion of assets under management with approximately $4.4 billion moving to nondiscretionary assets under administration.
(c) Estimated for December 31, 2004.
(d) Common shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets less goodwill and other intangible assets (excluding mortgage servicing rights).


Table of Contents

LOGO

 

THE PNC FINANCIAL SERVICES GROUP, INC.

 

FINANCIAL SUPPLEMENT (UNAUDITED)

FOURTH QUARTER AND FULL YEAR 2004


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT (UNAUDITED)

FOURTH QUARTER AND FULL YEAR 2004

 

     Page

Consolidated Statement of Income

   1 - 2

Consolidated Balance Sheet

   3

Capital and Asset Quality Ratios

   3

Results of Businesses

    

Summary and Reconciliation to Total Consolidated Results

   4 - 5

Banking Businesses

    

Regional Community Banking

   6 - 7

Wholesale Banking

   8 - 9

PNC Advisors

   10-12

Asset Management and Processing Businesses

    

BlackRock

   13-14

PFPC

   15-16

Details of Net Interest Income, Net Interest Margin and Trading Revenue

   17

Details of Noninterest Income and Noninterest Expense

   18

Average Consolidated Balance Sheet

   19-22

Details of Loans and Lending Statistics

   23

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

   24

Details of Nonperforming Assets

   25-26

Glossary of Terms

   27-29

Business Segment Products and Services

   30

 

The information contained in this Financial Supplement is preliminary, unaudited and based on data available at January 21, 2005. 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 SEC filings. We have reclassified certain prior period amounts included in this Financial Supplement to be consistent with the current period presentation. See our Current Report on Form 8-K dated April 5, 2004 regarding changes to the presentation of the results of our businesses as reflected in this Financial Supplement on pages 4 through 16. Business segment products and services are described on page 30.

 

The average full-time equivalent employee (FTE) statistics disclosed in this Financial Supplement for each business segment reflect staff directly employed by the respective business segment and exclude corporate and shared services employees.

 

The PNC Financial Services Group, Inc. (PNC) and Riggs National Corporation (Riggs) have filed with the United States Securities and Exchange Commission (SEC) a proxy statement/prospectus and will file other relevant documents concerning the merger of Riggs with and into PNC (Merger). 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 website (www.sec.gov). In addition, documents filed with the SEC by PNC will be available free of charge from Shareholder Relations at (800) 843-2206. Documents filed with the SEC by Riggs will be available free of charge from www.riggsbank.com.

 

The directors, executive officers, and certain other members of management of Riggs may be soliciting proxies in favor of the Merger from its shareholders. For information about these directors, executive officers, and members of management, shareholders are asked to refer to Riggs’ most recent annual meeting proxy statement, which is available at the web addresses provided in the preceding paragraph.


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Consolidated Statement of Income (Unaudited)

 

For the year ended - in millions, except per share data


   December 31
2004


   December 31
2003


    December 31
2002


 

Interest Income

                       

Loans and fees on loans

   $ 2,043    $ 1,962     $ 2,294  

Securities

     568      581       616  

Other

     141      169       262  
    

  


 


Total interest income

     2,752      2,712       3,172  
    

  


 


Interest Expense

                       

Deposits

     484      457       659  

Borrowed funds

     299      259       316  
    

  


 


Total interest expense

     783      716       975  
    

  


 


Net interest income

     1,969      1,996       2,197  

Provision for credit losses

     52      177       309  
    

  


 


Net interest income less provision for credit losses

     1,917      1,819       1,888  
    

  


 


Noninterest Income

                       

Asset management

     994      861       853  

Fund servicing

     817      762       816  

Service charges on deposits

     252      239       227  

Brokerage

     219      184       195  

Consumer services

     264      251       239  

Corporate services

     473      485       526  

Equity management gains (losses)

     67      (25 )     (51 )

Net securities gains

     55      116       89  

Other

     422      384       303  
    

  


 


Total noninterest income

     3,563      3,257       3,197  
    

  


 


Noninterest Expense

                       

Compensation

     1,755      1,480       1,417  

Employee benefits

     309      324       284  

Net occupancy

     267      282       243  

Equipment

     290      276       271  

Marketing

     87      64       51  

Other

     1,027      1,050       961  
    

  


 


Total noninterest expense

     3,735      3,476       3,227  
    

  


 


Income from continuing operations before minority and noncontrolling interests and income taxes

     1,745      1,600       1,858  

Minority and noncontrolling interests in income of consolidated entities

     10      32       37  

Income taxes

     538      539       621  
    

  


 


Income from continuing operations

     1,197      1,029       1,200  

Income (loss) from discontinued operations (less applicable income tax benefit of $9)

                    (16 )
    

  


 


Income before cumulative effect of accounting change

     1,197      1,029       1,184  

Cumulative effect of accounting change (less applicable income tax benefit of $14)

            (28 )        
    

  


 


Net income

   $ 1,197    $ 1,001     $ 1,184  
    

  


 


Earnings Per Common Share

                       

From continuing operations

                       

Basic

   $ 4.25    $ 3.68     $ 4.23  

Diluted

   $ 4.21    $ 3.65     $ 4.20  

From net income

                       

Basic

   $ 4.25    $ 3.58     $ 4.18  

Diluted

   $ 4.21    $ 3.55     $ 4.15  

Average Common Shares Outstanding

                       

Basic

     281      280       283  

Diluted

     284      281       285  

 

Page 1


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Consolidated Statement of Income (Unaudited)

 

For the three months ended - in millions, except per share data


   December 31
2004


   September 30
2004


    June 30
2004


   March 31
2004


   December 31
2003


 

Interest Income

                                     

Loans and fees on loans

   $ 547    $ 516     $ 490    $ 490    $ 472  

Securities

     154      139       130      145      141  

Other

     42      30       38      31      47  
    

  


 

  

  


Total interest income

     743      685       658      666      660  
    

  


 

  

  


Interest Expense

                                     

Deposits

     152      121       107      104      102  

Borrowed funds

     88      73       70      68      73  
    

  


 

  

  


Total interest expense

     240      194       177      172      175  
    

  


 

  

  


Net interest income

     503      491       481      494      485  

Provision for credit losses

     19      13       8      12      34  
    

  


 

  

  


Net interest income less provision for credit losses

     484      478       473      482      451  
    

  


 

  

  


Noninterest Income

                                     

Asset management

     254      238       250      252      229  

Fund servicing

     209      204       200      204      193  

Service charges on deposits

     65      65       63      59      62  

Brokerage

     53      52       56      58      51  

Consumer services

     68      66       67      63      63  

Corporate services

     120      100       128      125      123  

Equity management gains

     9      16       35      7         

Net securities gains

     10      16       14      15      15  

Other

     116      81       97      128      125  
    

  


 

  

  


Total noninterest income

     904      838       910      911      861  
    

  


 

  

  


Noninterest Expense

                                     

Compensation

     452      500       414      389      389  

Employee benefits

     82      76       77      74      83  

Net occupancy

     64      68       67      68      65  

Equipment

     74      72       70      74      71  

Marketing

     24      19       24      20      15  

Other

     253      246       258      270      235  
    

  


 

  

  


Total noninterest expense

     949      981       910      895      858  
    

  


 

  

  


Income before minority and noncontrolling interests and income taxes

     439      335       473      498      454  

Minority and noncontrolling interests in income (loss) of consolidated entities

     5      (13 )     11      7      6  

Income taxes

     127      90       158      163      146  
    

  


 

  

  


Income before cumulative effect of accounting change

     307      258       304      328      302  

Cumulative effect of accounting change (less applicable income tax benefit of $14)

                                  (28 )
    

  


 

  

  


Net income

   $ 307    $ 258     $ 304    $ 328    $ 274  
    

  


 

  

  


Earnings Per Common Share

                                     

Before cumulative effect of accounting change

                                     

Basic

   $ 1.09    $ .92     $ 1.08    $ 1.16    $ 1.09  

Diluted

   $ 1.08    $ .91     $ 1.07    $ 1.15    $ 1.08  

From net income

                                     

Basic

   $ 1.09    $ .92     $ 1.08    $ 1.16    $ .99  

Diluted

   $ 1.08    $ .91     $ 1.07    $ 1.15    $ .98  

Average Common Shares Outstanding

                                     

Basic

     281      281       281      282      276  

Diluted

     283      283       283      284      278  

 

Page 2


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Consolidated Balance Sheet (Unaudited)

 

In millions, except par value


   December 31
2004


    September 30
2004


   

June 30

2004


    March 31
2004


    December 31
2003


 

Assets

                                        

Cash and due from banks

   $ 3,230     $ 3,005     $ 3,065     $ 2,787     $ 2,968  

Federal funds sold and resale agreements

     1,635       1,154       1,096       1,979       1,876  

Other short-term investments

     1,848       1,801       1,335       1,243       720  

Loans held for sale

     1,670       1,582       1,457       1,548       1,400  

Securities

     16,761       16,824       14,954       16,941       15,690  

Loans, net of unearned income of $902, $931, $923, $980 and $1,009

     43,495       42,480       40,835       39,451       36,303  

Allowance for loan and lease losses

     (607 )     (581 )     (593 )     (604 )     (632 )
    


 


 


 


 


Net loans

     42,888       41,899       40,242       38,847       35,671  

Goodwill

     3,001       3,007       2,978       2,975       2,390  

Other intangible assets

     354       348       351       341       317  

Other

     8,336       7,678       7,641       7,454       7,136  
    


 


 


 


 


Total assets

   $ 79,723     $ 77,298     $ 73,119     $ 74,115     $ 68,168  
    


 


 


 


 


Liabilities

                                        

Deposits

                                        

Noninterest-bearing

   $ 12,915     $ 12,461     $ 12,246     $ 11,879     $ 11,505  

Interest-bearing

     40,354       38,701       37,748       36,246       33,736  
    


 


 


 


 


Total deposits

     53,269       51,162       49,994       48,125       45,241  

Borrowed funds

                                        

Federal funds purchased

     219       2,008       1,069       2,648       169  

Repurchase agreements

     1,376       1,595       1,163       1,279       1,081  

Bank notes and senior debt

     2,383       2,997       2,796       2,829       2,823  

Subordinated debt

     4,050       3,569       3,510       3,837       3,729  

Commercial paper

     2,251       1,805       1,743       1,934       2,226  

Other borrowed funds

     1,685       945       656       1,195       1,425  
    


 


 


 


 


Total borrowed funds

     11,964       12,919       10,937       13,722       11,453  

Allowance for unfunded loan commitments and letters of credit

     75       96       84       91       91  

Accrued expenses

     2,406       2,402       2,221       2,313       2,275  

Other

     4,032       2,908       2,400       2,216       2,001  
    


 


 


 


 


Total liabilities

     71,746       69,487       65,636       66,467       61,061  
    


 


 


 


 


Authorized 800 shares, Minority and noncontrolling interests in consolidated entities

     504       499       419       418       462  

Shareholders’ Equity

                                        

Preferred stock (a)

                                        

Common stock - $5 par value Authorized 800 shares issued 353 shares

     1,764       1,764       1,764       1,764       1,764  

Capital surplus

     1,265       1,246       1,235       1,209       1,108  

Retained earnings

     8,273       8,107       7,991       7,829       7,642  

Deferred compensation expense

     (51 )     (52 )     (54 )     (27 )     (29 )

Accumulated other comprehensive (loss) income

     (54 )     (25 )     (139 )     180       60  

Common stock held in treasury at cost: 70, 70, 71, 71 and 76 shares

     (3,724 )     (3,728 )     (3,733 )     (3,725 )     (3,900 )
    


 


 


 


 


Total shareholders’ equity

     7,473       7,312       7,064       7,230       6,645  
    


 


 


 


 


Total liabilities, minority and noncontrolling interests, and shareholders’ equity

   $ 79,723     $ 77,298     $ 73,119     $ 74,115     $ 68,168  
    


 


 


 


 


CAPITAL RATIOS

                                        

Tier 1 Risk-based (b)

     9.0 %     9.0 %     9.1 %     9.1 %     9.5 %

Total Risk-based (b)

     13.0       12.5       12.9       13.1       13.8  

Leverage (b)

     7.6       7.7       7.7       7.7       8.2  

Tangible common

     5.7       5.6       5.6       5.8       6.3  

Shareholders’ equity to total assets

     9.37       9.46       9.66       9.76       9.75  

Common shareholders’ equity to total assets

     9.36       9.45       9.65       9.74       9.73  

ASSET QUALITY RATIOS

                                        

Nonperforming assets to total loans, loans held for sale and foreclosed assets

     .39 %     .42 %     .49 %     .56 %     .87 %

Nonperforming loans to loans

     .33       .35       .41       .46       .73  

Net charge-offs to average loans (For the three months ended)

     .13       .12       .26       .64       .53  

Allowance for loan and lease losses to loans

     1.40       1.37       1.45       1.53       1.74  

Allowance for loan and lease losses to nonperforming loans

     424       393       351       330       238  

(a) Less than $.5 million at each date.
(b) Estimated for December 31, 2004.

 

Page 3


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Results of Businesses - Summary and Reconciliation to Total Consolidated Results (Unaudited) (a)

 

Year ended – dollars in millions

 

Earnings


   December 31
2004


    December 31
2003


 

Banking businesses

                

Regional Community Banking

   $ 504     $ 477  

Wholesale Banking

     443       391  

PNC Advisors

     106       89  
    


 


Total banking businesses

     1,053       957  
    


 


Asset management and processing businesses

                

BlackRock (b)

     143       155  

PFPC

     70       64  
    


 


Total asset management and processing businesses

     213       219  
    


 


Total business segment earnings

     1,266       1,176  

Minority interest in income of BlackRock

     (42 )     (47 )

Other

     (27 )     (100 )
    


 


Results before cumulative effect of accounting change

     1,197       1,029  

Cumulative effect of accounting change

             (28 )
    


 


Total consolidated earnings

   $ 1,197     $ 1,001  
    


 


Revenue (c)


   December 31
2004


    December 31
2003


 

Banking businesses

                

Regional Community Banking

   $ 2,073     $ 1,892  

Wholesale Banking

     1,271       1,282  

PNC Advisors

     629       615  
    


 


Total banking businesses

     3,973       3,789  
    


 


Asset management and processing businesses

                

BlackRock

     725       598  

PFPC

     814       762  
    


 


Total asset management and processing businesses

     1,539       1,360  
    


 


Total business segment revenue

     5,512       5,149  

Other

     40       114  
    


 


Total consolidated revenue

   $ 5,552     $ 5,263  
    


 



(a) See our Current Report on Form 8-K dated April 5, 2004 regarding changes to the presentation of the results of our businesses. Our business segment 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 businesses change.
(b) BlackRock results for 2004 reflect after-tax charges totaling $65 million for BlackRock’s 2002 Long-Term Retention and Incentive Program (LTIP).
(c) Business segment revenue is presented on a taxable-equivalent basis except for BlackRock and PFPC. BlackRock began reporting revenue on a taxable-equivalent basis in 2004. BlackRock for 2003 and PFPC for both years is presented on a book (GAAP) basis. 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 a taxable investment. To provide accurate comparisons of yields and margins for all earning assets, we have increased the interest income earned on tax-exempt assets to make them fully equivalent to other taxable interest income investments. The following is a reconciliation of total consolidated revenue on a book (GAAP) basis to total consolidated revenue on a taxable-equivalent basis (in millions):

 

     December 31
2004


   December 31
2003


Total consolidated revenue, book (GAAP) basis

   $ 5,532    $ 5,253

Taxable-equivalent adjustment

     20      10
    

  

Total consolidated revenue, taxable-equivalent basis

   $ 5,552    $ 5,263
    

  

 

Page 4


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Results of Businesses - Summary and Reconciliation to Total Consolidated Results (Unaudited) (a)

 

Three months ended – dollars in millions

 

Earnings


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Banking businesses

                                        

Regional Community Banking

   $ 143     $ 134     $ 125     $ 102     $ 127  

Wholesale Banking

     108       100       113       122       117  

PNC Advisors

     24       24       27       31       20  
    


 


 


 


 


Total banking businesses

     275       258       265       255       264  
    


 


 


 


 


Asset management and processing businesses

                                        

BlackRock (b)

     50       (10 )     48       55       41  

PFPC

     20       17       17       16       18  
    


 


 


 


 


Total asset management and processing businesses

     70       7       65       71       59  
    


 


 


 


 


Total business segment earnings

     345       265       330       326       323  

Minority interest in (income) loss of BlackRock

     (15 )     3       (14 )     (16 )     (12 )

Other

     (23 )     (10 )     (12 )     18       (9 )
    


 


 


 


 


Results before cumulative effect of accounting change

     307       258       304       328       302  

Cumulative effect of accounting change

                                     (28 )
    


 


 


 


 


Total consolidated earnings

   $ 307     $ 258     $ 304     $ 328     $ 274  
    


 


 


 


 


Revenue (c)


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Banking businesses

                                        

Regional Community Banking

   $ 536     $ 525     $ 511     $ 501     $ 489  

Wholesale Banking

     333       299       322       317       330  

PNC Advisors

     154       151       154       170       159  
    


 


 


 


 


Total banking businesses

     1,023       975       987       988       978  
    


 


 


 


 


Asset management and processing businesses

                                        

BlackRock

     188       171       184       182       161  

PFPC

     209       203       199       203       194  
    


 


 


 


 


Total asset management and processing businesses

     397       374       383       385       355  
    


 


 


 


 


Total business segment revenue

     1,420       1,349       1,370       1,373       1,333  

Other

     (7 )     (13 )     25       35       16  
    


 


 


 


 


Total consolidated revenue

   $ 1,413     $ 1,336     $ 1,395     $ 1,408     $ 1,349  
    


 


 


 


 



(a) See Note (a) on page 4.
(b) BlackRock results for the third quarter of 2004 reflect a $57 million after-tax charge for the BlackRock LTIP.
(c) Business segment revenue is presented on a taxable-equivalent basis except for BlackRock and PFPC. BlackRock began reporting revenue on a taxable-equivalent basis in the third quarter of 2004. BlackRock for all other prior periods and PFPC for all periods is presented on a book (GAAP) basis. 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 a taxable investment. To provide accurate comparisons of yields and margins for all earning assets, we have increased the interest income earned on tax-exempt assets to make them fully equivalent to other taxable interest income investments. The following is a reconciliation of total consolidated revenue on a book (GAAP) basis to total consolidated revenue on a taxable-equivalent basis (in millions):

 

     December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


   December 31
2003


Total consolidated revenue, book (GAAP) basis

   $ 1,407    $ 1,329    $ 1,391    $ 1,405    $ 1,346

Taxable-equivalent adjustment

     6      7      4      3      3
    

  

  

  

  

Total consolidated revenue, taxable-equivalent basis

   $ 1,413    $ 1,336    $ 1,395    $ 1,408    $ 1,349
    

  

  

  

  

 

Page 5


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Regional Community Banking (Unaudited) (a)

 

Year ended; taxable-equivalent basis (a)

Dollars in millions


   December 31
2004


    December 31
2003


 

INCOME STATEMENT

                

Net interest income

   $ 1,360     $ 1,223  

Noninterest income

                

Service charges on deposits

     242       228  

Investment products

     112       116  

Other

     359       325  
    


 


Total noninterest income

     713       669  
    


 


Total revenue

     2,073       1,892  

Provision for credit losses

     62       40  

Noninterest expense

                

Compensation and employee benefits

     534       484  

Net occupancy and equipment

     263       245  

Other

     419       373  
    


 


Total noninterest expense

     1,216       1,102  
    


 


Pretax earnings

     795       750  

Income taxes

     291       273  
    


 


Earnings

   $ 504     $ 477  
    


 


AVERAGE BALANCE SHEET

                

Loans

                

Consumer

                

Home equity

   $ 10,791     $ 8,285  

Indirect

     843       477  

Other consumer

     547       510  
    


 


Total consumer

     12,181       9,272  

Commercial

     4,034       3,218  

Floor plan

     970       844  

Residential mortgage

     759       466  

Other

     25       23  
    


 


Total loans

     17,969       13,823  

Goodwill

     1,001       429  

Loans held for sale

     1,183       1,164  

Other assets

     1,588       1,333  
    


 


Total assets

   $ 21,741     $ 16,749  
    


 


Deposits

                

Noninterest-bearing demand

   $ 6,584     $ 5,575  

Interest-bearing demand

     6,967       6,308  

Money market

     12,217       12,303  
    


 


Total transaction deposits

     25,768       24,186  

Savings

     2,611       2,023  

Certificates of deposit

     8,782       8,572  
    


 


Total deposits

     37,161       34,781  

Other liabilities

     243       168  

Capital

     2,380       2,231  
    


 


Total funds

   $ 39,784     $ 37,180  
    


 


PERFORMANCE RATIOS

                

Return on capital

     21 %     21 %

Noninterest income to total revenue

     34       35  

Efficiency

     59       58  

OTHER INFORMATION

                

Total nonperforming assets (c)

   $ 91     $ 85  

Net charge-offs (c)

   $ 63     $ 44  

Annualized net charge-off ratio (c)

     .35 %     .32 %

Home equity portfolio credit statistics:

                

Percentage of first lien positions

     51 %     51 %

Weighted average loan-to-value ratios

     71 %     70 %

Weighted average FICO scores

     716       713  

Loans 90 days past due

     .22 %     .25 %

Gains on sales of education loans (d)

   $ 30     $ 20  

Average FTE staff

     10,255       9,564  

ATMs

     3,581       3,600  

Branches

     774       719  

Checking relationships

     1,741,000       1,611,000  

Consumer DDA households using online banking

     711,000       593,000  

% of consumer DDA households using online banking

     45 %     41 %

Consumer DDA households using online bill payment

     112,000       63,000  

% of consumer DDA households using online bill payment

     7 %     4 %

Small business deposits

                

Demand

   $ 5,611     $ 4,969  

Money market

     2,711       2,128  

Certificates of deposit

     312       335  

(a) See Notes (a) and (c) on page 4.
(b) Presented as of period-end, except for net charge-offs, annualized net charge-off ratio, home equity portfolio weighted average statistics, gains on sales of education loans, average FTE staff and small business deposits.
(c) See Note (a) on page 25.
(d) Included in “Other noninterest income” above.

 

Page 6


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Regional Community Banking (Unaudited) (a)

 

Three months ended; taxable-equivalent basis (a)

Dollars in millions


   December 31
2004


    September 30
2004


   

June 30

2004


    March 31
2004


    December 31
2003


 

INCOME STATEMENT

                                        

Net interest income

   $ 345     $ 342     $ 340     $ 333     $ 314  

Noninterest income

                                        

Service charges on deposits

     62       63       60       57       59  

Investment products

     27       27       29       29       27  

Other

     102       93       82       82       89  
    


 


 


 


 


Total noninterest income

     191       183       171       168       175  
    


 


 


 


 


Total revenue

     536       525       511       501       489  

Provision for credit losses

     14       13       6       29       14  

Noninterest expense

                                        

Compensation and employee benefits

     136       132       130       136       122  

Net occupancy and equipment

     63       66       66       68       60  

Other

     98       102       111       108       94  
    


 


 


 


 


Total noninterest expense

     297       300       307       312       276  
    


 


 


 


 


Pretax earnings

     225       212       198       160       199  

Income taxes

     82       78       73       58       72  
    


 


 


 


 


Earnings

   $ 143     $ 134     $ 125     $ 102     $ 127  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Loans

                                        

Consumer

                                        

Home equity

   $ 11,652     $ 11,283     $ 10,734     $ 9,478     $ 8,926  

Indirect

     881       879       836       774       510  

Other consumer

     464       514       533       682       474  
    


 


 


 


 


Total consumer

     12,997       12,676       12,103       10,934       9,910  

Commercial

     4,220       4,113       3,943       3,901       3,205  

Floor plan

     961       929       1,037       947       844  

Residential mortgage

     708       737       776       813       389  

Other

     26       25       24       28       22  
    


 


 


 


 


Total loans

     18,912       18,480       17,883       16,623       14,370  

Goodwill

     1,000       1,005       1,005       994       438  

Loans held for sale

     1,221       1,238       1,156       1,115       1,158  

Other assets

     1,443       1,447       1,587       2,060       1,312  
    


 


 


 


 


Total assets

   $ 22,576     $ 22,170     $ 21,631     $ 20,792     $ 17,278  
    


 


 


 


 


Deposits

                                        

Noninterest-bearing demand

   $ 6,883     $ 6,712     $ 6,464     $ 6,248     $ 5,804  

Interest-bearing demand

     7,098       6,937       6,916       6,916       6,596  

Money market

     11,937       12,112       12,465       12,356       12,140  
    


 


 


 


 


Total transaction deposits

     25,918       25,761       25,845       25,520       24,540  

Savings

     2,727       2,659       2,548       2,508       2,020  

Certificates of deposit

     9,363       8,775       8,421       8,565       8,047  
    


 


 


 


 


Total deposits

     38,008       37,195       36,814       36,593       34,607  

Other liabilities

     164       185       223       432       147  

Capital

     2,420       2,375       2,364       2,362       2,218  
    


 


 


 


 


Total funds

   $ 40,592     $ 39,755     $ 39,401     $ 39,387     $ 36,972  
    


 


 


 


 


PERFORMANCE RATIOS

                                        

Return on capital

     24 %     22 %     21 %     17 %     23 %

Noninterest income to total revenue

     36       35       33       34       36  

Efficiency

     55       57       60       62       56  

OTHER INFORMATION (b)

                                        

Total nonperforming assets (c)

   $ 91     $ 85     $ 81     $ 75     $ 85  

Net charge-offs (c)

   $ 11     $ 10     $ 10     $ 32     $ 12  

Annualized net charge-off ratio (c)

     .23 %     .22 %     .22 %     .77 %     .33 %

Home equity portfolio credit statistics:

                                        

Percentage of first lien positions

     51 %     51 %     51 %     50 %     51 %

Weighted average loan-to-value ratios

     71 %     71 %     71 %     72 %     70 %

Weighted average FICO scores

     716       717       717       713       713  

Loans 90 days past due

     .22 %     .22 %     .20 %     .23 %     .25 %

Gains on sales of education loans (d)

   $ 13     $ 15     $ 2             $ 8  

Average FTE staff

     10,109       10,251       10,254       10,379       9,589  

ATMs

     3,581       3,555       3,528       3,486       3,600  

Branches

     774       774       775       769       719  

Checking relationships

     1,741,000       1,732,000       1,700,000       1,679,000       1,611,000  

Consumer DDA households using online banking

     711,000       690,000       663,000       637,000       593,000  

% of consumer DDA households using online banking

     45 %     44 %     43 %     42 %     41 %

Consumer DDA households using online bill payment

     112,000       108,000       112,000       102,000       63,000  

% of consumer DDA households using online bill payment

     7 %     7 %     7 %     7 %     4 %

Small business deposits

                                        

Demand

   $ 5,967     $ 5,641     $ 5,423     $ 5,407     $ 5,303  

Money market

     2,836       2,788       2,707       2,510       2,283  

Certificates of deposit

     318       304       300       324       300  

(a) See Notes (a) and (c) on page 4.
(b) Presented as of period-end, except for net charge-offs, annualized net charge-off ratio, home equity portfolio weighted average statistics, gains on sales of education loans, average FTE staff and small business deposits.
(c) See Note (a) on page 25.
(d) Included in “Other noninterest income” above.

 

Page 7


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Wholesale Banking (Unaudited) (a)

 

Year ended; taxable-equivalent basis (a)

Dollars in millions except as noted


   December 31
2004


    December 31
2003


 

INCOME STATEMENT

                

Net interest income

   $ 694     $ 677  

Net interest income - FIN 46

     4       3  
    


 


Total net interest income

     698       680  

Noninterest income

                

Net commercial mortgage banking

                

Net gains on loan sales

     50       52  

Servicing and other fees, net of amortization

     47       39  

Net gains on institutional loans held for sale

     52       69  

Other - FIN 46

     17       14  

Other

     407       428  
    


 


Noninterest income

     573       602  
    


 


Total revenue

     1,271       1,282  

Provision for credit losses

     5       121  

Noninterest expense - FIN 46

     61       36  

Noninterest expense

     610       598  
    


 


Pretax earnings

     595       527  

Noncontrolling interests in income of consolidated entities

     (43 )     (21 )

Income taxes

     195       157  
    


 


Earnings

   $ 443     $ 391  
    


 


AVERAGE BALANCE SHEET

                

Loans (b)

                

Corporate banking

   $ 9,865     $ 9,410  

Commercial real estate

     1,834       1,872  

Commercial - real estate related

     1,631       1,404  

PNC Business Credit

     3,803       3,551  
    


 


Total loans

     17,133       16,237  

Loans held for sale

     470       572  

Other assets

     4,470       4,214  
    


 


Total assets

   $ 22,073     $ 21,023  
    


 


Deposits

   $ 7,527     $ 6,354  

Commercial paper

     1,889       1,232  

Other liabilities

     3,433       3,250  

Capital

     1,672       1,994  
    


 


Total funds

   $ 14,521     $ 12,830  
    


 


PERFORMANCE RATIOS

                

Return on capital

     26 %     20 %

Noninterest income to total revenue

     45       47  

Efficiency

     53       49  

COMMERCIAL MORTGAGE

                

SERVICING PORTFOLIO (in billions)

                

Beginning of period

   $ 83     $ 74  

Acquisitions/additions

     41       23  

Repayments/transfers

     (26 )     (14 )
    


 


End of period

   $ 98     $ 83  
    


 


OTHER INFORMATION

                

Consolidated revenue from:

                

Treasury management

   $ 373     $ 360  

Capital markets

   $ 140     $ 119  

Midland Loan Services

   $ 108     $ 96  

Total loans (c)

   $ 17,959     $ 16,441  

Total nonperforming assets (c)

   $ 71     $ 227  

Net charge-offs

   $ 49     $ 158  

Average FTE staff

     3,086       2,989  

Net carrying amount of commercial mortgage servicing rights (c)

   $ 242     $ 209  

(a) See Notes (a) and (c) on page 4.
(b) Includes Market Street Funding Corporation. See Supplemental Average Balance Sheet Information on page 19.
(c) Presented as of period-end.

 

Page 8


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Wholesale Banking (Unaudited) (a)

 

 

Three months ended

Taxable-equivalent basis (a)

Dollars in millions except as noted


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

INCOME STATEMENT

                                        

Net interest income

   $ 182     $ 179     $ 170     $ 163     $ 169  

Net interest income - FIN 46

     1       1       1       1       1  
    


 


 


 


 


Total net interest income

     183       180       171       164       170  

Noninterest income

                                        

Net commercial mortgage banking

                                        

Net gains on loan sales

     20       6       14       10       14  

Servicing and other fees, net of amortization

     12       12       12       11       9  

Net gains on institutional loans held for sale

     2       5       17       28       16  

Other - FIN 46

     5       4       4       4       8  

Other

     111       92       104       100       113  
    


 


 


 


 


Noninterest income

     150       119       151       153       160  
    


 


 


 


 


Total revenue

     333       299       322       317       330  

Provision for credit losses

     9       1       8       (13 )     9  

Noninterest expense - FIN 46

     16       15       15       15       17  

Noninterest expense

     165       151       147       147       150  
    


 


 


 


 


Pretax earnings

     143       132       152       168       154  

Noncontrolling interests in income of consolidated entities

     (11 )     (12 )     (10 )     (10 )     (8 )

Income taxes

     46       44       49       56       45  
    


 


 


 


 


Earnings

   $ 108     $ 100     $ 113     $ 122     $ 117  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Loans (b)

                                        

Corporate banking

   $ 10,139     $ 9,776     $ 9,669     $ 9,875     $ 10,233  

Commercial real estate

     1,824       1,902       1,934       1,665       1,647  

Commercial - real estate related

     1,743       1,704       1,465       1,585       1,350  

PNC Business Credit

     3,976       3,838       3,788       3,608       3,658  
    


 


 


 


 


Total loans

     17,682       17,220       16,856       16,733       16,888  

Loans held for sale

     555       349       493       484       549  

Other assets

     4,514       4,010       4,640       4,630       4,574  
    


 


 


 


 


Total assets

   $ 22,751     $ 21,579     $ 21,989     $ 21,847     $ 22,011  
    


 


 


 


 


Deposits

   $ 8,536     $ 7,882     $ 6,981     $ 6,694     $ 6,641  

Commercial paper

     1,954       1,679       1,815       2,111       2,386  

Other liabilities

     3,395       2,944       3,583       3,725       3,707  

Capital

     1,590       1,586       1,659       1,854       1,942  
    


 


 


 


 


Total funds

   $ 15,475     $ 14,091     $ 14,038     $ 14,384     $ 14,676  
    


 


 


 


 


PERFORMANCE RATIOS

                                        

Return on capital

     27 %     25 %     27 %     26 %     24 %

Noninterest income to total revenue

     45       40       47       48       48  

Efficiency

     54       56       50       51       51  

COMMERCIAL MORTGAGE

                                        

SERVICING PORTFOLIO (in billions)

                                        

Beginning of period

   $ 93     $ 89     $ 86     $ 83     $ 80  

Acquisitions/additions

     12       11       11       7       6  

Repayments/transfers

     (7 )     (7 )     (8 )     (4 )     (3 )
    


 


 


 


 


End of period

   $ 98     $ 93     $ 89     $ 86     $ 83  
    


 


 


 


 


OTHER INFORMATION

                                        

Consolidated revenue from:

                                        

Treasury management

   $ 99     $ 95     $ 91     $ 88     $ 90  

Capital markets

   $ 44     $ 27     $ 37     $ 32     $ 32  

Midland Loan Services

   $ 27     $ 30     $ 26     $ 25     $ 23  

Total loans (c)

   $ 17,959     $ 17,650     $ 17,171     $ 16,728     $ 16,441  

Total nonperforming assets (c)

   $ 71     $ 82     $ 110     $ 131     $ 227  

Net charge-offs

   $ 3             $ 16     $ 30     $ 34  

Average FTE staff

     3,129       3,098       3,074       3,038       2,970  

Net carrying amount of commercial mortgage servicing rights (c)

   $ 242     $ 229     $ 226     $ 211     $ 209  

(a) See Notes (a) and (c) on page 4.
(b) Includes Market Street Funding Corporation. See Supplemental Average Balance Sheet Information on page 19.
(c) Presented as of period-end.

 

Page 9


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

PNC Advisors (Unaudited) (a)

 

Year ended; taxable-equivalent basis (a)

Dollars in millions except as noted


   December 31
2004


    December 31
2003


 

INCOME STATEMENT

                

Net interest income

   $ 111     $ 107  

Noninterest income

                

Investment management and trust

     316       313  

Brokerage

     111       101  

Other

     91       94  
    


 


Total noninterest income

     518       508  
    


 


Total revenue

     629       615  

Provision for credit losses

     (1 )     3  

Noninterest expense

     463       472  
    


 


Pretax earnings

     167       140  

Income taxes

     61       51  
    


 


Earnings

   $ 106     $ 89  
    


 


AVERAGE BALANCE SHEET

                

Loans

                

Consumer

   $ 1,518     $ 1,317  

Residential mortgage

     130       244  

Commercial

     407       438  

Other

     292       287  
    


 


Total loans

     2,347       2,286  

Other assets

     408       428  
    


 


Total assets

   $ 2,755     $ 2,714  
    


 


Deposits

   $ 2,264     $ 2,141  

Other liabilities

     278       259  

Capital

     307       313  
    


 


Total funds

   $ 2,849     $ 2,713  
    


 


PERFORMANCE RATIOS (e)

                

Return on capital

     35 %     28 %

Noninterest income to total revenue

     82       83  

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

                

Assets under management

                

Personal

   $ 41     $ 44  

Institutional

     9       9  
    


 


Total

   $ 50     $ 53  
    


 


Asset Type

                

Equity

   $ 30     $ 31  

Fixed income

     14       16  

Liquidity/Other

     6       6  
    


 


Total

   $ 50     $ 53  
    


 


Nondiscretionary assets under administration

                

Personal

   $ 29     $ 22  

Institutional

     64       65  
    


 


Total

   $ 93     $ 87  
    


 


Asset Type

                

Equity

   $ 32     $ 30  

Fixed income

     33       30  

Liquidity/Other

     28       27  
    


 


Total

   $ 93     $ 87  
    


 


OTHER INFORMATION (c)

                

Total nonperforming assets

   $ 9     $ 11  

Brokerage assets administered (in billions)

   $ 25     $ 23  

Full service brokerage offices

     75       76  

Financial consultants

     436       445  

Margin loans

   $ 254     $ 256  

Average FTE staff

     2,796       2,918  

(a) See Notes (a) and (c) on page 4.
(b) Excludes brokerage assets administered.
(c) Presented as of period-end, except for average FTE staff.
(d) Balances at December 31, 2004 reflect the first quarter 2004 sale of certain activities of the investment consulting business of Hawthorn and the expected reduction of approximately $5.9 billion of assets under management with approximately $4.4 billion moving to nondiscretionary assets under administration.
(e) See page 12 for information regarding efficiency ratios.

 

Page 10


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

PNC Advisors (Unaudited) (a)

 

Three months ended

Taxable-equivalent basis (a)

Dollars in millions except as noted


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

INCOME STATEMENT

                                        

Net interest income

   $ 28     $ 29     $ 27     $ 27     $ 27  

Noninterest income

                                        

Investment management and trust

     79       77       79       81       81  

Brokerage

     28       25       28       30       29  

Other

     19       20       20       32       22  
    


 


 


 


 


Total noninterest income

     126       122       127       143       132  
    


 


 


 


 


Total revenue

     154       151       154       170       159  

Provision for credit losses

     (1 )     1       (2 )     1       1  

Noninterest expense

     117       112       114       120       126  
    


 


 


 


 


Pretax earnings

     38       38       42       49       32  

Income taxes

     14       14       15       18       12  
    


 


 


 


 


Earnings

   $ 24     $ 24     $ 27     $ 31     $ 20  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Loans

                                        

Consumer

   $ 1,640     $ 1,568     $ 1,475     $ 1,386     $ 1,371  

Residential mortgage

     109       118       137       154       173  

Commercial

     384       412       417       415       415  

Other

     285       293       303       292       291  
    


 


 


 


 


Total loans

     2,418       2,391       2,332       2,247       2,250  

Other assets

     420       393       405       413       411  
    


 


 


 


 


Total assets

   $ 2,838     $ 2,784     $ 2,737     $ 2,660     $ 2,661  
    


 


 


 


 


Deposits

   $ 2,314     $ 2,252     $ 2,298     $ 2,189     $ 2,175  

Other liabilities

     299       276       272       268       262  

Capital

     297       305       301       325       305  
    


 


 


 


 


Total funds

   $ 2,910     $ 2,833     $ 2,871     $ 2,782     $ 2,742  
    


 


 


 


 


PERFORMANCE RATIOS (e)

                                        

Return on capital

     32 %     31 %     36 %     38 %     26 %

Noninterest income to total revenue

     82       81       82       84       83  

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

                                        

Assets under management

                                        

Personal

   $ 41     $ 39     $ 40     $ 39     $ 44  

Institutional

     9       9       9       9       9  
    


 


 


 


 


Total

   $ 50     $ 48     $ 49     $ 48     $ 53  
    


 


 


 


 


Asset Type

                                        

Equity

   $ 30     $ 28     $ 29     $ 28     $ 31  

Fixed income

     14       14       14       14       16  

Liquidity/Other

     6       6       6       6       6  
    


 


 


 


 


Total

   $ 50     $ 48     $ 49     $ 48     $ 53  
    


 


 


 


 


Nondiscretionary assets under administration

                                        

Personal

   $ 29     $ 27     $ 27     $ 29     $ 22  

Institutional

     64       64       64       65       65  
    


 


 


 


 


Total

   $ 93     $ 91     $ 91     $ 94     $ 87  
    


 


 


 


 


Asset Type

                                        

Equity

   $ 32     $ 31     $ 32     $ 33     $ 30  

Fixed income

     33       32       33       34       30  

Liquidity/Other

     28       28       26       27       27  
    


 


 


 


 


Total

   $ 93     $ 91     $ 91     $ 94     $ 87  
    


 


 


 


 


OTHER INFORMATION (c)

                                        

Total nonperforming assets

   $ 9     $ 10     $ 10     $ 11     $ 11  

Brokerage assets administered (in billions)

   $ 25     $ 23     $ 23     $ 24     $ 23  

Full service brokerage offices

     75       75       75       76       76  

Financial consultants

     436       435       436       444       445  

Margin loans

   $ 254     $ 267     $ 268     $ 270     $ 256  

Average FTE staff

     2,806       2,791       2,787       2,804       2,810  

(a) See Notes (a) and (c) on page 4.
(b) Excludes brokerage assets administered.
(c) Presented as of period-end, except for average FTE staff.
(d) Balances for each 2004 date reflect the first quarter 2004 sale of certain activities of the investment consulting business of Hawthorn and the expected reduction of approximately $5.9 billion of assets under management with approximately $4.4 billion moving to nondiscretionary assets under administration.
(e) See page 12 for information regarding efficiency ratios.

 

Page 11


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

PNC Advisors (Unaudited)

 

Efficiency ratios

 

     Quarter ended

    Year ended

 
     December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

Efficiency, GAAP basis (a)

   76 %   74 %   74 %   71 %   79 %   74 %   77 %

Efficiency, as adjusted (b)

   68 %   66 %   64 %   61 %   72 %   65 %   69 %

(a) Calculated as noninterest expense divided by the sum of net interest income and noninterest income.
(b) Calculated by excluding the impact of brokerage firm activities included within the PNC Advisors business segment. Brokerage firm activities excluded are the principal activities of Hilliard Lyons on a management reporting basis, including client-related brokerage and trading, investment banking and investment management. Industry-wide efficiency measures for brokerage firms and asset management firms differ significantly due primarily to the highly variable compensation structure of brokerage firms. We believe the disclosure of an efficiency ratio for PNC Advisors excluding the impact of these brokerage firm activities is meaningful for investors as it provides a more relevant basis of comparison with other asset management firms.

 

Reconciliation of GAAP amounts with amounts used in the calculation of adjusted efficiency ratio:

 

     Quarter ended

   Year ended

Dollars in millions


   December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


   December 31
2003


   December 31
2004


   December 31
2003


Revenue, GAAP basis

   $ 154    $ 151    $ 154    $ 170    $ 159    $ 629    $ 615

Less: brokerage firm activities

     53      47      52      55      55      207      205
    

  

  

  

  

  

  

Revenue, as adjusted

   $ 101    $ 104    $ 102    $ 115    $ 104    $ 422    $ 410

Noninterest expense, GAAP basis

   $ 117    $ 112    $ 114    $ 120    $ 126    $ 463    $ 472

Less: brokerage firm activities

     47      44      48      50      52      188      191
    

  

  

  

  

  

  

Noninterest expense, as adjusted

   $ 70    $ 68    $ 66    $ 70    $ 74    $ 275    $ 281

 

Page 12


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

BlackRock (Unaudited) (a)

 

Year ended; Taxable-equivalent basis (a)

Dollars in millions except as noted


   December 31
2004


    December 31
2003


 

INCOME STATEMENT

                

Investment advisory and administration fees

   $ 633     $ 529  

Other income

     92       69  
    


 


Total revenue

     725       598  

Operating expense

     423       336  

Operating expense - LTIP charges

     104          

Fund administration and servicing costs

     32       33  
    


 


Total expense

     559       369  
    


 


Operating income

     166       229  

Nonoperating income

     36       22  
    


 


Pretax earnings

     202       251  

Minority interest

     5          

Income taxes

     54       96  
    


 


Earnings

   $ 143     $ 155  
    


 


PERIOD-END BALANCE SHEET

                

Goodwill and other intangible assets

   $ 184     $ 192  

Other assets

     961       775  
    


 


Total assets

   $ 1,145     $ 967  
    


 


Liabilities and minority interest

   $ 377     $ 254  

Stockholders’ equity

     768       713  
    


 


Total liabilities and stockholders’ equity

   $ 1,145     $ 967  
    


 


PERFORMANCE DATA

                

Return on average equity

     19 %     23 %

Operating margin (b)

     37       41  

Diluted earnings per share

   $ 2.17     $ 2.36  

ASSETS UNDER MANAGEMENT (in billions) (period end)

                

Separate accounts

                

Fixed income

   $ 216     $ 190  

Liquidity

     7       6  

Liquidity - securities lending

     7       10  

Equity

     10       9  

Alternative investment products

     8       7  
    


 


Total separate accounts

     248       222  

Mutual funds (c)

                

Fixed income

     25       24  

Liquidity

     64       59  

Equity

     5       4  
    


 


Total mutual funds

     94       87  
    


 


Total assets under management

   $ 342     $ 309  
    


 


OTHER INFORMATION

                

Average FTE staff

     1,014       962  

(a)    See Notes (a) and (c) on page 4.

(b)    Calculated as operating income, adjusted for the LTIP charges and appreciation on Rabbi trust assets related to BlackRock’s deferred compensation plans, divided by total revenue less fund administration and servicing costs. The following is a reconciliation of this presentation to operating margin calculated on a GAAP basis (operating income divided by total revenue) in millions:

 

      

         

Operating income, GAAP basis

   $ 166     $ 229  

Add back: LTIP charges

     104          

Less: portion of LTIP to be funded by BlackRock

     (19 )        

Add back: appreciation on Rabbi trust assets

     4       2  
    


 


Operating income, as adjusted

   $ 255     $ 231  
    


 


Total revenue, GAAP basis

   $ 725     $ 598  

Less: fund administration and servicing costs

     32       33  
    


 


Revenue used for operating margin calculation, as reported

   $ 693     $ 565  
    


 


Operating margin, GAAP basis

     23 %     38 %

Operating margin, as reported

     37 %     41 %

We believe that operating margin, as reported, is a more relevant indicator of management’s ability to effectively employ BlackRock’s resources. The portion of the LTIP charges associated with awards to be met with the contribution of shares of BlackRock stock by PNC has been excluded from operating income because, exclusive of impact related to LTIP participants’ option to put awarded shares to BlackRock, this non-cash charge will not impact BlackRock’s book value. Appreciation on Rabbi trust assets related to BlackRock’s deferred compensation plans has been excluded because investment performance of these assets has a nominal impact on net income. We have excluded fund administration and servicing costs from the operating margin calculation because these costs are a fixed, asset-based expense which can fluctuate based on the discretion of a third party.

(c) Includes BlackRock Funds, BlackRock Liquidity Funds, BlackRock Closed End Funds, Short Term Investment Fund and BlackRock Global Series Funds.

 

Page 13


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

BlackRock (Unaudited) (a)

 

Three months ended

Taxable-equivalent basis (a)

Dollars in millions except as noted


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

INCOME STATEMENT

                                        

Investment advisory and administration fees

   $ 163     $ 148     $ 162     $ 160     $ 141  

Other income

     25       23       22       22       20  
    


 


 


 


 


Total revenue

     188       171       184       182       161  

Operating expense

     112       94       113       104       90  

Operating expense - LTIP charge

     13       91                          

Fund administration and servicing costs

     7       9       8       8       9  
    


 


 


 


 


Total expense

     132       194       121       112       99  
    


 


 


 


 


Operating income (loss)

     56       (23 )     63       70       62  

Nonoperating income

     8       7       15       6       5  
    


 


 


 


 


Pretax earnings (loss)

     64       (16 )     78       76       67  

Minority interest

     1               4                  

Income taxes

     13       (6 )     26       21       26  
    


 


 


 


 


Earnings (loss)

   $ 50     $ (10 )   $ 48     $ 55     $ 41  
    


 


 


 


 


PERIOD-END BALANCE SHEET

                                        

Goodwill and other intangible assets

   $ 184     $ 184     $ 186     $ 186     $ 192  

Other assets

     961       893       780       723       775  
    


 


 


 


 


Total assets

   $ 1,145     $ 1,077     $ 966     $ 909     $ 967  
    


 


 


 


 


Liabilities and minority interest

   $ 377     $ 342     $ 211     $ 186     $ 254  

Stockholders’ equity

     768       735       755       723       713  
    


 


 


 


 


Total liabilities and stockholders’ equity

   $ 1,145     $ 1,077     $ 966     $ 909     $ 967  
    


 


 


 


 


PERFORMANCE DATA

                                        

Return on average equity

     26 %     (5 )%     26 %     31 %     23 %

Operating margin (b)

     38       32       36       40       41  

Diluted earnings (loss) per share

   $ .75     $ (.15 )   $ .73     $ .84     $ .63  

ASSETS UNDER MANAGEMENT (in billions) (period end)

                                        

Separate accounts

                                        

Fixed income

   $ 216     $ 211     $ 200     $ 202     $ 190  

Liquidity

     7       8       7       6       6  

Liquidity - securities lending

     7       9       9       9       10  

Equity

     10       8       9       9       9  

Alternative investment products

     8       7       6       6       7  
    


 


 


 


 


Total separate accounts

     248       243       231       232       222  

Mutual funds (c)

                                        

Fixed income

     25       24       24       25       24  

Liquidity

     64       51       50       59       59  

Equity

     5       5       5       5       4  
    


 


 


 


 


Total mutual funds

     94       80       79       89       87  
    


 


 


 


 


Total assets under management

   $ 342     $ 323     $ 310     $ 321     $ 309  
    


 


 


 


 


OTHER INFORMATION

                                        

Average FTE staff

     1,062       1,063       984       947       991  

(a)    See Notes (a) and (c) on page 4.

(b)    Calculated as operating income, adjusted for the LTIP charges and appreciation on Rabbi trust assets related to BlackRock’s deferred compensation plans, divided by total revenue less fund administration and servicing costs. The following is a reconciliation of this presentation to operating margin calculated on a GAAP basis (operating income divided by total revenue) in millions:

 

      

         

Operating income (loss), GAAP basis

   $ 56     $ (23 )   $ 63     $ 70     $ 62  

Add back: LTIP charges

     13       91                          

Less: portion of LTIP to be funded by BlackRock

     (2 )     (17 )                        

Add back: appreciation on Rabbi trust assets

     2               1       1          
    


 


 


 


 


Operating income, as adjusted

   $ 69     $ 51     $ 64     $ 71     $ 62  
    


 


 


 


 


Total revenue, GAAP basis

   $ 188     $ 171     $ 184     $ 182     $ 161  

Less: fund administration and servicing costs

     7       9       8       8       9  
    


 


 


 


 


Revenue used for operating margin calculation, as reported

   $ 181     $ 162     $ 176     $ 174     $ 152  
    


 


 


 


 


Operating margin, GAAP basis

     30 %     (13 )%     34 %     38 %     38 %

Operating margin, as reported

     38 %     32 %     36 %     40 %     41 %

 

We believe that operating margin, as reported, is a more relevant indicator of management’s ability to effectively employ BlackRock’s resources. The portion of the LTIP charges associated with awards to be met with the contribution of shares of BlackRock stock by PNC has been excluded from operating income because, exclusive of impact related to LTIP participants’ option to put awarded shares to BlackRock, this non-cash charge will not impact BlackRock’s book value. Appreciation on Rabbi trust assets related to BlackRock’s deferred compensation plans has been excluded because investment performance of these assets has a nominal impact on net income. We have excluded fund administration and servicing costs from the operating margin calculation because these costs are a fixed, asset-based expense which can fluctuate based on the discretion of a third party.

(c) Includes BlackRock Funds, BlackRock Liquidity Funds, BlackRock Closed End Funds, Short Term Investment Fund and BlackRock Global Series Funds.

 

Page 14


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

PFPC (Unaudited) (a)

 

Year ended

Dollars in millions except as noted


   December 31
2004


    December 31
2003


 

INCOME STATEMENT

                

Fund servicing revenue

   $ 814     $ 762  

Operating expense

     643       618  

Amortization (accretion) of other intangibles, net

     3       (18 )
    


 


Operating income

     168       162  

Nonoperating income (b)

     3       14  

Debt financing

     54       69  
    


 


Pretax earnings

     117       107  

Income taxes

     47       43  
    


 


Earnings

   $ 70     $ 64  
    


 


AVERAGE BALANCE SHEET

                

Goodwill and other intangible assets

   $ 1,022     $ 1,037  

Other assets

     1,032       872  
    


 


Total assets

   $ 2,054     $ 1,909  
    


 


Debt financing

   $ 1,117     $ 1,279  

Other liabilities, net

     675       336  

Capital

     262       294  
    


 


Total funds

   $ 2,054     $ 1,909  
    


 


PERFORMANCE RATIOS

                

Return on capital

     27 %     22 %

Operating margin (c)

     21       21  

SERVICING STATISTICS (d)

                

Accounting/administration net fund assets (in billions)

                

Domestic

   $ 660     $ 609  

Foreign (e)

     61       45  
    


 


Total

   $ 721     $ 654  
    


 


Asset type (in billions)

                

Money market

   $ 341     $ 341  

Equity

     230       186  

Fixed income

     101       90  

Other

     49       37  
    


 


Total

   $ 721     $ 654  
    


 


Custody fund assets (in billions)

   $ 451     $ 401  
    


 


Shareholder accounts (in millions)

                

Transfer agency

     21       21  

Subaccounting

     36       32  
    


 


Total

     57       53  
    


 


OTHER INFORMATION

                

Average FTE staff

     4,749       5,081  

(a) See Note (a) on page 4.
(b) Net of nonoperating expense.
(c) Operating income divided by total fund servicing revenue.
(d) Presented as of period-end.
(e) Represents net assets serviced offshore.

 

Page 15


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

PFPC (Unaudited) (a)

 

Three months ended

Dollars in millions except as noted


   December 31
2004


    September 30
2004


   

June 30

2004


    March 31
2004


    December 31
2003


 

INCOME STATEMENT

                                        

Fund servicing revenue

   $ 209     $ 203     $ 199     $ 203     $ 194  

Operating expense

     160       158       158       167       155  

Amortization (accretion) of other intangibles, net

     4       3       (1 )     (3 )     (4 )
    


 


 


 


 


Operating income

     45       42       42       39       43  

Nonoperating income (b)

             1               2       3  

Debt financing

     12       14       14       14       16  
    


 


 


 


 


Pretax earnings

     33       29       28       27       30  

Income taxes

     13       12       11       11       12  
    


 


 


 


 


Earnings

   $ 20     $ 17     $ 17     $ 16     $ 18  
    


 


 


 


 


AVERAGE BALANCE SHEET

                                        

Goodwill and other intangible assets

   $ 1,017     $ 1,021     $ 1,024     $ 1,027     $ 1,034  

Other assets

     1,069       1,052       1,054       952       949  
    


 


 


 


 


Total assets

   $ 2,086     $ 2,073     $ 2,078     $ 1,979     $ 1,983  
    


 


 


 


 


Debt financing

   $ 1,067     $ 1,102     $ 1,137     $ 1,163     $ 1,248  

Other liabilities, net

     756       711       681       550       467  

Capital

     263       260       260       266       268  
    


 


 


 


 


Total funds

   $ 2,086     $ 2,073     $ 2,078     $ 1,979     $ 1,983  
    


 


 


 


 


PERFORMANCE RATIOS

                                        

Return on capital

     30 %     26 %     26 %     23 %     27 %

Operating margin (c)

     22       21       21       19       22  

SERVICING STATISTICS (d)

                                        

Accounting/administration net fund assets (in billions)

                                        

Domestic

   $ 660     $ 609     $ 612     $ 621     $ 609  

Foreign (e)

     61       58       53       48       45  
    


 


 


 


 


Total

   $ 721     $ 667     $ 665     $ 669     $ 654  
    


 


 


 


 


Asset type (in billions)

                                        

Money market

   $ 341     $ 322     $ 326     $ 337     $ 341  

Equity

     230       203       200       198       186  

Fixed income

     101       97       94       95       90  

Other

     49       45       45       39       37  
    


 


 


 


 


Total

   $ 721     $ 667     $ 665     $ 669     $ 654  
    


 


 


 


 


Custody fund assets (in billions)

   $ 451     $ 418     $ 416     $ 411     $ 401  
    


 


 


 


 


Shareholder accounts (in millions)

                                        

Transfer agency

     21       21       21       22       21  

Subaccounting

     36       34       34       33       32  
    


 


 


 


 


Total

     57       55       55       55       53  
    


 


 


 


 


OTHER INFORMATION

                                        

Average FTE staff

     4,659       4,614       4,816       4,910       4,801  

(a) See Note (a) on page 4.
(b) Net of nonoperating expense.
(c) Operating income divided by total fund servicing revenue.
(d) Presented as of period-end.
(e) Represents net assets serviced offshore.

 

Page 16


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Net Interest Income, Net Interest Margin and Trading Revenue (Unaudited)

 

Taxable-equivalent basis

 

Net Interest Income

In millions


  Quarter ended

    Year ended

 
  December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

Interest income

                                                       

Loans and fees on loans

  $ 549     $ 518     $ 491     $ 492     $ 474     $ 2,050     $ 1,970  

Securities

    155       141       131       146       142       573       583  

Other

    45       33       40       31       47       149       169  
   


 


 


 


 


 


 


Total interest income

    749       692       662       669       663       2,772       2,722  
   


 


 


 


 


 


 


Interest expense

                                                       

Deposits

    152       121       107       104       102       484       457  

Borrowed funds

    88       73       70       68       73       299       259  
   


 


 


 


 


 


 


Total interest expense

    240       194       177       172       175       783       716  
   


 


 


 


 


 


 


Net interest income (a)

  $ 509     $ 498     $ 485     $ 497     $ 488     $ 1,989     $ 2,006  
   


 


 


 


 


 


 


    Quarter ended

    Year ended

 

Net Interest Margin


  December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

Average yields/rates

                                                       

Yield on earning assets

                                                       

Loans and fees on loans

    5.04 %     4.89 %     4.89 %     5.05 %     5.08 %     5.01 %     5.48 %

Securities

    3.85       3.67       3.33       3.57       3.65       3.61       3.97  

Other

    3.25       2.89       3.07       2.54       3.94       2.98       3.69  

Total yield on earning assets

    4.59       4.44       4.34       4.44       4.60       4.48       4.93  

Rate on interest-bearing liabilities

                                                       

Deposits

    1.52       1.27       1.15       1.16       1.20       1.28       1.35  

Borrowed funds

    2.76       2.45       2.21       2.07       2.31       2.39       2.47  

Total rate on interest-bearing liabilities

    1.82       1.55       1.42       1.40       1.50       1.56       1.62  
   


 


 


 


 


 


 


Interest rate spread

    2.77       2.89       2.92       3.04       3.10       2.92       3.31  

Impact of noninterest-bearing sources

    .35       .30       .26       .26       .28       .30       .33  
   


 


 


 


 


 


 


Net interest margin

    3.12 %     3.19 %     3.18 %     3.30 %     3.38 %     3.22 %     3.64 %
   


 


 


 


 


 


 


    Quarter ended

    Year ended

 

Trading Revenue

In millions


  December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

Net interest income (expense)

  $ 4     $ 3     $ 4     $ 2     $ 1     $ 13     $ (2 )

Other noninterest income

    44       16       30       23       28       113       127  
   


 


 


 


 


 


 


Total trading revenue

  $ 48     $ 19     $ 34     $ 25     $ 29     $ 126     $ 125  
   


 


 


 


 


 


 


Securities underwriting and trading

  $ 23     $ 11     $ 16     $ 10     $ 19     $ 60     $ 82  

Foreign exchange

    9       8       7       7       6       31       25  

Financial derivatives

    16               11       8       4       35       18  
   


 


 


 


 


 


 


Total trading revenue

  $ 48     $ 19     $ 34     $ 25     $ 29     $ 126     $ 125  
   


 


 


 


 


 


 



(a)    The following is a reconciliation of net interest income as reported in the Consolidated Statement of Income to net interest income on a taxable-equivalent basis:

 

       

    Quarter ended

    Year ended

 
In millions   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 

Net interest income, GAAP basis

  $ 503     $ 491     $ 481     $ 494     $ 485     $ 1,969     $ 1,996  

Taxable-equivalent adjustment

    6       7       4       3       3       20       10  
   


 


 


 


 


 


 


Net interest income, taxable-equivalent basis

  $ 509     $ 498     $ 485     $ 497     $ 488     $ 1,989     $ 2,006  
   


 


 


 


 


 


 


 

Page 17


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Noninterest Income and Noninterest Expense (Unaudited)

 

In millions

 

     Quarter ended

    Year ended

 

Noninterest Income


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 
                                                          

Asset management

   $ 254     $ 238     $ 250     $ 252     $ 229     $ 994     $ 861  

Fund servicing

     209       204       200       204       193       817       762  

Service charges on deposits

     65       65       63       59       62       252       239  

Brokerage

     53       52       56       58       51       219       184  

Consumer services

     68       66       67       63       63       264       251  

Corporate services

     120       100       128       125       123       473       485  

Equity management gains (losses)

     9       16       35       7               67       (25 )

Net securities gains

     10       16       14       15       15       55       116  

Other

     116       81       97       128       125       422       384  
    


 


 


 


 


 


 


Total noninterest income

   $ 904     $ 838     $ 910     $ 911     $ 861     $ 3,563     $ 3,257  
    


 


 


 


 


 


 


Included in “Corporate services” above

                                                        

Net gains on institutional loans held for sale

   $ 2     $ 5     $ 17     $ 28     $ 16     $ 52     $ 69  

Net gains on sales of commercial mortgages

   $ 20     $ 6     $ 14     $ 10     $ 14     $ 50     $ 52  

Included in “Other” above (a)

                                                        

Gains on sales of education loans

   $ 13     $ 15     $ 2             $ 8     $ 30     $ 20  

Noninterest income to total revenue (b)

     64 %     63 %     65 %     65 %     64 %     64 %     62 %
     Quarter ended

    Year ended

 

Noninterest Expense


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


    December 31
2004


    December 31
2003


 
                                                          

Compensation

   $ 452     $ 500     $ 414     $ 389     $ 389     $ 1,755     $ 1,480  

Employee benefits

     82       76       77       74       83       309       324  

Net occupancy

     64       68       67       68       65       267       282  

Equipment

     74       72       70       74       71       290       276  

Marketing

     24       19       24       20       15       87       64  

Other

     253       246       258       270       235       1,027       1,050  
    


 


 


 


 


 


 


Total noninterest expense (c)

   $ 949     $ 981     $ 910     $ 895     $ 858     $ 3,735     $ 3,476  
    


 


 


 


 


 


 


Included in “Other” above (d)

                                                        

Costs incurred, including legal fees, in connection with agreement with the U.S. Department of Justice

                                                   $ 120  

Efficiency

                                                        

Efficiency (e)

     67 %     74 %     65 %     64 %     64 %     68 %     66 %

Bank efficiency (f)

     64 %     65 %     63 %     60 %     61 %     63 %     64 %

(a) “Other” also includes the “Other noninterest income” component of trading revenue. See page 17.
(b) Calculated as total noninterest income divided by the sum of net interest income and noninterest income. The ratio presented for the quarter ended December 31, 2003 and full year 2003 excludes the impact of revenue included in the cumulative effect of an accounting adjustment. We consider this to be a more meaningful comparison with the other periods presented. If the additional revenue included in the cumulative effect of an accounting adjustment had been included in the computation, the ratio would have been 62% for both the quarter and year ended December 31, 2003.
(c) The quarters ended September 30, 2004 and December 31, 2004 included $96 million and $14 million, respectively, of charges related to the BlackRock LTIP. See the Current Reports on Form 8-K dated October 6, 2004 filed by us and BlackRock for further information. Third quarter 2004 charges are comprised of $89 million of compensation expense, $2 million of employee benefits expense and $5 million of “Other” noninterest expense. Fourth quarter 2004 charges are comprised of $13 million of compensation expense and $1 million of “Other” noninterest expense.
(d) See “Agreement with Department of Justice” in the Financial Review section of our Quarterly Report on Form 10-Q for the second quarter of 2003 and our Current Report on Form 8-K dated June 23, 2004 for further information.
(e) Calculated as noninterest expense divided by the sum of net interest income and noninterest income.

The ratios presented for the quarter ended December 31, 2003 and full year 2003 exclude the impact of revenue and expense included in the cumulative effect of an accounting adjustment, recorded in fourth quarter 2003, as we consider this to be a more meaningful comparison with the other periods presented. If the additional revenue and expense included in the cumulative effect of an accounting adjustment had been included in the computations, the ratios would have been 66% for the quarter ended December 31, 2003 and 67% for the year ended December 31, 2003.

(f) The bank efficiency ratio represents the consolidated efficiency ratio excluding the effect of BlackRock and PFPC.

 

Page 18


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Average Consolidated Balance Sheet (Unaudited)

 

Year ended - in millions


   December 31
2004


    December 31
2003


 

Assets

                

Interest-earning assets

                

Securities

                

Securities available for sale

                

U.S. Treasury and government agencies/corporations

   $ 6,567     $ 4,358  

Other debt

     8,857       9,754  

State and municipal

     220       112  

Corporate stocks and other

     232       432  
    


 


Total securities available for sale

     15,876       14,656  

Securities held to maturity

     2       18  
    


 


Total securities

     15,878       14,674  

Loans, net of unearned income

                

Commercial

     16,627       15,336  

Commercial real estate

     2,137       2,072  

Consumer

     14,165       10,807  

Residential mortgage

     4,040       3,148  

Lease financing

     3,470       4,110  

Other

     506       444  
    


 


Total loans, net of unearned income

     40,945       35,917  

Loans held for sale

     1,636       1,664  

Federal funds sold and resale agreements

     1,670       1,954  

Other

     1,692       963  
    


 


Total interest-earning assets

     61,821       55,172  

Noninterest-earning assets

                

Allowance for loan and lease losses

     (608 )     (668 )

Cash and due from banks

     2,895       2,734  

Other assets

     11,158       10,041  
    


 


Total assets

   $ 75,266     $ 67,279  
    


 


Supplemental Average Balance Sheet Information

                

Loans excluding conduit

   $ 39,058     $ 34,687  

Market Street Funding Corporation conduit

     1,887       1,230  
    


 


Total loans

   $ 40,945     $ 35,917  
    


 


 

Page 19


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

Year ended - in millions


   December 31
2004


   December 31
2003


Liabilities, Minority and Noncontrolling Interests, Capital Securities and Shareholders’ Equity

             

Interest-bearing liabilities

             

Interest-bearing deposits

             

Money market

   $ 15,964    $ 15,163

Demand

     7,902      7,197

Savings

     2,684      2,106

Retail certificates of deposit

     9,075      8,810

Other time

     686      266

Time deposits in foreign offices

     1,371      283
    

  

Total interest-bearing deposits

     37,682      33,825

Borrowed funds

             

Federal funds purchased

     1,957      904

Repurchase agreements

     1,433      1,110

Bank notes and senior debt

     2,687      3,364

Subordinated debt

     3,506      2,510

Commercial paper

     1,887      1,232

Other borrowed funds

     1,045      1,371
    

  

Total borrowed funds

     12,515      10,491
    

  

Total interest-bearing liabilities

     50,197      44,316

Noninterest-bearing liabilities, minority and noncontrolling interests, capital securities and shareholders’ equity

             

Demand and other noninterest-bearing deposits

     12,015      10,637

Allowance for unfunded loan commitments and letters of credit

     90      82

Accrued expenses and other liabilities

     5,389      4,855

Minority and noncontrolling interests in consolidated entities

     455      317

Mandatorily redeemable capital securities of subsidiary trusts

            421

Shareholders’ equity

     7,120      6,651
    

  

Total liabilities, minority and noncontrolling interests, capital securities and shareholders’ equity

   $ 75,266    $ 67,279
    

  

Supplemental Average Balance Sheet Information

             

Interest-bearing deposits

   $ 37,682    $ 33,825

Demand and other noninterest-bearing deposits

     12,015      10,637
    

  

Total deposits

   $ 49,697    $ 44,462
    

  

Transaction deposits

   $ 35,881    $ 32,997
    

  

Common shareholders’ equity

   $ 7,112    $ 6,642
    

  

 

Page 20


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Average Consolidated Balance Sheet (Unaudited)

 

Three months ended - in millions


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Assets

                                        

Interest-earning assets

                                        

Securities

                                        

Securities available for sale

                                        

U.S. Treasury and government agencies/corporations

   $ 6,895     $ 6,288     $ 6,654     $ 6,432     $ 5,929  

Other debt

     8,846       8,667       8,624       9,293       9,154  

State and municipal

     175       216       225       264       149  

Corporate stocks and other

     188       201       259       282       383  
    


 


 


 


 


Total securities available for sale

     16,104       15,372       15,762       16,271       15,615  

Securities held to maturity

     1       2       2       2       2  
    


 


 


 


 


Total securities

     16,105       15,374       15,764       16,273       15,617  

Loans, net of unearned income

                                        

Commercial

     17,312       16,915       16,445       15,827       15,514  

Commercial real estate

     2,080       2,120       2,100       2,249       1,825  

Consumer

     15,280       14,673       13,968       12,719       11,692  

Residential mortgage

     4,683       4,354       3,622       3,492       2,932  

Lease financing

     3,216       3,182       3,437       4,050       4,252  

Other

     502       507       497       517       522  
    


 


 


 


 


Total loans, net of unearned income

     43,073       41,751       40,069       38,854       36,737  

Loans held for sale

     1,771       1,578       1,636       1,560       1,645  

Federal funds sold and resale agreements

     1,274       1,283       1,896       2,235       2,009  

Other

     2,302       1,746       1,551       1,162       1,084  
    


 


 


 


 


Total interest-earning assets

     64,525       61,732       60,916       60,084       57,092  

Noninterest-earning assets

                                        

Allowance for loan and lease losses

     (582 )     (593 )     (603 )     (653 )     (645 )

Cash and due from banks

     3,038       2,851       2,793       2,895       2,774  

Other assets

     11,791       11,372       10,762       10,697       9,873  
    


 


 


 


 


Total assets

   $ 78,772     $ 75,362     $ 73,868     $ 73,023     $ 69,094  
    


 


 


 


 


Supplemental Average Balance Sheet Information

                                        

Loans excluding conduit

   $ 41,121     $ 40,074     $ 38,257     $ 36,747     $ 34,352  

Market Street Funding Corporation conduit

     1,952       1,677       1,812       2,107       2,385  
    


 


 


 


 


Total loans

   $ 43,073     $ 41,751     $ 40,069     $ 38,854     $ 36,737  
    


 


 


 


 


 

Page 21


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Average Consolidated Balance Sheet (Unaudited) (Continued)

 

Three months ended - in millions


   December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


   December 31
2003


Liabilities, Minority and Noncontrolling Interests and
Shareholders’ Equity

Interest-bearing liabilities

                                  

Interest-bearing deposits

                                  

Money market

   $ 16,328    $ 15,916    $ 16,027    $ 15,581    $ 15,249

Demand

     7,999      7,857      7,878      7,873      7,496

Savings

     2,819      2,730      2,595      2,590      2,099

Retail certificates of deposit

     9,761      9,100      8,650      8,780      8,268

Other time

     892      825      680      343      265

Time deposits in foreign offices

     1,628      1,561      1,485      806      466
    

  

  

  

  

Total interest-bearing deposits

     39,427      37,989      37,315      35,973      33,843

Borrowed funds

                                  

Federal funds purchased

     1,676      1,940      2,303      1,912      1,558

Repurchase agreements

     1,906      1,158      1,508      1,157      1,226

Bank notes and senior debt

     2,535      2,709      2,752      2,752      2,752

Subordinated debt

     3,476      3,411      3,545      3,593      3,056

Commercial paper

     1,947      1,679      1,815      2,111      2,388

Other borrowed funds

     1,070      858      633      1,622      1,425
    

  

  

  

  

Total borrowed funds

     12,610      11,755      12,556      13,147      12,405
    

  

  

  

  

Total interest-bearing liabilities

     52,037      49,744      49,871      49,120      46,248

Noninterest-bearing liabilities, minority and noncontrolling interests and shareholders’ equity

                                  

Demand and other noninterest-bearing deposits

     12,539      12,477      11,681      11,350      11,070

Allowance for unfunded loan commitments and letters of credit

     96      84      90      90      88

Accrued expenses and other liabilities

     6,283      5,470      4,773      5,020      4,688

Minority and noncontrolling interests in consolidated entities

     501      466      419      434      471

Shareholders’ equity

     7,316      7,121      7,034      7,009      6,529
    

  

  

  

  

Total liabilities, minority and noncontrolling interests, and shareholders’ equity

   $ 78,772    $ 75,362    $ 73,868    $ 73,023    $ 69,094
    

  

  

  

  

Supplemental Average Balance Sheet Information

                                  

Interest-bearing deposits

   $ 39,427    $ 37,989    $ 37,315    $ 35,973    $ 33,843

Demand and other noninterest-bearing deposits

     12,539      12,477      11,681      11,350      11,070
    

  

  

  

  

Total deposits

   $ 51,966    $ 50,466    $ 48,996    $ 47,323    $ 44,913
    

  

  

  

  

Transaction deposits

   $ 36,866    $ 36,250    $ 35,586    $ 34,804    $ 33,815
    

  

  

  

  

Common shareholders’ equity

   $ 7,308    $ 7,113    $ 7,026    $ 7,000    $ 6,520
    

  

  

  

  

 

Page 22


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Loans and Lending Statistics (Unaudited)

 

Loans

 

Period ended-dollars in millions


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Commercial

                                        

Retail/wholesale

   $ 5,095     $ 4,855     $ 4,734     $ 4,528     $ 4,327  

Manufacturing

     4,092       4,033       4,050       3,917       3,786  

Service providers

     2,201       2,047       1,982       2,044       1,867  

Real estate related

     1,762       1,706       1,616       1,432       1,303  

Financial services

     1,129       1,214       1,268       1,157       1,169  

Health care

     503       473       470       448       403  

Communications

     62       98       105       78       93  

Other

     2,594       2,689       2,488       2,397       2,134  
    


 


 


 


 


Total commercial

     17,438       17,115       16,713       16,001       15,082  
    


 


 


 


 


Commercial real estate

                                        

Real estate projects

     1,460       1,513       1,530       1,521       1,392  

Mortgage

     520       527       575       534       432  
    


 


 


 


 


Total commercial real estate

     1,980       2,040       2,105       2,055       1,824  
    


 


 


 


 


Consumer

                                        

Home equity

     12,734       12,377       11,946       11,160       9,790  

Automobile

     836       842       825       762       585  

Other

     2,036       1,684       1,676       1,597       1,480  
    


 


 


 


 


Total consumer

     15,606       14,903       14,447       13,519       11,855  
    


 


 


 


 


Residential mortgage

     4,772       4,672       3,906       3,537       2,886  

Lease financing

                                        

Equipment

     3,907       3,949       3,818       3,859       3,935  

Vehicles

     189       228       285       968       1,212  
    


 


 


 


 


Total lease financing

     4,096       4,177       4,103       4,827       5,147  
    


 


 


 


 


Other

     505       504       484       492       518  

Unearned income

     (902 )     (931 )     (923 )     (980 )     (1,009 )
    


 


 


 


 


Total, net of unearned income

   $ 43,495     $ 42,480     $ 40,835     $ 39,451     $ 36,303  
    


 


 


 


 


Supplemental Loan Information

                                        

Loans excluding conduit

   $ 41,243     $ 40,676     $ 39,094     $ 37,519     $ 34,080  

Market Street Funding Corporation conduit

     2,252       1,804       1,741       1,932       2,223  
    


 


 


 


 


Total loans

   $ 43,495     $ 42,480     $ 40,835     $ 39,451     $ 36,303  
    


 


 


 


 


Wholesale Banking Lending Statistics (a)

                                        

Portfolio composition-total exposure

                                        

Investment grade equivalent or better

     52 %     53 %     53 %     53 %     52 %

Non-investment grade (secured lending)

     24       24       24       24       25  

Non-investment grade (other)

     24       23       23       23       23  
    


 


 


 


 


Total

     100 %     100 %     100 %     100 %     100 %
    


 


 


 


 


Client relationships >$50 million-total exposure

   $ 13,695     $ 12,986     $ 12,596     $ 12,000     $ 12,396  

Client relationships >$50 million-customers

     151       148       140       134       138  

Consumer Loan Statistic (b)

                                        

Net charge-offs to average loans

     .16 %     .19 %     .20 %     .21 %     .27 %

(a) Includes amounts for customers of Market Street Funding Corporation.
(b) Includes consumer, residential mortgage and vehicle leasing. During the second quarter of 2004, we sold our consumer vehicle leasing business.

 

Page 23


Table of Contents

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
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Beginning balance

   $ 581     $ 593     $ 604     $ 632     $ 648  

Charge-offs

                                        

Commercial

     (15 )     (13 )     (26 )     (59 )     (53 )

Commercial real estate

                             (2 )        

Consumer

     (11 )     (10 )     (11 )     (11 )     (10 )

Residential mortgage

             (2 )             (1 )     (2 )

Lease financing

     (1 )     (1 )     (1 )     (2 )     (4 )
    


 


 


 


 


Total charge-offs (a)

     (27 )     (26 )     (38 )     (75 )     (69 )

Recoveries

                                        

Commercial

     9       9       5       8       15  

Commercial real estate

                     1               1  

Consumer

     3       3       3       3       3  

Residential mortgage

                             1          

Lease financing

     1       1       3       1       1  
    


 


 


 


 


Total recoveries

     13       13       12       13       20  

Net charge-offs

                                        

Commercial

     (6 )     (4 )     (21 )     (51 )     (38 )

Commercial real estate

                     1       (2 )     1  

Consumer

     (8 )     (7 )     (8 )     (8 )     (7 )

Residential mortgage

             (2 )                     (2 )

Lease financing

                     2       (1 )     (3 )
    


 


 


 


 


Total net charge-offs

     (14 )     (13 )     (26 )     (62 )     (49 )

Provision for credit losses

     19       13       8       12       34  

Acquired allowance (United National)

                             22          

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

     21       (12 )     7               (1 )
    


 


 


 


 


Ending balance

   $ 607     $ 581     $ 593     $ 604     $ 632  
    


 


 


 


 


Change in Allowance for Unfunded Loan Commitments and Letters of Credit

 

 

Three months ended - in millions


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Beginning balance

   $ 96     $ 84     $ 91     $ 91     $ 90  

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

     (21 )     12       (7 )             1  
    


 


 


 


 


Ending balance

   $ 75     $ 96     $ 84     $ 91     $ 91  
    


 


 


 


 


Net Unfunded Commitments

 

 

In millions-period ended


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Net unfunded commitments

   $ 29,346     $ 27,972     $ 27,587     $ 26,356     $ 25,183  
    


 


 


 


 



(a) See Note (a) on page 25.

 

Page 24


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Nonperforming Assets (Unaudited)

 

Nonperforming Assets by Type

 

Period ended - in millions


   December 31
2004


    September 30
2004


    June 30
2004


    March 31
2004


    December 31
2003


 

Nonaccrual loans

                                        

Commercial (a)

   $ 89     $ 96     $ 119     $ 132     $ 213  

Commercial real estate

     14       10       3       3       6  

Consumer

     11       12       11       10       11  

Residential mortgage

     21       23       23       26       24  

Lease financing

     5       7       13       12       11  
    


 


 


 


 


Total nonaccrual loans

     140       148       169       183       265  

Troubled debt restructured loan

     3                               1  
    


 


 


 


 


Total nonperforming loans

     143       148       169       183       266  

Nonperforming loans held for sale (b)

     3       2       4       4       27  

Foreclosed and other assets

                                        

Lease financing

     14       16       17       17       17  

Residential mortgage

     10       11       11       13       9  

Other

     5       7       8       12       9  
    


 


 


 


 


Total foreclosed and other assets

     29       34       36       42       35  
    


 


 


 


 


Total nonperforming assets (c)

   $ 175     $ 184     $ 209     $ 229     $ 328  
    


 


 


 


 


Nonperforming loans to total loans

     .33 %     .35 %     .41 %     .46 %     .73 %

Nonperforming assets to total loans, loans held for sale and foreclosed assets

     .39       .42       .49       .56       .87  

Nonperforming assets to total assets

     .22       .24       .29       .31       .48  

                                        

(a) During the first quarter of 2004, we changed our policy for recognizing charge-offs on smaller nonperforming commercial loans. This change resulted in the recognition of an additional $24 million of gross charge-offs for the first quarter of 2004.

  

(b) Includes troubled debt restructured loans held for sale.

   $ 2     $ 2     $ 2     $ 3     $ 10  

(c) Excludes equity management assets carried at estimated fair value (December 31, 2004, September 30, 2004, June 30, 2004, March 31, 2004 and December 31, 2003 amounts include troubled debt restructured assets of $11 million, $10 million, $10 million, $11 million and $5 million, respectively).

   $ 32     $ 29     $ 32     $ 29     $ 37  

 

Change in Nonperforming Assets  

December 31, 2004 - in millions


  

Three months

ended


    Year
ended


 

Beginning of period

   $ 184     $ 328  

Purchases (United National)

             12  

Transferred from accrual

     43       213  

Returned to performing

     (3 )     (17 )

Principal reductions and payoffs

     (25 )     (211 )

Asset sales

     (7 )     (60 )

Charge-offs and valuation adjustments

     (17 )     (90 )
    


 


December 31

   $ 175     $ 175  
    


 


 

Page 25


Table of Contents

THE PNC FINANCIAL SERVICES GROUP, INC.

 

Details of Nonperforming Assets (Unaudited) (Continued)

 

Nonperforming Assets by Business

 

Period ended - in millions


   December 31
2004


   September 30
2004


   June 30
2004


   March 31
2004


   December 31
2003


Regional Community Banking

                                  

Nonperforming loans

   $ 80    $ 74    $ 70    $ 64    $ 74

Foreclosed and other assets

     11      11      11      11      11
    

  

  

  

  

Total

   $ 91    $ 85    $ 81    $ 75    $ 85
    

  

  

  

  

Wholesale Banking

                                  

Nonperforming loans

   $ 51    $ 60    $ 85    $ 102    $ 177

Nonperforming loans held for sale

     3      2      4      4      27

Foreclosed and other assets

     17      20      21      25      23
    

  

  

  

  

Total

   $ 71    $ 82    $ 110    $ 131    $ 227
    

  

  

  

  

PNC Advisors

                                  

Nonperforming loans

   $ 9    $ 10    $ 9    $ 11    $ 11

Foreclosed and other assets

                   1              
    

  

  

  

  

Total

   $ 9    $ 10    $ 10    $ 11    $ 11
    

  

  

  

  

Other (a)

                                  

Nonperforming loans

   $ 3    $ 4    $ 5    $ 6    $ 4

Foreclosed and other assets

     1      3      3      6      1
    

  

  

  

  

Total

   $ 4    $ 7    $ 8    $ 12    $ 5
    

  

  

  

  

Consolidated Totals

                                  

Nonperforming loans (b)

   $ 143    $ 148    $ 169    $ 183    $ 266

Nonperforming loans held for sale

     3      2      4      4      27

Foreclosed and other assets

     29      34      36      42      35
    

  

  

  

  

Total

   $ 175    $ 184    $ 209    $ 229    $ 328
    

  

  

  

  

 

Largest Nonperforming Loans at December 31, 2004 - in millions (c)

 

Ranking


   Outstandings

  

Industry


1

   $ 14    Air Transportation

2

     11    Fabricated Metal Manufacturing

3

     7    Individuals

4

     7    Real Estate Lessors

5

     5    Plastic and Mineral Manufacturing

6

     4    Machinery Manufacturing

7

     3    Other Transportation

8

     3    Plastic and Mineral Manufacturing

9

     3    Paper and Wood Product Manufacturing

10

     3    Construction
    

    

Total

   $ 60     
    

    

As a percent of nonperforming assets 34.3 %


(a) Represents residential mortgages related to PNC’s asset and liability management function.
(b) See Note (a) on page 25.
(c) Amounts shown are not net of related allowance for loan and lease losses, if applicable.

 

Page 26


Table of Contents

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.

 

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.

 

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 or generally accepted accounting principles. The economic capital measurement process involves converting a risk distribution to the capital that is required to support the risk, consistent with an institution’s target credit rating. As such, economic risk serves as a “common currency” of risk that allows an institution to compare different risks on a similar basis.

 

Charge-off - Process of removing a loan or portion of a loan from a bank’s balance sheet because the loan is considered uncollectible. A charge-off also is recorded when a loan is transferred to held for sale and the loan’s 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 preferred stock and the portion of capital surplus and retained interest related to the preferred stock.

 

Custody assets - All 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.

 

Earning assets - Assets that generate income, which include: short-term investments; loans held for sale; loans, net of unearned income; securities; federal funds sold and resale agreements; and certain other assets.

 

Economic value of equity (“EVE”) - The present value of the expected cash flows of our existing assets less the present value of the expected cash flows of our existing liabilities, plus the present value of the net cash flows of our existing off-balance sheet positions.

 

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 the sum of net interest income and noninterest income.

 

Page 27


Table of Contents

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 business segments. These balances are assigned funding rates that represent the interest cost for us to raise/invest funds with similar maturity and repricing structures, using the least-cost funding sources available.

 

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

 

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 total revenue. Total revenue includes noninterest income plus net interest income.

 

Nonperforming assets - Nonperforming assets include nonaccrual loans, troubled debt restructured loans, nonaccrual loans held for sale, foreclosed assets and other assets. Interest income does not accrue on assets classified as nonperforming.

 

Nonperforming loans - Nonperforming loans include loans to commercial, lease financing, consumer, commercial real estate and residential mortgage customers as well as troubled debt restructured loans. Nonperforming loans do not include nonaccrual loans held for sale or foreclosed and other assets. Interest income does not accrue on loans classified as nonperforming.

 

Recovery - Cash proceeds received on a loan that previously had been charged off. The amount received is credited to the allowance for loan and lease losses.

 

Return on 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.

 

Shareholders’ equity to total assets – Period-end total shareholders’ equity divided by period-end total assets.

 

Tangible common capital ratio - Common shareholders’ equity less goodwill and other intangible assets (excluding mortgage servicing rights) divided by total assets less goodwill and other intangible assets (excluding mortgage 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 a taxable investment. In order to provide accurate comparisons of yields and margins for all earning assets, the interest income earned on tax-exempt assets is increased to make them fully equivalent to other taxable interest income investments.

 

Tier 1 risk-based capital - Tier 1 capital equals: total shareholders’ equity, plus trust preferred capital securities, plus certain minority interests that are held by others; less goodwill and certain intangible assets, 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

 

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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 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 foreign fund investment assets for which we provide related processing services. We do not include these assets on our Consolidated Balance Sheet.

 

Total deposits - The sum of total transaction deposits, savings accounts, certificates of deposit, other time deposits and deposits in foreign offices.

 

Total risk-based capital - Tier 1 risk-based capital plus qualifying senior and subordinated debt, 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.

 

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Business Segment Products and Services

 

Regional Community Banking provides deposit, lending, cash management and investment services to 2.2 million consumer and small business customers within PNC’s primary geographic footprint.

 

Wholesale Banking provides lending, treasury management, capital markets-related products and services, and commercial loan servicing 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 products include foreign exchange, derivatives, loan syndications and securities underwriting and distribution. Wholesale Banking provides products and services generally within PNC’s primary geographic markets and provides certain products and services nationally.

 

PNC Advisors provides a broad range of tailored investment, trust and private banking products and services to affluent individuals and families, including investment consulting and trust services to the ultra-affluent through its Hawthorn unit and full-service brokerage through J.J.B. Hilliard, W.L. Lyons, Inc. and PNC Investments, LLC. PNC Advisors also serves as investment manager and trustee for employee benefit plans and charitable and endowment assets, and provides nondiscretionary defined contribution plan services and investment options through our Vested Interest ® product. PNC Advisors provides services to individuals and corporations primarily within PNC’s primary geographic markets.

 

BlackRock is one of the largest publicly traded investment management firms in the United States. BlackRock manages assets on behalf of institutions and individuals worldwide through a variety of fixed income, liquidity and equity mutual funds, separate accounts and alternative investment products. Mutual funds include the flagship fund families, BlackRock Funds and BlackRock Liquidity Funds (formerly BlackRock Provident Institutional Funds). In addition, BlackRock provides risk management and investment system services and products to institutional investors under the BlackRock Solutions® brand name and financial advisory services to institutional investors.

 

PFPC is among the largest providers of mutual fund transfer agency and accounting and administration services in the United States, offering a wide range of fund processing services to the investment management industry and providing processing solutions to the international marketplace through its Ireland and Luxembourg operations.

 

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