PNC Financial Services (PNC)

Net interest income was $235 million for the third quarter of 2009 compared with $295 million for the second quarter primarily due to lower interest on acquired impaired loans.

Noninterest income was $19 million for the third quarter compared with $39 million in the linked quarter. The decrease was mainly due to early termination of certain credit insurance and third party servicing contracts and a reduction in recourse reserves in the second quarter.

Noninterest expense increased $7 million to $62 million for the third quarter of 2009 compared with the second quarter due to higher levels of other real estate owned expenses in the third quarter.

The provision for credit losses of $127 million increased $97 million compared with the linked quarter as a result of an increase in required reserves allocated to this business segment.

Average loans were $20 billion for the third quarter of 2009 compared with $22 billion in the second quarter of 2009. The decline in average loans was primarily driven by scheduled repayments and net charge-offs.

Acquired impaired loans declined to $7.8 billion at September 30, 2009 compared with $8.7 billion at June 30, 2009 primarily as a result of paydowns. This segment contained 71 percent of the company’s acquired impaired loans at quarter end.

Loans in this segment require special servicing and management oversight given current loan performance and market conditions. Consequently, the business activities of this segment are focused on maximizing value within a defined risk profile, including selling assets when the terms and conditions are appropriate.

Net interest income of $295 million for the second quarter of 2009 declined by $36 million compared with the first quarter primarily as a result of a reduction in higher yielding loans.

Noninterest income was $39 million for the second quarter compared with $13 million in the first quarter of 2009. The increase was primarily due to the early termination of certain credit insurance and third party servicing contracts and a reduction in recourse reserves.

Noninterest expense was $55 million for the second quarter, a decrease of $25 million compared with the linked quarter due to lower other real estate owned expense.

The provision for credit losses of $30 million decreased $229 million due to credit quality stabilizing during the quarter, particularly in the consumer portfolios.

Acquired impaired loans were $8.8 billion at June 30, 2009 compared with $8.5 billion as of March 31, 2009. Nonperforming assets were $1.3 billion, an increase of $.4 billion from March 31, 2009 primarily in the residential mortgage portfolio.

Loans in this business segment require special servicing and management oversight given current loan performance and market conditions. Consequently, the business activities of this segment are focused on maximizing the value of the portfolios assigned to it.

Total loans were $22 billion at March 31, 2009 compared with $27 billion at December 31, 2008. The decline in loans during the first quarter was primarily due to net transfers to core portfolios and net paydowns.

The loan portfolio included residential real estate development loans, subprime residential mortgage loans, brokered home equity loans and certain other residential real estate loans and cross-border leases. The majority of the distressed loans were associated with acquisitions, including $20 billion related to National City at March 31, 2009.

As of March 31, 2009, $8.5 billion of loans were deemed impaired and nonperforming assets were $933 million.

Loans in this business segment require special servicing and management oversight given current market conditions. The business activities of this segment are primarily risk and asset management activities that are focused on maximizing value within a defined risk profile.