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This excerpt taken from the PNC 10-Q filed May 11, 2009. BUSINESS SEGMENT HIGHLIGHTS In the first quarter of 2009, we made changes to our business organization structure and management reporting in conjunction with the acquisition of National City. As a result, we now have seven reportable business segments which include:
Business segment results for the first quarter of 2008 have been reclassified to present prior periods on the same basis. Total business segment earnings were $750 million for the first three months of 2009 and $289 million for the first three months of 2008. Highlights of results for the first quarters of 2009 and 2008 are included below. The Business Segments Review section of this Financial Review includes further analysis of our business segment results over these periods. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 19 Segment Reporting. Retail Banking Retail Banking earned $56 million for the first quarter of 2009. Results for the quarter were challenged in this environment by ongoing credit deterioration, a lower value assigned to deposits in a declining rate environment, reduced consumer spending and increased FDIC insurance costs. Retail Banking continues to maintain its focus on customer growth, employee and customer satisfaction, investing in the business for future growth, as well as disciplined expense management during this period of market and economic uncertainty. Corporate & Institutional Banking Corporate & Institutional Banking earned $374 million in the first quarter of 2009. Total revenue of $1.3 billion was strong given the current environment, driven primarily by net interest income. Noninterest expense was tightly managed, and earnings were impacted by the provision for credit losses, indicative of deteriorating credit quality occurring throughout the economy. Asset Management Group Earnings from the Asset Management Group totaled $38 million in the first quarter of 2009 compared with $37 million in the prior year first quarter. The current period earnings reflects new business obtained from National City offset by lower noninterest income and higher provision for credit losses stemming from the depressed equity markets and continued economic challenges. This business segment was formed in the first quarter of 2009.
This excerpt taken from the PNC 10-Q filed Nov 6, 2008. BUSINESS SEGMENT HIGHLIGHTS Total business segment earnings were $904 million for the first nine months of 2008 and $1.278 billion for the first nine months of 2007. Third quarter 2008 business segment earnings of $241 million decreased $191 million compared with the third quarter of 2007. Results for 2008 were impacted by a lower assigned revenue value for deposits in the current interest rate environment, the impact of valuation adjustments on certain illiquid assets, and a higher provision for credit losses. Notwithstanding these factors, our business segments made significant progress in growing loans and deposits, adding customers and investing in products and services. Highlights of results for the third quarter and first nine months of 2008 and 2007 are included below. The Business Segments Review section of this Financial Review includes further analysis of our business segment results over these periods. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 16 Segment Reporting in the Notes To Consolidated Financial Statements in this Report. Retail Banking Retail Banking’s earnings were $414 million for the first nine months of 2008 compared with $665 million for the same period in 2007. The 38% decline in earnings over the prior year was primarily driven by increases in the provision for credit losses and expenses. Retail Banking’s earnings were $79 million for the third quarter of 2008 compared with $246 million for the same period in 2007. The decline from the prior year third quarter was driven by an increase in the provision for credit losses and higher noninterest expense. Corporate & Institutional Banking Corporate & Institutional Banking earned $208 million in the first nine months of 2008 compared with $341 million in the first nine months of 2007. Earnings in 2008 were impacted by pretax valuation losses of $238 million on commercial mortgage loans held for sale. Increases in the provision for credit losses and noninterest expenses were offset by higher net interest income.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed Aug 8, 2008. BUSINESS SEGMENT HIGHLIGHTS Total business segment earnings were $663 million for the first six months of 2008 and $846 million for the first six months of 2007. Second quarter 2008 business segment earnings of $376 million decreased $58 million compared with the second quarter of 2007. Results for 2008 were impacted by a lower assigned revenue value for deposits in the current interest rate environment as well as the impact of net valuation adjustments on certain illiquid assets. Notwithstanding these factors, our business segments made significant progress in growing loans and deposits, adding customers and investing in products and services. Highlights of results for the second quarter and first half of 2008 and 2007 are included below. The Business Segments Review section of this Financial Review includes further analysis of our business segment results over these periods. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 16 Segment Reporting in the Notes To Consolidated Financial Statements in this Report. Retail Banking Retail Banking’s earnings were $335 million for the first half of 2008 compared with $419 million for the first half of 2007. The 20% decline in earnings over the prior year was driven by increases in expenses and the provision for credit losses, partially offset by benefits from the first quarter 2008 gain related to the Visa initial public offering and the net benefits from acquisitions.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed May 12, 2008. BUSINESS SEGMENT HIGHLIGHTS Total business segment earnings decreased $103 million for the first quarter of 2008, to $313 million, compared with the first quarter of 2007. Highlights of results for the first three months of 2008 and 2007 are included below. The Business Segments Review section of this Financial Review includes further analysis of our business segment results over these periods. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 16 Segment Reporting in the Notes To Consolidated Financial Statements in this Report. Retail Banking Retail Banking’s earnings were $221 million for the first quarter of 2008 compared with $201 million for the same period in 2007. The 10% increase in earnings over the first quarter in 2007 was driven by acquisitions and gains related to our ownership interest in Visa and the Hilliard Lyons sale, partially offset by an increase in the provision for credit losses.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed Nov 8, 2007. BUSINESS SEGMENT HIGHLIGHTS
Total business segment earnings increased $152 million, or 13%, for the first nine months of 2007 compared with the first nine months of 2006. We refer you to page 18 of this Report for a Results of Businesses – Summary table, with further analysis of business segment results for the first nine months of 2007 and 2006 provided on pages 19 through 25. Third quarter 2007 business segment earnings of $436 million increased $37 million, or 9%, compared with the third quarter of 2006. Highlights of results for the first nine months and third quarter periods are included below. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 14 Segment Reporting in the Notes To Consolidated Financial Statements in this Report. The presentation of BlackRock segment and total business segment earnings in this Financial Review differs from Note 14 in that these earnings exclude BlackRock/MLIM integration costs and prior year results reflect BlackRock as if it had been accounted for under the equity method. Retail Banking Retail Banking’s earnings were $678 million for the first nine months of 2007 compared with $581 million for the same period in 2006. The 17% increase over the prior year was driven by the Mercantile acquisition, strong market-related fees and continued customer growth, partially offset by an increase in the provision for credit losses and in noninterest expense. Retail Banking earned $250 million for the third quarter of 2007, an increase of $44 million, or 21%, compared with the third quarter of 2006. The increase over the third quarter of 2006 was primarily due to the Mercantile acquisition, increased fee income and continued customer growth. Corporate & Institutional Banking Corporate & Institutional Banking earned $341 million in the first nine months of 2007 compared with $328 million in the first nine months of 2006. The increase compared with the 2006 period was largely the result of higher taxable-equivalent net interest income and corporate service fees, partly offset by an increase in noninterest expense, lower other noninterest income, and an increase in the provision for credit losses. For the third quarter of 2007, earnings from Corporate & Institutional Banking totaled $87 million compared with $111
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Table of ContentsThis excerpt taken from the PNC 10-Q filed Aug 8, 2007. BUSINESS SEGMENT HIGHLIGHTS
Total business segment earnings increased $115 million, or 16%, for the first half of 2007 compared with the first half of 2006. We refer you to page 17 of this Report for a Results of Businesses – Summary table, with further analysis of business segment results for the first six months of 2007 and 2006 provided on pages 18 through 24. Second quarter 2007 business segment earnings of $439 million increased $67 million, or 18%, compared with the second quarter of 2006. Highlights of results for the first six months and second quarter periods are included below.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed May 9, 2007. BUSINESS SEGMENT HIGHLIGHTS Total business segment earnings increased 13%, to $416 million, for the first quarter of 2007 compared with the first quarter of 2006. We refer you to page 15 of this Report for a Results of Businesses – Summary table. Highlights of results for the first quarter 2007 in comparison to the prior year period follow. Further analysis of business segment results for the first quarter 2007 is provided on pages 16 through 23. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 14 Segment Reporting in the Notes To Consolidated Financial Statements in this Report.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed Nov 9, 2006. BUSINESS SEGMENT HIGHLIGHTS
Total business segment earnings for the first nine months of 2005 included the benefit of a second quarter $53 million loan recovery included in the Corporate & Institutional Banking business segment. A summary of results for both the first nine months and third quarter 2006 comparisons with the prior year periods follows. Further analysis of business segment results for the nine-month periods is found on pages 15 through 24. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 14 Segment Reporting in the Notes To Consolidated Financial Statements in this Report and in the Results of Businesses - Summary table on page 15. Retail Banking Retail Banking’s earnings were $581 million for the first nine months of 2006 compared with $487 million for the same period in 2005. Compared with the prior year, revenues increased 10% and noninterest expenses increased 4%, resulting in a 19% earnings improvement. The increase in earnings was driven by improved fee income from customers, higher taxable-equivalent net interest income fueled by continued customer and balance sheet growth, and a sustained focus on expense management. Earnings from Retail Banking totaled $206 million in the third quarter of 2006 compared with $176 million in the third quarter of 2005. Revenue increased 7% compared with the prior year third quarter, while noninterest expense increased only 2%, driving a 17% increase in earnings and creating positive operating leverage. Corporate & Institutional Banking Earnings from Corporate & Institutional Banking for the first nine months of 2006 totaled $334 million compared with $372 million for the first nine months of 2005. This decline was primarily attributable to the benefit of a $53 million loan recovery recognized in the second quarter of 2005 compared with a $36 million provision for credit losses in the first nine
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Table of Contentsmonths of 2006. In addition to the negative impact of the $89 million change in the provision for credit losses, total revenue increased $101 million and noninterest expenses grew by $69 million for the first nine months of 2006 compared with the first nine months of 2005. Corporate & Institutional Banking earned $113 million in the third quarter of 2006 compared with $118 million in the third quarter of 2005. The decrease compared with the prior year quarter was largely the result of an increase in the provision for credit losses. The increase in noninterest revenue and expense was driven by the acquisition of Harris Williams. Revenue increased $10 million compared with the third quarter of 2005, driven by a $22 million increase in noninterest income, partly offset by a $12 million decrease in taxable-equivalent net interest income. BlackRock BlackRock reported net income of $153 million for the first nine months of 2006 and $161 million for the first nine months of 2005. BlackRock’s reported net income for the first nine months of 2006 and 2005 included after-tax MLIM and State Street Research and Management (“SSRM”) integration costs of $56 million and $6 million, respectively. The BlackRock business segment earned $209 million in the first nine months of 2006 and $167 million for the first nine months of 2005 excluding the impact of these costs, which we have reported in “Other” for PNC business segment reporting. Adjusted earnings in 2006 reflected higher investment advisory and administration fees due to an increase in assets under management and increased performance fees. These factors more than offset the increase in expense due to increased compensation and benefits, general and administration expense, and a one-time expense of $34 million incurred in the first quarter of 2006 related to the January 2005 acquisition of SSRM. BlackRock reported net income of $19 million for the third quarter of 2006, compared with $61 million for the third quarter of 2005. BlackRock’s reported net income included after-tax MLIM integration costs of $44 million in the third quarter of 2006. BlackRock earned $63 million in the third quarter of 2006, an increase of $2 million compared with the third quarter of 2005, excluding the impact of MLIM integration costs. The increase compared with the third quarter of 2005 was a result of higher investment and advisory fees due to growth in assets under management, partly offset by lower nonoperating income, due principally to unrealized losses on energy-related investments.
We refer you to the BlackRock/MLIM Transaction section of this Executive Summary for further information related to this transaction that closed on September 29, 2006. Information on this transaction is also included in Note 2 Acquisitions in the Notes To Consolidated Financial Statements included in this Report. PFPC PFPC’s earnings of $93 million in the first nine months of 2006 increased $18 million, or 24%, compared with the first nine months of 2005. Earnings for the 2006 period included the impact of a $14 million reversal of deferred taxes related to earnings from foreign subsidiaries following management’s determination that the earnings would be indefinitely reinvested outside of the United States. In addition, higher earnings in the first nine months of 2006 reflected servicing revenue contributions from several growth areas of the business and the successful implementation of expense control initiatives which improved the company’s operating margin. Earnings for the first nine months of 2005 included a $3 million tax benefit identified as part of the One PNC initiative. PFPC earned $40 million in the third quarter of 2006 compared with $28 million in the third quarter of 2005. The earnings increase from the third quarter of 2005 resulted from the $14 million reversal of deferred taxes referred to above. Other “Other” earnings for the first nine months of 2006 totaled $1.1 billion, while “Other” for the first nine months of 2005 was a net loss of $80 million. “Other” earnings for the 2006 period included the $1.3 billion after-tax gain on the BlackRock/MLIM transaction recorded in the third quarter of 2006, partially offset by the impact of charges related to the following, all on an after-tax basis:
The first nine months of 2005 included the impact of third quarter 2005 implementation costs related to the One PNC initiative totaling $29 million after-tax, net securities losses of $24 million after-tax, and Riggs acquisition integration costs totaling $19 million after-tax. These factors were partially offset by the first quarter 2005 benefit recognized from a $45 million deferred tax liability reversal related to the internal transfer of our investment in BlackRock as described above under Summary Financial Results. We recorded earnings of $1.1 billion in “Other” for the third quarter of 2006 primarily due to the reasons outlined above for the nine-month earnings. “Other” for the third quarter of 2005 was a net loss of $30 million. The net loss for the prior year quarter reflected the One PNC implementation costs referred to above.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed Aug 9, 2006. BUSINESS SEGMENT HIGHLIGHTS
Total business segment earnings for the second quarter and first half of 2005 included the benefit of a $53 million loan recovery included in the Corporate & Institutional Banking business segment. A summary of results for both the first half and second quarter of 2006 comparisons with the prior year periods follows. Further analysis of business segment results for the six-month periods is found on pages 15 through 23. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis in Note 13 Segment Reporting in the Notes To Consolidated Financial Statements in this Report and in the Results of Businesses - Summary table on page 15. Retail Banking Retail Banking’s earnings were $375 million for the first six months of 2006 compared with $311 million for the same period in 2005. Compared with the prior year, revenues increased 12% and noninterest expenses increased 5%, resulting in a 21% earnings improvement. The increase in earnings was driven by higher taxable-equivalent net interest income fueled by continued customer and balance sheet growth along with improved fee income from customers and a sustained focus on expense management. Earnings from Retail Banking totaled $185 million in the second quarter of 2006 compared with $162 million in the second quarter of 2005. Revenue increased 10% compared with the second quarter of 2005, while noninterest expense increased only 4%, driving a 14% increase in earnings. Corporate & Institutional Banking Earnings from Corporate & Institutional Banking for the first six months of 2006 totaled $221 million compared with $254 million for the first six months of 2005. This decline was primarily attributable to a $53 million loan recovery recognized in the second quarter of 2005 compared with a $29 million provision for credit losses in the first half of 2006. In addition to the $81 million swing in the provision for credit losses, total revenue increased $91 million and noninterest expenses grew by $59 million for the first six months of 2006 compared with the comparable 2005 period. Corporate & Institutional Banking earned $116 million in the second quarter of 2006 compared with $144 million in the second quarter of 2005. The earnings decrease compared with the prior year quarter was largely the result of an increase in the provision for credit losses, primarily due to a $53 million loan recovery referred to above that benefited the prior year quarter. Revenue increased $61 million in the second quarter of 2005, driven by an increase in noninterest income, while noninterest expense increased $37 million. BlackRock Earnings totaled $134 million for BlackRock for the first half of 2006 compared with $100 million for the prior year first half. Higher earnings in 2006 reflected higher investment advisory and administration fees due to an increase in assets under management and increased performance fees which more than offset higher expenses primarily associated with business growth. BlackRock earned $63 million in the second quarter of 2006, an increase of $10 million, or 19%, compared with the second quarter of 2005. The increase compared with the prior year quarter was largely the result of growth in investment advisory and administrative fees. BlackRock’s assets under management increased to $464 billion at June 30, 2006 compared with $414 billion at June 30, 2005. PNC owns approximately 69% of BlackRock and we consolidate BlackRock into our financial statements. Accordingly, approximately 31% of BlackRock’s earnings are recognized as minority interest expense in the Consolidated Income Statement. BlackRock financial information included in the Financial Review section of this Report is presented on a stand-alone basis. The market value of our BlackRock shares was approximately $6.2 billion at June 30, 2006 while the book value at that date was approximately $767 million. PFPC PFPC’s earnings of $53 million in the first six months of 2006 increased $6 million, or 13%, compared with the first six months of 2005. Higher earnings in the first half of 2006 reflected servicing revenue contributions from several growth areas of the business and the successful implementation of expense control initiatives which improved the company’s operating margin. PFPC earned $26 million in the second quarter of 2006 compared with $24 million in the second quarter of 2005. The earnings increase from the second quarter of 2005 was a result of continued emphasis on cost reductions and process efficiencies as competitive factors impacted revenue growth. Other “Other” for the first half of 2006 was a net loss of $7 million, while “Other” for the first half of 2005 was a net loss of $46 million. The first six months of 2005 included the impact of Riggs acquisition integration costs totaling $19 million after-tax. In addition, the first half of 2006 benefited in the comparison with higher equity management gains and lower net securities losses. Net securities losses for the first six months of 2005 reflected actions taken during the second quarter of that year regarding our securities portfolio that resulted in realized net securities and other losses of approximately $20 million after-tax. These factors were partially offset by the first quarter 2005 benefit recognized from a $45 million deferred tax liability reversal related to the internal transfer of our investment in BlackRock as described above under Summary Financial Results. We recorded earnings of $10 million in “Other” for the second quarter of 2006 primarily as a result of $54 million of pretax equity management gains. “Other” for the second quarter of 2005 was a net loss of $85 million. The increase in earnings compared with the second quarter of 2005 reflected higher equity management gains and lower net securities losses in the 2006 period, along with the impact of the nonrecurring Riggs costs referred to above in second quarter 2005 results.
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Table of ContentsThis excerpt taken from the PNC 10-Q filed May 9, 2006. BUSINESS SEGMENT HIGHLIGHTS Total business segment earnings were $393 million for the first quarter 2006, an increase of $64 million, or 19%, compared with the first quarter of 2005. Significant earnings growth in the Retail Banking, BlackRock and PFPC segments drove the overall improvement in business segment earnings. We provide a reconciliation of total business segment earnings to total PNC consolidated net income as reported under GAAP in Note 13 Segment Reporting in the Notes To Consolidated Financial Statements in this Report and in the Results of Businesses—Summary table on page 12. Retail Banking Retail Banking’s earnings were $190 million for the first quarter of 2006 compared with $149 million for the same period in 2005. Compared with the prior year first quarter, revenue increased 14%, while noninterest expense increased only 6%, driving a 28% increase in earnings. The increase in earnings compared with the first quarter of 2005 was driven by higher taxable-equivalent net interest income fueled by continued customer and balance sheet growth, including our expansion into the greater Washington, DC area, along with improved fee income from customers, strong asset quality, and a sustained focus on expense management. Corporate & Institutional Banking Earnings from Corporate & Institutional Banking for the first three months of 2006 totaled $105 million compared with $110 million in the prior year first quarter. The decrease when compared with the first quarter of 2005 was primarily the result of an increased provision for credit losses. Harris Williams, acquired in October 2005, was a significant contributor to both revenue and noninterest expense growth in 2006 compared with the prior year first quarter.
BlackRock BlackRock reported earnings of $71 million for the first quarter of 2006 compared with $47 million for the first quarter of 2005. Higher earnings in the 2006 quarter reflected higher investment advisory and administration fees due to an increase in assets under management and increased performance fees. These factors more than offset the increase in expense due to increased compensation and benefits, including higher incentive compensation associated with performance fees, and a one-time expense of $34 million related to the January 2005 acquisition of SSRM Holdings, Inc. (“SSRM”). BlackRock’s assets under management increased to $463 billion at March 31, 2006 compared with $391 billion at March 31, 2005. PNC owns approximately 69% of BlackRock and we consolidate BlackRock into our financial statements. Accordingly, approximately 31% of BlackRock’s earnings are recognized as minority interest expense in the Consolidated Income Statement. BlackRock financial information included in the Financial Review section of this Report is presented on a stand-alone basis. The market value of our BlackRock shares was approximately $6.2 billion at March 31, 2006 while the book value at that date was approximately $734 million. PFPC PFPC’s earnings increased $4 million, or 17%, to $27 million in the first quarter of 2006 compared with the prior year first quarter. Higher earnings in the 2006 quarter reflected strong revenue contributions from several areas of the business and disciplined expense control. PFPC’s accounting/administration net fund assets increased $5 billion, to $750 billion, and custody fund assets decreased $79 billion, or 17%, as of March 31, 2006 compared with the balances at March 31, 2005. The decrease in custody fund assets resulted primarily from the deconversion of a major client during the first quarter of 2006 which was partially offset by new business, asset inflows from existing customers and equity market appreciation. Other The “Other” net loss for the first quarter of 2006 was $17 million compared with net earnings of $39 million for the first quarter of 2005. The first quarter of 2005 benefited from a $45 million deferred tax liability reversal related to the internal transfer of our investment in BlackRock as described above under Summary Financial Results. In addition, the decline in “Other” in the comparison primarily reflected the after-tax impact of lower equity management gains in the first quarter of 2006 compared with the first quarter of 2005.
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