The PNC Financial Services Group, Inc. (NYSE: PNC) today reported second quarter 2001 earnings of $295 million or $1.00 per diluted share compared with earnings from continuing operations of $299 million or $1.01 per diluted share for the second quarter of 2000. Excluding a $22 million or $0.08 per diluted share net loss from venture capital activities, second quarter 2001 results increased 7 percent to $317 million or $1.08 per diluted share. Reported earnings for the second quarter of 2000, which include the residential mortgage banking business that was sold in January 2001, were $315 million or $1.06 per diluted share. Return on average common shareholders' equity was 18.13 percent and return on average assets was 1.67 percent for the second quarter of 2001 compared with 21.91 percent and 1.68 percent, respectively, for the second quarter of 2000.
"The diversity of PNC's businesses helped to mitigate the impact of a weaker economic environment. BlackRock and PFPC had a particularly strong quarter and the Regional Community Bank continued to grow its transaction deposit base," said James E. Rohr, chairman, president and chief executive officer of The PNC Financial Services Group. "Corporate Banking and other businesses that have greater exposure to equity and capital markets were negatively impacted. However, we are pleased that asset quality remained relatively stable as a result of continued actions to downsize our institutional lending business," said Rohr.
SECOND QUARTER 2001 HIGHLIGHTS -- Excluding venture capital activities, noninterest income grew 10 percent in the second quarter of 2001 compared with the prior- year quarter. -- BlackRock's and PFPC's earnings grew 26 percent and 50 percent, respectively, compared with the second quarter of 2000. -- Regional Community Banking's core earnings grew 10% compared with the prior-year quarter, primarily driven by a 10% increase in transaction deposits. -- Loans declined $6.4 billion from December 31, 2000 to $44.2 billion at June 30, 2001, as a result of ongoing efforts to reduce balance sheet leverage, and lending revenue was 23 percent of total revenue in the second quarter of 2001. -- The loan to deposit ratio improved to 96 percent at June 30, 2001 compared with 108 percent at June 30, 2000 and 121 percent at September 30, 1998 prior to the implementation of balance sheet downsizing initiatives. -- Nonperforming assets remained relatively stable, increasing $4 million during the quarter to $390 million at June 30, 2001. Net charge-offs were $45 million or 0.40 percent of average loans for the second quarter of 2001. SECOND QUARTER 2001 INCOME STATEMENT REVIEW
Taxable-equivalent net interest income of $569 million for the second quarter of 2001 increased $19 million or 3 percent compared with the second quarter of 2000 and the net interest margin widened 13 basis points to 3.76 percent for the second quarter of 2001. The increases were primarily due to the positive impact of transaction deposit growth and a lower rate environment that was partially offset by the impact of continued downsizing of the loan portfolio.
The provision for credit losses was $45 million for the second quarter of 2001 and equaled net charge-offs compared with $35 million for the second quarter of 2000.
Noninterest income was $720 million for the second quarter of 2001 and included $30 million of venture capital losses. Excluding venture capital gains and losses in both years, noninterest income increased 10 percent compared with the second quarter of 2000 primarily due to growth in asset management and processing revenue.
Asset management fees of $214 million for the second quarter of 2001 increased $18 million or 9 percent compared with the second quarter of 2000. The increase was primarily driven by new institutional business at BlackRock, partially offset by the impact of weak equity markets on investment management and trust revenue in PNC Advisors. Assets under management were $260 billion at June 30, 2001, a 16 percent increase compared with June 30, 2000. Fund servicing fees of $182 million for the second quarter of 2001 increased $18 million or 11 percent compared with the second quarter of 2000 primarily due to existing and new client growth. At June 30, 2001, PFPC provided accounting/administration services for $502 billion of pooled investment assets and provided custody services for $442 billion of customer assets. The comparable amounts were $449 billion and $416 billion, respectively, at June 30, 2000. PFPC serviced in excess of 45 million shareholder accounts at June 30, 2001 compared with 41 million a year ago.
Service charges on deposits were $54 million for the second quarter of 2001, up 8 percent compared with the same period last year primarily due to an increase in transaction deposit accounts. Brokerage fees were $55 million for the second quarter of 2001 compared with $60 million for the second quarter of 2000. The decrease was primarily due to a decline in equity markets activity. Consumer services revenue of $58 million for the second quarter of 2001 increased $7 million or 14 percent compared with the prior-year quarter primarily due to the expansion of PNC's ATM network and the increase in transaction deposit accounts.
Corporate services revenue was $76 million for the second quarter of 2001 compared with $80 million for the second quarter of 2000. Higher commercial mortgage servicing and treasury management revenue was more than offset by valuation adjustments of other assets and lower commercial mortgage-backed securitization gains.
Equity management, which is comprised of venture capital activities, reflected net losses of $30 million for the second quarter of 2001 compared with $48 million of net gains for the second quarter of 2000. The decrease primarily resulted from a decline in the estimated fair value of partnership and direct investments. At June 30, 2001, equity management had venture capital investments totaling approximately $700 million with net unrealized appreciation of $38 million.
Net securities gains were $17 million for the second quarter of 2001. The gains were mostly offset by $10 million of valuation adjustments that are reflected in corporate services revenue. Other noninterest income was $94 million for the second quarter of 2001 compared with $79 million for the second quarter of 2000. The increase was primarily due to residential mortgage loan securitizations.
Noninterest expense was $789 million and the efficiency ratio was 58 percent in the second quarter of 2001 compared with $780 million and 57 percent, respectively, during the second quarter of 2000. The increases were primarily related to the expansion of asset management and processing businesses.
SECOND QUARTER 2001 BALANCE SHEET REVIEW
The Corporation has been pursuing a number of initiatives designed to improve the risk and return characteristics of its lending businesses. These include the sale of the residential mortgage banking and credit card businesses, exiting certain non-strategic institutional lending businesses and the continued downsizing of the indirect automobile lending portfolio. These actions have resulted in a reduction of the loan to deposit ratio to 96 percent at June 30, 2001, down from 121 percent at September 30, 1998 prior to the implementation of balance sheet downsizing initiatives.
Total assets were $70.0 billion at June 30, 2001 compared with $75.7 billion at June 30, 2000 prior to the sale of PNC's residential mortgage banking business. On the same basis, average interest-earning assets were $60.0 billion for the second quarter of 2001 compared with $64.8 billion for the second quarter of 2000. The decrease was primarily due to an $8.7 billion reduction in loans and loans held for sale that resulted from the sale of the residential mortgage banking business and other balance sheet downsizing initiatives, partially offset by a $3.7 billion increase in securities available for sale that primarily resulted from the securitization of certain residential mortgage loans.
Average deposits from continuing operations were $45.4 billion and represented 64 percent of total sources of funds for the second quarter of 2001 compared with $45.5 billion and 66 percent, respectively, in the second quarter of 2000. While total deposits remained essentially unchanged, an increase in transaction deposits of $2.3 billion or 8% was mostly offset by a $2.2 billion decrease in higher-cost retail certificates and wholesale deposits.
Average borrowed funds declined to $14.0 billion for the second quarter of 2001 compared with $19.4 billion for the second quarter of 2000 prior to the sale of PNC's residential mortgage banking business.
Shareholders' equity totaled $6.7 billion at June 30, 2001. The regulatory capital ratios are estimated to be 8.1 percent for leverage, 8.9 percent for tier I and 12.7 percent for total risk-based capital. During the second quarter of 2001, PNC repurchased 1.1 million shares of common stock. Common shares outstanding at June 30, 2001 were 288.5 million.
ASSET QUALITY REVIEW
Nonperforming assets were $390 million at June 30, 2001 compared with $386 million and $353 million at March 31, 2001 and June 30, 2000, respectively. The ratio of nonperforming assets to total loans, loans held for sale and foreclosed assets was .85 percent at June 30, 2001 compared with .81 percent at March 31, 2001 and .67 percent at June 30, 2000. The increase primarily resulted from the downsizing of the loan portfolio.
The allowance for credit losses was $675 million and represented 1.53 percent of period-end loans and 180 percent of nonperforming loans at June 30, 2001. The comparable ratios were 1.48 percent and 201 percent, respectively, at March 31, 2001 and 1.34 percent and 217 percent, respectively, at June 30, 2000. Net charge-offs were $45 million or .40 percent of average loans in the second quarter of 2001. The comparable amounts were $80 million or .65 percent, respectively, in the first quarter of 2001 and $34 million or .27 percent, respectively, in the second quarter of 2000.
BUSINESS RESULTS Revenue Return on Earnings (taxable-equivalent Assigned Capital basis) Quarter ended June 30 - dollars in millions 2001 2000 2001 2000 2001 2000 PNC Bank Regional Community Banking $177 $152 $558 $514 26% 23% Corporate Banking 42 56 192 206 14 18 Total PNC Bank 219 208 750 720 22 22 Secured Finance PNC Real Estate Finance 18 20 53 57 18 21 PNC Business Credit 14 13 33 29 34 34 Total Secured Finance 32 33 86 86 23 25 Total Banking 251 241 836 806 22 22 Asset Management and Processing PNC Advisors 39 45 190 194 29 32 BlackRock 26 21 135 113 25 27 PFPC 15 10 186 170 29 19 Total Asset Management and Processing 80 76 511 477 27 27 Total business results 331 317 1,347 1,283 23 23 Other (36) (18) (58) (5) Results from continuing operations 295 299 1,289 1,278 18 21 Discontinued operations 16 Total Consolidated $295 $315 $1,289 $1,278 18 22
PNC Bank - Regional Community Banking earned $177 million for the second quarter of 2001, an increase of 16 percent compared with the same quarter in 2000 primarily due to strong business growth and net securities gains. Excluding net securities gains in 2001, earnings increased 10 percent primarily driven by growth in transaction deposits, higher noninterest income and aggressive expense management. Corporate Banking's earnings declined to $42 million for the second quarter of 2001 compared with $56 million for the second quarter of 2000. The decrease was primarily attributable to higher credit costs, the impact of continued downsizing and valuation adjustments of other assets.
Secured Finance - PNC Real Estate Finance earned $18 million for the second quarter of 2001 compared with $20 million for the second quarter of 2000. The prior-year quarter benefited from commercial mortgage-backed securitization gains that were not repeated due to weakness in the capital markets. Excluding these gains from the prior year, earnings increased 20 percent primarily due to higher commercial mortgage loan servicing income. PNC Business Credit earned $14 million for the second quarter of 2001, a 10 percent increase compared with the second quarter of 2000 primarily due to an increase in revenue associated with loan growth.
Asset Management and Processing - PNC Advisors earned $39 million for the second quarter of 2001 compared with $45 million during the same period last year. The decrease was primarily due to lower revenue that resulted from weak equity markets. BlackRock earned $26 million for the second quarter of 2001, a 26 percent increase compared with the same period in 2000 primarily resulting from new institutional business. PFPC's earnings were $15 million for the second quarter of 2001 compared with $10 million during the same period in 2000. The increase was primarily due to new and existing client growth. Cash earnings for PFPC, which exclude goodwill amortization, increased 25 percent in the period-to-period comparison to $25 million for the second quarter of 2001.
Total business financial results differ from consolidated results from continuing operations primarily due to differences between management accounting practices and generally accepted accounting principles, divested and exited businesses in the prior year, equity management activities, minority interests, residual asset and liability management activities, eliminations and unassigned items, the impact of which is reflected in the "Other" category.
RECORDED COMMENTS ON SECOND QUARTER 2001 RESULTS
Recorded comments providing further information regarding the topics addressed in this earnings release will be available for one week, beginning on July 19, by calling 1-888-567-0671. The recorded comments may include our earnings outlook and other forward-looking information and are subject to the cautionary statements set forth below in this press release.
FORWARD-LOOKING STATEMENTS
This press release and other statements by the Corporation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to the outlook for earnings, revenues and asset quality, other future financial or business performance, strategies and expectations. Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "outlook," "position" and similar expressions, or future or conditional verbs such as "will," "should," "would," and "could." Forward-looking statements are subject to numerous assumptions, risks and uncertainties. Forward-looking statements speak only as of today and PNC assumes no duty to update them.
In addition to factors previously disclosed in PNC's SEC reports (accessible on the SEC's website at http://www.sec.gov/ and on PNC's website at http://www.pnc.com/), the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) adjustments to recorded results of the sale of the residential mortgage banking business after final settlement is completed; (2) changes in economic or industry conditions, the interest rate environment or financial and capital markets, which could result in: a deterioration in credit quality and increased credit losses; an adverse effect on the allowance for loan losses; reduced demand for credit or fee-based products and services, net interest income, value of assets under management and assets serviced, value of debt and equity investments, or value of on-balance sheet and off- balance-sheet assets; or changes in the availability and terms of funding necessary to meet PNC's liquidity needs; (3) relative investment performance of assets under management; (4) the introduction, withdrawal, success and timing of business initiatives and strategies, decisions regarding further reductions in balance sheet leverage, and PNC's inability to realize cost savings or revenue enhancements, implement integration plans and other consequences of mergers, acquisitions, restructurings and divestitures; (5) customer borrowing, repayment, investment and deposit practices and their acceptance of PNC's products and services; (6) the impact of increased competition; (7) the means PNC chooses to redeploy available capital, including the extent and timing of any share repurchases and investments in PNC businesses; (8) the inability to manage risks inherent in PNC's business; (9) the unfavorable resolution of legal proceedings; (10) the denial of insurance coverage for claims made by PNC; (11) an increase in the number of customer or counterparty delinquencies, bankruptcies or defaults that could result in, among other things, increased credit and asset quality risk, a higher loan loss provision and reduced profitability; (12) the impact, extent and timing of technological changes; and (13) actions of the Federal Reserve Board and legislative and regulatory actions and reforms.
The PNC Financial Services Group, Inc., headquartered in Pittsburgh, is one of the nation's largest diversified financial services organizations, providing regional community banking, corporate banking, real estate finance, asset-based lending, wealth management, asset management and global fund services.
[TABULAR MATERIAL FOLLOWS] Consolidated Financial Highlights The PNC Financial Services Group, Inc. Three months ended Six months ended Dollars in millions, except per June 30 June 30 share data 2001 2000 2001 2000 FINANCIAL PERFORMANCE Revenue Net interest income (taxable- equivalent basis) $569 $550 $1,128 $1,110 Noninterest income 720 728 1,421 1,456 Total revenue 1,289 1,278 2,549 2,566 Income from continuing operations 295 299 560 601 Discontinued operations 16 40 22 Income before cumulative effect of accounting change 295 315 600 623 Cumulative effect of accounting change (5) Net income $295 $315 $595 $623 Cash Earnings (a) Continuing operations $324 $328 $619 $659 Discontinued operations 16 40 22 Before cumulative effect of accounting change 324 344 659 681 Cumulative effect of accounting change (5) Net income from cash earnings $324 $344 $654 $681 Per common share Diluted earnings Continuing operations $1.00 $1.01 $1.89 $2.02 Discontinued operations .05 .14 .07 Before cumulative effect of accounting change 1.00 1.06 2.03 2.09 Cumulative effect of accounting change (.02) Net income $1.00 $1.06 $2.01 $2.09 Diluted cash earnings (a) Continuing operations $1.10 $1.10 $2.10 $2.21 Discontinued operations .06 .14 .08 Before cumulative effect of accounting change 1.10 1.16 2.24 2.29 Cumulative effect of accounting change (.02) Net income from cash earnings $1.10 $1.16 $2.22 $2.29 Cash dividends declared $0.48 $0.45 $0.96 $0.90 SELECTED RATIOS From continuing operations Return on Average common shareholders' equity 18.13 % 20.77 % 17.36 % 21.03 % Average assets 1.67 1.74 1.58 1.75 Net interest margin 3.76 3.63 3.70 3.65 Noninterest income to total revenue 55.86 56.96 55.75 56.74 Efficiency (b) 57.65 57.29 57.78 57.57 From net income Return on Average common shareholders' equity 18.13 % 21.91 % 18.47 % 21.81 % Average assets 1.67 1.68 1.65 1.67 Net interest margin 3.76 3.41 3.64 3.43 Noninterest income to total revenue 55.86 58.92 56.51 58.60 Efficiency (c) 57.65 55.70 56.87 56.53 (a) Excludes amortization of goodwill. (b) Excludes amortization and distributions on capital securities. (c) Excludes amortization, distributions on capital securities and residential mortgage banking risk management activities. Consolidated Financial Highlights The PNC Financial Services Group, Inc. Dollars in millions, June 30 March 31 Dec. 31 Sept. 30 June 30 except per share data 2001 2001 2000 2000 2000 BALANCE SHEET DATA Assets $70,013 $70,966 $69,844 $69,884 $68,885 Earning assets 58,326 60,548 59,373 60,142 59,334 Loans, net of unearned income 44,167 45,626 50,601 49,791 50,281 Securities available for sale 11,258 11,976 5,902 6,490 5,315 Loans held for sale 1,613 1,765 1,655 2,127 2,305 Investment in discontinued operations 356 347 292 Deposits 45,826 47,189 47,664 47,494 46,381 Borrowed funds 12,119 12,279 11,718 12,299 13,028 Shareholders' equity 6,748 6,781 6,656 6,383 6,157 Common shareholders' equity 6,532 6,470 6,344 6,071 5,844 Book value per common share 22.60 22.39 21.88 21.01 20.22 Loans to deposits 96 % 97 % 106 % 105 % 108 % CAPITAL RATIOS Leverage 8.1 % 7.8 % 8.0 % 6.9 % 6.7 % Common shareholders' equity to total assets 9.33 9.12 9.08 8.69 8.48 ASSET QUALITY RATIOS Nonperforming assets to total loans, loans held for sale and foreclosed assets .85 % .81 % .71 % .68 % .67 % Allowance for credit losses to total loans 1.53 1.48 1.33 1.36 1.34 Allowance for credit losses to nonperforming loans 180.48 200.89 208.98 219.16 217.04 Net charge-offs to average loans (For the three months ended) .40 .65 .32 .24 .27 Three months ended Six months ended ANALYSIS OF 2001 RESULTS June 30 June 30 Per Per In millions, except per Net Diluted Net Diluted share data Income Share Income Share Net income $295 $1.00 $595 $2.01 Cumulative effect of accounting change 5 .02 Results before cumulative effect of accounting change 295 1.00 600 2.03 Venture capital activities 22 .08 49 .17 317 1.08 649 2.20 Discontinued operations (40) (.14) Loans designated for exit 27 .09 Severance costs 5 .02 Adjusted results $317 $1.08 $641 $2.17 Consolidated Statement of Income The PNC Financial Services Group, Inc. Three months ended Six months ended Dollars in millions, June 30 June 30 except per share data 2001 2000 2001 2000 Interest Income Loans and fees on loans $839 $1,009 $1,820 $1,993 Securities available for sale 177 97 299 191 Loans held for sale 31 52 68 116 Other 32 22 64 41 Total interest income 1,079 1,180 2,251 2,341 Interest Expense Deposits 334 397 731 766 Borrowed funds 180 238 401 475 Total interest expense 514 635 1,132 1,241 Net interest income 565 545 1,119 1,100 Provision for credit losses 45 35 125 66 Net interest income less provision for credit losses 520 510 994 1,034 Noninterest Income Asset management 214 196 437 382 Fund servicing 182 164 363 319 Service charges on deposits 54 50 104 100 Brokerage 55 60 109 131 Consumer services 58 51 113 98 Corporate services 76 80 152 162 Equity management (30) 48 (69) 135 Net securities gains (losses) 17 46 (3) Other 94 79 166 132 Total noninterest income 720 728 1,421 1,456 Noninterest Expense Staff expense 418 396 839 807 Net occupancy 54 48 107 101 Equipment 60 55 117 111 Amortization 27 28 53 56 Marketing 16 19 25 32 Distributions on capital securities 16 17 33 33 Other 198 217 390 432 Total noninterest expense 789 780 1,564 1,572 Income from continuing operations before income taxes 451 458 851 918 Income taxes 156 159 291 317 Income from continuing operations 295 299 560 601 Income from discontinued operations (less applicable income taxes of $10, $0, and $15) 16 40 22 Net income before cumulative effect of accounting change 295 315 600 623 Cumulative effect of accounting change (less applicable income taxes of $2) (5) Net income $295 $315 $595 $623 Earnings Per Common Share Continuing operations Basic $1.01 $1.01 $1.91 $2.03 Diluted 1.00 1.01 1.89 2.02 Net income Basic $1.01 $1.07 $2.03 $2.11 Diluted 1.00 1.06 2.01 2.09 Cash Dividends Declared Per Common Share .48 .45 .96 .90 Average Common Shares Outstanding Basic 288 290 289 291 Diluted 291 292 292 293 Details of Net Interest Income The PNC Financial Services Group, Inc. Net Interest Income Three months ended Six months ended Taxable-equivalent basis June 30 June 30 In millions 2001 2000 2001 2000 Interest income Loans and fees on loans $844 $1,013 $1,829 $2,001 Securities available for sale 178 98 300 193 Loans held for sale 31 52 68 116 Other 30 22 63 41 Total interest income 1,083 1,185 2,260 2,351 Interest expense Deposits 334 397 731 766 Borrowed funds 180 238 401 475 Total interest expense 514 635 1,132 1,241 Net interest income $569 $550 $1,128 $1,110 Lending revenue to total revenue 23 % 23 % 23 % 23 % Net Interest Income by Quarter Taxable-equivalent basis Three months ended - in June 30 March 31 Dec. 31 Sept. 30 June 30 millions 2001 2001 2000 2000 2000 Interest income Loans and fees on loans $844 $985 $1,031 $1,028 $1,013 Securities available for sale 178 122 97 99 98 Loans held for sale 31 37 41 47 52 Other 30 33 26 30 22 Total interest income 1,083 1,177 1,195 1,204 1,185 Interest expense Deposits 334 397 453 434 397 Borrowed funds 180 221 204 236 238 Total interest expense 514 618 657 670 635 Net interest income $569 $559 $538 $534 $550 Lending revenue to total revenue 23 % 22 % 24 % 24 % 23 % Details of Net Interest Margin The PNC Financial Services Group, Inc. Net Interest Margin Three months ended Six months ended June 30 June 30 Taxable-equivalent basis 2001 2000 2001 2000 Average yields/rates Yield on earning assets Loans and fees on loans 7.46 % 8.03 % 7.72 % 7.95 % Securities available for sale 6.07 6.50 6.06 6.35 Loans held for sale 7.06 8.11 7.19 7.76 Other 7.94 7.01 8.03 6.99 Total yield on earning assets 7.19 7.86 7.44 7.76 Rate on interest-bearing liabilities Deposits 3.60 4.30 3.92 4.17 Borrowed funds 5.09 6.54 5.63 6.33 Total rate on interest- bearing liabilities 4.01 4.92 4.38 4.79 Interest rate spread 3.18 2.94 3.06 2.97 Impact of noninterest-bearing sources .58 .69 .64 .68 Net interest margin 3.76 % 3.63 % 3.70 % 3.65 % Net Interest Margin by Quarter Taxable-equivalent basis June 30 March 31 Dec. 31 Sept. 30 June 30 Three months ended 2001 2001 2000 2000 2000 Average yields/rates Yield on earning assets Loans and fees on loans 7.46 % 7.96 % 8.16 % 8.13 % 8.03 % Securities available for sale 6.07 6.08 6.53 6.41 6.50 Loans held for sale 7.06 7.31 8.32 8.77 8.11 Other 7.94 7.20 7.80 8.05 7.01 Total yield on earning assets 7.19 7.67 7.99 7.98 7.86 Rate on interest-bearing liabilities Deposits 3.60 4.22 4.66 4.58 4.30 Borrowed funds 5.09 6.15 6.83 6.85 6.54 Total rate on interest- bearing liabilities 4.01 4.75 5.16 5.18 4.92 Interest rate spread 3.18 2.92 2.83 2.80 2.94 Impact of noninterest-bearing sources .58 .70 .77 .74 .69 Net interest margin 3.76 % 3.62 % 3.60 % 3.54 % 3.63 % Noninterest Income and Expense by Quarter The PNC Financial Services Group, Inc. Noninterest Income by Quarter Three months ended June 30 March 31 Dec. 31 Sept. 30 June 30 - in millions 2001 2001 2000 2000 2000 Asset management $214 $223 $219 $208 $196 Fund servicing 182 181 167 168 164 Service charges on deposits 54 50 56 50 50 Brokerage 55 54 57 61 60 Consumer services 58 55 56 55 51 Corporate services 76 76 94 86 80 Equity management (30) (39) 1 (3) 48 Net securities gains 17 29 16 7 Other 94 72 69 68 79 Total noninterest income $720 $701 $735 $700 $728 Noninterest income to total revenue 55.86 % 55.63 % 57.74 % 56.73 % 56.96 % Noninterest Expense by Quarter Three months ended June 30 March 31 Dec. 31 Sept. 30 June 30 - in millions 2001 2001 2000 2000 2000 Staff expense $418 $421 $410 $399 $396 Net occupancy 54 53 52 50 48 Equipment 60 57 59 54 55 Amortization 27 26 27 27 28 Marketing 16 9 22 16 19 Distributions on capital securities 16 17 17 17 17 Other 198 192 165 184 217 Total noninterest expense $789 $775 $752 $747 $780 Efficiency (a) 57.65 % 57.91 % 55.44 % 56.79 % 57.29 % (a) Excludes amortization and distributions on capital securities. Consolidated Balance Sheet The PNC Financial Services Group, Inc. June 30 December 31 June 30 In millions, except par value 2001 2000 2000 Assets Cash and due from banks $3,659 $3,662 $3,119 Short-term investments 793 1,151 1,377 Loans held for sale 1,613 1,655 2,305 Securities available for sale 11,258 5,902 5,315 Loans, net of unearned income of $1,073, $999 and $732 44,167 50,601 50,281 Allowance for credit losses (675) (675) (675) Net loans 43,492 49,926 49,606 Goodwill and other amortizable assets 2,405 2,468 2,497 Investment in discontinued operations 356 292 Other 6,793 4,724 4,374 Total assets $70,013 $69,844 $68,885 Liabilities Deposits Noninterest-bearing $9,009 $8,490 $8,866 Interest-bearing 36,817 39,174 37,515 Total deposits 45,826 47,664 46,381 Borrowed funds Federal funds purchased 1,444 1,445 882 Repurchase agreements 569 607 504 Bank notes and senior debt 4,496 6,110 6,878 Federal Home Loan Bank borrowings 2,464 500 1,339 Subordinated debt 2,349 2,407 2,426 Other borrowed funds 797 649 999 Total borrowed funds 12,119 11,718 13,028 Other 4,472 2,958 2,471 Total liabilities 62,417 62,340 61,880 Mandatorily redeemable capital securities of subsidiary trusts 848 848 848 Shareholders' Equity Preferred stock 5 7 7 Common stock - $5 par value Authorized 800, 450 and 450 shares Issued 353 shares 1,764 1,764 1,764 Capital surplus 1,257 1,303 1,287 Retained earnings 7,010 6,736 6,358 Deferred benefit expense (25) (25) (18) Accumulated other comprehensive loss from continuing operations (60) (43) (138) Accumulated other comprehensive loss from discontinued operations (45) (116) Common stock held in treasury at cost: 64, 63 and 64 shares (3,203) (3,041) (2,987) Total shareholders' equity 6,748 6,656 6,157 Total liabilities, capital securities and shareholders' equity $70,013 $69,844 $68,885 Consolidated Average Balance Sheet Data The PNC Financial Services Group, Inc. Three months ended Six months ended June 30 June 30 In millions 2001 2000 2001 2000 Assets Interest-earning assets Loans held for sale $1,720 $2,577 $1,862 $2,948 Securities available for sale 11,710 6,009 9,895 6,068 Loans, net of unearned income Consumer 9,096 9,209 9,090 9,228 Residential mortgage 8,459 12,571 10,554 12,577 Commercial 20,271 22,042 20,575 21,917 Commercial real estate 2,572 2,682 2,576 2,690 Lease financing 4,149 3,049 4,024 3,004 Other 459 676 490 682 Total loans, net of unearned income 45,006 50,229 47,309 50,098 Other 1,562 1,276 1,592 1,194 Total interest-earning assets 59,998 60,091 60,658 60,308 Noninterest-earning assets 10,718 8,566 10,589 8,192 Investment in discontinued operations 448 103 430 Total assets $70,716 $69,105 $71,350 $68,930 Liabilities Interest-bearing liabilities Deposits Demand and money market $20,944 $18,549 $20,707 $18,125 Savings 1,936 2,107 1,928 2,123 Retail certificates of deposit 12,662 14,403 13,190 14,497 Other time 537 641 551 639 Deposits in foreign offices 1,096 1,483 1,248 1,486 Total interest-bearing deposits 37,175 37,183 37,624 36,870 Borrowed funds 14,030 14,422 14,201 14,877 Total interest-bearing liabilities 51,205 51,605 51,825 51,747 Noninterest-bearing deposits 8,229 8,357 8,210 8,028 Other 3,777 2,290 3,803 2,341 Total liabilities 63,211 62,252 63,838 62,116 Mandatorily redeemable capital securities of subsidiary trusts 848 848 848 848 Shareholders' Equity 6,657 6,005 6,664 5,966 Total liabilities, capital securities and shareholders' equity $70,716 $69,105 $71,350 $68,930 Common Shareholders' Equity $6,437 $5,692 $6,398 $5,653 Consolidated Average Balance Sheet Data by Quarter The PNC Financial Services Group, Inc. Three months ended - in June 30 March 31 Dec. 31 Sept. 30 June 30 millions 2001 2001 2000 2000 2000 Assets Interest-earning assets Loans held for sale $1,720 $2,005 $1,991 $2,151 $2,577 Securities available for sale 11,710 8,061 5,928 6,179 6,009 Loans, net of unearned income Consumer 9,096 9,085 9,081 9,174 9,209 Residential mortgage 8,459 12,673 12,838 12,405 12,571 Commercial 20,271 20,882 21,109 21,800 22,042 Commercial real estate 2,572 2,580 2,670 2,688 2,682 Lease financing 4,149 3,897 3,639 3,238 3,049 Other 459 520 591 646 676 Total loans, net of unearned income 45,006 49,637 49,928 49,951 50,229 Other 1,562 1,831 1,322 1,445 1,276 Total interest-earning assets 59,998 61,534 59,169 59,726 60,091 Noninterest-earning assets 10,718 10,251 9,214 8,857 8,566 Investment in discontinued operations 207 570 515 448 Total assets $70,716 $71,992 $68,953 $69,098 $69,105 Liabilities Interest-bearing liabilities Deposits Demand and money market $20,944 $20,468 $19,762 $18,914 $18,549 Savings 1,936 1,919 1,937 2,020 2,107 Retail certificates of deposit 12,662 13,724 14,795 14,776 14,403 Other time 537 565 587 619 641 Deposits in foreign offices 1,096 1,402 1,579 1,342 1,483 Total interest-bearing deposits 37,175 38,078 38,660 37,671 37,183 Borrowed funds 14,030 14,375 11,738 13,518 14,422 Total interest-bearing liabilities 51,205 52,453 50,398 51,189 51,605 Noninterest-bearing deposits 8,229 8,190 8,304 8,239 8,357 Other 3,777 3,830 2,978 2,637 2,290 Total liabilities 63,211 64,473 61,680 62,065 62,252 Mandatorily redeemable capital securities of subsidiary trusts 848 848 848 848 848 Shareholders' Equity 6,657 6,671 6,425 6,185 6,005 Total liabilities, capital securities and shareholders' equity $70,716 $71,992 $68,953 $69,098 $69,105 Common Shareholders' Equity $6,437 $6,360 $6,113 $5,873 $5,692 Loan Portfolio and Allowance For Credit Losses by Quarter The PNC Financial Services Group, Inc. Loan Portfolio June 30 March 31 Dec. 31 Sept. 30 June 30 Period ended - in millions 2001 2001 2000 2000 2000 Consumer $9,114 $9,049 $9,133 $9,174 $9,213 Residential mortgage 8,219 8,806 13,264 12,563 12,470 Commercial 19,552 20,676 21,207 21,198 22,140 Commercial real estate 2,557 2,590 2,583 2,676 2,687 Lease financing 5,354 5,080 4,845 4,498 3,834 Other 444 487 568 646 669 Total loans 45,240 46,688 51,600 50,755 51,013 Unearned income (1,073) (1,062) (999) (964) (732) Total loans, net of unearned income $44,167 $45,626 $50,601 $49,791 $50,281 Allowance For Credit Losses Three months ended - June 30 March 31 Dec. 31 Sept. 30 June 30 in millions 2001 2001 2000 2000 2000 Beginning balance $675 $675 $675 $675 $674 Charge-offs Consumer (10) (10) (12) (11) (11) Residential mortgage (1) (4) (1) (1) Commercial (41) (78) (35) (27) (30) Commercial real estate (1) (2) Lease financing (5) (3) (3) (2) (1) Total charge-offs (57) (91) (55) (43) (43) Recoveries Consumer 4 5 6 5 5 Residential mortgage 1 1 Commercial 6 6 7 4 3 Commercial real estate 4 Lease financing 2 1 Total recoveries 12 11 15 13 9 Net charge-offs Consumer (6) (5) (6) (6) (6) Residential mortgage (1) (3) (1) Commercial (35) (72) (28) (23) (27) Commercial real estate (1) 2 Lease financing (3) (3) (2) (2) (1) Total net charge-offs (45) (80) (40) (30) (34) Provision for credit losses 45 80 40 30 35 Ending balance $675 $675 $675 $675 $675 Nonperforming Assets by Quarter The PNC Financial Services Group, Inc. Nonperforming Assets by Type June 30 March 31 Dec. 31 Sept. 30 June 30 Period ended - in millions 2001 2001 2000 2000 2000 Nonaccrual loans Commercial $334 $296 $312 $261 $259 Commercial real estate 20 21 3 16 12 Residential mortgage 4 4 4 26 34 Consumer 4 3 2 3 3 Lease financing 12 6 2 2 3 Total nonaccrual loans 374 330 323 308 311 Troubled debt restructured loans 6 Total nonperforming loans 374 336 323 308 311 Foreclosed and other assets Commercial real estate 2 2 3 4 4 Residential mortgage 3 7 8 8 9 Other 11 41 38 34 29 Total foreclosed and other assets 16 50 49 46 42 Total nonperforming assets $390 $386 $372 $354 $353 Nonperforming Assets by Business June 30 March 31 Dec. 31 Sept. 30 June 30 Period ended - in millions 2001 2001 2000 2000 2000 PNC Bank Regional Community Banking $51 $61 $47 $82 $96 Corporate Banking 258 210 219 156 153 Secured Finance PNC Real Estate Finance 23 25 9 22 19 PNC Business Credit 38 33 36 32 22 PNC Advisors 3 4 2 6 8 Other 17 53 59 56 55 Total nonperforming assets $390 $386 $372 $354 $353 Change in Nonperforming Assets In millions 2001 March 31 $386 Transferred from accrual 200 Principal reductions (58) Sales (93) Charge-offs and other (45) June 30 $390
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SOURCE: The PNC Financial Services Group, Inc.
Contact: MEDIA: R. Jeep Bryant, 412-762-4550,
corporate.communications@pnc.com, or INVESTORS: William H. Callihan,
412-762-8257, investor.relations@pnc.com, both of PNC Financial Services
Group
Website: http://www.pnc.com/
Company News On-Call: http://www.prnewswire.com/gh/cnoc/comp/701257.html