PNC Bank 2010 Annual Report Download

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To Our Shareholders,
Two years after the greatest
financial crisis since the Great Depression,
PNC has emerged as one of the largest,
strongest banks in America.
We are poised to compete successfully in
a consolidating industry despite economic
headwinds and significant regulatory change.
We see tremendous momentum for
growth in 2011 with the goal of
creating even greater value for
our shareholders.
From the
Chairman
March 3, 2011

Table of contents

  • Page 1
    ...To Our Shareholders, Two years after the greatest financial crisis since the Great Depression, PNC has emerged as one of the largest, strongest banks in America. We are poised to compete successfully in a consolidating industry despite economic headwinds and significant regulatory change. We see...

  • Page 2
    ... billion of small business loans. Our credit quality metrics improved during the year. With an improving economy, we expect greater loan demand in 2011. Total deposits were $183 billion at December 31. We increased transaction deposits by $8.4 billion, or 7 percent, during 2010, a strong sign of our...

  • Page 3
    ... along with repurchasing stock. Subject to approval from our regulators, I am optimistic that we would be able to increase our dividend in 2011. We would also consider mergers and acquisitions at the right prices that offer opportunities to expand or augment existing markets and businesses and to...

  • Page 4
    ... Mortgage Banking and our Asset Management Group accounted for nearly half of our 2010 revenue. We offer a broad array of products and services for individual consumers, small businesses, colleges and universities, and institutional clients. Checking Relationships Thousands Retail Banking PNC...

  • Page 5
    ... by year end. Assets under management totaled $108 billion. Assets Under Management Billions $103 $57 $108 2008 2009 2010 Despite extreme market volatility in the last two years, Asset Management has consistently grown sales and acquired new clients. Referrals from other PNC business units...

  • Page 6
    ... 15 states and the District of Columbia to encourage home ownership and economic development and to partner with community-based organizations. the industry in 2010. We have strengthened senior management in Residential Mortgage, reviewed our procedures, opened a second mortgage servicing facility...

  • Page 7
    ... Companies" award. In 2010, we launched PNC Living Well, which is focused on helping employees better manage their health, money and work/life balance. We also expanded our commitment to diversity and inclusion, launching training for employees. Each PNC line of business has developed a customized...

  • Page 8
    ... and Chief Executive Officer For more information regarding certain factors that could cause future results to differ, possibly materially, from historical performance or from those anticipated in forward-looking statements, see the Cautionary Statement in Item 7 of our 2010 Annual Report on Form...

  • Page 9
    UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2010 Commission file number 001-09718 FORM 10-K THE PNC FINANCIAL SERVICES GROUP, INC. (Exact name of ...

  • Page 10
    ... Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington, D.C., and Wisconsin. We also provide certain products and services internationally. At December 31, 2010, our consolidated total assets, deposits and total shareholders' equity were...

  • Page 11
    ... and small business customers within our primary geographic markets. Our customers are serviced through our branch network, call centers and the internet. The branch network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia...

  • Page 12
    ... Corporation (FHLMC), Federal Home Loan Banks and thirdparty investors, or are securitized and issued under the Government National Mortgage Association (GNMA) program, as described in more detail in Note 3 Loan Sale and Servicing Activities and Variable Interest Entities in Item 8 of this Report...

  • Page 13
    ...Average Amount And Average Rate Paid On Deposits 189 Time Deposits Of $100,000 Or More 146 and 192 Selected Consolidated Financial Data 23-24 Short-term borrowings - not included as average balances during 2010, 2009 and 2008 were less than 30% of total shareholders' equity at the end of each period...

  • Page 14
    ...as well as changes to the regulations implementing the Real Estate Settlement Procedures Act, the Federal Truth in Lending Act, and the Electronic Fund Transfer Act, including the new rules set forth in Regulation E related to overdraft charges. Dodd-Frank, which was signed into law on July 21, 2010...

  • Page 15
    ... its net income available to common shareholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with the corporation's capital needs, asset quality and overall financial condition. Further, in the November 17, 2010 announcement...

  • Page 16
    ... "Funding and Capital Sources" in the Consolidated Balance Sheet Review section of Item 7 of this Report and to Note 21 Regulatory Matters in the Notes To Consolidated Financial Statements in Item 8 of this Report. Laws and regulations limit the scope of our permitted activities and investments. In...

  • Page 17
    ...In making loans, PNC Bank, N.A. competes with traditional banking institutions as well as consumer finance companies, leasing companies and other non-bank lenders, and institutional investors including CLO managers, hedge funds, mutual fund complexes and private equity firms. Loan pricing, structure...

  • Page 18
    ... Savings banks, • Savings and loan associations, • Credit unions, • Treasury management service companies, • Insurance companies, and • Issuers of commercial paper and other securities, including mutual funds. Our various non-bank businesses engaged in investment banking and private equity...

  • Page 19
    ... and manage the risks presented by our business activities so that we can appropriately balance revenue generation and profitability. These risks include credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic and reputation risk. Our shareholders have...

  • Page 20
    ...: • Investors may have less confidence in the equity markets in general and in financial services industry stocks in particular, which could place downward pressure on PNC's stock price and resulting market valuation. • Economic and market developments may further affect consumer and business...

  • Page 21
    .... Although many of our businesses are national in scope, our retail banking business is concentrated within our retail branch network footprint, located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Virginia, Missouri, Delaware, Washington...

  • Page 22
    ..., our cost of funding. We cannot predict the nature or timing of future changes in monetary, tax and other policies or the effect that they may have on our activities and financial results. PNC faces increased risk arising out of its mortgage lending and servicing businesses. Numerous federal and...

  • Page 23
    ... other adverse consequences to PNC. Note 22 Legal Proceedings in the Notes To Consolidated Financial Statements in Item 8 of this Report describes several legal proceedings related to pre-acquisition activities of companies we have acquired, in particular National City. Other such legal proceedings...

  • Page 24
    ...well as multiple securities industry regulators. Applicable laws and regulations restrict our ability to repurchase stock or to receive dividends from subsidiaries that operate in the banking and securities businesses and impose capital adequacy requirements. PNC's ability to service its obligations...

  • Page 25
    ... used to prepare the consolidated financial statements. Changes in income tax regulations, revenue rulings, revenue procedures, and other guidance can impact our tax liability and alter the timing of cash flows associated with tax deductions and payments. New guidance often dictates how changes...

  • Page 26
    ... the valuation of assets as reported within our consolidated financial statements, and the period-to-period changes in value could vary significantly. We are subject to operational risk. Like all businesses, we are subject to operational risk, which represents the risk of loss resulting from human...

  • Page 27
    ...PROPERTIES Our executive and primary administrative offices are located at One PNC Plaza, Pittsburgh, Pennsylvania. The 30-story structure is owned by PNC Bank, N. A. We own or lease numerous other premises for use in conducting business activities, including operations centers, offices, and branch...

  • Page 28
    ... the New York Stock Exchange and is traded under the symbol "PNC." At the close of business on February 18, 2011, there were 79,520 common shareholders of record. Holders of PNC common stock are entitled to receive dividends when declared by the Board of Directors out of funds legally available for...

  • Page 29
    ...Consolidated Financial Statements in Item 8 of this Report includes additional information regarding our employee benefit plans that use PNC common stock. (c) Our current stock repurchase program allows us to purchase up to 25 million shares on the open market or in privately negotiated transactions...

  • Page 30
    ... or to be filed under the Exchange Act or the Securities Act. 200 150 Dollars 100 50 PNC 0 Dec 05 S&P 500 Index Dec 06 Dec 07 S&P 500 Banks Dec 08 Dec 09 Peer Group Dec 10 Assumes $100 investment at Close of 5-Year Market on December 31, 2005 Compound Base Total Return = Price change plus...

  • Page 31
    ...on the BlackRock/Merrill Lynch Investment Managers transaction. (c) Amount for 2008 includes the $504 million conforming provision for credit losses related to our National City acquisition. (d) Includes results of operations for GIS for all years presented and the related after-tax gain on sale. We...

  • Page 32
    ... common shareholders' equity Average assets Loans to deposits Dividend payout Tier 1 common Tier 1 risk-based Common shareholders' equity to total assets Average common shareholders' equity to average assets SELECTED STATISTICS Employees Retail Banking branches ATMs Residential mortgage servicing...

  • Page 33
    ... banking, corporate and institutional banking, asset management, and residential mortgage banking, providing many of its products and services nationally and others in PNC's primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida...

  • Page 34
    ... our servicing business is on behalf of other investors, principally the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA). Following the initial reports regarding these practices, we conducted an internal review of our foreclosure procedures. Based...

  • Page 35
    ..., management information systems, borrower communications, potential related financial injuries, and activities with respect to the Mortgage Electronic Registration System (a widely used electronic registry designed to track mortgage servicing rights and ownership of U.S. residential mortgage loans...

  • Page 36
    ...risk and capital management related to our efforts to return to our desired moderate risk profile, and • Actions we take within the capital and other financial markets. SUMMARY FINANCIAL RESULTS 2010 2009 • • • Net income (millions) Diluted earnings per common share Continuing operations...

  • Page 37
    ... the Consolidated Balance Sheet Review section of this Report. Average total deposits represented 69% of average total assets for both 2010 and 2009. Average borrowed funds were $40.2 billion for 2010 compared with $44.1 billion for 2009. A $6.2 billion decline in Federal Home Loan Bank borrowings...

  • Page 38
    ... lower origination volumes and lower net hedging gains on mortgage servicing rights. BlackRock Our BlackRock business segment earned $351 million in 2010 and $207 million in 2009. The benefits of BlackRock's December 2009 acquisition of Barclays Global Investors (BGI) and improved capital markets...

  • Page 39
    ... a fourth quarter 2010 gain on 7.5 million BlackRock common shares sold by PNC as part of a BlackRock secondary common stock offering and higher revenue from capital markets-related products and services including merger and acquisition advisory fees. Additional Analysis Asset management revenue was...

  • Page 40
    ... including treasury management, commercial real estate, and capital markets-related products and services that are marketed by several businesses primarily to commercial customers. Treasury management revenue, which includes fees as well as net interest income from customer deposit balances, totaled...

  • Page 41
    ...operations of National City with those of PNC. We expect that total noninterest expense in 2011 will be less than total noninterest expense in 2010, with the magnitude of the decline dependent upon the pace of our investment in business growth opportunities. EFFECTIVE TAX RATE The effective tax rate...

  • Page 42
    ... Loans In millions Dec. 31 2010 Dec. 31 2009 Assets Loans Investment securities Cash and short-term investments Loans held for sale Goodwill and other intangible assets Equity investments Other, net Total assets Liabilities Deposits Borrowed funds Other Total liabilities Total shareholders' equity...

  • Page 43
    ... and Letters of Credit in the Notes To Consolidated Financial Statements included in Item 8 of this Report. Information related to purchased impaired loans, purchase accounting accretion and accretable net interest recognized during 2010 and 2009 in connection with our acquisition of National City...

  • Page 44
    .... 31 2010 Dec. 31 2009 Non-impaired loans Impaired loans Reversal of contractual interest on impaired loans Net impaired loans Securities Deposits Borrowings Total $ 366 885 $ 773 914 Commercial / commercial real estate (a) Home equity lines of credit Consumer credit card lines Other Total $59...

  • Page 45
    ...Fair Value December 31, 2010 SECURITIES AVAILABLE FOR SALE Debt securities US Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed State and municipal Other debt Corporate stocks and other Total securities available...

  • Page 46
    ... Commercial MortgageMortgageBacked Backed Securities Securities Dollars in millions AssetBacked Securities Fair Value - Available for Sale Fair Value - Held to Maturity Total Fair Value % of Fair Value: By Vintage 2010 2009 2008 2007 2006 2005 and earlier Not Available Total By Credit Rating...

  • Page 47
    ...31, 2010 Commercial Mortgage-Backed Securities Net Unrealized Gain (Loss) In millions Residential MortgageBacked Securities Net Unrealized Gain (Loss) Asset-Backed Securities (a) Net Unrealized Gain (Loss) AVAILABLE FOR SALE SECURITIES (NON-AGENCY) Fair Value Fair Value Fair Value Credit Rating...

  • Page 48
    ... this Report provides further detail regarding our process for assessing OTTI for these securities. Commercial Mortgage-Backed Securities The fair value of the non-agency commercial mortgagebacked securities portfolio was $6.3 billion at December 31, 2010 and consisted of fixed-rate, private-issuer...

  • Page 49
    ... 2010 that impacted our borrowed funds balances. Capital We manage our capital position by making adjustments to our balance sheet size and composition, issuing debt, equity or hybrid instruments, executing treasury stock transactions, managing dividend policies and retaining earnings. PNC increased...

  • Page 50
    ... amount of capital we return to our shareholders, subject to obtaining necessary regulatory approvals. Our current common stock repurchase program permits us to purchase up to 25 million shares of PNC common stock on the open market or in privately negotiated transactions. This program will remain...

  • Page 51
    ...absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Effective January 1, 2010, we consolidated Market Street, a credit card securitization trust, and certain Low Income Housing Tax Credit (LIHTC) investments. We recorded consolidated assets...

  • Page 52
    ... millions Market Street Credit Card Securitization Trust Tax Credit Investments (b) Total Assets Cash and due from banks Interest-earning deposits with banks Investment securities Loans Allowance for loan and lease losses Equity investments Other assets Total assets Liabilities Other borrowed funds...

  • Page 53
    ...Capital Markets LLC owned no Market Street commercial paper at December 31, 2010 and December 31, 2009. PNC Bank, N.A. made no purchases of Market Street commercial paper during 2010. Assets of Market Street (a) Weighted Average Remaining Maturity In Years Market Street Commitments by Credit Rating...

  • Page 54
    ... recorded at fair value represented 3% and 2% of total liabilities at December 31, 2010 and December 31, 2009, respectively. Assets Securities available for sale Financial derivatives Residential mortgage loans held for sale Trading securities Residential mortgage servicing rights Commercial...

  • Page 55
    ... business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests. Period-end Employees Dec. 31 2010 Dec. 31 2009 Full-time employees Retail Banking Corporate & Institutional Banking Asset Management...

  • Page 56
    ... Year ended December 31- in millions Income (Loss) 2010 2009 Revenue 2010 2009 Average Assets (a) 2010 2009 Retail Banking (b) Corporate & Institutional Banking Asset Management Group Residential Mortgage Banking BlackRock Distressed Assets Portfolio Total business segments Other (b) (c) (d) Income...

  • Page 57
    .... (e) Recorded investment of purchased impaired loans related to acquisitions. (f) Excludes certain satellite branches that provide limited products and/or services. (g) Includes loans from acquired portfolios for which lien position and loan-to-value information is not available. (h) Represents the...

  • Page 58
    ... credits assigned to deposits, reflective of the rate environment, and benefited from the consolidation of the securitized credit card portfolio, higher transaction deposits, and increased education loans. Noninterest income for 2010 was $1.9 billion, a decline of $256 million over the prior year...

  • Page 59
    ...signs of stabilization during 2010 with a declining net charge-off trend in each of the last four quarters. The improvement in net charge-off trends was predominately driven by the small business commercial lending and credit card portfolios. The increase in non-performing assets over the prior year...

  • Page 60
    ... Consolidated revenue from: (b) Treasury Management Capital Markets Commercial mortgage loans held for sale (c) Commercial mortgage loan servicing (d) Total commercial mortgage banking activities Total loans (e) Net carrying amount of commercial mortgage servicing rights (e) Credit-related...

  • Page 61
    ... primarily due to a decline in the income associated with commercial mortgage loans held for sale, net of hedges, and the sale of the duplicative agency servicing operation in the second quarter of 2010. The provision for credit losses was $303 million in 2010 compared with $1.6 billion in 2009. The...

  • Page 62
    ... the sale during the second quarter of 2010 of a duplicative agency servicing operation acquired with National City. See the additional revenue discussion regarding treasury management, capital markets-related products and services, and commercial mortgage banking activities on page 32. Year ended...

  • Page 63
    ... in higher yield loans. Noninterest income of $627 million for 2010 increased $16 million compared with 2009 as the impacts of strong sales results and the improved equity markets were partially offset by the strategic exit of noncore businesses. The provision for credit losses was $20 million...

  • Page 64
    ... servicing fee (in basis points) OTHER INFORMATION Loan origination volume (in billions) Percentage of originations represented by: Agency and government programs Refinance volume Total nonperforming assets (a) (b) Impaired loans (a) (c) Residential Mortgage Banking earned $275 million for 2010...

  • Page 65
    ...) Information related to our equity investment in BlackRock follows: Year ended December 31 Dollars in millions 2010 2009 and participating preferred stock. In connection with the BGI transaction, BlackRock entered into a stock purchase agreement with PNC in which we purchased 3,556,188 shares of...

  • Page 66
    ...INCOME STATEMENT Net interest income Noninterest income Total revenue Provision for credit losses Noninterest expense Pretax earnings (loss) Income taxes (benefit) Earnings (loss) AVERAGE BALANCE SHEET COMMERCIAL LENDING: Commercial/Commercial real estate (a) Lease financing Total commercial lending...

  • Page 67
    ... and interest payments for the past 12 months. Currently, the portfolio yields over 7%. Consumer Lending consists of residential real estate mortgages and consumer or brokered home equity loans. • Residential real estate mortgages are primarily legacy National City originate-for-sale programs that...

  • Page 68
    ...To Consolidated Financial Statements and Allocation Of Allowance For Loan And Lease Losses in the Statistical Information (Unaudited) section of Item 8 of this Report. Estimated Cash Flows on Purchased Impaired Loans ASC Sub-Topic 310-30 - Loans and Debt Securities Acquired with Deteriorated Credit...

  • Page 69
    ... activities including foreign exchange. We also earn fees and commissions from issuing loan commitments, standby letters of credit and financial guarantees, selling various insurance products, providing treasury management services and participating in certain capital markets transactions. Revenue...

  • Page 70
    ... in fair value of the hedged MSR portfolio. The hedge relationships are actively managed in response to changing market conditions over the life of the MSR assets. Selecting appropriate financial instruments to hedge this risk requires significant management judgment to assess how mortgage rates and...

  • Page 71
    ... credit losses within the foreseeable future (but not less than 12 months). Recent Accounting Pronouncements See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements in Item 8 of this Report for information on new accounting pronouncements that were effective in 2009, 2010...

  • Page 72
    ... are primarily invested in equity investments and fixed income instruments. Plan fiduciaries determine and review the plan's investment policy, which is described more fully in Note 14 Employee Benefit Plans in the Notes To Consolidated Financial Statements in Item 8 of this Report. We calculate the...

  • Page 73
    ... is reported in the Residential Mortgage Banking segment. In addition, PNC's residential mortgage loan repurchase obligations include certain brokered home equity loans/lines that were sold to private investors by National City prior to our acquisition. PNC is no longer engaged in the business of...

  • Page 74
    ... millions 2010 2009 Residential mortgages: Agency securitizations Private investors (a) Home equity loans/lines: Private investors (b) Total unresolved claims $110 100 299 $509 $ 76 68 315 $459 (a) Activity relates to loans sold through Non-Agency securitization and whole-loan sale transactions...

  • Page 75
    ... are recognized in Residential mortgage revenue on the Consolidated Income Statement. Since PNC is no longer engaged in the brokered home equity lending business, only subsequent adjustments are recognized to the home equity loans/lines indemnification and repurchase liability. These adjustments are...

  • Page 76
    ... of our corporate-level risk management program. We also provide an analysis of our primary areas of risk: credit, operational, liquidity, and market. The discussion of market risk is further subdivided into interest rate, trading, and equity and other investment risk areas. Our use of financial...

  • Page 77
    ... these reports. CREDIT RISK MANAGEMENT Credit risk represents the possibility that a customer, counterparty or issuer may not perform in accordance with contractual terms. Credit risk is inherent in the financial services business and results from extending credit to customers, purchasing securities...

  • Page 78
    ... loans Commercial Retail/wholesale Manufacturing Real estate related (a) Financial services Health care Other Total commercial Commercial real estate Real estate projects Commercial mortgage Total commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer Home equity...

  • Page 79
    ... are changed, but could revert back to the original loan terms. Permanent modifications primarily include the government-created Home Affordable Modification Program (HAMP) or PNC-developed HAMP-like modification programs. For consumer loan programs (e.g., residential mortgages, home equity loans...

  • Page 80
    ... is no change to the loan's contractual terms so the borrower remains legally responsible for payment of the loan under its original terms. A payment plan involves the borrower making payments that differ from the contractual payment amount for a short period of time, generally three months. PNC...

  • Page 81
    ... status are no longer current under their modified terms and are now reported as nonperforming. In addition, credit cards and certain small business and consumer credit agreements whose terms have been modified primarily through interest rate reductions totaling $331 million at December 31, 2010...

  • Page 82
    ... due 90 days or more past due Total past due Nonperforming loans Total loans December 31, 2010 (a) Commercial Commercial real estate Equipment lease financing Home equity Residential real estate Credit card Other consumer Total December 31, 2009 (b) Commercial Commercial real estate Equipment lease...

  • Page 83
    ... due is included in Note 5 Asset Quality and Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit in the Notes To Consolidated Financial Statements in Item 8 of this Report. Our Special Asset Committee closely monitors loans that are not included in nonperforming...

  • Page 84
    ...We also sell loss protection to mitigate the net premium cost and the impact of fair value accounting on the CDS in cases where we buy protection to hedge the loan portfolio. These activities represent additional risk positions rather than hedges of risk. We approve counterparty credit lines for all...

  • Page 85
    ... contracts, laws or regulations. To monitor and control operational risk, we maintain a comprehensive framework including policies and a system of internal controls that is designed to manage risk and to provide management with timely and accurate information about the operations of PNC. Management...

  • Page 86
    ... mix of short and long-term funding sources. At December 31, 2010, our liquid assets consisted of shortterm investments (Federal funds sold, resale agreements, trading securities, and interest-earning deposits with banks) totaling $7.1 billion and securities available for sale totaling $57.3 billion...

  • Page 87
    ... the first quarter of 2010, and the exchange by the US Treasury of the TARP warrant into warrants sold by the US Treasury in a secondary public offering. These common stock warrants will expire December 31, 2018. Status of Credit Ratings The cost and availability of short- and long-term funding, as...

  • Page 88
    Credit ratings as of December 31, 2010 for PNC and PNC Bank, N.A. follow: Moody's Standard & Poor's Fitch The PNC Financial Services Group, Inc. Senior debt Subordinated debt Preferred stock PNC Bank, N.A. Subordinated debt Long-term deposits Short-term deposits A3 Baa1 Baa3 A3 A2 P-1 A ABBB A A+...

  • Page 89
    ... with these limits and guidelines, and reporting significant risks in the business to the Risk Committee of the Board. MARKET RISK MANAGEMENT - INTEREST RATE RISK Interest rate risk results primarily from our traditional banking activities of gathering deposits and extending loans. Many factors...

  • Page 90
    ...at fair value. (b) Product trading revenue includes related hedged activity. Trading revenue excludes the impact of economic hedging activities, which relate primarily to residential mortgage servicing rights, and residential and held-for-sale commercial real estate loans. Trading revenue increased...

  • Page 91
    ... we acquired with National City, on our Consolidated Balance Sheet. Based on the December 31, 2010 closing price of $70.38 for the Visa Class A shares, the market value of our investment was $837 million. The Visa Class B common shares we own generally will not be transferable, except under limited...

  • Page 92
    ... manage interest rate, market and credit risk inherent in our business activities. Substantially all such instruments are used to manage risk related to changes in interest rates. Interest rate and total return swaps, interest rate caps and floors, swaptions, options, forwards and futures contracts...

  • Page 93
    ...Credit default swaps Total commercial mortgage banking activities Derivatives used for customer-related activities: Interest rate contracts Swaps (c) Caps/floors Sold Purchased Swaptions Futures Foreign exchange contracts Equity contracts Credit contracts Risk participation agreements Total customer...

  • Page 94
    ... mortgage servicing rights of $355 million, • Valuation and sale income related to our commercial mortgage loans held for sale, net of hedges, of $107 million, • Gains of $103 million related to our BlackRock LTIP shares adjustment in the first quarter, and net losses on private equity...

  • Page 95
    ... savings related to National City increased to $300 million in the fourth quarter of 2009, or $1.2 billion per year. Acquisition cost savings totaled $800 million in 2009. Effective Tax Rate Our effective tax rate was 26.9% for 2009 and 27.2% for 2008. CONSOLIDATED BALANCE SHEET REVIEW Loans Loans...

  • Page 96
    ... of National City on PNC's adjusted average total 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...

  • Page 97
    ...-upon terms. Funds transfer pricing - A management accounting methodology designed to recognize the net interest income effects of sources and uses of funds provided by the assets and liabilities of a business segment. We assign these balances LIBOR-based funding rates at origination that represent...

  • Page 98
    ... gains / (losses), net - We have elected to measure acquired or originated residential mortgage servicing rights (MSRs) at fair value under GAAP. We employ a risk management strategy designed to protect the economic value of MSRs from changes in interest rates. This strategy utilizes securities and...

  • Page 99
    ... available for sale equity securities 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 interest-bearing money market deposits, interest...

  • Page 100
    ... in the markets for real estate and other assets commonly securing financial products. - Actions by the Federal Reserve and other government agencies, including those that impact 92 • • • • • • money supply and market interest rates. Changes in our customers', suppliers' and...

  • Page 101
    ... is referenced for informational purposes only and should not be deemed to constitute a part of this Report. We grow our business in part by acquiring from time to time other financial services companies, financial services assets and related deposits. Acquisitions present us with risks in addition...

  • Page 102
    ...DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of The PNC Financial Services Group, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, changes in equity, and cash flows present...

  • Page 103
    ... share data Year ended December 31 2010 2009 2008 Interest Income Loans Investment securities Other Total interest income Interest Expense Deposits Borrowed funds Total interest expense Net interest income Noninterest Income Asset management Consumer services Corporate services Residential mortgage...

  • Page 104
    ... at fair value) (a) (b) Total assets Liabilities Deposits Noninterest-bearing Interest-bearing Total deposits Borrowed funds Federal funds purchased and repurchase agreements Federal Home Loan Bank borrowings Bank notes and senior debt Subordinated debt Other (December 31, 2010 includes $3,354...

  • Page 105
    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY THE PNC FINANCIAL SERVICES GROUP, INC. Shareholders' Equity Capital Surplus Common Accumulated Stock Other and Retained Comprehensive Treasury Other Earnings Income (Loss) Stock In millions Shares Outstanding Common Stock Capital Surplus Common ...

  • Page 106
    ...million shares issued. (e) Includes 63.9 million common shares issuance, the net proceeds of which were used together with other available funds to redeem the Series N (TARP) Preferred Stock, for a $3.4 billion net increase in total equity. See accompanying Notes To Consolidated Financial Statements...

  • Page 107
    ... on sale of PNC Global Investment Servicing Gains on BlackRock transactions Net gains related to BlackRock LTIP shares adjustment Undistributed earnings of BlackRock Visa redemption gain Excess tax benefits from share-based payment arrangements Net change in Trading securities and other short-term...

  • Page 108
    ... Year ended December 31 2010 2009 2008 Financing Activities Net change in Noninterest-bearing deposits Interest-bearing deposits Federal funds purchased and repurchase agreements Federal Home Loan Bank short-term borrowings Other short-term borrowed funds Sales/issuances Federal Home Loan Bank long...

  • Page 109
    ... banking, corporate and institutional banking, asset management, and residential mortgage banking, providing many of its products and services nationally and others in PNC's primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida...

  • Page 110
    ... fair value option. These financial instruments include certain commercial and residential mortgage loans originated for sale, certain residential mortgage portfolio loans, structured resale agreements and our investment in BlackRock Series C preferred stock. We also recognize gain/(loss) on changes...

  • Page 111
    ... market prices from a national securities exchange. Dividend income on these securities is recognized in Net interest income. Those purchased with the intention of recognizing shortterm profits are classified as trading and included in trading securities and other assets on our Consolidated Balance...

  • Page 112
    ... lease losses (ALLL) are charged-off to reduce the basis of the loans to the lower of cost or estimated fair value less cost to sell. In addition to originating loans, we also acquire loans through portfolio purchases or acquisitions of other financial services companies. For certain acquired loans...

  • Page 113
    ... we are obligated for loss-sharing or recourse in a sale, our policy is to record such liabilities at fair value upon sale based on the guidance contained in applicable GAAP. We originate, sell and service mortgage loans under the Federal National Mortgage Association (FNMA) Delegated Underwriting...

  • Page 114
    ...and recorded in Other noninterest income each period. See Note 8 Fair Value for additional information. Also, we elected to account for residential real estate loans held for sale and securitizations acquired from National City, which were not purchased impaired loans, at fair value. Interest income...

  • Page 115
    ... of contractual terms for a reasonable period of time (generally 6 months). See Note 5 Asset Quality and Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional TDR information. Nonperforming loans are generally not returned to performing status until...

  • Page 116
    ... regard to market inputs used in determining fair value and how we manage the risks inherent in the commercial mortgage servicing rights assets. Specific risk characteristics of commercial mortgages include loan type, currency or exchange rate, interest rates, expected cash flows and changes in the...

  • Page 117
    ... reasonable in comparison to market participant valuations. Revenue from the various loan servicing contracts for commercial, residential and other consumer loans is reported on the Consolidated Income Statement in line items Consumer services, Corporate services and Residential mortgage. FAIR VALUE...

  • Page 118
    ...commitments to purchase or sell commercial and residential real estate loans. These commitments are accounted for as free-standing derivatives which are recorded at fair value in Other assets or Other liabilities on the Consolidated Balance Sheet. Any gain or loss from the change in fair value after...

  • Page 119
    ... receive benefits that in either case could potentially be significant to the VIE. Effective January 1, 2010, we consolidated Market Street Funding LLC (Market Street), a credit card securitization trust, and certain Low Income Housing Tax Credit (LIHTC) investments. We recorded consolidated assets...

  • Page 120
    ... monthly borrower principal and interest payments, maintaining escrow deposits, performing loss mitigation and foreclosure activities, and, in certain instances, funding of servicing advances. Servicing 112 NOTE 2 DIVESTITURE SALE OF PNC GLOBAL INVESTMENT SERVICING On July 1, 2010, we sold PNC...

  • Page 121
    ... Flows Associated with Loan Sale and Servicing Activities In millions Residential Mortgages Commercial Mortgages (a) Home Equity Loans/ Lines (b) FINANCIAL INFORMATION - December 31, 2010 Servicing portfolio (c) Carrying value of servicing assets (d) Servicing advances Servicing deposits Repurchase...

  • Page 122
    ... millions Market Street Credit Card Securitization Trust Tax Credit Investments (b) Total Assets Cash and due from banks Interest-earning deposits with banks Investment securities Loans Allowance for loan and lease losses Equity investments Other assets Total assets Liabilities Other borrowed funds...

  • Page 123
    ... liabilities represent estimated balances due to limited availability of financial information associated with certain acquired partnerships. (b) Amounts reported reflect involvement with securitization SPEs where PNC transferred to and/or services loans for a SPE and we hold securities issued by...

  • Page 124
    ..., we increase our recognized investments and recognize a liability for all legally binding unfunded equity commitments. These liabilities are reflected in Other liabilities on our Consolidated Balance Sheet. CREDIT RISK TRANSFER TRANSACTION National City Bank (which merged into PNC Bank, N.A. in...

  • Page 125
    ... OUTSTANDING In millions Dec. 31 2010 Dec. 31 2009 Commercial lending Commercial Commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer lending Home equity Residential real estate Credit card Other TOTAL CONSUMER LENDING Total loans (a) (b) $ 55,177 17,934 6,393 79,504...

  • Page 126
    ...due Accruing 60-89 days 90 days or past due more past due (b) Total past due Nonperforming loans (c) In millions Current Total loans December 31, 2010 (a) Commercial Commercial real estate Equipment lease financing Home equity Residential real estate Credit card Other consumer Total $ 53,522 15...

  • Page 127
    ..., 2008 National City acquisition. See Note 6 Purchased Impaired Loans for further information. Nonperforming Assets Dollars in millions December 31, 2010 December 31, 2009 Nonaccrual loans Commercial Commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer (a) Home equity...

  • Page 128
    ... under the modified terms. In addition, credit cards and certain small business and consumer credit agreements whose terms have been modified totaled $331 million at December 31, 2010 and are TDRs. However, since our policy is to exempt these loans from being placed on nonaccrual status as permitted...

  • Page 129
    ... millions Commercial Lending Consumer Lending Total December 31, 2010 Allowance for Loan and Lease Losses January 1 Charge-offs Recoveries Net charge-offs Provision for credit losses Adoption of ASU 2009-17, Consolidations Net change in allowance for unfunded loan commitments and letters of credit...

  • Page 130
    ... 31, 2010 Unpaid Average Principal Recorded Associated Recorded Balance Investment Allowance (b)(c) Investment (d)(e) In millions Impaired loans with an associated allowance Commercial Commercial real estate Home equity Residential real estate Credit card Other consumer Total impaired loans with...

  • Page 131
    ..., capital availability, business operations and payment patterns. We attempt to proactively manage these factors by using various procedures that are customized to the risk of a given loan. Among these procedures are: review by PNC's Special Asset Committee (SAC), ongoing outreach, contact...

  • Page 132
    ... and manage exposures. Loan purchase programs are sensitive to, and focused within, certain regions to manage geographic exposures and associated risks. The combination of FICO scores, LTV ratios and geographic location assigned to residential real estate and home equity loans are used to estimate...

  • Page 133
    ... with limited credit history, accounts for which we cannot get an updated FICO (e.g., recent profile changes), cards issued with a business name, and/ or collateral secured cards for which FICO scores were not available or required. Management proactively assesses the risk and size of unscored loans...

  • Page 134
    ... real estate Total $ 249 1,153 3,024 3,354 $7,780 $ 408 1,391 4,121 3,803 $9,723 $ 531 1,636 3,457 4,663 $ 921 2,600 5,097 6,620 $10,287 $15,238 During 2010, the recorded investment of purchased impaired loans decreased by a net $2.5 billion as a result of payments and other exit activities...

  • Page 135
    ... Gains Losses Fair Value December 31, 2010 SECURITIES AVAILABLE FOR SALE Debt securities US Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed State and municipal Other debt Total debt securities Corporate stocks...

  • Page 136
    ... shareholders' equity as accumulated other comprehensive income or loss, net of tax, unless credit-related. In March 2010, we transferred $2.2 billion of available for sale commercial mortgage-backed non-agency securities to the held to maturity portfolio. The reclassification was made at fair value...

  • Page 137
    ... Value of Securities Available for Sale In millions Unrealized loss position less than 12 months Unrealized Fair Loss Value Unrealized loss position 12 months or more Unrealized Fair Loss Value Total Unrealized Loss Fair Value December 31, 2010 Debt securities US Treasury and government agencies...

  • Page 138
    ...of our security. Credit Impairment Assessment Assumptions - Non-Agency Residential Mortgage-Backed and Asset-Backed Securities (a) December 31, 2010 Range Weightedaverage (b) Long-term prepayment rate (annual CPR) Prime Alt-A Remaining collateral expected to default Prime Alt-A Loss severity Prime...

  • Page 139
    ... were as follows: Summary of OTTI Credit Losses Recognized in Earnings In millions 2010 2009 Available for sale securities: Non-agency residential mortgage-backed Non-agency commercial mortgage-backed Asset-backed Other debt Marketable equity securities Total $(242) (5) (78) $(444) (6) (111) (12...

  • Page 140
    ... 5 Years through 10 Years After 10 Years Total SECURITIES AVAILABLE FOR SALE US Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed State and municipal Other debt Total debt securities available for sale Fair value...

  • Page 141
    ...of fair value requires significant management judgment or estimation. This category generally includes certain available for sale and trading securities, commercial mortgage loans held for sale, private equity investments, residential mortgage servicing rights, BlackRock Series C Preferred Stock and...

  • Page 142
    ... trade in an active open market with readily observable prices. Although sales of servicing assets do occur, the precise terms and conditions typically would not be available. Accordingly, management determines the fair value of its residential MSRs using a discounted cash flow model incorporating...

  • Page 143
    ... adjustments to the manager-provided value are made when available recent portfolio company information or market information indicates a significant change in value from that provided by the manager of the fund. These investments are classified as Level 3. Customer Resale Agreements We have elected...

  • Page 144
    ... investments Customer resale agreements (i) Loans (j) Other assets BlackRock Series C Preferred Stock (k) Other Total other assets Total assets Liabilities Financial derivatives (b) (l) Interest rate contracts BlackRock LTIP Other contracts Total financial derivatives Trading securities sold short...

  • Page 145
    ... Total securities available for sale Financial derivatives Trading securities - Debt Residential mortgage servicing rights Commercial mortgage loans held for sale Equity investments Direct investments Indirect investments Total equity investments Loans Other assets BlackRock Series C Preferred Stock...

  • Page 146
    ...available for sale Financial derivatives Trading securities Debt Equity Total trading securities Residential mortgage servicing rights Commercial mortgage loans held for sale Equity investments Direct investments Indirect investments Total equity investments Other assets BlackRock Series C Preferred...

  • Page 147
    ... amounts. Changes in fair value due to instrument-specific credit risk for 2010 and 2009 were not material. Residential Mortgage Loans Held for Sale Interest income on these loans is recorded as earned and reported on the Consolidated Income Statement in other interest income. Throughout 2010 and...

  • Page 148
    ... value option follow. Fair Value Option - Changes in Fair Value (a) In millions Gains (Losses) 2010 2009 2008 Assets Customer resale agreements Commercial mortgage loans held for sale Residential mortgage loans held for sale Residential mortgage loans - portfolio BlackRock Series C Preferred Stock...

  • Page 149
    ...represent the total market value of PNC's assets and liabilities as the table excludes the following: • real and personal property, • lease financing, • loan customer relationships, • deposit customer intangibles, • retail branch networks, • fee-based businesses, such as asset management...

  • Page 150
    ... See Note 6 Purchased Impaired Loans for additional information. For revolving home equity loans and commercial credit lines, this fair value does not include any amount for new loans or the related fees that will be generated from the existing customer relationships. Non-accrual loans are valued at...

  • Page 151
    ... its shares in the open market or issues shares for an acquisition or pursuant to its employee compensation plans. We adjust goodwill when BlackRock repurchases its shares at an amount greater (or less) than book value per share which results in an increase (or decrease) in our percentage ownership...

  • Page 152
    ... Consolidated Income Statement. The fair value of commercial mortgage servicing rights is estimated by using an internal valuation model. The model calculates the present value of estimated future net servicing 144 We recognize mortgage servicing right assets on residential real estate loans when...

  • Page 153
    ...generate servicing revenue from fee-based activities provided to others. Revenue from commercial mortgage servicing rights, residential mortgage servicing rights and other loan servicing are reported on our Consolidated Income Statement in the line items Corporate services, Residential mortgage, and...

  • Page 154
    We lease certain facilities and equipment under agreements expiring at various dates through the year 2067. We account for these as operating leases. Rental expense on such leases was as follows: Lease Rental Expense Year ended December 31 in millions 2010 2009 2008 NOTE 12 BORROWED FUNDS Bank ...

  • Page 155
    ... TRUST SECURITIES At December 31, 2010, capital securities totaling $3.4 billion represented non-voting preferred beneficial interests in the assets of the following Trusts: Capital Securities of Subsidiary Trusts Trust Date Formed Description of Capital Securities Redeemable PNC Capital Trust...

  • Page 156
    ...or federal tax rules, the capital securities are redeemable in whole. In accordance with GAAP, the financial statements of the Trusts are not included in PNC's consolidated financial statements. At December 31, 2010, PNC's junior subordinated debt of $3.4 billion represented debentures purchased and...

  • Page 157
    ... 149 securities during the next succeeding dividend period, other than: (i) purchases, redemptions or other acquisitions of shares of capital stock of PNC in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors...

  • Page 158
    ...and international equity securities and US government, agency, and corporate debt securities and real estate investments. Plan assets as of December 31, 2010 and 2009 do include common stock of PNC. During 2009, the assets related to the pension plan investments of the former National City qualified...

  • Page 159
    ... to be achieved over the long term (one or more market cycles) and is measured over rolling five-year periods. Total return calculations are timeweighted and are net of investment-related fees and expenses. The asset strategy allocations for the Trust at the end of 2010 and 2009, and the target...

  • Page 160
    ... changes in the methodologies used at December 31, 2010 compared with those in place at December 31, 2009: • Money market and mutual funds are valued at the net asset value of the shares held by the pension plan at year-end. • US government securities, corporate debt, common stock and preferred...

  • Page 161
    ... Using: Quoted Prices in Significant Active Markets Other Significant For Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) In millions December 31, 2010 Fair Value Cash Money market funds US government securities Corporate debt (a) Common and preferred stocks...

  • Page 162
    ... during 2010 and 2009: Rollforward of Pension Plan Level 3 Assets In millions Corporate debt Limited partnerships Other January 1, 2010 Net realized gain on sale of investments Net unrealized gain/(loss) on assets held at end of year Purchases, sales, issuances, and settlements (net) Transfers into...

  • Page 163
    ... present value obligation as that using spot rates aligned with the projected benefit payments. The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy...

  • Page 164
    ...Percent Change in Assumed Health Care Cost Year ended December 31, 2010 In millions Increase Decrease frozen to future investments of such contributions effective January 1, 2010. All shares of PNC common stock held by the plan are part of the ESOP. Employee contributions to the plan for 2010, 2009...

  • Page 165
    ... Price PNC Options Converted From National City WeightedAverage Exercise Price WeightedAverage Exercise Price Total WeightedAverage Remaining Contractual Life Aggregate Intrinsic Value Year ended December 31, 2010 In thousands, except weighted-average data Shares Shares Shares Outstanding...

  • Page 166
    ... equity compensation plans totaled 29,883,400 shares at December 31, 2010, which includes shares available for issuance under the Incentive Plans and the Employee Stock Purchase Plan as described below. During 2010, we issued approximately 312,000 shares from treasury stock in connection with stock...

  • Page 167
    ... C Preferred Stock is included in Note 8. NOTE 16 FINANCIAL DERIVATIVES We use derivative financial instruments (derivatives) primarily to help manage exposure to interest rate, market and credit risk and reduce the effects that changes in interest rates may have on net income, fair value of assets...

  • Page 168
    ...-fixed, receive- variable interest rate swaps to hedge changes in the fair value of fixed rate investment securities caused by fluctuations in market interest rates. The specific products hedged include US Treasury, government agency and other debt securities. For these hedge relationships, we use...

  • Page 169
    ... the extent not netted against derivative fair values under a master netting agreement, cash pledged is included in Other assets and cash held is included in Other borrowed funds on our Consolidated Balance Sheet. The credit risk associated with derivatives executed with customers is essentially the...

  • Page 170
    ... Derivatives used for commercial mortgage banking activities: Interest rate contracts Credit contracts: Credit default swaps Subtotal Derivatives used for customer- related activities: Interest rate contracts Foreign exchange contracts Equity contracts Credit contracts: Risk participation agreements...

  • Page 171
    ...Income in Income Amount Amount Year ended In millions Hedged Items Location Interest rate contracts Interest rate contracts US Treasury and Government Agencies Securities Other Debt Securities Federal Home Loan Bank borrowings Subordinated debt Bank notes and senior debt Investment securities...

  • Page 172
    ... commercial mortgage banking activities (b) Derivatives used for customer-related activities: Interest rate contracts Foreign exchange contracts Equity contracts Credit contracts Gains (losses) from customer-related activities (b) Derivatives used for other risk management activities: Interest rate...

  • Page 173
    ... rating follow: Internal Credit Ratings of Risk Participation Agreements Sold December 31, 2010 December 31, 2009 The referenced/underlying assets for these credit default swaps follow: Referenced/Underlying Assets of Credit Default Swaps Commercial mortgageCorporate backed Debt securities Loans...

  • Page 174
    ... share data 2010 2009 2008 Basic Net income from continuing operations Less: Net income (loss) attributable to noncontrolling interests Dividends distributed to common shareholders Dividends distributed to preferred shareholders Dividends distributed to nonvested restricted shares Preferred stock...

  • Page 175
    ... value per share 2010 2009 total dividends of $421 million to the US Treasury while the Series N preferred shares were outstanding. As part of the National City transaction, we issued 9.875% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series L in exchange for National City's Fixed...

  • Page 176
    ... certain stock plans and the conversion of certain debt and equity securities. Effective October 4, 2007, our Board of Directors approved a stock repurchase program to purchase up to 25 million shares of PNC common stock on the open market or in privately negotiated transactions. This program will...

  • Page 177
    ... ASC 320-10 Net increase in OTTI losses on debt securities Less: Net OTTI losses realized in net income Net unrealized losses on OTTI securities Balance at December 31, 2009 2010 activity Cumulative effect of adopting FASB ASU 2009-17, Consolidations Decrease in net unrealized losses for non-OTTI...

  • Page 178
    ... and Effective Tax Rates Year ended December 31 2010 2009 2008 $(431) $(1,962) Statutory tax rate Increases (decreases) resulting from State taxes net of federal benefit Tax-exempt interest Life insurance Dividend received deduction Tax credits IRS Letter ruling and settlements Tax gain on sale of...

  • Page 179
    ... letter ruling that resolved a prior uncertain tax position and resulted in a tax benefit of $89 million. California, Delaware, District of Columbia, Florida, Illinois, Indiana, Maryland, Missouri, New Jersey, New York, and New York City are principally where we are subject to state and local income...

  • Page 180
    ... and regulations, Corporate policies, Contractual restrictions, and Other factors. Also, there are statutory and regulatory limitations on the ability of national banks to pay dividends or make other capital distributions. The amount available for dividend payments to the parent company by PNC Bank...

  • Page 181
    ... of federal securities laws regarding public statements and disclosures relating to, among other things, the nature, quality, performance, and risks of National City's non-prime, residential construction, and National Home Equity portfolios, its loan loss reserves, its financial condition, and...

  • Page 182
    ...of the Plan and whose accounts were invested in Allegiant Funds from March 25, 2002 to the present. The consolidated complaint alleged breaches of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA) relating to, among other things, National City stock being offered as an...

  • Page 183
    ... illegal home equity lending 175 scheme of the Shumway/Bapst Organization (Shumway). The plaintiffs allege that Shumway used CBNV and another bank as "fronts" to make high-interest, high-fee loans that would otherwise have been prohibited by state usury laws but for the banks' status as depository...

  • Page 184
    ...). The first of these cases (Casayuran, et al. v. PNC Bank, National Association (Case No. 10-cv-20496-JLK)) was originally filed against PNC Bank in October 2009 in the United States District Court for the District of New Jersey, and an amended complaint was filed in June 2010 in the MDL Court. The...

  • Page 185
    ...numerous financial companies, including The PNC Financial Services 177 Group, Inc., as successor in interest to National City Corporation, and PNC Investments LLC, as successor in interest to NatCity Investments, Inc. (Federal Home Loan Bank of Chicago v. Bank of America Funding Corp., et al. (Case...

  • Page 186
    ... for loan losses, marketing practices, dividends, bank regulatory matters and the sale of First Franklin Financial Corporation. The SEC has been conducting an investigation into events at Equipment Finance LLC (EFI), a subsidiary of Sterling Financial Corporation, which PNC acquired in April...

  • Page 187
    ... officers, directors, employees and agents of PNC and companies we have acquired, including National City. As of December 31, 2010, assets of $2.2 billion secured certain specifically identified standby letters of credit. Recourse provisions from third parties of $3.0 billion were also available...

  • Page 188
    ... terms set forth in such indemnification agreement. Also in connection with the GIS divestiture, PNC has agreed to indemnify the buyer generally as described above. VISA INDEMNIFICATION Our payment services business issues and acquires credit and debit card transactions through Visa U.S.A. Inc. card...

  • Page 189
    ...brokered home equity loans/lines that were sold to private investors by National City prior to our acquisition. PNC is no longer engaged in the brokered home equity lending business, and our exposure under these loan repurchase obligations is reported in the Distressed Assets Portfolio segment. Loan...

  • Page 190
    ... home equity business which was acquired with National City. (c) Includes $157 million in 2009 for residential mortgages related to the final purchase price allocation associated with the National City acquisition. REINSURANCE AGREEMENTS We have two wholly-owned captive insurance subsidiaries...

  • Page 191
    ... mortgage servicing operations, the parent company has committed to maintain such affiliates' net worth above minimum requirements. Parent Company - Income Tax Refunds and Interest Paid Year ended December 31 (in millions) Income Tax Refunds Interest Paid Operating Revenue Dividends from: Bank...

  • Page 192
    ...include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting, and global trade services. Capital markets-related products...

  • Page 193
    ... in exchange traded funds. In addition, BlackRock provides market risk management, financial markets advisory and enterprise investment system services globally to a broad base of clients. At December 31, 2010, our economic interest in BlackRock was 20%. PNC received cash dividends from BlackRock of...

  • Page 194
    ... Of Businesses Year ended December 31 In millions Retail Banking Corporate & Institutional Banking Asset Management Group Residential Mortgage Banking Distressed Assets Portfolio BlackRock Other Consolidated 2010 Income Statement Net interest income Noninterest income Total revenue Provision...

  • Page 195
    ... Income from discontinued operations, net of income taxes (c) Net income Less: Net income (loss) attributable to noncontrolling interests Preferred stock dividends Preferred stock discount accretion and redemptions Net income attributable to common shareholders Per Common Share Data Book value...

  • Page 196
    ... deposits Money market Demand Savings Retail certificates of deposit Other time Time deposits in foreign offices Total interest-bearing deposits Borrowed funds Federal funds purchased and repurchase agreements Federal Home Loan Bank borrowings Bank notes and senior debt Subordinated debt Other Total...

  • Page 197
    ... deposits Money market Demand Savings Retail certificates of deposit Other time Time deposits in foreign offices Total interest-bearing deposits Borrowed funds Federal funds purchased and repurchase agreements Federal Home Loan Bank borrowings Bank notes and senior debt Subordinated debt Other Total...

  • Page 198
    ... of National City, which we acquired on December 31, 2008. NONPERFORMING ASSETS AND RELATED INFORMATION December 31 - dollars in millions 2010 (a) 2009 (a) 2008 (a) 2007 2006 Nonaccrual loans Commercial Commercial real estate Equipment lease financing TOTAL COMMERCIAL LENDING Consumer Home equity...

  • Page 199
    ... Commercial real estate Equipment lease financing Consumer (a) Residential real estate Total recoveries Net charge-offs Provision for credit losses (b) Acquired allowance - National City Acquired allowance - other Adoption of ASU 2009-17, Consolidations Net change in allowance for unfunded loan...

  • Page 200
    ... supervision and with the participation of our management, including the Chairman and Chief Executive Officer and the Executive Vice President and 192 At December 31, 2010, we had no pay-fixed interest rate swaps designated to commercial loans as part of fair value hedge strategies. At December 31...

  • Page 201
    ...and management is included under the caption "Security Ownership of Directors and Executive Officers" in our Proxy Statement to be filed for the 2011 annual meeting of shareholders and is incorporated herein by reference. Information regarding our compensation plans under which PNC equity securities...

  • Page 202
    ... Our consolidated financial statements required in response to this Item are incorporated by reference from Item 8 of this Report. Audited consolidated financial statements of BlackRock, Inc. as of December 31, 2010 and 2009 and for each of the three years ended December 31, 2010 are filed with...

  • Page 203
    .../s/ Richard J. Johnson Richard J. Johnson Executive Vice President and Chief Financial Officer March 1, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of The PNC Financial Services Group, Inc. and in the...

  • Page 204
    ... Bank of New York evidencing the succession of the Corporation to National City Deposit Agreement dated January 30, 2008 by and among National City Corporation, Wilmington Trust Company, National City Bank as Transfer Agent and Registrar, and all holders from time to time of Receipts issued pursuant...

  • Page 205
    ... Company Stock Purchase Contract between National City Corporation and National City Preferred Capital Trust I acting through the Bank of New York Trust Company, N.A. as Property Trustee, dated January 30, 2008 Form of PNC Bank, National Association Global Bank Note for Fixed Rate Global Senior Bank...

  • Page 206
    ... 10.62 to the Corporation's 2nd Quarter 2009 Form 10-Q* Incorporated herein by reference to Exhibit 10.17 to the Corporation's 2009 Form 10-K* Filed herewith* Incorporated herein by reference to Exhibit 10.8 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2005 (2005...

  • Page 207
    ... PNC Investment Corp., as settlor, and PNC Bank, National Association, as trustee The Corporation's Employee Stock Purchase Plan, as amended and restated as of January 1, 2009 Forms of employee stock option, restricted stock, restricted deferral, and incentive share agreements 2005 forms of employee...

  • Page 208
    ... to National City Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 Filed herewith 10.45 10.46 10.47 10.48 Form of agreement for long-term stock 10.49 10.50 2010 forms of employee stock option, restricted stock, and restricted share unit agreements 2010 forms of...

  • Page 209
    ...the Corporation and BlackRock, Inc. PNC Bank, National Association US $20,000,000,000 Global Bank Note Program for the Issue of Senior and Subordinated Bank Notes with Maturities of more than Nine Months from Date of Issue Distribution Agreement dated July 30, 2004 Agreement and Plan of Merger dated...

  • Page 210
    ...Securities Exchange Act of 1934, Making Findings and Imposing Cease-and-Desist Order Audited consolidated financial statements of BlackRock, Inc. as of December 31, 2010 and 2009 and for each of the three years ended December 31, 2010 Interactive Data File (XBRL) Filed herewith Filed herewith Filed...

  • Page 211
    ... does not relate to Interactive Data Files as defined in Rule 11 of Regulation S-T. CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, James E. Rohr, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2010 of The PNC Financial Services Group, Inc...

  • Page 212
    ... does not relate to Interactive Data Files as defined in Rule 11 of Regulation S-T. CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Richard J. Johnson, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2010 of The PNC Financial Services Group, Inc...

  • Page 213
    ...with the Annual Report on Form 10-K for the year ended December 31, 2010 of The PNC Financial Services Group, Inc. (Corporation) as filed with the Securities and Exchange Commission on the date hereof (Report), I, James E. Rohr, Chairman and Chief Executive Officer of the Corporation, hereby certify...

  • Page 214
    ... with the Annual Report on Form 10-K for the year ended December 31, 2010 of The PNC Financial Services Group, Inc. (Corporation) as filed with the Securities and Exchange Commission on the date hereof (Report), I, Richard J. Johnson, Executive Vice President and Chief Financial Officer of the...