PNC Bank 2011 Annual Report Download - page 42

Our performance in 2011 included the following:
• Net income for 2011 of $3.1 billion was down 10%
from 2010. Results for 2011 included $324 million for
residential mortgage foreclosure-related expenses
primarily as a result of ongoing governmental matters
and a noncash charge of $198 million related to the
redemption of trust preferred securities. Results for
2010 included $71 million of residential mortgage-
related expenses, $328 million after-tax gain on our
sale of GIS, and integration expenses of $387 million,
whereas the comparable amount of integration
expenses for 2011 was $42 million. For 2010, net
income attributable to common shareholders and
diluted earnings per common share were impacted by
a noncash reduction of $250 million related to our
redemption of TARP preferred stock.
• Net interest income of $8.7 billion for 2011 was
down 6% from 2010; net interest margin was down
to 3.92% in 2011 compared with 4.14% for 2010
primarily due to the impact of lower purchase
accounting accretion, a decline in average loan
balances and the low interest rate environment.
• Noninterest income of $5.6 billion in 2011 declined
5% compared with 2010. Noninterest income for 2011
reflected higher asset management fees that were
offset by lower corporate service fees primarily due to
a reduction in the value of commercial mortgage
servicing rights and the impact of the rules set forth in
Regulation E. The fourth quarter impact of Dodd-
Frank on interchange revenue was offset by increased
customer-initiated volumes throughout 2011.
• The provision for credit losses declined to $1.2
billion in 2011 compared with $2.5 billion in 2010 as
overall credit quality continued to improve due to
slowly improving economic conditions and actions
we took to reduce exposure levels during the year.
• Noninterest expense for 2011 increased by 6%
compared with 2010, to $9.1 billion primarily due to
higher residential mortgage foreclosure-related
expenses and a charge for the unamortized discount
related to the redemption of trust preferred securities.
• Overall credit quality continued to improve during
2011. Nonperforming assets declined $967 million,
or 19%, to $4.2 billion as of December 31, 2011 from
December 31, 2010. Accruing loans past due
increased $12 million, or less than 1%, during 2011
to $4.5 billion at year end primarily attributable to
government insured or guaranteed loans. The
allowance for loan and lease losses (ALLL) was $4.3
billion, or 2.73% of total loans and 122% of
nonperforming loans, as of December 31, 2011.
• We remain committed to responsible lending to
support economic growth. Total loan originations and
new commitments and renewals totaled
approximately $147 billion for 2011, including $4.1
billion of small business loans. Total loans were
$159.0 billion at December 31, 2011, an increase of
6% from $150.6 billion at December 31, 2010. The
growth in total loans exceeded the $2.4 billion
decrease in Non-Strategic Assets Portfolio loans
driven by customer payment activity and portfolio
management activities to reduce under-performing
assets. Consolidated growth in commercial loans of
$10.5 billion, auto loans of $2.2 billion, and
education loans of $.4 billion was partially offset by
declines of $1.7 billion in commercial real estate
loans, $1.5 billion of residential real estate loans and
$1.1 billion of home equity loans compared with
December 31, 2010. The $3.2 billion decrease in
consolidated commercial and residential real estate
loans included $1.4 billion of Non-Strategic Assets
• Portfolio loans, accounting for approximately 43% of
the consolidated decline.
• Total deposits were $188.0 billion at December 31,
2011 compared with $183.4 billion at the prior year
end. Growth in transaction deposits (interest-bearing
money market, interest-bearing demand and
noninterest-bearing) continued with an increase of
$13 billion, or 10%, for the year. Retail certificates of
deposit were reduced by $7.8 billion, or 21%, during
2011 and deposit costs were 51 basis points, which
was 19 basis points lower than in 2010.
• Our higher quality balance sheet during 2011
reflected core funding with a loans to deposits ratio
of 85% at year end and strong bank and holding
company liquidity positions to support growth.
• We grew common shareholders’ equity by $2.8
billion during 2011. The Tier 1 common capital ratio
was 10.3% at December 31, 2011, up 50 basis points
from December 31, 2010.
Our Consolidated Income Statement Review section of this
Item 7 describes in greater detail the various items that
impacted our results for 2011 and 2010.
B ALANCE S HEET H IGHLIGHTS
Total assets were $271.2 billion at December 31, 2011
compared with $264.3 billion at December 31, 2010. The
increase from year end 2010 resulted primarily from an
increase in loans and other assets somewhat offset by a
decrease in investment securities and short term investments.
Various seasonal and other factors impact our period-end
balances whereas average balances are generally more
indicative of underlying business trends apart from the impact
of acquisitions and divestitures. The Consolidated Balance
Sheet Review section of this Item 7 provides information on
changes in selected Consolidated Balance Sheet categories at
December 31, 2011 compared with December 31, 2010.
Total average assets were $265.3 billion for 2011 compared
with $264.9 billion for 2010. Average interest-earning assets
were $224.3 billion for 2011, compared with $224.7 billion in
2010. Both comparisons were primarily driven by a $1.8
The PNC Financial Services Group, Inc. – Form 10-K 33