Alternative Models of Bank Performance

Description
models to evaluate bank performance. How or which of the bank’s activities contribute to the creation of shareholder value, evaluating performance using Accounting data and ratios.

ALTERNATIVE MODELS OF BANK PERFORMANCE
1

Breaking Down ROE
ROE = Net Income/ Total Equity Capital

ROA = Net Income/Total Assets
x

x

Equity Multiplier = Total Assets/Equity Capital

Net Profit Margin = Asset Utilization = Net Income/Total Operating Revenue Total Operating Revenue/Total Assets
2

Bank Performance Model
Returns to Shareholders ROE = NI / TE Interest INCOME Non Interest Return to the Bank ROA = NI / TA Interest

Rate Composition (mix) Volume Fees and Serv Charge Trust Other Rate Composition (mix) Volume

EXPENSES Overhead Degree of Leverage EM = 1 / (TA / TE) Prov. for LL Taxes

Salaries and Benefits
Occupancy Other
3

Traditional bank performance analysis carries three basic flaws
1. It ignores the wide diversity in strategies pursued by different institutions 2. A bank’s total assets no longer serve as a meaningful yardstick when banks engage in offbalance sheet activities
3. The analysis provides no direct information

concerning how or which of the bank’s activities contribute to the creation of shareholder value

4

Wide diversity in strategies pursued by different institutions
• Most banks did similar things, which were reflected in their balance sheet
? They accepted deposits and made loans, and many interest rates were regulated ? The primary differentiation of performance was balance sheet composition

• Today, banks may pursue sharply different strategies

5

Total assets no longer serve as a meaningful yardstick when banks engage in off-balance sheet activities
• Consider the situation where two banks report the same asset size, but one also has an extensive mortgage-servicing operation that generates servicing income
• If the bank with mortgage-servicing makes a profit on this activity, it will report a higher ROA, due to the higher noninterest income for mortgage-servicing fees

6

How or which of the bank’s activities contribute to the creation of shareholder value • It similarly ignores other performance benchmarks that customer-focused managers must consider to identify the best strategies going forward

7

ROA v/s(ROE)
• Although ROA might be a biased indicator of performance, return on equity (ROE) doesn’t suffer from the same weaknesses. • When considering the entire bank, stockholders’ equity must support all activities, whether on- or off-balance sheet. • Thus, a comparison of net income to equity captures the returns to owners’ contributions.
8

The appropriate peer group
• As long as banks have a similar strategic focus and offer similar products and services, asset size and ratios can provide meaningful comparisons. To identify the appropriate peer institutions, management should consider the following:
1. What is the bank’s strategic focus? 2. What are the traditional balance sheet and offbalance sheet characteristics of firms with this focus? 3. How do the bank’s activities affect its operating revenue?
9

•

Starting Point
• A common starting point is to determine whether the bank’s strategy is more loan-driven or depositdriven. • A loan-driven bank’s profitability is generally a function of net interest income (the margin) with loan volume a major factor. • A deposit-driven bank’s profitability is generally a function of noninterest income with franchise value and deposit volume a major factor.

10

Loan driven bank finds that:
• asset size is determined by loan demand

• profitability is determined by loan economics; i.e., loan yields versus cost of fund
• loan margin is high as well as noninterest expense • the culture is typically “our bank underwrites loans better than other banks”

• value is typically some multiple of core earnings

11

Deposit driven bank typically finds that:
• asset size is determine by the growth in core deposits • value is determined by the bank’s franchise value - measured by the market share of low-cost core deposits • lower interest income, interest margins and noninterest expenses • lower loan losses
12

Evaluating performance using Accounting data and ratios
• A bank should compare its ratios with those from a select sample of peer institutions that are similarly loan-driven or deposit-driven. • Peers should operate the same approximate number of offices in the same metropolitan or non-metropolitan markets and have the same product and service mix. • Asset-based ratios are thus directly comparable. • Analysts can easily construct peer bank averages by direct comparison to other similar Banks

13

Ratios tied to a bank’s total operating revenue (net interest income plus noninterest income
• One way to construct ratios that avoid the problems of off-balance sheet activities is to calculate ratios tied to a bank’s total operating revenue (net interest income plus noninterest income • Fundamentally this means calculate performance measures using total operating revenue as the denominator rather than assets.
? Here, total operating revenue equals the sum of net interest income and noninterest income.
14

The efficiency ratio
• Measured as noninterest expense divided by total operating revenue, is a popular measure used by stock analysis based on operating revenue rather than assets.
• Analysts strongly encourage banks, regardless of size, to meet fairly specific targets in this ratio. • Because operating revenue includes both interest income and noninterest (fee-based) income, it captures all activities. • Efficiency Ratio = noninterest expense / net operating revenue
where net operating revenue = the sum of net interest income + noninterest income.
15

Bank stock analysts follow a standard procedure when evaluating firm performance
• Initially use financial information to calculate performance measures
? adjust the data to omit the impact of nonrecurring items, such as onetime asset sales and restructuring charges ? compare these historical ratios with a carefully selected group of peer institutions, matching each bank’s primary strategic focus

• Based on his or her own analysis and conversations with specialists within the bank, the analyst then assesses the quality of earnings based on: ? their sustainability
? the bank’s market power in specific product or service areas ? the bank’s franchise value

• The next step is to forecast earnings, cash flow, and market value of equity over a three- to five-year time horizon • Finally, the analyst makes a stock recommendation:
? accumulate (buy) ? neutral (hold) ? below-market performance (sell)
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Analyst Recommendation
• It is extremely rare, however, to see an outright sell recommendation because analysts want to remain in the good graces of the banks that they follow • Thus, they do not formally recommend selling the stock, but rather label it as likely to exhibit belowmarket performance. • A hold recommendation thus actually means “sell the stock” for most analysts.

• The recent failure of Enron is potentially an example of the conflict of interest “buy-side” and “sell-side” analysts have.
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Investors Perspective
• Investors in bank stocks are primarily concerned with whether the bank’s management is creating value for stockholders.

• When analysts compare performance over some historical period, they are less concerned with ROE, ROA, and efficiency ratios – rather the overall total return from investing in the bank’s stock. • Total return equals dividends received plus stock price appreciation/depreciation relative to the initial investment.
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Key stock market-based performance measures
• Return to stockholders = (Dprice + dividends) / pricet-1 • Earnings per share

?NI after taxes and dividends on preferred stock ? number of shares of common s tock outstanding
• Price to earnings (P/E) = stock price / EPS • Price to book value = stock price / book value per share • Market value (MV) of equity = MV of assets - MV of liabilities or = # share of common stock x stock price
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Example:
• Buy 100 shares of ABC Bank at the beginning of 2006 for Rs.73.06. The bank paid Rs.1.92 per share in dividends that generated reinvestment income of Rs.09. At the end of 2006, the price of stock was Rs.56.20. • Return to stockholders in 2006 was -20.3%. -0.203 = [56.20 - 73.06 + 2.01] ÷ 73.06

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Balanced scorecard
• Performance measures that look beyond just financial measures • An attempt to balance management decisions based on financial measures with decisions based on a firm’s relationships with its customers and the effectiveness of support processes in designing and delivering products and services • The result is that line of business managers use indicators such as:
? market share, ? customer retention and attrition, ? customer profitability, and ? service quality to evaluate performance

• Internally, they also track productivity and employee satisfaction Such nonfinancial indicators provide information regarding whether a bank is truly customer-focused and whether its systems are appropriate
21

Operationalize the balanced scorecard
• Divide the bank into a Customer Bank and a House Bank • Income derived from balance sheet and income statement items that are derived from bank customers determines The Customer Bank

• Items that arise when the bank is its own customer determines The House Bank
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Two banks in one house
• Traditional or Customer Bank, activities include:
? most loans, core deposits, payment services, credit enhancements, asset management, and financial advisory.

• Investment or House Bank, activities include:
? the investment portfolio, noncore, purchased liabilities, loan participations, asset sales, servicing, and banksponsored mutual funds.

• Items are assigned based on whether the underlying activities pertain to bank customers (Customer Bank) or the bank itself (Investment Bank). • Evaluate the returns on each Bank relative to the risks and relevant benchmarks.
23

Line of business profitability analysis
• By allocating operating expenses to activities that support bank customers and bank management, banks can obtain at least a rough estimate of segment net income. • Leads to the reporting and use of both financial and nonfinancial performance data, based on specific customers. • Many banks attempt to measure profitability by:

? type of loan customer (small business, middle market, consumer installment, etc.)
? type of depositor; by characteristics of the relationship (account longevity, cross-sell patterns, profitability, etc.) and ? delivery system (branch, ATM, telephone, home banking, etc.).
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RAROC/RORAC analysis
• RAROC refers to risk-adjusted return on capital, while RORAC refers to return on risk-adjusted capital

• In order to analyze profitability and risk precisely, each line of business must have its own balance sheet and income statement.
? These statements are difficult to construct because many nontraditional activities, such as trust and mortgage-servicing, do not explicitly require any direct equity support. ? Even traditional activities, such as commercial lending and consumer banking, complicate the issue because these business units do not have equal amounts of assets and liabilities generated by customers. ? The critical issue is to determine how much equity capital to assign each unit.
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Assigning equity capital to each unit
• Alternative capital allocation methods include:
? using regulatory risk-based capital standards ? assignment based on the size of assets ? benchmarking each unit to “pure-play” peers that are stand-alone, publicly held firms; and ? measures of each line of business’s riskiness.

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RAROC/RORAC
• Risk adjust return on capital (RAROC)
? RAROC = Risk-adjusted income / Allocated capital

• Using this method, income is adjust for risk.
• Typically, income is adjusted for expected losses.

• Return on risk adjusted capital (RORAC)
? RORAC = Net income / Allocated risk capital
• Using this method, capital is adjusted for risk. • Typically, capital is adjusted for a maximum potential loss based on the probability of future returns or volatility of earnings.

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Example:
• Banking Businesses
1. Regional Community Banking

2. Corporate Banking
3. Real Estate Finance 4. Business Credit

• Asset Management and Processing
5. Advisory

• The data is obtained from Bank’s management accounting system based on internal assumptions about revenue and expense allocations and assignment of equity to each line of business.

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PNC’s profitability analysis for 2000-2001

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Two lines of business
1.Corporate Banking
…represents products and services provided nationally in the areas of credit, equipment leasing, treasury management, and capital markets products to large and mid-sized corporations and government entities.

2.Community Banking
…encompasses the bank’s traditional deposit, branchbased brokerage, electronic banking and credit products to retail customers along with products to small businesses such that it is primarily a depositgenerating unit.
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PNC’s Profitability Analysis for 2000-2001 (cont.)

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Transfer pricing
• The interest rate at which a firm could buy or sell funds in the external capital markets • When management creates balance sheets for each line of business, it must allocate capital as well as assets or liabilities to make the balance sheet balance. • It must then assign a cost or yield to each of these components to produce income statement for each line of business.
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Transfer pricing systems
• Banks use internal funds transfer pricing systems to assign asset yields and cost of funds to different lines of business and products. • Most systems use a matched maturity framework that assigns rates by identifying the effective maturity of the underlying assets or liabilities and assigning a rate obtained from a money or capital market instrument of the same maturity.
33

Risk-adjusted income and economic income
• Two adjustments are frequently made to income in line of business profitability analysis:
1. The return is adjusted for risk by subtracting expected losses 2. The return nets out required returns expected by stockholders.

•

•

This minimum required return, or cost of equity, represents a hurdle rate, or stockholders’ minimum required rate of return. The specific concern is whether RAROC is greater than the firm’s cost of equity.
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Allocated risk capital
• The objective of RAROC analysis is to assist in risk management and the evaluation of line of business performance. As part of this, it is necessary to assign capital to each line of business Banks allocate risk capital by: 1. Regulatory risk-based capital standards

•

2. Asset size
3. Benchmarking v/s “pure-play” stand-alone businesses 4. Perceived riskiness of the business unit

Unfortunately, most lines of business do not have market value balance sheets. Hence, many banks focus on the volatility in economic earnings (earnings-at-risk) or estimate a value-at-risk figure.

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Earnings-at-risk
• The volatility of earnings from a line of business • Securities underwriting and letters of credit (guarantees) against customer exposures at a large bank do not require much capital to support day-to-day operations.
? But before a bank can actively engage in this business, it must have a strong credit and bond rating, which requires a substantial amount of risk capital.

• One way to measure the required risk capital is to relate it to the volatility of earnings from this line of business; i.e., earnings-at-risk.
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Earnings-at-risk applied to loans
1. 2. Using historical data for each of the past 30 months, estimate revenues obtained directly from these loans. Using historical data for each of the past 30 months, estimate direct expenses from offering these services and expected losses.

3.

Using the 60 observations for revenues minus expenses and losses, estimate one standard deviation of earnings. This is earnings-at-risk. Estimate risk capital as one (or two) standard deviation of earnings, divided by the risk-free interest rate.

4.

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Management of market risk
• Market risk is the risk of loss to earnings and capital related to changes in the market values of bank assets, liabilities, and off-balance sheet positions

• RBI imposed capital requirements against the market risk associated with large banks’ trading positions.
? The requirements apply to any bank or bank holding company that has a trading account in excess of Rs.100 crores or accounts for 10 percent or more of bank assets.

• Typically, market risk arises from taking positions and dealing in foreign exchange, equity, interest rate, and commodity markets, and the items affected are the securities trading account, derivatives positions, and foreign exchange positions. • The new capital requirements address market risk associated with a bank’s trading activities.
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Shareholder Value.
• Some analysts criticize traditional earnings measures such as ROE, ROA, and EPS because they provide no information about how a bank’s management is adding to shareholder value. • If the objective of the firm is to maximize stockholders’ wealth, such measures do not indicate whether stockholder wealth has increased over time, let alone whether it has been maximized. • Stern, Stewart & Company has introduced the concepts of market value added (MVA) and its associated economic value added (EVA) in an attempt to directly link performance to shareholder wealth creation.
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Economic value added (EVA)
• An approach to measuring performance that compares a bank’s (or line of business) net operating profit after-tax (NOPAT) with a capital charge • Economic Value Added (EVA) is the capital charge which represents the required return to stockholders assuming a specific allocated risk capital amount.
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Market and economic value added
• MVA represents the increment to market value and is determined by the present value of current and expected economic profit:
MVA = Mkt Value of Capital - Hist. Amt of Invested Capital

• Stern Stewart and Company measures economic profit with EVA, which is equal to a firm's operating profit minus the charge for the cost of capital:
EVA = Net Operating Profit After Tax (NOPAT) - Capital Charge

where the capital charge equals the product of the firm’s value of capital and the associated cost of capital
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Difficulties in measuring EVA for the entire bank
• It is often difficult to obtain an accurate measure of a firm's cost of capital. • The amount of bank capital includes not just stockholders' equity, but also includes loan loss reserves, deferred (net) tax credits, non-recurring items such as restructuring charges and unamortized securities gains. • NOPAT should reflect operating profit associated with the current economics of the firm. Thus, traditional accounting data, which distort true profits, must be modified to obtain estimates of economic profit.
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A. Balance Sheet Assets Cash Securities Commercial loans Credit card loans -Loss reserve Other assets Total assets

$Millions $150 $800 $2000 $1900 -$100 -$250 $5,000

Rate 0 6.5% 9.0% 10.0%

Liabilities & Equity Demand deposits MMDAs CDs Small time deposits Deferred tax credits Equity Liabilities + equity

$Millions $800 $1800 $1300 $680 $100 - $320 $5,000

Rate 3% 5.5% 4.5%

Risk-weighted assets: .50($800) + 1($2,000) + 1($1,900) + 1($250) = $4,550 Tier 1 capital = $320 Total capital = $420 Tier I ratio: $320/$4,550 = 7.03% Total capital ratio: $420/$4,550 = 9.23% $422 -$156.1 $265.9 -$25 $60 -$190 $110.90 $44.36 $66.54

EVA calculation For Ameribank

B. Income Statement Interest income: .065($800) + .090($2,000) + .10($1,900) = Interest expense: .03($1,800) + .055($1,300) + .045($680) = Net interest income Provision for loan losses Noninterest income Noninterest expense Pre tax Income Taxes @ 40% Net income

C. Profit Measures ROE = (66.54 / 320 ) = 20.8% ROA = (66.54 / 5,000) = 1.33% Assuming that net charge-offs $22, cash taxes pai, = $39, and allocated risk capital $550 with a capital charge of 12%: NOPAT = $110.90 + $25 - $22 - $39 = $74.9 EVA = $74.9 - 0.12($550) = $8.9

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EVA calculation for ameribank after sale of $1 billion in credit card loans

A. Change In Balance Sheet items Assets D Amount Credit card loans -$1,000 Loan loss reserve +$30 Total assets -$970 B. Income Statement

Liablilties CDs Equity Total

D Amount -$940 -$30 -$970 Change -$100 -$46.2 -$53.8 +$30.0 +$12 -$5 -$16.8 -6.72 -10.08

Interest income: .065($800) + .09($2,000) + .10($900) Interest expense: .03($1,800) + .055($460) + .045($680) Net interest income: Provision for loan losses: Noninterest income: Noninterest expense: Pre tax income: Taxes @ 40%: Net income: C.

$322 -$109.9 $212.1 +$5 $72 -$195 $94.1 $37.64 $56.46

Profit Measures: Actual net charge-oft $14, cash taxes paid = $31, and risk capital falls to $500. ROE = $56.46/$290 = 19.47% ROA = $56.46/$4,030 = 1.40% EVA = [$94.1 - $5 - $14 - $31] - $60 = -$15.9 Risk-weighted assets: .50($800) + 1($2,000) + 1($900) + 1($250) = $3,550 Tier 1 capital = $290 Tier I ratio: $290/$3,550 = 8.17% Tier 2 capital = $420 Total capital ratio: $420/$3,550 = 11.83% 44

Balanced scorecard
• One of the recent dramatic shifts in strategic thinking by management has recently produced a new approach to performance measurement at many firms, both financial and nonfinancial.
? The primary catalyst is an appreciation that financial measures alone do not provide sufficient information regarding a firm’s overall performance.

• In addition to profit and risk measures, managers need benchmarks and targets for efforts and activities related to:
? ? ? ? customer satisfaction, employee satisfaction, organizational innovation, and the development of business processes.

• This is particularly true if a bank is customer-focused. • Should management target and measure performance along the lines of:
? ? ? ? ? market share, service quality, customer profitability, sales performance, and customer satisfaction?
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Balanced scorecard framework with four blocks
1. Financial Performance:
? How Do Stockholders View Our Risk and Return Profile?

2. Customer Performance:
? How Do Customers See Us?

3. Internal Process Management:
? At What Must We Excel?

4. Innovation and Learning:
? How Can We Continue to Improve and Create Value?
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Scorecard measures
Financial Measures Customer profitability Lifestyle segment profitability Product profitability Delivery channel cost Return on investment Revenue growth Deposit service cost change Revenue mix Sales growth and target markets Dollars past due divided by total dollar loans Customer Measures Life cycle segment market share Customer satisfaction Customer retention Market share Customer acquisition Customer profitability Share of segment Depth of relationship Brand name rating Number of customer complaints Internal Measures Channel usage Product usage Percentage of revenue from new products Learning Measures Skill competency Sales productivity Employer satisfaction Percentage of revenue from product Employee retention promotions Product development cycle Hours with customer New product revenue Cross-sale ration Channel mix change Service error rate Request fulfillment time Loss ratio Underwriting quality audit Overhead ratio Ratio of branch to on-call transactions—ATM transactions Sales per sales call Sales per referral New sales divided by banker Productivity Efficiency ratio New product revenue as percent of total
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Employee satisfaction Employee productivity Strategic job coverage ratio Strategic information availability ratio Personal goals alignment Revenue per employee Sales force average length of service Turnover Training hours divided by FTE Number of training programs offered Turnover ratio Turbulence

Fee revenue divided by total revenue Closed accounts by reason Net income Share of wallet Return on risk-adjusted equity Net income after capital charge Cost of capital Efficiency Economic value added Assets per employee Percent of target accounts

ANALYZING BANK PERFORMANCE

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Group Assignment
• Based on the above discussion – analyze 2 Banks – one Public Sector and one Private Sector or Foreign Bank • How does current performance compare against past performance? Are there positive or negative trends in the bank’s performance? Should corrective action to address problems be taken? • Is current performance in line with expectations? If not, what adjustments are needed? • How does the bank’s current performance compare with similar banks? Is it a leader or laggard? • No 2 groups should have the same Banks • Not more than 4 in a group
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Group Assignment
• • With respect to Evaluation 8 revenue ratios (net interest income and net income) is your bank above or below peer? Are expense ratios (provision for loan losses, overhead (noninterest expenses) expenses) at your bank above or below peer?

•

Where does loan quality rank?
? Are the bank’s ratios of noncurrent loans/total loans (Noncurrent loans and leases (LN&LS) to gross LN&LS) and net loan losses/total loans (Net loss to average total LN&LS) above or below peer? Is Tier 1 capital/average assets (Tier 1 Leverage capital) above or below peer? Where do dividends rank?

•

Where does capital stand?
? ?

?

Is cash dividends/net income (Cash dividends to net income) above or below peer?

•

If your bank meets the following criteria:
? ? ? ? ? ? Your bank’s revenue ratios are above peer Its expense and asset quality ratios are below peer Its capital is above peer Dividend payout is at or below peer Then it is likely that your bank’s performance is relatively good. This is a very general analysis that is intended to help spot problems and to prompt questions to management. It does not give the bank a rating of its financial performance regarding earnings, asset quality and capital adequacy.
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Key Profitability Ratios in Banking
Net Income After Taxes Return on Equity Capital (ROE) ? Total Equity Capital

Net IncomeAfter Taxes Return on Assets (ROA) ? Total Assets

Net Interest Income Net Interest Margin ? Total Assets

Net Noninterest Income Net Noninterest Margin ? Total Assets
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Key Profitability Ratios in Banking
Total Operating Revenues Total Operating Expenses Net Bank Operating Margin ? Total Assets

Net Income After Taxes Earnings Per Share (EPS) ? Common Equity Shares Outstanding

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Breaking Down ROE
ROE = Net Income/ Total Equity Capital

ROA = Net Income/Total Assets

x

Equity Multiplier = Total Assets/Equity Capital

Net Profit Margin = Net Income/Total Operating Revenue

x

Asset Utilization = Total Operating Revenue/Total Assets

53

Bank Performance Model
Returns to Shareholders ROE = NI / TE Interest INCOME Non Interest Return to the Bank ROA = NI / TA Interest

Rate Composition (mix) Volume Fees and Serv Charge Trust Other Rate Composition (mix) Volume

EXPENSES Overhead Degree of Leverage EM = 1 / (TA / TE) Prov. for LL Taxes

Salaries and Benefits
Occupancy Other
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ROE Depends On:
• Equity Multiplier
? Leverage or Financing Policies

• Net Profit Margin
? Effectiveness of Expense Management

• Asset Utilization
? Portfolio Management Policies

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Bank Capital and Profitability
• ROA = Net profit after taxes Total Bank Assets
• ROE= Net profit after taxes Bank Capital

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Return on equity (ROE = NI / TE)
• The measure of stockholders’ returns • ROE is composed of two parts:
? Return on Assets (ROA = NI / TA)
• represents the returns to the assets the bank has invested in

? Equity Multiplier (EM = TA / TE)
• the degree of financial leverage employed by the bank
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Main Model: Standards
• Corporate: ROE = ROA * Lev 10-20% = 5-10% * 2 • Banks:

10-20% = 0.7 – 1.4% * 14

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Return on Assets (ROA = NI / TA)
? Asset utilization (AU) ? income generation ? Expense ratio (ER) ? expense control
• ROA = = AU ER (TR / TA) - (TE / TA)

• Where:
TR TE = total revenue or total operating income = Int. inc. + non-int. inc. + SG(L) and = total expenses = Int. exp. + non-int. exp. + PLL + Taxes
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Return on Assets
• ROA = NI / A NI = NII + NNonII - Other Expenses (OT) • ROA = NII / A + NNonII / A – OT / A Spread + Burden - OT 4% + -2.25% - 0.75% (Roughly)

Spread = Better credit than customers
Burden = Return from providing NNonII.
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Return on Assets
• Consider first the expense ratio (ER) - very intuitive interpretation. • Lower (greater) the ER, the more (less) efficient a bank controls expenses. • Suppose that two banks have the same total assets, but one reports total expenses that are twice as large as the other’s - ER is twice as large. To produce this difference, the bank with the greater ER reported higher expenses. • Three additional ratios isolate the impact of specific types of operating expenses:
? Interest expense ratio = Interest expense (IE) / Avg. total assets ? Noninterest expense ratio = Noninterest expense (OE) / Avg. total assets ? Provision for loan loss ratio = Provisions for loan losses (PLL) / Avg. total assets

• The sum of these ratios equals the total expense ratio

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Return on Assets
• The greater is AU, the greater the bank’s ability to generate income from the assets that the bank owns.

• The asset utilization ratio has a very intuitive interpretation. • Total revenue (TR), or total operating income, can be divided into three components:
• TR=Interest Income (II)+Noninterest Income (OI)+Realized Security Gains or Losses (SG)

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ROA is driven by the bank’s ability to
…generate income (AU) and control expenses (ER)

• Income generation (AU) as:
Int. Inc. Non. int. Inc. Sec gains (losses) AU ? ? ? TA TA TA
? Expense Control (ER) as:

Int. Exp. Non ? int . Exp. PLL ER ? ? ? TA TA TA
*

? Note, ER* does not include taxes.

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Main Model
• ROE (return on equity) DuPont: NI/S * S/A * A/Eq PM * ATO * Lev ROA * Lev Banks: NI / (Inc Before Tax, Sec G/L) *
(Inc Before Tax, Sec G/L) / Tot Optg Rev * Tot Optg Rev / A * A / Eq Tax Eff * Exp Eff * Asset Eff * Fund’g Eff 10-20% = 80% * 20% * 9% * 14 BIG 70% * 18% * 7% * 14 Small
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Expense ratio (ER = Exp / TA)
• The ability to control expenses • Interest expense / TA
? Cost per liability (rate)
• Int. exp. liab. / Rs. amt. liab. ? Composition of liabilities • Rs. amt. of liab. / TA

? Volume of debt and equity

• Non-interest expenses / TA
? Salaries and employee benefits / TA ? Occupancy expenses / TA ? Other operating expense / TA

• Provisions for loan losses / TA • Taxes / TA
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Asset utilization (AU = TR / TA):
• The ability to generate income • Interest Income / TA
? Asset yields (rate)
• Interest income asset / $ amount of asset

? Composition of assets (mix)
• Rupee amount asset / TA

? Volume of Earning Assets
• Earning assets / TA

• Non interest income / TA
? Fees and Service Charges ? Securities Gains (Losses) ? Other income
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Aggregate profitability measures
• Net interest margin
? NIM = NII / earning assets (EA)

• Spread
? Spread = (int inc / EA) ? (int exp / int bear. Liab.)

• Earnings base
? Eb = EA / TA

• Burden / TA
? (Noninterest exp. - Noninterest income) / TA

• Efficiency ratio
? Non int. Exp. / (Net int. Inc. + Non int. Inc.)
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Five categories of banking ratios
• Profitability Ratios
• Asset Quality Ratios • Capital Adequacy Ratios • Liquidity Ratios • Valuation Ratios

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Profitability Ratios
• Two Key Measures of Aggregate Bank Profitability:
? Annualized net income after taxes and extraordinary items as a percent of average total equity capital.

1. Return on Equity (ROE):

? Measures the return on each dollar of stockholders’ equity.

2. Return on Assets (ROA):
? Annualized net income after taxes and extraordinary items as a percent of average total assets. ? Net income generated per dollar of average assets invested during period. As a rule of thumb, an ROA of 1% is considered acceptable for most banks.

•

ROE = ROA * Earnings Multiplier (EM)

Net Income TotalAsset s ROE ? ? TotalAsset s Total Equity
• EM: a measure of leverage. Large values indicate large amounts of debt financing
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Profitability
• ROA Decomposition:

• ROA= Profit Margin (PM)*Asset Utilization (AU)
ROA ? Net Income Total Oper ating Income ? Total Operating Income Total Asse ts

• Profit Margin: measures a bank’s ability to control expenses and reduce taxes.

• Asset Utilization: represents the gross yield on assets.
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Profitability Ratios
• Net Interest Income = Interest Income – Interest Expense • Yield on Earning Assets:
? Total interest income (annualized) as a percent of average earning assets.
? This ratio measures how much a bank is earning on its interest-earning assets.
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Profitability Ratios
• Cost of Funding Earning Assets:
? Annualized total interest expense on deposits and other
borrowed money as a percent of average earning assets. ? This ratio attempts to measure how much a bank is paying for its deposits and borrowings.

• Net Interest Margin
? Net interest income as a percent of average earning assets. ? Measures the difference between what a bank earns on its loans and investments (yield on earning assets) and what it pays on deposits and borrowings (cost of funding earning assets).
72

Profitability Ratios
• Noninterest income to earning assets:
? Annualized fee income and other income from services as a percent of earning assets. ? This ratio is a measure of a bank’s other income sources (from fees, etc.).

• Noninterest expense to earning assets:
? Annualized non-interest expenses (e.g.: salaries and employee benefits, expenses of premises and fixed assets) as a percent of average earning assets. ? This ratio is a measure of bank’s operating expenses. For most banks, noninterest expenses far exceed noninterest income.

• Net operating income to assets:
? Net operating income as a percent of average assets
73

Profitability Ratios
• Efficiency Ratio
? Noninterest expense, less the amortization expense of intangible assets, as a percent of the sum of net interest income and noninterest income.
? This ratio evaluates the overhead structure of the bank. It is an overall indicator of how well the bank is managing its expenses.
74

Profitability Ratios
• Net charge-offs to loans:
? Gross loan and lease financing receivable charge-offs, less gross recoveries, (annualized) as a percent of average total loans and lease financing receivables.

• Credit loss provision to net charge-offs:
? Provision for possible credit and allocated transfer risk as a percent of net charge-offs. ? This ratio measures the adequacy of the bank’s periodic allocation to its allowance for loan losses.

• Earnings coverage of net loan charge-offs
? Annualized income before income taxes and extraordinary items and other adjustments plus provisions for loan and lease losses and allocated transfer risk reserve divided by net charge-offs.

75

Asset Quality Ratios
• Adequacy of Loan Loss Allowance:
? Loss allowance to loans
• Allowance for loan and lease losses as a percent of total loan and lease financing receivables, excluding unearned income.

• This measures whether the loan loss allowance is adequate to cover potential loan losses.

? Loss allowance to noncurrent loans
• Allowance for loan and lease losses as a percent of noncurrent loans and leases. • This is another measure of the adequacy of the loan loss allowance.
76

Asset Quality Ratios
• Quality of Loan Portfolio:
? Noncurrent assets plus other real estate owned to assets
• Noncurrent assets as a percent of total assets. Noncurrent assets are defined as assets that are past due 90 days or more plus assets placed in nonaccrual status plus other real estate owned (excluding direct and indirect investments in real estate). • This ratio attempts to measure the percent of non-performing assets.

? Noncurrent loans to loans
• Total noncurrent loans and leases (loans and leases 90 days or more past due plus loans in nonaccrual status) as a percent of gross loans and leases. • This ratio is an indicator of the percentage of problems loans in the bank’s portfolio.

77

Capital Adequacy Ratios
• Equity capital to assets ? Total equity capital as a percent of total assets.

• Core capital (leverage) ratio
? Tier 1 (core) capital as a percent of average total assets minus ineligible intangibles. ? Tier 1 (core) capital includes: common equity plus noncumulative perpetual preferred stock plus minority interests in consolidated subsidiaries less goodwill and other ineligible intangible assets. ? Total Capital = Tier 1 capital + Tier 2 capital. Tier 2 capital includes loan loss reserves, preferred stock, and mandatory convertible debt.

78

Capital Adequacy Ratios
• Tier 1 Risk-Based Capital Ratio
? Tier 1 (core) capital as a percent of risk-weighted assets as defined by the appropriate federal regulator for prompt corrective action during that time period.

• Total Risk-Based Capital Ratio
? Total risk based capital as a percent of risk-weighted assets as defined by the appropriate federal regulator for prompt corrective action during that time period.

? Banks must meet minimum ratio of capital to riskweighted assets of 9%, with at least 4% taking the form of Tier (1) capital.
79

Liquidity Ratios
• Asset Liquidity Ratios:
? Current Ratio
• Current assets / current liabilities

• Liability Liquidity Ratios:
? Net Loans and leases to deposits
• Loans and lease financing receivables net of unearned income, allowances and reserves, as a percent of total deposits. • This ratio is an indicator of a bank’s ability to support loan growth with deposits.
80

Liquidity Ratios
• Net loan and leases to core deposits:
? Loan and lease financing receivables, net of allowances and reserves, as a percent of total domestic deposits, less time deposits of Rs.100,000 or more.

• Net noncore funding dependence ratio
? (Noncore Liabilities – Short-term investments)/Longterm assets.

? This ratio highlights how dependent a bank is on volatile funding sources; the ratio attempts to measure a bank’s ability to withstand the sudden loss of its noncore liabilities.

81

Financial ratios of PNC and Community National Bank
UBPR

Risk Ratios Profitability Ratios

Pg #

PNC BANK, NATIONAL ASSOCIATION Dec-00 Dec-01 UBPR PEER1 CALC UBPR PEER1

COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7

ROE: Net Income / Average total equity 11 ROA: Net Income / Avg TA 1 AU: Total Revenue / Avg TA 1 calc ER: Total expenses (less Taxes) / Avg TA 1 calc Memo: PM: Net Income / Total Revenue 1 calc EM: Avg. TA / Avg, Total Equity 6 calc EB: Earning Assets / Avg TA 6 NIM: Net interest margin (te) 1 Spread (te) 3 calc Efficiency Ratio 1 calc Burden / Avg. Total Assets 1 calc Non Interest Income / Noninterest exp. calc 1 EXPENSES: ER*: Expense ratio components Total Interest expense / Avg. TA 1 Memo: Interest expense / Avg. Earn assets 1 Noninterest Expenses / Avg. TA 1 Personnel expenses 3 Occupancy expense 3 Other operating expense (incl. intangibles) 3 Provision: Loan & Lease Losses / Avg. TA 1 Income Taxes / Avg. TA 1 calc

18.94% 1.50% 9.24% 6.96% 16.23% 12.63x 86.95% 3.58% 3.11% 57.17% -0.71% 78.29% 6.96% 3.49% 3.94% 3.27% 1.46% 0.42% 1.39% 0.20% 0.78%

13.82% 1.09% 9.19% 7.47% 11.86% 12.50x 89.02% 3.76% 3.14% 59.44% -1.25% 60.69% 7.47% 3.90% 4.31% 3.18% 1.35% 0.41% 1.37% 0.39% 0.63%

9.31% 0.74% 9.06% 7.88% 8.38% 12.41x 85.76% 4.05% 3.62% 61.49% -1.04% 72.93% 7.88% 0.00% 2.62% 3.09% 3.84% 1.66% 0.48% 1.70% 1.42% 0.43%

9.37% 0.77% 9.10% 7.88% 8.46% 12.12x 85.13% 3.95% 3.44% 61.15% -1.04% 72.92% 7.88% 2.62% 2.98% 3.84% 1.66% 0.48% 1.70% 1.42% 0.45%

13.68% 1.12% 8.27% 6.54% 13.54% 11.88x 88.31% 3.71% 3.31% 59.51% -1.22% 61.39% 6.54% 2.90% 3.21% 3.16% 1.39% 0.39% 1.31% 0.48% 0.61%

20.28% 1.44% 9.00% 6.77% 16.00% 14.51x 90.38% 6.41% 4.99% 63.66% -3.47% 16.79% 6.77% 2.45% 2.69% 4.17% 2.38% 0.62% 1.17% 0.15% 0.79%

13.06% 1.14% 8.79% 7.08% 12.97% 11.45x 91.57% 4.74% 3.89% 63.64% -2.49% 25.89% 7.08% 3.51% 3.78% 3.36% 1.77% 0.52% 1.06% 0.21% 0.57%

10.98% 0.81% 8.29% 7.13% 9.80% 13.96x 90.36% 5.44% 4.02% 76.92% -3.65% 23.29% 7.13% 0.00% 2.11% 2.26% 4.76% 2.74% 0.75% 1.27% 0.26% 0.35%

11.04% 0.82% 8.30% 7.13% 9.88% 13.72x 89.65% 5.59% 4.27% 76.90% -3.65% 23.32% 7.13% 2.11% 2.32% 4.76% 2.74% 0.75% 1.27% 0.26% 0.35%

11.81% 1.07% 8.24% 6.69% 12.99% 11.11x 91.52% 4.49% 3.75% 65.35% -2.39% 28.01% 6.69% 3.14% 3.39% 3.32% 1.77% 0.50% 1.04% 0.23% 0.48% 82

Interest expense
PNC BANK, NATIONAL ASSOCIATION UBPR Dec-00 Dec-01 Pg # UBPR PEER1 CALC UBPR PEER1 COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7

Profitability Ratios
Interest Expense: Composition, Rate and Volume Effects Rate: Avg, interest cost of liabilities 3 4.41% Memo: Interest expense / Earning assets 1 3.94% Volume: All Interest bearing debt (avg.) / Avg. TA 1 79.02% Mix and Cost of Individual Liabilities:* Total deposits (avg.) / Avg. TA: 6 67.28% Cost (rate): Int bearing Total deposits 3 4.23% Core deposits (avg.) / Avg. TA 6 58.74% Trans (NOW & ATS) Accounts (avg.) / Avg. TA 6 1.77% Cost (rate): Trans (NOW & ATS) Accts* 3 2.98% Money mkt deposit accounts (avg.) / Avg. TA 6 28.31% Other savings deposits (avg.) / Avg. TA 6 2.97% Cost (rate): Other savings deposits* 3 1.62% Time deposits under $100M (avg.) / Avg. TA 6 15.69% Cost (rate): All other time dep. (CD < $100M)* 3 5.82% Memo: S.T. non core funding (avg.) / Avg. TA 6 17.48% Memo: Volatile liabilities (avg.) / Avg. TA calc 18.66% Large certificates of dep (inc. brokered) (avg.) / Avg. TA4.85% 6 Cost (rate): CD's over $100M 3 6.30% Deposits held in foreign offices (avg.) / Avg. TA 6 3.69% Cost (rate): Deposits held in foreign offices 3 6.31% Fed funds purchased & resale (avg.)/ Avg. TA 6 2.28% Cost (rate): Fed funds purchased & resale 3 7.37% Memo: All brokered deposits (avg.) / Avg. TA 6 0.60% All common and preferred capital (avg.) / Avg. TA 6 7.92% 4.94% 3.52% 4.31% 3.09% 79.45% 75.34% 66.58% 4.41% 49.81% 1.28% 2.32% 16.97% 7.07% 2.06% 12.38% 5.79% 28.81% 30.00% 8.38% 5.92% 6.39% 4.72% 8.61% 6.17% 2.29% 8.00% 73.44% 3.08% 65.14% 2.11% #N/A 33.50% 2.98% #N/A 14.94% #N/A 12.07% 13.42% 4.56% 5.27% 3.74% 2.29% 1.72% 9.18% 1.40% 8.06% 3.49% 3.65% 4.11% 4.63% 3.67% 3.64% 4.13% 2.98% 3.21% 2.69% 3.78% 2.26% 2.32% 3.39% 75.29% 79.81% 59.78% 75.83% 55.52% 57.90% 76.04% 70.93% 3.18% 63.74% 1.96% 2.17% 33.11% 2.95% 2.08% 14.77% 5.21% 11.02% 12.27% 4.37% 5.46% 2.83% 4.13% 2.28% 4.19% 1.41% 8.25% 66.78% 3.30% 51.70% 1.36% 1.96% 20.14% 7.53% 2.00% 11.46% 5.31% 26.65% 26.21% 7.66% 4.94% 5.09% 2.58% 8.93% 3.80% 2.12% 8.42% 91.91% 4.08% 81.11% 6.43% 1.42% 20.29% 4.26% 2.57% 16.86% 5.34% 10.25% 11.53% 10.79% 5.55% 0.00% 0.00% 0.74% 5.80% 0.00% 6.89% 85.51% 4.54% 73.32% 9.78% 2.11% 12.44% 8.43% 2.54% 25.15% 5.63% 13.37% 14.06% 11.56% 5.81% 0.00% 0.00% 1.47% 4.40% 0.13% 8.73% 91.90% 3.67% 81.59% 9.19% #N/A 15.48% 4.07% #N/A 15.79% #N/A 9.90% 10.99% 10.31% 5.28% 0.00% #N/A 0.68% 3.80% 0.00% 7.17% 91.65% 3.64% 80.85% 7.16% 0.90% 18.01% 4.21% 2.40% 16.27% 5.60% 10.30% 11.49% 10.80% 5.09% 0.00% 0.00% 0.69% 3.80% 0.00% 7.29% 85.39% 4.09% 72.12% 9.59% 1.65% 12.55% 8.07% 2.74% 24.90% 5.44% 13.59% 14.48% 12.62% 5.38% 0.00% 0.00% 1.20% 83 2.53% 0.23% 9.00%

Interest income
UBPR Pg #

PNC BANK, NATIONAL ASSOCIATION Dec-00 Dec-01 UBPR PEER1 CALC UBPR PEER1

COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7

Profitability Ratios
Interest Income: Composition, Rate and Volume Effects Rate: Avg, yield on Avg, TA Memo: Avg. yield on earn. assets (rate) 1 7.52% Volume: Earn assets (avg.) / Avg, TA 6 86.95% Non earning assets (avg.) / Avg. TA 13.05% Mix and Cost of Individual Assets:* Total Loans (Gross loans less unearned inc.) (avg.) / Avg. 6 76.87% Yield (rate): Total Loans & Leases (te) 3 7.90% Total Investments (avg.) / Avg. TA: 6-calc 11.04% Yield (rate): Total investment securities (TE): 4.98% 3 Yield (rate): Total investment securities (Book): 3 4.97% Interest bearing bank balances (avg.) / 6 Avg. TA0.18% Yield (rate): Interest bearing bank balances 7.02% 3 Fed funds sold & resales (avg.) / Avg. TA 6 1.01% Yield (rate): Fed funds sold & resales 3 6.30% Trading account assets (avg.) / Avg. TA 6 0.33% Held-to Maturity Securities (avg.) / Avg. 6 TA 0.00% Available-for-Sale-Securities (avg.) / Avg. TA 9.52% 6

8.08% 89.02% 10.71% TA 64.18% 8.63% 21.38% 6.72% 6.57% 0.84% 5.95% 2.34% 6.33% 1.09% 1.12% 15.99%

7.14% 85.76% 14.24% 71.87% 7.29% 14.89% 6.58% 6.58% 0.26% 3.35% 0.41% 4.88% 0.52% 0.00% 13.70%

6.93% 6.96% 85.13% 88.31% 14.88% 11.42% 69.69% 63.43% 7.29% 7.44% 16.46% 21.89% 5.55% 6.28% 5.54% 6.13% 0.20% 0.82% 5.33% 4.87% 0.58% 3.43% 3.86% 3.82% 0.59% 1.18% 0.00% 0.71% 15.09% 15.75%

9.10% 8.52% 7.69% 90.38% 91.57% 90.36% 9.62% 8.15% 9.64% 61.49% 65.48% 65.83% 10.42% 9.37% 9.06% 29.42% 23.93% 25.06% 6.20% 6.47% 4.49% 6.13% 6.12% 4.42% 0.00% 0.33% 0.17% 0.00% 3.99% #N/A 12.24% 2.61% 6.46% 6.22% 6.15% 4.62% 0.00% 0.00% 0.00% 9.22% 3.60% 5.75% 7.96% 17.39% 12.67%

7.91% 7.88% 89.65% 91.52% 10.34% 8.19% 65.47% 65.94% 9.06% 8.71% 24.71% 23.45% 5.13% 6.17% 5.05% 5.80% 0.14% 0.58% 4.44% 2.93% 7.79% 3.85% 3.99% 3.50% 0.00% 0.00% 5.28% 2.71% 11.50% 16.31%

84

Fundamental risks
• Credit risk
• Liquidity risk • Market risk • Operational risk • Capital or solvency risk

• Legal risk
• Reputational risk
85

Areas of Concentration
• Credit Risk Loans and Secs quality & type • Liquidity Risk S/T to L/T composition of Assets and Liabs • Market Risk Int Rate sensitivity of Assets & Liabs (GAP) • Operating Risk Employee usage and efficiency (A/#Emps, EmpExp/#Emps) • Legal Risk Lawsuits, Contract Exposure, negative publicity • Capital/Solvency Risk Eq Capital used and avail vs. Risk categories of usage
86

Credit risk
• The potential variation in net income and market value of equity resulting from nonpayment or delayed payment The Probability that Some of the Bank’s Assets Will Decline in Value and Perhaps Become Worthless Three Question need to be addressed:
1. What has been the loss experience?

•

•

2. What amount of losses do we expect?
3. How prepared is the bank?
87

Credit Risk Measures
• Nonperforming Loans/Total Loans • Net Charge-Offs/Total Loans • Provision for Loan Losses/Total Loans

• Provision for Loan Losses/Equity Capital
• Allowance for Loan Losses/Total Loans

• Allowance for Loan Losses/Equity Capital
• Total Loans/Total Deposits
88

Credit ratios to consider
• How prepared are we?
? Loss Provision to: average assets and avg total LN&LS
? LN&LS Allowance to: net losses and total LN&LS ? Earnings coverage of net loss

89

Credit risk ratios : PNC and Community National
UBPR

RISK RATIOS
Credit Risk Gross loss / Avg. Tot LN&LS Net loss / Avg. Tot LN&LS Recoveries / Avg. Tot LN&LS Recoveries to prior credit loss 90 days past due / EOP LN&LS Total Nonaccrual LN&LS / EOP LN&LS Total Noncurrent / EOP LN&LS LN&LS Allowance to total LN&LS LN&LS Allowance / Net losses Earn Coverage of net losses Net Loan and lease growth rate

Pg #

PNC BANK, NATIONAL ASSOCIATION Dec-00 Dec-01 UBPR PEER1 CALC UBPR PEER1 0.35% 0.26% 0.09% 23.51% 0.25% 0.71% 0.96% 1.30% 4.90x 12.32x -5.23% 0.56% 0.43% 0.12% 30.12% 0.19% 0.74% 0.99% 2.19% 2.11% 0.08% 19.8% 0.00% 0.42% 0.63% 1.05% 2.19% 0.76% 2.11% 0.63% 0.08% 0.12% 19.78% 26.90% 0.42% 0.63% 1.05% 1.49% 0.64x 1.62x -19.18% 0.23% 0.97% 1.31%

COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7 0.33% 0.22% 0.31% 0.16% 0.02% 0.05% 6.33% 31.64% 0.32% 0.05% 0.38% 0.13% 0.40% 0.59% 0.27% 0.24% 0.02% 8.5% 0.00% 2.49% 0.42% 2.91% 0.27% 0.27% 0.24% 0.21% 0.02% 0.05% 8.52% 33.01% 2.49% 0.42% 2.91% 0.16% 0.49% 0.71%

7 7 7 7 8A 8A 8A 7 7 7 1

1.48% 1.49% 4.60x 0.64x 11.46x 1.60x 26.93% -19.18% 0.00%

1.62% 0.79% 1.23% 0.82% 0.82% 1.24% 3.13x 276.00% 15.34x 3.71x 371.00% 12.71x 6.93x 1193.0% 33.17x 8.78x 883.00% 27.11x 8.39% 17.48% 16.13% 15.18% 15.18% 12.18% 0.00%

90

Liquidity risk
• The variation in net income and market value of equity caused by a bank's difficulty in obtaining cash at a reasonable cost from either the sale of assets or new borrowings Probability the Bank Will Not Have Sufficient Cash and Borrowing Capacity to Meet Deposit Withdrawals and Other Cash Needs Banks can acquire liquidity in two distinct ways:
1. By liquidation of assets.
• • Composition of investments Maturity of investments Core deposits Volatile deposits
91

•

•

2.

By borrowing.
• •

Liquidity Risk Measures
• Purchased Funds/Total Assets • Net Loans/Total Assets

• Cash and Due from Banks/Total Assets
• Cash and Government Securities/Total Assets

92

Liquidity risk ratios : PNC and Community National
PNC BANK, NATIONAL ASSOCIATION Dec-00 Dec-01 UBPR PEER1 CALC UBPR PEER1 COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7

UBPR

RISK RATIOS

Pg #

Liquidity Risk %Total (EOP) Assets (except where noted) Total equity 11 8.31% 8.03% 7.81% Core deposits 10 63.61% 49.59% 65.14% S.T Non-core funding 10 14.37% 28.27% 58.15% Avg. Volatile liabilities (% Avg, TA) 6 calc 18.66% 30.00% 13.41% Net loans & leases / Total Deposits 10 107.19% 96.26% 85.91% Net loans & leases / Core Deposits 10 122.68% 137.94% 95.43% Avg. Available for sale securities / Avg. TA 6 9.52% 15.99% 13.70% Short-term investments 10 0.66% 5.81% #N/A Pledged securities 10 74.50% 55.99% #N/A 0.00%

7.81% 66.70% 9.74% 12.27% 85.91% 95.43% 15.09% 0.74% 45.01%

8.36% 52.73% 25.13% 26.21% 93.01% 123.0% 15.75% 6.74% 52.38%

7.30% 81.21% 9.99% 11.53% 70.76% 79.90% 7.96% 12.30% 50.66%

8.86% 72.77% 13.45% 14.06% 76.78% 90.91% 17.39% 6.72% 41.89%

7.05% 81.59% 82.85% 11.00% 71.32% 80.17% 12.67% #N/A #N/A 0.00%

7.05% 81.92% 9.82% 11.49% 71.32% 80.17% 11.50% 8.50% 34.27%

8.92% 72.29% 13.31% 14.48% 77.33% 92.11% 16.31% 6.44% 38.82%

93

Market risk
• The risk to a financial institution’s condition resulting from adverse movements in market rates or prices • Probability of the Market Value of the Bank’s Investment Portfolio Declining in Value Due to a Rise in Interest Rates • Market risk arises from changes in:
? Interest rates

? Foreign exchange rates
? Equity and security prices.
94

Market Risk Measures
• Book-Value of Assets/ Market Value of Assets • Book-Value of Equity/ Market Value of Equity • Book-Value of Bonds/Market Value of Bonds

• Market Value of Preferred Stock and Common Stock
95

Interest Rate Risk
The Danger that Shifting Interest Rates May Adversely Affect a Bank’s Net Income, the Value of its Assets or Equity

96

Interest rate risk
• The potential variability in a bank's net interest income and market value of equity due to changes in the level of market interest rates

Example: Rs. 100,000 Car loan 4 year Car loan at 8.5% 1 year CD at 4.5% Spread 4.0% But for How long? • Funding GAP GAP = RSA - RSL, where RSA = amount of assets which will mature or reprice in a given period of time. • In this example: GAP3m = 0.00 - 100,000 = - 100,000 This is a negative GAP.

97

Interest Rate Risk Measures
• Interest Sensitive Assets/Interest Sensitive Liabilities • Uninsured Deposits/Total Deposits

98

Earnings Risk
The Risk to the Bank’s Bottom Line – Its Net Income After All Expenses

99

Earnings Risk Measures
• Standard Deviation of Net Income
• Standard Deviation of ROE

• Standard Deviation of ROA

100

Foreign exchange risk
• The risk to a financial institution’s condition resulting from adverse movements in foreign exchange rates • Foreign exchange risk arises from changes in foreign exchange rates that affect the values of assets, liabilities, and off-balance sheet activities denominated in currencies different from the bank’s domestic (home) currency. • This risk is often found in off-balance sheet loan commitments and guarantees denominated in foreign currencies; foreign currency translation risk.
101

Equity and security price risk
• Change in market prices, interest rates and foreign exchange rates affect the market values of equities, fixed income securities, foreign currency holdings, and associated derivative and other off-balance sheet contracts • Large banks must conduct value-at-risk analysis to assess the risk of loss with their trading account portfolios.
102

Operational risk
• Measures the cost efficiency of the bank's activities; i.e., expense control or productivity • Typical ratios focus on:
? total assets per employee ? total personnel expense per employee ? noninterest expense ratio

• There is no meaningful way to estimate the likelihood of fraud or other contingencies from published data

• A bank’s operating risk is closely related to its operating policies and processes and whether is has adequate controls

103

Operational risk ratios: PNC and Community National

UBPR

RISK RATIOS

Pg #

PNC BANK, NATIONAL ASSOCIATION Dec-00 Dec-01 UBPR PEER1 CALC UBPR PEER1 0.00% 0.00% 3,840x 59.40x 57.17% 35.00% 0.70% 4,780x 3,923x 55.47x 66.14x 59.44% 61.49% 0.00% #N/A 1.17% 1.04% 3,920x 4,730x 66.14x 58.28x 61.15% 59.51% 35.00% 0.00% 1.04% 1.15%

COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7 0.00% 0.00% 2,250x 2,630x 2,404x 50.82x 41.82x 59.88x 63.66% 63.64% 76.92% 34.00% 0.00% #N/A 3.47% 2.45% 3.65% 2,400x 2,720x 59.88x 43.83x 76.90% 65.35% 34.00% 0.00% 3.65% 2.35%

Operational Risk Total Assets / Number of employees 3 Personnel expense / number of employees 3 Efficiency ratio 1 calc Marginal tax rate 3 Overhead less noninterest income / Avg TA 3

104

Capital risk
• Closely tied to asset quality and a bank's overall risk profile • The more risk taken, the greater is the amount of capital required. • Appropriate risk measures include all the risk measures discussed earlier as well as ratios measuring the ratio of:
? tier 1 capital and total risk based capital to risk weighted assets, ? equity capital to total assets, ? dividend payout, and growth rate in tier 1 capital.
105

Capital Risk
Probability of the Value of the Bank’s Assets Declining Below the Level of its Total Liabilities. The Probability of the Bank’s Long Run Survival

106

Capital Risk Measures
• Stock Price/Earnings Per Share
• Equity Capital/Total Assets

• Purchased Funds/Total Liabilities
• Equity Capital/Risk Assets

107

Definitions of capital
• Tier 1 capital is:
? total common equity capital plus noncumulative preferred stock, plus minority interest in unconsolidated subsidiaries, less ineligible intangibles.

• Risk weighted assets are:
? the total of risk adjusted assets where the risk weights are based on four risk classes of assets.

• Importantly, a bank's dividend policy affects its capital risk by influencing retained earnings.
108

Capital risk ratios : PNC and Community National
PNC BANK, NATIONAL ASSOCIATION Dec-00 Dec-01 UBPR PEER1 CALC UBPR PEER1 0.00% 9.34% 12.15% 8.77% 8.31% 64.53% -5.23% 2.10% 8.49% 8.73% 8.69% 9.20% 11.21% 12.24% 12.19% 12.03% 7.04% 7.55% 7.65% 7.12% 8.03% 7.81% 7.81% 8.36% 64.59% 222.58% 211.54% 68.90% 32.87% -6.92% -6.92% 19.03% 4.78% -6.01% -6.01% 3.39% 0.00% COMMUNITY NATIONAL BANK Dec-00 Dec-01 UBPR PEER7 CALC UBPR PEER7 0.00% 11.80% 12.64% 7.31% 7.30% 24.47% 17.68% 3.33% 12.38% 10.73% 13.48% 11.58% 8.71% 6.91% 8.86% 7.05% 34.72% 31.17% 15.95% 9.78% 2.72% -4.02% 0.00% 10.73% 11.58% 7.02% 7.05% 30.85% 9.78% -4.02% 12.37% 13.48% 8.65% 8.92% 33.65% 11.09% -0.32%

UBPR

RISK RATIOS
Capital Risk Tier 1 Capital / Risk-weighted assets Total RBC / Risk weighted Assets Tier 1 Leverage Capital / Total Assets Equity Capital / Total Assets Dividend Payout Growth rate in total equity capital Equity growth less asset growth

Pg #

11A 11A 11A 11 11 11 11

109

Trading Risk
• If the price at which an instrument is purchased differs from the price at which it is sold, the risk is that the instrument may go down in value rather than up. • This type of risk is called trading risk

110

Legal risk
• The potential that unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise negatively affect the operations or condition of banking organization • Legal risk include:
? Compliance risks ? Strategic risks ? General liability issues
111

Reputational risk
• Reputational risk is the potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions.

112

Other Risks
• Foreign exchange risk comes from holding assets denominated in one currency and liabilities denominated in another • Sovereign risk arises from the fact that some foreign borrowers may not repay their loans, not because they are unwilling to, but because their government prohibits them from doing so.
113

Other Forms of Risk in Banking
• Inflation Risk • Currency or Exchange Rate Risk

• Political Risk
• Crime Risk

114

12-115

CAMELS Ratings
• C - Capital Adequacy

• A - Asset Quality
• M - Mgmt Quality, Mgmt & BoD ability and
systems (policies & procedures)

• E - Earnings, not just quantity, but
quality, sustainability

• L - Liquidity • S - Sensitivity to market fluctuations, Int
rates, FX, Commodity prices (thru loans)
116

The “Evaluation 8”
Earnings and Profitability • Net interest income/average assets • Provision for loan loss/average assets • Net realized securities gains and losses/average assets • Net income/average assets

Asset Quality
• Noncurrent loans/total loans • Allowance for loan and lease losses (ALLL)/noncurrent loans Capitalization • Cash dividends/net income • Tier 1 capital/average assets
117

The “Evaluation 8”
Selected financial items used in ratio calculations • Average assets (balance sheet) • Average loans (balance sheet) • Net loan losses (income statement) • Noncurrent loans (balance sheet) • Tier 1 capital (balance sheet) • Average assets for the leverage ratio (balance sheet) • Problem assets (balance sheet)

118

The “Evaluation 8”
Tier 1 Capital is adjusted equity capital + minority interest in consolidated subsidiaries + noncumulative perpetual

preferred-goodwill – other identified intangibles – net
unrealized loss in market equity securities – excess Purchased Mortgage Sourcing Rights (PMSRs) and PCCRs +

grandfathered intangibles.
Average assets used in the Tier 1 Capital ratio is average assets less all intangibles and net unrealized loss on

market equity securities.
Problem assets = noncurrent loans + restructured loans + other real estate owned.
119

The “Evaluation 8”
•

•
•

• •

•

Basic Guidelines Be aware of Rupee changes in the ratio’s numerator and denominator. Ratio changes can occasionally give a misleading performance picture. Let’s say a bank’s noncurrent loans to total loans ratio shows a decline, indicating improved asset quality. However, examining the numbers used to generate the ratio might give you a different picture of asset quality. For example, assume the bank’s loan portfolio grew rapidly. The large loan growth may disguise the fact that noncurrent loans are rising as well, but just not as fast, causing the ratio to fall. Analysis of ratio values alone would not have revealed this problem. 120

The “Evaluation 8”
• Be aware of levels and trends. • Levels tell you where your bank stands at a given point in time and can be used to judge matters pertaining to adequacy. • For instance, the level of your bank’s leverage ratio can be compared to capital guidelines to help determine capital adequacy. • Trends tell you about direction and help you determine where your bank’s performance is headed based on past performance. • It can take several years worth of information to determine a trend.
121

The “Evaluation 8”
• Reconcile differences in the time periods reported. • Because income statement amount occur for a period of time, it is reasonable to expect that values on a mid-year income statement should be less than those for a full year. • When comparing income statement values, you want the time periods to be the same. To do this, annualize data to correct time differences. • Reduce possible distortions in ratio calculations from statement time reference differences by following some of these basic guidelines:
? When all ratio components are taken from the same type of statement such as balance sheets or income statements, simply form the ratio and divide. ? If the ratio components come from a mix of balance sheet and income statements, use average values for the balance sheet components to get a more accurate ratio result. ? One of the Capital Adequacy ratios, Tier 1 Capital / Average Assets, is an exception to these rules. This is because it is a regulatory capital measure – Tier 1 Capital from the Balance Sheet divided by average assets, another balance sheet item.
122

Value of the Bank’s Stock

E(D t) P0 ? ? t t ? 0 (1 ? r)
123

?

Value of a Bank’s Stock Rises When:
• Expected Dividends Increase
• Risk of the Bank Falls • Combination of Expected Dividend Increase and Risk Decline

124

Value of Bank’s Stock if Earnings Growth is Constant

D1 P0 ? r-g

125

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY 12/31/2001 AVERAGE ASSETS ($000) 63,486,660 NET INCOME ($000) 491,731 NUMBER OF BANKS IN PEER GROUP 69 EARNINGS AND PROFITABILITY PERCENT OF AVERAGE ASSETS: INTEREST INCOME (TE) - INTEREST EXPENSE NET INTEREST INCOME (TE) + NONINTEREST INCOME - NONINTEREST EXPENSE - PROVISION: LOAN&LEASE LOSSES = PRETAX OPERATING INCOME (TE) + REALIZED GAINS/LOSSES SEC = PRETAX NET OPERATING INC (TE) NET OPERATING INCOME ADJUSTED NET OPERATING INCOME NET INCOME ADJUSTED SUB S NET INCOME MARGIN ANALYSIS: AVG EARNING ASSETS TO AVG ASSETS AVG INT-BEARING FUNDS TO AVG AST INT INC (TE) TO AVG EARN ASSETS INT EXPENSE TO AVG EARN ASSETS NET INT INC-TE TO AVG EARN ASSET LOAN & LEASE ANALYSIS NET LOSS TO AVERAGE TOTAL LN&LS EARNINGS COVERAGE OF NET LOSS(X) LN&LS ALLOWANCE TO NET LOSSES(X) LN&LS ALLOWANCE TO TOTAL LN&LS NON-CUR LN&LS TO GROSS LN&LS LIQUIDITY NET NON CORE FUND DEPENDENCE NET LOANS & LEASES TO ASSETS CAPITALIZATION TIER ONE LEVERAGE CAPITAL CASH DIVIDENDS TO NET INCOME RETAIN EARNS TO AVG TOTAL EQUITY RESTR+NONAC+RE ACQ TO EQCAP+ALLL BANK PEER1 6.10 2.62 3.47 2.80 3.84 1.42 1.02 0.20 1.21 0.78 0.71 0.77 87.99 75.29 6.93 2.98 3.95 2.11 1.62 0.64 1.49 1.05 20.10 63.65 7.65 213.53 -10.64 4.80 6.27 2.90 3.33 1.94 3.16 0.48 1.64 0.06 1.72 1.12 1.21 1.12 1.12 90.15 79.81 6.96 3.21 3.71 0.63 6.93 3.13 1.62 1.31 35.24 61.01 7.12 69.27 3.50 7.06

PNC BANK, NATIONAL ASSOCIATION SUMMARY RATIOS 12/31/2000 66,975,064 1,007,226 70 PCT 35 28 47 81 77 94 25 88 27 27 18 27 25 20 38 32 55 98 7 5 51 45 20 50 74 97 1 35 BANK PEER1 6.65 3.49 3.16 2.56 3.27 0.20 2.26 0.03 2.29 1.50 1.50 1.50 88.42 79.02 7.52 3.94 3.58 0.26 12.32 4.90 1.30 0.96 24.15 78.03 8.77 64.53 6.72 7.32 3.90 3.40 1.93 3.18 0.39 1.78 -0.06 1.70 1.09 1.21 1.09 1.09 90.80 79.45 8.08 4.31 3.76 0.43 11.46 4.60 1.48 0.99 40.16 64.01 7.04 66.60 3.34 PCT 21 22 29 77 56 35 77 91 81 83 74 83 26 42 21 28 35 32 67 67 38 54 14 90 92 52 71

PITTSBURGH, PA 12/31/1999 69,105,444 1,057,038 67 PCT 35 57 26 76 70 45 82 5 79 80 82 79 38 64 36 58 26 38 67 54 27 60 42 88 73 83 17 12/31/1998 69,511,004 1,008,240 64 BANK PEER1 7.18 3.60 3.57 3.04 4.19 0.31 2.11 0.17 2.28 1.45 1.13 1.45 90.75 79.00 7.91 3.97 3.94 0.79 3.76 1.62 1.25 0.95 36.42 79.69 7.72 70.32 4.92 7.04 3.47 3.59 2.14 3.47 0.28 1.94 0.04 1.99 1.27 1.31 1.27 1.27 90.70 76.06 7.79 3.83 3.97 0.42 11.02 4.92 1.52 0.77 36.79 62.99 6.92 62.32 6.03

PAGE 01 4/1/02 5:31:48 PM 12/31/1997 58,915,553 900,886 58 BANK PEER1 8.09 3.98 4.12 2.33 3.98 0.11 2.36 0.07 2.42 1.53 1.19 1.53 90.42 78.26 8.95 4.40 4.55 0.59 5.34 3.51 1.76 1.03 37.04 75.42 8.03 75.48 4.44 7.17 3.45 3.75 2.06 3.52 0.27 2.04 0.03 2.07 1.33 1.32 1.33 1.33 90.73 75.17 7.92 3.80 4.14 0.42 13.98 5.94 1.65 0.78 33.62 61.74 6.93 71.09 5.20

BANK PEER1 6.61 3.27 3.35 2.92 3.51 0.23 2.52 -0.17 2.35 1.53 1.53 1.53 89.91 79.38 7.36 3.63 3.72 0.29 12.15 4.16 1.22 0.83 35.98 76.30 7.65 102.74 -0.50 6.75 3.21 3.53 2.25 3.36 0.26 2.09 0.00 2.08 1.32 1.33 1.32 1.32 90.61 77.33 7.46 3.55 3.90 0.42 11.19 4.27 1.44 0.76 40.47 63.77 7.06 66.43 5.34

SUMMARY RATIOS

Page 01

GROWTH RATES ASSETS -0.91 14.33 20 -7.33 26.22 8 -4.27 TIER ONE CAPITAL -12.46 15.18 5 6.02 25.72 30 -6.82 NET LOANS & LEASES -19.18 8.39 8 -5.23 26.93 12 -8.35 SHORT TERM INVESTMENTS 11.84 78.80 44 -41.42 53.14 19 8.03 SHORT TERM NON CORE FUNDING -32.83 6.17 20 -41.28 22.83 5 8.04 * ONE OR MORE MERGERS, CONSOLIDATIONS OR PURCHASES HAVE OCCURRED DURING THE PERIOD. 12/31/01

13.97 17.65 12.60 26.16 35.58

14 8 8 52 29

2.18 4.23 7.97 -49.54 -24.24

30.19 29.12 30.77 43.67 39.52

21.69 509.13 24.98 417.11 33.84 436.60 -42.13 85.86 22.82 1,771.78

126

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY

PNC BANK, NATIONAL ASSOCIATION INCOME STATEMENT - REVENUE AND EXPENSES ($000) 12/31/2001 2,992,253 258,790 26,649 13,394 3,264,437 65,970 446,662 634 54,082 1,263 567,348 5,447 12,664 1,467 19,998 3,871,362 53,928 151,082 993,952 99,507 292,561 NA 75,145 1,666,175 2,205,187 1,776,499 3,981,686 2,435,920 898,743 647,023 0 123,985 771,008 260,608 14,029 0 274,637 496,371 -4,640 491,731 1,050,000 -558,269 0 12/31/2000 3,845,374 208,494 31,944 15,701 4,069,569 NA NA 791 NA 1,611 330,812 8,137 44,290 2,374 NA 4,455,183 111,622 211,127 1,286,558 168,549 473,858 NA 84,270 2,335,984 2,119,199 1,717,828 3,837,027 2,188,675 133,000 1,515,352 0 19,561 1,534,913 511,194 16,493 0 527,687 1,007,226 0 1,007,226 650,000 357,226 0 12/31/1999 3,931,743 160,760 34,436 17,111 4,109,614 NA NA 1,544 NA 3,109 418,364 5,238 34,006 2,729 NA 4,569,952 68,205 194,714 1,023,807 137,612 760,033 NA 73,313 2,257,684 2,312,268 2,014,857 4,327,125 2,427,447 156,640 1,743,038 0 -117,962 1,625,076 549,382 18,656 0 568,038 1,057,038 0 1,057,038 1,086,000 -28,962 0 12/31/1998 4,446,579 121,608 39,891 20,197 4,588,384 NA NA 3,359 NA 6,635 368,652 5,830 23,585 2,445 NA 4,988,896 65,672 238,544 1,051,049 191,768 897,833 NA 60,659 2,505,525 2,483,371 2,114,359 4,597,730 2,911,717 217,961 1,468,052 0 119,057 1,587,109 555,313 23,556 0 578,869 1,008,240 0 1,008,240 709,000 299,240 0

PITTSBURGH, PA

PAGE 02 4/1/02 5:31:51 PM PERCENT CHANGE1 YEAR -22.19 24.12 -16.58 -19.78

INTEREST AND FEES ON LOANS INCOME FROM LEASE FINANCING TAX-EXEMPT ESTIMATED TAX BENEFIT INCOME ON LOANS & LEASES (TE) U S TREAS & AGENCY (EXCL MBS) MORTGAGE BACKED SECURITIES ESTIMATED TAX BENEFIT ALL OTHER SECURITIES TAX EXEMPT SECURITIES INCOME INVESTMT INTEREST INCOME (TE)

12/31/1997 4,139,465 89,718 35,045 18,038 4,247,221 NA NA 4,437 NA 8,621 478,233 11,930 30,884 416 NA 4,768,684 94,506 238,509 1,058,108 149,947 756,283 NA 46,190 2,343,543 2,425,141 1,371,554 3,796,695 2,343,936 65,000 1,387,759 0 40,817 1,428,576 505,215 22,475 0 527,690 900,886 0 900,886 680,025 220,861 0

-21.60 71.50 -33.06 -71.41 -38.21 -13.10 -51.69 -28.44 -22.74 -40.96 -38.26 NA -10.83 -28.67 4.06 3.42 3.77 11.30 575.75 -57.30 NA 533.84 -49.77

INCOME STATEMENT - REVENUES AND EXPENSES ($000) Page 02

INTEREST ON DUE FROM BANKS INT ON FED FUNDS SOLD & RESALES TRADING ACCOUNT INCOME OTHER INTEREST INCOME TOTAL INTEREST INCOME (TE) INT ON DEPOSITS IN FOREIGN OFF INTEREST ON TIME DEP OVER $100M INTEREST ON ALL OTHER DEPOSITS INT ON FED FUNDS PURCH & REPOS INT TRAD LIAB & OTH BORROWINGS INT ON MORTGAGES & LEASES INT ON SUB NOTES & DEBENTURES TOTAL INTEREST EXPENSE NET INTEREST INCOME (TE) NONINTEREST INCOME ADJUSTED OPERATING INCOME (TE) NON-INTEREST EXPENSE PROVISION: LOAN & LEASE LOSSES PRETAX OPERATING INCOME (TE) REALIZED G/L HLD-TO-MATURITY SEC REALIZED G/L AVAIL-FOR SALE SEC PRETAX NET OPERATING INC (TE) APPLICABLE INCOME TAXES CURRENT TAX EQUIV ADJUSTMENT OTHER TAX EQUIV ADJUSTMENTS NET OPERATING INCOME NET OPERATING INCOME NET EXTRAORDINARY ITEMS NET INCOME CASH DIVIDENDS DECLARED RETAINED EARNINGS MEMO: NET INTERNATIONAL INCOME

-50.72 -51.18 61.54 -256.28 NA

127

Page 03

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY

PNC BANK, NATIONAL ASSOCIATION PITTSBURGH, PA NONINTEREST INCOME AND EXPENSES ($000) AND YIELDS 12/31/2001 12/31/2000 12/31/1999 12/31/1998 365,434 355,931 79,504 NA 975,630 1,776,499 1,055,515 303,353 1,077,052 2,435,920 683 8 90,484 15,958 771,456 335,720 34,225 NA 576,427 1,717,828 978,446 279,144 931,085 2,188,675 698 8 89,996 16,472 PCT 72 72 77 77 38 67 44 BANK 1.46 0.42 1.39 3.27 0.70 59.40 3.84 35.00 7.90 7.89 7.36 8.49 9.15 NA 8.76 8.70 4.98 4.97 NA NA NA 7.02 6.30 4.23 2.98 1.62 6.30 5.82 6.31 7.37 4.14 7.31 4.41 PEER1 1.35 0.41 1.37 3.18 1.17 55.47 4.78 PCT 61 54 60 56 22 69 45 634,045 323,231 -37,707 NA 1,095,288 2,014,857 1,086,137 401,473 939,837 2,427,447 687 8 99,099 18,776 BANK 1.57 0.58 1.36 3.51 0.60 57.85 3.63 35.00 7.66 7.63 7.34 8.05 9.13 NA 8.60 8.37 5.59 5.57 NA NA NA 6.21 5.06 3.52 2.59 1.51 5.27 5.00 5.09 4.47 5.38 6.97 4.12 PEER1 1.47 0.43 1.41 3.36 1.15 52.86 4.30 PCT 63 82 54 70 14 69 51 636,629 307,642 83,579 NA 1,086,509 2,114,359 1,175,148 354,378 1,382,191 2,911,717 724 8 98,241 22,348 BANK 1.69 0.51 1.99 4.19 1.15 52.58 3.19 35.00 8.19 8.16 7.84 7.92 10.99 NA 8.49 10.89 5.79 5.74 NA NA NA 6.29 5.22 3.86 2.41 1.84 6.39 5.15 5.51 5.15 5.89 7.18 4.56 PEER1 1.50 0.44 1.48 3.47 1.35 50.75 3.90

PAGE 03 4/1/02 5:31:52 PM 12/31/1997 462,220 290,552 21,309 NA 597,473 1,371,554 1,004,453 327,197 1,012,286 2,343,936 751 8 92,740 21,305 BANK 1.70 0.56 1.72 3.98 1.65 47.15 3.27 35.00 9.35 9.35 9.91 8.19 10.86 NA 22.02 7.09 7.02 6.95 NA NA NA 9.48 3.57 4.55 2.57 2.02 8.79 5.97 5.71 6.31 6.01 7.97 5.08 PEER1 1.54 0.47 1.46 3.52 1.41 50.66 3.78

NONINTEREST INCOME AND EXPENSE ($000) AND YIELDS

NONINTEREST INCOME & EXPENSES FIDUCIARY ACTIVITIES DEPOSIT SERVICE CHARGES TRADING REVENUE OTHER FOREIGN TRANSACTIONS OTHER NONINTEREST INCOME NONINTEREST INCOME PERSONNEL EXPENSE OCCUPANCY EXPENSE OTHER OPER EXP(INCL INTANGIBLES) TOTAL OVERHEAD EXPENSE DOMESTIC BANKING OFFICES(#) FOREIGN BRANCHES (#) ASSETS PER DOMESTIC OFFICE NUMBER OF EQUIVALENT EMPLOYEES PERCENT OF AVERAGE ASSETS PERSONNEL EXPENSE OCCUPANCY EXPENSE OTHER OPER EXP(INCL INTANGIBLES) TOTAL OVERHEAD EXPENSE OVERHEAD LESS NONINT INC OTHER INCOME & EXPENSE RATIOS: AVG PERSONNEL EXP PER EMPL($000) ASSETS PER EMPLOYEE ($MILLION) MARGINAL TAX RATE YIELD ON OR COST OF: TOTAL LOANS & LEASES (TE) LOANS IN DOMESTIC OFFICES REAL ESTATE COMMERCIAL & INDUSTRIAL INDIVIDUAL CREDIT CARD AGRICULTURAL LOANS IN FOREIGN OFFICES TOTAL INVESTMENT SECURITIES(TE) TOTAL INVESTMENT SECURITES(BOOK) U S TREAS & AGENCY (EXCL MBS) MORTGAGE BACKED SECURITIES ALL OTHER SECURITIES INTEREST-BEARING BANK BALANCES FEDERAL FUNDS SOLD & RESALES TOTAL-INT BEARING DEPOSITS TRANSACTION ACCOUNTS OTHER SAVINGS DEPOSITS TIME DEPS OVER $100M ALL OTHER TIME DEPOSITS FOREIGN OFFICE DEPOSITS FEDERAL FUNDS PURCHASED & REPOS OTHER BORROWED MONEY SUBORD NOTES & DEBENTURES ALL INTEREST-BEARING FUNDS

BANK 1.66 0.48 1.70 3.84 1.04 66.14 3.92 35.00 7.29 7.28 7.41 7.38 7.52 0.00 7.10 8.69 5.55 5.54 4.54 6.17 3.54 5.33 3.86 3.18 2.17 2.08 5.46 5.21 4.13 4.19 4.46 6.52 3.49

PEER1 1.39 0.39 1.31 3.16 1.15 58.28 4.73

7.44 7.39 7.55 7.41 8.15 4.93 6.41 2.24 6.28 6.13 5.48 6.42 5.84 4.87 3.82 3.30 1.96 2.00 4.94 5.31 2.58 3.80 5.18 4.27 3.65

32 34 34 50 28 52 40 90 22 25 24 22 11 71 55 37 62 61 65 47 78 80 34 72 35

8.63 8.69 8.60 9.19 9.78 0.00 8.36 2.70 6.72 6.57 0.00 0.00 0.00 5.95 6.33 4.41 2.32 2.06 5.92 5.79 4.72 6.17 6.24 5.55 4.94

14 15 7 23 52 98 38 87 2 2 98 98 98 76 39 35 67 36 70 61 83 94 12 74 23

7.97 7.97 8.12 8.00 9.33 0.00 7.54 2.51 6.39 6.22 0.00 0.00 0.00 5.37 5.25 3.72 1.96 1.98 4.98 5.01 4.05 4.89 5.83 4.94 4.16

25 26 11 52 52 98 61 91 7 14 98 98 98 76 45 32 70 26 75 48 83 13 54 75 48

8.41 8.39 8.40 8.36 10.25 0.00 7.97 3.51 6.58 6.41 0.00 0.00 0.00 6.24 5.66 4.23 2.35 2.39 5.38 5.44 4.69 5.17 5.96 4.99 4.56

8.55 8.59 8.57 8.44 10.44 0.00 8.39 3.81 6.73 6.56 0.00 0.00 0.00 5.84 5.72 4.28 2.08 2.41 5.45 5.44 4.66 5.34 5.47 5.69 4.58

128

BALANCE SHEET - ASSETS, LIABILITIES AND CAPITAL ($000) Page 04

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY

PNC BANK, NATIONAL ASSOCIATION BALANCE SHEET - ASSETS, LIABILITIES AND CAPITAL ($000) 12/31/2001 12/31/2000 23,403,724 18,180,941 3,529,627 1,717 4,588,422 347,421 50,051,852 96,913 648,833 49,306,106 1,887,310 45,237 27,401 2,971,309 167,916 217,241 168,345 5,484,759 54,790,865 3,565,214 52,401 800,722 15,047 4,320 3,957,334 63,185,903 62,706,833 6,581,761 1,228,615 19,973,653 1,856,609 10,549,034 40,189,672 3,412,724 2,397,676 46,000,072 1,586,709 2,496,693 9,080,920 3,793,924 2,904,691 56,782,089 1,152,698 5,251,116 63,185,903 4 19,539 15,047 1,655,003 0 4,931,257 586,684 12/31/1999 24,775,627 19,210,571 3,949,726 4,176 4,728,638 92,920 52,761,658 90,125 643,905 52,027,628 3,327,865 32,932 27,176 3,160,079 99,152 596,424 262,316 7,505,944 59,533,572 2,825,972 51,128 753,408 20,503 3,252 4,999,476 68,187,311 67,699,026 6,566,570 1,151,582 17,691,693 2,097,495 10,212,847 37,720,187 3,179,539 3,454,618 44,354,344 2,060,884 7,520,807 15,463,542 5,759,258 1,798,842 61,494,135 1,152,161 5,541,015 68,187,311 2 18,298 20,503 5,798,088 0 6,548,052 375,282

PITTSBURGH, PA

PAGE 04 4/1/02 5:31:55 PM PERCENT CHANGE 1 QTR 1 YEAR -1.63 -7.69 -0.80 6.20 -5.56 30.56 -3.85 -12.96 -3.63 5.78 -4.99 -5.49 34.31 47.80 -15.70 -26.78 -19.61 -7.59 -36.17 2.65 123.78 -19.08 -7.10 -19.18 82.85 -58.71 -5.72 196.36 -6.10 189.44

12/31/1998 23,865,234 20,020,701 7,479,982 3,291 6,095,857 93,648 57,558,713 74,906 718,873 56,764,934 3,393,428 60,406 23,806 2,380,076 139,128 503,873 190,921 6,691,638 63,456,572 2,543,636 48,769 788,383 33,575 4,273 4,355,213 71,230,421 72,021,559 7,260,300 1,099,994 16,988,379 2,478,782 11,179,408 39,006,863 4,927,216 399,027 44,333,106 1,698,578 7,976,219 14,312,251 8,578,171 1,459,583 64,045,657 901,452 6,283,312 71,230,421 2 14,820 33,575 3,233,546 0 5,857,716 1,233,264

12/31/1997 23,276,309 16,712,125 9,411,563 7,824 4,172,625 57,743 53,638,189 124,409 939,800 52,573,980 4,589,646 120,640 26,323 2,666,837 575,024 672,568 234,086 8,885,124 61,459,104 4,032,671 55,862 816,931 47,912 3,588 3,294,333 69,710,401 66,237,413 7,941,357 936,116 14,324,132 2,560,580 12,370,598 38,132,783 3,094,653 3,144,711 44,372,147 4,116,501 9,919,397 18,890,734 3,335,785 1,401,556 63,145,386 761,088 5,803,927 69,710,401 7 277,049 47,912 2,324,102 0 7,403,446 465,587

ASSETS: REAL ESTATE LOANS COMMERCIAL LOANS INDIVIDUAL LOANS AGRICULTURAL LOANS OTHER LN&LS IN DOMESTIC OFFICES LN&LS IN FOREIGN OFFICES GROSS LOANS & LEASES LESS: UNEARNED INCOME LN&LS ALLOWANCE NET LOANS & LEASES U S TREASURY & AGENCY SECURITIES MUNICIPAL SECURITIES FOREIGN DEBT SECURITIES ALL OTHER SECURITIES INTEREST-BEARING BANK BALANCES FEDERAL FUNDS SOLD & RESALES TRADING ACCOUNT ASSETS TOTAL INVESTMENTS TOTAL EARNING ASSETS NONINT CASH & DUE FROM BANKS ACCEPTANCES PREMISES, FIX ASSTS, CAP LEASES OTHER REAL ESTATE OWNED INV IN UNCONSOLIDATED SUBS OTHER ASSETS TOTAL ASSETS AVERAGE ASSETS DURING QUARTER LIABILITIES DEMAND DEPOSITS ALL NOW & ATS ACCOUNTS MONEY MARKET DEPOSIT ACCOUNTS OTHER SAVINGS DEPOSITS TIME DEP UNDER $100M CORE DEPOSITS TIME DEP OF $100M OR MORE DEPOSITS IN FOREIGN OFFICES TOTAL DEPOSITS FEDERAL FUNDS PURCH & RESALE OTHER BORROWINGS INCL MAT < 1 YR MEMO: SHT TERM N CORE FUNDING OTHER BORROWINGS WITH MAT > 1 YR ACCEPTANCES & OTHER LIABILITIES TOTAL LIABILITIES (INCL MORTG) SUBORD NOTES AND DEBENTURES ALL COMMON & PREFERRED CAPITAL TOTAL LIBILITIES & CAPITAL MEMORANDA: OFFICER, SHAREHOLDER LOANS (#) OFFICER, SHAREHOLDER LOANS ($) NON-INVESTMENT ORE LOANS HELD FOR SALE HELD-TO-MATURITY SECURITIES AVAILABLE-FOR-SALE-SECURITIES ALL BROKERED DEPOSITS

17,136,390 14,616,251 3,261,827 1,096 4,710,235 777,443 40,503,242 51,223 602,790 39,849,229 3,451,036 18,679 25,835 8,805,746 157,670 301,986 487,251 13,248,203 53,097,432 4,156,160 46,417 800,451 9,325 6,400 4,493,595 62,609,780 62,838,680 8,024,609 1,426,841 22,173,721 1,889,720 8,243,535 41,758,426 2,320,116 2,306,590 46,385,132 582,306 1,773,503 6,099,247 4,455,233 3,372,710 56,568,884 1,153,235 4,887,661 62,609,780 4 20,933 9,325 3,900,766 0 12,301,296 1,175,114

24.09 -1.22 45.82 -41.83 -3.23 1.30 20.15 14.28 2.14 1.29 -6.06 3.67 -12.05 403.29 6.94 43.65 6.58 -19.51 -39.86 -2.50 0.01 -11.55 -3.23 -5.80 45.82 NA NA 24.68 -10.85

16.58 -0.03 -38.03 13.55 -0.91 0.21 21.92 16.13 11.01 1.78 -21.86 3.90 -32.02 -3.80 0.84 -28.97 -32.83 17.43 16.11 -0.38 0.05 -6.92 -0.91 7.13 -38.03 NA NA 149.46 100.30

129

PAGE 05

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY

PNC BANK, NATIONAL ASSOCIATION OFF BALANCE SHEET ITEMS & DERIVATIVES ANALYSIS 12/31/2001 12/31/2000 3,137,699 0 1,302,778 1,675,731 25,628,908 0 14,169,017 4,061,186 244,260 108,349 0 0 0 4,390,723 8,909,432 49,214,806 PCT 78 50 41 95 87 84 91 68 67 64 52 64 72 78 82 71 BANK PEER1 4.97 2.90 0.00 2.58 2.06 2.15 2.65 0.40 40.56 22.56 50.24 33.04 0.00 0.00 6.43 0.39 0.17 0.00 0.00 0.00 6.95 14.10 77.89 4.29 0.36 0.23 2.40 0.45 0.13 0.23 4.24 52.10 PCT 80 43 53 97 85 81 91 71 67 56 30 30 74 95 87 76 12/31/1999 2,820,798 0 992,559 1,539,412 30,094,077 0 15,304,762 4,540,009 212,460 132,086 1,193,959 1,066,572 0 4,314,673 10,851,857 56,479,430 BANK PEER1 4.14 2.66 0.00 2.98 1.46 2.14 2.26 0.43 44.13 26.44 51.98 37.82 0.00 0.00 6.66 0.31 0.19 1.75 1.56 0.00 6.33 15.91 82.83 4.92 0.39 0.32 1.97 0.49 0.15 0.19 4.88 57.37 PCT 73 36 38 97 86 80 91 67 55 44 64 86 75 95 85 76

PITTSBURGH, PA

PAGE 05 4/1/02 5:31:56 PM PERCENT CHANGE 1 QTR 1 YEAR 5.23 -22.38 -2.24 0.16 -1.8 -1.77 5.43 -22.67 -12.09 10.16 40.81 29.45 4.16 -95.5 3.63 -7.41 14.05 -28.97 2.03 -3.77 -12.3 1.5 18.81 10.58

12/31/1998 2,624,740 14,712,437 1,323,755 1,240,608 31,830,540 0 16,620,894 4,987,870 247,854 115,850 543,444 414,751 0 4,254,673 5,048,189 66,682,106 BANK PEER1 3.68 2.34 20.65 3.99 1.86 2.25 1.74 0.37 44.69 27.33 72.63 38.73 0.00 0.00 7.00 0.35 0.16 0.76 0.58 0.00 5.97 7.09 93.61 4.66 0.44 0.39 1.49 0.35 0.10 0.22 2.83 54.58

12/31/1997 2,462,506 16,305,003 1,016,564 1,072,141 28,805,163 0 17,202,091 5,543,280 681,032 204,349 382,273 382,273 0 0 2,979,739 58,771,018 BANK PEER1 3.53 2.59 23.39 6.15 1.46 1.92 1.54 0.47 41.32 27.82 71.24 41.49 0.00 0.00 7.95 0.98 0.29 0.55 0.55 0.00 0.00 4.27 84.31 5.20 0.54 0.59 0.87 0.26 0.04 0.08 4.34 57.46

OUTSTANDING ($000) HOME EQUITY (1-4 FAMILY) CREDIT CARD COMMERCIAL RE SECURED BY RE COMMERCIAL RE NOT SECURED BY RE ALL OTHER SECURITIES UNDERWRITING MEMO: UNUSED COMMIT W/MAT GT 1 YR STANDBY LETTERS OF CREDIT AMOUNT CONVEYED TO OTHERS COMMERCIAL LETTERS OF CREDIT ASSETS SECURITIZED OR SOLD W REC AMOUNT OF RECOURSE EXPOSURE CREDIT DERIVS BANK AS GTR CREDIT DERIVS BANK AS BENEF ALL OTH OFF-BALANCE SHEET ITEMS

3,578,540 0 925,314 1,709,755 24,662,036 0 12,425,899 4,122,020 290,210 119,809 1,020,535 106,779 0 197,550 9,233,190 45,568,749

OFF-BALANCE SHEET ITEMS

OFF-BALANCE SHEET ITEMS

OUTSTANDING (% OF TOTAL) BANK PEER1 HOME EQUITY (1-4 FAMILY) 5.72 3.65 CREDIT CARD 0.00 1.94 COMMERCIAL RE SECURED BY RE 1.48 2.01 COMMERCIAL RE NOT SECURED BY RE 2.73 0.37 ALL OTHER 39.39 20.96 TOTAL LN&LS COMMITMENTS 49.31 31.11 SECURITIES UNDERWRITING 0.00 0.00 STANDBY LETTERS OF CREDIT AMOUNT CONVEYED TO OTHERS COMMERCIAL LETTERS OF CREDIT ASSETS SECURITIZED OR SOLD W REC AMOUNT OF RECOURSE EXPOSURE CREDIT DERIVS BANK AS GTR CREDIT DERIVS BANK AS BENEF ALL OTH OFF-BALANCE SHEET ITEMS OFF-BALANCE SHEET ITEMS 6.58 0.46 0.19 1.63 0.17 0.00 0.32 14.75 72.78 4.22 0.37 0.19 6.23 0.35 0.15 0.22 5.97 60.93

130

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY

PNC BANK, NATIONAL ASSOCIATION OFF BALANCE SHEET ITEMS & DERIVATIVES ANALYSIS 12/31/2001 12/31/2000 43,924,533 38,384,632 5,520,831 19,070 4,614,075 8,282,539 8,070 8,274,469 8,989,659 0 8,989,659 22,038,260 31,430,645 25,905,439 5,506,136 19,070 12,493,888 12,479,193 14,695 0 0 32,073,546 9,923,739 16,977,069 5,172,738 315,983 338,182 214,198 123,984 0 338,182 0 0 -56,473 -1,687 0 -58,160 12/31/1999 54,371,363 51,765,565 2,580,248 25,550 6,311,533 4,770,415 0 4,770,415 14,885,277 0 14,885,277 28,404,138 29,800,345 27,199,464 2,575,331 25,550 24,571,018 24,566,101 4,917 0 7,675,000 46,405,555 15,291,214 24,775,057 6,339,284 293,838 359,154 185,134 174,020 18,571 359,154 0 0 29,588 6,972 -354 36,206

PITTSBURGH, PA 12/31/1998 42,525,046 40,588,997 1,888,499 47,550 6,513,726 9,071,630 0 9,071,630 4,980,356 0 4,980,356 21,959,334 19,507,926 17,582,230 1,878,146 47,550 23,017,120 23,006,767 10,353 0 4,875,000 33,126,916 11,657,513 17,021,584 4,447,819 510,279 682,217 128,505 553,712 52,875 682,217 0 0 12,781 2,731 -1,880 13,632

PAGE 05A 4/1/02 5:31:59 PM 12/31/1997 25,223,958 23,504,661 1,710,897 8,400 5,173,792 6,921,999 0 6,921,999 2,759,643 0 2,759,643 10,368,524 11,091,610 9,393,779 1,689,431 8,400 14,132,348 14,110,882 21,466 0 3,864,840 17,727,459 8,121,140 6,855,589 2,750,730 173,855 283,323 69,817 213,506 94,745 283,323 0 0 -21,611 5,248 -1,528 -17,891

PAGE 05A

NOTIONAL AMOUNT ($000) DERIVATIVE CONTRACTS INTEREST RATE CONTRACTS FOREIGN EXCHANGE CONTRACTS EQUITY, COMM & OTH CONTRACTS DERIVATIVES POSITION FUTURES AND FORWARDS WRITTEN OPTIONS EXCHANGE TRADED OVER-THE-COUNTER PURCHASED OPTIONS EXCHANGE TRADED OVER-THE-COUNTER SWAPS HELD-FOR-TRADING INTEREST RATE CONTRACTS FOREIGN EXCHANGE CONTRACTS EQUITY, COMM & OTH CONTRACTS NON-TRADED INTEREST RATE CONTRACTS FOREIGN EXCHANGE CONTRACTS EQUITY, COMM & OTH CONTRACTS MEMO: MARKED-TO-MARKET DERIVATIVE CONTRACTS (RBC DEF ) ONE YEAR OR LESS OVER 1 YEAR TO 5 YEARS OVER 5 YEARS

50,934,116 46,904,961 4,022,155 7,000 5,126,370 5,343,653 0 5,343,653 8,075,266 0 8,075,266 32,388,827 40,968,606 36,939,451 4,022,155 7,000 9,965,510 9,965,510 0 0 9,965,510 37,631,791 9,525,537 22,174,113 5,932,141 573,820 711,223 425,603 285,620 285,620 711,223 0 122 25,170 -1,696 -25,193 -1,719

DERIVATIVES ANALYSIS

GROSS NEGATIVE FAIR VALUE GROSS POSTIVE FAIR VALUE HELD-FOR-TRADING NON-TRADED MEMO MARKED-TO-MARKET CURR CREDIT EXP ON RBC DERIV CONTR CREDIT LOSSES OFF-BS DERIVS PAST DUE DERIV INSTRUMENTS: FAIR VALUE CARRIED AS ASSETS IMPACT NONTRADED DERIV CONTRACTS: INCREASE (DECR) IN INTEREST INC INCREASE (DECR) IN INTEREST EXP INCREASE (DECR) IN NONINT ALLOC INCREASE (DECR) IN NET INCOME

131

BALANCE SHEET - PERCENTAGE COMPOSITION OF ASSETS & LIABILITIES PAGE 06

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 PNC BANK, NATIONAL ASSOCIATION COUNTY: ALLEGHENY BALANCE SHEET - PERCENTAGE COMPOSITION OF ASSETS AND LIABILITIES BANK 63.88 5.81 1.02 68.67 0.20 0.58 0.59 0.00 15.09 85.13 5.50 1.27 0.02 8.09 14.87 100.00 6.50 10.95 1.96 33.11 2.95 14.77 63.74 4.37 2.83 70.93 2.28 2.79 11.02 7.82 6.11 89.94 1.81 8.25 99.99 1.41 0.00 0.00 4.81 12/31/2001 PEER1 60.78 2.65 0.97 63.17 0.82 3.43 1.18 0.71 15.75 88.31 4.19 1.05 0.04 6.14 11.69 100.00 4.17 8.23 1.36 20.14 7.53 11.46 51.70 7.66 5.09 66.78 8.93 4.53 26.65 5.05 3.03 89.98 1.45 8.42 100.00 2.12 1.22 0.01 3.00 PCT 60 87 60 61 54 31 61 47 45 17 74 67 45 71 82 70 75 77 87 30 65 81 22 52 68 10 42 8 77 92 38 64 51 60 35 81 75 BANK 72.59 4.28 0.96 75.91 0.18 1.01 0.33 0.00 9.52 86.95 4.16 1.14 0.03 7.72 13.05 100.00 6.49 10.01 1.77 28.31 2.97 15.69 58.74 4.85 3.69 67.28 2.28 7.84 17.48 9.55 3.41 90.36 1.72 7.92 100.00 0.60 0.00 0.00 8.19 12/31/2000 PEER1 60.98 3.20 0.92 64.05 0.84 2.34 1.09 1.12 15.99 89.02 4.07 1.05 0.03 5.56 10.98 100.00 4.25 8.89 1.28 16.97 7.07 12.38 49.81 8.38 6.39 66.58 8.61 6.62 28.81 4.52 2.52 90.41 1.43 8.00 100.00 2.29 1.22 0.01 2.30 PCT 81 70 61 83 54 43 56 45 21 26 57 57 53 77 73 71 64 74 90 25 64 70 21 53 54 8 69 16 87 73 42 57 50 42 30 81 90 BANK 75.05 3.23 0.95 77.33 0.13 0.69 0.39 0.00 10.07 88.61 3.40 1.08 0.04 6.87 11.39 100.00 7.03 9.84 1.55 25.41 3.36 15.37 55.54 5.51 2.74 63.79 2.60 11.18 21.00 9.93 2.48 89.98 1.53 8.49 100.00 0.86 0.00 0.00 7.89 12/31/1999 PEER1 60.62 2.93 0.95 63.52 1.07 2.85 1.05 1.36 15.56 88.76 4.64 1.14 0.03 5.18 11.24 100.00 4.81 10.93 1.54 16.24 7.93 12.06 50.64 7.03 6.94 66.42 9.94 5.93 28.57 4.19 2.64 90.47 1.44 7.85 100.00 1.11 0.47 0.00 1.88 PCT 86 61 57 89 47 33 52 45 26 38 23 42 75 77 61 70 44 58 86 22 67 55 38 41 38 7 85 29 85 52 32 48 70 60 36 83 89

PITTSBURGH, PA 12/31/1998 BANK PEER1 77.54 60.54 2.40 2.79 1.19 0.99 78.75 62.98 0.27 0.62 0.26 0.00 9.19 89.09 3.80 1.15 0.06 5.89 10.90 99.99 7.48 10.67 1.37 21.55 3.63 16.91 54.12 5.21 3.73 63.06 3.32 12.55 23.46 8.91 2.24 90.08 1.21 8.71 100.00 1.20 0.00 0.00 5.28 1.25 2.96 1.40 1.90 15.52 88.71 5.02 1.22 0.04 4.87 11.28 100.00 4.70 12.52 1.75 14.72 7.53 13.70 52.32 7.09 6.77 67.86 10.01 4.84 27.47 3.97 2.56 90.59 1.36 7.85 100.00 0.99 0.51 0.01 2.20

PAGE 06 4/1/02 5:32:04 PM 12/31/1997 BANK PEER1 73.47 60.20 1.94 2.68 1.43 1.06 73.99 62.24 0.36 1.75 0.15 0.00 11.73 87.98 5.41 1.22 0.10 5.28 12.02 100.00 7.63 12.73 1.21 19.38 4.26 18.19 55.76 4.54 2.75 63.05 4.47 17.02 27.12 4.05 2.10 90.70 0.97 8.33 99.99 0.98 0.00 0.00 3.22 1.87 3.80 1.95 2.11 14.29 88.55 5.41 1.26 0.06 4.69 11.45 100.00 5.13 14.04 1.96 14.59 7.37 14.42 53.81 6.59 7.80 69.82 9.05 5.13 26.61 3.29 2.65 90.92 1.35 7.64 100.00 0.89 0.47 0.01 1.51

ASSETS, PERCENT OF AVG ASSETS TOTAL LOANS LEASE FINANCING RECEIVABLES LESS: LN&LS ALLOWANCE NET LOANS & LEASES INTEREST-BEARING BANK BALANCES FEDERAL FUNDS SOLD & RESALES TRADING ACCOUNT ASSETS HELD-TO-MATURITY SECURITIES AVAILABLE-FOR-SALE SECURITIES TOTAL EARNING ASSETS NONINT CASH & DUE FROM BANKS PREMISES, FIX ASSTS & CAP LEASES OTHER REAL ESTATE OWNED ACCEPTANCES & OTHER ASSETS SUBTOTAL TOTAL ASSETS STANDBY LETTERS OF CREDIT LIABILITIES, PERCENT OF AVG ASST DEMAND DEPOSITS ALL NOW & ATS ACCOUNTS MONEY MARKET DEPOSIT ACCOUNTS OTHER SAVINGS DEPOSITS TIME DEP LESS THAN $100M CORE DEPOSITS TIME DEP OF $100M OR MORE DEPOSITS IN FOREIGN OFFICES TOTAL DEPOSITS FEDERAL FUNDS PURCH & REPOS OTHER BORROWINGS INCL < 1 YR MEMO: SHT TER N CORE FUNDING OTHER BORROWINGS > 1 YR ACCEPTANCES & OTHER LIABILITIES TOTAL LIABILITIES (INCL MORTG) SUBORDINATED NOTES & DEBENTURES ALL COMMON & PREFERRED CAPITAL TOTAL LIABILITIES & CAPITAL MEMO: ALL BROKERED DEPOSITS INSURED BROKERED DEP DIRECT & INDIRECT INV IN RE LOANS HELD FOR SALE

133

PAGE 07

CERT # 6384 CHARTER # 1316

ANALYSIS OF LOAN & LEASE ALLOWANCE AND LOAN MIX

DIST/RSSD: 04 / 817824 PNC BANK, NATIONAL ASSOCIATION PITTSBURGH, PA COUNTY: ALLEGHENY ANALYSIS OF CREDIT ALLOWANCE AND LOAN MIX 12/31/2001 12/31/2000 12/31/1999 12/31/1998 CHANGE: CREDIT ALLOWANCE ($000) BEGINNING BALANCE 648,833 643,905 718,873 939,800 GROSS CREDIT LOSSES 980,672 181,385 208,026 516,340 MEMO: LOANS HFS WRITEDOWN 637,086 RECOVERIES 35,886 48,917 53,200 73,860 NET CREDIT LOSSES 944,786 132,468 154,826 442,480 PROVISION FOR CREDIT LOSS OTHER ADJUSTMENTS ENDING BALANCE AVERAGE TOTAL LOANS & LEASES ANALYSIS RATIOS LOSS PROVISION TO AVERAGE ASSETS RECOVERIES TO PRIOR CREDIT LOSS NET LOSS TO AVERAGE TOTAL LN&LS GROSS LOSS TO AVERAGE TOT LN&LS RECOVERIES TO AVERAGE TOT LN&LS LN&LS ALLOWANCE TO TOTAL LN&LS LN&LS ALLOWANCE TO NET LOSSES (X) LN&LS ALL TO NONACCURAL LN&LS (X) EARN COVER OF NET LN&LS LOSS (X) NET LOSSES BY TYPE OF LN&LS REAL ESTATE LOANS LOANS TO FINANCE COMML REAL EST CONTRUCTION & LAND DEV SECURED BY FARMLAND SINGLE & MULTI FAMILY MORTGAGE HOME EQUITY LOANS 1-4 FAMILY NON-REVOLVING MULTIFAMILY LOANS NON-FARM NON-RESIDENTIAL MTG RE LOANS IN FOREIGN OFFICES AGRICULTURAL LOANS COMMERCIAL AND INDUSTRIAL LOANS LEASE FINANCING LOANS TO INDIVIDUALS CREDIT CARD PLANS ALL OTHER LOANS & LEASES LOANS TO FOREIGN GOVERNMENTS 898,743 0 602,790 44,804,389 BANK 1.42 19.78 2.11 2.19 0.08 1.49 0.64 2.37 1.62 0.28 0.00 -0.01 0.00 0.10 0.07 0.11 -0.01 1.49 NA 2.72 5.14 0.32 0.45 0.00 1.29 NA PEER1 0.48 26.90 0.63 0.76 0.12 1.62 3.13 1.93 6.93 0.18 0.06 0.07 0.28 0.15 0.18 0.13 0.03 0.13 0.01 0.27 1.30 0.43 1.16 1.80 0.30 -0.03 PCT 94 37 98 98 41 51 5 7 75 77 7 64 61 41 67 11 95 90 91 95 54 27 58 87 95 133,000 4,396 648,833 51,542,871 BANK 0.20 23.51 0.26 0.35 0.09 1.30 4.90 1.83 12.32 0.04 -0.01 0.08 0.26 0.06 0.05 0.06 -0.01 -0.06 NA 0.16 0.54 0.22 0.36 3.02 0.19 0.00 PEER1 0.39 30.12 0.43 0.56 0.12 1.48 4.60 2.24 11.46 0.10 0.01 0.02 0.01 0.12 0.14 0.11 0.01 0.04 0.00 0.18 0.69 0.26 1.26 3.43 0.19 -0.31 PCT 35 45 32 30 40 38 67 67 39 9 81 94 46 40 53 15 5 98 71 49 56 22 54 67 95 156,640 -76,782 643,905 53,675,215 BANK 0.23 10.30 0.29 0.39 0.10 1.22 4.16 2.08 12.15 0.03 0.01 0.01 1.32 0.05 0.06 0.06 -0.07 -0.09 NA 1.75 0.20 0.35 1.70 8.49 0.44 0.00 PEER1 0.26 31.28 0.42 0.56 0.15 1.44 4.27 3.09 11.19 0.08 -0.01 -0.01 0.02 0.10 0.13 0.10 -0.02 0.00 0.00 0.23 0.50 0.25 1.41 3.14 0.34 0.00 PCT 45 7 38 32 33 27 54 67 39 91 70 97 44 44 54 13 19 98 94 23 67 69 95 70 92 217,961 3,592 718,873 56,032,063 BANK 0.31 19.55 0.79 0.92 0.13 1.25 1.62 2.50 3.76 0.05 0.00 0.12 -0.03 0.04 -0.02 0.05 0.00 0.10 NA 0.31 0.57 0.39 3.58 7.38 0.14 0.00 PEER1 0.28 35.95 0.42 0.59 0.16 1.52 4.92 3.77 11.02 0.05 0.00 -0.04 0.02 0.07 0.10 0.06 0.01 -0.01 0.00 0.13 0.41 0.24 1.70 4.20 0.20 0.02

PAGE 07 4/1/02 5:32:07 PM 12/31/1997 745,426 377,722 110,109 267,613 65,000 396,987 939,800 45,425,743 BANK 0.11 75.25 0.59 0.83 0.24 1.76 3.51 3.49 5.34 0.04 -0.09 0.04 0.15 0.08 0.08 0.08 -0.05 -0.20 NA 0.15 0.18 0.26 2.66 6.06 -0.19 0.00 PEER1 0.27 141.36 0.42 0.62 0.19 1.65 5.94 3.78 13.98 0.07 -0.02 -0.04 0.09 0.08 0.09 0.08 -0.01 -0.03 0.00 -0.01 0.29 0.21 2.03 4.43 0.27 -1.37

134

PAGE 07A

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY BANK 2.74 33.57 4.93 6.60 0.05 0.90 5.64 42.90 0.18 0.00 36.25 7.58 0.06 1.20 0.00 1.07 3.45 7.36 0.00 2.87 82.32 NA 0.06 0.03 0.00 0.00 0.01 0.00 0.01 0.00 0.02 0.00 0.02 0.00 0.00 111.86 111.86

PNC BANK, NATIONAL ASSOCIATION ANALYSIS OF LOAN AND LEASE ALLOWANCE AND LOAN MIX 12/31/2001 PEER1 4.75 25.68 4.33 13.10 0.26 1.29 11.12 45.66 1.57 0.38 24.46 10.07 0.96 0.38 0.00 2.14 2.65 4.22 0.04 0.90 55.55 0.00 0.48 0.29 0.00 0.00 0.02 0.00 0.01 0.00 0.04 0.00 0.04 0.48 13.06 1.85 18.93 PCT 35 77 65 21 37 52 20 41 50 15 82 38 35 85 84 70 81 75 62 91 78 98 37 35 90 97 60 97 70 91 47 92 45 52 40 98 92 BANK 2.31 38.70 3.61 6.32 0.06 0.89 5.36 47.33 0.25 0.01 35.17 6.99 0.24 1.06 0.00 0.36 3.46 5.38 0.00 2.88 68.34 NA 0.04 0.03 0.00 0.00 0.02 0.00 0.01 0.00 0.03 0.00 0.03 NA NA NA NA 12/31/2000 PEER1 3.91 23.90 3.63 12.72 0.22 1.40 10.75 42.11 1.44 0.36 26.30 11.02 1.40 0.41 0.00 2.76 3.17 4.98 0.07 0.84 58.43 0.00 0.49 0.30 0.00 0.00 0.02 0.00 0.01 0.00 0.03 0.00 0.03 0.00 0.00 0.00 0.00 PCT 38 87 54 21 38 45 21 64 42 21 76 29 21 84 76 69 67 61 61 91 70 98 25 26 87 97 74 95 71 91 56 92 53 98 98 98 98 BANK 2.14 35.47 2.91 7.26 0.06 1.23 5.97 44.87 1.09 0.01 33.95 9.04 1.34 1.15 0.00 0.17 5.61 4.12 0.00 3.00 70.91 NA 0.04 0.03 0.00 0.00 0.03 0.00 0.01 0.00 0.04 0.00 0.04 NA NA NA NA 12/31/1999 PEER1 3.23 22.95 3.07 12.32 0.20 1.29 10.44 39.59 0.91 0.35 27.19 12.21 1.76 0.46 0.01 3.38 3.90 4.60 0.11 1.08 69.11 0.00 0.67 0.38 0.00 0.00 0.01 0.00 0.01 0.00 0.03 0.00 0.03 0.00 0.00 0.00 0.00

PITTSBURGH, PA 12/31/1998 BANK PEER1 2.12 2.89 32.99 24.33 2.82 3.22 7.17 11.96 0.07 0.21 1.03 1.18 6.07 10.23 42.28 40.31 1.15 0.01 30.73 15.69 6.88 1.13 0.00 0.13 5.89 3.00 0.01 2.42 91.26 NA 0.03 0.02 0.01 0.00 0.03 0.00 0.02 0.00 0.06 0.00 0.06 NA NA NA NA 0.95 0.34 26.05 12.41 2.36 0.57 0.01 4.56 4.31 4.37 0.12 1.10 70.00 0.00 0.75 0.43 0.00 0.00 0.02 0.00 0.02 0.00 0.04 0.00 0.04 0.00 0.00 0.00 0.00

PAGE 07A 4/1/02 5:32:09 PM 12/31/1997 BANK PEER1 2.22 2.45 33.62 23.93 3.52 3.42 6.73 11.17 0.05 0.14 0.49 1.14 6.19 9.68 42.57 38.50 1.88 0.01 29.91 18.39 6.82 1.27 0.00 0.16 3.24 2.57 0.01 1.16 96.86 NA 0.54 0.40 0.01 0.00 0.04 0.00 0.05 0.00 0.10 0.00 0.10 NA NA NA NA 1.18 0.32 26.33 13.92 3.27 0.66 0.01 6.11 4.20 4.22 0.19 0.99 75.04 0.00 0.96 0.56 0.01 0.00 0.02 0.00 0.02 0.00 0.05 0.00 0.06 0.00 0.00 0.00 0.00

ANALYSIS OF LOAN & LEASE ALLOWANCE AND LOAN MIX

LOAN MIX, % AVERAGE GROSS LN&LS CONTRUCTION & DEVELOPMENT 1 - 4 FAMILY RESIDENTIAL HOME EQUITY LOANS OTHER REAL ESTATE LOANS FARMLAND MULTIFAMILY NON-FARM NON-RESIDENTIAL TOTAL REAL ESTATE FINANCIAL INSTITUTION LOANS AGRICULTURAL LOANS COMMERCIAL & INDUSTRIAL LOANS LOANS TO INDIVIDUALS CREDIT CARD LOANS MUNICIPAL LOANS ACCEPTANCES OF OTHER BANKS FOREIGN OFFICE LOANS & LEASES ALL OTHER LOANS LEASE FINANCING RECEIVABLES SUPPLEMENTAL: LOANS TO FOREIGN GOVERNMENTS LOANS TO FINANCE COMML REAL EST MEMORANDUM (% OF AVG TOT LOANS): LOAN & LEASE COMMITMENTS LOANS SOLD DURING THE QUARTER OFFICER, SHAREHOLDER LOANS OFFICER, SHAREH LOANS TO ASSETS OTHER REAL ESTATE OWNED % ASSETS CONSTRUCTION & LAND DEVELOPMENT FARMLAND 1-4 FAMILY MULTIFAMILY NON-FARM-NON-RESID FOREIGN OFFICES SUBTOTAL DIRECT AND INDIRECT INV TOTAL ASSET SERVICING % ASSETS MORTG SERV W RECOURSE MORTG SERV WO RECOURSE OTHER FINANCIAL ASSETS TOTAL

PCT 38 80 50 27 44 58 26 54 67 20 73 41 55 85 75 60 77 55 48 88 63 98 25 26 83 98 91 95 64 92 76 92 75 98 98 98 98

135

PAGE 08

CERT # 6384 CHARTER # 1316

ANALYSIS OF PAST DUE, NONACCRUAL & RESTRUCTURED LOANS & LEASE

DIST/RSSD: 04 / 817824 PNC BANK, NATIONAL ASSOCIATION COUNTY: ALLEGHENY ANALYSIS OF PAST DUE, NONACCRUAL & RESTRUCTURED LOANS & LEASES 12/31/2001 12/31/2000 12/31/1999 NON-CURRENT LN&LS ($000) 90 DAYS AND OVER PAST DUE 169,798 125,264 128,531 TOTAL NONACCRUAL LN&LS 253,945 354,651 309,309 TOTAL NON-CURRENT LN&LS 423,743 479,915 437,840 LN&LS 30-89 DAYS PAST DUE 332,103 RESTRUCTURED LN&LS 90+ DAYS P/D RESTRUCTURED LN&LS NONACCRL RESTRUCTURE LN&LS 30-89 DAYS PD CURRENT RESTRUCTURED LN&LS ALL OTHER REAL ESTATE OWNED % OF NON-CURR LN&LS BY LN TYPE REAL ESTATE LNS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D LNS FIN COML RE-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D CONST & LAND DEV-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D SINGLE & MULTI MTG-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D NON-FARM/RESI MTG-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D RE LNS FOR OFF–90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D COML & INDUST LNS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D LOANS TO INDIVDLS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D BANK 0.47 0.14 0.61 0.67 0.00 0.00 0.00 0.01 0.35 0.15 0.50 0.35 0.53 0.08 0.60 0.76 0.22 0.51 0.74 0.36 NA NA NA NA 0.36 1.53 1.88 0.99 0.78 0.08 0.86 1.45 0 0 0 0 9,325 PEER1 0.23 0.73 1.02 1.33 0.04 0.21 0.27 0.47 0.10 0.72 0.85 1.29 0.30 0.44 0.85 1.46 0.10 0.76 0.89 0.93 0.00 0.07 0.13 0.11 0.12 1.91 2.06 1.12 0.34 0.23 0.66 2.16 PCT 78 11 38 25 72 61 58 62 87 35 45 30 78 14 47 30 81 37 47 25 90 88 87 87 90 38 48 50 80 48 67 32 BANK 0.25 0.11 0.36 0.00 0.01 0.01 0.02 0.12 0.13 0.26 0.04 0.30 0.30 0.62 0.92 NA NA NA 0.20 1.68 1.89 0.66 0.03 0.69 0 380 0 15,047 PEER1 0.17 0.57 0.79 0.01 0.24 0.32 0.06 0.50 0.62 0.23 0.48 0.77 0.06 0.64 0.72 0.00 0.00 0.00 0.09 1.32 1.44 0.44 0.18 0.68 PCT 67 11 16 83 63 60 61 35 25 60 11 14 92 57 64 98 98 98 80 70 71 73 42 54 BANK 0.27 0.45 0.72 0.00 0.01 0.01 0.27 0.18 0.46 0.29 0.31 0.60 0.17 1.39 1.56 NA NA NA 0.13 0.92 1.04 0.76 0.04 0.80 0 0 0 20,503 PEER1 0.18 0.53 0.78 0.03 0.12 0.20 0.07 0.56 0.66 0.25 0.35 0.73 0.06 0.78 0.86 0.00 0.00 0.00 0.07 0.90 0.99 0.60 0.11 0.79 PCT 76 45 54 82 57 54 88 39 52 64 44 50 86 77 82 98 98 98 76 51 54 70 50 64

PITTSBURGH, PA 12/31/1998 258,187 287,304 545,491 0 1,114 0 33,575 BANK 0.47 0.57 1.04 0.00 0.01 0.02 1.36 0.18 1.54 0.37 0.35 0.72 0.75 1.97 2.72 NA NA NA 0.22 0.75 0.96 1.29 0.04 1.33 PEER1 0.23 0.60 0.89 0.02 0.10 0.15 0.10 0.66 0.80 0.29 0.47 0.86 0.11 0.80 0.99 0.00 0.00 0.00 0.09 0.68 0.79 0.63 0.14 0.84

PAGE 08 4/1/02 5:32:12 PM 12/31/1997 281,691 268,973 550,664 0 1,735 0 47,912 BANK 0.54 0.68 1.22 0.22 0.03 0.26 0.52 0.62 1.14 0.40 0.34 0.74 1.29 2.61 3.90 NA NA NA 0.31 0.63 0.94 1.12 0.08 1.19 PEER1 0.22 0.75 1.01 0.01 0.18 0.23 0.14 1.44 1.63 0.26 0.56 0.88 0.11 1.22 1.35 0.00 0.00 0.00 0.06 0.60 0.67 0.74 0.17 0.96

136

ANALYSIS OF PAST DUE NONACCRUAL & RESTRUCTURED LOANS & LEASES PAGE 08A

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY

PNC BANK, NATIONAL ASSOCIATION ANALYSIS OF PAST DUE, NONACCRUAL & RESTRUCTURED LOANS & LEASES 12/31/2001 PEER1 0.43 0.01 0.50 0.93 0.00 0.02 0.02 0.14 0.05 0.37 0.42 0.62 0.05 1.30 1.39 0.90 0.07 0.37 0.54 0.56 0.23 0.97 1.31 1.29 PCT 60 92 58 57 98 90 90 88 67 52 51 57 65 75 75 77 91 64 77 61 81 34 45 22 BANK 0.34 0.00 0.34 NA NA NA 0.03 0.04 0.07 0.00 0.00 0.00 0.12 0.57 0.69 0.25 0.71 0.96 12/31/2000 PEER1 0.57 0.05 0.71 0.00 0.01 0.01 0.06 0.30 0.40 0.09 1.15 1.37 0.08 0.33 0.43 0.19 0.74 0.99 PCT 49 69 42 97 91 90 64 46 43 61 35 28 78 76 78 66 54 54 BANK 0.24 0.00 0.24 0.00 0.00 0.00 0.05 0.05 0.10 0.00 0.00 0.00 0.13 0.50 0.63 0.24 0.59 0.83 12/31/1999 PEER1 0.64 0.09 0.86 0.00 0.01 0.05 0.06 0.17 0.29 0.10 1.24 1.43 0.07 0.18 0.26 0.21 0.53 0.76 PCT 39 58 29 94 85 82 67 58 45 55 41 35 73 86 88 64 61 60

PITTSBURGH, PA 12/31/1998 BANK PEER1 2.04 0.85 0.00 0.09 2.04 1.04 0.00 0.00 0.00 0.04 0.03 0.08 0.00 2.13 2.13 0.11 0.12 0.23 0.45 0.50 0.95 0.00 0.18 0.19 0.04 0.18 0.24 0.06 1.00 1.11 0.07 0.18 0.26 0.23 0.49 0.77

PAGE 08A 4/1/02 5:32:15 PM 12/31/1997 BANK PEER1 1.75 1.20 0.00 0.07 1.75 1.38 0.00 0.00 0.00 0.05 0.00 0.05 22.51 0.51 23.02 0.03 0.10 0.13 0.53 0.50 1.03 0.00 0.01 0.01 0.03 0.17 0.20 0.07 1.38 1.86 0.04 0.12 0.16 0.23 0.52 0.78

% OF NON-CURR LN&LS BY LN TYPE CREDIT CARD PLANS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D FOREIGN GOVT LNS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D LEASE FINANCING-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D AGRICULTURAL LNS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D OTHER LN&LS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D GROSS LN&LS-90+ DAYS P/D -NONACCRUAL -TOTAL -30-89 DAYS P/D OTHER PERTINENT RATIOS: NON-CUR LN&LS TO-LN&LS ALLOWANCE -EQUITY CAPITAL %TOTAL P/D LN&LS-INCL NONACCRUAL IENC-LOANS TO TOTAL LOANS NON CURR LNS+OREO TO LNS+OREO NON-CURR RESTRUCT DEBT/GR LN&LS CURR+NON-CURR RESTRUCT/GR LN&LS CURRENT RESTRUCT LN&LS

BANK 0.00 0.00 0.00 0.00 NA NA NA NA 0.03 0.24 0.27 0.48 0.00 2.37 2.37 1.82 0.58 0.24 0.81 0.55 0.42 0.63 1.05 0.82

70.30 8.67 1.87 NA 1.07 0.00 0.00 0.00

82.15 9.87 2.66 0.00 1.38 0.00 0.00 0.00

38 51 30 98 41 82 82 77

0.80

0.77

71

0.67

0.67

61

0.70

0.67

0.69

0.65

137

PAGE 09
CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY BANK 20.17 2.23 6.81 57.46 2.27 8.51 4.50 6.04 3.88 3.67 NA 0.36 4.03 19.65 0.00 72.78 0.00 0.00 31.56 4.80 26.77 41.58 12.45 29.13 53.53 169.60 -21.97 BANK 48.61 NA 4.79 53.40

PNC BANK, NATIONAL ASSOCIATION INTEREST RATE RISK ANALYSIS AS A PERCENT OF ASSETS 12/31/2001 PEER1 16.34 5.98 3.91 56.80 1.94 6.69 8.26 4.09 2.44 0.00 0.00 0.20 0.26 16.47 0.58 60.93 0.01 0.13 31.39 3.58 27.07 43.11 8.57 33.96 41.51 153.22 -9.87 PEER1 0.03 0.00 3.07 3.94 PCT 67 37 85 45 67 75 32 67 70 98 98 74 95 64 54 71 72 64 48 68 45 42 74 31 82 65 21 PCT 98 98 74 92 BANK 25.14 2.49 12.66 57.00 1.79 9.25 4.27 3.66 2.77 0.00 NA 0.42 0.42 7.80 0.00 77.89 0.00 0.00 39.58 2.91 36.67 47.92 9.55 38.37 46.91 118.51 -7.33 BANK 0.00 NA 4.94 4.94 12/31/2000 PEER1 14.94 4.60 3.87 60.61 1.70 7.56 6.47 4.10 2.37 0.01 0.00 0.19 0.23 15.32 1.03 52.10 0.00 0.04 31.59 3.22 27.75 43.77 9.22 33.63 36.15 128.49 -4.27 PEER1 0.12 0.00 2.89 3.42 PCT 87 40 94 33 63 70 43 63 67 78 98 76 71 21 46 76 74 66 70 57 76 57 57 57 84 54 38 PCT 70 98 71 69 BANK 24.69 1.57 12.25 57.34 1.57 10.80 3.14 3.84 3.02 0.00 NA 2.88 2.88 9.60 0.00 82.83 0.00 0.00 37.95 5.12 32.83 45.92 13.27 32.65 40.34 106.29 -2.39 BANK 0.00 NA 38.60 38.60 12/31/1999 PEER1 15.97 4.65 4.55 60.01 1.47 7.34 6.28 3.68 2.53 0.01 0.00 0.33 0.37 15.54 1.30 57.37 -0.03 -0.43 32.48 2.65 29.49 43.48 7.93 35.49 36.61 123.45 -3.92 PEER1 0.21 0.00 4.95 5.42

PITTSBURGH, PA 12/31/1998 BANK PEER1 20.66 17.48 1.73 4.83 8.97 4.44 64.22 0.91 11.30 2.64 3.13 0.76 0.00 0.00 1.39 1.39 8.22 0.00 93.61 0.00 0.00 32.75 8.82 23.93 42.61 15.93 26.68 39.07 119.29 -6.32 BANK 0.00 0.00 18.05 18.05 57.24 1.38 6.90 6.34 4.21 2.18 0.03 0.08 0.27 0.55 15.43 1.68 54.58 0.02 0.28 30.61 2.74 27.72 41.67 7.80 33.60 37.80 133.79 -6.90 PEER1 0.46 1.06 4.03 7.99

PAGE 09 4/1/02 5:32:17 PM 12/31/1997 BANK PEER1 20.30 16.18 2.58 3.85 6.13 3.75 60.82 1.87 7.17 4.45 5.49 0.54 0.00 0.07 0.59 0.66 10.62 0.00 84.31 0.00 0.00 28.44 6.03 22.40 41.50 12.06 29.44 36.96 129.96 -8.52 BANK 0.00 0.87 7.88 8.74 57.66 1.22 5.63 5.23 3.59 1.91 0.08 0.04 0.25 0.49 14.00 1.91 57.46 0.02 0.27 25.81 2.22 23.34 37.57 8.06 29.67 38.58 172.01 -12.11 PEER1 1.13 0.58 3.83 7.44

INTEREST RATE RISK ANALYSIS AS A PERCENT OF ASSETS

LONG ASSETS INSTS W/ OPTIONS MORTGAGE LOANS & PASS THRUS LOANS & SECURITIES OVER 15 YRS LOANS & SECURITIES 5-15 YRS OTHER LOANS AND SECURITIES LOANS & SECURITIES OVER 15 YRS LOANS & SECURITIES 5-15 YRS TOTAL LOANS & SECURITIES OVR 15 CMO`S TOTAL AVG LIFE OVER 3 YEARS STRUCTURED NOTES HIGH RISK SECURITIES MORTGAGE SERVICING TOTAL OVERALL RISK INDICATORS AVAILABLE FOR SALE HELD TO MATURITY OFF BALANCE SHEET UNREALIZED APPN/DEPN UNREAL APP/DEP % TIER ONE CAP CONTRACTUAL MAT/REPRICE DATA LOANS/SECURITIES OVER 3 YEARS LIABILITIES OVER 3 YEARS NET 3 YEAR POSITION LOANS/SECURITIES OVER 1 YEAR LIABILITIES OVER 1 YEAR NET OVER 1 YEAR POSITION NON-MATURITY DEPOSITS NON-MATURITY DEPS % LONG ASSETS NET OVER 3 YEAR POSITION AS % TIER 1 CAPITAL STRUCTURED NOTES HIGH RISK SECURITIES MORTGAGE SERVICING (FV) TOTAL

PCT 77 32 94 36 63 76 30 64 67 70 98 92 92 25 44 76 89 86 64 80 60 48 76 41 66 45 54 PCT 69 98 92 92

138

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY 12/31/2001 SHORT TERM INVESTMENTS 463,423 SHORT TERM ASSETS 9,304,052 SHORT TERM NON CORE FUNDING 6,099,247 NON CORE LIABLILITIES 10,946,665

PNC BANK, NATIONAL ASSOCIATION PITTSBURGH, PA LIQUIDITY AND INVESTMENT PORTFOLIO 12/31/2000 12/31/1999 414,363 707,293 9,320,772 12,130,113 9,080,920 15,463,542 13,508,285 21,785,581 0 0 0 PCT 22 70 81 8 20 20 67 64 38 54 38 37 20 58 81 70 74 82 95 77 81 54 47 21 37 32 84 95 82 62 98 98 98 98 62 64 38 BANK 0.66 0.06 63.61 14.37 15.98 24.15 1.28 23.22 4.56 51.86 13.70 107.19 122.68 84.46 0.00 0.00 0.00 0.00 NA 0.00 0.00 0.00 3.85 0.92 26.19 8.24 NA 51.88 0.56 0.73 7.65 100.00 0.00 NA NA 0.00 74.50 PEER1 5.81 0.17 49.59 28.27 27.57 40.16 3.97 38.34 20.80 64.30 13.42 96.26 137.94 68.29 0.42 0.70 0.82 0.34 0.00 0.81 0.02 4.77 18.55 4.18 25.45 11.29 0.00 13.34 0.87 1.26 3.18 90.60 0.11 0.00 0.25 0.03 55.99 PCT 21 49 85 8 12 14 46 43 35 40 52 77 42 91 71 56 69 74 98 70 74 46 16 35 49 47 98 91 80 52 88 98 70 98 64 66 73 BANK 1.04 0.01 55.32 22.68 25.19 35.98 0.85 23.23 4.57 52.91 15.83 117.30 137.93 82.96 0.00 0.00 0.00 0.00 NA 0.00 0.00 0.00 29.27 0.50 13.62 7.93 NA 41.49 0.42 0.06 6.71 100.00 0.00 NA NA 0.00 54.38 0 0 0 PEER1 5.52 0.14 49.07 29.84 29.27 40.47 2.07 34.03 18.43 66.02 13.30 97.86 137.75 68.65 0.40 0.88 0.99 0.36 0.00 0.62 0.03 5.99 19.08 3.75 27.25 11.74 0.00 11.71 1.65 1.02 2.92 88.57 0.20 0.00 -0.68 -0.38 59.04 PCT 20 39 57 25 38 42 51 41 25 36 54 80 63 86 73 55 69 75 98 69 70 44 70 26 33 47 98 92 76 36 88 98 69 98 85 86 39

12/31/1998 654,694 14,057,069 14,312,251 23,472,644 0 0 0 0 BANK 0.92 0.04 54.76 20.09 21.80 36.42 2.78 74.50 4.57 60.38 12.95 128.04 145.53 86.69 0.00 0.00 0.00 0.00 NA 0.00 0.00 0.00 45.56 1.03 0.08 12.30 NA 33.14 0.41 0.46 7.03 100.00 0.00 0.00 NA 0.00 69.58 PEER1 5.96 0.09 51.44 27.94 27.45 36.79 1.52 32.09 21.48 71.69 11.01 93.45 127.69 67.69 0.76 0.87 1.24 0.58 0.00 0.88 0.02 7.49 17.14 4.00 29.67 13.68 0.00 9.95 1.83 0.61 2.44 86.56 2.12 0.01 0.70 0.24 60.37

PAGE 10 4/1/02 5:32:20 PM 12/31/1997 1,297,356 12,746,506 18,890,734 23,509,965 0 0 37,805 0 BANK 1.86 0.06 54.70 27.10 29.33 37.04 1.05 26.43 6.87 47.18 20.47 118.48 137.87 83.37 0.00 0.00 0.00 0.00 NA 0.00 0.00 0.00 13.10 1.63 1.39 47.51 NA 30.65 0.36 0.59 4.78 100.00 0.72 -0.15 NA 0.00 54.73 PEER1 7.96 0.10 52.96 27.10 25.03 33.62 1.24 27.00 29.52 76.78 9.56 89.00 121.22 67.09 1.43 1.80 1.90 1.28 0.00 0.80 0.10 10.45 22.06 3.27 26.34 14.00 0.00 7.00 2.65 0.79 2.34 84.60 2.19 -0.01 0.89 0.22 58.25

PAGE 10

DEBT SECURITIES 90+ DAYS P/D TOTAL NON-CURRENT DEBT SEC FAIR VALUE HIGH-RISK MTG SECS FAIR VALUE STRUCTURED NOTES PERCENT OF TOTAL ASSETS SHORT TERM INVESTMENTS MARKETABLE EQUITY SEC (MES) CORE DEPOSITS S T NON CORE FUNDING LIQUIDITY RATIOS NET S T NONCORE FUND DEPENDENCE NET NON CORE FUND DEPENDENCE BROKERED DEPOSITS TO DEPOSITS BROKER DEP MAT < 1YR TO BKR DEPS SHORT TRM INV TO S T NCORE FUND SHORT TERM ASSET TO S T LIABS NET S T LIAB TO ASSETS NET LOANS & LEASES TO DEPOSITS NET LN&LS TO CORE DEPOSITS NET LN&LS & SBLC TO ASSETS SECURITIES MIX HELD-TO-MATURITY % TOTAL SECS US TREAS & GOVT AGENCIES MUNICIPAL SECURITIES PASS-THROUGH MTG BACKED SECS CMO & REMIC MTG BACKED SECS ASSET BACKED SECURITIES OTHER DOMESTIC DEBT SECS FOREIGN DEBT SECURITIES TOTAL HELD-TO-MATURITY AVAILABLE-FOR-SALE % TOTAL SECS US TREASURY & GOVT AGENCIES MUNICIPAL SECURITIES PASS-THROUGH MTG BACKED SECS CMO & REMIC MTG BACKED SECS ASSET BACKED SECURITIES OTHER DOMESTIC DEBT SECS FOREIGN DEBT SECURITIES INV MUT FND & OTH MKTBL OTHER EQUITY SECURITIES TOTAL AVAILABLE-FOR-SALE OTHER SECURITIES RATIOS: STRUC NOTE TO T1CAP APP (DEP) HI RISK & STRUC/T1CAP APP (DEP) IN HTM SEC TO HTM SEC APP (DEP) IN HTM SEC TO EQY CAP PLEDGED SECURITIES TO TOT SEC

0 0 2,282,713 BANK 0.74 0.27 66.70 9.74 10.81 20.10 2.53 75.72 7.60 81.85 3.30 85.91 95.43 70.23 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.48 0.15 20.36 2.22 20.33 49.90 0.21 1.35 NA 100.00 48.27 NA NA 0.00 45.01 PEER1 6.74 0.22 52.73 25.13 21.73 35.24 3.38 31.29 32.00 83.56 7.35 93.01 123.03 65.50 0.11 0.34 0.39 0.11 0.00 0.31 0.01 2.68 12.64 3.40 30.83 14.88 5.56 7.38 0.68 1.66 0.00 93.78 0.03 0.00 0.61 0.11 52.38

LIQUIDITY AND INVESTMENT PORTFOLIO

139

PAGE 11

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY 12/31/2001 0 218,918 1,344,558 3,298,500 25,685 0 4,887,661 1,153,235 5,251,116 491,731 18,960 70,284 0 5,345 1,050,000 100,225 4,887,661 199,344 0 4,220 1,016,636 1,220,200

PNC BANK, NATIONAL ASSOCIATION CAPITAL ANALYSIS 12/31/2000 0 218,919 1,255,760 3,845,935 -69,498 5,251,116 1,152,698 5,541,015 1,007,226 8,801 142,053 0 -969,849 650,000 171,870 5,251,116 155,229 0 18,619 1,051,192 1,225,040 0

PITTSBURGH, PA 12/31/1999 0 218,919 2,061,879 3,501,465 -241,248 5,541,015 1,152,161 6,283,312 1,057,038 5,661 0 0 -500,275 1,086,000 -218,721 5,541,015 1,720,128 0 9,639 1,109,759 2,839,526 0 12/31/1998 0 218,919 2,554,105 3,532,815 6,283,312 901,452 5,803,927 1,008,240 0 1,843 0 176,825 709,000 1,477 6,283,312 889,181 291,523 17,667 1,187,223 2,385,594 0 PCT 73 52 52 36 61 82 17 83 63 7 33 91 77 80 36 92 BANK 9.03 14.35 14.35 100.24 16.59 11.67 4.92 70.32 8.82 8.26 6.08 14.15 18.89 4.64 0.28 37.97 PEER1 7.99 18.85 18.85 118.73 15.89 9.63 6.03 62.29 7.76 32.31 1.37 2.81 10.30 0.05 1.29 16.30

PAGE 11 4/1/02 5:32:23 PM 12/31/1997 0 218,919 2,372,031 3,236,981 5,803,927 761,088 4,629,592 900,886 0 928,616 90,197 -95,578 680,025 30,239 5,803,927 384,608 320,140 25,259 893,040 1,623,047 0 BANK 9.06 13.11 13.11 97.65 18.11 13.67 4.44 75.48 8.33 25.37 3.68 6.63 15.39 5.52 0.44 27.96 PEER1 8.01 19.16 19.16 114.83 16.98 11.46 5.20 71.09 7.58 485.28 -5.91 2.79 7.73 0.10 1.42 14.07

END OF PERIOD CAPITAL ($000) PERPETUAL PREFERRED + COMMON STOCK + SURPLUS + UNDIVIDED PROFITS + ACCUM OTHER COMP INCOME + OTHER EQUITY CAPITAL COMP TOTAL EQUITY CAPITAL SUBORD NOTES & DEBENTURES CHANGES IN TOTAL EQUITY ($000) BALANCE AT BEGINNING OF PERIOD + NET INCOME + SALE OR PURCHASE OF CAPITAL + MERGER & ABSORPTIONS + RESTATE DUE TO ACCTG ERROR&CHG + TRANS WITH PARENT - DIVIDENDS + OTHER COMPREHENSIVE INCOME BALANCE AT END OF PERIOD INTANGIBLE ASSETS MORTGAGE SERVICING RIGHTS + PURCH CRED CARD RELATION + OTHER INTANGIBLES + GOODWILL TOTAL INTANGIBLES MEMO: GRANDFATHERED INTANG CAPITAL RATIOS PERCENT OF TOTAL EQUITY: NET LOANS & LEASES (X) SUBORD NOTES & DEBENTURES LONG TERM DEBT COM RE & RELATED VENTURES PERCENT OF AVERAGE TOTAL EQUITY: NET INCOME DIVIDENDS RETAINED EARNINGS OTHER CAPITAL RATIOS: DIVIDENDS TO NET OPER INCOME EQUITY CAPITAL TO ASSETS GROWTH RATES: TOTAL EQUITY CAPITAL EQUITY GROWTH LESS ASST GROWTH INTANG ASSETS % TOTAL EQUITY MORTGAGE SERVICING RIGHTS GOODWILL PURCH CREDIT CARD RELATION ALL OTHER INTANGIBLES TOTAL INTANGIBLES

CAPITAL ANALYSIS

BANK 8.15 23.59 23.59 101.51 9.37 20.01 -10.64 211.54 7.81 -6.92 -6.01 4.08 20.80 0.00 0.09 24.96

PEER1 7.35 17.56 17.56 137.01 13.68 9.51 3.50 68.90 8.36 19.03 3.39 2.24 11.78 0.02 1.67 17.43

PCT 70 65 65 35 25 94 1 97 44 5 25 77 72 78 30 74

BANK 9.39 21.95 21.95 95.98 18.94 12.22 6.72 64.53 8.31 -5.23 2.10 2.96 20.02 0.00 0.35 23.33

PEER1 7.92 18.73 18.73 128.97 13.82 9.25 3.34 64.59 8.03 32.87 4.78 2.17 11.41 0.05 1.28 17.35

PCT 76 54 54 33 76 67 71 52 61 14 43 70 77 76 46 69

BANK 9.39 20.79 20.79 102.83 18.11 18.61 -0.50 102.74 8.13 -11.81 -7.54 31.04 20.03 0.00 0.17 51.25

PEER1 8.22 18.91 18.91 127.77 16.96 11.10 5.34 66.54 7.77 12.26 -1.51 3.49 10.87 0.04 1.07 16.82

140

PAGE 11A

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 COUNTY: ALLEGHENY 12/31/2001 5,750,131 0 1,020,856 4,729,275 873,235 0 679,876 0 350,000 1,903,111 6,632,386 0 NA 0 6,632,386

PNC BANK, NATIONAL ASSOCIATION CAPITAL ANALYSIS 12/31/2000 6,472,461 0 1,069,811 5,402,650 977,698 0 648,833 0 NA 1,626,531 7,029,181 0 0 NA 7,029,181

PITTSBURGH, PA 12/31/1999 6,215,322 0 1,119,398 5,095,924 1,082,161 0 643,905 0 NA 1,726,066 6,821,990 0 0 NA 6,821,990 12/31/1998 6,674,497 0 1,205,524 5,468,972 866,452 0 718,873 0 NA 1,585,325 7,054,297 0 0 NA 7,054,297

PAGE 11A 4/1/02 5:32:25 PM 12/31/1997 6,177,931 0 930,928 5,247,002 761,088 0 809,545 0 NA 1,570,633 6,817,635 NA 0 NA 6,817,635

RISK BASED CAPITAL ($000) TIER ONE CAPITAL TOTAL EQUITY CAPITAL ADJUSTED - INELIGIBLE DEF TAX ASSETS - INELIGIBLE INTANGIBLES NET TIER ONE TIER TWO CAPITAL + QUALIF DEBT AND REDEEM PFD + CUMULATIVE PREFERRED STOCK + ALLOWABLE LN&LS LOSS ALLOW + UNRL GAIN MKTBL EQY SEC (45%) + OTHER TIER 2 CAPITAL COMP NET ELIGIBLE TIER TWO TOTAL RBC BEFORE DEDUCTIONS TIER ONE & TIER TWO TIER THREE - RECRIPROCAL CAPITAL HOLDINGS - DEDUCTIONS FOR TOTAL RBC TOTAL RISK-BASED-CAPITAL RISK-WEIGHTED ASSETS ON-BALANCE SHEET CATEGORY TWO - 20% CATEGORY THREE - 50% CATEGORY FOUR - 100% TOTAL ON-BALANCE SHEET MEMO: CATEGORY ONE - 0% OFF- BALANCE SHEET CATEGORY TWO - 20% CATEGORY THREE - 50% CATEGORY FOUR - 100% TOTAL OFF-BALANCE SHEET MEMO: CATEGORY ONE - 0% ADJUSTMENTS TO RISK-WGT ASSETS RISK-WIEGHTED ASSET BEFORE DED - INELIGIBLE DEF TAX ASSETS - INELIGIBLE INTANGIBLES - RECIPROCAL CAPITAL HOLDINGS - EXCESS ALLOWABLE LN&LS LOSS AL - ALLOCATED TRANSFER RISK RESERV - MARKET RISK EQUIV ASSETS TOTAL RISK-WEIGHTED ASSETS RISK-BASED CAPITAL TIER ONE RBC TO RISK-WGT ASSETS TOTAL RBC TO RISK-WEIGHT ASSETS TIER ONE LEVERAGE CAPITAL

RISK-BASED CAPITAL ANALYSIS

3,194,204 4,503,881 35,803,526 43,501,612 1,073,140 176,825 672,296 9,943,952 10,793,073 9,218,899 54,294,685 NA NA NA 0 0 109,892 54,404,578 BANK 8.69 12.19 7.65 PEER1 9.20 12.03 7.12 PCT 41 65 74

1,222,745 8,176,952 37,763,675 47,163,372 2,634,074 77,001 227,232 10,365,854 10,670,087 8,909,432 57,833,459 0 0 0 0 0 0 57,833,459 BANK 9.34 12.15 8.77 PEER1 8.49 11.21 7.04 PCT 71 87 92

1,254,530 9,128,006 38,878,280 49,260,816 4,676,051 58,060 833,414 11,574,581 12,466,056 10,851,857 61,726,873 0 0 0 0 0 0 61,726,873 BANK 8.26 11.05 7.65 PEER1 8.50 11.20 7.06 PCT 41 58 73

1,665,912 8,222,741 42,886,058 52,774,711 3,088,578 58,033 635,617 12,546,305 13,239,955 5,046,203 66,014,667 0 0 0 0 0 0 66,014,667 BANK 8.28 10.69 7.72 PEER1 8.36 11.17 6.92

1,866,122 7,201,706 42,758,757 51,826,585 3,218,481 312,676 191,450 12,432,919 12,937,045 2,978,504 64,763,631 0 0 0 130,254 0 NA 64,633,376 BANK 8.12 10.55 8.03 1.06 PEER1 8.39 11.15 6.93 1.67

OTHER CAPITAL RATIO: DEF TAX ASSET TO T1 CAP 0.00 1.12 64 0.00 1.15 61 0.00 2.65 42 0.00 1.37 NOTE: FROM MARCH 31, 2001 FORWARD RISK BASED CAPITAL RATIOS AND DATA DO NOT INCLUDE ADJUSTMENT FOR FINANCIAL SUBSIDIARIES. FOR BANKS WITH FINANCIAL SUBSIDIARIES PLEASE REFER TO CALL REPORT FOR INFORMATION ON THE ADJUSTMENT.

141

ONE QUARTER ANNUALIZED INCOME ANALYSIS PAGE 12

CERT # 6384 CHARTER # 1316

DIST/RSSD: 04 / 817824 PNC BANK, NATIONAL ASSOCIATION PITTSBURGH, PA COUNTY: ALLEGHENY ONE QUARTER ANNUALIZED INCOME ANALYSIS 12/31/2001 12/31/2000 12/31/1999 12/31/1998 EARNINGS AND PROFITABILITY PERCENT OF AVERAGE ASSETS: BANK PEER1 PCT BANK PEER1 PCT BANK PEER1 PCT BANK PEER1 INTEREST INCOME (TE) 5.36 5.68 34 6.04 7.53 8 6.68 6.94 30 7.04 7.52 - INTEREST EXPENSE 1.77 2.17 22 2.57 4.15 2 3.44 3.45 48 3.52 3.66 NET INTEREST INCOME (TE) 3.59 3.52 44 3.47 3.42 43 3.24 3.54 26 3.52 3.90 + NONINTEREST INCOME 2.57 2.07 71 1.05 1.98 19 2.99 2.48 69 3.66 2.46 - NON-INTEREST EXPENSE 4.46 3.31 82 1.77 3.20 7 3.77 3.58 69 4.50 4.07 - PROVISION: LOAN&LEASE LOSSES 4.24 0.63 98 0.27 0.52 45 0.17 0.30 36 0.63 0.32 PRETAX OPERATING INCOME (TE) -2.54 1.58 2 2.48 1.66 83 2.29 2.14 61 2.05 1.96 + REALIZED GAINS/LOSSES SECS -0.02 0.09 11 0.11 0.01 90 0.00 -0.02 72 0.24 0.06 PRETAX NET OPERATING INC (TE) -2.56 1.74 2 2.59 1.68 84 2.29 2.10 63 2.29 2.03 NET OPERATING INCOME -1.64 1.15 2 1.83 1.09 84 1.61 1.34 70 1.43 1.31 ADJUSTED NET OPERATING INCOME -2.21 1.29 2 1.83 1.29 80 1.61 1.34 69 1.07 1.32 NET INCOME ADJUSTED SUB S 1.15 1.09 1.36 1.31 NET INCOME -1.64 1.15 2 1.83 1.09 84 1.61 1.36 69 1.43 1.31 MARGIN ANALYSIS: INT INC (TE) TO AVG EARN ASSETS 6.12 6.32 37 6.80 8.33 8 7.48 7.70 33 7.75 8.34 INT EXPENSE TO AVG EARN ASSETS 2.02 2.40 22 2.89 4.57 2 3.85 3.82 52 3.88 4.04 NET INT INC-TE TO AVG EARN ASST 4.10 3.92 51 3.91 3.79 53 3.63 3.92 25 3.88 4.33 LOAN & LEASE ANALYSIS NET LOSS TO AVERAGE TOTAL LN&LS EARNINGS COVERAGE OF NET LOSS(X) LN&LS ALLOWANCE TO NET LOSSES(X) CAPITALIZATION CASH DIVIDENDS TO NET INCOME RETAIN EARNS TO AVG TOT EQUITY YIELD ON OR COST OF: TOTAL LOANS & LEASES (TE) LOANS IN DOMESTIC OFFICES REAL ESTATE COMMERCIAL & INDUSTRIAL INDIVIDUAL CREDIT CARD PLANS AGRICULTURAL LOANS IN FOREIGN OFFICES TOTAL INVESTMENT SECURITIES(TE) TOTAL INVESTMENT SECURITES(BOOK) U S TREAS & AGENCY (EXCL MBS) MORTGAGE BACKED SECURITIES ALL OTHER SECURITIES INTEREST-BEARING BANK BALANCES FEDERAL FUNDS SOLD & RESALES TOTAL INT-BEARING DEPOSITS TRANSACTION ACCOUNTS OTHER SAVINGS DEPOSITS TIME DEPS OVER $100M ALL OTHER TIME DEPOSITS DEPOSITS IN FOREIGN OFFICES FEDERAL FUNDS PURCHASED & REPOS OTHER BORROWED MONEY SUBORD NOTES & DEBENTURES ALL INTEREST-BEARING FUNDS 7.29 0.35 0.20 -97.00 -39.00 6.58 6.53 6.86 6.56 6.44 0.00 6.31 0.14 4.87 4.87 2.73 5.73 3.24 3.01 2.02 2.28 1.64 1.37 4.68 4.29 2.04 1.94 2.64 5.92 2.41 0.83 5.51 2.17 61.66 -0.30 6.79 6.68 6.91 6.40 7.81 4.71 5.49 12.16 6.06 5.92 4.79 6.21 5.73 4.14 2.25 2.51 1.43 1.46 4.21 4.50 1.56 2.26 4.52 3.78 2.73 98 8 7 7 5 37 34 42 58 30 57 52 78 18 21 17 20 11 52 22 37 67 50 71 44 44 34 18 67 28 0.34 10.10 3.84 104.71 -1.05 7.47 7.43 6.04 8.57 11.13 NA 11.10 0.22 0.53 0.52 NA NA NA 6.19 6.54 4.85 3.35 1.64 7.82 6.57 6.61 14.47 -8.25 7.69 3.27 0.58 8.36 3.26 84.86 0.92 8.90 8.93 8.77 9.51 10.25 0.00 8.38 1.53 6.90 6.74 0.00 0.00 0.00 7.38 6.67 4.71 2.67 2.10 6.34 6.20 4.80 6.42 6.49 5.85 5.22 32 70 69 73 35 5 5 1 14 66 98 87 76 2 2 98 98 98 43 26 61 67 39 92 76 78 97 1 77 1 0.21 14.89 5.81 135.80 -6.95 7.75 7.72 7.36 8.73 8.22 NA 8.67 0.40 5.88 5.86 NA NA NA 6.29 5.46 3.66 2.42 1.54 5.33 5.12 5.32 5.02 5.84 7.04 4.35 0.49 11.08 3.70 76.50 2.02 8.25 8.29 8.45 8.66 9.65 0.00 7.78 0.50 6.53 6.36 0.00 0.00 0.00 5.79 5.65 3.92 2.09 2.09 5.32 5.22 4.12 5.41 7.08 5.31 4.45 16 80 82 76 25 22 22 7 64 25 98 58 77 16 23 98 98 98 72 47 30 63 30 50 57 69 20 61 76 48 1.22 2.67 1.01 73.54 4.35 8.04 8.01 7.62 7.78 11.42 NA 6.40 0.30 5.50 5.46 NA NA NA 5.10 4.95 3.76 2.80 1.76 4.95 5.56 4.98 4.58 5.68 6.91 4.41 0.50 10.90 4.27 70.45 3.43 8.97 8.97 8.63 9.05 11.64 0.00 8.28 1.18 7.19 6.97 0.00 0.00 0.00 6.63 5.75 4.53 2.61 2.54 5.89 6.06 4.33 5.22 6.56 5.03 4.83

PAGE 12 4/1/02 5:32:28 PM 12/31/1997 BANK 10.52 5.24 5.28 2.83 5.01 0.15 2.96 0.14 3.10 1.92 1.52 1.92 11.57 5.76 5.81 0.69 5.57 2.61 92.44 1.80 12.04 12.05 14.49 9.49 12.92 NA 36.84 4.83 9.61 9.42 NA NA NA 11.77 -4.56 6.40 4.20 2.57 13.90 8.17 6.41 8.88 6.97 9.49 6.71 PEER1 7.50 3.65 3.90 2.17 3.72 0.33 2.04 0.03 2.10 1.41 1.39 1.41 1.41 8.30 4.02 4.33 0.52 9.53 4.42 71.99 2.12 8.97 8.99 8.93 8.72 11.23 0.00 9.86 7.81 6.97 6.82 0.00 0.00 0.00 6.05 5.66 4.49 2.41 2.50 5.78 5.96 4.79 5.73 5.94 6.01 4.84

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SUMMARY INFORMATION FOR BANKS IN STATE STAVG

SUMMARY INFORMATION FOR BANKS IN STATE OF PENNSYLVANIA AVERAGE FOR ALL INSURED COMMERCIAL BANKS IN STATE 12/31/2001 12/31/2000 12/31/1999 12/31/1998 12/31/1997 EARNINGS AND PROFITABILITY PERCENT OF AVERAGE ASSETS: INTEREST INCOME (TE) - INTEREST EXPENSE NET INTEREST INCOME (TE) + NONINTEREST INCOME - NON-INTEREST EXPENSE - PROVISION: LOAN&LEASE LOSSES = PRETAX OPERATING INCOME (TE) + SECURITIES GAINS (LOSSES) = PRETAX NET OPERATING INC (TE) NET OPERATING INCOME ADJUSTED NET OPERATING INCOME NET INCOME ADJUSTED SUB S NET INCOME MARGIN ANALYSIS AVG EARNINGS ASSETS TO AVG ASSETS AVG INT-BEARING FUNDS TO AVG AST INT INC (TE) TO AVG EARN ASSETS INT EXPENSE TO AVG EARN ASSETS NET INT INC-TE TO AVG EARN ASSET LOAN & LEASE ANALYSIS NET LOSS TO AVERAGE TOTAL LN&LS EARNINGS COVERAGE OF NET LOSS(X) LN&LS ALLOWANCE TO NET LOSSES(X) LN&LS ALLOWANCE TO TOTAL LN&LS LIQUIDITY NET NON CORE FUNDING DEPENDENCE NET LOANS & LEASES TO ASSETS CAPITALIZATION TIER ONE LEVERAGE CAPITAL CASH DIVIDENDS TO NET INCOME RETAIN EARNS TO AVG TOTAL EQUITY GROWTH RATES ASSETS TIER ONE CAPITAL NET LOANS & LEASES SHORT TERM INVESTMENTS SHORT TERM NON CORE FUNDING NON-CURRENT LOANS & LEASES: TOTAL LN&LS-90+ DAYS PAST DUE - NONACCRUAL - TOTAL TOTAL ASSETS ($MILLIONS) EQUITY CAPITAL ($MILLIONS) NET INCOME ($ MILLIONS) NUMBER OF BANKS IN TABULATION 7.09 3.34 3.75 0.70 2.86 0.17 1.48 0.04 1.54 1.04 1.09 1.04 1.04 93.66 78.69 7.57 3.58 4.01 0.17 27.41 14.08 1.21 15.13 62.67 9.40 42.40 4.71 11.18 5.85 9.45 62.88 15.57 0.24 0.54 0.86 193,504.03 17053 2599 181 7.51 3.62 3.91 0.64 2.94 0.15 1.54 0.00 1.54 1.04 1.12 1.04 1.04 94.23 78.54 7.96 3.85 4.14 0.13 28.02 13.36 1.21 13.61 63.87 9.95 44.19 4.83 9.68 6.50 12.13 83.07 8.56 0.20 0.40 0.65 189,582.47 15919 2783 187 7.20 3.23 3.96 0.60 2.82 0.14 1.66 0.01 1.68 1.12 1.17 1.11 1.12 94.17 78.40 7.65 3.43 4.21 0.12 35.97 16.27 1.21 14.56 62.49 9.78 42.73 5.48 9.90 7.37 13.29 -26.85 66.69 0.23 0.45 0.78 195,327.84 16547 2565 193 7.50 3.41 4.09 0.56 2.86 0.14 1.72 0.03 1.77 1.17 1.22 1.17 1.17 94.45 77.97 7.94 3.62 4.33 0.14 32.70 14.99 1.26 7.26 60.80 10.02 40.51 5.81 12.87 8.26 10.42 35.10 14.13 0.29 0.45 0.82 198,351.60 17743 2762 197 7.64 3.42 4.22 0.55 2.83 0.14 1.84 0.02 1.87 1.23 1.28 1.23 1.23 94.47 78.01 8.10 3.62 4.48 0.15 32.22 14.06 1.28 6.57 62.47 10.07 37.36 6.69 10.22 8.86 11.45 38.44 28.66 0.33 0.51 0.94 267,581.33 23039 3689 212

STAVG BANKS WITH ASSETS - $MILL 12/31/2001 0-25 25-100 100+ 6.48 2.76 3.72 3.60 7.02 0.14 0.15 0.02 0.18 0.00 0.14 0.00 0.00 88.64 64.53 7.33 3.13 4.20 0.00 66.50 18.50 1.00 10.15 49.23 22.60 20.12 -3.27 16.50 -0.50 30.73 61.41 98.88 0.21 0.00 0.21 133.89 39 -2 6 7.12 3.41 3.74 0.62 3.41 0.23 0.81 0.04 0.93 0.57 0.71 0.57 0.57 93.55 75.84 7.59 3.65 3.99 0.13 57.83 33.87 1.28 6.45 63.86 12.20 22.85 2.36 13.99 2.90 14.37 128.44 31.05 0.53 0.73 1.38 2,216.21 265 9 33 7.10 3.35 3.76 0.71 2.75 0.16 1.59 0.04 1.64 1.11 1.15 1.11 1.11 93.76 79.64 7.58 3.57 4.01 0.18 24.12 12.03 1.19 17.04 62.89 8.72 47.44 5.34 10.34 6.74 8.11 47.78 12.30 0.21 0.57 0.84 191,153.94 16749 2592 142

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• • • • • • • • • • • • • • Bank Financial Statement Analysis Alternate method to evaluate Banks Managing non-op income/ exp Pricing Securities Interest Rates Duration/ Gaps ALM Loans Customer profitability Options Futures Investment strategies Mergers Lending to SSIs/ Priority Sector/ CRR/ SLR/ CIBIL/ CDC/ etc. Banking Operations /Bankers Duties & Responsibilities/ etc.

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