PNC Financial Services Group (PNC) reported record income for 2010, even as its residential mortgage banking unit saw earnings drop more than 35% during the fourth quarter as it was hit with higher foreclosure costs. PNC had net income of $3.4 billion, or $5.74 per share, compared with 2009 net income of $2.4 billion, or $4.36 per share. Revenue was $15.17 billion, down from $16.23 billion a year ago. For the fourth quarter, PNC earned $798 million, or $1.50 per share, compared to $1.1 billion, or $2.17 per share, for the fourth quarter of 2009. Revenue was $3.9 billion, down from $4.89 billion in the year-ago period. Excluding gains linked to BlackRock's acquisition of Barclays Global Investors, PNC said adjusted earnings in the fourth quarter were $1.60, up from 90 cents a year earlier. “Net income and Tier 1 capital reached record levels, we transitioned to a higher quality balance sheet and credit quality has improved,” said James E. Rohr, chairman and chief executive officer. PNC's residential mortgage banking unit earned $275 million for the full year compared with $435 million for 2009. The decline was driven by a decrease in loan sales revenue from lower origination volumes and lower net hedging gains on mortgage servicing rights. Earnings for the residential mortgage unit were $3 million in the fourth quarter compared with $25 million in the fourth quarter of 2009. Earnings declined primarily due to higher foreclosure-related expenses and, when compared to the previous quarter, by lower net hedging gains on mortgage servicing rights. Noninterest expense for the fourth quarter of 2010 was $2.3 billion compared to $2.2 billion in the fourth quarter of 2009, due in part to higher residential mortgage expenses principally related to foreclosure activities. Overall credit quality continued to improve during the fourth quarter of 2010. Nonperforming assets declined $368 million to $5.3 billion as of Dec. 31. Accruing loans past due decreased $133 million, or 7%, during the quarter to $1.9 billion at year-end. The allowance for loan and lease losses was $4.9 billion, or 3.25% of total loans and 109% of nonperforming loans, as of Dec. 31. Residential mortgage fees in the fourth quarter declined $59 million, or 27%, from the third quarter mainly as a result of lower net hedging gains on mortgage servicing rights and lower loan servicing revenue. Write to Kerry Curry. Follow her on Twitter @communicatorKLC. The author holds no relevant investments.