Enduring criticism can be tough, especially when your competitors are vaulting ahead and leaving you in the dust. PNC Financial (NYSE:PNC) must certainly feel vindicated, then, since tenaciously maintaining its conservative practices helped it get the last laugh with its third-quarter results.

Not too long ago, PNC was getting criticized for its slow net interest income growth. However, PNC decided not to lose its head. As CEO Jim Rohr put it, "We didn't take subprime bets, we didn't rely on exotic product plays ... that strategy served us well."

The third quarter has been rough for many banks. Citigroup's (NYSE:C) net income dropped 57%, Wachovia's (NYSE:WB) fell 10%, and Washington Mutual's (NYSE:WM) plunged by 70%. Meanwhile, PNC -- after adjusting for the merger with Blackrock and Merrill Lynch's investment-management business -- earned $469 million in the third quarter, compared with $380 million a year ago.

PNC, along with Wells Fargo (NYSE:WFC) and Income Investor recommendation US Bancorp (NYSE:USB), belongs to an elite group of banks I call the 50/50 Club. These banks garner about 50% of their income from spread lending (the difference between long-term earning-asset rates and short-term depositor rates), and about 50% from non-interest income such as asset-management fees, deposit charges, and debit-card fees.

That 50% of revenue from fee income provides very valuable diversification and allows the banks to stay disciplined through credit cycles. All of the banks I mentioned in the 50/50 Club increased their income in Q3, despite being in one of the toughest banking environments of the past decade.

PNC has an easier time than many other banks do of staying disciplined in environments such as the current one, because 58% of its revenues come from fee-based businesses. They allow the company to earn high returns on capital without taking too many risks.

And those businesses have been performing extremely well.

PNC's non-performing assets as a percentage of total assets increased a mere 2 basis points to 0.22% from 0.20% last quarter. And the loan-to-deposit ratio remained among the lowest of its peers at 84%.

Unfortunately, the stock market doesn't seem to appreciate PNC's superior business franchise. Even as competitors such as State Street (NYSE:STT) and Northern Trust sell at all-time highs, PNC's stock languishes. That's probably why PNC just instituted a program to buy back a whopping 25 million shares. That's a pretty good indicator that these shares might be undervalued.

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