In the current banking environment, even the most disciplined spread lenders and subprime or Alt-A mortgage originators will stumble. However, PNC Financial's (NYSE:PNC) diversification helped it avoid the usual problems and buck the trend by posting great results.

In the first quarter, PNC increased adjusted earnings per share (which excludes one-time items) by 15% to $1.38 per share, and adjusted return on average assets increased seven basis points to 1.64%. In such a tough banking environment, PNC's secret sauce is that it has multiple weapons in its arsenal. Non-interest, or fee income, which helps insulate PNC from the vagaries of diminishing interest rate spreads, accounts for 60% of total sales, far more than most of PNC's banking peers. PNC's 34% stake in ultra-successful investment manager Blackrock (NYSE:BLK) -- which combined its operations with Merrill Lynch's (NYSE:MER) investment management business last year -- also helps insulate earnings from interest rate spreads.

Thus, because PNC has multiple revenue and earning streams, it can be very picky about where it chooses to do business. This has helped it sidestep credit problems in mortgages because the company doesn't do Alt-A lending, nor does it target subprime borrowers. In fact, credit quality got better in the first quarter, with nonperforming assets as a percentage of total assets dropping five basis points to 0.17% from 0.22% a year ago.

PNC's ability to be selective also manifests in its cost of funds. In the conference call, management noted that because PNC maintains a low loan-to-deposit ratio of 81%, it has ample liquidity and avoids chasing higher cost deposits (also known as "hot money"). This has helped the company keep the net interest margin flat at 2.95%

PNC's management also reported that its integration of the Mercantile Bankshares acquisition is proceeding as planned, with strong retention of Mercantile's sales force. All in all, the quarter's results, in contrast with many of its competitor's struggles, helped highlight the virtue of PNC's diversified business model.

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy.