64
The PNC Financial Services Group, Inc.
Form 10-Q
Table 52: Fair Value Option Fair Value and Principal Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
Fair
Value
|
|
|
Aggregate Unpaid
Principal Balance
|
|
|
Difference
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
$
|
837
|
|
|
$
|
805
|
|
|
$
|
32
|
|
Accruing loans 90 days or more past due
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
Nonaccrual loans
|
|
|
9
|
|
|
|
11
|
|
|
|
(2
|
)
|
Total
|
|
|
850
|
|
|
|
820
|
|
|
|
30
|
|
Commercial mortgage loans held for sale (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
980
|
|
|
|
1,012
|
|
|
|
(32
|
)
|
Nonaccrual loans
|
|
|
2
|
|
|
|
3
|
|
|
|
(1
|
)
|
Total
|
|
|
982
|
|
|
|
1,015
|
|
|
|
(33
|
)
|
Residential mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
259
|
|
|
|
293
|
|
|
|
(34
|
)
|
Accruing loans 90 days or more past due
|
|
|
356
|
|
|
|
366
|
|
|
|
(10
|
)
|
Nonaccrual loans
|
|
|
204
|
|
|
|
330
|
|
|
|
(126
|
)
|
Total
|
|
|
819
|
|
|
|
989
|
|
|
|
(170
|
)
|
Other assets
|
|
|
237
|
|
|
|
232
|
|
|
|
5
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowed funds
|
|
$
|
56
|
|
|
$
|
57
|
|
|
$
|
(1
|
)
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans held for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
$
|
1,000
|
|
|
$
|
988
|
|
|
$
|
12
|
|
Accruing loans 90 days or more past due
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
Nonaccrual loans
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
Total
|
|
|
1,010
|
|
|
|
998
|
|
|
|
12
|
|
Commercial mortgage loans held for sale (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
1,395
|
|
|
|
1,412
|
|
|
|
(17
|
)
|
Nonaccrual loans
|
|
|
5
|
|
|
|
9
|
|
|
|
(4
|
)
|
Total
|
|
|
1,400
|
|
|
|
1,421
|
|
|
|
(21
|
)
|
Residential mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing loans
|
|
|
247
|
|
|
|
289
|
|
|
|
(42
|
)
|
Accruing loans 90 days or more past due
|
|
|
427
|
|
|
|
428
|
|
|
|
(1
|
)
|
Nonaccrual loans
|
|
|
219
|
|
|
|
346
|
|
|
|
(127
|
)
|
Total
|
|
|
893
|
|
|
|
1,063
|
|
|
|
(170
|
)
|
Other assets
|
|
|
293
|
|
|
|
288
|
|
|
|
5
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowed funds
|
|
$
|
81
|
|
|
$
|
82
|
|
|
$
|
(1
|
)
|
(a)
|
There were no accruing loans 90 days or more past due within this category at June 30, 2017 or December 31, 2016.
|
The changes in fair value for items for which we elected the fair value option and are included in
Noninterest income and Noninterest expense on the Consolidated Income Statement are as follows.
Table 53:
Fair Value Option Changes in Fair Value (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses)
Three months ended
|
|
|
Gains (Losses)
Six months ended
|
|
In millions
|
|
June 30
2017
|
|
|
June 30
2016
|
|
|
June 30
2017
|
|
|
June 30
2016
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage loans held for sale
|
|
$
|
32
|
|
|
$
|
59
|
|
|
$
|
62
|
|
|
$
|
106
|
|
Commercial mortgage loans held for sale
|
|
$
|
25
|
|
|
$
|
22
|
|
|
$
|
43
|
|
|
$
|
49
|
|
Residential mortgage loans
|
|
$
|
7
|
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
17
|
|
Other assets
|
|
$
|
13
|
|
|
$
|
(3
|
)
|
|
$
|
20
|
|
|
$
|
(30
|
)
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
(3
|
)
|
|
|
|
|
|
$
|
(19
|
)
|
|
|
|
|
(a)
|
The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.
|
The PNC
Financial Services Group, Inc.
Form 10-Q
65
Additional Fair Value Information Related to Financial Instruments Not Recorded at Fair Value
The following table presents the carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of
all other financial instruments that are not recorded on the consolidated balance sheet at fair value as of June 30, 2017 and December 31, 2016.
Table 54: Additional Fair Value Information Related to Other Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Fair Value
|
|
In millions
|
|
Amount
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
5,039
|
|
|
$
|
5,039
|
|
|
$
|
5,039
|
|
|
|
|
|
|
|
|
|
Interest-earning deposits with banks
|
|
|
22,482
|
|
|
|
22,482
|
|
|
|
|
|
|
$
|
22,482
|
|
|
|
|
|
Securities held to maturity
|
|
|
17,553
|
|
|
|
17,669
|
|
|
|
565
|
|
|
|
16,961
|
|
|
$
|
143
|
|
Net loans (excludes leases)
|
|
|
206,935
|
|
|
|
209,414
|
|
|
|
|
|
|
|
|
|
|
|
209,414
|
|
Other assets
|
|
|
5,426
|
|
|
|
5,967
|
|
|
|
|
|
|
|
5,287
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
257,435
|
|
|
$
|
260,571
|
|
|
$
|
5,604
|
|
|
$
|
44,730
|
|
|
$
|
210,237
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
259,176
|
|
|
$
|
259,030
|
|
|
|
|
|
|
$
|
259,030
|
|
|
|
|
|
Borrowed funds
|
|
|
55,001
|
|
|
|
55,686
|
|
|
|
|
|
|
|
54,175
|
|
|
$
|
1,511
|
|
Unfunded loan commitments and letters of credit
|
|
|
304
|
|
|
|
304
|
|
|
|
|
|
|
|
|
|
|
|
304
|
|
Other liabilities
|
|
|
437
|
|
|
|
437
|
|
|
|
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
314,918
|
|
|
$
|
315,457
|
|
|
|
|
|
|
$
|
313,642
|
|
|
$
|
1,815
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
4,879
|
|
|
$
|
4,879
|
|
|
$
|
4,879
|
|
|
|
|
|
|
|
|
|
Interest-earning deposits with banks
|
|
|
25,711
|
|
|
|
25,711
|
|
|
|
|
|
|
$
|
25,711
|
|
|
|
|
|
Securities held to maturity
|
|
|
15,843
|
|
|
|
15,866
|
|
|
|
540
|
|
|
|
15,208
|
|
|
$
|
118
|
|
Net loans (excludes leases)
|
|
|
199,766
|
|
|
|
201,863
|
|
|
|
|
|
|
|
|
|
|
|
201,863
|
|
Other assets
|
|
|
4,793
|
|
|
|
5,243
|
|
|
|
|
|
|
|
4,666
|
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
250,992
|
|
|
$
|
253,562
|
|
|
$
|
5,419
|
|
|
$
|
45,585
|
|
|
$
|
202,558
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
257,164
|
|
|
$
|
257,038
|
|
|
|
|
|
|
$
|
257,038
|
|
|
|
|
|
Borrowed funds
|
|
|
51,736
|
|
|
|
52,322
|
|
|
|
|
|
|
|
50,941
|
|
|
$
|
1,381
|
|
Unfunded loan commitments and letters of credit
|
|
|
301
|
|
|
|
301
|
|
|
|
|
|
|
|
|
|
|
|
301
|
|
Other liabilities
|
|
|
417
|
|
|
|
417
|
|
|
|
|
|
|
|
417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
309,618
|
|
|
$
|
310,078
|
|
|
|
|
|
|
$
|
308,396
|
|
|
$
|
1,682
|
|
The aggregate fair values in Table 54 represent only a portion of the total market value of our assets and
liabilities as, in accordance with the guidance related to fair values about financial instruments, we exclude the following:
|
|
|
financial instruments recorded at fair value on a recurring basis (as they are disclosed in Table 47),
|
|
|
|
investments accounted for under the equity method,
|
|
|
|
real and personal property,
|
|
|
|
loan customer relationships,
|
|
|
|
deposit customer intangibles,
|
|
|
|
mortgage servicing rights,
|
|
|
|
retail branch networks,
|
|
|
|
fee-based
businesses, such as asset management and brokerage, and
|
|
|
|
trademarks and brand names.
|
For more information regarding the methods and assumptions used to estimate the fair values of financial instruments included in Table 54, see Note 6
Fair Value in our 2016
Form 10-K.
66
The PNC Financial Services Group, Inc.
Form 10-Q
N
OTE
7 G
OODWILL
AND
M
ORTGAGE
S
ERVICING
R
IGHTS
Goodwill
See Note 7 Goodwill and Mortgage Servicing Rights in our 2016 Form
10-K
for more information regarding our
goodwill.
Mortgage Servicing Rights
We recognize the right to service mortgage loans for others when we recognize it as an intangible asset and the servicing income we receive is more than adequate compensation. MSRs totaled
$1.9 billion and $1.8 billion at June 30, 2017 and December 31, 2016, respectively, and consisted of loan servicing contracts for commercial and residential mortgages measured at fair value.
MSRs are subject to declines in value from actual or expected prepayment of the underlying loans and defaults as well as market driven changes in
interest rates. We manage this risk by economically hedging the fair value of MSRs with securities and derivative instruments which are expected to increase (or decrease) in value when the value of MSRs decreases (or increases).
See the Sensitivity Analysis section of this Note 7, as well as Note 6 Fair Value in our 2016 Form
10-K
for more
detail on our fair value measurement of MSRs. Refer to Note 7 Goodwill and Mortgage Servicing Rights in our 2016
Form 10-K
for more information on our accounting and measurement of MSRs.
Changes in the commercial and residential MSRs follow:
Table 55: Mortgage Servicing Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial MSRs
|
|
|
Residential MSRs
|
|
In millions
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
January 1
|
|
$
|
576
|
|
|
$
|
526
|
|
|
$
|
1,182
|
|
|
$
|
1,063
|
|
Additions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From loans sold with servicing retained
|
|
|
46
|
|
|
|
23
|
|
|
|
28
|
|
|
|
23
|
|
Purchases
|
|
|
34
|
|
|
|
9
|
|
|
|
154
|
|
|
|
105
|
|
Changes in fair value due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time and payoffs (a)
|
|
|
(52
|
)
|
|
|
(46
|
)
|
|
|
(85
|
)
|
|
|
(78
|
)
|
Other (b)
|
|
|
14
|
|
|
|
(64
|
)
|
|
|
(30
|
)
|
|
|
(339
|
)
|
June 30
|
|
$
|
618
|
|
|
$
|
448
|
|
|
$
|
1,249
|
|
|
$
|
774
|
|
Related unpaid principal balance at June 30
|
|
$
|
147,531
|
|
|
$
|
142,968
|
|
|
$
|
131,060
|
|
|
$
|
126,172
|
|
Servicing advances at June 30
|
|
$
|
239
|
|
|
$
|
244
|
|
|
$
|
218
|
|
|
$
|
335
|
|
(a)
|
Represents decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or
paid off during the period.
|
(b)
|
Represents MSR value changes resulting primarily from market-driven changes in interest rates.
|
Sensitivity Analysis
The fair value of commercial and residential MSRs and significant inputs to the valuation models as of June 30, 2017 are shown in Tables 56 and 57. The expected and actual rates of mortgage loan
prepayments are significant factors driving the fair value. Management uses both internal proprietary models and a third-party model to estimate future commercial mortgage loan prepayments and a third-party model to estimate future residential
mortgage loan prepayments. These models have been refined based on current market conditions and management judgment. Future interest rates are another important factor in the valuation of MSRs. Management utilizes market implied forward interest
rates to estimate the future direction of mortgage and discount rates. The forward rates utilized are derived from the current yield curve for U.S. dollar interest rate swaps and are consistent with pricing of capital markets instruments. Changes in
the shape and slope of the forward curve in future periods may result in volatility in the fair value estimate.
A sensitivity analysis of the
hypothetical effect on the fair value of MSRs to adverse changes in key assumptions is presented in Tables 56 and 57. These sensitivities do not include the impact of the related hedging activities. Changes in fair value generally cannot be
extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated independently without
changing any other assumption. In reality, changes in one factor may result in changes in another (for example, changes in mortgage interest rates, which drive changes in prepayment rate estimates, could result in changes in the interest rate
spread), which could either magnify or counteract the sensitivities.
The following tables set forth the fair value of commercial and
residential MSRs and the sensitivity analysis of the hypothetical effect on the fair value of MSRs to immediate adverse changes of 10% and 20% in those assumptions.
Table 56: Commercial Mortgage Loan Servicing Rights Key Valuation Assumptions
|
|
|
|
|
|
|
|
|
Dollars in millions
|
|
June 30
2017
|
|
|
December 31
2016
|
|
Fair value
|
|
$
|
618
|
|
|
$
|
576
|
|
Weighted-average life (years)
|
|
|
4.5
|
|
|
|
4.6
|
|
Weighted-average constant prepayment rate
|
|
|
8.14
|
%
|
|
|
8.61
|
%
|
Decline in fair value from 10% adverse change
|
|
$
|
11
|
|
|
$
|
11
|
|
Decline in fair value from 20% adverse change
|
|
$
|
22
|
|
|
$
|
21
|
|
Effective discount rate
|
|
|
7.60
|
%
|
|
|
7.52
|
%
|
Decline in fair value from 10% adverse change
|
|
$
|
16
|
|
|
$
|
16
|
|
Decline in fair value from 20% adverse change
|
|
$
|
32
|
|
|
$
|
31
|
|
The PNC
Financial Services Group, Inc.
Form 10-Q
67
Table 57: Residential Mortgage Loan Servicing Rights Key Valuation
Assumptions
|
|
|
|
|
|
|
|
|
Dollars in millions
|
|
June 30
2017
|
|
|
December 31
2016
|
|
Fair value
|
|
$
|
1,249
|
|
|
$
|
1,182
|
|
Weighted-average life (years)
|
|
|
6.5
|
|
|
|
6.8
|
|
Weighted-average constant prepayment rate
|
|
|
9.95
|
%
|
|
|
9.41
|
%
|
Decline in fair value from 10% adverse change
|
|
$
|
48
|
|
|
$
|
45
|
|
Decline in fair value from 20% adverse change
|
|
$
|
93
|
|
|
$
|
86
|
|
Weighted-average option adjusted spread
|
|
|
845
|
bps
|
|
|
850
|
bps
|
Decline in fair value from 10% adverse change
|
|
$
|
38
|
|
|
$
|
37
|
|
Decline in fair value from 20% adverse change
|
|
$
|
74
|
|
|
$
|
72
|
|
Fees from mortgage loan servicing, which includes contractually specified servicing fees, late fees and
ancillary fees were $.1 billion for both the three months ended June 30, 2017 and 2016 and $.2 billion and $.3 billion for the six months ended June 30, 2017 and 2016, respectively. We also generate servicing fees from
fee-based
activities provided to others for which we do not have an associated servicing asset. Fees from commercial and residential MSRs are reported on our Consolidated Income Statement in the line items Corporate
services and Residential mortgage, respectively.
N
OTE
8 E
MPLOYEE
B
ENEFIT
P
LANS
Pension and Postretirement Plans
As described in Note 11 Employee Benefit Plans in our 2016 Form
10-K,
we have a noncontributory, qualified defined
benefit pension plan covering eligible employees. Benefits are determined using a cash balance formula where earnings credits are a percentage of eligible compensation. Any pension contributions to the plan are based on an actuarially determined
amount necessary to fund total benefits payable to plan participants.
We also maintain nonqualified supplemental retirement plans for certain
employees and provide certain health care and life insurance benefits for qualifying retired employees (postretirement benefits) through various plans. We reserve the right to terminate or make changes to these plans at any time. The nonqualified
pension plan is unfunded.
The components of our net periodic benefit cost for the three and six months ended June 30, 2017 and 2016,
respectively, were as follows:
Table 58: Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Pension Plan
|
|
|
Nonqualified Retirement
Plans
|
|
|
Postretirement Benefits
|
|
Three months ended June 30
In millions
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net periodic cost consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
25
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Interest cost
|
|
|
44
|
|
|
|
47
|
|
|
$
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
Expected return on plan assets
|
|
|
(71
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Amortization of prior service credit
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Amortization of actuarial losses
|
|
|
10
|
|
|
|
11
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Net periodic cost/(benefit)
|
|
$
|
7
|
|
|
$
|
11
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Pension Plan
|
|
|
Nonqualified Retirement
Plans
|
|
|
Postretirement Benefits
|
|
Six months ended June 30
In millions
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net periodic cost consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
51
|
|
|
$
|
51
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Interest cost
|
|
|
89
|
|
|
|
93
|
|
|
|
6
|
|
|
|
6
|
|
|
|
7
|
|
|
|
7
|
|
Expected return on plan assets
|
|
|
(142
|
)
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Amortization of prior service credit
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Amortization of actuarial losses
|
|
|
22
|
|
|
|
22
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Net periodic cost/(benefit)
|
|
$
|
18
|
|
|
$
|
22
|
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
6
|
|
|
$
|
7
|
|
68
The PNC Financial Services Group, Inc.
Form 10-Q
N
OTE
9 F
INANCIAL
D
ERIVATIVES
We use derivative financial instruments primarily to help manage exposure to interest rate, market and credit risk and reduce the effects
that changes in interest rates may have on net income, the fair value of assets and liabilities, and cash flows. We also enter into derivatives with customers to facilitate their risk management activities. Derivatives represent contracts between
parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional amount and an underlying as specified in the contract.
For more information regarding derivatives see Note 1 Accounting Policies and Note 13 Financial Derivatives in our Notes To Consolidated Financial
Statements in our 2016 Form
10-K.
The following table presents the notional amounts and gross fair
values of all derivative assets and liabilities held by us.
Table 59: Total Gross Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
In millions
|
|
Notional /
Contract
Amount
|
|
|
Asset Fair
Value (a)
|
|
|
Liability Fair
Value (b)
|
|
|
Notional /
Contract
Amount
|
|
|
Asset Fair
Value (a)
|
|
|
Liability Fair
Value (b)
|
|
Derivatives used for hedging under GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges (d)
|
|
$
|
33,057
|
|
|
$
|
201
|
|
|
$
|
63
|
|
|
$
|
34,010
|
|
|
$
|
551
|
|
|
$
|
214
|
|
Cash flow hedges (d)
|
|
|
20,875
|
|
|
|
91
|
|
|
|
3
|
|
|
|
20,831
|
|
|
|
313
|
|
|
|
71
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment hedges
|
|
|
1,003
|
|
|
|
|
|
|
|
25
|
|
|
|
945
|
|
|
|
25
|
|
|
|
|
|
Total derivatives designated for hedging
|
|
$
|
54,935
|
|
|
$
|
292
|
|
|
$
|
91
|
|
|
$
|
55,786
|
|
|
$
|
889
|
|
|
$
|
285
|
|
Derivatives not used for hedging under GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives used for mortgage banking activities (e):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps (d)
|
|
$
|
51,993
|
|
|
$
|
355
|
|
|
$
|
152
|
|
|
$
|
49,071
|
|
|
$
|
783
|
|
|
$
|
505
|
|
Futures (f)
|
|
|
38,413
|
|
|
|
|
|
|
|
|
|
|
|
36,264
|
|
|
|
|
|
|
|
|
|
Mortgage-backed commitments
|
|
|
13,095
|
|
|
|
35
|
|
|
|
24
|
|
|
|
13,317
|
|
|
|
96
|
|
|
|
56
|
|
Other
|
|
|
52,531
|
|
|
|
10
|
|
|
|
8
|
|
|
|
31,907
|
|
|
|
28
|
|
|
|
4
|
|
Subtotal
|
|
|
156,032
|
|
|
|
400
|
|
|
|
184
|
|
|
|
130,559
|
|
|
|
907
|
|
|
|
565
|
|
Derivatives used for customer-related activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps (d)
|
|
|
187,675
|
|
|
|
2,232
|
|
|
|
1,833
|
|
|
|
173,777
|
|
|
|
2,373
|
|
|
|
2,214
|
|
Futures (f)
|
|
|
3,860
|
|
|
|
|
|
|
|
|
|
|
|
4,053
|
|
|
|
|
|
|
|
|
|
Mortgage-backed commitments
|
|
|
3,375
|
|
|
|
8
|
|
|
|
4
|
|
|
|
2,955
|
|
|
|
10
|
|
|
|
8
|
|
Other
|
|
|
19,380
|
|
|
|
81
|
|
|
|
39
|
|
|
|
16,203
|
|
|
|
55
|
|
|
|
53
|
|
Subtotal
|
|
|
214,290
|
|
|
|
2,321
|
|
|
|
1,876
|
|
|
|
196,988
|
|
|
|
2,438
|
|
|
|
2,275
|
|
Foreign exchange contracts and other
|
|
|
22,991
|
|
|
|
237
|
|
|
|
223
|
|
|
|
21,889
|
|
|
|
342
|
|
|
|
309
|
|
Subtotal
|
|
|
237,281
|
|
|
|
2,558
|
|
|
|
2,099
|
|
|
|
218,877
|
|
|
|
2,780
|
|
|
|
2,584
|
|
Derivatives used for other risk management activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts and other (g)
|
|
|
6,283
|
|
|
|
6
|
|
|
|
321
|
|
|
|
5,581
|
|
|
|
40
|
|
|
|
405
|
|
Total derivatives not designated for hedging
|
|
$
|
399,596
|
|
|
$
|
2,964
|
|
|
$
|
2,604
|
|
|
$
|
355,017
|
|
|
$
|
3,727
|
|
|
$
|
3,554
|
|
Total gross derivatives
|
|
$
|
454,531
|
|
|
$
|
3,256
|
|
|
$
|
2,695
|
|
|
$
|
410,803
|
|
|
$
|
4,616
|
|
|
$
|
3,839
|
|
Less: Impact of legally enforceable master netting agreements (d)
|
|
|
|
|
|
|
(1,457
|
)
|
|
|
(1,457
|
)
|
|
|
|
|
|
|
(2,460
|
)
|
|
|
(2,460
|
)
|
Less: Cash collateral received/paid (d)
|
|
|
|
|
|
|
(389
|
)
|
|
|
(634
|
)
|
|
|
|
|
|
|
(657
|
)
|
|
|
(484
|
)
|
Total derivatives
|
|
|
|
|
|
$
|
1,410
|
|
|
$
|
604
|
|
|
|
|
|
|
$
|
1,499
|
|
|
$
|
895
|
|
(a)
|
Included in Other assets on our Consolidated Balance Sheet.
|
(b)
|
Included in Other liabilities on our Consolidated Balance Sheet.
|
(c)
|
Represents primarily swaps.
|
(d)
|
In the first quarter of 2017, PNC changed its accounting treatment for variation margin related to certain derivative instruments cleared through a central clearing
house. Previously, variation margin was treated as collateral subject to offsetting. As a result of changes made by the clearing house to its rules governing such instruments with its counterparties, effective for the first quarter of 2017,
variation margin will be treated as a settlement payment on the derivative instrument. The impact at June 30, 2017 was a reduction of gross derivative assets and gross derivative liabilities by $.9 billion and $.7 billion,
respectively. The accounting change had no impact on the net fair value of the derivative assets and liabilities that otherwise would have been reported on our Consolidated Balance Sheet. See Table 63 for more information.
|
(e)
|
Includes both residential and commercial mortgage banking activities.
|
(f)
|
Futures contracts settle in cash daily and, therefore, no derivative asset or derivative liability is recognized on our Consolidated Balance Sheet.
|
(g)
|
Includes our obligation to fund a portion of certain BlackRock LTIP programs and the swaps entered into in connection with sales of a portion of Visa Class B
common shares.
|
The PNC
Financial Services Group, Inc.
Form 10-Q
69
All derivatives are carried on our Consolidated Balance Sheet at fair value. Derivative balances are
presented on the Consolidated Balance Sheet on a net basis taking into consideration the effects of legally enforceable master netting agreements and, when appropriate, any related cash collateral exchanged with counterparties. Further discussion
regarding the offsetting rights associated with these legally enforceable master netting agreements is included in the Offsetting, Counterparty Credit Risk and Contingent Features section below. Any nonperformance risk, including credit risk, is
included in the determination of the estimated net fair value of the derivatives.
Derivatives Designated As Hedging Instruments under
GAAP
Certain derivatives used to manage interest rate and foreign exchange risk as part of our asset and liability risk management
activities are designated as accounting hedges under GAAP. Derivatives hedging the risks associated with changes in the fair value of assets or liabilities are considered fair value hedges, derivatives hedging the variability of
expected future cash flows are considered cash flow hedges, and derivatives hedging a net investment in a foreign subsidiary are considered net investment hedges. Designating derivatives as
accounting hedges allows for gains and losses on those derivatives, to the extent effective, to be recognized in the income statement in the same period the hedged items affect earnings.
Fair Value Hedges
We enter into receive-fixed,
pay-variable
interest rate swaps to hedge changes in the fair value of outstanding fixed-rate debt caused by fluctuations in market interest rates. We also enter into
pay-fixed,
receive-variable interest rate swaps and
zero-coupon
swaps to hedge changes in the fair value of fixed rate and
zero-coupon
investment securities caused by fluctuations in market interest rates. For these hedge relationships, we use statistical regression analysis to assess hedge effectiveness at both the inception of
the hedge relationship and on an ongoing basis. There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for all periods presented.
Further detail regarding gains
(losses) on fair value hedge derivatives and related hedged items is presented in the following table:
Table 60: Gains (Losses) on Derivatives and Related Hedged Items Fair Value Hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
In millions
|
|
Hedged Items
|
|
Location
|
|
Gain
(Loss) on
Derivatives
Recognized
in Income
|
|
|
Gain (Loss)
on Related
Hedged
Items
Recognized
in Income
|
|
|
Gain
(Loss) on
Derivatives
Recognized
in Income
|
|
|
Gain (Loss)
on Related
Hedged
Items
Recognized
in Income
|
|
|
Gain
(Loss) on
Derivatives
Recognized
in Income
|
|
|
Gain (Loss)
on Related
Hedged
Items
Recognized
in Income
|
|
|
Gain
(Loss) on
Derivatives
Recognized
in Income
|
|
|
Gain (Loss)
on Related
Hedged
Items
Recognized
in Income
|
|
Interest rate contracts
|
|
U.S. Treasury and Government Agencies and Other Debt Securities
|
|
Investment securities (interest income)
|
|
$
|
(34
|
)
|
|
$
|
33
|
|
|
$
|
(55
|
)
|
|
$
|
56
|
|
|
$
|
(12
|
)
|
|
$
|
12
|
|
|
$
|
(209
|
)
|
|
$
|
214
|
|
Interest rate contracts
|
|
Subordinated Debt and Bank Notes and Senior Debt
|
|
Borrowed funds (interest expense)
|
|
|
67
|
|
|
|
(75
|
)
|
|
|
155
|
|
|
|
(168
|
)
|
|
|
(28
|
)
|
|
|
11
|
|
|
|
562
|
|
|
|
(600
|
)
|
Total (a)
|
|
|
|
|
|
$
|
33
|
|
|
$
|
(42
|
)
|
|
$
|
100
|
|
|
$
|
(112
|
)
|
|
$
|
(40
|
)
|
|
$
|
23
|
|
|
$
|
353
|
|
|
$
|
(386
|
)
|
(a)
|
The difference between the gains (losses) recognized in income on derivatives and their related hedged items represents the ineffective portion of the change in value
of our fair value hedge derivatives.
|
Cash Flow Hedges
We enter into receive-fixed,
pay-variable
interest rate swaps to modify the interest rate characteristics of designated commercial loans from variable to fixed in
order to reduce the impact of changes in future cash flows due to market interest rate changes. For these cash flow hedges, any changes in the fair value of the derivatives that are effective in offsetting changes in the forecasted interest cash
flows are recorded in Accumulated other comprehensive income and are reclassified to interest income in conjunction with the recognition of interest received on the loans. We use statistical regression analysis to assess the effectiveness of these
hedge relationships at both the inception of the hedge relationship and on an ongoing basis.
We also periodically enter into forward purchase and sale contracts to hedge the variability of the
consideration that will be paid or received related to the purchase or sale of investment securities. The forecasted purchase or sale is consummated upon gross settlement of the forward contract itself. As a result, hedge ineffectiveness, if any, is
typically minimal. Gains and losses on these forward contracts are recorded in Accumulated other comprehensive income and are recognized in earnings when the hedged cash flows affect earnings.
70
The PNC Financial Services Group, Inc.
Form 10-Q
In the 12 months that follow June 30, 2017, we expect to reclassify net derivative gains of
$151 million pretax, or $97 million
after-tax,
from Accumulated other comprehensive income to interest income for both cash flow hedge strategies. This reclassified amount could differ from amounts
actually recognized due to changes in interest rates, hedge
de-designations
and the addition of other hedges subsequent to June 30, 2017. As of June 30, 2017, the maximum length of time over which
forecasted transactions are hedged is seven years. During the first six months of 2017 and 2016, there were no gains or losses from cash flow hedge derivatives reclassified to earnings because it became probable that the original forecasted
transaction would not occur.
There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness
related to either cash flow hedge strategy for all periods presented.
Further detail regarding gains (losses) on derivatives and related cash
flows is presented in the following table:
Table 61: Gains (Losses) on Derivatives and Related Cash Flows
Cash Flow Hedges (a) (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30
|
|
|
Six months
ended
June 30
|
|
In millions
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Gains (losses) on derivatives recognized in OCI (effective portion)
|
|
$
|
39
|
|
|
$
|
126
|
|
|
$
|
17
|
|
|
$
|
391
|
|
Less: Gains (losses) reclassified from accumulated OCI into income (effective portion)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
49
|
|
|
|
64
|
|
|
|
101
|
|
|
|
129
|
|
Noninterest income
|
|
|
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
(1
|
)
|
Total gains (losses) reclassified from accumulated OCI into income (effective portion)
|
|
$
|
49
|
|
|
$
|
63
|
|
|
$
|
104
|
|
|
$
|
128
|
|
Net unrealized gains (losses) on cash flow hedge derivatives
|
|
$
|
(10
|
)
|
|
$
|
63
|
|
|
$
|
(87
|
)
|
|
$
|
263
|
|
(a)
|
All cash flow hedge derivatives are interest rate contracts as of June 30, 2017 and June 30, 2016.
|
(b)
|
The amount of cash flow hedge ineffectiveness recognized in income was not significant for the periods presented.
|
Net Investment Hedges
We enter into
foreign currency forward contracts to hedge
non-U.S.
dollar net investments in foreign subsidiaries against adverse changes in foreign exchange rates. We assess whether the hedging relationship is highly
effective in achieving offsetting changes in the value of the hedge and hedged item by qualitatively verifying that the critical terms of the hedge and hedged item match at the inception of the hedging relationship and on an ongoing basis. Net
investment hedge derivatives are classified as foreign exchange contracts. There were no components of derivative gains or losses excluded
from the assessment of the hedge effectiveness for all periods presented. During the first six months of 2017 and 2016, there was no net investment hedge ineffectiveness. Gains (losses) on net
investment hedge derivatives recognized in OCI were net losses of $(36) million for the three months ended June 30, 2017 and net losses of $(50) million for the six months ended June 30, 2017, compared with net gains of $80 million
for the three months ended June 30, 2016 and net gains of $109 million for the six months ended June 30, 2016.
Derivatives Not Designated As Hedging Instruments under GAAP
We also enter into derivatives that are not designated as accounting hedges under GAAP. For additional information on derivatives not designated as hedging instruments under GAAP see Note 13 Financial
Derivatives in our 2016
Form 10-K.
Further detail regarding the gains (losses) on derivatives
not designated in hedging relationships is presented in the following table:
Table 62: Gains (Losses) on
Derivatives Not Designated for Hedging under GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
June 30
|
|
|
Six months
ended
June 30
|
|
In millions
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Derivatives used for mortgage banking activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (a)
|
|
$
|
80
|
|
|
$
|
172
|
|
|
$
|
73
|
|
|
$
|
413
|
|
Derivatives used for customer-related activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
19
|
|
|
$
|
1
|
|
|
$
|
53
|
|
|
$
|
(3
|
)
|
Foreign exchange contracts and other
|
|
|
40
|
|
|
|
17
|
|
|
|
72
|
|
|
|
46
|
|
Gains (losses) from customer-related activities (b)
|
|
$
|
59
|
|
|
$
|
18
|
|
|
$
|
125
|
|
|
$
|
43
|
|
Derivatives used for other risk management activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts and other (c)
|
|
$
|
(106
|
)
|
|
$
|
4
|
|
|
$
|
(156
|
)
|
|
$
|
(95
|
)
|
Gains (losses) from other risk management activities (b)
|
|
$
|
(106
|
)
|
|
$
|
4
|
|
|
$
|
(156
|
)
|
|
$
|
(95
|
)
|
Total gains (losses) from derivatives not designated as hedging
instruments
|
|
$
|
33
|
|
|
$
|
194
|
|
|
$
|
42
|
|
|
$
|
361
|
|
(a)
|
Included in Residential mortgage, Corporate services and Other noninterest income.
|
(b)
|
Included in Other noninterest income.
|
(c)
|
Includes BlackRock LTIP funding obligation and the swaps entered into in connection with sales of a portion of Visa Class B common shares.
|
The PNC
Financial Services Group, Inc.
Form 10-Q
71
Offsetting, Counterparty Credit Risk and Contingent Features
We generally utilize a net presentation on the Consolidated Balance Sheet for those derivative financial instruments entered into with counterparties
under legally enforceable master netting agreements. The master netting agreements reduce credit risk by permitting the closeout netting of all outstanding derivative instruments under the master netting agreement with the same counterparty upon the
occurrence of an event of default. The master netting agreement also may require the exchange of cash or marketable securities to collateralize either partys net position. For additional information on derivative offsetting, counterparty
credit risk and contingent features see Note 13 Financial Derivatives in our 2016 Form
10-K.
Table 63
shows the impact legally enforceable master netting agreements had on our derivative assets and derivative liabilities as of June 30, 2017 and December 31, 2016. The table includes cash collateral held or pledged under legally enforceable
master netting agreements. The table also includes the fair value of any securities collateral held or pledged under legally enforceable master netting agreements. Cash and securities collateral amounts are included in the table only to the extent
of the related net derivative fair values.
Table 63: Derivative Assets and Liabilities Offsetting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
In millions
|
|
|
|
|
Amounts Offset on the
Consolidated Balance Sheet
|
|
|
|
|
|
Securities
Collateral Held
/ (Pledged)
Under
Master
Netting
Agreements
|
|
|
|
|
|
Gross
Fair Value
|
|
|
Fair Value
Offset Amount
|
|
|
Cash
Collateral
|
|
|
Net
Fair Value
|
|
|
|
Net
Amounts
|
|
Derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
cleared (a)
|
|
$
|
497
|
|
|
$
|
185
|
|
|
$
|
244
|
|
|
$
|
68
|
|
|
|
|
|
|
$
|
68
|
|
Exchange-traded
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
Over-the-counter
|
|
|
2,512
|
|
|
|
1,184
|
|
|
|
142
|
|
|
|
1,186
|
|
|
$
|
68
|
|
|
|
1,118
|
|
Foreign exchange and other contracts
|
|
|
243
|
|
|
|
88
|
|
|
|
3
|
|
|
|
152
|
|
|
|
|
|
|
|
152
|
|
Total derivative assets
|
|
$
|
3,256
|
|
|
$
|
1,457
|
|
|
$
|
389
|
|
|
$
|
1,410
|
(b)
|
|
$
|
68
|
|
|
$
|
1,342
|
|
Derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
cleared (a)
|
|
$
|
210
|
|
|
$
|
185
|
|
|
|
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
25
|
|
Exchange-traded
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Over-the-counter
|
|
|
1,915
|
|
|
|
1,140
|
|
|
$
|
570
|
|
|
|
205
|
|
|
|
|
|
|
|
205
|
|
Foreign exchange and other contracts
|
|
|
569
|
|
|
|
132
|
|
|
|
64
|
|
|
|
373
|
|
|
|
|
|
|
|
373
|
|
Total derivative liabilities
|
|
$
|
2,695
|
|
|
$
|
1,457
|
|
|
$
|
634
|
|
|
$
|
604
|
(c)
|
|
|
|
|
|
$
|
604
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
cleared
|
|
$
|
1,498
|
|
|
$
|
940
|
|
|
$
|
480
|
|
|
$
|
78
|
|
|
|
|
|
|
$
|
78
|
|
Exchange-traded
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
9
|
|
Over-the-counter
|
|
|
2,702
|
|
|
|
1,358
|
|
|
|
164
|
|
|
|
1,180
|
|
|
$
|
62
|
|
|
|
1,118
|
|
Foreign exchange and other contracts
|
|
|
407
|
|
|
|
162
|
|
|
|
13
|
|
|
|
232
|
|
|
|
|
|
|
|
232
|
|
Total derivative assets
|
|
$
|
4,616
|
|
|
$
|
2,460
|
|
|
$
|
657
|
|
|
$
|
1,499
|
(b)
|
|
$
|
62
|
|
|
$
|
1,437
|
|
Derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
cleared
|
|
$
|
1,060
|
|
|
$
|
940
|
|
|
$
|
25
|
|
|
$
|
95
|
|
|
|
|
|
|
$
|
95
|
|
Exchange-traded
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Over-the-counter
|
|
|
2,064
|
|
|
|
1,395
|
|
|
|
431
|
|
|
|
238
|
|
|
|
|
|
|
|
238
|
|
Foreign exchange and other contracts
|
|
|
714
|
|
|
|
125
|
|
|
|
28
|
|
|
|
561
|
|
|
|
|
|
|
|
561
|
|
Total derivative liabilities
|
|
$
|
3,839
|
|
|
$
|
2,460
|
|
|
$
|
484
|
|
|
$
|
895
|
(c)
|
|
|
|
|
|
$
|
895
|
|
(a)
|
Reflects our first quarter 2017 change in accounting treatment for variation margin for certain derivative instruments cleared through a central clearing house. The
accounting change reduced the asset and liability gross fair values with corresponding reductions to the fair value and cash collateral offsets, resulting in no changes to the net fair value amounts.
|
(b)
|
Represents the net amount of derivative assets included in Other assets on our Consolidated Balance Sheet.
|
(c)
|
Represents the net amount of derivative liabilities included in Other liabilities on our Consolidated Balance Sheet.
|
72
The PNC Financial Services Group, Inc.
Form 10-Q
Table 63 includes
over-the-counter
(OTC) derivatives, cleared derivatives and exchange-traded derivatives. OTC derivatives represent contracts executed bilaterally with counterparties
that are not settled through an organized exchange or cleared through a central clearing house. The majority of OTC derivatives are governed by ISDA documentation or other legally enforceable industry standard master netting agreements. Cleared
derivatives represent contracts executed bilaterally with counterparties in the OTC market that are novated to a central clearing house who then becomes our counterparty. Exchange-traded derivatives represent standardized futures and options
contracts executed directly on an organized exchange.
In addition to using master netting agreements and other collateral agreements to
reduce credit risk associated with derivative instruments, we also seek to manage credit risk by evaluating credit ratings of counterparties and by using internal credit analysis, limits and monitoring procedures.
At June 30, 2017, we held cash, U.S. government securities and mortgage-backed securities totaling $.7 billion under master netting agreements
and other collateral agreements to collateralize net derivative assets due from counterparties, and we pledged cash totaling $1.5 billion under these agreements to collateralize net derivative liabilities owed to counterparties and to meet
initial margin requirements. These totals may differ from the amounts presented in the preceding offsetting table because these totals may include collateral exchanged
under an agreement that does not qualify as a master netting agreement or because the total amount of collateral held or pledged exceeds the net derivative fair values with the counterparty as of
the balance sheet date due to timing or other factors, such as initial margin. To the extent not netted against the derivative fair values under a master netting agreement, the receivable for cash pledged is included in Other assets and the
obligation for cash held is included in Other liabilities on our Consolidated Balance Sheet. Securities held from counterparties are not recognized on our balance sheet. Likewise securities we have pledged to counterparties remain on our balance
sheet.
Certain derivative agreements contain various credit-risk related contingent provisions, such as those that require our debt to
maintain a specified credit rating from one or more of the major credit rating agencies. If our debt ratings were to fall below such specified ratings, the counterparties to the derivative instruments could request immediate payment or demand
immediate and ongoing full collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position on
June 30, 2017 was $1.0 billion for which we had posted collateral of $.6 billion in the normal course of business. The maximum additional amount of collateral we would have been required to post if the credit-risk-related contingent
features underlying these agreements had been triggered on June 30, 2017 would be $.4 billion.
N
OTE
10 E
ARNINGS
P
ER
S
HARE
Table 64: Basic and Diluted Earnings Per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
In millions, except per share data
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,097
|
|
|
$
|
989
|
|
|
$
|
2,171
|
|
|
$
|
1,932
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests
|
|
|
10
|
|
|
|
23
|
|
|
|
27
|
|
|
|
42
|
|
Preferred stock dividends
|
|
|
55
|
|
|
|
42
|
|
|
|
118
|
|
|
|
105
|
|
Preferred discount accretion and redemptions
|
|
|
2
|
|
|
|
1
|
|
|
|
23
|
|
|
|
3
|
|
Net income attributable to common shares
|
|
|
1,030
|
|
|
|
923
|
|
|
|
2,003
|
|
|
|
1,782
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and undistributed earnings allocated to participating
securities
|
|
|
4
|
|
|
|
6
|
|
|
|
10
|
|
|
|
12
|
|
Net income attributable to basic common shares
|
|
$
|
1,026
|
|
|
$
|
917
|
|
|
$
|
1,993
|
|
|
$
|
1,770
|
|
Basic weighted-average common shares outstanding
|
|
|
484
|
|
|
|
497
|
|
|
|
486
|
|
|
|
499
|
|
Basic earnings per common share (a)
|
|
$
|
2.12
|
|
|
$
|
1.84
|
|
|
$
|
4.10
|
|
|
$
|
3.54
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to basic common shares
|
|
$
|
1,026
|
|
|
$
|
917
|
|
|
$
|
1,993
|
|
|
$
|
1,770
|
|
Less: Impact of BlackRock earnings per share dilution
|
|
|
1
|
|
|
|
3
|
|
|
|
5
|
|
|
|
6
|
|
Net income attributable to diluted common shares
|
|
$
|
1,025
|
|
|
$
|
914
|
|
|
$
|
1,988
|
|
|
$
|
1,764
|
|
Basic weighted-average common shares outstanding
|
|
|
484
|
|
|
|
497
|
|
|
|
486
|
|
|
|
499
|
|
Dilutive potential common shares
|
|
|
4
|
|
|
|
6
|
|
|
|
5
|
|
|
|
6
|
|
Diluted weighted-average common shares outstanding
|
|
|
488
|
|
|
|
503
|
|
|
|
491
|
|
|
|
505
|
|
Diluted earnings per common share (a)
|
|
$
|
2.10
|
|
|
$
|
1.82
|
|
|
$
|
4.05
|
|
|
$
|
3.49
|
|
(a)
|
Basic and diluted earnings per share under the
two-class
method are determined on net income reported on the income statement
less earnings allocated to nonvested restricted shares and restricted share units with nonforfeitable dividends and dividend rights (participating securities).
|
The PNC
Financial Services Group, Inc.
Form 10-Q
73
N
OTE
11 T
OTAL
E
QUITY
A
ND
O
THER
C
OMPREHENSIVE
I
NCOME
Activity in total equity for the first six
months of 2016 and 2017 follows:
Table 65: Rollforward of Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
|
|
|
|
|
In millions
|
|
Shares
Outstanding
Common
Stock
|
|
|
Common
Stock
|
|
|
Capital
Surplus -
Preferred
Stock
|
|
|
Capital
Surplus -
Common
Stock and
Other
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Treasury
Stock
|
|
|
Non-
controlling
Interests
|
|
|
Total Equity
|
|
Balance at January 1, 2016
|
|
|
504
|
|
|
$
|
2,708
|
|
|
$
|
3,452
|
|
|
$
|
12,745
|
|
|
$
|
29,043
|
|
|
$
|
130
|
|
|
$
|
(3,368
|
)
|
|
$
|
1,270
|
|
|
$
|
45,980
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,890
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
1,932
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
606
|
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($1.02 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(516
|
)
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(105
|
)
|
Preferred stock discount accretion
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock activity (a)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
Treasury stock activity
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
(936
|
)
|
|
|
|
|
|
|
(949
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(171
|
)
|
|
|
(260
|
)
|
Balance at June 30, 2016 (b)
|
|
|
493
|
|
|
$
|
2,709
|
|
|
$
|
3,455
|
|
|
$
|
12,653
|
|
|
$
|
30,309
|
|
|
$
|
736
|
|
|
$
|
(4,304
|
)
|
|
$
|
1,141
|
|
|
$
|
46,699
|
|
Balance at January 1, 2017
|
|
|
485
|
|
|
$
|
2,709
|
|
|
$
|
3,977
|
|
|
$
|
12,674
|
|
|
$
|
31,670
|
|
|
$
|
(265
|
)
|
|
$
|
(5,066
|
)
|
|
$
|
1,155
|
|
|
$
|
46,854
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,144
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
2,171
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
167
|
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($1.10 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(540
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(540
|
)
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(118
|
)
|
Preferred stock discount accretion
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
(981
|
)
|
|
|
(1,000
|
)
|
Common stock activity (a)
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Treasury stock activity
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
|
(921
|
)
|
|
|
|
|
|
|
(1,153
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
(206
|
)
|
Balance at June 30, 2017 (b)
|
|
|
480
|
|
|
$
|
2,710
|
|
|
$
|
3,981
|
|
|
$
|
12,345
|
|
|
$
|
33,133
|
|
|
$
|
(98
|
)
|
|
$
|
(5,987
|
)
|
|
$
|
101
|
|
|
$
|
46,185
|
|
(a)
|
Common stock activity totaled less than .5 million shares issued.
|
(b)
|
The par value of our preferred stock outstanding was less than $.5 million at each date and, therefore, is excluded from this presentation.
|
Warrants
We had 5.1 million, 11.3 million, and 13.4 million warrants outstanding at June 30, 2017, December 31, 2016, and June 30, 2016, respectively. As of June 30, 2017, each
warrant entitles the holder to purchase one share of PNC common stock at an exercise price of $67.33 per share. In accordance with the terms of the warrants, the warrants are exercised on a
non-cash
net basis
with the warrant holder receiving PNC common shares determined based on the excess of the market price of PNC common stock on the exercise date over the exercise price of the warrant. The outstanding warrants will expire as of December 31, 2018
and are considered in the calculation of diluted earnings per common share in Note 10 Earnings Per Share in this Report.
On July 6,
2017, PNC declared a quarterly common stock dividend of $.75 per share to shareholders of record as of July 17, 2017. In accordance with the terms of the warrants, the declaration of a dividend in excess of $.66 per share may result in an
adjustment to the warrant exercise price and to the warrant share number. As a result of this dividend, the warrant exercise price was reduced from $67.33 to $67.28 per share on July 17, 2017 and the warrant share number remained 1.00.
Noncontrolling Interests
Perpetual Trust Securities
Our noncontrolling interests balance at June 30, 2017
reflected our March 15, 2017 redemption of $1.0 billion
Fixed-to-Floating
Rate
Non-Cumulative
Exchangeable Perpetual
Trust Securities issued by PNC Preferred Funding Trusts I and II with current distribution rates of 2.61% and 2.19%, respectively. The Perpetual Trust Securities were subject to replacement capital covenants dated December 6, 2006 and
March 29, 2007 benefiting PNC Capital Trust C as the sole holder of $200 million of junior subordinated debentures issued by PNC in June 1998. Upon redemption of the Perpetual Trust Securities, the replacement capital covenants terminated
and such debentures ceased being covered debt with respect to the replacement capital covenants.
74
The PNC Financial Services Group, Inc.
Form 10-Q
Details of other comprehensive income (loss) are as follows:
Table 66: Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
In millions
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net unrealized gains (losses) on
non-OTTI
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net unrealized gains (losses) on
non-OTTI
securities
|
|
$
|
169
|
|
|
$
|
286
|
|
|
$
|
236
|
|
|
$
|
805
|
|
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income
|
|
|
5
|
|
|
|
8
|
|
|
|
10
|
|
|
|
14
|
|
Less: Net gains (losses) realized on sales of securities reclassified to noninterest
income
|
|
|
13
|
|
|
|
5
|
|
|
|
6
|
|
|
|
14
|
|
Net increase (decrease),
pre-tax
|
|
|
151
|
|
|
|
273
|
|
|
|
220
|
|
|
|
777
|
|
Effect of income taxes
|
|
|
(58
|
)
|
|
|
(100
|
)
|
|
|
(83
|
)
|
|
|
(285
|
)
|
Net increase (decrease),
after-tax
|
|
|
93
|
|
|
|
173
|
|
|
|
137
|
|
|
|
492
|
|
Net unrealized gains (losses) on OTTI securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net unrealized gains (losses) on OTTI securities
|
|
|
61
|
|
|
|
17
|
|
|
|
98
|
|
|
|
(22
|
)
|
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Less: OTTI losses realized on securities reclassified to noninterest
income
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Net increase (decrease),
pre-tax
|
|
|
62
|
|
|
|
17
|
|
|
|
97
|
|
|
|
(21
|
)
|
Effect of income taxes
|
|
|
(24
|
)
|
|
|
(6
|
)
|
|
|
(37
|
)
|
|
|
8
|
|
Net increase (decrease),
after-tax
|
|
|
38
|
|
|
|
11
|
|
|
|
60
|
|
|
|
(13
|
)
|
Net unrealized gains (losses) on cash flow hedge derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in net unrealized gains (losses) on cash flow hedge derivatives
|
|
|
39
|
|
|
|
126
|
|
|
|
17
|
|
|
|
391
|
|
Less: Net gains (losses) realized as a yield adjustment reclassified to loan interest income
|
|
|
44
|
|
|
|
56
|
|
|
|
90
|
|
|
|
116
|
|
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income
|
|
|
5
|
|
|
|
8
|
|
|
|
11
|
|
|
|
13
|
|
Less: Net gains (losses) realized on sales of securities reclassified to noninterest
income
|
|
|
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
|
(1
|
)
|
Net increase (decrease),
pre-tax
|
|
|
(10
|
)
|
|
|
63
|
|
|
|
(87
|
)
|
|
|
263
|
|
Effect of income taxes
|
|
|
4
|
|
|
|
(23
|
)
|
|
|
32
|
|
|
|
(96
|
)
|
Net increase (decrease),
after-tax
|
|
|
(6
|
)
|
|
|
40
|
|
|
|
(55
|
)
|
|
|
167
|
|
Pension and other postretirement benefit plan adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and other postretirement benefit activity
|
|
|
36
|
|
|
|
(7
|
)
|
|
|
(38
|
)
|
|
|
(5
|
)
|
Amortization of actuarial loss (gain) reclassified to other noninterest expense
|
|
|
11
|
|
|
|
12
|
|
|
|
24
|
|
|
|
24
|
|
Amortization of prior service cost (credit) reclassified to other noninterest
expense
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
(4
|
)
|
Net increase (decrease),
pre-tax
|
|
|
45
|
|
|
|
3
|
|
|
|
(17
|
)
|
|
|
15
|
|
Effect of income taxes
|
|
|
(17
|
)
|
|
|
(1
|
)
|
|
|
6
|
|
|
|
(5
|
)
|
Net increase (decrease),
after-tax
|
|
|
28
|
|
|
|
2
|
|
|
|
(11
|
)
|
|
|
10
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCs portion of BlackRocks OCI
|
|
|
20
|
|
|
|
13
|
|
|
|
22
|
|
|
|
(12
|
)
|
Net investment hedge derivatives
|
|
|
(36
|
)
|
|
|
80
|
|
|
|
(50
|
)
|
|
|
109
|
|
Foreign currency translation adjustments and other
|
|
|
38
|
|
|
|
(81
|
)
|
|
|
54
|
|
|
|
(112
|
)
|
Net increase (decrease),
pre-tax
|
|
|
22
|
|
|
|
12
|
|
|
|
26
|
|
|
|
(15
|
)
|
Effect of income taxes
|
|
|
6
|
|
|
|
(34
|
)
|
|
|
10
|
|
|
|
(35
|
)
|
Net increase (decrease),
after-tax
|
|
|
28
|
|
|
|
(22
|
)
|
|
|
36
|
|
|
|
(50
|
)
|
Total other comprehensive income,
pre-tax
|
|
|
270
|
|
|
|
368
|
|
|
|
239
|
|
|
|
1,019
|
|
Total other comprehensive income, tax effect
|
|
|
(89
|
)
|
|
|
(164
|
)
|
|
|
(72
|
)
|
|
|
(413
|
)
|
Total other comprehensive income,
after-tax
|
|
$
|
181
|
|
|
$
|
204
|
|
|
$
|
167
|
|
|
$
|
606
|
|
The PNC
Financial Services Group, Inc.
Form 10-Q
75
Table 67: Accumulated Other Comprehensive Income (Loss) Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions,
after-tax
|
|
Net unrealized
gains (losses) on
non-OTTI
securities
|
|
|
Net unrealized
gains (losses) on
OTTI securities
|
|
|
Net unrealized
gains (losses) on
cash flow
hedge
derivatives
|
|
|
Pension and other
postretirement
benefit
plan
adjustments
|
|
|
Other
|
|
|
Total
|
|
Balance at March 31, 2016
|
|
$
|
605
|
|
|
$
|
42
|
|
|
$
|
557
|
|
|
$
|
(546
|
)
|
|
$
|
(126
|
)
|
|
$
|
532
|
|
Net activity
|
|
|
173
|
|
|
|
11
|
|
|
|
40
|
|
|
|
2
|
|
|
|
(22
|
)
|
|
|
204
|
|
Balance at June 30, 2016
|
|
$
|
778
|
|
|
$
|
53
|
|
|
$
|
597
|
|
|
$
|
(544
|
)
|
|
$
|
(148
|
)
|
|
$
|
736
|
|
Balance at March 31, 2017
|
|
$
|
96
|
|
|
$
|
128
|
|
|
$
|
284
|
|
|
$
|
(592
|
)
|
|
$
|
(195
|
)
|
|
$
|
(279
|
)
|
Net activity
|
|
|
93
|
|
|
|
38
|
|
|
|
(6
|
)
|
|
|
28
|
|
|
|
28
|
|
|
|
181
|
|
Balance at June 30, 2017
|
|
$
|
189
|
|
|
$
|
166
|
|
|
$
|
278
|
|
|
$
|
(564
|
)
|
|
$
|
(167
|
)
|
|
$
|
(98
|
)
|
Balance at December 31, 2015
|
|
$
|
286
|
|
|
$
|
66
|
|
|
$
|
430
|
|
|
$
|
(554
|
)
|
|
$
|
(98
|
)
|
|
$
|
130
|
|
Net activity
|
|
|
492
|
|
|
|
(13
|
)
|
|
|
167
|
|
|
|
10
|
|
|
|
(50
|
)
|
|
|
606
|
|
Balance at June 30, 2016
|
|
$
|
778
|
|
|
$
|
53
|
|
|
$
|
597
|
|
|
$
|
(544
|
)
|
|
$
|
(148
|
)
|
|
$
|
736
|
|
Balance at December 31, 2016
|
|
$
|
52
|
|
|
$
|
106
|
|
|
$
|
333
|
|
|
$
|
(553
|
)
|
|
$
|
(203
|
)
|
|
$
|
(265
|
)
|
Net activity
|
|
|
137
|
|
|
|
60
|
|
|
|
(55
|
)
|
|
|
(11
|
)
|
|
|
36
|
|
|
|
167
|
|
Balance at June 30, 2017
|
|
$
|
189
|
|
|
$
|
166
|
|
|
$
|
278
|
|
|
$
|
(564
|
)
|
|
$
|
(167
|
)
|
|
$
|
(98
|
)
|
N
OTE
12 L
EGAL
P
ROCEEDINGS
We establish accruals for legal proceedings, including litigation and regulatory and governmental investigations and inquiries, when
information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to reflect changed
circumstances. When we are able to do so, we also determine estimates of possible losses or ranges of possible losses, whether in excess of any related accrued liability or where there is no accrued liability, for disclosed legal proceedings
(Disclosed Matters, which are those matters disclosed in this Note 12 as well as those matters disclosed in Note 19 Legal Proceedings in Part II, Item 8 of our 2016 Form
10-K
and in Note 12
Legal Proceedings in Part I, Item 1 of our first quarter 2017 Form
10-Q
(such prior disclosure collectively referred to as Prior Disclosure)). For Disclosed Matters where we are able to estimate
such possible losses or ranges of possible losses, as of June 30, 2017, we estimate that it is reasonably possible that we could incur losses in an aggregate amount of up to approximately $425 million. The estimates included in this amount
are based on our analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties. As new information is obtained we may change our estimates. Due to the inherent subjectivity of the
assessments and unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to us from the legal proceedings in question. Thus, our exposure and ultimate losses may
be higher, and possibly significantly so, than the amounts accrued or this aggregate amount.
As a result of the types of factors described in Note 19 in our 2016 Form
10-K,
we are unable, at this time, to estimate the losses that it is reasonably possible that we could incur or ranges of such losses with respect to some of the matters disclosed, and the aggregate estimated
amount provided above does not include an estimate for every Disclosed Matter. Therefore, as the estimated aggregate amount disclosed above does not include all of the Disclosed Matters, the amount disclosed above does not represent our maximum
reasonably possible loss exposure for all of the Disclosed Matters. The estimated aggregate amount also does not reflect any of our exposure to matters not so disclosed, as discussed below under Other.
We include in some of the descriptions of individual Disclosed Matters certain quantitative information related to the plaintiffs claim against us
as alleged in the plaintiffs pleadings or other public filings or otherwise publicly available information. While information of this type may provide insight into the potential magnitude of a matter, it does not necessarily represent our
estimate of reasonably possible loss or our judgment as to any currently appropriate accrual.
Some of our exposure in Disclosed Matters may
be offset by applicable insurance coverage. We do not consider the possible availability of insurance coverage in determining the amounts of any accruals (although we record the amount of related insurance recoveries that are deemed probable up to
the amount of the accrual) or in determining any estimates of possible losses or ranges of possible losses.
Fulton Financial
In the case pending in the U.S. District Court for the Eastern District of Pennsylvania under the caption
Fulton Financial
Advisors, N.A. v. NatCity Investments, Inc
.
(No. 5:09-cv-04855),
the court has scheduled the case for trial in February 2018.
76
The PNC Financial Services Group, Inc.
Form 10-Q
Mortgage Repurchase Litigation
In March 2017, we filed a motion to dismiss the complaint in
ResCap Liquidating Trust v. PNC Bank, N.A.
(No. 17-cv-196-JRT-FLN),
which has been consolidated for
pre-trial
purposes into
In Re: RFC and RESCAP
Liquidating Trust Litigation
(Civil File No.
13-cv-3451
(SRN/JJK/HB)) in the U.S. District Court for the District of Minnesota. In July 2017, the court denied the
motion.
Other Regulatory and Governmental Inquiries
We are the subject of investigations, audits and other forms of regulatory and governmental inquiry covering a broad range of issues in our consumer, mortgage, brokerage, securities and other financial
services businesses, as well as other aspects of our operations. In some cases, these inquiries are part of reviews of specified activities at multiple industry participants; in others, they are directed at PNC individually. These inquiries,
including those described in Prior Disclosure, may lead to administrative, civil or criminal proceedings, and possibly result in remedies including fines, penalties, restitution, or alterations in our business practices, and in additional expenses
and collateral costs and other consequences. These inquiries may result in significant reputational harm or other adverse collateral consequences even if direct resulting remedies are not material to us.
Our practice is to cooperate fully with regulatory and governmental investigations, audits and other inquiries, including those described in Prior
Disclosure.
Other
In
addition to the proceedings or other matters described above and in Prior Disclosure, PNC and persons to whom we may have indemnification obligations, in the normal course of business, are subject to various other pending and threatened legal
proceedings in which claims for monetary damages and other relief are asserted. We do not anticipate, at the present time, that the ultimate aggregate liability, if any, arising out of such other legal proceedings will have a material adverse effect
on our financial position. However, we cannot now determine whether or not any claims asserted against us or others to whom we may have indemnification obligations, whether in the proceedings or other matters described above or otherwise, will have
a material adverse effect on our results of operations in any future reporting period, which will depend on, among other things, the amount of the loss resulting from the claim and the amount of income otherwise reported for the reporting period.
N
OTE
13 C
OMMITMENTS
In the normal course of business, we have various commitments outstanding, certain of which are not included on our Consolidated Balance Sheet. The
following table presents our outstanding commitments to extend credit along with significant other commitments as of June 30, 2017 and December 31, 2016, respectively.
Table 68: Commitments to Extend Credit and Other Commitments
|
|
|
|
|
|
|
|
|
In millions
|
|
June 30
2017
|
|
|
December 31
2016
|
|
Commitments to extend credit
|
|
|
|
|
|
|
|
|
Total commercial lending
|
|
$
|
107,152
|
|
|
$
|
108,256
|
|
Home equity lines of credit
|
|
|
17,763
|
|
|
|
17,438
|
|
Credit card
|
|
|
23,345
|
|
|
|
22,095
|
|
Other
|
|
|
4,921
|
|
|
|
4,192
|
|
Total commitments to extend credit
|
|
|
153,181
|
|
|
|
151,981
|
|
Net outstanding standby letters of credit (a)
|
|
|
8,371
|
|
|
|
8,324
|
|
Reinsurance agreements (b)
|
|
|
1,726
|
|
|
|
1,835
|
|
Standby bond purchase agreements (c)
|
|
|
916
|
|
|
|
790
|
|
Other commitments (d)
|
|
|
950
|
|
|
|
967
|
|
Total commitments to extend credit and other commitments
|
|
$
|
165,144
|
|
|
$
|
163,897
|
|
(a)
|
Net outstanding standby letters of credit include $3.8 billion and $3.9 billion at June 30, 2017 and December 31, 2016, respectively, which support
remarketing programs.
|
(b)
|
Represents aggregate maximum exposure up to the specified limits of the reinsurance contracts and reflects estimates based on availability of financial information from
insurance carriers. As of June 30, 2017, the aggregate maximum exposure amount comprised $1.5 billion for accidental death & dismemberment contracts and $.2 billion for credit life, accident & health contracts.
Comparable amounts at December 31, 2016 were $1.5 billion and $.3 billion, respectively.
|
(c)
|
We enter into standby bond purchase agreements to support municipal bond obligations.
|
(d)
|
Includes $.5 billion related to investments in qualified affordable housing projects at both June 30, 2017 and December 31, 2016.
|
Commitments to Extend Credit
Commitments to extend credit, or net unfunded loan commitments, represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. These commitments generally have
fixed expiration dates, may require payment of a fee and contain termination clauses in the event the customers credit quality deteriorates.
Net Outstanding Standby Letters of Credit
We issue standby letters of credit and share in
the risk of standby letters of credit issued by other financial institutions, in each case to support obligations of our customers to third parties, such as insurance requirements and the facilitation of transactions involving capital markets
product execution. Approximately 91% and 94% of our net outstanding standby letters of credit were rated as Pass as of June 30, 2017 and December 31, 2016, respectively, with the remainder rated as Below Pass. An internal credit rating of
Pass indicates the
The PNC
Financial Services Group, Inc.
Form 10-Q
77
expected risk of loss is currently low, while a rating of Below Pass indicates a higher degree of risk.
If the customer fails to meet its financial or performance obligation to the third party under the terms of the contract or there is a need to support a remarketing program, then upon a draw by a
beneficiary, subject to the terms of the letter of credit, we would be obligated to make payment to them. The standby letters of credit outstanding on June 30, 2017 had terms ranging from less than 1 year to 8 years.
As of June 30, 2017, assets of $1.2 billion secured certain specifically identified standby letters of credit. In addition, a portion of the
remaining standby letters of credit issued on behalf of specific customers is also secured by collateral or guarantees that secure the customers other obligations to us. The carrying amount of the liability for our obligations related to
standby letters of credit and participations in standby letters of credit was $.2 billion at June 30, 2017 and is included in Other liabilities on our Consolidated Balance Sheet.
N
OTE
14 S
EGMENT
R
EPORTING
Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly, have changed the basis of presentation of our segments,
resulting in four reportable business segments:
|
|
|
Corporate & Institutional Banking
|
Net interest
income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product
repricing characteristics, tenor and other factors. Effective for the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certain
non-maturity
deposits based on our recent historical experience. These changes in methodology affected business segment results, primarily adversely impacting net interest income for Corporate &
Institutional Banking and Retail Banking, offset by increased net interest income in the Other category.
Prior periods presented
were revised to conform to the new segment alignment and to our change in internal funds transfer pricing methodology.
Results of individual
businesses are presented based on our internal management reporting practices. There is no comprehensive, authoritative body of guidance for management accounting equivalent to GAAP; therefore, the
financial results of our individual businesses are not necessarily comparable with similar information for any other company. We periodically refine our internal methodologies as management
reporting practices are enhanced. To the extent significant and practicable, retrospective application of new methodologies is made to prior period reportable business segment results and disclosures to create comparability with the current period.
Total business segment financial results differ from total consolidated net income. The impact of these differences is reflected in the
Other category in the business segment tables. Other includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as gains or losses related to BlackRock transactions,
integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, certain
non-strategic
runoff consumer loan portfolios, private equity investments, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments and differences
between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments results exclude their portion of net income attributable
to noncontrolling interests. Assets, revenue and earnings attributable to foreign activities were not material in the periods presented for comparative purposes.
Financial results are presented, to the extent practicable, as if each business operated on a stand-alone basis. Additionally, we have aggregated the results for corporate support functions within
Other for financial reporting purposes.
Our allocation of the costs incurred by shared support areas not directly aligned with
the businesses is primarily based on the use of services.
A portion of capital is intended to cover unexpected losses and is assigned to our
business segments using our risk-based economic capital model, including consideration of the goodwill at those business segments, as well as the diversification of risk among the business segments, ultimately reflecting our portfolio risk adjusted
capital allocation.
We have allocated the allowances for loan and lease losses and for unfunded loan commitments and letters of credit based
on the loan exposures within each business segments portfolio. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower
and economic conditions. Key reserve assumptions are periodically updated.
78
The PNC Financial Services Group, Inc.
Form 10-Q
Business Segment Products and Services
Retail Banking
provides deposit, lending, brokerage, investment management and cash management products and services to consumer and
small business customers within our primary geographic markets. Our customers are serviced through our branch network, ATMs, call centers, online banking and mobile channels. The branch network is located primarily in Pennsylvania, Ohio, New Jersey,
Michigan, Illinois, Maryland, Indiana, Florida, North Carolina, Kentucky, Washington, D.C., Delaware, Virginia, Georgia, Alabama, Missouri, Wisconsin and South Carolina. Deposit products include checking, savings and money market accounts and
certificates of deposit. Lending products include residential mortgages, home equity loans and lines of credit, auto loans, credit cards, education loans and personal loans and lines of credit. The residential mortgage loans are directly originated
within our branch network and nationwide, and are typically underwritten to government agency and/or third-party standards, and either sold, servicing retained, or held on our balance sheet. Our mortgage servicing operation performs all functions
related to servicing residential mortgage loans for investors and for loans we own. Brokerage, investment management and cash management products and services include managed accounts, education accounts, retirement accounts and trust and estate
services.
Corporate
& Institutional Banking
provides lending, treasury management and capital
markets-related products and services to
mid-sized
and large corporations, government and
not-for-profit
entities. Lending
products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting
and global trade services. Capital markets-related products and services include foreign exchange, derivatives, securities, loan syndications, mergers and acquisitions advisory and equity capital markets advisory related services. We also provide
commercial loan servicing and technology solutions for the commercial real estate finance industry. Products and services are generally provided within our primary geographic markets. We offer certain products and services nationally and
internationally.
Asset Management Group
provides personal wealth management for high net worth and
ultra high net worth clients and institutional asset management. Wealth management products and services include investment and retirement planning, customized investment management, private banking, tailored credit solutions and trust management
and administration for individuals and their families. Our Hawthorn unit provides multi-generational family planning including estate, financial, tax planning, fiduciary, investment management and consulting, private banking, personal administrative
services, asset custody and customized performance reporting to ultra high net worth families. Institutional asset management provides advisory, custody and retirement administration services. The business also offers PNC proprietary mutual funds.
Institutional clients include corporations, unions, municipalities,
non-profits,
foundations and endowments, primarily located in our geographic footprint.
BlackRock,
in which we hold an equity investment, is a leading publicly traded investment management firm providing a broad range of investment
and risk management services to institutional and retail clients worldwide. Using a diverse platform of active and index investment strategies across asset classes, BlackRock develops investment outcomes and asset allocation solutions for clients.
Product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. BlackRock also offers an investment and risk management technology platform, risk analytics, advisory
and technology services and solutions to a broad base of institutional and wealth management investors.
Our equity investment in BlackRock
provides us with an additional source of noninterest income and increases our overall revenue diversification. BlackRock is a publicly traded company, and additional information regarding its business is available in its filings with the Securities
and Exchange Commission (SEC). At June 30, 2017, our economic interest in BlackRock was 22%. We received cash dividends from BlackRock of $177 million and $165 million during the first six months of 2017 and 2016, respectively.
The PNC
Financial Services Group, Inc.
Form 10-Q
79
Table 69: Results of Businesses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
In millions
|
|
Retail
Banking
|
|
|
Corporate &
Institutional
Banking
|
|
|
Asset
Management
Group
|
|
|
BlackRock
|
|
|
Other
|
|
|
Consolidated (a)
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
1,139
|
|
|
$
|
853
|
|
|
$
|
73
|
|
|
|
|
|
|
$
|
193
|
|
|
$
|
2,258
|
|
Noninterest income
|
|
|
645
|
|
|
|
588
|
|
|
|
217
|
|
|
$
|
186
|
|
|
|
166
|
|
|
|
1,802
|
|
Total revenue
|
|
|
1,784
|
|
|
|
1,441
|
|
|
|
290
|
|
|
|
186
|
|
|
|
359
|
|
|
|
4,060
|
|
Provision for credit losses (benefit)
|
|
|
50
|
|
|
|
87
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
(32
|
)
|
|
|
98
|
|
Depreciation and amortization
|
|
|
47
|
|
|
|
54
|
|
|
|
14
|
|
|
|
|
|
|
|
128
|
|
|
|
243
|
|
Other noninterest expense
|
|
|
1,323
|
|
|
|
548
|
|
|
|
201
|
|
|
|
|
|
|
|
164
|
|
|
|
2,236
|
|
Income before income taxes and noncontrolling interests
|
|
|
364
|
|
|
|
752
|
|
|
|
82
|
|
|
|
186
|
|
|
|
99
|
|
|
|
1,483
|
|
Income taxes (benefit)
|
|
|
134
|
|
|
|
234
|
|
|
|
30
|
|
|
|
42
|
|
|
|
(54
|
)
|
|
|
386
|
|
Net income
|
|
$
|
230
|
|
|
$
|
518
|
|
|
$
|
52
|
|
|
$
|
144
|
|
|
$
|
153
|
|
|
$
|
1,097
|
|
Average Assets (b)
|
|
$
|
88,671
|
|
|
$
|
148,267
|
|
|
$
|
7,516
|
|
|
$
|
7,132
|
|
|
$
|
118,716
|
|
|
$
|
370,302
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
1,133
|
|
|
$
|
773
|
|
|
$
|
76
|
|
|
|
|
|
|
$
|
86
|
|
|
$
|
2,068
|
|
Noninterest income
|
|
|
725
|
|
|
|
539
|
|
|
|
213
|
|
|
$
|
170
|
|
|
|
79
|
|
|
|
1,726
|
|
Total revenue
|
|
|
1,858
|
|
|
|
1,312
|
|
|
|
289
|
|
|
|
170
|
|
|
|
165
|
|
|
|
3,794
|
|
Provision for credit losses
|
|
|
36
|
|
|
|
70
|
|
|
|
6
|
|
|
|
|
|
|
|
15
|
|
|
|
127
|
|
Depreciation and amortization
|
|
|
45
|
|
|
|
38
|
|
|
|
12
|
|
|
|
|
|
|
|
120
|
|
|
|
215
|
|
Other noninterest expense
|
|
|
1,260
|
|
|
|
519
|
|
|
|
194
|
|
|
|
|
|
|
|
172
|
|
|
|
2,145
|
|
Income (loss) before income taxes and noncontrolling interests
|
|
|
517
|
|
|
|
685
|
|
|
|
77
|
|
|
|
170
|
|
|
|
(142
|
)
|
|
|
1,307
|
|
Income taxes (benefit)
|
|
|
189
|
|
|
|
228
|
|
|
|
29
|
|
|
|
36
|
|
|
|
(164
|
)
|
|
|
318
|
|
Net income
|
|
$
|
328
|
|
|
$
|
457
|
|
|
$
|
48
|
|
|
$
|
134
|
|
|
$
|
22
|
|
|
$
|
989
|
|
Average Assets (b)
|
|
$
|
85,348
|
|
|
$
|
140,056
|
|
|
$
|
7,756
|
|
|
$
|
6,919
|
|
|
$
|
118,911
|
|
|
$
|
358,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30
In millions
|
|
Retail
Banking
|
|
|
Corporate &
Institutional
Banking
|
|
|
Asset
Management
Group
|
|
|
BlackRock
|
|
|
Other
|
|
|
Consolidated (a)
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
2,259
|
|
|
$
|
1,655
|
|
|
$
|
144
|
|
|
|
|
|
|
$
|
360
|
|
|
$
|
4,418
|
|
Noninterest income
|
|
|
1,248
|
|
|
|
1,112
|
|
|
|
435
|
|
|
$
|
372
|
|
|
|
359
|
|
|
|
3,526
|
|
Total revenue
|
|
|
3,507
|
|
|
|
2,767
|
|
|
|
579
|
|
|
|
372
|
|
|
|
719
|
|
|
|
7,944
|
|
Provision for credit losses (benefit)
|
|
|
121
|
|
|
|
112
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
(38
|
)
|
|
|
186
|
|
Depreciation and amortization
|
|
|
89
|
|
|
|
90
|
|
|
|
25
|
|
|
|
|
|
|
|
253
|
|
|
|
457
|
|
Other noninterest expense
|
|
|
2,596
|
|
|
|
1,096
|
|
|
|
407
|
|
|
|
|
|
|
|
325
|
|
|
|
4,424
|
|
Income before income taxes and noncontrolling interests
|
|
|
701
|
|
|
|
1,469
|
|
|
|
156
|
|
|
|
372
|
|
|
|
179
|
|
|
|
2,877
|
|
Income taxes (benefit)
|
|
|
258
|
|
|
|
467
|
|
|
|
57
|
|
|
|
83
|
|
|
|
(159
|
)
|
|
|
706
|
|
Net income
|
|
$
|
443
|
|
|
$
|
1,002
|
|
|
$
|
99
|
|
|
$
|
289
|
|
|
$
|
338
|
|
|
$
|
2,171
|
|
Average Assets (b)
|
|
$
|
88,559
|
|
|
$
|
145,445
|
|
|
$
|
7,517
|
|
|
$
|
7,132
|
|
|
$
|
119,717
|
|
|
$
|
368,370
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
2,255
|
|
|
$
|
1,559
|
|
|
$
|
153
|
|
|
|
|
|
|
$
|
199
|
|
|
$
|
4,166
|
|
Noninterest income
|
|
|
1,358
|
|
|
|
980
|
|
|
|
416
|
|
|
$
|
311
|
|
|
|
228
|
|
|
|
3,293
|
|
Total revenue
|
|
|
3,613
|
|
|
|
2,539
|
|
|
|
569
|
|
|
|
311
|
|
|
|
427
|
|
|
|
7,459
|
|
Provision for credit losses (benefit)
|
|
|
108
|
|
|
|
172
|
|
|
|
3
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
279
|
|
Depreciation and amortization
|
|
|
88
|
|
|
|
74
|
|
|
|
23
|
|
|
|
|
|
|
|
232
|
|
|
|
417
|
|
Other noninterest expense
|
|
|
2,516
|
|
|
|
1,016
|
|
|
|
389
|
|
|
|
|
|
|
|
303
|
|
|
|
4,224
|
|
Income (loss) before income taxes and noncontrolling interests
|
|
|
901
|
|
|
|
1,277
|
|
|
|
154
|
|
|
|
311
|
|
|
|
(104
|
)
|
|
|
2,539
|
|
Income taxes (benefit)
|
|
|
330
|
|
|
|
422
|
|
|
|
57
|
|
|
|
65
|
|
|
|
(267
|
)
|
|
|
607
|
|
Net income
|
|
$
|
571
|
|
|
$
|
855
|
|
|
$
|
97
|
|
|
$
|
246
|
|
|
$
|
163
|
|
|
$
|
1,932
|
|
Average Assets (b)
|
|
$
|
85,780
|
|
|
$
|
138,663
|
|
|
$
|
7,822
|
|
|
$
|
6,919
|
|
|
$
|
118,267
|
|
|
$
|
357,451
|
|
(a)
|
There were no material intersegment revenues for the three and six months ended June 30, 2017 and 2016.
|
(b)
|
Period-end
balances for BlackRock.
|
80
The PNC Financial Services Group, Inc.
Form 10-Q
N
OTE
15 S
UBSEQUENT
E
VENTS
On July 28, 2017, PNC Bank issued the following:
|
|
$750 million of senior notes with a maturity date of July 28, 2022. Interest is payable semi-annually at a fixed rate of 2.45% per annum on
January 28 and July 28 of each year, beginning on January 28, 2018.
|
|
|
$500 million of senior floating rate notes with a maturity date of July 27, 2022. Interest is payable at the
3-month LIBOR
rate reset quarterly, plus a spread of .50%, on January 27, April 27, July 27 and October 27 of each year, commencing on October 27, 2017.
|
The PNC
Financial Services Group, Inc.
Form 10-Q
81
STATISTICAL INFORMATION (UNAUDITED)
THE PNC FINANCIAL SERVICES GROUP, INC.
Average Consolidated Balance Sheet And Net Interest Analysis (a) (b) (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30
|
|
|
|
2017
|
|
|
2016
|
|
Taxable-equivalent basis
Dollars in millions
|
|
Average
Balances
|
|
|
Interest
Income/
Expense
|
|
|
Average
Yields/
Rates
|
|
|
Average
Balances
|
|
|
Interest
Income/
Expense
|
|
|
Average
Yields/
Rates
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
$
|
26,122
|
|
|
$
|
332
|
|
|
|
2.54
|
%
|
|
$
|
24,777
|
|
|
$
|
312
|
|
|
|
2.51
|
%
|
Non-agency
|
|
|
3,037
|
|
|
|
85
|
|
|
|
5.59
|
%
|
|
|
3,832
|
|
|
|
88
|
|
|
|
4.61
|
%
|
Commercial mortgage-backed
|
|
|
5,705
|
|
|
|
70
|
|
|
|
2.45
|
%
|
|
|
6,461
|
|
|
|
92
|
|
|
|
2.86
|
%
|
Asset-backed
|
|
|
5,927
|
|
|
|
74
|
|
|
|
2.49
|
%
|
|
|
5,579
|
|
|
|
63
|
|
|
|
2.25
|
%
|
U.S. Treasury and government agencies
|
|
|
12,990
|
|
|
|
112
|
|
|
|
1.72
|
%
|
|
|
9,804
|
|
|
|
76
|
|
|
|
1.53
|
%
|
Other
|
|
|
5,193
|
|
|
|
78
|
|
|
|
3.00
|
%
|
|
|
4,925
|
|
|
|
74
|
|
|
|
3.01
|
%
|
Total securities available for sale
|
|
|
58,974
|
|
|
|
751
|
|
|
|
2.54
|
%
|
|
|
55,378
|
|
|
|
705
|
|
|
|
2.54
|
%
|
Securities held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed
|
|
|
12,323
|
|
|
|
173
|
|
|
|
2.80
|
%
|
|
|
10,061
|
|
|
|
147
|
|
|
|
2.92
|
%
|
Commercial mortgage-backed
|
|
|
1,425
|
|
|
|
27
|
|
|
|
3.89
|
%
|
|
|
1,788
|
|
|
|
32
|
|
|
|
3.57
|
%
|
Asset-backed
|
|
|
523
|
|
|
|
6
|
|
|
|
2.28
|
%
|
|
|
712
|
|
|
|
7
|
|
|
|
1.87
|
%
|
U.S. Treasury and government agencies
|
|
|
531
|
|
|
|
8
|
|
|
|
3.09
|
%
|
|
|
260
|
|
|
|
5
|
|
|
|
3.80
|
%
|
Other
|
|
|
2,024
|
|
|
|
54
|
|
|
|
5.31
|
%
|
|
|
2,033
|
|
|
|
54
|
|
|
|
5.38
|
%
|
Total securities held to maturity
|
|
|
16,826
|
|
|
|
268
|
|
|
|
3.19
|
%
|
|
|
14,854
|
|
|
|
245
|
|
|
|
3.30
|
%
|
Total investment securities
|
|
|
75,800
|
|
|
|
1,019
|
|
|
|
2.69
|
%
|
|
|
70,232
|
|
|
|
950
|
|
|
|
2.70
|
%
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
105,024
|
|
|
|
1,767
|
|
|
|
3.35
|
%
|
|
|
99,530
|
|
|
|
1,550
|
|
|
|
3.08
|
%
|
Commercial real estate
|
|
|
29,418
|
|
|
|
500
|
|
|
|
3.38
|
%
|
|
|
28,313
|
|
|
|
477
|
|
|
|
3.33
|
%
|
Equipment lease financing
|
|
|
7,550
|
|
|
|
132
|
|
|
|
3.49
|
%
|
|
|
7,495
|
|
|
|
128
|
|
|
|
3.42
|
%
|
Consumer
|
|
|
56,591
|
|
|
|
1,261
|
|
|
|
4.49
|
%
|
|
|
57,839
|
|
|
|
1,231
|
|
|
|
4.28
|
%
|
Residential real estate
|
|
|
15,741
|
|
|
|
358
|
|
|
|
4.55
|
%
|
|
|
14,580
|
|
|
|
349
|
|
|
|
4.79
|
%
|
Total loans
|
|
|
214,324
|
|
|
|
4,018
|
|
|
|
3.75
|
%
|
|
|
207,757
|
|
|
|
3,735
|
|
|
|
3.58
|
%
|
Interest-earning deposits with banks
|
|
|
23,363
|
|
|
|
107
|
|
|
|
.92
|
%
|
|
|
25,998
|
|
|
|
65
|
|
|
|
.50
|
%
|
Other interest-earning assets
|
|
|
9,076
|
|
|
|
156
|
|
|
|
3.46
|
%
|
|
|
7,606
|
|
|
|
137
|
|
|
|
3.61
|
%
|
Total interest-earning assets/interest income
|
|
|
322,563
|
|
|
$
|
5,300
|
|
|
|
3.29
|
%
|
|
|
311,593
|
|
|
$
|
4,887
|
|
|
|
3.13
|
%
|
Noninterest-earning assets
|
|
|
45,807
|
|
|
|
|
|
|
|
|
|
|
|
45,858
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
368,370
|
|
|
|
|
|
|
|
|
|
|
$
|
357,451
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
63,034
|
|
|
$
|
83
|
|
|
|
.27
|
%
|
|
$
|
74,417
|
|
|
$
|
77
|
|
|
|
.21
|
%
|
Demand
|
|
|
57,157
|
|
|
|
31
|
|
|
|
.11
|
%
|
|
|
50,934
|
|
|
|
19
|
|
|
|
.07
|
%
|
Savings
|
|
|
40,620
|
|
|
|
88
|
|
|
|
.44
|
%
|
|
|
25,737
|
|
|
|
50
|
|
|
|
.39
|
%
|
Time deposits
|
|
|
17,136
|
|
|
|
61
|
|
|
|
.71
|
%
|
|
|
19,247
|
|
|
|
63
|
|
|
|
.66
|
%
|
Total interest-bearing deposits
|
|
|
177,947
|
|
|
|
263
|
|
|
|
.30
|
%
|
|
|
170,335
|
|
|
|
209
|
|
|
|
.25
|
%
|
Borrowed funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank borrowings
|
|
|
20,410
|
|
|
|
119
|
|
|
|
1.16
|
%
|
|
|
19,285
|
|
|
|
72
|
|
|
|
.74
|
%
|
Bank notes and senior debt
|
|
|
23,910
|
|
|
|
232
|
|
|
|
1.93
|
%
|
|
|
21,533
|
|
|
|
179
|
|
|
|
1.64
|
%
|
Subordinated debt
|
|
|
6,854
|
|
|
|
123
|
|
|
|
3.57
|
%
|
|
|
8,327
|
|
|
|
136
|
|
|
|
3.28
|
%
|
Other
|
|
|
5,067
|
|
|
|
39
|
|
|
|
1.54
|
%
|
|
|
4,484
|
|
|
|
29
|
|
|
|
1.31
|
%
|
Total borrowed funds
|
|
|
56,241
|
|
|
|
513
|
|
|
|
1.82
|
%
|
|
|
53,629
|
|
|
|
416
|
|
|
|
1.54
|
%
|
Total interest-bearing liabilities/interest expense
|
|
|
234,188
|
|
|
|
776
|
|
|
|
.66
|
%
|
|
|
223,964
|
|
|
|
625
|
|
|
|
.56
|
%
|
Noninterest-bearing liabilities and equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits
|
|
|
77,710
|
|
|
|
|
|
|
|
|
|
|
|
76,541
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
10,258
|
|
|
|
|
|
|
|
|
|
|
|
10,822
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
46,214
|
|
|
|
|
|
|
|
|
|
|
|
46,124
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
368,370
|
|
|
|
|
|
|
|
|
|
|
$
|
357,451
|
|
|
|
|
|
|
|
|
|
Interest rate spread
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
|
|
|
|
|
|
|
|
|
|
|
2.57
|
%
|
Impact of noninterest-bearing sources
|
|
|
|
|
|
|
|
|
|
|
.18
|
|
|
|
|
|
|
|
|
|
|
|
.16
|
|
Net interest income/margin
|
|
|
|
|
|
$
|
4,524
|
|
|
|
2.81
|
%
|
|
|
|
|
|
$
|
4,262
|
|
|
|
2.73
|
%
|
(a)
|
Nonaccrual loans are included in loans, net of unearned income. The impact of financial derivatives used in interest rate risk management is included in the interest
income/expense and average yields/rates of the related assets and liabilities. Basis adjustments related to hedged items are included in noninterest-earning assets and noninterest-bearing liabilities. Average balances of securities are based on
amortized historical cost (excluding adjustments to fair value, which are included in other noninterest-earning assets). Average balances for certain loans and borrowed funds accounted for at fair value, with changes in fair value recorded in
trading noninterest income, are included in noninterest-earning assets and noninterest-bearing liabilities.
|
82
The PNC Financial Services Group, Inc.
Form 10-Q
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2017
|
|
|
First Quarter 2017
|
|
|
Second Quarter 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Balances
|
|
|
Interest
Income/
Expense
|
|
|
Average
Yields/
Rates
|
|
|
Average
Balances
|
|
|
Interest
Income/
Expense
|
|
|
Average
Yields/
Rates
|
|
|
Average
Balances
|
|
|
Interest
Income/
Expense
|
|
|
Average
Yields/
Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$25,862
|
|
|
$
|
163
|
|
|
|
2.51
|
%
|
|
$
|
26,385
|
|
|
$
|
169
|
|
|
|
2.57
|
%
|
|
$
|
24,856
|
|
|
$
|
153
|
|
|
|
2.46
|
%
|
|
2,947
|
|
|
|
41
|
|
|
|
5.58
|
%
|
|
|
3,127
|
|
|
|
44
|
|
|
|
5.59
|
%
|
|
|
3,728
|
|
|
|
44
|
|
|
|
4.79
|
%
|
|
5,493
|
|
|
|
35
|
|
|
|
2.56
|
%
|
|
|
5,919
|
|
|
|
35
|
|
|
|
2.35
|
%
|
|
|
6,335
|
|
|
|
46
|
|
|
|
2.94
|
%
|
|
5,863
|
|
|
|
37
|
|
|
|
2.48
|
%
|
|
|
5,992
|
|
|
|
37
|
|
|
|
2.50
|
%
|
|
|
5,672
|
|
|
|
33
|
|
|
|
2.32
|
%
|
|
12,881
|
|
|
|
58
|
|
|
|
1.78
|
%
|
|
|
13,101
|
|
|
|
54
|
|
|
|
1.66
|
%
|
|
|
9,673
|
|
|
|
37
|
|
|
|
1.50
|
%
|
|
5,093
|
|
|
|
39
|
|
|
|
3.08
|
%
|
|
|
5,293
|
|
|
|
39
|
|
|
|
2.93
|
%
|
|
|
5,004
|
|
|
|
38
|
|
|
|
3.02
|
%
|
|
58,139
|
|
|
|
373
|
|
|
|
2.56
|
%
|
|
|
59,817
|
|
|
|
378
|
|
|
|
2.53
|
%
|
|
|
55,268
|
|
|
|
351
|
|
|
|
2.54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,790
|
|
|
|
90
|
|
|
|
2.82
|
%
|
|
|
11,852
|
|
|
|
83
|
|
|
|
2.79
|
%
|
|
|
10,215
|
|
|
|
72
|
|
|
|
2.81
|
%
|
|
1,393
|
|
|
|
14
|
|
|
|
4.30
|
%
|
|
|
1,458
|
|
|
|
13
|
|
|
|
3.50
|
%
|
|
|
1,755
|
|
|
|
16
|
|
|
|
3.61
|
%
|
|
490
|
|
|
|
3
|
|
|
|
2.35
|
%
|
|
|
556
|
|
|
|
3
|
|
|
|
2.21
|
%
|
|
|
708
|
|
|
|
4
|
|
|
|
1.91
|
%
|
|
533
|
|
|
|
4
|
|
|
|
3.10
|
%
|
|
|
529
|
|
|
|
4
|
|
|
|
3.07
|
%
|
|
|
262
|
|
|
|
3
|
|
|
|
3.79
|
%
|
|
2,007
|
|
|
|
27
|
|
|
|
5.28
|
%
|
|
|
2,041
|
|
|
|
27
|
|
|
|
5.34
|
%
|
|
|
1,986
|
|
|
|
26
|
|
|
|
5.40
|
%
|
|
17,213
|
|
|
|
138
|
|
|
|
3.22
|
%
|
|
|
16,436
|
|
|
|
130
|
|
|
|
3.16
|
%
|
|
|
14,926
|
|
|
|
121
|
|
|
|
3.22
|
%
|
|
75,352
|
|
|
|
511
|
|
|
|
2.71
|
%
|
|
|
76,253
|
|
|
|
508
|
|
|
|
2.67
|
%
|
|
|
70,194
|
|
|
|
472
|
|
|
|
2.68
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,944
|
|
|
|
932
|
|
|
|
3.45
|
%
|
|
|
103,084
|
|
|
|
835
|
|
|
|
3.24
|
%
|
|
|
99,991
|
|
|
|
779
|
|
|
|
3.08
|
%
|
|
29,655
|
|
|
|
261
|
|
|
|
3.48
|
%
|
|
|
29,178
|
|
|
|
239
|
|
|
|
3.27
|
%
|
|
|
28,659
|
|
|
|
229
|
|
|
|
3.16
|
%
|
|
7,602
|
|
|
|
69
|
|
|
|
3.65
|
%
|
|
|
7,497
|
|
|
|
63
|
|
|
|
3.34
|
%
|
|
|
7,570
|
|
|
|
65
|
|
|
|
3.44
|
%
|
|
56,342
|
|
|
|
635
|
|
|
|
4.52
|
%
|
|
|
56,843
|
|
|
|
626
|
|
|
|
4.47
|
%
|
|
|
57,467
|
|
|
|
610
|
|
|
|
4.28
|
%
|
|
15,830
|
|
|
|
180
|
|
|
|
4.55
|
%
|
|
|
15,651
|
|
|
|
178
|
|
|
|
4.55
|
%
|
|
|
14,643
|
|
|
|
177
|
|
|
|
4.84
|
%
|
|
216,373
|
|
|
|
2,077
|
|
|
|
3.82
|
%
|
|
|
212,253
|
|
|
|
1,941
|
|
|
|
3.67
|
%
|
|
|
208,330
|
|
|
|
1,860
|
|
|
|
3.56
|
%
|
|
22,543
|
|
|
|
58
|
|
|
|
1.04
|
%
|
|
|
24,192
|
|
|
|
49
|
|
|
|
.81
|
%
|
|
|
26,463
|
|
|
|
33
|
|
|
|
.51
|
%
|
|
9,748
|
|
|
|
82
|
|
|
|
3.38
|
%
|
|
|
8,395
|
|
|
|
74
|
|
|
|
3.54
|
%
|
|
|
7,449
|
|
|
|
67
|
|
|
|
3.59
|
%
|
|
324,016
|
|
|
$
|
2,728
|
|
|
|
3.35
|
%
|
|
|
321,093
|
|
|
$
|
2,572
|
|
|
|
3.22
|
%
|
|
|
312,436
|
|
|
$
|
2,432
|
|
|
|
3.10
|
%
|
|
46,286
|
|
|
|
|
|
|
|
|
|
|
|
45,323
|
|
|
|
|
|
|
|
|
|
|
|
46,554
|
|
|
|
|
|
|
|
|
|
|
$370,302
|
|
|
|
|
|
|
|
|
|
|
$
|
366,416
|
|
|
|
|
|
|
|
|
|
|
$
|
358,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$62,157
|
|
|
$
|
47
|
|
|
|
.30
|
%
|
|
$
|
63,921
|
|
|
$
|
36
|
|
|
|
.23
|
%
|
|
$
|
72,442
|
|
|
$
|
35
|
|
|
|
.20
|
%
|
|
57,513
|
|
|
|
17
|
|
|
|
.12
|
%
|
|
|
56,797
|
|
|
|
14
|
|
|
|
.10
|
%
|
|
|
52,218
|
|
|
|
10
|
|
|
|
.08
|
%
|
|
42,128
|
|
|
|
47
|
|
|
|
.45
|
%
|
|
|
39,095
|
|
|
|
41
|
|
|
|
.42
|
%
|
|
|
28,131
|
|
|
|
27
|
|
|
|
.39
|
%
|
|
17,214
|
|
|
|
32
|
|
|
|
.73
|
%
|
|
|
17,058
|
|
|
|
29
|
|
|
|
.69
|
%
|
|
|
19,056
|
|
|
|
32
|
|
|
|
.66
|
%
|
|
179,012
|
|
|
|
143
|
|
|
|
.32
|
%
|
|
|
176,871
|
|
|
|
120
|
|
|
|
.28
|
%
|
|
|
171,847
|
|
|
|
104
|
|
|
|
.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,405
|
|
|
|
63
|
|
|
|
1.23
|
%
|
|
|
20,416
|
|
|
|
56
|
|
|
|
1.09
|
%
|
|
|
18,716
|
|
|
|
38
|
|
|
|
.80
|
%
|
|
24,817
|
|
|
|
125
|
|
|
|
2.00
|
%
|
|
|
22,992
|
|
|
|
107
|
|
|
|
1.85
|
%
|
|
|
22,375
|
|
|
|
92
|
|
|
|
1.62
|
%
|
|
6,607
|
|
|
|
61
|
|
|
|
3.66
|
%
|
|
|
7,102
|
|
|
|
62
|
|
|
|
3.49
|
%
|
|
|
8,336
|
|
|
|
68
|
|
|
|
3.26
|
%
|
|
5,695
|
|
|
|
24
|
|
|
|
1.67
|
%
|
|
|
4,432
|
|
|
|
15
|
|
|
|
1.36
|
%
|
|
|
4,206
|
|
|
|
14
|
|
|
|
1.39
|
%
|
|
57,524
|
|
|
|
273
|
|
|
|
1.89
|
%
|
|
|
54,942
|
|
|
|
240
|
|
|
|
1.74
|
%
|
|
|
53,633
|
|
|
|
212
|
|
|
|
1.57
|
%
|
|
236,536
|
|
|
|
416
|
|
|
|
.70
|
%
|
|
|
231,813
|
|
|
|
360
|
|
|
|
.62
|
%
|
|
|
225,480
|
|
|
|
316
|
|
|
|
.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,375
|
|
|
|
|
|
|
|
|
|
|
|
78,050
|
|
|
|
|
|
|
|
|
|
|
|
75,775
|
|
|
|
|
|
|
|
|
|
|
10,432
|
|
|
|
|
|
|
|
|
|
|
|
10,081
|
|
|
|
|
|
|
|
|
|
|
|
11,390
|
|
|
|
|
|
|
|
|
|
|
45,959
|
|
|
|
|
|
|
|
|
|
|
|
46,472
|
|
|
|
|
|
|
|
|
|
|
|
46,345
|
|
|
|
|
|
|
|
|
|
|
$370,302
|
|
|
|
|
|
|
|
|
|
|
$
|
366,416
|
|
|
|
|
|
|
|
|
|
|
$
|
358,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.65
|
%
|
|
|
|
|
|
|
|
|
|
|
2.60
|
%
|
|
|
|
|
|
|
|
|
|
|
2.54
|
%
|
|
|
|
|
|
|
|
|
|
.19
|
|
|
|
|
|
|
|
|
|
|
|
.17
|
|
|
|
|
|
|
|
|
|
|
|
.16
|
|
|
|
|
|
$
|
2,312
|
|
|
|
2.84
|
%
|
|
|
|
|
|
$
|
2,212
|
|
|
|
2.77
|
%
|
|
|
|
|
|
$
|
2,116
|
|
|
|
2.70
|
%
|
(b)
|
Loan fees for the three months ended June 30, 2017, March 31, 2017 and June 30, 2016 were $30 million, $24 million and $34 million,
respectively. Loan fees for the six months ended June 30, 2017 and June 30, 2016 were $54 million and $60 million, respectively.
|
(c)
|
Interest income calculated as taxable-equivalent interest income. To provide more meaningful comparisons of interest income and yields for all interest-earning assets,
as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margin by increasing the interest income earned on
tax-exempt
assets to make
it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP. The taxable-equivalent adjustments to net interest income for the three months ended June 30, 2017, March 31, 2017, and
June 30, 2016 were $54 million, $52 million, and $48 million, respectively. The taxable-equivalent adjustments to net interest income for the six months ended June 30, 2017 and June 30, 2016 were $106 million and
$96 million, respectively.
|
The PNC
Financial Services Group, Inc.
Form 10-Q
83
R
ECONCILIATION
O
F
T
AXABLE
-E
QUIVALENT
N
ET
I
NTEREST
I
NCOME
(N
ON
-GAAP)
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
Three months ended
|
|
In millions
|
|
June 30
2017
|
|
|
June 30
2016
|
|
|
June 30
2017
|
|
|
March 31
2017
|
|
|
June 30
2016
|
|
Net interest income (GAAP)
|
|
$
|
4,418
|
|
|
$
|
4,166
|
|
|
$
|
2,258
|
|
|
$
|
2,160
|
|
|
$
|
2,068
|
|
Taxable-equivalent adjustments
|
|
|
106
|
|
|
|
96
|
|
|
|
54
|
|
|
|
52
|
|
|
|
48
|
|
Net interest income
(Non-GAAP)
|
|
$
|
4,524
|
|
|
$
|
4,262
|
|
|
$
|
2,312
|
|
|
$
|
2,212
|
|
|
$
|
2,116
|
|
(a)
|
The interest income earned on certain earning assets is completely or partially exempt from federal income tax. To provide more meaningful comparisons of net interest
income, we use interest income on a taxable-equivalent basis by increasing the interest income earned on
tax-exempt
assets to make it fully equivalent to interest income earned on taxable investments. This
adjustment is not permitted under GAAP.
|
T
RANSITIONAL
B
ASEL
III
A
ND
P
RO
F
ORMA
F
ULLY
P
HASED
-
IN
B
ASEL
III C
OMMON
E
QUITY
T
IER
1 C
APITAL
R
ATIOS
(N
ON
-G
AAP
) 2016 P
ERIODS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Transitional Basel III (a)
|
|
|
Pro forma Fully
Phased-In
Basel III
(Non-GAAP)
(estimated) (b) (c)
|
|
Dollars in millions
|
|
December 31
2016
|
|
|
June 30
2016
|
|
|
December 31
2016
|
|
|
June 30
2016
|
|
Common stock, related surplus and retained earnings, net of treasury stock
|
|
$
|
41,987
|
|
|
$
|
41,367
|
|
|
$
|
41,987
|
|
|
$
|
41,367
|
|
Less regulatory capital adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and disallowed intangibles, net of deferred tax liabilities
|
|
|
(8,974
|
)
|
|
|
(9,008
|
)
|
|
|
(9,073
|
)
|
|
|
(9,124
|
)
|
Basel III total threshold deductions
|
|
|
(762
|
)
|
|
|
(710
|
)
|
|
|
(1,469
|
)
|
|
|
(1,185
|
)
|
Accumulated other comprehensive income (d)
|
|
|
(238
|
)
|
|
|
172
|
|
|
|
(396
|
)
|
|
|
286
|
|
All other adjustments
|
|
|
(214
|
)
|
|
|
(158
|
)
|
|
|
(221
|
)
|
|
|
(165
|
)
|
Basel III Common equity Tier 1 capital
|
|
$
|
31,799
|
|
|
$
|
31,663
|
|
|
$
|
30,828
|
|
|
$
|
31,179
|
|
Basel III standardized approach risk-weighted assets (e)
|
|
$
|
300,533
|
|
|
$
|
297,724
|
|
|
$
|
308,517
|
|
|
$
|
305,918
|
|
Basel III advanced approaches risk-weighted assets (f)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
277,896
|
|
|
$
|
278,863
|
|
Basel III Common equity Tier 1 capital ratio
|
|
|
10.6
|
%
|
|
|
10.6
|
%
|
|
|
10.0
|
%
|
|
|
10.2
|
%
|
Risk weight and associated rules utilized
|
|
|
Standardized (with
2016 transition adjustments)
|
|
|
|
Standardized
|
|
(a)
|
Calculated using the regulatory capital methodology applicable to us during 2016.
|
(b)
|
PNC utilizes the pro forma fully
phased-in
Basel III capital ratios, to assess its capital position (without the benefit of
phase-ins),
as these ratios represent the regulatory capital standards that will ultimately be applicable to PNC under the final Basel III rules.
|
(c)
|
Basel III capital ratios and estimates may be impacted by additional regulatory guidance and, in the case of those ratios calculated using the advanced approaches, may
be subject to variability based on the ongoing evolution, validation and regulatory approval of PNCs models that are integral to the calculation of advanced approaches risk-weighted assets as PNC moves through the parallel run process.
|
(d)
|
Represents net adjustments related to accumulated other comprehensive income for securities currently and previously held as available for sale, as well as pension and
other postretirement plans.
|
(e)
|
Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets.
|
(f)
|
Basel III advanced approaches risk-weighted assets are based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted
assets. During the parallel run qualification phase PNC has refined the data, models and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements may result in increases or
decreases to this estimate through the parallel run qualification phase.
|
84
The PNC Financial Services Group, Inc.
Form 10-Q