~~0000713676srt:WeightedAverageMemberpnc:DiscountedCashFlowMemberus-gaap:MeasurementInputConstantPrepaymentRateMemberus-gaap:~~0000713676us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:~~ResidentialMortgageMemberus-gaap:ServicingContractsMember2021-03-31~~EquityMethodInvestmentsMember2021-07-012021-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-09718

The PNC Financial Services Group, Inc.

(Exact name of registrant as specified in its charter)


Pennsylvania						25-1435979
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2401

(Address of principal executive offices, including zip code)

(888) 762-2265

(Registrant’s telephone number including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $5.00	PNC	New York Stock Exchange
Depositary Shares Each Representing a 1/4,000 Interest in a Share of Fixed-to- Floating Rate Non-Cumulative Perpetual Preferred Stock, Series P	PNC P	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of ~~April 16,~~October 15, 2021, there were ~~424,858,349~~422,640,807 shares of the registrant’s common stock ($5 par value) outstanding.

THE PNC FINANCIAL SERVICES GROUP, INC.

Cross-Reference Index to ~~First~~Third Quarter 2021 Form 10-Q


			Pages
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Income Statement			4645
Consolidated Statement of Comprehensive Income			4746
Consolidated Balance Sheet			4847
Consolidated Statement of Cash Flows			4948
Notes To Consolidated Financial Statements (Unaudited)
Note 1 Accounting Policies			5150
Note 2 Acquisition and Divestiture Activity			5352
Note 3 Investment Securities			5456
Note 4 Loans and Related Allowance for Credit Losses			5759
Note 5 Loan Sale and Servicing Activities and Variable Interest Entities			6669
Note 6 Goodwill and Mortgage Servicing Rights			6771
Note 7 Leases			6973
Note 8 Commitments			7073
Note 9 Total Equity and Other Comprehensive Income			7175
Note 10 Earnings Per Share			7478
Note 11 Fair Value			7478
Note 12 Financial Derivatives			8288
Note 13 Legal Proceedings			8794
Note 14 Segment Reporting			8895
Note 15 Fee-based Revenue from Contracts with Customers			9099
Note 16 Subsequent Events			92101
Statistical Information (Unaudited)
Average Consolidated Balance Sheet And Net Interest Analysis			93102
Reconciliation of Taxable-Equivalent Net Interest Income (Non-GAAP)			95104
Glossary			95104
Defined Terms			95104
Acronyms			95104
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Financial Review			1
Consolidated Financial Highlights			1
Executive Summary			3
Consolidated Income Statement Review			5
Consolidated Balance Sheet Review			9
Business Segments Review			1312
Risk Management			2120
Recent Regulatory Developments			4039
Critical Accounting Estimates and Judgments			4140
Off-Balance Sheet Arrangements and Variable Interest Entities			4241
Internal Controls and Disclosure Controls and Procedures			4341
Cautionary Statement Regarding Forward-Looking Information			4443
Item 3. Quantitative and Qualitative Disclosures about Market Risk.			~~21-40, 51-52~~20-39, 50-51 and ~~82-87~~88-94
Item 4. Controls and Procedures.			4341
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.			96104
Item 1A. Risk Factors.			96104
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			96105
Item 6. Exhibits.			97106
Exhibit Index			97106
Corporate Information			97106
Signature			99108

MD&A TABLE REFERENCE
Table Description Page
1
Consolidated Financial Highlights
1
2
Summarized Average Balances and Net Interest Income
6
3
Noninterest Income
7
4
Noninterest Expense
7
5
Provision for (Recapture of) Credit Losses
8
6
Summarized Balance Sheet Data
9
7
Loans
10
8
Investment Securities Table
10
9
Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities
11
10
Details of Funding Sources
12
11
Retail Banking Table
14
12
Corporate & Institutional Banking Table
17
13
Asset Management Group Table
20
14
Details of Loans
22
15
Commercial and Industrial Loans by Industry
22
16
Commercial Real Estate Loans by Geography and Property Type
23
17
Home Equity Loans by Geography and by Lien Type
25
18
Residential Real Estate Loans by Geography
25
19
Auto Loan Key Statistics
26
20
Nonperforming Assets by Type
27
21
Change in Nonperforming Assets
27
22
Accruing Loans Past Due
28
23
Summary of Troubled Debt Restructurings
29
24
Consumer Loans in Active Hardship Relief Programs
30
25
Allowance for Credit Losses by Loan Class
31
26
Loan Charge-Offs and Recoveries
32
27
Senior and Subordinated Debt
33
28
Credit Ratings for PNC and PNC Bank
35
29
Basel III Capital
36
30
Interest Sensitivity Analysis
37
31
Net Interest Income Sensitivity to Alternative Rate Scenarios
38
32
Alternate Interest Rate Scenarios: One Year Forward
38
33
Equity Investments Summary
39



MD&A TABLE REFERENCE
Table	Description	Page
1	Consolidated Financial Highlights	1
2	Summarized Average Balances and Net Interest Income	6
3	Noninterest Income	7
4	Noninterest Expense	8
5	Provision for (Recapture of) Credit Losses	8
6	Summarized Balance Sheet Data	9
7	Loans	10
8	Investment Securities	10
9	Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities	11
10	Details of Funding Sources	11
11	Retail Banking Table	13
12	Corporate & Institutional Banking Table	16
13	Asset Management Group Table	19
14	Details of Loans	21
15	Commercial and Industrial Loans by Industry	21
16	Commercial Real Estate Loans by Geography and Property Type	22
17	Residential Real Estate Loans by Geography	24
18	Home Equity Loans by Geography and by Lien Type	25
19	Auto Loan Key Statistics	25
20	Nonperforming Assets by Type	26
21	Change in Nonperforming Assets	26
22	Accruing Loans Past Due	27
23	Summary of Troubled Debt Restructurings	28
24	Consumer Loans in Active Hardship Relief Programs	29
25	Allowance for Credit Losses by Loan Class	30
26	Loan Charge-Offs and Recoveries	31
27	Senior and Subordinated Debt	32
28	Credit Ratings for PNC, PNC Bank and BBVA USA	34
29	Basel III Capital	35
30	Interest Sensitivity Analysis	36
31	Net Interest Income Sensitivity to Alternative Rate Scenarios	36
32	Alternate Interest Rate Scenarios: One Year Forward	37
33	Equity Investments Summary	38


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE
Table	Table	Description	Page	Table	Description	Page
34	34	Consolidated Income Statement - Discontinued Operations	53	34	Acquisition Consideration	52
35	35	Investment Securities Summary	54	35	Fair Value and Unpaid Principal Balance of Loans from the BBVA Acquisition	53
36	36	Gross Unrealized Loss and Fair Value of Securities Available for Sale Without an Allowance for Credit Losses	55	36	Intangible Assets	53

37	37	Gains (Losses) on Sales of Securities Available for Sale	55	37	BBVA Financial Results	54
38	38	Contractual Maturity of Debt Securities	56	38	Unaudited Pro Forma Results	54
39	39	Fair Value of Securities Pledged and Accepted as Collateral	56	39	PCD Loan Activity	55
40	40	Analysis of Loan Portfolio	58	40	Consolidated Income Statement - Discontinued Operations	55
41	41	Nonperforming Assets	59	41	Consolidated Statement of Cash Flows - Discontinued Operations	55
42	42	Commercial Credit Quality Indicators	60	42	Investment Securities Summary	56
43	43	Home Equity and Residential Real Estate Credit Quality Indicators	61	43	Gross Unrealized Loss and Fair Value of Securities Available for Sale Without an Allowance for Credit Losses	57

44	44	Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes	63	44	Gains (Losses) on Sales of Securities Available for Sale	57
45	45	Financial Impact and TDRs by Concession Type	64	45	Contractual Maturity of Debt Securities	58
46	46	Rollforward of Allowance for Credit Losses	65	46	Fair Value of Securities Pledged and Accepted as Collateral	58
47	47	Cash Flows Associated with Loan Sale and Servicing Activities	66	47	Analysis of Loan Portfolio	60
48	48	Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others	66	48	Nonperforming Assets	61
49	49	Non-Consolidated VIEs	67	49	Commercial Credit Quality Indicators	62
50	50	Mortgage Servicing Rights	68	50	Residential Real Estate Credit Quality Indicators	63
51	51	Commercial Mortgage Servicing Rights – Key Valuation Assumptions	68	51	Home Equity Credit Quality Indicators	63
52	52	Residential Mortgage Servicing Rights – Key Valuation Assumptions	69	52	Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes	65
53	53	Lessor Income	69	53	Financial Impact and TDRs by Concession Type	67
54	54	Commitments to Extend Credit and Other Commitments	70	54	Subsequently Defaulted TDRs	67
55	55	Rollforward of Total Equity	71	55	Rollforward of Allowance for Credit Losses	68
56	56	Other Comprehensive Income (Loss)	72	56	Cash Flows Associated with Loan Sale and Servicing Activities	69
57	57	Accumulated Other Comprehensive Income (Loss) Components	73	57	Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others	70
58	58	Dividends Per Share	73	58	Non-Consolidated VIEs	70
59	59	Basic and Diluted Earnings Per Common Share	74	59	Goodwill by Business Segment	71
60	60	Fair Value Measurements – Recurring Basis Summary	75	60	Mortgage Servicing Rights	71
61	61	Reconciliation of Level 3 Assets and Liabilities	76	61	Commercial Mortgage Servicing Rights – Key Valuation Assumptions	72
62	62	Fair Value Measurements – Recurring Quantitative Information	78	62	Residential Mortgage Servicing Rights – Key Valuation Assumptions	72
63	63	Fair Value Measurements – Nonrecurring	80	63	Lessor Income	73
64	64	Fair Value Option – Fair Value and Principal Balances	80	64	Commitments to Extend Credit and Other Commitments	73
65	65	Fair Value Option – Changes in Fair Value	81	65	Rollforward of Total Equity	75
66	66	Additional Fair Value Information Related to Other Financial Instruments	81	66	Other Comprehensive Income (Loss)	76
67	67	Total Gross Derivatives	83	67	Accumulated Other Comprehensive Income (Loss) Components	77
68	68	Gains (Losses) Recognized on Fair Value and Cash Flow Hedges in the Consolidated Income Statement	84	68	Dividends Per Share	77
69	69	Hedged Items - Fair Value Hedges	85	69	Basic and Diluted Earnings Per Common Share	78
70	70	Gains (Losses) on Derivatives Not Designated for Hedging	85	70	Fair Value Measurements – Recurring Basis Summary	79
71	71	Derivative Assets and Liabilities Offsetting	86	71	Reconciliation of Level 3 Assets and Liabilities	80
72	72	Results of Businesses	89	72	Fair Value Measurements – Recurring Quantitative Information	84
73	73	Retail Banking Noninterest Income Disaggregation	91	73	Fair Value Measurements – Nonrecurring	86
74	74	Corporate & Institutional Banking Noninterest Income Disaggregation	91	74	Fair Value Option – Fair Value and Principal Balances	86
75	75	Asset Management Group Noninterest Income Disaggregation	91	75	Fair Value Option – Changes in Fair Value	87
76				76	Additional Fair Value Information Related to Other Financial Instruments	87
77				77	Total Gross Derivatives	89
78				78	Gains (Losses) Recognized on Fair Value and Cash Flow Hedges in the Consolidated Income Statement	91
79				79	Hedged Items - Fair Value Hedges	91
80				80	Gains (Losses) on Derivatives Not Designated for Hedging	92
81				81	Derivative Assets and Liabilities Offsetting	93
82				82	Results of Businesses	97
83				83	Retail Banking Noninterest Income Disaggregation	99
84				84	Corporate & Institutional Banking Noninterest Income Disaggregation	100
85				85	Asset Management Group Noninterest Income Disaggregation	100

FINANCIAL REVIEW

THE PNC FINANCIAL SERVICES GROUP, INC.

This Financial Review, including the Consolidated Financial Highlights, should be read together with our unaudited Consolidated Financial Statements and unaudited Statistical Information included elsewhere in this Quarterly Report on Form 10-Q (the Report or Form 10-Q) and with Items 6, 7, 8 and 9A of our 2020 Annual Report on Form 10-K (2020 Form 10-K). We have reclassified certain prior period amounts to conform with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. For information regarding certain business, regulatory and legal risks, see the following: the Risk Management section of this Financial Review and of Item 7 in our 2020 Form 10-K; Item 1A Risk Factors included in our 2020 Form 10-K; and the Commitments and Legal Proceedings Notes of the Notes To Consolidated Financial Statements included in Item 1 of this Report and Item 8 of our 2020 Form 10-K. Also, see the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and the Critical Accounting Estimates ~~And~~and Judgments section in this Financial Review and in our 2020 Form 10-K for certain other factors that could cause actual results or future events to differ, perhaps materially, from historical performance and from those anticipated in the forward-looking statements included in this Report. See Note 14 Segment Reporting in the Notes To Consolidated Financial Statements included in this Report for a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a GAAP basis. In this Report, “PNC”, “we” or “us” refers to The PNC Financial Services Group, Inc. and its subsidiaries on a consolidated basis (except when referring to PNC as a public company, its common stock or other securities issued by PNC, which just refer to The PNC Financial Services Group, Inc.). References to The PNC Financial Services Group, Inc. or to any of its subsidiaries are specifically made where applicable.

See page 95104 for a glossary of certain terms and acronyms used in this Report.

Table 1: Consolidated Financial Highlights


Dollars in millions, except per share data Unaudited	Dollars in millions, except per share data Unaudited	Three months ended March 31						Dollars in millions, except per share data Unaudited	Three months ended September 30						Nine months ended September 30
		2021			2020				Dollars in millions, except per share data Unaudited		2021			2020			2021			2020
Financial Results (a)	Financial Results (a)
Revenue	Revenue									Revenue
Net interest income	Net interest income	$	2,348		$	2,511				Net interest income		$	2,856		$	2,484		$	7,785		$	7,522
Noninterest income	Noninterest income	1,872			1,825					Noninterest income		2,341			1,797			6,299			5,171
Total revenue	Total revenue	4,220			4,336					Total revenue		5,197			4,281			14,084			12,693
Provision for (recapture of) credit losses	Provision for (recapture of) credit losses	(551)			914					Provision for (recapture of) credit losses		(203)			52			(452)			3,429
Noninterest expense	Noninterest expense	2,574			2,543					Noninterest expense		3,587			2,531			9,211			7,589
Income from continuing operations before income taxes and noncontrolling interests	Income from continuing operations before income taxes and noncontrolling interests	$	2,197		$	879				Income from continuing operations before income taxes and noncontrolling interests		$	1,813		$	1,698		$	5,325		$	1,675
Income taxes from continuing operations	Income taxes from continuing operations	371			120					Income taxes from continuing operations		323			166			906			128
Net income from continuing operations	Net income from continuing operations	$	1,826		$	759				Net income from continuing operations		$	1,490		$	1,532		$	4,419		$	1,547
Income from discontinued operations before taxes	Income from discontinued operations before taxes				$	181				Income from discontinued operations before taxes											$	5,777
Income taxes from discontinued operations	Income taxes from discontinued operations				25					Income taxes from discontinued operations											1,222
Net income from discontinued operations	Net income from discontinued operations				$	156				Net income from discontinued operations											$	4,555
Net income	Net income	$	1,826		$	915				Net income		$	1,490		$	1,532		$	4,419		$	6,102
Less:	Less:									Less:
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	10			7					Net income attributable to noncontrolling interests		16			13			38			27
Preferred stock dividends (b)	Preferred stock dividends (b)	57			63					Preferred stock dividends (b)		57			63			162			181
Preferred stock discount accretion and redemptions	Preferred stock discount accretion and redemptions	1			1					Preferred stock discount accretion and redemptions		1			1			3			3
Net income attributable to common shareholders	Net income attributable to common shareholders	$	1,758		$	844				Net income attributable to common shareholders		$	1,416		$	1,455		$	4,216		$	5,891
Per Common Share	Per Common Share									Per Common Share
Basic earnings from continuing operations	Basic earnings from continuing operations	$	4.11		$	1.59				Basic earnings from continuing operations		$	3.31		$	3.40		$	9.84		$	3.11
Basic earnings from discontinued operations	Basic earnings from discontinued operations				0.37					Basic earnings from discontinued operations											10.61
Total basic earnings	Total basic earnings	$	4.11		$	1.96				Total basic earnings		$	3.31		$	3.40		$	9.84		$	13.73
Diluted earnings from continuing operations	Diluted earnings from continuing operations	$	4.10		$	1.59				Diluted earnings from continuing operations		$	3.30		$	3.39		$	9.83		$	3.11
Diluted earnings from discontinued operations	Diluted earnings from discontinued operations				0.36					Diluted earnings from discontinued operations											10.59
Total diluted earnings	Total diluted earnings	$	4.10		$	1.95				Total diluted earnings		$	3.30		$	3.39		$	9.83		$	13.70
Cash dividends declared per common share	Cash dividends declared per common share	$	1.15		$	1.15				Cash dividends declared per common share		$	1.25		$	1.15		$	3.65		$	3.45
Effective tax rate from continuing operations (c)	Effective tax rate from continuing operations (c)	16.9		%	13.7		%			Effective tax rate from continuing operations (c)		17.8		%	9.8		%	17.0		%	7.6		%
Performance Ratios	Performance Ratios									Performance Ratios
Net interest margin (d)	Net interest margin (d)	2.27		%	2.84		%			Net interest margin (d)		2.27		%	2.39		%	2.28		%	2.57		%
Noninterest income to total revenue	Noninterest income to total revenue	44		%	42		%			Noninterest income to total revenue		45		%	42		%	45		%	41		%
Efficiency	Efficiency	61		%	59		%			Efficiency		69		%	59		%	65		%	60		%
Return on:	Return on:									Return on:
Average common shareholders’ equity	Average common shareholders’ equity	14.31		%	7.51		%			Average common shareholders’ equity		10.95		%	11.76		%	11.17		%	16.57		%
Average assets	Average assets	1.58		%	0.89		%			Average assets		1.06		%	1.32		%	1.16		%	1.83		%

(a)The Executive Summary and Consolidated Income Statement Review portions of this Financial Review section provide information regarding items impacting the comparability of the periods presented.

(b)Dividends are payable quarterly other than Series ~~O, Series~~ R and Series S preferred stock, which are payable ~~semiannually,~~semiannually. On September 13, 2021, PNC issued 1,500,000 depositary shares each representing 1/100th ownership in a share of 3.400% fixed-rate reset non-cumulative perpetual preferred stock, Series T, with a par value of $1 per share. Beginning on December 15, dividends will be paid on the Series ~~O payable in different quarters than the Series R~~T on a quarterly basis (March 15, June 15, September 15 and ~~Series S preferred stock.~~December 15 of each year).

(c)The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax.

(d)Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating average yields used in the calculation of 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 in the Consolidated Income Statement. For additional information, see Reconciliation of Taxable-Equivalent Net Interest Income ~~(Non-GAAP)~~(non-GAAP) in the Statistical Information (Unaudited) section in Item 1 of this Report.

The PNC Financial Services Group, Inc. – Form 10-Q 11

Table 1: Consolidated Financial Highlights (Continued) (a)


Unaudited	Unaudited	March 31 2021			December 31 2020			March 31 2020			Unaudited	September 30 2021			December 31 2020			September 30 2020
Balance Sheet Data (dollars in millions, except per share data)	Balance Sheet Data (dollars in millions, except per share data)										Balance Sheet Data (dollars in millions, except per share data)
Assets	Assets	$	474,414		$	466,679		$	445,493		Assets	$	553,515		$	466,679		$	461,817
Loans	Loans	$	237,013		$	241,928		$	264,643		Loans	$	290,230		$	241,928		$	249,279
Allowance for loan and lease losses	Allowance for loan and lease losses	$	4,714		$	5,361		$	3,944		Allowance for loan and lease losses	$	5,355		$	5,361		$	5,751
Interest-earning deposits with banks (b)	Interest-earning deposits with banks (b)	$	86,161		$	85,173		$	19,986		Interest-earning deposits with banks (b)	$	75,478		$	85,173		$	70,959
Investment securities	Investment securities	$	98,255		$	88,799		$	90,546		Investment securities	$	125,606		$	88,799		$	91,185
Loans held for sale	Loans held for sale	$	1,967		$	1,597		$	1,693		Loans held for sale	$	2,121		$	1,597		$	1,787
Equity investments	Equity investments	$	6,386		$	6,052		$	4,694		Equity investments	$	7,737		$	6,052		$	4,938
Asset held for sale (c)								$	8,511

Mortgage servicing rights	Mortgage servicing rights	$	1,680		$	1,242		$	1,082		Mortgage servicing rights	$	1,833		$	1,242		$	1,113
Goodwill	Goodwill	$	9,317		$	9,233		$	9,233		Goodwill	$	10,885		$	9,233		$	9,233
Other assets	Other assets	$	30,894		$	30,999		$	41,556		Other assets	$	36,137		$	30,999		$	32,445
Noninterest-bearing deposits	Noninterest-bearing deposits	$	120,641		$	112,637		$	81,614		Noninterest-bearing deposits	$	156,305		$	112,637		$	107,281
Interest-bearing deposits	Interest-bearing deposits	$	254,426		$	252,708		$	223,590		Interest-bearing deposits	$	292,597		$	252,708		$	247,798
Total deposits	Total deposits	$	375,067		$	365,345		$	305,204		Total deposits	$	448,902		$	365,345		$	355,079
Borrowed funds	Borrowed funds	$	33,030		$	37,195		$	73,399		Borrowed funds	$	33,471		$	37,195		$	42,110
Allowance for unfunded lending related commitments	Allowance for unfunded lending related commitments	$	507		$	584		$	450		Allowance for unfunded lending related commitments	$	646		$	584		$	689
Total shareholders’ equity	Total shareholders’ equity	$	53,849		$	54,010		$	49,263		Total shareholders’ equity	$	56,259		$	54,010		$	53,276
Common shareholders’ equity	Common shareholders’ equity	$	50,331		$	50,493		$	45,269		Common shareholders’ equity	$	51,250		$	50,493		$	49,760
Accumulated other comprehensive income	Accumulated other comprehensive income	$	1,290		$	2,770		$	2,518		Accumulated other comprehensive income	$	1,079		$	2,770		$	2,997
Book value per common share	Book value per common share	$	118.47		$	119.11		$	106.70		Book value per common share	$	121.16		$	119.11		$	117.44
Period-end common shares outstanding (in millions)	Period-end common shares outstanding (in millions)	425			424			424			Period-end common shares outstanding (in millions)	423			424			424
Loans to deposits	Loans to deposits	63		%	66		%	87		%	Loans to deposits	65		%	66		%	70		%
Common shareholders’ equity to total assets	Common shareholders’ equity to total assets	10.6		%	10.8		%	10.2		%	Common shareholders’ equity to total assets	9.3		%	10.8		%	10.8		%
Client Assets (in billions)	Client Assets (in billions)										Client Assets (in billions)
Discretionary client assets under management	Discretionary client assets under management	$	173		$	170		$	136		Discretionary client assets under management	$	183		$	170		$	158
Nondiscretionary client assets under administration	Nondiscretionary client assets under administration	161			154			128			Nondiscretionary client assets under administration	170			154			142
Total client assets under administration	Total client assets under administration	334			324			264			Total client assets under administration	353			324			300
Brokerage account client assets	Brokerage account client assets	61			59			49			Brokerage account client assets	81			59			55
Total client assets	Total client assets	$	395		$	383		$	313		Total client assets	$	434		$	383		$	355
Basel III Capital Ratios (d) (e)
Basel III Capital Ratios (c) (d)											Basel III Capital Ratios (c) (d)
Common equity Tier 1	Common equity Tier 1	12.6		%	12.2		%	9.4		%	Common equity Tier 1	10.3		%	12.2		%	11.7		%
Common equity Tier 1 fully implemented ~~(f)~~(e)	Common equity Tier 1 fully implemented ~~(f)~~(e)	12.3		%	11.8		%	9.2		%	Common equity Tier 1 fully implemented ~~(f)~~(e)	10.0		%	11.8		%	11.3		%
Tier 1 risk-based	Tier 1 risk-based	13.7		%	13.2		%	10.5		%	Tier 1 risk-based	11.6		%	13.2		%	12.8		%
Total capital risk-based ~~(g)~~(f)	Total capital risk-based ~~(g)~~(f)	16.0		%	15.6		%	12.6		%	Total capital risk-based ~~(g)~~(f)	13.6		%	15.6		%	15.2		%
Leverage	Leverage	9.7		%	9.5		%	9.5		%	Leverage	8.2		%	9.5		%	9.4		%
Supplementary leverage	Supplementary leverage	10.1		%	9.9		%	7.9		%	Supplementary leverage	7.0		%	9.9		%	9.5		%
Asset Quality	Asset Quality										Asset Quality
Nonperforming loans to total loans	Nonperforming loans to total loans	0.90		%	0.94		%	0.62		%	Nonperforming loans to total loans	0.87		%	0.94		%	0.84		%
Nonperforming assets to total loans, OREO and foreclosed assets	Nonperforming assets to total loans, OREO and foreclosed assets	0.92		%	0.97		%	0.66		%	Nonperforming assets to total loans, OREO and foreclosed assets	0.88		%	0.97		%	0.86		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.46		%	0.50		%	0.39		%	Nonperforming assets to total assets	0.46		%	0.50		%	0.47		%
Net charge-offs to average loans (for the three months ended) (annualized)	Net charge-offs to average loans (for the three months ended) (annualized)	0.25		%	0.37		%	0.35		%	Net charge-offs to average loans (for the three months ended) (annualized)	0.11		%	0.37		%	0.24		%
Allowance for loan and lease losses to total loans	Allowance for loan and lease losses to total loans	1.99		%	2.22 %			1.49		%	Allowance for loan and lease losses to total loans	1.85		%	2.22 %			2.31		%
Allowance for credit losses to total loans ~~(h)~~(g)	Allowance for credit losses to total loans ~~(h)~~(g)	2.20		%	2.46		%	1.66		%	Allowance for credit losses to total loans ~~(h)~~(g)	2.07		%	2.46		%	2.58		%
Allowance for loan and lease losses to nonperforming loans	Allowance for loan and lease losses to nonperforming loans	220		%	235		%	240		%	Allowance for loan and lease losses to nonperforming loans	212		%	235		%	276		%
Accruing loans past due 90 days or more (in millions)	Accruing loans past due 90 days or more (in millions)	$	479		$	509		$	534		Accruing loans past due 90 days or more (in millions)	$	492		$	509		$	448

(a)The Executive Summary and Consolidated Balance Sheet Review portions of this Financial Review provide information regarding items impacting the comparability of the periods presented.

(b)Amounts include balances held with the Federal Reserve Bank of ~~Cleveland (Federal Reserve Bank) of $85.8~~$75.1 billion, $84.9 billion and ~~$19.6~~$70.6 billion as of ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 2020, respectively.

(c)Represents our held for sale investment in BlackRock, Inc. In the second quarter of 2020, PNC divested its entire investment in BlackRock. Prior period BlackRock investment balances have been reclassified to the Asset held for sale line in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations. Refer to Note 2 Acquisition and Divestiture Activity in the Notes to Consolidated Financial Statements in Item 1 of this Report for additional details.

~~(d)~~All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Basel III Capital discussion in the Capital Management portion of the Risk Management section of this Financial Review and the capital discussion in the Banking Regulation and Supervision section of Item 1 Business and Item 1A Risk Factors in our 2020 Form 10-K.

2 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

~~(e)~~(d)Ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision, unless noted differently.

~~(f)~~(e)The fully implemented CET1 ratio is calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision.

~~(g)~~(f)The 2021 and 2020 Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of $20 million and $40 million, respectively, that are subject to a phase-out period that runs through 2021.

~~(h)~~(g)Calculated as the Allowance for loan and lease losses plus the Allowance for unfunded lending related commitments divided by total loans.

2 The PNC Financial Services Group, Inc. – Form 10-Q

EXECUTIVE SUMMARY

Headquartered in Pittsburgh, Pennsylvania, we are one of the largest diversified financial institutions in the U.S. We have businesses engaged in retail banking, including residential mortgage, corporate and institutional banking and asset management, providing many of our products and services nationally. Our retail branch network is located ~~primarily in markets across the Mid-Atlantic, Midwest and Southeast.~~coast-to-coast. We also have strategic international offices in four countries outside the U.S.

Key Strategic Goals

At PNC we manage our company for the long term. We are focused on the fundamentals of growing customers, loans, deposits and revenue and improving profitability, while investing for the future and managing risk, expenses and capital. We continue to invest in our products, markets and brand, and embrace our commitments to our customers, shareholders, employees and the communities where we do business.

We strive to serve our customers and expand and deepen relationships by offering a broad range of deposit, credit and fee-based products and services. We are focused on delivering those products and services to our customers with the goal of addressing their financial objectives and putting customers’ needs first. Our business model is built on customer loyalty and engagement, understanding our customers’ financial goals and offering our diverse products and services to help them achieve financial well-being. Our approach is concentrated on growing and deepening client relationships across our businesses that meet our risk/return measures.

We are focused on our strategic priorities, which are designed to enhance value over the long term, and consist of:

•Expanding our leading banking franchise to new markets and digital platforms,

•Deepening customer relationships by delivering a superior banking experience and financial solutions, and

•Leveraging technology to innovate and enhance products, services, security and processes.

Our capital priorities are to support customers and business investment, maintain appropriate capital in light of economic conditions, the Basel III framework, and other regulatory expectations, and return excess capital to shareholders. For more detail, see the Capital Highlights portion of this Executive Summary, the Liquidity and Capital Management portion of the Risk Management section of this Financial Review and the Supervision and Regulation section in Item 1 Business of our 2020 Form 10-K.

~~Pending~~ Acquisition of BBVA USA Bancshares, Inc.

On ~~November 16, 2020,~~June 1, 2021, PNC ~~announced a definitive agreement with~~acquired BBVA ~~S.A. to acquire BBVA,~~USA Bancshares Inc. (BBVA), a U.S. financial holding

company conducting its business operations primarily through its U.S. banking subsidiary, BBVA ~~USA, for a fixed purchase price of~~

~~$11.6~~USA. PNC paid $11.5 billion in ~~cash.~~cash as consideration for the acquisition.

On October 8, 2021, BBVA USA merged into PNC Bank. As of October 12, 2021, PNC has converted approximately 2.6 million customers, 9,000 employees and over 600 branches ~~in Texas, Alabama, Arizona, California, Florida, Colorado~~across seven states. PNC’s third quarter results reflect the full quarter benefit of BBVA’s acquired business operations. Our results for the first nine months of 2021 reflect the benefit of BBVA's acquired business operations for the period since the acquisition closed on June 1, 2021. PNC’s balance sheet at September 30, 2021 includes BBVA’s balances. See the Recent Regulatory Developments portion of this Report for more detail on the approval and ~~New Mexico.~~merger process.

~~The transaction is expected to add approximately $102 billion in total assets, $86 billion~~

For additional information on the acquisition of ~~deposits and $66 billion of loans to PNC’s~~

~~Consolidated Balance Sheet and to close in mid-2021, subject to customary closing conditions, including receipt of regulatory approvals.~~BBVA, see Note 2 Acquisition and Divestiture Activity in the Notes toTo Consolidated Financial Statements included in Item 1 of this Report.

Throughout this Report, ~~and~~

~~our Current Reports on Form 8-K dated November 16, 2020, November 19, 2020 and April 20, 2021 contain additional information regarding this pending acquisition.~~BBVA USA Bancshares, Inc. will be referred to as BBVA.

Discontinued Operations

In the second quarter of 2020, ~~PNC~~we divested ~~its~~our entire 22.4% equity investment in BlackRock. Net proceeds from the sale were

$14.2 billion with an after-tax gain on sale of $4.3 billion. BlackRock's historical results are reported as discontinued operations. For additional details on the divestiture of our equity investment in BlackRock, see Note 2 Acquisition and Divestiture Activity in the Notes toTo Consolidated Financial Statements in Item 1 of this Report.

Income Statement Highlights

Net income from continuing operations of ~~$1.8~~$1.5 billion ~~or $4.10~~for the third quarter of 2021 decreased $42.0 million compared to the third quarter of 2020. Earnings were $3.30 per diluted common share for the ~~first~~third quarter of 2021 ~~increased $1.1 billion~~ compared to ~~net income from continuing operations of $0.8 billion, or $1.59~~$3.39 per diluted common share for the ~~first~~third quarter of ~~2020~~2020. Other than the impact of the BBVA acquisition, the decrease was primarily due to a ~~provision recapture, driven by improvements~~lower effective tax rate in ~~macroeconomic factors~~the third quarter of 2020 as a result of tax credit benefits and ~~lower loans outstanding.~~the favorable resolution of certain tax matters.

•~~Total revenue decreased $116 million, or 3%, to $4.2 billion.~~

•Net interest income of $2.3 billion decreased $163 million, or 6%, due to lower yields on earning assets partially offset by lower rates on deposits, higher average earning assets and a decline in borrowing costs and balances.

The PNC Financial Services Group, Inc. – Form 10-Q 33

•For the three months ended September 30, 2021 compared to the same period in 2020:

•Total revenue increased $916 million, or 21%, to $5.2 billion.

•Net interest income of $2.9 billion increased $372 million, or 15%, primarily due to the benefit of BBVA.

•Net interest margin decreased 12 basis points to 2.27% ~~compared to 2.84% for the first quarter of 2020~~ reflecting ~~the impact of higher balances held with the Federal Reserve Bank and~~ lower ~~yields on~~ securities ~~and loans, partially offset by lower rates on deposits.~~yields.

•Noninterest income increased ~~$47~~$544 million, or 3%30%, to ~~$1.9 billion.~~$2.3 billion, primarily due to record merger and acquisition advisory fees and the benefit of BBVA.

•Provision recapture was ~~$551~~$203 million for the ~~first~~third quarter of 2021 driven by continued improvements in ~~macroeconomic factors~~credit quality and ~~lower loans outstanding.~~changes in portfolio composition. Provision for credit losses ~~for securities and other assets~~ was ~~$28~~$52 million for the ~~first~~third quarter of ~~2021.~~2020.

•Noninterest expense increased ~~$31 million,~~$1.1 billion, or 1%42%, to ~~$2.6~~$3.6 billion, due to ~~higher deferred compensation, partially offset by lower costs associated with~~BBVA operating expenses, integration expenses and increased business ~~travel~~ and marketing activity.

For additional detail, see the Consolidated Income Statement Review section of this Financial Review.

Balance Sheet Highlights

Our balance sheet was strong and well positioned at ~~March 31,~~September 30, 2021 and December 31, 2020. In comparison to December 31, ~~2020:~~2020, changes in our balance sheet were primarily driven by the BBVA acquisition.

•Total assets increased ~~$7.7~~$86.8 billion, or 2%19%, to ~~$474.4~~$553.5 billion.

•Total loans ~~decreased $4.9~~increased $48.3 billion, or 2%20%, to ~~$237.0~~$290.2 billion.

•Total commercial loans ~~decreased $2.7~~increased $28.0 billion, or 2%17%, to ~~$164.5 billion.~~$195.2 billion driven by BBVA loans, partially offset by PPP loan forgiveness.

•At ~~March 31,~~September 30, 2021, PNC had ~~$14.0~~$6.8 billion of PPP loans. PPP loans outstanding ~~$10.1 billion from the first round of PPP and $3.9 billion from the second round.~~at December 31, 2020 were $12.0 billion.

•Total consumer loans ~~decreased $2.2~~increased $20.3 billion, or 3%27%, to ~~$72.5 billion.~~$95.0 billion driven by loans from BBVA and increased originations of PNC legacy residential mortgages, partially offset by declines in PNC legacy home equity and auto loan portfolios.

•Investment securities increased ~~$9.5~~$36.8 billion, or ~~11%~~41%, to ~~$98.3~~$125.6 billion, resulting from ~~accelerated~~increased purchase activity ~~near the end of the first quarter as the interest rate environment improved. Purchase activity was primarily focused on U.S. Treasury~~ and ~~government agency~~ securities ~~as well as agency residential mortgage-backed securities.~~from BBVA.

•Interest-earning deposits with banks, primarily with the Federal Reserve Bank, ~~increased $1.0~~decreased $9.7 billion to ~~$86.2 billion.~~$75.5 billion, and included the payment for the purchase of BBVA.

•Total deposits increased ~~$9.7~~$83.6 billion, or 3%23%, to ~~$375.1~~$448.9 billion, ~~due to higher~~reflecting deposits from BBVA and growth in PNC legacy commercial and consumer ~~deposits driven by government stimulus payments.~~liquidity.

•Borrowed funds decreased ~~$4.2~~$3.7 billion, or ~~11%~~10%, to ~~$33.0~~$33.5 billion, due to lower FHLB borrowings reflecting the use of liquidity from deposit growth, ~~and lower loans outstanding.~~partially offset by borrowed funds from BBVA.

For additional detail, see the Consolidated Balance Sheet Review section of this Financial Review.

Credit Quality Highlights

~~Credit~~Third quarter 2021 credit quality ~~metrics in~~performance reflected the ~~first quarter~~acquisition of ~~2021 reflected~~BBVA, continued improvements in ~~the economic environment.~~credit quality and changes in portfolio composition.

•At ~~March 31,~~September 30, 2021 compared to December 31, 2020:

•Nonperforming assets of ~~$2.2~~$2.6 billion, ~~decreased $158~~increased $222 million, or 7%9%, ~~primarily~~ due to ~~lower commercial~~ nonperforming ~~loans,~~assets from BBVA, partially offset by ~~higher consumer~~lower PNC legacy nonperforming ~~loans.~~assets reflecting improved credit performance.

•Overall loan delinquencies of ~~$1.1~~$1.4 billion ~~decreased $217~~increased $33 million, or ~~16%~~2%, ~~driven~~as lower PNC legacy consumer and commercial delinquencies were more than offset by ~~lower consumer~~ delinquencies ~~primarily in auto and residential real estate loans.~~from the BBVA acquisition.

•The ACL related to loans, ~~decreased to $5.2~~which consists of the ALLL and the allowance for unfunded lending related commitments, totaled $6.0 billion ~~or 2.20%~~at September 30, 2021, an increase of ~~total loans, at March 31, 2021 compared to $5.9~~$0.1 billion ~~or 2.46% of total loans, at~~since December 31, 2020. The ~~decrease~~increase was primarily attributable to the addition of reserves related to the BBVA acquisition, partially offset by continued improvements in credit quality and macroeconomic factors ~~and lower loans outstanding~~along with changes in ~~the first quarter.~~portfolio composition.

•Net charge-offs were ~~$146~~$81 million, or ~~0.25%~~0.11% of average loans on an annualized basis in the ~~first~~third quarter of 2021 compared to ~~$212~~$155 million, or ~~0.35%~~0.24%, for the same quarter of 2020.

For additional detail see the Credit Risk Management portion of the Risk Management section of this Financial Review.

Capital Highlights

We maintained our strong capital ~~position.~~and liquidity positions.

•~~The~~Our CET1 ratio ~~increased~~decreased to ~~12.6%~~10.3% at ~~March 31,~~September 30, 2021 from 12.2% at December 31, ~~2020.~~2020, primarily due to the BBVA acquisition.

4 The PNC Financial Services Group, Inc. – Form 10-Q

•Capital ~~benefited from~~was impacted by our election of a five-year transition period for ~~CECL's~~CECL’s estimated impact on CET1 capital. ~~CECL's~~CECL’s estimated impact on CET1 capital is defined as the change in retained earnings at adoption plus or minus 25% of the change in CECL ACL at the balance sheet date, excluding the initial allowance for PCD loans from BBVA, compared to CECL ACL at transition. The estimated CECL impact is added to CET1 capital through December 31, 2021, then phased-out over the following three years.

•Common shareholders' equity ~~decreased~~increased to ~~$50.3~~$51.3 billion at ~~March 31,~~September 30, 2021, compared to $50.5 billion at December 31, 2020.

•In the ~~first~~third quarter, we returned $0.9 billion of ~~2021, PNC returned~~ capital to shareholders through dividends on common shares of $0.5 ~~billion.~~billion and $0.4 billion of common share repurchases representing 2.1 million shares. Repurchases were made under the share repurchase programs of up to $2.9 billion for the four-quarter period beginning in the third quarter of 2021.

4 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

•On ~~April~~October 1, 2021, the PNC ~~board~~Board of ~~directors~~Directors declared a quarterly cash dividend on common stock of ~~$1.15~~$1.25 per share payable on ~~May~~November 5, ~~2021.~~

•During the first quarter PNC refrained from repurchasing shares and expects to continue to do so for the remainder of the period leading up to the close of our pending BBVA transaction. Following the close, PNC expects to resume repurchases in the second half of 2021.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for more detail on our 2021 liquidity and capital actions as well as our capital ratios.

PNC’s ability to take certain capital actions, including returning capital to shareholders, is subject to PNC meeting or exceeding a stress capital buffer established by the Federal Reserve Board in connection with the Federal Reserve ~~Board's~~Board’s CCAR process. ~~The Federal Reserve also has imposed additional limitations on capital distributions through the second quarter of 2021 by CCAR-participating bank holding companies.~~ For additional information, see Capital Management in the Risk Management section in this Financial Review and the Supervision and Regulation section in Item 1 Business and Item 1A Risk Factors of our 2020 Form 10-K.

Business Outlook

Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than those we are currently expecting and do not take into account potential legal and regulatory contingencies. These statements are based on our views, as follows:

•The U.S. economy is in an economic recovery, following a very severe but very short economic contraction in the first half of 2020 due to the COVID-19 pandemic and public health measures to contain it.

•~~Despite the improvement~~The Delta COVID-19 variant and supply chain difficulties have been drags on economic growth in the second half of 2021, although the economy ~~since the spring of 2020, economic activity remains below its pre-pandemic level and unemployment remains elevated.~~

•continues to expand. Growth will pick up inat the ~~spring~~end of 2021 as ~~vaccine distribution continues~~the impact of the Delta variant fades and supply chains normalize and will remain solid into 2022. Employment in September 2021 was still down by almost 5 million from before the ~~federal government provides aid to households, small and medium-sized businesses, and state and local governments.~~pandemic; PNC expects ~~real GDP~~employment to return to its pre-pandemic level in mid-2022.

•Compared to the ~~third quarter~~spring of ~~2021,~~2020 (when prices were falling), inflation accelerated in mid-2021 due to strong demand in specific segments and ~~employment~~supply chain disruptions. Inflation has started to slow on a month-over-month basis but will remain elevated in the ~~second half of 2022.~~near term.

•PNC expects the FOMC to keep the fed funds rate in its current range of 0.00% to 0.25% until ~~at least~~ late ~~2023.~~2022.

For the ~~second~~fourth quarter of 2021, compared to the ~~first~~third quarter of 2021 where appropriate, we expect:

•Average loans, ~~to be stable,~~excluding PPP loans, up modestly,

•Net interest income to be up ~~approximately 2%,~~modestly,

•Fee income to be updown approximately 3% to 5%,

•Other noninterest income, excluding net securities gains and Visa activity, to be between ~~$300~~$375 million and ~~$350~~$425 million,

•Noninterest expense, excluding integration expense, to be ~~stable,~~down 3% to 5%, and

•Net loan charge-offs to be between ~~$150~~$100 million and ~~$200~~$150 million.

~~For the PNC standalone full year 2021, excluding one-time costs related~~Additionally, we are on track to ~~the BBVA transaction, compared~~realize $900 million in net expense savings of our forecast of BBVA’s 2022 expense base. We also expect to ~~full year 2020 where appropriate, we expect:~~

•~~Average loans to be down approximately 3% to 4%,~~

•~~Revenue to be stable,~~

•~~Noninterest expense to be stable,~~incur merger and

•~~The effective tax rate to be 17%.~~

~~Assuming a mid-2021 close date and excluding one-time~~ integration costs of approximately $980 million, inclusive of the write-off of certain technology and other assets. During the fourth quarter, we expect to incur the ~~pending BBVA acquisition to be approximately $700 million accretive to PNC’s 2021 pre-tax preprovision net revenue.~~majority of the remaining merger and integration costs of $450 million.

See the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and Item 1A Risk Factors in our 2020 Form 10-K for other factors that could cause future events to differ, perhaps materially, from those anticipated in these forward-looking statements.

CONSOLIDATED INCOME STATEMENT REVIEW

Our Consolidated Income Statement is presented in Part I, Item 1 of this Report.

Net income from continuing operations of ~~$1.8~~$1.5 billion ~~or $4.10~~for the third quarter of 2021 decreased $42.0 million compared to the third quarter of 2020. Earnings were $3.30 per diluted common share for the ~~first~~third quarter of 2021 ~~increased $1.1 billion~~ compared to ~~net income from continuing operations of $0.8 billion, or $1.59~~$3.39 per diluted common share for the ~~first~~third quarter of 2020. ~~The increase~~Other than the impact of the BBVA acquisition, the decrease in the quarterly comparison was ~~primarily due to a provision recapture, driven by improvements in macroeconomic factors and lower loans outstanding.~~

The PNC Financial Services Group, Inc. – Form 10-Q 55

primarily due to a lower effective tax rate in the third quarter of 2020 as a result of tax credit benefits and the favorable resolution of certain tax matters.

For the first nine months of 2021, net income from continuing operations was $4.4 billion, or $9.83 per diluted common share, compared to $1.5 billion, or $3.11 per diluted common share, for the first nine months of 2020. The year-to-date comparison reflects a lower provision for credit losses in 2021 due to continued improvements in credit quality and macroeconomic factors and higher noninterest income driven by the benefit of BBVA, partially offset by expenses related to the BBVA acquisition and increased business activity.

Net Interest Income

Table 2: Summarized Average Balances and Net Interest Income (a)


		2021						2020							2021						2020
Three months ended March 31 Dollars in millions		Average Balances		Average Yields/ Rates		Interest Income/ Expense		Average Balances		Average Yields/ Rates		Interest Income/ Expense
Three months ended September 30 Dollars in millions														Three months ended September 30 Dollars in millions	Average Balances		Average Yields/ Rates		Interest Income/ Expense		Average Balances		Average Yields/ Rates		Interest Income/ Expense
Assets	Assets													Assets
Interest-earning assets	Interest-earning assets													Interest-earning assets
Investment securities	Investment securities	$	86,396	1.97	%	$	426	$	84,422	2.78	%	$	588	Investment securities	$	120,586	1.54	%	$	465	$	90,502	2.18	%	$	496
Loans	Loans	238,135		3.38	%	2,006		243,572		4.08	%	2,496		Loans	291,326		3.32	%	2,454		253,092		3.32	%	2,127
Interest-earning deposits with banks	Interest-earning deposits with banks	85,410		0.10	%	21		17,569		1.27	%	56		Interest-earning deposits with banks	80,274		0.16	%	31		60,327		0.10	%	15
Other	Other	7,829		2.34	%	45		9,468		3.51	%	82		Other	9,113		2.03	%	47		9,752		2.23	%	55
Total interest-earning assets/interest income	Total interest-earning assets/interest income	$	417,770	2.40	%	2,498		$	355,031	3.62	%	3,222		Total interest-earning assets/interest income	$	501,299	2.36	%	2,997		$	413,673	2.57	%	2,693
Liabilities	Liabilities													Liabilities
Interest-bearing liabilities	Interest-bearing liabilities													Interest-bearing liabilities
Interest-bearing deposits	Interest-bearing deposits	$	252,077	0.06	%	40		$	215,336	0.70	%	375		Interest-bearing deposits	$	298,471	0.04	%	29		$	248,551	0.12	%	74
Borrowed funds	Borrowed funds	35,196		1.09	%	95		57,188		2.18	%	314		Borrowed funds	34,352		1.03	%	90		43,344		1.06	%	118
Total interest-bearing liabilities/interest expense	Total interest-bearing liabilities/interest expense	$	287,273	0.19	%	135		$	272,524	1.00	%	689		Total interest-bearing liabilities/interest expense	$	332,823	0.14	%	119		$	291,895	0.26	%	192
Net interest margin/income (Non-GAAP)				2.27	%	2,363				2.84	%	2,533
Net interest margin/income (non-GAAP)														Net interest margin/income (non-GAAP)			2.27	%	2,878				2.39	%	2,501
Taxable-equivalent adjustments	Taxable-equivalent adjustments					(15)						(22)		Taxable-equivalent adjustments					(22)						(17)
Net interest income (GAAP)	Net interest income (GAAP)					$	2,348					$	2,511	Net interest income (GAAP)					$	2,856					$	2,484


	2021						2020
Nine months ended September 30 Dollars in millions	Average Balances		Average Yields/ Rates		Interest Income/ Expense		Average Balances		Average Yields/ Rates		Interest Income/ Expense
Assets
Interest-earning assets
Investment securities	$	105,287	1.73	%	$	1,366	$	87,795	2.45	%	$	1,617
Loans	261,884		3.36	%	6,629		254,919		3.58	%	6,893
Interest-earning deposits with banks	81,383		0.12	%	74		37,582		0.28	%	80
Other	8,345		2.27	%	142		10,028		2.64	%	199
Total interest-earning assets/interest income	$	456,899	2.38	%	8,211		$	390,324	2.98	%	8,789
Liabilities
Interest-bearing liabilities
Interest-bearing deposits	$	273,498	0.05	%	99		$	235,160	0.34	%	590
Borrowed funds	34,562		1.05	%	275		51,225		1.59	%	619
Total interest-bearing liabilities/interest expense	$	308,060	0.16	%	374		$	286,385	0.56	%	1,209
Net interest margin/income (non-GAAP)			2.28	%	7,837				2.57	%	7,580
Taxable-equivalent adjustments					(52)						(58)
Net interest income (GAAP)					$	7,785					$	7,522

(a)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 margins 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 on the Consolidated Income Statement. For more information, see Reconciliation of Taxable-Equivalent Net Interest Income ~~(Non-GAAP)~~(non-GAAP) in the Statistical Information (Unaudited) section in Item 1 of this Report.

Changes in net interest income and margin result from the interaction of the volume and composition of interest-earning assets and related yields, interest-bearing liabilities and related rates paid, and noninterest-bearing sources of funding. See the Statistical Information (Unaudited) – Average Consolidated Balance Sheet And Net Interest Analysis section of this Report for additional information.

6 The PNC Financial Services Group, Inc. – Form 10-Q

Net interest income ~~decreased $163~~increased $372 million, or 6%15%, for the third quarter of 2021, and increased $263 million, or 3%, for the first ~~quarter~~nine months of 2021 compared to the same ~~period~~periods in 2020. The increase in both comparisons was primarily due to the benefit of BBVA interest-earning asset balances and lower deposit rates, partially offset by lower yields on securities.

Net interest margin in the quarterly and year-to-date comparisons decreased 12 basis points and 29 basis points, respectively. The decrease in both comparisons was largely due to lower yields on ~~earning assets partially offset by lower rates on deposits, higher average earning assets and a decline~~securities. The decrease in ~~borrowing costs and balances. Net interest margin decreased 57 basis points reflecting~~the year-to-date comparison also reflected higher balances held ~~with~~at the Federal Reserve Bank and lower yields on ~~securities and~~ loans, partially offset by lower rates paid on deposits ~~lower borrowing costs~~ and ~~balances.~~borrowings.

Average investment securities increased ~~$2.0~~$30.1 billion, or ~~2%. The increase was~~33%, and $17.5 billion, or 20%, in the quarterly and year-to-date comparisons, respectively. Both comparisons increased primarily due to anthe acquisition of BBVA. The increase in ~~U.S. treasury and government securities partially offset by lower residential mortgage-backed securities.~~ the quarterly comparison was also attributable to increased purchase activity. Average investment securities represented ~~21%~~24% of average interest-earning assets for the third quarter of 2021 and 23% for the first ~~quarter~~nine months of 2021, compared to ~~24%~~22% for ~~the same period~~both periods in 2020.

Average loans ~~decreased $5.4~~increased $38.2 billion, or 2%15%, and $7.0 billion, or 3%, in the quarterly and year-to-date comparisons, respectively. The increase in both comparisons was primarily ~~due to lower consumer loans,~~a result of the BBVA acquisition. In the year-to-date comparison, the increase was partially offset by ~~higher~~lower utilization of loan commitments by commercial ~~loans as a result of PPP loan originations.~~customers and lower consumer loans. Average loans represented ~~57%~~58% of average interest-earning assets for the ~~first~~third quarter of 2021 and 57% for the nine months ended September 30, 2021, compared to ~~69%~~61% and 65% for the same ~~period~~periods in 2020.

Average interest-earning deposits with banks increased ~~$67.8~~$19.9 billion and $43.8 billion in the respective quarterly and year-to-date comparisons, as average balances held with the Federal Reserve Bank increased due to higher ~~deposits.~~liquidity from deposit growth.

Average interest-bearing deposits grew ~~$36.7~~$49.9 billion, or ~~17%~~20%, and $38.3 billion, or 16% in the respective quarterly and year-to-date comparisons due to overall growth in commercial and consumer ~~liquidity.~~liquidity, including deposits from BBVA. In total, average interest-bearing deposits increased to ~~88%~~90% and 89% of average interest-bearing liabilities for the three and nine months ended September 30, 2021, compared to ~~79%~~85% and 82% for the same ~~period~~periods in 2020.

Average borrowed funds decreased ~~$22.0~~$9.0 billion, or ~~38%~~21%, compared with the third quarter of 2020 and $16.7 billion, or 33%, compared with the first nine months of 2020 primarily due to a decline in FHLB borrowings reflecting the use of liquidity from deposit growth.

Further details regarding average loans and deposits are included in the Business Segments Review section of this Financial Review.

6 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

Noninterest Income

Table 3: Noninterest Income


		Three months ended March 31								Three months ended September 30				Nine months ended September 30
						Change								Change								Change
Dollars in millions	Dollars in millions	2021		2020		$		%			Dollars in millions	2021		2020		$		%		2021		2020		$		%
Noninterest income	Noninterest income										Noninterest income
Asset management	Asset management	$	226	$	201	$	25	12	%		Asset management	$	248	$	215	$	33	15	%	$	713	$	615	$	98	16	%
Consumer services	Consumer services	384		377		7		2	%		Consumer services	496		390		106		27	%	1,337		1,097		240		22	%
Corporate services	Corporate services	555		526		29		6	%		Corporate services	842		479		363		76	%	2,085		1,517		568		37	%
Residential mortgage	Residential mortgage	105		210		(105)		(50)	%		Residential mortgage	147		137		10		7	%	355		505		(150)		(30)	%
Service charges on deposits	Service charges on deposits	119		168		(49)		(29)	%		Service charges on deposits	159		119		40		34	%	409		366		43		12	%
Other	Other	483		343		140		41	%		Other	449		457		(8)		(2)	%	1,400		1,071		329		31	%
Total noninterest income	Total noninterest income	$	1,872	$	1,825	$	47	3	%		Total noninterest income	$	2,341	$	1,797	$	544	30	%	$	6,299	$	5,171	$	1,128	22	%

Noninterest income as a percentage of total revenue was ~~44%~~45% for the third quarter and first ~~quarter~~nine months of 2021, compared to 42% and 41% for the same ~~period~~periods in 2020.

Asset management revenue increased in the quarterly and year-to-date comparisons due to the impact of higher average equity ~~markets.~~markets and the benefit of the BBVA acquisition. PNC's discretionary client assets under management increased to ~~$173~~$183 billion at ~~March 31,~~September 30, 2021 from ~~$136~~$158 billion at ~~March 31,~~September 30, 2020, primarily driven by higher spot equity ~~markets.~~markets and the BBVA acquisition.

Consumer services revenue increased in the quarterly and year-to-date comparisons reflecting the addition of BBVA customers and the impacts of higher consumer spending on debit cards, merchant services revenues, credit card fees and growth in brokerage ~~fees.~~fees primarily due to higher average equity markets.

The PNC Financial Services Group, Inc. – Form 10-Q 7

Corporate services revenue increased in the quarterly and year-to-date comparisons primarily due to higher merger and acquisition advisory fees, treasury management product revenue and equity capital markets advisory fees. The year-to-date comparison also benefited from higher revenue from commercial mortgage servicing ~~activities, loan commitment fees and treasury management product revenue.~~activities.

Residential Mortgage revenue increased in the quarterly comparison primarily due to higher loan sales revenue and higher mortgage servicing rights valuation, net of economic hedge. The decrease in the year-to-date comparison was primarily a result of lower servicing fee revenue ~~decreased driven by~~primarily due to higher payoffs and lower mortgage servicing rights valuation, net of economic hedge.

Service charges on deposits ~~decreased~~increased in the quarterly and year-to-date comparisons primarily due to ~~lower transaction volumes.~~the addition of BBVA customers, partially offset by the impact of Low Cash ModeSM on overdraft revenue.

Other noninterest income ~~increased~~decreased in the quarterly comparison due to a negative Visa Class B derivative fair value adjustment primarily ~~due~~related to the extension of anticipated litigation resolution timing, partially offset by higher private equity revenue. In the year-to-date comparison, the increase was primarily driven by higher private equity revenue and ~~capital markets-related revenue,~~the addition of BBVA, partially offset by ~~lower net securities gains.~~a larger negative Visa Class B derivative fair value adjustment.

Noninterest Expense

Table 4: Noninterest Expense


		Three months ended March 31								Three months ended September 30				Nine months ended September 30
						Change								Change								Change
Dollars in millions	Dollars in millions	2021		2020		$		%			Dollars in millions	2021		2020		$		%		2021		2020		$		%
Noninterest expense	Noninterest expense										Noninterest expense
Personnel	Personnel	$	1,477	$	1,369	$	108	8	%		Personnel	$	1,986	$	1,410	$	576	41	%	$	5,103	$	4,152	$	951	23	%
Occupancy	Occupancy	215		207		8		4	%		Occupancy	248		205		43		21	%	680		611		69		11	%
Equipment	Equipment	293		287		6		2	%		Equipment	355		292		63		22	%	974		880		94		11	%
Marketing	Marketing	45		58		(13)		(22)	%		Marketing	103		67		36		54	%	222		172		50		29	%
Other	Other	544		622		(78)		(13)	%		Other	895		557		338		61	%	2,232		1,774		458		26	%
Total noninterest expense	Total noninterest expense	$	2,574	$	2,543	$	31	1	%		Total noninterest expense	$	3,587	$	2,531	$	1,056	42	%	$	9,211	$	7,589	$	1,622	21	%

The increase in noninterest expense ~~is due to higher personnel expense, reflecting higher deferred compensation~~in the quarterly and ~~benefits expense, partially offset by lower costs associated with~~year-to-date comparisons reflected BBVA operating and integration expenses as well as increased business ~~travel~~ and marketing activity.

Effective Income Tax Rate

The effective income tax rate from continuing operations was ~~16.9%~~17.8% in the ~~first~~third quarter of 2021 compared to ~~13.7%~~9.8% in the third quarter of 2020, and 17.0% in the first ~~quarter~~nine months of 2021 compared to 7.6% in the same period of 2020. The increase ~~is primarily~~in both comparisons was due to ~~higher earnings in~~overall lower pre-tax income, tax benefits and the ~~first quarter of 2021 and a~~ favorable resolution of certain tax matters in ~~the first quarter of~~ 2020.

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 7

Provision For (Recapture of) Credit Losses

Table 5: Provision for (Recapture of) Credit Losses


							Three months ended September 30						Nine months ended September 30
		Three months ended March 31							Change						Change
Dollars in millions	Dollars in millions	2021		2020		Dollars in millions	2021		2020		$		2021		2020		$
Provision for (recapture of) credit losses	Provision for (recapture of) credit losses					Provision for (recapture of) credit losses
Loans and leases	Loans and leases	$	(502)	$	952	Loans and leases	$	(229)	$	(23)	$	(206)	$	(525)	$	3,149	$	(3,674)
Unfunded lending related commitments	Unfunded lending related commitments	(77)		(47)		Unfunded lending related commitments	1		27		(26)		16		192		(176)
Investment securities	Investment securities	26				Investment securities	25		39		(14)		51		69		(18)
Other financial assets	Other financial assets	2		9		Other financial assets			9		(9)		6		19		(13)
Total provision for (recapture of) credit losses	Total provision for (recapture of) credit losses	$	(551)	$	914	Total provision for (recapture of) credit losses	$	(203)	$	52	$	(255)	$	(452)	$	3,429	$	(3,881)

The provision recapture for the ~~first~~third quarter of 2021 reflected continued improvements in ~~macroeconomic factors~~credit quality and ~~lower loans outstanding.~~changes in portfolio composition.

~~The Credit Risk Management portion of the Risk Management section of this Financial Review includes additional information regarding factors impacting the provision for (recapture of) credit losses.~~

Net Income from Discontinued Operations

~~Net income from discontinued operations was $156 million for the three months ended March 31, 2020.~~ For additional details on the divestiture of our equity investment in BlackRock, see Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements of this Report.

8 The PNC Financial Services Group, Inc. – Form 10-Q

CONSOLIDATED BALANCE SHEET REVIEW

The summarized balance sheet data in Table 6 is based upon our Consolidated Balance Sheet in Part I, Item 1 of this Report.

Table 6: Summarized Balance Sheet Data


		March 31		December 31		Change					September 30		December 31		Change
Dollars in millions	Dollars in millions	2021		2020		$		%		Dollars in millions	2021		2020		$		%
Assets	Assets									Assets
Interest-earning deposits with banks	Interest-earning deposits with banks	$	86,161	$	85,173	$	988	1	%	Interest-earning deposits with banks	$	75,478	$	85,173	$	(9,695)	(11)	%
Loans held for sale	Loans held for sale	1,967		1,597		370		23	%	Loans held for sale	2,121		1,597		524		33	%
Investment securities	Investment securities	98,255		88,799		9,456		11	%	Investment securities	125,606		88,799		36,807		41	%
Loans	Loans	237,013		241,928		(4,915)		(2)	%	Loans	290,230		241,928		48,302		20	%
Allowance for loan and lease losses	Allowance for loan and lease losses	(4,714)		(5,361)		647		12	%	Allowance for loan and lease losses	(5,355)		(5,361)		6		—
Mortgage servicing rights	Mortgage servicing rights	1,680		1,242		438		35	%	Mortgage servicing rights	1,833		1,242		591		48	%
Goodwill	Goodwill	9,317		9,233		84		1	%	Goodwill	10,885		9,233		1,652		18	%
Other	Other	44,735		44,068		667		2	%	Other	52,717		44,068		8,649		20	%
Total assets	Total assets	$	474,414	$	466,679	$	7,735	2	%	Total assets	$	553,515	$	466,679	$	86,836	19	%
Liabilities	Liabilities									Liabilities
Deposits	Deposits	$	375,067	$	365,345	$	9,722	3	%	Deposits	$	448,902	$	365,345	$	83,557	23	%
Borrowed funds	Borrowed funds	33,030		37,195		(4,165)		(11)	%	Borrowed funds	33,471		37,195		(3,724)		(10)	%
Allowance for unfunded lending related commitments	Allowance for unfunded lending related commitments	507		584		(77)		(13)	%	Allowance for unfunded lending related commitments	646		584		62		11	%
Other	Other	11,931		9,514		2,417		25	%	Other	14,199		9,514		4,685		49	%
Total liabilities	Total liabilities	420,535		412,638		7,897		2	%	Total liabilities	497,218		412,638		84,580		20	%
Equity	Equity									Equity
Total shareholders’ equity	Total shareholders’ equity	53,849		54,010		(161)		—		Total shareholders’ equity	56,259		54,010		2,249		4	%
Noncontrolling interests	Noncontrolling interests	30		31		(1)		(3)	%	Noncontrolling interests	38		31		7		23	%
Total equity	Total equity	53,879		54,041		(162)		—		Total equity	56,297		54,041		2,256		4	%
Total liabilities and equity	Total liabilities and equity	$	474,414	$	466,679	$	7,735	2	%	Total liabilities and equity	$	553,515	$	466,679	$	86,836	19	%

Our balance sheet was strong and well positioned at ~~March 31,~~September 30, 2021 and December 31, 2020.

•Total ~~assets increased as a result~~asset growth reflected the addition of ~~higher~~loans and investment securities from the BBVA acquisition, partially offset by a decrease in ~~loans.~~interest-earning deposits with banks.

•Total liabilities increased primarily due to deposit growth reflecting ~~customer liquidity accumulation,~~higher commercial and consumer deposits driven by the acquisition of BBVA, partially offset by lower borrowed funds.

•Total equity ~~decreased primarily due to lower AOCI~~increased as net income and ~~dividends on common and~~the issuance of preferred stock was partially offset by lower AOCI, reflecting the impact of higher rates on net ~~income.~~unrealized securities gains, dividends and share repurchases.

The ACL related to loans totaled ~~$5.2~~$6.0 billion at ~~March 31,~~September 30, 2021, ~~a decrease~~an increase of ~~$0.7~~$0.1 billion since December 31, 2020. The ~~decrease~~increase was primarily attributable to ~~lower expected losses within~~ the ~~loan portfolio, resulting in a $0.6 billion provision recapture for credit losses and net charge-offs~~addition of ~~$0.1 billion. The provision recapture primarily reflected~~reserves related to the BBVA acquisition, partially offset by continued improvements in credit quality and macroeconomic factors ~~and lower loans outstanding.~~along with changes in portfolio composition. See the following for additional information regarding our ACL related to loans:

•Allowance for Credit Losses in the Credit Risk Management section of this Financial Review,

•Critical Accounting Estimates and Judgments section of this Financial Review, and

•Note 4 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in this Report.

The following discussion provides additional information about the major components of our balance sheet. Information regarding our capital and regulatory compliance is included in the Liquidity and Capital Management portion of the Risk Management section in this Financial Review and in Note 20 Regulatory Matters in the Notes To Consolidated Financial Statements included in our 2020 Form 10-K.

The PNC Financial Services Group, Inc. – Form 10-Q 9 9

Loans

Table 7: Loans


		March 31		December 31		Change					September 30		December 31		Change
Dollars in millions	Dollars in millions	2021		2020		$		%		Dollars in millions	2021		2020		$		%
Commercial	Commercial									Commercial
Commercial and industrial	Commercial and industrial	$	129,798	$	132,073	$	(2,275)	(2)	%	Commercial and industrial	$	152,735	$	132,073	$	20,662	16	%
Commercial real estate	Commercial real estate	28,319		28,716		(397)		(1)	%	Commercial real estate	36,195		28,716		7,479		26	%
Equipment lease financing	Equipment lease financing	6,389		6,414		(25)		—		Equipment lease financing	6,257		6,414		(157)		(2)	%
Total commercial	Total commercial	164,506		167,203		(2,697)		(2)	%	Total commercial	195,187		167,203		27,984		17	%
Consumer	Consumer									Consumer
Home equity		23,493		24,088		(595)		(2)	%
Residential real estate	Residential real estate	22,418		22,560		(142)		(1)	%	Residential real estate	38,214		22,560		15,654		69	%
Home Equity										Home Equity	24,479		24,088		391		2	%
Automobile	Automobile	13,584		14,218		(634)		(4)	%	Automobile	17,265		14,218		3,047		21	%
Credit card	Credit card	5,675		6,215		(540)		(9)	%	Credit card	6,466		6,215		251		4	%
Education	Education	2,842		2,946		(104)		(4)	%	Education	2,653		2,946		(293)		(10)	%
Other consumer	Other consumer	4,495		4,698		(203)		(4)	%	Other consumer	5,966		4,698		1,268		27	%
Total consumer	Total consumer	72,507		74,725		(2,218)		(3)	%	Total consumer	95,043		74,725		20,318		27	%
Total loans	Total loans	$	237,013	$	241,928	$	(4,915)	(2)	%	Total loans	$	290,230	$	241,928	$	48,302	20	%

Commercial loans ~~decreased reflecting lower utilization of~~increased driven by BBVA loans, partially offset by PPP loan ~~commitments and softer loan demand.~~forgiveness. At ~~March 31,~~September 30, 2021, PNC had ~~$14.0~~$6.8 billion of PPP loans ~~outstanding, $10.1 billion from the first round of PPP and $3.9 billion from the second round.~~outstanding. PPP loans outstanding at December 31, 2020 were $12.0 billion.

For commercial and industrial loans by industry and commercial real estate loans by geography and property type, see Loan Portfolio Characteristics and Analysis in the Credit Risk Management portion of the Risk Management section of this Financial Review.

~~Total consumer~~Consumer loans ~~declined~~increased primarily due to the addition of BBVA loans and increased originations of PNC legacy residential mortgages, partially offset by declines in the remaining PNC legacy portfolios as paydowns outpaced new originations.

For information on our ~~home equity and~~ residential real estate and home equity portfolios, including loans by geography, and our auto loan portfolio, see Loan Portfolio Characteristics and Analysis in the Credit Risk Management portion of the Risk Management section in this Financial Review.

For additional information regarding our loan portfolio see Note 4 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in this Report.

Investment Securities

Investment securities of ~~$98.3~~$125.6 billion at ~~March 31,~~September 30, 2021 increased ~~$9.5~~$36.8 billion, or ~~11%~~41%, compared to December 31, 2020, resulting from ~~accelerated~~increased purchase activity ~~near~~and the end of the first quarter as the interest rate environment improved. Purchase activity was primarily focused on U.S. Treasury and government agency securities as well as agency residential mortgage-backed securities.BBVA acquisition.

The level and composition of the investment securities portfolio fluctuates over time based on many factors including market conditions, loan and deposit growth and balance sheet management activities. We manage our investment securities portfolio to optimize returns, while providing a reliable source of liquidity for our banking and other activities, considering the LCR and other internal and external guidelines and constraints.

Table 8: Investment Securities


	September 30, 2021				December 31, 2020				Ratings as of September 30, 2021 (a)
Dollars in millions	Amortized Cost (b)		Fair Value		Amortized Cost (b)		Fair Value		AAA/ AA		A		BBB		BB and Lower		No Rating
U.S. Treasury and government agencies	$	41,437	$	41,860	$	20,616	$	21,631	100	%
Agency residential mortgage-backed	64,412		65,185		47,355		48,911		100	%
Non-agency residential mortgage-backed	1,003		1,242		1,272		1,501		8	%			2	%	49	%	41	%
Agency commercial mortgage-backed	2,008		2,060		2,571		2,688		100	%
Non-agency commercial mortgage-backed (c)	3,637		3,671		3,678		3,689		85	%	1	%	2	%			12	%
Asset-backed (d)	5,999		6,067		5,060		5,150		95	%	1	%			4	%
Other (e)	5,392		5,625		5,061		5,393		54	%	26	%	15	%			5	%
Total investment securities (f)	$	123,888	$	125,710	$	85,613	$	88,963	96	%	1	%	1	%	1	%	1	%

(a)Ratings percentages allocated based on amortized cost, net of allowance for investment securities.

10 The PNC Financial Services Group, Inc. – Form 10-Q

~~Table 8: Investment Securities~~

March 31, 2021 December 31, 2020 Ratings (a) as of March 31, 2021
Dollars in millions Amortized
Cost (b) Fair
Value Amortized
Cost (b) Fair
Value AAA/
AA A BBB BB and Lower No
Rating
U.S. Treasury and government agencies $ 26,470 $ 26,824 $ 20,616 $ 21,631 100 %
Agency residential mortgage-backed 50,499 51,554 47,355 48,911 100 %
Non-agency residential mortgage-backed 1,181 1,424 1,272 1,501 9 % 1 % 2 % 48 % 40 %
Agency commercial mortgage-backed 2,219 2,284 2,571 2,688 100 %
Non-agency commercial mortgage-backed (c) 4,191 4,236 3,678 3,689 88 % 1 % 1 % 4 % 6 %
Asset-backed (d) 5,969 6,041 5,060 5,150 94 % 1 % 5 %
Other (e) 5,733 5,995 5,061 5,393 58 % 25 % 15 % 2 %
Total investment securities (f) $ 96,262 $ 98,358 $ 85,613 $ 88,963 95 % 2 % 1 % 1 % 1 %

~~(a)Ratings percentages allocated based on amortized cost, net of allowance for securities.~~

(b)Amortized cost is presented net of applicable allowance for investment securities of ~~$108~~$133 million and $82 million at ~~March 31,~~September 30, 2021 and December 31, 2020, in accordance with the adoption of the CECL accounting standard.

(c)Collateralized primarily by retail properties, office buildings, lodging properties and multifamily housing.

(d)Collateralized primarily by corporate debt, government guaranteed education loans and other consumer credit products.

(e)Includes state and municipal securities.

(f)Includes available for sale and held to maturity securities, which are recorded on our balance sheet at fair value and amortized cost, respectively.

Table 8 presents the distribution of our total investment securities portfolio by amortized cost and fair value, as well as by credit rating. We have included credit ratings information because we believe that the information is an indicator of the degree of credit risk to which we are exposed. Changes in credit ratings classifications could indicate increased or decreased credit risk and could be accompanied by a reduction or increase in the fair value of our investment securities portfolio. We continually monitor the credit risk in our portfolio and maintain the allowance for investment securities at an appropriate level to absorb expected credit losses on our investment securities portfolio for the remaining contractual term of the securities adjusted for expected prepayments. See Note 3 Investment Securities in the Notes To Consolidated Financial Statements included in Item 1 of this Report for additional details regarding the amount of the allowance for investment ~~securities, respectively.~~securities.

The duration of investment securities was 3.8 years at ~~March 31,~~September 30, 2021. We estimate that at ~~March 31,~~September 30, 2021 the effective duration of investment securities was ~~4.1~~4 years for an immediate 50 basis points parallel increase in interest rates and 3.5 years for an immediate 50 basis points parallel decrease in interest rates.

Based on expected prepayment speeds, the weighted-average expected maturity of the investment securities portfolio was ~~4.3~~4.4 years at ~~March 31,~~September 30, 2021 compared to 3.4 years at December 31, 2020.

Table 9: Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities


~~March 31,~~September 30, 2021			Years
Agency residential mortgage-backed			~~4.2~~4.6
Non-agency residential mortgage-backed			~~6.4~~6.8
Agency commercial mortgage-backed			~~4.5~~5.0
Non-agency commercial mortgage-backed			~~2.3~~2.1
Asset-backed			~~2.6~~2.8

Additional information regarding our investment securities portfolio is included in Note 3 Investment Securities and Note 11 Fair Value in the Notes To Consolidated Financial Statements included in Item 1 of this Report.

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 11

Funding Sources

Table 10: Details of Funding Sources


		March 31		December 31		Change					September 30		December 31		Change
Dollars in millions	Dollars in millions	2021		2020		$		%		Dollars in millions	2021		2020		$		%
Deposits	Deposits									Deposits
Noninterest-bearing	Noninterest-bearing	$	120,641	$	112,637	$	8,004	7	%	Noninterest-bearing	$	156,305	$	112,637	$	43,668	39	%
Interest-bearing	Interest-bearing									Interest-bearing
Money market	Money market	55,799		59,737		(3,938)		(7)	%	Money market	79,829		59,737		20,092		34	%
Demand	Demand	93,840		92,294		1,546		2	%	Demand	103,569		92,294		11,275		12	%
Savings	Savings	85,974		80,985		4,989		6	%	Savings	90,288		80,985		9,303		11	%
Time deposits	Time deposits	18,813		19,692		(879)		(4)	%	Time deposits	18,911		19,692		(781)		(4)	%
Total interest-bearing deposits	Total interest-bearing deposits	254,426		252,708		1,718		1	%	Total interest-bearing deposits	292,597		252,708		39,889		16	%
Total deposits	Total deposits	375,067		365,345		9,722		3	%	Total deposits	448,902		365,345		83,557		23	%
Borrowed funds	Borrowed funds									Borrowed funds
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	1,500		3,500		(2,000)		(57)	%	Federal Home Loan Bank borrowings			3,500		(3,500)		(100)	%
Bank notes and senior debt	Bank notes and senior debt	22,139		24,271		(2,132)		(9)	%	Bank notes and senior debt	22,993		24,271		(1,278)		(5)	%
Subordinated debt	Subordinated debt	6,241		6,403		(162)		(3)	%	Subordinated debt	7,074		6,403		671		10	%
Other	Other	3,150		3,021		129		4	%	Other	3,404		3,021		383		13	%
Total borrowed funds	Total borrowed funds	33,030		37,195		(4,165)		(11)	%	Total borrowed funds	33,471		37,195		(3,724)		(10)	%
Total funding sources	Total funding sources	$	408,097	$	402,540	$	5,557	1	%	Total funding sources	$	482,373	$	402,540	$	79,833	20	%

Total deposits increased reflecting deposits from BBVA and growth in PNC legacy commercial and consumer ~~deposits primarily driven by government stimulus payments.~~liquidity.

Borrowed funds decreased due to lower FHLB borrowings, bank notes and senior debt ~~as well as lower FHLB borrowings~~ reflecting the use of liquidity from deposit ~~growth.~~growth, which more than offset borrowed funds from BBVA.

The PNC Financial Services Group, Inc. – Form 10-Q 11

The level and composition of borrowed funds fluctuates over time based on many factors including market conditions, loan, investment securities and deposit growth, and capital considerations. We manage our borrowed funds to provide a reliable source of liquidity for our banking and other activities, considering our LCR requirements and other internal and external guidelines and constraints.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for additional information regarding our 2021 liquidity and capital activities. See Note 10 Borrowed Funds in the Notes to Consolidated Financial Statements in Item 8 of our 2020 Form 10-K for additional information related to our borrowings.

Shareholders’ Equity

Total shareholders’ equity was ~~$53.8~~$56.3 billion at ~~March 31,~~September 30, 2021, ~~a decrease~~an increase of ~~$0.2~~$2.3 billion compared to December 31, 2020. The ~~decrease~~increase primarily resulted from net income of $4.4 billion and a preferred stock issuance of $1.5 billion, partially offset by lower AOCI of ~~$1.5~~$1.7 billion reflecting the impact of higher rates on net unrealized securities gains, ~~and~~ common and preferred stock dividends of ~~$0.5~~$1.7 billion ~~partially offset by net income~~and common share repurchases of ~~$1.8~~$0.4 billion.

During the first quarter, PNC refrained from repurchasing shares and expects to continue to do so for the remainder of the period leading up to the close of our pending BBVA transaction. Following the close, PNC expects to resume repurchases in the second half of 2021.

12 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

BUSINESS SEGMENTS REVIEW

We have three reportable business segments:

•Retail Banking

•Corporate & Institutional Banking

•Asset Management Group

Business segment results and a description of each business are included in Note 14 Segment Reporting in the Notes To Consolidated Financial Statements included in Item 1 of this Report. Certain amounts included in this Business Segments Review differ from those amounts shown in Note 14, primarily due to the presentation in this Financial Review of business net interest income on a taxable-equivalent basis.

Our business segment results for the first nine months of 2021 reflect the benefit of BBVA’s business operations for the period since the acquisition closed on June 1, 2021. Period end information presented includes BBVA's balances at September 30, 2021. Until the conversion of bank systems and branches as of October 12, 2021, PNC Bank and BBVA customers were served through their respective PNC Bank and BBVA USA branches, websites and mobile apps, financial advisors and relationship managers. Following conversion, there will be changes in the segmentation of BBVA USA customers as we continue to integrate data to PNC applications, finalize the review of customer relationships and better align customers with PNC’s products and services. These changes will be reflected in fourth quarter reporting. See Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements included in Item 1 of this Report for additional information on the acquisition of BBVA.

During the second quarter of 2020, we divested our entire 22.4% investment in BlackRock, which had previously been reported as a separate business segment. See Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements included in Item 1 of this Report for additional information.

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.

Total business segment financial results differ from total consolidated net income. The impact of these differences is reflected in the “Other” category as shown in Table 7282 in Note 14 Segment Reporting in the Notes To Consolidated Financial Statements included in Item 1 of this Report. “Other” includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, ACL for investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses and differences between business segment performance reporting and financial statement reporting (GAAP).

12The PNC Financial Services Group, Inc. – Form 10-Q

Retail Banking

Retail Banking's core strategy is to help all of our consumer and small business customers move financially forward. We aim to grow our primary checking and transaction relationships through strong acquisition and retention. We seek to deepen relationships by meeting the broad range of our customers’ financial needs with savings, liquidity, lending, investment and retirement solutions. A strategic priority for us is to differentiate the customer experience, leveraging technology to make banking easier for our customers. A key element of our strategy is to expand the use of lower-cost alternative distribution channels, with an emphasis on digital capabilities, while continuing to optimize the traditional branch network. In addition, we are focused on consistently engaging both our employees and customers, which is a strong driver of customer growth, retention and relationship expansion.

Table 11: Retail Banking Table


(Unaudited)	(Unaudited)											(Unaudited)
Three months ended March 31								Change
Nine months ended September 30												Nine months ended September 30							Change
Dollars in millions, except as noted	Dollars in millions, except as noted	2021			2020			$		%		Dollars in millions, except as noted	2021			2020			$		%
Income Statement	Income Statement											Income Statement
Net interest income	Net interest income	$	1,362		$	1,456		$	(94)	(6)	%	Net interest income	$	4,572		$	4,229		$	343	8	%
Noninterest income	Noninterest income	654			788			(134)		(17)	%	Noninterest income	2,022			2,046			(24)		(1)	%
Total revenue	Total revenue	2,016			2,244			(228)		(10)	%	Total revenue	6,594			6,275			319		5	%
Provision for (recapture of) credit losses	Provision for (recapture of) credit losses	(257)			445			(702)		(158)	%	Provision for (recapture of) credit losses	(156)			1,049			(1,205)		*
Noninterest expense	Noninterest expense	1,476			1,528			(52)		(3)	%	Noninterest expense	5,042			4,537			505		11	%
Pretax earnings	Pretax earnings	797			271			526		194	%	Pretax earnings	1,708			689			1,019		148	%
Income taxes	Income taxes	183			62			121		195	%	Income taxes	396			161			235		146	%
Noncontrolling interest	Noncontrolling interest	7			8			(1)		(13)	%	Noncontrolling interest	26			20			6		30	%
Earnings	Earnings	$	607		$	201		$	406	202	%	Earnings	$	1,286		$	508		$	778	153	%
Average Balance Sheet	Average Balance Sheet											Average Balance Sheet
Loans held for sale	Loans held for sale	$	891		$	779		$	112	14	%	Loans held for sale	$	1,296		$	769		$	527	69	%
Loans	Loans											Loans
Consumer	Consumer											Consumer
Residential real estate												Residential real estate	$	23,323		$	18,215		$	5,108	28	%
Home equity	Home equity	$	21,833		$	22,736		$	(903)	(4)	%	Home equity	22,324			22,723			(399)		(2)	%
Residential real estate		17,468			17,964			(496)		(3)	%
Automobile	Automobile	13,890			17,096			(3,206)		(19)	%	Automobile	15,398			16,449			(1,051)		(6)	%
Credit card	Credit card	5,819			7,207			(1,388)		(19)	%	Credit card	6,070			6,767			(697)		(10)	%
Education	Education	2,938			3,343			(405)		(12)	%	Education	2,820			3,226			(406)		(13)	%
Other consumer	Other consumer	1,898			2,533			(635)		(25)	%	Other consumer	2,326			2,417			(91)		(4)	%
Total consumer	Total consumer	63,846			70,879			(7,033)		(10)	%	Total consumer	72,261			69,797			2,464		4	%
Commercial	Commercial	13,743			10,524			3,219		31	%	Commercial	14,819			12,298			2,521		20	%
Total loans	Total loans	$	77,589		$	81,403		$	(3,814)	(5)	%	Total loans	$	87,080		$	82,095		$	4,985	6	%
Total assets	Total assets	$	92,891		$	97,062		$	(4,171)	(4)	%	Total assets	$	103,820		$	98,764		$	5,056	5	%
Deposits	Deposits											Deposits
Noninterest-bearing demand	Noninterest-bearing demand	$	44,845		$	32,225		$	12,620	39	%	Noninterest-bearing demand	$	55,107		$	38,390		$	16,717	44	%
Interest-bearing demand	Interest-bearing demand	54,269			42,865			11,404		27	%	Interest-bearing demand	58,700			46,501			12,199		26	%
Money market	Money market	24,198			22,866			1,332		6	%	Money market	31,639			23,210			8,429		36	%
Savings	Savings	75,180			62,781			12,399		20	%	Savings	78,907			67,000			11,907		18	%
Certificates of deposit	Certificates of deposit	9,742			12,233			(2,491)		(20)	%	Certificates of deposit	10,321			11,579			(1,258)		(11)	%
Total deposits	Total deposits	$	208,234		$	172,970		$	35,264	20	%	Total deposits	$	234,674		$	186,680		$	47,994	26	%
Performance Ratios	Performance Ratios											Performance Ratios
Return on average assets	Return on average assets	2.65		%	0.84		%					Return on average assets	1.66		%	0.69		%
Noninterest income to total revenue	Noninterest income to total revenue	32		%	35		%					Noninterest income to total revenue	31		%	33		%
Efficiency	Efficiency	73		%	68		%					Efficiency	76		%	72		%

14The PNC Financial Services Group, Inc. – Form 10-Q


At or for nine months ended September 30							Change
Dollars in millions, except as noted	2021			2020			$		%
Supplemental Noninterest Income Information
Consumer services	$	1,273		$	1,058		$	215	20	%
Residential mortgage	$	355		$	505		$	(150)	(30)	%
Service charges on deposits	$	406		$	364		$	42	12	%
Residential Mortgage Information
Residential mortgage servicing statistics (in billions, except as noted) (a)
Serviced portfolio balance (b)	$	139		$	119		$	20	17	%
Serviced portfolio acquisitions	$	42		$	21		$	21	100	%
MSR asset value (b)	$	1.1		$	0.6		$	0.5	83	%
MSR capitalization value (in basis points) (b)	81			50			31		62	%
Servicing income: (in millions)
Servicing fees, net (c)	$	20		$	105		$	(85)	(81)	%
Mortgage servicing rights valuation, net of economic hedge	$	62		$	138		$	(76)	(55)	%
Residential mortgage loan statistics
Loan origination volume (in billions)	$	18.2		$	11.4		$	6.8	60	%
Loan sale margin percentage	2.95		%	3.51		%
Percentage of originations represented by:
Purchase volume (d)	45		%	38		%
Refinance volume	55		%	62		%
Other Information (b)
Customer-related statistics (average) (e)
Non-teller deposit transactions (f)	66		%	63		%
Digital consumer customers (g)	80		%	73		%
Credit-related statistics
Nonperforming assets	$	1,220		$	1,077		$	143	13	%
Net charge-offs - loans and leases	$	269		$	433		$	(164)	(38)	%
Other statistics
ATMs	9,572			9,058			514		6	%
Branches (h)	2,712			2,207			505		23	%
Brokerage account client assets (in billions) (i)	$	76		$	55		$	21	38	%

At or for three months ended March 31 Change
Dollars in millions, except as noted 2021 2020 $ %
Supplemental Noninterest Income Information
Consumer services $ 368 $ 372 $ (4) (1) %
Residential mortgage $ 105 $ 210 $ (105) (50) %
Service charges on deposits $ 119 $ 166 $ (47) (28) %
Residential Mortgage Information
Residential mortgage servicing statistics (in billions, except as noted) (a)
Serviced portfolio balance (b) $ 117 $ 118 $ (1) (1) %
Serviced portfolio acquisitions $ 7 $ 2 $ 5 250 %
MSR asset value (b) $ 1.0 $ 0.6 $ 0.4 67 %
MSR capitalization value (in basis points) (b) 83 51 32 63 %
Servicing income: (in millions)
Servicing fees, net (c) $ 5 $ 44 $ (39) (89) %
Mortgage servicing rights valuation, net of economic hedge $ 14 $ 101 $ (87) (86) %
Residential mortgage loan statistics
Loan origination volume (in billions) $ 4.3 $ 3.2 $ 1.1 34 %
Loan sale margin percentage 3.28 % 3.16 %
Percentage of originations represented by:
Purchase volume (d) 34 % 36 %
Refinance volume 66 % 64 %
Other Information (b)
Customer-related statistics (average)
Non-teller deposit transactions (e) 66 % 59 %
Digital consumer customers (f) 79 % 71 %
Credit-related statistics
Nonperforming assets $ 1,229 $ 1,011 $ 218 22 %
Net charge-offs - loans and leases $ 108 $ 166 $ (58) (35) %
Other statistics
ATMs 8,874 9,048 (174) (2) %
Branches (g) 2,137 2,277 (140) (6) %
Brokerage account client assets (in billions) (h) $ 61 $ 49 $ 12 24 %
*- Not Meaningful

(a)Represents mortgage loan servicing balances for third parties and the related income.

(b)Presented as of period end, except for average customer-related statistics and net charge-offs, which are both shown for the ~~three~~nine months ended.

(c)Servicing fees net of impact of decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan payments, prepayments, and loans that were paid down or paid off during the period.

(d)Mortgages with borrowers as part of residential real estate purchase transactions.

(e)Represents PNC legacy only, statistics will include BBVA activity in the fourth quarter reporting following the conversion of bank systems and branches.

(f)Percentage of total consumer and business banking deposit transactions processed at an ATM or through our mobile banking application.

~~(f)~~(g)Represents consumer checking relationships that process the majority of their transactions through non-teller channels.

~~(g)~~(h)Excludes stand-alone mortgage offices and satellite offices (e.g., drive-ups, electronic branches and retirement centers) that provide limited products and/or services.

~~(h)~~(i)Includes cash and money market balances.

Retail Banking earnings for the first ~~quarter~~nine months of 2021 increased ~~$406~~$778 million ~~or 202%,~~ compared with the ~~first quarter of 2020. The increase was attributable to~~same period in 2020 driven by a provision recapture and ~~lower noninterest expense,~~higher net interest income, partially offset by ~~a decline in total revenue.~~higher noninterest expense. Results for the first nine months of 2021 reflect the benefit of BBVA's business operations since the acquisition closed on June 1, 2021.

Net interest income ~~decreased~~increased primarily due to growth in average deposit and loan balances, reflecting the BBVA acquisition, along with wider interest rate spreads on the value of loans, partially offset by narrower interest rate spreads on the value of ~~deposits and loans, as well as declines in average loan balances, partially offset by growth in average deposit balances.~~deposits.

Noninterest income decreased ~~largely~~ due to a larger negative derivative Visa Class B fair value adjustment related to the extension of litigation timing in the first nine months of 2021, along with declines in residential mortgage revenue, driven by lower servicing fees primarily due to higher payoffs and lower revenue from residential mortgage servicing rights valuation, net of economic ~~hedge and lower service charges on deposits driven primarily by lower overdraft instances as a result of higher average deposit account balances due to government stimulus.~~hedge. The decrease in noninterest income was partially offset by the ~~favorable impact of derivative fair value adjustments related to Visa Class B common shares in the first quarter of 2021.~~BBVA acquisition, increased consumer services revenue driven by debit card and brokerage fees, as well as higher service charges on deposits.

Provision recapture in the first ~~three~~nine months of 2021 was driven by improvements in credit quality and macroeconomic factors ~~and lower loans outstanding.~~along with changes in portfolio composition, partially offset by the additional provision for credit losses related to the BBVA acquisition.

~~Noninterest expense decreased primarily as a result of lower customer related transaction costs, personnel, and marketing expenses, partially offset by increased technology investments.~~

14The PNC Financial Services Group, Inc. – Form 10-Q

Noninterest expense increased primarily as a result of the impact of BBVA operating expenses, increased marketing activity and non-credit losses due to additions to litigation reserves.

The deposit strategy of Retail Banking is to remain disciplined on pricing and focused on growing and retaining relationship-based balances, executing on market-specific deposit growth strategies and providing a source of low-cost funding and liquidity to PNC. In the first ~~three~~nine months of 2021, average total deposits increased compared to the same period in 2020 primarily driven by growth in demand and savings deposits which benefited from the impact of continued government stimulus ~~payments and lower consumer spending due to the pandemic. Savings and demand deposits also increased due, in part, to a shift from money market deposits to relationship-based savings products.~~payments.

Retail Banking average total loans ~~decreased~~increased in the first ~~three~~nine months of 2021 compared with the same period in ~~2020:~~2020 due to the impact of the BBVA acquisition on all loan classes except education loans, which BBVA did not have in their loan portfolio.

•Average residential real estate loans increased due to originations outpacing paydowns.

•Average commercial loans increased primarily due to PPP loans.

•Average auto loan balances declined due to impacts of the pandemic on the auto industry and proactive credit tightening.

•Average credit card balances decreased due to changes in customer behavior resulting in higher balance paydowns driven by government stimulus payments combined with credit tightening actions taken as a result of the ~~pandemic combined with changes in customer behavior resulting in lower consumer spending and higher balance paydowns~~pandemic.

•Average education loans decreased driven by a continued decline in the runoff portfolio of government ~~stimulus.~~guaranteed education loans.

•Average home equity loans decreased as paydowns and payoffs exceeded new originated volume.

•Average other consumer loans declined driven by lower originations due to the pandemic and the effects of government stimulus and credit tightening.

•~~Average residential real estate loans decreased due to paydowns outpacing originations.~~

•~~Average education loans decreased driven by a decline in the runoff portfolio of government guaranteed education loans.~~

•~~Average commercial loans increased primarily due to PPP loans.~~

Our national expansion strategy is designed to grow customers with digitally-led banking and a thin branch network ~~in markets outside of our existing retail branch network and~~as we expand into new markets. In 2018, we began offering our digital high yield savings deposit product and opened our first solution center in Kansas City. Solution centers are an emerging branch operating model with a distinctive layout, where routine transactions are supported through a combination of technology and skilled banker assistance to create personalized experiences. The primary focus of the solution center is to bring a community element to our digital banking capabilities. The solution center provides a collaborative environment that connects our customers with our digital solutions and services, beyond deposits and withdrawals. In 2020, we expanded into three new markets, Boston, Houston and Nashville and opened seventeen new solution centers. In the first ~~quarter~~nine months of 2021 we opened ~~three~~ten new solution centers ~~bringing the~~and expanded into two new markets, Denver and Phoenix. In total, we have thirty-two open solution centers ~~to 25~~ within ~~our existing~~the markets of Boston, Dallas/Fort Worth, Denver, Houston, Kansas City, Nashville and ~~Nashville.~~Phoenix. We also offer digital unsecured installment and small business loans in the expansion markets. ~~Beginning in mid-2021, we expect~~As a result of the BBVA acquisition, ~~will accelerate our Retail National expansion efforts to~~we have become a coast-to-coast Retail ~~Bank.~~Bank and added over 600 branches across seven states to our network.

Retail Banking continues to enhance the customer experience with refinements to product and service offerings that drive value for consumers and small businesses. We are focused on meeting the financial needs of our customers by providing a broad range of liquidity, banking and investment products. In April 2021, we announced our Low Cash ModeSM Virtual Wallet® feature which ~~will give~~gives all Virtual Wallet® customers the ability to avoid unnecessary overdraft fees through real-time intelligent alerts, extra time to prevent or address overdrafts, and controls to choose whether to return certain debits rather than the bank making the decision. ~~During our pre-launch pilot~~Through the end of September, we have successfully rolled out Low Cash ModeSM to ~~nearly 20,000~~3.8 million PNC legacy Virtual Wallet® customers ~~overdraft fees were collectively reduced by more than 60 percent. As a result~~and have delivered over 10 million Low Cash ModeSM alerts.

Upon conversion, BBVA customers became eligible for the full suite of ~~these changes, we expect to help Virtual Wallet~~PNC products and services, including Low Cash Mode®SM ~~customers avoid $125 to $150 million in overdraft fees annually.~~. Our full year 2021 ~~revenue outlook anticipated this~~guidance includes the impact of fee ~~reduction,~~reductions on both PNC legacy and ~~as a result is not impacted by this change.~~ the conversion of BBVA customers.

See the Executive Summary section in this Financial Review for additional information on our business outlook.

Retail Banking continued to execute on its strategy of transforming the customer experience through transaction channel migration, branch network and home lending process transformations and multi-channel engagement and service strategies. We are also continually assessing our current branch network for optimization opportunities as usage of alternative channels has increased and as a result have closed 29112 branches in the first ~~three~~nine months of 2021, consistent with our plan.

•Approximately 79% of consumer customers used non-teller channels for the majority of their transactions in the first three months of 2021 compared with 71% in 2020, in part reflecting consumer transaction behavior changes during the pandemic.

•Deposit transactions via ATM and mobile channels increased to 66% of total deposit transactions in the first three months of 2021 from 59% in 2020, in part reflecting consumer transaction behavior changes during the pandemic.

Retail Banking completed its multi-year initiative to redesign the home lending process, including integrating mortgage and home equity lending into a common platform. Technology enhancements have supported increased residential mortgage origination volume. In addition, we enhanced the home equity origination process to make it easier and to reach additional customers by offering the product in new states. The enhanced product is currently available in 43 states and we are moving toward offering the product in most of the remaining states in 2021. Additional improvements for both mortgage and home equity are planned to continue throughout 2021.

16The PNC Financial Services Group, Inc. – Form 10-Q

Corporate & Institutional Banking

Corporate & Institutional Banking’s strategy is to be the leading relationship-based provider of traditional banking products and services to its customers through the economic cycles. We aim to grow our market share and drive higher returns by delivering value-added solutions that help our clients better run their organizations, all while maintaining prudent risk and expense management. We continue to focus on building client relationships where the risk-return profile is attractive.

Table 12: Corporate & Institutional Banking Table


(Unaudited)	(Unaudited)											(Unaudited)
Three months ended March 31								Change
Nine months ended September 30												Nine months ended September 30							Change
Dollars in millions	Dollars in millions	2021			2020			$		%		Dollars in millions	2021			2020			$		%
Income Statement	Income Statement											Income Statement
Net interest income	Net interest income	$	1,001		$	966		$	35	4	%	Net interest income	$	3,343		$	3,055		$	288	9	%
Noninterest income	Noninterest income	807			694			113		16	%	Noninterest income	2,730			2,143			587		27	%
Total revenue	Total revenue	1,808			1,660			148		9	%	Total revenue	6,073			5,198			875		17	%
Provision for (recapture of) credit losses	Provision for (recapture of) credit losses	(282)			458			(740)		(162)	%	Provision for (recapture of) credit losses	(277)			2,254			(2,531)		*
Noninterest expense	Noninterest expense	711			722			(11)		(2)	%	Noninterest expense	2,504			2,055			449		22	%
Pretax earnings	Pretax earnings	1,379			480			899		187	%	Pretax earnings	3,846			889			2,957		333	%
Income taxes	Income taxes	318			110			208		189	%	Income taxes	846			201			645		321	%
Noncontrolling interest	Noncontrolling interest	3						3		*		Noncontrolling interest	10			6			4		67	%
Earnings	Earnings	$	1,058		$	370		$	688	186	%	Earnings	$	2,990		$	682		$	2,308	338	%
Average Balance Sheet	Average Balance Sheet											Average Balance Sheet
Loans held for sale	Loans held for sale	$	691		$	395		$	296	75	%	Loans held for sale	$	598		$	669		$	(71)	(11)	%
Loans	Loans											Loans
Commercial	Commercial											Commercial
Commercial and industrial	Commercial and industrial	$	114,944		$	117,288		$	(2,344)	(2)	%	Commercial and industrial	$	123,505		$	127,149		$	(3,644)	(3)	%
Commercial real estate	Commercial real estate	27,182			26,589			593		2	%	Commercial real estate	30,919			27,070			3,849		14	%
Equipment lease financing	Equipment lease financing	6,332			7,066			(734)		(10)	%	Equipment lease financing	6,321			6,957			(636)		(9)	%
Total commercial	Total commercial	148,458			150,943			(2,485)		(2)	%	Total commercial	160,745			161,176			(431)		—
Consumer	Consumer	9			9			—		—		Consumer	14			9			5		56	%
Total loans	Total loans	$	148,467		$	150,952		$	(2,485)	(2)	%	Total loans	$	160,759		$	161,185		$	(426)	—
Total assets	Total assets	$	170,531		$	172,502		$	(1,971)	(1)	%	Total assets	$	184,964		$	185,001		$	(37)	—
Deposits	Deposits											Deposits
Noninterest-bearing demand	Noninterest-bearing demand	$	66,666		$	40,651		$	26,015	64	%	Noninterest-bearing demand	$	76,105		$	50,104		$	26,001	52	%
Interest-bearing demand	Interest-bearing demand	28,118			21,101			7,017		33	%	Interest-bearing demand	30,718			26,182			4,536		17	%
Money market	Money market	33,182			28,468			4,714		17	%	Money market	33,706			34,373			(667)		(2)	%
Other	Other	8,368			7,868			500		6	%	Other	7,723			8,789			(1,066)		(12)	%
Total deposits	Total deposits	$	136,334		$	98,088		$	38,246	39	%	Total deposits	$	148,252		$	119,448		$	28,804	24	%
Performance Ratios	Performance Ratios											Performance Ratios
Return on average assets	Return on average assets	2.52		%	0.87		%					Return on average assets	2.16		%	0.49		%
Noninterest income to total revenue	Noninterest income to total revenue	45		%	42		%					Noninterest income to total revenue	45		%	41		%
Efficiency	Efficiency	39		%	43		%					Efficiency	41		%	40		%
Other Information	Other Information											Other Information
Consolidated revenue from: (a)	Consolidated revenue from: (a)											Consolidated revenue from: (a)
Treasury Management (b)	Treasury Management (b)	$	494		$	491		$	3	1	%	Treasury Management (b)	$	1,609		$	1,412		$	197	14	%
Capital Markets (b)	Capital Markets (b)	$	403		$	344		$	59	17	%	Capital Markets (b)	$	1,412		$	1,077		$	335	31	%
Commercial mortgage banking activities:	Commercial mortgage banking activities:											Commercial mortgage banking activities:
Commercial mortgage loans held for sale (c)	Commercial mortgage loans held for sale (c)	$	30		$	29		$	1	3	%	Commercial mortgage loans held for sale (c)	$	103		$	117		$	(14)	(12)	%
Commercial mortgage loan servicing income (d)	Commercial mortgage loan servicing income (d)	90			69			21		30	%	Commercial mortgage loan servicing income (d)	244			212			32		15	%
Commercial mortgage servicing rights valuation, net of economic hedge (e)	Commercial mortgage servicing rights valuation, net of economic hedge (e)	17			20			(3)		(15)	%	Commercial mortgage servicing rights valuation, net of economic hedge (e)	64			58			6		10	%
Total	Total	$	137		$	118		$	19	16	%	Total	$	411		$	387		$	24	6	%
MSR asset value (f)	MSR asset value (f)	$	702		$	477		$	225	47	%	MSR asset value (f)	$	703		$	515		$	188	37	%
Average Loans by C&IB business
Average loans by C&IB business												Average loans by C&IB business
Corporate Banking	Corporate Banking	$	74,459		$	78,057		$	(3,598)	(5)	%	Corporate Banking	$	78,975		$	83,762		$	(4,787)	(6)	%
Real Estate	Real Estate	38,395			37,368			1,027		3	%	Real Estate	42,313			40,030			2,283		6	%
Business Credit	Business Credit	21,552			23,251			(1,699)		(7)	%	Business Credit	23,367			23,009			358		2	%
Commercial Banking	Commercial Banking	10,807			7,784			3,023		39	%	Commercial Banking	12,435			10,093			2,342		23	%
Other	Other	3,254			4,492			(1,238)		(28)	%	Other	3,669			4,291			(622)		(14)	%
Total average loans	Total average loans	$	148,467		$	150,952		$	(2,485)	(2)	%	Total average loans	$	160,759		$	161,185		$	(426)	—
Credit-related statistics	Credit-related statistics											Credit-related statistics
Nonperforming assets (f)	Nonperforming assets (f)	$	658		$	508		$	150	30	%	Nonperforming assets (f)	$	1,061		$	832		$	229	28	%
Net charge-offs - loans and leases	Net charge-offs - loans and leases	$	44		$	50		$	(6)	(12)	%	Net charge-offs - loans and leases	$	290		$	181		$	109	60	%

*- Not Meaningful

16The PNC Financial Services Group, Inc. – Form 10-Q

(a)See the additional revenue discussion regarding treasury management, capital markets-related products and services and commercial mortgage banking activities in the Product Revenue section of this Corporate & Institutional Banking section.

(b)Amounts are reported in net interest income and noninterest income.

(c)Represents other noninterest income for valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, originations fees, gains on sale of loans held for sale and net interest income on loans held for sale.

(d)Represents net interest income and noninterest income (primarily in corporate service fees) from loan servicing net of reduction in commercial mortgage servicing rights due to amortization expense and payoffs. Commercial mortgage servicing rights valuation, net of economic hedge, is shown separately.

(e)Amounts are reported in corporate service fees.

(f)As of ~~March 31.~~September 30.

Corporate & Institutional Banking earnings ~~for~~in the first ~~quarter~~nine months of 2021 increased ~~$688 million, or 186%,~~$2.3 billion compared with the ~~first quarter of~~same period in 2020 driven by a provision recapture and higher total ~~revenue.~~revenue, partially offset by higher noninterest expense. Results for the first nine months of 2021 reflect the benefit of BBVA's business operations since the acquisition closed on June 1, 2021.

Net interest income increased in the comparison primarily due to ~~higher average deposit balances and~~ wider interest rate spreads on the value of loans and higher average deposit balances, reflecting the BBVA acquisition, partially offset by narrower interest rate spreads on the value of deposits.

Growth in noninterest income in the comparison reflected broad-based increases, including the benefit of BBVA, in capital markets-related revenue, treasury management product revenue and revenue from commercial mortgage banking activities.

Provision recapture in the first ~~three~~nine months of 2021 was driven by improvements in credit quality and macroeconomic factors ~~and lower loans outstanding.~~

~~Nonperforming assets at March 31, 2021 increased over~~along with changes in portfolio composition, partially offset by the ~~comparative period of 2020 primarily due~~additional provision for credit losses related to ~~higher nonperforming commercial real estate loans, reflecting~~ the ~~impacts of the pandemic.~~BBVA acquisition.

Noninterest expense ~~decreased~~increased in the comparison ~~and included lower~~largely due to higher variable costs associated with increased business ~~travel.~~activity and the BBVA acquisition.

Average loans decreased compared with the ~~three~~nine months ended ~~March 31,~~September 30, 2020 due to declines in Corporate Banking, ~~and Business Credit,~~ partially offset by increases in Commercial Banking, Real Estate and ~~Real Estate:~~Business Credit:

•Corporate Banking provides lending, equipment finance, treasury management and capital markets-related products and services to mid-sized and large corporations, and government and not-for-profit entities. Average loans for this business declined reflecting lower average utilization of loan commitments, partially offset by loans from BBVA and new ~~production, including~~production.

•Commercial Banking provides lending, treasury management and capital markets-related products and services to smaller corporations and businesses. Average loans for this business increased primarily driven by loans from BBVA and PPP loan originations.

•Real Estate provides banking, financing and servicing solutions for commercial real estate clients across the country. Average loans for this business increased reflecting loans from BBVA, partially offset by lower commercial mortgage and multifamily agency warehouse lending.

•Business Credit provides asset-based lending and equipment financing solutions. The loan and lease portfolio is relatively high yielding, with acceptable risk as the loans are mainly secured by marketable collateral. Average loans for this business ~~declined primarily driven by lower average utilization of loan commitments, partially offset by new production, including PPP loan originations.~~

•~~Commercial Banking provides lending, treasury management and capital markets-related products and services to smaller corporations and businesses. Average loans for this business~~ increased primarily driven by ~~PPP loan originations,~~new production and loans from BBVA, partially offset by lower average utilization of loan ~~commitments and softer new production.~~

•Real Estate provides banking, financing and servicing solutions for commercial real estate clients across the country. Average loans for this business increased reflecting higher multifamily agency warehouse lending and higher project loans.commitments.

The deposit strategy of Corporate & Institutional Banking is to remain disciplined on pricing and focused on growing and retaining relationship-based balances over time, executing on customer and segment-specific deposit growth strategies and continuing to provide funding and liquidity to PNC. Average total deposits increased in the comparison reflecting customers maintaining liquidity due to the economic impacts of the pandemic. We continue to actively monitor the interest rate environment and make adjustments in response to evolving market conditions, bank funding needs and client relationship dynamics.

Corporate & Institutional Banking continues to expand its Corporate Banking business, focused on the middle market and larger sectors. We executed on our expansion plans into the Seattle and Portland markets in 2020, and in 2021, ~~we expect~~ the BBVA acquisition ~~to accelerate~~accelerated our expansion efforts across the ~~Southwest, but~~Southwest; however this has not changed our strategy regarding our de novo expansion efforts. This follows offices opened in Boston and Phoenix in 2019, Denver, Houston and Nashville in 2018, and Dallas, Kansas City and Minneapolis in 2017. These locations complement Corporate & Institutional Banking national businesses with a significant presence in these cities and build on past successes in the markets where PNC’s retail banking presence was limited, such as in the Southeast. Our full suite of commercial products and services is offered in these locations.

Product Revenue

In addition to credit and deposit products for commercial customers, Corporate & Institutional Banking offers other services, including treasury management, capital markets-related products and services and commercial mortgage banking activities, for customers of all business segments. On a consolidated basis, the revenue from these other services is included in net interest income, corporate service fees and other noninterest income. From a business perspective, the majority of the revenue and expense related to these services is reflected in the Corporate & Institutional Banking segment results and the remainder is reflected in the results of other businesses. The

18The PNC Financial Services Group, Inc. – Form 10-Q

Other Information section in Table 12 includes the consolidated revenue to PNC for these services. A discussion of the consolidated revenue from these services follows.

The Treasury Management business provides ~~payables,~~corporations with cash and investment management services, receivables ~~deposit~~ and ~~account~~disbursement management services, ~~liquidity~~funds transfer services, international payment services and ~~investments,~~access to online/mobile information management and ~~online~~reporting services. Within Treasury Management, PNC Global Transfers (formerly BBVA Transfer Services, Inc.) provides wholesale money transfer processing capabilities between the U.S. and ~~mobile banking products~~Mexico and ~~services to our clients.~~other countries primarily in Central America and South America. Treasury management revenue is reported in noninterest income and net interest income. Noninterest income includes treasury management product revenue less earnings credits provided to customers on compensating deposit balances used to pay for products and services. Net interest income primarily includes revenue from all treasury management customer deposit balances. Compared with the first ~~three~~nine months of 2020, treasury management revenue ~~was relatively unchanged as~~increased due to higher deposit balances and higher noninterest income, ~~was mostly~~partially offset by narrower interest rate spreads on the value of deposits.

Capital markets-related products and services include foreign exchange, derivatives, fixed income, securities underwriting, loan syndications, mergers and acquisitions advisory and equity capital markets advisory related services. The increase in capital markets-related revenue in the comparison was ~~primarily~~mostly driven by higher ~~fixed income trading,~~merger and acquisition advisory fees as well as higher equity capital market advisory ~~fees and underwriting~~ fees, partially offset by lower customer-related derivative fees.

Commercial mortgage banking activities include revenue derived from commercial mortgage servicing (both net interest income and noninterest income) and revenue derived from commercial mortgage loans held for sale and related hedges. Total revenue from commercial mortgage banking activities increased in the comparison primarily due to higher commercial mortgage servicing ~~income.~~income, partially offset by lower revenue from commercial mortgage loans held for sale.

18The PNC Financial Services Group, Inc. – Form 10-Q

Asset Management Group

Asset Management Group is focused on being a premier bank-held individual and institutional asset manager in each of the markets it serves. The business seeks to deliver high quality banking, trust and investment management services to our high net worth, ultra high net worth and institutional client sectors through a broad array of products and services. Asset Management Group’s priorities are to serve our clients' financial objectives, grow and deepen customer relationships and deliver solid financial performance with prudent risk and expense management.

Table 13: Asset Management Group Table


(Unaudited)	(Unaudited)											(Unaudited)
Three months ended March 31								Change
Nine months ended September 30												Nine months ended September 30							Change
Dollars in millions, except as noted	Dollars in millions, except as noted	2021			2020			$		%		Dollars in millions, except as noted	2021			2020			$		%
Income Statement	Income Statement											Income Statement
Net interest income	Net interest income	$	93		$	88		$	5	6	%	Net interest income	$	346		$	266		$	80	30	%
Noninterest income	Noninterest income	229			204			25		12	%	Noninterest income	729			629			100		16	%
Total revenue	Total revenue	322			292			30		10	%	Total revenue	1,075			895			180		20	%
Provision for (recapture of) credit losses		(9)			3			(12)		*
Provision for credit losses												Provision for credit losses	8			23			(15)		(65)	%
Noninterest expense	Noninterest expense	202			219			(17)		(8)	%	Noninterest expense	676			647			29		4	%
Pretax earnings	Pretax earnings	129			70			59		84	%	Pretax earnings	391			225			166		74	%
Income taxes	Income taxes	30			16			14		88	%	Income taxes	91			52			39		75	%
Earnings	Earnings	$	99		$	54		$	45	83	%	Earnings	$	300		$	173		$	127	73	%
Average Balance Sheet	Average Balance Sheet											Average Balance Sheet
Loans	Loans											Loans
Consumer	Consumer											Consumer
Residential real estate	Residential real estate	$	3,635		$	2,385		$	1,250	52	%	Residential real estate	$	4,608		$	2,667		$	1,941	73	%
Other consumer	Other consumer	4,008			4,052			(44)		(1)	%	Other consumer	4,249			4,031			218		5	%
Total consumer	Total consumer	7,643			6,437			1,206		19	%	Total consumer	8,857			6,698			2,159		32	%
Commercial	Commercial	756			856			(100)		(12)	%	Commercial	1,629			849			780		92	%
Total loans	Total loans	$	8,399		$	7,293		$	1,106	15	%	Total loans	$	10,486		$	7,547		$	2,939	39	%
Total assets	Total assets	$	8,873		$	7,801		$	1,072	14	%	Total assets	$	11,124		$	8,041		$	3,083	38	%
Deposits	Deposits											Deposits
Noninterest-bearing demand	Noninterest-bearing demand	$	1,754		$	1,468		$	286	19	%	Noninterest-bearing demand	$	2,884		$	1,528		$	1,356	89	%
Interest-bearing demand	Interest-bearing demand	9,104			6,850			2,254		33	%	Interest-bearing demand	9,597			7,566			2,031		27	%
Money market	Money market	1,520			1,709			(189)		(11)	%	Money market	3,610			1,616			1,994		123	%
Savings	Savings	7,747			7,197			550		8	%	Savings	7,755			7,279			476		7	%
Other	Other	454			847			(393)		(46)	%	Other	628			707			(79)		(11)	%
Total deposits	Total deposits	$	20,579		$	18,071		$	2,508	14	%	Total deposits	$	24,474		$	18,696		$	5,778	31	%
Performance Ratios	Performance Ratios											Performance Ratios
Return on average assets	Return on average assets	4.52		%	2.81		%					Return on average assets	3.61		%	2.88		%
Noninterest income to total revenue	Noninterest income to total revenue	71		%	70		%					Noninterest income to total revenue	68		%	70		%
Efficiency	Efficiency	63		%	75		%					Efficiency	63		%	72		%
Supplemental Noninterest Income Information	Supplemental Noninterest Income Information											Supplemental Noninterest Income Information
Asset management fees	Asset management fees	$	226		$	201		$	25	12	%	Asset management fees	$	713		$	615		$	98	16	%
Brokerage fees												Brokerage fees	6						6		*
Total												Total	$	719		$	615		$	104	17	%
Other Information	Other Information											Other Information
Nonperforming assets (a)	Nonperforming assets (a)	$	68		$	34		$	34	100	%	Nonperforming assets (a)	$	80		$	39		$	41	105	%
Net charge-offs (recoveries) - loans and leases					$	(1)		$	(1)	(100)	%
Net charge-offs - loans and leases												Net charge-offs - loans and leases	$	1					$	1	*
Brokerage account client assets (in billions) (a)												Brokerage account client assets (in billions) (a)	$	5					$	5	*
Client Assets Under Administration (in billions) (a) (b)	Client Assets Under Administration (in billions) (a) (b)											Client Assets Under Administration (in billions) (a) (b)
Discretionary client assets under management	Discretionary client assets under management	$	173		$	136		$	37	27	%	Discretionary client assets under management	$	183		$	158		$	25	16	%
Nondiscretionary client assets under administration	Nondiscretionary client assets under administration	161			128			33		26	%	Nondiscretionary client assets under administration	170			142			28		20	%
Total	Total	$	334		$	264		$	70	27	%	Total	$	353		$	300		$	53	18	%
Discretionary client assets under management	Discretionary client assets under management											Discretionary client assets under management
Personal	Personal	$	110		$	84		$	26	31	%	Personal	$	117		$	99		$	18	18	%
Institutional	Institutional	63			52			11		21	%	Institutional	66			59			7		12	%
Total	Total	$	173		$	136		$	37	27	%	Total	$	183		$	158		$	25	16	%

* - Not meaningful

(a)As of ~~March 31.~~September 30.

(b)Excludes brokerage account client assets.

Asset Management Group earnings for the first quarter of 2021 increased $45 million, or 83%, compared with the first quarter of 2020. The increase was attributable to a provision recapture, higher revenue and lower noninterest expense.

20The PNC Financial Services Group, Inc. – Form 10-Q

Asset Management Group earnings in the first nine months of 2021 increased $127 million compared with the same period in 2020 driven by higher revenue and lower provision for credit losses. Results for the first nine months of 2021 reflect the benefit of BBVA's business operations since the acquisition closed in June 2021.

Net interest income increased due to growth in average loan and deposit balances, reflecting the BBVA acquisition and wider interest rate spreads on ~~loans,~~loans. This was partially offset by narrower interest rate spreads on ~~the value of~~ deposits.

The increase in noninterest income was primarily attributable to increases in the average equity ~~markets.~~markets and the benefit of BBVA.

Noninterest expense ~~declined~~increased due to the impact of BBVA operations, partially offset by intangible asset amortization ~~run-off and lower costs associated with business travel.~~run-off.

Provision ~~recapture~~for credit losses in the first ~~three~~nine months of 2021 was driven by the additional provision for credit losses related to the BBVA acquisition, partially offset by improvements in credit quality and macroeconomic factors.

~~Asset Management Group’s discretionary~~Discretionary client assets under management increased in comparison to the prior year primarily ~~attributable~~due to the higher equity markets as of ~~March 31,~~September 30, 2021.

The Asset Management Group strives to be the leading relationship-based provider of investment, planning, ~~banking~~credit and cash management solutions and fiduciary services to wealthy individuals and institutions by proactively delivering value-added ideas, solutions and exceptional service.

~~Personal Wealth Management~~With the inclusion of BBVA, PNC Private Bank has ~~nearly~~approximately 100 offices operating in ~~six~~eight out of the ten most affluent states in the U.S. with a majority co-located with retail banking branches. The business provides customized investments, planning, trust and estate administration and private banking solutions to affluent individuals and ultra-affluent families.

Institutional Asset Management provides outsourced chief investment officer, custody, private real estate, cash and fixed income client solutions, and retirement plan fiduciary ~~retirement advisory~~investment services to institutional clients including corporations, healthcare systems, insurance companies, unions, municipalities and non-profits.

We expect that the BBVA acquisition will allow meaningful opportunities to grow the Asset Management Group segment by entering into new markets for both the Personal Wealth Management and Institutional Asset Management businesses.

RISK MANAGEMENT

The Risk Management section included in Item 7 of our 2020 Form 10-K describes our enterprise risk management framework including risk culture, enterprise strategy, risk governance and oversight framework, risk identification, risk assessment, risk controls and monitoring, and risk aggregation and reporting. Additionally, our 2020 Form 10-K provides an analysis of the firm's Capital Management and our key areas of risk, which include but are not limited to Credit, Market, Liquidity and Operational (including Compliance and Information Security).

Upon closing of the acquisition of BBVA, the PNC Enterprise Risk Management Framework applied to the legal entities acquired from BBVA S.A., including BBVA USA. Prior to closing, PNC’s Independent Risk Management group evaluated and updated the frameworks, policies and procedures of the acquired BBVA entities as necessary. The updates were made to align the acquired BBVA entities with PNC’s risk appetite and connected the elements of their respective risk governance and reporting into PNC’s existing enterprise risk framework. Connecting the existing BBVA risk governance and reporting framework into PNC’s existing enterprise risk framework allowed separate risk profiles, governance, and reporting for PNC Bank and the acquired BBVA entities during the period from acquisition through conversion, while also providing the ability to consolidate into one enterprise risk profile that was communicated through the established risk governance and reporting for PNC. Upon the merger of BBVA USA into PNC Bank, completed on October 8, 2021, the updated BBVA risk governance and reporting framework is no longer applicable as all acquired BBVA entities are under PNC’s framework.

Credit Risk Management

Credit risk represents the possibility that a customer, counterparty or issuer may not perform in accordance with contractual terms. Credit risk is inherent in the financial services business and results from extending credit to customers, purchasing securities, and entering into financial derivative transactions and certain guarantee contracts. Credit risk is one of our most significant risks. Our processes for managing credit risk are designed to be embedded in our risk culture and in our decision-making processes using a systematic approach whereby credit risks and related exposures are identified and assessed, managed through specific policies and processes, measured and evaluated against our risk appetite and credit concentration limits, and reported, along with specific mitigation activities, to management and the Board of Directors through our governance structure. Our most significant concentration of credit risk is in our loan portfolio.

20The PNC Financial Services Group, Inc. – Form 10-Q

Loan Portfolio Characteristics and Analysis

Table 14: Details of Loans

In billions

We use several credit quality indicators, as further detailed in Note 4 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in Item 1 of this Report, to monitor and measure our exposure to credit risk within our loan portfolio. The following provides additional information about the significant loan classes that comprise our Commercial and Consumer portfolio segments.

Commercial

Commercial and Industrial

Commercial and industrial loans comprised 53% and 55% of our total loan portfolio at ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. The majority of our commercial and industrial loans are secured by collateral that provides a secondary source of repayment for the loan should the borrower experience cash generation difficulties. Examples of this collateral include short-term assets, such as accounts receivable, inventory and securities, and long-lived assets, such as equipment, owner-occupied real estate and other business assets.

We actively manage our commercial and industrial loans to assess any changes (both positive and negative) in the level of credit risk at both the borrower and portfolio level. To evaluate the level of credit risk, we assign internal risk ratings reflecting our estimates of the borrower’s PD and LGD for each related credit facility. This two-dimensional credit risk rating methodology provides granularity in the risk monitoring process and is updated on an ongoing basis through our credit risk management processes. In addition to monitoring the level of credit risk, we also monitor concentrations of credit risk pertaining to both specific industries and geography that may exist in our portfolio. Our commercial and industrial portfolio is well-diversified as shown in the following table which provides a breakout by industry classification (classified based on the NAICS).

Table 15: Commercial and Industrial Loans by Industry


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
Dollars in millions	Dollars in millions	Amount		% of Total		Amount		% of Total		Dollars in millions	Amount		% of Total		Amount		% of Total
Commercial and industrial	Commercial and industrial									Commercial and industrial
Manufacturing										Manufacturing	$	22,760	15	%	$	20,712	16	%
Retail/wholesale trade	Retail/wholesale trade	$	20,349	16	%	$	20,218	15	%	Retail/wholesale trade	22,238		15		20,218		15
Manufacturing		20,032		15		20,712		16
Service providers	Service providers	19,403		15		19,419		15		Service providers	20,969		14		19,419		15
Financial services	Financial services	13,382		10		14,909		11		Financial services	18,022		12		14,909		11
Real estate related (a)	Real estate related (a)	13,052		10		13,369		10		Real estate related (a)	14,809		10		13,369		10
Health care	Health care	8,741		7		8,987		7		Health care	10,567		7		8,987		7
Transportation and warehousing	Transportation and warehousing	6,751		5		7,095		5		Transportation and warehousing	7,318		5		7,095		5
Other industries	Other industries	28,088		22		27,364		21		Other industries	36,052		22		27,364		21
Total commercial and industrial loans	Total commercial and industrial loans	$	129,798	100	%	$	132,073	100	%	Total commercial and industrial loans	$	152,735	100	%	$	132,073	100	%

(a) Represents loans to customers in the real estate and construction industries.

22The PNC Financial Services Group, Inc. – Form 10-Q

The ~~decrease~~increase in commercial and industrial loans compared to December 31, 2020 primarily reflects ~~lower utilization~~the acquisition of ~~loan commitments and softer loan demand.~~BBVA. Amounts also include ~~$14.0~~$6.8 billion of PPP loans outstanding at ~~March 31, 2021, $10.1 billion from the first round of PPP and $3.9 billion from the second round.~~September 30, 2021. PPP loans outstanding at December 31, 2020 totaled $12.0 billion. For additional information on PPP lending, see the COVID-19 Relief section within Item I of our 2020 Form 10-K.

See the Commercial High Impact Industries discussion within this Credit Risk Management section for additional discussion of the impact of COVID-19 on our commercial portfolio and how we are evaluating and monitoring the portfolio for elevated levels of credit risk.

Commercial Real Estate

Commercial real estate loans comprised ~~$17.0~~$20.9 billion related to commercial mortgages, ~~$6.5~~$8.4 billion of real estate project loans and ~~$4.8~~$6.9 billion of intermediate term financing loans as of ~~March 31,~~September 30, 2021. Comparable amounts as of December 31, 2020 were $17.3 billion, $6.3 billion and $5.1 billion, respectively.

We monitor credit risk associated with our commercial real estate loans similar to commercial and industrial loans by analyzing PD and LGD. Additionally, risks associated with these types of credit activities tend to be correlated to the loan structure, collateral location, project progress and business environment. These attributes are also monitored and utilized in assessing credit risk. The portfolio is geographically diverse due to the nature of our business involving clients throughout the U.S.

The following table presents our commercial real estate loans by geography and property type:

Table 16: Commercial Real Estate Loans by Geography and Property Type


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
Dollars in millions	Dollars in millions	Amount		% of Total		Amount		% of Total		Dollars in millions	Amount		% of Total		Amount		% of Total
Geography (a)	Geography (a)									Geography (a)
California	California	$	4,367	15	%	$	4,458	16	%	California	$	5,953	16	%	$	4,458	16	%
Texas										Texas	4,052		11		2,031		7
Florida	Florida	2,954		10		2,991		10		Florida	3,497		10		2,991		10
Texas		1,977		7		2,031		7
Virginia										Virginia	1,798		5		1,586		6
Maryland	Maryland	1,741		6		1,770		6		Maryland	1,683		5		1,770		6
Virginia		1,571		6		1,586		6
Pennsylvania	Pennsylvania	1,410		5		1,425		5		Pennsylvania	1,556		4		1,425		5
Ohio	Ohio	1,190		4		1,247		4		Ohio	1,262		3		1,247		4
New Jersey		1,051		4		1,117		4
Colorado										Colorado	1,237		3		584		2
Illinois	Illinois	895		3		900		3		Illinois	1,182		3		900		3
North Carolina		805		3		851		3
Arizona										Arizona	1,141		3		636		2
Other	Other	10,358		37		10,340		36		Other	12,834		37		11,088		39
Total commercial real estate loans	Total commercial real estate loans	$	28,319	100	%	$	28,716	100	%	Total commercial real estate loans	$	36,195	100	%	$	28,716	100	%
Property Type	Property Type									Property Type
Multifamily	Multifamily	$	9,683	34	%	$	9,617	33	%	Multifamily	$	12,148	34	%	$	9,617	33	%
Office	Office	7,546		27		7,691		27		Office	9,959		28		7,691		27
Retail	Retail	3,308		12		3,490		12		Retail	3,759		10		3,490		12
Industrial/warehouse	Industrial/warehouse	1,952		7		1,999		7		Industrial/warehouse	2,832		8		1,999		7
Seniors housing										Seniors housing	2,403		7		1,417		5
Hotel/motel	Hotel/motel	1,900		7		1,954		7		Hotel/motel	2,355		7		1,954		7
Seniors housing		1,434		5		1,417		5
Mixed use	Mixed use	805		3		835		3		Mixed use	756		2		835		3
Other	Other	1,691		5		1,713		6		Other	1,983		4		1,713		6
Total commercial real estate loans	Total commercial real estate loans	$	28,319	100	%	$	28,716	100	%	Total commercial real estate loans	$	36,195	100	%	$	28,716	100	%

(a) Presented in descending order based on loan balances at ~~March 31,~~September 30, 2021.

Commercial High Impact Industries

In light of the economic circumstances related to COVID-19, we are continuing to evaluate and monitor our entire commercial portfolio for elevated levels of credit risk; however, the industry sectors that have been and we believe will continue to be most likely impacted by the effects of the pandemic are:

•Non-real estate related

•Leisure recreation: restaurants, casinos, hotels, convention centers

•Non-essential retail: retail excluding auto, gas, staples

•Healthcare facilities: elective, private practices

•Consumer services: religious organizations, childcare

•Leisure travel: cruise, airlines, other travel/transportation

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 23

•Other impacted areas: shipping, senior living, specialty education

22 The PNC Financial Services Group, Inc. – Form 10-Q

•Real estate related

•Non-essential retail and restaurants: malls, lifestyle centers, outlets, restaurants

•Hotel: full service, limited service, extended stay

•Seniors housing: assisted living, independent living

As of ~~March 31,~~September 30, 2021, our outstanding loan balances in these industries totaled ~~$17.1~~$21.2 billion, or approximately 7% of our total loan portfolio, while additional unfunded loan commitments totaled ~~$11.0~~$13.3 billion. We continue to carefully monitor and manage these loans, and while we have not yet experienced material charge-offs in these industries, we ~~do expect~~believe uncertainty relative to ~~see continued stress.~~the timing and level of long-term recovery remains high.

In our non-real estate related category we have ~~$9.9~~$12.3 billion in loans outstanding, ~~$2.6~~$1.7 billion of which are funded through the PPP and guaranteed by the SBA. Nonperforming loans in these industries totaled ~~$0.1~~$0.2 billion, or 1%2% of total loans outstanding in the non-real estate related category, while criticized assets totaled ~~$1.3~~$1.8 billion at ~~March 31,~~September 30, 2021 with the greatest stress seen in the leisure recreation and leisure travel sectors.

Within the real estate related category we have ~~$7.2~~$8.9 billion in loans outstanding, which includes real estate projects of ~~$4.8~~$6.6 billion and unsecured real estate of ~~$2.4~~$2.3 billion. Nonperforming loans in these industries totaled ~~$0.1~~$0.2 billion at ~~March 31,~~September 30, 2021, or 1%2% of total loans outstanding in the commercial real estate related ~~category, driven primarily by one real estate investment trust.~~category. In this category, wewhile loan performance has not materially deteriorated, these industries continue to ~~see substantial stress~~face headwinds that have resulted in a slower recovery compared with the ~~non-essential retail and hotel segments.~~pace of the overall economy.

Oil and Gas Loan Portfolio

~~We are also monitoring our oil and gas portfolio closely for elevated levels of credit risk given the continued pressures on the energy industry.~~ As of ~~March 31,~~September 30, 2021, our outstanding loans in the oil and gas sector totaled ~~$3.0~~$3.9 billion, or ~~1.0%~~1% of total ~~loans.This~~loans. This portfolio comprised approximately ~~$1.3~~$1.4 billion in the midstream and downstream sectors, ~~$0.9~~$1.0 billion of oil services companies and ~~$0.8~~$1.5 billion related to exploration and production companies. Of the oil services category, approximately ~~$0.2~~$0.3 billion is not asset-based or investment grade. Nonperforming loans in the oil and gas sector as of ~~March 31,~~September 30, 2021 totaled ~~$0.1~~$0.2 billion, or 3%5% of total loans outstanding in this sector. Additional unfunded loan commitments for the oil and gas portfolio totaled ~~$7.2~~$10.1 billion at ~~March 31,~~September 30, 2021.

Consumer

Residential Real Estate

Residential real estate loans primarily consisted of residential mortgage loans at both September 30, 2021 and December 31, 2020.

We obtain loan attributes at origination, including original FICO scores and LTVs, and we update these and other credit metrics at least quarterly. We track borrower performance monthly. We also segment the mortgage portfolio into pools based on product type (e.g., nonconforming, conforming). This information is used for internal reporting and risk management. As part of our overall risk analysis and monitoring, we also segment the portfolio based upon loan delinquency, nonperforming status, modification and bankruptcy status, FICO scores, LTV and geographic concentrations. Loan performance is evaluated by source originators and loan servicers.

Newly originated loans that we retained on our balance sheet over the last twelve months had a weighted-average LTV on originations of 67% and a weighted-average FICO score of 776.

The PNC Financial Services Group, Inc. – Form 10-Q 23

The following table presents our residential real estate loans by geography:

Table 17: Residential Real Estate Loans by Geography


	September 30, 2021				December 31, 2020
Dollars in millions	Amount		% of Total		Amount		% of Total
Geography (a)
California	$	13,930	36	%	$	7,828	35	%
Texas	4,524		12		409		2
Florida	3,089		8		1,620		7
Washington	1,657		4		1,104		5
New Jersey	1,594		4		1,635		7
Arizona	1,464		4		163		1
New York	1,184		3		1,020		5
Colorado	1,174		3		262		1
Pennsylvania	1,037		3		1,036		5
Illinois	963		3		1,039		5
Other	7,598		20		6,444		27
Total residential real estate loans	$	38,214	100	%	$	22,560	100	%

(a) Presented in descending order based on loan balances at September 30, 2021.

We originate residential mortgage loans nationwide through our national mortgage business as well as within our branch network. Residential mortgage loans underwritten to agency standards, including conforming loan amount limits, are typically sold with servicing retained by us. We also originate nonconforming residential mortgage loans that do not meet agency standards, which we retain on our balance sheet. Our portfolio of originated nonconforming residential mortgage loans totaled $29.9 billion at September 30, 2021 with 43% located in California. Comparable amounts at December 31, 2020 were $17.9 billion and 41%, respectively.

Home Equity

Home equity loans comprised ~~$12.6~~$15.3 billion of primarily variable-rate home equity lines of credit and ~~$10.9~~$9.2 billion of closed-end home equity installment loans at ~~March 31,~~September 30, 2021. Comparable amounts were $12.6 billion and $11.5 billion as of December 31, 2020, respectively.

We track borrower performance of this portfolio monthly including obtaining original LTVs and updated FICO scores, LTVs and other credit metrics at least quarterly, including the historical performance of any related mortgage loans regardless of whether we hold the lien.similarly to residential real estate loans. We also segment the population into pools based on product type (e.g., home equity loans, brokered home equity loans, home equity lines of credit, brokered home equity lines of credit). and track the historical performance of any related mortgage loans regardless of whether we hold the lien. This information is used for internal reporting and risk management. As part of our overall risk analysis and monitoring, we also segment the portfolio based upon the loan delinquency, nonperforming status, modification and bankruptcy status, FICO scores, LTV, lien position and geographic concentration.

Newly originated loans over the last twelve months had a weighted-average LTV on originations of 66% and a weighted-average FICO score of ~~779.~~782.

The credit performance of the majority of the home equity portfolio where we hold the first lien position is superior to the portion of the portfolio where we hold the second lien position, but do not hold the first lien. Lien position information is generally determined at the time of origination and monitored on an ongoing basis for risk management purposes. We use an industry-leading third-party service provider to obtain updated loan information, including lien and collateral data that is aggregated from public and private sources.

24 The PNC Financial Services Group, Inc. – Form 10-Q

The following table presents our home equity loans by geography and lien type:

Table ~~17:~~18: Home Equity Loans by Geography and by Lien Type


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
Dollars in millions	Dollars in millions	Amount		% of Total		Amount		% of Total		Dollars in millions	Amount		% of Total		Amount		% of Total
Geography (a)	Geography (a)									Geography (a)
Pennsylvania	Pennsylvania	$	5,416	23	%	$	5,602	23	%	Pennsylvania	$	5,169	21	%	$	5,602	23	%
New Jersey	New Jersey	3,340		14		3,462		14		New Jersey	3,151		13		3,462		14
Ohio	Ohio	2,647		11		2,753		11		Ohio	2,459		10		2,753		11
Florida	Florida	1,520		6		1,536		6		Florida	1,703		7		1,536		6
Michigan	Michigan	1,350		6		1,398		6		Michigan	1,271		5		1,398		6
Maryland										Maryland	1,216		5		1,332		6
Illinois	Illinois	1,346		6		1,411		6		Illinois	1,200		5		1,411		6
Maryland		1,297		6		1,332		6
Texas										Texas	1,026		4		7
North Carolina	North Carolina	1,011		4		1,043		4		North Carolina	937		4		1,043		4
Kentucky	Kentucky	875		4		922		4		Kentucky	800		3		922		4
Indiana		779		3		813		3
Other	Other	3,912		17		3,816		17		Other	5,547		23		4,622		20
Total home equity loans	Total home equity loans	$	23,493	100	%	$	24,088	100	%	Total home equity loans	$	24,479	100	%	$	24,088	100	%
Lien type	Lien type									Lien type
1st lien	1st lien			64	%			63	%	1st lien			61	%			63	%
2nd lien	2nd lien			36				37		2nd lien			39				37
Total	Total			100	%			100	%	Total			100	%			100	%

(a) Presented in descending order based on loan balances at ~~March 31,~~September 30, 2021.

~~Residential Real Estate~~

~~Residential real estate loans primarily consisted of residential mortgage loans at both March 31, 2021 and December 31, 2020.~~

~~We track borrower performance of this portfolio monthly similarly to home equity loans. We also segment the mortgage portfolio into pools based on product type (e.g.~~, nonconforming, conforming). This information is used for internal reporting and risk management. As part of our overall risk analysis and monitoring, we also segment the portfolio based upon loan delinquency, nonperforming status, modification and bankruptcy status, FICO scores, LTV and geographic concentrations. Loan performance is evaluated by source originators and loan servicers.

~~Newly originated loans that we retained on our balance sheet over the last twelve months had a weighted-average LTV on originations of 67% and a weighted-average FICO score of 777.~~

~~The following table presents our residential real estate loans by geography:~~

~~Table 18: Residential Real Estate Loans by Geography~~

March 31, 2021 December 31, 2020
Dollars in millions Amount % of Total Amount % of Total
Geography (a)
California $ 7,846 35 % $ 7,828 35 %
Florida 1,604 7 1,620 7
New Jersey 1,565 7 1,635 7
Washington 1,160 5 1,104 5
New York 1,042 5 1,020 5
Illinois 1,014 5 1,039 5
Pennsylvania 1,005 4 1,036 5
Maryland 839 4 857 4
Virginia 839 4 864 4
North Carolina 786 4 796 4
Other 4,718 20 4,761 19
Total residential real estate loans $ 22,418 100 % $ 22,560 100 %

~~(a) Presented in descending order based on loan balances at March 31, 2021.~~

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 25

We originate residential mortgage loans nationwide through our national mortgage business as well as within our branch network. Residential mortgage loans underwritten to agency standards, including conforming loan amount limits, are typically sold with servicing retained by us. We also originate nonconforming residential mortgage loans that do not meet agency standards, which we retain on our balance sheet. The originated nonconforming residential mortgage portfolio at March 31, 2021 had an average original LTV of 68% and an average original FICO score of 776. Our portfolio of originated nonconforming residential mortgage loans totaled $17.9 billion at March 31, 2021 with 41% located in California.

Automobile

Auto loans comprised ~~$12.2~~$16.0 billion in the indirect auto portfolio and ~~$1.4~~$1.3 billion in the direct auto portfolio as of ~~March 31,~~September 30, 2021. Comparable amounts as of December 31, 2020 were $12.7 billion and $1.5 billion, respectively. The indirect auto portfolio pertains to loans originated through franchised dealers, including from expansion into new markets. This business is strategically aligned with our core retail banking business.

The following table presents certain key statistics related to our indirect and direct auto portfolios:

Table 19: Auto Loan Key Statistics


		March 31, 2021	December 31, 2020		September 30, 2021	December 31, 2020
Weighted-average loan origination FICO score (a)	Weighted-average loan origination FICO score (a)			Weighted-average loan origination FICO score (a)
Indirect auto	Indirect auto	793	784	Indirect auto	793	784
Direct auto	Direct auto	769	768	Direct auto	774	768
Weighted-average term of loan originations - in months (a)	Weighted-average term of loan originations - in months (a)			Weighted-average term of loan originations - in months (a)
Indirect auto	Indirect auto	71	72	Indirect auto	72	72
Direct auto	Direct auto	62	62	Direct auto	62	62

(a)Weighted-averages calculated for the twelve months ended ~~March 31,~~September 30, 2021 and December 31, 2020, ~~respectively.~~respectively, using the auto enhanced FICO scale.

We continue to focus on borrowers with strong credit profiles as evidenced by the weighted-average loan origination FICO scores noted in Table 19. We offer both new and used auto financing to customers through our various channels. The portfolio balance was composed of ~~56%~~53% new vehicle loans and ~~44%~~47% used vehicle loans at ~~both March 31, 2021 and~~September 30, 2021. Comparable amounts at December 31, ~~2020.~~2020 were 56% and 44%, respectively.

The auto loan portfolio’s performance is measured monthly, including updated collateral values that are obtained monthly and updated FICO scores that are obtained at least quarterly. For internal reporting and risk management, we analyze the portfolio by product channel and product type and regularly evaluate default and delinquency experience. As part of our overall risk analysis and monitoring, we segment the portfolio by ~~loan structure,~~geography, channel, collateral attributes and credit metrics which include FICO score, LTV and term.

Nonperforming Assets and Loan Delinquencies

Nonperforming Assets

Nonperforming assets include nonperforming loans and leases for which ultimate collectability of the full amount of contractual principal and interest is not probable and include nonperforming TDRs and PCD loans, OREO and foreclosed assets. Loans held for sale, certain government insured or guaranteed loans and loans accounted for under the fair value option are excluded from

The PNC Financial Services Group, Inc. – Form 10-Q 25

nonperforming loans. See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K for details on our nonaccrual policies.

26 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

The following table presents a summary of nonperforming assets by major category:

Table 20: Nonperforming Assets by Type (a)


		March 31, 2021			December 31, 2020			Change					September 30, 2021			December 31, 2020			Change
Dollars in millions	Dollars in millions							$		%		Dollars in millions							$		%
Nonperforming loans	Nonperforming loans											Nonperforming loans
Commercial	Commercial	$	749		$	923		$	(174)	(19)	%	Commercial	$	1,204		$	923		$	281	30	%
Consumer ~~(a)~~(b)	Consumer ~~(a)~~(b)	1,389			1,363			26		2	%	Consumer ~~(a)~~(b)	1,324			1,363			(39)		(3)	%
Total nonperforming loans	Total nonperforming loans	2,138			2,286			(148)		(6)	%	Total nonperforming loans	2,528			2,286			242		11	%
OREO and foreclosed assets	OREO and foreclosed assets	41			51			(10)		(20)	%	OREO and foreclosed assets	31			51			(20)		(39)	%
Total nonperforming assets	Total nonperforming assets	$	2,179		$	2,337		$	(158)	(7)	%	Total nonperforming assets	$	2,559		$	2,337		$	222	9	%
TDRs included in nonperforming loans	TDRs included in nonperforming loans	$	870		$	902		$	(32)	(4)	%	TDRs included in nonperforming loans	$	798		$	902		$	(104)	(12)	%
Percentage of total nonperforming loans	Percentage of total nonperforming loans	41		%	39		%					Percentage of total nonperforming loans	32		%	39		%
Nonperforming loans to total loans	Nonperforming loans to total loans	0.90		%	0.94		%					Nonperforming loans to total loans	0.87		%	0.94		%
Nonperforming assets to total loans, OREO and foreclosed assets	Nonperforming assets to total loans, OREO and foreclosed assets	0.92		%	0.97		%					Nonperforming assets to total loans, OREO and foreclosed assets	0.88		%	0.97		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.46		%	0.50		%					Nonperforming assets to total assets	0.46		%	0.50		%
Allowance for loan and lease losses to nonperforming loans	Allowance for loan and lease losses to nonperforming loans	220		%	235		%					Allowance for loan and lease losses to nonperforming loans	212		%	235		%

(a)Includes $715 million of nonperforming assets at September 30, 2021, $666 million in the commercial portfolio, $41 million in the consumer portfolio and $8 million of OREO and foreclosed assets, attributable to BBVA.

(b)Excludes most unsecured consumer loans and lines of credit, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.

~~The decrease~~Increases in nonperforming assets ~~at March~~from December 31, ~~2021 was~~2020 primarily ~~attributable to lower nonperforming commercial loans,~~reflects the impact of BBVA, partially offset by higher consumer nonperforming loans in the residential real estate and home equity loan classes. See the discussion of Commercial High Impact Industries and the Oil and Gas Loan Portfolio within this Credit Risk Management section for further detail on these industries.improved credit performance throughout 2021.

The following table provides details on the change in nonperforming assets for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020:

Table 21: Change in Nonperforming Assets


In millions	In millions	2021		2020		In millions	2021		2020
January 1	January 1	$	2,337	$	1,752	January 1	$	2,337	$	1,752
New nonperforming assets	New nonperforming assets	249		391		New nonperforming assets	821		1,361
Acquired nonperforming assets (a)						Acquired nonperforming assets (a)	880
Charge-offs and valuation adjustments	Charge-offs and valuation adjustments	(70)		(145)		Charge-offs and valuation adjustments	(202)		(324)
Principal activity, including paydowns and payoffs	Principal activity, including paydowns and payoffs	(186)		(158)		Principal activity, including paydowns and payoffs	(783)		(418)
Asset sales and transfers to loans held for sale	Asset sales and transfers to loans held for sale	(86)		(20)		Asset sales and transfers to loans held for sale	(131)		(68)
Returned to performing status	Returned to performing status	(65)		(65)		Returned to performing status	(363)		(151)
March 31		$	2,179	$	1,755
September 30						September 30	$	2,559	$	2,152

(a)Represents the June 30, 2021 balance of nonperforming assets attributable to BBVA. Changes in this acquired portfolio for the three months ended September 30, 2021 are reflected in the appropriate category based on activity.

As of ~~March 31,~~September 30, 2021, approximately ~~97%~~99% of total nonperforming loans were secured by collateral which lessened reserve requirements and is expected to reduce credit losses. As of March 31, 2021, commercial nonperforming loans were carried at approximately 75% of their unpaid principal balance, due to charge-offs and interest applied to principal, before consideration of the ALLL.

Within consumer nonperforming loans, residential real estate TDRs comprised ~~46%~~44% of total residential real estate nonperforming loans while home equity TDRs comprised ~~40%~~38% of home equity nonperforming loans at ~~March 31,~~September 30, 2021. Comparable amounts at December 31, 2020 were 47% and 41%, respectively. TDRs generally remain in nonperforming status until a borrower has made at least six consecutive months of both principal and interest payments under the modified terms or ultimate resolution occurs. Loans where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligations to us and loans to borrowers not currently obligated to make both principal and interest payments under the restructured terms are not returned to accrual status. Loans that have been restructured for COVID-19 related hardships and meet certain criteria under the CARES Act are not identified as TDRs. Refer to the Troubled Debt Restructurings and Loan Modifications discussion in this Credit Risk Management section for more information on the treatment of loan modifications under the CARES Act.

At March 31, 2021, our largest nonperforming asset was $141 million in the Real Estate and Rental and Leasing industry and the ten largest individual nonperforming assets represented 17% of total nonperforming assets.

26The PNC Financial Services Group, Inc. – Form 10-Q

Loan Delinquencies

We regularly monitor the level of loan delinquencies and believe these levels may be a key indicator of credit quality in our loan portfolio. Measurement of delinquency status is based on the contractual terms of each loan. Loans that are 30 days or more past due in terms of payment are considered delinquent. Loan delinquencies include government insured or guaranteed loans, loans accounted for under the fair value option and PCD loans. Amounts exclude loans held for sale.

Pursuant to the interagency guidance issued in April 2020 and in connection with the credit reporting rules from the CARES Act, the ~~March 31,~~September 30, 2021 and December 31, 2020 delinquency status of loans modified due to COVID-19 related hardships aligns with the rules set forth for banks to report delinquency status to the credit agencies. These rules require that COVID-19 related loan modifications be reported as follows:

•if current at the time of modification, the loan remains current throughout the modification period,

•if delinquent at the time of modification and the borrower was not made current as part of the modification, the loan maintains its reported delinquent status during the modification period, or

•if delinquent at the time of modification and the borrower was made current as part of the modification or became current during the modification period, the loan is reported as current.

As a result, certain loans modified due to COVID-19 related hardships are not being reported as past due as of ~~March 31,~~September 30, 2021 and December 31, 2020 based on the contractual terms of the loan, even where borrowers may not be making payments on their loans during the modification period. Loan modifications due to COVID-19 related hardships that permanently reduce either the contractual interest rate or the principal balance of a loan do not qualify for TDR relief under the CARES Act or the interagency guidance. See the COVID-19 Relief section in Item 1 of our 2020 Form 10-K for more information on the CARES Act and the related interagency guidance.

Table 22: Accruing Loans Past Due (a)


		Amount								% of Total Loans Outstanding					Amount								% of Total Loans Outstanding
		March 31 2021		December 31 2020		Change				March 31 2021		December 31 2020			September 30 2021 (b)		December 31 2020		Change				September 30 2021		December 31 2020
Dollars in millions	Dollars in millions					$		%						Dollars in millions					$		%
Early stage loan delinquencies	Early stage loan delinquencies													Early stage loan delinquencies
Accruing loans past due 30 to 59 days	Accruing loans past due 30 to 59 days	$	485	$	620	$	(135)	(22)	%	0.20	%	0.26	%	Accruing loans past due 30 to 59 days	$	659	$	620	$	39	6	%	0.23	%	0.26	%
Accruing loans past due 60 to 89 days	Accruing loans past due 60 to 89 days	182		234		(52)		(22)	%	0.08	%	0.10	%	Accruing loans past due 60 to 89 days	245		234		11		5	%	0.08	%	0.10	%
Total early stage loan delinquencies	Total early stage loan delinquencies	667		854		(187)		(22)	%	0.28	%	0.35	%	Total early stage loan delinquencies	904		854		50		6	%	0.31	%	0.35	%
Late stage loan delinquencies	Late stage loan delinquencies													Late stage loan delinquencies
Accruing loans past due 90 days or more	Accruing loans past due 90 days or more	479		509		(30)		(6)	%	0.20	%	0.21	%	Accruing loans past due 90 days or more	492		509		(17)		(3)	%	0.17	%	0.21	%
Total accruing loans past due	Total accruing loans past due	$	1,146	$	1,363	$	(217)	(16)	%	0.48	%	0.56	%	Total accruing loans past due	$	1,396	$	1,363	$	33	2	%	0.48	%	0.56	%

(a)Past due loan amounts include government insured or guaranteed loans of $0.5 billion and $0.6 billion at ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively.

(b)Amounts as of September 30, 2021 include $300 million of early stage loan delinquencies and $72 million of late stage loan delinquencies attributable to BBVA.

Accruing loans past due 90 days or more continue to accrue interest because they are (i) well secured by collateral and are in the process of collection, (ii) managed in homogeneous portfolios with specified charge-off timeframes adhering to regulatory guidelines, or (iii) certain government insured or guaranteed loans. As such, they are excluded from nonperforming loans.

Troubled Debt Restructurings and Loan Modifications

Troubled Debt Restructurings

A TDR is a loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs result from our loss mitigation activities and include rate reductions, principal forgiveness, postponement/reduction of scheduled amortization and extensions, which are intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Additionally, TDRs also result from court-imposed concessions (e.g., a Chapter 7 bankruptcy where the debtor is discharged from personal liability to us and a court approved Chapter 13 bankruptcy repayment plan). Loans to borrowers experiencing COVID-19 related hardships that have been restructured but that meet certain criteria under the CARES Act are not categorized as TDRs. For additional information on the CARES Act, including TDR treatment under the CARES Act and interagency guidance, see the COVID-19 Relief section within Item 1 of our 2020 Form 10-K.

28The PNC Financial Services Group, Inc. – Form 10-Q

The following table provides a summary of ~~Troubled Debt Restructurings~~troubled debt restructurings at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively:

Table 23: Summary of Troubled Debt Restructurings (a)


		March 31 2021		December 31 2020		Change					September 30 2021		December 31 2020		Change
Dollars in millions	Dollars in millions					$		%		Dollars in millions					$		%
Commercial	Commercial	$	500	$	528	$	(28)	(5)	%	Commercial	$	486	$	528	$	(42)	(8)	%
Consumer	Consumer	1,072		1,116		(44)		(4)	%	Consumer	970		1,116		(146)		(13)	%
Total TDRs	Total TDRs	$	1,572	$	1,644	$	(72)	(4)	%	Total TDRs	$	1,456	$	1,644	$	(188)	(11)	%
Nonperforming	Nonperforming	$	870	$	902	$	(32)	(4)	%	Nonperforming	$	798	$	902	$	(104)	(12)	%
Accruing (b)	Accruing (b)	702		742		(40)		(5)	%	Accruing (b)	658		742		(84)		(11)	%
Total TDRs	Total TDRs	$	1,572	$	1,644	$	(72)	(4)	%	Total TDRs	$	1,456	$	1,644	$	(188)	(11)	%

(a)Amounts in table do not include associated valuation allowances.

(b)Accruing loans include consumer credit card loans and certain loans that have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans.

Nonperforming TDRs represented approximately ~~41%~~32% of total nonperforming loans and 55% of total TDRs at ~~March 31,~~September 30, 2021. Comparable amounts at December 31, 2020 were 39% and 55%, respectively. The remaining portion of TDRs represents TDRs that have been returned to accrual status after performing under the restructured terms for at least six consecutive months.

See Note 4 Loans and Related Allowance for Credit Losses in the Notes to Consolidated Financial Statements included in Item 1 of this Report for additional information on TDRs.

Loan Modifications

During the first ~~quarter~~nine months of 2021, PNC continued to provide relief to our customers from the economic impacts of COVID-19 through a variety of solutions, including additional grants and extensions of loan and lease modifications under our hardship relief programs. We continued to see a reduction in the number of customers in active assistance from the peak in the summer of 2020, which led to additional declines in loans under modification that present credit risk to PNC at ~~March 31,~~September 30, 2021.

The impact of these modifications was considered within the quarterly reserve determination. See the Allowance for Credit Losses discussion within the Critical Accounting Estimates and Judgments section of this Financial Review for additional information. Refer to the Loan Delinquencies discussion in this Credit Risk Management section for information on how these hardship related loan modifications are reported from a delinquency perspective as of ~~March 31,~~September 30, 2021.

Under the CARES Act, loan modifications meeting certain criteria qualify the loan for relief from TDR treatment. Loans that do not meet the criteria for TDR relief under the CARES Act may also be evaluated under interagency guidance. For additional information on this criteria, see the Loan Modifications discussion in the Credit Risk Management section within Item 7 of our 2020 Form 10-K.

Consumer Loan Modifications Under Hardship Relief Programs

Our consumer loan modification programs are being granted in response to customer hardships that extended beyond the initial relief period. These loan and line modifications include all hardship related modifications. See the Loan Modifications discussion within Credit Risk Management in Item 7 of our 2020 Form 10-K for additional details.

The following table provides a summary of consumer accounts in active assistance under hardship relief programs that were on our balance sheet at ~~March 31,~~September 30, 2021. Excluded from Table 24 are government insured or guaranteed loans totaling ~~$444~~$284 million ~~and $282 million~~ in each of the Residential real estate and Education ~~loans classes, respectively.~~loan classes. These loans present minimal credit risk to PNC.

Loans in active hardship assistance programs offered by BBVA prior to acquisition were $59 million at September 30, 2021 and are excluded from Table 24.

28The PNC Financial Services Group, Inc. – Form 10-Q

Table 24: Consumer Loans in Active Hardship Relief Programs (a) (b)


As of March 31, 2021 - Dollars in millions		Number of Accounts	Unpaid Principal Balance		% of Loan Class (c)		% Making Payment in Last Payment Cycle
As of September 30, 2021 - Dollars in millions									As of September 30, 2021 - Dollars in millions	Number of Accounts	Unpaid Principal Balance		% of Loan Class (c)		% Making Payment in Last Payment Cycle
Consumer	Consumer								Consumer
Residential real estate									Residential real estate	1,334	$	234	0.6	%	36.5	%
Home equity	Home equity	1,031	$	84	0.4	%	69.0	%	Home equity	665	46		0.2	%	82.8	%
Residential real estate		2,080	540		2.4	%	26.0	%
Automobile	Automobile	4,218	105		0.8	%	70.7	%	Automobile	2,556	57		0.3	%	74.3	%
Credit card	Credit card	9,107	60		1.1	%	72.4	%	Credit card	6,519	41		0.6	%	71.6	%
Education	Education	4,219	64		2.3	%	62.1	%	Education	2,449	37		1.4	%	55.9	%
Other consumer	Other consumer	1,244	16		0.4	%	74.8	%	Other consumer	553	7		0.1	%	77.2	%
Total consumer (d)	Total consumer (d)	21,899	$	869	1.2	%	67.9	%	Total consumer (d)	14,076	$	422	0.4	%	69.0	%

(a)In cases where there have been multiple modifications on an individual loan, regardless of the number of modifications granted, each loan is counted only once in this table.

(b)Amounts include loan modifications that qualify for TDR accounting totaling ~~$145~~$101 million.

(c)Based on total loans outstanding at ~~March 31,~~September 30, 2021.

(d)Approximately ~~84%~~80% of these loan balances were secured by collateral at ~~March 31,~~September 30, 2021.

Modifications are considered to have exited active assistance after the modification period has expired or the modification was exited. As of ~~March 31,~~September 30, 2021, approximately 97% of the accruing consumer loans that have exited hardship relief program modifications offered by legacy PNC were current or less than 30 days past due.

See the Credit Risk Management section within Item 7 of our 2020 Form 10-K for information on the TDR impacts of our modification programs.

Allowance for Credit Losses

Our ACL is based on historical loss and performance experience, which is captured through PD, as well as current borrower risk characteristics including collateral type and quality, current economic conditions, reasonable and

supportable forecasts of future conditions and other relevant factors. We maintain the ACL at an appropriate level for expected losses

on our existing investment securities, loans, equipment finance leases, ~~(including residual values),~~ other financial assets and unfunded lending related commitments and determine this allowance based on quarterly assessments of the remaining estimated contractual term of the assets or exposures as of the balance sheet date.

See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K and the Credit Risk Management section within Item 7 of our 2020 Form 10-K for additional discussion of our ACL, including details of our methodologies. See also the Critical Accounting Estimates and Judgments section of this Financial Review for further discussion of the assumptions used in the determination of the ACL as of ~~March 31,~~September 30, 2021.

30The PNC Financial Services Group, Inc. – Form 10-Q29

The following table summarizes our allowance for credit losses by loan class:

Table 25: Allowance for Credit Losses by Loan Class (a)


		March 31, 2021						December 31, 2020							September 30, 2021						December 31, 2020
Dollars in millions	Dollars in millions	Allowance Amount		Total Loans		% of Total Loans		Allowance Amount		Total Loans		% of Total Loans		Dollars in millions	Allowance Amount		Total Loans		% of Total Loans		Allowance Amount		Total Loans		% of Total Loans
Allowance for loans and lease losses	Allowance for loans and lease losses													Allowance for loans and lease losses
Commercial	Commercial													Commercial
Commercial and industrial	Commercial and industrial	$	1,815	$	129,798	1.40	%	$	2,300	$	132,073	1.74	%	Commercial and industrial	$	2,173	$	152,735	1.42	%	$	2,300	$	132,073	1.74	%
Commercial real estate	Commercial real estate	1,126		28,319		3.98	%	880		28,716		3.06	%	Commercial real estate	1,312		36,195		3.62	%	880		28,716		3.06	%
Equipment lease financing	Equipment lease financing	142		6,389		2.22	%	157		6,414		2.45	%	Equipment lease financing	118		6,257		1.89	%	157		6,414		2.45	%
Total commercial	Total commercial	3,083		164,506		1.87	%	3,337		167,203		2.00	%	Total commercial	3,603		195,187		1.85	%	3,337		167,203		2.00	%
Consumer	Consumer													Consumer
Residential real estate														Residential real estate	42		38,214		0.11	%	28		22,560		0.12	%
Home equity	Home equity	239		23,493		1.02	%	313		24,088		1.30	%	Home equity	167		24,479		0.68	%	313		24,088		1.30	%
Residential real estate		(17)		22,418		(0.08)	%	28		22,560		0.12	%
Automobile	Automobile	344		13,584		2.53	%	379		14,218		2.67	%	Automobile	365		17,265		2.11	%	379		14,218		2.67	%
Credit card	Credit card	693		5,675		12.21	%	816		6,215		13.13	%	Credit card	701		6,466		10.84	%	816		6,215		13.13	%
Education	Education	112		2,842		3.94	%	129		2,946		4.38	%	Education	81		2,653		3.05	%	129		2,946		4.38	%
Other consumer	Other consumer	260		4,495		5.78	%	359		4,698		7.64	%	Other consumer	396		5,966		6.64	%	359		4,698		7.64	%
Total consumer	Total consumer	1,631		72,507		2.25	%	2,024		74,725		2.71	%	Total consumer	1,752		95,043		1.84	%	2,024		74,725		2.71	%
Total	Total	4,714		$	237,013	1.99	%	5,361		$	241,928	2.22	%	Total	5,355		$	290,230	1.85	%	5,361		$	241,928	2.22	%
Allowance for unfunded lending related commitments	Allowance for unfunded lending related commitments	507						584						Allowance for unfunded lending related commitments	646						584
Allowance for credit losses	Allowance for credit losses	$	5,221					$	5,945					Allowance for credit losses	$	6,001					$	5,945
Allowance for credit losses to total loans	Allowance for credit losses to total loans					2.20	%					2.46	%	Allowance for credit losses to total loans					2.07	%					2.46	%
Commercial	Commercial					2.12	%					2.29	%	Commercial					2.12	%					2.29	%
Consumer	Consumer					2.39	%					2.84	%	Consumer					1.96	%					2.84	%

(a) Excludes allowances for investment securities and other financial assets, which together totaled ~~$136~~$162 million and $109 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

30The PNC Financial Services Group, Inc. – Form 10-Q

The following table summarizes our loan charge-offs and recoveries:

Table 26: Loan Charge-Offs and Recoveries


Three months ended March 31		Gross Charge-offs		Recoveries		Net Charge-offs / (Recoveries)		% of Average Loans (Annualized)
Nine months ended September 30										Nine months ended September 30	Gross Charge-offs		Recoveries		Net Charge-offs / (Recoveries)		% of Average Loans (Annualized)
Dollars in millions	Dollars in millions	Gross Charge-offs		Recoveries		Net Charge-offs / (Recoveries)		% of Average Loans (Annualized)		Dollars in millions
2021	2021									2021
Commercial	Commercial									Commercial
Commercial and industrial	Commercial and industrial	$	59	$	14	$	45	0.14	%	Commercial and industrial	$	350	$	68	$	282	0.27	%
Commercial real estate	Commercial real estate	5		1		4		0.06	%	Commercial real estate	34		5		29		0.12	%
Equipment lease financing	Equipment lease financing	5		3		2		0.13	%	Equipment lease financing	9		8		1		0.02	%
Total commercial	Total commercial	69		18		51		0.13	%	Total commercial	393		81		312		0.23	%
Consumer	Consumer									Consumer
Residential real estate										Residential real estate	11		20		(9)		(0.04)	%
Home equity	Home equity	7		17		(10)		(0.17)	%	Home equity	16		63		(47)		(0.26)	%
Residential real estate		4		5		(1)		(0.02)	%
Automobile	Automobile	52		38		14		0.41	%	Automobile	120		117		3		0.03	%
Credit card	Credit card	69		12		57		3.97	%	Credit card	196		36		160		3.52	%
Education	Education	5		2		3		0.41	%	Education	11		6		5		0.24	%
Other consumer	Other consumer	37		5		32		2.84	%	Other consumer	130		21		109		2.77	%
Total consumer	Total consumer	174		79		95		0.53	%	Total consumer	484		263		221		0.36	%
Total	Total	$	243	$	97	$	146	0.25	%	Total	$	877	$	344	$	533	0.27	%
2020	2020									2020
Commercial	Commercial									Commercial
Commercial and industrial	Commercial and industrial	$	78	$	18	$	60	0.19	%	Commercial and industrial	$	249	$	52	$	197	0.19	%
Commercial real estate	Commercial real estate			4		(4)		(0.06)	%	Commercial real estate	1		6		(5)		(0.02)	%
Equipment lease financing	Equipment lease financing	5		2		3		0.17	%	Equipment lease financing	19		7		12		0.23	%
Total commercial	Total commercial	83		24		59		0.14	%	Total commercial	269		65		204		0.15	%
Consumer	Consumer									Consumer
Residential real estate										Residential real estate	4		12		(8)		(0.05)	%
Home equity	Home equity	11		14		(3)		(0.05)	%	Home equity	31		44		(13)		(0.07)	%
Residential real estate		2		4		(2)		(0.04)	%
Automobile	Automobile	84		35		49		1.15	%	Automobile	210		95		115		0.93	%
Credit card	Credit card	78		8		70		3.90	%	Credit card	228		26		202		3.98	%
Education	Education	6		2		4		0.48	%	Education	13		6		7		0.29	%
Other consumer	Other consumer	40		5		35		2.83	%	Other consumer	110		14		96		2.61	%
Total consumer	Total consumer	221		68		153		0.77	%	Total consumer	596		197		399		0.68	%
Total	Total	$	304	$	92	$	212	0.35	%	Total	$	865	$	262	$	603	0.32	%

Total net charge-offs decreased ~~$66~~$70 million, or ~~31%~~12%, for the first ~~three~~nine months of 2021 compared to the same period in ~~2020,~~2020. Commercial net charge-offs increased in the comparative primarily related to charge-offs attributable to BBVA, which were largely the result of required purchase accounting treatment for the acquisition. This increase was more than offset by declines in consumer net-charge-offs, driven primarily by decreases in ~~the commercial and industrial,~~ automobile and credit card ~~loan classes.~~due to the continued favorable impact of government stimulus programs benefiting consumers, as well as the increase in automobile collateral values which has limited our losses in the auto portfolio.

See Note 1 Accounting Policies in the Notes to Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K and Note 4 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements in Item 1 of this Report for additional information.

Liquidity and Capital Management

Liquidity risk, including our liquidity monitoring measures and tools, is described in further detail in the Liquidity and Capital Management section of our 2020 Form 10-K.

One of the ways we monitor our liquidity is by reference to the LCR, a regulatory minimum liquidity requirement designed to ensure that covered banking organizations maintain an adequate level of liquidity to meet net liquidity needs over the course of a hypothetical 30-day stress scenario. The LCR is calculated by dividing the amount of an institution’s HQLA, as ~~defined and~~ calculated in accordance with the LCR rules, by its estimated, weighted net cash outflows, with net cash outflows determined by applying the assumed outflow factors in the LCR rules. The resulting quotient is expressed as a percentage. Effective January 1, 2020, PNC and PNC Bank, as Category III institutions under the Tailoring Rules, were subject to a reduced LCR requirement, with each company's net outflows reduced by 15%,

The PNC Financial Services Group, Inc. – Form 10-Q 31

thereby reducing the amount of HQLA each institution must hold to meet the LCR minimum requirement. The minimum LCR that PNC and PNC Bank are required to maintain continues to be 100%. PNC and PNC Bank calculate the LCR daily, and as of ~~March 31,~~September 30, 2021, the LCR for PNC and PNC Bank exceeded the requirement of 100%.

32 ~~The~~Due to certain transition provisions in the LCR rules, BBVA USA was not subject to the LCR on a standalone basis prior to the merger into PNC ~~Financial Services Group, Inc. –~~ ~~Form 10-Q~~Bank as the merger was completed prior to the effective date for BBVA USA’s LCR compliance in 2022.

We provide additional information regarding regulatory liquidity requirements and their potential impact on us in the Supervision and Regulation and Recent Regulatory Developments section of Item 1 Business and Item 1A Risk Factors of our 2020 Form 10-K.

Sources of Liquidity

Our largest source of liquidity on a consolidated basis is the customer deposit base generated by our banking businesses. These deposits provide relatively stable and low-cost funding. Total deposits increased to ~~$375.1~~$448.9 billion at ~~March 31,~~September 30, 2021 from $365.3 billion at December 31, 2020, driven by growth in both noninterest-bearing and interest-bearing ~~deposits.~~deposits primarily due to the BBVA acquisition. See the Funding Sources portion of the Consolidated Balance Sheet Review section of this Financial Review for additional information related to our deposits. Additionally, certain assets determined by us to be liquid as well as unused borrowing capacity from a number of sources are also available to manage our liquidity position.

At ~~March 31,~~September 30, 2021, our liquid assets consisted of cash and due from banks and short-term investments (federal funds sold, resale agreements, trading securities and interest-earning deposits with banks) totaling ~~$96.0~~$87.0 billion and securities available for sale totaling ~~$96.8~~$124.1 billion. The level of liquid assets fluctuates over time based on many factors, including market conditions, loan and deposit growth and balance sheet management activities. Our liquid assets included ~~$21.7~~$25.2 billion of securities available for sale and trading securities pledged as collateral to secure public and trust deposits, repurchase agreements and for other purposes. In addition, $0.1 billion of securities held to maturity were also pledged as collateral for these purposes.

We also obtain liquidity through various forms of funding, including long-term debt (senior notes, subordinated debt and FHLB borrowings) and short-term borrowings (securities sold under repurchase agreements, commercial paper and other short-term borrowings). See the Funding Sources section of the Consolidated Balance Sheet Review in this Report and Note 10 Borrowed Funds in Item 8 of our 2020 Form 10-K for additional information related to our borrowings.

Total senior and subordinated debt, on a consolidated basis, decreased due to the following activity:

Table 27: Senior and Subordinated Debt


In billions	2021
January 1	$	30.7
Issuances	1.7
Calls and maturities	~~(1.7)~~(3.9)
Other	~~(0.6)~~(0.7)
~~March 31~~Impact from BBVA acquisition	2.2
September 30	$	~~28.4~~30.0

Bank Liquidity

Under PNC Bank’s 2014 bank note program, as amended, PNC Bank may from time to time offer up to $40.0 billion aggregate principal amount outstanding at any one time of its unsecured senior and subordinated notes with maturity dates more than nine months (in the case of senior notes) and five years or more (in the case of subordinated notes) from their date of issue. At ~~March 31,~~September 30, 2021, PNC Bank had ~~$17.6~~$15.9 billion of notes outstanding under this program of which ~~$12.6~~$10.9 billion were senior bank notes and $5.0 billion were subordinated bank notes.

~~On March~~At September 30, 2021, ~~PNC Bank redeemed $1.25~~BBVA USA had $2.1 billion of notes outstanding, ~~Senior Notes with an original scheduled maturity date~~ of ~~April~~which $1.3 billion were senior bank notes and $0.8 billion were subordinated banks notes.

See Note 16 Subsequent Events for details on the $750 million bank note redemption announced on October 29, 2021. The securities had a distribution rate of 2.150%. The redemption price was equal to $1,000 per $1,000 in principal amount, plus any accrued and unpaid distributions to the redemption date of March 30, 2021.

PNC Bank maintains additional secured borrowing capacity with the ~~FHLB-Pittsburgh~~FHLB and through the Federal Reserve Bank

discount window. The Federal Reserve Bank, however, is not viewed as a primary means of funding our routine business activities,

but rather as a potential source of liquidity in a stressed environment or during a market disruption. At ~~March 31,~~September 30, 2021, our

unused secured borrowing capacity at the ~~FHLB-Pittsburgh~~FHLB and the Federal Reserve Bank totaled ~~$81.8~~$95.3 billion. In March 2021, the Federal Reserve extended its PPP Liquidity Facility to June 30, 2021. For additional information on this special liquidity facility see the Recent Regulatory Developments section of this Report.

32 The PNC Financial Services Group, Inc. – Form 10-Q

PNC Bank has the ability to offer up to $10.0 billion of its commercial paper to provide additional liquidity. ~~As of March 31,~~At September 30, 2021, there were no issuances outstanding under this program.

Additionally, PNC Bank may also access funding from the parent company through deposits placed at the bank, or through issuing senior unsecured notes.

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 33

Parent Company Liquidity

In addition to managing liquidity risk at the bank level, we monitor the parent company’s liquidity. The parent company’s contractual obligations consist primarily of debt service related to parent company borrowings and funding non-bank affiliates. Additionally, the parent company maintains adequate liquidity to fund discretionary activities such as paying dividends to our shareholders, share repurchases and acquisitions.

~~As of March 31,~~At September 30, 2021, available parent company liquidity totaled ~~$14.2~~$6.0 billion. Parent company liquidity is primarily held in intercompany cash. Investments with longer durations may also be acquired, and if so, the related maturities are aligned with scheduled cash needs, such as the maturity of parent company debt obligations.

The principal source of parent company liquidity is the dividends or other capital distributions it receives from PNC Bank, which may be impacted by the following:

•Bank-level capital needs,

•Laws and regulations,

•Corporate policies,

•Contractual restrictions, and

•Other factors.

There are statutory and regulatory limitations on the ability of a ~~national~~ bank to pay dividends or make other capital distributions or to extend credit to the parent company or its non-bank subsidiaries. The amount available for dividend payments by PNC Bank to the parent company without prior regulatory approval was ~~approximately $2.2~~$3.1 billion at ~~March 31,~~September 30, 2021. See Note 20 Regulatory Matters in the Notes To Consolidated Financial Statements in our 2020 Form 10-K for a further discussion of these limitations. Due to the net earnings restrictions on dividend distributions under Alabama law, BBVA USA was not permitted to pay dividends any time between the BBVA acquisition on June 1, 2021 and the bank merger on October 8, 2021 without regulatory approval.

See Note 16 Subsequent Events for details on PNC Bank's return of capital of $3.0 billion to the parent company.

In addition to dividends from PNC Bank, other sources of parent company liquidity include cash and investments, as well as dividends and loan repayments from other subsidiaries and dividends or distributions from equity investments. We can also generate liquidity for the parent company and PNC’s non-bank subsidiaries through the issuance of debt and equity securities, including certain capital instruments, in public or private markets and commercial paper. The parent company has the ability to offer up to $5.0 billion of commercial paper to provide additional liquidity. ~~As of March 31,~~At September 30, 2021, there were no commercial paper issuances outstanding.

On August 4, 2021, PNC redeemed all of the outstanding senior notes due September 3, 2021 issued by PNC in the amount of $500 million. The securities had a distribution rate of 3.250%. The redemption price was equal to $1,000 per $1,000 in principal amount, plus any accrued and unpaid distributions to the redemption date.

On August 13, 2021, the parent company has an effective shelf registration statement pursuant to which we can issue additional debt, equity and other capital instruments. See Note 16 Subsequent Events for information on the April 2021 issuance of $1.0 billionissued $700 million of senior notes ~~by the parent company.~~with a maturity date of August 13, 2026. Interest is payable semi-annually in arrears at a fixed rate of 1.15% per annum, on August 13 and February 13 of each year, beginning on February 13, 2022.

Parent company senior and subordinated debt outstanding totaled ~~$10.2~~$11.4 billion and $10.6 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

~~PNC will use approximately $11.6 billion of parent company cash to acquire BBVA.~~

Contractual Obligations and Commitments

We have contractual obligations representing required future payments on borrowed funds, time deposits, leases, pension and postretirement benefits and purchase obligations. See the Liquidity and Capital Management portion of the Risk Management section in our 2020 Form 10-K for more information on these future cash outflows. Additionally, in the normal course of business we have various commitments outstanding, certain of which are not included on our Consolidated Balance Sheet. We provide information on our commitments in Note 8 Commitments in the Notes To Consolidated Financial Statements of this Report.

Credit Ratings

PNC’s credit ratings affect the cost and availability of short and long-term funding, collateral requirements for certain derivative instruments and the ability to offer certain products.

The PNC Financial Services Group, Inc. – Form 10-Q 33

In general, rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current legislative and regulatory environment, including implied government support. A decrease, or potential decrease, in credit ratings could impact access to the capital markets and/or increase the cost of debt, and thereby adversely affect liquidity and financial condition.

34 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

The following table presents credit ratings for PNC and PNC Bank as of ~~March 31,~~September 30, 2021:

Table 28: Credit Ratings for PNC and PNC Bank


	~~March 31,~~September 30, 2021
	Moody’s	Standard & Poor’s	Fitch
PNC
Senior debt	A3	A-	A
Subordinated debt	A3	BBB+	A-
Preferred stock	Baa2	BBB-	BBB
PNC Bank
Senior debt	A2	A	A+
Subordinated debt	A3	A-	A
Long-term deposits	~~Aa2~~Aa3	A	AA-
Short-term deposits	P-1	A-1	F1+
Short-term notes	P-1	A-1	F1

On July 12, 2021, Moody’s downgraded PNC Bank’s long-term deposit rating from Aa2 to Aa3. The rating action was driven by a change in Moody’s rating methodology and no impact to PNC or its businesses is expected as a result of this downgrade. PNC Bank’s senior unsecured and subordinated debt ratings were affirmed at A2 and A3, respectively. At the same time, the Moody’s rating outlook on PNC Bank’s long-term deposit, senior unsecured debt and issuer ratings were raised from negative to stable. The credit rating agencies have withdrawn ratings on BBVA USA as the entity no longer exists.

Capital Management

Detailed information on our capital management processes and activities, including additional information on our previous CCAR submissions and capital plans, is included in the Capital Management portion of the Risk Management section in our 2020 Form 10-K.

We manage our funding and capital positions by making adjustments to our balance sheet size and composition, issuing or redeeming debt, issuing equity or other capital instruments, executing treasury stock transactions and capital redemptions or repurchases, and managing dividend policies and retaining earnings.

On September 13, 2021, PNC issued 1,500,000 depositary shares each representing 1/100th ownership in a share of 3.400% fixed-rate reset non-cumulative perpetual preferred stock, Series T, with a par value of $1 per share.

~~We paid~~

In the third quarter of 2021, we returned capital to shareholders through dividends on common ~~stock~~shares of $0.5 billion ~~during~~and $0.4 billion of common share repurchases, representing 2.1 million shares. Repurchases were made under the ~~first~~share repurchase programs of up to $2.9 billion for the four-quarter period beginning in the third quarter of 2021.

On ~~April~~October 1, 2021, the PNC ~~board~~Board of ~~directors~~Directors declared a quarterly cash dividend on common stock of ~~$1.15~~$1.25 per share payable on ~~May~~November 5, ~~2021.~~

During the first quarter, we refrained from repurchasing shares and expect to continue to do so for the remainder of the period leading up to the close of our pending BBVA transaction. Following the close, we expect to resume repurchases in the second half of 2021.

The Federal Reserve has also imposed special limitations on dividends and share repurchases by CCAR-participating BHCs. These restrictions limit increases in dividends and generally restrict dividends and share repurchases to an amount based on income over the past year. For a firm with capital levels above those required by the current round of stress tests, these restrictions will end on June 30, 2021. Firms that fall below any of their minimum risk-based requirements in the stress tests will remain subject to the additional restrictions for three extra months, through September 30, 2021.

34The PNC Financial Services Group, Inc. – Form 10-Q

Table 29: Basel III Capital


		March 31, 2021							September 30, 2021
Dollars in millions	Dollars in millions	Basel III (a)			Fully Implemented (estimated) (b)			Dollars in millions	Basel III (a)			Fully Implemented (estimated) (b)
Common equity Tier 1 capital	Common equity Tier 1 capital							Common equity Tier 1 capital
Common stock plus related surplus, net of treasury stock	Common stock plus related surplus, net of treasury stock	$	927		$	927		Common stock plus related surplus, net of treasury stock	$	630		$	630
Retained earnings	Retained earnings	$	49,168		$	48,113		Retained earnings	50,598			49,541

Goodwill, net of associated deferred tax liabilities	Goodwill, net of associated deferred tax liabilities	$	(9,109)		$	(9,109)		Goodwill, net of associated deferred tax liabilities	(10,673)			(10,673)
Other disallowed intangibles, net of deferred tax liabilities	Other disallowed intangibles, net of deferred tax liabilities	$	(191)		$	(191)		Other disallowed intangibles, net of deferred tax liabilities	(469)			(469)
Other adjustments/(deductions)	Other adjustments/(deductions)	$	(36)		$	(42)		Other adjustments/(deductions)	(48)			(53)

Common equity Tier 1 capital	Common equity Tier 1 capital	$	40,759		$	39,698		Common equity Tier 1 capital	40,038			38,976
Additional Tier 1 capital	Additional Tier 1 capital							Additional Tier 1 capital
Preferred stock plus related surplus	Preferred stock plus related surplus	$	3,518		$	3,518		Preferred stock plus related surplus	5,009			5,009

Tier 1 capital	Tier 1 capital	$	44,277		$	43,216		Tier 1 capital	45,047			43,985
Additional Tier 2 capital	Additional Tier 2 capital							Additional Tier 2 capital
Qualifying subordinated debt	Qualifying subordinated debt	$	3,498		$	3,498		Qualifying subordinated debt	3,724			3,724
Trust preferred capital securities	Trust preferred capital securities	$	20					Trust preferred capital securities	20
Eligible credit reserves includable in Tier 2 capital	Eligible credit reserves includable in Tier 2 capital	$	4,019		$	4,019		Eligible credit reserves includable in Tier 2 capital	4,191			4,838
Total Basel III capital	Total Basel III capital	$	51,814		$	50,733		Total Basel III capital	$	52,982		$	52,547
Risk-weighted assets	Risk-weighted assets							Risk-weighted assets
Basel III standardized approach risk-weighted assets (c)	Basel III standardized approach risk-weighted assets (c)	$	323,630		$	322,649		Basel III standardized approach risk-weighted assets (c)	$	389,911		$	389,887

Average quarterly adjusted total assets	Average quarterly adjusted total assets	$	457,588		$	456,526		Average quarterly adjusted total assets	$	547,840		$	546,777
Supplementary leverage exposure (d)	Supplementary leverage exposure (d)	$	437,601		$	546,241		Supplementary leverage exposure (d)	$	643,732		$	643,727
Basel III risk-based capital and leverage ratios (a)(e)	Basel III risk-based capital and leverage ratios (a)(e)							Basel III risk-based capital and leverage ratios (a)(e)
Common equity Tier 1	Common equity Tier 1	12.6		%	12.3		%	Common equity Tier 1	10.3		%	10.0		%
Tier 1	Tier 1	13.7		%	13.4		%	Tier 1	11.6		%	11.3		%
Total (f)	Total (f)	16.0		%	15.7		%	Total (f)	13.6		%	13.5		%
Leverage (g)	Leverage (g)	9.7		%	9.5		%	Leverage (g)	8.2		%	8.0		%
Supplementary leverage ratio (d)	Supplementary leverage ratio (d)	10.1		%	7.9		%	Supplementary leverage ratio (d)	7.0		%	6.8		%

(a)The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision.

(b)The ratios are calculated to reflect the full impact of CECL and excludes the ~~expiration~~benefits of ~~the final SLR rule that temporarily revised the calculation of supplementary leverage exposure (the denominator of the SLR).~~phase-ins.

(c)Basel III standardized approach weighted-assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets.

(d)~~As of March 31, 2021, the BHC's Supplementary leverage exposure and Supplementary leverage ratio reflects the temporary exclusions of U.S. Treasury securities and deposits at Federal Reserve Banks.~~ The Supplementary leverage ratio is calculated based on Tier 1 capital divided by Supplementary leverage exposure, which takes into account the quarterly average of both on balance ~~sheets~~sheet assets as well as certain off-balance sheet items, including loan commitments and potential future exposure under derivative contracts.

(e)All ratios are calculated using the regulatory capital methodology applicable to PNC and calculated based on the standardized approach.

(f)The Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of $20 million that are subject to a phase-out period that runs through 2021.

(g)Leverage ratio is calculated based on Tier 1 capital divided by Average quarterly adjusted total assets.

PNC’s regulatory risk-based capital ratios are calculated using the standardized approach for determining risk-weighted assets. Under the standardized approach for determining credit risk-weighted assets, exposures are generally assigned a pre-defined risk weight. Exposures to high volatility commercial real estate, nonaccruals, TDRs, past due exposures and equity exposures are generally subject to higher risk weights than other types of exposures.

The regulatory agencies have adopted a rule permitting ~~banks~~banking organizations to delay the estimated impact on regulatory capital stemming from implementing CECL. CECL’s estimated impact on CET1 capital, as defined by the rule, is the change in retained earnings at adoption plus or minus 25% of the change in CECL ACL at the balance sheet date, excluding the initial allowance for PCD loans from BBVA, compared to ~~the~~ CECL ACL at transition. ~~The estimated CECL impact is added to CET1 capital through December 31, 2021, then phased-out over the following three years.~~ PNC elected to adopt this optional transition provision effective as of March 31, 2020. See additional discussion of this rule in the Supervision and Regulation section of Item 1 Business and Item 1A Risk Factors of our 2020 Form 10-K.

In response to the economic conditions caused by the pandemic, the Federal Reserve has adopted a final rule that revises, on a temporary basis, the calculation of supplementary leverage exposure (the denominator of the SLR) by BHCs to exclude the on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks. The rule was effective as of April 14, 2020 and remained in effect through March 31, 2021. The OCC also has permitted national banks to exclude such on-balance sheet amounts

36 ~~The~~At September 30, 2021, PNC, ~~Financial Services Group, Inc. –~~ ~~Form 10-Q~~

~~from the bank’s supplementary leverage exposure, provided the bank agrees to obtain OCC approval of capital distributions during the effective period of the exclusion.~~ PNC Bank ~~has not elected to take advantage of this OCC rule.~~

~~At March 31, 2021, PNC~~ and ~~PNC Bank, our sole bank subsidiary,~~BBVA USA were ~~both~~ considered “well capitalized,” based on applicable U.S. regulatory capital ratio requirements. To qualify as “well capitalized”, PNC must have Basel III capital ratios of at least 6% for Tier 1 risk-based capital and 10% for Total risk-based capital, and PNC Bank and BBVA USA must have Basel III capital ratios of at least 6.5% for Common equity Tier 1 risk-based capital, 8% for Tier 1 risk-based capital, 10% for Total risk-based capital and a Leverage ratio of at least 5%.

The PNC Financial Services Group, Inc. – Form 10-Q 35

Federal banking regulators have stated that they expect the largest U.S. BHCs, including PNC, to have a level of regulatory capital well in excess of the regulatory minimum and have required the largest U.S. BHCs, including PNC, to have a capital buffer sufficient to withstand losses and allow them to meet the credit needs of their customers through estimated stress scenarios. We seek to manage our capital consistent with these regulatory principles, and believe that our ~~March 31,~~September 30, 2021 capital levels were aligned with them.

We provide additional information regarding regulatory capital requirements and some of their potential impacts on us in the Supervision and Regulation section of Item 1 Business, Item 1A Risk Factors and Note 20 Regulatory Matters in the Notes To Consolidated Financial Statements in Item 8 of our 2020 Form 10-K.

Market Risk Management

See the Market Risk Management portion of the Risk Management Section in our 2020 Form 10-K for additional discussion regarding market risk.

Market Risk Management – Interest Rate Risk

Interest rate risk results primarily from our traditional banking activities of gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences, affect the difference between the interest that we earn on assets and the interest that we pay on liabilities and the level of our noninterest-bearing funding sources. Due to the repricing term mismatches and embedded options inherent in certain of these products, changes in market interest rates not only affect expected near-term earnings, but also the economic values of these assets and liabilities.

Our Asset and Liability Management group centrally manages interest rate risk as prescribed in our risk management policies, which are approved by management’s Asset and Liability Committee and the Risk Committee of the Board of Directors.

Sensitivity results and market interest rate benchmarks for the ~~first~~third quarter of 2021 and 2020 ~~follow.~~follow:

Table 30: Interest Sensitivity Analysis


		First Quarter 2021		First Quarter 2020			Third Quarter 2021 (a)		Third Quarter 2020
Net Interest Income Sensitivity Simulation ~~(a)~~	Net Interest Income Sensitivity Simulation ~~(a)~~					Net Interest Income Sensitivity Simulation ~~(a)~~
Effect on net interest income in first year from gradual interest rate change over the following 12 months of:	Effect on net interest income in first year from gradual interest rate change over the following 12 months of:					Effect on net interest income in first year from gradual interest rate change over the following 12 months of:
100 basis point increase	100 basis point increase	4.8	%	1.4	%	100 basis point increase	4.5	%	4.3	%

Effect on net interest income in second year from gradual interest rate change over the preceding 12 months of:	Effect on net interest income in second year from gradual interest rate change over the preceding 12 months of:					Effect on net interest income in second year from gradual interest rate change over the preceding 12 months of:
100 basis point increase	100 basis point increase	12.1	%	6.1	%	100 basis point increase	11.3	%	10.9	%

Key Period-End Interest Rates	Key Period-End Interest Rates					Key Period-End Interest Rates
One-month LIBOR	One-month LIBOR	0.11	%	0.99	%	One-month LIBOR	0.08	%	0.15	%
Three-month LIBOR	Three-month LIBOR	0.19	%	1.45	%	Three-month LIBOR	0.13	%	0.23	%
Three-year swap	Three-year swap	0.51	%	0.46	%	Three-year swap	0.65	%	0.24	%

(a) Results include BBVA USA.

In addition to measuring the effect on net interest income assuming parallel changes in current interest rates, we routinely simulate the effects of a number of nonparallel interest rate environments. Table 31 reflects the percentage change in net interest income over the next two 12-month periods, including BBVA USA, assuming (i) the PNC Economist’s most likely rate forecast, (ii) implied market forward rates and (iii) yield curve slope flattening (a 100 basis point yield curve slope flattening between one-month and ten-year rates superimposed on current base rates) scenario.

All changes in forecasted net interest income are relative to results in a base rate scenario where current market rates are assumed to remain unchanged over the forecast horizon.

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 37

Table 31: Net Interest Income Sensitivity to Alternative Rate Scenarios


		March 31, 2021							September 30, 2021
		PNC Economist		Market Forward		Slope Flattening			PNC Economist		Market Forward		Slope Flattening
First year sensitivity	First year sensitivity	0.0	%	0.8	%	(2.1)	%	First year sensitivity	1.6	%	1.0	%	(2.2)	%
Second year sensitivity	Second year sensitivity	1.3	%	4.7	%	(6.7)	%	Second year sensitivity	6.7	%	5.0	%	(7.3)	%

When forecasting net interest income, we make assumptions about interest rates and the shape of the yield curve, the volume and characteristics of new business and the behavior of existing on- and off-balance sheet positions. These assumptions determine the

36 The PNC Financial Services Group, Inc. – Form 10-Q

future level of simulated net interest income in the base interest rate scenario and the other interest rate scenarios presented in Tables 30 and 31. These simulations assume that as assets and liabilities mature, they are replaced or repriced at then current market rates.

The following graph presents the LIBOR/Swap yield curves for the base rate scenario and each of the alternate scenarios one year forward.

Table 32: Alternate Interest Rate Scenarios: One Year Forward

The ~~first~~third quarter 2021 interest sensitivity analyses indicate that our Consolidated Balance Sheet is positioned to benefit from an increase in interest rates and an upward sloping interest rate yield curve. We believe that we have the deposit funding base and balance sheet flexibility to adjust, where appropriate and permissible, to changing interest rates and market conditions.

As discussed in Item 1A Risk Factors in our 2020 Form 10-K, the planned discontinuance of the requirement that banks submit rates for the calculation of LIBOR after 2023 presents risks to the financial instruments originated, held or serviced by PNC that use LIBOR as a reference rate. PNC holds instruments and services its instruments and instruments owned by others that may be impacted by the likely discontinuance of LIBOR, including loans, investments, hedging products, floating-rate obligations, and other financial instruments that use LIBOR as a reference rate. The transition from LIBOR as an interest rate benchmark will subject PNC, like other financial participants, to financial, legal, operational, and reputational risks.

In order to address LIBOR cessation and the associated risks, PNC has established a cross-functional governance structure to oversee the overall strategy for the transition from LIBOR and mitigate risks associated with the transition. ~~An initial~~A LIBOR impact and risk assessment has been performed, which identified the associated risks across products, systems, models, and processes. PNC also established an enterprise-level program, which is actively monitoring PNC’s overall firm-wide exposure to LIBOR and using these results to plan transitional strategies and track progress versus these goals. Program workstreams were formed by Line of Business to ensure accountability and alignment with the appropriate operational, technology, and customer-facing stakeholders, while establishing a centralized Program Management Office to ensure consistency in execution and communication. Project plans and established milestones have been developed and have continued to evolve and be refined in line with industry developments and internal decisions and progress. PNC is also involved in industry discussions, preparing milestones for readiness and assessing progress against those milestones, along with developing and delivering on internal and external LIBOR cessation communication plans.

Key efforts in 2020 and the first nine months of 2021 included:

•Enhancing fallback language in new contracts and reviewing existing legal contracts/agreements to assess fallback language impacts,

•Making preparations for internal operational readiness,

•Making necessary enhancements to PNC's infrastructure, including systems, models, valuation tools and processes,

38 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

•Developing and delivering on internal and external LIBOR cessation communication plans,

•Engaging with PNC clients, industry working groups and regulators, and

•Monitoring developments associated with LIBOR alternatives and industry practices related to LIBOR-indexed instruments.

PNC also has been an active participant in efforts with the Federal Reserve and other regulatory agencies to explore the potential need for a credit-sensitive rate or add-on to SOFR for use in commercial loans. Those efforts led to the formation of the Credit ~~Sensitive~~ Sensitivity

The PNC Financial Services Group, Inc. – Form 10-Q 37

Group, which has held a series of workshops to assess how a credit-sensitive rate or add-on to SOFR might be constructed and discuss associated implementation issues.

In ~~addition, in the third quarter of~~late 2020, PNC began offering conforming adjustable rate mortgages using SOFR instead of USD LIBOR in line with Fannie Mae and Freddie Mac requirements. ~~Plans are in place to begin~~In the second quarter of 2021, PNC began offering nonconforming adjustable rate mortgages using SOFR and private student loans using Prime. Alternative rates including, but not limited to, the Bloomberg Short-Term Bank Yield Index and ~~portfolio~~SOFR are currently being offered to our corporate and commercial customers. LIBOR will cease to be offered for new loans ~~using non-LIBOR rates in the second quarter of~~by year end 2021. PNC has provided regular updates to Federal Reserve, OCC and Federal Deposit Insurance Corporation examination staff regarding its LIBOR cessation and transition plans.

Market Risk Management – Customer-Related Trading Risk

We engage in fixed income securities, derivatives and foreign exchange transactions to support our customers’ investing and hedging activities. These transactions, related hedges and the credit valuation adjustment related to our customer derivatives portfolio are marked-to-market daily and reported as customer-related trading ~~activities. We~~activities.We do not engage in proprietary trading of these products.

We use VaR as the primary means to measure and monitor market risk in customer-related trading activities. VaR is used to estimate the probability of portfolio losses based on the statistical analysis of historical market risk factors. VaR is calculated for each of the portfolios that comprise our ~~customer related~~customer-related trading activities of which the majority are covered positions as defined by the Market Risk Rule. VaR is computed with positions and market risk factors updated daily to ensure each portfolio is operating within its acceptable limits.

See the Market Risk Management – Customer-Related Trading Risk section of our 2020 Form 10-K for more information on our models used to calculate VaR and our backtesting process.

~~Customer related~~Customer-related trading revenue was ~~$111~~$278 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, compared to ~~$71~~$293 million for the same period in 2020. The ~~increase~~decrease was primarily due to lower interest rate derivative client sales revenues partially offset by improved foreign exchange client ~~related~~sales revenues. For the quarterly period, customer-related trading ~~results as 2020~~revenue was ~~negatively impacted~~$99 million for the third quarter of 2021, compared to $108 million in 2020. The decrease was primarily due to changes in the credit valuation for customer-related derivatives activities partially offset by ~~liquidity concerns and market volatility related to the pandemic.~~improved foreign exchange client revenues.

Market Risk Management – Equity And Other Investment Risk

Equity investment risk is the risk of potential losses associated with investing in both private and public equity markets. In addition to extending credit, taking deposits, underwriting securities and trading financial instruments, we make and manage direct investments in a variety of transactions, including management buyouts, recapitalizations and growth financings in a variety of industries. We also have investments in affiliated and non-affiliated funds that make similar investments in private equity. The economic and/or book value of these investments and other assets are directly affected by changes in market factors.

Various PNC business units manage our equity and other investment activities. Our businesses are responsible for making investment decisions within the approved policy limits and associated guidelines.

A summary of our equity investments follows:

Table 33: Equity Investments Summary


		March 31 2021		December 31 2020		Change					September 30 2021 (a)		December 31 2020		Change
Dollars in millions	Dollars in millions					$		%		Dollars in millions					$		%
Tax credit investments	Tax credit investments	$	2,808	$	2,870	$	(62)	(2)	%	Tax credit investments	$	3,723	$	2,870	$	853	30	%
Private equity and other	Private equity and other	3,578		3,182		396		12	%	Private equity and other	4,014		3,182		832		26	%
Total	Total	$	6,386	$	6,052	$	334	6	%	Total	$	7,737	$	6,052	$	1,685	28	%

(a)Includes $0.7 billion of investments from BBVA, of which $0.6 billion are tax credit investments and $0.1 billion are private equity and other.

Tax Credit Investments

Included in our equity investments are direct tax credit investments and equity investments held by consolidated entities. These tax credit investment balances included unfunded commitments totaling $2.0 billion and $1.4 billion at ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. These unfunded commitments are included in Other liabilities on our Consolidated Balance Sheet.

Note 5 Loan Sale and Servicing Activities and Variable Interest Entities in the Notes To Consolidated Financial Statements in our 2020 Form 10-K has further information on Tax Credit Investments.

Private Equity and Other

The ~~majority~~largest component of our other equity investments ~~consists of~~is our private equity portfolio. The private equity portfolio is an illiquid portfolio consisting of mezzanine and equity investments that vary by industry, stage and type of investment. Private equity investments carried at estimated fair value totaled $1.7 billion and $1.5 billion at September 30, 2021 and December 31, 2020,

38The PNC Financial Services Group, Inc. – Form 10-Q

~~investments carried at estimated fair value totaled $1.5 billion at both March 31, 2021 and December 31, 2020.~~respectively. As of ~~March 31,~~September 30, 2021, ~~$1.3~~$1.5 billion was invested directly in a variety of companies and $0.2 billion was invested indirectly through various private equity funds. See the Supervision and Regulation section in Item 1 of our 2020 Form 10-K for discussion of the potential impacts of the Volcker Rule provisions of Dodd-Frank on our interests in and other relationships with private funds covered by the Volcker Rule.

Included in our other equity investments are Visa Class B common shares, which are recorded at cost. Visa Class B common shares that we own are transferable only under limited circumstances until they can be converted into shares of the publicly-traded Class A common shares, which cannot happen until the resolution of the pending interchange litigation. Based upon the ~~March 31,~~September 30, 2021 per share closing price of ~~$211.73~~$222.75 for a Visa Class A common share, the estimated value of our total investment in the Class B common shares was approximately ~~$1.2~~$1.3 billion at the current conversion rate of Visa B shares to Visa A shares, while our cost basis was not significant. See Note 15 Fair Value and Note 21 Legal Proceedings in the Notes To Consolidated Financial Statements in Item 8 of our 2020 Form 10-K for additional information regarding our Visa shares and related agreements. The estimated value does not represent fair value of the Visa B common shares given the share’s limited transferability and the lack of observable transactions in the marketplace.

We also have certain other equity investments, the majority of which represent investments in affiliated and non-affiliated funds with both traditional and alternative investment strategies. Net gains related to these investments were ~~$38~~$44 million ~~at March 31,~~for the nine months ended September 30, 2021 and were not significant ~~at March 31,~~for the nine months ended September 30, 2020.

Financial Derivatives

We use a variety of financial derivatives as part of the overall asset and liability risk management process to help manage exposure to market (primarily interest rate) and credit risk inherent in our business activities. We also enter into derivatives with customers to facilitate their risk management activities.

Financial derivatives involve, to varying degrees, market and credit risk. 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 and an underlying as specified in the contract. Therefore, cash requirements and exposure to credit risk are significantly less than the notional amount on these instruments.

Further information on our financial derivatives is presented in Note 1 Accounting Policies, Note 15 Fair Value and Note 16 Financial Derivatives in our Notes To Consolidated Financial Statements in our 2020 Form 10-K and in Note 11 Fair Value and Note 12 Financial Derivatives in the Notes To Consolidated Financial Statements in Item 1 of this Report.

Not all elements of market and credit risk are addressed through the use of financial derivatives, and such instruments may be ineffective for their intended purposes due to unanticipated market changes, among other reasons.

RECENT REGULATORY DEVELOPMENTS

BBVA USA Merger

On October 8, 2021 and following regulatory approval from the Federal Reserve and the OCC, PNC consummated the merger of its U.S. state member bank subsidiary, BBVA USA, Birmingham, Alabama, with and into PNC Bank, with PNC Bank remaining as the surviving bank. The ~~U.S. Government continues~~regulatory approval process also included approvals from the banking departments of the states of Alabama and Texas. With completion of the merger and conversion of BBVA USA branches to ~~take action~~PNC Bank branches, PNC Bank has added branches in ~~order~~Texas, Alabama, Arizona, California, Florida, Colorado and New Mexico. The merger of the two banks did not affect PNC or PNC Bank’s classification as Category III institutions for purposes of federal bank regulations.

Other Developments

In September 2021, the OCC issued a notice of proposed rulemaking to ~~aid businesses~~rescind its June 2020 CRA rule. The OCC's June 2020 rule made significant changes to the OCC’s regulations implementing the CRA for national banks, like PNC Bank, and ~~consumers financially impacted by COVID-19,~~replaced the previous CRA rule jointly issued with the Federal Reserve and the FDIC (1995 rule). The June 2020 rule would have required significant changes to PNC Bank’s CRA framework. The OCC is proposing to replace its June 2020 rule, including provisions of the rule that were effective October 1, 2020, with rules largely based on the 1995 rule subject to a transition for certain aspects of the June 2020 rule. The proposal would facilitate the ~~orderly functioning of financial markets,~~OCC’s ongoing work with the Federal Reserve and ~~assist banking organizations in being able~~the FDIC to ~~meet~~modernize the ~~credit~~regulations implementing the CRA and ~~other banking needs of their customers and communities. In March 2021, President Biden signed~~create consistent rules for all insured depository institutions. Comments on the American Rescue Plan (The American Rescue Plan Act of 2021), which provides an additional $1.9 trillion in relief. Among other things, the American Rescue Plan provides for stimulus payments of up to $1,400 per-person, funding for various housing and education programs, grants to small businesses, extension of expanded unemployment benefits, and expansion of the child tax credit. The President also signed the PPP Extension Act of 2021, which extends the PPP application deadline to May 31, 2021, and extends the PPP authorization through June 30, 2021, to provide the SBA additional time to process applications received by the application deadline. PNC continues to participate in the PPP and assist customers with their PPP loans.proposal are due October 29, 2021.

In ~~March~~September 2021, the ~~Federal Reserve extended its PPP Liquidity Facility by three months~~CFPB issued a notice of proposed rulemaking to ~~June 30, 2021. The PPP Liquidity Facility extends term credit~~implement the small business lending data collection requirements set forth in section 1071 of the Dodd-Frank Act. Section 1071 amended the Equal Credit Opportunity Act to require financial institutions making PPP loans, accepting the PPP loans as collateral. The other currently active Federal Reserve liquidity facilities—the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility,to collect and ~~the Primary Dealer Credit Facility—expired on March 31, 2021.~~

~~Capital, Capital Planning and Liquidity~~

~~In March 2021, the Federal Reserve announced that its temporary modifications~~report to the ~~SLR to exclude U.S. Treasury securities and central bank reserves would expire on March 31, 2021. The temporary modifications had allowed BHCs~~CFPB data regarding certain small business credit applications. Under the proposal, financial institutions that meet small business credit transaction thresholds, like PNC Bank, would be required to ~~exclude U.S. Treasury securities~~collect and balances held at Federal Reserve Banks from the BHCs’ total leverage exposure for purposes of calculating its SLR. The Federal Reserve also announced that it would seek comment on measures to ensure the SLR remains effective in an environment of higher reserves.

report

40The PNC Financial Services Group, Inc. – Form 10-Q

~~Separately,~~significant amounts of data regarding applications for small business credit, including on the race, sex and ethnicity of the principal owners of the business, among other requirements. The CFPB has proposed that any final rule, when issued, would be effective 90 days after publication in the Federal Reserve extended the temporary and additional restrictions on BHC dividends and share repurchases that it put in place as a result of ongoing economic uncertainty from COVID-19. These restrictions limit increases in dividends and generally restrict dividends and share repurchases to an amount based on income over the past year. For a firmRegister, with capital levels above those required by the current round of stress tests, these restrictions will end on June 30, 2021. Firms that fall below any of their minimum risk-based requirements in the stress tests will remain subject to the additional restrictions for three extracompliance mandated 18 months ~~through September 30, 2021.~~

~~Other Developments~~

In April 2021, the CFPB proposed a set of rule changes intended to prevent foreclosures as the emergency federal foreclosure protections expire. The CFPB’s proposal would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021, permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application, and make temporary changes to certain required servicer communications that borrowers receive regarding their options.publication. Comments on the proposal are due ~~by May 10, 2021.~~January 6, 2022.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Note 1 Accounting Policies in our 2020 Form 10-K describes the most significant accounting policies that we use to prepare our consolidated financial statements. Certain of these policies require us to make estimates or economic assumptions that may vary under different assumptions or conditions, and such variations may significantly affect our reported results and financial position for the period or in future periods. The policies and judgments related to residential and commercial MSRs and fair value measurements are described in Critical Accounting Estimates and Judgments in Item 7 of our 2020 Form 10-K. For additional information on fair value measurements of assets and liabilities assumed in the BBVA acquisition, see Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements included in this Report. The following details the critical estimates and judgments around the ACL.

Allowance for Credit Losses

We maintain the ACL at levels that we believe to be appropriate as of the balance sheet date to absorb expected credit losses on our existing investment securities, loans, equipment finance leases, ~~(including residual values),~~ other financial assets and unfunded lending related commitments, for the remaining contractual term of the assets or exposures, taking into consideration expected prepayments. Our determination of the ACL is based on historical loss and performance experience, which is captured through PD, as well as current borrower characteristics including collateral type and quality, current economic conditions, reasonable and supportable forecasts of future conditions and other relevant factors. We use methods sensitive to changes in economic conditions, to interpret these factors to estimate expected credit losses. We evaluate and, when appropriate, enhance the quality of our data and models and other methods used to estimate ACL on an ongoing basis. We apply qualitative factors to reflect in the ACL our best estimate of amounts that we do not expect to collect because of, among other things, idiosyncratic risk factors, changes in economic conditions that may not be reflected in forecasted results, or other potential methodology limitations. The major drivers of ACL estimates include, but are ~~therefore susceptible to various factors, including, but~~ not limited ~~to, the following major factors:~~to:

•Current economic conditions and borrower quality: Our forecast of expected losses depends on economic conditions and

portfolio quality as of the estimation date. As current economic conditions evolve, forecasted losses could be materially

affected.

•Scenario weights and design: Our loss estimates are sensitive to the shape, direction and rate of change of macroeconomic forecasts and thus vary significantly between upside and downside scenarios. Change to probability weights assigned to these scenarios and timing of peak business cycles reflected by the scenarios could materially affect our loss estimates.

•Portfolio volume and mix: Changes to portfolio volume and mix could materially affect our estimates, as CECL reserves

would be recognized upon origination or acquisition.

For all assets and unfunded lending related commitments within the scope of the CECL standard, the applicable ACL is composed of one or a combination of the following components: (i) collectively assessed or pooled reserves, (ii) individually assessed reserves, and

(iii) qualitative (judgmental) reserves. Our methodologies and key assumptions for each of these components are discussed in Note 1

Accounting Policies in our 2020 Form 10-K.

Reasonable and Supportable Economic Forecast

Under CECL, we are required to consider reasonable and supportable forecasts in estimating expected credit losses. For this purpose,

we have established a framework which includes a three year forecast period and the use of four economic scenarios with associated probability weights, which in combination create a forecast of expected economic outcomes over our reasonable and supportable forecast period. Credit losses estimated in our reasonable and supportable forecast period are sensitive to the shape and severity of the scenarios used and weights assigned to them.

To generate the four economic forecast scenarios we use a combination of quantitative macroeconomic models, other measures of economic activity and forward-looking expert judgment to forecast the distribution of economic outcomes over the reasonable and supportable forecast period. Each scenario is then given an associated probability (weight) in order to represent our current expectation

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 41

within that distribution over the forecast period. This process is informed by current economic conditions, expected business cycle evolution and the expert judgment of PNC’s RAC. This approach seeks to provide a reasonable representation of the forecast of expected economic outcomes and is used to estimate expected credit losses across a variety of loans and securities. Each quarter the scenarios are presented for approval to PNC’s RAC and the committee determines and approves CECL scenarios' weights for use for the current reporting period.

The scenarios used for the period ended ~~March 31,~~September 30, 2021 ~~were designed to~~ reflect an improved near-term economic outlook ~~in comparison~~compared to the scenarios used for the period ended December 31, 2020. ~~This~~The overall improvement in the comparison was driven largely by

40 The PNC Financial Services Group, Inc. – Form 10-Q

improvements in both the ~~result~~outlook for consumer spending and the labor market, along with the impact from continued vaccine distribution, while also considering the lingering effects of ~~declining~~COVID-19 that slowed the momentum of economic recovery in recent months, as the Delta variant continued to drive increased COVID-19 cases ~~more rapid vaccine distribution,~~throughout the ~~passage of the American Rescue Plan stimulus package~~U.S. and ~~economic momentum fueled by increased consumer spending.~~ abroad.

We used a number of economic variables in our scenarios, with the most significant drivers being Real GDP and unemployment rate measures. Using the weighted-average of our four economic forecast scenarios, we estimated ~~that~~that:

•Real GDP grows ~~4.3%~~5.4% in 2021, ~~recovering~~ending the year 3.1% above pre-recession levels. Annual growth continues but slows to ~~pre-recession peak levels~~2.9% and 1.9% in ~~the third quarter of 2021. The weighted-average unemployment rate reflects~~2022 and 2023, respectively.

•Unemployment rates reflect continued recovery in the labor market in 2021, with the unemployment rate ~~estimated at 5.9%~~falling to 5.3% by the end of the year. Employment gains were estimated to continue through the forecast period with the unemployment rate reaching ~~4.9%~~4.8% and ~~4.4%~~4.3% by the end of 2022 and 2023, respectively.

One of the scenarios included in our weighted-average is our baseline prediction of the most likely economic ~~outcome; which~~outcome. This scenario includes estimated Real GDP ~~recovering~~growing to ~~pre-pandemic~~5.8% in 2021 and ending the year 3.4% above its pre-recession peak levels, with annual growth slowing to 3.2% and 1.6% in ~~third quarter~~2022 and 2023, respectively. Unemployment rates in this most likely scenario reach 5.0% by the end of 2021, ~~with unemployment expected to return to its pre-pandemic levels in~~4.3% by the ~~second half~~end of ~~2022.~~2022 and 3.9% by the end of 2023. See our Business Outlook and the Cautionary Statement Regarding Forward-Looking Information in this Financial Review for additional discussion on our baseline prediction of the most likely economic outcome. ~~While~~

Though the outlook of near-term growth is less optimistic than it was last quarter due to the emergence of the Delta COVID-19 variant and continued supply chain challenges, the economy ~~saw~~has seen significant recovery from the onset of the ~~pandemic in national level~~pandemic. National macroeconomic indicators, ~~considerable uncertainty remains regarding~~forecasts and performance expectations have all steadily improved, helping to lower overall ~~lifetime~~ loss ~~content~~expectations. These improvements have been reflected in the reserve releases through the first nine months of 2021. However, for ~~both~~certain portions of our commercial and consumer portfolios, ~~specifically as it relates to our customers that are less likely to benefit from the economic recovery currently underway.~~considerable uncertainty remains regarding lifetime losses. For commercial borrowers, there are still lingering concerns around industries that have been affected by COVID-19 related restrictions and emerging secular changes. For these industries, where unrestricted commerce has recently returned, the recovery will lag the broader economy. Where restrictions persist and/or secular changes have emerged, the impact and eventual level of recovery are ~~dependent on in-person gatherings, hospitality and tourism.~~less certain. For consumer borrowers, payment behavior ~~once the~~upon expiration of government stimulus, ~~wanes~~including recently expired enhanced unemployment benefits is ~~also~~still difficult to predict. ~~We believe the highest uncertainty is concentrated with consumer borrowers who have been afforded payment deferrals or forbearance and borrowers at the low end of our credit standards.~~ As such, for both our commercial and consumer loan portfolios, PNC identified and performed significant analysis around these ~~key, highly impacted~~ segments to ensure our reserves ~~were~~are adequate in ~~light of~~ the ~~improved~~current economic environment. We believe ~~that~~ the economic ~~assumptions used~~scenarios have effectively provided sufficient variation to capture probable recovery paths. Additionally, through in depth and granular analysis of COVID-19 related impacts, we have adequately addressed reserve requirements for specific populations most affected in the ~~scenarios for~~current environment. Through this approach, we believe the ~~first quarter of 2021, in combination with increased reserves for borrowers in segments most adversely impacted by the pandemic,~~reserve levels sufficiently reflect the expectation for life of loan losses inof the current portfolio.

To provide additional context regarding the sensitivity of the ACL to a more pessimistic forecast of expected economic outcomes, we considered what our ACL would be when applying a 100% probability weighting to the most severely adverse scenario. This severely adverse scenario estimates real GDP contracting and ending 2021 down 1.3% compared to 2020 levels, with recovery to pre-pandemic levels not expected until first quarter 2023, while the unemployment rate increases to end 2021 at 10.5% with the labor market beginning to improve again in 2022. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in our ACL of $2.0 billion at March 31, 2021. This scenario was not our expectation at March 31, 2021 and does not reflect our current expectation, nor does it capture all the potential unknown variables that would likely arise over 2021, but it provides an approximation of a possible outcome under hypothetical severe conditions. The CECL methodology inherently requires a high degree of judgment, and as a result, it is possible that we may, at another point in time, reach different conclusions regarding our credit loss estimates

See the following for additional details on the components of our ACL:

•Allowance For Credit Losses in the Credit Risk Management section of this Financial Review, and

•Note 3 Investment Securities and Note 4 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in this Report.

OFF-BALANCE SHEET ARRANGEMENTS AND VARIABLE INTEREST ENTITIES

We engage in a variety of activities that involve entities that are not consolidated or otherwise reflected in our Consolidated Balance Sheet that are generally referred to as off-balance sheet arrangements. Additional information on these types of activities is included in our 2020 Form 10-K and in Note 5 Loan Sale and Servicing Activities and Variable Interest Entities and Note 8 Commitments in the Notes To Consolidated Financial Statements included in this Report.

A summary and further description of VIEs is included in Note 1 Accounting Policies and Note 5 Loan Sale and Servicing Activities and Variable Interest Entities in our 2020 Form 10-K.

42 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

Trust Preferred Securities

See Note 10 Borrowed Funds in the Notes To Consolidated Financial Statements in our 2020 Form 10-K for additional information on trust preferred securities issued by PNC Capital Trust C including information on contractual limitations potentially imposed on payments (including dividends) with respect to PNC's equity securities.

INTERNAL CONTROLS AND DISCLOSURE CONTROLS AND PROCEDURES

As of ~~March 31,~~September 30, 2021, we performed an evaluation under the supervision of and with the participation of our management, including the Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of the

The PNC Financial Services Group, Inc. – Form 10-Q 41

effectiveness of the design and operation of our disclosure controls and procedures and of changes in our internal control over financial reporting.

Based on that evaluation, our Chairman, President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective as of ~~March 31,~~September 30, 2021, and that there has been no change in PNC’s internal control over financial reporting that occurred during the ~~first~~third quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As permitted by SEC guidance that an assessment of internal controls over financial reporting of a recently acquired business may be excluded from management's evaluation of disclosure controls and procedures for up to a year from the date of acquisition, we have excluded BBVA from management's reporting on internal control over financial reporting for the quarter ended September 30, 2021. We will continue to evaluate the effectiveness of internal controls over financial reporting post-integration of BBVA, including BBVA USA, with that of PNC and PNC Bank and will make changes to our internal control framework, as necessary. The acquisition of BBVA contributed $86.6 billion of assets, or 16% of our total assets, to our balance sheet at September 30, 2021. The BBVA acquisition also contributed $737 million of revenue, or 14% of total revenue, for the three months ended September 30, 2021 and $1.1 billion of revenue, or 7% of total revenue, for the nine months ended September 30, 2021.

42The PNC Financial Services Group, Inc. – Form 10-Q

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

We make statements in this Report, and we may from time to time make other statements, regarding our outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting us and our future business and operations that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “plan,” “expect,” “anticipate,” “see,” “look,” “intend,” “outlook,” “project,” “forecast,” “estimate,” “goal,” “will,” “should” and other similar words and expressions.

Forward-looking statements are necessarily subject to numerous assumptions, risks and uncertainties, which change over time. Future events or circumstances may change our outlook and may also affect the nature of the assumptions, risks and uncertainties to which our forward-looking statements are subject. Forward-looking statements speak only as of the date made. We do not assume any duty and do not undertake any obligation to update forward-looking statements. Actual results or future events could differ, possibly materially, from those anticipated in forward-looking statements, as well as from historical performance. As a result, we caution against placing undue reliance on any forward-looking statements.

Our forward-looking statements are subject to the following principal risks and uncertainties.

•Our businesses, financial results and balance sheet values are affected by business and economic conditions, ~~including the following:~~including:

–Changes in interest rates and valuations in debt, equity and other financial markets,

–Disruptions in the U.S. and global financial markets,

–Actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply, ~~and~~ market interest rates and inflation,

–Changes in customer behavior due to changing business and economic conditions or legislative or regulatory initiatives,

–Changes in customers’, suppliers’ and other counterparties’ performance and creditworthiness,

–Impacts of tariffs and other trade policies of the U.S. and its global trading partners,

–The length and extent of the economic ~~contraction as a result~~impacts of the COVID-19 pandemic,

–The impact of the results of the ~~recent~~2020 U.S. elections, including on the regulatory landscape, capital markets, tax policy, infrastructure spending and ~~the response to and management of the COVID-19 pandemic, including the effectiveness of already-enacted fiscal stimulus from the federal government and a potential infrastructure bill,~~social programs, and

–Commodity price volatility.

•Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than those we are currently expecting and do not take into account potential legal and regulatory contingencies. These statements are based on our view that:

–The U.S. economy is in an economic recovery, following a very severe but very short economic contraction in the first half of 2020 due to the COVID-19 pandemic and public health measures to contain it.

–~~Despite the improvement~~The Delta COVID-19 variant and supply chain difficulties have been drags on economic growth in the second half of 2021, although the economy ~~since the spring of 2020, economic activity remains below its pre-pandemic level and unemployment remains elevated.~~

–continues to expand. Growth will pick up inat the ~~spring~~end of 2021 as ~~vaccine distribution continues~~the impact of the Delta variant fades and supply chains normalize and will remain solid into 2022. Employment in September 2021 was still down by almost 5 million from before the ~~federal government provides aid to households, small and medium-sized businesses, and state and local governments.~~pandemic; PNC expects ~~real GDP~~employment to return to its pre-pandemic level in mid-2022.

–Compared to the ~~third quarter~~spring of ~~2021,~~2020 (when prices were falling), inflation accelerated in mid-2021 due to strong demand in specific segments and ~~employment~~supply chain disruptions. Inflation has started to slow on a month-over-month basis but will remain elevated in the ~~second half of 2022.~~near term.

–PNC expects the FOMC to keep the fed funds rate in its current range of 0.00% to 0.25 % until ~~at least~~ late ~~2023.~~2022.

•PNC’s ability to take certain capital actions, including returning capital to shareholders, is subject to PNC meeting or exceeding a stress capital buffer established by the Federal Reserve Board in connection with the Federal Reserve Board's CCAR process. ~~The Federal Reserve also has imposed additional limitations on capital distributions through the second quarter of 2021 by CCAR-participating bank holding companies.~~

•PNC’s regulatory capital ratios in the future will depend on, among other things, the company’s financial performance, the scope and terms of final capital regulations then in effect and management actions affecting the composition of PNC’s balance sheet. In addition, PNC’s ability to determine, evaluate and forecast regulatory capital ratios, and to take actions (such as capital distributions) based on actual or forecasted capital ratios, will be dependent at least in part on the development, validation and regulatory review of related models.

•Legal and regulatory developments could have an impact on our ability to operate our businesses, financial condition, results of operations, competitive position, reputation, or pursuit of attractive acquisition opportunities. Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and ability to attract and retain management. These developments could include:

–Changes to laws and regulations, including changes affecting oversight of the financial services industry, consumer protection, bank capital and liquidity standards, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.

44The PNC Financial Services Group, Inc. – Form 10-Q

–Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. These matters may result in monetary judgments or settlements or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to PNC.

–Results of the regulatory examination and supervision process, including our failure to satisfy requirements of agreements with governmental agencies.

–Impact on business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of adequacy of our intellectual property protection in general.

•Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards.

•Our ~~planned~~ acquisition of BBVA presents us with risks and uncertainties related ~~both to the acquisition transaction itself and~~ to the integration of the acquired business into PNC ~~after closing:~~including:

–The business of BBVA ~~including its U.S. banking subsidiary, BBVA USA,~~ going forward may not perform as we ~~currently~~ project or in a manner consistent with historical performance. As a result, the anticipated benefits, including estimated cost savings, of the transaction may be significantly more difficult or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events, including those that are outside of our control.

–The ~~combination~~integration of BBVA, including its U.S. banking subsidiary, BBVA USA, with that of PNC and PNC Bank ~~respectively,~~ may be more difficult to achieve than anticipated or have unanticipated adverse ~~results relating~~results. Our ability to integrate BBVA, including its U.S. banking subsidiary, BBVA USA, ~~or our existing businesses.~~

–~~Completion of~~successfully may be adversely affected by the fact that this transaction is dependent on the satisfaction of customary closing conditions, which cannot be assured. The timing of completion of the transaction is dependent on various factors that cannot be predicted with precision at this point.results in us entering several geographic markets where we did not previously have any meaningful presence.

•In addition to the ~~planned~~ BBVA transaction, we grow our business in part through acquisitions and new strategic initiatives. Risks and uncertainties include those presented by the nature of the business acquired and strategic initiative, including in some cases those associated with our entry into new businesses or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, regulatory issues, and the integration of the acquired businesses into PNC after closing.

•Competition can have an impact on customer acquisition, growth and retention and on credit spreads and product pricing, which can affect market share, deposits and revenues. Our ability to anticipate and respond to technological changes can also impact our ability to respond to customer needs and meet competitive demands.

•Business and operating results can also be affected by widespread natural and other disasters, pandemics, dislocations, terrorist activities, system failures, security breaches, cyberattacks or international hostilities through impacts on the economy and financial markets generally or on us or our counterparties specifically.

We provide greater detail regarding these as well as other factors in our 2020 Form 10-K and subsequent Form 10-Qs and elsewhere in this Report, including in the Risk Factors and Risk Management sections and the Legal Proceedings and Commitments Notes of the Notes To Consolidated Financial Statements in these reports. Our forward-looking statements may also be subject to other risks and uncertainties, including those we may discuss elsewhere in this Report or in our other filings with the SEC.

44The PNC Financial Services Group, Inc. – Form 10-Q

CONSOLIDATED INCOME STATEMENT

THE PNC FINANCIAL SERVICES GROUP, INC.


Unaudited	Unaudited	Three months ended March 31				Unaudited	Three months ended September 30				Nine months ended September 30
In millions, except per share data	In millions, except per share data	2021		2020				In millions, except per share data	2021		2020		2021		2020
Interest Income	Interest Income							Interest Income
Loans	Loans	$	1,996	$	2,480			Loans	$	2,437	$	2,116	$	6,593	$	6,853
Investment securities	Investment securities	421		582				Investment securities	460		490		1,350		1,599
Other	Other	66		138				Other	78		70		216		279
Total interest income	Total interest income	2,483		3,200				Total interest income	2,975		2,676		8,159		8,731
Interest Expense	Interest Expense							Interest Expense
Deposits	Deposits	40		375				Deposits	29		74		99		590
Borrowed funds	Borrowed funds	95		314				Borrowed funds	90		118		275		619
Total interest expense	Total interest expense	135		689				Total interest expense	119		192		374		1,209
Net interest income	Net interest income	2,348		2,511				Net interest income	2,856		2,484		7,785		7,522
Noninterest Income	Noninterest Income							Noninterest Income
Asset management	Asset management	226		201				Asset management	248		215		713		615
Consumer services	Consumer services	384		377				Consumer services	496		390		1,337		1,097
Corporate services	Corporate services	555		526				Corporate services	842		479		2,085		1,517
Residential mortgage	Residential mortgage	105		210				Residential mortgage	147		137		355		505
Service charges on deposits	Service charges on deposits	119		168				Service charges on deposits	159		119		409		366
Other	Other	483		343				Other	449		457		1,400		1,071
Total noninterest income	Total noninterest income	1,872		1,825				Total noninterest income	2,341		1,797		6,299		5,171
Total revenue	Total revenue	4,220		4,336				Total revenue	5,197		4,281		14,084		12,693
Provision For (Recapture of) Credit Losses	Provision For (Recapture of) Credit Losses	(551)		914				Provision For (Recapture of) Credit Losses	(203)		52		(452)		3,429
Noninterest Expense	Noninterest Expense							Noninterest Expense
Personnel	Personnel	1,477		1,369				Personnel	1,986		1,410		5,103		4,152
Occupancy	Occupancy	215		207				Occupancy	248		205		680		611
Equipment	Equipment	293		287				Equipment	355		292		974		880
Marketing	Marketing	45		58				Marketing	103		67		222		172
Other	Other	544		622				Other	895		557		2,232		1,774
Total noninterest expense	Total noninterest expense	2,574		2,543				Total noninterest expense	3,587		2,531		9,211		7,589
Income from continuing operations before income taxes and noncontrolling interests	Income from continuing operations before income taxes and noncontrolling interests	2,197		879				Income from continuing operations before income taxes and noncontrolling interests	1,813		1,698		5,325		1,675
Income taxes from continuing operations	Income taxes from continuing operations	371		120				Income taxes from continuing operations	323		166		906		128
Net income from continuing operations	Net income from continuing operations	1,826		759				Net income from continuing operations	1,490		1,532		4,419		1,547
Income from discontinued operations before taxes	Income from discontinued operations before taxes	0		181				Income from discontinued operations before taxes	0		0		0		5,777
Income taxes from discontinued operations	Income taxes from discontinued operations	0		25				Income taxes from discontinued operations	0		0		0		1,222
Net income from discontinued operations	Net income from discontinued operations	00		156				Net income from discontinued operations	0		0		0		4,555
Net income	Net income	1,826		915				Net income	1,490		1,532		4,419		6,102
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	10		7				Less: Net income attributable to noncontrolling interests	16		13		38		27
Preferred stock dividends	Preferred stock dividends	57		63				Preferred stock dividends	57		63		162		181
Preferred stock discount accretion and redemptions	Preferred stock discount accretion and redemptions	1		1				Preferred stock discount accretion and redemptions	1		1		3		3
Net income attributable to common shareholders	Net income attributable to common shareholders	$	1,758	$	844			Net income attributable to common shareholders	$	1,416	$	1,455	$	4,216	$	5,891
Earnings Per Common Share	Earnings Per Common Share							Earnings Per Common Share
Basic earnings from continuing operations	Basic earnings from continuing operations	$	4.11	$	1.59			Basic earnings from continuing operations	$	3.31	$	3.40	$	9.84	$	3.11
Basic earnings from discontinued operations	Basic earnings from discontinued operations	0		0.37				Basic earnings from discontinued operations	0		0		0		10.61
Total basic earnings	Total basic earnings	$	4.11	$	1.96			Total basic earnings	$	3.31	$	3.40	$	9.84	$	13.73
Diluted earnings from continuing operations	Diluted earnings from continuing operations	$	4.10	$	1.59			Diluted earnings from continuing operations	$	3.30	$	3.39	$	9.83	$	3.11
Diluted earnings from discontinued operations	Diluted earnings from discontinued operations	0		0.36				Diluted earnings from discontinued operations	0		0		0		10.59
Total diluted earnings	Total diluted earnings	$	4.10	$	1.95			Total diluted earnings	$	3.30	$	3.39	$	9.83	$	13.70
Average Common Shares Outstanding	Average Common Shares Outstanding							Average Common Shares Outstanding
Basic	Basic	426		429				Basic	426		426		426		427
Diluted	Diluted	426		430				Diluted	426		426		427		428

See accompanying Notes To Consolidated Financial Statements.

46The PNC Financial Services Group, Inc. – Form 10-Q

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

THE PNC FINANCIAL SERVICES GROUP, INC.


Unaudited In millions	Unaudited In millions	Three months ended March 31				Unaudited In millions	Three months ended September 30						Nine months ended September 30
		2021		2020			Unaudited In millions		2021			2020			2021			2020
Net income from continuing operations	Net income from continuing operations	$	1,826	$	759				$	1,490		$	1,532		$	4,419		$	1,547
Other comprehensive income (loss), before tax and net of reclassifications into Net income	Other comprehensive income (loss), before tax and net of reclassifications into Net income							Other comprehensive income (loss), before tax and net of reclassifications into Net income
Net change in debt securities	Net change in debt securities	(1,194)		1,480				Net change in debt securities		(323)			10			(1,471)			2,028
Net change in cash flow hedge derivatives	Net change in cash flow hedge derivatives	(775)		785				Net change in cash flow hedge derivatives		(174)			(119)			(727)			678
Pension and other postretirement benefit plan adjustments	Pension and other postretirement benefit plan adjustments	30		12				Pension and other postretirement benefit plan adjustments		2			2			(11)			(3)
Net change in Other	Net change in Other	1		8				Net change in Other		1						2			10
Other comprehensive income (loss) from continuing operations, before tax and net of reclassifications into Net income	Other comprehensive income (loss) from continuing operations, before tax and net of reclassifications into Net income	(1,938)		2,285				Other comprehensive income (loss) from continuing operations, before tax and net of reclassifications into Net income		(494)			(107)			(2,207)			2,713
Income tax benefit (expense) from continuing operations related to items of other comprehensive income	Income tax benefit (expense) from continuing operations related to items of other comprehensive income	458		(540)				Income tax benefit (expense) from continuing operations related to items of other comprehensive income		110			35			516			(630)
Other comprehensive income (loss) from continuing operations, after tax and net of reclassifications into Net income	Other comprehensive income (loss) from continuing operations, after tax and net of reclassifications into Net income	(1,480)		1,745				Other comprehensive income (loss) from continuing operations, after tax and net of reclassifications into Net income		(384)			(72)			(1,691)			2,083
Net income from discontinued operations	Net income from discontinued operations	00		156				Net income from discontinued operations		0			0			0			4,555
Other comprehensive income (loss) from discontinued operations, before tax and net of reclassifications into Net income				(34)
Other comprehensive income from discontinued operations, before tax and net of reclassifications into Net income								Other comprehensive income from discontinued operations, before tax and net of reclassifications into Net income		0						0			148
Income tax benefit (expense) from discontinued operations related to items of other comprehensive income	Income tax benefit (expense) from discontinued operations related to items of other comprehensive income			8				Income tax benefit (expense) from discontinued operations related to items of other comprehensive income		0						0			(33)
Other comprehensive income (loss) from discontinued operations, after tax and net of reclassifications into Net income		0		(26)
Other comprehensive income from discontinued operations, after tax and net of reclassifications into Net income								Other comprehensive income from discontinued operations, after tax and net of reclassifications into Net income		0			0			0			115
Other comprehensive income (loss), after tax and net of reclassifications into Net income	Other comprehensive income (loss), after tax and net of reclassifications into Net income	(1,480)		1,719				Other comprehensive income (loss), after tax and net of reclassifications into Net income		(384)			(72)			(1,691)			2,198
Comprehensive income	Comprehensive income	346		2,634				Comprehensive income		1,106			1,460			2,728			8,300
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	10		7				Less: Comprehensive income attributable to noncontrolling interests		16			13			38			27
Comprehensive income attributable to PNC	Comprehensive income attributable to PNC	$	336	$	2,627			Comprehensive income attributable to PNC		$	1,090		$	1,447		$	2,690		$	8,273

See accompanying Notes To Consolidated Financial Statements.

46The PNC Financial Services Group, Inc. – Form 10-Q

CONSOLIDATED BALANCE SHEET

THE PNC FINANCIAL SERVICES GROUP, INC.


Unaudited	Unaudited	March 31 2021		December 31 2020		Unaudited	September 30 2021		December 31 2020
In millions, except par value	In millions, except par value					In millions, except par value
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	7,455	$	7,017	Cash and due from banks	$	8,843	$	7,017
Interest-earning deposits with banks	Interest-earning deposits with banks	86,161		85,173		Interest-earning deposits with banks	75,478		85,173
Loans held for sale (a)	Loans held for sale (a)	1,967		1,597		Loans held for sale (a)	2,121		1,597
Investment securities – available for sale	Investment securities – available for sale	96,799		87,358		Investment securities – available for sale	124,127		87,358
Investment securities – held to maturity	Investment securities – held to maturity	1,456		1,441		Investment securities – held to maturity	1,479		1,441
Loans (a)	Loans (a)	237,013		241,928		Loans (a)	290,230		241,928
Allowance for loan and lease losses	Allowance for loan and lease losses	(4,714)		(5,361)		Allowance for loan and lease losses	(5,355)		(5,361)
Net loans	Net loans	232,299		236,567		Net loans	284,875		236,567
Equity investments	Equity investments	6,386		6,052		Equity investments	7,737		6,052
Mortgage servicing rights	Mortgage servicing rights	1,680		1,242		Mortgage servicing rights	1,833		1,242
Goodwill	Goodwill	9,317		9,233		Goodwill	10,885		9,233
Other (a)	Other (a)	30,894		30,999		Other (a)	36,137		30,999
Total assets	Total assets	$	474,414	$	466,679	Total assets	$	553,515	$	466,679
Liabilities	Liabilities					Liabilities
Deposits	Deposits					Deposits
Noninterest-bearing	Noninterest-bearing	$	120,641	$	112,637	Noninterest-bearing	$	156,305	$	112,637
Interest-bearing	Interest-bearing	254,426		252,708		Interest-bearing	292,597		252,708
Total deposits	Total deposits	375,067		365,345		Total deposits	448,902		365,345
Borrowed funds	Borrowed funds					Borrowed funds
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	1,500		3,500		Federal Home Loan Bank borrowings			3,500
Bank notes and senior debt	Bank notes and senior debt	22,139		24,271		Bank notes and senior debt	22,993		24,271
Subordinated debt	Subordinated debt	6,241		6,403		Subordinated debt	7,074		6,403
Other (b)	Other (b)	3,150		3,021		Other (b)	3,404		3,021
Total borrowed funds	Total borrowed funds	33,030		37,195		Total borrowed funds	33,471		37,195
Allowance for unfunded lending related commitments	Allowance for unfunded lending related commitments	507		584		Allowance for unfunded lending related commitments	646		584
Accrued expenses and other liabilities	Accrued expenses and other liabilities	11,931		9,514		Accrued expenses and other liabilities	14,199		9,514
Total liabilities	Total liabilities	420,535		412,638		Total liabilities	497,218		412,638
Equity	Equity					Equity
Preferred stock (c)	Preferred stock (c)	0		0		Preferred stock (c)	0		0
Common stock ($5 par value, Authorized 800 shares, issued 543 shares)	Common stock ($5 par value, Authorized 800 shares, issued 543 shares)	2,713		2,713		Common stock ($5 par value, Authorized 800 shares, issued 543 shares)	2,713		2,713
Capital surplus	Capital surplus	15,879		15,884		Capital surplus	17,453		15,884
Retained earnings	Retained earnings	48,113		46,848		Retained earnings	49,541		46,848
Accumulated other comprehensive income	Accumulated other comprehensive income	1,290		2,770		Accumulated other comprehensive income	1,079		2,770
Common stock held in treasury at cost: 118 and 119 shares		(14,146)		(14,205)
Common stock held in treasury at cost: 120 and 119 shares						Common stock held in treasury at cost: 120 and 119 shares	(14,527)		(14,205)
Total shareholders’ equity	Total shareholders’ equity	53,849		54,010		Total shareholders’ equity	56,259		54,010
Noncontrolling interests	Noncontrolling interests	30		31		Noncontrolling interests	38		31
Total equity	Total equity	53,879		54,041		Total equity	56,297		54,041
Total liabilities and equity	Total liabilities and equity	$	474,414	$	466,679	Total liabilities and equity	$	553,515	$	466,679

(a)Our consolidated assets included the following for which we have elected the fair value option: Loans held for sale of ~~$1.6~~$2.0 billion, Loans held for investment of ~~$1.4~~$1.6 billion and Other assets of $0.1 billion at ~~March 31,~~September 30, 2021. Comparable amounts at December 31, 2020 were $1.2 billion, $1.4 billion and $0.1 billion, respectively.

(b)Our consolidated liabilities included Other borrowed funds of less than $0.1 billion at both ~~March 31,~~September 30, 2021 and December 31, 2020, for which we have elected the fair value option.

(c)Par value less than $0.5 million at each date.

See accompanying Notes To Consolidated Financial Statements.

48The PNC Financial Services Group, Inc. – Form 10-Q

CONSOLIDATED STATEMENT OF CASH FLOWS

THE PNC FINANCIAL SERVICES GROUP, INC.


Unaudited In millions	Unaudited In millions	Three months ended March 31				Unaudited In millions	Nine months ended September 30
		2021		2020			2021		2020
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	1,826	$	915	Net income	$	4,419	$	6,102
Adjustments to reconcile net income to net cash provided (used) by operating activities	Adjustments to reconcile net income to net cash provided (used) by operating activities					Adjustments to reconcile net income to net cash provided (used) by operating activities
Provision for (recapture of) credit losses	Provision for (recapture of) credit losses	(551)		914		Provision for (recapture of) credit losses	(452)		3,429
Depreciation and amortization	Depreciation and amortization	375		328		Depreciation and amortization	1,215		944
Deferred income taxes	Deferred income taxes	(138)		(226)		Deferred income taxes	(74)		(2,505)

Net gains on sales of securities						Net gains on sales of securities	(50)		(254)
Changes in fair value of mortgage servicing rights	Changes in fair value of mortgage servicing rights	(323)		620		Changes in fair value of mortgage servicing rights	(8)		774

Gain on sale of BlackRock						Gain on sale of BlackRock			(5,740)
Undistributed earnings of BlackRock	Undistributed earnings of BlackRock			(56)		Undistributed earnings of BlackRock			(174)
Net change in	Net change in					Net change in
Trading securities and other short-term investments	Trading securities and other short-term investments	564		(1,014)		Trading securities and other short-term investments	388		1,132
Loans held for sale	Loans held for sale	(342)		(452)		Loans held for sale	(390)		(533)
Other assets	Other assets	(822)		(6,912)		Other assets	(1,504)		(2,112)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	245		5,376		Accrued expenses and other liabilities	341		1,044
Other	Other	(54)		(189)		Other	(165)		617
Net cash provided (used) by operating activities	Net cash provided (used) by operating activities	$	780	$	(696)	Net cash provided (used) by operating activities	$	3,720	$	2,724
Investing Activities	Investing Activities					Investing Activities
Sales	Sales					Sales
Securities available for sale	Securities available for sale	$	5,558	$	5,447	Securities available for sale	$	15,674	$	12,512

Net proceeds from sale of BlackRock						Net proceeds from sale of BlackRock			14,225
Loans	Loans	406		314		Loans	1,409		1,365
Repayments/maturities	Repayments/maturities					Repayments/maturities
Securities available for sale	Securities available for sale	7,263		4,332		Securities available for sale	23,829		19,850
Securities held to maturity	Securities held to maturity	14		12		Securities held to maturity	67		52
Purchases	Purchases					Purchases
Securities available for sale	Securities available for sale	(22,094)		(11,889)		Securities available for sale	(57,911)		(34,242)
Securities held to maturity	Securities held to maturity	(21)		(4)		Securities held to maturity	(83)		(49)
Loans	Loans	(778)		(100)		Loans	(1,564)		(1,600)
Net change in	Net change in					Net change in
Federal funds sold and resale agreements	Federal funds sold and resale agreements	(136)		965		Federal funds sold and resale agreements	(119)		1,693
Interest-earning deposits with banks	Interest-earning deposits with banks	(988)		3,427		Interest-earning deposits with banks	23,008		(47,546)
Loans	Loans	5,043		(25,758)		Loans	14,001		(10,323)

Net cash paid for acquisition (a)						Net cash paid for acquisition (a)	(10,511)		0
Other	Other	(339)		(125)		Other	(1,538)		(316)
Net cash provided (used) by investing activities	Net cash provided (used) by investing activities	$	(6,072)	$	(23,379)	Net cash provided (used) by investing activities	$	6,262	$	(44,379)

(continued on following page)

48The PNC Financial Services Group, Inc. – Form 10-Q

CONSOLIDATED STATEMENT OF CASH FLOWS

THE PNC FINANCIAL SERVICES GROUP, INC.

(continued from previous page)


Unaudited In millions	Unaudited In millions	Three Months Ended March 31				Unaudited In millions	Nine Months Ended September 30
		2021		2020			2021		2020
Financing Activities	Financing Activities					Financing Activities
Net change in	Net change in					Net change in
Noninterest-bearing deposits	Noninterest-bearing deposits	$	8,096	$	8,857	Noninterest-bearing deposits	$	7,832	$	34,479
Interest-bearing deposits	Interest-bearing deposits	1,718		7,829		Interest-bearing deposits	(9,826)		32,037
Federal funds purchased and repurchase agreements	Federal funds purchased and repurchase agreements	(3)		2,306		Federal funds purchased and repurchase agreements	91		(5,870)
Short-term Federal Home Loan Bank borrowings	Short-term Federal Home Loan Bank borrowings			(400)		Short-term Federal Home Loan Bank borrowings			(6,300)

Other borrowed funds	Other borrowed funds	168		1,044		Other borrowed funds	164		298
Sales/issuances	Sales/issuances					Sales/issuances
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings			9,060		Federal Home Loan Bank borrowings			9,060
Bank notes and senior debt	Bank notes and senior debt			3,486		Bank notes and senior debt	1,692		3,487

Other borrowed funds	Other borrowed funds	188		172		Other borrowed funds	551		458

Preferred stock						Preferred stock	1,485
Common and treasury stock	Common and treasury stock	27		23		Common and treasury stock	58		54
Repayments/maturities	Repayments/maturities					Repayments/maturities
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	(2,000)		(1,510)		Federal Home Loan Bank borrowings	(3,680)		(13,601)
Bank notes and senior debt	Bank notes and senior debt	(1,650)		(2,100)		Bank notes and senior debt	(3,850)		(6,647)

Other borrowed funds	Other borrowed funds	(198)		(172)		Other borrowed funds	(547)		(479)

Preferred stock redemption						Preferred stock redemption			(480)
Acquisition of treasury stock	Acquisition of treasury stock	(66)		(1,522)		Acquisition of treasury stock	(441)		(1,604)
Preferred stock cash dividends paid	Preferred stock cash dividends paid	(57)		(63)		Preferred stock cash dividends paid	(162)		(181)
Common stock cash dividends paid	Common stock cash dividends paid	(493)		(503)		Common stock cash dividends paid	(1,523)		(1,488)

Net cash provided (used) by financing activities	Net cash provided (used) by financing activities	$	5,730	$	26,507	Net cash provided (used) by financing activities	$	(8,156)	$	43,223
Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash	Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash	$	438	$	2,432	Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash	$	1,826	$	1,568
Net cash provided by discontinued operations	Net cash provided by discontinued operations	0		126		Net cash provided by discontinued operations	0		12,244
Net cash provided (used) by continuing operations	Net cash provided (used) by continuing operations	438		2,306		Net cash provided (used) by continuing operations	1,826		(10,676)
Cash and due from banks and restricted cash at beginning of period	Cash and due from banks and restricted cash at beginning of period	7,017		5,061		Cash and due from banks and restricted cash at beginning of period	7,017		5,061
Cash and due from banks and restricted cash at end of period	Cash and due from banks and restricted cash at end of period	$	7,455	$	7,493	Cash and due from banks and restricted cash at end of period	$	8,843	$	6,629

Cash and due from banks and restricted cash	Cash and due from banks and restricted cash					Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	Cash and due from banks at end of period (unrestricted cash)	$	6,698	$	7,161	Cash and due from banks at end of period (unrestricted cash)	$	8,201	$	6,297
Restricted cash	Restricted cash	757		332		Restricted cash	642		332
Cash and due from banks and restricted cash at end of period	Cash and due from banks and restricted cash at end of period	$	7,455	$	7,493	Cash and due from banks and restricted cash at end of period	$	8,843	$	6,629
Supplemental Disclosures	Supplemental Disclosures					Supplemental Disclosures
Interest paid	Interest paid	$	188	$	638	Interest paid	$	395	$	1,071
Income taxes paid	Income taxes paid	$	15	$	36	Income taxes paid	$	402	$	2,762
Income taxes refunded	Income taxes refunded	$	4	$	5	Income taxes refunded	$	68	$	9
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	$	12	$	57	Leased assets obtained in exchange for new operating lease liabilities	$	289	$	71

Non-cash Investing and Financing Items	Non-cash Investing and Financing Items					Non-cash Investing and Financing Items
Transfer from loans to loans held for sale, net	Transfer from loans to loans held for sale, net	$	344	$	313	Transfer from loans to loans held for sale, net	$	677	$	1,026

Transfer from trading securities to investment securities						Transfer from trading securities to investment securities	0		$	289
Transfer from loans to foreclosed assets	Transfer from loans to foreclosed assets	$	7	$	37	Transfer from loans to foreclosed assets	$	22	$	57

(a)Cash paid to acquire BBVA was $11,480 million. The amount of $10,511 million represents the cash paid for the acquisition less $969 million in cash acquired. See Note 2 Acquisition & Divestiture Activity for more detailed information on the BBVA acquisition.

See accompanying Notes To Consolidated Financial Statements.

50The PNC Financial Services Group, Inc. – Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THE PNC FINANCIAL SERVICES GROUP, INC.

Unaudited

See page 95104 for a glossary of certain terms and acronyms used in this Report.

BUSINESS

PNC is one of the largest diversified financial services companies in the U.S. and is headquartered in Pittsburgh, Pennsylvania.

We have businesses engaged in retail banking, including residential mortgage, corporate and institutional banking and asset management, providing many of our products and services nationally. Our retail branch network is located ~~primarily in markets across the Mid-Atlantic, Midwest and Southeast.~~coast-to-coast. We also have strategic international offices in four countries outside the U.S.

NOTE 1 ACCOUNTING POLICIES

Basis of Financial Statement Presentation

Our consolidated financial statements include the accounts of the parent company and its subsidiaries, most of which are wholly-owned, certain partnership interests and VIEs.

On June 1, 2021, we acquired BBVA, a U.S. financial holding company conducting its business operations primarily through its U.S. banking subsidiary, BBVA USA. Our results for the first nine months of 2021 reflect BBVA's acquired business operations for the period since the acquisition closed on June 1, 2021. Our balance sheet at September 30, 2021 includes BBVA's balances. See Note 2 Acquisition and Divestiture Activity for additional information on this acquisition.

We prepared these consolidated financial statements in accordance with GAAP. We have eliminated intercompany accounts and transactions. We have also reclassified certain prior year amounts to conform to the current period presentation, which did not have a material impact on our consolidated financial condition or results of operations.

In our opinion, the unaudited interim consolidated financial statements reflect all normal, recurring adjustments needed to present fairly our results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

We have also considered the impact of subsequent events on these consolidated financial statements.

When preparing these unaudited interim consolidated financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2020 Form 10-K. Reference is made to Note 1 Accounting Policies in our 2020 Form 10-K for a detailed description of significant accounting policies. These interim consolidated financial statements serve to update our 2020 Form 10-K and may not include all information and Notes necessary to constitute a complete set of financial statements. There have been no significant changes to our accounting policies as disclosed in our 2020 Form 10-K.

Use of Estimates

We prepared these consolidated financial statements using financial information available at the time of preparation, which requires us to make estimates and assumptions that affect the amounts reported. Our most significant estimates pertain to the ACL and our fair value ~~measurements.~~measurements, including for the BBVA acquisition. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

50The PNC Financial Services Group, Inc. – Form 10-Q

Recently Adopted Accounting Standards


Accounting Standards Update	Description	Financial Statement Impact
Income Tax Simplification - ASU 2019-12 Issued December 2019	• Simplifies the accounting for income taxes by eliminating certain exceptions in ASC 740, Income Taxes, relating to the approach for intraperiod tax allocation, the recognition of deferred tax liabilities for outside basis differences and the methodology for calculating income taxes in an interim period. • Clarifies areas of the income tax guidance around franchise taxes partially based on income, step-ups in the tax basis of goodwill, and enacted changes in tax laws. • Specifies that an entity is no longer required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements.	• Adopted January 1, 2021. • The adoption of this standard did not impact our consolidated results of operations or our consolidated financial position. PNC will no longer allocate the consolidated amount of current and deferred income tax expense to certain qualifying stand-alone entities, which ~~may~~will impact the presentation of parent company tax expense subsequent to adoption.
Accounting Standards Update	Description	Financial Statement Impact
Reference Rate Reform - ASU 2020-04 Issued March 2020 Reference Rate Reform Scope - ASU 2021-01 Issued January 2021	• Provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform (codified in ASC 848). • Includes optional expedients related to contract modifications that allow an entity to account for modifications (if certain criteria are met) as if the modifications were only minor (assets within the scope of ASC 310, Receivables), were not substantial (assets within the scope of ASC 470, Debt) and/or did not result in remeasurements or reclassifications (assets within the scope of ASC 842, Leases, and other Topics) of the existing contract. • Includes optional expedients related to hedging relationships within the scope of ASC 815, Derivatives & Hedging, whereby changes to the critical terms of a hedging relationship do not require dedesignation if certain criteria are met. In addition, potential sources of ineffectiveness as a result of reference rate reform may be disregarded when performing some effectiveness assessments. • Includes optional expedients and exceptions for contract modifications and hedge accounting that apply to derivative instruments impacted by the market-wide discounting transition. • Allows for a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. • Guidance in these ASUs are effective as of March 12, 2020 through December 31, 2022.	• ASU 2020-04 was adopted March 12, 2020. ASU 2021-01 was retrospectively adopted October 1, 2020. • Refer to Note 1 Accounting Policies in the 2020 Form 10-K for more information on elections of optional expedients that occurred in 2020. • During the first quarter of 2021, we elected to apply certain optional expedients to derivative instruments that were modified in the first quarter due to the adoption of fallback language recommended by the ISDA to address the anticipated cessation of LIBOR. These optional expedients remove the requirement to remeasure contract modifications or dedesignate hedging relationships due to reference rate reform. • As of ~~March 31,~~September 30, 2021, we have not yet elected to apply any optional expedients for contract modifications and hedging relationships to any other financial instruments. However, we plan to elect these optional expedients in the future.
Accounting Standards Update	Description	Financial Statement Impact
SEC Paragraph Amendments – ASU 2020-09 Issued October 2020	• Amends the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered, and issuers’ affiliates whose securities collateralize securities registered or being registered in Regulation S-X. • Improves disclosure requirements for both investors and registrants. • Provides investors with material information given the specific facts and circumstances, making the disclosures easier to understand and reducing the costs and burdens to registrants.	• Adopted January 4, 2021. • In accordance with the requirements of this ASU, we included Exhibit 22 in the Exhibit Index of Item 6 of this Report to disclose PNC’s guarantee of the PNC Capital Trust C preferred securities.

52The PNC Financial Services Group, Inc. – Form 10-Q

NOTE 2 ACQUISITION AND DIVESTITURE ACTIVITY

~~Pending~~ Acquisition of BBVA USA Bancshares, Inc.

On ~~November 16, 2020, we announced a definitive agreement with BBVA, S.A. to acquire~~June 1, 2021, PNC acquired BBVA including its U.S. banking subsidiary, BBVA USA, for ~~a fixed purchase price of $11.6~~$11.5 billion in cash. PNC did not acquire the following entities as part of the acquisition: BBVA Securities, Inc., Propel Venture Partners Fund I, L.P. and BBVA Processing Services, Inc. This transaction has been accounted for as a business combination. Accordingly, the assets and liabilities from BBVA were recorded at fair value as of the acquisition date. The determination of fair value requires management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Fair value estimates related to the assets and liabilities from BBVA are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, loans, certain deposits, certain other assets, customer relationships and the core deposit intangibles.

~~BBVA USA~~As of October 12, 2021, PNC has converted approximately 2.6 million customers, 9,000 employees and over 600 branches across 7 states, merging BBVA USA into PNC Bank.

PNC incurred merger and integration costs of $243 million and $360 million for the three and nine months ended September 30, 2021, in ~~Texas, Alabama, Arizona, California, Florida, Colorado~~connection with the transaction. These costs are recorded as contra-revenue and ~~New Mexico.~~expense on the Consolidated Income Statement. The integration expenses are primarily related to personnel, technology, advisory and legal, with $49 million direct acquisition-related costs. Cumulative costs through September 30, 2021 were $367 million.

The following table includes the preliminary fair value of the identifiable tangible and intangible assets and liabilities from BBVA:

Table 34: Acquisition Consideration


	June 1, 2021
In millions	Fair Value
Fair value of acquisition consideration	$	11,480
Assets
Cash and due from banks	$	969
Interest-earning deposits with banks	13,313
Loans held for sale	463
Investment securities – available for sale	18,358
Net loans	61,439
Equity investments	723
Mortgage servicing rights	35
Core deposit intangibles and other intangible assets	399
Other	3,531
Total assets	$	99,230
Liabilities
Deposits	$	85,562
Borrowed funds	2,449
Accrued expenses and other liabilities	1,285
Total liabilities	$	89,296
Noncontrolling interests	22
Less: Net assets	$	9,912
Goodwill	$	1,568

Preliminary goodwill of $1.6 billion recorded in connection with the transaction isresulted from the reputation, operating model and expertise of BBVA. The amount of goodwill recorded reflects the increased market share and related synergies that are expected to ~~add approximately $102 billion~~result from the acquisition, and represents the excess purchase price over the estimated fair value of the net assets from BBVA. The goodwill was allocated to each of our three business segments on a preliminary basis and is not deductible for income tax purposes. See Note 6 Goodwill and Mortgage Servicing Rights for additional information on the allocation of goodwill to the segments.

52 The PNC Financial Services Group, Inc. – Form 10-Q

The following table includes the fair value and unpaid principal balance of the loans from the BBVA acquisition:

Table 35: Fair Value and Unpaid Principal Balance of Loans from the BBVA Acquisition


	June 1, 2021
In millions	Unpaid Principal Balance		Fair Value
Loans
Commercial
Commercial and industrial	$	29,864	$	29,381
Commercial real estate	10,632		10,313
Equipment lease financing	48		48
Total commercial	40,544		39,742
Consumer
Residential real estate	12,871		12,977
Home equity	2,430		2,423
Automobile	3,916		3,910
Credit card	820		758
Other consumer	1,688		1,629
Total consumer	21,725		21,697
Total	$	62,269	$	61,439

Other intangible assets from the BBVA acquisition as of June 1, 2021 consisted of the following:

Table 36: Intangible Assets


In millions	Fair Value		Weighted Life (years)	Amortization Method
Residential mortgage servicing rights	$	35	5.5	(a)
Core deposits	$	283	10.0	Accelerated
Other	116		9.8	Straight-line
Total core deposits and other	$	399

(a) Intangible asset accounted for at fair value.

The following is a description of the methods used to determine the fair values of significant assets and liabilities.

Cash and Due from Banks and Interest-earning Deposits with Banks

The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Loans Held for Sale

Residential mortgage loans are valued based on quoted market prices, where available, prices for other traded mortgage loans with

similar characteristics, and purchase commitments and bid information received from market participants. The prices are adjusted as

necessary to include the embedded servicing value in ~~total~~the loans and to take into consideration the specific characteristics of certain similar loans.

Personal installment loans are pooled based on delinquency status, and fair value of individual loans is calculated based on traded

consumer unsecured loans, dealer research and loan level performance characteristics.

Available For Sale Securities

All investment securities from the BBVA acquisition were classified within the available for sale portfolio at acquisition. Fair value

estimates for available for sale securities were determined by third-party pricing vendors. The third-party vendors use a variety of

methods when pricing securities that incorporate relevant market data to arrive at an estimate of what a buyer in the marketplace

would pay for a security under current market conditions. These methods include the use of quoted prices for the identical or a similar

security, an alternative market-based approach or an income approach, such as a discounted cash flow pricing model.

Loans

Fair value for loans is based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market

interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated

on an individual loan basis. The PD, LGD, exposure at default and prepayment assumptions are the key factors driving credit losses

which are embedded into the estimated cash flows.

The PNC Financial Services Group, Inc. – Form 10-Q 53

Equity Investments

Equity investments primarily include LIHTC investments and preservation fund investments. The fair value of the LIHTC investments

was estimated based on LIHTC pricing observed for recent transactions in markets where the properties underlying the LIHTC

investments from the BBVA acquisition are located. The fair value of the preservation investments was estimated based on appraisals

and valuations of the properties in the investment portfolio using income and market projections.

Mortgage Servicing Rights

The fair value of mortgage servicing rights from the BBVA acquisition is estimated by using a discounted cash flow valuation model

which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage

loan prepayment rates, discount rates, servicing costs and other factors which are determined based on current market conditions.

Core Deposit Intangible

This intangible asset represents the value of certain client deposit relationships. The fair value was estimated utilizing the cost method.

Appropriate consideration was given to deposit costs including servicing costs, client retention and alternative funding source costs at

the time of acquisition. The discount rate used was derived taking into account the estimated cost of equity, risk-free return rate and

risk premium for the market and specific risk related to the asset’s cash flows. The core deposit intangible is being amortized over 10

years using an accelerated depreciation methodology.

Deposits

The fair values for time deposits were estimated by discounting contractual cash flows using current market rates for instruments with

similar maturities. For deposits with no defined maturity, carrying values approximate fair values.

Borrowed Funds

The fair values of long-term debt instruments were estimated based on quoted market prices.

The following table presents financial results of BBVA included in the Consolidated Income Statement from the date of acquisition through September 30, 2021.

Table 37: BBVA Financial Results


In millions	Four months ended September 30, 2021
Net interest income	$	768
Noninterest income	$	285
Net income	$	378

The following table presents unaudited pro forma results as if the acquisition of BBVA by PNC had occurred on January 1, 2020 and includes the impact of amortizing and accreting certain estimated purchase accounting adjustments such as intangible assets ~~$86 billion of~~as well as fair value adjustments to loans, deposits and ~~$66~~long-term debt. Merger and integration costs of $360 million that have been incurred since January 1, 2021 are included in the pro forma results. PNC's financial results include the divestiture of BlackRock of $4.3 billion ~~of loans to PNC’s Consolidated Balance Sheet and to close~~recorded in ~~mid-2021, subject to customary closing conditions, including receipt of regulatory approvals.~~net income. Additionally, BBVA's financial results through the nine months ended September 30, 2020 included a $2.2 billion goodwill impairment charge recorded in noninterest expense. The pro forma information does not necessarily reflect the results that would have occurred had PNC acquired BBVA on January 1, 2020.

Table 38: Unaudited Pro Forma Results


	Three months ended September 30				Nine months ended September 30
In millions	2021		2020		2021		2020
Net interest income	$	2,837	$	3,099	$	8,812	$	9,349
Noninterest income	$	2,341	$	2,007	$	6,695	$	5,832
Net income	$	1,959	$	1,616	$	6,185	$	2,467

54 The PNC Financial Services Group, Inc. – Form 10-Q

Under CECL, PNC is required to determine whether purchased loans held for investment have experienced more-than-insignificant deterioration in credit quality since origination. PNC considers a variety of factors in connection with the identification of more-than-insignificant deterioration in credit quality, including but not limited to nonperforming status, delinquency, risk ratings, TDR classification, FICO scores and other qualitative factors that indicate deterioration in credit quality since origination. PNC initially measures the amortized cost of a PCD loan by adding the acquisition date estimate of expected credit losses to the loan's purchase price. The initial ACL for PCD loans of $1.1 billion was established through an adjustment to the BBVA loan balance and related purchase accounting mark. Non-PCD loans and PCD loans had a fair value of $52.1 billion and $9.4 billion at the acquisition date and unpaid principal balance of $52.0 billion and $10.3 billion, respectively. In accordance with U.S. GAAP, there was no carryover of the ACL that had been previously recorded by BBVA. Subsequent to acquisition, PNC recorded an ACL on non-PCD loans of $1.0 billion through an increase to the provision for credit losses.

Table 39: PCD Loan Activity


	June 1, 2021
In millions
Principal Balance	$	10,253
ACL at acquisition	(1,102)
Non-credit premium	219
Purchase price	$	9,370

Sale of Equity Investment in BlackRock, Inc.

In May 2020, PNC completed the sale of its 31.6 million shares of BlackRock, Inc. common and preferred stock through a registered secondary offering at a price of $420 per share. In addition, BlackRock repurchased 2.65 million shares from PNC at a price of $414.96 per share. The total proceeds from the sale were $14.2 billion in cash, net of $0.2 billion in expenses, and resulted in a gain on sale of $4.3 billion. Additionally, PNC contributed 500,000 BlackRock shares to the PNC Foundation.

Following the sale and donation, PNC has divested its entire investment in BlackRock and only holds shares of BlackRock stock in a fiduciary capacity for clients of PNC.

The following table summarizes the results from the discontinued operations of BlackRock included in the Consolidated Income Statement:

Table ~~34:~~40: Consolidated Income Statement - Discontinued Operations

~~Three~~Nine months ended ~~March 31~~September 30

In millions

~~2020~~

2020

Noninterest income

~~181~~5,777

Total revenue

~~181~~

5,777

Income from discontinued operations before income taxes and noncontrolling interests

~~181~~

5,777

Income taxes

1,222

Net income from discontinued operations

~~156~~4,555

The ~~net~~following table summarizes the cash ~~provided by operating activities~~flows of discontinued operations ~~was $126 million for the three months ended March 31, 2020 and is~~of BlackRock included in the Consolidated Statement of Cash ~~Flows.~~Flows:

Table 41: Consolidated Statement of Cash Flows - Discontinued Operations


	Nine months ended September 30
In millions	2020
Cash from discontinued operations
Net cash provided (used) by operating activities of discontinued operations	$	(1,981)
Net cash provided by investing activities of discontinued operations	$	14,225

The PNC Financial Services Group, Inc. – Form 10-Q 55 53

NOTE 3 INVESTMENT SECURITIES

The following table summarizes our available for sale and held to maturity portfolios by major security type:

Table ~~35:~~42: Investment Securities Summary


		March 31, 2021 (a)											December 31, 2020 (a)																	September 30, 2021 (a)																	December 31, 2020 (a)
In millions	In millions	Amortized Cost		Unrealized				Fair Value					Amortized Cost				Unrealized								Fair Value		In millions			Amortized Cost				Unrealized								Fair Value					Amortized Cost				Unrealized								Fair Value
				Gains		Losses						Gains							Losses				Gains													Losses										Gains							Losses
Securities Available for Sale	Securities Available for Sale																										Securities Available for Sale
U.S. Treasury and government agencies	U.S. Treasury and government agencies	$	25,670	$	546	$	(266)			$	25,950				$	19,821			$	903			$	(13)			$	20,711	U.S. Treasury and government agencies			$	40,628			$	472			$	(131)			$	40,969				$	19,821			$	903			$	(13)			$	20,711
Residential mortgage-backed	Residential mortgage-backed																										Residential mortgage-backed
Agency	Agency	50,499		1,227		(172)		51,554					47,355				1,566				(10)				48,911		Agency			64,412				957				(184)				65,185					47,355				1,566				(10)				48,911
Non-agency	Non-agency	1,181		252		(9)		1,424					1,272				243				(14)				1,501		Non-agency			1,003				242				(3)				1,242					1,272				243				(14)				1,501
Commercial mortgage-backed	Commercial mortgage-backed																										Commercial mortgage-backed
Agency	Agency	2,219		68		(3)		2,284					2,571				119				(2)				2,688		Agency			2,008				56				(4)				2,060					2,571				119				(2)				2,688
Non-agency	Non-agency	4,191		60		(15)		4,236					3,678				78				(67)				3,689		Non-agency			3,637				48				(14)				3,671					3,678				78				(67)				3,689
Asset-backed	Asset-backed	5,969		89		(17)		6,041					5,060				100				(10)				5,150		Asset-backed			5,999				75				(7)				6,067					5,060				100				(10)				5,150
Other	Other	5,077		238		(5)		5,310					4,415				293				0				4,708		Other			4,722				216				(5)				4,933					4,415				293				0				4,708
Total securities available for sale (b)	Total securities available for sale (b)	$	94,806	$	2,480	$	(487)	$	96,799				$	84,172			$	3,302			$	(116)			$	87,358	Total securities available for sale (b)			$	122,409			$	2,066			$	(348)			$	124,127				$	84,172			$	3,302			$	(116)			$	87,358
Securities Held to Maturity	Securities Held to Maturity																										Securities Held to Maturity
U.S. Treasury and government agencies	U.S. Treasury and government agencies	$	800	$	74			$	874				$	795			$	125							$	920	U.S. Treasury and government agencies			$	809			$	82							$	891				$	795			$	125							$	920

Other	Other	656		36		$	(7)	685					646				42				$	(3)			685		Other			670				29				$	(7)			692					646				42				$	(3)			685
Total securities held to maturity (c)	Total securities held to maturity (c)	$	1,456	$	110	$	(7)	$	1,559				$	1,441			$	167			$	(3)			$	1,605	Total securities held to maturity (c)			$	1,479			$	111			$	(7)			$	1,583				$	1,441			$	167			$	(3)			$	1,605

(a) The accrued interest associated with our available for sale portfolio totaled ~~$244~~$284 million and $238 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

These amounts are included in Other assets on the Consolidated Balance Sheet.

(b) Amortized cost is presented net of allowance of ~~$105~~$130 million and $79 million for securities available for sale at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

(c) Credit ratings represent a primary credit quality indicator used to monitor and manage credit risk. 84% and 85% of our securities held to maturity were rated AAA/AA ~~as of both March 31,~~at September 30, 2021 and December 31, ~~2020.~~2020, respectively.

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Securities available for sale are carried at fair value with net unrealized gains and losses included in Shareholders’ equity as AOCI, unless credit related. Net unrealized gains and losses are determined by taking the difference between the fair value of a security and its amortized cost, net of any allowance. Securities held to maturity are carried at amortized cost less any allowance. Investment securities at ~~March 31,~~September 30, 2021 included ~~$1.8~~$2.4 billion of net unsettled purchases which represent non-cash investing activity, and accordingly, are not reflected on the Consolidated Statement of Cash Flows. The comparable amount for ~~March 31,~~September 30, 2020 was ~~$0.4~~$0.7 billion.

We maintain the allowance for investment securities at levels that we believe to be appropriate as of the balance sheet date based on estimation of expected credit losses on our portfolio. As of ~~March 31,~~September 30, 2021, the allowance for investment securities was ~~$108~~$133 million and primarily related to non-agency commercial mortgage-backed securities in the available for sale portfolio. The provision for credit losses on investment securities ~~totaled $26~~was $25 million and $51 million for the three and nine months ended ~~March 31,~~September 30, 2021. See Note 1 Accounting Policies included in Item 8 of our 2020 Form 10-K for a discussion of the methodologies used to determine the allowance for investment securities.

Table 3643 presents the gross unrealized losses and fair value of securities available for sale that do not have an associated allowance for investment securities ~~as of March~~at September 30, 2021 and December 31, ~~2021.~~2020. These securities are segregated between investments that had been in a continuous unrealized loss position for less than twelve months and twelve months or more, based on the point in time that the fair value declined below the amortized cost basis. All securities included in the table have been evaluated to determine if a credit loss exists. As part of that assessment, as of ~~March 31,~~September 30, 2021, we concluded that we do not intend to sell and believe we will not be required to sell these securities prior to recovery of the amortized cost basis.

5654 The PNC Financial Services Group, Inc. – Form 10-Q

Table ~~36:~~43: Gross Unrealized Loss and Fair Value of Securities Available for Sale Without an Allowance for Credit Losses


		Unrealized loss position less than 12 months				Unrealized loss position 12 months or more				Total					Unrealized loss position less than 12 months				Unrealized loss position 12 months or more				Total
In millions	In millions	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		In millions	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value
March 31, 2021
September 30, 2021														September 30, 2021

U.S. Treasury and government agencies	U.S. Treasury and government agencies	$	(266)	$	12,798					$	(266)	$	12,798	U.S. Treasury and government agencies	$	(131)	$	21,970					$	(131)	$	21,970
Residential mortgage-backed	Residential mortgage-backed													Residential mortgage-backed
Agency	Agency	(170)		19,019		$	(2)	$	75	(172)		19,094		Agency	(177)		31,410		$	(7)	$	1,135	(184)		32,545
Non-agency	Non-agency					(9)		165		(9)		165		Non-agency					(2)		136		(2)		136
Commercial mortgage-backed	Commercial mortgage-backed													Commercial mortgage-backed
Agency	Agency	(2)		190		(1)		69		(3)		259		Agency	(3)		380		(1)		61		(4)		441
Non-agency	Non-agency	(1)		275		(5)		911		(6)		1,186		Non-agency	(1)		661		(2)		489		(3)		1,150
Asset-backed	Asset-backed	(12)		1,707		(5)		794		(17)		2,501		Asset-backed	(5)		1,585		(2)		331		(7)		1,916
Other	Other	(4)		457						(4)		457		Other	(3)		413						(3)		413
Total securities available for sale	Total securities available for sale	$	(455)	$	34,446	$	(22)	$	2,014	$	(477)	$	36,460	Total securities available for sale	$	(320)	$	56,419	$	(14)	$	2,152	$	(334)	$	58,571
December 31, 2020	December 31, 2020													December 31, 2020
U.S. Treasury and government agencies	U.S. Treasury and government agencies	$	(13)	$	603					$	(13)	$	603	U.S. Treasury and government agencies	$	(13)	$	603					$	(13)	$	603
Residential mortgage-backed	Residential mortgage-backed													Residential mortgage-backed
Agency	Agency	(8)		3,152		$	(2)	$	82	(10)		3,234		Agency	(8)		3,152		$	(2)	$	82	(10)		3,234
Non-agency	Non-agency	(7)		119		(7)		73		(14)		192		Non-agency	(7)		119		(7)		73		(14)		192
Commercial mortgage-backed	Commercial mortgage-backed													Commercial mortgage-backed
Agency	Agency	0		0		(2)		149		(2)		149		Agency					(2)		149		(2)		149
Non-agency	Non-agency	(13)		972		(7)		714		(20)		1,686		Non-agency	(13)		972		(7)		714		(20)		1,686
Asset-backed	Asset-backed	(1)		339		(9)		706		(10)		1,045		Asset-backed	(1)		339		(9)		706		(10)		1,045

Total securities available for sale	Total securities available for sale	$	(42)	$	5,185	$	(27)	$	1,724	$	(69)	$	6,909	Total securities available for sale	$	(42)	$	5,185	$	(27)	$	1,724	$	(69)	$	6,909

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table:

Table ~~37:~~44: Gains (Losses) on Sales of Securities Available for Sale


Three months ended March 31 In millions		Gross Gains		Gross Losses		Net Gains		Tax Expense
Nine months ended September 30 In millions										Nine months ended September 30 In millions	Gross Gains		Gross Losses		Net Gains		Tax Expense
2021	2021	$	159	$	(134)	$	25	$	5	2021	$	275	$	(225)	$	50	$	11
2020	2020	$	184	$	(2)	$	182	$	38	2020	$	256	$	(2)	$	254	$	53

The PNC Financial Services Group, Inc. – Form 10-Q 57 55

The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at ~~March 31,~~September 30, 2021:

Table ~~38:~~45: Contractual Maturity of Debt Securities


March 31, 2021 Dollars in millions		1 Year or Less			After 1 Year through 5 Years			After 5 Years through 10 Years			After 10 Years			Total
September 30, 2021 Dollars in millions																	September 30, 2021 Dollars in millions	1 Year or Less			After 1 Year through 5 Years			After 5 Years through 10 Years			After 10 Years			Total
Securities Available for Sale	Securities Available for Sale																Securities Available for Sale
U.S. Treasury and government agencies	U.S. Treasury and government agencies	$	2,685		$	15,164		$	6,237		$	1,584		$	25,670		U.S. Treasury and government agencies	$	3,326		$	24,754		$	10,796		$	1,752		$	40,628
Residential mortgage-backed	Residential mortgage-backed																Residential mortgage-backed
Agency	Agency	2			205			2,248			48,044			50,499			Agency	1			108			2,448			61,855			64,412
Non-agency	Non-agency							2			1,179			1,181			Non-agency							2			1,001			1,003
Commercial mortgage-backed	Commercial mortgage-backed																Commercial mortgage-backed
Agency	Agency				545			662			1,012			2,219			Agency	76			413			778			741			2,008
Non-agency	Non-agency				202			210			3,779			4,191			Non-agency				147			182			3,308			3,637
Asset-backed	Asset-backed	86			2,322			1,274			2,287			5,969			Asset-backed	97			2,104			711			3,087			5,999
Other	Other	733			1,826			1,672			846			5,077			Other	317			2,080			1,593			732			4,722
Total securities available for sale at amortized cost	Total securities available for sale at amortized cost	$	3,506		$	20,264		$	12,305		$	58,731		$	94,806		Total securities available for sale at amortized cost	$	3,817		$	29,606		$	16,510		$	72,476		$	122,409
Fair value	Fair value	$	3,529		$	20,700		$	12,405		$	60,165		$	96,799		Fair value	$	3,836		$	29,919		$	16,673		$	73,699		$	124,127
Weighted-average yield, GAAP basis (a)	Weighted-average yield, GAAP basis (a)	1.68		%	1.58		%	1.72		%	2.62		%	2.25		%	Weighted-average yield, GAAP basis (a)	1.29		%	1.18		%	1.63		%	2.45		%	2.00		%
Securities Held to Maturity	Securities Held to Maturity																Securities Held to Maturity
U.S. Treasury and government agencies	U.S. Treasury and government agencies				$	199		$	315		$	286		$	800		U.S. Treasury and government agencies				$	199		$	321		$	289		$	809

Other	Other	$	71		396			109			80			656			Other	$	126		367			115			62			670
Total securities held to maturity at amortized cost	Total securities held to maturity at amortized cost	$	71		$	595		$	424		$	366		$	1,456		Total securities held to maturity at amortized cost	$	126		$	566		$	436		$	351		$	1,479
Fair value	Fair value	$	72		$	626		$	490		$	371		$	1,559		Fair value	$	128		$	590		$	502		$	363		$	1,583
Weighted-average yield, GAAP basis (a)	Weighted-average yield, GAAP basis (a)	3.70		%	3.21		%	3.93		%	2.48		%	3.28		%	Weighted-average yield, GAAP basis (a)	3.47		%	2.91		%	3.91		%	2.52		%	3.16		%

(a) Weighted-average yields are based on amortized cost with effective yields weighted for the contractual maturity of each security.

At ~~March 31,~~September 30, 2021, there were no securities of a single issuer, other than FNMA and FHLMC, that exceeded 10% of total shareholders’ equity. The FNMA and FHLMC investments had a total amortized cost of ~~$30.8~~$33.1 billion and ~~$18.9~~$21.6 billion and fair value of ~~$31.7~~$33.8 billion and ~~$18.8~~$21.6 billion, respectively.

The following table presents the fair value of securities that have been either pledged to or accepted from others to collateralize outstanding ~~borrowings.~~borrowings:

Table ~~39:~~46: Fair Value of Securities Pledged and Accepted as Collateral


In millions	In millions	March 31 2021		December 31 2020		In millions	September 30 2021		December 31 2020
Pledged to others	Pledged to others	$	21,794	$	22,841	Pledged to others	$	25,252	$	22,841
Accepted from others:	Accepted from others:					Accepted from others:
Permitted by contract or custom to sell or repledge	Permitted by contract or custom to sell or repledge	$	817	$	683	Permitted by contract or custom to sell or repledge	$	800	$	683
Permitted amount repledged to others	Permitted amount repledged to others	$	817	$	683	Permitted amount repledged to others	$	800	$	683

The securities pledged to others include positions held in our portfolio of investment securities, trading securities and securities accepted as collateral from others that we are permitted by contract or custom to sell or repledge, and were used to secure public and trust deposits, repurchase agreements and for other purposes.

5658 The PNC Financial Services Group, Inc. – Form 10-Q

NOTE 4 LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loan Portfolio

Our loan portfolio consists of 2 portfolio segments – Commercial and Consumer. Each of these segments comprises multiple loan classes. Classes are characterized by similarities in risk attributes and the manner in which we monitor and assess credit risk.


Commercial						Consumer

• Commercial and industrial						• Residential real estate~~Home equity~~
• Commercial real estate						• Home equity~~Residential real estate~~
• Equipment lease financing						• Automobile
						• Credit card
						• Education
						• Other consumer

See Note 1 Accounting Policies included in Item 8 of our 2020 Form 10-K for additional information on our loan related policies.

Credit Quality

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk within the loan portfolio based on our defined loan classes. In doing so, we use several credit quality indicators, including trends in delinquency rates, nonperforming status, analysis of PD and LGD ratings, updated credit scores, and originated and updated LTV ratios.

The measurement of delinquency status is based on the contractual terms of each loan. Loans that are 30 days or more past due in terms of payment are considered delinquent. Loan delinquencies include government insured or guaranteed loans, loans accounted for under the fair value option and PCD loans.

~~The following table~~Table 47 presents the composition and delinquency status of our loan portfolio at ~~March 31,~~September 30, 2021 and December 31, 2020. Pursuant to the interagency guidance issued in April 2020 and in connection with the credit reporting rules from the CARES Act, the delinquency status of loans modified due to COVID-19 related hardships aligns with the rules set forth for banks to report delinquency status to the credit agencies. These rules require that COVID-19 related loan modifications be reported as follows:

•if current at the time of modification, the loan remains current throughout the modification period,

•if delinquent at the time of modification and the borrower was not made current as part of the modification, the loan maintains its reported delinquent status during the modification period, or

•if delinquent at the time of modification and the borrower was made current as part of the modification or became current during the modification period, the loan is reported as current.

The PNC Financial Services Group, Inc. – Form 10-Q 59 57

Table ~~40:~~47: Analysis of Loan Portfolio (a) (b)


		Accruing																										Accruing
Dollars in millions	Dollars in millions	Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (c)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (d)			Total Loans (e)(f)			Dollars in millions	Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (c)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (d)			Total Loans (e)(f)
March 31, 2021
September 30, 2021																											September 30, 2021
Commercial	Commercial																										Commercial
Commercial and industrial	Commercial and industrial	$	129,130		$	80		$	13		$	63		$	156			$	512					$	129,798		Commercial and industrial	$	151,703		$	97		$	50		$	56		$	203			$	829					$	152,735
Commercial real estate	Commercial real estate	28,085			12			1						13				221						28,319			Commercial real estate	35,749			68			2			11			81				365						36,195
Equipment lease financing	Equipment lease financing	6,351			21			1						22				16						6,389			Equipment lease financing	6,238			5			4						9				10						6,257
Total commercial	Total commercial	163,566			113			15			63			191				749						164,506			Total commercial	193,690			170			56			67			293				1,204						195,187
Consumer	Consumer																										Consumer
Residential real estate																											Residential real estate	36,504			209			80			296			585			(c)	533			$	592		38,214
Home equity	Home equity	22,706			43			20						63				656			$	68		23,493			Home equity	23,719			45			18						63				592			105			24,479
Residential real estate		20,862			162			73			275			510			(c)	541			505			22,418
Automobile	Automobile	13,305			76			19			6			101				178						13,584			Automobile	16,940			114			23			4			141				184						17,265
Credit card	Credit card	5,561			31			24			52			107				7						5,675			Credit card	6,337			42			27			53			122				7						6,466
Education	Education	2,692			49			25			76			150			(c)							2,842			Education	2,521			45			26			61			132			(c)							2,653
Other consumer	Other consumer	4,464			11			6			7			24				7						4,495			Other consumer	5,898			34			15			11			60				8						5,966
Total consumer	Total consumer	69,590			372			167			416			955				1,389			573			72,507			Total consumer	91,919			489			189			425			1,103				1,324			697			95,043
Total	Total	$	233,156		$	485		$	182		$	479		$	1,146			$	2,138		$	573		$	237,013		Total	$	285,609		$	659		$	245		$	492		$	1,396			$	2,528		$	697		$	290,230
Percentage of total loans	Percentage of total loans	98.38		%	0.20		%	0.08		%	0.20		%	0.48		%		0.90		%	0.24		%	100.00		%	Percentage of total loans	98.41		%	0.23		%	0.08		%	0.17		%	0.48		%		0.87		%	0.24		%	100.00		%
December 31, 2020	December 31, 2020																										December 31, 2020
Commercial	Commercial																										Commercial
Commercial and industrial	Commercial and industrial	$	131,245		$	106		$	26		$	30		$	162			$	666					$	132,073		Commercial and industrial	$	131,245		$	106		$	26		$	30		$	162			$	666					$	132,073
Commercial real estate	Commercial real estate	28,485			6			1						7				224						28,716			Commercial real estate	28,485			6			1						7				224						28,716
Equipment lease financing	Equipment lease financing	6,345			31			5						36				33						6,414			Equipment lease financing	6,345			31			5						36				33						6,414
Total commercial	Total commercial	166,075			143			32			30			205				923						167,203			Total commercial	166,075			143			32			30			205				923						167,203
Consumer	Consumer																										Consumer
Residential real estate																											Residential real estate	20,945			181			78			319			578			(c)	528			$	509		22,560
Home equity	Home equity	23,318			50			21						71				645			$	54		24,088			Home equity	23,318			50			21						71				645			54			24,088
Residential real estate		20,945			181			78			319			578			(c)	528			509			22,560
Automobile	Automobile	13,863			134			34			12			180				175						14,218			Automobile	13,863			134			34			12			180				175						14,218
Credit card	Credit card	6,074			43			30			60			133				8						6,215			Credit card	6,074			43			30			60			133				8						6,215
Education	Education	2,785			55			29			77			161			(c)							2,946			Education	2,785			55			29			77			161			(c)							2,946
Other consumer	Other consumer	4,656			14			10			11			35				7						4,698			Other consumer	4,656			14			10			11			35				7						4,698
Total consumer	Total consumer	71,641			477			202			479			1,158				1,363			563			74,725			Total consumer	71,641			477			202			479			1,158				1,363			563			74,725
Total	Total	$	237,716		$	620		$	234		$	509		$	1,363			$	2,286		$	563		$	241,928		Total	$	237,716		$	620		$	234		$	509		$	1,363			$	2,286		$	563		$	241,928
Percentage of total loans	Percentage of total loans	98.27		%	0.26		%	0.10		%	0.21		%	0.56		%		0.94		%	0.23		%	100.00		%	Percentage of total loans	98.27		%	0.26		%	0.10		%	0.21		%	0.56		%		0.94		%	0.23		%	100.00		%

(a)Amounts in table represent loans held for investment and do not include any associated valuation allowance.

(b)The accrued interest associated with our loan portfolio totaled $0.8 billion and $0.7 billion at ~~both March 31,~~September 30, 2021 and December 31, 2020, ~~and is~~respectively. These amounts are included in Other assets on the Consolidated Balance Sheet.

(c)Past due loan amounts include government insured or guaranteed Residential real estate loans and Education loans totaling $0.4 billion and $0.1 billion at ~~March 31,~~September 30, 2021. Comparable amounts at December 31, 2020 were $0.4 billion and $0.2 billion.

(d)Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population.

(e)~~Net of~~Includes unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling ~~$1.4~~$0.9 billion and $1.3 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

(f)Collateral dependent loans totaled ~~$1.4~~$1.7 billion and $1.5 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. ~~The majority of these loans are within the Home equity and Residential real estate loan classes and are secured by consumer real estate.~~

At ~~March 31,~~September 30, 2021, we pledged ~~$28.6~~$25.6 billion of commercial and other loans to the Federal Reserve Bank and ~~$66.9~~$77.8 billion of residential real estate and other loans to the FHLB as collateral for the ability to borrow, if necessary. The comparable amounts at December 31, 2020 were $30.1 billion and $69.0 billion, respectively. Amounts pledged reflect the unpaid principal balances.

Nonperforming Assets

Nonperforming assets include nonperforming loans and leases, OREO and foreclosed assets. Nonperforming loans are those loans accounted for at amortized cost whose credit quality has deteriorated to the extent that full collection of contractual principal and interest is not ~~probable.~~probable and include nonperforming TDRs and PCD loans. Interest income is not recognized on these loans. Loans accounted for under the fair value option are reported as performing loans, however, when nonaccrual criteria is met interest income is not recognized on these loans. Additionally, certain government insured or guaranteed loans for which we expect to collect ~~substantially all principal and interest are not reported as~~

5860 The PNC Financial Services Group, Inc. – Form 10-Q

substantially all principal and interest are not reported as nonperforming loans and continue to accrue interest. ~~Amounts include nonperforming PCD loans.~~ See Note 1 Accounting Policies included in Item 8 of our 2020 Form 10-K for additional information on our nonperforming loan and lease policies.

The following table presents our nonperforming assets as of ~~March 31,~~September 30, 2021 and December 31, 2020 , respectively:

Table ~~41:~~48: Nonperforming Assets


Dollars in millions	Dollars in millions	March 31 2021			December 31 2020			Dollars in millions	September 30 2021			December 31 2020
Nonperforming loans	Nonperforming loans							Nonperforming loans
Commercial	Commercial	$	749		$	923		Commercial	$	1,204		$	923
Consumer (a)	Consumer (a)	1,389			1,363			Consumer (a)	1,324			1,363
Total nonperforming loans (b)	Total nonperforming loans (b)	2,138			2,286			Total nonperforming loans (b)	2,528			2,286
OREO and foreclosed assets	OREO and foreclosed assets	41			51			OREO and foreclosed assets	31			51
Total nonperforming assets	Total nonperforming assets	$	2,179		$	2,337		Total nonperforming assets	$	2,559		$	2,337
Nonperforming loans to total loans	Nonperforming loans to total loans	0.90		%	0.94		%	Nonperforming loans to total loans	0.87		%	0.94		%
Nonperforming assets to total loans, OREO and foreclosed assets	Nonperforming assets to total loans, OREO and foreclosed assets	0.92		%	0.97		%	Nonperforming assets to total loans, OREO and foreclosed assets	0.88		%	0.97		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.46		%	0.50		%	Nonperforming assets to total assets	0.46		%	0.50		%

(a)Excludes most unsecured consumer loans and lines of credit, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.

(b)Nonperforming loans for which there is no related ALLL totaled ~~$0.7~~$1.0 billion at ~~March 31,~~September 30, 2021 and is primarily ~~comprised of~~include loans with a fair value of collateral that exceeds the amortized cost basis. The comparable amount at December 31, 2020 was $0.8 billion.

Nonperforming loans ~~also~~ include certain loans whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. In accordance with applicable accounting guidance, these loans are considered TDRs. See Note 1 Accounting Policies included in Item 8 of our 2020 Form 10-K and the Troubled Debt Restructurings section of this Note 4 for additional information on TDRs.

Total nonperforming loans in Table 4148 include TDRs of $0.8 billion and $0.9 billion at ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. TDRs that are performing, including consumer credit card TDR loans, are excluded from nonperforming loans and totaled $0.7 billion at both ~~March 31,~~September 30, 2021 and December 31, ~~2020 and are excluded from nonperforming loans.~~2020.

Additional Credit Quality Indicators by Loan Class

Commercial Loan Classes

See Note 4 Loans and Related Allowance for Credit Losses included in Item 8 of our 2020 Form 10-K for additional information related to these loan classes, including discussion around the credit quality indicators that we use to monitor and manage the credit risk associated with each loan class.

The PNC Financial Services Group, Inc. – Form 10-Q 61 59

The following table presents credit quality indicators for the ~~Commercial~~commercial loan classes:

Table ~~42:~~49: Commercial Credit Quality Indicators (a)


		Term Loans by Origination Year																			Term Loans by Origination Year
March 31, 2021 - In millions		2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
September 30, 2021 - In millions																				September 30, 2021 - In millions	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass Rated	Pass Rated	$	13,796	$	19,870	$	12,404	$	7,540	$	5,559	$	10,715	$	53,161	$	51	$	123,096	Pass Rated	$	23,953	$	13,493	$	12,681	$	7,612	$	7,144	$	13,065	$	66,452	$	93	$	144,493
Criticized	Criticized	158		429		725		603		317		594		3,856		20		6,702		Criticized	254		487		878		906		517		997		4,176		27		8,242
Total commercial and industrial	Total commercial and industrial	13,954		20,299		13,129		8,143		5,876		11,309		57,017		71		129,798		Total commercial and industrial	24,207		13,980		13,559		8,518		7,661		14,062		70,628		120		152,735
Commercial real estate	Commercial real estate																			Commercial real estate
Pass Rated	Pass Rated	1,041		3,261		6,034		3,195		2,675		8,673		239				25,118		Pass Rated	2,704		4,531		7,545		4,956		3,006		8,375		429				31,546
Criticized	Criticized	132		137		663		166		487		1,597		19				3,201		Criticized	160		287		1,000		710		657		1,812		23				4,649
Total commercial real estate	Total commercial real estate	1,173		3,398		6,697		3,361		3,162		10,270		258		0		28,319		Total commercial real estate	2,864		4,818		8,545		5,666		3,663		10,187		452				36,195
Equipment lease financing	Equipment lease financing																			Equipment lease financing
Pass Rated	Pass Rated	339		1,360		1,142		868		678		1,711						6,098		Pass Rated	885		1,257		1,026		777		570		1,551						6,066
Criticized	Criticized	11		71		73		79		34		23						291		Criticized	26		59		44		33		23		6						191
Total equipment lease financing	Total equipment lease financing	350		1,431		1,215		947		712		1,734						6,389		Total equipment lease financing	911		1,316		1,070		810		593		1,557						6,257
Total commercial	Total commercial	$	15,477	$	25,128	$	21,041	$	12,451	$	9,750	$	23,313	$	57,275	$	71	$	164,506	Total commercial	$	27,982	$	20,114	$	23,174	$	14,994	$	11,917	$	25,806	$	71,080	$	120	$	195,187


		Term Loans by Origination Year																			Term Loans by Origination Year
December 31, 2020 - In millions	December 31, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans		December 31, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass Rated	Pass Rated	$	31,680	$	13,340	$	8,209	$	5,956	$	4,242	$	7,141	$	54,775	$	53	$	125,396	Pass Rated	$	31,680	$	13,340	$	8,209	$	5,956	$	4,242	$	7,141	$	54,775	$	53	$	125,396
Criticized	Criticized	339		702		578		334		224		351		4,130		19		6,677		Criticized	339		702		578		334		224		351		4,130		19		6,677
Total commercial and industrial	Total commercial and industrial	32,019		14,042		8,787		6,290		4,466		7,492		58,905		72		132,073		Total commercial and industrial	32,019		14,042		8,787		6,290		4,466		7,492		58,905		72		132,073
Commercial real estate	Commercial real estate																			Commercial real estate
Pass Rated	Pass Rated	3,709		6,268		3,426		2,841		2,341		6,792		218				25,595		Pass Rated	3,709		6,268		3,426		2,841		2,341		6,792		218				25,595
Criticized	Criticized	319		548		148		423		400		1,159		124				3,121		Criticized	319		548		148		423		400		1,159		124				3,121
Total commercial real estate	Total commercial real estate	4,028		6,816		3,574		3,264		2,741		7,951		342		0		28,716		Total commercial real estate	4,028		6,816		3,574		3,264		2,741		7,951		342				28,716
Equipment lease financing	Equipment lease financing																			Equipment lease financing
Pass Rated	Pass Rated	1,429		1,202		942		738		405		1,350						6,066		Pass Rated	1,429		1,202		942		738		405		1,350						6,066
Criticized	Criticized	78		92		86		39		22		31						348		Criticized	78		92		86		39		22		31						348
Total equipment lease financing	Total equipment lease financing	1,507		1,294		1,028		777		427		1,381						6,414		Total equipment lease financing	1,507		1,294		1,028		777		427		1,381						6,414
Total commercial	Total commercial	$	37,554	$	22,152	$	13,389	$	10,331	$	7,634	$	16,824	$	59,247	$	72	$	167,203	Total commercial	$	37,554	$	22,152	$	13,389	$	10,331	$	7,634	$	16,824	$	59,247	$	72	$	167,203

(a)Loans in our commercial portfolio are classified as Pass Rated or Criticized based on the regulatory definitions, which are driven by the PD and LGD ratings that we assign. The Criticized classification includes loans that were rated special mention, substandard or doubtful as of ~~March 31,~~September 30, 2021 and December 31, 2020.

Consumer Loan Classes

associated with each loan class.

60 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

~~Home Equity and Residential Real Estate~~

~~The following table presents credit quality indicators for the home equity and residential real estate loan classes:~~

~~Table 43: Home Equity and Residential Real Estate Credit Quality Indicators~~
Term Loans by Origination Year
March 31, 2021 - In millions 2021 2020 2019 2018 2017 Prior Revolving Loans Revolving Loans Converted to Term Total Loans
Home equity
Current estimated LTV ratios .
Greater than 100% $ 8 $ 41 $ 13 $ 10 $ 73 $ 471 $ 254 $ 870
Greater than or equal to 80% to 100% $ 35 253 200 39 27 139 1,384 615 2,692
Less than 80% 196 3,019 1,560 482 712 4,081 6,418 3,463 19,931
Total home equity $ 231 $ 3,280 $ 1,801 $ 534 $ 749 $ 4,293 $ 8,273 $ 4,332 $ 23,493
Updated FICO scores
Greater than or equal to 780 $ 127 $ 1,925 $ 960 $ 273 $ 467 $ 2,640 $ 5,148 $ 1,844 $ 13,384
720 to 779 84 947 505 138 164 865 1,950 1,084 5,737
660 to 719 19 346 264 83 80 428 905 678 2,803
Less than 660 1 61 71 39 37 350 255 628 1,442
No FICO score available 1 1 1 1 10 15 98 127
Total home equity $ 231 $ 3,280 $ 1,801 $ 534 $ 749 $ 4,293 $ 8,273 $ 4,332 $ 23,493
Residential real estate
Current estimated LTV ratios
Greater than 100% 0 $ 4 $ 56 $ 23 $ 28 $ 150 $ 261
Greater than or equal to 80% to 100% $ 346 142 274 70 113 328 1,273
Less than 80% 2,175 7,157 2,995 856 1,485 5,286 19,954
Government insured or guaranteed loans 8 29 25 39 829 930
Total residential real estate $ 2,521 $ 7,311 $ 3,354 $ 974 $ 1,665 $ 6,593 $ 22,418
Updated FICO scores
Greater than or equal to 780 $ 1,409 $ 5,220 $ 2,411 $ 661 $ 1,206 $ 3,564 $ 14,471
720 to 779 1,061 1,767 708 182 308 1,056 5,082
660 to 719 51 267 166 81 85 518 1,168
Less than 660 43 38 23 24 501 629
No FICO score available 6 2 2 3 125 138
Government insured or guaranteed loans 8 29 25 39 829 930
Total residential real estate $ 2,521 $ 7,311 $ 3,354 $ 974 $ 1,665 $ 6,593 $ 22,418

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 61

Term Loans by Origination Year
December 31, 2020 - In millions 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Total Loans
Home equity
Current estimated LTV ratios .
Greater than 100% $ 8 $ 44 $ 18 $ 15 $ 9 $ 88 $ 580 $ 279 $ 1,041
Greater than or equal to 80% to 100% 517 320 59 42 25 158 1,781 591 3,493
Less than 80% 2,909 1,636 513 773 660 3,754 6,433 2,876 19,554
Total home equity $ 3,434 $ 2,000 $ 590 $ 830 $ 694 $ 4,000 $ 8,794 $ 3,746 $ 24,088
Updated FICO scores
Greater than or equal to 780 $ 2,019 $ 1,094 $ 311 $ 525 $ 449 $ 2,467 $ 5,382 $ 1,480 $ 13,727
720 to 779 1,028 558 153 181 145 777 2,137 941 5,920
660 to 719 334 273 86 84 66 402 985 625 2,855
Less than 660 52 74 39 39 33 345 277 620 1,479
No FICO score available 1 1 1 1 1 9 13 80 107
Total home equity $ 3,434 $ 2,000 $ 590 $ 830 $ 694 $ 4,000 $ 8,794 $ 3,746 $ 24,088
Residential real estate
Current estimated LTV ratios
Greater than 100% $ 3 $ 52 $ 26 $ 42 $ 41 $ 160 $ 324
Greater than or equal to 80% to 100% 495 422 127 156 124 307 1,631
Less than 80% 7,491 3,656 992 1,706 1,847 3,991 19,683
Government insured or guaranteed loans 7 28 27 38 57 765 922
Total residential real estate $ 7,996 $ 4,158 $ 1,172 $ 1,942 $ 2,069 $ 5,223 $ 22,560
Updated FICO scores
Greater than or equal to 780 $ 5,425 $ 3,099 $ 814 $ 1,432 $ 1,538 $ 2,551 $ 14,859
720 to 779 2,268 820 220 340 335 818 4,801
660 to 719 252 161 76 98 92 475 1,154
Less than 660 40 48 33 31 41 485 678
No FICO score available 4 2 2 3 6 129 146
Government insured or guaranteed loans 7 28 27 38 57 765 922
Total residential real estate $ 7,996 $ 4,158 $ 1,172 $ 1,942 $ 2,069 $ 5,223 $ 22,560

62 The PNC Financial Services Group, Inc. – Form 10-Q

Residential Real Estate and Home Equity

The following table presents credit quality indicators for the residential real estate loan class:

Table 50: Residential Real Estate Credit Quality Indicators


	Term Loans by Origination Year
September 30, 2021 - In millions	2021		2020		2019		2018		2017		Prior		Total Loans

PNC legacy
Current estimated LTV ratios
Greater than 100%	$	1	$	9	$	12	$	2	$	4	$	71	$	99
Greater than or equal to 80% to 100%	711		143		107		30		34		165		1,190
Less than 80%	9,359		5,802		2,193		638		1,179		4,356		23,527
Government insured or guaranteed loans	1		11		24		21		30		688		775
Total PNC legacy portfolio	10,072		5,965		2,336		691		1,247		5,280		25,591
Acquired loans
Estimated LTV ratios (a)
Greater than 100%	13		23		2		2		4		18		62
Greater than or equal to 80% to 100%	847		1,225		488		241		243		534		3,578
Less than 80%	1,689		1,941		728		287		369		3,248		8,262
No LTV ratio available	207		320		93		26		1				647
Government insured or guaranteed loans			4		14		11		10		35		74
Total acquired loans	2,756		3,513		1,325		567		627		3,835		12,623
Total residential real estate	$	12,828	$	9,478	$	3,661	$	1,258	$	1,874	$	9,115	$	38,214
Updated FICO scores
Greater than or equal to 780	$	7,778	$	6,577	$	2,405	$	701	$	1,170	$	4,549	$	23,180
720 to 779	3,957		1,917		733		250		372		1,670		8,899
660 to 719	498		464		292		145		144		821		2,364
Less than 660	52		123		92		80		85		805		1,237
No FICO score available	542		382		101		50		63		547		1,685
Government insured or guaranteed loans	1		15		38		32		40		723		849
Total residential real estate	$	12,828	$	9,478	$	3,661	$	1,258	$	1,874	$	9,115	$	38,214


	Term Loans by Origination Year
December 31, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Total Loans

Current estimated LTV ratios
Greater than 100%	$	3	$	52	$	26	$	42	$	41	$	160	$	324
Greater than or equal to 80% to 100%	495		422		127		156		124		307		1,631
Less than 80%	7,491		3,656		992		1,706		1,847		3,991		19,683
Government insured or guaranteed loans	7		28		27		38		57		765		922
Total residential real estate	$	7,996	$	4,158	$	1,172	$	1,942	$	2,069	$	5,223	$	22,560
Updated FICO scores
Greater than or equal to 780	$	5,425	$	3,099	$	814	$	1,432	$	1,538	$	2,551	$	14,859
720 to 779	2,268		820		220		340		335		818		4,801
660 to 719	252		161		76		98		92		475		1,154
Less than 660	40		48		33		31		41		485		678
No FICO score available	4		2		2		3		6		129		146
Government insured or guaranteed loans	7		28		27		38		57		765		922
Total residential real estate	$	7,996	$	4,158	$	1,172	$	1,942	$	2,069	$	5,223	$	22,560

(a) LTV ratios, inclusive of CLTV for first lien and certain subordinate lien positions, in the BBVA loan portfolio are calculated on a quarterly basis utilizing the real estate collateral values available at origination. These calculations will be refreshed for our 2021 Form 10-K to update the property values of real estate collateral and calculate an updated current estimated LTV ratio in connection with the conversion of bank systems, which occurred as of October 12, 2021. See Note 4 Loans and Related Allowance for Credit Losses included in Item 8 of our 2020 Form 10-K for additional information on how current estimated LTV ratios are calculated in the PNC legacy portfolio.

The PNC Financial Services Group, Inc. – Form 10-Q 63

The following table presents credit quality indicators for the home equity loan class:

Table 51: Home Equity Credit Quality Indicators


	Term Loans by Origination Year
September 30, 2021 - In millions	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans

PNC legacy
Current estimated LTV ratios
Greater than 100%	$	1	$	16	$	15	$	2	$	2	$	30	$	270	$	91	$	427
Greater than or equal to 80% to 100%	17		97		87		18		13		78		847		570		1,727
Less than 80%	201		2,704		1,315		401		600		3,427		6,473		4,834		19,955
Total PNC legacy portfolio	219		2,817		1,417		421		615		3,535		7,590		5,495		22,109
Acquired loans
Estimated LTV ratios (a)
Greater than 100%											3		68				71
Greater than or equal to 80% to 100%	4		4		2		2		1		14		567		1		595
Less than 80%	7		4		5		5		3		80		1,575		1		1,680
No LTV ratio available	1										4		19				24
Total acquired loans	12		8		7		7		4		101		2,229		2		2,370
Total home equity	$	231	$	2,825	$	1,424	$	428	$	619	$	3,636	$	9,819	$	5,497	$	24,479
Updated FICO scores
Greater than or equal to 780	$	129	$	1,756	$	787	$	221	$	403	$	2,237	$	5,812	$	2,706	$	14,051
720 to 779	69		745		385		107		125		712		2,403		1,405		5,951
660 to 719	24		270		192		65		59		370		1,140		741		2,861
Less than 660	3		52		59		34		31		305		411		561		1,456
No FICO score available	6		2		1		1		1		12		53		84		160
Total home equity	$	231	$	2,825	$	1,424	$	428	$	619	$	3,636	$	9,819	$	5,497	$	24,479


	Term Loans by Origination Year
December 31, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans

Current estimated LTV ratios																	.
Greater than 100%	$	8	$	44	$	18	$	15	$	9	$	88	$	580	$	279	$	1,041
Greater than or equal to 80% to 100%	517		320		59		42		25		158		1,781		591		3,493
Less than 80%	2,909		1,636		513		773		660		3,754		6,433		2,876		19,554
Total home equity	$	3,434	$	2,000	$	590	$	830	$	694	$	4,000	$	8,794	$	3,746	$	24,088
Updated FICO scores
Greater than or equal to 780	$	2,019	$	1,094	$	311	$	525	$	449	$	2,467	$	5,382	$	1,480	$	13,727
720 to 779	1,028		558		153		181		145		777		2,137		941		5,920
660 to 719	334		273		86		84		66		402		985		625		2,855
Less than 660	52		74		39		39		33		345		277		620		1,479
No FICO score available	1		1		1		1		1		9		13		80		107
Total home equity	$	3,434	$	2,000	$	590	$	830	$	694	$	4,000	$	8,794	$	3,746	$	24,088

64 The PNC Financial Services Group, Inc. – Form 10-Q

Automobile, Credit Card, Education and Other Consumer

The following table presents credit quality indicators for the automobile, credit card, education and other consumer loan classes:

Table ~~44:~~52: Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes


		Term Loans by Origination Year																			Term Loans by Origination Year
March 31, 2021 - In millions		2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
September 30, 2021 - In millions																				September 30, 2021 - In millions	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Updated FICO Scores	Updated FICO Scores																			Updated FICO Scores
Automobile	Automobile																			Automobile
FICO score greater than or equal to 780	FICO score greater than or equal to 780	$	775	$	1,545	$	1,701	$	688	$	362	$	216					$	5,287	FICO score greater than or equal to 780	$	2,828	$	1,638	$	1,551	$	624	$	281	$	116					$	7,038
720 to 779	720 to 779	242		1,067		1,380		678		320		157						3,844		720 to 779	1,694		1,157		1,225		595		248		91						5,010
660 to 719	660 to 719	63		591		1,076		590		240		106						2,666		660 to 719	730		705		913		505		195		65						3,113
Less than 660	Less than 660	4		228		723		535		208		89						1,787		Less than 660	220		349		658		504		198		79						2,008
No FICO score available or required (a)																				No FICO score available or required (a)	45		29		13		6		3								96
Total automobile	Total automobile	$	1,084	$	3,431	$	4,880	$	2,491	$	1,130	$	568					$	13,584	Total automobile	$	5,517	$	3,878	$	4,360	$	2,234	$	925	$	351					$	17,265
Credit card	Credit card																			Credit card
FICO score greater than or equal to 780	FICO score greater than or equal to 780													$	1,513	$	3	$	1,516	FICO score greater than or equal to 780													$	1,718	$	2	$	1,720
720 to 779	720 to 779													1,541		11		1,552		720 to 779													1,796		10		1,806
660 to 719	660 to 719													1,621		25		1,646		660 to 719													1,836		22		1,858
Less than 660	Less than 660													817		46		863		Less than 660													925		33		958
No FICO score available or required (a)	No FICO score available or required (a)													94		4		98		No FICO score available or required (a)													121		3		124
Total credit card	Total credit card													$	5,586	$	89	$	5,675	Total credit card													$	6,396	$	70	$	6,466
Education	Education																			Education
FICO score greater than or equal to 780	FICO score greater than or equal to 780	$	1	$	64	$	86	$	70	$	55	$	450					$	726	FICO score greater than or equal to 780	$	12	$	63	$	81	$	66	$	51	$	412					$	685
720 to 779	720 to 779	4		34		44		37		27		202						348		720 to 779	11		31		39		31		22		175						309
660 to 719	660 to 719	4		10		14		14		8		90						140		660 to 719	8		9		12		12		7		75						123
Less than 660	Less than 660	1		1		3		2		2		35						44		Less than 660	2		1		2		2		2		27						36
No FICO score available or required (a)	No FICO score available or required (a)	3		12		9		5		3		1						33		No FICO score available or required (a)	12		11		9		4		1		1						38
Education loans using FICO credit metric	Education loans using FICO credit metric	13		121		156		128		95		778						1,291		Education loans using FICO credit metric	45		115		143		115		83		690						1,191
Other internal credit metrics	Other internal credit metrics											1,551						1,551		Other internal credit metrics											1,462						1,462
Total education	Total education	$	13	$	121	$	156	$	128	$	95	$	2,329					$	2,842	Total education	$	45	$	115	$	143	$	115	$	83	$	2,152					$	2,653
Other consumer	Other consumer																			Other consumer
FICO score greater than or equal to 780	FICO score greater than or equal to 780	$	31	$	135	$	150	$	49	$	15	$	40	$	73	$	1	$	494	FICO score greater than or equal to 780	$	181	$	172	$	162	$	62	$	18	$	38	$	203	$	2	$	838
720 to 779	720 to 779	33		169		206		65		16		23		109				621		720 to 779	229		209		209		85		21		23		200				976
660 to 719	660 to 719	27		111		185		68		13		14		107		0		525		660 to 719	179		170		201		105		21		14		144		1		835
Less than 660	Less than 660	1		34		81		34		7		7		47		1		212		Less than 660	47		73		96		67		14		9		57		1		364
No FICO score available or required (a)																				No FICO score available or required (a)	20		7		1		1				1		24				54
Other consumer loans using FICO credit metric	Other consumer loans using FICO credit metric	92		449		622		216		51		84		336		2		1,852		Other consumer loans using FICO credit metric	656		631		669		320		74		85		628		4		3,067
Other internal credit metrics	Other internal credit metrics	32		29		28		29		26		126		2,365		8		2,643		Other internal credit metrics	64		16		26		19		22		108		2,617		27		2,899
Total other consumer	Total other consumer	$	124	$	478	$	650	$	245	$	77	$	210	$	2,701	$	10	$	4,495	Total other consumer	$	720	$	647	$	695	$	339	$	96	$	193	$	3,245	$	31	$	5,966

The PNC Financial Services Group, Inc. – Form 10-Q 65 63


		Term Loans by Origination Year																			Term Loans by Origination Year
December 31, 2020 - In millions	December 31, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans		December 31, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Updated FICO Scores	Updated FICO Scores																			Updated FICO Scores
Automobile	Automobile																			Automobile
FICO score greater than or equal to 780	FICO score greater than or equal to 780	$	1,807	$	1,915	$	807	$	452	$	246	$	58					$	5,285	FICO score greater than or equal to 780	$	1,807	$	1,915	$	807	$	452	$	246	$	58					$	5,285
720 to 779	720 to 779	1,098		1,581		789		381		167		44						4,060		720 to 779	1,098		1,581		789		381		167		44						4,060
660 to 719	660 to 719	617		1,222		684		288		109		31						2,951		660 to 719	617		1,222		684		288		109		31						2,951
Less than 660	Less than 660	192		776		598		240		87		29						1,922		Less than 660	192		776		598		240		87		29						1,922
Total automobile	Total automobile	$	3,714	$	5,494	$	2,878	$	1,361	$	609	$	162					$	14,218	Total automobile	$	3,714	$	5,494	$	2,878	$	1,361	$	609	$	162					$	14,218
Credit card	Credit card																			Credit card
FICO score greater than or equal to 780	FICO score greater than or equal to 780													$	1,635	$	3	$	1,638	FICO score greater than or equal to 780													$	1,635	$	3	$	1,638
720 to 779	720 to 779													1,724		11		1,735		720 to 779													1,724		11		1,735
660 to 719	660 to 719													1,765		26		1,791		660 to 719													1,765		26		1,791
Less than 660	Less than 660													902		51		953		Less than 660													902		51		953
No FICO score available or required (a)	No FICO score available or required (a)													94		4		98		No FICO score available or required (a)													94		4		98
Total credit card	Total credit card													$	6,120	$	95	$	6,215	Total credit card													$	6,120	$	95	$	6,215
Education	Education																			Education
FICO score greater than or equal to 780	FICO score greater than or equal to 780	$	34	$	90	$	74	$	59	$	50	$	428					$	735	FICO score greater than or equal to 780	$	34	$	90	$	74	$	59	$	50	$	428					$	735
720 to 779	720 to 779	24		46		38		28		20		190						346		720 to 779	24		46		38		28		20		190						346
660 to 719	660 to 719	15		15		14		9		6		90						149		660 to 719	15		15		14		9		6		90						149
Less than 660	Less than 660	3		2		3		2		2		37						49		Less than 660	3		2		3		2		2		37						49
No FICO score available or required (a)	No FICO score available or required (a)	16		10		6		3		0		1						36		No FICO score available or required (a)	16		10		6		3		0		1						36
Education loans using FICO credit metric	Education loans using FICO credit metric	92		163		135		101		78		746						1,315		Education loans using FICO credit metric	92		163		135		101		78		746						1,315
Other internal credit metrics	Other internal credit metrics	0										1,631						1,631		Other internal credit metrics											1,631						1,631
Total education	Total education	$	92	$	163	$	135	$	101	$	78	$	2,377					$	2,946	Total education	$	92	$	163	$	135	$	101	$	78	$	2,377					$	2,946
Other consumer	Other consumer																			Other consumer
FICO score greater than or equal to 780	FICO score greater than or equal to 780	$	162	$	187	$	63	$	21	$	5	$	42	$	86	$	1	$	567	FICO score greater than or equal to 780	$	162	$	187	$	63	$	21	$	5	$	42	$	86	$	1	$	567
720 to 779	720 to 779	197		247		82		22		5		22		123		0		698		720 to 779	197		247		82		22		5		22		123				698
660 to 719	660 to 719	127		210		81		17		3		14		117		1		570		660 to 719	127		210		81		17		3		14		117		1		570
Less than 660	Less than 660	28		86		41		9		2		8		53		1		228		Less than 660	28		86		41		9		2		8		53		1		228
Other consumer loans using FICO credit metric	Other consumer loans using FICO credit metric	514		730		267		69		15		86		379		3		2,063		Other consumer loans using FICO credit metric	514		730		267		69		15		86		379		3		2,063
Other internal credit metrics	Other internal credit metrics	67		33		37		26		60		75		2,334		3		2,635		Other internal credit metrics	67		33		37		26		60		75		2,334		3		2,635
Total other consumer	Total other consumer	$	581	$	763	$	304	$	95	$	75	$	161	$	2,713	$	6	$	4,698	Total other consumer	$	581	$	763	$	304	$	95	$	75	$	161	$	2,713	$	6	$	4,698

(a)Loans with no FICO score available or required generally refers to new accounts issued to borrowers with limited credit history, accounts for which we cannot obtain an updated FICO score (e.g., recent profile changes), cards issued with a business name and/or cards secured by collateral. Management proactively assesses the risk and size of this loan category and, when necessary, takes actions to mitigate the credit risk.

Troubled Debt Restructurings

Table 4553 quantifies the number of loans that were classified as TDRs as well as the change in the loans’ balance as a result of becoming a TDR during the three and nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020. Additionally, the table provides information about the types of TDR concessions. See Note 1 Accounting Policies and Note 4 Loans and Related Allowance for Credit Losses included in Item 8 of our 2020 Form 10-K for additional discussion of TDRs.

66 The PNC Financial Services Group, Inc. – Form 10-Q

Table ~~45:~~53: Financial Impact and TDRs by Concession Type (a)


				Pre-TDR Amortized Cost Basis (b)		Post-TDR Amortized Cost Basis (c)											Pre-TDR Amortized Cost Basis (b)		Post-TDR Amortized Cost Basis (c)
During the three months ended March 31, 2021 Dollars in millions		Number of Loans				Principal Forgiveness		Rate Reduction		Other		Total
Three months ended September 30 Dollars in millions														Three months ended September 30 Dollars in millions	Number of Loans				Pre-TDR Amortized Cost Basis (b)	Principal Forgiveness		Rate Reduction		Other		Total
2021														2021
Commercial	Commercial		19	$	93					$	94	$	94	Commercial		13	$	123						$	139	$	139
Consumer	Consumer		2,096	32				$	16	12		28		Consumer		1,340	31			$	21	7		28
Total TDRs	Total TDRs		2,115	$	125			$	16	$	106	$	122	Total TDRs		1,353	$	154		$	21	$	146	$	167
During the three months ended March 31, 2020 Dollars in millions
2020														2020
Commercial	Commercial		13	$	62	$	6	0		$	37	$	43	Commercial		16	$	95		$	10	$	69	$	79
Consumer	Consumer		3,567	36		0		$	22	10		32		Consumer		2,769	46			26		14		40
Total TDRs	Total TDRs		3,580	$	98	$	6	$	22	$	47	$	75	Total TDRs		2,785	$	141	0	$	36	$	83	$	119


			Pre-TDR Amortized Cost Basis (b)		Post-TDR Amortized Cost Basis (c)
Nine months ended September 30 Dollars in millions	Number of Loans				Principal Forgiveness		Rate Reduction		Other		Total
2021
Commercial		43	$	320					$	315	$	315
Consumer		4,822	86				$	49	28		77
Total TDRs		4,865	$	406	0		$	49	$	343	$	392
2020
Commercial		58	$	304	$	39	$	10	$	231	$	280
Consumer		9,925	139				67		59		126
Total TDRs		9,983	$	443	$	39	$	77	$	290	$	406

(a) Impact of partial charge-offs at TDR date is included in this table.

(b) Represents the amortized cost basis of the loans as of the quarter end prior to TDR designation.

64 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

After a loan is determined to be a TDR, we continue to track its performance under its most recent restructured terms. We consider a TDR to have subsequently defaulted when it becomes 60 days past due after the most recent date the loan was restructured. ~~Loans~~The following table provides a summary of TDRs that ~~were both (i) classified as TDRs within the last twelve months from the balance sheet date, and (ii)~~ subsequently defaulted during the periods presented and were classified as TDRs during the ~~three months ended March 31,~~applicable 12-month period preceding September 30, 2021 and ~~March 31, 2020 totaled $15 million and $29 million, respectively.~~September 30, 2020:

Table 54: Subsequently Defaulted TDRs


In millions	2021		2020
Three months ended September 30	$	6	$	26
Nine months ended September 30	$	25	$	46

The PNC Financial Services Group, Inc. – Form 10-Q 67

Allowance for Credit Losses

We maintain the ACL related to loans at levels that we believe to be appropriate to absorb expected credit losses in the portfolios as of the balance sheet date. See Note 1 Accounting Policies included in Item 8 of our 2020 Form 10-K for a discussion of the methodologies used to determine this allowance. A rollforward of the ACL related to loans follows:

Table ~~46:~~55: Rollforward of Allowance for Credit Losses ~~(a)~~
Three months ended March 31, 2021 Three Months Ended March 31, 2020
In millions Commercial Consumer Total Commercial Consumer Total
Allowance for loan and lease losses
Beginning balance $ 3,337 $ 2,024 $ 5,361 $ 1,812 $ 930 $ 2,742
Adoption of ASU 2016-13 (b) (304) 767 463
Beginning balance, adjusted 3,337 2,024 5,361 1,508 1,697 3,205
Charge-offs (69) (174) (243) (83) (221) (304)
Recoveries 18 79 97 24 68 92
Net (charge-offs) (51) (95) (146) (59) (153) (212)
Provision for (recapture of) credit losses (204) (298) (502) 531 421 952
Other 1 1 (1) (1)
Ending balance $ 3,083 $ 1,631 $ 4,714 $ 1,979 $ 1,965 $ 3,944
Allowance for unfunded lending related commitments (c)
Beginning balance $ 485 $ 99 $ 584 $ 316 $ 2 $ 318
Adoption of ASU 2016-13 (b) 53 126 179
Beginning balance, adjusted 485 99 584 369 128 497
Provision for (recapture of) credit losses (82) 5 (77) (25) (22) (47)
Ending balance $ 403 $ 104 $ 507 $ 344 $ 106 $ 450
Allowance for credit losses at March 31 $ 3,486 $ 1,735 $ 5,221 $ 2,323 $ 2,071 $ 4,394
Allowance for credit losses at December 31 $ 3,822 $ 2,123 $ 5,945 $ 2,128 $ 932 $ 3,060

~~(a) Excludes allowances for investment securities and other financial assets, which together totaled $136 million and $21 million at March 31, 2021 and March 31, 2020, respectively.~~


	Three months ended September 30												Nine months ended September 30
	2021						2020						2021						2020
In millions	Commercial		Consumer		Total		Commercial		Consumer		Total		Commercial		Consumer		Total		Commercial		Consumer		Total
Allowance for loan and lease losses
Beginning balance	$	3,812	$	1,918	$	5,730	$	3,380	$	2,548	$	5,928	$	3,337	$	2,024	$	5,361	$	1,812	$	930	$	2,742
Adoption of ASU 2016-13 (a)							0		0		0		0		0		0		(304)		767		463
Beginning balance, adjusted	3,812		1,918		5,730		3,380		2,548		5,928		3,337		2,024		5,361		1,508		1,697		3,205
Acquisition PCD reserves	(54)		(5)		(59)								774		282		1,056
Charge-offs	(50)		(156)		(206)		(64)		(183)		(247)		(393)		(484)		(877)		(269)		(596)		(865)
Recoveries	29		96		125		26		66		92		81		263		344		65		197		262
Net (charge-offs) (b)	(21)		(60)		(81)		(38)		(117)		(155)		(312)		(221)		(533)		(204)		(399)		(603)
Provision for (recapture of) credit losses	(129)		(100)		(229)		185		(208)		(23)		(193)		(332)		(525)		2,224		925		3,149
Other	(5)		(1)		(6)		1				1		(3)		$	(1)	(4)		0				0
Ending balance	$	3,603	$	1,752	$	5,355	$	3,528	$	2,223	$	5,751	$	3,603	$	1,752	$	5,355	$	3,528	$	2,223	$	5,751
Allowance for unfunded lending related commitments (c)
Beginning balance	$	533	$	112	$	645	$	548	$	114	$	662	$	485	$	99	$	584	$	316	$	2	$	318
Adoption of ASU 2016-13 (a)							0		0		0		0		0		0		53		126		179
Beginning balance, adjusted	533		112		645		548		114		662		485		99		584		369		128		497
Acquisition PCD reserves	0		0		0								43		3		46
Provision for (recapture of) credit losses	2		(1)		1		34		(7)		27		7		9		16		213		(21)		192
Ending balance	$	535	$	111	$	646	$	582	$	107	$	689	$	535	$	111	$	646	$	582	$	107	$	689
Allowance for credit losses at September 30 (d)	$	4,138	$	1,863	$	6,001	$	4,110	$	2,330	$	6,440	$	4,138	$	1,863	$	6,001	$	4,110	$	2,330	$	6,440

~~(b)~~(a) Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020 and our transition from an incurred loss methodology for our reserves to an expected credit loss methodology.

(b) Amounts for the nine months ended September 30, 2021 include amounts attributable to BBVA, primarily related to commercial loans, which were largely the result of required purchase accounting treatment for the BBVA acquisition.

(d) Represents the ALLL plus allowance for unfunded lending related commitments and excludes allowances for investment securities and other financial assets, which together totaled $162 million and $98 million at September 30, 2021 and 2020, respectively.

The ACL at ~~March 31,~~September 30, 2021 totaled ~~$5.2~~$6.0 billion, ~~a $0.7~~an increase of $0.1 billion ~~decrease compared to~~since December 31, 2020. This ~~decrease in reserves~~increase was primarily attributable to the ~~improved economic outlook and portfolio changes,~~addition of reserves related to the BBVA acquisition, partially offset by ~~increases in qualitative factor reserves~~declines due to portfolio ~~sensitivity from specific customers~~changes and ~~segments still impacted by the pandemic.~~an improved economic outlook. The following summarizes the changes in these factors that influenced the current ~~ACL:~~ACL during the nine months ended September 30, 2021:

•Reserves in the current period include expected credit losses on the acquired BBVA loan portfolio.

•Portfolio changes that drove reserve declines included improvements in credit quality along with changes in portfolio composition reflecting both shifts in the portfolio mix and declines in certain legacy PNC loan balances.

•The economic scenarios used for the period ended ~~March 31,~~September 30, 2021 ~~were designed to~~ reflect an improved near-term economic outlook ~~in comparison~~compared to the scenarios used for the period ended December 31, 2020. ~~This~~The overall improvement in the comparison was driven largely by improvements in both the ~~result~~outlook for consumer spending and the labor market, along with the impact from continued vaccine distribution, while also considering the lingering effects of ~~declining~~COVID-19 that slowed the momentum of economic recovery in recent months, as the Delta variant continued to drive increased COVID-19 cases ~~more rapid vaccine distribution,~~throughout the ~~passage of the American Rescue Plan stimulus package~~U.S. and ~~economic momentum fueled by increased consumer spending.~~abroad.

•Portfolio changes primarily reflecting decreases in both commercial and consumer loan balances drove reserve declines at March 31, 2021. Declines were attributable to lower utilization of loan commitments and softer loan production in the commercial portfolio and paydowns outpacing new originations in the consumer portfolio.

•Increases in qualitative factor reserves at March 31, 2021 were attributable to the considerable uncertainty that remains regarding overall lifetime loss content for both our commercial and consumer portfolios, specifically as it relates to our customers that are less likely to benefit from the economic recovery currently underway. For commercial borrowers, there are concerns around industries that are dependent on in-person gatherings, hospitality and tourism. For consumer borrowers, payment behavior once the government stimulus wanes is also difficult to predict.

The ACL at March 31, 2020 totaled $4.4 billion, a $1.3 billion increase in reserves compared to December 31, 2019. This increase reflected the day-one CECL transition adjustment along with the significantly adverse economic impacts of the pandemic and its resulting effects on credit quality and loan growth in the first quarter of 2020.

68The PNC Financial Services Group, Inc. – Form 10-Q65

NOTE 5 LOAN SALE AND SERVICING ACTIVITIES AND VARIABLE INTEREST ENTITIES

Loan Sale and Servicing Activities

As more fully described in Note 5 Loan Sale and Servicing Activities and Variable Interest Entities in Item 8 of our 2020 Form 10-K, we have transferred residential and commercial mortgage loans in securitization or sales transactions in which we have continuing involvement. Our continuing involvement generally consists of servicing, repurchasing previously transferred loans under certain conditions and loss share arrangements, and, in limited circumstances, holding of mortgage-backed securities issued by the securitization SPEs.

We earn servicing and other ancillary fees for our role as servicer and, depending on the contractual terms of the servicing arrangement, we can be terminated as servicer with or without cause. At the consummation date of each type of loan transfer where we retain the servicing, we recognize a servicing right at fair value. See Note 8 Commitments and Note 11 Fair Value for information on our servicing rights, including the carrying value of servicing assets.

The following table provides cash flows associated with our loan sale and servicing activities:

Table ~~47:~~56: Cash Flows Associated with Loan Sale and Servicing Activities


In millions	In millions	Residential Mortgages		Commercial Mortgages (a)			In millions	Residential Mortgages		Commercial Mortgages (a)
Cash Flows - Three months ended March 31, 2021
Cash Flows - Three months ended September 30, 2021							Cash Flows - Three months ended September 30, 2021
Sales of loans (b)	Sales of loans (b)	$	1,239		$	988	Sales of loans (b)	$	2,475		$	881
Repurchases of previously transferred loans (c)	Repurchases of previously transferred loans (c)	$	93		$	33	Repurchases of previously transferred loans (c)	$	45		$	103
Servicing fees (d)	Servicing fees (d)	$	82		$	38	Servicing fees (d)	$	105		$	43
Servicing advances recovered/(funded), net	Servicing advances recovered/(funded), net	$	17		$	(10)	Servicing advances recovered/(funded), net	$	(4)		$	28
Cash flows on mortgage-backed securities held (e)	Cash flows on mortgage-backed securities held (e)	$	2,555		$	29	Cash flows on mortgage-backed securities held (e)	$	2,041		$	18
Cash Flows - Three months ended March 31, 2020
Cash Flows - Three months ended September 30, 2020							Cash Flows - Three months ended September 30, 2020
Sales of loans (b)	Sales of loans (b)	$	1,334		$	493	Sales of loans (b)	$	1,799		$	839
Repurchases of previously transferred loans (c)	Repurchases of previously transferred loans (c)	$	95		$	15	Repurchases of previously transferred loans (c)	$	352		$	107
Servicing fees (d)	Servicing fees (d)	$	85		$	33	Servicing fees (d)	$	85		$	33
Servicing advances recovered/(funded), net	Servicing advances recovered/(funded), net	$	12		$	12	Servicing advances recovered/(funded), net	$	(15)		$	(78)
Cash flows on mortgage-backed securities held (e)	Cash flows on mortgage-backed securities held (e)	$	1,361		$	37	Cash flows on mortgage-backed securities held (e)	$	2,829		$	14

Cash Flows - Nine months ended September 30, 2021							Cash Flows - Nine months ended September 30, 2021
Sales of loans (b)							Sales of loans (b)	$	5,997		$	2,604
Repurchases of previously transferred loans (c)							Repurchases of previously transferred loans (c)	$	189		$	145
Servicing fees (d)							Servicing fees (d)	$	270		$	119
Servicing advances recovered/(funded), net							Servicing advances recovered/(funded), net	$	8		$	(8)
Cash flows on mortgage-backed securities held (e)							Cash flows on mortgage-backed securities held (e)	$	7,256		$	66
Cash Flows - Nine months ended September 30, 2020							Cash Flows - Nine months ended September 30, 2020
Sales of loans (b)							Sales of loans (b)	$	5,328		$	2,666
Repurchases of previously transferred loans (c)							Repurchases of previously transferred loans (c)	$	547		$	132
Servicing fees (d)							Servicing fees (d)	$	251		$	97
Servicing advances recovered/(funded), net							Servicing advances recovered/(funded), net	$	4		$	(206)
Cash flows on mortgage-backed securities held (e)							Cash flows on mortgage-backed securities held (e)	$	6,374		$	65

(a)Represents cash flow information associated with both commercial mortgage loan transfers and servicing activities.

(b)Gains/losses recognized on sales of loans were insignificant for the periods presented.

(c)Includes both residential and commercial mortgage government insured or guaranteed loans eligible for repurchase through the exercise of our ROAP option, as well as residential mortgage loans repurchased due to alleged breaches of origination covenants or representations and warranties made to purchasers.

(d)Includes contractually specified servicing fees, late charges and ancillary fees.

(e)Represents cash flows on securities where we transferred to and/or service loans for a securitization SPE and we hold securities issued by that SPE. The carrying values of such securities held were ~~$15.4~~$15.9 billion, $16.5 billion and ~~$17.1~~$19.5 billion in residential mortgage-backed securities and $0.6 billion, $0.8 billion and $0.8 billion in commercial mortgage-backed securities at ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 2020.

Table 4857 presents information about the principal balances of transferred loans that we service and are not recorded on our Consolidated Balance Sheet. We would only experience a loss on these transferred loans if we were required to repurchase a loan, where the repurchase price exceeded the loan's fair value, due to a breach in representations and warranties or a loss sharing arrangement associated with our continuing involvement with these loans. The estimate of losses related to breaches in representations and warranties was insignificant at ~~March 31,~~September 30, 2021.

The PNC Financial Services Group, Inc. – Form 10-Q 69

Table ~~48:~~57: Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others

In millions Residential Mortgages Commercial Mortgages (a)
March 31, 2021
Total principal balance $ 41,096 $ 41,735
Delinquent loans (b) $ 450 $ 126
December 31, 2020
Total principal balance $ 43,351 $ 40,790
Delinquent loans (b) $ 453 $ 136
Three months ended March 31, 2021
Net charge-offs (c) $ 2 $ 153
Three months ended March 31, 2020
Net charge-offs (c) $ 8 $ 99

66 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~


In millions	Residential Mortgages		Commercial Mortgages (a)
September 30, 2021
Total principal balance	$	43,447	$	40,775
Delinquent loans (b)	$	551	$	71
December 31, 2020
Total principal balance	$	43,351	$	40,790
Delinquent loans (b)	$	453	$	136
Three months ended September 30, 2021
Net charge-offs (c)	$	1	$	2
Three months ended September 30, 2020
Net charge-offs (c)	$	4	$	4
Nine months ended September 30, 2021
Net charge-offs (c)	$	4	$	180
Nine months ended September 30, 2020
Net charge-offs (c)	$	14	$	103

(a)Represents information at the securitization level in which we have sold loans and we are the servicer for the securitization.

(b)Serviced delinquent loans are 90 days or more past due or are in process of foreclosure.

(c)Net charge-offs for Residential mortgages represent credit losses less recoveries distributed and as reported to investors during the period. Net charge-offs for Commercial mortgages represent credit losses less recoveries distributed and as reported by the trustee for commercial mortgage-backed securitizations. Realized losses for Agency securitizations are not reflected as we do not manage the underlying real estate upon foreclosure and, as such, do not have access to loss information.

Variable Interest Entities (VIEs)

As discussed in Note 5 Loan Sale and Servicing Activities and Variable Interest Entities in Item 8 of our 2020 Form 10-K, we are involved with various entities in the normal course of business that are deemed to be VIEs.

The following table provides a summary of non-consolidated VIEs with which we have significant continuing involvement but are not the primary beneficiary. We have excluded certain transactions with non-consolidated VIEs from the balances presented in Table 4958 where we have determined that our continuing involvement is not significant. We do not consider our continuing involvement to be significant when it relates to a VIE where we only invest in securities issued by the VIE and were not involved in the design of the VIE or where no transfers have occurred between us and the VIE. In addition, where we only have lending arrangements in the normal course of business with entities that could be VIEs, we have excluded these transactions with non-consolidated entities from the balances presented in Table ~~49.~~58. These loans are included as part of the asset quality disclosures that we make in Note 4 Loans and Related Allowance for Credit Losses.

Table ~~49:~~58: Non-Consolidated VIEs


In millions	In millions	PNC Risk of Loss (a)		Carrying Value of Assets Owned by PNC			Carrying Value of Liabilities Owned by PNC			In millions	PNC Risk of Loss (a)		Carrying Value of Assets Owned by PNC			Carrying Value of Liabilities Owned by PNC
March 31, 2021
September 30, 2021										September 30, 2021
Mortgage-backed securitizations (b)	Mortgage-backed securitizations (b)	$	16,883	$	16,883	(c)	$	1		Mortgage-backed securitizations (b)	$	17,223	$	17,223	(c)	$	1
Tax credit investments and other	Tax credit investments and other	3,094		3,077		(d)	1,425		(e)	Tax credit investments and other	3,778		3,952		(d)	1,847		(e)
Total	Total	$	19,977	$	19,960		$	1,426		Total	$	21,001	$	21,175		$	1,848
December 31, 2020	December 31, 2020									December 31, 2020
Mortgage-backed securitizations (b)	Mortgage-backed securitizations (b)	$	18,207	$	18,207	(c)	$	1		Mortgage-backed securitizations (b)	$	18,207	$	18,207	(c)	$	1
Tax credit investments and other	Tax credit investments and other	3,121		2,894		(d)	1,198		(e)	Tax credit investments and other	3,121		2,894		(d)	1,198		(e)
Total	Total	$	21,328	$	21,101		$	1,199		Total	$	21,328	$	21,101		$	1,199

(a)Represents loans, investments and other assets related to non-consolidated VIEs, net of collateral (if applicable). The risk of loss excludes any potential tax recapture associated with tax credit investments.

(b)Amounts reflect involvement with securitization SPEs where we transferred to and/or service loans for an SPE and we hold securities issued by that SPE. Values disclosed in the PNC Risk of Loss column represent our maximum exposure to loss for those securities’ holdings.

(c)Included in Investment securities, Mortgage servicing rights and Other assets on our Consolidated Balance Sheet.

(d)Included in Investment securities, Loans, Equity investments and Other assets on our Consolidated Balance Sheet.

(e)Included in Deposits and Other liabilities on our Consolidated Balance Sheet.

We make certain equity investments in various tax credit limited partnerships or LLCs. The purpose of these investments is to achieve a satisfactory return on capital and to assist us in achieving goals associated with the CRA. Within Income taxes, during both the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, we recognized ~~less than~~ $0.1 billion or less of amortization, tax credits and other tax benefits associated with qualified investments in low income housing tax credits.

70 The PNC Financial Services Group, Inc. – Form 10-Q

NOTE 6 GOODWILL AND MORTGAGE SERVICING RIGHTS

Goodwill

Allocations of Goodwill by business segment during 2021 and 2020 follow:

Table 59: Goodwill by Business Segment


In millions	Retail Banking		Corporate & Institutional Banking		Asset Management Group		Total
September 30, 2021 (a)	$	6,459	$	4,239	$	187	$	10,885
December 31, 2020	$	5,795	$	3,374	$	64	$	9,233

(a)Includes $1.6 billion of goodwill from the BBVA acquisition.

Goodwill increased during the nine months ended September 30, 2021 primarily as a result of the acquisition of BBVA. Goodwill was recorded and allocated to each segment on a preliminary basis and is subject to change based on new information obtained related to the close date or reallocation of assets and liabilities to each segment. See Note ~~6 Goodwill~~2 Acquisition and ~~Mortgage Servicing Rights~~Divestiture Activities for additional information.

We review goodwill in each of our reporting units for impairment at least annually, in the ~~Notes to Consolidated Financial Statements included in Item 8~~fourth quarter, or more frequently if events occur or circumstances have changed significantly from the annual test date. Based on results of our ~~2020 Form 10-K~~review for ~~more information regarding our goodwill.~~triggering events, there were no impairment charges related to goodwill in the first nine months of 2021 or in 2020.

Mortgage Servicing Rights

We recognize the right to service mortgage loans for others as an intangible asset when the servicing income we receive is more than ~~adequate compensation.~~our projected servicing costs. MSRs are purchased or originated when loans are sold with servicing retained. MSRs totaled ~~$1.7~~$1.8 billion and $1.2 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, 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).

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 67

See the Sensitivity Analysis section of this Note 6 for more detail on our fair value measurement of MSRs. See Note 15 Fair Value and Note 6 Goodwill and Mortgage Servicing Rights in the Notes to Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K for more detail on our fair value measurement and our accounting of MSRs.

Changes in the commercial and residential MSRs follow:

Table ~~50:~~60: Mortgage Servicing Rights


		Commercial MSRs				Residential MSRs					Commercial MSRs				Residential MSRs
In millions	In millions	2021		2020		2021		2020		In millions	2021		2020		2021		2020
January 1	January 1	$	569	$	649	$	673	$	995	January 1	$	569	$	649	$	673	$	995
Additions:	Additions:									Additions:
BBVA Acquisition										BBVA Acquisition					35
From loans sold with servicing retained	From loans sold with servicing retained	18		11		13		10		From loans sold with servicing retained	61		65		61		34
Purchases	Purchases	13		19		71		18		Purchases	26		31		400		113
Changes in fair value due to:	Changes in fair value due to:									Changes in fair value due to:
Time and payoffs (a)	Time and payoffs (a)	(28)		(35)		(73)		(39)		Time and payoffs (a)	(87)		(87)		(242)		(136)
Other (b)	Other (b)	129		(167)		295		(379)		Other (b)	134		(143)		203		(408)
March 31		$	701	$	477	$	979	$	605
Related unpaid principal balance at March 31		$	256,198	$	225,769	$	117,287	$	118,104
Servicing advances at March 31		$	447	$	145	$	126	$	99
September 30										September 30	$	703	$	515	$	1,130	$	598
Related unpaid principal balance at September 30										Related unpaid principal balance at September 30	$	263,862	$	234,897	$	139,154	$	119,158
Servicing advances at September 30										Servicing advances at September 30	$	445	$	363	$	139	$	107

(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.

The PNC Financial Services Group, Inc. – Form 10-Q 71

Sensitivity Analysis

The fair value of commercial and residential MSRs and significant inputs to the valuation models as of ~~March 31,~~September 30, 2021 and December 31, 2020 are shown in Tables 5161 and ~~52.~~62. 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 5161 and ~~52.~~62. 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 (e.g., 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 ~~51:~~61: Commercial Mortgage Servicing Rights – Key Valuation Assumptions


Dollars in millions	Dollars in millions	March 31 2021			December 31 2020			Dollars in millions	September 30 2021			December 31 2020
Fair value	Fair value	$	701		$	569		Fair value	$	703		$	569
Weighted-average life (years)	Weighted-average life (years)	4.7			4.4			Weighted-average life (years)	4.4			4.4
Weighted-average constant prepayment rate	Weighted-average constant prepayment rate	4.87		%	4.87		%	Weighted-average constant prepayment rate	5.46		%	4.87		%
Decline in fair value from 10% adverse change	Decline in fair value from 10% adverse change	$	11		$	9		Decline in fair value from 10% adverse change	$	10		$	9
Decline in fair value from 20% adverse change	Decline in fair value from 20% adverse change	$	22		$	18		Decline in fair value from 20% adverse change	$	20		$	18
Effective discount rate	Effective discount rate	7.39		%	7.33		%	Effective discount rate	7.55		%	7.33		%
Decline in fair value from 10% adverse change	Decline in fair value from 10% adverse change	$	20		$	15		Decline in fair value from 10% adverse change	$	19		$	15
Decline in fair value from 20% adverse change	Decline in fair value from 20% adverse change	$	40		$	31		Decline in fair value from 20% adverse change	$	39		$	31

68 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

Table ~~52:~~62: Residential Mortgage Servicing Rights – Key Valuation Assumptions


Dollars in millions	Dollars in millions	March 31 2021				December 31 2020				Dollars in millions	September 30 2021				December 31 2020
Fair value	Fair value	$	979			$	673			Fair value	$	1,130			$	673
Weighted-average life (years)	Weighted-average life (years)	6.2				3.8				Weighted-average life (years)	5.9				3.8
Weighted-average constant prepayment rate	Weighted-average constant prepayment rate	10.72		%		21.13		%		Weighted-average constant prepayment rate	11.49		%		21.13		%
Decline in fair value from 10% adverse change	Decline in fair value from 10% adverse change	$	38			$	41			Decline in fair value from 10% adverse change	$	47			$	41
Decline in fair value from 20% adverse change	Decline in fair value from 20% adverse change	$	79			$	82			Decline in fair value from 20% adverse change	$	94			$	82
Weighted-average option adjusted spread	Weighted-average option adjusted spread	944			bps	922			bps	Weighted-average option adjusted spread	909			bps	922			bps
Decline in fair value from 10% adverse change	Decline in fair value from 10% adverse change	$	34			$	20			Decline in fair value from 10% adverse change	$	37			$	20
Decline in fair value from 20% adverse change	Decline in fair value from 20% adverse change	$	66			$	38			Decline in fair value from 20% adverse change	$	72			$	38

Fees from mortgage loan servicing, which includes contractually specified servicing fees, late fees and ancillary fees were ~~$0.1~~$0.2 billion for the three months ended ~~March 31,~~September 30, 2021 and 2020 and $0.4 billion for the nine months ended September 30, 2021 and 2020. 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 within Noninterest income on our Consolidated Income Statement in Corporate services and Residential mortgage, respectively.

72 The PNC Financial Services Group, Inc. – Form 10-Q

NOTE 7 LEASES

PNC's lessor arrangements primarily consist of direct financing, sales-type and operating leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term. For more information on lease accounting see Note 1 Accounting Policies and Note 7 Leases in the Notes to Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K.

Table ~~53:~~63: Lessor Income


		Three months ended March 31				Three months ended September 30				Nine months ended September 30
In millions	In millions	2021		2020			In millions	2021		2020		2021		2020
Product	Product						Product
Sales-type leases and direct financing leases (a)	Sales-type leases and direct financing leases (a)	$	62	$	71		Sales-type leases and direct financing leases (a)	$	61	$	66	$	184	$	207
Operating leases (b)	Operating leases (b)	20		27			Operating leases (b)	18		22		58		74
Lessor income	Lessor income	$	82	$	98		Lessor income	$	79	$	88	$	242	$	281

(a)Included in Loan interest income on the Consolidated Income Statement.

(b)Included in Corporate services on the Consolidated Income Statement.

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 69

NOTE 8 COMMITMENTS

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 other commitments as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Table ~~54:~~64: Commitments to Extend Credit and Other Commitments


In millions	In millions	March 31 2021		December 31 2020		In millions	September 30 2021		December 31 2020
Commitments to extend credit	Commitments to extend credit					Commitments to extend credit
Commercial	Commercial	$	154,482	$	153,089	Commercial	$	177,033	$	153,089
Home equity lines of credit	Home equity lines of credit	16,604		16,626		Home equity lines of credit	19,300		16,626
Credit card	Credit card	31,132		31,019		Credit card	34,488		31,019
Other	Other	8,195		7,087		Other	10,693		7,087
Total commitments to extend credit	Total commitments to extend credit	210,413		207,821		Total commitments to extend credit	241,514		207,821
Net outstanding standby letters of credit (a)	Net outstanding standby letters of credit (a)	9,090		9,053		Net outstanding standby letters of credit (a)	9,495		9,053
Standby bond purchase agreements (b)	Standby bond purchase agreements (b)	1,543		1,448		Standby bond purchase agreements (b)	1,300		1,448
Other commitments (c)	Other commitments (c)	2,733		2,046		Other commitments (c)	2,745		2,046
Total commitments to extend credit and other commitments	Total commitments to extend credit and other commitments	$	223,779	$	220,368	Total commitments to extend credit and other commitments	$	255,054	$	220,368

(a)Net outstanding standby letters of credit include ~~$3.7~~$3.4 billion and $3.8 billion at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, which support remarketing programs.

(b)We enter into standby bond purchase agreements to support municipal bond obligations.

(c)Includes $1.7 billion and $1.1 billion related to investments in qualified affordable housing projects for ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively.

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 generally contain termination clauses in the event the customer’s 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 97% of our net outstanding standby letters of credit were rated as Pass as of ~~March 31,~~September 30, 2021, with the remainder rated as Criticized. An internal credit rating of Pass indicates the expected risk of loss is currently low, while a rating of Criticized 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 ~~March 31,~~September 30, 2021 had terms ranging from less than one year to ~~six~~eight years.

The PNC Financial Services Group, Inc. – Form 10-Q 73

As of ~~March 31,~~September 30, 2021, assets of ~~$1.3~~$1.5 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 $0.1 billion at ~~March 31,~~September 30, 2021 and is included in Other liabilities on our Consolidated Balance Sheet.

7074 The PNC Financial Services Group, Inc. – Form 10-Q

NOTE 9 TOTAL EQUITY AND OTHER COMPREHENSIVE INCOME

Activity in total equity for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 is as follows:

Table ~~55:~~65: Rollforward of Total Equity


			Shareholders’ Equity																		Shareholders’ Equity
In millions	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		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
Three months ended	Three months ended																		Three months ended
Balance at December 31, 2019 (a)		433	$	2,712	$	3,993	$	12,376	$	42,215	$	799	$	(12,781)	$	29	$	49,343
Cumulative effect of ASU 2016-13 adoption (b)									(671)								(671)
Balance at January 1, 2020 (a)		433	$	2,712	$	3,993	$	12,376	$	41,544	$	799	$	(12,781)	$	29	$	48,672
Balance at June 30, 2020 (a)																			Balance at June 30, 2020 (a)	425	$	2,712	$	3,995	$	12,289	$	44,986	$	3,069	$	(14,128)	$	25	$	52,948
Net income	Net income								908						7		915		Net income								1,519						13		1,532
Other comprehensive income, net of tax	Other comprehensive income, net of tax										1,719						1,719		Other comprehensive income, net of tax										(72)						(72)
Cash dividends declared - Common	Cash dividends declared - Common								(503)								(503)		Cash dividends declared - Common								(494)								(494)
Cash dividends declared - Preferred	Cash dividends declared - Preferred								(63)								(63)		Cash dividends declared - Preferred								(63)								(63)
Preferred stock discount accretion	Preferred stock discount accretion				1				(1)										Preferred stock discount accretion				1				(1)

Treasury stock activity	Treasury stock activity	(9)					49						(1,359)				(1,310)		Treasury stock activity	(1)					1						(88)				(87)
Preferred stock redemption - Series Q (b)																			Preferred stock redemption - Series Q (b)				(480)												(480)
Other	Other						(131)								(9)		(140)		Other						30								(4)		26
Balance at March 31, 2020 (a)		424	$	2,712	$	3,994	$	12,294	$	41,885	$	2,518	$	(14,140)	$	27	$	49,290

Balance at December 31, 2020 (a)		424	$	2,713	$	3,517	$	12,367	$	46,848	$	2,770	$	(14,205)	$	31	$	54,041
Balance at September 30, 2020 (a)																			Balance at September 30, 2020 (a)	424	$	2,712	$	3,516	$	12,320	$	45,947	$	2,997	$	(14,216)	$	34	$	53,310
Balance at June 30, 2021 (a)																			Balance at June 30, 2021 (a)	425	$	2,713	$	3,519	$	12,409	$	48,663	$	1,463	$	(14,140)	$	58	$	54,685
Net income	Net income								1,816						10		1,826		Net income								1,474						16		1,490
Other comprehensive income (loss), net of tax											(1,480)						(1,480)
Other comprehensive income, net of tax																			Other comprehensive income, net of tax										(384)						(384)
Cash dividends declared - Common	Cash dividends declared - Common								(493)								(493)		Cash dividends declared - Common								(538)								(538)
Cash dividends declared - Preferred	Cash dividends declared - Preferred								(57)								(57)		Cash dividends declared - Preferred								(57)								(57)
Preferred stock discount accretion	Preferred stock discount accretion				1				(1)										Preferred stock discount accretion				1				(1)								0
Preferred stock issuance (c)																			Preferred stock issuance (c)				1,489												1,489

Treasury stock activity	Treasury stock activity	1					69						59				128		Treasury stock activity	(2)					5						(387)				(382)

Other	Other						(75)								(11)		(86)		Other						30								(36)		(6)
Balance at March 31, 2021 (a)		425	$	2,713	$	3,518	$	12,361	$	48,113	$	1,290	$	(14,146)	$	30	$	53,879
Balance at September 30, 2021 (a)																			Balance at September 30, 2021 (a)	423	$	2,713	$	5,009	$	12,444	$	49,541	$	1,079	$	(14,527)	$	38	$	56,297
Nine months ended																			Nine months ended
Balance at December 31, 2019 (a)																			Balance at December 31, 2019 (a)	433	$	2,712	$	3,993	$	12,376	$	42,215	$	799	$	(12,781)	$	29	$	49,343
Cumulative effect of ASU 2016-13 adoption (d)																			Cumulative effect of ASU 2016-13 adoption (d)								(671)								(671)
Balance at January 1, 2020 (a)																			Balance at January 1, 2020 (a)	433	$	2,712	$	3,993	$	12,376	$	41,544	$	799	$	(12,781)	$	29	$	48,672
Net income																			Net income								6,075						27		6,102
Other comprehensive income, net of tax																			Other comprehensive income, net of tax										2,198						2,198
Cash dividends declared - Common																			Cash dividends declared - Common								(1,488)								(1,488)
Cash dividends declared - Preferred																			Cash dividends declared - Preferred								(181)								(181)
Preferred stock discount accretion																			Preferred stock discount accretion				3				(3)
Common stock activity																			Common stock activity						11										11
Treasury stock activity																			Treasury stock activity	(9)					52						(1,435)				(1,383)
Preferred stock redemption - Series Q (b)																			Preferred stock redemption - Series Q (b)				(480)												(480)
Other																			Other						(119)								(22)		(141)
Balance at September 30, 2020 (a)																			Balance at September 30, 2020 (a)	424	$	2,712	$	3,516	$	12,320	$	45,947	$	2,997	$	(14,216)	$	34	$	53,310
Balance at December 31, 2020 (a)																			Balance at December 31, 2020 (a)	424	$	2,713	$	3,517	$	12,367	$	46,848	$	2,770	$	(14,205)	$	31	$	54,041
Net income																			Net income								4,381						38		4,419
Other comprehensive income, net of tax																			Other comprehensive income, net of tax										(1,691)						(1,691)
Cash dividends declared - Common																			Cash dividends declared - Common								(1,523)								(1,523)
Cash dividends declared - Preferred																			Cash dividends declared - Preferred								(162)								(162)
Preferred stock discount accretion																			Preferred stock discount accretion				3				(3)
Preferred stock issuance (c)																			Preferred stock issuance (c)				1,489												1,489
Common stock activity																			Common stock activity						12										12
Treasury stock activity																			Treasury stock activity	(1)					78						(322)				(244)

Other																			Other						(13)								(31)		(44)
Balance at September 30, 2021 (a)																			Balance at September 30, 2021 (a)	423	$	2,713	$	5,009	$	12,444	$	49,541	$	1,079	$	(14,527)	$	38	$	56,297

(a)The par value of our preferred stock outstanding was less than $0.5 million at each date and, therefore, is excluded from this presentation.

(b)On September 1, 2020, PNC redeemed all 4,800 shares of its Series Q Preferred Stock, as well as all 19.2 million Depositary Shares representing fractional interests in such shares.

(c)On September 13, 2021, PNC issued 1,500,000 depositary shares each representing 1/100th ownership in a share of 3.400% fixed-rate reset non-cumulative perpetual preferred stock, Series T, with a par value of $1 per share.

(d)Represents the cumulative effect of adopting ASU 2016-13 - Financial Instruments - Credit Losses.

The PNC Financial Services Group, Inc. – Form 10-Q 7571

Details of other comprehensive income (loss) are as follows:

Table ~~56:~~66: Other Comprehensive Income (Loss)


		Three months ended March 31												Three months ended September 30						Nine months ended September 30
		2021						2020							2021	2020						2021						2020
In millions	In millions	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax					In millions	Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax		Pre-tax		Tax effect		After-tax
Debt securities	Debt securities																Debt securities
Net unrealized gains (losses) on securities	Net unrealized gains (losses) on securities	$	(1,181)	$	278	$	(903)	$	1,662	$	(381)	$	1,281				Net unrealized gains (losses) on securities	$	(320)	$	76	$	(244)	$	42	$	(9)	$	33	$	(1,446)	$	341	$	(1,105)	$	2,283	$	(525)	$	1,758
Less: Net realized gains (losses) reclassified to earnings (a)	Less: Net realized gains (losses) reclassified to earnings (a)	13		(3)		10		182		(42)		140					Less: Net realized gains (losses) reclassified to earnings (a)	3		(1)		2		32		(7)		25		25		(6)		19		255		(59)		196
Net change	Net change	(1,194)		281		(913)		1,480		(339)		1,141					Net change	(323)		77		(246)		10		(2)		8		(1,471)		347		(1,124)		2,028		(466)		1,562
Cash flow hedge derivatives	Cash flow hedge derivatives																Cash flow hedge derivatives
Net unrealized gains (losses) on cash flow hedge derivatives	Net unrealized gains (losses) on cash flow hedge derivatives	(640)		151		(489)		830		(190)		640					Net unrealized gains (losses) on cash flow hedge derivatives	(59)		14		(45)		15		(3)		12		(369)		87		(282)		960		(221)		739
Less: Net realized gains (losses) reclassified to earnings (a)	Less: Net realized gains (losses) reclassified to earnings (a)	135		(32)		103		45		(10)		35					Less: Net realized gains (losses) reclassified to earnings (a)	115		(27)		88		134		(30)		104		358		(84)		274		282		(65)		217
Net change	Net change	(775)		183		(592)		785		(180)		605					Net change	(174)		41		(133)		(119)		27		(92)		(727)		171		(556)		678		(156)		522
Pension and other postretirement benefit plan adjustments	Pension and other postretirement benefit plan adjustments																Pension and other postretirement benefit plan adjustments
Net pension and other postretirement benefit plan activity and other reclassified to earnings (b)	Net pension and other postretirement benefit plan activity and other reclassified to earnings (b)	30		(7)		23		12		(3)		9					Net pension and other postretirement benefit plan activity and other reclassified to earnings (b)	2		0		2		2		0		2		(11)		3		(8)		(3)		1		(2)
Net change	Net change	30		(7)		23		12		(3)		9					Net change	2		0		2		2		0		2		(11)		3		(8)		(3)		1		(2)
Other	Other																Other
Net unrealized gains (losses) on other transactions	Net unrealized gains (losses) on other transactions	1		1		2		8		(18)		(10)					Net unrealized gains (losses) on other transactions	1		(8)		(7)		0		10		10		2		(5)		(3)		10		(9)		1
Net change	Net change	1		1		2		8		(18)		(10)					Net change	1		(8)		(7)		0		10		10		2		(5)		(3)		10		(9)		1
Total other comprehensive income (loss) from continuing operations	Total other comprehensive income (loss) from continuing operations	(1,938)		458		(1,480)		2,285		(540)		1,745					Total other comprehensive income (loss) from continuing operations	(494)		110		(384)		(107)		35		(72)		(2,207)		516		(1,691)		2,713		(630)		2,083
Total other comprehensive income (loss) from discontinued operations	Total other comprehensive income (loss) from discontinued operations							(34)		8		(26)					Total other comprehensive income (loss) from discontinued operations	0						0		0				0		0				148		(33)		115
Total other comprehensive income (loss)	Total other comprehensive income (loss)	$	(1,938)	$	458	$	(1,480)	$	2,251	$	(532)	$	1,719				Total other comprehensive income (loss)	$	(494)	$	110	$	(384)	$	(107)	$	35	$	(72)	$	(2,207)	$	516	$	(1,691)	$	2,861	$	(663)	$	2,198

(a)Reclassifications for pre-tax debt securities and cash flow hedges are recorded in interest income and noninterest income on the Consolidated Income Statement.

(b)Reclassifications include amortization of actuarial losses (gains) and amortization of prior period services costs (credits) which are recorded in noninterest expense on the Consolidated Income Statement.

7276 The PNC Financial Services Group, Inc. – Form 10-Q

Table ~~57:~~67: Accumulated Other Comprehensive Income (Loss) Components


In millions, after-tax	In millions, after-tax	Debt securities		Cash flow hedge derivatives		Pension and other postretirement benefit plan adjustments		Other		Accumulated other Comprehensive Income from Continuing Operations		Accumulated other Comprehensive Income from Discontinued Operations		Total		In millions, after-tax	Debt securities		Cash flow hedge derivatives		Pension and other postretirement benefit plan adjustments		Other		Accumulated other Comprehensive Income from Continuing Operations		Accumulated other Comprehensive Income from Discontinued Operations		Total
Three months ended	Three months ended															Three months ended
Balance at June 30, 2020																Balance at June 30, 2020	$	2,621	$	890	$	(412)	$	(30)	$	3,069	0		$	3,069
Net activity																Net activity	8		(92)		2		10		(72)		0		(72)
Balance at September 30, 2020																Balance at September 30, 2020	$	2,629	$	798	$	(410)	$	(20)	$	2,997	0		$	2,997
Balance at June 30, 2021																Balance at June 30, 2021	$	1,584	$	236	$	(355)	$	(2)	$	1,463	0		$	1,463
Net activity																Net activity	(246)		(133)		2		(7)		(384)		0		(384)
Balance at September 30, 2021																Balance at September 30, 2021	$	1,338	$	103	$	(353)	$	(9)	$	1,079	0		$	1,079
Nine months ended																Nine months ended
Balance at December 31, 2019	Balance at December 31, 2019	$	1,067	$	276	$	(408)	$	(21)	$	914	$	(115)	$	799	Balance at December 31, 2019	$	1,067	$	276	$	(408)	$	(21)	$	914	$	(115)	$	799
Net activity	Net activity	1,141		605		9		(10)		1,745		(26)		1,719		Net activity	1,562		522		(2)		1		2,083		115		2,198
Balance at March 31, 2020		$	2,208	$	881	$	(399)	$	(31)	$	2,659	$	(141)	$	2,518

Balance at September 30, 2020																Balance at September 30, 2020	$	2,629	$	798	$	(410)	$	(20)	$	2,997	0		$	2,997
Balance at December 31, 2020	Balance at December 31, 2020	$	2,462	$	659	$	(345)	$	(6)	$	2,770			$	2,770	Balance at December 31, 2020	$	2,462	$	659	$	(345)	$	(6)	$	2,770	0		$	2,770
Net activity	Net activity	(913)		(592)		23		2		(1,480)				(1,480)		Net activity	(1,124)		(556)		(8)		(3)		(1,691)		0		(1,691)
Balance at March 31, 2021		$	1,549	$	67	$	(322)	$	(4)	$	1,290	0		$	1,290

Balance at September 30, 2021																Balance at September 30, 2021	$	1,338	$	103	$	(353)	$	(9)	$	1,079	0		$	1,079

The following table provides the dividends per share for PNC's common and preferred stock:

Table ~~58:~~68: Dividends Per Share (a)


		Three months ended March 31				Three months ended September 30				Nine months ended September 30
		2021		2020				2021		2020		2021		2020
Common Stock	Common Stock	$	1.15	$	1.15		Common Stock	$	1.25	$	1.15	$	3.55	$	3.45
Preferred Stock	Preferred Stock						Preferred Stock
Series B	Series B	$	0.45	$	0.45		Series B	$	0.45	$	0.45	$	1.35	$	1.35
Series O	Series O	$	3,375	$	3,375		Series O	$	3,375	$	3,375	$	6,750	$	6,750
Series P	Series P	$	1,531	$	1,531		Series P	$	1,531	$	1,531	$	4,594	$	4,594
Series Q (b)	Series Q (b)			$	1,344		Series Q (b)			$	1,343			$	4,031

Series R							Series R			0		$	2,425	$	2,425
Series S							Series S			0		$	2,500	$	2,500

(a)Dividends are payable quarterly other than Series ~~O, Series~~ R and Series S preferred stock, which are payable ~~semiannually,~~semiannually. On September 13, 2021, PNC issued 1,500,000 depositary shares each representing 1/100th ownership in a share of 3.400% fixed-rate reset non-cumulative perpetual preferred stock, Series T, with a par value of $1 per share. Beginning on December 15, dividends will be paid on the Series ~~O payable in different quarters from the Series R~~T on a quarterly basis (March 15, June 15, September 15 and ~~Series S preferred stock.~~December 15 of each year).

(b)On September 1, 2020, PNC redeemed all 4,800 shares of its Series Q Preferred Stock, as well as all 19.2 million Depositary Shares representing fractional interest in such shares.

On ~~April~~October 1, 2021, the PNC ~~Board~~board of ~~Directors~~directors declared a quarterly cash dividend on common stock of ~~$1.15~~$1.25 per share payable on ~~May~~November 5, 2021.

The PNC Financial Services Group, Inc. – Form 10-Q 7773

NOTE 10 EARNINGS PER SHARE

Table ~~59:~~69: Basic and Diluted Earnings Per Common Share


		Three months ended March 31				Three months ended September 30				Nine months ended September 30
In millions, except per share data	In millions, except per share data	2021		2020			In millions, except per share data	2021		2020		2021		2020
Basic	Basic						Basic
Net income from continuing operations	Net income from continuing operations	$	1,826	$	759		Net income from continuing operations	$	1,490	$	1,532	$	4,419	$	1,547
Less:	Less:						Less:
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	10		7			Net income attributable to noncontrolling interests	16		13		38		27
Preferred stock dividends	Preferred stock dividends	57		63			Preferred stock dividends	57		63		162		181
Preferred stock discount accretion and redemptions	Preferred stock discount accretion and redemptions	1		1			Preferred stock discount accretion and redemptions	1		1		3		3
Net income from continuing operations attributable to common shareholders	Net income from continuing operations attributable to common shareholders	1,758		688			Net income from continuing operations attributable to common shareholders	1,416		1,455		4,216		1,336
Less: Dividends and undistributed earnings allocated to nonvested restricted shares	Less: Dividends and undistributed earnings allocated to nonvested restricted shares	8		3			Less: Dividends and undistributed earnings allocated to nonvested restricted shares	8		8		21		7
Net income from continuing operations attributable to basic common shareholders	Net income from continuing operations attributable to basic common shareholders	$	1,750	$	685		Net income from continuing operations attributable to basic common shareholders	$	1,408	$	1,447	$	4,195	$	1,329
Net income from discontinued operations attributable to common shareholders	Net income from discontinued operations attributable to common shareholders	00		$	156		Net income from discontinued operations attributable to common shareholders	0		0		0		$	4,555
Less: Undistributed earnings allocated to nonvested restricted shares	Less: Undistributed earnings allocated to nonvested restricted shares			1			Less: Undistributed earnings allocated to nonvested restricted shares							22
Net income from discontinued operations attributable to basic common shareholders	Net income from discontinued operations attributable to basic common shareholders	0		$	155		Net income from discontinued operations attributable to basic common shareholders	0		0		0		$	4,533
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	426		429			Basic weighted-average common shares outstanding	426		426		426		427
Basic earnings per common share from continuing operations (a)	Basic earnings per common share from continuing operations (a)	$	4.11	$	1.59		Basic earnings per common share from continuing operations (a)	$	3.31	$	3.40	$	9.84	$	3.11
Basic earnings per common share from discontinued operations (a)	Basic earnings per common share from discontinued operations (a)	0		$	0.37		Basic earnings per common share from discontinued operations (a)	0		0		0		$	10.61
Basic earnings per common share(b)	Basic earnings per common share(b)	$	4.11	$	1.96		Basic earnings per common share(b)	$	3.31	$	3.40	$	9.84	$	13.73
Diluted	Diluted						Diluted
Net income from continuing operations attributable to diluted common shareholders	Net income from continuing operations attributable to diluted common shareholders	$	1,750	$	685		Net income from continuing operations attributable to diluted common shareholders	$	1,408	$	1,447	$	4,195	$	1,329
Net income from discontinued operations attributable to basic common shareholders	Net income from discontinued operations attributable to basic common shareholders	0		$	155		Net income from discontinued operations attributable to basic common shareholders	0		0		0		$	4,533
Less: Impact of earnings per share dilution from discontinued operations	Less: Impact of earnings per share dilution from discontinued operations			1			Less: Impact of earnings per share dilution from discontinued operations	0		0		0		2
Net income from discontinued operations attributable to diluted common shareholders	Net income from discontinued operations attributable to diluted common shareholders	0		$	154		Net income from discontinued operations attributable to diluted common shareholders	0		0		0		$	4,531
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	426		429			Basic weighted-average common shares outstanding	426		426		426		427
Dilutive potential common shares	Dilutive potential common shares			1			Dilutive potential common shares					1		1
Diluted weighted-average common shares outstanding	Diluted weighted-average common shares outstanding	426		430			Diluted weighted-average common shares outstanding	426		426		427		428
Diluted earnings per common share from continuing operations (a)	Diluted earnings per common share from continuing operations (a)	$	4.10	$	1.59		Diluted earnings per common share from continuing operations (a)	$	3.30	$	3.39	$	9.83	$	3.11
Diluted earnings per common share from discontinued operations (a)	Diluted earnings per common share from discontinued operations (a)	0		$	0.36		Diluted earnings per common share from discontinued operations (a)	0		0		0		$	10.59
Diluted earnings per common share(b)	Diluted earnings per common share(b)	$	4.10	$	1.95		Diluted earnings per common share(b)	$	3.30	$	3.39	$	9.83	$	13.70

(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).

(b)For additional information on our policy for not allocating losses to participating securities, see the Earnings Per Common Share section of Note 1 Accounting Policies included in Item 8 of our 2020 Form 10-K.

NOTE 11 FAIR VALUE

Fair Value Measurement

We measure certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date, and is determined using an exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair value hierarchy established by GAAP requires us to maximize the use of observable inputs when measuring fair value. For more information regarding the fair value hierarchy, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K. Additionally, for more information regarding the fair value of assets and liabilities from our BBVA acquisition, see Note 2 Acquisition and Divestiture Activity in this Report.

7478 The PNC Financial Services Group, Inc. – Form 10-Q

Assets and Liabilities Measured at Fair Value on a Recurring Basis

For more information on the valuation methodologies used to measure assets and liabilities at fair value on a recurring basis, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K. The following table summarizes our assets and liabilities measured at fair value on a recurring basis, including instruments for which we have elected the fair value option.

Table ~~60:~~70: Fair Value Measurements – Recurring Basis Summary


		March 31, 2021								December 31, 2020									September 30, 2021								December 31, 2020
In millions	In millions	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		In millions	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value
Assets	Assets																	Assets
Residential mortgage loans held for sale	Residential mortgage loans held for sale			$	1,087	$	165	$	1,252			$	691	$	163	$	854	Residential mortgage loans held for sale			$	1,433	$	86	$	1,519			$	691	$	163	$	854
Commercial mortgage loans held for sale	Commercial mortgage loans held for sale			329		56		385				305		57		362		Commercial mortgage loans held for sale			457		51		508				305		57		362

Securities available for sale	Securities available for sale																	Securities available for sale
U.S. Treasury and government agencies	U.S. Treasury and government agencies	$	21,997	3,953				25,950		$	16,675	4,036				20,711		U.S. Treasury and government agencies	$	36,613	4,356				40,969		$	16,675	4,036				20,711
Residential mortgage-backed	Residential mortgage-backed																	Residential mortgage-backed
Agency	Agency			51,554				51,554				48,911				48,911		Agency			65,185				65,185				48,911				48,911
Non-agency	Non-agency			108		1,316		1,424				136		1,365		1,501		Non-agency			74		1,168		1,242				136		1,365		1,501
Commercial mortgage-backed	Commercial mortgage-backed																	Commercial mortgage-backed
Agency	Agency			2,284				2,284				2,688				2,688		Agency			2,060				2,060				2,688				2,688
Non-agency	Non-agency			4,225		11		4,236				3,678		11		3,689		Non-agency			3,668		3		3,671				3,678		11		3,689
Asset-backed	Asset-backed			5,847		194		6,041				4,951		199		5,150		Asset-backed			5,895		172		6,067				4,951		199		5,150
Other	Other			5,238		72		5,310				4,636		72		4,708		Other			4,864		69		4,933				4,636		72		4,708
Total securities available for sale	Total securities available for sale	21,997		73,209		1,593		96,799		16,675		69,036		1,647		87,358		Total securities available for sale	36,613		86,102		1,412		124,127		16,675		69,036		1,647		87,358
Loans	Loans			730		711		1,441				718		647		1,365		Loans			673		936		1,609				718		647		1,365
Equity investments (a)	Equity investments (a)	1,133				1,343		2,725		1,070				1,263		2,629		Equity investments (a)	1,071				1,530		2,804		1,070				1,263		2,629
Residential mortgage servicing rights	Residential mortgage servicing rights					979		979						673		673		Residential mortgage servicing rights					1,130		1,130						673		673
Commercial mortgage servicing rights	Commercial mortgage servicing rights					701		701						569		569		Commercial mortgage servicing rights					703		703						569		569
Trading securities (b)	Trading securities (b)	576		1,012				1,588		548		1,690				2,238		Trading securities (b)	570		1,308				1,878		548		1,690				2,238
Financial derivatives (b) (c)	Financial derivatives (b) (c)			4,853		63		4,916				6,415		118		6,533		Financial derivatives (b) (c)	1		6,978		56		7,035				6,415		118		6,533
Other assets	Other assets	384		93				477		373		81				454		Other assets	395		102				497		373		81				454
Total assets (d)	Total assets (d)	$	24,090	$	81,313	$	5,611	$	111,263	$	18,666	$	78,936	$	5,137	$	103,035	Total assets (d)	$	38,650	$	97,053	$	5,904	$	141,810	$	18,666	$	78,936	$	5,137	$	103,035
Liabilities	Liabilities																	Liabilities
Other borrowed funds	Other borrowed funds	$	790	$	46	$	2	$	838	$	661	$	44	$	2	$	707	Other borrowed funds	$	832	$	116	$	4	$	952	$	661	$	44	$	2	$	707
Financial derivatives (c) (e)	Financial derivatives (c) (e)			2,796		227		3,023				2,483		273		2,756		Financial derivatives (c) (e)			4,450		331		4,781				2,483		273		2,756
Other liabilities	Other liabilities					73		73						43		43		Other liabilities					167		167						43		43
Total liabilities (f)	Total liabilities (f)	$	790	$	2,842	$	302	$	3,934	$	661	$	2,527	$	318	$	3,506	Total liabilities (f)	$	832	$	4,566	$	502	$	5,900	$	661	$	2,527	$	318	$	3,506

(a)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(b)Included in Other assets on the Consolidated Balance Sheet.

(c)Amounts at ~~March 31,~~September 30, 2021 and December 31, 2020 are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow us to net positive and negative positions and cash collateral held or placed with the same counterparty. See Note 12 Financial Derivatives for additional information related to derivative offsetting.

(d)Total assets at fair value as a percentage of total consolidated assets was ~~23%~~26% and 22% as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Level 3 assets as a percentage of total assets at fair value was 4% and 5% at ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. Level 3 assets as a percentage of total consolidated assets was 1% at both ~~March 31,~~September 30, 2021 and December 31, 2020.

(e)Included in Other liabilities on the Consolidated Balance Sheet.

(f)Total liabilities at fair value as a percentage of total consolidated liabilities was 1% at both ~~March 31,~~September 30, 2021 and December 31, 2020. Level 3 liabilities as a percentage of total liabilities at fair value was ~~8% and~~ 9% ~~as of March 31,~~at both September 30, 2021 and December 31, ~~2020, respectively.~~2020. Level 3 liabilities as a percentage of total consolidated liabilities was less than 1% at both ~~March 31,~~September 30, 2021 and December 31, 2020.

The PNC Financial Services Group, Inc. – Form 10-Q 7975

Reconciliations of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 follow:

Table ~~61:~~71: Reconciliation of Level 3 Assets and Liabilities

Three Months Ended ~~March 31,~~September 30, 2021


				Total realized / unrealized gains or losses for the period (a)																				Unrealized gains / losses on assets and liabilities held on Consolidated Balance Sheet at Mar. 31, 2021 (a) (c)						Total realized / unrealized gains or losses for the period (a)																						Unrealized gains / losses on assets and liabilities held on Consolidated Balance Sheet at Sept. 30, 2021 (a) (c)
Level 3 Instruments Only In millions	Level 3 Instruments Only In millions	Fair Value Dec. 31, 2020		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements		Transfers into Level 3		Transfers out of Level 3			Fair Value Mar. 31, 2021					Level 3 Instruments Only In millions	Fair Value June 30, 2021		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements		Transfers into Level 3		Transfers out of Level 3			Impact from BBVA Acquisition		Fair Value Sept. 30, 2021
Assets	Assets																										Assets
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	163	$	1				$	35	$	(16)			$	(16)	$	3	$	(5)	(e)	$	165				Residential mortgage loans held for sale	$	119	$	(1)				$	5	$	(29)			$	(6)	$	4	$	(6)	(e)			$	86	$	(1)
Commercial mortgage loans held for sale	Commercial mortgage loans held for sale	57		(1)																		56					Commercial mortgage loans held for sale	52		(1)																				51
Other consumer loans held for sale																											Other consumer loans held for sale	239									(256)											$	17
Securities available for sale	Securities available for sale																										Securities available for sale
Residential mortgage- backed non-agency	Residential mortgage- backed non-agency	1,365		9			$	16							(74)							1,316					Residential mortgage- backed non-agency	1,237		10			$	(2)							(77)									1,168
Commercial mortgage- backed non-agency	Commercial mortgage- backed non-agency	11																				11					Commercial mortgage- backed non-agency	11					(8)																	3
Asset-backed	Asset-backed	199		1			3								(9)							194					Asset-backed	175		1			5								(9)									172
Other	Other	72							1						(1)							72					Other	73							2		(9)				3									69
Total securities available for sale	Total securities available for sale	1,647		10			19		1						(84)							1,593					Total securities available for sale	1,496		11			(5)		2		(9)				(83)									1,412
Loans	Loans	647		10					88		(3)				(28)				(3)		(e)	711		$	11		Loans	979		12					14		(6)				(58)				(5)		(e)			936		12
Equity investments	Equity investments	1,263		67					40		(27)											1,343		63			Equity investments	1,540		265					158		(433)													1,530		95
Residential mortgage servicing rights	Residential mortgage servicing rights	673		295					71				$	13	(73)							979		295			Residential mortgage servicing rights	1,111		49					28				$	24	(82)									1,130		49
Commercial mortgage servicing rights	Commercial mortgage servicing rights	569		129					13				18		(28)							701		129			Commercial mortgage servicing rights	682		24					5				22		(30)									703		24

Financial derivatives	Financial derivatives	118		(14)					1						(42)							63		(11)			Financial derivatives	87		23					1						(55)									56		39

Total assets	Total assets	$	5,137	$	497		$	19	$	249	$	(46)	$	31	$	(271)	$	3	$	(8)		$	5,611	$	487		Total assets	$	6,305	$	382		$	(5)	$	213	$	(733)	$	46	$	(314)	$	4	$	(11)		$	17	$	5,904	$	218
Liabilities	Liabilities																										Liabilities
Other borrowed funds	Other borrowed funds	$	2										$	1	$	(1)						$	2				Other borrowed funds	$	2										$	3	$	(1)								$	4
Financial derivatives	Financial derivatives	273		$	(14)						$	2			(34)							227		$	(30)		Financial derivatives	200		$	165						$	3			(37)									331		$	171
Other liabilities	Other liabilities	43		35									30		(35)							73		4			Other liabilities	124		45									4		(6)									167		44
Total liabilities	Total liabilities	$	318	$	21						$	2	$	31	$	(70)						$	302	$	(26)		Total liabilities	$	326	$	210						$	3	$	7	$	(44)								$	502	$	215
Net gains (losses)	Net gains (losses)			$	476	(f)																		$	513	(g)	Net gains (losses)			$	172	(f)																				$	3	(g)

7680 The PNC Financial Services Group, Inc. – Form 10-Q

Three Months Ended ~~March 31,~~September 30, 2020


				Total realized / unrealized gains or losses for the period (a)																					Unrealized gains/losses on assets and liabilities held on Consolidated Balance Sheet at Mar. 31, 2020 (a) (c)						Total realized / unrealized gains or losses for the period (a)																			Unrealized gains/losses on assets and liabilities held on Consolidated Balance Sheet at Sept. 30, 2020 (a) (c)
Level 3 Instruments Only In millions	Level 3 Instruments Only In millions	Fair Value Dec. 31, 2019		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value Mar. 31, 2020					Level 3 Instruments Only In millions	Fair Value June 30, 2020		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements		Transfers into Level 3		Transfers out of Level 3		Fair Value Sept. 30, 2020
Assets	Assets																											Assets
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	2						$	2	$(1)							$	4	$	(3)	(e)	$	4				Residential mortgage loans held for sale	$	88						$	15	$	(10)			$	(9)	$	3	$	(10)	$	77
Commercial mortgage loans held for sale	Commercial mortgage loans held for sale	64		$	(1)										$	(3)							60		$	(1)		Commercial mortgage loans held for sale	60		$	(1)																59
Securities available for sale	Securities available for sale																											Securities available for sale
Residential mortgage- backed non-agency	Residential mortgage- backed non-agency	1,741		16			$	(222)							(93)								1,442					Residential mortgage- backed non-agency	1,491		12			$	18							(83)						1,438
Commercial mortgage-backed non-agency																												Commercial mortgage-backed non-agency	19					(8)														11
Asset-backed	Asset-backed	240		2			(29)								(11)								202					Asset-backed	210		1			5								(8)						208
Other	Other	74					(5)		4														73					Other	72							(1)												71
Total securities available for sale	Total securities available for sale	2,055		18			(256)		4						(104)								1,717					Total securities available for sale	1,792		13			15		(1)						(91)						1,728
Loans	Loans	300		11					16		(26)		0		362		(d)			(8)		(e)	655		11			Loans	607		7					63		(3)				(27)						647		$	7
Equity investments	Equity investments	1,276		(69)					71		(58)												1,220		(64)			Equity investments	1,183		63					60		(47)										1,259		56
Residential mortgage servicing rights	Residential mortgage servicing rights	995		(379)					18				$	10	(39)								605		(379)			Residential mortgage servicing rights	577		11					52				$	12	(54)						598		11
Commercial mortgage servicing rights	Commercial mortgage servicing rights	649		(167)					19				11		(35)								477		(166)			Commercial mortgage servicing rights	490		23					8				20		(26)						515		23
Trading securities

Financial derivatives	Financial derivatives	54		101					2						(22)								135		75			Financial derivatives	141		41					3						(48)						137		52
Other assets

Total assets	Total assets	$	5,395	$	(486)		$	(256)	$	132	$	(85)	$	21	$	159		$	4	$	(11)		$	4,873	$	(524)		Total assets	$	4,938	$	157		$	15	$	200	$	(60)	$	32	$	(255)	$	3	$	(10)	$	5,020	$	149
Liabilities	Liabilities																											Liabilities
Other borrowed funds	Other borrowed funds	$	7										$	12	$	(14)							$	5				Other borrowed funds	$	2										$	2	$	(2)					$	2
Financial derivatives	Financial derivatives	200		$	8						$	1			(24)								185		$	10		Financial derivatives	209		$	(10)						$	1			(57)						143		$	(7)
Other liabilities	Other liabilities	137		2									11		(78)			$	2	$	(2)		72		(6)			Other liabilities	85		7									17		(19)						90		6
Total liabilities	Total liabilities	$	344	$	10				0		$	1	$	23	$	(116)		$	2	$	(2)		$	262	$	4		Total liabilities	$	296	$	(3)						$	1	$	19	$	(78)					$	235	$	(1)
Net gains (losses)	Net gains (losses)			$	(496)	(f)																			$	(528)	(g)	Net gains (losses)			$	160	(f)																	$	150	(g)

The PNC Financial Services Group, Inc. – Form 10-Q 81

(continued from previous page)

Nine Months Ended September 30, 2021


			Total realized / unrealized gains or losses for the period (a)																						Unrealized gains / losses on assets and liabilities held on Consolidated Balance Sheet at Sept. 30, 2021 (a) (c)
Level 3 Instruments Only In millions	Fair Value Dec. 31, 2020		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements		Transfers into Level 3		Transfers out of Level 3			Impact from BBVA Acquisition		Fair Value Sept. 30, 2021
Assets
Residential mortgage loans held for sale	$	163	$	(1)				$	43	$	(81)			$	(34)	$	12	$	(16)	(e)			$	86	$	(1)
Commercial mortgage loans held for sale	57		(1)							(6)				1									51		1
Other consumer loans held for sale										(256)											$	256
Securities available for sale
Residential mortgage-backed non-agency	1,365		30			$	14							(241)									1,168
Commercial mortgage-backed non-agency	11					(8)																	3
Asset-backed	199		2			10								(39)									172
Other	72					1		5		(9)													69
Total securities available for sale	1,647		32			17		5		(9)				(280)									1,412
Loans	647		32					111		(12)				(121)				(13)		(e)	292		936		32
Equity investments	1,263		489					290		(512)													1,530		294
Residential mortgage servicing rights	673		203					400				$	61	(242)							35		1,130		203
Commercial mortgage servicing rights	569		134					26				61		(87)									703		134

Financial derivatives	118		69					4						(140)							5		56		87

Total assets	$	5,137	$	957		$	17	$	879	$	(876)	$	122	$	(903)	$	12	$	(29)		$	588	$	5,904	$	750
Liabilities
Other borrowed funds	$	2										$	4	$	(2)								$	4
Financial derivatives	273		$	155						$	6			(110)							$	7	331		$	156
Other liabilities	43		108									321		(305)									167		81
Total liabilities	$	318	$	263						$	6	$	325	$	(417)						$	7	$	502	$	237
Net gains (losses)			$	694	(f)																				$	513	(g)

82 The PNC Financial Services Group, Inc. – Form 10-Q

Nine Months Ended September 30, 2020


			Total realized / unrealized gains or losses for the period (a)																					Unrealized gains/losses on assets and liabilities held on Consolidated Balance Sheet at Sept. 30, 2020 (a) (c)
Level 3 Instruments Only In millions	Fair Value Dec. 31, 2019		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value Sept. 30, 2020
Assets
Residential mortgage loans held for sale	$	2						$	22	$	(12)			$	(12)		$	90	$	(13)	(e)	$	77
Commercial mortgage loans held for sale	64		$	(2)										(3)								59		$	(1)
Securities available for sale
Residential mortgage- backed non-agency	1,741		40			$	(81)							(262)								1,438
Commercial mortgage- backed non-agency						(8)											19					11
Asset-backed	240		5			(8)		0						(29)								208
Other	74					(3)		3						(3)								71
Total securities available for sale	2,055		45			(100)		3		0				(294)			19					1,728
Loans	300		20					134		(34)		0		313		(d)			(86)		(e)	647		20
Equity investments	1,276		(68)					173		(122)												1,259		(69)
Residential mortgage servicing rights	995		(408)					113				$	34	(136)								598		(408)
Commercial mortgage servicing rights	649		(143)					31				65		(87)								515		(144)

Financial derivatives	54		192					9						(118)								137		200

Total assets	$	5,395	$	(364)		$	(100)	$	485	$	(168)	$	99	$	(337)		$	109	$	(99)		$	5,020	$	(402)
Liabilities
Other borrowed funds	$	7										$	27	$	(32)							$	2
Financial derivatives	200		$	26						$	3			(86)								143		$	30
Other liabilities	137		13									54		(116)			$	2				90		(2)
Total liabilities	$	344	$	39						$	3	$	81	$	(234)		$	2				$	235	$	28
Net gains (losses)			$	(403)	(f)																			$	(430)	(g)

(a)Losses for assets are bracketed while losses for liabilities are not.

(b)The difference in unrealized gains and losses for the period included in Other comprehensive income and changes in unrealized gains and losses for the period included in Other comprehensive income for securities available for sale held at the end of the reporting period were not significant.

(c)The amount of the total gains or losses for the period included in earnings that is attributable to the change in unrealized gains or losses related to those assets and liabilities held at the end of the reporting period.

(d)Upon adoption of ASU 2016-13 - Credit Losses, we discontinued the accounting for purchased impaired loans and elected the one-time fair value option election for some of these loans and certain nonperforming loans.

(e)Residential mortgage loan transfers out of Level 3 are primarily driven by residential mortgage loans transferring to OREO as well as reclassification of mortgage loans held for sale to held for investment.

(f)Net gains (losses) realized and unrealized included in earnings related to Level 3 assets and liabilities included amortization and accretion. The amortization and accretion amounts were included in Interest income on the Consolidated Income Statement and the remaining net gains (losses) realized and unrealized were included in Noninterest income on the Consolidated Income Statement.

(g)Net unrealized gains (losses) related to assets and liabilities held at the end of the reporting period were included in Noninterest income on the Consolidated Income Statement.

An instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Changes from one quarter to the next related to the observability of inputs to a fair value measurement may result in a reclassification (transfer) of assets or liabilities between hierarchy levels.

The PNC Financial Services Group, Inc. – Form 10-Q 8377

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities follows:

Table ~~62:~~72: Fair Value Measurements – Recurring Quantitative Information

~~March 31,~~September 30, 2021

Level 3 Instruments Only
Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted-Average) (a)

Commercial mortgage loans held for sale

5651

Discounted cash flow

Spread over the benchmark curve (b)

~~620bps~~610bps - ~~6,350bps (4,038bps)~~10,580bps (2,442bps)

Residential mortgage-backed
non-agency securities

~~1,316~~1,168

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% - ~~37.6% (10.2%~~30.7% (11.2%)

Constant default rate

0.0% - ~~18.8% (6.0%~~16.9% (4.6%)

Loss severity

~~25.0% -95.7% (48.6%~~20.0% - 95.7% (47.7%)

Spread over the benchmark curve (b)

~~155bps~~160bps weighted-average

Asset-backed securities

~~194~~172

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% - 40.0% ~~(8.4%~~(10.5%)

Constant default rate

1.4% - ~~6.0% (2.9%~~20.0% (3.3%)

Loss severity

~~30.0%~~8.0% - 100.0% ~~(55.3%~~(52.1%)

Spread over the benchmark curve (b)

~~197bps~~198bps weighted-average

Loans - Residential real estate

~~429~~640

Consensus pricing (c)

Cumulative default rate

3.6% - 100.0% ~~(81.5%~~(77.2%)

Loss severity

0.0% - 100.0% ~~(10.0%~~(8.9%)

Discount rate

4.8% - 6.8% (5.1%)

~~130~~116

Discounted cash flow

Loss severity

8.0% weighted-average

Discount rate

3.2% weighted-average

Loans - Home equity

2018

Consensus pricing (c)

Cumulative default rate

3.6% -100.0% ~~(85.5%~~(83.9%)

Loss severity

0.0% - 98.4% ~~(31.5%~~(29.6%)

Discount rate

4.8% - 6.8% (6.2%)

~~132~~162

Consensus pricing (c)

Credit and liquidity discount

~~4.7%~~0.0% - ~~92.0% (44.0%~~100.0% (23.1%)

Equity investments

~~1,343~~1,530

Multiple of adjusted earnings

Multiple of earnings

~~4.0x~~5.0x - ~~20.1x (8.8x)~~14.8x (9.0x)

Residential mortgage servicing rights

~~979~~1,130

Discounted cash flow

Constant prepayment rate

0.0% - ~~31.4% (10.7%~~40.0% (11.5%)

Spread over the benchmark curve (b)

~~383bps~~380bps - ~~2,893bps (944bps)~~2,271bps (909bps)

Commercial mortgage servicing rights

~~701~~703

Discounted cash flow

Constant prepayment rate

~~4.1%~~4.9% - ~~13.6% (4.9%~~13.9% (5.5%)

Discount rate

~~5.5%~~5.3% - ~~7.6% (7.4%~~7.8% (7.6%)

Financial derivatives - Swaps related to
sales of certain Visa Class B
common shares

~~(201)~~(314)

Discounted cash flow

Estimated conversion factor of Visa Class B shares into Class A shares

162.3% weighted-average

Estimated annual growth rate of Visa Class A share price

16.0%

Estimated length of litigation resolution date

Q2 ~~2022~~2023

Insignificant Level 3 assets, net of
liabilities (d)

~~210~~26

Total Level 3 assets, net of liabilities (e)

~~5,309~~5,402

7884 The PNC Financial Services Group, Inc. – Form 10-Q

(continued from previous page)

December 31, 2020

Level 3 Instruments Only
Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted-Average) (a)

Commercial mortgage loans held for sale

Discounted cash flow

Spread over the benchmark curve (b)

630bps - 5,275bps (3,406bps)

Residential mortgage-backed
non-agency securities

1,365

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% - 37.6% (8.6%)

Constant default rate

0.0% - 12.2% (4.7%)

Loss severity

25.0% - 95.7% (48.8%)

Spread over the benchmark curve (b)

242bps weighted-average

Asset-backed securities

199

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% -22.0% (7.4%)

Constant default rate

1.0% - 6.0% (3.3%)

Loss severity

30.0% - 100.0% (58.1%)

Spread over the benchmark curve (b)

291bps weighted-average

Loans - Residential real estate

434

Consensus pricing (c)

Cumulative default rate

3.6% - 100.0% (82.1%)

Loss severity

0.0% - 100.0% (11.2%)

Discount rate

4.8% - 6.8% (5.1%)

132

Discounted cash flow

Loss severity

8.0% weighted-average

Discount rate

3.2% weighted-average

Loans - Home equity

Consensus pricing (c)

Cumulative default rate

3.6% - 100.0% (88.5%)

Loss severity

0.0% ~~-98.4%~~- 98.4% (33.3%)

Discount rate

4.8% - 6.8% (6.3%)

Consensus pricing (c)

Credit and Liquidity discount

17.5% ~~-97.0%~~- 97.0% (57.7%)

Equity investments

1,263

Multiple of adjusted earnings

Multiple of earnings

5.0x - 15.9x (8.7x)

Residential mortgage servicing rights

673

Discounted cash flow

Constant prepayment rate

0.0% - 77.5% (21.1%)

Spread over the benchmark curve (b)

325bps - 2,783bps (922bps)

Commercial mortgage servicing rights

569

Discounted cash flow

Constant prepayment rate

4.0% - 16.1% (4.9%)

Discount rate

4.7% - 7.8% (7.3%)

Financial derivatives - Swaps related to
sales of certain Visa Class B
common shares

(252)

Discounted cash flow

Estimated conversion factor of Visa Class B shares into Class A shares

162.3% weighted-average

Estimated annual growth rate of Visa Class A share price

16.0%

Estimated length of litigation
resolution date

Q2 2022

Insignificant Level 3 assets, net of
liabilities (d)

298

Total Level 3 assets, net of liabilities (e)

4,819

(a)Unobservable inputs were weighted by the relative fair value of the instruments.

(b)The assumed yield spread over the benchmark curve for each instrument is generally intended to incorporate non-interest rate risks, such as credit and liquidity risks.

(c)Consensus pricing refers to fair value estimates that are generally internally developed using information such as dealer quotes or other third-party provided valuations or comparable asset prices.

(d)Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes certain financial derivative assets and liabilities, trading securities, other securities, residential mortgage loans held for sale, other assets, other borrowed funds and other liabilities.

(e)Consisted of total Level 3 assets of ~~$5.6~~$5.9 billion and total Level 3 liabilities of ~~$0.3~~$0.5 billion as of ~~March 31,~~September 30, 2021 and $5.1 billion and $0.3 billion as of December 31, 2020, respectively.

Financial Assets Accounted for at Fair Value on a Nonrecurring Basis

We may be required to measure certain financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower of amortized cost or fair value accounting or write-downs of individual assets due to impairment and are included in Table ~~63.~~73. For more information regarding the valuation methodologies of our financial assets measured at fair value on a nonrecurring basis, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

The PNC Financial Services Group, Inc. – Form 10-Q 8579

Assets measured at fair value on a nonrecurring basis follow:

Table ~~63:~~73: Fair Value Measurements – Nonrecurring (a) (b) (c)


		Fair Value				Gains (Losses) Three months ended				Fair Value				Gains (Losses) Three months ended				Gains (Losses) Nine months ended
In millions	In millions	March 31 2021		December 31 2020		March 31 2021		March 31 2020			In millions	September 30 2021		December 31 2020		September 30 2021		September 30 2020		September 30 2021		September 30 2020
Assets	Assets										Assets
Nonaccrual loans	Nonaccrual loans	$	345	$	332	$	(17)	$	(28)		Nonaccrual loans	$	209	$	332	$	(3)	$	(38)	$	(3)	$	(73)
Loans held for sale	Loans held for sale	243				(17)					Loans held for sale	39				(1)				(18)
OREO and foreclosed assets	OREO and foreclosed assets	2		18				(1)			OREO and foreclosed assets	5		18				(1)				(2)
Long-lived assets	Long-lived assets	6		20		(2)		(1)			Long-lived assets	12		20		(6)		(4)		(17)		(7)
Total assets	Total assets	$	596	$	370	$	(36)	$	(30)		Total assets	$	265	$	370	$	(10)	$	(43)	$	(38)	$	(82)

(a)All Level 3 as of ~~March 31,~~September 30, 2021 and December 31, 2020, except for ~~$243~~$39 million included in Loans held for sale which was categorized as Level 2 as of ~~March 31,~~September 30, 2021.

(b)Valuation techniques applied were fair value of property or collateral.

(c)Unobservable inputs used were appraised value/sales price, broker opinions or projected income/required improvement costs. Additional quantitative information was not meaningful for the periods presented.

Financial Instruments Accounted for under Fair Value Option

We elect the fair value option to account for certain financial instruments. For more information on these financial instruments for which the fair value option election has been made, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

Fair values and aggregate unpaid principal balances of certain items for which we elected the fair value option follow:

Table ~~64:~~74: Fair Value Option – Fair Value and Principal Balances


		March 31, 2021						December 31, 2020							September 30, 2021						December 31, 2020
In millions	In millions	Fair Value		Aggregate Unpaid Principal Balance		Difference		Fair Value		Aggregate Unpaid Principal Balance		Difference		In millions	Fair Value		Aggregate Unpaid Principal Balance		Difference		Fair Value		Aggregate Unpaid Principal Balance		Difference
Assets	Assets													Assets
Residential mortgage loans held for sale	Residential mortgage loans held for sale													Residential mortgage loans held for sale
Accruing loans less than 90 days past due	Accruing loans less than 90 days past due	$	1,204	$	1,172	$	32	$	831	$	793	$	38	Accruing loans less than 90 days past due	$	1,465	$	1,422	$	43	$	831	$	793	$	38
Accruing loans 90 days or more past due	Accruing loans 90 days or more past due	3		3				4		4				Accruing loans 90 days or more past due	4		4				4		4
Nonaccrual loans	Nonaccrual loans	45		54		(9)		20		24		(4)		Nonaccrual loans	50		59		(9)		20		24		(4)
Total	Total	$	1,252	$	1,229	$	23	$	855	$	821	$	34	Total	$	1,519	$	1,485	$	34	$	855	$	821	$	34
Commercial mortgage loans held for sale (a)	Commercial mortgage loans held for sale (a)													Commercial mortgage loans held for sale (a)
Accruing loans less than 90 days past due	Accruing loans less than 90 days past due	$	380	$	396	$	(16)	$	357	$	370	$	(13)	Accruing loans less than 90 days past due	$	508	$	520	$	(12)	$	357	$	370	$	(13)
Nonaccrual loans	Nonaccrual loans	5		6		(1)		5		6		(1)		Nonaccrual loans					0		5		6		(1)
Total	Total	$	385	$	402	$	(17)	$	362	$	376	$	(14)	Total	$	508	$	520	$	(12)	$	362	$	376	$	(14)
Loans	Loans													Loans
Accruing loans less than 90 days past due	Accruing loans less than 90 days past due	$	622	$	632	$	(10)	$	519	$	530	$	(11)	Accruing loans less than 90 days past due	$	652	$	669	$	(17)	$	519	$	530	$	(11)
Accruing loans 90 days or more past due	Accruing loans 90 days or more past due	246		260		(14)		283		295		(12)		Accruing loans 90 days or more past due	260		278		(18)		283		295		(12)
Nonaccrual loans	Nonaccrual loans	573		845		(272)		563		820		(257)		Nonaccrual loans	697		971		(274)		563		820		(257)
Total	Total	$	1,441	$	1,737	$	(296)	$	1,365	$	1,645	$	(280)	Total	$	1,609	$	1,918	$	(309)	$	1,365	$	1,645	$	(280)
Other assets	Other assets	$	93	$	91	$	2	$	81	$	69	$	12	Other assets	$	96	$	93	$	3	$	81	$	69	$	12
Liabilities	Liabilities													Liabilities
Other borrowed funds	Other borrowed funds	$	28	$	28			$	32	$	33	$	(1)	Other borrowed funds	$	31	$	31			$	32	$	33	$	(1)

(a)There were no accruing loans 90 days or more past due within this category at ~~March 31,~~September 30, 2021 or December 31, 2020.

8086 The PNC Financial Services Group, Inc. – Form 10-Q

The changes in fair value for items for which we elected the fair value option are as follows:

Table ~~65:~~75: Fair Value Option – Changes in Fair Value (a)


		Gains (Losses)				Gains (Losses)				Gains (Losses)
		Three months ended				Three months ended				Nine months ended
		March 31		March 31				September 30		September 30		September 30		September 30
In millions	In millions	2021		2020			In millions	2021		2020		2021		2020
Assets	Assets						Assets
Residential mortgage loans held for sale	Residential mortgage loans held for sale	$	16	$	46		Residential mortgage loans held for sale	$	47	$	53	$	120	$	151
Commercial mortgage loans held for sale	Commercial mortgage loans held for sale	$	20	$	48		Commercial mortgage loans held for sale	$	31	$	46	$	77	$	106
Loans	Loans	$	14	$	18		Loans	$	21	$	5	$	52	$	31
Other assets	Other assets	$	14	$	(36)		Other assets	$	3	$	3	$	25	$	(24)

(a)The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.

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 our Consolidated Balance Sheet at fair value as of ~~March 31,~~September 30, 2021 and December 31, 2020. For more information regarding the methods and assumptions used to estimate the fair values of financial instruments included in Table ~~66,~~76, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

Table ~~66:~~76: Additional Fair Value Information Related to Other Financial Instruments


		Carrying		Fair Value									Carrying		Fair Value
In millions	In millions	Amount		Total		Level 1		Level 2		Level 3		In millions	Amount		Total		Level 1		Level 2		Level 3
March 31, 2021
September 30, 2021												September 30, 2021
Assets	Assets											Assets
Cash and due from banks	Cash and due from banks	$	7,455	$	7,455	$	7,455					Cash and due from banks	$	8,843	$	8,843	$	8,843
Interest-earning deposits with banks	Interest-earning deposits with banks	86,161		86,161				$	86,161			Interest-earning deposits with banks	75,478		75,478				$	75,478
Securities held to maturity	Securities held to maturity	1,459		1,559		874		485		$	200	Securities held to maturity	1,482		1,583		890		483		$	210
Net loans (excludes leases)	Net loans (excludes leases)	224,468		228,650						228,650		Net loans (excludes leases)	277,010		282,407						282,407
Other assets	Other assets	3,783		3,782				3,780		2		Other assets	4,265		4,265				4,262		3
Total assets	Total assets	$	323,326	$	327,607	$	8,329	$	90,426	$	228,852	Total assets	$	367,078	$	372,576	$	9,733	$	80,223	$	282,620
Liabilities	Liabilities											Liabilities
Time deposits	Time deposits	$	18,813	$	18,651			$	18,651			Time deposits	$	18,911	$	18,779			$	18,779
Borrowed funds	Borrowed funds	32,192		32,790				31,129		$	1,661	Borrowed funds	32,520		33,203				31,528		$	1,675
Unfunded lending related commitments	Unfunded lending related commitments	507		507						507		Unfunded lending related commitments	646		646						646
Other liabilities	Other liabilities	486		486				486				Other liabilities	467		467				467
Total liabilities	Total liabilities	$	51,998	$	52,434			$	50,266	$	2,168	Total liabilities	$	52,544	$	53,095			$	50,774	$	2,321
December 31, 2020	December 31, 2020											December 31, 2020
Assets	Assets											Assets
Cash and due from banks	Cash and due from banks	$	7,017	$	7,017	$	7,017					Cash and due from banks	$	7,017	$	7,017	$	7,017
Interest-earning deposits with banks	Interest-earning deposits with banks	85,173		85,173				$	85,173			Interest-earning deposits with banks	85,173		85,173				$	85,173
Securities held to maturity	Securities held to maturity	1,445		1,604		920		489		$	195	Securities held to maturity	1,445		1,604		920		489		$	195
Net loans (excludes leases)	Net loans (excludes leases)	228,788		233,688						233,688		Net loans (excludes leases)	228,788		233,688						233,688
Other assets	Other assets	3,601		3,600				3,559		41		Other assets	3,601		3,600				3,559		41
Total assets	Total assets	$	326,024	$	331,082	$	7,937	$	89,221	$	233,924	Total assets	$	326,024	$	331,082	$	7,937	$	89,221	$	233,924
Liabilities	Liabilities											Liabilities
Time deposits	Time deposits	$	19,692	$	19,662			$	19,662			Time deposits	$	19,692	$	19,662			$	19,662
Borrowed funds	Borrowed funds	36,488		37,192				35,571		$	1,621	Borrowed funds	36,488		37,192				35,571		$	1,621
Unfunded lending related commitments	Unfunded lending related commitments	584		584						584		Unfunded lending related commitments	584		584						584
Other liabilities	Other liabilities	413		413				413				Other liabilities	413		413				413
Total liabilities	Total liabilities	$	57,177	$	57,851			$	55,646	$	2,205	Total liabilities	$	57,177	$	57,851			$	55,646	$	2,205

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 81

The aggregate fair values in Table 6676 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 ~~60);~~70),

•investments accounted for under the equity method,

The PNC Financial Services Group, Inc. – Form 10-Q 87

•equity securities without a readily determinable fair value that apply for the alternative measurement approach to fair value under ASU 2016-01,

•real and personal property,

•lease financing,

•loan customer relationships,

•deposit customer intangibles,

•mortgage servicing rights (MSRs),

•retail branch networks,

•fee-based businesses, such as asset management and brokerage,

•trademarks and brand names,

•trade receivables and payables due in one year or less, ~~and~~

•deposit liabilities with no defined or contractual maturities under ASU 2016-01, and

•insurance contracts.

NOTE 12 FINANCIAL DERIVATIVES

We use a variety of financial derivatives to both mitigate exposure to market (primarily interest rate) and credit risks inherent in our business activities, as well as to facilitate customer risk management activities. We manage these risks as part of our overall asset and liability management process and through our credit policies and procedures. 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.

Derivative transactions are often measured in terms of notional amount, but this amount is generally not exchanged and it is not recorded on the balance sheet. The notional amount is the basis to which the underlying is applied to determine required payments under the derivative contract. The underlying is a referenced interest rate, security price, credit spread or other index. Residential and commercial real estate loan commitments associated with loans to be sold also qualify as derivative instruments.

For more information regarding derivatives see Note 1 Accounting Policies and Note 16 Financial Derivatives in the Notes to Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K.

8288 The PNC Financial Services Group, Inc. – Form 10-Q

The following table presents the notional ~~amounts~~ and gross fair ~~values~~value amounts of all derivative assets and liabilities held by us:

Table ~~67:~~77: Total Gross Derivatives (a)


		March 31, 2021						December 31, 2020							September 30, 2021						December 31, 2020
In millions	In millions	Notional / Contract Amount		Asset Fair Value (b)		Liability Fair Value (c)		Notional / Contract Amount		Asset Fair Value (b)		Liability Fair Value (c)		In millions	Notional / Contract Amount		Asset Fair Value (b)		Liability Fair Value (c)		Notional / Contract Amount		Asset Fair Value (b)		Liability Fair Value (c)
Derivatives used for hedging	Derivatives used for hedging													Derivatives used for hedging
Interest rate contracts (d):	Interest rate contracts (d):													Interest rate contracts (d):
Fair value hedges	Fair value hedges	$	22,802					$	24,153					Fair value hedges	$	24,837					$	24,153
Cash flow hedges	Cash flow hedges	35,017		$	14	$	99	22,875		$	14			Cash flow hedges	42,018		$	12	$	38	22,875		$	14
Foreign exchange contracts:	Foreign exchange contracts:													Foreign exchange contracts:
Net investment hedges	Net investment hedges	1,081		0		30		1,075		0		$	22	Net investment hedges	1,148		1		3		1,075		0		$	22
Total derivatives designated for hedging	Total derivatives designated for hedging	$	58,900	$	14	$	129	$	48,103	$	14	$	22	Total derivatives designated for hedging	$	68,003	$	13	$	41	$	48,103	$	14	$	22
Derivatives not used for hedging	Derivatives not used for hedging													Derivatives not used for hedging
Derivatives used for mortgage banking activities (e):	Derivatives used for mortgage banking activities (e):													Derivatives used for mortgage banking activities (e):
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps	Swaps	$	26,974					$	50,511	0				Swaps	$	33,994					$	50,511	0
Futures (f)	Futures (f)	2,883						2,841						Futures (f)	3,666						2,841
Mortgage-backed commitments	Mortgage-backed commitments	14,979		$	144	$	82	11,288		$	147	$	77	Mortgage-backed commitments	13,702		$	98	$	54	11,288		$	147	$	77
Other	Other	4,307		58		16		1,831		11		2		Other	13,732		38		11		1,831		11		2
Total interest rate contracts	Total interest rate contracts	49,143		202		98		66,471		158		79		Total interest rate contracts	65,094		136		65		66,471		158		79
Derivatives used for customer-related activities:	Derivatives used for customer-related activities:													Derivatives used for customer-related activities:
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps	Swaps	278,447		3,614		1,578		280,125		5,475		1,601		Swaps	304,724		3,961		1,508		280,125		5,475		1,601
Futures (f)	Futures (f)	965						1,235						Futures (f)	1,006						1,235
Mortgage-backed commitments	Mortgage-backed commitments	7,324		36		30		4,178		11		14		Mortgage-backed commitments	4,692		18		16		4,178		11		14
Other	Other	22,475		157		123		20,125		193		88		Other	25,333		143		88		20,125		193		88
Total interest rate contracts	Total interest rate contracts	309,211		3,807		1,731		305,663		5,679		1,703		Total interest rate contracts	335,755		4,122		1,612		305,663		5,679		1,703
Commodity contracts:	Commodity contracts:													Commodity contracts:
Swaps	Swaps	7,032		558		533		6,149		350		323		Swaps	9,249		2,099		2,114		6,149		350		323
Other	Other	3,247		120		120		2,770		61		61		Other	3,236		422		422		2,770		61		61
Total commodity contracts	Total commodity contracts	10,279		678		653		8,919		411		384		Total commodity contracts	12,485		2,521		2,536		8,919		411		384
Foreign exchange contracts and other	Foreign exchange contracts and other	26,183		186		172		26,620		267		243		Foreign exchange contracts and other	27,995		192		182		26,620		267		243
Total derivatives for customer-related activities	Total derivatives for customer-related activities	345,673		4,671		2,556		341,202		6,357		2,330		Total derivatives for customer-related activities	376,235		6,835		4,330		341,202		6,357		2,330
Derivatives used for other risk management activities:	Derivatives used for other risk management activities:													Derivatives used for other risk management activities:
Foreign exchange contracts and other	Foreign exchange contracts and other	10,836		29		240		10,931		4		325		Foreign exchange contracts and other	12,782		51		345		10,931		4		325
Total derivatives not designated for hedging	Total derivatives not designated for hedging	$	405,652	$	4,902	$	2,894	$	418,604	$	6,519	$	2,734	Total derivatives not designated for hedging	$	454,111	$	7,022	$	4,740	$	418,604	$	6,519	$	2,734
Total gross derivatives	Total gross derivatives	$	464,552	$	4,916	$	3,023	$	466,707	$	6,533	$	2,756	Total gross derivatives	$	522,114	$	7,035	$	4,781	$	466,707	$	6,533	$	2,756
Less: Impact of legally enforceable master netting agreements	Less: Impact of legally enforceable master netting agreements			904		904				720		720		Less: Impact of legally enforceable master netting agreements			1,027		1,027				720		720
Less: Cash collateral received/paid	Less: Cash collateral received/paid			716		1,295				1,434		1,452		Less: Cash collateral received/paid			757		2,403				1,434		1,452
Total derivatives	Total derivatives			$	3,296	$	824			$	4,379	$	584	Total derivatives			$	5,251	$	1,351			$	4,379	$	584

(a)Centrally cleared derivatives are settled in cash daily and result in no derivative asset or derivative liability being recognized on our Consolidated Balance Sheet.

(b)Included in Other assets on our Consolidated Balance Sheet.

(c)Included in Other liabilities on our Consolidated Balance Sheet.

(d)Represents primarily swaps.

(e)Includes both residential and commercial mortgage banking activities.

(f)Futures contracts are settled in cash daily and result in no derivative asset or derivative liability being recognized on our Consolidated Balance Sheet.

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 of this Note 12. Any nonperformance risk, including credit risk, is included in the determination of the estimated net fair value of the derivatives.

The PNC Financial Services Group, Inc. – Form 10-Q 8983

Derivatives Designated As Hedging Instruments

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. 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 be recognized in the same period and in the same income statement line item as the earnings impact of the hedged items.

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. Gains and losses on the interest rate swaps designated in these hedge relationships, along with the offsetting gains and losses on the hedged items attributable to the hedged risk, are recognized in current earnings within the same income statement line item.

Cash Flow Hedges

We enter into receive-fixed, pay-variable interest rate swaps and interest rate caps and floors 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. 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. For these cash flow hedges, gains and losses on the hedging instruments are recorded in AOCI and are then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line as the hedged cash flows.

In the 12 months that follow ~~March 31,~~September 30, 2021, we expect to reclassify ~~an insignificant amount of~~ net derivative gains of $312 million pretax, or $240 million after-tax, from AOCI to interest income for these 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 ~~March 31,~~September 30, 2021. As of ~~March 31,~~September 30, 2021, the maximum length of time over which forecasted transactions are hedged is ten years.

90 The PNC Financial Services Group, Inc. – Form 10-Q

Further detail regarding gains (losses) related to our fair value and cash flow hedge derivatives is presented in the following table:

Table ~~68:~~78: Gains (Losses) Recognized on Fair Value and Cash Flow Hedges in the Consolidated Income Statement (a) (b)


		Location and Amount of Gains (Losses) Recognized in Income									Location and Amount of Gains (Losses) Recognized in Income
		Interest Income				Interest Expense		Noninterest Income			Interest Income				Interest Expense		Noninterest Income
In millions	In millions	Loans		Investment Securities		Borrowed Funds		Other		In millions	Loans		Investment Securities		Borrowed Funds		Other
For the three months ended March 31, 2021
For the three months ended September 30, 2021										For the three months ended September 30, 2021
Total amounts on the Consolidated Income Statement	Total amounts on the Consolidated Income Statement	$	1,996	$	421	$	95	$	483	Total amounts on the Consolidated Income Statement	$	2,437	$	460	$	90	$	449
Gains (losses) on fair value hedges recognized on:	Gains (losses) on fair value hedges recognized on:									Gains (losses) on fair value hedges recognized on:
Hedged items (c)	Hedged items (c)			$	(8)	$	646			Hedged items (c)			$	2	$	155
Derivatives	Derivatives			$	9	$	(664)			Derivatives					$	(169)
Amounts related to interest settlements on derivatives	Amounts related to interest settlements on derivatives			$	(1)	$	134			Amounts related to interest settlements on derivatives			$	(1)	$	129
Gains (losses) on cash flow hedges (d):	Gains (losses) on cash flow hedges (d):									Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from AOCI	Amount of derivative gains (losses) reclassified from AOCI	$	100	$	22			$	13	Amount of derivative gains (losses) reclassified from AOCI	$	91	$	11			$	13
For the three months ended March 31, 2020
For the three months ended September 30, 2020										For the three months ended September 30, 2020
Total amounts on the Consolidated Income Statement	Total amounts on the Consolidated Income Statement	$	2,480	$	582	$	314	$	343	Total amounts on the Consolidated Income Statement	$	2,116	$	490	$	118	$	457
Gains (losses) on fair value hedges recognized on:	Gains (losses) on fair value hedges recognized on:									Gains (losses) on fair value hedges recognized on:
Hedged items (c)	Hedged items (c)			$	234	$	(1,361)			Hedged items (c)			$	(13)	$	141
Derivatives	Derivatives			$	(231)	$	1,339			Derivatives			$	14	$	(166)
Amounts related to interest settlements on derivatives	Amounts related to interest settlements on derivatives			$	(2)	$	59			Amounts related to interest settlements on derivatives			$	(3)	$	149
Gains (losses) on cash flow hedges (d):	Gains (losses) on cash flow hedges (d):									Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from AOCI	Amount of derivative gains (losses) reclassified from AOCI	$	42	$	2			$	1	Amount of derivative gains (losses) reclassified from AOCI	$	118	$	16			0

For the nine months ended September 30, 2021										For the nine months ended September 30, 2021
Total amounts on the Consolidated Income Statement										Total amounts on the Consolidated Income Statement	$	6,593	$	1,350	$	275	$	1,400
Gains (losses) on fair value hedges recognized on:										Gains (losses) on fair value hedges recognized on:
Hedged items (c)										Hedged items (c)			$	(3)	$	695
Derivatives										Derivatives			$	7	$	(740)
Amounts related to interest settlements on derivatives										Amounts related to interest settlements on derivatives			$	(3)	$	394
Gains (losses) on cash flow hedges (d):										Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from AOCI										Amount of derivative gains (losses) reclassified from AOCI	$	282	$	49			$	27
For the nine months ended September 30, 2020										For the nine months ended September 30, 2020
Total amounts on the Consolidated Income Statement										Total amounts on the Consolidated Income Statement	$	6,853	$	1,599	$	619	$	1,071
Gains (losses) on fair value hedges recognized on:										Gains (losses) on fair value hedges recognized on:
Hedged items (c)										Hedged items (c)			$	224	$	(1,300)
Derivatives										Derivatives			$	(219)	$	1,220
Amounts related to interest settlements on derivatives										Amounts related to interest settlements on derivatives			$	(7)	$	341
Gains (losses) on cash flow hedges (d):										Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from AOCI										Amount of derivative gains (losses) reclassified from AOCI	$	262	$	19			$	1

(a)For all periods presented, there were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for any of the fair value or cash flow hedge strategies.

(b)All cash flow and fair value hedge derivatives were interest rate contracts for the periods presented.

(c)Includes an insignificant amount of fair value hedge adjustments related to discontinued hedge relationships.

(d)For all periods presented, there were no gains or losses from cash flow hedge derivatives reclassified to income because it became probable that the original forecasted transaction would not occur.

84 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

Detail regarding the impact of fair value hedge accounting on the carrying value of the hedged items is presented in the following table:

Table ~~69:~~79: Hedged Items - Fair Value Hedges


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
In millions	In millions	Carrying Value of the Hedged Items		Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a)		Carrying Value of the Hedged Items		Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a)		In millions	Carrying Value of the Hedged Items		Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a)		Carrying Value of the Hedged Items		Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a)
Investment securities - available for sale (b)	Investment securities - available for sale (b)	$	2,778	$	22	$	2,785	$	30	Investment securities - available for sale (b)	$	2,905	$	25	$	2,785	$	30
Borrowed funds	Borrowed funds	$	23,936	$	966	$	25,797	$	1,611	Borrowed funds	$	25,924	$	906	$	25,797	$	1,611

(a)Includes $(0.1) billion of fair value hedge adjustments primarily related to discontinued borrowed funds hedge relationships at both ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

(b)Carrying value shown represents amortized cost.

The PNC Financial Services Group, Inc. – Form 10-Q 91

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 0no components of derivative gains or losses excluded from the assessment of the hedge effectiveness for all periods presented. Net gains (losses) on net investment hedge derivatives recognized in OCI were ~~$(8)~~$28 million and ~~$75~~$20 million for the three and nine months ended ~~March 31,~~September 30, 2021, compared with $(42) million and $38 million for the same periods in 2020, respectively.

Derivatives Not Designated As Hedging Instruments

For additional information on derivatives not designated as hedging instruments under GAAP, see Note 16 Financial Derivatives in the Notes to Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K.

Further detail regarding the gains (losses) on derivatives not designated in hedging relationships is presented in the following table:

Table ~~70:~~80: Gains (Losses) on Derivatives Not Designated for Hedging


		Three months ended March 31						Three months ended September 30	Nine months ended September 30
In millions	In millions		2021		2020		In millions			2021		2020		2021		2020
Derivatives used for mortgage banking activities:	Derivatives used for mortgage banking activities:						Derivatives used for mortgage banking activities:
Interest rate contracts (a)	Interest rate contracts (a)		$	(322)	$	654	Interest rate contracts (a)			$	6	$	20	$	(100)	$	799
Derivatives used for customer-related activities:	Derivatives used for customer-related activities:						Derivatives used for customer-related activities:
Interest rate contracts	Interest rate contracts		82		2		Interest rate contracts			(4)		59		93		99
Foreign exchange contracts and other	Foreign exchange contracts and other		22		11		Foreign exchange contracts and other			23		43		88		83
Gains (losses) from customer-related activities (b)	Gains (losses) from customer-related activities (b)		104		13		Gains (losses) from customer-related activities (b)			19		102		181		182
Derivatives used for other risk management activities:	Derivatives used for other risk management activities:						Derivatives used for other risk management activities:
Foreign exchange contracts and other (b)	Foreign exchange contracts and other (b)		48		207		Foreign exchange contracts and other (b)			(72)		(106)		(53)		(1)
Total gains (losses) from derivatives not designated as hedging instruments	Total gains (losses) from derivatives not designated as hedging instruments		$	(170)	$	874	Total gains (losses) from derivatives not designated as hedging instruments			$	(47)	$	16	$	28	$	980

(a)Included in Residential mortgage, Corporate services and Other noninterest income on our Consolidated Income Statement.

(b)Included in Other noninterest income on our Consolidated Income Statement.

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 party’s net position. For additional information on derivative offsetting, counterparty credit risk and contingent features, see Note 16 Financial Derivatives in the Notes to Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K.

Table 7181 shows the impact legally enforceable master netting agreements had on our derivative assets and derivative liabilities as of ~~March 31,~~September 30, 2021 and December 31, 2020. The table includes cash collateral held or pledged under legally enforceable master netting

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 85

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 7181 includes OTC derivatives and OTC derivatives cleared through a central clearing house. OTC derivatives represent contracts executed bilaterally with counterparties that are not settled through an organized exchange or directly cleared through a central clearing house. The majority of OTC derivatives are governed by the ISDA documentation or other legally enforceable master netting agreements. OTC 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. OTC cleared derivative instruments are typically settled in cash each day based on the prior day value.

92 The PNC Financial Services Group, Inc. – Form 10-Q

Table ~~71:~~81: Derivative Assets and Liabilities Offsetting


In millions	In millions			Amounts Offset on the Consolidated Balance Sheet							Securities Collateral Held/Pledged Under Master Netting Agreements				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			Gross Fair Value		Fair Value Offset Amount		Cash Collateral		Net Fair Value					Net Amounts
March 31, 2021
September 30, 2021															September 30, 2021
Derivative assets	Derivative assets														Derivative assets
Interest rate contracts:	Interest rate contracts:														Interest rate contracts:
Over-the-counter cleared	Over-the-counter cleared	$	101					$	101				$	101	Over-the-counter cleared	$	51					$	51				$	51

Over-the-counter	Over-the-counter	3,922		$	620	$	700	2,602			$	263	2,339		Over-the-counter	4,219		$	556	$	723	2,940			$	287	2,653
Commodity contracts	Commodity contracts	678		190		8		480					480		Commodity contracts	2,521		343		28		2,150					2,150
Foreign exchange and other contracts	Foreign exchange and other contracts	215		94		8		113			1		112		Foreign exchange and other contracts	244		128		6		110					110
Total derivative assets	Total derivative assets	$	4,916	$	904	$	716	$	3,296	(a)	$	264	$	3,032	Total derivative assets	$	7,035	$	1,027	$	757	$	5,251	(a)	$	287	$	4,964
Derivative liabilities	Derivative liabilities														Derivative liabilities
Interest rate contracts:	Interest rate contracts:														Interest rate contracts:
Over-the-counter cleared	Over-the-counter cleared	$	158					$	158				$	158	Over-the-counter cleared	$	68					$	68				$	68

Over-the-counter	Over-the-counter	1,770		$	653	$	792	325					325		Over-the-counter	1,647		$	613	$	813	221					221
Commodity contracts	Commodity contracts	653		184		407		62					62		Commodity contracts	2,536		353		1,511		672					672
Foreign exchange and other contracts	Foreign exchange and other contracts	442		67		96		279					279		Foreign exchange and other contracts	530		61		79		390					390
Total derivative liabilities	Total derivative liabilities	$	3,023	$	904	$	1,295	$	824	(b)			$	824	Total derivative liabilities	$	4,781	$	1,027	$	2,403	$	1,351	(b)			$	1,351
December 31, 2020	December 31, 2020														December 31, 2020
Derivative assets	Derivative assets														Derivative assets
Interest rate contracts:	Interest rate contracts:														Interest rate contracts:
Over-the-counter cleared	Over-the-counter cleared	$	48					$	48				$	48	Over-the-counter cleared	$	48					$	48				$	48

Over-the-counter	Over-the-counter	5,803		$	430	$	1,426	3,947			$	531	3,416		Over-the-counter	5,803		$	430	$	1,426	3,947			$	531	3,416
Commodity contracts	Commodity contracts	411		209		4		198					198		Commodity contracts	411		209		4		198					198
Foreign exchange and other contracts	Foreign exchange and other contracts	271		81		4		186			1		185		Foreign exchange and other contracts	271		81		4		186			1		185
Total derivative assets	Total derivative assets	$	6,533	$	720	$	1,434	$	4,379	(a)	$	532	$	3,847	Total derivative assets	$	6,533	$	720	$	1,434	$	4,379	(a)	$	532	$	3,847
Derivative liabilities	Derivative liabilities														Derivative liabilities
Interest rate contracts:	Interest rate contracts:														Interest rate contracts:
Over-the-counter cleared	Over-the-counter cleared	$	42					$	42				$	42	Over-the-counter cleared	$	42					$	42				$	42

Over-the-counter	Over-the-counter	1,740		$	462	$	1,179	99					99		Over-the-counter	1,740		$	462	$	1,179	99					99
Commodity contracts	Commodity contracts	384		182		103		99					99		Commodity contracts	384		182		103		99					99
Foreign exchange and other contracts	Foreign exchange and other contracts	590		76		170		344					344		Foreign exchange and other contracts	590		76		170		344					344
Total derivative liabilities	Total derivative liabilities	$	2,756	$	720	$	1,452	$	584	(b)	0		$	584	Total derivative liabilities	$	2,756	$	720	$	1,452	$	584	(b)	0		$	584

(a)Represents the net amount of derivative assets included in Other assets on our Consolidated Balance Sheet.

(b)Represents the net amount of derivative liabilities included in Other liabilities on our Consolidated Balance Sheet.

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 ~~March 31,~~September 30, 2021, we held cash ~~U.S. government~~and debt securities ~~and~~(primarily agency mortgage-backed ~~securities~~securities) totaling ~~$1.5~~$1.6 billion under master netting agreements and other collateral agreements to collateralize net derivative assets due from counterparties, and we pledged cash

86 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

totaling ~~$2.0~~$3.4 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.

The PNC Financial Services Group, Inc. – Form 10-Q 93

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 ~~March 31,~~September 30, 2021 was ~~$1.8~~$3.5 billion for which we had posted collateral of ~~$1.3~~$2.8 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 ~~March 31,~~September 30, 2021 would be ~~$0.5~~$0.7 billion.

NOTE 13 LEGAL PROCEEDINGS

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 13 as well as those matters disclosed in Note 21 Legal Proceedings in Part II, Item 8 of our 2020 Form 10-K and in Note 13 Legal Proceedings in Part I, Item 1 of our first and second quarter 2021 Form 10-Q (such prior disclosure referred to as “Prior Disclosure”)). For Disclosed Matters where we are able to estimate such possible losses or ranges of possible losses, as of ~~March 31,~~September 30, 2021, we estimate that it is reasonably possible that we could incur losses in excess of related accrued liabilities, if any, in an aggregate amount less than $100 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 21 Legal Proceedings in Part II, Item 8 of our 2020 Form 10-K, we are unable, at this time, to estimate the losses that are reasonably possible to be incurred 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 plaintiff’s claim against us as alleged in the plaintiff’s 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.

Pre-need Funeral Arrangements

National City Bank and PNC Bank (collectively, "the PNC defendants") were defendants in a lawsuit filed in the U.S. District Court for the Eastern District of Missouri under the caption Jo Ann Howard and Associates, P.C., et al. v. Cassity, et al (No. 4:09-CV-1252-ERW) arising out of trustee services provided by Allegiant Bank, a National City Bank and PNC Bank predecessor, with respect to Missouri trusts that held pre-need funeral contract assets.

In July 2019, following a new trial on remand from the court of appeals, the district court awarded the plaintiffs $72 million in compensatory damages, $15 million in interest, and $15 million in punitive damages. The PNC defendants appealed this judgment to the court of appeals, and the plaintiffs cross-appealed. In December 2019, the court reduced the judgment by approximately $2.6 million to correct a mathematical error in calculating pre-judgment interest, reducing the total judgment to $99.5 million. In March 2020, the court dismissed the plaintiffs’ cross-appeal on the plaintiffs’ motion. In February 2020, the district court awarded $7 million in fees and costs to the plaintiffs, and the PNC defendants appealed this judgment to the court of appeals. The consolidated appeals of the district court’s judgments were argued in January 2021.

94 The PNC Financial Services Group, Inc. – Form 10-Q

In August 2021, the court of appeals affirmed the judgment of the district court. The PNC defendants paid the judgment and a satisfaction of judgment was filed by plaintiffs with the district court.

USAA Patent Infringement Litigation

In ~~January~~September 2021, ~~USAA filed a motion to dismiss or transfer PNC Bank’s declaratory judgment complaint~~ in~~PNC Bank, N.A. v. United Services Automobile Association~~ ~~(Case No. 2:20-cv-1886), pending in the United States District Court for the Western District of Pennsylvania.~~

~~In February 2021, in~~ United Services Automobile Association v. PNC Bank ~~N.A.~~N.A. (Case No. 2:20-cv-319), pending in the United States District Court for the Eastern District of Texas ~~we answered~~ (“the ~~amended complaint and asserted counterclaims alleging that~~first Texas case”), the

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 87

plaintiff infringed four patents owned by PNC Bank, as well as for a declaratory judgment that PNC Bank does not infringe certain patents asserted by the plaintiff. In March 2021, the plaintiff filed a Court denied our motion to dismiss ~~two of~~and our motion to transfer the ~~patent infringement~~

~~counterclaims, as well as to sever the patent infringement counterclaims for trial.~~case.

In ~~March~~April 2021, ~~USAA filed another lawsuit (~~in United Services Automobile Association v. PNC Bank N.A. (Case No. 2:21-cv-110)), pending in the United States District Court for the Eastern District of Texas, we moved to consolidate this action with the first Texas case and we filed motions to dismiss and transfer this action. In July 2021, this action was consolidated with the first Texas case. In September 2021, the Court denied our motion to dismiss and our motion to transfer, for the same reasons set forth in its September 2021 orders in the first Texas case. Trial in the two consolidated cases is presently scheduled to commence on April 18, 2022.

In July 2021, in United Services Automobile Association v. PNC Bank N.A (case No. 2:21-cv-246), pending in the United States District Court for the Eastern District of Texas, we filed motions to dismiss and transfer this action.

In August 2021, USAA filed a lawsuit, United Services Automobile Association v. BBVA USA (Case No. 2:21-cv-311), in the United States District Court for the Eastern District of Texas against ~~PNC Bank~~BBVA USA for patent infringement. The complaint alleges that ~~PNC’s mobile~~BBVA USA’s remote deposit capture systems infringe ~~two~~six patents owned by the plaintiff. The plaintiff seeks, among other things, a judgment that ~~PNC~~BBVA USA is infringing each of the patents, damages for willful infringement and attorneys’ fees. ~~On April 19,~~In October 2021, BBVA USA was merged into PNC Bank. Also in October 2021, we ~~moved to consolidate this action with~~answered the ~~other action brought by USAA pending in~~complaint and asserted counterclaims for a declaratory judgment that the ~~same district. On April 22, 2021, we filed motions to dismiss~~asserted patents are invalid and ~~transfer this action.~~not infringed.

Other Regulatory and Governmental Inquiries

We are the subject of investigations, audits, examinations 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~~review of specified activities at multiple industry participants; in others, they are directed at PNC individually. From time to time, these inquiries have involved and may in the future involve or lead to regulatory enforcement actions and other administrative proceedings. These inquiries have also led to and may in the future lead to civil or criminal judicial proceedings. Some of these inquiries result in remedies including fines, penalties, restitution, or alterations in our business practices, and in additional expenses and collateral costs and other consequences. Such remedies and other consequences typically have not been material to us from a financial standpoint but could be in the future. Even if not ~~financially~~ material, they may result in significant reputational harm or other adverse consequences.

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 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.

NOTE 14 SEGMENT REPORTING

We have 3 reportable business segments:

•Retail Banking

•Corporate & Institutional Banking

•Asset Management Group

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

The PNC Financial Services Group, Inc. – Form 10-Q 95

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.

Our third quarter 2021 business segment results reflect the full quarter of BBVA's business operations, while results for the nine months ended September 2021 also include the impact of BBVA for the month of June. Until conversion of bank systems and branches as of October 12, 2021, PNC Bank and BBVA customers were served through their respective PNC Bank and BBVA branches, websites and mobile apps, financial advisors and relationship managers. Following conversion, there will be changes in the segmentation of BBVA USA customers as we continue to integrate data to PNC applications, finalize the review of customer relationships and better align customers with PNC's products and services. These changes will be reflected in fourth quarter reporting. See Note 2 Acquisition and Divestiture Activity for additional information on the acquisition of BBVA.

Total business segment financial results differ from total consolidated net income. These differences are reflected in the “Other” category in ~~the~~ Table ~~72.~~82. “Other” includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, ACL for investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses and differences between business segment performance reporting and financial statement reporting (GAAP). ~~The “Other” category also included our BlackRock held for~~

88 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

~~sale asset for the three months ended March 31, 2020.~~ Assets, revenue and earnings attributable to foreign activities were not material in the periods presented for comparison.

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.

We have allocated the ALLL and the allowance for unfunded lending related commitments based on the loan exposures within each business segment’s 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.

96 The PNC Financial Services Group, Inc. – Form 10-Q

Business Segment Results

Table ~~72:~~82: Results of Businesses


Three months ended March 31 In millions		Retail Banking		Corporate & Institutional Banking		Asset Management Group		Other		Consolidated (a)
Three months ended September 30 In millions												Three months ended September 30 In millions	Retail Banking		Corporate & Institutional Banking		Asset Management Group		Other		Consolidated (a)
2021	2021											2021
Income Statement	Income Statement											Income Statement
Net interest income	Net interest income	$	1,362	$	991	$	93	$	(98)	$	2,348	Net interest income	$	1,713	$	1,241	$	141	$	(239)	$	2,856
Noninterest income	Noninterest income	654		807		229		182		1,872		Noninterest income	662		1,056		256		367		2,341
Total revenue	Total revenue	2,016		1,798		322		84		4,220		Total revenue	2,375		2,297		397		128		5,197
Provision for (recapture of) credit losses	Provision for (recapture of) credit losses	(257)		(282)		(9)		(3)		(551)		Provision for (recapture of) credit losses	(113)		(99)		(6)		15		(203)
Depreciation and amortization	Depreciation and amortization	63		47		4		120		234		Depreciation and amortization	78		54		7		138		277
Other noninterest expense	Other noninterest expense	1,413		664		198		65		2,340		Other noninterest expense	1,811		926		248		325		3,310
Income (loss) from continuing operations before income taxes (benefit) and noncontrolling interests	Income (loss) from continuing operations before income taxes (benefit) and noncontrolling interests	797		1,369		129		(98)		2,197		Income (loss) from continuing operations before income taxes (benefit) and noncontrolling interests	599		1,416		148		(350)		1,813
Income taxes (benefit) from continuing operations	Income taxes (benefit) from continuing operations	183		308		30		(150)		371		Income taxes (benefit) from continuing operations	140		290		34		(141)		323
Net income from continuing operations		614		1,061		99		52		1,826
Net income (loss) from continuing operations												Net income (loss) from continuing operations	459		1,126		114		(209)		1,490
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	7		3		0		0		10		Less: Net income attributable to noncontrolling interests	12		3		0		1		16
Net income from continuing operations excluding noncontrolling interests		$	607	$	1,058	$	99	$	52	$	1,816
Net income (loss) from continuing operations excluding noncontrolling interests												Net income (loss) from continuing operations excluding noncontrolling interests	$	447	$	1,123	$	114	$	(210)	$	1,474
Average Assets	Average Assets	$	92,891	$	170,531	$	8,873	$	195,925	$	468,220	Average Assets	$	117,394	$	202,268	$	13,805	$	225,775	$	559,242
2020	2020											2020
Income Statement	Income Statement											Income Statement
Net interest income	Net interest income	$	1,456	$	950	$	88	$	17	$	2,511	Net interest income	$	1,383	$	1,012	$	89	0		$	2,484
Noninterest income	Noninterest income	788		694		204		139		1,825		Noninterest income	673		723		221		$	180	1,797
Total revenue	Total revenue	2,244		1,644		292		156		4,336		Total revenue	2,056		1,735		310		180		4,281
Provision for credit losses		445		458		3		8		914
Provision for (recapture of) credit losses												Provision for (recapture of) credit losses	(157)		211		(19)		17		52
Depreciation and amortization	Depreciation and amortization	57		48		11		124		240		Depreciation and amortization	64		50		11		121		246
Other noninterest expense	Other noninterest expense	1,471		674		208		(50)		2,303		Other noninterest expense	1,448		613		200		24		2,285
Income from continuing operations before income taxes (benefit) and noncontrolling interests	Income from continuing operations before income taxes (benefit) and noncontrolling interests	271		464		70		74		879		Income from continuing operations before income taxes (benefit) and noncontrolling interests	701		861		118		18		1,698
Income taxes (benefit) from continuing operations	Income taxes (benefit) from continuing operations	62		94		16		(52)		120		Income taxes (benefit) from continuing operations	162		188		27		(211)		166
Net income from continuing operations	Net income from continuing operations	209		370		54		126		759		Net income from continuing operations	539		673		91		229		1,532
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	8		0		0		(1)		7		Less: Net income attributable to noncontrolling interests	9		3		0		1		13
Net income from continuing operations excluding noncontrolling interests	Net income from continuing operations excluding noncontrolling interests	$	201	$	370	$	54	$	127	$	752	Net income from continuing operations excluding noncontrolling interests	$	530	$	670	$	91	$	228	$	1,519
Average Assets	Average Assets	$	97,062	$	172,502	$	7,801	$	135,071	$	412,436	Average Assets	$	98,731	$	183,266	$	8,361	$	171,781	$	462,139

The PNC Financial Services Group, Inc. – Form 10-Q 97


(Continued from previous page)
Nine months ended September 30 In millions	Retail Banking		Corporate & Institutional Banking		Asset Management Group		Other		Consolidated (a)
2021
Income Statement
Net interest income	$	4,572	$	3,315	$	346	$	(448)	$	7,785
Noninterest income	2,022		2,730		729		818		6,299
Total revenue	6,594		6,045		1,075		370		14,084
Provision for (recapture of) credit losses	(156)		(277)		8		(27)		(452)
Depreciation and amortization	214		152		16		385		767
Other noninterest expense	4,828		2,352		660		604		8,444
Income (loss) from continuing operations before income taxes (benefit) and noncontrolling interests	1,708		3,818		391		(592)		5,325
Income taxes (benefit) from continuing operations	396		818		91		(399)		906
Net income (loss) from continuing operations	1,312		3,000		300		(193)		4,419
Less: Net income attributable to noncontrolling interests	26		10		0		2		38
Net income (loss) from continuing operations excluding noncontrolling interests	$	1,286	$	2,990	$	300	$	(195)	$	4,381
Average Assets	$	103,820	$	184,964	$	11,124	$	211,056	$	510,964
2020
Income Statement
Net interest income	$	4,229	$	3,014	$	266	$	13	$	7,522
Noninterest income	2,046		2,143		629		353		5,171
Total revenue	6,275		5,157		895		366		12,693
Provision for credit losses	1,049		2,254		23		103		3,429
Depreciation and amortization	188		149		34		366		737
Other noninterest expense	4,349		1,906		613		(16)		6,852
Income (loss) from continuing operations before income taxes (benefit) and noncontrolling interests	689		848		225		(87)		1,675
Income taxes (benefit) from continuing operations	161		160		52		(245)		128
Net income from continuing operations	528		688		173		158		1,547
Less: Net income attributable to noncontrolling interests	20		6		0		1		27
Net income from continuing operations excluding noncontrolling interests	$	508	$	682	$	173	$	157	$	1,520
Average Assets	$	98,764	$	185,001	$	8,041	$	152,223	$	444,029

(a)There were no material intersegment revenues for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

Business Segment Products and Services

Retail Banking provides deposit, lending, brokerage, insurance services, investment management and cash management products and services to consumer and small business customers. Our customers are serviced through our branch network, ATMs, call centers, online banking and mobile channels. ~~The branch network is located primarily in markets across~~As a result of the ~~Mid-Atlantic, Midwest and Southeast.~~BBVA acquisition, we have become a coast-to-coast Retail Bank. Our national expansion strategy is designed to grow customers with digitally-led banking and a thin branch network ~~in markets outside of our existing retail branch network.~~as we expand into new markets. 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,

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 89

education loans and personal and small business loans and lines of credit. The residential mortgage loans are directly originated within our branch network and nationwide, and are typically underwritten to agency and/or third-party standards, and either sold, servicing retained or held on our balance sheet. Brokerage, investment management and cash management products and services include managed, education, retirement and trust accounts.

Corporate & Institutional Banking provides lending, treasury management and capital markets-related products and services to mid-sized and large corporations, and government and not-for-profit entities. Lending products include secured and unsecured loans, letters of credit and equipment leases. The Treasury Management business provides ~~payables,~~corporations with cash and investment management services, receivables ~~deposit~~ and ~~account~~disbursement management services, ~~liquidity~~funds transfer services, international payment services and ~~investments,~~access to online/mobile information management and ~~online~~reporting services. Within Treasury Management, PNC Global Transfers (formerly BBVA Transfer Services, Inc.) provides wholesale money transfer processing capabilities between the U.S. and ~~mobile banking products~~Mexico and ~~services to our clients.~~other countries primarily in Central America and South America. Capital markets-related products and services include foreign exchange, derivatives, fixed income, securities underwriting, 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 provided nationally.

98 The PNC Financial Services Group, Inc. – Form 10-Q

Asset Management Group provides ~~personal wealth management~~private banking for high net worth and ultra high net worth clients and institutional asset management. The Asset Management group is composed of 2 distinct operating units:

•~~Personal Wealth Management, inclusive of Hawthorn,~~PNC Private Bank provides products and services to emerging affluent, high net worth and ultra high net worth individuals and their families including investment and retirement planning, customized investment management, ~~private banking,~~credit and cash management solutions, and trust management and ~~administration for individuals and their families. The business also provides~~administration. In addition, 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~~are also provided to ultra high net worth ~~clients.~~individuals and families which include estate, financial, tax, fiduciary and customized performance reporting through PNC Private Bank Hawthorn.

•Institutional ~~asset management~~Asset Management provides outsourced chief investment officer, custody, private real estate, cash and fixed income client solutions, and retirement plan fiduciary ~~retirement advisory~~investment services to institutional clients including corporations, healthcare systems, insurance companies, unions, municipalities and non-profits.

NOTE 15 FEE-BASED REVENUE FROM CONTRACTS WITH CUSTOMERS

As more fully described in Note 24 Fee-based Revenue from Contracts with Customers in our 2020 Form 10-K, a subset of our noninterest income relates to certain fee-based revenue within the scope of ASC Topic 606 - Revenue from Contracts with Customers (Topic 606).

Fee-based revenue within the scope of Topic 606 is recognized within our 3 reportable business segments: Retail Banking, Corporate & Institutional Banking and Asset Management Group. Interest income, income from lease contracts, fair value gains from financial instruments (including derivatives), income from mortgage servicing rights and guarantee products, letter of credit fees, non-refundable fees associated with acquiring or originating a loan and gains from the sale of financial assets are outside of the scope of Topic 606.

90 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

The following tables present noninterest income within the scope of Topic 606 disaggregated by segment. A description of the fee-based revenue and how it is recognized for each segment’s principal services and products is included in our 2020 Form 10-K.

Retail Banking

Table ~~73:~~83: Retail Banking Noninterest Income Disaggregation


		Three months ended March 31				Three months ended September 30				Nine months ended September 30
In millions	In millions	2021		2020			In millions	2021		2020		2021		2020
Product	Product						Product
Debit card fees	Debit card fees	$	138	$	129		Debit card fees	$	184	$	136	$	486	$	385
Deposit account fees	Deposit account fees	108		158			Deposit account fees	142		108		367		339
Brokerage fees	Brokerage fees	102		93			Brokerage fees	123		94		334		273
Net credit card fees (a)	Net credit card fees (a)	47		41			Net credit card fees (a)	53		50		157		130
Merchant services	Merchant services	32		49			Merchant services	46		40		125		112
Other	Other	57		56			Other	76		62		201		170
Total in-scope noninterest income by product	Total in-scope noninterest income by product	$	484	$	526		Total in-scope noninterest income by product	$	624	$	490	$	1,670	$	1,409
Reconciliation to total Retail Banking noninterest income	Reconciliation to total Retail Banking noninterest income						Reconciliation to total Retail Banking noninterest income
Total in-scope noninterest income	Total in-scope noninterest income	$	484	$	526		Total in-scope noninterest income	$	624	$	490	$	1,670	$	1,409
Total out-of-scope noninterest income (b)	Total out-of-scope noninterest income (b)	170		262			Total out-of-scope noninterest income (b)	38		183		352		637
Total Retail Banking noninterest income	Total Retail Banking noninterest income	$	654	$	788		Total Retail Banking noninterest income	$	662	$	673	$	2,022	$	2,046

(a)Net credit card fees consists of interchange fees of ~~$120~~$155 million and ~~$118~~$121 million and credit card reward costs of ~~$73~~$102 million and ~~$77~~$71 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Net credit card fees consists of interchange fees of $421 million and $341 million and credit card reward costs of $264 million and $211 million for the nine months ended September 30, 2021 and 2020, respectively.

(b)Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

The PNC Financial Services Group, Inc. – Form 10-Q 99

Corporate & Institutional Banking

Table ~~74:~~84: Corporate & Institutional Banking Noninterest Income Disaggregation


		Three months ended March 31				Three months ended September 30				Nine months ended September 30
In millions	In millions	2021		2020			In millions	2021		2020		2021		2020
Product	Product						Product
Treasury management fees	Treasury management fees	$	235	$	216		Treasury management fees	$	323	$	231	$	837	$	665
Capital markets fees	Capital markets fees	192		175			Capital markets fees	354		132		778		494
Commercial mortgage banking activities	Commercial mortgage banking activities	31		26			Commercial mortgage banking activities	36		31		102		81
Other	Other	29		20			Other	17		18		64		55
Total in-scope noninterest income by product	Total in-scope noninterest income by product	$	487	$	437		Total in-scope noninterest income by product	$	730	$	412	$	1,781	$	1,295
Reconciliation to total Corporate & Institutional Banking noninterest income	Reconciliation to total Corporate & Institutional Banking noninterest income						Reconciliation to total Corporate & Institutional Banking noninterest income
Total in-scope noninterest income	Total in-scope noninterest income	$	487	$	437		Total in-scope noninterest income	$	730	$	412	$	1,781	$	1,295
Total out-of-scope noninterest income (a)	Total out-of-scope noninterest income (a)	320		257			Total out-of-scope noninterest income (a)	326		311		949		848
Total Corporate & Institutional Banking noninterest income	Total Corporate & Institutional Banking noninterest income	$	807	$	694		Total Corporate & Institutional Banking noninterest income	$	1,056	$	723	$	2,730	$	2,143

(a)Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

Treasury Management Fees

Corporate & Institutional Banking provides corporations with cash and investment management services, receivables and disbursement management services, funds transfer services, international payment services and access to online/mobile information management and reporting services. Within Treasury Management, PNC Global Transfers (formerly BBVA Transfer Services, Inc.) provides wholesale money transfer processing capabilities between the U.S. and Mexico and other countries primarily in Central America and South America. Treasury management fees are primarily recognized over time as we perform these services.

Asset Management Group

Table ~~75:~~85: Asset Management Group Noninterest Income Disaggregation


		Three months ended March 31				Three months ended September 30				Nine months ended September 30
In millions	In millions	2021		2020			In millions	2021		2020		2021		2020
Customer Type	Customer Type						Customer Type
Personal	Personal	$	173	$	150		Personal	$	196	$	164	$	554	$	465
Institutional	Institutional	53		51			Institutional	56		51		165		150
Total in-scope noninterest income by customer type(a)	Total in-scope noninterest income by customer type(a)	$	226	$	201		Total in-scope noninterest income by customer type(a)	$	252	$	215	$	719	$	615
Reconciliation to Asset Management Group noninterest income	Reconciliation to Asset Management Group noninterest income						Reconciliation to Asset Management Group noninterest income
Total in-scope noninterest income	Total in-scope noninterest income	$	226	$	201		Total in-scope noninterest income	$	252	$	215	$	719	$	615
Total out-of-scope noninterest income ~~(a)~~(b)	Total out-of-scope noninterest income ~~(a)~~(b)	3		3			Total out-of-scope noninterest income ~~(a)~~(b)	4		6		10		14
Total Asset Management Group noninterest income	Total Asset Management Group noninterest income	$	229	$	204		Total Asset Management Group noninterest income	$	256	$	221	$	729	$	629

(a)Amounts include $248 million of Asset Management Fees and $4 million of Brokerage Fees for the three months ended September 30, 2021. Amounts include $713 million of Asset Management Fees and $6 million of Brokerage Fees for the nine months ended September 30, 2021. Amounts for the three and nine months ended September 30, 2020 consist only of Asset Management Fees. As described in the "Asset Management Services and Brokerage Fees" narrative following this table 85, Brokerage Fees were assumed by the Asset Management Group as a result of the BBVA acquisition..

(b)Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

Asset Management Services and Brokerage Fees

Asset Management Group provides both personal wealth and institutional asset management services including investment management, custody services, retirement planning, family planning, trust management and retirement plan fiduciary investment services. As a result of the acquisition of BBVA, the Asset Management Group assumed brokerage account client assets, resulting in brokerage fee revenue, included in the table above for the three and nine months ended September 30, 2021. We recognize fee revenue over the term of the customer contract based on the value of assets under management at a point in time.

100The PNC Financial Services Group, Inc. – Form 10-Q

NOTE 16 SUBSEQUENT EVENTS

On ~~April 23,~~October 14, 2021, following completion of the bank merger on October 8, 2021, PNC Bank completed a one-time return of capital of $3.0 billion to the parent ~~company~~company.

On October 29, 2021, PNC announced the redemption on November 9, 2021 of all of the outstanding senior notes due December 9, 2021 issued ~~$1.0 billion~~by PNC Bank, National Association in the amount of ~~senior fixed-to-floating~~$750 million. The securities have a distribution rate ~~notes with a~~of 2.550% and an original scheduled maturity date of ~~April 23, 2032. Interest is payable semi-annually in arrears at a fixed rate of 2.307% per annum, on April 23 and October 23 of each year, beginning on October 23,~~December 9, 2021. ~~Beginning on April 23, 2031, interest is payable quarterly in arrears at a floating rate per annum~~The redemption price will be equal to ~~Compounded SOFR (determined with respect~~$1,000 per $1,000 in principal amount, plus any accrued and unpaid distributions to ~~each quarterly interest period using~~ the ~~SOFR Index as described in the Prospectus Supplement), plus 0.97926%, on July 23, 2031, October 23, 2031, January 23, 2032 and at the maturity~~redemption date.

92The PNC Financial Services Group, Inc. – Form 10-Q

101

STATISTICAL INFORMATION (UNAUDITED)

THE PNC FINANCIAL SERVICES GROUP, INC.

Average Consolidated Balance Sheet And Net Interest Analysis (a) (b) (c)


		Three months ended March 31													Nine months ended September 30
		2021						2020							2021						2020
Taxable-equivalent basis Dollars in millions	Taxable-equivalent basis Dollars in millions	Average Balances		Interest Income/Expense		Average Yields/Rates		Average Balances		Interest Income/ Expense		Average Yields/ Rates		Taxable-equivalent basis Dollars in millions	Average Balances		Interest Income/Expense		Average Yields/Rates		Average Balances		Interest Income/ Expense		Average Yields/ Rates
Assets	Assets													Assets
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Investment securities	Investment securities													Investment securities
Securities available for sale	Securities available for sale													Securities available for sale
Residential mortgage-backed	Residential mortgage-backed													Residential mortgage-backed
Agency	Agency	$	45,298	$	195	1.72	%	$	49,636	$	326	2.63	%	Agency	$	54,900	$	644	1.56	%	$	51,453	$	891	2.31	%
Non-agency	Non-agency	1,236		22		7.24	%	1,617		32		7.87	%	Non-agency	1,142		66		7.70	%	1,527		85		7.43	%
Commercial mortgage-backed	Commercial mortgage-backed	6,241		40		2.58	%	6,734		50		2.95	%	Commercial mortgage-backed	6,280		116		2.47	%	6,964		140		2.68	%
Asset-backed	Asset-backed	5,304		24		1.84	%	5,003		38		3.05	%	Asset-backed	5,590		76		1.80	%	5,115		103		2.70	%
U.S. Treasury and government agencies	U.S. Treasury and government agencies	22,309		94		1.68	%	15,938		92		2.29	%	U.S. Treasury and government agencies	31,017		315		1.34	%	16,714		240		1.88	%
Other	Other	4,561		39		3.28	%	4,024		37		3.69	%	Other	4,889		112		3.05	%	4,567		120		3.51	%
Total securities available for sale	Total securities available for sale	84,949		414		1.95	%	82,952		575		2.77	%	Total securities available for sale	103,818		1,329		1.70	%	86,340		1,579		2.43	%
Securities held to maturity	Securities held to maturity													Securities held to maturity

Asset-backed	Asset-backed							51				2.77	%	Asset-backed							24				2.66	%
U.S. Treasury and government agencies	U.S. Treasury and government agencies	797		6		2.83	%	779		6		2.84	%	U.S. Treasury and government agencies	802		17		2.86	%	783		17		2.85	%
Other	Other	650		6		4.17	%	640		7		4.48	%	Other	667		20		4.05	%	648		21		4.32	%
Total securities held to maturity	Total securities held to maturity	1,447		12		3.43	%	1,470		13		3.56	%	Total securities held to maturity	1,469		37		3.40	%	1,455		38		3.50	%
Total investment securities	Total investment securities	86,396		426		1.97	%	84,422		588		2.78	%	Total investment securities	105,287		1,366		1.73	%	87,795		1,617		2.45	%
Loans	Loans													Loans
Commercial and industrial	Commercial and industrial	129,996		948		2.91	%	128,723		1,180		3.62	%	Commercial and industrial	140,368		3,049		2.87	%	140,701		3,286		3.07	%
Commercial real estate	Commercial real estate	28,598		200		2.80	%	28,275		260		3.64	%	Commercial real estate	32,452		734		2.98	%	28,689		663		3.03	%
Equipment lease financing	Equipment lease financing	6,332		62		3.90	%	7,066		69		3.93	%	Equipment lease financing	6,321		182		3.83	%	6,958		201		3.85	%
Consumer	Consumer	50,904		599		4.78	%	57,680		771		5.38	%	Consumer	53,695		1,934		4.82	%	56,279		2,099		4.98	%
Residential real estate	Residential real estate	22,305		197		3.53	%	21,828		216		3.96	%	Residential real estate	29,048		730		3.35	%	22,292		644		3.85	%
Total loans	Total loans	238,135		2,006		3.38	%	243,572		2,496		4.08	%	Total loans	261,884		6,629		3.36	%	254,919		6,893		3.58	%
Interest-earning deposits with banks	Interest-earning deposits with banks	85,410		21		0.10	%	17,569		56		1.27	%	Interest-earning deposits with banks	81,383		74		0.12	%	37,582		80		0.28	%
Other interest-earning assets	Other interest-earning assets	7,829		45		2.34	%	9,468		82		3.51	%	Other interest-earning assets	8,345		142		2.27	%	10,028		199		2.64	%
Total interest-earning assets/interest income	Total interest-earning assets/interest income	417,770		2,498		2.40	%	355,031		3,222		3.62	%	Total interest-earning assets/interest income	456,899		8,211		2.38	%	390,324		8,789		2.98	%
Noninterest-earning assets	Noninterest-earning assets	50,450						57,405						Noninterest-earning assets	54,065						53,705
Total assets	Total assets	$	468,220					$	412,436					Total assets	$	510,964					$	444,029
Liabilities and Equity	Liabilities and Equity													Liabilities and Equity
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing deposits	Interest-bearing deposits													Interest-bearing deposits
Money market	Money market	$	59,083	5		0.03	%	$	53,287	95		0.72	%	Money market	$	69,105	$	15	0.03	%	$	59,426	$	130	0.29	%
Demand	Demand	91,619		9		0.04	%	70,931		72		0.41	%	Demand	99,154		23		0.03	%	80,371		100		0.17	%
Savings	Savings	82,926		12		0.06	%	69,977		138		0.79	%	Savings	86,662		32		0.05	%	74,279		217		0.39	%
Time deposits	Time deposits	18,449		14		0.32	%	21,141		70		1.34	%	Time deposits	18,577		29		0.21	%	21,084		143		0.91	%
Total interest-bearing deposits	Total interest-bearing deposits	252,077		40		0.06	%	215,336		375		0.70	%	Total interest-bearing deposits	273,498		99		0.05	%	235,160		590		0.34	%
Borrowed funds	Borrowed funds													Borrowed funds
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	2,411		3		0.43	%	13,440		58		1.69	%	Federal Home Loan Bank borrowings	883		3		0.42	%	11,051		98		1.16	%
Bank notes and senior debt	Bank notes and senior debt	22,799		60		1.04	%	29,988		183		2.41	%	Bank notes and senior debt	22,663		172		1.00	%	28,040		366		1.72	%
Subordinated debt	Subordinated debt	5,929		21		1.43	%	5,934		40		2.73	%	Subordinated debt	6,315		64		1.35	%	5,935		91		2.05	%
Other	Other	4,057		11		1.21	%	7,826		33		1.69	%	Other	4,701		36		1.02	%	6,199		64		1.33	%
Total borrowed funds	Total borrowed funds	35,196		95		1.09	%	57,188		314		2.18	%	Total borrowed funds	34,562		275		1.05	%	51,225		619		1.59	%
Total interest-bearing liabilities/interest expense	Total interest-bearing liabilities/interest expense	287,273		135		0.19	%	272,524		689		1.00	%	Total interest-bearing liabilities/interest expense	308,060		374		0.16	%	286,385		1,209		0.56	%
Noninterest-bearing liabilities and equity:	Noninterest-bearing liabilities and equity:													Noninterest-bearing liabilities and equity:
Noninterest-bearing deposits	Noninterest-bearing deposits	113,299						74,396						Noninterest-bearing deposits	133,999						90,078
Accrued expenses and other liabilities	Accrued expenses and other liabilities	14,258						16,437						Accrued expenses and other liabilities	14,787						16,251
Equity	Equity	53,390						49,079						Equity	54,118						51,315
Total liabilities and equity	Total liabilities and equity	$	468,220					$	412,436					Total liabilities and equity	$	510,964					$	444,029
Interest rate spread	Interest rate spread					2.21	%					2.62	%	Interest rate spread					2.22	%					2.42	%
Impact of noninterest-bearing sources	Impact of noninterest-bearing sources					0.06						0.22		Impact of noninterest-bearing sources					0.06						0.15
Net interest income/margin	Net interest income/margin			$	2,363	2.27	%			$	2,533	2.84	%	Net interest income/margin			$	7,837	2.28	%			$	7,580	2.57	%

(continued on following page)

102The PNC Financial Services Group, Inc. – Form 10-Q

Average Consolidated Balance Sheet And Net Interest Analysis (a) (b) (c) (Continued)


		Three months ended December 31						Three months ended September 30
		2020							2021				2020
Taxable-equivalent basis Dollars in millions	Taxable-equivalent basis Dollars in millions	Average Balances		Interest Income/ Expense		Average Yields/ Rates				Taxable-equivalent basis Dollars in millions	Average Balances		Interest Income/Expense		Average Yields/Rates		Average Balances		Interest Income/ Expense		Average Yields/ Rates
Assets	Assets									Assets
Interest-earning assets:	Interest-earning assets:									Interest-earning assets:
Investment securities	Investment securities									Investment securities
Securities available for sale	Securities available for sale									Securities available for sale
Residential mortgage-backed	Residential mortgage-backed									Residential mortgage-backed
Agency	Agency	$	48,036	$	218	1.81	%			Agency	$	63,163	$	223	1.41	%	$	52,215	$	265	2.03	%
Non-agency	Non-agency	1,337		24		7.15	%			Non-agency	1,051		21		8.07	%	1,437		26		7.26	%
Commercial mortgage-backed	Commercial mortgage-backed	6,568		43		2.66	%			Commercial mortgage-backed	6,134		35		2.34	%	6,927		44		2.50	%
Asset-backed	Asset-backed	5,017		26		2.04	%			Asset-backed	5,608		21		1.50	%	5,033		30		2.44	%
U.S. Treasury and government agencies	U.S. Treasury and government agencies	18,783		84		1.77	%			U.S. Treasury and government agencies	38,149		115		1.18	%	18,724		79		1.64	%
Other	Other	4,561		40		3.45	%			Other	4,994		37		2.90	%	4,723		39		3.39	%
Total securities available for sale	Total securities available for sale	84,302		435		2.05	%			Total securities available for sale	119,099		452		1.51	%	89,059		483		2.16	%
Securities held to maturity	Securities held to maturity									Securities held to maturity

Asset-backed										Asset-backed
U.S. Treasury and government agencies	U.S. Treasury and government agencies	793		5		2.88	%			U.S. Treasury and government agencies	807		6		2.88	%	788		6		2.86	%
Other	Other	650		7		4.20	%			Other	680		7		4.33	%	655		7		4.20	%
Total securities held to maturity	Total securities held to maturity	1,443		12		3.47	%			Total securities held to maturity	1,487		13		3.54	%	1,443		13		3.47	%
Total investment securities	Total investment securities	85,745		447		2.08	%			Total investment securities	120,586		465		1.54	%	90,502		496		2.18	%
Loans	Loans									Loans
Commercial and industrial	Commercial and industrial	134,944		990		2.87	%			Commercial and industrial	152,964		1,095		2.80	%	139,795		1,008		2.82	%
Commercial real estate	Commercial real estate	28,991		195		2.63	%			Commercial real estate	37,054		300		3.17	%	29,081		197		2.65	%
Equipment lease financing	Equipment lease financing	6,380		62		3.90	%			Equipment lease financing	6,300		61		3.83	%	6,771		64		3.80	%
Consumer	Consumer	52,872		631		4.74	%			Consumer	57,533		703		4.85	%	54,692		645		4.69	%
Residential real estate	Residential real estate	22,638		208		3.69	%			Residential real estate	37,475		295		3.15	%	22,753		213		3.74	%
Total loans	Total loans	245,825		2,086		3.35	%			Total loans	291,326		2,454		3.32	%	253,092		2,127		3.32	%
Interest-earning deposits with banks	Interest-earning deposits with banks	76,374		20		0.10	%			Interest-earning deposits with banks	80,274		31		0.16	%	60,327		15		0.10	%
Other interest-earning assets	Other interest-earning assets	8,134		40		1.99	%			Other interest-earning assets	9,113		47		2.03	%	9,752		55		2.23	%
Total interest-earning assets/interest income	Total interest-earning assets/interest income	416,078		2,593		2.46	%			Total interest-earning assets/interest income	501,299		2,997		2.36	%	413,673		2,693		2.57	%
Noninterest-earning assets	Noninterest-earning assets	48,901								Noninterest-earning assets	57,943						48,466
Total assets	Total assets	$	464,979							Total assets	$	559,242					$	462,139
Liabilities and Equity	Liabilities and Equity									Liabilities and Equity
Interest-bearing liabilities:	Interest-bearing liabilities:									Interest-bearing liabilities:
Interest-bearing deposits	Interest-bearing deposits									Interest-bearing deposits
Money market	Money market	$	62,621	8		0.05	%			Money market	$	82,911	$	6	0.03	%	$	63,598	$	12	0.07	%
Demand	Demand	88,026		9		0.04	%			Demand	106,588		7		0.03	%	87,226		12		0.05	%
Savings	Savings	79,430		16		0.08	%			Savings	89,679		10		0.04	%	77,479		22		0.11	%
Time deposits	Time deposits	19,448		20		0.41	%			Time deposits	19,293		6		0.12	%	20,248		28		0.58	%
Total interest-bearing deposits	Total interest-bearing deposits	249,525		53		0.08	%			Total interest-bearing deposits	298,471		29		0.04	%	248,551		74		0.12	%
Borrowed funds	Borrowed funds									Borrowed funds
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	4,761		5		0.40	%			Federal Home Loan Bank borrowings							7,196		9		0.47	%
Bank notes and senior debt	Bank notes and senior debt	24,022		62		1.00	%			Bank notes and senior debt	22,573		56		0.97	%	25,858		71		1.08	%
Subordinated debt	Subordinated debt	5,936		21		1.38	%			Subordinated debt	6,787		22		1.28	%	5,936		22		1.51	%
Other	Other	3,433		11		1.39	%			Other	4,992		12		0.93	%	4,354		16		1.31	%
Total borrowed funds	Total borrowed funds	38,152		99		1.02	%			Total borrowed funds	34,352		90		1.03	%	43,344		118		1.06	%
Total interest-bearing liabilities/interest expense	Total interest-bearing liabilities/interest expense	287,677		152		0.21	%			Total interest-bearing liabilities/interest expense	332,823		119		0.14	%	291,895		192		0.26	%
Noninterest-bearing liabilities and equity:	Noninterest-bearing liabilities and equity:									Noninterest-bearing liabilities and equity:
Noninterest-bearing deposits	Noninterest-bearing deposits	109,878								Noninterest-bearing deposits	155,948						101,931
Accrued expenses and other liabilities	Accrued expenses and other liabilities	14,348								Accrued expenses and other liabilities	15,332						15,341
Equity	Equity	53,076								Equity	55,139						52,972
Total liabilities and equity	Total liabilities and equity	$	464,979							Total liabilities and equity	$	559,242					$	462,139
Interest rate spread	Interest rate spread					2.25	%			Interest rate spread					2.22	%					2.31	%
Impact of noninterest-bearing sources	Impact of noninterest-bearing sources					0.07				Impact of noninterest-bearing sources					0.05						0.08
Net interest income/margin	Net interest income/margin			$	2,441	2.32	%			Net interest income/margin			$	2,878	2.27	%			$	2,501	2.39	%

(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 assets). Average balances for certain loans and borrowed funds accounted for at fair value are included in noninterest-earning assets and noninterest-bearing liabilities, with changes in fair value recorded in Noninterest income.

(b)Loan fees for the three months ended ~~March 31,~~September 30, 2021 ~~December 31, 2020~~ and ~~March 31,~~September 30, 2020 were ~~$55 million, $39~~$54 million and ~~$44~~$38 million, respectively. Loan fees for the nine months ended September 30, 2021 and September 30, 2020 were $151 million and $117 million, respectively.

94~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

(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. See Reconciliation of Taxable-Equivalent Net Interest Income in this Statistical Information section for more information.

The PNC Financial Services Group, Inc. – Form 10-Q 103

RECONCILIATION OF TAXABLE-EQUIVALENT NET INTEREST INCOME (NON~~-GAAP)~~(non-GAAP) (a)


		Three months ended							Nine months ended			Three months ended
In millions	In millions	March 31, 2021		December 31, 2020		March 31, 2020		In millions		September 30, 2021			September 30, 2020		September 30, 2021		September 30, 2020
Net interest income (GAAP)	Net interest income (GAAP)	$	2,348	$	2,424	$	2,511	Net interest income (GAAP)		$	7,785		$	7,522	$	2,856	$	2,484
Taxable-equivalent adjustments	Taxable-equivalent adjustments	15		17		22		Taxable-equivalent adjustments		52			58		22		17
Net interest income (Non-GAAP)		$	2,363	$	2,441	$	2,533
Net interest income (non-GAAP)								Net interest income (non-GAAP)		$	7,837		$	7,580	$	2,878	$	2,501

(a)The interest income earned on certain interest-earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. 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.

GLOSSARY

DEFINED TERMS

For a glossary of terms commonly used in our filings, please see the glossary of terms included in our 2020 Form 10-K.

ACRONYMS

ACL

Allowance for credit losses

~~LGD~~LIHTC

~~Loss given default~~Low income housing tax credit

ALLL

Allowance for loan and lease losses

~~LIBOR~~LLC

~~London Interbank Offered Rate~~Limited liability company

AOCI

Accumulated other comprehensive income

~~LIHTC~~LTV

~~Low income housing tax credit~~Loan-to-value ratio

ASC

Accounting Standards Codification

~~LLC~~

~~Limited liability company~~

~~ASF~~

~~Available stable funding~~

~~LTV~~

~~Loan-to-value ratio~~

~~ASU~~

~~Accounting Standards Update~~

MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations

ASU

Accounting Standards Update

MSR

Mortgage servicing right

BBVA

BBVA USA Bancshares, Inc.

~~MSR~~NAICS

~~Mortgage servicing right~~North American Industry Classification System

BBVA, S.A.

Banco Bilbao Vizcaya Argentaria, S.A.

~~NAICS~~NSFR

~~North American Industry Classification System~~Net Stable Funding Ratio

BBVA USA

BBVA USA, the Alabama-chartered bank subsidiary of BBVA USA Bancshares, Inc.

~~NSFR~~

~~Net Stable Funding Ratio~~

~~BHC~~

~~Bank holding company~~

OCC

Office of the Comptroller of the Currency

~~bps~~BHC

~~Basis points~~Bank holding company

OCI

Other comprehensive income

bps

Basis points

OREO

Other real estate owned

CARES Act

Coronavirus Aid, Relief and Economic Security Act

~~OREO~~OTC

~~Other real estate owned~~Over-the-counter

CCAR

Comprehensive Capital Analysis and Review

~~OTC~~PCD

~~Over-the-counter~~Purchased credit deteriorated

CECL

Current expected credit losses

~~PCAOB~~PD

~~Public Company Accounting Oversight Board~~Probability of default

CET1

Common equity tier 1

~~PCD~~PPP

~~Purchased credit deteriorated~~Paycheck Protection Program

CFPB

Consumer Financial Protection Bureau

PDRAC

~~Probability of default~~PNC’s Reserve Adequacy Committee

CRA

Community Reinvestment Act

~~PPP~~

~~Paycheck Protection Program~~

~~DFAST~~

~~Dodd-Frank capital stress testing~~

~~RAC~~

~~PNC’s Reserve Adequacy Committee~~

~~EAD~~

~~Exposure at default~~

ROAP

Removal of account provisions

~~ERM~~

~~Enterprise Risk Management~~

~~RSF~~

~~Required stable funding~~

FHLB

Federal Home Loan Bank

SBA

Small Business Administration

FHLMC

Federal Home Loan Mortgage Corporation

SCB

Stress capital buffer

FICO

Fair Isaac Corporation (credit score)

SEC

Securities and Exchange Commission

FNMA

Federal National Mortgage Association

SLR

Supplementary leverage ratio

FOMC

Federal Open Market Committee

SOFR

Secured Overnight Financing Rate

GAAP

Accounting principles generally accepted in the United States of America

SPE

Special purpose entity

GDP

Gross Domestic Product

TDR

Troubled debt restructuring

~~GLB Act~~

~~Gramm-Leach-Bliley Act~~

~~U.S.~~

~~United States of America~~

HQLA

High quality, unencumbered liquid assets

VAU.S.

~~Department~~United States of ~~Veterans Affairs~~America

ISDA

International Swaps and Derivatives Association

~~VaR~~VA

~~Value-at-risk~~Department of Veterans Affairs

LCR

Liquidity Coverage Ratio

VaR

Value-at-risk

LGD

Loss given default

VIE

Variable interest entity

LIBOR

London Interbank Offered Rate

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 95

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the information set forth in Note 13 Legal Proceedings in the Notes To Consolidated Financial Statements under Part I, Item 1 of this Report, which is incorporated by reference in response to this item.

ITEM 1A. RISK FACTORS

There are no material changes from any of the risk factors previously disclosed in our 2020 Form 10-K in response to Part II, Item 1A and Part I, Item 1A, respectively.

104 The PNC Financial Services Group, Inc. – Form 10-Q

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Equity Security Repurchases

Details of our repurchases of PNC common stock during the ~~first~~third quarter of 2021 are included in the following table.

2021 period
In thousands, except per share data Total shares purchased (a) Average price paid per share Total shares purchased as part of publicly announced programs (b) Maximum number of shares that may yet be purchased under the programs (b)
January 1 - 31 3 $ 154.78 75,109
February 1 – 28 406 $ 162.47 75,109
March 1 - 31 75,109
Total 409 $ 162.41


2021 period In thousands, except per share data	Total shares purchased (a)	Average price paid per share		Total shares purchased as part of publicly announced programs (b)	Maximum number of shares that may yet be purchased under the programs (b)
July 1 - 31	3	$	183.43		75,109
August 1 – 31	956	$	188.93	956	74,153
September 1 – 30	1,105	$	191.85	1,105	73,048
Total	2,064	$	190.49

(a)Includes PNC common stock purchased in connection with our various employee benefit plans generally related to shares used to cover employee payroll tax withholding requirements. See Note 17 Employee Benefit Plans and Note 18 Stock Based Compensation Plans in the Notes To Consolidated Financial Statements included in Item 8 of our 2020 Form 10-K which include additional information regarding our employee benefit and equity compensation plans that use PNC common stock.

(b)On April 4, 2019, our Board of Directors approved the establishment of a stock repurchase program authorization in the amount of 100 million shares of PNC common

stock, effective July 1, 2019. Under this authorization, repurchases may be made in open market or privately negotiated transactions, with the timing and exact amount of

common stock repurchases depending on a number of factors including, among others, market and general economic conditions, regulatory capital considerations, alternative

uses of capital, the potential impact on our credit ratings, and contractual and regulatory limitations, including the results of the supervisory assessment of capital adequacy

and capital planning processes undertaken by the Federal Reserve as part of the CCAR process. PNC announced on March 16, 2020 a temporary suspension of our common stock repurchase program in conjunction with the Federal Reserve’s effort to support the U.S. economy during the pandemic. We continued the suspension through the ~~first~~second quarter of 2021, with the exception of employee benefit-related purchases in the third quarter of 2020, consistent with extension of the Federal Reserves's special capital distribution restrictions. ~~We expect~~During the second quarter of 2021, PNC announced the reinstatement of share repurchase programs with repurchases of up to ~~continue~~$2.9 billion for the four-quarter period beginning in the third quarter of 2021. In the third quarter of 2021, we returned $0.4 billion of capital to ~~refrain from~~shareholders through common share repurchases, ~~for the remainder of the period leading up to the close of our pending BBVA transaction. Following the close, PNC expects to resume repurchases in the second half of 2021.~~representing 2.1 million shares.

96The PNC Financial Services Group, Inc. – Form 10-Q

105

ITEM 6. EXHIBITS

The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this Quarterly Report on Form 10-Q:


EXHIBIT INDEX
3.1.8						Statement with Respect to Shares of the 3.400% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series T (incorporated herein by reference to Exhibit 3.1 of the Corporation’s Current Report on Form 8-K filed September 13, 2021)

4.11						Deposit Agreement, dated as of September 13, 2021, between the Corporation, Computershare Trust Company, N.A. and Computershare Inc., as depositary, and the holders from time to time of the Depositary Receipts described therein (incorporated herein by reference to Exhibit 4.1 of the Corporation’s Current Report on Form 8-K filed September 13, 2021)

10.6.1						Amendment 2021-1 to the Corporation and Affiliates Deferred Compensation and Incentive Plan, as amended and restated effective January 1, 2020

22						Subsidiary Issuers of Guaranteed Securities

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2						Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS						Inline XBRL Instance Document *

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL.

You can obtain copies of these Exhibits electronically at the SEC’s website at www.sec.gov. The Exhibits are also available as part of this Form 10-Q on PNC’s corporate website at www.pnc.com/secfilings. Shareholders and bondholders may also obtain copies of Exhibits, without charge, by contacting Shareholder Relations at 800-843-2206 or via e-mail at investor.relations@pnc.com.

CORPORATE INFORMATION

The PNC Financial Services Group, Inc.

Corporate Headquarters

The PNC Financial Services Group, Inc.

The Tower at PNC Plaza

300 Fifth Avenue

Pittsburgh, Pennsylvania 15222-2401

Internet Information

The PNC Financial Services Group, Inc.'s financial reports and information about its products and services are available on the internet at www.pnc.com. We provide information for investors on our corporate website under “About Us – Investor Relations.” We use our Twitter account, @pncnews, as an additional way of disseminating to the public information that may be relevant to investors.

We generally post the following under “About Us – Investor Relations” shortly before or promptly following its first use or release: financially-related press releases, including earnings releases and supplemental financial information, various SEC filings, including annual, quarterly and current reports and proxy statements, presentation materials associated with earnings and other investor conference calls or events, and access to live and recorded audio from earnings and other investor conference calls or events. In some cases, we may post the presentation materials for other investor conference calls or events several days prior to the call or event. For earnings and other conference calls or events, we generally include in our posted materials a cautionary statement regarding forward-looking and non-GAAP financial information, and we provide GAAP reconciliations when we include non-GAAP financial

106 The PNC Financial Services Group, Inc. – Form 10-Q

information. Such GAAP reconciliations may be in materials for the applicable presentation, in materials for prior presentations or in our annual, quarterly or current reports.

When warranted, we will also use our website to expedite public access to time-critical information regarding PNC instead of using a press release or a filing with the SEC for first disclosure of the information. In some circumstances, the information may be relevant to investors but directed at customers, in which case it may be accessed directly through the home page rather than “About Us – Investor Relations.”

We are required to provide additional public disclosure regarding estimated income, losses and pro forma regulatory capital ratios under supervisory and PNC-developed hypothetical severely adverse economic scenarios, as well as information concerning our

~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~ 97

capital stress testing processes, pursuant to the stress testing regulations adopted by the Federal Reserve and the OCC. We are also required to make certain additional regulatory capital-related public disclosures about our capital structure, risk exposures, risk assessment processes, risk-weighted assets and overall capital adequacy, including market risk-related disclosures, under the regulatory capital rules adopted by the Federal banking agencies. Similarly, the Federal Reserve's rules require quantitative and qualitative disclosures about LCR and, beginning in 2023, our NSFR. Under these regulations, we may satisfy these requirements through postings on our website, and we have done so and expect to continue to do so without also providing disclosure of this information through filings with the SEC.

Other information posted on our corporate website that may not be available in our filings with the SEC includes information relating to our corporate governance and annual communications from our chairman to shareholders.

Where we have included internet addresses in this Report, such as our internet address and the internet address of the SEC, we have included those internet addresses as inactive textual references only. Except as specifically incorporated by reference into this Report, information on those websites is not part hereof.

Financial Information

We are subject to the informational requirements of the Exchange Act and, in accordance with the Exchange Act, we file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC File Number is 001-09718. You can obtain copies of these and other filings, including exhibits, electronically at the SEC’s internet website at www.sec.gov or on our corporate internet website at www.pnc.com/secfilings. Shareholders and bond holders may also obtain copies of these filings without charge by contacting Shareholder Services at 800-982-7652 or via the online contact form at www.computershare.com/contactus for copies without exhibits, or via email to investor.relations@pnc.com for copies of exhibits, including financial statement and schedule exhibits where applicable.

Corporate Governance at PNC

Information about our Board of Directors and its committees and corporate governance, including our PNC Code of Business Conduct and Ethics (as amended from time to time), is available on our corporate website at www.pnc.com/corporategovernance. In addition, any future waivers from a provision of the PNC Code of Business Conduct and Ethics covering any of our directors or executive officers (including our principal executive officer, principal financial officer and principal accounting officer or controller) will be posted at this internet address.

Shareholders who would like to request printed copies of the PNC Code of Business Conduct and Ethics or our Corporate Governance Guidelines or the charters of our Board’s Audit, Nominating and Governance, Personnel and Compensation, or Risk Committees (all of which are posted on our corporate website at www.pnc.com/corporategovernance) may do so by sending their requests to our Corporate Secretary at corporate headquarters at the above address. Copies will be provided without charge.

Inquiries

For financial services, call 888-762-2265.

Registered shareholders should contact Shareholder Services at 800-982-7652.

Analysts and institutional investors should contact Bryan Gill, Executive Vice President, Director of Investor Relations, at 412-768-4143 or via email at investor.relations@pnc.com.

News media representatives should contact PNC Media Relations at 412-762-4550 or via email at media.relations@pnc.com.

Dividend Policy

Holders of PNC common stock are entitled to receive dividends when declared by our Board of Directors out of funds legally available for this purpose. Our Board of Directors may not pay or set apart dividends on the common stock until dividends for all past dividend periods on any series of outstanding preferred stock and certain outstanding capital securities issued by the parent company

The PNC Financial Services Group, Inc. – Form 10-Q 107

have been paid or declared and set apart for payment. The Board of Directors presently intends to continue the policy of paying quarterly cash dividends. The amount of any future dividends will depend on economic and market conditions, our financial condition and operating results, and other factors, including contractual restrictions and applicable government regulations and policies (such as those relating to the ability of bank and non-bank subsidiaries to pay dividends to the parent company and regulatory capital limitations). The amount of our dividend is also currently subject to the results of the supervisory assessment of capital adequacy and capital planning processes undertaken by the Federal Reserve as part of the CCAR process as described in the Capital Management portion of the Risk Management section of the Financial Review of this Report and in the Supervision and Regulation section in Item 1 of our 2020 Form 10-K.

98 ~~The PNC Financial Services Group, Inc. –~~ ~~Form 10-Q~~

Dividend Reinvestment and Stock Purchase Plan

The PNC Financial Services Group, Inc. Dividend Reinvestment and Stock Purchase Plan enables holders of our common stock to conveniently purchase additional shares of common stock. You can obtain a prospectus and enrollment form by contacting Shareholder Services at 800-982-7652. Registered shareholders may also contact this phone number regarding dividends and other shareholder services.

Stock Transfer Agent and Registrar

Computershare

462 South 4th Street, Suite 1600

Louisville, KY 40202

800-982-7652

www.computershare.com/pnc

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on ~~May 5,~~November 3, 2021 on its behalf by the undersigned thereunto duly authorized.


/s/ Robert Q. Reilly
Robert Q. Reilly
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

108The PNC Financial Services Group, Inc. – Form 10-Q


	March 31, 2021				December 31, 2020				Ratings (a) as of March 31, 2021
Dollars in millions	Amortized Cost (b)		Fair Value		Amortized Cost (b)		Fair Value		AAA/ AA		A		BBB		BB and Lower		No Rating
U.S. Treasury and government agencies	$	26,470	$	26,824	$	20,616	$	21,631	100	%
Agency residential mortgage-backed	50,499		51,554		47,355		48,911		100	%
Non-agency residential mortgage-backed	1,181		1,424		1,272		1,501		9	%	1	%	2	%	48	%	40	%
Agency commercial mortgage-backed	2,219		2,284		2,571		2,688		100	%
Non-agency commercial mortgage-backed (c)	4,191		4,236		3,678		3,689		88	%	1	%	1	%	4	%	6	%
Asset-backed (d)	5,969		6,041		5,060		5,150		94	%	1	%			5	%
Other (e)	5,733		5,995		5,061		5,393		58	%	25	%	15	%			2	%
Total investment securities (f)	$	96,262	$	98,358	$	85,613	$	88,963	95	%	2	%	1	%	1	%	1	%


At or for three months ended March 31							Change
Dollars in millions, except as noted	2021			2020			$		%
Supplemental Noninterest Income Information
Consumer services	$	368		$	372		$	(4)	(1)	%
Residential mortgage	$	105		$	210		$	(105)	(50)	%
Service charges on deposits	$	119		$	166		$	(47)	(28)	%
Residential Mortgage Information
Residential mortgage servicing statistics (in billions, except as noted) (a)
Serviced portfolio balance (b)	$	117		$	118		$	(1)	(1)	%
Serviced portfolio acquisitions	$	7		$	2		$	5	250	%
MSR asset value (b)	$	1.0		$	0.6		$	0.4	67	%
MSR capitalization value (in basis points) (b)	83			51			32		63	%
Servicing income: (in millions)
Servicing fees, net (c)	$	5		$	44		$	(39)	(89)	%
Mortgage servicing rights valuation, net of economic hedge	$	14		$	101		$	(87)	(86)	%
Residential mortgage loan statistics
Loan origination volume (in billions)	$	4.3		$	3.2		$	1.1	34	%
Loan sale margin percentage	3.28		%	3.16		%
Percentage of originations represented by:
Purchase volume (d)	34		%	36		%
Refinance volume	66		%	64		%
Other Information (b)
Customer-related statistics (average)
Non-teller deposit transactions (e)	66		%	59		%
Digital consumer customers (f)	79		%	71		%
Credit-related statistics
Nonperforming assets	$	1,229		$	1,011		$	218	22	%
Net charge-offs - loans and leases	$	108		$	166		$	(58)	(35)	%
Other statistics
ATMs	8,874			9,048			(174)		(2)	%
Branches (g)	2,137			2,277			(140)		(6)	%
Brokerage account client assets (in billions) (h)	$	61		$	49		$	12	24	%


	Three months ended March 31, 2021						Three Months Ended March 31, 2020
In millions	Commercial		Consumer		Total		Commercial		Consumer		Total
Allowance for loan and lease losses
Beginning balance	$	3,337	$	2,024	$	5,361	$	1,812	$	930	$	2,742
Adoption of ASU 2016-13 (b)							(304)		767		463
Beginning balance, adjusted	3,337		2,024		5,361		1,508		1,697		3,205
Charge-offs	(69)		(174)		(243)		(83)		(221)		(304)
Recoveries	18		79		97		24		68		92
Net (charge-offs)	(51)		(95)		(146)		(59)		(153)		(212)
Provision for (recapture of) credit losses	(204)		(298)		(502)		531		421		952
Other	1				1		(1)				(1)
Ending balance	$	3,083	$	1,631	$	4,714	$	1,979	$	1,965	$	3,944
Allowance for unfunded lending related commitments (c)
Beginning balance	$	485	$	99	$	584	$	316	$	2	$	318
Adoption of ASU 2016-13 (b)							53		126		179
Beginning balance, adjusted	485		99		584		369		128		497
Provision for (recapture of) credit losses	(82)		5		(77)		(25)		(22)		(47)
Ending balance	$	403	$	104	$	507	$	344	$	106	$	450
Allowance for credit losses at March 31	$	3,486	$	1,735	$	5,221	$	2,323	$	2,071	$	4,394
Allowance for credit losses at December 31	$	3,822	$	2,123	$	5,945	$	2,128	$	932	$	3,060