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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 September 30, 20222023
or
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 ClassTrading Symbol(s)
 Name of Each Exchange
    on Which Registered    
Common Stock, par value $5.00PNCNew 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 October 17, 2022,2023, there were 403,319,033398,341,110 shares of the registrant’s common stock ($5 par value) outstanding.


THE PNC FINANCIAL SERVICES GROUP, INC.
Cross-Reference Index to Third Quarter 20222023 Form 10-Q

 Pages
PART I – FINANCIAL INFORMATION
Item 1.   Financial Statements (Unaudited).
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Item 3. Quantitative and Qualitative Disclosures about Market Risk.21-38, 49-50,
83-89
Item 4. Controls and Procedures.



MD&A TABLE REFERENCEMD&A TABLE REFERENCEMD&A TABLE REFERENCE
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCENOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCENOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE
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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“Report” or Form 10-Q)“Form 10-Q”) and with Items 6, 7, 8 and 9A of our 20212022 Annual Report on Form 10-K (2021(our “2022 Form 10-K)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 20212022 Form 10-K; Item 1A Risk Factors included in our 2021first quarter 2023 Form 10-Q and our 2022 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 in our first and second quarter 20222023 Form 10-Qs and Item 8 of our 20212022 Form 10-K. Also, see the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and the Critical Accounting Estimates and Judgments section in this Financial Review and in our 20212022 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 1514 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”,“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 99107 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
Three months endedNine months ended
September 30June 30September 30September 30September 30
20222022202120222021
Financial Results (a)
Net interest income$3,475 $3,051 $2,856 $9,330 $7,785 
Noninterest income2,074 2,065 2,341 6,027 6,299 
Total revenue5,549 5,116 5,197 15,357 14,084 
Provision for (recapture of) credit losses241 36 (203)69 (452)
Noninterest expense3,280 3,244 3,587 9,696 9,211 
Income before income taxes and noncontrolling interests
$2,028 $1,836 $1,813 $5,592 $5,325 
Income taxes
388 340 323 1,027 906 
Net income$1,640 $1,496 $1,490 $4,565 $4,419 
Net income attributable to common shareholders$1,558 $1,409 $1,416 $4,328 $4,216 
Per Common Share

Basic$3.78 $3.39 $3.31 $10.39 $9.84 
Diluted$3.78 $3.39 $3.30 $10.39 $9.83 
Book value per common share$97.59 $101.39 $121.16 
Performance Ratios
Net interest margin (b)2.82 %2.50 %2.27 %2.54 %2.28 %
Noninterest income to total revenue37 %40 %45 %39 %45 %
Efficiency59 %63 %69 %63 %65 %
Return on:
Average common shareholders’ equity14.97 %13.52 %10.95 %13.31 %11.17 %
Average assets1.19 %1.10 %1.06 %1.11 %1.16 %
(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)See explanation and reconciliation of this non-GAAP measure in Average Consolidated Balance Sheet and Net Interest Analysis and Reconciliation of Taxable-Equivalent Net Interest Income (non-GAAP) in the Statistical Information (Unaudited) section in Item 1 of this Report.















The PNC Financial Services Group, Inc. – Form 10-Q 1


Table 1: Consolidated Financial Highlights (Continued) (a)
Dollars in millions, except as noted
Unaudited
September 30
2022
December 31
2021
September 30
2021
Balance Sheet Data
Assets$559,477 $557,191 $553,515 
Loans$315,400 $288,372 $290,230 
Allowance for loan and lease losses


$4,581 $4,868 $5,355 
Interest-earning deposits with banks$40,278 $74,250 $75,478 
Investment securities$136,451 $132,962 $125,606 
Total deposits$438,194 $457,278 $448,902 
Borrowed funds$54,633 $30,784 $33,471 
Total shareholders’ equity$46,688 $55,695 $56,259 
Common shareholders’ equity$39,444 $50,685 $51,250 
Other Selected Ratios
Common equity Tier 19.3 %10.3 %10.3 %
Loans to deposits72 %63 %65 %
Common shareholders’ equity to total assets7.1 %9.1 %9.3 %
(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.

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 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 needs. 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 organically 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.create efficiencies that help us better serve customers.

Our capital and liquidity priorities are to support customers, fund business investments and return excess capital to shareholders, while maintaining appropriate capital and liquidity in light of economic conditions, the Basel III framework and other regulatory expectations. 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 20212022 Form 10-K.

Hurricane IanPresentation of Noninterest Income

DuringIn the last weekfourth quarter of September 2022, Hurricane Ian caused widespread damagePNC updated the name of the noninterest income line item “Capital markets related” to “Capital markets and advisory.” This update did not impact the components of the category. All periods presented herein reflect these changes. For a description of each updated noninterest income revenue stream, see Note 1 Accounting Policies in central and southwest Florida,our 2022 Form 10-K.

Signature Bank Portfolio Acquisition

On October 2, 2023, PNC acquired a key market areaportfolio of capital commitments facilities from Signature Bridge Bank, N.A. through an agreement with the FDIC as receiver of the former Signature Bank, New York. The acquired portfolio represents approximately $16 billion in total commitments, including approximately $9 billion of funded loans. See Note 17 Subsequent Events for us. The storm resulted in significant property damage to our customers, the closing or disruption of many businesses, including some of PNC’s branches and facilities, and damage to the community infrastructure. We continue to evaluate the impact to our businesses, and, basedmore information on our assessment to date, we do not expect Hurricane Ian to have a material impact on our operating results, including credit losses.this acquisition.


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


Workforce Reduction

On October 6, 2023, PNC committed to a workforce reduction that is expected to reduce 2024 personnel expenses by approximately $325 million annually on a pre-tax basis, with cost savings beginning in the fourth quarter of 2023. PNC has incurred one-time expenses of approximately $150 million. See Note 17 Subsequent Events for more information on our workforce reduction.

Selected Financial Data
The following tables include selected financial data, which should be reviewed in conjunction with the Consolidated Financial Statements and Notes included in Item 1 of this Report as well as the other disclosures in this Report concerning our historical financial performance, our future prospects and the risks associated with our business and financial performance.
Table 1: Summary of Operations, Per Common Share Data and Performance Ratios
Dollars in millions, except per share data
Unaudited
Three months endedNine months ended
September 30June 30September 30September 30September 30
20232023202220232022
Summary of Operations (a)
Net interest income$3,418 $3,510 $3,475 $10,513 $9,330 
Noninterest income1,815 1,783 2,074 5,616 6,027 
Total revenue5,233 5,293 5,549 16,129 15,357 
Provision for credit losses129 146 241 510 69 
Noninterest expense3,245 3,372 3,280 9,938 9,696 
Income before income taxes and noncontrolling interests
$1,859 $1,775 $2,028 $5,681 $5,592 
Income taxes
289 275 388 917 1,027 
Net income$1,570 $1,500 $1,640 $4,764 $4,565 
Net income attributable to common shareholders$1,448 $1,354 $1,558 $4,409 $4,328 
Per Common Share

Basic$3.60 $3.36 $3.78 $10.95 $10.39 
Diluted$3.60 $3.36 $3.78 $10.94 $10.39 
Book value per common share$105.98 $105.67 $97.59 
Performance Ratios
Net interest margin (b)2.71 %2.79 %2.82 %2.78 %2.54 %
Noninterest income to total revenue35 %34 %37 %35 %39 %
Efficiency62 %64 %59 %62 %63 %
Return on:
Average common shareholders’ equity13.65 %13.01 %14.97 %14.23 %13.31 %
Average assets1.12 %1.08 %1.19 %1.14 %1.11 %
(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)See explanation and reconciliation of this non-GAAP measure in the Average Consolidated Balance Sheet and Net Interest Analysis and Reconciliation of Taxable-Equivalent Net Interest Income (non-GAAP) in the Statistical Information (Unaudited) section in Item 1 of this Report.

Table 2: Balance Sheet Highlights and Other Selected Ratios
Dollars in millions, except as noted
Unaudited
September 30
2023
December 31
2022
September 30
2022
Balance Sheet Highlights (a)
Assets$557,334 $557,263 $559,477 
Loans$318,416 $326,025 $315,400 
Allowance for loan and lease losses


$4,767 $4,741 $4,581 
Interest-earning deposits with banks$41,484 $27,320 $40,278 
Investment securities$132,387 $139,334 $136,451 
Total deposits$423,609 $436,282 $438,194 
Borrowed funds$66,167 $58,713 $54,633 
Total shareholders’ equity$49,454 $45,774 $46,688 
Common shareholders’ equity$42,215 $40,028 $39,444 
Other Selected Ratios
Common equity Tier 19.8 %9.1 %9.3 %
Loans to deposits75 %75 %72 %
Common shareholders’ equity to total assets7.6 %7.2 %7.1 %
(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.



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



Presentation of Noninterest Income

Effective for the first quarter of 2022, PNC updated the presentation of its noninterest income categorization to be based on product and service type, and accordingly, has changed the basis of presentation of its noninterest income revenue streams to: (i) Asset management and brokerage, (ii) Capital markets related, (iii) Card and cash management, (iv) Lending and deposit services, (v) Residential and commercial mortgage and (vi) Other noninterest income. For a description of each updated noninterest income revenue stream, see Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in Item 1 of this Report.

Acquisition of BBVA USA Bancshares, Inc.

On June 1, 2021, PNC acquired BBVA USA Bancshares, Inc. (BBVA), a U.S. financial holding company conducting its business operations primarily through its U.S. banking subsidiary, BBVA USA. PNC paid $11.5 billion in cash as consideration for the acquisition.

On October 8, 2021, BBVA USA merged into PNC Bank. On October 12, 2021, PNC converted approximately 2.6 million customers, 9,000 employees and over 600 branches across seven states. Our results of operations and balance sheets for all periods presented in this Report reflect the benefit of BBVA's acquired businesses for the period since the acquisition closed on June 1, 2021.

For additional information on the acquisition of BBVA, see Note 2 Acquisition Activity in the Notes To Consolidated Financial Statements included in Item 1 of this Report and Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements included in Item 8 of our 2021 Form 10-K.

Income Statement Highlights

Net income of $1.6 billion, or $3.78$3.60 per diluted common share, for the third quarter of 20222023 increased $144$70 million, or 10%5%, compared to $1.5 billion, or $3.39$3.36 per diluted common share, for the second quarter of 2023 primarily due to lower expenses and higher noninterest income, partially offset by a decline in net interest income.
For the three months ended September 30, 2023 compared to the three months ended June 30, 2023:
Total revenue decreased $60 million, to $5.2 billion.
Net interest income of $3.4 billion decreased $92 million, or 3%, as higher yields on interest-earning assets were more than offset by increased funding costs.
Net interest margin decreased 8 basis points to 2.71%.
Noninterest income increased $32 million, or 2%, primarily due to higher residential and commercial mortgage revenue, partially offset by lower capital markets and advisory fees and a decline in private equity revenue.
Provision for credit losses of $129 million in the third quarter of 2023 included the impact of our updated economic outlook and portfolio activity. The second quarter of 2023 included a provision for credit losses of $146 million.
Noninterest expense decreased $127 million, or 4%, to $3.2 billion, reflecting a continued focus on expense management as expenses were lower or stable across all categories.

Net income of $4.8 billion, or $10.94 per diluted common share, for the first nine months of 2023 increased $199 million, or 4%, compared to $4.6 billion, or $10.39 per diluted common share, for the nine months ended 2022, primarily driven byas a result of higher net interest income, partially offset by a higher provision for credit losses.losses, lower noninterest income and increased expenses.
For the threenine months ended September 30, 20222023 compared to the threenine months ended JuneSeptember 30, 2022:
Total revenue increased $433 million,$0.8 billion, or 8%5%, to $5.5$16.1 billion.
Net interest income increased $1.2 billion, or 13%, as a result of $3.5 billion increased $424 million, or 14%, driven by higher interest-earning asset yields on interest-earning assets and loan growth,balances, partially offset by higher funding costs.
Net interest margin increased 3224 basis points to 2.82% primarily due to higher yields on interest-earning assets.
Noninterest income increased $9 million.
The third quarter of 2022 included a provision for credit losses of $241 million, reflecting slightly weaker economic expectations which impacted our macroeconomic scenarios and weightings. The second quarter of 2022 included a provision for credit losses of $36 million.
Noninterest expense increased $36 million to $3.3 billion, reflecting increased personnel expense to support business growth as well as one additional day in the quarter.
We generated positive operating leverage of 7%.

Net income of $4.6 billion, or $10.39 per diluted common share, for the first nine months of 2022 increased $146 million, or 3%, compared to $4.4 billion, or $9.83 per diluted common share, for the first nine months of 2021, driven by higher net interest income, partially offset by an increased provision for credit losses, higher expenses and lower noninterest income.
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:
Total revenue increased $1.3 billion, or 9%, to $15.4 billion.
Net interest income increased $1.5 billion, or 20%, due to higher interest-earning asset balances, which included the benefit of BBVA, and higher yields, partially offset by higher funding costs.
Net interest margin increased 26 basis points, primarily due to higher yields on interest-earning assets.
Noninterest income decreased $272$411 million, or 4%7%, primarily due toand included lower merger and acquisition advisory activity and trading revenue, as well as a decline in private equity residential and commercial mortgage and capital markets related fees, partially offset by an increase in card and cash management revenue and $1 million of positiverevenue. The decrease also included negative Visa Class B fair value adjustments of $179 million for the first nine months of 2023 compared to $165$1 million of negativepositive adjustments for the same period in 2021.2022.
Provision for credit losses of $510 million for the first nine months of 2023 included the impact of our updated economic outlook and changes in portfolio composition and quality. The first nine months of 2022 included a provision for credit losses of $69 million.
Noninterest expense increased $485$242 million, or 5%2%, driven by the addition of BBVA operating expensesdue to higher personnel costs, an increased FDIC assessment rate and continuedhigher marketing and equipment costs to support business investment, partially offset by lower integration expenses and a decline in variable compensation related to lower business activity.growth.

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

The PNC Financial Services Group, Inc. – Form 10-Q 3


Balance Sheet Highlights
Our balance sheet was strong and well positioned at September 30, 2022.2023. In comparison to December 31, 2021:2022:
Total assets increased modestly, to $559.5 billion.of $557.3 billion were stable.
Total loans increased $27.0decreased $7.6 billion, or 9%2%, to $315.4$318.4 billion.
Total commercial loans increased $22.5decreased $8.6 billion, or 12%4%, to $215.6$216.4 billion, driven by paydowns outpacing new production and higherlower utilization of loan commitments, partially offset by PPP loan forgiveness.
PPP loans outstanding were $0.6 billion and $3.4 billion at September 30, 2022 and December 31, 2021, respectively.commitments.
Total consumer loans increased $4.5$1.0 billion or 5%, to $99.8$102.0 billion primarily due to increasesas a result of growth in residential mortgages, home equity and credit card,automobile loans, partially offset by declines in the remaining portfolios as paydowns outpaced new originations.originations and draws on existing accounts.
Investment securities increased $3.5decreased $6.9 billion, or 5%, to $136.5$132.4 billion as a result of net purchase activity, partially offset by net unrealized losses.primarily due to prepayments and maturities outpacing purchases.
Interest-earning deposits with banks, primarily with the Federal Reserve Bank, decreased $34.0increased $14.2 billion, or 46%52%, to $40.3$41.5 billion reflectingprimarily due to a decrease in loans and higher loans outstanding and lower deposits,borrowed funds, partially offset by an increase in borrowed funds.lower deposits.
Total deposits decreased $19.1$12.7 billion, or 4%3%, to $438.2$423.6 billion due toas a result of lower commercialconsumer and consumercommercial deposits, reflecting deposit outflows, higher consumer spending and the impact of inflationary pressures.economic pressures and continued elevated levels of consumer spending. In addition, noninterest-bearing balances decreased due to the continued shift into interest-bearing deposit products as interest rates have risen.
Borrowed funds increased $23.8$7.5 billion, or 77%13%, to $54.6$66.2 billion driven by increaseddue to parent company senior debt issuances and higher FHLB borrowings, partially offset by lower bank notes and senior debt.borrowings.

For additional detail, see the Consolidated Balance Sheet Review section of this Financial Review.
The PNC Financial Services Group, Inc. – Form 10-Q 3


Credit Quality Highlights
The third quarter of 20222023 reflected strong credit quality performance.
At September 30, 20222023 compared to December 31, 2021:
Nonperforming assets of $2.1 billion decreased $405 million, or 16%, due to lower commercial and consumer nonperforming loans.2022:
Overall loan delinquencies of $1.6$1.3 billion decreased $359$203 million, or 18%14%, driven by lower commercial and consumer delinquencies, which included the resolution of BBVA USA conversion-related administrative and operational delays.loan delinquencies.
The ACL related to loans, which consists of the ALLL and the allowance for unfunded lending related commitments, decreasedtotaled $5.4 billion at both September 30, 2023 and December 31, 2022. During the nine months ended September 30, 2023, reserves reflected our updated economic outlook and changes in portfolio composition and quality. ACL to $5.3 billion, or 1.67% of total loans was 1.70% and 1.67% at September 30, 2022, compared to $5.5 billion, or 1.92% of total loans at2023 and December 31, 2021. The decrease was primarily2022, respectively.
Nonperforming assets increased $139 million, or 7%, to $2.2 billion, driven by the reassessment of pandemic-related risks and the impacts of portfolio changes, partially offset by weaker economic expectations.higher commercial real estate nonperforming loans.
Net charge-offs of $119$121 million, or 0.15% of average loans, in the third quarter of 2022 increased $362023 decreased $73 million or 43%, compared to $83 million, or 0.11% of average loans, for the second quarter of 2022,2023 primarily driven by higherreflecting lower commercial real estate net loan net charge-offs.

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

Capital and Liquidity Highlights

We maintained our strong capital position.and liquidity positions.
Common shareholders’ equity of $39.4$42.2 billion at September 30, 2022, decreased $11.32023, increased $2.2 billion, or 22%5%, compared to December 31, 2021 as2022 due to the benefit of net income, was more thanpartially offset by a decrease in AOCI, reflecting the negative impact of higher interest rates on net unrealized securities and swap losses. The decline was also attributable tocommon dividends paid, common share repurchases and common dividends paid.a decline in AOCI.
In the third quarter weof 2023, PNC returned $1.7$0.6 billion of capital to shareholders through common share repurchases of $1.1 billion, representing 6.7 million shares, and dividends on common shares of $0.6 million.shares.
TheConsistent with the SCB framework, which allows for capital returnsreturn in amounts up to the level of capital in excess of the firm's SCB plus the regulatory minimum level of capital. Consistent with the flexibility provided under the SCB framework,levels, our Board of Directors has authorized a repurchase framework under the previously approved repurchase program of up to 100 million common shares, of which approximately 53%46% were still available for repurchase at September 30, 2022. Under this framework, PNC expects its quarterly repurchases to approximate $700 million to $750 million with2023. In light of the abilityFederal banking agencies proposed rules to adjust those levelsthe Basel III capital framework, share repurchase activity was paused in the third quarter of 2023 and is expected to remain paused during the fourth quarter of 2023. PNC continues to evaluate the potential impact of the proposed rules and may resume share repurchase activity depending on market and economic conditions, as conditions warrant. PNC'swell as other factors. PNC’s SCB for the four-quarter period beginning October 1, 20222023 is 2.9%the regulatory minimum of 2.5%.
On October 3, 2022,2, 2023, the PNC Board of Directors declared a quarterly cash dividend on common stock of $1.50$1.55 per share payable onshare. The dividend, with a payment date of November 5, 2022.2023, will be payable the next business day.
Our CET1 ratio decreasedincreased to 9.3%9.8% at September 30, 20222023 from 10.3% 9.1% at December 31, 2021.2022.



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



PNC elected a five-year transition provision effective March 31, 2020 to delay the estimated impact of CECL on CET1 capital through December 31, 2021 the full impact of the CECL standard on regulatory capital, followed by a three-year transition period. 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 adoption. Effective for the first quarter of 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024. The CET1 fully implemented ratio, which reflectsratios reflect the full impact of CECL and excludesexclude the benefits of the optional five-yearthis transition provision. The estimated CET1 fully implemented ratio was 9.1%9.7% at September 30, 20222023 compared to 10.0%8.9% at December 31, 2021.2022.
PNC’s average LCR for the three months ended September 30, 2023 was 107% and exceeded the regulatory minimum requirement throughout the quarter.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for more detail on our 20222023 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 an SCB established by the Federal Reserve Board in connection with the Federal Reserve Board’s CCAR process. 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 20212022 Form 10-K.

Business Outlook
Statements regarding our business outlook are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. 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 the potential impact of legal and regulatory contingencies. These statements are based on our views that:
Although real GDP contractedEconomic growth accelerated in the first half of 2023, but ongoing Federal Reserve monetary policy tightening to slow inflation is weighing on interest-rate sensitive industries. Sectors where interest rates play an outsized role, such as business



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



investment and second quarters of 2022, the U.S. economy is notconsumer spending on durable goods, will contract in recession. In particular, the labor market remains extremely strong, with average monthly job growth well above the pre-pandemic pace, and the unemployment rate at a 50-year low. Supply-chain difficulties will continue to ease into 2023. Labor shortages will remain a constraint into 2023, although strong wage growth and high levels of household saving will support consumer spending.2024.
PNC expects economic growthPNC’s baseline outlook is for a mild recession starting in mid-2024, with a small contraction in real GDP of less than 1%, lasting into late 2024. The unemployment rate will be below its long-term trendincrease through the rest of 2023 and throughout 2024, peaking at close to 5% in the near term as the Federal Reserve continues to tighten monetary policy in an attempt to reduce inflationary pressures, but does not expect a near-term recession. Recession risks over the next few years are elevated, however, because of tighter monetary policy.
early 2025. Inflation has started towill slow but remains near the strongest pace in decades. Inflation should slow further due to softer economic growth and a continued easing in supply-chain difficulties and will returnwith weaker demand, moving back to the Federal Reserve’s 2% long-run objective inby the second half of 2024.
The FOMC raised the federal funds rate by 0.75% in September, to a range of 3.00% to 3.25%. PNC expects further increases in the federal funds rate through the rest of this year, to a range of 4.25% to 4.50% at the end of 2022. PNC expects the federal funds rate to peakremain unchanged in the near term, between 4.50%5.25% and 4.75%5.50% through mid-2024, with federal funds rate cuts starting in early 2023, before fallingthe third quarter of 2024 in early 2024 as inflation ebbs and economic growth slows.response to the recession.

For the fourth quarter of 2022,2023, compared to the third quarter of 2022,2023, we expect:
Average loans to be up approximately 1%3%,
Net interest income to be up 6%down 1% to 8%2%,
Fee income to be stable to downup approximately 1%,
Other noninterest income, excluding net securities gains and Visa activity, to be $200$150 million to $250$200 million,
Revenue to be up approximately 2%,
Noninterest expense to be stableup 8% to 9%,
Core noninterest expense to be up 1%3% to 4%, excluding charges related to the workforce reduction of approximately $150 million in the fourth quarter of 2023, and
Net loan charge-offs to be $125$200 million to $175 million, and$250 million.

Effective tax rate
Noninterest expense and core noninterest expense guidance does not contemplate the FDIC special assessment related to recovering the cost of the closures of Silicon Valley Bank and Signature Bank. See the Statistical Information (Unaudited) – Reconciliation of Core Noninterest Expense Guidance (non-GAAP) section of this Report.

We are unable to provide a meaningful or accurate reconciliation of forward-looking non-GAAP measures, without unreasonable effort, to their most directly comparable GAAP financial measures except for the impact of the workforce reduction charges to noninterest expense. This is due to the inherent difficulty of forecasting the timing and amounts necessary for the reconciliation when such amounts are subject to events that cannot be approximately 18.5%.reasonably predicted, as noted in our Cautionary Statement. Accordingly, we cannot address the probable significance of unavailable information.

See the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and Item 1A Risk Factors included in our 2021first quarter 2023 Form 10-Q and 2022 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 Item 1 of this Report.

Net income of $1.6 billion, or $3.78$3.60 per diluted common share, for the third quarter of 20222023 increased $144$70 million, or 10%5%, compared to $1.5 billion, or $3.39$3.36 per diluted common share, for the second quarter of 2023 primarily due to lower expenses and higher noninterest income, partially offset by a decline in net interest income. Net income of $4.8 billion, or $10.94 per diluted common share for the first nine months of 2023 increased $199 million, or 4%, compared to $4.6 billion, or $10.39 per diluted common share for the same period in 2022 primarily driven byas a result of higher net interest income, partially offset by a higher provision for credit losses. Netlosses, lower noninterest income of $4.6 billion, or $10.39 per diluted common share for the first nine months of 2022and increased $146 million, or 3%, compared to $4.4 billion, or $9.83 per diluted common share, for the same period inexpenses.

















The PNC Financial Services Group, Inc. – Form 10-Q 5  


2021. The increase was driven by higher net interest income, partially offset by an increased provision for credit losses, higher expenses and lower noninterest income.
Net Interest Income
Table 2:3: Summarized Average Balances and Net Interest Income (a)
September 30, 2022June 30, 2022 September 30, 2023June 30, 2023
Three months ended
Dollars in millions
Three months ended
Dollars in millions
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
Three months ended
Dollars in millions
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
AssetsAssetsAssets
Interest-earning assetsInterest-earning assetsInterest-earning assets
Investment securitiesInvestment securities$136,990 2.10 %$720 $134,724 1.89 %$636 Investment securities$139,663 2.57 %$898 $141,038 2.52 %$889 
LoansLoans313,026 3.98 %3,162 304,790 3.29 %2,524 Loans319,504 5.75 %4,673 324,534 5.57 %4,554 
Interest-earning deposits with banksInterest-earning deposits with banks31,892 2.32 %185 39,689 0.79 %78 Interest-earning deposits with banks38,352 5.44 %522 31,433 5.10 %400 
OtherOther9,560 3.94 %94 9,935 2.76 %68 Other8,777 6.66 %146 9,215 5.96 %138 
Total interest-earning assets/interest incomeTotal interest-earning assets/interest income$491,468 3.35 %4,161 $489,138 2.69 %3,306 Total interest-earning assets/interest income$506,296 4.87 %6,239 $506,220 4.70 %5,981 
LiabilitiesLiabilitiesLiabilities
Interest-bearing liabilitiesInterest-bearing liabilitiesInterest-bearing liabilities
Interest-bearing depositsInterest-bearing deposits$298,073 0.45 %340 $297,096 0.12 %88 Interest-bearing deposits$314,555 2.26 %1,792 $312,559 1.96 %1,531 
Borrowed fundsBorrowed funds44,261 2.81 %317 35,656 1.58 %142 Borrowed funds67,465 5.77 %993 65,692 5.44 %903 
Total interest-bearing liabilities/interest expenseTotal interest-bearing liabilities/interest expense$342,334 0.75 %657 $332,752 0.27 %230 Total interest-bearing liabilities/interest expense$382,020 2.86 %2,785 $378,251 2.56 %2,434 
Net interest margin/income (non-GAAP)Net interest margin/income (non-GAAP)2.82 %3,504 2.50 %3,076 Net interest margin/income (non-GAAP)2.71 %3,454 2.79 %3,547 
Taxable-equivalent adjustmentsTaxable-equivalent adjustments(29)(25)Taxable-equivalent adjustments(36)(37)
Net interest income (GAAP)Net interest income (GAAP)$3,475   $3,051 Net interest income (GAAP)$3,418   $3,510 
September 30, 2022September 30, 2021 September 30, 2023September 30, 2022
Nine months ended
Dollars in millions
Nine months ended
Dollars in millions
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
Nine months ended
Dollars in millions
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
Average
Balances
Average
Yields/
Rates
Interest
Income/
Expense
AssetsAssetsAssets
Interest-earning assetsInterest-earning assetsInterest-earning assets
Investment securitiesInvestment securities$135,215 1.88 %$1,904 $105,287 1.73 %$1,366 Investment securities$141,350 2.52 %$2,678 $135,215 1.88 %$1,904 
LoansLoans302,921 3.50 %7,997 261,884 3.36 %6,629 Loans323,166 5.54 %13,517 302,921 3.50 %7,997 
Interest-earning deposits with banksInterest-earning deposits with banks44,641 0.87 %292 81,383 0.12 %74 Interest-earning deposits with banks34,629 5.05 %1,312 44,641 0.87 %292 
OtherOther9,637 2.92 %210 8,345 2.27 %142 Other8,933 6.12 %410 9,637 2.92 %210 
Total interest-earning assets/interest incomeTotal interest-earning assets/interest income$492,414 2.80 %10,403 $456,899 2.38 %8,211 Total interest-earning assets/interest income$508,078 4.68 %17,917 $492,414 2.80 %10,403 
LiabilitiesLiabilitiesLiabilities
Interest-bearing liabilitiesInterest-bearing liabilitiesInterest-bearing liabilities
Interest-bearing depositsInterest-bearing deposits$298,232 0.20 %455 $273,498 0.05 %99 Interest-bearing deposits$314,055 1.96 %4,614 $298,232 0.20 %455 
Borrowed fundsBorrowed funds36,794 1.95 %542 34,562 1.05 %275 Borrowed funds65,392 5.41 %2,679 36,794 1.95 %542 
Total interest-bearing liabilities/interest expenseTotal interest-bearing liabilities/interest expense$335,026 0.39 %997 $308,060 0.16 %374 Total interest-bearing liabilities/interest expense$379,447 2.54 %7,293 $335,026 0.39 %997 
Net interest margin/income (non-GAAP)Net interest margin/income (non-GAAP)2.54 %9,406 2.28 %7,837 Net interest margin/income (non-GAAP)2.78 %10,624 2.54 %9,406 
Taxable-equivalent adjustmentsTaxable-equivalent adjustments(76)(52)Taxable-equivalent adjustments(111)(76)
Net interest income (GAAP)Net interest income (GAAP)  $9,330   $7,785 Net interest income (GAAP)  $10,513   $9,330 
(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) 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.

Net interest income increased $424decreased $92 million, or 14%3%, for the third quarter of 20222023 compared to the second quarter of 2022, driven by2023 as higher yields on interest-earning assets were more than offset by increased funding costs. Net interest income increased $1.2 billion, or 13%, for the first nine months of 2023 compared to the same period in 2022 as a result of higher interest-earning asset yields and loan growth,balances, partially offset by higher funding costs. Net interest income increased $1.5 billion, or 20%, for the first nine months of 2022margin decreased 8 basis points compared to the same periodsecond quarter of 2023 as higher yields on interest-earning assets were more than offset by increased funding costs. Net interest margin increased 24 basis points in 2021, due to higher interest-earning asset balances, which includedthe year-to-date comparison, reflecting the benefit of BBVA, and higher yields partially offset by higher funding costs.on interest-earning assets.

Average investment securities for the third quarter of 2023 decreased $1.3 billion, or 1%, compared to the second quarter of 2023 as limited purchase activity during the quarter was more than offset by portfolio paydowns and maturities. Average investment securities



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



Net interest marginincreased $6.1 billion, or 5%, in the quarterly and year-to-date comparisons increased 32 basis points and 26 basis points, respectively. In both comparisons the increase was primarily due to higher yields on interest-earning assets.

Average investment securities for the third quarter of 2022 increased $2.3 billion, or 2% compared to the second quarter of 2022comparison, reflecting net securities purchases, primarily of agency residential mortgage-backed securities within the held-to-maturity portfolio. Average investment securities increased $29.9 billion, or 28% in the year-to-date comparison, due to net securities purchases, primarily of U.S. Treasury and government agency securities, agency residential mortgage-backed securities and the addition of BBVA.securities. Average investment securities represented 28% of average interest-earning assets for both the third and second quarterquarters of 2022,2023, and 28% for the first nine months of 2023 compared to 27% for the first nine months of 2022 compared to 23% for the first nine months of 2021.2022.

InAverage loans for the quarterly and year-to-date comparisons, average loans increased $8.2third quarter of 2023 decreased $5.0 billion, or 3%2%, and $41.0 billion, or 16%, respectively. In both comparisons,compared to the increase wassecond quarter of 2023 primarily due to growth inlower commercial and consumer loans, partially offset by PPP loan forgiveness. Thean increase in consumer loans. Average loans increased $20.2 billion, or 7%, in the year-to-date comparison, also reflects the impact of the BBVA acquisition.reflecting growth in both commercial and consumer loans. Average loans represented 64%63% of average interest-earning assets for the third quarter of 20222023 compared to 62%64% for the second quarter of 2022,2023, and 64% for the first nine months of 2023 compared to 62% for the first nine months of 2022 compared to 57% for the first nine months of 2021.2022.

Average interest-earning deposits with banks for the third quarter of 2022 decreased $7.82023 increased $6.9 billion, or 20%22%, compared to the second quarter of 2022, driven by increased loans outstanding and2023 primarily due to lower deposits, partially offset by higher borrowed funds.loan balances. In the year-to-date comparison, average interest-earning deposits with banks decreased $36.7$10.0 billion, or 45%22%, reflectingprimarily due to higher loan balances and net securities purchases,lower deposits, partially offset by higher deposits.borrowed funds.

Average interest-bearing deposits for the third quarter of 2022 were largely stable2023 increased $2.0 billion, or 1%, compared to the second quarter of 2022.2023. Average interest-bearing deposits for the first nine months of 2023 increased $24.7$15.8 billion, or 9%5%, compared to the same period in the year-to-date comparison, reflecting the BBVA acquisition and the2022. The increase in both comparisons reflected a continued shift in commercial deposits from noninterest-bearing to interest bearinginterest-bearing deposits as deposit rates have risen. In total, average interest-bearing deposits represented 87%82% of average interest-bearing liabilities for the third quarter of 20222023 compared to 83% for the second quarter of 2023, and 83% for the first nine months of 2023 compared to 89% for the second quarter of 2022, and the first nine months of both 2022 and 2021.2022.

Average borrowed funds for the third quarter of 2022 increased $8.6$1.8 billion, or 24%3%, compared to the second quarter of 2022,2023 primarily due to increased FHLB borrowings.parent company senior debt issuances near the end of the second quarter. Average borrowed funds for the first nine months of 2022 increased $2.2$28.6 billion, or 6%78%, comparedin the year-to-date comparison due to the first nine months of 2021, reflecting higher FHLB borrowings partially offset by lower bank notes and parent company senior debt.debt issuances.

Further details regarding average loans and deposits are included in the Business Segments Review section of this Financial Review.
Noninterest Income
Table 3:4: Noninterest Income
Three months endedNine months ended Three months endedNine months ended
September 30June 30ChangeSeptember 30September 30Change September 30June 30ChangeSeptember 30September 30Change
Dollars in millionsDollars in millions20222022$%20222021$%Dollars in millions20232023$%20232022$%
Noninterest incomeNoninterest incomeNoninterest income
Asset management and brokerageAsset management and brokerage$357 $365 $(8)(2)%$1,099 $1,053 $46 %Asset management and brokerage$348 $348  — $1,052 $1,099 $(47)(4)%
Capital markets related299 409 (110)(27)%960 1,117 (157)(14)%
Capital markets and advisoryCapital markets and advisory168 213 $(45)(21)%643 960 (317)(33)%
Card and cash managementCard and cash management671 671  — 1,962 1,752 210 12 %Card and cash management689 697 (8)(1)%2,045 1,962 83 %
Lending and deposit servicesLending and deposit services287 282 %838 829 %Lending and deposit services315 298 17 %919 838 81 10 %
Residential and commercial mortgageResidential and commercial mortgage143 161 (18)(11)%463 641 (178)(28)%Residential and commercial mortgage201 98 103 105 %476 463 13 %
OtherOther317 177 140 79 %705 907 (202)(22)%Other94 129 (35)(27)%481 705 (224)(32)%
Total noninterest incomeTotal noninterest income$2,074 $2,065 $— $6,027 $6,299 $(272)(4)%Total noninterest income$1,815 $1,783 $32 %$5,616 $6,027 $(411)(7)%
 
Noninterest income as a percentage of total revenue was 37%35% for the third quarter of 20222023 compared to 40%34% for the second quarter of 2022,2023, and 39%35% for the first nine months of 20222023 compared to 45%39% for the same period in 2021.2022.

Asset management and brokerage fees decreasedwere stable compared to the second quarter of 2022, and included the impact of lower average equity markets.2023. The increasedecrease in the year-to-date comparison reflected the benefit of BBVA and increased product sales, partially offset by lower average equity markets. PNC'sclient activity. PNC’s discretionary client assets under management of $176 billion at September 30, 2023 were stable compared to June 30, 2023. PNC’s discretionary client assets under management increased $10 billion from $166 billion at September 30, 2022 decreased from $167 billion at June 30, 2022 and $183 billion at September 30, 2021, primarily as a result of lowerdriven by higher spot equity markets.markets, partially offset by client activity.

Capital markets relatedand advisory fees decreased compared to the second quarter of 2023 driven by lower trading revenue. The decrease in the year-to-date comparison was primarily due to lower merger and acquisition advisory fees and trading revenue.

Card and cash management revenue decreased compared to the second quarter of 2022 driven2023 as increased treasury management product revenue was more than offset by lower merger and acquisition advisory fees, reflectingconsumer transaction volumes. The increase compared to the impactfirst nine months of elevated second quarter activity. In the year-to-date comparison the decrease2022 was primarily due to a declinehigher treasury management product revenue.

Lending and deposit services increased in equity capital markets advisory, underwritingboth the quarterly and merger and acquisition advisoryyear-to-date comparisons, reflecting increased customer activity. In comparison to the first nine months of 2022, the increase was also driven by growth in loan commitment fees.

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


CardResidential and cash management revenue was stable compared to the second quarter of 2022. The increase in the year-to-date comparison was primarily due to increased treasury management product revenue, the addition of BBVA and higher consumer spending.

Lending and deposit servicescommercial mortgage increased compared to the second quarter of 2023, primarily due to a $97 million increase in mortgage servicing rights valuation, net of economic hedge. The increase compared to the first nine months of 2022 was driven by higher loan commitment fees. The increase in the year-to-date comparison included the benefit of BBVA.

Residential and commercial mortgage decreased in both the quarterly and year-to-date comparisons, primarily due to lower residential mortgage banking activities.

Other noninterest income increased compared todecreased both in the second quarter of 2022,quarterly and year-to-date comparisons. Both comparisons included higherlower private equity revenue and positivethe impact of negative Visa Class B derivative fair value adjustments related to the extension of $13 million. Theanticipated litigation resolution timing. Negative Visa Class B fair value adjustments were $51 million for the third quarter of 2023 compared to $83 million for the second quarter of 20222023. The first nine months of 2023 included $16 million of negative Visa Class B fair value adjustments. The decrease in the year-to-date comparison was primarily dueadjustments of $179 million compared to lower private equity revenue, partially offset by positive Visa Class B derivative fair value adjustments. The first nine months of 2022 included $1 million of positive Visa Class B fair value adjustments compared to $165 million of negative adjustments for the same period in 2021.2022.

Noninterest Expense

Table 4:5: Noninterest Expense
Three months endedNine months ended Three months endedNine months ended
September 30June 30ChangeSeptember 30September 30Change September 30June 30ChangeSeptember 30September 30Change
Dollars in millionsDollars in millions20222022$%20222021$%Dollars in millions20232023$%20232022$%
Noninterest expenseNoninterest expenseNoninterest expense
PersonnelPersonnel$1,805 $1,779 $26 %$5,301 $5,103 $198 %Personnel$1,773 $1,846 $(73)(4)%$5,445 $5,301 $144 %
OccupancyOccupancy241 246 (5)(2)%745 680 65 10 %Occupancy244 244  — 739 745 (6)(1)%
EquipmentEquipment344 351 (7)(2)%1,026 974 52 %Equipment347 349 (2)(1)%1,046 1,026 20 %
MarketingMarketing93 95 (2)(2)%249 222 27 12 %Marketing93 109 (16)(15)%276 249 27 11 %
OtherOther797 773 24 %2,375 2,232 143 %Other788 824 (36)(4)%2,432 2,375 57 %
Total noninterest expenseTotal noninterest expense$3,280 $3,244 $36 %$9,696 $9,211 $485 %Total noninterest expense$3,245 $3,372 $(127)(4)%$9,938 $9,696 $242 %
 
Noninterest expense increaseddecreased compared to the second quarter of 2022,2023, reflecting increased personnela continued focus on expense to support business growthmanagement as well as one additional day in the quarter.expenses were lower or stable across all categories. The increase incompared to the first nine months of 2022 comparedwas due to the same period in 2021 was driven by the addition of BBVA operating expenseshigher personnel costs, an increased FDIC assessment rate and continuedhigher marketing and equipment costs to support business investment, partially offset by lower integration expenses and a decline in variable compensation related to lower business activity.growth.

See Note 17 Subsequent Events for details regarding our workforce reduction announced in the fourth quarter of 2023.

Effective Income Tax Rate

The effective income tax rate was 19.1%15.5% in both the third quarterand second quarters of 2022, compared to 18.5% in the second quarter of 2022, and 18.4%2023. The effective income tax rate was 16.1% in the first nine months of 20222023 compared to 17.0%18.4% for the same period in 2021.2022. The third quarter of 2023 included the favorable impact of certain tax matters.

Provision For (Recapture of) Credit Losses
Table 5:6: Provision for (Recapture of) Credit Losses
Three months endedNine months ended Three months endedNine months ended
September 30June 30ChangeSeptember 30ChangeSeptember 30June 30ChangeSeptember 30Change
Dollars in millionsDollars in millions20222022$20222021$Dollars in millions20232023$20232022$
Provision for (recapture of) credit lossesProvision for (recapture of) credit lossesProvision for (recapture of) credit losses
Loans and leasesLoans and leases$241 $(10)$251 $59 $(525)$584 Loans and leases$153 $189 $(36)$571 $59 $512 
Unfunded lending related commitmentsUnfunded lending related commitments42 (41)20 16 Unfunded lending related commitments(23)(9)(14)(54)20 (74)
Investment securitiesInvestment securities 51 (44)Investment securities(10)(10)(11)(18)
Other financial assetsOther financial assets(4)(5)(17)(23)Other financial assets(34)43 (17)21 
Total provision for (recapture of) credit lossesTotal provision for (recapture of) credit losses$241 $36 $205 $69 $(452)$521 Total provision for (recapture of) credit losses$129 $146 $(17)$510 $69 $441 

TheProvision for credit losses of $129 million in the third quarter of 2023 included the impact of our updated economic outlook and portfolio activity. The second quarter of 2023 included a provision for credit losses of $146 million. Provision for credit losses of $510 million for the first nine months of 2023 included the impact of our updated economic outlook and changes in portfolio composition and quality. The first nine months of 2022 included a provision for credit losses of $241 million, reflecting slightly weaker economic expectations which impacted our macroeconomic scenarios and weightings. The second quarter of 2022 included a provision for credit losses of $36$69 million.









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



CONSOLIDATED BALANCE SHEET REVIEW
The summarized balance sheet data in Table 67 is based upon our Consolidated Balance Sheet in Item 1 of this Report.
Table 6:7: Summarized Balance Sheet Data
September 30December 31Change September 30December 31Change
Dollars in millionsDollars in millions20222021$%Dollars in millions20232022$%
AssetsAssets   Assets   
Interest-earning deposits with banksInterest-earning deposits with banks$40,278 $74,250 $(33,972)(46)%Interest-earning deposits with banks$41,484 $27,320 $14,164 52 %
Loans held for saleLoans held for sale1,126 2,231 (1,105)(50)%Loans held for sale923 1,010 (87)(9)%
Investment securitiesInvestment securities136,451 132,962 3,489 %Investment securities132,387 139,334 (6,947)(5)%
LoansLoans315,400 288,372 27,028 %Loans318,416 326,025 (7,609)(2)%
Allowance for loan and lease lossesAllowance for loan and lease losses(4,581)(4,868)287 %Allowance for loan and lease losses(4,767)(4,741)(26)(1)%
Mortgage servicing rightsMortgage servicing rights3,206 1,818 1,388 76 %Mortgage servicing rights4,006 3,423 583 17 %
GoodwillGoodwill10,987 10,916 71 %Goodwill10,987 10,987  — 
OtherOther56,610 51,510 5,100 10 %Other53,898 53,905 (7)— 
Total assetsTotal assets$559,477 $557,191 $2,286 — Total assets$557,334 $557,263 $71 — 
LiabilitiesLiabilitiesLiabilities
DepositsDeposits$438,194 $457,278 $(19,084)(4)%Deposits$423,609 $436,282 $(12,673)(3)%
Borrowed fundsBorrowed funds54,633 30,784 23,849 77 %Borrowed funds66,167 58,713 7,454 13 %
Allowance for unfunded lending related commitmentsAllowance for unfunded lending related commitments682 662 20 %Allowance for unfunded lending related commitments640 694 (54)(8)%
OtherOther19,245 12,741 6,504 51 %Other17,437 15,762 1,675 11 %
Total liabilitiesTotal liabilities512,754 501,465 11,289 %Total liabilities507,853 511,451 (3,598)(1)%
EquityEquityEquity
Total shareholders’ equityTotal shareholders’ equity46,688 55,695 (9,007)(16)%Total shareholders’ equity49,454 45,774 3,680 %
Noncontrolling interestsNoncontrolling interests35 31 13 %Noncontrolling interests27 38 (11)(29)%
Total equityTotal equity46,723 55,726 (9,003)(16)%Total equity49,481 45,812 3,669 %
Total liabilities and equityTotal liabilities and equity$559,477 $557,191 $2,286 — Total liabilities and equity$557,334 $557,263 $71 — 

Our balance sheet was strong and well positioned at September 30, 2022.2023. In comparison to December 31, 2021:2022:
Total assets increased modestly, reflecting higher loans, securities and MSRs, partially offset by lower balances held with the Federal Reserve Bank.were stable.
Total liabilities increaseddecreased primarily due to higher borrowed funds,lower deposits, partially offset by lower deposits.increased borrowed funds.
Total equity decreased asincreased due to the benefit of net income and a preferred stock issuances was more thanissuance, partially offset by a decrease in AOCI, reflecting the negative impact of higher interest rates on net unrealized securities and swap losses. The decline was also attributable todividends paid, common share repurchases and dividends paid.a decline in AOCI.

The ACL related to loans totaled $5.3$5.4 billion at both September 30, 2022, a decrease of $0.2 billion since2023 and December 31, 2021, driven by2022. During the reassessment of pandemic-related risksnine months ended September 30, 2023, reserves reflected our updated economic outlook and the impacts ofchanges in portfolio changes, partially offset by weaker economic expectations.composition and quality. 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 43 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in this Report.Losses.

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 20212022 Form 10-K.
The PNC Financial Services Group, Inc. – Form 10-Q  


Loans
Table 7:8: Loans
September 30December 31Change September 30December 31Change
Dollars in millionsDollars in millions20222021$%Dollars in millions20232022$%
CommercialCommercial   Commercial   
Commercial and industrialCommercial and industrial$173,813 $152,933 $20,880 14 %Commercial and industrial$174,163 $182,219 $(8,056)(4)%
Commercial real estateCommercial real estate35,592 34,0151,577 %Commercial real estate35,776 36,316(540)(1)%
Equipment lease financingEquipment lease financing6,192 6,13062 %Equipment lease financing6,493 6,514(21)— 
Total commercialTotal commercial215,597 193,078 22,519 12 %Total commercial216,432 225,049 (8,617)(4)%
ConsumerConsumerConsumer
Residential real estateResidential real estate45,057 39,712 5,345 13 %Residential real estate47,359 45,889 1,470 %
Home equityHome equity25,367 24,061 1,306 %Home equity26,159 25,983 176 %
AutomobileAutomobile15,025 16,635 (1,610)(10)%Automobile14,940 14,836 104 %
Credit cardCredit card6,774 6,626 148 %Credit card7,060 7,069 (9)— 
EducationEducation2,287 2,533 (246)(10)%Education2,020 2,173 (153)(7)%
Other consumerOther consumer5,293 5,727 (434)(8)%Other consumer4,446 5,026 (580)(12)%
Total consumerTotal consumer99,803 95,294 4,509 %Total consumer101,984 100,976 1,008 %
Total loansTotal loans$315,400 $288,372 $27,028 %Total loans$318,416 $326,025 $(7,609)(2)%

Commercial loans increaseddecreased driven by paydowns outpacing new production and higherlower utilization of loan commitments, partially offset by PPP loan forgiveness. PPP loans outstanding were $0.6 billion and $3.4 billion at September 30, 2022 and December 31, 2021, respectively.

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.commitments.

Consumer loans increased primarily due to increasesas growth in residential mortgages, home equity and credit card,automobile loans were partially offset by declines in the remaining portfolios as paydowns outpaced new originations.

For informationoriginations and draws on our 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.existing accounts.

For additional information regarding our loan portfolio see the Credit Risk Management portion of the Risk Management section in this Item 1Financial Review and Note 43 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in this Report.Losses.




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



Investment Securities

Investment securities of $136.5$132.4 billion at September 30, 2022 increased $3.52023 decreased $6.9 billion, or 3%5%, compared to December 31, 2021, from net purchase activity, partially offset by net unrealized losses.2022, primarily due to prepayments and maturities outpacing purchases.

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, NSFR and other internal and external guidelines and constraints.
Table 8:9: Investment Securities (a)
September 30, 2022December 31, 2021Ratings as of September 30, 2022 (a) September 30, 2023December 31, 2022
Dollars in millionsDollars in millionsAmortized
Cost (b)
Fair
Value
Amortized
Cost (b)
Fair
Value
AAA/
AA
ABBBBB and LowerNo
Rating
Dollars in millionsAmortized
Cost (b)
Fair
Value
Amortized
Cost (b)
Fair
Value
U.S. Treasury and government agenciesU.S. Treasury and government agencies$47,213 $44,622 $47,024 $47,054 100 %U.S. Treasury and government agencies$43,879 $41,156 $45,767 $43,330 
Agency residential mortgage-backedAgency residential mortgage-backed74,145 67,149 67,326 67,632 100 %Agency residential mortgage-backed74,567 65,233 77,385 71,073 
Non-agency residential mortgage-backedNon-agency residential mortgage-backed1,006 1,129 927 1,158 %%37 %54 %Non-agency residential mortgage-backed870 941 973 1,074 
Agency commercial mortgage-backedAgency commercial mortgage-backed2,593 2,391 1,740 1,773 100 %Agency commercial mortgage-backed2,648 2,401 2,693 2,501 
Non-agency commercial mortgage-backed (c)Non-agency commercial mortgage-backed (c)3,109 3,026 3,423 3,436 85 %%%12 %Non-agency commercial mortgage-backed (c)2,438 2,352 2,992 2,883 
Asset-backed (d)Asset-backed (d)6,671 6,536 6,380 6,409 96 %%%%Asset-backed (d)7,298 7,215 7,291 7,183 
Other (e)Other (e)6,505 6,133 5,404 5,596 50 %29 %18 %%Other (e)6,087 5,739 6,642 6,394 
Total investment securities (f)Total investment securities (f)$141,242 $130,986 $132,224 $133,058 97 %%%%Total investment securities (f)$137,787 $125,037 $143,743 $134,438 
(a)Ratings percentages allocated based on amortized cost, net of allowance for investment securities.Of our total securities portfolio, 97% were rated AAA/AA at both September 30, 2023 and December 31, 2022.
(b)Amortized cost is presented net of the allowance for investment securities, which totaled $140$98 million at September 30, 20222023 and primarily related to non-agency commercial mortgage-backed securities. The comparable amount at December 31, 20212022 was $133$149 million.
(c)Collateralized primarily by office buildings, multifamily housing, retail properties, lodging properties and industrial properties.
(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 89 presents the distribution of our investment securities portfolio by amortized cost and fair value, as well as by credit rating.value. The relationship of fair value to amortized cost at September 30, 2022 compared2023 was comparable to December 31, 20212022 and primarily reflected the impact of higher interest rates on the valuation of fixed rate securities. We have included credit ratings information because we believe thatfixed-rate securities offset by the information is an indicatorpassage 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.time. 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 32 Investment Securities in the Notes To Consolidated Financial Statements included in Item 1 of this Report for additional details regarding the allowance for investment securities.

During the first nine months of 2022, we transferred securities with a fair value of $82.7 billion, from available for sale to held to maturity. We changed our intent and committed to hold these high-quality securities to maturity in order to reduce the impact of price volatility on AOCI and tangible capital. See Note 3 Investment Securities in the Notes To Consolidated Financial Statements included in Item 1 of this Report for additional details regarding these transfers.

The duration of investment securities was 4.3 years and 4.5 years at September 30, 2022.2023 and December 31, 2022, respectively. We estimate that at September 30, 20222023 the effective duration of investment securities was 4.44.2 years for an immediate 50 basis points parallel increase in interest rates and 4.54.4 years for an immediate 50 basis points parallel decrease in interest rates. Comparable amounts at December 31, 20212022 for the effective duration of investment securities were 3.84.4 years and 3.54.5 years, respectively.

Based on expected prepayment speeds, the weighted-average expected maturity of the investment securities portfolio was 5.8 years at September 30, 20222023 compared to 4.46.0 years at December 31, 2021.2022.

Table 10: Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities
September 30, 2023Years
Agency residential mortgage-backed7.8 
Non-agency residential mortgage-backed10.1 
Agency commercial mortgage-backed5.1 
Non-agency commercial mortgage-backed1.1 
Asset-backed2.2 

Additional information regarding our investment securities portfolio is included in Note 2 Investment Securities and Note 11 Fair Value.

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


Table 9: Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities
September 30, 2022Years
Agency residential mortgage-backed7.4 
Non-agency residential mortgage-backed9.6 
Agency commercial mortgage-backed5.3 
Non-agency commercial mortgage-backed1.5 
Asset-backed2.6 

Additional information regarding our investment securities portfolio is included in Note 3 Investment Securities and Note 12 Fair Value in the Notes To Consolidated Financial Statements included in Item 1 of this Report.

Funding Sources
Table 10:11: Details of Funding Sources
September 30December 31ChangeSeptember 30December 31Change
Dollars in millionsDollars in millions20222021$%Dollars in millions20232022$%
DepositsDeposits   Deposits   
Noninterest-bearingNoninterest-bearing$138,423 $155,175 $(16,752)(11)%Noninterest-bearing$105,672 $124,486 $(18,814)(15)%
Interest-bearingInterest-bearingInterest-bearing
Money marketMoney market61,366 61,229 137 — Money market63,780 64,150 (370)(1)%
DemandDemand124,167 115,910 8,257 %Demand127,413 126,143 1,270 %
SavingsSavings104,204 107,598 (3,394)(3)%Savings99,535 103,033 (3,498)(3)%
Time depositsTime deposits10,034 17,366 (7,332)(42)%Time deposits27,209 18,470 8,739 47 %
Total interest-bearing depositsTotal interest-bearing deposits299,771 302,103 (2,332)(1)%Total interest-bearing deposits317,937 311,796 6,141 %
Total depositsTotal deposits438,194 457,278 (19,084)(4)%Total deposits423,609 436,282 (12,673)(3)%
Borrowed fundsBorrowed fundsBorrowed funds
Federal Home Loan Bank borrowingsFederal Home Loan Bank borrowings30,075 30,075 — Federal Home Loan Bank borrowings36,000 32,075 3,925 12 %
Bank notes and senior debt13,357 20,661 (7,304)(35)%
Senior debtSenior debt22,407 16,657 5,750 35 %
Subordinated debtSubordinated debt7,286 6,996 290 %Subordinated debt4,728 6,307 (1,579)(25)%
OtherOther3,915 3,127 788 25 %Other3,032 3,674 (642)(17)%
Total borrowed fundsTotal borrowed funds54,633 30,784 23,849 77 %Total borrowed funds66,167 58,713 7,454 13 %
Total funding sourcesTotal funding sources$492,827 $488,062 $4,765 %Total funding sources$489,776 $494,995 $(5,219)(1)%

Total deposits decreased due toas a result of lower commercialconsumer and consumercommercial deposits, reflecting deposit outflows, higher consumer spending and the impact of inflationary pressures.economic pressures and continued elevated levels of consumer spending. In addition, noninterest-bearing balances decreased due to the continued shift into interest-bearing deposit products as interest rates have risen.

Borrowed funds increased primarily due to increasedparent company senior debt issuances and higher FHLB borrowings, partially offset by lower bank notes and senior debt.borrowings.

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 and NSFR requirements and other internal and external guidelines and constraints.

See the Liquidity and Capital Management portion of the Risk Management section ofin this Financial Review for additional information regarding our 2022 liquidity and capital activities. See Note 87 Borrowed Funds in the Notes To Consolidated Financial Statements in this Report and Note 10 Borrowed Funds in the Notes To Consolidated Financial Statements in Item 8 of our 20212022 Form 10-K for additional information related to our borrowings.
Shareholders’ Equity

Total shareholders’ equity was $46.7$49.5 billion at September 30, 2022, a decrease2023, an increase of $9.0$3.7 billion compared to December 31, 2021,2022, as increases related to net income of $4.6$4.8 billion and a preferred stock issuancesissuance of $2.2$1.5 billion were more thanpartially offset by a decrease in AOCIdividends paid of $10.9$2.1 billion, reflecting the negative impact of higher interest rates on net unrealized securities and swap losses. The decline was also attributable to common share repurchases of $3.0$0.5 billion and dividends paida decline in AOCI of $1.9$0.1 billion.

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 1514 Segment Reporting in the Notes To Consolidated Financial Statements included in Item 1 of this Report.Reporting. Certain amounts included in this Business Segments Review differ from those amounts shown in Note 15,14, primarily due to the presentation in this Financial Review of business net interest income on a taxable-equivalent basis.

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 7679 in Note 1514 Segment Reporting in the Notes To Consolidated Financial Statements included in Item 1 of this Report.Reporting. “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 PNC Financial Services Group, Inc. – Form 10-Q 13  


Retail Banking

Retail Banking'sBanking’s core strategy is to help allbuild lifelong, primary relationships by creating a sense of financial well-being and ease for our consumer and small business customers move forward financially. We aim to grow our primary checking and transaction relationships through strong customer acquisition and retention. Weclients. Over time, we seek to deepen those relationships by meeting the broad range of our customers’clients’ financial needs withacross savings, liquidity, lending, payments, investment and retirement solutions. A strategic priority for us isWe work to differentiatedeliver these solutions in the most seamless and efficient way possible, meeting our customers where they want to be met — whether in a branch, through digital channels, at an ATM or through our phone-based customer experience, leveraging technologycontact centers — while continuously optimizing the cost to make banking easier forsell and service. We believe that, over time, we can grow our customers. A key elementcustomer base, enhance the breadth and depth of our strategy is to expand the use of lower-cost alternative distribution channels, with an emphasis onclient relationships and improve our efficiency through differentiated products and leading digital capabilities and ATM access, 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.channels.

Table 11:12: Retail Banking Table
(Unaudited)(Unaudited)(Unaudited)
Nine months ended September 30Nine months ended September 30    ChangeNine months ended September 30    Change
Dollars in millions, except as notedDollars in millions, except as noted20222021$%Dollars in millions, except as noted20232022$%
Income StatementIncome StatementIncome Statement
Net interest incomeNet interest income$5,210 $4,572 $638 14 %Net interest income$7,305 $5,210 $2,095 40 %
Noninterest incomeNoninterest income2,218 2,022 196 10 %Noninterest income2,229 2,218 11 — 
Total revenueTotal revenue7,428 6,594 834 13 %Total revenue9,534 7,428 2,106 28 %
Provision for (recapture of) credit losses66 (156)222 *
Provision for credit lossesProvision for credit losses266 66 200 *
Noninterest expenseNoninterest expense5,706 5,042 664 13 %Noninterest expense5,707 5,706 — 
Pretax earningsPretax earnings1,656 1,708 (52)(3)%Pretax earnings3,561 1,656 1,905 115 %
Income taxesIncome taxes389 396 (7)(2)%Income taxes834 389 445 114 %
Noncontrolling interestsNoncontrolling interests45 26 19 73 %Noncontrolling interests32 45 (13)(29)%
EarningsEarnings$1,222 $1,286 $(64)(5)%Earnings$2,695 $1,222 $1,473 121 %
Average Balance SheetAverage Balance SheetAverage Balance Sheet
Loans held for saleLoans held for sale$991 $1,296 $(305)(24)%Loans held for sale$597 $991 $(394)(40)%
LoansLoansLoans
ConsumerConsumerConsumer
Residential real estateResidential real estate$33,088 $23,323 $9,765 42 %Residential real estate$35,225 $33,088 $2,137 %
Home equityHome equity22,916 22,324 592 %Home equity24,608 22,916 1,692 %
AutomobileAutomobile15,638 15,398 240 %Automobile14,966 15,638 (672)(4)%
Credit cardCredit card6,532 6,070 462 %Credit card6,999 6,532 467 %
EducationEducation2,422 2,820 (398)(14)%Education2,119 2,422 (303)(13)%
Other consumerOther consumer2,204 2,326 (122)(5)%Other consumer1,934 2,204 (270)(12)%
Total consumerTotal consumer82,800 72,261 10,539 15 %Total consumer85,851 82,800 3,051 %
CommercialCommercial11,176 14,819 (3,643)(25)%Commercial11,628 11,176 452 %
Total loansTotal loans$93,976 $87,080 $6,896 %Total loans$97,479 $93,976 $3,503 %
Total assetsTotal assets$113,157 $103,820 $9,337 %Total assets$114,975 $113,157 $1,818 %
DepositsDepositsDeposits
Noninterest-bearingNoninterest-bearing$65,026 $55,107 $9,919 18 %Noninterest-bearing$59,448 $65,026 $(5,578)(9)%
Interest-bearingInterest-bearing200,918 179,567 21,351 12 %Interest-bearing198,356 200,918 (2,562)(1)%
Total depositsTotal deposits$265,944 $234,674 $31,270 13 %Total deposits$257,804 $265,944 $(8,140)(3)%
Performance RatiosPerformance RatiosPerformance Ratios
Return on average assetsReturn on average assets1.44 %1.66 %Return on average assets3.13 %1.44 %
Noninterest income to total revenueNoninterest income to total revenue30 %31 %Noninterest income to total revenue23 %30 %
EfficiencyEfficiency77 %76 % Efficiency60 %77 % 

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



At or for nine months ended September 30At or for nine months ended September 30    ChangeAt or for nine months ended September 30    Change
Dollars in millions, except as notedDollars in millions, except as noted20222021$%Dollars in millions, except as noted20232022$%
Supplemental Noninterest Income InformationSupplemental Noninterest Income InformationSupplemental Noninterest Income Information
Asset management and brokerageAsset management and brokerage$400 $334 $66 20 %Asset management and brokerage$384 $400 $(16)(4)%
Card and cash managementCard and cash management$1,003 $934 $69 %Card and cash management$997 $1,003 $(6)(1)%
Lending and deposit servicesLending and deposit services$498 $462 $36 %Lending and deposit services$550 $498 $52 10 %
Residential and commercial mortgageResidential and commercial mortgage$208 $355 $(147)(41)%Residential and commercial mortgage$307 $208 $99 48 %
Residential Mortgage InformationResidential Mortgage InformationResidential Mortgage Information
Residential mortgage servicing statistics (in billions, except as noted) (a)Residential mortgage servicing statistics (in billions, except as noted) (a)Residential mortgage servicing statistics (in billions, except as noted) (a)
Serviced portfolio balance (b)Serviced portfolio balance (b)$170 $139 $31 22 %Serviced portfolio balance (b)$213 $170 $43 25 %
Serviced portfolio acquisitionsServiced portfolio acquisitions$50 $42 $19 %Serviced portfolio acquisitions$34 $50 $(16)(32)%
MSR asset value (b)MSR asset value (b)$2.1 $1.1 $1.0 91 %MSR asset value (b)$2.8 $2.1 $0.7 33 %
MSR capitalization value (in basis points) (b)MSR capitalization value (in basis points) (b)122 81 41 51 %MSR capitalization value (in basis points) (b)133 122 11 %
Servicing income: (in millions)Servicing income: (in millions)Servicing income: (in millions)
Servicing fees, net (c)Servicing fees, net (c)$119 $20 $99 *Servicing fees, net (c)$212 $119 $93 78 %
Mortgage servicing rights valuation, net of economic hedgeMortgage servicing rights valuation, net of economic hedge$(15)$62 $(77)(124)%Mortgage servicing rights valuation, net of economic hedge$42 $(15)$57 *
Residential mortgage loan statisticsResidential mortgage loan statisticsResidential mortgage loan statistics
Loan origination volume (in billions)Loan origination volume (in billions)$13.0 $18.2 $(5.2)(29)%Loan origination volume (in billions)$5.9 $13.0 $(7.1)(55)%
Loan sale margin percentageLoan sale margin percentage2.13 %2.95 %Loan sale margin percentage2.31 %2.13 %
Percentage of originations represented by:Percentage of originations represented by:Percentage of originations represented by:
Purchase volume (d)Purchase volume (d)64 %45 %Purchase volume (d)87 %64 %
Refinance volumeRefinance volume36 %55 % Refinance volume13 %36 % 
Other Information (b)Other Information (b)Other Information (b)
Customer-related statistics (average)Customer-related statistics (average)Customer-related statistics (average)
Non-teller deposit transactions (e)Non-teller deposit transactions (e)64 %66 %Non-teller deposit transactions (e)66 %64 %
Digital consumer customers (f)Digital consumer customers (f)78 %80 %Digital consumer customers (f)77 %78 %
Credit-related statisticsCredit-related statisticsCredit-related statistics
Nonperforming assetsNonperforming assets$1,027 $1,220 $(193)(16)%Nonperforming assets$856 $1,027 $(171)(17)%
Net charge-offs - loans and leasesNet charge-offs - loans and leases$327 $269 $58 22 %Net charge-offs - loans and leases$335 $327 $%
Other statisticsOther statisticsOther statistics
ATMsATMs9,169 9,572 (403)(4)%ATMs8,476 9,169 (693)(8)%
Branches (g)Branches (g)2,527 2,712 (185)(7)%Branches (g)2,303 2,527 (224)(9)%
Brokerage account client assets (in billions) (h)Brokerage account client assets (in billions) (h)$67 $76 $(9)(12)%Brokerage account client assets (in billions) (h)$73 $67 $%
*- 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 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 principal 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)Percentage of total consumer and business banking deposit transactions processed at an ATM or through our mobile banking application.
(f)Represents consumer checking relationships that process the majority of their transactions through non-teller channels.
(g)Reflects all branches and solution centers excluding stand-alonestandalone mortgage offices and satellite offices (e.g., drive-ups, electronic branches and retirement centers) that provide limited products and/or services.
(h)Includes cash and money market balances.

Retail Banking earnings for the first nine months of 2022 decreased $64 million2023 increased $1.5 billion compared to the same period in 20212022 primarily due to increased noninterest expense and a highernet interest income, partially offset by an increased provision for credit losses, partially offset by higher net interest and noninterest income.losses.

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

Noninterest income increased primarily due to growth in residential mortgage banking and lending and deposit customer-related activities, partially offset by the favorable impact of negative Visa Class B fair value adjustments compared to a negative adjustmentthe same period in 2021 related to expected litigation timing. The increase was also driven by higher card2022.

Provision for credit losses included the impact of our updated economic outlook and cash management revenue, increased asset managementchanges in portfolio composition and brokerage fees and higher lending and deposit related fees, which included the addition of BBVA customers.quality.

Noninterest expense increased due towas relatively stable in the impact of BBVA operating expenses, increased business activity and continued investments in strategic initiatives.comparison.

The deposit strategy of Retail Banking isaverage total loans increased in the first nine months of 2023 compared to remain disciplinedthe same period in 2022. Average consumer loans increased driven by higher residential real estate and home equity loans as a result of new volume and draws on pricingexisting accounts outpacing liquidations, as well as growth in credit card loans due to new account production 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. Inpurchase volume increases.
The PNC Financial Services Group, Inc. – Form 10-Q 15  


the first nine months of 2022, average total deposits increased compared to the same period in 2021, primarily driven by growth in demand and savings deposits which included the impact of the BBVA acquisition.

Retail Banking average total loans increased in the first nine months of 2022 compared to the same period in 2021. Average consumer loans increased 15% due to the impact of the BBVA acquisition on all loan classes except education loans, which BBVA did not have in their loan portfolio. In addition, average residential real estate loans increased, as new originations outpaced the runoff. The increase was partially offset by a decline in automobile, education and other consumer loans as paydowns outpaced new originations. Average commercial loans decreased primarilyincreased due to growth in automobile dealer segment balances, partially offset by forgiveness of PPP loans.

Our focus on growing primary customer relationships is at the core of our deposit strategy in Retail, which is based on attracting and retaining stable, low-cost deposits as a key funding source for PNC. We have taken a disciplined approach to pricing, focused on retaining relationship-based balances and executing on targeted deposit growth and retention strategies aimed at more rate-sensitive customers. Our goal with regard to deposits is to optimize balances, economics and long-term customer growth. In the first nine months of 2023, average total deposits decreased compared to the same period in 2022, reflecting the impact of continued elevated levels of consumer spending and quantitative tightening by the Federal Reserve.

As part of our strategic focus on growing customers and meeting their financial needs, we have establishedoperate a coast-to-coast network of retail branches, solution centers and ATMs, that operate alongsidewhich are complemented by PNC’s suite of digital capabilities. Over time, we plan to continue to convert a portion of these branches to solution centers, which have a distinctive layout and the capability to support transactions, sales and advice using a combination of technology and personalized banker assistance. PNC began to deploy solution centers in 2018.

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 customers by providing a broad range of liquidity, banking, payments and investment products. In 2021, we successfully rolled out Low Cash Mode
® to all Virtual Wallet® customers providing them with 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.In August, we eliminated non-sufficient fund fees for all consumer checking account customers. Virtual Wallet® customers had previously received this benefit with the launch of Low Cash Mode®.

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 105 branches in the first nine months of 2022, consistent with our plan.

16    The 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 12:13: Corporate & Institutional Banking Table
(Unaudited)(Unaudited)(Unaudited)
Nine months ended September 30Nine months ended September 30    ChangeNine months ended September 30    Change
Dollars in millions20222021$%
Dollars in millions, except as notedDollars in millions, except as noted20232022$%
Income StatementIncome StatementIncome Statement
Net interest incomeNet interest income$3,781 $3,343 $438 13 %Net interest income$4,214 $3,781 $433 11 %
Noninterest incomeNoninterest income2,659 2,730 (71)(3)%Noninterest income2,542 2,659 (117)(4)%
Total revenueTotal revenue6,440 6,073 367 %Total revenue6,756 6,440 316 %
Provision for (recapture of) credit losses15 (277)292 *
Provision for credit lossesProvision for credit losses283 15 268 *
Noninterest expenseNoninterest expense2,661 2,504 157 %Noninterest expense2,755 2,661 94 %
Pretax earningsPretax earnings3,764 3,846 (82)(2)%Pretax earnings3,718 3,764 (46)(1)%
Income taxesIncome taxes864 846 18 %Income taxes867 864 — 
Noncontrolling interestsNoncontrolling interests12 10 20 %Noncontrolling interests15 12 25 %
EarningsEarnings$2,888 $2,990 $(102)(3)%Earnings$2,836 $2,888 $(52)(2)%
Average Balance SheetAverage Balance SheetAverage Balance Sheet
Loans held for saleLoans held for sale$522 $598 $(76)(13)%Loans held for sale$392 $522 $(130)(25)%
LoansLoansLoans
CommercialCommercialCommercial
Commercial and industrialCommercial and industrial$151,971 $123,505 $28,466 23 %Commercial and industrial$165,987 $151,971 $14,016 %
Commercial real estateCommercial real estate32,938 30,919 2,019 %Commercial real estate34,534 32,938 1,596 %
Equipment lease financingEquipment lease financing6,168 6,321 (153)(2)%Equipment lease financing6,419 6,168 251 %
Total commercialTotal commercial191,077 160,745 30,332 19 %Total commercial206,940 191,077 15,863 %
ConsumerConsumer14 (5)(36)%Consumer(3)(33)%
Total loansTotal loans$191,086 $160,759 $30,327 19 %Total loans$206,946 $191,086 $15,860 %
Total assetsTotal assets$215,163 $184,964 $30,199 16 %Total assets$232,914 $215,163 $17,751 %
DepositsDepositsDeposits
Noninterest-bearingNoninterest-bearing$80,197 $76,105 $4,092 %Noninterest-bearing$52,829 $80,197 $(27,368)(34)%
Interest-bearingInterest-bearing68,514 72,147 (3,633)(5)%Interest-bearing89,845 68,514 21,331 31 %
Total depositsTotal deposits$148,711 $148,252 $459 — Total deposits$142,674 $148,711 $(6,037)(4)%
Performance RatiosPerformance RatiosPerformance Ratios
Return on average assetsReturn on average assets1.79 %2.16 %Return on average assets1.63 %1.79 %
Noninterest income to total revenueNoninterest income to total revenue41 %45 %Noninterest income to total revenue38 %41 %
EfficiencyEfficiency41 %41 % Efficiency41 %41 % 
Other InformationOther InformationOther Information
Consolidated revenue from: (a)Consolidated revenue from: (a)Consolidated revenue from: (a)
Treasury Management (b)Treasury Management (b)$1,958 $1,609 $349 22 %Treasury Management (b)$2,412 $1,958 $454 23 %
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)$62 $103 $(41)(40)%Commercial mortgage loans held for sale (c)$57 $62 $(5)(8)%
Commercial mortgage loan servicing income (d)Commercial mortgage loan servicing income (d)204 244 (40)(16)%Commercial mortgage loan servicing income (d)126 204 (78)(38)%
Commercial mortgage servicing rights valuation, net of economic hedgeCommercial mortgage servicing rights valuation, net of economic hedge99 64 35 55 %Commercial mortgage servicing rights valuation, net of economic hedge99 99  — 
TotalTotal$365 $411 $(46)(11)%Total$282 $365 $(83)(23)%
Commercial mortgage servicing statisticsCommercial mortgage servicing statistics
Serviced portfolio balance (in billions) (e)Serviced portfolio balance (in billions) (e)$282 $282  — 
MSR asset value (e)MSR asset value (e)$1,132 $703 $429 61 %MSR asset value (e)$1,169 $1,132 $37 %
Average loans by C&IB business
Average loans by C&IB business (f)Average loans by C&IB business (f)
Corporate BankingCorporate Banking$101,826 $78,975 $22,851 29 %Corporate Banking$116,777 $103,055 $13,722 13 %
Real EstateReal Estate44,427 42,313 2,114 %Real Estate47,407 44,427 2,980 %
Business CreditBusiness Credit27,913 23,367 4,546 19 %Business Credit30,230 27,913 2,317 %
Commercial BankingCommercial Banking9,500 12,435 (2,935)(24)%Commercial Banking8,170 9,500 (1,330)(14)%
OtherOther7,420 3,669 3,751 102 %Other4,362 6,191 (1,829)(30)%
Total average loansTotal average loans$191,086 $160,759 $30,327 19 %Total average loans$206,946 $191,086 $15,860 %
Credit-related statisticsCredit-related statisticsCredit-related statistics
Nonperforming assets (e)Nonperforming assets (e)$779 $1,061 $(282)(27)%Nonperforming assets (e)$1,130 $779 $351 45 %
Net charge-offs - loans and leasesNet charge-offs - loans and leases$43 $290 $(247)(85)%Net charge-offs - loans and leases$190 $43 $147 *
*- Not Meaningful
(a)See the additional revenue discussion regarding treasury management and commercial mortgage banking activities in the Product Revenue section of this Corporate & Institutional Banking section.
The PNC Financial Services Group, Inc. – Form 10-Q 17 


(b)Amounts are reported in net interest income and noninterest income.
(c)Represents commercial mortgage banking income for valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, origination fees, gains on sale of loans held for sale and net interest income on loans held for sale.
The PNC Financial Services Group, Inc. – Form 10-Q 17 


(d)Represents net interest income and noninterest income 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)As of September 30.
(f)As the result of a business realignment within C&IB during the second quarter of 2023, certain loans were reclassified from Other to Corporate Banking in the prior periods to conform to the current period presentation.

Corporate & Institutional Banking earnings in the first nine months of 20222023 decreased $102$52 million compared to the same period in 20212022 driven by a higher provision for credit losses, higher noninterest expense and lower noninterest income substantiallyand increased noninterest expense, partially offset by higher net interest income.

Net interest income increased in the comparison primarily due to higher average loan balances, reflecting the addition of BBVA and organic growth, as well as wider interest rate spreads on the value of deposits and higher average loan balances, partially offset by narrower interest rate spreads on the value of loans.loans and lower average deposit balances.

Noninterest income decreased in the comparison driven by lower capital markets relatedand advisory fees and lower commercial mortgage banking activities, partially offset by highergrowth in treasury management product revenue.

Provision for credit losses included the impact of our updated economic outlook and changes in portfolio composition and quality.

Noninterest expense increased in the comparison largely due to the addition of BBVA operating expenses andreflecting continued investments in strategic initiatives.to support business growth.

Average loans increased compared towith the nine months ended September 30, 20212022 due to increases in Corporate Banking, Real Estate and Business Credit, and Real Estate, partially offset by a decrease in Commercial Banking:
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 increased driven by strong new production throughout 2022 and higher average utilization of loan commitments as well as the addition of loans from BBVA.
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 business assets. Average loans for this business increased, primarily driven by higher utilization of loan commitments and new production.commitments.
Real Estate provides banking, financing and servicing solutions for commercial real estate clients across the country. Average loans for this business increased reflectinglargely due to new production throughout 2022, partially offset by a lower average utilization of loan commitments.
Business Credit provides asset-based lending and equipment financing solutions. The loan and lease portfolio is mainly secured by business assets. Average loans from BBVA andfor this business increased primarily driven by new production, partially offset by lower average utilization of loan commitments.
Commercial Banking provides lending, treasury management and capital markets related products and services to smaller corporations and businesses. Average loans for this business declined primarily driven by lower average utilization of loan commitments, PPP loan forgiveness partially offset by loans from BBVA.and paydowns outpacing new production.

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 slightlydecreased compared to the nine months ended September 30, 2021.2022, reflecting the impact of quantitative tightening by the Federal Reserve and included a continued shift from noninterest-bearing to interest-bearing deposits as deposit rates have risen. We continue to actively monitor the interest rate environment and make adjustments to our deposit strategy in response to evolving market conditions, bank funding needs and client relationship dynamics.

In 2021,Following the BBVA acquisition accelerated Corporate & Institutional Banking’s geographic expansion. Following the BBVA acquisitionin 2021 and our de novo expansion efforts, we are now a coast-to-coast franchise and have a presence in the largest 30 largest U.S. metropolitan statistical areas. These expanded locations complement Corporate & Institutional Banking’s existing national businesses with a significant presence in these cities, and our full suite of commercial products and services is noware offered nationally.

Product Revenue
In addition to credit and deposit products for commercial customers, Corporate & Institutional Banking offers other services, including treasury management, capital markets relatedand advisory 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 and noninterest income, as appropriate. 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 where the customer relationship exists.relationships exist. The Other Information section in Table 1213 includes the consolidated revenue to PNC for treasury management and commercial mortgage banking services. A discussion of the consolidated revenue from these services follows.
The Treasury Management business 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 provides wholesale money transfer processing capabilities between the U.S. and Mexico and other countries primarily in Central 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 includes revenue from all treasury management customer deposit balances. Compared to the first nine months of 2021, treasury management revenue increased due to wider interest rate spreads on the value of deposits and higher noninterest income, including the impact of the BBVA acquisition.

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



deposit balances used to pay for products and services. Net interest income includes funding credit from all treasury management customer deposit balances. Compared to the first nine months of 2022, treasury management revenue increased due to wider interest rate spreads on the value of deposits and higher product revenue.

Commercial mortgage banking activities include revenue derived from commercial mortgage servicing (both net interest income and noninterest income), revenue derived from commercial mortgage loans held for sale and hedges related to those activities. Total revenue from commercial mortgage banking activities decreased in the comparison primarily due to lower revenue from commercial mortgage loans held for sale and lower commercial mortgage servicing income partially offsetdriven by a higher benefit from commercial mortgage servicing rights valuation, net of economic hedge.MSRs amortization.

Capital markets and advisory includes services and activities primarily related productsto merger and services include foreign exchange, derivatives, fixed income, securities underwriting, loan syndications, mergers and acquisitionsacquisition advisory, and equity capital markets advisory, related services.asset-backed financing, loan syndication, securities underwriting and customer-related trading. The noninterest income generated from these revenue streams is reflecteddecrease in capital markets and advisory fees in the capital markets related category on the Consolidated Income Statement. Compared to the first nine months of 2021, capital markets related noninterest income decreased due to lower equity capital markets advisory fees, lower underwriting fees andcomparison was mostly driven by lower merger and acquisition fees. These decreases wereadvisory fees and lower loan syndication fees, partially offset by higher fees on customer-related trading revenue for derivatives, activitiesforeign exchange and higher loan syndication fees.fixed income.
The PNC Financial Services Group, Inc. – Form 10-Q 19  


Asset Management Group

The Asset Management Group strives to be thea leading relationship-based provider of investment, planning, credit and cash management solutions and fiduciary services to affluent individuals and institutions by endeavoring to proactively deliver value-added ideas, solutions and exceptional service. Asset Management Group’s priorities are to serve our clients'clients’ financial objectives, grow and deepen customer relationships and deliver solid financial performance with prudent risk and expense management.

Table 13:14: Asset Management Group Table
(Unaudited)(Unaudited)(Unaudited)
Nine months ended September 30Nine months ended September 30    ChangeNine months ended September 30    Change
Dollars in millions, except as notedDollars in millions, except as noted20222021$%Dollars in millions, except as noted20232022$%
Income StatementIncome StatementIncome Statement
Net interest incomeNet interest income$456 $346 $110 32 %Net interest income$391 $456 $(65)(14)%
Noninterest incomeNoninterest income713 729 (16)(2)%Noninterest income681 713 (32)(4)%
Total revenueTotal revenue1,169 1,075 94 %Total revenue1,072 1,169 (97)(8)%
Provision for credit losses11 38 %
Provision for (recapture of) credit lossesProvision for (recapture of) credit losses(5)11 (16)*
Noninterest expenseNoninterest expense795 676 119 18 %Noninterest expense831 795 36 %
Pretax earningsPretax earnings363 391 (28)(7)%Pretax earnings246 363 (117)(32)%
Income taxesIncome taxes85 91 (6)(7)%Income taxes58 85 (27)(32)%
EarningsEarnings$278 $300 $(22)(7)%Earnings$188 $278 $(90)(32)%
Average Balance SheetAverage Balance SheetAverage Balance Sheet
LoansLoansLoans
ConsumerConsumerConsumer
Residential real estateResidential real estate$7,756 $4,608 $3,148 68 %Residential real estate$9,932 $7,756 $2,176 28 %
Other consumerOther consumer4,605 4,249 356 %Other consumer4,040 4,605 (565)(12)%
Total consumerTotal consumer12,361 8,857 3,504 40 %Total consumer13,972 12,361 1,611 13 %
CommercialCommercial1,577 1,629 (52)(3)%Commercial1,188 1,577 (389)(25)%
Total loansTotal loans$13,938 $10,486 $3,452 33 %Total loans$15,160 $13,938 $1,222 %
Total assetsTotal assets$14,360 $11,124 $3,236 29 %Total assets$15,578 $14,360 $1,218 %
DepositsDepositsDeposits
Noninterest-bearingNoninterest-bearing$2,852 $2,884 $(32)(1)%Noninterest-bearing$1,796 $2,852 $(1,056)(37)%
Interest-bearingInterest-bearing28,564 21,590 6,974 32 %Interest-bearing25,742 28,564 (2,822)(10)%
Total depositsTotal deposits$31,416 $24,474 $6,942 28 %Total deposits$27,538 $31,416 $(3,878)(12)%
Performance RatiosPerformance RatiosPerformance Ratios
Return on average assetsReturn on average assets2.59 %3.61 %Return on average assets1.61 %2.59 %
Noninterest income to total revenueNoninterest income to total revenue61 %68 %Noninterest income to total revenue64 %61 %
EfficiencyEfficiency68 %63 % Efficiency78 %68 % 
Supplemental Noninterest Income InformationSupplemental Noninterest Income InformationSupplemental Noninterest Income Information
Asset management feesAsset management fees$693 $713 $(20)(3)%Asset management fees$663 $693 $(30)(4)%
Brokerage feesBrokerage fees— Brokerage fees— 
TotalTotal$699 $719 $(20)(3)%Total$669 $699 $(30)(4)%
Other InformationOther InformationOther Information
Nonperforming assets (a)Nonperforming assets (a)$95 $80 $15 19 %Nonperforming assets (a)$39 $95 $(56)(59)%
Net charge-offs (recoveries) - loans and leasesNet charge-offs (recoveries) - loans and leases$(1)$$(2)(200)%Net charge-offs (recoveries) - loans and leases$(2)$(1)$(1)*
Brokerage account client assets (in billions) (a)Brokerage account client assets (in billions) (a)$$$(1)(20)%Brokerage account client assets (in billions) (a)$$$25 %
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 managementDiscretionary client assets under management$166 $183 $(17)(9)%Discretionary client assets under management$176 $166 $10 %
Nondiscretionary client assets under administrationNondiscretionary client assets under administration148 170 (22)(13)%Nondiscretionary client assets under administration170 148 22 15 %
TotalTotal$314 $353 $(39)(11)%Total$346 $314 $32 10 %
Discretionary client assets under managementDiscretionary client assets under managementDiscretionary client assets under management
PNC Private BankPNC Private Bank$99 $117 $(18)(15)%PNC Private Bank$109 $99 $10 10 %
Institutional Asset ManagementInstitutional Asset Management67 66 %Institutional Asset Management67 67  — 
TotalTotal$166 $183 $(17)(9)%Total$176 $166 $10 %
*- Not Meaningful
(a)As of September 30.
(b)Excludes brokerage account client assets. 

The Asset Management Group consists of two primary businesses: PNC Private Bank and Institutional Asset Management.

The PNC Private Bank is focused on being a premier private bank in each of the markets it serves. TheThis business seeks to deliver high quality banking, trust and investment management services to our emerging affluent, high net worth and ultra-highultra high net worth clients through a broad array of products and services.


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



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

With the inclusion of BBVA, PNC Private Bank has approximately 100 offices operating in nine of the ten most affluent states in the U.S. with a majority co-located within retail banking branches.

Asset Management Group earnings in the first nine months of 20222023 decreased $22$90 million compared to the same period in 20212022, primarily driven by lower net interest income, higher noninterest expense and lowera decrease in noninterest income, partially offset by higher net interest income.

Net interest income increaseddecreased in the comparison due to growtha decline in average deposit and loan balances, reflecting the BBVA acquisition and organic growth,deposits as well as widernarrower interest rate spreads on the value of deposits.loans.

Noninterest income decreased in the comparison primarily attributabledriven by lower asset management fees due to the asset management fee impact from netof client outflows.    activity.

Noninterest expense increased in the comparison, due to the impact of BBVA operations and strategicreflecting continued investments to support business growth.

Average loans increased compared with the nine months ended September 30, 2022, driven by growth in residential real estate lending, partially offset by a decrease in security based lending lines of credit.

Average deposits decreased in the comparison due to competitive pricing pressures as clients continue to seek higher yielding returns, including deploying funds into discretionary client assets under management.

Discretionary client assets under management decreasedincreased in comparison to the prior year, primarily due to lowerhigher equity markets as of September 30, 2022.2023.

RISK MANAGEMENT

The Risk Management section included in Item 7 of our 20212022 Form 10-K describes our enterprise risk management framework, including risk culture, enterprise strategy, risk governance and oversight framework, risk identification, risk assessments, risk controls and monitoring, and risk aggregation and reporting. Additionally, our 20212022 Form 10-K provides an analysis of the firm'sfirm’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).

Credit Risk Management
Credit risk, including our credit risk management processes, is described in further detail in the Credit Risk Management section of our 20212022 Form 10-K. The following provides additional information around our loan portfolio, which is our most significant concentration of credit risk.

Loan Portfolio Characteristics and Analysis
Table 14:15: Details of Loans
In billions
pnc-20220930_g1.jpg73
The PNC Financial Services Group, Inc. – Form 10-Q 21 


We use several credit quality indicators, as further detailed in Note 43 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.
The PNC Financial Services Group, Inc. – Form 10-Q 21 


Commercial

Commercial and Industrial
Commercial and industrial loans comprised 55% and 53%56% of our total loan portfolio at September 30, 20222023 and December 31, 2021,2022, respectively. The majority of our commercial and industrial loans are secured by collateral that provides a secondary source of repayment for thea loan should thea borrower experience cash generation difficulties. Examples of this collateral include short-term assets, such as accounts receivable, inventory and securities;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 geographies that may exist in our portfolio. Our commercial and industrial portfolio is well-diversified across industries as shown in the following table which provides a breakout by industry classification (classified based(based on the North American Industry Classification System).

Table 15:16: Commercial and Industrial Loans by Industry
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Dollars in millionsDollars in millionsAmount% of TotalAmount% of TotalDollars in millionsAmount% of TotalAmount% of Total
Commercial and industrialCommercial and industrialCommercial and industrial
ManufacturingManufacturing$28,629 16 %$22,597 15 %Manufacturing$29,163 17 %$30,845 17 %
Retail/wholesale tradeRetail/wholesale trade27,532 16 22,803 15 Retail/wholesale trade28,284 16 29,176 16 
Financial servicesFinancial services22,770 13 21,320 12 
Service providersService providers22,043 13 20,750 14 Service providers21,680 12 23,548 13 
Financial services21,590 12 17,950 12 
Real estate related (a)Real estate related (a)17,513 10 15,123 10 Real estate related (a)16,182 17,780 10 
Technology, media & telecommunicationsTechnology, media & telecommunications11,366 10,070 Technology, media & telecommunications10,989 11,845 
Health careHealth care10,420 9,944 Health care10,092 10,649 
Transportation and warehousingTransportation and warehousing7,977 7,136 Transportation and warehousing7,891 7,858 
Other industriesOther industries26,743 15 26,560 15 Other industries27,112 16 29,198 15 
Total commercial and industrial loansTotal commercial and industrial loans$173,813 100 %$152,933 100 %Total commercial and industrial loans$174,163 100 %$182,219 100 %
(a)    Represents loans to customers in the real estate and construction industries.

Commercial and industrial loan growth from December 31, 2021 was driven by new production and higher utilization of loan commitments, partially offset by PPP loan forgiveness. PPP loans outstanding totaled $0.6 billion and $3.4 billion at September 30, 2022 and December 31, 2021, respectively.

Commercial Real Estate
Commercial real estate loans comprised $21.6$21.4 billion related to commercial mortgages on income-producing properties, $6.2$6.3 billion of real estate construction project loans and $7.8$8.1 billion of intermediate-term financing loans as of September 30, 2022.2023. Comparable amounts as of December 31, 20212022 were $18.6$22.3 billion, $7.3$6.4 billion and $8.1$7.6 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 activitiescommercial real estate loans tend to be correlated to the loan structure, collateral location and quality, 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.













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



The following table presents our commercial real estate loans by geography and property type:
Table 16:17: Commercial Real Estate Loans by Geography and Property Type
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Dollars in millionsDollars in millionsAmount% of TotalAmount% of TotalDollars in millionsAmount% of TotalAmount% of Total
Geography (a)Geography (a)Geography (a)
CaliforniaCalifornia$5,908 17 %$5,561 16 %California$6,199 17 %$6,224 17 %
FloridaFlorida3,710 10 3,275 
TexasTexas3,761 11 3,458 10 Texas3,705 10 3,871 11 
Florida3,085 2,987 
PennsylvaniaPennsylvania1,702 1,638 
VirginiaVirginia1,733 1,720 Virginia1,573 1,638 
Pennsylvania1,594 1,482 
MarylandMaryland1,527 1,557 Maryland1,401 1,496 
IllinoisIllinois1,413 970 Illinois1,256 1,321 
ColoradoColorado1,239 1,126 Colorado1,218 1,336 
OhioOhio1,212 1,219 Ohio1,176 1,236 
ArizonaArizona1,114 855 Arizona1,171 1,040 
OtherOther13,006 37 13,080 38 Other12,665 37 13,241 35 
Total commercial real estate loansTotal commercial real estate loans$35,592 100 %$34,015 100 %Total commercial real estate loans$35,776 100 %$36,316 100 %
Property Type (a)Property Type (a)Property Type (a)
MultifamilyMultifamily$13,272 37 %$10,581 31 %Multifamily$15,336 43 %$13,738 38 %
OfficeOffice9,268 26 9,547 28 Office8,569 24 9,123 25 
Industrial/warehouseIndustrial/warehouse3,509 10 2,413 Industrial/warehouse3,984 11 4,035 11 
RetailRetail2,857 3,570 10 Retail2,604 2,855 
Hotel/motelHotel/motel1,796 1,896 
Seniors housingSeniors housing2,289 2,602 Seniors housing1,765 2,228 
Hotel/motel1,950 2,008 
Mixed useMixed use704 724 Mixed use381 701 
OtherOther1,743 2,570 Other1,341 1,740 
Total commercial real estate loansTotal commercial real estate loans$35,592 100 %$34,015 100 %Total commercial real estate loans$35,776 100 %$36,316 100 %
(a)    Presented in descending order based on loan balances at September 30, 2022.2023.

As remote work continues to be a feasible alternative and notable portions of leasedavailable space remain unoccupied,underutilized, real estate related to the office sector is an area of continuing uncertainty. Evolving conditions suggest a structural change for office demand moving forward; however, the change is anticipated to develop over time. PNC continuesWe continue to closely monitor and manage our exposureoffice portfolio for elevated levels of credit risk given the ongoing shift in office demand.

At September 30, 2023, our outstanding loan balances in the office sector as these concerns develop,portfolio totaled $8.6 billion, or 2.7% of total loans, while additional unfunded loan commitments totaled $0.4 billion. Nonperforming loans within the office portfolio totaled 7.7% and while internal risk and regulatory classification assessments have moved higher,criticized loans within the office portfolio totaled 23.2%. At September 30, 2023, there were no office loans outstanding that were 30 or more days delinquent outside of the nonperforming category. As of September 30, 2023, we have not seenestablished reserves of 8.5% against office loans.

Our office portfolio is well diversified geographically across our coast-to-coast franchise. From a notable change in loan performancetenancy category perspective, 59% of this portfolio represents multi-tenant properties at this time.September 30, 2023, which is an area where we have noted increased stress. The remaining 41% of the portfolio is primarily comprised of single-tenant, government tenant and medical office tenant properties.

Consumer

Residential Real Estate
Residential real estate loans primarily consisted of residential mortgage loans at both September 30, 20222023 and December 31, 2021.2022.

We obtain loan attributes at origination, including 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 or 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.

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


The following table presents certain key statistics related to our residential real estate portfolio:

Table 17:18: Residential Real Estate Loan Statistics
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Dollars in millionsDollars in millionsAmount% of TotalAmount% of TotalDollars in millionsAmount% of TotalAmount% of Total
Geography (a)Geography (a)Geography (a)
CaliforniaCalifornia$18,121 40 %$15,041 38 %California$19,660 42 %$18,609 41 %
TexasTexas4,224 4,397 11 Texas4,070 4,194 
WashingtonWashington3,408 3,009 
FloridaFlorida3,337 3,124 Florida3,369 3,360 
Washington2,842 1,909 
New JerseyNew Jersey1,893 1,660 New Jersey1,919 1,925 
New YorkNew York1,514 1,279 New York1,557 1,558 
ArizonaArizona1,431 1,435 Arizona1,443 1,436 
PennsylvaniaPennsylvania1,219 1,188 
ColoradoColorado1,174 1,145 Colorado1,199 1,192 
Pennsylvania1,173 1,069 
Illinois959 957 
VirginiaVirginia987 960 
OtherOther8,389 20 7,696 19 Other8,528 17 8,458 18 
Total residential real estate loansTotal residential real estate loans$45,057 100 %$39,712 100 %Total residential real estate loans$47,359 100 %$45,889 100 %
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Weighted-average loan origination statistics (b)Weighted-average loan origination statistics (b)Weighted-average loan origination statistics (b)
Loan origination FICO scoreLoan origination FICO score771775Loan origination FICO score772770
LTV of loan originationsLTV of loan originations69 %67 %LTV of loan originations73 %71 %
(a)Presented in descending order based on loan balances at September 30, 2022.2023.
(b)Weighted-averages calculated for the twelve months ended September 30, 20222023 and December 31, 2021,2022, respectively.

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 $39.8$42.2 billion at September 30, 20222023, with 44%45% located in California. Comparable amounts at December 31, 20212022 were $34.9$40.6 billion and 42%44%, respectively.

Home Equity
Home equity loans comprised $18.6$20.4 billion of primarily variable-rate home equity lines of credit and $6.8$5.8 billion of closed-end home equity installment loans at September 30, 2022.2023. Comparable amounts were $15.8$19.5 billion and $8.3$6.5 billion as of December 31, 2021,2022, respectively. Home equity lines of credit are a variable interest rate product with fixed rate conversion options available to certain borrowers.

WeSimilar to residential real estate loans, we track borrower performance of this portfolio on a monthly similarly to residential real estate loans.basis. We also segment the population into pools based on product type (e.g., home equity loans, legacy brokered home equity loans, home equity lines of credit or legacy brokered home equity lines of credit) and track the historical performance of any related mortgage loans regardless of whether we hold the lien.such liens. 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.

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 a 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 certain key statistics related to our home equity portfolio:

Table 18:19: Home Equity Loan Statistics
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Dollars in millionsDollars in millionsAmount% of TotalAmount% of TotalDollars in millionsAmount% of TotalAmount% of Total
Geography (a)Geography (a)Geography (a)
PennsylvaniaPennsylvania$5,093 20 %$5,108 21 %Pennsylvania$4,807 18 %$5,051 19 %
New JerseyNew Jersey3,230 13 3,117 13 New Jersey3,207 12 3,266 13 
OhioOhio2,370 2,398 10 Ohio2,272 2,352 
FloridaFlorida1,972 1,701 Florida2,202 2,082 
CaliforniaCalifornia1,513 1,247 
MarylandMaryland1,238 1,254 
MichiganMichigan1,263 1,246 Michigan1,225 1,263 
Maryland1,239 1,206 
TexasTexas1,208 1,144 
IllinoisIllinois1,130 1,154 Illinois1,083 1,126 
Texas1,061 978 
California1,054 705 
North CarolinaNorth Carolina965 918 North Carolina1,005 995 
OtherOther5,990 24 5,530 23 Other6,399 24 6,203 24 
Total home equity loansTotal home equity loans$25,367 100 %$24,061 100 %Total home equity loans$26,159 100 %$25,983 100 %
Lien typeLien typeLien type
1st lien1st lien60 %62 %1st lien53 %58 %
2nd lien2nd lien40 38 2nd lien47 42 
TotalTotal100 %100 %Total100 %100 %
Weighted-average loan origination statistics (b)Weighted-average loan origination statistics (b)September 30, 2022December 31, 2021Weighted-average loan origination statistics (b)September 30, 2023December 31, 2022
Loan origination FICO scoreLoan origination FICO score775782Loan origination FICO score772774
LTV of loan originationsLTV of loan originations67 %66 %LTV of loan originations65 %67 %
(a)Presented in descending order based on loan balances at September 30, 2022.2023.
(b)Weighted-averages calculated for the twelve months ended September 30, 20222023 and December 31, 2021,2022, respectively.

Automobile
Auto loans comprised $13.9$13.8 billion in the indirect auto portfolio and $1.1 billion in the direct auto portfolio as of September 30, 2022.2023. Comparable amounts as of December 31, 20212022 were $15.4$13.7 billion and $1.2$1.1 billion, respectively. The indirect auto portfolio consists of loans originated primarily 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 19:20: Auto Loan Statistics (a)
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Weighted-average loan origination FICO score (b)
Weighted-average loan origination FICO score (a) (b)Weighted-average loan origination FICO score (a) (b)
Indirect autoIndirect auto787791Indirect auto784784
Direct autoDirect auto777775Direct auto782776
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 autoIndirect auto7372Indirect auto7373
Direct autoDirect auto6362Direct auto6463
(a)Weighted-averages calculated for the twelve months ended September 30, 20222023 and December 31, 2021,2022, respectively.
(b)Calculated 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 19.20. We offer both new and used auto financing to customers through our various channels. At September 30, 2022,2023, the portfolio balance was composed of 51%46% new vehicle loans and 49%54% used vehicle loans. Comparable amounts at December 31, 20212022 were 53%50% and 47%50%, 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 geography, channel, collateral attributes and credit metrics which include FICO score, LTV and term.


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


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 TDRsloans whose terms were modified as a result of a borrower’s financial difficulty 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 nonperforming loans. See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in Item 8 of our 2021 Form 10-K for details on our nonaccrual policies.

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

Table 20:21: Nonperforming Assets by Type
September 30, 2022December 31, 2021Change September 30, 2023December 31, 2022Change
Dollars in millionsDollars in millions$%Dollars in millions$%
Nonperforming loans(a)Nonperforming loans(a)   Nonperforming loans(a)   
CommercialCommercial$903 $1,168 $(265)(23)%Commercial$1,211 $858 $353 41 %
Consumer (a)(b)Consumer (a)(b)1,165 1,312 (147)(11)%Consumer (a)(b)912 1,127 (215)(19)%
Total nonperforming loansTotal nonperforming loans2,068 2,480 (412)(17)%Total nonperforming loans2,123 1,985 138 %
OREO and foreclosed assetsOREO and foreclosed assets33 26 27 %OREO and foreclosed assets35 34 %
Total nonperforming assetsTotal nonperforming assets$2,101 $2,506 $(405)(16)%Total nonperforming assets$2,158 $2,019 $139 %
TDRs included in nonperforming loans$676 $988 $(312)(32)%
Percentage of total nonperforming loans33 %40 %  
Nonperforming loans to total loansNonperforming loans to total loans0.66 %0.86 %Nonperforming loans to total loans0.67 %0.61 %
Nonperforming assets to total loans, OREO and foreclosed assetsNonperforming assets to total loans, OREO and foreclosed assets0.67 %0.87 %Nonperforming assets to total loans, OREO and foreclosed assets0.68 %0.62 %
Nonperforming assets to total assetsNonperforming assets to total assets0.38 %0.45 %Nonperforming assets to total assets0.39 %0.36 %
Allowance for loan and lease losses to nonperforming loansAllowance for loan and lease losses to nonperforming loans222 %196 %  Allowance for loan and lease losses to nonperforming loans225 %239 %  
Allowance for credit losses to nonperforming loans (b)254 %223 %
Allowance for credit losses to nonperforming loans (c)Allowance for credit losses to nonperforming loans (c)255 %274 %
(a)In connection with the adoption of ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, nonperforming loans as of September 30, 2023 include certain loans where terms were modified as a result of a borrower’s financial difficulty. Prior period amounts included nonperforming TDRs, for which accounting guidance was eliminated effective January 1, 2023. See Note 1 Accounting Policies and the Loan Modifications to Borrowers Experiencing Financial Difficulty section of Note 3 Loans and Related Allowance for more information on our adoption of this ASU.
(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.
(b)(c)Calculated excluding allowances for investment securities and other financial assets.

The following table provides details on the change in nonperforming assets for the nine months ended September 30, 20222023 and 2021:2022:

Table 21:22: Change in Nonperforming Assets
In millions20222021
January 1$2,506 $2,337 
Acquired nonperforming assets (a)880 
New nonperforming assets1,177 821 
Charge-offs and valuation adjustments(196)(202)
Principal activity, including paydowns and payoffs(729)(783)
Asset sales and transfers to loans held for sale(30)(131)
Returned to performing status(627)(363)
September 30$2,101 $2,559 
(a)Represents the June 30, 2021 balance of nonperforming assets attributable to BBVA.
In millions20232022
January 1$2,019 $2,506 
New nonperforming assets1,503 1,177 
Charge-offs and valuation adjustments(348)(196)
Principal activity, including paydowns and payoffs(581)(729)
Asset sales and transfers to loans held for sale(65)(30)
Returned to performing status(370)(627)
September 30$2,158 $2,101 

As of September 30, 2022,2023, approximately 98% of total nonperforming loans were secured by collateral which lessened reserve requirements and is expected to reduce credit losses.collateral.

Within consumer nonperforming loans, residential real estate TDRs comprised 50% of total residential real estate nonperforming loans while home equity TDRs comprised 32% of home equity nonperforming loans at September 30, 2022. Comparable amounts at December 31, 2021 were 42% and 36%, 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. See Troubled Debt Restructurings and Loan Modifications within this Credit Risk
26   The PNC Financial Services Group, Inc. – Form 10-Q



Management section for more information on how certain loans to borrowers experiencing COVID-19 related difficulties were treated prior to the expiration of CARES Act TDR relief.

Loan Delinquencies
We regularly monitor the level of loan delinquencies and believe these levels may beare 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.

We manage credit risk based on the risk profile of the borrower, repayment sources, underlying collateral, and other support given current events, economic conditions and expectations. We refine our practices to meet the changing environment resulting from risingelevated inflation levels, supply chain disruptions,industry specific risks, higher interest rates, declining consumer savings and deposit balances, and structural and secular changes fostered by the COVID-19 pandemic. To mitigate losses and enhance customer support, we have customer assistance,offer loan modificationmodifications and collection programs that align with the CARES Act and subsequent interagency guidance. As a result, under theto assist our customers. The CARES Act credit reporting rules expired in the third quarter of 2023 and as such,

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



delinquency status at September 30, 2023 is being reported for all loans based on the contractual terms of the loan. Amounts as of December 31, 2022 continue to be presented in accordance with the credit reporting rules under the CARES Act, which required certain loans modified due to COVID-19 relatedpandemic-related hardships areto not beingbe reported as past due as of September 30, 2022 and December 31, 2021 based on the contractual terms of the loan, even wherewhen borrowers may not be makinghave made payments on their loans during the modification period.
The following table presents a summary of accruing loans past due by delinquency status:
Table 22:23: Accruing Loans Past Due (a)
Amount
  
% of Total Loans Outstanding Amount
  
% of Total Loans Outstanding
September 30
2022
December 31
2021
ChangeSeptember 30
2022
December 31
2021
September 30
2023
December 31
2022
ChangeSeptember 30
2023
December 31
2022
Dollars in millionsDollars in millions$%Dollars in millions$%
Early stage loan delinquenciesEarly stage loan delinquencies      Early stage loan delinquencies      
Accruing loans past due 30 to 59 daysAccruing loans past due 30 to 59 days$879 $1,011 $(132)(13)%0.28 %0.35 %Accruing loans past due 30 to 59 days$607 $747 $(140)(19)%0.19 %0.23 %
Accruing loans past due 60 to 89 daysAccruing loans past due 60 to 89 days268 355 (87)(25)%0.08 %0.12 %Accruing loans past due 60 to 89 days253 261 (8)(3)%0.08 %0.08 %
Total early stage loan delinquenciesTotal early stage loan delinquencies1,147 1,366 (219)(16)%0.36 %0.47 %Total early stage loan delinquencies860 1,008 (148)(15)%0.27 %0.31 %
Late stage loan delinquenciesLate stage loan delinquenciesLate stage loan delinquencies
Accruing loans past due 90 days or moreAccruing loans past due 90 days or more479 619 (140)(23)%0.15 %0.21 %Accruing loans past due 90 days or more427 482 (55)(11)%0.13 %0.15 %
Total accruing loans past dueTotal accruing loans past due$1,626 $1,985 $(359)(18)%0.52 %0.69 %Total accruing loans past due$1,287 $1,490 $(203)(14)%0.40 %0.46 %
(a)Past due loan amounts include government insured or guaranteed loans of $0.4 billion and $0.5 billion at both September 30, 20222023 and December 31, 2021, respectively.2022.

The decline in accruing loans past due from December 31, 2021 was driven by lower consumer delinquencies, which included the resolution of BBVA USA conversion-related administrative and operational delays.

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 met certain criteria under the CARES Act were not categorized as TDRs during the relief period, which expired on January 1, 2022. Consistent with the expiration of the CARES Act TDR relief (and as amended by the Consolidated Appropriations Act), loans that experience a COVID-19 related hardship and are restructured after January 1, 2022 are subject to existing GAAP guidance related to TDRs.

The PNC Financial Services Group, Inc. – Form 10-Q 27 


The following table provides a summary of troubled debt restructurings at September 30, 2022 and December 31, 2021, respectively:
Table 23: Summary of Troubled Debt Restructurings (a)
 September 30
2022
December 31
2021
Change
Dollars in millions$%
Commercial$533 $672 $(139)(21)%
Consumer854 919 (65)(7)%
Total TDRs$1,387 $1,591 $(204)(13)%
Nonperforming$676 $988 $(312)(32)%
Accruing (b)711 603 108 18 %
Total TDRs$1,387 $1,591 $(204)(13)%
(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 33% of total nonperforming loans and 49% of total TDRs at September 30, 2022. Comparable amounts at December 31, 2021 were 40% and 62%, 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
PNC providesWe provide relief to our customers experiencing financial hardships through a variety of solutions. Commercial loan and lease modifications are based on each individual borrower’s situation, and may involve reduction of the interest rate, extension of the loan term and/or forgiveness of principal. Consumerwhile consumer loan modifications are evaluated under our hardship relief programs, including COVID-19 related hardships that extended beyond the initial relief period.programs.

SeeOn January 1, 2023, we adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings within thisand Vintage Disclosures, which eliminates the accounting guidance for TDRs and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. Refer to Note 1 Accounting Policies and Note 3 Loans and Related Allowance for Credit Risk Management sectionLosses for moreadditional information on how certain loans to borrowers experiencing COVID-19 related difficulties were treated prior to the expirationour adoption of CARES Act TDR relief.this ASU.

For additional information related to loan modifications granted in response to the economic impacts of COVID-19, see the Credit Risk Management portion of the Risk Management section of our 2021 Form 10-K.

Allowance for Credit Losses
Our determination of the ACL is based on historical loss and performance experience, current economic conditions, reasonable and supportable forecasts of future economic conditions and other relevant factors, including current borrower and/or transaction characteristics. We maintain the ACL at an appropriate level for expected losses on our existing investment securities, loans, equipment finance leases, trade receivables and other financial assets and off-balance sheet credit exposuresunfunded 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 2021 Form 10-K and the Credit Risk Management section within Item 7 of our 2021 Form 10-K for additional discussion of our ACL, including details of our methodologies. See alsoAlso see the Critical Accounting Estimates and Judgments section of this Financial ReviewReport for further discussion of the assumptions used in the determination of the ACL as of September 30, 2022.











2023.


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

27 


The following table summarizes our ACL related to loans:

Table 24: Allowance for Credit Losses by Loan Class (a)
September 30, 2022December 31, 2021September 30, 2023December 31, 2022

Dollars in millions

Dollars in millions
Allowance AmountTotal Loans% of Total LoansAllowance AmountTotal Loans% of Total Loans
Dollars in millions
Allowance AmountTotal Loans% of Total LoansAllowance AmountTotal Loans% of Total Loans
Allowance for loans and lease lossesAllowance for loans and lease lossesAllowance for loans and lease losses
CommercialCommercialCommercial
Commercial and industrialCommercial and industrial$1,974 $173,813 1.14 %$1,879 $152,933 1.23 %Commercial and industrial$1,843 $174,163 1.06 %$1,957 $182,219 1.07 %
Commercial real estateCommercial real estate994 35,592 2.79 %1,216 34,015 3.57 %Commercial real estate1,270 35,776 3.55 %1,047 36,316 2.88 %
Equipment lease financingEquipment lease financing93 6,192 1.50 %90 6,130 1.47 %Equipment lease financing109 6,493 1.68 %110 6,514 1.69 %
Total commercialTotal commercial3,061 215,597 1.42 %3,185 193,078 1.65 %Total commercial3,222 216,432 1.49 %3,114 225,049 1.38 %
ConsumerConsumerConsumer
Residential real estateResidential real estate50 45,057 0.11 %21 39,712 0.05 %Residential real estate62 47,359 0.13 %92 45,889 0.20 %
Home equityHome equity215 25,367 0.85 %149 24,061 0.62 %Home equity288 26,159 1.10 %274 25,983 1.05 %
AutomobileAutomobile214 15,025 1.42 %372 16,635 2.24 %Automobile169 14,940 1.13 %226 14,836 1.52 %
Credit cardCredit card732 6,774 10.81 %712 6,626 10.75 %Credit card762 7,060 10.79 %748 7,069 10.58 %
EducationEducation64 2,287 2.80 %71 2,533 2.80 %Education56 2,020 2.77 %63 2,173 2.90 %
Other consumerOther consumer245 5,293 4.63 %358 5,727 6.25 %Other consumer208 4,446 4.68 %224 5,026 4.46 %
Total consumerTotal consumer1,520 99,803 1.52 %1,683 95,294 1.77 %Total consumer1,545 101,984 1.51 %1,627 100,976 1.61 %
TotalTotal4,581 $315,400 1.45 %4,868 $288,372 1.69 %Total4,767 $318,416 1.50 %4,741 $326,025 1.45 %
Allowance for unfunded lending related commitmentsAllowance for unfunded lending related commitments682 662 Allowance for unfunded lending related commitments640 694 
Allowance for credit lossesAllowance for credit losses$5,263 $5,530 Allowance for credit losses$5,407 $5,435 
Allowance for credit losses to total loansAllowance for credit losses to total loans1.67 %1.92 %Allowance for credit losses to total loans1.70 %1.67 %
CommercialCommercial1.70 %1.94 %Commercial1.73 %1.66 %
ConsumerConsumer1.60 %1.87 %Consumer1.62 %1.69 %
(a)    Excludes allowances for investment securities and other financial assets, which together totaled $162$131 million and $171$176 million at September 30, 20222023 and December 31, 2021,2022, respectively.


28The PNC Financial Services Group, Inc. – Form 10-Q
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The following table summarizes our loan charge-offs and recoveries:
Table 25: Loan Charge-Offs and Recoveries
Nine months ended September 30Nine months ended September 30Gross
Charge-offs
RecoveriesNet Charge-offs /
(Recoveries)
% of Average
Loans (Annualized)
Nine months ended September 30Gross
Charge-offs
RecoveriesNet Charge-offs /
(Recoveries)
% of Average
Loans (Annualized)
Dollars in millionsDollars in millionsDollars in millions
20232023
CommercialCommercial
Commercial and industrialCommercial and industrial$192 $98 $94 0.07 %
Commercial real estateCommercial real estate124 120 0.45 %
Equipment lease financingEquipment lease financing11 0.06 %
Total commercialTotal commercial327 110 217 0.13 %
ConsumerConsumer
Residential real estateResidential real estate10 (4)(0.01)%
Home equityHome equity15 36 (21)(0.11)%
AutomobileAutomobile91 77 14 0.12 %
Credit cardCredit card232 32 200 3.82 %
EducationEducation13 0.50 %
Other consumerOther consumer124 28 96 2.73 %
Total consumerTotal consumer481 188 293 0.39 %
Total Total$808 $298 $510 0.21 %
202220222022
CommercialCommercialCommercial
Commercial and industrialCommercial and industrial$136 $68 $68 0.06 %Commercial and industrial$136 $68 $68 0.06 %
Commercial real estateCommercial real estate22 19 0.07 %Commercial real estate22 19 0.07 %
Equipment lease financingEquipment lease financing(3)(0.07)%Equipment lease financing(3)(0.07)%
Total commercialTotal commercial162 78 84 0.05 %Total commercial162 78 84 0.05 %
ConsumerConsumerConsumer
Residential real estateResidential real estate15 (6)(0.02)%Residential real estate15 (6)(0.02)%
Home equityHome equity58 (49)(0.27)%Home equity58 (49)(0.27)%
AutomobileAutomobile118 100 18 0.15 %Automobile118 100 18 0.15 %
Credit cardCredit card194 43 151 3.09 %Credit card194 43 151 3.09 %
EducationEducation12 0.44 %Education12 0.44 %
Other consumerOther consumer164 31 133 3.20 %Other consumer164 31 133 3.20 %
Total consumerTotal consumer506 251 255 0.35 %Total consumer506 251 255 0.35 %
Total Total$668 $329 $339 0.15 % Total$668 $329 $339 0.15 %
2021
Commercial
Commercial and industrial$350 $68 $282 0.27 %
Commercial real estate34 29 0.12 %
Equipment lease financing0.02 %
Total commercial393 81 312 0.23 %
Consumer
Residential real estate11 20 (9)(0.04)%
Home equity16 63 (47)(0.26)%
Automobile120 117 0.03 %
Credit card196 36 160 3.52 %
Education11 0.24 %
Other consumer130 21 109 2.77 %
Total consumer484 263 221 0.36 %
Total$877 $344 $533 0.27 %

Total net charge-offs decreased $194increased $171 million, or 36%50%, for the first nine months of 20222023 compared to the same period in 2021. Declines were driven by fewer commercial2022. The increase in the comparison was attributable to higher net charge-offs which in the comparative period included charge-offs attributable to BBVA that were largely the result of required purchase accounting treatment for the acquisition.both our commercial and consumer portfolios.

See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K and Note 43 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included inof 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 20212022 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. PNC and PNC Bank calculate the LCR daily and asare required to maintain a regulatory minimum of September 30, 2022, the100%. The LCR for each of PNC and PNC Bank exceeded the regulatory minimum requirement throughout the third quarter of 100%.2023. Fluctuations in our average LCR result from changes to the components of the calculation, including high-quality liquid assets and net cash outflows, as a result of ongoing business activity.

The NSFR is designed to measure the stability of the maturity structure of assets and liabilities of banking organizations over a one-year time horizon. PNC and PNC Bank are required to calculate the NSFR on an ongoing basis and asare required to maintain a regulatory minimum of September 30, 2022, the100%. The NSFR for each of PNC and PNC Bank exceeded the regulatory minimum requirement throughout the third quarter of 100%.2023.

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

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We provide additional information regarding regulatory liquidity requirements and their potential impact on us in the Supervision and Regulation section of Item 1 Business and Item 1A Risk Factors of our 20212022 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 decreased to $438.2$423.6 billion at September 30, 20222023 from $457.3$436.3 billion at December 31, 2021, driven by decreases in both2022, and included a continued shift from noninterest-bearing to interest-bearing deposit products, as interest rates have risen. As of September 30, 2023, uninsured deposits represented approximately 46% of our total deposit base. The majority of our uninsured deposits are related to commercial operating and interest-bearing deposits.relationship accounts, which we define as commercial deposit customers who utilize two or more PNC products. See the Funding Sources portion of the Consolidated Balance Sheet Review sectionand Business Segments Review sections of this Financial Review for additional information on our deposits and 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 September 30, 2022, 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 $51.0 billion and securities available for sale totaling $45.8 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. PNC pledges securities as collateral to secure public and trust deposits, repurchase agreements and for other purposes. Pledged securities included $20.0 billion of securities held to maturity and an immaterial amount of available for sale and trading securities.strategies.

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 Financial Review, Note 87 Borrowed Funds in the Notes To Consolidated Financial Statements included in this Report and Note 10 Borrowed Funds in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K for additional information related to our borrowings.

Total senior and subordinated debt, on a consolidated basis, decreasedincreased due to the following activity:
Table 26: Senior and Subordinated Debt
In billions20222023
January 1$27.723.0 
Issuances0.97.0 
Calls and maturities(5.8)(2.3)
Other(2.2)(0.6)
September 30$20.627.1 

Additionally, certain liquid assets and unused borrowing capacity from a number of sources are also available to manage our liquidity position. The following table summarizes our contingent liquidity from on-balance sheet and off-balance sheet funding sources:
Table 27: Contingent Liquidity Sources
In billionsSeptember 30, 2023December 31, 2022
Cash balance with Federal Reserve Bank$41.1 $26.9 
Available investment securities (a)97.4109.8
Unused borrowing capacity from FHLB and Federal Reserve Bank84.467.2
Total available contingent liquidity$222.9 $203.9 
(a) Available investment securities represents the fair value of investment securities that are available for sale or that can be used for pledging or to secure other sources of funding.
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 September 30, 2022,2023, PNC Bank had $9.3 billion of notes outstandingBank’s remaining capacity to issue under thisthe program of which $4.5 billion were senior bank notes and $4.8 billion were subordinated bank notes.
PNC Bank maintains additional secured borrowing capacity with the FHLB-Pittsburgh 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 September 30, 2022, our unused secured borrowing capacity at the FHLB-Pittsburgh and the Federal Reserve Bank totaled $63.9was $33.3 billion.

Under PNC Bank’s 2013 commercial paper program, PNC Bank has the ability to offer up to $10.0 billion of its commercial paper to provide additional liquidity. At September 30, 2022,2023, 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 its senior unsecured notes.

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 liquidity to fund discretionary activities such as paying dividends to our shareholders, share repurchases and acquisitions.


30The PNC Financial Services Group, Inc. – Form 10-Q
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At September 30, 2022,2023, available parent company liquidity totaled $8.8$17.4 billion. Parent company liquidity is held in intercompany cash and investments. For investments with longer durations, 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, regulations and the results of supervisory activities,
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 $2.4$6.1 billion at September 30, 2022.2023. See Note 20 Regulatory Matters in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K for further discussion of these limitations.

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. Authorized byUnder the Board of Directors,parent company’s 2014 commercial paper program, the parent company has the ability to offer up to $5.0 billion of commercial paper to provide additional liquidity. At September 30, 2022,2023, there were no commercial paper issuances outstanding.outstanding under this program.
The following table details parent company note issuances in the third quarter of 2023:

Table 28: Parent Company Notes Issued
Issuance DateAmountDescription of Issuance
August 18, 2023$750 million$750 million of senior fixed-to-floating notes with a maturity date of August 18, 2034. Interest is payable semi-annually in arrears at a fixed rate of 5.939% per annum, on February 18 and August 18 of each year, beginning on February 18, 2024. Beginning on August 18, 2033, interest is payable quarterly in arrears at a floating rate per annum equal to Compounded SOFR (determined with respect to each quarterly interest period using the SOFR Index as described in the Prospectus Supplement), plus 1.946%, on November 18, 2033, February 18, 2034, May 18, 2034 and at the maturity date.

Parent company senior and subordinated debt outstanding totaled $10.0$19.6 billion and $11.4$13.1 billion at September 30, 20222023 and December 31, 2021,2022, respectively.

See Note 17 Subsequent Events in the Notes To Consolidated Financial Statements of this Report for details on the parent company's issuancecompany’s issuances of $1.0$1.25 billion of its 5.671%6.615% senior fixed-to-floating
rate notes that mature on October 27, 2023 and $2.25 billion of its 6.875% senior fixed-to-floating rate notes that mature on October 28, 2025, and $1.5 billion of its 6.037% senior fixed-to-floating rate notes that mature on October 28, 2033.20, 2034.

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 of our 20212022 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 9 Commitments in the Notes To Consolidated Financial Statements of this Report.8 Commitments.

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.

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

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The following table presents credit ratings and outlook for PNC and PNC Bank as of September 30, 2022:PNC:
Table 27:29: Credit Ratings for PNC and PNC BankOutlook
September 30, 20222023
  
Moody’s (a)Standard & Poor’sFitch
PNCParent Company
Senior debtA3A-A
Subordinated debtA3BBB+A-
Preferred stockBaa2BBB-BBB
PNC Bank
Senior debtA2AA+
Subordinated debtA3A-A
Long-term depositsAa3AAA-
Short-term depositsP-1A-1F1+
Short-term notesP-1A-1F1
PNC
Agency rating outlookNegativeStableStable
(a)On August 7, 2023, the Moody's rating outlook on PNC's long-term issuer rating, long-term local currency bank deposits and senior unsecured local currency notes was changed to negative from stable, reflecting the current pressures on the U.S. banking sector.

Capital Management
Detailed information on our capital management processes and activities is included in the Supervision and Regulation section of Item 1 of our 20212022 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 August 19, 2022, PNC issued 1,250,000 depositary shares each representing 1/100th ownership in a share of 6.200% fixed-rate reset non-cumulative perpetual preferred stock, Series V, with a par value of $1 per share.

See Note 17 Subsequent Events in the Notes To Consolidated Financial Statements of this Report for details on the redemption of $1.5$1.0 billion of Series PO preferred stock on November 1, 2022.2023.

In the third quarter of 2022,2023, PNC returned $1.7$0.6 billion of capital to shareholders an increase of $0.3 billion from the second quarter of 2022, due to higher share repurchases. Capital return in the third quarter of 2022 was comprised of $1.1 billion of common share repurchases, representing 6.7 million shares, and $0.6 billion ofthrough dividends on common shares. Consistent with the SCB framework, which allows for capital return in amounts in excess of the SCB minimum levels (the regulatory minimum (4.5%) plus our SCB), our Board of Directors has authorized a repurchase framework under the previously approved repurchase program of up to 100 million common shares, of which approximately 53%46% were still available for repurchase at September 30, 2022. Under this framework, PNC expects its quarterly repurchases to approximate $700 million to $750 million with2023. In light of the abilityFederal banking agencies proposed rules to adjust those levelsthe Basel III capital framework, share repurchase activity was paused in the third quarter of 2023 and is expected to remain paused during the fourth quarter of 2023. PNC continues to evaluate the potential impact of the proposed rules and may resume share repurchase activity depending on market and economic conditions, as conditions warrant. PNC'swell as other factors. PNC’s SCB for the four-quarter period beginning October 1, 20222023 is 2.9%the regulatory minimum of 2.5%.

On October 3, 2022,2, 2023, the PNC Board of Directors declared a quarterly cash dividend on common stock of $1.50$1.55 per share payable onshare. The dividend, with a payment date of November 5, 2022.2023, will be payable the next business day.





32The PNC Financial Services Group, Inc. – Form 10-Q
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The following table summarizes our Basel III capital balances and ratios:

Table 28:30: Basel III Capital
September 30, 2022September 30, 2023
Dollars in millionsDollars in millionsBasel III (a) Fully Implemented
(estimated) (b)
Dollars in millionsBasel III (a) Fully Implemented
(estimated) (b)
Common equity Tier 1 capitalCommon equity Tier 1 capitalCommon equity Tier 1 capital
Common stock plus related surplus, net of treasury stockCommon stock plus related surplus, net of treasury stock(2,847)(2,847)Common stock plus related surplus, net of treasury stock$(3,694)$(3,694)
Retained earningsRetained earnings53,501 52,777 Retained earnings56,652 56,170 
Goodwill, net of associated deferred tax liabilitiesGoodwill, net of associated deferred tax liabilities(10,761)(10,761)Goodwill, net of associated deferred tax liabilities(10,754)(10,754)
Other disallowed intangibles, net of deferred tax liabilitiesOther disallowed intangibles, net of deferred tax liabilities(398)(398)Other disallowed intangibles, net of deferred tax liabilities(329)(329)
Other adjustments/(deductions)Other adjustments/(deductions)(123)(127)Other adjustments/(deductions)(99)(101)
Common equity Tier 1 capital (c)Common equity Tier 1 capital (c)39,372 38,644 Common equity Tier 1 capital (c)41,776 41,292 
Additional Tier 1 capitalAdditional Tier 1 capitalAdditional Tier 1 capital
Preferred stock plus related surplusPreferred stock plus related surplus7,245 7,245 Preferred stock plus related surplus7,239 7,239 
Tier 1 capitalTier 1 capital46,617 45,889 Tier 1 capital49,015 48,531 
Additional Tier 2 capitalAdditional Tier 2 capitalAdditional Tier 2 capital
Qualifying subordinated debtQualifying subordinated debt3,646 3,646 Qualifying subordinated debt2,971 2,971 
Eligible credit reserves includable in Tier 2 capitalEligible credit reserves includable in Tier 2 capital4,252 4,968 Eligible credit reserves includable in Tier 2 capital4,800 5,277 
Total Basel III capitalTotal Basel III capital$54,515 $54,503 Total Basel III capital$56,786 $56,779 
Risk-weighted assetsRisk-weighted assetsRisk-weighted assets
Basel III standardized approach risk-weighted assets (d)Basel III standardized approach risk-weighted assets (d)$423,446 $423,593 Basel III standardized approach risk-weighted assets (d)$425,131 $425,323 
Average quarterly adjusted total assetsAverage quarterly adjusted total assets$539,869 $539,141 Average quarterly adjusted total assets$549,724 $549,239 
Supplementary leverage exposure (e)Supplementary leverage exposure (e)$639,250 $639,246 Supplementary leverage exposure (e)$648,959 $648,958 
Basel III risk-based capital and leverage ratios (f)Basel III risk-based capital and leverage ratios (f)Basel III risk-based capital and leverage ratios (f)
Common equity Tier 1Common equity Tier 19.3 %9.1 %Common equity Tier 19.8 %9.7 %
Tier 1Tier 111.0 %10.8 %Tier 111.5 %11.4 %
TotalTotal12.9 %12.9 %Total13.4 %13.3 %
Leverage (g)Leverage (g)8.6 %8.5 %Leverage (g)8.9 %8.8 %
Supplementary leverage ratio (e)Supplementary leverage ratio (e)7.3 %7.2 %Supplementary leverage ratio (e)7.6 %7.5 %
(a)The ratios are calculated to reflect PNC’s election to adopt the CECL five-year transition provisions. Effective for the first quarter 2022, PNC is now in the three-year transition period and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024.
(b)The ratios are calculated to reflect the full impact of CECL and excludesexclude the benefits of the optional five-year transition.
(c)As permitted, PNC and PNC Bank have elected to exclude AOCI related to both available for sale securities and pension and other post-retirement plans from CET1 capital.
(d)Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets.
(e)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 sheet assets as well as certain off-balance sheet items, including loan commitments and potential future exposure under derivative contracts.
(f)All ratios are calculated using the regulatory capital methodology applicable to PNC and calculated based on the standardized approach.
(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,FDMs, 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 certain banks, including PNC, 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 CECL ACL at adoption. Effective for the first quarter of 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being phased-in to regulatory capital through December 31, 2024. See additional discussion of this rule in the Supervision and Regulation section of Item 1 Business and Item 1A Risk Factors of our 20212022 Form 10-K.
At September 30, 2022,2023, PNC and PNC Bank were considered “well capitalized,”capitalized” based on applicable U.S. regulatory capital ratio requirements. To qualify as “well capitalized”,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 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 33 


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



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 we believe that our September 30, 20222023 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 20212022 Form 10-K.

Market Risk Management
See the Market Risk Management portion of the Risk Management Sectionsection in our 20212022 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 market risk-related 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 third quarters of 20222023 and 20212022 follow:

Table 29:31: Interest Sensitivity Analysis
Third Quarter 2022Third Quarter 2021
Net Interest Income Sensitivity Simulation
Effect on net interest income in first year from gradual interest rate change over the
   following 12 months of:
100 basis point increase2.5 %4.5 %
100 basis point decrease (a)(2.5)%N/A
Effect on net interest income in second year from gradual interest rate change over the
    preceding 12 months of:
100 basis point increase4.5 %11.3 %
100 basis point decrease (a)(4.8)%N/A
(a)Due to the prevailing low interest rate environment post pandemic, the reporting of Net interest income sensitivities for the 100 basis point decrease scenario was suspended from the first quarter of 2020 to the first quarter of 2022.
Third Quarter 2023Third Quarter 2022
Net Interest Income Sensitivity Simulation
Effect on net interest income in first year from gradual parallel interest rate change over the
   following 12 months of:
100 basis point increase(0.4)%2.5 %
100 basis point decrease0.3 %(2.5)%
Effect on net interest income in second year from gradual parallel interest rate change over the
    preceding 12 months of:
100 basis point increase(0.3)%4.5 %
100 basis point decrease0.1 %(4.8)%
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 3032 reflects the percentage change in net interest income over the next two 12-monthtwelve-month periods, 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.
Table 30:32: Net Interest Income Sensitivity to Alternative Rate Scenarios
September 30, 2022September 30, 2023
PNC
Economist
Market
Forward
Slope
Flattening
PNC
Economist
Market
Forward
Slope
Flattening
First year sensitivityFirst year sensitivity3.5 %4.2 %(0.5)%First year sensitivity0.6 %1.3 %(0.4)%
Second year sensitivitySecond year sensitivity(4.3)%(3.0)%(2.7)%Second year sensitivity4.5 %3.3 %(2.5)%

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 future level of simulated net interest income in the base interest rate scenario and the other interest rate scenarios presented in Tables 2931 and 30.32. These simulations assume that as assets and liabilities mature, they are replaced or repriced at then currentthen-current market rates.

34The PNC Financial Services Group, Inc. – Form 10-Q
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The following graph presents the SOFR curves for the base rate scenario and each of the alternate scenarios one year forward:
Table 31:33: Alternate Interest Rate Scenarios: One Year Forward
pnc-20220930_g2.gif
Picture2.jpg

The third quarter 20222023 interest sensitivity analyses indicate that our Consolidated Balance Sheet is positioned to benefit from an increase in interest rates over the longer term 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.

LIBOR Transition
The scheduled discontinuance of the requirement that banks submit rates for the calculation of LIBOR after June 30, 2023 presents risks to the financial instruments originated, held or serviced by PNC that use LIBOR as a reference rate. For more discussion regarding the transition from LIBOR, see the Risk Management section in Item 7 of our 2021 Form 10-K.

Key efforts related to our transition plan to date have 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,
Developing and delivering on internal and external LIBOR cessation communication plans,
Engaging with PNC clients, industry working groups and regulators,
Monitoring developments associated with LIBOR alternatives and industry practices related to LIBOR-indexed instruments,
Incorporating BBVA into PNC’s LIBOR transition effort, and
Initiating the offering of instruments referencing alternative rates in order to align with regulatory guidance encouraging the transition away from the use of USD LIBOR in new contracts after December 31, 2021.

As of December 31, 2021, PNC Bank ceased entering into new contracts with a LIBOR reference rate, except on a limited basis, as permissible. PNC is offering conforming adjustable rate mortgages using SOFR instead of USD LIBOR, in line with Fannie Mae and Freddie Mac requirements, and nonconforming adjustable rate residential mortgages using SOFR and private education loans using Prime. Alternative rates, primarily SOFR, are currently offered to our corporate and commercial customers. The focus for 2022 is planning for the cessation event in 2023 for all lines of business. Corporate & Institutional Banking has initiated amending contracts with inadequate fallback language, working on systems enhancements and continuing with client outreach and education. PNC has provided regular updates to Federal Reserve, OCC and FDIC examination staff regarding its LIBOR cessation and transition plans.




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



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.Weactivities. 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 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 20212022 Form 10-K for more information on our models used to calculate VaR and our backtesting process.

Customer-related trading revenue was $118 million for the nine months ended September 30, 2023, compared to $291 million for the nine months ended September 30, 2022, compared to $278 million for the nine months ended September 30, 2021.2022. The increasedecrease was primarilymainly due to improved interest ratehigher funding costs on the trading positions inventory and lower derivative and foreign exchange client sales revenues, partially offset by the impact of changes in credit valuations for customer-related derivative activities.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, consistent with regulatory limitations. 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.
The PNC Financial Services Group, Inc. – Form 10-Q 35 


A summary of our equity investments follows:
Table 32:34: Equity Investments Summary
September 30
2022
December 31
2021
Change September 30
2023
December 31
2022
Change
Dollars in millionsDollars in millions$%Dollars in millions$%
Tax credit investmentsTax credit investments$3,993 $3,954 $39 %Tax credit investments$4,159 $4,308 $(149)(3)%
Private equity and otherPrivate equity and other4,137 4,226 (89)(2)%Private equity and other3,887 4,129 (242)(6)%
TotalTotal$8,130 $8,180 $(50)(1)%Total$8,046 $8,437 $(391)(5)%

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 $2.3 billion and $2.2$2.5 billion at both September 30, 20222023 and December 31, 2021,2022, 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 Item 8 of our 20212022 Form 10-K has further information on tax credit investments.

Private Equity and Other
The largest component of our other equity investments 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 $2.0$1.9 billion and $1.8 billion at September 30, 20222023 and December 31, 2021,2022, respectively. As of September 30, 2022, $1.82023, $1.7 billionwas invested directly in a variety of companies and $0.2 billion was invested indirectly through various private equity funds.

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 September 30, 20222023 per share closing price of $177.65$230.01 for a Visa Class A common share, the estimated value of our total investment in the Class B common shares was approximately $1.0$1.3 billion at the current conversion rate of Visa B shares to Visa A shares, while our cost basis was insignificant. See Note 15 Fair Value and Note 21 Legal Proceedings in the Notes To Consolidated Financial Statementsour 2022 Form 10-K and Note 13 Legal Proceedings in Item 8 of our 2021 Form 10-Kthis Report for additional information regarding our Visa agreements.agreements, and Visa’s proposed amendments to its Certificate of Incorporation to institute, if approved by stockholders, an exchange offer program that would release transfer restrictions on portions of the Visa Class B common shares. The estimated value does not represent fair value of the Visa B common shares given the shares'shares’ limited transferability and the lack of observable transactions in the marketplace.

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


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 $17 million for the nine months ended September 30, 2023 and $26 million for the nine months ended September 30, 2022 and $44 million for the nine months ended September 30, 2021.

2022.

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 Item 8 of our 20212022 Form 10-K and in Note 1211 Fair Value and Note 1312 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.







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



RECENT REGULATORY DEVELOPMENTS

Long-Term Debt Requirements
In August 2022,2023, the President signedfederal banking agencies proposed rules that would require Category II, III, and IV bank holding companies under the Federal Reserve’s Enhanced Prudential Standards to issue and maintain minimum amounts of long-term debt that satisfies certain requirements. Under the proposal, insured depository institutions of such bank holding companies would also be required to issue and maintain long-term debt internally to a company that consolidates the insured depository institution, which in turn would be required to purchase that long-term debt. Additionally, Category II, III, and IV bank holding companies would be subject to “clean holding company” requirements, which would prohibit such companies from entering into lawcertain financial arrangements and cap liabilities that are not long-term debt and rank at either the Inflation Reduction Actsame priority as or junior to eligible external long-term debt. PNC, as a Category III holding company, and PNC Bank would be subject to the rules and would have a three-year phase-in period after any final rule to achieve compliance with the long-term debt requirements. If the rules were finalized in their current form, we would expect to achieve compliance through normal course funding.

Resolution Plan Requirements
In August 2023, the FDIC proposed changes to its rule requiring certain insured depository institutions, including PNC Bank, to periodically submit a resolution plan that, in the event of 2022 (the “Act”). Among other things, includinga hypothetical failure, should enable the allocation of $369.0FDIC to resolve the bank under the Federal Deposit Insurance Act. Under the proposed rule, banks with $100 billion for climate-related spendingor more in assets, such as clean energy tax creditsPNC Bank, would be required to submit full resolution plans on a two-year cycle with an interim informational supplement and investments,FDIC supervisory activities and capabilities testing between full submissions. The proposed rule would significantly expand the required content elements and add virtual data room and valuation capabilities as significant components of the resolution planning process. The proposal would divide banks with $100 billion or more in assets into two future groups, with one group of banks required to submit their first full resolution plan under the new rule at least 270 days after the effective date of the final rule, and the other submitting full plans the following year.

The Federal Reserve and FDIC also proposed new guidance for holding company resolution plans submitted by triennial full filers, such as PNC, under section 165(d) of the Dodd-Frank Act imposes a 15% minimum tax onand the adjusted financial statement incomeimplementing regulations. The proposed guidance bifurcates each area of taxpayersrequirements into separate sections for single point of entry and multiple point of entry resolution strategies, generally applying—to the extent relevant to each resolution strategy—the expectations from the 2019 resolution plan guidance applicable to U.S. GSIBs. Firms like PNC with a multiple point of entry resolution strategy would be required to incorporate more than $1.0 billion of such income. The Act also imposes a 1% excise tax on corporate stock repurchases. The minimum taxsevere plan assumptions and excise tax requirements, as written, could impact PNC's cash tax liability.

In October 2022,include new required plan content, operational capabilities, legal entity rationalization, and separability options, among other requirements. PNC’s next 165(d) resolution plan is due July 1, 2024, unless the Federal Reserve and FDIC jointly issuedprovide an advance notice of proposed rulemaking to solicit input on potential changes to the resolution-related requirements applicable to large banking organizations like PNC that are not GSIBs. The advance notice of proposed rulemaking solicits comments and poses specific questions on whether to impose GSIB-like resolution requirements on large banking organizations that are not GSIBs, including a requirement to maintain loss-absorbing capacity at the insured depository institution or holding company in the form of long-term debt, a “clean holding company” requirement that would prohibit top-tier holding companies from entering certain financial arrangements (such as short-term borrowing or derivative contracts), the Federal Reserve’s supervisory guidance on recovery planning, separability requirements and certain disclosure requirements currently applicable to GSIBs. Such requirements could, among other things, increase PNC’s borrowing costs, require the implementation of new operational capabilities, and require changes to PNC’s resolution strategies at the holding company and bank level.extension.

Other Regulatory Developments
On October 19, 2023, the CFPB proposed for public comment a rule to implement Section 1033 of the Dodd-Frank Act, which requires certain entities, including PNC and PNC Bank, to, upon request, make available to a consumer information in the entity’s control or possession concerning the consumer financial product or service that the consumer obtained from that entity. In general, the proposed rule would require data providers holding a consumer account, such as PNC Bank, to establish a developer interface satisfying certain security and other standards, accept requests for specific types of data covered by the rule through the developer interface and, in response to such a request, make that data available in electronic form to consumers and authorized third parties, including data aggregators. Data providers could not charge consumers or third parties fees for processing these requests. The proposed rule would also place data security, authorization, and other obligations on third parties accessing covered data from data providers, which could include PNC and PNC Bank when acting in certain capacities. The rule would also require third parties to limit their collection, use, and retention of the data received to only that reasonably necessary to provide the consumer’s requested product or service. The rule would be effective for PNC and PNC Bank six months after publication of the final rule.

On October 24, 2023, the federal banking agencies issued a final rule to amend the regulations implementing the Community Reinvestment Act (CRA), which requires the agencies to assess a bank’s record of meeting the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods. The rule significantly expands the number of areas in which a bank is evaluated, materially changes the tests used to evaluate the bank in those areas and expands the data a bank must collect and report. We expect the rule will increase PNC Bank’s obligations and compliance costs necessary to achieve a “Satisfactory” or “Outstanding” rating under the CRA framework, which factors into the ability of banks to expand and engage in new activities.

On October 25, 2023, the Federal Reserve proposed revisions to the three components of the interchange fee cap for a debit card transaction received by a debit card issuer that does not qualify for a statutory exemption, such as PNC Bank. Under the proposed rule, the base component would decrease from 21.0 to 14.4 cents, the ad valorem component would decrease from 5.0 basis points to 4.0 basis points (multiplied by the value of the transaction) and for a debit card issuer that meets certain fraud-prevention standards, the fraud-prevention adjustment component would increase from 1.0 cents to 1.3 cents. The proposed rule would also codify an approach to update the three components every other year. The final rule would take effect on the first day of the next calendar quarter that begins at least 60 days after the rule is published.

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


CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Our consolidated financial statements are prepared by applying certain accounting policies. Note 1 Accounting Policies in our 20212022 Form 10-K describes the most significant accounting policies that we use to prepare our consolidated financial statements.use. 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 levelLevel 3 fair value measurements are described in Critical Accounting Estimates and Judgments in Item 7 of our 20212022 Form 10-K. 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, other financial assets and unfunded lending related commitments, for the remaining estimated contractual term of the assets or exposures, taking into consideration expected prepayments.prepayments and estimated recoveries. Our determination of the ACL is based on historical loss and performance experience, as well as current borrower and transaction characteristics including collateral type and quality, current economic conditions, reasonable and supportable forecasts of future economic conditions and other relevant factors. We use methods sensitive to changes in economic conditions to interpret these factors and to estimate expected credit losses. We evaluate and, when appropriate, enhance the quality of our data and models and other methods used to estimate the ACL on an ongoing basis. We applyincorporate qualitative factors to reflect in the ACL that reflect our best estimate of amounts that we do not expect to collect because
38   The PNC Financial Services Group, Inc. – Form 10-Q



of, among other things, idiosyncratic risk factors, changes in economic conditionsexpected losses that may not be reflectedadequately represented in forecasted results,our quantitative methods or other potential methodology limitations.economic assumptions. The major drivers of ACL estimates include:include, but are not limited to:
Current economic conditions: Our forecast of expected losses depends on economic conditions 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. Changes to probability weights assigned to these scenarios and timing of peak business cycles reflected by the scenarios could materially affect our loss estimates.
Current borrower quality: Our forecast of expected losses depends on current borrower and transaction characteristics, including credit metrics and collateral type/quality. As borrower quality changes,evolves, forecasted losses could be materially affected.
Portfolio volume and mix:composition: Changes to portfolio volume and mix could materially affect our estimates, as CECL reserves
would be recognized upon origination or acquisition.acquisition and derecognized upon paydown, maturity or sale.

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 2021 Form 10-K.Policies.

Reasonable and Supportable Economic Forecast
UnderPursuant to the CECL standard, we are required to consider reasonable and supportable forecasts in estimating expected credit losses. For this purpose,
we have established a framework whichthat includes a three yearthree-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.outcomes. 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 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, securities and securities.other financial assets. Each quarter, the scenarios are presented to RAC for approval, to PNC’s RAC, whichand the committee also determines and approves CECL scenarios'scenario weights for use forduring the current reporting period.

The scenarios used for the period ended September 30, 2022 reflect an increase in downside risk compared to December 31, 2021. The current outlook considers2023 consider, among other factors, the ongoing inflationary pressures that have broadened and intensified since the startcorresponding tightening of the year, along with the fact that the FOMC raised interest rates more aggressively than what was expected at December 31, 2021, increasing the risk of a broader-ranged economic slowdown. Though themonetary policy and credit availability. Our most-likely expectation continues to beat September 30, 2023 is that the U.S. economy narrowly avoidswill be impacted by a mild recession growth is expected to slow andstarting in the primary downside risk to the outlook has shifted from the pandemic to monetary policy tightening and inflation.first half of 2024.

We used a number of economic variables in our scenarios, with two of the most significant drivers being Realreal GDP and the U.S. unemployment rate. The following table presents a comparison of these two economic variables based on the weighted-average scenario forecasts used in determining our ACL at September 30, 20222023 and December 31, 2021.2022.

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



Table 33:35: Key Macroeconomic Variables in CECL Weighted-Average Scenarios
Assumptions as of September 30, 2022
202220232024
U.S. Real GDP (a)0.2%0.1%1.5%
U.S. Unemployment Rate (b)3.8%4.8%4.7%
Assumptions as of December 31, 2021
202220232024
U.S. Real GDP (a)2.8%1.4%1.3%
U.S. Unemployment Rate (b)4.4%4.1%3.9%
Assumptions as of September 30, 2023
202320242025
U.S. real GDP (a)2.1%(0.1)%1.9%
U.S. unemployment rate (b)3.8%4.6%4.6%
Assumptions as of December 31, 2022
202320242025
U.S. real GDP (a)(0.4)%1.4%1.9%
U.S. unemployment rate (b)4.9%4.9%4.4%
(a)Represents year-over-year growth (loss) rates.
(b)Represents quarterly average rate at December 31, 2022, 2023, 2024 and 2024,2025, respectively.

Real GDP growth is expected to end 20222023 at 0.2%2.1% on a weighted average basis, downup from the 2.8%(0.4%) assumed at December 31, 20212022, primarily due primarily to weaker expectedstronger-than-anticipated growth in the secondfirst half of 2022, along with the unexpected contraction of GDP in the first and second quarter of 2022.2023. Growth then drops to 0.1%(0.1)% in 2023,2024, before growingjumping to 1.5%1.9% in 2024.2025. In line with stronger-than-anticipated job growth in 2023, the slowing in overall economic
The PNC Financial Services Group, Inc. – Form 10-Q 39 


activity,weighted-average projection of the weighted average unemployment rate is expected to end 2023 at 3.8%, down from the 4.9% assumed at December 31,2022. The weighted-average unemployment rate is then expected to increase modestly to 4.8% in 2023, with unemployment narrowly improving to 4.7% in 2024.through 2024, reaching 4.6% by year-end 2024, and remain flat at 4.6% through the fourth quarter of 2025.

The current state of the economy reflects an environment with receding COVID-19 relatedpandemic-related risks butand labor-related supply chain pressures. However, heightened uncertainty remains in terms of losses due to structural and secular changes fostered by the pandemic for certain sectors of the economy combined with inflation, rising interest rates and ongoing supply chain pressures.declining consumer savings and deposit balances. As such, for both our commercial and consumer loan portfolios, PNC identified and performed significant analysis around segments impacted by such uncertainties to ensure our reserves are adequate, given our current macroeconomic expectations.

We believe the economic scenarios effectively reflect the distribution of potential economic outcomes. Additionally, through in-depth and granular analysisanalyses, we have addressed reserve requirements for the specific populations most affected in the current environment. Through this approach, we believe the reserve levels appropriately reflect the expected credit losses in the portfolio as of the balance sheet date.

See the following for additional details on the components of our ACL:
Allowance Forfor Credit Losses in the Credit Risk Management section of this Financial Review,
Note 2 Investment Securities, 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.Losses.

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



Recently Issued Accounting Standards

Accounting Standards UpdateDescriptionFinancial Statement Impact
Portfolio Layer Hedging -
ASU 2022-01

Issued March 2022
• Required effective date of January 1, 2023; early adoption is permitted.
• Permits entities to expand their use of the portfolio layer method (previously the last-of-layer method) for fair value hedges of interest rate risk.
• Expands the scope to allow nonprepayable financial assets to be included in a closed portfolio hedge using the portfolio layer method.
• Allows multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments.
• Provides additional guidance on accounting for fair value hedge basis adjustments associated with portfolio layer hedges, generally requiring these adjustments to be maintained at the closed portfolio level and clarifying how these amounts should be disclosed.
• Requires a prospective transition approach for designation of multiple hedged layers of a single closed portfolio, a modified retrospective transition approach for hedge basis adjustments under the portfolio layer method, and the option of a prospective or retrospective transition approach for disclosures.
• Allows for an election to transfer debt securities classified as held to maturity to available for sale if the portfolio layer hedging method is applied to those securities; the election must be made within 30 days of adoption.
• We are currently evaluating when to adopt the amendments in ASU 2022-01 and the impact of the ASU on our consolidated results of operations and our consolidated financial position.
Troubled Debt Restructurings and Vintage Disclosures - ASU 2022-02

Issued March 2022
Required effective date of January 1, 2023; early adoption is permitted.
Eliminates the accounting guidance for TDRs and requires an entity to apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan.
Eliminates the requirement to use a discounted cash flow approach to measure the allowance for credit losses for TDRs.
Enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.
Requires disclosure of current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of CECL.
Requires a prospective transition approach to all amendments except those related to the recognition and measurement of TDRs (which allow a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings in the period of adoption).
We do not plan to early adopt ASU 2022-02.
We do not expect the adoption of this standard to materially impact our consolidated results of operations or our consolidated financial position. The amendments will require changes to disclosures on information related to loan modifications to borrowers experiencing financial difficulty and current-period gross charge-offs.

Recently Adopted Accounting Pronouncements

See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in this Report regarding the impact of new accounting pronouncements whichthat we have adopted.


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


INTERNAL CONTROLS AND DISCLOSURE CONTROLS AND PROCEDURES

As of September 30, 2022,2023, 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 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 September 30, 2022,2023, and that there has been no change in PNC’s internal control over financial reporting that occurred during the third quarter of 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.










The PNC Financial Services Group, Inc. – Form 10-Q 39 


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 financial performance, such as 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, including our sustainability strategy, 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:
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, 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 sanctions, tariffs and other trade policies of the U.S. and its global trading partners,
The impact of the Russia-Ukraine conflict, and associated sanctions or other actions in response, on the global and U.S. economy,
The length and extent of the economic impacts of the COVID-19 pandemic,
Impacts of changes in federal, state and local governmental policy, including on the regulatory landscape, capital markets, taxes, infrastructure spending and social programs,
PNC’sOur ability to attract, recruit and retain skilled employees, 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 views that:
Although real GDP contractedEconomic growth accelerated in the first half of 2023, but ongoing Federal Reserve monetary policy tightening to slow inflation is weighing on interest-rate sensitive industries. Sectors where interest rates play an outsized role, such as business investment and second quarters of 2022, the U.S. economy is notconsumer spending on durable goods, will contract in a recession. In particular, the labor market remains extremely strong, with average monthly job growth well above the pre-pandemic pace, and the unemployment rate at a 50-year low. Supply-chain difficulties will continue to ease into 2023. Labor shortages will remain a constraint into 2023, although strong wage growth and high levels of household saving will support consumer spending.2024.
PNC expects economic growthPNC’s baseline outlook is for a mild recession starting in mid-2024, with a small contraction in real GDP of less than 1%, lasting into late 2024. The unemployment rate will be below its long-term trend in the near term as the Federal Reserve continues to tighten monetary policy in an attempt to reduce inflationary pressures, but does not expect a near-term recession. Recession risks over the next few years are elevated, however, because of tighter monetary policy.
Inflation has started to slow, but remains near the strongest pace in decades. Inflation should slow further due to softer economic growth and a continued easing in supply-chain difficulties and will return to the Federal Reserve's 2% long-run objective in 2024.
42   The PNC Financial Services Group, Inc. – Form 10-Q



The FOMC raised the federal funds rate by 0.75% in September, to a range of 3.00% to 3.25%. PNC expects further increases in the federal funds rateincrease through the rest of this year,2023 and throughout 2024, peaking at close to a range5% in early 2025. Inflation will slow with weaker demand, moving back to the Federal Reserve’s 2% objective by the second half of 4.25% to 4.50% at the end of 2022. 2024.
PNC expects the federal funds rate to peakremain unchanged in the near term, between 4.50%5.25% and 4.75%5.50% through mid-2024, with federal funds rate cuts starting in early 2023, before fallingthe third quarter of 2024 in early 2024 as inflation ebbs and economic growth slows.response to the recession.
PNC’s ability to take certain capital actions, including returning capital to shareholders, is subject to PNC meeting or exceeding an SCB established by the Federal Reserve Board in connection with the Federal Reserve Board'sBoard’s CCAR process.
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 and the reliability of and risks resulting from extensive use of such 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 employees. These developments could include:
Changes to laws and regulations, including changes affecting oversight of the financial services industry, changes in the enforcement and interpretation of such laws and regulations and changes in accounting and reporting standards.
Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries resulting in monetary losses, costs, or alterations in our business practices and potentially causing reputational harm to PNC.
Results of the regulatory examination and supervision process, including our failure to satisfy requirements of agreements with governmental agencies.

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



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 reputation and business and operating results may be affected by our ability to appropriately meet or address environmental, social or governance targets, goals, commitments or concerns that may arise.
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, the integration of the acquired businesses into PNC after closing or any failure to execute strategic or operational plans.
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 manmade, natural and other disasters (including severe weather events), health emergencies, dislocations, geopolitical instabilities or events, terrorist activities, system failures or disruptions, security breaches, cyberattacks, international hostilities, or other extraordinary events beyond PNC'sPNC’s control through impacts on the economy and financial markets generally or on us or our counterparties, customers or third-party vendors and service providers specifically.
We provide greater detail regarding these as well as other factors in our 20212022 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 discussed elsewhere in this Report or in our other filings with the SEC.



The PNC Financial Services Group, Inc. – Form 10-Q 4341  


CONSOLIDATED INCOME STATEMENT
THE PNC FINANCIAL SERVICES GROUP, INC.
UnauditedUnauditedThree months ended
September 30
Nine months ended
September 30
UnauditedThree months ended
September 30
Nine months ended
September 30
In millions, except per share dataIn millions, except per share data2022202120222021In millions, except per share data2023202220232022
Interest IncomeInterest IncomeInterest Income
LoansLoans$3,138 $2,437 $7,935 $6,593 Loans$4,643 $3,138 $13,424 $7,935 
Investment securitiesInvestment securities715 460 1,890 1,350 Investment securities892 715 2,660 1,890 
OtherOther279 78 502 216 Other668 279 1,722 502 
Total interest incomeTotal interest income4,132 2,975 10,327 8,159 Total interest income6,203 4,132 17,806 10,327 
Interest ExpenseInterest ExpenseInterest Expense
DepositsDeposits340 29 455 99 Deposits1,792 340 4,614 455 
Borrowed fundsBorrowed funds317 90 542 275 Borrowed funds993 317 2,679 542 
Total interest expenseTotal interest expense657 119 997 374 Total interest expense2,785 657 7,293 997 
Net interest incomeNet interest income3,475 2,856 9,330 7,785 Net interest income3,418 3,475 10,513 9,330 
Noninterest IncomeNoninterest IncomeNoninterest Income
Asset management and brokerageAsset management and brokerage357 375 1,099 1,053 Asset management and brokerage348 357 1,052 1,099 
Capital markets related299 482 960 1,117 
Capital markets and advisoryCapital markets and advisory168 299 643 960 
Card and cash managementCard and cash management671 663 1,962 1,752 Card and cash management689 671 2,045 1,962 
Lending and deposit servicesLending and deposit services287 305 838 829 Lending and deposit services315 287 919 838 
Residential and commercial mortgageResidential and commercial mortgage143 248 463 641 Residential and commercial mortgage201 143 476 463 
OtherOther317 268 705 907 Other94 317 481 705 
Total noninterest incomeTotal noninterest income2,074 2,341 6,027 6,299 Total noninterest income1,815 2,074 5,616 6,027 
Total revenueTotal revenue5,549 5,197 15,357 14,084 Total revenue5,233 5,549 16,129 15,357 
Provision For (Recapture of) Credit Losses241 (203)69 (452)
Provision For Credit LossesProvision For Credit Losses129 241 510 69 
Noninterest ExpenseNoninterest ExpenseNoninterest Expense
PersonnelPersonnel1,805 1,986 5,301 5,103 Personnel1,773 1,805 5,445 5,301 
OccupancyOccupancy241 248 745 680 Occupancy244 241 739 745 
EquipmentEquipment344 355 1,026 974 Equipment347 344 1,046 1,026 
MarketingMarketing93 103 249 222 Marketing93 93 276 249 
OtherOther797 895 2,375 2,232 Other788 797 2,432 2,375 
Total noninterest expenseTotal noninterest expense3,280 3,587 9,696 9,211 Total noninterest expense3,245 3,280 9,938 9,696 
Income before income taxes and noncontrolling interestsIncome before income taxes and noncontrolling interests2,028 1,813 5,592 5,325 Income before income taxes and noncontrolling interests1,859 2,028 5,681 5,592 
Income taxesIncome taxes388 323 1,027 906 Income taxes289 388 917 1,027 
Net incomeNet income1,640 1,490 4,565 4,419 Net income1,570 1,640 4,764 4,565 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests16 16 52 38 Less: Net income attributable to noncontrolling interests16 16 50 52 
Preferred stock dividendsPreferred stock dividends65 57 181 162 Preferred stock dividends104 65 299 181 
Preferred stock discount accretion and redemptionsPreferred stock discount accretion and redemptionsPreferred stock discount accretion and redemptions
Net income attributable to common shareholdersNet income attributable to common shareholders$1,558 $1,416 $4,328 $4,216 Net income attributable to common shareholders$1,448 $1,558 $4,409 $4,328 
Earnings Per Common ShareEarnings Per Common ShareEarnings Per Common Share
BasicBasic$3.78 $3.31 $10.39 $9.84 Basic$3.60 $3.78 $10.95 $10.39 
DilutedDiluted$3.78 $3.30 $10.39 $9.83 Diluted$3.60 $3.78 $10.94 $10.39 
Average Common Shares OutstandingAverage Common Shares OutstandingAverage Common Shares Outstanding
BasicBasic410 426 414 426 Basic400 410 401 414 
DilutedDiluted410 426 415 427 Diluted400 410 401 415 
See accompanying Notes To Consolidated Financial Statements.
44
42    The 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
September 30
Nine months ended
September 30
Unaudited
In millions
Three months ended
September 30
Nine months ended September 30
20222021202220212023202220232022
Net incomeNet income$1,640 $1,490 $4,565 $4,419 Net income$1,570 $1,640 $4,764 $4,565 
Other comprehensive income (loss), before tax and net of reclassifications into Net incomeOther comprehensive income (loss), before tax and net of reclassifications into Net incomeOther comprehensive income (loss), before tax and net of reclassifications into Net income
Net change in debt securitiesNet change in debt securities(1,738)(323)(10,768)(1,471)Net change in debt securities(932)(1,738)(304)(10,768)
Net change in cash flow hedge derivativesNet change in cash flow hedge derivatives(1,025)(174)(3,484)(727)Net change in cash flow hedge derivatives(35)(1,025)176 (3,484)
Pension and other postretirement benefit plan adjustmentsPension and other postretirement benefit plan adjustments64 (11)Pension and other postretirement benefit plan adjustments(3)64 
Net change in OtherNet change in Other(3)Net change in Other(3)
Other comprehensive income (loss), before tax and net of reclassifications into Net income(2,757)(494)(14,191)(2,207)
Income tax benefit (expense) related to items of other comprehensive income629 110 3,296 516 
Other comprehensive income (loss), after tax and net of reclassifications into Net income(2,128)(384)(10,895)(1,691)
Other comprehensive loss, before tax and net of reclassifications into Net incomeOther comprehensive loss, before tax and net of reclassifications into Net income(965)(2,757)(123)(14,191)
Income tax benefit related to items of other comprehensive incomeIncome tax benefit related to items of other comprehensive income229 629 34 3,296 
Other comprehensive income loss, after tax and net of reclassifications into Net incomeOther comprehensive income loss, after tax and net of reclassifications into Net income(736)(2,128)(89)(10,895)
Comprehensive income (loss)Comprehensive income (loss)(488)1,106 (6,330)2,728 Comprehensive income (loss)834 (488)4,675 (6,330)
Less: Comprehensive income attributable to noncontrolling interestsLess: Comprehensive income attributable to noncontrolling interests1652 38 Less: Comprehensive income attributable to noncontrolling interests1650 52 
Comprehensive income (loss) attributable to PNCComprehensive income (loss) attributable to PNC$(504)$1,090 $(6,382)$2,690 Comprehensive income (loss) attributable to PNC$818 $(504)$4,625 $(6,382)
See accompanying Notes To Consolidated Financial Statements.
The PNC Financial Services Group, Inc. – Form 10-Q 4543  


CONSOLIDATED BALANCE SHEET
THE PNC FINANCIAL SERVICES GROUP, INC.
UnauditedUnauditedSeptember 30
2022
December 31
2021
UnauditedSeptember 30
2023
December 31
2022
In millions, except par valueIn millions, except par valueIn millions, except par value
AssetsAssetsAssets
Cash and due from banksCash and due from banks$6,548 $8,004 Cash and due from banks$5,300 $7,043 
Interest-earning deposits with banksInterest-earning deposits with banks40,278 74,250 Interest-earning deposits with banks41,484 27,320 
Loans held for sale (a)Loans held for sale (a)1,126 2,231 Loans held for sale (a)923 1,010 
Investment securities – available for saleInvestment securities – available for sale45,798 131,536 Investment securities – available for sale40,590 44,159 
Investment securities – held to maturityInvestment securities – held to maturity90,653 1,426 Investment securities – held to maturity91,797 95,175 
Loans (a)Loans (a)315,400 288,372 Loans (a)318,416 326,025 
Allowance for loan and lease lossesAllowance for loan and lease losses(4,581)(4,868)Allowance for loan and lease losses(4,767)(4,741)
Net loansNet loans310,819 283,504 Net loans313,649 321,284 
Equity investmentsEquity investments8,130 8,180 Equity investments8,046 8,437 
Mortgage servicing rightsMortgage servicing rights3,206 1,818 Mortgage servicing rights4,006 3,423 
GoodwillGoodwill10,987 10,916 Goodwill10,987 10,987 
Other (a)Other (a)41,932 35,326 Other (a)40,552 38,425 
Total assetsTotal assets$559,477 $557,191 Total assets$557,334 $557,263 
LiabilitiesLiabilitiesLiabilities
DepositsDepositsDeposits
Noninterest-bearingNoninterest-bearing$138,423 $155,175 Noninterest-bearing$105,672 $124,486 
Interest-bearingInterest-bearing299,771 302,103 Interest-bearing317,937 311,796 
Total depositsTotal deposits438,194 457,278 Total deposits423,609 436,282 
Borrowed fundsBorrowed fundsBorrowed funds
Federal Home Loan Bank borrowingsFederal Home Loan Bank borrowings30,075 Federal Home Loan Bank borrowings36,000 32,075 
Bank notes and senior debt13,357 20,661 
Senior debtSenior debt22,407 16,657 
Subordinated debtSubordinated debt7,286 6,996 Subordinated debt4,728 6,307 
Other (b)Other (b)3,915 3,127 Other (b)3,032 3,674 
Total borrowed fundsTotal borrowed funds54,633 30,784 Total borrowed funds66,167 58,713 
Allowance for unfunded lending related commitmentsAllowance for unfunded lending related commitments682 662 Allowance for unfunded lending related commitments640 694 
Accrued expenses and other liabilities(b)Accrued expenses and other liabilities(b)19,245 12,741 Accrued expenses and other liabilities(b)17,437 15,762 
Total liabilitiesTotal liabilities512,754 501,465 Total liabilities507,853 511,451 
EquityEquityEquity
Preferred stock (c)Preferred stock (c)Preferred stock (c)
Common stock ($5 par value, Authorized 800 shares, issued 543 shares)2,714 2,713 
Common stock ($5 par value, Authorized 800,000,000 shares, issued 543,012,047 and 542,874,829 shares)Common stock ($5 par value, Authorized 800,000,000 shares, issued 543,012,047 and 542,874,829 shares)2,715 2,714 
Capital surplusCapital surplus19,810 17,457 Capital surplus19,971 18,376 
Retained earningsRetained earnings52,777 50,228 Retained earnings56,170 53,572 
Accumulated other comprehensive income (loss)Accumulated other comprehensive income (loss)(10,486)409 Accumulated other comprehensive income (loss)(10,261)(10,172)
Common stock held in treasury at cost: 139 and 123 shares(18,127)(15,112)
Common stock held in treasury at cost: 144,671,252 and 142,298,689 sharesCommon stock held in treasury at cost: 144,671,252 and 142,298,689 shares(19,141)(18,716)
Total shareholders’ equityTotal shareholders’ equity46,688 55,695 Total shareholders’ equity49,454 45,774 
Noncontrolling interestsNoncontrolling interests35 31 Noncontrolling interests27 38 
Total equityTotal equity46,723 55,726 Total equity49,481 45,812 
Total liabilities and equityTotal liabilities and equity$559,477 $557,191 Total liabilities and equity$557,334 $557,263 
(a)Our consolidated assets included the following for which we have elected the fair value option: Loans held for sale of $1.1$0.9 billion, Loans held for investment of $1.3$1.2 billion and Other assets of $0.1 billion at September 30, 2022.2023. Comparable amounts at December 31, 20212022 were $1.9$0.9 billion, $1.5$1.3 billion and $0.1 billion, respectively.
(b)Our consolidated liabilities included the following for which we have elected the fair value option: Other borrowed funds of less than $0.1 billion and Other liabilities of $0.2$0.1 billion at September 30, 2022.2023. Comparable amounts at December 31, 20212022 were less than $0.1 billion and zero.$0.2 billion, respectively.
(c)Par value less than $0.5 million at each date.

See accompanying Notes To Consolidated Financial Statements.
46
44    The 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
Nine months ended September 30Unaudited
In millions
Nine months ended September 30
2022202120232022
Operating ActivitiesOperating ActivitiesOperating Activities
Net incomeNet income$4,565 $4,419 Net income$4,764 $4,565 
Adjustments to reconcile net income to net cash provided (used) by operating activitiesAdjustments to reconcile net income to net cash provided (used) by operating activitiesAdjustments to reconcile net income to net cash provided (used) by operating activities
Provision for (recapture of) credit losses69 (452)
Depreciation and amortization587 1,215 
Provision for credit lossesProvision for credit losses510 69 
Depreciation, amortization and accretionDepreciation, amortization and accretion174 587 
Deferred income taxes (benefit)Deferred income taxes (benefit)401 (74)Deferred income taxes (benefit)(119)401 
Net losses (gains) on sales of securities(50)
Net losses on sales of securitiesNet losses on sales of securities
Changes in fair value of mortgage servicing rightsChanges in fair value of mortgage servicing rights(635)(8)Changes in fair value of mortgage servicing rights(63)(635)
Net change inNet change inNet change in
Trading securities and other short-term investmentsTrading securities and other short-term investments(573)388 Trading securities and other short-term investments(506)(573)
Loans held for sale and related securitization activityLoans held for sale and related securitization activity962 (390)Loans held for sale and related securitization activity40 962 
Other assetsOther assets(3,512)(1,504)Other assets(1,899)(3,512)
Accrued expenses and other liabilitiesAccrued expenses and other liabilities2,586 341 Accrued expenses and other liabilities1,304 2,586 
OtherOther583 (165)Other1,040 583 
Net cash provided (used) by operating activitiesNet cash provided (used) by operating activities$5,037 $3,720 Net cash provided (used) by operating activities$5,247 $5,037 
Investing ActivitiesInvesting ActivitiesInvesting Activities
SalesSalesSales
Securities available for saleSecurities available for sale$2,765 $15,674 Securities available for sale$(93)$2,765 
LoansLoans5,353 1,409 Loans812 5,353 
Repayments/maturitiesRepayments/maturitiesRepayments/maturities
Securities available for saleSecurities available for sale11,473 23,829 Securities available for sale5,524 11,473 
Securities held to maturitySecurities held to maturity3,206 67 Securities held to maturity5,592 3,206 
PurchasesPurchasesPurchases
Securities available for saleSecurities available for sale(23,591)(57,911)Securities available for sale(2,791)(23,591)
Securities held to maturitySecurities held to maturity(7,961)(83)Securities held to maturity(1,664)(7,961)
LoansLoans(1,681)(1,564)Loans(588)(1,681)
Net change inNet change inNet change in
Federal funds sold and resale agreementsFederal funds sold and resale agreements(905)(119)Federal funds sold and resale agreements417 (905)
Interest-earning deposits with banksInterest-earning deposits with banks33,972 23,008 Interest-earning deposits with banks(14,199)33,972 
LoansLoans(31,029)14,001 Loans6,230 (31,029)
Net cash paid for acquisition(10,511)
OtherOther(2,275)(1,538)Other(954)(2,275)
Net cash provided (used) by investing activitiesNet cash provided (used) by investing activities$(10,673)$6,262 Net cash provided (used) by investing activities$(1,714)$(10,673)
The PNC Financial Services Group, Inc. – Form 10-Q 4745  


CONSOLIDATED STATEMENT OF CASH FLOWS
THE PNC FINANCIAL SERVICES GROUP, INC.
(Continued from previous page)
Unaudited
In millions
Nine months ended September 30
20222021
Financing Activities
Net change in
Noninterest-bearing deposits$(16,748)$7,832 
Interest-bearing deposits(2,332)(9,826)
Federal funds purchased and repurchase agreements(1)91 
Other borrowed funds862 164 
Sales/issuances
Federal Home Loan Bank borrowings30,075 
Bank notes and senior debt1,692 
Subordinated debt847 
Other borrowed funds573 551 
Preferred stock2,225 1,485 
Common and treasury stock58 58 
Repayments/maturities
Federal Home Loan Bank borrowings(3,680)
Bank notes and senior debt(5,750)(3,850)
Other borrowed funds(591)(547)
Acquisition of treasury stock(3,078)(441)
Preferred stock cash dividends paid(181)(162)
Common stock cash dividends paid(1,779)(1,523)
Net cash provided (used) by financing activities$4,180 $(8,156)
Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash$(1,456)$1,826 
Cash and due from banks and restricted cash at beginning of period8,004 7,017 
Cash and due from banks and restricted cash at end of period$6,548 $8,843 
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)$5,974 $8,201 
Restricted cash574642
Cash and due from banks and restricted cash at end of period$6,548 $8,843 
Supplemental Disclosures
Interest paid$895 $395 
Income taxes paid$80 $402 
Income taxes refunded$15 $68 
Leased assets obtained in exchange for new operating lease liabilities$149 $289 
Non-cash Investing and Financing Items
Transfer from securities available for sale to securities held to maturity (a)$88,605 
Transfer from loans to loans held for sale, net$341 $677 
Transfer from loans to foreclosed assets$38 $22 
(a)During the first nine months of 2022, we transferred securities from available for sale to held to maturity in non-cash transactions. The amount of $88.6 billion includes the aggregate fair value of the securities of $82.7 billion and aggregate net pretax unrealized losses of $5.9 billion included in AOCI at transfer. See Note 3 Investment Securities for more detailed information on the transfers.

(Continued from previous page)
Unaudited
In millions
Nine months ended September 30
20232022
Financing Activities
Net change in
Noninterest-bearing deposits$(18,823)$(16,748)
Interest-bearing deposits6,141 (2,332)
Federal funds purchased and repurchase agreements231 (1)
Other borrowed funds(272)862 
Sales/issuances
Federal Home Loan Bank borrowings4,000 30,075 
Senior debt6,977  
Subordinated debt 847 
Other borrowed funds619 573 
Preferred stock1,484 2,225 
Common and treasury stock62 58 
Repayments/maturities
Federal Home Loan Bank borrowings(75) 
Senior debt(750)(5,750)
Subordinated debt(1,500)
Other borrowed funds(635)(591)
Acquisition of treasury stock(599)(3,078)
Preferred stock cash dividends paid(299)(181)
Common stock cash dividends paid(1,837)(1,779)
Net cash provided (used) by financing activities$(5,276)$4,180 
Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash$(1,743)$(1,456)
Cash and due from banks and restricted cash at beginning of period7,043 8,004 
Cash and due from banks and restricted cash at end of period$5,300 $6,548 
Cash And Due From Banks And Restricted Cash
Cash and due from banks at end of period (unrestricted cash)$4,782 $5,974 
Restricted cash518574
Cash and due from banks and restricted cash at end of period$5,300 $6,548 
Supplemental Disclosures
Interest paid$6,273 $895 
Income taxes paid$945 $80 
Income taxes refunded$830 $15 
Leased assets obtained in exchange for new operating lease liabilities$148 $149 
Non-cash Investing And Financing Items
Transfer from securities available for sale to securities held to maturity$88,605 
Transfer from loans to loans held for sale, net$349 $341 
Transfer from loans to foreclosed assets$44 $38 
Adjustment to assets and liabilities related to partially financed investment exits$834 
See accompanying Notes To Consolidated Financial Statements.








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



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE PNC FINANCIAL SERVICES GROUP, INC.
Unaudited

See page 99107 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 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 of operations and balance sheets for all periods presented in this Report reflect the benefit of BBVA's acquired businesses for the period since the acquisition closed on June 1, 2021. See Note 2 Acquisition Activity for additional information related to 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 state 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 20212022 Form 10-K. Reference is made to Note 1 Accounting Policies in our 2021 Form 10-K for a detailed description of significant accounting policies. These interim consolidated financial statements serve to update our 20212022 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 certain of our accounting policies as disclosed in our 20212022 Form 10-K.
10-K due to the adoption of ASU 2022-02
Financial Instruments
Noninterest Income Presentation

-
Effective forCredit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02) in the first quarter of 2023 and the adoption of ASU 2023-02 Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (ASU 2023-02) in the third quarter of 2023. The updated policies impacted by this adoption are included in this Note 1. Reference is made to Note 1 Accounting Policies in our 2022 PNC updated the presentation of its noninterest income categorization to be based on product and service type, and accordingly, has changed the basis of presentation of its noninterest income revenue streams to: (i) Asset management and brokerage, (ii) Capital markets related, (iii) Card and cash management, (iv) Lending and deposit services, (v) Residential and commercial mortgage and (vi) Other noninterest income. AForm 10-K for a detailed description of each revenue stream follows:

all other significant accounting policies.
Asset management and brokerage includes revenue from our asset management and retail brokerage businesses. Asset management services include investment management, custody, retirement planning, family planning, trust management and retirement administration. Brokerage services offer retail customers a wide range of investment options, including mutual funds, annuities, stock, bonds and managed accounts.

Capital markets related includes revenue from services and activities primarily related to merger and acquisition advisory, equity capital markets advisory, asset-backed financing, loan syndication, securities underwriting, credit valuation adjustments related to the derivatives portfolio and customer-related trading.

Card and cash management includes revenue primarily from debit and credit card activities, inclusive of credit card points and rewards, treasury management services and ATM fees. Debit and credit card activities include interchange revenue and merchant
The PNC Financial Services Group, Inc. – Form 10-Q 49 


service fees. Treasury management services include cash and investment management, receivables and disbursement management, funds transfer, international payment and access to online/mobile information management and reporting.

Lending and deposit services includes revenue primarily related to service charges on deposits, loan commitment and usage fees, the issuance of standby letters of credit, operating lease income and long-term care and insurance products.

Residential and commercial mortgage includes the gain and loss on sale of mortgages, revenue related to our mortgage servicing responsibilities, mortgage servicing rights valuation adjustments and net gains on originations and sales of loans held for sale.

Other noninterest income is primarily composed of private equity revenue, net securities gains and losses, activity related to our equity investment in Visa and gains and losses on asset sales.

See Note 16 Fee-based Revenue from Contracts with Customers for additional details related to these revenue streams within the scope of ASC 606 - Revenue from Contracts with Customers.

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, including for the BBVA acquisition.measurements. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

Loans
Loans are classified as held for investment when management has both the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. Management’s intent and view of the foreseeable future may change based on changes in business strategies, the economic environment, market conditions and the availability of government programs.

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. The CARES Act credit reporting rules, which required exceptions to this policy, expired in the third quarter of 2023. As such, delinquency status at September 30, 2023 is being reported for all loans based on the contractual terms of each loan. Prior period amounts continue to be presented in accordance with the credit reporting rules under the CARES Act, which required certain loans modified due to pandemic-related hardships to not be reported as past due based on the contractual terms of the loan, even when borrowers may not have made payments on their loans during the modification period.

The PNC Financial Services Group, Inc. – Form 10-Q 47 


Loans held for investment, excluding PCD loans, are recorded at amortized cost basis unless we elect to measure these under the fair value option. Amortized cost basis represents principal amounts outstanding, net of unearned income, unamortized deferred fees and costs on originated loans, premiums or discounts on purchased loans and charge-offs. Amortized cost basis does not include accrued interest, as we include accrued interest in Other assets on our Consolidated Balance Sheet. Interest on performing loans is accrued based on the principal amount outstanding and recorded in Interest income as earned using the constant effective yield method over the contractual life. Loan origination fees, direct loan origination costs, and loan premiums and discounts are deferred and accreted or amortized into Net interest income using the constant effective yield method, over the contractual life of the loan. The processing fee received for loans originated through PPP lending under the CARES Act is deferred and accreted into Net interest income using the effective yield method, over the contractual life of the loan. Loans under the fair value option are reported at their fair value, with any changes to fair value reported as Noninterest income on the Consolidated Income Statement, and are excluded from the measurement of ALLL.

In addition to originating loans, we also acquire loans through the secondary loan market, portfolio purchases or acquisitions of other financial services companies. Certain acquired loans that have experienced a more-than-insignificant deterioration of credit quality since origination (i.e., PCD) are recognized at an amortized cost basis equal to their purchase price plus an ALLL measured at the acquisition date. 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 and other qualitative factors that indicate deterioration in credit quality since origination. Subsequent decreases in expected cash flows that are attributable, at least in part, to credit quality are recognized through a charge to the provision for credit losses resulting in an increase in the ALLL. Subsequent increases in expected cash flows are recognized as a provision recapture of previously recorded ALLL.

We consider a loan to be collateral dependent when we determine that substantially all of the expected cash flows will be generated
from the operation or sale of the collateral underlying the loan, or when the borrower is experiencing financial difficulty and we have elected to measure the loan at the estimated fair value of collateral (less costs to sell if sale or foreclosure of the property is expected).
Additionally, we consider a loan to be collateral dependent when foreclosure or liquidation of the underlying collateral is probable. Collateral dependent designation is removed when a loan no longer meets these conditions.

On January 1, 2023, we adopted ASU 2022-02, which eliminates the accounting guidance for TDRs. See Note 1 Accounting Policies in our 2022 Form 10-K for a description of our accounting policies for TDRs that were in effect prior to adoption.

Loan modifications to borrowers experiencing financial difficulty, or FDMs, result from our loss mitigation activities and include principal forgiveness, interest rate reductions, term extensions, payment delays, repayment plans or combinations thereof. FDMs continue to be subject to our existing nonaccrual policies. Expected losses or recoveries on FDMs have been factored into the ALLL estimates for each loan class under the methodologies described in this Note. Refer to Note 3 Loans and Related Allowance for Credit Losses for more information on FDMs.

See the following for additional information related to loans, including further discussion regarding our policies, the methodologies and significant inputs used to determine the ALLL and additional details on the composition of our loan portfolio:
Nonperforming Loans and Leases section of this Note 1,
Allowance for Credit Losses section of this Note 1,
Note 3 Loans and Related Allowance for Credit Losses in this Report, and
Note 4 Loans and Related Allowance for Credit Losses in our 2022 Form 10-K.


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



Nonperforming Loans and Leases
The matrix that follows summarizes our policies for classifying certain loans as nonperforming loans and/or discontinuing the accrual of loan interest income.

Commercial
Loans classified as nonperforming and accounted for as nonaccrual
•  Loans accounted for at amortized cost where:
The loan is 90 days or more past due.
The loan is rated substandard or worse due to the determination that full collection of principal and interest is not probable as demonstrated by the following conditions:
The collection of principal or interest is 90 days or more past due,
Reasonable doubt exists as to the certainty of the borrower’s future debt service ability, according to the terms of the credit arrangement, regardless of whether 90 days have passed or not,
The borrower has filed, or will likely file for bankruptcy, and it is not probable the borrower will be able to repay contractual payments due under the loan,
The bank advances additional funds to cover principal or interest,
We are in the process of liquidating a commercial borrower, or
We are pursuing remedies under a guarantee.
Loans excluded from nonperforming classification but accounted for as nonaccrual
•  Loans accounted for under the fair value option and full collection of principal and interest is not probable.
•  Loans accounted for at the lower of cost or market less costs to sell (held for sale) and full collection of
   principal and interest is not probable.
Loans excluded from nonperforming classification and nonaccrual accounting
•  Loans that are well secured and in the process of collection.
 Certain government insured or guaranteed loans where substantially all principal and interest is insured.
 Commercial purchasing card assets that do not accrue interest.
Consumer
Loans classified as nonperforming and accounted for as nonaccrual
•  Loans accounted for at amortized cost where full collection of contractual principal and interest is not
   deemed probable as demonstrated in the policies below:
–  The loan is 90 days past due for home equity and installment loans, and 180 days past due for well-
   secured residential real estate loans,
–  The loan has been modified due to a borrower experiencing financial difficulty and is not government
    insured or guaranteed,
– The loan has been modified to defer prior payments in forbearance to the end of the loan term,
–  Notification of bankruptcy has been received,
–  The bank holds a subordinate lien position in the loan and the first lien mortgage loan is seriously
   stressed (i.e., 90 days or more past due),
–  Other loans within the same borrower relationship have been placed on nonaccrual or charge-offs have
   been taken on them,
–  The bank has ordered the repossession of non-real estate collateral securing the loan, or
–  The bank has charged-off the loan to the value of the collateral.
Loans excluded from nonperforming classification but accounted for as nonaccrual
•  Loans accounted for under the fair value option and full collection of principal and interest is not probable.
•  Loans accounted for at the lower of cost or market less costs to sell (held for sale) and full collection of
   principal and interest is not probable.
Loans excluded from nonperforming classification and nonaccrual accounting
 Certain government insured or guaranteed loans where substantially all principal and interest is insured.
•  Residential real estate loans that are well secured and in the process of collection.
•  Consumer loans and lines of credit, not secured by residential real estate or automobiles, as permitted by
   regulatory guidance.

Commercial
We generally charge off commercial (commercial and industrial, commercial real estate and equipment lease financing) nonperforming loans when we determine that a specific loan, or portion thereof, is uncollectible. This determination is based on the specific facts and circumstances of the individual loans. In making this determination, we consider the viability of the business or project as a going concern, the past due status when the asset is not well secured, the expected cash flows to repay the loan, the value of the collateral and the ability and willingness of any guarantors to perform. For commercial loans and leases less than a defined dollar threshold, balances are generally charged off in full after 180 days for loans and 120 days for leases.

Consumer
We generally charge off secured consumer (home equity, residential real estate and automobile) nonperforming loans to the fair
value of collateral less costs to sell if the fair value is lower than the amortized cost basis of the loan outstanding and the delinquency of the loan, combined with other risk factors such as bankruptcy or lien position, indicates that the loan (or a portion thereof) is uncollectible as per our historical experience. These nonperforming loans would also be charged off when the collateral has been repossessed. We charge off secured consumer loans no later than 180 days past due. Most consumer loans and lines of credit, not secured by automobiles or residential real estate, are charged off once they have reached 120-180 days past due.

For secured collateral dependent loans, collateral values are updated at least annually and subsequent declines in collateral values are charged off, resulting in incremental provision for credit loss. Subsequent increases in collateral values may be reflected as an
The PNC Financial Services Group, Inc. – Form 10-Q 49 


adjustment to the ALLL to reflect the expectation of recoveries in an amount greater than previously expected, limited to amounts previously charged-off.

Accounting for Nonperforming Assets and Leases and Other Nonaccrual Loans
For nonaccrual loans, interest income accrual and deferred fee/cost recognition is discontinued. Additionally, depending on whether the accrued interest has been incorporated into the ACL estimates, as discussed in the Accrued Interest section of this Note 1, the accrued and uncollected interest is either reversed through Net interest income (if a CECL reserve is not maintained for accrued interest) or charged off against the allowance (if a CECL reserve is maintained for accrued interest), except for credit cards, where we reverse any accrued interest through Net interest income at the time of a charge-off, as per industry standard practice. Nonaccrual loans that are also collateral dependent may be charged off to reduce the basis to the fair value of collateral less costs to sell.
If payment is received on a nonaccrual loan, generally the payment is first applied to the remaining principal balance. Payments are then applied to recover any charged-off amounts related to the loan. Finally, if both the principal balance and any charge-offs have been recovered, then the payment will be recorded as fee and interest income. For certain consumer loans, the receipt of interest payments is recognized as interest income on a cash basis. Cash basis income recognition is applied if a loan’s amortized cost basis is deemed fully collectible and the loan has performed for at least six months. For loans modified due to a borrower experiencing financial difficulty, payments are applied based upon their contractual terms unless the related loan is deemed nonperforming. Loans modified due to a borrower experiencing financial difficulty are generally included in nonperforming and nonaccrual loans if they are not government insured or guaranteed. However, after a reasonable period of time, generally six months, in which the loan performs under modified terms and meets other performance indicators, it is returned to accruing status. This return to accruing status demonstrates that the bank expects to collect all of the loan’s remaining contractual principal and interest. Loan modifications granted to borrowers experiencing financial difficulty resulting from (i) borrowers that have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligations to us, and (ii) borrowers that are not currently obligated to make both principal and interest payments under the modified terms are not returned to accrual status.
Other nonaccrual loans are generally not returned to accruing status until the borrower has performed in accordance with the loan’s contractual terms and other performance indicators for at least six months, the period of time which was determined to demonstrate the expected collectability of the loan’s remaining contractual principal and interest. Nonaccrual loans with partially charged-off principal may return to accruing status if the loan performs after a reasonable period of time, generally six months, and the loan meets other performance indicators. Nonaccrual loans with fully charged-off principal are prohibited from returning to accruing status. When a nonperforming loan is returned to accruing status, it is then considered a performing loan.
Foreclosed assets consist of any asset seized or property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure. OREO comprises principally residential and commercial real estate properties obtained in partial or total satisfaction of loan obligations. After obtaining a foreclosure judgment, or in some jurisdictions the initiation of proceedings under a power of sale in the loan instruments, the property will be sold. When we are awarded title or completion of deed-in-lieu of foreclosure, we transfer the loan to foreclosed assets included in Other assets on our Consolidated Balance Sheet. Property obtained in satisfaction of a loan is initially recorded at estimated fair value less cost to sell. Based upon the estimated fair value less cost to sell, the amortized cost basis of the loan is adjusted, and a charge-off/recovery is recognized to the ALLL. We estimate fair values primarily based on appraisals, or sales agreements with third parties. Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or estimated fair value less cost to sell. Valuation adjustments on these assets and gains or losses realized from disposition of such property are reflected in Other noninterest expense.
For certain mortgage loans that have a government guarantee, we establish a separate other receivable upon foreclosure. The receivable is measured based on the loan balance (inclusive of principal and interest) that is expected to be recovered from the guarantor.
See Note 3 Loans and Related Allowance for Credit Losses for additional information on FDMs, nonperforming assets and credit quality indicators related to our loan portfolio.
Allowance for Credit Losses

Our ACL is based on historical loss experience, current borrower risk characteristics, 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, other financial assets and unfunded lending related commitments, for the remaining estimated contractual term of the assets or exposures as of the balance sheet date. The remaining contractual term of assets in scope of CECL is estimated considering contractual maturity dates, prepayment expectations, utilization or draw expectations and any contractually embedded extension options that do not allow us to unilaterally cancel the extension options. For products without a fixed contractual maturity date (e.g., credit cards), we rely on historical payment behavior to determine the length of the paydown or default time period.


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



We estimate expected losses on a pooled basis using a combination of (i) the expected losses over a reasonable and supportable forecast period, (ii) a period of reversion to long-run average expected losses, where applicable and (iii) the long-run average expected losses for the remaining estimated contractual term. For all assets and unfunded lending related commitments in the scope of CECL, the ACL also includes individually assessed reserves and qualitative reserves, as applicable.

We use forward-looking information in estimating expected credit losses for our reasonable and supportable forecast period. For this purpose, we use forecasted scenarios produced by PNC’s Economics Team, which are designed to reflect business cycles and their related estimated probabilities. The forecast length that we have currently determined to be reasonable and supportable is three years. As noted in the methodology discussions that follow, forward-looking information is incorporated into the expected credit loss estimates. Such forward-looking information includes forecasted relevant macroeconomic variables, which are estimated using quantitative macroeconomic models, analysis from PNC economists and management judgment.

The reversion period is used to bridge our three-year reasonable and supportable forecast period and the long-run average expected credit losses. We consider a number of factors in determining the duration of the reversion period, such as contractual maturity of the asset, observed historical patterns and the estimated credit loss rates at the end of the forecast period relative to the beginning of the long-run average period. The reversion period is typically one to three years, if not immediate.

The long-run average expected credit losses are derived from long-run historical credit loss information adjusted for the credit quality of the current portfolio and, therefore, do not consider current and forecasted economic conditions.

See the following sections related to loans and leases and unfunded lending related commitments for details about specific reserve methodologies.

The PNC Financial Services Group, Inc. – Form 10-Q 51 


Allowance for Loan and Lease Losses
Our pooled expected loss methodology is based upon the quantification of risk parameters, such as PD, LGD and EAD for a loan, loan segment or lease. We also consider the impact of prepayments and amortization on contractual maturity in our expected loss estimates. We use historical credit loss information, current borrower risk characteristics and forecasted economic variables for the reasonable and supportable forecast period, coupled with analytical methods, to estimate these risk parameters by loan, loan segment or lease. PD, LGD and EAD parameters are calculated for each forecasted scenario and the long-run average period, and combined to generate expected loss estimates by scenario. The following matrix provides key credit risk characteristics that we use to estimate these risk parameters.

Loan ClassProbability of DefaultLoss Given DefaultExposure at Default
Commercial
Commercial and industrial / Equipment lease financing
For wholesale obligors: internal risk ratings based on borrower characteristics and industry
For retail small balance obligors: credit score, delinquency status, and product type




Collateral type, LTV, industry, size and outstanding exposure for secured loans
Capital structure, industry and size for unsecured loans
For retail small balance obligors, product type and credit scores






Outstanding balances, commitment, contractual maturities and historical prepayment experience for loans
Current utilization and historical pre-default draw experience for lines



Commercial real estate (CRE)
Property performance metrics, property type, market and risk pool for the forecast period
For the long-run average period, internal risk ratings based on borrower characteristics

Property type, LTV, market, risk pool and costs to sell for the forecast period
For the long-run average period, internal ratings based on collateral performance
Outstanding balances, commitment, contractual maturities and historical prepayment experience for loans
Consumer
Home equity / Residential real estate
Borrower credit scores, delinquency status, origination vintage, LTV and contractual maturity
Collateral characteristics, LTV and costs to sell
Outstanding balances, contractual maturities and historical prepayment experience for loans
Current utilization and historical pre-default draw experience for lines
Automobile
Borrower credit scores, delinquency status, borrower income, LTV and contractual maturity
New vs. used, LTV and borrower credit scores
Outstanding balances, contractual maturities and historical prepayment experience
Credit card
Borrower credit scores, delinquency status, utilization, payment behavior and months on book
Borrower credit scores and credit line amount
Pay-down curves are developed using a pro-rata method and estimated using borrower behavior segments, payment ratios and borrower credit scores
Education / Other consumer
Modeled using either discrete risk parameters or analytical approaches based on net charge-offs and pay-down rates











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



The following matrix describes the key economic variables that are consumed during our forecast period by loan class, as well as other assumptions that are used for our reversion and long-run average approaches.
Loan ClassForecast Period - Key Economic VariablesReversion MethodLong-Run Average
Commercial
Commercial and industrial / Equipment lease financing
GDP and Gross Domestic Investment measures, employment related variables and personal income and consumption measures

Immediate reversion

Average parameters determined based on internal and external historical data
Modeled parameters using long-run economic conditions for retail small balance obligors

Commercial real estate (CRE)• CRE Price Index, unemployment rates, GDP, corporate bond yield and interest rates• Immediate reversion• Average parameters determined based on internal and external historical data
Consumer
Home equity / Residential real estate
Unemployment rates, HPI and interest rates
Straight-line over 3 years
Modeled parameters using long-run economic conditions
Automobile
Unemployment rates, HPI, disposable personal income and Manheim used car index

Straight-line over 1 year

Average parameters determined based on internal historical data

Credit card
Unemployment rates, personal consumption expenditure and HPI

Straight-line over 2 years

Modeled parameters using long-run economic conditions

Education / Other consumer
Modeled using either discrete risk parameters or analytical approaches based net charge-offs and pay-down rates

After the forecast period, we revert to the long-run average over the reversion period noted above, which is the period between the end of the forecast period and when losses are estimated to have completely reverted to the long-run average.

Once we have developed a combined estimate of credit losses (i.e., for the forecast period, reversion period and long-run average) under each of the forecasted scenarios, we produce a probability-weighted credit loss estimate by loan class. We then add or deduct any qualitative components and other adjustments, such as individually assessed loans, to produce the ALLL. See the Individually Assessed Component and Qualitative Component discussions that follow in this Note 1 for additional information about those adjustments.
Discounted Cash Flow
Prior to January 1, 2023, we used a discounted cash flow methodology for our home equity and residential real estate loan classes. Effective January 1, 2023, we discontinued our use of a discounted cash flow methodology, and we now use a pooled expected loss methodology based upon the quantification of risk parameters, such as PD, LGD and EAD for a loan or loan segment. See Note 1 Accounting Policies in our 2022 Form 10-K for a description of our use of a discounted cash flow methodology prior to January 1, 2023.
Individually Assessed Component
Loans and leases that do not share similar risk characteristics with a pool of loans are individually assessed as follows:
For commercial nonperforming loans greater than or equal to a defined dollar threshold, reserves are based on an analysis of the present value of the loan’s expected future cash flows or the fair value of the collateral, if appropriate under our policy for collateral dependent loans. Nonperforming commercial loans below the defined threshold are reserved for under a pooled basis.
For consumer nonperforming loans classified as collateral dependent, charge-off and ALLL related to recovery of amounts previously charged off are evaluated through an analysis of the fair value of the collateral less costs to sell.

Qualitative Component
While our reserve methodologies strive to reflect all relevant expected credit risk factors, the ACL also accounts for factors that may not be directly measured in the determination of individually assessed or pooled reserves. Such qualitative factors may include, but are not limited to:
The PNC Financial Services Group, Inc. – Form 10-Q 53 


Industry concentrations and conditions,
Changes in market conditions, including regulatory and legal requirements,
Changes in the nature and volume of our portfolio,
Recent credit quality trends,
Recent loss experience in particular portfolios, including specific and unique events,
Recent macroeconomic factors that may not be reflected in the forecast information,
Limitations of available input data, including historical loss information and recent data such as collateral values,
Model imprecision and limitations,
Changes in lending policies and procedures, including changes in loss recognition and mitigation policies and procedures, and
Timing of available information.

See Note 3 Loans and Related Allowance for Credit Losses for additional information about our loan portfolio and the related allowance.
Accrued Interest
When accrued interest is reversed or charged-off in a timely manner, the CECL standard provides a practical expedient to exclude
accrued interest from ACL measurement. We consider our nonaccrual and charge-off policies to be timely for all of our investment
securities, loans and leases, with the exception of consumer credit cards, education loans and certain unsecured consumer lines of credit. We consider the length of time before nonaccrual/charge-off and the use of appropriate other triggering events for nonaccrual and charge-offs in making this determination. Pursuant to these policy elections, we calculate reserves for accrued interest on credit cards, education loans and certain unsecured consumer lines of credit, which are then included within the ALLL. See the Debt Securities section of Note 1 Accounting Policies in our 2022 Form 10-K and the Nonperforming Loans and Leases section of this Note 1 for additional information on our nonaccrual and charge-off policies.

See Note 1 Accounting Policies in our 2022 Form 10-K for a description of the accounting policies related to the applicable reserves on accrued interest for our home equity and residential real estate loan classes prior to January 1, 2023.
Purchased Credit Deteriorated Loans or Securities
The allowance for PCD loans or securities is determined at the time of acquisition, as the estimated expected credit loss of the outstanding balance or par value,based on the methodologies described previously for loans and securities. In accordance with CECL, the allowance recognized at acquisition is added to the acquisition date purchase price to determine the asset’s amortized cost basis.
Allowance for Unfunded Lending Related Commitments
We maintain the allowance for unfunded lending related commitments on off-balance sheet credit exposures that are not unconditionally cancelable (e.g., unfunded loan commitments, letters of credit and certain financial guarantees), at a level we believe is appropriate as of the balance sheet date to absorb expected credit losses on these exposures. Other than the estimation of the probability of funding, this reserve is estimated in a manner similar to the methodology used for determining reserves for loans and leases. See the Allowance for Loan and Lease Losses section of this Note 1 for the key credit risk characteristics for unfunded lending related commitments. The allowance for unfunded lending related commitments is recorded as a liability on the Consolidated Balance Sheet. Net adjustments to this reserve are included in the provision for credit losses.

See Note 3 Loans and Related Allowance for Credit Losses for additional information about this allowance.
Income Taxes
We have elected to apply the proportional amortization method to our qualifying LIHTC and NMTC equity investments. Investment tax credits and investment impairment are recognized in tax expense for any individual LIHTC and NMTC equity investment for which we can demonstrate that the investment was made primarily for the purpose of receiving income tax credits and other income tax benefits. We use the deferral method of accounting for all other tax credit investments. Under this method, the investment tax credits are recognized as a reduction to the related asset.







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



Recently Adopted Accounting Standards

Accounting Standards UpdateDescriptionFinancial Statement Impact
Reference Rate Reform - ASU 2020-04

Issued March 2020

Reference Rate Reform Scope - ASU 2021-01

Issued January 2021

Reference Rate Reform Deferral of Sunset Date – ASU 2022-06

Issued December 2022



• 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)Receivables), were not substantial (assets within the scope of ASC 470, Debt)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.
• Guidance in these ASUs are currentlyis effective as of March 12, 2020 through December 31, 2022. We expect the FASB to extend the relief to December 31, 2024 in a future ASU.

2024.


 • ASU 2020-04 was adopted March 12, 2020. ASU 2021-01 was retrospectively adopted October 1, 2020. ASU 2022-06 was adopted upon issuance.
• Refer to Note 1 Accounting Policies in the 2021our 2022 Form 10-K for more information on elections of optional expedients that occurred in 2020, 2021 and 2021.2022. We applied these optional expedients consistently to all eligible LIBOR cessation-related contract modifications and hedging relationships since election.
• During the second quarter of 2023, we elected and applied certain optional expedients for contract modifications and hedging relationships impacted by the central clearing counterparties conversion processes for LIBOR-indexed derivative instruments. These optional expedients remove the requirement to remeasure contract modifications or dedesignate hedging relationships due to reference rate reform. The elections made apply only to derivatives instruments impacted by the central clearinghouse conversion process.
• During the second quarter of 2023, we applied certain optional expedients for investment security, debt and preferred stock instrument contract modifications impacted by LIBOR cessation. These optional expedients remove the requirement to remeasure contract modifications.
 • We did not make anymay elect additional elections for the third quarter of 2022. We expect to continue to elect various optional expedients for contract modifications and hedge relationships affected by reference rate reform through the effective date of this guidance.

Accounting Standards UpdateDescriptionFinancial Statement Impact
Troubled Debt Restructurings and Vintage Disclosures - ASU 2022-02

Issued March 2022
Eliminates the accounting guidance for TDRs and requires an entity to apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan.
Eliminates the requirement to use a discounted cash flow approach to measure the allowance for credit losses for TDRs.
Enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.
Requires disclosure of current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of CECL.

Adopted January 1, 2023 using a modified retrospective transition approach for the amendments related to the recognition and measurement of TDRs.
The impact of adoption resulted in a decrease to the beginning period ALLL of $35 million, resulting in an increase to Retained Earnings of $26 million, net of tax, as of January 1, 2023.
• The presentation of our loan modification disclosures have been updated to reflect information on loan modifications given to borrowers experiencing financial difficulty and can be found within Note 3 Loans and Related Allowance for Credit Losses. TDR disclosures are presented for comparative periods only and are not required to be updated in current periods. Additionally, our vintage disclosure has been updated to reflect gross charge-offs by year of origination.
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method– ASU 2023-02

Issued March 2023
• Permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.
• A reporting entity makes an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments.

Adopted September 30, 2023, using a modified retrospective transition approach for the amendments related to our tax credit programs that are eligible to apply proportional amortization. The cumulative effect to Retained earnings as of January 1, 2023 was immaterial.
• At adoption, we elected to apply the proportional amortization method to all qualifying investments in the NMTC program. PNC historically applied proportional amortization to LIHTC investments since applying ASU 2014-01.
 • See Note 4 for the impact of adoption.

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



NOTE 2 ACQUISITION ACTIVITY

Acquisition of BBVA USA Bancshares, Inc.
On June 1, 2021, PNC acquired BBVA including its U.S. banking subsidiary, BBVA USA, for $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 were subject to adjustment for up to one year after the closing date of the acquisition as additional information became available. Valuations subject to adjustment included, but were not limited to, loans, certain deposits, certain other assets, customer relationships and the core deposit intangibles.
On October 12, 2021, PNC converted approximately 2.6 million customers, 9,000 employees and over 600 branches across seven states, merging BBVA USA into PNC Bank.
PNC incurred an insignificant amount of merger and integration costs for the three month ended September 30, 2022 and $46 million for the nine months ended September 30, 2022, in connection with the transaction. These costs are recorded as contra-revenue and expense on the Consolidated Income Statement. The integration expenses are primarily related to retail services and realty expenses. Cumulative costs through September 30, 2022 were $851 million.
The following table includes the fair value of the identifiable tangible and intangible assets and liabilities from BBVA:
Table 34: Acquisition Consideration
June 1, 2021
In millionsFair Value
Fair value of acquisition consideration$11,480 
Assets
Cash and due from banks$969 
Interest-earning deposits with banks13,313 
Loans held for sale463 
Investment securities – available for sale18,358 
Net loans61,423 
Equity investments723 
Mortgage servicing rights35 
Core deposit intangibles and other intangible assets378 
Other3,527 
Total assets$99,189 
Liabilities
Deposits$85,562 
Borrowed funds2,449 
Accrued expenses and other liabilities1,275 
Total liabilities$89,286 
Noncontrolling interests22 
Less: Net assets$9,881 
Goodwill$1,599 

Goodwill of $1.6 billion recorded in connection with the transaction resulted from the reputation, operating model and expertise of BBVA. The amount of goodwill recorded reflected the increased market share and related synergies that resulted 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 and is not deductible for income tax purposes. See Note 6 Goodwill and Mortgage Servicing Rights in Item 8 of our 2021 Form 10-K for additional information on the allocation of goodwill to the segments.

For a description of the fair value and unpaid principal balance of loans from the BBVA acquisition, as well as the methods used to determine the fair values of significant assets and liabilities, see Note 2 Acquisition and Divestiture Activity in Item 8 of our 2021 Form 10-K.
The PNC Financial Services Group, Inc. – Form 10-Q 5155  


NOTE 32 INVESTMENT SECURITIES

The following table summarizes our available for sale and held to maturity portfolios by major security type:
Table 35:36: Investment Securities Summary (a)(b)
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
In millionsIn millionsAmortized
Cost (b)
UnrealizedFair
Value
Amortized
Cost (b)
UnrealizedFair
Value
In millionsAmortized
Cost (c)
UnrealizedFair
Value
Amortized
Cost (c)
UnrealizedFair
Value
GainsLossesGainsLossesGainsLossesGainsLosses
Securities Available for SaleSecurities Available for SaleSecurities Available for Sale
U.S. Treasury and government agenciesU.S. Treasury and government agencies$11,093 $$(884)$10,218 $46,210 $324 $(370)$46,164 U.S. Treasury and government agencies$7,494 $$(781)$6,717 $9,196 $10 $(836)$8,370 
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency31,993 (3,609)28,388 67,326 695 (389)67,632 Agency31,177  (4,278)26,899 32,114 13 (3,304)28,823 
Non-agencyNon-agency725 151 (5)871 927 231 1,158 Non-agency607 115 (9)713 697 131 (9)819 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency1,930 (176)1,755 1,740 39 (6)1,773 Agency1,738  (194)1,544 1,845 (170)1,675 
Non-agencyNon-agency1,363 (61)1,303 3,423 31 (18)3,436 Non-agency982  (59)923 1,325 (69)1,256 
Asset-backedAsset-backed106 27 (1)132 6,380 60 (31)6,409 Asset-backed1,084 18 (7)1,095 103 27 (1)129 
OtherOther3,379 43 (291)3,131 4,792 186 (14)4,964 Other2,908 42 (251)2,699 3,288 44 (245)3,087 
Total securities available for saleTotal securities available for sale$50,589 $236 $(5,027)$45,798 $130,798 $1,566 $(828)$131,536 Total securities available for sale$45,990 $179 $(5,579)$40,590 $48,568 $225 $(4,634)$44,159 
Securities Held to MaturitySecurities Held to MaturitySecurities Held to Maturity
U.S. Treasury and government agenciesU.S. Treasury and government agencies$36,120 $$(1,717)$34,404 $814 $76 $890 U.S. Treasury and government agencies$36,385  $(1,946)$34,439 $36,571 $$(1,617)$34,960 
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency42,152  (3,391)38,761 Agency43,390  (5,056)38,334 45,271 74 (3,095)42,250 
Non-agencyNon-agency281 (23)258 Non-agency263 (35)228 276 (21)255 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency663 (27)636 Agency910  (53)857 848 (26)826 
Non-agencyNon-agency1,746 (25)1,723 Non-agency1,456 $(28)1,429 1,667 (40)1,627 
Asset-backedAsset-backed6,565  (161)6,404 Asset-backed6,214 (97)6,120 7,188 (140)7,054 
OtherOther3,126  (124)3,002 612 27 $(7)632 Other3,179 (143)3,040 3,354 25 (72)3,307 
Total securities held to maturity (c) (d)$90,653 $$(5,468)$85,188 $1,426 $103 $(7)$1,522 
Total securities held to maturity (d)Total securities held to maturity (d)$91,797 $$(7,358)$84,447 $95,175 $115 $(5,011)$90,279 
(a) At September 30, 2022,2023, the accrued interest associated with our held to maturity and available for sale portfolios totaled $211$255 million and $140$134 million, respectively. The comparable amounts at December 31, 20212022 were $5$282 million and $322$144 million, respectively. These amounts are included in Other assets on the Consolidated Balance Sheet.
(b) Amortized cost is presented net of allowance of $133 million for securities available for sale and $7 million for securities held to maturity at September 30, 2022. The comparable amounts at December 31, 2021 were $130 million and $3 million, respectively.
(c) Credit ratings represent a primary credit quality indicator used to monitor and manage credit risk. 99%Of our total securities portfolio, 97% were rated AAA/AA at both September 30, 2023 and 86%December 31, 2022.
(c) Amortized cost is presented net of ourallowance of $92 million for securities available for sale, primarily related to non-agency commercial mortgage-backed securities, and $6 million for securities held to maturity were rated AAA/AA at September 30, 2022 and2023. The comparable amounts at December 31, 2021,2022 were $142 million and $7 million, respectively.
(d) Held to maturity securities transferred from available for sale are included in held to maturity at fair value at the time of the transfer. The amortized cost of held to maturity securities included net unrealized losses of $5.4$4.4 billion at September 30, 2022,2023 related to securities transferred, which are offset in AOCI, net of tax.

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 Total shareholders’ equity as AOCI, unless credit related.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, lessnet of any allowance. Investment securities at September 30, 20222023 included $2.0less than $0.1 billion of net unsettled purchases whichthat represent non-cash investing activity, and accordingly, are not reflected on the Consolidated Statement of Cash Flows. The comparable amount for September 30, 20212022 was $2.4 billion.

In the third quarter of 2022, we transferred an additional $4.9$2.0 billion of securities, at fair value, from available for sale to held to maturity. The securities transferred included $3.3 billion of U.S. Treasury and government agency securities and $1.6 billion of agency residential mortgage-backed securities. During the first nine months of 2022, we transferred securities with a fair value of $82.7 billion from available for sale to held to maturity. The securities transferred included $34.0 billion of U.S. Treasury and government agency securities, $39.0 billion of agency residential mortgage-backed securities, $6.3 billion of asset-backed securities and $3.4 billion of other securities. The securities were reclassified at fair value at the time of the transfer and the transfers represented non-cash transactions. AOCI at September 30, 2022 included pretax unrealized losses of $5.4 billion related to the transfers. These unrealized losses will be amortized, consistent with the amortization of the discount on these securities, over the remaining life as an adjustment of yield, resulting in no impact to net interest income or net income.unsettled purchases.

We maintain the allowance for investment securities at levels that we believe to be appropriate as of the balance sheet date to absorb expected credit losses on our portfolio. At September 30, 2022,2023, the allowance for investment securities was $140$98 million and primarily related to non-agency commercial mortgage-backed securities in the available for sale portfolio. The comparable amount at
52   The PNC Financial Services Group, Inc. – Form 10-Q


December 31, 20212022 was $133$149 million. See Note 1 Accounting Policies included in Item 8 of our 20212022 Form 10-K for a discussion of the methodologies used to determine the allowance for investment securities.

At September 30, 2022,2023, AOCI included pretax losses of $132$297 million from derivatives that hedged the purchase of investment securities classified as held to maturity. The losses will be accreted to interest income as an adjustment of yield on the securities.

Table 3637 presents the gross unrealized losses and fair value of securities available for sale that do not have an associated allowance for investment securities at September 30, 20222023 and December 31, 2021.2022. 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
56   The PNC Financial Services Group, Inc. – Form 10-Q


loss exists. As part of that assessment, as of September 30, 2022,2023, 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.
 
Table 36:37: 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
TotalUnrealized loss position
less than 12 months
Unrealized loss position
12 months or more
Total
In millionsIn millionsUnrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
In millionsUnrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
September 30, 2022
September 30, 2023September 30, 2023
U.S. Treasury and government agenciesU.S. Treasury and government agencies$(817)$9,462 $(67)$404 $(884)$9,866 U.S. Treasury and government agencies$(3)$374 $(778)$6,013 $(781)$6,387 
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency(2,874)24,373 (735)3,602 (3,609)27,975 Agency(107)3,294 (4,171)23,547 (4,278)26,841 
Non-agencyNon-agency(3)71 (1)17 (4)88 Non-agency(1)51 (6)71 (7)122 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency(166)1,588 (10)144 (176)1,732 Agency(1)42 (193)1,493 (194)1,535 
Non-agencyNon-agency(42)945 (7)236 (49)1,181 Non-agency(55)793 (55)793 
Asset-backedAsset-backed(1)10 (1)10 Asset-backed(6)687 (1)10 (7)697 
OtherOther(195)2,266 (52)314(247)2,580 Other(8)205 (208)2,152 (216)2,357 
Total securities available for saleTotal securities available for sale$(4,098)$38,715 $(872)$4,717 $(4,970)$43,432 Total securities available for sale$(126)$4,653 $(5,412)$34,079 $(5,538)$38,732 
December 31, 2021
December 31, 2022December 31, 2022
U.S. Treasury and government agenciesU.S. Treasury and government agencies$(370)$32,600 $(370)$32,600 U.S. Treasury and government agencies$(601)$5,868 $(235)$2,208 $(836)$8,076 
Agency residential mortgage-backed(369)41,521 $(20)$1,489 (389)43,010 
Residential mortgage-backedResidential mortgage-backed
AgencyAgency(1,744)19,036 (1,560)8,971 (3,304)28,007 
Non-agencyNon-agency(6)112 (2)17 (8)129 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency(5)451 (1)60 (6)511 Agency(125)1,283 (45)372 (170)1,655 
Non-agencyNon-agency(4)1,453 (3)474 (7)1,927 Non-agency(44)750 (18)394 (62)1,144 
Asset-backedAsset-backed(29)3,465 (2)188 (31)3,653 Asset-backed(1)(1)
OtherOther(13)1,405 (13)1,405 Other(96)1,418 (112)1,144 (208)2,562 
Total securities available for saleTotal securities available for sale$(790)$80,895 $(26)$2,211 $(816)$83,106 Total securities available for sale$(2,616)$28,467 $(1,973)$13,111 $(4,589)$41,578 

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

Table 37:38: Gains (Losses) on Sales of Securities Available for Sale
Nine months ended September 30
In millions
Gross GainsGross LossesNet Gains (Losses)Tax Expense (Benefit)
2022$11 $(15)$(4)$(1)
2021$275 $(225)$50 $11 

Nine months ended September 30
In millions
Gross GainsGross LossesNet Gains (Losses)Tax Expense (Benefit)
2023 $(2)$(2) 
2022$11 $(15)$(4)$(1)











The PNC Financial Services Group, Inc. – Form 10-Q 5357  


The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at September 30, 2022:2023:
Table 38:39: Contractual Maturity of Debt Securities
September 30, 2022
Dollars in millions
1 Year or LessAfter 1 Year
through 5 Years
After 5 Years
through 10 Years
After 10
Years
Total
September 30, 2023
Dollars in millions
September 30, 2023
Dollars in millions
1 Year or LessAfter 1 Year
through 5 Years
After 5 Years
through 10 Years
After 10
Years
Total
Securities Available for SaleSecurities Available for SaleSecurities Available for Sale
U.S. Treasury and government agenciesU.S. Treasury and government agencies$3,686 $3,265 $2,100 $2,042 $11,093 U.S. Treasury and government agencies$1,912 $2,958 $800 $1,824 $7,494 
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency79 2,985 28,927 31,993 Agency185 3,811 27,180 31,177 
Non-agencyNon-agency718 725 Non-agency598 607 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency59 454 1,095 322 1,930 Agency46 444 865 383 1,738 
Non-agencyNon-agency388 969 1,363 Non-agency103 118 760 982 
Asset-backedAsset-backed10 96 106 Asset-backed249 171 664 1,084 
OtherOther134 2,228 859 158 3,379 Other286 2,055 416 151 2,908 
Total securities available for sale at amortized costTotal securities available for sale at amortized cost$3,881 $6,032 $7,444 $33,232 $50,589 Total securities available for sale at amortized cost$2,246 $5,994 $6,190 $31,560 $45,990 
Fair valueFair value$3,861 $5,645 $6,681 $29,611 $45,798 Fair value$2,179 $5,487 $5,603 $27,321 $40,590 
Weighted-average yield, GAAP basis (a)Weighted-average yield, GAAP basis (a)2.38 %1.67 %2.30 %2.75 %2.52 %Weighted-average yield, GAAP basis (a)1.25 %2.25 %2.77 %3.08 %2.84 %
Securities Held to MaturitySecurities Held to MaturitySecurities Held to Maturity
U.S. Treasury and government agenciesU.S. Treasury and government agencies$1,212 $25,882 $8,515 $511 $36,120 U.S. Treasury and government agencies$3,087 $30,686 $1,705 $907 $36,385 
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency264 41,879 42,152 Agency321 43,063 43,390 
Non-agencyNon-agency281 281 Non-agency263 263 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency448 215 663 Agency136 490 284 910 
Non-agencyNon-agency115 1,626 1,746 Non-agency42 49  1,365 1,456 
Asset-backedAsset-backed99 1,908 1,765 2,793 6,565 Asset-backed1,886 1,949 2,372 6,214 
OtherOther230 1,057 592 1,247 3,126 Other181 1,053 600 1,345 3,179 
Total securities held to maturity at amortized costTotal securities held to maturity at amortized cost$1,541 $28,971 $11,589 $48,552 $90,653 Total securities held to maturity at amortized cost$3,317 $33,816 $5,065 $49,599 $91,797 
Fair valueFair value$1,527 $27,909 $10,879 $44,873 $85,188 Fair value$3,253 $32,192 $4,753 $44,249 $84,447 
Weighted-average yield, GAAP basis (a)Weighted-average yield, GAAP basis (a)1.25 %1.26 %2.01 %2.66 %2.11 %Weighted-average yield, GAAP basis (a)0.93 %1.44 %4.10 %2.93 %2.38 %
(a)Weighted-average yields are based on amortized cost with effective yields weighted for the contractual maturity of each security. Actual maturities and yields may differ as certain securities may be prepaid.
At September 30, 2022,2023, 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 $38.3$38.1 billion and $30.7$32.4 billion and fair value of $34.6$33.4 billion and $27.9$28.7 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:
Table 39:40: Fair Value of Securities Pledged and Accepted as Collateral
In millionsIn millionsSeptember 30
2022
December 31
2021
In millionsSeptember 30, 2023December 31, 2022
Pledged to othersPledged to others$19,408 $27,349 Pledged to others$27,462 $24,708 
Accepted from others:Accepted from others:Accepted from others:
Permitted by contract or custom to sell or repledgePermitted by contract or custom to sell or repledge$1,507 $707 Permitted by contract or custom to sell or repledge$946 $1,266 
Permitted amount repledged to othersPermitted amount repledged to others$1,507 $707 Permitted amount repledged to others$946 $1,266 

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. See Note 1312 Financial Derivatives for information related to securities pledged and accepted as collateral for derivatives.





5458    The PNC Financial Services Group, Inc. – Form 10-Q


NOTE 43 LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loan Portfolio

Our loan portfolio consists of two 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.
CommercialConsumer
• Commercial and industrial
• Residential real estate
• Commercial real estate
• Home equity
• Equipment lease financing
• Automobile
• Credit card
• Education
• Other consumer
See Note 1 Accounting Policies included in Item 8 of our 2021 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.

Table 40 presents the composition and delinquency status of our loan portfolio at September 30, 2022 and December 31, 2021. We manage credit risk based on the risk profile of the borrower, repayment sources, underlying collateral and other support given current events, economic conditions and expectations. We refine our practices to meet the changing environment resulting from risingelevated inflation levels, supply chain disruptions,industry specific risks, higher interest rates, declining consumer savings and deposit balances, and structural and secular changes fostered by the COVID-19 pandemic. To mitigate losses and enhance customer support, we have customer assistance,offer loan modificationmodifications and collection programs that align withto assist our customers.

Table 41 presents the CARES Actcomposition and subsequent interagency guidance. As a result, under the CARES Act credit reporting rules, certain loans modified due to COVID-19 related hardships are not being reported as past due asdelinquency status of our loan portfolio at September 30, 20222023 and December 31, 2021 based on2022. Loan delinquencies include government insured or guaranteed loans and loans accounted for under the contractual terms of the loan, even where borrowers may not be making payments on their loans during the modification period.



fair value option.
The PNC Financial Services Group, Inc. – Form 10-Q 5559  


Table 40:41: Analysis of Loan Portfolio (a) (b) (c)
Accruing    Accruing   
Dollars in millionsDollars in millionsCurrent 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 millionsCurrent 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 (d)
 Nonperforming
Loans
Fair Value
Option
Nonaccrual
Loans (e)
Total Loans
(f)(g)
September 30, 2022 
September 30, 2023September 30, 2023 
CommercialCommercial Commercial 
Commercial and industrialCommercial and industrial$172,550 $321 $55 $139 $515   $748 $173,813 Commercial and industrial$173,487 $84 $32 $102 $218   $458 $174,163 
Commercial real estateCommercial real estate35,424 11 20   148 35,592 Commercial real estate35,049    723 35,776 
Equipment lease financingEquipment lease financing6,173 12   6,192 Equipment lease financing6,432 25 31   30 6,493 
Total commercialTotal commercial214,147 338 65 144 547   903 215,597 Total commercial214,968 111 40 102 253   1,211 216,432 
ConsumerConsumer Consumer 
Residential real estateResidential real estate43,467 298 95 196 589 (c)429 $572 45,057 Residential real estate45,958 257 103 182 542 (d)330 $529 47,359 
Home equityHome equity24,693 46 16 62 530 82 25,367 Home equity25,562 59 22 81 446 70 26,159 
AutomobileAutomobile14,735 96 21 123   167 15,025 Automobile14,718 83 19 108   114 14,940 
Credit cardCredit card6,636 44 30 58 132   6,774 Credit card6,881 50 38 80 168   11 7,060 
EducationEducation2,162 36 26 63 125 (c)2,287 Education1,918 32 22 48 102 (d)2,020 
Other consumerOther consumer5,212 21 15 12 48 33 5,293 Other consumer4,402 15 33 11 4,446 
Total consumerTotal consumer96,905 541 203 335 1,079   1,165 654 99,803 Total consumer99,439 496 213 325 1,034   912 599 101,984 
TotalTotal$311,052 $879 $268 $479 $1,626   $2,068 $654 $315,400 Total$314,407 $607 $253 $427 $1,287   $2,123 $599 $318,416 
Percentage of total loansPercentage of total loans98.61 %0.28 %0.08 %0.15 %0.52 %0.66 %0.21 %100.00 %Percentage of total loans98.74 %0.19 %0.08 %0.13 %0.40 %0.67 %0.19 %100.00 %
December 31, 2021
December 31, 2022December 31, 2022
CommercialCommercialCommercial
Commercial and industrialCommercial and industrial$151,698 $235 $72 $132 $439 $796 $152,933 Commercial and industrial$181,223 $169 $27 $137 $333 $663 $182,219 
Commercial real estateCommercial real estate33,580 46 24 71 364 34,015 Commercial real estate36,104 19 23 189 36,316 
Equipment lease financingEquipment lease financing6,095 25 27 6,130 Equipment lease financing6,484 20 24 6,514 
Total commercialTotal commercial191,373 306 98 133 537 1,168 193,078 Total commercial223,811 208 35 137 380 858 225,049 
ConsumerConsumerConsumer
Residential real estateResidential real estate37,706 379 119 328 826 (c)517 $663 39,712 Residential real estate44,306 281 112 199 592 (d)424 $567 45,889 
Home equityHome equity23,305 53 18 71 596 89 24,061 Home equity25,305 53 20 73 526 79 25,983 
AutomobileAutomobile16,252 146 40 14 200 183 16,635 Automobile14,543 106 25 138 155 14,836 
Credit cardCredit card6,475 49 33 62 144 6,626 Credit card6,906 50 35 70 155 7,069 
EducationEducation2,400 43 25 65 133 (c)2,533 Education2,058 34 22 59 115 (d)2,173 
Other consumerOther consumer5,644 35 22 17 74 5,727 Other consumer4,975 15 12 10 37 14 5,026 
Total consumerTotal consumer91,782 705 257 486 1,448 1,312 752 95,294 Total consumer98,093 539 226 345 1,110 1,127 646 100,976 
TotalTotal$283,155 $1,011 $355 $619 $1,985 $2,480 $752 $288,372 Total$321,904 $747 $261 $482 $1,490 $1,985 $646 $326,025 
Percentage of total loansPercentage of total loans98.19 %0.35 %0.12 %0.21 %0.69 %0.86 %0.26 %100.00 %Percentage of total loans98.73 %0.23 %0.08 %0.15 %0.46 %0.61 %0.20 %100.00 %
(a)Amounts in table represent loans held for investment and do not include any associated ALLL.
(b)The CARES Act credit reporting rules expired in the third quarter of 2023 and as such, delinquency status at September 30, 2023 is being reported for all loans based on the contractual terms of the loan. Amounts as of December 31, 2022 continue to be presented in accordance with the credit reporting rules under the CARES Act, which required certain loans modified due to pandemic related hardships to not be reported as past due based on the contractual terms of the loan, even when borrowers may not have made payments on their loans during the modification period.
(c)The accrued interest associated with our loan portfolio totaled $1.0$1.4 billion and $0.7$1.2 billion at September 30, 20222023 and December 31, 2021,2022, respectively. These amounts are included in Other assets on the Consolidated Balance Sheet.
(c)(d)Past due loan amounts include government insured or guaranteed Residential real estate loans and Education loans totaling $0.3 billion and $0.1 billion at both September 30, 2022. Comparable amounts at2023 and December 31, 2021 were $0.4 billion and $0.1 billion.2022.
(d)(e)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.policy criteria. Given that these loans are not accounted for at amortized cost, these loansthey have been excluded from the nonperforming loan population.
(e)(f)Includes unearned income, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans totaling $0.7$0.8 billion and $0.9 billion at both September 30, 20222023 and December 31, 2021.2022, respectively.
(f)(g)Collateral dependent loans totaled $1.3$1.1 billion and $1.7$1.3 billion at September 30, 20222023 and December 31, 2021,2022, respectively.
At September 30, 2022,2023, we pledged $26.0$50.4 billion of commercial and other loans to the Federal Reserve Bank and $90.7$91.4 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, 20212022 were $25.7$28.1 billion and $66.2$90.4 billion, respectively. Amounts pledged reflect the unpaid principal balances.



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


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 and include nonperforming TDRs and PCD loans.probable. 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
56   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. See Note 1 Accounting Policies included in Item 8 of our 2021 Form 10-K for additional information on our nonperforming loan and lease policies.
The following table presents our nonperforming assets as of September 30, 20222023 and December 31, 2021,2022, respectively:
Table 41:42: Nonperforming Assets
Dollars in millionsDollars in millionsSeptember 30
2022
December 31
2021
Dollars in millionsSeptember 30, 2023December 31, 2022
Nonperforming loans(a)Nonperforming loans(a)Nonperforming loans(a)
CommercialCommercial$903 $1,168 Commercial$1,211 $858 
Consumer (a)(b)Consumer (a)(b)1,165 1,312 Consumer (a)(b)912 1,127 
Total nonperforming loans (b)(c)Total nonperforming loans (b)(c)2,068 2,480 Total nonperforming loans (b)(c)2,123 1,985 
OREO and foreclosed assetsOREO and foreclosed assets33 26 OREO and foreclosed assets35 34 
Total nonperforming assetsTotal nonperforming assets$2,101 $2,506 Total nonperforming assets$2,158 $2,019 
Nonperforming loans to total loansNonperforming loans to total loans0.66 %0.86 %Nonperforming loans to total loans0.67 %0.61 %
Nonperforming assets to total loans, OREO and foreclosed assetsNonperforming assets to total loans, OREO and foreclosed assets0.67 %0.87 %Nonperforming assets to total loans, OREO and foreclosed assets0.68 %0.62 %
Nonperforming assets to total assetsNonperforming assets to total assets0.38 %0.45 %Nonperforming assets to total assets0.39 %0.36 %
(a)In connection with the adoption of ASU 2022-02, nonperforming loans as of September 30, 2023 include certain loans where terms were modified as a result of a borrower’s financial difficulty. Prior period amounts included nonperforming TDRs, for which accounting guidance was eliminated effective January 1, 2023. See Note 1 Accounting Policies and the Loan Modifications to Borrowers Experiencing Financial Difficulty section of this Note 3 for more information on our adoption of this ASU.
(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.
(b)(c)Nonperforming loans for which there is no related ALLL totaled $0.9$0.5 billion at September 30, 20222023 and primarily include loans with a fair value of collateral that exceeds the amortized cost basis. The comparable amount at December 31, 20212022 was $1.0$0.7 billion.

Nonperforming loans 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 2021 Form 10-K and the Troubled Debt Restructurings section of this Note 4 for additional information on TDRs.

Total nonperforming loans in Table 41 include TDRs of $0.7 billion and $1.0 billion at September 30, 2022 and December 31, 2021, respectively. TDRs that are performing, including consumer credit card TDR loans, are excluded from nonperforming loans and totaled $0.7 billion and $0.6 billion at September 30, 2022 and December 31, 2021, respectively.
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 20212022 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 5761  


The following table presents credit quality indicators for theour commercial loan classes:
Table 42:43: Commercial Credit Quality Indicators (a)
Term Loans by Origination Year  Term Loans by Origination Year 
September 30, 2022
In millions
20222021202020192018PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
September 30, 2023
In millions
September 30, 2023
In millions
20232022202120202019PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial and industrialCommercial and industrialCommercial and industrial
Pass RatedPass Rated$31,271 $14,475 $9,018 $7,607 $4,858 $14,602 $85,101 $69 $167,001 Pass Rated$18,791 $29,249 $8,476 $6,061 $4,654 $12,952 $84,123 $603 $164,909 
CriticizedCriticized802 439 360 429 334 643 3,777 28 6,812 Criticized537 1,916 743 355 249 710 4,705 39 9,254 
Total commercial and industrial32,073 14,914 9,378 8,036 5,192 15,245 88,878 97 173,813 
Total commercial and industrial loansTotal commercial and industrial loans$19,328 $31,165 $9,219 $6,416 $4,903 $13,662 $88,828 $642 $174,163 
Gross charge-offs (b)Gross charge-offs (b)$17 (c)$19 $27 $$$19 $90 $11 $192 
Commercial real estateCommercial real estateCommercial real estate
Pass RatedPass Rated6,789 4,114 3,684 5,975 3,198 7,957 266 31,983 Pass Rated$3,592 $9,008 $3,282 $2,376 $4,918 $8,062 $342 $31,580 
CriticizedCriticized332 39 235 583 833 1,584 3,609 Criticized109 685 470 370 664 1,880 18 4,196 
Total commercial real estate7,121 4,153 3,919 6,558 4,031 9,541 269 35,592 
Total commercial real estate loansTotal commercial real estate loans$3,701 $9,693 $3,752 $2,746 $5,582 $9,942 $360 $35,776 
Gross charge-offs (b)Gross charge-offs (b)    $29 $95   $124 
Equipment lease financingEquipment lease financingEquipment lease financing
Pass RatedPass Rated1,168 1,010 1,000 718 454 1,599 5,949 Pass Rated$1,126 $1,507 $779 $761 $506 $1,469 $6,148 
CriticizedCriticized45 59 61 42 21 15 243 Criticized68 79 56 50 38 54 345 
Total equipment lease financing1,213 1,069 1,061 760 475 1,614 6,192 
Total commercial$40,407 $20,136 $14,358 $15,354 $9,698 $26,400 $89,147 $97 $215,597 
Total equipment lease financing loansTotal equipment lease financing loans$1,194 $1,586 $835 $811 $544 $1,523 $6,493 
Gross charge-offs (b)Gross charge-offs (b)$$$$$$  $11 
Total commercial loansTotal commercial loans$24,223 $42,444 $13,806 $9,973 $11,029 $25,127 $89,188 $642 $216,432 
Total commercial gross charge-offsTotal commercial gross charge-offs$18 $21 $29 $11 $32 $115 $90 $11 $327 
Term Loans by Origination Year  Term Loans by Origination Year 
December 31, 2021
In millions
20212020201920182017PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
December 31, 2022
In millions
December 31, 2022
In millions
20222021202020192018PriorRevolving LoansRevolving Loans Converted to TermTotal
Loans
Commercial and industrialCommercial and industrialCommercial and industrial
Pass RatedPass Rated$27,104 $12,053 $10,731 $6,698 $6,355 $11,759 $71,230 $90 $146,020 Pass Rated$41,685 $12,493 $8,134 $6,261 $4,209 $13,165 $89,384 $69 $175,400 
CriticizedCriticized283 368 815 649 496 824 3,448 30 6,913 Criticized1,259 423 277 299 297 551 3,682 31 6,819 
Total commercial and industrialTotal commercial and industrial27,387 12,421 11,546 7,347 6,851 12,583 74,678 120 152,933 Total commercial and industrial42,944 12,916 8,411 6,560 4,506 13,716 93,066 100 182,219 
Commercial real estateCommercial real estateCommercial real estate
Pass RatedPass Rated4,110 4,109 6,355 4,234 2,634 7,562 436 29,440 Pass Rated8,835 4,153 3,266 5,511 3,005 7,454 450 32,674 
CriticizedCriticized294 298 999 820 566 1,552 46 4,575 Criticized348 37 322 758 807 1,367 3,642 
Total commercial real estateTotal commercial real estate4,404 4,407 7,354 5,054 3,200 9,114 482 34,015 Total commercial real estate9,183 4,190 3,588 6,269 3,812 8,821 453 36,316 
Equipment lease financingEquipment lease financingEquipment lease financing
Pass RatedPass Rated1,212 1,190 942 682 507 1,410 5,943 Pass Rated1,797 962 942 670 410 1,495 6,276 
CriticizedCriticized37 54 41 29 19 187 Criticized60 55 56 39 17 11 238 
Total equipment lease financingTotal equipment lease financing1,249 1,244 983 711 526 1,417 6,130 Total equipment lease financing1,857 1,017 998 709 427 1,506 6,514 
Total commercialTotal commercial$33,040 $18,072 $19,883 $13,112 $10,577 $23,114 $75,160 $120 $193,078 Total commercial$53,984 $18,123 $12,997 $13,538 $8,745 $24,043 $93,519 $100 $225,049 
(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 September 30, 20222023 and December 31, 2021.2022.
(b)Gross charge-offs are presented on a year-to-date basis, as of the reporting date.
(c)Includes charge-offs of deposit overdrafts.

Consumer Loan Classes
See Note 4 Loans and Related Allowance for Credit Losses included in Item 8 of our 20212022 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.










5862    The PNC Financial Services Group, Inc. – Form 10-Q


Residential Real Estate and Home Equity
The following table presents credit quality indicators for theour residential real estate and home equity loan classes:
Table 43:44: Credit Quality Indicators for Residential Real Estate and Home Equity Loan Classes
Term Loans by Origination Year
September 30, 2022
In millions
20222021202020192018PriorRevolving LoansRevolving Loans Converted to TermTotal Loans
Residential real estate
Current estimated LTV ratios
Greater than 100%$46 $24 $$$40 $122 
Greater than or equal to 80% to 100%$979 529 173 67 19 95 1,862 
Less than 80%8,168 16,197 7,240 2,409 852 7,493 42,359 
No LTV available53 62 
Government insured or guaranteed loans50 35 24 531 652 
Total residential real estate$9,150 $16,834 $7,488 $2,517 $901 $8,167 $45,057 
Updated FICO scores
Greater than or equal to 780$5,416 $12,138 $5,267 $1,644 $465 $4,113 $29,043 
720 to 7793,152 3,294 1,457 499 212 1,610 10,224 
660 to 719442 752 403 190 91 806 2,684 
Less than 66042 109 112 83 71 775 1,192 
No FICO score available95 532 199 66 38 332 1,262 
Government insured or guaranteed loans50 35 24 531 652 
Total residential real estate$9,150 $16,834 $7,488 $2,517 $901 $8,167 $45,057 
Home equity
Current estimated LTV ratios
Greater than 100%$$12 $$$14 $220 $95 $351 
Greater than or equal to 80% to 100%52 27 30 748 1,058 1,923 
Less than 80%179 2,143 1,004 300 3,021 7,861 8,585 23,093 
Total home equity$185 $2,207 $1,038 $305 $3,065 $8,829 $9,738 $25,367 
Updated FICO scores
Greater than or equal to 780$109 $1,400 $577 $162 $1,895 $5,154 $5,123 $14,420 
720 to 77951 537 269 69 602 2,274 2,582 6,384 
660 to 71921 212 138 44 307 1,059 1,331 3,112 
Less than 66055 53 29 251 324 633 1,349 
No FICO score available10 18 69 102 
Total home equity$185 $2,207 $1,038 $305 $3,065 $8,829 $9,738 $25,367 
The PNC Financial Services Group, Inc. – Form 10-Q 59 


(Continued from previous page)Term Loans by Origination Year
December 31, 2021
In millions
20212020201920182017PriorRevolving LoansRevolving Loans Converted to TermTotal Loans
Residential real estate
Current estimated LTV ratios
Greater than 100%$10 $52 $21 $12 $13 $77 $185 
Greater than or equal to 80% to 100%1,460 560 221 86 66 190 2,583 
Less than 80%15,213 7,822 2,834 1,004 1,570 7,385 35,828 
No LTV available275 22 305 
Government insured or guaranteed loans33 37 30 39 669 811 
Total residential real estate$16,961 $8,473 $3,114 $1,133 $1,688 $8,343 $39,712 
Updated FICO scores
Greater than or equal to 780$11,110 $5,898 $1,996 $596 $1,029 $4,052 $24,681 
720 to 7794,921 1,735 643 247 345 1,619 9,510 
660 to 719717 463 255 136 133 796 2,500 
Less than 66083 103 96 75 94 848 1,299 
No FICO score available127 241 87 49 48 359 911 
Government insured or guaranteed loans33 37 30 39 669 811 
Total residential real estate$16,961 $8,473 $3,114 $1,133 $1,688 $8,343 $39,712 
Home equity
Current estimated LTV ratios
Greater than 100%$$16 $14 $$$25 $329 $90 $480 
Greater than or equal to 80% to 100%85 62 13 11 66 990 674 1,908 
Less than 80%204 2,487 1,189 370 549 3,200 7,868 5,806 21,673 
Total home equity$212 $2,588 $1,265 $386 $562 $3,291 $9,187 $6,570 $24,061 
Updated FICO scores
Greater than or equal to 780$124 $1,619 $692 $201 $364 $2,035 $5,490 $3,320 $13,845 
720 to 77961 666 348 96 116 642 2,283 1,679 5,891 
660 to 71923 248 167 56 53 327 1,071 872 2,817 
Less than 66053 57 32 28 277 325 615 1,391 
No FICO score available10 18 84 117 
Total home equity$212 $2,588 $1,265 $386 $562 $3,291 $9,187 $6,570 $24,061 































60   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: Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes
Term Loans by Origination Year
September 30, 2022
In millions
20222021202020192018PriorRevolving LoansRevolving Loans Converted to TermTotal Loans
Updated FICO Scores
Automobile
FICO score greater than or equal to 780$1,984 $2,327 $1,041 $887 $301 $111 $6,651 
720 to 7791,277 1,503 649 635 277 100 4,441 
660 to 719622 728 388 470 229 79 2,516 
Less than 660117 289 242 404 266 99 1,417 
Total automobile$4,000 $4,847 $2,320 $2,396 $1,073 $389 $15,025 
Credit card
FICO score greater than or equal to 780$1,835 $$1,837 
720 to 7791,945 1,952 
660 to 7191,876 15 1,891 
Less than 660952 32 984 
No FICO score available or required (a)107 110 
Total credit card$6,715 $59 $6,774 
Education
FICO score greater than or equal to 780$18 $55 $51 $63 $52 $373 $612 
720 to 77920 28 25 31 25 151 280 
660 to 71912 10 64 111 
Less than 66022 30 
No FICO score available or required (a)16 42 
Education loans using FICO credit metric68 100 94 112 90 611 1,075 
Other internal credit metrics1,212 1,212 
Total education$68 $100 $94 $112 $90 $1,823 $2,287 
Other consumer
FICO score greater than or equal to 780$176 $118 $68 $59 $20 $22 $51 $$516 
720 to 779240 149 84 80 28 16 93 692 
660 to 719182 122 83 83 37 11 96 617 
Less than 66015 49 42 48 26 45 234 
Other consumer loans using FICO credit metric613 438 277 270 111 56 285 2,059 
Other internal credit metrics78 44 39 59 31 2,950 25 3,234 
Total other consumer$691 $482 $316 $329 $119 $87 $3,235 $34 $5,293 

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


(Continued from previous page)Term Loans by Origination Year
December 31, 2021
In millions
20212020201920182017PriorRevolving LoansRevolving Loans Converted to TermTotal Loans
Updated FICO Scores
Automobile
FICO score greater than or equal to 780$3,247 $1,496 $1,380 $533 $226 $79 $6,961 
720 to 7792,119 983 1,030 499 195 62 4,888 
660 to 719969 609 772 413 155 44 2,962 
Less than 660277 315 583 429 162 58 1,824 
Total automobile$6,612 $3,403 $3,765 $1,874 $738 $243 $16,635 
Credit card
FICO score greater than or equal to 780$1,815 $$1,817 
720 to 7791,836 1,845 
660 to 7191,856 19 1,875 
Less than 660943 29 972 
No FICO score available or required (a)114 117 
Total credit card$6,564 $62 $6,626 
Education
FICO score greater than or equal to 780$37 $60 $77 $62 $48 $392 $676 
720 to 77920 29 37 30 21 160 297 
660 to 71911 11 73 118 
Less than 66025 33 
No FICO score available or required (a)11 10 31 
Education loans using FICO credit metric76 109 134 107 78 651 1,155 
Other internal credit metrics1,378 1,378 
Total education$76 $109 $134 $107 $78 $2,029 $2,533 
Other consumer
FICO score greater than or equal to 780$199 $131 $123 $47 $12 $32 $95 $$640 
720 to 779250 172 167 68 15 19 125 816 
660 to 719190 145 165 82 16 11 122 731 
Less than 66050 62 85 54 10 50 318 
Other consumer loans using FICO credit metric689 510 540 251 53 68 392 2,505 
Other internal credit metrics87 31 35 23 22 48 2,955 21 3,222 
Total other consumer$776 $541 $575 $274 $75 $116 $3,347 $23 $5,727 
(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.






















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


Troubled Debt Restructurings
Table 45 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 September 30, 2022 and September 30, 2021. 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 2021 Form 10-K for additional discussion of TDRs.
Table 45: Financial Impact and TDRs by Concession Type (a)
 Pre-TDR
Amortized Cost Basis (b)
Post-TDR Amortized Cost Basis (c)
During the three months ended September 30, 2022
Dollars in millions
Number
of Loans
Principal
Forgiveness
Rate
Reduction
OtherTotal
Commercial15 $96 $10 $67 $77 
Consumer2,232 40 29 35 
Total TDRs2,247 $136 $39 $73 $112 
During the nine months ended September 30, 2022
Dollars in millions
Commercial42 $184 $$10 $135 $154 
Consumer8,152 126 95 18 113 
Total TDRs8,194 $310 $$105 $153 $267 
Pre-TDR
Amortized Cost Basis (b)
Post-TDR Amortized Cost Basis (c)
During the three months ended September 30, 2021
Dollars in millions
Number
of Loans
Principal
Forgiveness
Rate
Reduction
OtherTotal
Commercial13 $123 $139 $139 
Consumer1,340 31 $21 28 
Total TDRs1,353 $154 $21 $146 $167 
During the nine months ended September 30, 2021
Dollars in millions
Commercial43 $320 $315 $315 
Consumer4,822 86 $49 28 77 
Total TDRs4,865 $406 $49 $343 $392 
(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.
(c) Represents the amortized cost basis of the TDRs as of the end of the quarter in which the TDR occurs.
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. The following table provides a summary of TDRs that subsequently defaulted during the periods presented and were classified as TDRs during the applicable 12-month period preceding September 30, 2022 and September 30, 2021.
Table 46: Subsequently Defaulted TDRs

In millions20222021
Three months ended September 30$23 $
Nine months ended September 30$45 $25 

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 2021 Form 10-K for a discussion of the methodologies used to determine this allowance. A rollforward of the ACL related to loans follows:
Term Loans by Origination Year
September 30, 2023
In millions
20232022202120202019PriorRevolving LoansRevolving Loans Converted to TermTotal
Residential real estate
Current estimated LTV ratios
Greater than 100%$34 $141 $103 $33 $$34 $353 
Greater than or equal to 80% to 100%1,770 3,372 1,044 207 69 105 6,567 
Less than 80%2,577 6,661 14,517 6,639 2,196 7,129 39,719 
No LTV available52  13 68 
Government insured or guaranteed loans18 18 66 37 504 652 
Total residential real estate loans$4,442 $10,192 $15,695 $6,945 $2,310 $7,775 $47,359 
Updated FICO scores
Greater than or equal to 780$2,418 $7,728 $12,239 $5,060 $1,538 $4,099 $33,082 
720 to 7791,495 1,857 2,547 1,214 414 1,439 8,966 
660 to 719302 514 670 322 176 782 2,766 
Less than 66086 64 129 110 87 676 1,152 
No FICO score available132 11 92 173 58 275 741 
Government insured or guaranteed loans18 18 66 37 504 652 
Total residential real estate loans$4,442 $10,192 $15,695 $6,945 $2,310 $7,775 $47,359 
Gross charge-offs (a) $ $ $$
Home equity
Current estimated LTV ratios
Greater than 100%$$10 $$13 $294 $285 $609 
Greater than or equal to 80% to 100%39 21 27 1,266 1,949 3,307 
Less than 80%161 1,922 871 2,683 6,901 9,705 22,243 
Total home equity loans$168 $1,971 $897 $2,723 $8,461 $11,939 $26,159 
Updated FICO scores
Greater than or equal to 780$107 $1,283 $503 $1,685 $4,700 $6,039 $14,317 
720 to 77938 443 223 525 2,203 3,193 6,625 
660 to 71918 185 117 286 1,210 1,756 3,572 
Less than 66058 53 219 338 895 1,568 
No FICO score available 10 56 77 
Total home equity loans$168 $1,971 $897 $2,723 $8,461 $11,939 $26,159 
Gross charge-offs (a)     $$$$15 
The PNC Financial Services Group, Inc. – Form 10-Q 63  


(Continued from previous page)Term Loans by Origination Year
December 31, 2022
In millions
20222021202020192018PriorRevolving LoansRevolving Loans Converted to TermTotal Loans
Residential real estate
Current estimated LTV ratios
Greater than 100%$$52 $20 $10 $$41 $131 
Greater than or equal to 80% to 100%1,185 678 232 84 24 92 2,295 
Less than 80%9,396 15,844 7,074 2,346 822 7,220 42,702 
No LTV available61 68 
Government insured or guaranteed loans15 66 39 28 536 693 
Total residential real estate$10,594 $16,650 $7,392 $2,482 $878 $7,893 $45,889 
Updated FICO scores
Greater than or equal to 780$6,825 $12,596 $5,276 $1,623 $463 $4,027 $30,810 
720 to 7793,172 3,024 1,369 476 180 1,457 9,678 
660 to 719514 744 378 189 98 796 2,719 
Less than 66063 108 110 88 71 740 1,180 
No FICO score available11 163 193 67 38 337 809 
Government insured or guaranteed loans15 66 39 28 536 693 
Total residential real estate$10,594 $16,650 $7,392 $2,482 $878 $7,893 $45,889 
Home equity
Current estimated LTV ratios
Greater than 100%$$14 $$$15 $268 $137 $449 
Greater than or equal to 80% to 100%51 27 31 854 1,149 2,120 
Less than 80%172 2,078 961 285 2,851 7,780 9,287 23,414 
Total home equity$180 $2,143 $997 $291 $2,897 $8,902 $10,573 $25,983 
Updated FICO scores
Greater than or equal to 780$110 $1,357 $554 $155 $1,791 $5,093 $5,545 $14,605 
720 to 77947 515 248 64 567 2,305 2,843 6,589 
660 to 71919 211 140 42 288 1,146 1,449 3,295 
Less than 66057 54 29 242 342 671 1,399 
No FICO score available16 65 95 
Total home equity$180 $2,143 $997 $291 $2,897 $8,902 $10,573 $25,983 
Table 47: Rollforward(a)Gross charge-offs are presented on a year-to-date basis, as of Allowance for Credit Losses
Three months ended September 30Nine months ended September 30
2022202120222021
In millionsCommercialConsumerTotalCommercialConsumerTotalCommercialConsumerTotalCommercialConsumerTotal
Allowance for loan and lease losses
Beginning balance$2,937 $1,525 $4,462 $3,812 $1,918 $5,730 $3,185 $1,683 $4,868 $3,337 $2,024 $5,361 
Acquisition PCD reserves(54)(5)(59)774 282 1,056 
Charge-offs(73)(149)(222)(50)(156)(206)(162)(506)(668)(393)(484)(877)
Recoveries25 78 103 29 96 125 78 251 329 81 263 344 
Net (charge-offs)(48)(71)(119)(21)(60)(81)(84)(255)(339)(312)(221)(533)
Provision for (recapture of) credit losses174 67 241 (129)(100)(229)(34)93 59 (193)(332)(525)
Other(2)(1)(3)(5)(1)(6)(6)$(1)(7)(3)(1)(4)
Ending balance$3,061 $1,520 $4,581 $3,603 $1,752 $5,355 $3,061 $1,520 $4,581 $3,603 $1,752 $5,355 
Allowance for unfunded lending related commitments (a)
 Beginning balance$630 $51 $681 $533 $112 $645 $564 $98 $662 $485 $99 $584 
Acquisition PCD reserves43 46 
Provision for (recapture of) credit losses(22)23 (1)44 (24)20 16 
Ending balance$608 $74 $682 $535 $111 $646 $608 $74 $682 $535 $111 $646 
Allowance for credit losses at
      September 30 (b)
$3,669 $1,594 $5,263 $4,138 $1,863 $6,001 $3,669 $1,594 $5,263 $4,138 $1,863 $6,001 
(a)     See Note 9 Commitments for additional information about the underlying commitments related to this allowance.
(b)    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 at both September 30, 2022 and 2021.

reporting date.
The ACL related to loans at September 30, 2022 totaled $5.3 billion, a decrease of $0.2 billion since December 31, 2021. The following summarizes the changes in factors that influenced the ACL decline during the nine months ended September 30, 2022.

The reassessment of pandemic-related risks drove reduced reserves at September 30, 2022, partially offset by the heightened economic stress which impacted our macroeconomic scenarios and related weightings.
Portfolio changes also drove reserve declines at September 30, 2022 reflecting improvements in credit quality and changes in portfolio composition, partially offset by the impact from loan growth primarily in the commercial and industrial portfolio.



























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 our automobile, credit card, education and other consumer loan classes:

Table 45: Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes
Term Loans by Origination Year
September 30, 2023
In millions
20232022202120202019PriorRevolving LoansRevolving Loans Converted to TermTotal
Automobile
Updated FICO scores
Greater than or equal to 780$2,221 $1,776 $1,653 $624 $456 $127 $6,857 
720 to 7791,454 1,266 892 356 309 115 4,392 
660 to 719804 677 456 218 228 100 2,483 
Less than 660168 261 248 165 230 136 1,208 
Total automobile loans$4,647 $3,980 $3,249 $1,363 $1,223 $478 $14,940 
Gross charge-offs (a) $18 $18 $13 $23 $19 $91 
Credit card
Updated FICO scores
Greater than or equal to 780$1,920 $$1,921 
720 to 7791,967 1,972 
660 to 7191,982 13 1,995 
Less than 6601,016 44 1,060 
No FICO score available or required (b)109 112 
Total credit card loans$6,994 $66 $7,060 
Gross charge-offs (a)$212 $20 $232 
Education
Updated FICO scores
Greater than or equal to 780$$25 $$11 $19 $133 $203 
720 to 77920 45 25 25 32 182 329 
660 to 71919 45 27 23 29 156 299 
Less than 66037 16 94 171 
No FICO score available or required (b)20 13 10 57 
Total loans using FICO credit metric75 165 86 74 89 570 1,059 
Other internal credit metrics961 961 
Total education loans$75 $165 $86 $74 $89 $1,531 $2,020 
Gross charge-offs (a)  $$$$10 $13 
Other consumer
Updated FICO scores
Greater than or equal to 780$195 $151 $57 $27 $20 $14 $40 $$506 
720 to 779244 189 68 32 25 14 81 654 
660 to 719117 155 68 35 29 14 88 508 
Less than 66011 51 34 21 19 10 43 190 
Total loans using FICO credit metric567 546 227 115 93 52 252 1,858 
Other internal credit metrics32 107 32 73 72 23 2,239 10 2,588 
Total other consumer loans$599 $653 $259 $188 $165 $75 $2,491 $16 $4,446 
Gross charge-offs (a)$54 (c)$16 $14 $12 $12 $$$$124 

The PNC Financial Services Group, Inc. – Form 10-Q 65 


(Continued from previous page)Term Loans by Origination Year
December 31, 2022
In millions
20222021202020192018PriorRevolving LoansRevolving Loans Converted to TermTotal Loans
Updated FICO Scores
Automobile
Greater than or equal to 780$2,390 $2,162 $922 $760 $241 $75 $6,550 
720 to 7791,702 1,312 561 538 222 69 4,404 
660 to 719854 660 341 401 187 56 2,499 
Less than 660193 290 230 368 228 74 1,383 
Total automobile$5,139 $4,424 $2,054 $2,067 $878 $274 $14,836 
Credit card
Greater than or equal to 780$1,954 $$1,956 
720 to 7791,994 2,000 
660 to 7191,957 13 1,970 
Less than 6601,001 35 1,036 
No FICO score available or required (b)104 107 
Total credit card$7,010 $59 $7,069 
Education
Greater than or equal to 780$42 $53 $48 $61 $51 $357 $612 
720 to 77939 27 24 30 24 143 287 
660 to 71921 59 113 
Less than 66024 34 
No FICO score available or required (b)20 39 
Education loans using FICO credit metric126 97 88 105 85 584 1,085 
Other internal credit metrics1,088 1,088 
Total education$126 $97 $88 $105 $85 $1,672 $2,173 
Other consumer
Greater than or equal to 780$224 $97 $53 $46 $14 $18 $47 $$501 
720 to 779302 122 68 62 20 15 89 680 
660 to 719229 110 68 66 28 95 606 
Less than 66032 48 37 40 20 44 229 
Other consumer loans using FICO credit metric787 377 226 214 82 47 275 2,016 
Other internal credit metrics125 43 40 34 29 2,720 12 3,010 
Total other consumer$912 $420 $266 $248 $89 $76 $2,995 $20 $5,026 
(a)Gross charge-offs are presented on a year-to-date basis, as of the reporting date.
(b)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.
(c)Includes charge-offs of deposit overdrafts.




























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


Loan Modifications to Borrowers Experiencing Financial Difficulty

On January 1, 2023, we adopted ASU 2022-02, which eliminates the accounting guidance for TDRs and enhances the disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty (FDMs).

FDMs occur as a result of our loss mitigation activities. A variety of solutions are offered to borrowers, including loan modifications that may result in principal forgiveness, interest rate reductions, term extensions, payment delays, repayment plans or combinations thereof:
Principal forgiveness includes principal and accrued interest forgiveness.
Interest rate reductions include modifications where the interest rate is reduced and/or interest is deferred.
Term extensions extend the original contractual maturity date of the loan.
Payment delays consist of modifications where we expect to collect contractual amounts due but that result in a delay in the receipt of payments specified under the original loan terms. We generally consider payment delays to be insignificant when the delay is three months or less.
Repayment plans are offered for some of our credit card and unsecured line of credit products, which provide for a reduced payment and interest rate for a specific period of time.

Additionally, modifications to borrowers experiencing financial difficulty also result from borrowers that have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their obligations to us, and those that enter into trial modifications.

FDMs exclude loans held for sale and loans accounted for under the fair value option. Our disclosed FDM population also excludes government insured or guaranteed education loans as loss mitigation activities for these loans are either required by law or they are considered separate from PNC’s loss mitigation treatments. Commercial loans with an appraised value of collateral that exceeds the loan value, loans with guarantor support, and residential mortgage government insured or guaranteed loans are included in our disclosed population of FDMs when those loan modifications are granted to a borrower experiencing financial difficulty.

Refer to Note 1 Accounting Policies for additional information around our adoption of ASU 2022-02.










































The PNC Financial Services Group, Inc. – Form 10-Q 67 


The following table presents the amortized cost basis, as of September 30, 2023, of FDMs granted during the three and nine months ended September 30, 2023:

Table 46: Loan Modifications Granted to Borrowers Experiencing Financial Difficulty (a) (b)
Three months ended September 30, 2023
Dollars in millions
Interest Rate ReductionTerm ExtensionPayment DelayRepayment PlanInterest Rate Reduction and Term ExtensionPayment Delay and Term ExtensionOther (c)Total% of Loan Class
Commercial
Commercial and industrial$15 $356 $37 $$83 $498 0.29 %
Commercial real estate307 16 323 0.90 %
Total commercial1566353783821 0.38 %
Consumer
Residential real estate50  54 0.11 %
Home equity 0.03 %
Credit card$20 20 0.28 %
Education0.05 %
Other consumer0.02 %
Total consumer52 21  83 0.08 %
Total$16 $664 $105 $21  $$91 $904 0.28 %
Nine months ended September 30, 2023
Dollars in millions
Commercial
Commercial and industrial$15 $704 $91 $20 $130 $960 0.55 %
Commercial real estate745 1661 822 2.30 %
Total commercial151,449 107201911,782 0.82 %
Consumer
Residential real estate83 $93 0.20 %
Home equity22 0.08 %
Credit card$45 45 0.64 %
Education0.15 %
Other consumer0.02 %
Total consumer89 46 10 15 164 0.16 %
Total$16 $1,452 $196 $46 $10 $20 $206 $1,946 0.61 %
(a)At September 30, 2023, there were $0.3 billion of unfunded lending related commitments associated with FDMs.
(b)Excludes the amortized cost basis of modified loans that were paid off, charged off or otherwise liquidated as of period end.
(c)Includes loans where we have received notification that a borrower has filed for Chapter 7 bankruptcy relief, but specific instructions as to the terms of the relief have not been formally ruled upon by the court. Amounts also include trial modifications.

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


Table 47 presents the financial effect of FDMs granted during the three and nine months ended September 30, 2023:

Table 47: Financial Effect of FDMs (a)
Three months ended September 30, 2023
Dollars in millions
Weighted-Average Interest Rate ReductionWeighted-Average Term Extension
(in Months)
Weighted-Average Payment Delay
(in Months)
Commercial
Commercial and industrial0.25 %136
Commercial real estate138
Consumer
Residential real estate0.72 %10
Home equity 5
Education15
Nine months ended September 30, 2023
Dollars in millions
Commercial
Commercial and industrial0.25 %126
Commercial real estate168
Consumer
Residential real estate1.13 %1189
Home equity1.17 %534
Education16
(a)Excludes the financial effects of modifications for loans that were paid off, charged off or otherwise liquidated as of period end.

Repayment plans are excluded from Table 47. The terms of these programs, which are offered for certain credit card and unsecured line of credit products, are as follows:
Short-term programs are granted for periods of 6 and 12 months. These programs are structurally similar such that the interest rate is reduced to a standard rate of 4.99% and the minimum payment percentage is adjusted to 1.90% of the outstanding balance. At the end of the 6 or 12 months, the borrower is returned to the original contractual interest rate and minimum payment amount specified in the original lending agreement.
Fully-amortized repayment plans are also granted, the most common of which being a 60-month program. In this program, we convert the borrower’s drawn and unpaid balances into a fully-amortized repayment plan consisting of an interest rate of 4.99% and a minimum payment amount of 1.90%. This fully-amortized program is designed in a manner that allows the drawn and unpaid amounts to be recaptured at the end of the 60 months.
After we modify a loan, we continue to track its performance under its most recent modified terms. The following table presents the performance, as of September 30, 2023, of FDMs granted during the nine months ended September 30, 2023:

Table 48: Delinquency Status of FDMs (a)
Nine months ended September 30, 2023
Dollars in millions
Current or Less Than 30 Days Past Due30-59 Days Past Due60-89 Days Past Due90 Days
or More
Past Due
Nonperforming
Loans
Total
Commercial
Commercial and industrial$801   $$156 $960 
Commercial real estate755    67 822 
Total commercial1,556   223 1,782 
Consumer 
Residential real estate$  88 93 
Home equity   21 22 
Credit card31 $45 
Education    
Other consumer    
Total consumer39 111 164 
Total$1,595 $$$$334 $1,946 
(a)Represents amortized cost basis.

We generally consider FDMs to have subsequently defaulted when they become 60 days past due after the most recent date the loan was modified. Loans that were both (i) modified due to a financial difficulty during the period, and (ii) subsequently defaulted during the three and nine months ended September 30, 2023 were $36 million and $84 million, respectively.

The PNC Financial Services Group, Inc. – Form 10-Q 69 


Troubled Debt Restructuring Disclosures Prior to the Adoption of ASU 2022-02

Table 49 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 September 30, 2022. 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 in our 2022 Form 10-K for additional discussion of TDRs.

Table 49: Financial Impact and TDRs by Concession Type (a)
Pre-TDR
Amortized Cost Basis (b)
Post-TDR Amortized Cost Basis (c)
During the three months ended September 30, 2022
Dollars in millions
Number
of Loans
Principal
Forgiveness
Rate
Reduction
OtherTotal
Commercial15 $96 $10 $67 $77 
Consumer2,232 40 29 35 
Total TDRs2,247 $136 $39 $73 $112 
During the nine months ended September 30, 2022
Dollars in millions
Commercial42 $184 $$10 $135 $154 
Consumer8,152 126 $95 18 113 
Total TDRs8,194 $310 $$105 $153 $267 
(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.
(c) Represents the amortized cost basis of the TDRs as of the end of the quarter in which the TDR occurred.
After a loan was determined to be a TDR, we continued to track its performance under its most recent restructured terms. We considered a TDR to have subsequently defaulted when it became 60 days past due after the most recent date the loan was restructured. Loans that were both (i) classified as TDRs within the last twelve months from the balance sheet date, and (ii) subsequently defaulted during the three and nine months ended September 30, 2022 totaled $23 million and $45 million, respectively.

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 for a discussion of the methodologies used to determine this allowance. A rollforward of the ACL related to loans follows:
Table 50: Rollforward of Allowance for Credit Losses
Three months ended September 30Nine months ended September 30
2023202220232022
In millionsCommercialConsumerTotalCommercialConsumerTotalCommercialConsumerTotalCommercialConsumerTotal
Allowance for loan and lease losses
Beginning balance$3,142 $1,595 $4,737 $2,937 $1,525 $4,462 $3,114 $1,627 $4,741 $3,185 $1,683 $4,868 
Adoption of ASU 2022-02 (a)  (35)(35) 
Beginning balance, adjusted3,142 1,595 4,737 2,937 1,525 4,462 3,114 1,592 4,706 3,185 1,683 4,868 
Charge-offs(72)(161)(233)(73)(149)(222)(327)(481)(808)(162)(506)(668)
Recoveries49 63 112 25 78 103 110 188 298 78 251 329 
Net (charge-offs)(23)(98)(121)(48)(71)(119)(217)(293)(510)(84)(255)(339)
Provision for (recapture of) credit losses105 48 153 174 67 241 325 246 571 (34)93 59 
Other(2) (2)(2)(1)(3)   (6)(1)(7)
Ending balance$3,222 $1,545 $4,767 $3,061 $1,520 $4,581 $3,222 $1,545 $4,767 $3,061 $1,520 $4,581 
Allowance for unfunded lending related commitments (b)
 Beginning balance$555 $108 $663 $630 $51 $681 $613 $81 $694 $564 $98 $662 
Provision for (recapture of) credit losses(22)(1)(23)(22)23 (80)26 (54)44 (24)20 
Ending balance$533 $107 $640 $608 $74 $682 $533 $107 $640 $608 $74 $682 
Allowance for credit losses at September 30 (c)$3,755 $1,652 $5,407 $3,669 $1,594 $5,263 $3,755 $1,652 $5,407 $3,669 $1,594 $5,263 
(a)Represents the impact of adopting ASU 2022-02 on January 1, 2023. As a result of adoption, we eliminated the accounting guidance for TDRs, including the use of a discounted cash flow approach to measure the allowance for TDRs.
(b)See Note 8 Commitments for additional information about the underlying commitments related to this allowance.
(c)Represents the ALLL plus allowance for unfunded lending related commitments and excludes allowances for investment securities and other financial assets, which together totaled $131 million and $162 million at September 30, 2023 and 2022, respectively.
70   The PNC Financial Services Group, Inc. – Form 10-Q


The ACL related to loans totaled $5.4 billion at both September 30, 2023 and December 31, 2022. During the nine months ended September 30, 2023, reserves reflected our updated economic outlook and changes in portfolio composition and quality.

NOTE 54 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 20212022 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 in the FNMA, FHLMC and GNMA securitizations, Non-agency securitizations and loan sale transactions 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 98 Commitments and Note 1211 Fair Value for information on our servicing rights, including the carrying value of servicing assets.

The following table provides our loan sale and servicing activities:
Table 48:51: Loan Sale and Servicing Activities
In millionsIn millionsResidential
Mortgages
Commercial
Mortgages (a)
In millionsResidential MortgagesCommercial Mortgages (a)
Cash Flows - Three months ended September 30, 2023Cash Flows - Three months ended September 30, 2023
Sales of loans and related securitization activity (b)Sales of loans and related securitization activity (b)$873 $398 
Repurchases of previously transferred loans (c)Repurchases of previously transferred loans (c)$16 $(9)
Servicing fees (d)Servicing fees (d)$129 $51 
Servicing advances recovered/(funded), netServicing advances recovered/(funded), net$$(22)
Cash flows on mortgage-backed securities held (e)Cash flows on mortgage-backed securities held (e)$710 $19 
Cash Flows - Three months ended September 30, 2022Cash Flows - Three months ended September 30, 2022Cash Flows - Three months ended September 30, 2022
Sales of loans and related securitization activity (b)Sales of loans and related securitization activity (b)$1,019 $863 Sales of loans and related securitization activity (b)$1,019 $863 
Repurchases of previously transferred loans (c)Repurchases of previously transferred loans (c)$49 Repurchases of previously transferred loans (c)$49  
Servicing fees (d)Servicing fees (d)$99 $51 Servicing fees (d)$99 $51 
Servicing advances recovered/(funded), netServicing advances recovered/(funded), net$11 $11 Servicing advances recovered/(funded), net$11 $11 
Cash flows on mortgage-backed securities held (e)Cash flows on mortgage-backed securities held (e)$797 $15 Cash flows on mortgage-backed securities held (e)$797 $15 
Cash Flows - Three months ended September 30, 2021
Cash Flows - Nine months ended September 30, 2023Cash Flows - Nine months ended September 30, 2023
Sales of loans and related securitization activity (b)Sales of loans and related securitization activity (b)$2,475 $881 Sales of loans and related securitization activity (b)$2,044 $2,554 
Repurchases of previously transferred loans (c)Repurchases of previously transferred loans (c)$45 $103 Repurchases of previously transferred loans (c)$67  
Servicing fees (d)Servicing fees (d)$105 $43 Servicing fees (d)$384 $146 
Servicing advances recovered/(funded), netServicing advances recovered/(funded), net$(4)$28 Servicing advances recovered/(funded), net$44 $(86)
Cash flows on mortgage-backed securities held (e)Cash flows on mortgage-backed securities held (e)$2,041 $18 Cash flows on mortgage-backed securities held (e)$2,008 $49 
Cash Flows - Nine months ended September 30, 2022Cash Flows - Nine months ended September 30, 2022Cash Flows - Nine months ended September 30, 2022
Sales of loans and related securitization activity (b)Sales of loans and related securitization activity (b)$4,367 $2,702 Sales of loans and related securitization activity (b)$4,367 $2,702 
Repurchases of previously transferred loans (c)Repurchases of previously transferred loans (c)$154 $27 Repurchases of previously transferred loans (c)$154 $27 
Servicing fees (d)Servicing fees (d)$283 $140 Servicing fees (d)$283 $140 
Servicing advances recovered/(funded), netServicing advances recovered/(funded), net$44 $15 Servicing advances recovered/(funded), net$44 $15 
Cash flows on mortgage-backed securities held (e)Cash flows on mortgage-backed securities held (e)$3,122 $43 Cash flows on mortgage-backed securities held (e)$3,122 $43 
Cash Flows - Nine months ended September 30, 2021
Sales of loans and related securitization activity (b)$5,997 $2,604 
Repurchases of previously transferred loans (c)$189 $145 
Servicing fees (d)$270 $119 
Servicing advances recovered/(funded), net$$(8)
Cash flows on mortgage-backed securities held (e)$7,256 $66 
(a)Represents both commercial mortgage loan transferstransfer 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 $19.1$20.5 billion, $17.6$21.4 billion and $15.9$19.1 billion in residential mortgage-backed securities and $0.7 billion, $0.6$0.7 billion and $0.6$0.7 billion in commercial mortgage-backed securities at September 30, 2022,2023, December 31, 20212022 and September 30, 2021.2022, respectively.




The PNC Financial Services Group, Inc. – Form 10-Q 65


Table 4952 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'sloan’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 September 30, 2022.2023.
The PNC Financial Services Group, Inc. – Form 10-Q 71


Table 49:52: Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others
In millionsIn millionsResidential MortgagesCommercial Mortgages (a)In millionsResidential MortgagesCommercial Mortgages (a)
September 30, 2022
September 30, 2023September 30, 2023
Total principal balanceTotal principal balance$41,413 $38,457 Total principal balance$39,542 $58,761 
Delinquent loans (b)Delinquent loans (b)$354 $Delinquent loans (b)$324  
December 31, 2021
December 31, 2022December 31, 2022
Total principal balanceTotal principal balance$42,726 $39,551 Total principal balance$41,031 $57,974 
Delinquent loans (b)Delinquent loans (b)$569 $42 Delinquent loans (b)$346 
Three months ended September 30, 2023Three months ended September 30, 2023
Net charge-offs (c)Net charge-offs (c) $14 
Three months ended September 30, 2022Three months ended September 30, 2022Three months ended September 30, 2022
Net charge-offs (c)$$
Three months ended September 30, 2021
Net charge-offs (c)$$
Nine months ended September 30, 2022
Net charge-offs (c)$$12 
Nine months ended September 30, 2021
Net charge-offs (c)Net charge-offs (c)$$180 Net charge-offs (c)$$
Nine months ended September 30, 2023Nine months ended September 30, 2023
Net charge-offs (c)Net charge-offs (c)$$18 
Nine months ended September 30, 2022Nine months ended September 30, 2022
Net charge-offs (c)Net charge-offs (c)$$12 
(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 the process of foreclosure.
(c)Net charge-offs for residentialResidential 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 included in Item 8 of our 20212022 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 5053 where we have determined that our continuing involvement is insignificant. 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 50.53. These loans are included as part of the assetcredit quality disclosures that we make in Note 43 Loans and Related Allowance for Credit Losses.
Table 50 :53: Non-Consolidated VIEs
In millionsIn millionsPNC Risk of Loss (a)Carrying Value of Assets
Owned by PNC
 Carrying Value of Liabilities
Owned by PNC
 In millionsPNC Risk of Loss (a)Carrying Value of AssetsCarrying Value of Liabilities
September 30, 2022 
September 30, 2023September 30, 2023 
Mortgage-backed securitizations (b)Mortgage-backed securitizations (b)$20,233 $20,237 (c) $ Mortgage-backed securitizations (b)$21,511 $21,522 (c)   
Tax credit investments and otherTax credit investments and other4,186 4,019 (d) 1,961 (e) Tax credit investments and other4,639 4,586 (d) (e)$2,264 (f) (g)
TotalTotal$24,419 $24,256  $1,962  Total$26,150 $26,108  $2,264  
December 31, 2021 
December 31, 2022December 31, 2022 
Mortgage-backed securitizations (b)Mortgage-backed securitizations (b)$18,708 $18,708 (c) $ Mortgage-backed securitizations (b)$22,666 $22,670 (c) $ 
Tax credit investments and otherTax credit investments and other3,865 3,893 (d) 1,798 (e) Tax credit investments and other4,411 4,240 (d)2,063 (f) 
TotalTotal$22,573 $22,601  $1,799  Total$27,077 $26,910  $2,064  
(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)Amount includes $2.9 billion of LIHTCs and $0.2 billion of NMTCs, which are included in Equity investments on our Consolidated Balance Sheet.
(f)Included in Deposits and Other liabilities on our Consolidated Balance Sheet.
66(g)   The PNC Financial Services Group, Inc. – Form 10-QAmount includes $1.6 billion of LIHTCs and $0.2 billion of NMTCs, which are included in 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 Community Reinvestment Act. Within Income taxes, during the nine months ended September 30, 2023, we recognized $0.3 billion of amortization, $0.3 billion of tax credits and $0.1 billion of other tax benefits associated with qualified investments in LIHTCs and NMTCs. During the nine months ended
72   The PNC Financial Services Group, Inc. – Form 10-Q



September 30, 2022, we recognized $0.3 billion of amortization, $0.3 billion of tax credits and $0.1 billion of other tax benefits associated with qualified investments in LIHTCs. During the nine months ended September 30, 2021, we recognized $0.1 billion or less of amortization, tax credits and other tax benefits associated with qualified investments in LIHTCs.

NOTE 65 GOODWILL AND MORTGAGE SERVICING RIGHTS

Goodwill

See Note 6 Goodwill and Mortgage Servicing Rights in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K for more information regarding our goodwill.

Mortgage Servicing Rights
We recognize the right to service mortgage loans for others as an intangible asset when the benefits of servicing income we receive isare expected to be more than our projected servicing costs.adequate compensation to a servicer for performing the servicing. MSRs are recognized either when purchased or when originated loans are sold with servicing retained. MSRs totaled $3.2$4.0 billion at September 30, 20222023 and $1.8$3.4 billion at December 31, 2021,2022, and consisted of loan servicing contracts for commercial and residential mortgages which are measured at fair value.

We recognize gains (losses) on changes in the fair value of MSRs. MSRs are subject to changes 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, derivative instruments and resale agreements, which are expected to increase (or decrease) in value when the value of MSRs decreases (or increases).

See the Sensitivity Analysis section of this Note 65 for more detail on our fair value measurement of MSRs. See Note 6 Goodwill and Mortgage Servicing Rights and Note 15 Fair Value in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 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 51:54: Mortgage Servicing Rights
Commercial MSRsResidential MSRs Commercial MSRsResidential MSRs
In millionsIn millions2022202120222021In millions2023202220232022
January 1January 1$740 $569 $1,078 $673 January 1$1,113 $740 $2,310 $1,078 
Additions:Additions:Additions:
BBVA Acquisition35 
From loans sold with servicing retainedFrom loans sold with servicing retained52 61 49 61 From loans sold with servicing retained38 52 17 49 
PurchasesPurchases32 26 620 400 Purchases27 32 438 620 
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)(130)(87)(178)(242)Time and payoffs (a)(247)(130)(176)(178)
Other (b)Other (b)438 134 505 203 Other (b)238 438 248 505 
September 30September 30$1,132 $703 $2,074 $1,130 September 30$1,169 $1,132 $2,837 $2,074 
Related unpaid principal balance at September 30$281,931 $263,862 $169,678 $139,154 
Related unpaid principal balance of loans serviced at September 30Related unpaid principal balance of loans serviced at September 30$282,123 $281,931 $212,521 $169,678 
Servicing advances at September 30Servicing advances at September 30$448 $445 $132 $139 Servicing advances at September 30$507 $448 $121 $132 
(a)Represents decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments, prepayments and loans that were paid down or paid off during the period.
(b)Represents MSR value changes resulting primarily from market-driven changes in interest rates.

Sensitivity Analysis
The fair value of commercial and residential MSRs and significant inputs to the valuation models as of September 30, 20222023 and December 31, 20212022 are shown in Tables 5255 and 53.56. 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.
The PNC Financial Services Group, Inc. – Form 10-Q 6773  


A sensitivity analysis of the hypothetical effect on the fair value of MSRs to adverse changes in key assumptions is presented in Tables 5255 and 53.56. 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.assumptions:

Table 52:55: Commercial Mortgage Servicing Rights – Key Valuation Assumptions
Dollars in millionsDollars in millionsSeptember 30
2022
December 31
2021
Dollars in millionsSeptember 30, 2023December 31, 2022
Fair valueFair value$1,132 $740 Fair value$1,169 $1,113 
Weighted-average life (years)Weighted-average life (years)4.14.2Weighted-average life (years)4.04.0
Weighted-average constant prepayment rateWeighted-average constant prepayment rate4.25 %5.49 %Weighted-average constant prepayment rate5.42 %4.28 %
Decline in fair value from 10% adverse changeDecline in fair value from 10% adverse change$$12 Decline in fair value from 10% adverse change$$
Decline in fair value from 20% adverse changeDecline in fair value from 20% adverse change$16 $21 Decline in fair value from 20% adverse change$18 $15 
Effective discount rateEffective discount rate9.73 %7.75 %Effective discount rate10.22 %9.77 %
Decline in fair value from 10% adverse changeDecline in fair value from 10% adverse change$35 $20 Decline in fair value from 10% adverse change$36 $34 
Decline in fair value from 20% adverse changeDecline in fair value from 20% adverse change$69 $40 Decline in fair value from 20% adverse change$73 $68 

Table 53:56: Residential Mortgage Servicing Rights – Key Valuation Assumptions
Dollars in millionsDollars in millionsSeptember 30
2022
 December 31
2021
 Dollars in millionsSeptember 30, 2023 December 31, 2022 
Fair valueFair value$2,074  $1,078  Fair value$2,837  $2,310  
Weighted-average life (years)Weighted-average life (years)7.9 5.7 Weighted-average life (years)8.4 8.0 
Weighted-average constant prepayment rateWeighted-average constant prepayment rate6.76 %12.63 %Weighted-average constant prepayment rate5.77 %6.72 %
Decline in fair value from 10% adverse changeDecline in fair value from 10% adverse change$49  $46  Decline in fair value from 10% adverse change$58  $55  
Decline in fair value from 20% adverse changeDecline in fair value from 20% adverse change$95  $89  Decline in fair value from 20% adverse change$112  $107  
Weighted-average option adjusted spreadWeighted-average option adjusted spread759 bps857 bpsWeighted-average option adjusted spread765 bps766 bps
Decline in fair value from 10% adverse changeDecline in fair value from 10% adverse change$60  $31  Decline in fair value from 10% adverse change$89  $69  
Decline in fair value from 20% adverse changeDecline in fair value from 20% adverse change$117  $60  Decline in fair value from 20% adverse change$173  $134  

Fees from mortgage loan servicing, which include contractually specified servicing fees, late fees and ancillary fees were $0.1 billion and $0.2 billion for theboth three months ended September 30, 2023 and 2022, and 2021, respectively,$0.5 billion and $0.4 billion for both the nine months ended September 30, 2023 and 2022, and 2021.respectively. We also generate servicing fees from fee-based activities provided to others for which we do not have an associated servicing asset. Fees from commercial and residential MSRs are reported within Noninterest income on our Consolidated Income Statement in Residential and commercial mortgage.

NOTE 76 LEASES
PNC'sPNC’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 20212022 Form 10-K.

Table 54:57: Lessor Income
Three months ended
September 30
Nine months ended
September 30
Three months ended
September 30
Nine months ended September 30
In millionsIn millions2022202120222021In millions2023202220232022
Sales-type and direct financing leases (a) Sales-type and direct financing leases (a)$61 $61 $177 $184  Sales-type and direct financing leases (a)$76 $61 $219 $177 
Operating leases (b) Operating leases (b)15 18 48 58  Operating leases (b)15 40 48 
Lease incomeLease income$76 $79 $225 $242 Lease income$85 $76 $259 $225 
(a)Included in Loans interest income on the Consolidated Income Statement.
(b)Included in Lending and deposit services on the Consolidated Income Statement.


6874    The PNC Financial Services Group, Inc. – Form 10-Q



NOTE 87 BORROWED FUNDS
The following table shows the carrying value of total borrowed funds of $54.6 billion at September 30, 20222023 (including adjustments related to accounting hedges, purchase accounting and unamortized original issuance discounts) by remaining contractual maturity:
Table 55:58: Borrowed Funds
In billionsmillions
Less than 1 year$5.914,193 
1 to 2 years$21,763 8.4 
2 to 3 years$12,138 20.5 
3 to 4 years$1,945 9.2 
4 to 5 years$2,931 0.7 
Over 5 years13,197 
Total$9.966,167 

The following table presents the contractual rates and maturity dates of our FHLB borrowings, senior debt and subordinated debt as of September 30, 2022,2023, and the carrying values as of September 30, 20222023 and December 31, 2021.2022.
Table 56:59: FHLB Borrowings, Senior Debt and Subordinated Debt
Stated RateMaturityCarrying Value Stated RateMaturityCarrying Value
Dollars in millionsDollars in millions2022202220222021Dollars in millionsSeptember 30, 2023September 30, 2023September 30, 2023December 31, 2022
Parent CompanyParent CompanyParent Company
Senior debtSenior debt1.15% - 3.50%2022 - 2032$8,296 $10,369 Senior debt1.20% - 6.00%2024-2034$17,880 $11,374 
Subordinated debtSubordinated debt3.90% - 4.63%2024 - 20331,520 777 Subordinated debt3.90% - 4.60%2024-20331,493 1,524 
Junior subordinated debtJunior subordinated debt3.65 %2028206 205 Junior subordinated debt6.20 %2028205 205 
Subtotal  10,022 11,351 
Total Parent CompanyTotal Parent Company  19,578 13,103 
BankBankBank
Federal Home Loan Bank borrowings (a)Federal Home Loan Bank borrowings (a)3.14% - 3.38%2023 - 202630,075 Federal Home Loan Bank borrowings (a)5.50% - 5.90%2024-202636,000 32,075 
Senior debtSenior debt2.50% - 3.50%2023 - 20435,061 10,292 Senior debt2.50% - 6.10%2024-20434,527 5,283 
Subordinated debtSubordinated debt2.70% - 5.90%2022 - 20295,560 6,014 Subordinated debt2.70% - 5.90%2025-20293,030 4,578 
Subtotal  40,696 16,306 
Total BankTotal Bank  43,557 41,936 
TotalTotal  $50,718 $27,657 Total  $63,135 $55,039 
(a)FHLB borrowings are generally collateralized by residential mortgage loans, other mortgage-related loans and investment securities.
In Table 56,59, the carrying values for Parent Companyparent company senior and subordinated debt include basis adjustments of $(810)$(1,214) million and $(75)$(104) million, respectively, whereas Bank senior and subordinated debt include basis adjustments of $(272)$(254) million and $(254)$(262) million, respectively, related to fair value accounting hedges as of September 30, 2022.2023.
Certain borrowings are reported at fair value. Refer to Note 1211 Fair Value for more information on those borrowings.
For further information regarding junior subordinated debentures, refer to Note 10 Borrowed Funds in Item 8 of our 20212022 Form 10-K.



















The PNC Financial Services Group, Inc. – Form 10-Q 6975  


NOTE 98 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 September 30, 20222023 and December 31, 2021,2022, respectively.
Table 57:60: Commitments to Extend Credit and Other Commitments
In millionsIn millionsSeptember 30
2022
December 31
2021
In millionsSeptember 30, 2023December 31, 2022
Commitments to extend creditCommitments to extend creditCommitments to extend credit
Commercial(a)Commercial(a)$190,761 $176,248 Commercial(a)$209,397 $198,542 
Home equityHome equity21,674 19,410 Home equity24,037 22,783 
Credit cardCredit card33,142 32,499 Credit card34,197 33,066 
OtherOther7,884 9,081 Other7,741 7,337 
Total commitments to extend creditTotal commitments to extend credit253,461 237,238 Total commitments to extend credit275,372 261,728 
Net outstanding standby letters of credit (a)(b)Net outstanding standby letters of credit (a)(b)9,987 9,303 Net outstanding standby letters of credit (a)(b)10,326 10,575 
Standby bond purchase agreements (b)(c)Standby bond purchase agreements (b)(c)1,317 1,268 Standby bond purchase agreements (b)(c)1,088 1,208 
Other commitments (c)(d)Other commitments (c)(d)3,533 3,045 Other commitments (c)(d)3,585 3,661 
Total commitments to extend credit and other commitmentsTotal commitments to extend credit and other commitments$268,298 $250,854 Total commitments to extend credit and other commitments$290,371 $277,172 
(a)September 30, 2023 includes approximately $16 billion of acquired Signature Bridge Bank, N.A capital commitments facilities.
(b)Net outstanding standby letters of credit include $3.8 billion and $3.3$3.6 billion at both September 30, 20222023 and December 31, 2021, respectively,2022, which support remarketing programs.
(b)(c)We enter into standby bond purchase agreements to support municipal bond obligations.
(c)(d)Includes $2.0$2.1 billion and $2.2 billion related to investments in qualified affordable housing projects for bothat September 30, 20222023 and December 31, 2021.2022, 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 98% of our net outstanding standby letters of credit were rated as Pass as ofat September 30, 2022,2023, 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 September 30, 20222023 had terms ranging from less than one year to seven years.

As of September 30, 2022,2023, assets of $1.3$1.2 billion secured certain specifically identified standby letters of credit. In addition, a portion of the remaining standby letters of credit issued on behalf of specific customers is also secured by collateral or guarantees that secure the customers’ other obligations to us. The carrying amount of the liability for our obligations related to standby letters of credit and participations in standby letters of credit was $0.1$0.2 billion at September 30, 20222023 and is included in Other liabilities on our Consolidated Balance Sheet.












7076    The PNC Financial Services Group, Inc. – Form 10-Q



NOTE 109 TOTAL EQUITY AND OTHER COMPREHENSIVE INCOME

Activity in total equity for the three and nine months ended September 30, 20222023 and 20212022 is as follows:
Table 58:61: Rollforward of Total Equity
 Shareholders’ Equity      Shareholders’ Equity    
In millionsIn millionsShares
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 EquityIn millionsShares
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 endedThree months endedThree months ended
Balance at June 30, 2021 (a)425 $2,713 $3,519 $12,409 $48,663 $1,463 $(14,140)$58 $54,685 
Balance at June 30, 2022 (a)Balance at June 30, 2022 (a)411 $2,714 $6,004 $12,527 $51,841 $(8,358)$(17,076)$36 $47,688 
Net incomeNet income1,474 16 1,490 Net income1,624 16 1,640 
Other comprehensive income (loss), net of tax(384)(384)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax(2,128)(2,128)
Cash dividends declared - CommonCash dividends declared - Common(538)(538)Cash dividends declared - Common(622)(622)
Cash dividends declared - PreferredCash dividends declared - Preferred(57)(57)Cash dividends declared - Preferred(65)(65)
Preferred stock discount accretionPreferred stock discount accretion(1)Preferred stock discount accretion(1) 
Preferred stock issuance (b)Preferred stock issuance (b)1,489 1,489 Preferred stock issuance (b)1,239 1,239 
Treasury stock activity(2)(387)(382)
Other30 (36)(6)
Balance at September 30, 2021 (a)423 $2,713 $5,009 $12,444 $49,541 $1,079 $(14,527)$38 $56,297 
Balance at June 30, 2022 (a)411 $2,714 $6,004 $12,527 $51,841 $(8,358)$(17,076)$36 $47,688 
Net income1,624 16 1,640 
Other comprehensive income (loss), net of tax(2,128)(2,128)
Cash dividends declared - Common(622)(622)
Cash dividends declared - Preferred(65)(65)
Preferred stock discount accretion(1)
Preferred stock issuance (c)1,239 1,239 
Treasury stock activityTreasury stock activity(7)(1,051)(1,045)Treasury stock activity(7)(1,051)(1,045)
OtherOther33 (17)16 Other33 (17)16 
Balance at September 30, 2022 (a)Balance at September 30, 2022 (a)404 $2,714 $7,244 $12,566 $52,777 $(10,486)$(18,127)$35 $46,723 Balance at September 30, 2022 (a)404 $2,714 $7,244 $12,566 $52,777 $(10,486)$(18,127)$35 $46,723 
Balance at June 30, 2023 (a)Balance at June 30, 2023 (a)398$2,715 $7,237 $12,697 $55,346 $(9,525)$(19,150)$26 $49,346 
Net incomeNet income1,554 16 1,570 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax(736)(736)
Cash dividends declared - CommonCash dividends declared - Common(624)(624)
Cash dividends declared - PreferredCash dividends declared - Preferred(104)(104)
Preferred stock discount accretionPreferred stock discount accretion(2) 
Treasury stock activityTreasury stock activity 12 
OtherOther32 (15)17 
Balance at September 30, 2023 (a)Balance at September 30, 2023 (a)398 $2,715 $7,239 $12,732 $56,170 $(10,261)$(19,141)$27 $49,481 
Nine months endedNine months endedNine months ended
Balance at December 31, 2020 (a)424 $2,713 $3,517 $12,367 $46,848 $2,770 $(14,205)$31 $54,041 
Balance at December 31, 2021 (a)Balance at December 31, 2021 (a)420 $2,713 $5,009 $12,448 $50,228 $409 $(15,112)$31 $55,726 
Net incomeNet income4,381 38 4,419 Net income4,513 52 4,565 
Other comprehensive income (loss), net of tax(1,691)(1,691)
Other comprehensive loss, net of taxOther comprehensive loss, net of tax(10,895)(10,895)
Cash dividends declared - CommonCash dividends declared - Common(1,523)(1,523)Cash dividends declared - Common(1,779)(1,779)
Cash dividends declared - PreferredCash dividends declared - Preferred(162)(162)Cash dividends declared - Preferred(181)(181)
Preferred stock discount accretionPreferred stock discount accretion(3)Preferred stock discount accretion(4)
Preferred stock issuance (b)1,489 1,489 
Common stock activity12 12 
Treasury stock activity(1)78 (322)(244)
Other(13)(31)(44)
Balance at September 30, 2021 (a)423 $2,713 $5,009 $12,444 $49,541 $1,079 $(14,527)$38 $56,297 
Balance at December 31, 2021 (a)420 $2,713 $5,009 $12,448 $50,228 $409 $(15,112)$31 $55,726 
Net income4,513 52 4,565 
Other comprehensive income (loss), net of tax(10,895)(10,895)
Cash dividends declared - Common(1,779)(1,779)
Cash dividends declared - Preferred(181)(181)
Preferred stock discount accretion(4)
Preferred stock issuance (c) (d)2,231 2,231 
Preferred stock issuance (b) (c)Preferred stock issuance (b) (c)2,231 2,231 
Common stock activityCommon stock activity14 15 Common stock activity14 15 
Treasury stock activityTreasury stock activity(16)56 (3,015)(2,959)Treasury stock activity(16)56 (3,015)(2,959)
OtherOther48 (48)Other48 (48) 
Balance at September 30, 2022 (a)Balance at September 30, 2022 (a)404 $2,714 $7,244 $12,566 $52,777 $(10,486)$(18,127)$35 $46,723 Balance at September 30, 2022 (a)404 $2,714 $7,244 $12,566 $52,777 $(10,486)$(18,127)$35 $46,723 
Balance at December 31, 2022 (a)Balance at December 31, 2022 (a)401 $2,714 $5,746 $12,630 $53,572 $(10,172)$(18,716)$38 $45,812 
Cumulative effect of ASU adoptions (d)Cumulative effect of ASU adoptions (d)26 26 
Balance at January 1, 2023 (a)Balance at January 1, 2023 (a)401$2,714 $5,746 $12,630 $53,598 $(10,172)$(18,716)$38 $45,838 
Net incomeNet income4,714 50 4,764 
Other comprehensive loss, net of taxOther comprehensive loss, net of tax(89)(89)
Cash dividends declared - CommonCash dividends declared - Common(1,837)(1,837)
Cash dividends declared - PreferredCash dividends declared - Preferred(299)(299)
Preferred stock discount accretionPreferred stock discount accretion(6)
Preferred stock issuance (e)Preferred stock issuance (e)1,487 1,487 
Common stock activityCommon stock activity16 17 
Treasury stock activityTreasury stock activity(3)76 (425)(349)
OtherOther10 (61)(51)
Balance at September 30, 2023 (a)Balance at September 30, 2023 (a)398 $2,715 $7,239 $12,732 $56,170 $(10,261)$(19,141)$27 $49,481 
(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 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.
(c)On August 19, 2022, PNC issued 1,250,000 depositary shares each representing 1/100th ownership in a share of 6.200% fixed-rate reset non-cumulative perpetual preferred stock, Series V, with a par value of $1 per share.
(d)(c)On April 26, 2022, PNC issued 1,000,000 depositary shares each representing 1/100th ownership in a share of 6.000% fixed-rate reset non-cumulative perpetual preferred stock, Series U, with a par value of $1 per share.
.(d)Represents the cumulative effect of adopting ASU 2022-02.
(e)On February 7, 2023, PNC issued 1,500,000 depositary shares each representing 1/100th ownership in a share of 6.250% fixed-rate reset non-cumulative perpetual preferred stock, Series W, with a par value of $1 per share.
The PNC Financial Services Group, Inc. – Form 10-Q 7177  


Details of other comprehensive income (loss) are as follows:

Table 59:62: Other Comprehensive Income (Loss)

Three months ended September 30Nine months ended September 30 Three months ended September 30Nine months ended September 30
20222021202220212023202220232022
In millionsIn millionsPre-taxTax effectAfter-
tax
Pre-taxTax effectAfter-taxPre-taxTax effectAfter-taxPre-taxTax effectAfter-taxIn millionsPre-taxTax effectAfter-taxPre-taxTax effectAfter-taxPre-taxTax effectAfter-taxPre-taxTax effectAfter-tax
Debt securitiesDebt securitiesDebt securities
Net unrealized gains (losses) on securitiesNet unrealized gains (losses) on securities$(1,998)$471 $(1,527)$(320)$76 $(244)$(11,245)$2,650 $(8,595)$(1,446)$341 $(1,105)Net unrealized gains (losses) on securities$(1,171)$280 $(891)$(1,998)$471 $(1,527)$(993)$238 $(755)$(11,245)$2,650 $(8,595)
Less: Net realized gains (losses) reclassified to
earnings (a)
Less: Net realized gains (losses) reclassified to
earnings (a)
(260)61 (199)(1)(477)112 (365)25 (6)19 Less: Net realized gains (losses) reclassified to
earnings (a)
(239)57 (182)(260)61 (199)(689)163 (526)(477)112 (365)
Net changeNet change(1,738)410 (1,328)(323)77 (246)(10,768)2,538 (8,230)(1,471)347 (1,124)Net change(932)223 (709)(1,738)410 (1,328)(304)75 (229)(10,768)2,538 (8,230)
Cash flow hedge derivativesCash flow hedge derivativesCash flow hedge derivatives
Net unrealized gains (losses) on cash flow hedge derivativesNet unrealized gains (losses) on cash flow hedge derivatives(1,154)272 (882)(59)14 (45)(3,486)821 (2,665)(369)87 (282)Net unrealized gains (losses) on cash flow hedge derivatives(461)122 (339)(1,154)272 (882)(953)238 (715)(3,486)821 (2,665)
Less: Net realized gains (losses) reclassified to earnings (a)Less: Net realized gains (losses) reclassified to earnings (a)(129)30 (99)115 (27)88 (2)(2)358 (84)274 Less: Net realized gains (losses) reclassified to earnings (a)(426)112 (314)(129)30 (99)(1,129)278 (851)(2) (2)
Net changeNet change(1,025)242 (783)(174)41 (133)(3,484)821 (2,663)(727)171 (556)Net change(35)10 (25)(1,025)242 (783)176 (40)136 (3,484)821 (2,663)
Pension and other postretirement benefit plan adjustmentsPension and other postretirement benefit plan adjustmentsPension 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)(1)64 (16)48 (11)(8)Net pension and other postretirement benefit plan activity and other reclassified to earnings (b)(1) (1)(3) (3)64 (16)48 
Net changeNet change(1) 64 (16)48 (11)(8)Net change(1) (1)(3) (3)64 (16)48 
OtherOtherOther
Net unrealized gains (losses) on other transactionsNet unrealized gains (losses) on other transactions(22)(18)(8)(7)(3)(47)(50)(5)(3)Net unrealized gains (losses) on other transactions(3)(2)(22)(18)(1)(3)(47)(50)
Net changeNet change(22)(18)(8)(7)(3)(47)(50)(5)(3)Net change(3)(2)(22)(18)(1)(3)(47)(50)
Total other comprehensive income (loss)Total other comprehensive income (loss)$(2,757)$629 $(2,128)$(494)$110 $(384)$(14,191)$3,296 $(10,895)$(2,207)$516 $(1,691)Total other comprehensive income (loss)$(965)$229 $(736)$(2,757)$629 $(2,128)$(123)$34 $(89)$(14,191)$3,296 $(10,895)
(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 noninterestNoninterest expense on the Consolidated Income Statement.


Table 60:63: Accumulated Other Comprehensive Income (Loss) Components
In millions, after-taxIn millions, after-taxDebt securitiesCash flow hedge derivativesPension and  other postretirement benefit plan adjustmentsOtherTotalIn millions, after-taxDebt securitiesCash flow hedge derivativesPension and  other postretirement benefit plan adjustmentsOtherTotal
Three months endedThree months endedThree months ended
Balance at June 30, 2021$1,584 $236 $(355)$(2)$1,463 
Net activity(246)(133)(7)(384)
Balance at September 30, 2021$1,338 $103 $(353)$(9)$1,079 
Balance at June 30, 2022Balance at June 30, 2022$(6,313)$(2,081)$74 $(38)$(8,358)Balance at June 30, 2022$(6,313)$(2,081)$74 $(38)$(8,358)
Net activityNet activity(1,328)(783)(18)(2,128)Net activity(1,328)(783)(18)(2,128)
Balance at September 30, 2022 (a)Balance at September 30, 2022 (a)$(7,641)$(2,864)$75 $(56)$(10,486)Balance at September 30, 2022 (a)$(7,641)$(2,864)$75 $(56)$(10,486)
Balance at June 30, 2023Balance at June 30, 2023$(6,684)$(2,544)$(254)$(43)$(9,525)
Net activityNet activity(709)(25) (2)(736)
Balance at September 30, 2023 (a)Balance at September 30, 2023 (a)$(7,393)$(2,569)$(254)$(45)$(10,261)
Nine months endedNine months endedNine months ended
Balance at December 31, 2020$2,462 $659 $(345)$(6)$2,770 
Net activity(1,124)(556)(8)(3)(1,691)
Balance at September 30, 2021$1,338 $103 $(353)$(9)$1,079 
Balance at December 31, 2021Balance at December 31, 2021$589 $(201)$27 $(6)$409 Balance at December 31, 2021$589 $(201)$27 $(6)$409 
Net activityNet activity(8,230)(2,663)48 (50)(10,895)Net activity(8,230)(2,663)48 (50)(10,895)
Balance at September 30, 2022 (a)Balance at September 30, 2022 (a)$(7,641)$(2,864)$75 $(56)$(10,486)Balance at September 30, 2022 (a)$(7,641)$(2,864)$75 $(56)$(10,486)
Balance at December 31, 2022Balance at December 31, 2022$(7,164)$(2,705)$(251)$(52)$(10,172)
Net activityNet activity(229)136 (3)(89)
Balance at September 30, 2023 (a)Balance at September 30, 2023 (a)$(7,393)$(2,569)$(254)$(45)$(10,261)
(a)At September 30, 2022, AOCI included pretax losses of $297 million and $132 million from derivatives that hedged the purchase of investment securities classified as held to maturity.maturity at September 30, 2023 and September 30, 2022, respectively.
7278    The PNC Financial Services Group, Inc. – Form 10-Q



The following table provides the dividends per share for PNC'sPNC’s common and preferred stock:

Table 61:64: Dividends Per Share (a)
Three months ended September 30Nine months ended September 30Three months ended September 30Nine months ended September 30
20222021202220212023202220232022
Common StockCommon Stock$1.50 $1.25 $4.25 $3.55 Common Stock$1.55 $1.50 $4.55 $4.25 
Preferred StockPreferred StockPreferred Stock
Series B Series B$0.45 $0.45 $1.35 $1.35  Series B$0.45 $0.45 $1.35 $1.35 
Series O Series O$1,269 $3,375 $3,230 $6,750  Series O$2,294 $1,269 $6,468 $3,230 
Series P Series P$1,368 $1,531 $4,431 $4,594  Series P $1,368  $4,431 
Series R $2,425 $2,425 
Series R (b) Series R (b)$2,181 $4,606 $2,425 
Series SSeries S $2,500 $2,500 Series S $2,500 $2,500 
Series T Series T$850 $2,550  Series T$850 $850 $2,550 $2,550 
Series USeries U$1,817 $1,817 Series U$1,500 $1,817 $4,500 $1,817 
Series VSeries V$1,550  $4,650 
Series WSeries W$1,563 $3,785 
(a)Dividends are payable quarterly, other than Series R and Series S preferred stock, which is payable semiannually.
(b) Beginning September 1, 2023, Series R preferred stock dividends are payable semiannually. On August 19, 2022, PNC issued 1,250,000 depositary shares each representing 1/100th ownership in a share of 6.200% fixed-rate reset non-cumulative perpetual preferred stock, Series V, with a par value of $1 per share. Beginning on December 15, 2022, dividends will be paid on the Series V on a quarterly basis (March 15, June 15, September 15, and December 15 of each year).quarterly.

On October 3, 2022,2, 2023, the PNC Board of Directors declared a quarterly cash dividend on common stock of $1.50$1.55 per share payable onshare. The dividend, with a payment date of November 5, 2022.
2023, will be payable the next business day.



































The PNC Financial Services Group, Inc. – Form 10-Q 79


NOTE 1110 EARNINGS PER SHARE

Table 62:65: Basic and Diluted Earnings Per Common Share
Three months ended September 30Nine months ended September 30 Three months ended September 30Nine months ended September 30
In millions, except per share dataIn millions, except per share data2022202120222021In millions, except per share data2023202220232022
BasicBasicBasic
Net incomeNet income$1,640 $1,490 $4,565 $4,419 Net income$1,570 $1,640 $4,764 $4,565 
Less:Less:Less:
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests16 16 52 38 Net income attributable to noncontrolling interests16 16 50 52 
Preferred stock dividendsPreferred stock dividends65 57 181 162 Preferred stock dividends104 65 299 181 
Preferred stock discount accretion and redemptionsPreferred stock discount accretion and redemptionsPreferred stock discount accretion and redemptions
Net income attributable to common shareholdersNet income attributable to common shareholders1,558 1,416 4,328 4,216 Net income attributable to common shareholders1,448 1,558 4,409 4,328 
Less: Dividends and undistributed earnings allocated to nonvested restricted
shares
Less: Dividends and undistributed earnings allocated to nonvested restricted
shares
21 21 Less: Dividends and undistributed earnings allocated to nonvested restricted shares23 21 
Net income attributable to basic common shareholdersNet income attributable to basic common shareholders$1,550 $1,408 $4,307 $4,195 Net income attributable to basic common shareholders$1,440 $1,550 $4,386 $4,307 
Basic weighted-average common shares outstandingBasic weighted-average common shares outstanding410 426 414 426 Basic weighted-average common shares outstanding400 410 401 414 
Basic earnings per common share (a)Basic earnings per common share (a)$3.78 $3.31 $10.39 $9.84 Basic earnings per common share (a)$3.60 $3.78 $10.95 $10.39 
DilutedDilutedDiluted
Net income attributable to diluted common shareholders
Net income attributable to diluted common shareholders
$1,550 $1,408 $4,307 $4,195 Net income attributable to diluted common shareholders
$1,440 $1,550 $4,386 $4,307 
Basic weighted-average common shares outstandingBasic weighted-average common shares outstanding410 426414 426Basic weighted-average common shares outstanding400 410401 414
Dilutive potential common sharesDilutive potential common sharesDilutive potential common shares 
Diluted weighted-average common shares outstandingDiluted weighted-average common shares outstanding410 426 415 427 Diluted weighted-average common shares outstanding400 410 401 415 
Diluted earnings per common share (a)Diluted earnings per common share (a)$3.78 $3.30 $10.39 $9.83 Diluted earnings per common share (a)$3.60 $3.78 $10.94 $10.39 
(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).


80The PNC Financial Services Group, Inc. – Form 10-Q
73


NOTE 1211 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 the Notes To Consolidated Financial Statements included in Item 8 of our 2021 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 the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K.

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 the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 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 63:66: Fair Value Measurements – Recurring Basis Summary

September 30, 2022December 31, 2021 September 30, 2023December 31, 2022
In millionsIn millionsLevel 1Level 2Level 3Total
Fair Value
Level 1Level 2Level 3Total
Fair Value
In millionsLevel 1Level 2Level 3Total
Fair Value
Level 1Level 2Level 3Total
Fair Value
AssetsAssetsAssets
Residential mortgage loans held for saleResidential mortgage loans held for sale$719 $116 $835 $1,221 $81 $1,302 Residential mortgage loans held for sale$432 $97 $529 $411 $243 $654 
Commercial mortgage loans held for saleCommercial mortgage loans held for sale200 35 235 526 49 575 Commercial mortgage loans held for sale354 25 379 243 33 276 
Securities available for saleSecurities available for saleSecurities available for sale
U.S. Treasury and government agenciesU.S. Treasury and government agencies$9,938 280 10,218 $41,873 4,291 46,164 U.S. Treasury and government agencies$6,320 397 6,717 $8,108 262 8,370 
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency28,388 28,388 67,632 67,632 Agency26,899 26,899 28,823 28,823 
Non-agencyNon-agency871 871 61 1,097 1,158 Non-agency713 713  819 819 
Commercial mortgage-backedCommercial mortgage-backedCommercial mortgage-backed
AgencyAgency1,755 1,755 1,773 1,773 Agency1,544 1,544 1,675 1,675 
Non-agencyNon-agency1,300 1,303 3,433 33,436 Non-agency828 95 923 1,253 31,256 
Asset-backedAsset-backed127 132 6,246 163 6,409 Asset-backed992 103 1,095 124 129 
OtherOther3,062 69 3,131 4,895 69 4,964 Other2,643 56 2,699 3,032 55 3,087 
Total securities available for saleTotal securities available for sale9,938 34,790 1,070 45,798 41,873 88,331 1,332 131,536 Total securities available for sale6,320 33,303 967 40,590 8,108 35,050 1,001 44,159 
LoansLoans503 775 1,278 617 884 1,501 Loans506 738 1,244 541 769 1,310 
Equity investments (a)Equity investments (a)1,074 1,795 3,050 1,373 1,680 3,231 Equity investments (a)696 1,729 2,618 1,173 1,778 3,147 
Residential mortgage servicing rightsResidential mortgage servicing rights2,074 2,074 1,078 1,078 Residential mortgage servicing rights2,837 2,837 2,310 2,310 
Commercial mortgage servicing rightsCommercial mortgage servicing rights1,132 1,132 740 740 Commercial mortgage servicing rights1,169 1,169 1,113 1,113 
Trading securities (b)Trading securities (b)934 1,673 2,607 250 1,601 1,851 Trading securities (b)464 2,002 2,466 798 1,168 1,966 
Financial derivatives (b) (c)Financial derivatives (b) (c)5,857 5,868 55,109 38 5,152 Financial derivatives (b) (c)11 3,821 3,838 163,747 3,768 
Other assetsOther assets337 101 438 404 114 518 Other assets376 67 448 352 80 432 
Total assets (d)Total assets (d)$12,286 $43,843 $7,005 $63,315 $43,905 $97,519 $5,882 $147,484 Total assets (d)$7,867 $40,485 $7,573 $56,118 $10,447 $41,240 $7,252 $59,135 
LiabilitiesLiabilitiesLiabilities
Other borrowed fundsOther borrowed funds$1,408 $203 $$1,613 $725 $45 $$773 Other borrowed funds$954 $81 $$1,042 $1,230 $232 $$1,466 
Financial derivatives (c) (e)Financial derivatives (c) (e)9,614 120 9,737 3,285 285 3,570 Financial derivatives (c) (e)14 8,098 108 8,220 7,491 123 7,618 
Other liabilitiesOther liabilities269 269 175 175 Other liabilities250 250 294 294 
Total liabilities (f)Total liabilities (f)$1,411 $9,817 $391 $11,619 $725 $3,330 $463 $4,518 Total liabilities (f)$968 $8,179 $365 $9,512 $1,234 $7,723 $421 $9,378 
(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 September 30, 20222023 and December 31, 20212022 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 1312 Financial Derivatives for additional information related to derivative offsetting.
(d)Total assets at fair value as a percentage of total consolidated assets was 11%10% and 26%11% as of September 30, 20222023 and December 31, 2021,2022, respectively. Level 3 assets as a percentage of total assets at fair value was 11%13% and 4%12% at September 30, 20222023 and December 31, 2021,2022, respectively. Level 3 assets as a percentage of total consolidated assets was 1% at both September 30, 20222023 and December 31, 2021.2022.
(e)Included in Other liabilities on the Consolidated Balance Sheet.
(f)Total liabilities at fair value as a percentage of total consolidated liabilities was 2% and 1% at both September 30, 20222023 and December 31, 2021, respectively.2022. Level 3 liabilities as a percentage of total liabilities at fair value was 3% and 10%4% at both September 30, 20222023 and December 31, 2021, respectively.2022. Level 3 liabilities as a percentage of total consolidated liabilities was less than 1% at both September 30, 20222023 and December 31, 2021.2022.
74The PNC Financial Services Group, Inc. – Form 10-Q

81


Reconciliations of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for the three and nine months ended September 30, 2023 and 2022 and 2021 follow:are as follows:

Table 64:67: Reconciliation of Level 3 Assets and Liabilities
Three Months Ended September 30, 20222023
  Total realized / unrealized
gains or losses for the 
period (a)
      Unrealized
gains / losses for the period
on assets and
liabilities held on
Consolidated
Balance Sheet at
Sept. 30, 2022
(a) (c)
  Total realized / unrealized
gains or losses for the 
period (a)
      Unrealized
gains / losses for the period
on assets and
liabilities held on
Consolidated
Balance Sheet at
Sept. 30, 2023 (a) (c)
Level 3 Instruments Only
In millions
Level 3 Instruments Only
In millions
Fair Value June 30, 2022Included in
Earnings
Included
in Other
comprehensive
income (b)
PurchasesSalesIssuancesSettlementsTransfers
into
Level 3
Transfers
out of
Level 3
Fair
Value Sept. 30, 2022
Level 3 Instruments Only
In millions
Fair Value June 30, 2023Included in
Earnings
Included
in Other
comprehensive
income (b)
PurchasesSalesIssuancesSettlementsTransfers
into
Level 3
Transfers
out of
Level 3
Fair
Value Sept. 30, 2023
AssetsAssets    Assets    
Residential mortgage
loans held for sale
Residential mortgage
loans held for sale
$83 $(4)$46 $(1)$(2)$$(14)(d)$116 $(4) Residential mortgage
loans held for sale
$191 $(3) $$(89) $(2)$$(4)(e)$97 $(4) 
Commercial mortgage
loans held for sale
Commercial mortgage
loans held for sale
38 (3)35  Commercial mortgage
loans held for sale
25        25  
Securities available for saleSecurities available for saleSecurities available for sale     
Residential mortgage-
backed non-agency
Residential mortgage-
backed non-agency
925 $(18)(40)871  Residential mortgage-
backed non-agency
768 $(20)   (40) 713  
Commercial mortgage-
backed non-agency
Commercial mortgage-
backed non-agency
 Commercial mortgage-
backed non-agency
      92 95  
Asset-backedAsset-backed138  (5)(6)127  Asset-backed117  (3)   (11) 103  
OtherOther67  69  Other54 (1)  (1) 56  
Total securities
available for sale
Total securities
available for sale
1,133 (21) (46)1,070  Total securities
available for sale
942 (22)(52)92 967  
LoansLoans804 (1)11 (2)(35)(2)(d)775  Loans745  19   (27)(6)(e)738 
Equity investmentsEquity investments1,867 167 69 (308)1,795 65  Equity investments1,623 (9) 212 (97)    1,729 (16) 
Residential mortgage
servicing rights
Residential mortgage
servicing rights
1,620 135 363 $11 (55)2,074 135 Residential mortgage
servicing rights
2,349 215  329  $(63) 2,837 215 
Commercial mortgage
servicing rights
Commercial mortgage
servicing rights
988 176 17 (56)1,132 176  Commercial mortgage
servicing rights
1,106 130  10  (83) 1,169 130  
Financial derivativesFinancial derivatives13 (10) Financial derivatives    (6)  
Other assetsOther assets  
Total assetsTotal assets$6,546 $481 $(21)$497 $(311)$28 $(207)$$(16)$7,005 $379 Total assets$6,987 $348 $(22)$577 $(186)$13 $(233)$99 $(10)$7,573 $337 
LiabilitiesLiabilities Liabilities 
Other borrowed fundsOther borrowed funds$ $(1)$ Other borrowed funds$$$(1)$ 
Financial derivativesFinancial derivatives213 $(11)$(86)120 $(7) Financial derivatives140 $50 $ (84)108 $51  
Other liabilitiesOther liabilities182 26 $32 $362 (333)269 24  Other liabilities239   329 (324)250   
Total liabilitiesTotal liabilities$398 $15 $32 $$362 $(420)$391 $17  Total liabilities$384 $56  $$332 $(409)$365 $51  
Net gains (losses)Net gains (losses) $466 (e)   $362 (f) Net gains (losses) $292 (f)   $286 (g) 

82The PNC Financial Services Group, Inc. – Form 10-Q
75


(Continued from previous page)

Three Months Ended September 30, 20212022
  Total realized / unrealized
gains or losses for the 
period (a)
  Unrealized gains/losses for the period on assets and liabilities held on Consolidated Balance Sheet at Sept. 30, 2021
 (a) (c)
  Total realized / unrealized
gains or losses for the 
period (a)
  Unrealized gains/losses for the period on assets and liabilities held on Consolidated Balance Sheet at Sept. 30, 2022 (a) (c)
Level 3 Instruments Only
In millions
Level 3 Instruments Only
In millions
Fair Value June 30, 2021Included in EarningsIncluded in Other comprehensive income (b)PurchasesSalesIssuancesSettlementsTransfers into Level 3Transfers out of Level 3Impact from BBVA AcquisitionFair Value Sept. 30, 2021Level 3 Instruments Only
In millions
Fair Value June 30, 2022Included in EarningsIncluded in Other comprehensive income (b)PurchasesSalesIssuancesSettlementsTransfers into Level 3Transfers out of Level 3Fair Value Sept. 30, 2022
AssetsAssets    Assets    
Residential mortgage
loans held for sale
Residential mortgage
loans held for sale
$119 $(1)$$(29)$(6)$$(6)(d)$86 $(1)Residential mortgage
loans held for sale
$83 $(4)$46 $(1)$(2)$$(14)(e)$116 $(4)
Commercial mortgage
loans held for sale
Commercial mortgage
loans held for sale
52 (1)51 Commercial mortgage
loans held for sale
38  (3)35  
Other consumer loans held for sale239 (256)$17 
Securities available for saleSecurities available for saleSecurities available for sale
Residential mortgage-
backed non-agency
Residential mortgage-
backed non-agency
1,237 10 $(2)(77)1,168 Residential mortgage-
backed non-agency
925 $(18)(40)871 
Commercial mortgage-backed non-agencyCommercial mortgage-backed non-agency11 (8)Commercial mortgage-backed non-agency 
Asset-backedAsset-backed175 (9)172 Asset-backed138  (5)(6)127 
OtherOther73 (9)69 Other67    69 
Total securities
available for sale
Total securities
available for sale
1,496 11 (5)(9)(83)1,412 Total securities
available for sale
1,133 (21)  (46)1,070 
LoansLoans979 12 14 (6)(58)(5)(d)936 12 Loans804 (1)11 (2)(35)(2)(e)775  
Equity investmentsEquity investments1,540 265 158 (433)1,530 95 Equity investments1,867 167 69 (308)1,795 65 
Residential mortgage
servicing rights
Residential mortgage
servicing rights
1,111 49 28 $24 (82)1,130 49 Residential mortgage
servicing rights
1,620 135 363 $11 (55)2,074 135 
Commercial mortgage
servicing rights
Commercial mortgage
servicing rights
682 24 22 (30)703 24 Commercial mortgage
servicing rights
988 176 17 (56)1,132 176 
Financial derivativesFinancial derivatives87 23 (55)56 39 Financial derivatives13 (10)
Total assetsTotal assets$6,305 $382 $(5)$213 $(733)$46 $(314)$$(11)$17 $5,904 $218 Total assets$6,546 $481 $(21)$497 $(311)$28 $(207)$$(16)$7,005 $379 
LiabilitiesLiabilitiesLiabilities
Other borrowed fundsOther borrowed funds$$$(1)$Other borrowed funds$ $(1)$
Financial derivativesFinancial derivatives200 $165 $(37)331 $171 Financial derivatives213 $(11)$(86)120 $(7)
Other liabilitiesOther liabilities124 45 (6)167 44 Other liabilities182 26 $32 $362 (333)269 24 
Total liabilitiesTotal liabilities$326 $210 $$$(44)$502 $215 Total liabilities$398 $15 $32 $$362 $(420)$391 $17 
Net gains (losses)Net gains (losses)$172 (e)$(f)Net gains (losses)$466 (f)$362 (g)


76The PNC Financial Services Group, Inc. – Form 10-Q

83


(Continued from previous page)

Nine Months Ended September 30, 20222023

  Total realized / unrealized
gains or losses for the 
period (a)
     Unrealized
gains / losses for the period
on assets and
liabilities held on
Consolidated
Balance Sheet at
Sept. 30, 2022
(a) (c)
  Total realized / unrealized
gains or losses for the 
period (a)
     Unrealized
gains / losses for the period
on assets and
liabilities held on
Consolidated
Balance Sheet at
Sept. 30, 2023 (a) (c)
Level 3 Instruments Only
In millions
Level 3 Instruments Only
In millions
Fair
Value
Dec. 31,
2021
Included in
Earnings
Included
in Other
comprehensive
income (b)
PurchasesSalesIssuancesSettlementsTransfers
into
Level 3
Transfers
out of
Level 3
 Fair
Value Sept. 30, 2022
Level 3 Instruments Only
In millions
Fair
Value
Dec. 31,
2022
Included in
Earnings
Included
in Other
comprehensive
income (b)
PurchasesSalesIssuancesSettlementsTransfers
into
Level 3
Transfers
out of
Level 3
 Fair
Value Sept. 30, 2023
AssetsAssets   Assets   
Residential mortgage
loans held for sale
Residential mortgage
loans held for sale
$81 $(6)$91 $(33)$(11)$22 $(28)(d)$116 $(6) Residential mortgage
loans held for sale
$243 $(3)$12 $(131)$(9)$$(19)(e)$97 $(3) 
Commercial mortgage
loans held for sale
Commercial mortgage
loans held for sale
49 (4) (10)35 (4) Commercial mortgage
loans held for sale
33   (8)25   
Securities available for saleSecurities available for sale Securities available for sale 
Residential mortgage-
backed non-agency
Residential mortgage-
backed non-agency
1,097 19 $(84)(161)871 Residential mortgage-
backed non-agency
819 13 $(16)(103)713 
Commercial mortgage-
backed non-agency
Commercial mortgage-
backed non-agency
Commercial mortgage-
backed non-agency
92 95 
Asset-backedAsset-backed163 (18)(19)127  Asset-backed124 (3)(19)103  
OtherOther69  (3) 69   Other55 (1)(3)(4) 56   
Total securities
available for sale
Total securities
available for sale
1,332 20  (102)(183) 1,070 Total securities
available for sale
1,001 13  (22)(126)95  967 
LoansLoans884 20 31 (10)(132)(18)(d)775 20 Loans769 11 39 (1)(77)17 (20)(e)738 11 
Equity investmentsEquity investments1,680 312  185 (382)1,795 211  Equity investments1,778 136  444 (495)(134)(d)1,729 103  
Residential mortgage
servicing rights
Residential mortgage
servicing rights
1,078 505 620 $49 (178)2,074 506 Residential mortgage
servicing rights
2,310 248 438 $17 (176)2,837 248 
Commercial mortgage
servicing rights
Commercial mortgage
servicing rights
740 438  32 52 (130)1,132 438  Commercial mortgage
servicing rights
1,113 238  27 38 (247)1,169 238  
Financial derivativesFinancial derivatives38 (2)(32)18  Financial derivatives13 (15)16  
Other assetsOther assets  
Total assetsTotal assets$5,882 $1,283  $(102)$966 $(425)$101 $(676)$22 $(46)$7,005 $1,183  Total assets$7,252 $656  $(22)$970 $(627)$55 $(658)$120 $(173)7,573 $613  
LiabilitiesLiabilities Liabilities 
Other borrowed fundsOther borrowed funds$$$(5)$ Other borrowed funds$$$(6)$ 
Financial derivativesFinancial derivatives285 $12 $10 (187)120 $22  Financial derivatives123 $168 $(188)108 $173  
Other liabilitiesOther liabilities175 47 $32 604 (589) 269 39  Other liabilities294 61  436 (541) 250 41  
Total liabilitiesTotal liabilities$463 $59  $32 $10 $608 $(781)$391 $61  Total liabilities$421 $229   $$445 $(735)$365 $214  
Net gains (losses)Net gains (losses) $1,224 (e)   $1,122 (f) Net gains (losses) $427 (f)   $399 (g) 


84The PNC Financial Services Group, Inc. – Form 10-Q
77


(Continued from previous page)

Nine Months Ended September 30, 20212022
  Total realized / unrealized
gains or losses for the 
period (a)
    Unrealized
gains / losses for the period
on assets and
liabilities held on
Consolidated
Balance Sheet at
Sept. 30, 2021
(a) (c)
  Total realized / unrealized
gains or losses for the 
period (a)
    
Unrealized
gains / losses for the period
on assets and
liabilities held on
Consolidated
Balance Sheet at
Sept. 30, 2022
(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)
PurchasesSalesIssuancesSettlementsTransfers
into
Level 3
Transfers
out of
Level 3
Impact from BBVA AcquisitionFair Value Sept. 30, 2021Level 3 Instruments Only
In millions
Fair
Value
Dec. 31,
2021
Included in
Earnings
Included
in Other
comprehensive
income (b)
PurchasesSalesIssuancesSettlementsTransfers
into
Level 3
Transfers
out of
Level 3
Fair Value Sept. 30, 2022
AssetsAssets   Assets   
Residential mortgage
loans held for sale
Residential mortgage
loans held for sale
$163 $(1)$43 $(81)$(34)$12 $(16)(d)$86 $(1)Residential mortgage
loans held for sale
$81 $(6)$91 $(33)$(11)$22 $(28)(e)$116 $(6)
Commercial mortgage
loans held for sale
Commercial mortgage
loans held for sale
57 (1)(6)51 Commercial mortgage
loans held for sale
49 (4) (10)35 (4)
Other consumer loans held for sale(256)$256 
Securities available for saleSecurities available for saleSecurities available for sale
Residential mortgage-
backed non-agency
Residential mortgage-
backed non-agency
1,365 30 $14 (241)1,168 Residential mortgage-
backed non-agency
1,097 19 $(84)(161)871 
Commercial mortgage-
backed non-agency
Commercial mortgage-
backed non-agency
11 (8)Commercial mortgage-
backed non-agency
 
Asset-backedAsset-backed199 10 (39)172 Asset-backed163 (18)(19)127 
OtherOther72 (9)69 Other69   (3)69 
Total securities
available for sale
Total securities
available for sale
1,647 32 17 (9)(280)1,412 Total securities
available for sale
1,332 20 (102) (183)1,070 
LoansLoans647 32 111 (12)(121)(13)(d)292 936 32 Loans884 20 31 (10)(132)(18)(e)775 20 
Equity investmentsEquity investments1,263 489 290 (512)1,530 294 Equity investments1,680 312 185 (382)1,795 211 
Residential mortgage
servicing rights
Residential mortgage
servicing rights
673 203 400 $61 (242)35 1,130 203 Residential mortgage
servicing rights
1,078 505 620 $49 (178)2,074 506 
Commercial mortgage
servicing rights
Commercial mortgage
servicing rights
569 134 26 61 (87)703 134 Commercial mortgage
servicing rights
740 438 32 52 (130)1,132 438 
Financial derivativesFinancial derivatives118 69 (140)56 87 Financial derivatives38 (2)(32)18 
Total assetsTotal assets$5,137 $957 $17 $879 $(876)$122 $(903)$12 $(29)$588 $5,904 $750 Total assets$5,882 $1,283 $(102)$966 $(425)$101 $(676)$22 $(46)$7,005 $1,183 
LiabilitiesLiabilitiesLiabilities
Other borrowed fundsOther borrowed funds$$$(2)$Other borrowed funds$$$(5)$
Financial derivativesFinancial derivatives273 $155 $(110)$331 $156 Financial derivatives285 $12 $10 (187)120 $22 
Other liabilitiesOther liabilities43 108 321 (305)167 81 Other liabilities175 47 $32 604 (589)269 39 
Total liabilitiesTotal liabilities$318 $263 $$325 $(417)$$502 $237 Total liabilities$463 $59 $32 $10 $608 $(781)$391 $61 
Net gains (losses)Net gains (losses)$694 (e)$513 (f)Net gains (losses)$1,224 (f)$1,122 (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 insignificant.
(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)Transfers out of Level 3 during the current period were due to valuation methodology changes for certain private company investments. See Note 1 Accounting Policies in our 2022 Form 10-K for more information on our accounting for private company investments.
(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.
(e)(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.
(f)(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.



78The PNC Financial Services Group, Inc. – Form 10-Q

85


Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities follows:

Table 65:68: Fair Value Measurements – Recurring Quantitative Information

September 30, 2023
Level 3 Instruments Only
Dollars in millions
Fair ValueValuation TechniquesUnobservable InputsRange (Weighted-Average) (a)
Commercial mortgage loans held for sale$25 Discounted cash flowSpread over the benchmark curve (b)585bps - 7,140bps (2,611bps)
Residential mortgage-backed
    non-agency securities
713 Priced by a third-party vendor using a discounted cash flow pricing modelConstant prepayment rate1.0% - 27.9% (3.8%)
Constant default rate0.0% - 12.0% (2.8%)
Loss severity10.0% - 71.4% (42.1%)
Spread over the benchmark curve (b)250bps weighted-average
Asset-backed securities103 Priced by a third-party vendor using a discounted cash flow pricing modelConstant prepayment rate1.0% - 11.0% (5.3%)
Constant default rate0.0% - 4.3% (1.7%)
Loss severity30.0% - 100.0% (48.8%)
Spread over the benchmark curve (b)256bps weighted-average
Loans - Residential real estate - Uninsured555 Consensus pricing (c)Cumulative default rate3.6% - 100.0% (59.6%)
Loss severity0.0% - 100.0% (5.4%)
Discount rate5.5% - 7.5% (5.8%)
Loans - Residential real estate75 Discounted cash flowLoss severity6.0% weighted-average
Discount rate8.4% weighted-average
Loans - Home equity - First-lien19 Consensus pricing (c)Cumulative default rate3.6% - 100.0% (63.3%)
Loss severity0.0% - 100.0% (15.2%)
Discount rate5.5% - 7.5% (6.3%)
Loans - Home equity89 Consensus pricing (c)Credit and liquidity discount0.4% - 100.0% (44.7%)
Equity investments1,729 Multiple of adjusted earningsMultiple of earnings4.5x - 20.0x (9.7x)
Residential mortgage servicing rights2,837 Discounted cash flowConstant prepayment rate0.0% - 29.7% (5.8%)
Spread over the benchmark curve (b)337bps - 1,650bps (765bps)
Commercial mortgage servicing rights1,169 Discounted cash flowConstant prepayment rate5.2% - 7.4% (5.4%)
Discount rate8.3% - 10.7% (10.2%)
Financial derivatives - Swaps related to
    sales of certain Visa Class B
    common shares
(99)Discounted cash flowEstimated conversion factor of Visa Class B shares into Class A shares1.59 weighted-average
Estimated annual growth rate of Visa Class A share price16.0%
Estimated litigation resolution dateQ1 2024
Insignificant Level 3 assets, net of
    liabilities (d)
(7)
Total Level 3 assets, net of liabilities (e)$7,208 













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



(Continued from previous page)

December 31, 2022
Level 3 Instruments Only
Dollars in millions
Fair ValueValuation TechniquesUnobservable InputsRange (Weighted-Average) (a)
Commercial mortgage loans held for sale$3533 Discounted cash flowSpread over the benchmark curve (b)580bps585bps - 3,665bps (1,004bps)2,465bps (959bps)
Residential mortgage-backed
    non-agency securities
871819 Priced by a third-party vendor using a discounted cash flow pricing modelConstant prepayment rate1.0% - 27.9% (10.1%(9.9%)
Constant default rate0.0% - 13.0% (4.1%(4.0%)
Loss severity15.0% - 80.0% (46.1%)
Spread over the benchmark curve (b)233bps289bps weighted-average
Asset-backed securities127124 Priced by a third-party vendor using a discounted cash flow pricing modelConstant prepayment rate1.0% - 40.0% (9.0%(7.5%)
Constant default rate0.0% - 7.3% (2.2%(2.1%)
Loss severity15.0%20.0% - 100.0% (48.5%(49.0%)
Spread over the benchmark curve (b)314bps296bps weighted-average
Loans - Residential real estate - Uninsured576570 Consensus pricing (c)Cumulative default rate3.6% - 100.0% (68.2%(66.2%)
Loss severity0.0% - 100.0% (6.0%(6.2%)
Discount rate5.5% - 7.5% (5.9%)
Loans - Residential real estate7076 Discounted cash flowLoss severity6.0% weighted-average
Discount rate7.2%7.9% weighted-average
Loans - Home equity - First-lien25 Consensus pricing (c)Cumulative default rate3.6% -100.0% (74.3%- 100.0% (72.5%)
Loss severity0.0% - 100.0% (18.2%(15.3%)
Discount rate5.5% - 7.5% (6.6%(6.5%)
Loans - Home equity10498 Consensus pricing (c)Credit and liquidityLiquidity discount0.4% - 100.0% (45.7%(46.2%)
Equity investments1,7951,778 Multiple of adjusted earningsMultiple of earnings5.0x4.5x - 86.6x (9.8x)25.0x (9.1x)
Residential mortgage servicing rights2,0742,310 Discounted cash flowConstant prepayment rate0.0% - 35.6% (6.8%34.5% (6.7%)
Spread over the benchmark curve (b)254bps - 1,656bps (759bps)1,653bps (766bps)
Commercial mortgage servicing rights1,1321,113 Discounted cash flowConstant prepayment rate3.9% - 10.0% (4.2%9.8% (4.3%)
Discount rate7.7%7.8% - 10.1% (9.7%)
Financial derivatives - Swaps related to
    sales of certain Visa Class B
    common shares
(100)Discounted cash flowEstimated conversion factor of Visa Class B shares into Class A shares160.6% weighted-average
Estimated annual growth rate of Visa Class A share price16.0%
Estimated length of litigation resolution dateQ2 2023
Insignificant Level 3 assets, net of
    liabilities (d)
(95)
Total Level 3 assets, net of liabilities (e)$6,614 













The PNC Financial Services Group, Inc. – Form 10-Q 79


(Continued from previous page)

December 31, 2021
Level 3 Instruments Only
Dollars in millions
Fair ValueValuation TechniquesUnobservable InputsRange (Weighted-Average) (a)
Commercial mortgage loans held for sale$49 Discounted cash flowSpread over the benchmark curve (b)555bps - 15,990bps (9,996bps)
Residential mortgage-backed
    non-agency securities
1,097 Priced by a third-party vendor using a discounted cash flow pricing modelConstant prepayment rate1.0% - 30.7% (11.3%)
Constant default rate0.0% - 16.9% (4.6%)
Loss severity20.0% - 96.4% (47.6%)
Spread over the benchmark curve (b)163bps weighted-average
Asset-backed securities163 Priced by a third-party vendor using a discounted cash flow pricing modelConstant prepayment rate1.0% -40.0% (11.1%)
Constant default rate1.4% - 20.0% (3.2%)
Loss severity8.0% - 100.0% (57.4%)
Spread over the benchmark curve (b)182bps weighted-average
Loans - Residential real estate622 Consensus pricing (c)Cumulative default rate3.6% - 100.0% (74.2%)
Loss severity0.0% - 100.0% (6.9%)
Discount rate4.8% - 6.8% (5.2%)
Loans - Residential real estate109 Discounted cash flowLoss severity6.0% weighted-average
Discount rate3.5% weighted-average
Loans - Home equity28 Consensus pricing (c)Cumulative default rate3.6% - 100.0% (75.8%)
Loss severity0.0% - 98.4% (17.7%)
Discount rate4.8% - 6.8% (6.0%)
Loans - Home equity125 Consensus pricing (c)Credit and Liquidity discount0.5% - 100.0% (47.3%)
Equity investments1,680 Multiple of adjusted earningsMultiple of earnings5.0x - 14.4x (8.8x)
Residential mortgage servicing rights1,078 Discounted cash flowConstant prepayment rate0.0% - 41.0% (12.6%)
Spread over the benchmark curve (b)249bps - 2,218bps (857bps)
Commercial mortgage servicing rights740 Discounted cash flowConstant prepayment rate5.0% - 15.5% (5.5%)
Discount rate5.4% - 8.0% (7.8%(9.8%)
Financial derivatives - Swaps related to
    sales of certain Visa Class B
    common shares
(277)(107)Discounted cash flowEstimated conversion factor of Visa Class B shares into Class A shares161.8%1.61 weighted-average
Estimated annual growth rate of Visa Class A share price16.0%
Estimated length of litigation
resolution date
Q2 2023
Insignificant Level 3 assets, net of
    liabilities (d)
(8) 
Total Level 3 assets, net of liabilities (e)$5,4196,831    
(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 $7.0$7.6 billion and total Level 3 liabilities of $0.4 billion as of September 30, 20222023 and $5.9$7.3 billion and $0.5$0.4 billion as of December 31, 2021,2022, 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 66.69. 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 the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K.









80The PNC Financial Services Group, Inc. – Form 10-Q

87


Assets measured at fair value on a nonrecurring basis follow:

Table 66:69: Fair Value Measurements – Nonrecurring (a) (b) (c)
Fair ValueGains (Losses)
Three months ended
Gains (Losses)
Nine months ended
Fair ValueGains (Losses)
Three months ended
Gains (Losses)
Nine months ended
In millionsIn millionsSeptember 30
2022
December 31
2021
September 30
2022
September 30
2021
September 30
2022
September 30
2021
In millionsSeptember 30
2023
December 31
2022
September 30
2023
September 30
2022
September 30
2023
September 30
2022
AssetsAssetsAssets
Nonaccrual loansNonaccrual loans$211 $348 $(111)$(3)$(145)$(3)Nonaccrual loans$361 $280 $(84)$(111)$(260)$(145)
Equity investmentsEquity investments30  Equity investments57 135 (15)(19)
Loans held for sale(1) (18)
OREO and foreclosed assetsOREO and foreclosed assetsOREO and foreclosed assets11 10 (1)(1)
Long-lived assetsLong-lived assets103 (1)(6)(5)(17)Long-lived assets23 (3)(1)(17)(5)
Total assetsTotal assets$253 $457 $(112)$(10)$(150)$(38)Total assets$433 $448 $(103)$(112)$(297)$(150)
(a)All Level 3 for the periods presented.presented, except for $28 million and $42 million included in Equity investments which were categorized as Level 1 as of September 30, 2023 and December 31, 2022, respectively.
(b)Valuation techniques applied were discounted cash flow and 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 the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K.

Fair values and aggregate unpaid principal balances of certain items for which we elected the fair value option follow:are as follows:

Table 67:70: Fair Value Option – Fair Value and Principal Balances
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
In millionsIn millionsFair ValueAggregate Unpaid
Principal Balance
DifferenceFair ValueAggregate Unpaid
Principal Balance
DifferenceIn millionsFair ValueAggregate Unpaid
Principal Balance
DifferenceFair ValueAggregate Unpaid
Principal Balance
Difference
AssetsAssetsAssets
Residential mortgage loans held for saleResidential mortgage loans held for saleResidential mortgage loans held for sale
Accruing loans less than 90 days past dueAccruing loans less than 90 days past due$769 $794 $(25)$1,249 $1,219 $30 Accruing loans less than 90 days past due$486 $496 $(10)$609 $633 $(24)
Accruing loans 90 days or more past dueAccruing loans 90 days or more past dueAccruing loans 90 days or more past due10 10 
Nonaccrual loansNonaccrual loans58 70 (12)47 57 (10)Nonaccrual loans33 40 (7)40 49 (9)
TotalTotal$835 $872 $(37)$1,302 $1,282 $20 Total$529 $546 $(17)$654 $687 $(33)
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 dueAccruing loans less than 90 days past due$218 $222 $(4)$575 $580 $(5)Accruing loans less than 90 days past due$365 $368 $(3)$261 $256 $
Nonaccrual loansNonaccrual loans1745(28)Nonaccrual loans1443(29)15 44 (29)
TotalTotal$235 $267 $(32)$575 $580 $(5)Total$379 $411 $(32)$276 $300 $(24)
LoansLoansLoans
Accruing loans less than 90 days past dueAccruing loans less than 90 days past due$472 $484 $(12)$487 $498 $(11)Accruing loans less than 90 days past due$505 $518 $(13)$509 $521 $(12)
Accruing loans 90 days or more past dueAccruing loans 90 days or more past due152 166 (14)262 278 (16)Accruing loans 90 days or more past due140 152 (12)155 167 (12)
Nonaccrual loansNonaccrual loans654 893 (239)752 1,028 (276)Nonaccrual loans599 815 (216)646 880 (234)
TotalTotal$1,278 $1,543 $(265)$1,501 $1,804 $(303)Total$1,244 $1,485 $(241)$1,310 $1,568 $(258)
Other assetsOther assets$101 $114 $(13)$105 $107 $(2)Other assets$68 $75 $(7)$80 $80 
LiabilitiesLiabilitiesLiabilities
Other borrowed fundsOther borrowed funds$20 $20 $30 $30 Other borrowed funds$37 $38 $(1)$31 $32 $(1)
Other liabilitiesOther liabilities$175 $175 Other liabilities$141 $141 $196 $196 
(a)There were no accruing loans 90 days or more past due within this category at September 30, 20222023 or December 31, 2021.2022.
88The PNC Financial Services Group, Inc. – Form 10-Q
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The changes in fair value for items for which we elected the fair value option are as follows:

Table 68:71: Fair Value Option – Changes in Fair Value (a)
Gains (Losses)Gains (Losses)Gains (Losses)Gains (Losses)
Three months endedNine months ended Three months endedNine months ended
September 30September 30September 30September 30September 30September 30September 30September 30
In millionsIn millions2022202120222021In millions2023202220232022
AssetsAssetsAssets
Residential mortgage loans held for saleResidential mortgage loans held for sale$(29)$47 $(92)$120 Residential mortgage loans held for sale$(3)$(29)$14 $(92)
Commercial mortgage loans held for saleCommercial mortgage loans held for sale$14 $31 $34 $77 Commercial mortgage loans held for sale$$14 $29 $34 
LoansLoans$$21 $37 $52 Loans$$$17 $37 
Other assetsOther assets$(3)$$(21)$25 Other assets $(3)$(12)$(21)
LiabilitiesLiabilitiesLiabilities
Other liabilitiesOther liabilities$(24)$(40)Other liabilities $(24)$(41)$(40)
(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 September 30, 20222023 and December 31, 2021.2022. For more information regarding the methods and assumptions used to estimate the fair values of financial instruments included in Table 69,72, see Note 15 Fair Value in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K.

Table 69:72: Additional Fair Value Information Related to Other Financial Instruments
CarryingFair Value CarryingFair Value
In millionsIn millionsAmountTotalLevel 1Level 2Level 3In millionsAmountTotalLevel 1Level 2Level 3
September 30, 2022
September 30, 2023September 30, 2023
AssetsAssetsAssets
Cash and due from banksCash and due from banks$6,548 $6,548 $6,548 Cash and due from banks$5,300 $5,300 $5,300 
Interest-earning deposits with banksInterest-earning deposits with banks40,278 40,278 $40,278 Interest-earning deposits with banks41,484 41,484 $41,484 
Securities held to maturitySecurities held to maturity90,660 85,189 30,614 54,431 $144 Securities held to maturity91,803 84,447 30,110 54,189 $148 
Net loans (excludes leases)Net loans (excludes leases)303,348 299,519 299,519 Net loans (excludes leases)305,911 295,609 295,609 
Other assetsOther assets6,178 6,147 6,144 Other assets5,916 5,916 5,915 
Total assetsTotal assets$447,012 $437,681 $37,162 $100,853 $299,666 Total assets$450,414 $432,756 $35,410 $101,588 $295,758 
LiabilitiesLiabilitiesLiabilities
Time depositsTime deposits$10,034 $9,661 $9,661 Time deposits$27,209 $27,142 $27,142 
Borrowed fundsBorrowed funds52,946 52,700 50,981 $1,719 Borrowed funds65,052 65,127 63,943 $1,184 
Unfunded lending related commitmentsUnfunded lending related commitments682 682 682 Unfunded lending related commitments640 640 640 
Other liabilitiesOther liabilities551 551 551 Other liabilities1,106 1,106 1,106 
Total liabilitiesTotal liabilities$64,213 $63,594  $61,193 $2,401 Total liabilities$94,007 $94,015  $92,191 $1,824 
December 31, 2021
December 31, 2022December 31, 2022
AssetsAssetsAssets
Cash and due from banksCash and due from banks$8,004 $8,004 $8,004 Cash and due from banks$7,043 $7,043 $7,043 
Interest-earning deposits with banksInterest-earning deposits with banks74,250 74,250 $74,250 Interest-earning deposits with banks27,320 27,320 $27,320 
Securities held to maturitySecurities held to maturity1,429 1,522 890 456 $176 Securities held to maturity95,183 90,279 30,748 59,377 $154 
Net loans (excludes leases)Net loans (excludes leases)275,874 280,498 280,498 Net loans (excludes leases)313,460 310,864 310,864 
Other assetsOther assets4,205 4,204 4,141 63 Other assets6,022 6,022 6,020 
Total assetsTotal assets$363,762 $368,478 $8,894 $78,847 $280,737 Total assets$449,028 $441,528 $37,791 $92,717 $311,020 
LiabilitiesLiabilitiesLiabilities
Time depositsTime deposits$17,366 $17,180 $17,180 Time deposits$18,470 $18,298 $18,298 
Borrowed fundsBorrowed funds30,011 30,616 28,936 $1,680 Borrowed funds57,182 57,557 55,922 $1,635 
Unfunded lending related commitmentsUnfunded lending related commitments662 662 662 Unfunded lending related commitments694 694 694 
Other liabilitiesOther liabilities449 449 449 Other liabilities660 660 660 
Total liabilitiesTotal liabilities$48,488 $48,907 $46,565 $2,342 Total liabilities$77,006 $77,209 $74,880 $2,329 


82The PNC Financial Services Group, Inc. – Form 10-Q

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The aggregate fair values in Table 6972 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 63)66),
investments accounted for under the equity method,
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),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,
deposit liabilities with no defined or contractual maturities under ASU 2016-01, and
insurance contracts.
NOTE 1312 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 20212022 Form 10-K.




























90The PNC Financial Services Group, Inc. – Form 10-Q
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The following tableTable 73 presents the notional and gross fair value amounts of all derivative assets and liabilities held by us:us.

During the second quarter, in anticipation of LIBOR’s cessation on June 30, 2023, LIBOR-indexed interest-rate swap contracts with central clearing counterparties were subject to a conversion process whereby an individual LIBOR swap contract was exchanged for a SOFR replacement swap contract, along with one or more overlay swap contracts replicating the final LIBOR cash flows on the original swap contract. The swap contracts exchanged were substantially economically equivalent. Conversion-related valuation differences were settled in cash on the conversion dates and were not material. The SOFR replacement and overlay swaps are considered separate contracts, and the overlay swaps will result in a gross-up of the notional amounts presented until those swaps mature upon settlement of the final LIBOR payment. The majority of overlay swaps matured during the third quarter of 2023.
Table 70:73: Total Gross Derivatives (a)
September 30, 2022December 31, 2021 September 30, 2023December 31, 2022
In millionsIn millionsNotional /
Contract Amount
Asset Fair
Value (b)
Liability Fair
Value (c)
Notional /
Contract Amount
Asset Fair
Value (b)
Liability Fair
Value (c)
In millionsNotional /
Contract Amount
Asset Fair
Value (b)
Liability Fair
Value (c)
Notional /
Contract Amount
Asset Fair
Value (b)
Liability Fair
Value (c)
Derivatives used for hedgingDerivatives used for hedgingDerivatives used for hedging
Interest rate contracts (d):
Interest rate contracts:Interest rate contracts:
Fair value hedges(d)Fair value hedges(d)$22,222 $23,345 Fair value hedges(d)$29,523 $24,231 
Cash flow hedges(d)Cash flow hedges(d)41,700 $170 48,961 $15 $14 Cash flow hedges(d)35,241 $40,310 $
Cash flow hedges - other (e)Cash flow hedges - other (e)25,000 $222 281 
Foreign exchange contracts:Foreign exchange contracts:Foreign exchange contracts:
Net investment hedgesNet investment hedges1,343 $176 1,113 24 Net investment hedges1,168 22  1,120 $24  
Total derivatives designated for hedgingTotal derivatives designated for hedging$65,265 $176 $171 $73,419 $15 $38 Total derivatives designated for hedging$90,932 $244 $283 $65,661 $24 $
Derivatives not used for hedgingDerivatives not used for hedgingDerivatives not used for hedging
Derivatives used for mortgage banking activities (e):
Derivatives used for mortgage banking activities (f):Derivatives used for mortgage banking activities (f):
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Swaps$55,098 $35 $35,623 
Futures (f)7,020 4,592 
Swaps (g)Swaps (g)$45,056 $$47,908 $$
Futures (h)Futures (h)8,860 5,537 
Mortgage-backed commitmentsMortgage-backed commitments5,539 $170 125 9,917 $55 $31 Mortgage-backed commitments4,750 $77 73 4,516 85 89 
OtherOther20,703 175 16 12,225 46 12 Other16,588 51 21 18,017 90 14 
Total interest rate contractsTotal interest rate contracts88,360 345 176 62,357 101 43 Total interest rate contracts75,254 128 98 75,978 182 104 
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:
Swaps333,106 1,593 5,693 297,711 3,335 1,520 
Futures (f)896 907 
Swaps (g)Swaps (g)420,301 2,170 6,579 354,150 1,597 5,397 
Futures (h)Futures (h)41 32 
Mortgage-backed commitmentsMortgage-backed commitments2,119 39 16 4,147 Mortgage-backed commitments3,675 27 11 2,799 10 
OtherOther29,742 339 320 25,718 125 72 Other28,734 292 285 29,071 334 321 
Total interest rate contractsTotal interest rate contracts365,863 1,971 6,029 328,483 3,465 1,598 Total interest rate contracts452,751 2,489 6,875 386,052 1,941 5,724 
Commodity contracts:Commodity contracts:Commodity contracts:
SwapsSwaps7,868 2,105 2,206 8,840 1,150 1,161 Swaps6,558 477 504 5,792 1,003 1,067 
OtherOther5,307 470 467 3,128 213 212 Other2,894 71 73 4,488 205 202 
Total commodity contractsTotal commodity contracts13,175 2,575 2,673 11,968 1,363 1,373 Total commodity contracts9,452 548 577 10,280 1,208 1,269 
Foreign exchange contracts and otherForeign exchange contracts and other28,984 601 566 27,563 199 179 Foreign exchange contracts and other31,358 312 277 30,512 366 293 
Total derivatives for customer-related activitiesTotal derivatives for customer-related activities408,022 5,147 9,268 368,014 5,027 3,150 Total derivatives for customer-related activities493,561 3,349 7,729 426,844 3,515 7,286 
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 otherForeign exchange contracts and other11,930 200 122 11,512 339 Foreign exchange contracts and other17,427 117 110 12,785 47 227 
Total derivatives not designated for hedgingTotal derivatives not designated for hedging$508,312 $5,692 $9,566 $441,883 $5,137 $3,532 Total derivatives not designated for hedging$586,242 $3,594 $7,937 $515,607 $3,744 $7,617 
Total gross derivativesTotal gross derivatives$573,577 $5,868 $9,737 $515,302 $5,152 $3,570 Total gross derivatives$677,174 $3,838 $8,220 $581,268 $3,768 $7,618 
Less: Impact of legally enforceable master netting agreementsLess: Impact of legally enforceable master netting agreements1,774 1,774 928 928 Less: Impact of legally enforceable master netting agreements1,396 1,396 1,523 1,523 
Less: Cash collateral received/paidLess: Cash collateral received/paid1,282 2,572  604 1,657 Less: Cash collateral received/paid1,593 1,599  714 1,571 
Total derivativesTotal derivatives $2,812 $5,391 $3,620 $985 Total derivatives $849 $5,225 $1,531 $4,524 
(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)Represents caps and floors.
(f)Includes both residential and commercial mortgage banking activities.
(f)(g)At September 30, 2023, the gross-up of the notional amounts due to overlay swap contracts used for mortgage banking and customer-related activities were $0.4 billion and $22.6 billion, respectively
(h)Futures contracts are settled in cash daily and result in no derivative asset or derivative liability being recognized on our Consolidated Balance Sheet.

The PNC Financial Services Group, Inc. – Form 10-Q 91


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 and Counterparty Credit Risk section of this Note 13.12. Any nonperformance risk, including credit risk, is included in the determination of the estimated net fair value of the derivatives.





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



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 September 30, 2022,2023, we expect to reclassify net derivative losses of $1.2$1.5 billion pretax, or $1.0$1.1 billion 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 September 30, 2022.2023. As of September 30, 2022,2023, the maximum length of time over which forecasted transactions are hedged is teneight years.

92The PNC Financial Services Group, Inc. – Form 10-Q
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Further detail regarding gains (losses) related to our fair value and cash flow hedge derivatives is presented in the following table:
Table 71:74: 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 IncomeInterest ExpenseNoninterest IncomeInterest IncomeInterest ExpenseNoninterest Income
In millionsIn millionsLoansInvestment SecuritiesBorrowed FundsOtherIn millionsLoansInvestment SecuritiesBorrowed FundsOther
For the three months ended September 30, 2023For the three months ended September 30, 2023
Total amounts in the Consolidated Income StatementTotal amounts in the Consolidated Income Statement$4,643 $892 $993 $94 
Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:
Hedged items (c)Hedged items (c)$(156)$416 
DerivativesDerivatives$158 $(421)
Amounts related to interest settlements on derivativesAmounts related to interest settlements on derivatives$$(167)
Gains (losses) on cash flow hedges (d):Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$(418)$(8)
For the three months ended September 30, 2022For the three months ended September 30, 2022For the three months ended September 30, 2022
Total amounts in the Consolidated Income StatementTotal amounts in the Consolidated Income Statement$3,138 $715 $317 $317 Total amounts in the Consolidated Income Statement$3,138 $715 $317 $317 
Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:
Hedged items (c)Hedged items (c)$(85)$696 Hedged items (c)$(85)$696 
DerivativesDerivatives$86 $(706)Derivatives$86 $(706)
Amounts related to interest settlements on derivativesAmounts related to interest settlements on derivatives$(1)$Amounts related to interest settlements on derivatives$(1)$
Gains (losses) on cash flow hedges (d):Gains (losses) on cash flow hedges (d):Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$(122)$(7)Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$(122)$(7)
For the three months ended September 30, 2021
Total amounts in the Consolidated Income Statement$2,437 $460 $90 $268 
For the nine months ended September 30, 2023For the nine months ended September 30, 2023
Total amounts on the Consolidated Income StatementTotal amounts on the Consolidated Income Statement$13,424 $2,660 $2,679 $481 
Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:
Hedged items (c)Hedged items (c)$$155 Hedged items (c)$(157)$551 
DerivativesDerivatives$(169)Derivatives$163 $(569)
Amounts related to interest settlements on derivativesAmounts related to interest settlements on derivatives$(1)$129 Amounts related to interest settlements on derivatives$20 $(427)
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 accumulated
other comprehensive income
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$91 $11 $13 Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$(1,108)$(21)
For the nine months ended September 30, 2022For the nine months ended September 30, 2022For the nine months ended September 30, 2022
Total amounts on the Consolidated Income StatementTotal amounts on the Consolidated Income Statement$7,935 $1,890 $542 $705 Total amounts on the Consolidated Income Statement$7,935 $1,890 $542 $705 
Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:Gains (losses) on fair value hedges recognized on:
Hedged items (c)Hedged items (c)$(131)$2,073 Hedged items (c)$(131)$2,073 
DerivativesDerivatives$135 $(2,101)Derivatives$135 $(2,101)
Amounts related to interest settlements on derivativesAmounts related to interest settlements on derivatives$(4)$185 Amounts related to interest settlements on derivatives$(4)$185 
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 accumulated
other comprehensive income
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$(5)$Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$(5)$
For the nine months ended September 30, 2021
Total amounts on the Consolidated Income Statement$6,593 $1,350 $275 $907 
Gains (losses) on fair value hedges recognized on:
Hedged items (c)$(3)$695 
Derivatives$$(740)
Amounts related to interest settlements on derivatives$(3)$394 
Gains (losses) on cash flow hedges (d):
Amount of derivative gains (losses) reclassified from accumulated
other comprehensive income
$282 $49 $27 
(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.









86The PNC Financial Services Group, Inc. – Form 10-Q

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Detail regarding the impact of fair value hedge accounting on the carrying value of the hedged items is presented in the following table:

Table 72:75: Hedged Items - Fair Value Hedges
 
September 30, 2022December 31, 2021 September 30, 2023December 31, 2022
In millionsIn millionsCarrying Value of the Hedged ItemsCumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a)Carrying Value of the Hedged ItemsCumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a)In millionsCarrying Value of the Hedged ItemsCumulative Fair
Value Hedge Adjustment
included in the Carrying
Value of Hedged Items (a)
Carrying Value of the Hedged ItemsCumulative 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)$2,356 $(114)$2,655 $23 Investment securities - available for sale (b)$1,874 $(282)$2,376 $(121)
Borrowed fundsBorrowed funds$19,633 $(1,411)$24,259 $663 Borrowed funds$25,959 $(1,834)$21,781 $(1,283)
(a)Includes less than $(0.1) billion and $(0.1) billion of fair value hedge adjustments primarily related to discontinued borrowed funds hedge relationships at both September 30, 20222023 and December 31, 2021, respectively.2022.
(b)Carrying value shown represents amortized cost.

Net Investment Hedges
We enter into foreign currency forward contracts to hedge non-U.S. dollar net investments in foreign subsidiaries against adverse changes in foreign exchange rates. We assess whether the hedging relationship is highly effective in achieving offsetting changes in the value of the hedge and hedged item by qualitatively verifying that the critical terms of the hedge and hedged item match at the inception of the hedging relationship and on an ongoing basis. Net investment hedge derivatives are classified as foreign exchange contracts. There were no components of derivative gains or losses excluded from the assessment of the hedge effectiveness for the periods presented. Net gains (losses) on net investment hedge derivatives recognized in OCI were $44 million and $(2) million for the three and nine months ended September 30, 2023, respectively, and insignificant for both the three and nine months ended September 30, 2022.

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 20212022 Form 10-K.

Further detail regarding the gains (losses) on derivatives not designated in hedging relationships is presented in the following table:
Table 73:76: Gains (Losses) on Derivatives Not Designated for Hedging
Three months ended
September 30
Nine months ended
September 30
Three months ended
September 30
Nine months ended
September 30
In millionsIn millions2022202120222021In millions2023202220232022
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)$(245)$$(700)$(100)Interest rate contracts (a)$(224)$(245)$(301)$(700)
Derivatives used for customer-related activities:Derivatives used for customer-related activities:Derivatives used for customer-related activities:
Interest rate contractsInterest rate contracts65 (4)231 93 Interest rate contracts11 65 46 231 
Foreign exchange contracts and otherForeign exchange contracts and other(2)23 22 88 Foreign exchange contracts and other31 (2)145 22 
Gains (losses) from customer-related activities (b)63 19 253 181 
Gains from customer-related activities (b)Gains from customer-related activities (b)42 63 191 253 
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)309 (72)572 (53)Foreign exchange contracts and other (b)129 309 (85)572 
Total gains (losses) from derivatives not designated as hedging instrumentsTotal gains (losses) from derivatives not designated as hedging instruments$127 $(47)$125 $28 Total gains (losses) from derivatives not designated as hedging instruments$(53)$127 $(195)$125 
(a)Included in Residential and commercial mortgage noninterest income on our Consolidated Income Statement.
(b)Included in Capital markets relatedand advisory and Other noninterest income on our Consolidated Income Statement.

Offsetting and Counterparty Credit Risk

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 and counterparty credit risk, see Note 16 Financial Derivatives in the Notes To Consolidated Financial Statements included in Item 8 of our 20212022 Form 10-K.

Table 7477 shows the impact legally enforceable master netting agreements had on our derivative assets and derivative liabilities at September 30, 20222023 and December 31, 2021.2022. The table includes cash collateral held or pledged under legally enforceable master netting agreements. The table also includes the fair value of any securities collateral held or pledged under legally enforceable master
94   The PNC Financial Services Group, Inc. – Form 10-Q



netting agreements. Cash and securities collateral amounts are included in the table only to the extent of the related net derivative fair values.
The PNC Financial Services Group, Inc. – Form 10-Q 87


Table 7477 includes OTC derivatives not settled through an exchange ("(“OTC derivatives"derivatives”) and OTC derivatives cleared through a central clearing house ("(“OTC cleared derivatives"derivatives”). 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 whothat then becomes our counterparty. OTC cleared derivative instruments are typically settled in cash each day based on the prior day value.

Table 74:77: Derivative Assets and Liabilities Offsetting

In millionsIn 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 AmountsGross
Fair Value
Fair Value
Offset Amount
Cash
Collateral
Net
Fair Value
 Net Amounts
September 30, 2022
September 30, 2023September 30, 2023
Derivative assetsDerivative assetsDerivative assets
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Over-the-counter clearedOver-the-counter cleared$140 $140  $140 Over-the-counter cleared$43 $43  $43 
Over-the-counterOver-the-counter2,176 $873 $790 513  $35 478 Over-the-counter2,796 $1,014 $1,318 464  $116 348 
Commodity contractsCommodity contracts2,575 555 105 1,915 1,915 Commodity contracts548 250 71 227 2225 
Foreign exchange and other contractsForeign exchange and other contracts977 346 387 244  244 Foreign exchange and other contracts451 132 204 115  115 
Total derivative assetsTotal derivative assets$5,868 $1,774 $1,282 $2,812 (a) $35 $2,777 Total derivative assets$3,838 $1,396 $1,593 $849 (a) $118 $731 
Derivative liabilitiesDerivative liabilitiesDerivative liabilities
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Over-the-counter clearedOver-the-counter cleared$244 $244  $244 Over-the-counter cleared$30 $30  $30 
Over-the-counterOver-the-counter6,131 $550 $1,015 4,566  $79 4,487 Over-the-counter7,226 $811 $1,567 4,848  $87 4,761 
Commodity contractsCommodity contracts2,673 1,012 1,548 113 113 Commodity contracts577 459 31 87 87 
Foreign exchange and other contractsForeign exchange and other contracts689 212 468  468 Foreign exchange and other contracts387 126 260  260 
Total derivative liabilitiesTotal derivative liabilities$9,737 $1,774 $2,572 $5,391 (b)$79 $5,312 Total derivative liabilities$8,220 $1,396 $1,599 $5,225 (b)$87 $5,138 
December 31, 2021
December 31, 2022December 31, 2022
Derivative assetsDerivative assetsDerivative assets
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Over-the-counter clearedOver-the-counter cleared$20 $20  $20 Over-the-counter cleared$23 $23  $23 
Over-the-counterOver-the-counter3,561 $533 $593 2,435  $300 2,135 Over-the-counter2,100 $974 $630 496  $34 462 
Commodity contractsCommodity contracts1,363 299 1,063 1,063 Commodity contracts1,208 335 871 871 
Foreign exchange and other contractsForeign exchange and other contracts208 96 10 102  102 Foreign exchange and other contracts437 214 82 141  141 
Total derivative assetsTotal derivative assets$5,152 $928 $604 $3,620 (a)$300 $3,320 Total derivative assets$3,768 $1,523 $714 $1,531 (a)$34 $1,497 
Derivative liabilitiesDerivative liabilitiesDerivative liabilities
Interest rate contracts:Interest rate contracts:Interest rate contracts:
Over-the-counter clearedOver-the-counter cleared$12 $12  $12 Over-the-counter cleared$28 $28  $28 
Over-the-counterOver-the-counter1,643 $569 $776 298  298 Over-the-counter5,801 $625 $1,041 4,135  $78 4,057 
Commodity contractsCommodity contracts1,373 291 784 298 298 Commodity contracts1,269 679 520 70 66 
Foreign exchange and other contractsForeign exchange and other contracts542 68 97 377  377 Foreign exchange and other contracts520 219 10 291  291 
Total derivative liabilitiesTotal derivative liabilities$3,570 $928 $1,657 $985 (b)$985 Total derivative liabilities$7,618 $1,523 $1,571 $4,524 (b)$82 $4,442 
(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 September 30, 2022,2023, cash and debt securities (primarily agency mortgage-backed securities) totaling $2.2$2.5 billion were pledged to us under master netting agreements and other collateral agreements to collateralize net derivative assets due from counterparties and to
The PNC Financial Services Group, Inc. – Form 10-Q 95


meet initial margin requirements, and we pledged cash and debt securities (primarily agency mortgage-backed securities) totaling $3.9$2.6 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
88   The PNC Financial Services Group, Inc. – Form 10-Q



exchanged under an agreement that does not qualify as a master netting agreement or because the total amount of collateral 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 pledged to us by counterparties are not recognized on our balance sheet. Likewise, securities we have pledged to counterparties remain on our balance sheet.
Credit-Risk Contingent Features

Certain derivative agreements contain various credit-risk relatedcredit-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 following table presents the aggregate fair value of derivative instruments with credit-risk-related contingent features, the associated collateral posted in the normal course of business and the maximum amount of collateral we would be required to post if the credit-risk-related contingent features underlying these agreements had been triggered on September 30, 20222023 and December 31, 2021.2022.

Table 75:78: Credit-Risk Contingent Features
In billions In billionsSeptember 30
2022
December 31
2021
In billionsSeptember 30, 2023December 31, 2022
Net derivative liabilities with credit-risk contingent featuresNet derivative liabilities with credit-risk contingent features$7.5 $2.4 Net derivative liabilities with credit-risk contingent features$6.5 $5.8 
Collateral postedCollateral posted2.7 1.8 Collateral posted1.7 1.7 
Maximum additional amount of collateral exposureMaximum additional amount of collateral exposure$4.8 $0.6 Maximum additional amount of collateral exposure$4.8 $4.1 
NOTE 1413 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 reasonably possible losses or ranges of reasonably 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 1413 as well as those matters disclosed in Note 21 Legal Proceedings in Item 8 of our 20212022 Form 10-K, in Note 13 Legal Proceedings in Item 1 of our first quarter 20222023 Form 10-Q and inNote 1413 Legal Proceedings in Item 1 of our second quarter 20222023 Form 10-Q(such (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 September 30, 2022,2023, 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 $300 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 Item 8 of our 20212022 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,Disclosed Matters, 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 would 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.


96The PNC Financial Services Group, Inc. – Form 10-Q
89


Interchange Litigation

In September 2023, Visa announced proposed amendments to its Certificate of Incorporation to institute, if approved by stockholders, an exchange offer program that would initially convert Visa’s Class B common stock to Class B-1 common stock and release transfer restrictions on up to 50% of the Class B-1 common stock. By participating in the program, a holder of Class B-1 common stock would have the ability to exchange up to half of its Class B-1 common stock into Visa’s Class C common stock. Subject to certain restrictions, the Class C shares could then be converted into Visa’s Class A shares at the then-applicable conversion rate, which, subject to lock-up periods, could be sold on the open market. The exchanges would be subject to the applicable stockholder agreeing to make-whole agreements that would subject them to the same indemnity obligations to Visa as are currently present. Three additional such exchanges taking place no less than one year apart, and permitting a holder of Visa’s Class B-1 common stock to exchange up to half of its then held Class B-1 common stock into Visa’s Class C common stock, would be possible but not guaranteed.

USAA Patent Infringement Litigation

In July 2022, following a2023, both PNC and USAA appealed the Final Written Decision of the Patent Trial and Appeal Board that held unpatentable many of the claims of the patent presented to the jury verdict in United Services Automobile Association v. PNC Bank N.A. (Case No. 2:20-cv-319)21-cv-246) (the “first“third Texas case”) and United Services Automobile Association v. PNC Bank N.A. (Case No. 2:21-cv-110) (together, “the first consolidated cases”),. It held that other claims of that patent were patentable. With respect to the parties submitted briefs on PNC’s remaining equitable defenses. In August 2022, the court denied our request for relief, entered final judgment, declined to award enhanced damages for willfulness and awarded USAA pre-judgment and applicable post-judgment interest. In September 2022, PNC filed its post-trial motions for judgment as a matter of law and for a new trial.

In September 2022, following a jury trialother patent originally at issue in the second consolidated cases (representing the case for PNC’s patent infringement counterclaims (originally asserted in the first Texas case) which was previously consolidated into USAA’s third lawsuit filed in July 2021 in the United States District Court for the Eastern District of Texas against PNC Bank for patent infringement (United Services Automobile Association v. PNC Bank N.A. (Case No. 2:21-cv-246)) (“the third Texas case”)), a jury found against PNC for infringement of at least one of the two asserted patentscase and awarded $4.3 million, and determined that PNC did not willfully infringe the patents. The jury further found that USAA did not infringe any of PNC’s asserted patents.

Because of USAA’s case narrowing in the first consolidated cases, only one of the three patents grantedsubject to inter partes review (“IPR”) by the Patent Trial and Appeal Board, was presented toin August 2023, USAA appealed the jury in the first consolidated cases. In addition, becauseFinal Written Decision of USAA’s case narrowing in the third Texas case, only one of the two patents granted IPR by the Patent Trial and Appeal Board that held all of the claims unpatentable. This second patent was not presented to the jury in the third Texas case.

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 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.

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.















90The PNC Financial Services Group, Inc. – Form 10-Q

97


NOTE 1514 SEGMENT REPORTING

We have three 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 businesses are not necessarily comparable with similar information for any other company. We periodically refine our internal methodologies as management reporting practices are enhanced. To the extent significant and practicable, retrospective application of new methodologies is made to prior period reportable business segment results and disclosures to create comparability with the current period.

Total business segment financial results differ from total consolidated net income. These differences are reflected in the “Other” category in Table 76.79. “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). Assets, revenue and earnings attributable to foreign activities were not material in the periods presented for comparison. The declines in earnings for the three months ended and nine months ended September 30, 2023 when compared to the same periods in 2022 for the “Other” category were primarily due to internal funds transfer pricing impacts between business segments.

Financial results are presented, to the extent practicable, as if each business operated on a stand-alonestandalone basis. Additionally, we have aggregated the results for corporate support functions within “Other” for financial reporting purposes.

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.

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.


























98The PNC Financial Services Group, Inc. – Form 10-Q
91


Business Segment Results

Table 76:79: Results of Businesses
Three months ended September 30
In millions
Three months ended September 30
In millions
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
OtherConsolidated (a) Three months ended September 30
In millions
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
OtherConsolidated (a) 
20232023
Income StatementIncome Statement
Net interest incomeNet interest income$2,576 $1,390 $139 $(687)$3,418 
Noninterest incomeNoninterest income784 835 223 (27)1,815 
Total revenueTotal revenue3,360 2,225 362 (714)5,233 
Provision for (recapture of) credit lossesProvision for (recapture of) credit losses42 102 (4)(11)129 
Depreciation and amortizationDepreciation and amortization80 52 144 285 
Other noninterest expenseOther noninterest expense1,796 843 262 59 2,960 
Income (loss) before income taxes (benefit) and noncontrolling interestsIncome (loss) before income taxes (benefit) and noncontrolling interests1,442 1,228 95 (906)1,859 
Income taxes (benefit)Income taxes (benefit)337 263 22 (333)289 
Net income (loss)Net income (loss)1,105 965 73 (573)1,570 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests11  16 
Net income (loss) excluding noncontrolling interestsNet income (loss) excluding noncontrolling interests$1,094 $960 $73 $(573)$1,554 
Average AssetsAverage Assets$114,724 $230,082 $16,161 $193,996 $554,963 
202220222022
Income StatementIncome StatementIncome Statement
Net interest incomeNet interest income$2,017 $1,345 $165 $(52)$3,475 Net interest income$2,017 $1,345 $165 $(52)$3,475 
Noninterest incomeNoninterest income725 887 231 231 2,074 Noninterest income725 887 231 231 2,074 
Total revenueTotal revenue2,742 2,232 396 179 5,549 Total revenue2,742 2,232 396 179 5,549 
Provision for (recapture of) credit lossesProvision for (recapture of) credit losses92 150 (5)241 Provision for (recapture of) credit losses92 150 (5)241 
Depreciation and amortizationDepreciation and amortization76 50 145 277 Depreciation and amortization76 50 145 277 
Other noninterest expenseOther noninterest expense1,825 840 268 70 3,003 Other noninterest expense1,825 840 268 70 3,003 
Income (loss) before income taxes (benefit) and noncontrolling interestsIncome (loss) before income taxes (benefit) and noncontrolling interests749 1,192 118 (31)2,028 Income (loss) before income taxes (benefit) and noncontrolling interests749 1,192 118 (31)2,028 
Income taxes (benefit)Income taxes (benefit)175 258 28 (73)388 Income taxes (benefit)175 258 28 (73)388 
Net incomeNet income574 934 90 42 1,640 Net income574 934 90 42 1,640 
Less: Net income (loss) attributable to noncontrolling interestsLess: Net income (loss) attributable to noncontrolling interests14 (3)16 Less: Net income (loss) attributable to noncontrolling interests14  (3)16 
Net income excluding noncontrolling interestsNet income excluding noncontrolling interests$560 $929 $90 $45 $1,624 Net income excluding noncontrolling interests$560 $929 $90 $45 $1,624 
Average AssetsAverage Assets$114,619 $224,984 $14,820 $192,674 $547,097 Average Assets$114,619 $224,984 $14,820 $192,674 $547,097 
2021
Income Statement
Net interest income$1,713 $1,241 $141 $(239)$2,856 
Noninterest income662 1,056 256 367 2,341 
Total revenue2,375 2,297 397 128 5,197 
Provision for (recapture of) credit losses(113)(99)(6)15 (203)
Depreciation and amortization78 54 138 277 
Other noninterest expense1,811 926 248 325 3,310 
Income (loss) before income taxes (benefit) and noncontrolling interests599 1,416 148 (350)1,813 
Income taxes (benefit)140 290 34 (141)323 
Net income (loss)459 1,126 114 (209)1,490 
Less: Net income attributable to noncontrolling interests12 16 
Net income (loss) excluding noncontrolling interests$447 $1,123 $114 $(210)$1,474 
Average Assets$117,394 $202,268 $13,805 $225,775 $559,242 
92The PNC Financial Services Group, Inc. – Form 10-Q

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(Continued from previous page)(Continued from previous page)(Continued from previous page)
Nine months ended September 30
In millions
Nine months ended September 30
In millions
Retail
Banking
Corporate &
Institutional
Banking
Asset
Management
Group
OtherConsolidated (a) Nine months ended September 30
In millions
Retail
Banking
Corporate &
Institutional
Banking
Asset
Management
Group
OtherConsolidated (a) 
20232023
Income StatementIncome Statement
Net interest incomeNet interest income$7,305 $4,122 $391 $(1,305)$10,513 
Noninterest incomeNoninterest income2,229 2,542 681 164 5,616 
Total revenueTotal revenue9,534 6,664 1,072 (1,141)16,129 
Provision for (recapture of) credit lossesProvision for (recapture of) credit losses266 283 (5)(34)510 
Depreciation and amortizationDepreciation and amortization239 159 22 430 850 
Other noninterest expenseOther noninterest expense5,468 2,596 809 215 9,088 
Income (loss) before income taxes (benefit) and noncontrolling interestsIncome (loss) before income taxes (benefit) and noncontrolling interests3,561 3,626 246 (1,752)5,681 
Income taxes (benefit)Income taxes (benefit)834 775 58 (750)917 
Net income (loss)Net income (loss)2,727 2,851 188 (1,002)4,764 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests32 15 50 
Net income (loss) excluding noncontrolling interestsNet income (loss) excluding noncontrolling interests$2,695 $2,836 $188 $(1,005)$4,714 
Average AssetsAverage Assets$114,975 $232,914 $15,578 $194,107 $557,574 
202220222022
Income StatementIncome StatementIncome Statement
Net interest incomeNet interest income$5,210 $3,720 $456 $(56)$9,330 Net interest income$5,210 $3,720 $456 $(56)$9,330 
Noninterest incomeNoninterest income2,218 2,659 713 437 6,027 Noninterest income2,218 2,659 713 437 6,027 
Total revenueTotal revenue7,428 6,379 1,169 381 15,357 Total revenue7,428 6,379 1,169 381 15,357 
Provision for (recapture of) credit lossesProvision for (recapture of) credit losses66 15 11 (23)69 Provision for (recapture of) credit losses66 15 11 (23)69 
Depreciation and amortizationDepreciation and amortization233 153 20 437 843 Depreciation and amortization233 153 20 437 843 
Other noninterest expenseOther noninterest expense5,473 2,508 775 97 8,853 Other noninterest expense5,473 2,508 775 97 8,853 
Income (loss) before income taxes (benefit) and noncontrolling interestsIncome (loss) before income taxes (benefit) and noncontrolling interests1,656 3,703 363 (130)5,592 Income (loss) before income taxes (benefit) and noncontrolling interests1,656 3,703 363 (130)5,592 
Income taxes (benefit)Income taxes (benefit)389 803 85 (250)1,027 Income taxes (benefit)389 803 85 (250)1,027 
Net incomeNet income1,267 2,900 278 120 4,565 Net income1,267 2,900 278 120 4,565 
Less: Net income (loss) attributable to noncontrolling interestsLess: Net income (loss) attributable to noncontrolling interests45 12 (5)52 Less: Net income (loss) attributable to noncontrolling interests45 12 (5)52 
Net income excluding noncontrolling interestsNet income excluding noncontrolling interests$1,222 $2,888 $278 $125 $4,513 Net income excluding noncontrolling interests$1,222 $2,888 $278 $125 $4,513 
Average AssetsAverage Assets$113,157 $215,163 $14,360 $205,763 $548,443 Average Assets$113,157 $215,163 $14,360 $205,763 $548,443 
2021
Income Statement
Net interest income$4,572 $3,315 $346 $(448)$7,785 
Noninterest income2,022 2,730 729 818 6,299 
Total revenue6,594 6,045 1,075 370 14,084 
Provision for (recapture of) credit losses(156)(277)(27)(452)
Depreciation and amortization214 152 16 385 767 
Other noninterest expense4,828 2,352 660 604 8,444 
Income (loss) before income taxes (benefit) and noncontrolling interests1,708 3,818 391 (592)5,325 
Income taxes (benefit)396 818 91 (399)906 
Net income (loss)1,312 3,000 300 (193)4,419 
Less: Net income attributable to noncontrolling interests26 10 38 
Net income (loss) excluding noncontrolling interests$1,286 $2,990 $300 $(195)$4,381 
Average Assets$103,820 $184,964 $11,124 $211,056 $510,964 
(a)There were no material intersegment revenues for the three and nine months ended September 30, 20222023 and 2021.2022.
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 who are serviced through our coast-to-coast branch network, digital channels, ATMs, call centers, online banking and mobile channels. As a result of the 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 as we expand into new markets.or through our phone-based customer contact centers. Deposit products include checking, savings and money market accounts and certificates of deposit.time deposits. Lending products include residential mortgages, home equity loans and lines of credit, auto loans, credit cards, 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 relatedand advisory 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 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 provides wholesale money transfer processing capabilities between the U.S., Mexico and other countries primarily in Central and South America. Capital markets and advisory includes services and activities primarily related products and services include foreign exchange, derivatives, fixed income, securities underwriting, loan syndications, mergersto merger and acquisitions advisory, and equity capital markets advisory, related services.asset-backed financing, loan syndication, securities underwriting and customer-related trading. We also provide commercial loan servicing and technology solutions for the commercial real estate finance industry. Products and services are provided nationally.

Asset Management Group provides private banking for high net worth and ultra high net worth clients and institutional asset management. The Asset Management group is composed of two distinct operating units:
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, credit and cash
The PNC Financial Services Group, Inc. – Form 10-Q 93


management solutions, trust management and administration. In addition, multi-generational family planning services are also provided to ultra high net worth individuals and their families, which include estate, financial, tax, fiduciary and customized performance reporting through PNC Private Bank Hawthorn.
100   The PNC Financial Services Group, Inc. – Form 10-Q



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

NOTE 1615 FEE-BASED REVENUE FROM CONTRACTS WITH CUSTOMERS
As more fully described in Note 24 Fee-based Revenue from Contracts with Customers in Item 8 of our 20212022 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 three 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.
Effective forIn the firstfourth quarter of 2022, PNC updated the presentationname of itsthe noninterest income categorizationline item “Capital markets related” to be based on product“Capital markets and service type, and accordingly, has changedadvisory.” This update did not impact the basiscomponents of presentation of its noninterest income revenue streams to: (i) Asset management and brokerage, (ii) Capital markets related, (iii) Card and cash management, (iv) Lending and deposit services, (v) Residential and commercial mortgage and (vi) Other noninterest income.the category. All periods presented herein reflect these changes. For a description of each updated noninterest income revenue stream, see Note 1 Accounting Policies.Policies in our 2022 Form 10-K.

Table 7780 presents the noninterest income recognized within the scope of Topic 606 for each of our three reportable business segments'segments’ principal products and services, along with the relationship to the noninterest income revenue streams shown on our Consolidated Income Statement. For a description of the fee-based revenue and how it is recognized for each segment'ssegment’s principal products and services, see Note 24 Fee-based Revenue from Contracts with Customers included in Item 8 of our 20212022 Form 10-K.





















94The PNC Financial Services Group, Inc. – Form 10-Q 101


Table 80: Noninterest Income by Business Segment and Reconciliation to Consolidated Noninterest Income
Three Months Ended
September 30, 2023
Three Months Ended
September 30, 2022

In millions
Retail BankingCorporate &
Institutional
Banking
Asset Management GroupRetail BankingCorporate &
Institutional
Banking
Asset Management Group
Asset management and brokerage
Asset management fees$217 $224 
Brokerage fees$129 $131 
Total asset management and brokerage129 219 131 226 
Card and cash management
Treasury management fees10 $351 11 $328 
Debit card fees175 175 
Net credit card fees (a)54 60 
Merchant services42 20 48 16 
Other24 23 
Total card and cash management305 371 317 344 
Lending and deposit services
Deposit account fees170 146 
Other18 16 
Total lending and deposit services188 162 
Residential and commercial mortgage (b)32 36 
Capital markets and advisory124 155 
Other22 11 
Total in-scope noninterest income622 557 219 610 554 226 
Out-of-scope noninterest income (c)162 278 115 333 
Noninterest income by business segment$784 $835 $223 $725 $887 $231 
Reconciliation to consolidated noninterest income
Total in-scope business segment noninterest income$1,398 $1,390 
Out-of-scope business segment noninterest income (c)444 453 
Noninterest income from other segments(27)231 
Noninterest income as shown on the Consolidated Income Statement$1,815 $2,074 
102    The PNC Financial Services Group, Inc. – Form 10-Q



Table 77: Noninterest Income by Business Segment and Reconciliation to Consolidated Noninterest Income
Three Months Ended
September 30, 2022
Three Months Ended
September 30, 2021

In millions
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
Asset management and brokerage
Asset management fees$224 $248 
Brokerage fees$131 $123 
Total asset management and brokerage131 226 123 252 
Card and cash management
Treasury management fees11 $328 15 $306 
Debit card fees175 184 
Net credit card fees (a)60 53 
Merchant services48 16 46 17 
Other23 30 
Total card and cash management317 344 328 323 
Lending and deposit services
Deposit account fees146 158 
Other16 15 
Total lending and deposit services162 173 
Residential and commercial mortgage (b)36 36 
Capital markets related155 354 
Other11 
Total in-scope noninterest income610 554 226 624 730 252 
Out-of-scope noninterest income (c)115 333 38 326 
Noninterest income by business segment$725 $887 $231 $662 $1,056 $256 
Reconciliation to consolidated noninterest income
Total in-scope business segment noninterest income$1,390 $1,606 
Out-of-scope business segment noninterest income (c)453 368 
Noninterest income from other segments231 367 
Noninterest income as shown on the Consolidated Income Statement$2,074 $2,341 
The PNC Financial Services Group, Inc. – Form 10-Q 95


(Continued from previous page)(Continued from previous page)(Continued from previous page)Nine Months Ended
September 30, 2023
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2021

In millions

In millions
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group

In millions
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
Retail BankingCorporate &
Institutional
Banking
Asset
Management
Group
Asset management and brokerageAsset management and brokerageAsset management and brokerage
Asset management feesAsset management fees$693 $713 Asset management fees$663 $693 
Brokerage feesBrokerage fees$400 $334 Brokerage fees$383 $400 
Total asset management and brokerageTotal asset management and brokerage400 699 334 719 Total asset management and brokerage383 669 400 699 
Card and cash managementCard and cash managementCard and cash management
Treasury management feesTreasury management fees30 $957 33 $793 Treasury management fees31 $1,024 30 $957 
Debit card feesDebit card fees513 486 Debit card fees518  513 
Net credit card fees (a)Net credit card fees (a)178 157 Net credit card fees (a)173  178 
Merchant servicesMerchant services141 47 125 44 Merchant services126 58 141 47 
OtherOther73 87 Other73  73 
Total card and cash managementTotal card and cash management935 1,004 888 837 Total card and cash management921 1,082 935 1,004 
Lending and deposit servicesLending and deposit servicesLending and deposit services
Deposit account feesDeposit account fees433 406 Deposit account fees476 433 
OtherOther50 25 42 28 Other54 24 50 25 
Total lending and deposit servicesTotal lending and deposit services483 25 448 28 Total lending and deposit services530 24 483 25 
Residential and commercial mortgage (b)Residential and commercial mortgage (b)100 102 Residential and commercial mortgage (b)114 100 
Capital markets related564 778 
Capital markets and advisoryCapital markets and advisory410 564 
OtherOther33 36 Other44 33 
Total in-scope noninterest incomeTotal in-scope noninterest income1,818 1,726 699 1,670 1,781 719 Total in-scope noninterest income1,834 1,674 669 1,818 1,726 699 
Out-of-scope noninterest income (c)Out-of-scope noninterest income (c)400 933 14 352 949 10 Out-of-scope noninterest income (c)395 868 12 400 933 14 
Noninterest income by business segmentNoninterest income by business segment$2,218 $2,659 $713 $2,022 $2,730 $729 Noninterest income by business segment$2,229 $2,542 $681 $2,218 $2,659 $713 
Reconciliation to consolidated noninterest incomeReconciliation to consolidated noninterest incomeReconciliation to consolidated noninterest income
Total in-scope business segment noninterest incomeTotal in-scope business segment noninterest income$4,243 $4,170 Total in-scope business segment noninterest income$4,177 $4,243 
Out-of-scope business segment noninterest income (c)Out-of-scope business segment noninterest income (c)1,347 1,311 Out-of-scope business segment noninterest income (c)1,275 1,347 
Noninterest income from other segmentsNoninterest income from other segments437 818 Noninterest income from other segments164 437 
Noninterest income as shown on the Consolidated Income StatementNoninterest income as shown on the Consolidated Income Statement$6,027 $6,299 Noninterest income as shown on the Consolidated Income Statement$5,616 $6,027 
(a)Net credit card fees consists of interchange fees of $169 million for both the three months ended September 30, 2023 and $155 million and credit2022. Credit card reward costs of $109totaled $115 million and $102$109 million for the three months ended September 30, 20222023 and 2021,2022, respectively. Net credit card fees consists of interchange fees of $489$502 million and $421$489 million and credit card reward costs of $311$329 million and $264$311 million for the nine months ended September 30, 20222023 and 2021,2022, respectively.
(b)Residential mortgage noninterest income falls under the scope of other accounting and disclosure requirements outside of Topic 606 and is included within the out-of-scope noninterest income line for the Retail Banking segment.
(c)Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

NOTE 16 REGULATORY MATTERS

FDIC Special Assessment Pursuant to Systemic Risk Determination
In May 2023, the FDIC proposed a rule to implement a special assessment, in connection with the systemic risk determination announced in March 2023, to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. Under the proposal, the FDIC would collect from PNC, along with other BHCs and insured depository institutions, special assessments at an annual rate of 12.5 basis points of PNC’s uninsured deposits reported as of December 31, 2022 (adjusted to exclude the first $5.0 billion), over eight quarterly assessment periods, beginning after the first quarter 2024. We expect the FDIC will enact a special deposit insurance assessment that will significantly increase our FDIC deposit insurance costs. The total cost and timing is subject to the pending finalization of the assessment.

Proposed Expanded Risk-Based Capital Rules
On July 27, 2023, the Federal Reserve, OCC, and FDIC proposed for public comment an interagency rule to implement the final components of the Basel III framework that would significantly revise the capital requirements for large banking organizations, including PNC and PNC Bank. The proposed rule will apply an expanded risk-based approach which leverages the Basel rules, including the calculation of risk-weighted assets, in addition to the current U.S. standardized approach. In addition, this proposal would align the regulatory capital elements and required deductions for Category III banking organizations such as PNC and PNC Bank with those currently applicable to Category I and II banking organizations. PNC and PNC Bank would be required to recognize most elements of AOCI in regulatory capital and deduct from CET1 capital, among other items, mortgage servicing assets and deferred tax assets that individually exceed 10% of CET1 capital or in the aggregate with other threshold items that exceed 15% of CET1 capital. PNC and PNC Bank would be required to calculate their risk-based capital ratios under the existing standardized approach and the expanded risk-based approach and would be subject to the lower of the two resulting ratios for their risk-based capital minimums and buffer requirements, including the SCB. The proposed effective date is July 1, 2025, with certain provisions—
The PNC Financial Services Group, Inc. – Form 10-Q 103


including the recognition of AOCI elements in regulatory capital and the increase in risk-weighted assets due to the expanded risk-based approach—having a three-year phase-in period. The closing date for the comment period for the proposal was extended from November 30, 2023 to January 16, 2024.

NOTE17 SUBSEQUENT EVENTS

On October 28, 2022,2, 2023, PNC acquired a portfolio of capital commitments facilities from Signature Bridge Bank, N.A. through an agreement with the FDIC as receiver of the former Signature Bank, New York. The acquired portfolio represents approximately $16 billion in total commitments, including approximately $9 billion of funded loans. The transaction did not have a material impact to PNC’s total assets, capital ratios or tangible book value per share. PNC purchased these commitments and loans without any funding, guarantees or loss-sharing agreements from the FDIC. The facilities acquired are primarily comprised of fund subscription lines to private equity sponsors to help them manage liquidity and bridge financing for investments.

On October 6, 2023, PNC committed to a workforce reduction that is expected to reduce our workforce by approximately 4%. PNC has incurred one-time expenses of approximately $150 million primarily related to cash severance, benefits and related termination costs.

On October 20, 2023, the parent company issued $1.0$1.25 billion of senior fixed-to-floating rate notes with a maturity date of October 28, 202520, 2027 (the “2025“2027 Senior Notes”) and $1.5$2.25 billion of senior fixed-to-floating rate notes with a maturity date of October 28, 203320, 2034 (the “2033“2034 Senior Notes”). Interest is payable on the 20252027 Senior Notes semi-annually in arrears at a fixed rate of 5.671%6.615% per annum, on April 2820 and October 2820 of each year, beginning on April 28, 2023.20, 2024. Beginning on October 28, 2024,20, 2026, interest is payable on the 20252027 Senior Notes quarterly in arrears at a floating rate per annum equal to Compounded SOFR (determined with respect to each quarterly interest period using the SOFR Index as described in the Prospectus Supplement), plus 1.09%1.730%, on January 28, 2025,20, 2027, April 28, 2025,20, 2027, July 28, 202520, 2027 and at the maturity date. Interest is payable on the 20332034 Senior Notes semi-annually in arrears at a fixed rate of 6.037%6.875% per annum, on April 2820 and October 2820 of each year, beginning on April 28, 2023.20, 2024. Beginning on October 28, 2032,20, 2033, interest is payable on the 20332034 Senior Notes quarterly in arrears at a floating rate per annum equal to Compounded SOFR (determined with respect to each quarterly interest period using the SOFR Index as described in the Prospectus Supplement), plus 2.14%2.284%, on January 28, 2033,20, 2034, April 28, 2033,20, 2034, July 28, 203320, 2034 and at the maturity date.date.

On November 1, 2022,2023, PNC redeemed $1.5$1.0 billion of depositary shares representing interests in PNC’s fixed-to-floating rate non-cumulative perpetual preferred stock, Series P.O. Each depositary share represents a 1/4,000th100th interest in a share of the Series PO preferred stock. The depositary shares were redeemed at a redemption price of $25.00$1,000 per depositary share plusshare. The redemption price does not include the regular quarterly dividend on the depositary shares that was declared and unpaid dividends of $0.43763 per depositary share, representing the dividend for the period from August 1, 2022 to, but excluding,paid separately on November 1, 2022.2023, to holders of record on the record date for such dividend payment in the customary manner. All 60one million depositary shares outstanding were redeemed.


96104    The PNC Financial Services Group, Inc. – Form 10-Q



STATISTICAL INFORMATION (UNAUDITED)
THE PNC FINANCIAL SERVICES GROUP, INC.
Average Consolidated Balance Sheet And Net Interest Analysis (a) (b) (c)
Nine months ended September 30 Nine months ended September 30
20222021 20232022
Taxable-equivalent basis
Dollars in millions
Taxable-equivalent basis
Dollars in millions
Average
Balances
Interest Income/ExpenseAverage Yields/RatesAverage
Balances
Interest Income/
Expense
Average Yields/
Rates
Taxable-equivalent basis
Dollars in millions
Average
Balances
Interest Income/ExpenseAverage Yields/RatesAverage
Balances
Interest Income/
Expense
Average Yields/
Rates
AssetsAssetsAssets
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Investment securitiesInvestment securitiesInvestment securities
Securities available for saleSecurities available for saleSecurities available for sale
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency$45,633 $687 2.01 %$54,900 $644 1.56 %Agency$31,347 $632 2.69 %$45,633 $687 2.01 %
Non-agencyNon-agency88550 7.57 %1,142 66 7.70 %Non-agency65947 9.42 %885 50 7.57 %
Commercial mortgage-backedCommercial mortgage-backed4,35481 2.49 %6,280 116 2.47 %Commercial mortgage-backed2,97666 2.95 %4,354 81 2.49 %
Asset-backedAsset-backed2,88534 1.56 %5,590 76 1.80 %Asset-backed59729 6.44 %2,885 34 1.56 %
U.S. Treasury and government agenciesU.S. Treasury and government agencies25,448262 1.36 %31,017 315 1.34 %U.S. Treasury and government agencies8,434139 2.17 %25,448 262 1.36 %
OtherOther4,18982 2.61 %4,889 112 3.05 %Other3,06258 2.53 %4,189 82 2.61 %
Total securities available for saleTotal securities available for sale83,3941,196 1.91 %103,818 1,329 1.70 %Total securities available for sale47,075971 2.75 %83,394 1,196 1.91 %
Securities held to maturitySecurities held to maturitySecurities held to maturity
Residential mortgage-backedResidential mortgage-backed24,317 390 2.14 %Residential mortgage-backed44,914 919 2.73 %24,317 390 2.14 %
Commercial mortgage-backedCommercial mortgage-backed1,089 25 3.04 %Commercial mortgage-backed2,398 95 5.28 %1,089 25 3.04 %
Asset-backedAsset-backed3,587 62 2.31 %Asset-backed6,732 209 4.14 %3,587 62 2.31 %
U.S. Treasury and government agenciesU.S. Treasury and government agencies21,243 182 1.14 %802 17 2.86 %U.S. Treasury and government agencies36,902 370 1.34 %21,243 182 1.14 %
OtherOther1,58549 4.12 %667 20 4.05 %Other3,329114 4.61 %1,585 49 4.12 %
Total securities held to maturityTotal securities held to maturity51,821708 1.82 %1,469 37 3.40 %Total securities held to maturity94,2751,707 2.41 %51,821 708 1.82 %
Total investment securitiesTotal investment securities135,2151,904 1.88 %105,287 1,366 1.73 %Total investment securities141,3502,678 2.52 %135,215 1,904 1.88 %
LoansLoansLoans
Commercial and industrialCommercial and industrial165,1423,929 3.14 %140,368 3,049 2.87 %Commercial and industrial179,3427,666 5.64 %165,142 3,929 3.14 %
Commercial real estateCommercial real estate34,541901 3.44 %32,452 734 2.98 %Commercial real estate36,0261,728 6.33 %34,541 901 3.44 %
Equipment lease financingEquipment lease financing6,168173 3.73 %6,321 182 3.83 %Equipment lease financing6,419217 4.51 %6,168 173 3.73 %
ConsumerConsumer54,6922,002 4.89 %53,695 1,934 4.82 %Consumer54,9442,712 6.60 %54,692 2,002 4.89 %
Residential real estateResidential real estate42,378992 3.12 %29,048 730 3.35 %Residential real estate46,4351,194 3.43 %42,378 992 3.12 %
Total loansTotal loans302,9217,997 3.50 %261,884 6,629 3.36 %Total loans323,16613,517 5.54 %302,921 7,997 3.50 %
Interest-earning deposits with banksInterest-earning deposits with banks44,641292 0.87 %81,383 74 0.12 %Interest-earning deposits with banks34,6291,312 5.05 %44,641 292 0.87 %
Other interest-earning assetsOther interest-earning assets9,637210 2.92 %8,345 142 2.27 %Other interest-earning assets8,933410 6.12 %9,637 210 2.92 %
Total interest-earning assets/interest incomeTotal interest-earning assets/interest income492,41410,403 2.80 %456,899 8,211 2.38 %Total interest-earning assets/interest income508,07817,917 4.68 %492,414 10,403 2.80 %
Noninterest-earning assetsNoninterest-earning assets56,02954,065 Noninterest-earning assets49,49656,029 
Total assetsTotal assets$548,443 $510,964 Total assets$557,574 $548,443 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing depositsInterest-bearing depositsInterest-bearing deposits
Money marketMoney market$60,510 $161 0.36 %$69,105 $15 0.03 %Money market$64,579 1,334 2.76 %$60,510 161 0.36 %
DemandDemand117,485231 0.26 %99,154 23 0.03 %Demand124,0701,739 1.87 %117,485 231 0.26 %
SavingsSavings108,11247 0.06 %86,662 32 0.05 %Savings102,475964 1.26 %108,112 47 0.06 %
Time depositsTime deposits12,12516 0.18 %18,577 29 0.21 %Time deposits22,931577 3.34 %12,125 16 0.18 %
Total interest-bearing depositsTotal interest-bearing deposits298,232455 0.20 %273,498 99 0.05 %Total interest-bearing deposits314,0554,614 1.96 %298,232 455 0.20 %
Borrowed fundsBorrowed fundsBorrowed funds
Federal Home Loan Bank borrowingsFederal Home Loan Bank borrowings7,957133 2.20 %883 0.42 %Federal Home Loan Bank borrowings33,3131,318 5.22 %7,957 133 2.20 %
Bank notes and senior debtBank notes and senior debt16,249222 1.80 %22,663 172 1.00 %Bank notes and senior debt21,370947 5.85 %16,249 222 1.80 %
Subordinated debtSubordinated debt7,131123 2.30 %6,315 64 1.35 %Subordinated debt5,745264 6.12 %7,131 123 2.30 %
OtherOther5,45764 1.54 %4,701 36 1.02 %Other4,964150 3.98 %5,457 64 1.54 %
Total borrowed fundsTotal borrowed funds36,794542 1.95 %34,562 275 1.05 %Total borrowed funds65,3922,679 5.41 %36,794 542 1.95 %
Total interest-bearing liabilities/interest expenseTotal interest-bearing liabilities/interest expense335,026997 0.39 %308,060 374 0.16 %Total interest-bearing liabilities/interest expense379,4477,293 2.54 %335,026 997 0.39 %
Noninterest-bearing liabilities and equity:Noninterest-bearing liabilities and equity:Noninterest-bearing liabilities and equity:
Noninterest-bearing depositsNoninterest-bearing deposits148,062133,999 Noninterest-bearing deposits114,063148,062 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities16,06114,787 Accrued expenses and other liabilities15,56716,061 
EquityEquity49,29454,118 Equity48,49749,294 
Total liabilities and equityTotal liabilities and equity$548,443   $510,964   Total liabilities and equity$557,574   $548,443   
Interest rate spreadInterest rate spread2.41 %2.22 %Interest rate spread2.14 %2.41 %
Impact of noninterest-bearing sourcesImpact of noninterest-bearing sources  0.13   0.06 Impact of noninterest-bearing sources  0.64   0.13 
Net interest income/marginNet interest income/margin $9,406 2.54 % $7,837 2.28 %Net interest income/margin $10,624 2.78 % $9,406 2.54 %


The PNC Financial Services Group, Inc. – Form 10-Q 97105  


STATISTICAL INFORMATION (UNAUDITED)
THE PNC FINANCIAL SERVICES GROUP, INC.
Average Consolidated Balance Sheet And Net Interest Analysis (a) (b) (c)
(Continued from previous page)(Continued from previous page)Three months ended September 30(Continued from previous page)Three months ended September 30
20222021 20232022
Taxable-equivalent basis
Dollars in millions
Taxable-equivalent basis
Dollars in millions
Average
Balances
Interest Income/ExpenseAverage Yields/RatesAverage
Balances
Interest Income/
Expense
Average Yields/
Rates
Taxable-equivalent basis
Dollars in millions
Average
Balances
Interest Income/ExpenseAverage Yields/RatesAverage
Balances
Interest Income/
Expense
Average Yields/
Rates
AssetsAssetsAssets
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Investment securitiesInvestment securitiesInvestment securities
Securities available for saleSecurities available for saleSecurities available for sale
Residential mortgage-backedResidential mortgage-backedResidential mortgage-backed
AgencyAgency$32,500 $192 2.36 %$63,163 $223 1.41 %Agency$31,020 $211 2.73 %$32,500 $192 2.36 %
Non-agencyNon-agency74814 7.62 %1,051 21 8.07 %Non-agency62717 10.42 %748 14 7.62 %
Commercial mortgage-backedCommercial mortgage-backed3,48923 2.70 %6,134 35 2.34 %Commercial mortgage-backed2,88025 3.41 %3,489 23 2.70 %
Asset-backedAsset-backed1106.31 %5,608 21 1.50 %Asset-backed98916 6.30 %110 6.31 %
U.S. Treasury and government agenciesU.S. Treasury and government agencies11,78952 1.73 %38,149 115 1.18 %U.S. Treasury and government agencies7,99647 2.28 %11,789 52 1.73 %
OtherOther3,50622 2.47 %4,994 37 2.90 %Other2,93118 2.58 %3,506 22 2.47 %
Total securities available for saleTotal securities available for sale52,142305 2.33 %119,099 452 1.51 %Total securities available for sale46,443334 2.87 %52,142 305 2.33 %
Securities held to maturitySecurities held to maturitySecurities held to maturity
Residential mortgage-backedResidential mortgage-backed39,329 226 2.30 %Residential mortgage-backed44,112 301 2.72 %39,329 226 2.30 %
Commercial mortgage-backedCommercial mortgage-backed2,069 18 3.50 %Commercial mortgage-backed2,346 33 5.55 %2,069 18 3.50 %
Asset-backedAsset-backed6,571 42 2.58 %Asset-backed6,463 71 4.36 %6,571 42 2.58 %
U.S. Treasury and government agenciesU.S. Treasury and government agencies34,279102 1.19 %807 2.88 %U.S. Treasury and government agencies37,043125 1.34 %34,279 102 1.19 %
OtherOther2,60027 4.10 %680 4.33 %Other3,25634 4.57 %2,600 27 4.10 %
Total securities held to maturityTotal securities held to maturity84,848415 1.96 %1,487 13 3.54 %Total securities held to maturity93,220564 2.42 %84,848 415 1.96 %
Total investment securitiesTotal investment securities136,990720 2.10 %120,586 465 1.54 %Total investment securities139,663898 2.57 %136,990 720 2.10 %
LoansLoansLoans
Commercial and industrialCommercial and industrial172,7881,632 3.69 %152,964 1,095 2.80 %Commercial and industrial175,2062,625 5.86 %172,788 1,632 3.69 %
Commercial real estateCommercial real estate35,140383 4.27 %37,054 300 3.17 %Commercial real estate36,032607 6.59 %35,140 383 4.27 %
Equipment lease financingEquipment lease financing6,20260 3.85 %6,300 61 3.83 %Equipment lease financing6,44176 4.72 %6,202 60 3.85 %
ConsumerConsumer54,563731 5.32 %57,533 703 4.85 %Consumer54,744950 6.89 %54,563 731 5.32 %
Residential real estateResidential real estate44,333356 3.21 %37,475 295 3.15 %Residential real estate47,081415 3.52 %44,333 356 3.21 %
Total loansTotal loans313,0263,162 3.98 %291,326 2,454 3.32 %Total loans319,5044,673 5.75 %313,026 3,162 3.98 %
Interest-earning deposits with banksInterest-earning deposits with banks31,892185 2.32 %80,274 31 0.16 %Interest-earning deposits with banks38,352522 5.44 %31,892 185 2.32 %
Other interest-earning assetsOther interest-earning assets9,56094 3.94 %9,113 47 2.03 %Other interest-earning assets8,777146 6.66 %9,560 94 3.94 %
Total interest-earning assets/interest incomeTotal interest-earning assets/interest income491,4684,161 3.35 %501,299 2,997 2.36 %Total interest-earning assets/interest income506,2966,239 4.87 %491,468 4,161 3.35 %
Noninterest-earning assetsNoninterest-earning assets55,62957,943 Noninterest-earning assets48,66755,629 
Total assetsTotal assets$547,097 $559,242 Total assets$554,963 $547,097 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
Interest-bearing depositsInterest-bearing depositsInterest-bearing deposits
Money marketMoney market$60,934 $130 0.85 %$82,911 $0.03 %Money market$64,310 502 3.10 %$60,934 130 0.85 %
DemandDemand120,358180 0.59 %106,588 0.03 %Demand123,730670 2.15 %120,358 180 0.59 %
SavingsSavings106,76125 0.09 %89,679 10 0.04 %Savings100,643379 1.49 %106,761 25 0.09 %
Time depositsTime deposits10,0200.26 %19,293 0.12 %Time deposits25,872241 3.67 %10,020 0.26 %
Total interest-bearing depositsTotal interest-bearing deposits298,073340 0.45 %298,471 29 0.04 %Total interest-bearing deposits314,5551,792 2.26 %298,073 340 0.45 %
Borrowed fundsBorrowed fundsBorrowed funds
Federal Home Loan Bank borrowingsFederal Home Loan Bank borrowings16,708111 2.60 %Federal Home Loan Bank borrowings34,109483 5.55 %16,708 111 2.60 %
Bank notes and senior debtBank notes and senior debt14,597110 2.96 %22,573 56 0.97 %Bank notes and senior debt23,479370 6.17 %14,597 110 2.96 %
Subordinated debtSubordinated debt7,61465 3.43 %6,787 22 1.28 %Subordinated debt5,29387 6.52 %7,614 65 3.43 %
OtherOther5,34231 2.20 %4,992 12 0.93 %Other4,58453 4.49 %5,342 31 2.20 %
Total borrowed fundsTotal borrowed funds44,261317 2.81 %34,352 90 1.03 %Total borrowed funds67,465993 5.77 %44,261 317 2.81 %
Total interest-bearing liabilities/interest expenseTotal interest-bearing liabilities/interest expense342,334657 0.75 %332,823 119 0.14 %Total interest-bearing liabilities/interest expense382,0202,785 2.86 %342,334 657 0.75 %
Noninterest-bearing liabilities and equity:Noninterest-bearing liabilities and equity:Noninterest-bearing liabilities and equity:
Noninterest-bearing depositsNoninterest-bearing deposits141,167155,948 Noninterest-bearing deposits107,981141,167 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities15,69915,332 Accrued expenses and other liabilities15,62915,699 
EquityEquity47,89755,139 Equity49,33347,897 
Total liabilities and equityTotal liabilities and equity$547,097   $559,242   Total liabilities and equity$554,963   $547,097   
Interest rate spreadInterest rate spread2.60 %2.22 %Interest rate spread2.01 %2.60 %
Impact of noninterest-bearing sourcesImpact of noninterest-bearing sources  0.22   0.05 Impact of noninterest-bearing sources  0.70   0.22 
Net interest income/marginNet interest income/margin $3,504 2.82 % $2,878 2.27 %Net interest income/margin $3,454 2.71 % $3,504 2.82 %
(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 September 30, 20222023 and September 30, 20212022 were $48$47 million and $54$48 million, respectively. Loan fees for the nine months ended September 30, 20222023 and September 30, 20212022 were $146$137 million and $151$146 million, respectively.
(c)Interest income calculated as taxable-equivalent interest income. To provide more meaningful comparisons of interest income and yields for all interest-earning assets, as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP. See Reconciliation of Taxable-Equivalent Net Interest Income in this Statistical Information section for more information.
98106    The PNC Financial Services Group, Inc. – Form 10-Q



RECONCILIATION OF TAXABLE-EQUIVALENT NET INTEREST INCOME (non-GAAP)(non-GAAP) (a)
Nine months endedThree months ended Nine months endedThree months ended
In millionsIn millionsSeptember 30, 2022September 30, 2021September 30, 2022September 30, 2021In millionsSeptember 30, 2023September 30, 2022September 30, 2023September 30, 2022
Net interest income (GAAP)Net interest income (GAAP)$9,330 $7,785 $3,475 $2,856 Net interest income (GAAP)$10,513 $9,330 $3,418 $3,475 
Taxable-equivalent adjustmentsTaxable-equivalent adjustments76 52 29 22 Taxable-equivalent adjustments111 76 36 29 
Net interest income (non-GAAP)Net interest income (non-GAAP)$9,406 $7,837 $3,504 $2,878 Net interest income (non-GAAP)$10,624 $9,406 $3,454 $3,504 
(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. This adjustment is not permitted under GAAP.

RECONCILIATION OF CORE NONINTEREST EXPENSE GUIDANCE (non-GAAP) (a)
ActualOutlook - Low EndActualOutlook - High End
Three months endedThree months ended% ChangeThree months endedThree months ended% Change
Dollars in millionsSeptember 30, 2023December 31, 2023September 30, 2023December 31, 2023
Noninterest expense (b)$3,245 $3,492 %$3,245 $3,525 %
Less: Workforce reduction charges150 150 
Core noninterest expense (non-GAAP)$3,245 $3,342 %$3,245 $3,375 %
(a)Core noninterest expense is a non-GAAP measure calculated based on Noninterest expense less one-time costs related to the workforce reduction that are incurred outside of our core business operations. We believe this non-GAAP measure to be a useful tool for comparison of operating expenses incurred during the normal course of business.
(b)Amounts for the three months ended December 31, 2023 are estimated and, given that the amount and timing are uncertain, exclude the FDIC special assessment related to recovering the cost of the closures of Silicon Valley Bank and Signature Bank.

GLOSSARY

DEFINED TERMS
For a glossary of terms commonly used in our filings, please see the glossary of terms included in our 20212022 Form 10-K.

ACRONYMS
ACLAllowance for credit lossesLIBORLCRLondon Interbank Offered RateLiquidity Coverage Ratio
ALLLAllowance for loan and lease lossesLIHTCLGDLow income housing tax creditLoss given default
AOCIAccumulated other comprehensive incomeLLCLIBORLimited liability companyLondon Interbank Offered Rate
ASCAccounting Standards CodificationLTVLIHTCLoan-to-value ratioLow income housing tax credit
ASUAccounting Standards UpdateLLCLimited liability company
BHCBank holding companyLTVLoan-to-value ratio
bpsBasis pointsMD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
BBVABSBYBBVA USA Bancshares, Inc.Bloomberg Short-Term Bank Yield IndexMSRMortgage servicing right
BBVA USABBVA USA, the Alabama-chartered bank subsidiary of BBVA USA Bancshares, Inc.NSFRNet Stable Funding Ratio
BHCBank holding companyOCCOffice of the Comptroller of the Currency
bpsBasis pointsOREOOther real estate owned
CARES ActCoronavirus Aid, Relief and Economic Security ActOTCNMTCOver-the-counterNew market tax credit
CCARComprehensive Capital Analysis and ReviewPCDNSFRPurchased credit deterioratedNet Stable Funding Ratio
CECLCurrent expected credit lossesPDOCCProbabilityOffice of defaultthe Comptroller of the Currency
CET1Common equity tier 1PPPOREOPaycheckOther real estate owned
CFPBConsumer Financial Protection ProgramBureauOTCOver-the-counter
FDICFederal Deposit Insurance CorporationPCDPurchased credit deteriorated
FDMFinancial Difficulty ModificationPDProbability of default
FHLBFederal Home Loan BankRACPPPPNC’s Reserve Adequacy CommitteePaycheck Protection Program
FHLMCFederal Home Loan Mortgage CorporationROAPRACRemoval of account provisionsPNC’s Reserve Adequacy Committee
FICOFair Isaac Corporation (credit score)SCBROAPStress capital bufferRemoval of account provisions
FNMAFederal National Mortgage AssociationSECSCBSecurities and Exchange CommissionStress capital buffer
FOMCFederal Open Market CommitteeSOFRSECSecured Overnight Financing RateSecurities and Exchange Commission
GAAPAccounting principles generally accepted in the United States of AmericaSOFRSecured Overnight Financing Rate
GDPGross Domestic ProductSPESpecial purpose entity
GDPGNMAGross Domestic ProductGovernment National Mortgage AssociationTDRTroubled debt restructuring
GSIBGlobally systemically important bankU.S.United States of America
HPIHome price indexVaRValue-at-risk
ISDAInternational Swaps and Derivatives AssociationVaRValue-at-risk
LCRLiquidity Coverage RatioVIEVariable interest entity
LGDLoss given default

The PNC Financial Services Group, Inc. – Form 10-Q 107


PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the information set forth in Note 1413 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 2021first quarter 2023 Form 10-Q and 2022 Form 10-K in response to Part II, Item 1A and Part I, Item 1A, respectively.




The PNC Financial Services Group, Inc. – Form 10-Q 99


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 third quarter of 20222023 are included in the following table.
2022 period
In thousands, except per share data
Total shares purchased (a)Average price paid per shareTotal shares purchased as part of publicly announced programs (b)Maximum number of shares that may yet be purchased under the programs (b)
2023 period
In thousands, except per share data
2023 period
In thousands, except per share data
Total shares purchased (a)Average price paid per shareTotal shares purchased as part of publicly announced programs (b)Maximum number of shares that may yet be purchased under the programs (b)
July 1 – 31July 1 – 311,551 $158.64 1,544 57,912 July 1 – 31$127.15  45,500 
August 1 – 31August 1 – 311,194 $166.65 1,188 56,724 August 1 – 31$136.89  45,500 
September 1 – 30September 1 – 303,921 $156.73 3,921 52,803 September 1 – 30   45,500 
TotalTotal6,666 $158.95 6,653  Total$133.83   
(a)Includes PNC common stock purchased in connection with our various employee benefit plans generally related to forfeitures of unvested restricted stock awards and 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 20212022 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,Consistent 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, which includes setting PNC's SCB. The SCB framework, which allows for capital returns in amounts up to the level of capital in excess of the SCB minimum. Consistent with the flexibility provided under the SCB framework,minimum levels (the regulatory minimum (4.5%) plus our SCB), our Board of Directors has authorized a repurchase structureframework under the previously approved repurchase program of up to 100 million common shares, of which approximately 53%46% were still available for repurchase at September 30, 2022. Under this framework, PNC expects its quarterly repurchases to approximate $700 million to $750 million with2023. In light of the abilityFederal banking agencies proposed rules to adjust those levelsthe Basel III capital framework, share repurchase activity was paused in the third quarter of 2023 and is expected to remain paused during the fourth quarter of 2023. PNC continues to evaluate the potential impact of the proposed rules and may resume share repurchase activity depending on market and economic conditions, as conditions warrant.

well as other factors. PNC's SCB for the four-quarter period beginning October 1, 2023 is the regulatory minimum of 2.5%.

ITEM 5. OTHER INFORMATION
Director or Executive Officer Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2023, none of PNC’s directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.
100108    The PNC Financial Services Group, Inc. – Form 10-Q



ITEM 6. EXHIBITS
The following exhibit index lists Exhibits filed or furnished with this Quarterly Report on Form 10-Q:

EXHIBIT INDEX
3.1.10
4.13
22
31.1  
31.2  
32.1  
32.2  
101.INS  Inline XBRL Instance Document *Document*
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover 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 ShareholderInvestor 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’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 account with X, formerly known as 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 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.
The PNC Financial Services Group, Inc. – Form 10-Q 101


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 at “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 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'sReserve’s rules require quantitative and
The PNC Financial Services Group, Inc. – Form 10-Q 109


qualitative disclosures about our 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 all 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 PNC Investor Relations at 800-843-2206, via the information request financial information form at www.pnc.com/investorrelations for copies without exhibits, or via email to investor.relations@pnc.com.investor.relations@pnc.com for copies of exhibits, including financial statements and schedule exhibits where applicable. The interactive date file (XBRL) is only available electronically.
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, Human Resources, 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 headquartersThe PNC Financial Services Group, Inc. at the above address.The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2401. Copies will be provided without charge.
Inquiries
For financial services, call 888-762-2265.
Registered shareholders should contact Shareholder Services at 800-982-7652. Hearing impaired: 800-952-9245.
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
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
102   The PNC Financial Services Group, Inc. – Form 10-Q



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, which includes setting PNC'sPNC’s SCB, 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 20212022 Form 10-K.


110   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 obtainObtain a prospectus and enrollment form by contacting Shareholder Servicesenroll at www.computershare.com/pnc or contact Computershare 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,150 Royall Steet, Suite 1600101
Louisville, KY 40202Canton, MA 02021
800-982-7652
Hearing impaired: 800-952-9245
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 November 2, 20222023 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)

The PNC Financial Services Group, Inc. – Form 10-Q 103111