EXECUTIVE SUMMARY

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

PNC has businesses engaged in retail banking, corporate and institutional banking, asset management and residential mortgage banking, providing many of its products and services nationally, as well as other products and services in PNC’s primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, North Carolina, Florida, Kentucky, Washington, D.C., Delaware, Alabama, Virginia, Georgia, Missouri, Wisconsin and South Carolina. PNC also provides certain products and services internationally.

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 fee revenue and improving profitability, while investing for the future and managing risk and capital. We continue to invest in our products, markets and brand, and embrace our corporate responsibility to the communities where we do business.

We strive to expand and deepen customer relationships by offering convenient banking options and innovative technology solutions, providing a broad range of fee-based and credit products and services, focusing on customer service and enhancing our brand. Our approach is focused on organically growing and deepening client relationships that meet our risk/return measures. Our strategies for growing fee income across our lines of business ~~will be~~are focused on achieving deeper market penetration and cross selling our diverse product mix. A key priority is to drive growth in newly acquired and underpenetrated markets, including in the Southeast. We may also grow revenue through appropriate and targeted acquisitions and, in certain businesses, by expanding into new geographical markets.

Our capital priorities for 2013 are to support client growth and business investment, maintain appropriate capital in light of economic uncertainty and the Basel III framework and return excess capital to shareholders through dividends, ~~subject~~in accordance with our capital plan included in our 2013 Comprehensive Capital Analysis and Review (CCAR) submission to ~~regulatory approval.~~the Board of Governors of the Federal Reserve System (Federal Reserve). We continue to improve our capital levels and ratios through retention of quarterly earnings and expect to build capital through ~~retained~~retention of future earnings. During 2013, PNC does not expect to repurchase common stock through a share buyback program. PNC continues to maintain a strong bank and bank holding company liquidity position. For more detail, see the 2013 Capital and Liquidity Actions portion of this Executive Summary, the Funding and Capital Sources portion of the Consolidated Balance Sheet Review section and the Liquidity Risk Management section of this Financial Review and the Supervision and Regulation section in Item 1 Business of our 2012 Form 10-K.

PNC faces a variety of risks that may impact various aspects of our risk profile from time to time. The extent of such impacts may vary depending on factors such as the current economic, political and regulatory environment, merger and acquisition activity and operational challenges. Many of these risks and our risk management strategies are described in more detail in our 2012 Form 10-K and elsewhere in this Report.

~~RBC BANK~~ ~~(USA) ACQUISITION~~

On March 2, 2012, we acquired 100% of the issued and outstanding common stock of RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada. As part of the acquisition, PNC also purchased a credit card portfolio from RBC Bank (Georgia), National Association. PNC paid $3.6 billion in cash as the consideration for the acquisition of both RBC Bank (USA) and the credit card portfolio. The transaction added approximately $18.1 billion in deposits, $14.5 billion of loans, $1.0 billion of goodwill and $.2 billion of other intangible assets to PNC’s Consolidated Balance Sheet. Our Consolidated Income Statement includes the impact of business activity associated with the RBC Bank (USA) acquisition subsequent to March 2, 2012. See Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements in this Report for additional information regarding this acquisition.

S~~ALE~~OF S~~MARTSTREET~~

Effective October 26, 2012, PNC divested certain deposits and assets of the Smartstreet business unit, which was acquired by PNC as part of the RBC Bank (USA) acquisition, to Union Bank, N.A. Smartstreet is a nationwide business focused on homeowner or community association managers and had approximately $1 billion of assets and deposits as of September 30, 2012. The gain on sale was immaterial and resulted in a reduction of goodwill and core deposit intangibles of $46 million and $13 million, respectively.

2013 CAPITALAND LIQUIDITY ACTIONS

Our ability to take certain capital actions, including plans to pay or increase common stock dividends or to repurchase shares under current or future programs, is subject to the results of the supervisory assessment of capital adequacy undertaken by the ~~Board of Governors of the~~ Federal Reserve ~~System (Federal Reserve)~~ and our primary bank regulators as part of the ~~Comprehensive Capital Analysis and Review (CCAR)~~CCAR process. This capital adequacy assessment is based on a review of a comprehensive capital plan submitted to the Federal Reserve.

In connection with the 2013 CCAR, PNC submitted its capital plan, approved by its board of directors, to the Federal Reserve and our primary bank regulators in January 2013. As

we announced on March 14, 2013, the Federal Reserve accepted the capital plan ~~that we submitted for their review~~ and did not object to our proposed capital actions, which included a recommendation to increase the quarterly common stock dividend in the second quarter of 2013. A share repurchase program for 2013 was not included in the capital plan primarily as a result of PNC’s 2012 acquisition of RBC Bank (USA) and expansion into Southeastern markets. For additional information concerning the CCAR process and the factors the Federal Reserve takes into consideration in evaluating capital plans, see Item 1 Business – Supervision and Regulation included in our 2012 Form 10-K.

See the Liquidity Risk Management portion of the Risk Management section of this Financial Review, as well as Note 20 Subsequent Events in the Notes To Consolidated Financial Statements in this Report, for more detail on our 2013 capital and liquidity actions.

On April 4, 2013, consistent with our capital plan submitted to the Federal Reserve in 2013, our board of directors approved an increase to PNC’s quarterly common stock dividend from 40 cents per common share to 44 cents per common ~~share. For~~share with a payment date of May 5, 2013, payable the ~~second quarter of 2013, the increased dividend was payable~~next business day, to shareholders of record at the close of business on April 16, 2013. On July 3, 2013, ~~and was paid on the next business day after the~~our board of directors declared a quarterly common stock cash dividend of 44 cents per share with a payment date of ~~May~~August 5, 2013 to shareholders of record at the close of business on July 15, 2013.

RECENT MARKETAND INDUSTRY DEVELOPMENTS

There have been numerous legislative and regulatory developments and dramatic changes in the competitive landscape of our industry over the last several years.

The United States and other governments have undertaken major reform of the regulation of the financial services industry, including engaging in new efforts to impose requirements designed to strengthen the stability of the financial system and protect consumers and investors. We expect to face further increased regulation of our industry as a result of current and future initiatives intended to provide economic stimulus, financial market stability and enhanced regulation of financial services companies and to enhance the liquidity and solvency of financial institutions and markets. We also expect in many cases more intense scrutiny from our ~~bank~~ supervisors in the examination process and more aggressive enforcement of regulations on both the federal and state levels. Compliance with new regulations will increase our costs and reduce our revenue. Some new regulations may limit our ability to pursue certain desirable business opportunities.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), enacted in July 2010, mandates the most wide-ranging overhaul of financial industry regulation in decades. Many parts of the law are now in effect,

and others are now in the implementation stage, which is likely to continue for several years.

New and evolving capital and liquidity standards will have a significant effect on banks and bank holding companies, including PNC. In July 2013, the U.S. banking agencies issued final rules to implement the Basel III capital framework in the United States. In addition, the banking agencies issued final rules to revise the framework for the risk-weighting of assets under Basel I and Basel II (referred to as the standardized approach and the advanced approaches, respectively). For banking organizations subject to Basel II (such as PNC), the Basel III final rules become effective on January 1, 2014, although many provisions are phased-in over a period of years, with the rules generally fully phased-in as of January 1, 2019. The changes made to the Basel I risk-weighting framework by the standardized approach rules become effective on January 1, 2015, and the changes made to the Basel II risk-weighting framework by the advanced approaches rules become effective on January 1, 2014.

The Basel III final rules, among other things, narrow the definition of regulatory capital, require banking organizations with $15 billion or more in assets to phase-out trust preferred securities from Tier 1 regulatory capital, establish a new Tier 1 common capital requirement for banking organizations and revise the capital levels at which a bank would be subject to prompt corrective action. As of June 30, 2013, PNC had $216 million of trust preferred securities included in Tier 1 capital which, under these rules and Dodd-Frank, will no longer qualify as Tier 1 capital over time to the extent they remain outstanding. The final rules also would require that significant common stock investments in unconsolidated financial institutions (as defined in the final rules), as well as mortgage servicing rights and deferred tax assets, be deducted from regulatory capital to the extent such items individually exceed 10%, or in the aggregate exceed 15%, of the organization’s adjusted Tier 1 common capital. The Basel III final rules also significantly limit the extent to which minority interests in consolidated subsidiaries (including minority interests in the form of REIT preferred securities) may be included in regulatory capital. As of June 30, 2013, PNC had approximately $1 billion of REIT preferred securities outstanding that will be ~~providing~~subject to these limitations over time to the extent they remain outstanding. In addition, for Basel II banking organizations, like PNC, the final rules remove the filter that currently excludes unrealized gains and losses (other than those resulting from other-than-temporary impairments) on available for sale debt securities from affecting regulatory capital, which could increase the volatility of regulatory capital of Basel II banking organizations in response to changes in interest rates.

When fully phased-in on January 1, 2019, the Basel III rules require that banking organizations maintain a minimum Tier 1 common ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0% and a leverage ratio of 4.0%. Moreover,

the final rules, when fully phased-in, will also require banking organizations to maintain a Tier 1 common ratio of at least 7.0%, a Tier 1 capital ratio of at least 8.5%, and a total capital ratio of at least 10.5% to avoid limitations on capital distributions (including common stock dividends and share repurchases) and certain discretionary incentive compensation payments. For Basel II banking organizations (such as PNC), these higher buffer levels above the regulatory minimums could be supplemented by a countercyclical capital buffer of up to an additional 2.5% during periods of excessive credit growth, although this buffer is initially set at zero in the United States. After a Basel II banking organization exits its ~~first market-risk related disclosures~~“parallel run” qualification phase under the ~~final market risk~~Basel II framework, its compliance with these minimum and buffer ratio levels will be determined using the lower of the organization’s capital ~~rules adopted by~~ratios calculated under the ~~Federal~~standardized or the advanced approach. For additional information concerning PNC’s estimated fully phased-in pro forma Basel III Tier 1 common ratio as well as the Basel II “parallel run” process, please see Balance Sheet Highlights in this Executive Summary section, and Capital and Table 22: Estimated Pro Forma Basel III Tier 1 Common Capital in the Consolidated Balance Sheet Review section, of this Report.

Basel II banking organizations also are subject to a new minimum 3% supplementary leverage ratio that becomes effective on January 1, 2018, with public reporting of the ratio beginning in 2015. Unlike the existing leverage ratio, the denominator of the supplementary leverage ratio takes into account certain off-balance sheet items, including loan commitments and potential future exposure under derivative contracts. We estimate that our supplementary leverage ratio currently exceeds the new minimum ratio requirement applicable to PNC that goes into effect in 2018. In July 2013, the U.S. banking agencies in June 2012 (commonly referred to as “Basel II.5”) with respect to the quarter ended March 31, 2013. PNC is able to satisfy the requirement to make this disclosure through postings on its website, and PNC expects to do so without also providing disclosure of this information through filings with the SEC.

~~In April 2013, the Federal Reserve~~separately requested comment on a proposed rule that would ~~require~~raise the supplemental leverage ratio for U.S. bank holding companies ~~with $50~~that have $700 billion or more in total consolidated assets ~~including~~or $10 trillion or more in assets under custody and for the insured depository institution subsidiaries of these bank holding companies. Based on the asset and custody thresholds included in the proposed rule, PNC and ~~systemically designated nonbank financial companies~~PNC Bank, National Association would not be subject to this higher proposed supplemental leverage ratio.

As noted above, the final rules adopted by the U.S. banking agencies in July 2013 revise both the Basel I and Basel II risk-weighting framework. Both the standardized approach rules (which will replace the Basel I risk-weighting framework as of January 1, 2015) and the advanced approaches modifications to the Basel II risk-weighting framework replace the use of credit ratings with alternative methodologies for assessing creditworthiness and establish a new framework (referred to as the Simplified Supervisory Framework Approach) for risk-weighting securitization exposures (such as privately issued mortgage-backed securities and asset-backed securities). The standardized approach also would, among other things, increase the risk weight applicable to high volatility commercial real estate exposures and past due exposures,

establish a new framework for cleared derivatives and securities financing transactions, and require that equity exposures (other than those that are deducted from capital) be risk-weighted in a manner similar to the existing Basel II rules for equity exposures. In addition, Basel II banks that have not exited the parallel run qualification phase by the first quarter of 2015 are required to make certain public disclosures after that date under the standardized approach until the bank exits parallel run (after which it would make the public disclosures required by the advanced approaches rule). The advanced approaches rule would, among other things, significantly alter the methodology for determining counterparty credit risk weights, including the establishment of a credit valuation adjustment for counterparty risk in over-the-counter (OTC) derivative transactions, under Basel II.

The need to maintain more and higher quality capital could limit PNC’s business activities, including lending, and its ability to expand, either organically or through acquisitions. It could also result in PNC taking steps to increase its capital that may be dilutive to shareholders or being limited in its ability to pay ~~beginning~~dividends or otherwise return capital to shareholders, or selling or refraining from acquiring assets, the capital requirements for which are inconsistent with the assets’ underlying risks. Moreover, although these new requirements are being phased in over time, U.S. federal banking agencies have been taking into account expectations regarding the ability of banks to meet these new requirements, including under stressed conditions, in approving actions that represent uses of capital, such as dividend increases, share repurchases and acquisitions.

On July 31, 2013, ~~an annual assessment~~the United States District Court for the District of Columbia granted summary judgment to ~~reimburse~~the plaintiffs inNACS, et al. v. Board of Governors of the Federal Reserve System.The decision vacated the debit card interchange and network processing rules that went into effect in October 2011 and that were adopted by the Federal Reserve to implement provisions of the Dodd-Frank Act. The court found among other things that the debit card interchange fees permitted under the rules allowed card issuers to recover costs that were not permitted by the statute. The court has temporarily stayed its decision. We do not now know the ultimate impact of this ruling, nor the timing of any such impact, but if the ruling were to take effect it could have a materially adverse impact on our debit card interchange revenues. Debit card interchange revenue for the costs of supervising and regulating such companies. While the assessment formula remains subject to change until a final rule is adopted, PNC’s annual assessment would not be material based on the formula contained in the proposal.year ended December 31, 2012 was approximately $305 million.

For additional information concerning recent legislative and regulatory developments, ~~including developments related to the implementation of the Basel III capital framework,~~ as well as certain governmental, legislative and regulatory inquiries and investigations that may affect PNC, please see Item 1 Business – Supervision and Regulation, Item 1A Risk Factors and Note 23 Legal Proceedings in Item 8 of our 2012 Form 10-K and Note 17 Legal Proceedings and Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report.

KEY FACTORS AFFECTING FINANCIAL PERFORMANCE

Our financial performance is substantially affected by a number of external factors outside of our control, including the following:

General economic conditions, including the continuity, speed and stamina of the moderate U.S. economic recovery in general and on our customers in particular,

The level of, and direction, timing and magnitude of movement in, interest rates and the shape of the interest rate yield curve,

The functioning and other performance of, and availability of liquidity in, the capital and other financial markets,

Loan demand, utilization of credit commitments and standby letters of credit, and asset quality,

Customer demand for non-loan products and services,

Changes in the competitive and regulatory landscape and in counterparty creditworthiness and performance as the financial services industry restructures in the current environment,

The impact of the extensive reforms enacted in the Dodd-Frank legislation and other legislative, regulatory and administrative initiatives, including those outlined elsewhere in this Report, in our 2012 Form 10-K and in our other SEC filings, and

The impact of market credit spreads on asset valuations.

In addition, our success will depend upon, among other things:

Further success in growing profitability through the acquisition and retention of customers,

Continued development of the geographic markets related to our recent acquisitions, including full deployment of our product offerings into our Southeast markets,

Our ability to effectively manage PNC’s balance sheet and generate net interest income,

Revenue growth and our ability to provide innovative and valued products to our customers,

Our ability to utilize technology to develop and deliver products and services to our customers and protect PNC’s systems and customer information,

Our ability to manage and implement strategic business objectives within the changing regulatory environment,

A sustained focus on expense management,

Managing the non-strategic assets portfolio and impaired assets,

Improving our overall asset quality,

Continuing to maintain and grow our deposit base as a low-cost funding source,

Prudent risk and capital management related to our efforts to manage risk ~~in keeping with a moderate risk philosophy,~~to acceptable levels and to meet evolving regulatory capital standards,

Actions we take within the capital and other financial markets,

The impact of legal and regulatory-related contingencies, and

The appropriateness of reserves needed for critical estimates and related contingencies.

For additional information, please see the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and Item 1A Risk Factors in our 2012 Form 10-K.

INCOME STATEMENT HIGHLIGHTS

Net income for the ~~first~~second quarter of 2013 of ~~$1.0~~$1.1 billion increased ~~24%~~$.6 billion compared to the ~~first~~second quarter of 2012, driven by revenue growth of ~~6% and~~12%, a decline in noninterest expense of ~~2%, partially offset by an increase~~8% and a decrease in ~~the~~ provision for credit losses. For additional detail, please see the Consolidated Income Statement Review section in this Financial Review.

Net interest income of ~~$2.4~~$2.3 billion for the ~~first~~second quarter of 2013 ~~increased 4%~~decreased 11% compared with the ~~first~~second quarter of 2012, ~~driven by organic loan growth and~~reflecting the ~~full quarter~~ impact of ~~the RBC Bank (USA) acquisition.~~lower purchase accounting accretion and lower yields on loans and securities, partially offset by lower rates paid on borrowed funds.

Net interest margin decreased to ~~3.81%~~3.58% for the ~~first~~second quarter of 2013 compared to ~~3.90%~~4.08% for the ~~first~~second quarter of ~~2012 due to~~2012. Consistent with the decline in net interest income, the decrease in net interest margin reflected lower purchase accounting ~~accretion.~~accretion and lower yields on loans and securities, partially offset by lower rates paid on borrowed funds.

Noninterest income of ~~$1.6~~$1.8 billion for the ~~first~~second quarter of 2013 increased 9%by $.7 billion compared to the ~~first~~second quarter of 2012. The increase ~~reflected higher~~was attributable to lower provision for residential mortgage repurchase obligations, strong customer fee income ~~from corporate services, consumer services~~ and higher gains on asset ~~management.~~sales and valuations.

The provision for credit losses ~~increased~~decreased to ~~$236~~$157 million for the ~~first~~second quarter of 2013 compared to ~~$185~~$256 million for the ~~first~~second quarter of ~~2012. The increase in the comparison primarily reflected a larger loan portfolio.~~2012 driven by overall credit quality improvement.

Noninterest expense of $2.4 billion for the ~~first~~second quarter of 2013 decreased 2%8% compared with the ~~first~~second quarter of 2012, primarily ~~driven by~~due to lower noncash charges related to redemption of trust preferred securities, the impact of second quarter 2012 integration costs, partially offset by the impact in the first quarter 2013 of a full quarter of operating expense for the RBC Bank (USA) acquisition. The decline also reflected our continued commitment to disciplined expense management.and lower residential mortgage foreclosure-related expenses.

CREDIT QUALITY HIGHLIGHTS

Overall credit quality improved during the ~~first~~second quarter of 2013. ~~While credit quality metrics for the first quarter of 2013~~The following comparisons to December 31, 2012 were impacted by alignment with interagency guidance ~~underlying credit quality continued to improve. Alignment with interagency guidance on practices for loans and lines of credit related to consumer lending~~ in the first quarter of 2013 ~~had the overall effect of accelerating charge-offs and nonaccrual classification while reducing delinquencies.~~on

practices for loans and lines of credit related to consumer lending. This had the overall effect of (i) accelerating charge-offs, (ii) increasing nonperforming loans and (iii), in the case of loans accounted for under the fair value option, increasing nonaccrual loans. In addition, commercial real estate delinquencies declined due to improved performance. See the Credit Risk Management section of this Financial Review for further detail.

Nonperforming assets of ~~$3.9~~$3.8 billion at ~~March 31,~~June 30, 2013 ~~increased by $.1 billion, or 4%,~~remained relatively flat compared to December 31, 2012. The ~~increase was mainly due~~comparison includes the addition of $426 million of consumer loans to ~~the~~nonperforming pursuant to alignment with interagency guidance for loans and lines of credit ~~related to consumer loans~~that occurred in the first quarter of ~~$426 million. Commercial lending~~2013, substantially offset by a reduction in total commercial nonperforming loans ~~decreased $115 million, or 8%, as a result of improving~~due to credit ~~quality.~~quality improvement and lower consumer nonperforming loans largely due to principal activity. Nonperforming assets to total assets were ~~1.31%~~1.24% at ~~March 31,~~both June 30, 2013 ~~compared with 1.24% at~~and December 31, 2012 ~~and 1.47%~~compared with 1.39% at ~~March 31,~~June 30, 2012.

Overall delinquencies of ~~$3.2~~$2.8 billion decreased ~~$.6~~$.9 billion as of ~~March 31,~~June 30, 2013 compared with December 31, 2012. The reduction was partially due to a decline ~~was due~~ in ~~part to~~total consumer loan delinquencies of $395 million ~~for~~pursuant to alignment with interagency ~~guidance. A substantial portion~~guidance in which loans were moved from various delinquency categories to either nonperforming or, in the case of ~~this decrease was reflected in~~loans accounted for under the fair value option, nonaccruing. In addition, during the first six months of 2013, government insured residential real estate accruing loans past due 90 days or ~~more.~~more declined $324 million, the majority of which were transferred to OREO. Finally, commercial real estate delinquencies decreased $84 million due to improved performance.

Net charge-offs of ~~$456~~$208 million ~~increased $123~~decreased $107 million compared to the ~~first~~second quarter of ~~2012. First quarter 2013 included~~2012, reflecting a decrease in home equity, commercial and commercial real estate net charge-offs of ~~$134 million primarily related to home equity and residential real estate loans to align with interagency guidance.~~$97 million. On an annualized basis, net charge-offs were ~~0.99%~~0.44% of average loans for the second quarter of 2013 and 0.71% of average loans for the second quarter of 2012. Net charge-offs for the first six months were $664 million, up slightly compared to $648 million of net charge-offs for the first six months of 2012, due to the impact of alignment with interagency guidance in first quarter 2013, partially offset by improving credit quality in the second quarter of 2013. On an annualized basis, net charge-offs for the first half of 2013 were 0.71% of average loans and 0.76% of average loans for the first ~~quarter~~half of ~~2013 and 0.81% of average loans for the first quarter of~~ 2012. ~~Excluding the impact of these $134 million additional charge-offs, annualized net charge-offs to average loans for the first quarter 2013 was 0.70%.~~

The allowance for loan and lease losses was ~~2.05%~~1.99% of total loans and ~~112%~~114% of nonperforming loans at ~~March 31,~~June 30, 2013, compared with 2.17% and 124% at December 31, 2012, respectively. The decrease in the ~~allowance compared with year end resulted from improved overall credit quality and the impact of alignment with interagency guidance.~~

allowance compared with year end resulted from improved overall credit quality and the impact of alignment with interagency guidance.

BALANCE SHEET HIGHLIGHTS

Total loans increased by ~~$.6~~$3.9 billion to ~~$187~~$190 billion at ~~March 31,~~June 30, 2013 compared to December 31, 2012.

Total commercial lending increased by ~~$1.3~~$4.3 billion, or 1%4%, from December 31, 2012, as a result of growth in commercial loans ~~primarily from~~to new ~~relationships.~~and existing customers.

Total consumer lending decreased ~~$.7~~$.4 billion from December 31, 2012 primarily from pay downs of residential real estate, education and credit card loans, partially offset by increases in home equity and ~~education~~automobile loans.

Total deposits decreased by ~~$1.5~~$0.9 billion to $212 billion at ~~March 31,~~June 30, 2013 compared with December 31, 2012.

~~Runoff of year-end seasonally higher transaction deposits resulted in a decrease of $1.3 billion to $175 billion at March 31, 2013 compared with December 31, 2012.~~

~~Average transaction deposits grew $3.1 billion to $173.2 billion in the first quarter of 2013 compared with average transaction deposits in the fourth quarter of 2012.~~

PNC’s well-positioned balance sheet remained core funded with a loans to deposits ratio of ~~88%~~89% at ~~March 31,~~June 30, 2013.

PNC had a strong capital position at ~~March 31,~~June 30, 2013.

The Basel I Tier 1 common capital ratio increased to ~~9.8%~~10.1% compared with 9.6% at December 31, 2012.

The ~~estimated~~ pro forma Basel III Tier 1 common capital ratio was ~~8.0%~~an estimated 8.2% at ~~March~~June 30, 2013 compared with 7.5% at December 31, ~~2013,~~2012 without benefit of phase-ins. ~~See Table 22: Estimated Pro forma Basel III Tier 1 Common Capital in the Consolidated Balance Sheet Review section of this Financial Review for more detail.~~

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PNC continues to evaluate the Basel III final rules adopted in July 2013. Pending completion of that evaluation this estimate is based on our understanding of the prior U.S. Basel III rule proposals issued in 2012. We do not believe the changes in the final rules from the proposals will negatively impact our common capital ratio.

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See the Capital discussion and Table 22: Estimated Pro forma Basel III Tier 1 Common Capital Ratio in the Consolidated Balance Sheet Review section of this Financial Review for more detail.

In April 2013, the PNC board of directors raised the quarterly cash dividend on common stock to 44 cents per share, an increase of 4 cents per share, or ~~10 %,~~10%, effective with the May dividend.

Our Consolidated Income Statement and Consolidated Balance Sheet Review sections of this Financial Review describe in greater detail the various items that impacted our results for the first ~~three~~six months of 2013 and 2012 and balances at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively.

2012 ACQUISITIONAND DIVESTITURE ACTIVITY

Effective October 26, 2012, PNC divested certain deposits and assets of the Smartstreet business unit, which was acquired by PNC as part of the RBC Bank (USA) acquisition, to Union Bank, N.A.

See Note 2 Acquisition and Divestiture Activity in the Notes To Consolidated Financial Statements in this Report for additional information regarding this 2012 acquisition and divestiture activity.

AVERAGE CONSOLIDATED BALANCE SHEET HIGHLIGHTS

Table 2: Summarized Average Balance Sheet


Three months ended March 31 Dollars in millions	2013		2012
Six months ended June 30 Dollars in millions					2013		2012
Average assets
Interest-earning assets
Investment securities	$	58,531	$	61,583	$	57,683	$	61,469
Loans		186,099		164,556		187,359		171,239
Other		11,550		11,595		11,099		11,225
Total interest-earning assets		256,180		237,734		256,141		243,933
Other		47,265		43,808		46,591		44,914
Total average assets	$	303,445	$	281,542	$	302,732	$	288,847
Average liabilities and equity
Interest-bearing liabilities
Interest-bearing deposits	$	144,801	$	134,193	$	145,014	$	138,220
Borrowed funds		39,727		40,212		39,161		41,668
Total interest-bearing liabilities		184,528		174,405		184,175		179,888
Noninterest-bearing deposits		64,850		57,900		64,800		59,189
Other liabilities		12,140		11,426		11,650		11,023
Equity		41,927		37,811		42,107		38,747
Total average liabilities and equity	$	303,445	$	281,542	$	302,732	$	288,847

Various seasonal and other factors impact our period-end balances, whereas average balances are generally more indicative of underlying business trends apart from the impact of acquisitions and divestitures. The Consolidated Balance Sheet Review section of this Financial Review provides

information on changes in selected Consolidated Balance Sheet categories at ~~March 31,~~June 30, 2013 compared with December 31, 2012.

Total average assets increased to ~~$303.4~~$302.7 billion for the first ~~quarter~~six months of 2013 compared with ~~$281.5~~$288.8 billion for the first ~~quarter~~six months of 2012, primarily due to an increase of ~~$18.4~~$12.2 billion in average interest-earning assets driven by an increase in average total loans, including the ~~full quarter~~ impact of loans added in the RBC Bank (USA) acquisition, which closed March 2, 2012.

Total assets were ~~$300.8~~$304.4 billion at ~~March 31,~~June 30, 2013 compared with $305.1 billion at December 31, 2012.

Average total loans increased by ~~$21.5~~$16.1 billion to ~~$186.1~~$187.4 billion for the first ~~quarter~~six months of 2013 compared with the ~~first quarter~~six months of 2012, including increases in average commercial loans of ~~$14.2~~$11.5 billion and average consumer loans of ~~$4.3~~$3.0 billion. The overall increase in loans reflected organic loan growth, primarily in ~~corporate banking and real estate,~~our Corporate & Institutional Banking segment, as well as the ~~full quarter~~ impact of loans added in the RBC Bank (USA) acquisition.

Loans represented 73% of average interest-earning assets for the first ~~quarter~~six months of 2013 and ~~69%~~70% of average interest-earning assets for the first ~~quarter~~six months of 2012.

Average investment securities decreased ~~$3.1~~$3.8 billion to ~~$58.5~~$57.7 billion in the first ~~quarter~~six months of 2013 compared with the first ~~quarter~~six months of 2012, primarily as a result of principal ~~payments.~~payments, including prepayments and maturities, partially offset by net purchase activity. During the second quarter of 2013, we entered into certain transactions to purchase securities that will be delivered in the third and fourth quarters of 2013. Total investment securities comprised 23% of average interest-earning assets for the first ~~quarter~~six months of 2013 and ~~26%~~25% for the first ~~quarter~~six months of 2012.

Average noninterest-earning assets increased ~~$3.5~~$1.7 billion to ~~$47.3~~$46.6 billion in the ~~first quarter~~six months of 2013 compared with the ~~first quarter~~six months of 2012. The increase included the impact of higher adjustments for net unrealized gains on securities, which are included in ~~noninterest-earnings~~noninterest-earning assets for average balance sheet purposes, the six month impact of the RBC Bank (USA) acquisition, including goodwill, and an increase in equity investments. These increases were partially offset by decreased unsettled securities sales, which are included in noninterest-earning assets for average balance sheet purposes.

Average total deposits were ~~$209.7~~$209.8 billion for the first ~~quarter~~six months of 2013 compared with ~~$192.1~~$197.4 billion for the first ~~quarter~~six months of 2012. The increase of ~~$17.6~~$12.4 billion primarily resulted from an increase of $17.4 billion in average transaction deposits which grew to $173.6 billion for the first six months of ~~$22.6~~2013 compared with $156.2 billion ~~partially offset by a decrease~~for the first six months of ~~$5.5 billion in average retail~~

~~certificates of deposit attributable to runoff of maturing accounts.~~2012. Growth in ~~average money market deposits,~~ average interest-bearing demand deposits, average noninterest-bearing deposits and average ~~noninterest-bearing~~money market deposits drove the increase in average transaction deposits, which resulted from ~~deposits added in~~the six month impact of the RBC Bank (USA) ~~acquisition~~acquired deposits and organic growth. ~~Average transaction deposits~~These increases were ~~$173.2~~partially offset by a decrease of $5.1 billion ~~for the first quarter~~in average retail certificates of ~~2013 compared with $150.7 billion for the first quarter~~deposit attributable to runoff of ~~2012.~~maturing accounts. Total deposits at ~~March 31,~~June 30, 2013 were ~~$211.6~~$212.3 billion compared with $213.1 billion at December 31, 2012 and are further discussed within the Consolidated Balance Sheet Review section of this Financial Review.

Average total deposits represented 69% of average total assets for the first ~~quarter~~six months of 2013 and 68% for the first ~~quarter~~six months of 2012.

Retail Banking

Retail Banking earned ~~$120~~$278 million in the first ~~three~~six months of 2013 compared with ~~$147~~$283 million for the same period a year ago. Earnings were essentially flat compared to a year ago as higher noninterest income was offset by lower net interest income and higher noninterest expense. Retail Banking’s core strategy is to efficiently grow customers by providing an experience that builds customer loyalty and expands loan, investment product, and money management share of wallet. Net checking relationships grew 114,000 in the first six months of 2013. The ~~decrease~~growth reflects strong results and gains in all of our markets, as well as strong customer retention in the overall network.

In the second quarter of 2013, Retail Banking earned $158 million compared with earnings of $136 million for the second quarter of 2012. The increase in earnings ~~resulted from~~was primarily due to the gain on sale of 2 million Visa Class B common shares, higher ~~noninterest expense and~~fee income, lower provision for credit losses ~~both attributable~~and lower additions to the full quarter impact of the RBC Bank (USA) acquisition. Noninterest income was also higher compared with the first quarter of 2012 primarily due to increased debit and credit card transactions, brokerage activity and the RBC Bank (USA) acquisition.legal reserves. These increases were partially offset by a decline in net interest income.

Corporate & Institutional Banking

Corporate & Institutional Banking earned $1.2 billion in the first six months of 2013 as compared with $1.1 billion in the first six months of 2012. The increase in earnings was primarily due to an increase in noninterest income and improved credit quality, partially offset by lower net interest income. We continued to focus on building client relationships, including increasing cross sales and adding new clients where the risk-return profile was attractive.

In the ~~first~~second quarter of 2013, Corporate & Institutional Banking earned ~~$541~~$612 million compared with ~~$495~~earnings of $577 million in the ~~first~~second quarter of 2012. ~~Earnings increased for the first quarter of 2013 primarily due to the full quarter impact of the RBC Bank (USA) acquisition and organic growth.~~ The increase ~~in revenue in the comparison~~ reflected higher noninterest income and a benefit on the provision for credit losses, which were partially offset by a decrease in net interest income from higher average loans and deposits, as well as growth in corporate service fees primarily due to higher commercial mortgage servicing revenue. The increase in noninterest expense reflected a full quarter impact of the RBC Bank (USA) acquisition.income.

Asset Management Group

Asset Management Group earned ~~$43~~$79 million inthrough the first ~~three~~six months of 2013 compared with ~~$36~~$74 million in the ~~first three months~~same period of 2012. ~~Assets under administration reached a record high for Asset Management Group of $236 billion as of March 31, 2013 and were $219 billion as of March 31, 2012. Revenue increased $12 million, or 5%,~~The increase in ~~the year over year comparison~~earnings was due to ~~stronger average equity markets and increased sales volume.~~ higher

revenue ~~increase was~~of $26 million partially offset by higher noninterest expense. Assets under administration were $233 billion as of June 30, 2013 compared to $214 billion as of June 30, 2012. The core growth strategies for the business continue to include: investing in higher growth geographies, increasing internal referral sales and adding new front line sales staff.

In the second quarter of 2013, Asset Management Group earned $36 million compared with $38 million in the second quarter of 2012. The decrease is primarily due to an increase in noninterest expense from strategic business ~~investments.~~investments and an increase in the provision for credit losses.

Residential Mortgage Banking

Residential Mortgage Banking reported ~~net income~~earnings of ~~$45~~$65 million in the first ~~three~~six months of 2013 compared with ~~$61~~losses of $152 million in the first ~~three~~six months of 2012. Earnings ~~declined~~increased from the prior year six month period primarily as a result of higher provision for credit losses. Noninterest income was stable in the comparison, as decreases in net hedging gains on mortgage servicing rights and servicing fees were offset by increased loan sales revenue and lowerdecreased provision for residential mortgage repurchase obligations. ~~The increase~~

In the second quarter of 2013, Residential Mortgage Banking reported earnings of $20 million compared with a loss of $213 million in the second quarter of 2012 due to ~~noninterest expense from higher loan origination volume was more than offset by lower~~a decrease in provision for residential mortgage ~~foreclosure-related expense~~repurchase obligations and ~~legal~~a decrease in the noninterest expense.

BlackRock

Our BlackRock business segment earned ~~$108~~$220 million in the first ~~three~~six months of 2013 and ~~$90~~$178 million in the first ~~three~~six months of 2012. ~~The higher~~In the second quarter of 2013, business segment earnings from BlackRock ~~for~~were $112 million compared with $88 million in the ~~first~~second quarter of ~~2013 compared to the first quarter of 2012 was primarily due to PNC’s higher equity earnings from BlackRock.~~2012.

Non-Strategic Assets Portfolio

This business segment consists primarily of acquired non-strategic assets. Non-Strategic Assets Portfolio had earnings of $139 million for the first six months of 2013 compared with $138 million in the first six months of 2012. Earnings were relatively flat year-over-year as higher noninterest income and lower noninterest expense were offset by lower net interest income and a higher provision for credit losses.

In the ~~first~~second quarter of 2013, Non-Strategic Assets Portfolio had earnings of ~~$79~~$60 million compared with ~~$71~~$67 million for the ~~first~~second quarter of ~~2012, primarily attributable~~2012. The decrease was due to ~~higher noninterest~~a decrease in net interest income partially offset by higher provision for credit losses. The increase in noninterest income reflected a lower provision for estimated losses on home equity repurchase obligations. The increase in provision for credit losses in the comparison was driven by ~~reductions in expected cash flows on purchased impaired home equity loans.~~lower purchase accounting accretion and lower loan balances.

Other

“Other” reported earnings of ~~$68~~$193 million for the ~~three~~six months of 2013 compared with a loss of ~~$89~~$236 million for the first ~~three~~six months of 2012. ~~Increased~~In the second quarter of 2013, “Other” reported earnings ~~for~~of $125 million compared with a loss of $147 million in the ~~2013 period was primarily due to lower integration costs.~~second quarter of 2012.

CONSOLIDATED INCOME STATEMENT REVIEW

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

Net income for the first ~~three~~six months of 2013 was ~~$1.0~~$2.1 billion, ~~an increase of 24%~~ compared with ~~$.8~~net income of $1.4 billion for the first ~~three~~six months of 2012. The increase in year-over-year net income was driven by revenue growth of ~~6% and~~9%, a decline in noninterest expense of ~~2%, partially offset by an increase~~5% and a decrease in ~~the~~ provision for credit losses. ~~Revenue growth in~~Higher revenue for the ~~comparison~~first six months of 2013 reflected lower provision for residential mortgage repurchase obligations, strong customer fee income and higher gains on asset sales and valuations and was ~~driven~~partially offset by ~~higher~~lower net interest income.

Net income ~~higher corporate and consumer services fees and higher asset management revenue.~~for the second quarter of 2013 was $1.1 billion compared with $.5 billion for the second quarter of 2012. The increase in net income was due to revenue growth of 12%, a decline in noninterest expense of 8% and a decrease in provision for credit losses. Higher revenue for the ~~comparison~~second quarter of 2013 reflected lower ~~integration costs~~provision for residential mortgage repurchase obligations, strong customer fee income and ~~continued commitment to disciplined expense management,~~higher gains on asset sales and valuations, partially offset by ~~the impact of a full quarter of operating expense for the RBC Bank (USA) acquisition.~~lower net interest income.

NET INTEREST INCOME

Table 4: Net Interest Income and Net Interest Margin


	Three months ended March 31						Six months ended June 30						Three months ended June 30
Dollars in millions	2013			2012			2013			2012			2013			2012
Net interest income	$	2,389		$	2,291		$	4,647		$	4,817		$	2,258		$	2,526
Net interest margin		3.81	%		3.90	%		3.69	%		3.99	%		3.58	%		4.08	%

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 and the discussion of purchase accounting accretion of purchased impaired loans in the Consolidated Balance Sheet review of this Report for additional information.

Net interest income ~~increased~~decreased by ~~$98~~$170 million, or 4%, in the first half of 2013 compared with the first half of 2012. Net interest income decreased by $268 million, or 11%, in the

second quarter of 2013 compared with the ~~first~~second quarter of ~~2012, driven~~2012. The decline in both comparisons reflected lower purchase accounting accretion, the impact of lower yields on loans and securities, as well as the impact of lower securities balances during the quarter as a result of portfolio management activities. The impact of the decline in earning asset yields and lower security balances was partially offset by ~~organic~~increases in loan balances, reflecting commercial and consumer loan growth over the period, and lower rates paid on borrowed funds. The six months period comparison was also impacted by the ~~full quarter impact of the~~March 2012 RBC Bank (USA) acquisition.

~~The decline~~During the second quarter of 2013, we entered into transactions to purchase securities that will be delivered in the third and fourth quarters of 2013. As a result, we expect interest income from securities to improve in the third quarter versus second quarter.

The declines in net interest margin for both the first six months and second quarter of 2013 compared with the ~~first quarter of~~ 2012 ~~was due to~~periods reflected lower purchase accounting ~~accretion.~~accretion and lower yields on earning assets.

~~Net interest margin~~The decrease for the first ~~quarter~~six months of 2013 ~~also reflected~~included a 2643 basis point decrease in the yield on total interest-earning assets, partially offset by a decrease in the weighted-average rate accrued on total interest-bearing liabilities of 2217 basis points. In the second quarter comparison, the yield on total interest-earning assets decreased 60 basis points, partially offset by a decrease in the weighted-average rate accrued on total interest-bearing liabilities of 12 basis points.

The ~~decrease~~decreases in the yield on interest-earning assets ~~was~~

were primarily due to lower rates on new loans and purchased securities in the ongoing low rate environment. The ~~decrease~~decreases in the rate accrued on interest-bearing liabilities ~~was~~were primarily due to net redemptions and maturities of bank notes and senior debt and subordinated debt, including the redemption of trust preferred and hybrid capital ~~securities, and the runoff of maturing retail certificates of deposit during 2012.~~securities.

With respect to the ~~second~~third quarter of 2013, we expect net interest income to be modestly lower as we expect the continuing impact of lower loan and security yields and a decline in purchase accounting accretion to be partially offset by ~~two to three percent compared to first quarter 2013 net interest income.~~loan growth and the impact of our securities portfolio management activities.

For the full year 2013, we expect net interest income to decrease compared with 2012, assuming an expected decline in the purchase accounting accretion component of net interest income of approximately $350 million.

NONINTEREST INCOME

Table 5: Noninterest Income


Three months ended March 31 Dollars in millions	2013			2012
							Six months ended June 30						Three months ended June 30
Dollars in millions							2013			2012			2013			2012
Noninterest income
Asset management	$	308		$	284		$	648		$	562		$	340		$	278
Consumer services		296			264			610			554			314			290
Corporate services		277			232			603			522			326			290
Residential mortgage		234			230			401			57			167			(173	)
Service charges on deposits		136			127			283			271			147			144
Net gains on sales of securities		14			57			75			119			61			62
Net other-than-temporary impairments		(10	)		(38	)		(14	)		(72	)		(4	)		(34	)
Other		311			285			766			525			455			240
Total noninterest income	$	1,566		$	1,441		$	3,372		$	2,538		$	1,806		$	1,097

Noninterest income increased by ~~$125~~$834 million, or 9%33%, during the first ~~three months~~half of 2013 compared to the first ~~three months~~half of 2012. ~~The overall increase reflected higher~~Noninterest income for the second quarter increased by $709 million, or 65%, compared to the second quarter of 2012. Both increases were driven by lower provision for residential mortgage repurchase obligations in the 2013 periods, strong customer fee income ~~from corporate services, consumer services~~ and higher gains on asset ~~management.~~sales and valuations.

Asset management revenue, including BlackRock, increased ~~$24~~$86 million, or 15% in the first ~~three~~six months of 2013 ~~to $308 million~~ compared ~~with $284 million in~~to the first ~~three~~six months of 2012. The comparison included an increase ~~was~~of $62 million, or 22%, in the second quarter compared to the prior year quarter. Both increases were due to ~~stronger equity markets, growth in customers and~~ higher earnings from our BlackRock ~~investment.~~investment, stronger equity markets and growth in customers. Discretionary assets under management increased to ~~$118~~$117 billion at ~~March 31,~~June 30, 2013 compared with ~~$112~~$109 billion at ~~March 31,~~June 30, 2012 driven by ~~higher~~stronger average equity markets ~~strong sales performance~~ and ~~successful client retention.~~positive net flows.

Consumer service fees ~~were $296 million for the first three months of 2013, which reflected an increase of $32 million, or 12%, compared with $264~~increased $56 million in the first ~~three~~six months of 2013 compared to the first six months of 2012 ~~due~~and increased $24 million in the second quarter of 2013 compared to the second quarter of 2012. Both increases reflected growth in ~~customers~~debit card, brokerage, credit card and ~~transaction volume.~~

Corporate services revenue increased ~~by $45 million, or 19%, in the first quarter of 2013~~ to ~~$277 million compared to $232~~$603 million in the first six months of 2013 compared with $522 million in the first six months of 2012, including $326 million in the second quarter of ~~2012, primarily as a result~~2013 compared with $290 million in the second quarter of ~~higher~~2012. Corporate services revenue for the first six months of 2013 included $55 million related to valuation gains from the impact of rising interest rates on commercial

mortgage servicing rights valuations, including $44 million in the second quarter. These amounts contributed to increases in commercial mortgage servicing ~~revenue.~~revenue, as the comparable amounts for the 2012 periods were not significant. In addition, the increase in the six months comparison also reflected higher treasury management fees. The increases in both comparisons were partially offset by lower merger and acquisition advisory fees.

Residential mortgage revenue increased to ~~$234~~$401 million in the first ~~three~~six months of 2013 ~~from $230~~compared with $57 million in the first ~~three~~six months of ~~2012, which includes~~2012. The second quarter comparables were revenue of $167 million in the ~~impact~~second quarter of 2013 and a loss of $173 million for the ~~decline in~~second quarter of 2012. Residential mortgage revenue for the first six months of 2013 included provision for residential mortgage repurchase obligations of $77 million compared to $4$470 million infor the first ~~three months of 2013, compared to $32 million in the first three~~six months of 2012. ~~Excluding~~The comparable amounts for the second quarters of 2013 and 2012 were $73 million and $438 million, respectively. See the Recourse and Repurchase Obligations section of this ~~provision impact,~~Financial Review for further detail. These increases to both 2013 periods in residential mortgage revenue ~~decreased~~were partially offset by ~~$24 million due to the impact of~~ lower net hedging gains on mortgage servicing ~~rights, which was partially offset by higher loan sales revenue.~~rights.

~~Service charges on deposits grew to $136~~Other noninterest income totaled $766 million for the first ~~quarter of 2013 from $127 million for the first quarter of 2012. The increase reflected customer growth, including the RBC Bank (USA) acquisition.~~

~~Other noninterest income increased by $26 million, or 9%, to $311 million for the first three~~six months of 2013 compared with ~~$285~~$525 million for the first ~~three~~six months of 2012. Other noninterest income totaled $455 million for the second quarter of 2013 and $240 million for the second quarter of 2012. The increases in both 2013 periods included the $83 million gain on the sale of 2 million Visa Class B common shares during the second quarter of 2013. Other noninterest income for the first six months of 2013 also included $41 million of revenue from credit valuations related to customer-initiated hedging activities as higher market interest rates reduced the fair value of PNC’s credit exposure on these activities. The comparable amount for the first six months of 2012 ~~which~~ was ~~primarily attributable~~a loss of $28 million. The impacts to the second quarters of 2013 and 2012 were revenue of $39 million and a loss of $35 million, respectively. In addition, the increase in other noninterest income in the year-to-date comparison also reflected higher revenue associated with commercial mortgage banking activity.

We continue to hold approximately 12 million Visa Class B common shares with an estimated fair value of approximately $950 million and recorded investment of approximately $204 million as of June 30, 2013.

Other noninterest income typically fluctuates from period to period depending on the nature and magnitude of transactions completed. Further details regarding our trading activities are included in the Market Risk Management – Trading Risk portion of the Risk Management section of this Financial Review. Further details regarding private and other equity investments are included in the Market Risk Management – Equity And Other Investment Risk section, and further details

regarding gains or losses related to our equity investment in BlackRock are included in the Business Segments Review section.

For 2013, we continue to expect both full year 2013 noninterest income and total revenue to increase compared with 2012.

PROVISION F~~FOR~~OR CREDIT LOSSES

The provision for credit losses totaled ~~$236~~$393 million for the first ~~three months~~half of 2013 compared with ~~$185~~$441 million for the first ~~three months~~half of 2012. The ~~increase~~provision for credit losses was $157 million for the second quarter of 2013 compared with $256 million for the second quarter of 2012. The declines in the ~~comparison~~comparisons were driven primarily ~~reflected a larger loan portfolio.~~by overall commercial credit quality improvement.

We ~~currently~~ expect our provision for credit losses infor the ~~second~~third quarter of 2013 to be between ~~$200~~$170 million and ~~$300 million.~~$250 million as we expect the pace of commercial credit improvement to ease and net credit exposure to increase.

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

NONINTEREST EXPENSE

Noninterest expense was ~~$2.4~~$4.8 billion for the first ~~three months~~half of 2013, ~~and $2.5~~a decrease of $.3 billion, or 5%, from $5.1 billion for the first ~~three months~~half of 2012. ~~The decline in the comparison reflected residential mortgage foreclosure-related expenses of $15 million for the first three months of 2013, while noninterest~~Noninterest expense for the first ~~three~~six months of 2013 included $30 million of noncash charges related to redemption of trust preferred securities and $18 million of residential mortgage foreclosure-related expenses. The first half of 2012 included $197 million of integration costs, noncash charges of ~~$145~~$130 million related to redemption of trust preferred securities and $81 million of residential mortgage foreclosure-related ~~expenses of $38 million.~~expenses. These ~~declines~~decreases to noninterest expense were partially offset by the impact ~~in the first quarter 2013~~ of ~~a full quarter of~~higher operating expense for the RBC Bank (USA) ~~acquisition.~~acquisition during the first half of 2013 compared to the first six months of 2012.

Noninterest expense decreased $.2 billion, or 8%, to $2.4 billion for the second quarter of 2013 compared with $2.6 billion for the second quarter of 2012. The second quarter of 2013 included $30 million of noncash charges related to redemption of trust preferred securities, while the second quarter of 2012 included $130 million of noncash charges related to redemption of trust preferred securities, $52 million of integration costs and $43 million of residential mortgage foreclosure-related expenses. The impact of residential mortgage foreclosure-related expenses in second quarter 2013 was not significant.

The decline in noninterest expense in the comparison also reflected our continued commitment to disciplined expense management, and we currently expect to ~~achieve~~exceed our $700 million continuous improvement savings goal for 2013. Through the ~~end~~first half of the ~~first quarter,~~year, we have captured approximately ~~$500~~$600 million of annualized savings. Cost savings are expected to offset investments we are making in our businesses and infrastructure.

For the ~~second~~third quarter of 2013, we currently expect noninterest expenses to be ~~two~~modestly up compared to ~~three percent higher than~~ the ~~first~~second quarter of 2013.

We ~~continue to~~ expect noninterest expense for 2013 to decline by ~~mid-single digits on a percentage basis~~at least five percent compared with ~~2012. We expect noninterest expense, excluding integration costs and trust preferred securities redemption related charges, to be flat to down in 2013 versus~~ 2012.

EFFECTIVE INCOME TAX RATE

The effective income tax rate was ~~24.2%~~23.9% in the first ~~three~~six months of 2013 compared with ~~25.7%~~25.1% in the first ~~three~~six months of 2012. For the second quarter of 2013, our effective income tax rate was 23.7% compared with 24.1% for the second quarter of 2012. The effective tax rate is generally lower than the statutory rate primarily due to ~~increased~~ tax credits PNC receives from our investments in low income housing and new markets investments, as well as increased earnings in other tax exempt investments.

The ~~lower~~decrease in the effective ~~income~~ tax rate infor the second quarter and the first ~~quarter~~six months of 2013 compared to the ~~prior year quarter was primarily attributable to the impact of higher tax-exempt income~~2012 periods resulted from increased tax exempt investments and tax ~~credits,~~benefits from tax audit settlements, partially offset by higher levels of pretax income.

CCONSOLIDATED BALANCE SHEET REVIEW

Table 6: Summarized Balance Sheet Data


In millions	March 31 2013			December 31 2012			June 30 2013			December 31 2012
Assets
Loans held for sale	$	3,295		$	3,693		$	3,814		$	3,693
Investment securities		59,361			61,406			57,449			61,406
Loans		186,504			185,856			189,775			185,856
Allowance for loan and lease losses		(3,828	)		(4,036	)		(3,772	)		(4,036	)
Goodwill		9,075			9,072			9,075			9,072
Other intangible assets		1,921			1,797			2,153			1,797
Other, net		44,484			47,319			45,921			47,319
Total assets	$	300,812		$	305,107		$	304,415		$	305,107
Liabilities
Deposits	$	211,620		$	213,142		$	212,279		$	213,142
Borrowed funds		37,647			40,907			39,864			40,907
Other		9,467			9,293			10,331			9,293
Total liabilities		258,734			263,342			262,474			263,342
Equity
Total shareholders’ equity		39,663			39,003			40,286			39,003
Noncontrolling interests		2,415			2,762			1,655			2,762
Total equity		42,078			41,765			41,941			41,765
Total liabilities and equity	$	300,812		$	305,107		$	304,415		$	305,107

The summarized balance sheet data above is based upon our Consolidated Balance Sheet in this Report.

~~The decrease in total~~Total assets ~~of $4.3 billion~~decreased $692 million, or less than 1%, at ~~March 31,~~June 30, 2013 compared with December 31, ~~2012 was primarily due to lower interest-earning deposits with banks (which is included in Other, net~~2012. Total liabilities declined $868 million, or less than 1%, in the preceding table) and investment securities. The decline in investment securities was primarily due to principal payments. The decline in interest-earning deposits with banks was primarily driven by the impact of decreased borrowed funds and decreased deposits, partially offset by the impact of decreased investment securities. Total liabilities decreased $4.6 billion at March 31, 2013 compared with December 31, 2012 primarily due to the runoff of year end seasonally higher deposits and lower FHLB borrowings.

same comparison. An analysis of changes in selected balance sheet categories follows.

LOANS

A summary of the major categories of loans outstanding follows. Outstanding loan balances of ~~$186.5~~$189.8 billion at ~~March 31,~~June 30, 2013 and $185.9 billion at December 31, 2012 were net of unearned income, net deferred loan fees, unamortized discounts and premiums, and purchase discounts and premiums of ~~$2.5~~$2.3 billion at ~~March 31,~~June 30, 2013 and $2.7 billion at December 31, 2012, respectively. The balances

include purchased impaired loans but do not include future accretable net interest (i.e., the difference between the undiscounted expected cash flows and the carrying value of the loan) on those loans.

Table 7: Details Of Loans


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Commercial Lending
Commercial lending
Commercial
Retail/wholesale trade	$	14,109	$	13,801	$	14,466	$	13,801
Manufacturing		14,139		13,856		14,270		13,856
Service providers		12,568		12,095		12,758		12,095
Real estate related (a)		10,274		10,616		10,248		10,616
Financial services (b)		9,679		9,026		10,834		9,026
Health care		7,392		7,267		7,618		7,267
Other industries		16,124		16,379		16,736		16,379
Total commercial		84,285		83,040		86,930		83,040
Commercial real estate
Real estate projects (c)		12,596		12,347		12,636		12,347
Commercial mortgage		6,183		6,308		6,355		6,308
Total commercial real estate		18,779		18,655		18,991		18,655
Equipment lease financing		7,240		7,247		7,349		7,247
Total Commercial Lending (d)		110,304		108,942
Consumer Lending
Total commercial lending (d)						113,270		108,942
Consumer lending
Home equity
Lines of credit		23,029		23,576		22,559		23,576
Installment		13,001		12,344		13,857		12,344
Total home equity		36,030		35,920		36,416		35,920
Residential real estate
Residential mortgage		14,217		14,430		14,051		14,430
Residential construction		768		810		726		810
Total residential real estate		14,985		15,240		14,777		15,240
Credit card		4,081		4,303		4,135		4,303
Other consumer
Education		8,048		8,238		7,814		8,238
Automobile		8,716		8,708		9,066		8,708
Other		4,340		4,505		4,297		4,505
Total Consumer Lending		76,200		76,914
Total consumer lending						76,505		76,914
Total loans	$	186,504	$	185,856	$	189,775	$	185,856

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

(b)	Includes loans issued to a Financing Special Purpose Entity which holds receivables from the other industries within Commercial Lending.

(c)	Includes both construction loans and intermediate financing for projects.

(d)	Construction loans with interest reserves and A/B Note restructurings are not significant to PNC.

The increase in loans of ~~$.6~~$3.9 billion from December 31, 2012 included an increase in commercial lending of ~~$1.3~~$4.3 billion and a decrease in consumer lending of ~~$.7~~$.4 billion. The increase in commercial lending was the result of growth in commercial ~~loans primarily from new relationships. The decline in consumer lending resulted primarily from pay downs of residential real estate, credit card and education loans.~~

loans, primarily from an increase in loan commitments to new and existing customers. The decline in consumer lending resulted from pay downs of residential real estate, education, credit card and other loans, along with the movement of residential real estate loans to OREO and charge-offs taken in the first quarter of 2013 related to the alignment with interagency supervisory guidance, partially offset by net growth in home equity and increases in indirect auto loans.

Loans represented 62% of total assets at ~~March 31,~~June 30, 2013 and 61% of total assets at December 31, 2012. Commercial lending represented ~~59%~~60% of the loan portfolio at ~~both March 31,~~June 30, 2013 and 59% at December 31, 2012. Consumer lending represented ~~41%~~40% of the loan portfolio at ~~both March 31,~~June 30, 2013 and 41% at December 31, 2012.

Commercial real estate loans represented 10% of total loans and 6% of total assets at both ~~March 31,~~June 30, 2013 and December 31, 2012. See the Credit Risk Management portion of the Risk Management section of this Financial Review for additional details of loans.

Total loans above include purchased impaired loans of ~~$7.1~~$6.8 billion, or 4% of total loans, at ~~March 31,~~June 30, 2013, and $7.4 billion, or 4% of total loans, at December 31, 2012.

Our loan portfolio continued to be diversified among numerous industries, types of businesses and consumers across our principal geographic markets.

The Allowance for Loan and Lease Losses (ALLL) and the Allowance for Unfunded Loan Commitments and Letters of Credit are sensitive to changes in assumptions and judgments and are inherently subjective as they require material estimates, all of which may be susceptible to significant change, including, among others:

Probability of default,

Loss given default,

Exposure at date of default,

Movement through delinquency stages,

Amounts and timing of expected cash flows,

Value of collateral, which may be obtained from third parties, and

Qualitative factors, such as changes in current economic conditions, that may not be reflected in historical results.

HIGHER RISK LOANS

Our total ALLL of $3.8 billion at ~~March 31,~~June 30, 2013 consisted of $1.7 billion and $2.1 billion established for the commercial lending and consumer lending categories, respectively. The ALLL included what we believe to be appropriate loss coverage on higher risk loans in the commercial and consumer

portfolios. We do not consider government insured or guaranteed loans to be higher risk as defaults have historically been materially mitigated by payments of insurance or guarantee amounts for approved claims. Additional information regarding our higher risk loans is included in the

Credit Risk Management portion of the Risk Management section of this Financial Review and in Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit in our Notes To Consolidated Financial Statements included in Part I, Item 1 of this Report.

PURCHASE ACCOUNTING ACCRETIONAND VALUATIONOF PURCHASED IMPAIRED LOANS

Information related to purchase accounting accretion and accretable yield for the second quarter and first ~~three~~six months of 2013 and 2012 follows. Additional information is provided in Note 6 Purchased Loans in the Notes To Consolidated Financial Statements in this Report.

Table 8: Accretion – Purchased Impaired Loans


	Three months ended March 31						Three months ended June 30						Six months ended June 30
In millions	2013			2012			2013			2012			2013			2012
Accretion on purchased impaired loans
Scheduled accretion	$	157		$	158		$	150		$	178		$	307		$	336
Reversal of contractual interest on impaired loans		(85	)		(97	)		(83	)		(111	)		(168	)		(208	)
Scheduled accretion net of contractual interest		72			61			67			67			139			128
Excess cash recoveries		50			40			11			51			61			91
Total	$	122		$	101		$	78		$	118		$	200		$	219

Table 9: Purchased Impaired Loans – Accretable Yield


In millions	2013			2012			2013			2012
January 1	$	2,166		$	2,109		$	2,166		$	2,109
Addition of accretable yield due to RBC Bank (USA) acquisition on March 2, 2012					587						587
Scheduled accretion		(157	)		(158	)		(307	)		(336	)
Excess cash recoveries		(50	)		(40	)		(61	)		(91	)
Net reclassifications to accretable from non-accretable and other activity (a)		213			(29	)		366			134
March 31 (b)	$	2,172		$	2,469
June 30 (b)							$	2,164		$	2,403

(a)

~~Over 48%~~Approximately 58% of the net reclassifications for the first six months of 2013 were driven by the ~~commercial portfolio. Approximately half of the commercial~~consumer portfolio ~~impact related to excess cash recoveries recognized during the period, with the remaining~~and were due to improvements of cash expected to be collected on both RBC Bank (USA) and National City loans in future periods. The remaining net reclassifications were predominantly due to future cash flow changes in the ~~consumer~~commercial portfolio.

(b)	As of ~~March 31,~~June 30, 2013, we estimate that the reversal of contractual interest on purchased impaired loans will total approximately $1.2 billion in future periods. This will offset the total net accretable interest in future interest income of $2.2 billion on purchased impaired loans.

The unpaid principal balance of purchased impaired loans decreased to ~~$7.8~~$7.4 billion at ~~March 31,~~June 30, 2013 from $8.3 billion at December 31, 2012 due to payments, disposals and charge-offs of amounts determined to be uncollectible. The remaining purchased impaired mark at ~~March 31,~~June 30, 2013 was ~~$751~~$616 million, which was a decrease from $913 million at December 31, 2012. The associated allowance for loan losses remained relatively flat at $1.1 billion. The net investment of ~~$6.0~~$5.7 billion at ~~March 31,~~June 30, 2013 decreased 5%10% from $6.3 billion at December 31, 2012. At ~~March 31,~~June 30, 2013, our largest individual purchased impaired loan had a recorded investment of $19 million.

We currently expect to collect total cash flows of ~~$8.2~~$7.9 billion on purchased impaired loans, representing the ~~$6.0~~$5.7 billion net investment at ~~March 31,~~June 30, 2013 and the accretable net interest of $2.2 billion shown in Table 9: Purchased Impaired Loans – Accretable Yield.

~~The PNC Financial Services Group, Inc. –~~~~Form 10-Q~~13

WEIGHTED AVERAGE LIFEOFTHE PURCHASED IMPAIRED PORTFOLIOS

The table below provides the weighted average life (WAL) for each of the purchased impaired portfolios as of the ~~first~~second quarter of 2013.

Table 11: Weighted Average Life of the Purchased Impaired Portfolios

As of March 31, 2013

In millions

Recorded Investment

WAL (a)

As of June 30, 2013

In millions

Recorded

Investment

WAL (a)

Commercial

270

2.1 years

231

2.0 years

Commercial real estate

809

2.0 years

737

1.8 years

Consumer (b)

2,557

4.5 years

2,474

4.7 years

Residential real estate

3,437

4.6 years

3,336

4.8 years

Total

7,073

4.1 years

6,778

4.3 years

(a)	Weighted average life represents the average number of years for which each dollar of unpaid principal remains outstanding.

(b)	Portfolio primarily consists of nonrevolving home equity products.

PURCHASED IMPAIRED LOANS – ACCRETABLE DIFFERENCE SENSITIVITY ANALYSIS

The following table provides a sensitivity analysis on the Purchased Impaired Loans portfolio. The analysis reflects hypothetical changes in key drivers for expected cash flows over the life of the loans under declining and improving conditions at a point in time. Any unusual significant economic events or changes, as well as other variables not considered below (e.g., natural or widespread disasters), could result in impacts outside of the ranges represented below. Additionally, commercial and commercial real estate loan settlements or sales proceeds can vary widely from appraised values due to a number of factors including, but not limited to, special use considerations, liquidity premiums and improvements/deterioration in other income sources.

Table 12: Accretable Difference Sensitivity – Total Purchased Impaired Loans


In billions	In billions	March 31, 2013			Declining Scenario (a)			Improving Scenario (b)		June 30, 2013			Declining Scenario (a)			Improving Scenario (b)
Expected Cash Flows	Expected Cash Flows	$	8.2		$	(.4	)	$	.4	$	7.9		$	(.3	)	$	.4
Accretable Difference	Accretable Difference		2.2			(.1	)		.2		2.2			(.1	)		.2
Allowance for Loan and Lease Losses	Allowance for Loan and Lease Losses		(1.1	)		(.4	)		.2		(1.1	)		(.3	)		.2

(a)

Declining Scenario – Reflects hypothetical changes that would decrease future cash flow expectations. For consumer loans we assume home price forecast decreases by ten percent and unemployment rate forecast increases by two percentage points; for commercial loans, we assume that collateral values decrease by ten percent.

(b)

Improving Scenario – Reflects hypothetical changes that would increase future cash flow expectations. For consumer loans, we assume home price forecast increases by ten percent, unemployment rate forecast decreases by two percentage points and interest rate forecast increases by two percentage points; for commercial loans, we assume that collateral values increase by ten percent.

The impact of declining cash flows is primarily reflected as immediate impairment (allowance for loan losses). The impact of increased cash flows is first recognized as a reversal of the allowance with any additional cash flow increases reflected as an increase in accretable yield over the life of the loan.

NET UNFUNDED CREDIT COMMITMENTS

Net unfunded credit commitments are comprised of the following:

Table 13: Net Unfunded Credit Commitments


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Commercial / commercial real estate (a)	$	79,953	$	78,703
Commercial and commercial real estate (a)					$	82,790	$	78,703
Home equity lines of credit		19,696		19,814		19,325		19,814
Credit card		17,356		17,381		17,101		17,381
Other		4,807		4,694		4,926		4,694
Total	$	121,812	$	120,592	$	124,142	$	120,592

(a)	Less than 5% of ~~these amounts at each date~~total net unfunded credit commitments relate to commercial real ~~estate.~~estate at each date.

Commitments to extend credit represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. Commercial commitments reported above exclude syndications, assignments and participations, primarily to financial institutions, totaling ~~$22.9~~$23.5 billion at ~~March 31,~~June 30, 2013 and $22.5 billion at December 31, 2012.

Unfunded liquidity facility commitments and standby bond purchase agreements totaled ~~$713~~$701 million at ~~March 31,~~June 30, 2013 and $732 million at December 31, 2012 and are included in the preceding table primarily within the Commercial /and commercial real estate category.

In addition to the credit commitments set forth in the table above, our net outstanding standby letters of credit totaled $10.9 billion at June 30, 2013 and $11.5 billion at ~~both March 31, 2013 and~~ December 31, 2012. Standby letters of credit commit us to make payments on behalf of our customers if specified future events occur.

Information regarding our Allowance for unfunded loan commitments and letters of credit is included in Note 7 Allowance for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report.

INVESTMENT SECURITIES

Table 14: Investment Securities


	March 31, 2013				December 31, 2012				June 30, 2013				December 31, 2012
In millions	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Total securities available for sale (a)	$	47,950	$	49,536	$	49,447	$	51,052	$	47,176	$	47,899	$	49,447	$	51,052
Total securities held to maturity		9,825		10,272		10,354		10,860		9,550		9,749		10,354		10,860
Total securities	$	57,775	$	59,808	$	59,801	$	61,912	$	56,726	$	57,648	$	59,801	$	61,912

(a)

Includes ~~$288~~$297 million of both amortized cost and fair value of securities classified as corporate stocks and other at ~~March 31,~~June 30, 2013. Comparably, at December 31, 2012, amortized cost and fair value of these corporate stocks and other was $367 million. The remainder of securities available for sale are debt securities.

The carrying amount of investment securities totaled ~~$59.4~~$57.4 billion at ~~March 31,~~June 30, 2013, which was made up of ~~$49.6~~$47.9 billion of securities available for sale carried at fair value and ~~$9.8~~$9.5 billion of securities held to maturity carried at amortized cost. Comparably, at December 31, 2012, the carrying value of investment securities totaled $61.4 billion of which $51.0 billion represented securities available for sale carried at fair value and $10.4 billion of securities held to maturity carried at amortized cost.

The decrease in the carrying amount of investment securities of ~~$2.0~~$4.0 billion since December 31, 2012 resulted primarily from a decline in agency residential mortgage-backed securities due to principal ~~payments.~~payments partially offset by net purchase activity. Investment securities represented ~~20%~~19% of total assets at ~~both March 31,~~June 30, 2013 and 20% at December 31, 2012.

We evaluate our portfolio of investment securities in light of changing market conditions and other factors and, where appropriate, take steps to improve our overall positioning. We consider the portfolio to be well-diversified and of high quality. U.S. Treasury and government agencies, agency residential mortgage-backed and agency commercial mortgage-backed securities collectively represented ~~57%~~56% of the investment securities portfolio at ~~March 31,~~June 30, 2013.

At ~~both March 31,~~June 30, 2013, ~~and December 31, 2012,~~ the securities available for sale portfolio included a net unrealized gain of ~~$1.6~~$.7 billion, which

represented the difference between fair value and amortized cost. The comparable balance at December 31, 2012 was $1.6 billion. The decrease in the net unrealized gain since December 31, 2012 resulted from an increase in market interest rates and widening asset spreads. The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. The fair value of investment securities generally decreases when interest rates increase and vice versa. In addition, the fair value generally

decreases when credit spreads widen and vice versa. Net unrealized gains and losses in the securities available for sale portfolio are included in Shareholders’ equity as Accumulated other comprehensive income or loss, net of tax, on our Consolidated Balance Sheet.

Additional information regarding our investment securities is included in Note 8 Investment Securities and Note 9 Fair Value in our Notes To Consolidated Financial Statements included in Part I, Item 1 of this Report.

Unrealized gains and losses on available for sale securities do not impact liquidity or risk-based capital under currently effective capital rules. However, reductions in the credit ratings of these securities could have an impact on the liquidity of the securities or the determination of risk-weighted assets, which could reduce our regulatory capital ratios under currently effective capital rules. In addition, the amount representing the credit-related portion of ~~other-than- temporary~~other-than-temporary impairment (OTTI) on available for sale securities would reduce our earnings and regulatory capital ratios.

The weighted-average expected life of investment securities (excluding corporate stocks and other) was ~~4.2~~4.5 years at ~~March 31,~~June 30, 2013 and 4.0 years at December 31, 2012.

The duration of investment securities was ~~2.4~~2.8 years at ~~March 31,~~June 30, 2013. We estimate that, at ~~March 31,~~June 30, 2013, the effective duration of investment securities was ~~2.6~~2.9 years for an immediate 50 basis points parallel increase in interest rates and ~~2.2~~2.6 years for an immediate 50 basis points parallel decrease in interest rates. Comparable amounts at December 31, 2012 were 2.3 years and 2.2 years, respectively.

18The PNC Financial Services Group, Inc. –Form 10-Q15

The following table provides details regarding the vintage, current credit rating and FICO score of the underlying collateral at origination, where available, for residential mortgage-backed, commercial mortgage-backed and other asset-backed securities held in the available for sale and held to maturity portfolios:

Table 15: Vintage, Current Credit Rating and FICO Score for Asset-Backed Securities


	Agency						Non-agency									Agency						Non-agency
As of March 31, 2013 Dollars in millions	Residential Mortgage- Backed Securities			Commercial Mortgage- Backed Securities			Residential Mortgage- Backed Securities			Commercial Mortgage- Backed Securities			Asset- Backed Securities (a)
As of June 30, 2013 Dollars in millions																Residential Mortgage- Backed Securities			Commercial Mortgage- Backed Securities			Residential Mortgage- Backed Securities			Commercial Mortgage- Backed Securities			Asset- Backed Securities (a)
Fair Value – Available for Sale	$	25,272		$	615		$	6,038		$	3,477		$	6,015		$	24,248		$	595		$	5,852		$	3,679		$	6,034
Fair Value – Held to Maturity		4,178			1,357						2,400			997			3,825			1,319						2,231			1,100
Total Fair Value	$	29,450		$	1,972		$	6,038		$	5,877		$	7,012		$	28,073		$	1,914		$	5,852		$	5,910		$	7,134
% of Fair Value:
By Vintage
2013		1	%														4	%					1	%		4	%
2012		20	%		1	%					12	%					18	%		1	%		1	%		12	%
2011		26	%		49	%					6	%					25	%		49	%					6	%
2010		24	%		11	%		1	%		4	%		3	%		24	%		11	%		1	%		5	%		2	%
2009		9	%		19	%					2	%		1	%		9	%		19	%					2	%		1	%
2008		2	%		3	%								1	%		2	%		3	%								1	%
2007		3	%		2	%		25	%		11	%		2	%		5	%		2	%		25	%		11	%		2	%
2006		1	%		3	%		21	%		20	%		6	%		1	%		4	%		20	%		19	%		6	%
2005 and earlier		6	%		12	%		52	%		44	%		6	%		6	%		11	%		51	%		41	%		5	%
Not Available		8	%					1	%		1	%		81	%		6	%					1	%					83	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%
By Credit Rating (at March 31, 2013)
By Credit Rating (at June 30, 2013)
Agency		100	%		100	%											100	%		100	%
AAA											71	%		65	%								3	%		69	%		66	%
AA								1	%		8	%		25	%								1	%		9	%		25	%
A								1	%		12	%		1	%								1	%		10	%		1	%
BBB								4	%		4	%											4	%		4	%
BB								12	%		2	%											11	%		2	%
B								7	%		1	%		1	%								7	%		1	%		1	%
Lower than B								73	%					8	%								71	%					7	%
No rating								2	%		2	%											2	%		5	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%
By FICO Score (at origination)
>720								56	%					2	%								51	%
<720 and >660								31	%					5	%								36	%					7	%
<660														2	%														2	%
No FICO score								13	%					91	%								13	%					91	%
Total								100	%					100	%								100	%					100	%

(a)	Available for sale asset-backed securities include $2 million of available for sale agency asset-backed securities.

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

We conduct a comprehensive security-level impairment assessment quarterly on all securities. For those securities in an unrealized loss position, towe determine whether the loss represents OTTI. Our assessment considers the security structure, recent security collateral performance metrics, external credit ratings, failure of the issuer to make scheduled interest or principal payments, our judgment and expectations of future performance, and relevant independent industry research, analysis and forecasts.

We also consider the severity of the impairment and the length of time that the security has been impaired in our assessment. Results of the periodic assessment are reviewed by a cross-functional senior management team representing Asset & Liability

The PNC Financial Services Group, Inc. –Form 10-Q19

Management, Finance and Market Risk Management. The senior management team considers the results of the assessments, as well as other factors, in determining whether the impairment is other-than-temporary.

For those debt securities where we do not intend to sell and believe we will not be required to sell the securities prior to expected recovery, we recognize the credit portion of OTTI charges in current earnings and the noncredit portion of OTTI is included in Net unrealized gains (losses) on OTTI securities on our Consolidated Statement of Comprehensive Income and in Accumulated other comprehensive income (loss), net of tax, on our Consolidated Balance Sheet.

We recognized OTTI for the first ~~three~~six months of 2013 and 2012 as follows:

Table 16: Other-Than-Temporary Impairments


	Three months ended March 31						Three months ended June 30					Six months ended June 30
In millions	2013			2012			2013		2012			2013			2012
Credit portion of OTTI losses (a)
Non-agency residential mortgage-backed	$	7		$	32		$	3	$	31		$	10		$	63
Asset-backed		3			5			1		3			4			8
Other debt					1											1
Total credit portion of OTTI losses		10			38			4		34			14			72
Noncredit portion of OTTI (recoveries) (b)		(9	)		(22	)
Noncredit portion of OTTI losses (recoveries) (b)								6		(2	)		(3	)		(24	)
Total OTTI losses	$	1		$	16		$	10	$	32		$	11		$	48

(a)	Reduction of Noninterest income on our Consolidated Income Statement.

(b)	Included in Accumulated other comprehensive income (loss), net of tax, on our Consolidated Balance Sheet and in Net unrealized gains (losses) on OTTI securities on our Consolidated Statement of Comprehensive Income.

20The PNC Financial Services Group, Inc. –Form 10-Q17

The following table summarizes net unrealized gains and losses recorded on non-agency residential and commercial mortgage-backed securities and other asset-backed securities, which represent our most significant categories of securities not backed by the U.S. government or its agencies. A summary of all OTTI credit losses recognized for the first ~~three~~six months of 2013 by investment type is included in Note 8 Investment Securities in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report.

Table 17: Net Unrealized Gains and Losses on Non-Agency Securities


As of March 31, 2013 In millions	Residential Mortgage- Backed Securities					Commercial Mortgage- Backed Securities				Asset-Backed Securities (a)
	Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain		Fair Value		Net Unrealized Gain (Loss)			Residential Mortgage- Backed Securities					Commercial Mortgage- Backed Securities				Asset-Backed Securities (a)
As of June 30, 2013 In millions															Fair Value		Net Unrealized Gain (Loss)			Fair Value		Net Unrealized Gain		Fair Value		Net Unrealized Gain (Loss)
Available for Sale Securities (Non-Agency)
Credit Rating Analysis
AAA	$	20				$	2,015	$	81	$	3,814	$	32		$	159	$	(8	)	$	2,031	$	43	$	3,814	$	12
Other Investment Grade (AA, A, BBB)		369	$	31			1,179		91		1,567		19			334		25			1,170		64		1,609		13
Total Investment Grade		389		31			3,194		172		5,381		51			493		17			3,201		107		5,423		25
BB		702		(50	)		113		8		5					671		(66	)		139		5		4
B		427		(8	)		58		4		31					393		(13	)		57		3		46
Lower than B		4,395		160							570		(20	)		4,181		92							534		(15	)
Total Sub-Investment Grade		5,524		102			171		12		606		(20	)		5,245		13			196		8		584		(15	)
Total No Rating		125		10		��	112		7		26		(11	)		114		6			282		4		25		(12	)
Total	$	6,038	$	143		$	3,477	$	191	$	6,013	$	20		$	5,852	$	36		$	3,679	$	119	$	6,032	$	(2	)
OTTI Analysis
Investment Grade:
OTTI has been recognized
No OTTI recognized to date	$	389	$	31		$	3,194	$	172	$	5,381	$	51		$	493	$	17		$	3,201	$	107	$	5,423	$	25
Total Investment Grade		389		31			3,194		172		5,381		51			493		17			3,201		107		5,423		25
Sub-Investment Grade:
OTTI has been recognized		3,679		(35	)						573		(18	)		3,490		(82	)						551		(15	)
No OTTI recognized to date		1,845		137			171		12		33		(2	)		1,755		95			196		8		33
Total Sub-Investment Grade		5,524		102			171		12		606		(20	)		5,245		13			196		8		584		(15	)
No Rating:
OTTI has been recognized		80		3							26		(11	)		74		2							25		(12	)
No OTTI recognized to date		45		7			112		7							40		4			282		4
Total No Rating		125		10			112		7		26		(11	)		114		6			282		4		25		(12	)
Total	$	6,038	$	143		$	3,477	$	191	$	6,013	$	20		$	5,852	$	36		$	3,679	$	119	$	6,032	$	(2	)
Securities Held to Maturity (Non-Agency)
Credit Rating Analysis
AAA						$	2,179	$	53	$	746	$	4							$	2,015	$	30	$	857	$	(1	)
Other Investment Grade (AA, A, BBB)							221		12		241		3								216		8		233		1
Total Investment Grade							2,400		65		987		7								2,231		38		1,090
BB											10		1												10
B
Lower than B
Total Sub-Investment Grade											10		1												10
Total No Rating
Total						$	2,400	$	65	$	997	$	8							$	2,231	$	38	$	1,100	$	–

(a)	Excludes $2 million of available for sale agency asset-backed securities.

18The PNC Financial Services Group, Inc. –Form 10-Q21

Residential Mortgage-Backed Securities

At ~~March 31,~~June 30, 2013, our residential mortgage-backed securities portfolio was comprised of ~~$29.5~~$28.1 billion fair value of U.S. government agency-backed securities and ~~$6.0~~$5.9 billion fair value of non-agency (private issuer) securities. The agency securities are generally collateralized by 1-4 family, conforming, fixed-rate residential mortgages.The non-agency securities are also generally collateralized by 1-4 family residential mortgages. The mortgage loans underlying the non-agency securities are generally non-conforming (i.e., original balances in excess of the amount qualifying for agency securities) and predominately have interest rates that are fixed for a period of time, after which the rate adjusts to a floating rate based upon a contractual spread that is indexed to a market rate (i.e., a “hybrid ARM”), or interest rates that are fixed for the term of the loan.

Substantially all of the non-agency securities are senior tranches in the securitization structure and at origination had credit protection in the form of credit enhancement, over-collateralization and/or excess spread accounts.

During the first ~~three~~six months of 2013, we recorded OTTI credit losses of $7$10 million on non-agency residential mortgage-backed securities. All of the losses were associated with securities rated below investment grade. As of ~~March 31,~~June 30, 2013, the net unrealized loss recorded in Accumulated other comprehensive income for non-agency residential mortgage-backed securities for which we have recorded an OTTI credit loss totaled ~~$32~~$80 million and the related securities had a fair value of ~~$3.8~~$3.6 billion.

The fair value of sub-investment grade investment securities for which we have not recorded an OTTI credit loss as of ~~March 31,~~June 30, 2013 totaled $1.8 billion, with unrealized net gains of ~~$137~~$95 million. Based on the results of our security-level assessments, we anticipate recovering the cost basis of these securities.

Commercial Mortgage-Backed Securities

The fair value of the non-agency commercial mortgage-backed securities portfolio was $5.9 billion at ~~March 31,~~June 30, 2013 and consisted of fixed-rate, private-issuer securities collateralized by non-residential properties, primarily retail properties, office buildings and multi-family housing. The agency commercial mortgage-backed securities portfolio had a fair value of ~~$2.0~~$1.9 billion at ~~March 31,~~June 30, 2013 consisting of multi-family housing. Substantially all of the securities are the most senior tranches in the subordination structure.

There were no OTTI credit losses on commercial mortgage-backed securities during the first ~~three~~six months of 2013.

Asset-Backed Securities

The fair value of the asset-backed securities portfolio was ~~$7.0~~$7.1 billion at ~~March 31,~~June 30, 2013. The portfolio consisted of fixed-rate

and floating-rate securities collateralized by various consumer credit products, primarily student loans and residential mortgage loans, as well as securities backed by corporate debt. Substantially all of the securities are senior tranches in the securitization structure and have credit protection in the form of credit enhancement, over-collateralization and/or excess spread accounts. Substantially all of the student loans in the securitizations are guaranteed by an agency of the U.S. government.

We recorded OTTI credit losses of $3$4 million on asset-backed securities during the first ~~three~~six months of 2013. All of the securities are collateralized by first and second lien residential mortgage loans and are rated below investment grade. As of ~~March 31,~~June 30, 2013, the net unrealized loss recorded in Accumulated other comprehensive income for asset-backed securities for which we have recorded an OTTI credit loss totaled ~~$29~~$27 million and the related securities had a fair value of ~~$599~~$576 million.

For the sub-investment grade investment securities ~~(available for sale and held to maturity)~~ for which we have not recorded an OTTI loss through ~~March 31,~~June 30, 2013, the fair value was $43 million, with no unrealized net losses ~~of $1 million. The~~recorded. Based on the results of our security-level assessments, ~~indicate that~~ we ~~will recover~~anticipate recovering the cost basis of these securities.

Note 8 Investment Securities in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report provides additional information on OTTI losses and further detail regarding our process for assessing OTTI.

If current housing and economic conditions were to ~~worsen,~~deteriorate from current levels, and if market volatility and illiquidity were to ~~worsen,~~deteriorate from current levels, or if market interest rates were to increase or credit spreads were to widen appreciably, the valuation of our investment securities portfolio could be adversely affected and we could incur additional OTTI credit losses that would impact our Consolidated Income Statement.

~~The PNC Financial Services Group, Inc. –~~~~Form 10-Q~~19

LOANS HELDFOR SALE

Table 18: Loans Held For Sale


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Commercial mortgages at fair value	$	769	$	772	$	635	$	772
Commercial mortgages at lower of cost or market		126		620		437		620
Total commercial mortgages		895		1,392		1,072		1,392
Residential mortgages at fair value		2,204		2,096		2,246		2,096
Residential mortgages at lower of cost or market		127		124		107		124
Total residential mortgages		2,331		2,220		2,353		2,220
Other		69		81		389		81
Total	$	3,295	$	3,693	$	3,814	$	3,693

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

We stopped originating certain commercial mortgage loans held for sale designated at fair value and continue pursuing opportunities to reduce these positions at appropriate prices. At ~~March 31,~~June 30, 2013, the balance relating to these loans was ~~$769~~$635 million, compared to $772 million at December 31, 2012.

We sold ~~$926 million~~$1.4 billion of commercial mortgages held for sale carried at lower of cost or market during the first ~~three~~six months of 2013 compared to ~~$481 million~~$.9 billion during the first ~~three~~six months of ~~2012, due to an increase in~~2012. All of these loan sales were to government agencies. Gains on sale, net of hedges, were ~~immaterial.~~$43 million during the first six months of 2013, including $20 million in the second quarter. Comparable amounts for 2012 were $15 million and $18 million, respectively.

Residential mortgage loan origination volume was ~~$4.2~~$8.9 billion in the first ~~three~~six months of 2013 compared to ~~$3.4~~$7.0 billion for the first ~~three~~six months of 2012. Substantially all such loans were originated under agency or Federal Housing Administration (FHA) standards. We sold ~~$3.8~~$8.0 billion of loans and recognized related gains of ~~$172~~$362 million during the first ~~three~~six months of ~~2013.~~2013, of which $190 million occurred in the second quarter. The comparable amounts for the first ~~three~~six months of 2012 were ~~$3.5~~$6.4 billion and ~~$141~~$318 million, ~~respectively.~~respectively, including $177 million in the second quarter.

Interest income on loans held for sale was ~~$53~~$85 million in the first ~~three~~six months of 2013, ~~and $50~~including $32 million in the ~~first three months of 2012.~~second quarter. Comparable amounts for 2012 were $95 million and $45 million, respectively. These amounts are included in Other interest income on our Consolidated Income Statement.

Additional information regarding our loan sale and servicing activities is included in Note 3 Loan Sales and Servicing Activities and Variable Interest Entities and Note 9 Fair Value in our Notes To Consolidated Financial Statements included in Part I, Item 1 of this Report.

GOODWILLAND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets totaled ~~$11.0~~$11.2 billion at ~~March 31,~~June 30, 2013 and $10.9 billion at December 31, 2012. The increase of $.3 billion was primarily due to mortgage and other loan servicing rights. See additional information regarding our goodwill and intangible assets in Note 10 Goodwill and Other Intangible Assets included in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report.

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

FUNDINGAND CAPITAL SOURCES

Table 19: Details Of Funding Sources


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Deposits
Money market	$	103,429	$	102,706	$	103,480	$	102,706
Demand		71,975		73,995		72,080		73,995
Retail certificates of deposit		23,097		23,837		22,265		23,837
Savings		11,137		10,350		11,085		10,350
Time deposits in foreign offices and other time		1,982		2,254		3,369		2,254
Total deposits		211,620		213,142		212,279		213,142
Borrowed funds
Federal funds purchased and repurchase agreements		4,000		3,327		4,303		3,327
Federal Home Loan Bank borrowings		5,483		9,437		8,481		9,437
Bank notes and senior debt		10,918		10,429		11,177		10,429
Subordinated debt		7,996		7,299		7,113		7,299
Commercial paper		6,953		8,453		6,400		8,453
Other		2,297		1,962		2,390		1,962
Total borrowed funds		37,647		40,907		39,864		40,907
Total funding sources	$	249,267	$	254,049	$	252,143	$	254,049

See the Liquidity Risk Management portion of the Risk Management section of this Financial Review and Note 20 Subsequent Events in the Notes To Consolidated Financial Statements of this Report for additional information regarding our 2013 capital and liquidity activities.

Total funding sources decreased ~~$4.8~~$1.9 billion at ~~March 31,~~June 30, 2013 compared with December 31, 2012.

Total deposits decreased ~~$1.5~~$.9 billion at ~~March 31,~~June 30, 2013 compared with December 31, 2012 ~~primarily~~ due to ~~a decrease~~decreases in demand deposits and retail certificates of deposit, partially offset by increases in time deposits in foreign offices and other time, money market and savings deposits. Interest-bearing deposits represented 69% of total deposits at ~~March 31,~~June 30, 2013 compared to 67% at December 31, 2012. Total borrowed funds decreased ~~$3.3~~$1.0 billion since December 31, ~~2012.~~ 2012 as a result of declines in commercial paper and FHLB borrowings, partially offset by higher federal funds purchased and repurchase agreements and bank notes and senior debt.

The ~~change from December 31, 2012 was largely due to redemptions and maturities of FHLB borrowings.~~PNC Financial Services Group, Inc. –Form 10-Q�� 23

CAPITAL

Table 20: Shareholders’ Equity


In millions	March 31 2013			December 31 2012			June 30 2013			December 31 2012
Shareholders’ equity
Preferred stock(a)
Common stock	$	2,690		$	2,690		$	2,693		$	2,690
Capital surplus – preferred stock		3,591			3,590			3,939			3,590
Capital surplus – common stock and other		12,174			12,193			12,234			12,193
Retained earnings		20,993			20,265			21,828			20,265
Accumulated other comprehensive income (loss)		767			834			45			834
Common stock held in treasury at cost		(552	)		(569	)		(453	)		(569	)
Total shareholders’ equity	$	39,663		$	39,003		$	40,286		$	39,003

(a)	Par value less than $.5 million at each date.

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

Total shareholders’ equity increased ~~$.7~~$1.3 billion, to ~~$39.7~~$40.3 billion at ~~March 31,~~June 30, 2013, compared with December 31, 2012 primarily reflecting an increase in retained earnings of ~~$.7 billion. Accumulated~~$1.6 billion (driven by net income of $2.1 billion and the impact of $.6 billion of dividends declared) and an increase of $.3

billion in capital surplus-preferred stock due to the net issuances of preferred stock. These increases were partially offset by the decline of accumulated other comprehensive income ~~remained relatively flat at~~of $.8 ~~billion.~~billion primarily due to the impact of an increase in market interest rates and widening asset spreads on securities available for sale and derivatives that are part of cash flow hedging strategies. Common shares outstanding were ~~529~~531 million at ~~March 31,~~June 30, 2013 and 528 million at December 31, 2012.

See the Liquidity Risk Management portion of the Risk Management section of this Financial Review ~~and Note 20 Subsequent Events in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report~~ for additional information regarding ~~our March 2013 announcement of~~ our April 2013 redemption of our Series L Preferred Stock and our May 2013 issuance of our Series R Preferred Stock.

Our current common stock repurchase program permits us to purchase up to 25 million shares of PNC common stock on the open market or in privately negotiated transactions. This program will remain in effect until fully utilized or until modified, superseded or terminated. The extent and timing of share repurchases under this program will depend on a number of factors including, among others, market and general economic conditions, economic and regulatory capital considerations, alternative uses of capital and the potential impact on our credit ratings. We do not expect to repurchase any shares under this program in 2013. We did not include any such share repurchases in our 2013 capital plan submitted to the Federal Reserve, primarily as a result of PNC’s 2012 acquisition of RBC Bank (USA) and expansion into Southeastern markets.

Our Basel I Tier 1 common capital ratio was ~~9.8%~~10.1% at ~~March 31,~~June 30, 2013, compared with 9.6% at December 31, 2012. Our Basel I Tier 1 risk-based capital ratio ~~remained consistent~~increased 40 basis points to 12.0% at June 30, 2013 from 11.6% ~~for both March 31, 2013 and~~at December 31, 2012. Our Basel I total risk-based capital ratio increased 2050 basis points to ~~14.9%~~15.2% at ~~March 31,~~June 30, 2013 from 14.7% at December 31, 2012. ~~These~~Basel I capital ratios ~~were positively impacted by a net increase~~increased in all comparisons primarily due to growth in retained earnings. The ~~positive impacts on~~net issuance of preferred stock during the ~~Tier 1 risk-based capital and total risk-based capital ratios were~~six months ended June 30, 2013 partially offset by the redemption of trust preferred securities favorably impacted the June 30, 2013 Basel I Tier 1 risk-based and ~~announced call of the Series L preferred stock.~~Basel I total risk-based capital ratios. Basel I risk-weighted assets increased ~~$.7~~$3.9 billion ~~from $260.8~~to $264.8 billion at ~~December 31, 2012 to $261.5 billion at March 31,~~June 30, 2013.

At ~~March 31,~~June 30, 2013, PNC and PNC Bank, National Association (PNC Bank, N.A.), our domestic bank subsidiary, were both considered “well capitalized” based on USU.S. regulatory capital ratio requirements under Basel I. To qualify as “well-capitalized”, regulators currently require bank holding companies and banks to maintain Basel I capital ratios of at least 6% for Tier 1 risk-based, 10% for total risk-based, and 5% for leverage. We believe PNC and PNC Bank, N.A. will continue to meet these requirements during the remainder of 2013.

PNC and PNC Bank, N.A. entered the “parallel run” qualification phase under the Basel II capital framework on January 1, 2013. The Basel II framework, which was adopted by the Basel Committee on Banking Supervision in 2004, seeks to provide more risk-sensitive regulatory capital calculations and promote enhanced risk management practices among large, internationally active banking organizations. The U.S. banking agencies initially adopted ~~final~~ rules to implement the Basel II capital framework in ~~December 2007 and in June 2012 requested comment on proposed modifications to these~~2004. In July 2013, the U.S. banking agencies adopted final rules ~~(collectively referred~~(referred to as the ~~“advanced approaches”).~~advanced approaches) that modify the Basel II risk-weighting framework. See Recent Market and Industry Developments in the Executive Summary section of this Financial Review and Item 1 Business – Supervision and Regulation and Item 1A Risk Factors in our 2012 Form 10-K. Prior to fully implementing the advanced approaches established by these rules to calculate risk-weighted assets, PNC and PNC Bank, N.A. must successfully complete a “parallel run” qualification phase. This phase must last at least four consecutive quarters, although, consistent with the experience of other U.S. banks, we currently anticipate a multi-year parallel run period.

We provide information below regarding PNC’s pro forma fully phased-in Basel III Tier 1 common capital ratio using PNC’s estimated Basel III advanced approaches risk-weighted assets and how it differs from the Basel I Tier 1 common capital ~~ratio as we expect the~~ratio. The Basel III ratio towill replace the current Basel I ratio for this regulatory metric when ~~the applicable rules are finalized and fully implemented and~~ PNC exits the parallel ~~run.~~run qualification phase.

The Federal Reserve announced final rules implementing Basel III on July 2, 2013. PNC continues its evaluation of these rules. Pending completion of that evaluation, we have estimated our Basel III capital information set forth below based on our understanding of the prior U.S. Basel III rule proposals issued in 2012.

Table 22: Estimated Pro forma Basel III Tier 1 Common Capital Ratio


Dollars in millions	March 31 2013			December 31 2012			June 30 2013			December 31 2012
Basel I Tier 1 common capital	$	25,680		$	24,951		$	26,668		$	24,951
Less regulatory capital adjustments:
Basel III quantitative limits		(2,076	)		(2,330	)		(2,224	)		(2,330	)
Accumulated other comprehensive income (a)		289			276			(241	)		276
All other adjustments		(367	)		(396	)		(283	)		(396	)
Estimated Basel III Tier 1 common capital	$	23,526		$	22,501		$	23,920		$	22,501
Estimated Basel III risk-weighted assets		293,810			301,006			290,838			301,006
Pro forma Basel III Tier 1 common capital ratio		8.0	%		7.5	%		8.2	%		7.5	%

(a)	Represents net adjustments related to accumulated other comprehensive income for available for sale securities and pension and other postretirement benefit plans.

PNC’s pro forma Basel III Tier 1 common capital ratio was estimated without the benefit of phase-ins and is based on our current understanding of Basel III proposed rules. PNC utilizes this estimate to assess its Basel III capital position, including comparison to similar estimates made by other financial institutions. Tier 1 common capital as defined under the ~~proposed~~ Basel III rules differs materially from Basel I. ~~Under~~For example, under Basel III, ~~unconsolidated~~significant common stock investments in unconsolidated financial institutions, mortgage servicing rights and deferred tax assets must be deducted from capital to the extent they individually exceed 10%, or in the aggregate exceed 15%, of the institution’s adjusted Tier 1 common capital. Also, Basel I regulatory capital excludes certain other comprehensive income related to both available for sale securities and pension and other postretirement plans, whereas under Basel III these items are a component of PNC’s capital. Basel III risk-weighted assets were estimated under ~~Basel II (including the modifications to~~ the advanced approaches ~~proposed under~~included in the Basel ~~III)~~III rules and application of Basel II.5, and reflect credit, market and operational risk.

PNC utilizes this capital ratio estimate to assess its Basel III capital position (without the benefit of phase-ins), including comparison to similar estimates made by other financial institutions. This Basel III capital estimate is likely to be impacted by ~~the finalization~~PNC’s ongoing analysis of the recently issued Basel III ~~rules, further regulatory clarity relating to the capital~~final rules and the ongoing evolution, validation and regulatory approval of PNC’s models integral to the calculation of ~~Basel II~~advanced approaches risk-weighted assets.

The access to and cost of funding for new business initiatives, the ability to undertake new business initiatives including acquisitions, the ability to engage in expanded business activities, the ability to pay dividends or repurchase shares or other capital instruments, the level of deposit insurance costs, and the level and nature of regulatory oversight depend, in large part, on a financial institution’s capital strength.

We provide additional information regarding enhanced capital requirements and some of their potential impacts on PNC in Item 1A Risk Factors included in our 2012 Form 10-K.

OFF-BALANCE SHEET ARRANGEMENTS A~~AND~~ND VARIABLE INTEREST ENTITIES

We engage in a variety of activities that involve unconsolidated entities or that are otherwise not reflected in our Consolidated Balance Sheet that are generally referred to as “off-balance sheet arrangements.” Additional information on these types of activities is included in our 2012 Form 10-K and in the following sections of this Report:

Commitments, including contractual obligations and other commitments, included within the Risk Management section of this Financial Review,

Note 3 Loan Sale and Servicing Activities and Variable Interest Entities in the Notes To Consolidated Financial Statements,

Note 11 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities in the Notes To Consolidated Financial Statements, and

Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements.

PNC consolidates variable interest entities (VIEs) when we are deemed to be the primary beneficiary. The primary beneficiary of a VIE is determined to be the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.

A summary of VIEs, including those that we have consolidated and those in which we hold variable interests but have not consolidated into our financial statements, as of ~~March 31,~~June 30, 2013 and December 31, 2012 is included in Note 3 of this Report.

TRUST PREFERRED SECURITIESAND REIT PREFERRED SECURITIES

We are subject to certain restrictions, including restrictions on dividend payments, in connection with ~~$402~~$265 million in principal amount of outstanding junior subordinated debentures associated with ~~$390~~$257 million of trust preferred securities that were issued by various subsidiary statutory trusts (both amounts as of ~~March 31,~~June 30, 2013). Generally, if there is (i) an event of default under the debentures, (ii) PNC elects to defer interest on the debentures, (iii) PNC exercises its right to defer payments on the related trust preferred securities issued by the statutory trusts or (iv) there is a default under PNC’s guarantee of such payment obligations, as specified in the applicable governing documents, then PNC would be subject during the period of such default or deferral to restrictions on dividends and other provisions protecting the status of the debenture holders similar to or in some ways more restrictive than those potentially imposed under the Exchange Agreement with PNC Preferred Funding Trust II, as described in Note 14 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities in our 2012 Form 10-K. See the Liquidity Risk Management portion of the Risk Management section of this Financial Review for additional information regarding our first quarter 2013 redemption of the REIT Preferred Securities issued by PNC Preferred Funding Trust III and additional discussion of redemptions of trust preferred securities.

The majority of assets recorded at fair value are included in the securities available for sale portfolio. The majority of Level 3 assets represent non-agency residential mortgage-backed and asset-backed securities in the securities available for sale portfolio for which there was limited market activity.

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

An instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. PNC reviews and updates fair value hierarchy classifications quarterly. 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. PNC’s policy is to recognize transfers in and transfers out as of the end of the reporting period. During the first ~~three~~six months of 2013, there were transfers of residential mortgage loans held for sale and loans from Level 2 to Level 3 of $3$6 million and $1$11 million, respectively, as a result of reduced market activity in the

nonperforming residential mortgage sales market which reduced the observability of valuation inputs. Also during 2013, there were transfers out of Level 3 residential mortgage

loans held for sale and loans of $4$7 million and $4$16 million, respectively, primarily due to the transfer of residential mortgage loans held for sale and loans to OREO. In addition, there was approximately ~~$11~~$46 million of Level 3 residential mortgage loans held for sale reclassified to Level 3 loans during the first ~~three~~six months of 2013 due to the loans being reclassified from held for sale loans to held in portfolio loans. This amount was included in Transfers out of Level 3 residential mortgage loans held for sale and Transfers into Level 3 loans within Table 90: Reconciliation of Level 3 Assets and Liabilities. In the comparable period of 2012, there were transfers of assets and liabilities from Level 2 to Level 3 of $460 million consisting of mortgage-backed available for sale securities transferred as a result of a ratings downgrade which reduced the observability of valuation inputs.

EUROPEAN EXPOSURE

Table 24: Summary of European Exposure

June 30, 2013


*March 31, 2013*	Direct Exposure
																	Direct Exposure														Total Exposure
	Funded								Unfunded								Funded								Unfunded
In millions	Loans		Leases		Securities		Total		Other (a)		Total Direct Exposure		Total Indirect Exposure		Total Exposure		Loans		Leases		Securities		Total		Other (a)		Total Direct Exposure		Total Indirect Exposure
Greece, Ireland, Italy, Portugal and Spain (GIIPS)	$	85	$	123			$	208	$	3	$	211	$	37	$	248	$	84	$	124			$	208	$	3	$	211	$	36	$	247
Belgium and France				72	$	30		102		35		137		927		1,064				72				72		35		107		919		1,026
United Kingdom		680		32				712		360		1,072		587		1,659		747		71				818		332		1,150		612		1,762
Europe – Other (b)		237		531		244		1,012		93		1,105		713		1,818		107		532	$	324		963		49		1,012		703		1,715
Total Europe (c)	$	1,002	$	758	$	274	$	2,034	$	491	$	2,525	$	2,264	$	4,789	$	938	$	799	$	324	$	2,061	$	419	$	2,480	$	2,270	$	4,750

*December 31, 2012*	Direct Exposure
	Funded								Unfunded
In millions	Loans		Leases		Securities		Total		Other (a)		Total Direct Exposure		Total Indirect Exposure		Total Exposure
Greece, Ireland, Italy, Portugal and Spain (GIIPS)	$	85	$	122			$	207	$	3	$	210	$	31	$	241
Belgium and France				73	$	30		103		35		138		1,083		1,221
United Kingdom		698		32				730		449		1,179		525		1,704
Europe – Other (b)		113		529		168		810		63		873		838		1,711
Total Europe (c)	$	896	$	756	$	198	$	1,850	$	550	$	2,400	$	2,477	$	4,877

December 31, 2012


	Direct Exposure
	Funded									Unfunded
In millions	Loans		Leases			Securities		Total		Other (a)		Total Direct Exposure		Total Indirect Exposure		Total Exposure
Greece, Ireland, Italy, Portugal and Spain (GIIPS)	$	85	$	122	��			$	207	$	3	$	210	$	31	$	241
Belgium and France				73		$	30		103		35		138		1,083		1,221
United Kingdom		698		32					730		449		1,179		525		1,704
Europe – Other (b)		113		529			168		810		63		873		838		1,711
Total Europe (c)	$	896	$	756		$	198	$	1,850	$	550	$	2,400	$	2,477	$	4,877

(a)	Includes unfunded commitments, guarantees, standby letters of credit and sold protection credit derivatives.

(b)	Europe – Other primarily consists of Denmark, Germany, Netherlands, Sweden and Switzerland. For the period ended June 30, 2013, Europe – Other also included Norway.

(c)

Included within Europe – Other is funded direct exposure of $68 million and $168 million consisting of AAA-rated sovereign debt securities at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively. There was no other direct or indirect exposure to European sovereigns as of ~~March 31,~~June 30, 2013 and December 31, 2012.

European entities are defined as supranational, sovereign, financial institutions and non-financial entities within the countries that comprise the European Union, European Union candidate countries and other European countries. Foreign exposure underwriting and approvals are centralized. PNC currently underwrites new ~~foreign~~European activities if the credit is generally associated with activities of its United States commercial customers, and, in the case of PNC Business Credit’s United Kingdom operations, ~~transactions that~~loans with moderate risk as they are predominantly well ~~collateralized~~secured by ~~self liquidating~~short-term assets ~~such as receivables, inventories~~ or, in limited situations, the borrower’s appraised value of certain fixed ~~assets, such that~~

~~PNC is at minimal risk of loss.~~assets. Formerly, PNC had underwritten foreign infrastructure leases supported by highly rated bank letters of credit and other collateral, U.S. Treasury securities and the underlying assets of the lease. Country exposures are monitored and reported on a regular basis. We actively monitor sovereign risk, banking system health, and market conditions and adjust limits as appropriate. We rely on information from internal and external sources, including international financial institutions, economists and analysts, industry trade organizations, rating agencies, econometric data analytical service providers and geopolitical news analysis services.

28The PNC Financial Services Group, Inc. –Form 10-Q25

Among the regions and nations that PNC monitors, we have identified seven countries for which we are more closely monitoring their economic and financial situation. The basis for the increased monitoring includes, but is not limited to, sovereign debt burden, near term financing risk, political instability, GDP trends, balance of payments, market confidence, banking system distress and/or holdings of stressed sovereign debt. The countries identified are: Greece, Ireland, Italy, Portugal, Spain (collectively “GIIPS”), Belgium and France.

Direct exposure primarily consists of loans, leases, securities, derivatives, letters of credit and unfunded contractual commitments with European entities. As of ~~March 31,~~June, 30, 2013, the ~~$2.0~~$2.1 billion of funded direct exposure ~~(.67%~~(.68% of PNC’s total assets) primarily represented ~~$650~~$655 million for cross-border leases in support of national infrastructure, which were supported by letters of credit and other collateral having trigger mechanisms that require replacement or collateral in the form of cash or United States Treasury or government securities, ~~$586~~$598 million for United Kingdom foreign office loans and $68 million of securities issued by AAA-rated sovereigns. The comparable level of direct exposure outstanding at December 31, 2012 was $1.9 billion (.61% of PNC’s total assets), which primarily included $645 million for cross-border leases in support of national infrastructure, $600 million for United Kingdom foreign office loans and $168 million of securities issued by AAA-rated sovereigns.

The ~~$491~~$419 million of unfunded direct exposure as of ~~March 31,~~June 30, 2013 was largely comprised of ~~$360~~$332 million for unfunded contractual commitments primarily for United Kingdom local office commitments to PNC Business Credit corporate customers on a secured basis or activities supporting our domestic customers export activities through the confirmation of trade letters of credit. Comparably, the $550 million of unfunded direct exposure as of December 31, 2012 was largely comprised of $449 million for unfunded contractual commitments primarily for United Kingdom local office commitments to PNC Business Credit corporate customers on a secured basis or activities supporting our domestic customers export activities through the confirmation of trade letters of credit.

We also track European financial exposures where our clients, primarily U.S. entities, appoint PNC as a letter of credit

issuing bank and we elect to assume the joint probability of default risk. As of ~~March 31,~~June 30, 2013 and December 31, 2012, PNC had $2.3 billion and $2.5 billion, respectively, of indirect exposure. For PNC to incur a loss in these indirect exposures, both the obligor and the financial counterparty participating bank would need to default. PNC assesses both the corporate customers and the participating banks for counterparty risk and where PNC has found that a participating bank exposes PNC to unacceptable risk, PNC will reject the participating bank as an acceptable counterparty and will ask the corporate customer to find an acceptable participating bank.

Direct and indirect exposure to entities in the GIIPS countries totaled ~~$248~~$247 million as of ~~March 31,~~June 30, 2013, of which ~~$123~~$124 million was direct exposure for cross-border leases within Portugal, $67 million represented direct exposure for loans outstanding within Ireland and ~~$37~~$36 million represented indirect exposure for letters of credit with strong underlying obligors, primarily U.S. entities, with participating banks in Ireland, Italy and Spain. The comparable amounts as of December 31, 2012 were total direct and indirect exposure of $241 million, consisting of $122 million of direct exposure for cross-border leases within Portugal, $67 million represented direct exposure for loans outstanding within Ireland and $31 million represented indirect exposure for letters of credit with strong underlying obligors, primarily U.S. entities, with participating banks in Ireland, Italy and Spain.

Direct and indirect exposure to entities in Belgium and France totaled ~~$1.1~~$1.0 billion as of ~~March 31,~~June 30, 2013. Direct exposure of ~~$137~~$107 million primarily consisted of ~~$69~~$70 million for cross-border leases within Belgium and $35 million for unfunded contractual commitments in ~~France and $30 million of covered bonds issued by a financial institution in~~ France. Indirect exposure was ~~$927~~$919 million for letters of credit with strong underlying obligors, primarily U.S. entities, with creditworthy participant banks in France and Belgium. The comparable amounts as of December 31, 2012 were total direct and indirect exposure of $1.2 billion of which there was $138 million of direct exposure primarily consisting of $69 million for cross-border leases within Belgium, $35 million for unfunded contractual commitments in France and $30 million of covered bonds issued by a financial institution in France. Indirect exposure at December 31, 2012 was $1.1 billion for letters of credit with strong underlying obligors and creditworthy participant banks in France and Belgium.

26The PNC Financial Services Group, Inc. –Form 10-Q29

BUSINESS SEGMENTS REVIEW

We have six reportable business segments:

Retail Banking

Corporate & Institutional Banking

Asset Management Group

Residential Mortgage Banking

BlackRock

Non-Strategic Assets Portfolio

Business segment results, including inter-segment revenues, and a description of each business are included in Note 19 Segment Reporting included in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report. Certain amounts included in this Financial Review differ from those amounts shown in Note 19 primarily due to the presentation in this Financial Review of business net interest revenue on a taxable-equivalent basis.

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 practicable, retrospective application of new methodologies is made to prior period reportable business segment results and disclosures to create comparability to the current period presentation to reflect any such refinements.

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

Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing

methodology that incorporates product maturities, duration and other factors. A portion of capital is intended to cover unexpected losses and is assigned to our business segments using our risk-based economic capital model, including consideration of the goodwill and other intangible assets at those business segments, as well as the diversification of risk among the business segments.

We have allocated the allowances for loan and lease losses and for unfunded loan commitments and letters of credit based on our assessment of risk in each business segment’s loan 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. Our allocation of the costs incurred by operations and other shared support areas not directly aligned with the businesses is primarily based on the use of services.

Total business segment financial results differ from total consolidated net income. The impact of these differences is reflected in the “Other” category. “Other” for purposes of this Business Segments Review and the Business Segment Highlights in the Executive Summary section of this Financial Review includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as gains or losses related to BlackRock transactions, integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, private equity investments, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments and differences between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments’ results exclude their portion of net income attributable to noncontrolling interests.

30The PNC Financial Services Group, Inc. –Form 10-Q27

RETAIL BANKING

(Unaudited)

Table 25: Retail Banking Table


Three months ended March 31 Dollars in millions, except as noted	2013			2012
Six months ended June 30 Dollars in millions, except as noted							2013			2012
Income Statement
Net interest income	$	1,049		$	1,045		$	2,061		$	2,159
Noninterest income
Service charges on deposits		129			121			270			258
Brokerage		52			45			110			94
Consumer services		216			191			445			404
Other		37			34			151			72
Total noninterest income		434			391			976			828
Total revenue		1,483			1,436			3,037			2,987
Provision for credit losses		162			135			310			300
Noninterest expense		1,131			1,069			2,287			2,240
Pretax earnings		190			232			440			447
Income taxes		70			85			162			164
Earnings	$	120		$	147		$	278		$	283
Average Balance Sheet
Loans
Consumer
Home equity	$	28,913		$	26,759		$	29,063		$	27,499
Indirect auto		7,006			4,439			7,161			4,735
Indirect other		1,000			1,292			969			1,242
Education		8,220			9,440			8,101			9,270
Credit cards		4,108			3,928			4,085			4,001
Other		2,141			1,888			2,141			2,222
Total consumer		51,388			47,746			51,520			48,969
Commercial and commercial real estate		11,290			10,682			11,318			11,083
Floor plan		2,014			1,663			2,031			1,733
Residential mortgage		811			1,031			788			1,002
Total loans		65,503			61,122			65,657			62,787
Goodwill and other intangible assets		6,148			5,888			6,138			6,058
Other assets		2,465			2,699			2,522			2,575
Total assets	$	74,116		$	69,709		$	74,317		$	71,420
Deposits
Noninterest-bearing demand	$	20,744		$	18,764		$	20,967		$	19,572
Interest-bearing demand		31,183			25,707			31,595			26,986
Money market		48,291			43,601			48,469			45,436
Total transaction deposits		100,218			88,072			101,031			91,994
Savings		10,537			9,077			10,768			9,489
Certificates of deposit		22,683			28,150			22,251			27,309
Total deposits		133,438			125,299			134,050			128,792
Other liabilities		273			629			308			410
Capital		9,058			8,328			8,967			8,391
Total liabilities and equity	$	142,769		$	134,256		$	143,325		$	137,593
Performance Ratios
Return on average capital		5	%		7	%		6	%		7	%
Return on average assets		.66			.85			.75			.80
Noninterest income to total revenue		29			27			32			28
Efficiency		76			74			75			75
Other Information (a)
Credit-related statistics:
Commercial nonperforming assets							$	222		$	275
Consumer nonperforming assets								1,068			685
Total nonperforming assets (b)							$	1,290		$	960
Purchased impaired loans (c)							$	750		$	886
Commercial lending net charge-offs							$	59		$	66
Credit card lending net charge-offs								84			99
Consumer lending (excluding credit card) net charge-offs								259			213
Total net charge-offs							$	402		$	378
Commercial lending annualized net charge-off ratio								.89	%		1.04	%
Credit card lending annualized net charge-off ratio								4.15	%		4.98	%
Consumer lending (excluding credit card) annualized net charge-off ratio (h)								1.08	%		.93	%
Total annualized net charge-off ratio (h)								1.23	%		1.21	%


Three months ended March 31 Dollars in millions, except as noted		2013			2012
Other Information (a)
Credit-related statistics:
Commercial nonperforming assets		$	230		$	315
Consumer nonperforming assets			1,050			650
Total nonperforming assets (b)		$	1,280		$	965
Purchased impaired loans (c)		$	788		$	903
Commercial lending net charge-offs		$	37		$	28
Credit card lending net charge-offs			45			50
Consumer lending (excluding credit card) net charge-offs			168			113
Total net charge-offs		$	250		$	191
Commercial lending annualized net charge-off ratio			1.13	%		.91	%
Credit card lending annualized net charge-off ratio			4.44	%		5.12	%
Consumer lending (excluding credit card) annualized net charge-off ratio			1.42	%		1.01	%
Total annualized net charge-off ratio			1.55	%		1.26	%
At June 30 Dollars in millions, except as noted								2013			2012
Other Information (Continued) (a)
Home equity portfolio credit statistics: (d)	Home equity portfolio credit statistics: (d)
% of first lien positions at origination (e)			48	%		37	%		50	%		39	%
Weighted-average loan-to-value ratios (LTVs) (e) (f)			85	%		81	%		85	%		78	%
Weighted-average updated FICO scores (g)			743			739			745			742
Annualized net charge-off ratio (h)			1.97	%		1.11	%		1.39	%		1.01	%
Delinquency data: (i)
Loans 30 – 59 days past due			.44	%		.56	%		.20	%		.32	%
Loans 60 – 89 days past due			.24	%		.35	%		.08	%		.18	%
Loans 90 days past due			.99	%		1.24	%
Total accruing loans past due									.28	%		.50	%
Nonperforming loans									3.12	%		1.98	%
Other statistics:
ATMs			7,303			7,220			7,335			7,206
Branches (j)			2,856			2,900			2,780			2,888
Full service brokerage offices			39			38			37			40
Brokerage account assets (billions)		$	39		$	37		$	39		$	36
Customer-related statistics: (in thousands)	Customer-related statistics: (in thousands)
Retail Banking checking relationships			6,534			6,278			6,589			6,349
Retail online banking active customers			4,234			3,823			4,271			3,953
Retail online bill payment active customers			1,260			1,161			1,270			1,189

(a)	Presented as of ~~March 31,~~June 30, except for net charge-offs and annualized net charge-off ratios, which are for the ~~three~~six months ended.

(b)	Includes nonperforming loans of $1.2 billion at ~~March 31,~~June 30, 2013 and ~~$.9~~$0.9 billion at ~~March 31,~~June 30, 2012.

(c)	Recorded investment of purchased impaired loans related to acquisitions.

(d)	Lien position, LTV and FICO statistics are based upon customer balances.

(e)	Lien position and LTV calculation at ~~March 31,~~June 30, 2013 reflect the use of revised assumptions where data is missing.

(f)	LTV statistics are based upon current information.

(g)	Represents FICO scores that are updated at least quarterly.

(h)	~~Ratio~~Ratios for the ~~three~~six months ended ~~March 31,~~June 30, 2013 ~~includes~~include additional consumer charge-offs taken as a result of alignment with interagency guidance on practices for loans and lines of credit we implemented in the first quarter of 2013.

(i)

~~Delinquency data includes nonaccrual loans. Amounts as of March 31, 2013 are~~Data based upon recorded ~~investment; previous quarters’~~investment. Past due amounts exclude purchased impaired loans, even if contractually past due as we are ~~based upon unpaid principal balances.~~currently accreting interest income over the expected life of the loans. In the first quarter of 2012, we adopted a policy stating that Home equity loans past due 90 days or more would be placed on nonaccrual status.

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

Retail Banking earned ~~$120~~$278 million in the first ~~quarter~~six months of 2013 compared with earnings of ~~$147~~$283 million for the same period a year ago. ~~The decrease in earnings resulted from~~Earnings were essentially flat compared to a year ago as higher noninterest ~~expense and provision for credit losses, both attributable to the full quarter impact of the RBC Bank (USA) acquisition. Noninterest~~ income was ~~also~~offset by lower net interest income and higher ~~compared with the first quarter of 2012 primarily due to increased debit and credit card transactions, brokerage activity and the RBC Bank (USA) acquisition.~~noninterest expense.

Retail Banking’s core strategy is to efficiently grow ~~consumer and small business checking households~~customers by providing an experience that builds customer loyalty and ~~creates opportunities to sell our savings, loans,~~expands loan, investment ~~products~~product, and money management ~~services.~~share of wallet. Net checking relationships grew ~~59,000~~114,000 in the first ~~three~~six months of 2013. The growth reflects strong results and gains in ~~all~~the majority of our markets, as well as strong customer retention in the overall network. As customer preferences for convenience evolve, we continue to provide more cost effective alternate servicing channels. Non-branch

deposits via ATM and mobile channels increased from ~~14%~~14 percent a year ago to ~~20%~~23 percent of the total deposits in the first ~~quarter~~half of 2013. Active online banking customers and active online bill payment customers increased by ~~11%~~8% and 9%7%, respectively, from a year ago.

Retail Banking’s footprint extends across 17 states and Washington, D.C., covering nearly half the U.S. population and serving ~~5,784,000~~5.8 million consumers and ~~750,000~~757 thousand small businesses with ~~2,856~~2,780 branches and ~~7,303~~7,335 ATMs. PNC consolidated 30108 branches in the first ~~quarter and has~~six months of 2013 with plans to close aan approximate total of ~~approximately~~ 200 branches ~~in 2013.~~this year. We will continue to invest selectively in new ~~branches. This quarter five~~ branches ~~were opened.~~and we opened seven branches in the first half of 2013.

Total revenue for the first ~~three~~six months of 2013 was ~~$1.5~~$3.0 billion, ~~compared with $1.4 billion for~~$50 million higher than the same period of 2012. Net interest income ~~increased $4~~of $2.1 billion decreased $98 million compared with the first ~~three~~six months of 2012. The ~~increase~~decrease resulted from ~~higher organic loan~~spread compression on both loans and ~~transaction deposit balances, lower rates paid on deposits, and the impact of the RBC Bank (USA) acquisition.~~deposits.

Noninterest income increased ~~$43~~$148 million compared to the first ~~three months~~half of 2012. The increase was driven by ~~higher volumes~~the second quarter pretax gain of ~~customer debit card and credit card transactions, brokerage activity~~$83 million on the sale of Visa Class B common shares and the ~~RBC Bank (USA) acquisition.~~impact of higher customer-initiated fee based transactions.

The provision for credit losses was ~~$162~~$310 million and net charge-offs were $402 million in the first ~~quarter~~six months of 2013 ~~and net charge-offs were $250 million~~ compared with ~~$135~~$300 million and ~~$191~~$378 million, respectively, for the same period in 2012. The increase in ~~the provision for credit losses year over year is attributable~~net charge-offs year-over-year was due to the impact of ~~the RBC Bank (USA) acquisition. The increase in net charge-offs was due to the~~ alignment with ~~interagency guidance.~~regulatory guidance in the first quarter of 2013.

Noninterest expense increased ~~$62~~$47 million in the first ~~three~~six months of 2013 compared to the same period of 2012. The increase was primarily attributable to ~~the first three months~~a greater number of ~~2013 including a full quarter of~~months’ operating expenses in 2013 associated with the RBC Bank (USA) ~~acquisition.~~acquisition, partially offset by lower additions to legal reserves.

Growing core checking deposits is key to Retail Banking’s growth and to providing a source of low-cost funding to PNC. The deposit product strategy of Retail Banking is to remain disciplined on pricing, target specific products and markets for growth, and focus on the retention and growth of balances for relationship customers. In the first ~~three~~six months of 2013, average total deposits of ~~$133.4~~$134.1 billion increased ~~$8.1~~$5.3 billion, or 6%4%, compared with the same period in 2012.

Average transaction deposits grew ~~$12.1~~$9.0 billion, or ~~14%,~~10% and average savings deposit balances grew ~~$1.5~~$1.3 billion or ~~16%, compared with the first three months of 2012~~13% year-over-year as a result of organic deposit growth, continued customer preference for liquidity and the RBC Bank (USA) acquisition. In the first ~~three~~six months of 2013, compared with the same period a year ago, average demand deposits increased ~~$7.5~~$6.0 billion, or ~~17%~~13%, to ~~$51.9~~$52.6 billion and average ~~money market deposits increased $4.7 billion, or 11%, to $48.3 billion.~~

money market deposits increased $3.0 billion, or 7%, to $48.5 billion.

Total average certificates of deposit decreased ~~$5.5~~$5.1 billion or 19%, compared to the same period in 2012. The decline in average certificates of deposit was due to the run-off of maturing ~~accounts partially offset by the impact of the RBC Bank (USA) acquisition.~~accounts.

Retail Banking continues to focus on a relationship-based lending strategy that targets specific products and markets for growth, small ~~businesses~~business and auto dealerships. In the first ~~three~~six months of 2013, average total loans were ~~$65.5~~$65.7 billion, an increase of ~~$4.4~~$2.9 billion, or 7%5%, over the same period in 2012.

Average indirect auto loans increased ~~$2.6~~$2.4 billion, or ~~58%~~51%, over the first ~~three~~six months of 2012. The increase was primarily due to the expansion of our indirect sales force and product introduction to acquired markets, as well as overall increases in auto sales.

Average home equity loans increased ~~$2.2~~$1.6 billion, or 8%6%, compared with the same period in 2012. The increase was ~~due to~~driven by the RBC Bank (USA) acquisition. The remainder of the portfolio ~~was relatively flat~~grew modestly as increases in term loans were offset by declines in lines of credit. Retail Banking’s home equity loan portfolio is relationship based, with 97% of the portfolio attributable to borrowers in our primary geographic footprint.

Average auto dealer floor plan loans grew $298 million, or 17%, compared with the first six months of 2012, primarily resulting from dealer line utilization and additional dealer relationships.

Average commercial and commercial real estate loans increased ~~$608~~$235 million, or 6%2%, compared with the same period in 2012. The increase was due to the acquisition of RBC Bank (USA). The remainder of the portfolio showed a decline as loan demand was outpaced by paydowns, refinancings, and charge-offs.

~~Average auto dealer floor plan loans grew $351 million, or 21%, compared with the first three months of 2012, primarily resulting from dealer line utilization and additional dealer relationships.~~

Average credit card balances increased ~~$180~~$84 million, or 5%2%, compared with the same period of 2012 as a result of the portfolio purchase from RBC Bank (Georgia), National Association in March 2012.

Average education loans for the first ~~three~~six months of 2013 declined $1.2 billion or 13%, compared with the same period in 2012. The decline was a result of run-off of the discontinued government guaranteed portfolio.

Average indirect other and residential mortgages in this segment are primarily run-off portfolios and declined ~~$292~~$273 million and ~~$220~~$214 million, respectively, compared with the same period in 2012. The indirect other portfolio is comprised of marine, RV, and other indirect loan products.

Nonperforming assets totaled $1.3 billion ~~in the first quarter of~~at June 30, 2013, a ~~33%~~34% increase from a year ago. The increase was in consumer assets and was due to the alignment with interagency ~~guidance.~~guidance on practices for loans and lines of credit related to consumer loans that we implemented in the first quarter of 2013.

CORPORATE & INSTITUTIONAL BANKING

(Unaudited)

Table 26: Corporate & Institutional Banking Table


Three months ended March 31 Dollars in millions, except as noted	2013			2012
Six months ended June 30 Dollars in millions, except as noted							2013			2012
Income Statement
Net interest income	$	956		$	938		$	1,899		$	2,023
Noninterest income
Corporate service fees		246			200			543			448
Other		139			128			319			234
Noninterest income		385			328			862			682
Total revenue		1,341			1,266			2,761			2,705
Provision for credit losses		14			19
Provision for credit losses (benefit)								(26	)		52
Noninterest expense		480			463			979			959
Pretax earnings		847			784			1,808			1,694
Income taxes		306			289			655			622
Earnings	$	541		$	495		$	1,153		$	1,072
Average Balance Sheet
Loans
Commercial	$	52,893		$	42,919		$	53,696		$	46,004
Commercial real estate		16,876			14,388			16,939			15,158
Commercial – real estate related		6,826			4,971			6,902			5,258
Asset-based lending		11,181			9,266			11,397			9,510
Equipment lease financing		6,552			5,706			6,604			5,808
Total loans		94,328			77,250			95,538			81,738
Goodwill and other intangible assets		3,752			3,442			3,763			3,595
Loans held for sale		1,236			1,244			1,101			1,217
Other assets		12,355			10,960			11,539			11,316
Total assets	$	111,671		$	92,896		$	111,941		$	97,866
Deposits
Noninterest-bearing demand	$	40,572		$	37,225		$	40,239		$	37,519
Money market		17,023			13,872			16,977			14,803
Other		6,979			5,372			6,947			5,653
Total deposits		64,574			56,469			64,163			57,975
Other liabilities		18,779			15,987			17,914			16,769
Capital		9,588			8,537			9,541			8,676
Total liabilities and equity	$	92,941		$	80,993		$	91,618		$	83,420
Performance Ratios
Return on average capital		23	%		23	%		24	%		25	%
Return on average assets		1.96			2.14			2.08			2.20
Noninterest income to total revenue		29			26			31			25
Efficiency		36			37			35			35

Corporate & Institutional Banking earned ~~$541 million~~$1.2 billion in the first ~~three~~six months of 2013, an increase of $81 million compared with ~~$495 million in~~ the first ~~three~~six months of 2012. The increase in earnings was ~~primarily~~ due to ~~the full quarter impact of the RBC Bank (USA) acquisition~~an increase in noninterest income and ~~organic growth.~~improved credit quality, partially offset by lower net interest income. We continued to focus on building client relationships, including increasing cross sales and adding new clients where the risk-return profile was attractive.

Results infor the first ~~three~~six months of 2013 include the impact of the RBC Bank (USA) acquisition, which added approximately $7.5 billion of loans and $4.8 billion of deposits as of March 2, 2012.

Highlights of Corporate & Institutional Banking’s performance ~~in the first three months of 2013~~ include the following:

Corporate & Institutional Banking continued to execute on strategic initiatives, including in the Southeast, by organically growing and deepening client relationships that meet our risk/return measures. Approximately ~~140~~345 new primary Corporate Banking clients were added in the first ~~three~~six months of 2013.

Loan commitments increased ~~12%~~10% to ~~$183~~$186 billion at ~~March 31,~~June 30, 2013 compared to ~~March 31,~~June 30, 2012, primarily due to ~~the RBC Bank (USA) acquisition and~~ growth in our Corporate Banking, Real Estate and Business Credit ~~and Corporate Banking~~ businesses.

Period-end loan balances have increased for the ~~tenth~~eleventh consecutive quarter, including an increase of ~~1.2%~~3.0% at June 30, 2013 compared with March 31, 2013 and 10.0% compared with ~~December 31, 2012 and 12.5% compared with March 31,~~June 30, 2012.

Our Treasury Management business, which ranks among the top providers in the country, continued to invest in markets, products and infrastructure as well as major initiatives such as healthcare.

Midland Loan Services was the number one servicer of Fannie Mae and Freddie Mac multifamily and healthcare loans and was the second leading servicer of commercial and multifamily loans by volume as of December 31, 2012 according to Mortgage Bankers Association. Midland is the only U.S. commercial mortgage servicer to receive the highest primary, master and special servicer ratings from Fitch Ratings, Standard & Poor’s and Morningstar.

Mergers and Acquisitions Journal named Harris Williams & Co. its 2012 Mid-Market Investment Bank of the Year. This is the second time in three years that Harris Williams & Co. has earned the title.

Net interest income was ~~$956 million~~$1.9 billion in the first ~~three~~six months of 2013, ~~an increase~~a decrease of ~~$18~~$124 million from the first ~~three~~six months of 2012, reflecting ~~higher average~~lower spreads on loans and deposits and lower purchase accounting accretion, partially offset by ~~lower spreads on~~higher average loans and deposits.

Corporate service fees were ~~$246~~$543 million in the first ~~three~~six months of 2013, an increase of ~~$46~~$95 million from the first ~~three~~ six

months of 2012, primarily due to higher commercial mortgage servicing revenue primarily driven by the impact of higher market interest rates on commercial mortgage servicing rights valuations, and higher treasury management fees, partially offset by lower merger and acquisition advisory fees. The major components of corporate service fees are treasury management revenue, corporate finance fees, including revenue from certain capital markets-related products and services, and commercial mortgage servicing revenue.

Other noninterest income was ~~$139~~$319 million in the first ~~three~~six months of 2013 compared with ~~$128~~$234 million in the first ~~three~~six months of 2012. The increase of ~~$11~~$85 million was ~~primarily due~~driven by the impact of higher market interest rates on credit valuations related to ~~higher revenue from~~customer-initiated hedging activities and an increase in commercial mortgage loans held for sale, ~~net of valuations, partially~~which more than offset by lower customer driven derivatives revenue.

The provision for credit losses was ~~$14~~a benefit of $26 million in the first ~~three~~six months of 2013 compared with ~~$19~~a provision of $52 million in the first ~~three~~six months of ~~2012. Positive~~2012, primarily due to positive credit ~~migration offset the impact of higher loan and commitment levels.~~migration. Overall ~~strong~~ credit quality ~~remains.~~remains strong. Net charge-offs were ~~$58~~$39 million in the first ~~three~~six months of 2013, which ~~increased $15~~decreased $34 million, or ~~35%~~47%, compared with ~~2012. The~~the 2012 period primarily attributable to lower levels of commercial real estate and commercial charge-offs and an increase ~~was attributable primarily to the~~in commercial ~~portfolio.~~real estate recoveries.

Nonperforming assets declined for the ~~twelfth~~thirteenth consecutive quarter, and at ~~$1.1~~$1.0 billion, represented a ~~39%~~41% decrease from ~~March 31,~~June 30, 2012 as a result of improving credit quality.

Noninterest expense was ~~$480~~$979 million in the first ~~three~~six months of 2013, an increase of ~~$17~~$20 million or 2% from ~~2012. Higher compensation-related costs were driven by improved performance~~the comparable period of 2012, and ~~higher staffing, including a full quarter~~included the impact of the RBC Bank (USA) ~~acquisition.~~acquisition and higher asset impairments.

Average loans were ~~$94.3~~$95.5 billion in the first ~~three~~six months of 2013 compared with ~~$77.3~~$81.7 billion in the first ~~three~~six months of 2012, an increase of ~~22%~~17%. ~~Organically, average loans grew 18% in~~This increase includes 16% organic growth, excluding the ~~comparison.~~impact of the RBC Bank (USA) acquisition.

The Corporate Banking business provides lending, treasury management and capital markets-related products and services to mid-sized corporations, government and not-for-profit entities, and ~~selectively~~ to large corporations. Average loans for this business increased ~~$9.4~~$7.4 billion, or ~~24%~~17%, in the first ~~three~~six months of 2013 compared with the first ~~three~~six months of 2012, primarily due to an increase in loan commitments from new customers. Organically, average loans for this business grew ~~17%~~15% in the comparison.

PNC Real Estate provides commercial real estate and real estate-related lending and is one of the industry’s top providers of both conventional and affordable multifamily financing. Average loans for this business increased ~~$3.7~~$3.6 billion, or ~~21%~~20%, in the first ~~three months of 2013 compared with the first three months of 2012 due to increased originations.~~

six months of 2013 compared with the first six months of 2012 due to increased originations.

PNC Business Credit is one of the top three asset-based lenders in the country, as of year-end 2012, with increasing market share according to the Commercial Finance Association. The loan portfolio is relatively high yielding, with moderate risk as the loans are mainly secured by short-term assets. Average loans increased $1.9 billion, or ~~21%~~20%, in the first ~~three~~six months of 2013 compared with the first ~~three~~six months of 2012 due to customers seeking stable lending sources, loan usage rates and market share expansion.

PNC Equipment Finance is the 4th largest bank-affiliated leasing company with over $11 billion in equipment finance assets.

Average deposits were ~~$64.6~~$64.2 billion in the first ~~three~~six months of 2013, an increase of ~~$8.1~~$6.2 billion, or ~~14%~~11%, compared with the first ~~three~~six months of 2012 due to deposits added in the RBC Bank (USA) acquisition and inflows into noninterest-bearing deposits.

The commercial mortgage servicing portfolio was ~~$290~~$294 billion at ~~March 31,~~June 30, 2013 compared with ~~$268~~$264 billion at ~~March 31,~~June 30, 2012 as servicing additions exceeded portfolio run-off.

Product Revenue

In addition to credit and deposit products for commercial customers, Corporate & Institutional Banking offers other services, including treasury management, capital markets-related products and services, and commercial mortgage banking activities, for customers of all our business segments. The revenue from these other services is included in net interest income, corporate service fees and other noninterest income. The majority of the revenue and expense related to these services is reflected in the Corporate & Institutional Banking segment results and the remainder is reflected in the results of other businesses. The Other Information section in Table 26: Corporate & Institutional Banking Table in this Business Segments Review section includes the consolidated revenue to PNC for these services. A discussion of the consolidated revenue from these services follows.

Treasury management revenue, comprised of fees and net interest income from customer deposit balances, totaled ~~$329~~$642 million for the first ~~three~~six months of 2013 and ~~$343~~$697 million for the first ~~three~~six months of 2012. Lower spreads on deposits drove the decline in revenue in the first ~~three~~six months of 2013 compared to the first ~~three~~six months of 2012. Growth in deposit balances and core businesses such as commercial card, account services, wire and ACH was strong.

Capital markets revenue includes merger and acquisition advisory fees, loan syndications, derivatives, foreign exchange, fees on the asset-backed commercial paper conduit and fixed income activities. Revenue from capital markets-related products and services totaled ~~$131~~$327 million in the first ~~three~~six months of 2013 compared with ~~$156~~$307 million in the first ~~three~~six months of 2012. The increase in the comparison ~~reflects lower customer~~was driven ~~capital markets activity and~~by the impact of higher market interest rates on credit valuations related to customer-initiated hedging activities, mostly offset by lower merger and acquisition advisory ~~fees.~~fees and lower customer driven derivatives revenue.

Commercial mortgage banking activities include revenue derived from commercial mortgage servicing (including net interest income and noninterest income from loan servicing and ancillary services, net of commercial mortgage servicing rights amortization, and commercial mortgage servicing rights valuations net of economic hedge), and revenue derived from commercial mortgage loans intended for sale and related hedges (including loan origination fees, net interest income, valuation adjustments and gains or losses on sales).

Commercial mortgage banking activities resulted in revenue of ~~$102~~$230 million in the first ~~three~~six months of 2013 compared with ~~$48~~$129 million in the first ~~three~~six months of 2012. The increase in the comparison was mainly due to higher net revenue from commercial mortgage servicing, ~~which~~primarily driven by the impact of higher market interest rates on commercial mortgage servicing rights valuations and higher loan originations. The first six months of 2012 included a direct write-down of commercial mortgage servicing rights of $24 ~~million in the first three months of 2012, and higher loan originations.~~million.

ASSET MANAGEMENT GROUP

(Unaudited)

Table 27: Asset Management Group Table


Three months ended March 31
Dollars in millions, except as noted	2013			2012
Six months ended June 30 Dollars in millions, except as noted							2013			2012
Income Statement
Net interest income	$	73		$	75		$	143		$	150
Noninterest income		182			168			366			333
Total revenue		255			243			509			483
Provision for credit losses		5			10			6			9
Noninterest expense		183			176			378			357
Pretax earnings		67			57			125			117
Income taxes		24			21			46			43
Earnings	$	43		$	36		$	79		$	74
Average Balance Sheet
Loans
Consumer	$	4,793		$	4,183		$	4,870		$	4,252
Commercial and commercial real estate		1,037			1,126			1,040			1,112
Residential mortgage		772			692			772			692
Total loans		6,602			6,001			6,682			6,056
Goodwill and other intangible assets		306			345			302			339
Other assets		223			220			226			218
Total assets	$	7,131		$	6,566		$	7,210		$	6,613
Deposits
Noninterest-bearing demand	$	1,331		$	1,575		$	1,290		$	1,468
Interest-bearing demand		3,616			2,637			3,545			2,656
Money market		3,841			3,651			3,781			3,593
Total transaction deposits		8,788			7,863			8,616			7,717
CDs/IRAs/savings deposits		454			549			448			519
Total deposits		9,242			8,412			9,064			8,236
Other liabilities		60			71			59			70
Capital		474			347			465			405
Total liabilities and equity	$	9,776		$	8,830		$	9,588		$	8,711
Performance Ratios
Return on average capital		37	%		42	%		34	%		37	%
Return on average assets		2.45			2.21			2.21			2.25
Noninterest income to total revenue		71			69			72			69
Efficiency		72			72			74			74

Asset Management Group earned ~~$43~~$79 million inthrough the first ~~quarter~~six months of 2013 compared with ~~$36~~$74 million in the ~~first quarter~~same period of 2012. Assets under administration reached a record high for Asset Management Group of $236 billion as of March 31, 2013 compared to $219 billion as of March 31, 2012. Revenue increased $12 million, or 5%,The increase in ~~the year over year comparison~~earnings was due to ~~stronger average equity markets and increased sales volume. The~~higher revenue ~~increase was~~of $26 million partially offset by higher noninterest ~~expense from strategic business investments.~~expense. Assets under administration were $233 billion as of June 30, 2013 compared to $214 billion as of June 30, 2012.

The core growth strategies for the business continue to include: investing in higher growth geographies, increasing internal referral sales and adding new front line sales staff. Through the first ~~quarter~~six months of 2013, the business delivered strong sales production and benefited from significant referrals from other PNC lines of business. Over time, the successful execution of these strategies and the accumulation of our strong sales performance are expected to create meaningful growth in assets under management and noninterest income.

Highlights of Asset Management Group’s performance during the first ~~three~~six months of 2013 include the following:

Positive net flows of approximately ~~$1.2~~$2.1 billion in discretionary assets under management after adjustments to total net flows for cyclical client activities,

New primary client acquisition increased ~~53%~~36% over the ~~prior year~~ first ~~quarter,~~six months of 2012,

Strong sales production, up nearly ~~50%~~24% over the ~~prior year~~ first ~~quarter,~~six months of 2012,

Significant referrals from other PNC lines of business, an increase of ~~70%~~51% over the first ~~quarter~~six months of 2012, and

Continuing levels of new business investment and focused hiring to drive growth ~~with nearly 90 external new hires.~~resulting in a 6% increase in personnel at June 30, 2013 versus June 30, 2012.

Assets under administration were ~~$236~~$233 billion at ~~March 31,~~June 30, 2013, an increase of ~~$17~~$19 billion compared to ~~March 31~~June 30 of the

prior year. Discretionary assets under management ~~also reached a record high of $118~~were $117 billion at ~~March 31,~~June 30, 2013 compared with ~~$112~~$109 billion at ~~March 31,~~June 30, 2012. The increase was driven by higher equity markets and positive net flows due to strong sales performance and successful client retention. ~~Nondiscretionary assets under administration were $118 billion, an increase of $11 billion from March 31, 2012.~~

Total revenue for the first ~~quarter~~half of 2013 was ~~$255~~$509 million compared with ~~$243~~$483 million for the same period in 2012. Net interest income was ~~$73~~$143 million for the first ~~quarter~~six months of 2013 compared with ~~$75~~$150 million for the same period in ~~the first quarter 2012.~~2012 due to narrower spreads partially offset by balance sheet growth. Noninterest income was ~~$182~~$366 million for the first ~~three~~six months of 2013, an increase of ~~$14~~$33 million, or 8%10%, from the prior year period due to stronger average equity markets and positive net flows.

Provision for credit losses was $5$6 million for the first ~~quarter~~six months of 2013 compared to ~~$10~~$9 million for the same period of 2012. Noninterest expense was $378 million in the first ~~quarter of 2012.~~

~~Noninterest expense was $183 million in the first quarter~~half of 2013, an increase of $7$21 million, or 4%6%, from the prior year period. The increase was primarily attributable to compensation expense. Over the last 12 months, total full-time headcount has increased by approximately ~~221~~195 positions, or 7%6%. Asset Management Group remains focused on disciplined expense management as it invests in these strategic growth opportunities.

Average deposits for the first ~~quarter~~half of 2013 increased ~~$830~~$828 million, or 10%, over the prior year period. Average transaction deposits grew 12% compared with the first ~~quarter~~half of 2012 and ~~was~~were partially offset by the run-off of maturing certificates of deposit. Average loan balances of ~~$6.6~~$6.7 billion increased $.6 billion, or 10%, from the prior year ~~quarter~~period due to continued growth in the consumer loan portfolio, primarily home equity installment loans due to a favorable rate environment.

RESIDENTIAL MORTGAGE BANKING

(Unaudited)

Table 28: Residential Mortgage Banking Table


Three months ended March 31
Dollars in millions, except as noted	2013			2012
Six months ended June 30 Dollars in millions, except as noted							2013			2012
Income Statement
Net interest income	$	48		$	51		$	99		$	104
Noninterest income
Loan servicing revenue
Servicing fees		41			56			78			108
Net MSR hedging gains		37			71			63			110
Loan sales revenue
Provision for residential mortgage repurchase obligations		(4	)		(32	)		(77	)		(470	)
Loan sales revenue		172			141			362			318
Other		(3	)		6			(6	)		14
Total noninterest income		243			242			420			80
Total revenue		291			293			519			184
Provision for credit losses (benefit)		20			(7	)		24			(9	)
Noninterest expense		200			203			392			433
Pretax earnings		71			97			103			(240	)
Income taxes		26			36
Earnings	$	45		$	61
Income taxes (benefit)								38			(88	)
Earnings (loss)							$	65		$	(152	)
Average Balance Sheet
Portfolio loans	$	2,553		$	2,922		$	2,478		$	2,836
Loans held for sale		2,038			1,675			2,072			1,753
Mortgage servicing rights (MSR)		764			645			807			655
Other assets		5,448			6,747			5,247			6,501
Total assets	$	10,803		$	11,989		$	10,604		$	11,745
Deposits	$	3,106		$	1,662		$	3,183		$	1,723
Borrowings and other liabilities		3,487			4,353			3,351			4,209
Capital		1,752			832			1,622			995
Total liabilities and equity	$	8,345		$	6,847		$	8,156		$	6,927
Performance Ratios
Return on average capital		10	%		29	%		8	%		(31	)%
Return on average assets		1.69			2.05			1.24			(2.60	)
Noninterest income to total revenue		84			83			81			43
Efficiency		69			69			76			235

Residential Mortgage Banking reported net income of ~~$45~~$65 million in the first ~~three~~six months of 2013 compared with ~~$61~~a net loss of $152 million in the first ~~three~~six months of 2012. Earnings ~~declined~~increased from the prior year ~~three~~six month period primarily as a result of ~~increased~~decreased provision for ~~credit losses.~~residential mortgage repurchase obligations.

The strategic focus of the business is the acquisition of new customers through a retail loan officer sales force with an emphasis on home purchase transactions. Two key aspects of this strategy are: ~~(i)~~(1) competing on the basis of superior service to new and existing customers in serving their home purchase and refinancing ~~needs,~~needs; and ~~(ii) pursuing~~(2) operating strategic partnerships with reputable residential real estate franchises to acquire new customers. A key consideration in pursuing this approach is the cross-sell opportunity, especially in the bank footprint markets.

Residential Mortgage Banking overview:

Total loan originations were ~~$4.2~~$8.9 billion for the first ~~three~~six months of 2013 compared with ~~$3.4~~$7.0 billion in the comparable period of 2012. Loans continue to be originated primarily through direct channels under Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Federal Housing Administration (FHA)/Department of Veterans Affairs (VA) agency guidelines. Refinancings were ~~81%~~76% of originations for the first ~~three~~six months of 2013 and ~~82%~~77% in the first ~~three~~six months of 2012. During the first ~~three~~six months of 2013, 33% of loan originations were under the original or revised Home Affordable Refinance Program (HARP or HARP 2). ~~The Home Affordable Refinance Program has been recently extended until December 31, 2015.~~

Investors having purchased mortgage loans may request PNC to indemnify them against losses on certain loans or to repurchase loans that they believe do not comply with applicable contractual loan origination covenants and representations and warranties we have made. At ~~March 31,~~June 30, 2013, the ~~liability for estimated losses on repurchase and indemnification claims for the Residential Mortgage Banking business segment was $522 million, compared with $101 million at March 31,~~

liability for estimated losses on repurchase and indemnification claims for the Residential Mortgage Banking business segment was $523 million compared with $462 million at June 30, 2012.

Consistent with the year ended December 31, 2012, PNC has and continues to experience elevated levels of residential mortgage loan repurchase demands reflecting changes in behavior and demand patterns

~~of two government-sponsored enterprises, FHLMC and FNMA, primarily related to loans sold in 2004 through 2008 in agency securitizations.~~ See the Recourse And Repurchase Obligations section of this Financial Review and Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements ~~in Part I, Item 1~~ of this Report for additional information.

–

PNC has and expects to experience elevated levels of residential mortgage loan repurchase demands reflecting a change in behavior and demand patterns of two government-sponsored enterprises, FNMA and FHLMC, primarily related to loans sold in 2008 and prior in agency securitizations.

Residential mortgage loans serviced for others totaled ~~$120~~$116 billion at ~~March 31,~~both June 30, 2013 ~~compared with $121 billion at March 31,~~and June 30, 2012 as ~~in the aggregate,~~ payoffs ~~since March 31, 2012 have exceeded~~continued to approximate new direct loan origination volume and acquisitions.

Noninterest income was ~~$243~~$420 million in the first ~~three~~six months of 2013 compared with ~~$242~~$80 million in the first ~~three~~six months of 2012. The decreases in MSR hedging gains and servicing fees were more than offset by lower recourse provision in the 2013 period and increased loan sales ~~revenue and lower provision for residential mortgage repurchase obligations.~~revenue.

Net interest income was ~~$48~~$99 million in the first ~~three~~six months of 2013 compared with ~~$51~~$104 million in the first ~~three~~six months of 2012.

Noninterest expense was ~~$200~~$392 million in the first ~~three~~six months of 2013 compared with ~~$203~~$433 million in the first ~~three~~six months of 2012. Increased ~~expenses~~expense on higher loan origination volumes ~~were~~was more than offset by lower residential mortgage foreclosure-related expenses and legal expenses.

The fair value of mortgage servicing rights was ~~$.8~~$1.0 billion at ~~March 31,~~June 30, 2013 compared with ~~$.7~~$0.6 billion at ~~March 31,~~June 30, 2012. The increase in fair value was primarily due to rising residential mortgage interest rates at June 30, 2013.

BLACKROCK

(Unaudited)

Table 29: BlackRock Table

Information related to our equity investment in BlackRock follows:


Three months ended March 31
Dollars in millions	2013			2012
Six months ended June 30 Dollars in millions							2013			2012
Business segment earnings (a)	$	108		$	90		$	220		$	178
PNC’s economic interest in BlackRock (b)		22	%		21	%		22	%		22	%

(a)	Includes PNC’s share of BlackRock’s reported GAAP earnings and additional income taxes on those earnings incurred by PNC.

(b)	At ~~March 31.~~June 30.


	March 31		December 31
In billions	2013		2012		June 30 2013		December 31 2012
Carrying value of PNC’s investment in BlackRock (c)	$	5.6	$	5.6	$	5.8	$	5.6
Market value of PNC’s investment in BlackRock (d)		9.2		7.4		9.2		7.4

(c)

PNC accounts for its investment in BlackRock under the equity method of accounting, exclusive of a related deferred tax liability of $1.9 billion at both ~~March 31,~~June 30, 2013 and December 31, 2012. Our voting interest in BlackRock common stock was approximately 21% at ~~March 31,~~June 30, 2013.

(d)	Does not include liquidity discount.

PNC accounts for its BlackRock Series C Preferred Stock at fair value, which offsets the impact of marking-to-market the obligation to deliver these shares to BlackRock to partially fund BlackRock long-term incentive plan (LTIP) programs. The fair value amount of the BlackRock Series C Preferred Stock is included on our Consolidated Balance Sheet in the caption Other assets. Additional information regarding the valuation of the BlackRock Series C Preferred Stock is included in Note 9 Fair Value in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report and in Note 9 in our 2012 Form 10-K.

On January 31, 2013, we transferred 205,350 shares of BlackRock Series C Preferred Stock to BlackRock to satisfy a portion of our LTIP obligation. The transfer reduced Other assets and Other liabilities on our Consolidated Balance Sheet by $33 million. At ~~March 31,~~June 30, 2013, we hold approximately 1.3 million shares of BlackRock Series C Preferred Stock which are available to fund our obligation in connection with the BlackRock LTIP programs.

Our 2012 Form 10-K includes additional information about our investment in BlackRock.

NON-STRATEGIC ASSETS PORTFOLIO

(Unaudited)

Table 30: Non-Strategic Assets Portfolio Table

Three months ended March 31
Dollars in millions
   2013 2012
Income Statement

Net interest income
   $ 203    $ 217
Noninterest income
   16    (19 )
Total revenue
   219    198
Provision for credit losses
   42    18
Noninterest expense
   52    68
Pretax earnings
   125    112
Income taxes
   46    41
Earnings
   $ 79    $ 71
Average Balance Sheet

Commercial Lending:

Commercial/Commercial real estate
   $ 537    $ 1,004
Lease financing
   688    670
Total commercial lending
   1,225    1,674
Consumer Lending:

Home equity
   4,158    4,849
Residential real estate
   5,938    6,046
Total consumer lending
   10,096    10,895
Total portfolio loans
   11,321    12,569
Other assets (a)
   (586 ) (445 )
Total assets
   $ 10,735    $ 12,124
Deposits and other liabilities
   $ 168    $ 177
Capital
   1,094    1,176
Total liabilities and equity
   $ 1,262    $ 1,353
Performance Ratios

Return on average capital
   29 % 24 %
Return on average assets
   2.98    2.36
Noninterest income to total revenue
   7    (10 )
Efficiency
   24    34
Other Information

Nonperforming assets (b) (c)
   $ 999    $ 1,192
Purchased impaired loans (b) (d)
   $ 5,372    $ 6,097
Net charge-offs (e)
   $ 87    $ 91
Annualized net charge-off ratio (e)
   3.12 % 2.91 %
Loans (b)

Commercial Lending

Commercial/Commercial real estate
   $ 493    $ 1,104
Lease financing
   690    671
Total commercial lending
   1,183    1,775
Consumer Lending

Home equity
   4,209    4,751
Residential real estate
   5,880    6,693
Total consumer lending
   10,089    11,444
Total loans
   $ 11,272    $ 13,219


Six months ended June 30 Dollars in millions	2013			2012
Income Statement
Net interest income	$	367		$	438
Noninterest income		27			(17	)
Total revenue		394			421
Provision for credit losses		81			68
Noninterest expense		93			135
Pretax earnings		220			218
Income taxes		81			80
Earnings	$	139		$	138
Average Balance Sheet
Commercial Lending:
Commercial/Commercial real estate	$	487		$	1,006
Lease financing		691			672
Total commercial lending		1,178			1,678
Consumer Lending:
Home equity		4,139			4,758
Residential real estate		5,823			6,291
Total consumer lending		9,962			11,049
Total portfolio loans		11,140			12,727
Other assets (a)		(629	)		(320	)
Total assets	$	10,511		$	12,407
Deposits and other liabilities	$	222		$	179
Capital		1,104			1,244
Total liabilities and equity	$	1,326		$	1,423
Performance Ratios
Return on average capital		25	%		22	%
Return on average assets		2.67			2.24
Noninterest income to total revenue		7			(4	)
Efficiency		24			32
Other Information
Nonperforming assets (b)(c)	$	935		$	1,120
Purchased impaired loans (b)(d)	$	5,193		$	5,889
Net charge-offs (e)	$	140		$	174
Annualized net charge-off ratio (e)		2.53	%		2.75	%
Loans (b)
Commercial Lending
Commercial/Commercial real estate	$	388		$	945
Lease financing		696			677
Total commercial lending		1,084			1,622
Consumer Lending
Home equity		4,029			4,575
Residential real estate		5,659			6,475
Total consumer lending		9,688			11,050
Total loans	$	10,772		$	12,672

(a)	Other assets includes deferred taxes, ALLL and ~~other real estate owned (OREO).~~OREO. Other assets were negative in both periods due to the ALLL.

(b)	As of ~~March 31.~~June 30.

(c)	Includes nonperforming loans of $.7 billion at ~~both March 31,~~June 30, 2013 and ~~March 31,~~June 30, 2012 ~~respectively.~~

(d)	Recorded investment of purchased impaired loans related to acquisitions. At ~~March 31,~~June 30, 2013, this segment contained ~~76%~~77% of PNC’s purchased impaired loans.

(e)	For the ~~three~~six months ended ~~March 31.~~June 30.

This business segment consists primarily of non-strategic assets obtained through acquisitions of other companies. Non-Strategic Assets Portfolio had earnings of ~~$79~~$139 million in the first ~~three~~six months of 2013 compared with ~~$71~~$138 million in the first ~~three~~six months of 2012. ~~The increase was primarily attributable to~~Earnings were relatively flat year-over-year as higher noninterest income ~~due to~~and lower noninterest expense were offset by lower net interest income and a higher provision for ~~estimated losses on home equity repurchase obligations.~~credit losses.

The first ~~three~~six months of 2013 included the impact of the March 2012 RBC Bank (USA) acquisition, which added approximately $1.0 billion of residential real estate loans, $.2 billion of commercial/commercial real estate loans and $.2 billion of OREO assets. Of these assets, $1.0 billion were deemed purchased impaired loans.

Non-Strategic Assets Portfolio overview:

Net interest income was ~~$203~~$367 million in the first ~~three~~six months of 2013 compared with ~~$217~~$438 million in the first ~~three~~six months of 2012. The decrease was driven by lower purchase accounting accretion as well as lower average loan ~~balances and lower interest due to declining average yield, as high yield commercial real estate loans declined faster than the remainder of the portfolio.~~balances.

Noninterest income was ~~$16~~$27 million in the first ~~three~~six months of 2013 compared with a loss of ~~$19~~$17 million in the first ~~three~~six months of 2012. The increase was driven by lower provision for estimated losses on home equity repurchase obligations.

The provision for credit losses was ~~$42~~$81 million in the first ~~three~~six months of 2013 compared with ~~$18~~$68 million in the first ~~three~~six months of 2012 driven by ~~reductions~~a decrease in expected cash flows on purchased impaired home equity loans.

Noninterest expense in the first ~~three~~six months of 2013 was ~~$52~~$93 million compared with ~~$68~~$135 million in the first ~~three~~six months of 2012. The decrease was driven by lower commercial OREO write-downs.

Average portfolio loans declined to ~~$11.3~~$11.1 billion in the first ~~three~~six months of 2013 compared with ~~$12.6~~$12.7 billion in the first ~~three~~six months of 2012. The overall decline was driven by customer payment activity and portfolio management activities to reduce under-performing assets, partially offset by the addition of loans from the March 2012 RBC Bank (USA) acquisition.

Nonperforming loans were at $.7 billion at ~~March 31,~~June 30, 2013 and ~~March 31,~~June 30, 2012. The consumer lending portfolio comprised ~~81%~~86% of the nonperforming loans in this segment at ~~March 31,~~June 30, 2013. Nonperforming consumer loans increased $122 million from March 31, 2012, due to alignment with interagency guidance in the first quarter of 2013. The commercial lending portfolio comprised 19% of the nonperforming loans as of March 31, 2013. Nonperforming commercial loans decreased $79 million from March 31, 2012.

consumer loans increased $128 million from June 30, 2012, due to alignment with interagency guidance in the first quarter of 2013. The commercial lending portfolio comprised 14% of the nonperforming loans as of June 30, 2013. Nonperforming commercial loans decreased $99 million from June 30, 2012.

Net charge-offs were ~~$87~~$140 million in the first ~~three~~six months of 2013 and ~~$91~~$174 million in the first ~~three~~six months of ~~2012. The first three months of 2013 included additional~~2012 primarily due to lower charge-offs ~~related to alignment with interagency guidance.~~on home equity loans.

The business activity of this segment is to manage the wind-down of the portfolio while maximizing the value and mitigating risk. The fair value marks taken upon acquisition of the assets, the team we have in place and targeted asset resolution strategies help us to manage these assets.

The Commercial Lending portfolio declined 33% since ~~March 31,~~June 30, 2012. Commercial and commercial real estate loans declined ~~55%~~59% to ~~$.5~~$.4 billion while the lease financing portfolio remained relatively flat at $.7 billion. The leases are long-term with relatively low credit risk.

The Consumer Lending portfolio declined $1.4 billion, or 12%, when compared to ~~March 31~~June 30 of last year. The portfolio’s credit quality has stabilized through actions taken by management. We have implemented various refinance programs, line management programs and loss mitigation programs to mitigate risks within this portfolio while assisting borrowers to maintain home ownership when possible.

~~implemented various refinance programs, line management programs and loss mitigation programs to mitigate risks within this portfolio while assisting borrowers to maintain homeownership when possible.~~

When loans are sold, we may assume certain loan repurchase obligations to indemnify investors against losses or to repurchase loans that they believe do not comply with applicable contractual loan origination covenants and representations and warranties we have made. From 2005 to 2007, home equity loans were sold with such contractual provisions. At ~~March 31,~~June 30, 2013, the liability for estimated losses on repurchase and indemnification claims for the Non-Strategic Assets Portfolio was ~~$25~~$24 million compared to ~~$51~~$61 million at ~~March 31,~~June 30, 2012. See the Recourse And Repurchase Obligations section of this Financial Review and Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements included in Part I, Item 1 of this Report for additional information.

CRITICAL ACCOUNTING ESTIMATES A~~AND~~ND JUDGMENTS

Note 1 Accounting Policies in Item 8 of our 2012 Form 10-K and in the Notes To Consolidated Financial Statements included in Part I, Item 1 of this Report describe the most significant accounting policies that we use. Certain of these policies require us to make estimates or economic assumptions that may prove inaccurate or be subject to variations that may significantly affect our reported results and financial position for the period or in future periods.

We must use estimates, assumptions and judgments when assets and liabilities are required to be recorded at, or adjusted to reflect, fair value.

Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on either quoted market prices or are provided by independent third-party sources, including appraisers and valuation specialists, when available. When such third-party information is not available, we estimate fair value primarily by using cash flow and other financial modeling techniques. Changes in underlying factors, assumptions or estimates could materially impact our future financial condition and results of operations.

We discuss the following critical accounting policies and judgments under this same heading in Item 7 of our 2012 Form 10-K:

Fair Value Measurements

Allowances For Loan And Lease Losses And Unfunded Loan Commitments And Letters of Credit

Estimated Cash Flows On Purchased Impaired Loans

Goodwill

Lease Residuals

Revenue Recognition

Residential And Commercial Mortgage Servicing Rights

Income Taxes

Proposed Accounting Standards

We provide additional information about many of these items in the Notes To Consolidated Financial Statements included in Part I, Item l of this Report.

The following critical accounting estimate and judgment has been updated during the first ~~three~~six months of 2013.

ALLOWANCES F~~FOR~~OR LOAN A~~AND~~ND LEASE LOSSES A~~AND~~ND UNFUNDED LOAN COMMITMENTS A~~AND~~ND LETTERS OOFF CREDIT

We maintain the ALLL and the Allowance For Unfunded Loan Commitments And Letters Of Credit at levels that we believe to be appropriate to absorb estimated probable credit losses incurred in the loan and lease portfolio and on these

unfunded credit facilities as of the balance sheet date. Our determination of these allowances is based on periodic evaluations of the loan and lease portfolios and unfunded credit facilities and other relevant factors. These critical estimates include the use of significant amounts of PNC’s own historical data and complex methods to interpret them. We have an ongoing process to evaluate and enhance the quality, quantity and timeliness of our data and interpretation methods used in the determination of these allowances. These evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change, including, among others:

Probability of default (PD),

Loss given default (LGD),

Exposure at date of default,

Movement through delinquency stages,

Amounts and timing of expected future cash flows,

Value of collateral, which may be obtained from third parties, and

Qualitative factors, such as changes in current economic conditions, that may not be reflected in historical results.

In determining the appropriateness of the ALLL, we make specific allocations to impaired loans and allocations to portfolios of commercial and consumer loans. We also allocate reserves to provide coverage for probable losses incurred in the portfolio at the balance sheet date based upon current market conditions, which may not be reflected in historical loss data. Commercial lending is the largest category of credits and is sensitive to changes in assumptions and judgments underlying the determination of the ALLL. We have allocated approximately $1.7 billion, or ~~45%~~44%, of the ALLL at ~~March 31,~~June 30, 2013 to the commercial lending category. Consumer lending allocations are made based on historical loss experience adjusted for recent activity. Approximately $2.1 billion, or ~~55%~~56%, of the ALLL at ~~March 31,~~June 30, 2013 has been allocated to these consumer lending categories.

RECENTLYPROPOSED ACCOUNTING STANDARDS

In February 2013, the Financial Accounting Standards Board (FASB) issued Proposed Accounting Standards Update (ASU)Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This exposure draft would change the determination of the classification and measurement of financial instruments. Under the proposal, loans and securities would be classified and measured based on both the contractual cash flow characteristics of the assets and the business model for managing the assets. Financial assets would be included in one of three categories: (i) amortized cost, (ii) fair value through other comprehensive income, and (iii) fair value through net income, while financial liabilities would generally be measured at amortized cost. In April 2013, the FASB issued a related document which proposes amendments to the FASB Accounting Standards Codification as a result of the proposed classification and measurement

model. The effective date of the proposals has not yet been determined. We are evaluating the impact of these proposals on our financial statements.

In ~~February~~April 2013, the FASB issued Proposed ASU,~~Derivatives~~Investments – Equity Method and ~~Hedging~~Joint Ventures (Topic ~~815)~~323): ~~Inclusion~~Accounting for Investments in Qualified Affordable Housing Projects. This exposure draft addresses the accounting for an investment in a Low Income Housing Tax Credit (LIHTC) partnership through a limited partnership investment. If certain criteria are met, the allocated tax credits, net of amortization of the ~~Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes~~.investment, could be recognized in income taxes attributable to continuing operations under the effective yield method. The exposure draft ~~would amend existing guidance to include~~also requires disclosure of information regarding the ~~fed funds~~nature of LIHTC investments and whether they are accounted for under the effective swap rate (OIS) as a U.S. benchmark interest rate for hedge accounting purposes. Current guidance considers only interest rates on direct Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (LIBOR) swap rate as benchmark interest rates.yield or equity method. The effective date has not yet been determined. We are evaluating the impact of this proposal on our financial statements.

In May 2013, the FASB issued Proposed ASU,Leases (Topic 842),a revision of the 2010 proposed FASB Accounting Standards Update,Leases (Topic 840). The Proposed ASU would require lessees to recognize right of use assets and lease liabilities for most leases. Depending on the significance of the present value of minimum lease payments to the fair value of the underlying asset or its useful life to the lease term, leases are classified as “Type A” or “Type B” leases. As per the Proposed ASU, most leases of assets other than property (i.e. land and/or building or part of a building) would be classified as Type A leases, while most property leases would be classified as Type B leases. For Type A leases, lessees would generally recognize amortization of the right of use asset on a straight-line basis and interest expense on the lease liability under the effective interest method, whereas, for Type B leases, lessees would generally recognize the total lease expense on a straight-line basis. Lessors would account for a Type A lease similar to a finance lease and a Type B lease similar to an operating lease. The effective date has not been determined. We are evaluating the impact of the proposal on our financial statements.

In June 2013, the FASB issued Proposed ASU,Insurance Contracts (Topic 834). This exposure draft would change the accounting and financial reporting for insurance and reinsurance contracts issued and reinsurance contracts held, regardless of the type of entity issuing or holding these contracts. Certain financial guarantee contracts would also meet the definition of an insurance contract. The exposure draft introduces a building-block approach (based on a discounted estimate of future cash flows under the contract and a margin to remove any gain at inception) to account for most life, annuity, and long-term health contracts and a

premium allocation approach (comprising a liability for the remaining coverage under the contract and a liability for incurred claims) for most property and casualty and short-term health contracts. The effective date has not yet been determined. We are evaluating the impact of the proposal on our financial statements.

In July 2013, the FASB issued Proposed ASU,Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Collateralized Mortgage Loans upon a Troubled Debt Restructuring. This exposure draft would clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon (1) the creditor obtaining legal title to the residential real estate property or (2) completion of a deed in lieu of foreclosure or similar legal agreement under which the borrower conveys all interest in the residential real estate property to the creditor to satisfy that loan, even though the legal title may not yet have passed. The exposure draft would also require additional disclosures, including: (1) a rollforward schedule reconciling the change from the beginning to the ending balance of foreclosed properties at every reporting period and (2) the recorded investment in consumer mortgage loans secured by residential real estate properties that are in the process of foreclosure. The effective date has not yet been determined. We are evaluating the impact of the proposal on our financial statements.

In July 2013, the FASB issued Proposed ASU,Consolidation (Topic 810): Measuring the Financial Liabilities of a Consolidated Collateralized Financing Entity.This Proposed ASU would define “collateralized financing entity” and allow a reporting entity that consolidates a collateralized financing entity and recognizes the associated financial assets at fair value, to measure the financial liabilities based on the fair value of the financial assets. The reporting entity would allocate this value to individual liabilities on a reasonable and consistent basis. The Proposed ASU would allow for a modified retrospective transition approach which includes a cumulative-effect adjustment to equity as of the beginning of the period of adoption. Early adoption would be permitted. The effective date has not yet been determined. We are evaluating the impact of the proposal on our financial statements.

R~~ECENT~~ECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For information on ~~Recent~~Recently Issued Accounting Pronouncements, see Note 1 Accounting Policies in the Notes To Consolidated Financial Statements included in Part I, Item I of this Report regarding the impact of the adoption of new accounting guidance issued by the FASB.

STATUS OOFF QUALIFIED DEFINED BENEFIT PENSION PLAN

We have a noncontributory, qualified defined benefit pension plan (plan or pension plan) covering eligible employees. Benefits are determined using a cash balance formula where earnings credits are applied as a percentage of eligible compensation. We calculate the expense associated with the pension plan, and the assumptions and methods that we use include a policy of reflecting trust assets at their fair market value. On an annual basis, we review the actuarial assumptions related to the pension plan.

We currently estimate a pretax pension expense of ~~$73~~$74 million in 2013 compared with pretax expense of $89 million in 2012. This year-over-year expected decrease reflects the impact of favorable returns on plan assets experienced in 2012, as well as the effects of the lower discount rate required to be used in 2013.

The following table reflects the estimated effects on pension expense of certain changes in annual assumptions, using 2013 estimated expense as a baseline.

Table 31: Pension Expense – Sensitivity Analysis


~~Change in Assumption (a)~~	~~Estimated Increase to 2013~~ ~~Pension Expense (In millions)~~
~~.5% decrease in discount rate~~		~~$21~~
~~.5% decrease in expected long-term return on assets~~		~~$19~~
~~.5% increase in compensation rate~~		~~$ 2~~


Change in Assumption (a)	Estimated Increase to 2013 Pension Expense (In millions)
.5% decrease in discount rate	$	21
.5% decrease in expected long-term return on assets	$	19
.5% increase in compensation rate	$	2

(a)	The impact is the effect of changing the specified assumption while holding all other assumptions constant.

We provide additional information on our pension plan in Note 15 Employee Benefit Plans in our 2012 Form 10-K.

RECOURSE A~~AND~~ND REPURCHASE OBLIGATIONS

As discussed in Note 3 Loan Sale and Servicing Activities and Variable Interest Entities in our 2012 Form 10-K, PNC has sold commercial mortgage, residential mortgage and home equity loans directly or indirectly through securitization and loan sale transactions in which we have continuing involvement. One form of continuing involvement includes certain recourse and loan repurchase obligations associated with the transferred assets.

COMMERCIAL MORTGAGE LOAN RECOURSE OBLIGATIONS

We originate, close and service certain multi-family commercial mortgage loans which are sold to FNMA under FNMA’s Delegated Underwriting and Servicing (DUS) program. We participated in a similar program with the FHLMC. For more information regarding our Commercial Mortgage Loan Recourse Obligations, see the Recourse and

~~Under these programs, we generally assume up to a one-third pari passu risk~~Repurchase Obligations section of ~~loss on unpaid principal balances through a loss share arrangement. At March 31, 2013~~Note 18 Commitments and December 31, 2012, the unpaid principal balance outstanding of loans sold as a participant in these programs was $13.0 billion and $12.8 billion, respectively. The potential maximum exposure under the loss share arrangements was $4.0 billion at March 31, 2013 and $3.9 billion at December 31, 2012. We maintain a reserve for estimated losses based on our exposure. The reserve for losses under these programs totaled $42 million and $43 million as of March 31, 2013 and December 31, 2012, respectively, and isGuarantees included in ~~Other liabilities on our~~the Notes To Consolidated ~~Balance Sheet. If payment is required under these programs, we would not have a contractual interest~~Financial Statements in ~~the collateral underlying the mortgage loans on which losses occurred, although the value~~Part 1, Item 1 of the collateral is taken into account in determining our share of such losses. Our exposure and activity associated with these recourse obligations are reported in the Corporate & Institutional Banking segment.this Report.

RESIDENTIAL MORTGAGE REPURCHASE OBLIGATIONS

While residential mortgage loans are sold on a non-recourse basis, we assume certain loan repurchase obligations associated with mortgage loans we have sold to investors. These loan repurchase obligations primarily relate to situations where PNC is alleged to have breached certain origination covenants and representations and warranties made to purchasers of the loans in the respective purchase and sale agreements. Residential mortgage loans covered by these loan repurchase obligations include first and second-lien mortgage loans we have sold through Agency securitizations, Non-Agency securitizations, and loan sale transactions. As discussed in Note 3 in our 2012 Form 10-K, Agency securitizations consist of mortgage loan sale transactions with FNMA, FHLMC and the Government National Mortgage Association (GNMA) ~~program,~~, while Non-Agency

securitizations consist of mortgage loan sale transactions with private investors. Mortgage loan sale transactions that are not part of a securitization may involve FNMA, FHLMC or private investors. Our historical exposure and activity associated with Agency securitization repurchase obligations has primarily been related to transactions with FNMA and FHLMC, as indemnification and repurchase losses associated with FHA and VA-insured and uninsured loans pooled in GNMA securitizations historically have been minimal. Repurchase obligation activity associated with residential mortgages is reported in the Residential Mortgage Banking segment.

Loan covenants and representations and warranties are established through loan sale agreements with various investors to provide assurance that PNC has sold loans that are of sufficient investment quality. Key aspects of such covenants and representations and warranties include the loan’s compliance with any applicable loan criteria established for the transaction, including underwriting standards, delivery of all required loan documents to the investor or its designated party, sufficient collateral valuation and the validity of the lien securing the loan. As a result of alleged breaches of these contractual obligations, investors may request PNC to indemnify them against losses on certain loans or to repurchase loans.

We investigate every investor claim on a loan by loan basis to determine the existence of a legitimate claim, and that all other conditions for indemnification or repurchase have been met prior to the settlement with that investor. Indemnifications for loss or loan repurchases typically occur when, after review of the claim, we agree insufficient evidence exists to dispute the investor’s claim that a breach of a loan covenant and representation and warranty has occurred, such breach has not been cured and the effect of such breach is deemed to have had a material and adverse effect on the value of the transferred loan. Depending on the sale agreement and upon

proper notice from the investor, we typically respond to such indemnification and repurchase requests within 9060 days, although final resolution of the claim may take a longer period of time. With the exception of the sales agreements associated with the Agency securitizations, most sale agreements do not provide for penalties or other remedies if we do not respond timely to investor indemnification or repurchase requests.

Indemnification and repurchase claims are typically settled on an individual loan basis through make-whole payments or loan repurchases; however, on occasion we may negotiate pooled settlements with investors. In connection with pooled settlements, we typically do not repurchase loans and the consummation of such transactions generally results in us no longer having indemnification and repurchase exposure with the investor in the transaction.

For the first and second-lien mortgage balances of unresolved and settled claims contained in the tables below, a significant amount of these claims were associated with sold loans originated through correspondent lender and broker origination channels. In certain instances when indemnification or repurchase claims are settled for these types of sold loans, we have recourse back to the correspondent lenders, brokers and other third-parties (e.g., contract underwriting companies, closing agents, appraisers, etc.). Depending on the underlying reason for the investor claim, we determine our ability to pursue recourse with these parties and file claims with them accordingly. Our historical recourse recovery rate has been insignificant as our efforts have been impacted by the inability of such parties to reimburse us for their recourse obligations (e.g., their capital availability or whether they remain in business) or factors that

limit our ability to pursue recourse from these parties (e.g., contractual loss caps, statutes of limitations).

Origination and sale of residential mortgages is an ongoing business activity and, accordingly, management continually assesses the need to recognize indemnification and repurchase liabilities pursuant to the associated investor sale agreements. We establish indemnification and repurchase liabilities for estimated losses on sold first and second-lien

mortgages for which indemnification is expected to be provided or for loans that are expected to be repurchased. For the first and second-lien mortgage sold portfolio, we have established an indemnification and repurchase liability pursuant to investor sale agreements based on claims made and our estimate of future claims on a loan by loan basis. To estimate the mortgage repurchase liability arising from breaches of representations and warranties, we consider the following factors: (i) borrower performance in our historically sold portfolio (both actual and estimated future defaults), (ii) the level of outstanding unresolved repurchase claims, (iii) estimated probable future repurchase claims, considering information about file requests, delinquent and liquidated loans, resolved and unresolved mortgage insurance rescission notices and our historical experience with claim rescissions, (iv) the potential ability to cure the defects identified in the repurchase claims (“rescission rate”) and (v) the estimated severity of loss upon repurchase of the loan or collateral, make-whole settlement or indemnification.

See Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information.

During 2012 and the first ~~three~~six months of 2013, unresolved and settled investor indemnification and repurchase claims were primarily related to one of the following alleged breaches in representations and warranties: (i) misrepresentation of income, assets or employment; (ii) property evaluation or status issues (e.g., appraisal, title, etc.); (iii) underwriting guideline violations; or (iv) mortgage insurance rescissions. During 2012, FNMA and FHLMC expanded their efforts to reduce their exposure to losses on purchased loans resulting in a dramatic increase in second and third quarter 2012 repurchase claims, primarily on the 2006-2008 vintages, but also on other vintages. Included in this higher volume were repurchase claims made on loans in later stages of default than had previously been observed. For example, in the second quarter of 2012, we experienced repurchase claims on loans which had defaulted more than two years prior to the claim date, which was inconsistent with historical activity. In

December 2012, PNC discussed with FNMA and FHLMC their intentions to further expand their purchased loan review activities in 2013 with a focus on 2004 and 2005 vintages, as well as certain loan modifications and aged default loans not previously reviewed. Based on those discussions, we expected an increase in repurchase claims in 2013 and increased the liability for estimated losses on indemnification and repurchase claims accordingly during the fourth quarter of 2012. ~~The~~Additional discussions with FNMA and FHLMC during the second quarter of 2013 resulted in further refinements to incremental file request expectations, primarily relating to older vintages. As a result, the liability for estimated losses on indemnification and repurchase claims was increased in June 2013 to reflect this expected additional claim activity, despite the fact that the volume of government-sponsored enterprise (GSE) claims in the second quarter of 2013 dropped compared to first quarter of ~~2013 was consistent with~~2013.

In addition to the ~~expectations established~~decline in ~~the fourth quarter.~~

~~The ongoing elevated~~ repurchase claim activity in ~~2012 contributed to~~ the ~~higher balances~~second quarter of 2013, the level of unresolved claims for residential mortgages and the increase in residential mortgage indemnification and repurchase settlement activity in 2012. In the first quarter of 2013, consistent with our expectations, repurchase claim activity remained high. Despite the high level of new claims, unresolved claims for residential mortgages decreasedis also continuing to decline. This decline is due to an acceleration inof settlement

activity and a continued high level of claim rescissions. The increase in settlements during the first quarter of 2013 was driven by the high volume of claims in 2012 as well as increased efforts to resolve outstanding claims. Because the volume of claims in the first quarter 2013 was consistent with expectations, the first quarter 2013 provision for our indemnification and repurchase liability represents only additions for new production.

At ~~March 31,~~June 30, 2013 and December 31, 2012, the liability for estimated losses on indemnification and repurchase claims for residential mortgages totaled ~~$522~~$523 million and $614 million, respectively. We believe our indemnification and repurchase liability appropriately reflects the estimated probable losses on indemnification and repurchase claims for all residential mortgage loans sold and outstanding as of ~~March 31,~~June 30, 2013 and December 31, 2012. In making these estimates, we consider the losses that we expect to incur over the life of the sold loans. See Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information.

Indemnification and repurchase liabilities, which are included in Other liabilities on the Consolidated Balance Sheet, are initially recognized when loans are sold to investors and are subsequently evaluated by management. Initial recognition and subsequent adjustments to the indemnification and repurchase liability for the sold residential mortgage portfolio are recognized in Residential mortgage revenue on the Consolidated Income Statement.

HOME EQUITY REPURCHASE OBLIGATIONS

PNC’s repurchase obligations include obligations with respect to certain brokered home equity loans/lines that were sold to a limited number of private investors in the financial services industry by National City prior to our acquisition of National City. PNC is no longer engaged in the brokered home equity lending business, and our exposure under these loan

repurchase obligations is limited to repurchases of the loans sold in these transactions. Repurchase activity associated with brokered home equity lines/loans is reported in the Non-Strategic Assets Portfolio segment.

~~Loan covenants~~ For more information regarding our Home Equity Repurchase Obligations, see the Recourse and representations and warranties were established through loan sale agreements with various investors to provide assurance that loans PNC sold to the investors are of sufficient investment quality. Key aspects of such covenants and representations and warranties include the loan’s compliance with any applicable loan criteria established for the transaction, including underwriting standards, delivery of all required loan documents to the investor or its designated party, sufficient collateral valuation and the validityRepurchase Obligations portion of the ~~lien securing the loan. As a result of alleged breaches of these contractual obligations, investors may request PNC to indemnify them against losses on certain loans or to repurchase loans.~~

We investigate every investor claim on a loan by loan basis to determine the existence of a legitimate claim, and that all other conditions for indemnification or repurchase have been met prior to settlement with that investor. Indemnifications for loss or loan repurchases typically occur when, after reviewRisk Management section of the ~~claim, we agree insufficient evidence exists to dispute the investor’s claim that a breach~~Financial Review under Item 7 of ~~a loan covenant and representation and warranty has occurred, such breach has not been cured and the effect of such breach is deemed to have had a material and adverse effect on the value of the~~

transferred loan. Depending on the sale agreement and upon proper notice from the investor, we typically respond to home equity indemnification and repurchase requests within 60 days, although final resolution of the claim may take a longer period of time. Most home equity sale agreements do not provide for penalties or other remedies if we do not respond timely to investor indemnification or repurchase requests.

Investor indemnification or repurchase claims are typically settled on an individual loan basis through make-whole payments or loan repurchases; however, on occasion we may negotiate pooled settlements with investors. In connection with pooled settlements, we typically do not repurchase loans and the consummation of such transactions generally results in us no longer having indemnification and repurchase exposure with the investor in the transaction.our 2012 Form 10-K.

The following table details the unpaid principal balance of our unresolved home equity indemnification and repurchase claims at ~~March 31,~~June 30, 2013 and December 31, 2012.

Table 35: Analysis of Home Equity Unresolved Asserted Indemnification and Repurchase Claims


In millions		Mar. 31 2013		Dec. 31 2012			June 30 2013		Dec. 31 2012
Home equity loans/lines:	Home equity loans/lines:					Home equity loans/lines:
Private investors(a)		$	20	$	74
Private investors (a)							$	18	$	74

(a)	Activity relates to brokered home equity loans/lines sold through loan sale transactions which occurred during 2005-2007.

The PNC Financial Services Group, Inc. –Form 10-Q47

An indemnification and repurchase liability for estimated losses for which indemnification is expected to be provided or for loans that are expected to be repurchased was established at the acquisition of National City. Management’s evaluation of these indemnification and repurchase liabilities is based upon trends in indemnification and repurchase claims, actual loss experience, risks in the underlying serviced loan portfolios, current economic conditions and the periodic negotiations that management may enter into with investors to settle existing and potential future claims.

At ~~March 31,~~June 30, 2013 and December 31, 2012, the liability for estimated losses on indemnification and repurchase claims for home equity loans/lines was ~~$25~~$24 million and $58 million, respectively. We believe our indemnification and repurchase liability appropriately reflects the estimated probable losses on indemnification and repurchase claims for all home equity loans/lines sold and outstanding as of ~~March 31,~~June 30, 2013 and December 31, 2012. In making these estimates, we consider the losses that we expect to incur over the life of the sold loans. See Note 18 Commitments and Guarantees in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information.

Indemnification and repurchase liabilities, which are included in Other liabilities on the Consolidated Balance Sheet, are evaluated by management on a quarterly basis. Initial recognition and subsequent adjustments to the indemnification and repurchase liability for home equity loans/lines are recognized in Other noninterest income on the Consolidated Income Statement.

RISK MANAGEMENT

PNC encounters risk as part of the normal course of operating our business. Accordingly, we design risk management processes to help manage these risks.

The Risk Management section included in Item 7 of our 2012 Form 10-K describes our risk management philosophy, appetite, culture, governance, risk identification, controls and monitoring and reporting. Additionally, our 2012 Form 10-K provides an analysis of our key areas of risk: credit, operational, liquidity, market and ~~model, as well as a~~model. The discussion of ~~our~~market risk is further subdivided into interest rate, trading and equity and other investment risk areas. Our use of financial derivatives as part of our overall asset and liability risk management ~~process.~~process is also addressed within the Risk Management section of this Item 7.

The following information updates our 2012 Form 10-K risk management disclosures.

CREDIT RISK MANAGEMENT

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

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

ASSET QUALITY OVERVIEW

~~While credit quality metrics for the first quarter of 2013 were impacted by alignment with interagency supervisory guidance, underlying asset~~Asset quality trends for the first ~~three~~six months of 2013 improved from both December 31, 2012 and ~~March 31,~~June 30, 2012, including the impact of alignment with interagency supervisory guidance during the first quarter of 2013, and included the following:

Nonperforming loans ~~increased $.2 billion, or 5%,~~remained flat from December 31, 2012 ~~to $3.4~~at $3.3 billion as of ~~March 31, 2013. This increase was mainly due to~~June 30, 2013 and included the impact from the alignment with interagency supervisory guidance for loans and lines of credit related to consumer loans of $426 ~~million. This~~million that occurred in the first quarter of 2013. The increase in nonperforming loans from this alignment was ~~partially~~substantially offset by a reduction in total commercial nonperforming loans, mainly related to commercial real estate, in addition to principal activity within consumer loans.

Overall loan delinquencies decreased ~~$588~~$944 million, or ~~16%~~25%, from year-end 2012 levels. The reduction was ~~mainly~~partially due to a decline in total consumer ~~loans~~loan delinquencies of $395 million ~~due~~pursuant to ~~the~~ alignment with interagency supervisory guidance ~~as discussed above.~~in which loans were moved from various delinquency categories to either nonperforming or, in the case of loans accounted for under the fair value option, nonaccruing. In addition, government insured residential real estate accruing loans past due 90 days or more declined $324 million, the majority of which were transferred to OREO. Finally, commercial real estate delinquencies decreased $84 million due to improved performance.

~~First~~Second quarter 2013 net charge-offs were ~~$456~~$208 million, ~~up 37%~~down 34% from ~~first~~second quarter 2012 net charge-offs of ~~$333~~$315 million primarily due to ~~the $134~~improving credit quality. Six months ending June 30, 2013 net charge-offs were $664 million, up slightly from six months ending June 30, 2012 net charge-offs of ~~charge-offs recognized in the first quarter of 2013~~$648 million, due to the impact of alignment with interagency supervisory guidance ~~as mentioned above.~~in the first

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

quarter of 2013 as discussed above partially offset by improving credit quality in the second quarter of 2013.

Provision for credit losses ~~increased~~decreased to ~~$236~~$157 million in the ~~first~~second quarter of 2013 compared with ~~$185~~$256 million for the ~~first~~second quarter of ~~2012 due~~2012. Provision for credit losses for the six months ending June 30, 2013 declined to ~~a larger loan portfolio.~~$393 million compared with $441 million for the six months ending June 30, 2012. The declines in the comparisons were driven primarily by overall commercial credit quality improvement.

The level of ALLL ~~has~~ decreased to $3.8 billion at ~~March 31,~~June 30, 2013 from $4.0 billion at December 31, 2012 and $4.2 billion at ~~March 31,~~June 30, 2012.

NONPERFORMING ASSETSAND LOAN DELINQUENCIES

Nonperforming Assets, including OREO and Foreclosed Assets

Nonperforming assets include ~~nonaccrual~~nonperforming loans and leases for which ultimate collectability of the full amount of contractual principal and interest is not probable and include troubled debt restructurings (TDRs), OREO and foreclosed assets. Loans held for sale, certain government insured or guaranteed loans, purchased impaired loans and loans accounted for under the fair value option are excluded from nonperforming loans. Additional information regarding our nonperforming loans and nonaccrual policies is included in Note 1 Accounting Policies in the Notes toTo Consolidated Financial Statements in Part I, Item 1 of this Report. The major categories of nonperforming assets are presented in Table 37: Nonperforming Assets By Type.

Nonperforming assets ~~increased $.1~~stayed flat at $3.8 billion ~~from~~between June 30, 2013 and December 31, ~~2012, to $3.9 billion at March 31, 2013, due to the increase in nonperforming loans as discussed above.~~2012. Nonperforming loans increased ~~$.2 billion~~$67 million to ~~$3.4~~$3.3 billion while OREO and foreclosed assets decreased ~~$35~~$83 million to

~~$505~~ $457 million. The ratio of nonperforming loans to total loans ~~increased to 1.83%~~stayed constant at ~~March 31,~~1.75 % at June 30, 2013 compared to ~~1.75% at~~ December 31, 2012. The ratio of nonperforming assets to total loans, OREO and foreclosed assets ~~increased~~decreased to ~~2.10%~~1.99% at ~~March 31,~~June 30, 2013 from 2.04% at December 31, 2012.

equity loans and lines and residential mortgages) where the first-lien loan was 90 days or more past due, (ii) government guaranteed loans where the guarantee may not result in collection of substantially all contractual principal and interest and (iii) loans with borrowers in bankruptcy. In the first quarter of 2013, nonperforming loans increased by $426 million and net charge-offs increased by $134 million as a result of completing the alignment of the aforementioned policies. Additionally, overall delinquencies decreased $395 million due to loans now being reported as either nonperforming or, in the case of loans accounted for under the fair value option, nonaccruing or having been ~~charged-off.~~charged off. The impact of the alignment of the policies was considered in our reserving process in the determination of our ALLL at December 31, 2012. See Table 37: Nonperforming Assets By Type, Table 39: Change in Nonperforming Assets, Table 40: Accruing Loans Past Due 30 To 59 Days, Table 41: Accruing Loans Past Due 60 To 89 Days and Table 42: Accruing Loans Past Due 90 Days Or More for additional information.

At ~~March 31,~~June 30, 2013, TDRs included in nonperforming loans were $1.5 billion, or ~~44%~~46%, of total nonperforming loans compared to $1.6 billion, or 49%, of nonperforming loans as of December 31, 2012. Within consumer nonperforming loans, residential real estate TDRs comprise ~~51%~~53% of total residential real estate nonperforming loans at ~~March 31,~~June 30, 2013, down from 64% at December 31, 2012. Home equity TDRs comprise 59% of home equity nonperforming loans at ~~March 31,~~June 30, 2013, down from 70% at December 31, 2012. The level of TDRs in these portfolios is expected to result in elevated nonperforming loan levels for longer periods because TDRs generally remain in nonperforming status until a borrower has made at least six consecutive months of 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 obligation ~~with~~to PNC are not returned to accrual status.

At ~~March 31,~~June 30, 2013, our largest nonperforming asset was $37 million in the Real Estate, Rental and Leasing Industry and our average nonperforming loans associated with commercial lending were under $1 million. Nine of our ten largest outstanding nonperforming assets are from the commercial lending portfolio and represent ~~13%~~14% and 4% of total commercial lending nonperforming loans and total nonperforming assets, respectively, as of ~~March 31,~~June 30, 2013.

48The PNC Financial Services Group, Inc. –Form 10-Q49

Table 37: Nonperforming Assets By Type

In millions March 31
2013 December 31
2012
Nonperforming loans

Commercial lending

Commercial

Retail/wholesale trade
$ 62    $ 61
Manufacturing
75    73
Service providers
112    124
Real estate related (a)
161    178
Financial services
13    9
Health care
21    25
Other industries
98    120
Total commercial
542    590
Commercial real estate

Real estate projects (b)
606    654
Commercial mortgage
138    153
Total commercial real estate
744    807
Equipment lease financing
9    13
Total commercial lending
1,295    1,410
Consumer lending (c)

Home equity (d)
1,088    951
Residential real estate

Residential mortgage (d)
952    824
Residential construction
13    21
Credit card
6    5
Other consumer (d)
68    43
Total consumer lending
2,127    1,844
Total nonperforming loans (e)
3,422    3,254
OREO and foreclosed assets

Other real estate owned (OREO) (f)
472    507
Foreclosed and other assets
33    33
Total OREO and foreclosed assets
505    540
Total nonperforming assets
$ 3,927    $ 3,794
Amount of commercial lending nonperforming loans contractually current as to remaining principal and interest
$ 364    $ 342
Percentage of total commercial lending nonperforming loans
28 % 24 %
Amount of TDRs included in nonperforming loans
$ 1,517    $ 1,589
Percentage of total nonperforming loans
44 % 49 %
Nonperforming loans to total loans
1.83 % 1.75 %
Nonperforming assets to total loans, OREO and foreclosed assets
2.10    2.04
Nonperforming assets to total assets
1.31    1.24
Allowance for loan and lease losses to total nonperforming loans (g)
112    124


In millions	June 30 2013			December 31 2012
Nonperforming loans
Commercial lending
Commercial
Retail/wholesale trade	$	63		$	61
Manufacturing		62			73
Service providers		110			124
Real estate related (a)		163			178
Financial services		14			9
Health care		24			25
Other industries		85			120
Total commercial		521			590
Commercial real estate
Real estate projects (b)		516			654
Commercial mortgage		123			153
Total commercial real estate		639			807
Equipment lease financing		7			13
Total commercial lending		1,167			1,410
Consumer lending (c)
Home equity (d)		1,131			951
Residential real estate
Residential mortgage (d)		947			824
Residential construction		15			21
Credit card		4			5
Other consumer (d)		57			43
Total consumer lending		2,154			1,844
Total nonperforming loans (e)		3,321			3,254
OREO and foreclosed assets
Other real estate owned (OREO) (f)		432			507
Foreclosed and other assets		25			33
Total OREO and foreclosed assets		457			540
Total nonperforming assets	$	3,778		$	3,794
Amount of commercial lending nonperforming loans contractually current as to remaining principal and interest	$	319		$	342
Percentage of total commercial lending nonperforming loans		27	%		24	%
Amount of TDRs included in nonperforming loans	$	1,531		$	1,589
Percentage of total nonperforming loans		46	%		49	%
Nonperforming loans to total loans		1.75	%		1.75	%
Nonperforming assets to total loans, OREO and foreclosed assets		1.99			2.04
Nonperforming assets to total assets		1.24			1.24
Allowance for loan and lease losses to total nonperforming loans (g)		114			124

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

(b)	Includes both construction loans and intermediate financing for projects.

(c)	Excludes most consumer loans and lines of credit, not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.

(d)

Pursuant to alignment with interagency supervisory guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, nonperforming home equity loans increased $214 million, nonperforming residential mortgage loans increased $187 million and nonperforming other consumer loans increased $25 million. Charge-offs have been taken on these loans where the fair value less costs to sell the collateral was less than the recorded investment of the loan and were $134 million.

(e)	Nonperforming loans exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.

(f)	OREO excludes ~~$383~~$311 million and $380 million at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively, related to residential real estate that was acquired by us upon foreclosure of serviced loans because they are insured by the FHA or guaranteed by the VA.

(g)

The allowance for loan and lease losses includes impairment reserves attributable to purchased impaired loans. See Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit in the Notes To Consolidated Financial Statements in this Report for additional information.

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

Table 38 : OREO and Foreclosed Assets


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Other real estate owned (OREO):
Residential properties	$	166	$	167	$	149	$	167
Residential development properties		116		135		100		135
Commercial properties		190		205		183		205
Total OREO		472		507		432		507
Foreclosed and other assets		33		33		25		33
Total OREO and foreclosed assets	$	505	$	540	$	457	$	540

Total OREO and foreclosed assets decreased ~~$35~~$83 million during the first ~~three~~six months of 2013 from $540 million at December 31, 2012, to ~~$505~~$457 million, or ~~13%~~12% of total nonperforming assets, at ~~March 31,~~June 30, 2013. As of ~~March 31,~~June 30, 2013 and December 31, 2012, 33% and 31%, respectively, of our OREO and foreclosed assets were comprised of 1-4 family residential properties. The lower level of OREO and foreclosed assets was driven mainly by continued strong sales activity ~~along with valuation losses~~ offset slightly by an increase in ~~residential~~ foreclosures. Excluded from OREO at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively, was ~~$383~~$311 million and $380 million of residential real estate that was acquired by us upon foreclosure of serviced loans because they are insured by the FHA or guaranteed by the VA.

~~The PNC Financial Services Group, Inc. –~~~~Form 10-Q~~49

Table 39: Change in Nonperforming Assets


In millions	2013			2012			2013			2012
January 1	$	3,794		$	4,156		$	3,794		$	4,156
New nonperforming assets (a)		1,032			1,186			1,805			1,983
Charge-offs and valuation adjustments (b)		(343	)		(236	)		(559	)		(529	)
Principal activity, including paydowns and payoffs		(258	)		(414	)		(586	)		(842	)
Asset sales and transfers to loans held for sale		(114	)		(146	)		(260	)		(314	)
Returned to performing status		(184	)		(185	)		(416	)		(278	)
March 31	$	3,927		$	4,361
June 30							$	3,778		$	4,176

(a)	New nonperforming assets include $560 million of loans added in the first quarter of 2013 due to the alignment with interagency supervisory guidance on practices for loans and lines of credit related to consumer lending.

(b)	Charge-offs and valuation adjustments include $134 million of charge-offs added in the first quarter of 2013 due to the alignment with interagency supervisory guidance discussed in footnote (a) above.

The table above presents nonperforming asset activity for the ~~three~~six months ended ~~March 31,~~June 30, 2013 and 2012. For the ~~three~~six months ended ~~March 31,~~June 30, 2013, nonperforming assets ~~increased $.1 billion~~decreased $16 million from $3.8 billion at December 31, 2012, ~~to $3.9 billion at March 31, 2013,~~ driven primarily by a decrease in commercial lending nonperforming loans and principal activity within consumer, partially offset by increases in consumer lending nonperforming loans due to alignment with interagency supervisory guidance in the first quarter of ~~2013, partially offset by a decrease in commercial lending nonperforming loans and principal activity.~~2013. Approximately ~~87%~~86% of total nonperforming loans are secured by collateral which would be expected to reduce credit losses and require less reserve in the event of default, and ~~28%~~27% of commercial lending nonperforming loans

are contractually current as to both principal and interest obligations. As of ~~March 31,~~June 30, 2013, commercial nonperforming loans are carried at approximately ~~55%~~61% of their unpaid principal balance, due to charge-offs recorded to date, before consideration of the ALLL. See Note 5 Asset Quality in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information on these loans.

Purchased impaired loans are considered performing, even if contractually past due (or if we do not expect to receive payment in full based on the original contractual terms), as we are currently accreting interest income over the expected life of the loans. The accretable yield represents the excess of the expected cash flows on the loans at the measurement date over the carrying value. Generally decreases, other than interest rate decreases for variable rate notes, in the net present value of expected cash flows of individual commercial or pooled purchased impaired loans would result in an impairment charge to the provision for loan losses in the period in which

the change is deemed probable. Generally increases in the net present value of expected cash flows of purchased impaired loans would first result in a recovery of previously recorded allowance for loan losses, to the extent applicable, and then an increase to accretable yield for the remaining life of the purchased impaired loans. Total nonperforming loans and assets in the tables above are significantly lower than they would have been due to this accounting treatment for purchased impaired loans. This treatment also results in a lower ratio of nonperforming loans to total loans and a higher ratio of ALLL to nonperforming loans. See Note 6 Purchased Loans in the Notes To Consolidated Financial Statements in this Report for additional information on these loans.

Loan Delinquencies

We regularly monitor the level of loan delinquencies and believe these levels may be a key indicator of loan portfolio asset quality. 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 exclude loans held for sale and purchased impaired loans, but include government insured or guaranteed loans and loans accounted for under the fair value option.

Total early stage loan delinquencies (accruing loans past due 30 to 89 days) decreased from $1.4 billion at December 31, 2012, to ~~$1.2~~$1.0 billion at ~~March 31,~~June 30, 2013. ~~Consumer~~The reduction in consumer lending early stage delinquencies ~~decreased by $.2 billion. This reduction~~ was mainly due to the alignment with interagency supervisory guidance in the first quarter of 2013 ~~which was partially offset by increases~~whereby such loans were classified as either nonperforming or, in ~~commercial~~the case of loans accounted for under the fair value option, nonaccruing. See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information regarding our nonperforming loan and nonaccrual policies. Commercial lending ~~delinquencies.~~early stage delinquencies decreased primarily due to improving credit quality.

The PNC Financial Services Group, Inc. –Form 10-Q51

Accruing loans past due 90 days or more are referred to as late stage delinquencies. These loans are not included in nonperforming loans and continue to accrue interest because they are well secured by collateral, and/or are in the process of collection, ~~and are reasonably expected to result in repayment and/or restoration to current status,~~ or are managed in homogenous portfolios with specified charge-off timeframes adhering to regulatory guidelines. These loans decreased ~~$.4~~$.6 billion, or ~~19%~~25%, from $2.4 billion at December 31, 2012, to ~~$1.9~~$1.8 billion at ~~March 31,~~June 30, 2013, mainly due to the alignment with interagency supervisory guidance in the first quarter of ~~2013.~~2013 in which loans were moved to either nonperforming or, in the case of loans accounted for under the fair value option, nonaccruing. In addition, government insured residential real estate loans declined $324 million, the majority of which were transferred to OREO. The following tables display the delinquency status of our loans at ~~March 31,~~June 30, 2013 and December 31, 2012. Additional information regarding accruing loans past due is included in Note 5 Asset Quality in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report.

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

Table 40: Accruing Loans Past Due 30 To 59 Days (a)(b)


	Amount				Percentage of Total Outstandings						Amount				Percentage of Total Outstandings
Dollars in millions	March 31 2013		December 31 2012		March 31 2013			December 31 2012			June 30 2013		December 31 2012		June 30 2013			December 31 2012
Commercial	$	163	$	115		.19	%		.14	%	$	85	$	115		.10	%		.14	%
Commercial real estate		111		100		.59			.54			66		100		.35			.54
Equipment lease financing		34		17		.47			.23			2		17		.03			.23
Home equity		86		117		.24			.33			76		117		.21			.33
Residential real estate
Non government insured		145		151		.97			.99			120		151		.81			.99
Government insured		114		127		.76			.83			110		127		.74			.83
Credit card		30		34		.74			.79			27		34		.65			.79
Other consumer
Non government insured		49		65		.23			.30			52		65		.25			.30
Government insured		162		193		.77			.90			148		193		.70			.90
Total	$	894	$	919		.48			.49		$	686	$	919		.36			.49

(a)	See note (a) at Table 42: Accruing Loans Past Due 90 Days Or More.

(b)	See note (b) at Table 42: Accruing Loans Past Due 90 Days Or More.

Table 41: Accruing Loans Past Due 60 To 89 Days (a)(b)


	Amount				Percentage of Total Outstandings						Amount				Percentage of Total Outstandings
Dollars in millions	March 31 2013		December 31 2012		March 31 2013			December 31 2012			June 30 2013		December 31 2012		June 30 2013			December 31 2012
Commercial	$	35	$	55		.04	%		.07	%	$	53	$	55		.06	%		.07	%
Commercial real estate		36		57		.19			.31			22		57		.12			.31
Equipment lease financing		1		1		.01			.01			4		1		.05			.01
Home equity		33		58		.09			.16			29		58		.08			.16
Residential real estate
Non government insured		41		49		.27			.32			29		49		.20			.32
Government insured		86		97		.57			.64			79		97		.53			.64
Credit card		20		23		.49			.53			19		23		.46			.53
Other consumer
Non government insured		15		21		.07			.10			14		21		.07			.10
Government insured		86		110		.41			.51			100		110		.47			.51
Total	$	353	$	471		.19			.25		$	349	$	471		.18			.25

(a)	See note (a) at Table 42: Accruing Loans Past Due 90 Days Or More.

(b)	See note (b) at Table 42: Accruing Loans Past Due 90 Days Or More.

52The PNC Financial Services Group, Inc. –Form 10-Q51

Table 42: Accruing Loans Past Due 90 Days Or More (a)(b)


	Amount				Percentage of Total Outstandings						Amount				Percentage of Total Outstandings
Dollars in millions	March 31 2013		December 31 2012		March 31 2013			December 31 2012			June 30 2013		December 31 2012		June 30 2013			December 31 2012
Commercial	$	27	$	42		.03	%		.05	%	$	31	$	42		.04	%		.05	%
Commercial real estate		3		15		.02			.08					15					.08
Equipment lease financing				2					.03					2					.03
Residential real estate
Non government insured		59		46		.39			.30			50		46		.34			.30
Government insured		1,458		1,855		9.73			12.17			1,326		1,855		8.97			12.17
Credit card		35		36		.86			.84			33		36		.80			.84
Other consumer
Non government insured		13		18		.06			.08			12		18		.06			.08
Government insured		311		337		1.47			1.57			310		337		1.46			1.57
Total	$	1,906	$	2,351		1.02			1.26		$	1,762	$	2,351		.93			1.26

(a)	Amounts in table represent recorded investment.

(b)

Pursuant to alignment with interagency supervisory guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, accruing consumer loans past due 30 – 59 days decreased $44 million, accruing consumer loans past due 60 – 89 days decreased $36 million and accruing consumer loans past due 90 days or more decreased $315 million, of which $295 million related to residential real estate government insured loans. As part of this alignment, these loans were moved into nonaccrual status.

On a regular basis our Special Asset Committee closely monitors loans, primarily commercial loans, that are not included in the nonperforming or accruing past due categories and for which we are uncertain about the borrower’s ability to comply with existing repayment terms over the next six months. These loans totaled $.2 billion at both ~~March 31,~~June 30, 2013 and December 31, 2012.

Home Equity Loan Portfolio

Our home equity loan portfolio totaled ~~$36~~$36.4 billion as of ~~March 31,~~June 30, 2013, or 19% of the total loan portfolio. Of that total, ~~$23~~$22.5 billion, or ~~64%~~62%, was outstanding under primarily variable-rate home equity lines of credit and ~~$13~~$13.9 billion, or ~~36%~~38%, consisted of closed-end home equity installment loans. Approximately 3% of the home equity portfolio was on nonperforming status as of ~~March 31,~~June 30, 2013.

As of ~~March 31,~~June 30, 2013, we are in an originated first lien position for approximately ~~44%~~46% of the total portfolio and, where originated as a second lien, we currently hold or service the first lien position for approximately an additional 2% of the portfolio. Historically, we have originated and sold first lien residential real estate mortgages which resulted in a low percentage of home equity loans where we hold the first lien

mortgage position. The remaining ~~54%~~52% of the portfolio was secured by second liens where we do not hold the first lien position. For the majority of the home equity portfolio where we are in, hold or service the first lien position, the credit performance of this portion of the portfolio 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 based upon original LTV at the time of origination. However, after origination PNC is not typically notified when a senior lien position that is not held by PNC is satisfied. Therefore, information about

the current lien status of junior lien loans is less readily available in cases where PNC does not also hold the senior lien. Additionally, PNC is not typically notified when a junior lien position is added after origination of a PNC first lien. This updated information for both junior and senior liens must be obtained from external sources and therefore PNC has contracted with an industry leading third-party service provider to obtain updated loan, lien and collateral data that is aggregated from public and private sources. In the first quarter of 2013, PNC further refined our process to include additional validation efforts around the use of third-party data.

The PNC Financial Services Group, Inc. –Form 10-Q53

We track borrower performance monthly, including obtaining original LTVs, updated FICO scores at least quarterly, updated LTVs semi-annually, and other credit metrics at least quarterly, including the historical performance of any mortgage loans regardless of lien position that we may or may not hold. This information is used for internal reporting and risk management. For internal reporting and risk management we also segment the population into pools based on product type (e.g., home equity loans, brokered home equity loans, home equity lines of credit, brokered home equity lines of credit). As part of our overall risk ~~analytics~~analysis and monitoring, we segment the home equity portfolio based upon the delinquency, modification status and bankruptcy status of these loans, as well as the delinquency, modification status and bankruptcy status of any mortgage loan with the same borrower (regardless of whether it is a first lien senior to our second lien).

In establishing our ALLL for non-impaired loans, we utilize a delinquency roll-rate methodology for pools of loans. In accordance with accounting principles, under this methodology, we establish our allowance based upon incurred losses and not lifetime expected losses. We also consider the incremental impact to ALLL when home equity lines of credit transition from interest only product to principal and interest product. The roll-rate methodology estimates transition/roll of loan balances from

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

one delinquency state (e.g., 30-59 days past due) to another delinquency state (e.g., 60-89 days past due) and ultimately to charge-off. The roll through to charge-off is based on PNC’s actual loss experience for each type of pool. Since a pool may consist of first and second liens, the charge-off amounts for the pool are proportionate to the composition of first and second liens in the pool. Our experience has been that the ratio of first to second lien loans has been consistent over time and is appropriately represented in our pools used for roll-rate calculations.

Generally, our variable-rate home equity lines of credit have either a seven or ten year draw period, followed by a 20 year amortization term. During the draw period, we have home equity lines of credit where borrowers pay interest only and home equity lines of credit where borrowers pay principal and interest. The risk associated with our home equity lines of credit end of period draw dates is considered in establishing our ALLL. Based upon outstanding balances at ~~March 31,~~June 30, 2013, the following table presents the periods when home equity lines of credit draw periods are scheduled to end.

Table 43: Home Equity Lines of Credit – Draw Period End Dates


In millions	Interest Only Product		Principal and Interest Product		Interest Only Product		Principal and Interest Product
Remainder of 2013	$	1,332	$	178	$	1,191	$	132
2014		1,972		459		1,906		448
2015		1,941		636		1,878		620
2016		1,512		489		1,469		477
2017		2,949		674		2,832		659
2018 and thereafter		5,413		4,898		5,378		5,031
Total (a)	$	15,119	$	7,334	$	14,654	$	7,367

(a)

Includes approximately ~~$257~~$218 million, ~~$206~~$199 million, ~~$211~~$203 million, ~~$60~~$57 million, ~~$70~~$65 million and ~~$602~~$597 million of home equity lines of credit with balloon payments with draw periods scheduled to end in the remainder of 2013, 2014, 2015, 2016, 2017 and 2018 and thereafter, respectively.

We view home equity lines of credit where borrowers are paying principal and interest under the draw period as less risky than those where the borrowers are paying interest only, as these borrowers have a demonstrated ability to make some level of principal and interest payments.

Based upon outstanding balances, and excluding purchased impaired loans, at ~~March 31,~~June 30, 2013, for home equity lines of credit for which the borrower can no longer draw (e.g., draw period has ended or borrowing privileges have been terminated), approximately ~~3.59%~~3.53% were 30-89 days past due and approximately ~~6.14%~~5.64% were greater than or equal to 90 days past due. Generally, when a borrower becomes 60 days past due we terminate borrowing privileges and those privileges are not subsequently reinstated. At that point, we continue our collection/recovery processes, which may include a loss mitigation loan modification resulting in a loan that is classified as a TDR.

See Note 5 Asset Quality in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information.

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

LOAN MODIFICATIONSAND TROUBLED DEBT RESTRUCTURINGS

Consumer Loan Modifications

We modify loans under government and PNC-developed programs based upon our commitment to help eligible homeowners and borrowers avoid foreclosure, where appropriate. Initially, a borrower is evaluated for a modification under a government program. If a borrower does not qualify under a government program, the borrower is then evaluated under a PNC program. Our programs utilize both temporary and permanent modifications and typically reduce the interest rate, extend the term and/or defer principal. Temporary and permanent modifications under programs involving a change to loan terms are generally classified as TDRs. Further, certain payment plans and trial payment arrangements which do not include a contractual change to loan terms may be classified as TDRs. Additional detail on TDRs is discussed below as well as in Note 5 Asset Quality in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report.

A temporary modification, with a term between 3 and 60 months, involves a change in original loan terms for a period of time and reverts to a calculated exit rate for the remaining term of the loan as of a specific date. A permanent modification, with a term greater than 60 months, is a modification in which the terms of the original loan are

changed. Permanent modifications primarily include the government-created Home Affordable Modification Program (HAMP) or PNC-developed HAMP-like modification programs.

For ~~consumer loan programs, such as residential mortgages and~~ home equity lines of credit we will enter into a temporary modification when the borrower has indicated a temporary hardship and a willingness to bring current the delinquent loan balance. Examples of this situation often include delinquency due to illness or death in the family or loss of employment. The majority of these modifications involve periods of three to 24 months. Permanent modifications are entered into when it is confirmed that the borrower does not possess the income necessary to continue making loan payments at the current amount, but our expectation is that payments at lower amounts can be made. ~~Residential mortgages and home equity loans and lines of credit have been modified with changes in terms for up to 60 months, although the majority involve periods of three to 24 months.~~

We also monitor the success rates and delinquency status of our loan modification programs to assess their effectiveness in serving our customers’ needs while mitigating credit losses. ~~The following tables provide~~Table 44: Consumer Real Estate Related Loan Modifications provides the number of accounts and unpaid principal balance of modified consumer real estate related loans ~~as well as~~and Table 45: Consumer Real Estate Related Loan Modifications Re-Default by Vintage provides the number of accounts and unpaid principal balance of modified loans that were 60 days or more past due as of six months, nine months, twelve months and fifteen months after the modification date.

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

Table 44: Consumer Real Estate Related Loan Modifications


	March 31, 2013				December 31, 2012				June 30, 2013				December 31, 2012
Dollars in millions	Number of Accounts		Unpaid Principal Balance		Number of Accounts		Unpaid Principal Balance		Number of Accounts		Unpaid Principal Balance		Number of Accounts		Unpaid Principal Balance
Home equity
Temporary Modifications		8,434	$	714		9,187	$	785		7,744	$	646		9,187	$	785
Permanent Modifications		8,589		631		7,457		535		9,716		730		7,457		535
Total home equity		17,023		1,345		16,644		1,320		17,460		1,376		16,644		1,320
Residential Mortgages
Permanent Modifications		8,647		1,618		9,151		1,676		8,933		1,652		9,151		1,676
Non-Prime Mortgages
Permanent Modifications		4,401		625		4,449		629		4,390		622		4,449		629
Residential Construction
Permanent Modifications		1,894		618		1,735		609		2,053		630		1,735		609
Total Consumer Real Estate Related Loan Modifications		31,965	$	4,206		31,979	$	4,234		32,836	$	4,280		31,979	$	4,234

The PNC Financial Services Group, Inc. –Form 10-Q55

Table 45: Consumer Real Estate Related Loan Modifications Re-Default by Vintage (a) (b)

Six Months Nine Months Twelve Months Fifteen Months
March 31, 2013
Dollars in thousands
Number of
Accounts
Re-defaulted % of
Vintage
Re-defaulted Number of
Accounts
Re-defaulted % of
Vintage
Re-defaulted Number of
Accounts
Re-defaulted % of
Vintage
Re-defaulted Number of
Accounts
Re-defaulted % of
Vintage
Re-defaulted Unpaid
Principal
Balance (c)
Permanent Modifications

Home Equity

Third Quarter 2012
48    3.0 % $ 4,733
Second Quarter 2012
36    2.0    60    3.3 % 4,461
First Quarter 2012
24    2.2    42    3.8    47    4.2 % 3,059
Fourth Quarter 2011
9    2.0    17    3.7    24    5.3    25    5.5 % 1,901
Third Quarter 2011
23    4.0    31    5.4    37    6.5    49    8.6    3,252
Residential Mortgages

Third Quarter 2012
220    22.6    37,165
Second Quarter 2012
190    18.0    320    30.3    53,843
First Quarter 2012
175    16.9    230    22.3    305    29.5    50,093
Fourth Quarter 2011
196    21.0    268    28.7    303    32.4    379    40.5    64,071
Third Quarter 2011
243    20.7    327    27.9    415    35.4    442    37.7    66,648
Non-Prime Mortgages

Third Quarter 2012
30    21.0    4,447
Second Quarter 2012
39    20.1    56    28.9    6,613
First Quarter 2012
44    20.0    55    25.0    72    32.7    10,061
Fourth Quarter 2011
38    14.6    58    22.2    80    30.7    93    35.6    13,219
Third Quarter 2011
83    22.6    100    27.3    130    35.4    141    38.4    18,440
Residential Construction

Third Quarter 2012
3    1.3    1,062
Second Quarter 2012 (d)
1    0.8    193
First Quarter 2012
2    1.6    5    3.9    6    4.7    2,162
Fourth Quarter 2011
5    5.5    7    7.7    14    15.4    13    14.3    3,951
Third Quarter 2011
2    1.8    2    1.8    6    5.5    14    12.7    1,988
Temporary Modifications

Home Equity

Third Quarter 2012
17    10.3 % $ 963
Second Quarter 2012
29    9.9    36    12.3 % 3,044
First Quarter 2012
32    7.0    43    9.4    59    12.9 % 4,508
Fourth Quarter 2011
26    5.2    39    7.8    53    10.7    59    11.9 % 5,219
Third Quarter 2011
41    9.8    49    11.7    64    15.2    73    17.4    7,627

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


	Six Months					Nine Months					Twelve Months					Fifteen Months
June 30, 2013 Dollars in thousands	Number of Accounts Re-defaulted		% of Vintage Re-defaulted			Number of Accounts Re-defaulted		% of Vintage Re-defaulted			Number of Accounts Re-defaulted		% of Vintage Re-defaulted			Number of Accounts Re-defaulted		% of Vintage Re-defaulted			Unpaid Principal Balance (c)
Permanent Modifications
Home Equity
Fourth Quarter 2012		38		3.0	%																$	4,114
Third Quarter 2012		48		3.0			75		4.6	%												7,293
Second Quarter 2012		35		2.0			59		3.3			73		4.1	%							5,262
First Quarter 2012		24		2.2			42		3.8			47		4.2			52		4.7	%		3,371
Fourth Quarter 2011		9		2.0			17		3.8			24		5.3			25		5.5			1,797
Residential Mortgages
Fourth Quarter 2012		127		17.5																		22,350
Third Quarter 2012		219		22.5			260		26.7													43,799
Second Quarter 2012		182		17.4			310		29.6			319		30.5								52,455
First Quarter 2012		166		16.3			218		21.4			293		28.7			319		31.2			51,617
Fourth Quarter 2011		183		20.3			245		27.2			275		30.5			346		38.4			51,456
Non-Prime Mortgages
Fourth Quarter 2012		25		21.4																		3,498
Third Quarter 2012		30		21.0			36		25.2													5,534
Second Quarter 2012		37		19.3			55		28.7			66		34.4								7,935
First Quarter 2012		41		18.9			52		24.0			69		31.8			71		32.7			9,912
Fourth Quarter 2011		36		14.0			56		21.7			78		30.2			90		34.9			11,642
Residential Construction
Fourth Quarter 2012		3		1.7																		418
Third Quarter 2012		3		1.3			1		0.4													405
Second Quarter 2012 (d)		—		—			1		0.8			2		1.7								170
First Quarter 2012		2		1.6			5		3.9			6		4.7			6		4.7			2,141
Fourth Quarter 2011		5		5.6			7		7.8			13		14.4			12		13.3			3,000
Temporary Modifications
Home Equity
Fourth Quarter 2012		6		5.7	%																$	574
Third Quarter 2012		17		10.4			24		14.7	%												1,745
Second Quarter 2012		29		10.1			35		12.2			46		16.0	%							3,788
First Quarter 2012		32		7.0			43		9.5			57		12.5			62		13.6	%		4,632
Fourth Quarter 2011		26		5.3			39		7.9			51		10.4			55		11.2			4,498

(a)

An account is considered in re-default if it is 60 days or more delinquent after modification. The data in this table represents loan modifications completed during the quarters ending ~~September 30,~~December 31, 2011 through ~~September 30,~~December 31, 2012 and represents a vintage look at all quarterly accounts and the number of those modified accounts (for each quarterly vintage) 60 days or more delinquent at six, nine, twelve, and fifteen months after modification. Account totals include active and inactive accounts that were delinquent when they achieved inactive status. Accounts that are no longer 60 days or more delinquent, or were re-modified since prior period, are removed from re-default status in the period they are cured or re-modified.

(b)	Vintage refers to the quarter in which the modification occurred.

(c)

Reflects ~~March 31,~~June 30, 2013 unpaid principal balances of the re-defaulted accounts for the ~~Third~~Fourth Quarter 2012 Vintage at Six Months, ~~Second~~for the Third Quarter 2012 Vintage at Nine Months, for the ~~First~~Second Quarter 2012 Vintage at Twelve Months, and for the ~~Fourth~~First Quarter ~~2011~~2012 and prior Vintages at Fifteen Months.

(d)	There were no Residential Construction modified loans which became six months past due in the second quarter of 2012.

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

In addition to temporary loan modifications, we may make available to a borrower a payment plan or a HAMP trial payment period. Under a payment plan or a HAMP trial payment period, there is no change to the loan’s contractual terms so the borrower remains legally responsible for payment of the loan under its original terms.

Payment plans may include extensions, re-ages and/or forbearance plans. All payment plans bring an account current once certain requirements are achieved and are primarily intended to demonstrate a borrower’s renewed willingness and ability to re-pay. Due to the short term nature of the payment plan there is a minimal impact to the ALLL.

Under a HAMP trial payment period, we establish an alternate payment, generally at an amount less than the contractual payment amount, for the borrower during this short time period. This allows a borrower to demonstrate successful payment performance before permanently restructuring the loan into a HAMP modification. Subsequent to successful borrower performance under the trial payment period, we will capitalize the original contractual amount past due and restructure the loan’s contractual terms, along with bringing the restructured account to current. As the borrower is often already delinquent at the time of participation in the HAMP trial payment period, there is not a significant increase in the ALLL. If the trial payment period is unsuccessful, the loan will be evaluated for further action based upon our existing policies.

Residential conforming and certain residential construction loans have been permanently modified under HAMP or, if they do not qualify for a HAMP modification, under PNC-developed programs, which in some cases may operate similarly to HAMP. These programs first require a reduction of the interest rate followed by an extension of term and, if appropriate, deferral of principal payments. As of ~~March 31,~~June 30, 2013 and December 31, 2012, ~~4,611~~5,125 accounts with a balance of ~~$.7~~$.8 billion and 4,188 accounts with a balance of $.6 billion, respectively, of residential real estate loans had been modified under HAMP and were still outstanding on our balance sheet.

We do not re-modify a defaulted modified loan except for subsequent significant life events, as defined by the OCC.

A re-modified loan continues to be classified as a TDR for the remainder of its term regardless of subsequent payment performance.

Commercial Loan Modifications and Payment Plans

Modifications of terms for commercial loans are based on individual facts and circumstances. Commercial loan modifications may involve reduction of the interest rate, extension of the term of the loan and/or forgiveness of principal. Modified commercial loans are usually already nonperforming prior to modification. We evaluate these modifications for TDR classification based upon whether we granted a concession to a borrower experiencing financial

difficulties. Additional detail on TDRs is discussed below as well as in Note 5 Asset Quality in the Notes To Consolidated Financial Statements in this Report.

Beginning in 2010, we established certain commercial loan modification and payment programs for small business loans, Small Business Administration loans, and investment real estate loans. As of ~~March 31,~~June 30, 2013 and December 31, 2012, ~~$63~~$57 million and $68 million, respectively, in loan balances were covered under these modification and payment plan programs. Of these loan balances, ~~$21~~$19 million and $24 million have been determined to be TDRs as of ~~March 31,~~June 30, 2013 and December 31, 2012.

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 ~~typically~~ result from ~~bankruptcy discharges~~borrowers that have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligations to PNC. Additionally, 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. For the ~~three~~six months ended ~~March 31,~~June 30, 2013, ~~$.7~~$1.7 billion of loans held for sale, loans accounted for under the fair value option and pooled purchased impaired loans, as well as certain consumer government insured or guaranteed loans, ~~which~~ were ~~evaluated for~~excluded from the TDR ~~consideration, are not classified as TDRs.~~population. The comparable amount for the ~~three~~six months ended ~~March 31,~~June 30, 2012 was ~~$.7~~$1.6 billion.

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

Table 46: Summary of Troubled Debt Restructurings


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Consumer lending:
Real estate-related	$	1,956	$	2,028	$	1,982	$	2,028
Credit card (a)		221		233		208		233
Other consumer		54		57		53		57
Total consumer lending		2,231		2,318		2,243		2,318
Total commercial lending		610		541		599		541
Total TDRs	$	2,841	$	2,859	$	2,842	$	2,859
Nonperforming	$	1,517	$	1,589	$	1,531	$	1,589
Accruing (b)		1,103		1,037		1,103		1,037
Credit card (a)		221		233		208		233
Total TDRs	$	2,841	$	2,859	$	2,842	$	2,859

(a)

Includes credit cards and certain small business and consumer credit agreements whose terms have been restructured and are TDRs. However, since our policy is to exempt these loans from being placed on nonaccrual status as permitted by regulatory guidance as generally these loans are directly charged off in the period that they become 180 days past due, these loans are excluded from nonperforming loans.

(b)

Accruing loans have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans. Loans where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligation to PNC are not returned to accrual status.

The PNC Financial Services Group, Inc. –Form 10-Q57

Total TDRs decreased ~~$18~~$17 million, or 1%, during the first ~~three~~six months of 2013. Nonperforming TDRs totaled $1.5 billion, which represents approximately ~~44%~~46% of total nonperforming loans.

TDRs that have returned to performing (accruing) status are excluded from nonperforming loans. Generally, these loans have been returned to performing status as the borrowers ~~have demonstrated~~are performing under the restructured terms for ~~a period of~~ at least six consecutive ~~months that they can perform under the restructured terms.~~months. These TDRs increased $66 million, or 6%, during the first ~~three~~six months of 2013 to $1.1 billion as of ~~March 31,~~June 30, 2013. This increase reflects the further seasoning and performance of the TDRs. Loans where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligation to PNC are not returned to accrual status. See Note 5 Asset Quality in the Notes toTo Consolidated Financial Statements in this Report for additional information.

For the first ~~quarter~~six months of 2013, loan charge-offs were ~~$569~~$925 million and annualized net charge-offs to average loans was ~~0.99%~~0.71%. Pursuant to alignment with interagency guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, additional charge-offs of $134 million were taken. ~~Excluding the impact of these additional charge-offs, annualized net charge-offs to average loans for the first quarter of 2013 was 0.70%.~~

In addition, total net charge-offs are lower than they would have been otherwise due to the accounting treatment for purchased impaired loans. This treatment also results in a lower ratio of net charge-offs to average loans. See Note 6 Purchased Loans in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information on net charge-offs related to these loans.

We maintain an ALLL to absorb losses from the loan and lease portfolio and determine this allowance based on quarterly assessments of the estimated probable credit losses incurred in the loan and lease portfolio. We maintain the ALLL at a level that we believe to be appropriate to absorb estimated probable credit losses incurred in the loan and lease portfolio as of the balance sheet date. The reserve calculation and determination process is dependent on the use of key assumptions. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan and lease portfolio performance experience, the financial strength of the borrower, and economic conditions. Key reserve assumptions are periodically updated.

We establish specific allowances for loans considered impaired using methods prescribed by GAAP. All impaired loans are subject to individual analysis, except leases and large groups of smaller-balance homogeneous loans which may include, but are not limited to, credit card, residential mortgage and consumer installment loans. Specific allowances for individual loans (including commercial and consumer TDRs) are determined based on an analysis of the present value of expected future cash flows from the loans discounted at their effective interest rate, observable market price or the fair value of the underlying collateral.

Reserves allocated to non-impaired commercial loan classes are based on PD and LGD credit risk ratings.

Our commercial pool reserve methodology is sensitive to changes in key risk parameters such as PD and LGD; the results of these parameters are then applied to the loan balance to determine the amount of the reserve. In general, a given change in any of the major risk parameters will have a corresponding change in the pool reserve allocations for non-impaired commercial loans.

The majority of the commercial portfolio is secured by collateral, including loans to asset-based lending customers that continue to show demonstrably lower LGD. Further, the

large investment grade or equivalent portion of the loan portfolio has performed well and has not been subject to significant deterioration. Additionally, guarantees on loans greater than $1 million and owner guarantees for small business loans do not significantly impact our ALLL.

Allocations to non-impaired consumer loan classes are based upon a roll-rate model which uses statistical relationships, calculated from historical data that estimate the movement of loan outstandings through the various stages of delinquency and ultimately charge-off.

A portion of the ALLL related to qualitative and measurement factors has been assigned to loan categories. These factors may include, but are not limited to, the following:

Industry concentrations and conditions,

Recent credit quality trends,

Recent loss experience in particular portfolios,

Recent macro-economic factors,

Model imprecision,

Changes in lending policies and procedures, ~~and~~

Timing of available information, including the performance of first lien ~~positions.~~positions, and

Limitations of available historical data.

Purchased impaired loans are initially recorded at fair value and applicable accounting guidance prohibits the carry over or creation of valuation allowances at acquisition. Because the initial fair values of these loans already reflect a credit

component, additional reserves are established when performance is expected to be worse than our expectations as of the acquisition date. At ~~March 31,~~June 30, 2013, we had established reserves of $1.1 billion for purchased impaired loans. In addition, all loans (purchased impaired and non-impaired) acquired in the RBC Bank (USA) acquisition were recorded at fair value. No allowance for loan losses was carried over and no allowance was created at acquisition. See Note 6 Purchased Loans in the Notes To Consolidated Financial Statements in this Report for additional information.

In addition to the ALLL, we maintain an allowance for unfunded loan commitments and letters of credit. We report this allowance as a liability on our Consolidated Balance Sheet. We maintain the allowance for unfunded loan commitments and letters of credit at a level we believe is appropriate to absorb estimated probable losses on these unfunded credit facilities. We determine this amount using estimates of the probability of the ultimate funding and losses related to those credit exposures. Other than the estimation of the probability of funding, this methodology is very similar to the one we use for determining our ALLL.

We refer you to Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for further information on key asset quality indicators that we use to evaluate our portfolio and establish the allowances.

Table 48: Allowance for Loan and Lease Losses


Dollars in millions	2013			2012			2013			2012
January 1	$	4,036		$	4,347		$	4,036		$	4,347
Total net charge-offs		(456	)		(333	)		(664	)		(648	)
Provision for credit losses		236			185			393			441
Net change in allowance for unfunded loan commitments and letters of credit		12			(3	)		8			16
March 31	$	3,828		$	4,196
Net charge-offs to average loans (for the three months ended) (annualized) (a)		.99	%		.81	%
Other								(1	)
June 30							$	3,772		$	4,156
Net charge-offs to average loans (for the six months ended) (annualized) (a)								.71	%		.76	%
Allowance for loan and lease losses to total loans		2.05			2.38			1.99			2.30
Commercial lending net charge-offs	$	(121	)	$	(96	)	$	(151	)	$	(189	)
Consumer lending net charge-offs		(335	)		(237	)		(513	)		(459	)
Total net charge-offs	$	(456	)	$	(333	)	$	(664	)	$	(648	)
Net charge-offs to average loans (for the three months ended) (annualized)
Net charge-offs to average loans (for the six months ended) (annualized)
Commercial lending		.45	%		.42	%		.27	%		.39	%
Consumer lending (a)		1.78			1.32			1.35			1.25

(a)

Pursuant to alignment with interagency guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013, additional charge-offs of $134 million have been taken. Excluding the impact of these additional charge-offs, annualized net charge-offs to average loans for the first quarter 2013 was 0.70%. For consumer lending, excluding the impact of these additional charge-offs, annualized net charge-offs to average loans for the first quarter 2013 was 1.07%.

As further described in the Consolidated Income Statement Review section of this Report, the provision for credit losses totaled ~~$236~~$393 million for the first ~~three~~six months of 2013 compared to ~~$185~~$441 million for the first ~~three~~six months of 2012. For the first ~~three~~six months of 2013, the provision for commercial lending credit losses ~~increased~~decreased by ~~$11~~$60 million, or ~~25%~~68%, from the first ~~three~~six months of 2012. ~~Similarly, the~~The provision for consumer lending credit losses increased ~~$40~~$12 million, or ~~28%~~3%, from the first ~~three~~six months of 2012.

At ~~March 31,~~June 30, 2013, total ALLL to total nonperforming loans was ~~112%~~114%. The comparable amount for December 31, 2012 was 124%. These ratios are ~~70%~~71% and 79%, respectively, when excluding the $1.4 billion and $1.5 billion, respectively, of ALLL at ~~March 31,~~June 30, 2013 and December 31, 2012 allocated to consumer loans and lines of credit not secured by residential real estate and purchased impaired loans. We have excluded consumer loans and lines of credit not secured by real estate as they are charged off after 120 to 180 days past due and not placed on nonperforming status. Additionally, we have excluded purchased impaired loans as they are considered performing regardless of their delinquency status as interest is accreted based on our estimate of expected cash flows and additional allowance is recorded when these cash flows are below recorded investment. See Table 37: Nonperforming Assets By Type within this Credit Risk Management section for additional information.

The ALLL balance increases or decreases across periods in relation to fluctuating risk factors, including asset quality trends, charge-offs and changes in aggregate portfolio balances. During the first ~~quarter~~six months of 2013, improving asset quality trends, including, but not limited to, delinquency status and improving economic conditions, realization of previously estimated losses through charge-offs, including the impact of alignment with interagency guidance and overall portfolio growth, combined to result in the ALLL balance declining $.2 billion, or 5% to $3.8 billion as of ~~March 31,~~June 30, 2013 compared to December 31, 2012.

See Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit and Note 6 Purchased Loans in the Notes To Consolidated Financial Statements in Part I, Item ~~1 of~~1of this Report regarding changes in the ALLL and in the allowance for unfunded loan commitments and letters of credit.

LIQUIDITY RISK MANAGEMENT

Liquidity risk has two fundamental components. The first is potential loss assuming we were unable to meet our funding requirements at a reasonable cost. The second is the potential inability to operate our businesses because adequate contingent liquidity is not available in a stressed environment. We manage liquidity risk at the consolidated company level (bank, parent company, and nonbank subsidiaries combined) to help ensure that we can obtain cost-effective funding to meet current and future obligations under both normal “business as usual” and stressful circumstances, and to help ensure that we maintain an appropriate level of contingent liquidity.

Spot and forward funding gap analyses are used to measure and monitor consolidated liquidity risk. Funding gaps represent the difference in projected sources of liquidity available to offset projected uses. We calculate funding gaps for the overnight, thirty-day, ninety-day, one hundred eighty-day and one-year time intervals. Management also monitors liquidity through a series of early warning indicators that may indicate a potential market, or PNC-specific, liquidity stress event. Finally, management performs a set of liquidity stress tests and maintains a contingency funding plan to address a potential liquidity crisis. In the most severe liquidity stress simulation, we assume that PNC’s liquidity position is under pressure, while the market in general is under systemic pressure. The simulation considers, among other things, the impact of restricted access to both secured and unsecured external sources of funding, accelerated run-off of customer deposits, valuation pressure on assets and heavy demand to fund contingent obligations. Risk limits are established within our Liquidity Risk Policy. Management’s Asset and Liability Committee regularly reviews compliance with the established limits.

Parent company liquidity guidelines are designed to help ensure that sufficient liquidity is available to meet our parent company obligations over the succeeding 24-month period. Risk limits for parent company liquidity are established within our Enterprise Capital and Liquidity Management Policy. The Board of Directors’ Risk Committee regularly reviews compliance with the established limits.

BANK LEVEL LIQUIDITY – USES

Obligations requiring the use of liquidity can generally be characterized as either contractual or discretionary. At the bank level, primary contractual obligations include funding loan commitments, satisfying deposit withdrawal requests and maturities and debt service related to bank borrowings. As of ~~March 31,~~June 30, 2013, there were approximately ~~$12.2~~$13.5 billion of bank borrowings with contractual maturities of less than one year. We also maintain adequate bank liquidity to meet future potential loan demand and provide for other business needs, as necessary. See the Bank Level Liquidity – Sources section below.

On March 15, 2013 we redeemed $375 million of REIT preferred securities issued by PNC Preferred Funding Trust III with a current distribution rate of 8.7%.

BANK LEVEL LIQUIDITY – SOURCES

Our largest source of bank liquidity on a consolidated basis is the deposit base that comes from our retail and commercial businesses. Total deposits decreased to ~~$211.6~~$212.3 billion at ~~March 31,~~June 30, 2013 from $213.1 billion at December 31, 2012, primarily due to runoff of year-end seasonally higher transactions deposits. Liquid assets and unused borrowing capacity from a number of sources are also available to maintain our liquidity position. Borrowed funds come from a diverse mix of short and long-term funding sources.

At ~~March 31,~~June 30, 2013, our liquid assets consisted of short-term investments (Federal funds sold, resale agreements, trading securities and interest-earning deposits with banks) totaling ~~$5.1~~$7.5 billion and securities available for sale totaling ~~$49.5~~$47.9 billion. Of our total liquid assets of ~~$54.6~~$55.4 billion, we had ~~$24.9~~$23.1 billion pledged as collateral for borrowings, trust, and other commitments. The level of liquid assets fluctuates over time based on many factors, including market conditions, loan and deposit growth and ~~active~~ balance sheet management ~~including securities purchases to manage duration.~~activities.

In addition to the customer deposit base, which has historically provided the single largest source of relatively stable and low-cost funding, the bank also obtains liquidity through the issuance of traditional forms of funding including long-term debt (senior notes and subordinated debt and FHLB advances) and short-term borrowings (Federal funds purchased, securities sold under repurchase agreements, commercial paper issuances and other short-term borrowings).

PNC Bank, N.A. is authorized by its board to offer up to $20 billion in senior and subordinated unsecured debt obligations with maturities of more than nine months. Through ~~March 31,~~June 30, 2013, PNC Bank, N.A. had issued ~~$13.6~~$15.0 billion of debt under this program including the following during ~~the first quarter of~~ 2013:

$750 million of fixed rate senior notes with a maturity date of January 28, 2016. Interest is payable semi-annually, at a fixed rate of .80%, on January 28 and July 28 of each year, beginning on July 28, 2013,

$250 million of floating rate senior notes with a maturity date of January 28, 2016. Interest is payable at the 3-month LIBOR rate, reset quarterly, plus a spread of .31%, on January 28, April 28, July 28, and October 28 of each year, beginning on April 28, 2013,

$750 million of subordinated notes with a maturity date of January 30, 2023. Interest is payable semi-annually, at a fixed rate of 2.950%, on January 30 and July 30 of each year, beginning on July 30, 2013, ~~and~~

$1.4 billion of senior extendible floating rate bank notes issued to an affiliate with an initial maturity date of April 14, 2014, subject to the holder’s monthly option to extend, and a final maturity date of January 14, 2015. Interest is payable at the 3-month LIBOR rate, reset quarterly, plus a spread of .225%, which spread is subject to four potential one basis point increases in the event of certain extensions of maturity by the holder. Interest is payable on March 14, June 14, September 14, and December 14 of each year, beginning on June 14, 2013.

January 14, 2015. Interest is payable at the 3-month LIBOR rate, reset quarterly, plus a spread of .225%, which spread is subject to four potential one basis point increases in the event of certain extensions of maturity by the holder. Interest is payable on March 14, June 14, September 14, and December 14 of each year, beginning on June 14, 2013,

~~On April 29, 2013 and May 9, 2013, PNC Bank, N.A. issued $525~~$645 million ~~and $120 million, respectively,~~ of floating rate senior notes with a maturity date of April 29, 2016. Interest is payable at the 3-month LIBOR rate, reset quarterly, plus a spread of .32% on January 29, April 29, July 29 and October 29 of each year, beginning on July 29, 2013, and

$800 million of senior extendible floating rate bank notes with an initial maturity date of July 18, 2014, subject to the holder’s monthly option to extend, and a final maturity date of June 18, 2015. Interest is payable at the 3-Month LIBOR rate, reset quarterly, plus a spread of .225%, which spread is subject to four potential one basis point increases in the event of certain extensions of maturity by the holder. Interest is payable on March 20, June 20, September 20 and December 20 of each year, beginning on September 20, 2013.

Total senior and subordinated debt of PNC Bank, N.A. increased to ~~$10.3~~$9.4 billion at ~~March 31,~~June 30, 2013 from $7.6 billion at December 31, 2012 primarily due to ~~$3.2~~$4.6 billion in new borrowing less ~~$450 million~~$2.6 billion in calls and maturities.

PNC Bank, N.A. is a member of the FHLB-Pittsburgh and as such has access to advances from FHLB-Pittsburgh secured generally by residential mortgage and other mortgage-related loans. At ~~March 31,~~June 30, 2013, our unused secured borrowing capacity was ~~$14.6~~$17.2 billion with FHLB-Pittsburgh. Total FHLB borrowings decreased to ~~$5.5~~$8.5 billion at ~~March 31,~~June 30, 2013 from $9.4 billion at December 31, 2012 due to $4$6 billion in calls and ~~maturities.~~maturities and $5 billion of new issuance.

PNC Bank, N.A. has the ability to offer up to $10.0 billion of its commercial paper to provide additional liquidity. As of

~~March 31,~~ June 30, 2013, there was ~~$1.1 billion~~$500 million outstanding under this program. Commercial paper on our Consolidated Balance Sheet also includes $5.9 billion of commercial paper issued by Market Street Funding LLC, a consolidated VIE.

PNC Bank, N.A. can also borrow from the Federal Reserve Bank of Cleveland’s (Federal Reserve Bank) discount window to meet short-term liquidity requirements. The Federal Reserve Bank, however, is not viewed as the 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. These potential borrowings are secured by securities and commercial loans. At ~~March 31,~~June 30, 2013, our unused secured borrowing capacity was ~~$27.9~~$27.3 billion with the Federal Reserve Bank.

See Note 20 Subsequent Events in the Notes To Consolidated Financial Statements of this Report for information on the issuance of subordinated notes of $750 million on July 25, 2013.

PARENT COMPANY LIQUIDITY – USES

Obligations requiring the use of liquidity can generally be characterized as either contractual or discretionary. The parent company’s contractual obligations consist primarily of debt service related to parent company borrowings and funding non-bank affiliates. As of ~~March 31,~~June 30, 2013, there were approximately ~~$800 million~~$1.4 billion of parent company borrowings with maturities of less than one year.

Additionally, the parent company maintains adequate liquidity to fund discretionary activities such as paying dividends to PNC shareholders, share repurchases, and acquisitions. See the Parent Company Liquidity – Sources section below.

See Supervision and Regulation in Item 1 of this Report for information regarding the Federal Reserve’s CCAR process, including its impact on our ability to take certain capital actions, including plans to pay or increase common stock dividends, reinstate or increase common stock repurchase programs, or redeem preferred stock or other regulatory capital instruments.

On March 14, 2013, we used $1.4 billion of parent company cash to purchase senior extendible floating rate bank notes issued by PNC Bank, N.A.

On March 19, 2013, PNC announced the redemption completed on April 19, 2013 of depositary shares representing interests in PNC’s 9.875% Fixed-To-Floating Rate Non-Cumulative Preferred Stock, Series L. Each depositary share represents a 1/4,000^th interest in a share of the Series L Preferred Stock. All 6,000,000 depositary shares outstanding were redeemed, as well as all 1,500 shares of Series L Preferred Stock underlying such depositary ~~shares.~~shares, resulting in a net outflow of $150 million.

On March 22, 2013, we called for the redemption completed on April 23, 2013 of $15 million of trust preferred securities issued by Yardville Capital Trust VI.

On April 8, 2013 we called for redemption completed on May 23, 2013 of the $30 million of trust preferred securities issued by Fidelity Capital Trust III.

On May 1, 2013 we called for redemption completed on June 17, 2013 of the following trust preferred securities:

$15 million issued by Sterling Financial Statutory Trust III,

$15 million issued by Sterling Financial Statutory Trust IV,

$20 million issued by Sterling Financial Statutory Trust V,

$30 million issued by MAF Bancorp Capital Trust I, and

$8 million issued by James Monroe Statutory Trust III.

See Note 20 Subsequent Events ~~Note~~ in the Notes To Consolidated Financial Statements of this Report for information on the ~~additional announcements~~redemption of $22 million on July 23, 2013 and ~~completions~~a planned redemption of ~~redemptions~~$35 million on September 16, 2013 of trust preferred securities.

PARENT COMPANY LIQUIDITY – SOURCES

The principal source of parent company liquidity is the dividends it receives from its subsidiary bank, which may be impacted by the following:

Bank-level capital needs,

Laws and regulations,

Corporate policies,

Contractual restrictions, and

Other factors.

~~The amount available for dividend payments by PNC Bank, N.A. to the parent company without prior regulatory approval was approximately $866 million at March 31, 2013.~~ There are statutory and regulatory limitations on the ability of national banks 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, N.A. to the parent company without prior regulatory approval was approximately $1.1 billion at June 30, 2013. See Note 22 Regulatory Matters in the Notes To Consolidated Financial Statements in Item 8 of our 2012 Form 10-K for a further discussion of these limitations. ~~Dividends may also be impacted by the bank’s capital needs and by contractual restrictions.~~ We provide additional information on certain contractual restrictions under the “Trust Preferred Securities” section of the Off-Balance Sheet Arrangements And Variable Interest Entities section of this Financial Review and in Note 14 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities in the Notes To Consolidated Financial Statements in Item 8 of our 2012 Form 10-K.

In addition to dividends from PNC Bank, N.A., 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. As of ~~March 31,~~June 30, 2013, the parent company had approximately ~~$4.0~~$4.5 billion in funds available from its cash and investments.

We can also generate liquidity for the parent company and PNC’s non-bank subsidiaries through the issuance of debt securities and equity securities, including certain capital instruments, in public or private markets and commercial paper. We have an effective shelf registration statement pursuant to which we can issue additional debt, equity and other capital instruments. Total senior and subordinated debt and hybrid capital instruments decreased to ~~$11.4~~$10.8 billion at ~~March 31,~~June 30, 2013 from $11.5 billion at December 31, 2012.

The parent company, through its subsidiary PNC Funding Corp, has the ability to offer up to $3.0 billion of commercial

paper to provide additional liquidity. As of ~~March 31,~~June 30, 2013, there were no issuances outstanding under this program.

Note 19 Equity in Item 8 of our 2012 Form 10-K describes the 16,885,192 warrants we have outstanding, each to purchase one share of PNC common stock at an exercise price of $67.33 per share. These warrants were sold by the U.S. Treasury in a secondary public offering in May 2010 after the U.S. Treasury exchanged its TARP Warrant. These warrants will expire December 31, 2018.

On May 7, 2013, we issued 500,000 depositary shares, each representing a 1/100^th interest in a share of our Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series R, in an underwritten public offering resulting in gross proceeds of $500 million to us before commissions and expenses. We issued 5,000 shares of Series R Preferred Stock to the depositary in this transaction. Non-cumulative cash dividends are payable when, as, and if declared by our board of directors, or an authorized committee of our board, semi-annually on June 1 and December 1 of each year, beginning on December 1, 2013 and ending on June 1, 2023, at a rate of 4.850%. From and including June 1, 2023, such dividends will be payable quarterly on March 1, June 1, September 1 and December 1 of each year beginning on September 1, 2023 at a rate of three-month LIBOR plus 3.04% per annum. The Series R Preferred Stock is redeemable at our option on or

after June 1, 2023 and at our option within 90 days of a regulatory capital treatment event as defined in the designations.

STATUSOF CREDIT RATINGS

The cost and availability of short-term and long-term funding, as well as collateral requirements for certain derivative instruments, is influenced by PNC’s debt ratings.

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. In

addition, rating agencies themselves have been subject to scrutiny arising from the financial crisis and could make or be required to make substantial changes to their ratings policies and practices, particularly in response to legislative and regulatory changes, including as a result of provisions in Dodd-Frank. Potential changes in the legislative and regulatory environment and the timing of those changes could impact our ratings, which as noted above, could impact our liquidity and financial condition. 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.

We had unrecognized tax benefits of ~~$133~~$109 million at ~~March 31,~~June 30, 2013. This liability for unrecognized tax benefits represents an estimate of tax positions that we have taken in our tax returns which ultimately may not be sustained upon examination by taxing authorities. Since the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty, this estimated liability has been excluded from the contractual obligations table. See Note 16 Income Taxes in the Notes To Consolidated Financial Statements of this Report for additional information.

Our contractual obligations totaled $71.1 billion at December 31, 2012. The decrease in the comparison is primarily attributable to the decrease in borrowed funds and time deposits. See Funding and Capital Sources in the Consolidated Balance Sheet Review section of this Financial Review for additional information regarding our funding sources.

MARKET RISK MANAGEMENT

Market risk is the risk of a loss in earnings or economic value due to adverse movements in market factors such as interest rates, credit spreads, foreign exchange rates and equity prices. We are exposed to market risk primarily by our involvement in the following activities, among others:

Traditional banking activities of taking deposits and extending loans,

Equity and other investments and activities whose economic values are directly impacted by market factors, and

Fixed income ~~equities,~~securities, derivatives and foreign exchange activities, as a result of customer activities and underwriting.

We have established enterprise-wide policies and methodologies to identify, measure, monitor and report market risk. Market Risk Management provides independent oversight by monitoring compliance with these limits and

guidelines, and reporting significant risks in the business to the Risk Committee of the Board.

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.

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

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. The following Net Interest Income Sensitivity to Alternative Rate Scenarios ~~(First~~(Second Quarter 2013) table reflects the percentage change in net interest income over the next two 12-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 1-month and ten-year rates superimposed on current base rates) scenario.

Table 53: Net Interest Income Sensitivity to Alternative Rate Scenarios ~~(First~~(Second Quarter 2013)


	PNC Economist			Market Forward			Slope Flattening			PNC Economist			Market Forward			Slope Flattening
First year sensitivity		.09	%		.52	%		(.89	)%		(.43	)%		.99	%		(.74	)%
Second year sensitivity		1.55	%		2.50	%		(3.73	)%		(.17	)%		4.09	%		(3.21	)%

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.

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 the above table. These simulations assume that as assets and liabilities mature, they are replaced or repriced at then current market rates. We also consider forward projections of purchase accounting accretion when forecasting net interest income.

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

Table 54: Alternate Interest Rate Scenarios: One Year Forward

LOGO

The ~~first~~second quarter 2013 interest sensitivity analyses indicate that our Consolidated Balance Sheet is positioned to benefit from an increase in interest rates and an upward sloping interest rate yield curve. We believe that we have the deposit funding base and balance sheet flexibility to adjust, where appropriate and permissible, to changing interest rates and market conditions.

MARKET RISK MANAGEMENT – TRADING RISK

Our trading activities are primarily customer-driven trading in fixed income securities, derivatives and foreign exchange contracts, as well as the daily mark-to-market impact from the

credit valuation adjustment (CVA) on the customer derivatives portfolio. They also include the underwriting of fixed income and equity securities.

We use value-at-risk (VaR) as the primary means to measure and monitor market risk in trading activities. We calculate a diversified VaR at a 95% confidence interval. VaR is used to estimate the probability of portfolio losses based on the statistical analysis of historical market risk factors. A diversified VaR reflects empirical correlations across different asset classes.

~~PNC began to include the daily mark-to-market impact from the CVA in determining the diversified VaR measure during the first quarter of 2012 due to enhancements in our models.~~ During the first ~~three~~six months of 2013, our 95% VaR ranged between ~~$3.2~~$1.9 million and ~~$5.3~~$5.5 million, averaging ~~$3.8~~$4.1 million. During the first ~~three~~six months of 2012, our 95% VaR ranged between ~~$3.3~~$2.5 million and ~~$4.6~~$5.3 million, averaging ~~$4.0~~$3.9 million.

To help ensure the integrity of the models used to calculate VaR for each portfolio and enterprise-wide, we use a process known as backtesting. The backtesting process consists of comparing actual observations of trading-related gains or losses against the VaR levels that were calculated at the close of the prior day. This assumes that market exposures remain constant throughout the day and that recent historical market variability is a good predictor of future variability. Our actual ~~trading related~~trading-related activity includes customer revenue and intraday hedging which helps to reduce trading losses, and may reduce the number of instances of actual losses exceeding the prior day VaR measure. There were no such instances during the first ~~three~~six months of 2013 under our diversified VaR measure. In comparison, there was ~~one~~two such instance during the first ~~three~~six months of 2012. We use a 500 day look back period for backtesting and include customer related revenue.

The following graph shows a comparison of enterprise-wide trading-related gains and losses against prior day diversified VaR for the period indicated.

Table 55: Enterprise-Wide Trading-Related Gains/Losses Versus ~~Value at Risk~~Value-at-Risk

LOGO

Total trading revenue was as follows:

Table 56: Trading Revenue


Three months ended March 31 In millions	2013		2012
Six months ended June 30 In millions					2013		2012
Net interest income	$	9	$	9	$	17	$	20
Noninterest income		51		72		144		105
Total trading revenue	$	60	$	81	$	161	$	125
Securities underwriting and trading (a)	$	25	$	25	$	41	$	43
Foreign exchange		19		20		42		47
Financial derivatives and other		16		36		78		35
Total trading revenue	$	60	$	81	$	161	$	125


Three months ended June 30 In millions	2013		2012
Net interest income	$	8	$	11
Noninterest income		93		33
Total trading revenue	$	101	$	44
Securities underwriting and trading (a)	$	16	$	18
Foreign exchange		23		27
Financial derivatives and other		62		(1	)
Total trading revenue	$	101	$	44

(a)	Includes changes in fair value for certain loans accounted for at fair value.

The trading revenue disclosed above includes results from providing investing, ~~and~~ risk management and underwriting services to our customers as well as results from hedges of customer activity. Trading revenue excludes the impact of economic hedging activities which we transact to manage risk primarily related to residential and commercial mortgage servicing rights and residential and commercial mortgage loans held-for-sale. Derivatives used for economic hedges are not designated as accounting hedges because the contracts they are hedging are typically also carried at fair value on the balance sheet, resulting in symmetrical accounting treatment for both the hedging instrument and the hedged item. Economic hedge results, along with the associated hedged items, are reported in the respective income statement line items, as appropriate.

Trading ~~revenue~~revenues for the first ~~quarter~~six months of 2013 ~~decreased $21~~increased $36 million compared with the first six months of 2012. Trading revenue for the second quarter of ~~2012~~2013 increased $57 million compared with the second quarter of 2012. The increases in both comparisons primarily ~~due~~result from the impact of higher market interest rates on credit valuations related to ~~lower derivative~~customer-initiated hedging activities and improved debt underwriting results which were partially offset by reduced client ~~related revenues.~~derivatives revenue.

MARKET RISK MANAGEMENT – EQUITYAND OTHER INVESTMENT RISK

Equity investment risk is the risk of potential losses associated with investing in both private and public equity markets. PNC invests primarily in private equity markets. In addition to extending credit, taking deposits, and underwriting 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 and in debt and equity-oriented hedge funds. The economic and/or book value of these investments and other assets such as loan servicing rights are directly affected by changes in market factors.

The primary risk measurement for equity and other investments is economic capital. Economic capital is a common measure of risk for credit, market and operational risk. It is an estimate of the potential value depreciation over a one year horizon commensurate with solvency expectations of an institution rated single-A by the credit rating agencies.

Given the illiquid nature of many of these types of investments, it can be a challenge to determine their fair values. See Note 9 Fair Value in the Notes To Consolidated Financial Statements in this Report and in our 2012Form 10-K for additional information.

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

A summary of our equity investments follows:

Table 57: Equity Investments Summary


In millions	Mar. 31 2013		Dec. 31 2012		June 30 2013		Dec. 31 2012
BlackRock	$	5,590	$	5,614	$	5,713	$	5,614
Tax credit investments		3,126		2,965		2,175		2,965
Private equity		1,811		1,802		1,729		1,802
Visa		251		251		204		251
Other		230		245		233		245
Total	$	11,008	$	10,877	$	10,054	$	10,877

BLACKROCK

PNC owned approximately 36 million common stock equivalent shares of BlackRock equity at ~~March 31,~~June 30, 2013, accounted for under the equity method. The primary risk measurement, similar to other equity investments, is economic capital. The Business Segments Review section of this Financial Review includes additional information about BlackRock.

TAX CREDIT INVESTMENTS

Included in our equity investments are tax credit investments which are accounted for under the equity method. These investments, as well as equity investments held by consolidated partnerships, totaled ~~$3.1~~$2.2 billion at ~~March 31,~~June 30, 2013 and $3.0 billion at December 31, 2012. These equity investment balances include unfunded commitments totaling ~~$707~~$674 million and $685 million, respectively. These unfunded commitments are included in Other Liabilities on our Consolidated Balance Sheet.

Note 3 Loan Sale and Servicing Activities and Variable Interest Entities in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report has further information on Tax Credit Investments.

PRIVATE EQUITY

The private equity portfolio is an illiquid portfolio comprised of mezzanine and equity investments that vary by industry, stage and type of investment.

Private equity investments carried at estimated fair value totaled $1.7 billion at June 30, 2013 compared with $1.8 billion at ~~both March 31, 2013 and~~ December 31, 2012. As of ~~March 31,~~June 30, 2013, ~~$1.2~~$1.1 billion was invested directly

in a variety of companies and $.6 billion was invested indirectly through various private equity funds. Included in direct investments are investment activities of two private equity funds that are consolidated for financial reporting purposes. The noncontrolling interests of these funds totaled ~~$270~~$235 million as of ~~March 31,~~June 30, 2013. The interests held in indirect private equity funds are not redeemable, but PNC ~~receives~~may receive distributions over the life of the partnership from liquidation of the underlying ~~investments by the investee.~~investments. See Item 1 Business – Supervision and Regulation and Item 1A Risk Factors included in our 2012 Form 10-K for discussion of potential impacts of the Volcker Rule provisions of Dodd-Frank on our holding interests in and sponsorship of private equity or hedge funds.

Our unfunded commitments related to private equity totaled ~~$178~~$171 million at ~~March 31,~~June 30, 2013 compared with $182 million at December 31, 2012.

VISA

~~In 2012,~~During second quarter of 2013 we sold 92 million of Visa Class B common shares, in addition to the 9 million shares sold in the second half of 2012, and entered into swap agreements with the purchaser of the shares. See Note 9 Fair Value in this Report and in our 2012 Form 10-K and Note 13 Financial Derivatives in the Notes To Consolidated Financial Statements in Part I, Item 1 of this Report for additional information. At ~~March 31,~~June 30, 2013, our investment in Visa Class B common shares totaled approximately 1412 million shares and was recorded at ~~$251~~$204 million. Based on the ~~March 31,~~June 30, 2013 closing price of ~~$169.84~~$182.75 for the Visa Class A common shares,

the fair value of our total investment was approximately ~~$1.0 billion~~$950 million at the current conversion rate which reflects adjustments in respect of all litigation funding by Visa to date. The Visa Class B common shares that we own are transferable only under limited circumstances (including those applicable to the sales in the second quarter of 2013 and in the second half of 2012) until they can be converted into shares of the publicly traded class of stock, which cannot happen until the settlement of all of the specified litigation. It is expected that Visa will continue to adjust the conversion rate of Visa Class B common shares to Class A common shares in connection with any settlements of the specified litigation in excess of any amounts then in escrow for that purpose and will also reduce the conversion rate to the extent that it adds any funds to the escrow in the future.

Our 2012 Form 10-K has additional information regarding the October 2007 Visa restructuring, our involvement with judgment and loss sharing agreements with Visa and certain other banks, and the status of pending interchange litigation. See Note 17 Legal Proceedings and Note 18 Commitments and Guarantees in our Notes To Consolidated Financial Statements of this Report for additional information.

OTHER INVESTMENTS

We also make investments in affiliated and non-affiliated funds with both traditional and alternative investment strategies. The economic values could be driven by either the fixed-income market or the equity markets, or both. At ~~March 31,~~June 30, 2013, other investments totaled ~~$230~~$233 million compared with $245 million at December 31, 2012. We recognized net gains related to these investments of ~~$20~~$25 million and ~~$15~~$13 million during the first ~~three~~six months of 2013 and 2012, ~~respectively.~~including net gains of $5 million during the second quarter of 2013 and $2 million loss during second quarter of 2012.

Given the nature of these investments, if market conditions affecting their valuation were to worsen, we could incur future losses.

Our unfunded commitments related to other investments ~~totaled~~were less than $1 million at ~~March 31,~~June 30, 2013 and $3 million at December 31, 2012.

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 interest rate, market and credit risk inherent in our business activities. Substantially all such instruments are used to manage risk related to changes in interest rates. Interest rate and total return swaps, interest rate caps and floors, swaptions, options, forwards and futures contracts are the primary instruments we use for interest rate risk management. We also enter into derivatives with customers to facilitate their risk management activities.

INTERNAL CONTROLS A~~AND~~ND DISCLOSURE CONTROLS A~~AND~~ND PROCEDURES

As of ~~March 31,~~June 30, 2013, we performed an evaluation under the supervision and with the participation of our management, including the 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 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 and Exchange Act of 1934, as amended) were effective as of ~~March 31,~~June 30, 2013, and that there has been no change in PNC’s internal control over financial reporting that occurred during the ~~first~~second quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

GLOSSARY OF TERMS

Accretable net interest (Accretable yield) – The excess of cash flows expected to be collected on a purchased impaired loan over the carrying value of the loan. The accretable net interest is recognized into interest income over the remaining life of the loan using the constant effective yield method.

Adjusted average total assets – Primarily comprised of total average quarterly (or annual) assets plus (less) unrealized losses (gains) on investment securities, less goodwill and certain other intangible assets (net of eligible deferred taxes).

Annualized – Adjusted to reflect a full year of activity.

Assets under management – Assets over which we have sole or shared investment authority for our customers/clients. We do not include these assets on our Consolidated Balance Sheet.

Basel I Tier 1 common capital – Basel I Tier 1 risk-based capital, less preferred equity, less trust preferred capital securities, and less noncontrolling interests.

Basel I Tier 1 common capital ratio – Basel I Tier 1 common capital divided by period-end Basel I risk-weighted assets.

Basel I Leverage ratio – Basel I Tier 1 risk-based capital divided by adjusted average total assets.

Basel I Tier 1 risk-based capital – Total shareholders’ equity, plus trust preferred capital securities, plus certain noncontrolling interests that are held by others; less goodwill and certain other intangible assets (net of eligible deferred taxes relating to taxable and nontaxable combinations), less equity investments in nonfinancial companies less ineligible servicing assets and less net unrealized holding losses on available for sale equity securities. Net unrealized holding gains on available for sale equity securities, net unrealized holding gains (losses) on available for sale debt securities and net unrealized holding gains (losses) on cash flow hedge derivatives are excluded from total shareholders’ equity for Basel I Tier 1 risk-based capital purposes.

Basel I Tier 1 risk-based capital ratio – Basel I Tier 1 risk-based capital divided by period-end Basel I risk-weighted assets.

Basel I Total risk-based capital – Basel I Tier 1 risk-based capital plus qualifying subordinated debt and trust preferred securities, other noncontrolling interest not qualified as Basel I Tier 1, eligible gains on available for sale equity securities and the allowance for loan and lease losses, subject to certain limitations.

Basel I Total risk-based capital ratio – Basel I Total risk-based capital divided by period-end Basel I risk-weighted assets.

Basis point – One hundredth of a percentage point.

Carrying value of purchased impaired loans – The net value on the balance sheet which represents the recorded investment less any valuation allowance.

Cash recoveries – Cash recoveries used in the context of purchased impaired loans represent cash payments from customers that exceeded the recorded investment of the designated impaired loan.

Charge-off – Process of removing a loan or portion of a loan from our balance sheet because it is considered uncollectible. We also record a charge-off when a loan is transferred from portfolio holdings to held for sale by reducing the loan carrying amount to the fair value of the loan, if fair value is less than carrying amount.

Combined loan-to-value ratio (CLTV) – This is the aggregate principal balance(s) of the mortgages on a property divided by its appraised value or purchase price.

Commercial mortgage banking activities – Includes commercial mortgage servicing, originating commercial mortgages for sale and related hedging activities. Commercial mortgage banking activities revenue includes revenue derived from commercial mortgage servicing (including net interest income and noninterest income from loan servicing and ancillary services, net of commercial mortgage servicing rights amortization, and commercial mortgage servicing rights valuations net of economic hedge), and revenue derived from commercial mortgage loans intended for sale and related hedges (including loan origination fees, net interest income, valuation adjustments and gains or losses on sales).

Common shareholders’ equity to total assets – Common shareholders’ equity divided by total assets. Common shareholders’ equity equals total shareholders’ equity less the liquidation value of preferred stock.

Core net interest income– Core net interest income is total net interest income less purchase accounting accretion.

Credit derivatives – Contractual agreements, primarily credit default swaps, that provide protection against a credit event of one or more referenced credits. The nature of a credit event is established by the protection buyer and protection seller at the inception of a transaction, and such events include bankruptcy, insolvency and failure to meet payment obligations when due. The buyer of the credit derivative pays a periodic fee in return for a payment by the protection seller upon the occurrence, if any, of a credit event.

Credit spread – The difference in yield between debt issues of similar maturity. The excess of yield attributable to credit spread is often used as a measure of relative creditworthiness, with a reduction in the credit spread reflecting an improvement in the borrower’s perceived creditworthiness.

Derivatives – Financial contracts whose value is derived from changes in publicly traded securities, interest rates, currency exchange rates or market indices. Derivatives cover a wide assortment of financial contracts, including but not limited to forward contracts, futures, options and swaps.

Duration of equity – An estimate of the rate sensitivity of our economic value of equity. A negative duration of equity is associated with asset sensitivity (i.e., positioned for rising interest rates), while a positive value implies liability sensitivity (i.e., positioned for declining interest rates). For example, if the duration of equity is ~~+1.5~~-1.5 years, the economic value of equity ~~declines~~increases by 1.5% for each 100 basis point increase in interest rates.

Earning assets – Assets that generate income, which include: federal funds sold; resale agreements; trading securities; interest-earning deposits with banks; loans held for sale; loans; investment securities; and certain other assets.

Economic capital – Represents the amount of resources that a business or business segment should hold to guard against potentially large losses that could cause insolvency and is based on a measurement of economic risk. The economic capital measurement process involves converting a risk distribution to the capital that is required to support the risk, consistent with our target credit rating. As such, economic risk serves as a “common currency” of risk that allows us to compare different risks on a similar basis.

Effective duration – A measurement, expressed in years, that, when multiplied by a change in interest rates, would approximate the percentage change in value of ~~on-and off-balance~~on- and off- balance sheet positions.

Efficiency – Noninterest expense divided by total revenue.

Fair value – The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

FICO score – A credit bureau-based industry standard score created by Fair Isaac Co. which predicts the likelihood of borrower default. We use FICO scores both in underwriting and assessing credit risk in our consumer lending portfolio. Lower FICO scores indicate likely higher risk of default, while higher FICO scores indicate likely lower risk of default. FICO scores are updated on a periodic basis.

Foreign exchange contracts – Contracts that provide for the future receipt and delivery of foreign currency at previously agreed-upon terms.

Funds transfer pricing – A management accounting methodology designed to recognize the net interest income effects of sources and uses of funds provided by the assets and liabilities of a business segment. We assign these balances

LIBOR-based funding rates at origination that represent the interest cost for us to raise/invest funds with similar maturity and repricing structures.

Futures and forward contracts – Contracts in which the buyer agrees to purchase and the seller agrees to deliver a specific financial instrument at a predetermined price or yield. May be settled either in cash or by delivery of the underlying financial instrument.

GAAP – Accounting principles generally accepted in the United States of America.

Home price index (HPI) – A broad measure of the movement of single-family house prices in the U.S.

Impaired loans – Loans are determined to be impaired when, based on current information and events, it is probable that all contractually required payments will not be collected. Impaired loans include commercial nonperforming loans and consumer and commercial TDRs, regardless of nonperforming status. Excluded from impaired loans are nonperforming leases, loans held for sale, loans accounted for under the fair value option, smaller balance homogenous type loans and purchased impaired loans.

Interest rate floors and caps – Interest rate protection instruments that involve payment from the protection seller to the protection buyer of an interest differential, which represents the difference between a short-term rate (e.g., three-month LIBOR) and an agreed-upon rate (the strike rate) applied to a notional principal amount.

Interest rate swap contracts – Contracts that are entered into primarily as an asset/liability management strategy to reduce interest rate risk. Interest rate swap contracts are exchanges of interest rate payments, such as fixed-rate payments for floating-rate payments, based on notional principal amounts.

Intrinsic value – The difference between the price, if any, required to be paid for stock issued pursuant to an equity compensation arrangement and the fair market value of the underlying stock.

Investment securities – Collectively, securities available for sale and securities held to maturity.

~~Leverage ratio~~ ~~– Tier 1 risk-based capital divided by adjusted average total assets.~~

LIBOR – Acronym for London InterBank Offered Rate. LIBOR is the average interest rate charged when banks in the London wholesale money market (or interbank market) borrow unsecured funds from each other. LIBOR rates are used as a benchmark for interest rates on a global basis. PNC’s product set includes loans priced using LIBOR as a benchmark.

Loan-to-value ratio (LTV) – A calculation of a loan’s collateral coverage that is used both in underwriting and

assessing credit risk in our lending portfolio. LTV is the sum total of loan obligations secured by collateral divided by the market value of that same collateral. Market values of the collateral are based on an independent valuation of the

collateral. For example, an LTV of less than 90% is better secured and has less credit risk than an LTV of greater than or equal to 90%.

Loss given default (LGD) – An estimate of loss, net of recovery based on collateral type, collateral value, loan exposure, or the guarantor(s) quality and guaranty type (full or partial). Each loan has its own LGD. The LGD risk rating measures the percentage of exposure of a specific credit obligation that we expect to lose if default occurs. LGD is net of recovery, through either liquidation of collateral or deficiency judgments rendered from foreclosure or bankruptcy proceedings.

Net interest margin – Annualized taxable-equivalent net interest income divided by average earning assets.

Nonaccretable difference – Contractually required payments receivable on a purchased impaired loan in excess of the cash flows expected to be collected.

Nonaccrual loans – Loans for which we do not accrue interest income. Nonaccrual loans include nonperforming loans, in addition to loans accounted for under fair value option and loans accounted for as held for sale for which full collection of contractual principal and/or interest is not probable.

Nondiscretionary assets under administration – Assets we hold for our customers/clients in a ~~non-discretionary,~~nondiscretionary, custodial capacity. We do not include these assets on our Consolidated Balance Sheet.

Nonperforming assets – Nonperforming assets include nonperforming loans and OREO and foreclosed assets, but exclude certain government insured or guaranteed loans for which we expect to collect substantially all principal and interest, loans held for sale, loans accounted for under the fair value option and purchased impaired loans. We do not accrue interest income on assets classified as nonperforming.

Nonperforming loans – Loans accounted for at amortized cost for which we do not accrue interest income. Nonperforming loans include loans to commercial, commercial real estate, equipment lease financing, home equity, residential real estate, credit card and other consumer customers as well as TDRs which have not returned to performing status. Nonperforming loans exclude certain government insured or guaranteed loans for which we expect to collect substantially all principal and interest, loans held for sale, loans accounted for under the fair value option and purchased impaired loans. Nonperforming loans exclude purchased impaired loans as we are currently accreting interest income over the expected life of the loans.

Notional amount – A number of currency units, shares, or other units specified in a derivative contract.

Operating leverage – The period to period dollar or percentage change in total revenue (GAAP basis) less the dollar or percentage change in noninterest expense. A positive variance indicates that revenue growth exceeded expense growth (i.e., positive operating leverage) while a negative variance implies expense growth exceeded revenue growth (i.e., negative operating leverage).

Options – Contracts that grant the purchaser, for a premium payment, the right, but not the obligation, to either purchase or sell the associated financial instrument at a set price during a specified period or at a specified date in the future.

Other real estate owned (OREO) and foreclosed assets – Assets taken in settlement of troubled loans primarily through deed-in-lieu of foreclosure or foreclosure. Foreclosed assets include real and personal property, equity interests in corporations, partnerships, and limited liability companies.

Other-than-temporary impairment (OTTI) – When the fair value of a security is less than its amortized cost basis, an assessment is performed to determine whether the impairment is other-than-temporary. If we intend to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current-period credit loss, an other-than-temporary impairment is considered to have occurred. In such cases, an other-than-temporary impairment is recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. Further, if we do not expect to recover the entire amortized cost of the security, an other-than-temporary impairment is considered to have occurred. However for debt securities, if we do not intend to sell the security and it is not more likely than not that we will be required to sell the security before its recovery, the other-than-temporary loss is separated into (a) the amount representing the credit loss, and (b) the amount related to all other factors. The other-than-temporary impairment related to credit losses is recognized in earnings while the amount related to all other factors is recognized in other comprehensive income, net of tax.

Parent company liquidity coverage – Liquid assets divided by funding obligations within a two year period.

Pretax earnings – Income before income taxes and noncontrolling interests.

Pretax, pre-provision earnings – Total revenue less noninterest expense.

Primary client relationship – A corporate banking client relationship with annual revenue generation of $10,000 to ~~$50,000~~

$50,000 or more, and for Asset Management Group, a client relationship with annual revenue generation of $10,000 or more.

Probability of default (PD) – An internal risk rating that indicates the likelihood that a credit obligor will enter into default status.

Purchase accounting accretion – Accretion of the discounts and premiums on acquired assets and liabilities. The purchase accounting accretion is recognized in net interest income over the weighted-average life of the financial instruments using the constant effective yield method. Accretion for purchased impaired loans includes any cash recoveries received in excess of the recorded investment.

Purchased impaired loans – Acquired loans determined to be credit impaired under FASB ASC 310-30 (AICPA SOP 03-3). Loans are determined to be impaired if there is evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected.

Recorded investment (purchased impaired loans) – The initial investment of a purchased impaired loan plus interest accretion and less any cash payments and writedowns to date. The recorded investment excludes any valuation allowance which is included in our allowance for loan and lease losses.

Recovery – Cash proceeds received on a loan that we had previously charged off. We credit the amount received to the allowance for loan and lease losses.

Residential development loans – Project-specific loans to commercial customers for the construction or development of residential real estate including land, single family homes, condominiums and other residential properties.

Residential mortgage servicing rights hedge gains/(losses), net – We have elected to measure acquired or originated residential mortgage servicing rights (MSRs) at fair value under GAAP. We employ a risk management strategy designed to protect the economic value of MSRs from changes in interest rates. This strategy utilizes securities and a portfolio of derivative instruments to hedge changes in the fair value of MSRs arising from changes in interest rates. These financial instruments are expected to have changes in fair value which are negatively correlated to the change in fair value of the MSR portfolio. Net MSR hedge gains/(losses) represent the change in the fair value of MSRs, exclusive of changes due to time decay and payoffs, combined with the change in the fair value of the associated securities and derivative instruments.

Return on average assets – Annualized net income divided by average assets.

Return on average capital – Annualized net income divided by average capital.

Return on average common shareholders’ equity – Annualized net income attributable to common shareholders divided by average common shareholders’ equity.

Risk-weighted assets – Computed by the assignment of specific risk-weights (as defined by the Board of Governors of the Federal Reserve System) to assets and off-balance sheet instruments.

Securitization – The process of legally transforming financial assets into securities.

Servicing rights – An intangible asset or liability created by an obligation to service assets for others. Typical servicing rights include the right to receive a fee for collecting and forwarding payments on loans and related taxes and insurance premiums held in escrow.

Swaptions – Contracts that grant the purchaser, for a premium payment, the right, but not the obligation, to enter into an interest rate swap agreement during a specified period or at a specified date in the future.

Taxable-equivalent interest – The interest income earned on certain 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 yields and margins for all interest-earning assets, 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 other taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.

~~Tier 1 common capital~~ ~~– Tier 1 risk-based capital, less preferred equity, less trust preferred capital securities, and less noncontrolling interests.~~

~~Tier 1 common capital ratio~~ ~~– Tier 1 common capital divided by period-end risk-weighted assets.~~

~~Tier 1 risk-based capital~~ – Total shareholders’ equity, plus trust preferred capital securities, plus certain noncontrolling interests that are held by others; less goodwill and certain other intangible assets (net of eligible deferred taxes relating to taxable and nontaxable combinations), less equity investments in nonfinancial companies less ineligible servicing assets and less net unrealized holding losses on available for sale equity securities. Net unrealized holding gains on available for sale equity securities, net unrealized holding gains (losses) on available for sale debt securities and net unrealized holding gains (losses) on cash flow hedge derivatives are excluded from total shareholders’ equity for Tier 1 risk-based capital purposes.

~~Tier 1 risk-based capital ratio~~ ~~– Tier 1 risk-based capital divided by period-end risk-weighted assets.~~

Total equity – Total shareholders’ equity plus noncontrolling interests.

Total return swap – A non-traditional swap where one party agrees to pay the other the “total return” of a defined underlying asset (e.g., a loan), usually in return for receiving a stream of LIBOR-based cash flows. The total returns of the asset, including interest and any default shortfall, are passed through to the counterparty. The counterparty is therefore assuming the credit and economic risk of the underlying asset.

~~Total risk-based capital~~ – Tier 1 risk-based capital plus qualifying subordinated debt and trust preferred securities, other noncontrolling interest not qualified as Tier 1, eligible gains on available for sale equity securities and the allowance for loan and lease losses, subject to certain limitations.

~~Total risk-based capital ratio~~ ~~– Total risk-based capital divided by period-end risk-weighted assets.~~

Transaction deposits – The sum of interest-bearing money market deposits, interest-bearing demand deposits, and noninterest-bearing deposits.

Troubled debt restructuring (TDR) ~~(TDR)~~ – A loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.

Value-at-risk (VaR) – A statistically-based measure of risk that describes the amount of potential loss which may be incurred due to adverse market movements. The measure is of the maximum loss which should not be exceeded on 95 out of 100 days for a 95% VaR.

Watchlist – A list of criticized loans, credit exposure or other assets compiled for internal monitoring purposes. We define criticized exposure for this purpose as exposure with an internal risk rating of other assets especially mentioned, substandard, doubtful or loss.

Yield curve – A graph showing the relationship between the yields on financial instruments or market indices of the same credit quality with different maturities. For example, a “normal” or “positive” yield curve exists when long-term bonds have higher yields than short-term bonds. A “flat” yield curve exists when yields are the same for short-term and long-term bonds. A “steep” yield curve exists when yields on long-term bonds are significantly higher than on short-term bonds. An “inverted” or “negative” yield curve exists when short-term bonds have higher yields than long-term bonds.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

Forward-looking statements speak only as of the date made. We do not assume any duty and do not undertake 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.

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

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

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

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Disruptions in the liquidity and other functioning of U.S. and global financial markets.

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The impact on financial markets and the economy of any changes in the credit ratings of U.S. Treasury obligations and other U.S. government-backed debt, as well as issues surrounding the level of U.S. and European government debt and concerns regarding the creditworthiness of certain sovereign governments, supranationals and financial institutions in Europe.

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

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

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Slowing or failure of the current moderate economic expansion.

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Continued effects of aftermath of recessionary conditions and uneven spread of positive impacts of recovery on the economy and our counterparties, including adverse impacts on levels of unemployment, loan utilization rates, delinquencies, defaults and counterparty ability to meet credit and other obligations.

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Changes in customer preferences and behavior, whether due to changing business and economic conditions, legislative and regulatory initiatives, or other factors.

Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than we are currently expecting. These statements are based on our current view that the moderate U.S. economic expansion will persist, ~~and interest rates will remain very low in 2013,~~ despite drags from Federal fiscal restraint and a European ~~recession.~~recession, and short-term interest rates will remain very low but bond yields will be higher in the second half of 2013. These forward-looking statements also do not, unless otherwise indicated, take into account the impact of potential legal and regulatory contingencies.

PNC’s ability to take certain capital actions, including paying dividends and any plans to increase common stock dividends, repurchase common stock under current or future programs, or issue or redeem preferred stock or other regulatory capital instruments, is subject to the review of such proposed actions by the Federal Reserve as part of PNC’s comprehensive capital plan for the applicable period in connection with the regulators’ Comprehensive Capital Analysis and Review (CCAR) process and to the acceptance of such capital plan and non-objection to such capital actions by the Federal Reserve.

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 (particularly those implementing the Basel Capital Accords), 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 on the ongoing development, validation and regulatory approval of related models.

financial performance, the scope and terms of final capital regulations then in effect (particularly those implementing the Basel Capital Accords), 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 on the ongoing development, validation and regulatory approval of related models.

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

~~These developments could include:~~

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Changes resulting from legislative and regulatory reforms, including major reform of the regulatory oversight structure of the financial services industry and changes to laws and regulations involving tax, pension, bankruptcy, consumer protection, and other industry aspects, and changes in accounting policies and principles. We will be impacted by extensive reforms provided for in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and otherwise growing out of the recent financial crisis, the precise nature, extent and timing of which, and their impact on us, remains uncertain.

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Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act and to Basel-related initiatives.

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Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. In addition to matters relating to PNC’s business and activities, such matters may include proceedings, claims, investigations, or inquiries relating topre-acquisition business and activities of acquired companies, such as National City. These matters may result in monetary judgments or settlements or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to PNC.

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

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

Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital standards. In particular, our results currently depend on our ability to manage elevated levels of impaired assets.

Business and operating results also include impacts relating to our equity interest in BlackRock, Inc. and rely to a significant extent on information provided to us by BlackRock. Risks and uncertainties that could affect BlackRock are discussed in more detail by BlackRock in its SEC filings.

We grow our business in part by acquiring from time to time other financial services companies, financial services assets and related deposits and other liabilities. Acquisition risks and uncertainties include those presented by the nature of the business acquired, including in some cases those associated with our entry into new businesses or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, regulatory issues, and the integration of the acquired businesses into PNC after closing.

Competition can have an impact on customer acquisition, growth and retention and on credit spreads and product pricing, which can affect market share, deposits and revenues. Industry restructuring in the current environment could also impact our business and financial performance through changes in counterparty creditworthiness and performance and in the competitive and regulatory landscape. Our ability to anticipate and respond to technological changes can also impact our ability to respond to customer needs and meet competitive demands.

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

We provide greater detail regarding these as well as other factors in our 2012 Form 10-K, in our first quarter 2013 Form 10-Q, and elsewhere in this Report, including in the Risk Factors and Risk Management sections and the Legal Proceedings and Commitments and Guarantees Notes of the Notes To Consolidated Financial Statements in those 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.

BUSINESS

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

PNC has businesses engaged in retail banking, corporate and institutional banking, asset management, and residential mortgage banking, providing many of its products and services nationally, as well as other products and services in PNC’s primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, North Carolina, Florida, Kentucky, Washington, D.C., Delaware, Alabama, Virginia, Georgia, Missouri, Wisconsin and South Carolina. PNC also provides certain products and services internationally.

NOTE 1 ACCOUNTING POLICIES

BASIS OOFF FINANCIAL STATEMENT PRESENTATION

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

We prepared these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). We have eliminated intercompany accounts and transactions. We have also reclassified certain prior year amounts to conform to the 2013 presentation. These reclassifications did not have a material impact on our consolidated financial condition or results of operations. We evaluate the materiality of identified errors in the financial statements using both an income statement and a balance sheet approach, based on relevant quantitative and qualitative factors. Net income includes certain adjustments to correct immaterial errors related to previously reported periods.

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

When preparing these unaudited interim consolidated financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2012 Annual Report on Form 10-K. Reference is made to Note 1 Accounting Policies in the 2012 Form 10-K for a detailed description of significant accounting policies. There have been no significant changes to these policies in the first ~~three~~six months of 2013 other than as disclosed herein. These interim

consolidated financial statements serve to update the 2012 Form 10-K and may not include all information and notes necessary to constitute a complete set of financial statements.

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

USE OOFF ESTIMATES

We prepared these consolidated financial statements using financial information available at the time, which requires us to make estimates and assumptions that affect the amounts reported. Our most significant estimates pertain to our fair value measurements, allowances for loan and lease losses and unfunded loan commitments and letters of credit, and accretion on purchased impaired loans. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

INVESTMENT IINN BLACKROCK, INC.

We account for our investment in the common stock and Series B Preferred Stock of BlackRock (deemed to be in-substance common stock) under the equity method of accounting. In May 2012, we exchanged 2 million shares of Series B Preferred Stock of BlackRock for an equal number of shares of BlackRock common stock. The exchange transaction had no impact on the carrying value of our investment in BlackRock or our use of the equity method of accounting. The investment in BlackRock is reflected on our Consolidated Balance Sheet in Equity investments, while our equity in earnings of BlackRock is reported on our Consolidated Income Statement in Asset management revenue.

We also hold shares of Series C Preferred Stock of BlackRock pursuant to our obligation to partially fund a portion of certain BlackRock long-term incentive plan (LTIP) programs. Since these preferred shares are not deemed to be in-substance common stock, we have elected to account for these preferred shares at fair value and the changes in fair value will offset the impact of marking-to-market the obligation to deliver these shares to BlackRock. Our investment in the BlackRock Series C Preferred Stock is included on our Consolidated Balance Sheet in Other assets. Our obligation to transfer these shares to BlackRock is classified as a derivative not designated as a hedging instrument under GAAP as disclosed in Note 13 Financial Derivatives.

On January 31, 2013, we transferred 205,350 shares to BlackRock in connection with our obligation. After this transfer, we hold approximately 1.3 million shares of BlackRock Series C Preferred Stock which are available to fund our obligation in connection with the BlackRock LTIP programs.

NONPERFORMING ASSETS

Nonperforming assets include nonperforming loans and leases, including nonperforming troubled debt restructurings (TDRs) and other real estate owned and foreclosed assets.

Commercial Loans

We generally classify Commercial Lending (Commercial, Commercial Real Estate, and Equipment Lease Financing) loans as nonperforming and place them on nonaccrual status when we determine that the collection of interest or principal is not probable, orincluding when delinquency of interest or principal payments has existed for 90 days or more and the loans are not well-secured and/or in the process of collection. A loan is considered well-secured when the collateral in the form of liens on (or pledges of) real or personal property, including marketable securities, has a realizable value sufficient to discharge the debt in full, including accrued interest. Such factors that would lead to nonperforming status would include, but are not limited to, the following:

Deterioration in the financial position of the borrower resulting in the loan moving from accrual to cash basis accounting,

The collection of principal or interest is 90 days or more past due unless the asset is both well-secured and in the process of collection,

Reasonable doubt exists as to the certainty of the borrower’s future debt service ability, whether 90 days have passed or not,

The borrower has filed or will likely file for bankruptcy,

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.

We charge off commercial ~~nonaccrual~~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.

The commercial nonaccrual policy is also applied to certain small business credit card balances, which means that they are placed on nonaccrual status when they become 90 days or more past due. Such loans are charged-off at 180 days past due.

Additionally, in general, for smaller dollar commercial loans of $1 million or less, a partial or full charge-off will occur at 120 days past due for term loans and 180 days past due for revolvers.

Certain small business credit card balances are placed on nonaccrual status when they become 90 days or more past due. Such loans are charged-off at 180 days past due.

Consumer Loans

Nonperforming loans are those loans accounted for at amortized cost that have deteriorated in credit quality to the extent that full collection of contractual principal and interest is not probable. ~~When a loan that is accounted for at amortized cost is determined to be nonperforming, the accrual of interest is ceased and the loan is~~These loans are also classified as nonaccrual. ~~The~~For these loans, the current year accrued and

uncollected interest is reversed ~~out of~~through net interest ~~income. Additionally, any~~income and prior year accrued and uncollected interest is charged-off. Additionally, these loans may be charged-off down to the fair value less costs to sell.

Loans acquired and accounted for under ASC 310-30 – Loans and Debt Securities Acquired with Deteriorated Credit Quality are reported as performing and accruing loans ~~and performing assets~~ due to the accretion of interest income.

~~Based upon the nonaccrual policies discussed below, interest income is not recognized for loans~~Loans accounted for under the fair value option and loans accounted for as held for ~~sale. However, since~~sale are reported as performing loans as these loans are accounted for at fair value and ~~based upon~~the lower of carrying value or fair value less costs to sell, ~~respectively, they are~~respectively. However, based upon the nonaccrual policies discussed below, interest income is not ~~reported as nonperforming loans.~~accrued. Additionally, based upon the nonaccrual policies discussed below, certain government insured loans for which we do not expect to collect substantially all principal and interest are reported as nonperforming and do not accrue interest. Alternatively, certain government insured loans for which we expect to collect substantially all principal and interest are not reported as nonperforming loans and continue to accrue interest.

In the first quarter of 2013, we completed our alignment of certain nonaccrual and charge-off policies consistent with interagency supervisory guidance on practices for loans and lines of credit related to consumer lending. This alignment primarily related to (i) subordinate consumer loans (home equity loans and lines and residential mortgages) where the first-lien loan was 90 days or more past due, (ii) government guaranteed loans where the guarantee may not result in collection of substantially all contractual principal and interest and (iii) loans with borrowers in bankruptcy. In the first quarter of 2013, due to classification as either nonperforming or, in the case of loans accounted for under the fair value option, nonaccrual loans, nonperforming loans increased by $426 million and net charge-offs increased by $134 million as a result of completing the alignment of the aforementioned policies. Additionally, overall delinquencies decreased $395 million due to loans now being reported as either nonperforming or, in the case of loans accounted for under the fair value option, nonaccruing or having been charged-off. The impact of the alignment of the policies was considered in our reserving process in the determination of our ~~ALLL~~Allowance for Loan and Lease Losses (ALLL) at December 31, 2012. See Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional information.

A consumer loan is considered well-secured when the collateral in the form of liens on (or pledges of) real or

personal property, including marketable securities, has a realizable value sufficient to discharge the debt in full, including accrued interest. Home equity installment loans and lines of credit, whether well-secured or not, are classified as nonaccrual at 90 days past due. Well-secured residential real estate loans are classified as nonaccrual at 180 days past due. In addition to these ~~delinquency related~~delinquency-related policies, a consumer loan may also be placed on nonaccrual status when:

The loan has been modified and classified as a TDR, as further discussed below;

Notification of bankruptcy has been received and the loan is 30 days or more past due;

The bank holds a subordinate lien position in the loan and the first lien 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-off has been taken on them;

The bank has repossessed non-real estate collateral securing the loan; or

The bank has charged-off the loan ~~to write the loan down~~ to the value of the collateral.

Most consumer loans and lines of credit, not secured by residential real estate, are charged off after 120 to 180 days past due. Generally, they are not placed on nonaccrual status as permitted by regulatory guidance.

Home equity installment loans, home equity lines of credit, and residential real estate loans that are not well-secured and in the process of collection are charged-off at no later than 180 days past due to the estimated fair value of the collateral less costs to sell. In addition to this policy, the bank will also recognize a charge-off on a secured consumer loan when:

The bank holds a subordinate lien position in the loan and a foreclosure notice has been received on the first lien loan;

The bank holds a subordinate lien position in the loan which is 30 days or more past due with a combined loan to value ratio of greater than or equal to 110% and the first lien loan is seriously stressed (i.e., 90 days or more past due);

It is modified or otherwise restructured in a manner that results in the loan becoming collateral dependent;

Notification of bankruptcy has been received within the last 60 days and the loan is 60 days or more past due;

The borrower has been discharged from personal liability inthrough Chapter 7 bankruptcy and has not formally reaffirmed his or her loan obligation to PNC; or

The collateral securing the loan has been repossessed and the value of the collateral is less than the recorded investment of the loan outstanding.

If payment is received on a nonaccrual loan, generally the payment is first applied to the recorded investment; ~~once this principal obligation has been fulfilled,~~ payments are then applied to recover any charged-off amounts related to

the ~~loan that might exist.~~loan. Finally, if both ~~principal~~recorded investment and any charge-offs have been recovered, then the payment will be recorded as fee and interest income.

Nonaccrual loans are generally not returned to accrual status until the ~~obligation is brought current and the~~ borrower has performed in accordance with the contractual terms for a reasonable period of time (e.g., 6 months). When a nonperforming loan is returned to accrual status, it is then considered a performing loan.

A TDR is a loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs may include restructuring certain terms of loans, receipts of assets from debtors in partial satisfaction of loans, or a combination thereof. For TDRs, payments are applied based upon their contractual terms unless the related loan is deemed non-performing. TDRs ~~except those loans where a borrower has been discharged from personal liability in Chapter 7 bankruptcy and has not formally reaffirmed his or her loan obligation to PNC,~~ are generally included in nonperforming loans until returned to performing status through the fulfilling of restructured terms for a reasonable period of time (generally 6 months). ~~Loans where~~TDRs resulting from borrowers that have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan ~~obligation~~obligations to PNC are not returned to accrual status.

See Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional TDR information.

Foreclosed assets are comprised of any asset seized or property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure. Other real estate owned is comprised principally of commercial real estate and residential 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, 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 recorded investment of the loan is adjusted and, typically, a charge-off/recovery is recognized to the ~~Allowance for Loan and Lease Losses (ALLL).~~ALLL. We estimate fair values primarily based on appraisals, or sales agreements with third parties. ~~Anticipated recoveries~~Fair value also considers the proceeds expected from government insurance and ~~government~~ guarantees ~~are also considered in evaluating~~upon the ~~potential impairment~~conveyance of ~~loans at~~ the ~~date of transfer.~~other real estate owned (OREO).

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.

See Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional information.

ALLOWANCE F~~FOR~~OR LOAN A~~AND~~ND LEASE LOSSES

We maintain the ALLL at a level that we believe to be appropriate to absorb estimated probable credit losses incurred in the loan and lease portfolios as of the balance sheet date.

Our determination of the allowance is based on periodic evaluations of these loan and lease portfolios and other relevant factors. This critical estimate includes the use of significant amounts of PNC’s own historical data and complex methods to interpret them. We have an ongoing process to evaluate and enhance the quality, quantity and timeliness of our data and interpretation methods used in the determination of this allowance. These evaluations are inherently subjective as it requires material estimates, all of which may be susceptible to significant change, including, among others:

Probability of default (PD),

Loss given default (LGD),

Outstanding balance of the loan,

Movement through delinquency stages,

Amounts and timing of expected future cash flows,

Value of collateral, which may be obtained from third parties, and

Qualitative factors such as changes in current economic conditions that may not be reflected in historical results.

While our reserve methodologies strive to reflect all relevant risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between estimates and actual outcomes. We provide additional reserves that are designed to provide coverage for losses attributable to such risks. The ALLL also includes factors which may not be directly measured in the determination of specific or pooled reserves. Such qualitative factors may include:

Industry concentrations and conditions,

Recent credit quality trends,

Recent loss experience in particular portfolios,

Recent macro-economic factors,

Model imprecision,

Changes in lending policies and procedures, ~~and~~

Timing of available information, including the performance of first lien ~~positions.~~positions, and

Limitations of available historical data.

In determining the appropriateness of the ALLL, we make specific allocations to impaired loans and allocations to portfolios of commercial and consumer loans.

Nonperforming loans are considered impaired under ASC 310-Receivables and are evaluated for a specific reserve. Specific reserve allocations are determined as follows:

For commercial nonperforming loans and TDRs greater than or equal to a defined dollar threshold, specific reserves are based on an analysis of the present value of the loan’s expected future cash ~~flows, the loan’s observable market price or the fair value of the collateral.~~

flows, the loan’s observable market price or the fair value of the collateral.

For commercial nonperforming loans and TDRs below the defined dollar threshold, the loans are aggregated for purposes of measuring specific reserve impairment using the applicable loan’s LGD percentage multiplied by the balance of the loan.

Consumer nonperforming loans are collectively reserved for unless classified as TDRs. For TDRs, ~~for which~~ specific reserves are ~~based on~~determined through an analysis of the present value of the loan’s expected future cash ~~flows. Additionally,~~flows, except for those instances where loans have been deemed collateral dependent, including loans where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligations to ~~PNC~~PNC. Once that determination has been made, those TDRs are charged down to the fair value of the collateral less costs to ~~sell.~~sell at each period end.

For purchased impaired loans, subsequent decreases to the net present value of expected cash flows will generally result in an impairment charge to the provision for credit losses, resulting in an increase to the ALLL.

When applicable, this process is applied across all the loan classes in a similar manner. However, as previously discussed, certain consumer loans and lines of credit, not secured by residential real estate, are charged off instead of being classified as nonperforming.

Our credit risk management policies, procedures and practices are designed to promote sound lending standards and prudent credit risk management. We have policies, procedures and practices that address financial statement requirements, collateral review and appraisal requirements, advance rates based upon collateral types, appropriate levels of exposure, cross-border risk, lending to specialized industries or borrower type, guarantor requirements, and regulatory compliance.

See Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional information.

ALLOWANCE F~~FOR~~OR UNFUNDED LOAN COMMITMENTS A~~AND~~ND LETTERS OOFF CREDIT

We maintain the allowance for unfunded loan commitments and letters of credit at a level we believe is appropriate to absorb estimated probable credit losses on these unfunded credit facilities as of the balance sheet date. We determine the allowance based on periodic evaluations of the unfunded credit facilities, including an assessment of the probability of commitment usage, credit risk factors, and, solely for commercial lending, the terms and expiration dates of the unfunded credit facilities. Other than the estimation of the

probability of funding, the reserve for unfunded loan commitments is estimated in a manner similar to the methodology used for determining reserves for funded exposures. The allowance for unfunded loan commitments and letters of credit is recorded as a liability on the Consolidated Balance Sheet. Net adjustments to the allowance for unfunded loan commitments and letters of credit are included in the provision for credit losses.

See Note 5 Asset Quality and Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit for additional information.

EARNINGS PER COMMON SHARE

Basic earnings per common share is calculated using the two-class method to determine income attributable to common shareholders. Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities under the two-class method. Income attributable to common shareholders is then divided by the weighted-average common shares outstanding for the period.

Diluted earnings per common share is calculated under the more dilutive of either the treasury method or the two-class method. For the diluted calculation, we increase the weighted-average number of shares of common stock outstanding by the assumed conversion of outstanding convertible preferred stock ~~and debentures~~ from the beginning of the year or date of issuance, if later, and the number of shares of common stock that would be issued assuming the exercise of stock options and warrants and the issuance of incentive shares using the treasury stock method. These adjustments to the weighted-average number of shares of common stock outstanding are made only when such adjustments will dilute earnings per common share. See Note 14 Earnings Per Share for additional information.

R~~ECENT~~ECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In ~~March~~June 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2013-05,~~2013-08,~~Foreign Currency Matters (Topic 830)~~Financial Services – Investment Companies (ASC Topic 946): ~~Parent’s Accounting for~~Amendments to the ~~Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.~~Scope, Measurement and Disclosure Requirement. This ASU ~~clarifies~~modifies the ~~timing of release of Currency Translation Adjustments (CTA) from Accumulated Other Comprehensive Income (AOCI) upon deconsolidation or derecognition of~~guidance in ASC 946 for determining whether an entity is an investment company, as well as the measurement and disclosure requirements for investment companies. The ASU does not change current accounting where a ~~foreign entity,~~noninvestment company parent retains the specialized accounting applied by an investment company subsidiary ~~or a group of assets within a foreign entity and~~ in ~~step acquisitions.~~consolidation. ASU ~~2013-05~~2013-08 will be applied prospectively for all periods beginning after December 15, ~~2013 and early adoption is permitted.~~2013. We do not expect this ASU to have a material effect on our results of operations or financial position.

In July 2013, the FASB issued ASU 2013-10,Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes. This ASU

amends existing guidance to include the Fed Funds effective swap rate (OIS) as a U.S. benchmark interest rate for hedge accounting purposes. The amendments also remove the restriction on using different benchmark interest rates for similar hedges. The effective date of ASU 2013-10 was July 17, 2013. However, since this ASU does not impact existing hedge accounting relationships, it did not have an effect on our results of operations or financial position.

In ~~February~~July 2013, the FASB issued ASU ~~2013-04, Liabilities~~2013-11,Income Taxes (Topic ~~405)~~740): ~~Obligations Resulting from Joint and Several Liability Arrangements~~Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU clarifies current guidance to require that an unrecognized tax benefit or a portion thereof be presented in the statement of financial position as a reduction to a deferred tax asset for ~~Which~~an NOL carryforward, similar tax loss, or a tax credit carryforward except when an NOL carryforward, similar tax loss, or tax credit carryforward is not available under the ~~Total Amount~~tax law of the ~~Obligation is Fixed at the Reporting Date. This ASU requires entities~~applicable jurisdiction to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, as the sum of the following: a) the amount the reporting entity agreed to pay on the basis of its arrangement with its co-obligors and b)settle any additional ~~amount~~income taxes that would result from the ~~reporting entity expects to pay on behalf~~disallowance of ~~its co-obligors. Required~~a tax position. In such a case, the unrecognized tax benefit would be presented in the statement of financial position as a liability. No additional recurring disclosures ~~include a description of the joint and several arrangement and the total outstanding amount of the obligation for all joint parties.~~are required by this ASU. This ASU ~~2013-04~~ is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2013 and should be applied retrospectively~~2013. Early adoption is permitted with prospective application to ~~joint and several obligations existing~~

all unrecognized tax benefits that exist at the ~~beginning of 2014.~~effective date. Retrospective application is also permitted. We do not expect this ASU to have ana material effect on our results of operations or financial position.

~~In February 2013,~~For information on Recent Accounting Pronouncements issued prior to the ~~FASB issued ASU 2013-02,~~~~Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.~~ ~~This ASU requires companies to present information about reclassification adjustments from accumulated other comprehensive income~~second quarter, see Note 1 Accounting Policies in ~~a single note or on~~ the face of the financial statements. Additionally, companies are to disclose by component reclassifications out of accumulated other comprehensive income and their effects on the respective line items on net income and other disclosures currently required under U.S. GAAP. ASU 2013-02 was effective for annual and interim reporting periods beginning after December 15, 2012. These required disclosures areNotes To The Consolidated Financial Statements included in ~~Note 15 Total Equity And Other Comprehensive Income.~~

~~In December 2011, the FASB issued ASU 2011-11,~~~~Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities~~~~and then amended the scope~~Part I, Item I of ~~ASU 2011-11 in January~~our First Quarter 2013 ~~through the issuance of ASU 2013-01,~~~~Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.~~ This ASU applies to all entities that have derivative instruments, repurchase agreements and reverse repurchase agreements, or securities lending agreements that are (i) offset in accordance with ASC 210-20-45 or ASC 815-10-45 or (ii) subject to an enforceable master netting arrangement or similar agreement, and requires an entity to disclose information about offsetting to enable users of its financial statements to understand the effect of those arrangements on its financial position. The disclosures are required for quarterly and annual reporting periods beginning on or after January 1, 2013 and are to be applied retrospectively for all comparative periods presented. We adopted these ASUs on January 1, 2013 for our derivatives that we offset in accordance with ASC 815-10-45 and for our repurchase/resale arrangements under enforceable master netting arrangements, which we do not currently offset on our Consolidated Balance Sheet. These ASUs did not change the accounting for these arrangements or require them to be offset and thus had no impact on our statement of financial position. These disclosures are included in Note 13 Financial Derivatives and Note 18 Commitments and Guarantees.

~~In December 2011, the FASB issued ASU 2011-10,~~~~Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate – a Scope Clarification (a consensus of the FASB Emerging Issues Task Force)~~. This ASU clarified that the guidance in ASC 360-20 applies to a parent that ceases to have a controlling financial interest (as described in ASC 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. ASU 2011-10 should be applied on a prospective basis and is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. We adopted ASU 2011-10 on January 1, 2013 and there was no impact to our results of operations or financial position.

NOTE 2 ACQUISITIONAND DIVESTITURE ACTIVITY

RBC Bank (USA) Acquisition

On March 2, 2012, PNC acquired 100% of the issued and outstanding common stock of RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada. As part of the acquisition, PNC also purchased a credit card portfolio from RBC Bank (Georgia), National Association. PNC paid $3.6 billion in cash as consideration for the acquisition of both RBC Bank (USA) and the credit card portfolio. The fair value of the net assets acquired totaled approximately $2.6 billion, including $18.1 billion of deposits, $14.5 billion of loans and $.2 billion of other intangible assets. Goodwill of $1.0 billion was recorded as part of the acquisition. Refer to Note 2 Acquisition and Divestiture Activity in Item 8 of our 2012 Form 10-K for additional details related to the RBC Bank (USA) transactions.

Sale of Smartstreet

NOTE 3 LOAN SALEAND SERVICING ACTIVITIESAND VARIABLE INTEREST ENTITIES

Loan Sale and Servicing Activities

We have transferred residential and commercial mortgage loans in securitization or sales transactions in which we have continuing involvement. These transfers have occurred through Agency securitization, Non-agency securitization, and loan sale transactions. Agency securitizations consist of securitization transactions with Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Government National Mortgage Association (GNMA) (collectively the Agencies). FNMA and FHLMC generally securitize our transferred loans into mortgage-backed securities for sale into the secondary market through special purpose entities (SPEs) that they sponsor. We, as an authorized GNMA issuer/servicer, pool Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) insured loans into mortgage-backed securities for sale into the secondary market. In Non-agency securitizations, we have transferred loans into securitization SPEs. In other instances, third-party investors have also purchased our loans in loan sale transactions and in certain instances have subsequently sold these loans into securitization SPEs.

Securitization SPEs utilized in the Agency and Non-agency securitization transactions are variable interest entities (VIEs).

Our continuing involvement in the FNMA, FHLMC, and GNMA securitizations, Non-agency securitizations, and loan sale transactions generally consists of servicing, repurchases of previously transferred loans under certain conditions and loss share arrangements, and, in limited circumstances, holding of mortgage-backed securities issued by the securitization SPEs.

Depending on the transaction, we may act as the master, primary, and/or special servicer to the securitization SPEs or third-party investors. Servicing responsibilities typically consist of collecting and remitting monthly borrower principal and interest payments, maintaining escrow deposits, performing loss mitigation and foreclosure activities, and, in certain instances, funding of servicing advances. Servicing advances, which are reimbursable, are recognized in Other

assets at cost and are made for principal and interest and collateral protection.

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, we recognize a servicing right at fair value. Servicing rights are recognized in Other intangible assets on our Consolidated Balance Sheet and when subsequently accounted for at fair value are classified within Level 3 of the fair value hierarchy. See Note 9 Fair Value and Note 10 Goodwill and Other Intangible Assets for further discussion of our residential and commercial servicing rights.

Certain loans transferred to the Agencies contain removal of account provisions (ROAPs). Under these ROAPs, we hold an option to repurchase at par individual delinquent loans that meet certain criteria. When we have the unilateral ability to repurchase a delinquent loan, effective control over the loan has been regained and we recognize an asset (in either Loans or Loans held for sale) and a corresponding liability (in Other borrowed funds) on the balance sheet regardless of our intent to repurchase the loan. At ~~March 31,~~June 30, 2013 and December 31, 2012, the balance of our ROAP asset and liability totaled ~~$155~~$149 million and $190 million, respectively.

The Agency and Non-agency mortgage-backed securities issued by the securitization SPEs that are purchased and held on our balance sheet are typically purchased in the secondary market. PNC does not retain any credit risk on its Agency mortgage-backed security positions as FNMA, FHLMC, and the USU.S. Government (for GNMA) guarantee losses of principal and interest. Substantially all of the Non-agency mortgage-backed securities acquired and held on our balance sheet are senior tranches in the securitization structure.

Market Street

Market Street Funding LLC (Market Street), owned by an independent third-party, is a multi-seller asset-backed commercial paper conduit that primarily purchases assets or makes loans secured by interests in pools of receivables from U.S. corporations. Market Street funds the purchases of assets or loans by issuing commercial paper. Market Street is supported by pool-specific credit enhancements, liquidity facilities, and a program-level credit enhancement. Generally, Market Street mitigates its potential interest rate risk by entering into agreements with its borrowers that reflect interest rates based upon its weighted-average commercial paper cost of funds. During 2012 and the first ~~three~~six months of 2013, Market Street met all of its funding needs through the issuance of commercial paper.

PNC Bank, National Association, (PNC Bank, N.A.) provides certain administrative services, the program-level credit enhancement and liquidity facilities to Market Street in exchange for fees negotiated based on market rates. The program-level credit enhancement covers net losses in the amount of 10% of commitments, excluding explicitly rated AAA/Aaa facilities. Coverage is a cash collateral account funded by a loan facility. This facility expires in June ~~2017.~~2018. At ~~March 31,~~June 30, 2013, $1.2 billion was outstanding on this facility.

Although the commercial paper obligations at ~~March 31,~~June 30, 2013 and December 31, 2012 were supported by Market Street’s assets, PNC Bank, N.A. may be obligated to fund Market Street under the ~~$11.9~~$11.4 billion of liquidity facilities for events such as commercial paper market disruptions, borrower bankruptcies, collateral deficiencies or covenant violations. Our credit risk under the liquidity facilities is secondary to the risk of first loss absorbed by Market Street borrowers through over-collateralization of assets and losses absorbed by deal-specific credit enhancement provided by a third party. The deal-specific credit enhancement is generally structured to cover a multiple of expected losses for the pool of assets and is sized to meet rating agency standards for comparably structured transactions.

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

Through the credit enhancement and liquidity facility arrangements, PNC Bank, N.A. has the power to direct the activities of Market Street that most significantly affect its economic performance and these arrangements expose PNC Bank, N.A. to expected losses or residual returns that are potentially significant to Market Street. Therefore, PNC Bank, N.A. consolidates Market Street. PNC Bank, N.A. is not required to nor have we provided additional financial support to Market Street and Market Street creditors have no direct recourse to PNC Bank, N.A.

Credit Card Securitization Trust

We were the sponsor of several credit card securitizations facilitated through a trust. This bankruptcy-remote SPE was established to purchase credit card receivables from the sponsor and to issue and sell asset-backed securities created

by it to independent third-parties. The SPE was financed primarily through the sale of these asset-backed securities. These transactions were originally structured to provide liquidity and to afford favorable capital treatment.

Our continuing involvement in these securitization transactions consisted primarily of holding certain retained interests and acting as the primary servicer. For each securitization series that was outstanding, our retained interests held were in the form of a pro-rata undivided interest, or sellers’ interest, in the transferred receivables, subordinated tranches of asset-backed securities, interest-only strips, discount receivables, and subordinated interests in accrued interest and fees in securitized receivables. We consolidated the SPE as we were deemed the primary beneficiary of the entity based upon our level of continuing involvement. Our role as primary servicer gave us the power to direct the activities of the SPE that most significantly affect its economic performance and our holding of retained interests gave us the obligation to absorb expected losses, or the ability to receive residual returns that could be potentially significant to the SPE. The underlying assets of the consolidated SPE were restricted only for payment of the beneficial interests issued by the SPE. We were not required to nor did we provide additional financial support to the SPE. Additionally, creditors of the SPE have no direct recourse to PNC.

During the first quarter of 2012, the last series issued by the SPE, Series 2007-1, matured. At ~~March 31,~~June 30, 2013, the SPE continued to exist and we consolidated the entity as we continued to be the primary beneficiary of the SPE through our holding of seller’s interest and our role as the primary servicer.

Tax Credit Investments

We make certain equity investments in various tax credit limited partnerships or limited liability companies (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.

Also, we are a national syndicator of affordable housing equity. In these syndication transactions, we create funds in

which our subsidiaries are the general partner or managing member and sell limited partnership or non-managing member interests to third parties. In some cases PNC may also purchase a limited partnership or non-managing member interest in the fund. The purpose of this business is to generate income from the syndication of these funds, generate servicing fees by managing the funds, and earn tax credits to reduce our tax liability. General partner or managing member activities include selecting, evaluating, structuring, negotiating, and closing the fund investments in operating limited partnerships or LLCs, as well as oversight of the ongoing operations of the fund portfolio.

Typically, the general partner or managing member will be the party that has the right to make decisions that will most

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

significantly impact the economic performance of the entity. However, certain partnership or LLC agreements provide the limited partner or non-managing member the ability to remove the general partner or managing member without cause. This results in the limited partner or non-managing member being the party that has the right to make decisions that will most significantly impact the economic performance of the entity. The primary sources of losses and benefits for these investments are the tax credits and tax benefits due to passive losses on the investments. We have consolidated investments in which we have the power to direct the activities that most significantly impact the entity’s performance, and have an obligation to absorb expected losses or receive benefits that could be potentially significant. The assets are primarily included in Equity investments and Other assets on our Consolidated Balance Sheet with the liabilities classified in Other borrowed funds, Accrued expenses, and Other liabilities and the third party investors’ interests included in the Equity section as Noncontrolling interests. Neither creditors nor equity investors in these investments have any recourse to our general credit. We have not provided financial ~~or other~~ support to the limited partnership or LLC that we are not contractually obligated to provide. The consolidated aggregate assets and liabilities of these investments are provided in the Consolidated VIEs table and reflected in the “Other” business segment.

For tax credit investments in which we do not have the right to make decisions that will most significantly impact the economic performance of the entity, we are not the primary beneficiary and thus they are not consolidated. These investments are disclosed in Table 62: Non-Consolidated VIEs. The table also reflects our maximum exposure to ~~loss.~~loss exclusive of any potential tax credit recapture. Our maximum exposure to loss is equal to our legally binding equity commitments adjusted for recorded impairment and partnership results. We use the equity method to account for our investment in these entities with the investments reflected in Equity investments on our Consolidated Balance Sheet. In addition, we increase our recognized investments and recognize a liability for all legally binding unfunded equity commitments. These liabilities are reflected in Other liabilities on our Consolidated Balance Sheet.

~~The~~During the second quarter of 2013, PNC ~~Financial Services Group, Inc. –~~~~Form 10-Q~~87sold limited partnership or non-managing member interests previously held in certain consolidated funds. As a result, PNC no longer met the consolidation criteria for those investments and deconsolidated approximately $675 million of net assets related to the funds.

Residential and Commercial Mortgage-Backed Securitizations

In connection with each Agency and Non-agency securitization discussed above, we evaluate each SPE utilized in these transactions for consolidation. In performing these assessments, we evaluate our level of continuing involvement in these transactions as the nature of our involvement ultimately determines whether or not we hold a variable interest and/or are the primary beneficiary of the SPE. Factors we consider in our consolidation assessment include the significance of (i) our role as servicer, (ii) our holdings of mortgage-backed securities issued by the securitization SPE, and (iii) the rights of third-party variable interest holders.

The first step in our assessment is to determine whether we hold a variable interest in the securitization SPE. We hold variable interests in Agency and Non-agency securitization SPEs through our holding of mortgage-backed securities issued by the SPEs and/or our recourse obligations. Each SPE in which we hold a variable interest is evaluated to determine whether we are the primary beneficiary of the entity. For Agency securitization transactions, our contractual role as servicer does not give us the power to direct the activities that most significantly affect the economic performance of the SPEs. Thus, we are not the primary beneficiary of these entities. For Non-agency securitization transactions, we would be the primary beneficiary to the extent our servicing activities give us the power to direct the activities that most significantly affect the economic performance of the SPE and we hold a more than insignificant variable interest in the entity.

In the first quarter 2013, contractual provisions of a Non-agency securitization were modified resulting in PNC being deemed the primary beneficiary of the securitization. As a result, we consolidated the SPE and recorded the SPE’s home equity line of credit assets and associated beneficial interest liabilities and are continuing to account for these instruments at fair value. These balances are included within the Credit Card and Other Securitization Trusts balances line in Table 60: Consolidated VIEs – Carrying Value and Table 61: Assets and Liabilities of Consolidated VIEs. We are not required to provide additional support to the SPE. Additionally, creditors of the SPE have no direct recourse to PNC.

Details about the Agency and Non-agency securitization SPEs where we hold a variable interest and are not the primary beneficiary are included in Table 62: Non-Consolidated VIEs. Our maximum exposure to loss as a result of our involvement with these SPEs is the carrying value of the mortgage-backed securities, servicing assets, servicing advances, and our liabilities associated with our recourse obligations. Creditors of the securitization SPEs have no recourse to PNC’s assets or general credit.

NOTE 4 LOANSAND COMMITMENTSTO EXTEND CREDIT

Loans outstanding were as follows:

Table 63: Loans Outstanding


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Commercial lending
Commercial	$	84,285	$	83,040	$	86,930	$	83,040
Commercial real estate		18,779		18,655		18,991		18,655
Equipment lease financing		7,240		7,247		7,349		7,247
Total commercial lending		110,304		108,942		113,270		108,942
Consumer lending
Home equity		36,030		35,920		36,416		35,920
Residential real estate		14,985		15,240		14,777		15,240
Credit card		4,081		4,303		4,135		4,303
Other consumer		21,104		21,451		21,177		21,451
Total consumer lending		76,200		76,914		76,505		76,914
Total loans (a) (b)	$	186,504	$	185,856	$	189,775	$	185,856

(a)	Net of unearned income, net deferred loan fees, unamortized discounts and premiums, and purchase discounts and premiums totaling ~~$2.5~~$2.3 billion and $2.7 billion at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively.

(b)	Future accretable yield related to purchased impaired loans is not included in loans outstanding.

At ~~March 31,~~June 30, 2013, we pledged ~~$23.1~~$22.9 billion of commercial loans to the Federal Reserve Bank and ~~$34.8~~$45.5 billion of residential real estate and other loans to the Federal Home Loan Bank as collateral for the contingent ability to borrow, if necessary. The comparable amounts at December 31, 2012 were $23.2 billion and $37.3 billion, respectively.

Table 64: Net Unfunded Credit Commitments


In millions	March 31 2013		December 31 2012		June 30 2013		December 31 2012
Commercial and commercial real estate	$	79,953	$	78,703	$	82,790	$	78,703
Home equity lines of credit		19,696		19,814		19,325		19,814
Credit card		17,356		17,381		17,101		17,381
Other		4,807		4,694		4,926		4,694
Total (a)	$	121,812	$	120,592	$	124,142	$	120,592

(a)	Excludes standby letters of credit. See Note 18 Commitments and Guarantees for additional information on standby letters of credit.

Commitments to extend credit represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. At ~~March 31,~~June 30, 2013, commercial commitments reported above exclude ~~$22.9~~$23.5 billion of syndications, assignments and participations, primarily to financial institutions. The comparable amount at December 31, 2012 was $22.5 billion.

Commitments generally have fixed expiration dates, may require payment of a fee, and contain termination clauses in the event the customer’s credit quality deteriorates. Based on our historical experience, most commitments expire unfunded, and therefore cash requirements are substantially less than the total commitment.

The PNC Financial Services Group, Inc. –Form 10-Q93

Table 66: Nonperforming Assets


Dollars in millions	March 31 2013			December 31 2012			June 30 2013			December 31 2012
Nonperforming loans
Commercial lending
Commercial	$	542		$	590		$	521		$	590
Commercial real estate		744			807			639			807
Equipment lease financing		9			13			7			13
Total commercial lending		1,295			1,410			1,167			1,410
Consumer lending (a)
Home equity (b)		1,088			951			1,131			951
Residential real estate (b)		965			845			962			845
Credit card		6			5			4			5
Other consumer (b)		68			43			57			43
Total consumer lending		2,127			1,844			2,154			1,844
Total nonperforming loans (c)		3,422			3,254			3,321			3,254
OREO and foreclosed assets
Other real estate owned (OREO) (d)		472			507			432			507
Foreclosed and other assets		33			33			25			33
Total OREO and foreclosed assets		505			540			457			540
Total nonperforming assets	$	3,927		$	3,794		$	3,778		$	3,794
Nonperforming loans to total loans		1.83	%		1.75	%		1.75	%		1.75	%
Nonperforming assets to total loans, OREO and foreclosed assets		2.10			2.04			1.99			2.04
Nonperforming assets to total assets		1.31			1.24			1.24			1.24

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

(b)

(c)	Nonperforming loans exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.

(d)

OREO excludes ~~$383~~$311 million and $380 million at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively, related to residential real estate that was acquired by us upon foreclosure of serviced loans because they are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).

Nonperforming loans also include certain loans whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. In accordance with applicable accounting guidance, these loans are considered TDRs. See Note 1 Accounting Policies and the TDR section of this Note 5 for additional information. For the ~~three~~six months ended ~~March 31,~~June 30, 2013, ~~$.7~~$1.7 billion of loans held for sale, loans accounted for under the fair value option, pooled purchased impaired loans, as well as certain consumer government insured or guaranteed loans which were evaluated for TDR consideration, are not classified as TDRs. The comparable amount for the ~~three~~six months ended ~~March 31,~~June 30, 2012 was ~~$.7~~$1.6 billion.

Total nonperforming loans in the nonperforming assets table above include TDRs of $1.5 billion at ~~March 31,~~June 30, 2013 and $1.6 billion at December 31, 2012. TDRs returned to performing (accruing) status totaled $1.1 billion and $1.0 billion at ~~March 31,~~June 30, 2013 and December 31, 2012, respectively, and are excluded from nonperforming loans. ~~These~~Generally, these loans have demonstrated a period of at least six months of consecutive performance under the restructured terms. Loans

where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligation to PNC are not returned to accrual status. At ~~March 31,~~June 30, 2013 and December 31, 2012, remaining commitments to lend additional funds to debtors in a commercial or consumer TDR were immaterial.

Additional Asset Quality Indicators

We have two overall portfolio segments – Commercial Lending and Consumer Lending. Each of these two segments is comprised of multiple loan classes. Classes are characterized by similarities in initial measurement, risk attributes and the manner in which we monitor and assess credit risk. The commercial segment is comprised of the commercial, commercial real estate, equipment lease financing, and commercial purchased impaired loan classes. The consumer segment is comprised of the home equity, residential real estate, credit card, other consumer, and consumer purchased impaired loan classes. Asset quality indicators for each of these loan classes are discussed in more detail below.

COMMERCIAL LENDING ASSET CLASSES

Commercial Loan Class

For commercial loans, we monitor the performance of the borrower in a disciplined and regular manner based upon the level of credit risk inherent in the loan. To evaluate the level of credit risk, we assign an internal risk rating reflecting the borrower’s PD and LGD. This two-dimensional credit risk rating methodology provides ~~risk~~ granularity in the risk monitoring process on an ongoing basis. These ratings are reviewed and updated on a risk-adjusted basis, generally at least once per year. Additionally, on an annual basis, we update PD rates related to each rating grade based upon internal historical data, augmented by market data. For small balance homogenous pools of commercial loans, mortgages and leases, we apply statistical modeling to assist in determining the probability of default within these pools. Further, on a periodic basis, we update our LGD estimates associated with each rating grade based upon historical data. The combination of the PD and LGD ratings assigned to a commercial loan, capturing both the combination of expectations of default and loss severity in event of default, reflects the relative estimated likelihood of loss for that loan at the reporting date. In general, loans with better PD and LGD tend to have a lower likelihood of ~~loss. Conversely,~~loss compared to loans with worse PD and LGD which tend to have a higher likelihood of loss. The loss amount also considers exposure at date of default, which we also periodically update based upon historical data.

Based upon the amount of the lending arrangement and our risk rating assessment, we follow a formal schedule of written periodic review. On a quarterly basis, we conduct formal reviews of a market’s or business unit’s entire loan portfolio, focusing on those loans which we perceive to be of higher risk, based upon PDs and LGDs, or ~~weakening~~loans for which credit ~~quality.~~quality is weakening. If circumstances warrant, it is our practice to review any customer obligation and its level of credit risk more frequently. We attempt to proactively manage our loans by using various procedures that are customized to the risk of a given loan, including ongoing outreach, contact, and assessment of obligor financial conditions, collateral inspection and appraisal.

Commercial Real Estate Loan Class

We manage credit risk associated with our commercial real estate projects and commercial mortgage activities similar to commercial loans by analyzing PD and LGD. Additionally, risks connected with commercial real estate projects and commercial mortgage activities tend to be correlated to the loan structure and collateral location, project progress and business environment. As a result, these attributes are also monitored and utilized in assessing credit risk.

As with the commercial class, a formal schedule of periodic review is performed to also assess market/geographic risk and business unit/industry risk. Often as a result of these overviews, more in-depth reviews and increased scrutiny is placed on areas of higher risk, including adverse changes in risk ratings, deteriorating operating trends, and/or areas that concern management. ~~The goal of these~~These reviews isare designed to assess risk and take actions to mitigate our exposure to such risks.

Equipment Lease Financing Loan Class

We manage credit risk associated with our equipment lease financing class similar to commercial loans by analyzing PD and LGD.

Based upon the dollar amount of the lease and of the level of credit risk, we follow a formal schedule of periodic review. Generally, this occurs on a quarterly basis, although we have established practices to review such credit risk more frequently if circumstances warrant. Our review process entails analysis of the following factors: equipment value/residual value, exposure levels, jurisdiction risk, industry risk, guarantor requirements, and regulatory compliance.

Commercial Purchased Impaired Loans Class

The credit impacts of purchased impaired loans are primarily determined through the estimation of expected cash flows. Commercial cash flow estimates are influenced by a number of credit related items, which include but are not limited to: estimated collateral value, receipt of additional collateral, secondary trading prices, circumstances of possible and/or ongoing liquidation, capital availability, business operations and payment patterns.

We attempt to proactively manage these factors by using various procedures that are customized to the risk of a given loan. These procedures include a review by our Special Asset Committee (SAC), ongoing outreach, contact, and assessment of obligor financial conditions, collateral inspection and appraisal.

See Note 6 Purchased Loans for additional information.

CONSUMER LENDING ASSET CLASSES

~~Home Equity and Residential Real Estate Loan Classes~~HOME EQUITYAND RESIDENTIAL REAL ESTATE LOAN CLASSES

We use several credit quality indicators, including delinquency information, nonperforming loan information, updated credit scores, originated and updated LTV ratios, and geography, to monitor and manage credit risk within the home equity and residential real estate loan classes. We evaluate mortgage loan performance by source originators and loan servicers. A summary of asset quality indicators follows:

Delinquency/Delinquency Rates: We monitor trending of delinquency/delinquency rates for home equity and residential real estate loans. See the Asset Quality section of this Note 5 for additional information.

Nonperforming Loans: We monitor trending of nonperforming loans for home equity and residential real estate loans. See the Asset Quality section of this Note 5 for additional information.

Credit Scores: We use a national third-party provider to update FICO credit scores for home equity loans and lines of credit and residential real estate loans on at least a quarterly basis. The updated scores are incorporated into a series of credit management reports, which are utilized to monitor the risk in the loan classes.

LTV (inclusive of combined loan-to-value (CLTV) for first and subordinate lien positions): At least semi-annually, we update the property values of real estate collateral and

calculate an updated LTV ratio. For open-end credit lines secured by real estate in regions experiencing significant declines in property values, more frequent valuations may occur. We examine LTV migration and stratify LTV into categories to monitor the risk in the loan classes.

Historically, we used, and we continue to use, a combination of original LTV and updated LTV for internal risk management reporting and risk management purposes (e.g., line management, loss mitigation strategies). In addition to the fact that estimated property values by their nature are estimates, given certain data limitations it is important to note that updated LTVs may be based upon management’s assumptions (e.g., if an updated LTV is not provided by the third-party service provider, home price index (HPI) changes will be incorporated in arriving at management’s estimate of updated LTV).

Geography: Geographic concentrations are monitored to evaluate and manage exposures. Loan purchase programs are sensitive to, and focused within, certain regions to manage geographic exposures and associated risks.


	Pages
PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).
Consolidated Income Statement		7376
Consolidated Statement of Comprehensive Income		7477
Consolidated Balance Sheet		7578
Consolidated Statement Of Cash Flows		7679

Notes To Consolidated Financial Statements (Unaudited)
Note 1 Accounting Policies		7881
Note 2 Acquisition and Divestiture Activity		8385
Note 3 Loan Sale and Servicing Activities and Variable Interest Entities		8386
Note 4 Loans and Commitments to Extend Credit		8892
Note 5 Asset Quality		8992
Note 6 Purchased Loans		~~102~~108
Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit		~~103~~109
Note 8 Investment Securities		~~106~~112
Note 9 Fair Value		~~111~~118
Note 10 Goodwill and Other Intangible Assets		~~121~~130
Note 11 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities		~~124~~133
Note 12 Certain Employee Benefit And Stock Based Compensation Plans		~~125~~134
Note 13 Financial Derivatives		~~127~~136
Note 14 Earnings Per Share		~~136~~145
Note 15 Total Equity And Other Comprehensive Income		~~137~~146
Note 16 Income Taxes		~~140~~151
Note 17 Legal Proceedings		~~140~~151
Note 18 Commitments and Guarantees		~~141~~154
Note 19 Segment Reporting		~~146~~158
Note 20 Subsequent Events		~~149~~161

Statistical Information (Unaudited)
Average Consolidated Balance Sheet And Net Interest Analysis		~~150~~162

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.
Financial Review		1
Consolidated Financial Highlights		1
Executive Summary		3
Consolidated Income Statement Review		911
Consolidated Balance Sheet Review		1114
Off-Balance Sheet Arrangements And Variable Interest Entities		2427
Fair Value Measurements		2427
European Exposure		2528
Business Segments Review		2730
Critical Accounting Estimates And Judgments		4142
Status Of Qualified Defined Benefit Pension Plan		4244
Recourse And Repurchase Obligations		4344
Risk Management		4748
Internal Controls And Disclosure Controls And Procedures		6669
Glossary Of Terms		6670
Cautionary Statement Regarding Forward-Looking Information		7174

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.		~~47-66, 111-121~~48-69, 118-130 and ~~127-135~~136-144

Item 4. Controls and ~~Procedures~~Procedures.		6669

PART II – OTHER INFORMATION		~~152~~

Item 1. Legal ~~Proceedings~~Proceedings.		~~152~~164

Item 1A. ~~Risk Factors~~RiskFactors.		~~152~~164

Item 2. Unregistered Sales Of Equity Securities And Use Of ~~Proceeds~~Proceeds.		~~152~~164

Item 6. ~~Exhibits~~Exhibits.		~~153~~165
Exhibit ~~Index~~Index.		~~153~~165
Signature		~~154~~165

Corporate Information		~~154~~166


	March 31, 2013						December 31, 2012						June 30, 2013						December 31, 2012
Dollars in millions	Balance			Net Investment			Balance			Net Investment			Balance			Net Investment			Balance			Net Investment
Commercial and commercial real estate loans:
Unpaid principal balance	$	1,465					$	1,680					$	1,299					$	1,680
Purchased impaired mark		(386	)					(431	)					(331	)					(431	)
Recorded investment		1,079						1,249						968						1,249
Allowance for loan losses		(198	)					(239	)					(183	)					(239	)
Net investment		881			60	%		1,010			60	%		785			60	%		1,010			60	%
Consumer and residential mortgage loans:
Unpaid principal balance		6,359						6,639						6,095						6,639
Purchased impaired mark		(365	)					(482	)					(285	)					(482	)
Recorded investment		5,994						6,157						5,810						6,157
Allowance for loan losses		(911	)					(858	)					(934	)					(858	)
Net investment		5,083			80	%		5,299			80	%		4,876			80	%		5,299			80	%
Total purchased impaired loans:
Unpaid principal balance		7,824						8,319						7,394						8,319
Purchased impaired mark		(751	)					(913	)					(616	)					(913	)
Recorded investment		7,073						7,406						6,778						7,406
Allowance for loan losses		(1,109	)					(1,097	)					(1,117	)					(1,097	)
Net investment	$	5,964			76	%	$	6,309			76	%	$	5,661			77	%	$	6,309			76	%


Dollars in millions	March 31 2013			December 31 2012			June 30 2013			December 31 2012
Capital components
Shareholders’ equity
Common	$	36,072		$	35,413		$	36,347		$	35,413
Preferred		3,591			3,590			3,939			3,590
Trust preferred capital securities		317			331			216			331
Noncontrolling interests		983			1,354			985			1,354
Goodwill and other intangible assets		(9,763	)		(9,798	)		(9,727	)		(9,798	)
Eligible deferred income taxes on goodwill and other intangible assets		351			354			346			354
Pension and other postretirement benefit plan adjustments		748			777			743			777
Net unrealized securities (gains)/losses, after-tax		(1,037	)		(1,052	)		(502	)		(1,052	)
Net unrealized gains on cash flow hedge derivatives, after-tax		(510	)		(578	)
Net unrealized (gains)/losses on cash flow hedge derivatives, after-tax								(332	)		(578	)
Other		(331	)		(165	)		(207	)		(165	)
Tier 1 risk-based capital		30,421			30,226			31,808			30,226
Subordinated debt		5,276			4,735			5,081			4,735
Eligible allowance for credit losses		3,278			3,276			3,318			3,276
Total risk-based capital	$	38,975		$	38,237		$	40,207		$	38,237
Tier 1 common capital
Tier 1 risk-based capital	$	30,421		$	30,226		$	31,808		$	30,226
Preferred equity		(3,441	)		(3,590	)		(3,939	)		(3,590	)
Trust preferred capital securities		(317	)		(331	)		(216	)		(331	)
Noncontrolling interests		(983	)		(1,354	)		(985	)		(1,354	)
Tier 1 common capital	$	25,680		$	24,951		$	26,668		$	24,951
Assets
Risk-weighted assets, including off-balance sheet instruments and market risk equivalent assets	$	261,491		$	260,847		$	264,750		$	260,847
Adjusted average total assets		292,911			291,426			291,605			291,426
Basel I capital ratios
Tier 1 common		9.8	%		9.6	%		10.1	%		9.6	%
Tier 1 risk-based		11.6			11.6			12.0			11.6
Total risk-based		14.9			14.7			15.2			14.7
Leverage		10.4			10.4			10.9			10.4


	2013					2012						2013					2012
Three months ended March 31 – In millions	Unpaid Principal Balance (a)		Losses Incurred (b)		Fair Value of Repurchased Loans (c) (d)	Unpaid Principal Balance (a)		Losses Incurred (b)		Fair Value of Repurchased Loans (c)
Six months ended June 30 – In millions												Unpaid Principal Balance (a)		Losses Incurred (b)		Fair Value of Repurchased Loans (c)(d)	Unpaid Principal Balance (a)		Losses Incurred (b)		Fair Value of Repurchased Loans (c)
Home equity loans/lines:
Private investors – Repurchases (e)	$	2	$	30		$	10	$	8	$	2	$	4	$	32		$	16	$	13	$	3


Table	Description	Page		Description	Page
1	Consolidated Financial Highlights		1	Consolidated Financial Highlights		1
2	Summarized Average Balance Sheet		6	Summarized Average Balance Sheet		8
3	Results Of Businesses – Summary		8	Results Of Businesses – Summary		9
4	Net Interest Income and Net Interest Margin		9	Net Interest Income and Net Interest Margin		11
5	Noninterest Income		9	Noninterest Income		12
6	Summarized Balance Sheet Data		11	Summarized Balance Sheet Data		14
7	Details Of Loans		11	Details Of Loans		14
8	Accretion – Purchased Impaired Loans		12	Accretion – Purchased Impaired Loans		15
9	Purchased Impaired Loans – Accretable Yield		12	Purchased Impaired Loans – Accretable Yield		15
10	Valuation of Purchased Impaired Loans		13	Valuation of Purchased Impaired Loans		16
11	Weighted Average Life of the Purchased Impaired Portfolios		14	Weighted Average Life of the Purchased Impaired Portfolios		16
12	Accretable Difference Sensitivity – Total Purchased Impaired Loans		14	Accretable Difference Sensitivity – Total Purchased Impaired Loans		17
13	Net Unfunded Credit Commitments		14	Net Unfunded Credit Commitments		17
14	Investment Securities		15	Investment Securities		18
15	Vintage, Current Credit Rating and FICO Score for Asset-Backed Securities		16	Vintage, Current Credit Rating and FICO Score for Asset-Backed Securities		19
16	Other-Than-Temporary Impairments		17	Other-Than-Temporary Impairments		20
17	Net Unrealized Gains and Losses on Non-Agency Securities		18	Net Unrealized Gains and Losses on Non-Agency Securities		21
18	Loans Held For Sale		20	Loans Held For Sale		22
19	Details Of Funding Sources		21	Details Of Funding Sources		23
20	Shareholders’ Equity		21	Shareholders’ Equity		24
21	Risk-Based Capital		22	Basel I Risk-Based Capital		25
22	Estimated Pro forma Basel III Tier 1 Common Capital		23	Estimated Pro forma Basel III Tier 1 Common Capital Ratio		26
23	Fair Value Measurements – Summary		24	Fair Value Measurements – Summary		27
24	Summary of European Exposure		25	Summary of European Exposure		28
25	Retail Banking Table		28	Retail Banking Table		31
26	Corporate & Institutional Banking Table		31	Corporate & Institutional Banking Table		33
27	Asset Management Group Table		34	Asset Management Group Table		36
28	Residential Mortgage Banking Table		36	Residential Mortgage Banking Table		38
29	BlackRock Table		38	BlackRock Table		40
30	Non-Strategic Assets Portfolio Table		39	Non-Strategic Assets Portfolio Table		40
31	Pension Expense – Sensitivity Analysis		42	Pension Expense – Sensitivity Analysis		44
32	Analysis of Quarterly Residential Mortgage Repurchase Claims by Vintage		44	Analysis of Quarterly Residential Mortgage Repurchase Claims by Vintage		45
33	Analysis of Quarterly Residential Mortgage Unresolved Asserted Indemnification and Repurchase Claims		44	Analysis of Quarterly Residential Mortgage Unresolved Asserted Indemnification and Repurchase Claims		46
34	Analysis of Residential Mortgage Indemnification and Repurchase Claim Settlement Activity		45	Analysis of Residential Mortgage Indemnification and Repurchase Claim Settlement Activity		46
35	Analysis of Home Equity Unresolved Asserted Indemnification and Repurchase Claims		46	Analysis of Home Equity Unresolved Asserted Indemnification and Repurchase Claims		47
36	Analysis of Home Equity Indemnification and Repurchase Claim Settlement Activity		46	Analysis of Home Equity Indemnification and Repurchase Claim Settlement Activity		47
37	Nonperforming Assets By Type		49	Nonperforming Assets By Type		50
38	OREO and Foreclosed Assets		49	OREO and Foreclosed Assets		51
39	Change in Nonperforming Assets		50	Change in Nonperforming Assets		51
40	Accruing Loans Past Due 30 To 59 Days		51	Accruing Loans Past Due 30 To 59 Days		52
41	Accruing Loans Past Due 60 To 89 Days		51	Accruing Loans Past Due 60 To 89 Days		52
42	Accruing Loans Past Due 90 Days Or More		52	Accruing Loans Past Due 90 Days Or More		53
43	Home Equity Lines of Credit – Draw Period End Dates		53	Home Equity Lines of Credit – Draw Period End Dates		54
44	Consumer Real Estate Related Loan Modifications		54	Consumer Real Estate Related Loan Modifications		55
45	Consumer Real Estate Related Loan Modifications Re-Default by Vintage		54	Consumer Real Estate Related Loan Modifications Re-Default by Vintage		56
46	Summary of Troubled Debt Restructurings		56	Summary of Troubled Debt Restructurings		57
47	Loan Charge-Offs And Recoveries		56	Loan Charge-Offs And Recoveries		58
48	Allowance for Loan and Lease Losses		58	Allowance for Loan and Lease Losses		59
49	Credit Ratings as of March 31, 2013 for PNC and PNC Bank, N.A.		61	Credit Ratings as of June 30, 2013 for PNC and PNC Bank, N.A.		63
50	Contractual Obligations		61	Contractual Obligations		64
51	Other Commitments		62	Other Commitments		64
52	Interest Sensitivity Analysis		62	Interest Sensitivity Analysis		65
53	Net Interest Income Sensitivity to Alternative Rate Scenarios (First Quarter 2013)		62	Net Interest Income Sensitivity to Alternative Rate Scenarios (Second Quarter 2013)		65
54	Alternate Interest Rate Scenarios: One Year Forward		63	Alternate Interest Rate Scenarios: One Year Forward		66
55	Enterprise-Wide Trading-Related Gains/Losses Versus Value at Risk		63	Enterprise-Wide Trading-Related Gains/Losses Versus Value-at-Risk		66
56	Trading Revenue		64	Trading Revenue		67
57	Equity Investments Summary		64	Equity Investments Summary		67
58	Financial Derivatives Summary		66	Financial Derivatives Summary		69


Dollars in millions, except per share data Unaudited	Three months ended March 31						Three months ended June 30						Six months ended June 30
Dollars in millions, except per share data Unaudited	2013			2012			2013			2012			2013			2012
Financial Results (a)
Revenue
Net interest income	$	2,389		$	2,291		$	2,258		$	2,526		$	4,647		$	4,817
Noninterest income		1,566			1,441			1,806			1,097			3,372			2,538
Total revenue		3,955			3,732			4,064			3,623			8,019			7,355
Noninterest expense		2,395			2,455			2,435			2,648			4,830			5,103
Pretax, pre-provision earnings (b)		1,560			1,277			1,629			975			3,189			2,252
Provision for credit losses		236			185			157			256			393			441
Income before income taxes and noncontrolling interests	$	1,324		$	1,092		$	1,472		$	719		$	2,796		$	1,811
Net income	$	1,004		$	811		$	1,123		$	546		$	2,127		$	1,357
Less:
Net income (loss) attributable to noncontrolling interests		(9	)		6			1			(5	)		(8	)		1
Preferred stock dividends and discount accretion		75			39			53			25			128			64
Net income attributable to common shareholders	$	938		$	766		$	1,069		$	526		$	2,007		$	1,292
Diluted earnings per common share	$	1.76		$	1.44		$	1.99		$	.98		$	3.76		$	2.42
Cash dividends declared per common share	$	.40		$	.35		$	.44		$	.40		$	.84		$	.75
Performance Ratios
Net interest margin (c)		3.81	%		3.90	%		3.58	%		4.08	%		3.69	%		3.99	%
Noninterest income to total revenue		40			39			44			30			42			35
Efficiency		61			66			60			73			60			69
Return on:
Average common shareholders’ equity		10.68			9.41			11.81			6.23			11.25			7.80
Average assets		1.34			1.16			1.49			.74			1.42			.94


Unaudited	March 31 2013			December 31 2012			March 31 2012			June 30 2013			December 31 2012			June 30 2012
Balance Sheet Data (dollars in millions, except per share data)
Assets	$	300,812		$	305,107		$	295,883		$	304,415		$	305,107		$	299,575
Loans (b) (c)		186,504			185,856			176,214			189,775			185,856			180,425
Allowance for loan and lease losses (b)		3,828			4,036			4,196			3,772			4,036			4,156
Interest-earning deposits with banks (b)		1,541			3,984			2,084			3,797			3,984			3,995
Investment securities (b)		59,361			61,406			64,554			57,449			61,406			61,937
Loans held for sale (c)		3,295			3,693			2,456			3,814			3,693			3,333
Goodwill and other intangible assets		10,996			10,869			11,188			11,228			10,869			10,962
Equity investments (b) (d)		11,008			10,877			10,352			10,054			10,877			10,617
Other assets (b) (c)											24,297			23,679			24,559

Noninterest-bearing deposits		64,652			69,980			62,463			66,708			69,980			64,476
Interest-bearing deposits		146,968			143,162			143,664			145,571			143,162			142,447
Total deposits		211,620			213,142			206,127			212,279			213,142			206,923
Transaction deposits		175,407			176,705			164,575			175,564			176,705			166,043
Borrowed funds (b) (c)		37,647			40,907			42,539			39,864			40,907			43,689
Shareholders’ equity		39,663			39,003			35,045			40,286			39,003			37,005
Common shareholders’ equity		36,072			35,413			33,408			36,347			35,413			33,884
Accumulated other comprehensive income		767			834			281			45			834			402

Book value per common share		68.23			67.05			63.26		$	68.46		$	67.05		$	64.00
Common shares outstanding (millions)		529			528			528			531			528			529
Loans to deposits		88	%		87	%		85	%		89	%		87	%		87	%

Client Assets(billions)
Discretionary assets under management	$	118		$	112		$	112		$	117		$	112		$	109
Nondiscretionary assets under administration		118			112			107			116			112			105
Total assets under administration		236			224			219			233			224			214
Brokerage account assets		39			38			37			39			38			36
Total client assets	$	275		$	262		$	256		$	272		$	262		$	250

Capital Ratios
Basel I ratios
Basel I capital ratios
Tier 1 common		9.8	%		9.6	%		9.3	%		10.1	%		9.6	%		9.3	%
Tier 1 risk-based (e)		11.6			11.6			11.4			12.0			11.6			11.4
Total risk-based (e)		14.9			14.7			14.4			15.2			14.7			14.2
Leverage (e)		10.4			10.4			10.5			10.9			10.4			10.1

Common shareholders’ equity to assets		12.0			11.6			11.3			11.9			11.6			11.3

Pro forma Basel III Tier 1 common (f)		8.0	%		7.5	%		N/A	(g)		8.2	%		7.5	%		N/A	(g)

Asset Quality
Nonperforming loans to total loans		1.83	%		1.75	%		2.03	%		1.75	%		1.75	%		1.92	%
Nonperforming assets to total loans, OREO and foreclosed assets		2.10			2.04			2.46			1.99			2.04			2.31
Nonperforming assets to total assets		1.31			1.24			1.47			1.24			1.24			1.39
Net charge-offs to average loans (for the three months ended) (annualized) (h)		.99			.67			.81			.44			.67			.71
Allowance for loan and lease losses to total loans		2.05			2.17			2.38			1.99			2.17			2.30
Allowance for loan and lease losses to nonperforming loans (i)		112			124			117			114	%		124	%		120	%
Accruing loans past due 90 days or more	$	1,906		$	2,351		$	2,585		$	1,762		$	2,351		$	2,483


	Net Income					Revenue				Average Assets (a)				Net Income					Revenue				Average Assets (a)
Three months ended March 31 – in millions	2013		2012			2013		2012		2013		2012
Six months ended June 30-in millions														2013		2012			2013		2012		2013		2012
Retail Banking	$	120	$	147		$	1,483	$	1,436	$	74,116	$	69,709	$	278	$	283		$	3,037	$	2,987	$	74,317	$	71,420
Corporate & Institutional Banking		541		495			1,341		1,266		111,671		92,896		1,153		1,072			2,761		2,705		111,941		97,866
Asset Management Group		43		36			255		243		7,131		6,566		79		74			509		483		7,210		6,613
Residential Mortgage Banking		45		61			291		293		10,803		11,989		65		(152	)		519		184		10,604		11,745
BlackRock		108		90			138		116		5,859		5,565		220		178			287		227		5,982		5,597
Non-Strategic Assets Portfolio		79		71			219		198		10,735		12,124		139		138			394		421		10,511		12,407
Total business segments		936		900			3,727		3,552		220,315		198,849		1,934		1,593			7,507		7,007		220,565		205,648
Other (b) (c)		68		(89	)		228		180		83,130		82,693		193		(236	)		512		348		82,167		83,199
Total	$	1,004	$	811		$	3,955	$	3,732	$	303,445	$	281,542	$	2,127	$	1,357		$	8,019	$	7,355	$	302,732	$	288,847


	2013						2012
Three months ended June 30 – In millions	Unpaid Principal Balance (a)		Losses Incurred (b)		Fair Value of Repurchased Loans (c)		Unpaid Principal Balance (a)		Losses Incurred (b)		Fair Value of Repurchased Loans (c)
Residential mortgages (d):
FNMA, FHLMC, and GNMA securitizations	$	109	$	62	$	33	$	103	$	60	$	25
Private investors (e)		13		10		1		25		17		1
Total indemnification and repurchase settlements	$	122	$	72	$	34	$	128	$	77	$	26


Three months ended March 31 Dollars in millions	Charge-offs		Recoveries			Net Charge-offs / (Recoveries)			Percent of Average Loans (annualized)
Six months ended June 30 Dollars in millions												Charge-offs		Recoveries		Net Charge-offs / (Recoveries)			Percent of Average Loans (annualized)
2013
Commercial	$	114	$	63		$	51			.25	%	$	195	$	129	$	66			.16	%
Commercial real estate		86		13			73			1.57			137		46		91			.97
Equipment lease financing		3		6			(3	)		(.17	)		4		10		(6	)		(.17	)
Home equity		194		13			181			2.05			286		37		249			1.39
Residential real estate		79		(1	)		80			2.15			122				122			1.64
Credit card		50		5			45			4.42			95		11		84			4.13
Other consumer		43		14			29			.55			86		28		58			.55
Total	$	569	$	113		$	456			.99		$	925	$	261	$	664			.71
2012
Commercial	$	111	$	72		$	39			.23	%	$	234	$	147	$	87			.24	%
Commercial real estate		84		23			61			1.46			159		52		107			1.22
Equipment lease financing		5		9			(4	)		(.25	)		10		15		(5	)		(.16	)
Home equity		131		13			118			1.40			252		30		222			1.28
Residential real estate		30		(1	)		31			.84			67				67			.87
Credit card		55		5			50			5.10			110		11		99			4.95
Other consumer		51		13			38			.79			97		26		71			.73
Total	$	467	$	134		$	333			.81		$	929	$	281	$	648			.76


			Payment Due By Period											Payment Due By Period
March 31, 2013 – in millions	Total		Less than one year		One to three years		Four to five years		After five years
June 30, 2013 – in millions											Total			Less than one year		One to three years		Four to five years		After five years
Remaining contractual maturities of time deposits (a)	$	25,079	$	17,163	$	4,272	$	1,379	$	2,265	$	25,634		$	17,824	$	4,328	$	1,072	$	2,410
Borrowed funds (a) (b)		37,647		18,166		6,069		4,931		8,481		39,864			20,308		6,388		5,440		7,728
Minimum annual rentals on noncancellable leases		2,768		394		662		470		1,242		2,735			392		652		476		1,215
Nonqualified pension and postretirement benefits		584		96		120		113		255		584			96		120		113		255
Purchase obligations (c)		668		390		197		51		30		765			454		237		48		26
Total contractual cash obligations	$	66,746	$	36,209	$	11,320	$	6,944	$	12,273	$	69,582	��	$	39,074	$	11,725	$	7,149	$	11,634


			Amount Of Commitment Expiration By Period										Amount Of Commitment Expiration By Period
March 31, 2013 – in millions	Total Amounts Committed		Less than one year		One to three years		Four to five years		After five years
June 30, 2013 – in millions											Total Amounts Committed		Less than one year		One to three years		Four to five years		After five years
Net unfunded credit commitments	$	121,812	$	50,110	$	40,074	$	31,053	$	575	$	124,142	$	51,305	$	40,591	$	31,707	$	539
Standby letters of credit (b)		11,458		5,137		4,898		1,400		23
Net outstanding standby letters of credit (b)												10,917		5,066		4,566		1,274		11
Reinsurance agreements (c)		5,814		2,919		51		31		2,813		5,731		2,954		43		31		2,703
Other commitments (d)		943		615		273		52		3		909		647		226		34		2
Total commitments	$	140,027	$	58,781	$	45,296	$	32,536	$	3,414	$	141,699	$	59,972	$	45,426	$	33,046	$	3,255


	First Quarter 2013			First Quarter 2012			Second Quarter 2013			Second Quarter 2012
Net Interest Income Sensitivity Simulation
Effect on net interest income in first year from gradual interest rate change over following 12 months of:
100 basis point increase		2.1	%		2.4	%		1.7	%		2.5	%
100 basis point decrease (a)		(1.2	)%		(1.7	)%		(1.0	)%		(1.9	)%
Effect on net interest income in second year from gradual interest rate change over the preceding 12 months of:
100 basis point increase		8.0	%		7.1	%		6.0	%		7.9	%
100 basis point decrease (a)		(4.8	)%		(4.9	)%		(4.5	)%		(5.1	)%
Duration of Equity Model (a)
Base case duration of equity (in years):		(5.6	)		(6.0	)		(2.4	)		(8.2	)
Key Period-End Interest Rates
One-month LIBOR		.20	%		.24	%		.19	%		.25	%
Three-year swap		.54	%		.76	%		.82	%		.62	%


In millions, except per share data Unaudited	Three months ended March 31						Three months ended June 30						Six months ended June 30
In millions, except per share data Unaudited	2013			2012			2013			2012			2013			2012
*Interest Income*
Loans	$	2,029		$	1,951		$	1,955		$	2,163		$	3,984		$	4,114
Investment securities		470			526			422			527			892			1,053
Other		112			120			92			106			204			226
Total interest income		2,611			2,597			2,469			2,796			5,080			5,393
*Interest Expense*
Deposits		93			103			86			83			179			186
Borrowed funds		129			203			125			187			254			390
Total interest expense		222			306			211			270			433			576
Net interest income		2,389			2,291			2,258			2,526			4,647			4,817
*Noninterest Income*
Asset management		308			284			340			278			648			562
Consumer services		296			264			314			290			610			554
Corporate services		277			232			326			290			603			522
Residential mortgage		234			230			167			(173	)		401			57
Service charges on deposits		136			127			147			144			283			271
Net gains on sales of securities		14			57			61			62			75			119
Other-than-temporary impairments		(1	)		(16	)		(10	)		(32	)		(11	)		(48	)
Less: Noncredit portion of other-than-temporary impairments (a)		9			22			(6	)		2			3			24
Net other-than-temporary impairments		(10	)		(38	)		(4	)		(34	)		(14	)		(72	)
Other		311			285			455			240			766			525
Total noninterest income		1,566			1,441			1,806			1,097			3,372			2,538
Total revenue		3,955			3,732			4,064			3,623			8,019			7,355
*Provision For Credit Losses*		236			185			157			256			393			441
*Noninterest Expense*
Personnel		1,169			1,111			1,186			1,119			2,355			2,230
Occupancy		211			190			206			199			417			389
Equipment		183			175			189			181			372			356
Marketing		45			68			67			67			112			135
Other		787			911			787			1,082			1,574			1,993
Total noninterest expense		2,395			2,455			2,435			2,648			4,830			5,103
Income before income taxes and noncontrolling interests		1,324			1,092			1,472			719			2,796			1,811
Income taxes		320			281			349			173			669			454
Net income		1,004			811			1,123			546			2,127			1,357
Less: Net income (loss) attributable to noncontrolling interests		(9	)		6			1			(5	)		(8	)		1
Preferredstock dividends and discount accretion and redemptions		75			39
Preferred stock dividends and discount accretion and redemptions								53			25			128			64
Net income attributable to common shareholders	$	938		$	766		$	1,069		$	526		$	2,007		$	1,292
*Earnings Per Common Share*
Basic	$	1.78		$	1.45		$	2.02		$	1.00		$	3.79		$	2.44
Diluted		1.76			1.44			1.99			.98			3.76			2.42
*Average Common Shares Outstanding*
Basic		526			526			528			527			527			526
Diluted		528			529			531			530			530			529


In millions Unaudited	Three months ended March 31						Three months ended June 30						Six months ended June 30
In millions Unaudited	2013			2012			2013			2012			2013			2012
*Net income*	$	1,004		$	811		$	1,123		$	546		$	2,127		$	1,357
*Other comprehensive income, before tax and net of reclassifications into Net income:*
Net unrealized gains (losses) on non-OTTI securities		(170	)		238			(793	)		158			(963	)		396
Net unrealized gains (losses) on OTTI securities		141			406			(45	)		8			96			414
Net unrealized gains (losses) on cash flow hedge derivatives		(107	)		(90	)		(281	)		6			(388	)		(84	)
Pension and other postretirement benefit plan adjustments		46			48			7			39			53			87
Other		(6	)		12			(7	)		(30	)		(13	)		(18	)
*Other comprehensive income, before tax and net of reclassifications into Net income*		(96	)		614
Income tax benefit (expense) related to items of other comprehensive income		29			(228	)
*Other comprehensive income, after tax and net of reclassifications into Net income*		(67	)		386
*Other comprehensive income (loss), before tax and net of reclassifications into Net income*								(1,119	)		181			(1,215	)		795
Income tax benefit (expense) related to items of Other comprehensive income								397			(60	)		426			(288	)
*Other comprehensive income (loss), after tax and net of reclassifications into Net income*								(722	)		121			(789	)		507
*Comprehensive income*		937			1,197			401			667			1,338			1,864
Less: Comprehensive income (loss) attributable to noncontrolling interests		(9	)		6			1			(5	)		(8	)		1
*Comprehensive income attributable to PNC*	$	946		$	1,191		$	400		$	672		$	1,346		$	1,863


In millions, except par value Unaudited	March 31 2013			December 31 2012			June 30 2013			December 31 2012
*Assets*
Cash and due from banks (includes $4 and $4 for VIEs) (a)	$	3,948		$	5,220		$	4,051		$	5,220
Federal funds sold and resale agreements (includes $213 and $256 measured at fair value) (b)		1,274			1,463
Federal funds sold and resale agreements (includes $210 and $256 measured at fair value) (b)								1,613			1,463
Trading securities		2,243			2,096			2,109			2,096
Interest-earning deposits with banks (includes $6 and $6 for VIEs) (a)		1,541			3,984			3,797			3,984
Loans held for sale (includes $2,973 and $2,868 measured at fair value) (b)		3,295			3,693
Investment securities (includes $8 and $9 for VIEs) (a)		59,361			61,406
Loans (includes $7,538 and $7,781 for VIEs) (a) (includes $634 and $244 measured at fair value) (b)		186,504			185,856
Allowance for loan and lease losses (includes $(67) and $(75) for VIEs) (a)		(3,828	)		(4,036	)
Loans held for sale (includes $2,881 and $2,868 measured at fair value) (b)								3,814			3,693
Investment securities (includes $7 and $9 for VIEs) (a)								57,449			61,406
Loans (includes $7,845 and $7,781 for VIEs) (a) (includes $811 and $244 measured at fair value) (b)								189,775			185,856
Allowance for loan and lease losses (includes $(64) and $(75) for VIEs) (a)								(3,772	)		(4,036	)
Net loans		182,676			181,820			186,003			181,820
Goodwill		9,075			9,072			9,075			9,072
Other intangible assets		1,921			1,797			2,153			1,797
Equity investments (includes $1,504 and $1,429 for VIEs) (a)		11,008			10,877
Other (includes $1,186 and $1,281 for VIEs) (a) (includes $298 and $319 measured at fair value) (b)		24,470			23,679
Equity investments (includes $492 and $1,429 for VIEs) (a)								10,054			10,877
Other (includes $567 and $1,281 for VIEs) (a) (includes $291 and $319 measured at fair value) (b)								24,297			23,679
Total assets	$	300,812		$	305,107		$	304,415		$	305,107
*Liabilities*
Deposits
Noninterest-bearing	$	64,652		$	69,980		$	66,708		$	69,980
Interest-bearing		146,968			143,162			145,571			143,162
Total deposits		211,620			213,142			212,279			213,142
Borrowed funds
Federal funds purchased and repurchase agreements		4,000			3,327			4,303			3,327
Federal Home Loan Bank borrowings		5,483			9,437			8,481			9,437
Bank notes and senior debt		10,918			10,429			11,177			10,429
Subordinated debt		7,996			7,299			7,113			7,299
Commercial paper (includes $5,848 and $6,045 for VIEs) (a)		6,953			8,453
Other (includes $379 and $257 for VIEs) (a) (includes $130 and $0 measured at fair value) (b)		2,297			1,962
Commercial paper (includes $5,900 and $6,045 for VIEs) (a)								6,400			8,453
Other (includes $434 and $257 for VIEs) (a) (includes $195 and $0 measured at fair value) (b)								2,390			1,962
Total borrowed funds		37,647			40,907			39,864			40,907
Allowance for unfunded loan commitments and letters of credit		238			250			242			250
Accrued expenses (includes $130 and $132 for VIEs) (a)		4,181			4,449
Other (includes $1,034 and $976 for VIEs) (a)		5,048			4,594
Accrued expenses (includes $120 and $132 for VIEs) (a)								4,057			4,449
Other (includes $378 and $976 for VIEs) (a)								6,032			4,594
Total liabilities		258,734			263,342			262,474			263,342
*Equity*
Preferred stock (c)
Common stock ($5 par value, authorized 800 shares, issued 538 and 538 shares)		2,690			2,690
Common stock ($5 par value, authorized 800 shares, issued 539 and 538 shares)								2,693			2,690
Capital surplus – preferred stock		3,591			3,590			3,939			3,590
Capital surplus – common stock and other		12,174			12,193			12,234			12,193
Retained earnings		20,993			20,265			21,828			20,265
Accumulated other comprehensive income (loss)		767			834			45			834
Common stock held in treasury at cost: 9 and 10 shares		(552	)		(569	)
Common stock held in treasury at cost: 8 and 10 shares								(453	)		(569	)
Total shareholders’ equity		39,663			39,003			40,286			39,003
Noncontrolling interests		2,415			2,762			1,655			2,762
Total equity		42,078			41,765			41,941			41,765
Total liabilities and equity	$	300,812		$	305,107		$	304,415		$	305,107


In millions	Residential Mortgages		Commercial Mortgages (a)		Home Equity Loans/Lines (b)		Residential Mortgages		Commercial Mortgages (a)		Home Equity Loans/Lines (b)
FINANCIAL INFORMATION – March 31, 2013
FINANCIAL INFORMATION – June 30, 2013
Servicing portfolio (c)	$	120,490	$	160,911	$	5,274	$	115,740	$	166,356	$	5,176
Carrying value of servicing assets (d)		779		452				975		525
Servicing advances (e)		588		509		5		558		502		5
Repurchase and recourse obligations (f)		522		42		25		523		37		24
Carrying value of mortgage-backed securities held (g)		5,164		1,572				4,503		1,528
FINANCIAL INFORMATION – December 31, 2012
Servicing portfolio (c)	$	119,262	$	153,193	$	5,353	$	119,262	$	153,193	$	5,353
Carrying value of servicing assets (d)		650		420				650		420
Servicing advances (e)		582		505		5		582		505		5
Repurchase and recourse obligations (f)		614		43		58		614		43		58
Carrying value of mortgage-backed securities held (g)		5,445		1,533				5,445		1,533


March 31, 2013 In millions	Market Street		Credit Card and Other Securitization Trusts (c)			Tax Credit Investments		Total
June 30, 2013 In millions											Market Street		Credit Card and Other Securitization Trusts (c)			Tax Credit Investments		Total
Assets
Cash and due from banks						$	4	$	4							$	4	$	4
Interest-earning deposits with banks							6		6								6		6
Investment securities	$	8							8		$	7							7
Loans		5,788	$	1,750					7,538			6,116	$	1,729					7,845
Allowance for loan and lease losses				(67	)				(67	)				(64	)				(64	)
Equity investments							1,504		1,504								492		492
Other assets(d)		526		13			647		1,186			6		27			534		567
Total assets	$	6,322	$	1,696		$	2,161	$	10,179		$	6,129	$	1,692		$	1,036	$	8,857
Liabilities
Commercial paper	$	5,848						$	5,848		$	5,900						$	5,900
Other borrowed funds			$	130		$	249		379				$	195		$	239		434
Accrued expenses							130		130								120		120
Other liabilities		520		71			443		1,034			223					155		378
Total liabilities	$	6,368	$	201		$	822	$	7,391		$	6,123	$	195		$	514	$	6,832


December 31, 2012 In millions	Market Street		Credit Card Securitization Trust (d)			Tax Credit Investments		Total			Market Street		Credit Card Securitization Trust (e)			Tax Credit Investments		Total
Assets
Cash and due from banks						$	4	$	4							$	4	$	4
Interest-earning deposits with banks							6		6								6		6
Investment securities	$	9							9		$	9							9
Loans		6,038	$	1,743					7,781			6,038	$	1,743					7,781
Allowance for loan and lease losses				(75	)				(75	)				(75	)				(75	)
Equity investments							1,429		1,429								1,429		1,429
Other assets		536		31			714		1,281			536		31			714		1,281
Total assets	$	6,583	$	1,699		$	2,153	$	10,435		$	6,583	$	1,699		$	2,153	$	10,435
Liabilities
Commercial paper	$	6,045						$	6,045		$	6,045						$	6,045
Other borrowed funds						$	257		257							$	257		257
Accrued expenses							132		132								132		132
Other liabilities		529					447		976			529					447		976
Total liabilities	$	6,574				$	836	$	7,410		$	6,574				$	836	$	7,410


In millions	Aggregate Assets		Aggregate Liabilities
March 31, 2013
Market Street	$	7,623	$	7,623
Credit Card and Other Securitization Trusts		1,948		201
Tax Credit Investments		2,170		840
December 31, 2012
Market Street	$	7,796	$	7,796
Credit Card Securitization Trust		1,782
Tax Credit Investments		2,162		853


In millions	Aggregate Assets		Aggregate Liabilities
June 30, 2013
Market Street	$	7,322	$	7,322
Credit Card and Other Securitization Trusts		1,978		195
Tax Credit Investments		1,045		544

December 31, 2012
Market Street	$	7,796	$	7,796
Credit Card Securitization Trust		1,782
Tax Credit Investments		2,162		853


	Accruing																											Accruing
In millions	Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (b)			Nonperforming Loans			Fair Value Option Nonaccrual Loans (c)			Purchased Impaired			Total Loans			Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (b)			Nonperforming Loans			Fair Value Option Nonaccrual Loans (c)			Purchased Impaired			Total Loans
March 31, 2013
June 30, 2013
Commercial	$	83,248		$	163		$	35		$	27		$	225		$	542					$	270		$	84,285		$	86,009		$	85		$	53		$	31		$	169		$	521					$	231		$	86,930
Commercial real estate		17,076			111			36			3			150			744						809			18,779			17,527			66			22						88			639						737			18,991
Equipment lease financing		7,196			34			1						35			9									7,240			7,336			2			4						6			7									7,349
Home equity (d)		32,267			86			33						119			1,088						2,556			36,030			32,707			76			29						105			1,131						2,473			36,416
Residential real estate (d) (e)		8,437			259			127			1,517			1,903			965		$	243			3,437			14,985			8,464			230			108			1,376			1,714			962		$	301			3,336			14,777
Credit card		3,990			30			20			35			85			6									4,081			4,052			27			19			33			79			4									4,135
Other consumer (d) (f)		20,399			211			101			324			636			68						1			21,104			20,483			200			114			322			636			57						1			21,177
Total	$	172,613		$	894		$	353		$	1,906		$	3,153		$	3,422		$	243		$	7,073		$	186,504		$	176,578		$	686		$	349		$	1,762		$	2,797		$	3,321		$	301		$	6,778		$	189,775
Percentage of total loans		92.56	%		.48	%		.19	%		1.02	%		1.69	%		1.83	%		0.13	%		3.79	%		100.00	%		93.05	%		.36	%		.18	%		.93	%		1.47	%		1.75	%		.16	%		3.57	%		100.00	%
December 31, 2012
Commercial	$	81,930		$	115		$	55		$	42		$	212		$	590					$	308		$	83,040		$	81,930		$	115		$	55		$	42		$	212		$	590					$	308		$	83,040
Commercial real estate		16,735			100			57			15			172			807						941			18,655			16,735			100			57			15			172			807						941			18,655
Equipment lease financing		7,214			17			1			2			20			13									7,247			7,214			17			1			2			20			13									7,247
Home equity		32,174			117			58						175			951						2,620			35,920			32,174			117			58						175			951						2,620			35,920
Residential real estate (e)		8,464			278			146			1,901			2,325			845		$	70			3,536			15,240			8,464			278			146			1,901			2,325			845		$	70			3,536			15,240
Credit card		4,205			34			23			36			93			5									4,303			4,205			34			23			36			93			5									4,303
Other consumer (f)		20,663			258			131			355			744			43						1			21,451			20,663			258			131			355			744			43						1			21,451
Total	$	171,385		$	919		$	471		$	2,351		$	3,741		$	3,254		$	70		$	7,406		$	185,856		$	171,385		$	919		$	471		$	2,351		$	3,741		$	3,254		$	70		$	7,406		$	185,856
Percentage of total loans		92.21	%		.49	%		.25	%		1.26	%		2.00	%		1.75	%		.04	%		3.99	%		100.00	%		92.21	%		.49	%		.25	%		1.26	%		2.00	%		1.75	%		.05	%		3.99	%		100.00	%


			Criticized Commercial Loans										Criticized Commercial Loans
In millions	Pass Rated (b)		Special Mention (c)		Substandard (d)		Doubtful (e)		Total Loans		Pass Rated (b)		Special Mention (c)		Substandard (d)		Doubtful (e)		Total Loans
March 31, 2013
June 30, 2013
Commercial	$	79,662	$	1,721	$	2,513	$	119	$	84,015	$	82,619	$	1,607	$	2,363	$	110	$	86,699
Commercial real estate		15,547		627		1,648		148		17,970		16,344		399		1,382		129		18,254
Equipment lease financing		7,066		85		88		1		7,240		7,169		99		79		2		7,349
Purchased impaired loans		14		60		850		155		1,079		31		42		732		163		968
Total commercial lending (f)	$	102,289	$	2,493	$	5,099	$	423	$	110,304
Total commercial lending (f) (g)											$	106,163	$	2,147	$	4,556	$	404	$	113,270
December 31, 2012
Commercial	$	78,048	$	1,939	$	2,600	$	145	$	82,732	$	78,048	$	1,939	$	2,600	$	145	$	82,732
Commercial real estate		14,898		804		1,802		210		17,714		14,898		804		1,802		210		17,714
Equipment lease financing		7,062		68		112		5		7,247		7,062		68		112		5		7,247
Purchased impaired loans		49		60		852		288		1,249		49		60		852		288		1,249
Total commercial lending (f)	$	100,057	$	2,871	$	5,366	$	648	$	108,942	$	100,057	$	2,871	$	5,366	$	648	$	108,942


	Home Equity (b) (c)				Residential Real Estate (b) (c)				Home Equity (b) (c)				Residential Real Estate (b) (c)
March 31, 2013 – in millions	1st Liens		2nd Liens				Total
Current estimated LTV ratios (d) (e)
June 30, 2013 – in millions									1st Liens		2nd Liens				Total
Current estimated LTV ratios (d)
Greater than or equal to 125% and updated FICO scores:
Greater than 660	$	16	$	748	$	465	$	1,229	$	15	$	673	$	488	$	1,176
Less than or equal to 660		16		364		344		724		16		316		391		723
Missing FICO				21		35		56				17		31		48

Greater than or equal to 100% to less than 125% and updated FICO scores:
Greater than 660		25		544		418		987		23		550		390		963
Less than or equal to 660		19		257		311		587		18		246		323		587
Missing FICO				16		22		38		1		16		18		35

Greater than or equal to 90% to less than 100% and updated FICO scores:
Greater than 660		14		136		203		353		12		145		217		374
Less than or equal to 660		12		93		186		291		13		89		162		264
Missing FICO				6		13		19				7		11		18

Less than 90% and updated FICO scores:
Greater than 660		89		178		681		948		92		189		626		907
Less than or equal to 660		140		166		718		1,024		135		169		599		903
Missing FICO		2		7		42		51		1		8		38		47

Missing LTV and updated FICO scores:
Greater than 660						16		16		2				19		21
Less than or equal to 660						11		11		1				17		18
Missing FICO						24		24				3		7		10
Total home equity and residential real estate loans	$	333	$	2,536	$	3,489	$	6,358	$	329	$	2,428	$	3,337	$	6,094


During the three months ended March 31, 2013 Dollars in millions	Number of Loans			Pre-TDR Recorded Investment (b)			Post-TDR Recorded Investment (c)
	Number of Loans					Principal Forgiveness			Rate Reduction			Other			Total
																		Number of Loans			Pre-TDR Recorded Investment (b)			Post-TDR Recorded Investment (c)
During the three months ended June 30, 2013 Dollars in millions																				Principal Forgiveness					Rate Reduction			Other			Total
Commercial lending				Pre-TDR Recorded Investment (b)														Number of Loans
Commercial		31		$	38					$	2		$	22		$	24		47		Pre-TDR Recorded Investment (b)	$	48		$	4		$	2		$	28			$	34
Commercial real estate		35			133		$	6			40			75			121		30			50			6			2			27				35
Equipment lease financing		2			6									1			1		5			23						11			1				12
Total commercial lending		68			177			6			42			98			146		82			121			10			15			56				81
Consumer lending																																	��
Home equity		2,305			119						39			49			88		1,410			98						43			39				82
Residential real estate		324			46						12			33			45		285			32						7			25				32
Credit card		2,530			18						18						18		2,288			18						17							17
Other consumer		642			10									9			9		783			9						1			6				7
Total consumer lending		5,801			193						69			91			160		4,766			157						68			70				138
Total TDRs		5,869		$	370		$	6		$	111		$	189		$	306		4,848		$	278		$	10		$	83		$	126			$	219

During the three months ended March 31, 2012 Dollars in millions
During the three months ended June 30, 2012 Dollars in millions
Commercial lending
Commercial		104		$	26		$	2		$	4		$	11		$	17		33		$	102		$	1		$	40		$	42			$	83
Commercial real estate		21			74			9			38			20			67		13			26			8			5			9				22
Equipment lease financing		5			15									11			11		1			3			1										1
Total commercial lending		130			115			11			42			42			95		47			131			10			45			51				106
Consumer lending
Home equity		1,103	��		74						52			22			74		1,083			69						60			8				68
Residential real estate		182			33						11			22			33		200			41						18			20				38
Credit card		2,501			18						17						17		2,268			17						16							16
Other consumer		352			9						1			8			9		61			1									1				1
Total consumer lending		4,138			134						81			52			133		3,612			128						94			29				123
Total TDRs		4,268		$	249		$	11		$	123		$	94		$	228		3,659		$	259		$	10		$	139		$	80			$	229


During the six months ended June 30, 2013 Dollars in millions	Number of Loans		Pre-TDR Recorded Investment (b)		Post-TDR Recorded Investment (c)
	Number of Loans		Pre-TDR Recorded Investment (b)		Principal Forgiveness		Rate Reduction		Other		Total
Commercial lending
Commercial		78	$	86	$	4	$	4	$	50	$	58
Commercial real estate		65		183		12		42		102		156
Equipment lease financing		7		29				11		2		13
Total commercial lending		150		298		16		57		154		227
Consumer lending
Home equity		3,715		217				82		88		170
Residential real estate		609		78				19		58		77
Credit card		4,663		35				33				33
Other consumer		1,425		19				1		15		16
Total consumer lending		10,412		349				135		161		296
Total TDRs		10,562	$	647	$	16	$	192	$	315	$	523

During the six months ended June 30, 2012 Dollars in millions
Commercial lending
Commercial		137	$	128	$	3	$	44	$	53	$	100
Commercial real estate		34		100		17		43		29		89
Equipment lease financing		6		18		1				11		12
Total commercial lending		177		246		21		87		93		201
Consumer lending
Home equity		2,186		143				112		30		142
Residential real estate		382		74				29		42		71
Credit card		4,651		35				33				33
Other consumer		413		10				1		9		10
Total consumer lending		7,632		262				175		81		256
Total TDRs		7,809	$	508	$	21	$	262	$	174	$	457


During the three months ended March 31, 2013 Dollars in millions	Number of Contracts		Recorded Investment
During the three months ended June 30, 2013 Dollars in millions					Number of Contracts		Recorded Investment
Commercial lending
Commercial		15	$	10		11	$	8
Commercial real estate		6		10		12		21
Total commercial lending (a)		21		20		23		29
Consumer lending
Home equity		152		11		402		26
Residential real estate		94		13		251		35
Credit card		1,427		11		1,225		9
Other consumer		33		1		55		1
Total consumer lending		1,706		36		1,933		71
Total TDRs		1,727	$	56		1,956	$	100

During the three months ended March 31, 2012 Dollars in millions	Number of Contracts		Recorded Investment
During the three months ended June 30, 2012 Dollars in millions					Number of Contracts		Recorded Investment
Commercial lending
Commercial		31	$	10		27	$	5
Commercial real estate		8		5		15		35
Total commercial lending (a)		39		15
Equipment lease financing						5		11
Total commercial lending						47		51
Consumer lending
Home equity		205		19		161		14
Residential real estate		163		24		144		23
Credit card		1,685		12		2,114		15
Other consumer		37		1		39		1
Total consumer lending		2,090		56		2,458		53
Total TDRs		2,129	$	71		2,505	$	104


In millions	Unpaid Principal Balance		Recorded Investment (a)		Associated Allowance (b)		Average Recorded Investment (a)		Unpaid Principal Balance		Recorded Investment (a)		Associated Allowance (b)		Average Recorded Investment (a)
March 31, 2013
June 30, 2013
Impaired loans with an associated allowance
Commercial	$	681	$	457	$	137	$	490	$	636	$	444	$	117	$	475
Commercial real estate		834		570		131		581		702		481		111		548
Home equity		1,101		1,019		334		1,016		1,033		1,012		354		1,014
Residential real estate		739		624		100		644		589		479		86		589
Credit card		193		193		43		198		209		208		39		202
Other consumer		94		82		3		84		64		53		3		73
Total impaired loans with an associated allowance	$	3,642	$	2,945	$	748	$	3,013	$	3,233	$	2,677	$	710	$	2,901
Impaired loans without an associated allowance
Commercial	$	261	$	143			$	135	$	376	$	155			$	141
Commercial real estate		510		376				366		531		359				363
Home equity		178		81				101		292		118				107
Residential real estate		316		232				231		395		373				279
Total impaired loans without an associated allowance	$	1,265	$	832			$	833	$	1,594	$	1,005			$	890
Total impaired loans	$	4,907	$	3,777	$	748	$	3,846	$	4,827	$	3,682	$	710	$	3,791
December 31, 2012
Impaired loans with an associated allowance
Commercial	$	824	$	523	$	150	$	653	$	824	$	523	$	150	$	653
Commercial real estate		851		594		143		778		851		594		143		778
Home equity		1,070		1,013		328		851		1,070		1,013		328		851
Residential real estate		778		663		168		700		778		663		168		700
Credit card		204		204		48		227		204		204		48		227
Other consumer		104		86		3		63		104		86		3		63
Total impaired loans with an associated allowance	$	3,831	$	3,083	$	840	$	3,272	$	3,831	$	3,083	$	840	$	3,272
Impaired loans without an associated allowance
Commercial	$	362	$	126			$	157	$	362	$	126			$	157
Commercial real estate		562		355				400		562		355				400
Home equity		169		121				40		169		121				40
Residential real estate		316		231				77		316		231				77
Total impaired loans without an associated allowance	$	1,409	$	833			$	674	$	1,409	$	833			$	674
Total impaired loans	$	5,240	$	3,916	$	840	$	3,946	$	5,240	$	3,916	$	840	$	3,946


In millions	Commercial Lending			Consumer Lending			Total			Commercial Lending			Consumer Lending			Total
March 31, 2013
June 30, 2013
Allowance for Loan and Lease Losses
January 1	$	1,774		$	2,262		$	4,036		$	1,774		$	2,262		$	4,036
Charge-offs		(203	)		(366	)		(569	)		(336	)		(589	)		(925	)
Recoveries		82			31			113			185			76			261
Net charge-offs		(121	)		(335	)		(456	)		(151	)		(513	)		(664	)
Provision for credit losses		55			181			236			28			365			393
Net change in allowance for unfunded loan commitments and letters of credit		12						12			8						8
March 31	$	1,720		$	2,108		$	3,828
Other											(1	)					(1	)
June 30										$	1,658		$	2,114		$	3,772
TDRs individually evaluated for impairment	$	35		$	480		$	515		$	25		$	482		$	507
Other loans individually evaluated for impairment		233						233			203						203
Loans collectively evaluated for impairment		1,254			717			1,971			1,247			698			1,945
Purchased impaired loans		198			911			1,109			183			934			1,117
March 31	$	1,720		$	2,108		$	3,828
June 30										$	1,658		$	2,114		$	3,772
Loan Portfolio
TDRs individually evaluated for impairment	$	610		$	2,231		$	2,841		$	599		$	2,243		$	2,842
Other loans individually evaluated for impairment		936						936			840						840
Loans collectively evaluated for impairment (a)		107,679			67,975			175,654			110,863			68,452			179,315
Purchased impaired loans		1,079			5,994			7,073			968			5,810			6,778
March 31	$	110,304		$	76,200		$	186,504
June 30										$	113,270		$	76,505		$	189,775
Portfolio Segment ALLL as a percentage of total ALLL		45	%		55	%		100	%		44	%		56	%		100	%
Ratio of the allowance for loan and lease losses to total loans		1.56	%		2.77	%		2.05	%		1.46	%		2.76	%		1.99	%
March 31, 2012
June 30, 2012
Allowance for Loan and Lease Losses
January 1	$	1,995		$	2,352		$	4,347		$	1,995		$	2,352		$	4,347
Charge-offs		(200	)		(267	)		(467	)		(403	)		(526	)		(929	)
Recoveries		104			30			134			214			67			281
Net charge-offs		(96	)		(237	)��		(333	)		(189	)		(459	)		(648	)
Provision for credit losses		44			141			185			88			353			441
Net change in allowance for unfunded loan commitments and letters of credit		(6	)		3			(3	)		7			9			16
March 31	$	1,937		$	2,259		$	4,196
June 30										$	1,901		$	2,255		$	4,156
TDRs individually evaluated for impairment	$	35		$	536		$	571		$	45		$	527		$	572
Other loans individually evaluated for impairment		455						455			419						419
Loans collectively evaluated for impairment		1,211			968			2,179			1,210			920			2,130
Purchased impaired loans		236			755			991			227			808			1,035
March 31	$	1,937		$	2,259		$	4,196
June 30										$	1,901		$	2,255		$	4,156
Loan Portfolio
TDRs individually evaluated for impairment	$	412		$	1,821		$	2,233		$	483		$	1,836		$	2,319
Other loans individually evaluated for impairment		1,736						1,736			1,523						1,523
Loans collectively evaluated for impairment		96,799			67,025			163,824			100,607			67,893			168,500
Purchased impaired loans		1,696			6,725			8,421			1,532			6,551			8,083
March 31	$	100,643		$	75,571		$	176,214
June 30										$	104,145		$	76,280		$	180,425
Portfolio segment ALLL as a percentage of total ALLL		46	%		54	%		100	%		46	%		54	%		100	%
Ratio of the allowance for loan and lease losses to total loans		1.92	%		2.99	%		2.38	%		1.83	%		2.96	%		2.30	%


	Amortized Cost			Unrealized						Fair Value				Amortized			Unrealized							Fair
In millions			Gains			Losses				Fair Value			Cost			Gains			Losses				Value
March 31, 2013	Amortized Cost
June 30, 2013
Securities Available for Sale
Debt securities
U.S. Treasury and government agencies	$	2,406		$	240					$	2,646			$	2,052		$	158						$	2,210
Residential mortgage-backed
Agency		24,483			817		$	(28	)		25,272				23,915			514		$	(181	)			24,248
Non-agency		5,895			361			(218	)		6,038				5,816			292			(256	)			5,852
Commercial mortgage-backed
Agency		588			27						615				574			22			(1	)			595
Non-agency		3,286			191						3,477				3,560			135			(16	)			3,679
Asset-backed		5,995			76			(56	)		6,015				6,036			57			(59	)			6,034
State and municipal		2,202			102			(20	)		2,284	��			2,193			64			(40	)			2,217
Other debt		2,807			97			(3	)		2,901				2,733			60			(26	)			2,767
Total debt securities		47,662			1,911			(325	)		49,248				46,879			1,302			(579	)			47,602
Corporate stocks and other		288									288				297										297
Total securities available for sale	$	47,950		$	1,911		$	(325	)	$	49,536			$	47,176		$	1,302		$	(579	)		$	47,899
Securities Held to Maturity
Debt securities
U.S. Treasury and government agencies	$	232		$	42					$	274			$	234		$	21						$	255
Residential mortgage-backed (agency)		4,012			166						4,178				3,773			84		$	(32	)			3,825
Commercial mortgage-backed
Agency		1,267			90						1,357				1,262			57							1,319
Non-agency		2,335			66		$	(1	)		2,400				2,193			42			(4	)			2,231
Asset-backed		989			8						997				1,100			3			(3	)			1,100
State and municipal		639			58						697				639			19							658
Other debt		351			18						369				349			12							361
Total securities held to maturity	$	9,825		$	448		$	(1	)	$	10,272			$	9,550		$	238		$	(39	)		$	9,749
December 31, 2012

Securities Available for Sale
Debt securities
U.S. Treasury and government agencies	$	2,868		$	245					$	3,113			$	2,868		$	245						$	3,113
Residential mortgage-backed
Agency		25,844			952		$	(12	)		26,784				25,844			952		$	(12	)			26,784
Non-agency		6,102			314			(309	)		6,107				6,102			314			(309	)			6,107
Commercial mortgage-backed
Agency		602			31						633				602			31							633
Non-agency		3,055			210			(1	)		3,264				3,055			210			(1	)			3,264
Asset-backed		5,667			65			(79	)		5,653				5,667			65			(79	)			5,653
State and municipal		2,197			111			(21	)		2,287				2,197			111			(21	)			2,287
Other debt		2,745			103			(4	)		2,844				2,745			103			(4	)			2,844
Total debt securities		49,080			2,031			(426	)		50,685				49,080			2,031			(426	)			50,685
Corporate stocks and other		367									367				367										367
Total securities available for sale	$	49,447		$	2,031		$	(426	)	$	51,052			$	49,447		$	2,031		$	(426	)		$	51,052
Securities Held to Maturity
Debt securities
U.S. Treasury and government agencies	$	230		$	47					$	277			$	230		$	47						$	277
Residential mortgage-backed (agency)		4,380			202						4,582				4,380			202							4,582
Commercial mortgage-backed
Agency		1,287			87						1,374				1,287			87							1,374
Non-agency		2,582			85						2,667				2,582			85							2,667
Asset-backed		858			5						863				858			5							863
State and municipal		664			61						725				664			61							725
Other debt		353			19						372				353			19							372
Total securities held to maturity	$	10,354		$	506					$	10,860			$	10,354		$	506						$	10,860


	Unrealized loss position less than 12 months					Unrealized loss position 12 months or more					Total
In millions	Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized loss position less than 12 months					Unrealized loss position 12 months or more					Total
March 31, 2013
																Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss				Fair Value
June 30, 2013
Debt securities
Residential mortgage-backed
Agency																$	(176	)	$	8,046	$	(5	)	$	163	$	(181	)		$	8,209
Non-agency																	(53	)		1,563		(203	)		1,877		(256	)			3,440
Commercial mortgage-backed
Agency	$	(24	)	$	2,696	$	(4	)	$	143	$	(28	)	$	2,839		(1	)		32							(1	)			32
Non-agency		(11	)		412		(207	)		2,427		(218	)		2,839		(16	)		1,039							(16	)			1,039
Asset-backed		(1	)		669		(55	)		379		(56	)		1,048		(8	)		1,055		(51	)		228		(59	)	��		1,283
State and municipal		(3	)		229		(17	)		297		(20	)		526		(22	)		818		(18	)		274		(40	)			1,092
Other debt		(2	)		66		(1	)		16		(3	)		82		(25	)		867		(1	)		16		(26	)			883
Total	$	(41	)	$	4,072	$	(284	)	$	3,262	$	(325	)	$	7,334	$	(301	)	$	13,420	$	(278	)	$	2,558	$	(579	)		$	15,978
December 31, 2012
Debt securities
Residential mortgage-backed
Agency	$	(9	)	$	1,128	$	(3	)	$	121	$	(12	)	$	1,249	$	(9	)	$	1,128	$	(3	)	$	121	$	(12	)		$	1,249
Non-agency		(3	)		219		(306	)		3,185		(309	)		3,404		(3	)		219		(306	)		3,185		(309	)			3,404
Commercial mortgage-backed
Non-agency		(1	)		60							(1	)		60		(1	)		60							(1	)			60
Asset-backed		(1	)		370		(78	)		625		(79	)		995		(1	)		370		(78	)		625		(79	)			995
State and municipal		(2	)		240		(19	)		518		(21	)		758		(2	)		240		(19	)		518		(21	)			758
Other debt		(2	)		61		(2	)		15		(4	)		76		(2	)		61		(2	)		15		(4	)			76
Total	$	(18	)	$	2,078	$	(408	)	$	4,464	$	(426	)	$	6,542	$	(18	)	$	2,078	$	(408	)	$	4,464	$	(426	)		$	6,542


~~March 31,~~June 30, 2013	Range			Weighted- average (b)
Long-term prepayment rate (annual CPR)
Prime		7-20	%		14	%
Alt-A		5-12			6
Option ARM		3-6			3
Remaining collateral expected to default
Prime		~~1-46~~1-45	%		1918	%
Alt-A		~~3-57~~7-57			33
Option ARM		~~20-70~~16-69			5048
Loss severity
Prime		~~25-70~~25-71	%		4743	%
Alt-A		30-85			5956
Option ARM		~~40-69~~40-70			6159


In millions	Non-agency residential mortgage-backed			Non-agency commercial mortgage-backed			Asset-backed			Other debt			Total			Non-agency residential mortgage-backed			Non-agency commercial mortgage-backed			Asset-backed			Other debt			Total
For the three months ended March 31, 2013
December 31, 2012	$	(926	)	$	(6	)	$	(255	)	$	(14	)	$	(1,201	)
For the three months ended June 30, 2013
March 31, 2013																$	(887	)	$	(6	)	$	(258	)	$	(14	)	$	(1,165	)
Additional loss where credit impairment was previously recognized		(7	)					(3	)					(10	)		(3	)					(1	)					(4	)
Reduction due to credit impaired securities sold or matured		46												46			5												5
March 31, 2013	$	(887	)	$	(6	)	$	(258	)	$	(14	)	$	(1,165	)
June 30, 2013																$	(885	)	$	(6	)	$	(259	)	$	(14	)	$	(1,164	)


In millions	Proceeds		Gross Gains		Gross Losses			Net Gains		Tax Expense
For the three months ended March 31
2013	$	1,255	$	17	$	(3	)	$	14	$	5
2012		3,553		67		(10	)		57		20

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