☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2018
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Pennsylvania | 25-1435979 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Pages | |||||
PART I – FINANCIAL INFORMATION | |||||
Item 1. Financial Statements (Unaudited). | |||||
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Item 3. Quantitative and Qualitative Disclosures about Market Risk. | 76-81 | ||||
Item 4. Controls and Procedures. | |||||
MD&A TABLE REFERENCE
MD&A TABLE REFERENCE | ||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE (Continued) | ||
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Dollars in millions, except per share data Unaudited | Three months ended March 31 | |||||||
2017 | 2016 | |||||||
Financial Results (a) | ||||||||
Revenue | ||||||||
Net interest income | $ | 2,160 | $ | 2,098 | ||||
Noninterest income | 1,724 | 1,567 | ||||||
Total revenue | 3,884 | 3,665 | ||||||
Provision for credit losses | 88 | 152 | ||||||
Noninterest expense | 2,402 | 2,281 | ||||||
Income before income taxes and noncontrolling interests | $ | 1,394 | $ | 1,232 | ||||
Net income | $ | 1,074 | $ | 943 | ||||
Less: | ||||||||
Net income attributable to noncontrolling interests | 17 | 19 | ||||||
Preferred stock dividends | 63 | 63 | ||||||
Preferred stock discount accretion and redemptions | 21 | 2 | ||||||
Net income attributable to common shareholders | $ | 973 | $ | 859 | ||||
Less: | ||||||||
Dividends and undistributed earnings allocated to nonvested restricted shares | 6 | 6 | ||||||
Impact of BlackRock earnings per share dilution | 4 | 3 | ||||||
Net income attributable to diluted common shares | $ | 963 | $ | 850 | ||||
Diluted earnings per common share | $ | 1.96 | $ | 1.68 | ||||
Cash dividends declared per common share | $ | .55 | $ | .51 | ||||
Effective tax rate (b) | 23.0 | % | 23.5 | % | ||||
Performance Ratios | ||||||||
Net interest margin (c) | 2.77 | % | 2.75 | % | ||||
Noninterest income to total revenue | 44 | % | 43 | % | ||||
Efficiency | 62 | % | 62 | % | ||||
Return on: | ||||||||
Average common shareholders’ equity | 9.50 | % | 8.44 | % | ||||
Average assets | 1.19 | % | 1.07 | % |
Dollars in millions, except per share data Unaudited | Three months ended March 31 | ||||||
2018 | 2017 | ||||||
Financial Results (a) | |||||||
Revenue | |||||||
Net interest income | $ | 2,361 | $ | 2,160 | |||
Noninterest income | 1,750 | 1,724 | |||||
Total revenue | 4,111 | 3,884 | |||||
Provision for credit losses | 92 | 88 | |||||
Noninterest expense | 2,527 | 2,402 | |||||
Income before income taxes and noncontrolling interests | $ | 1,492 | $ | 1,394 | |||
Net income | $ | 1,239 | $ | 1,074 | |||
Less: | |||||||
Net income attributable to noncontrolling interests | 10 | 17 | |||||
Preferred stock dividends | 63 | 63 | |||||
Preferred stock discount accretion and redemptions | 1 | 21 | |||||
Net income attributable to common shareholders | 1,165 | 973 | |||||
Less: | |||||||
Dividends and undistributed earnings allocated to nonvested restricted shares | 5 | 6 | |||||
Impact of BlackRock earnings per share dilution | 2 | 4 | |||||
Net income attributable to diluted common shares | $ | 1,158 | $ | 963 | |||
Diluted earnings per common share | $ | 2.43 | $ | 1.96 | |||
Cash dividends declared per common share | $ | .75 | $ | .55 | |||
Effective tax rate (b) | 17.0 | % | 23.0 | % | |||
Performance Ratios | |||||||
Net interest margin (c) | 2.91 | % | 2.77 | % | |||
Noninterest income to total revenue | 43 | % | 44 | % | |||
Efficiency | 61 | % | 62 | % | |||
Return on: | |||||||
Average common shareholders’ equity | 11.04 | % | 9.50 | % | |||
Average assets | 1.34 | % | 1.19 | % |
(a) | The Executive Summary and Consolidated Income Statement Review portions of this Financial Review section provide information regarding items impacting the comparability of the periods presented. |
(b) | The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. The first quarter 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. |
(c) | Calculated as annualized taxable-equivalent net interest income divided by average earning assets. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned ontax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP in the Consolidated Income Statement. |
Balance Sheet Data(dollars in millions, except per share data) Assets Loans Allowance for loan and lease losses Interest-earning deposits with banks (b) Investment securities Loans held for sale Equity investments (c) Mortgage servicing rights Goodwill Other assets Noninterest-bearing deposits Interest-bearing deposits Total deposits Borrowed funds Total shareholders’ equity Common shareholders’ equity Accumulated other comprehensive income (loss) Book value per common share Common shares outstanding (in millions) Loans to deposits Client Assets(in billions) Discretionary client assets under management Nondiscretionary client assets under administration Total client assets under administration (d) Brokerage account client assets Total client assets Capital Ratios Transitional Basel III (e) (f) Common equity Tier 1 Tier 1 risk-based Total capital risk-based Leverage Pro forma FullyPhased-In Basel III(Non-GAAP) (f) Common equity Tier 1 Common shareholders’ equity to assets Asset Quality Nonperforming loans to total loans Nonperforming assets to total loans, OREO, foreclosed and other assets Nonperforming assets to total assets Net charge-offs to average loans (for the three months ended) (annualized) Allowance for loan and lease losses to total loans Allowance for loan and lease losses to total nonperforming loans Accruing loans past due 90 days or more (in millions)1:1: Consolidated Financial Highlights (Continued) (a)Unaudited March 31
2017 December 31
2016 March 31
2016 $ 370,944 $ 366,380 $ 360,985 $ 212,826 $ 210,833 $ 207,485 $ 2,561 $ 2,589 $ 2,711 $ 27,877 $ 25,711 $ 29,478 $ 76,432 $ 75,947 $ 72,569 $ 1,414 $ 2,504 $ 1,541 $ 10,900 $ 10,728 $ 10,391 $ 1,867 $ 1,758 $ 1,323 $ 9,103 $ 9,103 $ 9,103 $ 28,083 $ 27,506 $ 27,945 $ 79,246 $ 80,230 $ 78,151 $ 181,464 $ 176,934 $ 172,208 $ 260,710 $ 257,164 $ 250,359 $ 55,062 $ 52,706 $ 54,178 $ 45,754 $ 45,699 $ 45,130 $ 41,774 $ 41,723 $ 41,677 $ (279 ) $ (265 ) $ 532 $ 86.14 $ 85.94 $ 83.47 485 485 499 82 % 82 % 83 % $ 141 $ 137 $ 135 123 120 118 264 257 253 46 44 43 $ 310 $ 301 $ 296 10.5 % 10.6 % 10.6 % 11.8 % 12.0 % 11.9 % 14.1 % 14.3 % 14.4 % 9.9 % 10.1 % 10.2 % 10.0 % 10.0 % 10.1 % 11.3 % 11.4 % 11.5 % .94 % 1.02 % 1.10 % 1.04 % 1.12 % 1.23 % .60 % .65 % .71 % .23 % .20 % .29 % 1.20 % 1.23 % 1.31 % 128 % 121 % 119 % $ 699 $ 782 $ 782 Unaudited March 31
2018December 31
2017March 31
2017 Assets $ 379,161 $ 380,768 $ 370,944 Loans $ 221,614 $ 220,458 $ 212,826 Allowance for loan and lease losses $ 2,604 $ 2,611 $ 2,561 Interest-earning deposits with banks (b) $ 28,821 $ 28,595 $ 27,877 Investment securities $ 74,562 $ 76,131 $ 76,432 Loans held for sale $ 965 $ 2,655 $ 1,414 Equity investments (c) $ 12,008 $ 11,392 $ 10,900 Mortgage servicing rights $ 1,979 $ 1,832 $ 1,867 Goodwill $ 9,218 $ 9,173 $ 9,103 Other assets $ 27,949 $ 27,894 $ 28,083 Noninterest-bearing deposits $ 78,303 $ 79,864 $ 79,246 Interest-bearing deposits $ 186,401 $ 185,189 $ 181,464 Total deposits $ 264,704 $ 265,053 $ 260,710 Borrowed funds $ 58,039 $ 59,088 $ 55,062 Total shareholders’ equity $ 46,969 $ 47,513 $ 45,754 Common shareholders’ equity $ 42,983 $ 43,530 $ 41,774 Accumulated other comprehensive income (loss) $ (699 ) $ (148 ) $ (279 ) Book value per common share $ 91.39 $ 91.94 $ 86.14 Period-end common shares outstanding (in millions) 470 473 485 Loans to deposits 84 % 83 % 82 % Discretionary client assets under management $ 148 $ 151 $ 141 Nondiscretionary client assets under administration 129 131 123 Total client assets under administration 277 282 264 Brokerage account client assets 49 49 46 Total client assets $ 326 $ 331 $ 310 Capital Ratios Basel III (d) (e) (f) Common equity Tier 1 9.6 % N/A N/A Tier 1 risk-based 10.8 % N/A N/A Total capital risk-based 12.8 % N/A N/A Leverage 9.4 % N/A N/A Supplementary leverage 7.9 % N/A N/A Fully Phased-In Basel III (Non-GAAP) (f) (g) Common equity Tier 1 N/A 9.8 % 10.0 % 2017 Transitional Basel III (d) (f) Common equity Tier 1 N/A 10.4 % 10.5 % Tier 1 risk-based N/A 11.6 % 11.8 % Total capital risk-based N/A 13.7 % 14.1 % Leverage N/A 9.9 % 9.9 % Common shareholders’ equity to total assets 11.3 % 11.4 % 11.3 % Asset Quality Nonperforming loans to total loans .83 % .85 % .94 % Nonperforming assets to total loans, OREO, foreclosed and other assets .90 % .92 % 1.04 % Nonperforming assets to total assets .53 % .53 % .60 % Net charge-offs to average loans (for the three months ended) (annualized) .21 % .22 % .23 % Allowance for loan and lease losses to total loans 1.18 % 1.18 % 1.20 % Allowance for loan and lease losses to total nonperforming loans 141 % 140 % 128 % Accruing loans past due 90 days or more (in millions) $ 628 $ 737 $ 699 (a) The Executive Summary and Consolidated Balance Sheet Review portions of this Financial Review provide information regarding items impacting the comparability of the periods presented. (b) Amounts include balances held with the Federal Reserve Bank of Cleveland (Federal Reserve Bank) of $27.5$28.6 billion, $25.1$28.3 billion and $29.0$27.5 billion as of March 31, 2017,2018, December 31, 20162017 and March 31, 2016,2017, respectively.(c) Amounts include our equity interest in BlackRock. The amount at March 31, 2018 includes $.6 billion of trading and available for sale securities that were reclassified to Equity investments on January 1, 2018 in accordance with the adoption of Accounting Standard Update 2016-01. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in the Notes To Consolidated Financial Statements of this Report for additional detail on this adoption. (d) As a result of certain investment advisory services performed by one of our registered investment advisors, certain assets were previously reported as both discretionary client assets under management and nondiscretionary client assets under administration. Effective for the first quarter of 2017, these amountsAll ratios are only reported as discretionary assets under management. Prior periods were adjusted to remove amounts previously included in nondiscretionary assets under administration of approximately $9 billion and $7 billion as of December 31, 2016 and March 31, 2016, respectively.(e)Calculatedcalculated using the regulatory capital methodology applicable to PNC during each period presented.presented and calculated based on the standardized approach.(e) The Basel III ratios for common equity Tier 1 capital, Tier 1 risk-based capital, Leverage and Supplementary leverage reflect the full phase-in of all Basel III adjustments to these metrics applicable to PNC. The Basel III total risk-based capital ratio includes $80 million of nonqualifying trust preferred capital securities that are subject to a phase-out period that runs through 2022. (f) See Basel III Capital discussion in the Capital Management portion of the Risk Management section of this Financial Review and the capital discussion in the Banking Regulation and Supervision section of Item 1 Business and Item 1A Risk Factors in our 20162017 Form10-K. See also the Transitional Basel III and Pro forma FullyPhased-In Basel III Common Equity Tier 1 Capital Ratios(Non-GAAP) – 2016 PeriodsMarch 31, 2017 table in the Statistical Information section of this Report for a reconciliation of the 2016 periods’March 31, 2017 ratios.
Analysis and Review (CCAR) submission to the Board of Governors of the Federal Reserve System (Federal Reserve). For more detail, see the Capital Highlights portion of this Executive Summary and the Liquidity and Capital Management portion of the Risk Management section of this Financial Review and the Supervision and Regulation section in Item 1 Business of our (g) 2017 Fully Phased-in Basel III results are presented as Pro forma estimates. Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, Florida, North Carolina, Kentucky, Washington, D.C., Delaware, Virginia, Georgia, Alabama, Missouri, Wisconsinthe Mid-Atlantic, Midwest and South Carolina.Southeast. We also provide certain products and services internationally.fee-based credit and creditfee-based products and services. We are focused on delivering those products and services to our customers with the goal of addressing their financial objectives and putting customers’ needs first. Our business model is built on customer loyalty and engagement, understanding our customers’ financial goals and offering our diverse products and services to help them achieve financial wellbeing.well-being. Our approach is concentrated on organically growing and deepening client relationships across our businesses that meet our risk/return measures.Ourterm. One ofterm, and consist of: priorities is to build a leading banking franchise in our underpenetrated geographic markets. We are focused on reinventing the retailto new markets and digital platforms;by transforming the retail distribution network and the home lending process for a better customer experiencefinancial solutions; and improved efficiency, and growing our consumer loan portfolio. In addition, we are seeking to attract more of the investable assets of new and existing clients and we continue to focus on expense management while investing inbolster critical business infrastructureinnovate and streamline coreenhance products, services, security and processes.20162017 Form10-K.2017 was2018 increased 15% to $1.2 billion, or $2.43 per diluted common share, compared to $1.1 billion, or $1.96 per diluted common share, an increase of 14%, compared to $943 million, or $1.68 per diluted common share, for the first quarter of 2016.2017.$219$227 million, or 6%, to $3.9$4.1 billion.$62$201 million, or 3%9%, to $2.2$2.4 billion.2.77%2.91% compared to 2.75%2.77% for the first quarter of 2016.2017.$157$26 million, or 10%2%, to $1.7 billion primarily due to growth in fee income.$1.8 billion.decreasedwas $92 million compared to $88 million for the first quarter of 20172017.$152$320 million for the first quarter of 2016.2017.Noninterest expense increased $121 millionFederal tax reform legislation, the Tax Cuts and Jobs Act, lowered the statutory federal income tax rate for corporations to $2.4 billion, reflecting overall higher levels of business activity.21% from 35% effective January 1, 2018.
See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for more detail on our 20172018 liquidity and capital and liquidity actions as well as our capital ratios.
Statements regarding our business outlook are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.
For the full year 2017 compared to full year 2016, we expect:
For the remaining quarters of 2017, we expect quarterly other noninterest income to be between $225 million and $275 million.
For the second quarter of 20172018 compared to the first quarter of 2017,2018, we expect:
Three months ended March 31 Dollars in millions Assets Interest-earning assets Investment securities Loans Interest-earning deposits with banks Other Total interest-earning assets/interest income Liabilities Interest-bearing liabilities Interest-bearing deposits Borrowed funds Total interest-bearing liabilities/interest expense Net interest margin/income(Non-GAAP) Taxable-equivalent adjustments Net interest income (GAAP)20172018 was $1.1$1.2 billion, or $1.96$2.43 per diluted common share, an increase of 14%,15% compared to $943 million,$1.1 billion, or $1.68$1.96 per diluted common share, for the first quarter of 2016.2017. The increase was driven by a 6% increase in revenue and a lower provision for credit losses,effective tax rate, partially offset by a 5% increase in noninterest expense. Higher revenue in the comparison reflected a 10% increase in noninterest income and a 3%9% increase in net interest income and a 2% increase in noninterest income. 2017 2016 Average
Balances Average
Yields/
Rates Interest
Income/
Expense Average
Balances Average
Yields/
Rates Interest
Income/
Expense $ 76,253 2.67 % $ 508 $ 70,269 2.72 % $ 478 212,253 3.67 % 1,941 207,184 3.60 % 1,875 24,192 .81 % 49 25,533 .50 % 32 8,395 3.54 % 74 7,764 3.62 % 70 $ 321,093 3.22 % 2,572 $ 310,750 3.15 % 2,455 $ 176,871 .28 % 120 $ 168,823 .25 % 105 54,942 1.74 % 240 53,626 1.51 % 204 $ 231,813 .62 % 360 $ 222,449 .55 % 309 2.77 % 2,212 2.75 % 2,146 (52 ) (48 ) $ 2,160 $ 2,098 2018 2017 Three months ended March 31
Dollars in millions Assets Interest-earning assets Investment securities $ 74,656 2.78 % $ 519 $ 76,253 2.67 % $ 508 Loans 221,104 4.09 % 2,250 212,253 3.67 % 1,941 Interest-earning deposits with banks 25,667 1.52 % 98 24,192 .81 % 49 Other 7,904 4.11 % 80 8,395 3.54 % 74 Total interest-earning assets/interest income $ 329,331 3.59 % 2,947 $ 321,093 3.22 % 2,572 Liabilities Interest-bearing liabilities Interest-bearing deposits $ 183,438 .47 % 213 $ 176,871 .28 % 120 Borrowed funds 59,638 2.31 % 344 54,942 1.74 % 240 Total interest-bearing liabilities/interest expense $ 243,076 .91 % 557 $ 231,813 .62 % 360 Net interest margin/income (Non-GAAP) 2.91 % 2,390 2.77 % 2,212 Taxable-equivalent adjustments (29 ) (52 ) Net interest income (GAAP) $ 2,361 $ 2,160 (a) Interest income calculated as taxable-equivalent interest income. To provide more meaningful comparisons of interest income and yields for all interest-earning assets, as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margins by increasing the interest income earned ontax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement. For more information, see Reconciliation of Taxable-Equivalent Net Interest Income (Non-GAAP) in the Statistical Information (Unaudited) section of this Report.
PNC Financial Services Group, Inc. –
Form 10-Q5mortgage-backed securities andnon-agency residential mortgage-backed securities.
2017.
The PNC Financial Services Group, Inc. –Form 10-Q5
Average total deposits of $254.9increased $5.7 billion, or 2%. Average interest-bearing deposits grew $8.8$6.6 billion, or 4%, reflecting the higher interest rate environment and customer growth. Average savings deposits increased $9.4 billion due in part to a shift to relationship-based savings products from money market deposits, which decreased $5.4 billion. Additionally, average interest-bearing demand deposits grew $2.8 billion. Average interest-bearing deposits represented 75% of average interest-bearing liabilities for the first quarter of 20172018 compared to 76% for the first quartersame period in 2017. Average noninterest-bearing deposits declined $.9 billion to $77.2 billion.
level and composition of borrowed funds.
Three months ended March 31 Dollars in millions | Change | |||||||||||||||
2017 | 2016 | $ | % | |||||||||||||
Noninterest income | ||||||||||||||||
Asset management | $ | 403 | $ | 341 | $ | 62 | 18 | % | ||||||||
Consumer services | 332 | 337 | (5 | ) | (1 | )% | ||||||||||
Corporate services | 393 | 325 | 68 | 21 | % | |||||||||||
Residential mortgage | 113 | 100 | 13 | 13 | % | |||||||||||
Service charges on deposits | 161 | 158 | 3 | 2 | % | |||||||||||
Other | 322 | 306 | 16 | 5 | % | |||||||||||
Total noninterest income | $ | 1,724 | $ | 1,567 | $ | 157 | 10 | % |
Three months ended March 31 | ||||||||||||||||
Change | ||||||||||||||||
Dollars in millions | 2018 | 2017 | $ | % | ||||||||||||
Noninterest income | ||||||||||||||||
Asset management | $ | 455 | $ | 403 | $ | 52 | 13 | % | ||||||||
Consumer services | 357 | 332 | 25 | 8 | % | |||||||||||
Corporate services | 429 | 414 | 15 | 4 | % | |||||||||||
Residential mortgage | 97 | 113 | (16 | ) | (14 | )% | ||||||||||
Service charges on deposits | 167 | 161 | 6 | 4 | % | |||||||||||
Other | 245 | 301 | (56 | ) | (19 | )% | ||||||||||
Total noninterest income | $ | 1,750 | $ | 1,724 | $ | 26 | 2 | % |
2017.
2017.
Residentialhedge.
Otherloan sales revenue, which reflected compressed pricing margins and lower refinancing origination volume.
our receipt of a five-year extension of the prior July 2017 deadline to conform certain equity investments subjectrelated to the Volcker Rule provisions of the Dodd-Frank Act. The increaseThis decrease was partially offset by the impact of first quarter 2016 net gains on the sale ofa $14 million decline in negative derivative fair value adjustments related to Visa Class B common shares.
shares in the comparison.
2017.
Three months ended March 31 Dollars in millions | Change | |||||||||||||||
2017 | 2016 | $ | % | |||||||||||||
Noninterest expense | ||||||||||||||||
Personnel | $ | 1,249 | $ | 1,145 | $ | 104 | 9 | % | ||||||||
Occupancy | 222 | 221 | 1 | – | ||||||||||||
Equipment | 251 | 234 | 17 | 7 | % | |||||||||||
Marketing | 55 | 54 | 1 | 2 | % | |||||||||||
Other | 625 | 627 | (2 | ) | – | |||||||||||
Total noninterest expense | $ | 2,402 | $ | 2,281 | $ | 121 | 5 | % |
Higher
Three months ended March 31 | ||||||||||||||||
Change | ||||||||||||||||
Dollars in millions | 2018 | 2017 | $ | % | ||||||||||||
Noninterest expense | ||||||||||||||||
Personnel | $ | 1,354 | $ | 1,257 | $ | 97 | 8 | % | ||||||||
Occupancy | 218 | 222 | (4 | ) | (2 | )% | ||||||||||
Equipment | 273 | 251 | 22 | 9 | % | |||||||||||
Marketing | 55 | 55 | — | — | ||||||||||||
Other | 627 | 617 | 10 | 2 | % | |||||||||||
Total noninterest expense | $ | 2,527 | $ | 2,402 | $ | 125 | 5 | % |
management. As of March 31, 2017,2018, we were on track to achieve our full-year 20172018 goal of $350$250 million in cost savings through our continuous improvement program, which we expect will substantiallypartially fund our 2017ongoing business and technology investments.
6
March 31 2017 December 31 2016 Assets Interest-earning deposits with banks Loans held for sale Investment securities Loans Allowance for loan and lease losses Mortgage servicing rights Goodwill Other, net Total assets Liabilities Deposits Borrowed funds Other Total liabilities Equity Total shareholders’ equity Noncontrolling interests Total equity Total liabilities and equity Change Dollars in millions $ % $ 27,877 $ 25,711 $ 2,166 8 % 1,414 2,504 (1,090 ) (44 )% 76,432 75,947 485 1 % 212,826 210,833 1,993 1 % (2,561 ) (2,589 ) 28 1 % 1,867 1,758 109 6 % 9,103 9,103 – – 43,986 43,113 873 2 % $ 370,944 $ 366,380 $ 4,564 1 % $ 260,710 $ 257,164 $ 3,546 1 % 55,062 52,706 2,356 4 % 9,269 9,656 (387 ) (4 )% 325,041 319,526 5,515 2 % 45,754 45,699 55 – 149 1,155 (1,006 ) (87 )% 45,903 46,854 (951 ) (2 )% $ 370,944 $ 366,380 $ 4,564 1 % March 31 December 31 Change Dollars in millions 2018 2017 $ % Assets Interest-earning deposits with banks $ 28,821 $ 28,595 $ 226 1 % Loans held for sale 965 2,655 (1,690 ) (64 )% Investment securities 74,562 76,131 (1,569 ) (2 )% Loans 221,614 220,458 1,156 1 % Allowance for loan and lease losses (2,604 ) (2,611 ) 7 — Mortgage servicing rights 1,979 1,832 147 8 % Goodwill 9,218 9,173 45 — Other, net 44,606 44,535 71 — Total assets $ 379,161 $ 380,768 $ (1,607 ) — Liabilities Deposits $ 264,704 $ 265,053 $ (349 ) — Borrowed funds 58,039 59,088 (1,049 ) (2 )% Other 9,383 9,042 341 4 % Total liabilities 332,126 333,183 (1,057 ) — Equity Total shareholders’ equity 46,969 47,513 (544 ) (1 )% Noncontrolling interests 66 72 (6 ) (8 )% Total equity 47,035 47,585 (550 ) (1 )% Total liabilities and equity $ 379,161 $ 380,768 $ (1,607 ) — 20172018 and December 31, 2016.2017.increased primarily drivendecreased due to lower loans held for sale and investment securities, partially offset by loan growth and higher interest-earning deposits with banks;loans;
March 31 | December 31 | Change | ||||||||||||
Dollars in millions | 2018 | 2017 | $ | % | ||||||||||
Commercial lending | ||||||||||||||
Commercial | $ | 112,308 | $ | 110,527 | $ | 1,781 | 2 | % | ||||||
Commercial real estate | 28,835 | 28,978 | (143 | ) | — | |||||||||
Equipment lease financing | 7,802 | 7,934 | (132 | ) | (2 | )% | ||||||||
Total commercial lending | 148,945 | 147,439 | 1,506 | 1 | % | |||||||||
Consumer lending | ||||||||||||||
Home equity | 27,699 | 28,364 | (665 | ) | (2 | )% | ||||||||
Residential real estate | 17,456 | 17,212 | 244 | 1 | % | |||||||||
Credit card | 5,657 | 5,699 | (42 | ) | (1 | )% | ||||||||
Other consumer | ||||||||||||||
Automobile | 13,295 | 12,880 | 415 | 3 | % | |||||||||
Education | 4,228 | 4,454 | (226 | ) | (5 | )% | ||||||||
Other | 4,334 | 4,410 | (76 | ) | (2 | ) | ||||||||
Total consumer lending | 72,669 | 73,019 | (350 | ) | — | |||||||||
Total loans | $ | 221,614 | $ | 220,458 | $ | 1,156 | 1 | % |
Loans
Dollars in millions | Change | |||||||||||||||
March 31 2017 | December 31 2016 | $ | % | |||||||||||||
Commercial lending | ||||||||||||||||
Commercial | ||||||||||||||||
Manufacturing | $ | 20,054 | $ | 18,891 | $ | 1,163 | 6 | % | ||||||||
Retail/wholesale trade | 17,446 | 16,752 | 694 | 4 | % | |||||||||||
Service providers | 14,185 | 14,707 | (522 | ) | (4 | )% | ||||||||||
Real estate related (a) | 11,690 | 11,920 | (230 | ) | (2 | )% | ||||||||||
Health care | 9,603 | 9,491 | 112 | 1 | % | |||||||||||
Financial services | 7,710 | 7,241 | 469 | 6 | % | |||||||||||
Other industries | 23,077 | 22,362 | 715 | 3 | % | |||||||||||
|
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| ||||||||||||||
Total commercial | 103,765 | 101,364 | 2,401 | 2 | % | |||||||||||
|
|
| ||||||||||||||
Commercial real estate | 29,435 | 29,010 | 425 | 1 | % | |||||||||||
Equipment lease financing | 7,462 | 7,581 | (119 | ) | (2 | )% | ||||||||||
|
|
| ||||||||||||||
Total commercial lending | 140,662 | 137,955 | 2,707 | 2 | % | |||||||||||
|
|
| ||||||||||||||
Consumer lending | ||||||||||||||||
Home equity | 29,577 | 29,949 | (372 | ) | (1 | )% | ||||||||||
Residential real estate | 15,781 | 15,598 | 183 | 1 | % | |||||||||||
Credit card | 5,112 | 5,282 | (170 | ) | (3 | )% | ||||||||||
Other consumer | ||||||||||||||||
Automobile | 12,337 | 12,380 | (43 | ) | – | |||||||||||
Education | 4,974 | 5,159 | (185 | ) | (4 | )% | ||||||||||
Other | 4,383 | 4,510 | (127 | ) | (3 | )% | ||||||||||
|
|
| ||||||||||||||
Total consumer lending | 72,164 | 72,878 | (714 | ) | (1 | )% | ||||||||||
|
|
| ||||||||||||||
Total loans | $ | 212,826 | $ | 210,833 | $ | 1,993 | 1 | % |
Growth in commercial lending
See
Ratings (a) As of March 31, 2017 AAA/ AA BB and Lower No Rating U.S. Treasury and government agencies Agency residential mortgage-backed Non-agency residential mortgage-backed Agency commercial mortgage-backed Non-agency commercial mortgage-backed (b) Asset-backed (c) Other debt (d) Corporate stock and other Total investment securities(e) March 31, 2017 December 31, 2016 Dollars in millions Amortized
Cost Fair Value Amortized
Cost Fair Value A BBB $ 13,318 $ 13,459 $ 13,627 $ 13,714 100 % 38,673 38,427 37,319 37,109 100 3,196 3,394 3,382 3,564 11 4 % 76 % 9 % 2,919 2,906 3,053 3,046 100 4,407 4,434 4,590 4,602 85 4 % 1 1 9 6,486 6,532 6,496 6,524 85 5 3 7 6,610 6,782 6,679 6,810 73 15 8 1 3 517 515 603 601 100 $ 76,126 $ 76,449 $ 75,749 $ 75,970 91 % 2 % 1 % 4 % 2 % 8 The PNC Financial Services Group, Inc. –Form 10-Q March 31, 2018 December 31, 2017 Ratings (a) as of March 31, 2018 Dollars in millions A BBB U.S. Treasury and government agencies $ 14,390 $ 14,335 $ 15,173 $ 15,286 100 % Agency residential mortgage-backed 41,175 40,301 40,037 39,847 100 % Non-agency residential mortgage-backed 2,483 2,802 2,610 2,932 11 % 3 % 66 % 20 % Agency commercial mortgage-backed 2,222 2,146 2,367 2,315 100 % Non-agency commercial mortgage-backed (b) 3,109 3,098 3,141 3,161 84 % 6 % 10 % Asset-backed (c) 5,325 5,380 5,531 5,598 84 % 3 % 6 % 7 % Other debt (d) 6,081 6,179 6,279 6,459 74 % 15 % 7 % 1 % 3 % Other (e) 587 585 $ 74,785 $ 74,241 $ 75,725 $ 76,183 93 % 2 % 1 % 3 % 1 % (a) Ratings percentages allocated based on amortized cost. (b) Collateralized primarily by retail properties, office buildings, lodging properties and multi-family housing. (c) Collateralized primarily by corporate debt, government guaranteed education loans and other consumer credit products. (d) Includes state and municipal securities. (e) On January 1, 2018, $.6 billion of available for sale securities, primarily money market funds, were reclassified to equity investments in accordance with the adoption of ASU 2016-01. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in the Notes To Consolidated Financial Statements of this Report for additional detail on this adoption. (f) Includes available for sale and held to maturity securities.securities, which are recorded on our balance sheet at fair value and amortized cost, respectively.
2017.
March 31, | 2018 | Years | |||
Agency residential mortgage-backed | 6.6 | ||||
Non-agency residential mortgage-backed | 6.3 | ||||
Agency commercial mortgage-backed | 3.5 | ||||
Non-agency commercial mortgage-backed | 3.1 | ||||
Asset-backed | 2.5 |
Dollars in millions | March 31 2017 | December 31 2016 | Change | |||||||||||||||||
$ | % | |||||||||||||||||||
Deposits | ||||||||||||||||||||
Money market | $ | 105,230 | $ | 105,849 | $ | (619 | ) | (1 | )% | |||||||||||
Demand | 97,076 | 96,799 | 277 | – | ||||||||||||||||
Savings | 41,428 | 36,956 | 4,472 | 12 | % | |||||||||||||||
Time deposits | 16,976 | 17,560 | (584 | ) | (3 | )% | ||||||||||||||
Total deposits | 260,710 | 257,164 | 3,546 | 1 | % | |||||||||||||||
Borrowed funds | ||||||||||||||||||||
FHLB borrowings | 19,549 | 17,549 | 2,000 | 11 | % | |||||||||||||||
Bank notes and senior debt | 23,745 | 22,972 | 773 | 3 | % | |||||||||||||||
Subordinated debt | 6,889 | 8,009 | (1,120 | ) | (14 | )% | ||||||||||||||
Other | 4,879 | 4,176 | 703 | 17 | % | |||||||||||||||
Total borrowed funds | 55,062 | 52,706 | 2,356 | 4 | % | |||||||||||||||
Total funding sources | $ | 315,772 | $ | 309,870 | $ | 5,902 | 2 | % |
Growth
March 31 | December 31 | Change | ||||||||||||
Dollars in millions | 2018 | 2017 | $ | % | ||||||||||
Deposits | ||||||||||||||
Noninterest-bearing | $ | 78,303 | $ | 79,864 | $ | (1,561 | ) | (2 | )% | |||||
Interest-bearing | ||||||||||||||
Money market | 57,260 | 59,735 | (2,475 | ) | (4 | )% | ||||||||
Demand | 62,289 | 61,213 | 1,076 | 2 | % | |||||||||
Savings | 50,582 | 46,980 | 3,602 | 8 | % | |||||||||
Time deposits | 16,270 | 17,261 | (991 | ) | (6 | )% | ||||||||
Total interest-bearing deposits | 186,401 | 185,189 | 1,212 | 1 | % | |||||||||
Total deposits | 264,704 | 265,053 | (349 | ) | — | |||||||||
Borrowed funds | ||||||||||||||
Federal Home Loan Bank (FHLB) borrowings | 19,537 | 21,037 | (1,500 | ) | (7 | )% | ||||||||
Bank notes and senior debt | 28,773 | 28,062 | 711 | 3 | % | |||||||||
Subordinated debt | 5,121 | 5,200 | (79 | ) | (2 | )% | ||||||||
Other | 4,608 | 4,789 | (181 | ) | (4 | )% | ||||||||
Total borrowed funds | 58,039 | 59,088 | (1,049 | ) | (2 | )% | ||||||||
Total funding sources | $ | 322,743 | $ | 324,141 | $ | (1,398 | ) | — |
composition of borrowed funds fluctuates over time based on many factors including market conditions, loan, investment securities and deposit growth, and capital considerations. We manage our borrowed funds to provide a reliable source of liquidity for our banking and other activities, considering LCR and other internal and external guidelines and constraints.
The PNC Financial Services Group, Inc. –Form 10-Q9
Common shares outstanding were 485470 million and 473 million at both March 31, 2017,2018 and December 31, 2016,2017, respectively, as repurchases of 5.04.8 million shares during the first quarter of 2017period were largelypartially offset by share issuances from treasury stock related to warrants exercised and stock basedstock-based compensation activity.
Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly,
Our changes in business segment presentation resulting from the realignment included the following:
Net interest income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. Effective for the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certainnon-maturity deposits based on our recent historical experience. These changes in methodology affected business segment results, primarily adversely impacting net interest income for Corporate & Institutional Banking and Retail Banking, offset by increased net interest income in the “Other” category.
The prior period presented was revised to conform to the new segment alignment and to our change in internal funds transfer pricing methodology.
Business segment results and a description of each business are included in Note 14 Segment Reporting included in the Notes To Consolidated Financial Statements in this Report. Certain amounts included in this Business Segments Review differ from those amounts shown in Note 14, primarily due to the presentation in this Financial Review of business net interest revenueincome on a taxable-equivalent basis.
Total
10
Three months ended March 31 | Change | |||||||||||||
Dollars in millions, except as noted | 2018 | 2017 | $ | % | ||||||||||
Income Statement | ||||||||||||||
Net interest income | $ | 1,218 | $ | 1,121 | $ | 97 | 9 | % | ||||||
Noninterest income | 635 | 603 | 32 | 5 | % | |||||||||
Total revenue | 1,853 | 1,724 | 129 | 7 | % | |||||||||
Provision for credit losses | 69 | 71 | (2 | ) | (3 | )% | ||||||||
Noninterest expense | 1,395 | 1,315 | 80 | 6 | % | |||||||||
Pretax earnings | 389 | 338 | 51 | 15 | % | |||||||||
Income taxes | 93 | 125 | (32 | ) | (26 | )% | ||||||||
Earnings | $ | 296 | $ | 213 | $ | 83 | 39 | % | ||||||
Average Balance Sheet | ||||||||||||||
Loans held for sale | $ | 652 | $ | 843 | $ | (191 | ) | (23 | )% | |||||
Loans | ||||||||||||||
Consumer | ||||||||||||||
Home equity | $ | 24,608 | $ | 25,601 | $ | (993 | ) | (4 | )% | |||||
Automobile | 13,105 | 12,146 | 959 | 8 | % | |||||||||
Education | 4,409 | 5,131 | (722 | ) | (14 | )% | ||||||||
Credit cards | 5,619 | 5,121 | 498 | 10 | % | |||||||||
Other | 1,765 | 1,756 | 9 | 1 | % | |||||||||
Total consumer | 49,506 | 49,755 | (249 | ) | (1 | )% | ||||||||
Commercial and commercial real estate | 10,527 | 11,006 | (479 | ) | (4 | )% | ||||||||
Residential mortgage | 13,420 | 11,688 | 1,732 | 15 | % | |||||||||
Total loans | $ | 73,453 | $ | 72,449 | $ | 1,004 | 1 | % | ||||||
Total assets | $ | 88,734 | $ | 87,109 | $ | 1,625 | 2 | % | ||||||
Deposits | ||||||||||||||
Noninterest-bearing demand | $ | 29,779 | $ | 29,010 | $ | 769 | 3 | % | ||||||
Interest-bearing demand | 41,939 | 40,649 | 1,290 | 3 | % | |||||||||
Money market | 32,330 | 39,321 | (6,991 | ) | (18 | )% | ||||||||
Savings | 43,838 | 35,326 | 8,512 | 24 | % | |||||||||
Certificates of deposit | 12,082 | 13,735 | (1,653 | ) | (12 | )% | ||||||||
Total deposits | $ | 159,968 | $ | 158,041 | $ | 1,927 | 1 | % | ||||||
Performance Ratios | ||||||||||||||
Return on average assets | 1.35 | % | .99 | % | ||||||||||
Noninterest income to total revenue | 34 | % | 35 | % | ||||||||||
Efficiency | 75 | % | 76 | % |
Retail Banking
(Unaudited)
Table 10: Retail Banking Table
Three months ended March 31 Dollars in millions, except as noted | Change | |||||||||||||||
2017 | 2016 | $ | % | |||||||||||||
Income Statement | ||||||||||||||||
Net interest income | $ | 1,121 | $ | 1,122 | $ | (1 | ) | – | ||||||||
Noninterest income | 603 | 633 | (30 | ) | (5 | )% | ||||||||||
|
|
| ||||||||||||||
Total revenue | 1,724 | 1,755 | (31 | ) | (2 | )% | ||||||||||
Provision for credit losses | 71 | 72 | (1 | ) | (1 | )% | ||||||||||
Noninterest expense | 1,315 | 1,299 | 16 | 1 | % | |||||||||||
|
|
| ||||||||||||||
Pretax earnings | 338 | 384 | (46 | ) | (12 | )% | ||||||||||
Income taxes | 125 | 141 | (16 | ) | (11 | )% | ||||||||||
|
|
| ||||||||||||||
Earnings | $ | 213 | $ | 243 | $ | (30 | ) | (12 | )% | |||||||
Average Balance Sheet | ||||||||||||||||
Loans held for sale | $ | 843 | $ | 801 | $ | 42 | 5 | % | ||||||||
Loans | ||||||||||||||||
Consumer | ||||||||||||||||
Home equity | $ | 25,601 | $ | 26,743 | $ | (1,142 | ) | (4 | )% | |||||||
Automobile | 12,146 | 10,787 | 1,359 | 13 | % | |||||||||||
Education | 5,131 | 5,865 | (734 | ) | (13 | )% | ||||||||||
Credit cards | 5,121 | 4,722 | 399 | 8 | % | |||||||||||
Other | 1,756 | 1,823 | (67 | ) | (4 | )% | ||||||||||
|
|
| ||||||||||||||
Total consumer | 49,755 | 49,940 | (185 | ) | – | |||||||||||
Commercial and commercial real estate | 11,006 | 11,801 | (795 | ) | (7 | )% | ||||||||||
Residential mortgage | 11,688 | 10,268 | 1,420 | 14 | % | |||||||||||
|
|
| ||||||||||||||
Total loans | $ | 72,449 | $ | 72,009 | $ | 440 | 1 | % | ||||||||
Total assets | $ | 87,109 | $ | 86,213 | $ | 896 | 1 | % | ||||||||
Deposits | ||||||||||||||||
Noninterest-bearing demand | $ | 29,010 | $ | 26,980 | $ | 2,030 | 8 | % | ||||||||
Interest-bearing demand | 40,649 | 37,815 | 2,834 | 7 | % | |||||||||||
Money market | 39,321 | 49,336 | (10,015 | ) | (20 | )% | ||||||||||
Savings | 35,326 | 21,780 | 13,546 | 62 | % | |||||||||||
Certificates of deposit | 13,735 | 15,320 | (1,585 | ) | (10 | )% | ||||||||||
|
|
| ||||||||||||||
Total deposits | $ | 158,041 | $ | 151,231 | $ | 6,810 | 5 | % | ||||||||
Performance Ratios | ||||||||||||||||
Return on average assets | .99 | % | 1.14 | % | ||||||||||||
Noninterest income to total revenue | 35 | % | 36 | % | ||||||||||||
Efficiency | 76 | % | 74 | % |
(continued on following page)
The PNC Financial Services Group, Inc. –Form 10-Q11
(continued from previous page)
Change | ||||||||||||||||
Dollars in millions, except as noted | 2017 | 2016 | $ | % | ||||||||||||
Supplemental Noninterest Income Information | ||||||||||||||||
Consumer services | $ | 250 | $ | 254 | $ | (4 | ) | (2 | )% | |||||||
Brokerage | $ | 76 | $ | 75 | $ | 1 | 1 | % | ||||||||
Residential mortgage | $ | 113 | $ | 100 | $ | 13 | 13 | % | ||||||||
Service charges on deposits | $ | 154 | $ | 151 | $ | 3 | 2 | % | ||||||||
Residential Mortgage Information | ||||||||||||||||
Residential mortgage servicing statistics (in billions, except as noted) (a) | ||||||||||||||||
Serviced portfolio balance (b) | $ | 130 | $ | 125 | $ | 5 | 4 | % | ||||||||
Serviced portfolio acquisitions | $ | 8 | $ | 5 | $ | 3 | 60 | % | ||||||||
MSR asset value (b) | $ | 1.3 | $ | .9 | $ | .4 | 44 | % | ||||||||
MSR capitalization value (in basis points) (b) | 97 | 69 | 28 | 41 | % | |||||||||||
Servicing income: (in millions) | ||||||||||||||||
Servicing fees, net (c) | $ | 52 | $ | 55 | $ | (3 | ) | (5 | )% | |||||||
Mortgage servicing rights valuation, net of economic hedge | $ | 12 | $ | (8 | ) | $ | 20 | 250 | % | |||||||
Residential mortgage loan statistics | ||||||||||||||||
Loan origination volume (in billions) | $ | 1.9 | $ | 1.9 | – | – | ||||||||||
Loan sale margin percentage | 2.96 | % | 3.21 | % | ||||||||||||
Percentage of originations represented by: | ||||||||||||||||
Purchase volume (d) | 43 | % | 40 | % | ||||||||||||
Refinance volume | 57 | % | 60 | % | ||||||||||||
Other Information (b) | ||||||||||||||||
Customer-related statistics (average) | ||||||||||||||||
Non-teller deposit transactions (e) | 52 | % | 47 | % | ||||||||||||
Digital consumer customers (f) | 61 | % | 56 | % | ||||||||||||
Credit-related statistics | ||||||||||||||||
Nonperforming assets (g) | $ | 1,209 | $ | 1,298 | $ | (89 | ) | (7 | )% | |||||||
Net charge-offs | $ | 100 | $ | 97 | $ | 3 | 3 | % | ||||||||
Other statistics | ||||||||||||||||
ATMs | 8,976 | 8,940 | 36 | – | ||||||||||||
Branches (h) | 2,508 | 2,613 | (105 | ) | (4 | )% | ||||||||||
Universal branches (i) | 527 | 362 | 165 | 46 | % | |||||||||||
Brokerage account client assets (in billions) (j) | $ | 46 | $ | 43 | $ | 3 | 7 | % |
Three months ended March 31 | Change | |||||||||||||
Dollars in millions, except as noted | 2018 | 2017 | $ | % | ||||||||||
Supplemental Noninterest Income Information | ||||||||||||||
Consumer services | $ | 266 | $ | 250 | $ | 16 | 6 | % | ||||||
Brokerage | $ | 86 | $ | 76 | $ | 10 | 13 | % | ||||||
Residential mortgage | $ | 97 | $ | 113 | $ | (16 | ) | (14 | )% | |||||
Service charges on deposits | $ | 160 | $ | 154 | $ | 6 | 4 | % | ||||||
Residential Mortgage Information | ||||||||||||||
Residential mortgage servicing statistics (in billions, except as noted) (a) | ||||||||||||||
Serviced portfolio balance (b) | $ | 125 | $ | 130 | $ | (5 | ) | (4 | )% | |||||
Serviced portfolio acquisitions | $ | 1 | $ | 8 | $ | (7 | ) | (88 | )% | |||||
MSR asset value (b) | $ | 1.3 | $ | 1.3 | — | — | ||||||||
MSR capitalization value (in basis points) (b) | 101 | 97 | 4 | 4 | % | |||||||||
Servicing income: (in millions) | ||||||||||||||
Servicing fees, net (c) | $ | 51 | $ | 52 | $ | (1 | ) | (2 | )% | |||||
Mortgage servicing rights valuation, net of economic hedge | $ | 9 | $ | 12 | $ | (3 | ) | (25 | )% | |||||
Residential mortgage loan statistics | ||||||||||||||
Loan origination volume (in billions) | $ | 1.7 | $ | 1.9 | $ | (.2 | ) | (11 | )% | |||||
Loan sale margin percentage | 2.83 | % | 2.96 | % | ||||||||||
Percentage of originations represented by: | ||||||||||||||
Purchase volume (d) | 56 | % | 43 | % | ||||||||||
Refinance volume | 44 | % | 57 | % | ||||||||||
Other Information (b) | ||||||||||||||
Customer-related statistics (average) | ||||||||||||||
Non-teller deposit transactions (e) | 54 | % | 52 | % | ||||||||||
Digital consumer customers (f) | 64 | % | 61 | % | ||||||||||
Credit-related statistics | ||||||||||||||
Nonperforming assets (g) | $ | 1,131 | $ | 1,209 | $ | (78 | ) | (6 | )% | |||||
Net charge-offs | $ | 100 | $ | 100 | — | — | ||||||||
Other statistics | ||||||||||||||
ATMs | 9,047 | 8,976 | 71 | 1 | % | |||||||||
Branches (h) | 2,442 | 2,508 | (66 | ) | (3 | )% | ||||||||
Brokerage account client assets (in billions) (i) | $ | 49 | $ | 46 | $ | 3 | 7 | % |
(a) | Represents mortgage loan servicing balances for third parties and the related income. |
(b) | Presented as of March 31, except for customer-related statistics, which are quarterly averages, |
(c) | Servicing fees net of impact of decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan prepayments and loans that were paid down or paid off during the period. |
(d) | Mortgages with borrowers as part of residential real estate purchase transactions. |
(e) | Percentage of total consumer and business banking deposit transactions processed at an ATM or through our mobile banking application. |
(f) | Represents consumer checking relationships that process the majority of their transactions throughnon-teller channels. |
(g) | Includes nonperforming loans of $1.1 billion at both March 31, |
(h) | Excludes stand-alone mortgage offices and satellite offices |
Includes cash and money market balances. |
Noninterest income declined compared to the same period a year ago due to the impact of first quarter of 2016 net gainswider interest rate spreads on the salevalue of deposits.
Theloan sales revenue, which reflected compressed pricing margins and lower refinancing origination volume.
The deposit strategy of Retail Banking is to remain disciplined on pricing and focused on growing and retaining relationship-based balances, executing on market specific deposit growth strategies and providing a source oflow-cost funding and liquidity to PNC. In the first three months of 2017, average total deposits increased compared to the same period a year ago, driven by growth in savings deposits reflecting in part a shift from money market deposits to relationship-based savings products. Additionally, demand deposits increased, partially offset by a decline in certificates of deposit due to the net runoff of maturing accounts.
12
Retail Banking continued to focus on a relationship-based lending strategy. Total average loans increased in the comparison due to increases in residential mortgage and automobile loans partially offset by declines in home equity and commercial loans, as well as runoff of certain portfolios, as more fully described below.
Nonperforming assets decreased compared to March 31, 2016 driven by declines in both consumer and commercial nonperforming loans.
Retail Banking continues to enhance the customer experience with refinements to product and service offerings that drive product value for consumers and small businesses. We are focused on meeting the financial needs of our customers by providing a broad range of liquidity, banking and investment products.
Income Statement Net interest income Noninterest income Total revenue Provision for credit losses Noninterest expense Pretax earnings Income taxes Earnings Average Balance Sheet Loans held for sale Loans Commercial Commercial real estate Equipment lease financing Total commercial lending Consumer Total loans Total assets Deposits Noninterest-bearing demand Money market Interest-bearing demand and other �� Total deposits Performance Ratios Return on average assets Noninterest income to total revenue Efficiency Other Information Commercial loan servicing portfolio (in billions) (a) (b) Consolidated revenue from: (c) Treasury Management (d) Capital Markets (d) Commercial mortgage banking activities Commercial mortgage loans held for sale (e) Commercial mortgage loan servicing income (f) Commercial mortgage servicing rights valuation, net of economic hedge (g) Total Net carrying amount of commercial mortgage servicing rights (a) Average Loans (by C&IB business) Corporate Banking Real Estate Business Credit Equipment Finance Commercial Banking Other Total average loans Credit-related statistics Nonperforming assets (a) (h) Net charge-offsThree months ended March 31 Change Dollars in millions, except as noted 2017 2016 $ % $ 839 $ 817 $ 22 3 % 524 441 83 19 % 1,363 1,258 105 8 % 25 102 (77 ) (75 )% 584 533 51 10 % 754 623 131 21 % 270 225 45 20 % $ 484 $ 398 $ 86 22 % $ 1,116 $ 708 $ 408 58 % $ 92,116 $ 87,324 $ 4,792 5 % 27,091 25,959 1,132 4 % 7,497 7,420 77 1 % 126,704 120,703 6,001 5 % 331 503 (172 ) (34 )% $ 127,035 $ 121,206 $ 5,829 5 % $ 142,592 $ 137,270 $ 5,322 4 % $ 47,423 $ 48,715 $ (1,292 ) (3 )% 21,086 22,298 (1,212 ) (5 )% 15,391 11,391 4,000 35 % $ 83,900 $ 82,404 $ 1,496 2 % 1.38 % 1.18 % 38 % 35 % 43 % 42 % $ 490 $ 453 $ 37 8 % $ 359 $ 315 $ 44 14 % $ 247 $ 152 $ 95 63 % $ 13 $ 26 $ (13 ) (50 )% 58 62 (4 ) (6 )% 16 1 15 * $ 87 $ 89 $ (2 ) (2 )% $ 606 $ 460 $ 146 32 % $ 53,839 $ 49,533 $ 4,306 9 % 37,136 35,784 1,352 4 % 14,839 14,672 167 1 % 12,478 11,652 826 7 % 7,041 7,384 (343 ) (5 )% 1,702 2,181 (479 ) (22 )% $ 127,035 $ 121,206 $ 5,829 5 % $ 546 $ 760 $ (214 ) (28 )% $ 21 $ 38 $ (17 ) (45 )% 14Three months ended March 31 Change Dollars in millions 2018 2017 $ % Income Statement Net interest income $ 882 $ 839 $ 43 5 % Noninterest income 547 524 23 4 % Total revenue 1,429 1,363 66 5 % Provision for credit losses 41 25 16 64 % Noninterest expense 626 584 42 7 % Pretax earnings 762 754 8 1 % Income taxes 178 270 (92 ) (34 )% Earnings $ 584 $ 484 $ 100 21 % Average Balance Sheet Loans held for sale $ 1,189 $ 1,116 $ 73 7 % Loans Commercial $ 100,802 $ 92,116 $ 8,686 9 % Commercial real estate 26,732 27,091 (359 ) (1 )% Equipment lease financing 7,845 7,497 348 5 % Total commercial lending 135,379 126,704 8,675 7 % Consumer 77 331 (254 ) (77 )% Total loans $ 135,456 $ 127,035 $ 8,421 7 % Total assets $ 151,909 $ 142,592 $ 9,317 7 % Deposits Noninterest-bearing demand $ 45,896 $ 47,423 $ (1,527 ) (3 )% Money market 23,406 21,086 2,320 11 % Other 18,592 15,391 3,201 21 % Total deposits $ 87,894 $ 83,900 $ 3,994 5 % Performance Ratios Return on average assets 1.56 % 1.38 % Noninterest income to total revenue 38 % 38 % Efficiency 44 % 43 % Other Information Consolidated revenue from: (a) Treasury Management (b) $ 419 $ 359 $ 60 17 % Capital Markets (b) $ 258 $ 247 $ 11 4 % Commercial mortgage banking activities Commercial mortgage loans held for sale (c) $ 14 $ 13 $ 1 8 % Commercial mortgage loan servicing income (d) 55 58 (3 ) (5 )% Commercial mortgage servicing rights valuation, net of economic hedge (e) 4 16 (12 ) (75 )% Total $ 73 $ 87 $ (14 ) (16 )% MSR asset value (f) $ 723 $ 606 $ 117 19 % Average Loans by C&IB business Corporate Banking $ 57,856 $ 53,839 $ 4,017 7 % Real Estate 37,252 37,136 116 — Business Credit 16,818 14,839 1,979 13 % Equipment Finance 14,243 12,478 1,765 14 % Commercial Banking 7,066 7,041 25 — Other 2,221 1,702 519 30 % Total average loans $ 135,456 $ 127,035 $ 8,421 7 % Credit-related statistics Nonperforming assets (f) (g) $ 508 $ 546 $ (38 ) (7 )% Net charge-offs $ 9 $ 21 $ (12 ) (57 )% * -Not meaningful.(a) As of March 31.(b)Represents loans serviced for PNC and others.(c)Represents consolidated amounts. See the additional revenue discussion regarding treasury management, capital markets-related products and services, and commercial mortgage banking activities in the Product Revenue section of thethis Corporate & Institutional Banking portion of this Business Segments Review section.(d)(b) Includes amounts reported in net interest income corporate service fees and other noninterest income.(e)(c) Includes other noninterest income for valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, originationoriginations fees, gains on sale of loans held for sale and net interest income on loans held for sale.(f)(d) Includes net interest income and noninterest income (primarily in corporate servicesservice fees) from loan servicing net of reduction in commercial mortgage servicing rights due to time decayamortization expense and payoffs. Commercial mortgage servicing rights valuation, net of economic hedge is shown separately.(g)(e) Amounts reported in corporate service fees. (h)(f) As of March 31. (g) Includes nonperforming loans of $.4 billion at both March 31, 20172018 and $.6 billion at March 31, 2016.2017.
from wider interest rate spreads on the value of deposits, partially offset by narrower interest rate spreads on the value of loans.
amortization expense as a result of higher interest rates.
2018 and loan growth. Overall, credit quality remained stable, as nonperforming assets and net charge-offs declined in the comparison to the prior year quarter.
and continued investments in technology and risk management activities.
|
Growthprior year quarter driven by growth in interest-bearing deposits reflecting in part a shift from noninterest-bearing deposits in the rising rate environment. We continue to monitor and balance the relationship between increases to rates paid and overall profitability of our deposit balances.
services. In 2018, similar efforts have begun to expand our middle market business into the Denver, Houston and Nashville markets.
expansion, and higher fee income.
The PNC Financial Services Group, Inc. –Form 10-Q15
Commercial mortgage banking activities include revenue derived from commercial mortgage servicing (including net interest income and noninterest income) and revenue derived from commercial mortgage loans held for sale and related hedges. Total revenue from commercial mortgage banking
activities decreased slightly in the comparison asprimarily due to a decline in revenue from commercial mortgage loans held for sale and lower commercial mortgage loan servicing income was mostly offset by a higher benefit from commercial mortgage servicing rights valuation, net of economic hedge.
Asset Management Group
(Unaudited)
Table 12: Asset Management Group Table
Three months ended March 31 | Change | |||||||||||||||
Dollars in millions, except as noted | 2017 | 2016 | $ | % | ||||||||||||
Income Statement | ||||||||||||||||
Net interest income | $ | 71 | $ | 77 | $ | (6 | ) | (8 | )% | |||||||
Noninterest income | 218 | 203 | 15 | 7 | % | |||||||||||
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Total revenue | 289 | 280 | 9 | 3 | % | |||||||||||
Provision for credit losses (benefit) | (2 | ) | (3 | ) | 1 | 33 | % | |||||||||
Noninterest expense | 217 | 206 | 11 | 5 | % | |||||||||||
|
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| ||||||||||||||
Pretax earnings | 74 | 77 | (3 | ) | (4 | )% | ||||||||||
Income taxes | 27 | 28 | (1 | ) | (4 | )% | ||||||||||
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| ||||||||||||||
Earnings | $ | 47 | $ | 49 | $ | (2 | ) | (4 | )% | |||||||
Average Balance Sheet | ||||||||||||||||
Loans | ||||||||||||||||
Consumer | $ | 5,113 | $ | 5,630 | $ | (517 | ) | (9 | )% | |||||||
Commercial and commercial real estate | 728 | 788 | (60 | ) | (8 | )% | ||||||||||
Residential mortgage | 1,190 | 1,003 | 187 | 19 | % | |||||||||||
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Total loans | $ | 7,031 | $ | 7,421 | $ | (390 | ) | (5 | )% | |||||||
Total assets | $ | 7,476 | $ | 7,887 | $ | (411 | ) | (5 | )% | |||||||
Deposits | ||||||||||||||||
Noninterest-bearing demand | $ | 1,433 | $ | 1,407 | $ | 26 | 2 | % | ||||||||
Interest-bearing demand | 3,829 | 4,280 | (451 | ) | (11 | )% | ||||||||||
Money market | 3,500 | 4,758 | (1,258 | ) | (26 | )% | ||||||||||
Savings | 3,768 | 1,563 | 2,205 | 141 | % | |||||||||||
Other | 246 | 275 | (29 | ) | (11 | )% | ||||||||||
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| ||||||||||||||
Total deposits | $ | 12,776 | $ | 12,283 | $ | 493 | 4 | % | ||||||||
Performance Ratios | ||||||||||||||||
Return on average assets | 2.55 | % | 2.52 | % | ||||||||||||
Noninterest income to total revenue | 75 | % | 73 | % | ||||||||||||
Efficiency | 75 | % | 74 | % | ||||||||||||
Other Information | ||||||||||||||||
Nonperforming assets (a) (b) | $ | 51 | $ | 54 | $ | (3 | ) | (6 | )% | |||||||
Net charge-offs | $ | 1 | $ | 4 | $ | (3 | ) | (75 | )% | |||||||
Client Assets Under Administration(in billions) (a) (c) (d) | ||||||||||||||||
Discretionary client assets under management | $ | 141 | $ | 135 | $ | 6 | 4 | % | ||||||||
Nondiscretionary client assets under administration | 123 | 118 | 5 | 4 | % | |||||||||||
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Total | $ | 264 | $ | 253 | $ | 11 | 4 | % | ||||||||
Discretionary client assets under management | ||||||||||||||||
Personal | $ | 87 | $ | 84 | $ | 3 | 4 | % | ||||||||
Institutional | 54 | 51 | 3 | 6 | % | |||||||||||
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| ||||||||||||||
Total | $ | 141 | $ | 135 | $ | 6 | 4 | % | ||||||||
Equity | $ | 71 | $ | 66 | $ | 5 | 8 | % | ||||||||
Fixed Income | 50 | 45 | 5 | 11 | % | |||||||||||
Liquidity/Other | 20 | 24 | (4 | ) | (17 | )% | ||||||||||
|
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| ||||||||||||||
Total | $ | 141 | $ | 135 | $ | 6 | 4 | % |
16
Three months ended March 31 | Change | |||||||||||||
Dollars in millions, except as noted | 2018 | 2017 | $ | % | ||||||||||
Income Statement | ||||||||||||||
Net interest income | $ | 74 | $ | 71 | $ | 3 | 4 | % | ||||||
Noninterest income | 226 | 218 | 8 | 4 | % | |||||||||
Total revenue | 300 | 289 | 11 | 4 | % | |||||||||
Provision for credit losses (benefit) | (7 | ) | (2 | ) | (5 | ) | * | |||||||
Noninterest expense | 218 | 217 | 1 | — | ||||||||||
Pretax earnings | 89 | 74 | 15 | 20 | % | |||||||||
Income taxes | 21 | 27 | (6 | ) | (22 | )% | ||||||||
Earnings | $ | 68 | $ | 47 | $ | 21 | 45 | % | ||||||
Average Balance Sheet | ||||||||||||||
Loans | ||||||||||||||
Consumer | $ | 4,785 | $ | 5,113 | $ | (328 | ) | (6 | )% | |||||
Commercial and commercial real estate | 733 | 728 | 5 | 1 | % | |||||||||
Residential mortgage | 1,517 | 1,190 | 327 | 27 | % | |||||||||
Total loans | $ | 7,035 | $ | 7,031 | $ | 4 | — | |||||||
Total assets | $ | 7,499 | $ | 7,476 | $ | 23 | — | |||||||
Deposits | ||||||||||||||
Noninterest-bearing demand | $ | 1,466 | $ | 1,433 | $ | 33 | 2 | % | ||||||
Interest-bearing demand | 3,540 | 3,829 | (289 | ) | (8 | )% | ||||||||
Money market | 2,577 | 3,500 | (923 | ) | (26 | )% | ||||||||
Savings | 4,613 | 3,768 | 845 | 22 | % | |||||||||
Other | 305 | 246 | 59 | 24 | % | |||||||||
Total deposits | $ | 12,501 | $ | 12,776 | $ | (275 | ) | (2 | )% | |||||
Performance Ratios | ||||||||||||||
Return on average assets | 3.68 | % | 2.55 | % | ||||||||||
Noninterest income to total revenue | 75 | % | 75 | % | ||||||||||
Efficiency | 73 | % | 75 | % | ||||||||||
Supplemental Noninterest Income Information | ||||||||||||||
Asset management fees | $ | 222 | $ | 215 | $ | 7 | 3 | % | ||||||
Other Information | ||||||||||||||
Nonperforming assets (a) (b) | $ | 52 | $ | 51 | $ | 1 | 2 | % | ||||||
Net charge-offs | $ | 6 | $ | 1 | $ | 5 | * | |||||||
Client Assets Under Administration (in billions) (a) (c) | ||||||||||||||
Discretionary client assets under management | $ | 148 | $ | 141 | $ | 7 | 5 | % | ||||||
Nondiscretionary client assets under administration | 129 | 123 | 6 | 5 | % | |||||||||
Total | $ | 277 | $ | 264 | $ | 13 | 5 | % | ||||||
Discretionary client assets under management | ||||||||||||||
Personal | $ | 92 | $ | 87 | $ | 5 | 6 | % | ||||||
Institutional | 56 | 54 | 2 | 4 | % | |||||||||
Total | $ | 148 | $ | 141 | $ | 7 | 5 | % |
(a) | As of March 31. |
(b) | Includes nonperforming loans of $47 million and $45 million at March 31, |
(c) | Excludes brokerage account client assets. |
increased benefit from the provision for credit losses. First quarter 2018 earnings also benefited from the lower statutory federal income tax rate.
Noninterest expense
Asset Management Group’s strategy is focused on growing investable assets by continually evolvingstrives to be the client experience and products and services. The business offers an open architecture platform with a full arrayleading relationship-based provider of investment, productsplanning, banking and banking solutions.
fiduciary services to wealthy individuals and institutions by proactively delivering value-added ideas and solutions and exceptional service.
Asset Management Group’s discretionary client assets under
Three months ended March 31 | ||||||||
Dollars in millions | 2017 | 2016 | ||||||
Business segment earnings (a) | $ | 145 | $ | 114 | ||||
PNC’s economic interest in BlackRock (b) | 22 | % | 22 | % |
Three months ended March 31 | ||||||||
Dollars in millions | 2018 | 2017 | ||||||
Business segment earnings (a) | $197 | $145 | ||||||
PNC’s economic interest in BlackRock (b) | 22 | % | 22 | % |
(a) | Includes our share of BlackRock’s reported GAAP earnings |
(b) | At March 31. |
March 31 | December 31 | |||||||
In billions | 2017 | 2016 | ||||||
Carrying value of our investment in BlackRock (c) | $ | 7.1 | $ | 7.0 | ||||
Market value of our investment in BlackRock (d) | 13.5 | 13.4 |
In billions | March 31 2018 | December 31 2017 | |||||
Carrying value of our investment in BlackRock (c) | $7.7 | $7.7 | |||||
Market value of our investment in BlackRock (d) | $18.8 | $17.9 |
(c) | We account for our investment in BlackRock under the equity method of accounting, exclusive of a related deferred tax liability of |
(d) | Does not include liquidity discount. |
March 31, 2018 | December 31, 2017 | ||||||||||||||
Dollars in millions | Amount | % of Total | Amount | % of Total | |||||||||||
Commercial | |||||||||||||||
Manufacturing | $ | 21,367 | 19 | % | $ | 20,578 | 19 | % | |||||||
Retail/wholesale trade | 18,232 | 16 | 17,846 | 16 | |||||||||||
Service providers | 14,554 | 13 | 15,100 | 14 | |||||||||||
Real estate related (a) | 12,701 | 11 | 12,496 | 11 | |||||||||||
Health care | 9,937 | 9 | 9,739 | 9 | |||||||||||
Financial services | 9,479 | 8 | 8,532 | 8 | |||||||||||
Transportation and warehousing | 5,488 | 5 | 5,609 | 5 | |||||||||||
Other industries | 20,550 | 19 | 20,627 | 18 | |||||||||||
Total commercial loans | $ | 112,308 | 100 | % | $ | 110,527 | 100 | % |
March 31, 2018 | December 31, 2017 | ||||||||||||||
Dollars in millions | Amount | % of Total | Amount | % of Total | |||||||||||
Geography | |||||||||||||||
California | $ | 4,239 | 15 | % | $ | 4,192 | 14 | % | |||||||
Florida | 2,263 | 8 | 2,221 | 8 | |||||||||||
Maryland | 2,116 | 7 | 2,104 | 7 | |||||||||||
Virginia | 1,667 | 6 | 1,609 | 5 | |||||||||||
Texas | 1,592 | 5 | 1,639 | 6 | |||||||||||
Pennsylvania | 1,382 | 5 | 1,394 | 5 | |||||||||||
Illinois | 1,333 | 5 | 1,325 | 5 | |||||||||||
New York | 1,183 | 4 | 1,163 | 4 | |||||||||||
Ohio | 1,149 | 4 | 1,134 | 4 | |||||||||||
New Jersey | 972 | 3 | 964 | 3 | |||||||||||
All other states | 10,939 | 38 | 11,233 | 39 | |||||||||||
Total commercial real estate loans | $ | 28,835 | 100 | % | $ | 28,978 | 100 | % |
March 31, 2018 | December 31, 2017 | ||||||||||||||
Dollars in millions | Amount | % of Total | Amount | % of Total | |||||||||||
Geography | |||||||||||||||
Pennsylvania | $ | 6,602 | 24 | % | $ | 6,792 | 24 | % | |||||||
New Jersey | 4,172 | 15 | 4,252 | 15 | |||||||||||
Ohio | 3,316 | 12 | 3,413 | 12 | |||||||||||
Illinois | 1,755 | 6 | 1,801 | 6 | |||||||||||
Maryland | 1,544 | 6 | 1,572 | 6 | |||||||||||
Michigan | 1,414 | 5 | 1,442 | 5 | |||||||||||
Florida | 1,245 | 5 | 1,255 | 4 | |||||||||||
North Carolina | 1,236 | 4 | 1,266 | 5 | |||||||||||
Kentucky | 1,111 | 4 | 1,138 | 4 | |||||||||||
Indiana | 895 | 3 | 924 | 3 | |||||||||||
All other states | 4,409 | 16 | 4,509 | 16 | |||||||||||
Total home equity loans | $ | 27,699 | 100 | % | $ | 28,364 | 100 | % | |||||||
Lien type | |||||||||||||||
1st lien | 58 | % | 58 | % | |||||||||||
2nd lien | 42 | 42 | |||||||||||||
Total home equity loans | 100 | % | 100 | % |
March 31, 2018 | December 31, 2017 | ||||||||||||||
Dollars in millions | Amount | % of Total | Amount | % of Total | |||||||||||
Geography | |||||||||||||||
California | $ | 3,858 | 22 | % | $ | 3,676 | 21 | % | |||||||
New Jersey | 1,538 | 9 | 1,503 | 9 | |||||||||||
Florida | 1,533 | 9 | 1,529 | 9 | |||||||||||
Illinois | 1,206 | 7 | 1,230 | 7 | |||||||||||
Pennsylvania | 965 | 5 | 962 | 5 | |||||||||||
Maryland | 903 | 5 | 902 | 5 | |||||||||||
New York | 862 | 5 | 847 | 5 | |||||||||||
North Carolina | 831 | 5 | 821 | 5 | |||||||||||
Virginia | 822 | 5 | 824 | 5 | |||||||||||
Ohio | 678 | 4 | 684 | 4 | |||||||||||
All other states | 4,260 | 24 | 4,234 | 25 | |||||||||||
Total residential real estate loans | $ | 17,456 | 100 | % | $ | 17,212 | 100 | % |
March 31 2017 December 31 2016 Nonperforming loans Commercial lending Consumer lending (a) Total nonperforming loans (b) OREO, foreclosed and other assets Total nonperforming assets Amount of TDRs included in nonperforming loans Percentage of total nonperforming loans Nonperforming loans to total loans Nonperforming assets to total loans, OREO, foreclosed and other assets Nonperforming assets to total assets Allowance for loan and lease losses to total nonperforming loans14:19: Nonperforming Assets by Type Change Dollars in millions $ % $ 549 $ 655 $ (106) (16 )% 1,449 1,489 (40) (3 )% 1,998 2,144 (146) (7 )% 214 230 (16) (7 )% $ 2,212 $ 2,374 $ (162) (7 )% $ 1,009 $ 1,112 $ (103) (9 )% 51 % 52 % .94 % 1.02 % 1.04 % 1.12 % .60 % .65 % 128 % 121 % March 31, 2018 December 31, 2017 Change Dollars in millions $ % Nonperforming loans Commercial lending $ 537 $ 554 $ (17 ) (3 )% Consumer lending (a) 1,305 1,311 (6 ) — Total nonperforming loans 1,842 1,865 (23 ) (1 )% OREO, foreclosed and other assets 162 170 (8 ) (5 )% Total nonperforming assets $ 2,004 $ 2,035 $ (31 ) (2 )% Amount of TDRs included in nonperforming loans $ 939 $ 964 $ (25 ) (3 )% Percentage of total nonperforming loans 51 % 52 % Nonperforming loans to total loans .83 % .85 % Nonperforming assets to total loans, OREO, foreclosed and other assets .90 % .92 % Nonperforming assets to total assets .53 % .53 % Allowance for loan and lease losses to total nonperforming loans 141 % 140 % (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)The recorded investment of loans collateralized by residential real estate property that are in process of foreclosure was $.4 billion at both March 31, 2017 and December 31, 2016, which included $.2 billion of loans that are government insured/guaranteed.
In millions | 2017 | 2016 | ||||||
January 1 | $ | 2,374 | $ | 2,425 | ||||
New nonperforming assets | 330 | 542 | ||||||
Charge-offs and valuation adjustments | (150 | ) | (161 | ) | ||||
Principal activity, including paydowns and payoffs | (228 | ) | (98 | ) | ||||
Asset sales and transfers to loans held for sale | (42 | ) | (90 | ) | ||||
Returned to performing status | (72 | ) | (66 | ) | ||||
March 31 | $ | 2,212 | $ | 2,552 |
In millions | 2018 | 2017 | |||||||
January 1 | $ | 2,035 | $ | 2,374 | |||||
New nonperforming assets | 249 | 330 | |||||||
Charge-offs and valuation adjustments | (137 | ) | (150 | ) | |||||
Principal activity, including paydowns and payoffs | (81 | ) | (228 | ) | |||||
Asset sales and transfers to loans held for sale | (29 | ) | (42 | ) | |||||
Returned to performing status | (33 | ) | (72 | ) | |||||
March 31 | $ | 2,004 | $ | 2,212 |
Allowance for loan and lease losses (ALLL).
18 The PNC Financial Services Group, Inc. –Form 10-Q
December 31, 2016.2017. Home equity TDRs comprise 51%50% of home equity nonperforming loans at both March 31, 2017 and 52%2018 at December 31, 2016.2017. TDRs generally remain in nonperforming status until a borrower has made at least six consecutive months of both principal and interest payments under the modified terms or ultimate resolution occurs. Loans where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligations to us and loans to borrowers not currently obligated to make both principal and interest payments under the restructured terms are not returned to accrual status.
less than $1 million. Thethe ten largest individual nonperforming assets are from the commercial lending portfolio and represented 42% and 10%12% of total commercial lending nonperforming loans and total nonperforming assets, respectively, as of March 31, 2017.
assets.
March 31 2017 December 31 2016 March 31 2017 December 31 2016 Early stage loan delinquencies Accruing loans past due 30 to 59 days Accruing loans past due 60 to 89 days Total Late stage loan delinquencies Accruing loans past due 90 days or more Total16:21: Accruing Loans Past Due (a) Amount Percentage of Total Loans
Outstanding Change Dollars in millions $ % $ 458 $ 562 $ (104 ) (19 )% .22 % .27 % 227 232 (5 ) (2 )% .11 % .11 % 685 794 (109 ) (14 )% .32 % .38 % 699 782 (83 ) (11 )% .33 % .37 % $ 1,384 $ 1,576 $ (192 ) (12 )% .65 % .75 % Amount Percentage of Total Loans Outstanding March 31
2018 December 31
2017 Change March 31
2018 December 31
2017 Dollars in millions $ % Early stage loan delinquencies Accruing loans past due 30 to 59 days $ 527 $ 545 $ (18 ) (3 )% .24 % .25 % Accruing loans past due 60 to 89 days 234 238 (4 ) (2 )% .11 % .11 % Total 761 783 (22 ) (3 )% .34 % .36 % Late stage loan delinquencies Accruing loans past due 90 days or more 628 737 (109 ) (15 )% .28 % .33 % Total $ 1,389 $ 1,520 $ (131 ) (9 )% .63 % .69 % (a) Past due loan amounts include government insured or guaranteed loans of $.8 billion at March 31, 2018 and $.9 billion at both March 31, 2017 and December 31, 2016.2017.
Home Equity and Auto Loan Portfolios
Home Equity Loan Portfolio
Our home equity loan portfolio totaled $29.6 billion as of March 31, 2017, or 14% of the total loan portfolio. Of that total, $17.4 billion, or 59%, were outstanding under primarily variable-rate home equity lines of credit and $12.2 billion, or 41%, consisted ofclosed-end home equity installment loans. Approximately 4% of the home equity portfolio was purchased impaired and 3% of the home equity portfolio was on nonperforming status as of March 31, 2017.
As of March 31, 2017, we were in an originated first lien position for approximately 57% of the total outstanding portfolio and, where originated as a second lien, we held and serviced the first lien position for an additional 1% of the portfolio. The remaining 42% of the portfolio was secured by second liens where we do not hold the first lien position. The credit performance of the majority of the home equity portfolio where we are in, hold or service the first lien position, is superior to the portion of the portfolio where we hold the second lien position but do not hold the first lien. Lien position information is generally based upon original LTV at the time of origination. We use an industry-leading third-party service provider to obtain updated loan, lien and collateral data that is aggregated from public and private sources.
We track borrower performance monthly, including obtaining original LTVs and 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 do or do 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
The PNC Financial Services Group, Inc. –Form 10-Q19
(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 analysis and monitoring, we segment the home equity portfolio based upon the loan delinquency, modification status and bankruptcy status, 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 fornon-impaired loans, we utilize a delinquency roll-rate methodology for pools of loans. The roll-rate methodology estimates transition/roll of loan balances from one delinquency state to the next delinquency state and ultimately tocharge-off. The roll through tocharge-off is based on our actual loss experience for each type of pool. Each of our home equity pools contains both first and second liens. Our experience has been that the ratio of first to second lien loans has been consistent over time and thecharge-off amounts for the pools, used to establish our allowance, include losses on both first and second lien loans.
Generally, our variable-rate home equity lines of credit have either a seven or ten year draw period, followed by a20-year amortization term. During the draw period, we have home equity lines of credit where borrowers pay either interest only or principal and interest. 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. The risk associated with the borrower’s ability to satisfy the loan terms upon the draw period ending is considered in establishing our ALLL. Based upon outstanding balances at March 31, 2017, the following table presents the periods when home equity lines of credit draw periods are scheduled to end.
Table 17: Home Equity Lines of Credit – Draw Period End Dates
In millions | Interest Only Product | Principal and Interest Product | ||||||
Remainder of 2017 | $ | 1,257 | $ | 308 | ||||
2018 | 757 | 606 | ||||||
2019 | 518 | 460 | ||||||
2020 | 416 | 412 | ||||||
2021 | 436 | 638 | ||||||
2022 and thereafter | 2,536 | 6,054 | ||||||
Total (a) (b) | $ | 5,920 | $ | 8,478 |
Based upon outstanding balances, and excluding purchased impaired loans, at March 31, 2017, 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% were30-89 days past due and approximately 5% were 90 days or more past due, which are accounted for as nonperforming. 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 loan modification resulting in a loan that is classified as a TDR.
Auto Loan Portfolio
The auto loan portfolio totaled $12.3 billion as of March 31, 2017, or 6% of our total loan portfolio. Of that total, $10.8 billion resides in the indirect auto portfolio, $1.3 billion in the direct auto portfolio and $.2 billion in acquired or securitized portfolios, which have been declining as no pools have been recently acquired. Indirect auto loan applications are generated from franchised automobile dealers. This business is strategically aligned with our core retail business.
We have elected not to pursuenon-prime auto lending. Our average new loan origination FICO score over the last twelve months was 758 for indirect auto loans and 773 for direct auto loans. As of March 31, 2017, .5% of our auto loan portfolio was nonperforming and .4% of the portfolio was accruing past due. We offer both new and used automobile financing to customers through our various channels. The portfolio was composed of 56% new vehicle loans and 44% used vehicle loans at March 31, 2017.
The auto loan portfolio’s performance is measured monthly, including updated collateral values that are obtained monthly and updated FICO scores that are obtained at least quarterly. For internal reporting and risk management, we analyze the portfolio by product channel and product type and regularly evaluate default and delinquency experience. As part of our overall risk analysis and monitoring, we segment the portfolio by loan structure, collateral attributes and credit metrics which include FICO score,loan-to-value and term.
20 The PNC Financial Services Group, Inc. –Form 10-Q
Loan Modifications and Troubled Debt Restructurings
March 31, 2017 | December 31, 2016 | |||||||||||||||
Dollars in millions | Number of Accounts | Unpaid Principal Balance | Number of Accounts | Unpaid Principal Balance | ||||||||||||
Temporary modifications | 3,315 | $ | 242 | 3,484 | $ | 258 | ||||||||||
Permanent modifications | 24,024 | 2,718 | 23,904 | 2,693 | ||||||||||||
Total consumer real estate related loan modifications | 27,339 | $ | 2,960 | 27,388 | $ | 2,951 |
March 31, 2018 | December 31, 2017 | ||||||||||||||
Dollars in millions | Number of Accounts | Unpaid Principal Balance | Number of Accounts | Unpaid Principal Balance | |||||||||||
Temporary modifications | 2,890 | $ | 203 | 3,033 | $ | 217 | |||||||||
Permanent modifications | 22,989 | 2,530 | 23,270 | 2,581 | |||||||||||
Total consumer real estate related loan modifications | 25,879 | $ | 2,733 | 26,303 | $ | 2,798 |
March 31 2017 | December 31 2016 | Change | ||||||||||||||
In millions | $ | % | ||||||||||||||
Total commercial lending | $ | 366 | $ | 428 | $ | (62 | ) | (14 | )% | |||||||
Total consumer lending | 1,764 | 1,793 | (29 | ) | (2 | )% | ||||||||||
| ||||||||||||||||
Total TDRs | $ | 2,130 | $ | 2,221 | $ | (91 | ) | (4 | )% | |||||||
Nonperforming | $ | 1,009 | $ | 1,112 | $ | (103 | ) | (9 | )% | |||||||
Accruing (b) | 1,121 | 1,109 | 12 | 1 | % | |||||||||||
| ||||||||||||||||
Total TDRs | $ | 2,130 | $ | 2,221 | $ | (91 | ) | (4 | )% |
March 31 2018 | December 31 2017 | Change | ||||||||||||||
Dollars in millions | $ | % | ||||||||||||||
Total commercial lending | $ | 384 | $ | 409 | $ | (25 | ) | (6 | )% | |||||||
Total consumer lending | 1,608 | 1,652 | (44 | ) | (3 | )% | ||||||||||
Total TDRs | $ | 1,992 | $ | 2,061 | $ | (69 | ) | (3 | )% | |||||||
Nonperforming | $ | 939 | $ | 964 | $ | (25 | ) | (3 | )% | |||||||
Accruing (b) | 1,053 | 1,097 | (44 | ) | (4 | )% | ||||||||||
Total TDRs | $ | 1,992 | $ | 2,061 | $ | (69 | ) | (3 | )% |
(a) | Amounts in table represent recorded investment, which includes the unpaid principal balance plus |
(b) | Accruing loans include consumer credit card loans and loans that have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans. |
The PNC Financial Services Group, Inc. –Form 10-Q21
Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit
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 real estate secured 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
LGD.
Allocations to
In determining
acquisition.
22 The PNC Financial Services Group, Inc. –Form 10-Q
Dollars in millions | 2017 | 2016 | ||||||
January 1 | $ | 2,589 | $ | 2,727 | ||||
Total net charge-offs | (118 | ) | (149 | ) | ||||
Provision for credit losses | 88 | 152 | ||||||
Net change in allowance for unfunded loan commitments and letters of credit | (4 | ) | (21 | ) | ||||
Other | 6 | 2 | ||||||
March 31 | $ | 2,561 | $ | 2,711 | ||||
Net charge-offs to average loans (for the three months ended) (annualized) | .23 | % | .29 | % | ||||
Total allowance for loan and lease losses to total loans | 1.20 | % | 1.31 | % | ||||
Commercial lending net charge-offs | $ | (23 | ) | $ | (43 | ) | ||
Consumer lending net charge-offs | (95 | ) | (106 | ) | ||||
Total net charge-offs | $ | (118 | ) | $ | (149 | ) | ||
Net charge-offs to average loans (for the three months ended) (annualized) | ||||||||
Commercial lending | .07 | % | .13 | % | ||||
Consumer lending | .53 | % | .59 | % |
Dollars in millions | 2018 | 2017 | |||||||
January 1 | $ | 2,611 | $ | 2,589 | |||||
Total net charge-offs | (113 | ) | (118 | ) | |||||
Provision for credit losses | 92 | 88 | |||||||
Net decrease / (increase) in allowance for unfunded loan commitments and letters of credit | 7 | (4 | ) | ||||||
Other | 7 | 6 | |||||||
March 31 | $ | 2,604 | $ | 2,561 | |||||
Net charge-offs to average loans (for the three months ended) (annualized) | .21 | % | .23 | % | |||||
Total allowance for loan and lease losses to total loans | 1.18 | % | 1.20 | % | |||||
Commercial lending net charge-offs | $ | (10 | ) | $ | (23 | ) | |||
Consumer lending net charge-offs | (103 | ) | (95 | ) | |||||
Total net charge-offs | $ | (113 | ) | $ | (118 | ) | |||
Net charge-offs to average loans (for the three months ended) (annualized) | |||||||||
Commercial lending | .03 | % | .07 | % | |||||
Consumer lending | .57 | % | .53 | % |
Three months ended Dollars in millions | Gross Charge-offs | Recoveries | Net Charge-offs / | Percent of Average Loans (Annualized) | ||||||||||||
2017 | ||||||||||||||||
Commercial | $ | 53 | $ | 24 | $ | 29 | .11 | % | ||||||||
Commercial real estate | 1 | 7 | (6 | ) | (.08 | )% | ||||||||||
Equipment lease financing | 1 | 1 | ||||||||||||||
Home equity | 34 | 20 | 14 | .19 | % | |||||||||||
Residential real estate | 4 | 4 | ||||||||||||||
Credit card | 46 | 5 | 41 | 3.24 | % | |||||||||||
Other consumer | 59 | 19 | 40 | .74 | % | |||||||||||
Total | $ | 198 | $ | 80 | $ | 118 | .23 | % | ||||||||
2016 | ||||||||||||||||
Commercial | $ | 78 | $ | 33 | $ | 45 | .18 | % | ||||||||
Commercial real estate | 10 | 12 | (2 | ) | (.03 | )% | ||||||||||
Equipment lease financing | 1 | 1 | ||||||||||||||
Home equity | 48 | 21 | 27 | .34 | % | |||||||||||
Residential real estate | 8 | 3 | 5 | .14 | % | |||||||||||
Credit card | 42 | 4 | 38 | 3.23 | % | |||||||||||
Other consumer | 49 | 13 | 36 | .67 | % | |||||||||||
Total | $ | 236 | $ | 87 | $ | 149 | .29 | % |
Three months ended March 31 | Gross Charge-offs | Recoveries | Net Charge-offs / (Recoveries) | Percent of Average Loans (Annualized) | ||||||||||||
Dollars in millions | ||||||||||||||||
2018 | ||||||||||||||||
Commercial | $ | 28 | $ | 16 | $ | 12 | .04 | % | ||||||||
Commercial real estate | 6 | 6 | ||||||||||||||
Equipment lease financing | 2 | 4 | (2 | ) | (.10 | )% | ||||||||||
Home equity | 28 | 21 | 7 | .10 | % | |||||||||||
Residential real estate | 2 | 4 | (2 | ) | (.05 | )% | ||||||||||
Credit card | 56 | 6 | 50 | 3.60 | % | |||||||||||
Other consumer | ||||||||||||||||
Automobile | 38 | 17 | 21 | .65 | % | |||||||||||
Education | 9 | 2 | 7 | .64 | % | |||||||||||
Other | 24 | 4 | 20 | 1.85 | % | |||||||||||
Total | $ | 193 | $ | 80 | $ | 113 | .21 | % | ||||||||
2017 | ||||||||||||||||
Commercial | $ | 53 | $ | 24 | $ | 29 | .11 | % | ||||||||
Commercial real estate | 1 | 7 | (6 | ) | (.08 | )% | ||||||||||
Equipment lease financing | 1 | 1 | ||||||||||||||
Home equity | 34 | 20 | 14 | .19 | % | |||||||||||
Residential real estate | 4 | 4 | ||||||||||||||
Credit card | 46 | 5 | 41 | 3.24 | % | |||||||||||
Other consumer | ||||||||||||||||
Automobile | 30 | 13 | 17 | .56 | % | |||||||||||
Education | 7 | 2 | 5 | .40 | % | |||||||||||
Other | 22 | 4 | 18 | 1.64 | % | |||||||||||
Total | $ | 198 | $ | 80 | $ | 118 | .23 | % |
Residential Mortgage Repurchase Obligations
As discussed in Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in the Notes To Consolidated Financial Statements in our 2016 Form10-K, we have sold residential mortgage loans directly or indirectly through securitization and loan sale transactions in which we have continuing involvement. One form of continuing involvement includes certain loan repurchase obligations associated with the transferred assets. For additional information regarding our residential mortgage repurchase obligations, see the Credit Risk Management portion of the Risk Management section in our 2016 Form10-K.
The PNC Financial Services Group, Inc. –Form 10-Q23
Liquidity and Capital Management
The PNC Financial Services Group, Inc. – Form 10-Q
Liquidity
See Note 10 Borrowed Funds in our 2017 Form 10-K and the Funding Sources section of the Consolidated Balance Sheet Review for additional information related to our borrowings.
In billions | 2017 | |||
January 1 | $ | 31.0 | ||
Issuances | 1.8 | |||
Calls and maturities | (2.2 | ) | ||
March 31 | $ | 30.6 |
In billions | 2018 | |||
January 1 | $ | 33.3 | ||
Issuances | 2.0 | |||
Calls and maturities | (1.0 | ) | ||
Other | (0.4 | ) | ||
March 31 | $ | 33.9 |
2923:27: PNC Bank Notes Issued During First Quarter 20172018Issuance Date Amount Description of Issuance February 17, 2017March 8, 2017 (re-opening)January 22, 2018 $ 1.0 billion$250900 millionSenior notes with a maturity date of February 17, 2022.January 22, 2021. Interest is payable semi-annually at a fixed rate of 2.625%2.500% per annum on February 17January 22 and August��17July 22 of each year, beginning August 17, 2017. FollowingJuly 22, 2018.January 22, 2018 $700 million Senior notes with a maturity date of January 22, 2028. Interest is payable semi-annually at a fixed rate of 3.250% per annum on January 22 and July 22 of each year, beginning July 22, 2018. January 22, 2018 $400 million Floating rate senior notes with a maturity date of January 22, 2021. Interest is payable at the re-opening, the aggregate outstanding principal amount 3-month LIBOR rate, reset quarterly, plus a spread of this series.25% on January 22, April 22, July 22 and October 22 of notes increased to $1.25 billion.each year, beginning on April 22, 2018.24 The PNC Financial Services Group, Inc. –Form 10-Qis a member ofmaintains additional secured borrowing capacity with the FHLB-Pittsburgh and as such, has access to advances from FHLB-Pittsburgh secured generally by residential mortgage loans, other mortgage-related loans and commercial mortgage-backed securities. At March 31, 2017, our unused secured borrowing capacity was $25.6 billion with the FHLB-Pittsburgh. Total FHLB borrowings increased to $19.5 billion at March 31, 2017 compared with $17.5 billion at December 31, 2016 as draws outpaced maturities.The FHLB-Pittsburgh also periodically provides standby letters of credit on behalf of PNC Bank to secure certain public deposits. If the FHLB-Pittsburgh is required to make payment for a beneficiary’s draw, the payment amount is converted into a collateralized advance to PNC Bank. At March 31, 2017, standby letters of credit issued on our behalf by the FHLB-Pittsburgh totaled $4.4 billion.PNC Bank has the ability to offer up to $10.0 billion of its commercial paper to provide additional liquidity. As of March 31, 2017, there were no issuances outstanding under this program.PNC Bank can also borrow fromthrough the Federal Reserve Bank discount window to meet short-term liquidity requirements.window. The Federal Reserve Bank, however, is not viewed as a primary means of funding our routine business activities, but rather as a potential source of liquidity in a stressed environment or during a market disruption. These potential borrowings are secured by commercial loans. At March 31, 2017,2018, our unused secured borrowing capacity was $17.5 billion withat the FHLB-Pittsburgh and the Federal Reserve Bank.Borrowed funds come from a diverse mixBank totaled $44.6 billion.short-term and long-term funding sources. See Note 10 Borrowed Funds in our 2016 its commercial paper to provide additional liquidity. As of March 31, 2018, there were no issuances outstanding under this program.10-K 10-Q and the Funding Sources section of the Consolidated Balance Sheet Review for additional information related to our Borrowings.consolidated companybank level, we monitor the parent company’s liquidity. The parent company’s contractual obligations consist primarily of debt service related to parent company borrowings and fundingnon-bank affiliates. Additionally, the parent company maintains adequate liquidity to fund discretionary activities such as paying dividends to our shareholders, share repurchases, and acquisitions.2017,2018, available parent company liquidity totaled $4.5$5.9 billion. Parent company liquidity is primarily held in intercompany short-term investments, the terms of which provide for the availability of cash in 31 days or less. Investments with longer durations may also be acquired, but if so, the related maturities are aligned with scheduled cash needs, such as the maturity of parent company debt obligations.its subsidiary bank,PNC Bank, which may be impacted by the following:
Total parent company borrowingssubordinated debt outstanding totaled $6.2$6.8 billion at both March 31, 20172018 and December 31, 2016. As of March 31, 2017, there were no parent company borrowings with contractual maturities of less than one year.
2017.
Moody’s | Standard & Poor’s | Fitch | ||||||||||
PNC | ||||||||||||
| ||||||||||||
Senior debt | A3 | A- | A+ | |||||||||
Subordinated debt | A3 | BBB+ | A | |||||||||
Preferred stock | Baa2 | BBB- | BBB- | |||||||||
PNC Bank | ||||||||||||
Senior debt | A2 | A | A+ | |||||||||
Subordinated debt | A3 | A- | A | |||||||||
Long-term deposits | Aa2 | A | AA- | |||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
Short-term deposits | P-1 | A-1 | F1+ | |||||||||
Short-term notes | P-1 | A-1 | ||||||||||
| F1 |
2018.
See Note 11 Total Equity and Other Comprehensive Income in the Notes To Consolidated Financial Statements in this Report for additional information on the March 15, 2017 redemption of $1.0 billion ofFixed-to-Floating RateNon-Cumulative Exchangeable Perpetual Trust Securities issued by PNC Preferred Funding Trusts I and II.
26
2017 Transitional Basel III (a) Common equity Tier 1 capital Common stock plus related surplus, net of treasury stock Retained earnings Accumulated other comprehensive income for securities currently and previously held as available for sale Accumulated other comprehensive income for pension and other postretirement plans Goodwill, net of associated deferred tax liabilities Other disallowed intangibles, net of deferred tax liabilities Other adjustments/(deductions) Total common equity Tier 1 capital before threshold deductions Total threshold deductions Common equity Tier 1 capital Additional Tier 1 capital Preferred stock plus related surplus Other adjustments/(deductions) Tier 1 capital Additional Tier 2 capital Qualifying subordinated debt Trust preferred capital securities Eligible credit reserves includable in Tier 2 capital Total Basel III capital Risk-weighted assets Basel III standardized approach risk-weighted assets (d) Basel III advanced approaches risk-weighted assets (e) Average quarterly adjusted total assets Supplementary leverage exposure (f) Basel III risk-based capital and leverage ratios Common equity Tier 1 Tier 1 Total Leverage (k) Supplementary leverage ratio (l)25:29: Basel III Capital March 31, 2017 Dollars in millions Pro forma Fully Phased-In Basel III
(Non-GAAP) (estimated) (b) (c) $ 9,681 $ 9,681 32,372 32,372 179 223 (474 ) (592 ) (8,824 ) (8,824 ) (183 ) (228 ) (183 ) (180 ) 32,568 32,452 (1,064 ) (1,585 ) 31,504 30,867 3,980 3,980 (94 ) (104 ) 35,390 34,743 3,846 3,778 100 – 2,866 2,866 $ 42,202 $ 41,387 $ 300,233 $ 308,392 N/A $ 278,938 $ 356,237 $ 355,657 $ 423,122 $ 422,542 10.5 % 10.0 % (g) (h) 11.8 % 11.3 % (g) (i) 14.1 % 13.4 % (g) (j) 9.9 % 9.8 % 8.4 % 8.2 % Dollars in millions Common equity Tier 1 capital Common stock plus related surplus, net of treasury stock $ 7,416 $ 8,195 $ 8,195 Retained earnings 36,265 35,481 35,481 (151 ) 337 270 (494 ) (544 ) (436 ) Goodwill, net of associated deferred tax liabilities (9,028 ) (8,988 ) (8,988 ) Other disallowed intangibles, net of deferred tax liabilities (315 ) (319 ) (255 ) Other adjustments/(deductions) (121 ) (141 ) (138 ) 33,572 34,021 34,129 Total threshold deductions (d) (3,272 ) (2,928 ) (1,983 ) Common equity Tier 1 capital 30,300 31,093 32,146 Additional Tier 1 capital Preferred stock plus related surplus 3,986 3,985 3,985 Other adjustments/(deductions) (148 ) (146 ) (124 ) Tier 1 capital 34,138 34,932 36,007 Additional Tier 2 capital Qualifying subordinated debt 3,324 3,433 3,482 Trust preferred capital securities 80 100 Eligible credit reserves includable in Tier 2 capital 2,893 2,907 2,907 Total Basel III capital $ 40,435 $ 41,272 $ 42,496 Risk-weighted assets Basel III standardized approach risk-weighted assets (e) $ 314,922 $ 316,120 $ 309,460 Basel III advanced approaches risk-weighted assets (f) $ 280,385 $ 285,226 N/A Average quarterly adjusted total assets $ 364,242 $ 363,967 $ 364,999 $ 433,233 $ 434,698 $ 435,731 Basel III risk-based capital and leverage ratios Common equity Tier 1 (i) 9.6 % 9.8 % (h) 10.4 % Tier 1 (j) 10.8 % 11.1 % (h) 11.6 % Total (k) (l) (m) 12.8 % 13.1 % (h) 13.7 % Leverage (n) 9.4 % 9.6 % 9.9 % Supplementary leverage ratio (o) 7.9 % 8.0 % 8.3 % (a) CalculatedAll ratios are calculated using the regulatory capital methodology applicable to usPNC during 2017.each period presented and calculated based on the standardized approach.(b) PNC utilizes the pro forma fullyphased-inThe Basel III Common equity Tier 1 capital, Tier 1 risk-based capital, Leverage and Supplementary ratios as of March 31, 2018 reflect the full phase-in of all Basel III adjustments to assess its capital position (without the benefit ofphase-ins), as these ratios represent the regulatory capital standards that will ultimately bemetrics applicable to PNC under the finalPNC.(c) 2017 Fully Phased-In Basel III rules.results are presented as Pro forma fullyphased-in capital amounts, ratios and risk-weighted and leverage-related assets are estimates.(c)(d) Under the Basel III rules, certain items such as significant common stock investments in unconsolidated financial institutions (primarily BlackRock), mortgage servicing rights and deferred tax assets must be deducted from capital ratios(subject to a phase-in schedule that ended December 31, 2017 and estimates may be impacted by additional regulatory guidancenet of associated deferred tax liabilities) to the extent they individually exceed 10%, or analysis and, in the caseaggregate exceed 15%, of those ratios calculated using the advanced approaches, may be subject to variability based on the ongoing evolution, validation and regulatory approval of PNC’s models integral to the calculation of advanced approaches risk-weighted assets.PNC's adjusted common equity Tier 1 capital.(d)(e) Includes credit and market risk-weighted assets. (e)(f) Basel III advanced approaches risk-weighted assets are estimatedcalculated based on the Basel III advanced approaches rules, and include credit, market, and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models, and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements to this estimatecalculation through the parallel run qualification phase.(f)(g) Supplementary leverage exposure is the sum of Adjusted average assets and certainoff-balance sheet exposures including undrawn credit commitments and derivative potential future exposures. (g)(h) Pro forma fullyphased-in Basel III capital ratioratios based on Basel III standardized approach risk-weighted assets and rules.(h)(i) For comparative purposes only, the pro forma fullyphased-in advanced approaches Basel III Common equity Tier 1 capital ratio estimatefor March 31, 2018 is 11.1%10.8% and for December 31, 2017 is 10.9% (estimated). This capital ratio is calculated using pro forma fullyphased-in Common equity Tier 1 capital and dividing by estimated Basel III advanced approaches risk-weighted assets.(i)(j) For comparative purposes only, the pro forma fullyphased-in advanced approaches Basel III Tier 1 risk-based capital ratio estimatefor March 31, 2018 is 12.5%12.2% and for December 31, 2017 is 12.2% (estimated). This capital ratio is calculated using fullyphased-inTier 1 capital and dividing by estimated Basel III advanced approaches risk-weighted assets.(j)(k) For comparative purposes only, the pro forma fullyphased-in advanced approaches Basel III Total capital risk-based capital ratio estimatefor March 31, 2018 is 13.8%13.5% and for December 31, 2017 is 13.5% (estimated). This ratio is calculated using fullyphased-in Total Basel III capital, which under the advanced approaches, Additional Tier 2 capital includes allowance for loan and lease losses in excess of Basel expected credit losses, if any, up to 0.6% of credit risk related risk-weighted assets, and dividing by estimated Basel III advanced approachapproaches risk-weighted assets.(k)(l) The Basel III total risk-based capital ratio includes $80 million of nonqualifying trust preferred capital securities that are subject to a phase-out period that runs through 2022. (m) For comparative purposes only, as of March 31, 2018 the ratio is 12.8%, assuming nonqualifying trust preferred capital securities are phased out. (n) Leverage ratio is calculated based on Tier 1 capital divided by Average quarterly adjusted total assets. (l)(o) Supplementary leverage ratio is calculated based on Tier 1 capital divided by Supplementary leverage exposure. As advanced approaches banking organizations, PNC and PNC Bank will bebecame subject to a 3% minimum supplementary leverage ratio effective January 1, 2018.
As a result of thephase-in periods included
Under the Basel III rules adopted by the U.S. banking agencies, significant common stock investments in unconsolidated financial institutions, mortgage servicing rights and deferred tax assets must be deducted from capital (subject to aphase-in schedule and net of associated deferred tax liabilities) to the extent they individually exceed 10%, or in the aggregate exceed 15%, of the institution’s adjusted common equity Tier 1 capital. Also, Basel III regulatory capital includes (subjectmethodology applicable to aphase-in schedule) accumulated other comprehensive income related to securities currently and previously held as available for sale, as well as pension and other postretirement plans.
us during 2018.
capital and 10% for Total risk-based capital, and PNC Bank must have Transitional Basel III capital ratios of at least 6.5% for Common equity Tier 1 risk-based capital, 8% for Tier 1 risk-based capital, 10% for Total risk-based capital and a Leverage ratio of at least 5%.
28 The PNC Financial Services Group, Inc. –Form 10-Q
First Quarter 2017 | First Quarter 2016 | |||||||
Net Interest Income Sensitivity Simulation (a) | ||||||||
Effect on net interest income in first year from gradual interest rate change over the following 12 months of: | ||||||||
100 basis point increase | 2.5 | % | 2.7 | % | ||||
100 basis point decrease | (4.5 | )% | (2.9 | )% | ||||
Effect on net interest income in second year from gradual interest rate change over the preceding 12 months of: | ||||||||
100 basis point increase | 4.0 | % | 6.7 | % | ||||
100 basis point decrease | (8.8 | )% | (7.8 | )% | ||||
Duration of Equity Model (a) | ||||||||
Base case duration of equity (in years) | (2.3 | ) | (7.1 | ) | ||||
KeyPeriod-End Interest Rates | ||||||||
One-month LIBOR | .98 | % | .44 | % | ||||
Three-year swap | 1.81 | % | .95 | % |
First Quarter 2018 | First Quarter 2017 | |||||
Net Interest Income Sensitivity Simulation (a) | ||||||
Effect on net interest income in first year from gradual interest rate change over the following 12 months of: | ||||||
100 basis point increase | 2.5 | % | 2.5 | % | ||
100 basis point decrease | (3.1 | )% | (4.5 | )% | ||
Effect on net interest income in second year from gradual interest rate change over the preceding 12 months of: | ||||||
100 basis point increase | 4.3 | % | 4.0 | % | ||
100 basis point decrease | (7.0 | )% | (8.8 | )% | ||
Duration of Equity Model (a) | ||||||
Base case duration of equity (in years) | (.7 | ) | (2.3 | ) | ||
Key Period-End Interest Rates | ||||||
One-month LIBOR | 1.88 | % | .98 | % | ||
Three-month LIBOR | 2.31 | % | 1.15 | % | ||
Three-year swap | 2.66 | % | 1.81 | % |
(a) | Given the inherent limitations in certain of these measurement tools and techniques, results become less meaningful as interest rates approach zero. |
In addition to measuring the effect on net interest income assuming parallel changes in current interest rates, we routinely simulate the effects of a number of nonparallel interest rate environments. Table 2731 reflects the percentage change in net interest income over the next two12-month periods assuming (i) the PNC Economist’s most likely rate forecast, (ii) implied market forward rates and
PNC Economist | Market Forward | Slope Flattening | ||||||||||
First year sensitivity | 1.8 | % | 2.0 | % | (2.3 | )% | ||||||
Second year sensitivity | 4.8 | % | 2.6 | % | (6.5 | )% |
2018)
PNC Economist | Market Forward | Slope Flattening | |||||
First year sensitivity | .7 | % | 1.8 | % | (.8 | )% | |
Second year sensitivity | 1.3 | % | .4 | % | (3.5 | )% |
The PNC Financial Services Group, Inc. –Form 10-Q29
Market Risk Management – Customer-Related Trading Risk
Customer-related
foreign exchange client sales revenues.
March 31 | December 31 | Change | ||||||||||||
In millions | 2017 | 2016 | $ | % | ||||||||||
BlackRock | $ | 6,907 | $6,886 | $ | 21 | – | ||||||||
Tax credit investments | 2,204 | 2,090 | 114 | 5 | % | |||||||||
Private equity and other | 1,789 | 1,752 | 37 | 2 | % | |||||||||
Total | $ | 10,900 | $10,728 | $ | 172 | 2 | % |
March 31 2018 | December 31 2017 | Change | |||||||||||||
Dollars in millions | $ | % | |||||||||||||
BlackRock | $ | 7,642 | $ | 7,576 | $ | 66 | 1 | % | |||||||
Tax credit investments | 2,071 | 2,148 | (77 | ) | (4 | )% | |||||||||
Private equity and other | 2,295 | 1,668 | 627 | 38 | % | ||||||||||
Total | $ | 12,008 | $ | 11,392 | $ | 616 | 5 | % |
adoption of ASU 2016-01. These securities were primarily money market funds.
30
may be ineffective for their intended purposes due to unanticipated market changes, among other reasons.
2020.
require us to make estimates or economic assumptions that may vary under different assumptions or conditions and such variations may significantly affect our reported results and financial position for the period or in future periods.
Goodwill
Goodwill arising from business acquisitions represents the value attributable to unidentifiable intangible elements in the business acquired. Most of our goodwill relates to value inherent in the Retail Banking and Corporate & Institutional Banking businesses.
The value of goodwill is supported by earnings, which is driven by our invested assets and transaction volume and, for certain businesses, the market value of assets under administration or for which processing services are provided. Lower earnings and realized profitability resulting from a lack of growth or our inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill, which could result in a current period charge to earnings. At least annually, in the fourth quarter, or more frequently if events occur or circumstances have changed significantly from the annual test date, management reviews the current operating environment and strategic direction of each reporting unit taking into consideration any events or changes in circumstances that may have an effect on the unit. For this review, inputs are generated and used in calculating the fair value of the reporting unit, which is compared to its carrying amount (“Step 1” of the goodwill impairment test) as further discussed below. The fair values of our reporting units are determined using a discounted cash flow valuation model with assumptions based upon market comparables. Additionally, we may also evaluate certain financial metrics that are indicative of fair value, including market quotes, price to earnings ratios and recent acquisitions involving other financial institutions.
Given our segment realignment, as described in the Business Segments Review section of this Financial Review, we performed an interim impairment test as of March 31, 2017. The results indicated that the estimated fair value of our reporting units exceeded their carrying values by at least 10% and are not considered to be at risk of not passing Step 1.
See the Critical Accounting Estimates and Judgments section in Item 7 of our 2016 Form10-K for additional information on our annual impairment test processes.
The PNC Financial Services Group, Inc. –Form 10-Q31
Total assets Total assets at fair value as a percentage of consolidated assets Level 3 assets as a percentage of total assets at fair value Level 3 assets as a percentage of consolidated assets Total liabilities Total liabilities at fair value as a percentage of consolidated liabilities Level 3 liabilities as a percentage of total liabilities at fair value Level 3 liabilities as a percentage of consolidated liabilities20172018 and December 31, 2016,2017, respectively, and the portions of such assets and liabilities that are classified within Level 3 of the valuation hierarchy. Level 3 assets and liabilities are those where the fair value is estimated using significant unobservable inputs.30:34: Fair Value Measurements – Summary March 31, 2017 December 31, 2016 Dollars in millions Total Fair
Value Level 3 Total Fair
Value Level 3 $ 71,352 $ 7,526 $ 74,608 $ 8,830 19 % 20 % 11 % 12 % 2 % 2 % $ 4,315 $ 292 $ 4,818 $ 433 1 % 2 % 7 % 9 % <1 % <1 % March 31, 2018 December 31, 2017 Dollars in millions Level 3 Level 3 Total assets $ 66,580 $ 6,546 $ 69,673 $ 6,475 Total assets at fair value as a percentage of consolidated assets 18 % 18 % Level 3 assets as a percentage of total assets at fair value 10 % 9 % Level 3 assets as a percentage of consolidated assets 2 % 2 % Total liabilities $ 4,161 $ 488 $ 4,233 $ 531 Total liabilities at fair value as a percentage of consolidated liabilities 1 % 1 % Level 3 liabilities as a percentage of total liabilities at fair value 12 % 13 % Level 3 liabilities as a percentage of consolidated liabilities <1 % <1 % Recently IssuedStandardsRevenue RecognitionIn May 2014, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU)2014-09, Revenue from Contracts with Customers (Topic 606). This ASU clarifies the principlesEstimates and Judgments section in Item 7 of our 2017 Form 10-K for recognizing revenue and replaces nearly all existing revenue recognition guidance in U.S. GAAP with oneinformation on our accounting model. The core principleof certain income tax effects of the guidance is that an entity should recognize revenue to depict the satisfactionTax Cuts and Jobs Act enacted on December 22, 2017. Where certain income tax effects could be reasonably estimated, these were included as provisional amounts as of a performance obligation by transfer of promised goods or services to customers. The ASU also requires additional qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.In August 2015, the FASB issued guidance deferring the mandatory effective date of ASU2014-09 for one year, to annual reporting periods beginning after December 15,31, 2017. During 2016, the FASB also issued four separate ASUsmeasurement period, which amendwill end in December 2018, these estimates may be adjusted upon obtaining or analyzing additional information about facts and circumstances or clarifications of uncertain aspects of the original standardnewly enacted tax law, which if known would have affected the initially reported provisional amounts. No changes were made to clarify guidance regarding principal versus agent considerations, identifying performance obligations and licensing, certain narrow-scope amendments which addressthese provisional amounts during the presentationfirst quarter of sales tax, noncash consideration, contract modifications at transition and assessing collectability and other minor technical corrections and improvements.The requirements within ASU2018.2014-0938 and its subsequent amendments should be applied retrospectively to each prior period presented (with several practical expedients for certain completed contracts) or retrospectively with the cumulative effect of initially applying ASU2014-09 recognized at the date of initial application (i.e., modified retrospective application). We plan to adopt the ASU consistent with the deferred mandatory effective date using the modified retrospective approach. Based on our evaluation to date, we do not expect the adoption of this standard to have a significant impact on our consolidated results of operations or our consolidated financial position. We expect that the most significant impact related to the standard’s expanded disclosure requirements will be the disaggregation of revenue.32 The PNC Financial Services Group, Inc. –Form 10-QFinancial InstrumentsIn January 2016, the FASB issued ASU2016-01, Financial Instruments – Overall (Subtopic825-10):Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU changes the accounting for certain equity investments, financial liabilities under the fair value option and presentation and disclosure requirements for financial instruments. Equity investments not accounted for under the equity method of accounting will be measured at fair value with any changes in fair value recognized in net income. The ASU also simplifies the impairment assessment of equity investments for which fair value is not readily determinable. Additionally, the ASU changes the presentation of certain fair value changes for financial liabilities measured at fair value and amends certain disclosure requirements relating to the fair value of financial instruments. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and should be applied using a modified retrospective approach through a cumulative-effect adjustment to the balance sheet, except for the amendment related to equity securities without readily determinable fair values, which should be applied prospectively. We plan to adopt all provisions consistent with the effective date and are currently evaluating the impact of this ASU on our results of operations and financial position. However, we expect the standard will most significantly impact equity investments that are currently accounted for under the cost method which will likely have a positive impact on income when transitioned to fair value measurement.LeasesIn February 2016, the FASB issued ASU2016-02, Leases (Topic 842). The primary change in the new guidance is the recognition of lease assets and lease liabilities by lessees for operating leases. The ASU requires lessees to recognize aright-of-use asset and related lease liability for all leases with lease terms of more than 12 months. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018Accounting Standards Update (ASU) Description Financial Statement Impact We are currently evaluating the impact of adopting this standard.Credit LossesIn June 2016, the FASB issued ASU2016-13, Financial Instruments – Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The ASU requires the use of an expected credit loss methodology; specifically, expected credit losses for the remaining life of the asset will be recognized at the time of origination or acquisition. The expected credit loss methodology will apply to loans, debt securities and other financial assets accounted for at amortized cost and net investment in leases not accounted for at fair value through net income. It will also apply tooff-balancesheet credit exposures except for unconditionally cancellable commitments. Assets in the scope of the ASU, except for purchased credit deteriorated assets, will be presented at the net amount expected to be collected after deducting the allowance for credit losses from the amortized cost basis of the assets.Enhanced credit quality disclosures will be required including disaggregation of credit quality indicators by vintage. The development of an expected credit loss methodology and new disclosures will require significant data collection, building or enhancing loss models, and processre-development prior to adoption. The ASU is effective for us for the first quarter of 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. We have established a company-wide, cross-functional governance structure. We are in the process of determining the required changes to our credit loss estimation methodologies, data and systems to be able to comply with the standard. We continue to assess the impact of the standard; however, we expect the guidance will result in an increase in the allowance for loan losses to cover credit losses over the estimated life of the financial assets. The magnitude of the increase in our allowance for loan losses at the adoption date will be dependent upon the nature of the characteristics of the portfolio at the adoption date, as well as macroeconomic conditions and forecasts at that date.Statement of Cash FlowsIn August 2016, the FASB issued ASU2016-15, Statement of Cash Flows (Topic 230):Classification of Certain Cash Receipts and Cash Payments.The ASU provides guidance on eight specific issues related to classification within the statement of cash flows with the objective of reducing existing diversity in practice. The specific issues cover cash payments for debt prepayment or debt extinguishment costs; cash outflows for settlement ofzero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant; contingent consideration payments that are not made soon after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests received in securitization transactions; and clarifies that when no specific GAAP guidance exists and the source of the cash flows are not separately identifiable, then the predominant source of cash flows should be used to determine the classification for the item. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. Based on our evaluation to date, we do not expect the adoption of this standard to have a significant impact on our consolidated statement of cash flows.
The PNC Financial Services Group, Inc. –Form 10-Q33
Goodwill
In January 2017, the FASB issued ASU2017-04, Intangibles – Goodwill and Other (Topic 350):Simplifying the Accounting for Goodwill Impairment.This ASU eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. Under Step 2, an entity had to calculate the implied fair value of goodwill at the impairment testing date of its assets and liabilities as if those assets and liabilities had been acquired in a business combination. Under the ASU, the goodwill impairment test compares the fair value of a reporting unit with its carrying amount, and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying amount of goodwill. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this standard to impact our consolidated results of operations or our consolidated financial position.
Recently Adopted Accounting Standards
the first quarter of 2018.
34 The PNC Financial Services Group, Inc. –Form 10-Q
– | Changes in interest rates and valuations in debt, equity and other financial markets. |
– | Disruptions in the U.S. and global financial markets. |
– | Actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply and market interest rates. |
– | Changes in |
– | Changes in customers’, suppliers’ and other counterparties’ performance and creditworthiness. |
– | Slowing or reversal of the current U.S. economic expansion. |
– | Commodity price volatility. |
|
– | Changes resulting from legislative and regulatory reforms, including changes affecting oversight of the financial services industry, consumer protection, |
– | Changes to regulations governing bank capital and liquidity standards, including due to the Dodd-Frank Act and initiatives of the Basel Committee. |
– | Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. These matters may |
The PNC Financial Services Group, Inc. –Form 10-Q35
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 us. |
– | Results of the regulatory examination and supervision process, including our failure to satisfy requirements of agreements with governmental agencies. |
– | Impact on business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of adequacy of our intellectual property protection in general. |
|
36
Unaudited In millions, except per share data Three months ended March 31 Interest Income Loans Investment securities Other Total interest income Interest Expense Deposits Borrowed funds Total interest expense Net interest income Noninterest Income Asset management Consumer services Corporate services Residential mortgage Service charges on deposits Other Total noninterest income Total revenue Provision For Credit Losses Noninterest Expense Personnel Occupancy Equipment Marketing Other Total noninterest expense Income before income taxes and noncontrolling interests Income taxes Net income Less: Net income attributable to noncontrolling interests Preferred stock dividends Preferred stock discount accretion and redemptions Net income attributable to common shareholders Earnings Per Common Share Basic Diluted Average Common Shares Outstanding Basic Diluted 2017 2016 $ 1,904 $ 1,843 493 462 123 102 2,520 2,407 120 105 240 204 360 309 2,160 2,098 403 341 332 337 393 325 113 100 161 158 322 306 1,724 1,567 3,884 3,665 88 152 1,249 1,145 222 221 251 234 55 54 625 627 2,402 2,281 1,394 1,232 320 289 1,074 943 17 19 63 63 21 2 $ 973 $ 859 $ 1.99 $ 1.70 1.96 1.68 487 501 492 507 Unaudited Three months ended
March 31In millions, except per share data 2018 2017 Interest Income Loans $ 2,228 $ 1,904 Investment securities 512 493 Other 178 123 Total interest income 2,918 2,520 Interest Expense Deposits 213 120 Borrowed funds 344 240 Total interest expense 557 360 Net interest income 2,361 2,160 Noninterest Income Asset management 455 403 Consumer services 357 332 Corporate services 429 414 Residential mortgage 97 113 Service charges on deposits 167 161 Other 245 301 Total noninterest income 1,750 1,724 Total revenue 4,111 3,884 Provision For Credit Losses 92 88 Noninterest Expense Personnel 1,354 1,257 Occupancy 218 222 Equipment 273 251 Marketing 55 55 Other 627 617 Total noninterest expense 2,527 2,402 Income before income taxes and noncontrolling interests 1,492 1,394 Income taxes 253 320 Net income 1,239 1,074 Less: Net income attributable to noncontrolling interests 10 17 Preferred stock dividends 63 63 Preferred stock discount accretion and redemptions 1 21 Net income attributable to common shareholders $ 1,165 $ 973 Earnings Per Common Share Basic $ 2.45 $ 1.99 Diluted $ 2.43 $ 1.96 Average Common Shares Outstanding Basic 473 487 Diluted 476 492 37
Unaudited In millions Three months ended March 31 Net income Other comprehensive income (loss), before tax and net of reclassifications into Net income: Net unrealized gains (losses) onnon-OTTI securities Net unrealized gains (losses) on OTTI securities Net unrealized gains (losses) on cash flow hedge derivatives Pension and other postretirement benefit plan adjustments Other Other comprehensive income (loss), before tax and net of reclassifications into Net income Income tax benefit (expense) related to items of other comprehensive income Other comprehensive income (loss), after tax and net of reclassifications into Net income Comprehensive income Less: Comprehensive income (loss) attributable to noncontrolling interests Comprehensive income attributable to PNC 2017 2016 $ 1,074 $ 943 69 504 35 (38 ) (77 ) 200 (62 ) 12 4 (27 ) (31 ) 651 17 (249 ) (14 ) 402 1,060 1,345 17 19 $ 1,043 $ 1,326 Three months ended
March 31 2018 2017 Net income $ 1,239 $ 1,074 Other comprehensive income (loss), before tax and net of reclassifications into Net income: Net unrealized gains (losses) on non-OTTI securities (646 ) 69 Net unrealized gains (losses) on OTTI securities 14 35 Net unrealized gains (losses) on cash flow hedge derivatives (193 ) (77 ) Pension and other postretirement benefit plan adjustments 63 (62 ) Other 27 4 Other comprehensive income (loss), before tax and net of reclassifications into Net income (735 ) (31 ) Income tax benefit (expense) related to items of other comprehensive income 178 17 Other comprehensive income (loss), after tax and net of reclassifications into Net income (557 ) (14 ) Comprehensive income 682 1,060 Less: Comprehensive income (loss) attributable to noncontrolling interests 10 17 Comprehensive income attributable to PNC $ 672 $ 1,043 38
Unaudited In millions, except par value Assets Cash and due from banks Interest-earning deposits with banks Loans held for sale (a) Investment securities – available for sale Investment securities – held to maturity Loans (a) Allowance for loan and lease losses Net loans Equity investments Mortgage servicing rights Goodwill Other (a) Total assets Liabilities Deposits Noninterest-bearing Interest-bearing Total deposits Borrowed funds Federal Home Loan Bank borrowings Bank notes and senior debt Subordinated debt Other (b) Total borrowed funds Allowance for unfunded loan commitments and letters of credit Accrued expenses and other liabilities Total liabilities Equity Preferred stock (c) Common stock ($5 par value, Authorized 800 shares, issued 542 shares) Capital surplus Retained earnings Accumulated other comprehensive income (loss) Common stock held in treasury at cost: 57 shares Total shareholders’ equity Noncontrolling interests Total equity Total liabilities and equity March 31
2017 December 31
2016 $ 5,003 $ 4,879 27,877 25,711 1,414 2,504 59,339 60,104 17,093 15,843 212,826 210,833 (2,561 ) (2,589 ) 210,265 208,244 10,900 10,728 1,867 1,758 9,103 9,103 28,083 27,506 $ 370,944 $ 366,380 $ 79,246 $ 80,230 181,464 176,934 260,710 257,164 19,549 17,549 23,745 22,972 6,889 8,009 4,879 4,176 55,062 52,706 305 301 8,964 9,355 325,041 319,526 2,709 2,709 16,275 16,651 32,372 31,670 (279 ) (265 ) (5,323 ) (5,066 ) 45,754 45,699 149 1,155 45,903 46,854 $ 370,944 $ 366,380 Unaudited March 31
2018 December 31
2017In millions, except par value Assets Cash and due from banks $ 4,649 $ 5,249 Interest-earning deposits with banks 28,821 28,595 Loans held for sale (a) 965 2,655 Investment securities – available for sale 56,018 57,618 Investment securities – held to maturity 18,544 18,513 Loans (a) 221,614 220,458 Allowance for loan and lease losses (2,604 ) (2,611 ) Net loans 219,010 217,847 Equity investments (b) 12,008 11,392 Mortgage servicing rights 1,979 1,832 Goodwill 9,218 9,173 Other (a) 27,949 27,894 Total assets $ 379,161 $ 380,768 Liabilities Deposits Noninterest-bearing $ 78,303 $ 79,864 Interest-bearing 186,401 185,189 Total deposits 264,704 265,053 Borrowed funds Federal Home Loan Bank borrowings 19,537 21,037 Bank notes and senior debt 28,773 28,062 Subordinated debt 5,121 5,200 Other (c) 4,608 4,789 Total borrowed funds 58,039 59,088 Allowance for unfunded loan commitments and letters of credit 290 297 Accrued expenses and other liabilities 9,093 8,745 Total liabilities 332,126 333,183 Equity Preferred stock (d) Common stock ($5 par value, Authorized 800 shares, issued 542 shares) 2,710 2,710 Capital surplus 16,227 16,374 Retained earnings 36,266 35,481 Accumulated other comprehensive income (loss) (699 ) (148 ) Common stock held in treasury at cost: 72 and 69 shares (7,535 ) (6,904 ) Total shareholders’ equity 46,969 47,513 Noncontrolling interests 66 72 Total equity 47,035 47,585 Total liabilities and equity $ 379,161 $ 380,768 (a) Our consolidated assets included the following for which we have elected the fair value option: Loans held for sale of $1.3$.9 billion, Loans of $.8 billion and Other assets of $.3 billion at March 31, 2018 and Loans held for sale of $1.7 billion, Loans of $.9 billion and Other assets of $.3 billion at March 31, 2017 and Loans held for sale of $2.4 billion, Loans of $.9 billion and Other assets of $.5 billion at December 31, 2016.2017.(b) (c) Our consolidated liabilities at both March 31, 2018 and December 31, 2017 included Other borrowed funds of $.1 billion at both March 31, 2017 and December 31, 2016, for which we have elected the fair value option.(c)(d) Par value less than $.5 million at each date.
Unaudited In millions Operating Activities Net income Adjustments to reconcile net income to net cash provided (used) by operating activities Provision for credit losses Depreciation and amortization Deferred income taxes Changes in fair value of mortgage servicing rights Gain on sales of Visa Class B common shares Undistributed earnings of BlackRock Net change in Trading securities and other short-term investments Loans held for sale Other assets Accrued expenses and other liabilities Other Net cash provided (used) by operating activities Investing Activities Sales Securities available for sale Loans Repayments/maturities Securities available for sale Securities held to maturity Purchases Securities available for sale Securities held to maturity Loans Net change in Federal funds sold and resale agreements Interest-earning deposits with banks Loans Other Net cash provided (used) by investing activities Unaudited In millions Financing Activities Net change in Noninterest-bearing deposits Interest-bearing deposits Federal funds purchased and repurchase agreements Other borrowed funds Sales/issuances Federal Home Loan Bank borrowings Bank notes and senior debt Other borrowed funds Common and treasury stock Repayments/maturities Federal Home Loan Bank borrowings Bank notes and senior debt Subordinated debt Other borrowed funds Redemption of noncontrolling interests Acquisition of treasury stock Preferred stock cash dividends paid Common stock cash dividends paid Net cash provided (used) by financing activities Net Increase (Decrease) In Cash And Due From Banks Cash and due from banks at beginning of period Cash and due from banks at end of period Supplemental Disclosures Interest paid Income taxes paid Income taxes refunded Non-cash Investing and Financing Items Transfer from loans to loans held for sale, net Transfer from loans to foreclosed assets Three months ended
March 31 2017 2016 $ 1,074 $ 943 88 152 279 270 21 (49 ) 33 341 (44 ) (100 ) (61 ) (405 ) (946 ) 1,065 51 554 (1,310 ) (884 ) 1,084 (116 ) (155 ) 1,609 276 3,202 782 338 371 2,790 2,005 504 523 (5,142 ) (3,441 ) (1,778 ) (687 ) (177 ) (363 ) (674 ) 246 (2,166 ) 1,067 (2,359 ) (1,530 ) (177 ) 119 (5,639 ) (908 ) Three months ended
March 31 2018 2017 Operating Activities Net income $ 1,239 $ 1,074 Adjustments to reconcile net income to net cash provided (used) by operating activities Provision for credit losses 92 88 Depreciation and amortization 280 279 Deferred income taxes 81 21 Changes in fair value of mortgage servicing rights (85 ) 33 Undistributed earnings of BlackRock (133 ) (100 ) Net change in Trading securities and other short-term investments 176 (405 ) Loans held for sale 1,675 1,065 Other assets (1,217 ) 541 Accrued expenses and other liabilities 710 (884 ) Other 104 (122 ) Net cash provided (used) by operating activities $ 2,922 $ 1,590 Investing Activities Sales Securities available for sale $ 4,461 $ 3,202 Loans 479 338 Repayments/maturities Securities available for sale 2,027 2,790 Securities held to maturity 598 504 Purchases Securities available for sale (5,905 ) (5,142 ) Securities held to maturity (662 ) (1,778 ) Loans (224 ) (177 ) Net change in Federal funds sold and resale agreements 97 (674 ) Interest-earning deposits with banks (226 ) (2,166 ) Loans (1,611 ) (2,359 ) Other (284 ) (158 ) Net cash provided (used) by investing activities $ (1,250 ) $ (5,620 ) 40 Three months ended
March 31 2017 2016 $ (944 ) $ (877 ) 4,530 2,641 8 718 795 128 4,500 1,820 997 26 80 60 18 (2,500 ) (1,050 ) (1,000 ) (997 ) (1,100 ) 18 (19 ) (373 ) (1,000 ) (688 ) (551 ) (63 ) (64 ) (271 ) (260 ) 4,154 428 124 (204 ) 4,879 4,065 $ 5,003 $ 3,861 $ 347 $ 345 $ 8 $ 19 $ 9 $ 33 $ 107 $ 191 $ 57 $ 81
Unaudited In millions | Three Months Ended March 31 | ||||||||
2018 | 2017 | ||||||||
Financing Activities | |||||||||
Net change in | |||||||||
Noninterest-bearing deposits | $ | (1,683 | ) | $ | (944 | ) | |||
Interest-bearing deposits | 1,212 | 4,530 | |||||||
Federal funds purchased and repurchase agreements | 87 | 8 | |||||||
Commercial paper | (100 | ) | |||||||
Other borrowed funds | (11 | ) | 795 | ||||||
Sales/issuances | |||||||||
Federal Home Loan Bank borrowings | 4,500 | ||||||||
Bank notes and senior debt | 1,991 | 1,820 | |||||||
Other borrowed funds | 123 | 26 | |||||||
Common and treasury stock | 33 | 60 | |||||||
Repayments/maturities | |||||||||
Federal Home Loan Bank borrowings | (1,500 | ) | (2,500 | ) | |||||
Bank notes and senior debt | (1,000 | ) | (1,000 | ) | |||||
Subordinated debt | (1,100 | ) | |||||||
Other borrowed funds | (163 | ) | (19 | ) | |||||
Redemption of noncontrolling interests | (1,000 | ) | |||||||
Acquisition of treasury stock | (840 | ) | (688 | ) | |||||
Preferred stock cash dividends paid | (63 | ) | (63 | ) | |||||
Common stock cash dividends paid | (358 | ) | (271 | ) | |||||
Net cash provided (used) by financing activities | (2,272 | ) | 4,154 | ||||||
Net Increase (Decrease) In Cash And Due From Banks | (600 | ) | 124 | ||||||
Cash and due from banks at beginning of period | 5,249 | 4,879 | |||||||
Cash and due from banks at end of period | $ | 4,649 | $ | 5,003 | |||||
Supplemental Disclosures | |||||||||
Interest paid | $ | 501 | $ | 347 | |||||
Income taxes paid | $ | 7 | $ | 8 | |||||
Income taxes refunded | $ | 11 | $ | 9 | |||||
Non-cash Investing and Financing Items | |||||||||
Transfer from loans to loans held for sale, net | $ | 173 | $ | 107 | |||||
Transfer from loans to foreclosed assets | $ | 45 | $ | 57 |
CONSOLIDATED STATEMENT OF CASH FLOWS
THE PNC FINANCIAL SERVICES GROUP, INC.
(continued from previous page)
description of significant accounting policies. There have been no significant changes to our accounting policies as disclosed in our 2017 Form 10-K, except for those accounting policies included in this Note as a result of the Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, Florida, North Carolina, Kentucky, Washington, D.C., Delaware, Virginia, Georgia, Alabama, Missouri, Wisconsinthe Mid-Atlantic, Midwest and South Carolina.Southeast. We also provide certain products and services internationally.2017current period presentation, which did not have a material impact on our consolidated financial condition or results of operations.2016 Annual Report on2017 Form10-K. Reference is made to Note 1 Accounting Policies in the 2016our 2017 Form10-K for a detailed2016 Annual Report on Form10-K.adoption of new accounting standards that were effective in the first quarter of 2018. These interim consolidated financial statements serve to update the 2016our 2017 Form10-K and may not include all information and notesNotes necessary to constitute a complete set of financial statements.We did not adopt any new accounting standards that had a significant impact during the first quarter of 2017.Accounting Standards Update (ASU) Description Financial Statement Impact Accounting Standards Update (ASU) Description Financial Statement Impact 20162017 Form10-K, we have transferred residential and commercial mortgage loans in securitization or sales transactions in which we have continuing involvement. Our continuing involvement generally consists of servicing, repurchasing previously transferred loans under certain conditions and loss share arrangements, and, in limited circumstances, holding of mortgage-backed securities issued by the securitization special purpose entities (SPEs).
42 The PNC Financial Services Group, Inc. –Form 10-Q
In millions | Residential Mortgages | Commercial Mortgages (a) | ||||||
CASH FLOWS – Three months ended March 31, 2017 | ||||||||
Sales of loans (b) | $ | 1,594 | $ | 1,617 | ||||
Repurchases of previously transferred loans (c) | $ | 131 | ||||||
Servicing fees (d) | $ | 94 | $ | 33 | ||||
Servicing advances recovered/(funded), net | $ | 42 | $ | 31 | ||||
Cash flows on mortgage-backed securities held (e) | $ | 349 | $ | 129 | ||||
CASH FLOWS – Three months ended March 31, 2016 | ||||||||
Sales of loans (b) | $ | 1,438 | $ | 650 | ||||
Repurchases of previously transferred loans (c) | $ | 160 | ||||||
Servicing fees (d) | $ | 93 | $ | 30 | ||||
Servicing advances recovered/(funded), net | $ | 28 | $ | 31 | ||||
Cash flows on mortgage-backed securities held (e) | $ | 352 | $ | 105 |
In millions | Residential Mortgages | Commercial Mortgages (a) | |||||||
Cash Flows - Three months ended March 31, 2018 | |||||||||
Sales of loans (b) | $ | 1,193 | $ | 1,202 | |||||
Repurchases of previously transferred loans (c) | $ | 119 | |||||||
Servicing fees (d) | $ | 92 | $ | 31 | |||||
Servicing advances recovered/(funded), net | $ | 4 | $ | 17 | |||||
Cash flows on mortgage-backed securities held (e) | $ | 422 | $ | 21 | |||||
Cash Flows - Three months ended March 31, 2017 | |||||||||
Sales of loans (b) | $ | 1,594 | $ | 1,617 | |||||
Repurchases of previously transferred loans (c) | $ | 131 | |||||||
Servicing fees (d) | $ | 94 | $ | 33 | |||||
Servicing advances recovered/(funded), net | $ | 42 | $ | 31 | |||||
Cash flows on mortgage-backed securities held (e) | $ | 349 | $ | 129 |
(a) | Represents cash flow information associated with both commercial mortgage loan transfer and servicing activities. |
(b) | Gains/losses recognized on sales of loans were |
(c) | Includes residential mortgage government insured or guaranteed loans eligible for repurchase through the exercise of our removal of account provision option and loans repurchased due to alleged breaches of origination covenants or representations and warranties made to purchasers. |
(d) | Includes contractually specified servicing fees, late charges and ancillary fees. |
(e) | Represents cash flows on securities we hold issued by a securitization SPE in which we transferred to |
In millions | Residential Mortgages | Commercial Mortgages (a) | ||||||
March 31, 2017 | ||||||||
Total principal balance | $ | 64,825 | $ | 45,043 | ||||
Delinquent loans (b) | $ | 1,248 | $ | 1,148 | ||||
December 31, 2016 | ||||||||
Total principal balance | $ | 66,081 | $ | 45,855 | ||||
Delinquent loans (b) | $ | 1,422 | $ | 941 | ||||
Three months ended March 31, 2017 | ||||||||
Net charge-offs (c) | $ | 25 | $ | 355 | ||||
Three months ended March 31, 2016 | ||||||||
Net charge-offs (c) | $ | 26 | $ | 912 |
In millions | Residential Mortgages | Commercial Mortgages (a) | |||||||
March 31, 2018 | |||||||||
Total principal balance | $ | 57,339 | $ | 47,480 | |||||
Delinquent loans (b) | $ | 796 | $ | 298 | |||||
December 31, 2017 | |||||||||
Total principal balance | $ | 58,320 | $ | 49,116 | |||||
Delinquent loans (b) | $ | 899 | $ | 355 | |||||
Three months ended March 31, 2018 | |||||||||
Net charge-offs (c) | $ | 12 | $ | 30 | |||||
Three months ended March 31, 2017 | |||||||||
Net charge-offs (c) | $ | 25 | $ | 355 |
(a) | Represents information at the securitization level in which we have sold loans and we are the servicer for the securitization. |
(b) | Serviced delinquent loans are 90 days or more past due or are in process of foreclosure. |
(c) | Net charge-offs for Residential mortgages represent credit losses less recoveries distributed and as reported to investors during the period. Net charge-offs for Commercial mortgages represent credit losses less recoveries distributed and as reported by the trustee for commercial mortgage backed securitizations. Realized losses for Agency securitizations are not reflected as we do not manage the underlying real estate upon foreclosure and, as such, do not have access to loss information. |
20162017 Form10-K, we are involved with various entities in the normal course of business that are deemed to be VIEs.3337 where we have determined that our continuing involvement is not significant. In addition, where we only have lending arrangements in the normal course of business with entities that could be VIEs, we have excluded these transactions withnon-consolidated entities from the balances presented in Table 33.37. These loans are included as part of the asset quality disclosures that we make in Note 3 Asset Quality.
The PNC Financial Services Group, Inc. –Form 10-Q43
In millions | PNC Risk of Loss (a) | Carrying Value of Assets Owned by PNC | Carrying Value of Liabilities Owned by PNC | |||||||||
March 31, 2017 | ||||||||||||
Mortgage-Backed Securitizations (b) | $ | 7,771 | $ | 7,771 | (c) | |||||||
Tax Credit Investments and Other | 3,194 | 3,173 | (d) | $ | 865 | (e) | ||||||
Total | $ | 10,965 | $ | 10,944 | $ | 865 | ||||||
December 31, 2016 | ||||||||||||
Mortgage-Backed Securitizations (b) | $ | 8,003 | $ | 8,003 | (c) | |||||||
Tax Credit Investments and Other | 3,083 | 3,043 | (d) | $ | 823 | (e) | ||||||
Total | $ | 11,086 | $ | 11,046 | $ | 823 |
In millions | PNC Risk of Loss (a) | Carrying Value of Assets Owned by PNC | Carrying Value of Liabilities Owned by PNC | ||||||||||||
March 31, 2018 | |||||||||||||||
Mortgage-Backed Securitizations (b) | $ | 10,481 | $ | 10,481 | (c) | ||||||||||
Tax Credit Investments and Other | 3,033 | 2,979 | (d) | $ | 799 | (e) | |||||||||
Total | $ | 13,514 | $ | 13,460 | $ | 799 | |||||||||
December 31, 2017 | |||||||||||||||
Mortgage-Backed Securitizations (b) | $ | 9,738 | $ | 9,738 | (c) | ||||||||||
Tax Credit Investments and Other | 3,069 | 3,001 | (d) | $ | 858 | (e) | |||||||||
Total | $ | 12,807 | $ | 12,739 | $ | 858 |
(a) | This represents loans, investments and other assets related tonon-consolidated VIEs, net of collateral (if applicable). The risk of loss excludes any potential tax recapture associated with tax credit investments. |
(b) | Amounts reflect involvement with securitization SPEs where we transferred to and/or |
(c) | Included in Investment securities, Mortgage servicing rights and Other assets on our Consolidated Balance Sheet. |
(d) | Included in Investment securities, Loans, Equity investments and Other assets on our Consolidated Balance Sheet. |
(e) | Included in Deposits and Other liabilities on our Consolidated Balance Sheet. |
44
Accruing | ||||||||||||||||||||||||||||||||||||
Dollars in millions | Current or Less Than 30 Days Past Due | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days Or More Past Due | Total Past Due (b) | Nonperforming Loans | Fair Value Option Nonaccrual Loans (c) | Purchased Impaired Loans | Total Loans (d) | |||||||||||||||||||||||||||
March 31, 2017 | ||||||||||||||||||||||||||||||||||||
Commercial Lending | ||||||||||||||||||||||||||||||||||||
Commercial | $ | 103,217 | $ | 62 | $ | 29 | $ | 40 | $ | 131 | $ | 400 | $ | 17 | $ | 103,765 | ||||||||||||||||||||
Commercial real estate | 29,212 | 15 | 6 | 21 | 137 | 65 | 29,435 | |||||||||||||||||||||||||||||
Equipment lease financing | 7,431 | 19 | 19 | 12 | 7,462 | |||||||||||||||||||||||||||||||
Total commercial lending | 139,860 | 96 | 35 | 40 | 171 | 549 | 82 | 140,662 | ||||||||||||||||||||||||||||
Consumer Lending | ||||||||||||||||||||||||||||||||||||
Home equity | 27,541 | 57 | 23 | 80 | 900 | 1,056 | 29,577 | |||||||||||||||||||||||||||||
Residential real estate | 12,787 | 122 | 77 | 432 | 631 | (b) | 473 | $ | 217 | 1,673 | 15,781 | |||||||||||||||||||||||||
Credit card | 5,018 | 32 | 21 | 37 | 90 | 4 | 5,112 | |||||||||||||||||||||||||||||
Other consumer | ||||||||||||||||||||||||||||||||||||
Automobile | 12,226 | 35 | 10 | 5 | 50 | 61 | 12,337 | |||||||||||||||||||||||||||||
Education and other | 8,984 | 116 | 61 | 185 | 362 | (b) | 11 | 9,357 | ||||||||||||||||||||||||||||
Total consumer lending | 66,556 | 362 | 192 | 659 | 1,213 | 1,449 | 217 | 2,729 | 72,164 | |||||||||||||||||||||||||||
Total | $ | 206,416 | $ | 458 | $ | 227 | $ | 699 | $ | 1,384 | $ | 1,998 | $ | 217 | $ | 2,811 | $ | 212,826 | ||||||||||||||||||
Percentage of total loans | 96.99 | % | .22 | % | .11 | % | .33 | % | .65 | % | .94 | % | .10 | % | 1.32 | % | 100.00 | % | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||||||||||||||||||
Commercial Lending | ||||||||||||||||||||||||||||||||||||
Commercial | $ | 100,710 | $ | 81 | $ | 20 | $ | 39 | $ | 140 | $ | 496 | $ | 18 | $ | 101,364 | ||||||||||||||||||||
Commercial real estate | 28,769 | 5 | 2 | 7 | 143 | 91 | 29,010 | |||||||||||||||||||||||||||||
Equipment lease financing | 7,535 | 29 | 1 | 30 | 16 | 7,581 | ||||||||||||||||||||||||||||||
Total commercial lending | 137,014 | 115 | 23 | 39 | 177 | 655 | 109 | 137,955 | ||||||||||||||||||||||||||||
Consumer Lending | ||||||||||||||||||||||||||||||||||||
Home equity | 27,820 | 64 | 30 | 94 | 914 | 1,121 | 29,949 | |||||||||||||||||||||||||||||
Residential real estate | 12,425 | 159 | 68 | 500 | 727 | (b) | 501 | $ | 219 | 1,726 | 15,598 | |||||||||||||||||||||||||
Credit card | 5,187 | 33 | 21 | 37 | 91 | 4 | 5,282 | |||||||||||||||||||||||||||||
Other consumer | ||||||||||||||||||||||||||||||||||||
Automobile | 12,257 | 51 | 12 | 5 | 68 | 55 | 12,380 | |||||||||||||||||||||||||||||
Education and other | 9,235 | 140 | 78 | 201 | 419 | (b) | 15 | 9,669 | ||||||||||||||||||||||||||||
Total consumer lending | 66,924 | 447 | 209 | 743 | 1,399 | 1,489 | 219 | 2,847 | 72,878 | |||||||||||||||||||||||||||
Total | $ | 203,938 | $ | 562 | $ | 232 | $ | 782 | $ | 1,576 | $ | 2,144 | $ | 219 | $ | 2,956 | $ | 210,833 | ||||||||||||||||||
Percentage of total loans | 96.73 | % | .27 | % | .11 | % | .37 | % | .75 | % | 1.02 | % | .10 | % | 1.40 | % | 100.00 | % |
Accruing | |||||||||||||||||||||||||||||
Dollars in millions | Current or Less Than 30 Days Past Due | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days Or More Past Due | Total Past Due (b) | Nonperforming Loans | Fair Value Option Nonaccrual Loans (c) | Purchased Impaired Loans | Total Loans (d) | ||||||||||||||||||||
March 31, 2018 | |||||||||||||||||||||||||||||
Commercial Lending | |||||||||||||||||||||||||||||
Commercial | $ | 111,754 | $ | 53 | $ | 22 | $ | 53 | $ | 128 | $ | 426 | $ | 112,308 | |||||||||||||||
Commercial real estate | 28,695 | 21 | 12 | 33 | 107 | 28,835 | |||||||||||||||||||||||
Equipment lease financing | 7,779 | 18 | 1 | 19 | 4 | 7,802 | |||||||||||||||||||||||
Total commercial lending | 148,228 | 92 | 35 | 53 | 180 | 537 | 148,945 | ||||||||||||||||||||||
Consumer Lending | |||||||||||||||||||||||||||||
Home equity | 25,919 | 94 | 31 | 125 | 820 | $ | 835 | 27,699 | |||||||||||||||||||||
Residential real estate | 14,824 | 130 | 70 | 373 | 573 | (b) | 391 | $ | 189 | 1,479 | 17,456 | ||||||||||||||||||
Credit card | 5,540 | 40 | 26 | 45 | 111 | 6 | 5,657 | ||||||||||||||||||||||
Other consumer | |||||||||||||||||||||||||||||
Automobile | 13,112 | 77 | 18 | 9 | 104 | 79 | 13,295 | ||||||||||||||||||||||
Education and other | 8,257 | 94 | 54 | 148 | 296 | (b) | 9 | 8,562 | |||||||||||||||||||||
Total consumer lending | 67,652 | 435 | 199 | 575 | 1,209 | 1,305 | 189 | 2,314 | 72,669 | ||||||||||||||||||||
Total | $ | 215,880 | $ | 527 | $ | 234 | $ | 628 | $ | 1,389 | $ | 1,842 | $ | 189 | $ | 2,314 | $ | 221,614 | |||||||||||
Percentage of total loans | 97.41 | % | .24 | % | .11 | % | .28 | % | .63 | % | .83 | % | .09 | % | 1.04 | % | 100.00 | % | |||||||||||
December 31, 2017 | |||||||||||||||||||||||||||||
Commercial Lending | |||||||||||||||||||||||||||||
Commercial | $ | 109,989 | $ | 45 | $ | 25 | $ | 39 | $ | 109 | $ | 429 | $ | 110,527 | |||||||||||||||
Commercial real estate | 28,826 | 27 | 2 | 29 | 123 | 28,978 | |||||||||||||||||||||||
Equipment lease financing | 7,914 | 17 | 1 | 18 | 2 | 7,934 | |||||||||||||||||||||||
Total commercial lending | 146,729 | 89 | 28 | 39 | 156 | 554 | 147,439 | ||||||||||||||||||||||
Consumer Lending | |||||||||||||||||||||||||||||
Home equity | 26,561 | 78 | 26 | 104 | 818 | $ | 881 | 28,364 | |||||||||||||||||||||
Residential real estate | 14,389 | 151 | 74 | 486 | 711 | (b) | 400 | $ | 197 | 1,515 | 17,212 | ||||||||||||||||||
Credit card | 5,579 | 43 | 26 | 45 | 114 | 6 | 5,699 | ||||||||||||||||||||||
Other consumer | |||||||||||||||||||||||||||||
Automobile | 12,697 | 79 | 20 | 8 | 107 | 76 | 12,880 | ||||||||||||||||||||||
Education and other | 8,525 | 105 | 64 | 159 | 328 | (b) | 11 | 8,864 | |||||||||||||||||||||
Total consumer lending | 67,751 | 456 | 210 | 698 | 1,364 | 1,311 | 197 | 2,396 | 73,019 | ||||||||||||||||||||
Total | $ | 214,480 | $ | 545 | $ | 238 | $ | 737 | $ | 1,520 | $ | 1,865 | $ | 197 | $ | 2,396 | $ | 220,458 | |||||||||||
Percentage of total loans | 97.29 | % | .25 | % | .11 | % | .33 | % | .69 | % | .85 | % | .09 | % | 1.08 | % | 100.00 | % |
(a) | Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment in a loan includes the unpaid principal balance plus |
(b) | Past due loan amounts exclude purchased impaired loans, 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. Past due loan amounts include government insured or guaranteed Residential real estate mortgages totaling |
(c) | Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population. |
(d) | Net of unearned income, net deferred loan fees, unamortized discounts and premiums, and purchase discounts and premiums totaling $1.2 billion |
Dollars in millions | March 31 2017 | December 31 2016 | ||||||
Nonperforming loans | ||||||||
Total commercial lending | $ | 549 | $ | 655 | ||||
Total consumer lending (a) | 1,449 | 1,489 | ||||||
Total nonperforming loans (b) | 1,998 | 2,144 | ||||||
OREO, foreclosed and other assets | 214 | 230 | ||||||
Total nonperforming assets | $ | 2,212 | $ | 2,374 | ||||
Nonperforming loans to total loans | .94 | % | 1.02 | % | ||||
Nonperforming assets to total loans, OREO, foreclosed and other assets | 1.04 | % | 1.12 | % | ||||
Nonperforming assets to total assets | .60 | % | .65 | % |
Dollars in millions | March 31 2018 | December 31 2017 | |||||||
Nonperforming loans | |||||||||
Total commercial lending | $ | 537 | $ | 554 | |||||
Total consumer lending (a) | 1,305 | 1,311 | |||||||
Total nonperforming loans | 1,842 | 1,865 | |||||||
OREO, foreclosed and other assets | 162 | 170 | |||||||
Total nonperforming assets | $ | 2,004 | $ | 2,035 | |||||
Nonperforming loans to total loans | .83 | % | .85 | % | |||||
Nonperforming assets to total loans, OREO, foreclosed and other assets | .90 | % | .92 | % | |||||
Nonperforming assets to total assets | .53 | % | .53 | % |
(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. |
Table 36: Commercial Lending Asset Quality Indicators (a)
Criticized Commercial Loans | ||||||||||||||||||||
In millions | Pass Rated | Special Mention (b) | Substandard (c) | Doubtful (d) | Total Loans | |||||||||||||||
March 31, 2017 | ||||||||||||||||||||
Commercial | $ | 98,379 | $ | 1,894 | $ | 3,367 | $ | 125 | $ | 103,765 | ||||||||||
Commercial real estate | 28,983 | 122 | 309 | 21 | 29,435 | |||||||||||||||
Equipment lease financing | 7,294 | 70 | 92 | 6 | 7,462 | |||||||||||||||
Total commercial lending | $ | 134,656 | $ | 2,086 | $ | 3,768 | $ | 152 | $ | 140,662 | ||||||||||
December 31, 2016 | ||||||||||||||||||||
Commercial | $ | 96,231 | $ | 1,612 | $ | 3,449 | $ | 72 | $ | 101,364 | ||||||||||
Commercial real estate | 28,561 | 98 | 327 | 24 | 29,010 | |||||||||||||||
Equipment lease financing | 7,395 | 89 | 91 | 6 | 7,581 | |||||||||||||||
Total commercial lending | $ | 132,187 | $ | 1,799 | $ | 3,867 | $ | 102 | $ | 137,955 |
46
Criticized Commercial Loans | |||||||||||||||||||||
In millions | Pass Rated | Special Mention (b) | Substandard (c) | Doubtful (d) | Total Loans | ||||||||||||||||
March 31, 2018 | |||||||||||||||||||||
Commercial | $ | 106,681 | $ | 2,075 | $ | 3,449 | $ | 103 | $ | 112,308 | |||||||||||
Commercial real estate | 28,274 | 163 | 397 | 1 | 28,835 | ||||||||||||||||
Equipment lease financing | 7,606 | 91 | 102 | 3 | 7,802 | ||||||||||||||||
Total commercial lending | $ | 142,561 | $ | 2,329 | $ | 3,948 | $ | 107 | $ | 148,945 | |||||||||||
December 31, 2017 | |||||||||||||||||||||
Commercial | $ | 105,280 | $ | 1,858 | $ | 3,331 | $ | 58 | $ | 110,527 | |||||||||||
Commercial real estate | 28,380 | 148 | 435 | 15 | 28,978 | ||||||||||||||||
Equipment lease financing | 7,754 | 77 | 102 | 1 | 7,934 | ||||||||||||||||
Total commercial lending | $ | 141,414 | $ | 2,083 | $ | 3,868 | $ | 74 | $ | 147,439 |
(a) | Loans are classified as “Pass”, “Special Mention”, “Substandard” and “Doubtful” based on the Regulatory Classification definitions. We use PDs and LGDs to rate commercial |
(b) | Special Mention rated loans have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects at some future date. These loans do not expose us to sufficient risk to warrant a more adverse classification at the reporting date. |
(c) | Substandard rated loans have a well-defined weakness or weaknesses that jeopardize the collection or liquidation of debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. |
(d) | Doubtful rated loans possess all the inherent weaknesses of a Substandard rated loan with the additional characteristics that the weakness makes collection or liquidation in full improbable due to existing facts, conditions and values. |
2017, respectively. Current estimated LTV ratios Greater than or equal to 125% and updated FICO scores: Greater than 660 Less than or equal to 660 (b) Missing FICO Greater than or equal to 100% to less than 125% and updated FICO scores: Greater than 660 Less than or equal to 660 (b) Missing FICO Greater than or equal to 90% to less than 100% and updated FICO scores: Greater than 660 Less than or equal to 660 Missing FICO Less than 90% and updated FICO scores: Greater than 660 Less than or equal to 660 Missing FICO Total home equity and residential real estate loans Current estimated LTV ratios Greater than or equal to 125% and updated FICO scores: Greater than 660 Less than or equal to 660 (b) Missing FICO Greater than or equal to 100% to less than 125% and updated FICO scores: Greater than 660 Less than or equal to 660 (b) Missing FICO Greater than or equal to 90% to less than 100% and updated FICO scores: Greater than 660 Less than or equal to 660 Missing FICO Less than 90% and updated FICO scores: Greater than 660 Less than or equal to 660 Missing FICO Missing LTV and updated FICO scores: Greater than 660 Total home equity and residential real estate loansAssetLoan Classes20162017 Form10-K for additional information related to our Consumer Lending assetloan classes, including discussion around the asset quality indicators that we use to monitor and manage the credit risk associated with each loan class.balances,loan classes, excluding consumer purchased impaired loans of $2.7$2.3 billion and $2.8$2.4 billion at March 31, 20172018 and December 31, 2016,2017, respectively, and government insured or guaranteed residential real estate mortgages of $.7 billion and $.8 billion at both March 31, 20172018 and December 31, 2016.37:41: Asset Quality Indicators for Home Equity and Residential Real Estate Loans – Excluding Purchased Impaired and Government Insured or Guaranteed Loans (a) Home Equity Residential
Real Estate March 31, 2017 – in millions 1st Liens 2nd Liens Total $ 149 $ 576 $ 146 $ 871 25 101 33 159 1 9 3 13 360 1,112 320 1,792 67 200 81 348 3 10 5 18 430 1,047 431 1,908 69 161 75 305 2 8 6 16 14,150 7,815 11,499 33,464 1,323 808 597 2,728 42 54 90 186 $ 16,621 $ 11,901 $ 13,286 $ 41,808 (continued on following page)The PNC Financial Services Group, Inc. –Form 10-Q47(continued from previous page) Home Equity Residential
Real Estate December 31, 2016 – in millions 1st Liens 2nd Liens Total $ 161 $ 629 $ 174 $ 964 32 110 35 177 1 9 2 12 394 1,190 345 1,929 66 211 76 353 3 10 7 20 453 1,100 463 2,016 77 171 78 326 1 8 6 15 14,047 7,913 11,153 33,113 1,323 822 586 2,731 42 55 102 199 1 1 $ 16,600 $ 12,228 $ 13,028 $ 41,856 Home Equity Total March 31, 2018 - in millions 1st Liens 2nd Liens Current estimated LTV ratios Greater than or equal to 125% and updated FICO scores: Greater than 660 $ 99 $ 359 $ 123 $ 581 Less than or equal to 660 (b) 16 58 24 98 Missing FICO 1 4 1 6 Greater than or equal to 100% to less than 125% and updated FICO scores: Greater than 660 277 794 249 1,320 Less than or equal to 660 (b) 45 133 49 227 Missing FICO 1 8 5 14 Greater than or equal to 90% to less than 100% and updated FICO scores: Greater than 660 333 853 300 1,486 Less than or equal to 660 51 132 51 234 Missing FICO 2 8 3 13 Less than 90% and updated FICO scores: Greater than 660 13,678 7,877 13,795 35,350 Less than or equal to 660 1,212 775 555 2,542 Missing FICO 42 56 97 195 Total home equity and residential real estate loans $ 15,757 $ 11,057 $ 15,252 $ 42,066 December 31, 2017 - in millions Home Equity Total 1st Liens 2nd Liens Current estimated LTV ratios Greater than or equal to 125% and updated FICO scores: Greater than 660 $ 108 $ 385 $ 126 $ 619 Less than or equal to 660 (b) 21 64 23 108 Missing FICO 1 5 1 7 Greater than or equal to 100% to less than 125% and updated FICO scores: Greater than 660 300 842 253 1,395 Less than or equal to 660 (b) 46 143 45 234 Missing FICO 2 9 5 16 Greater than or equal to 90% to less than 100% and updated FICO scores: Greater than 660 331 890 324 1,545 Less than or equal to 660 55 134 55 244 Missing FICO 2 9 4 15 Less than 90% and updated FICO scores: Greater than 660 13,954 8,066 13,445 35,465 Less than or equal to 660 1,214 774 507 2,495 Missing FICO 42 57 95 194 Total home equity and residential real estate loans $ 16,076 $ 11,378 $ 14,883 $ 42,337 (a) Amounts shown represent recorded investment. (b) Higher risk loans are defined as loans with both an updated FICO score of less than or equal to 660 and an updated LTV greater than or equal to 100%. The following states had the highest percentage of higher risk loans at March 31, 2017:2018: New Jersey 16%, Pennsylvania 13%, Illinois 12%, Ohio 9%10%, Maryland 8%, Florida 6%, MichiganNorth Carolina 5% and North Carolina 5%Michigan 4%. The remainder of the states had lower than 4% of the higher risk loans individually, and collectively they represent approximately 26% of the higher risk loans. The following states had the highest percentage of higher risk loans at December 31, 2016:2017: New Jersey 16%17%, Pennsylvania 14%13%, Illinois 12%13%, Ohio 10%9%, Maryland 8%, Florida 7%, Maryland 6%, Michigan 4%North Carolina 5% and North CarolinaMichigan 4%. The remainder of the states had lower than 4% of the highhigher risk loans individually, and collectively they represent approximately 27%25% of the higher risk loans.
Credit Card | Other Consumer (a) | |||||||||||||||
Dollars in millions | Amount | % of Total Loans Using FICO Credit Metric | Amount | % of Total Loans Using FICO Credit Metric | ||||||||||||
March 31, 2017 | ||||||||||||||||
FICO score greater than 719 | $ | 3,071 | 60 | % | $ | 10,062 | 64 | % | ||||||||
650 to 719 | 1,448 | 28 | 4,025 | 26 | ||||||||||||
620 to 649 | 219 | 4 | 596 | 4 | ||||||||||||
Less than 620 | 239 | 5 | 674 | 4 | ||||||||||||
No FICO score available or required (b) | 135 | 3 | 390 | 2 | ||||||||||||
Total loans using FICO credit metric | 5,112 | 100 | % | 15,747 | 100 | % | ||||||||||
Consumer loans using other internal credit metrics (a) | 5,947 | |||||||||||||||
Total loan balance | $ | 5,112 | $ | 21,694 | ||||||||||||
Weighted-average updated FICO score (b) | 734 | 742 | ||||||||||||||
December 31, 2016 | ||||||||||||||||
FICO score greater than 719 | $ | 3,244 | 61 | % | $ | 10,247 | 65 | % | ||||||||
650 to 719 | 1,466 | 28 | 3,873 | 25 | ||||||||||||
620 to 649 | 215 | 4 | 552 | 3 | ||||||||||||
Less than 620 | 229 | 4 | 632 | 4 | ||||||||||||
No FICO score available or required (b) | 128 | 3 | 489 | 3 | ||||||||||||
Total loans using FICO credit metric | 5,282 | 100 | % | 15,793 | 100 | % | ||||||||||
Consumer loans using other internal credit metrics (a) | 6,256 | |||||||||||||||
Total loan balance | $ | 5,282 | $ | 22,049 | ||||||||||||
Weighted-average updated FICO score (b) | 736 | 744 |
48 The PNC Financial Services Group, Inc. –Form 10-Q
Credit Card | Other Consumer (a) | ||||||||||||||
Dollars in millions | Amount | % of Total Loans Using FICO Credit Metric | Amount | % of Total Loans Using FICO Credit Metric | |||||||||||
March 31, 2018 | |||||||||||||||
FICO score greater than 719 | $ | 3,368 | 60 | % | $ | 10,235 | 61 | % | |||||||
650 to 719 | 1,603 | 28 | % | 4,611 | 27 | % | |||||||||
620 to 649 | 254 | 5 | % | 815 | 5 | % | |||||||||
Less than 620 | 297 | 5 | % | 844 | 5 | % | |||||||||
No FICO score available or required (b) | 135 | 2 | % | 316 | 2 | % | |||||||||
Total loans using FICO credit metric | 5,657 | 100 | % | 16,821 | 100 | % | |||||||||
Consumer loans using other internal credit metrics (a) | 5,036 | ||||||||||||||
Total loan balance | $ | 5,657 | $ | 21,857 | |||||||||||
Weighted-average updated FICO score (b) | 733 | 737 | |||||||||||||
December 31, 2017 | |||||||||||||||
FICO score greater than 719 | $ | 3,457 | 61 | % | $ | 10,366 | 63 | % | |||||||
650 to 719 | 1,596 | 28 | % | 4,352 | 27 | % | |||||||||
620 to 649 | 250 | 4 | % | 659 | 4 | % | |||||||||
Less than 620 | 272 | 5 | % | 715 | 4 | % | |||||||||
No FICO score available or required (b) | 124 | 2 | % | 314 | 2 | % | |||||||||
Total loans using FICO credit metric | 5,699 | 100 | % | 16,406 | 100 | % | |||||||||
Consumer loans using other internal credit metrics (a) | 5,338 | ||||||||||||||
Total loan balance | $ | 5,699 | $ | 21,744 | |||||||||||
Weighted-average updated FICO score (b) | 735 | 741 |
(a) | We use updated FICO scores as an asset quality indicator fornon-government guaranteed or insured education loans, automobile loans and other secured and unsecured lines and loans. We use internal credit metrics, such as delinquency status, geography or other factors, as an asset quality indicator for government guaranteed or insured education loans and consumer loans to high net worth individuals, as internal credit metrics are more relevant than FICO scores for these types of loans. |
(b) | Credit card loans and other consumer loans with no FICO score available or required generally refers to new accounts issued to borrowers with limited credit history, accounts for which we cannot obtain an updated FICO score |
Number Pre-TDR Recorded During the three months ended March 31, 2017 Dollars in millions Total commercial lending Total consumer lending Total TDRs During the three months ended March 31, 2016 Dollars in millions Total commercial lending Total consumer lending Total TDRs3943 quantifies the number of loans that were classified as TDRs, as well as the change in the loans’ recorded investment as a result of becoming a TDR during the three months ended March 31, 20172018 and March 31, 2016.2017. Additionally, the table provides information about the types of TDR concessions. See Note 3 Asset Quality in our 20162017 Form10-K for additional discussion of TDRs.39:43: Financial Impact and TDRs by Concession Type (a)
of Loans
Investment (b) Post-TDR Recorded Investment (c) Principal
Forgiveness Rate
Reduction Other Total 49 $ 35 $ 4 $ 6 $ 5 $ 15 2,899 73 37 31 68 2,948 $ 108 $ 4 $ 43 $ 36 $ 83 42 $ 168 $ 10 $ 142 $ 152 2,965 68 44 20 64 3,007 $ 236 $ 54 $ 162 $ 216 Post-TDR Recorded Investment (c) During the three months ended March 31, 2018
Dollars in millions Other Total Total commercial lending 32 $ 10 $ 1 $ 7 $ 8 Total consumer lending 2,979 49 30 16 46 Total TDRs 3,011 $ 59 $ 31 $ 23 $ 54 During the three months ended March 31, 2017
Dollars in millions Total commercial lending 49 $ 35 $ 4 $ 6 $ 5 $ 15 Total consumer lending 2,899 73 37 31 68 Total TDRs 2,948 $ 108 $ 4 $ 43 $ 36 $ 83 (a) Impact of partial charge-offs at TDR date are included in this table. (b) Represents the recorded investment of the loans as of the quarter end prior to TDR designation, and excludes immaterial amounts of accrued interest receivable. (c) Represents the recorded investment of the TDRs as of the end of the quarter in which the TDR occurs, and excludes immaterial amounts of accrued interest receivable.
The PNC Financial Services Group, Inc. –Form 10-Q49
In millions | Unpaid Principal Balance | Recorded Investment | Associated Allowance | Average Recorded Investment (a) | ||||||||||||
March 31, 2017 | ||||||||||||||||
Impaired loans with an associated allowance | ||||||||||||||||
Total commercial lending | $ | 613 | $ | 372 | $ | 90 | $ | 425 | ||||||||
Total consumer lending | 1,236 | 1,178 | 215 | 1,181 | ||||||||||||
Total impaired loans with an associated allowance | $ | 1,849 | $ | 1,550 | $ | 305 | $ | 1,606 | ||||||||
Impaired loans without an associated allowance | ||||||||||||||||
Total commercial lending | $ | 617 | $ | 345 | $ | 333 | ||||||||||
Total consumer lending | 957 | 586 | 598 | |||||||||||||
Total impaired loans without an associated allowance | $ | 1,574 | $ | 931 | $ | 931 | ||||||||||
Total impaired loans | $ | 3,423 | $ | 2,481 | $ | 305 | $ | 2,537 | ||||||||
December 31, 2016 | ||||||||||||||||
Impaired loans with an associated allowance | ||||||||||||||||
Total commercial lending | $ | 742 | $ | 477 | $ | 105 | $ | 497 | ||||||||
Total consumer lending | 1,237 | 1,185 | 226 | 1,255 | ||||||||||||
Total impaired loans with an associated allowance | $ | 1,979 | $ | 1,662 | $ | 331 | $ | 1,752 | ||||||||
Impaired loans without an associated allowance | ||||||||||||||||
Total commercial lending | $ | 447 | $ | 322 | $ | 365 | ||||||||||
Total consumer lending | 982 | 608 | 604 | |||||||||||||
Total impaired loans without an associated allowance | $ | 1,429 | $ | 930 | $ | 969 | ||||||||||
Total impaired loans | $ | 3,408 | $ | 2,592 | $ | 331 | $ | 2,721 |
In millions | Unpaid Principal Balance | Recorded Investment | Associated Allowance | Average Recorded Investment (a) | |||||||||||||
March 31, 2018 | |||||||||||||||||
Impaired loans with an associated allowance | |||||||||||||||||
Total commercial lending | $ | 537 | $ | 371 | $ | 101 | $ | 363 | |||||||||
Total consumer lending | 980 | 915 | 152 | 964 | |||||||||||||
Total impaired loans with an associated allowance | 1,517 | 1,286 | 253 | 1,327 | |||||||||||||
Impaired loans without an associated allowance | |||||||||||||||||
Total commercial lending | 427 | 326 | 345 | ||||||||||||||
Total consumer lending | 1,158 | 693 | 666 | ||||||||||||||
Total impaired loans without an associated allowance | 1,585 | 1,019 | 1,011 | ||||||||||||||
Total impaired loans | $ | 3,102 | $ | 2,305 | $ | 253 | $ | 2,338 | |||||||||
December 31, 2017 | |||||||||||||||||
Impaired loans with an associated allowance | |||||||||||||||||
Total commercial lending | $ | 580 | $ | 353 | $ | 76 | $ | 419 | |||||||||
Total consumer lending | 1,061 | 1,014 | 195 | 1,072 | |||||||||||||
Total impaired loans with an associated allowance | 1,641 | 1,367 | 271 | 1,491 | |||||||||||||
Impaired loans without an associated allowance | |||||||||||||||||
Total commercial lending | 494 | 366 | 330 | ||||||||||||||
Total consumer lending | 1,019 | 638 | 648 | ||||||||||||||
Total impaired loans without an associated allowance | 1,513 | 1,004 | 978 | ||||||||||||||
Total impaired loans | $ | 3,154 | $ | 2,371 | $ | 271 | $ | 2,469 |
(a) | Average recorded investment is for the three months ended March 31, |
50 The PNC Financial Services Group, Inc. –Form 10-Q
follows: March 31, 2017 Allowance for Loan and Lease Losses January 1 Charge-offs Recoveries Net charge-offs Provision for credit losses Net change in allowance for unfunded loan commitments and letters of credit Other March 31 TDRs individually evaluated for impairment Other loans individually evaluated for impairment Loans collectively evaluated for impairment Purchased impaired loans March 31 Loan Portfolio TDRs individually evaluated for impairment Other loans individually evaluated for impairment Loans collectively evaluated for impairment Fair value option loans (a) Purchased impaired loans March 31 Portfolio segment ALLL as a percentage of total ALLL Ratio of the allowance for loan and lease losses to total loans March 31, 2016 Allowance for Loan and Lease Losses January 1 Charge-offs Recoveries Net charge-offs Provision for credit losses Net change in allowance for unfunded loan commitments and letters of credit Other March 31 TDRs individually evaluated for impairment Other loans individually evaluated for impairment Loans collectively evaluated for impairment Purchased impaired loans March 31 Loan Portfolio TDRs individually evaluated for impairment Other loans individually evaluated for impairment Loans collectively evaluated for impairment Fair value option loans (a) Purchased impaired loans March 31 Portfolio segment ALLL as a percentage of total ALLL Ratio of the allowance for loan and lease losses to total loans20162017 Form10-K for a description of the accounting policies for ALLL.follows.41:45: Rollforward of Allowance for Loan and Lease Losses and Associated Loan DataIn millions Commercial
Lending Consumer
Lending Total $ 1,534 $ 1,055 $ 2,589 (55 ) (143 ) (198 ) 32 48 80 (23 ) (95 ) (118 ) 23 65 88 (5 ) 1 (4 ) 1 5 6 $ 1,530 $ 1,031 $ 2,561 $ 37 $ 215 $ 252 53 53 1,412 526 1,938 28 290 318 $ 1,530 $ 1,031 $ 2,561 $ 366 $ 1,764 $ 2,130 351 351 139,863 66,797 206,660 874 874 82 2,729 2,811 $ 140,662 $ 72,164 $ 212,826 60 % 40 % 100 % 1.09 % 1.43 % 1.20 % $ 1,605 $ 1,122 $ 2,727 (89 ) (147 ) (236 ) 46 41 87 (43 ) (106 ) (149 ) 84 68 152 (19 ) (2 ) (21 ) 1 1 2 $ 1,628 $ 1,083 $ 2,711 $ 49 $ 261 $ 310 115 115 1,414 560 1,974 50 262 312 $ 1,628 $ 1,083 $ 2,711 $ 500 $ 1,891 $ 2,391 436 436 134,045 66,338 200,383 895 895 149 3,231 3,380 $ 135,130 $ 72,355 $ 207,485 60 % 40 % 100 % 1.20 % 1.50 % 1.31 % Dollars in millions Total March 31, 2018 Allowance for Loan and Lease Losses January 1 $ 1,582 $ 1,029 $ 2,611 Charge-offs (36 ) (157 ) (193 ) Recoveries 26 54 80 Net (charge-offs) (10 ) (103 ) (113 ) Provision for credit losses 37 55 92 Net (increase) / decrease in allowance for unfunded loan commitments and letters of credit 5 2 7 Other 7 7 March 31 $ 1,614 $ 990 $ 2,604 TDRs individually evaluated for impairment $ 34 $ 152 $ 186 Other loans individually evaluated for impairment 67 67 Loans collectively evaluated for impairment 1,513 556 2,069 Purchased impaired loans 282 282 March 31 $ 1,614 $ 990 $ 2,604 Loan Portfolio TDRs individually evaluated for impairment $ 384 $ 1,608 $ 1,992 Other loans individually evaluated for impairment 313 313 Loans collectively evaluated for impairment 148,248 67,934 216,182 Fair value option loans (a) 813 813 Purchased impaired loans 2,314 2,314 March 31 $ 148,945 $ 72,669 $ 221,614 Portfolio segment ALLL as a percentage of total ALLL 62 % 38 % 100 % Ratio of ALLL to total loans 1.08 % 1.36 % 1.18 % March 31, 2017 Allowance for Loan and Lease Losses January 1 $ 1,534 $ 1,055 $ 2,589 Charge-offs (55 ) (143 ) (198 ) Recoveries 32 48 80 Net (charge-offs) (23 ) (95 ) (118 ) Provision for credit losses 23 65 88 Net (increase) / decrease in allowance for unfunded loan commitments and letters of credit (5 ) 1 (4 ) Other 1 5 6 March 31 $ 1,530 $ 1,031 $ 2,561 TDRs individually evaluated for impairment $ 37 $ 215 $ 252 Other loans individually evaluated for impairment 53 53 Loans collectively evaluated for impairment 1,412 526 1,938 Purchased impaired loans 28 290 318 March 31 $ 1,530 $ 1,031 $ 2,561 Loan Portfolio TDRs individually evaluated for impairment $ 366 $ 1,764 $ 2,130 Other loans individually evaluated for impairment 351 351 Loans collectively evaluated for impairment 139,863 66,797 206,660 Fair value option loans (a) 874 874 Purchased impaired loans 82 2,729 2,811 March 31 $ 140,662 $ 72,164 $ 212,826 Portfolio segment ALLL as a percentage of total ALLL 60 % 40 % 100 % Ratio of ALLL to total loans 1.09 % 1.43 % 1.20 % (a) Loans accounted for under the fair value option are not evaluated for impairment as these loans are accounted for at fair value. Accordingly, there is no allowance recorded on these loans.
In millions Amortized Cost Fair Value March 31, 2017 Securities Available for Sale Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities Corporate stocks and other Total securities available for sale Securities Held to Maturity Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total securities held to maturity December 31, 2016 Securities Available for Sale Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities Corporate stocks and other Total securities available for sale Securities Held to Maturity Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total securities held to maturity42:46: Investment Securities Summary Unrealized Gains Losses $ 12,787 $ 185 $ (62 ) $ 12,910 26,329 153 (293 ) 26,189 3,011 236 (44 ) 3,203 2,037 4 (35 ) 2,006 3,846 28 (11 ) 3,863 5,934 59 (13 ) 5,980 4,572 124 (23 ) 4,673 58,516 789 (481 ) 58,824 517 (2 ) 515 $ 59,033 $ 789 $ (483 ) $ 59,339 $ 531 $ 36 $ (18 ) $ 549 12,344 66 (172 ) 12,238 185 6 191 882 18 900 561 10 571 552 1 (1 ) 552 2,038 92 (21 ) 2,109 $ 17,093 $ 229 $ (212 ) $ 17,110 $ 13,100 $ 151 $ (77 ) $ 13,174 26,245 170 (287 ) 26,128 3,191 227 (52 ) 3,366 2,150 3 (34 ) 2,119 4,023 29 (27 ) 4,025 5,938 52 (22 ) 5,968 4,656 104 (37 ) 4,723 59,303 736 (536 ) 59,503 603 (2 ) 601 $ 59,906 $ 736 $ (538 ) $ 60,104 $ 527 $ 35 $ (22 ) $ 540 11,074 68 (161 ) 10,981 191 7 198 903 24 927 567 10 577 558 (2 ) 556 2,023 76 (12 ) 2,087 $ 15,843 $ 220 $ (197 ) $ 15,866 52In millions Unrealized Gains Losses March 31, 2018 Securities Available for Sale Debt securities U.S. Treasury and government agencies $ 13,645 $ 123 $ (179 ) $ 13,589 Residential mortgage-backed Agency 26,512 74 (584 ) 26,002 Non-agency 2,320 333 (17 ) 2,636 Commercial mortgage-backed Agency 1,884 1 (78 ) 1,807 Non-agency 2,585 9 (24 ) 2,570 Asset-backed 5,129 71 (17 ) 5,183 Other debt 4,166 103 (38 ) 4,231 Total securities available for sale $ 56,241 $ 714 $ (937 ) $ 56,018 Securities Held to Maturity Debt securities U.S. Treasury and government agencies $ 745 $ 28 $ (27 ) $ 746 Residential mortgage-backed Agency 14,663 18 (382 ) 14,299 Non-agency 163 3 166 Commercial mortgage-backed Agency 338 2 (1 ) 339 Non-agency 524 4 528 Asset-backed 196 1 197 Other debt 1,915 59 (26 ) 1,948 Total securities held to maturity $ 18,544 $ 115 $ (436 ) $ 18,223 December 31, 2017 Securities Available for Sale Debt securities U.S. Treasury and government agencies $ 14,432 $ 173 $ (84 ) $ 14,521 Residential mortgage-backed Agency 25,534 121 (249 ) 25,406 Non-agency 2,443 336 (21 ) 2,758 Commercial mortgage-backed Agency 1,960 2 (58 ) 1,904 Non-agency 2,603 19 (9 ) 2,613 Asset-backed 5,331 74 (8 ) 5,397 Other debt 4,322 129 (17 ) 4,434 Total debt securities 56,625 854 (446 ) 57,033 Other (a) 587 (2 ) 585 Total securities available for sale $ 57,212 $ 854 $ (448 ) $ 57,618 Securities Held to Maturity Debt securities U.S. Treasury and government agencies $ 741 $ 37 $ (13 ) $ 765 Residential mortgage-backed Agency 14,503 77 (139 ) 14,441 Non-agency 167 7 174 Commercial mortgage-backed Agency 407 4 411 Non-agency 538 10 548 Asset-backed 200 1 201 Other debt 1,957 88 (20 ) 2,025 Total securities held to maturity $ 18,513 $ 224 $ (172 ) $ 18,565 (a) On January 1, 2018, $.6 billion of available for sale securities, primarily money market funds, were reclassified to equity investments in accordance with the adoption of ASU 2016-01. See the Recently Adopted Accounting Standards portion of Note 1 for additional detail on this adoption. Accumulated other comprehensive income or loss, net of tax,AOCI, unless credit-related. Securities held to maturity are carried at amortized cost. At March 31, 2017, Accumulated other comprehensive income2018, AOCI included pretax gains of $52$50 million from derivatives that hedged the purchase of investment securities classified as held to maturity. The gains will be accreted into interest income as an adjustment of yield on the securities.4347 presents gross unrealized losses and fair value of debt securities at March 31, 20172018 and December 31, 2016.2017. The securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more based on the point in time that the fair value declined below the amortized cost basis. The table includes debt securities where a portion of OTTIother than temporary impairment (OTTI) has been recognized in Accumulated other comprehensive income (loss).AOCI.
March 31, 2017 Securities Available for Sale Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities available for sale Securities Held to Maturity Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities held to maturity December 31, 2016 Securities Available for Sale Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities available for sale Securities Held to Maturity Debt securities U.S. Treasury and government agencies Residential mortgage-backed Agency Asset-backed Other debt Total debt securities held to maturity OTTI noncredit losses recognized in table: Three months ended March 31 In millions 2017 2016 March 31, 2017 Dollars in millions Securities Available for Sale U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities available for sale Fair value Weighted-average yield, GAAP basis Securities Held to Maturity U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities held to maturity Fair value Weighted-average yield, GAAP basis Pledged to others Accepted from others: Permitted by contract or custom to sell or repledge Permitted amount repledged to others43:47: Gross Unrealized Loss and Fair Value of Debt Securities 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 $ (50 ) $ 2,756 $(12) $ 869 $ (62 ) $ 3,625 (274 ) 16,931 (19) 870 (293 ) 17,801 (2 ) 152 (42) 838 (44 ) 990 (34 ) 1,582 (1) 39 (35 ) 1,621 (10 ) 755 (1) 377 (11 ) 1,132 (3 ) 1,065 (10) 606 (13 ) 1,671 (20 ) 1,200 (3) 292 (23 ) 1,492 $ (393 ) $ 24,441 $(88) $ 3,891 $ (481 ) $ 28,332 $ (18 ) $ 242 $ (18 ) $ 242 (164 ) 7,961 $(8) $ 152 (172 ) 8,113 68 1 69 3 3 25 (1) 251 (1 ) 276 (21 ) 141 (a) 1 (21 ) 142 $ (203 ) $ 8,437 $(9) $ 408 $ (212 ) $ 8,845 $ (57 ) $ 3,108 $(20) $ 2,028 $ (77 ) $ 5,136 (267 ) 16,942 (20) 922 (287 ) 17,864 (1 ) 109 (51) 1,119 (52 ) 1,228 (33 ) 1,577 (1) 86 (34 ) 1,663 (14 ) 880 (13) 987 (27 ) 1,867 (5 ) 1,317 (17) 902 (22 ) 2,219 (33 ) 1,827 (4) 243 (37 ) 2,070 $ (410 ) $ 25,760 $(126) $ 6,287 $ (536 ) $ 32,047 $ (22 ) $ 238 $ (22 ) $ 238 (153 ) 8,041 $(8) $ 161 (161 ) 8,202 (2) 451 (2 ) 451 (12 ) 146 (a) 1 (12 ) 147 $ (187 ) $ 8,425 $(10) $ 613 $ (197 ) $ 9,038 (a)The unrealized loss on these securities was less than $.5 million.The PNC Financial Services Group, Inc. –Form 10-Q53 Total In millions March 31, 2018 Securities Available for Sale Debt securities U.S. Treasury and government agencies $ (120 ) $ 6,937 $ (59 ) $ 1,142 $ (179 ) $ 8,079 Residential mortgage-backed Agency (229 ) 11,684 (355 ) 8,965 (584 ) 20,649 Non-agency (1 ) 94 (16 ) 352 (17 ) 446 Commercial mortgage-backed Agency (16 ) 499 (62 ) 1,243 (78 ) 1,742 Non-agency (15 ) 1,284 (9 ) 325 (24 ) 1,609 Asset-backed (14 ) 2,366 (3 ) 383 (17 ) 2,749 Other debt (16 ) 1,675 (22 ) 787 (38 ) 2,462 Total debt securities available for sale $ (411 ) $ 24,539 $ (526 ) $ 13,197 $ (937 ) $ 37,736 Securities Held to Maturity Debt securities U.S. Treasury and government agencies $ (7 ) $ 191 $ (20 ) $ 246 $ (27 ) $ 437 Residential mortgage-backed - Agency (133 ) 7,080 (249 ) 5,830 (382 ) 12,910 Commercial mortgage-backed - Agency (1 ) 170 (1 ) 170 Other debt (7 ) 105 (19 ) 85 (26 ) 190 Total debt securities held to maturity $ (148 ) $ 7,546 $ (288 ) $ 6,161 $ (436 ) $ 13,707 December 31, 2017 Securities Available for Sale Debt securities U.S. Treasury and government agencies $ (42 ) $ 6,099 $ (42 ) $ 1,465 $ (84 ) $ 7,564 Residential mortgage-backed Agency (47 ) 8,151 (202 ) 9,954 (249 ) 18,105 Non-agency (21 ) 383 (21 ) 383 Commercial mortgage-backed Agency (11 ) 524 (47 ) 1,302 (58 ) 1,826 Non-agency (3 ) 400 (6 ) 333 (9 ) 733 Asset-backed (4 ) 1,697 (4 ) 462 (8 ) 2,159 Other debt (3 ) 966 (14 ) 798 (17 ) 1,764 Total debt securities available for sale $ (110 ) $ 17,837 $ (336 ) $ 14,697 $ (446 ) $ 32,534 Securities Held to Maturity Debt securities U.S. Treasury and government agencies $ (3 ) $ 195 $ (10 ) $ 255 $ (13 ) $ 450 Residential mortgage-backed - Agency (10 ) 3,167 (129 ) 6,168 (139 ) 9,335 Other debt (12 ) 83 (8 ) 67 (20 ) 150 Total debt securities held to maturity $ (25 ) $ 3,445 $ (147 ) $ 6,490 $ (172 ) $ 9,935 Other-than-Temporary Impairments43,47, as of March 31, 20172018 we do not intend to sell and believe we will not be required to sell the securities prior to recovery of the amortized cost basis.the 2016our 2017 Form10-K. For those securities on our balance sheetConsolidated Balance Sheet at March 31, 2017,2018, where during our quarterly security-level impairment assessments we determined losses represented OTTI, we have recorded cumulative credit losses of $1.1 billion in earnings and accordingly have reduced the amortized cost of our securities.2017the first quarters of 2018 and 2016,2017, the OTTI credit losses recognized in noninterest income and the OTTIaccumulated other comprehensive income (loss), net of tax,AOCI on securities were not significant.table.44:48: Gains (Losses) on Sales of Securities Available for Sale Proceeds Gross
Gains Gross
Losses Net
(Losses)
Gains Tax
(Benefit)
Expense $ 3,222 $ 14 $ (16 ) $ (2 ) $ (1 ) $ 788 $ 9 $ 9 $ 3 Three months ended March 31
In millionsProceeds Gross Gains Gross Losses Net Losses Tax Benefit 2018 $ 4,490 $ 37 $ (38 ) $ (1 ) 2017 $ 3,222 $ 14 $ (16 ) $ (2 ) $ (1 ) 2017.45:49: Contractual Maturity of Debt Securities 1 Year or Less After 1 Year
through 5 Years After 5 Years
through 10 Years After 10
Years Total $ 157 $ 5,714 $ 5,745 $ 1,171 $ 12,787 1 81 558 25,689 26,329 1 3,010 3,011 74 155 758 1,050 2,037 108 108 3,630 3,846 28 2,255 1,764 1,887 5,934 310 2,311 569 1,382 4,572 $ 570 $ 10,625 $ 9,502 $ 37,819 $ 58,516 $ 573 $ 10,683 $ 9,536 $ 38,032 $ 58,824 2.99 % 2.14 % 2.15 % 2.91 % 2.65 % $ 109 $ 422 $ 531 $ 51 413 11,880 12,344 185 185 $ 84 739 5 54 882 561 561 1 451 100 552 12 219 967 840 2,038 $ 96 $ 1,010 $ 1,945 $ 14,042 $ 17,093 $ 96 $ 1,035 $ 2,004 $ 13,975 $ 17,110 3.67 % 3.62 % 3.33 % 3.20 % 3.24 % 54March 31, 2018
Dollars in millions 1 Year or Less Total Securities Available for Sale U.S. Treasury and government agencies $ 85 $ 7,752 $ 5,335 $ 473 $ 13,645 Residential mortgage-backed Agency 3 50 568 25,891 26,512 Non-agency 2,320 2,320 Commercial mortgage-backed Agency 313 560 1,011 1,884 Non-agency 450 2,135 2,585 Asset-backed 19 1,877 1,940 1,293 5,129 Other debt 683 1,784 632 1,067 4,166 Total debt securities available for sale $ 790 $ 11,776 $ 9,485 $ 34,190 $ 56,241 Fair value $ 789 $ 11,676 $ 9,462 $ 34,091 $ 56,018 Weighted-average yield, GAAP basis 2.39 % 2.18 % 2.40 % 3.05 % 2.75 % Securities Held to Maturity U.S. Treasury and government agencies $ 478 $ 267 $ 745 Residential mortgage-backed Agency $ 79 334 14,250 14,663 Non-agency 163 163 Commercial mortgage-backed Agency $ 156 125 5 52 338 Non-agency 524 524 Asset-backed 113 83 196 Other debt 14 431 848 622 1,915 Total debt securities held to maturity $ 170 $ 635 $ 1,778 $ 15,961 $ 18,544 Fair value $ 170 — $ 646 — $ 1,821 $ 15,586 $ 18,223 Weighted-average yield, GAAP basis 3.53 % 3.84 % 3.52 % 3.21 % 3.26 % historicalamortized cost with effective yields weighted for the contractual maturity of each security. At March 31, 2017,2018, there were no securities of a single issuer, other than FNMA,the Federal National Mortgage Association (FNMA), that exceeded 10% of Total shareholders’ equity. The FNMA investments had a total amortized cost of $29.1$32.7 billion and fair value of $28.8$31.9 billion.46:50: Fair Value of Securities Pledged and Accepted as CollateralIn millions March 31
2017 December 31
2016 $ 8,889 $9,493 $ 1,693 $912 $ 1,599 $799 In millions March 31
2018December 31
2017Pledged to others $ 8,264 $ 8,175 Accepted from others: Permitted by contract or custom to sell or repledge $ 1,134 $ 1,152 Permitted amount repledged to others $ 1,098 $ 1,097 20162017 Form10-K.20162017 Form10-K. The following table summarizes our assets and liabilities measured at fair value on a recurring basis, including instruments for which we have elected the fair value option.55
Total Fair Value Total Fair Value Assets Residential mortgage loans held for sale Commercial mortgage loans held for sale Securities available for sale U.S. Treasury and government agencies Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Agency Non-agency Asset-backed Other debt Total debt securities Corporate stocks and other Total securities available for sale Loans Equity investments (a) Residential mortgage servicing rights Commercial mortgage servicing rights Trading securities (b) Financial derivatives (b) (c) Other Total assets Liabilities Other borrowed funds Financial derivatives (c) (d) Other liabilities Total liabilities47:51: Fair Value Measurements – Recurring Basis Summary March 31, 2017 December 31, 2016 In millions Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 $ 719 $ 4 $ 723 $ 1,008 $ 2 $ 1,010 581 581 1,400 1,400 $ 12,312 598 12,910 $ 12,572 602 13,174 26,189 26,189 26,128 26,128 107 3,096 3,203 112 3,254 3,366 2,006 2,006 2,119 2,119 3,863 3,863 4,025 4,025 5,614 366 5,980 5,565 403 5,968 4,598 75 4,673 4,657 66 4,723 12,312 42,975 3,537 58,824 12,572 43,208 3,723 59,503 454 61 515 541 60 601 12,766 43,036 3,537 59,339 13,113 43,268 3,723 60,104 551 323 874 558 335 893 1,106 1,390 1,331 1,381 1,261 1,261 1,182 1,182 606 606 576 576 1,312 1,313 2 2,627 1,458 1,169 2 2,629 13 3,265 24 3,302 10 4,566 40 4,616 276 291 82 649 266 312 239 817 $ 14,367 $ 49,175 $ 7,526 $ 71,352 $ 14,847 $ 50,881 $ 8,830 $ 74,608 $ 1,497 $ 158 $ 7 $ 1,662 $ 799 $ 161 $ 10 $ 970 2 2,366 254 2,622 1 3,424 414 3,839 31 31 9 9 $ 1,499 $ 2,524 $ 292 $ 4,315 $ 800 $ 3,585 $ 433 $ 4,818 March 31, 2018 December 31, 2017 In millions Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Residential mortgage loans held for sale $ 615 $ 2 $ 617 $ 829 $ 3 $ 832 Commercial mortgage loans held for sale 153 92 245 723 107 830 Securities available for sale U.S. Treasury and government agencies $ 13,158 431 13,589 $ 14,088 433 14,521 Residential mortgage-backed Agency 26,002 26,002 25,406 25,406 Non-agency 91 2,545 2,636 97 2,661 2,758 Commercial mortgage-backed Agency 1,807 1,807 1,904 1,904 Non-agency 2,570 2,570 2,613 2,613 Asset-backed 4,862 321 5,183 5,065 332 5,397 Other debt 4,137 94 4,231 4,347 87 4,434 Total debt securities 13,158 39,900 2,960 56,018 14,088 39,865 3,080 57,033 Other (a) 524 61 585 Total securities available for sale 13,158 39,900 2,960 56,018 14,612 39,926 3,080 57,618 Loans 511 302 813 571 298 869 Equity investments (b) 489 60 1,129 1,905 1,036 1,265 Residential mortgage servicing rights 1,256 1,256 1,164 1,164 Commercial mortgage servicing rights 723 723 668 668 Trading securities (c) 827 1,678 2 2,507 1,243 1,670 2 2,915 Financial derivatives (c) (d) 2 1,889 12 1,903 2,864 10 2,874 Other assets 275 250 68 593 278 253 107 638 Total assets $ 14,751 $ 45,056 $ 6,546 $ 66,580 $ 16,133 $ 46,836 $ 6,475 $ 69,673 Liabilities Other borrowed funds $ 963 $ 205 $ 9 $ 1,177 $ 1,079 $ 254 $ 11 $ 1,344 Financial derivatives (d) (e) 2,505 437 2,942 2,369 487 2,856 Other liabilities 42 42 33 33 Total liabilities $ 963 $ 2,710 $ 488 $ 4,161 $ 1,079 $ 2,623 $ 531 $ 4,233 (a) Prior period amounts included $.6 billion of available for sale securities, primarily money market funds, that were reclassified to equity investments on January 1, 2018 as the result of the adoption of ASU 2016-01. See the Recently Adopted Accounting Standards portion of Note 1 for additional details on this adoption. (b) Certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the Consolidated Balance Sheet. (b)(c) Included in Other assets on the Consolidated Balance Sheet. (c)(d) Amounts at March 31, 20172018 and December 31, 2016,2017 are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow us to net positive and negative positions and cash collateral held or placed with the same counterparty. See Note 9 Financial Derivatives for additional information related to derivative offsetting.(d)(e) Included in Other liabilities on the Consolidated Balance Sheet.
56
Total realized / unrealized gains or losses for the period (a) | Unrealized Consolidated | |||||||||||||||||||||||||||||||||||||||||
Level 3 Instruments Only In millions | Fair Value Dec. 31, 2016 | Included in Earnings | Included in Other comprehensive income | Purchases | Sales | Issuances | Settlements | Transfers into Level 3 | Transfers out of Level 3 | Fair Value Mar. 31, 2017 | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||
Residential mortgage loans held for sale | $ | 2 | $ | 2 | $2 | $ | (2 | ) | $ | 4 | ||||||||||||||||||||||||||||||||
Commercial mortgage loans held for sale | 1,400 | $ | 9 | $ | (1,617 | ) | $ | 801 | $ | (12 | ) | 581 | $ | (5 | ) | |||||||||||||||||||||||||||
Securities available for sale | ||||||||||||||||||||||||||||||||||||||||||
Residential mortgage- backednon-agency | 3,254 | 26 | $18 | (202 | ) | 3,096 | ||||||||||||||||||||||||||||||||||||
Asset-backed | 403 | 4 | 4 | (25 | ) | (20 | ) | 366 | ||||||||||||||||||||||||||||||||||
Other debt | 66 | 9 | 1 | (1 | ) | 75 | ||||||||||||||||||||||||||||||||||||
Total securities available for sale | 3,723 | 30 | 31 | 1 | (26 | ) | (222 | ) | 3,537 | |||||||||||||||||||||||||||||||||
Loans | 335 | 1 | 22 | (4 | ) | (19 | ) | 2 | (14 | ) | 323 | |||||||||||||||||||||||||||||||
Equity investments | 1,331 | 96 | 37 | (175 | ) | (183 | ) | (c) | 1,106 | 67 | ||||||||||||||||||||||||||||||||
Residential mortgage servicing rights | 1,182 | 18 | 83 | 17 | (39 | ) | 1,261 | 17 | ||||||||||||||||||||||||||||||||||
Commercial mortgage servicing rights | 576 | 13 | 13 | 29 | (25 | ) | 606 | 13 | ||||||||||||||||||||||||||||||||||
Trading securities | 2 | 2 | ||||||||||||||||||||||||||||||||||||||||
Financial derivatives | 40 | (1 | ) | (15 | ) | 24 | 22 | |||||||||||||||||||||||||||||||||||
Other assets | 239 | (2 | ) | (155 | ) | 82 | (2 | ) | ||||||||||||||||||||||||||||||||||
Total assets | $ | 8,830 | $ | 164 | $31 | $ | 158 | $ | (1,822 | ) | $ | 847 | $ | (487 | ) | $4 | $ | (199 | ) | $ | 7,526 | $ | 112 | |||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||
Other borrowed funds | $ | 10 | $ | 19 | $ | (22 | ) | $ | 7 | |||||||||||||||||||||||||||||||||
Financial derivatives | 414 | $ | 9 | $ | 2 | (171 | ) | 254 | $ | 7 | ||||||||||||||||||||||||||||||||
Other liabilities | 9 | 16 | 77 | (71 | ) | 31 | 16 | |||||||||||||||||||||||||||||||||||
Total liabilities | $ | 433 | $ | 25 | $ | 2 | $ | 96 | $ | (264 | ) | $ | 292 | $ | 23 | |||||||||||||||||||||||||||
Net gains (losses) | $ | 139 | (d) | $ | 89 | (e) |
(continued on following page)
2018
Total realized / unrealized gains or losses for the period (a) | Unrealized gains / losses on assets and liabilities held on Consolidated Balance Sheet at Mar. 31, 2018 (a) (b) | |||||||||||||||||||||||||||||||||||
Level 3 Instruments Only In millions | Fair Value Dec. 31, 2017 | Included in Earnings | Included in Other comprehensive income | Purchases | Sales | Issuances | Settlements | Transfers into Level 3 | Transfers out of Level 3 | Fair Value Mar. 31, 2018 | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Residential mortgage loans held for sale | $ | 3 | $ | 1 | $ | (1 | ) | $ | 2 | $ | (3 | ) | $ | 2 | ||||||||||||||||||||||
Commercial mortgage loans held for sale | 107 | $ | (15 | ) | 92 | |||||||||||||||||||||||||||||||
Securities available for sale | ||||||||||||||||||||||||||||||||||||
Residential mortgage- backed non-agency | 2,661 | $ | 19 | $ | 3 | (138 | ) | 2,545 | ||||||||||||||||||||||||||||
Asset-backed | 332 | (1 | ) | 5 | (15 | ) | 321 | |||||||||||||||||||||||||||||
Other debt | 87 | 5 | 1 | 2 | (1 | ) | 94 | |||||||||||||||||||||||||||||
Total securities available for sale | 3,080 | 23 | 9 | 2 | (154 | ) | 2,960 | |||||||||||||||||||||||||||||
Loans | 298 | 2 | 37 | (7 | ) | (18 | ) | 2 | (12 | ) | 302 | $ | 2 | |||||||||||||||||||||||
Equity investments | 1,036 | 26 | 82 | (15 | ) | 1,129 | 25 | |||||||||||||||||||||||||||||
Residential mortgage servicing rights | 1,164 | 107 | 9 | $ | 13 | (37 | ) | 1,256 | 105 | |||||||||||||||||||||||||||
Commercial mortgage servicing rights | 668 | 48 | 23 | 17 | (33 | ) | 723 | 48 | ||||||||||||||||||||||||||||
Trading securities | 2 | 2 | ||||||||||||||||||||||||||||||||||
Financial derivatives | 10 | 7 | 1 | (6 | ) | 12 | 9 | |||||||||||||||||||||||||||||
Other assets | 107 | 3 | (42 | ) | 68 | 3 | ||||||||||||||||||||||||||||||
Total assets | $ | 6,475 | $ | 216 | $ | 9 | $ | 155 | $ | (23 | ) | $ | 30 | $ | (305 | ) | $ | 4 | $ | (15 | ) | $ | 6,546 | $ | 192 | |||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||
Other borrowed funds | $ | 11 | $ | 19 | $ | (21 | ) | $ | 9 | |||||||||||||||||||||||||||
Financial derivatives | 487 | $ | 10 | $ | 3 | (63 | ) | 437 | $ | 5 | ||||||||||||||||||||||||||
Other liabilities | 33 | 2 | $ | 12 | 5 | (10 | ) | 42 | 2 | |||||||||||||||||||||||||||
Total liabilities | $ | 531 | $ | 12 | $ | 12 | $ | 3 | $ | 24 | $ | (94 | ) | $ | 488 | $ | 7 | |||||||||||||||||||
Net gains (losses) | $ | 204 | (c) | $ | 185 | (d) |
(continued from previous page)
Total realized / unrealized gains or losses for the Unrealized gains / losses on assets and Consolidated 2016 (a) (b) Level 3 Instruments Only In millions Assets Residential mortgage loans held for sale Commercial mortgage loans held for sale Securities available for sale Residential mortgage- backednon-agency Asset-backed Other debt Total securities available for sale Loans Equity investments Residential mortgage servicing rights Commercial mortgage servicing rights Trading securities Financial derivatives Other Total assets Liabilities Other borrowed funds Financial derivatives Other liabilities Total liabilities Net gains (losses)20162017
period (a)
liabilities held on
Balance Sheet at
Mar. 31, Fair Value
Dec. 31,
2015 Included
in
Earnings Included in
Other
comprehensive
income Purchases Sales Issuances Settlements Transfers
into
Level 3 Transfers
out of
Level 3 Fair Value
Mar. 31,
2016 $ 5 $ 3 $ (1 ) $2 $(5) $ 4 641 $ 16 (649 ) $ 647 655 $ 12 4,008 22 $ (45 ) $ (175 ) 3,810 (1 ) 482 3 (12 ) (22 ) 451 45 (1 ) 2 (2 ) 44 4,535 25 (58 ) 2 (2 ) (197 ) 4,305 (1 ) 340 2 33 (8 ) (25 ) (13) 329 1 1,098 51 23 (16 ) 1,156 50 1,063 (226 ) 52 11 (37 ) 863 (225 ) 526 (55 ) 3 9 (23 ) 460 (55 ) 3 (1 ) 2 31 34 (24 ) 41 28 364 (9 ) (2 ) (1 ) (138 ) 214 (11 ) $ 8,606 $ (162 ) $ (60 ) $ 116 $ (677 ) $ 667 $ (445 ) $2 $(18) $ 8,029 $ (201 ) $ 12 $ 23 $ (27 ) $ 8 473 $ 7 $ 2 (149 ) 333 $ 8 10 38 (34 ) 14 $ 495 $ 7 $ 2 $ 61 $ (210 ) $ 355 $ 8 $ (169 ) (d) $ (209 ) (e) Total realized / unrealized
gains or losses for the
period (a) Unrealized
gains / losses
on assets and
liabilities held on
Consolidated
Balance Sheet at
Mar. 31, 2017
(a) (b)Fair
Value
Dec. 31,
2016Included in
EarningsIncluded
in Other
comprehensive
income Purchases Sales Issuances Settlements Transfers
into
Level 3Transfers
out of
Level 3 Fair
Value
Mar.
31,
2017Assets Residential mortgage loans
held for sale$ 2 $ 2 $ 2 $ (2 ) $ 4 Commercial mortgage
loans held for sale1,400 $ 9 $ (1,617 ) $ 801 $ (12 ) 581 $ (5 ) Securities available for sale Residential mortgage-
backed non-agency3,254 26 $ 18 (202 ) 3,096 Asset-backed 403 4 4 (25 ) (20 ) 366 Other debt 66 9 1 (1 ) 75 Total securities
available for sale3,723 30 31 1 (26 ) (222 ) 3,537 Loans 335 1 22 (4 ) (19 ) 2 (14 ) 323 Equity investments 1,331 96 37 (175 ) (183 ) (e) 1,106 67 Residential mortgage
servicing rights1,182 18 83 17 (39 ) 1,261 17 Commercial mortgage
servicing rights576 13 13 29 (25 ) 606 13 Trading securities 2 2 Financial derivatives 40 (1 ) (15 ) 24 22 Other assets 239 (2 ) (155 ) 82 (2 ) Total assets $ 8,830 $ 164 $ 31 $ 158 $ (1,822 ) $ 847 $ (487 ) $ 4 $ (199 ) $ 7,526 $ 112 Liabilities Other borrowed funds $ 10 $ 19 $ (22 ) $ 7 Financial derivatives 414 $ 9 $ 2 (171 ) 254 $ 7 Other liabilities 9 16 77 (71 ) 31 16 Total liabilities $ 433 $ 25 $ 2 $ 96 $ (264 ) $ 292 $ 23 Net gains (losses) $ 139 (c) $ 89 (d) (a) Losses for assets are bracketed while losses for liabilities are not. (b) The amount of the total gains or losses for the period included in earnings that is attributable to the change in unrealized gains or losses related to those assets and liabilities held at the end of the reporting period. (c)Reflects transfers out of Level 3 associated with a change in valuation methodology for certain equity investments subject to the Volcker Rule provisions of the Dodd-Frank Act. These investments are measured at fair value using the NAV per share (or its equivalent) practical expedient as of March 31, 2017.(d)(c)Net gains (losses) realized and unrealized included in earnings related to Level 3 assets and liabilities included amortization and accretion. The amortization and accretion amounts were included in Interest income on the Consolidated Income Statement and the remaining net gains (losses) realized and unrealized were included in Noninterest income on the Consolidated Income Statement. (e)(d) Net unrealized gains (losses) related to assets and liabilities held at the end of the reporting period were included in Noninterest income on the Consolidated Income Statement.
(e) | Reflects transfer out of Level 3 associated with change in valuation methodology for certain equity investments subject to the Volcker Rule provisions of the Dodd-Frank Act. |
58
Level 3 Instruments Only Dollars in millions | Fair Value | Valuation Techniques | Unobservable Inputs | Range (Weighted Average) | ||||||
Commercial mortgage loans held for sale | $ | 581 | Discounted cash flow | Spread over the benchmark curve (a)
Estimated servicing cash flows | 40bps-13,520bps (1,046bps)
0.0%-5.4% (2.0%) | |||||
Residential mortgage-backednon-agency securities | 3,096 | Priced by a third-party vendor | Constant prepayment rate (CPR) | 1.0%-24.2% (7.4%) | ||||||
using a discounted cash flow | Constant default rate (CDR) | 0.0%-16.7% (5.2%) | ||||||||
pricing model | Loss severity
Spread over the benchmark curve (a) | 10.0%-98.5% (53.4%)
225bps weighted average | ||||||||
Asset-backed securities | 366 | Priced by a third-party vendor | Constant prepayment rate (CPR) | 1.0%-16.0% (6.5%) | ||||||
using a discounted cash flow | Constant default rate (CDR) | 2.0%-13.9% (6.5%) | ||||||||
pricing model | Loss severity | 24.2%-100.0% (75.5%) | ||||||||
Spread over the benchmark curve (a) | 256bps weighted average | |||||||||
Loans | 136 | Consensus pricing (b) | Cumulative default rate | 11.0%-100.0% (85.4%) | ||||||
Loss severity | 0.0%-100.0% (21.4%) | |||||||||
Discount rate | 4.7%-7.5% (5.1%) | |||||||||
113 | Discounted cash flow | Loss severity | 8.0% weighted average | |||||||
Discount rate | 4.4% weighted average | |||||||||
74 | Consensus pricing (b) | Credit and Liquidity discount | 0.0%-99.0% (58.6%) | |||||||
Equity investments | 1,106 | Multiple of adjusted earnings | Multiple of earnings | 4.5x-13.4x (8.0x) | ||||||
Residential mortgage servicing rights | 1,261 | Discounted cash flow | Constant prepayment rate (CPR) | 0.1%-38.1% (9.3%) | ||||||
Spread over the benchmark curve (a) | 224bps-1,900bps (850bps) | |||||||||
Commercial mortgage servicing rights | 606 | Discounted cash flow | Constant prepayment rate (CPR) | 7.1%-37.8% (8.1%) | ||||||
Discount rate | 5.0%-7.7% (7.6%) | |||||||||
Financial derivatives - Swaps related to sales of certain Visa Class B common shares | (165 | ) | Discounted cash flow | Estimated conversion factor of Class B shares into Class A shares | 164.4% weighted average | |||||
Estimated growth rate of Visa Class A share price | 14.0% | |||||||||
Estimated length of litigation resolution date | Q2 2019 | |||||||||
Insignificant Level 3 assets, net of liabilities (c) | 60 | |||||||||
|
| |||||||||
Total Level 3 assets, net of liabilities (d) | $ | 7,234 |
(continued on following page)
2018
Level 3 Instruments Only Dollars in millions | Fair Value | Valuation Techniques | Unobservable Inputs | Range (Weighted-Average) | ||
Commercial mortgage loans held for sale | $ | 92 | Discounted cash flow | Spread over the benchmark curve (a) | 525bps - 1,580bps (1,069bps) | |
Residential mortgage-backed non-agency securities | 2,545 | Priced by a third-party vendor using a discounted cash flow pricing model | Constant prepayment rate (CPR) | 1.0% - 33.0% (10.9%) | ||
Constant default rate (CDR) | 0.0% - 17.8% (5.7%) | |||||
Loss severity | 20.0% - 100.0% (50.5%) | |||||
Spread over the benchmark curve (a) | 196bps weighted-average | |||||
Asset-backed securities | 321 | Priced by a third-party vendor using a discounted cash flow pricing model | Constant prepayment rate (CPR) | 1.0% - 19.0% (7.9%) | ||
Constant default rate (CDR) | 2.0% - 11.8% (5.1%) | |||||
Loss severity | 16.0% - 100.0% (67.1%) | |||||
Spread over the benchmark curve (a) | 126bps weighted-average | |||||
Loans | 142 | Consensus pricing (b) | Cumulative default rate | 11.0% - 100.0% (82.5%) | ||
Loss severity | 0.0% - 100.0% (18.5%) | |||||
Discount rate | 5.5% - 8.0% (5.7%) | |||||
99 | Discounted cash flow | Loss severity | 8.0% weighted-average | |||
Discount rate | 5.4% weighted-average | |||||
61 | Consensus pricing (b) | Credit and Liquidity discount | 0.0% - 99.0% (61.1%) | |||
Equity investments | 1,129 | Multiple of adjusted earnings | Multiple of earnings | 4.9x - 29.7x (8.3x) | ||
Residential mortgage servicing rights | 1,256 | Discounted cash flow | Constant prepayment rate (CPR) | 0.0% - 44.4% (8.7%) | ||
Spread over the benchmark curve (a) | 346bps - 1,811bps (831bps) | |||||
Commercial mortgage servicing rights | 723 | Discounted cash flow | Constant prepayment rate (CPR) | 7.0% - 13.7% (7.9%) | ||
Discount rate | 6.3% - 8.3% (8.1%) | |||||
Financial derivatives - Swaps related to sales of certain Visa Class B common shares | (363 | ) | Discounted cash flow | Estimated conversion factor of Visa Class B shares into Class A shares | 163.8% weighted-average | |
Estimated growth rate of Visa Class A share price | 16.0% | |||||
Estimated length of litigation resolution date | Q2 2021 | |||||
Insignificant Level 3 assets, net of liabilities (c) | 53 | |||||
Total Level 3 assets, net of liabilities (d) | $ | 6,058 |
(continued from previous page)
Level 3 Instruments Only Dollars in millions Commercial mortgage loans held for sale Residential mortgage-backednon-agency securities Asset-backed securities Loans Equity investments Residential mortgage servicing rights Commercial mortgage servicing rights Other assets - BlackRock Series C Preferred Stock Financial derivatives - BlackRock LTIP Financial derivatives - Swaps related to sales of certain Visa Class B common shares Estimated conversion factor of Class B shares into Class A shares Estimated growth rate of Visa Class A share price Estimated length of litigation resolution date Insignificant Level 3 assets, net of liabilities (c) Total Level 3 assets, net of liabilities (d)20162017 Fair Value Valuation Techniques Unobservable Inputs Range (Weighted Average) $ 1,400 Discounted cash flow Spread over the benchmark curve (a) 42bps - 1,725bps (362bps) Estimated servicing cash flows 0.0% - 7.3% (1.5%) 3,254 Priced by a third-party vendor Constant prepayment rate (CPR) 1.0% - 24.2% (7.2%) using a discounted cash flow Constant default rate (CDR) 0.0% - 16.7% (5.3%) pricing model Loss severity 10.0% - 98.5% (53.5%) Spread over the benchmark curve (a) 236bps weighted average 403 Priced by a third-party vendor Constant prepayment rate (CPR) 1.0% - 16.0% (6.4%) using a discounted cash flow Constant default rate (CDR) 2.0% - 13.9% (6.6%) pricing model Loss severity 24.2% - 100.0% (77.3%) Spread over the benchmark curve (a) 278bps weighted average 141 Consensus pricing (b) Cumulative default rate 11.0% - 100.0% (86.9%) Loss severity 0.0% - 100.0% (22.9%) Discount rate 4.7%- 6.7% (5.1%) 116 Discounted cash flow Loss severity 8.0% weighted average Discount rate 4.2% weighted average 78 Consensus pricing (b) Credit and Liquidity discount 0.0% - 99.0% (57.9%) 1,331 Multiple of adjusted earnings Multiple of earnings 4.5x- 12.0x (7.8x) Consensus pricing (b) Liquidity discount 0.0%- 40.0% 1,182 Discounted cash flow Constant prepayment rate (CPR) 0.0%- 36.0% (9.4%) Spread over the benchmark curve (a) 341bps - 1,913bps (850bps) 576 Discounted cash flow Constant prepayment rate (CPR) 7.5%- 43.4% (8.6%) Discount rate 3.5%- 7.6% (7.5%) 232 Consensus pricing (b) Liquidity discount 15.0%- 25.0% (20.0%) (232 ) Consensus pricing (b) Liquidity discount 15.0%- 25.0% (20.0%) (164 ) Discounted cash flow 164.4% weighted average 14.0% Q2 2019 80 $ 8,397 Fair Value Valuation Techniques Unobservable Inputs Range (Weighted-Average) Commercial mortgage loans held for sale $ 107 Discounted cash flow Spread over the benchmark curve (a) 525bps - 1,470bps (1020bps) Residential mortgage-backed
non-agency securities2,661 Priced by a third-party vendor using a discounted cash flow pricing model Constant prepayment rate (CPR) 1.0% - 31.6% (10.8%) Constant default rate (CDR) 0.1% - 18.8% (5.4%) Loss severity 15.0% - 100.0% (51.5%) Spread over the benchmark curve (a) 190bps weighted-average Asset-backed securities 332 Priced by a third-party vendor using a discounted cash flow pricing model Constant prepayment rate (CPR) 1.0% - 19.0% (7.9%) Constant default rate (CDR) 2.0% - 11.8% (5.4%) Loss severity 15.0% - 100.0% (68.5%) Spread over the benchmark curve (a) 179bps weighted-average Loans 133 Consensus pricing (b) Cumulative default rate 11.0% - 100.0% (85.7%) Loss severity 0.0% - 100.0% (20.6%) Discount rate 5.5% - 8.0% (5.7%) 104 Discounted cash flow Loss severity 8.0% weighted-average Discount rate 4.9% weighted-average 61 Consensus pricing (b) Credit and Liquidity discount 0.0% - 99.0% (61.1%) Equity investments 1,036 Multiple of adjusted earnings Multiple of earnings 4.5x - 29.7x (8.3x) Residential mortgage servicing rights 1,164 Discounted cash flow Constant prepayment rate (CPR) 0.0% - 36.7% (10.0%) Spread over the benchmark curve (a) 390bps - 1,839bps (830bps) Commercial mortgage servicing rights 668 Discounted cash flow Constant prepayment rate (CPR) 7.7% - 14.2% (8.5%) Discount rate 6.4% - 7.9% (7.8%) Financial derivatives - Swaps related to
sales of certain Visa Class B
common shares(380 ) Discounted cash flow Estimated conversion factor of Visa Class B shares into Class A shares 163.8% weighted-average Estimated growth rate of Visa Class
A share price16.0% Estimated length of litigation
resolution dateQ2 2021 Insignificant Level 3 assets, net of
liabilities (c)58 Total Level 3 assets, net of liabilities (d) $ 5,944 (a) The assumed yield spread over the benchmark curve for each instrument is generally intended to incorporate non-interest-rate non-interest rate risks, such as credit and liquidity risks.(b) Consensus pricing refers to fair value estimates that are generally internally developed using information such as dealer quotes or other third-party provided valuations or comparable asset prices. (c) Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes certain financial derivative assets and liabilities, trading securities, state and municipal and other debt securities, residential mortgage loans held for sale, other assets, other borrowed funds and other liabilities.(d) Consisted of total Level 3 assets of $7.5$6.5 billion and total Level 3 liabilities of $.3$.5 billion as of March 31, 20172018 and $8.8$6.4 billion and $.4$.5 billion as of December 31, 2016,2017, respectively.
60
Gains (Losses) Three months ended Assets Nonaccrual loans OREO and foreclosed assets Insignificant assets Total assets5054 and Table 51.55. For more information regarding the valuation methodologies of our financial assets measured at fair value on a nonrecurring basis, see Note 6 Fair Value in our 20162017 Form 10-K.50:54: Fair Value Measurements – Nonrecurring Fair Value (a) In millions March 31
2017 December 31
2016 March 31
2017 March 31
2016 $ 146 $ 187 $ (6 ) $ (47 ) 56 107 (4 ) (8 ) 9 19 3 (7 ) $ 211 $ 313 $ (7 ) $ (62 ) Fair Value (a) In millions March 31
2018 December 31
2017 March 31
2018 March 31
2017 Assets Nonaccrual loans $ 137 $ 100 $ (23 ) $ (6 ) OREO, foreclosed and other assets 35 70 (4 ) Long-lived assets 15 80 (2 ) 3 Total assets $ 187 $ 250 $ (25 ) $ (7 ) (a) All Level 3 as of March 31, 20172018 and December 31, 2016.2017.
follows:
Level 3 Instruments Only Dollars in millions | Fair Value | Valuation Techniques | Unobservable Inputs | Range (Weighted Average) | ||||||
March 31, 2017 | ||||||||||
Assets | ||||||||||
Nonaccrual loans | $ | 70 | LGD percentage | Loss severity | 6.4%- 86.8% (23.3%) | |||||
76 | Fair value of property or collateral | Appraised value/sales price | Not meaningful | |||||||
OREO and foreclosed assets | 56 | Fair value of property or collateral | Appraised value/sales price | Not meaningful | ||||||
Insignificant assets | 9 | |||||||||
|
| |||||||||
Total assets | $ | 211 | ||||||||
December 31, 2016 | ||||||||||
Assets | ||||||||||
Nonaccrual loans | $ | 112 | LGD percentage | Loss severity | 6.0%- 77.1% (31.3%) | |||||
75 | Fair value of property or collateral | Appraised value/sales price | Not meaningful | |||||||
OREO and foreclosed assets | 107 | Fair value of property or collateral | Appraised value/sales price | Not meaningful | ||||||
Insignificant assets | 19 | |||||||||
|
| |||||||||
Total assets | $ | 313 |
Level 3 Instruments Only In millions | Fair Value | Valuation Techniques | Unobservable Inputs | |||
March 31, 2018 | ||||||
Assets | ||||||
Nonaccrual loans | $ | 137 | Fair value of property or collateral | Appraised value/sales price | ||
OREO, foreclosed and other assets | 35 | Fair value of property or collateral | Appraised value/sales price | |||
Long-lived assets | 15 | Fair value of property or collateral | Appraised value/sales price | |||
Total assets | $ | 187 | ||||
December 31, 2017 | ||||||
Assets | ||||||
Nonaccrual loans | $ | 100 | Fair value of property or collateral | Appraised value/sales price | ||
OREO, foreclosed and other assets | 70 | Fair value of property or collateral | Appraised value/sales price | |||
Long-lived assets | 47 | Fair value of property or collateral | Appraised value/sales price | |||
20 | Fair value of property or collateral | Broker opinion | ||||
13 | Fair value of property or collateral | Projected income/required improvement costs | ||||
Total assets | $ | 250 |
The PNC Financial Services Group, Inc. –Form 10-Q61
In millions | Fair Value | Aggregate Unpaid Principal Balance | Difference | |||||||||
March 31, 2017 | ||||||||||||
Assets | ||||||||||||
Residential mortgage loans held for sale | ||||||||||||
Performing loans | $ | 711 | $ | 684 | $ | 27 | ||||||
Accruing loans 90 days or more past due | 3 | 3 | ||||||||||
Nonaccrual loans | 9 | 10 | (1 | ) | ||||||||
Total | 723 | 697 | 26 | |||||||||
Commercial mortgage loans held for sale (a) | ||||||||||||
Performing loans | 578 | 610 | (32 | ) | ||||||||
Nonaccrual loans | 3 | 5 | (2 | ) | ||||||||
Total | 581 | 615 | (34 | ) | ||||||||
Residential mortgage loans | ||||||||||||
Performing loans | 279 | 320 | (41 | ) | ||||||||
Accruing loans 90 days or more past due | 378 | 378 | ||||||||||
Nonaccrual loans | 217 | 339 | (122 | ) | ||||||||
Total | 874 | 1,037 | (163 | ) | ||||||||
Other assets | 272 | 278 | (6 | ) | ||||||||
Liabilities | ||||||||||||
Other borrowed funds | $ | 57 | $ | 58 | $ | (1 | ) | |||||
December 31, 2016 | ||||||||||||
Assets | ||||||||||||
Residential mortgage loans held for sale | ||||||||||||
Performing loans | $ | 1,000 | $ | 988 | $ | 12 | ||||||
Accruing loans 90 days or more past due | 4 | 4 | ||||||||||
Nonaccrual loans | 6 | 6 | ||||||||||
Total | 1,010 | 998 | 12 | |||||||||
Commercial mortgage loans held for sale (a) | ||||||||||||
Performing loans | 1,395 | 1,412 | (17 | ) | ||||||||
Nonaccrual loans | 5 | 9 | (4 | ) | ||||||||
Total | 1,400 | 1,421 | (21 | ) | ||||||||
Residential mortgage loans | ||||||||||||
Performing loans | 247 | 289 | (42 | ) | ||||||||
Accruing loans 90 days or more past due | 427 | 428 | (1 | ) | ||||||||
Nonaccrual loans | 219 | 346 | (127 | ) | ||||||||
Total | 893 | 1,063 | (170 | ) | ||||||||
Other assets | 293 | 288 | 5 | |||||||||
Liabilities | ||||||||||||
Other borrowed funds | $ | 81 | $ | 82 | $ | (1 | ) |
In millions | Fair Value | Aggregate Unpaid Principal Balance | Difference | |||||||||
March 31, 2018 | ||||||||||||
Assets | ||||||||||||
Residential mortgage loans held for sale | ||||||||||||
Performing loans | $ | 604 | $ | 591 | $ | 13 | ||||||
Accruing loans 90 days or more past due | 3 | 3 | ||||||||||
Nonaccrual loans | 10 | 11 | (1 | ) | ||||||||
Total | $ | 617 | $ | 605 | $ | 12 | ||||||
Commercial mortgage loans held for sale (a) | ||||||||||||
Performing loans | $ | 244 | $ | 264 | $ | (20 | ) | |||||
Nonaccrual loans | 1 | 2 | (1 | ) | ||||||||
Total | $ | 245 | $ | 266 | $ | (21 | ) | |||||
Residential mortgage loans | ||||||||||||
Performing loans | $ | 290 | $ | 319 | $ | (29 | ) | |||||
Accruing loans 90 days or more past due | 334 | 344 | (10 | ) | ||||||||
Nonaccrual loans | 189 | 307 | (118 | ) | ||||||||
Total | $ | 813 | $ | 970 | $ | (157 | ) | |||||
Other assets | $ | 216 | $ | 221 | $ | (5 | ) | |||||
Liabilities | ||||||||||||
Other borrowed funds | $ | 56 | $ | 57 | $ | (1 | ) | |||||
December 31, 2017 | ||||||||||||
Assets | ||||||||||||
Residential mortgage loans held for sale | ||||||||||||
Performing loans | $ | 822 | $ | 796 | $ | 26 | ||||||
Accruing loans 90 days or more past due | 3 | 3 | ||||||||||
Nonaccrual loans | 7 | 8 | (1 | ) | ||||||||
Total | $ | 832 | $ | 807 | $ | 25 | ||||||
Commercial mortgage loans held for sale (a) | ||||||||||||
Performing loans | $ | 828 | $ | 842 | $ | (14 | ) | |||||
Nonaccrual loans | 2 | 3 | (1 | ) | ||||||||
Total | $ | 830 | $ | 845 | $ | (15 | ) | |||||
Residential mortgage loans | ||||||||||||
Performing loans | $ | 251 | $ | 280 | $ | (29 | ) | |||||
Accruing loans 90 days or more past due | 421 | 431 | (10 | ) | ||||||||
Nonaccrual loans | 197 | 317 | (120 | ) | ||||||||
Total | $ | 869 | $ | 1,028 | $ | (159 | ) | |||||
Other assets | $ | 216 | $ | 212 | $ | 4 | ||||||
Liabilities | ||||||||||||
Other borrowed funds | $ | 84 | $ | 85 | $ | (1 | ) |
(a) | There were no accruing loans 90 days or more past due within this category at March 31, |
follows:
Gains (Losses) Three months ended | ||||||||
In millions | March 31 2017 | March 31 2016 | ||||||
Assets | ||||||||
Residential mortgage loans held for sale | $ | 30 | $ | 47 | ||||
Commercial mortgage loans held for sale | $ | 18 | $ | 27 | ||||
Residential mortgage loans | $ | 4 | $ | 6 | ||||
Other assets | $ | 7 | $ | (27 | ) | |||
Liabilities | ||||||||
Other liabilities | $ | (16 | ) |
Gains (Losses) | ||||||||
Three months ended | ||||||||
Mar. 31 | Mar. 31 | |||||||
In millions | 2018 | 2017 | ||||||
Assets | ||||||||
Residential mortgage loans held for sale | $ | 4 | $ | 30 | ||||
Commercial mortgage loans held for sale | $ | 14 | $ | 18 | ||||
Residential mortgage loans | $ | 3 | $ | 4 | ||||
Other assets | $ | 11 | $ | 7 | ||||
Liabilities | ||||||||
Other liabilities | $ | (2 | ) | $ | (16 | ) |
(a) | The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts. |
62 The PNC Financial Services Group, Inc. –Form 10-Q
Additional Fair Value Information Related to Financial Instruments Not Recorded at Fair Value
2017.
Carrying Amount | Fair Value | |||||||||||||||||||
In millions | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||
March 31, 2017 | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 5,003 | $ | 5,003 | $ | 5,003 | ||||||||||||||
Interest-earning deposits with banks | 27,877 | 27,877 | $ | 27,877 | ||||||||||||||||
Securities held to maturity | 17,093 | 17,110 | 549 | 16,428 | $ | 133 | ||||||||||||||
Net loans (excludes leases) | 201,921 | 203,319 | 203,319 | |||||||||||||||||
Other assets | 5,512 | 6,025 | 5,387 | 638 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 257,406 | $ | 259,334 | $ | 5,552 | $ | 49,692 | $ | 204,090 | ||||||||||
Liabilities | ||||||||||||||||||||
Deposits | $ | 260,710 | $ | 260,552 | $ | 260,552 | ||||||||||||||
Borrowed funds | 53,400 | 54,134 | 52,743 | $ | 1,391 | |||||||||||||||
Unfunded loan commitments and letters of credit | 305 | 305 | 305 | |||||||||||||||||
Other liabilities | 388 | 388 | 388 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities | $ | 314,803 | $ | 315,379 | $ | 313,683 | $ | 1,696 | ||||||||||||
December 31, 2016 | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 4,879 | $ | 4,879 | $ | 4,879 | ||||||||||||||
Interest-earning deposits with banks | 25,711 | 25,711 | $ | 25,711 | ||||||||||||||||
Securities held to maturity | 15,843 | 15,866 | 540 | 15,208 | $ | 118 | ||||||||||||||
Net loans (excludes leases) | 199,766 | 201,863 | 201,863 | |||||||||||||||||
Other assets | 4,793 | 5,243 | 4,666 | 577 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 250,992 | $ | 253,562 | $ | 5,419 | $ | 45,585 | $ | 202,558 | ||||||||||
Liabilities | ||||||||||||||||||||
Deposits | $ | 257,164 | $ | 257,038 | $ | 257,038 | ||||||||||||||
Borrowed funds | 51,736 | 52,322 | 50,941 | $ | 1,381 | |||||||||||||||
Unfunded loan commitments and letters of credit | 301 | 301 | 301 | |||||||||||||||||
Other liabilities | 417 | 417 | 417 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities | $ | 309,618 | $ | 310,078 | $ | 308,396 | $ | 1,682 |
Carrying | Fair Value | |||||||||||||||||||
In millions | Amount | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||
March 31, 2018 | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 4,649 | $ | 4,649 | $ | 4,649 | ||||||||||||||
Interest-earning deposits with banks | 28,821 | 28,821 | $ | 28,821 | ||||||||||||||||
Securities held to maturity | 18,544 | 18,223 | 746 | 17,333 | $ | 144 | ||||||||||||||
Net loans (excludes leases) | 210,395 | 211,926 | 211,926 | |||||||||||||||||
Other assets | 4,954 | 4,954 | 4,940 | 14 | ||||||||||||||||
Total assets | $ | 267,363 | $ | 268,573 | $ | 5,395 | $ | 51,094 | $ | 212,084 | ||||||||||
Liabilities | ||||||||||||||||||||
Time deposits (a) | $ | 16,270 | $ | 15,976 | $ | 15,976 | ||||||||||||||
Borrowed funds | 56,862 | 57,514 | 55,838 | $ | 1,676 | |||||||||||||||
Unfunded loan commitments and letters of credit | 290 | 290 | 290 | |||||||||||||||||
Other liabilities | 416 | 416 | 416 | |||||||||||||||||
Total liabilities | $ | 73,838 | $ | 74,196 | $ | 72,230 | $ | 1,966 | ||||||||||||
December 31, 2017 | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 5,249 | $ | 5,249 | $ | 5,249 | ||||||||||||||
Interest-earning deposits with banks | 28,595 | 28,595 | $ | 28,595 | ||||||||||||||||
Securities held to maturity | 18,513 | 18,565 | 765 | 17,658 | $ | 142 | ||||||||||||||
Net loans (excludes leases) | 209,044 | 211,175 | 211,175 | |||||||||||||||||
Other assets | 6,078 | 6,736 | 5,949 | 787 | ||||||||||||||||
Total assets | $ | 267,479 | $ | 270,320 | $ | 6,014 | $ | 52,202 | $ | 212,104 | ||||||||||
Liabilities | ||||||||||||||||||||
Deposits | $ | 265,053 | $ | 264,854 | $ | 264,854 | ||||||||||||||
Borrowed funds | 57,744 | 58,503 | 56,853 | $ | 1,650 | |||||||||||||||
Unfunded loan commitments and letters of credit | 297 | 297 | 297 | |||||||||||||||||
Other liabilities | 399 | 399 | 399 | |||||||||||||||||
Total liabilities | $ | 323,493 | $ | 324,053 | $ | 322,106 | $ | 1,947 |
(a) | The amount at March 31, 2018 excludes deposit liabilities with no defined or contractual maturities in accordance with the adoption of ASU 2016-01. See the Recently Adopted Accounting Standards portion of Note 1 for additional details on this adoption. |
The PNC Financial Services Group, Inc. –Form 10-Q63
January 1 Additions: From loans sold with servicing retained Purchases Changes in fair value due to: Time and payoffs (a) Other (b) March 31 Related unpaid principal balance at March 31 Servicing advances at March 3120162017 Form10-K for more information regarding our goodwill.$1.9$2.0 billion and $1.8 billion at March 31, 20172018 and December 31, 2016,2017, respectively, and consisted of loan servicing contracts for commercial and residential mortgages measured at fair value.20162017 Form10-K for more detail on our fair value measurement of MSRs. Refer to Note 7 Goodwill and Mortgage Servicing Rights in our 20162017 Form10-K for more information on our accounting and measurement of MSRs.55:59: Mortgage Servicing Rights Commercial MSRs Residential MSRs In millions 2017 2016 2017 2016 $ 576 $ 526 $ 1,182 $ 1,063 29 9 17 11 13 3 83 52 (25 ) (23 ) (39 ) (37 ) 13 (55 ) 18 (226 ) $ 606 $ 460 $ 1,261 $ 863 $ 143,908 $ 143,922 $ 130,382 $ 124,839 $ 234 $ 220 $ 260 $ 383 Commercial MSRs Residential MSRs In millions 2018 2017 2018 2017 January 1 $ 668 $ 576 $ 1,164 $ 1,182 Additions: From loans sold with servicing retained 17 29 13 17 Purchases 23 13 9 83 Changes in fair value due to: Time and payoffs (a) (33 ) (25 ) (37 ) (39 ) Other (b) 48 13 107 18 March 31 $ 723 $ 606 $ 1,256 $ 1,261 Related unpaid principal balance at March 31 $ 169,172 $ 143,908 $ 124,696 $ 130,382 Servicing advances at March 31 $ 200 $ 234 $ 197 $ 260 (a) Represents decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period. (b) Represents MSR value changes resulting primarily from market-driven changes in interest rates.
64 The PNC Financial Services Group, Inc. –Form 10-Q
Dollars in millions | March 31 2017 | December 31 2016 | ||||||
Fair value | $ | 606 | $ | 576 | ||||
Weighted-average life (years) | 4.5 | 4.6 | ||||||
Weighted-average constant prepayment rate | 8.14 | % | 8.61 | % | ||||
Decline in fair value from 10% adverse change | $ | 11 | $ | 11 | ||||
Decline in fair value from 20% adverse change | $ | 21 | $ | 21 | ||||
Effective discount rate | 7.58 | % | 7.52 | % | ||||
Decline in fair value from 10% adverse change | $ | 17 | $ | 16 | ||||
Decline in fair value from 20% adverse change | $ | 33 | $ | 31 |
Dollars in millions | March 31 2018 | December 31 2017 | ||||||
Fair value | $ | 723 | $ | 668 | ||||
Weighted-average life (years) | 4.4 | 4.4 | ||||||
Weighted-average constant prepayment rate | 7.89 | % | 8.51 | % | ||||
Decline in fair value from 10% adverse change | $ | 12 | $ | 12 | ||||
Decline in fair value from 20% adverse change | $ | 22 | $ | 23 | ||||
Effective discount rate | 8.09 | % | 7.81 | % | ||||
Decline in fair value from 10% adverse change | $ | 19 | $ | 18 | ||||
Decline in fair value from 20% adverse change | $ | 39 | $ | 36 |
Dollars in millions | March 31 2017 | December 31 2016 | ||||||
Fair value | $ | 1,261 | $ | 1,182 | ||||
Weighted-average life (years) | 6.9 | 6.8 | ||||||
Weighted-average constant prepayment rate | 9.34 | % | 9.41 | % | ||||
Decline in fair value from 10% adverse change | $ | 47 | $ | 45 | ||||
Decline in fair value from 20% adverse change | $ | 90 | $ | 86 | ||||
Weighted-average option adjusted spread | 850 | bps | 850 | bps | ||||
Decline in fair value from 10% adverse change | $ | 39 | $ | 37 | ||||
Decline in fair value from 20% adverse change | $ | 76 | $ | 72 |
Dollars in millions | March 31 2018 | December 31 2017 | ||||||
Fair value | $ | 1,256 | $ | 1,164 | ||||
Weighted-average life (years) | 7.0 | 6.4 | ||||||
Weighted-average constant prepayment rate | 8.72 | % | 10.04 | % | ||||
Decline in fair value from 10% adverse change | $ | 40 | $ | 44 | ||||
Decline in fair value from 20% adverse change | $ | 78 | $ | 85 | ||||
Weighted-average option adjusted spread | 831 | bps | 830 | bps | ||||
Decline in fair value from 10% adverse change | $ | 38 | $ | 35 | ||||
Decline in fair value from 20% adverse change | $ | 74 | $ | 67 |
Three months ended March 31 In millions Net periodic cost consists of: Service cost Interest cost Expected return on plan assets Amortization of prior service credit Amortization of actuarial losses Net periodic cost/(benefit) (a)20162017 Form10-K, we have a noncontributory, qualified defined benefit pension plan covering eligible employees. Benefits are determined using a cash balance formula where earnings credits are a percentage of eligible compensation. Beginning in 2018, these earnings credits are subject to a minimum annual amount. Any pension contributions to the plan are based on an actuarially determined amount necessary to fund total benefits payable to plan participants. The nonqualified pension plan is unfunded.20172018 and 2016,2017, respectively, were as follows:58:62: Components of Net Periodic Benefit Cost Qualified Pension Plan Nonqualified Retirement Plans Postretirement Benefit 2017 2016 2017 2016 2017 2016 $ 26 $ 26 $ 1 $ 1 $ 1 45 46 3 $ 3 4 4 (71 ) (70 ) (1 ) (1 ) (1 ) (2 ) 12 11 1 1 $ 11 $ 11 $ 5 $ 4 $ 4 $ 4 Qualified Pension Plan Nonqualified Pension Plan Postretirement Benefits Three months ended March 31
In millions2018 2017 2018 2017 2018 2017 Net periodic cost consists of: Service cost $ 28 $ 26 $ 1 $ 1 $ 1 $ 1 Interest cost 43 45 2 3 3 4 Expected return on plan assets (76 ) (71 ) (1 ) (1 ) Amortization of prior service credit (1 ) Amortization of actuarial losses 12 1 1 Net periodic cost/(benefit) $ (5 ) $ 11 $ 4 $ 5 $ 3 $ 4 (a) The service cost component is included in Personnel expense on the Consolidated Income Statement. All other components are included in Other noninterest expense on the Consolidated Income Statement. 6575
us. Derivatives used for hedging under GAAP Interest rate contracts (c): Fair value hedges (d) Cash flow hedges (d) Foreign exchange contracts: Net investment hedges Total derivatives designated for hedging Derivatives not used for hedging under GAAP Derivatives used for mortgage banking activities (e): Interest rate contracts: Swaps (d) Futures (f) Mortgage-backed commitments Other Subtotal Derivatives used for customer-related activities: Interest rate contracts: Swaps (d) Futures (f) Mortgage-backed commitments Other Subtotal Foreign exchange contracts and other Subtotal Derivatives used for other risk management activities: Foreign exchange contracts and other (g) Total derivatives not designated for hedging Total gross derivatives Less: Impact of legally enforceable master netting agreements (d) Less: Cash collateral received/paid (d) Total derivativesNotes To Consolidated Financial Statements in our 20162017 Form10-K.us:59:63: Total Gross Derivatives March 31, 2017 December 31, 2016 In millions Notional /
Contract
Amount Asset Fair
Value (a) Liability Fair
Value (b) Notional /
Contract
Amount Asset Fair
Value (a) Liability Fair
Value (b) $ 31,380 $ 216 $ 71 $ 34,010 $ 551 $ 214 18,577 109 1 20,831 313 71 962 11 945 25 $ 50,919 $ 336 $ 72 $ 55,786 $ 889 $ 285 $ 49,790 $ 344 $ 145 $ 49,071 $ 783 $ 505 33,779 36,264 9,074 41 19 13,317 96 56 47,181 27 8 31,907 28 4 139,824 412 172 130,559 907 565 177,719 2,252 1,869 173,777 2,373 2,214 3,763 4,053 2,687 7 7 2,955 10 8 18,013 74 50 16,203 55 53 202,182 2,333 1,926 196,988 2,438 2,275 20,880 203 191 21,889 342 309 223,062 2,536 2,117 218,877 2,780 2,584 6,174 18 261 5,581 40 405 $ 369,060 $ 2,966 $ 2,550 $ 355,017 $ 3,727 $ 3,554 $ 419,979 $ 3,302 $ 2,622 $ 410,803 $ 4,616 $ 3,839 (1,497 ) (1,497 ) (2,460 ) (2,460 ) (507 ) (508 ) (657 ) (484 ) $ 1,298 $ 617 $ 1,499 $ 895 March 31, 2018 December 31, 2017 In millions Derivatives used for hedging under GAAP Interest rate contracts (c): Fair value hedges $ 32,810 $ 75 $ 105 $ 34,059 $ 114 $ 94 Cash flow hedges 25,647 54 9 23,875 60 6 Foreign exchange contracts: Net investment hedges 1,112 51 1,060 11 Total derivatives designated for hedging $ 59,569 $ 129 $ 165 $ 58,994 $ 174 $ 111 Derivatives not used for hedging under GAAP Derivatives used for mortgage banking activities (d): Interest rate contracts: Swaps $ 54,578 $ 4 $ 48,335 $ 162 $ 42 Futures (e) 52,555 47,494 Mortgage-backed commitments 6,796 $ 30 18 8,999 19 9 Other 6,370 15 3 2,530 11 2 Subtotal 120,299 45 25 107,358 192 53 Derivatives used for customer-related activities: Interest rate contracts: Swaps 200,489 1,182 1,807 194,042 2,079 1,772 Futures (e) 3,274 3,453 Mortgage-backed commitments 1,894 6 4 2,228 2 2 Other 18,784 70 64 17,775 75 36 Subtotal 224,441 1,258 1,875 217,498 2,156 1,810 Foreign exchange contracts and other 30,043 451 432 27,330 349 332 Subtotal 254,484 1,709 2,307 244,828 2,505 2,142 Derivatives used for other risk management activities: Foreign exchange contracts and other (f) 7,142 20 445 7,445 3 550 Total derivatives not designated for hedging $ 381,925 $ 1,774 $ 2,777 $ 359,631 $ 2,700 $ 2,745 Total gross derivatives $ 441,494 $ 1,903 $ 2,942 $ 418,625 $ 2,874 $ 2,856 Less: Impact of legally enforceable master netting agreements 795 795 1,054 1,054 Less: Cash collateral received/paid 45 648 636 763 Total derivatives $ 1,063 $ 1,499 $ 1,184 $ 1,039 (a) Included in Other assets on our Consolidated Balance Sheet. (b) Included in Other liabilities on our Consolidated Balance Sheet. (c) Represents primarily swaps. (d)In the first quarter of 2017, PNC changed its accounting treatment for variation margin related to certain derivative instruments cleared through a central clearing house. Previously, variation margin was treated as collateral subject to offsetting. As a result of changes made by the clearing house to its rules governing such instruments with its counterparties, effective for the first quarter of 2017, variation margin will be treated as a settlement payment on the derivative instrument. The impact at March 31, 2017 was a reduction of gross derivative assets and gross derivative liabilities by $.8 billion and $.7 billion, respectively. The accounting change had no impact on the net fair value of the derivative assets and liabilities that otherwise would have been reported on our Consolidated Balance Sheet. See Table 63 for more information.(e)(d)Includes both residential and commercial mortgage banking activities. (f)(e) Futures contracts settle in cash daily and, therefore, no derivative asset or derivative liability is recognized on our Consolidated Balance Sheet. (g)(f) Includes our obligation to fund a portion of certain BlackRock LTIP programs and the swaps entered into in connection with sales of a portion of Visa Class B common shares.
66
Exchange-traded and over-the-counter cleared derivative instruments are typically settled in cash each day based on the prior day value. In the first quarter of 2018, we changed our presentation for variation margin related to derivative instruments cleared through a central clearinghouse as a result of changes made by that clearinghouse to its rules governing such instruments with its counterparties. This variation margin is now recorded as a settlement payment instead of collateral. The impact at March 31, 2018 was a reduction of gross derivative assets and gross derivative liabilities of $1.3 billion and $.5 billion, respectively. The accounting change had no impact on the net fair value of the derivative assets and liabilities that otherwise would have been reported on our Consolidated Balance Sheet. See Table 67 for more information.
expected future cash flows are considered cash flow hedges, and derivatives hedging a net investment in a foreign subsidiary are considered net investment hedges. Designating derivatives as accounting hedges allows for gains and losses on those derivatives to the extent effective, to be recognized in the income statementsame period and in the same periodincome statement line item as the earnings impact of the hedged items affect earnings.
items.
Further detail regarding gains (losses) on fair value hedge derivatives and related hedged items is presentedattributable to the hedged risk, are recognized in current earnings within the following table:
Table 60: Gains (Losses) on Derivatives and Related Hedged Items – Fair Value Hedges (a)
Three months ended | ||||||||||||
March 31, 2017 | March 31, 2016 | |||||||||||
In millions | Hedged Items | Location | Gain (Loss) on Derivatives Recognized in Income | Gain (Loss) on Related Hedged Items Recognized in Income | Gain (Loss) on Derivatives Recognized in Income | Gain (Loss) on Related Hedged Items Recognized in Income | ||||||
Interest rate contracts | U.S. Treasury and Government Agencies and Other Debt Securities | Investment securities (interest income) | $22 | $(21) | $(154) | $158 | ||||||
Interest rate contracts | Subordinated Debt and Bank Notes and Senior Debt | Borrowed funds (interest expense) | (95) | 86 | 407 | (432) | ||||||
Total | $(73) | $65 | $253 | $(274) |
We also periodically enter into forward purchase and sale contracts to hedge the variability of the consideration that will be paid or received related to the purchase or sale of investment securities. The forecasted purchase or sale is consummated upon gross settlement of the forward contract itself. As a result, hedge ineffectiveness, if any, is typically minimal. GainsFor these cash flow hedges, gains and losses on thesethe interest rate swaps and forward contracts are recorded in Accumulated other comprehensive income and are recognizedthen reclassified into earnings in earnings whenthe same period the hedged cash flows affect earnings.
earnings and within the same income statement line as the hedged cash flows.
The PNC Financial Services Group, Inc. –Form 10-Q67
hedge strategies. This reclassified amount could differ from amounts actually recognized due to changes in interest rates, hedgede-designations and the addition of other hedges subsequent to March 31, 2017.2018. As of March 31, 2017,2018, the maximum length of time over which forecasted transactions are hedged is seven years. During the first three months
There were no components of derivative2017 period presented.
Further detail regarding gains (losses) on derivatives and related cash flows is presented in the following table:
Three months ended March 31 | ||||||||
In millions | 2017 | 2016 | ||||||
Gains (losses) on derivatives recognized in Other comprehensive income (OCI) – (effective portion) | $ | (22 | ) | $ | 265 | |||
Less: Gains (losses) reclassified from Accumulated other comprehensive income (AOCI) into income – (effective portion) | ||||||||
Interest income | 52 | 65 | ||||||
Noninterest income | 3 | |||||||
Total gains (losses) reclassified from AOCI into income – (effective portion) | $ | 55 | $ | 65 | ||||
Net unrealized gains (losses) on cash flow hedge derivatives | $ | (77 | ) | $ | 200 |
Location and Amount of Gains (Losses) Recognized in Income | ||||||||||||
Interest Income | Interest Expense | Noninterest Income | ||||||||||
In millions | Loans | Investment Securities | Borrowed Funds | Other | ||||||||
For the three months ended March 31, 2018 | ||||||||||||
Total amounts on the Consolidated Income Statement | $ | 2,228 | $ | 512 | $ | 344 | $ | 245 | ||||
Gains (losses) on fair value hedges recognized on: | ||||||||||||
Hedged items (c) | $ | (90 | ) | $ | 370 | |||||||
Derivatives | $ | 92 | $ | (370 | ) | |||||||
Amounts related to interest settlements on derivatives | $ | (3 | ) | $ | 26 | |||||||
Gains (losses) on cash flow hedges (d): | ||||||||||||
Amount of derivative gains (losses) reclassified from accumulated OCI | $ | 26 | $ | 4 | $ | 2 | ||||||
For the three months ended March 31, 2017 | ||||||||||||
Total amounts on the Consolidated Income Statement | $ | 1,904 | $ | 493 | $ | 240 | $ | 301 | ||||
Gains (losses) on fair value hedges recognized on: | ||||||||||||
Hedged items | $ | (21 | ) | $ | 86 | |||||||
Derivatives | $ | 22 | $ | (95 | ) | |||||||
Amounts related to interest settlements on derivatives | $ | (15 | ) | $ | 76 | |||||||
Gains (losses) on cash flow hedges - interest rate contracts (d): | ||||||||||||
Amount of derivative gains (losses) reclassified from accumulated OCI | $ | 46 | $ | 6 | $ | 3 |
(a) | For all periods presented, there were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for any of the fair value or cash flow hedge strategies. |
(b) | All cash flow and fair value hedge derivatives |
(c) | Includes an insignificant amount of fair value hedge adjustments related to discontinued relationships. |
(d) | For all periods presented, there were no gains or losses from cash flow hedge derivatives reclassified to income because it became probable that the original forecasted transaction would not occur. |
March 31, 2018 | ||||||||
In millions | Carrying Value of the Hedged Items | Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a) | ||||||
Investment securities - Available for Sale (b) | $ | 6,228 | $ | (178 | ) | |||
Borrowed funds | $ | 28,788 | $ | (480 | ) |
(a) | Includes an insignificant amount of fair value hedge adjustments related to discontinued relationships. |
(b) | Carrying value shown represents amortized cost. |
ended March 31, 2017 compared with net gains of $29$39 million for the three months ended March 31, 2016.
2018 compared with $14 million for the three months ended March 31, 2017.
Three months ended March 31 | ||||||||
In millions | 2017 | 2016 | ||||||
Derivatives used for mortgage banking activities: | ||||||||
Interest rate contracts (a) | $ | (7 | ) | $ | 241 | |||
Derivatives used for customer-related activities: | ||||||||
Interest rate contracts | $ | 34 | $ | (4 | ) | |||
Foreign exchange contracts and other | 32 | 29 | ||||||
Gains (losses) from customer-related activities (b) | $ | 66 | $ | 25 | ||||
Derivatives used for other risk management activities: | ||||||||
Foreign exchange contracts and other (c) | $ | (50 | ) | $ | (99 | ) | ||
Gains (losses) from other risk management activities (b) | $ | (50 | ) | $ | (99 | ) | ||
Total gains (losses) from derivatives not designated as hedging instruments | $ | 9 | $ | 167 |
Three months ended March 31 | ||||||||
In millions | 2018 | 2017 | ||||||
Derivatives used for mortgage banking activities: | ||||||||
Interest rate contracts (a) | $ | (114 | ) | $ | (7 | ) | ||
Derivatives used for customer-related activities: | ||||||||
Interest rate contracts | 56 | 34 | ||||||
Foreign exchange contracts and other | 44 | 32 | ||||||
Gains (losses) from customer-related activities (b) | 100 | 66 | ||||||
Derivatives used for other risk management activities: | ||||||||
Foreign exchange contracts and other (b) (c) | (17 | ) | (50 | ) | ||||
Total gains (losses) from derivatives not designated as hedging instruments | $ | (31 | ) | $ | 9 |
(a) | Included in Residential mortgage, Corporate services and Other noninterest |
(b) | Included in Other noninterest |
(c) | Includes BlackRock LTIP funding obligation and the swaps entered into in connection with sales of a portion of Visa Class B common shares. |
20162017 Form10-K.
68 The PNC Financial Services Group, Inc. –Form 10-Q
March 31, 2017 In millions | Gross Fair Value |
Amounts Offset on the | Net Fair Value | Securities Under Master | Net Amounts | |||||||||||||||||
Fair Value Offset Amount | Cash Collateral | |||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||
Cleared (a) | $ | 556 | $ | 157 | $ | 366 | $ | 33 | $ | 33 | ||||||||||||
Exchange-traded | 10 | 10 | 10 | |||||||||||||||||||
Over-the-counter | 2,504 | 1,216 | 137 | 1,151 | $54 | 1,097 | ||||||||||||||||
Foreign exchange and other contracts | 232 | 124 | 4 | 104 | 104 | |||||||||||||||||
Total derivative assets | $ | 3,302 | $ | 1,497 | $ | 507 | $ | 1,298 | (b) | $54 | $ | 1,244 | ||||||||||
Derivative liabilities | ||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||
Cleared (a) | $ | 176 | $ | 157 | $ | 19 | $ | 19 | ||||||||||||||
Exchange-traded | 2 | 2 | 2 | |||||||||||||||||||
Over-the-counter | 1,992 | 1,238 | $ | 490 | 264 | 264 | ||||||||||||||||
Foreign exchange and other contracts | 452 | 102 | 18 | 332 | 332 | |||||||||||||||||
Total derivative liabilities | $ | 2,622 | $ | 1,497 | $ | 508 | $ | 617 | (c) | $ | 617 | |||||||||||
December 31, 2016 In millions | ||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||
Cleared | $ | 1,498 | $ | 940 | $ | 480 | $ | 78 | $ | 78 | ||||||||||||
Exchange-traded | 9 | 9 | 9 | |||||||||||||||||||
Over-the-counter | 2,702 | 1,358 | 164 | 1,180 | $62 | 1,118 | ||||||||||||||||
Foreign exchange and other contracts | 407 | 162 | 13 | 232 | 232 | |||||||||||||||||
Total derivative assets | $ | 4,616 | $ | 2,460 | $ | 657 | $ | 1,499 | (b) | $62 | $ | 1,437 | ||||||||||
Derivative liabilities | ||||||||||||||||||||||
Interest rate contracts: | ||||||||||||||||||||||
Cleared | $ | 1,060 | $ | 940 | $ | 25 | $ | 95 | $ | 95 | ||||||||||||
Exchange-traded | 1 | 1 | 1 | |||||||||||||||||||
Over-the-counter | 2,064 | 1,395 | 431 | 238 | 238 | |||||||||||||||||
Foreign exchange and other contracts | 714 | 125 | 28 | 561 | 561 | |||||||||||||||||
Total derivative liabilities | $ | 3,839 | $ | 2,460 | $ | 484 | $ | 895 | (c) | $ | 895 |
In millions | Amounts Offset on the Consolidated Balance Sheet | Securities Collateral Held / (Pledged) Under Master Netting Agreements | |||||||||||||||||||||||||
Gross Fair Value | Fair Value Offset Amount | Cash Collateral | Net Fair Value | Net Amounts | |||||||||||||||||||||||
March 31, 2018 | |||||||||||||||||||||||||||
Derivative assets | |||||||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||||||
Over-the-counter cleared (a) | $ | 24 | $ | 24 | $ | 24 | |||||||||||||||||||||
Exchange-traded | 2 | 2 | 2 | ||||||||||||||||||||||||
Over-the-counter | 1,406 | $ | 602 | $ | 41 | 763 | $ | 12 | 751 | ||||||||||||||||||
Foreign exchange and other contracts | 471 | 193 | 4 | 274 | 274 | ||||||||||||||||||||||
Total derivative assets | $ | 1,903 | $ | 795 | $ | 45 | $ | 1,063 | (b) | $ | 12 | $ | 1,051 | ||||||||||||||
Derivative liabilities | |||||||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||||||
Over-the-counter cleared (a) | $ | 18 | $ | 18 | $ | 18 | |||||||||||||||||||||
Over-the-counter | 1,996 | $ | 629 | $ | 570 | 797 | 797 | ||||||||||||||||||||
Foreign exchange and other contracts | 928 | 166 | 78 | 684 | 684 | ||||||||||||||||||||||
Total derivative liabilities | $ | 2,942 | $ | 795 | $ | 648 | $ | 1,499 | (c) | $ | 1,499 | ||||||||||||||||
December 31, 2017 | |||||||||||||||||||||||||||
Derivative assets | |||||||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||||||
Over-the-counter cleared | $ | 827 | $ | 251 | $ | 567 | $ | 9 | $ | 9 | |||||||||||||||||
Over-the-counter | 1,695 | 668 | 67 | 960 | $ | 32 | 928 | ||||||||||||||||||||
Foreign exchange and other contracts | 352 | 135 | 2 | 215 | 215 | ||||||||||||||||||||||
Total derivative assets | $ | 2,874 | $ | 1,054 | $ | 636 | $ | 1,184 | (b) | $ | 32 | $ | 1,152 | ||||||||||||||
Derivative liabilities | |||||||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||||||
Over-the-counter cleared | $ | 260 | $ | 251 | $ | 9 | $ | 9 | |||||||||||||||||||
Over-the-counter | 1,703 | 662 | 669 | 372 | 372 | ||||||||||||||||||||||
Foreign exchange and other contracts | 893 | 141 | 94 | 658 | 658 | ||||||||||||||||||||||
Total derivative liabilities | $ | 2,856 | $ | 1,054 | $ | 763 | $ | 1,039 | (c) | $ | 1,039 |
(a) | Reflects our first quarter |
(b) | Represents the net amount of derivative assets included in Other assets on our Consolidated Balance Sheet. |
(c) | Represents the net amount of derivative liabilities included in Other liabilities on our Consolidated Balance Sheet. |
The PNC Financial Services Group, Inc. –Form 10-Q69
Other assets and the obligation for cash held is included in Other liabilities on our Consolidated Balance Sheet. Securities held from counterparties are not recognized on our balance sheet. Likewise securities we have pledged to counterparties remain on our balance sheet.
Basic Net income Less: Net income attributable to noncontrolling interests Preferred stock dividends Preferred stock discount accretion and redemptions Net income attributable to common shares Less: Dividends and undistributed earnings allocated to participating securities Net income attributable to basic common shares Basic weighted-average common shares outstanding Basic earnings per common share (a) Diluted Net income attributable to basic common shares Less: Impact of BlackRock earnings per share dilution Net income attributable to diluted common shares Basic weighted-average common shares outstanding Dilutive potential common shares Diluted weighted-average common shares outstanding Diluted earnings per common share (a)64:68: Basic and Diluted Earnings Per Common Share Three months ended March 31 In millions, except per share data 2017 2016 $ 1,074 $ 943 17 19 63 63 21 2 973 859 6 6 $ 967 $ 853 487 501 $ 1.99 $ 1.70 $ 967 $ 853 4 3 $ 963 $ 850 487 501 5 6 492 507 $ 1.96 $ 1.68 Three months ended
March 31 In millions, except per share data 2018 2017 Basic Net income $ 1,239 $ 1,074 Less: Net income (loss) attributable to noncontrolling interests 10 17 Preferred stock dividends 63 63 Preferred discount accretion and redemptions 1 21 Net income attributable to common shares 1,165 973 Less: Dividends and undistributed earnings allocated to participating securities 5 6 Net income attributable to basic common shares $ 1,160 $ 967 Basic weighted-average common shares outstanding 473 487 Basic earnings per common share (a) $ 2.45 $ 1.99 Diluted Net income attributable to basic common shares $ 1,160 $ 967 Less: Impact of BlackRock earnings per share dilution 2 4 Net income attributable to diluted common shares $ 1,158 $ 963 Basic weighted-average common shares outstanding 473 487 Dilutive potential common shares 3 5 Diluted weighted-average common shares outstanding 476 492 Diluted earnings per common share (a) $ 2.43 $ 1.96 (a) Basic and diluted earnings per share under thetwo-class method are determined on net income reported on the income statement less earnings allocated to nonvested restricted shares and restricted share units with nonforfeitable dividends and dividend rights (participating securities).
70
Shares Capital Surplus – Preferred Capital Surplus Common Non- controlling Balance at January 1, 2016 Net income Other comprehensive income (loss), net of tax Cash dividends declared Common ($.51 per share) Preferred Preferred stock discount accretion Common stock activity (a) Treasury stock activity Other Balance at March 31, 2016 (b) Balance at January 1, 2017 Net income Other comprehensive income (loss), net of tax Cash dividends declared Common ($.55 per share) Preferred Preferred stock discount accretion Redemption of noncontrolling interests Treasury stock activity (c) Other Balance at March 31, 2017 (b)first three months of 2016ended March 31, 2018 and 2017 follows:65:69: Rollforward of Total Equity
Outstanding
Common
Stock Shareholders’ Equity In millions Common
Stock
Stock
–
Stock
and
Other Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury
Stock
Interests Total
Equity 504 $2,708 $ 3,452 $ 12,745 $ 29,043 $ 130 $ (3,368 ) $ 1,270 $ 45,980 924 19 943 402 402 (260 ) (260 ) (64 ) (64 ) 1 (1 ) 2 2 (5 ) (11 ) (423 ) (434 ) (150 ) (91 ) (241 ) 499 $2,708 $ 3,453 $ 12,586 $ 29,642 $ 532 $ (3,791 ) $ 1,198 $ 46,328 485 $2,709 $ 3,977 $ 12,674 $ 31,670 $ (265 ) $ (5,066 ) $ 1,155 $ 46,854 1,057 17 1,074 (14 ) (14 ) (271 ) (271 ) (63 ) (63 ) 2 (2 ) (19 ) (981 ) (1,000 ) (216 ) (257 ) (473 ) (162 ) (42 ) (204 ) 485 $2,709 $ 3,979 $ 12,296 $ 32,372 $ (279 ) $ (5,323 ) $ 149 $ 45,903 Shareholders’ Equity In millions Total Equity Balance at January 1, 2017 485 $ 2,709 $ 3,977 $ 12,674 $ 31,670 $ (265 ) $ (5,066 ) $ 1,155 $ 46,854 Net income 1,057 17 1,074 Other comprehensive income (loss), net of tax (14 ) (14 ) Cash dividends declared Common ($.55 per share) (271 ) (271 ) Preferred (63 ) (63 ) Preferred stock discount accretion 2 (2 ) Redemption of noncontrolling interests (a) (19 ) (981 ) (1,000 ) Treasury stock activity (b) (216 ) (257 ) (473 ) Other (162 ) (42 ) (204 ) Balance at March 31, 2017 (c) 485 $ 2,709 $ 3,979 $ 12,296 $ 32,372 $ (279 ) $ (5,323 ) $ 149 $ 45,903 Balance at December 31, 2017 473 $ 2,710 $ 3,985 $ 12,389 $ 35,481 $ (148 ) $ (6,904 ) $ 72 $ 47,585 Cumulative effect of ASU adoptions (d) (22 ) 6 (16 ) Balance at January 1, 2018 473 $ 2,710 $ 3,985 $ 12,389 $ 35,459 $ (142 ) $ (6,904 ) $ 72 $ 47,569 Net income 1,229 10 1,239 Other comprehensive income (loss), net of tax (557 ) (557 ) Cash dividends declared Common ($.75 per share) (358 ) (358 ) Preferred (63 ) (63 ) Preferred stock discount accretion 1 (1 ) Treasury stock activity (3 ) 6 (631 ) (625 ) Other (154 ) (16 ) (170 ) Balance at March 31, 2018 (c) 470 $ 2,710 $ 3,986 $ 12,241 $ 36,266 $ (699 ) $ (7,535 ) $ 66 $ 47,035 (a) CommonSee Note 15 Equity in our 2017 Form 10-K for additional information on the redemption of Perpetual Trust Securities.(b) Treasury stock activity totaled less than .5 million shares issued. (b)(c) The par value of our preferred stock outstanding was less than $.5 million at each date and, therefore, is excluded from this presentation. (c)Treasury stock activity totaled less than .5 million shares issued.(d) Represents the cumulative effect of adopting ASU 2014-09, ASU 2016-01, ASU 2017-12 and ASU 2018-02. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in this Report for additional detail on the adoption of these ASUs.
Noncontrolling Interests
Perpetual Trust Securities
Our noncontrolling interests balance at March 31, 2017 reflected our March 15, 2017 redemption
Three Months Ended March 31 | ||||||||
In millions | 2017 | 2016 | ||||||
Net unrealized gains (losses) onnon-OTTI securities | ||||||||
Increase in net unrealized gains (losses) onnon-OTTI securities | $ | 67 | $ | 519 | ||||
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income | 5 | 6 | ||||||
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income | (7 | ) | 9 | |||||
Net increase (decrease),pre-tax | 69 | 504 | ||||||
Effect of income taxes | (25 | ) | (185 | ) | ||||
Net increase (decrease),after-tax | 44 | 319 | ||||||
Net unrealized gains (losses) on OTTI securities | ||||||||
Increase in net unrealized gains (losses) on OTTI securities | 37 | (39 | ) | |||||
Less: OTTI losses realized on securities reclassified to noninterest income | (1 | ) | ||||||
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income | 2 | |||||||
Net increase (decrease),pre-tax | 35 | (38 | ) | |||||
Effect of income taxes | (13 | ) | 14 | |||||
Net increase (decrease),after-tax | 22 | (24 | ) | |||||
Net unrealized gains (losses) on cash flow hedge derivatives | ||||||||
Increase in net unrealized gains (losses) on cash flow hedge derivatives | (22 | ) | 265 | |||||
Less: Net gains (losses) realized as a yield adjustment reclassified to loan interest income | 46 | 60 | ||||||
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income | 6 | 5 | ||||||
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income | 3 | |||||||
Net increase (decrease),pre-tax | (77 | ) | 200 | |||||
Effect of income taxes | 28 | (73 | ) | |||||
Net increase (decrease),after-tax | (49 | ) | 127 | |||||
Pension and other postretirement benefit plan adjustments | ||||||||
Net pension and other postretirement benefit activity | (74 | ) | 2 | |||||
Amortization of actuarial loss (gain) reclassified to other noninterest expense | 13 | 12 | ||||||
Amortization of prior service cost (credit) reclassified to other noninterest expense | (1 | ) | (2 | ) | ||||
Net increase (decrease),pre-tax | (62 | ) | 12 | |||||
Effect of income taxes | 23 | (4 | ) | |||||
Net increase (decrease),after-tax | (39 | ) | 8 | |||||
Other | ||||||||
PNC’s portion of BlackRock’s OCI | 2 | (25 | ) | |||||
Net investment hedge derivatives | (14 | ) | 29 | |||||
Foreign currency translation adjustments and other | 16 | (29 | ) | |||||
SBA I/O Strip sold | (2 | ) | ||||||
Net increase (decrease),pre-tax | 4 | (27 | ) | |||||
Effect of income taxes | 4 | (1 | ) | |||||
Net increase (decrease),after-tax | 8 | (28 | ) | |||||
Total other comprehensive income (loss),pre-tax | (31 | ) | 651 | |||||
Total other comprehensive income, tax effect | 17 | (249 | ) | |||||
Total other comprehensive income (loss),after-tax | $ | (14 | ) | $ | 402 |
72
Three months ended March 31 | ||||||||
In millions | 2018 | 2017 | ||||||
Net unrealized gains (losses) on non-OTTI securities | ||||||||
Increase in net unrealized gains (losses) on non-OTTI securities | $ | (645 | ) | $ | 67 | |||
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income | 4 | 5 | ||||||
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income | (3 | ) | (7 | ) | ||||
Net increase (decrease), pre-tax | (646 | ) | 69 | |||||
Effect of income taxes | 150 | (25 | ) | |||||
Net increase (decrease), after-tax | (496 | ) | 44 | |||||
Net unrealized gains (losses) on OTTI securities | ||||||||
Increase in net unrealized gains (losses) on OTTI securities | 14 | 37 | ||||||
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income | 2 | |||||||
Net increase (decrease), pre-tax | 14 | 35 | ||||||
Effect of income taxes | (4 | ) | (13 | ) | ||||
Net increase (decrease), after-tax | 10 | 22 | ||||||
Net unrealized gains (losses) on cash flow hedge derivatives | ||||||||
Increase in net unrealized gains (losses) on cash flow hedge derivatives | (161 | ) | (22 | ) | ||||
Less: Net gains (losses) realized as a yield adjustment reclassified to loan interest income | 26 | 46 | ||||||
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income | 4 | 6 | ||||||
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income | 2 | 3 | ||||||
Net increase (decrease), pre-tax | (193 | ) | (77 | ) | ||||
Effect of income taxes | 44 | 28 | ||||||
Net increase (decrease), after-tax | (149 | ) | (49 | ) | ||||
Pension and other postretirement benefit plan adjustments | ||||||||
Net pension and other postretirement benefit activity | 61 | (74 | ) | |||||
Amortization of actuarial loss (gain) reclassified to other noninterest expense | 1 | 13 | ||||||
Amortization of prior service cost (credit) reclassified to other noninterest expense | 1 | (1 | ) | |||||
Net increase (decrease), pre-tax | 63 | (62 | ) | |||||
Effect of income taxes | (15 | ) | 23 | |||||
Net increase (decrease), after-tax | 48 | (39 | ) | |||||
Other | ||||||||
PNC’s portion of BlackRock’s OCI | 22 | 2 | ||||||
Net investment hedge derivatives | (39 | ) | (14 | ) | ||||
Foreign currency translation adjustments and other | 44 | 16 | ||||||
Net increase (decrease), pre-tax | 27 | 4 | ||||||
Effect of income taxes | 3 | 4 | ||||||
Net increase (decrease), after-tax | 30 | 8 | ||||||
Total other comprehensive income, pre-tax | (735 | ) | (31 | ) | ||||
Total other comprehensive income, tax effect | 178 | 17 | ||||||
Total other comprehensive income, after-tax | $ | (557 | ) | $ | (14 | ) |
Balance at December 31, 2015 Net activity Balance at March 31, 2016 Balance at December 31, 2016 Net activity Balance at March 31, 2017 estimated aggregate amount also does not reflect any of our exposure to matters not so disclosed, as discussed below under “Other.”67:71: Accumulated Other Comprehensive Income (Loss) ComponentsIn millions,after-tax Net unrealized
gains (losses)
onnon-OTTI
securities Net unrealized
gains (losses) on
OTTI securities Net unrealized
gains (losses) on
cash flow hedge
derivatives Pension and other
postretirement
benefit plan
adjustments Other Total $ 286 $ 66 $ 430 $ (554 ) $ (98 ) $ 130 319 (24 ) 127 8 (28 ) 402 $ 605 $ 42 $ 557 $ (546 ) $ (126 ) $ 532 $ 52 $ 106 $ 333 $ (553 ) $ (203 ) $ (265 ) 44 22 (49 ) (39 ) 8 (14 ) $ 96 $ 128 $ 284 $ (592 ) $ (195 ) $ (279 ) In millions, after-tax Net unrealized gains (losses) on non-OTTI securities Net unrealized gains (losses) on OTTI securities Net unrealized gains (losses) on cash flow hedge derivatives Pension and other postretirement benefit plan adjustments Other Total Balance at December 31, 2016 $ 52 $ 106 $ 333 $ (553 ) $ (203 ) $ (265 ) Net activity 44 22 (49 ) (39 ) 8 (14 ) Balance at March 31, 2017 $ 96 $ 128 $ 284 $ (592 ) $ (195 ) $ (279 ) Balance at December 31, 2017 $ 62 $ 215 $ 151 $ (446 ) $ (130 ) $ (148 ) Cumulative effect of adopting ASU 2018-02 (a) 59 33 (96 ) 10 6 Balance at January 1, 2018 $ 121 $ 215 $ 184 $ (542 ) $ (120 ) $ (142 ) Net activity (496 ) 10 (149 ) 48 30 (557 ) Balance at March 31, 2018 $ (375 ) $ 225 $ 35 $ (494 ) $ (90 ) $ (699 ) (a) Represents the cumulative impact of adopting ASU 2018-02 which permits the reclassification to retained earnings of the income tax effects stranded within AOCI. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in this Report for additional detail on this adoption. the Notes To Consolidated Financial Statements inPart II, Item 8 of our 20162017 Form10-K (such prior disclosure referred to as “Prior Disclosure”)). For Disclosed Matters where we are able to estimate such possible losses or ranges of possible losses, as of March 31, 2017,2018, we estimate that it is reasonably possible that we could incur losses in an aggregate amount of up to approximately $425$100 million. The estimates included in this amount are based on our analysis of currently available information and are subject to significant judgment and a variety of assumptions and uncertainties. As new information is obtained we may change our estimates. Due to the inherent subjectivity of the assessments and unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to us from the legal proceedings in question. Thus, our exposure and ultimate losses may be higher, and possibly significantly so, than the amounts accrued or this aggregate amount.20162017 Form10-K, we are unable, at this time, to estimate the losses that it is reasonably possible that we could incur or ranges of such losses with respect to some of the matters disclosed, and the aggregate estimated amount provided above does not include an estimate for every Disclosed Matter. Therefore, as the estimated aggregate amount disclosed above does not include all of the Disclosed Matters, the amount disclosed above does not represent our maximum reasonably possible loss exposure for all of the Disclosed Matters. TheInterchangeIn March 2017,U.S. Supreme Court denied the petition for a writ of certiorari challenging the decision of the U.S. Court of Appeals for the Second Circuit’s reversal of the order approving a settlement in the cases that had been consolidated forplaintiffs to settle pre-trialWhite et. al v. The PNC Financial Services Group, Inc. et al. (Civil Action No. 11-7928) proceedings, pending in the U.S. District Court for the Eastern District of New York underPennsylvania. This settlement is subject to, among other things, final documentation. The financial impact of the caption In re Payment Card Interchange Fee and Merchant-Discount Antitrust Litigation (Master FileNo. 1:05-md-1720-JG-JO).CBNV Mortgage LitigationBetween 2001 and 2003, on behalf of either individual plaintiffs or proposed classes of plaintiffs, several separate lawsuits were filed in state and federal courts against Community Bank of Northern Virginia (CBNV), a PNC Bank predecessor, and other defendants asserting claims arising from second mortgage loans madesettlement will not be material to the plaintiffs. The state lawsuits were removed to federal court and, with the lawsuits that had been filed in federal court, were consolidated forpre-trialPNC. proceedings in a multidistrict litigation (MDL) proceeding in the U.S. District Court for the Western
In October 2011, the plaintiffs filed a joint consolidated amended class action complaint covering allFederal Home Loan Mortgage Corporation (FHLMC) and the Federal Housing Administration (FHA) for costs incurred in connection with foreclosures on residential mortgage loans purchased or guaranteed by FNMA or FHLMC or insured by FHA in violation of the class action lawsuits pending in this proceeding.relevant regulations and applicable contractual reimbursement terms. The amended complaint named several defendants, including CBNV. As relevant to CBNV, the principal allegations in the amended complaint were that a group of persons and entities collectively characterized as the “Shumway/Bapst Organization” referred prospective second residential mortgage loan borrowers to CBNV, that CBNV charged these borrowers improper title and loan fees at loan closings, that the disclosures provided to the borrowers at loan closings were inaccurate, and that CBNV paid some of the loan fees to the Shumway/Bapst Organization as purported “kickbacks” for the referrals. The amended complaint asserted claims for violations of the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), as amended by the Home Ownership and Equity Protection Act (HOEPA), and the Racketeer Influenced and Corrupt Organizations Act (RICO).
The amended complaint sought to certify a class of all borrowers who obtained a second residentialnon-purchase money mortgage loan, secured by their principal dwelling, including from CBNV, the terms of which made the loan subject to HOEPA. The plaintiffs sought,plaintiff seeks, among other things, unspecified damages equal to the damage to the United States (including treble damages under RICO and RESPA)the False Claims Act), rescission of loans, declaratory and injunctive relief, interestunspecified civil penalties, and attorneys’ fees. In November 2011,fees and other costs of bringing this lawsuit. The government declined to intervene in the defendants filedaction, but is prosecuting a motion to dismiss the amended complaint. In June 2013, the court granted in part and denied in part the motion, dismissing the claims of any plaintiff whose loan did not originate with or was not assigned to CBNV, narrowing the scoperelated suit against one of the RESPA claim,law firms and dismissing severalcertain affiliated entities. The district court has set a trial date for March 2019.
In August 2016, we reached a settlement with the plaintiffs. In December 2016, the court granted final approval of the settlement. Under this settlement, the matter was submitted to binding arbitration in February 2017 before a panel of three arbitrators, who were to determine whether we would pay the plaintiff class either an amount (inclusive of class counsel fees and expenses) we proposed ($24 million) or an amount proposed by the plaintiffs ($70 million), with no discretion to choose any other amount. The arbitrators reached a unanimous
decision in March 2017 deciding in favor of our position and awarding the plaintiffs a total of $24 million.
Captive Mortgage Reinsurance Litigation
In March 2017, in the lawsuit currently pending against PNC (as successor in interest to National City Corporation and several of its subsidiaries) in the U.S. District Court for the EasternSouthern District of PennsylvaniaNew York described in Note 19 in our 2017 Form 10-K under the captionWhite, et al. v. The PNC Financial Services Group, Inc., et al. (Civil ActionNo. 11-7928), the district court certified the issue as to whether the plaintiffs’ claim under RESPA is not barred by the statute of limitations under the “continuing violations doctrine” for interlocutory appeal to the U.S. Court of Appeals for the Third Circuit“Other Regulatory and stayed the action. Also in March 2017, the court of appeals declined to accept the appeal, and as a result proceedings will resume in the district court.
Governmental Inquiries.”
74
Commitments to extend credit Total commercial lending Home equity lines of credit Credit card Other Total commitments to extend credit Net outstanding standby letters of credit (a) Reinsurance agreements (b) Standby bond purchase agreements (c) Other commitments (d) Total commitments to extend credit and other commitments20172018 and December 31, 2016,2017, respectively.68:72: Commitments to Extend Credit and Other CommitmentsIn millions March 31
2017 December 31
2016 $ 106,308 $ 108,256 17,719 17,438 22,807 22,095 4,431 4,192 151,265 151,981 8,558 8,324 1,766 1,835 788 790 1,073 967 $ 163,450 $ 163,897 In millions March 31
2018 December 31
2017 Commitments to extend credit Total commercial lending $ 113,268 $ 112,125 Home equity lines of credit 16,888 17,852 Credit card 25,861 24,911 Other 4,812 4,753 Total commitments to extend credit 160,829 159,641 Net outstanding standby letters of credit (a) 8,350 8,651 Reinsurance agreements (b) 1,622 1,654 Standby bond purchase agreements (c) 1,014 843 Other commitments (d) 1,129 1,732 Total commitments to extend credit and other commitments $ 172,944 $ 172,521 (a) Net outstanding standby letters of credit include $3.9$3.1 billion and $3.5 billion at both March 31, 20172018 and December 31, 2016,2017, respectively, which support remarketing programs.(b) Represents aggregate maximum exposure up to the specified limits of the reinsurance contracts and reflectsprovided by our wholly-owned captive insurance subsidiary. These amounts reflect estimates based on availability of financial information from insurance carriers. As of March 31, 2017 and December 31, 2016,2018, the aggregate maximum exposure amount comprised $1.5$1.4 billion for accidental death & dismemberment contracts and $.3$.2 billion for credit life, accident &and health contracts. Comparable amounts at December 31, 2017 were $1.5 billion and $.2 billion, respectively.(c) We enter into standby bond purchase agreements to support municipal bond obligations. (d) Includes $.5 billion related to investments in qualified affordable housing projects at both March 31, 20172018 and December 31, 2016.2017.
Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly, have changed the basis of presentation of our segments, resulting in four reportable business segments:
Net interest income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. Effective for the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certain
86The PNC Financial Services Group, Inc. –Form 10-Q75
The prior period presented was revised to conform to the new segment alignment and to our change in internal funds transfer pricing methodology.
diversification of risk among the business segments, ultimately reflecting our portfolio risk adjusted capital allocation.
accounts.
76 The PNC Financial Services Group, Inc. –Form 10-Q
Asset Management Groupprovides personal wealth management for high net worth and ultra high net worth clients and institutional asset management. Wealth management products and services include investment and retirement planning, customized investment management, private banking, tailored credit solutions and trust management and administration for individuals and their families. Our Hawthorn unit provides multi-generational family planning including estate, financial, tax planning, fiduciary, investment management and consulting, private banking, personal administrative services, asset custody and customized performance reporting to ultra high net worth families. Institutional asset management provides advisory, custody and retirement administration services. The business also offers PNC proprietary mutual funds. Institutional clients include corporations, unions, municipalities,non-profits, foundations and endowments, primarily located inlargely within our primary geographic footprint.
Three months ended March 31 In millions 2017 Income Statement Net interest income Noninterest income Total revenue Provision for credit losses (benefit) Depreciation and amortization Other noninterest expense Income before income taxes and noncontrolling interests Income taxes (benefit) Net income Average Assets (b) 2016 Income Statement Net interest income Noninterest income Total revenue Provision for credit losses (benefit) Depreciation and amortization Other noninterest expense Income before income taxes and noncontrolling interests Income taxes (benefit) Net income Average Assets (b)69:73: Results of Businesses Retail
Banking Corporate &
Institutional
Banking Asset
Management
Group BlackRock Other Consolidated (a) $ 1,120 $ 802 $ 71 $ 167 $ 2,160 603 524 218 $ 186 193 1,724 1,723 1,326 289 186 360 3,884 71 25 (2 ) (6 ) 88 42 36 11 125 214 1,273 548 206 161 2,188 337 717 74 186 80 1,394 124 233 27 41 (105 ) 320 $ 213 $ 484 $ 47 $ 145 $ 185 $ 1,074 $ 87,109 $ 142,592 $ 7,476 $ 6,983 $ 122,256 $ 366,416 $ 1,121 $ 785 $ 77 $ 115 $ 2,098 633 441 203 $ 141 149 1,567 1,754 1,226 280 141 264 3,665 72 102 (3 ) (19 ) 152 44 36 11 111 202 1,255 497 195 132 2,079 383 591 77 141 40 1,232 140 193 28 27 (99 ) 289 $ 243 $ 398 $ 49 $ 114 $ 139 $ 943 $ 86,213 $ 137,270 $ 7,887 $ 6,775 $ 117,768 $ 355,913 Three months ended March 31
In millions Retail
Banking Corporate &
Institutional
Banking Asset
Management
Group BlackRock Other Consolidated (a) 2018 Income Statement Net interest income $ 1,218 $ 861 $ 74 $ 208 $ 2,361 Noninterest income 635 547 226 $ 235 107 1,750 Total revenue 1,853 1,408 300 235 315 4,111 Provision for credit losses (benefit) 69 41 (7 ) (11 ) 92 Depreciation and amortization 45 48 12 128 233 Other noninterest expense 1,350 578 206 160 2,294 Income before income taxes and noncontrolling interests 389 741 89 235 38 1,492 Income taxes (benefit) 93 157 21 38 (56 ) 253 Net income $ 296 $ 584 $ 68 $ 197 $ 94 $ 1,239 Average Assets (b) $ 88,734 $ 151,909 $ 7,499 $ 7,704 $ 120,429 $ 376,275 2017 Income Statement Net interest income $ 1,120 $ 802 $ 71 $ 167 $ 2,160 Noninterest income 603 524 218 $ 186 193 1,724 Total revenue 1,723 1,326 289 186 360 3,884 Provision for credit losses (benefit) 71 25 (2 ) (6 ) 88 Depreciation and amortization 42 36 11 125 214 Other noninterest expense 1,273 548 206 161 2,188 Income before income taxes and noncontrolling interests 337 717 74 186 80 1,394 Income taxes (benefit) 124 233 27 41 (105 ) 320 Net income $ 213 $ 484 $ 47 $ 145 $ 185 $ 1,074 Average Assets (b) $ 87,109 $ 142,592 $ 7,476 $ 6,983 $ 122,256 $ 366,416 (a) There were no material intersegment revenues for the three months ended March 31, 20172018 and 2016.2017.(b) Period-end balances for BlackRock.
– Taxable-equivalent basis Dollars in millions Average Yields/ Rates Average Yields/ Rates Assets Interest-earning assets: Investment securities Securities available for sale Residential mortgage-backed Agency Non-agency Commercial mortgage-backed Asset-backed U.S. Treasury and government agencies Other Total securities available for sale Securities held to maturity Residential mortgage-backed Commercial mortgage-backed Asset-backed U.S. Treasury and government agencies Other Total securities held to maturity Total investment securities Loans Commercial Commercial real estate Equipment lease financing Consumer Residential real estate Total loans Interest-earning deposits with banks Other interest-earning assets Total interest-earning assets/interest income Noninterest-earning assets Total assets Liabilities and Equity Interest-bearing liabilities: Interest-bearing deposits Money market Demand Savings Time deposits Total interest-bearing deposits Borrowed funds Federal Home Loan Bank borrowings Bank notes and senior debt Subordinated debt Other Total borrowed funds Total interest-bearing liabilities/interest expense Noninterest-bearing liabilities and equity: Noninterest-bearing deposits Accrued expenses and other liabilities Equity Total liabilities and equity Interest rate spread Impact of noninterest-bearing sources Net interest income/marginIn millions Three months ended March 31, 2018 Product Deposit account fees $ 144 Debit card fees 117 Brokerage fees 86 Merchant services 47 Net credit card fees (a) 45 Other 70 Total in-scope noninterest income by product $ 509 Reconciliation to total Retail Banking noninterest income Total in-scope noninterest income $ 509 Total out-of-scope noninterest income (b) 126 Total Retail Banking noninterest income $ 635 (a) Net credit card fees consists of interchange fees of $102 million and credit card reward costs of $57 million for the three months ended March 31, 2018. (b) Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606. In millions Three months ended March 31, 2018 Product Treasury management fees $ 185 Capital markets fees 115 Commercial mortgage banking activities 21 Other 16 Total in-scope noninterest income by product $ 337 Reconciliation to total Corporate & Institutional Banking noninterest income Total in-scope noninterest income $ 337 Total out-of-scope noninterest income (a) 210 Total Corporate & Institutional Banking noninterest income $ 547 (a) Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606. In millions Three months ended March 31, 2018 Customer Type Personal $ 154 Institutional 68 Total in-scope noninterest income by customer type $ 222 Reconciliation to Asset Management Group noninterest income Total in-scope noninterest income $ 222 Total out-of-scope noninterest income (a) 4 Total Asset Management Group noninterest income $ 226 (a) Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606. First Quarter 2017 Fourth Quarter 2016 Average
Balances Interest
Income/
Expense Average
Balances Interest
Income/
Expense $ 26,385 $ 169 2.57 % $ 26,374 $ 151 2.30 % 3,127 44 5.59 % 3,303 42 5.18 % 5,919 35 2.35 % 6,283 36 2.25 % 5,992 37 2.50 % 5,977 36 2.39 % 13,101 54 1.66 % 12,805 46 1.41 % 5,293 39 2.93 % 5,237 39 2.97 % 59,817 378 2.53 % 59,979 350 2.33 % 11,852 83 2.79 % 11,465 72 2.52 % 1,458 13 3.50 % 1,532 15 4.12 % 556 3 2.21 % 585 4 2.29 % 529 4 3.07 % 444 4 3.25 % 2,041 27 5.34 % 2,030 27 5.35 % 16,436 130 3.16 % 16,056 122 3.04 % 76,253 508 2.67 % 76,035 472 2.48 % 103,084 835 3.24 % 101,880 810 3.11 % 29,178 239 3.27 % 29,247 247 3.30 % 7,497 63 3.34 % 7,398 62 3.33 % 56,843 626 4.47 % 57,164 624 4.35 % 15,651 178 4.55 % 15,193 176 4.64 % 212,253 1,941 3.67 % 210,882 1,919 3.59 % 24,192 49 .81 % 25,245 36 .56 % 8,395 74 3.54 % 7,983 76 3.80 % 321,093 2,572 3.22 % 320,145 2,503 3.09 % 45,323 46,041 $ 366,416 $ 366,186 $ 63,921 $ 36 .23 % $ 67,271 $ 35 .21 % 56,797 14 .10 % 55,223 11 .08 % 39,095 41 .42 % 35,224 37 .42 % 17,058 29 .69 % 18,409 31 .66 % 176,871 120 .28 % 176,127 114 .26 % 20,416 56 1.09 % 17,465 45 1.01 % 22,992 107 1.85 % 21,653 86 1.55 % 7,102 62 3.49 % 8,287 63 3.05 % 4,432 15 1.36 % 4,127 15 1.41 % 54,942 240 1.74 % 51,532 209 1.60 % 231,813 360 .62 % 227,659 323 .56 % 78,050 80,925 10,081 10,828 46,472 46,774 $ 366,416 $ 366,186 2.60 % 2.53 % .17 .16 $ 2,212 2.77 % $ 2,180 2.69 % Three months ended March 31 2018 2017 Assets Interest-earning assets: Investment securities Securities available for sale Residential mortgage-backed Agency $ 25,438 $ 165 2.60 % $ 26,385 $ 169 2.57 % Non-agency 2,398 36 5.99 % 3,127 44 5.59 % Commercial mortgage-backed 4,534 31 2.75 % 5,919 35 2.35 % Asset-backed 5,158 37 2.87 % 5,992 37 2.50 % U.S. Treasury and government agencies 14,307 74 2.07 % 13,101 54 1.66 % Other 4,233 34 3.17 % 5,293 39 2.93 % Total securities available for sale 56,068 377 2.69 % 59,817 378 2.53 % Securities held to maturity Residential mortgage-backed 14,818 105 2.84 % 11,852 83 2.79 % Commercial mortgage-backed 902 8 3.76 % 1,458 13 3.50 % Asset-backed 199 1 2.90 % 556 3 2.21 % U.S. Treasury and government agencies 743 5 2.80 % 529 4 3.07 % Other 1,926 23 4.44 % 2,041 27 5.34 % Total securities held to maturity 18,588 142 3.05 % 16,436 130 3.16 % Total investment securities 74,656 519 2.78 % 76,253 508 2.67 % Loans Commercial 111,462 1,044 3.74 % 103,084 835 3.24 % Commercial real estate 28,901 276 3.81 % 29,178 239 3.27 % Equipment lease financing 7,845 73 3.68 % 7,497 63 3.34 % Consumer 55,588 667 4.87 % 56,843 626 4.47 % Residential real estate 17,308 190 4.40 % 15,651 178 4.55 % Total loans 221,104 2,250 4.09 % 212,253 1,941 3.67 % Interest-earning deposits with banks 25,667 98 1.52 % 24,192 49 .81 % Other interest-earning assets 7,904 80 4.11 % 8,395 74 3.54 % Total interest-earning assets/interest income 329,331 $ 2,947 3.59 % 321,093 $ 2,572 3.22 % Noninterest-earning assets 46,944 45,323 Total assets $ 376,275 $ 366,416 Liabilities and Equity Interest-bearing liabilities: Interest-bearing deposits Money market $ 58,523 $ 78 .54 % $ 63,921 $ 36 .23 % Demand 59,620 31 .21 % 56,797 14 .10 % Savings 48,451 68 .57 % 39,095 41 .42 % Time deposits 16,844 36 .88 % 17,058 29 .69 % Total interest-bearing deposits 183,438 213 .47 % 176,871 120 .28 % Borrowed funds Federal Home Loan Bank borrowings 20,721 91 1.76 % 20,416 56 1.09 % Bank notes and senior debt 28,987 176 2.43 % 22,992 107 1.85 % Subordinated debt 5,179 51 3.91 % 7,102 62 3.49 % Other 4,751 26 2.18 % 4,432 15 1.36 % Total borrowed funds 59,638 344 2.31 % 54,942 240 1.74 % Total interest-bearing liabilities/interest expense 243,076 557 .91 % 231,813 360 .62 % Noninterest-bearing liabilities and equity: Noninterest-bearing deposits 77,222 78,050 Accrued expenses and other liabilities 9,118 10,081 Equity 46,859 46,472 Total liabilities and equity $ 376,275 $ 366,416 Interest rate spread 2.68 % 2.60 % Impact of noninterest-bearing sources .23 .17 Net interest income/margin $ 2,390 2.91 % $ 2,212 2.77 % Three months ended December 31 2017 Assets Interest-earning assets: Investment securities Securities available for sale Residential mortgage-backed Agency $ 25,338 $ 164 2.58 % Non-agency 2,577 27 4.29 % Commercial mortgage-backed 4,542 53 4.68 % Asset-backed 5,330 38 2.82 % U.S. Treasury and government agencies 13,646 62 1.79 % Other 4,940 42 3.32 % Total securities available for sale 56,373 386 2.73 % Securities held to maturity Residential mortgage-backed 13,976 96 2.74 % Commercial mortgage-backed 963 10 4.11 % Asset-backed 220 2 2.66 % U.S. Treasury and government agencies 739 5 2.85 % Other 1,974 25 5.28 % Total securities held to maturity 17,872 138 3.10 % Total investment securities 74,245 524 2.82 % Loans Commercial 111,365 1,020 3.59 % Commercial real estate 29,432 277 3.68 % Equipment lease financing 7,670 45 2.33 % Consumer 55,814 665 4.72 % Residential real estate 16,840 186 4.41 % Total loans 221,121 2,193 3.91 % Interest-earning deposits with banks 25,567 85 1.33 % Other interest-earning assets 8,759 77 3.55 % Total interest-earning assets/interest income 329,692 $ 2,879 3.45 % Noninterest-earning assets 47,136 Total assets $ 376,828 Liabilities and Equity Interest-bearing liabilities: Interest-bearing deposits Money market $ 60,954 $ 69 .45 % Demand 57,128 25 .17 % Savings 45,817 59 .51 % Time deposits 17,438 37 .85 % Total interest-bearing deposits 181,337 190 .42 % Borrowed funds Federal Home Loan Bank borrowings 19,565 75 1.48 % Bank notes and senior debt 27,778 145 2.04 % Subordinated debt 5,433 48 3.49 % Other 5,261 22 1.74 % Total borrowed funds 58,037 290 1.96 % Total interest-bearing liabilities/interest expense 239,374 480 .79 % Noninterest-bearing liabilities and equity: Noninterest-bearing deposits 80,152 Accrued expenses and other liabilities 10,801 Equity 46,501 Total liabilities and equity $ 376,828 Interest rate spread 2.66 % Impact of noninterest-bearing sources .22 Net interest income/margin $ 2,399 2.88 % (a) Nonaccrual loans are included in loans, net of unearned income. The impact of financial derivatives used in interest rate risk management is included in the interest income/expense and average yields/rates of the related assets and liabilities. Basis adjustments related to hedged items are included in noninterest-earning assets and noninterest-bearing liabilities. Average balances of securities are based on amortized historical cost (excluding adjustments to fair value, which are included in other noninterest-earning assets). Average balances for certain loans and borrowed funds accounted for at fair value, with changes in fair value recorded in trading noninterestNoninterest income, are included in noninterest-earning assets and noninterest-bearing liabilities.
78 The PNC Financial Services Group, Inc. –Form 10-Q
Third Quarter 2016 | Second Quarter 2016 | First Quarter 2016 | ||||||||||||||||||||||||||||||||
Average Balances | Interest Income/ Expense | Average Yields/ Rates | Average Balances | Interest Income/ Expense | Average Yields/ Rates | Average Balances | Interest Income/ Expense | Average Yields/ Rates | ||||||||||||||||||||||||||
$25,825 | $ | 154 | 2.39 | % | $ | 24,856 | $ | 153 | 2.46 | % | $ | 24,696 | $ | 159 | 2.57 | % | ||||||||||||||||||
3,490 | 45 | 5.06 | % | 3,728 | 44 | 4.79 | % | 3,936 | 44 | 4.45 | % | |||||||||||||||||||||||
6,276 | 39 | 2.47 | % | 6,335 | 46 | 2.94 | % | 6,586 | 46 | 2.79 | % | |||||||||||||||||||||||
5,823 | 33 | 2.31 | % | 5,672 | 33 | 2.32 | % | 5,486 | 30 | 2.19 | % | |||||||||||||||||||||||
9,929 | 33 | 1.33 | % | 9,673 | 37 | 1.50 | % | 9,936 | 39 | 1.55 | % | |||||||||||||||||||||||
5,166 | 39 | 2.99 | % | 5,004 | 38 | 3.02 | % | 4,847 | 36 | 2.99 | % | |||||||||||||||||||||||
56,509 | 343 | 2.42 | % | 55,268 | 351 | 2.54 | % | 55,487 | 354 | 2.55 | % | |||||||||||||||||||||||
10,521 | 71 | 2.71 | % | 10,215 | 72 | 2.81 | % | 9,906 | 75 | 3.02 | % | |||||||||||||||||||||||
1,666 | 15 | 3.51 | % | 1,755 | 16 | 3.61 | % | 1,821 | 16 | 3.53 | % | |||||||||||||||||||||||
702 | 3 | 1.99 | % | 708 | 4 | 1.91 | % | 715 | 3 | 1.84 | % | |||||||||||||||||||||||
264 | 2 | 3.81 | % | 262 | 3 | 3.79 | % | 259 | 2 | 3.80 | % | |||||||||||||||||||||||
1,983 | 33 | 6.58 | % | 1,986 | 26 | 5.40 | % | 2,081 | 28 | 5.35 | % | |||||||||||||||||||||||
15,136 | 124 | 3.29 | % | 14,926 | 121 | 3.22 | % | 14,782 | 124 | 3.37 | % | |||||||||||||||||||||||
71,645 | 467 | 2.60 | % | 70,194 | 472 | 2.68 | % | 70,269 | 478 | 2.72 | % | |||||||||||||||||||||||
100,320 | 781 | 3.05 | % | 99,991 | 779 | 3.08 | % | 99,068 | 771 | 3.08 | % | |||||||||||||||||||||||
29,034 | 240 | 3.23 | % | 28,659 | 229 | 3.16 | % | 27,967 | 248 | 3.51 | % | |||||||||||||||||||||||
7,463 | 76 | 4.06 | % | 7,570 | 65 | 3.44 | % | 7,420 | 63 | 3.40 | % | |||||||||||||||||||||||
57,163 | 621 | 4.32 | % | 57,467 | 610 | 4.28 | % | 58,212 | 621 | 4.29 | % | |||||||||||||||||||||||
14,870 | 171 | 4.60 | % | 14,643 | 177 | 4.84 | % | 14,517 | 172 | 4.74 | % | |||||||||||||||||||||||
208,850 | 1,889 | 3.57 | % | 208,330 | 1,860 | 3.56 | % | 207,184 | 1,875 | 3.60 | % | |||||||||||||||||||||||
28,063 | 35 | .50 | % | 26,463 | 33 | .51 | % | 25,533 | 32 | .50 | % | |||||||||||||||||||||||
8,174 | 66 | 3.23 | % | 7,449 | 67 | 3.59 | % | 7,764 | 70 | 3.62 | % | |||||||||||||||||||||||
316,732 | 2,457 | 3.07 | % | 312,436 | 2,432 | 3.10 | % | 310,750 | 2,455 | 3.15 | % | |||||||||||||||||||||||
47,138 | 46,554 | 45,163 | ||||||||||||||||||||||||||||||||
$363,870 | $ | 358,990 | $ | 355,913 | ||||||||||||||||||||||||||||||
$70,076 | $ | 34 | .19 | % | $ | 72,442 | $ | 35 | .20 | % | $ | 76,392 | $ | 42 | .22 | % | ||||||||||||||||||
53,428 | 10 | .08 | % | 52,218 | 10 | .08 | % | 49,770 | 9 | .07 | % | |||||||||||||||||||||||
31,791 | 32 | .40 | % | 28,131 | 27 | .39 | % | 23,343 | 23 | .39 | % | |||||||||||||||||||||||
18,910 | 31 | .66 | % | 19,056 | 32 | .66 | % | 19,318 | 31 | .65 | % | |||||||||||||||||||||||
174,205 | 107 | .25 | % | 171,847 | 104 | .24 | % | 168,823 | 105 | .25 | % | |||||||||||||||||||||||
17,524 | 38 | .86 | % | 18,716 | 38 | .80 | % | 19,855 | 34 | .68 | % | |||||||||||||||||||||||
22,896 | 87 | 1.50 | % | 22,375 | 92 | 1.62 | % | 20,690 | 87 | 1.66 | % | |||||||||||||||||||||||
8,356 | 65 | 3.06 | % | 8,336 | 68 | 3.26 | % | 8,317 | 68 | 3.29 | % | |||||||||||||||||||||||
4,205 | 16 | 1.41 | % | 4,206 | 14 | 1.39 | % | 4,764 | 15 | 1.24 | % | |||||||||||||||||||||||
52,981 | 206 | 1.53 | % | 53,633 | 212 | 1.57 | % | 53,626 | 204 | 1.51 | % | |||||||||||||||||||||||
227,186 | 313 | .54 | % | 225,480 | 316 | .56 | % | 222,449 | 309 | .55 | % | |||||||||||||||||||||||
78,303 | 75,775 | 77,306 | ||||||||||||||||||||||||||||||||
11,855 | 11,390 | 10,255 | ||||||||||||||||||||||||||||||||
46,526 | 46,345 | 45,903 | ||||||||||||||||||||||||||||||||
$363,870 | $ | 358,990 | $ | 355,913 | ||||||||||||||||||||||||||||||
2.53 | % | 2.54 | % | 2.60 | % | |||||||||||||||||||||||||||||
.15 | .16 | .15 | ||||||||||||||||||||||||||||||||
$ | 2,144 | 2.68 | % | $ | 2,116 | 2.70 | % | $ | 2,146 | 2.75 | % |
(b) | Loan fees for the three months ended March 31, |
(c) | Interest income calculated as taxable-equivalent interest income. To provide more meaningful comparisons of interest income and yields for all interest-earning assets, as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margin by increasing the interest income earned ontax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP. |
Net interest income (GAAP) Taxable-equivalent adjustments Net interest income(Non-GAAP) Three months ended
March 31 In millions 2017 2016 $ 2,160 $ 2,098 52 48 $ 2,212 $ 2,146 Three months ended In millions March 31, 2018 December 31, 2017 March 31, 2017 Net interest income (GAAP) $ 2,361 $ 2,345 $ 2,160 Taxable-equivalent adjustments 29 54 52 Net interest income (Non-GAAP) $ 2,390 $ 2,399 $ 2,212 (a) The interest income earned on certain earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest income, we use interest income on a taxable-equivalent basis by increasing the interest income earned ontax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP. As a result of the Tax Cuts and Jobs Act, which was enacted into law during the fourth quarter of 2017, the statutory tax rate for corporations was lowered to 21% from 35%, effective January 1, 2018. Amounts for the 2017 periods were calculated using the previously applicable statutory federal income tax rate of 35%.
March 31 2016 Common stock, related surplus and retained earnings, net of treasury stock Less regulatory capital adjustments: Goodwill and disallowed intangibles, net of deferred tax liabilities Basel III total threshold deductions Accumulated other comprehensive income (d) All other adjustments Basel III Common equity Tier 1 capital Basel III standardized approach risk-weighted assets (e) Basel III advanced approaches risk-weighted assets (f) Basel III Common equity Tier 1 capital ratio Risk weight and associated rules utilizedRO FORMA FULLY PHASED-IN BASEL III COMMON EQUITY TIER 1 CAPITAL RATIOS (NON-GAAP)-GAAP) – 2016 PERIODSMARCH 31, 2017 2016 Transitional Basel III (a) Pro forma Fully Phased-In Basel III
(Non-GAAP) (estimated) (b) (c) Dollars in millions December 31
2016 December 31
2016 March 31
2016 $ 41,987 $ 41,145 $ 41,987 $ 41,145 (8,974 ) (9,023 ) (9,073 ) (9,148 ) (762 ) (678 ) (1,469 ) (1,139 ) (238 ) 60 (396 ) 101 (214 ) (139 ) (221 ) (148 ) $ 31,799 $ 31,365 $ 30,828 $ 30,811 $ 300,533 $ 295,555 $ 308,517 $ 303,805 N/A N/A $ 277,896 $ 283,297 10.6 % 10.6 % 10.0 % 10.1 % Standardized (with 2016 transition
adjustments)
Standardized 2017 Transitional Basel III (a) Fully Phased-In Basel III (Non-GAAP) (b) Dollars in millions March 31
2017 March 31
2017 Common stock, related surplus and retained earnings, net of treasury stock $ 42,053 $ 42,053 Less regulatory capital adjustments: Goodwill and disallowed intangibles, net of deferred tax liabilities (9,007 ) (9,052 ) Basel III total threshold deductions (1,064 ) (1,585 ) Accumulated other comprehensive income (c) (295 ) (369 ) All other adjustments (183 ) (180 ) Basel III Common equity Tier 1 capital $ 31,504 $ 30,867 Basel III standardized approach risk-weighted assets (d) $ 300,233 $ 308,392 Basel III advanced approaches risk-weighted assets (e) N/A $ 278,938 Basel III Common equity Tier 1 capital ratio 10.5 % 10.0 % Risk weight and associated rules utilized Standardized (with 2017 transition adjustments) Standardized (a) Calculated using the regulatory capital methodology applicable to usPNC during 2016.2017.(b) PNC utilizes the pro forma fullyphased-in2017 Fully Phased-In Basel III capital ratios, to assess its capital position (without the benefit ofphase-ins),results are presented as these ratios represent the regulatory capital standards that will ultimately be applicable to PNC under the final Basel III rules.Pro forma estimates.(c)Basel III capital ratios and estimates may be impacted by additional regulatory guidance and, in the case of those ratios calculated using the advanced approaches, may be subject to variability based on the ongoing evolution, validation and regulatory approval of PNC’s models that are integral to the calculation of advanced approaches risk-weighted assets as PNC moves through the parallel run process.(d)(c)Represents net adjustments related to accumulated other comprehensive income for securities currently and previously held as available for sale, as well as pension and other postretirement plans. (e)Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include(d) Includes credit and market risk-weighted assets. (f)(e) Basel III advanced approaches risk-weighted assets are calculated based on the Basel III advanced approaches rules, and include credit, market, and operational risk-weighted assets. During the parallel run qualification phase, PNC has refined the data, models, and internal processes used as part of the advanced approaches for determining risk-weighted assets. We anticipate additional refinements may result in increases or decreases to this estimatecalculation through the parallel run qualification phase.
80 The PNC Financial Services Group, Inc. –Form 10-Q
In thousands, except 2017 period | Total shares purchased (a) | Average price paid per share | Total shares purchased as part of publicly announced programs (b) | Maximum number of shares that may yet be purchased under the programs (b) | ||||||
January 1 –31 | 1,588 | $117.81 | 1,578 | 57,692 | ||||||
February 1 – 28 | 1,918 | $124.97 | 1,341 | 56,351 | ||||||
March 1 – 31 | 2,170 | $123.12 | 2,100 | 54,251 | ||||||
|
| |||||||||
Total | 5,676 | $122.26 |
2018 period In thousands, except per share data | Total shares purchased (a) | Average price paid per share | Total shares purchased as part of publicly announced programs (b) | Maximum number of shares that may yet be purchased under the programs (b) | |||||
January 1 - 31 | 1,708 | $ | 152.08 | 1,698 | 38,939 | ||||
February 1 - 28 | 2,001 | $ | 155.77 | 1,493 | 37,446 | ||||
March 1 - 31 | 1,660 | $ | 157.08 | 1,629 | 35,817 | ||||
Total | 5,369 | $ | 155.00 |
(a) | Includes PNC common stock purchased in connection with our various employee benefit plans generally related to shares used to cover employee payroll tax withholding requirements. Note 11 Employee Benefit Plans and Note 12 Stock Based Compensation Plans in the Notes |
(b) | On March 11, 2015, we announced that our Board of Directors approved the establishment of a stock repurchase program authorization in the amount of 100 million shares of PNC common stock, effective April 1, 2015. Repurchases are made in open market or privately negotiated transactions and the timing and exact amount of common stock repurchases will depend on a number of factors including, among others, market and general economic conditions, regulatory capital considerations, alternative uses of capital, the potential impact on our credit ratings, and contractual and regulatory limitations, including the results of the supervisory assessment of capital adequacy and capital planning processes undertaken by the Federal Reserve as part of the CCAR process. In June |
EXHIBIT INDEX | ||||
12.1 | ||||
12.2 | ||||
31.1 | ||||
31.2 | ||||
32.1 | ||||
32.2 | ||||
101 | Interactive Data File (XBRL) |
Corporate Headquarters
The PNC Financial Services Group, Inc.
public disclosures about our capital structure, risk exposures, risk assessment processes, risk-weighted assets and overall capital adequacy, including market risk-related disclosures, under the regulatory capital rules adopted by the Federal banking agencies. Under these regulations, we may satisfy these requirements through postings on our website, and we have done so and expect to continue to do so without also providing disclosure of this information through filings with the SEC.
82 The PNC Financial Services Group, Inc. –Form 10-Q
Shareholders who would like to request printed copies of the PNC Code of Business Conduct and Ethics or our Corporate Governance Guidelines or the charters of our Board’s Audit, Nominating and Governance, Personnel and Compensation, or Risk Committees (all of which are posted on the PNC corporate website) may do so by sending their requests to our Corporate Secretary at corporate headquarters at the above address. Copies will be provided without charge to shareholders.
888-762-2265.
Form 10-Q95
media.relations@pnc.com.
High | Low | Close | Cash Dividends Declared (a) | |||||||||||||
2017 Quarter | ||||||||||||||||
First | $ | 131.83 | $ | 113.66 | $ | 120.24 | $ | .55 | ||||||||
2016 Quarter | ||||||||||||||||
First | $ | 94.26 | $ | 77.67 | $ | 84.57 | $ | .51 | ||||||||
Second | $ | 90.85 | $ | 77.40 | $ | 81.39 | .51 | |||||||||
Third | $ | 91.39 | $ | 77.86 | $ | 90.09 | .55 | |||||||||
Fourth | $ | 118.57 | $ | 87.34 | $ | 116.96 | .55 | |||||||||
Total | $ | 2.12 |
High | Low | Close | Cash Dividends Declared (a) | |||||||||||||
2018 Quarter | ||||||||||||||||
First | $ | 163.59 | $ | 143.94 | $ | 151.24 | $ | .75 | ||||||||
2017 Quarter | ||||||||||||||||
First | $ | 131.83 | $ | 113.66 | $ | 120.24 | $ | .55 | ||||||||
Second | $ | 128.25 | $ | 115.45 | $ | 124.87 | .55 | |||||||||
Third | $ | 135.73 | $ | 119.77 | $ | 134.77 | .75 | |||||||||
Fourth | $ | 147.28 | $ | 130.46 | $ | 144.29 | .75 | |||||||||
Total | $ | 2.60 |
(a) | Our Board approved a second quarter |
Directors may not pay or set apart dividends on the common stock until dividends for all past dividend periods on any series of outstanding preferred stock have been paid or declared and set apart for payment. The Board presently intends to continue the policy of paying quarterly cash dividends. The amount of any future dividends will depend on economic and market conditions, our financial condition and operating results, and other factors, including contractual restrictions and applicable government regulations and policies (such as those relating to the ability of bank andnon-bank subsidiaries to pay dividends to the parent company and regulatory capital limitations). The amount of our dividend is also currently subject to the results of the supervisory assessment of capital adequacy and capital planning processes undertaken by the Federal Reserve as part of the CCAR process as described in the Capital Management portion of the Risk Management section of the Financial Review of this Report and in the Supervision and Regulation section in Item 1 of our 20162017 Form10-K.20172018 on its behalf by the undersigned thereunto duly authorized./s/ Robert Q. Reilly Robert Q. Reilly Executive Vice President and Chief Financial Officer (Principal Financial Officer)