THE PNC FINANCIAL SERVICES GROUP, INC.

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

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

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

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

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

Our capital priorities are to support customers and business investment, maintain appropriate capital in light of economic conditions, the Basel III framework, and other regulatory expectations, and return excess capital to shareholders. For more detail, see the Capital Highlights portion of this Executive Summary 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 2019 Form 10-K.

See the Recent Regulatory Developments section of this ~~Report~~Financial Review as well as the Recent Regulatory Developments section in our first quarter 2020 Form 10-Q for additional detail on the CARES Act and other governmental responses to the COVID-19 ~~outbreak~~pandemic and its economic and financial impacts. See also Risk Factors in Part II, Item 1A of ~~this Report~~our first quarter 2020 Form 10-Q for a description of the ~~risks~~ associated ~~with~~risks.

~~Net income~~

Results from continuing operations was a net loss of ~~$915~~$744 million, or ~~$1.95~~$1.90 loss per diluted common share for the ~~first~~second quarter of 2020, ~~decreased $356 million, or 28%,~~a decrease of $1.9 billion, compared to ~~$1.3~~net income from continuing operations of $1.2 billion, or ~~$2.61~~$2.47 per diluted common share, for the ~~first~~second quarter of ~~2019.~~2019, driven by a higher provision for credit losses.

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

Our balance sheet was strong and well positioned at ~~March 31,~~June 30, 2020 and December 31, 2019. In comparison to December 31, 2019:

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

Credit quality metrics ~~remained strong~~ in the ~~first~~second quarter of 2020 ~~entering~~reflected a challenging economic environment.

For additional detail, including the adoption of the CECL accounting standard and the significant economic impact of COVID-19, see the Credit Risk Management portion of the Risk Management section of this Financial Review.

We ~~maintained a~~further strengthened our already strong capital ~~position and continued to return capital to shareholders.~~position.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for more detail on our 2020 liquidity and capital actions as well as our capital ratios.

PNC’s ability to take certain capital actions, including returning capital to shareholders ~~is subject to review by~~beginning in the Federal Reserve Board as part of PNC’s comprehensive capital plan for the applicable period in connection with the Federal Reserve Board’s Comprehensive Capital Analysis and Review (CCAR) process. During the thirdfourth quarter of 2020, the Federal Reserve’s revised capital plan rule permits PNC to make capital distributions in an amount equal to the average quarterly amount that was approved by the Federal Reserve for the 2019 capital plan year (July 1, 2019 through June 30, 2020). Once the Federal Reserve's new stress capital buffer rules become effective on October 1, 2020, our ability to take certain capital actions, including returning capital to shareholders, will beis subject to PNC meeting or exceeding a stress capital buffer established by the Federal Reserve Board ~~as part~~in connection with the Federal Reserve Board's Comprehensive Capital Analysis and Review (CCAR) process. The Federal Reserve also has imposed limitations on capital distributions in the third quarter of ~~the annual CCAR process.~~2020 by CCAR-participating bank holding companies and may extend these limitations, potentially in modified form. For additional information, see Capital Management in the ~~Recent Regulatory Developments~~Risk Management section in this ~~Report~~Financial Review and the Supervision and Regulation section in Item 1 Business of our 2019 Form 10-K.

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

Given the ~~unprecedented circumstances~~many unknowns and ~~fluidity of the current environment,~~potential downside risks, including additional COVID-19 outbreaks, our forward-looking statements are subject to ~~potentially substantial shifts in~~the risk that conditions ~~which accordingly,~~will be substantially different than we are currently expecting. If efforts to contain COVID-19 are unsuccessful and restrictions on businesses and activities are reimposed or expanded, the economy could ~~alter~~fall back into recession. The potential expiration of fiscal stimulus is also a major downside risk. The longer the labor market recovery takes, the more it will damage consumer fundamentals and sentiment. This could make the recovery weaker. Similarly, weak near-term growth could damage business fundamentals and an extended global recession due to COVID-19 would weaken the U.S. recovery. As a result, the outbreak and its consequences, including responsive measures to manage it, have had and are likely to continue to have an adverse effect, possibly materially, on our ~~expected results materially. Past~~business and financial performance ~~trends are not necessarily predictive~~by adversely affecting, possibly materially, the demand and profitability of ~~future performance in~~our products and services, the ~~current economic environment.~~valuation of assets and our ability to meet the needs of our customers.

For the ~~second~~third quarter of 2020 compared to the ~~first~~second quarter of 2020, we expect:

See the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and Item 1A Risk Factors in ~~this Report~~our first quarter 2020 Form 10-Q and ~~our~~ 2019 Form 10-K for other factors that could cause future events to differ, perhaps materially, from those anticipated in these forward-looking statements.

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

~~Net income~~Results from continuing operations for the ~~first~~second quarter of 2020 was ~~$915~~a net loss of $744 million, or ~~$1.95~~$1.90 diluted loss per ~~diluted~~ common share, a decrease of ~~$356~~$1.9 billion compared to net income from continuing operations of $1.2 billion, or $2.47 per diluted common share, for the second quarter of 2019.For the first six months of 2020, net income from continuing operations was $15 million, or ~~28%,~~$0.29 diluted loss per common share, compared to ~~$1.3~~$2.3 billion, or ~~$2.61~~$4.67 per diluted common share, for the first ~~quarter~~six months of 2019.

The ~~decrease~~second quarter loss was ~~primarily~~ driven by a ~~$725 million~~$2.3 billion increase in the provision for credit losses, ~~which was~~ calculated under the CECL accounting standard ~~effective~~adopted January 1, 2020 and ~~reflects~~reflecting the change in methodology together with the ~~significant~~significantly adverse economic impact of ~~COVID-19~~the pandemic and its resulting effects on loan portfolio credit quality and loan ~~growth, partially offset by an increase in revenue of $231 million, or 5% resulting from higher noninterest income and net interest income.~~growth.

Net interest income increased ~~$36~~$29 million, or 1%, and $65 million, or 1%, for the second quarter and first ~~quarter~~six months of 2020, respectively, compared with the ~~first quarter of~~same periods in 2019. The increase in both comparisons was driven by lower rates on borrowings and deposits and higher ~~loan~~average loans, balances held with the Federal Reserve Bank and securities, ~~balances and one additional day in the first quarter of 2020 substantially~~partially offset by lower ~~asset~~ yields ~~due to the decrease in interest rates.~~on interest-earning assets. Net interest margin in the quarterly comparison decreased 1439 basis points reflecting the full quarter impact of ~~lower interest~~the 1.5% reduction in the federal funds rate by the Federal Reserve in March 2020 and related changes in other short-term rates.

Average investment securities increased ~~$2.1~~$4.8 billion, or ~~3%.~~6%, in the quarterly comparison and $3.4 billion, or 4% in the year-to-date comparison. The increase in both comparisons was primarily due to ~~net purchase activity of~~increases in agency residential mortgage-backed securities ~~of $5.0 billion~~ and commercial mortgage-backed securities, ~~of $.8 billion,~~ partially offset by ~~decreases of~~a decrease in U.S. Treasury and government agency securities.

Average investment securities represented ~~24%~~22% of average interest-earning assets for ~~both~~the second quarter of 2020 and 23% for the first six months of 2020 compared to 24% for the same periods in ~~the comparison.~~2019.

Average interest-bearing deposits grew ~~$19.5~~$40.2 billion, or ~~10%~~20%, and $29.9 billion, or 15%, in the respective quarterly and year-to-date comparisons reflecting ~~overall deposit and~~pandemic-related accumulation of customer ~~growth. The increase includes a shift from money market deposits to relationship-based savings products~~liquidity as well as growth in ~~both~~commercial and consumer deposits and ~~commercial deposits.~~customers. In total, average interest-bearing deposits increased to ~~79%~~82% and 81% of average interest-bearing liabilities for the second quarter and first six months of 2020 compared to ~~77%~~76% for the ~~first quarter of~~same periods in 2019.

Average borrowed funds decreased ~~by $2.6~~$9.1 billion, or 4%15%, compared with the second quarter of 2019 and $5.9 billion, or 10%, compared with the first six months of 2019 primarily due to a decline in Federal Home Loan Bank (FHLB) borrowings and federal funds purchased reflecting use of ~~$8.0 billion,~~liquidity from deposit growth and proceeds from the sale of our equity investment in BlackRock, partially offset by ~~an increase in~~higher bank notes and senior ~~debt of $4.6 billion~~ and ~~an increase in other borrowed funds of $.8 billion driven by federal funds purchased and repurchase agreements.~~subordinated debt.

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

Noninterest income as a percentage of total revenue was ~~44%~~38% and 41% for the second quarter of 2020 and 2019, respectively, and 40% for the first ~~quarter~~six months of both 2020 ~~compared to 42% for the same period in~~and 2019.

Asset management revenue declined due to ~~lower earnings from our equity investment in BlackRock, including the impact of BlackRock's charitable contribution in the first quarter of 2020, and~~ the impact on fees of PNC's divestiture activity in ~~2019.~~2019 of the recordkeeping retirement business and proprietary mutual funds. PNC's discretionary client assets under management decreased to ~~$136~~$151 billion at ~~March 31,~~June 30, 2020 ~~compared to $158~~from $162 billion at ~~March 31,~~June 30, 2019, primarily as a result of ~~declines in the equity markets and~~ our fourth quarter 2019 sale of PNC's proprietary mutual funds.

~~Growth~~Consumer services revenue declined in the quarterly and year-to-date comparisons as a result of lower transaction volumes and activity reflecting lower consumer ~~service revenue resulted from increases in debit card and brokerage fees, partially offset by increased credit card rewards.~~spending.

~~Corporate services revenue increased primarily~~Service charges on deposits decreased in both comparisons due to ~~higher treasury management product revenue,~~lower transaction volumes and fees waived to assist customers as a ~~higher benefit from commercial mortgage servicing rights valuation, net~~result of ~~economic hedge, and higher merger and acquisition advisory fees.~~

Residential mortgage revenue increased in the quarterly comparison due to higher loan sales revenue from higher origination volumes. Revenue increases in the year-to-date comparison were attributable to higher residential mortgage servicing rights (RMSR) hedging gains and loan sales revenue.

The ~~increase~~decrease in other noninterest income in the quarterly and year-to-date comparisons was primarily attributable to negative valuation adjustments of private equity investments and the second quarter 2019 gain on the sale of the retirement recordkeeping business, partially offset by higher capital markets-related revenue, and higher net securities gains ~~partially offset by negative private equity valuation adjustments~~in the year-to-date comparison.

Table 4: Noninterest Expense



	Three months ended June 30									Six months ended June 30
					Change									Change
Dollars in millions	2020		2019		$			%		2020		2019		$			%
Noninterest expense
Personnel	$	1,373	$	1,365	$	8		1	%	$	2,742	$	2,779	$	(37	)	(1	)%
Occupancy	199		212		(13		)	(6	)%	406		427		(21		)	(5	)%
Equipment	301		298		3			1	%	588		571		17			3	%
Marketing	47		83		(36		)	(43	)%	105		148		(43		)	(29	)%
Other	595		653		(58		)	(9	)%	1,217		1,264		(47		)	(4	)%
Total noninterest expense	$	2,515	$	2,611	$	(96	)	(4	)%	$	5,058	$	5,189	$	(131	)	(3	)%

The decrease in noninterest expense in the quarterly and year-to-date comparisons reflected lower business activity related to the economic impact of ~~COVID-19.~~the pandemic, including lower marketing expense and costs associated with business travel. In the year-to-date comparison, personnel expense declined due to variable costs associated with decreased business activity, partially offset by higher equipment expense related to technology investments.

The effective income tax rate from continuing operations was 17.5% in the second quarter of 2020 compared to 16.8% in the second quarter of 2019 and 165.2% in the first six months of 2019 compared to 16.6% in the same period in 2019.

The provision for credit losses increased ~~$725 million to $914 million in~~$2.3 billion and $3.0 billion for the second quarter and first ~~quarter~~six months of 2020, respectively, compared ~~to $189 million~~with the same periods in ~~the first quarter of~~ 2019. The provision ~~for~~in the ~~first quarter of~~ 2020 periods was calculated under the CECL accounting standard ~~effective~~adopted January 1, 2020 and the increase ~~compared to~~in both the ~~first quarter 2019 was due to~~quarterly and year-to-date comparison reflects the change in methodology together with the ~~significant~~significantly adverse economic impact of ~~COVID-19~~the pandemic and its resulting effects on loan portfolio credit quality and loan growth.

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

Table 6: Discontinued Operations

For additional details on the divestiture of our equity investment in BlackRock, see the Executive Summary within this Financial Review and Note 2 Discontinued Operations in the Notes To Consolidated Financial Statements of this Report.

The summarized balance sheet data in Table 57 is based upon our Consolidated Balance Sheet in Part I, Item 1 of this Report.

Our balance sheet was strong and well positioned at both ~~March 31,~~June 30, 2020 and December 31, 2019.

The following discussion provides additional information about the major components of our balance sheet. Information regarding our capital and regulatory compliance is included in the Liquidity and Capital Management portion of the Risk Management section in this Financial Review and in Note 18 Regulatory Matters in the Notes To Consolidated Financial Statements included in our 2019 Form 10-K.

Commercial loan growth reflected the impact of PPP lending ~~increased reflecting broad-based growth across our Corporate & Institutional Banking segment, including~~under the CARES Act and higher utilization of loan commitments ~~primarily~~ driven by the economic impact of ~~COVID-19.~~the pandemic on customer liquidity preferences. PNC funded $13.7 billion of PPP loans during the second quarter of 2020, which benefited over 73,000 of our customers. At June 30, 2020, we had $12.8 billion of PPP loans in our commercial loan balance.

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

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

For additional information regarding our loan portfolio see Note 1 Accounting Policies and Note 34 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements included in this Report.

Investment securities of ~~$90.5~~$98.5 billion at ~~March 31,~~June 30, 2020 increased ~~$3.7~~$11.7 billion, or 4%13%, compared to December 31, 2019, ~~driven~~due primarily byto net purchases and an increase in the fair value of ~~U.S. Treasury and~~ agency residential mortgage-backed ~~securities due to a decline in market interest rates~~ and ~~net purchases of agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, asset-backed securities, and other debt securities~~U.S. Treasury securities.

The level and composition of the investment securities portfolio fluctuates over time based on many factors including market conditions, loan and deposit growth, and balance sheet management activities. We manage our investment securities portfolio to optimize returns, while providing a reliable source of liquidity for our banking and other activities, considering the Liquidity Coverage Ratio (LCR) and other internal and external guidelines and constraints. ~~Effective January 1,~~During the first half of 2020, ~~upon the adoption of ASU 2019-04,~~ $16.2 billion of debt securities were transferred from held to maturity to available for ~~sale.~~sale, including $49 million in the second quarter of 2020 pursuant to elections made under recently adopted accounting standards. See further discussion in Note 1 Accounting ~~Policies in the Notes To Consolidated Financial Statements in Item 1 of this Report.~~

The duration of investment securities was ~~2.2~~2 years at ~~March 31,~~June 30, 2020. We estimate that at ~~March 31,~~June 30, 2020 the effective duration of investment securities was ~~2.3~~2.5 years for an immediate 50 basis points parallel increase in interest rates and ~~2.1~~1.5 years for an immediate 50 basis points parallel decrease in interest rates.

Based on expected prepayment speeds, the weighted-average expected maturity of the investment securities portfolio was ~~3.5~~3.3 years at ~~March 31,~~June 30, 2020 compared to 4.1 years at December 31, 2019.



~~March 31,~~June 30, 2020	Years
Agency residential mortgage-backed	3.0
Non-agency residential mortgage-backed	~~6.2~~6.4
Agency commercial mortgage-backed	~~3.6~~3.5
Non-agency commercial mortgage-backed	~~2.9~~2.6
Asset-backed	~~1.9~~2.1

Additional information regarding our investment securities is included in Note 23 Investment Securities and Note 1112 Fair Value in the Notes To Consolidated Financial Statements included in this Report.

~~Total deposits increased with growth~~Growth in both interest-bearing and noninterest-bearing deposits reflected pandemic-related accumulation of liquidity by commercial and ~~interest-bearing. Commercial~~consumer customers, including from government stimulus payments and lower consumer spending. In addition, there was a shift from interest-bearing to noninterest-bearing deposits ~~increased near~~in the ~~end~~first six months of 2020 that reflected the impact of the ~~first quarter reflecting liquidity maintained by customers due to the economic impact of COVID-19.~~current interest rate environment.

Borrowed funds ~~increased primarily~~decreased due to ~~higher~~lower FHLB borrowings, federal funds purchased included in other borrowed funds and bank notes and senior debt, reflecting the use of liquidity from deposit growth and ~~repurchase agreements included~~proceeds from the sale of our equity investment in ~~other borrowed funds, in part related to enhanced liquidity to meet customer needs caused by the economic impact of COVID-19.~~ BlackRock.

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

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for additional information regarding our 2020 liquidity and capital activities. See Note 78 Borrowed Funds in the Notes to Consolidated Financial Statements in Item 1 of this Report for additional information related to our borrowings.

Total shareholders’ equity ~~of $49.3~~was $52.9 billion at ~~both March 31,~~June 30, 2020, ~~and~~an increase of $3.6 billion compared to December 31, ~~2019 decreased $51 million.~~2019. The ~~slight decline~~increase resulted from net income of $4.6 billion driven by the gain on sale of our equity investment in BlackRock and higher AOCI of $2.3 billion, partially offset by common share repurchases of ~~$1.4~~$1.3 billion, common and preferred stock dividends of ~~$.6~~$1.1 billion, and a day-one transition adjustment of $.7 billion for the adoption of the CECL accounting ~~standard, substantially offset by higher AOCI of $1.7 billion and net income of $915 million.~~standard.

Common shares outstanding declined to 424 million at March 31, 2020 from 433 million at December 31, 2019 as repurchases of 10.1 million shares during the period were partially offset by stock-based compensation activity. OnPNC announced on March 16, 2020 ~~PNC announced~~ a temporary suspension of its common stock repurchase program ~~through June 30, 2020~~ in conjunction with the Federal Reserve's effort to support the U.S. economy during the ~~COVID-19 outbreak.~~pandemic, and will continue the suspension through the third quarter of 2020, with the exception of share repurchases to offset the effects of employee benefit plan-related issuances as permitted by recent guidance from the Federal Reserve. The estimated amount of these repurchases in the third quarter of 2020 is $100 million, but the timing and amount of executed repurchases will be based on market conditions and other factors.

We have ~~four~~three reportable business segments:

Business segment results and a description of each business are included in Note 1415 Segment Reporting 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,~~15, primarily due to the presentation in this Financial Review of business net interest income on a taxable-equivalent basis.

Net interest income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors.

See the Executive Summary of this Financial Review for our discussion of the impact of COVID-19 related developments on our business and operations, including ~~loan modifications and~~ COVID-19 relief efforts for our customers. We have granted loan modifications through extensions, deferrals, and forbearance to assist our customers in need during the pandemic. See Loan Modifications in the Troubled Debt Restructurings and Loan Modifications section of Credit Risk Management for details on our commercial and consumer loan modifications.

Table ~~10:~~12: Retail Banking Table

The Treasury Management business provides payables, receivables, deposit and account services, liquidity and investments, and online and mobile banking products and services to our clients. Treasury management revenue is reported in noninterest income and net interest income. Noninterest income includes treasury management product revenue less earnings credits provided to customers on compensating deposit balances used to pay for products and services. Net interest income primarily includes revenue from all treasury

management customer deposit balances. Compared with the first ~~quarter~~six months of 2019, treasury management revenue increased primarily due to higher deposit balances, ~~and product revenue.~~partially offset by narrower interest rate spreads on the value of deposits.

Table ~~12:~~14: Asset Management Group Table

The Risk Management section included in Item 7 of our 2019 Form 10-K describes our enterprise risk management framework including risk culture, enterprise strategy, risk governance and framework, risk identification, risk assessment, risk controls and monitoring, and risk aggregation and reporting. Additionally, our 2019 Form 10-K provides an analysis of our key areas of risk, which include but are not limited to credit, liquidity and capital, market, operational, compliance and information security.

Credit Risk Management

Table ~~15:~~16: Commercial and Industrial Loans by Industry


	March 31, 2020				December 31, 2019				June 30, 2020				December 31, 2019
Dollars in millions	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Geography(a)
California	$	4,406	15	%	$	4,393	16	%	$	4,524	16	%	$	4,393	16	%
Florida	2,651		9		2,557		9		2,863		10		2,557		9
Texas	1,844		6		1,717		6		1,847		6		1,717		6
Maryland	1,743		6		1,889		7		1,771		6		1,889		7
Virginia	1,509		5		1,547		6		1,577		5		1,547		6
Pennsylvania	1,341		5		1,310		4		1,351		5		1,310		4
Ohio	1,265		4		1,307		4		1,280		4		1,307		4
New Jersey	1,159		4		1,106		4		1,209		4		1,106		4
Illinois	1,028		4		1,001		4		999		4		1,001		4
North Carolina	997		4		1,015		4		961		3		1,015		4
Other	10,601		38		10,268		36		10,381		37		10,268		36
Total commercial real estate loans	$	28,544	100	%	$	28,110	100	%	$	28,763	100	%	$	28,110	100	%
Property Type
Multifamily	$	9,123	32	%	$	9,003	32	%	$	9,326	32	%	$	9,003	32	%
Office	7,794		27		7,641		27		7,785		27		7,641		27
Retail	3,599		13		3,702		13		3,615		13		3,702		13
Industrial/Warehouse	2,169		8		2,003		7		2,069		7		2,003		7
Hotel/Motel	1,892		7		1,813		7		1,923		7		1,813		7
Senior Housing	1,238		4		1,123		4		1,309		5		1,123		4
Mixed Use	871		3		943		3		905		3		943		3
Other	1,858		6		1,882		7		1,831		6		1,882		7
Total commercial real estate loans	$	28,544	100	%	$	28,110	100	%	$	28,763	100	%	$	28,110	100	%

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

Residential Real Estate

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

Table ~~18:~~19: Residential Real Estate Loans by Geography

The increase in nonperforming assets at June 30, 2020 was primarily attributable to higher nonperforming commercial loans in industries economically impacted by the pandemic and the energy industry, partially offset by the decline in OREO and foreclosed assets due to asset sales and the suspension of pandemic-related foreclosures. See the discussions of Commercial High Impact Industries and the Oil and Gas Loan Portfolio within this Credit Risk Management section for further detail on these industries.

Table ~~20:~~21: Change in Nonperforming Assets

As of ~~March 31,~~June 30, 2020, approximately ~~83%~~81% of total nonperforming loans were secured by collateral which lessened reserve requirements and is expected to reduce credit losses. As of ~~March 31,~~June 30, 2020, commercial ~~lending~~ nonperforming loans were carried at approximately ~~74%~~78% of their unpaid principal balance, due to charge-offs recorded to date, before consideration of the ~~ACL.~~ALLL.

Within consumer ~~lending~~ nonperforming loans, residential real estate TDRs comprised ~~76%~~77% and 79% of total residential real estate nonperforming loans at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, while home equity TDRs comprised ~~46%~~45% and 49% of home equity nonperforming loans at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively. TDRs generally remain in nonperforming status until a borrower has made at least six consecutive months of both principal and interest payments under the modified terms or ultimate resolution occurs. Loans where borrowers have been discharged from personal liability through Chapter 7 bankruptcy and have not formally reaffirmed their loan obligations to us and loans to borrowers not currently obligated to make both principal and interest payments under the restructured terms are not returned to accrual status. Loans that have been restructured for COVID-19

At ~~March 31,~~June 30, 2020, our largest nonperforming asset was ~~$41~~$99 million in the ~~Mining, Quarrying,~~Real Estate and ~~Oil~~Rental and ~~Gas Extraction~~Leasing industry and the ten largest individual nonperforming assets represented ~~13%~~18% of total nonperforming assets.

We regularly monitor the level of loan delinquencies and believe these levels may be a key indicator of credit quality in our loan ~~portfolio asset quality.~~portfolio. Measurement of delinquency status is based on the contractual terms of each loan. Loans that are 30 days or more past due in terms of payment are considered delinquent. Loan delinquencies include government insured or guaranteed loans, loans accounted for under the fair value option and at ~~March 31,~~June 30, 2020 also include ~~purchased credit deteriorated~~PCD loans. Amounts exclude loans held for sale, while amounts as of December 31, 2019 also excluded purchased impaired loans.

Pursuant to the interagency guidance issued in April 2020 and in connection with the credit reporting rules from the CARES Act, the delinquency status of loans modified due to COVID-19 related hardships are being reported as of June 30, 2020 in alignment with the rules set forth for banks to report delinquency status to the credit agencies. These rules require that COVID-19 related loan modifications be reported as follows: (i) if current at the time of modification, the loan remains current throughout the modification period, (ii) if delinquent at the time of modification and the borrower was not made current as part of the modification, the loan maintains its reported as delinquent status during the modification period, or (iii) if delinquent at the time of modification and the borrower was made current as part of the modification or became current during the modification period, the loan is reported as current. As a result, certain loans modified due to COVID-19 related hardships are not being reported as past due as of June 30, 2020 based on the contractual terms of the loan, even where borrowers may not be making payments on their loans during the modification period. See Recent Regulatory Developments in Item 2 of our first quarter 2020 Form 10-Q for more information on the CARES Act and the related interagency guidance.

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

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

~~under the fair value option and pooled purchased impaired loans, as well as certain government insured or guaranteed loans.~~ Nonperforming TDRs represented approximately ~~47%~~46% and 52% of total nonperforming loans at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, and ~~50%~~54% and 51% of total TDRs at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively. The remaining portion of TDRs represents TDRs that have been returned to accrual status after performing under the restructured terms for at least six consecutive months.

See Note 31 Accounting Policies and 4 Loans and Related Allowance for Credit Losses in the Notes to Consolidated Financial Statements in this Report for additional information on TDRs. For additional information on the CARES Act, see the Recent Regulatory Developments section in Item 2 of our first quarter 2020 Form 10-Q.

~~See~~PNC is working to provide relief and flexibility to our customers, many of whom are suffering hardships as a result of COVID-19 and the ~~Executive Summary~~resulting economic downturn, through a variety of solutions, including granting loan and lease modifications. We continue to monitor the success rates and delinquency status of our loan and lease modification programs to assess their effectiveness in serving our borrowers’ and servicing customers’ needs while mitigating credit losses.

PNC is granting temporary loan and lease modifications to our commercial clients in the form of principal and/or interest deferrals, covenant waivers and other types of modifications including term extensions. Initial principal and/or interest deferrals are being offered with terms typically up to 90 days, and we are analyzing and making decisions on these modifications based on each individual borrower’s situation. Modifications made in the form of covenant waivers include modifying financial covenants, waiving covenants currently in default, amending reporting requirements and waiving the receipt of required reporting.



	Number of Accounts	Unpaid Principal Balance
As of June 30, 2020 - Dollars in millions	Number of Accounts	Unpaid Principal Balance
Commercial
Commercial and industrial	12,534	$	4,939
Commercial real estate	407	1,544
Equipment lease financing	2,774	285
Total commercial	15,715	$	6,768

We are also granting temporary loan and line modifications for our consumer loan customers through extensions, deferrals, partial payments and forbearance. The consumer loan modifications are inclusive of all hardship related modifications granted in 2020. In addition, we have temporarily halted the majority of consumer real estate related foreclosures, while we continue to monitor the situation.

On January 1, 2020 we adopted the CECL standard which replaced the incurred loss methodology for our credit related reserves with an expected credit loss methodology for the remaining estimated contractual term of in-scope assets and off-balance sheet exposures. Our ACL is based on historical loss experience, borrower characteristics, current economic conditions, reasonable and supportable forecasts of future conditions and other relevant factors. We maintain the ACL at an appropriate level for expected losses on our existing investment securities, loans, finance leases, trade receivables and other financial assets and off-balance sheet credit exposures and determine this allowance based on quarterly assessments of the remaining estimated contractual term of the assets or exposures as of the balance sheet date.

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

Total net charge-offs increased ~~$76~~$170 million, or ~~56%~~61%, for the first ~~three~~six months of 2020 compared to the same period in 2019. The increase in commercial net charge-offs reflected the impact of certain individual credits, while the increases in automobile, credit card and other consumer loan net charge-offs were due in part to loan portfolio growth.

See Note 1 Accounting Policies and Note 34 Loans and Related Allowance for Credit Losses in the Notes To Consolidated Financial Statements in this report for additional information.

Liquidity risk, including our liquidity monitoring measures and tools, is described in further detail in the Liquidity and Capital Management section of our 2019 Form 10-K.

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

maintain continues to be 100%. PNC and PNC Bank calculate the LCR daily, and as of ~~March 31,~~June 30, 2020, the LCR for PNC and PNC Bank exceeded the requirement of 100%.

We provide additional information regarding regulatory liquidity requirements and their potential impact on us in the Supervision and Regulation section of Item 1 Business and Item 1A Risk Factors of our 2019 Form 10-K.

Our largest source of liquidity on a consolidated basis is the customer deposit base generated by our banking businesses. These deposits provide relatively stable and low-cost funding. Total deposits increased to ~~$305.2~~$346.0 billion at ~~March 31,~~June 30, 2020 from $288.5 billion at December 31, 2019 driven by growth in both interest-bearing and noninterest-bearing deposits. See the Funding Sources portion of the Consolidated Balance Sheet Review section of this Financial Review for additional information related to our deposits. Additionally, certain assets determined by us to be liquid as well as unused borrowing capacity from a number of sources are also available to manage our liquidity position.

We also obtain liquidity through various forms of funding, including long-term debt (senior notes, subordinated debt and FHLB borrowings) and short-term borrowings (securities sold under repurchase agreements, commercial paper and other short-term borrowings). See Note 78 Borrowed Funds in the Notes To Consolidated Financial Statements and the Funding Sources section of the Consolidated Balance Sheet Review in this Report, and Note 10 Borrowed Funds in Item 8 of our 2019 Form 10-K for additional information related to our borrowings.

Under PNC Bank’s 2014 bank note program, as amended, PNC Bank may from time to time offer up to $40.0 billion aggregate principal amount outstanding at any one time of its unsecured senior and subordinated notes with maturity dates more than nine months (in the case of senior notes) and five years or more (in the case of subordinated notes) from their date of issue. At ~~March 31,~~June 30, 2020, PNC Bank had ~~$25.4~~$21.6 billion of notes outstanding under this program of which ~~$20.4~~$16.6 billion were senior bank notes and $5.0 billion were subordinated bank notes. ~~The following table details issuances for the three months ended March 31, 2020.~~

PNC Bank maintains additional secured borrowing capacity with the FHLB-Pittsburgh and through the Federal Reserve Bank discount window. The Federal Reserve Bank, however, is not viewed as a primary means of funding our routine business activities, but rather as a potential source of liquidity in a stressed environment or during a market disruption. At ~~March 31,~~June 30, 2020, our unused secured borrowing capacity at the FHLB-Pittsburgh and the Federal Reserve Bank totaled ~~$51.4 billion, including $20.2 billion through the~~

PNC Bank has the ability to offer up to $10.0 billion of its commercial paper to provide additional liquidity. As of ~~March 31,~~June 30, 2020, there were no issuances outstanding under this program.

From time to time, the parent company may make capital contributions to PNC Bank. In the second quarter of 2020, a capital contribution to PNC Bank of $2.5 billion was made by the parent company.

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

As of ~~March 31,~~June 30, 2020, available parent company liquidity totaled ~~$6.5 billion.~~ $17.7 billion which includes proceeds from our second quarter 2020 sale of our equity investment in BlackRock. See Note 2 Discontinued Operations in the Notes To Consolidated Financial Statements of this Report for additional information.

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.

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

There are statutory and regulatory limitations on the ability of a national bank to pay dividends or make other capital distributions or to extend credit to the parent company or its non-bank subsidiaries. The amount available for dividend payments by PNC Bank to the parent company without prior regulatory approval was approximately ~~$2.5~~$1.8 billion at ~~March 31,~~June 30, 2020. See Note 18 Regulatory Matters in the Notes To Consolidated Financial Statements in our 2019 Form 10-K for a further discussion of these limitations.

In addition to dividends from PNC Bank, other sources of parent company liquidity include cash and investments, as well as dividends and loan repayments from other subsidiaries and dividends or distributions from equity investments. We can also generate liquidity for the parent company and PNC’s non-bank subsidiaries through the issuance of debt and equity securities, including certain capital instruments, in public or private markets and commercial paper. The parent company has the ability to offer up to $5.0 billion of commercial paper to provide additional liquidity. As of ~~March 31,~~June 30, 2020, there were no commercial paper issuances outstanding.

The parent company has an effective shelf registration statement pursuant to which we can issue additional debt, equity and other capital instruments. On January 22, 2020, the parent company issued $2.0 billion of senior notes with a maturity date of January 22, 2030, redeemable, in whole or in part, on or after October 24, 2029. Interest is payable semi-annually at a fixed rate of 2.550% per annum, on January 22 and July 22 of each year, commencing on July 22, 2020.

Parent company senior and subordinated debt outstanding totaled $11.5 billion and $9.8 billion at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively.

We have contractual obligations representing required future payments on borrowed funds, time deposits, leases, pension and postretirement benefits and purchase obligations. See the Liquidity and Capital Management portion of the Risk Management section in our 2019 Form 10-K for more information on these future cash outflows. Additionally, in the normal course of business we have various commitments outstanding, certain of which are not included on our Consolidated Balance Sheet. We provide information on our commitments in Note 89 Commitments in the Notes To Consolidated Financial Statements of this Report.

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

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



	~~March 31,~~June 30, 2020
	Moody’s	Standard & Poor’s	Fitch
PNC
Senior debt	A3	A-	A+
Subordinated debt	A3	BBB+	AA-
Preferred stock	Baa2	BBB-	~~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

Detailed information on our capital management processes and activities, including additional information on our previous CCAR submissions and capital plans, is included in the Capital Management portion of the Risk Management section in our 2019 Form 10-K.

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

We paid dividends on common stock of $.5 billion, or $1.15 per common share, during the ~~first~~second quarter of 2020. ~~On April 2, 2020, the~~The PNC Board of Directors declared a quarterly cash dividend on common stock ~~cash dividend~~payable on August 5, 2020 of $1.15 per share, consistent with ~~a payment date of~~the second quarter dividend paid on May 5, 2020. OnIn April 6, 2020, PNC submitted its capital plan ~~and stress test results~~ to the Federal Reserve and OCC as part of the 2020 annual Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress testing (DFAST) process.

On June 25, 2020, the Federal Reserve released the results of its supervisory stress tests conducted as part of the 2020 CCAR/DFAST process, as well as the results of additional sensitivity analysis it conducted to account for the uncertainty presented by the COVID-19 pandemic. Based on the results of the Federal Reserve's supervisory stress tests, PNC's Stress Capital Buffer (SCB), which is scheduled to go into effect on October 1, 2020, was set at 2.5%, the minimum level permitted under applicable rules. For additional information on the SCB and its potential impact on PNC's capital distributions, see the Recent Regulatory Developments section of the Financial Review of our first quarter 2020 Form 10-Q.

Following completion of the 2020 CCAR/DFAST process, the Federal Reserve announced certain limitations on the capital distributions of any CCAR-participating bank holding company (including PNC) during the third quarter of 2020. Under these limitations, PNC and other CCAR-participating firms, absent Federal Reserve approval, are permitted to make only the following capital distributions during the third quarter of 2020:

The Federal Reserve has indicated that it reserves the right to extend these limitations to additional quarters, potentially in modified form.

In June 2020, the Federal Reserve also announced that all 2020 CCAR-participating firms (including PNC) would be required to conduct an additional round of company and supervisory stress tests in the fourth quarter of 2020 using updated baseline and stressed scenarios that better incorporate the current, expected and potential effects of the COVID-19 pandemic. The Federal Reserve has indicated it will provide updated supervisory scenarios to firms by September 30, 2020, and stress test projections and updated capital plans will be due within 45 days of distribution of the supervisory scenarios. It is unclear at this time how the Federal Reserve expects to utilize the results of this additional 2020 stress test or what, if any, impact this additional round of stress testing may have on the SCB or authorized capital distributions of participating firms.

Federal banking regulators have stated that they expect the largest U.S. bank holding companies (BHCs), including PNC, to have a level of regulatory capital well in excess of the regulatory minimum and have required the largest U.S. BHCs, including PNC, to have a capital buffer sufficient to withstand losses and allow them to meet the credit needs of their customers through estimated stress scenarios. We seek to manage our capital consistent with these regulatory principles, and believe that our ~~March 31,~~June 30, 2020 capital levels were aligned with them.

At ~~March 31,~~June 30, 2020, PNC and PNC Bank, our sole bank subsidiary, were both considered “well capitalized,” based on applicable U.S. regulatory capital ratio requirements. To qualify as “well capitalized”, PNC must have Basel III capital ratios of at least 6% for Tier 1 risk-based capital and 10% for Total risk-based capital, and PNC Bank must have Basel III capital ratios of at least 6.5% for Common equity Tier 1 risk-based capital, 8% for Tier 1 risk-based capital, 10% for Total risk-based capital and a Leverage ratio of at least 5%.

See the Recent Regulatory Developments section of ~~this Report~~our first quarter 2020 Form 10-Q for recent developments that could have a potential impact on our Basel III capital ratios. We provide additional information regarding regulatory capital requirements and some of their potential impacts on us in the Supervision and Regulation section of Item 1 Business, Item 1A Risk Factors and Note 18 Regulatory Matters in our 2019 Form 10-K.

See the Market Risk Management portion of the Risk Management Section in our 2019 Form 10-K for additional discussion regarding market risk.

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

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

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

When forecasting net interest income, we make assumptions about interest rates and the shape of the yield curve, the volume and characteristics of new business and the behavior of existing on- and off-balance sheet positions. These assumptions determine the future level of simulated net interest income in the base interest rate scenario and the other interest rate scenarios presented in Tables 2931 and ~~30.~~32. These simulations assume that as assets and liabilities mature, they are replaced or repriced at then current market rates.

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

The ~~first~~second quarter 2020 interest sensitivity analyses indicate that our Consolidated Balance Sheet is positioned to benefit from an increase in interest rates and an upward sloping interest rate yield curve. We believe that we have the deposit funding base and balance sheet flexibility to adjust, where appropriate and permissible, to changing interest rates and market conditions.

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

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

Table ~~32:~~34: Equity Investments Summary

Included in our equity investments are direct tax credit investments and equity investments held by consolidated entities. These tax credit investment balances included unfunded commitments totaling ~~$.9~~$.8 billion and $1.0 billion at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively. These unfunded commitments are included in Other liabilities on our Consolidated Balance Sheet.

Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in the Notes To Consolidated Financial Statements in our 2019 Form 10-K has further information on Tax Credit Investments.

The majority of our other equity investments consists of our private equity portfolio. The private equity portfolio is an illiquid portfolio consisting of mezzanine and equity investments that vary by industry, stage and type of investment. Private equity investments carried at estimated fair value totaled $1.4 billion and $1.5 billion at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively. As of ~~March 31,~~June 30, 2020, $1.2 billion was invested directly in a variety of companies and $.2 billion was invested indirectly through various private equity funds. See the Supervision and Regulation section in Item 1 of our 2019 Form 10-K for discussion of the potential impacts of the Volcker Rule provisions of Dodd-Frank on our interests in and other relationships with private funds covered by the Volcker Rule.

We also have certain other equity investments, the majority of which represent investments in affiliated and non-affiliated funds with both traditional and alternative investment strategies. Net gains related to these investments were not significant at ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019.

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

Financial derivatives involve, to varying degrees, market and credit risk. Derivatives represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional and an underlying as specified in the contract. Therefore, cash requirements and exposure to credit risk are significantly less than the notional amount on these instruments.

Further information on our financial derivatives is presented in Note 1 Accounting Policies, ~~and~~ Note 6 Fair Value and Note 13 Financial Derivatives in our Notes To Consolidated Financial Statements in our 2019 Form 10-K and in Note 1112 Fair Value and Note 1213 Financial Derivatives in the Notes To Consolidated Financial Statements in this Report.

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

In ~~March~~July 2020, ~~the U.S. Congress passed, and~~ President Trump signed into law, the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which includes a variety of provisions designed to aid business and consumers financially impacted by the COVID-19 pandemic and associated public health directives. The provisionsan extension of the ~~CARES Act applicable to individuals and businesses generally include, among other things:~~

In May 2020, the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued an interim final rule that modifies the agencies’ LCR rule to support banking organizations’ participation in the Federal Reserve’s Money Market Mutual Fund Liquidity Facility (MMLF) and the PPP Liquidity Facility (PPPLF). The interim final rule neutralizes the LCR impact associated with the non-recourse funding provided by these facilities. Separately, in June 2020, the FDIC issued a final rule to mitigate the deposit insurance assessment effects of participating in the PPP, the PPPLF, and the MMLF. Among other changes, the final rule removes the effect of participation in the PPP and borrowings under the PPPLF on various risk measures used to calculate the assessment rate of an insured depository institution like PNC Bank, and provides an offset to an insured depository institution’s assessment for the increase to its assessment base attributable to participation in the PPP and MMLF. The final rule will be applied to assessments starting in the second quarter of 2020. Similarly, in June 2020, the OCC issued an interim final rule that will reduce assessments due to be paid to the ~~extent~~OCC on September 30, 2020. Under the ~~borrower expends funds during~~interim final rule, assessments due will be calculated using the ~~eight weeks following receipt~~lower of the ~~loan proceeds~~bank’s assets on December 31, 2019 or June 30, 2020.

In June 2020, the OCC released a notice of proposed rulemaking (NPR) to update its rules for national bank and federal savings association activities and operations. Among other significant changes, the NPR would incorporate and streamline interpretations addressing permissible derivatives activities and codify interpretations that permit national banks to engage in certain tax equity finance transactions and participate in payment systems. Separately, the OCC also released an advance notice of proposed rulemaking (ANPR) seeking public comment on how the OCC’s rules could be modified to better facilitate the provision of banking products and services through digital means. Comments for the NPR and ANPR are due on August 3, 2020.

in COVID-related payment forbearance programs or experiencing financial hardships due to COVID-19.

provide estimates of the exchange rate and certain remittance fees under certain conditions.

In May 2020, the OCC finalized amendments to its regulations implementing the Community Reinvestment Act (CRA), which requires the agencies to assess a bank’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods. The final rule significantly revamps for national banks like PNC Bank how the OCC defines what qualifies for CRA credit, where such activity must be conducted to receive credit, how CRA performance is measured, and how CRA performance is documented and reported. The final rule is effective October 1, 2020, with a compliance date of January 1, 2023, for PNC Bank. The OCC has indicated it will conduct a future rulemaking to set the quantitative levels of CRA activity that a national bank would have to achieve to receive a Satisfactory or Outstanding CRA rating, either within a particular assessment area or overall.

Note 1 Accounting Policies of our 2019 Form 10-K describes the most significant accounting policies that we use to prepare our consolidated financial statements, including discussion of our policies for the Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit, prior to the adoption of the CECL standard. See Note 1 Accounting Policies in the Notes To Consolidated Financial Statements in this Report regarding the impact of new accounting pronouncements, including CECL, that were adopted in the first ~~quarter~~and second quarters of 2020.

such variations may significantly affect our reported results and financial position for the period or in future periods.

The following critical accounting policies and judgments are described in more detail in Critical Accounting Estimates and Judgments in Item 7 of our 2019 Form 10-K:

Accounting Policies in the Notes To Consolidated Financial Statements of this Report.

The scenarios used for the period ended ~~March 31,~~June 30, 2020 were designed to address the ~~emerging~~impact of the continuing COVID-19 crisis on the macroeconomic environment, based on our best estimate as of ~~March 31,~~June 30, 2020. We used a number of economic variables, ~~a large driver~~with the largest drivers being ~~GDP.~~GDP and the unemployment rate measures. Using a weighted average of our four economic forecast scenarios, we estimated at ~~March 31,~~June 30, 2020 that annualized GDP contracts 11.2% in the second quarter of 2020 and ends 2020 down 2.3%, with recovery to the pre-recession peak levels occurring by the fourth quarter of 2021. Since March 31, 2020, the macro-economic backdrop has worsened, suggesting additional deterioration in GDP, unemployment and other economic factors than what our forecasted scenarios contemplated. Should this macro-economic environment persist, we will adjust our scenarios accordingly, which would likely result in a material build to our allowance for credit losses during the second quarter of 2020.

fourth quarter 2019 levels and recovering to pre-recession peak levels by the first quarter of 2022. Additionally, the quarterly unemployment rate falls to 9.5% in the fourth quarter of 2020, from a ~~peak-to-trough decline~~peak of ~~14%.~~ 13.6% in the second quarter, with the labor market continuing to recover in 2021 and 2022. We believe that the economic assumptions used in the scenarios for the second quarter of 2020 sufficiently reflect the life of loan losses in the current portfolio, and based on these assumptions we do not anticipate any substantial reserve builds related to our current portfolio during the remainder of 2020.

We engage in a variety of activities that involve entities that are not consolidated or otherwise reflected in our Consolidated Balance Sheet that are generally referred to as off-balance sheet arrangements. Additional information on these types of activities is included in our 2019 Form 10-K and in Note 45 Loan Sale and Servicing Activities and Variable Interest Entities and Note 89 Commitments in the Notes To Consolidated Financial Statements included in this Report.

A summary and further description of variable interest entities (VIEs) is included in Note 1 Accounting Policies and Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in our 2019 Form 10-K.

See Note 10 Borrowed Funds in the Notes To Consolidated Financial Statements in our 2019 Form 10-K for additional information on trust preferred securities issued by PNC Capital Trust C including information on contractual limitations potentially imposed on payments (including dividends) with respect to PNC's equity securities.

As of ~~March 31,~~June 30, 2020, we performed an evaluation under the supervision of and with the participation of our management, including the Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures and of changes in our internal control over financial reporting.

Based on that evaluation, our Chairman, President and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) were effective as of ~~March 31,~~June 30, 2020, and that there has been no change in PNC’s internal control over financial reporting that occurred during the ~~first~~second quarter of 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

For a glossary of terms commonly used in our filings, please see the glossary of terms ~~included~~updated in our first quarter 2020 Form 10-Q and our2019 Form 10-K. ~~Below are terms that have been added or updated based upon our adoption of CECL and the 2019 Tailoring Rules on January 1, 2020.~~

THE PNC FINANCIAL SERVICES GROUP, INC.



Unaudited	Three months ended June 30					Six months ended June 30
In millions, except per share data	2020			2019		2020			2019
Interest Income
Loans	$	2,257		$	2,672	$	4,737		$	5,274
Investment securities	527			629		1,109			1,249
Other	71			196		209			402
Total interest income	2,855			3,497		6,055			6,925
Interest Expense
Deposits	141			515		516			987
Borrowed funds	187			484		501			965
Total interest expense	328			999		1,017			1,952
Net interest income	2,527			2,498		5,038			4,973
Noninterest Income
Asset management	199			221		400			433
Consumer services	330			392		707			763
Corporate services	512			484		1,038			946
Residential mortgage	158			82		368			147
Service charges on deposits	79			171		247			339
Other	271			367		614			675
Total noninterest income	1,549			1,717		3,374			3,303
Total revenue	4,076			4,215		8,412			8,276
Provision For Credit Losses	2,463			180		3,377			369
Noninterest Expense
Personnel	1,373			1,365		2,742			2,779
Occupancy	199			212		406			427
Equipment	301			298		588			571
Marketing	47			83		105			148
Other	595			653		1,217			1,264
Total noninterest expense	2,515			2,611		5,058			5,189
Income (loss) from continuing operations before income taxes and noncontrolling interests	(902		)	1,424		(23		)	2,718
Income taxes (benefit) from continuing operations	(158		)	239		(38		)	451
Net income (loss) from continuing operations	(744		)	1,185		15			2,267
Income from discontinued operations before taxes	5,596			224		5,777			449
Income taxes from discontinued operations	1,197			35		1,222			71
Net income from discontinued operations	4,399			189		4,555			378
Net income	3,655			1,374		4,570			2,645
Less: Net income attributable to noncontrolling interests	7			12		14			22
Preferred stock dividends	55			55		118			118
Preferred stock discount accretion and redemptions	1			1		2			2
Net income attributable to common shareholders	$	3,592		$	1,306	$	4,436		$	2,503
Earnings Per Common Share
Basic earnings (loss) from continuing operations	$	(1.90	)	$	2.47	$	(0.29	)	$	4.68
Basic earnings from discontinued operations	10.28			.42		10.60			.83
Total basic earnings	$	8.40		$	2.89	$	10.33		$	5.51
Diluted earnings (loss) from continuing operations	$	(1.90	)	$	2.47	$	(0.29	)	$	4.67
Diluted earnings from discontinued operations	10.28			.41		10.59			.82
Total diluted earnings	$	8.40		$	2.88	$	10.32		$	5.49
Average Common Shares Outstanding
Basic	426			451		428			453
Diluted	426			452		428			454

Unaudited Three months ended
March 31
In millions, except per share data 2020
2019
Interest Income
Loans $ 2,480
$ 2,602
Investment securities 582
620
Other 138
206
Total interest income 3,200
3,428
Interest Expense
Deposits 375
472
Borrowed funds 314
481
Total interest expense 689
953
Net interest income 2,511
2,475
Noninterest Income
Asset management 382
437
Consumer services 377
371
Corporate services 526
462
Residential mortgage 210
65
Service charges on deposits 168
168
Other 343
308
Total noninterest income 2,006
1,811
Total revenue 4,517
4,286
Provision For Credit Losses 914
189
Noninterest Expense
Personnel 1,369
1,414
Occupancy 207
215
Equipment 287
273
Marketing 58
65
Other 622
611
Total noninterest expense 2,543
2,578
Income before income taxes and noncontrolling interests 1,060
1,519
Income taxes 145
248
Net income 915
1,271
Less: Net income attributable to noncontrolling interests 7
10
Preferred stock dividends 63
63
Preferred stock discount accretion and redemptions 1
1
Net income attributable to common shareholders $ 844
$ 1,197
Earnings Per Common Share
Basic $ 1.96
$ 2.62
Diluted $ 1.95
$ 2.61
Average Common Shares Outstanding
Basic 429
455
Diluted 430
456

See accompanying Notes To Consolidated Financial Statements.

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

~~CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME~~

~~THE PNC FINANCIAL SERVICES GROUP, INC.~~

Unaudited
In millions
Three months ended
March 31
2020
�� 2019
Net income $ 915
$ 1,271
Other comprehensive income (loss), before tax and net of reclassifications into Net income:
Net unrealized gains (losses) on securities without an allowance for credit losses 1,487

Net unrealized gains (losses) on securities with an allowance for credit losses (7 )
Net unrealized gains (losses) on non-OTTI securities 639
Net unrealized gains (losses) on OTTI securities 9
Net unrealized gains (losses) on cash flow hedge derivatives 785
100
Pension and other postretirement benefit plan adjustments 12
145
Other (26 ) 34
Other comprehensive income (loss), before tax and net of reclassifications into Net income 2,251

927
Income tax benefit (expense) related to items of other comprehensive income (532 ) (207 )
Other comprehensive income (loss), after tax and net of reclassifications into Net income 1,719

720
Comprehensive income 2,634
1,991
Less: Comprehensive income attributable to noncontrolling interests 7
10
Comprehensive income attributable to PNC $ 2,627

$ 1,981

~~See accompanying Notes To Consolidated Financial Statements.~~

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

CONSOLIDATED ~~BALANCE SHEET~~STATEMENT OF COMPREHENSIVE INCOME

THE PNC FINANCIAL SERVICES GROUP, INC.

Unaudited March 31
2020
December 31
2019
In millions, except par value
Assets
Cash and due from banks $ 7,493
$ 5,061
Interest-earning deposits with banks 19,986
23,413
Loans held for sale (a) 1,693
1,083
Investment securities – available for sale 89,077
69,163
Investment securities – held to maturity (b) 1,469
17,661
Loans (a) 264,643
239,843
Allowance for credit losses – loan and lease losses (c) (3,944 ) (2,742 )
Net loans 260,699
237,101
Equity investments (d) 13,205
13,734
Mortgage servicing rights 1,082
1,644
Goodwill 9,233
9,233
Other (a) (b) 41,556
32,202
Total assets $ 445,493
$ 410,295
Liabilities
Deposits
Noninterest-bearing $ 81,614
$ 72,779
Interest-bearing 223,590
215,761
Total deposits 305,204
288,540
Borrowed funds
Federal Home Loan Bank borrowings 23,491
16,341
Bank notes and senior debt 31,438
29,010
Subordinated debt 6,475
6,134
Other (e) 11,995
8,778
Total borrowed funds 73,399
60,263
Allowance for credit losses – unfunded lending related commitments (c) 450
318
Accrued expenses and other liabilities 17,150
11,831
Total liabilities 396,203
360,952
Equity
Preferred stock (f)

Common stock ($5 par value, Authorized 800 shares, issued 542 shares) 2,712
2,712
Capital surplus 16,288
16,369
Retained earnings 41,885
42,215
Accumulated other comprehensive income 2,518
799
Common stock held in treasury at cost: 118 and 109 shares (14,140 ) (12,781 )
Total shareholders’ equity 49,263
49,314
Noncontrolling interests 27
29
Total equity 49,290
49,343
Total liabilities and equity $ 445,493
$ 410,295


~~(a)~~	Our consolidated assets included the following for which we have elected the fair value option: Loans held for sale of $1.5 billion, Loans of $1.1 billion and Other assets of $.1 billion at March 31, 2020 and Loans held for sale of $1.1 billion, Loans of $.7 billion and Other assets of $.1 billion at December 31, 2019.

~~(b)~~

~~Amounts as of March 31, 2020 are net of the related Allowances for Credit Losses recorded in accordance with the adoption of Accounting Standards Update 2016-13, Financial Instruments -~~ ~~Credit Losses~~, which totaled $2 million and $19 million for Investment securities and Other assets, respectively. See Recently Adopted Accounting Standards portion of Note 1 Accounting Policies for additional detail on the adoption of this ASU.

~~(c)~~

Amounts as of March 31, 2020 reflect the impact of adopting the CECL accounting standard and our transition from an incurred loss methodology for these reserves to an expected credit loss methodology. Prior period amounts represent Allowance for Loans and Leases (ALLL) under the incurred loss methodology. Refer to Note 1 Accounting Policies in this Report for additional detail on the adoption of this standard.


~~(d)~~	~~Amounts include our equity investment in BlackRock.~~


~~(e)~~	~~Our consolidated liabilities at both March 31, 2020 and December 31, 2019 included Other borrowed funds of $.1 billion for which we have elected the fair value option.~~


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



Unaudited In millions	Three months ended June 30						Six months ended June 30
Unaudited In millions	2020			2019			2020			2019
Net income (loss) from continuing operations	$	(744	)	$	1,185		$	15		$	2,267
Other comprehensive income (loss), before tax and net of reclassifications into Net income:
Net unrealized gains (losses) on securities without an allowance for credit losses	620						2,107
Net unrealized gains (losses) on securities with an allowance for credit losses	(82		)				(89		)
Net unrealized gains (losses) on non-OTTI securities				694						1,333
Net unrealized gains (losses) on OTTI securities										9
Net unrealized gains (losses) on cash flow hedge derivatives	12			254			797			354
Pension and other postretirement benefit plan adjustments	(17		)	(84		)	(5		)	61
Other	2			5			10			10
Other comprehensive income (loss) from continuing operations, before tax and net of reclassifications into Net income	535			869			2,820			1,767
Income tax benefit (expense) from continuing operations related to items of other comprehensive income	(125		)	(205		)	(665		)	(407		)
Other comprehensive income (loss) from continuing operations, after tax and net of reclassifications into Net income	410			664			2,155			1,360
Net income from discontinued operations	4,399			189			4,555			378
Other comprehensive income (loss) from discontinued operations, before tax and net of reclassifications into Net income	182			(35		)	148			(6		)
Income tax benefit (expense) from discontinued operations related to items of other comprehensive income	(41		)	7			(33		)	2
Other comprehensive income (loss) from discontinued operations, after tax and net of reclassifications into Net income	141			(28		)	115			(4		)
Other comprehensive income (loss), after tax and net of reclassifications into Net income	551			636			2,270			1,356
Comprehensive income	4,206			2,010			6,840			4,001
Less: Comprehensive income attributable to noncontrolling interests	7			12			14			22
Comprehensive income attributable to PNC	$	4,199		$	1,998		$	6,826		$	3,979

See accompanying Notes To Consolidated Financial Statements.

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

CONSOLIDATED ~~STATEMENT OF CASH FLOWS~~BALANCE SHEET

THE PNC FINANCIAL SERVICES GROUP, INC.

Unaudited
In millions
Three months ended
March 31
2020
2019

Operating Activities
Net income $ 915
$ 1,271

Adjustments to reconcile net income to net cash provided (used) by operating activities
Provision for credit losses 914
189

Depreciation and amortization 328
272

Deferred income taxes (226 ) 111

Changes in fair value of mortgage servicing rights 620
210

Undistributed earnings of BlackRock (56 ) (111 )
Net change in
Trading securities and other short-term investments (1,014 ) 358

Loans held for sale (452 ) 320

Other assets (6,912 ) (2,931 )
Accrued expenses and other liabilities 5,376
1,796

Other (189 ) (84 )
Net cash provided (used) by operating activities $ (696 ) $ 1,401

Investing Activities
Sales
Securities available for sale $ 5,447
$ 840

Loans 314
306

Repayments/maturities
Securities available for sale 4,332
2,103

Securities held to maturity 12
510

Purchases
Securities available for sale (11,889 ) (3,861 )
Securities held to maturity (4 ) (23 )
Loans (100 ) (468 )
Net change in
Federal funds sold and resale agreements 965
4,810

Interest-earning deposits with banks 3,427
(4,368 )
Loans (25,758 ) (6,085 )
Other (125 ) 213

Net cash provided (used) by investing activities $ (23,379 ) $ (6,023 )



Unaudited	June 30 2020			December 31 2019
In millions, except par value
Assets
Cash and due from banks	$	6,338		$	5,061
Interest-earning deposits with banks	50,233			23,413
Loans held for sale (a)	1,443			1,083
Asset held for sale (b)				8,558
Investment securities – available for sale	97,052			69,163
Investment securities – held to maturity	1,441			17,661
Loans (a)	258,236			239,843
Allowance for loan and lease losses (c)	(5,928		)	(2,742		)
Net loans	252,308			237,101
Equity investments	4,943			5,176
Mortgage servicing rights	1,067			1,644
Goodwill	9,233			9,233
Other (a)	34,920			32,202
Total assets	$	458,978		$	410,295
Liabilities
Deposits
Noninterest-bearing	$	99,458		$	72,779
Interest-bearing	246,539			215,761
Total deposits	345,997			288,540
Borrowed funds
Federal Home Loan Bank borrowings	8,500			16,341
Bank notes and senior debt	27,704			29,010
Subordinated debt	6,500			6,134
Other (d)	4,322			8,778
Total borrowed funds	47,026			60,263
Allowance for unfunded lending related commitments (c)	662			318
Accrued expenses and other liabilities	12,345			11,831
Total liabilities	406,030			360,952
Equity
Preferred stock (e)
Common stock ($5 par value, Authorized 800 shares, issued 542 shares)	2,712			2,712
Capital surplus	16,284			16,369
Retained earnings	44,986			42,215
Accumulated other comprehensive income	3,069			799
Common stock held in treasury at cost: 117 and 109 shares	(14,128		)	(12,781		)
Total shareholders’ equity	52,923			49,314
Noncontrolling interests	25			29
Total equity	52,948			49,343
Total liabilities and equity	$	458,978		$	410,295


(a)	Our consolidated assets included the following for which we have elected the fair value option: Loans held for sale of $1.2 billion, Loans of $1.0 billion and Other assets of $.1 billion at June 30, 2020 and Loans held for sale of $1.1 billion, Loans of $.7 billion and Other assets of $.1 billion at December 31, 2019.

(b)

Represents our held for sale investment in BlackRock. In the second quarter of 2020, PNC divested its entire investment in BlackRock. See Note 2 Discontinued Operations for additional information. Prior period BlackRock investment balances have been reclassified to the Asset held for sale line in accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations. Refer to Note 1 Accounting Policies and Note 2 Discontinued Operations for additional details.

(c)

Amount as of June 30, 2020 reflects the impact of adopting Accounting Standards Update 2016-13, Financial Instruments - Credit Losses, which is commonly referred to as the Current Expected Credit Losses (CECL) standard and our transition from an incurred loss methodology for these reserves to an expected credit loss methodology. Refer to Note 1 Accounting Policies in this Report for additional detail on the adoption of this standard.


(d)	Our consolidated liabilities at June 30, 2020 and December 31, 2019 included Other borrowed funds of less than $.1 billion and $.1 billion, respectively, for which we have elected the fair value option.


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

~~(continued on following page)~~See accompanying Notes To Consolidated Financial Statements.

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

CONSOLIDATED STATEMENT OF CASH FLOWS

THE PNC FINANCIAL SERVICES GROUP, INC.

~~(continued from previous page)~~

Unaudited
In millions
Three Months Ended
March 31
2020
2019

Financing Activities
Net change in
Noninterest-bearing deposits $ 8,857
$ (2,337 )
Interest-bearing deposits 7,829
5,736

Federal funds purchased and repurchase agreements 2,306
2,232

Federal Home Loan Bank borrowings (400 )

Other borrowed funds 1,044
250

Sales/issuances
Federal Home Loan Bank borrowings 9,060
5,000

Bank notes and senior debt 3,486
2,147

Other borrowed funds 172
397

Common and treasury stock 23
22

Repayments/maturities
Federal Home Loan Bank borrowings (1,510 ) (6,000 )
Bank notes and senior debt (2,100 ) (1,750 )
Other borrowed funds (172 ) (296 )
Acquisition of treasury stock (1,522 ) (826 )
Preferred stock cash dividends paid (63 ) (63 )
Common stock cash dividends paid (503 ) (436 )
Net cash provided (used) by financing activities $ 26,507
$ 4,076

Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash 2,432
(546 )
Cash and due from banks and restricted cash at beginning of period 5,061
5,608

Cash and due from banks and restricted cash at end of period $ 7,493
$ 5,062

Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash) $ 7,161
$ 5,062

Restricted cash 332

Cash and due from banks and restricted cash at end of period $ 7,493
$ 5,062

Supplemental Disclosures
Interest paid $ 638
$ 907

Income taxes paid $ 36
$ 30

Income taxes refunded $ 5
$ 2

Leased assets obtained in exchange for new operating lease liabilities $ 57
$ 155

Right-of-use assets recognized at adoption of ASU 2016-02 $ 2,004

Non-cash Investing and Financing Items
Transfer from loans to loans held for sale, net $ 313
$ 139

Transfer from loans to foreclosed assets $ 37
$ 48



Unaudited In millions	Six months ended June 30
Unaudited In millions	2020			2019
Operating Activities
Net income	$	4,570		$	2,645
Adjustments to reconcile net income to net cash provided (used) by operating activities
Provision for credit losses	3,377			369
Depreciation and amortization	712			579
Deferred income taxes	(2,501		)	106
Net gains on sales of securities	(222		)	(32		)
Changes in fair value of mortgage servicing rights	728			502
Gain on sale of BlackRock	(5,740		)
Undistributed earnings of BlackRock	(174		)	(220		)
Net change in
Trading securities and other short-term investments	(266		)	1,465
Loans held for sale	(170		)	(116		)
Other assets	(1,675		)	(2,286		)
Accrued expenses and other liabilities	3,161			812
Other	531			(180		)
Net cash provided (used) by operating activities	$	2,331		$	3,644
Investing Activities
Sales
Securities available for sale	$	12,055		$	2,817
Net proceeds from sale of BlackRock	14,225
Loans	597			520
Repayments/maturities
Securities available for sale	10,110			4,795
Securities held to maturity	38			1,155
Purchases
Securities available for sale	(31,593		)	(11,141		)
Securities held to maturity	(44		)	(292		)
Loans	(173		)	(735		)
Net change in
Federal funds sold and resale agreements	460			4,538
Interest-earning deposits with banks	(26,820		)	(7,469		)
Loans	(19,886		)	(11,169		)
Other	(206		)	(502		)
Net cash provided (used) by investing activities	$	(41,237	)	$	(17,483	)

~~See accompanying Notes To Consolidated Financial Statements.~~(continued on following page)

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

CONSOLIDATED STATEMENT OF CASH FLOWS

THE PNC FINANCIAL SERVICES GROUP, INC.

(continued from previous page)



Unaudited In millions	Six Months Ended June 30
Unaudited In millions	2020			2019
Financing Activities
Net change in
Noninterest-bearing deposits	$	26,673		$	(3,992	)
Interest-bearing deposits	30,778			9,514
Federal funds purchased and repurchase agreements	(5,888		)	1,546
Federal Home Loan Bank borrowings	(6,300		)	6,875
Other borrowed funds	1,486			(119		)
Sales/issuances
Federal Home Loan Bank borrowings	9,060			12,000
Bank notes and senior debt	3,487			4,438
Other borrowed funds	304			771
Common and treasury stock	34			40
Repayments/maturities
Federal Home Loan Bank borrowings	(10,601		)	(11,000		)
Bank notes and senior debt	(5,897		)	(2,350		)
Subordinated debt				(700		)
Other borrowed funds	(318		)	(777		)
Acquisition of treasury stock	(1,523		)	(1,613		)
Preferred stock cash dividends paid	(118		)	(118		)
Common stock cash dividends paid	(994		)	(868		)
Net cash provided (used) by financing activities	$	40,183		$	13,647
Net Increase (Decrease) In Cash And Due From Banks And Restricted Cash	1,277			(192		)
Net cash provided by discontinued operations	14,299			159
Net cash provided (used) by continuing operations	(13,022		)	(351		)
Cash and due from banks and restricted cash at beginning of period	5,061			5,608
Cash and due from banks and restricted cash at end of period	$	6,338		$	5,416
Cash and due from banks and restricted cash
Cash and due from banks at end of period (unrestricted cash)	$	5,977		$	5,416
Restricted cash	361
Cash and due from banks and restricted cash at end of period	$	6,338		$	5,416
Supplemental Disclosures
Interest paid	$	913		$	1,905
Income taxes paid	$	528		$	217
Income taxes refunded	$	9		$	7
Leased assets obtained in exchange for new operating lease liabilities	$	59		$	236
Right-of-use assets recognized at adoption of ASU 2016-02				$	2,004
Non-cash Investing and Financing Items
Transfer from loans to loans held for sale, net	$	542		$	256
Transfer from trading securities to investment securities	$	289
Transfer from loans to foreclosed assets	$	43		$	90

See accompanying Notes To Consolidated Financial Statements.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THE PNC FINANCIAL SERVICES GROUP, INC.

Unaudited

BUSINESS

The PNC Financial Services Group, Inc. (PNC) is one of the largest diversified financial services companies in the United States (U.S.) and is headquartered in Pittsburgh, Pennsylvania.

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

NOTE 1 ACCOUNTING POLICIES

Basis of Financial Statement Presentation

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

We prepared these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). We have eliminated intercompany accounts and transactions.

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

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

When preparing these unaudited interim consolidated financial statements, we have assumed that you have read the audited consolidated financial statements included in our 2019 Form 10-K. These interim consolidated financial statements serve to update our 2019 Form 10-K and may not include all information and Notes necessary to constitute a complete set of financial statements. There have been significant changes to our accounting policies as disclosed in our 2019 Form 10-K due to the adoption of the ~~current expected credit losses standard.~~Current Expected Credit Losses (CECL) standard and our discontinued operation as a result of the disposal of our equity investment in BlackRock. As a result of this disposal, BlackRock’s historical results of operations are reported as discontinued operations in our consolidated financial statements for all periods presented. The updated policies impacted by ~~this adoption~~these changes are included in this Note ~~1 in the first quarter of 2020.~~1. Reference is made to Note 1 Accounting Policies in our 2019 Form 10-K for a detailed description of all other significant accounting policies.

Use of Estimates

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

Discontinued Operations

A disposal of an asset or business that meets the criteria for held for sale classification is reported as discontinued operations when the disposal represents a strategic shift that has had, or will have, a major effect on our operating results. We report an asset as held for sale when management has approved or received approval to sell the asset and is committed to a formal plan, the asset is available for immediate sale, the asset is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met. An asset classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the asset exceeds its estimated fair value, the asset is written down to its fair value upon the held for sale designation. Our BlackRock held for sale asset is recorded at its carrying amount as we accounted for this investment under the equity method of accounting and the fair value of the asset exceeded the carrying value at each balance sheet date.

When presenting discontinued operations, assets classified as held for sale are segregated in the Consolidated Balance Sheet commencing in the period in which the asset meets all of the held for sale criteria described above and prior periods are recast. The results of discontinued operations are reported in Discontinued Operations in the Consolidated Statement of Income for current and

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

prior periods commencing in the period in which the asset or business is either disposed of or is classified as held for sale, including any gain or loss recognized on sale or adjustment of the carrying amount to fair value less cost to sell.

Earnings Per Common Share

Basic earnings per common share is calculated using the two-class method to determine income attributable to common shareholders. Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities under the two-class method. Distributed dividends and dividend equivalents related to participating securities and an allocation of undistributed net income to participating securities reduce the amount of income attributable to common shareholders. In a period with a loss, no allocation will be made to the participating securities, as they do not have a contractual obligation to absorb losses. Income attributable to common shareholders is then divided by the weighted-average common shares outstanding for the period.

Diluted earnings per common share is calculated under the more dilutive of either the treasury method or the two-class method. For the diluted calculation, we increase the weighted-average number of shares of common stock outstanding by the assumed conversion of outstanding convertible preferred stock from the beginning of the year or date of issuance, if later, and the number of shares of common stock that would be issued assuming the exercise of stock options and warrants and the issuance of incentive shares using the treasury stock method. These adjustments to the weighted-average number of shares of common stock outstanding are made only when such adjustments will dilute earnings per common share. For periods in which there is a loss from continuing operations, any potential dilutive shares will be anti-dilutive. In this scenario, no potential dilutive shares will be included in the continuing operations, discontinued operations or total earnings per common share calculations, even if overall net income is reported. See Note 11 Earnings Per Share for additional information.

The PNC Financial Services Group, Inc. – Form 10-Q 5355

Recently Adopted Accounting Standards



Accounting Standards Update (ASU)	Description	Financial Statement Impact
Credit Losses- ASU 2016-13 Issued June 2016 Codification Improvements - ASU 2019-04 Various improvements related to Credit Losses (Topics 1, 2 and 5) Issued April 2019 Targeted Transition Relief - Credit Losses - ASU 2019-05 Issued May 2019 Codification Improvements - ASU 2019-11 Issued November 2019	• Commonly referred to as the ~~Current Expected Credit Losses (CECL)~~CECL standard. •Replaces measurement, recognition and disclosure guidance for credit related reserves (i.e., the allowance for loan and lease losses (ALLL) and the allowance for unfunded loan commitments and letters of credit) and Other than Temporary Impairment (OTTI) for debt securities. •Requires the use of an expected credit loss methodology; specifically, current expected credit losses for the remaining life of the asset will be recognized starting from the time of origination or acquisition. •Methodology applies to loans, net investment in leases, debt securities and certain financial assets not accounted for at fair value through net income. It also applies to unfunded lending related commitments except for unconditionally cancellable commitments. •In-scope assets are presented at the net amount expected to be collected after the deduction or addition of the ACL from the amortized cost basis of the assets. • Requires inclusion of expected recoveries of previously charged-off amounts for in-scope assets. • Requires enhanced credit quality disclosures including disaggregation of credit quality indicators by vintage. • Requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings at adoption.	• Adopted January 1, 2020 under the modified retrospective approach. The cumulative-effect adjustment to retained earnings totaled $671 million at adoption. • Amended presentation and disclosures are required prospectively. Refer to the disclosures in this Note 1, Note 23 Investment Securities, Note 34 Loans and Related Allowance for Credit Losses and Note 910 Total Equity and Other Comprehensive Income for additional information. • With the adoption of CECL, we discontinued the accounting for purchased impaired loans and elected the one-time fair value option election for some of these loans and certain residential real estate collateral dependent loans. Loans that were previously accounted for as purchased impaired where the fair value option election was not made are now accounted for as purchased credit deteriorated (PCD) loans. • There was no impact to the recorded investment of our investment securities or loans, except for our ~~purchased credit deteriorated~~PCD loan portfolio. Accounting for these loans as ~~purchased credit deteriorated~~PCD required an adjustment to the remaining accretable discount and recorded investment in addition to the impact on ACL due to the adoption of CECL methodology. • Refer to Table 3335 for a summary of the impact of the CECL standard adoption.
Accounting Standards Update (ASU)	Description	Financial Statement Impact
Codification Improvements - ASU 2019-04 Topic 3: Codification Improvements to ASU 2017-12 and Other Hedging Items Issued April 2019	• Targeted improvements related to: - Partial-term fair value hedges of interest rate risk - Amortization of fair value hedge basis adjustments - Disclosure of fair value hedge basis adjustments - Consideration of the hedged contractually specified interest rate under the hypothetical derivative method - Application of a first-payments-received cash flow hedging technique to overall cash flows on a group of variable interest payments - Update to transition guidance for ASU 2017-12 • This ASU permits a one-time transfer out of held to maturity securities to provide entities the opportunity to hedge fixed rate, prepayable securities under a last of layer hedging strategy (although an entity is not required to hedge such securities subsequent to transfer).	• Adopted January 1, 2020. • As permitted by the eligibility requirements in this guidance, at adoption we elected to transfer debt securities with an amortized cost of $16.2 billion (fair value of $16.5 billion) from held to maturity to the available for sale portfolio. The transfer resulted in a pretax increase to AOCI of $306 million. There were no other impacts to PNC's consolidated financial statements from the adoption of this guidance.
Accounting Standards Update (ASU)	Description	Financial Statement Impact
Goodwill - ASU 2017-04 Issued January 2017	• Eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill under which a loss was recognized only if the estimated implied fair value of the goodwill is below its carrying value. • Requires impairment to be recognized if the reporting unit's carrying value exceeds the fair value.	• Adopted January 1, 2020. • The adoption of this standard did not impact our consolidated results of operations or our consolidated financial position.

5456 The PNC Financial Services Group, Inc. – Form 10-Q



Accounting Standards Update (ASU)	Description	Financial Statement Impact
Reference Rate Reform - ASU 2020-04 Issued March 2020	• Provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. • Includes optional expedients related to contract modifications that allow an entity to account for modifications (if certain criteria are met) as if the modifications were only minor (assets within the scope of ASC 310, Receivables), were not substantial (assets within the scope of ASC 470, Debt), and/or did not result in remeasurements or reclassifications (assets within the scope of ASC 842, Leases, and other Topics) of the existing contract. • Includes optional expedients related to hedging relationships within the scope of ASC 815, Derivatives & Hedging, whereby changes to the critical terms of a hedging relationship do not require dedesignation if certain criteria are met. In addition, potential sources of ineffectiveness as a result of reference rate reform may be disregarded when performing some effectiveness assessments. • Allows for a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. • Guidance in this ASU is effective as of March 12, 2020 through December 31, 2022.	• Adopted March 12, 2020, will apply prospectively. • As of ~~March 31,~~June 30, 2020, we have not yet elected any optional expedients related to contract modifications or hedging relationships as outlined in this ASU. However, we plan to elect these optional expedients in the future. • During the second quarter of 2020, we elected to transfer all debt securities classified as held to maturity that are indexed to LIBOR to the available for sale portfolio. All securities were classified as held to maturity prior to January 1, 2020. These securities had an amortized cost and fair value of $49 million and $48 million, respectively, as of the transfer date. See Note 3 Investment Securities for more information.

The following table presents the impact of adopting the CECL standard on January 1, 2020 on our allowance and retained earnings.

Cash and due from banks are considered cash and cash equivalents for financial reporting purposes because they represent a primary source of liquidity. Certain cash balances within Cash and due from banks on our Consolidated Balance Sheet are restricted as to withdrawal or usage by legally binding contractual agreements or regulatory requirements.

payment are considered delinquent.

PNC excludes consumer loans held for sale, loans accounted for under the fair value option and certain government insured or guaranteed loans from our TDR population. PCD loans that do not meet the criteria to be classified as TDRs are also excluded. In addition, PNC has elected not to apply a TDR designation to loans that have been restructured due to a COVID-19 hardship pursuant to specific criteria under the CARES Act. Since loans restructured due to a COVID-19 related hardship were not identified as TDRs, they are not placed on nonaccrual at the time of modification. However, these loans will be subject to our existing nonaccrual policy subsequent to the modification.

value of collateral less costs to sell, if lower than the amortized cost basis of the loan outstanding, when delinquency of the loan, combined with other risk factors (e.g., bankruptcy, lien position, or troubled debt restructuring), indicates that the loan, or some portion thereof, is uncollectible as per our historical experience, or the collateral has been repossessed. We charge-off secured

See Note 34 Loans and Related Allowance for Credit Losses in this Report for additional information on nonperforming assets, TDRs and credit quality indicators related to our loan portfolio.

See Note 23 Investment Securities in this Report for additional information about the investment securities portfolio.

estimate these risk parameters.

assumptions that are used for our reversion and LRA approaches.

individually assessed or pooled reserves. Such qualitative factors may include, but are not limited to:

See Note 34 Loans and Related Allowance for Credit Losses for additional information about our loan portfolio and the related allowance.


	March 31, 2020 (a)									December 31, 2019									June 30, 2020 (a)									December 31, 2019
In millions	Amortized Cost (b)		Unrealized					Fair Value		Amortized Cost		Unrealized					Fair Value		Amortized Cost (b)		Unrealized					Fair Value		Amortized Cost		Unrealized					Fair Value
In millions	Amortized Cost (b)		Gains		Losses			Fair Value		Amortized Cost		Gains		Losses			Fair Value		Amortized Cost (b)		Gains		Losses			Fair Value		Amortized Cost		Gains		Losses			Fair Value
Securities Available for Sale
U.S. Treasury and government agencies	$	16,102	$	879				$	16,981	$	16,150	$	382	$	(16	)	$	16,516	$	19,255	$	933				$	20,188	$	16,150	$	382	$	(16	)	$	16,516
Residential mortgage-backed
Agency	50,828		1,810		$	(10	)	52,628		35,847		517		(43		)	36,321		55,630		1,860		$	(10	)	57,480		35,847		517		(43		)	36,321
Non-agency	1,563		142		(62		)	1,643		1,515		302		(3		)	1,814		1,472		225		(15		)	1,682		1,515		302		(3		)	1,814
Commercial mortgage-backed
Agency	3,181		114		(6		)	3,289		3,094		42		(18		)	3,118		3,002		141		(3		)	3,140		3,094		42		(18		)	3,118
Non-agency	4,249		27		(194		)	4,082		3,352		29		(9		)	3,372		4,134		57		(152		)	4,039		3,352		29		(9		)	3,372
Asset-backed	5,339		43		(104		)	5,278		5,044		78		(8		)	5,114		5,312		96		(40		)	5,368		5,044		78		(8		)	5,114
Other	4,962		218		(4		)	5,176		2,788		121		(1		)	2,908		4,856		301		(2		)	5,155		2,788		121		(1		)	2,908
Total securities available for sale(b)	$	86,224	$	3,233	$	(380	)	$	89,077	$	67,790	$	1,471	$	(98	)	$	69,163	$	93,661	$	3,613	$	(222	)	$	97,052	$	67,790	$	1,471	$	(98	)	$	69,163
Securities Held to Maturity
U.S. Treasury and government agencies	$	781	$	143				$	924	$	776	$	56				$	832	$	785	$	146				$	931	$	776	$	56				$	832
Residential mortgage-backed
Agency										14,419		270		$	(26	)	14,663											14,419		270		$	(26	)	14,663
Non-agency										133		7					140											133		7					140
Commercial mortgage-backed
Agency										59		1					60											59		1					60
Non-agency										430		4					434											430		4					434
Asset-backed	50				$	(1	)	49		52							52											52							52
Other	638		33		(23		)	648		1,792		85		(14		)	1,863		656		42		$	(14	)	684		1,792		85		(14		)	1,863
Total securities held to maturity, net of ACL (c)	$	1,469	$	176	$	(24	)	$	1,621	$	17,661	$	423	$	(40	)	$	18,044
Total securities held to maturity (b) (c)																			$	1,441	$	188	$	(14	)	$	1,615	$	17,661	$	423	$	(40	)	$	18,044

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Securities available for sale are carried at fair value with net unrealized gains and losses included in Shareholders’ equity as AOCI, unless credit related. Net unrealized gains and losses are determined by taking the difference between the fair value of a security and its amortized cost, net of any ~~ACL.~~allowance. Securities held to maturity are carried at amortized cost less any ~~ACL.~~allowance. Investment securities at ~~March 31,~~June 30, 2020 included ~~$388~~$347 million of net unsettled purchases which represent non-cash investing activity, and accordingly, are not reflected on the Consolidated Statement of Cash Flows. The comparable amount for ~~March 31,~~June 30, 2019 was ~~$623 million.~~$2.0 billion.

Table ~~36:~~40: 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
December 31, 2019
Securities Available for Sale
U.S. Treasury and government agencies	$	(14	)	$	2,451	$	(2	)	$	607	$	(16	)	$	3,058
Residential mortgage-backed
Agency	(6		)	2,832		(37		)	4,659		(43		)	7,491
Non-agency						(3		)	102		(3		)	102
Commercial mortgage-backed
Agency	(6		)	852		(12		)	953		(18		)	1,805
Non-agency	(4		)	1,106		(5		)	230		(9		)	1,336
Asset-backed	(3		)	660		(5		)	561		(8		)	1,221
Other						(1		)	403		(1		)	403
Total securities available for sale	$	(33	)	$	7,901	$	(65	)	$	7,515	$	(98	)	$	15,416
Securities Held to Maturity
Residential mortgage-backed - Agency						$	(26	)	$	2,960	$	(26	)	$	2,960
Other	$	(1	)	$	22	(13		)	105		(14		)	127
Total securities held to maturity	$	(1	)	$	22	$	(39	)	$	3,065	$	(40	)	$	3,087

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

Table ~~37:~~41: Gains (Losses) on Sales of Securities Available for Sale


Three months ended March 31 In millions	Gross Gains		Gross Losses			Net Gains (Losses)		Tax Expense (Benefit)
Six months ended June 30 In millions										Gross Gains		Gross Losses			Net Gains (Losses)		Tax Expense (Benefit)
2020	$	184	$	(2	)	$	182	$	38	$	224	$	(2	)	$	222	$	47
2019	$	27	$	(14	)	$	13	$	3	$	47	$	(15	)	$	32	$	7


March 31, 2020 Dollars in millions	1 Year or Less			After 1 Year through 5 Years			After 5 Years through 10 Years			After 10 Years			Total
June 30, 2020 Dollars in millions																1 Year or Less			After 1 Year through 5 Years			After 5 Years through 10 Years			After 10 Years			Total
Securities Available for Sale
U.S. Treasury and government agencies	$	249		$	10,949		$	3,839		$	1,065		$	16,102		$	5,647		$	9,172		$	3,516		$	920		$	19,255
Residential mortgage-backed
Agency	3			117			2,092			48,616			50,828			2			112			1,220			54,296			55,630
Non-agency										1,563			1,563												1,472			1,472
Commercial mortgage-backed
Agency	7			466			828			1,880			3,181						459			265			2,278			3,002
Non-agency				75			351			3,823			4,249						75			301			3,758			4,134
Asset-backed	15			2,721			1,169			1,434			5,339			66			2,603			1,039			1,604			5,312
Other	505			1,958			1,355			1,144			4,962			607			1,794			1,108			1,347			4,856
Total securities available for sale at amortized cost	$	779		$	16,286		$	9,634		$	59,525		$	86,224		$	6,322		$	14,215		$	7,449		$	65,675		$	93,661
Fair value	$	785		$	16,788		$	10,017		$	61,487		$	89,077		$	6,341		$	14,801		$	7,823		$	68,087		$	97,052
Weighted-average yield, GAAP basis (a)	3.10		%	2.16		%	2.58		%	3.14		%	2.89		%	0.75		%	2.08		%	2.12		%	2.97		%	2.62		%
Securities Held to Maturity
U.S. Treasury and government agencies				$	198		$	303		$	280		$	781					$	198		$	306		$	281		$	785
Asset-backed				6			18			26			50
Other	$	32		379			113			114			638			$	18		403			120			115			656
Total securities held to maturity at amortized cost	$	32		$	583		$	434		$	420		$	1,469		$	18		$	601		$	426		$	396		$	1,441
Fair value	$	32		$	613		$	516		$	460		$	1,621		$	18		$	638		$	515		$	444		$	1,615
Weighted-average yield, GAAP basis (a)	3.32		%	3.23		%	3.87		%	2.63		%	3.26		%	2.94		%	3.23		%	3.93		%	2.66		%	3.30		%

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

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

The measurement of delinquency status is based on the contractual terms of each loan. Loans that are 30 days or more past due in terms of payment are considered delinquent. With the adoption of the CECL standard, accruing loans past due as of ~~March 31,~~June 30, 2020 include ~~purchased credit deteriorated~~PCD loans, while amounts as of December 31, 2019 excluded purchased impaired loans. See Note 1 Accounting Policies for additional information related to the adoption of this standard, including the discontinuation of purchased impaired loan accounting.

The following table presents the composition and delinquency status of our loan portfolio at ~~March 31,~~June 30, 2020 and December 31, 2019. Pursuant to the interagency guidance issued in April 2020 and in connection with the credit reporting rules from the CARES Act, the delinquency status of loans modified due to COVID-19 related hardships are being reported as of June 30, 2020 in alignment with the rules set forth for banks to report delinquency status to the credit agencies. These rules require that COVID-19 related loan modifications be reported as follows: (i) if current at the time of modification, the loan remains current throughout the modification period, (ii) if delinquent at the time of modification and the borrower was not made current as part of the modification, the loan maintains its reported as delinquent status during the modification period, or (iii) if delinquent at the time of modification and the borrower was made current as part of the modification or became current during the modification period, the loan is reported as current. As a result, certain loans modified due to COVID-19 related hardships are not being reported as past due as of June 30, 2020 based on the contractual terms of the loan, even where borrowers may not be making payments on their loans during the modification period.

Table ~~40:~~44: Analysis of Loan Portfolio

At ~~March 31,~~June 30, 2020, we pledged ~~$16.6~~$34.3 billion of commercial loans to the Federal Reserve Bank and ~~$69.3~~$70.2 billion of residential real estate and other loans to the Federal Home Loan Bank as collateral for the ability to borrow, if necessary. The comparable amounts at December 31, 2019 were $16.9 billion and $68.0 billion, respectively. Amounts pledged reflect the unpaid principal balances.

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

With the adoption of the CECL standard, nonperforming loans as of ~~March 31,~~June 30, 2020 include ~~purchased credit deteriorated~~PCD loans. Amounts as of December 31, 2019 excluded purchased impaired loans as we were accreting interest income over the expected life of the loans. See Note 1 Accounting Policies for additional information related to the adoption of this standard and our nonperforming loan and lease policies.

Nonperforming loans also include certain loans whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. In accordance with applicable accounting guidance, these loans are considered TDRs. See Note 1 Accounting Policies and the TDR section of this Note 34 for additional information on TDRs.

Total nonperforming loans in Table 4145 include TDRs of ~~$.7 billion and~~ $.9 billion at ~~March 31,~~both June 30, 2020 and December 31, ~~2019, respectively.~~2019. TDRs that are performing, including consumer credit card TDR loans, totaled $.7 billion and $.8 billion at ~~both March 31,~~June 30, 2020 and December 31, 2019, respectively, and are excluded from nonperforming loans.

For commercial and industrial loans, we monitor the performance of the borrower in a disciplined and regular manner based upon the level of credit risk inherent in the loan. To evaluate the level of credit risk, we assign an internal risk rating reflecting the borrower’s PD and LGD. This two-dimensional credit risk rating methodology provides granularity in the risk monitoring process. These ratings are reviewed and updated, generally at least once per year. For small balance homogeneous pools of commercial and industrial loans, mortgages and leases, we apply scoring techniques to assist in determining the PD. Further, on a periodic basis, we update our LGD estimates associated with each rating grade based upon historical data. The combination of the PD and LGD ratings assigned to commercial and industrial loans, capturing both the combination of expectations of default and loss severity in event of default, reflects ~~the relative estimated likelihood~~credit quality characteristics as of ~~loss at~~ the reporting ~~date. In general, loans with lower PD~~date and ~~LGD tend to have less likelihood of~~are used as inputs into our loss ~~compared to loans with higher PD and LGD. The loss amount also considers an estimate of exposure at date of default, which we also periodically update based upon historical data.~~forecasting process.

We manage credit risk associated with our commercial real estate projects and commercial mortgages similar to commercial and industrial loans by ~~analyzing~~evaluating PD and LGD. ~~Additionally, risks~~Risks associated with commercial real estate projects and commercial mortgage activities tend to be correlated to the loan structure and collateral location, project progress and business environment. As a result, these attributes are also monitored and utilized in assessing credit risk.

We manage credit risk associated with our equipment lease financing loan class similar to commercial and industrial loans by analyzing PD and LGD.

Based upon the dollar amount of the lease and the level of credit risk, we follow a formal schedule of periodic review. Generally, this occurs quarterly, although we have established practices to review such credit risk more frequently if circumstances warrant. Our review process entails analysis of the following factors: equipment value/residual value, exposure levels, jurisdiction risk, industry risk, guarantor requirements, and regulatory compliance as applicable.

December 31, 2019 - Dollars in millions Pass Rated
Criticized
Total Loans

Commercial $ 119,761
$ 5,576
$ 125,337

Commercial real estate 27,424
686
28,110

Equipment lease financing 6,891
264
7,155

Total commercial lending $ 154,076
$ 6,526
$ 160,602



December 31, 2019 - In millions	Pass Rated		Criticized		Total Loans
Commercial and industrial	$	119,761	$	5,576	$	125,337
Commercial real estate	27,424		686		28,110
Equipment lease financing	6,891		264		7,155
Total commercial	$	154,076	$	6,526	$	160,602

We use several credit quality indicators, including delinquency information, nonperforming loan information, updated credit scores, originated and updated LTV ratios to monitor and manage credit risk within the home equity and residential real estate loan classes. A summary of credit quality indicators follows:

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

We monitor a variety of credit quality information in the management of these consumer loan classes. For all loan types, we generally use a combination of internal loan parameters as well as an updated FICO score. We use FICO scores as a primary credit quality indicator for automobile and credit card loans, as well as non-government guaranteed or non-insured education loans and other secured and unsecured lines and loans. Internal credit metrics, such as delinquency status, are heavily relied upon as credit quality indicators 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.

Along with the monitoring of delinquency trends and losses for each class, FICO credit score updates are obtained at least quarterly along with a variety of credit bureau attributes. Loans with high FICO scores tend to have a lower likelihood of loss. Conversely, loans with low FICO scores tend to have a higher likelihood of loss.

Table ~~44:~~48: Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes

Table 4549 quantifies the number of loans that were classified as TDRs as well as the change in the loans’ ~~amortized cost basis~~balance as a result of becoming a TDR during the three and six months ended ~~March 31, 2020. Amounts for the three months ended March 31, 2019 represent recorded investment.~~June 30, 2020 and June 30, 2019. Additionally, the table provides information about the types of TDR concessions. See Note 3 Asset Quality in our 2019 Form 10-K for additional ~~discussion of TDRs.~~details on these TDR concessions.

After a loan is determined to be a TDR, we continue to track its performance under its most recent restructured terms. We consider a TDR to have subsequently defaulted when it becomes 60 days past due after the most recent date the loan was restructured. The ~~amortized cost basis~~following table provides a summary of ~~loans~~TDRs that ~~were both (i) classified as TDRs or were subsequently modified during each 12-month period preceding January 1, 2020 and January 1, 2019, respectively, and (ii)~~ subsequently defaulted during the ~~three months ended March 31,~~periods presented and were classified as

TDRs during the applicable 12-month period preceding June 30, 2020 and ~~March 31, 2019 totaled $29 million and $18 million respectively. The comparable amount reflects recorded investment.~~June 30, 2019.

Table 50: Subsequently Defaulted TDRs

The $2.9 billion increase in the ACL ~~as of March 31,~~since January 1, 2020 was ~~primarily~~driven by the following factors in the commercial and consumer portfolios:

Prior to January 1, 2020, we maintained our ALLL at levels we believed to be appropriate to absorb estimated probable credit losses incurred in the portfolios as of the balance sheet date. We used the two main portfolio segments - Commercial ~~Lending~~ and Consumer, ~~Lending,~~ and developed and documented the ALLL under separate methodologies for each of these portfolio segments. See Note 1 Accounting Policies in our 2019 Form 10-K for a description of the accounting policies for ALLL.

A rollforward of the ALLL and associated loan data follows:

Table ~~49:~~53: Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data


At or for the three months ended March 31, 2019 Dollars in millions	Commercial Lending			Consumer Lending			Total
At or for the six months ended June 30, 2019 Dollars in millions										Commercial			Consumer			Total
Allowance for loan and lease losses
January 1, 2019	$	1,663		$	966		$	2,629		$	1,663		$	966		$	2,629
Charge-offs	(31		)	(184		)	(215		)	(84		)	(358		)	(442		)
Recoveries	19			60			79			40			124			164
Net (charge-offs)	(12		)	(124		)	(136		)	(44		)	(234		)	(278		)
Provision for credit losses	80			109			189			187			182			369
Net decrease in allowance for unfunded loan commitments and letters of credit	5			1			6			(7		)	1			(6		)
Other				4			4						7			7
March 31, 2019	$	1,736		$	956		$	2,692
June 30, 2019										$	1,799		$	922		$	2,721
TDRs individually evaluated for impairment	$	27		$	130		$	157		$	33		$	123		$	156
Other loans individually evaluated for impairment	60						60			53						53
Loans collectively evaluated for impairment	1,649			551			2,200			1,713			517			2,230
Purchased impaired loans				275			275						282			282
March 31, 2019	$	1,736		$	956		$	2,692
June 30, 2019										$	1,799		$	922		$	2,721
Loan portfolio
TDRs individually evaluated for impairment	$	456		$	1,412		$	1,868		$	396		$	1,381		$	1,777
Other loans individually evaluated for impairment	190						190			287						287
Loans collectively evaluated for impairment	157,796			69,732			227,528			160,920			71,605			232,525
Fair value option loans (a)				758			758						755			755
Purchased impaired loans				1,949			1,949						1,871			1,871
March 31, 2019	$	158,442		$	73,851		$	232,293
Portfolio segment ALLL as a percentage of total ALLL	64		%	36		%	100		%
Ratio of ALLL to total loans	1.10		%	1.29		%	1.16		%
June 30, 2019										$	161,603		$	75,612		$	237,215

As more fully described in Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in our 2019 Form 10-K, we have transferred residential and commercial mortgage loans in securitization or sales transactions in which we have continuing involvement. Our continuing involvement generally consists of servicing, repurchasing previously transferred loans under certain conditions and loss share arrangements, and, in limited circumstances, holding of mortgage-backed securities issued by the securitization special purpose entities (SPEs).

We earn servicing and other ancillary fees for our role as servicer and, depending on the contractual terms of the servicing arrangement, we can be terminated as servicer with or without cause. At the consummation date of each type of loan transfer where we retain the servicing, we recognize a servicing right at fair value. See Note 89 Commitments and Note 1112 Fair Value for information on our servicing rights, including the carrying value of servicing assets.

The following table provides cash flows associated with our loan sale and servicing activities:

As discussed in Note 2 Loan Sale and Servicing Activities and Variable Interest Entities in our 2019 Form 10-K, we are involved with various entities in the normal course of business that are deemed to be VIEs.

The following table provides a summary of non-consolidated VIEs with which we have significant continuing involvement but are not the primary beneficiary. We have excluded certain transactions with non-consolidated VIEs from the balances presented in Table 5256 where we have determined that our continuing involvement is not significant. We do not consider our continuing involvement to be significant when it relates to a VIE where we only invest in securities issued by the VIE and were not involved in the design of the VIE or where no transfers have occurred between us and the VIE. In addition, where we only have lending arrangements in the normal

We make certain equity investments in various tax credit limited partnerships or limited liability companies (LLCs). The purpose of these investments is to achieve a satisfactory return on capital and to assist us in achieving goals associated with the Community Reinvestment Act. Within Income taxes, during the ~~three~~six months ended ~~March 31,~~June 30, 2020, we recognized ~~$49~~$96 million of amortization, ~~$50~~ $98

million of tax credits and ~~$12~~$22 million of other tax benefits associated with qualified investments in low income housing tax credits. The amounts for the second quarter of 2020 were $47 million, $48 million and $10 million, respectively.

See Note 1 Accounting Policies in this Report and Note 7 Goodwill and Mortgage Servicing Rights in our 2019 Form 10-K for more information regarding our goodwill.

We recognize the right to service mortgage loans for others as an intangible asset when the servicing income we receive is more than adequate compensation. MSRs totaled $1.1 billion and $1.6 billion at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, and consisted of loan servicing contracts for commercial and residential mortgages measured at fair value.

MSRs are subject to declines in value from actual or expected prepayment of the underlying loans and defaults as well as market driven changes in interest rates. We manage this risk by economically hedging the fair value of MSRs with securities and derivative instruments which are expected to increase (or decrease) in value when the value of MSRs decreases (or increases).

See the Sensitivity Analysis section of this Note 5,6, as well as Note 6 Fair Value in our 2019 Form 10-K for more detail on our fair value measurement of MSRs. Refer to Note 7 Goodwill and Mortgage Servicing Rights in our 2019 Form 10-K for more information on our accounting and measurement of MSRs.

Changes in the commercial and residential MSRs follow:

The fair value of commercial and residential MSRs and significant inputs to the valuation models as of ~~March 31,~~June 30, 2020 are shown in Tables 5458 and ~~55.~~59. The expected and actual rates of mortgage loan prepayments are significant factors driving the fair value. Management uses both internal proprietary models and a third-party model to estimate future commercial mortgage loan prepayments and a third-party model to estimate future residential mortgage loan prepayments. These models have been refined based on current market conditions and management judgment. Future interest rates are another important factor in the valuation of MSRs. Management utilizes market implied forward interest rates to estimate the future direction of mortgage and discount rates. The forward rates utilized are derived from the current yield curve for U.S. dollar interest rate swaps and are consistent with pricing of capital markets instruments. Changes in the shape and slope of the forward curve in future periods may result in volatility in the fair value estimate.

A sensitivity analysis of the hypothetical effect on the fair value of MSRs to adverse changes in key assumptions is presented in Tables 5458 and ~~55.~~59. These sensitivities do not include the impact of the related hedging activities. Changes in fair value generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (e.g., changes in mortgage interest rates, which drive changes in

prepayment rate estimates, could result in changes in the interest rate spread), which could either magnify or counteract the sensitivities.

The following tables set forth the fair value of commercial and residential MSRs and the sensitivity analysis of the hypothetical effect on the fair value of MSRs to immediate adverse changes of 10% and 20% in those assumptions.


Dollars in millions	March 31 2020			December 31 2019			June 30 2020			December 31 2019
Fair value	$	477		$	649		$	490		$	649
Weighted-average life (years)	4.1			4.1			4.3			4.1
Weighted-average constant prepayment rate	4.51		%	4.56		%	4.84		%	4.56		%
Decline in fair value from 10% adverse change	$	8		$	9		$	8		$	9
Decline in fair value from 20% adverse change	$	16		$	17		$	16		$	17
Effective discount rate	7.57		%	7.91		%	7.42		%	7.91		%
Decline in fair value from 10% adverse change	$	12		$	17		$	13		$	17
Decline in fair value from 20% adverse change	$	24		$	34		$	26		$	34


Dollars in millions	March 31 2020				December 31 2019				June 30 2020				December 31 2019
Fair value	$	605			$	995			$	577			$	995
Weighted-average life (years)	2.9				5.2				2.9				5.2
Weighted-average constant prepayment rate	27.14		%		13.51		%		27.56		%		13.51		%
Decline in fair value from 10% adverse change	$	43			$	46			$	41			$	46
Decline in fair value from 20% adverse change	$	81			$	89			$	79			$	89
Weighted-average option adjusted spread	770			bps	769			bps	912			bps	769			bps
Decline in fair value from 10% adverse change	$	13			$	27			$	14			$	27
Decline in fair value from 20% adverse change	$	26			$	52			$	27			$	52

Fees from mortgage loan servicing, which includes contractually specified servicing fees, late fees and ancillary fees were $.1 billion for the three months ended ~~March 31,~~June 30, 2020 and 2019 and $.2 billion for the six months ended June 30, 2020 and 2019. We also generate servicing fees from fee-based activities provided to others for which we do not have an associated servicing asset. Fees from commercial and residential MSRs are reported within Noninterest income on our Consolidated Income Statement in Corporate services and Residential mortgage, respectively.


In billions	In billions		In billions
Less than 1 year	$	38.8	$	16.1
1 to 2 years	$	7.4	$	3.6
2 to 3 years	$	8.1	$	8.9
3 to 4 years	$	2.7	$	2.8
4 to 5 years	$	2.9	$	3.2
Over 5 years	$	13.5	$	12.4

The following table presents the contractual rates and maturity dates of our FHLB borrowings, senior debt and subordinated debt as of ~~March 31,~~June 30, 2020, and the carrying values as of ~~March 31,~~June 30, 2020 and December 31, 2019.

In Table ~~58,~~62, the carrying values for Parent Company senior and subordinated debt include basis adjustments of ~~$778~~$820 million and ~~$65~~$67 million, respectively, whereas Bank senior and subordinated debt include basis adjustments of ~~$592~~$608 million and ~~$473~~$496 million, respectively, related to fair value accounting hedges as of ~~March 31,~~June 30, 2020.

We issue standby letters of credit and share in the risk of standby letters of credit issued by other financial institutions, in each case to support obligations of our customers to third parties, such as insurance requirements and the facilitation of transactions involving capital markets product execution. Approximately ~~97%~~96% of our net outstanding standby letters of credit were rated as Pass as of ~~March 31,~~June 30, 2020, with the remainder rated as Criticized. An internal credit rating of Pass indicates the expected risk of loss is currently low, while a rating of Criticized indicates a higher degree of risk.

If the customer fails to meet its financial or performance obligation to the third party under the terms of the contract or there is a need to support a remarketing program, then upon a draw by a beneficiary, subject to the terms of the letter of credit, we would be obligated to make payment to them. The standby letters of credit outstanding on ~~March 31,~~June 30, 2020 had terms ranging from less than one year to six years.

As of ~~March 31,~~June 30, 2020, assets of $1.1 billion secured certain specifically identified standby letters of credit. In addition, a portion of the remaining standby letters of credit issued on behalf of specific customers is also secured by collateral or guarantees that secure the customers’ other obligations to us. The carrying amount of the liability for our obligations related to standby letters of credit and participations in standby letters of credit was $.2 billion at ~~March 31,~~June 30, 2020 and is included in Other liabilities on our Consolidated Balance Sheet.

Activity in total equity for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 is as follows.

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

Table ~~61:~~65: Other Comprehensive Income (Loss)


	Three months ended March 31						Three months ended June 30						Six months ended June 30
In millions	2020			2019			2020			2019			2020			2019
Net unrealized gains (losses) on securities without an allowance for credit losses
Increase in net unrealized gains (losses) on securities	$	1,669					$	661					$	2,330
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income	1						1						2
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income	181						40						221
Net increase (decrease), pre-tax	1,487						620						2,107
Effect of income taxes	(341		)				(143		)				(484		)
Net increase (decrease), after-tax	1,146						477						1,623
Net unrealized gains (losses) on securities with an allowance for credit losses
Increase in net unrealized gains (losses) on securities	(7		)				(82		)				(89		)
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income
Net increase (decrease), pre-tax	(7		)				(82		)				(89		)
Effect of income taxes	2						18						20
Net increase (decrease), after-tax	(5		)				(64		)				(69		)
Net unrealized gains (losses) on non-OTTI securities
Increase in net unrealized gains (losses) on non-OTTI securities				$	640					$	713					$	1,353
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income				3						3						6
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income				(2		)				16						14
Net increase (decrease), pre-tax				639						694						1,333
Effect of income taxes				(147		)				(159		)				(306		)
Net increase (decrease), after-tax				492						535						1,027
Net unrealized gains (losses) on OTTI securities
Increase in net unrealized gains (losses) on OTTI securities				9												9
Net increase (decrease), pre-tax				9						—						9
Effect of income taxes				(2		)										(2		)
Net increase (decrease), after-tax				7						—						7
Net unrealized gains (losses) on cash flow hedge derivatives
Increase in net unrealized gains (losses) on cash flow hedge derivatives	830			108			115			246			945			354
Less: Net gains (losses) realized as a yield adjustment reclassified to loan interest income	42			(8		)	102			(12		)	144			(20		)
Less: Net gains (losses) realized as a yield adjustment reclassified to investment securities interest income	2			1			1			1			3			2
Less: Net gains (losses) realized on sales of securities reclassified to noninterest income	1			15			—			3			1			18
Net increase (decrease), pre-tax	785			100			12			254			797			354
Effect of income taxes	(180		)	(23		)	(3		)	(58		)	(183		)	(81		)
Net increase (decrease), after-tax	605			77			9			196			614			273
Pension and other postretirement benefit plan adjustments
Net pension and other postretirement benefit activity	10			143			(20		)	(89		)	(10		)	54
Amortization of actuarial loss (gain) reclassified to other noninterest expense	1			1			2			4			3			5
Amortization of prior service cost (credit) reclassified to other noninterest expense	1			1			1			1			2			2
Net increase (decrease), pre-tax	12			145			(17		)	(84		)	(5		)	61
Effect of income taxes	(3		)	(33		)	4			19			1			(14		)
Net increase (decrease), after-tax	9			112			(13		)	(65		)	(4		)	47
Other
PNC’s portion of BlackRock’s OCI	(34		)	29
Net investment hedge derivatives	75			(18		)	5			32			80			14
Foreign currency translation adjustments and other	(67		)	23			(3		)	(27		)	(70		)	(4		)
Net increase (decrease), pre-tax	(26		)	34			2			5			10			10
Effect of income taxes	(10		)	(2		)	(1		)	(7		)	(19		)	(4		)
Net increase (decrease), after-tax	(36		)	32			1			(2		)	(9		)	6
Total other comprehensive income (loss), pre-tax	2,251			927
Total other comprehensive income (loss), tax effect	(532		)	(207		)
Total other comprehensive income (loss) from continuing operations, pre-tax							535			869			2,820			1,767
Total other comprehensive income (loss) from continuing operations, tax effect							(125		)	(205		)	(665		)	(407		)
Total other comprehensive income (loss) from continuing operations, after-tax							$	410		$	664		$	2,155		$	1,360
Total other comprehensive income (loss) from discontinued operations, after-tax							141			(28		)	115			(4		)
Total other comprehensive income (loss), after-tax	$	1,719		$	720		$	551		$	636		$	2,270		$	1,356

Table ~~62:~~66: Accumulated Other Comprehensive Income (Loss) Components


In millions, after-tax	Net unrealized gains (losses) on non-OTTI securities			Net unrealized gains (losses) on OTTI securities		Net unrealized gains (losses) on cash flow hedge derivatives		Pension and other postretirement benefit plan adjustments			Other			Total			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			Accumulated other Comprehensive Income from Continuing Operations			Accumulated other Comprehensive Income from Discontinued Operations			Total
Three months ended
Balance at March 31, 2019																	$	208		$	211	$	124	$	(418	)	$	(35	)	$	90		$	(95	)	$	(5	)
Net activity																	535					196		(65		)	(2		)	664			(28		)	636
Balance at June 30, 2019																	$	743		$	211	$	320	$	(483	)	$	(37	)	$	754		$	(123	)	$	631
Six months ended
Balance at December 31, 2018	$	(284	)	$	204	$	47	$	(530	)	$	(162	)	$	(725	)	$	(284	)	$	204	$	47	$	(530	)	$	(43	)	$	(606	)	$	(119	)	$	(725	)
Net activity	492			7		77		112			32			720			1,027			7		273		47			6			1,360			(4		)	1,356
Balance at March 31, 2019	$	208		$	211	$	124	$	(418	)	$	(130	)	$	(5	)
Balance at June 30, 2019																	$	743		$	211	$	320	$	(483	)	$	(37	)	$	754		$	(123	)	$	631

~~On April 2, 2020, we~~The PNC board of directors declared a quarterly cash dividend on common stock ~~cash dividend~~payable on August 5, 2020 of $1.15 per share, ~~payable~~consistent with the second quarter dividend paid on May 5, 2020.

We measure certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date, and is determined using an exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair value hierarchy established by GAAP requires us to maximize the use of observable inputs when measuring fair value. For more information regarding the fair value hierarchy, see Note 6 Fair Value in our 2019 Form 10-K.

For more information on the valuation methodologies used to measure assets and liabilities at fair value on a recurring basis, see Note 6 Fair Value in our 2019 Form 10-K. The following table summarizes our assets and liabilities measured at fair value on a recurring basis, including instruments for which we have elected the fair value option.

Table ~~65:~~69: Fair Value Measurements – Recurring Basis Summary

Six Months Ended June 30, 2020



			Total realized / unrealized gains or losses for the period (a)																										Unrealized gains / losses on assets and liabilities held on Consolidated Balance Sheet at June 30, 2020 (a) (c)
Level 3 Instruments Only In millions	Fair Value Dec. 31, 2019		Included in Earnings			Included in Other comprehensive income (b)				Purchases		Sales			Issuances		Settlements				Transfers into Level 3		Transfers out of Level 3				Fair Value June 30, 2020
Assets
Residential mortgage loans held for sale	$	2								$	7	$	(2	)			$	(3	)		$	87	$	(3	)	(e)	$	88
Commercial mortgage loans held for sale	64		$	(1	)												(3		)								60		$	(1	)
Securities available for sale
Residential mortgage- backed non-agency	1,741		28				$	(99	)								(179		)								1,491
Commercial mortgage- backed non-agency																					19						19
Asset-backed	240		4				(13		)								(21		)								210
Other	74						(3		)	4							(3		)								72
Total securities available for sale	2,055		32				(115		)	4							(203		)		19						1,792
Loans	300		13							71		(31		)			340			(d)			(86		)	(e)	607		13
Equity investments	1,276		(131		)					113		(75		)													1,183		(125		)
Residential mortgage servicing rights	995		(419		)					61					$	22	(82		)								577		(420		)
Commercial mortgage servicing rights	649		(166		)					23					45		(61		)								490		(166		)
Trading securities
Financial derivatives	54		151							6							(70		)								141		158
Other assets
Total assets	$	5,395	$	(521	)		$	(115	)	$	285	$	(108	)	$	67	$	(82	)		$	106	$	(89	)		$	4,938	$	(541	)
Liabilities
Other borrowed funds	$	7													$	25	$	(30	)								$	2
Financial derivatives	200		$	36								$	2				(29		)								209		$	37
Other liabilities	137		6												37		(97		)		$	2					85		(8		)
Total liabilities	$	344	$	42								$	2		$	62	$	(156	)		$	2					$	296	$	29
Net gains (losses)			$	(563	)	(f)																							$	(570	)	(g)

~~Three~~Six Months Ended ~~March 31,~~June 30, 2019

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

Table ~~67:~~71: Fair Value Measurements – Recurring Quantitative Information

~~March 31,~~June 30, 2020

December 31, 2019



Level 3 Instruments Only Dollars in millions	Fair Value			Valuation Techniques	Unobservable Inputs	Range (Weighted-Average) (a)
Commercial mortgage loans held for sale	$	64		Discounted cash flow	Spread over the benchmark curve (b)	530bps - 2,935bps (1,889bps)
Residential mortgage-backed non-agency securities	1,741			Priced by a third-party vendor using a discounted cash flow pricing model	Constant prepayment rate	1.0% - 36.2% (9.9%)
					Constant default rate	0.0% - 14.1% (4.3%)
					Loss severity	26.6% - 95.7% (51.9%)
					Spread over the benchmark curve (b)	188bps weighted-average
Asset-backed securities	240			Priced by a third-party vendor using a discounted cash flow pricing model	Constant prepayment rate	1.0% - 22.0% (7.5%)
					Constant default rate	1.0% - 7.2% (3.4%)
					Loss severity	30.0% - 100.0% (57.6%)
					Spread over the benchmark curve (b)	215bps weighted-average
Loans	184			Consensus pricing (c)	Cumulative default rate	3.6% - 100.0% (76.7%)
					Loss severity	0.0% - 100.0% (14.5%)
					Discount rate	5.0% - 8.0% (5.2%)
	72			Discounted cash flow	Loss severity	8.0% weighted-average
	72			Discounted cash flow	Discount rate	4.8% weighted-average
	44			Consensus pricing (c)	Credit and Liquidity discount	0.0% - 99.0% (63.4%)
Equity investments	1,276			Multiple of adjusted earnings	Multiple of earnings	5.0x - 16.5x (8.5x)
Residential mortgage servicing rights	995			Discounted cash flow	Constant prepayment rate	0.0% - 53.8% (13.5%)
Residential mortgage servicing rights	995			Discounted cash flow	Spread over the benchmark curve (b)	320bps - 1,435bps (769bps)
Commercial mortgage servicing rights	649			Discounted cash flow	Constant prepayment rate	3.5% - 18.1% (4.6%)
Commercial mortgage servicing rights	649			Discounted cash flow	Discount rate	5.6% - 8.1% (7.9%)
Financial derivatives - Swaps related to sales of certain Visa Class B common shares	(176		)	Discounted cash flow	Estimated conversion factor of Visa Class B shares into Class A shares	162.3% weighted-average
					Estimated annual growth rate of Visa Class A share price	16.0%
					Estimated length of litigation resolution date	Q1 2021
Insignificant Level 3 assets, net of liabilities (d)	(38		)
Total Level 3 assets, net of liabilities (e)	$	5,051

We may be required to measure certain financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower of amortized cost or fair value accounting or write-downs of individual assets due to impairment and are included in Table ~~68.~~72. 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 2019 Form 10-K.

We elect the fair value option to account for certain financial instruments. For more information on these financial instruments for which the fair value option election has been made, see Note 6 Fair Value in our 2019 Form 10-K.

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

Table ~~69:~~73: Fair Value Option – Fair Value and Principal Balances

The changes in fair value for items for which we elected the fair value option are as follows:

Table ~~71:~~75: Additional Fair Value Information Related to Other Financial Instruments


	Carrying		Fair Value								Carrying		Fair Value
In millions	Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
March 31, 2020
June 30, 2020
Assets
Cash and due from banks	$	7,493	$	7,493	$	7,493					$	6,338	$	6,338	$	6,338
Interest-earning deposits with banks	19,986		19,986				$	19,986			50,233		50,233				$	50,233
Securities held to maturity	1,469		1,621		924		542		$	155	1,443		1,615		931		487		$	197
Net loans (excludes leases)	252,557		259,894						259,894		244,181		251,421						251,421
Other assets	5,493		5,493				5,493				5,198		5,184				5,180		4
Total assets	$	286,998	$	294,487	$	8,417	$	26,021	$	260,049	$	307,393	$	314,791	$	7,269	$	55,900	$	251,622
Liabilities
Time deposits	$	22,440	$	22,399			$	22,399			$	21,220	$	21,227			$	21,227
Borrowed funds	71,975		70,660				68,909		$	1,751	45,024		45,309				43,603		$	1,706
Unfunded loan commitments and letters of credit	450		450						450
Unfunded lending related commitments											662		662						662
Other liabilities	456		456				456				372		372				372
Total liabilities	$	95,321	$	93,965			$	91,764	$	2,201	$	67,278	$	67,570			$	65,202	$	2,368
December 31, 2019
Assets
Cash and due from banks	$	5,061	$	5,061	$	5,061					$	5,061	$	5,061	$	5,061
Interest-earning deposits with banks	23,413		23,413				$	23,413			23,413		23,413				$	23,413
Securities held to maturity	17,661		18,044		832		17,039		$	173	17,661		18,044		832		17,039		$	173
Net loans (excludes leases)	229,205		232,670						232,670		229,205		232,670						232,670
Other assets	5,700		5,700				5,692		8		5,700		5,700				5,692		8
Total assets	$	281,040	$	284,888	$	5,893	$	46,144	$	232,851	$	281,040	$	284,888	$	5,893	$	46,144	$	232,851
Liabilities
Time deposits	$	21,663	$	21,425			$	21,425			$	21,663	$	21,425			$	21,425
Borrowed funds	59,745		60,399				58,622		$	1,777	59,745		60,399				58,622		$	1,777
Unfunded loan commitments and letters of credit	318		318						318
Unfunded lending related commitments											318		318						318
Other liabilities	506		506				506				506		506				506
Total liabilities	$	82,232	$	82,648			$	80,553	$	2,095	$	82,232	$	82,648			$	80,553	$	2,095

The aggregate fair values in Table 7175 represent only a portion of the total market value of our assets and liabilities as, in accordance with the guidance related to fair values about financial instruments, we exclude the following:

We use a variety of financial derivatives to both mitigate exposure to market (primarily interest rate) and credit risk inherent in our business activities, as well as, to facilitate customer risk management activities. We manage these risks as part of our overall asset and liability management process and through our credit policies and procedures. Derivatives represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional amount and an underlying as specified in the contract.

Derivative transactions are often measured in terms of notional amount, but this amount is generally not exchanged and it is not recorded on the balance sheet. The notional amount is the basis to which the underlying is applied to determine required payments under the derivative contract. The underlying is a referenced interest rate (commonly LIBOR), security price, credit spread or other index. Residential and commercial real estate loan commitments associated with loans to be sold also qualify as derivative instruments.

For more information regarding derivatives see Note 1 Accounting Policies and Note 13 Financial Derivatives in our 2019 Form 10-K.

The following table presents the notional amounts and gross fair values of all derivative assets and liabilities held by us.

All derivatives are carried on our Consolidated Balance Sheet at fair value. Derivative balances are presented on the Consolidated Balance Sheet on a net basis taking into consideration the effects of legally enforceable master netting agreements and, when appropriate, any related cash collateral exchanged with counterparties. Further discussion regarding the offsetting rights associated with these legally enforceable master netting agreements is included in the Offsetting, Counterparty Credit Risk and Contingent Features section of this Note ~~12.~~13. Any nonperformance risk, including credit risk, is included in the determination of the estimated net fair value of the derivatives.

Certain derivatives used to manage interest rate and foreign exchange risk as part of our asset and liability risk management activities are designated as accounting hedges. Derivatives hedging the risks associated with changes in the fair value of assets or liabilities are considered fair value hedges, derivatives hedging the variability of expected future cash flows are considered cash flow hedges, and derivatives hedging a net investment in a foreign subsidiary are considered net investment hedges. Designating derivatives as accounting hedges allows for gains and losses on those derivatives to be recognized in the same period and in the same income statement line item as the earnings impact of the hedged items.

We enter into receive-fixed, pay-variable interest rate swaps to hedge changes in the fair value of outstanding fixed-rate debt caused by fluctuations in market interest rates. We also enter into pay-fixed, receive-variable interest rate swaps and zero-coupon swaps to hedge changes in the fair value of fixed rate and zero-coupon investment securities caused by fluctuations in market interest rates. Gains and losses on the interest rate swaps designated in these hedge relationships, along with the offsetting gains and losses on the hedged items attributable to the hedged risk, are recognized in current earnings within the same income statement line item.

We enter into receive-fixed, pay-variable interest rate swaps to modify the interest rate characteristics of designated commercial loans from variable to fixed in order to reduce the impact of changes in future cash flows due to market interest rate changes. We also periodically enter into forward purchase and sale contracts to hedge the variability of the consideration that will be paid or received related to the purchase or sale of investment securities. The forecasted purchase or sale is consummated upon gross settlement of the forward contract itself. For these cash flow hedges, gains and losses on the interest rate swaps and forward contracts are recorded in AOCI and are then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line as the hedged cash flows.

We enter into foreign currency forward contracts to hedge non-U.S. dollar net investments in foreign subsidiaries against adverse changes in foreign exchange rates. We assess whether the hedging relationship is highly effective in achieving offsetting changes in the value of the hedge and hedged item by qualitatively verifying that the critical terms of the hedge and hedged item match at the inception of the hedging relationship and on an ongoing basis. Net investment hedge derivatives are classified as foreign exchange contracts. There were 0 components of derivative gains or losses excluded from the assessment of the hedge effectiveness for all periods presented. Gains ~~(losses)~~ on net investment hedge derivatives recognized in OCI were ~~$75~~$5 million and ~~$(18)~~$80 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, compared with $32 million and $14 million for the three and six months ended June 30, 2019, respectively.

For additional information on derivatives not designated as hedging instruments under GAAP, see Note 13 Financial Derivatives in our 2019 Form 10-K.

Further detail regarding the gains (losses) on derivatives not designated in hedging relationships is presented in the following table.

We generally utilize a net presentation on the Consolidated Balance Sheet for those derivative financial instruments entered into with counterparties under legally enforceable master netting agreements. The master netting agreements reduce credit risk by permitting the closeout netting of all outstanding derivative instruments under the master netting agreement with the same counterparty upon the occurrence of an event of default. The master netting agreement also may require the exchange of cash or marketable securities to collateralize either party’s net position. For additional information on derivative offsetting, counterparty credit risk and contingent features, see Note 13 Financial Derivatives in our 2019 Form 10-K.

Table 7680 shows the impact legally enforceable master netting agreements had on our derivative assets and derivative liabilities as of ~~March 31,~~June 30, 2020 and December 31, 2019. The table includes cash collateral held or pledged under legally enforceable master netting

Table 7680 includes over-the-counter (OTC) derivatives and OTC derivatives cleared through a central clearing house. OTC derivatives represent contracts executed bilaterally with counterparties that are not settled through an organized exchange or directly cleared through a central clearing house. The majority of OTC derivatives are governed by the International Swaps and Derivatives Association (ISDA) documentation or other legally enforceable master netting agreements. OTC cleared derivatives represent contracts executed bilaterally with counterparties in the OTC market that are novated to a central clearing house who then becomes our counterparty. OTC cleared derivative instruments are typically settled in cash each day based on the prior day value.

In addition to using master netting agreements and other collateral agreements to reduce credit risk associated with derivative instruments, we also seek to manage credit risk by evaluating credit ratings of counterparties and by using internal credit analysis, limits and monitoring procedures.

At ~~March 31,~~June 30, 2020, we held cash, U.S. government securities and mortgage-backed securities totaling ~~$3.0~~$2.7 billion under master netting agreements and other collateral agreements to collateralize net derivative assets due from counterparties, and we pledged cash totaling $2.0 billion under these agreements to collateralize net derivative liabilities owed to counterparties and to meet initial margin

Certain derivative agreements contain various credit-risk related contingent provisions, such as those that require our debt to maintain a specified credit rating from one or more of the major credit rating agencies. If our debt ratings were to fall below such specified ratings, the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position on ~~March 31,~~June 30, 2020 was ~~$3.5~~$3.1 billion for which we had posted collateral of ~~$2.4~~$2.5 billion in the normal course of business. The maximum additional amount of collateral we would have been required to post if the credit-risk-related contingent features underlying these agreements had been triggered on ~~March 31,~~June 30, 2020 would be ~~$1.1~~$.6 billion.

We have 43 reportable business segments:

Results of individual businesses are presented based on our internal management reporting practices. There is no comprehensive, authoritative body of guidance for management accounting equivalent to GAAP; therefore, the financial results of our individual businesses are not necessarily comparable with similar information for any other company. We periodically refine our internal methodologies as management reporting practices are enhanced. To the extent significant and practicable, retrospective application of new methodologies is made to prior period reportable business segment results and disclosures to create comparability with the current period.

Total business segment financial results differ from total consolidated net income. These differences are reflected in the “Other” category in the business segment tables. “Other” includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, ~~gains or losses related to BlackRock transactions,~~ exited businesses and differences between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments’ results exclude their portion of net income attributable to noncontrolling interests. The “Other” category also includes our BlackRock held for sale asset. Assets, revenue and earnings attributable to foreign activities were not material in the period presented for comparison.

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

Net interest income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors.

We have allocated the ~~ACL~~ALLL and ~~allowances~~the allowance for ~~loan and lease losses and~~ unfunded lending related commitments ~~and letters of credit~~ based on the loan exposures within each business segment’s portfolio. Key reserve assumptions and estimation processes react to and are influenced by

Table ~~77:~~81: Results of Businesses

Retail Banking provides deposit, lending, brokerage, insurance services, investment management and cash management products and services to consumer and small business customers. Our customers are serviced through our branch network, ATMs, call centers, online banking and mobile channels. The branch network is located primarily in markets across the Mid-Atlantic, Midwest and Southeast. In 2018, Retail Banking launched its national expansion strategy designed to grow customers with digitally-led banking and an ultra-thin branch network in markets outside of our existing retail branch network. Deposit products include checking, savings and money market accounts and certificates of deposit. Lending products include residential mortgages, home equity loans and lines of credit, auto loans, credit cards, education loans and personal and small business loans and lines of credit. The residential mortgage loans are directly originated within our branch network and nationwide, and are typically underwritten to agency and/or third-party standards, and either sold, servicing retained, or held on our balance sheet. Brokerage, investment management and cash management products and services include managed, education, retirement and trust accounts.

Corporate & Institutional Banking provides lending, treasury management and capital markets-related products and services to mid-sized and large corporations, and government and not-for-profit entities. Lending products include secured and unsecured loans, letters of credit and equipment leases. The Treasury Management business provides payables, receivables, deposit and account services, liquidity and investments, and online and mobile banking products and services to our clients. Capital markets-related products and services include foreign exchange, derivatives, securities underwriting, loan syndications, mergers and acquisitions advisory and equity capital markets advisory related services. We also provide commercial loan servicing and technology solutions for the commercial real estate finance industry. Products and services are provided nationally.

~~BlackRock,~~ in which we hold an equity investment, is a leading publicly-traded investment management firm providing a broad range of investment and technology services to institutional and retail clients worldwide. Using a diverse platform of alpha-seeking active, index and cash management investment strategies across asset classes, BlackRock tailors investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. BlackRock also offers technology services, including an investment and risk management technology platform, as well as advisory services and solutions to a broad base of institutional and wealth management clients.

2020 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 4,056
$ 153.22
4,052
82,040
February 1 - 29 4,423
$ 147.96
3,982
78,058
March 1 - 31 2,030
$ 107.57
2,030
76,028
Total 10,509
$ 142.19



2020 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)
April 1 - 30	16	$	101.50	—	76,028
May 1 - 31 (c)	—	$	105.99	—	76,028
June 1 - 30	—	$	—	—	76,028
Total	16	$	101.50

The Tower at PNC Plaza

300 Fifth Avenue

Pittsburgh, Pennsylvania 15222-2401

888-762-2265

The PNC Financial Services Group, Inc.'s financial reports and information about products and services are available on the internet at www.pnc.com. We provide information for investors on our corporate website under “About Us – Investor Relations.” We use our Twitter account, @pncnews, as an additional way of disseminating to the public information that may be relevant to investors.

462 South 4th Street, Suite 1600

Louisville, KY 40202

800-982-7652

www.computershare.com/pnc



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



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $5.00	PNC	New York Stock Exchange
Depositary Shares Each Representing a 1/4,000 Interest in a Share of Fixed-to- Floating Rate Non-Cumulative Perpetual Preferred Stock, Series P	PNC P	New York Stock Exchange
Depositary Shares Each Representing a 1/4,000 Interest in a Share of 5.375% Non-Cumulative Perpetual Preferred Stock, Series Q	PNC Q	New York Stock Exchange



	Pages
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Income Statement	4849
Consolidated Statement of Comprehensive Income	4950
Consolidated Balance Sheet	5051
Consolidated Statement of Cash Flows	5152
Notes To Consolidated Financial Statements (Unaudited)
Note 1 Accounting Policies	5354
Note 2 ~~Investment Securities~~Discontinued Operations	6466
Note 3 ~~Loans~~Investment Securities	6766
Note 4 Loans and Related Allowance for Credit Losses	70
Note 5 Loan Sale and Servicing Activities and Variable Interest Entities	77
~~Note 5 Goodwill and Mortgage Servicing Rights~~	79
Note 6 ~~Leases~~	81
~~Note 7 Borrowed Funds~~	81
~~Note 8 Commitments~~Goodwill and Mortgage Servicing Rights	82
Note ~~9 Total Equity and Other Comprehensive Income~~7 Leases	83
Note 8 Borrowed Funds	84
Note 9 Commitments	85
Note 10 ~~Earnings Per Share~~Total Equity and Other Comprehensive Income	86
Note 11 ~~Fair Value~~Earnings Per Share	8689
Note 12 ~~Financial Derivatives~~Fair Value	9489
Note 13 ~~Legal Proceedings~~Financial Derivatives	99
Note 14 ~~Segment Reporting~~Legal Proceedings	~~100~~105
Note 15 Segment Reporting	106
Note 16 Fee-based Revenue from Contracts with Customers	~~102~~108
Note 17 Subsequent Events	110
Statistical Information (Unaudited)
Average Consolidated Balance Sheet And Net Interest Analysis	~~104~~111
Reconciliation of Taxable-Equivalent Net Interest Income (Non-GAAP)	~~106~~113
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Financial Review	1
Consolidated Financial Highlights	1
Executive Summary	3
Consolidated Income Statement Review	6
Consolidated Balance Sheet Review	910
Business Segments Review	1214
Risk Management	22
Recent Regulatory Developments	4043
Critical Accounting Estimates and Judgments	4345
Off-Balance Sheet Arrangements and Variable Interest Entities	4446
Internal Controls and Disclosure Controls and Procedures	4546
Glossary of Terms	4546
Cautionary Statement Regarding Forward-Looking Information	4647
Item 3. Quantitative and Qualitative Disclosures about Market Risk.	~~22-40, 53-64~~22-43, 54-66 and ~~94-99~~99-105
Item 4. Controls and Procedures.	4546
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	~~106~~113
Item 1A. Risk Factors.	~~106~~113
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	~~108~~113
Item 6. Exhibits.	~~109~~114
Exhibit Index	~~109~~114
Corporate Information	~~109~~114
Signature	~~111~~116



	2020							2019
Three months ended June 30 Dollars in millions	Average Balances		Average Yields/ Rates		Interest Income/ Expense			Average Balances		Average Yields/ Rates		Interest Income/ Expense
Assets
Interest-earning assets
Investment securities	$	88,430	2.41	%	$	533		$	83,641	3.03	%	$	635
Loans	268,114		3.37	%	2,270			234,845		4.56	%	2,693
Interest-earning deposits with banks	34,600		0.10	%	9			13,469		2.38	%	80
Other	10,867		2.26	%	62			13,145		3.55	%	116
Total interest-earning assets/interest income	$	402,011	2.85	%	2,874			$	345,100	4.06	%	3,524
Liabilities
Interest-bearing liabilities
Interest-bearing deposits	$	241,445	.23	%	141			$	201,234	1.03	%	515
Borrowed funds	53,229		1.39	%	187			62,335		3.08	%	484
Total interest-bearing liabilities/interest expense	$	294,674	.44	%	328			$	263,569	1.51	%	999
Net interest margin/income (Non-GAAP)			2.52	%	2,546					2.91	%	2,525
Taxable-equivalent adjustments					(19		)					(27		)
Net interest income (GAAP)					$	2,527						$	2,498



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



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



MD&A TABLE REFERENCE	MD&A TABLE REFERENCE		MD&A TABLE REFERENCE
Table	Description	Page	Description	Page
1	Consolidated Financial Highlights	1	Consolidated Financial Highlights	1
2	Summarized Average Balances and Net Interest Income	6	Summarized Average Balances and Net Interest Income	7
3	Noninterest Income	7	Noninterest Income	8
4	Noninterest Expense	8	Noninterest Expense	9
5	Summarized Balance Sheet Data	9	Provision for Credit Losses	9
6	Loans	10	Discontinued Operations	10
7	Investment Securities	11	Summarized Balance Sheet Data	10
8	Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities	11	Loans	11
9	Details of Funding Sources	12	Investment Securities	11
10	Retail Banking Table	14	Weighted-Average Expected Maturities of Mortgage and Asset-Backed Debt Securities	12
11	Corporate & Institutional Banking Table	17	Details of Funding Sources	13
12	Asset Management Group Table	20	Retail Banking Table	15
13	BlackRock Table	21	Corporate & Institutional Banking Table	18
14	Details of Loans	22	Asset Management Group Table	21
15	Commercial Loans by Industry	23	Details of Loans	23
16	Commercial Real Estate Loans by Geography and Property Type	24	Commercial and Industrial Loans by Industry	23
17	Home Equity Loans by Geography and by Lien Type	25	Commercial Real Estate Loans by Geography and Property Type	24
18	Residential Real Estate Loans by Geography	26	Home Equity Loans by Geography and by Lien Type	26
19	Nonperforming Assets by Type	27	Residential Real Estate Loans by Geography	26
20	Change in Nonperforming Assets	27	Nonperforming Assets by Type	28
21	Accruing Loans Past Due	28	Change in Nonperforming Assets	28
22	Summary of Troubled Debt Restructurings	28	Accruing Loans Past Due	29
23	Allowance for Credit Losses by Loan Class	31	Summary of Troubled Debt Restructurings	29
24	Loan Charge-Offs and Recoveries	32	Unpaid Principal Balance of Commercial Loans with a COVID-19 Related Principal/Interest Deferral Modification	30
25	Senior and Subordinated Debt	33	Unpaid Principal Balance of Consumer Loan Modifications Under Hardship Relief Programs	31
26	PNC Bank Notes Issued	33	Allowance for Credit Losses by Loan Class	33
27	Credit Ratings for PNC and PNC Bank	35	Loan Charge-Offs and Recoveries	34
28	Basel III Capital	36	Senior and Subordinated Debt	35
29	Interest Sensitivity Analysis	37	Credit Ratings for PNC and PNC Bank	37
30	Net Interest Income Sensitivity to Alternative Rate Scenarios	38	Basel III Capital	38
31	Alternate Interest Rate Scenarios: One Year Forward	38	Interest Sensitivity Analysis	40
32	Equity Investments Summary	39	Net Interest Income Sensitivity to Alternative Rate Scenarios	40
33			Alternate Interest Rate Scenarios: One Year Forward	41
34			Equity Investments Summary	42


Dollars in millions, except per share data Unaudited	Three months ended March 31						Three months ended June 30						Six months ended June 30
Dollars in millions, except per share data Unaudited	2020			2019			2020			2019			2020			2019
Financial Results (a)
Revenue
Net interest income	$	2,511		$	2,475		$	2,527		$	2,498		$	5,038		$	4,973
Noninterest income	2,006			1,811			1,549			1,717			3,374			3,303
Total revenue	4,517			4,286			4,076			4,215			8,412			8,276
Provision for credit losses	914			189			2,463			180			3,377			369
Noninterest expense	2,543			2,578			2,515			2,611			5,058			5,189
Income before income taxes and noncontrolling interests	$	1,060		$	1,519
Income (loss) from continuing operations before income taxes and noncontrolling interests							$	(902	)	$	1,424		$	(23	)	$	2,718
Income taxes (benefit) from continuing operations							(158		)	239			(38		)	451
Net income (loss) from continuing operations							$	(744	)	$	1,185		$	15		$	2,267
Income from discontinued operations before taxes							$	5,596		$	224		$	5,777		$	449
Income taxes from discontinued operations							1,197			35			1,222			71
Net income from discontinued operations							$	4,399		$	189		$	4,555		$	378
Net income	$	915		$	1,271		$	3,655		$	1,374		$	4,570		$	2,645
Less:
Net income attributable to noncontrolling interests	7			10			7			12			14			22
Preferred stock dividends	63			63
Preferred stock dividends (b)							55			55			118			118
Preferred stock discount accretion and redemptions	1			1			1			1			2			2
Net income attributable to common shareholders	844			1,197			$	3,592		$	1,306		$	4,436		$	2,503
Less:
Dividends and undistributed earnings allocated to participating securities	4			5
Impact of BlackRock earnings per share dilution	1			3
Net income attributable to diluted common shares	$	839		$	1,189
Diluted earnings per common share	$	1.95		$	2.61
Per Common Share
Basic earnings (loss) from continuing operations							$	(1.90	)	$	2.47		$	(.29	)	$	4.68
Basic earnings from discontinued operations							10.28			.42			10.60			.83
Total basic earnings							$	8.40		$	2.89		$	10.33		$	5.51
Diluted earnings (loss) from continuing operations							$	(1.90	)	$	2.47		$	(.29	)	$	4.67
Diluted earnings from discontinued operations							10.28			.41			10.59			.82
Total diluted earnings							$	8.40		$	2.88		$	10.32		$	5.49
Cash dividends declared per common share	$	1.15		$	.95		$	1.15		$	.95		$	2.30		$	1.90
Effective tax rate (b)	13.7		%	16.3		%
Effective tax rate from continuing operations (c)							17.5		%	16.8		%	165.2		%	16.6		%
Performance Ratios
Net interest margin (c)	2.84		%	2.98		%
Net interest margin (d)							2.52		%	2.91		%	2.67		%	2.94		%
Noninterest income to total revenue	44		%	42		%	38		%	41		%	40		%	40		%
Efficiency	56		%	60		%	62		%	62		%	60		%	63		%
Return on:
Average common shareholders’ equity	7.51		%	11.13		%	30.11		%	11.75		%	19.15		%	11.45		%
Average assets	.89		%	1.34		%	3.21		%	1.39		%	2.11		%	1.36		%


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


(b)	Dividends are payable quarterly other than Series O, Series R and Series S preferred stock, which are payable semiannually, with the Series O payable in different quarters than the Series R and Series S preferred stock.


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


(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.


(c)	Amounts include balances held with the Federal Reserve Bank of Cleveland (Federal Reserve Bank) of ~~$19.6~~$50.0 billion, $23.2 billion and ~~$15.0~~$18.1 billion as of ~~March 31,~~June 30, 2020, December 31, 2019 and ~~March 31,~~June 30, 2019, respectively.


~~(g)~~(f)	The ~~March 31,~~June 30, 2020 ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision, unless noted differently.


~~(h)~~(g)	The ~~March 31,~~June 30, 2020 fully implemented CET1 ratio is calculated to reflect the full impact of CECL and excludes the benefits of ~~phase-ins under~~ the ~~optional~~five-year transition provision.


~~(i)~~(h)	The 2020 and 2019 Basel III Total risk-based capital ratios include nonqualifying trust preferred capital securities of $40 million and $60 million, respectively, that are subject to a phase-out period that runs through 2021.


~~(k)~~(j)	Calculated as the ~~ACL~~Allowance for ~~loans~~loan and ~~leases and~~lease losses plus the ~~ACL~~Allowance for unfunded lending related commitments divided by total loans.


	Three months ended March 31									Three months ended June 30									Six months ended June 30
					Change									Change									Change
Dollars in millions	2020		2019		$			%		2020		2019		$			%		2020		2019		$			%
Noninterest income
Asset management	$	382	$	437	$	(55	)	(13	)%	$	199	$	221	$	(22	)	(10	)%	$	400	$	433	$	(33	)	(8	)%
Consumer services	377		371		6			2	%	330		392		(62		)	(16	)%	707		763		(56		)	(7	)%
Corporate services	526		462		64			14	%	512		484		28			6	%	1,038		946		92			10	%
Residential mortgage	210		65		145			223	%	158		82		76			93	%	368		147		221			150	%
Service charges on deposits	168		168		—			—		79		171		(92		)	(54	)%	247		339		(92		)	(27	)%
Other	343		308		35			11	%	271		367		(96		)	(26	)%	614		675		(61		)	(9	)%
Total noninterest income	$	2,006	$	1,811	$	195		11	%	$	1,549	$	1,717	$	(168	)	(10	)%	$	3,374	$	3,303	$	71		2	%


	March 31			December 31			Change					June 30			December 31			Change
Dollars in millions	2020			2019			$			%		2020			2019			$			%
Assets
Interest-earning deposits with banks	$	19,986		$	23,413		$	(3,427	)	(15	)%	$	50,233		$	23,413		$	26,820		115	%
Loans held for sale	1,693			1,083			610			56	%	1,443			1,083			360			33	%
Investment securities (a)	90,546			86,824			3,722			4	%
Asset held for sale (a)															8,558			(8,558		)	(100	)%
Investment securities												98,493			86,824			11,669			13	%
Loans	264,643			239,843			24,800			10	%	258,236			239,843			18,393			8	%
Allowance for credit losses - loans and leases (b)	(3,944		)	(2,742		)	(1,202		)	(44	)%
Allowance for loan and lease losses (b)												(5,928		)	(2,742		)	(3,186		)	(116	)%
Mortgage servicing rights	1,082			1,644			(562		)	(34	)%	1,067			1,644			(577		)	(35	)%
Goodwill	9,233			9,233			—			—		9,233			9,233			—			—
Other (a)	62,254			50,997			11,257			22	%
Other												46,201			42,439			3,762			9	%
Total assets	$	445,493		$	410,295		$	35,198		9	%	$	458,978		$	410,295		$	48,683		12	%
Liabilities
Deposits	$	305,204		$	288,540		$	16,664		6	%	$	345,997		$	288,540		$	57,457		20	%
Borrowed funds	73,399			60,263			13,136			22	%	47,026			60,263			(13,237		)	(22	)%
Allowance for credit losses - unfunded lending related commitments (b)	450			318			132			42	%
Allowance for unfunded lending related commitments (b)												662			318			344			108	%
Other	17,150			11,831			5,319			45	%	12,345			11,831			514			4	%
Total liabilities	396,203			360,952			35,251			10	%	406,030			360,952			45,078			12	%
Equity
Total shareholders’ equity	49,263			49,314			(51		)	—		52,923			49,314			3,609			7	%
Noncontrolling interests	27			29			(2		)	(7	)%	25			29			(4		)	(14	)%
Total equity	49,290			49,343			(53		)	—		52,948			49,343			3,605			7	%
Total liabilities and equity	$	445,493		$	410,295		$	35,198		9	%	$	458,978		$	410,295		$	48,683		12	%


	March 31, 2020				December 31, 2019				Ratings (a) as of March 31, 2020										June 30, 2020				December 31, 2019				Ratings (a) as of June 30, 2020
Dollars in millions	Amortized Cost (b)		Fair Value		Amortized Cost		Fair Value		AAA/ AA		A		BBB		BB and Lower		No Rating		Amortized Cost (b)		Fair Value		Amortized Cost		Fair Value		AAA/ AA		A		BBB		BB and Lower		No Rating
U.S. Treasury and government agencies	$	16,883	$	17,905	$	16,926	$	17,348	100	%									$	20,040	$	21,119	$	16,926	$	17,348	100	%
Agency residential mortgage-backed	50,828		52,628		50,266		50,984		100	%									55,630		57,480		50,266		50,984		100	%
Non-agency residential mortgage-backed	1,563		1,643		1,648		1,954		13	%	1	%	2	%	47	%	37	%	1,472		1,682		1,648		1,954		13	%	1	%	2	%	47	%	37	%
Agency commercial mortgage-backed	3,181		3,289		3,153		3,178		100	%									3,002		3,140		3,153		3,178		100	%
Non-agency commercial mortgage-backed (c)	4,249		4,082		3,782		3,806		81	%	1	%	4	%	2	%	12	%	4,134		4,039		3,782		3,806		85	%	1	%	5	%	1	%	8	%
Asset-backed (d)	5,389		5,327		5,096		5,166		91	%	2	%			6	%	1	%	5,312		5,368		5,096		5,166		91	%	2	%			6	%	1	%
Other (e)	5,600		5,824		4,580		4,771		68	%	22	%	8	%			2	%	5,512		5,839		4,580		4,771		67	%	23	%	8	%			2	%
Total investment securities (f)	$	87,693	$	90,698	$	85,451	$	87,207	95	%	2	%	1	%	1	%	1	%	$	95,102	$	98,667	$	85,451	$	87,207	96	%	1	%	1	%	1	%	1	%


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


(b)	Amortized cost is presented net of applicable ~~ACL~~allowance for securities of $2$32 million at ~~March 31,~~June 30, 2020 in accordance with the adoption of the CECL accounting standard. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies for additional detail on the adoption of this ASU.


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


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


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


(Unaudited)
Three months ended March 31							Change
Six months ended June 30																		Change
Dollars in millions, except as noted	2020			2019			$			%		2020			2019			$			%
Income Statement
Net interest income	$	1,456		$	1,349		$	107		8	%	$	2,846		$	2,725		$	121		4	%
Noninterest income	788			595			193			32	%	1,373			1,252			121			10	%
Total revenue	2,244			1,944			300			15	%	4,219			3,977			242			6	%
Provision for credit losses	445			128			317			248	%	1,206			209			997			477	%
Noninterest expense	1,536			1,468			68			5	%	3,036			2,995			41			1	%
Pretax earnings	263			348			(85		)	(24	)%	(23		)	773			(796		)	(103	)%
Income taxes	62			84			(22		)	(26	)%
Income taxes (benefit)												(1		)	184			(185		)	(101	)%
Earnings	$	201		$	264		$	(63	)	(24	)%	$	(22	)	$	589		$	(611	)	(104	)%
Average Balance Sheet
Loans held for sale	$	779		$	441		$	338		77	%	$	804		$	498		$	306		61	%
Loans
Consumer lending
Consumer
Home equity	$	22,736		$	22,990		$	(254	)	(1	)%	$	22,763		$	22,804		$	(41	)	—	%
Residential real estate	17,964			15,034			2,930			19	%	18,104			15,388			2,716			18	%
Automobile	17,096			14,608			2,488			17	%	16,892			14,917			1,975			13	%
Credit cards	7,207			6,204			1,003			16	%
Credit card												6,948			6,291			657			10	%
Education	3,343			3,816			(473		)	(12	)%	3,281			3,740			(459		)	(12	)%
Other	2,533			2,068			465			22	%
Total consumer lending	70,879			64,720			6,159			10	%
Commercial and commercial real estate	10,524			10,461			63			1	%
Other consumer												2,494			2,123			371			17	%
Total consumer												70,482			65,263			5,219			8	%
Commercial												12,068			10,471			1,597			15	%
Total loans	$	81,403		$	75,181		$	6,222		8	%	$	82,550		$	75,734		$	6,816		9	%
Total assets	$	97,062		$	91,255		$	5,807		6	%	$	99,583		$	91,805		$	7,778		8	%
Deposits
Noninterest-bearing demand	$	32,225		$	30,389		$	1,836		6	%	$	35,680		$	30,956		$	4,724		15	%
Interest-bearing demand	42,865			42,477			388			1	%	45,102			42,607			2,495			6	%
Money market	22,866			26,773			(3,907		)	(15	)%	22,903			26,283			(3,380		)	(13	)%
Savings	62,781			53,100			9,681			18	%	65,364			54,596			10,768			20	%
Certificates of deposit	12,233			12,381			(148		)	(1	)%	11,947			12,543			(596		)	(5	)%
Total deposits	$	172,970		$	165,120		$	7,850		5	%	$	180,996		$	166,985		$	14,011		8	%
Performance Ratios
Return on average assets	.84		%	1.17		%						(.04		)%	1.29		%
Noninterest income to total revenue	35		%	31		%						33		%	31		%
Efficiency	68		%	76		%						72		%	75		%


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


(b)	Presented as of ~~March 31,~~June 30, except for customer-related statistics, which are averages for the ~~three~~six months ended, and net charge-offs, which are for the ~~three~~six months ended.


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


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


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


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


(g)	Primarily nonperforming loans of $1.0 billion and $1.1 billion for ~~both March 31,~~June 30, 2020 and ~~March 31, 2019.~~June 30, 2019, respectively.


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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company