Edgar Filing: PNC FINANCIAL SERVICES GROUP, INC.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q



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

For the quarterly period ended September 30, 2017



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

For the transition period from to

Commission file number 001-09718

The PNC Financial Services Group, Inc.

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive offices, including zip code)

(888) 762-2265

(Registrant’s telephone number including area code)

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

Yes ☐ No ☒

As of October 20, 2017, there were 475,801,081 shares of the registrant’s common stock ($5 par value) outstanding.

THE PNC FINANCIAL SERVICES GROUP, INC.

Cross-Reference Index to Third Quarter 2017 Form 10-Q




	Pages
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Income Statement	39
Consolidated Statement of Comprehensive Income	40
Consolidated Balance Sheet	41
Consolidated Statement of Cash Flows	42
Notes To Consolidated Financial Statements (Unaudited)
Note 1 Accounting Policies	44
Note 2 Loan Sale and Servicing Activities and Variable Interest Entities	44
Note 3 Asset Quality	46
Note 4 Allowance for Loan and Lease Losses	54
Note 5 Investment Securities	55
Note 6 Fair Value	58
Note 7 Goodwill and Mortgage Servicing Rights	69
Note 8 Employee Benefit Plans	70
Note 9 Financial Derivatives	71
Note 10 Earnings Per Share	76
Note 11 Total Equity and Other Comprehensive Income	77
Note 12 Legal Proceedings	79
Note 13 Commitments	81
Note 14 Segment Reporting	82
Note 15 Subsequent Events	85
Statistical Information (Unaudited)
Average Consolidated Balance Sheet And Net Interest Analysis	86
Reconciliation of Taxable-Equivalent Net Interest Income (Non-GAAP)	88
Transitional Basel III and Pro forma Fully Phased-In Basel III Common Equity Tier 1 Capital Ratios (Non-GAAP) – 2016 Periods	88
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
Financial Review	1
Consolidated Financial Highlights	1
Executive Summary	3
Consolidated Income Statement Review	5
Consolidated Balance Sheet Review	8
Business Segments Review	12
Risk Management	20
Recent Regulatory Developments	33
Critical Accounting Estimates and Judgments	34
Off-Balance Sheet Arrangements and Variable Interest Entities	36
Internal Controls and Disclosure Controls and Procedures	36
Glossary of Terms	37
Cautionary Statement Regarding Forward-Looking Information	37
Item 3. Quantitative and Qualitative Disclosures about Market Risk.	20-33, 58-68 and 71-76
Item 4. Controls and Procedures.	36
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	89
Item 1A. Risk Factors.	89
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	89
Item 6. Exhibits.	89
Exhibit Index	89
Corporate Information	90
Signature	91

THE PNC FINANCIAL SERVICES GROUP, INC.

Cross-Reference Index to Third Quarter 2017 Form 10-Q (continued)




MD&A TABLE REFERENCE
Table	Description	Page
1	Consolidated Financial Highlights	1
2	Summarized Average Balances and Net Interest Income	5
3	Noninterest Income	6
4	Noninterest Expense	7
5	Summarized Balance Sheet Data	8
6	Details of Loans	9
7	Investment Securities	10
8	Weighted-Average Expected Maturities of Mortgage and Other Asset-Backed Debt Securities	10
9	Details of Funding Sources	11
10	Retail Banking Table	13
11	Corporate & Institutional Banking Table	16
12	Asset Management Group Table	19
13	BlackRock Table	20
14	Nonperforming Assets by Type	21
15	Change in Nonperforming Assets	21
16	Accruing Loans Past Due	22
17	Home Equity Lines of Credit – Draw Period End Dates	23
18	Consumer Real Estate Related Loan Modifications	23
19	Summary of Troubled Debt Restructurings	24
20	Allowance for Loan and Lease Losses	25
21	Loan Charge-Offs and Recoveries	25
22	Senior and Subordinated Debt	26
23	PNC Bank Notes Issued During Third Quarter 2017	27
24	Credit Ratings as of September 30, 2017 for PNC and PNC Bank	28
25	Basel III Capital	29
26	Interest Sensitivity Analysis	31
27	Net Interest Income Sensitivity to Alternative Rate Scenarios (Third Quarter 2017)	31
28	Alternate Interest Rate Scenarios: One Year Forward	31
29	Equity Investments Summary	32
30	Fair Value Measurements – Summary	34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE
Table	Description	Page
31	Cash Flows Associated with Loan Sale and Servicing Activities	45
32	Principal Balance, Delinquent Loans and Net Charge-offs Related to Serviced Loans For Others	45
33	Non-Consolidated VIEs	46
34	Analysis of Loan Portfolio	47
35	Nonperforming Assets	48
36	Commercial Lending Asset Quality Indicators	49
37	Asset Quality Indicators for Home Equity and Residential Real Estate Loans – Excluding Purchased Impaired and Government Insured or Guaranteed Loans	50
38	Credit Card and Other Consumer Loan Classes Asset Quality Indicators	51
39	Financial Impact and TDRs by Concession Type	52
40	Impaired Loans	53
41	Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data	54
42	Investment Securities Summary	55
43	Gross Unrealized Loss and Fair Value of Debt Securities	56
44	Gains (Losses) on Sales of Securities Available for Sale	57
45	Contractual Maturity of Debt Securities	57
46	Fair Value of Securities Pledged and Accepted as Collateral	58

THE PNC FINANCIAL SERVICES GROUP, INC.

Cross-Reference Index to Third Quarter 2017 Form 10-Q (continued)




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE (Continued)
Table	Description	Page
47	Fair Value Measurements – Recurring Basis Summary	59
48	Reconciliation of Level 3 Assets and Liabilities	60
49	Fair Value Measurements – Recurring Quantitative Information	64
50	Fair Value Measurements – Nonrecurring	66
51	Fair Value Measurements – Nonrecurring Quantitative Information	66
52	Fair Value Option – Fair Value and Principal Balances	67
53	Fair Value Option – Changes in Fair Value	67
54	Additional Fair Value Information Related to Other Financial Instruments	68
55	Mortgage Servicing Rights	69
56	Commercial Mortgage Loan Servicing Rights – Key Valuation Assumptions	69
57	Residential Mortgage Loan Servicing Rights – Key Valuation Assumptions	70
58	Components of Net Periodic Benefit Cost	70
59	Total Gross Derivatives	71
60	Gains (Losses) on Derivatives and Related Hedged Items – Fair Value Hedges	72
61	Gains (Losses) on Derivatives and Related Cash Flows – Cash Flow Hedges	73
62	Gains (Losses) on Derivatives Not Designated for Hedging under GAAP	74
63	Derivative Assets and Liabilities Offsetting	75
64	Basic and Diluted Earnings Per Common Share	76
65	Rollforward of Total Equity	77
66	Other Comprehensive Income	78
67	Accumulated Other Comprehensive Income (Loss) Components	79
68	Commitments to Extend Credit and Other Commitments	81
69	Results of Businesses	84

FINANCIAL REVIEW

THE PNC FINANCIAL SERVICES GROUP, INC.

This Financial Review, including the Consolidated Financial Highlights, should be read together with our unaudited Consolidated Financial Statements and unaudited Statistical Information included elsewhere in this Report and with Items 6, 7, 8 and 9A of our 2016 Annual Report on Form 10-K (2016 Form 10-K). We have reclassified certain prior period amounts to conform with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. For information regarding certain business, regulatory and legal risks, see the following: the Risk Management section of this Financial Review and of Item 7 in our 2016 Form 10-K; Item 1A Risk Factors included in our 2016 Form 10-K; and the Legal Proceedings and Commitments Notes of the Notes To Consolidated Financial Statements included in Item 1 of this Report and Item 8 of our 2016 Form 10-K. Also, see the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and the Critical Accounting Estimates And Judgments section in this Financial Review and in our 2016 Form 10-K for certain other factors that could cause actual results or future events to differ, perhaps materially, from historical performance and from those anticipated in the forward-looking statements included in this Report. See Note 14 Segment Reporting in the Notes To Consolidated Financial Statements included in this Report for a reconciliation of total business segment earnings to total PNC consolidated net income as reported on a generally accepted accounting principles (GAAP) basis. In this Report, “PNC”, “we” or “us” refers to The PNC Financial Services Group, Inc. and its subsidiaries on a consolidated basis. References to The PNC Financial Services Group, Inc. or to any of its subsidiaries are specifically made where applicable.

Table 1: Consolidated Financial Highlights



Dollars in millions, except per share data Unaudited	Three months ended September 30						Nine months ended September 30
Dollars in millions, except per share data Unaudited	2017			2016			2017			2016
Financial Results (a)
Revenue
Net interest income	$	2,345		$	2,095		$	6,763		$	6,261
Noninterest income	1,780			1,734			5,306			5,027
Total revenue	$	4,125		$	3,829		$	12,069		$	11,288
Provision for credit losses	130			87			316			366
Noninterest expense	2,456			2,394			7,337			7,035
Income before income taxes and noncontrolling interests	$	1,539		$	1,348		$	4,416		$	3,887
Net income	$	1,126		$	1,006		$	3,297		$	2,938
Less:
Net income attributable to noncontrolling interests	12			18			39			60
Preferred stock dividends	63			63			181			168
Preferred stock discount accretion and redemptions	1			1			24			4
Net income attributable to common shareholders	$	1,050		$	924		$	3,053		$	2,706
Less:
Dividends and undistributed earnings allocated to nonvested restricted shares	5			7			15			19
Impact of BlackRock earnings per share dilution	3			4			8			10
Net income attributable to diluted common shares	$	1,042		$	913		$	3,030		$	2,677
Diluted earnings per common share	$	2.16		$	1.84		$	6.21		$	5.33
Cash dividends declared per common share	$	.75		$	.55		$	1.85		$	1.57
Effective tax rate (b)	26.8		%	25.4		%	25.3		%	24.4		%
Performance Ratios
Net interest margin (c)	2.91		%	2.68		%	2.84		%	2.71		%
Noninterest income to total revenue	43		%	45		%	44		%	45		%
Efficiency	60		%	63		%	61		%	62		%
Return on:
Average common shareholders’ equity	9.89		%	8.74		%	9.76		%	8.69		%
Average assets	1.20		%	1.10		%	1.19		%	1.09		%


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


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

(c)

Calculated as annualized taxable-equivalent net interest income divided by average earning assets. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended September 30, 2017 and September 30, 2016 were $55 million and $49 million, respectively. The taxable-equivalent adjustments to net interest income for the nine months ended September 30, 2017 and September 30, 2016 were $161 million and $145 million, respectively. For additional information, see Statistical Information (Unaudited) section in Item 1 of this Report.

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

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



Unaudited	September 30 2017			December 31 2016			September 30 2016
Balance Sheet Data (dollars in millions, except per share data)
Assets	$	375,191		$	366,380		$	369,348
Loans	$	221,109		$	210,833		$	210,446
Allowance for loan and lease losses	$	2,605		$	2,589		$	2,619
Interest-earning deposits with banks (b)	$	24,713		$	25,711		$	27,058
Investment securities	$	74,994		$	75,947		$	78,514
Loans held for sale	$	1,764		$	2,504		$	2,053
Equity investments (c)	$	11,009		$	10,728		$	10,605
Mortgage servicing rights	$	1,854		$	1,758		$	1,293
Goodwill	$	9,163		$	9,103		$	9,103
Other assets	$	28,454		$	27,506		$	28,364
Noninterest-bearing deposits	$	79,967		$	80,230		$	82,159
Interest-bearing deposits	$	180,768		$	176,934		$	177,736
Total deposits	$	260,735		$	257,164		$	259,895
Borrowed funds	$	57,564		$	52,706		$	51,541
Total shareholders’ equity	$	46,388		$	45,699		$	45,707
Common shareholders’ equity	$	42,406		$	41,723		$	42,251
Accumulated other comprehensive income (loss)	$	(22	)	$	(265	)	$	646
Book value per common share	$	89.05		$	85.94		$	86.57
Common shares outstanding (in millions)	476			485			488
Loans to deposits	85		%	82		%	81		%
Client Assets (in billions)
Discretionary client assets under management	$	146		$	137		$	138
Nondiscretionary client assets under administration	129			120			119
Total client assets under administration (d)	275			257			257
Brokerage account client assets	48			44			44
Total client assets	$	323		$	301		$	301
Capital Ratios
Transitional Basel III (e) (f)
Common equity Tier 1	10.3		%	10.6		%	10.6		%
Tier 1 risk-based	11.6		%	12.0		%	11.9		%
Total capital risk-based	13.7		%	14.3		%	14.2		%
Leverage	9.9		%	10.1		%	10.1		%
Pro forma Fully Phased-In Basel III (Non-GAAP) (f)
Common equity Tier 1	9.8		%	10.0		%	10.2		%
Common shareholders’ equity to assets	11.3		%	11.4		%	11.4		%
Asset Quality
Nonperforming loans to total loans	.85		%	1.02		%	1.02		%
Nonperforming assets to total loans, OREO, foreclosed and other assets	.93		%	1.12		%	1.13		%
Nonperforming assets to total assets	.55		%	.65		%	.64		%
Net charge-offs to average loans (for the three months ended) (annualized)	.19		%	.20		%	.29		%
Allowance for loan and lease losses to total loans	1.18		%	1.23		%	1.24		%
Allowance for loan and lease losses to total nonperforming loans	139		%	121		%	122		%
Accruing loans past due 90 days or more (in millions)	$	678		$	782		$	766


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


(b)	Amounts include balances held with the Federal Reserve Bank of Cleveland (Federal Reserve Bank) of $24.3 billion, $25.1 billion and $26.6 billion as of September 30, 2017, December 31, 2016 and September 30, 2016, respectively.


(c)	Amounts include our equity interest in BlackRock.

(d)

As a result of certain investment advisory services performed by one of our registered investment advisors, certain assets were previously reported as both discretionary client assets under management and nondiscretionary client assets under administration. Effective for the first quarter of 2017, these amounts are only reported as discretionary assets under management. Prior periods were adjusted to remove amounts previously included in nondiscretionary assets under administration of approximately $9 billion at both December 31, 2016 and September 30, 2016.


(e)	Calculated using the regulatory capital methodology applicable to PNC during each period presented.

(f)

See Basel III Capital discussion in the Capital Management portion of the Risk Management section of this Financial Review and the capital discussion in the Banking Regulation and Supervision section of Item 1 Business in our 2016 Form 10-K. See also the Transitional Basel III and Pro forma Fully Phased-In Basel III Common Equity Tier 1 Capital Ratios (Non-GAAP) – 2016 Periods table in the Statistical Information section of this Report for a reconciliation of the 2016 periods’ ratios.

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

EXECUTIVE SUMMARY

The PNC Financial Services Group, Inc. is one of the largest diversified financial services companies in the United States 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 primary geographic markets are located in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, Florida, North Carolina, Kentucky, Washington, D.C., Delaware, Virginia, Georgia, Alabama, Missouri, Wisconsin and South Carolina. We also provide certain products and services internationally.

Key Strategic Goals

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

Our strategic priorities are designed to enhance value over the long term. One of our priorities is to build a leading banking franchise in our underpenetrated geographic markets. We are focused on reinventing the retail banking experience by transforming the retail distribution network and the home lending process for a better customer experience and improved efficiency, and growing our consumer loan portfolio. In addition, we are seeking to attract more of the investable assets of new and existing clients and we continue to focus on expense management while investing in technology to bolster critical business infrastructure and streamline core processes.

Our capital priorities are to support client growth and business investment, maintain appropriate capital in light of economic conditions and the Basel III framework and return excess capital to shareholders, in accordance with the currently effective capital plan included in our Comprehensive Capital Analysis and Review (CCAR) submission to the Board of Governors of the Federal Reserve System (Federal Reserve). For more detail, see the Capital Highlights portion of this Executive Summary and the Liquidity and Capital Management portion of the Risk Management section of this

Financial Review and the Supervision and Regulation section in Item 1 Business of our 2016 Form 10-K.

Income Statement Highlights

Net income for the third quarter of 2017 increased 12% to $1.1 billion, or $2.16 per diluted common share, compared to $1.0 billion, or $1.84 per diluted common share, for the third quarter of 2016.


•	Total revenue increased $296 million, or 8%, to $4.1 billion.


•	Net interest income increased $250 million, or 12%, to $2.3 billion.


•	Net interest margin increased to 2.91% compared to 2.68% for the third quarter of 2016.


•	Noninterest income increased $46 million, or 3%, to $1.8 billion.


•	Provision for credit losses increased to $130 million compared to $87 million for the third quarter of 2016.


•	Noninterest expense increased $62 million, or 3%, to $2.5 billion.

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

Balance Sheet Highlights

Our balance sheet was strong and well positioned at September 30, 2017 and December 31, 2016.


•	Total loans increased $10.3 billion, or 5%, to $221.1 billion.


•	Total commercial lending grew $10.6 billion, or 8%.


•	Total consumer lending decreased $.3 billion.


•	Total deposits increased $3.6 billion, or 1%, to $260.7 billion.


•	Investment securities decreased $1 billion, or 1%, to $75.0 billion.

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

Credit Quality Highlights

Overall credit quality remained stable at September 30, 2017 compared to December 31, 2016.


•	Nonperforming assets decreased $307 million, or 13%, to $2.1 billion at September 30, 2017 compared with December 31, 2016.


•	Overall loan delinquencies decreased $157 million, or 10%, as of September 30, 2017 compared with December 31, 2016.


•	Net charge-offs of $106 million in the third quarter of 2017 decreased 31% compared to net charge-offs of $154 million for the third quarter of 2016.

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

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

Capital Highlights

We maintained a strong capital position and continued to return capital to shareholders.


•	The Transitional Basel III common equity Tier 1 capital ratio was 10.3% at September 30, 2017 compared to 10.6% at December 31, 2016.


•	Pro forma fully phased-in Basel III common equity Tier 1 capital ratio, a non-GAAP financial measure, was an estimated 9.8% at September 30, 2017 compared to 10.0% at December 31, 2016

based on the standardized approach rules.


•	In the third quarter of 2017, PNC returned $.9 billion of capital to shareholders through repurchases of 4.2 million common shares for $.5 billion, made under new share repurchase programs, and dividends on common shares of $.4 billion.


•	On October 3, 2017, the PNC board of directors declared a quarterly cash dividend on common stock of 75 cents per share effective with the November 5, 2017 dividend payment date.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for more detail on our 2017 capital and liquidity actions as well as our capital ratios.

Our ability to take certain capital actions, including plans to pay or increase common stock dividends or to repurchase shares under current or future programs, is subject to the results of the supervisory assessment of capital adequacy undertaken by the Federal Reserve as part of the CCAR

process. For additional information, see the Supervision and Regulation section in Item 1 Business of our 2016 Form 10-K.

Business Outlook

Statements regarding our business outlook are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements in this section and elsewhere in this Form 10-Q 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 current view that the U.S. economy and the labor market will grow moderately through the rest of 2017 and in 2018, supported by gains in consumer spending thanks to solid job growth and rising wages, continued gradual improvement in the housing market, modest growth in business investment, an expanding global economy and some fiscal stimulus from corporate and personal income tax cuts. Although inflation has slowed in 2017, it should pick up as the labor market continues to tighten. Short-term interest rates and bond yields are expected to rise through the rest of this year and throughout 2018; PNC’s baseline forecast is for one 25 basis point increase in the federal funds rate in December of 2017, and three more increases in 2018. Longer-term rates will also increase as the Federal Reserve slowly reduces the size of its balance sheet, but at a slower pace than short-term rates.

For the fourth quarter of 2017 compared to the third quarter of 2017, we expect:


•	Modest loan growth;


•	Net interest income to increase by low single digits, on a percentage basis;


•	Fee income to increase by low single digits, on a percentage basis. Fee income consists of asset management, consumer services, corporate services, residential mortgage and service charges on deposits;


•	Provision for credit losses to be between $100 million and $150 million; and


•	Noninterest expense to increase by low single digits, on a percentage basis.

We expect other noninterest income in the fourth quarter to be in the range of $250 million to $300 million.

We also expect the full year 2017 effective tax rate to be between 25% and 26% absent the impact of any tax reform.

See the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and Item 1A Risk Factors in our 2016 Form 10-K for other factors that could cause future events to differ, perhaps materially, from those anticipated in these forward-looking statements.

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

CONSOLIDATED INCOME STATEMENT REVIEW

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

Net income for the third quarter of 2017 was $1.1 billion, or $2.16 per diluted common share, an increase of 12% compared to $1.0 billion, or $1.84 per diluted common share, for the third quarter of 2016. For the first nine months of 2017, net income was $3.3 billion, or $6.21 per diluted common share, an increase of 12% compared to $2.9 billion, or $5.33 per diluted common share, for the first nine months of 2016.

Net income increased in both comparisons driven by an increase in revenue from higher net interest income and noninterest income, partially offset by an increase in noninterest expense.

Net Interest Income

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



	2017							2016
Three months ended September 30 Dollars in millions	Average Balances		Average Yields/ Rates		Interest Income/ Expense			Average Balances		Average Yields/ Rates		Interest Income/ Expense
Assets
Interest-earning assets
Investment securities	$	74,406	2.77	%	$	516		$	71,645	2.60	%	$	467
Loans	219,218		3.92	%	2,179			208,850		3.57	%	1,889
Interest-earning deposits with banks	23,859		1.26	%	75			28,063		.50	%	35
Other	9,024		3.47	%	80			8,174		3.23	%	66
Total interest-earning assets/interest income	$	326,507	3.45	%	2,850			$	316,732	3.07	%	2,457
Liabilities
Interest-bearing liabilities
Interest-bearing deposits	$	180,508	.37	%	170			$	174,205	.25	%	107
Borrowed funds	57,016		1.93	%	280			52,981		1.53	%	206
Total interest-bearing liabilities/interest expense	$	237,524	.75	%	450			$	227,186	.54	%	313
Net interest margin/income (Non-GAAP)			2.91	%	2,400					2.68	%	2,144
Taxable-equivalent adjustments					(55		)					(49		)
Net interest income (GAAP)					$	2,345						$	2,095



	2017							2016
Nine months ended September 30 Dollars in millions	Average Balances		Average Yields/ Rates		Interest Income/ Expense			Average Balances		Average Yields/ Rates		Interest Income/ Expense
Assets
Interest-earning assets
Investment securities	$	75,330	2.71	%	$	1,535		$	70,706	2.67	%	$	1,417
Loans	215,974		3.81	%	6,197			208,124		3.58	%	5,624
Interest-earning deposits with banks	23,530		1.03	%	182			26,691		.50	%	100
Other	9,058		3.46	%	236			7,797		3.48	%	203
Total interest-earning assets/interest income	$	323,892	3.34	%	8,150			$	313,318	3.11	%	7,344
Liabilities
Interest-bearing liabilities
Interest-bearing deposits	$	178,810	.32	%	433			$	171,635	.25	%	316
Borrowed funds	56,502		1.86	%	793			53,411		1.54	%	622
Total interest-bearing liabilities/interest expense	$	235,312	.69	%	1,226			$	225,046	.55	%	938
Net interest margin/income (Non-GAAP)			2.84	%	6,924					2.71	%	6,406
Taxable-equivalent adjustments					(161		)					(145		)
Net interest income (GAAP)					$	6,763						$	6,261

(a)

Interest income calculated as taxable-equivalent interest income. To provide more meaningful comparisons of interest income and yields for all interest-earning assets, as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margins by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.

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

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

Net interest income increased by $250 million, or 12%, and $502 million, or 8%, for the third quarter and first nine months of 2017, respectively, compared to the same periods in 2016. The increase in both comparisons was attributable to higher loan yields and balances partially offset by an increase in borrowing and deposit costs. Net interest margin increased in both comparisons largely reflecting the benefit from higher interest rates in the 2017 periods.

Average investment securities increased $2.8 billion, or 4%, and $4.6 billion, or 7%, in the quarterly and year-to-date comparisons, respectively. The increase in both comparisons reflected net purchases of U.S. Treasury and government agency securities and agency residential mortgage-backed securities, partially offset by net declines in average commercial mortgage-backed securities. Total investment securities remained stable at 23% of average interest-earning assets in both the quarterly and the year-to-date comparisons.

Average loans grew $10.4 billion, or 5%, and $7.9 billion, or 4%, in the quarterly and year-to-date comparisons, respectively. The increase in average loans in both comparisons was driven by strong growth across our businesses within our Corporate & Institutional Banking segment, as well as higher residential mortgage loans within our Retail Banking segment. Both comparisons also reflected the impact of our acquisition of a commercial and vendor finance business with $1.0 billion of loans and leases in the second quarter of 2017. These increases were partially offset by decreases in consumer loans driven by runoff in the non-strategic consumer loan portfolios of brokered home equity and government guaranteed education loans. Loans increased to 67% of average interest-earning assets for the third quarter and first nine months of 2017 compared to 66% for the same periods in 2016.

Average total deposits of $259.4 billion for the third quarter of 2017 grew $6.9 billion, or 3%, over the third quarter of 2016, and average year-to-date deposits grew $8.2 billion, or 3%, over the same period of 2016, largely due to growth in average interest-bearing deposits, which increased $6.3 billion and $7.2 billion in the respective comparisons. This growth was driven by higher average savings deposits, which reflected a shift from money market deposits to relationship-based savings products, as well as higher average interest-bearing demand deposits. Average interest-bearing deposits represented 76% of average interest-bearing liabilities for the third quarter of 2017 compared to 77% for the same period in 2016 and remained stable at 76% in the year-to-date comparison.

Noninterest Income

Table 3: Noninterest Income



	Three months ended September 30									Nine months ended September 30
					Change									Change
Dollars in millions	2017		2016		$			%		2017		2016		$			%
Noninterest income
Asset management	$	421	$	404	$	17		4	%	$	1,222	$	1,122	$	100		9	%
Consumer services	357		348		9			3	%	1,049		1,039		10			1	%
Corporate services	371		389		(18		)	(5	)%	1,198		1,117		81			7	%
Residential mortgage	104		160		(56		)	(35	)%	321		425		(104		)	(24	)%
Service charges on deposits	181		174		7			4	%	512		495		17			3	%
Other	346		259		87			34	%	1,004		829		175			21	%
Total noninterest income	$	1,780	$	1,734	$	46		3	%	$	5,306	$	5,027	$	279		6	%

Noninterest income as a percentage of total revenue was 43% for the third quarter of 2017 compared to 45% for the same period in 2016. The comparable amounts for the year-to-date periods were 44% and 45%, respectively.

Asset management revenue increased in both comparisons driven by higher earnings from BlackRock and the impact of stronger average equity markets in our asset management business. Discretionary client assets under management increased to $146 billion at September 30, 2017 compared with $138 billion at September 30, 2016.

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

Growth in consumer services revenue and service charges on deposits in both comparisons was driven by higher customer activity.

Corporate services revenue decreased in the quarterly comparison primarily due to lower merger and acquisition advisory fees. The year-to-date comparison increased largely due to higher capital markets-related revenue, including both higher merger and acquisition advisory fees and loan syndication fees, and higher treasury management fees.

Residential mortgage revenue decreased in both the quarterly and year-to-date comparisons as a result of lower loan sales revenue and a lower benefit from residential mortgage servicing rights valuation, net of economic hedge.

Other noninterest income increased in the quarterly comparison and included higher revenue from private equity investments, higher underwriting fees and higher operating lease income related to the business acquired in the second quarter of 2017. The increase in the year-to-date comparison was largely driven by higher revenue from private equity investments reflecting positive impacts from valuation adjustments on equity investments subject to the Volcker Rule provisions of the Dodd-Frank Act, higher revenue from credit

valuations on customer-related derivative activities and increased operating lease income related to the business acquired in the second quarter of 2017. These increases were partially offset by the impact of 2016 net gains on the sale of Visa Class B common shares.

Provision For Credit Losses

The provision for credit losses increased $43 million to $130 million for the third quarter of 2017 compared to the third quarter of 2016 mainly driven by loan growth, consumer loan credit trends, and the impact related to Hurricanes Harvey and Irma. The first nine months of 2017 decreased $50 million to $316 million compared to the same period in 2016 mostly due to lower provisions for certain loans in the oil, gas and coal sectors, partially offset by portfolio growth including an initial provision for a loan and lease portfolio obtained through the business acquired in the second quarter of 2017.

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

Noninterest Expense

Table 4: Noninterest Expense



	Three months ended September 30									Nine months ended September 30
					Change									Change
Dollars in millions	2017		2016		$			%		2017		2016		$			%
Noninterest expense
Personnel	$	1,274	$	1,239	$	35		3	%	$	3,786	$	3,610	$	176		5	%
Occupancy	204		215		(11		)	(5	)%	628		651		(23		)	(4	)%
Equipment	259		246		13			5	%	791		720		71			10	%
Marketing	62		72		(10		)	(14	)%	184		187		(3		)	(2	)%
Other	657		622		35			6	%	1,948		1,867		81			4	%
Total noninterest expense	$	2,456	$	2,394	$	62		3	%	$	7,337	$	7,035	$	302		4	%

Noninterest expense increased in both the quarterly and year-to-date comparisons as a result of overall higher levels of business activity as reflected in higher personnel and equipment expense and ongoing investments in technology and business infrastructure. The increase in both comparisons also reflected the impact of operating expense related to the business acquired in the second quarter of 2017.

PNC continued to focus on disciplined expense management. As of September 30, 2017, we were on track to achieve our full-year 2017 goal of $350 million in cost savings through our continuous improvement program, which we expect will fund a significant portion of our 2017 business and technology investments, including our Retail branch strategy, enhanced digital capabilities and our home lending transformation.

Effective Income Tax Rate

The effective income tax rate was 26.8% in the third quarter of 2017 compared to 25.4% in the third quarter of 2016 and 25.3% in the first nine months of 2017 compared to 24.4% in the same period of 2016. The increases in both comparisons were primarily related to higher pretax earnings and the impact of state tax legislative changes. The increase in the year-to-date comparison was partially offset by the impact of higher tax deductions related to stock-based compensation in the first quarter of 2017.

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

CONSOLIDATED BALANCE SHEET REVIEW

Table 5: Summarized Balance Sheet Data



	September 30			December 31			Change
Dollars in millions	2017			2016			$			%
Assets
Interest-earning deposits with banks	$	24,713		$	25,711		$	(998	)	(4	)%
Loans held for sale	1,764			2,504			(740		)	(30	)%
Investment securities	74,994			75,947			(953		)	(1	)%
Loans	221,109			210,833			10,276			5	%
Allowance for loan and lease losses	(2,605		)	(2,589		)	(16		)	(1	)%
Mortgage servicing rights	1,854			1,758			96			5	%
Goodwill	9,163			9,103			60			1	%
Other, net	44,199			43,113			1,086			3	%
Total assets	$	375,191		$	366,380		$	8,811		2	%
Liabilities
Deposits	$	260,735		$	257,164		$	3,571		1	%
Borrowed funds	57,564			52,706			4,858			9	%
Other	10,440			9,656			784			8	%
Total liabilities	328,739			319,526			9,213			3	%
Equity
Total shareholders’ equity	46,388			45,699			689			2	%
Noncontrolling interests	64			1,155			(1,091		)	(94	)%
Total equity	46,452			46,854			(402		)	(1	)%
Total liabilities and equity	$	375,191		$	366,380		$	8,811		2	%

The summarized balance sheet data in Table 5 is based upon our Consolidated Balance Sheet in Part 1, Item 1 of this Report.

Our balance sheet was strong and well positioned at both September 30, 2017 and December 31, 2016.


•	Total assets increased driven by strong loan growth;


•	Total liabilities increased due to higher borrowed funds and deposit growth;


•	Total equity decreased due to a decline in noncontrolling interests related to the redemption of Perpetual Trust Securities in the first quarter of 2017.

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 of this Financial Review and in Note 18 Regulatory Matters in the Notes To Consolidated Financial Statements included in our 2016 Form 10-K.

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

Loans

Table 6: Details of Loans



	September 30		December 31		Change
Dollars in millions	2017		2016		$			%
Commercial lending
Commercial
Manufacturing	$	20,658	$	18,891	$	1,767		9	%
Retail/wholesale trade	18,256		16,752		1,504			9	%
Service providers	15,014		14,707		307			2	%
Real estate related (a)	12,174		11,920		254			2	%
Health care	9,659		9,491		168			2	%
Financial services	10,968		7,241		3,727			51	%
Other industries	24,588		22,362		2,226			10	%
Total commercial	111,317		101,364		9,953			10	%
Commercial real estate	29,516		29,010		506			2	%
Equipment lease financing	7,694		7,581		113			1	%
Total commercial lending	148,527		137,955		10,572			8	%
Consumer lending
Home equity	28,811		29,949		(1,138		)	(4	)%
Residential real estate	16,601		15,598		1,003			6	%
Credit card	5,375		5,282		93			2	%
Other consumer
Automobile	12,743		12,380		363			3	%
Education	4,620		5,159		(539		)	(10	)%
Other	4,432		4,510		(78		)	(2	)%
Total consumer lending	72,582		72,878		(296		)	—
Total loans	$	221,109	$	210,833	$	10,276		5	%


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

Growth in commercial lending was broad based across our lending businesses and included the acquisition of a commercial and vendor finance business with $1.0 billion of loans and leases during the second quarter of 2017. Lower consumer lending was driven by declines in home equity and education loans, mostly offset by higher residential real estate loans. The decreases in home equity and education reflected runoff in the non-strategic brokered home equity and government guaranteed education loan portfolios.

See the Credit Risk Management portion of the Risk Management section of this Financial Review and Note 1 Accounting Policies, Note 3 Asset Quality and Note 4 Allowance for Loan and Lease Losses in our Notes To Consolidated Financial Statements included in this Report for additional information regarding our loan portfolio.

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

Investment Securities

Table 7: Investment Securities



	September 30, 2017				December 31, 2016				Ratings (a) as of September 30, 2017
Dollars in millions	Amortized Cost		Fair Value		Amortized Cost		Fair Value		AAA/ AA		A		BBB		BB and Lower		No Rating
U.S. Treasury and government agencies	$	13,969	$	14,149	$	13,627	$	13,714	100	%
Agency residential mortgage-backed	39,253		39,263		37,319		37,109		100	%
Non-agency residential mortgage-backed	2,816		3,126		3,382		3,564		12	%			4	%	75	%	9	%
Agency commercial mortgage-backed	2,432		2,415		3,053		3,046		100	%
Non-agency commercial mortgage-backed (b)	3,273		3,310		4,590		4,602		87	%	3	%			1	%	9	%
Asset-backed (c)	5,638		5,708		6,496		6,524		87	%	3	%	3	%	7	%
Other debt (d)	6,418		6,644		6,679		6,810		74	%	15	%	7	%	1	%	3	%
Corporate stock and other	536		534		603		601										100	%
Total investment securities (e)	$	74,335	$	75,149	$	75,749	$	75,970	92	%	2	%	1	%	3	%	2	%


(a)	Ratings percentages allocated based on amortized cost.


(b)	Collateralized primarily by retail properties, office buildings, lodging properties and multi-family housing.


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


(d)	Includes state and municipal securities.


(e)	Includes available for sale and held to maturity securities.

Investment securities decreased $1.0 billion at September 30, 2017 compared to December 31, 2016. The decline in investment securities was driven by portfolio runoff and lower reinvestments in part due to relatively less attractive market opportunities.

Table 7 presents the distribution of our investment securities portfolio by credit rating. We have included credit ratings information because we believe that the information is an indicator of the degree of credit risk to which we are exposed, which could affect our risk-weighted assets and, therefore, our risk-based regulatory capital ratios under the regulatory capital rules. Changes in credit ratings classifications could indicate increased or decreased credit risk and could be accompanied by a reduction or increase in the fair value of our investment securities portfolio.

At least quarterly, we conduct a comprehensive security-level impairment assessment on all securities. If economic conditions, including home prices, were to deteriorate from current levels, and if market volatility and liquidity were to deteriorate from current levels, or if market interest rates were to increase or credit spreads were to widen appreciably, the valuation of our investment securities portfolio would likely be adversely affected and we could incur additional other than temporary impairment (OTTI) credit losses that would impact our Consolidated Income Statement.

The duration of investment securities was 3.0 years at September 30, 2017. We estimate that at September 30, 2017 the effective duration of investment securities was 3.2 years for an immediate 50 basis points parallel increase in interest rates and 2.8 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 (excluding corporate stock and other) was 4.8 years at September 30, 2017 compared to 5.0 years at December 31, 2016.

Table 8: Weighted-Average Expected Maturities of Mortgage and Other Asset-Backed Debt Securities



September 30, 2017	Years
Agency residential mortgage-backed	4.9
Non-agency residential mortgage-backed	5.7
Agency commercial mortgage-backed	3.5
Non-agency commercial mortgage-backed	3.8
Asset-backed	2.5

Additional information regarding our investment securities is included in Note 5 Investment Securities and Note 6 Fair Value in the Notes To Consolidated Financial Statements included in this Report.

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

Funding Sources

Table 9: Details of Funding Sources



	September 30		December 31		Change
Dollars in millions	2017		2016		$			%
Deposits
Money market	$	105,383	$	105,849	$	(466	)	—
Demand	93,320		96,799		(3,479		)	(4	)%
Savings	44,610		36,956		7,654			21	%
Time deposits	17,422		17,560		(138		)	(1	)%
Total deposits	260,735		257,164		3,571			1	%
Borrowed funds
FHLB borrowings	20,538		17,549		2,989			17	%
Bank notes and senior debt	26,467		22,972		3,495			15	%
Subordinated debt	5,601		8,009		(2,408		)	(30	)%
Other	4,958		4,176		782			19	%
Total borrowed funds	57,564		52,706		4,858			9	%
Total funding sources	$	318,299	$	309,870	$	8,429		3	%

Growth in total deposits was driven by higher consumer and commercial deposits. Consumer deposits reflected in part a shift to relationship-based savings products from money market deposits. Higher interest rates in 2017 contributed to a shift in commercial deposits from demand deposits to money market deposits.

The increase in total borrowed funds reflected net increases in bank notes and senior debt and FHLB borrowings, as new issuances outpaced maturities and calls. These increases were partially offset by subordinated debt maturities.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for additional information regarding our 2017 liquidity and capital activities.

Shareholders’ Equity

Total shareholders’ equity as of September 30, 2017 increased $.7 billion compared to December 31, 2016. Increased retained earnings, which reflected net income of $3.3 billion partially offset by $1.1 billion of common and preferred dividends, was largely offset by common share repurchases of $1.8 billion.

Common shares outstanding were 476 million at September 30, 2017 and 485 million at December 31, 2016, as repurchases of 14.9 million shares during the period were partially offset by share issuances from treasury stock related to warrants exercised and stock-based compensation activity.

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

BUSINESS SEGMENTS REVIEW

Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly, have changed the basis of presentation of our segments, resulting in four reportable business segments:


•	Retail Banking


•	Corporate & Institutional Banking


•	Asset Management Group


•	BlackRock

Our changes in business segment presentation resulting from the realignment included the following:

•

The Residential Mortgage Banking segment was combined into Retail Banking as a result of our strategic initiative to transform the home lending process by integrating mortgage and home equity lending to enhance product capability and speed of delivery for a better customer experience and to improve efficiency. In conjunction with this shift, residential mortgages previously reported within the “Other” category were also moved to Retail Banking.


•	The Non-Strategic Assets Portfolio segment was eliminated. The segment’s remaining consumer assets were moved to the “Other” category as they are unrelated to the ongoing strategy of any segment, while its commercial assets were transferred to Corporate & Institutional Banking in order to continue the relationships we have with those customers.


•	A portion of business banking clients was moved from Retail Banking to Corporate & Institutional Banking to facilitate enhanced product offerings to meet the financial needs of our business banking clients.

Net interest income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. Effective for the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certain non-maturity deposits based on our recent historical experience. These changes in methodology affected business segment results, primarily adversely impacting net interest income for Corporate & Institutional Banking and Retail Banking, offset by increased net interest income in the “Other” category.

The prior period presented was revised to conform to the new segment alignment and to our change in internal funds transfer pricing methodology.

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

Total business segment financial results differ from total consolidated net income. The impact of these differences is 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 gains or losses related to BlackRock transactions, integration costs, asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities and certain trading activities, exited businesses, certain non-strategic runoff consumer loan portfolios, private equity investments, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments and differences between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments’ results exclude their portion of net income attributable to noncontrolling interests.

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

Retail Banking

(Unaudited)

Table 10: Retail Banking Table



Nine months ended September 30							Change
Dollars in millions, except as noted	2017			2016			$			%
Income Statement
Net interest income	$	3,436		$	3,391		$	45		1	%
Noninterest income	1,891			2,038			(147		)	(7	)%
Total revenue	5,327			5,429			(102		)	(2	)%
Provision for credit losses	198			210			(12		)	(6	)%
Noninterest expense	4,060			3,963			97			2	%
Pretax earnings	1,069			1,256			(187		)	(15	)%
Income taxes	394			461			(67		)	(15	)%
Earnings	$	675		$	795		$	(120	)	(15	)%
Average Balance Sheet
Loans held for sale	$	791		$	902		$	(111	)	(12	)%
Loans
Consumer
Home equity	$	25,394		$	26,351		$	(957	)	(4	)%
Automobile	12,285			11,040			1,245			11	%
Education	4,921			5,653			(732		)	(13	)%
Credit cards	5,180			4,818			362			8	%
Other	1,767			1,799			(32		)	(2	)%
Total consumer	49,547			49,661			(114		)	—
Commercial and commercial real estate	10,852			11,520			(668		)	(6	)%
Residential mortgage	11,999			10,518			1,481			14	%
Total loans	$	72,398		$	71,699		$	699		1	%
Total assets	$	88,589		$	85,783		$	2,806		3	%
Deposits
Noninterest-bearing demand	$	29,600		$	28,009		$	1,591		6	%
Interest-bearing demand	40,959			38,387			2,572			7	%
Money market	37,492			46,147			(8,655		)	(19	)%
Savings	37,881			25,738			12,143			47	%
Certificates of deposit	13,331			14,978			(1,647		)	(11	)%
Total deposits	$	159,263		$	153,259		$	6,004		4	%
Performance Ratios
Return on average assets	1.02		%	1.24		%
Noninterest income to total revenue	35		%	38		%
Efficiency	76		%	73		%

(continued on following page)

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

(continued from previous page)



Nine months ended September 30							Change
Dollars in millions, except as noted	2017			2016			$			%
Supplemental Noninterest Income Information
Consumer services	$	800		$	792		$	8		1	%
Brokerage	$	231		$	222		$	9		4	%
Residential mortgage	$	321		$	425		$	(104	)	(24	)%
Service charges on deposits	$	491		$	474		$	17		4	%
Residential Mortgage Information
Residential mortgage servicing statistics (in billions, except as noted) (a)
Serviced portfolio balance (b)	$	129		$	126		$	3		2	%
Serviced portfolio acquisitions	$	18		$	16		$	2		13	%
MSR asset value (b)	$	1.2		$	.8		$	.4		50	%
MSR capitalization value (in basis points) (b)	95			65			30			46	%
Servicing income: (in millions)
Servicing fees, net (c)	$	142		$	150		$	(8	)	(5	)%
Mortgage servicing rights valuation, net of economic hedge	$	30		$	57		$	(27	)	(47	)%
Residential mortgage loan statistics
Loan origination volume (in billions)	$	6.6		$	7.6		$	(1.0	)	(13	)%
Loan sale margin percentage	2.83		%	3.33		%
Percentage of originations represented by:
Purchase volume (d)	54		%	43		%
Refinance volume	46		%	57		%