Exhibit 99.1
pncbanklogoa01.jpg



THE PNC FINANCIAL SERVICES GROUP, INC.

FINANCIAL SUPPLEMENT
FIRST QUARTER 2018
(Unaudited)




THE PNC FINANCIAL SERVICES GROUP, INC.
FINANCIAL SUPPLEMENT
FIRST QUARTER 2018
(UNAUDITED)



Consolidated Results:
Page
 
 
Business Segment Results:
 
 
 


The information contained in this Financial Supplement is preliminary, unaudited and based on data available on April 13, 2018. We have reclassified certain prior period amounts to be consistent with the current period presentation, which we believe is more meaningful to readers of our consolidated financial statements. This information speaks only as of the particular date or dates included in the schedules. We do not undertake any obligation to, and disclaim any duty to, correct or update any of the information provided in this Financial Supplement. Our future financial performance is subject to risks and uncertainties as described in our United States Securities and Exchange Commission (SEC) filings.

BUSINESS
PNC is one of the largest diversified financial services companies in the United States and is headquartered in Pittsburgh, Pennsylvania. PNC has businesses engaged in retail banking, including residential mortgage, corporate and institutional banking and asset management, providing many of its products and services nationally. PNC's primary geographic markets are located in the Mid-Atlantic, Midwest and Southeast. PNC also provides certain products and services internationally.



THE PNC FINANCIAL SERVICES GROUP, INC.
 
Cross Reference Index to First Quarter 2018 Financial Supplement (Unaudited)
Financial Supplement Table Reference
 
 
 
Table
Description
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 1


Table 1: Consolidated Income Statement (Unaudited)
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
In millions, except per share data
2018
 
2017
 
2017
 
2017
 
2017
Interest Income
 
 

 
 
 
 
 

Loans
$
2,228

 
$
2,154

 
$
2,140

 
$
2,040

 
$
1,904

Investment securities
512

 
509

 
501

 
495

 
493

Other
178

 
162

 
154

 
139

 
123

Total interest income
2,918

 
2,825

 
2,795

 
2,674

 
2,520

Interest Expense


 


 
 
 
 
 


Deposits
213

 
190

 
170

 
143

 
120

Borrowed funds
344

 
290

 
280

 
273

 
240

Total interest expense
557

 
480

 
450

 
416

 
360

Net interest income
2,361

 
2,345

 
2,345

 
2,258

 
2,160

Noninterest Income


 


 
 
 
 
 


Asset management
455

 
720

 
421

 
398

 
403

Consumer services
357

 
366

 
357

 
360

 
332

Corporate services (a)
429

 
458

 
404

 
466

 
414

Residential mortgage
97

 
29

 
104

 
104

 
113

Service charges on deposits
167

 
183

 
181

 
170

 
161

Other (a) (b)
245

 
159

 
313

 
304

 
301

Total noninterest income
1,750

 
1,915

 
1,780

 
1,802

 
1,724

Total revenue
4,111

 
4,260

 
4,125

 
4,060

 
3,884

Provision For Credit Losses
92

 
125

 
130

 
98

 
88

Noninterest Expense


 


 
 
 
 
 


Personnel
1,354

 
1,449

 
1,286

 
1,276

 
1,257

Occupancy
218

 
240

 
204

 
202

 
222

Equipment
273

 
274

 
259

 
281

 
251

Marketing
55

 
60

 
62

 
67

 
55

Other
627

 
1,038

 
645

 
653

 
617

Total noninterest expense
2,527

 
3,061

 
2,456

 
2,479

 
2,402

Income before income taxes (benefit) and noncontrolling interests
1,492

 
1,074

 
1,539

 
1,483

 
1,394

Income taxes (benefit)
253

 
(1,017
)
 
413

 
386

 
320

Net income
1,239

 
2,091

 
1,126

 
1,097

 
1,074

Less: Net income attributable to noncontrolling interests
10

 
11

 
12

 
10

 
17

Preferred stock dividends (c)
63

 
55

 
63

 
55

 
63

Preferred stock discount accretion and redemptions
1

 
2

 
1

 
2

 
21

Net income attributable to common shareholders
$
1,165

 
$
2,023

 
$
1,050

 
$
1,030

 
$
973

Earnings Per Common Share


 
 
 
 
 
 
 
 
Basic
$
2.45

 
$
4.23

 
$
2.18

 
$
2.12

 
$
1.99

Diluted
$
2.43

 
$
4.18

 
$
2.16

 
$
2.10

 
$
1.96

Average Common Shares Outstanding


 
 
 
 
 
 
 
 
Basic
473

 
476

 
479

 
484

 
487

Diluted
476

 
480

 
483

 
488

 
492

Efficiency
61
%
 
72
 %
 
60
%
 
61
%
 
62
%
Noninterest income to total revenue
43
%
 
45
 %
 
43
%
 
44
%
 
44
%
Effective tax rate (d)
17.0
%
 
(94.7
)%
 
26.8
%
 
26.0
%
 
23.0
%

(a)
Effective for the first quarter 2018, we have reclassified operating lease income to corporate services noninterest income from other noninterest income. Prior period amounts were reclassified for operating lease income of $35 million, $34 million, $31 million, and $21 million for the three months ended December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.
(b)
Includes net gains (losses) on sales of securities of $(1) million, $(3) million, $(1) million, $13 million, and $(2) million for the quarters ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.
(c)
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.
(d)
The effective income tax rates are generally lower than the statutory rate due to the relationship of pretax income to tax credits and earnings that are not subject to tax. The first quarter 2018 results reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. The fourth quarter 2017 results benefited from an income tax benefit from the new federal tax legislation primarily attributable to revaluation of deferred tax liabilities at the lower statutory tax rate. Where certain income tax effects could be reasonably estimated, these were included as provisional amounts as of December 31, 2017. As a result, these provisional amounts could be adjusted during the measurement period, which will end in December 2018. No changes were made to these provisional amounts during the first quarter of 2018.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 2

Table 2: Consolidated Balance Sheet (Unaudited)
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
In millions, except par value
2018
 
2017
 
2017
 
2017
 
2017
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
4,649

 
$
5,249

 
$
4,736

 
$
5,039

 
$
5,003

Interest-earning deposits with banks (a)
28,821

 
28,595

 
24,713

 
22,482

 
27,877

Loans held for sale (b)
965

 
2,655

 
1,764

 
2,030

 
1,414

Investment securities – available for sale
56,018

 
57,618

 
57,254

 
58,878

 
59,339

Investment securities – held to maturity
18,544

 
18,513

 
17,740

 
17,553

 
17,093

Loans (b)
221,614

 
220,458

 
221,109

 
218,034

 
212,826

Allowance for loan and lease losses
(2,604
)
 
(2,611
)
 
(2,605
)
 
(2,561
)
 
(2,561
)
Net loans
219,010

 
217,847

 
218,504

 
215,473

 
210,265

Equity investments (c)
12,008

 
11,392

 
11,009

 
10,819

 
10,900

Mortgage servicing rights
1,979

 
1,832

 
1,854

 
1,867

 
1,867

Goodwill
9,218

 
9,173

 
9,163

 
9,163

 
9,103

Other (b)
27,949

 
27,894

 
28,454

 
28,886

 
28,083

Total assets
$
379,161

 
$
380,768

 
$
375,191

 
$
372,190

 
$
370,944

Liabilities
 
 
 
 
 
 
 
 
 
Deposits
 
 
 
 
 
 
 
 
 
Noninterest-bearing
$
78,303

 
$
79,864

 
$
79,967

 
$
79,550

 
$
79,246

Interest-bearing
186,401

 
185,189

 
180,768

 
179,626

 
181,464

Total deposits
264,704

 
265,053

 
260,735

 
259,176

 
260,710

Borrowed funds
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank borrowings
19,537

 
21,037

 
20,538

 
19,039

 
19,549

Bank notes and senior debt
28,773

 
28,062

 
26,467

 
26,054

 
23,745

Subordinated debt
5,121

 
5,200

 
5,601

 
6,111

 
6,889

Other (b)
4,608

 
4,789

 
4,958

 
5,202

 
4,879

Total borrowed funds
58,039

 
59,088

 
57,564

 
56,406

 
55,062

Allowance for unfunded loan commitments and letters of credit
290

 
297

 
293

 
304

 
305

Accrued expenses and other liabilities
9,093

 
8,745

 
10,147

 
10,119

 
8,964

Total liabilities
332,126

 
333,183

 
328,739

 
326,005

 
325,041

Equity
 
 
 
 
 
 
 
 
 
Preferred stock (d)
 
 
 
 
 
 
 
 
 
Common stock - $5 par value
 
 
 
 
 
 
 
 
 
Authorized 800 shares, issued 542 shares
2,710

 
2,710

 
2,710

 
2,710

 
2,709

Capital surplus
16,227

 
16,374

 
16,343

 
16,326

 
16,275

Retained earnings
36,266

 
35,481

 
33,819

 
33,133

 
32,372

Accumulated other comprehensive income (loss)
(699
)
 
(148
)
 
(22
)
 
(98
)
 
(279
)
Common stock held in treasury at cost: 72, 69, 66, 62 and 57 shares
(7,535
)
 
(6,904
)
 
(6,462
)
 
(5,987
)
 
(5,323
)
Total shareholders’ equity
46,969

 
47,513

 
46,388

 
46,084

 
45,754

Noncontrolling interests
66

 
72

 
64

 
101

 
149

Total equity
47,035

 
47,585

 
46,452

 
46,185

 
45,903

Total liabilities and equity
$
379,161

 
$
380,768

 
$
375,191

 
$
372,190

 
$
370,944

 
(a)
Amounts include balances held with the Federal Reserve Bank of Cleveland of $28.6 billion, $28.3 billion, $24.3 billion, $22.1 billion and $27.5 billion as of March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.
(b)
Amounts include assets and liabilities for which PNC has elected the fair value option. Our 2017 Form 10-K included, and our first quarter 2018 Form 10-Q will include, additional information regarding these items.
(c)
Amounts include our equity interest in BlackRock. The amount at March 31, 2018 includes $603 million of trading and available for sale securities that were reclassified to Equity investments on January 1, 2018 in accordance with the adoption of Accounting Standard Update 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.
(d)
Par value less than $.5 million at each date.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 3

Table 3: Average Consolidated Balance Sheet (Unaudited) (a)
 
 
Three months ended

 
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
 
In millions
2018
 
2017
 
2017
 
2017
 
2017
 
Assets

 

 
 
 
 
 
 
 
Interest-earning assets:

 

 
 
 
 
 
 
 
Investment securities

 

 
 
 
 
 
 
 
Securities available for sale

 

 
 
 
 
 
 
 
Residential mortgage-backed

 

 
 
 
 
 
 
 
Agency
$
25,438

 
$
25,338

 
$
25,493

 
$
25,862

 
$
26,385

 
Non-agency
2,398

 
2,577

 
2,758

 
2,947

 
3,127

 
Commercial mortgage-backed
4,534

 
4,542

 
4,838

 
5,493

 
5,919

 
Asset-backed
5,158

 
5,330

 
5,546

 
5,863

 
5,992

 
U.S. Treasury and government agencies
14,307

 
13,646

 
13,081

 
12,881

 
13,101

 
Other
4,233

 
4,940

 
5,011

 
5,093

 
5,293

 
Total securities available for sale
56,068

 
56,373

 
56,727

 
58,139

 
59,817

 
Securities held to maturity


 


 
 
 
 
 
 
 
Residential mortgage-backed
14,818

 
13,976

 
13,549

 
12,790

 
11,852

 
Commercial mortgage-backed
902

 
963

 
1,211

 
1,393

 
1,458

 
Asset-backed
199

 
220

 
358

 
490

 
556

 
U.S. Treasury and government agencies
743

 
739

 
561

 
533

 
529

 
Other
1,926

 
1,974

 
2,000

 
2,007

 
2,041

 
Total securities held to maturity
18,588

 
17,872

 
17,679

 
17,213

 
16,436

 
Total investment securities
74,656

 
74,245

 
74,406

 
75,352

 
76,253

 
Loans


 


 
 
 
 
 
 
 
Commercial
111,462

 
111,365

 
109,503

 
106,944

 
103,084

 
Commercial real estate
28,901

 
29,432

 
29,676

 
29,655

 
29,178

 
Equipment lease financing
7,845

 
7,670

 
7,704

 
7,602

 
7,497

 
Consumer
55,588

 
55,814

 
56,062

 
56,342

 
56,843

 
Residential real estate
17,308

 
16,840

 
16,273

 
15,830

 
15,651

 
Total loans
221,104

 
221,121

 
219,218

 
216,373

 
212,253

 
Interest-earning deposits with banks (b)
25,667

 
25,567

 
23,859

 
22,543

 
24,192

 
Other interest-earning assets
7,904

 
8,759

 
9,024

 
9,748

 
8,395

 
Total interest-earning assets
329,331

 
329,692

 
326,507

 
324,016

 
321,093

 
Noninterest-earning assets
46,944

 
47,136

 
46,890

 
46,286

 
45,323

 
Total assets
$
376,275

 
$
376,828

 
$
373,397

 
$
370,302

 
$
366,416

 
Liabilities and Equity


 


 
 
 
 
 
 
 
Interest-bearing liabilities:


 


 
 
 
 
 
 
 
Interest-bearing deposits


 


 
 
 
 
 
 
 
Money market
$
58,523

 
$
60,954

 
$
62,325

 
$
62,157

 
$
63,921

 
Demand
59,620

 
57,128

 
56,743

 
57,513

 
56,797

 
Savings
48,451

 
45,817

 
43,869

 
42,128

 
39,095

 
Time deposits
16,844

 
17,438

 
17,571

 
17,214

 
17,058

 
Total interest-bearing deposits
183,438

 
181,337

 
180,508

 
179,012

 
176,871

 
Borrowed funds


 


 
 
 
 
 
 
 
Federal Home Loan Bank borrowings
20,721

 
19,565

 
19,190

 
20,405

 
20,416

 
Bank notes and senior debt
28,987

 
27,778

 
26,602

 
24,817

 
22,992

 
Subordinated debt
5,179

 
5,433

 
5,970

 
6,607

 
7,102

 
Other
4,751

 
5,261

 
5,254

 
5,695

 
4,432

 
Total borrowed funds
59,638

 
58,037

 
57,016

 
57,524

 
54,942

 
Total interest-bearing liabilities
243,076

 
239,374

 
237,524

 
236,536

 
231,813

 
Noninterest-bearing liabilities and equity:


 


 
 
 
 
 
 
 
Noninterest-bearing deposits
77,222

 
80,152

 
78,931

 
77,375

 
78,050

 
Accrued expenses and other liabilities
9,118

 
10,801

 
10,749

 
10,432

 
10,081

 
Equity
46,859

 
46,501

 
46,193

 
45,959

 
46,472

 
Total liabilities and equity
$
376,275

 
$
376,828

 
$
373,397

 
$
370,302

 
$
366,416

 

(a)
Calculated using average daily balances.
(b)
Amounts include balances held with the Federal Reserve Bank of Cleveland of $25.4 billion, $25.3 billion, $23.4 billion, $22.1 billion and $23.7 billion for the three months ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 4

Table 4: Details of Net Interest Margin (Unaudited) (a)
 
 
Three months ended
 
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
 
 
2018
 
2017
 
2017
 
2017
 
2017
 
Average yields/rates
 
 
 
 
 
 
 
 
 
 
Yield on interest-earning assets
 
 
 
 
 
 
 
 
 
 
Investment securities
 
 
 
 
 
 
 
 
 
 
Securities available for sale
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed
 
 
 
 
 
 
 
 
 
 
Agency
2.60
%
 
2.58
%
 
2.61
%
 
2.51
%
 
2.57
%
 
Non-agency
5.99
%
 
4.29
%
 
5.91
%
 
5.58
%
 
5.59
%
 
Commercial mortgage-backed
2.75
%
 
4.68
%
 
2.71
%
 
2.56
%
 
2.35
%
 
Asset-backed
2.87
%
 
2.82
%
 
2.53
%
 
2.48
%
 
2.50
%
 
U.S. Treasury and government agencies
2.07
%
 
1.79
%
 
1.83
%
 
1.78
%
 
1.66
%
 
Other
3.39
%
 
3.32
%
 
3.08
%
 
3.08
%
 
2.93
%
 
Total securities available for sale
2.71
%
 
2.73
%
 
2.63
%
 
2.56
%
 
2.53
%
 
Securities held to maturity
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed
2.84
%
 
2.74
%
 
2.81
%
 
2.82
%
 
2.79
%
 
Commercial mortgage-backed
3.76
%
 
4.11
%
 
4.42
%
 
4.30
%
 
3.50
%
 
Asset-backed
2.90
%
 
2.66
%
 
2.53
%
 
2.35
%
 
2.21
%
 
U.S. Treasury and government agencies
2.80
%
 
2.85
%
 
3.07
%
 
3.10
%
 
3.07
%
 
Other
4.44
%
 
5.28
%
 
5.30
%
 
5.28
%
 
5.34
%
 
Total securities held to maturity
3.05
%
 
3.10
%
 
3.20
%
 
3.22
%
 
3.16
%
 
Total investment securities
2.79
%
 
2.82
%
 
2.77
%
 
2.71
%
 
2.67
%
 
Loans
 
 
 
 
 
 
 
 
 
 
Commercial
3.74
%
 
3.59
%
 
3.54
%
 
3.45
%
 
3.24
%
 
Commercial real estate
3.81
%
 
3.68
%
 
3.65
%
 
3.48
%
 
3.27
%
 
Equipment lease financing
3.68
%
 
2.33
%
 
3.71
%
 
3.65
%
 
3.34
%
 
Consumer
4.87
%
 
4.72
%
 
4.67
%
 
4.52
%
 
4.47
%
 
Residential real estate
4.40
%
 
4.41
%
 
4.45
%
 
4.55
%
 
4.55
%
 
Total loans
4.09
%
 
3.91
%
 
3.92
%
 
3.82
%
 
3.67
%
 
Interest-earning deposits with banks
1.52
%
 
1.33
%
 
1.26
%
 
1.04
%
 
.81
%
 
Other interest-earning assets
4.00
%
 
3.55
%
 
3.47
%
 
3.38
%
 
3.54
%
 
Total yield on interest-earning assets
3.59
%
 
3.45
%
 
3.45
%
 
3.35
%
 
3.22
%
 
Rate on interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits
 
 
 
 
 
 
 
 
 
 
Money market
.54
%
 
.45
%
 
.41
%
 
.30
%
 
.23
%
 
Demand
.21
%
 
.17
%
 
.14
%
 
.12
%
 
.10
%
 
Savings
.57
%
 
.51
%
 
.45
%
 
.45
%
 
.42
%
 
Time deposits
.88
%
 
.85
%
 
.79
%
 
.73
%
 
.69
%
 
Total interest-bearing deposits
.47
%
 
.42
%
 
.37
%
 
.32
%
 
.28
%
 
Borrowed funds
 
 
 
 
 
 
 
 
 
 
Federal Home Loan Bank borrowings
1.76
%
 
1.48
%
 
1.37
%
 
1.23
%
 
1.09
%
 
Bank notes and senior debt
2.43
%
 
2.04
%
 
2.05
%
 
2.00
%
 
1.85
%
 
Subordinated debt
3.91
%
 
3.49
%
 
3.48
%
 
3.66
%
 
3.49
%
 
Other 
2.18
%
 
1.74
%
 
1.60
%
 
1.67
%
 
1.36
%
 
Total borrowed funds
2.31
%
 
1.96
%
 
1.93
%
 
1.89
%
 
1.74
%
 
Total rate on interest-bearing liabilities
.91
%
 
.79
%
 
.75
%
 
.70
%
 
.62
%
 
Interest rate spread
2.68
%
 
2.66
%
 
2.70
%
 
2.65
%
 
2.60
%
 
Impact of noninterest-bearing sources (b)
.23

 
.22

 
.21

 
.19

 
.17

 
Net interest margin
2.91
%
 
2.88
%
 
2.91
%
 
2.84
%
 
2.77
%
 

(a)
Calculated as annualized taxable-equivalent net interest income divided by average earning assets. To provide more meaningful comparisons of net interest yields for all earning assets, as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating net interest 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 generally accepted accounting principles (GAAP) in the Consolidated Income Statement. The taxable-equivalent adjustments to net interest income for the three months ended March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, were $29 million, $54 million, $55 million, $54 million and $52 million, respectively. Taxable equivalent amounts for the 2018 period were calculated using a statutory federal income tax rate of 21%, reflecting the enactment of the new federal tax legislation effective January 1, 2018. Amounts for the 2017 periods were calculated using the previously applicable statutory federal income tax rate of 35%.
(b)
Represents the positive effects of investing noninterest-bearing sources in interest-earning assets.




THE PNC FINANCIAL SERVICES GROUP, INC.

Page 5

Table 5: Per Share Related Information (Unaudited)
 
 
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
In millions, except per share data
2018
 
2017
 
2017
 
2017
 
2017
Basic
 
 
 
 
 
 
 
 
 
Net income
$
1,239

 
$
2,091

 
$
1,126

 
$
1,097

 
$
1,074

Less:
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to noncontrolling interests
10

 
11

 
12

 
10

 
17

Preferred stock dividends (a)
63

 
55

 
63

 
55

 
63

Preferred stock discount accretion and redemptions
1

 
2

 
1

 
2

 
21

Net income attributable to common shareholders
1,165

 
2,023

 
1,050

 
1,030

 
973

Less:
 
 
 
 
 
 
 
 
 
Dividends and undistributed earnings allocated to nonvested restricted shares
5

 
8

 
5

 
4

 
6

Net income attributable to basic common shares
$
1,160

 
$
2,015

 
$
1,045

 
$
1,026

 
$
967

Basic weighted-average common shares outstanding
473

 
476

 
479

 
484

 
487

Basic earnings per common share
$
2.45

 
$
4.23

 
$
2.18

 
$
2.12

 
$
1.99

Diluted
 
 
 
 
 
 
 
 
 
Net income attributable to basic common shares
$
1,160

 
$
2,015

 
$
1,045

 
$
1,026

 
$
967

Less: Impact of BlackRock earnings per share dilution
2

 
8

 
3

 
1

 
4

Net income attributable to diluted common shares
$
1,158

 
$
2,007

 
$
1,042

 
$
1,025

 
$
963

Basic weighted-average common shares outstanding
473

 
476

 
479

 
484

 
487

Dilutive potential common shares
3

 
4

 
4

 
4

 
5

Diluted weighted-average common shares outstanding
476

 
480

 
483

 
488

 
492

Diluted earnings per common share
$
2.43

 
$
4.18

 
$
2.16

 
$
2.10

 
$
1.96


(a)
Dividends are payable quarterly other than the 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.

Table 6: Details of Loans (Unaudited)
 
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
 
In millions
 
2018
 
2017
 
2017
 
2017
 
2017
 
Commercial lending
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
Manufacturing
 
$
21,367

 
$
20,578

 
$
20,658

 
$
20,533

 
$
20,054

 
Retail/wholesale trade
 
18,232

 
17,846

 
18,256

 
18,101

 
17,446

 
Service providers
 
14,554

 
15,100

 
15,014

 
15,111

 
14,185

 
Real estate related (a)
 
12,701

 
12,496

 
12,174

 
12,179

 
11,690

 
Health care
 
9,937

 
9,739

 
9,659

 
9,541

 
9,603

 
Financial services
 
9,479

 
8,532

 
10,968

 
8,493

 
7,710

 
Transportation and warehousing
 
5,488

 
5,609

 
5,597

 
5,589

 
5,260

 
Other industries
 
20,550

 
20,627

 
18,991

 
19,010

 
17,817

 
Total commercial
 
112,308

 
110,527

 
111,317

 
108,557

 
103,765

 
Commercial real estate
 
28,835

 
28,978

 
29,516

 
29,489

 
29,435

 
Equipment lease financing
 
7,802

 
7,934

 
7,694

 
7,719

 
7,462

 
Total commercial lending
 
148,945

 
147,439

 
148,527

 
145,765

 
140,662

 
Consumer lending
 
 
 
 
 
 
 
 
 
 
 
Home equity
 
27,699

 
28,364

 
28,811

 
29,219

 
29,577

 
Residential real estate
 
17,456

 
17,212

 
16,601

 
16,049

 
15,781

 
Credit card
 
5,657

 
5,699

 
5,375

 
5,211

 
5,112

 
Other consumer
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
13,295

 
12,880

 
12,743

 
12,488

 
12,337

 
Education
 
4,228

 
4,454

 
4,620

 
4,751

 
4,974

 
Other
 
4,334

 
4,410

 
4,432

 
4,551

 
4,383

 
Total consumer lending
 
72,669

 
73,019

 
72,582

 
72,269

 
72,164

 
Total loans
 
$
221,614

 
$
220,458

 
$
221,109

 
$
218,034

 
$
212,826

 

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


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 6

Allowance for Loan and Lease Losses (Unaudited)
Table 7: Change in Allowance for Loan and Lease Losses
 
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
Three months ended - in millions
 
2018
 
2017
 
2017
 
2017
 
2017
Beginning balance
 
$
2,611

 
$
2,605

 
$
2,561

 
$
2,561

 
$
2,589

Gross charge-offs:
 
 
 
 
 
 
 
 
 
 
Commercial
 
(28
)
 
(46
)
 
(39
)
 
(48
)
 
(53
)
Commercial real estate
 
(6
)
 
(15
)
 
(6
)
 
(2
)
 
(1
)
Equipment lease financing
 
(2
)
 
(5
)
 
(4
)
 
(1
)
 
(1
)
Home equity
 
(28
)
 
(25
)
 
(26
)
 
(38
)
 
(34
)
Residential real estate
 
(2
)
 
(1
)
 
(4
)
 

 
(4
)
Credit card
 
(56
)
 
(46
)
 
(44
)
 
(46
)
 
(46
)
Other consumer
 
 
 
 
 
 
 
 
 
 
Automobile
 
(38
)
 
(37
)
 
(31
)
 
(28
)
 
(30
)
Education
 
(9
)
 
(11
)
 
(7
)
 
(9
)
 
(7
)
Other
 
(24
)
 
(23
)
 
(24
)
 
(22
)
 
(22
)
Total gross charge-offs
 
(193
)
 
(209
)
 
(185
)
 
(194
)
 
(198
)
Recoveries:
 
 
 
 
 
 
 
 
 
 
Commercial
 
16

 
20

 
17

 
20

 
24

Commercial real estate
 
6

 
7

 
6

 
8

 
7

Equipment lease financing
 
4

 
3

 
2

 
1

 
1

Home equity
 
21

 
24

 
24

 
23

 
20

Residential real estate
 
4

 
6

 
4

 
4

 
4

Credit card
 
6

 
5

 
5

 
6

 
5

Other consumer
 
 
 
 
 
 
 
 
 
 
Automobile
 
17

 
15

 
15

 
15

 
13

Education
 
2

 
2

 
2

 
2

 
2

Other
 
4

 
4

 
4

 
5

 
4

Total recoveries
 
80

 
86

 
79

 
84

 
80

Net (charge-offs) / recoveries:
 
 
 
 
 
 
 
 
 
 
Commercial
 
(12
)
 
(26
)
 
(22
)
 
(28
)
 
(29
)
Commercial real estate
 

 
(8
)
 

 
6

 
6

Equipment lease financing
 
2

 
(2
)
 
(2
)
 

 

Home equity
 
(7
)
 
(1
)
 
(2
)
 
(15
)
 
(14
)
Residential real estate
 
2

 
5

 

 
4

 

Credit card
 
(50
)
 
(41
)
 
(39
)
 
(40
)
 
(41
)
Other consumer
 

 

 

 

 

Automobile
 
(21
)
 
(22
)
 
(16
)
 
(13
)
 
(17
)
Education
 
(7
)
 
(9
)
 
(5
)
 
(7
)
 
(5
)
Other
 
(20
)
 
(19
)
 
(20
)
 
(17
)
 
(18
)
Total net (charge-offs)
 
(113
)
 
(123
)
 
(106
)
 
(110
)
 
(118
)
Provision for credit losses
 
92

 
125

 
130

 
98

 
88

Net decrease / (increase) in allowance for unfunded loan commitments
and letters of credit
 
7

 
(4
)
 
11

 
1

 
(4
)
Other
 
7

 
8

 
9

 
11

 
6

Ending balance
 
$
2,604

 
$
2,611

 
$
2,605

 
$
2,561

 
$
2,561

Supplemental Information
 
 
 
 
 
 
 
 
 
 
Net charge-offs to average loans (for the three months ended) (annualized)
 
.21
%
 
.22
%
 
.19
%
 
.20
%
 
.23
%
Allowance for loan and lease losses to total loans
 
1.18
%
 
1.18
%
 
1.18
%
 
1.17
%
 
1.20
%
Commercial lending net charge-offs
 
$
(10
)
 
$
(36
)
 
$
(24
)
 
$
(22
)
 
$
(23
)
Consumer lending net charge-offs
 
(103
)
 
(87
)
 
(82
)
 
(88
)
 
(95
)
Total net charge-offs
 
$
(113
)
 
$
(123
)
 
$
(106
)
 
$
(110
)
 
$
(118
)
Net charge-offs to average loans
 
 
 
 
 
 
 
 
 
 
Commercial lending
 
.03
%
 
.10
%
 
.06
%
 
.06
%
 
.07
%
Consumer lending
 
.57
%
 
.48
%
 
.45
%
 
.49
%
 
.53
%


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 7

Details of Nonperforming Assets (Unaudited)

Table 8: Nonperforming Assets by Type
 
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
In millions
 
2018
 
2017
 
2017
 
2017
 
2017
Nonperforming loans, including TDRs
 
 
 
 
 
 
 
 
 
 
Commercial lending
 
 
 
 
 
 
 
 
 
 
Commercial
 
 
 
 
 
 
 
 
 
 
Retail/wholesale trade
 
$
126

 
$
115

 
$
76

 
$
86

 
$
106

Manufacturing
 
67

 
55

 
63

 
65

 
41

Service providers
 
36

 
35

 
48

 
52

 
44

Real estate related (a)
 
25

 
33

 
37

 
26

 
28

Health care
 
13

 
15

 
23

 
33

 
23

Transportation and warehousing
 
3

 
27

 
15

 
16

 
3

Other industries
 
156

 
149

 
157

 
190

 
155

Total commercial
 
426

 
429

 
419

 
468

 
400

Commercial real estate
 
107

 
123

 
128

 
127

 
137

Equipment lease financing
 
4

 
2

 
3

 
4

 
12

Total commercial lending
 
537

 
554

 
550

 
599

 
549

Consumer lending (b)
 
 
 

 

 

 

Home equity
 
820

 
818

 
814

 
837

 
900

Residential real estate
 
391

 
400

 
423

 
439

 
473

Credit card
 
6

 
6

 
5

 
5

 
4

Other consumer
 
 
 

 

 

 

Automobile
 
79

 
76

 
71

 
66

 
61

Education and other
 
9

 
11

 
10

 
11

 
11

Total consumer lending
 
1,305

 
1,311

 
1,323

 
1,358

 
1,449

Total nonperforming loans (c)
 
1,842

 
1,865

 
1,873

 
1,957

 
1,998

OREO, foreclosed and other assets
 
162

 
170

 
194

 
196

 
214

Total nonperforming assets
 
$
2,004

 
$
2,035

 
$
2,067

 
$
2,153

 
$
2,212

Nonperforming loans to total loans
 
.83
%
 
.85
%
 
.85
%
 
.90
%
 
.94
%
Nonperforming assets to total loans, OREO, foreclosed and other
assets
 
.90
%
 
.92
%
 
.93
%
 
.99
%
 
1.04
%
Nonperforming assets to total assets
 
.53
%
 
.53
%
 
.55
%
 
.58
%
 
.60
%
Allowance for loan and lease losses to nonperforming loans
 
141
%
 
140
%
 
139
%
 
131
%
 
128
%

(a)
Includes loans related to customers in the real estate and construction industries.
(b)
Excludes most consumer loans and lines of credit, not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.
(c)
Nonperforming loans exclude certain government insured or guaranteed loans, loans held for sale, loans accounted for under the fair value option and purchased impaired loans.




THE PNC FINANCIAL SERVICES GROUP, INC.

Page 8

Details of Nonperforming Assets (Unaudited) (Continued)

Table 9: Change in Nonperforming Assets
 
 
January 1, 2018 -

 
October 1, 2017 -

 
July 1, 2017 -

 
April 1, 2017 -

 
January 1, 2017 -

In millions
 
March 31, 2018

 
December 31, 2017

 
September 30, 2017

 
June 30, 2017

 
March 31, 2017

Beginning balance
 
$
2,035

 
$
2,067

 
$
2,153

 
$
2,212

 
$
2,374

New nonperforming assets
 
249

 
307

 
303

 
436

 
330

Charge-offs and valuation adjustments
 
(137
)
 
(141
)
 
(142
)
 
(152
)
 
(150
)
Principal activity, including paydowns and payoffs
 
(81
)
 
(87
)
 
(162
)
 
(161
)
 
(228
)
Asset sales and transfers to loans held for sale
 
(29
)
 
(40
)
 
(38
)
 
(58
)
 
(42
)
Returned to performing status
 
(33
)
 
(71
)
 
(47
)
 
(124
)
 
(72
)
Ending balance
 
$
2,004

 
$
2,035

 
$
2,067

 
$
2,153

 
$
2,212


Table 10: Largest Individual Nonperforming Assets at March 31, 2018 (a)
In millions
 
 
 
 
 
Ranking
 
Outstandings
Industry
1
 
$41
 
 Wholesale Trade
2
 
39
 
 Wholesale Trade
3
 
39
 
 Information
4
 
27
 
 Mining, Quarrying, and Oil and Gas Extraction
5
 
25
 
 Mining, Quarrying, and Oil and Gas Extraction
6
 
20
 
 Manufacturing
7
 
15
 
 Manufacturing
8
 
13
 
 Real Estate and Rental and Leasing
9
 
13
 
 Transportation and Warehousing
10
 
13
 
 Mining, Quarrying, and Oil and Gas Extraction
Total
 
$245
 
 
As a percent of total nonperforming assets
 
12%
 
 
(a) Amounts shown are not net of related allowance for loan and lease losses, if applicable.



THE PNC FINANCIAL SERVICES GROUP, INC.

Page 9

Accruing Loans Past Due (Unaudited)

Table 11: Accruing Loans Past Due 30 to 59 Days (a)
 
 
Amount
 
Percent of Total Outstandings
 
 
Mar. 31
 
Dec. 31
 
Sept. 30
 
Jun. 30
 
Mar. 31
 
Mar. 31
 
Dec. 31
 
Sept. 30
 
Jun. 30
 
Mar. 31
Dollars in millions
 
2018
 
2017
 
2017
 
2017
 
2017
 
2018
 
2017
 
2017
 
2017
 
2017
Commercial
 
$
53

 
$
45

 
$
44

 
$
42

 
$
62

 
.05
%
 
.04
%
 
.04
%
 
.04
%
 
.06
%
Commercial real estate
 
21

 
27

 
8

 
4

 
15

 
.07
%
 
.09
%
 
.03
%
 
.01
%
 
.05
%
Equipment lease financing
 
18

 
17

 
4

 
2

 
19

 
.23
%
 
.21
%
 
.05
%
 
.03
%
 
.25
%
Home equity
 
94

 
78

 
74

 
61

 
57

 
.34
%
 
.27
%
 
.26
%
 
.21
%
 
.19
%
Residential real estate
 
 
 

 

 

 

 
 
 

 

 

 

Non government insured
 
66

 
90

 
75

 
78

 
62

 
.38
%
 
.52
%
 
.45
%
 
.49
%
 
.39
%
Government insured
 
64

 
61

 
60

 
51

 
60

 
.37
%
 
.35
%
 
.36
%
 
.32
%
 
.38
%
Credit card
 
40

 
43

 
40

 
34

 
32

 
.71
%
 
.75
%
 
.74
%
 
.65
%
 
.63
%
Other consumer
 
 
 

 

 

 

 
 
 

 

 

 

Automobile
 
77

 
79

 
71

 
44

 
35

 
.58
%
 
.61
%
 
.56
%
 
.35
%
 
.28
%
Education and other
 
 
 

 

 

 

 
 
 

 

 

 

Non government insured
 
22

 
25

 
30

 
24

 
22

 
.26
%
 
.28
%
 
.33
%
 
.26
%
 
.24
%
Government insured
 
72

 
80

 
80

 
93

 
94

 
.84
%
 
.90
%
 
.88
%
 
1.00
%
 
1.00
%
Total
 
$
527

 
$
545

 
$
486

 
$
433

 
$
458

 
.24
%
 
.25
%
 
.22
%
 
.20
%
 
.22
%

Table 12: Accruing Loans Past Due 60 to 89 Days (a)
 
 
Amount
 
Percent of Total Outstandings
 
 
Mar. 31
 
Dec. 31
 
Sept. 30
 
Jun. 30
 
Mar. 31
 
Mar. 31
 
Dec. 31
 
Sept. 30
 
Jun. 30
 
Mar. 31
Dollars in millions
 
2018
 
2017
 
2017
 
2017
 
2017
 
2018
 
2017
 
2017
 
2017
 
2017
Commercial
 
$
22

 
$
25

 
$
28

 
$
26

 
$
29

 
.02
%
 
.02
%
 
.03
%
 
.02
%
 
.03
%
Commercial real estate
 
12

 
2

 
13

 
1

 
6

 
.04
%
 
.01
%
 
.04
%
 
.00
%
 
.02
%
Equipment lease financing
 
1

 
1

 
3

 
4

 

 
.01
%
 
.01
%
 
.04
%
 
.05
%
 

Home equity
 
31

 
26

 
31

 
24

 
23

 
.11
%
 
.09
%
 
.11
%
 
.08
%
 
.08
%
Residential real estate
 

 

 

 

 

 
 
 

 

 

 

Non government insured
 
16

 
21

 
17

 
14

 
23

 
.09
%
 
.12
%
 
.10
%
 
.09
%
 
.15
%
Government insured
 
54

 
53

 
54

 
55

 
54

 
.31
%
 
.31
%
 
.33
%
 
.34
%
 
.34
%
Credit card
 
26

 
26

 
25

 
20

 
21

 
.46
%
 
.46
%
 
.47
%
 
.38
%
 
.41
%
Other consumer
 

 

 

 

 

 
 
 

 

 

 

Automobile
 
18

 
20

 
16

 
12

 
10

 
.14
%
 
.16
%
 
.13
%
 
.10
%
 
.08
%
Education and other
 

 

 

 

 

 
 
 

 

 

 

Non government insured
 
11

 
12

 
15

 
9

 
11

 
.13
%
 
.14
%
 
.17
%
 
.10
%
 
.12
%
Government insured
 
43

 
52

 
53

 
54

 
50

 
.50
%
 
.59
%
 
.59
%
 
.58
%
 
.53
%
Total
 
$
234

 
$
238

 
$
255

 
$
219

 
$
227

 
.11
%
 
.11
%
 
.12
%
 
.10
%
 
.11
%

Table 13: Accruing Loans Past Due 90 Days or More (a)
 
 
Amount
 
Percent of Total Outstandings
 
 
Mar. 31
 
Dec. 31
 
Sept. 30
 
Jun. 30
 
Mar. 31
 
Mar. 31
 
Dec. 31
 
Sept. 30
 
Jun. 30
 
Mar. 31
Dollars in millions
 
2018
 
2017
 
2017
 
2017
 
2017
 
2018
 
2017
 
2017
 
2017
 
2017
Commercial
 
$
53

 
$
39

 
$
47

 
$
50

 
$
40

 
.05
%
 
.04
%
 
.04
%
 
.05
%
 
.04
%
Commercial real estate
 
 
 

 

 
2

 

 
 
 

 

 
.01
%
 

Residential real estate
 
 
 

 

 

 

 
 
 

 

 

 

Non government insured
 
13

 
24

 
12

 
11

 
10

 
.07
%
 
.14
%
 
.07
%
 
.07
%
 
.06
%
Government insured
 
360

 
462

 
406

 
400

 
422

 
2.06
%
 
2.68
%
 
2.45
%
 
2.49
%
 
2.67
%
Credit card
 
45

 
45

 
38

 
36

 
37

 
.80
%
 
.79
%
 
.71
%
 
.69
%
 
.72
%
Other consumer
 
 
 

 

 

 

 
 
 

 

 

 

Automobile
 
9

 
8

 
5

 
4

 
5

 
.07
%
 
.06
%
 
.04
%
 
.03
%
 
.04
%
Education and other
 
 
 

 

 

 

 
 
 

 

 

 

Non government insured
 
12

 
11

 
9

 
8

 
9

 
.14
%
 
.12
%
 
.10
%
 
.09
%
 
.10
%
Government insured
 
136

 
148

 
161

 
163

 
176

 
1.59
%
 
1.67
%
 
1.78
%
 
1.75
%
 
1.88
%
Total
 
$
628

 
$
737

 
$
678

 
$
674

 
$
699

 
.28
%
 
.33
%
 
.31
%
 
.31
%
 
.33
%
(a) Excludes loans held for sale and purchased impaired loans.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 10

 
Business Segment Descriptions (Unaudited)

Retail Banking provides deposit, lending, brokerage, insurance services, investment management and cash management services to consumer and small business customers within our primary geographic markets. Our customers are serviced through our branch network, ATMs, call centers, online banking and mobile channels. The branch network is located primarily 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. 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 government 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. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting and global trade services. 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. We offer certain products and services internationally.

Asset Management Group provides personal wealth management for high net worth and ultra high net worth clients and institutional asset management. Wealth management products and services include investment and retirement planning, customized investment management, private banking, tailored credit solutions, and trust management and administration for individuals and their families. Our Hawthorn unit provides multi-generational family planning including estate, financial, tax planning, fiduciary, investment management and consulting, private banking, personal administrative services, asset custody and customized performance reporting to ultra high net worth families. Institutional asset management provides advisory, custody and retirement administration services. The business also offers PNC proprietary mutual funds. Institutional clients include corporations, unions, municipalities, non-profits, foundations and endowments, largely within our primary geographic markets.

BlackRock, in which we hold an equity investment, is a leading publicly-traded investment management firm providing a broad range of investment, risk management and technology services to institutional and retail clients worldwide. Using a diverse platform of active and index investment strategies across asset classes, BlackRock develops 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 an investment and risk management technology platform, risk analytics, advisory and technology services and solutions to a broad base of institutional and wealth management investors. Our equity investment in BlackRock provides us with an additional source of noninterest income and increases our overall revenue diversification. BlackRock is a publicly-traded company, and additional information regarding its business is available in its filings with the Securities and Exchange Commission (SEC). At March 31, 2018, our economic interest in BlackRock was 22%.

Table 14: Period End Employees (a)
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
 
2018
 
2017
 
2017
 
2017
 
2017
Full-time employees
 
 
 
 
 
 
 
 
 
Retail Banking
29,903

 
29,604

 
29,486

 
29,463

 
29,606

Other full-time employees
21,055

 
20,754

 
20,637

 
20,399

 
20,065

Total full-time employees
50,958

 
50,358

 
50,123

 
49,862

 
49,671

Part-time employees
 
 
 
 
 
 
 
 
 
Retail Banking
2,337

 
2,368

 
2,422

 
2,554

 
2,492

Other part-time employees
189

 
180

 
223

 
540

 
192

Total part-time employees
2,526

 
2,548

 
2,645

 
3,094

 
2,684

Total
53,484

 
52,906

 
52,768

 
52,956

 
52,355

 
(a) In each of the second and third quarters of 2017, certain personnel were moved from Other into Retail Banking. Prior periods have been revised to reflect these changes.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 11

Table 15: Summary of Business Segment Income and Revenue (Unaudited) (a) (b)
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
In millions
2018
 
2017
 
2017
 
2017
 
2017
Income (loss)
 
 
 
 
 
 
 
 
 
Retail Banking
$
296

 
$
(145
)
 
$
232

 
$
230

 
$
213

Corporate & Institutional Banking
584

 
937

 
525

 
518

 
484

Asset Management Group
68

 
56

 
47

 
52

 
47

Other, including BlackRock (c)
291

 
1,243

 
322

 
297

 
330

Net income
$
1,239

 
$
2,091

 
$
1,126

 
$
1,097

 
$
1,074

 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
Retail Banking
$
1,853

 
$
1,535

 
$
1,819

 
$
1,784

 
$
1,724

Corporate & Institutional Banking
1,429

 
1,502

 
1,479

 
1,478

 
1,363

Asset Management Group
300

 
297

 
292

 
290

 
289

Other, including BlackRock (c)
529

 
926

 
535

 
508

 
508

Total revenue
$
4,111

 
$
4,260

 
$
4,125

 
$
4,060

 
$
3,884

 

(a)
Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflects PNC’s 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.
(b)
Our business segment results for the first quarter of 2018 reflected the change in the statutory federal income tax rate from 35% to 21%, effective as of January 1, 2018, as a result of the new federal tax legislation. Our business segment results for the fourth quarter of 2017 reflect the allocation of the impact of the new tax legislation to our business segments, primarily the revaluation of the net deferred tax positions allocated to the segments. Where certain income tax effects could be reasonably estimated, these were included as provisional amounts as of December 31, 2017. As a result, these provisional amounts could be adjusted during the measurement period, which will end in December 2018. No changes were made to these provisional amounts during the first quarter of 2018.
(c)
Includes earnings and gains or losses related to PNC's equity interest in BlackRock and residual activities that do not meet the criteria for disclosure as a separate reportable business. We provide additional information on these activities in our Form 10-K and Form 10-Q filings with the SEC.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 12

Table 16: Retail Banking (Unaudited) (a)
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
Dollars in millions
2018
 
2017
 
2017
 
2017
 
2017
Income Statement
 
 
 
 
 
 
 
 
 
Net interest income
$
1,218

 
$
1,190

 
$
1,176

 
$
1,139

 
$
1,121

Noninterest income
635

 
345

 
643

 
645

 
603

Total revenue
1,853

 
1,535

 
1,819

 
1,784

 
1,724

Provision for credit losses
69

 
149

 
77

 
50

 
71

Noninterest expense
1,395

 
1,391

 
1,375

 
1,370

 
1,315

Pretax earnings (loss)
389

 
(5
)
 
367

 
364

 
338

Income taxes
93

 
140

 
135

 
134

 
125

Earnings (loss)
$
296

 
$
(145
)
 
$
232

 
$
230

 
$
213

Average Balance Sheet


 
 
 
 
 
 
 
 
Loans held for sale
$
652

 
$
819

 
$
802

 
$
730

 
$
843

Loans


 
 
 
 
 
 
 
 
Consumer


 
 
 
 
 
 
 
 
Home equity
$
24,608

 
$
24,933

 
$
25,173

 
$
25,413

 
$
25,601

Automobile
13,105

 
12,767

 
12,484

 
12,220

 
12,146

Education
4,409

 
4,567

 
4,723

 
4,913

 
5,131

Credit cards
5,619

 
5,450

 
5,280

 
5,137

 
5,121

Other
1,765

 
1,793

 
1,787

 
1,760

 
1,756

Total consumer
49,506

 
49,510

 
49,447

 
49,443

 
49,755

Commercial and commercial real estate
10,527

 
10,513

 
10,630

 
10,925

 
11,006

Residential mortgage
13,420

 
12,950

 
12,382

 
11,918

 
11,688

Total loans
$
73,453

 
$
72,973

 
$
72,459

 
$
72,286

 
$
72,449

Total assets
$
88,734

 
$
88,883

 
$
88,642

 
$
88,671

 
$
87,109

Deposits


 
 
 
 
 
 
 
 
Noninterest-bearing demand
$
29,779

 
$
30,344

 
$
30,222

 
$
29,540

 
$
29,010

Interest-bearing demand
41,939

 
40,954

 
40,762

 
41,465

 
40,649

Money market
32,330

 
33,922

 
35,671

 
37,523

 
39,321

Savings
43,838

 
41,536

 
39,908

 
38,358

 
35,326

Certificates of deposit
12,082

 
12,554

 
12,962

 
13,304

 
13,735

Total deposits
$
159,968

 
$
159,310

 
$
159,525

 
$
160,190

 
$
158,041

Performance Ratios
 
 
 
 
 
 
 
 
 
Return on average assets
1.35
%
 
(.65
)%
 
1.04
%
 
1.04
%
 
.99
%
Noninterest income to total revenue
34
%
 
22
 %
 
35
%
 
36
%
 
35
%
Efficiency
75
%
 
91
 %
 
76
%
 
77
%
 
76
%
 
(a)
See notes (a) and (b) on page 11.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 13

Retail Banking (Unaudited) (Continued)
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
Dollars in millions, except as noted
2018
 
2017
 
2017
 
2017
 
2017
Supplemental Noninterest Income Information
 
 
 
 
 
 
 
 
 
Consumer services
$
266

 
$
279

 
$
273

 
$
277

 
$
250

Brokerage
$
86

 
$
81

 
$
77

 
$
78

 
$
76

Residential mortgage
$
97

 
$
29

 
$
104

 
$
104

 
$
113

Service charges on deposits
$
160

 
$
177

 
$
174

 
$
163

 
$
154

Residential Mortgage Information
 
 
 
 
 
 
 
 
 
Residential mortgage servicing statistics (in billions, except as noted) (a)
 
 
 
 
 
 
 
 
 
Serviced portfolio balance (b)
$
125

 
$
127

 
$
129

 
$
131

 
$
130

Serviced portfolio acquisitions
$
1

 
$
1

 
$
2

 
$
8

 
$
8

MSR asset value (b)
$
1.3

 
$
1.2

 
$
1.2

 
$
1.2

 
$
1.3

MSR capitalization value (in basis points) (b)
101

 
92

 
95

 
95

 
97

Servicing income: (in millions)
 
 
 
 
 
 
 
 
 
Servicing fees, net (c)
$
51

 
$
45

 
$
46

 
$
44

 
$
52

Mortgage servicing rights valuation, net of economic hedge
$
9

 
$
(60
)
 
$
7

 
$
11

 
$
12

Residential mortgage loan statistics
 
 
 
 
 
 
 
 
 
Loan origination volume (in billions)
$
1.7

 
$
2.4

 
$
2.5

 
$
2.2

 
$
1.9

Loan sale margin percentage
2.83
%
 
2.71
%
 
2.80
%
 
2.74
%
 
2.96
%
Percentage of originations represented by:
 
 
 
 
 
 
 
 
 
Purchase volume (d)
56
%
 
50
%
 
57
%
 
61
%
 
43
%
Refinance volume
44
%
 
50
%
 
43
%
 
39
%
 
57
%
Other Information (b)
 
 
 
 
 
 
 
 
 
Customer-related statistics (average)
 
 
 
 
 
 
 
 
 
Non-teller deposit transactions (e)
54
%
 
54
%
 
54
%
 
52
%
 
52
%
Digital consumer customers (f)
64
%
 
63
%
 
62
%
 
62
%
 
61
%
Credit-related statistics
 
 
 
 
 
 
 
 
 
Nonperforming assets
$
1,131

 
$
1,129

 
$
1,126

 
$
1,149

 
$
1,209

Net charge-offs
$
100

 
$
99

 
$
85

 
$
87

 
$
100

Other statistics
 
 
 
 
 
 
 
 
 
ATMs
9,047

 
9,051

 
8,987

 
8,972

 
8,976

Branches (g)
2,442

 
2,459

 
2,474

 
2,481

 
2,508

Brokerage account client assets (in billions) (h)
$
49

 
$
49

 
$
48

 
$
46

 
$
46


(a)
Represents mortgage loan servicing balances for third parties and the related income.
(b)
Presented as of period end, except for customer-related statistics, which are quarterly averages, and net charge-offs, which are for the three 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 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)
Excludes stand-alone mortgage offices and satellite offices (e.g., drive-ups, electronic branches and retirement centers) that provide limited products and/or services.
(h)
Includes cash and money market balances.



THE PNC FINANCIAL SERVICES GROUP, INC.

Page 14

Table 17: Corporate & Institutional Banking (Unaudited) (a)
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
Dollars in millions
2018
 
2017
 
2017
 
2017
 
2017
Income Statement
 
 
 
 
 
 
 
 
 
Net interest income
$
882

 
$
898

 
$
924

 
$
890

 
$
839

Noninterest income
547

 
604

 
555

 
588

 
524

Total revenue
1,429

 
1,502

 
1,479

 
1,478

 
1,363

Provision for credit losses (benefit)
41

 
(14
)
 
62

 
87

 
25

Noninterest expense
626

 
643

 
599

 
602

 
584

Pretax earnings
762

 
873

 
818

 
789

 
754

Income taxes (benefit)
178

 
(64
)
 
293

 
271

 
270

Earnings
$
584

 
$
937

 
$
525

 
$
518

 
$
484

Average Balance Sheet
 
 
 
 
 
 
 
 
 
Loans held for sale
$
1,189

 
$
845

 
$
917

 
$
716

 
$
1,116

Loans
 
 
 
 
 
 
 
 
 
Commercial
$
100,802

 
$
100,726

 
$
98,794

 
$
96,012

 
$
92,116

Commercial real estate
26,732

 
27,259

 
27,559

 
27,575

 
27,091

Equipment lease financing
7,845

 
7,670

 
7,704

 
7,602

 
7,497

Total commercial lending
135,379

 
135,655

 
134,057

 
131,189

 
126,704

Consumer
77

 
107

 
222

 
278

 
331

Total loans
$
135,456

 
$
135,762

 
$
134,279

 
$
131,467

 
$
127,035

Total assets
$
151,909

 
$
151,721

 
$
150,948

 
$
148,267

 
$
142,592

Deposits
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand
$
45,896

 
$
48,116

 
$
47,180

 
$
46,327

 
$
47,423

Money market
23,406

 
23,992

 
23,413

 
21,321

 
21,086

Other
18,592

 
17,247

 
16,879

 
16,016

 
15,391

Total deposits
$
87,894

 
$
89,355

 
$
87,472

 
$
83,664

 
$
83,900

Performance Ratios
 
 
 
 
 
 
 
 
 
Return on average assets
1.56
%
 
2.45
%
 
1.38
%
 
1.40
%
 
1.38
%
Noninterest income to total revenue
38
%
 
40
%
 
38
%
 
40
%
 
38
%
Efficiency
44
%
 
43
%
 
41
%
 
41
%
 
43
%
Other Information
 
 
 
 
 
 
 
 
 
Consolidated revenue from: (b)
 
 
 
 
 
 
 
 
 
Treasury Management (c)
$
419

 
$
401

 
$
384

 
$
372

 
$
359

Capital Markets (c)
$
258

 
$
271

 
$
231

 
$
268

 
$
247

Commercial mortgage banking activities
 
 
 
 
 
 
 
 
 
Commercial mortgage loans held for sale (d)
$
14

 
$
42

 
$
22

 
$
38

 
$
13

Commercial mortgage loan servicing income (e)
55

 
59

 
56

 
55

 
58

Commercial mortgage servicing rights valuation, net of economic hedge (f)
4

 
13

 
6

 
19

 
16

Total
$
73

 
$
114

 
$
84

 
$
112

 
$
87

Average Loans by C&IB business
 
 
 
 
 
 
 
 
 
Corporate Banking
$
57,856

 
$
57,064

 
$
56,867

 
$
54,937

 
$
53,839

Real Estate
37,252

 
38,949

 
38,516

 
38,318

 
37,136

Business Credit
16,818

 
16,612

 
16,097

 
15,645

 
14,839

Equipment Finance
14,243

 
13,912

 
13,744

 
13,481

 
12,478

Commercial Banking
7,066

 
6,957

 
7,042

 
7,124

 
7,041

Other
2,221

 
2,268

 
2,013

 
1,962

 
1,702

Total average loans
$
135,456

 
$
135,762

 
$
134,279

 
$
131,467

 
$
127,035

MSR asset value (g)
$
723

 
$
668

 
$
628

 
$
618

 
$
606

Credit-related statistics
 
 
 
 
 
 
 
 
 
Nonperforming assets (g)
$
508

 
$
531

 
$
549

 
$
586

 
$
546

Net charge-offs
$
9

 
$
29

 
$
22

 
$
21

 
$
21

 
(a)
See notes (a) and (b) on page 11.
(b)
Represents consolidated amounts.
(c)
Includes amounts reported in net interest income and noninterest income, predominantly in corporate service fees.
(d)
Includes other noninterest income for valuations on commercial mortgage loans held for sale and related commitments, derivative valuations, originations fees, gains on sale of loans held for sale and net interest income on loans held for sale.
(e)
Includes net interest income and noninterest income (primarily in corporate service fees) from loan servicing net of reduction in commercial mortgage servicing rights due to time decay and payoffs. Commercial mortgage servicing rights valuation, net of economic hedge is shown separately.
(f)
Includes amounts reported in corporate service fees.
(g)
Presented as of period end.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 15

Table 18: Asset Management Group (Unaudited) (a)
 
Three months ended
 
March 31
 
December 31
 
September 30
 
June 30
 
March 31
Dollars in millions, except as noted
2018
 
2017
 
2017
 
2017
 
2017
Income Statement
 
 
 
 
 
 
 
 
 
Net interest income
$
74

 
$
71

 
$
72

 
$
73

 
$
71

Noninterest income
226

 
226

 
220

 
217

 
218

Total revenue
300

 
297

 
292

 
290

 
289

Provision for credit losses (benefit)
(7
)
 
7

 
3

 
(7
)
 
(2
)
Noninterest expense
218

 
217

 
214

 
215

 
217

Pretax earnings
89

 
73

 
75

 
82

 
74

Income taxes
21

 
17

 
28

 
30

 
27

Earnings
$
68

 
$
56

 
$
47

 
$
52

 
$
47

Average Balance Sheet
 
 
 
 
 
 
 
 
 
Loans
 
 
 
 
 
 
 
 
 
Consumer
$
4,785

 
$
4,894

 
$
4,977

 
$
5,089

 
$
5,113

Commercial and commercial real estate
733

 
745

 
680

 
700

 
728

Residential mortgage
1,517

 
1,433

 
1,330

 
1,246

 
1,190

Total loans
$
7,035

 
$
7,072

 
$
6,987

 
$
7,035

 
$
7,031

Total assets
$
7,499

 
$
7,545

 
$
7,464

 
$
7,516

 
$
7,476

Deposits
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand
$
1,466

 
$
1,609

 
$
1,464

 
$
1,468

 
$
1,433

Interest-bearing demand
3,540

 
3,517

 
3,469

 
3,704

 
3,829

Money market
2,577

 
2,863

 
3,058

 
3,219

 
3,500

Savings
4,613

 
4,282

 
3,961

 
3,770

 
3,768

Other
305

 
288

 
237

 
230

 
246

Total deposits
$
12,501

 
$
12,559

 
$
12,189

 
$
12,391

 
$
12,776

Performance Ratios
 
 
 
 
 
 
 
 
 
Return on average assets
3.68
%
 
2.94
%
 
2.50
%
 
2.78
%
 
2.55
%
Noninterest income to total revenue
75
%
 
76
%
 
75
%
 
75
%
 
75
%
Efficiency
73
%
 
73
%
 
73
%
 
74
%
 
75
%
Other Information
 
 
 
 
 
 
 
 
 
Nonperforming assets (b)
$
52

 
$
49

 
$
45

 
$
49

 
$
51

Net charge-offs
$
6

 
$
(1
)
 
$
3

 
$
1

 
$
1

Client Assets Under Administration (in billions) (b) (c)
 
 
 
 
 
 
 
 
 
Discretionary client assets under management
$
148

 
$
151

 
$
146

 
$
141

 
$
141

Nondiscretionary client assets under administration
129

 
131

 
129

 
125

 
123

Total
$
277

 
$
282

 
$
275

 
$
266

 
$
264

Discretionary client assets under management
 
 
 
 
 
 
 
 
 
Personal
$
92

 
$
94

 
$
90

 
$
89

 
$
87

Institutional
56

 
57

 
56

 
52

 
54

Total
$
148

 
$
151

 
$
146

 
$
141

 
$
141

 
(a)
See notes (a) and (b) on page 11.
(b)
As of period end.
(c)
Excludes brokerage account client assets.


THE PNC FINANCIAL SERVICES GROUP, INC.

Page 16

Glossary of Terms

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

Basel III common equity Tier 1 capital - Common stock plus related surplus, net of treasury stock, plus retained earnings, plus accumulated other comprehensive income for securities currently and those transferred from available for sale and pension and other postretirement benefit plans, subject to phase-in limits, less goodwill, net of associated deferred tax liabilities, less other disallowed intangibles, net of deferred tax liabilities and plus/less other adjustments. Significant common stock investments in unconsolidated financial institutions, as well as mortgage servicing rights and deferred tax assets, must then be deducted to the extent such items individually exceed 10%, or in the aggregate exceed 15%, of our adjusted Basel III common equity Tier 1 capital.

Basel III common equity Tier 1 capital ratio - Common equity Tier 1 capital divided by period-end risk-weighted assets (as applicable).

Basel III Tier 1 capital - Common equity Tier 1 capital, plus qualifying preferred stock, plus certain trust preferred capital securities, plus certain noncontrolling interests that are held by others and plus/less other adjustments.

Basel III Tier 1 capital ratio - Tier 1 capital divided by period-end risk-weighted assets (as applicable).

Basel III Total capital - Tier 1 capital plus qualifying subordinated debt, plus certain trust preferred securities, plus, under the Basel III transitional rules and the standardized approach, the allowance for loan and lease losses included in Tier 2 capital and other.

Basel III Total capital ratio - Total capital divided by period-end risk-weighted assets (as applicable).

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

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

Common shareholders’ equity - Total shareholders' equity less the liquidation value of preferred stock.

Credit valuation adjustment - Represents an adjustment to the fair value of our derivatives for our own and counterparties’ non-performance risk.

Criticized commercial loans - Loans with potential or identified weaknesses based upon internal risk ratings that comply with the regulatory classification definitions of “Special Mention,” “Substandard” or “Doubtful.”

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

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

Earning assets - Assets that generate income, which include: interest-earning deposits with banks; loans held for sale; loans; investment securities; and certain other assets.

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

Efficiency - Noninterest expense divided by total revenue.

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



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Fee income - When referring to the components of Noninterest income, we use the term fee income to refer to the following categories within Noninterest income: Asset management; Consumer services; Corporate services; Residential mortgage; and Service charges on deposits.

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

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

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

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

Leverage ratio - Tier 1 capital divided by average quarterly adjusted total assets.

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

Loan-to-value ratio (LTV) - A calculation of a loan's collateral coverage that is used both in underwriting and assessing credit risk in our lending portfolio. LTV is the sum total of loan obligations secured by collateral divided by the market value of that same collateral. Market values of the collateral are based on an independent valuation of the collateral. For example, a LTV of less than 90% is better secured and has less credit risk than a LTV of greater than or equal to 90%.

Loss given default (LGD) - An estimate of loss, net of recovery based on collateral type, collateral value, loan exposure, and other factors. Each loan has its own LGD. The LGD risk rating measures the percentage of exposure of a specific credit obligation that we expect to lose if default occurs. LGD is net of recovery, through any means, including but not limited to the liquidation of collateral or deficiency judgments rendered from foreclosure or bankruptcy proceedings.

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

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

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

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

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

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



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

Other real estate owned (OREO), foreclosed and other assets - Assets taken in settlement of troubled loans primarily through deed-in-lieu of foreclosure or foreclosure. Foreclosed and other assets include real and personal property, equity interests in corporations, partnerships, and limited liability companies. Excludes certain assets that have a government-guarantee which are classified as other receivables.

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

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

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

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

Taxable-equivalent interest income - The interest income earned on certain assets that is completely or partially exempt from federal income tax. These tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of yields and margins for all interest-earning assets, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margins by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on other taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement.

Troubled debt restructuring (TDR) - A loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.

Yield curve - A graph showing the relationship between the yields on financial instruments or market indices of the same credit quality with different maturities. For example, a “normal” or “positive” yield curve exists when long-term bonds have higher yields than short-term bonds. A “flat” yield curve exists when yields are the same for short-term and long-term bonds. A “steep” yield curve exists when yields on long-term bonds are significantly higher than on short-term bonds. An “inverted” or “negative” yield curve exists when short-term bonds have higher yields than long-term bonds.