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PNC divested its 22.4% equity investment in BlackRock in May 2020 primarily through the sale of 31.6 million shares in a registered offering and 2.65 million shares repurchased by BlackRock. PNC also contributed .5 million BlackRock shares to the PNC Foundation. Net proceeds from the sale were $14.2 billion. The after-tax gain on the sale of $4.3 billion, and donation expense and BlackRock's historical results, are reported in PNC's consolidated financial statements as discontinued operations.

▪	Results from continuing operations reflected a loss of $744 million, a decrease of $1.5 billion due to a higher provision for credit losses.

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▪	Provision for credit losses increased to $2.5 billion for the second quarter compared with $914 million for the first quarter due to the significant estimated economic impact of the pandemic. Provision was calculated under the Current Expected Credit Loss (CECL) accounting standard adopted January 1, 2020.

–	Provision was $1.7 billion for the commercial portfolio and $720 million for the consumer portfolio.

▪	Total revenue of $4.1 billion declined $260 million, or 6%.

▪	Net interest income of $2.5 billion increased $16 million, or 1%, as lower rates on deposits and borrowings and higher average loans, balances held with the Federal Reserve Bank and securities were partially offset by lower yields on earning assets.

–	Net interest margin decreased 32 basis points to 2.52% reflecting the full quarter impact of the 1.5 percentage point reduction in the federal funds rate by the Federal Reserve in March 2020.

▪	Noninterest income of $1.6 billion decreased $276 million, or 15%.

–	Fee income of $1.3 billion declined $204 million, or 14%. Service charges on deposits and consumer service fees decreased $136 million reflecting lower consumer spending and fees waived to assist customers in the pandemic, and residential mortgage revenue decreased $52 million due to a lower benefit from residential mortgage servicing rights valuation, net of economic hedge.

–	Other noninterest income of $271 million declined $72 million primarily due to lower net securities gains partially offset by higher capital markets-related revenue.

▪	Noninterest expense of $2.5 billion decreased $28 million, or 1%, reflecting lower business activity related to the economic impact of the pandemic and well-controlled expenses.

▪	The effective tax rate was 17.5% for the second quarter and 13.7% for the first quarter.

▪	Average loans increased $24.5 billion, or 10%, to $268.1 billion in the second quarter compared with the first quarter.

–	Average commercial loans of $189.3 billion increased $25.2 billion, or 15%, reflecting Paycheck Protection Program (PPP) lending under the CARES Act and higher utilization of loan commitments driven by the economic impact of the pandemic on customer liquidity preferences.

–	Average consumer loans of $78.8 billion decreased $.7 billion, or 1%, primarily due to lower credit card, auto and student loans partially offset by higher residential mortgage loans.

▪	Loans at June 30, 2020 declined $6.4 billion, or 2%, to $258.2 billion compared with March 31, 2020.

–	Commercial loans decreased $4.5 billion, or 2%. PNC funded $13.7 billion of PPP loans during the second quarter. New loans were more than offset by paydowns of March 2020 draws on loan commitments.

–	Consumer loans decreased $1.9 billion, or 2%, primarily in auto, credit card and home equity loans.

▪	Credit quality performance:

–	Overall delinquencies of $1.3 billion at June 30, 2020 decreased $173 million, or 12%, compared with March 31, 2020 due to lower consumer loan and commercial loan delinquencies reflecting CARES Act and other forbearance.

–	Nonperforming assets of $2.0 billion at June 30, 2020 increased $200 million, or 11%, compared with March 31, 2020.

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–	Net loan charge-offs were $236 million for the second quarter compared with $212 million for the first quarter.

–	The allowance for credit losses to total loans was 2.55% at June 30, 2020 and 1.66% at March 31, 2020.

▪	Average deposits increased $45.5 billion, or 16%, to $335.2 billion in the second quarter compared with the first quarter due to growth in commercial deposits reflecting pandemic-related accumulation of liquidity by customers. Consumer deposits also increased driven by government stimulus payments and lower consumer spending.

–	Deposits at June 30, 2020 increased $40.8 billion, or 13%, to $346.0 billion compared with March 31, 2020.

▪	Average investment securities increased $4.0 billion, or 5%, to $88.4 billion in the second quarter compared with the first quarter.

–	Investment securities at June 30, 2020 increased $8.0 billion, or 9%, to $98.5 billion compared with March 31, 2020.

▪	Average balances held with the Federal Reserve Bank of $34.2 billion for the second quarter increased $16.9 billion compared with the first quarter, and balances at June 30, 2020 of $50.0 billion increased $30.4 billion compared with March 31, 2020, reflecting higher liquidity from deposit growth and proceeds from the sale of the equity investment in BlackRock.

▪	PNC maintained strong capital and liquidity positions.

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

–	PNC announced on March 16, 2020 a temporary suspension of its common stock repurchase program in conjunction with the Federal Reserve's effort to support the U.S. economy during the pandemic, and will continue the suspension through the third quarter of 2020, with the exception of permissible share repurchases to offset the effects of employee benefit plan-related issuances.

–	The Basel III common equity Tier 1 capital ratio was an estimated 11.3 percent at June 30, 2020 and 9.4 percent at March 31, 2020.

–	The Liquidity Coverage Ratio at June 30, 2020 for both PNC and PNC Bank, N.A. exceeded the regulatory minimum requirement.

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▪	Average loans increased 3% compared with the first quarter of 2020 and 10% compared with the second quarter of 2019 due to growth in commercial lending, driven by PPP loans, and higher residential mortgage loans. Compared with second quarter 2019, growth in auto, unsecured installment and credit card loans contributed to the increase.

▪

Average deposits increased 9% compared with the first quarter and 12% compared with second quarter 2019 due to increases in demand deposits and savings as a result of government stimulus payments and lower consumer spending. Compared to the second quarter of 2019, the increase was partially offset by lower money market deposits, reflecting a shift to relationship-based savings products, and lower certificates of deposit.

▪	Net loan charge-offs were $142 million for the second quarter of 2020 compared with $166 million in the first quarter of 2020 and $120 million in the second quarter of 2019. The decline from the first quarter reflected COVID-19 related hardship assistance and suspension of pandemic-related foreclosures.

▪	Residential mortgage loan origination volume was $4.2 billion for the second quarter of 2020 compared with $3.2 billion for the first quarter of 2020 and $2.9 billion for the second quarter of 2019. Approximately 34% of second quarter 2020 volume was for home purchase transactions compared with 36% and 54% for the first quarter of 2020 and second quarter of 2019, respectively.

▪	The third party residential mortgage servicing portfolio was $122 billion at June 30, 2020 compared with $118 billion at March 31, 2020 and $124 billion at June 30, 2019. Residential mortgage loan servicing acquisitions were $11 billion for second quarter 2020 compared with $2 billion for the first quarter of 2020 and $5 billion for the second quarter of 2019.

▪	Approximately 73% of consumer customers used non-teller channels for the majority of their transactions during the second quarter of 2020 compared with 71% in the first quarter of 2020 and 69% in the second quarter of 2019.

▪	Deposit transactions via ATM and mobile channels were 65% of total deposit transactions in the second quarter of 2020 compared with 59% in the first quarter of 2020 and 56% in the second quarter of 2019.

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▪	Average loans increased 15% compared with the first quarter and 18% over the second quarter of 2019 due to broad growth across PNC’s corporate banking, real estate, commercial banking and business credit businesses, including higher average utilization of loan commitments primarily driven by the economic impact of the pandemic and PPP loan originations.

▪	Average deposits increased 29% from the first quarter and 40% from the second quarter of 2019 reflecting liquidity maintained by customers due to the economic impact of the pandemic.

▪	Net charge-offs were $99 million in the second quarter of 2020 compared with $50 million in the first quarter and $23 million in the second quarter of 2019.

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(a)	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.

(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.

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(a)

Net interest margin is the total yield on interest-earning assets minus the total rate on interest-bearing liabilities and includes the benefit from use of noninterest-bearing sources. To provide more meaningful comparisons of net interest margins, we use net interest income on a taxable-equivalent basis in calculating average yields used in the calculation of 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 June 30, 2020, March 31, 2020 and June 30, 2019 were $19 million, $22 million and $27 million, respectively. The taxable equivalent adjustments to net interest income for the six months ended June 30, 2020 and June 30, 2019 were $41 million and $54 million, respectively.

(b)	Calculated as noninterest expense divided by total revenue.

(c)

Our business information is presented based on our internal management reporting practices. Net interest income in business segment results reflect 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.

(d)	Includes earnings and gains or losses related to 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.

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(a)	Amounts include assets and liabilities for which we have elected the fair value option. Our first quarter 2020 Form 10-Q included, and our second quarter 2020 Form 10-Q will include, additional information regarding these Consolidated Balance Sheet line items.

(b)

Amounts at June 30, 2020 and March 31, 2020 reflect the impact of adopting Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses, which is commonly referred to as the Current Expected Credit Losses (CECL) standard and our transition from an incurred loss methodology for these reserves to an expected credit loss methodology. Our 2019 Form 10-K and our first quarter 2020 Form 10-Q included, and our second quarter 2020 Form 10-Q will include additional information related to our adoption of this standard.

(c)

Represents our held for sale investment in BlackRock. In the second quarter of 2020, PNC divested its entire holding in BlackRock. Prior period BlackRock investment balances have been reclassified to the Asset held for sale line in accordance with Accounting Standard Codification 205-20, Presentation of Financial Statements - Discontinued Operations. Our second quarter 2020 Form 10-Q will include additional information.

(d)	See the Tangible Book Value per Common Share table on page 18 for additional information.

(e)	All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Capital Ratios on page 17 for additional information. The ratios as of June 30, 2020 are estimated.

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

(g)	The June 30, 2020 and March 31, 2020 fully implemented ratios are calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision.

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

(i)	Ratios at June 30, 2020 and March 31, 2020 reflect an increase in reserves due to the impact of CECL adoption, the significant economic impact of COVID-19 and loan growth. Our 2019 Form 10-K and our first quarter 2020 Form 10-Q included and our second quarter 2020 Form 10-Q will include additional information related to our adoption of this standard.

(j)	Excludes allowances for investment securities and other financial assets.

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(a)	All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented.

(b)	The June 30, 2020 and March 31, 2020 ratio is calculated to reflect PNC's election to adopt the CECL optional five-year transition provision.

(c)	The June 30, 2020 and March 31, 2020 ratio is calculated to reflect the full impact of CECL and excludes the benefits of the five-year transition provision.

(d)	Based on the Tailoring Rules, effective January 1, 2020 for PNC, the limit for threshold deductions increased, resulting in no deduction as of June 30, 2020 and March 31, 2020.

(e)	Based on the Tailoring Rules effective January 1, 2020, PNC elected to opt-out of the inclusion of accumulated other comprehensive income in regulatory capital.

(f)	Basel III standardized approach risk-weighted assets are based on the Basel III standardized approach rules and include credit and market risk-weighted assets.

(g)	Basel III advanced approaches risk-weighted assets in 2019 were based on the Basel III advanced approaches rules, and include credit, market and operational risk-weighted assets. Based on the Tailoring Rules effective January 1, 2020, PNC is no longer required to report advanced approaches risk-weighted assets.

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▪	Our businesses, financial results and balance sheet values are affected by business and economic conditions, including the following:

–	Changes in interest rates and valuations in debt, equity and other financial markets.

–	Disruptions in the U.S. and global financial markets.

–	Actions by the Federal Reserve Board, U.S. Treasury and other government agencies, including those that impact money supply and market interest rates.

–	Changes in customer behavior due to changing business and economic conditions or legislative or regulatory initiatives.

–	Changes in customers’, suppliers’ and other counterparties’ performance and creditworthiness.

–	Impacts of tariffs and other trade policies of the U.S. and its global trading partners.

–	The length and extent of economic contraction as a result of the COVID-19 pandemic.

–	Commodity price volatility.

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

–

PNC’s baseline economic forecast is for an economic recovery in the second half of 2020 and into 2021, following a very severe but short recession in the first half of 2020. Consumers are increasing their spending and workers are returning to their job sites as states are gradually lifting restrictions on movement because of the COVID-19 pandemic; fiscal stimulus from the federal government is also supporting economic growth in mid-2020. After a significant contraction in real GDP, steep job losses, and a large increase in the unemployment rate in the second quarter, economic growth has resumed and the labor market is improving.

–	In the baseline forecast, real GDP increases in the third quarter as consumers start to spend again. Fiscal stimulus and extremely low interest rates support the recovery. Real GDP surpasses its pre-recession peak in 2022, and growth is well above its long-term trend through 2023.

–	The baseline forecast assumes that the Federal Open Market Committee keeps the federal funds rate in its current range of 0.00% to 0.25% into 2023.

▪

Given the many unknowns and potential downside risks, including additional COVID-19 outbreaks, our forward-looking statements are subject to the risk that conditions will be substantially different than we are currently expecting. If efforts to contain COVID-19 are unsuccessful and restrictions on movement are reimposed or expanded, the economy could fall back into recession. The potential expiration of fiscal stimulus is also a major downside risk. The longer the labor market recovery takes, the more it will damage consumer fundamentals and sentiment. This could make the recovery weaker. Similarly, weak near-term growth could damage business fundamentals. And an extended global recession due to COVID-19 would weaken the U.S. recovery. As a result, the outbreak and its consequences, including responsive measures to manage it, have had and are likely to continue to have an adverse effect, possibly materially, on our business and financial performance by adversely affecting, possibly materially, the demand and profitability of our products and services, the valuation of assets and our ability to meet the needs of our customers.

▪

PNC’s ability to take certain capital actions, including returning capital to shareholders beginning in the fourth quarter of 2020, is subject to PNC meeting or exceeding a stress capital buffer established by the Federal Reserve Board in connection with the Federal Reserve Board's Comprehensive Capital Analysis and Review (CCAR) process. The Federal Reserve also has imposed limitations on capital distributions in the third quarter of 2020 by CCAR-participating bank holding companies and may extend these limitations, potentially in modified form.

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PNC’s regulatory capital ratios in the future will depend on, among other things, the company’s financial performance, the scope and terms of final capital regulations then in effect and management actions affecting the composition of PNC’s balance sheet. In addition, PNC’s ability to determine, evaluate and forecast regulatory capital ratios, and to take actions (such as capital distributions) based on actual or forecasted capital ratios, will be dependent at least in part on the development, validation and regulatory review of related models.

▪

Legal and regulatory developments could have an impact on our ability to operate our businesses, financial condition, results of operations, competitive position, reputation, or pursuit of attractive acquisition opportunities. Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and ability to attract and retain management. These developments could include:

–	Changes to laws and regulations, including changes affecting oversight of the financial services industry, consumer protection, bank capital and liquidity standards, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.

–	Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. These matters may result in monetary judgments or settlements or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to PNC.

–	Results of the regulatory examination and supervision process, including our failure to satisfy requirements of agreements with governmental agencies.

–	Impact on business and operating results of any costs associated with obtaining rights in intellectual property claimed by others and of adequacy of our intellectual property protection in general.

▪	Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards.

▪

We grow our business in part through acquisitions and new strategic initiatives. Risks and uncertainties include those presented by the nature of the business acquired and strategic initiative, including in some cases those associated with our entry into new businesses or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, regulatory issues, and the integration of the acquired businesses into PNC after closing.

▪	Competition can have an impact on customer acquisition, growth and retention and on credit spreads and product pricing, which can affect market share, deposits and revenues. Our ability to anticipate and respond to technological changes can also impact our ability to respond to customer needs and meet competitive demands.

▪	Business and operating results can also be affected by widespread natural and other disasters, pandemics, dislocations, terrorist activities, system failures, security breaches, cyberattacks or international hostilities through impacts on the economy and financial markets generally or on us or our counterparties specifically.