PNC FINANCIAL SERVICES GROUP, INC. - Quarter Report: 2020 March (Form 10-Q)

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(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)

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 GAAP in the Consolidated Income Statement. For additional information, see Reconciliation of Taxable-Equivalent Net Interest Income (Non-GAAP) in the Statistical Information (Unaudited) section in Item 1 of this Report.

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(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)

Amount at March 31, 2020 reflects the impact of adopting Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses, which is commonly referred to as the Current Expected Credit Losses (CECL) standard and our transition from an incurred loss methodology for these reserves to an expected credit loss methodology. Prior period amounts represent Allowance for Loan and Lease Losses (ALLL) under the incurred loss methodology. See Note 1 Accounting Policies of this Report for additional information related to our adoption of this standard.

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

(d)	Amounts as of March 31, 2020 are net of the related Allowance for Credit Losses (ACL) recorded in accordance with the adoption of the CECL standard, which totaled $2 million and $19 million for Investment securities and Other assets, respectively. See Note 1 Accounting Policies of this Report for additional detail related to our adoption of this standard.

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(e)	Amounts include our equity interest in BlackRock, Inc.

(f)

All ratios are calculated using the regulatory capital methodology applicable to PNC during each period presented and calculated based on the standardized approach. See Basel III Capital discussion in the Capital Management portion of the Risk Management section of this Financial Review and the capital discussion in the Banking Regulation and Supervision section of Item 1 Business and Item 1A Risk Factors in our 2019 Form 10-K.

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

(h)	The March 31, 2020 ratio is calculated to reflect the full impact of CECL and excludes the benefits of phase-ins under the optional transition provision.

(i)	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.

(j)	Prior period ratios are calculated with ALLL as the numerator under the incurred loss methodology prior to the adoption of the CECL standard.

(k)	Calculated as the ACL for loans and leases and the ACL for unfunded lending related commitments divided by total loans.

•	Expanding our leading banking franchise to new markets and digital platforms;

•	Deepening customer relationships by delivering a superior banking experience and financial solutions; and

•	Leveraging technology to innovate and enhance products, services, security and processes.

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•	Total revenue increased $231 million, or 5%, to $4.5 billion.

•	Net interest income of $2.5 billion increased $36 million, or 1%.

•	Net interest margin decreased to 2.84% compared to 2.98% for the first quarter of 2019.

•	Noninterest income increased $195 million, or 11%, to $2.0 billion.

•	Provision for credit losses of $914 million, which was calculated under the Current Expected Credit Losses (CECL) accounting standard effective January 1, 2020, increased $725 million compared to the first quarter of 2019 reflecting the change in methodology together with the significant economic impact of COVID-19 and loan growth.

•	Noninterest expense decreased $35 million, or 1%, to $2.5 billion.

•	Earnings per diluted common share decreased primarily due to lower net income partially offset by lower average common shares outstanding due to share repurchases.

•	Total assets increased $35.2 billion, or 9%, to $445.5 billion.

•	Total loans increased $24.8 billion, or 10%, to $264.6 billion.

•	Total commercial lending grew $24.1 billion, or 15%, to $184.7 billion, reflecting higher utilization of loan commitments near quarter end driven by the economic impact of COVID-19.

•	Total consumer lending increased $.7 billion, or 1%, to $79.9 billion.

•	Investment securities increased $3.7 billion, or 4%, to $90.5 billion.

•	Interest-earning deposits with banks, primarily with the Federal Reserve Bank, decreased $3.4 billion to $20.0 billion.

•	Total deposits increased $16.7 billion, or 6%, to $305.2 billion as higher commercial deposits near quarter end reflected liquidity maintained by customers due to the economic impact of COVID-19.

•	Borrowed funds increased $13.1 billion, or 22%, to $73.4 billion in part related to enhanced liquidity to meet customer needs caused by the economic impact of COVID-19.

•	At March 31, 2020 compared to December 31, 2019:

•	Nonperforming assets of $1.8 billion increased $3 million.

•	Overall loan delinquencies of $1.5 billion decreased $21 million, or 1%.

•	Net charge-offs were $212 million, or .35% of average loans on annualized basis, in the first quarter of 2020 compared to $136 million, or .24%, for the first quarter of 2019.

•	The allowance for credit losses of $4.4 billion to total loans was 1.66% at March 31, 2020, and reflects the January 1, 2020 transition adjustment of $.6 billion for the adoption of the CECL accounting standard.

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•	The Basel III common equity Tier 1 (CET1) capital ratio was 9.4% at March 31, 2020 and 9.5% at December 31, 2019.

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The March 31, 2020 ratio reflects 2019 Tailoring Rules changes and our election of a five-year transition provision that delays CECL's estimated impact on CET1 capital, as defined by the rule. CECL's estimated impact on CET1 capital is the change in retained earnings at adoption plus or minus 25% of the change in CECL ACL at the balance sheet date compared to CECL ACL at transition. The estimated CECL impact is added to CET1 through December 31, 2021, then phased-out over the following three years.

•	Common shareholders' equity was $45.3 billion at both March 31, 2020 and December 31, 2019.

•	In the first quarter of 2020, we returned $1.9 billion of capital to shareholders through repurchases of 10.1 million common shares for $1.4 billion and dividends on common shares of $.5 billion.

•	We announced on March 16, 2020 a temporary suspension of our common stock share repurchase program through June 30, 2020 in conjunction with the Federal Reserve's effort to support the U.S. economy during the COVID-19 outbreak.

•	On April 2, 2020, the PNC board of directors declared a quarterly cash dividend on common stock of $1.15 per share effective with the May 5, 2020 dividend payment date.

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Our baseline economic forecast is for a severe but short recession in the first half of 2020. Restrictions on movement because of the COVID-19 pandemic have led to a substantial drop in consumer spending and a steep drop in output as many businesses are closed or operating at significantly reduced levels, and many workers are unable to get to their jobs. PNC expects a significant contraction in U.S. real GDP and steep job losses over the next few months and a large increase in the unemployment rate through mid-2020.

•	In the baseline forecast, economic growth resumes in the third quarter as businesses re-open and consumers start to spend again. Fiscal stimulus and extremely low interest rates support the recovery. Real GDP surpasses its pre-recession peak in the second half of 2021, and growth is well above its long-term trend through 2022.

•	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.

•	Average loans to be up approximately 10% to 15%;

•	Net interest income to be stable;

•	Noninterest income to be down approximately 15% to 20%;

•	Noninterest expense to be stable to down; and

•	Net charge-offs to be between $250 million and $350 million.

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(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. For more information, see Reconciliation of Taxable-Equivalent Net Interest Income (Non-GAAP) in the Statistical Information (Unaudited) section in Item 1 of this Report.

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(a)	Amount as of March 31, 2020 is net of the related Allowance for Credit Losses recorded in accordance with the adoption of the CECL accounting standard. Refer to Note 1 Accounting Policies in this Report for additional detail on the adoption of this standard.

(b)

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

•	Total assets increased driven by loan growth, higher other assets due to timing of unsettled securities sales at quarter end and an increase in derivative values, and higher investment securities;

•	Total liabilities increased due to deposit growth and higher borrowed funds, and higher other liabilities due to timing of unsettled securities purchases at quarter end and higher derivative values;

•	Total equity decreased due to higher accumulated other comprehensive income (AOCI) and net income more than offset by share repurchases and dividends and the day-one effect of adopting the CECL accounting standard.

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(a)	Ratings percentages allocated based on amortized cost.

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

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

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

(e)	Includes state and municipal securities.

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

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•	Retail Banking

•	Corporate & Institutional Banking

•	Asset Management Group

•	BlackRock

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

(b)	Presented as of March 31, except for customer-related statistics, which are averages for the three months ended, 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 payments, prepayments, and loans that were paid down or paid off during the period.

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

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

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

(g)	Primarily nonperforming loans of $1.0 billion for both March 31, 2020 and March 31, 2019.

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

(i)	Includes cash and money market balances.

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•	Average residential mortgages increased primarily as a result of growth in nonconforming residential mortgage loans.

•	Average auto loans increased primarily due to strong new indirect auto loan volumes, including in our Southeast and expansion markets, as well as growth in direct auto loans.

•	Average credit card balances increased as we continued to focus on our long-term objective of deepening penetration within our existing customer base as well as new client acquisition.

•	Average education loans decreased driven by a decline in the runoff portfolio of government guaranteed education loans.

•	Average unsecured installment loans increased primarily driven by growth in originations through digital channels.

•	Average home equity loans decreased as paydowns and payoffs on loans exceeded new originated volume.

•	Approximately 71% of consumer customers used non-teller channels for the majority of their transactions in the first three months of 2020 compared with 68% for the same period in 2019.

•	Deposit transactions via ATM and mobile channels increased to 59% of total deposit transactions in the first three months of 2020 from 57% for the same period in 2019.

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(a)	See the additional revenue discussion regarding treasury management, capital markets-related products and services, and commercial mortgage banking activities in the Product Revenue section of this Corporate & Institutional Banking section.

(b)	Amounts are reported in net interest income and noninterest income.

(c)	Represents 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.

(d)	Represents net interest income and noninterest income (primarily in corporate service fees) from loan servicing net of reduction in commercial mortgage servicing rights due to amortization expense and payoffs. Commercial mortgage servicing rights valuation, net of economic hedge is shown separately.

(e)	Amounts are reported in corporate service fees.

(f)	As of March 31.

(g)	Primarily nonperforming loans of $.5 billion and $.4 billion at March 31, 2020 and March 31, 2019, respectively.

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•	Corporate 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. Average loans for this business grew reflecting strong new production and increased utilization in asset-backed financing, and increased lending to large and mid-sized corporate clients.

•	PNC Business Credit provides asset-based lending. The loan portfolio is relatively high yielding, with acceptable risk as the loans are mainly secured by short-term assets. Average loans for this business increased primarily due to new originations, partially offset by payoffs.

•	PNC Real Estate provides banking, financing and servicing solutions for commercial real estate clients across the country. Average loans for this business increased primarily driven by higher commercial mortgage balances, partially offset by loan payoffs.

•	Commercial Banking provides lending, treasury management and capital markets-related products and services to smaller corporations and businesses. Average loans for this business decreased as portfolio runoff outpaced new originations.

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(a)	As of March 31.

(b)	Primarily nonperforming loans of $34 million at March 31, 2020 and $47 million at March 31, 2019.

(c)	Excludes brokerage account client assets.

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(a)	Represents our share of BlackRock’s reported GAAP earnings net of income taxes on those earnings incurred by us.

(b)	At March 31.

(c)	We account for our investment in BlackRock under the equity method of accounting, exclusive of a related deferred tax liability of $1.8 billion for both March 31, 2020 and December 31, 2019, respectively. Our voting interest in BlackRock common stock was approximately 22% at March 31, 2020.

(d)	Does not include liquidity discount.

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•	Non-real estate related

◦	Leisure recreation: restaurants, casinos, hotels, convention centers

◦	Non-essential retail: retail excluding auto, gas, staples

◦	Healthcare facilities: elective, private practices

◦	Leisure travel: cruise, airlines, other travel/transportation

◦	Consumer services: religious organizations, childcare

◦	Other impacted areas: shipping, senior living, specialty education

•	Real estate related

◦	Non-essential retail and restaurants: malls, lifestyle centers, outlets, restaurants

◦	Hotel: full service, limited service, extended stay

◦	Senior housing: assisted living, independent living

•	Non-essential retail loans outstanding totaled $2.5 billion, 60% of which were asset-based loans;

•	Restaurant loan outstanding balances were $1.5 billion; and

•	Cruise line and commercial airline loan outstanding balances were less than $600 million.

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(a)	Excludes most unsecured consumer loans and lines of credit, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.

(b)	Ratio at March 31, 2020 reflects the transition impact on our allowance for loans and leases from the adoption of the CECL standard along with the increases in reserves during the first quarter of 2020 due to the significant economic impact of COVID-19 and loan growth.

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(a)	Past due loan amounts include government insured or guaranteed loans of $.5 billion at March 31, 2020 and $.6 billion at December 31, 2019. Additionally, in connection with the adoption of the CECL standard, past due loan amounts at March 31, 2020 include purchased credit deteriorated loans totaling $.1 billion.

(a)	Amounts in table do not include associated valuation allowances.

(b)	Accruing loans include consumer credit card loans and loans that have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans.

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•	Industry concentrations and conditions,

•	Changes in market conditions, including regulatory and legal requirements,

•	Changes in the nature and volume of our portfolio,

•	Recent credit quality trends,

•	Recent loss experience in particular portfolios, including specific and unique events,

•	Recent macro-economic factors that may not be reflected in the forecast information,

•	Limitations of available data, including historical loss information and recent data such as collateral values,

•	Model imprecision,

•	Changes in lending policies and procedures, including changes in loss recognition and mitigation policies and procedures,

•	Timing of available information, including the performance of first lien positions, and

•	Other relevant factors.

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•	Bank-level capital needs,

•	Laws and regulations,

•	Corporate policies,

•	Contractual restrictions, and

•	Other factors.

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(a)	The ratios are calculated to reflect PNC's election to adopt the CECL optional five-year transition provision.

(b)	The ratios are calculated to reflect the full impact of CECL and excludes the benefits of phase-ins under the optional transition provision.

(c)	Based on the Tailoring Rules, effective January 1, 2020 for PNC, the quantitative threshold limits increased, resulting in no deduction as of March 31, 2020.

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

(e)	All ratios are calculated using the regulatory capital methodology applicable to PNC and calculated based on the standardized approach.

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

(g)	Leverage ratio is calculated based on Tier 1 capital divided by Average quarterly adjusted total assets.

(h)	Supplementary leverage ratio is calculated based on Tier 1 capital divided by Supplementary leverage exposure. PNC and PNC Bank are subject to a 3% minimum supplementary leverage ratio.

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(a)	Given the inherent limitations in certain of these measurement tools and techniques, results become less meaningful as interest rates approach zero. Senior management recently approved the suspension of the 100bps decrease in rate shock sensitivities considering the current low rate environment.

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•	enhancing fallback language in new contracts and reviewing existing legal contracts/agreements to assess fallback language impacts;

•	making preparations for internal operational readiness;

•	making necessary enhancements to our infrastructure including systems, models, valuation tools, and processes;

•	developing and delivering on internal and external LIBOR cessation communication plans;

•	engaging with our clients, industry working groups, and regulators; and

•	monitoring developments associated with LIBOR alternatives and industry practices related to LIBOR-indexed instruments.

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•	Funding for an additional 13 weeks of unemployment benefits, an additional $600 a week (for up to four months) of unemployment payments, and payments during the first week of an individual’s unemployment on a temporary basis;

•	Delays in the payment of the employer portion of Social Security taxes otherwise payable through January 1, 2021, with 50% of delayed amounts due by each of December 31, 2021 and December 31, 2022;

•	An expansion of the ability of corporate taxpayers to take advantage of net operating losses; and

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Refundable tax credits for eligible employers against their portion of Social Security taxes equal to 50% of eligible wages paid between March 13, 2020 and December 31, 2020 (up to a maximum of $10,000 per employee) if the employer’s operations were fully or partially suspended by governmental authorities due to the COVID-19 crisis or the employer experienced a significant decline in gross receipts (as measured in the manner specified in the CARES Act).

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•	Main Street Lending Facility, which will purchase up to $600 billion of participations in eligible loans made by U.S. banking organizations to eligible small- and medium-sized U.S. businesses;

•	Commercial Paper Funding Facility, which will purchase highly rated unsecured and asset-backed commercial paper issued by eligible U.S. issuers;

•	Primary Market Corporate Credit Facility, which will purchase up to $750 billion (in combination with the Secondary Market Corporate Facility) in corporate bonds and loans issued by eligible, investment grade U.S. issuers;

•	Secondary Market Corporate Credit Facility, which will purchase up to $750 billion (in combination with the Primary Market Corporate Facility) in investment grade corporate debt issued by eligible U.S issuers or shares of exchange traded funds that primarily invest in investment grade debt of U.S. issuers;

•	Municipal Liquidity Facility, which will purchase up to $500 billion of certain types of debt obligations issued by states and eligible cities and counties;

•	Term Asset-Backed Securities Loan Facility, which will purchase up to $100 billion in highly rated asset-backed securities that are backed by specified types of consumer, small business or commercial loans;

•	Paycheck Protection Program Lending Facility, which will provide lenders funding secured by SBA-guaranteed loans made under the PPP described above;

•	Primary Dealer Credit Facility, which will provide secured funding to broker-dealers that are registered as primary dealers with the Federal Reserve in exchange for a broad range of collateral; and

•	Money Market Mutual Fund Liquidity Facility, which is intended to provide liquidity to money market mutual funds by lending to U.S. banking entities in exchange for highly-rated collateral acquired from money market mutual funds.

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•	Fair Value Measurements

•	Residential and Commercial Mortgage Servicing Rights

•	Scenario weights and design: Our loss estimates are sensitive to the shape and severity of macroeconomic forecasts and thus

•	Portfolio volume and mix: Changes to portfolio volume and mix could materially affect our estimates, as CECL reserves

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•	Allowance For Credit Losses in the Credit Risk Management section of this Financial Review, and

•	Note 1 Accounting Policies, Note 2 Investment Securities and Note 3 Loans in the Notes To Consolidated Financial Statements included in this Report.

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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 coronavirus (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 view that:

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Our baseline economic forecast is for a severe but short recession in the first half of 2020. Restrictions on movement because of the COVID-19 pandemic have led to a huge drop in consumer spending and a steep drop in output as many workers are unable to get to their jobs. We expect a significant contraction in U.S. real GDP and steep job losses over the next few months and a large increase in the unemployment rate in through mid-2020.

–	In the baseline forecast, economic growth resumes 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 the second half of 2021, and growth is well above its long-term trend through 2022.

–	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.

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Given the many unknowns and risks being heavily weighted to the downside, 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 last into the third quarter or beyond, the recession would be much longer and much more severe. Ineffective fiscal stimulus, or an extended delay in implementing it, are also major downside risks. The deeper the recession is, and the longer it lasts, the more it will damage consumer fundamentals and sentiment. This could both prolong the recession, and/or make any recovery weaker. Similarly, the recession 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, is subject to review by the Federal Reserve Board as part of PNC’s comprehensive capital plan for the applicable period in connection with the Federal Reserve

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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.

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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.

•	Business and operating results also include impacts relating to our equity interest in BlackRock, Inc. and rely to a significant extent on information provided to us by BlackRock. Risks and uncertainties that could affect BlackRock are discussed in more detail by BlackRock in its SEC filings.

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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.

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

(b)

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

(c)

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

(d)	Amounts include our equity investment in BlackRock.

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

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

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For commercial nonperforming loans greater than or equal to a defined dollar threshold, reserves are based on an analysis of the present value of the loan’s expected future cash flows or the fair value of the collateral, if appropriate under our policy for collateral dependent loans. Nonperforming commercial loans below the defined threshold and accruing TDRs are reserved for under a pooled basis.

•	For consumer nonperforming loans classified as collateral dependent, charge-off and ACL related to recovery of amounts previously charged-off are evaluated through an analysis of the fair value of the collateral less costs to sell.

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•	Industry concentrations and conditions,

•	Changes in market conditions, including regulatory and legal requirements,

•	Changes in the nature and volume of our portfolio,

•	Recent credit quality trends,

•	Recent loss experience in particular portfolios, including specific and unique events,

•	Recent macro-economic factors that may not be reflected in the forecast information,

•	Limitations of available data, including historical loss information and recent data such as collateral values,

•	Model imprecision,

•	Changes in lending policies and procedures, including changes in loss recognition and mitigation policies and procedures,

•	Timing of available information, including the performance of first lien positions, and

•	Other relevant factors

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(a)	Balances at December 31, 2019 include $2.0 billion in fair value of securities accepted from others to collateralize short-term investments in resale agreements that were not repledged.

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(a)	Amounts in table represent loans held for investment and do not include any associated valuation allowance.

(b)	Past due loan amounts include purchased credit deteriorated loans totaling $.1 billion and government insured or guaranteed Residential real estate loans and Education loans totaling $.4 billion and $.2 billion, respectively, at March 31, 2020.

(c)	Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population.

(d)	Net of unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling $1.3 billion at March 31, 2020.

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(e)	Collateral dependent loans totaled $1.1 billion at March 31, 2020. The majority of these loans are within the Home equity and Residential real estate loan classes and are secured by consumer real estate.

(f)	The accrued interest associated with our loan portfolio is included in Other assets on the Consolidated Balance Sheet.

(g)	Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment does not include any associated valuation allowance.

(h)

Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to receive payment in full based on the original contractual terms), as we accreted interest income over the expected life of the loans. Past due loan amounts include government insured or guaranteed Residential real estate loans totaling $.4 billion and Education loans totaling $.2 billion at December 31, 2019.

(i)	Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population.

(j)	Net of unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling $1.1 billion at December 31, 2019.

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(a)	Excludes most unsecured consumer loans and lines of credit, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.

(b)	Nonperforming loans for which there is no related ACL totaled $.3 billion at March 31, 2020.

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(a)	Loans in our commercial lending portfolio are classified as Pass Rated or Criticized based on the regulatory definitions, which are driven by the PD and LGD ratings that we assign. The Criticized classification includes loans that were rated special mention, substandard or doubtful as of March 31, 2020 and December 31, 2019.

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(a)

Loans with no FICO score available or required generally refers to new accounts issued to borrowers with limited credit history, accounts for which we cannot obtain an updated FICO score (e.g., recent profile changes), cards issued with a business name and/or cards secured by collateral. Management proactively assesses the risk and size of this loan category and, when necessary, takes actions to mitigate the credit risk.

(b)	Weighted-average updated FICO score excludes accounts with no FICO score available or required.

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(a)	Represents cash flow information associated with both commercial mortgage loan transfers and servicing activities.

(b)	Gains/losses recognized on sales of loans were insignificant for the periods presented.

(c)	Includes both residential and commercial mortgage government insured or guaranteed loans eligible for repurchase through the exercise of our removal of account provision option, as well as residential mortgage loans repurchased due to alleged breaches of origination covenants or representations and warranties made to purchasers.

(d)	Includes contractually specified servicing fees, late charges and ancillary fees.

(e)

Represents cash flows on securities where we transferred to and/or service loans for a securitization SPE and we hold securities issued by that SPE. The carrying values of such securities held were $17.1 billion, $17.8 billion, and $14.6 billion in residential mortgage-backed securities and $.8 billion, $.6 billion, and $.6 billion in commercial mortgage-backed securities at March 31, 2020, December 31, 2019, and March 31, 2019, respectively.

(a)	Represents information at the securitization level in which we have sold loans and we are the servicer for the securitization.

(b)	Serviced delinquent loans are 90 days or more past due or are in process of foreclosure.

(c)

Net charge-offs for Residential mortgages represent credit losses less recoveries distributed and as reported to investors during the period. Net charge-offs for Commercial mortgages represent credit losses less recoveries distributed and as reported by the trustee for commercial mortgage-backed securitizations. Realized losses for Agency securitizations are not reflected as we do not manage the underlying real estate upon foreclosure and, as such, do not have access to loss information.

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(a)	Represents loans, investments and other assets related to non-consolidated VIEs, net of collateral (if applicable). The risk of loss excludes any potential tax recapture associated with tax credits investments.

(b)	Amounts reflect involvement with securitization SPEs where we transferred to and/or service loans for an SPE and we hold securities issued by that SPE. Values disclosed in the PNC Risk of Loss column represent our maximum exposure to loss for those securities’ holdings.

(c)	Included in Investment securities, Mortgage servicing rights and Other assets on our Consolidated Balance Sheet.

(d)	Included in Investment securities, Loans, Equity investments and Other assets on our Consolidated Balance Sheet.

(e)	Included in Deposits and Other liabilities on our Consolidated Balance Sheet.

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

(b)	Represents MSR value changes resulting primarily from market-driven changes in interest rates.

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(a)	FHLB borrowings are generally collateralized by residential mortgage loans, other mortgage-related loans and investment securities.

(a)	Net outstanding standby letters of credit include $4.0 billion and $4.1 billion at March 31, 2020 and December 31, 2019, respectively, which support remarketing programs.

(b)

Represents aggregate maximum exposure up to the specified limits of the reinsurance contracts provided by our wholly-owned captive insurance subsidiary. These amounts reflect estimates based on availability of financial information from insurance carriers. As of March 31, 2020, the aggregate maximum exposure amount was zero for accidental death and dismemberment contracts, and $.1 billion for credit life, accident and health contracts. Comparable amounts at December 31, 2019 were $1.3 billion and $.1 billion, respectively.

(c)	We enter into standby bond purchase agreements to support municipal bond obligations.

(d)	Includes $.6 billion related to investments in qualified affordable housing projects at both March 31, 2020 and December 31, 2019.

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(a)	The par value of our preferred stock outstanding was less than $.5 million at each date and, therefore, is excluded from this presentation.

(b)	Represents the cumulative effect of adopting ASU 2016-02 - Leases related primarily to deferred gains on previous sale-leaseback transactions. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in our 2019 Form 10-K for additional detail.

(c)	Represents the cumulative effect of adopting ASU 2016-13 - Financial Instruments - Credit Losses. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in this Report for additional detail on this adoption.

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(a)	Represents the cumulative effect of adopting ASU 2016-13 - Credit Losses reflecting the change from OTTI to ACL for debt securities. See the Recently Adopted Accounting Standards portion of Note 1 Accounting Policies in this Report for additional detail on this adoption.

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(a)	Basic and diluted earnings per share under the two-class method are determined on net income reported on the income statement less earnings allocated to nonvested restricted shares and restricted share units with nonforfeitable dividends and dividend rights (participating securities).

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(a)	Certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(b)	Included in Other assets on the Consolidated Balance Sheet.

(c)	Amounts at March 31, 2020 and December 31, 2019 are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow us to net positive and negative positions and cash collateral held or placed with the same counterparty. See Note 12 Financial Derivatives for additional information related to derivative offsetting.

(d)	Total assets at fair value as a percentage of total consolidated assets was 24% and 20% as of March 31, 2020 and December 31, 2019, respectively. Level 3 assets as a percentage of total assets at fair value was 5% and 7% as of March 31, 2020 and December 31, 2019, respectively. Level 3 assets as a percentage of total consolidated assets was 1% at both March 31, 2020 and December 31, 2019.

(e)	Included in Other liabilities on the Consolidated Balance Sheet.

(f)

Total liabilities at fair value as a percentage of total consolidated liabilities was 1% at both March 31, 2020 and December 31, 2019. Level 3 liabilities as a percentage of total liabilities at fair value was 5% and 13% as of March 31, 2020 and December 31, 2019, respectively. Level 3 liabilities as a percentage of total consolidated liabilities was less than 1% at both March 31, 2020 and December 31, 2019.

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(a)	Losses for assets are bracketed while losses for liabilities are not.

(b)	The difference in unrealized gains and losses for the period included in Other comprehensive income and changes in unrealized gains and losses for the period included in Other comprehensive income for securities available for sale held at the end of the reporting period were not significant.

(c)	The amount of the total gains or losses for the period included in earnings that is attributable to the change in unrealized gains or losses related to those assets and liabilities held at the end of the reporting period.

(d)	Upon adoption of ASU 2016-13 - Credit Losses, we discontinued the accounting for purchased impaired loans and elected the one-time fair value option election for some of these loans and certain nonperforming loans.

(e)	Residential mortgage loan transfers out of Level 3 are primarily driven by residential mortgage loans transferring to OREO as well as reclassification of mortgage loans held for sale to held for investment.

(f)	Net gains (losses) realized and unrealized included in earnings related to Level 3 assets and liabilities included amortization and accretion. The amortization and accretion amounts were included in Interest income on the Consolidated Income Statement and the remaining net gains (losses) realized and unrealized were included in Noninterest income on the Consolidated Income Statement.

(g)	Net unrealized gains (losses) related to assets and liabilities held at the end of the reporting period were included in Noninterest income on the Consolidated Income Statement.

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(a)	Unobservable inputs were weighted by the relative fair value of the instruments.

(b)	The assumed yield spread over the benchmark curve for each instrument is generally intended to incorporate non-interest rate risks, such as credit and liquidity risks.

(c)	Consensus pricing refers to fair value estimates that are generally internally developed using information such as dealer quotes or other third-party provided valuations or comparable asset prices.

(d)	Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes certain financial derivative assets and liabilities, trading securities, other securities, residential mortgage loans held for sale, other assets, other borrowed funds and other liabilities.

(e)	Consisted of total Level 3 assets of $4.9 billion and total Level 3 liabilities of $.3 billion as of March 31, 2020 and $5.4 billion and $.3 billion as of December 31, 2019, respectively.

(a)	All Level 3 for the periods presented.

(b)	Valuation techniques applied were fair value of property or collateral.

(c)	Unobservable inputs used were appraised value/sales price, broker opinions or projected income/required improvement costs. Additional quantitative information was not meaningful for the periods presented.

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(a)	There were no accruing loans 90 days or more past due within this category at March 31, 2020 or December 31, 2019.

(a)	The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.

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•	financial instruments recorded at fair value on a recurring basis (as they are disclosed in Table 65);

•	investments accounted for under the equity method;

•	equity securities without a readily determinable fair value that apply for the alternative measurement approach to fair value under ASU 2016-01;

•	real and personal property;

•	lease financing;

•	loan customer relationships;

•	deposit customer intangibles;

•	mortgage servicing rights (MSRs);

•	retail branch networks;

•	fee-based businesses, such as asset management and brokerage;

•	trademarks and brand names;

•	trade receivables and payables due in one year or less; and

•	deposit liabilities with no defined or contractual maturities under ASU 2016-01.

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(a)	Centrally cleared derivatives are settled in cash daily and result in no derivative asset or derivative liability being recognized on our Consolidated Balance Sheet.

(b)	Included in Other assets on our Consolidated Balance Sheet.

(c)	Included in Other liabilities on our Consolidated Balance Sheet.

(d)	Represents primarily swaps.

(e)	Includes both residential and commercial mortgage banking activities.

(f)	Futures contracts settle in cash daily and, therefore, no derivative asset or derivative liability is recognized on our Consolidated Balance Sheet.

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(a)	For all periods presented, there were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for any of the fair value or cash flow hedge strategies.

(b)	All cash flow and fair value hedge derivatives were interest rate contracts for the periods presented.

(c)	Includes an insignificant amount of fair value hedge adjustments related to discontinued hedge relationships.

(d)	For all periods presented, there were no gains or losses from cash flow hedge derivatives reclassified to income because it became probable that the original forecasted transaction would not occur.

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(a)	Includes $(.2) billion and $(.3) billion of fair value hedge adjustments primarily related to discontinued borrowed funds hedge relationships for March 31, 2020 and December 31, 2019, respectively.

(b)	Carrying value shown represents amortized cost.

(a)	Included in Residential mortgage, Corporate services and Other noninterest income on our Consolidated Income Statement.

(b)	Includes an insignificant amount of gains (losses) on commodity contracts for all periods presented.

(c)	Included in Other noninterest income on our Consolidated Income Statement.

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(a)	Represents the net amount of derivative assets included in Other assets on our Consolidated Balance Sheet.

(b)	Represents the net amount of derivative liabilities included in Other liabilities on our Consolidated Balance Sheet.

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•	Retail Banking

•	Corporate & Institutional Banking

•	Asset Management Group

•	BlackRock

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(a)	There were no material intersegment revenues for the three months ended March 31, 2020 and 2019.

(b)	Period-end balances for BlackRock.

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•	Wealth Management provides products and services to individuals and their families including investment and retirement planning, customized investment management, private banking, 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 clients.

•	Institutional asset management provides outsourced chief investment officer, custody, private real estate, cash and fixed income client solutions, and fiduciary retirement advisory services to institutional clients including corporations, healthcare systems, insurance companies, unions, municipalities and non-profits.

(a)	Net credit card fees consists of interchange fees of $118 million and $112 million and credit card reward costs of $77 million and $64 million for the three months ended March 31, 2020 and 2019, respectively.

(b)	Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

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(a)	Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

(a)	Out-of-scope noninterest income includes revenue streams that fall under the scope of other accounting and disclosure requirements outside of Topic 606.

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(a)

Nonaccrual loans are included in loans, net of unearned income. The impact of financial derivatives used in interest rate risk management is included in the interest income/expense and average yields/rates of the related assets and liabilities. Basis adjustments related to hedged items are included in noninterest-earning assets and noninterest-bearing liabilities. Average balances of securities are based on amortized historical cost (excluding adjustments to fair value, which are included in other assets). Average balances for certain loans and borrowed funds accounted for at fair value are included in noninterest-earning assets and noninterest-bearing liabilities, with changes in fair value recorded in Noninterest income.

(b)	Loan fees for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019 were $44 million, $43 million and $28 million, respectively.

(c)

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

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(a)

The interest income earned on certain interest-earning assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments. To provide more meaningful comparisons of net interest income, we use interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments.

•	The deterioration of national and global economic conditions, substantial increases in unemployment, and associated turmoil and volatility in the financial markets has negatively affected and is likely to continue to negatively affect, possibly materially, our financial performance and capital and liquidity. The following are the key factors contributing to this risk:

◦

There is a greater likelihood that more of our commercial and consumer customers or counterparties will become delinquent on their loans or other obligations to us, which, in turn, will result in a higher level of non-performing loans and net charge-offs. It will result in a higher and more volatile provision for credit losses for financial instruments held by us that are subject to CECL. Even if a loan returns to full performing status, it may be on modified terms that result in, for example, a term extension, interest rate reduction or principal deferral or forgiveness. Increases in loan delinquencies or modifications will also result in increased administrative costs.

◦	There has been and there is likely to continue to be a decrease in the demand for certain of our products and services.

◦	These rapidly changing and unprecedented market conditions have impacted and are likely to continue to impact the valuation of assets as reported within our consolidated financial statements, as well as causing substantial reductions in the value of our assets under management, all with the possible effects described in Item 1A of our 2019 Form 10-

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◦

Although PNC’s capital and liquidity continue to be strong, these conditions also have and are likely to continue to negatively affect our capital and liquidity positions, possibly materially, which are critical to our ability to operate and grow our business. In addition, continued or accelerated disruption and volatility in the financial markets or long-lasting or deeper recessionary conditions may diminish our access to the capital markets. We have suspended our discretionary common share repurchase program and may take further actions that would limit a return of capital to shareholders, including potentially a reduction or suspension of the dividend payable to common shareholders, as a result of these conditions and their effect on our financial performance and position or as a result of regulatory guidance.

•

Some of the legislation responsive to the outbreak, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), provides for certain commercial and consumer protections which are likely to alter the profitability of the transactions in which we engage, such as by allowing borrowers to delay payments on loans or other obligations to us and imposing other costs on us. These laws are also likely to delay or restrict our ability to realize the value of collateral by, for example, providing temporary foreclosure protection and eviction protection even when a customer is in breach of its obligations to us. We may also be limited in our ability to realize the value of collateral as a result of court closures and related delays. Moreover, collateral may be liquidated at prices insufficient to recover the full amount of exposure to us as a result of deteriorating economic conditions and volatile markets. See Recent Regulatory Developments in this Report for more information on PNC’s implementation of these programs.

•

Other laws related to employee benefits and the treatment of employees could also negatively impact us by increasing administrative, compensation and benefits costs by, for example, mandating coverage of certain COVID-19 related testing and treatment or mandating additional paid or unpaid leave. Further governmental action that is taken to mitigate the economic effects of the pandemic, as well as additional compensation or benefit actions taken by PNC, could adversely affect our financial condition and results of operations, possibly materially, in other ways that are not known now.

•

In response to the outbreak and its economic consequences, the Federal Reserve lowered its target for the federal funds rate to a range of 0% to 0.25%. As a result of the high percentage of our assets and liabilities that are in the form of interest-bearing or interest-related instruments, this change in interest rates will have a negative impact on our net interest income and net interest margin, which could be material and which could materially adversely affect our profitability. The possible effects of a low interest rate environment are further described in Item 1A of our 2019 Form 10-K in the Risk Factor headed “Our business and financial performance are impacted significantly by market interest rates and movements in those rates.” Moreover, such low rates increase the risk in the U.S. of a negative interest rate environment in which interest rates drop below zero, either broadly or for some types of instruments. For example, yields on one-month and three-month Treasuries briefly dropped below zero in March 2020. Such an occurrence would likely further reduce the interest we earn on loans and other earning assets, while also likely requiring us to pay to maintain our deposits with the Federal Reserve Bank. Our systems may not be able to handle adequately a negative interest rate environment and not all variable rate instruments are designed for such a circumstance. We cannot predict the nature or timing of future changes in monetary policies in response to the outbreak or the precise effects that they may have on our activities and financial results.

•

To protect our employees, customers and the communities in which we operate, we have modified the operations of many of our retail branches, including temporarily closing some branches, and have otherwise implemented work-from-home policies for a significant portion of our workforce. We believe we are capable of meeting the needs of our customers despite these modifications. However, these efforts may result in the loss of customers, impede our ability to perform certain transactions, and impair our ability to effectively identify, manage and control risk. For example, customers may be unwilling or unable to conduct transactions with us via online channels or through a local branch that is operating only in a drive-through mode. Another example is the infrastructure needed to provide products and services via online channels or to work effectively in a work-from-home environment, such as internet, telecommunications and internal information technology systems, may fail to perform as anticipated, resulting in our inability to deliver products or services or effectively manage the risks arising from our businesses. In addition, we rely on our employees, third party vendors and service providers and other counterparties, both domestically and abroad, to support many aspects of our business. Reduced workforces which may be caused by, but not limited to, illness, quarantine, stay at home or other government mandates, or difficulties transitioning back to an in office environment, could result in an adverse impact to our operations and financial performance. Redeployment of employees from current positions and of technology from current uses to support products and services responsive to the outbreak may further adversely impact our operations. Further, third party vendors, service providers and other counterparties, both domestically and abroad, face access, connectivity or other challenges operating within a work-from-home virtual environment.

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•

In support of our employees, customers and communities, we may take steps beyond or in addition to those required by governmental or regulatory minimums which may further adversely impact our profitability. For example, we have and may continue to provide additional relief or forbearance to customers, health and wellness benefits to employees or financial support for community initiatives to assist those in need as a result of the outbreak. The actual or perceived failure to provide sufficient services, support or relief to those businesses or individuals in need or properly implement legislation responsive to the outbreak or our voluntary commitments to regulators could negatively impact our reputation with adverse consequences to our business. In addition, such actual or perceived failure, or operational and other issues that arise in connection with the implementation of government-mandated or other financial assistance or relief programs present elevated levels of legal and reputational risk, including the potential for governmental and regulatory inquiries, investigations and enforcement actions, as well as private lawsuits. Participation by PNC in governmental programs designed to provide liquidity to the financial system or impacted businesses, such as borrowing through the Federal Reserve discount window or borrowing from, or selling financial assets to, facilities established by the Federal Reserve or participation in programs under the CARES Act, also could expose us to governmental or public scrutiny and criticism, either at the time we participate in the program or subsequently.

(a)

Includes PNC common stock purchased in connection with our various employee benefit plans generally related to shares used to cover employee payroll tax withholding requirements. Note 11 Employee Benefit Plans and Note 12 Stock Based Compensation Plans in the Notes To Consolidated Financial Statements of our 2019 Annual Report on Form 10-K include additional information regarding our employee benefit and equity compensation plans that use PNC common stock.

(b)

On April 4, 2019, our Board of Directors approved the establishment of a new stock repurchase program authorization in the amount of 100 million shares of PNC common stock, effective July 1, 2019.  The previous 2015 authorization was terminated as of end of day on June 30, 2019. Under this authorization, repurchases may be made in the open market or privately negotiated transactions, with the timing and exact amount of common stock repurchases depending on a number of factors including, among others, market and general economic conditions, regulatory capital considerations, alternative uses of capital, the potential impact on our credit ratings, and contractual and regulatory limitations, including the results of the supervisory assessment of capital adequacy and capital planning processes undertaken by the Federal Reserve as part of the CCAR process. In June 2019, we announced share repurchase programs of up to $4.3 billion for the four quarter period beginning with the third quarter of 2019, in accordance with PNC's 2019 capital plan. In January 2020, we announced an increase to these programs to repurchase up to an additional $1.0 billion in common shares through the end of the second quarter of 2020. In the first quarter of 2020, we repurchased 10.1 million shares of common stock on the open market, with an average price of $141.67 per share and an aggregate repurchase price of $1.4 billion. On March 16, 2020, PNC announced a temporary suspension of its common stock repurchase program through June 30, 2020 in conjunction with the Federal Reserve's effort to support the U.S. economy during the COVID-19 outbreak.

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