Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# Annual	Report	Pursuant	to	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934

For	the	fiscal	year	ended	December	31,	2012

# THE	PNC	FINANCIAL	SERVICES	GROUP,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Pennsylvania

(State	or	other	jurisdiction	of	incorporation	or	organization)

(I.R.S.	Employer	Identification	No.)

One	PNC	Plaza

249	Fifth	Avenue

(Address	of	principal	executive	offices,	including	zip	code)

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Title	of	Each	Class

Common	Stock,	par	value	$5.00

Depositary	Shares	Each	Representing	1/4,000	Interest	in	a	Share	of	9.875%

Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series	L,	par	value	$1.00

Depositary	Shares	Each	Representing	a	1/4,000	Interest	in	a	Share	of	Fixed-to-Floating	Rate

# Non-Cumulative	Perpetual	Preferred	Stock,	Series	P

Depositary	Shares	Each	Representing	a	1/4,000	Interest	in	a	Share	of	5.375%	Non-Cumulative

# Perpetual	Preferred	Stock,	Series	Q

Warrants	(expiring	December	31,	2018)	to	purchase	Common	Stock

	Name	of	Each	Exchange

				on	Which	Registered

	 New	York	Stock	Exchange

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:

# $1.80	Cumulative	Convertible	Preferred	Stock	-	Series	B,	par	value	$1.00

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.	Yes	X	No

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.	Yes						No	X

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

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

Indicate	by	check	mark	if	the	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.	X

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

Large	accelerated	filer	X

Accelerated	filer

	 Non-accelerated	filer

Smaller	reporting	company

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).	Yes						No	X

The	aggregate	market	value	of	the	registrant's	outstanding	voting	common	stock	held	by	nonaffiliates	on	June	30,	2012,	determined	using	the	per	share	closing	price	on that	date	on	the	New	York	Stock	Exchange	of	$61.11,	was	approximately	$32.2	billion.	There	is	no	non-voting	common	equity	of	the	registrant	outstanding.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	definitive	Proxy	Statement	of	The	PNC	Financial	Services	Group,	Inc.	to	be	filed	pursuant	to	Regulation	14A	for	the	2013	annual	meeting	of shareholders	(Proxy	Statement)	are	incorporated	by	reference	into	Part	III	of	this	Form	10-K.

# Cross-Reference	Index	to	2012	Form	10-K

|  |  | Page |
| :--- | :--- | :--- |
| PART\tI |  |  |
| Item\t1 | \t\t Business. | 1 |
| Item\t1A | \t\t Risk\tFactors. | 12 |
| Item\t1B | \t\t Unresolved\tStaff\tComments. | 24 |
| Item\t2 | \t\t Properties. | 24 |
| Item\t3 | \t\t Legal\tProceedings. | 25 |
| Item\t4 | \t\t Mine\tSafety\tDisclosures. | 25 |
| Executive\tOfficers\tof\tthe\tRegistrant | Executive\tOfficers\tof\tthe\tRegistrant | 25 |
| Directors\tof\tthe\tRegistrant | Directors\tof\tthe\tRegistrant | 26 |
| PART\tII |  |  |
| Item\t5 | \t\t Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities. | 27 |
|  | \t\t Common\tStock\tPerformance\tGraph | 28 |
| Item\t6 | \t\t Selected\tFinancial\tData. | 29 |
| Item\t7 | \t\t Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations. | 31 |
|  | Executive\tSummary | 31 |
|  | Consolidated\tIncome\tStatement\tReview | 39 |
|  | Consolidated\tBalance\tSheet\tReview | 42 |
|  | Off-Balance\tSheet\tArrangements\tAnd\tVariable\tInterest\tEntities | 53 |
|  | Fair\tValue\tMeasurements | 54 |
|  | European\tExposure | 55 |
|  | Business\tSegments\tReview | 57 |
|  | Critical\tAccounting\tEstimates\tAnd\tJudgments | 71 |
|  | Status\tOf\tQualified\tDefined\tBenefit\tPension\tPlan | 76 |
|  | Recourse\tAnd\tRepurchase\tObligations | 78 |
|  | Risk\tManagement | 83 |
|  | 2011\tVersus\t2010 | \t108 |
|  | Glossary\tOf\tTerms | \t111 |
|  | Cautionary\tStatement\tRegarding\tForward-Looking\tInformation | \t116 |
| Item\t7A | \t\t Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk. | \t117 |
| Item\t8 |  | \t118 |
|  | Financial\tStatements\tand\tSupplementary\tData. |  |
|  | \t\t Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | \t118 |
|  | \t\t Consolidated\tIncome\tStatement | \t119 |
|  | \t\t Consolidated\tStatement\tof\tComprehensive\tIncome | \t120 |
|  | \t\t Consolidated\tBalance\tSheet | \t121 |
|  | \t\t Consolidated\tStatement\tOf\tChanges\tIn\tEquity | \t122 |
|  | \t\t Consolidated\tStatement\tOf\tCash\tFlows | \t123 |
|  | \t\t Notes\tTo\tConsolidated\tFinancial\tStatements | \t125 |
|  | Note\t1\tAccounting\tPolicies | \t125 |
|  | Note\t2\tAcquisition\tand\tDivestiture\tActivity | \t137 |

# Cross-Reference	Index	to	2012	Form	10-K	(continued)

# TABLE	OF	CONTENTS	(Continued)

| TABLE	OF	CONTENTS	(Continued) |  |  |
| :--- | :--- | :--- |
|  |  | Page |
| Item\t8 | Financial\tStatements\tand\tSupplementary\tData.\t(continued) |  |
|  | Note\t3\tLoan\tSale\tand\tServicing\tActivities\tand\tVariable\tInterest\tEntities | \t139 |
|  | Note\t4\tLoans\tand\tCommitments\tto\tExtend\tCredit | \t145 |
|  | Note\t5\tAsset\tQuality | \t146 |
|  | Note\t6\tPurchased\tLoans | \t159 |
|  | Note\t7\tAllowances\tfor\tLoan\tand\tLease\tLosses\tand\tUnfunded\tLoan\tCommitments\tand\tLetters\tof\tCredit | \t162 |
|  | Note\t8\tInvestment\tSecurities | \t165 |
|  | Note\t9\tFair\tValue | \t171 |
|  | Note\t10\tGoodwill\tand\tOther\tIntangible\tAssets | \t187 |
|  | Note\t11\tPremises,\tEquipment\tand\tLeasehold\tImprovements | \t190 |
|  | Note\t12\tTime\tDeposits | \t191 |
|  | Note\t13\tBorrowed\tFunds | \t191 |
|  | Note\t14\tCapital\tSecurities\tof\tSubsidiary\tTrusts\tand\tPerpetual\tTrust\tSecurities | \t192 |
|  | Note\t15\tEmployee\tBenefit\tPlans | \t195 |
|  | Note\t16\tStock\tBased\tCompensation\tPlans | \t202 |
|  | Note\t17\tFinancial\tDerivatives | \t205 |
|  | Note\t18\tEarnings\tPer\tShare | \t213 |
|  | Note\t19\tEquity | \t214 |
|  | Note\t20\tOther\tComprehensive\tIncome | \t216 |
|  | Note\t21\tIncome\tTaxes | \t217 |
|  | Note\t22\tRegulatory\tMatters | \t219 |
|  | Note\t23\tLegal\tProceedings | \t219 |
|  | Note\t24\tCommitments\tand\tGuarantees | \t226 |
|  | Note\t25\tParent\tCompany | \t231 |
|  | Note\t26\tSegment\tReporting | \t232 |
|  | Note\t27\tSubsequent\tEvents | \t235 |
|  | Statistical\tInformation\t(Unaudited) | \t236 |
| Item\t9 | Changes\tin\tand\tDisagreements\tWith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure. | \t243 |
| Item\t9A | Controls\tand\tProcedures. | \t243 |
| Item\t9B | Other\tInformation. | \t243 |
| PART\tIII |  |  |
| Item\t10 | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance. | \t243 |
| Item\t11 | Executive\tCompensation. | \t244 |
| Item\t12 | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters. | \t244 |
| Item\t13 | Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence. | \t246 |
| Item\t14 | Principal\tAccounting\tFees\tand\tServices. | \t246 |
| PART\tIV |  |  |
| Item\t15 | Exhibits,\tFinancial\tStatement\tSchedules. | \t246 |
| SIGNATURES |  | \t247 |

# MD&A	TABLE	REFERENCE

| Table | Description | Page |
| :--- | :--- | :--- |
| 1 | Summary\tFinancial\tResults | 35 |
| 2 | Net\tInterest\tIncome\tand\tNet\tInterest\tMargin | 39 |
| 3 | Summarized\tBalance\tSheet\tData | 42 |
| 4 | Details\tOf\tLoans | 43 |
| 5 | Accretion\t–\tPurchased\tImpaired\tLoans | 44 |
| 6 | Accretable\tNet\tInterest\t–\tPurchased\tImpaired\tLoans | 44 |
| 7 | Valuation\tof\tPurchased\tImpaired\tLoans | 44 |
| 8 | Weighted\tAverage\tLife\tof\tthe\tPurchased\tImpaired\tPortfolios | 45 |
| 9 | Accretable\tDifference\tSensitivity\t–\tTotal\tPurchased\tImpaired\tLoans | 45 |
| 10 | Net\tUnfunded\tCredit\tCommitments | 45 |
| 11 | Details\tof\tInvestment\tSecurities | 46 |
| 12 | Vintage,\tCurrent\tCredit\tRating,\tand\tFICO\tScore\tfor\tAsset-Backed\tSecurities | 47 |
| 13 | Other-Than-Temporary\tImpairments | 48 |
| 14 | Net\tUnrealized\tGains\tand\tLosses\ton\tNon-Agency\tSecurities | 48 |
| 15 | Loans\tHeld\tFor\tSale | 49 |
| 16 | Details\tOf\tFunding\tSources | 50 |
| 17 | Risk-Based\tCapital | 51 |
| 18 | Fair\tValue\tMeasurements\t–\tSummary | 54 |
| 19 | Summary\tof\tEuropean\tExposure | 55 |
| 20 | Results\tOf\tBusinesses\t–\tSummary | 58 |
| 21 | Retail\tBanking\tTable | 59 |
| 22 | Corporate\t&\tInstitutional\tBanking\tTable | 62 |
| 23 | Asset\tManagement\tGroup\tTable | 65 |
| 24 | Residential\tMortgage\tBanking\tTable | 67 |
| 25 | BlackRock\tTable | 69 |
| 26 | Non-Strategic\tAssets\tPortfolio\tTable | 69 |
| 27 | Pension\tExpense\t–\tSensitivity\tAnalysis | 77 |
| 28 | Analysis\tof\tQuarterly\tResidential\tMortgage\tRepurchase\tClaims\tby\tVintage | 79 |
| 29 | Analysis\tof\tQuarterly\tResidential\tMortgage\tUnresolved\tAsserted\tIndemnification\tand\tRepurchase\tClaims | 80 |
| 30 | Analysis\tof\tResidential\tMortgage\tIndemnification\tand\tRepurchase\tClaim\tSettlement\tActivity | 80 |
| 31 | Analysis\tof\tHome\tEquity\tUnresolved\tAsserted\tIndemnification\tand\tRepurchase\tClaims | 81 |
| 32 | Analysis\tof\tHome\tEquity\tIndemnification\tand\tRepurchase\tClaim\tSettlement\tActivity | 82 |
| 33 | Nonperforming\tAssets\tBy\tType | 87 |
| 34 | OREO\tand\tForeclosed\tAssets | 88 |
| 35 | Change\tin\tNonperforming\tAssets | 88 |
| 36 | Accruing\tLoans\tPast\tDue\t30\tTo\t59\tDays | 89 |
| 37 | Accruing\tLoans\tPast\tDue\t60\tTo\t89\tDays | 89 |
| 38 | Accruing\tLoans\tPast\tDue\t90\tDays\tOr\tMore | 90 |
| 39 | Home\tEquity\tLines\tof\tCredit\t–\tDraw\tPeriod\tEnd\tDates | 91 |
| 40 | Bank-Owned\tConsumer\tReal\tEstate\tRelated\tLoan\tModifications | 92 |
| 41 |  | 93 |
|  | Bank-Owned\tConsumer\tReal\tEstate\tRelated\tLoan\tModifications\tRe-Default\tby\tVintage |  |
| 42 | Summary\tof\tTroubled\tDebt\tRestructurings | 94 |
| 43 | Loan\tCharge-Offs\tAnd\tRecoveries | 95 |
| 44 | Allowance\tfor\tLoan\tand\tLease\tLosses | 97 |
| 45 | Credit\tRatings\tas\tof\tDecember\t31,\t2012\tfor\tPNC\tand\tPNC\tBank,\tN.A. | \t103 |
| 46 | Contractual\tObligations | \t103 |
| 47 | Other\tCommitments | \t104 |
| 48 | Interest\tSensitivity\tAnalysis | \t104 |
| 49 | Net\tInterest\tIncome\tSensitivity\tto\tAlternative\tRate\tScenarios\t(Fourth\tQuarter\t2012) | \t105 |
| 50 | Alternate\tInterest\tRate\tScenarios:\tOne\tYear\tForward | \t105 |
| 51 | Enterprise-Wide\tTrading-Related\tGains/Losses\tVersus\tValue\tat\tRisk | \t106 |
| 52 | Trading\tRevenue | \t106 |
| 53 | Equity\tInvestments\tSummary | \t106 |
| 54 | Financial\tDerivatives\tSummary | \t108 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	TABLE	REFERENCE

| Table | Description | Page |
| :--- | :--- | :--- |
| 55 | RBC\tBank\t(USA)\tPurchase\tAccounting | \t137 |
| 56 | RBC\tBank\t(USA)\tIntangible\tAssets | \t137 |
| 57 | RBC\tBank\t(USA)\tand\tPNC\tUnaudited\tPro\tForma\tResults | \t138 |
| 58 | Certain\tFinancial\tInformation\tand\tCash\tFlows\tAssociated\twith\tLoan\tSale\tand\tServicing\tActivities | \t140 |
| 59 | Consolidated\tVIEs\t–\tCarrying\tValue | \t141 |
| 60 | Assets\tand\tLiabilities\tof\tConsolidated\tVIEs | \t142 |
| 61 | Non-Consolidated\tVIEs | \t142 |
| 62 | Loans\tOutstanding | \t145 |
| 63 | Net\tUnfunded\tCredit\tCommitments | \t145 |
| 64 | Age\tAnalysis\tof\tPast\tDue\tAccruing\tLoans | \t146 |
| 65 | Nonperforming\tAssets | \t147 |
| 66 | Commercial\tLending\tAsset\tQuality\tIndicators | \t149 |
| 67 | Home\tEquity\tand\tResidential\tReal\tEstate\tBalances | \t150 |
| 68 | Consumer\tReal\tEstate\tSecured\tAsset\tQuality\tIndicators\t–\tExcluding\tPurchased\tImpaired\tLoans | \t150 |
| 69 | Consumer\tReal\tEstate\tSecured\tAsset\tQuality\tIndicators\t–\tPurchased\tImpaired\tLoans | \t152 |
| 70 | Credit\tCard\tand\tOther\tConsumer\tLoan\tClasses\tAsset\tQuality\tIndicators | \t154 |
| 71 |  |  |
|  | Summary\tof\tTroubled\tDebt\tRestructurings | \t155 |
| 72 | Financial\tImpact\tand\tTDRs\tby\tConcession\tType | \t156 |
| 73 | TDRs\twhich\thave\tSubsequently\tDefaulted | \t157 |
| 74 | Impaired\tLoans | \t158 |
| 75 | Purchased\tImpaired\tLoans\t–\tBalances | \t159 |
| 76 | Purchased\tImpaired\tLoans\t–\tAccretable\tYield | \t160 |
| 77 | RBC\tBank\t(USA)\tAcquisition\t–\tPurchased\tLoans\tBalances | \t160 |
| 78 | Purchased\tImpaired\tLoans\t–\tRBC\tBank\t(USA)\tAcquisition | \t160 |
| 79 | Purchased\tNon-Impaired\tLoans\t–\tFair\tValue | \t161 |
| 80 | Purchased\tNon-Impaired\tLoans\t–\tCash\tFlows | \t161 |
| 81 | Rollforward\tof\tAllowance\tfor\tLoan\tand\tLease\tLosses\tand\tAssociated\tLoan\tData | \t163 |
| 82 | Rollforward\tof\tAllowance\tfor\tUnfunded\tLoan\tCommitments\tand\tLetters\tof\tCredit | \t164 |
| 83 | Investment\tSecurities\tSummary | \t165 |
| 84 | Gross\tUnrealized\tLoss\tand\tFair\tValue\tof\tSecurities\tAvailable\tfor\tSale | \t167 |
| 85 | Credit\tImpairment\tAssessment\tAssumptions\t–\tNon-Agency\tResidential\tMortgage-Backed\tand\tAsset-Backed\tSecurities | \t168 |
| 86 | Summary\tof\tOTTI\tCredit\tLosses\tRecognized\tin\tEarnings | \t169 |
| 87 | Summary\tof\tOTTI\tNoncredit\t(Losses)\tRecoveries\tIncluded\tin\tAccumulated\tOther\tComprehensive\tIncome\t(Loss) | \t169 |
| 88 | Rollforward\tof\tCumulative\tOTTI\tCredit\tLosses\tRecognized\tin\tEarnings | \t169 |
| 89 | Gains\t(Losses)\ton\tSales\tof\tSecurities\tAvailable\tfor\tSale | \t169 |
| 90 | Contractual\tMaturity\tof\tDebt\tSecurities | \t170 |
| 91 | Weighted-Average\tExpected\tMaturity\tof\tMortgage\tand\tOther\tAsset-Backed\tDebt\tSecurities | \t171 |
| 92 | Fair\tValue\tof\tSecurities\tPledged\tand\tAccepted\tas\tCollateral | \t171 |

NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	TABLE	REFERENCE	(Continued)

| Table | Description | Page |
| :--- | :--- | :--- |
| 93 | Fair\tValue\tMeasurements\t–\tSummary | \t177 |
| 94 | Reconciliation\tof\tLevel\t3\tAssets\tand\tLiabilities | \t178 |
| 95 | Fair\tValue\tMeasurement\t–\tRecurring\tQuantitative\tInformation | \t180 |
| 96 | Fair\tValue\tMeasurements\t–\tNonrecurring | \t182 |
| 97 | Fair\tValue\tMeasurements\t–\tNonrecurring\tQuantitative\tInformation | \t183 |
| 98 | Fair\tValue\tOption\t–\tChanges\tin\tFair\tValue | \t183 |
| 99 | Fair\tValue\tOption\t–\tFair\tValue\tand\tPrincipal\tBalances | \t184 |
| 100 | Additional\tFair\tValue\tInformation\tRelated\tto\tFinancial\tInstruments | \t185 |
| 101 | Changes\tin\tGoodwill\tby\tBusiness\tSegment | \t187 |
| 102 | Summary\tof\tChanges\tin\tGoodwill\tand\tOther\tIntangible\tAssets | \t187 |
| 103 | Other\tIntangible\tAssets | \t188 |
| 104 | Amortization\tExpense\ton\tExisting\tIntangible\tAssets | \t188 |
| 105 | Commercial\tMortgage\tServicing\tRights | \t188 |
| 106 | Residential\tMortgage\tServicing\tRights | \t189 |
| 107 | Commercial\tMortgage\tLoan\tServicing\tAssets\t–\tKey\tValuation\tAssumptions | \t189 |
| 108 | Residential\tMortgage\tLoan\tServicing\tAssets\t–\tKey\tValuation\tAssumptions | \t190 |
| 109 | Fees\tfrom\tMortgage\tand\tOther\tLoan\tServicing | \t190 |
| 110 | Premises,\tEquipment\tand\tLeasehold\tImprovements | \t190 |
| 111 | Depreciation\tand\tAmortization\tExpense | \t190 |
| 112 | Lease\tRental\tExpense | \t190 |
| 113 | Bank\tNotes,\tSenior\tDebt\tand\tSubordinated\tDebt | \t191 |
| 114 | Capital\tSecurities\tof\tSubsidiary\tTrusts | \t192 |
| 115 | Perpetual\tTrust\tSecurities\tSummary | \t193 |
| 116 | Summary\tof\tReplacement\tCapital\tCovenants\tof\tPerpetual\tTrust\tSecurities | \t193 |
| 117 | Summary\tof\tContractual\tCommitments\tof\tPerpetual\tTrust\tSecurities | \t194 |
| 118 | Reconciliation\tof\tChanges\tin\tProjected\tBenefit\tObligation\tand\tChange\tin\tPlan\tAssets | \t195 |
| 119 | Asset\tStrategy\tAllocations | \t196 |
| 120 | Pension\tPlan\tAssets\t–\tFair\tValue\tHierarchy | \t198 |
| 121 | Rollforward\tof\tPension\tPlan\tLevel\t3\tAssets | \t199 |
| 122 | Estimated\tCash\tFlows | \t199 |
| 123 | Components\tof\tNet\tPeriodic\tBenefit\tCost | \t200 |
| 124 | Net\tPeriodic\tCosts\t–\tAssumptions | \t200 |
| 125 | Other\tPension\tAssumptions | \t200 |
| 126 | Effect\tof\tOne\tPercent\tChange\tin\tAssumed\tHealth\tCare\tCost | \t201 |
| 127 | Estimated\tAmortization\tof\tUnamortized\tActuarial\tGains\tand\tLosses\t–\t2013 | \t201 |
| 128 | Option\tPricing\tAssumptions | \t202 |
| 129 | Stock\tOption\tRollforward | \t202 |
| 130 | Nonvested\tIncentive/Performance\tUnit\tShare\tAwards\tand\tRestricted\tStock/Unit\tAwards\t–\tRollforward | \t203 |
| 131 | Nonvested\tCash-Payable\tRestricted\tShare\tUnit\t–\tRollforward | \t204 |

# PART	I

Forward-Looking	Statements:	From	time	to	time,	The	PNC	Financial	Services	Group,	Inc.	(PNC	or	the	Corporation)	has	made	and	may	continue	to	make	written	or oral	forward-looking	statements	regarding	our	outlook	for	earnings,	revenues,	expenses,	capital	levels	and	ratios,	liquidity	levels,	asset	levels,	asset	quality,	financial position	and	other	matters	regarding	or	affecting	PNC	and	its	future	business	and	operations	or	the	impact	of	legal,	regulatory	or	supervisory	matters	on	our	business operations	or	performance.	This	Annual	Report	on	Form	10-K	(the	Report	or	Form	10-K)	also	includes	forward-looking	statements.	With	respect	to	all	such	forward- looking	statements,	you	should	review	our	Risk	Factors	discussion	in	Item	1A,	our	Risk	Management,	Critical	Accounting	Estimates	And	Judgments,	and	Cautionary Statement	Regarding	Forward-Looking	Information	sections	included	in	Item	7,	and	Note	23	Legal	Proceedings	and	Note	24	Commitments	and	Guarantees	in	the	Notes To	Consolidated	Financial	Statements	included	in	Item	8	of	this	Report.

# ITEM	1	–	BUSINESS

# BUSINESS	OVERVIEW

Headquartered	in	Pittsburgh,	Pennsylvania,	we	are	one	of	the	largest	diversified financial	services	companies	in	the	United	States.	We	have	businesses	engaged in	retail	banking,	corporate	and	institutional	banking,	asset	management,	and residential	mortgage	banking,	providing	many	of	our	products	and	services nationally,	as	well	as	products	and	services	in	our	primary	geographic	markets located	in	Pennsylvania,	Ohio,	New	Jersey,	Michigan,	Illinois,	Maryland, Indiana,	North	Carolina,	Florida,	Kentucky,	Washington,	D.C.,	Delaware, Alabama,	Virginia,	Georgia,	Missouri,	Wisconsin	and	South	Carolina.	We	also provide	certain	products	and	services	internationally.	At	December	31,	2012,	our consolidated	total	assets,	total	deposits	and	total	shareholders'	equity	were $305.1	billion,	$213.1	billion	and	$39.0	billion,	respectively.

We	were	incorporated	under	the	laws	of	the	Commonwealth	of	Pennsylvania	in 1983	with	the	consolidation	of	Pittsburgh	National	Corporation	and	Provident National	Corporation.	Since	1983,	we	have	diversified	our	geographical presence,	business	mix	and	product	capabilities	through	internal	growth, strategic	bank	and	non-bank	acquisitions	and	equity	investments,	and	the formation	of	various	non-banking	subsidiaries.

# RBC	BANK	(USA)	ACQUISITION

On	March	2,	2012,	we	acquired	100%	of	the	issued	and	outstanding	common stock	of	RBC	Bank	(USA),	the	U.S.	retail	banking	subsidiary	of	Royal	Bank	of Canada.	As	part	of	the	acquisition,	PNC	also	purchased	a	credit	card	portfolio from	RBC	Bank	(Georgia),	National	Association.	PNC	paid	$3.6	billion	in	cash as	the	consideration	for	the	acquisition	of	both	RBC	Bank	(USA)	and	the	credit card	portfolio.	The	transaction	added	approximately	$18.1	billion	in	deposits, $14.5	billion	of	loans	and	$1.1	billion	of	goodwill	and	intangible	assets	to	PNC's Consolidated	Balance	Sheet.	Our	Consolidated	Income	Statement	includes	the impact	of	business	activity	associated	with	the	RBC	Bank	(USA)	acquisition subsequent	to	March	2,	2012.

RBC	Bank	(USA),	based	in	Raleigh,	North	Carolina,	operated	more	than	400 branches	in	North	Carolina,	Florida,	Alabama,	Georgia,	Virginia	and	South Carolina.	The	primary	reasons	for	the	acquisition	of	RBC	Bank	(USA)	were	to enhance

shareholder	value,	to	improve	PNC's	competitive	position	in	the	financial services	industry,	and	to	further	expand	PNC's	existing	branch	network	in	the states	where	it	currently	operates	as	well	as	expanding	into	new	markets.

# SALE	OF	SMARTSTREET

Effective	October	26,	2012,	PNC	divested	certain	deposits	and	assets	of	the Smartstreet	business	unit,	which	was	acquired	by	PNC	as	part	of	the	RBC	Bank (USA)	acquisition,	to	Union	Bank,	N.A.	Smartstreet	is	a	nationwide	business focused	on	homeowner	or	community	association	managers	and	had approximately	$1	billion	of	assets	and	deposits	as	of	September	30,	2012.	The gain	on	sale	was	immaterial	and	we	reduced	goodwill	and	core	deposit intangibles	of	$46	million	and	$13	million,	respectively.

# FLAGSTAR	BRANCH	ACQUISITION

Effective	December	9,	2011,	PNC	acquired	27	branches	in	the	northern metropolitan	Atlanta,	Georgia	area	from	Flagstar	Bank,	FSB,	a	subsidiary	of Flagstar	Bancorp,	Inc.	We	assumed	approximately	$210	million	of	deposits associated	with	these	branches.	No	loans	were	acquired	in	the	transaction.

# BANKATLANTIC	BRANCH	ACQUISITION

Effective	June	6,	2011,	PNC	acquired	19	branches	in	the	greater	Tampa,	Florida area	from	BankAtlantic,	a	subsidiary	of	BankAtlantic	Bancorp,	Inc.	We assumed	approximately	$324	million	of	deposits	associated	with	these	branches. No	loans	were	acquired	in	the	transaction.

# REVIEW	OF	BUSINESS	SEGMENTS

In	addition	to	the	following	information	relating	to	our	lines	of	business,	we incorporate	the	information	under	the	captions	Business	Segment	Highlights, Product	Revenue,	and	Business	Segments	Review	in	Item	7	of	this	Report	here by	reference.	Also,	we	include	the	financial	and	other	information	by	business	in Note	26	Segment	Reporting	in	the	Notes	To	Consolidated	Financial	Statements in	Item	8	of	this	Report	here	by	reference.

Assets,	revenue	and	earnings	attributable	to	foreign	activities	were	not	material in	the	periods	presented.	Business	segment	results	for	periods	prior	to	2012	have been	reclassified	to	reflect	current	methodologies	and	current	business	and management	structure	and	to	present	those	periods	on	the

same	basis.	Business	segment	information	does	not	include	PNC	Global Investment	Servicing	Inc.	(GIS).	Results	of	operations	of	GIS	through	June	30, 2010	and	the	related	after-tax	gain	on	its	sale	in	the	third	quarter	of	2010	are reflected	in	discontinued	operations.

Retail	Banking	provides	deposit,	lending,	brokerage,	investment	management and	cash	management	services	to	consumer	and	small	business	customers	within our	primary	geographic	markets.	Our	customers	are	serviced	through	our	branch network,	call	centers,	online	banking	and	mobile	channels.	The	branch	network is	principally	located	in	our	primary	geographical	markets.

Our	core	strategy	is	to	acquire	and	retain	customers	who	maintain	their	primary checking	and	transaction	relationships	with	PNC.	We	also	seek	revenue	growth by	deepening	our	share	of	our	customers'	financial	assets,	including	savings	and liquidity	deposits,	loans	and	investable	assets,	including	retirement	assets.	A	key element	of	our	strategy	is	to	expand	the	use	of	lower-cost	alternative	distribution channels	while	continuing	to	optimize	the	traditional	branch	network.	In addition,	we	have	a	disciplined	process	to	continually	improve	the	engagement of	both	our	employees	and	customers,	which	is	a	strong	indicator	of	customer growth,	retention	and	relationship	expansion.

Corporate	&	Institutional	Banking	provides	lending,	treasury	management	and capital	markets-related	products	and	services	to	mid-sized	corporations, government	and	not-for-profit	entities	and	selectively	to	large	corporations. Lending	products	include	secured	and	unsecured	loans,	letters	of	credit	and equipment	leases.	Treasury	management	services	include	cash	and	investment management,	receivables	management,	disbursement	services,	funds	transfer services,	information	reporting	and	global	trade	services.	Capital	markets-related products	and	services	include	foreign	exchange,	derivatives,	loan	syndications, mergers	and	acquisitions	advisory	and	related	services	to	middle-market companies,	our	multi-seller	conduit,	securities	underwriting	and	securities	sales and	trading.	Corporate	&	Institutional	Banking	also	provides	commercial	loan servicing,	and	real	estate	advisory	and	technology	solutions	for	the	commercial real	estate	finance	industry.	Corporate	&	Institutional	Banking	provides	products and	services	generally	within	our	primary	geographic	markets,	with	certain products	and	services	offered	nationally	and	internationally.

Corporate	&	Institutional	Banking	is	focused	on	becoming	a	premier	provider	of financial	services	in	each	of	the	markets	it	serves.	The	value	proposition	to	our customers	is	driven	by	providing	a	broad	range	of	competitive	and	high	quality products	and	services	by	a	team	fully	committed	to	delivering	the comprehensive	resources	of	PNC	to	help	each	client	succeed.	Corporate	& Institutional	Banking's	primary	goals	are	to	achieve	market	share	growth	and enhanced	returns	by	means	of	expansion	and	retention	of	customer	relationships and	prudent	risk	and	expense	management.

Asset	Management	Group	includes	personal	wealth	management	for	high	net worth	and	ultra	high	net	worth	clients	and	institutional	asset	management. Wealth	management	products	and	services	include	investment	and	retirement planning,	customized	investment	management,	private	banking,	tailored	credit solutions	and	trust	management	and	administration	for	individuals	and	their families.	Institutional	asset	management	provides	investment	management, custody	and	retirement	administration	services.	Institutional	clients	include corporations,	unions,	municipalities,	non-profits,	foundations	and	endowments, primarily	located	in	our	geographic	footprint.

Asset	Management	Group	is	focused	on	being	one	of	the	premier	bank-held individual	and	institutional	asset	managers	in	each	of	the	markets	it	serves.	The business	seeks	to	deliver	high	quality	banking	advice	and	trust	and	investment management	services	to	our	high	net	worth,	ultra	high	net	worth	and	institutional client	sectors	through	a	broad	array	of	products	and	services.	Asset	Management Group's	primary	goals	are	to	service	our	clients,	grow	the	business	and	deliver solid	financial	performance	with	prudent	risk	and	expense	management.

Residential	Mortgage	Banking	directly	originates	primarily	first	lien	residential mortgage	loans	on	a	nationwide	basis	with	a	significant	presence	within	the	retail banking	footprint,	and	also	originates	loans	through	majority	owned	affiliates. Mortgage	loans	represent	loans	collateralized	by	one-to-four-family	residential real	estate.	These	loans	are	typically	underwritten	to	government	agency	and/or third-party	standards,	and	sold,	servicing	retained,	to	secondary	mortgage conduits	of	Federal	National	Mortgage	Association	(FNMA),	Federal	Home Loan	Mortgage	Corporation	(FHLMC),	Federal	Home	Loan	Banks	and	third- party	investors,	or	are	securitized	and	issued	under	the	Government	National Mortgage	Association	(GNMA)	program,	as	described	in	more	detail	in	Note	3 Loan	Sale	and	Servicing	Activities	and	Variable	Interest	Entities	in	Item	8	of this	Report	and	included	here	by	reference.	The	mortgage	servicing	operation performs	all	functions	related	to	servicing	mortgage	loans,	primarily	those	in first	lien	position,	for	various	investors	and	for	loans	owned	by	PNC.	Certain loan	applications	are	brokered	by	majority	owned	affiliates	to	others.

Residential	Mortgage	Banking	is	focused	on	adding	value	to	the	PNC	franchise by	building	stronger	customer	relationships,	providing	quality	investment	loans, and	delivering	acceptable	returns	consistent	with	a	moderate	risk	philosophy. Our	national	distribution	capability	provides	volume	that	drives	economies	of scale,	risk	dispersion,	and	cost-effective	extension	of	the	retail	banking	footprint for	cross-selling	opportunities.

BlackRock	is	a	leader	in	investment	management,	risk	management	and advisory	services	for	institutional	and	retail	clients	worldwide.	BlackRock provides	diversified	investment

management	services	to	institutional	clients,	intermediary	and	individual investors	through	various	investment	vehicles.	Investment	management	services primarily	consist	of	the	management	of	equity,	fixed	income,	multi-asset	class, alternative	investment	and	cash	management	products.	BlackRock	offers	its investment	products	in	a	variety	of	vehicles,	including	open-end	and	closed-end mutual	funds,	iShares ®	exchange-traded	funds	(ETFs),	collective	investment trusts	and	separate	accounts.	In	addition,	BlackRock	provides	market	risk management,	financial	markets	advisory	and	enterprise	investment	system services	to	a	broad	base	of	clients.	Financial	markets	advisory	services	include valuation	services	relating	to	illiquid	securities,	dispositions	and	workout assignments	(including	long-term	portfolio	liquidation	assignments),	risk management	and	strategic	planning	and	execution.

We	hold	an	equity	investment	in	BlackRock,	which	is	a	key	component	of	our diversified	revenue	strategy.	BlackRock	is	a	publicly	traded	company,	and additional	information	regarding	its	business	is	available	in	its	filings	with	the Securities	and	Exchange	Commission	(SEC).

Non-Strategic	Assets	Portfolio	(formerly,	Distressed	Assets	Portfolio)	includes	a consumer	portfolio	of	mainly	residential	mortgage	and	brokered	home	equity loans	and	a	small	commercial	loan	and	lease	portfolio.	We	obtained	a	significant portion	of	these	non-strategic	assets	through	acquisitions	of	other	companies.

# SUBSIDIARIES

Our	corporate	legal	structure	at	December	31,	2012	consisted	of	one	domestic subsidiary	bank,	including	its	subsidiaries,	and	approximately	141	active	non- bank	subsidiaries.	Our	bank	subsidiary	is	PNC	Bank,	National	Association (PNC	Bank,	N.A.),	headquartered	in	Pittsburgh,	Pennsylvania.	For	additional information	on	our	subsidiaries,	see	Exhibit	21	to	this	Report.

# STATISTICAL	DISCLOSURE	BY	BANK	HOLDING	COMPANIES

The	following	statistical	information	is	included	on	the	indicated	pages	of	this Report	and	is	incorporated	herein	by	reference:

# EUROPEAN	EXPOSURE

For	information	regarding	our	exposure	to	European	entities	at	December	31, 2012	and	December	31,	2011,	see	the	European	Exposure	section	included	in Item	7	of	this	Report.

# SUPERVISION	AND	REGULATION

# OVERVIEW

PNC	is	a	bank	holding	company	registered	under	the	Bank	Holding	Company Act	of	1956	as	amended	(BHC	Act)	and	a	financial	holding	company	under	the Gramm-Leach-Bliley	Act	(GLB	Act).

We	are	subject	to	numerous	governmental	regulations,	some	of	which	are highlighted	below.	See	Note	22	Regulatory	Matters	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report,	for	additional information	regarding	our	regulatory	matters.	Applicable	laws	and	regulations restrict	our	permissible	activities	and	investments	and	require	compliance	with protections	for	loan,	deposit,	brokerage,	fiduciary,	investment	management	and other	customers,	among	other	things.	They	also	restrict	our	ability	to	repurchase stock	or	pay	dividends,	or	to	receive	dividends	from	our	bank	subsidiary,	and impose	capital	adequacy	requirements.	The	consequences	of	noncompliance	can include	substantial	monetary	and	nonmonetary	sanctions.

In	addition,	we	are	subject	to	comprehensive	examination	and	supervision	by, among	other	regulatory	bodies,	the	Board	of	Governors	of	the	Federal	Reserve System	(Federal	Reserve)	and	the	Office	of	the	Comptroller	of	the	Currency (OCC),	which	result	in	examination	reports	and	ratings	(which	are	not	publicly available)	that	can	impact	the	conduct	and	growth	of	our	businesses.	These examinations	consider	not	only	compliance	with	applicable	laws	and	regulations, but	also	capital	levels,	asset	quality	and	risk,	management	ability	and performance,	earnings,	liquidity	and	various	other	factors.	The	results	of examination	activity	by	any	of	our	federal	bank	regulators	potentially	can	result in	the	imposition	of	significant	limitations	on	our	activities	and	growth.	These regulatory	agencies	generally	have	broad	discretion	to	impose	restrictions	and limitations	on	the	operations	of	a	regulated	entity	where	the	relevant	agency determines,	among	other	things,	that	such	operations	are	conducted	in	an	unsafe or	unsound	manner,	fail	to	comply	with	applicable	law	or	are	otherwise inconsistent	with	the	regulations	or	supervisory	policies	of	the	agency.	This supervisory	framework	could	materially	impact	the	conduct,	growth	and profitability	of	our	operations.

The	Consumer	Financial	Protection	Bureau	(CFPB),	a	new	agency	established by	the	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	(Dodd- Frank),	is	responsible	for	examining	PNC	Bank,	N.A.	and	its	affiliates (including	PNC)	for	compliance	with	most	consumer	financial	protection	laws and	for	enforcing	such	laws	with	respect	to	PNC	Bank,	N.A.	and	its	affiliates. This	authority	previously	was	exercised	by	the	OCC	and	the	Federal	Reserve. The	CFPB	also	now	has	authority	for	prescribing	rules	governing	the	provision of	consumer	financial	products	and	services	such	as	credit	cards,	student	and other	loans,	deposits	and	residential	mortgages.	The	agency	has	issued	final regulations	that	impose	broad	new

requirements	relating	to	our	mortgage	origination	activities	and	the	servicing activities	we	perform	for	residential	mortgage	loans.	These	regulations	include	a requirement	that	residential	mortgage	lenders,	like	PNC	Bank,	make	a	"good faith	and	reasonable	determination"	at	or	before	the	time	of	consummation	of	a residential	mortgage	loan	that	the	prospective	borrower	has	a	reasonable	ability to	repay	that	loan.	The	new	regulations	also	include	broad	new	requirements applicable	to	servicers	of	residential	mortgage	loans,	like	PNC,	which	include provisions	requiring	policies	and	procedures	relating	to	how	servicers	respond	to and	manage	loans	of	borrowers	who	are	in	default.	Most	of	these	regulations	are scheduled	to	take	effect	in	January	of	2014.	In	addition,	the	CFPB	is	now considering	additional	regulations	that	will	modify	the	application	and	closing disclosures	that	must	be	provided	to	borrowers	in	connection	with	residential mortgage	loans.

As	a	result	of	Dodd-Frank,	after	July	21,	2011,	subsidiaries	of	PNC	Bank,	N.A. are	subject	to	state	law	and	regulation	to	the	same	extent	as	if	they	were	not subsidiaries	of	a	national	bank.	Additionally,	based	on	Dodd-Frank,	state authorities	may	assert	that	certain	state	consumer	financial	laws	that	provide different	requirements	or	limitations	than	Federal	law	may	apply	to	national banks,	including	PNC	Bank,	N.A.	Such	state	laws	may	be	preempted	if	they meet	certain	standards	set	forth	in	Dodd-Frank	or	other	applicable	law.	We expect	to	experience	an	increase	in	regulation	of	our	Retail	Banking,	Asset Management	Group	and	Residential	Mortgage	Banking	businesses	and additional	compliance	obligations,	revenue	and	cost	impacts.

We	also	are	subject	to	regulation	by	the	SEC	by	virtue	of	our	status	as	a	public company	and	by	the	SEC	and	the	Commodity	Futures	Trading	Commission (CFTC)	due	to	the	nature	of	some	of	our	businesses.	Our	banking	and	securities businesses	with	operations	outside	the	United	States,	including	those	conducted by	BlackRock,	are	also	subject	to	regulation	by	appropriate	authorities	in	the foreign	jurisdictions	in	which	they	do	business.

As	a	regulated	financial	services	firm,	our	relationships	and	good	standing	with regulators	are	of	fundamental	importance	to	the	operation	and	growth	of	our businesses.	The	Federal	Reserve,	OCC,	CFPB,	SEC,	CFTC	and	other	domestic and	foreign	regulators	have	broad	enforcement	powers,	and	certain	of	the regulators	have	the	power	to	approve,	deny,	or	refuse	to	act	upon	our applications	or	notices	to	conduct	new	activities,	acquire	or	divest	businesses	or assets	and	deposits,	or	reconfigure	existing	operations.

We	anticipate	new	legislative	and	regulatory	initiatives	over	the	next	several years,	focused	specifically	on	banking	and	other	financial	services	in	which	we are	engaged.	These	initiatives	would	be	in	addition	to	the	actions	already	taken by	Congress	and	the	regulators,	including	the	Credit	Card	Accountability, Responsibility,	and	Disclosure	Act	of	2009

(Credit	CARD	Act),	the	Secure	and	Fair	Enforcement	for	Mortgage	Licensing Act	(the	SAFE	Act),	and	Dodd-Frank,	as	well	as	changes	to	the	regulations implementing	the	Real	Estate	Settlement	Procedures	Act,	the	Federal	Truth	in Lending	Act,	and	the	Electronic	Fund	Transfer	Act,	including	the	new	rules	set forth	in	Regulation	E	related	to	overdraft	charges.

Dodd-Frank,	which	was	signed	into	law	on	July	21,	2010,	comprehensively reforms	the	regulation	of	financial	institutions,	products	and	services.	Dodd- Frank	requires	various	federal	regulatory	agencies	to	implement	numerous	new rules	and	regulations.	Because	the	federal	agencies	are	granted	broad	discretion in	drafting	these	rules	and	regulations,	and	many	implementing	rules	either	have not	yet	been	issued	or	have	only	been	issued	in	proposed	form,	many	of	the details	and	much	of	the	impact	of	Dodd-Frank	may	not	be	known	for	many months	or	years.	Among	other	things,	Dodd-Frank	provides	for	new	capital standards	that	eliminate	the	treatment	of	trust	preferred	securities	as	Tier	1 regulatory	capital;	requires	that	deposit	insurance	assessments	be	calculated based	on	an	insured	depository	institution's	assets	rather	than	its	insured deposits;	raises	the	minimum	Designated	Reserve	Ratio	(the	balance	in	the Deposit	Insurance	Fund	divided	by	estimated	insured	deposits)	to	1.35%; establishes	a	comprehensive	regulatory	regime	for	the	derivatives	activities	of financial	institutions;	limits	proprietary	trading	and	owning	or	sponsoring	hedge funds	and	private	equity	funds	by	banking	entities;	requires	the	Federal	Reserve to	establish	a	variety	of	enhanced	prudential	standards	for	bank	holding companies	with	$50	billion	or	more	in	total	assets;	places	limitations	on	the interchange	fees	charged	for	debit	card	transactions;	and	establishes	new minimum	mortgage	underwriting	standards	for	residential	mortgages.

Dodd-Frank	established	the	10-member	inter-agency	Financial	Stability Oversight	Council	(FSOC),	which	is	charged	with	identifying	systemic	risks	and strengthening	the	regulation	of	financial	holding	companies	and	certain	non- bank	companies	deemed	to	be	"systemically	important"	and	could,	in extraordinary	cases	and	in	conjunction	with	the	Federal	Reserve,	break	up financial	firms	that	are	deemed	to	present	a	grave	threat	to	the	financial	stability of	the	United	States.	Dodd-Frank	also	requires	the	Federal	Reserve	to	establish prudential	standards	for	bank	holding	companies	with	total	consolidated	assets equal	to	or	greater	than	$50	billion	that	are	more	stringent	than	the	standards	and requirements	applicable	to	bank	holding	companies	with	assets	below	this threshold,	and	that	increase	in	stringency	for	bank	holding	companies	that present	heightened	risk	to	the	financial	system.	Additional	information concerning	these	enhanced	prudential	standards	is	provided	in	Item	1A	–	Risk Factors	of	this	Report.	The	FSOC	may	make	recommendations	to	the	Federal Reserve	concerning	the	establishment	and	refinement	of	these	prudential standards	and	reporting	and	disclosure	requirements.

Legislative	and	regulatory	developments	to	date,	as	well	as	those	that	come	in the	future,	have	had	and	are	likely	to	continue	to	have	an	impact	on	the	conduct of	our	business.	The	more	detailed	description	of	the	significant	regulations	to which	we	are	subject	included	in	this	Report	is	based	on	the	current	regulatory environment	and	is	subject	to	potentially	material	change.	See	also	the	additional information	included	in	Item	1A	of	this	Report	under	the	risk	factors	discussing the	impact	of	financial	regulatory	reform	initiatives,	including	Dodd-Frank	and regulations	promulgated	to	implement	it,	on	the	regulatory	environment	for	PNC and	the	financial	services	industry.

Among	other	areas	that	have	been	receiving	a	high	level	of	regulatory	focus	over the	last	several	years	are	compliance	with	anti-money	laundering	laws	and	the protection	of	confidential	customer	information.	In	addition,	at	least	in	part driven	by	the	current	economic	and	financial	situation,	there	is	an	increased focus	on	fair	lending	and	other	issues	related	to	the	mortgage	industry.	Ongoing mortgage-related	regulatory	reforms	include	measures	aimed	at	reducing mortgage	foreclosures.

Additional	legislation,	changes	in	rules	promulgated	by	the	Federal	Reserve,	the OCC,	the	Federal	Deposit	Insurance	Corporation	(FDIC),	the	CFPB,	the	SEC, the	CFTC,	other	federal	and	state	regulatory	authorities	and	self-regulatory organizations,	or	changes	in	the	interpretation	or	enforcement	of	existing	laws and	rules,	may	directly	affect	the	method	of	operation	and	profitability	of	our businesses.	The	profitability	of	our	businesses	could	also	be	affected	by	rules and	regulations	that	impact	the	business	and	financial	communities	in	general, including	changes	to	the	laws	governing	taxation,	antitrust	regulation	and electronic	commerce.

There	are	numerous	rules	governing	the	regulation	of	financial	services institutions	and	their	holding	companies.	Accordingly,	the	following	discussion is	general	in	nature	and	does	not	purport	to	be	complete	or	to	describe	all	of	the laws	and	regulations	that	apply	to	us.	To	a	substantial	extent,	the	purpose	of	the regulation	and	supervision	of	financial	services	institutions	and	their	holding companies	is	not	to	protect	our	shareholders	and	our	non-customer	creditors,	but rather	to	protect	our	customers	(including	depositors)	and	the	financial	markets in	general.

# BANKING	REGULATION	AND	SUPERVISION

Capital	Regulations.	PNC	and	PNC	Bank,	N.A.	are	subject	to	the	regulatory capital	requirements	established	by	the	Federal	Reserve	and	the	OCC, respectively.	In	addition,	PNC	is	subject	to	the	Federal	Reserve's	capital	plan rule	and	annual	capital	stress	testing	and	Comprehensive	Capital	Analysis	and Review	(CCAR)	process.	As	part	of	this	annual	capital	planning	process,	the Federal	Reserve	undertakes	a	supervisory	assessment	of	the	capital	adequacy	of bank	holding	companies	(BHCs),	including	PNC,	that	have	$50	billion	or	more in	total	consolidated	assets.	This	capital	adequacy	assessment	is	based	on	a review	of	a	comprehensive	capital	plan	submitted	by	each	participating	BHC	to the	Federal	Reserve	that	describes	the	company's	planned	capital	actions	during the	nine	quarter	review	period,	as	well	as	the	results	of	stress	tests	conducted	by both	the	company	and	the	Federal	Reserve	under	different	hypothetical	macro- economic	scenarios,	including	a	severely	stressed	scenario	provided	by	the Federal	Reserve	(supervisory	severely	adverse	scenario).	In	evaluating	a	BHC's capital	plan,	the	Federal	Reserve	considers	a	number	of	factors,	including	the company's	risk	profile,	the	strength	of	the	company's	internal	capital	assessment process,	and	whether	the	company's	projected	pro	forma	Basel	I	Tier	1	common capital	ratio	under	the	hypothetical	supervisory	severely	adverse	scenario	would remain	above	5	percent	throughout	the	nine	quarter	planning	horizon	even	if	the company	continued	with	the	capital	distributions	proposed	under	a	baseline scenario.	In	addition,	the	Federal	Reserve	evaluates	a	company's	projected	path towards	compliance	with	the	proposed	Basel	III	regulatory	capital	framework. After	completing	its	review,	the	Federal	Reserve	may	object	or	not	object	to	the firm's	proposed	capital	actions,	such	as	plans	to	pay	or	increase	common	stock dividends,	reinstate	or	increase	common	stock	repurchase	programs,	or	redeem preferred	stock	or	other	regulatory	capital	instruments.

In	connection	with	the	2013	CCAR,	PNC	filed	its	capital	plan	and	stress	testing results	using	financial	data	as	of	September	30,	2012	with	the	Federal	Reserve	on January	7,	2013.	PNC	expects	to	receive	the	Federal	Reserve's	response	(either	a non-objection	or	objection)	to	the	capital	plan	submitted	as	part	of	the	2013 CCAR	by	March	15,	2013.	The	Federal	Reserve	also	has	announced	that	it intends	to	publish	on	this	date	the	results	of	its	assessments,	including	the Federal	Reserve's	estimates	of	the	Basel	I	capital	ratios	for	each	of	the	largest	19 BHCs	participating	in	the	2013	reviews,	including	PNC,	during	the	review period	under	the	Federal	Reserve's	severely	adverse	macro-economic	scenario and	applying	the	firm's	proposed	base	case	capital	distributions.	Prior	to	this release,	the	Federal	Reserve	will	release	on	March	7,	2013	its	estimate	of	the Basel	I	capital	ratios,	as	well	as	its	estimate	of	certain	revenue	and	loss information,	for	such	BHCs	under	the	same	supervisory	severely	adverse scenario	but	applying	the	common	assumptions	concerning	capital	distributions by	firms	established	by	the	Federal	Reserve	for	the	stress	tests	required	by	Dodd- Frank	(Dodd-

Frank	capital	action	assumptions).	PNC	also	is	required	to	publicly	disclose,	in March	2013,	its	estimates	of	certain	capital,	revenue	and	loss	information	under the	same	hypothetical	supervisory	severely	adverse	macro-economic	scenario and	applying	the	Dodd-Frank	capital	action	assumptions.	Federal	Reserve regulations	also	require	that	PNC	and	other	large	bank	holding	companies conduct	a	separate	mid-year	stress	test	using	financial	data	as	of	March	31 	and three	company-derived	macro-economic	scenarios	(base,	adverse	and	severely adverse)	and	publish	a	summary	of	the	results	under	the	severely	adverse scenario	in	September. st

The	Federal	banking	agencies	have	requested	comment	on	proposed	rules	to implement	the	Basel	III	capital	framework	in	the	United	States.	These	rules	have not	yet	been	finalized	and	remain	subject	to	change.	For	additional	information on	these	proposed	rules,	see	Recent	Market	and	Industry	Developments	in Item	7	and	Item	1A	–	Risk	Factors	in	this	Report.	PNC's	estimated	pro	forma Basel	III	Tier	1	common	ratio	was	7.5%	at	December	31,	2012,	excluding	the benefits	of	the	transitional	phase-in	periods	provided	by	Basel	III.	This	estimate is	based	on	management's	understanding	of	the	Basel	III	proposed	rules	issued by	the	U.S.	banking	agencies	in	June	2012	and	on	available	data	and	information as	of	December	31,	2012.	It	also	reflects	our	estimates	of	PNC's	risk-weighted assets	under	Basel	II	(with	the	modifications	proposed	in	June	2012)	and application	of	the	Basel	II.5	market	risk	rules	that	became	effective	on January	1,	2013.	Both	our	Basel	II	and	Basel	III	estimates	are	point	in	time estimates	and	are	subject	to	further	regulatory	guidance	and	clarity,	as	well	as the	development,	refinement,	validation	and	regulatory	approval	of	internal models.

Parent	Company	Liquidity	and	Dividends.	The	principal	source	of	our	liquidity at	the	parent	company	level	is	dividends	from	PNC	Bank,	N.A.	PNC	Bank, N.A.	is	subject	to	various	federal	restrictions	on	its	ability	to	pay	dividends	to PNC	Bancorp,	Inc.,	its	direct	parent.	PNC	Bank,	N.A.	is	also	subject	to	federal laws	limiting	extensions	of	credit	to	its	parent	holding	company	and	non-bank affiliates	as	discussed	in	Note	22	Regulatory	Matters	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report.	Further	information on	bank	level	liquidity	and	parent	company	liquidity	and	on	certain	contractual restrictions	is	also	available	in	the	Liquidity	Risk	Management	portion	of	the Risk	Management	section	and	the	Trust	Preferred	Securities	portion	of	the	Off- Balance	Sheet	Arrangements	And	Variable	Interest	Entities	section	of	Item	7	of this	Report,	and	in	Note	14	Capital	Securities	of	Subsidiary	Trusts	and	Perpetual Trust	Securities	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of this	Report.

Federal	Reserve	rules	provide	that	a	bank	holding	company	is	expected	to	serve as	a	source	of	financial	strength	to	its	subsidiary	banks	and	to	commit	resources to	support	such	banks	if	necessary.	Consistent	with	the	"source	of	strength"

policy	for	subsidiary	banks,	the	Federal	Reserve	has	stated	that,	as	a	matter	of prudent	banking,	a	bank	holding	company	generally	should	not	maintain	a	rate of	cash	dividends	unless	its	net	income	available	to	common	shareholders	has been	sufficient	to	fully	fund	the	dividends	and	the	prospective	rate	of	earnings retention	appears	to	be	consistent	with	the	corporation's	capital	needs,	asset quality	and	overall	financial	condition.	Further,	in	providing	guidance	to	the large	BHCs	participating	in	the	2013	CCAR,	discussed	above,	the	Federal Reserve	stated	that	it	expects	capital	plans	submitted	in	2013	will	reflect conservative	dividend	payout	ratios	and	net	share	repurchase	programs,	and	that requests	that	imply	common	dividend	payout	ratios	above	30%	of	projected after-tax	net	income	available	to	common	shareholders	will	receive	particularly close	scrutiny.	The	Federal	Reserve	also	has	stated	that	it	expects	BHCs	that meet	the	minimum	capital	ratio	requirements	under	Basel	III	during	the transition	periods	provided	by	Basel	III,	but	that	do	not	meet	the	fully-phased	in Basel	III	minimum	plus	capital	conservation	buffer	ratio	of	7	percent	Tier	1 common	(plus	any	applicable	capital	surcharge	for	globally	systemically important	banks),	to	maintain	prudent	earnings	retention	policies	with	a	view	to meeting	this	standard	in	accordance	with	the	phase-in	schedule	included	in	the agencies'	proposed	Basel	III	rules.

# Additional	Powers	Under	the	GLB	Act.	The	Gramm–Leach–Bliley	Act	(GLB

Act)	permits	a	qualifying	bank	holding	company	to	become	a	"financial	holding company"	and	thereby	engage	in,	or	affiliate	with	financial	companies	engaging in,	a	broader	range	of	activities	than	would	otherwise	be	permitted	for	a	bank holding	company.	Permitted	affiliates	include	securities	underwriters	and dealers,	insurance	companies	and	companies	engaged	in	other	activities	that	are determined	by	the	Federal	Reserve,	in	consultation	with	the	Secretary	of	the Treasury,	to	be	"financial	in	nature	or	incidental	thereto"	or	are	determined	by the	Federal	Reserve	unilaterally	to	be	"complementary"	to	financial	activities. We	became	a	financial	holding	company	as	of	March	13,	2000.	In	order	to	be and	remain	a	financial	holding	company,	a	bank	holding	company	and	its subsidiary	depository	institutions	must	be	"well	capitalized"	and	"well managed."	In	addition,	a	financial	holding	company	generally	may	not	engage	in a	new	financial	activity	if	any	of	its	insured	depository	institutions	received	a less	than	Satisfactory	rating	at	its	most	recent	evaluation	under	the	Community Reinvestment	Act	(CRA).

The	Federal	Reserve	is	the	"umbrella"	regulator	of	a	financial	holding	company, with	its	operating	entities,	such	as	its	subsidiary	broker-dealers,	investment advisers,	insurance	companies	and	banks,	as	well	as	investment	companies advised	by	investment	adviser	subsidiaries	of	the	financial	holding	company, also	being	subject	to	the	jurisdiction	of	various	federal	and	state	"functional" regulators	with	normal	regulatory	responsibility	for	companies	in	their	lines	of business.

As	subsidiaries	of	a	financial	holding	company	under	the	GLB	Act,	our	non- bank	subsidiaries	are	generally	allowed	to	conduct	new	financial	activities,	and PNC	is	generally	permitted	to	acquire	non-bank	financial	companies	that	have less	than	$10	billion	in	assets,	with	after-the-fact	notice	to	the	Federal	Reserve.	In addition,	our	non-bank	subsidiaries	(and	any	financial	subsidiaries	of	subsidiary banks)	are	permitted	to	engage	in	certain	activities	that	were	not	permitted	for bank	holding	companies	and	banks	prior	to	enactment	of	the	GLB	Act,	and	to engage	on	less	restrictive	terms	in	certain	activities	that	were	previously permitted.	Among	other	activities,	we	currently	rely	on	our	status	as	a	financial holding	company	to	conduct	merchant	banking	activities	and	securities underwriting	and	dealing	activities.

In	addition,	the	GLB	Act	permits	national	banks,	such	as	PNC	Bank,	N.A.,	to engage	in	expanded	activities	through	the	formation	of	a	"financial	subsidiary." PNC	Bank,	N.A.	has	filed	a	financial	subsidiary	certification	with	the	OCC	and currently	engages	in	insurance	agency	activities	through	financial	subsidiaries. PNC	Bank,	N.A.	may	also	generally	engage	through	a	financial	subsidiary	in any	activity	that	is	determined	to	be	financial	in	nature	or	incidental	to	a financial	activity	by	the	Secretary	of	the	Treasury,	in	consultation	with	the Federal	Reserve.	Certain	activities,	however,	are	impermissible	for	a	financial subsidiary	of	a	national	bank,	including	certain	insurance	underwriting	activities, insurance	company	investment	activities,	real	estate	investment	or	development, and	merchant	banking.

Other	Federal	Reserve	and	OCC	Regulation	and	Supervision.	The	federal banking	agencies	possess	broad	powers	to	take	corrective	action	as	deemed appropriate	for	an	insured	depository	institution	and	its	holding	company.	In some	cases,	the	extent	of	these	powers	depends	upon	whether	the	institution	in question	is	considered	"well	capitalized,"	"adequately	capitalized," "undercapitalized,"	"significantly	undercapitalized"	or	"critically undercapitalized."	Generally,	the	smaller	an	institution's	capital	base	in	relation to	its	risk-weighted	or	total	assets,	the	greater	the	scope	and	severity	of	the agencies'	powers,	ultimately	permitting	the	agencies	to	appoint	a	receiver	for	the institution.	Business	activities	may	also	be	influenced	by	an	institution's	capital classification.	For	instance,	only	a	"well	capitalized"	depository	institution	may accept	brokered	deposits	without	prior	regulatory	approval	and	an	"adequately capitalized"	depository	institution	may	accept	brokered	deposits	only	with	prior regulatory	approval.	At	December	31,	2012,	PNC	Bank,	N.A.	exceeded	the required	ratios	for	classification	as	"well	capitalized."	For	additional	discussion of	capital	adequacy	requirements,	we	refer	you	to	the	Funding	and	Capital Sources	portion	of	the	Consolidated	Balance	Sheet	Review	section	of	Item	7	of this	Report	and	to	Note	22	Regulatory	Matters	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.

Laws	and	regulations	limit	the	scope	of	our	permitted	activities	and	investments. National	banks	(such	as	PNC	Bank,

N.A.)	and	their	operating	subsidiaries	generally	may	engage	only	in	any activities	that	are	determined	by	the	OCC	to	be	part	of	or	incidental	to	the business	of	banking,	although	a	financial	subsidiary	may	engage	in	a	broader range	of	activities	as	described	above.

Moreover,	examination	ratings	of	"3"	or	lower,	lower	capital	ratios	than	peer group	institutions,	regulatory	concerns	regarding	management,	controls,	assets, operations	or	other	factors,	can	all	potentially	result	in	practical	limitations	on the	ability	of	a	bank	or	bank	holding	company	to	engage	in	new	activities,	grow, acquire	new	businesses,	repurchase	its	stock	or	pay	dividends,	or	to	continue	to conduct	existing	activities.

The	Federal	Reserve's	prior	approval	is	required	whenever	we	propose	to acquire	all	or	substantially	all	of	the	assets	of	any	bank	or	thrift,	to	acquire	direct or	indirect	ownership	or	control	of	more	than	5%	of	any	class	of	voting	shares	of any	bank	or	thrift,	or	to	merge	or	consolidate	with	any	other	bank	holding company	or	thrift	holding	company.	The	BHC	Act	enumerates	the	factors	the Federal	Reserve	must	consider	when	reviewing	the	merger	of	bank	holding companies	or	the	acquisition	of	banks.	These	factors	include	the	competitive effects	of	the	proposal	in	the	relevant	geographic	markets;	the	financial	and managerial	resources	and	future	prospects	of	the	companies	and	banks	involved in	the	transaction;	the	effect	of	the	transaction	on	financial	stability	of	the	United States;	the	organizations'	compliance	with	anti-money	laundering	laws	and regulations;	the	convenience	and	needs	of	the	communities	to	be	served;	and	the records	of	performance	under	the	CRA	of	the	insured	depository	institutions involved	in	the	transaction.	In	cases	involving	interstate	bank	acquisitions,	the Federal	Reserve	also	must	consider	the	concentration	of	deposits	nationwide	and in	certain	individual	states.	OCC	prior	approval	is	required	for	PNC	Bank,	N.A. to	acquire	another	insured	bank	or	thrift	by	merger.	In	deciding	whether	to approve	such	a	transaction,	the	OCC	is	required	to	consider	factors	similar	to those	that	must	be	considered	by	the	Federal	Reserve.	Our	ability	to	grow through	acquisitions	could	be	limited	by	these	approval	requirements.

At	December	31,	2012,	PNC	Bank,	N.A.	was	rated	"Outstanding"	with	respect to	CRA.

Because	of	PNC's	ownership	interest	in	BlackRock,	BlackRock	is	subject	to	the supervision	and	regulation	of	the	Federal	Reserve.

FDIC	Insurance.	PNC	Bank,	N.A.	is	insured	by	the	FDIC	and	subject	to premium	assessments.	Regulatory	matters	could	increase	the	cost	of	FDIC deposit	insurance	premiums	to	an	insured	bank	as	FDIC	deposit	insurance premiums	are	"risk	based."	Therefore,	higher	fee	percentages	would	be	charged to	banks	that	have	lower	capital	ratios	or	higher	risk	profiles.	These	risk	profiles take	into	account	weaknesses	that	are	found	by	the	primary	banking	regulator through	its	examination	and	supervision	of	the	bank.	A	negative

evaluation	by	the	FDIC	or	a	bank's	primary	federal	banking	regulator	could increase	the	costs	to	a	bank	and	result	in	an	aggregate	cost	of	deposit	funds higher	than	that	of	competing	banks	in	a	lower	risk	category.	Under	Dodd- Frank,	in	April	2011,	the	deposit	insurance	base	calculation	shifted	from deposits	to	average	assets	less	Tier	1	capital.	This	methodology	change	did	not materially	impact	the	premiums	due	to	the	FDIC	for	PNC.

CFPB	Regulation	and	Supervision.	Dodd-Frank	gives	the	CFPB	authority	to examine	PNC	and	PNC	Bank,	N.A.	for	compliance	with	a	broad	range	of	federal consumer	financial	laws	and	regulations,	including	the	laws	and	regulations	that relate	to	credit	card,	deposit,	mortgage	and	other	consumer	financial	products and	services	we	offer.	In	addition,	Dodd-Frank	gives	the	CFPB	broad	authority to	take	corrective	action	against	PNC	Bank,	N.A.	and	PNC	as	it	deems appropriate.	The	CFPB	also	has	powers	that	it	was	assigned	in	Dodd-Frank	to issue	regulations	and	take	enforcement	actions	to	prevent	and	remedy	acts	and practices	relating	to	consumer	financial	products	and	services	that	it	deems	to	be unfair,	deceptive	or	abusive.	The	agency	also	has	authority	to	impose	new disclosure	requirements	for	any	consumer	financial	product	or	service.	These authorities	are	in	addition	to	the	authority	the	CFPB	assumed	on	July	21,	2011 under	existing	consumer	financial	law	governing	the	provision	of	consumer financial	products	and	services.

# SECURITIES	AND	DERIVATIVES	REGULATION

Our	registered	broker-dealer	and	investment	adviser	subsidiaries	are	subject	to rules	and	regulations	promulgated	by	the	SEC.

Several	of	our	subsidiaries	are	registered	with	the	SEC	as	investment	advisers and	may	provide	investment	advisory	services	to	clients,	other	PNC	affiliates	or related	entities,	including	registered	investment	companies.	Certain	of	these advisers	are	registered	as	investment	advisers	to	private	equity	funds	under	rules adopted	under	Dodd-Frank.

Broker-dealer	subsidiaries	are	subject	to	the	requirements	of	the	Securities Exchange	Act	of	1934,	as	amended,	and	the	regulations	promulgated	thereunder. The	Financial	Industry	Regulatory	Authority	(FINRA)	is	the	primary	self- regulatory	organization	(SRO)	for	our	registered	broker-dealer	subsidiaries. Investment	adviser	subsidiaries	are	subject	to	the	requirements	of	the	Investment Advisers	Act	of	1940,	as	amended,	and	the	regulations	thereunder.	An investment	adviser	to	a	registered	investment	company	is	also	subject	to	the requirements	of	the	Investment	Company	Act	of	1940,	as	amended,	and	the regulations	thereunder.	Our	broker-dealer	and	investment	adviser	subsidiaries also	are	subject	to	additional	regulation	by	states	or	local	jurisdictions.

Over	the	past	several	years,	the	SEC	and	other	regulatory	agencies	have increased	their	focus	on	the	mutual	fund	and	broker-dealer	industries.	Congress and	the	SEC	have	adopted

regulatory	reforms	and	are	considering	additional	reforms	that	have	increased, and	are	likely	to	continue	to	increase,	the	extent	of	regulation	of	the	mutual	fund and	broker-dealer	industries	and	impose	additional	compliance	obligations	and costs	on	our	subsidiaries	involved	with	those	industries.	Under	provisions	of	the federal	securities	laws	applicable	to	broker-dealers,	investment	advisers	and registered	investment	companies	and	their	service	providers,	a	determination	by a	court	or	regulatory	agency	that	certain	violations	have	occurred	at	a	company or	its	affiliates	can	result	in	fines,	restitution,	a	limitation	on	permitted	activities, disqualification	to	continue	to	conduct	certain	activities	and	an	inability	to	rely on	certain	favorable	exemptions.	Certain	types	of	infractions	and	violations	can also	affect	a	public	company	in	its	timing	and	ability	to	expeditiously	issue	new securities	into	the	capital	markets.	In	addition,	certain	changes	in	the	activities	of a	broker-dealer	require	approval	from	FINRA,	and	FINRA	takes	into	account	a variety	of	considerations	in	acting	upon	applications	for	such	approval,	including internal	controls,	capital	levels,	management	experience	and	quality,	prior enforcement	and	disciplinary	history	and	supervisory	concerns.

Title	VII	of	Dodd-Frank	imposes	new	comprehensive	and	significant	regulations on	the	activities	of	financial	institutions	that	are	active	in	the	U.S.	over-the- counter	("OTC")	derivatives	and	foreign	exchange	markets.	Title	VII	was enacted	to	(i)	address	systemic	risk	issues,	(ii)	bring	greater	transparency	to	the derivatives	markets,	(iii)	provide	enhanced	disclosures	and	protection	to customers,	and	(iv)	promote	market	integrity.	Among	other	things,	Title	VII: (i)	requires	the	registration	of	both	"swap	dealers"	and	"major	swap	participants" with	one	or	both	of	the	Commodity	Futures	Trading	Commission	("CFTC")	(in the	case	of	non	security-based	swaps)	and	the	SEC	(in	the	case	of	security-based swaps);	(ii)	requires	that	most	standardized	swaps	be	centrally	cleared	through	a regulated	clearing	house	and	traded	on	a	centralized	exchange	or	swap	execution facility;	(iii)	subjects	swap	dealers	and	major	swap	participants	to	capital	and margin	requirements	in	excess	of	historical	practice;	(iv)	subjects	swap	dealers and	major	swap	participants	to	comprehensive	new	recordkeeping	and	real-time public	reporting	requirements;	(v)	subjects	swap	dealers	and	major	swap participants	to	new	business	conduct	requirements	(including	the	providing	of daily	marks	to	counterparties	and	disclosing	to	counterparties	(pre-execution)	the material	risks	associated	with	their	swap	and	of	material	incentives	and	any conflicts	of	interest	associated	with	their	swap);	and	(vi)	imposes	special	duties on	swap	dealers	and	major	swap	participants	when	transacting	a	swap	with	a "special	entity"	(e.g.,	governmental	agency	(federal,	state	or	local)	or	political subdivision	thereof,	pension	plan	or	endowment).

Based	on	the	definition	of	a	"swap	dealer"	under	Title	VII,	PNC	Bank,	N.A. registered	with	the	CFTC	as	a	swap	dealer	on	January	31,	2013.	As	a	result thereof,	PNC	Bank,	N.A.	is	subject	to	all	of	the	above-described	regulations	and

requirements	imposed	on	registered	swap	dealers,	and	the	CFTC	will	have	a meaningful	supervisory	role	with	respect	to	PNC	Bank,	N.A.'s	derivatives	and foreign	exchange	businesses.	Because	of	the	limited	volume	of	our	security- based	swap	activities,	we	have	not	registered	with	the	SEC	as	a	security-based swap	dealer.	The	above	described	requirements	will	collectively	impose implementation	and	ongoing	compliance	burdens	on	PNC	Bank,	N.A.	and	will introduce	additional	legal	risks	(including	as	a	result	of	newly	applicable antifraud	and	anti-manipulation	provisions	and	private	rights	of	action).

In	addition,	an	investment	adviser	to	private	funds	or	to	registered	investment companies	may	be	required	to	register	with	the	CFTC	as	a	commodity	pool operator.	Registration	could	impose	significant	new	regulatory	compliance burdens.	Presently,	we	expect	our	subsidiaries	that	serve	as	investment	advisers to	such	entities	to	be	eligible	for	exemptions	from	registration	as	a	commodity pool	operator.

BlackRock	has	subsidiaries	in	securities	and	related	businesses	subject	to	SEC, other	governmental	agencies,	state,	local	and	FINRA	regulation,	as	described above,	and	a	federally	chartered	nondepository	trust	company	subsidiary	subject to	supervision	and	regulation	by	the	OCC.	For	additional	information	about	the regulation	of	BlackRock	by	these	agencies	and	otherwise,	we	refer	you	to	the discussion	under	the	"Regulation"	section	of	Item	1	Business	in	BlackRock's most	recent	Annual	Report	on	Form	10-K,	which	may	be	obtained	electronically at	the	SEC's	website	at	www.sec.gov.

# COMPETITION

We	are	subject	to	intense	competition	from	various	financial	institutions	and from	non-bank	entities	that	can	offer	a	number	of	similar	products	and	services without	being	subject	to	bank	regulatory	supervision	and	restrictions.

In	making	loans,	PNC	Bank,	N.A.	competes	with	traditional	banking	institutions as	well	as	consumer	finance	companies,	leasing	companies	and	other	non-bank lenders,	and	institutional	investors	including	collateralized	loan	obligation (CLO)	managers,	hedge	funds,	mutual	fund	complexes	and	private	equity	firms. Loan	pricing,	structure	and	credit	standards	are	extremely	important	in	the current	environment	as	we	seek	to	achieve	appropriate	risk-adjusted	returns. Traditional	deposit-taking	activities	are	also	subject	to	pricing	pressures	and	to customer	migration	as	a	result	of	intense	competition	for	consumer	investment dollars.

PNC	Bank,	N.A.	competes	for	deposits	with:

•	Other	commercial	banks,

•	Savings	banks,

•	Savings	and	loan	associations,

•	Credit	unions,

•	Treasury	management	service	companies,

•	Insurance	companies,	and

•	Issuers	of	commercial	paper	and	other	securities,	including	mutual funds.

Our	various	non-bank	businesses	engaged	in	investment	banking	and	alternative investment	activities	compete	with: •	Commercial	banks,

•	Investment	banking	firms, •	Merchant	banks,

•	Insurance	companies,

•	Private	equity	firms,	and •	Other	investment	vehicles.

In	providing	asset	management	services,	our	businesses	compete	with: •	Investment	management	firms,

•	Large	banks	and	other	financial	institutions, •	Brokerage	firms,

•	Mutual	fund	complexes,	and •	Insurance	companies.

We	include	here	by	reference	the	additional	information	regarding	competition included	in	the	Item	1A	Risk	Factors	section	of	this	Report.

# EMPLOYEES

Employees	totaled	56,285	at	December	31,	2012.	This	total	includes	50,947	full- time	and	5,338	part-time	employees,	of	which	23,331	full-time	and	4,563	part- time	employees	were	employed	by	our	Retail	Banking	business.

# SEC	REPORTS	AND	CORPORATE	GOVERNANCE	INFORMATION

We	are	subject	to	the	informational	requirements	of	the	Securities	Exchange	Act of	1934,	as	amended	(Exchange	Act),	and,	in	accordance	with	the	Exchange	Act, we	file	annual,	quarterly	and	current	reports,	proxy	statements,	and	other information	with	the	SEC.	Our	SEC	File	Number	is	001-09718.	You	may	read and	copy	this	information	at	the	SEC's	Public	Reference	Room	located	at	100	F Street	NE,	Room	1580,	Washington,	D.C.	20549.	You	can	obtain	information	on the	operation	of	the	Public	Reference	Room	by	calling	the	SEC	at	1-800-SEC- 0330.

You	can	also	obtain	copies	of	this	information	by	mail	from	the	Public	Reference Section	of	the	SEC,	100	F	Street	NE,	Washington,	D.C.	20549,	at	prescribed rates.

The	SEC	also	maintains	an	internet	website	that	contains	reports,	proxy	and information	statements,	and	other	information	about	issuers,	like	us,	who	file electronically	with	the	SEC.	The	address	of	that	site	is	www.sec.gov.	You	can also	inspect	reports,	proxy	statements	and	other	information	about	us	at	the offices	of	the	New	York	Stock	Exchange,	20	Broad	Street,	New	York,	New York	10005.

We	also	make	our	Annual	Report	on	Form	10-K,	Quarterly	Reports	on	Form	10- Q,	Current	Reports	on	Form	8-K,	and	amendments	to	those	reports	filed	with	or furnished	to	the	SEC	pursuant	to	Section	13(a)	or	15(d)	of	the	Exchange	Act available	free	of	charge	on	our	internet	website	as	soon	as

reasonably	practicable	after	we	electronically	file	such	material	with,	or	furnish it	to,	the	SEC.	PNC's	corporate	internet	address	is	www.pnc.com	and	you	can find	this	information	at	www.pnc.com/secfilings.	Shareholders	and	bondholders may	also	obtain	copies	of	these	filings	without	charge	by	contacting	Shareholder Services	at	800-982-7652	or	via	the	online	contact	form	at www.computershare.com/contactus	for	copies	without	exhibits,	and	by contacting	Shareholder	Relations	at	800-843-2206	or	via	e-mail	at investor.relations@pnc.com	for	copies	of	exhibits,	including	financial	statement and	schedule	exhibits	where	applicable.	The	interactive	data	file	(XBRL)	exhibit is	only	available	electronically.

Information	about	our	Board	of	Directors	and	its	committees	and	corporate governance	at	PNC	is	available	on	PNC's	corporate	website	at www.pnc.com/corporategovernance.	Our	PNC	Code	of	Business	Conduct	and Ethics	is	available	on	our	corporate	website	at www.pnc.com/corporategovernance.	In	addition,	any	future	amendments	to,	or waivers	from,	a	provision	of	the	PNC	Code	of	Business	Conduct	and	Ethics	that applies	to	our	directors	or	executive	officers	(including	the	Chairman	and	Chief Executive	Officer,	the	Chief	Financial	Officer	and	the	Controller)	will	be	posted at	this	internet	address.

Shareholders	who	would	like	to	request	printed	copies	of	the	PNC	Code	of Business	Conduct	and	Ethics	or	our	Corporate	Governance	Guidelines	or	the charters	of	our	Board's	Audit,	Nominating	and	Governance,	Personnel	and Compensation,	or	Risk	Committees	(all	of	which	are	posted	on	the	PNC corporate	website)	may	do	so	by	sending	their	requests	to	George	P.	Long,	III, Chief	Governance	Counsel	and	Corporate	Secretary,	at	corporate	headquarters	at One	PNC	Plaza,	249	Fifth	Avenue,	Pittsburgh,	Pennsylvania	15222-2707. Copies	will	be	provided	without	charge	to	shareholders.

Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	(NYSE)	under	the symbol	"PNC."

# INTERNET	INFORMATION

The	PNC	Financial	Services	Group,	Inc.'s	financial	reports	and	information about	its	products	and	services	are	available	on	the	internet	at	www.pnc.com. We	provide	information	for	investors	on	our	corporate	website	under	"About PNC	–	Investor	Relations,"	such	as	Investor	Events,	Quarterly	Earnings,	SEC Filings,	Financial	Information,	Financial	Press	Releases	and	Message	from	the Chairman.	Under	"Investor	Relations,"	we	will	from	time	to	time	post information	that	we	believe	may	be	important	or	useful	to	investors.	We generally	post	the	following	shortly	before	or	promptly	following	its	first	use	or release:	financially-related	press	releases	(including	earnings	releases),	various SEC	filings,	presentation	materials	associated	with	earnings	and	other	investor conference	calls	or	events,	and	access	to	live	and	replay	audio	from	such	calls	or events.	When	warranted,	we	will	also	use	our	website	to	expedite	public	access to	time-critical	information	regarding	PNC	in	advance	of	distribution	of	a	press release	or	a	filing	with	the	SEC	disclosing	the	same	information.

Starting	in	2013,	PNC	will	be	required	to	provide	additional	public	disclosure regarding	estimated	income,	losses	and	pro	forma	regulatory	capital	ratios	under a	supervisory	hypothetical	severely	adverse	economic	scenario	in	March	of	each year	and	under	a	PNC-developed	hypothetical	severely	adverse	economic scenario	in	September	of	each	year,	as	well	as	information	concerning	its	capital stress	testing	processes,	pursuant	to	the	stress	testing	regulations	adopted	by	the Federal	Reserve	and	the	OCC.	Under	these	regulations,	PNC	may	be	able	to satisfy	at	least	a	portion	of	these	requirements	through	postings	on	its	website, and	PNC	may	elect	to	do	so

without	also	providing	disclosure	of	this	information	through	filings	with	the Securities	and	Exchange	Commission.

You	can	also	find	the	SEC	reports	and	corporate	governance	information described	in	the	sections	above	in	the	Investor	Relations	section	of	our	website.

Where	we	have	included	web	addresses	in	this	Report,	such	as	our	web	address and	the	web	address	of	the	SEC,	we	have	included	those	web	addresses	as inactive	textual	references	only.	Except	as	specifically	incorporated	by	reference into	this	Report,	information	on	those	websites	is	not	part	hereof.

# ITEM	1A	–	RISK	FACTORS

We	are	subject	to	a	number	of	risks	potentially	impacting	our	business,	financial condition,	results	of	operations	and	cash	flows.	As	a	financial	services organization,	certain	elements	of	risk	are	inherent	in	our	transactions	and	are present	in	the	business	decisions	we	make.	Thus,	we	encounter	risk	as	part	of	the normal	course	of	our	business,	and	we	design	risk	management	processes	to	help manage	these	risks.

There	are	risks	that	are	known	to	exist	at	the	outset	of	a	transaction.	For example,	every	loan	transaction	presents	credit	risk	(the	risk	that	the	borrower may	not	perform	in	accordance	with	contractual	terms)	and	market	risk	(a potential	loss	in	earnings	or	economic	value	due	to	adverse	movement	in	market interest	rates	or	credit	spreads),	with	the	nature	and	extent	of	these	risks principally	depending	on	the	financial	profile	of	the	borrower	and	overall economic	conditions.	We	focus	on	lending	that	is	within	the	boundaries	of	our risk	framework,	and	manage	these	risks	by	adjusting	the	terms	and	structure	of the	loans	we	make	and	through	our	oversight	of	the	borrower	relationship,	as well	as	through	management	of	our	deposits	and	other	funding	sources.

Risk	management	is	an	important	part	of	our	business	model.	The	success	of	our business	is	dependent	on	our	ability	to	identify,	understand	and	manage	the	risks presented	by	our	business	activities	so	that	we	can	appropriately	balance	revenue generation	and	profitability.	These	risks	include,	but	are	not	limited	to,	credit risk,	market	risk,	liquidity	risk,	operational	risk,	model	risk,	technology, compliance	and	legal	risk,	and	strategic	and	reputation	risk.	We	discuss	our principal	risk	management	processes	and,	in	appropriate	places,	related	historical performance	in	the	Risk	Management	section	included	in	Item	7	of	this	Report.

The	following	are	the	key	risk	factors	that	affect	us.	Any	one	or	more	of	these risk	factors	could	have	a	material	adverse	impact	on	our	business,	financial condition,	results	of	operations	or	cash	flows,	in	addition	to	presenting	other possible	adverse	consequences,	which	are	described	below.	These	risk	factors and	other	risks	are	also	discussed	further	in	other	sections	of	this	Report.

# The	possibility	of	the	moderate	economic	recovery	returning	to recessionary	conditions	or	of	turmoil	or	volatility	in	the	financial	markets would	likely	have	an	adverse	effect	on	our	business,	financial	position	and results	of	operations.

Although	the	United	States	economy	has	shown	modest	improvement	recently, economic	conditions	continue	to	pose	a	risk	to	financial	institutions,	including PNC.	The	economic	recovery,	although	continuing,	did	so	only	at	a	pace	in	2012 below	trend	for	other	recent	recoveries	from	recessions.	Job	growth	has	not	yet been	sufficient	to	significantly	reduce	high	unemployment	in	the	United	States. Consumer	and	business	confidence	is	improving	but	remains	in	the	cautious zone.

There	continues	to	be	concern	regarding	the	possibility	of	a	return	to recessionary	conditions,	as	well	as	regarding	the	possibility	of	increased	turmoil or	volatility	in	financial	markets.

The	recent	global	recession	and	disruption	of	the	financial	markets	has	led	to concerns	over	the	solvency	of	certain	Eurozone	states,	including	Greece,	Ireland, Italy,	Portugal	and	Spain,	affecting	these	countries'	capital	markets	access,	as well	as	market	perception	of	financial	institutions	that	have	significant	direct	or indirect	exposure	to	these	countries'	creditworthiness.	Certain	of	the	major	rating agencies	have	downgraded	the	sovereign	credit	ratings	of	Greece,	Portugal	and Ireland	to	below	investment	grade.	The	sovereign	credit	ratings	of	France,	Italy and	Spain	have	also	been	downgraded.	These	ratings	downgrades,	uncertainties surrounding	the	implementation	of	reform	programs,	the	effect	of	economic contraction,	and	the	Eurozone's	financial	inter-linkages	increase	the	risk	of financial	distress	spreading	to	other	Eurozone	states.	If	measures	to	address sovereign	debt	and	financial	sector	problems	in	Europe	are	inadequate,	they	may result	in	a	delayed	economic	recovery,	the	exit	of	one	or	more	member	states from	the	Eurozone,	or	more	severe	recessionary	conditions.	If	realized,	these	risk scenarios	could	contribute	to	severe	financial	market	stress	or	a	global	recession, likely	affecting	the	economy	and	capital	markets	in	the	United	States	as	well.

Although	the	so-called	"fiscal	cliff"	was	averted	in	early	2013,	Congress	and	the President	still	need	to	resolve	issues	with	respect	to	the	U.S.	government's	debt ceiling	and	other	budgetary	and	spending	matters.	Uncertainty	as	to	whether these	issues	can	be	resolved	or	how	effective	a	resolution	might	be	increases	the risk	of	slower	economic	growth.	The	nature	and	ultimate	resolution	of	these issues,	or	a	failure	to	achieve	a	timely	and	effective	resolution,	may	further adversely	affect	the	U.S.	economy	through	possible	consequences	including downgrades	in	the	ratings	for	U.S.	Treasury	securities,	government	shutdowns, or	substantial	spending	cuts	resulting	from	sequestration.

Current	economic	conditions	have	had	an	adverse	effect	on	our	business	and financial	performance	and	may	not	improve	in	the	near	future.	We	expect	these conditions	to	continue	to	have	an	ongoing	negative	impact	on	us	and	a worsening	of	conditions	would	likely	aggravate	the	adverse	effects	of	these difficult	economic	and	market	conditions	on	us	and	on	others	in	the	financial services	industry.

In	particular,	we	may	face	the	following	risks	in	connection	with	the	current economic	and	market	environment:

•	Investors	may	have	less	confidence	in	the	equity	markets	in	general and	in	financial	services	industry	stocks	in	particular,	which	could place	downward	pressure	on	PNC's	stock	price	and	resulting	market valuation.

•	Economic	and	market	developments,	in	the	United	States,	Europe	or elsewhere,	may	further	affect

consumer	and	business	confidence	levels	and	may	cause	declines	in credit	usage	and	adverse	changes	in	payment	patterns,	causing increases	in	delinquencies	and	default	rates.

•	The	continuation	of	the	current	very	low	interest	rate	environment, which	is	expected	to	continue	at	least	through	mid-year	2015	based	on statements	by	the	Chairman	of	the	Federal	Reserve	Board,	could	affect consumer	and	business	behavior	in	ways	that	are	adverse	to	us	and could	also	hamper	our	ability	to	increase	our	net	interest	income. •	Our	ability	to	assess	the	creditworthiness	of	our	customers	may	be impaired	if	the	models	and	approaches	we	use	to	select,	manage,	and underwrite	our	customers	become	less	predictive	of	future	behaviors. •	The	process	we	use	to	estimate	losses	in	our	credit	exposures	requires difficult,	subjective	and	complex	judgments,	including	with	respect	to economic	conditions	and	how	economic	conditions	might	impair	the ability	of	our	borrowers	to	repay	their	loans.	At	any	point	in	time	or	for any	length	of	time,	such	losses	may	no	longer	be	capable	of	accurate estimation,	which	may,	in	turn,	adversely	impact	the	reliability	of	the process	for	estimating	losses	and,	therefore,	the	establishment	of adequate	reserves	for	those	losses.

•	We	could	suffer	decreases	in	customer	desire	to	do	business	with	us, whether	as	a	result	of	a	decreased	demand	for	loans	or	other	financial products	and	services	or	decreased	deposits	or	other	investments	in accounts	with	PNC.

•	Competition	in	our	industry	could	intensify	as	a	result	of	the	increasing consolidation	of	financial	services	companies	in	connection	with current	market	conditions,	or	otherwise.

•	A	continuation	or	deterioration	of	current	economic	trends	may	lead	to declines	in	the	values	of	our	businesses	potentially	resulting	in goodwill	impairments.

•	A	lessening	of	confidence	in	the	creditworthiness	of	the	United	States or	other	governments	whose	securities	we	hold	could	impact	the	value of	those	holdings.

•	Increased	regulation	of	compensation	at	financial	services	companies as	part	of	government	efforts	to	reform	the	industry	may	hinder	our ability	to	attract,	retain	and	incentivize	well-qualified	individuals	in key	positions.

•	Investors	in	mortgage	loans	and	other	assets	that	we	sell	or	sold	are more	likely	to	seek	indemnification	from	us	against	losses	or	otherwise seek	to	have	us	share	in	such	losses	or	to	request	us	to	repurchase	loans that	they	believe	do	not	comply	with	applicable	representations	and warranties	or	other	contractual	provisions.

•	We	may	be	subject	to	additional	fees	and	taxes	as	the	government seeks	to	recover	some	of	the	costs	of	its	recovery	efforts,	reduce	the national	debt	or	pay	for	additional	government	programs,	in	particular from	the	financial	services	industry.

# The	regulatory	environment	for	the	financial	services	industry	is	being significantly	impacted	by	financial	regulatory	reform	initiatives	in	the United	States	and	elsewhere,	including	Dodd-Frank	and	regulations promulgated	to	implement	it.

The	United	States	and	other	governments	have	undertaken	major	reform	of	the regulatory	oversight	structure	of	the	financial	services	industry,	including engaging	in	new	efforts	to	impose	requirements	designed	to	reduce	systemic risks	and	protect	consumers	and	investors.	We	expect	to	face	further	increased regulation	of	our	industry	as	a	result	of	current	and	future	initiatives	intended	to provide	economic	stimulus,	financial	market	stability	and	enhanced	regulation	of financial	services	companies	and	to	enhance	the	liquidity	and	solvency	of financial	institutions	and	markets.	We	also	expect	in	many	cases	more	intense scrutiny	from	our	bank	supervisors	in	the	examination	process	and	more aggressive	enforcement	of	laws	and	regulations	on	both	the	federal	and	state levels.	Compliance	with	regulations	and	other	supervisory	initiatives	will	likely increase	our	costs	and	reduce	our	revenue,	and	may	limit	our	ability	to	pursue certain	desirable	business	opportunities.

The	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	(Dodd- Frank)	mandates	the	most	wide-ranging	overhaul	of	financial	industry	regulation in	decades.	Dodd-Frank	was	signed	into	law	on	July	21,	2010.	Many	parts	of	the law	are	now	in	effect	and	others	are	now	in	the	implementation	stage,	which	is likely	to	continue	for	several	years.	The	law	requires	that	regulators,	some	of which	are	new	regulatory	bodies	created	by	Dodd-Frank,	draft,	review	and approve	more	than	300	implementing	regulations	and	conduct	numerous	studies that	are	likely	to	lead	to	more	regulations,	a	process	that,	while	well	underway,	is proceeding	somewhat	slower	than	originally	anticipated,	thus	extending	the uncertainty	surrounding	the	ultimate	impact	of	Dodd-Frank	on	us.

A	number	of	reform	provisions	are	likely	to	significantly	impact	the	ways	in which	banks	and	bank	holding	companies,	including	PNC,	do	business. •	Newly	created	regulatory	bodies	include	the	Consumer	Financial Protection	Bureau	(CFPB)	and	the	Financial	Stability	Oversight Council	(FSOC).	The	CFPB	has	been	given	authority	to	regulate consumer	financial	products	and	services	sold	by	banks	and	non-bank companies	and	to	supervise	banks	with	assets	of	more	than	$10	billion and	their	affiliates	for	compliance	with	Federal	consumer	protection laws.	The	FSOC	has	been	charged	with

identifying	systemic	risks,	promoting	stronger	financial	regulation	and identifying	those	non-bank	companies	that	are	"systemically important"	and	thus	should	be	subject	to	regulation	by	the	Federal Reserve.	In	addition,	in	extraordinary	cases	and	together	with	the Federal	Reserve,	the	FSOC	could	break	up	financial	firms	that	are deemed	to	present	a	grave	threat	to	the	financial	stability	of	the	United States.

•	Dodd-Frank	(through	provisions	commonly	known	as	the	"Volcker Rule")	prohibits	banks	and	their	affiliates	from	engaging	in	some	types of	proprietary	trading	and	restricts	the	ability	of	banks	and	their affiliates	to	sponsor,	invest	in	or	have	other	financial	relationships	with private	equity	or	hedge	funds.	In	October	2011,	four	of	the	five agencies	with	authority	for	rulemaking	issued	proposed	rules	to implement	the	Volcker	Rule.	In	January	2012,	the	fifth	agency	issued substantially	similar	proposed	rules.	The	rules	set	forth	a	complex	and detailed	compliance,	reporting	and	monitoring	program	for	large banks,	and	seek	comments	on	numerous	questions.	Although	the comment	deadline	expired	in	February	2012	on	the	four	agency proposals	(and	later	in	2012	on	the	single	agency	proposal),	the agencies	have	not	yet	issued	final	rules.	The	timing	and	content	of	the final	rules	remain	uncertain.	The	manner	in	which	the	questions	posed by	the	proposed	rules	are	addressed	by	the	agencies	will	have	an important	influence	on	the	impact	of	the	final	rules	on	PNC.

Although	PNC	no	longer	has	a	designated	proprietary	trading operation,	the	proposed	rules	broadly	define	what	constitutes potentially	prohibited	"proprietary	trading,"	thereby	making	the	scope of	the	statutory	and	regulatory	exemptions	for	trading	activities, including	the	exemptions	for	hedging	activities	and	customer	trading, all	the	more	important.	Until	more	is	known	about	how	the	final	rules will	define	"proprietary	trading"	and	the	scope	of	permissible	trading activities,	it	is	not	possible	to	determine	the	impact	to	PNC	of	the proprietary	trading	prohibition.	However,	any	meaningful	limitation	on PNC's	ability	to	hedge	its	risks	in	the	ordinary	course	or	to	trade	on behalf	of	customers	would	likely	be	adverse	to	PNC's	business	and results	of	operations.	In	addition,	the	proposed	rules	contain	extensive compliance	and	recordkeeping	requirements	related	to	permissible trading	activities.	Such	requirements,	if	included	in	a	final	rule,	could increase	the	costs	of	hedging	or	other	types	of	permissible	transactions and	potentially	result	in	PNC	not	engaging	in	certain	transactions,	or types	of	transactions,	in	which	we	would	otherwise	engage.

With	respect	to	the	restrictions	on	private	equity	and	hedge	fund activities,	as	of	December	31,	2012,	PNC	held	interests	in	such	funds likely	to	be	covered	totaling	approximately	$859	million	including three

sponsored	funds	with	total	invested	capital	of	approximately	$389 million.	PNC	expects	that	over	time	it	will	need	to	eliminate	these investments	and	cease	sponsoring	these	funds,	although	it	is	likely	that at	least	some	of	these	amounts	will	reduce	over	time	in	the	ordinary course	before	compliance	is	required,	and	the	Volcker	Rule	also permits	extensions	of	the	compliance	date	under	some	circumstances. A	forced	sale	of	some	of	these	investments	due	to	the	Volcker	Rule could	result	in	PNC	receiving	less	value	than	it	would	otherwise	have received.	Depending	on	the	provisions	of	the	final	rule,	it	is	possible that	other	structures	through	which	PNC	conducts	business,	such	as operating	subsidiaries,	joint	ventures	or	securitization	vehicles,	but	that are	not	typically	referred	to	as	private	equity	or	hedge	funds,	could	be restricted,	with	an	impact	that	cannot	now	be	evaluated. •	Pursuant	to	Dodd-Frank,	in	December	2011	the	Federal	Reserve requested	comment	on	proposed	rules	that	would	establish	enhanced prudential	standards	governing	U.S.	bank	holding	companies	with	$50 billion	or	more	in	consolidated	total	assets	("covered	companies").	The proposed	enhanced	prudential	standards	would	include,	among	other things,	heightened	liquidity	risk	management	standards;	new	standards governing	oversight	by	a	covered	company's	board	of	directors	and board-level	risk	committee;	and	new	limits	on	the	aggregate	amount	of credit	exposure	a	covered	company	may	have	to	any	single	customer or	counterparty.	These	proposed	rules	also	would	establish	an	"early remediation"	regime	for	covered	companies,	under	which	the	Federal Reserve	would	be	required	to	take	increasingly	stringent	actions against	a	covered	company	as	its	financial	condition	or	risk management	deteriorated	as	reflected	by	the	company's	current	or projected	post-stress	capital	levels,	compliance	with	supervisory liquidity	and	risk	management	standards	and,	in	some	instances, market-based	indicators,	such	as	credit	default	swap	spreads.	The comment	period	on	the	proposed	rules	closed	in	March	2012.	Final rules,	however,	have	not	been	issued,	and	as	such	the	impact	of	these rules	cannot	now	be	evaluated.

•	In	addition,	the	relevant	regulatory	agencies	have	proposed	rules	to implement	the	Dodd-Frank	provisions	requiring	retention	of	risk	by certain	securitization	participants	through	holding	interests	in	the securitization	vehicles,	but	the	rules	are	not	yet	finalized	or	effective. As	a	result,	the	ultimate	impact	of	these	Dodd-Frank	provisions	on PNC	remains	unpredictable.	That	impact	on	PNC	could	be	direct,	by requiring	PNC	to	hold	interests	in	a	securitization	vehicle	or	other assets	that	represent	a	portion	of	the	credit	risk	of	the	assets	held	by	the securitization	vehicle,	or	indirect,	by	impacting	markets	in	which

PNC	participates	and	increasing	the	costs	associated	with	mortgage assets	that	we	originate.	Since	the	beginning	of	the	financial	crisis, there	has	been	and	continues	to	be	substantially	less	private	(that	is, non-government	backed)	securitization	activity	than	had	previously been	the	case.	It	is	unclear	at	present	whether	and	to	what	extent	the private	securitization	markets	will	rebound.	In	recent	years,	PNC	has only	engaged	to	a	limited	extent	in	securitization	transactions	under circumstances	where	we	might	expect	to	be	required	to	retain additional	risk	on	our	balance	sheet	as	a	result	of	implementation	of these	Dodd-Frank	provisions.	If	the	market	for	private	securitizations rebounds	and	PNC	decides	to	increase	its	participation	in	that	market, we	would	likely	be	required	under	the	regulations	to	retain	more	risk than	would	otherwise	have	been	the	case,	and	as	a	result	could	be required	to	consolidate	certain	securitization	vehicles	on	our	balance sheet,	with	currently	an	uncertain	financial	impact. •	On	the	indirect	impact	side,	PNC	originates	loans	of	a	variety	of	types, including	residential	and	commercial	mortgages,	credit	card,	auto,	and student,	that	historically	have	commonly	been	securitized,	and	PNC	is also	a	significant	servicer	of	residential	and	commercial	mortgages held	by	others,	including	securitization	vehicles.	PNC	anticipates	that the	risk	retention	requirements	will	impact	the	market	for	loans	of types	that	historically	have	been	securitized,	potentially	affecting	the volumes	of	loans	securitized,	the	types	of	loan	products	made available,	the	terms	on	which	loans	are	offered,	consumer	and	business demand	for	loans,	and	the	need	for	third-party	loan	servicers.	It	should be	noted	that	the	risk	retention	rules	themselves	could	have	the	effect of	slowing	the	rebound	in	the	securitization	markets.	One	effect	of having	substantially	reduced	opportunities	to	securitize	loans	would likely	be	a	reduction	in	the	willingness	of	banks,	including	PNC,	to make	loans	due	to	balance	sheet	management	requirements.	Any	of these	potential	impacts	of	the	Dodd-Frank	risk	retention	rules	could affect	the	way	in	which	PNC	conducts	its	business,	including	its product	offerings,	and	could	also	affect	PNC's	revenue	and profitability,	although,	as	noted	above,	not	in	ways	that	are	currently predictable.

•	Title	VII	of	Dodd-Frank	imposes	new	comprehensive	and	significant restrictions	on	the	activities	of	financial	institutions	that	are	active	in the	U.S.	over-the-counter	("OTC")	derivatives	and	foreign	exchange markets.	Title	VII	(i)	requires	the	registration	of	both	"swap	dealers" and	"major	swap	participants"	with	one	or	both	of	the	Commodity Futures	Trading	Commission	("CFTC")	(in	the	case	of	non	security- based	swaps)	and	the	Securities	Exchange	Commission	("SEC")	(in	the case	of	security-based	swaps);	(ii)	requires	that	most

standardized	swaps	be	centrally	cleared	through	a	regulated	clearing house	and	traded	on	a	centralized	exchange	or	swap	execution	facility; (iii)	subjects	swap	dealers	and	major	swap	participants	to	capital	and margin	requirements	in	excess	of	current	practice;	(iv)	subjects	swap dealers	and	major	swap	participants	to	comprehensive	new recordkeeping	and	real-time	public	reporting	requirements; (v)	subjects	swap	dealers	and	major	swap	participants	to	new	business conduct	requirements	(including	an	obligation	to	provide	daily	marks to	counterparties	and	to	disclose	to	counterparties	(pre-execution)	the material	risks	associated	with	a	swap	and	material	incentives	and conflicts	of	interest	associated	with	the	swap);	and	(vi)	imposes	special duties	on	swap	dealers	and	major	swap	participants	when	transacting	a swap	with	a	"special	entity"	(e.g.,	governmental	agency	(federal,	state or	local)	or	political	subdivision	thereof,	pension	plan	or	endowment). Based	on	the	definition	of	a	"swap	dealer"	under	Title	VII,	PNC	Bank, N.A.	registered	with	the	CFTC	as	a	swap	dealer	effective	January	31, 2013.	As	a	result,	PNC	Bank,	N.A.	will	be	subject	to	all	of	the	above- described	restrictions	and	the	CFTC	will	have	a	meaningful supervisory	role	with	respect	to	PNC	Bank,	N.A.'s	derivatives	and foreign	exchange	businesses.

The	above	described	requirements	will	collectively	impose	potentially significant	implementation	and	ongoing	compliance	burdens	on	PNC and	will	introduce	additional	legal	risk	(including	as	a	result	of	newly applicable	antifraud	and	anti-manipulation	provisions	and	private	rights of	action).

•	New	provisions	under	Dodd-Frank	concerning	the	applicability	of	state consumer	protection	laws	to	national	banks,	such	as	PNC	Bank,	N.A., became	effective	in	2011.	Questions	may	arise	as	to	whether	certain state	consumer	financial	laws	that	may	have	previously	been preempted	by	federal	law	are	no	longer	preempted	as	a	result	of	the effectiveness	of	these	new	provisions.	Depending	on	how	such questions	are	resolved,	we	may	experience	an	increase	in	state-level regulation	of	our	retail	banking	business	and	additional	compliance obligations,	revenue	impacts	and	costs.	In	addition,	provisions	under Dodd-Frank	that	also	took	effect	in	2011	permit	state	attorneys	general to	bring	civil	actions	against	national	banks,	such	as	PNC	Bank,	N.A., for	violations	of	law,	as	well	as	regulations	issued	by	the	CFPB. •	Dodd-Frank	requires	bank	holding	companies	that	have	$50	billion	or more	in	assets,	such	as	PNC,	to	periodically	submit	to	the	Federal Reserve,	the	FDIC	and	the	FSOC	a	resolution	plan	that	includes, among	other	things,	an	analysis	of	how	the	company	could	be	resolved in	a	rapid	and	orderly	fashion	if	the	company	were	to	fail	or	experience material	financial

distress.	The	Federal	Reserve	and	the	FDIC	may	jointly	impose restrictions	on	PNC,	including	additional	capital	requirements	or limitations	on	growth,	if	the	agencies	jointly	determine	that	the company's	plan	is	not	credible	or	would	not	facilitate	a	rapid	and orderly	resolution	of	PNC	under	the	U.S.	Bankruptcy	Code,	and additionally	could	require	PNC	to	divest	assets	or	take	other	actions	if we	did	not	submit	an	acceptable	resolution	plan	within	two	years	after any	such	restrictions	were	imposed.	The	FDIC	also	has	adopted	a	rule that	requires	large	insured	depository	institutions,	including	PNC Bank,	N.A.,	to	periodically	submit	a	resolution	plan	to	the	FDIC	that includes,	among	other	things,	an	analysis	of	how	the	institution	could be	resolved	under	the	Federal	Deposit	Insurance	Act	(FDI	Act)	in	a manner	that	protects	depositors	and	limits	losses	or	costs	to	creditors	of the	bank	in	accordance	with	the	FDI	Act.	PNC	and	PNC	Bank,	N.A. must	file	their	first	plans	under	these	rules	by	December	31,	2013. Depending	on	how	the	agencies	conduct	their	review	of	the	resolution plans	submitted	by	PNC	and	PNC	Bank,	N.A.,	it	is	possible	that	these requirements	could	affect	the	ways	in	which	PNC	structures	and conducts	its	business	and	result	in	higher	compliance	and	operating costs.

•	Other	provisions	of	Dodd-Frank	will	affect	regulatory	oversight, holding	company	capital	requirements,	and	residential	mortgage products.

While	much	of	how	the	Dodd-Frank	and	other	financial	industry	reforms	will change	our	current	business	operations	depends	on	the	specific	regulatory promulgations	and	interpretations,	many	of	which	have	yet	to	be	released	or finalized,	it	is	clear	that	the	reforms,	both	under	Dodd-Frank	and	otherwise,	will have	a	significant	effect	on	our	entire	industry.	Although	Dodd-Frank	and	other reforms	will	affect	a	number	of	the	areas	in	which	we	do	business,	it	is	not	clear at	this	time	the	full	extent	of	the	adjustments	that	will	be	required	and	the	extent to	which	we	will	be	able	to	adjust	our	businesses	in	response	to	the	requirements. Although	it	is	difficult	to	predict	the	magnitude	and	extent	of	these	effects	at	this stage,	we	believe	compliance	with	Dodd-Frank	and	its	implementing	regulations and	other	initiatives	will	continue	to	negatively	impact	revenue,	at	least	to	some extent,	and	increase	the	cost	of	doing	business,	both	in	terms	of	transition expenses	and	on	an	ongoing	basis,	and	may	also	limit	our	ability	to	pursue certain	desirable	business	opportunities.

# New	capital	and	liquidity	standards	will	result	in	banks	and	bank	holding companies	needing	to	maintain	more	and	higher	quality	capital	and	greater liquidity	than	has	historically	been	the	case.

New	and	evolving	capital	and	liquidity	standards	will	have	a	significant	effect	on banks	and	bank	holding	companies,	including	PNC.	These	evolving	standards include	the

proposals	issued	by	the	U.S.	banking	agencies	in	June	2012	to	implement	the Basel	III	capital	framework	in	the	United	States	and	revise	the	framework	for	the risk-weighting	of	assets	under	Basel	I.	The	Basel	III	proposed	rules	would, among	other	things,	narrow	the	definition	of	regulatory	capital,	require	the phase-out	of	trust	preferred	securities	from	Tier	1	regulatory	capital,	establish	a new	Tier	1	common	capital	requirement	for	banking	organizations	and	revise	the capital	levels	at	which	a	bank	would	be	subject	to	prompt	corrective	action.	As of	December	31,	2012,	PNC	had	$331	million	of	trust	preferred	securities included	in	Tier	1	capital	which,	under	these	rules	and	Dodd-Frank,	will	no longer	qualify	as	Tier	1	capital	over	time	to	the	extent	they	remain	outstanding. The	proposed	rules	also	would	require	that	unconsolidated	investments	in financial	entities	(potentially	including	PNC's	investment	in	BlackRock),	as	well as	mortgage	servicing	rights	and	deferred	tax	assets,	above	certain	thresholds	be deducted	from	regulatory	capital	and	significantly	limit	the	extent	to	which minority	interests	in	consolidated	subsidiaries	(including	minority	interests	in the	form	of	REIT	preferred	securities)	may	be	included	in	regulatory	capital.	As of	December	31,	2012,	PNC	had	approximately	$1.4	billion	of	REIT	preferred securities	outstanding.	PNC	has	submitted	the	necessary	redemption	notice	to redeem	$375	million	of	this	amount	on	March	15,	2013,	as	discussed	further	in the	Capital	and	Liquidity	Actions	portion	of	the	Executive	Summary	section	in Item	7	of	this	Report.	In	addition,	the	proposed	rules	would	remove	the	filter that	currently	excludes	unrealized	gains	and	losses	(other	than	those	resulting from	other-than-temporary	impairments)	on	available	for	sale	debt	securities from	affecting	regulatory	capital,	which	could	increase	the	volatility	of regulatory	capital	of	banking	organizations,	including	PNC.	When	fully	phased- in	on	January	1,	2019,	the	Basel	III	rules	would	require	that	banking organizations	maintain	a	minimum	Tier	1	common	ratio	of	4.5%,	a	Tier	1 capital	ratio	of	6.0%,	a	total	capital	ratio	of	8.0%	and	a	leverage	ratio	of	4%. Moreover,	the	proposed	rules,	when	fully	phased-in,	would	require	banking organizations,	including	PNC,	to	maintain	a	minimum	Tier	1	common	ratio	of 7.0%,	a	Tier	1	capital	ratio	of	8.5%,	and	a	total	capital	ratio	of	10.5%	to	avoid limitations	on	capital	distributions	(including	common	stock	dividends	and	share repurchases)	and	certain	discretionary	incentive	compensation	payments.	For banking	organizations	subject	to	the	Basel	II	advanced	approaches	(such	as PNC),	these	levels	could	be	supplemented	by	an	additional	countercyclical capital	buffer	of	up	to	an	additional	2.5%	during	periods	of	excessive	credit growth,	although	this	buffer	is	proposed	to	initially	be	set	at	zero	in	the	United States.	Such	organizations	would	also	be	subject	to	a	new	supplementary leverage	ratio	that	would	take	into	account	certain	off-balance	sheet	items.

The	proposed	rules	issued	in	June	2012	that	would	revise	the	Basel	I	risk- weighting	framework	(referred	to	as	the	standardized	approach)	and	the	Basel	II risk-weighting	framework	(referred	to	as	the	advanced	approaches)	would replace	the	use	of	credit	ratings	with	alternative

methodologies	for	assessing	creditworthiness	and	establish	a	new	framework (referred	to	as	the	Simplified	Supervisory	Framework	Approach)	for	risk- weighting	securitization	exposures	(such	as	privately	issued	mortgage-backed securities	and	asset-backed	securities).	The	standardized	approach	also	would, among	other	things,	significantly	revise	the	risk	weight	assigned	to	residential mortgages	(with	risk	weights	changing	from	between	50%	to	100%	to	between 35%	and	200%)	and	increase	the	risk	weight	applicable	to	certain	types	of commercial	real	estate	loans	under	Basel	I.	The	advanced	approaches	rule would,	among	other	things,	significantly	alter	the	methodology	for	determining counterparty	credit	risk	weights,	including	the	establishment	of	a	credit valuation	adjustment	for	counterparty	risk	in	over-the-counter	(OTC)	derivative transactions,	under	Basel	II.

The	Basel	III	framework	adopted	by	the	Basel	Committee	also	includes	new short-term	liquidity	standards	(the	Liquidity	Coverage	Ratio)	and	long-term funding	standards	(the	Net	Stable	Funding	Ratio).	The	Liquidity	Coverage	Ratio, which	is	scheduled	to	begin	to	take	effect	on	January	1,	2015	and	be	fully	phased in	by	January	1,	2019,	is	designed	to	ensure	that	banking	organizations	maintain an	adequate	level	of	cash,	or	other	high	quality	and	unencumbered	liquid	assets that	can	readily	be	converted	to	cash,	to	meet	estimated	liquidity	needs	in	a	stress scenario	lasting	30	days.	The	Basel	Committee	has	defined	the	types	of	assets that	would	qualify	as	high	quality	liquid	assets,	and	also	has	established	various assumptions	regarding	cash	outflows	and	inflows	during	the	30-day	stress period,	for	purposes	of	the	Liquidity	Coverage	Ratio.	The	Net	Stable	Funding Ratio	is	designed	to	promote	a	stable	maturity	structure	of	assets	and	liabilities of	banking	organizations	over	a	one-year	time	horizon.	The	Net	Stable	Funding Ratio	is	scheduled	to	take	effect	by	January	1,	2018	but	continues	to	undergo review	by	the	Basel	Committee.

In	November	2011,	the	Basel	Committee	also	adopted	a	framework	that	would require	globally	systemically	important	banks	("G-SIBs")	to	maintain	additional Tier	1	common	capital	ranging	between	1.0%	to	2.5%	of	risk-weighted	assets, with	the	actual	required	amount	varying	based	on	the	firm's	global	systemic importance	as	determined	using	five	criteria	(size,	interconnectedness,	lack	of substitutability,	cross-jurisdictional	activity,	and	complexity).	The	Federal Reserve	has	indicated	that	it	expects	to	propose	a	capital	surcharge	in	the	United States	based	on	the	Basel	Committee's	G-SIB	framework.	While	these	rules have	not	yet	been	proposed,	and	the	identity	of	the	banking	organizations	that would	be	subject	to	a	surcharge	as	a	G-SIB	definitively	determined,	PNC believes	that	it	is	unlikely	to	be	deemed	a	G-SIB	based	on	the	criteria	included	in the	Basel	Committee's	framework.	Dodd-Frank	directs	the	Federal	Reserve	to establish	heightened	risk-based	and	leverage	capital	requirements	and	liquidity requirements	for	bank	holding	companies,	like	PNC,	that	have	$50	billion	or more	in	assets.	The	Basel	Committee	also	has	adopted	an	analytical	framework for	national	jurisdictions	to	use	in	determining	whether	to	apply	a	capital surcharge	to

firms	that	may	be	systemically	important	on	a	domestic	basis	("D-SIBs"),	but that	are	not	G-SIBs.	The	Federal	Reserve	has	stated	that	it	is	still	considering whether	to	impose	an	additional	capital	surcharge	on	bank	holding	companies that	have	$50	billion	or	more	in	consolidated	total	assets,	but	that	are	not	subject to	a	G-SIB	surcharge.

Because	proposals	by	the	U.S.	agencies	to	implement	the	Basel	III	capital standards	and	revise	the	Basel	I	risk-weighting	framework	have	not	been finalized,	and	any	additional	heightened	capital	or	liquidity	standards	that	may be	established	by	the	Federal	Reserve	under	Basel	III	or	Dodd-Frank	(such	as,	for example,	a	D-SIB	surcharge)	remain	subject	to	rulemaking	in	the	U.S.,	the	full effect	of	these	standards	on	PNC's	regulatory	capital	and	liquidity,	both	during and	after	any	applicable	phase-in	periods,	is	uncertain	at	this	time.

The	need	to	maintain	more	and	higher	quality	capital,	as	well	as	greater	liquidity, going	forward	than	historically	has	been	required	could	limit	PNC's	business activities,	including	lending,	and	its	ability	to	expand,	either	organically	or through	acquisitions.	It	could	also	result	in	PNC	taking	steps	to	increase	its capital	that	may	be	dilutive	to	shareholders	or	being	limited	in	its	ability	to	pay dividends	or	otherwise	return	capital	to	shareholders,	or	selling	or	refraining from	acquiring	assets,	the	capital	requirements	for	which	are	inconsistent	with the	assets'	underlying	risks.	In	addition,	the	new	liquidity	standards	could require	PNC	to	increase	its	holdings	of	highly	liquid	short-term	investments, thereby	reducing	PNC's	ability	to	invest	in	longer-term	or	less	liquid	assets	even if	more	desirable	from	a	balance	sheet	management	perspective.	Moreover, although	these	new	requirements	are	being	phased	in	over	time,	U.S.	federal banking	agencies	have	been	taking	into	account	expectations	regarding	the ability	of	banks	to	meet	these	new	requirements,	including	under	stressed conditions,	in	approving	actions	that	represent	uses	of	capital,	such	as	dividend increases,	share	repurchases	and	acquisitions.

# Our	lending	and	servicing	businesses	and	the	value	of	the	loans	and	debt securities	we	hold	may	be	adversely	affected	by	economic	conditions, including	a	reversal	or	slowing	of	the	current	moderate	recovery. Downward	valuation	of	debt	securities	could	also	negatively	impact	our capital	position.

Given	the	high	percentage	of	our	assets	represented	directly	or	indirectly	by loans,	and	the	importance	of	lending	to	our	overall	business,	weak	economic conditions	are	likely	to	have	a	negative	impact	on	our	business	and	our	results	of operations.	This	could	adversely	impact	loan	utilization	rates	as	well	as delinquencies,	defaults	and	customer	ability	to	meet	obligations	under	the	loans. This	is	particularly	the	case	during	the	period	in	which	the	aftermath	of recessionary	conditions	continues	and	the	positive	effects	of	economic	recovery appear	to	be	slow	to	materialize	and	unevenly	spread	among	our	customers.

Further,	weak	economic	conditions	would	likely	have	a	negative	impact	on	our business,	our	ability	to	serve	our	customers,	and	our	results	of	operations.	Such conditions	are	likely	to	lead	to	increases	in	the	number	of	borrowers	who become	delinquent	or	default	or	otherwise	demonstrate	a	decreased	ability	to meet	their	obligations	under	their	loans.	This	would	result	in	higher	levels	of nonperforming	loans,	net	charge-offs,	provision	for	credit	losses	and	valuation adjustments	on	loans	held	for	sale.	The	value	to	us	of	other	assets	such	as investment	securities,	most	of	which	are	debt	securities	or	other	financial instruments	supported	by	loans,	similarly	would	be	negatively	impacted	by widespread	decreases	in	credit	quality	resulting	from	a	weakening	of	the economy.

We	have	historically	not	considered	government	insured	or	guaranteed	loans	to be	higher	risk	loans	as	defaults	are	materially	mitigated	by	payments	of insurance	or	guaranteed	amounts	for	approved	claims	by	the	applicable government	agency.	While	the	level	of	claim	denials	by	government	agencies, including	the	Department	of	Housing	and	Urban	Development,	has	historically been	low,	if	financial	conditions	prompt	government	agencies	to	deny	or	curtail an	increasing	number	of	these	claims,	we	could	face	additional	losses	in	our lending	business.	In	addition,	in	the	event	that	submitted	claims	are	denied	or curtailed	as	a	result	of	our	failure	as	a	servicer	of	the	loan	to	adhere	to	applicable agency	servicing	guidelines,	we	will	be	required	to	remit	the	difference	between the	claims	proceeds	that	should	have	been	received	and	the	claim	amounts actually	received	to	the	holder	of	the	loan.

# A	failure	to	sustain	reduced	amounts	of	the	provision	for	credit	losses, which	has	benefitted	results	of	operations	in	recent	periods,	could	result	in decreases	in	net	income.

As	was	typical	in	the	banking	industry,	the	economic	downturn	that	started	in 2007	resulted	in	PNC	experiencing	high	levels	of	provision	for	credit	losses.	In 2009,	PNC	reported	provision	for	credit	losses	totaling	$3.9	billion. Subsequently,	in	part	due	to	improvement	in	economic	conditions,	as	well	as actions	taken	by	PNC	to	manage	its	portfolio,	PNC's	provision	for	credit	losses has	declined	substantially,	to	$2.5	billion	in	2010,	$1.2	billion	in	2011	and	$1.0 billion	in	2012.	This	decline	in	provision	for	credit	losses	has	been	a	major contributor	to	PNC's	ability	to	maintain	and	grow	its	net	income	during	this period.	As	the	provision	for	credit	losses	stabilizes,	there	may	not	be	as	much opportunity	as	there	has	been	for	declining	provision	to	help	PNC	maintain	and grow	net	income.	In	addition,	if	PNC's	provision	for	credit	losses	were	to	rise back	towards	levels	experienced	during	the	height	of	the	economic	downturn,	it would	have	an	adverse	effect	on	PNC's	net	income	and	could	result	in	lower levels	of	net	income	than	PNC	has	reported	in	recent	periods.

# Our	regional	concentrations	make	us	particularly	at	risk	to	adverse economic	conditions	in	our	primary	retail	banking	footprint.

Although	many	of	our	businesses	are	national	in	scope,	our	retail	banking business	is	concentrated	within	our	retail	branch	network	footprint,	located principally	in	our	primary	geographic	markets.	Thus,	we	are	particularly vulnerable	to	adverse	changes	in	economic	conditions	in	the	Mid-Atlantic, Midwest,	and	Southeast	regions.

# Our	business	and	performance	are	vulnerable	to	the	impact	of	volatility	in debt	and	equity	markets.

As	most	of	our	assets	and	liabilities	are	financial	in	nature,	we	tend	to	be particularly	sensitive	to	the	performance	of	the	financial	markets.	Turmoil	and volatility	in	U.S.	and	global	financial	markets,	such	as	that	experienced	during the	recent	financial	crisis,	can	be	a	major	contributory	factor	to	overall	weak economic	conditions,	leading	to	some	of	the	risks	discussed	above,	including	the impaired	ability	of	borrowers	and	other	counterparties	to	meet	obligations	to	us. Financial	market	volatility	also	can	have	some	of	the	following	adverse	effects on	PNC	and	our	business	and	financial	performance.

•	It	can	affect	the	value	or	liquidity	of	our	on-balance	sheet	and	off- balance	sheet	financial	instruments.

•	It	can	affect	the	value	of	servicing	rights,	including	those	we	carry	at fair	value.

•	It	can	affect	our	ability	to	access	capital	markets	to	raise	funds necessary	to	support	our	businesses	and	maintain	our	overall	liquidity position.	Inability	to	access	capital	markets	as	needed,	or	at	cost effective	rates,	could	adversely	affect	our	liquidity	and	results	of operations.

•	It	can	affect	the	value	of	the	assets	that	we	manage	or	otherwise administer	for	others	or	the	assets	for	which	we	provide	processing	and information	services.	Although	we	are	not	directly	impacted	by changes	in	the	value	of	such	assets,	decreases	in	the	value	of	those assets	would	affect	related	fee	income	and	could	result	in	decreased demand	for	our	services.

•	It	can	affect	the	required	funding	of	our	pension	obligations	to	the extent	that	the	value	of	the	assets	supporting	those	obligations	drops below	minimum	levels.

•	In	general,	it	can	impact	the	nature,	profitability	or	risk	profile	of	the financial	transactions	in	which	we	engage.

Volatility	in	the	markets	for	real	estate	and	other	assets	commonly	securing financial	products	has	been	and	is	likely	to	continue	to	be	a	significant contributor	to	overall	volatility	in	financial	markets.

# Our	business	and	financial	performance	is	impacted	significantly	by	market interest	rates	and	movements	in	those	rates.	The	monetary,	tax	and	other policies	of	governmental	agencies,	including	the	Federal	Reserve,	have	a significant	impact	on	interest	rates	and	overall	financial	market performance	over	which	we	have	no	control	and	which	we	may	not	be	able to	predict	adequately.

As	a	result	of	the	high	percentage	of	our	assets	and	liabilities	that	are	in	the	form of	interest-bearing	or	interest-related	instruments,	changes	in	interest	rates,	in	the shape	of	the	yield	curve	or	in	spreads	between	different	market	interest	rates	can have	a	material	effect	on	our	business,	our	profitability	and	the	value	of	our financial	assets	and	liabilities.	For	example:

•	Changes	in	interest	rates	or	interest	rate	spreads	can	affect	the difference	between	the	interest	that	we	earn	on	assets	and	the	interest that	we	pay	on	liabilities,	which	impacts	our	overall	net	interest	income and	profitability.

•	Such	changes	can	affect	the	ability	of	borrowers	to	meet	obligations under	variable	or	adjustable	rate	loans	and	other	debt	instruments,	and can,	in	turn,	affect	our	loss	rates	on	those	assets.

•	Such	changes	may	decrease	the	demand	for	interest	rate-based products	and	services,	including	loans	and	deposit	accounts. •	Such	changes	can	also	affect	our	ability	to	hedge	various	forms	of market	and	interest	rate	risk	and	may	decrease	the	profitability	or increase	the	risk	associated	with	such	hedges.

•	Movements	in	interest	rates	also	affect	mortgage	prepayment	speeds and	could	result	in	impairments	of	mortgage	servicing	assets	or otherwise	affect	the	profitability	of	such	assets.

The	monetary,	tax	and	other	policies	of	the	government	and	its	agencies, including	the	Federal	Reserve,	have	a	significant	impact	on	interest	rates	and overall	financial	market	performance.	These	governmental	policies	can	thus affect	the	activities	and	results	of	operations	of	banking	companies	such	as	PNC. An	important	function	of	the	Federal	Reserve	is	to	regulate	the	national	supply of	bank	credit	and	certain	interest	rates.	The	actions	of	the	Federal	Reserve influence	the	rates	of	interest	that	we	charge	on	loans	and	that	we	pay	on borrowings	and	interest-bearing	deposits	and	can	also	affect	the	value	of	our	on- balance	sheet	and	off-balance	sheet	financial	instruments.	Both	due	to	the impact	on	rates	and	by	controlling	access	to	direct	funding	from	the	Federal Reserve	Banks,	the	Federal	Reserve's	policies	also	influence,	to	a	significant extent,	our	cost	of	funding.	We	cannot	predict	the	nature	or	timing	of	future changes	in	monetary,	tax	and	other	policies	or	the	effects	that	they	may	have	on our	activities	and	financial	results.

# PNC	faces	legal	and	regulatory	risk	arising	out	of	its	residential	mortgage businesses.

Numerous	federal	and	state	governmental,	legislative	and	regulatory	authorities are	investigating	practices	in	the	business	of	mortgage	and	home	equity	loan lending	and	servicing	and	in	the	mortgage-related	insurance	and	reinsurance industries.	PNC	has	received	inquiries	from	governmental,	legislative	and regulatory	authorities	on	these	topics	and	is	responding	to	these	inquiries.	These inquiries	and	investigations	could	lead	to	administrative,	civil	or	criminal proceedings,	possibly	resulting	in	remedies	including	fines,	penalties,	restitution, alterations	in	our	business	practices	and	additional	expenses	and	collateral	costs.

In	addition	to	governmental	or	regulatory	inquiries	and	investigations,	PNC,	like other	companies	with	residential	mortgage	and	home	equity	loan	origination	and servicing	operations,	faces	the	risk	of	class	actions,	other	litigation	and	claims from:	the	owners	of,	investors	in,	or	purchasers	of	such	loans	originated	or serviced	by	PNC	(or	securities	backed	by	such	loans),	homeowners	involved	in foreclosure	proceedings	or	various	mortgage-related	insurance	programs, downstream	purchasers	of	homes	sold	after	foreclosure,	title	insurers,	and	other potential	claimants.	Included	among	these	claims	are	claims	from	purchasers	of mortgage	and	home	equity	loans	seeking	the	repurchase	of	loans	where	the	loans allegedly	breached	origination	covenants	and	representations	and	warranties made	to	the	purchasers	in	the	purchase	and	sale	agreements.

At	this	time	PNC	cannot	predict	the	ultimate	overall	cost	to	or	effect	upon	PNC from	governmental,	legislative	or	regulatory	actions	and	private	litigation	or claims	arising	out	of	residential	mortgage	and	home	equity	loan	lending, servicing	or	reinsurance	practices,	although	such	actions,	litigation	and	claims could,	individually	or	in	the	aggregate,	result	in	significant	expense.	See	Note	23 Legal	Proceedings	and	Note	24	Commitments	and	Guarantees	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	additional information	regarding	federal	and	state	governmental,	legislative	and	regulatory inquiries	and	investigations	and	additional	information	regarding	potential repurchase	obligations	relating	to	mortgage	and	home	equity	loans.

Moreover,	the	CFPB	recently	issued	final	regulations	that	impose	new requirements	relating	to	our	residential	mortgage	origination	practices	and servicing	practices.	These	regulations	are	not	yet	in	effect,	but	we	are	in	the processes	of	implementing	them.	We	cannot	predict	at	this	time	the	overall	cost of	implementing	these	requirements,	but	implementation	is	likely	to	result	in significant	expense.

The	issues	described	above	may	affect	the	value	of	our	ownership	interests, direct	or	indirect,	in	property	subject	to	foreclosure.	In	addition,	possible	delays in	the	schedule	for	processing	foreclosures	may	result	in	an	increase	in nonperforming	loans,	additional	servicing	costs	and	possible	demands	for contractual	fees	or	penalties	under	servicing	agreements.

There	is	also	a	continuing	risk	of	incurring	costs	related	to	further	remedial	and related	efforts	required	by	the	consent	orders	and	related	to	repurchase	requests arising	out	of	either	the	foreclosure	process	or	origination	issues.	Reputational damage	arising	out	of	this	industry-wide	inquiry	could	also	have	an	adverse effect	upon	our	existing	mortgage	and	home	equity	loan	business	and	could reduce	future	business	opportunities.

One	or	more	of	the	foregoing	could	adversely	affect	PNC's	business,	financial condition,	results	of	operations	or	cash	flows.

# We	grow	our	business	in	part	by	acquiring	other	financial	services companies	from	time	to	time,	and	these	acquisitions	present	a	number	of risks	and	uncertainties	related	both	to	the	acquisition	transactions themselves	and	to	the	integration	of	the	acquired	businesses	into	PNC	after closing.

Acquisitions	of	other	financial	services	companies,	financial	services	assets	and related	deposits	and	other	liabilities	present	risks	and	uncertainties	to	PNC	in addition	to	those	presented	by	the	nature	of	the	business	acquired.

In	general,	acquisitions	may	be	substantially	more	expensive	to	complete	than anticipated	(including	unanticipated	costs	incurred	in	connection	with	the integration	of	the	acquired	company).	Anticipated	benefits	(including	anticipated cost	savings	and	strategic	gains)	may	be	significantly	harder	or	take	longer	to achieve	than	expected	or	may	not	be	achieved	in	their	entirety	as	a	result	of unexpected	factors	or	events.

Our	ability	to	achieve	anticipated	results	from	acquisitions	is	often	dependent also	on	the	extent	of	credit	losses	in	the	acquired	loan	portfolios	and	the	extent	of deposit	attrition,	which	are,	in	part,	related	to	the	state	of	economic	and	financial markets.	Also,	litigation	and	governmental	investigations	that	may	be	filed	or commenced,	as	a	result	of	an	acquisition	or	otherwise,	could	impact	the	timing or	realization	of	anticipated	benefits	to	PNC.

Integration	of	an	acquired	company's	business	and	operations	into	PNC, including	conversion	of	the	acquired	company's	different	systems	and procedures,	may	take	longer	than	anticipated	or	be	more	costly	than	anticipated or	have	unanticipated	adverse	results	relating	to	the	acquired	company's	or PNC's	existing	businesses.	In	some	cases,	acquisitions	involve	our	entry	into new	businesses	or	new	geographic	or	other	markets,	and	these	situations	also present	risks	and	uncertainties	in	instances	where	we	may	be	inexperienced	in these	new	areas.

Our	ability	to	analyze	the	risks	presented	by	prospective	acquisitions,	as	well	as our	ability	to	prepare	in	advance	of	closing	for	integration,	depends,	in	part,	on the	information	we	can	gather	with	respect	to	the	target,	which	is	more	limited than	the	information	we	have	regarding	companies	we	already	own.

As	a	regulated	financial	institution,	our	ability	to	pursue	or	complete	attractive acquisition	opportunities	could	be	negatively	impacted	by	regulatory	delays	or other	regulatory	issues.	In	addition,	legal	and	regulatory	or	other	governmental proceedings,	claims,	investigations	or	inquiries	relating	to	pre-acquisition business	and	activities	of	acquired	companies	may	result	in	future	monetary judgments	or	settlements	or	other	remedies,	including	damages,	fines,	penalties, restitution	or	alterations	in	our	business	practices,	and	in	additional	expenses	and collateral	costs,	and	may	cause	reputational	harm	to	PNC.	The	processes	of integrating	acquired	businesses,	as	well	as	the	deconsolidation	of	divested businesses,	also	pose	many	additional	possible	risks	which	could	result	in increased	costs,	liability	or	other	adverse	consequences	to	PNC.	Note	23	Legal Proceedings	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report	describes	several	legal	proceedings	related	to	pre-acquisition	activities	of companies	we	have	acquired,	including	National	City.	Other	such	legal proceedings	may	be	commenced	in	the	future.

# The	soundness	of	other	financial	institutions	could	adversely	affect	us.

Financial	services	institutions	are	interrelated	as	a	result	of	trading,	clearing, counterparty,	and	other	relationships.	We	have	exposure	to	many	different industries	and	counterparties,	and	we	routinely	execute	transactions	with counterparties	in	the	financial	services	industry,	including	brokers	and	dealers, commercial	banks,	investment	banks,	mutual	and	hedge	funds,	and	other institutional	clients.	Many	of	these	transactions	expose	us	to	credit	risk	in	the event	of	default	of	our	counterparty	or	client.	In	addition,	our	credit	risk	may	be exacerbated	when	the	collateral	held	by	us	cannot	be	realized	upon	or	is liquidated	at	prices	that	are	not	sufficient	to	recover	the	full	amount	of	the	loan or	derivative	exposure	due	us.

# We	operate	in	a	highly	competitive	environment,	in	terms	of	the	products and	services	we	offer	and	the	geographic	markets	in	which	we	conduct business,	as	well	as	in	our	labor	markets	where	we	compete	for	talented employees.	Competition	could	adversely	impact	our	customer	acquisition, growth	and	retention,	as	well	as	our	credit	spreads	and	product	pricing, causing	us	to	lose	market	share	and	deposits	and	revenues.

We	are	subject	to	intense	competition	from	various	financial	institutions	as	well as	from	non-bank	entities	that	engage	in	many	similar	activities	without	being subject	to	bank	regulatory	supervision	and	restrictions.	This	competition	is described	in	Item	1	of	this	Report	under	"Competition."

In	all,	the	principal	bases	for	competition	are	pricing	(including	the	interest	rates charged	on	loans	or	paid	on	interest-bearing	deposits),	product	structure,	the range	of	products	and	services	offered,	and	the	quality	of	customer	service (including	convenience	and	responsiveness	to	customer	needs	and	concerns). The	ability	to	access	and	use	technology	is	an	increasingly	important competitive	factor	in	the	financial	services	industry,	and	it	is	a	critically important	component	to	customer	satisfaction	as	it	affects	our	ability	to	deliver the	right	products	and	services.

Another	increasingly	competitive	factor	in	the	financial	services	industry	is	the competition	to	attract	and	retain	talented	employees	across	many	of	our	business and	support	areas.	This	competition	leads	to	increased	expenses	in	many	business areas	and	can	also	cause	us	to	not	pursue	certain	business	opportunities.

A	failure	to	adequately	address	the	competitive	pressures	we	face	could	make	it harder	for	us	to	attract	and	retain	customers	across	our	businesses.	On	the	other hand,	meeting	these	competitive	pressures	could	require	us	to	incur	significant additional	expense	or	to	accept	risk	beyond	what	we	would	otherwise	view	as desirable	under	the	circumstances.	In	addition,	in	our	interest	rate	sensitive businesses,	pressures	to	increase	rates	on	deposits	or	decrease	rates	on	loans could	reduce	our	net	interest	margin	with	a	resulting	negative	impact	on	our	net interest	income.

# The	performance	of	our	asset	management	businesses	may	be	adversely impacted	by	overall	economic	and	market	conditions	as	well	as	the	relative performance	of	our	products	compared	with	the	offerings	by	competitors.

Asset	management	revenue	is	primarily	based	on	a	percentage	of	the	value	of	the assets	and	thus	is	impacted	by	general	changes	in	market	valuations,	customer preferences	and	needs.	In	addition,	investment	performance	is	an	important factor	influencing	the	level	of	assets.	Poor	investment	performance	could	impair revenue	and	growth	as	existing	clients	might	withdraw	funds	in	favor	of	better performing	products.	Additionally,	the	ability	to	attract	funds	from	existing	and new	clients	might	diminish.	Overall	economic	conditions	may	limit

the	amount	that	customers	are	able	or	willing	to	invest	as	well	as	the	value	of	the assets	they	do	invest.

The	failure	or	negative	performance	of	products	of	other	financial	institutions could	lead	to	a	loss	of	confidence	in	similar	products	offered	by	us	without regard	to	the	performance	of	our	products.	Such	a	negative	contagion	could	lead to	withdrawals,	redemptions	and	liquidity	issues	in	such	products	and	have	a material	adverse	impact	on	our	assets	under	management	and	asset	management revenues	and	earnings.

# As	a	regulated	financial	services	firm,	we	are	subject	to	numerous governmental	regulations	and	to	comprehensive	examination	and supervision	by	regulators,	which	affect	our	business	as	well	as	our competitive	position.

PNC	is	a	bank	holding	company	and	a	financial	holding	company	and	is	subject to	numerous	governmental	regulations	involving	both	its	business	and organization.

Our	businesses	are	subject	to	regulation	by	multiple	bank	regulatory	bodies	as well	as	multiple	securities	industry	regulators.	Applicable	laws	and	regulations restrict	our	ability	to	repurchase	stock	or	to	receive	dividends	from	subsidiaries that	operate	in	the	banking	and	securities	businesses	and	impose	capital	adequacy requirements.	PNC's	ability	to	service	its	obligations	is	dependent	on	the	receipt of	dividends	and	advances	from	its	subsidiaries.	Applicable	laws	and	regulations also	restrict	permissible	activities	and	investments	and	require	compliance	with protections	for	loan,	deposit,	brokerage,	fiduciary,	mutual	fund	and	other customers,	and	for	the	protection	of	customer	information,	among	other	things. We	are	also	subject	to	laws	and	regulations	designed	to	combat	money laundering,	terrorist	financing,	and	transactions	with	persons,	companies	or foreign	governments	designated	by	U.S.	authorities.	The	consequences	of noncompliance	can	include	substantial	monetary	and	nonmonetary	sanctions	as well	as	damage	to	our	reputation	and	businesses.

In	addition,	we	are	subject	to	comprehensive	examination	and	supervision	by banking	and	other	regulatory	bodies.	Examination	reports	and	ratings	(which often	are	not	publicly	available)	and	other	aspects	of	this	supervisory	framework can	materially	impact	the	conduct,	growth,	and	profitability	of	our	businesses.

Due	to	the	current	economic	environment	and	issues	facing	the	financial	services industry,	we	anticipate	that	there	will	be	new	legislative	and	regulatory initiatives	over	the	next	several	years,	including	many	focused	specifically	on banking	and	other	financial	services	in	which	we	are	engaged.	These	initiatives will	be	in	addition	to	the	actions	already	taken	by	Congress	and	the	regulators, through	enactment	of	the	Credit	CARD	Act,	the	SAFE	Act,	and	Dodd-Frank,	as well	as	changes	to	the	regulations	implementing	the	Real	Estate	Settlement Procedures	Act,	the	Federal	Truth	in	Lending	Act,

and	the	Electronic	Fund	Transfer	Act.	Legislative	and	regulatory	initiatives	have had	and	are	likely	to	continue	to	have	an	impact	on	the	conduct	of	our	business. This	impact	could	include	rules	and	regulations	that	affect	the	nature	and profitability	of	our	business	activities,	how	we	use	our	capital,	how	we compensate	and	incent	our	employees,	the	type	and	amount	of	instruments	we hold	for	liquidity	purposes,	and	other	matters	potentially	having	a	negative	effect on	our	overall	business	results	and	prospects.

Under	the	regulations	of	the	Federal	Reserve,	a	bank	holding	company	is expected	to	act	as	a	source	of	financial	and	managerial	strength	for	its	subsidiary banks.	As	a	result,	the	Federal	Reserve	could	require	PNC	to	commit	resources to	PNC	Bank,	N.A.	when	doing	so	is	not	otherwise	in	the	interests	of	PNC	or	its shareholders	or	creditors.

Our	ability	to	pay	dividends	to	shareholders	is	largely	dependent	on	dividends from	our	operating	subsidiaries,	principally	PNC	Bank,	N.A.	Banks	are	subject to	regulation	that	limits	and	governs	the	payout	of	dividends	to	their	holding companies.

We	discuss	these	and	other	regulatory	issues	applicable	to	PNC,	including	some particular	areas	of	current	regulatory	focus	or	concern,	in	the	Supervision	and Regulation	section	included	in	Item	1	of	this	Report	and	in	Note	22	Regulatory Matters	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report.

A	failure	to	comply,	or	to	have	adequate	policies	and	procedures	designed	to comply,	with	regulatory	requirements	could	expose	us	to	damages,	fines	and regulatory	penalties	and	other	regulatory	actions,	which	could	be	significant,	and could	also	injure	our	reputation	with	customers	and	others	with	whom	we	do business.

We	must	comply	with	generally	accepted	accounting	principles	established	by the	Financial	Accounting	Standards	Board,	accounting,	disclosure	and	other rules	set	forth	by	the	SEC,	income	tax	and	other	regulations	established	by	the U.S.	Treasury	and	state	and	local	taxing	authorities,	and	revenue	rulings	and other	guidance	issued	by	the	Internal	Revenue	Service,	which	affect	our financial	condition	and	results	of	operations.

Changes	in	accounting	standards,	or	interpretations	of	those	standards,	can impact	our	revenue	recognition	and	expense	policies	and	affect	our	estimation methods	used	to	prepare	the	consolidated	financial	statements.	Changes	in income	tax	regulations,	revenue	rulings,	revenue	procedures,	and	other	guidance can	impact	our	tax	liability	and	alter	the	timing	of	cash	flows	associated	with	tax deductions	and	payments.	New	guidance	often	dictates	how	changes	to	standards and	regulations	are	to	be	presented	in	our	consolidated	financial	statements,	as either	an	adjustment	to	beginning	retained	earnings	for	the	period	or	as	income or	expense	in	current

period	earnings.	In	some	cases,	changes	may	be	applied	to	previously	reported disclosures.

# The	determination	of	the	amount	of	loss	allowances	and	impairments	taken on	our	assets	is	highly	subjective,	and	inaccurate	estimates	could	materially impact	our	results	of	operations	or	financial	position.

The	determination	of	the	amount	of	loss	allowances	and	asset	impairments	varies by	asset	type	and	is	based	upon	our	periodic	evaluation	and	assessment	of known	and	inherent	risks	associated	with	the	respective	asset	class.	Such evaluations	and	assessments	are	revised	as	conditions	change	and	new information	becomes	available.	Management	updates	its	evaluations	regularly and	reflects	changes	in	allowances	and	impairments	in	operations	as	such evaluations	are	revised.	Although	we	have	policies	and	procedures	in	place	to determine	loss	allowance	and	asset	impairments,	due	to	the	substantial	subjective nature	of	this	area,	there	can	be	no	assurance	that	our	management	has accurately	assessed	the	level	of	impairments	taken	and	allowances	reflected	in our	financial	statements.	Furthermore,	additional	impairments	may	need	to	be taken	or	allowances	provided	for	in	the	future.	Historical	trends	may	not	be indicative	of	future	impairments	or	allowances.

# Our	asset	valuation	may	include	methodologies,	estimations	and assumptions	that	are	subject	to	differing	interpretations	and	this,	along with	market	factors	such	as	volatility	in	one	or	more	markets,	could	result in	changes	to	asset	valuations	that	may	materially	adversely	affect	our results	of	operations	or	financial	condition.

We	must	use	estimates,	assumptions,	and	judgments	when	assets	and	liabilities are	measured	and	reported	at	fair	value.	Assets	and	liabilities	carried	at	fair	value inherently	result	in	a	higher	degree	of	financial	statement	volatility.	Fair	values and	the	information	used	to	record	valuation	adjustments	for	certain	assets	and liabilities	are	based	on	quoted	market	prices	and/or	other	observable	inputs provided	by	independent	third-party	sources,	when	available.	When	such	third- party	information	is	not	available,	we	estimate	fair	value	primarily	by	using	cash flow	and	other	financial	modeling	techniques	utilizing	assumptions	such	as credit	quality,	liquidity,	interest	rates	and	other	relevant	inputs.	Changes	in underlying	factors	or	assumptions	in	any	of	the	areas	underlying	our	estimates could	materially	impact	our	future	financial	condition	and	results	of	operations.

During	periods	of	market	disruption,	including	periods	of	significantly	rising	or high	interest	rates,	rapidly	widening	credit	spreads	or	illiquidity,	it	may	be	more difficult	to	value	certain	of	our	assets	if	trading	becomes	less	frequent	and/or market	data	becomes	less	observable.	There	may	be	certain	asset	classes	that were	historically	in	active	markets	with	significant	observable	data	that	rapidly become	illiquid	due	to	market	volatility,	a	loss	in	market	confidence	or	other factors.	In	such	cases,	valuations	in	certain	asset	classes	may	require

more	subjectivity	and	management	judgment;	valuations	may	include	inputs	and assumptions	that	are	less	observable	or	require	greater	estimation.	Further, rapidly	changing	and	unprecedented	market	conditions	in	any	particular	market (e.g.	credit,	equity,	fixed	income,	foreign	exchange)	could	materially	impact	the valuation	of	assets	as	reported	within	our	consolidated	financial	statements,	and the	period-to-period	changes	in	value	could	vary	significantly.

# There	are	risks	resulting	from	the	extensive	use	of	models	in	our	business.

PNC	relies	on	quantitative	models	to	measure	risks	and	to	estimate	certain financial	values.	Models	may	be	used	in	such	processes	as	determining	the pricing	of	various	products,	grading	loans	and	extending	credit,	measuring interest	rate	and	other	market	risks,	predicting	losses,	assessing	capital adequacy,	and	calculating	regulatory	capital	levels,	as	well	as	to	estimate	the value	of	financial	instruments	and	balance	sheets	items.	Poorly	designed	or implemented	models	present	the	risk	that	our	business	decisions	based	on information	incorporating	models	will	be	adversely	affected	due	to	the inadequacy	of	that	information.	Also,	information	we	provide	to	the	public	or	to our	regulators	based	on	poorly	designed	or	implemented	models	could	be inaccurate	or	misleading.	Some	of	the	decisions	that	our	regulators	make, including	those	related	to	capital	distributions	to	our	shareholders,	could	be affected	adversely	due	to	their	perception	that	the	quality	of	the	models	used	to generate	the	relevant	information	is	insufficient.	See	the	Model	Risk Management	portion	of	the	Risk	Management	section	included	in	Item	7	of	this Report.

# We	are	subject	to	operational	risk.

Like	all	businesses,	we	are	subject	to	operational	risk,	which	represents	the	risk of	loss	resulting	from	inadequate	or	failed	internal	processes	and	systems, human	error	and	external	events.	Operational	risk	also	encompasses	technology, compliance	and	legal	risk,	which	is	the	risk	of	loss	from	violations	of,	or noncompliance	with,	laws,	rules,	regulations,	prescribed	practices	or	ethical standards,	as	well	as	the	risk	of	our	noncompliance	with	contractual	and	other obligations.	We	are	also	exposed	to	operational	risk	through	our	outsourcing arrangements,	and	the	effect	that	changes	in	circumstances	or	capabilities	of	our outsourcing	vendors	can	have	on	our	ability	to	continue	to	perform	operational functions	necessary	to	our	business.	Although	we	seek	to	mitigate	operational risk	through	a	system	of	internal	controls	which	we	review	and	update,	no system	of	controls,	however	well	designed	and	maintained,	is	infallible.	Control weaknesses	or	failures	or	other	operational	risks	could	result	in	charges, increased	operational	costs,	harm	to	our	reputation	or	foregone	business opportunities.

# We	continually	encounter	technological	change	and	we	could	falter	in	our ability	to	remain	competitive	in	this	arena.

The	financial	services	industry	is	continually	undergoing	rapid	technological change	with	frequent	introductions	of	new	technology-driven	products	and services.	The	effective	use	of	technology	increases	efficiency	and	enables financial	institutions	to	better	serve	customers	and	to	reduce	costs.	Our	continued success	depends,	in	part,	upon	our	ability	to	address	the	needs	of	our	customers by	using	technology	to	provide	products	and	services	that	satisfy	customer demands	and	create	efficiencies	in	our	operations.	We	may	not	be	able	to effectively	implement	new	technology-driven	products	and	services	that	allow us	to	remain	competitive	or	be	successful	in	marketing	these	products	and services	to	our	customers.

# Our	information	systems	may	experience	interruptions	or	breaches	in security.

We	rely	heavily	on	communications	and	information	systems	to	conduct	our business.	Any	failure,	interruption	or	breach	in	security	of	these	systems	could result	in	disruptions	to	our	accounting,	deposit,	loan	and	other	systems,	and adversely	affect	our	customer	relationships.	While	we	have	policies,	procedures and	systems	designed	to	prevent	or	limit	the	effect	of	these	possible	events,	there remains	the	risk	that	such	a	failure,	interruption	or	security	breach	might	occur and,	if	it	does	occur,	that	it	might	not	be	sufficiently	remediated.

Recently,	there	have	been	several	well-publicized	series	of	apparently	related denial	of	service	attacks	on	large	financial	services	companies,	including	PNC. In	a	denial	of	service	attack,	hackers	flood	commercial	websites	with extraordinarily	high	volumes	of	traffic,	with	the	goal	of	disrupting	the	ability	of commercial	enterprises	to	process	transactions	and	possibly	making	their websites	unavailable	to	customers	for	extended	periods	of	time.	The	recent attacks	against	PNC	resulted	in	temporary	disruptions	in	customers'	ability	to access	the	corporate	website	and	to	perform	on-line	banking	transactions, although	no	customer	data	was	lost	or	compromised.	Furthermore,	even	if	not directed	at	PNC	specifically,	attacks	on	other	entities	with	whom	we	do	business or	on	whom	we	otherwise	rely	or	attacks	on	financial	or	other	institutions important	to	the	overall	functioning	of	the	financial	system	could	adversely affect,	directly	or	indirectly,	aspects	of	PNC's	business.

In	addition,	there	have	been	increasing	efforts	on	the	part	of	third	parties	to breach	data	security	at	financial	institutions	or	with	respect	to	financial transactions,	including	through	the	use	of	social	engineering	schemes	such	as "phishing."	The	ability	of	our	customers	to	bank	remotely,	including	online	and through	mobile	devices,	requires	secure	transmission	of	confidential	information and	increases	the	risk	of	data	security	breaches.

Because	the	techniques	used	to	attack	financial	services	company communications	and	information	systems	change	frequently	(and	generally increasing	in	sophistication),	often	are	not	recognized	until	launched	against	a target,	may	be	supported	by	foreign	governments	or	other	well-financed	entities, and	may	originate	from	less	regulated	and	remote	areas	around	the	world,	we may	be	unable	to	address	these	techniques	in	advance	of	attacks,	including	by implementing	adequate	preventative	measures.

Despite	temporary	disruptions	in	our	ability	to	provide	products	and	services	to our	customers,	to	date	these	efforts	have	not	had	a	material	impact	on	PNC. Nonetheless,	the	occurrence	of	any	such	failure,	interruption	or	security	breach of	our	systems,	particularly	if	widespread	or	resulting	in	financial	losses	to	our customers,	could	damage	the	reputation	of	PNC,	result	in	a	loss	of	customer business,	subject	us	to	additional	regulatory	scrutiny,	or	expose	us	to	civil litigation	and	financial	liability.	In	addition,	the	increasing	prevalence	of cyberattacks	and	other	efforts	to	breach	or	disrupt	our	systems	has	led,	and	we expect	will	continue	to	lead,	to	increased	costs	to	PNC	with	respect	to	prevention and	mitigation	of	these	risks,	as	well	as	costs	reimbursing	customers	for	losses suffered	as	a	result	of	these	actions.	Successful	attacks	or	systems	failures	at other	large	financial	institutions,	whether	or	not	PNC	is	included,	could	lead	to	a general	loss	of	customer	confidence	in	financial	institutions	with	a	potential negative	impact	on	PNC's	business,	additional	demands	on	the	part	of	our regulators,	and	increased	costs	to	deal	with	risks	identified	as	a	result	of	the problems	affecting	others.

# Our	business	and	financial	results	could	be	impacted	materially	by	adverse results	in	legal	proceedings.

Many	aspects	of	our	business	involve	substantial	risk	of	legal	liability.	We	have been	named	or	threatened	to	be	named	as	defendants	in	various	lawsuits	arising from	our	business	activities	(and	in	some	cases	from	the	activities	of	companies we	have	acquired).	In	addition,	we	are	regularly	the	subject	of	governmental investigations	and	other	forms	of	regulatory	inquiry.	We	also	are	at	risk	when	we have	agreed	to	indemnify	others	for	losses	related	to	legal	proceedings,	including litigation	and	governmental	investigations	and	inquiries,	they	face,	such	as	in connection	with	the	sale	of	a	business	or	assets	by	us.	The	results	of	these	legal proceedings	could	lead	to	significant	monetary	damages	or	penalties,	restrictions on	the	way	in	which	we	conduct	our	business,	or	reputational	harm.

Although	we	establish	accruals	for	legal	proceedings	when	information	related to	the	loss	contingencies	represented	by	those	matters	indicates	both	that	a	loss	is probable	and	that	the	amount	of	loss	can	be	reasonably	estimated,	we	do	not have	accruals	for	all	legal	proceedings	where	we	face	a	risk	of	loss.	In	addition, due	to	the	inherent	subjectivity	of	the	assessments	and	unpredictability	of	the outcome	of	legal	proceedings,	amounts	accrued	may	not	represent	the	ultimate loss	to	us	from	the	legal	proceedings	in	question.	Thus,	our	ultimate

losses	may	be	higher,	and	possibly	significantly	so,	than	the	amounts	accrued	for legal	loss	contingencies.

We	discuss	further	the	unpredictability	of	legal	proceedings	and	describe	some of	our	pending	legal	proceedings	in	Note	23	Legal	Proceedings	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report.

# Our	business	and	financial	performance	could	be	adversely	affected, directly	or	indirectly,	by	disasters,	natural	or	otherwise,	by	terrorist activities	or	by	international	hostilities.

Neither	the	occurrence	nor	the	potential	impact	of	disasters	(such	as	earthquakes, hurricanes,	tornadoes,	floods,	fires,	explosions,	and	other	severe	weather conditions	or	catastrophic	accidents),	terrorist	activities	and	international hostilities	can	be	predicted.	However,	these	occurrences	could	impact	us	directly (for	example,	by	causing	significant	damage	to	our	facilities	or	preventing	us from	conducting	our	business	in	the	ordinary	course),	or	indirectly	as	a	result	of their	impact	on	our	borrowers,	depositors,	other	customers,	suppliers	or	other counterparties.	We	could	also	suffer	adverse	consequences	to	the	extent	that disasters,	terrorist	activities	or	international	hostilities	affect	the	financial markets	or	the	economy	in	general	or	in	any	particular	region.	These	types	of impacts	could	lead,	for	example,	to	an	increase	in	delinquencies,	bankruptcies	or defaults	that	could	result	in	our	experiencing	higher	levels	of	nonperforming assets,	net	charge-offs	and	provisions	for	credit	losses.

Our	ability	to	mitigate	the	adverse	consequences	of	such	occurrences	is	in	part dependent	on	the	quality	of	our	resiliency	planning,	and	our	ability,	if	any,	to anticipate	the	nature	of	any	such	event	that	occurs.	The	adverse	impact	of disasters	or	terrorist	activities	or	international	hostilities	also	could	be	increased to	the	extent	that	there	is	a	lack	of	preparedness	on	the	part	of	national	or regional	emergency	responders	or	on	the	part	of	other	organizations	and businesses	that	we	deal	with,	particularly	those	that	we	depend	upon	but	have	no control	over.

# ITEM	1B	–	UNRESOLVED	STAFF	COMMENTS

There	are	no	SEC	staff	comments	regarding	PNC's	periodic	or	current	reports under	the	Exchange	Act	that	are	pending	resolution.

# ITEM	2	–	PROPERTIES

Our	executive	and	primary	administrative	offices	are	currently	located	at	One PNC	Plaza,	Pittsburgh,	Pennsylvania.	The	30-story	structure	is	owned	by	PNC Bank,	N.A.

We	own	or	lease	numerous	other	premises	for	use	in	conducting	business activities,	including	operations	centers,	offices,	and	branch	and	other	facilities. We	consider	the	facilities	owned	or	occupied	under	lease	by	our	subsidiaries	to be	adequate	for	the	purposes	of	our	business	operations.	We	include	here	by reference	the	additional	information	regarding	our	properties	in	Note	11 Premises,	Equipment	and	Leasehold

Improvements	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of this	Report.

# ITEM	3	–	LEGAL	PROCEEDINGS

See	the	information	set	forth	in	Note	23	Legal	Proceedings	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report,	which	is incorporated	here	by	reference.

# ITEM	4	–	MINE	SAFETY	DISCLOSURES

# Not	applicable

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

Information	regarding	each	of	our	executive	officers	as	of	February	22,	2013	is set	forth	below.	Executive	officers	do	not	have	a	stated	term	of	office.	Each executive	officer	has	held	the	position	or	positions	indicated	or	another executive	position	with	the	same	entity	or	one	of	its	affiliates	for	the	past	five years	unless	otherwise	indicated	below.

(a) Where	applicable,	refers	to	year	employed	by	predecessor	company.

(b) Mr.	Rohr	and	Mr.	Demchak	also	serve	as	directors.	Biographical	information	for	Mr.	Rohr	and	Mr. Demchak	is	included	in	"Election	of	Directors	(Item	1)"	in	our	proxy	statement	for	the	2013	annual meeting	of	shareholders.	See	Item	10	of	this	Report.

Joseph	C.	Guyaux	was	appointed	Senior	Vice	Chairman	and	Chief	Risk	Officer in	February	2012,	prior	to	which	he	served	as	President.

Thomas	K.	Whitford	has	served	as	Vice	Chairman	since	February	2009.	He	was appointed	Chief	Administrative	Officer	in	May	2007.	From	April	2002	through May	2007	and	then	from	November	2009	until	April	2010,	he	served	as	Chief Risk	Officer.	Mr.	Whitford	has	announced	that	he	intends	to	retire	from	PNC	in April	2013.

Joan	L.	Gulley	has	served	as	Chief	Human	Resources	Officer	since	April	2008. She	was	appointed	Senior	Vice	President	in	April	2008	and	then	Executive	Vice President	in	February	2009.	She	served	as	Chief	Executive	Officer	for	PNC's wealth	management	business	from	2002	to	2006.	From	1998	until	April	2008, she	served	as	Executive	Vice	President	of	PNC	Bank,	N.A.	and	was	responsible for	product	and	segment	management,	as	well	as	advertising	and	brand management	for	PNC.

Neil	F.	Hall	has	been	an	Executive	Vice	President	since	April	2012	and	head	of PNC's	Retail	Banking	since	February	2012.	Prior	to	being	named	to	his	current position,	Mr.	Hall	led	the	delivery	of	sales	and	service	to	PNC's	retail	and	small business	customers,	directed	branch	banking,	business	banking,	community development	and	PNC	Investments.	Mr.	Hall	joined	PNC	in	1995	and	has	held various	positions	within	retail	banking.

Michael	J.	Hannon	has	served	as	Executive	Vice	President	since	February	2009, prior	to	which	he	served	as	Senior	Vice	President.	He	has	served	as	Chief	Credit Officer	since	November	2009.	From	February	2009	to	November	2009	he	also served	as	Chief	Risk	Officer	and	served	as	Interim	Chief	Risk	Officer	from December	2011	to	February	2012.

Robert	F.	Hoyt	has	served	as	General	Counsel	since	June	2012	and	as	PNC's Chief	Regulatory	Affairs	Officer	since	May	2009.	He	served	as	Senior	Deputy General	Counsel	from	October	2009	to	May	2012	and	as	director	of	business planning	from	May	2009	to	November	2011.	He	was	appointed	Executive	Vice President	in	November	2011	and	was	previously	Senior	Vice	President.	From December	2006	to	January	2009,	Mr.	Hoyt	served	as	General	Counsel	of	the U.S.	Department	of	the	Treasury.

Richard	J.	Johnson	has	served	as	Chief	Financial	Officer	since	August	2005.	He was	appointed	Executive	Vice	President	in	February	2009	and	was	previously Senior	Vice	President.

Michael	P.	Lyons	has	been	an	Executive	Vice	President	since	November	2011 and	is	head	of	Corporate	and	Institutional	Banking.	Prior	to	joining	PNC	in October	2011,	from	May	2010	until	October	2011,	Mr.	Lyons	was	head	of corporate	development	and	strategic	planning	for	Bank	of	America.	Prior	to joining	Bank	of	America,	from	September	2004	to	May	2010,	Mr.	Lyons	held various	positions	at	Maverick	Capital,	most	recently	as	a	principal	focused	on financial	institutions	investments.

Saiyid	Naqvi	has	been	an	Executive	Vice	President	since	April	2012	and	has served	as	Chief	Executive	Officer	of	PNC	Mortgage	since	he	returned	to	PNC	in 2009.	Mr.	Naqvi	had	previously	served	as	Chief	Executive	Officer	of	PNC Mortgage	from	1993	until	its	sale	in	2001.	Prior	to	returning	to	PNC	in	2009, Mr.	Naqvi	served	as	president	of	Harley	Davidson	Financial	Services	Inc.

E.	William	Parsley,	III	has	served	as	Treasurer	and	Chief	Investment	Officer since	January	2004.	He	was	appointed	Executive	Vice	President	of	PNC	in February	2009.

Robert	Q.	Reilly	has	served	as	the	head	of	PNC's	Asset	Management	Group since	2005.	Previously,	he	held	numerous	management	roles	in	both	Corporate Banking	and	Asset	Management.	He	was	appointed	Executive	Vice	President	in February	2009.

Steven	Van	Wyk	joined	PNC	as	head	of	Technology	and	Operations	in	January 2013.	Prior	to	joining	PNC,	Mr.	Van	Wyk	served	as	Global	Chief	Operating Officer	for	ING.	He	was	appointed	Executive	Vice	President	of	PNC	in February	2013.

Gregory	H.	Kozich	has	served	as	a	Senior	Vice	President	and	Corporate Controller	of	PNC	since	2011.	Mr.	Kozich	joined	PNC	as	Senior	Vice	President of	PNC	Bank,	N.A.	in	October	2010.	Prior	to	joining	PNC,	Mr.	Kozich	was	with Fannie	Mae	from	2005	until	late	2010,	most	recently	serving	as	its	corporate controller.

# DIRECTORS	OF	THE	REGISTRANT

The	name,	age	and	principal	occupation	of	each	of	our	directors	as	of February	22,	2013,	and	the	year	he	or	she	first	became	a	director	is	set	forth below:

•	Richard	O.	Berndt,	70,	Managing	Partner	of	Gallagher,	Evelius	& Jones	LLP	(law	firm)	(2007)

•	Charles	E.	Bunch,	63,	Chairman	and	Chief	Executive	Officer	of	PPG Industries,	Inc.	(coatings,	sealants	and	glass	products)	(2007)

•	Paul	W.	Chellgren,	70,	Operating	Partner,	Snow	Phipps	Group,	LLC (private	equity)	(1995)

•	Kay	Coles	James,	63,	President	and	Founder	of	The	Gloucester

•	Richard	B.	Kelson,	66,	President	and	Chief	Executive	Officer,	ServCo,

LLC	(strategic	sourcing,	supply	chain	management)	(2002)

•	Bruce	C.	Lindsay,	71,	Chairman	and	Managing	Member	of	2117

Associates,	LLC	(business	consulting	firm)	(1995)

•	Anthony	A.	Massaro,	68,	Retired	Chairman	and	Chief	Executive

Officer	of	Lincoln	Electric	Holdings,	Inc.	(manufacturer	of	welding

•	Jane	G.	Pepper,	67,	Retired	President	of	the	Pennsylvania	Horticultural Society	(non-profit)	(1997)

•	James	E.	Rohr,	64,	Chairman	and	Chief	Executive	Officer	of	PNC (1990)

•	Donald	J.	Shepard,	66,	Retired	Chairman	of	the	Executive	Board	and Chief	Executive	Officer	of	AEGON	N.V.	(insurance)	(2007) •	Lorene	K.	Steffes,	67,	Independent	Business	Advisor	(technology	and technical	services)	(2000)

•	Dennis	F.	Strigl,	66,	Retired	President	and	Chief	Operating	Officer	of Verizon	Communications	Inc.	(telecommunications)	(2001)

•	Thomas	J.	Usher,	70,	Non-executive	Chairman	of	Marathon	Petroleum Corporation	(oil	and	gas	industry)	(1992)

•	George	H.	Walls,	Jr.,	70,	former	Chief	Deputy	Auditor	for	the	State	of North	Carolina	(2006)

•	Helge	H.	Wehmeier,	70,	Retired	Vice	Chairman	of	Bayer	Corporation

(healthcare,	crop	protection,	and	chemicals)	(1992)

# PART	II

# ITEM	5	–	MARKET	FOR	REGISTRANT'S	COMMON	EQUITY, RELATED	STOCKHOLDER	MATTERS	AND	ISSUER	PURCHASES OF	EQUITY	SECURITIES

(a)	(1)	Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	and	is traded	under	the	symbol	"PNC."	At	the	close	of	business	on	February	15,	2013, there	were	75,100	common	shareholders	of	record.

Holders	of	PNC	common	stock	are	entitled	to	receive	dividends	when	declared by	the	Board	of	Directors	out	of	funds	legally	available	for	this	purpose.	Our Board	of	Directors	may	not	pay	or	set	apart	dividends	on	the	common	stock until	dividends	for	all	past	dividend	periods	on	any	series	of	outstanding preferred	stock	have	been	paid	or	declared	and	set	apart	for	payment.	The	Board presently	intends	to	continue	the	policy	of	paying	quarterly	cash	dividends.	The amount	of	any	future	dividends	will	depend	on	economic	and	market	conditions, our	financial	condition	and	operating	results,	and	other	factors,	including contractual	restrictions	and	applicable	government	regulations	and	policies	(such as	those	relating	to	the	ability	of	bank	and	non-bank	subsidiaries	to	pay dividends	to	the	parent	company	and	regulatory	capital	limitations).	The	amount of	our	dividend	is	also	currently	subject	to	the	results	of	the	Federal	Reserve's 2013	Comprehensive	Capital	Analysis	and	Review	(CCAR)	as	part	of	its supervisory	assessment	of	capital	adequacy	described	under	"Supervision	and Regulation"	in	Item	1	of	this	Report.

The	Federal	Reserve	has	the	power	to	prohibit	us	from	paying	dividends	without its	approval.	For	further	information	concerning	dividend	restrictions	and restrictions	on	loans,	dividends	or	advances	from	bank	subsidiaries	to	the	parent company,	see	"Supervision	and	Regulation"	in	Item	1	of	this	Report,	"Funding and	Capital	Sources"	in	the	Consolidated	Balance	Sheet	Review	section, "Liquidity	Risk	Management"	in	the	Risk	Management	section,	and	"Trust Preferred	Securities"	in	the	Off-Balance	Sheet	Arrangements	And	Variable Interest	Entities	section	of	Item	7	of	this	Report,	and	Note	14	Capital	Securities of	Subsidiary	Trusts	and	Perpetual	Trust	Securities	and	Note	22	Regulatory Matters	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report,	which	we	include	here	by	reference.

We	include	here	by	reference	additional	information	relating	to	PNC	common stock	under	the	caption	"Common	Stock	Prices/Dividends	Declared"	in	the Statistical	Information	(Unaudited)	section	of	Item	8	of	this	Report.

We	include	here	by	reference	the	information	regarding	our	compensation	plans under	which	PNC	equity	securities	are	authorized	for	issuance	as	of December	31,	2012	in	the	table	(with	introductory	paragraph	and	notes)	that appears	in	Item	12	of	this	Report.

Our	registrar,	stock	transfer	agent,	and	dividend	disbursing	agent	is: Computershare	Trust	Company,	N.A. 250	Royall	Street Canton,	MA	02021 800-982-7652

We	include	here	by	reference	the	information	that	appears	under	the	caption "Common	Stock	Performance	Graph"	at	the	end	of	this	Item	5.

# (b) Not	applicable.

(c) Details	of	our	repurchases	of	PNC	common	stock	during	the	fourth quarter	of	2012	are	included	in	the	following	table:

# In	thousands,	except	per	share	data

|  |  |  |  | Maximum |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Total\tshares | number\tof |
|  |  |  | purchased\tas | shares\tthat |
|  |  | Average | part\tof | may\tyet\tbe |
| 2012\tperiod\t(a) | Total\tshares\npurchased\t(b) | price\npaid\tper\nshare | publicly\nannounced\nprograms\t(c) | purchased\nunder\tthe\nprograms\t(c) |
| October\t1\t–\t31 | 13 | $60.05 |  | 22,552 |
| November\t1\t–\t30 | 750 | $55.08 | 750 | 21,802 |
| December\t1\t–\t31 | 292 | $55.74 | 251 | 21,551 |
| Total | 1,055 | $55.32 | 1,001 |  |

(a) In	addition	to	the	repurchases	of	PNC	common	stock	during	the	fourth	quarter	of	2012	included	in the	table	above,	PNC	redeemed	all	5,001	shares	of	its	Series	M	Preferred	Stock	on	December	10, 2012	as	further	described	below.

As	part	of	the	National	City	transaction,	we	established	the	PNC	Non-Cumulative	Perpetual Preferred	Stock,	Series	M	(the	"Series	M	Preferred	Stock"),	which	mirrored	in	all	material	respects the	former	National	City	Non-Cumulative	Perpetual	Preferred	Stock,	Series	E.	On	December	10, 2012,	PNC	issued	$500.1	million	aggregate	liquidation	amount	(5,001	shares)	of	the	Series	M Preferred	Stock	to	the	National	City	Preferred	Capital	Trust	I	(the	"Trust")	as	required	pursuant	to the	settlement	of	a	Stock	Purchase	Contract	Agreement	between	the	Trust	and	PNC	dated	as	of January	30,	2008.	Immediately	upon	such	issuance,	PNC	redeemed	all	5,001	shares	of	the	Series	M Preferred	Stock	from	the	Trust	on	December	10,	2012	at	a	redemption	price	equal	to	$100,000	per share.

(b) Includes	PNC	common	stock	purchased	under	the	program	referred	to	in	note	(c)	to	this	table	and PNC	common	stock	purchased	in	connection	with	our	various	employee	benefit	plans.	Note	15 Employee	Benefit	Plans	and	Note	16	Stock	Based	Compensation	Plans	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	include	additional	information	regarding our	employee	benefit	plans	that	use	PNC	common	stock.

(c) Our	current	stock	repurchase	program	allows	us	to	purchase	up	to	25	million	shares	on	the	open market	or	in	privately	negotiated	transactions.	This	program	was	authorized	on	October	4,	2007	and will	remain	in	effect	until	fully	utilized	or	until	modified,	superseded	or	terminated.	The	extent	and timing	of	share	repurchases	under	this	program	will	depend	on	a	number	of	factors	including, among	others,	market	and	general	economic	conditions,	economic	capital	and	regulatory	capital considerations,	alternative	uses	of	capital,	the	potential	impact	on	our	credit	ratings,	and	contractual and	regulatory	limitations,	including	the	impact	of	the	Federal	Reserve's	supervisory	assessment	of capital	adequacy	program.

# COMMON	STOCK	PERFORMANCE	GRAPH

This	graph	shows	the	cumulative	total	shareholder	return	(i.e.,	price	change	plus reinvestment	of	dividends)	on	our	common	stock	during	the	five-year	period ended	December	31,	2012,	as	compared	with:	(1)	a	selected	peer	group	of	our competitors,	called	the	"Peer	Group;"	(2)	an	overall	stock	market	index,	the	S&P 500	Index;	and	(3)	a	published	industry	index,	the	S&P	500	Banks.	The	yearly points	marked	on	the	horizontal	axis	of	the	graph	correspond	to	December	31	of that	year.	The	stock	performance	graph	assumes	that	$100	was	invested	on January	1,	2008	for	the	five-year	period	and	that	any	dividends	were	reinvested. The	table	below	the	graph	shows	the	resultant	compound	annual	growth	rate	for the	performance	period.

|  |  |  | Assumes	$100	investment	at	Close	of | Assumes	$100	investment	at	Close	of | Assumes	$100	investment	at	Close	of |  | 5-Year |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Market\ton\tDecember\t31,\t2007 | Market\ton\tDecember\t31,\t2007 | Market\ton\tDecember\t31,\t2007 |  | Compound |
|  | Base\nPeriod | Total\tReturn\t=\tPrice\tchange\tplus\treinvestment | Total\tReturn\t=\tPrice\tchange\tplus\treinvestment | of\tdividends |  |  | Growth\nRate |
|  | Dec.\t07 | Dec.\t08 | Dec.\t09 | Dec.\t10 | Dec.\t11 | Dec.\t12 |  |
| PNC | 100 | 77.82 | 85.81 | 99.37 | 96.33 | 99.87 | (0.03)% |
| S&P\t500\tIndex | 100 | 63.00 | 79.68 | 91.68 | 93.61 | 108.59 | 1.66\t% |
| S&P\t500\tBanks | 100 | 52.51 | 49.05 | 58.78 | 52.53 | 65.28 | (8.18)% |
| Peer\tGroup | 100 | 69.81 | 75.86 | 96.52 | 82.36 | 99.87 | (0.03)% |

The	Peer	Group	for	the	preceding	chart	and	table	consists	of	the	following companies:	BB&T	Corporation;	Comerica	Inc.;	Fifth	Third	Bancorp;	KeyCorp; The	PNC	Financial	Services	Group,	Inc.;	SunTrust	Banks,	Inc.;	U.S.	Bancorp; Regions	Financial	Corporation;	Wells	Fargo	&	Company;	Capital	One Financial,	Inc.;	Bank	of	America	Corporation;	M&T	Bank;	and	JP	Morgan Chase	and	Company.	This	Peer	Group	was	approved	by	the	Board's	Personnel and	Compensation	Committee	(the	Committee)	for	2012.	The	Committee	has approved	the	same	Peer	Group	for	2013.

Each	yearly	point	for	the	Peer	Group	is	determined	by	calculating	the	cumulative total	shareholder	return	for	each	company	in	the	Peer	Group	from	December	31, 2007	to	December	31	of	that	year	(End	of	Month	Dividend	Reinvestment Assumed)	and	then	using	the	median	of	these	returns	as	the	yearly	plot	point.

In	accordance	with	the	rules	of	the	SEC,	this	section,	captioned	"Common	Stock Performance	Graph,"	shall	not	be	incorporated	by	reference	into	any	of	our future	filings	made	under	the	Securities	Exchange	Act	of	1934	or	the	Securities Act	of	1933.	The	Common	Stock	Performance	Graph,	including	its accompanying	table	and	footnotes,	is	not	deemed	to	be	soliciting	material	or	to be	filed	under	the	Exchange	Act	or	the	Securities	Act.

# ITEM	6	–	SELECTED	FINANCIAL	DATA

|  |  | Year	ended	December	31 | Year	ended	December	31 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions,\texcept\tper\tshare\tdata | 2012\t(a)\t(b) | 2011\t(b) | 2010\t(b) | 2009\t(b) | 2008 |
| SUMMARY\tOF\tOPERATIONS |  |  |  |  |  |
| Interest\tincome | $10,734 | $10,194 | $11,150 | $12,086 | $6,301 |
| Interest\texpense | 1,094 | 1,494 | 1,920 | 3,003 | \t 2,447 |
| Net\tinterest\tincome | 9,640 | 8,700 | 9,230 | 9,083 | \t 3,854 |
| Noninterest\tincome\t(c) | 5,872 | 5,626 | 5,946 | 7,145 | \t 2,442 |
| Total\trevenue | 15,512 | \t 14,326 | \t 15,176 | \t 16,228 | \t 6,296 |
| Provision\tfor\tcredit\tlosses\t(d) | 987 | 1,152 | 2,502 | 3,930 | \t 1,517 |
| Noninterest\texpense | 10,582 | 9,105 | 8,613 | 9,073 | \t 3,685 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes\tand\tnoncontrolling\tinterests | 3,943 | 4,069 | 4,061 | 3,225 | \t 1,094 |
| Income\ttaxes | 942 | 998 | 1,037 | 867 | 298 |
| Income\tfrom\tcontinuing\toperations\tbefore\tnoncontrolling\tinterests | 3,001 | 3,071 | 3,024 | 2,358 | 796 |
| Income\tfrom\tdiscontinued\toperations\t(net\tof\tincome\ttaxes\tof\tzero,\tzero,\t$338,\t$54\tand\t$63)\t(e) |  |  | 373 | 45 | 118 |
| Net\tincome | 3,001 | 3,071 | 3,397 | 2,403 | 914 |
| Less:\t\tNet\tincome\t(loss)\tattributable\tto\tnoncontrolling\tinterests | (12) | 15 | (15) | (44) | 32 |
| \t\t\t\t\t\t\t\t\t\t\t\tPreferred\tstock\tdividends\t(f) | 177 | 56 | 146 | 388 | 21 |
| \t\t\t\t\t\t\t\t\t\t\t\tPreferred\tstock\tdiscount\taccretion\tand\tredemptions\t(f) | 4 | 2 | 255 | 56 |  |
| Net\tincome\tattributable\tto\tcommon\tshareholders\t(f) | $2,832 | $2,998 | $3,011 | $2,003 | $861 |
| PER\tCOMMON\tSHARE |  |  |  |  |  |
| Basic\tearnings |  |  |  |  |  |
| Continuing\toperations | $5.36 | $5.70 | $5.08 | $4.30 | $2.15 |
| Discontinued\toperations\t(e) |  |  | .72 | .10 | .34 |
| Net\tincome | $5.36 | $5.70 | $5.80 | $4.40 | $2.49 |
| Diluted\tearnings |  |  |  |  |  |
| Continuing\toperations | $5.30 | $5.64 | $5.02 | $4.26 | $2.10 |
| Discontinued\toperations\t(e) |  |  | .72 | .10 | .34 |
| Net\tincome | $5.30 | $5.64 | $5.74 | $4.36 | $2.44 |
| Book\tvalue | $67.05 | $61.52 | $56.29 | $47.68 | $39.44 |
| Cash\tdividends\tdeclared | $1.55 | $1.15 | $.40 | $.96 | $2.61 |
| (a) |  |  |  |  |  |

(a) Includes	the	impact	of	RBC	Bank	(USA),	which	we	acquired	on	March	2,	2012.

(b) Includes	the	impact	of	National	City,	which	we	acquired	on	December	31,	2008.

(c) Amount	for	2009	includes	recognition	of	a	$1.1	billion	pretax	gain	on	our	portion	of	the	increase	in	BlackRock's	equity	resulting	from	the	value	of	BlackRock	shares	issued	in	connection	with	BlackRock's acquisition	of	Barclays	Global	Investors	(BGI)	on	December	1,	2009.

(d) Amount	for	2008	includes	the	$504	million	conforming	provision	for	credit	losses	related	to	our	National	City	acquisition.

(e) Includes	results	of	operations	for	PNC	Global	Investment	Servicing	Inc.	(GIS)	through	June	30,	2010	and	the	related	after-tax	gain	on	sale.	We	sold	GIS	effective	July	1,	2010,	resulting	in	a	gain	of	$639	million, or	$328	million	after	taxes,	recognized	during	the	third	quarter	of	2010.	See	Sale	of	PNC	Global	Investment	Servicing	in	the	Executive	Summary	section	of	Item	7	and	Note	2	Acquisition	and	Divestiture	Activity in	the	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of	this	Report	for	additional	information.

(f) We	redeemed	the	Series	N	(TARP)	Preferred	Stock	on	February	10,	2010.	In	connection	with	the	redemption,	we	accelerated	the	accretion	of	the	remaining	issuance	discount	on	the	Series	N	Preferred	Stock	and recorded	a	corresponding	reduction	in	retained	earnings	of	$250	million	in	the	first	quarter	of	2010.	This	resulted	in	a	noncash	reduction	in	net	income	attributable	to	common	shareholders	and	related	basic	and diluted	earnings	per	share.	The	Series	N	Preferred	Stock	was	issued	on	December	31,	2008.

Certain	prior	period	amounts	have	been	reclassified	to	conform	with	the	current	period	presentation,	which	we	believe	is	more	meaningful	to	readers	of	our	consolidated financial	statements.

For	information	regarding	certain	business,	regulatory	and	legal	risks,	see	Item	1A	Risk	Factors,	the	Risk	Management	section	of	Item	7	of	this	Report,	and	Note	23 Legal	Proceedings	and	Note	24	Commitments	and	Guarantees	in	the	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of	this	Report	for	additional information.	Also,	see	the	Cautionary	Statement	Regarding	Forward-Looking	Information	and	Critical	Accounting	Estimates	And	Judgments	sections	included	in	Item	7 of	this	Report	for	certain	other	factors	that	could	cause	actual	results	or	future	events	to	differ,	perhaps	materially,	from	historical	performance	and	from	those anticipated	in	the	forward-looking	statements	included	in	this	Report.	See	also	the	Executive	Summary	section	in	Item	7	of	this	Report	for	additional	information affecting	financial	performance.

|  |  | At	or	for	the	year	ended	December	31 | At	or	for	the	year	ended	December	31 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions,\texcept\tas\tnoted | 2012\t(a)\t(b) | 2011\t(b) | 2010\t(b) | 2009\t(b) | 2008\t(c) |
| BALANCE\tSHEET\tHIGHLIGHTS |  |  |  |  |  |
| Assets | $305,107 | $271,205 | $264,284 | $269,863 | \t$291,081 |
| Loans | \t 185,856 | \t 159,014 | \t 150,595 | \t 157,543 | \t\t 175,489 |
| Allowance\tfor\tloan\tand\tlease\tlosses | 4,036 | 4,347 | 4,887 | 5,072 | 3,917 |
| Interest-earning\tdeposits\twith\tbanks | 3,984 | 1,169 | 1,610 | 4,488 | 14,859 |
| Investment\tsecurities | 61,406 | 60,634 | 64,262 | 56,027 | 43,473 |
| Loans\theld\tfor\tsale | 3,693 | 2,936 | 3,492 | 2,539 | 4,366 |
| Goodwill\tand\tother\tintangible\tassets | 10,869 | 10,144 | 10,753 | 12,909 | 11,688 |
| Equity\tinvestments | 10,877 | 10,134 | 9,220 | 10,254 | 8,554 |
| Noninterest-bearing\tdeposits | 69,980 | 59,048 | 50,019 | 44,384 | 37,148 |
| Interest-bearing\tdeposits | \t 143,162 | \t 128,918 | \t 133,371 | \t 142,538 | \t\t 155,717 |
| Total\tdeposits | \t 213,142 | \t 187,966 | \t 183,390 | \t 186,922 | \t\t 192,865 |
| Transaction\tdeposits\t(d) | \t 176,705 | \t 147,637 | \t 134,654 | \t 126,244 | \t\t 110,997 |
| Borrowed\tfunds\t(e) | 40,907 | 36,704 | 39,488 | 39,261 | 52,240 |
| Total\tshareholders'\tequity | 39,003 | 34,053 | 30,242 | 29,942 | 25,422 |
| Common\tshareholders'\tequity | 35,413 | 32,417 | 29,596 | 22,011 | 17,490 |
| CLIENT\tASSETS\t(billions) |  |  |  |  |  |
| Discretionary\tassets\tunder\tmanagement | $112 | $107 | $108 | $103 | \t$103 |
| Nondiscretionary\tassets\tunder\tmanagement | 112 | 103 | 104 | 102 | 125 |
| Total\tassets\tunder\tadministration | 224 | 210 | 212 | 205 | 228 |
| Brokerage\taccount\tassets\t(f) | 38 | 34 | 34 | 32 | 29 |
| Total\tclient\tassets | $262 | $244 | $246 | $237 | \t$257 |
| SELECTED\tRATIOS |  |  |  |  |  |
| Net\tinterest\tmargin\t(g) | 3.94% | 3.92% | 4.14% | 3.82% | 3.37% |
| Noninterest\tincome\tto\ttotal\trevenue | 38 | 39 | 39 | 44 | 39 |
| Efficiency | 68 | 64 | 57 | 56 | 59 |
| Return\ton |  |  |  |  |  |
| Average\tcommon\tshareholders'\tequity | 8.31 | 9.56 | 10.88 | 9.78 | 6.52 |
| Average\tassets | 1.02 | 1.16 | 1.28 | .87 | .64 |
| Loans\tto\tdeposits | 87 | 85 | 82 | 84 | 91 |
| Dividend\tpayout | 29.0 | 20.2 | 6.8 | 21.4 | 104.6 |
| Tier\t1\tcommon | 9.6 | 10.3 | 9.8 | 6.0 | 4.8 |
| Tier\t1\trisk-based | 11.6 | 12.6 | 12.1 | 11.4 | 9.7 |
| Common\tshareholders'\tequity\tto\ttotal\tassets | 11.6 | 12.0 | 11.2 | 8.2 | 6.0 |
| Average\tcommon\tshareholders'\tequity\tto\taverage\tassets | 11.5 | 11.9 | 10.4 | 7.2 | 9.6 |
| SELECTED\tSTATISTICS |  |  |  |  |  |
| Employees | 56,285 | 51,891 | 50,769 | 55,820 | 59,595 |
| Retail\tBanking\tbranches | 2,881 | 2,511 | 2,470 | 2,513 | 2,581 |
| ATMs | 7,282 | 6,806 | 6,673 | 6,473 | 6,233 |
| Residential\tmortgage\tservicing\tportfolio\t(billions) | $135 | $131 | $139 | $158 | \t$187 |
| Commercial\tmortgage\tservicing\tportfolio\t(billions) | $282 | $267 | $266 | $287 | \t$270 |
| (a) |  |  |  |  |  |

(c) Includes	the	impact	of	National	City	except	for	the	following	Selected	Ratios:	Net	interest	margin,	Noninterest	income	to	total	revenue,	Efficiency,	Return	on	Average	common	shareholders'	equity,	Return	on Average	assets,	Dividend	payout	and	Average	common	shareholders'	equity	to	average	assets.

(d) Represents	the	sum	of	interest-bearing	money	market	deposits,	interest-bearing	demand	deposits,	and	noninterest-bearing	deposits.

(g) Calculated	as	taxable-equivalent	net	interest	income	divided	by	average	earning	assets.	The	interest	income	earned	on	certain	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	margins	for	all	earning	assets,	we	use	net	interest	income	on	a	taxable- equivalent	basis	in	calculating	net	interest	margin	by	increasing	the	interest	income	earned	on	tax-exempt	assets	to	make	it	fully	equivalent	to	interest	income	earned	on	taxable	investments.	This	adjustment	is	not permitted	under	accounting	principles	generally	accepted	in	the	United	States	of	America	(GAAP)	on	the	Consolidated	Income	Statement.	The	taxable-equivalent	adjustments	to	net	interest	income	for	the	years 2012,	2011,	2010,	2009	and	2008	were	$144	million,	$104	million,	$81	million,	$65	million	and	$36	million,	respectively.

# ITEM	7	–	MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

# EXECUTIVE	SUMMARY

# KEY	STRATEGIC	GOALS

At	PNC	we	manage	our	company	for	the	long	term.	We	are	focused	on	revenue growth,	with	an	emphasis	on	deepening	customer	relationships	and	increasing fee	income,	while	reducing	expenses.	Our	goal	for	2013	is	to	deliver	positive operating	leverage	and	create	momentum	going	into	2014,	while	investing	for the	future,	and	managing	risk	and	capital.	We	continue	to	invest	in	our	products, markets	and	brand,	and	embrace	our	corporate	responsibility	to	the	communities where	we	do	business.

The	primary	drivers	of	revenue	are	the	acquisition,	expansion	and	retention	of customer	relationships.	We	strive	to	expand	and	deepen	customer	relationships by	offering	convenient	banking	options	and	innovative	technology	solutions, providing	a	broad	range	of	fee-based	and	credit	products	and	services,	focusing on	customer	service,	and	enhancing	our	brand.	This	strategy	is	designed	to	give our	customers	choices	based	on	their	needs.	Our	approach	is	focused	on effectively	growing	targeted	market	share	and	"share	of	wallet"	rather	than	short term	fee	revenue	optimization.	We	may	also	grow	revenue	through	appropriate and	targeted	acquisitions	and,	in	certain	businesses,	by	expanding	into	new geographical	markets.

PNC	faces	a	variety	of	risks	that	may	impact	various	aspects	of	our	risk	profile from	time	to	time.	The	extent	of	such	impacts	may	vary	depending	on	factors such	as	the	current	economic,	political	and	regulatory	environment,	merger	and acquisition	activity,	and	operational	challenges.	Many	of	these	risks	and	our	risk management	strategies	are	described	in	more	detail	elsewhere	in	this	Report.

Our	priorities	for	2013	are	to	build	capital	to	support	client	growth	and	business investment,	maintain	appropriate	capital	in	light	of	economic	uncertainty	and	the Basel	III	framework	and	return	excess	capital	to	shareholders,	subject	to regulatory	approval.	We	continue	to	work	to	improve	the	quality	of	our	capital and	expect	to	build	capital	through	retained	earnings.	PNC	continues	to	maintain a	strong	bank	holding	company	liquidity	position.	See	the	Capital	and	Liquidity Actions	section	of	this	Executive	Summary,	the	Funding	and	Capital	Sources section	of	the	Consolidated	Balance	Sheet	Review	section	and	the	Liquidity	Risk Management	section	of	this	Financial	Review	and	the	Supervision	and Regulation	section	in	Item	1	of	this	Report.

RBC	Bank	(USA),	based	in	Raleigh,	North	Carolina,	operated	more	than	400 branches	in	North	Carolina,	Florida,	Alabama,	Georgia,	Virginia	and	South Carolina.	The	primary	reasons	for	the	acquisition	of	RBC	Bank	(USA)	were	to enhance	shareholder	value,	to	improve	PNC's	competitive	position	in	the financial	services	industry,	and	to	further	expand	PNC's	existing	branch	network in	the	states	where	it	currently	operates	as	well	as	expanding	into	new	markets. When	combined	with	PNC's	existing	network,	PNC	now	has	2,881	branches across	17	states	and	the	District	of	Columbia,	ranking	it	fifth	among	U.S.	banks in	branches.	See	Note	2	Acquisition	and	Divestiture	Activity	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	additional information	regarding	this	acquisition	and	the	Smartstreet	divestiture	and	2011 branch	acquisitions	described	below.

Effective	October	26,	2012,	PNC	divested	certain	deposits	and	assets	of	the Smartstreet	business	unit,	which	was	acquired	by	PNC	as	part	of	the	RBC	Bank (USA)	acquisition,	to	Union	Bank,	N.A.	Smartstreet	is	a	nationwide	business focused	on	homeowner	or	community	association	managers	and	had approximately	$1	billion	of	assets	and	deposits	as	of	September	30,	2012.	The gain	on	sale	was	immaterial	and	resulted	in	a	reduction	of	goodwill	and	core deposit	intangibles	of	$46	million	and	$13	million,	respectively.

# BRANCH	ACQUISITIONS

Effective	December	9,	2011,	PNC	acquired	27	branches	in	the	northern metropolitan	Atlanta,	Georgia	area	from	Flagstar	Bank,	FSB,	a	subsidiary	of Flagstar	Bancorp,	Inc.	Effective	June	6,	2011,	PNC	acquired	19	branches	in	the greater	Tampa,	Florida	area	from	BankAtlantic,	a	subsidiary	of	BankAtlantic Bancorp,	Inc.	Our	Consolidated	Income	Statement	includes	the	impact	of	the branch	activity	subsequent	to	each	date	of	the	respective	acquisitions.

# SALE	OF	PNC	GLOBAL	INVESTMENT	SERVICING

On	July	1,	2010,	we	sold	PNC	Global	Investment	Servicing	Inc.	(GIS),	a	leading provider	of	processing,	technology	and	business	intelligence	services	to	asset managers,	broker-dealers	and	financial	advisors	worldwide,	for	$2.3	billion	in cash.	The	pretax	gain	in	discontinued	operations	recorded	in	the	third	quarter	of 2010	related	to	this	sale	was	$639	million,	net	of	transaction	costs,	or	$328 million	after	taxes.

Results	of	operations	of	GIS	through	June	30,	2010	are	presented	as	income from	discontinued	operations,	net	of	income	taxes,	on	our	Consolidated	Income Statement	in	this	Report.	Once	we	entered	into	the	sales	agreement,	GIS	was	no longer	a	reportable	business	segment.	See	Note	2	Acquisition	and	Divestiture Activity	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report.

# CAPITAL	AND	LIQUIDITY	ACTIONS

Our	ability	to	take	certain	capital	actions,	including	plans	to	pay	or	increase common	stock	dividends	or	to	repurchase	shares	under	current	or	future programs,	is	subject	to	the	results	of	the	supervisory	assessment	of	capital adequacy	undertaken	by	the	Board	of	Governors	of	the	Federal	Reserve	System (Federal	Reserve)	and	our	primary	bank	regulators	as	part	of	the	Comprehensive Capital	Analysis	and	Review	(CCAR)	process.	This	capital	adequacy	assessment is	based	on	a	review	of	a	comprehensive	capital	plan	submitted	to	the	Federal Reserve.	In	connection	with	the	2013	CCAR,	PNC	filed	its	capital	plan	and stress	testing	results	with	the	Federal	Reserve	on	January	7,	2013.	PNC	expects to	receive	the	Federal	Reserve's	response	(either	a	non-objection	or	objection)	to the	capital	plan	submitted	as	part	of	the	2013	CCAR	by	March	15,	2013.	For additional	information	concerning	the	CCAR	process	and	the	factors	the	Federal Reserve	takes	into	consideration	in	evaluating	capital	plans,	see	Item	1	Business –	Supervision	and	Regulation	of	this	Report.

# A	summary	of	2012	capital	and	liquidity	actions	follows.

# DEBT	SECURITIES	ISSUED

On	March	8,	2012,	PNC	Funding	Corp	issued	$1	billion	of	senior	notes, unconditionally	guaranteed	by	The	PNC	Financial	Services	Group,	Inc.,	due March	8,	2022.	Interest	is	paid	semi-annually	at	a	fixed	rate	of	3.30%.	The offering	resulted	in	gross	proceeds	to	us	of	$990	million	before	offering	related expenses.	We	used	the	net	proceeds	from	this	offering	for	general	corporate purposes,	which	included	advances	to	PNC	and	its	subsidiaries	to	finance	their activities,	repayment	of	outstanding	indebtedness,	and	repurchases	and redemptions	of	issued	and	outstanding	securities	of	PNC	and	its	subsidiaries.

On	June	20,	2012,	PNC	Bank,	N.A.	issued	$1.0	billion	of	senior	extendible floating	rate	bank	notes	with	an	initial	maturity	date	of	July	20,	2013,	subject	to the	holder's	monthly	option	to	extend,	and	a	final	maturity	date	of	June	20, 2014.

Interest	is	paid	at	the	3-month	LIBOR	rate,	reset	quarterly,	plus	a	spread	of	22.5 basis	points,	which	spread	is	subject	to	four	potential	one	basis	point	increases	in the	event	of	certain	extensions	of	maturity	by	the	holder.

On	October	22,	2012,	PNC	Bank,	N.A.	issued	$1.0	billion	of	subordinated	notes with	a	maturity	date	of	November	1,	2022.	Interest	is	payable	semi-annually,	at	a fixed	rate	of	2.70%,	on	May	1	and	November	1	of	each	year,	beginning	on May	1,	2013.

# TRUST	PREFERRED	SECURITIES	REDEEMED

On	April	25,	2012	we	redeemed	$300	million	of	trust	preferred	securities	issued by	PNC	Capital	Trust	D	with	a	current	distribution	rate	of	6.125%	and	$6 million	of	trust	preferred	securities	issued	by	Yardville	Capital	Trust	III	with	a current	distribution	rate	of	10.18%.	In	addition,	on	May	25,	2012	we	redeemed $500	million	of	trust	preferred	securities	issued	by	National	City	Capital	Trust III	with	a	current	distribution	rate	of	6.625%.	These	redemptions	together resulted	in	a	noncash	charge	for	unamortized	discounts	of	approximately	$130 million	in	the	second	quarter	of	2012.

On	July	30,	2012	we	redeemed	$450	million	of	trust	preferred	securities	issued by	PNC	Capital	Trust	E	with	a	current	distribution	rate	of	7.750%	and	$517.5 million	of	enhanced	trust	preferred	securities	issued	by	National	City	Capital Trust	IV	with	a	current	distribution	rate	of	8.000%.	These	redemptions	together resulted	in	a	noncash	charge	for	unamortized	discounts	of	approximately	$95 million	in	the	third	quarter	of	2012.

# PREFERRED	STOCK	ISSUED

On	April	24,	2012,	we	issued	60	million	depositary	shares,	each	representing	a 1/4,000th	interest	in	a	share	of	our	Fixed-to-Floating	Rate	Non-Cumulative Perpetual	Preferred	Stock,	Series	P,	in	an	underwritten	public	offering	resulting in	gross	proceeds	of	$1.5	billion	to	us	before	commissions	and	expenses.	We used	the	net	proceeds	from	the	sale	of	the	depositary	shares	for	general	corporate purposes,	which	included	repurchases	and	redemptions	of	issued	and	outstanding securities	of	PNC	and	its	subsidiaries,	including	trust	preferred	securities.

On	September	21,	2012	we	issued	18	million	depositary	shares,	each representing	a	1/4,000th	interest	in	a	share	of	our	5.375%	Non-Cumulative Perpetual	Preferred	Stock,	Series	Q,	in	an	underwritten	public	offering	resulting in	gross	proceeds	of	$450	million	to	us	before	commissions	and	expenses.	On October	9,	2012,	pursuant	to	the	underwriting	agreement	for	this	offering,	we issued	an	additional	1.2	million	depositary	shares	in	satisfaction	of	an	option granted	to	the	underwriters	in	the	underwriting	agreement	to	cover	over- allotments,	resulting	in	additional	gross	proceeds	of	$30	million.	We	used	the	net proceeds	from	the	sales	of	the	depositary	shares	for	general	corporate	purposes, which	included	advances	to	our	subsidiaries	to	finance	their	activities,	repayment of

outstanding	indebtedness,	and	repurchases	and	redemptions	of	issued	and outstanding	securities	of	PNC	and	its	subsidiaries.

# SENIOR	DEBT	ISSUED	AND	REDEMPTION	OF	NORMAL	APEX

On	November	9,	2012	PNC	issued	$500.1	million	of	its	parent	company	Senior Notes	due	November	9,	2022	(the	"Senior	Notes")	which	were	sold	in	a secondary	public	offering	made	in	connection	with	the	remarketing	of	PNC's Remarketable	8.729%	Junior	Subordinated	Notes	due	2043	(the	"Subordinated Notes")	owned	by	the	National	City	Preferred	Capital	Trust	I	(the	"Trust").	In the	remarketing	the	Trust	sold	the	Subordinated	Notes	and	PNC	exchanged	the Senior	Notes	with	the	purchasers	of	the	Subordinated	Notes.	The	Senior	Notes were	then	sold	by	the	purchasers	in	the	secondary	public	offering.	The	Senior Notes	bore	interest	at	8.729%	from	and	including	June	10,	2012,	to	but excluding	November	9,	2012	and	thereafter	bear	interest	at	2.854%	per	annum. The	proceeds	of	the	remarketing	were	ultimately	used	by	the	Trust,	after	the completion	of	the	Preferred	Stock	transactions	described	below,	to	redeem	all $500.0	million	outstanding	of	its	12%	Fixed-to-Floating	Rate	Normal	APEX	and $.1	million	Common	Securities	of	the	Trust.

In	the	fourth	quarter	of	2012,	PNC	incurred	noncash	charges	for	unamortized discounts	of	$70	million	related	to	this	redemption.	After	the	closing	of	these transactions,	including	the	redemption	of	the	Normal	APEX,	only	the	Senior Notes	due	November	9,	2022	remain	outstanding.

As	required	under	a	stock	purchase	contract	agreement,	the	Trust	purchased $500.1	million	of	PNC's	Non-Cumulative	Perpetual	Preferred	Stock,	Series	M (the	"Preferred	Stock").	PNC	then	redeemed	all	of	the	Preferred	Stock	from	the Trust	immediately	upon	its	issuance.	See	Note	19	Equity	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	further	detail.

A	summary	of	2013	capital	and	liquidity	actions	to	date	follows.

•	$750	million	of	fixed	rate	senior	notes	with	a	maturity	date	of January	28,	2016.	Interest	is	payable	semi-annually,	at	a	fixed	rate	of .80%,	on	January	28	and	July	28	of	each	year,	beginning	on	July	28, 2013.

•	$250	million	of	floating	rate	senior	notes	with	a	maturity	date	of January	28,	2016.	Interest	is	payable	at	the	3-month	LIBOR	rate,	reset quarterly,	plus	a	spread	of	.31%	on	January	28,	April	28,	July	28,	and October	28	of	each	year,	beginning	on	April	28,	2013. •	$750	million	of	subordinated	notes	with	a	maturity	date	of	January	30, 2023.	Interest	is	payable	semi-annually,	at	a	fixed	rate	of	2.905%,	on January	30	and	July	30	of	each	year,	beginning	on	July	30,	2013.

On	February	7,	2013,	PNC	announced	that	on	March	15,	2013	we	will	redeem all	$375	million	of	REIT	preferred	securities

issued	by	PNC	Preferred	Funding	Trust	III.	See	Note	27	Subsequent	Events	in the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

# RECENT	MARKET	AND	INDUSTRY	DEVELOPMENTS

There	have	been	numerous	legislative	and	regulatory	developments	and dramatic	changes	in	the	competitive	landscape	of	our	industry	over	the	last several	years.

The	United	States	and	other	governments	have	undertaken	major	reform	of	the regulation	of	the	financial	services	industry,	including	engaging	in	new	efforts	to impose	requirements	designed	to	strengthen	the	stability	of	the	financial	system and	protect	consumers	and	investors.	We	expect	to	face	further	increased regulation	of	our	industry	as	a	result	of	current	and	future	initiatives	intended	to provide	economic	stimulus,	financial	market	stability	and	enhanced	regulation	of financial	services	companies	and	to	enhance	the	liquidity	and	solvency	of financial	institutions	and	markets.	We	also	expect	in	many	cases	more	intense scrutiny	from	our	bank	supervisors	in	the	examination	process	and	more aggressive	enforcement	of	regulations	on	both	the	federal	and	state	levels. Compliance	with	new	regulations	will	increase	our	costs	and	reduce	our revenue.	Some	new	regulations	may	limit	our	ability	to	pursue	certain	desirable business	opportunities.

The	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	(Dodd- Frank),	enacted	in	July	2010,	mandates	the	most	wide-ranging	overhaul	of financial	industry	regulation	in	decades.	Many	parts	of	the	law	are	now	in	effect and	others	are	now	in	the	implementation	stage,	which	is	likely	to	continue	for several	years.

Until	such	time	as	the	regulatory	agencies	issue	final	regulations	implementing all	of	the	numerous	provisions	of	Dodd-Frank,	PNC	will	not	be	able	to	fully assess	the	impact	the	legislation	will	have	on	its	businesses.	However,	we believe	that	the	expected	changes	will	be	manageable	for	PNC	and	will	have	an overall	smaller	impact	on	us	than	on	our	larger	peers.

Included	in	these	recent	legislative	and	regulatory	developments	are	evolving regulatory	capital	standards	for	financial	institutions.	These	evolving	standards include	the	three	sets	of	proposed	rules	that	the	U.S.	banking	agencies	released in	June	2012	to	implement	the	Basel	III	regulatory	capital	framework	developed by	the	Basel	Committee	on	Banking	Supervision	(Basel	III)	and	also	make	other changes	to	U.S.	regulatory	capital	standards	for	banking	institutions.	The	Basel III	proposed	rules	include	heightened	capital	requirements	for	banking institutions	in	terms	of	both	higher	quality	capital	and	higher	regulatory	capital ratios.	The	proposed	Basel	III	rules	would	become	effective	under	a	phase-in period	and	would	be	in	full	effect	on	January	1,	2019.

The	capital	rules	issued	by	the	Federal	banking	agencies	in	June	2012	would	also revise	the	manner	in	which	a	banking

institution	determines	its	risk-weighted	assets	for	risk-based	capital	purposes under	the	Basel	II	framework	applicable	to	large	or	internationally	active	banks (referred	to	as	the	advanced	approaches)	and	under	the	Basel	I	framework applicable	to	all	banking	institutions	(referred	to	as	the	standardized	approach). For	additional	information	on	the	proposed	capital	rules	issued	by	the	U.S. banking	agencies	in	June	2012	and	the	potential	impact	of	such	rules	on	PNC, please	see	Risk	Factors	in	Item	1A	of	this	Report.

The	public	comment	period	on	these	three	sets	of	proposed	rules	closed	on October	22,	2012,	and	final	rules	have	not	yet	been	issued.	The	agencies originally	proposed	that	the	Basel	III	and	advanced	approaches	proposal	would become	effective	on	January	1,	2013,	but	subsequently	indicated	that	the effective	date	of	these	rules	remains	under	consideration.	The	standardized approach	proposal	is	proposed	to	become	effective	on	January	1,	2015.

In	June	2012,	the	Federal	banking	agencies	also	adopted	final	market	risk	capital rules	to	implement	the	enhancements	to	the	market	risk	framework	adopted	by the	Basel	Committee	(commonly	referred	to	as	"Basel	II.5").	The	final	rules, which	apply	to	PNC,	became	effective	January	1,	2013	and,	among	other	things, narrow	the	types	of	positions	that	are	subject	to	the	market	risk	capital framework,	establish	a	new	stressed	Value	at	Risk	("VaR")	charge	for	covered trading	positions,	provide	for	certain	market	risk-related	public	disclosures	and replace	references	to	credit	ratings	in	the	market	risk	rules	with	alternative methodologies	for	assessing	credit	risk.

A	number	of	other	reform	provisions	are	likely	to	significantly	impact	the	ways in	which	banks	and	bank	holding	companies,	including	PNC,	do	business.	We provide	additional	information	on	a	number	of	these	provisions	(including	new regulatory	agencies	(such	as	the	Consumer	Financial	Protection	Bureau (CFPB)),	consumer	protection	regulation,	enhanced	prudential	standards (including	stress	test	requirements),	limitations	on	investment	in	and	sponsorship of	funds,	risk	retention	by	securitization	participants,	new	regulation	of derivatives,	and	potential	applicability	of	state	consumer	protection	laws)	and some	of	their	potential	impacts	on	PNC	in	Item	1	Business–Supervision	and Regulation	and	Item	1A	Risk	Factors	of	this	Report.

As	noted	in	prior	filings,	in	April	2011,	PNC	and	other	mortgage	servicers entered	into	Consent	Orders	with	the	OCC	and	Federal	Reserve	Board	requiring, among	other	matters,	that	the	servicers	retain	independent	consultants	to	conduct reviews	of	default	and	foreclosure	files	from	the	2009-2010	timeframe	regarding possible	improper	financial	harm	to	borrowers	as	a	result	of	such	default	and foreclosure	activities.	In	early	2013,	PNC	and	12	other	servicers	agreed	with	the OCC	and	the	Federal	Reserve	to	end	the	independent	consultants'	files	review program	and	to	replace	it	with	an

accelerated	remediation	process.	PNC	agreed	to	pay	approximately	$70	million for	distribution	to	potentially	affected	borrowers	in	the	review	population,	and agreed	to	provide	approximately	$111	million	in	additional	loss	mitigation	or other	foreclosure	prevention	relief,	which	may	be	satisfied	pursuant	to	the amended	consent	orders	by	a	variety	of	borrower	relief	actions	or	by	additional cash	payments	or	resource	commitments	to	borrower	counseling	or	education. PNC	expects	residential	mortgage	foreclosure-related	compliance	expenses	to decrease	substantially	in	2013	compared	with	2012.

There	have	been,	and	continue	to	be,	numerous	other	governmental,	legislative and	regulatory	inquiries	and	investigations	on	this	topic	and	other	issues	related to	mortgage	lending	and	servicing.	These	inquiries	and	investigations	may	result in	significant	additional	actions,	penalties	or	other	remedies.

For	additional	information,	including	with	respect	to	some	of	the	governmental, legislative	and	regulatory	inquiries	and	investigations,	please	see	Risk	Factors	in Item	1A	of	this	Report	and	Note	23	Legal	Proceedings	and	Note	24 Commitments	and	Guarantees	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report.

The	mortgage	industry,	including	PNC,	has	seen	further	changes	in	behavior	and demand	patterns	of	government-sponsored	enterprises,	FHLMC	and	FNMA,	for loans	sold	into	agency	securitizations,	primarily	focused	on	loans	originated prior	to	2008.	PNC	recorded	an	additional	pre-tax	provision	of	$761	million	in 2012	for	residential	mortgage	repurchase	obligations	related	to	expected	elevated levels	of	repurchase	demands	bringing	the	total	reserve	on	our	balance	sheet	for residential	mortgage	repurchase	claims	at	December	31,	2012	to	$614	million.

# HURRICANE	SANDY

During	the	last	week	of	October	2012,	Hurricane	Sandy	caused	widespread damage	along	the	East	Coast	particularly	in	New	Jersey,	a	key	market	area	for us.	The	storm	resulted	in	significant	property	damage	to	our	customers,	the closing	or	disruption	of	many	businesses	and	damage	to	the	community infrastructure.	Despite	the	damage	and	disruption	to	some	of	its	branches	and facilities,	PNC	assisted	its	customers,	clients	and	borrowers	in	the	affected	areas. PNC	waived	a	number	of	checking	account	and	loan	fees,	including	late payment	fees	on	business	and	consumer	loans,	which	did	not	have	a	significant impact	to	PNC's	financial	statements.	PNC	also	incurred	expenses	related	to Hurricane	Sandy	the	majority	of	which	are	related	to	damage	to	branches	in	the affected	areas.	In	addition,	PNC	also	experienced	some	credit-related	expenses. These	expenses	did	not	have	a	significant	impact	to	PNC's	financial	statements.

# KEY	FACTORS	AFFECTING	FINANCIAL	PERFORMANCE

Our	financial	performance	is	substantially	affected	by	a	number	of	external factors	outside	of	our	control,	including	the	following: •	General	economic	conditions,	including	the	continuity,	speed	and stamina	of	the	moderate	economic	recovery	in	general	and	on	our customers	in	particular,

•	The	level	of,	and	direction,	timing	and	magnitude	of	movement	in, interest	rates	and	the	shape	of	the	interest	rate	yield	curve,

•	The	functioning	and	other	performance	of,	and	availability	of	liquidity in,	the	capital	and	other	financial	markets,

•	Loan	demand,	utilization	of	credit	commitments	and	standby	letters	of credit,	and	asset	quality,

•	Customer	demand	for	non-loan	products	and	services,

•	Changes	in	the	competitive	and	regulatory	landscape	and	in counterparty	creditworthiness	and	performance	as	the	financial services	industry	restructures	in	the	current	environment, •	The	impact	of	the	extensive	reforms	enacted	in	the	Dodd-Frank legislation	and	other	legislative,	regulatory	and	administrative initiatives,	including	those	outlined	elsewhere	in	this	Report,	and •	The	impact	of	market	credit	spreads	on	asset	valuations.

In	addition,	our	success	will	depend	upon,	among	other	things:

•	Further	success	in	growing	profitability	through	the	acquisition	and retention	of	customers,

•	Continued	development	of	the	geographic	markets	related	to	our	recent

acquisitions,	including	full	deployment	of	our	product	offerings	into our	Southeast	markets,

•	Revenue	growth	and	our	ability	to	provide	innovative	and	valued products	to	our	customers,

•	Our	ability	to	utilize	technology	to	develop	and	deliver	products	and services	to	our	customers,

•	Our	ability	to	manage	and	implement	strategic	business	objectives

within	the	changing	regulatory	environment,

•	A	sustained	focus	on	expense	management,

•	Managing	the	non-strategic	assets	portfolio	and	impaired	assets,

•	Improving	our	overall	asset	quality,

•	Continuing	to	maintain	and	grow	our	deposit	base	as	a	low-cost funding	source,

•	Prudent	risk	and	capital	management	related	to	our	efforts	to	manage

risk	in	keeping	with	a	moderate	risk	philosophy,	and	to	meet	evolving regulatory	capital	standards,

•	Actions	we	take	within	the	capital	and	other	financial	markets,

•	The	impact	of	legal	and	regulatory-related	contingencies,	and •	The	appropriateness	of	reserves	needed	for	critical	estimates	and related	contingencies.

For	additional	information,	please	see	Risk	Factors	in	Item	1A	of	this	Report	and the	Cautionary	Statement	Regarding	Forward-Looking	Information	section	in this	Item	7.

# Table	1:	Summary	Financial	Results

| Year	ended	December	31 | 2012 | 2011 |
| :--- | :--- | :--- |
| Net\tincome\t(millions) | $3,001 | $3,071 |
| Diluted\tearnings\tper\tcommon\tshare |  |  |
| from\tnet\tincome | $5.30 | $5.64 |
| Return\tfrom\tnet\tincome\ton: |  |  |
| Average\tcommon\tshareholders' |  |  |
| equity | 8.31% | 9.56% |
| Average\tassets | 1.02% | 1.16% |

# INCOME	STATEMENT	HIGHLIGHTS

Our	performance	in	2012	included	the	following:

•	Net	income	for	2012	of	$3.0	billion	decreased	2	percent	compared	to 2011.	Revenue	growth	of	8	percent	and	a	decline	in	the	provision	for credit	losses	were	more	than	offset	by	a	16	percent	increase	in noninterest	expense	in	2012	compared	with	2011.	Further	detail	is included	below	and	in	the	Consolidated	Income	Statement	Review section	of	this	Item	7.

•	Net	interest	income	of	$9.6	billion	for	2012	increased	11	percent

compared	with	2011	driven	by	the	impact	of	the	RBC	Bank	(USA) acquisition,	organic	loan	growth	and	lower	funding	costs.

•	Noninterest	income	of	$5.9	billion	for	2012	increased	$.2	billion compared	to	2011.	The	increase	was	primarily	driven	by	higher residential	mortgage	loans	sales	revenue	related	to	an	increase	in	loan origination	volume,	gains	on	sales	of	Visa	Class	B	common	shares	and higher	corporate	service	fees,	largely	offset	by	higher	provision	for residential	mortgage	repurchase	obligations.

•	The	provision	for	credit	losses	decreased	to	$1.0	billion	for	2012 compared	to	$1.2	billion	for	2011.	The	decline	in	the	comparison	was driven	by	overall	credit	quality	improvement.

•	Noninterest	expense	of	$10.6	billion	for	2012	increased	$1.5	billion compared	with	2011	primarily	driven	by	operating	expense	for	the RBC	Bank	(USA)	acquisition,	higher	integration	costs,	increased noncash	charges	related	to	redemption	of	trust	preferred	securities	and a	charge	for	residential	mortgage	banking	goodwill	impairment, partially	offset	by	the	impact	from	higher	residential	mortgage foreclosure-related	expenses	in	2011.

# CREDIT	QUALITY	HIGHLIGHTS

•	Overall	credit	quality	improved	during	2012. •	Nonperforming	assets	of	$3.8	billion	at	December	31,	2012	decreased 9	percent	compared	to	December	31,	2011.	The	decrease	in nonperforming	assets	from	December	31,	2011	was	primarily attributable	to	decreases	in	commercial	real	estate	and	commercial nonperforming	loans.	This	decrease	was	partially	offset	by	the acquisition	of	RBC	Bank	(USA)	and	higher	nonperforming	home equity	loans	from	a	change	in	policy	for	home	equity	loans	past	due	90 days	being	placed	on	nonaccrual	status,	compared	to	a	prior	policy	of past	due	180	days.	Additionally,	pursuant	to	regulatory	guidance issued	in	the	third	quarter	of	2012,	nonperforming	consumer	loans increased	related	to	changes	in	treatment	of	certain	loans	classified	as TDRs	resulting	from	bankruptcy.	Of	these	loans,	approximately	78% were	current	on	their	payments	as	of	December	31,	2012.	Further detail	is	included	in	the	Credit	Risk	Management	portion	of	the	Risk Management	section	of	this	Item	7.

•	Accruing	loans	past	due	90	days	or	more	of	$2.4	billion	at December	31,	2012	decreased	$.6	billion,	or	21	percent,	from December	31,	2011,	primarily	due	to	a	decline	in	government	insured delinquent	residential	real	estate	loans,	a	decline	in	delinquent	home equity	loans	due	to	a	change	in	policy	for	home	equity	loans	past	due 90	days	being	placed	on	nonaccrual	status,	compared	to	prior	policy	of past	due	180	days,	and	a	decrease	in	non	government	insured residential	real	estate	loans	pursuant	to	regulatory	guidance	issued	in the	third	quarter	of	2012	related	to	changes	in	treatment	of	certain loans	classified	as	TDRs	resulting	from	bankruptcy.	Further	detail	is included	in	the	Credit	Risk	Management	portion	of	the	Risk Management	section	of	this	Item	7.

# BALANCE	SHEET	HIGHLIGHTS

•	Total	loans	increased	by	$27	billion,	or	17	percent,	to	$186	billion	at December	31,	2012	compared	to	$159	billion	at	December	31,	2011. •	Total	commercial	lending	increased	by	$20.6	billion,	or	23 percent,	from	December	31,	2011,	due	to	strong	organic	growth and	the	impact	from	the	RBC	Bank	(USA)	acquisition.

•	Total	consumer	lending	increased	$6.2	billion,	or	9	percent,	from December	31,	2011	primarily	in	home	equity	and	automobile loans,

	including	the	impact	from	the	RBC	Bank	(USA)	acquisition. •	Total	deposits	were	$213	billion	at	December	31,	2012	compared	with $188	billion	at	December	31,	2011.

•	Transaction	deposits	increased	to	$177	billion	at	December	31, 2012	compared	to	$148	billion	at	December	31,	2011,	including the	impact	from	the	RBC	Bank	(USA)	acquisition	as	well	as organic	transaction	deposit	growth	from	increases	in	both consumer	and	commercial	liquidity.	Transaction	deposits	were 83%	percent	of	total	deposits	at	December	31,	2012,	reflecting our	strong	customer	focus	and	core	strategy	to	grow	checking relationships.

•	Retail	certificates	of	deposit	declined	by	$5.7	billion	at December	31,	2012	from	December	31,	2011	due	to	runoff	of maturing	accounts.

•	As	of	February	22,	2013,	deposits	have	declined	by approximately	2.7%	from	the	December	31,	2012	level	as	a result	of	seasonal	and	normal	business	activity.	Deposit fluctuations	due	to	the	Transaction	Account	Guarantee Program's	expiration	have	not	been	significant.	Management expects	that	in	the	current	interest	rate	environment,	additional deposit	runoff	will	not	be	significant.

•	PNC's	balance	sheet	remained	core	funded	with	a	loans	to	deposits ratio	of	87	percent	at	December	31,	2012	and	retained	a	strong	bank holding	company	liquidity	position.

•	Trust	preferred	securities	and	hybrid	capital	securities	redeemed	in 2012	totaled	$2.3	billion	with	a	weighted	average	rate	of	8.3	percent, effectively	lowering	funding	costs.

•	PNC	issued	approximately	$2	billion	of	preferred	stock	in	2012	with	a weighted	average	rate	of	5.9	percent.

•	PNC	had	strong	capital	levels	at	December	31,	2012	with	a	Tier	1 common	capital	ratio	of	9.6	percent	compared	to	10.3	percent	at December	31,	2011,	which	reflected	a	decrease	of	approximately	1.2 percentage	points	from	the	acquisition	of	RBC	Bank	(USA),	partially offset	by	retention	of	earnings.

•	PNC's	estimated	proforma	Basel	III	Tier	1	common	capital	ratio	was 7.5	percent	at	December	31,	2012	without	benefit	of	phase-ins,	based on	current	understanding	of	Basel	III	proposed	rules,	estimates	of Basel	II	(with	proposed	modifications)	risk-weighted	assets,	and application	of	Basel	II.5	rules.	PNC's	goal	is	to	be	within	a	Basel	III Tier	1	common	capital	ratio	range	of	between	8.0	to	8.5	percent	by year	end	2013	without	benefit	of	phase-ins.	We	believe	we	are positioned	to	reach	this	goal.

•	In	April	2012	the	PNC	board	of	directors	raised	the	quarterly	cash dividend	on	common	stock	to	40	cents

per	share,	an	increase	of	5	cents	per	share,	or	14	percent.	PNC purchased	$190	million	of	common	stock	in	2012	under	a	$250	million authorization	as	part	of	its	existing	25	million	share	repurchase program	in	open	market	or	privately	negotiated	transactions.

Our	Consolidated	Income	Statement	Review	section	of	this	Item	7	describes	in greater	detail	the	various	items	that	impacted	our	results	for	2012	and	2011.

# AVERAGE	CONSOLIDATED	BALANCE	SHEET	HIGHLIGHTS

Total	assets	were	$305.1	billion	at	December	31,	2012	compared	with	$271.2 billion	at	December	31,	2011.	The	increase	from	year	end	2011	was	primarily due	to	the	addition	of	assets	from	the	RBC	Bank	(USA)	acquisition	and	organic loan	growth.

Various	seasonal	and	other	factors	impact	our	period-end	balances	whereas average	balances	are	generally	more	indicative	of	underlying	business	trends apart	from	the	impact	of	acquisitions	and	divestitures.	The	Consolidated	Balance Sheet	Review	section	of	this	Item	7	provides	information	on	changes	in	selected Consolidated	Balance	Sheet	categories	at	December	31,	2012	compared	with December	31,	2011.

Total	average	assets	increased	to	$295.0	billion	for	2012	compared	with	$265.3 billion	for	2011,	reflecting	an	increase	of	$24.2	billion	in	average	interest- earning	assets	to	$248.6	billion	for	2012,	compared	with	$224.3	billion	in	2011. The	increase	in	average	interest-earning	assets	was	primarily	driven	by	an increase	in	average	total	loans,	including	those	acquired	from	the	RBC	Bank (USA)	acquisition.

Total	loans	at	December	31,	2012	increased	$26.8	billion	to	$185.9	billion compared	to	December	31,	2011.	Average	total	loans	increased	by	$24.6	billion to	$176.6	billion	for	2012	compared	with	2011,	primarily	due	to	increases	in average	commercial	loans	of	$17.2	billion	and	in	average	consumer	loans	of $5.1	billion.	Loans	added	from	the	RBC	Bank	(USA)	acquisition	contributed	to the	increase.	In	addition,	average	commercial	loans	increased	from	organic	loan growth	primarily	in	corporate	banking,	real	estate	and	asset-based	lending	and average	consumer	loans	increased	due	to	growth	in	indirect	auto	loans.	Loans represented	71	percent	of	average	interest-earning	assets	for	2012	compared	to 68	percent	for	2011.

Average	investment	securities	increased	$1.1	billion	to	$60.8	billion	in	2012 compared	with	2011.	Total	investment	securities	comprised	24	percent	of average	interest-earning	assets	for	2012	and	27	percent	for	2011.

Average	noninterest-earning	assets	totaled	$46.5	billion	in	2012	compared	with $41.0	billion	in	2011.	The	increase	included	the	impact	of	higher	adjustments	for net	unrealized	gains	on	securities,	which	are	included	in	noninterest-earning assets	for	average	balance	sheet	purposes,	the	impact	of	the

RBC	Bank	(USA)	acquisition,	including	goodwill,	and	an	increase	in	equity investments.

Average	total	deposits	increased	by	$18.5	billion	to	$201.6	billion	in	2012 compared	with	2011.	This	increase	primarily	resulted	from	an	increase	in average	transaction	deposits	of	$23.9	billion	partially	offset	by	a	decrease	of $7.4	billion	in	retail	certificates	of	deposit	attributable	to	runoff	of	maturing accounts.	Growth	in	average	noninterest-bearing	deposits,	average	money market	deposits	and	average	interest-bearing	demand	deposits	drove	the	increase in	transaction	deposits,	which	resulted	from	deposits	added	in	the	RBC	Bank (USA)	acquisition	and	organic	growth.	Average	transaction	deposits	were	$161.9 billion	for	2012	compared	with	$138.0	billion	for	2011.	Total	deposits	at December	31,	2012	were	$213.1	billion	compared	with	$188.0	billion	at December	31,	2011	and	are	further	discussed	within	the	Consolidated	Balance Sheet	Review	section	of	this	Item	7.

Average	total	deposits	represented	68	percent	of	average	total	assets	for	2012 and	69	percent	for	2011.

Average	borrowed	funds	increased	to	$41.8	billion	for	2012	compared	with $35.7	billion	for	2011.	An	increase	in	commercial	paper	and	net	issuances	of Federal	Home	Loan	Bank	(FHLB)	borrowings	during	2012	drove	the	increase compared	with	2011.	Total	borrowed	funds	at	December	31,	2012	were	$40.9 billion	compared	with	$36.7	billion	at	December	31,	2011	and	are	further discussed	within	the	Consolidated	Balance	Sheet	Review	section	of	this	Item	7. In	addition,	the	Liquidity	Risk	Management	portion	of	the	Risk	Management section	of	this	Item	7	includes	additional	information	regarding	our	sources	and uses	of	borrowed	funds.

# BUSINESS	SEGMENT	HIGHLIGHTS

Total	business	segment	earnings	were	$3.4	billion	for	2012	and	$3.1	billion	for 2011.	Highlights	of	results	for	2012	and	2011	are	included	below.	Enhancements were	made	to	the	internal	funds	transfer	pricing	methodology	during	the	second quarter	of	2012.	Retrospective	application	of	our	new	funds	transfer	pricing methodology	has	been	made	to	the	prior	period	reportable	business	segment results	and	disclosures	to	create	comparability	to	the	current	period	presentation, which	we	believe	is	more	meaningful	to	readers	of	our	financial	statements.	Key reserve	assumptions	and	estimation	processes	react	to	and	are	influenced	by observed	changes	in	loan	portfolio	performance	experience,	the	financial strength	of	the	borrower,	and	economic	conditions.	Key	reserve	assumptions	are periodically	updated.	During	the	third	quarter	of	2012,	PNC	increased	the amount	of	internally	observed	data	used	in	estimating	the	key	commercial lending	assumptions	of	Probabilities	of	Default	(PDs)	and	Losses	Given	Default (LGDs).	The	estimated	impact	as	of	the	beginning	of	the	third	quarter	2012	was approximately	an	increase	of	$41	million	and	a	decrease	of	$55	million	to	the provision	for	credit	losses	of	Retail	Banking	and	Corporate	&	Institutional Banking,	respectively.	Prior	periods	are	not	presented	on	a	comparable	basis	as	it is	not	practicable	to	do	so.

We	refer	you	to	Item	1	of	this	Report	under	the	captions	Business	Overview	and Review	of	Business	Segments	for	an	overview	of	our	business	segments	and	to the	Business	Segments	Review	section	of	this	Item	7	for	the	Results	Of Businesses	–	Summary	table	and	further	analysis	of	business	segment	results	for 2012	and	2011,	including	presentation	differences	from	Note	26	Segment Reporting	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report.

We	provide	a	reconciliation	of	total	business	segment	earnings	to	PNC consolidated	income	from	continuing	operations	before	noncontrolling	interests as	reported	according	to	accounting	principles	generally	accepted	in	the	United States	of	America	(GAAP)	in	Note	26	Segment	Reporting	in	our	Notes	To Consolidated	Financial	Statements	of	Item	8	of	this	Report.

# RETAIL	BANKING

Retail	Banking	earned	$596	million	in	2012	compared	with	$371	million	in 2011.	The	increase	in	earnings	resulted	from	organic	growth	in	transaction deposit	balances,	gains	on	sales	of	Visa	Class	B	common	shares,	lower	rates paid	on	deposits,	higher	levels	of	customer-initiated	transactions,	a	lower provision	for	credit	losses,	and	the	impact	of	the	RBC	Bank	(USA)	acquisition, partially	offset	by	the	regulatory	impact	of	lower	interchange	fees	on	debit	card transactions	and	higher	additions	to	legal	reserves.

# CORPORATE	&	INSTITUTIONAL	BANKING

Corporate	&	Institutional	Banking	earned	$2.3	billion	in	2012	compared	with $1.9	billion	in	2011.	The	increase	in	earnings	was	primarily	due	to	higher revenue	partially	offset	by	higher	noninterest	expense	and	a	provision	for	credit losses	of	zero	in	2012	compared	with	a	benefit	of	$124	million	in	2011.	We continued	to	focus	on	building	client	relationships	including	increasing	cross sales	and	adding	new	clients	where	the	risk-return	profile	was	attractive.

# ASSET	MANAGEMENT	GROUP

Asset	Management	Group	earned	$145	million	in	2012	compared	with	$168 million	in	2011.	Assets	under	administration	increased	to	$224	billion	at December	31,	2012	from	$210	billion	at	December	31,	2011	driven	by	stronger average	equity	markets.	Revenue	increased	$44	million	in	the	year	over	year comparison	as	strong	sales	and	higher	average	equity	markets	increased noninterest	income	by	4%	and	higher	average	deposit	balances	increased	net interest	income	by	6%.	The	revenue	increase	was	offset	by	higher	noninterest expense	from	strategic	business	investments	and	higher	provision	for	credit losses.

# RESIDENTIAL	MORTGAGE	BANKING

Residential	Mortgage	Banking	reported	a	loss	of	$308	million	in	2012	compared with	earnings	of	$89	million	in	2011.	Earnings	declined	from	the	prior	year primarily	as	a	result	of	higher	provision	for	residential	mortgage	repurchase obligations,	higher	noninterest	expense,	including	goodwill	impairment,	and lower	net	hedging	gains	on	mortgage	servicing	rights,	partially	offset	by increased	loan	sales	revenue	driven	by	higher	loan	origination	volume.

# BLACKROCK

Our	BlackRock	business	segment	earned	$395	million	in	2012	and	$361	million in	2011.	We	hold	an	equity	investment	in	BlackRock,	which	is	a	key	component of	our	diversified	revenue	strategy.	BlackRock	is	a	publicly	traded	company, and	additional	information	regarding	its	business	is	available	in	its	filings	with the	SEC.

# NON-STRATEGIC	ASSETS	PORTFOLIO

This	business	segment	consists	primarily	of	non-strategic	assets	obtained through	acquisitions	of	other	companies.	Non-Strategic	Assets	Portfolio	had earnings	of	$237	million	for	2012	compared	with	$200	million	in	2011.	The increase	was	primarily	attributable	to	a	lower	provision	for	credit	losses, partially	offset	by	lower	net	interest	income	driven	by	declines	in	loan	balances and	purchase	accounting	accretion.

# OTHER

"Other"	had	a	loss	of	$392	million	in	2012	compared	with	a	loss	of	$58	million in	2011.	The	increase	in	loss	in	the	2012	period	was	primarily	due	to	higher integration	costs	and	noncash	charges	related	to	redemption	of	trust	preferred securities.

# CONSOLIDATED	INCOME	STATEMENT	REVIEW

Our	Consolidated	Income	Statement	is	presented	in	Item	8	of	this	Report.

Net	income	for	2012	was	$3.0	billion	compared	with	$3.1	billion	for	2011. Revenue	growth	of	8	percent	and	a	decline	in	the	provision	for	credit	losses	were more	than	offset	by	a	16	percent	increase	in	noninterest	expense	in	2012 compared	to	2011.	Further	detail	is	included	in	the	Net	Interest	Income, Noninterest	Income,	Provision	For	Credit	Losses	and	Noninterest	Expense portions	of	this	Consolidated	Income	Statement	Review.

# NET	INTEREST	INCOME

# Table	2:	Net	Interest	Income	and	Net	Interest	Margin

| Dollars	in	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| Net\tinterest\tincome | $9,640 | $8,700 |
| Net\tinterest\tmargin | 3.94% | 3.92% |

Changes	in	net	interest	income	and	margin	result	from	the	interaction	of	the volume	and	composition	of	interest-earning	assets	and	related	yields,	interest- bearing	liabilities	and	related	rates	paid,	and	noninterest-bearing	sources	of funding.	See	the	Statistical	Information	(Unaudited)	–	Average	Consolidated Balance	Sheet	And	Net	Interest	Analysis	and	Analysis	Of	Year-To-Year Changes	In	Net	Interest	Income	in	Item	8	of	this	Report	and	the	discussion	of purchase	accounting	accretion	of	purchased	impaired	loans	in	the	Consolidated Balance	Sheet	Review	in	this	Item	7	for	additional	information.

The	increase	in	net	interest	income	in	2012	compared	with	2011	was	primarily due	to	the	impact	of	the	RBC	Bank	(USA)	acquisition,	organic	loan	growth	and lower	funding	costs.	Purchase	accounting	accretion	remained	stable	at	$1.1 billion	in	both	periods.

The	net	interest	margin	was	3.94%	for	2012	and	3.92%	for	2011.	The	increase	in the	comparison	was	primarily	due	to	a	decrease	in	the	weighted-average	rate accrued	on	total	interest-bearing	liabilities	of	29	basis	points,	largely	offset	by	a 21	basis	point	decrease	on	the	yield	on	total	interest-earning	assets.	The	decrease in	the	rate	on	interest-bearing	liabilities	was	primarily	due	to	the	runoff	of maturing	retail	certificates	of	deposit	and	the	redemption	of	additional	trust preferred	and	hybrid	capital	securities	during	2012,	in	addition	to	an	increase	in FHLB	borrowings	and	commercial	paper	as	lower-cost	funding	sources.	The decrease	in	the	yield	on	interest-earning	assets	was	primarily	due	to	lower	rates on	new	loan	volume	and	lower	yields	on	new	securities	in	the	current	low	rate environment.

With	respect	to	the	first	quarter	of	2013,	we	expect	net	interest	income	to	decline by	two	to	three	percent	compared	to	fourth

quarter	2012	net	interest	income	of	$2.4	billion,	due	to	a	decrease	in	purchase accounting	accretion	of	up	to	$50	to	$60	million,	including	lower	expected	cash recoveries.

For	the	full	year	2013,	we	expect	net	interest	income	to	decrease	compared	with 2012,	assuming	an	expected	decline	in	purchase	accounting	accretion	of approximately	$400	million,	while	core	net	interest	income	is	expected	to increase	in	the	year-over-year	comparison.	We	believe	our	net	interest	margin will	come	under	pressure	in	2013,	due	to	the	expected	decline	in	purchase accounting	accretion	and	assuming	that	the	current	low	rate	environment continues.

# NONINTEREST	INCOME

Noninterest	income	totaled	$5.9	billion	for	2012	and	$5.6	billion	for	2011.	The overall	increase	in	the	comparison	was	primarily	due	to	an	increase	in	residential mortgage	loan	sales	revenue	driven	by	higher	loan	origination	volume,	gains	on sales	of	Visa	Class	B	common	shares	and	higher	corporate	service	fees,	largely offset	by	higher	provision	for	residential	mortgage	repurchase	obligations.

Asset	management	revenue,	including	BlackRock,	totaled	$1.2	billion	in	2012 compared	with	$1.1	billion	in	2011.	This	increase	was	primarily	due	to	higher earnings	from	our	BlackRock	investment.	Discretionary	assets	under management	increased	to	$112	billion	at	December	31,	2012	compared	with $107	billion	at	December	31,	2011	driven	by	stronger	average	equity	markets, positive	net	flows	and	strong	sales	performance.

For	2012,	consumer	services	fees	were	$1.1	billion	compared	with	$1.2	billion	in 2011.	The	decline	reflected	the	regulatory	impact	of	lower	interchange	fees	on debit	card	transactions	partially	offset	by	customer	growth.	As	further	discussed in	the	Retail	Banking	portion	of	the	Business	Segments	Review	section	of	this Item	7,	the	Dodd-Frank	limits	on	interchange	rates	were	effective	October	1, 2011	and	had	a	negative	impact	on	revenue	of	approximately	$314	million	in 2012	and	$75	million	in	2011.	This	impact	was	partially	offset	by	higher volumes	of	merchant,	customer	credit	card	and	debit	card	transactions	and	the impact	of	the	RBC	Bank	(USA)	acquisition.

Corporate	services	revenue	increased	by	$.3	billion,	or	30	percent,	to	$1.2	billion in	2012	compared	with	$.9	billion	in	2011	due	to	higher	commercial	mortgage servicing	revenue	and	higher	merger	and	acquisition	advisory	fees	in	2012.	The major	components	of	corporate	services	revenue	are	treasury	management revenue,	corporate	finance	fees,	including	revenue	from	capital	markets-related products	and	services,	and	commercial	mortgage	servicing	revenue,	including commercial	mortgage	banking	activities.	See	the	Product	Revenue	portion	of	this Consolidated	Income	Statement	Review	for	further	detail.

Residential	mortgage	revenue	decreased	to	$284	million	in	2012	from	$713 million	in	2011.	This	decrease	of	$429	million,	or	60	percent,	was	largely	due	to a	higher	provision	for	residential	mortgage	repurchase	obligations	of	$761 million	in	2012	compared	with	$102	million	in	2011,	partially	offset	by	an increase	in	loan	sales	revenue	driven	by	higher	loan	origination	volume.

The	higher	provision	for	residential	mortgage	repurchase	obligations	in	2012 reflected	expected	further	elevated	levels	of	repurchase	demands	primarily	as	a result	of	changes	in	behaviors	and	demand	patterns	of	two	government- sponsored	enterprises,	FHLMC	and	FNMA,	for	loans	sold	into	agency securitizations.	The	recorded	liability	for	residential	mortgage	indemnification and	repurchase	claims	was	$614	million	at	December	31,	2012.	See	the Recourse	And	Repurchase	Obligations	section	of	this	Item	7	for	more	detail.

Service	charges	on	deposits	grew	to	$573	million	in	2012	compared	with	$534 million	in	2011.	This	increase	reflected	continued	success	in	growing	customers, including	through	the	RBC	Bank	(USA)	acquisition.

Net	gains	on	sales	of	securities	totaled	$204	million	for	2012	and	$249	million for	2011.	The	net	credit	component	of	other-than-temporary	impairment	(OTTI) of	securities	recognized	in	earnings	was	$111	million	in	2012	compared	with $152	million	for	2011.

Other	noninterest	income	increased	by	$.4	billion,	or	38	percent,	to	$1.5	billion for	2012	compared	with	$1.1	billion	for	2011.	This	increase	was	primarily	due	to $267	million	of	gains	on	sales	of	approximately	9	million	Visa	Class	B	common shares	during	the	third	and	fourth	quarters	of	2012,	as	well	as	higher	revenue associated	with	private	equity	investments.	We	continue	to	hold	approximately 14.4	million	Visa	Class	B	common	shares	with	an	estimated	fair	value	of approximately	$916	million	as	of	December	31,	2012.	Our	recorded	investment in	these	remaining	shares	was	approximately	$251	million	at	December	31, 2012.

Other	noninterest	income	typically	fluctuates	from	period	to	period	depending on	the	nature	and	magnitude	of	transactions	completed.	Further	details	regarding our	trading	activities	are	included	in	the	Market	Risk	Management	–	Trading Risk	portion	of	the	Risk	Management	section	of	this	Item	7.	Further	details regarding	private	and	other	equity	investments	are	included	in	the	Market	Risk Management	–	Equity	And	Other	Investment	Risk	portion	of	the	Risk Management	section	of	this	Item	7,	and	further	details	regarding	gains	or	losses related	to	our	equity	investment	in	BlackRock	are	included	in	the	Business Segments	Review	section	of	this	Item	7.

For	2013,	we	currently	expect	both	noninterest	income	and	total	revenue	to increase	compared	with	2012.

# PRODUCT	REVENUE

In	addition	to	credit	and	deposit	products	for	commercial	customers, Corporate	&	Institutional	Banking	offers	other	services,	including	treasury management,	capital	markets-related	products	and	services,	and	commercial mortgage	banking	activities	for	customers	of	all	our	business	segments.	A portion	of	the	revenue	and	expense	related	to	these	products	is	reflected	in	the Corporate	&	Institutional	Banking	segment	results	and	the	remainder	is	reflected in	the	results	of	other	businesses.	The	Other	Information	section	in	the Corporate	&	Institutional	Banking	table	in	the	Business	Segments	Review section	of	this	Item	7	includes	the	consolidated	revenue	to	PNC	for	these services.	A	discussion	of	the	consolidated	revenue	from	these	services	follows.

Treasury	management	revenue,	comprised	of	fees	and	net	interest	income	from customer	deposit	balances,	totaled	$1.4	billion	for	2012	and	$1.3	billion	for 2011.	Higher	deposit	balances	along	with	strong	growth	in	commercial	card, lockbox	and	traditional	products,	including	DDA,	wire	and	ACH,	led	to	the favorable	results.

Revenue	from	capital	markets-related	products	and	services	totaled	$710	million in	2012	compared	with	$622	million	in	2011.	The	comparison	reflects	higher merger	and	acquisition	advisory	fees	and	strong	customer	driven	capital	markets activity.

Commercial	mortgage	banking	activities	include	revenue	derived	from commercial	mortgage	servicing	(including	net	interest	income	and	noninterest income	from	loan	servicing	and	ancillary	services,	net	of	commercial	mortgage servicing	rights	amortization,	and	commercial	mortgage	servicing	rights valuations	net	of	economic	hedge),	and	revenue	derived	from	commercial mortgage	loans	intended	for	sale	and	related	hedges	(including	loan	origination fees,	net	interest	income,	valuation	adjustments	and	gains	or	losses	on	sales).

Commercial	mortgage	banking	activities	resulted	in	revenue	of	$330	million	in 2012	compared	with	$136	million	in	2011.	The	increase	in	the	comparison	was mainly	due	to	the	impact	of	recoveries	on	commercial	mortgage	servicing	rights in	2012	compared	to	impairments	taken	during	2011.

# PROVISION	FOR	CREDIT	LOSSES

The	provision	for	credit	losses	totaled	$1.0	billion	for	2012,	a	decrease	of	$.2 billion,	or	14	percent,	compared	with	$1.2	billion	for	2011.	The	decline	in	the comparison	was	driven	by	overall	credit	quality	improvement.

We	currently	expect	our	provision	for	credit	losses	in	the	first	quarter	of	2013	to be	between	$200	and	$300	million,	as	we	expect	the	benefit	of	commercial	loan reserve	releases	to	be	lower	in	2013	compared	to	2012.

The	Credit	Risk	Management	portion	of	the	Risk	Management	section	of	this Item	7	includes	additional	information	regarding	factors	impacting	the	provision for	credit	losses.	See	also	Item	1A	Risk	Factors	and	the	Cautionary	Statement Regarding	Forward-Looking	Information	section	of	Item	7	of	this	Report.

# NONINTEREST	EXPENSE

Noninterest	expense	was	$10.6	billion	for	2012	and	$9.1	billion	for	2011. Noninterest	expense	for	2012	included	noncash	charges	of	$295	million	related to	redemption	of	trust	preferred	securities,	integration	costs	of	$267	million, $225	million	of	residential	mortgage	foreclosure-related	expenses,	and	a	noncash charge	of	$45	million	for	residential	mortgage	banking	goodwill	impairment. Noninterest	expense	for	2011	included	$324	million	of	residential	mortgage foreclosure-related	expenses,	$198	million	of	noncash	charges	related	to redemption	of	trust	preferred	securities	and	$42	million	of	integration	costs.	The increase	in	noninterest	expense	in	2012	compared	with	2011	also	reflected operating	expense	for	the	RBC	Bank	(USA)	acquisition,	higher	personnel expense,	higher	settlements	for	other	litigation	and	increased	expenses	for	other real	estate	owned.

In	the	first	quarter	of	2013,	we	expect	noninterest	expense	to	decrease	by	at	least $300	million	compared	to	noninterest	expense	in	fourth	quarter	2012	of	$2.8 billion.	This	expected	decline	is	primarily	due	to	our	expectations	for	a significant	reduction	in	residential	mortgage	foreclosure-related	compliance expenses,	which	were	$91	million	in	the	fourth	quarter	and	included	the	impact of	a	charge	of	approximately	$70	million	for	the	early	2013	amendment	to	our foreclosure	consent	orders,	and	for	no	anticipated	noncash	charges	related	to redemption	of	trust	preferred	securities	and	goodwill	impairment,	and	integration costs,	which	were	$70	million,	$45	million	and	$35	million	in	the	fourth	quarter of	2012,	respectively.

For	full	year	2013,	we	have	increased	our	continuous	improvement	expense savings	goal	to	$700	million,	which	represents	approximately	7	percent	of	our noninterest	expense	in	2012	and	reflects	an	expected	decline	in	residential mortgage	foreclosure-related	compliance	expenses.	We	expect	that	amount	to	be offset	by	investments	in	our	businesses	and	infrastructure,	including	the	full	year impact	of	investing	in	the	Southeast.	However,	we	are	not	expecting	to	incur integration	costs	in	2013	and	anticipate	the	charges	for	any	noncash	charges related	to	redemption	of	trust	preferred	securities	to	be	approximately	$60 million	or	less	in	2013.

As	a	result,	we	currently	expect	total	noninterest	expense	for	2013	to	decline	by mid-single	digits	on	a	percentage	basis	compared	with	2012.

# EFFECTIVE	INCOME	TAX	RATE

The	effective	income	tax	rate	was	23.9%	in	2012	compared	with	24.5%	in	2011. The	effective	tax	rate	is	generally	lower	than	the	statutory	rate	primarily	due	to tax	credits	PNC	receives	from	our	investments	in	low	income	housing partnerships	and	other	tax	exempt	investments.

We	expect	our	2013	full	year	effective	tax	rate	to	be	between	25	to	26	percent, reflecting	expected	higher	pre-tax	income.

# CONSOLIDATED	BALANCE	SHEET	REVIEW

# Table	3:	Summarized	Balance	Sheet	Data

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Assets |  |  |
| Loans | $185,856 | $159,014 |
| Investment\tsecurities | 61,406 | 60,634 |
| Cash\tand\tshort-term\tinvestments | 12,763 | 9,992 |
| Loans\theld\tfor\tsale | 3,693 | 2,936 |
| Goodwill\tand\tother\tintangible\tassets | 10,869 | 10,144 |
| Equity\tinvestments | 10,877 | 10,134 |
| Other,\tnet | 19,643 | 18,351 |
| Total\tassets | $305,107 | $271,205 |
| Liabilities |  |  |
| Deposits | $213,142 | $187,966 |
| Borrowed\tfunds |  |  |
| Commercial\tpaper | 8,453 | 4,271 |
| Other | 32,454 | 32,433 |
| Other | 9,293 | 9,289 |
| Total\tliabilities | 263,342 | 233,959 |
| Total\tshareholders'\tequity | 39,003 | 34,053 |

The	summarized	balance	sheet	data	above	is	based	upon	the	Consolidated Balance	Sheet	in	Item	8	of	this	Report.

The	increase	in	total	assets	of	$33.9	billion	at	December	31,	2012	compared	with December	31,	2011	was	primarily	due	to	the	addition	of	assets	from	the	RBC Bank	(USA)	acquisition	and	organic	loan	growth.	Total	liabilities	increased $29.4	billion	at	December	31,	2012	compared	with	December	31,	2011	primarily due	to	the	addition	of	deposits	from	the	RBC	Bank	(USA)	acquisition,	organic growth	in	transaction	deposits,	and	higher	commercial	paper	and	Federal	Home Loan	Bank	borrowings,	partially	offset	by	the	maturity	of	retail	certificates	of deposit	and	lower	bank	notes	and	senior	and	subordinated	debt.

An	analysis	of	changes	in	selected	balance	sheet	categories	follows.

# LOANS

A	summary	of	the	major	categories	of	loans	outstanding	follows.	Outstanding loan	balances	of	$185.9	billion	at	December	31,	2012	and	$159.0	billion	at December	31,	2011	were	net	of	unearned	income,	net	deferred	loan	fees, unamortized	discounts	and	premiums,	and	purchase	discounts	and	premiums	of $2.7	billion	at	December	31,	2012	and	$2.3	billion	at	December	31,	2011, respectively.	The	balances	include	purchased	impaired	loans	but	do	not	include future	accretable	net	interest	(i.e.,	the	difference	between	the	undiscounted expected	cash	flows	and	the	carrying	value	of	the	loan)	on	those	loans.

Loans	increased	$26.9	billion	as	of	December	31,	2012	compared	with December	31,	2011.	On	March	2,	2012,	our	RBC	Bank	(USA)	acquisition	added $14.5	billion	of	loans,	which	included	$6.3	billion	of	commercial,	$2.7	billion	of commercial	real	estate,	$3.3	billion	of	consumer	(including	$3.0	billion	of	home equity	loans	and	$.3	billion	of	credit	card	loans),	$2.1	billion	of	residential	real estate,	and	$.1	billion	of	equipment	lease	financing	loans.	Excluding	acquisition activity,	the	increase	in	commercial	loans	was	due	to	growth	primarily	in	asset- based	lending,	real	estate,	healthcare,	and	public	finance	loans	while	the	growth in	consumer	loans	was	primarily	driven	by	organic	growth	in	automobile	loans and	the	acquisition	of	an	indirect	automobile	loan	portfolio	in	the	third	quarter, partially	offset	by	lower	education	loans.	In	addition,	excluding	acquisition activity,	residential	real	estate	loans	declined	due	to	continued	run-off.

Commercial	real	estate	loans	represented	6%	of	total	assets	at	both December	31,	2012	and	December	31,	2011.

# Table	4:	Details	Of	Loans

(a) Includes	loans	to	customers	in	the	real	estate	and	construction	industries. (b) Includes	both	construction	loans	and	intermediate	financing	for	projects. (c) Construction	loans	with	interest	reserves	and	A/B	Note	restructurings	are	not	significant	to	PNC.

We	are	committed	to	providing	credit	and	liquidity	to	qualified	borrowers.	Total loan	originations	and	new	commitments	and	renewals	totaled	$157.0	billion	for 2012.

Our	loan	portfolio	continued	to	be	diversified	among	numerous	industries,	types of	businesses	and	consumers	across	our	principal	geographic	markets.

The	Allowance	for	Loan	and	Lease	Losses	(ALLL)	and	the	Allowance	for Unfunded	Loan	Commitments	and	Letters	of	Credit	are	sensitive	to	changes	in assumptions	and	judgments	and	are	inherently	subjective	as	they	require	material estimates,	all	of	which	may	be	susceptible	to	significant	change,	including, among	others:

•	Probability	of	default, •	Loss	given	default,

•	Exposure	at	date	of	default	(EAD), •	Movement	through	delinquency	stages, •	Amounts	and	timing	of	expected	cash	flows, •	Value	of	collateral,	and

•	Qualitative	factors,	such	as	changes	in	current	economic	conditions, that	may	not	be	reflected	in	historical	results.

# HIGHER	RISK	LOANS

Our	total	ALLL	of	$4.0	billion	at	December	31,	2012	consisted	of	$1.8	billion and	$2.2	billion	established	for	the	commercial	lending	and	consumer	lending categories,	respectively.	The	ALLL	included	what	we	believe	to	be	appropriate loss	coverage	on	higher	risk	loans	in	the	commercial	and	consumer	portfolios. We	do	not	consider	government	insured	or	guaranteed	loans	to	be	higher	risk	as defaults	have	historically	been	materially	mitigated	by	payments	of	insurance	or guarantee	amounts	for	approved	claims.	Additional	information	regarding	our higher	risk	loans	is	included	in	the	Credit	Risk	Management	portion	of	the	Risk Management	section	of	this	Item	7	and	in	Note	5	Asset	Quality	and	Note	7 Allowances	for	Loan	and	Lease	Losses	and	Unfunded	Loan	Commitments	and Letters	of	Credit	in	the	Notes	To	Consolidated	Financial	Statements	included	in Item	8	of	this	Report.

# PURCHASE	ACCOUNTING	ACCRETION	AND	VALUATION	OF	PURCHASED IMPAIRED	LOANS

Information	related	to	purchase	accounting	accretion	and	valuation	of	purchased impaired	loans	for	2012	and	2011	follows.	Additional	information	is	provided	in Note	6	Purchased	Loans	in	the	Notes	To	Consolidated	Financial	Statements included	in	Item	8	of	this	Report.

# Table	5:	Accretion	–	Purchased	Impaired	Loans

| Year	ended	December	31<br>In	millions | 2012<br>(a) | 2011<br>(b) |
| :--- | :--- | :--- |
| Impaired\tloans |  |  |
| Scheduled\taccretion | $671 | $666 |
| Reversal\tof\tcontractual\tinterest\ton\timpaired\tloans | (404) | (395) |
| Scheduled\taccretion\tnet\tof\tcontractual\tinterest | 267 | 271 |
| Excess\tcash\trecoveries | 157 | 254 |
| Total\timpaired\tloans | $424 | $525 |

(a) Represents	National	City	and	RBC	Bank	(USA)	acquisitions. (b) Represents	National	City	acquisition.

# Table	6:	Accretable	Net	Interest	–	Purchased	Impaired	Loans

| In	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| January\t1 | $2,109 | $2,185 |
| Addition\tof\taccretable\tyield\tdue\tto\tRBC\tBank\t(USA) |  |  |
| acquisition\ton\tMarch\t2,\t2012 | 587 |  |
| Scheduled\taccretion | (671) | (666) |
| Excess\tcash\trecoveries | (157) | (254) |
| Net\treclassifications\tto\taccretable\tfrom\tnon-\naccretable\tand\tother\tactivity\t(a) | 298 | 844 |
| December\t31\t(b) | $2,166 | $2,109 |
| (a) |  |  |

(a) Over	85	percent	of	the	net	reclassifications	were	driven	by	the	commercial	portfolio.	Over	half	of the	commercial	portfolio	impact	related	to	excess	cash	recoveries	recognized	during	the	period,	with the	remaining	due	to	improvements	of	cash	expected	to	be	collected	on	both	RBC	Bank	(USA)	and National	City	loans	in	future	periods.	The	remaining	net	reclassifications	were	due	to	future	cash flow	changes	in	the	consumer	portfolio.

(b) As	of	December	31,	2012	we	estimate	that	the	reversal	of	contractual	interest	on	purchased impaired	loans	will	total	approximately	$1.2	billion	in	future	periods.	This	will	offset	the	total	net accretable	interest	in	future	interest	income	of	$2.2	billion	on	purchased	impaired	loans.

# Table	7:	Valuation	of	Purchased	Impaired	Loans

|  |  | December	31,	2012	(a) |  | December	31,	2011	(b) |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions | Dollars\tin\tmillions | Balance | Net\tInvestment | Balance | Net\tInvestment |
| Commercial\tand\tcommercial\treal\testate\tloans: |  |  |  |  |  |
| Unpaid\tprincipal\tbalance | Unpaid\tprincipal\tbalance | $1,680 |  | $988 |  |
| Purchased\timpaired\tmark | Purchased\timpaired\tmark | (431) |  | (136) |  |
| Recorded\tinvestment | Recorded\tinvestment | 1,249 |  | 852 |  |
| Allowance\tfor\tloan\tlosses | Allowance\tfor\tloan\tlosses | (239) |  | (229) |  |
| Net\tinvestment | Net\tinvestment | 1,010 | 60% | 623 | 63% |
| Consumer\tand\tresidential\tmortgage\tloans: |  |  |  |  |  |
| Unpaid\tprincipal\tbalance | Unpaid\tprincipal\tbalance | 6,639 |  | \t 6,533 |  |
| Purchased\timpaired\tmark | Purchased\timpaired\tmark | (482) |  | (718) |  |
| Recorded\tinvestment | Recorded\tinvestment | 6,157 |  | \t 5,815 |  |
| Allowance\tfor\tloan\tlosses | Allowance\tfor\tloan\tlosses | (858) |  | (769) |  |
| Net\tinvestment | Net\tinvestment | 5,299 | 80% | \t 5,046 | 77% |
| Total\tpurchased\timpaired\tloans: |  |  |  |  |  |
| Unpaid\tprincipal\tbalance | Unpaid\tprincipal\tbalance | 8,319 |  | \t 7,521 |  |
| Purchased\timpaired\tmark | Purchased\timpaired\tmark | (913) |  | (854) |  |
| Recorded\tinvestment | Recorded\tinvestment | 7,406 |  | \t 6,667 |  |
| Allowance\tfor\tloan\tlosses | Allowance\tfor\tloan\tlosses | (1,097) |  | (998) |  |
| Net\tinvestment | Net\tinvestment | $6,309 | 76% | \t 5,669 | 75% |
| (a) | Represents\tNational\tCity\tand\tRBC\tBank\t(USA)\tacquisitions. |  |  |  |  |

(a) Represents	National	City	and	RBC	Bank	(USA)	acquisitions.

(b) Represents	National	City	acquisition.

The	unpaid	principal	balance	of	purchased	impaired	loans	increased	to	$8.3 billion	at	December	31,	2012	from	$7.5	billion	at	December	31,	2011	due	to	the acquisition	of	RBC	Bank	(USA),	partially	offset	by	payments,	disposals,	and charge-offs	of	amounts	determined	to	be	uncollectible.	The	remaining	purchased impaired	mark	at	December	31,	2012	was	$913	million,	which	was	an	increase from	$854	million	at	December	31,	2011.	The	associated	allowance	for	loan losses	increased	slightly	by	$.1	billion	to	$1.1	billion	at	December	31,	2012.	The net	investment	of	$6.3	billion	at

December	31,	2012	increased	11%	from	$5.7	billion	at	December	31,	2011.	At December	31,	2012,	our	largest	individual	purchased	impaired	loan	had	a recorded	investment	of	$18.6	million.

We	currently	expect	to	collect	total	cash	flows	of	$8.5	billion	on	purchased impaired	loans,	representing	the	$6.3	billion	net	investment	at	December	31, 2012	and	the	accretable	net	interest	of	$2.2	billion	shown	in	the	Accretable	Net Interest-Purchased	Impaired	Loans	table.

# WEIGHTED	AVERAGE	LIFE	OF	THE	PURCHASED	IMPAIRED	PORTFOLIOS

The	table	below	provides	the	weighted	average	life	(WAL)	for	each	of	the purchased	impaired	portfolios	as	of	December	31,	2012.

# Table	8:	Weighted	Average	Life	of	the	Purchased	Impaired	Portfolios

|  |  | December	31,	2012 |
| :--- | :--- | :--- |
| In\tmillions | Recorded\tInvestment | WAL\t(a) |
| Commercial | $308 | \t2.1\tyears |
| Commercial\treal\testate | 941 | \t1.9\tyears |
| Consumer\t(b) | 2,621 | \t4.1\tyears |
| Residential\treal\testate | 3,536 | \t4.5\tyears |
| Total | $7,406 | \t3.9\tyears |
| (a)\nWeighted\taverage\tlife\trepresents\tthe\taverage\tnumber\tof\tyears\tfor\twhich\teach\tdollar\tof\tunpaid |  |  |

(a) Weighted	average	life	represents	the	average	number	of	years	for	which	each	dollar	of	unpaid principal	remains	outstanding.

(b) Portfolio	primarily	consists	of	nonrevolving	home	equity	products.

# PURCHASED	IMPAIRED	LOANS	–	ACCRETABLE	DIFFERENCE	SENSITIVITY ANALYSIS

The	following	table	provides	a	sensitivity	analysis	on	the	Purchased	Impaired Loans	portfolio.	The	analysis	reflects	hypothetical	changes	in	key	drivers	for expected	cash	flows	over	the	life	of	the	loans	under	declining	and	improving conditions	at	a	point	in	time.	Any	unusual	significant	economic	events	or changes,	as	well	as	other	variables	not	considered	below	(e.g.,	natural	or widespread	disasters),	could	result	in	impacts	outside	of	the	ranges	represented below.	Additionally,	commercial	and	commercial	real	estate	loan	settlements	or sales	proceeds	can	vary	widely	from	appraised	values	due	to	a	number	of	factors including,	but	not	limited	to,	special	use	considerations,	liquidity	premiums,	and improvements	/	deterioration	in	other	income	sources.

# Table	9:	Accretable	Difference	Sensitivity	–	Total	Purchased	Impaired	Loans

| In	billions | December	31,	2012 | Declining	Scenario	(a) | Improving	Scenario	(b) |
| :--- | :--- | :--- | :--- |
| Expected\tCash\tFlows | $8.5 | $(.4) | $.5 |
| Accretable\tDifference | 2.2 | (.1) | .3 |
| Allowance\tfor\tLoan\tand\tLease\tLosses | (1.1) | (.4) | .2 |
| (a) |  |  |  |

(a) Declining	Scenario	–	Reflects	hypothetical	changes	that	would	decrease	future	cash	flow	expectations.	For	consumer	loans,	we	assume	home	price	forecast	decreases	by	10%	and	unemployment	rate	forecast increases	by	2	percentage	points;	for	commercial	loans,	we	assume	that	collateral	values	decrease	by	10%.

(b) Improving	Scenario	–	Reflects	hypothetical	changes	that	would	increase	future	cash	flow	expectations.	For	consumer	loans,	we	assume	home	price	forecast	increases	by	10%,	unemployment	rate	forecast	decreases by	2	percentage	points	and	interest	rate	forecast	increases	by	2	percentage	points;	for	commercial	loans,	we	assume	that	collateral	values	increase	by	10%.

The	impact	of	declining	cash	flows	is	primarily	reflected	as	immediate impairment	(allowance	for	loan	losses).	The	impact	of	increased	cash	flows	is first	recognized	as	a	reversal	of	the	allowance	with	any	additional	cash	flow increases	reflected	as	an	increase	in	accretable	yield	over	the	life	of	the	loan.

Net	unfunded	credit	commitments	are	comprised	of	the	following:

# Table	10:	Net	Unfunded	Credit	Commitments

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Commercial/commercial\treal\testate\t(a) | $78,703 | $64,955 |
| Home\tequity\tlines\tof\tcredit | 19,814 | 18,317 |
| Credit\tcard | 17,381 | 16,216 |
| Other | 4,694 | 3,783 |
| Total | $120,592 | $103,271 |
| (a) |  |  |

(a) Less	than	5%	of	these	amounts	at	each	date	relate	to	commercial	real	estate.

Commitments	to	extend	credit	represent	arrangements	to	lend	funds	or	provide liquidity	subject	to	specified	contractual	conditions.	Commercial	commitments reported	above	exclude	syndications,	assignments	and	participations,	primarily to	financial	institutions,	totaling	$22.5	billion	at	December	31,	2012	and	$20.2 billion	at	December	31,	2011.

Unfunded	liquidity	facility	commitments	and	standby	bond	purchase	agreements totaled	$732	million	at	December	31,	2012	and	$742	million	at	December	31, 2011	and	are	included	in	the	preceding	table	primarily	within	the	Commercial	/ commercial	real	estate	category.

In	addition	to	the	credit	commitments	set	forth	in	the	table	above,	our	net outstanding	standby	letters	of	credit	totaled	$11.5	billion	at	December	31,	2012 and	$10.8	billion	at	December	31,	2011.	Standby	letters	of	credit	commit	us	to make	payments	on	behalf	of	our	customers	if	specified	future	events	occur.

# INVESTMENT	SECURITIES

# Table	11:	Details	of	Investment	Securities

|  | December	31,	2012 | December	31,	2012 | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Amortized\nCost | Fair\nValue | Amortized\nCost | Fair\nValue |
| Total\tsecurities\tavailable\tfor\tsale\t(a) | \t\t $49,447 | $51,052 | $48,609 | $48,568 |
| Total\tsecurities\theld\tto\tmaturity | \t 10,354 | \t 10,860 | \t 12,066 | \t 12,450 |
| Total\tsecurities | \t\t $59,801 | $61,912 | $60,675 | $61,018 |

(a) Includes	$367	million	of	both	amortized	cost	and	fair	value	of	securities	classified	as	corporate	stocks	and	other	at	December	31,	2012.	Comparably,	at	December	31,	2011,	the	amortized	cost	and	fair	value	of corporate	stocks	and	other	was	$368	million.	The	remainder	of	securities	available	for	sale	were	debt	securities.

The	carrying	amount	of	investment	securities	totaled	$61.4	billion	at December	31,	2012,	which	was	made	up	of	$51.0	billion	of	securities	available for	sale	carried	at	fair	value	and	$10.4	billion	of	securities	held	to	maturity carried	at	amortized	cost.	Comparably,	at	December	31,	2011,	the	carrying	value of	investment	securities	totaled	$60.6	billion	of	which	$48.6	billion	represented securities	available	for	sale	carried	at	fair	value	and	$12.0	billion	of	securities held	to	maturity	carried	at	amortized	cost.

The	increase	in	carrying	amount	between	the	periods	primarily	reflected	an increase	of	$2.0	billion	in	available	for	sale	asset-backed	securities,	which	was primarily	due	to	net	purchase	activity,	and	an	increase	of	$.6	billion	in	available for	sale	non-agency	residential	mortgage-backed	securities	due	to	increases	in fair	value	at	December	31,	2012.	These	increases	were	partially	offset	by	a	$1.7 billion	decrease	in	held	to	maturity	debt	securities	due	to	principal	payments. Investment	securities	represented	20%	of	total	assets	at	December	31,	2012	and 22%	at	December	31,	2011.

We	evaluate	our	portfolio	of	investment	securities	in	light	of	changing	market conditions	and	other	factors	and,	where	appropriate,	take	steps	intended	to improve	our	overall	positioning.	We	consider	the	portfolio	to	be	well-diversified and	of	high	quality.	U.S.	Treasury	and	government	agencies,	agency	residential mortgage-backed	and	agency	commercial	mortgage-backed	securities collectively	represented	59%	of	the	investment	securities	portfolio	at December	31,	2012.

At	December	31,	2012,	the	securities	available	for	sale	portfolio	included	a	net unrealized	gain	of	$1.6	billion,	which	represented	the	difference	between	fair value	and	amortized	cost.	The	comparable	amount	at	December	31,	2011	was	a net	unrealized	loss	of	$41	million.	The	fair	value	of	investment	securities	is impacted	by	interest	rates,	credit	spreads,	market	volatility	and	liquidity conditions.	The	fair	value	of	investment	securities	generally	decreases	when interest	rates	increase	and	vice	versa.	In	addition,	the	fair	value	generally decreases	when	credit	spreads	widen	and	vice	versa.

The	improvement	in	the	net	unrealized	gain	as	compared	with	a	loss	at December	31,	2011	was	primarily	due	to	improvement	in	the	value	of	non- agency	residential	mortgage-backed	securities,	which	had	a	decrease	in	net unrealized	losses	of	$1.1	billion,	and	lower	market	interest	rates.	Net	unrealized gains	and	losses	in	the	securities	available	for	sale	portfolio	are	included	in Shareholders'	equity	as	Accumulated	other	comprehensive	income	or	loss	from continuing	operations,	net	of	tax,	on	our	Consolidated	Balance	Sheet.

Additional	information	regarding	our	investment	securities	is	included	in	Note	8 Investment	Securities	and	Note	9	Fair	Value	in	our	Notes	To	Consolidated Financial	Statements	included	in	Item	8	of	this	Report.

Unrealized	gains	and	losses	on	available	for	sale	securities	do	not	impact liquidity	or	risk-based	capital	under	currently	effective	capital	rules.	However, reductions	in	the	credit	ratings	of	these	securities	could	have	an	impact	on	the liquidity	of	the	securities	or	the	determination	of	risk-weighted	assets	which could	reduce	our	regulatory	capital	ratios	under	currently	effective	capital	rules. In	addition,	the	amount	representing	the	credit-related	portion	of	OTTI	on available	for	sale	securities	would	reduce	our	earnings	and	regulatory	capital ratios.

The	expected	weighted-average	life	of	investment	securities	(excluding	corporate stocks	and	other)	was	4.0	years	at	December	31,	2012	and	3.7	years	at December	31,	2011.

We	estimate	that,	at	December	31,	2012,	the	effective	duration	of	investment securities	was	2.3	years	for	an	immediate	50	basis	points	parallel	increase	in interest	rates	and	2.2	years	for	an	immediate	50	basis	points	parallel	decrease	in interest	rates.	Comparable	amounts	at	December	31,	2011	were	2.6	years	and	2.4 years,	respectively.

The	following	table	provides	detail	regarding	the	vintage,	current	credit	rating, and	FICO	score	of	the	underlying	collateral	at	origination,	where	available,	for residential	mortgage-backed,	commercial	mortgage-backed	and	other	asset- backed	securities	held	in	the	available	for	sale	and	held	to	maturity	portfolios:

# Table	12:	Vintage,	Current	Credit	Rating,	and	FICO	Score	for	Asset-Backed	Securities

|  | Residential | Commercial | Residential | Commercial |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Mortgage- | Mortgage- | Mortgage- | Mortgage- | Asset- |
|  | Backed | Backed | Backed | Backed | Backed |
| Dollars\tin\tmillions | Securities | Securities | Securities | Securities | Securities\t(a) |
| Fair\tValue\t–\tAvailable\tfor\tSale | $26,784 | $633 | $6,107 | $3,264 | $5,653 |
| Fair\tValue\t–\tHeld\tto\tMaturity | 4,582 | 1,374 |  | 2,667 | 863 |
| Total\tFair\tValue | $31,366 | $2,007 | $6,107 | $5,931 | $6,516 |
| %\tof\tFair\tValue: |  |  |  |  |  |
| By\tVintage |  |  |  |  |  |
| 2012 | 19% | 1% |  | 7% |  |
| 2011 | 27% | 48% |  | 6% | 1% |
| 2010 | 25% | 11% | 1% | 4% | 4% |
| 2009 | 9% | 19% |  | 2% | 1% |
| 2008 | 2% | 3% |  |  | 1% |
| 2007 | 2% | 2% | 25% | 11% | 2% |
| 2006 | 1% | 4% | 21% | 22% | 7% |
| 2005\tand\tearlier | 6% | 12% | 52% | 47% | 6% |
| Not\tAvailable | 9% |  | 1% | 1% | 78% |
| Total | 100% | 100% | 100% | 100% | 100% |
| By\tCredit\tRating\t(at\tDecember\t31,\t2012) |  |  |  |  |  |
| Agency | 100% | 100% |  |  |  |
| AAA |  |  | 1% | 72% | 63% |
| AA |  |  | 1% | 8% | 26% |
| A |  |  | 1% | 13% | 1% |
| BBB |  |  | 5% | 3% |  |
| BB |  |  | 11% | 1% |  |
| B |  |  | 7% | 1% | 1% |
| Lower\tthan\tB |  |  | 72% |  | 9% |
| No\trating |  |  | 2% | 2% |  |
| Total | 100% | 100% | 100% | 100% | 100% |
| By\tFICO\tScore\t(at\torigination) |  |  |  |  |  |
| &gt;720 |  |  | 56% |  | 2% |
| &lt;720\tand\t&gt;660 |  |  | 31% |  | 6% |
| &lt;660 |  |  |  |  | 2% |
| No\tFICO\tscore |  |  | 13% |  | 90% |
| Total |  |  | 100% |  | 100% |
| (a) |  |  |  |  |  |

(a) Available	for	sale	asset-backed	securities	include	$3	million	of	available	for	sale	agency	asset-backed	securities.

We	conduct	a	comprehensive	security-level	impairment	assessment	quarterly	on all	securities	in	an	unrealized	loss	position	to	determine	whether	the	loss represents	OTTI.	Our	assessment	considers	the	security	structure,	recent	security collateral	performance	metrics,	external	credit	ratings,	failure	of	the	issuer	to make	scheduled	interest	or	principal	payments,	our	judgment	and	expectations	of future	performance,	and	relevant	independent	industry	research,	analysis	and forecasts.

We	also	consider	the	severity	of	the	impairment	and	the	length	of	time	that	the security	has	been	impaired	in	our	assessment.	Results	of	the	periodic	assessment are	reviewed	by	a	cross-functional	senior	management	team	representing Asset	&

Liability	Management,	Finance,	and	Market	Risk	Management.	The	senior management	team	considers	the	results	of	the	assessments,	as	well	as	other factors,	in	determining	whether	the	impairment	is	other-than-temporary.

For	those	debt	securities	where	we	do	not	intend	to	sell	and	believe	we	will	not be	required	to	sell	the	securities	prior	to	expected	recovery,	we	recognize	the credit	portion	of	OTTI	charges	in	current	earnings	and	the	noncredit	portion	of OTTI	is	included	in	Accumulated	other	comprehensive	income	(loss).	Also	see our	Consolidated	Statement	of	Comprehensive	Income	in	Item	8	of	this	Report.

# Table	13:	Other-Than-Temporary	Impairments

| In	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| Credit\tportion\tof\tOTTI\tlosses\t(a) |  |  |
| Non-agency\tresidential\tmortgage-backed | $(99) | $(130) |
| Asset-backed | (11) | (21) |
| Other\tdebt | (1) | (1) |
| Total\tcredit\tportion\tof\tOTTI\tlosses | (111) | (152) |
| Noncredit\tportion\tof\tOTTI\tlosses\t(b) | 32 | (268) |
| Total\tOTTI\tlosses | $(79) | $(420) |
| (a)\nReduction\tof\tNoninterest\tincome\tin\tour\tConsolidated\tIncome\tStatement. |  |  |

(a) Reduction	of	Noninterest	income	in	our	Consolidated	Income	Statement.

(b) Included	in	Accumulated	other	comprehensive	income	(loss),	net	of	tax,	on	our	Consolidated	Balance	Sheet.	Also	see	our	Consolidated	Statement	of	Comprehensive	Income	in	Item	8	of	this	Report.

The	following	table	summarizes	net	unrealized	gains	and	losses	recorded	on	non-agency	residential	and	commercial	mortgage-backed	and	other	asset-backed	securities, which	represent	our	most	significant	categories	of	securities	not	backed	by	the	US	government	or	its	agencies.

# Table	14:	Net	Unrealized	Gains	and	Losses	on	Non-Agency	Securities

|  |  | Fair<br>Value | Net<br>Unrealized<br>Gain<br>(Loss) | Fair<br>Value | Net<br>Unrealized<br>Gain | Fair<br>Value | Net<br>Unrealized<br>Gain<br>(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Credit\tRating\tAnalysis |  |  |  |  |  |  |  |
| AAA |  | $36 |  | $1,847\t\t\t $ | 95 | $3,460\t\t\t $ | 29 |
| Other\tInvestment\tGrade\t(AA,\tA,\tBBB) | Other\tInvestment\tGrade\t(AA,\tA,\tBBB) | 383\t\t\t $ | 35 | 1,191 | 100 | \t 1,554 | 12 |
| Total\tInvestment\tGrade | Total\tInvestment\tGrade | 419 | 35 | 3,038 | 195 | \t 5,014 | 41 |
| BB | BB | 683 | (59) | 56 | 5 | 5 |  |
| B |  | 459 | (16) | 57 | 2 | 33 |  |
| Lower\tthan\tB | Lower\tthan\tB | 4,421 | 39 |  |  | 575 | (40) |
| Total\tSub-Investment\tGrade | Total\tSub-Investment\tGrade | 5,563 | (36) | 113 | 7 | 613 | (40) |
| Total\tNo\tRating | Total\tNo\tRating | 125 | 6 | 113 | 7 | 23 | (15) |
| Total | Total | $ 6,107\t\t\t $ | 5 | $3,264\t\t\t $ | 209 | $5,650\t\t\t $ | (14) |
| OTTI\tAnalysis |  |  |  |  |  |  |  |
| Investment\tGrade: |  |  |  |  |  |  |  |
| OTTI\thas\tbeen\trecognized |  |  |  |  |  |  |  |
| No\tOTTI\trecognized\tto\tdate | No\tOTTI\trecognized\tto\tdate | $419\t\t\t $ | 35 | $3,038\t\t\t $ | 195 | $5,014\t\t\t $ | 41 |
| Total\tInvestment\tGrade | Total\tInvestment\tGrade | 419 | 35 | 3,038 | 195 | \t 5,014 | 41 |
| Sub-Investment\tGrade: |  |  |  |  |  |  |  |
| OTTI\thas\tbeen\trecognized | OTTI\thas\tbeen\trecognized | 3,690 | (150) |  |  | 580 | (37) |
| No\tOTTI\trecognized\tto\tdate | No\tOTTI\trecognized\tto\tdate | 1,873 | 114 | 113 | 7 | 33 | (3) |
| Total\tSub-Investment\tGrade | Total\tSub-Investment\tGrade | 5,563 | (36) | 113 | 7 | 613 | (40) |
| No\tRating: |  |  |  |  |  |  |  |
| OTTI\thas\tbeen\trecognized | OTTI\thas\tbeen\trecognized | 81 |  |  |  | 23 | (15) |
| No\tOTTI\trecognized\tto\tdate | No\tOTTI\trecognized\tto\tdate | 44 | 6 | 113 | 7 |  |  |
| Total\tNo\tRating | Total\tNo\tRating | 125 | 6 | 113 | 7 | 23 | (15) |
| Total | Total | $ 6,107\t\t\t $ | 5 | $3,264\t\t\t $ | 209 | $5,650\t\t\t $ | (14) |
| Securities\tHeld\tto\tMaturity\t(Non-Agency) |  |  |  |  |  |  |  |
| Credit\tRating\tAnalysis |  |  |  |  |  |  |  |
| AAA | AAA |  |  | $2,444\t\t\t $ | 72 | $629\t\t\t $ | 3 |
| Other\tInvestment\tGrade\t(AA,\tA,\tBBB) | Other\tInvestment\tGrade\t(AA,\tA,\tBBB) |  |  | 223 | 13 | 220 | 2 |
| Total\tInvestment\tGrade | Total\tInvestment\tGrade |  |  | 2,667 | 85 | 849 | 5 |
| BB |  |  |  |  |  | 13 |  |
| B | B |  |  |  |  | 1 |  |
| Lower\tthan\tB |  |  |  |  |  |  |  |
| Total\tSub-Investment\tGrade | Total\tSub-Investment\tGrade |  |  |  |  | 14 |  |
| Total\tNo\tRating |  |  |  |  |  |  |  |
| Total | Total |  |  | $2,667\t\t\t $ | 85 | $863\t\t\t $ | 5 |
| (a) | Excludes\t$3\tmillion\tof\tavailable\tfor\tsale\tagency\tasset-backed\tsecurities. |  |  |  |  |  |  |

(a) Excludes	$3	million	of	available	for	sale	agency	asset-backed	securities.

# RESIDENTIAL	MORTGAGE-BACKED	SECURITIES

At	December	31,	2012,	our	residential	mortgage-backed	securities	portfolio	was comprised	of	$31.4	billion	fair	value	of	US	government	agency-backed	securities and	$6.1	billion	fair	value	of	non-agency	(private	issuer)	securities.	The	agency securities	are	generally	collateralized	by	1-4	family,	conforming,	fixed-rate residential	mortgages.	The	non-agency	securities	are	also	generally	collateralized by	1-4	family	residential	mortgages.	The	mortgage	loans	underlying	the	non- agency	securities	are	generally	non-conforming	(i.e.,	original	balances	in	excess of	the	amount	qualifying	for	agency	securities)	and	predominately	have	interest rates	that	are	fixed	for	a	period	of	time,	after	which	the	rate	adjusts	to	a	floating rate	based	upon	a	contractual	spread	that	is	indexed	to	a	market	rate	(i.e.,	a "hybrid	ARM"),	or	interest	rates	that	are	fixed	for	the	term	of	the	loan.

Substantially	all	of	the	non-agency	securities	are	senior	tranches	in	the securitization	structure	and	at	origination	had	credit	protection	in	the	form	of credit	enhancement,	over-collateralization	and/or	excess	spread	accounts.

During	2012,	we	recorded	OTTI	credit	losses	of	$99	million	on	non-agency residential	mortgage-backed	securities.	All	of	the	losses	were	associated	with securities	rated	below	investment	grade.	As	of	December	31,	2012,	the	noncredit portion	of	impairment	recorded	in	Accumulated	other	comprehensive	income	for non-agency	residential	mortgage-backed	securities	for	which	we	have	recorded an	OTTI	credit	loss	totaled	$150	million	and	the	related	securities	had	a	fair value	of	$3.7	billion.

The	fair	value	of	sub-investment	grade	investment	securities	for	which	we	have not	recorded	an	OTTI	credit	loss	as	of	December	31,	2012	totaled	$1.9	billion, with	unrealized	net	gains	of	$114	million.

# COMMERCIAL	MORTGAGE-BACKED	SECURITIES

The	fair	value	of	the	non-agency	commercial	mortgage-backed	securities portfolio	was	$5.9	billion	at	December	31,	2012	and	consisted	of	fixed-rate, private-issuer	securities	collateralized	by	non-residential	properties,	primarily retail	properties,	office	buildings,	and	multi-family	housing.	The	agency commercial	mortgage-backed	securities	portfolio	was	$2.0	billion	fair	value	at December	31,	2012	consisting	of	multi-family	housing.	Substantially	all	of	the securities	are	the	most	senior	tranches	in	the	subordination	structure.

There	were	no	OTTI	credit	losses	on	commercial	mortgage-backed	securities during	2012.

# ASSET-BACKED	SECURITIES

The	fair	value	of	the	asset-backed	securities	portfolio	was	$6.5	billion	at December	31,	2012	and	consisted	of	fixed-rate	and	floating-rate,	private-issuer securities	collateralized	primarily	by	various	consumer	credit	products,	including residential

mortgage	loans,	credit	cards,	automobile	loans,	and	student	loans.	Substantially all	of	the	securities	are	senior	tranches	in	the	securitization	structure	and	have credit	protection	in	the	form	of	credit	enhancement,	over-collateralization	and/or excess	spread	accounts.

We	recorded	OTTI	credit	losses	of	$11	million	on	asset-backed	securities	during 2012.	All	of	the	securities	are	collateralized	by	first	lien	and	second	lien residential	mortgage	loans	and	are	rated	below	investment	grade.	As	of December	31,	2012,	the	noncredit	portion	of	impairment	recorded	in Accumulated	other	comprehensive	income	for	asset-backed	securities	for	which we	have	recorded	an	OTTI	credit	loss	totaled	$52	million	and	the	related securities	had	a	fair	value	of	$603	million.

For	the	sub-investment	grade	investment	securities	(available	for	sale	and	held	to maturity)	for	which	we	have	not	recorded	an	OTTI	loss	through	December	31, 2012,	the	fair	value	was	$47	million,	with	unrealized	net	losses	of	$3	million. The	results	of	our	security-level	assessments	indicate	that	we	will	recover	the cost	basis	of	these	securities.

Note	8	Investment	Securities	in	the	Notes	To	Consolidated	Financial	Statements in	Item	8	of	this	Report	provides	additional	information	on	OTTI	losses	and further	detail	regarding	our	process	for	assessing	OTTI.

If	current	housing	and	economic	conditions	were	to	worsen,	and	if	market volatility	and	illiquidity	were	to	worsen,	or	if	market	interest	rates	were	to increase	appreciably,	the	valuation	of	our	investment	securities	portfolio	could be	adversely	affected	and	we	could	incur	additional	OTTI	credit	losses	that would	impact	our	Consolidated	Income	Statement.

# LOANS	HELD	FOR	SALE

# Table	15:	Loans	Held	For	Sale

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Commercial\tmortgages\tat\tfair\tvalue | $772 | $843 |
| Commercial\tmortgages\tat\tlower\tof\tcost\tor |  |  |
| market | 620 | 451 |
| Total\tcommercial\tmortgages | 1,392 | 1,294 |
| Residential\tmortgages\tat\tfair\tvalue | 2,096 | 1,415 |
| Residential\tmortgages\tat\tlower\tof\tcost\tor |  |  |
| market | 124 | 107 |
| Total\tresidential\tmortgages | 2,220 | 1,522 |
| Other | 81 | 120 |
| Total | $3,693 | $2,936 |

We	stopped	originating	commercial	mortgage	loans	held	for	sale	designated	at fair	value	in	2008	and	continue	pursuing	opportunities	to	reduce	these	positions at	appropriate	prices.	At	December	31,	2012,	the	balance	relating	to	these	loans was	$772	million,	compared	to	$843	million	at	December	31,	2011.	We	sold	$32 million	in	unpaid	principal	balances	of	these	commercial	mortgage	loans	held for	sale	carried	at	fair	value	in	2012	and	sold	$25	million	in	2011.

We	sold	$2.2	billion	of	commercial	mortgages	held	for	sale	carried	at	the	lower of	cost	or	market	in	2012.	The	comparable	amount	in	2011	was	$2.4	billion.	The increase	in	these	loans	to	$620	million	at	December	31,	2012,	compared	to	$451 million	at	December	31,	2011,	was	due	to	an	increase	in	loans	awaiting	sale	to government	agencies.

We	recognized	total	net	gains	of	$41	million	in	2012	and	$48	million	in	2011	on the	valuation	and	sale	of	commercial	mortgage	loans	held	for	sale,	net	of	hedges.

Residential	mortgage	loan	origination	volume	was	$15.2	billion	in	2012 compared	with	$11.4	billion	in	2011.	Substantially	all	such	loans	were	originated under	agency	or	Federal	Housing	Administration	(FHA)	standards.	We	sold $13.8	billion	of	loans	and	recognized	related	gains	of	$747	million	during	2012. The	comparable	amounts	for	2011	were	$11.9	billion	and	$384	million, respectively.

Interest	income	on	loans	held	for	sale	was	$168	million	in	2012	and	$193	million in	2011.	These	amounts	are	included	in	Other	interest	income	on	our Consolidated	Income	Statement.

Additional	information	regarding	our	loan	sale	and	servicing	activities	is included	in	Note	3	Loan	Sale	and	Servicing	Activities	and	Variable	Interest Entities	in	our	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of this	Report.

# GOODWILL	AND	OTHER	INTANGIBLE	ASSETS

Goodwill	and	other	intangible	assets	totaled	$10.9	billion	at	December	31,	2012 and	$10.1	billion	at	December	31,	2011.	During	2012,	we	recorded	goodwill	of $950	million	and	other	intangible	assets	of	$180	million	associated	with	the RBC	Bank	(USA)	acquisition.	In	the	fourth	quarter	of	2012,	we	sold	certain deposits	and	assets	of	the	Smartstreet	business	unit,	which	was	acquired	by	PNC as	part	of	the	RBC	Bank	(USA)	acquisition,	which	resulted	in	a	reduction	of goodwill	and	core	deposit	intangibles	by	approximately	$46	million	and	$13 million,	respectively.	Also	in	the	fourth	quarter	of	2012,	we	recorded	a	$45 million	noncash	charge	for	goodwill	impairment	related	to	PNC's	Residential Mortgage	Banking	business	segment.	See	Note	2	Acquisition	and	Divestiture Activity	and	Note	10	Goodwill	and	Other	Intangible	Assets	in	the	Notes	To Consolidated	Financial	Statements	included	in	Item	8	of	this	Report.

# FUNDING	AND	CAPITAL	SOURCES

# Table	16:	Details	Of	Funding	Sources

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Deposits |  |  |
| Money\tmarket | $102,706 | $89,912 |
| Demand | 73,995 | 57,717 |
| Retail\tcertificates\tof\tdeposit | 23,837 | 29,518 |
| Savings | 10,350 | 8,705 |
| Time\tdeposits\tin\tforeign\toffices\tand\tother |  |  |
| time | 2,254 | 2,114 |
| Total\tdeposits | 213,142 | 187,966 |
| Borrowed\tfunds |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase |  |  |
| agreements | 3,327 | 2,984 |
| Federal\tHome\tLoan\tBank\tborrowings | 9,437 | 6,967 |
| Bank\tnotes\tand\tsenior\tdebt | 10,429 | 11,793 |
| Subordinated\tdebt | 7,299 | 8,321 |
| Commercial\tpaper | 8,453 | 4,271 |
| Other | 1,962 | 2,368 |
| Total\tborrowed\tfunds | 40,907 | 36,704 |
| Total | $254,049 | $224,670 |

See	the	Capital	and	Liquidity	Actions	portion	of	the	Executive	Summary	section of	this	Item	7	for	additional	information	regarding	our	2012	capital	and	liquidity activities	and	2013	activities	to	date.

Total	funding	sources	increased	$29.4	billion	at	December	31,	2012	compared with	December	31,	2011.

Total	deposits	increased	$25.2	billion,	or	13%,	at	December	31,	2012	compared with	December	31,	2011.	On	March	2,	2012,	our	RBC	Bank	(USA)	acquisition added	$18.1	billion	of	deposits,	including	$6.9	billion	of	money	market,	$6.7 billion	of	demand,	$4.1	billion	of	retail	certificates	of	deposit,	and	$.4	billion	of savings.	Excluding	acquisition	activity,	money	market	and	demand	deposits increased	during	2012,	partially	offset	by	the	maturity	of	retail	certificates	of deposit.	Interest-bearing	deposits	represented	67%	of	total	deposits	at December	31,	2012	compared	to	69%	at	December	31,	2011.	Total	borrowed funds	increased	$4.2	billion	from	December	31,	2011	to	$40.9	billion	at December	31,	2012,	due	to	increases	in	Federal	funds	purchased	and	repurchase agreements,	FHLB	borrowings	and	commercial	paper	net	issuances,	partially offset	by	net	repayments	and	maturities	of	bank	notes	and	senior	debt	and	a reduction	in	subordinated	debt	due	to	redemptions	of	trust	preferred	securities and	hybrid	capital	securities.

# CAPITAL

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

Total	shareholders'	equity	increased	$5.0	billion,	to	$39.0	billion	at December	31,	2012	compared	with	December	31,	2011,	reflecting	an	increase	in retained	earnings	of	$2.0	billion	and	the	issuance	of	$480	million	of	preferred stock	in	September	and	October	2012	and	$1.5	billion	in	April	2012.	This contributed	to	the	increase	in	capital	surplus	–	preferred	stock	from	$1.6	billion at	December	31,	2011	to	$3.6	billion	at	December	31,	2012.	Accumulated	other comprehensive	income	increased	$.9	billion,	to	$.8	billion,	at	December	31, 2012	compared	with	a	loss	of	$.1	billion	at	December	31,	2011	due	to	higher	net unrealized	gains	on	securities,	partially	offset	by	lower	unrealized	gains	on	cash flow	hedge	derivatives.	Common	shares	outstanding	were	528	million	at December	31,	2012	and	527	million	at	December	31,	2011.

Our	current	common	stock	repurchase	program	permits	us	to	purchase	up	to 25	million	shares	of	PNC	common	stock	on	the	open	market	or	in	privately negotiated	transactions.	This	program	will	remain	in	effect	until	fully	utilized	or until	modified,	superseded	or	terminated.	The	extent	and	timing	of	share repurchases	under	this	program	will	depend	on	a	number	of	factors	including, among	others,	market	and	general	economic	conditions,	economic	and regulatory	capital	considerations,	alternative	uses	of	capital,	and	the	potential impact	on	our	credit	ratings.	Consistent	with	our	capital	plan	submitted	to	the Federal	Reserve	in	the	first	quarter	of	2012,	PNC	purchased	$190	million	of common	stock	in	2012	under	a	$250	million	authorization	for	2012	as	part	of	its existing	25	million	share	repurchase	program	in	open	market	or	privately negotiated	transactions.	During	2013,	management	does	not	expect	to repurchase	any	common	stock	under	this	repurchase	program.	See	"Supervision and	Regulation"	in	Item	1	of	this	Report	for	further	information	concerning restrictions	on	dividends	and	stock	repurchases,	including	the	impact	of	the Federal	Reserve's	current	supervisory	assessment	of	capital	adequacy	program, which	is	also	discussed	in	the	Capital	and	Liquidity	Actions	portion	of	the Executive	Summary	section	of	this	Item	7.

# Table	17:	Risk-Based	Capital

Federal	banking	regulators	have	stated	that	they	expect	all	bank	holding companies	to	have	a	level	and	composition	of	Tier	1	capital	well	in	excess	of	the 4%	Basel	I	regulatory	minimum,	and	they	have	required	the	largest	US	bank holding	companies,	including	PNC,	to	have	a	capital	buffer	sufficient	to withstand	losses	and	allow	them	to	meet	credit	needs	of	their	customers	through estimated	stress	scenarios.	They	have	also	stated	their	view	that	common	equity should	be	the

dominant	form	of	Tier	1	capital.	As	a	result,	regulators	are	now	emphasizing	the Tier	1	common	capital	ratio	in	their	evaluation	of	bank	holding	company	capital levels,	although	a	formal	ratio	for	this	metric	is	not	provided	for	in	current regulations.	We	seek	to	manage	our	capital	consistent	with	these	regulatory principles,	and	believe	that	our	December	31,	2012	capital	levels	were	aligned with	them.

Dodd-Frank	requires	the	Federal	Reserve	Board	to	establish	capital	requirements that	would,	among	other	things,	eliminate	the	Tier	1	treatment	of	trust	preferred securities	following	a	phase-in	period	expected	to	begin	in	2013.	Accordingly, PNC	has	redeemed	some	of	its	trust	preferred	securities	and	will	consider redeeming	others	on	or	after	their	first	call	date,	based	on	such	considerations	as dividend	rates,	future	capital	requirements,	capital	market	conditions	and	other factors.	See	the	Capital	and	Liquidity	Actions	portion	of	the	Executive	Summary section	of	this	Item	7	for	additional	information	regarding	our	April	2012,	May 2012,	July	2012,	and	November	2012	redemptions	of	trust	preferred	securities and	hybrid	capital	securities.	See	Note	14	Capital	Securities	of	Subsidiary	Trusts and	Perpetual	Trust	Securities	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	for	additional	information	on	trust	preferred securities.

Our	Tier	1	common	capital	ratio	was	9.6%	at	December	31,	2012,	compared with	10.3%	at	December	31,	2011.	Our	Tier	1	risk-based	capital	ratio	decreased 100	basis	points	to	11.6%	at	December	31,	2012	from	12.6%	at	December	31, 2011.	Our	total	risk-based	capital	ratio	declined	110	basis	points	to	14.7%	at December	31,	2012	from	15.8%	at	December	31,	2011.	The	decline	in	these ratios	was	primarily	due	to	the	RBC	Bank	(USA)	acquisition,	which	resulted	in higher	goodwill	and	risk-weighted	assets,	partially	offset	by	retention	of	earnings which	more	than	offset	organic	asset	growth.	Our	Tier	1	risk-based	capital	ratio reflected	our	2012	capital	actions	of	issuing	approximately	$2.0	billion	of preferred	stock	and	redeeming	approximately	$2.3	billion	of	trust	preferred securities	and	hybrid	capital	securities.	Basel	I	risk-weighted	assets	increased $30.1	billion	from	$230.7	billion	at	December	31,	2011	to	$260.8	billion	at December	31,	2012	due	to	the	RBC	Bank	(USA)	acquisition	and	organic	loan growth	for	2012.

At	December	31,	2012,	PNC	Bank,	N.A.,	our	domestic	bank	subsidiary,	was considered	"well	capitalized"	based	on	U.S.	regulatory	capital	ratio	requirements under	Basel	I.	To	qualify	as	"well-capitalized",	regulators	currently	require banks	to	maintain	capital	ratios	of	at	least	6%	for	Tier	1	risk-based,	10%	for	total risk-based,	and	5%	for	leverage.	See	the	"Supervision	and	Regulation"	section of	Item	1	and	Note	22	Regulatory	Matters	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	for	additional	information.	We believe	PNC	Bank,	N.A.	will	continue	to	meet	these	requirements	during	2013.

PNC	and	PNC	Bank,	N.A.	entered	the	"parallel	run"	qualification	phase	under the	Basel	II	capital	framework	on	January	1,	2013.	The	Basel	II	framework, which	was	adopted	by	the	Basel	Committee	on	Banking	Supervision	in	2004, seeks	to	provide	more	risk-sensitive	regulatory	capital	calculations	and	promote enhanced	risk	management	practices	among	large,	internationally	active	banking organizations.	The	U.S.	banking	agencies	adopted	final	rules	to	implement	the Basel	II	capital	framework	in	December	2007	and	in	June	2012	requested comment	on	proposed	modifications	to	these	rules	(collectively	referred	to	as	the "advanced	approaches").	See	Recent	Market	and	Industry	Developments	in	the Executive	Summary	section	of	this	Financial	Review.	Prior	to	fully implementing	the	advanced	approaches	to	calculate	risk-weighted	assets,	PNC and	PNC	Bank,	N.A.	must	successfully	complete	a	"parallel	run"	qualification phase.	This	phase	must	last	at	least	four	consecutive	quarters,	although, consistent	with	the	experience	of	other	U.S.	banks,	we	currently	anticipate	a multi-year	parallel	run	period.

The	access	to	and	cost	of	funding	for	new	business	initiatives,	the	ability	to undertake	new	business	initiatives	including	acquisitions,	the	ability	to	engage	in expanded	business	activities,	the	ability	to	pay	dividends	or	repurchase	shares	or other	capital	instruments,	the	level	of	deposit	insurance	costs,	and	the	level	and nature	of	regulatory	oversight	depend,	in	large	part,	on	a	financial	institution's capital	strength.

We	provide	additional	information	regarding	enhanced	capital	requirements	and some	of	their	potential	impacts	on	PNC	in	Item	1A	Risk	Factors	of	this	Report.

# OFF-BALANCE	SHEET	ARRANGEMENTS	AND VARIABLE	INTEREST	ENTITIES

We	engage	in	a	variety	of	activities	that	involve	unconsolidated	entities	or	that are	otherwise	not	reflected	in	our	Consolidated	Balance	Sheet	that	are	generally referred	to	as	"off-balance	sheet	arrangements."	Additional	information	on	these types	of	activities	is	included	in	the	following	sections	of	this	Report: •	Commitments,	including	contractual	obligations	and	other commitments,	included	within	the	Risk	Management	section	of	this Item	7,

•	Note	3	Loan	Sale	and	Servicing	Activities	and	Variable	Interest Entities	in	the	Notes	To	Consolidated	Financial	Statements	included	in Item	8	of	this	Report,

•	Note	14	Capital	Securities	of	Subsidiary	Trusts	and	Perpetual	Trust Securities	in	the	Notes	To	Consolidated	Financial	Statements	included in	Item	8	of	this	Report,	and

•	Note	24	Commitments	and	Guarantees	in	the	Notes	To	Consolidated Financial	Statements	included	in	Item	8	of	this	Report.

PNC	consolidates	variable	interest	entities	(VIEs)	when	we	are	deemed	to	be	the primary	beneficiary.	The	primary	beneficiary	of	a	VIE	is	determined	to	be	the party	that	meets	both	of	the	following	criteria:	(i)	has	the	power	to	make decisions	that	most	significantly	affect	the	economic	performance	of	the	VIE; and	(ii)	has	the	obligation	to	absorb	losses	or	the	right	to	receive	benefits	that	in either	case	could	potentially	be	significant	to	the	VIE.

A	summary	of	VIEs,	including	those	that	we	have	consolidated	and	those	in which	we	hold	variable	interests	but	have	not	consolidated	into	our	financial statements,	as	of	December	31,	2012	and	December	31,	2011	is	included	in	Note 3	in	the	Notes	To	Consolidated	Financial	Statements	included	in	Item	8	of	this Report.

# Trust	Preferred	Securities	and	REIT	Preferred	Securities

In	connection	with	$402	million	in	principal	amount	of	outstanding	junior subordinated	debentures	associated	with	$390	million	of	trust	preferred securities	as	of	December	31,	2012	that	were	issued	by	various	subsidiary statutory	trusts,	we	are	subject	to	certain	restrictions,	including	restrictions	on dividend	payments.	Generally,	if	(i)	there	is	an	event	of	default	under	the debentures,	(ii)	PNC	elects	to	defer	interest	on	the	debentures,	(iii)	PNC exercises	its	right	to	defer	payments	on	the	related	trust	preferred	securities issued	by	the	statutory	trusts,	or	(iv)	there	is	a	default	under	PNC's	guarantee	of such	payment	obligations,	as	specified	in	the	applicable	governing	documents, then	PNC	would	be	subject	during	the	period	of	such	default	or	deferral	to restrictions	on	dividends	and	other	provisions	protecting	the	status	of	the debenture	holders	similar	to	or	in	some	ways	more	restrictive	than	those potentially	imposed	under	the	Exchange	Agreements	with	PNC	Preferred Funding	Trust	II	and	Trust	III,	as	described	in	Note	14	Capital	Securities	of Subsidiary	Trusts	and	Perpetual	Trust	Securities	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.	See	the	Capital	and	Liquidity Actions	portion	of	the	Executive	Summary	section	of	this	Item	7	for	additional information	regarding	our	redemptions	of	trust	preferred	securities	and	hybrid capital	securities	during	2012	and	announced	redemption	of	the	REIT	Preferred Securities	issued	by	PNC	Preferred	Funding	Trust	III.

# FAIR	VALUE	MEASUREMENTS

In	addition	to	the	following,	see	Note	9	Fair	Value	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	further	information	regarding	fair value.

The	following	table	summarizes	the	assets	and	liabilities	measured	at	fair	value	at	December	31,	2012	and	December	31,	2011,	respectively,	and	the	portions	of	such assets	and	liabilities	that	are	classified	within	Level	3	of	the	valuation	hierarchy.

# Table	18:	Fair	Value	Measurements	–	Summary

|  | December	31,	2012 | December	31,	2012 | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Total\tFair\nValue | Level\t3 | Total\tFair\nValue | Level\t3 |
| Total\tassets | $68,352 | $10,988 | $66,428 | $10,053 |
| Total\tassets\tat\tfair\tvalue\tas\ta\tpercentage\tof\tconsolidated\tassets | 22% |  | 24% |  |
| Level\t3\tassets\tas\ta\tpercentage\tof\ttotal\tassets\tat\tfair\tvalue |  | 16% |  | 15% |
| Level\t3\tassets\tas\ta\tpercentage\tof\tconsolidated\tassets |  | 4% |  | 4% |
| Total\tliabilities | $7,356 | $376 | $8,625 | $308 |
| Total\tliabilities\tat\tfair\tvalue\tas\ta\tpercentage\tof\tconsolidated\tliabilities | 3% |  | 4% |  |
| Level\t3\tliabilities\tas\ta\tpercentage\tof\ttotal\tliabilities\tat\tfair\tvalue |  | 5% |  | 4% |
| Level\t3\tliabilities\tas\ta\tpercentage\tof\tconsolidated\tliabilities |  | &lt;1% |  | &lt;1% |

The	majority	of	assets	recorded	at	fair	value	are	included	in	the	securities	available	for	sale	portfolio.	The	majority	of	Level	3	assets	represent	Non-agency	residential mortgage-backed	and	asset-backed	securities	in	the	securities	available	for	sale	portfolio	for	which	there	was	limited	market	activity.

An	instrument's	categorization	within	the	hierarchy	is	based	on	the	lowest	level	of	input	that	is	significant	to	the	fair	value	measurement.	PNC	reviews	and	updates	fair value	hierarchy	classifications	quarterly.	Changes	from	one	quarter	to	the	next	related	to	the	observability	of	inputs	to	a	fair	value	measurement	may	result	in	a reclassification	(transfer)	of	assets	or	liabilities	between	hierarchy	levels.	PNC's	policy	is	to	recognize	transfers	in	and	transfers	out	as	of	the	end	of	the	reporting	period. During	2012,	there	were	transfers	of	securities	available	for	sale	from	Level	2	to	Level	3	of	$478	million	consisting	of	mortgage-backed	securities	as	a	result	of	a	ratings downgrade	which	reduced	the	observability	of	valuation	inputs	and	certain	state	and	municipal	securities	with	valuation	inputs	that	were	determined	to	be	unobservable. Level	2	to	Level	3	transfers	also	included	$127	million	and	$27	million	for	loans	and	residential	mortgage	loans	held	for	sale,	respectively,	as	a	result	of	reduced	market activity	in	the	nonperforming	residential	mortgage	sales	market	which	reduced	the	observability	of	valuation	inputs.	Also	during	2012,	there	was	a	transfer	out	of	Level	3 securities	available	for	sale	of	$40	million	due	to	an	instrument	being	reclassified	to	a	loan	and	no	longer	being	carried	at	fair	value.	During	2011,	there	were	no	material transfers	of	assets	or	liabilities	between	the	hierarchy	levels.

# Table	19:	Summary	of	European	Exposure

|  |  |  | Funded |  | Unfunded | Total | Total |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  |  | Direct | Indirect | Total |
| In\tmillions | Loans | Leases | Securities | Total | Other\t(a) | Exposure | Exposure | Exposure |
| Greece,\tIreland,\tItaly,\tPortugal\tand\tSpain\t(GIIPS) | $85 | $122 |  | $207\t\t\t $ | 3 | \t\t $210 | \t\t $31 | \t\t$241 |
| Belgium\tand\tFrance |  | 73 | $30 | 103 | 35 | 138 | 1,083 | 1,221 |
| United\tKingdom | \t 698 | 32 |  | 730 | 449 | 1,179 | 525 | 1,704 |
| Europe\t-\tOther\t(b) | \t 113 | \t 529 | 168 | 810 | 63 | 873 | 838 | 1,711 |
| Total\tEurope\t(c) | $896 | $756 | $198 | $1,850\t\t\t $ | 550 | \t\t $2,400 | \t\t $2,477 | \t\t$4,877 |
| December\t31,\t2011 |  |  |  |  |  |  |  |  |
|  |  |  | Direct\tExposure |  |  |  |  |  |
|  |  |  | Funded |  | \t\t\t Unfunded | Total | Total |  |

| In	millions | Loans | Leases | Securities | Total | Other	(a) | Direct<br>Exposure | Indirect<br>Exposure | Total<br>Exposure |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Greece,\tIreland,\tItaly,\tPortugal\tand\tSpain\t(GIIPS) |  | $118 |  | $118 |  | \t\t $118 | \t\t $63 | \t\t$181 |
| Belgium,\tFrance,\tTurkey | $11 | 75 |  | 86\t\t\t $ | 68 | 154 | 935 | 1,089 |
| United\tKingdom | \t 452 | 14 |  | 466 | 381 | 847 | 529 | 1,376 |
| Europe\t-\tOther\t(b) | \t 100 | \t 475 | $357 | 932 | 36 | 968 | 803 | 1,771 |
| Total\tEurope\t(c) | $563 | $682 | $357 | $1,602\t\t\t $ | 485 | \t\t $2,087 | \t\t $2,330 | \t\t$4,417 |
| (a) |  |  |  |  |  |  |  |  |

(a) Includes	unfunded	commitments,	guarantees,	standby	letters	of	credit,	and	sold	protection	credit	derivatives.

(b) Europe	-	Other	primarily	consists	of	Denmark,	Germany,	Netherlands,	Sweden,	and	Switzerland.

(c) Included	within	Europe	-	Other	is	funded	direct	exposure	of	$168	million	and	$357	million	consisting	of	sovereign	debt	securities	at	December	31,	2012	and	2011,	respectively.	There	was	no	other	direct	or indirect	exposure	to	European	sovereigns	as	of	December	31,	2012	and	2011.

European	entities	are	defined	as	supranational,	sovereign,	financial	institutions and	non-financial	entities	within	the	countries	that	comprise	the	European Union,	European	Union	candidate	countries	and	other	European	countries. Foreign	exposure	underwriting	and	approvals	are	centralized.	PNC	currently underwrites	new	foreign	activities	if	the	credit	is	generally	associated	with activities	of	its	United	States	commercial	customers,	and,	in	the	case	of	PNC Business	Credit's	United	Kingdom	operations,	transactions	that	are predominantly	well	collateralized	by	self	liquidating	assets	such	as	receivables, inventories	or,	in	limited	situations,	the	borrower's	appraised	value	of	certain fixed	assets,	such	that	PNC	is	at	minimal	risk	of	loss.	Formerly,	PNC	had underwritten	foreign	infrastructure	leases	supported	by	highly	rated	bank	letters of	credit	and	other	collateral,	US	Treasury	securities	and	the	underlying	assets	of the	lease.	Country	exposures	are	monitored	and	reported	on	a	regular	basis.	We actively	monitor	sovereign	risk,	banking	system	health,	and	market	conditions and	adjust	limits	as	appropriate.	We	rely	on	information	from	internal	and external	sources,	including	international	financial	institutions,	economists	and analysts,	industry	trade	organizations,	rating	agencies,	econometric	data analytical	service	providers	and	geopolitical	news	analysis	services.

Among	the	regions	and	nations	that	PNC	monitors,	we	have	identified	seven countries	for	which	we	are	more	closely	monitoring	their	economic	and	financial situation.	The	basis	for	the	increased	monitoring	includes,	but	is	not	limited	to, sovereign	debt	burden,	near	term	financing	risk,	political	instability,	GDP	trends, balance	of	payments,	market	confidence,	banking	system	distress	and/or holdings	of	stressed	sovereign	debt.	The	countries	identified	are:	Greece,	Ireland, Italy,	Portugal,	Spain	(collectively	"GIIPS"),	Belgium	and	France.	At December	31,	2012,	PNC's	exposure	to	Turkey	was	de	minimis.

Direct	exposure	primarily	consists	of	loans,	leases,	securities,	derivatives,	letters of	credit	and	unfunded	contractual	commitments	with	European	entities.	As	of December	31,	2012,	the	$1.9	billion	of	funded	direct	exposure	(.61%	of	PNC's total	assets)	primarily	represented	$645	million	for	cross-border	leases	in	support of	national	infrastructure,	which	were	supported	by	letters	of	credit	and	other collateral	having	trigger	mechanisms	that	require	replacement	or	collateral	in	the form	of	cash	or	United	States	Treasury	or	government	securities,	$600	million for	United	Kingdom	foreign	office	loans	and	$168	million	of	securities	issued	by AAA-rated	sovereigns.	The	comparable	level	of	direct	exposure	outstanding	at December	31,	2011	was	$1.6	billion	(.59%	of	PNC's	total	assets),	which primarily	included	$625	million	for	cross-border	leases	in	support	of	national infrastructure,	$382	million	for	United	Kingdom	foreign	office	loans	and	$357 million	of	securities	issued	by	AAA-rated	sovereigns.

The	$550	million	of	unfunded	direct	exposure	as	of	December	31,	2012	was largely	comprised	of	$449	million	for	unfunded	contractual	commitments primarily	for	United	Kingdom	local	office	commitments	to	PNC	Business	Credit corporate	customers	on	a	secured	basis	or	activities	supporting	our	domestic customers	export	activities	through	the	confirmation	of	trade	letters	of	credit. Comparably,	the	$485	million	of	unfunded	direct	exposure	as	of	December	31, 2011	was	largely	comprised	of	$440	million	for	unfunded	contractual commitments	primarily	for	United	Kingdom	local	office	commitments	to	PNC Business	Credit	corporate	customers	on	a	secured	basis.

We	also	track	European	financial	exposures	where	our	clients,	primarily	U.S. entities,	appoint	PNC	as	a	letter	of	credit	issuing	bank	and	we	elect	to	assume	the joint	probability	of	default	risk.	As	of	December	31,	2012	and	December	31, 2011,	PNC	had	$2.5	billion	and	$2.3	billion,	respectively,	of	indirect	exposure. For	PNC	to	incur	a	loss	in	these	indirect	exposures,	both	the	obligor	and	the financial	counterparty	participating	bank	would	need	to	default.	PNC	assesses both	the	corporate	customers	and	the	participating	banks	for	counterparty	risk and	where	PNC	has	found	that	a

participating	bank	exposes	PNC	to	unacceptable	risk,	PNC	will	reject	the participating	bank	as	an	acceptable	counterparty	and	will	ask	the	corporate customer	to	find	an	acceptable	participating	bank.

Direct	and	indirect	exposure	to	entities	in	the	GIIPS	countries	totaled	$241 million	as	of	December	31,	2012,	of	which	$122	million	was	direct	exposure	for cross-border	leases	within	Portugal,	$67	million	represented	direct	exposure	for loans	outstanding	within	Ireland	and	$31	million	represented	indirect	exposure for	letters	of	credit	with	strong	underlying	obligors,	primarily	U.S.	entities,	with participating	banks	in	Ireland,	Italy	and	Spain.	The	comparable	amounts	as	of December	31,	2011	were	total	direct	and	indirect	exposure	of	$181	million, consisting	of	$118	million	of	direct	exposure	for	cross-border	leases	within Portugal,	indirect	exposure	of	$48	million	for	letters	of	credit	with	strong underlying	obligors,	primarily	U.S.	entities,	with	participating	banks	in	Ireland, Italy	and	Spain	and	$15	million	for	unfunded	contractual	commitments	in	Spain.

Direct	and	indirect	exposure	to	entities	in	Belgium	and	France	totaled	$1.2 billion	as	of	December	31,	2012.	Direct	exposure	of	$138	million	primarily consisted	of	$69	million	for	cross-border	leases	within	Belgium,	$35	million	for unfunded	contractual	commitments	in	France	and	$30	million	of	covered	bonds issued	by	a	financial	institution	in	France.	Indirect	exposure	was	$1.1	billion	for letters	of	credit	with	strong	underlying	obligors,	primarily	U.S.	entities,	with creditworthy	participant	banks	in	France	and	Belgium.	The	comparable	amounts as	of	December	31,	2011	were	total	direct	and	indirect	exposure	of	$1.1	billion as	of	December	31,	2011	of	which	there	was	$154	million	of	direct	exposure primarily	consisting	of	$75	million	for	cross-border	leases	within	Belgium	and $62	million	for	unfunded	contractual	commitments	in	France.	In	addition,	direct exposure	at	December	31,	2011	included	$11	million	for	90%	Overseas	Private Investment	Corporation	("OPIC")	guaranteed	Turkish	loans.	Indirect	exposure	at December	31,	2011	was	$935	million	for	letters	of	credit	with	strong	underlying obligors	and	creditworthy	participant	banks	in	France	and	Belgium.

# BUSINESS	SEGMENTS	REVIEW

We	have	six	reportable	business	segments: •	Retail	Banking •	Corporate	&	Institutional	Banking •	Asset	Management	Group

Business	segment	results,	including	inter-segment	revenues,	and	a	description	of each	business	are	included	in	Note	26	Segment	Reporting	included	in	the	Notes To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.	Certain	amounts included	in	this	Item	7	differ	from	those	amounts	shown	in	Note	26	primarily due	to	the	presentation	in	this	Business	Segments	Review	of	business	net	interest revenue	on	a	taxable-equivalent	basis.

Results	of	individual	businesses	are	presented	based	on	our	internal	management reporting	practices.	There	is	no	comprehensive,	authoritative	body	of	guidance for	management	accounting	equivalent	to	GAAP;	therefore,	the	financial	results of	our	individual	businesses	are	not	necessarily	comparable	with	similar information	for	any	other	company.	We	periodically	refine	our	internal methodologies	as	management	reporting	practices	are	enhanced.	To	the	extent practicable,	retrospective	application	of	new	methodologies	is	made	to	prior period	reportable	business	segment	results	and	disclosures	to	create comparability	to	the	current	period	presentation	to	reflect	any	such	refinements. Financial	results	are	presented,	to	the	extent	practicable,	as	if	each	business operated	on	a	stand-alone	basis.	We	have	aggregated	the	business	results	for certain	similar	operating	segments	for	financial	reporting	purposes.

Assets	receive	a	funding	charge	and	liabilities	and	capital	receive	a	funding credit	based	on	a	transfer	pricing	methodology	that	incorporates	product maturities,	duration	and	other	factors.	During	the	second	quarter	of	2012, enhancements	were	made	to	the	funds	transfer	pricing	methodology. Retrospective	application	of	our	new	funds	transfer	pricing	methodology	has been	made	to	the	prior	period	reportable	business	segment	results	and disclosures	to	create	comparability	to	the	current	period	presentation,	which	we believe	is	more	meaningful	to	readers	of	our	financial	statements.

A	portion	of	capital	is	intended	to	cover	unexpected	losses	and	is	assigned	to	our business	segments	using	our	risk-based	economic	capital	model,	including consideration	of	the	goodwill	and	other	intangible	assets	at	those	business segments,	as	well	as	the	diversification	of	risk	among	the	business	segments.

We	have	allocated	the	allowances	for	loan	and	lease	losses	and	for	unfunded loan	commitments	and	letters	of	credit	based	on	our	assessment	of	risk	in	the business	segment	loan	portfolios.	Our	allocation	of	the	costs	incurred	by operations	and	other	shared	support	areas	not	directly	aligned	with	the businesses	is	primarily	based	on	the	use	of	services.	Key	reserve	assumptions and	estimation	processes	react	to	and	are	influenced	by	observed	changes	in	loan portfolio	performance	experience,	the	financial	strength	of	the	borrower,	and economic	conditions.	Key	reserve	assumptions	are	periodically	updated.	During the	third	quarter	of	2012,	PNC	increased	the	amount	of	internally	observed	data used	in	estimating	the	key	commercial	lending	assumptions	of	PDs	and	LGDs. The	estimated	impact	as	of	the	beginning	of	the	third	quarter	2012	was approximately	an	increase	of	$41	million	and	a	decrease	of	$55	million	to	the provision	for	credit	losses	of	Retail	Banking	and	Corporate	&	Institutional Banking,	respectively.	Prior	periods	are	not	presented	on	a	comparable	basis	as	it is	not	practicable	to	do	so.

Total	business	segment	financial	results	differ	from	consolidated	income	from continuing	operations	before	noncontrolling	interests.	The	impact	of	these differences	is	reflected	in	the	"Other"	category.	"Other"	for	purposes	of	this Business	Segments	Review	and	the	Business	Segment	Highlights	in	the Executive	Summary	includes	residual	activities	that	do	not	meet	the	criteria	for disclosure	as	a	separate	reportable	business,	such	as	gains	or	losses	related	to BlackRock	transactions,	integration	costs,	asset	and	liability	management activities	including	net	securities	gains	or	losses,	other-than-temporary impairment	of	investment	securities	and	certain	trading	activities,	exited businesses,	alternative	investments	including	private	equity,	intercompany eliminations,	most	corporate	overhead,	tax	adjustments	that	are	not	allocated	to business	segments	and	differences	between	business	segment	performance reporting	and	financial	statement	reporting	(GAAP),	including	the	presentation of	net	income	attributable	to	noncontrolling	interests	as	the	segments'	results exclude	their	portion	of	net	income	attributable	to	noncontrolling	interests.

# Table	20:	Results	Of	Businesses	–	Summary

# (Unaudited)

|  | Net	Income	(Loss) |  | Revenue |  | Average	Assets	(a) | Average	Assets	(a) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\t-\tin\tmillions | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 |
| Retail\tBanking | $596 | $371 | $6,328 | $5,579 | $72,573\t\t\t $ | 66,448 |
| Corporate\t&amp;\tInstitutional\tBanking | \t 2,328 | \t 1,940 | 5,697 | 4,775 | \t 102,962 | 81,043 |
| Asset\tManagement\tGroup | 145 | 168 | 973 | 929 | 6,735 | 6,719 |
| Residential\tMortgage\tBanking | (308) | 89 | 526 | 952 | 11,529 | 11,270 |
| BlackRock | 395 | 361 | 512 | 464 | 5,857 | 5,516 |
| Non-Strategic\tAssets\tPortfolio | 237 | 200 | 843 | 960 | 12,050 | 13,119 |
| Total\tbusiness\tsegments | \t 3,393 | \t 3,129 | \t 14,879 | \t 13,659 | \t 211,706 | \t 184,115 |
| Other\t(b) | (392) | (58) | 633 | 667 | 83,319 | 81,220 |
| Total | $3,001 | $3,071 | $15,512 | $14,326 | $295,025\t\t\t $265,335 | $295,025\t\t\t $265,335 |
| (a)\nPeriod-end\tbalances\tfor\tBlackRock. |  |  |  |  |  |  |

(a) Period-end	balances	for	BlackRock.

(b) "Other"	average	assets	include	securities	available	for	sale	associated	with	asset	and	liability	management	activities.

# Table	21:	Retail	Banking	Table

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Net\tinterest\tincome\nNoninterest\tincome | $4,316 | $3,806 |
| Service\tcharges\ton\tdeposits | 547 | 510 |
| Brokerage | 189 | 201 |
| Consumer\tservices | 838 | 927 |
| Other | 438 | 135 |
| Total\tnoninterest\tincome | 2,012 | 1,773 |
| Total\trevenue | 6,328 | 5,579 |
| Provision\tfor\tcredit\tlosses | 800 | 891 |
| Noninterest\texpense | 4,586 | 4,103 |
| Pretax\tearnings | 942 | 585 |
| Income\ttaxes | 346 | 214 |
| Earnings | $596 | $371 |
| AVERAGE\tBALANCE\tSHEET |  |  |
| Loans |  |  |
| Consumer |  |  |
| Home\tequity | $28,321 | $25,972 |
| Indirect\tauto | 5,467 | 3,094 |
| Indirect\tother | 1,174 | 1,491 |
| Education | 8,878 | 9,103 |
| Credit\tcards | 4,063 | 3,738 |
| Other | 2,039 | 1,750 |
| Total\tconsumer | 49,942 | 45,148 |
| Commercial\tand\tcommercial\treal\nestate | 11,198 | 10,567 |
| Floor\tplan | 1,788 | 1,450 |
| Residential\tmortgage | 946 | 1,180 |
| Total\tloans | 63,874 | 58,345 |
| Goodwill\tand\tother\tintangible\tassets | 6,123 | 5,751 |
| Other\tassets | 2,576 | 2,352 |
| Total\tassets | $72,573 | $66,448 |
| Deposits |  |  |
| Noninterest-bearing\tdemand | $20,179 | $18,183 |
| Interest-bearing\tdemand | 28,007 | 22,196 |
| Money\tmarket | 46,578 | 41,002 |
| Total\ttransaction\tdeposits | 94,764 | 81,381 |
| Savings | 9,751 | 8,098 |
| Certificates\tof\tdeposit | 25,715 | 33,006 |
| Total\tdeposits | \t 130,230 | \t 122,485 |
| Other\tliabilities | 340 | 855 |
| Capital | 8,747 | 8,168 |
| Total\tliabilities\tand\tequity | $139,317 | $131,508 |

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tcapital | 7% | 5% |
| Return\ton\taverage\tassets | .82 | .56 |
| Noninterest\tincome\tto\ttotal\trevenue | 32 | 32 |
| Efficiency | 72 | 74 |
| OTHER\tINFORMATION\t(a) |  |  |
| Credit-related\tstatistics: |  |  |
| Commercial\tnonperforming\tassets | $245 | $336 |
| Consumer\tnonperforming\tassets | 902 | 513 |
| Total\tnonperforming\tassets\t(b) | $1,147 | $849 |
| Purchased\timpaired\tloans\t(c) | $819 | $757 |
| Commercial\tlending\tnet\tcharge-offs | $119 | $219 |
| Credit\tcard\tlending\tnet\tcharge-offs | 174 | 211 |
| Consumer\tlending\t(excluding\tcredit\tcard)\tnet |  |  |
| charge-offs | 521 | 427 |
| Total\tnet\tcharge-offs | $814 | $857 |
| Commercial\tlending\tnet\tcharge-off\tratio | .92% | 1.82% |
| Credit\tcard\tlending\tnet\tcharge-off\tratio | 4.28% | 5.64% |
| Consumer\tlending\t(excluding\tcredit\tcard)\tnet |  |  |
| charge-off\tratio | 1.11% | 1.00% |
| Total\tnet\tcharge-off\tratio | 1.27% | 1.47% |
| Home\tequity\tportfolio\tcredit\tstatistics:\t(d) |  |  |
| %\tof\tfirst\tlien\tpositions\tat\torigination | 42% | 39% |
| Weighted-average\tloan-to-value\tratios\t(LTVs) |  |  |
| (e) | 81% | 72% |
| Weighted-average\tupdated\tFICO\tscores\t(f) | 742 | 743 |
| Net\tcharge-off\tratio | 1.22% | 1.09% |
| Loans\t30\t–\t59\tdays\tpast\tdue | .52% | .58% |
| Loans\t60\t–\t89\tdays\tpast\tdue | .33% | .38% |
| Loans\t90\tdays\tpast\tdue\t(g) | 1.22% | 1.22% |
| Other\tstatistics: |  |  |
| ATMs | \t 7,282 | \t 6,806 |
| Branches\t(h) | \t 2,881 | \t 2,511 |
| Customer-related\tstatistics:\t(in\tthousands) |  |  |
| Retail\tBanking\tchecking\trelationships | \t 6,475 | \t 5,761 |
| Retail\tonline\tbanking\tactive\tcustomers | \t 4,227 | \t 3,519 |
| Retail\tonline\tbill\tpayment\tactive\tcustomers |  |  |
|  | \t 1,236 | \t 1,105 |
| Brokerage\tstatistics: |  |  |
| Financial\tconsultants\t(i) | 636 | 686 |
| Full\tservice\tbrokerage\toffices | 41 | 38 |
| Brokerage\taccount\tassets\t(billions) | $38 | $34 |

(a) Presented	as	of	December	31,	except	for	net	charge-offs	and	net	charge-off	ratios,	which	are	for	the year	ended.

(b) Includes	nonperforming	loans	of	$1.1	billion	at	December	31,	2012	and	$.8	billion	at	December	31, 2011.	In	the	first	quarter	of	2012,	we	adopted	a	policy	stating	that	Home	equity	loans	past	due	90 days	or	more	would	be	placed	on	nonaccrual	status.	The	prior	policy	required	that	these	loans	be past	due	180	days	before	being	placed	on	nonaccrual	status.

(c) Recorded	investment	of	purchased	impaired	loans	related	to	acquisitions.

(d) Lien	position,	LTV,	FICO	and	delinquency	statistics	are	based	upon	balances	and	other	data	that exclude	the	impact	of	accounting	for	acquired	loans.

(e) Updated	LTV	is	reported	for	December	31,	2012.	For	December	31,	2011,	LTV	is	based	upon	data from	loan	origination.	Original	LTV	excludes	certain	acquired	portfolio	loans	where	this	data	is	not available.

(f) Represents	FICO	scores	that	are	updated	monthly	for	home	equity	lines	and	quarterly	for	the	home equity	installment	loans.

(g) Includes	non-accrual	loans.

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

(i) Financial	consultants	provide	services	in	full	service	brokerage	offices	and	traditional	bank branches.

Retail	Banking	earned	$596	million	for	2012	compared	with	earnings	of	$371 million	in	2011.	The	increase	in	earnings	resulted	from	organic	growth	in transaction	deposit	balances,	gains	on	sales	of	Visa	Class	B	common	shares, lower	rates	paid	on	deposits,	higher	levels	of	customer-initiated	transactions,	a lower	provision	for	credit	losses,	and	the	impact	of	the	RBC	Bank	(USA) acquisition,	partially	offset	by	the	regulatory	impact	of	lower	interchange	fees	on debit	card	transactions	and	higher	additions	to	legal	reserves.

The	results	for	2012	include	the	impact	of	the	retail	business	associated	with	the acquisition	of	RBC	Bank	(USA)	and	the	credit	card	portfolio	purchase	from RBC	Bank	(Georgia),	National	Association	in	March	2012.	Retail	Banking added	approximately	$12.1	billion	in	deposits,	$4.9	billion	in	loans,	460,000 checking	relationships,	over	400	branches,	and	over	400	ATMs	through	this acquisition.	Retail	Banking's	footprint	extends	across	17	states	and	Washington, D.C.,	covering	nearly	half	the	US	population	and	serving	5,733,000	consumers and	742,000	small	businesses	with	2,881	branches	and	7,282	ATMs.

Retail	Banking's	core	strategy	is	to	grow	consumer	and	small	business	checking households	profitably	by	providing	an	experience	that	builds	customer	loyalty and	creates	opportunities	to	sell	other	products	and	services,	including	loans, savings	accounts,	investment	products	and	money	management	services.	Net checking	relationships	grew	714,000	in	2012,	including	460,000	from	the	RBC Bank	(USA)	acquisition.	Organic	net	checking	relationships	grew	by	4%	in	2012 from	year	end	2011.	The	growth	reflects	strong	results	and	gains	in	all	of	our markets	as	well	as	strong	customer	retention	in	the	overall	network.	Active online	banking	customers	and	active	online	bill	payment	customers	increased	by 20%	and	12%,	respectively,	from	year	end	2011.	The	business	is	also	focused	on expanding	the	use	of	technology,	using	services	such	as	online	banking	and mobile	deposit	taking	to	improve	customer	service	convenience	and	lower	our service	delivery	costs.

Total	revenue	for	2012	was	$6.3	billion	compared	with	$5.6	billion	in	2011.	Net interest	income	of	$4.3	billion	increased	$510	million	compared	with	2011.	The increase	resulted	from	higher	organic	transaction	deposit	balances,	lower	rates paid	on	deposits,	and	the	impact	of	the	RBC	Bank	(USA)	acquisition.

Noninterest	income	increased	$239	million	compared	to	2011.	The	increase	was driven	by	the	$267	million	gain	on	the	sale	of	9	million	Visa	Class	B	common shares.	Noninterest	income	has	been	adversely	affected	by	Dodd-Frank	limits related	to	interchange	rates	that	became	effective	in	October	2011.	The	negative impact	of	these	limits	was	approximately	$314	million	in	2012	and approximately	$75	million	in	2011.	This	impact	has	been	partially	offset	by higher	volumes	of	merchant,	customer	credit	card	and	debit	card	transactions and	the	RBC	Bank	(USA)	acquisition.

The	provision	for	credit	losses	was	$800	million	in	2012	compared	with	$891 million	in	the	prior	year.	Net	charge-offs	were	$814	million	for	2012	compared with	$857	million	for	2011.	Improvements	in	credit	quality	over	the	prior	year were	evident	in	the	small	business	and	credit	card	portfolios.	Pursuant	to regulatory	guidance	issued	in	the	third	quarter	of	2012,	consumer	charge-offs were	taken	in	2012	related	to	troubled	debt	restructurings	resulting	from bankruptcy.	Such	loans	have	been	classified	as	troubled	debt	restructurings	and have	been	measured	at	the	fair	value	of	the	collateral	less	costs	to	sell.

Noninterest	expense	increased	$483	million	in	2012	compared	to	2011.	The increase	was	primarily	attributable	to	the	operating	expenses	associated	with RBC	Bank	(USA)	and	higher	additions	to	legal	reserves.

Growing	core	checking	deposits	is	key	to	Retail	Banking's	growth	and	to providing	a	source	of	low-cost	funding	to	PNC.	The	deposit	product	strategy	of Retail	Banking	is	to	remain	disciplined	on	pricing,	target	specific	products	and markets	for	growth,	and	focus	on	the	retention	and	growth	of	balances	for relationship	customers.	In	2012,	average	total	deposits	of	$130.2	billion increased	$7.7	billion,	or	6%,	compared	with	2011.

•	Average	transaction	deposits	grew	$13.4	billion,	or	16%,	and	average savings	deposit	balances	grew	$1.7	billion,	or	20%,	year	over	year	as	a result	of	organic	deposit	growth,	continued	customer	preference	for liquidity,	and	the	RBC	Bank	(USA)	acquisition.	In	2012,	average demand	deposits	increased	$7.8	billion,	or	19%,	to	$48.2	billion; average	money	market	deposits	increased	$5.6	billion,	or	14%,	to $46.6	billion.

•	Total	average	certificates	of	deposit	decreased	$7.3	billion,	or	22%, compared	to	2011.	This	decline	was	in	support	of	our	low-cost	funding strategy	and	was	due	to	the	run-off	of	maturing	accounts	partially offset	by	the	impact	of	the	RBC	Bank	(USA)	acquisition.

Retail	Banking	continues	to	focus	primarily	on	a	relationship-based	lending strategy	that	targets	specific	customer	sectors,	including	mass	and	mass	affluent consumers,	small	businesses	and	auto	dealerships.	In	2012,	average	total	loans were	$63.9	billion,	an	increase	of	$5.5	billion,	or	9%,	of	which	$4.0	billion	was attributable	to	the	RBC	Bank	(USA)	acquisition,	primarily	in	the	home	equity portfolio.

The	increase	was	due	to	the	expansion	of	our	indirect	sales	force	and product	introduction	to	acquired	markets,	as	well	as	overall	increases in	auto	sales.	An	indirect	auto	portfolio	of	$522	million	was	purchased in	September	2012.

•	Average	home	equity	loans	increased	$2.3	billion,	or	9%,	in	2012.	The increase	was	due	to	the	RBC	Bank	(USA)	acquisition.	The	remainder of	the	portfolio

showed	a	decline	as	loan	demand	was	outpaced	by	paydowns, refinancing	and	charge-offs.	Retail	Banking's	home	equity	loan portfolio	is	relationship	based,	with	97%	of	the	portfolio	attributable	to borrowers	in	our	primary	geographic	footprint. •	Average	commercial	and	commercial	real	estate	loans	increased	$631 million,	or	6%,	over	2011.	The	increase	was	due	to	the	acquisition	of RBC	Bank	(USA).	The	remainder	of	the	portfolio	showed	a	decline	as loan	demand	was	outpaced	by	paydowns,	refinancing	and	charge-offs. •	Average	auto	dealer	floor	plan	loans	grew	$338	million,	or	23%,	in 2012,	primarily	resulting	from	dealer	line	utilization	and	additional dealer	relationships.

•	Average	credit	card	balances	increased	$325	million,	or	9%,	over	2011 as	a	result	of	the	portfolio	purchase	from	RBC	Bank	(Georgia), National	Association	in	March	2012	and	organic	customer	growth.

•	Average	education	loans	were	down	$225	million,	or	2%,	from	2011 as	paydowns	and	charge-offs	in	the	discontinued	government guaranteed	portfolio	outpaced	growth	in	the	private	portfolio. •	Average	indirect	other	and	residential	mortgages	in	this	segment	are primarily	run-off	portfolios	and	declined	$317	million	and	$234 million,	respectively,	in	2012.	The	indirect	other	portfolio	is	comprised of	marine,	RV,	and	other	indirect	loan	products.

Nonperforming	assets	increased	$298	million	to	$1.1	billion	due	to	a	change	in policy	on	home	equity	loans,	implemented	in	the	first	quarter	of	2012,	which places	these	loans	on	nonaccrual	status	at	90	days	past	due	(versus	the	prior policy	of	180	days)	as	well	as	the	implementation	of	regulatory	guidance	issued in	the	third	quarter	of	2012	related	to	troubled	debt	restructurings	resulting	from bankruptcy.	These	increases	were	partially	offset	by	a	decline	in	the	level	of commercial	nonperforming	assets.

# Table	22:	Corporate	&	Institutional	Banking	Table

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Net\tinterest\tincome\nNoninterest\tincome | $4,099 | $3,538 |
| Corporate\tservice\tfees | 1,030 | 752 |
| Other | 568 | 485 |
| Noninterest\tincome | 1,598 | 1,237 |
| Total\trevenue | 5,697 | 4,775 |
| Provision\tfor\tcredit\tlosses\t(benefit) | – | (124) |
| Noninterest\texpense | 2,028 | 1,832 |
| Pretax\tearnings | 3,669 | 3,067 |
| Income\ttaxes | 1,341 | 1,127 |
| Earnings | $2,328 | $1,940 |
| AVERAGE\tBALANCE\tSHEET |  |  |
| Loans |  |  |
| Commercial | $48,444 | $35,764 |
| Commercial\treal\testate | 15,768 | \t 13,938 |
| Commercial\t–\treal\testate\trelated | 5,774 | 3,782 |
| Asset-based\tlending | 10,083 | 8,171 |
| Equipment\tlease\tfinancing | 5,997 | 5,506 |
| Total\tloans | 86,066 | \t 67,161 |
| Goodwill\tand\tother\tintangible\tassets | 3,656 | 3,405 |
| Loans\theld\tfor\tsale | 1,222 | 1,257 |
| Other\tassets | 12,018 | 9,220 |
| Total\tassets | $102,962 | $81,043 |
| Deposits |  |  |
| Noninterest-bearing\tdemand | $38,337 | $31,462 |
| Money\tmarket | 15,590 | \t 12,925 |
| Other | 6,108 | 5,651 |
| Total\tdeposits | 60,035 | \t 50,038 |
| Other\tliabilities | 17,969 | \t 13,323 |
| Capital | 9,272 | 8,010 |
| Total\tliabilities\tand\tequity | $87,276 | $71,371 |

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tcapital | 25% | 24% |
| Return\ton\taverage\tassets | 2.26 | 2.39 |
| Noninterest\tincome\tto\ttotal\trevenue | 28 | 26 |
| Efficiency | 36 | 38 |
| COMMERCIAL\tMORTGAGE\tSERVICING |  |  |
| PORTFOLIO\t(in\tbillions) |  |  |
| Beginning\tof\tperiod | $267 | $266 |
| Acquisitions/additions | 64 | 43 |
| Repayments/transfers | (49) | (42) |
| End\tof\tperiod | $282 | $267 |
| OTHER\tINFORMATION |  |  |
| Consolidated\trevenue\tfrom:\t(a) |  |  |
| Treasury\tManagement\t(b) | $1,380 | $1,266 |
| Capital\tMarkets\t(c) | $710 | $622 |
| Commercial\tmortgage\tloans\theld\tfor\tsale |  |  |
| (d) | $104 | $113 |
| Commercial\tmortgage\tloan\tservicing |  |  |
| income,\tnet\tof\tamortization\t(e) | 195 | 180 |
| Commercial\tmortgage\tservicing\trights |  |  |
| recovery/(impairment),\tnet\tof |  |  |
| economic\thedge | 31 | (157) |
| Total\tcommercial\tmortgage\tbanking |  |  |
| activities | $330 | $136 |
| Total\tloans\t(f) | $93,721 | $73,417 |
| Credit-related\tstatistics: |  |  |
| Nonperforming\tassets\t(f)\t(g) | $1,181 | $1,889 |
| Purchased\timpaired\tloans\t(f)\t(h) | $875 | $404 |
| Net\tcharge-offs | $142 | $375 |
| Net\tcarrying\tamount\tof\tcommercial\tmortgage |  |  |
| servicing\trights\t(f) | $420 | $468 |
| (a) |  |  |

(a) Represents	consolidated	PNC	amounts.	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	the	Consolidated	Income	Statement	Review.

(b) Includes	amounts	reported	in	net	interest	income	and	corporate	service	fees.

(c) Includes	amounts	reported	in	net	interest	income,	corporate	service	fees	and	other	noninterest income.

(d) Includes	valuations	on	commercial	mortgage	loans	held	for	sale	and	related	commitments, derivative	valuations,	origination	fees,	gains	on	sale	of	loans	held	for	sale	and	net	interest	income on	loans	held	for	sale.

(e) Includes	net	interest	income	and	noninterest	income	from	loan	servicing	and	ancillary	services,	net of	commercial	mortgage	servicing	rights	amortization	and	a	direct	write-down	of	commercial mortgage	servicing	rights	of	$24	million	recognized	in	the	first	quarter	of	2012.	Commercial mortgage	servicing	rights	(impairment)/recovery,	net	of	economic	hedge	is	shown	separately.

(h) Recorded	investment	of	purchased	impaired	loans	related	to	acquisitions.

Results	in	2012	include	the	impact	of	the	RBC	Bank	(USA)	acquisition	in	March 2012,	which	added	approximately	$7.5	billion	of	loans	and	$4.8	billion	of deposits	at	acquisition	date.

Highlights	of	Corporate	&	Institutional	Banking's	performance	throughout	2012 include	the	following:

•	Corporate	&	Institutional	Banking	continued	to	execute	on	strategic initiatives,	including	in	the	Southeast,	by	organically	growing	and deepening	client	relationships	that	meet	our	risk/return	measures. Approximately	1,100	new	primary	Corporate	Banking	clients	were added	in	2012.

•	Loan	commitments	increased	24%	to	$181	billion	at	December	31, 2012	compared	to	December	31,	2011,	primarily	due	to	the	RBC	Bank (USA)	acquisition	and	growth	in	our	Corporate	Banking	(Corporate Finance,	Financial	Services	Advisory	and	Banking,	Public	Finance	and Healthcare	businesses),	Real	Estate	and	Business	Credit	(asset-based lending)	businesses.

•	Period-end	loan	balances	have	increased	for	the	ninth	consecutive quarter,	including	an	increase	of	4%	at	December	31,	2012	compared with	September	30,	2012	and	22%	compared	with	December	31,	2011. •	Our	Treasury	Management	business,	which	ranks	among	the	top providers	in	the	country,	continued	to	invest	in	markets,	products	and infrastructure	as	well	as	major	initiatives	such	as	healthcare.

•	Cross	sales	of	treasury	management	and	capital	markets-related products	and	services	to	customers	in	PNC's	markets	continued	to	be successful	and	were	ahead	of	2011.

•	Midland	Loan	Services	was	the	number	one	servicer	of	Fannie	Mae and	Freddie	Mac	multifamily	and	healthcare	loans	and	was	the	second leading	servicer	of	commercial	and	multifamily	loans	by	volume	as	of June	30,	2012	according	to	Mortgage	Bankers	Association.	Midland	is the	only	U.S.	commercial	mortgage	servicer	to	receive	the	highest primary,	master	and	special	servicer	ratings	from	Fitch	Ratings, Standard	&	Poor's	and	Morningstar.

Net	interest	income	in	2012	was	$4.1	billion,	a	16%	increase	from	2011, reflecting	higher	average	loans	and	deposits,	partially	offset	by	lower	spreads	on loans	and	deposits.

Corporate	service	fees	were	$1.0	billion	in	2012,	an	increase	of	$278	million from	2011,	primarily	due	to	higher

commercial	mortgage	servicing	revenue	and	merger	and	acquisition	advisory fees.	The	major	components	of	corporate	service	fees	are	treasury	management, corporate	finance	fees	and	commercial	mortgage	servicing	revenue.

Other	noninterest	income	was	$568	million	in	2012	compared	with	$485	million in	2011.	The	increase	of	$83	million	was	primarily	due	to	gains	on	asset	sales and	the	impact	of	customer	driven	capital	markets	activity.

The	provision	for	credit	losses	was	zero	in	2012	compared	with	a	benefit	of	$124 million	in	2011.	The	increase	reflects	higher	loan	and	commitment	levels	offset by	positive	credit	migration.	Despite	the	increase,	the	overall	credit	quality remains	strong.	Net	charge-offs	were	$142	million	in	2012,	which	decreased $233	million,	or	62%,	compared	with	2011.	The	decline	was	attributable primarily	to	the	commercial	real	estate	portfolio.

Nonperforming	assets	declined	for	the	eleventh	consecutive	quarter,	and	at	$1.2 billion,	represented	a	37%	decrease	from	December	31,	2011.

Noninterest	expense	was	$2.0	billion	in	2012,	an	increase	of	$196	million	from 2011.	Higher	compensation-related	costs	were	driven	by	improved	performance and	higher	staffing,	including	the	impact	of	the	RBC	Bank	(USA)	acquisition.

Average	loans	were	$86.1	billion	in	2012	compared	with	$67.2	billion	in	2011, an	increase	of	28%.	Organically,	average	loans	grew	20%	in	the	comparison. •	The	Corporate	Banking	business	provides	lending,	treasury management,	and	capital	markets-related	products	and	services	to	mid- sized	corporations,	government	and	not-for-profit	entities,	and selectively	to	large	corporations.	Average	loans	for	this	business increased	$11.0	billion,	or	33%,	in	2012	compared	with	2011,

primarily	due	to	an	increase	in	loan	commitments	from	new	customers. Organically,	average	loans	for	this	business	grew	22%	in	the comparison.

•	PNC	Real	Estate	provides	commercial	real	estate	and	real	estate- related	lending	and	is	one	of	the	industry's	top	providers	of	both conventional	and	affordable	multifamily	financing.	Average	loans	for this	business	increased	$2.7	billion,	or	17%,	in	2012	compared	with 2011	due	to	increased	originations.

•	PNC	Business	Credit	is	one	of	the	top	five	asset-based	lenders	in	the country	with	increasing	market	share	according	to	the	Commercial Finance	Association.	The	loan	portfolio	is	relatively	high	yielding, with	moderate	risk	as	the	loans	are	mainly	secured	by	short-term assets.	Average	loans	increased	$1.9	billion,	or	23%,	in	2012	compared with	2011	due	to	customers	seeking	stable	lending	sources,	loan	usage rates,	and	market	share	expansion.

•	PNC	Equipment	Finance	is	the	4th	largest	bank-affiliated	leasing company	with	over	$11	billion	in	equipment	finance	assets.

•	Deposit	growth	has	been	very	strong,	consistent	with	the	industry-wide trend,	as	clients	hold	record	levels	of	cash.

•	Deposit	inflows	into	noninterest-bearing	demand	deposits	continued	as FDIC	insurance	has	been	an	attraction	for	customers	maintaining liquidity	during	this	prolonged	period	of	low	interest	rates. •	The	repeal	of	Regulation	Q	limitations	on	interest-bearing	commercial demand	deposit	accounts	became	effective	in	the	third	quarter	of	2011. Interest	in	this	product	has	been	muted	due	to	the	current	rate environment.

•	As	of	February	22,	2013,	commercial	deposits	have	declined	by	$3.6 billion	from	the	December	31,	2012	level	as	a	result	of	seasonal	and normal	business	activity.	Deposit	fluctuations	due	to	the	Transaction Account	Guarantee	Program's	expiration	have	not	been	significant. Management	expects	that	in	the	current	interest	rate	environment, additional	runoff	of	commercial	deposits	will	not	be	significant.

The	commercial	mortgage	servicing	portfolio	was	$282	billion	at	December	31, 2012	compared	with	$267	billion	at	December	31,	2011.	Servicing	additions exceeded	portfolio	run-off.

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	the	Consolidated	Income	Statement Review.

# Table	23:	Asset	Management	Group	Table

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Net\tinterest\tincome | $297 | $280 |
| Noninterest\tincome | 676 | 649 |
| Total\trevenue | 973 | 929 |
| Provision\tfor\tcredit\tlosses\t(benefit) | 11 | (24) |
| Noninterest\texpense | 732 | 687 |
| Pretax\tearnings | 230 | 266 |
| Income\ttaxes | 85 | 98 |
| Earnings | $145 | $168 |
| AVERAGE\tBALANCE\tSHEET |  |  |
| Loans |  |  |
| Consumer | $4,416 | $4,108 |
| Commercial\tand\tcommercial\treal\testate | \t 1,076 | \t 1,301 |
| Residential\tmortgage | 695 | 706 |
| Total\tloans | \t 6,187 | \t 6,115 |
| Goodwill\tand\tother\tintangible\tassets | 329 | 361 |
| Other\tassets | 219 | 243 |
| Total\tassets | $6,735 | $6,719 |
| Deposits |  |  |
| Noninterest-bearing\tdemand | $1,462 | $1,209 |
| Interest-bearing\tdemand | \t 2,746 | \t 2,361 |
| Money\tmarket | \t 3,553 | \t 3,589 |
| Total\ttransaction\tdeposits | \t 7,761 | \t 7,159 |
| CDs/IRAs/savings\tdeposits | 491 | 632 |
| Total\tdeposits | \t 8,252 | \t 7,791 |
| Other\tliabilities | 68 | 74 |
| Capital | 439 | 349 |
| Total\tliabilities\tand\tequity | $8,759 | $8,214 |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tcapital | 33% | 48% |
| Return\ton\taverage\tassets | 2.15 | 2.50 |
| Noninterest\tincome\tto\ttotal\trevenue | 69 | 70 |
| Efficiency | 75 | 74 |

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| OTHER\tINFORMATION |  |  |
| Total\tnonperforming\tassets\t(a)\t(b) | $69 | $60 |
| Purchased\timpaired\tloans\t(a)\t(c) | $109 | $127 |
| Total\tnet\tcharge-offs | $6 | $– |
| ASSETS\tUNDER\tADMINISTRATION |  |  |
| (in\tbillions)\t(a)\t(d) |  |  |
| Personal | $107 | $100 |
| Institutional | \t 117 | \t 110 |
| Total | $224 | $210 |
| Asset\tType |  |  |
| Equity | $120 | $111 |
| Fixed\tIncome | 69 | 66 |
| Liquidity/Other | 35 | 33 |
| Total | $224 | $210 |
| Discretionary\tassets\tunder\tmanagement |  |  |
| Personal | $73 | $69 |
| Institutional | 39 | 38 |
| Total | $112 | $107 |
| Asset\tType |  |  |
| Equity | $56 | $53 |
| Fixed\tIncome | 39 | 38 |
| Liquidity/Other | 17 | 16 |
| Total | $112 | $107 |
| Nondiscretionary\tassets\tunder\tadministration |  |  |
| Personal | $34 | $31 |
| Institutional | 78 | 72 |
| Total | $112 | $103 |
| Asset\tType |  |  |
| Equity | $64 | $58 |
| Fixed\tIncome | 30 | 28 |
| Liquidity/Other | 18 | 17 |
| Total | $112 | $103 |
| (a)\nAs\tof\tDecember\t31. |  |  |

(d) Excludes	brokerage	account	assets.

Asset	Management	Group	earned	$145	million	in	2012	compared	with	$168 million	in	2011.	Revenue	increased	$44	million	in	the	year	over	year comparison	as	strong	sales	and	higher	average	equity	markets	increased noninterest	income	by	4%	and	higher	average	deposit	balances	increased	net interest	income	by	6%.	The	revenue	increase	was	offset	by	higher	noninterest expense	from	strategic	business	investments	and	higher	provision	for	credit losses.	During	2012	the	business	continued	to	focus	on	client	acquisition	and asset	and	revenue	growth.

The	core	growth	strategies	for	the	business	continue	to	include:	investing	in higher	growth	geographies	including	the	Southeast	region,	increasing	internal referral	sales	and	adding	new	front	line	sales	staff	throughout	our	footprint.	For 2012,	the	business	delivered	strong	sales	production,	grew	high	value	clients	and benefited	from	significant	referrals	from	other	PNC	lines	of	business.	Over	time, the	successful	execution	of	these	strategies	and	the	accumulation	of	our	strong sales	performance	are	expected	to	create	meaningful	growth	in	assets	under management	and	noninterest	income.	Highlights	of	Asset	Management	Group's performance	during	2012	include	the	following:

•	Assets	under	administration	of	$224	billion	with	positive	net	flows	of $2.5	billion	in	discretionary	assets	under	management	after adjustments	to	total	net	flows	for	cyclical	client	activities,

•	Strong	sales	production,	up	32%	over	the	prior	year	including	a	37% increase	in	the	acquisition	of	new	primary	clients,

•	Significant	referrals	from	other	PNC	lines	of	business,	reflecting	an increase	of	approximately	39%	over	2011,

•	Continuing	levels	of	new	business	investment	and	focused	hiring	to drive	growth,	with	over	360	external	new	hires,	and

•	PNC	Wealth	Insight ®	was	awarded	a	"2012	CIO	100	Award"	by	CIO Magazine.	The	online	client	reporting	tool	now	enables	clients	to	view their	PNC	Investments	brokerage	accounts	and	access	all	client

information	through	a	mobile	application	that	supports	a	number	of smartphone	platforms.

Assets	under	administration	increased	to	$224	billion	at	December	31,	2012 from	$210	billion	at	December	31,	2011.	Discretionary	assets	under management	were	$112	billion	at	December	31,	2012	compared	with	$107 billion	at	December	31,	2011.	The	increase	in	the	comparisons	was	driven	by stronger	average	equity	markets,	positive	net	flows,	and	strong	sales performance.

Total	revenue	for	2012	was	$973	million	compared	with	$929	million	for	2011. Noninterest	income	was	$676	million	for	2012,	an	increase	of	$27	million	from the	prior	year	attributable	to	stronger	average	equity	markets,	increased	sales	and new	client	acquisition.	Net	interest	income	was	$297	million	for	2012	compared with	$280	million	for	2011.	The	increase	was	primarily	a	result	of	growth	in transaction	deposit	balances.

Provision	for	credit	losses	of	$11	million	in	2012	increased	$35	million compared	to	a	benefit	of	$24	million	for	2011.	Noninterest	expense	was	$732 million	in	2012,	an	increase	of	$45	million,	or	7%,	from	the	prior	year.	The increase	was	attributable	to	investments	in	the	business	including	the	Southeast region	and	higher	compensation-related	costs.	Asset	Management	Group	remains focused	on	disciplined	expense	management	as	it	invests	in	these	strategic growth	opportunities.

Average	deposits	of	$8.3	billion	for	2012	increased	$461	million,	or	6%,	over	the prior	year.	Average	transaction	deposits	grew	8%	compared	with	2011	and	were partially	offset	by	the	strategic	run-off	of	maturing	certificates	of	deposit	in	the comparison.

Average	loan	balances	of	$6.2	billion	increased	$72	million,	or	1%,	from	the prior	year	primarily	due	to	increased	consumer	loan	activity	partially	offset	by decreases	in	commercial	and	commercial	real	estate	loans.

# Table	24:	Residential	Mortgage	Banking	Table

| Dollars	in	millions,	except	as	noted | 2012 | 2011 |
| :--- | :--- | :--- |
| RESIDENTIAL\tMORTGAGE\tSERVICING |  |  |
| PORTFOLIO\t-\tTHIRD-PARTY\t(in\tbillions) |  |  |
| Beginning\tof\tperiod | $118 | $125 |
| Acquisitions | 21 | 6 |
| Additions | 14 | 12 |
| Repayments/transfers | (34) | (25) |
| End\tof\tperiod | $119 | $118 |
| Servicing\tportfolio\t-\tthird-party\tstatistics:\t(b) |  |  |
| Fixed\trate | 92% | 90% |
| Adjustable\trate/balloon | 8% | 10% |
| Weighted-average\tinterest\trate | 4.94% | 5.38% |
| MSR\tcapitalized\tvalue\t(in\tbillions) | $.7 | $.7 |
| MSR\tcapitalization\tvalue\t(in\tbasis\tpoints) | 54 | 54 |
| Weighted-average\tservicing\tfee\t(in\tbasis\npoints) | 28 | 29 |
| RESIDENTIAL\tMORTGAGE\tREPURCHASE |  |  |
| RESERVE |  |  |
| Beginning\tof\tperiod | $83 | $144 |
| Provision | 761 | 102 |
| RBC\tBank\t(USA)\tacquisition | 26 | – |
| Losses\t-\tloan\trepurchases\tand\tsettlements | (256) | (163) |
| End\tof\tPeriod | $614 | $83 |
| OTHER\tINFORMATION |  |  |
| Loan\torigination\tvolume\t(in\tbillions) | $15.2 | $11.4 |
| Percentage\tof\toriginations\trepresented\tby: |  |  |
| Agency\tand\tgovernment\tprograms | 100% | 100% |
| Refinance\tvolume | 77% | 76% |
| Total\tnonperforming\tassets\t(b)\t(c) | $134 | $76 |
| Purchased\timpaired\tloans\t(b)\t(d) | $38 | $112 |
| (a) |  |  |

(a) Includes	a	goodwill	impairment	charge	of	$45	million	during	the	fourth	quarter	of	2012.

(d) Recorded	investment	of	purchased	impaired	loans	related	to	acquisitions.

The	strategic	focus	of	the	business	is	the	acquisition	of	new	customers	through	a retail	loan	officer	sales	force	with	an	emphasis	on	home	purchase	transactions. Two	key	aspects	of	this	strategy	are:	(i)	competing	on	the	basis	of	superior service	to	new	and	existing	customers	in	serving	their	home	purchase	and refinancing	needs;	and	(ii)	pursuing	strategic	partnerships	with	reputable residential	real	estate	franchises	to	acquire	new	customers.	A	key	consideration in	pursuing	this	approach	is	the	cross-sell	opportunity,	especially	in	the	bank footprint	markets.

Residential	Mortgage	Banking	overview: •	Total	loan	originations	were	$15.2	billion	for	2012	compared	with $11.4	billion	in	2011.	Loans	continue	to	be	originated	primarily through	direct	channels	under	FNMA,	FHLMC	and	FHA/VA	agency guidelines.	Refinancings	were	77%	of	originations	for	2012	and	76% in	2011.	During	2012,	30%	of	loan	originations	were	under	the original	or	revised	Home	Affordable	Refinance	Program	(HARP	or HARP	2).

•	Investors	having	purchased	mortgage	loans	may	request	PNC	to indemnify	them	against	losses	on	certain	loans	or	to	repurchase	loans that	they	believe	do	not	comply	with	applicable	contractual	loan origination	covenants	and	representations	and	warranties	we	have made.	At	December	31,	2012,	the	liability	for	estimated	losses	on repurchase	and	indemnification	claims	for	the	Residential	Mortgage Banking	business	segment	was	$614	million	compared	with	$83 million	at	December	31,	2011.	See	the	Recourse	And	Repurchase Obligations	section	of	this	Item	7	and	Note	24	Commitments	and Guarantees	in	the	Notes	To	Consolidated	Financial

	Statements	in	Item	8	of	this	Report	for	additional	information.

– PNC	has	experienced	and	expects	to	experience	further	elevated levels	of	residential	mortgage	loan	repurchase	demands	reflecting changes	in	behavior	and	demand	patterns	of	two	government- sponsored	enterprises,	FHLMC	and	FNMA,	primarily	related	to loans	sold	in	2004	through	2008	into	agency	securitizations. •	Residential	mortgage	loans	serviced	for	others	totaled	$119	billion	at December	31,	2012	compared	with	$118	billion	at	December	31,	2011. Payoff	volumes	remained	high,	but	new	direct	loan	origination	volume and	servicing	portfolio	acquisitions	offset	the	decline. •	Noninterest	income	was	$317	million	in	2012	compared	with	$751 million	in	2011.	The	decrease	resulted	from	current	year	additions	to reserves	of	$761	million	for	residential	mortgage	loan	repurchase obligations	as	compared	to	$102	million	in	2011	and	lower	net	hedging gains	on	mortgage	servicing	rights,	partially	offset	by	increased	loan sales	revenue	driven	by	higher	loan	origination	volume.

•	Noninterest	expense	was	$992	million	in	2012	compared	with	$797 million	in	2011.	The	increase	from	the	prior	year	was	primarily	driven by	increased	residential	mortgage	origination	volumes,	servicing	costs, a	goodwill	impairment	charge	and	higher	additions	to	legal	reserves. Included	in	noninterest	expense	in	the	fourth	quarter	of	2012	was	an approximately	$70	million	charge	resulting	from	an	agreement	to amend	consent	orders	previously	entered	into	by	PNC	with	its	banking regulators.	The	agreement	ends	the	independent	foreclosure	review program	under	the	consent	orders	and	replaces	it	with	an	accelerated remediation	process.

•	The	fair	value	of	mortgage	servicing	rights	was	$.7	billion	at	both December	31,	2012	and	December	31,	2011.

# Table	25:	BlackRock	Table

Information	related	to	our	equity	investment	in	BlackRock	follows:

(a) Includes	PNC's	share	of	BlackRock's	reported	GAAP	earnings	net	of	additional	income	taxes	on those	earnings	incurred	by	PNC.

| In	billions | Dec.	31<br>2012 | Dec.	31<br>2011 |
| :--- | :--- | :--- |
| Carrying\tvalue\tof\tPNC's\tinvestment\tin\tBlackRock\t(c) | $5.6 | $5.3 |
| Market\tvalue\tof\tPNC's\tinvestment\tin\tBlackRock\t(d) | 7.4 | 6.4 |

(c) PNC	accounts	for	its	investment	in	BlackRock	under	the	equity	method	of	accounting,	exclusive	of	a related	deferred	tax	liability	of	$1.9	billion	at	December	31,	2012	and	$1.7	billion	at	December	31, 2011.	In	May	2012,	we	exchanged	2	million	shares	of	BlackRock	Series	B	Preferred	Stock	for	an equal	number	of	shares	of	BlackRock	common	stock.	The	exchange	transaction	had	no	impact	on the	carrying	value	of	our	investment	in	BlackRock	nor	on	our	use	of	the	equity	method	of accounting.	Our	voting	interest	in	BlackRock	common	stock	was	approximately	21%	at December	31,	2012.

(d) Does	not	include	liquidity	discount.

PNC	accounts	for	its	shares	of	BlackRock	Series	C	Preferred	Stock	at	fair	value, which	offsets	the	impact	of	marking-to-market	the	obligation	to	deliver	these shares	to	BlackRock	to	partially	fund	BlackRock	long-term	incentive	plan (LTIP)	programs.	The	fair	value	amount	of	the	BlackRock	Series	C	Preferred Stock	is	included	on	our	Consolidated	Balance	Sheet	in	the	caption	Other	assets. Additional	information	regarding	the	valuation	of	the	BlackRock	Series	C Preferred	Stock	is	included	in	Note	9	Fair	Value	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.

On	September	29,	2011,	PNC	transferred	1.3	million	shares	of	BlackRock	Series C	Preferred	Stock	to	BlackRock	to	satisfy	a	portion	of	our	LTIP	obligation. Upon	transfer,	Other	assets	and	Other	liabilities	on	our	Consolidated	Balance Sheet	were	reduced	by	$172	million,	representing	the	fair	value	of	the	shares transferred.	On	January	31,	2013,	we	transferred	an	additional	205,350	shares	to BlackRock	in	connection	with	our	obligation.	The	transfer	reduced	Other	assets and	Other	liabilities	on	our	Consolidated	Balance	Sheet	by	$33	million.	After this	transfer,	we	hold	approximately	1.3	million	shares	of	BlackRock	Series	C Preferred	Stock	which	are	available	to	fund	our	obligation	in	connection	with	the BlackRock	LTIP	programs.	Additional	information	regarding	our	BlackRock LTIP	shares	obligation	is	included	in	Note	16	Stock	Based	Compensation	Plans in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

# Table	26:	Non-Strategic	Assets	Portfolio	Table

| Dollars	in	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| INCOME\tSTATEMENT |  |  |
| Net\tinterest\tincome | $830 | $913 |
| Noninterest\tincome | 13 | 47 |
| Total\trevenue | 843 | 960 |
| Provision\tfor\tcredit\tlosses | 181 | 366 |
| Noninterest\texpense | 287 | 275 |
| Pretax\tearnings | 375 | 319 |
| Income\ttaxes | 138 | 119 |
| Earnings | $237 | $200 |
| AVERAGE\tBALANCE\tSHEET |  |  |
| Commercial\tLending: |  |  |
| Commercial/Commercial\treal\testate | $894 | $1,277 |
| Lease\tfinancing | 677 | 712 |
| Total\tcommercial\tlending | 1,571 | 1,989 |
| Consumer\tLending: |  |  |
| Home\tequity | 4,584 | 5,257 |
| Residential\treal\testate | 6,259 | 6,161 |
| Total\tconsumer\tlending | \t 10,843 | \t 11,418 |
| Total\tportfolio\tloans | \t 12,414 | \t 13,407 |
| Other\tassets\t(a) | (364) | (288) |
| Total\tassets | $12,050 | $13,119 |
| Deposits\tand\tother\tliabilities | $183 | $111 |
| Capital | 1,238 | 1,319 |
| Total\tliabilities\tand\tequity | $1,421 | $1,430 |
| PERFORMANCE\tRATIOS |  |  |
| Return\ton\taverage\tcapital | 19% | 15% |
| Return\ton\taverage\tassets | 1.97 | 1.52 |
| Noninterest\tincome\tto\ttotal\trevenue | 2 | 5 |
| Efficiency | 34 | 29 |
| OTHER\tINFORMATION |  |  |
| Nonperforming\tassets\t(b)\t(c) | $999 | $1,024 |
| Purchased\timpaired\tloans\t(b)\t(d) | $5,547 | $5,251 |
| Net\tcharge-offs\t(e) | $299 | $370 |
| Net\tcharge-off\tratio\t(e) | 2.41% | 2.76% |
| Loans\t(b) |  |  |
| Commercial\tLending |  |  |
| Commercial/Commercial\treal\testate | $665 | $976 |
| Lease\tfinancing | 686 | 670 |
| Total\tcommercial\tlending | 1,351 | 1,646 |
| Consumer\tLending |  |  |
| Home\tequity | 4,237 | 4,930 |
| Residential\treal\testate | 6,093 | 5,840 |
| Total\tconsumer\tlending | \t 10,330 | \t 10,770 |
| Total\tloans | $11,681 | $12,416 |

(a) Other	assets	includes	deferred	taxes,	ALLL	and	OREO.	Other	assets	were	negative	in	both	periods due	to	the	ALLL.

(d) Recorded	investment	of	purchased	impaired	loans	related	to	acquisitions.	At	December	31,	2012, this	segment	contained	75%	of	PNC's	purchased	impaired	loans.

(e) For	the	year	ended	December	31.

This	business	segment	consists	primarily	of	non-strategic	assets	obtained through	acquisitions	of	other	companies.	Non-Strategic	Assets	Portfolio	had earnings	of	$237	million	in	2012	compared	with	$200	million	in	2011.	The increase	was	primarily	attributable	to	a	lower	provision	for	credit	losses, partially	offset	by	lower	net	interest	income	driven	by	declines	in	loan	balances and	purchase	accounting	accretion.

2012	included	the	impact	of	the	RBC	Bank	(USA)	acquisition,	which	added approximately	$1.0	billion	of	residential	real	estate	loans,	$.2	billion	of commercial/commercial	real	estate	loans	and	$.2	billion	of	OREO	assets.	Of these	assets,	$1.0	billion	were	deemed	purchased	impaired	loans.

Non-Strategic	Assets	Portfolio	overview: •	Net	interest	income	was	$830	million	in	2012	compared	with	$913 million	2011.	The	decrease	was	driven	by	lower	purchase	accounting accretion	and	loan	balances.

•	Noninterest	income	was	$13	million	in	2012	compared	with	$47 million	2011.	The	decline	was	driven	mainly	by	larger	valuation adjustments	to	liabilities	for	estimated	repurchase	losses	on	home equity	loans	sold.

•	The	provision	for	credit	losses	was	$181	million	in	2012	compared with	$366	million	in	2011.	The	decrease	in	the	provision	for	credit losses	reflected	a	declining	loan	portfolio	and	improvement	in	asset quality.

•	Noninterest	expense	in	2012	was	$287	million	compared	with	$275 million	in	2011.	The	increase	was	primarily	due	to	higher	other	real estate	owned	expenses.

•	Average	portfolio	loans	declined	to	$12.4	billion	in	2012	compared with	$13.4	billion	in	2011.	The	overall	decline	was	driven	by	customer payment	activity	and	portfolio	management	activities	to	reduce	under- performing	assets	partially	offset	by	the	addition	of	loans	from	the RBC	Bank	(USA)	acquisition.

•	Nonperforming	loans	were	$.7	billion	as	of	December	31,	2012	and December	31,	2011.	The	consumer	lending	portfolio	comprised	80% of	nonperforming	loans	at	December	31,	2012.	Nonperforming consumer	loans	increased	$83	million	from	December	31,	2011	as	a result	of	a	change	in	the	nonaccrual	policy	for	home	equity	loans requiring	loans	to	be	placed	on	nonaccrual	at	90	days	past	due compared	to	the	prior	policy	of	180	days.	Also	contributing	to	the increase	was	a	change	in	the	treatment	of	certain	consumer	loans classified	as	TDRs,	pursuant	to	regulatory	guidance	issued	in	the	third quarter	of	2012.	These	TDRs	resulted	from	bankruptcy	where	no formal	reaffirmation	was	provided	by	the	borrower	thereby	granting	a concession	upon	discharge	from	personal	liability.

•	Net	charge-offs	were	$299	million	in	2012	and	$370	million	in	2011. Net	charge-offs	declined	17%	on	the	consumer	lending	portfolio	and 23%	on	the	commercial	lending	portfolio.

The	business	activity	of	this	segment	is	to	manage	the	wind-down	of	the portfolio	assigned	to	it	while	maximizing	the	value	and	mitigating	risk.	The	fair value	marks	taken	upon	acquisition	of	the	assets,	the	team	we	have	in	place,	and targeted	asset	resolution	strategies	help	us	to	manage	these	assets. •	The	Commercial	Lending	portfolio	declined	18%	to	$1.35	billion	at December	31,	2012	compared	to	December	31,	2011.	Loans	to residential	developers	declined	32%	to	$.7	billion	while	the	lease financing	portfolio	remained	relatively	flat	at	$.7	billion.	The	leases are	long-term	with	relatively	low	credit	risk.

•	The	Consumer	Lending	portfolio	declined	$.4	billion,	or	4%,	when compared	to	the	same	period	last	year.	Excluding	$.9	billion	of residential	mortgage	loans	from	the	RBC	Bank	(USA)	acquisition,	the portfolio	decreased	13%.	The	portfolio's	credit	quality	has	stabilized through	actions	taken	by	management.	We	have	implemented	various refinance	programs,	line	management	programs,	and	loss	mitigation programs	to	mitigate	risks	within	this	portfolio	while	assisting borrowers	to	maintain	homeownership	when	possible.

•	When	loans	are	sold,	we	may	assume	certain	loan	repurchase obligations	to	indemnify	investors	against	losses	or	to	repurchase	loans that	they	believe	do	not	comply	with	applicable	contractual	loan origination	covenants	and	representations	and	warranties	we	have made.	From	2005	to	2007,	home	equity	loans	were	sold	with	such contractual	provisions.	At	December	31,	2012,	the	liability	for estimated	losses	on	repurchase	and	indemnification	claims	for	the Non-Strategic	Assets	Portfolio	was	$58	million	compared	to	$47 million	at	December	31,	2011.	See	the	Recourse	And	Repurchase Obligations	section	of	this	Item	7	and	Note	24	Commitments	and Guarantees	in	the	Notes	To	Consolidated	Financial	Statements included	in	Item	8	of	this	Report	for	additional	information.

# CRITICAL	ACCOUNTING	ESTIMATES AND	JUDGMENTS

Our	consolidated	financial	statements	are	prepared	by	applying	certain accounting	policies.	Note	1	Accounting	Policies	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	describes	the	most	significant accounting	policies	that	we	use.	Certain	of	these	policies	require	us	to	make estimates	or	economic	assumptions	that	may	vary	under	different	assumptions	or conditions	and	such	variations	may	significantly	affect	our	reported	results	and financial	position	for	the	period	or	in	future	periods.

We	must	use	estimates,	assumptions,	and	judgments	when	assets	and	liabilities are	required	to	be	recorded	at,	or	adjusted	to	reflect,	fair	value.

Assets	and	liabilities	carried	at	fair	value	inherently	result	in	a	higher	degree	of financial	statement	volatility.	Fair	values	and	the	information	used	to	record valuation	adjustments	for	certain	assets	and	liabilities	are	based	on	either	quoted market	prices	or	are	provided	by	independent	third-party	sources,	including appraisers	and	valuation	specialists,	when	available.	When	such	third-party information	is	not	available,	we	estimate	fair	value	primarily	by	using	cash	flow and	other	financial	modeling	techniques.	Changes	in	underlying	factors, assumptions,	or	estimates	in	any	of	these	areas	could	materially	impact	our future	financial	condition	and	results	of	operations.

PNC	applies	ASC	820	Fair	Value	Measurements	and	Disclosures.	This	guidance defines	fair	value	as	the	price	that	would	be	received	to	sell	a	financial	asset	or paid	to	transfer	a	financial	liability	in	an	orderly	transaction	between	market participants	at	the	measurement	date.	This	guidance	requires	a	three	level hierarchy	for	disclosure	of	assets	and	liabilities	recorded	at	fair	value.	The classification	of	assets	and	liabilities	within	the	hierarchy	is	based	on	whether the	inputs	to	the	valuation	methodology	used	in	the	measurement	are	observable or	unobservable.

The	following	sections	of	this	Report	provide	further	information	on	this	type	of activity:

•	Fair	Value	Measurements	included	within	this	Item	7,	and •	Note	9	Fair	Value	included	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report.

# Allowances	For	Loan	And	Lease	Losses	And	Unfunded	Loan	Commitments And	Letters	Of	Credit

We	maintain	the	ALLL	and	the	Allowance	For	Unfunded	Loan	Commitments And	Letters	Of	Credit	at	levels	that	we	believe	to	be	appropriate	to	absorb estimated	probable	credit

losses	incurred	in	the	loan	portfolio	and	on	these	unfunded	credit	facilities	as	of the	balance	sheet	date.	Our	determination	of	the	allowances	is	based	on	periodic evaluations	of	the	loan	and	lease	portfolios	and	unfunded	credit	facilities	and other	relevant	factors.	This	evaluation	is	inherently	subjective	as	it	requires material	estimates,	all	of	which	may	be	susceptible	to	significant	change, including,	among	others:

•	Probability	of	default	(PD),

•	Loss	given	default	(LGD),

•	Exposure	at	date	of	default	(EAD),

•	Movement	through	delinquency	stages,

•	Amounts	and	timing	of	expected	future	cash	flows,

# •	Value	of	collateral,	and

In	determining	the	appropriateness	of	the	ALLL,	we	make	specific	allocations	to impaired	loans	and	allocations	to	portfolios	of	commercial	and	consumer	loans. We	also	allocate	reserves	to	provide	coverage	for	probable	losses	incurred	in	the portfolio	at	the	balance	sheet	date	based	upon	current	market	conditions,	which may	not	be	reflected	in	historical	loss	data.	Commercial	lending	is	the	largest category	of	credits	and	is	sensitive	to	changes	in	assumptions	and	judgments underlying	the	determination	of	the	ALLL.	We	have	allocated	approximately $1.8	billion,	or	44%,	of	the	ALLL	at	December	31,	2012	to	the	commercial lending	category.	Consumer	lending	allocations	are	made	based	on	historical loss	experience	adjusted	for	recent	activity.	Approximately	$2.2	billion,	or	56%, of	the	ALLL	at	December	31,	2012	have	been	allocated	to	these	consumer lending	categories.

During	the	third	quarter	of	2012,	PNC	increased	the	amount	of	internally observed	data	used	in	estimating	the	key	commercial	lending	assumptions	of	PD and	LGD.

To	the	extent	actual	outcomes	differ	from	our	estimates,	additional	provision	for credit	losses	may	be	required	that	would	reduce	future	earnings.	See	the following	for	additional	information:

•	Allowances	For	Loan	And	Lease	Losses	And	Unfunded	Loan Commitments	And	Letters	Of	Credit	in	the	Credit	Risk	Management section	of	this	Item	7	(which	includes	an	illustration	of	the	estimated impact	on	the	aggregate	of	the	ALLL	and	allowance	for	unfunded	loan commitments	and	letters	of	credit	assuming	we	increased	pool	reserve loss	rates	for	certain	loan	categories),	and •	Note	7	Allowances	for	Loan	and	Lease	Losses	and	Unfunded	Loan Commitments	and	Letters	of	Credit	in	the	Notes	To	Consolidated Financial	Statements	and	Allocation	Of	Allowance	For	Loan	And Lease	Losses	in	the	Statistical	Information	(Unaudited)	section	of Item	8	of	this	Report.

# Estimated	Cash	Flows	On	Purchased	Impaired	Loans

ASC	310-30	Loans	and	Debt	Securities	Acquired	with	Deteriorated	Credit Quality	(formerly	SOP	03-3)	provides	the	GAAP	guidance	for	accounting	for certain	loans.	These	loans	have	experienced	a	deterioration	of	credit	quality	from origination	to	acquisition	for	which	it	is	probable	that	the	investor	will	be	unable to	collect	all	contractually	required	payments	receivable,	including	both	principal and	interest.

In	our	assessment	of	credit	quality	deterioration,	we	must	make	numerous assumptions,	interpretations	and	judgments,	using	internal	and	third-party	credit quality	information	to	determine	whether	it	is	probable	that	we	will	be	able	to collect	all	contractually	required	payments.	This	point	in	time	assessment	is inherently	subjective	due	to	the	nature	of	the	available	information	and	judgment involved.

Those	loans	that	qualify	under	ASC	310-30	are	recorded	at	fair	value	at acquisition,	which	involves	estimating	the	expected	cash	flows	to	be	received. Measurement	of	the	fair	value	of	the	loan	is	based	on	the	provisions	of	ASC	820. ASC	310-30	prohibits	the	carryover	or	establishment	of	an	allowance	for	loan losses	on	the	acquisition	date.

Subsequent	to	the	acquisition	of	the	loan,	we	are	required	to	continue	to	estimate cash	flows	expected	to	be	collected	over	the	life	of	the	loan.	The	measurement	of expected	cash	flows	involves	assumptions	and	judgments	as	to	credit	risk, interest	rate	risk,	prepayment	risk,	default	rates,	loss	severity,	payment	speeds and	collateral	values.	All	of	these	factors	are	inherently	subjective	and	can	result in	significant	changes	in	the	cash	flow	estimates	over	the	life	of	the	loan.	Such changes	in	expected	cash	flows	could	increase	future	earnings	volatility	due	to increases	or	decreases	in	the	accretable	yield	(i.e.,	the	difference	between	the undiscounted	expected	cash	flows	and	the	recorded	investment	in	the	loan).	The accretable	yield	is	recognized	as	interest	income	on	a	constant	effective	yield method	over	the	life	of	the	loan.	In	addition,	changes	in

expected	cash	flows	could	result	in	the	recognition	of	impairment	through provision	for	credit	losses	if	the	decline	in	expected	cash	flows	is	attributable	to	a decline	in	credit	quality.

# Goodwill

Goodwill	arising	from	business	acquisitions	represents	the	value	attributable	to unidentifiable	intangible	elements	in	the	business	acquired.	Most	of	our	goodwill relates	to	value	inherent	in	the	Retail	Banking	and	Corporate	&	Institutional Banking	businesses.	The	value	of	this	goodwill	is	dependent	upon	our	ability	to provide	quality,	cost-effective	services	in	the	face	of	competition	from	other market	participants	on	a	national	and,	with	respect	to	some	products	and services,	an	international	basis.	We	also	rely	upon	continuing	investments	in processing	systems,	the	development	of	value-added	service	features,	and	the ease	of	access	by	customers	to	our	services.

As	such,	the	value	of	goodwill	is	supported	by	earnings,	which	is	driven	by transaction	volume	and,	for	certain	businesses,	the	market	value	of	assets	under administration	or	for	which	processing	services	are	provided.	Lower	earnings resulting	from	a	lack	of	growth	or	our	inability	to	deliver	cost-effective	services over	sustained	periods	can	lead	to	impairment	of	goodwill,	which	could	result	in a	current	period	charge	to	earnings.	At	least	annually,	in	the	fourth	quarter,	or more	frequently	if	events	occur	or	circumstances	have	changed	significantly from	the	annual	test	date,	management	reviews	the	current	operating environment	and	strategic	direction	of	each	reporting	unit	taking	into consideration	any	events	or	changes	in	circumstances	that	may	have	an	effect	on the	unit.	For	this	review,	inputs	are	generated	and	used	in	calculating	the	fair value	of	the	reporting	unit,	which	is	compared	to	its	carrying	amount	("Step	1" of	the	goodwill	impairment	test)	as	further	discussed	below.	The	fair	values	of our	reporting	units	are	determined	using	a	discounted	cash	flow	valuation	model with	assumptions	based	upon	market	comparables.	Additionally,	we	may	also evaluate	certain	financial	metrics	that	are	indicative	of	fair	value,	including	price to	earnings	ratios	and	recent	acquisitions	involving	other	financial	institutions.	A reporting	unit	is	defined	as	an	operating	segment	or	one	level	below	an	operating segment.	If	the	fair	value	of	the	reporting	unit	exceeds	its	carrying	amount,	the reporting	unit	is	not	considered	impaired.	However,	if	the	fair	value	of	the reporting	unit	is	less	than	its	carrying	amount,	the	reporting	unit's	goodwill would	be	evaluated	for	impairment.	In	this	circumstance,	the	implied	fair	value of	reporting	unit	goodwill	would	be	compared	to	the	carrying	amount	of	that goodwill	("Step	2"	of	the	goodwill	impairment	test).	If	the	carrying	amount	of goodwill	exceeds	the	implied	fair	value	of	goodwill,	the	difference	is	recognized as	an	impairment	loss.	The	implied	fair	value	of	reporting	unit	goodwill	is determined	by	assigning	the	fair	value	of	a	reporting	unit	to	its	assets	and liabilities	(including	any	unrecognized	intangible	assets)	with	the	residual amount	equal	to	the	implied	fair	value	of	goodwill	as	if	the	reporting	unit	had been	acquired	in	a	business	combination.

A	reporting	unit's	carrying	amount	is	based	upon	assigned	economic	capital	as determined	by	PNC's	internal	management	methodologies.	In	performing	Step	1 of	our	goodwill	impairment	testing,	we	utilize	three	equity	metrics: •	Assigned	reporting	unit	economic	capital	as	determined	by	our	internal management	methodologies,	inclusive	of	goodwill. •	A	6%,	"well	capitalized",	Tier	1	common	ratio	for	the	reporting	unit. •	The	capital	levels	for	comparable	companies	(as	reported	in comparable	company	public	financial	statements),	adjusted	for differences	in	risk	characteristics	between	the	comparable	companies and	the	reporting	unit.

In	determining	a	reporting	unit's	fair	value	and	comparing	it	to	its	carrying value,	we	utilize	the	highest	of	these	three	amounts	(the	"targeted	equity")	in	our discounted	cash	flow	methodology.	Under	this	methodology,	we	will	infuse capital	to	achieve	the	targeted	equity	amount.	As	of	October	1,	2012	(annual impairment	testing	date),	there	was	no	unallocated	excess	capital	(difference between	shareholders'	equity	minus	total	economic	capital	assigned	and increased	by	the	incremental	targeted	equity	capital	infusion).

Except	for	the	Residential	Mortgage	Banking	reporting	unit,	which	is	discussed below,	the	estimated	fair	values	of	our	reporting	units	exceeded	their	carrying values	by	at	least	10%	and	are	not	considered	to	be	at	risk	of	not	passing	Step	1. By	definition,	assumptions	utilized	in	estimating	the	fair	value	of	a	reporting	unit are	judgmental	and	inherently	uncertain,	but	absent	a	significant	change	in economic	conditions	of	a	reporting	unit,	we	would	not	expect	the	fair	values	of these	reporting	units	to	decrease	below	their	respective	carrying	values.

During	2012,	an	interim	period	goodwill	impairment	test	was	performed	for	the Residential	Mortgage	Banking	reporting	unit	as	a	result	of	additional	provision recorded	for	residential	mortgage	repurchase	obligations	during	the	second quarter.	Based	on	the	results	of	the	interim	analysis,	the	fair	value	of	the Residential	Mortgage	Banking	reporting	unit	exceeded	its	carrying	amount	and no	impairment	was	recorded.	However,	the	results	of	Step	1	of	the	annual goodwill	impairment	test	indicated	that	the	Residential	Mortgage	Banking reporting	unit's	fair	value	using	a	discounted	cash	flow	approach	was	less	than its	carrying	value.	Our	residential	mortgage	banking	business,	similar	to	other residential	mortgage	banking	businesses,	is	operating	in	an	unsettled environment,	which	may	result	in	higher	operating	costs,	and	has	experienced increased	uncertainties	such	as	elevated	indemnification	and	repurchase liabilities	and	foreclosure	related	issues.	Additionally,	the	current	level	of refinance	volumes	is	not	expected	to	continue	indefinitely	given	that	interest rates	have	been	low	for	a	prolonged	period	of	time.	During	the	fourth	quarter,	we recorded	additional	provision	for	residential	mortgage	repurchase	obligations	of approximately	$254

million	principally	driven	by	expected	elevated	levels	of	repurchase	demands primarily	as	a	result	of	further	changes	in	behavior	and	demand	patterns	of government-sponsored	enterprises,	FHLMC	and	FNMA,	for	loans	sold	into agency	securitizations,	including	the	years	2004	and	2005.	These	risk characteristics	were	reflected	in	the	Residential	Mortgage	Banking	reporting unit's	assigned	economic	capital	utilized	and	discount	rate	assumption	in	the impairment	test.	We	performed	Step	2	of	the	goodwill	impairment	test	and determined	that	Residential	Mortgage	Banking's	goodwill	was	impaired.	The most	significant	fair	value	adjustment	assumption	related	to	the	provision	for residential	mortgage	repurchase	obligations	as	we	believe	a	market	participant would	consider	an	incremental	amount	reasonably	possible	above	the	amount accrued.	The	impairment	charge	of	$45	million	was	included	in	noninterest expense	and	did	not	affect	our	regulatory	and	capital	ratios.	The	Residential Mortgage	Banking	reporting	unit	does	not	have	any	remaining	goodwill	as	of December	31,	2012.

There	were	no	impairment	charges	related	to	goodwill	in	2011	or	2010.

See	Note	10	Goodwill	and	Other	Intangible	Assets	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	for	additional	information.

# Lease	Residuals

We	provide	financing	for	various	types	of	equipment,	including	aircraft,	energy and	power	systems,	and	vehicles	through	a	variety	of	lease	arrangements.	Direct financing	leases	are	carried	at	the	sum	of	lease	payments	and	the	estimated residual	value	of	the	leased	property,	less	unearned	income.	Residual	values	are subject	to	judgments	as	to	the	value	of	the	underlying	equipment	that	can	be affected	by	changes	in	economic	and	market	conditions	and	the	financial viability	of	the	residual	guarantors.	Residual	values	are	derived	from	historical remarketing	experience,	secondary	market	contacts,	and	industry	publications. To	the	extent	not	guaranteed	or	assumed	by	a	third-party,	we	bear	the	risk	of ownership	of	the	leased	assets.	This	includes	the	risk	that	the	actual	value	of	the leased	assets	at	the	end	of	the	lease	term	will	be	less	than	the	estimated	residual value,	which	could	result	in	an	impairment	charge	and	reduce	earnings	in	the future.	Residual	values	are	reviewed	for	impairment	at	least	annually.

# Revenue	Recognition

We	earn	net	interest	and	noninterest	income	from	various	sources,	including: •	Lending,

•	Securities	portfolio, •	Asset	management,

•	Customer	deposits,

•	Loan	sales	and	servicing,

•	Brokerage	services,

•	Sale	of	loans	and	securities,

•	Certain	private	equity	activities,	and •	Securities	and	derivatives	trading	activities,	including	foreign exchange.

We	also	earn	fees	and	commissions	from	issuing	loan	commitments,	standby letters	of	credit	and	financial	guarantees,	selling	various	insurance	products, providing	treasury	management	services,	providing	merger	and	acquisition advisory	and	related	services,	and	participating	in	certain	capital	markets transactions.	Revenue	earned	on	interest-earning	assets,	including	the	accretion of	discounts	recognized	on	acquired	or	purchased	loans	recorded	at	fair	value,	is recognized	based	on	the	constant	effective	yield	of	the	financial	instrument.

The	timing	and	amount	of	revenue	that	we	recognize	in	any	period	is	dependent on	estimates,	judgments,	assumptions,	and	interpretation	of	contractual	terms. Changes	in	these	factors	can	have	a	significant	impact	on	revenue	recognized	in any	period	due	to	changes	in	products,	market	conditions	or	industry	norms.

# Residential	And	Commercial	Mortgage	Servicing	Rights

We	elect	to	measure	our	residential	mortgage	servicing	rights	(MSRs)	at	fair value.	This	election	was	made	to	be	consistent	with	our	risk	management strategy	to	hedge	changes	in	the	fair	value	of	these	assets	as	described	below. The	fair	value	of	residential	MSRs	is	estimated	by	using	a	cash	flow	valuation model	which	calculates	the	present	value	of	estimated	future	net	servicing	cash flows,	taking	into	consideration	actual	and	expected	mortgage	loan	prepayment rates,	discount	rates,	servicing	costs,	and	other	economic	factors	which	are determined	based	on	current	market	conditions.

Assumptions	incorporated	into	the	residential	MSRs	valuation	model	reflect management's	best	estimate	of	factors	that	a	market	participant	would	use	in valuing	the	residential	MSRs.	Although	sales	of	residential	MSRs	do	occur, residential	MSRs	do	not	trade	in	an	active	market	with	readily	observable	prices so	the	precise	terms	and	conditions	of	sales	are	not	available.	As	a	benchmark	for the	reasonableness	of	its	residential	MSRs	fair	value,	PNC	obtains	opinions	of value	from	independent	parties	("brokers").	These	brokers	provided	a	range	(+/- 10	bps)	based	upon	their	own	discounted	cash	flow	calculations	of	our	portfolio that	reflected	conditions	in	the	secondary	market,	and	any	recently	executed servicing	transactions.	PNC	compares	its	internally-developed

residential	MSRs	value	to	the	ranges	of	values	received	from	the	brokers.	If	our residential	MSRs	fair	value	falls	outside	of	the	brokers'	ranges,	management	will assess	whether	a	valuation	adjustment	is	warranted.	For	2012	and	2011,	PNC's residential	MSRs	value	has	not	fallen	outside	of	the	brokers'	ranges.	We consider	our	residential	MSRs	value	to	represent	a	reasonable	estimate	of	fair value.

Commercial	MSRs	are	purchased	or	originated	when	loans	are	sold	with servicing	retained.	Commercial	MSRs	do	not	trade	in	an	active	market	with readily	observable	prices	so	the	precise	terms	and	conditions	of	sales	are	not available.	Commercial	MSRs	are	initially	recorded	at	fair	value	and	are subsequently	accounted	for	at	the	lower	of	amortized	cost	or	fair	value. Commercial	MSRs	are	periodically	evaluated	for	impairment.	For	purposes	of impairment,	the	commercial	mortgage	servicing	rights	are	stratified	based	on asset	type,	which	characterizes	the	predominant	risk	of	the	underlying	financial asset.	The	fair	value	of	commercial	MSRs	is	estimated	by	using	a	discounted cash	flow	model	incorporating	inputs	for	assumptions	as	to	constant	prepayment rates,	discount	rates	and	other	factors	determined	based	on	current	market conditions	and	expectations.

PNC	employs	risk	management	strategies	designed	to	protect	the	value	of	MSRs from	changes	in	interest	rates	and	related	market	factors.	Residential	MSRs values	are	economically	hedged	with	securities	and	derivatives,	including interest-rate	swaps,	options,	and	forward	mortgage-backed	and	futures	contracts. As	interest	rates	change,	these	financial	instruments	are	expected	to	have changes	in	fair	value	negatively	correlated	to	the	change	in	fair	value	of	the hedged	residential	MSRs	portfolio.	The	hedge	relationships	are	actively managed	in	response	to	changing	market	conditions	over	the	life	of	the residential	MSRs	assets.	Commercial	MSRs	are	economically	hedged	at	a	macro level	or	with	specific	derivatives	to	protect	against	a	significant	decline	in interest	rates.	Selecting	appropriate	financial	instruments	to	economically	hedge residential	or	commercial	MSRs	requires	significant	management	judgment	to assess	how	mortgage	rates	and	prepayment	speeds	could	affect	the	future	values of	MSRs.	Hedging	results	can	frequently	be	less	predictable	in	the	short	term, but	over	longer	periods	of	time	are	expected	to	protect	the	economic	value	of	the MSRs.

The	fair	value	of	residential	and	commercial	MSRs	and	significant	inputs	to	the valuation	models	as	of	December	31,	2012	are	shown	in	Note	10	Goodwill	and Other	Intangible	Assets	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report.	The	expected	and	actual	rates	of	mortgage	loan prepayments	are	significant	factors	driving	the	fair	value.	Management	uses	a third-party	model	to	estimate	future	residential	loan	prepayments	and	internal proprietary	models	to	estimate	future	commercial	loan	prepayments.	These models	have	been	refined	based	on	current	market	conditions.	Future	interest rates	are	another	important	factor	in	the	valuation	of	MSRs.	Management utilizes	market	implied

forward	interest	rates	to	estimate	the	future	direction	of	mortgage	and	discount rates.	The	forward	rates	utilized	are	derived	from	the	current	yield	curve	for	U.S. dollar	interest	rate	swaps	and	are	consistent	with	pricing	of	capital	markets instruments.	Changes	in	the	shape	and	slope	of	the	forward	curve	in	future periods	may	result	in	volatility	in	the	fair	value	estimate.

A	sensitivity	analysis	of	the	hypothetical	effect	on	the	fair	value	of	MSRs	to adverse	changes	in	key	assumptions	is	presented	in	Note	10	Goodwill	and	Other Intangible	Assets	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of this	Report.	These	sensitivities	do	not	include	the	impact	of	the	related	hedging activities.	Changes	in	fair	value	generally	cannot	be	extrapolated	because	the relationship	of	the	change	in	the	assumption	to	the	change	in	fair	value	may	not be	linear.	Also,	the	effect	of	a	variation	in	a	particular	assumption	on	the	fair value	of	the	MSRs	is	calculated	independently	without	changing	any	other assumption.	In	reality,	changes	in	one	factor	may	result	in	changes	in	another (for	example,	changes	in	mortgage	interest	rates,	which	drive	changes	in prepayment	rate	estimates,	could	result	in	changes	in	the	interest	rate	spread), which	could	either	magnify	or	counteract	the	sensitivities.

# Income	Taxes

In	the	normal	course	of	business,	we	and	our	subsidiaries	enter	into	transactions for	which	the	tax	treatment	is	unclear	or	subject	to	varying	interpretations.	In addition,	filing	requirements,	methods	of	filing	and	the	calculation	of	taxable income	in	various	state	and	local	jurisdictions	are	subject	to	differing interpretations.

We	evaluate	and	assess	the	relative	risks	and	merits	of	the	tax	treatment	of transactions,	filing	positions,	filing	methods	and	taxable	income	calculations after	considering	statutes,	regulations,	judicial	precedent,	and	other	information, and	maintain	tax	accruals	consistent	with	our	evaluation	of	these	relative	risks and	merits.	The	result	of	our	evaluation	and	assessment	is	by	its	nature	an estimate.	We	and	our	subsidiaries	are	routinely	subject	to	audit	and	challenges from	taxing	authorities.	In	the	event	we	resolve	a	challenge	for	an	amount different	than	amounts	previously	accrued,	we	will	account	for	the	difference	in the	period	in	which	we	resolve	the	matter.

# Proposed	Accounting	Standards

The	Financial	Accounting	Standards	Board	(FASB)	issued	several	Exposure Drafts	for	comment	during	2012	as	well	as	the	beginning	of	2013.

In	January	2013,	the	FASB	issued	Proposed	Accounting	Standards	Update (ASU)	Transfers	and	Servicing	(Topic	860):	Effective	Control	for	Transfers	with Forward	Agreements	to	Repurchase	Assets	and	Accounting	for	Repurchase Financings.	This	exposure	draft	would	change	the	accounting	for	repurchase-to- maturity	agreements	("repos-to-maturity").

Under	the	existing	guidance,	repos-to-maturity	may	meet	the	criteria	to	be accounted	for	as	sales,	but	the	proposed	guidance	would	require	them	to	be accounted	for	as	secured	borrowings.	It	would	also	clarify	the	evaluation	of whether	financial	assets	that	will	be	repurchased	are	"substantially	the	same"	as those	transferred.	Additionally,	the	exposure	draft	proposes	a	change	to	the accounting	for	repurchases	that	are	part	of	repurchase	financings,	such	that	the initial	transfer	and	repurchase	are	evaluated	as	two	separate	transactions.	The effective	date	has	not	yet	been	determined.	We	are	evaluating	the	impact	of	this proposal	on	our	financial	statements.

In	December	2012,	the	FASB	issued	Proposed	ASU	Financial	Instruments	– Credit	Losses	(Subtopic	825-15).	The	FASB	has	exposed	a	single-model approach	which	would	apply	to	all	financial	instruments	carried	at	amortized cost	or	at	fair-value	through	other	comprehensive	income	(replacing	the	current ASC	450,	Contingencies,	ASC	310-10,	Receivables	–	Overall,	ASC	310-30, Receivables	–	Loans	and	Debt	Securities	Acquired	with	Deteriorated	Credit Quality	and	ASC	320,	Investments	–	Debt	and	Equity	Securities	approaches). This	model	would	require	reserves	for	all	expected	credit	losses	over	the	life	of the	instrument.	Under	the	proposal,	retrospective	application	with	cumulative adjustment	to	retained	earnings	will	be	required	and	early	adoption	would	not	be permitted.	The	effective	date	has	not	yet	been	determined.	We	are	evaluating	the impact	of	this	proposal	on	our	financial	statements.

In	October	2012,	the	FASB	issued	Proposed	ASU	Consolidation	(Topic	810): Accounting	for	the	Difference	between	the	Fair	Value	of	the	Assets	and	the	Fair Value	of	the	Liabilities	of	a	Consolidated	Collateralized	Financing	Entity.	This exposure	draft	would	define	"collateralized	financing	entity"	and	require	a reporting	entity	that	consolidates	a	collateralized	financing	entity	and	measures the	associated	financial	assets	and	financial	liabilities	at	fair	value,	to	measure that	fair	value	consistently	with	how	a	market	participant	would	price	the reporting	entity's	net	exposure.	The	reporting	entity	would	allocate	portfolio- level	adjustments	to	the	individual	assets	and	liabilities	on	a	reasonable	and consistent	basis.	The	exposure	draft	would	require	a	modified	retrospective approach	to	be	applied	at	adoption	for	only	those	collateralized	financing	entities that	exist	at	the	date	of	adoption.	Early	adoption	would	be	permitted.	An effective	date	has	not	yet	been	determined.	We	are	evaluating	the	impact	of	this proposal	on	our	financial	statements.

In	October	2012,	the	FASB	issued	Proposed	ASU	Foreign	Currency	Matters (Topic	830):	Parent's	Accounting	for	the	Cumulative	Translation	Adjustment upon	Derecognition	of	Certain	Subsidiaries	or	Groups	of	Assets	within	a Foreign	Entity	or	of	an	Investment	in	a	Foreign	Entity.	This	exposure	draft would	clarify	the	timing	of	release	of	Currency	Translation	Adjustments	(CTA) from	Accumulated	Other	Comprehensive	Income	(AOCI)	upon	deconsolidation or

derecognition	of	a	foreign	entity,	subsidiary	or	a	group	of	assets	within	a	foreign entity	and	in	step	acquisitions.	Specifically,	1)	Upon	deconsolidation	or derecognition	of	a	foreign	entity,	CTA	would	be	released;	2)	Upon	sale	of	a subsidiary	or	a	group	of	assets	within	a	foreign	entity,	CTA	would	not	be released,	unless	it	also	represents	the	complete	or	substantially	complete liquidation	of	the	foreign	entity	in	which	it	resides;	and	3)	In	a	step	acquisition, the	AOCI	related	to	the	previously	held	investment	would	be	included	in	the calculation	of	gain	or	loss	upon	change	in	control.	The	proposed	standard	would be	applied	prospectively	from	the	date	of	adoption	with	early	adoption permitted.	An	effective	date	has	not	yet	been	determined.	We	are	evaluating	the impact	of	this	proposal	on	our	financial	statements.

In	July	2012,	the	FASB	issued	Proposed	ASU	Liabilities	(Topic	405): Obligations	Resulting	from	Joint	and	Several	Liability	Arrangements.	This exposure	draft	would	require	an	entity	to	measure	obligations	resulting	from joint	and	several	liability	arrangements	for	which	the	total	amount	under	the arrangement	is	fixed	at	the	reporting	date	per	ASC	450-20,	Contingencies— Loss	Contingencies.	This	exposure	draft	would	also	require	an	entity	to	disclose the	nature	and	amount	of	the	obligation	as	well	as	information	about	the	risks that	such	obligations	pose	to	an	entity's	future	cash	flows.	If	the	primary	role	of	a reporting	entity	in	the	joint	and	several	liability	arrangement	is	that	of	a guarantor,	then	it	should	account	for	the	obligation	under	ASC	460,	Guarantees. This	guidance	would	be	applied	retrospectively	to	all	prior	periods	presented	for those	obligations	resulting	from	joint	and	several	liability	arrangements	that exist	at	the	beginning	of	an	entity's	fiscal	year	of	adoption.	The	effective	date has	not	yet	been	determined.	The	comment	period	ended	September	20,	2012. We	are	evaluating	the	impact	of	this	proposal	on	our	financial	statements.

# Recent	Accounting	Pronouncements

See	Note	1	Accounting	Policies	in	the	Notes	To	the	Consolidated	Financial Statements	in	Item	8	of	this	Report	regarding	the	impact	of	new	accounting pronouncements.

# STATUS	OF	QUALIFIED	DEFINED BENEFIT	PENSION	PLAN

We	have	a	noncontributory,	qualified	defined	benefit	pension	plan	(plan	or pension	plan)	covering	eligible	employees.	Benefits	are	determined	using	a	cash balance	formula	where	earnings	credits	are	applied	as	a	percentage	of	eligible compensation.	Pension	contributions	are	based	on	an	actuarially	determined amount	necessary	to	fund	total	benefits	payable	to	plan	participants.	Consistent with	our	investment	strategy,	plan	assets	are	primarily	invested	in	equity investments	and	fixed	income	instruments.	Plan	fiduciaries	determine	and review	the	plan's	investment	policy,	which	is	described	more	fully	in	Note	15 Employee	Benefit	Plans	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report.

We	calculate	the	expense	associated	with	the	pension	plan	and	the	assumptions and	methods	that	we	use	include	a	policy	of	reflecting	trust	assets	at	their	fair market	value.	On	an	annual	basis,	we	review	the	actuarial	assumptions	related	to the	pension	plan.	The	primary	assumptions	used	to	measure	pension	obligations and	costs	are	the	discount	rate,	compensation	increase	and	expected	long-term return	on	assets.	Among	these,	the	compensation	increase	assumption	does	not significantly	affect	pension	expense.

The	discount	rate	used	to	measure	pension	obligations	is	determined	by comparing	the	expected	future	benefits	that	will	be	paid	under	the	plan	with yields	available	on	high	quality	corporate	bonds	of	similar	duration.	The	impact on	pension	expense	of	a	0.5%	decrease	in	discount	rate	in	the	current environment	is	$21	million	per	year.	In	contrast,	the	sensitivity	to	the	same change	in	discount	rate	in	a	higher	interest	rate	environment	is	less	significant.

The	expected	long-term	return	on	assets	assumption	also	has	a	significant	effect on	pension	expense.	The	expected	return	on	plan	assets	is	a	long-term assumption	established	by	considering	historical	and	anticipated	returns	of	the asset	classes	invested	in	by	the	pension	plan	and	the	asset	allocation	policy currently	in	place.	For	purposes	of	setting	and	reviewing	this	assumption,	"long term"	refers	to	the	period	over	which	the	plan's	projected	benefit	obligations	will be	disbursed.	We	review	this	assumption	at	each	measurement	date	and	adjust	it if	warranted.	Our	selection	process	references	certain	historical	data	and	the current	environment,	but	primarily	utilizes	qualitative	judgment	regarding	future return	expectations.	Accordingly,	we	generally	do	not	change	the	assumption unless	we	modify	our	investment	strategy	or	identify	events	that	would	alter	our expectations	of	future	returns.

To	evaluate	the	continued	reasonableness	of	our	assumption,	we	examine	a variety	of	viewpoints	and	data.	Various	studies	have	shown	that	portfolios comprised	primarily	of	U.S.	equity

securities	have	historically	returned	approximately	10%	annually	over	long periods	of	time,	while	U.S.	debt	securities	have	returned	approximately	6% annually	over	long	periods.	Application	of	these	historical	returns	to	the	plan's allocation	ranges	for	equities	and	bonds	produces	a	result	between	7.25%	and 8.75%	and	is	one	point	of	reference,	among	many	other	factors,	that	is	taken	into consideration.	We	also	examine	the	plan's	actual	historical	returns	over	various periods	and	consider	the	current	economic	environment.	Recent	experience	is considered	in	our	evaluation	with	appropriate	consideration	that,	especially	for short	time	periods,	recent	returns	are	not	reliable	indicators	of	future	returns. While	annual	returns	can	vary	significantly	(actual	returns	for	2012,	2011,	and 2010	were	+15.29%,	+.11%,	and	+14.87%,	respectively),	the	selected assumption	represents	our	estimated	long-term	average	prospective	returns.

Acknowledging	the	potentially	wide	range	for	this	assumption,	we	also	annually examine	the	assumption	used	by	other	companies	with	similar	pension investment	strategies,	so	that	we	can	ascertain	whether	our	determinations markedly	differ	from	others.	In	all	cases,	however,	this	data	simply	informs	our process,	which	places	the	greatest	emphasis	on	our	qualitative	judgment	of future	investment	returns,	given	the	conditions	existing	at	each	annual measurement	date.

Taking	into	consideration	all	of	these	factors,	the	expected	long-term	return	on plan	assets	for	determining	net	periodic	pension	cost	for	2012	was	7.75%,	the same	as	it	was	for	2011.	After	considering	the	views	of	both	internal	and external	capital	market	advisors,	particularly	with	regard	to	the	effects	of	the recent	economic	environment	on	long-term	prospective	fixed	income	returns,	we are	reducing	our	expected	long-term	return	on	assets	to	7.50%	for	determining pension	cost	for	2013.

Under	current	accounting	rules,	the	difference	between	expected	long-term returns	and	actual	returns	is	accumulated	and	amortized	to	pension	expense	over future	periods.	Each	one	percentage	point	difference	in	actual	return	compared with	our	expected	return	causes	expense	in	subsequent	years	to	increase	or decrease	by	up	to	$8	million	as	the	impact	is	amortized	into	results	of	operations.

We	currently	estimate	a	pretax	pension	expense	of	$73	million	in	2013 compared	with	pretax	expense	of	$89	million	in	2012.	This	year-over-year expected	decrease	reflects	the	impact	of	favorable	returns	on	plan	assets experienced	in	2012	as	well	as	the	effects	of	the	lower	discount	rate	required	to be	used	in	2013.

The	table	below	reflects	the	estimated	effects	on	pension	expense	of	certain changes	in	annual	assumptions,	using	2013	estimated	expense	as	a	baseline.

# Table	27:	Pension	Expense	-	Sensitivity	Analysis

(a) The	impact	is	the	effect	of	changing	the	specified	assumption	while	holding	all	other	assumptions constant.

Our	pension	plan	contribution	requirements	are	not	particularly	sensitive	to actuarial	assumptions.	Investment	performance	has	the	most	impact	on contribution	requirements	and	will	drive	the	amount	of	required	contributions	in future	years.	Also,	current	law,	including	the	provisions	of	the	Pension Protection	Act	of	2006,	sets	limits	as	to	both	minimum	and	maximum contributions	to	the	plan.	We	do	not	expect	to	be	required	by	law	to	make	any contributions	to	the	plan	during	2013.

We	maintain	other	defined	benefit	plans	that	have	a	less	significant	effect	on financial	results,	including	various	nonqualified	supplemental	retirement	plans for	certain	employees,	which	are	described	more	fully	in	Note	15	Employee Benefit	Plans	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of this	Report.

# RECOURSE	AND	REPURCHASE	OBLIGATIONS

As	discussed	in	Note	3	Loan	Sale	and	Servicing	Activities	and	Variable	Interest Entities	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report,	PNC	has	sold	commercial	mortgage,	residential	mortgage	and	home equity	loans	directly	or	indirectly	through	securitization	and	loan	sale transactions	in	which	we	have	continuing	involvement.	One	form	of	continuing involvement	includes	certain	recourse	and	loan	repurchase	obligations associated	with	the	transferred	assets.

# COMMERCIAL	MORTGAGE	LOAN	RECOURSE	OBLIGATIONS

We	originate,	close,	and	service	certain	multi-family	commercial	mortgage	loans which	are	sold	to	FNMA	under	FNMA's	Delegated	Underwriting	and	Servicing (DUS)	program.	We	participated	in	a	similar	program	with	the	FHLMC.

Under	these	programs,	we	generally	assume	up	to	a	one-third	pari	passu	risk	of loss	on	unpaid	principal	balances	through	a	loss	share	arrangement.	At December	31,	2012	and	December	31,	2011,	the	unpaid	principal	balance outstanding	of	loans	sold	as	a	participant	in	these	programs	was	$12.8	billion and	$13.0	billion,	respectively.	The	potential	maximum	exposure	under	the	loss share	arrangements	was	$3.9	billion	at	December	31,	2012	and	$4.0	billion	at December	31,	2011.

We	maintain	a	reserve	for	estimated	losses	based	on	our	exposure.	The	reserve for	losses	under	these	programs	totaled	$43	million	and	$47	million	as	of December	31,	2012	and	December	31,	2011,	respectively,	and	is	included	in Other	liabilities	on	our	Consolidated	Balance	Sheet.	If	payment	is	required under	these	programs,	we	would	not	have	a	contractual	interest	in	the	collateral underlying	the	mortgage	loans	on	which	losses	occurred,	although	the	value	of the	collateral	is	taken	into	account	in	determining	our	share	of	such	losses.	Our exposure	and	activity	associated	with	these	recourse	obligations	are	reported	in the	Corporate	&	Institutional	Banking	segment.

# RESIDENTIAL	MORTGAGE	REPURCHASE	OBLIGATIONS

While	residential	mortgage	loans	are	sold	on	a	non-recourse	basis,	we	assume certain	loan	repurchase	obligations	associated	with	mortgage	loans	we	have	sold to	investors.	These	loan	repurchase	obligations	primarily	relate	to	situations where	PNC	is	alleged	to	have	breached	certain	origination	covenants	and representations	and	warranties	made	to	purchasers	of	the	loans	in	the	respective purchase	and	sale	agreements.	Residential	mortgage	loans	covered	by	these	loan repurchase	obligations	include	first	and	second-lien	mortgage	loans	we	have	sold through	Agency	securitizations,	Non-agency	securitizations,	and	loan	sale transactions.	As

discussed	in	Note	3	Loan	Sale	and	Servicing	Activities	and	Variable	Interest Entities	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report,	Agency	securitizations	consist	of	mortgage	loan	sale	transactions	with FNMA,	FHLMC,	and	the	Government	National	Mortgage	Association	(GNMA) program,	while	Non-agency	securitizations	consist	of	mortgage	loan	sale transactions	with	private	investors.	Mortgage	loan	sale	transactions	that	are	not part	of	a	securitization	may	involve	FNMA,	FHLMC	or	private	investors.	Our historical	exposure	and	activity	associated	with	Agency	securitization	repurchase obligations	has	primarily	been	related	to	transactions	with	FNMA	and	FHLMC, as	indemnification	and	repurchase	losses	associated	with	Federal	Housing Agency	(FHA)	and	Department	of	Veterans	Affairs	(VA)-insured	and	uninsured loans	pooled	in	GNMA	securitizations	historically	have	been	minimal. Repurchase	obligation	activity	associated	with	residential	mortgages	is	reported in	the	Residential	Mortgage	Banking	segment.

Loan	covenants	and	representations	and	warranties	are	established	through	loan sale	agreements	with	various	investors	to	provide	assurance	that	PNC	has	sold loans	that	are	of	sufficient	investment	quality.	Key	aspects	of	such	covenants	and representations	and	warranties	include	the	loan's	compliance	with	any	applicable loan	criteria	established	for	the	transaction,	including	underwriting	standards, delivery	of	all	required	loan	documents	to	the	investor	or	its	designated	party, sufficient	collateral	valuation,	and	the	validity	of	the	lien	securing	the	loan.	As	a result	of	alleged	breaches	of	these	contractual	obligations,	investors	may	request PNC	to	indemnify	them	against	losses	on	certain	loans	or	to	repurchase	loans.

We	investigate	every	investor	claim	on	a	loan	by	loan	basis	to	determine	the existence	of	a	legitimate	claim,	and	that	all	other	conditions	for	indemnification or	repurchase	have	been	met	prior	to	the	settlement	with	that	investor. Indemnifications	for	loss	or	loan	repurchases	typically	occur	when,	after	review of	the	claim,	we	agree	insufficient	evidence	exists	to	dispute	the	investor's	claim that	a	breach	of	a	loan	covenant	and	representation	and	warranty	has	occurred, such	breach	has	not	been	cured,	and	the	effect	of	such	breach	is	deemed	to	have had	a	material	and	adverse	effect	on	the	value	of	the	transferred	loan.	Depending on	the	sale	agreement	and	upon	proper	notice	from	the	investor,	we	typically respond	to	such	indemnification	and	repurchase	requests	within	90	days, although	final	resolution	of	the	claim	may	take	a	longer	period	of	time.	With	the exception	of	the	sales	agreements	associated	with	the	Agency	securitizations, most	sale	agreements	do	not	provide	for	penalties	or	other	remedies	if	we	do	not respond	timely	to	investor	indemnification	or	repurchase	requests.

Indemnification	and	repurchase	claims	are	typically	settled	on	an	individual	loan basis	through	make-whole	payments	or	loan	repurchases;	however,	on	occasion we	may	negotiate	pooled	settlements	with	investors.	In	connection	with	pooled settlements,	we	typically	do	not	repurchase	loans	and	the	consummation	of	such transactions	generally	results	in	us	no	longer	having	indemnification	and repurchase	exposure	with	the	investor	in	the	transaction.

For	the	first	and	second-lien	mortgage	balances	of	unresolved	and	settled	claims contained	in	the	tables	below,	a	significant	amount	of	these	claims	were associated	with	sold	loans	originated	through	correspondent	lender	and	broker origination	channels.	In	certain	instances	when	indemnification	or	repurchase claims	are	settled	for	these	types	of	sold	loans,	we	have	recourse	back	to	the correspondent	lenders,	brokers	and	other	third-parties	(e.g.,	contract underwriting	companies,	closing	agents,	appraisers,	etc.).	Depending	on	the underlying	reason	for	the	investor	claim,	we	determine	our	ability	to	pursue recourse	with	these	parties	and	file	claims	with	them	accordingly.	Our	historical recourse	recovery	rate	has	been	insignificant	as	our	efforts	have	been	impacted by	the	inability	of	such	parties	to	reimburse	us	for	their	recourse	obligations (e.g.,	their	capital	availability	or	whether	they	remain	in	business)	or	factors	that limit	our	ability	to	pursue	recourse	from	these	parties	(e.g.,	contractual	loss	caps, statutes	of	limitations).

Origination	and	sale	of	residential	mortgages	is	an	ongoing	business	activity, and,	accordingly,	management	continually	assesses	the	need	to	recognize indemnification	and	repurchase	liabilities	pursuant	to	the	associated	investor	sale agreements.	We	establish	indemnification	and	repurchase	liabilities	for estimated	losses	on	sold	first	and	second-lien	mortgages	for	which indemnification	is	expected	to	be	provided	or	for	loans	that	are	expected	to	be repurchased.	For	the	first	and	second-lien	mortgage	sold	portfolio,	we	have established	an	indemnification	and	repurchase	liability	pursuant	to	investor	sale agreements	based	on	claims	made,	demand	patterns	observed	to	date	and/or expected	in	the	future,	and	our	estimate	of	future	claims	on	a	loan	by	loan	basis. To	estimate	the	mortgage	repurchase	liability	arising	from	breaches	of representations	and	warranties,	we	consider	the	following	factors:	(i)	borrower performance	in	our	historically	sold	portfolio	(both	actual	and	estimated	future defaults),	(ii)	the	level	of	outstanding	unresolved	repurchase	claims, (iii)	estimated	probable	future	repurchase	claims,	considering	information	about file	requests,	delinquent	and	liquidated	loans,	resolved	and	unresolved	mortgage insurance	rescission	notices	and	our	historical	experience	with	claim	rescissions, (iv)	the	potential	ability	to	cure	the	defects	identified	in	the	repurchase	claims ("rescission	rate"),	and	(v)	the	estimated	severity	of	loss	upon	repurchase	of	the loan	or	collateral,	make-whole	settlement,	or	indemnification.

See	Note	24	Commitments	and	Guarantees	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	for	additional	information.

The	following	tables	present	the	unpaid	principal	balance	of	repurchase	claims	by	vintage	and	total	unresolved	repurchase	claims	for	the	past	five	quarters.

# Table	28:	Analysis	of	Quarterly	Residential	Mortgage	Repurchase	Claims	by	Vintage

| Dollars	in	millions | December	31<br>2012 | September	30<br>2012 | June	30<br>2012 | March	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2004\t&amp;\tPrior | $11 | $15 | $31 | $10 | $11 |
| 2005 | 8 | 10 | 19 | 12 | 13 |
| 2006 | 23 | 30 | 56 | 41 | 28 |
| 2007 | 45 | 137 | 182 | 100 | 90 |
| 2008 | 7 | 23 | 49 | 17 | 18 |
| 2008\t&amp;\tPrior | 94 | 215 | 337 | 180 | 160 |
| 2009\t–\t2012 | 38 | 52 | 42 | 33 | 29 |
| Total | $132 | $267 | $379 | $213 | $189 |
| FNMA,\tFHLMC,\tand\tGNMA\t% | 94% | 87% | 86% | 88% | 91% |

# Table	29:	Analysis	of	Quarterly	Residential	Mortgage	Unresolved	Asserted	Indemnification	and	Repurchase	Claims

| Dollars	in	millions | December	31<br>2012 | September	30<br>2012 | June	30<br>2012 | March	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| FNMA,\tFHLMC,\tand\tGNMA\tSecuritizations | $290 | $430 | $419 | $337 | $302 |
| Private\tInvestors\t(a) | 47 | 82 | 83 | 69 | 73 |
| Total\tunresolved\tclaims | $337 | $512 | $502 | $406 | $375 |
| FNMA,\tFHLMC,\tand\tGNMA\t% | 86% | 84% | 83% | 83% | 81% |
| (a) |  |  |  |  |  |

(a) Activity	relates	to	loans	sold	through	Non-agency	securitization	and	loan	sale	transactions.

The	table	below	details	our	indemnification	and	repurchase	claim	settlement	activity	during	2012	and	2011.

# Table	30:	Analysis	of	Residential	Mortgage	Indemnification	and	Repurchase	Claim	Settlement	Activity

|  |  | 2012 |  |  | 2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\t–\tIn\tmillions | Unpaid\nPrincipal\nBalance\t(a) | Losses\nIncurred\t(b) | Fair\tValue\tof\nRepurchased\nLoans\t(c) | Unpaid\nPrincipal\nBalance\t(a) | Losses\nIncurred\t(b) | Fair\tValue\tof\nRepurchased\nLoans\t(c) |
| Residential\tmortgages\t(d): |  |  |  |  |  |  |
| FNMA,\tFHLMC,\tand\tGNMA\tsecuritizations | $356 | $210 | $85 | $220 | $115 | $74 |
| Private\tinvestors\t(e) | 75 | 46 | 5 | 76 | 48 | 14 |
| Total\tindemnification\tand\trepurchase\tsettlements | $431 | $256 | $90 | $296 | $163 | $88 |
| (a) |  |  |  |  |  |  |

(a) Represents	unpaid	principal	balance	of	loans	at	the	indemnification	or	repurchase	date.	Excluded	from	these	balances	are	amounts	associated	with	pooled	settlement	payments	as	loans	are	typically	not repurchased	in	these	transactions.

(b) Represents	both	i)	amounts	paid	for	indemnification/settlement	payments	and	ii)	the	difference	between	loan	repurchase	price	and	fair	value	of	the	loan	at	the	repurchase	date.	These	losses	are	charged	to	the indemnification	and	repurchase	liability.

(c) Represents	fair	value	of	loans	repurchased	only	as	we	have	no	exposure	to	changes	in	the	fair	value	of	loans	or	underlying	collateral	when	indemnification/settlement	payments	are	made	to	investors.

(d) Repurchase	activity	associated	with	insured	loans,	government-guaranteed	loans,	and	loans	repurchased	through	the	exercise	of	our	removal	of	account	provision	(ROAP)	option	are	excluded	from	this	table.	Refer to	Note	3	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	further	discussion	of	ROAPs.

(e) Activity	relates	to	loans	sold	through	Non-agency	securitizations	and	loan	sale	transactions.

During	2012	and	2011,	unresolved	and	settled	investor	indemnification	and repurchase	claims	were	primarily	related	to	one	of	the	following	alleged breaches	in	representations	and	warranties:	(i)	misrepresentation	of	income, assets	or	employment,	(ii)	property	evaluation	or	status	issues	(e.g.,	appraisal, title,	etc.),	(iii)	underwriting	guideline	violations,	or	(iv)	mortgage	insurance rescissions.	During	2012,	FNMA	and	FHLMC	expanded	their	efforts	to	reduce their	exposure	to	losses	on	purchased	loans	resulting	in	a	dramatic	increase	in second	and	third	quarter	repurchase	claims,	primarily	on	the	2006-2008 vintages,	but	also	other	vintages.	Included	in	this	higher	volume	were	repurchase claims	made	on	loans	in	later	stages	of	default	than	had	previously	been observed.	For	example,	in	the	second	quarter	of	2012,	we	experienced repurchase	claims	on	loans	which	had	defaulted	more	than	two	years	prior	to	the claim	date,	which	was	inconsistent	with historical	activity.	In	addition,	in	December	2012,	PNC	discussed	with	FHLMC and	FNMA	their	intentions	to	further	expand	their	purchased	loan	review activities	in	2013	with	a	focus	on	2004	and	2005	vintages,	as	well	as	certain	loan modifications	and	aged	default	loans	not	previously	reviewed.	Based	on	our discussions	with	both	FNMA	and	FHLMC,	we	expect	an	increase	in	repurchase claims	in	2013	and	have	increased	the	liability	for	estimated	losses	on indemnification	and	repurchase	claims	accordingly.

The	ongoing	elevated	repurchase	claim	activity	in	2012	contributed	to	the	higher balance	of	unresolved	claims	for

residential	mortgages	in	2012,	as	well	as	the	increase	in	residential	mortgage indemnification	and	repurchase	settlement	activity	in	2012.	In	response	to	the significant	increase	in	claims	in	2012	and	expected	increase	in	claims	in	2013 due	to	changes	in	FNMA's	and	FHLMC's	behavior,	management	revised	its estimates	of	future	claims	resulting	in	significant	increases	to	the	indemnification and	repurchase	liability	in	both	the	second	and	fourth	quarters	of	2012.

At	December	31,	2012	and	December	31,	2011,	the	liability	for	estimated	losses on	indemnification	and	repurchase	claims	for	residential	mortgages	totaled	$614 million	and	$83	million,	respectively.	We	believe	our	indemnification	and repurchase	liability	appropriately	reflects	the	estimated	probable	losses	on indemnification	and	repurchase	claims	for	all	residential	mortgage	loans	sold	and outstanding	as	of	December	31,	2012	and	December	31,	2011.	In	making	these estimates,	we	consider	the	losses	that	we	expect	to	incur	over	the	life	of	the	sold loans.	See	Note	24	Commitments	and	Guarantees	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	for	additional	information.

Indemnification	and	repurchase	liabilities,	which	are	included	in	Other	liabilities on	the	Consolidated	Balance	Sheet,	are	initially	recognized	when	loans	are	sold to	investors	and	are	subsequently	evaluated	by	management.	Initial	recognition and	subsequent	adjustments	to	the	indemnification	and	repurchase	liability	for the	sold	residential	mortgage	portfolio	are	recognized	in	Residential	mortgage revenue	on	the	Consolidated	Income	Statement.

# Home	Equity	Repurchase	Obligations

PNC's	repurchase	obligations	include	obligations	with	respect	to	certain brokered	home	equity	loans/lines	that	were	sold	to	a	limited	number	of	private investors	in	the	financial	services	industry	by	National	City	prior	to	our acquisition	of	National	City.	PNC	is	no	longer	engaged	in	the	brokered	home equity	lending	business,	and	our	exposure	under	these	loan	repurchase obligations	is	limited	to	repurchases	of	the	loans	sold	in	these	transactions. Repurchase	activity	associated	with	brokered	home	equity	lines/loans	is	reported in	the	Non-Strategic	Assets	Portfolio	segment.

Loan	covenants	and	representations	and	warranties	were	established	through loan	sale	agreements	with	various	investors	to	provide	assurance	that	loans	PNC sold	to	the	investors	are	of	sufficient	investment	quality.	Key	aspects	of	such covenants	and	representations	and	warranties	include	the	loan's	compliance	with any	applicable	loan	criteria	established	for	the	transaction,	including underwriting	standards,	delivery	of	all	required	loan	documents	to	the	investor or	its	designated	party,	sufficient	collateral	valuation,	and	the	validity	of	the	lien securing	the	loan.	As	a	result	of	alleged	breaches	of	these	contractual obligations,	investors	may	request	PNC	to	indemnify	them	against	losses	on certain	loans	or	to	repurchase	loans.

We	investigate	every	investor	claim	on	a	loan	by	loan	basis	to	determine	the existence	of	a	legitimate	claim,	and	that	all	other	conditions	for	indemnification or	repurchase	have	been	met	prior	to	settlement	with	that	investor. Indemnifications	for	loss	or	loan	repurchases	typically	occur	when,	after	review of	the	claim,	we	agree	insufficient	evidence	exists	to	dispute	the	investor's	claim that	a	breach	of	a	loan	covenant	and	representation	and	warranty	has	occurred, such	breach	has	not

been	cured,	and	the	effect	of	such	breach	is	deemed	to	have	had	a	material	and adverse	effect	on	the	value	of	the	transferred	loan.	Depending	on	the	sale agreement	and	upon	proper	notice	from	the	investor,	we	typically	respond	to home	equity	indemnification	and	repurchase	requests	within	60	days,	although final	resolution	of	the	claim	may	take	a	longer	period	of	time.	Most	home	equity sale	agreements	do	not	provide	for	penalties	or	other	remedies	if	we	do	not respond	timely	to	investor	indemnification	or	repurchase	requests.

Investor	indemnification	or	repurchase	claims	are	typically	settled	on	an individual	loan	basis	through	make-whole	payments	or	loan	repurchases; however,	on	occasion	we	may	negotiate	pooled	settlements	with	investors.	In connection	with	pooled	settlements,	we	typically	do	not	repurchase	loans	and	the consummation	of	such	transactions	generally	results	in	us	no	longer	having indemnification	and	repurchase	exposure	with	the	investor	in	the	transaction.

The	following	table	details	the	unpaid	principal	balance	of	our	unresolved	home equity	indemnification	and	repurchase	claims	at	December	31,	2012	and December	31,	2011,	respectively.

# Table	31:	Analysis	of	Home	Equity	Unresolved	Asserted	Indemnification	and Repurchase	Claims

(a) Activity	relates	to	brokered	home	equity	loans/lines	sold	through	loan	sale	transactions	which occurred	during	2005-2007.

The	table	below	details	our	home	equity	indemnification	and	repurchase	claim	settlement	activity	during	2012	and	2011.

# Table	32:	Analysis	of	Home	Equity	Indemnification	and	Repurchase	Claim	Settlement	Activity

|  |  | 2012 |  |  | 2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\t–\tIn\tmillions | Unpaid\nPrincipal\nBalance\t(a) | Losses\nIncurred\t(b) | Fair\tValue\tof\nRepurchased\nLoans\t(c) | Unpaid\nPrincipal\nBalance\t(a) | Losses\nIncurred\t(b) | Fair\tValue\tof\nRepurchased\nLoans\t(c) |
| Home\tequity\tloans/lines: |  |  |  |  |  |  |
| Private\tinvestors\t–\tRepurchases\t(d) | $22 | $18 | $4 | $42 | $107 | $3 |
| (a) |  |  |  |  |  |  |

(b) Represents	the	difference	between	loan	repurchase	price	and	fair	value	of	the	loan	at	the	repurchase	date.	These	losses	are	charged	to	the	indemnification	and	repurchase	liability.	Amounts	for	2011	include amounts	for	settlement	payments.

(d) Activity	relates	to	brokered	home	equity	loans/lines	sold	through	loan	sale	transactions	which	occurred	during	2005-2007.

During	2012	and	2011,	unresolved	and	settled	investor	indemnification	and repurchase	claims	were	primarily	related	to	one	of	the	following	alleged breaches	in	representations	and	warranties:	(i)	misrepresentation	of	income, assets	or	employment,	(ii)	property	evaluation	or	status	issues	(e.g.,	appraisal, title,	etc.),	or	(iii)	underwriting	guideline	violations.	The	lower	balance	of unresolved	indemnification	and	repurchase	claims	at	December	31,	2012	is attributable	to	lower	claims	submissions	and	lower	inventories	of	claims undergoing	review	due	to	the	elevated	settlement	activity	in	2011.	The	lower 2012	indemnification	and	repurchase	settlement	activity	was	also	affected	by	the lower	claim	activity	and	the	lower	inventory	of	claims	mentioned	above	as	well as	a	higher	rate	of	claim	rescissions.

An	indemnification	and	repurchase	liability	for	estimated	losses	for	which indemnification	is	expected	to	be	provided	or	for	loans	that	are	expected	to	be repurchased	was	established	at	the	acquisition	of	National	City.	Management's evaluation	of	these	indemnification	and	repurchase	liabilities	is	based	upon trends	in	indemnification	and	repurchase	claims,	actual	loss	experience,	risks	in the	underlying	serviced	loan	portfolios,	current	economic	conditions	and	the periodic	negotiations	that	management	may	enter	into	with	investors	to	settle existing	and	potential	future	claims.

At	December	31,	2012	and	December	31,	2011,	the	liability	for	estimated	losses on	indemnification	and	repurchase	claims	for	home	equity	loans/lines	was	$58 million	and	$47	million,	respectively.	We	believe	our	indemnification	and repurchase	liability	appropriately	reflects	the	estimated	probable	losses	on indemnification	and	repurchase	claims	for	all	home	equity	loans/lines	sold	and outstanding	as	of	December	31,	2012	and	December	31,	2011.	In	making	these estimates,	we	consider	the	losses	that	we	expect	to	incur	over	the	life	of	the	sold loans.	See	Note	24	Commitments	and	Guarantees	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report	for	additional	information.

Indemnification	and	repurchase	liabilities,	which	are	included	in	Other	liabilities on	the	Consolidated	Balance	Sheet,	are	evaluated	by	management	on	a	quarterly basis.	Initial	recognition	and	subsequent	adjustments	to	the	indemnification	and repurchase	liability	for	home	equity	loans/lines	are	recognized	in	Other noninterest	income	on	the	Consolidated	Income	Statement.

# RISK	MANAGEMENT

PNC	encounters	risk	as	part	of	the	normal	course	of	operating	our	business. Accordingly	we	design	risk	management	processes	to	help	manage	these	risks. This	Risk	Management	section	describes	our	risk	management	philosophy, appetite,	culture,	governance,	risk	identification,	controls	and	monitoring	and reporting.	We	also	provide	an	analysis	of	our key	areas	of	risk:	credit,	operational,	liquidity,	market,	and	model.	The discussion	of	market	risk	is	further	subdivided	into	interest	rate,	trading,	and equity	and	other	investment	risk	areas.	Our	use	of	financial	derivatives	as	part	of our	overall	asset	and	liability	risk	management	process	is	also	addressed	within the	Risk	Management	section	of	this	Item	7.

We	view	Risk	Management	as	a	cohesive	combination	of	the	following	risk elements:

# Risk	Philosophy

PNC's	risk	philosophy	is	to	manage	to	an	overall	moderate	level	of	risk	to capture	opportunities	and	optimize	shareholder	value.	We	dynamically	set	our strategies	and	make	distinct	risk	taking	decisions	with	consideration	for	the impact	to	our	aggregate	risk	position.	The	following	principles	guide	our	risk taking	activities:

1. Identify	and	Understand	Risks	and	Returns

2. Make	Balanced	Risk	Decisions

3. Continuously	Monitor	and	Manage	Risks

# Risk	Appetite,	Strategy	and	Optimization

Risk	appetite	represents	the	organization's	desired	enterprise	risk	position. Reviewed	periodically	through	the	Risk	Reporting	process,	the	risk	appetite serves	as	an	operating	guide	for	making	balanced	risk	decisions	that	support	our business	strategies;	it	will	adjust	over	time	to	reflect	the	current	and	anticipated economic	environment,	growth	objectives,	and	our	risk	profile.

The	risk	appetite	is	not	set	or	managed	through	a	single	determinant;	rather,	it	is derived	through	a	series	of

quantitative	and	qualitative	risk	limits	defined	in	policy	and	managed	through the	application	of	the	enterprise	risk	management	framework.	The	primary	risk policies	establish	the	enterprise	level	risk	limits	and	collectively	represent	PNC's enterprise	risk	appetite.	This	serves	as	an	operating	guide	for	making	balanced risk	decisions	that	support	our	business	strategies,	including	growth	strategy	and exit	strategy,	where	appropriate.

# Risk	Culture

All	employees	are	treated	as	risk	managers,	and	they	are	responsible	for understanding	the	overall	risk	philosophy	and	principles	and	how	they	apply within	their	areas.	They	are	encouraged	to	collaborate	across	groups	to	identify and	mitigate	risks	and	elevate	issues	as	required.	PNC	reinforces	risk management	responsibilities	through	a	performance	management	system	where employee	performance	goals	include	risk	management	objectives.	Incentives	for relevant	employees	incorporate	risk	management	results	through	balanced measures	of	risk-adjusted	performance.

Proactive	communication,	between	groups	and	up	to	the	Board	of	Directors, facilitates	timely	identification	and	resolution	of	issues.	PNC's	multi-level	risk committee	structure	provides	a	formal	channel	to	identify,	decision,	and	report risk.	Risk	committees	membership	includes	representatives	from	business	and risk	groups	that	are	responsible	for	helping	ensure	risk	issues	are	proactively identified,	decisioned,	and	communicated	appropriately	within	the	enterprise	risk management	framework.

# Risk	Organization	and	Governance

PNC	employs	a	comprehensive	Risk	Management	governance	structure	to	help ensure	that	risks	are	identified;	balanced	decisions	are	made	that	consider	risk and	return;	and	risks	are	adequately	monitored	and	managed.	Risk	committees established	within	this	governance	structure	provide	oversight	for	risk management	activities	at	the	board,	corporate,	and	business	levels.	We	use	our governance	structure	to	assess	the	effectiveness	of	our	Risk	Management practices	on	an	ongoing	basis,	based	on	how	we	manage	our	day-to-day	business activities	and	on	our	development	and	execution	of	more	specific	strategies	to mitigate	risks.	Specific	responsibilities	include:

Board	of	Directors	–	The	Board	oversees	enterprise	risk	management.	The	Risk Committee	of	the	Board	of	Directors	evaluates	PNC's	risk	appetite, management's	assessment	of	the	enterprise	risk	profile,	and	the	enterprise-wide risk	structure	and	processes	established	by	management	to	identify,	measure, monitor,	and	manage	risk.	The	Audit	Committee	of	the	Board	also	has responsibility	for	select	areas	of	risk	(e.g.,	Financial	Reporting,	Ethics,	ICFR).

Corporate	Committees	–	At	the	management	level,	PNC	has	established	several senior	management-level	committees	to	facilitate	the	review,	evaluation,	and management	of	risk.	The

management-level	Executive	Committee	(EC)	is	the	corporate	committee	that	is responsible	for	developing	enterprise-wide	strategy	and	achieving	PNC's strategic	objectives.	The	EC	evaluates	risk	management,	in	part,	by	monitoring risk	reporting	from	the	other	corporate	committees,	which	are	the	supporting committees	for	EC.	The	corporate	committees	are	responsible	for	overseeing	risk standards	and	strategies,	recommending	risk	limits,	policies,	and	metrics, monitoring	risk	exposures,	reviewing	risk	profiles	and	key	risk	issues,	and approving	significant	transactions	and	initiatives.

Working	Committees	–	The	working	committees	are	generally	subcommittees	of the	corporate	committees	and	include	risk	management	committees	for	each	of PNC's	major	businesses	or	functions.	Working	committees	are	intended	to define,	design	and	develop	the	risk	management	framework	at	the	business	or function	level.	The	working	committees	help	to	implement	key	enterprise-level activities	within	a	business	or	function.	These	committees	recommend	risk management	policies	for	the	business	or	function	that	are	consistent	with	the enterprise-wide	risk	management	objectives	and	policies.	The	business	level committees	are	also	responsible	for	approving	significant	initiatives	under	a certain	threshold.

Working	Groups	–	Where	appropriate,	management	will	also	form	ad	hoc groups	(working	groups)	to	address	specific	risk	topics	and	report	to	a	working committee	or	corporate	committee.	These	working	groups	generally	have	a narrower	scope	and	may	be	limited	in	their	duration.

Policies	and	Procedures	–	PNC	uses	various	risk	management	policies	and procedures	to	provide	direction	and	guidance	to	management	and	the	Board	of Directors.	These	policies	and	procedures	are	organized	in	a	framework	of different	levels	requiring	review	and	approval	at	varying	committees	within	the governance	structure.

Business	Activities	–	Our	businesses	strive	to	enhance	risk	management	and internal	control	processes.	Integrated	and	comprehensive	processes	are	designed to	adequately	identify,	measure,	manage,	monitor,	and	report	risks	which	may significantly	impact	each	business.

# Risk	Identification	and	Quantification

Risk	identification	takes	place	across	a	variety	of	different	risk	types	throughout the	organization.	These	risk	types	consist	of,	but	are	not	limited	to,	Credit	Risk, Market	Risk,	Operational	Risk,	Model	Risk	and	Liquidity	Risk.	Risks	are identified	based	on	a	balanced	use	of	analytical	tools	and	management	judgment for	both	on-	and	off-balance	sheet	exposures.	Our	governance	structure	supports risk	identification	by	facilitating	that	issues	of	the	risk	types,	both	existing	and emerging,	are	assessed	and	mitigation	strategies	implemented.	These	risks	are prioritized	based	on	quantitative	and	qualitative	analysis	and	assessed	against	the risk	appetite.

Multiple	tools	and	approaches	are	used	to	help	identify	and	prioritize	risks, including	Key	Risk	Indicators	(KRIs),	Key	Performance	Indicators	(KPIs),	Risk Control	and	Self	Assessments	(RCSAs),	scenario	analysis,	stress	testing,	and special	investigations.

Risks	are	aggregated	and	assessed	within	and	across	risk	functions	or	businesses. The	aggregated	risk	information	is	reviewed	and	reported	at	an	enterprise	level for	adherence	to	the	risk	appetite	and	tolerances	as	established	through	the	policy framework	and	approved	by	the	Board	of	Directors	or	by	appropriate	managing committees.	This	enterprise	aggregation	and	reporting	approach	promotes	the identification	and	appropriate	escalation	of	material	risks	across	the	organization and	supports	an	understanding	of	the	cumulative	impact	of	risk	in	relation	to	our risk	appetite.

# Risk	Control	and	Limits

PNC	uses	a	multi-tiered	risk	policy,	procedure,	and	committee	charter framework	to	provide	direction	and	guidance	for	identifying,	decisioning,	and managing	risk,	including	appropriate	processes	to	escalate	control	parameter exceptions	when	applicable.

Risk	limits,	defined	quantitatively	and	qualitatively,	are	established	within	policy across	risk	categories.	When	setting	risk	limits,	PNC	considers	major	risks, aligns	with	established	risk	appetite,	balances	risk-reward,	leverages	analytics, and	adjusts	limits	timely	in	response	to	changes	in	external	and	internal environments.

Quantitative	and	qualitative	operating	guidelines	support	risk	limits	and	serve	as an	early	warning	system	for	potential	violations	of	the	limits.	These	operating guidelines	trigger	mitigation	strategies	and	management	escalation	protocols	if limits	are	breached.

# Risk	Monitoring	and	Reporting

PNC	uses	similar	tools	to	monitor	and	report	risk	as	to	perform	Risk Identification.	These	tools	include	KRIs,	KPIs,	RCSAs,	scenario	analysis,	stress testing,	and	special	investigations.

The	risk	identification	and	quantification	processes,	the	risk	control	and	limits reviews,	and	the	tools	used	for	risk	monitoring	provide	the	basis	for	risk reporting.	The	objective	of	risk	reporting	is	comprehensive	risk	aggregation	and transparent	communication	of	aggregated	risks.	Risk	reports	are	produced	at	the line	of	business	level,	the	functional	level	(credit,	market,	operational)	and	the enterprise	level.	The	enterprise	level	report	aggregates	the	risks	identified	in	the functional	and	business	reports.	The	enterprise	level	report	is	provided	through the	governance	structure	to	the	Board	of	Directors.

# CREDIT	RISK	MANAGEMENT

Credit	risk	represents	the	possibility	that	a	customer,	counterparty	or	issuer	may not	perform	in	accordance	with	contractual	terms.	Credit	risk	is	inherent	in	the financial	services	business	and	results	from	extending	credit	to	customers, purchasing	securities,	and	entering	into	financial	derivative	transactions	and certain	guarantee	contracts.	Credit	risk	is	one	of	our	most	significant	risks.	Our processes	for	managing	credit	risk	are	embedded	in	PNC's	risk	culture	and	in our	decision-making	processes	using	a	systematic	approach	whereby	credit	risks and	related	exposures	are:	identified	and	assessed;	managed	through	specific policies	and	processes;	measured	and	evaluated	against	our	risk	tolerance	limits; and	reported,	along	with	specific	mitigation	activities,	to	management	and	the board	through	our	governance	structure.

# Asset	Quality	Overview

Overall	asset	quality	trends	in	2012	improved	from	December	31,	2011	and included	the	following:

•	Nonperforming	loans	decreased	$306	million,	or	9%,	to	$3.3	billion	as of	December	31,	2012	compared	with	$3.6	billion	as	of	December	31, 2011.	This	decrease	was	mainly	attributable	to	decreases	in	commercial real	estate	and	commercial	nonperforming	loans,	which	were	partially offset	by	the	acquisition	of	RBC	Bank	(USA)	and	higher nonperforming	consumer	loans.	Pursuant	to	regulatory	guidance	issued in	the	third	quarter	of	2012,	nonperforming	consumer	loans,	primarily home	equity	and	residential	mortgage,	increased	$288	million	in	2012 related	to	changes	in	treatment	of	certain	loans	classified	as	TDRs,	net of	charge-offs,	resulting	from	bankruptcy	where	no	formal reaffirmation	was	provided	by	the	borrower	and	therefore	a	concession has	been	granted	based	upon	discharge	from	personal	liability.	Of these	loans,	approximately	78%	were	current	on	their	payments	at December	31,	2012.	Additionally,	nonperforming	home	equity	loans increased	due	to	a	change	in	policy	made	in	the	first	quarter	of	2012 which	places	home	equity	loans	on	nonaccrual	status	when	past	due	90 days	or	more	compared	with	180	days	under	the	prior	policy.

•	Overall	loan	delinquencies	decreased	$797	million,	or	18%,	from	year- end	2011.	The	reduction	was	mainly	due	to	a	decline	in	government insured	residential	real	estate	loans	in	addition	to	a	first	quarter	of	2012 policy	change	for	home	equity	loans	whereby	loans	are	placed	on nonaccrual	status	when	past	due	90	days	compared	to	prior	policy	of placing	loans	on	nonaccrual	status	when	past	due	180	days.	In	addition, consumer	loan	delinquencies,	primarily	residential	real	estate delinquencies,	decreased	pursuant	to	regulatory	guidance	issued	in	the third	quarter	of	2012	related	to	treatment	of	certain	loans	classified	as TDRs	resulting	from	bankruptcy	as	discussed	above.	These	decreases were	partially	offset	by	an	increase	in	commercial	real	estate delinquencies.

•	Net	charge-offs	were	$1.3	billion	in	2012,	down	21%	from	2011	net charge-offs	of	$1.6	billion.	Pursuant	to	regulatory	guidance	issued	in the	third	quarter	of	2012,	additional	consumer	charge-offs	of	$128.1 million	have	been	taken	in	2012	related	to	changes	in	treatment	of certain	loans	where	borrowers	have	been	discharged	from	personal liability	under	bankruptcy	protection	where	no	formal	reaffirmation was	provided	by	the	borrower.	Such	loans	have	been	classified	as TDRs	and	have	been	measured	at	the	fair	value	of	the	collateral	less costs	to	sell.

# NONPERFORMING	ASSETS	AND	LOAN	DELINQUENCIES

# Nonperforming	Assets,	including	OREO	and	Foreclosed	Assets

Nonperforming	assets	include	nonaccrual	loans	and	leases	for	which	ultimate collectability	of	the	full	amount	of	contractual	principal	and	interest	is	not probable	and	include	nonperforming	TDRs,	OREO	and	foreclosed	assets.	Loans held	for	sale,	certain	government	insured	or	guaranteed	loans,	purchased impaired	loans	and	loans	accounted	for	under	the	fair	value	option	are	excluded from	nonperforming	loans.	Additional	information	regarding	our	nonaccrual policies	is	included	in	Note	1	Accounting	Policies	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.	The	major	categories	of nonperforming	assets	are	presented	in	the	table	below.

Nonperforming	assets	decreased	$362	million	from	December	31,	2011,	to	$3.8 billion	at	December	31,	2012,	as	discussed	above.	Nonperforming	loans decreased	$306	million	to	$3.3	billion	and	OREO	and	foreclosed	assets decreased	$56	million	to	$540	million.	The	ratio	of	nonperforming	assets	to	total loans,	OREO	and	foreclosed	assets	decreased	to	2.04%	at	December	31,	2012 from	2.60%	at	December	31,	2011.	The	ratio	of	nonperforming	loans	to	total loans	declined	to	1.75%	at	December	31,	2012,	compared	to	2.24%	at December	31,	2011.	Total	nonperforming	assets	have	declined	$2.6	billion,	or 41%,	from	their	peak	of	$6.4	billion	at	March	31,	2010.

Management	continues	to	evaluate	nonaccrual	and	charge-off	policies	for second-lien	consumer	loans	(residential	mortgages	and	home	equity	loans	and lines)	pursuant	to	interagency	supervisory	guidance	on	practices	for	loans	and lines	of	credit	secured	by	junior	liens	on	1-4	family	residential	properties.	This will	result	in	future	classification	of	performing	second-lien	consumer	loans	as nonperforming	where	the	first-lien	loan	is	90	days	or	more	past	due.	Pursuant	to the	guidance,	the	Company	will	adopt	a	policy	in	the	first	quarter	of	2013, subsequent	to	operationalizing	related	procedures,	to	charge-

off	a	portion	of	certain	second-lien	consumer	loans	(residential	mortgage	and home	equity	lines	of	credit)	where	the	first-lien	loan	is	90	days	or	more	past	due. Additionally,	given	these	operational	enhancements	and	pursuant	to	interagency supervisory	guidance,	the	company	will	update	certain	additional	nonaccrual	and charge-off	policies.	We	estimate	adding	approximately	$350	million	to	$450 million	to	the	nonaccrual	consumer	loan	population	in	the	first	quarter	of	2013. If	these	policies	had	been	in	effect	as	of	December	31,	2012,	there	would	have been	an	estimated	cumulative	charge-off	of	approximately	$140	million.	The credit	loss	policies	for	these	loans	are	considered	in	our	reserving	process	and the	risk	of	loss	associated	with	these	loans	was	considered	in	the	determination of	our	ALLL	at	December	31,	2012.

At	December	31,	2012,	TDRs	included	in	nonperforming	loans	were	$1.6	billion or	49%	of	total	nonperforming	loans	compared	to	$1.1	billion	or	32%	of nonperforming	loans	as	of	December	31,	2011.	Within	consumer	nonperforming loans,	residential	real	estate	TDRs	comprise	64%	of	total	residential	real	estate nonperforming	loans	at	December	31,	2012,	up	from	51%	at	December	31, 2011.	Home	equity	TDRs	comprise	70%	of	home	equity	nonperforming	loans	at December	31,	2012,	down	from	77%	at	December	31,	2011.	The	level	of	TDRs in	these	portfolios	is	expected	to	result	in	elevated	nonperforming	loan	levels because	TDRs	remain	in	nonperforming	status	until	a	borrower	has	made	at	least six	consecutive	months	of	payments	under	the	modified	terms	or	ultimate resolution	occurs.

At	December	31,	2012,	our	largest	nonperforming	asset	was	$38	million	and	in the	Real	Estate	Rental	and	Leasing	Industry.	Our	average	nonperforming	loans associated	with	commercial	lending	were	under	$1	million.	Eight	of	our	ten largest	outstanding	nonperforming	assets	are	from	the	commercial	lending portfolio	and	represent	11%	and	4%	of	total	commercial	lending	nonperforming loans	and	total	nonperforming	assets,	respectively,	as	of	December	31,	2012.

# Table	33:	Nonperforming	Assets	By	Type

| In	millions | Dec.	31<br>2012 | Dec.	31<br>2011 |
| :--- | :--- | :--- |
| Nonperforming\tloans |  |  |
| Commercial\tlending |  |  |
| Commercial |  |  |
| Retail/wholesale\ttrade | $61 | $109 |
| Manufacturing | 73 | 117 |
| Service\tproviders | 124 | 147 |
| Real\testate\trelated\t(a) | 178 | 252 |
| Financial\tservices | 9 | 36 |
| Health\tcare | 25 | 29 |
| Other\tindustries | 120 | 209 |
| Total\tcommercial | 590 | 899 |
| Commercial\treal\testate |  |  |
| Real\testate\tprojects | 654 | \t 1,051 |
| Commercial\tmortgage | 153 | 294 |
| Total\tcommercial\treal\testate | 807 | \t 1,345 |
| Equipment\tlease\tfinancing | 13 | 22 |
| Total\tcommercial\tlending | \t 1,410 | \t 2,266 |
| Consumer\tlending\t(b) |  |  |
| Home\tequity\t(c) | 951 | 529 |
| Residential\treal\testate |  |  |
| Residential\tmortgage\t(d) | 824 | 685 |
| Residential\tconstruction | 21 | 41 |
| Credit\tcard | 5 | 8 |
| Other\tconsumer | 43 | 31 |
| Total\tconsumer\tlending\t(e) | \t 1,844 | \t 1,294 |
| Total\tnonperforming\tloans\t(f) | \t 3,254 | \t 3,560 |
| OREO\tand\tforeclosed\tassets |  |  |
| Other\treal\testate\towned\t(OREO)\t(g) | 507 | 561 |
| Foreclosed\tand\tother\tassets | 33 | 35 |
| Total\tOREO\tand\tforeclosed\tassets | 540 | 596 |
| Total\tnonperforming\tassets | $3,794 | $4,156 |
| Amount\tof\tcommercial\tlending\tnonperforming\tloans\tcontractually\tcurrent\tas\tto\tremaining\tprincipal\tand\tinterest | $342 | $632 |
| Percentage\tof\ttotal\tcommercial\tlending\tnonperforming\tloans | 24% | 28% |
| Amount\tof\tTDRs\tincluded\tin\tnonperforming\tloans | $1,589 | $1,141 |
| Percentage\tof\ttotal\tnonperforming\tloans | 49% | 32% |
| Nonperforming\tloans\tto\ttotal\tloans | 1.75% | 2.24% |
| Nonperforming\tassets\tto\ttotal\tloans,\tOREO\tand\tforeclosed\tassets | 2.04 | 2.60 |
| Nonperforming\tassets\tto\ttotal\tassets | 1.24 | 1.53 |
| Allowance\tfor\tloan\tand\tlease\tlosses\tto\ttotal\tnonperforming\tloans\t(f)\t(h) | 124 | 122 |
| (a) |  |  |

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

(b) Excludes	most	consumer	loans	and	lines	of	credit,	not	secured	by	residential	real	estate,	which	are	charged	off	after	120	to	180	days	past	due	and	are	not	placed	on	nonperforming	status.

(c) In	the	first	quarter	of	2012,	we	adopted	a	policy	stating	that	Home	equity	loans	past	due	90	days	or	more	would	be	placed	on	nonaccrual	status.	Prior	policy	required	that	these	loans	be	past	due	180	days	before being	placed	on	nonaccrual	status.

(d) Nonperforming	residential	mortgage	excludes	loans	of	$69	million	and	$61	million	accounted	for	under	the	fair	value	option	as	December	31,	2012	and	December	31,	2011,	respectively.

(e) Pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012,	nonperforming	consumer	loans,	primarily	home	equity	and	residential	mortgage,	increased	$288	million	in	2012	related	to	changes	in	treatment of	certain	loans	classified	as	TDRs,	net	of	charge-offs,	resulting	from	bankruptcy	where	no	formal	reaffirmation	was	provided	by	the	borrower	and	therefore	a	concession	has	been	granted	based	upon	discharge from	personal	liability.	Charge-offs	have	been	taken	where	the	fair	value	less	costs	to	sell	the	collateral	was	less	than	the	recorded	investment	of	the	loan	and	were	$128.1	million.	Of	these	loans,	approximately 78%	were	current	on	their	payments	at	December	31,	2012.

(f) Nonperforming	loans	exclude	certain	government	insured	or	guaranteed	loans,	loans	held	for	sale,	loans	accounted	for	under	the	fair	value	option	and	purchased	impaired	loans.

(g) OREO	excludes	$380	million	and	$280	million	at	December	31,	2012	and	December	31,	2011,	respectively,	related	to	residential	real	estate	that	was	acquired	by	us	upon	foreclosure	of	serviced	loans	because	they are	insured	by	the	Federal	Housing	Administration	(FHA)	or	guaranteed	by	the	Department	of	Veterans	Affairs	(VA).

(h) The	allowance	for	loan	and	lease	losses	includes	impairment	reserves	attributable	to	purchased	impaired	loans.	See	Note	7	Allowances	for	Loan	and	Lease	Losses	and	Unfunded	Loan	Commitments	and	Letters	of Credit	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	additional	information.

# Table	34:	OREO	and	Foreclosed	Assets

| In	millions | Dec.	31<br>2012 | Dec.	31<br>2011 |
| :--- | :--- | :--- |
| Other\treal\testate\towned\t(OREO): |  |  |
| Residential\tproperties | $167 | $191 |
| Residential\tdevelopment\tproperties | 135 | 183 |
| Commercial\tproperties | 205 | 187 |
| Total\tOREO | 507 | 561 |
| Foreclosed\tand\tother\tassets | 33 | 35 |
| Total\tOREO\tand\tforeclosed\tassets | $540 | $596 |

Total	OREO	and	foreclosed	assets	declined	$56	million	during	2012	from	$596 million	at	December	31,	2011,	to	$540	million	at	December	31,	2012,	which represents	14%	of	total	nonperforming	assets.	The	decrease	is	primarily	due	to increased	sales	activity	and	greater	valuation	losses	offset	in	part	by	an	increase from	the	acquisition	of	RBC	Bank	(USA).	Of	the	$245	million	added	to	OREO through	the	acquisition	of	RBC	Bank	(USA),	$109	million	remained	at December	31,	2012.	As	of	December	31,	2012	and	December	31,	2011,	31% and	32%,	respectively,	of	our	OREO	and	foreclosed	assets	were	comprised	of	1- 4	family	residential	properties.	Excluded	from	OREO	at	December	31,	2012	and December	31,	2011,	respectively,	was	$380	million	and	$280	million	of residential	real	estate	that	was	acquired	by	us	upon	foreclosure	of	serviced	loans because	they	are	insured	by	the	Federal	Housing	Administration	(FHA)	or guaranteed	by	the	Department	of	Veterans	Affairs	(VA).

# Table	35:	Change	in	Nonperforming	Assets

| In	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| January\t1 | $4,156 | $5,123 |
| New\tnonperforming\tassets | 3,648 | 3,625 |
| Charge-offs\tand\tvaluation\tadjustments | (1,218) | (1,220) |
| Principal\tactivity,\tincluding\tpaydowns\tand\tpayoffs | (1,812) | (1,960) |
| Asset\tsales\tand\ttransfers\tto\tloans\theld\tfor\tsale | (610) | (613) |
| Returned\tto\tperforming\tstatus | (370) | (799) |
| December\t31 | $3,794 | $4,156 |

The	table	above	represents	nonperforming	asset	activity	for	2012	and	2011.	For 2012,	nonperforming	assets	decreased	$362	million	from	$4.2	billion	at December	31,	2011	to	$3.8	billion	primarily	due	to	decreases	in	commercial	real estate	and	commercial	nonperforming	loans.	These	decreases	were	offset,	in part,	by	higher	nonperforming	consumer	loans.	Pursuant	to	regulatory	guidance issued	in	the	third	quarter	of	2012,	nonperforming	consumer	loans,	primarily home	equity	and	residential	mortgage,	increased	$288	million	in	2012

related	to	changes	in	treatment	of	certain	loans	classified	as	TDRs	resulting	from bankruptcy	where	no	formal	reaffirmation	was	provided	by	the	borrower	and therefore	a	concession	has	been	granted	based	upon	discharge	from	personal liability.	Of	these	loans,	approximately	78%	were	current	on	their	payments	at December	31,	2012.	Additionally,	nonperforming	home	equity	loans	increased due	to	a	change	in	policy	made	in	the	first	quarter	of	2012	which	places	home equity	loans	on	nonaccrual	status	when	past	due	90	days	or	more	compared	with 180	days	under	the	prior	policy.	Approximately	85%	of	total	nonperforming loans	are	secured	by	collateral	which	is	generally	expected	to	reduce	credit losses	in	the	event	of	default.	As	of	December	31,	2012,	commercial nonperforming	loans	are	carried	at	approximately	53%	of	unpaid	principal balance,	due	to	charge-offs	recorded	to	date.	Approximately	24%	of	commercial lending	nonperforming	loans	are	contractually	current	as	to	principal	and interest.	See	Note	5	Asset	Quality	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	for	additional	nonperforming	asset information.

Purchased	impaired	loans	are	considered	performing,	even	if	contractually	past due	(or	if	we	do	not	expect	to	receive	payment	in	full	based	on	the	original contractual	terms),	as	we	are	currently	accreting	interest	income	over	the expected	life	of	the	loans.	The	accretable	yield	represents	the	excess	of	the expected	cash	flows	on	the	loans	at	the	measurement	date	over	the	carrying value.	Generally,	decreases,	other	than	interest	rate	decreases	for	variable	rate notes,	in	the	net	present	value	of	expected	cash	flows	of	individual	commercial or	pooled	purchased	impaired	loans	will	result	in	an	impairment	charge	to	the provision	for	loan	losses	in	the	period	in	which	the	change	is	deemed	probable. Generally,	increases	in	the	net	present	value	of	expected	cash	flows	of	purchased impaired	loans	will	first	result	in	a	recovery	of	previously	recorded	allowance	for loan	losses,	to	the	extent	applicable,	and	then	an	increase	to	accretable	yield	for the	remaining	life	of	the	purchased	impaired	loans.	This	accounting	treatment	for purchased	impaired	loans	significantly	reduces	nonperforming	loans	and	assets in	the	tables	above.	This	treatment	also	results	in	a	lower	ratio	of	nonperforming loans	to	total	loans	and	a	higher	ratio	of	ALLL	to	nonperforming	loans.	See	Note 6	Purchased	Loans	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8 of	this	Report	for	additional	information	on	these	loans.

# Loan	Delinquencies

We	regularly	monitor	the	level	of	loan	delinquencies	and	believe	these	levels may	be	a	key	indicator	of	loan	portfolio	asset	quality.	Measurement	of delinquency	status	is	based	on	the	contractual	terms	of	each	loan.	Loans	for which	payment	is	30	days	or	more	past	due	are	considered	delinquent.	Loan

delinquencies	exclude	loans	held	for	sale	and	purchased	impaired	loans,	but include	government	insured	or	guaranteed	loans.

Total	early	stage	loan	delinquencies,	or	accruing	loans	past	due	30	to	89	days, were	$1.4	billion	at	December	31,	2012,	a	decrease	of	$175	million	or	11%	from December	31,	2011.	The	main	driver	of	this	decrease	was	due	to	consumer lending	early	stage	delinquencies,	mainly	home	equity,	which	were	partly	offset by	an	increase	in	commercial	lending	early	stage	delinquencies	related	to commercial	and	commercial	real	estate	loans.

Accruing	loans	past	due	90	days	or	more	are	considered	late	stage	delinquencies. These	loans	are	not	included	in	nonperforming	loans	and	continue	to	accrue interest	because	they	are	well	secured	by	collateral,	are	in	the	process	of collection	and	are	reasonably	expected	to	result	in	repayment

and/or	restoration	to	current	status,	or	are	managed	in	homogenous	portfolios with	specified	charge-off	timeframes	adhering	to	regulatory	guidelines.	These loans	decreased	$622	million,	or	21%,	from	$3.0	billion	at	December	31,	2011, to	$2.4	billion	at	December	31,	2012,	mainly	due	to	improvements	in government	insured	delinquent	residential	real	estate	loans,	decline	in	delinquent home	equity	loans	due	to	the	change	in	policy	made	in	the	first	quarter	of	2012, along	with	the	decrease	in	non	government	insured	residential	real	estate	loans pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012	related	to changes	in	treatment	of	certain	loans	classified	as	TDRs	resulting	from bankruptcy.	The	following	tables	display	the	delinquency	status	of	our	loans	at December	31,	2012	and	December	31,	2011.	Additional	information	regarding accruing	loans	past	due	is	included	in	Note	5	Asset	Quality	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report.

|  |  | Amount | Percent	of	Total<br>Outstandings | Percent	of	Total<br>Outstandings |
| :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions | Dec.\t31\n2012 | Dec.\t31\n2011 | Dec.\t31\n2012 | Dec.\t31\n2011 |
| Commercial | $115 | $122 | .14% | .19% |
| Commercial\treal\testate | 100 | 96 | .54 | .59 |
| Equipment\tlease\tfinancing | 17 | 22 | .23 | .34 |
| Home\tequity | 117 | 173 | .33 | .52 |
| Residential\treal\testate |  |  |  |  |
| Non\tgovernment\tinsured | 151 | 180 | .99 | 1.24 |
| Government\tinsured | 127 | 122 | .83 | .84 |
| Credit\tcard | 34 | 38 | .79 | .96 |
| Other\tconsumer |  |  |  |  |
| Non\tgovernment\tinsured | 65 | 58 | .30 | .30 |
| Government\tinsured | 193 | 207 | .90 | 1.08 |
| Total | $919 | $1,018 | .49 | .64 |

|  |  |  | Percent	of	Total | Percent	of	Total |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Amount |  | Outstandings |
| Dollars\tin\tmillions | Dec.\t31\n2012 | Dec.\t31\n2011 | Dec.\t31\n2012 | Dec.\t31\n2011 |
| Commercial | $55 | $47 | .07% | .07% |
| Commercial\treal\testate | 57 | 35 | .31 | .22 |
| Equipment\tlease\tfinancing | 1 | 5 | .01 | .08 |
| Home\tequity | 58 | 114 | .16 | .34 |
| Residential\treal\testate |  |  |  |  |
| Non\tgovernment\tinsured | 49 | 72 | .32 | .50 |
| Government\tinsured | 97 | 104 | .64 | .72 |
| Credit\tcard | 23 | 25 | .53 | .63 |
| Other\tconsumer |  |  |  |  |
| Non\tgovernment\tinsured | 21 | 21 | .10 | .11 |
| Government\tinsured | 110 | 124 | .51 | .65 |
| Total | $471 | $547 | .25 | .34 |

# Table	38:	Accruing	Loans	Past	Due	90	Days	Or	More	(a)

|  |  | Amount | Percentage	of	Total | Outstandings |
| :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions | Dec.\t31\n2012 | Dec.\t31\n2011 | Dec.\t31\n2012 | Dec.\t31\n2011 |
| Commercial | $42 | $49 | .05% | .07% |
| Commercial\treal\testate | 15 | 6 | .08 | .04 |
| Equipment\tlease\tfinancing | 2 |  | .03 |  |
| Home\tequity\t(b) |  | 221 |  | .67 |
| Residential\treal\testate |  |  |  |  |
| Non\tgovernment\tinsured | 46 | 152 | .30 | 1.05 |
| Government\tinsured | \t 1,855 | \t 2,129 | \t12.17 | \t14.71 |
| Credit\tcard | 36 | 48 | .84 | 1.21 |
| Other\tconsumer |  |  |  |  |
| Non\tgovernment\tinsured | 18 | 23 | .08 | .12 |
| Government\tinsured | 337 | 345 | 1.57 | 1.80 |
| Total | $2,351 | $2,973 | 1.26 | 1.87 |
| (a)\nAmounts\tin\ttable\trepresent\trecorded\tinvestment. |  |  |  |  |

(a) Amounts	in	table	represent	recorded	investment.

(b) In	the	first	quarter	of	2012,	we	adopted	a	policy	stating	that	Home	equity	loans	past	due	90	days	or	more	would	be	placed	on	nonaccrual	status.	Prior	policy	required	that	these	loans	be	past	due	180	days	before being	placed	on	nonaccrual	status.

On	a	regular	basis	our	Special	Asset	Committee	closely	monitors	loans, primarily	commercial	loans,	that	are	not	included	in	the	nonperforming	or accruing	past	due	categories	and	for	which	we	are	uncertain	about	the	borrower's ability	to	comply	with	existing	repayment	terms	over	the	next	six	months.	These loans	totaled	$242	million	at	December	31,	2012	and	$438	million	at December	31,	2011.

# Home	Equity	Loan	Portfolio

Our	home	equity	loan	portfolio	totaled	$35.9	billion	as	of	December	31,	2012, or	19%	of	the	total	loan	portfolio.	Of	that	total,	$23.6	billion,	or	66%,	was outstanding	under	primarily	variable-rate	home	equity	lines	of	credit	and	$12.3 billion,	or	34%,	consisted	of	closed-end	home	equity	installment	loans. Approximately	3%	of	the	home	equity	portfolio	was	on	nonperforming	status	as of	December	31,	2012.

As	of	December	31,	2012,	we	are	in	an	originated	first	lien	position	for approximately	37%	of	the	total	portfolio	and,	where	originated	as	a	second	lien, we	currently	hold	or	service	the	first	lien	position	for	approximately	an additional	2%	of	the	portfolio.	Historically,	we	have	originated	and	sold	first	lien residential	real	estate	mortgages	which	resulted	in	a	low	percentage	of	home equity	loans	where	we	hold	the	first	lien	mortgage	position.	The	remaining	61% of	the	portfolio	was	secured	by	second	liens	where	we	do	not	hold	the	first	lien position.	For	the	majority	of	the	home	equity	portfolio	where	we	are	in,	hold	or service	the	first	lien	position,	the	credit	performance	of	this	portion	of	the portfolio	is	superior	to	the	portion	of	the	portfolio	where	we	hold	the	second	lien position	but	do	not	hold	the	first	lien.

Subsequent	to	origination,	PNC	is	not	typically	notified	when	a	senior	lien position	that	is	not	held	by	PNC	is	satisfied.	Therefore,	information	about	the current	lien	status	of	the

loans	is	limited,	for	loans	that	were	originated	in	subordinated	lien	positions where	PNC	does	not	also	hold	the	senior	lien,	to	what	can	be	obtained	from external	sources.	PNC	contracted	with	a	third-party	service	provider	to	provide updated	loan,	lien	and	collateral	data	that	is	aggregated	from	public	and	private sources.

We	track	borrower	performance	monthly,	including	obtaining	updated	FICO scores	at	least	quarterly,	original	LTVs,	updated	LTVs	semi-annually,	and	other credit	metrics	at	least	quarterly,	including	the	historical	performance	of	any mortgage	loans	regardless	of	lien	position	that	we	may	or	may	not	hold.	This information	is	used	for	internal	reporting	and	risk	management	purposes.	For internal	reporting	and	risk	management	purposes	we	also	segment	the	population into	pools	based	on	product	type	(e.g.,	home	equity	loans,	brokered	home	equity loans,	home	equity	lines	of	credit,	brokered	home	equity	lines	of	credit).	As	part of	our	overall	risk	analytics	monitoring,	we	segment	the	home	equity	portfolio based	upon	the	delinquency,	modification	status,	and	bankruptcy	status	of	these loans,	as	well	as	based	upon	the	delinquency,	modification	status,	and bankruptcy	status	of	any	mortgage	loan	with	the	same	borrower	(regardless	of whether	it	is	a	first	lien	senior	to	our	second	lien).

In	establishing	our	ALLL	for	non-impaired	loans,	we	utilize	a	delinquency	roll- rate	methodology	for	pools	of	loans.	In	accordance	with	accounting	principles, under	this	methodology,	we	establish	our	allowance	based	upon	incurred	losses and	not	lifetime	expected	losses.	The	roll-rate	methodology	estimates transition/roll	of	loan	balances	from	one	delinquency	state	(e.g.,	30-59	days	past due)	to	another	delinquency	state	(e.g.,	60-89	days	past	due),	and	ultimately charge-off.	The	roll	through	to	charge-off	is	based	on	PNC's	actual	loss experience	for	each	type	of	pool.	Since	a	pool	may

consist	of	first	and	second	liens,	the	charge-off	amounts	for	the	pool	are proportionate	to	the	composition	of	first	and	second	liens	in	the	pool.	Our experience	has	been	that	the	ratio	of	first	to	second	lien	loans	has	been	consistent over	time	and	is	appropriately	represented	in	our	pools	used	for	roll-rate calculations.

Generally,	our	variable-rate	home	equity	lines	of	credit	have	either	a	seven	or	ten year	draw	period,	followed	by	a	20	year	amortization	term.	During	the	draw period,	we	have	home	equity	lines	of	credit	where	borrowers	pay	interest	only and	home	equity	lines	of	credit	where	borrowers	pay	principal	and	interest. Based	upon	outstanding	balances	at	December	31,	2012,	the	following	table presents	the	periods	when	home	equity	lines	of	credit	draw	periods	are scheduled	to	end.

# Table	39:	Home	Equity	Lines	of	Credit	–	Draw	Period	End	Dates

| In	millions | Interest<br>Only<br>Product | Principal<br>and<br>Interest<br>Product |
| :--- | :--- | :--- |
| 2013 | $1,338 | $221 |
| 2014 | 2,048 | 475 |
| 2015 | 2,024 | 654 |
| 2016 | 1,571 | 504 |
| 2017 | 3,075 | 697 |
| 2018\tand\tthereafter | 5,497 | \t 4,825 |
| Total\t(a) | $15,553 | $7,376 |
| (a)\nIncludes\tapproximately\t$166\tmillion,\t$208\tmillion,\t$213\tmillion,\t$61\tmillion,\t$70\tmillion\tand |  |  |

We	view	home	equity	lines	of	credit	where	borrowers	are	paying	principal	and interest	under	the	draw	period	as	less	risky	than	those	where	the	borrowers	are paying	interest	only,	as	these	borrowers	have	a	demonstrated	ability	to	make some	level	of	principal	and	interest	payments.

Based	upon	outstanding	balances,	and	excluding	purchased	impaired	loans,	at December	31,	2012,	for	home	equity	lines	of	credit	for	which	the	borrower	can no	longer	draw	(e.g.,	draw	period	has	ended	or	borrowing	privileges	have	been terminated),	approximately	3.86%	were	30-89	days	past	due	and	approximately 5.96%	were	greater	than	or	equal	to	90	days	past	due.	Generally,	when	a borrower	becomes	60	days	past	due,	we	terminate	borrowing	privileges,	and those	privileges	are	not	subsequently	reinstated.	At	that	point,	we	continue	our collection/recovery	processes,	which	may	include	a	loss	mitigation	loan modification	resulting	in	a	loan	that	is	classified	as	a	TDR.

See	Note	5	Asset	Quality	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report	for	additional	information.

# LOAN	MODIFICATIONS	AND	TROUBLED	DEBT	RESTRUCTURINGS

# Consumer	Loan	Modifications

We	modify	loans	under	government	and	PNC-developed	programs	based	upon our	commitment	to	help	eligible	homeowners	and	borrowers	avoid	foreclosure, where	appropriate.	Initially,	a	borrower	is	evaluated	for	a	modification	under	a government	program.	If	a	borrower	does	not	qualify	under	a	government program,	the	borrower	is	then	evaluated	under	a	PNC	program.	Our	programs utilize	both	temporary	and	permanent	modifications	and	typically	reduce	the interest	rate,	extend	the	term	and/or	defer	principal.	Temporary	and	permanent modifications	under	programs	involving	a	change	to	loan	terms	are	generally classified	as	TDRs.	Further,	certain	payment	plans	and	trial	payment arrangements	which	do	not	include	a	contractual	change	to	loan	terms	may	be classified	as	TDRs.	Additional	detail	on	TDRs	is	discussed	below	as	well	as	in Note	5	Asset	Quality	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report.

A	temporary	modification,	with	a	term	between	three	and	60	months,	involves	a change	in	original	loan	terms	for	a	period	of	time	and	reverts	to	a	calculated	exit rate	for	the	remaining	term	of	the	loan	as	of	a	specific	date.	A	permanent modification,	with	a	term	greater	than	60	months,	is	a	modification	in	which	the terms	of	the	original	loan	are	changed.	Permanent	modifications	primarily include	the	government-created	Home	Affordable	Modification	Program (HAMP)	or	PNC-developed	HAMP-like	modification	programs.

For	consumer	loan	programs,	such	as	residential	mortgages	and	home	equity loans	and	lines,	we	will	enter	into	a	temporary	modification	when	the	borrower has	indicated	a	temporary	hardship	and	a	willingness	to	bring	current	the delinquent	loan	balance.	Examples	of	this	situation	often	include	delinquency due	to	illness	or	death	in	the	family,	or	a	loss	of	employment.	Permanent modifications	are	entered	into	when	it	is	confirmed	that	the	borrower	does	not possess	the	income	necessary	to	continue	making	loan	payments	at	the	current amount,	but	our	expectation	is	that	payments	at	lower	amounts	can	be	made. Residential	mortgage	and	home	equity	loans	and	lines	have	been	modified	with changes	in	terms	for	up	to	60	months,	although	the	majority	involve	periods	of three	to	24	months.

We	also	monitor	the	success	rates	and	delinquency	status	of	our	loan modification	programs	to	assess	their	effectiveness	in	serving	our	customers' needs	while	mitigating	credit	losses.	The	following	tables	provide	the	number	of accounts	and	unpaid	principal	balance	of	modified	consumer	real	estate	related loans	as	well	as	the	number	of	accounts	and	unpaid	principal	balance	of modified	loans	that	were	60	days	or	more	past	due	as	of	six	months,	nine months,	twelve	months	and	fifteen	months	after	the	modification	date.

# Table	40:	Bank-Owned	Consumer	Real	Estate	Related	Loan	Modifications

|  | December	31,	2012 | December	31,	2012 | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions | Number\nof\nAccounts | Unpaid\nPrincipal\nBalance | Number\nof\nAccounts | Unpaid\nPrincipal\nBalance |
| Home\tequity |  |  |  |  |
| Temporary\tModifications | 9,187 | $785 | \t13,352\t\t\t $1,215 | \t13,352\t\t\t $1,215 |
| Permanent\tModifications | 7,457 | 535 | 1,533 | 92 |
| Total\thome\tequity | \t16,644 | \t 1,320 | \t14,885 | \t 1,307 |
| Residential\tMortgages |  |  |  |  |
| Permanent\tModifications | 9,151 | \t 1,676 | 7,473 | \t 1,342 |
| Non-Prime\tMortgages |  |  |  |  |
| Permanent\tModifications | 4,449 | 629 | 4,355 | 610 |
| Residential\tConstruction |  |  |  |  |
| Permanent\tModifications | 1,735 | 609 | 1,282 | 578 |
| Total\tBank-Owned\tConsumer\tReal\tEstate\tRelated\tLoan\tModifications | \t31,979 | $4,234 | \t27,995\t\t\t $3,837 | \t27,995\t\t\t $3,837 |

# Table	41:	Bank-Owned	Consumer	Real	Estate	Related	Loan	Modifications	Re-Default	by	Vintage	(a)	(b)

|  | Six	Months |  | Nine	Months |  | Twelve	Months |  | Fifteen	Months |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Number |  | Number |  | Number |  | Number |  |  |
|  | of | %\tof | of | %\tof | of | %\tof | of | %\tof |  |
| December\t31,\t2012\nDollars\tin\tmillions | Accounts\nRe-\ndefaulted | Vintage\nRe-\ndefaulted | Accounts\nRe-\ndefaulted | Vintage\nRe-\ndefaulted | Accounts\nRe-\ndefaulted | Vintage\nRe-\ndefaulted | Accounts\nRe-\ndefaulted | Vintage\nRe-\ndefaulted | Unpaid\nPrincipal\nBalance\t(c) |
| Permanent\tModifications |  |  |  |  |  |  |  |  |  |
| Home\tEquity |  |  |  |  |  |  |  |  |  |
| Second\tQuarter\t2012 | 36 | 2.0% |  |  |  |  |  |  | $2,340 |
| First\tQuarter\t2012 | 24 | 2.2 | 42 | 3.8% |  |  |  |  | 2,519 |
| Fourth\tQuarter\t2011 | 9 | 2.0 | 18 | 3.9 | 25 | 5.4% |  |  | 2,149 |
| Third\tQuarter\t2011 | 23 | 4.0 | 31 | 5.4 | 37 | 6.5 | 49 | 8.6% | 3,514 |
| Second\tQuarter\t2011 | 20 | 5.4 | 29 | 7.8 | 38 | 10.2 | 42 | 11.3 | 2,588 |
| Residential\tMortgages |  |  |  |  |  |  |  |  |  |
| Second\tQuarter\t2012 | 192 | 18.7 |  |  |  |  |  |  | 32,842 |
| First\tQuarter\t2012 | 181 | 17.7 | 238 | 23.2 |  |  |  |  | 38,753 |
| Fourth\tQuarter\t2011 | 206 | 21.8 | 281 | 29.7 | 318 | 33.6 |  |  | 53,211 |
| Third\tQuarter\t2011 | 260 | 21.6 | 350 | 29.1 | 442 | 36.7 | 471 | 39.1 | 75,420 |
| Second\tQuarter\t2011 | 338 | 25.5 | 424 | 31.9 | 469 | 35.3 | 533 | 40.1 | 83,804 |
| Non-Prime\tMortgages |  |  |  |  |  |  |  |  |  |
| Second\tQuarter\t2012 | 39 | 20.1 |  |  |  |  |  |  | 5,014 |
| First\tQuarter\t2012 | 46 | 21.3 | 57 | 26.4 |  |  |  |  | 8,344 |
| Fourth\tQuarter\t2011 | 38 | 14.7 | 59 | 22.9 | 81 | 31.4 |  |  | 11,390 |
| Third\tQuarter\t2011 | 85 | 23.0 | 103 | 27.8 | 133 | 35.9 | 144 | 38.9 | 19,836 |
| Second\tQuarter\t2011 | 105 | 17.8 | 143 | 24.2 | 163 | 27.6 | 189 | 32.0 | 28,585 |
| Residential\tConstruction |  |  |  |  |  |  |  |  |  |
| Second\tQuarter\t2012 | 4 | 3.0 |  |  |  |  |  |  | – |
| First\tQuarter\t2012 | 2 | 1.6 | 5 | 3.9 |  |  |  |  | 1,522 |
| Fourth\tQuarter\t2011 | 5 | 5.6 | 7 | 7.8 | 13 | 14.4 |  |  | 4,598 |
| Third\tQuarter\t2011 | 2 | 1.8 | 2 | 1.8 | 6 | 5.5 | 14 | 12.7 | 2,644 |
| Second\tQuarter\t2011 | 4 | 3.9 | 4 | 3.9 | 3 | 2.9 | 5 | 4.9 | 1,915 |
| Temporary\tModifications |  |  |  |  |  |  |  |  |  |
| Home\tEquity |  |  |  |  |  |  |  |  |  |
| Second\tQuarter\t2012 | 33 | 11.0% |  |  |  |  |  |  | $3,384 |
| First\tQuarter\t2012 | 33 | 7.1 | 46 | 9.9% |  |  |  |  | 3,388 |
| Fourth\tQuarter\t2011 | 26 | 5.2 | 39 | 7.8 | 53 | 10.6% |  |  | 4,688 |
| Third\tQuarter\t2011 | 42 | 9.8 | 50 | 11.7 | 65 | 15.2 | 76 | 17.8% | 8,158 |
| Second\tQuarter\t2011 |  |  |  |  |  |  |  |  |  |
|  | 63 | 10.7 | 92 | 15.6 | 113 | 19.2 | 135 | 22.9 | 14,077 |
| (a) |  |  |  |  |  |  |  |  |  |

(a) An	account	is	considered	in	re-default	if	it	is	60	days	or	more	delinquent	after	modification.	The	data	in	this	table	represents	loan	modifications	completed	during	the	quarters	ending	June	30,	2011	through June	30,	2012	and	represents	a	vintage	look	at	all	quarterly	accounts	and	the	number	of	those	modified	accounts	(for	each	quarterly	vintage)	60	days	or	more	delinquent	at	six,	nine,	twelve,	and	fifteen	months	after modification.	Account	totals	include	active	and	inactive	accounts	that	were	delinquent	when	they	achieved	inactive	status.

(b) Vintage	refers	to	the	quarter	in	which	the	modification	occurred.

(c) Reflects	December	31,	2012	unpaid	principal	balances	of	the	re-defaulted	accounts	for	the	Second	Quarter	2012	Vintage	at	Six	Months,	for	the	First	Quarter	2012	Vintage	at	Nine	Months,	for	the	Fourth	Quarter 2011	Vintage	at	Twelve	Months,	and	for	the	Third	and	Second	Quarter	2011	at	Fifteen	Months.

In	addition	to	temporary	loan	modifications,	we	may	make	available	to	a borrower	a	payment	plan	or	a	HAMP	trial	payment	period.	Under	a	payment plan	or	a	HAMP	trial	payment	period,	there	is	no	change	to	the	loan's contractual	terms	so	the	borrower	remains	legally	responsible	for	payment	of	the loan	under	its	original	terms.	A	payment	plan	involves	the	borrower	paying	the past	due	amounts	over	a	short	period	of	time,	generally	three	months,	in	addition to	the	contractual	payment	amounts	over	that	period	upon	which	a	borrower	is

brought	current.	Due	to	the	short	term	nature	of	the	payment	plan	there	is	a minimal	impact	to	the	ALLL.

Under	a	HAMP	trial	payment	period,	we	establish	an	alternate	payment, generally	at	an	amount	less	than	the	contractual	payment	amount,	for	the borrower	during	this	short	time	period.	This	allows	a	borrower	to	demonstrate successful	payment	performance	before	permanently	restructuring	the	loan	into	a HAMP	modification.	Subsequent	to	successful

borrower	performance	under	the	trial	payment	period,	we	will	capitalize	the original	contractual	amount	past	due	and	restructure	the	loan's	contractual	terms, along	with	bringing	the	restructured	account	to	current.	As	the	borrower	is	often already	delinquent	at	the	time	of	participation	in	the	HAMP	trial	payment	period, there	is	not	a	significant	increase	in	the	ALLL.	If	the	trial	payment	period	is unsuccessful,	the	loan	will	be	evaluated	for	further	action	based	upon	our existing	policies.

Residential	conforming	and	certain	residential	construction	loans	have	been permanently	modified	under	HAMP	or,	if	they	do	not	qualify	for	a	HAMP modification,	under	PNC-developed	programs,	which	in	some	cases	may	operate similarly	to	HAMP.	These	programs	first	require	a	reduction	of	the	interest	rate followed	by	an	extension	of	term	and,	if	appropriate,	deferral	of	principal payments.	As	of	December	31,	2012	and	December	31,	2011,	4,188	accounts with	a	balance	of	$627	million	and	2,701	accounts	with	a	balance	of	$478 million,	respectively,	of	residential	real	estate	loans	have	been	modified	under HAMP	and	were	still	outstanding	on	our	balance	sheet.

We	do	not	re-modify	a	defaulted	modified	loan	except	for	subsequent	significant life	events.	A	re-modified	loan	continues	to	be	classified	as	a	TDR	for	the remainder	of	its	term	regardless	of	subsequent	payment	performance.

# Commercial	Loan	Modifications	and	Payment	Plans

Modifications	of	terms	for	large	commercial	loans	are	based	on	individual	facts and	circumstances.	Commercial	loan	modifications	may	involve	reduction	of	the interest	rate,	extension	of	the	term	of	the	loan	and/or	forgiveness	of	principal. Modified	large	commercial	loans	are	usually	already	nonperforming	prior	to modification.	We	evaluate	these	modifications	for	TDR	classification	based upon	whether	we	granted	a	concession	to	a	borrower	experiencing	financial difficulties.	Additional	detail	on	TDRs	is	discussed	below	as	well	as	in	Note	5 Asset	Quality	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of this	Report.

Beginning	in	2010,	we	established	certain	commercial	loan	modification	and payment	programs	for	small	business	loans,	Small	Business	Administration loans,	and	investment	real	estate	loans.	As	of	December	31,	2012	and December	31,	2011,	$68	million	and	$81	million,	respectively,	in	loan	balances were	covered	under	these	modification	and	payment	plan	programs.	Of	these loan	balances,	$24	million	have	been	determined	to	be	TDRs	as	of	both December	31,	2012	and	December	31,	2011.

# Troubled	Debt	Restructurings

A	TDR	is	a	loan	whose	terms	have	been	restructured	in	a	manner	that	grants	a concession	to	a	borrower	experiencing	financial	difficulties.	TDRs	typically result	from	our	loss	mitigation	activities	and	include	rate	reductions,	principal forgiveness,	postponement/reduction	of	scheduled	amortization,	extensions,	and bankruptcy	discharges	from	personal	liability,	which	are	intended	to	minimize economic	loss	and	to	avoid	foreclosure	or	repossession	of	collateral.	For	the	year ended	December	31,	2012,	$3.1	billion	of	loans	held	for	sale,	loans	accounted for	under	the	fair	value	option,	pooled	purchased	impaired	loans,	as	well	as certain	consumer	government	insured	or	guaranteed	loans	which	were	evaluated for	TDR	consideration,	are	not	classified	as	TDRs.	The	comparable	amount	for the	year	ended	December	31,	2011	was	$2.7	billion.

# Table	42:	Summary	of	Troubled	Debt	Restructurings

| In	millions | Dec.	31<br>2012 | Dec.	31<br>2011 |
| :--- | :--- | :--- |
| Consumer\tlending: |  |  |
| Real\testate-related | $2,028 | $1,492 |
| Credit\tcard\t(a) | 233 | 291 |
| Other\tconsumer | 57 | 15 |
| Total\tconsumer\tlending\t(b) | \t 2,318 | \t 1,798 |
| Total\tcommercial\tlending | 541 | 405 |
| Total\tTDRs | $2,859 | $2,203 |
| Nonperforming | $1,589 | $1,141 |
| Accruing\t(c) | \t 1,037 | 771 |
| Credit\tcard\t(a) | 233 | 291 |
| Total\tTDRs | $2,859 | $2,203 |

(a) Includes	credit	cards	and	certain	small	business	and	consumer	credit	agreements	whose	terms	have been	restructured	and	are	TDRs.	However,	since	our	policy	is	to	exempt	these	loans	from	being placed	on	nonaccrual	status	as	permitted	by	regulatory	guidance	as	generally	these	loans	are directly	charged	off	in	the	period	that	they	become	180	days	past	due,	these	loans	are	excluded	from nonperforming	loans.

(b) Pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012,	additional	troubled	debt restructurings	related	to	changes	in	treatment	of	certain	loans	of	$366	million	in	2012,	net	of	charge- offs,	resulting	from	bankruptcy	where	no	formal	reaffirmation	was	provided	by	the	borrower	and therefore	a	concession	has	been	granted	based	upon	discharge	from	personal	liability	were	added	to the	consumer	lending	population.	The	additional	TDR	population	increased	nonperforming	loans	by $288	million.	Charge-offs	have	been	taken	where	the	fair	value	less	costs	to	sell	the	collateral	was less	than	the	recorded	investment	of	the	loan	and	were	$128.1	million.	Of	these	nonperforming loans,	approximately	78%	were	current	on	their	payments	at	December	31,	2012.

(c) Accruing	loans	have	demonstrated	a	period	of	at	least	six	months	of	performance	under	the restructured	terms	and	are	excluded	from	nonperforming	loans.

Total	TDRs	increased	$656	million	or	30%	during	the	year	ended	December	31, 2012	to	$2.9	billion.	Of	this	total,	nonperforming	TDRs	totaled	$1.6	billion, which	represents	approximately	49%	of	total	nonperforming	loans.

TDRs	that	have	returned	to	performing	(accruing)	status	are	excluded	from nonperforming	loans.	These	loans	have	demonstrated	a	period	of	at	least	six months	of	consecutive	performance	under	the	restructured	terms.	These	TDRs increased	$.3	billion,	or	35%	during	2012	to	$1.0	billion	as	of	December	31, 2012.	This	increase	reflects	the	further	seasoning	and	performance	of	the	TDRs. See	Note	5	Asset	Quality	in	the	Notes	to	Consolidated	Financial	Statements	in Item	8	of	this	Report	for	additional	information.

# Table	43:	Loan	Charge-Offs	And	Recoveries

| Year	ended	December	31<br>Dollars	in	millions | Charge-<br>offs | Recoveries | Net	Charge-<br>offs | Percent	of<br>Average	Loans |
| :--- | :--- | :--- | :--- | :--- |
| 2012 |  |  |  |  |
| Commercial | $474 | $300 | $174 | .23% |
| Commercial\treal\testate | 314 | 115 | 199 | 1.10 |
| Equipment\tlease\tfinancing | 16 | 30 | (14) | (.21) |
| Home\tequity | 560 | 61 | 499 | 1.41 |
| Residential\treal\testate | 110 | (1) | 111 | .72 |
| Credit\tcard | 200 | 26 | 174 | 4.26 |
| Other\tconsumer | 196 | 50 | 146 | .72 |
| Total | $1,870 | $581 | $1,289 | .73 |
| 2011 |  |  |  |  |
| Commercial | $700 | $332 | $368 | .62% |
| Commercial\treal\testate | 464 | 105 | 359 | 2.14 |
| Equipment\tlease\tfinancing | 35 | 50 | (15) | (.24) |
| Home\tequity | 484 | 48 | 436 | 1.30 |
| Residential\treal\testate | 153 | 11 | 142 | .95 |
| Credit\tcard | 235 | 23 | 212 | 5.62 |
| Other\tconsumer | 193 | 56 | 137 | .79 |
| Total | $2,264 | $625 | $1,639 | 1.08 |

Total	net	charge-offs	are	lower	than	they	would	have	been	otherwise	due	to	the accounting	treatment	for	purchased	impaired	loans.	This	treatment	also	results	in a	lower	ratio	of	net	charge-offs	to	average	loans.	See	Note	6	Purchased	Loans	in the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for additional	information	on	net	charge-offs	related	to	these	loans.

We	maintain	an	ALLL	to	absorb	losses	from	the	loan	portfolio	and	determine this	allowance	based	on	quarterly	assessments	of	the	estimated	probable	credit losses	incurred	in	the	loan	portfolio.	We	maintain	the	ALLL	at	a	level	that	we believe	to	be	appropriate	to	absorb	estimated	probable	credit	losses	incurred	in the	loan	portfolio	as	of	the	balance	sheet	date.	The	reserve	calculation	and determination	process	is	dependent	on	the	use	of	key	assumptions.	Key	reserve assumptions	and	estimation	processes	react	to	and	are	influenced	by	observed changes	in	loan	portfolio	performance	experience,	the	financial	strength	of	the borrower,	and	economic	conditions.	Key	reserve	assumptions	are	periodically updated.	During	the

third	quarter	of	2012,	PNC	increased	the	amount	of	internally	observed	data used	in	estimating	the	key	commercial	lending	assumptions	of	PD	and	LGD.	See the	Critical	Accounting	Estimates	And	Judgments	section	of	this	Item	7	for additional	information.

We	establish	specific	allowances	for	loans	considered	impaired	using	methods prescribed	by	GAAP.	All	impaired	loans	are	subject	to	individual	analysis, except	leases	and	large	groups	of	smaller-balance	homogeneous	loans	which may	include,	but	are	not	limited	to,	credit	card,	residential	mortgage,	and consumer	installment	loans.	Specific	allowances	for	individual	loans	(including commercial	and	consumer	TDRs)	are	determined	based	on	an	analysis	of	the present	value	of	expected	future	cash	flows	from	the	loans	discounted	at	their effective	interest	rate,	observable	market	price,	or	the	fair	value	of	the	underlying collateral.

Reserves	allocated	to	non-impaired	commercial	loan	classes	are	based	on	PD and	LGD	credit	risk	ratings.

Our	commercial	pool	reserve	methodology	is	sensitive	to	changes	in	key	risk parameters	such	as	PD	and	LGD;	the	results	of	these	parameters	are	then	applied to	the	loan	balance	to	determine	the	amount	of	the	reserve.	In	general,	a	given change	in	any	of	the	major	risk	parameters	will	have	a	corresponding	change	in the	pool	reserve	allocations	for	non-impaired	commercial	loans.	To	illustrate,	if we	increase	the	pool	reserve	LGD	by	5%	for	all	categories	of	non-impaired commercial	loans	at	December	31,	2012,	then	the	aggregate	of	the	ALLL	and allowance	for	unfunded	loan	commitments	and	letters	of	credit	would	increase by	$74	million.

The	majority	of	the	commercial	portfolio	is	secured	by	collateral,	including loans	to	asset-based	lending	customers	that	continue	to	show	demonstrably lower	LGD.	Further,	the	large	investment	grade	or	equivalent	portion	of	the	loan portfolio	has	performed	well	and	has	not	been	subject	to	significant deterioration.	Additionally,	guarantees	on	loans	greater	than	$1	million	and owner	guarantees	for	small	business	loans	do	not	significantly	impact	our	ALLL.

Allocations	to	non-impaired	consumer	loan	classes	are	based	upon	a	roll-rate model	which	uses	statistical	relationships,	calculated	from	historical	data	that estimate	the	movement	of	loan	outstandings	through	the	various	stages	of delinquency	and	ultimately	charge-off.

A	portion	of	the	ALLL	related	to	qualitative	and	measurement	factors	has	been assigned	to	loan	categories.	These	factors	include,	but	are	not	limited	to,	the following:

•	Industry	concentrations	and	conditions,

•	Recent	credit	quality	trends,

•	Recent	loss	experience	in	particular	portfolios,

•	Recent	macro-economic	factors,

•	Changes	in	risk	selection	and	underwriting	standards,	and

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

Purchased	impaired	loans	are	initially	recorded	at	fair	value	and	applicable accounting	guidance	prohibits	the	carry	over	or	creation	of	valuation	allowances at	acquisition.	Because	the	initial	fair	values	of	these	loans	already	reflect	a credit	component,	additional	reserves	are	established	when	performance	is expected	to	be	worse	than	our	expectations	as	of	the	acquisition	date.	At December	31,	2012,	we	had	established	reserves	of	$1.1	billion	for	purchased impaired	loans.	In	addition,	all	loans	(purchased	impaired	and	non-impaired) acquired	in	the	RBC	Bank	(USA)	acquisition	were	recorded	at	fair	value.	No allowance	for	loan	losses	was	carried	over	and	no	allowance	was	created	at acquisition.	See	Note	6	Purchased	Loans	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	for	additional	information.

In	addition	to	the	ALLL,	we	maintain	an	allowance	for	unfunded	loan commitments	and	letters	of	credit.	We	report	this	allowance	as	a	liability	on	our Consolidated	Balance	Sheet.	We	maintain	the	allowance	for	unfunded	loan commitments	and	letters	of	credit	at	a	level	we	believe	is	appropriate	to	absorb estimated	probable	losses	on	these	unfunded	credit	facilities.	We	determine	this amount	using	estimates	of	the	probability	of	the	ultimate	funding	and	losses related	to	those	credit	exposures.	Other	than	the	estimation	of	the	probability	of funding,	this	methodology	is	similar	to	the	one	we	use	for	determining	our ALLL.

We	refer	you	to	Note	5	Asset	Quality	and	Note	7	Allowances	for	Loan	and Lease	Losses	and	Unfunded	Loan	Commitments	and	Letters	of	Credit	in	the Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	for	further information	on	key	asset	quality	indicators	that	we	use	to	evaluate	our	portfolio and	establish	the	allowances.

# Table	44:	Allowance	for	Loan	and	Lease	Losses

| Dollars	in	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| January\t1 | $4,347 | $4,887 |
| Total\tnet\tcharge-offs | (1,289) | (1,639) |
| Provision\tfor\tcredit\tlosses | 987 | 1,152 |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | (10) | (52) |
| Other | 1 | (1) |
| December\t31 | $4,036 | $4,347 |
| Net\tcharge-offs\tto\taverage\tloans\t(for\tthe\tyear\tended) | .73% | 1.08% |
| Allowance\tfor\tloan\tand\tlease\tlosses\tto\ttotal\tloans | 2.17 | 2.73 |
| Commercial\tlending\tnet\tcharge-offs | $(359) | $(712) |
| Consumer\tlending\tnet\tcharge-offs | (930) | (927) |
| Total\tnet\tcharge-offs | $(1,289) | $(1,639) |
| Net\tcharge-offs\tto\taverage\tloans\t(for\tthe\tyear\tended) |  |  |
| Commercial\tlending | .35% | .86% |
| Consumer\tlending | 1.24 | 1.33 |

As	further	described	in	the	Consolidated	Income	Statement	Review	section	of this	Item	7,	the	provision	for	credit	losses	totaled	$1.0	billion	for	2012	compared to	$1.2	billion	for	2011.	For	2012,	the	provision	for	commercial	lending	credit losses	declined	by	$39	million	or	22%	from	2011.	Similarly,	the	provision	for consumer	lending	credit	losses	decreased	$126	million	or	13%	from	2011.

At	December	31,	2012,	total	ALLL	to	total	nonperforming	loans	was	124%.	The comparable	amount	for	December	31,	2011	was	122%.	These	ratios	are	79%	and 84%,	respectively,	when	excluding	the	$1.5	billion	and	$1.4	billion,	respectively, of	allowance	at	December	31,	2012	and	December	31,	2011	allocated	to consumer	loans	and	lines	of	credit	not	secured	by	residential	real	estate	and purchased	impaired	loans.	We	have	excluded	consumer	loans	and	lines	of	credit not	secured	by	real	estate	as	they	are	charged	off	after	120	to	180	days	past	due and	not	placed	on	nonperforming	status.	Additionally,	we	have	excluded purchased	impaired	loans	as	they	are	considered	performing	regardless	of	their delinquency	status	as	interest	is	accreted	based	on	our	estimate	of	expected	cash flows	and	additional	allowance	is	recorded	when	these	cash	flows	are	below recorded	investment.	See	Table	33:	Nonperforming	Assets	By	Type	within	this Credit	Risk	Management	section	for	additional	information.

The	ALLL	balance	increases	or	decreases	across	periods	in	relation	to fluctuating	risk	factors,	including	asset	quality	trends,	charge-offs	and	changes	in aggregate	portfolio	balances.	During	2012,	improving	asset	quality	trends, including,	but	not	limited	to,	delinquency	status,	improving	economic conditions,	realization	of	previously	estimated	losses	through	charge-offs	and overall	portfolio	growth,	combined	to	result	in	reducing	the	estimated	credit losses	within	the	portfolio.	As	a	result,	the	ALLL	balance	declined	$311	million, or	7%,	to	$4.0	billion	during	the	year	ended	December	31,	2012.

See	Note	7	Allowances	for	Loan	and	Lease	Losses	and	Unfunded	Loan Commitments	and	Letters	of	Credit	and	Note	6	Purchased	Loans	in	the	Notes	To Consolidated	Financial	Statements	in	Item	8	of	this	Report	regarding	changes	in the	ALLL	and	in	the	allowance	for	unfunded	loan	commitments	and	letters	of credit.

# CREDIT	DEFAULT	SWAPS

From	a	credit	risk	management	perspective,	we	use	credit	default	swaps	(CDS) as	a	tool	to	manage	risk	concentrations	in	the	credit	portfolio.	That	risk management	could	come	from	protection	purchased	or	sold	in	the	form	of	single name	or	index	products.	When	we	buy	loss	protection	by	purchasing	a	CDS,	we pay	a	fee	to	the	seller,	or	CDS	counterparty,	in	return	for	the	right	to	receive	a payment	if	a	specified	credit	event	occurs	for	a	particular	obligor	or	reference entity.

When	we	sell	protection,	we	receive	a	CDS	premium	from	the	buyer	in	return	for PNC's	obligation	to	pay	the	buyer	if	a	specified	credit	event	occurs	for	a particular	obligor	or	reference	entity.

We	evaluate	the	counterparty	credit	worthiness	for	all	our	CDS	activities. Counterparty	creditworthiness	is	approved	based	on	a	review	of	credit	quality	in accordance	with	our	traditional	credit	quality	standards	and	credit	policies.	The credit	risk	of	our	counterparties	is	monitored	in	the	normal	course	of	business.	In addition,	all	counterparty	credit	lines	are	subject	to	collateral	thresholds	and exposures	above	these	thresholds	are	secured.

CDSs	are	included	in	the	"Derivatives	not	designated	as	hedging	instruments under	GAAP"	section	of	Table	54:	Financial	Derivatives	Summary	in	the Financial	Derivatives	section	of	this	Risk	Management	discussion.

# Operational	Risk	Management

Operational	risk	is	the	risk	of	loss	resulting	from	inadequate	or	failed	internal processes	or	systems,	human	factors,	or	external	events.	This	includes	losses	that may	arise	as	a	result	of	non-compliance	with	laws	or	regulations,	failure	to	fulfill fiduciary	responsibilities,	as	well	as	litigation	or	other	legal	actions.	Operational risk	may	occur	in	any	of	our	business	activities	and	manifests	itself	in	various ways,	including	but	not	limited	to:

•	Transaction	processing	errors,

•	Unauthorized	transactions	and	fraud	by	employees	or	third	parties, •	Material	disruption	in	business	activities,

•	System	breaches	and	misuse	of	sensitive	information,

•	Regulatory	or	governmental	actions,	fines	or	penalties,	and •	Significant	legal	expenses,	judgments	or	settlements.

PNC's	Operational	Risk	Management	is	inclusive	of	Technology	Risk Management,	Compliance,	and	Business	Resiliency.	Operational	Risk Management	focuses	on	balancing	business	needs,	regulatory	expectations	and risk	management	priorities	through	an	adaptive	and	proactive	program	that	is designed	to	provide	a	strong	governance	model,	sound	and	consistent	risk management	processes	and	transparent	operational	risk	reporting	across	the enterprise.

The	PNC	Board	determines	the	strategic	approach	to	operational	risk	via establishment	of	the	operational	risk	appetite	and	appropriate	risk	management structure.	This	includes	establishment	of	risk	metrics	and	limits	and	a	reporting structure	to	identify,	understand	and	manage	operational	risks.

Executive	Management	has	responsibility	for	operational	risk	management.	The executive	management	team	is	responsible	for	monitoring	risk	issues	through management	reporting	and	a	governance	structure	of	risk	committees	and	sub- committees.

Within	Risk	Management,	Operational	Risk	Management	functions	are responsible	for	developing	and	maintaining	the	policies,	methodologies,	tools, and	technology	utilized	across	the	enterprise	to	identify,	assess,	monitor,	and report	operational	risks,	including	compliance	risk.	A	key	function	of Operational	Risk	Management	is	to	help	ensure	business	units'	alignment	with the	Operational	Risk	Management	framework	and	to	validate	results	and	overall program	effectiveness.

Business	Unit	management	is	responsible	for	the	day-to-day	management	of operational	risks	inherent	in	the	products,	services,	and	activities	for	which	they are	responsible.	Business	Unit	management	is	also	responsible	for	adhering	to PNC's	enterprise-wide	operational	risk	management	policies

and	procedures;	including	regularly	identifying,	measuring,	and	monitoring operational	risks	in	their	respective	area,	as	well	as	capturing,	analyzing	and reporting	operational	loss	events.

Management	of	operational	risk	is	based	upon	a	comprehensive	framework designed	to	enable	the	company	to	determine	the	enterprise	and	individual business	unit's	operational	risk	profile	in	comparison	to	the	established	risk appetite	and	identify	operational	risks	that	may	require	further	mitigation.	This framework	is	established	around	a	set	of	enterprise-wide	policies	and	a	system	of internal	controls	that	are	designed	to	manage	risk	and	to	provide	management with	timely	and	accurate	information	about	the	operations	of	PNC.	This framework	employs	a	number	of	techniques	to	manage	operational	risk, including:

•	Risk	and	Control	Self-Assessments	(RCSAs)	are	performed	at	least annually	across	PNC's	businesses,	processes,	systems	and	products. RCSA	methodology	is	a	standard	process	for	management	to	self assess	operational	risks,	evaluate	control	effectiveness,	and	determine if	risk	exposure	is	within	established	tolerances, •	Scenario	Analysis	is	leveraged	to	proactively	evaluate	operational	loss events	with	the	potential	for	severe	business,	financial,	operational	or regulatory	impact	on	the	company	or	a	major	business	unit.	This methodology	leverages	standard	processes	and	tools	to	evaluate	a	wide range	of	business	and	operational	risks	encompassing	both	external and	internal	events	relevant	to	the	company.	Based	upon	scenario analysis	conclusions,	management	may	implement	additional	controls or	risk	management	activities	to	reduce	exposure	to	an	acceptable level,

•	A	Key	Risk	Indicator	(KRI)	framework	allows	management	to	assess actual	operational	risk	results	compared	to	expectations	and	thresholds, as	well	as	proactively	identify	unexpected	shifts	in	operational	risk exposure	or	control	effectiveness.	Enterprise-level	KRIs	are	designed to	monitor	exposure	across	the	different	inherent	operational	risk types,	including	compliance	risk.	Business-specific	KRIs	are established	in	support	of	the	individual	risk	and	control	self assessments,	and

•	Operational	loss	events	across	the	enterprise	are	continuously	captured and	maintained	in	a	central	repository.	This	information	is	analyzed and	used	to	help	determine	the	root	causes	of	these	events	and	to identify	trends	that	could	indicate	changes	in	the	company's	risk exposure	or	control	effectiveness.	PNC	utilizes	a	number	of	sources	to identify	external	loss	events	occurring	across	the	financial	services industry.	These	events	are	evaluated	to	determine	whether	PNC	is exposed	to	similar	events,	and	if	so,	whether	appropriate	controls	are	in place.

We	continue	to	enhance	our	methodology	to	estimate	capital	requirements	for Operational	Risk	using	a	proprietary	version	of	an	Advanced	Measurement Approach	(AMA).	Under	the	AMA	approach,	the	results	of	the	program elements	described	above	are	key	inputs	directly	incorporated	into	the	capital calculation	methodology.

Risk	professionals	from	Operational	Risk	Management,	Technology	Risk Management,	Business	Resiliency,	Compliance,	and	Legal	work	closely	with business	areas	to	evaluate	risks	and	help	ensure	that	appropriate	controls	are established	prior	to	the	introduction	of	new	or	enhanced	products,	services,	and technologies.	These	risk	professionals	also	consult	with	business	areas	in	the design	and	implementation	of	mitigation	strategies	to	address	risks	and	issues identified	through	ongoing	assessment	and	monitoring	activities.

PNC's	technology	risk	management	program	is	aligned	with	the	operational	risk framework.	Management	of	technology	risk	is	embedded	into	the	culture	and decision	making	processes	of	PNC	through	an	information	and	technology	risk management	framework	designed	to	help	ensure	secure,	sound,	and	compliant	IT systems	and	infrastructure	in	support	of	business	strategies	and	goals.	PNC's Technology	Risk	Management	(TRM)	function	supports	enterprise	management of	technology	risk	by	independently	assessing	technology	and	information security	risks,	and	by	serving	in	an	oversight	role	by	measuring,	monitoring,	and challenging	enterprise	technology	capabilities.

Our	business	resiliency	program	manages	the	organization's	capabilities	to provide	services	in	the	case	of	an	event	that	results	in	material	disruption	of business	activities.	Prioritization	of	investments	in	people,	processes,	technology and	facilities	is	based	on	different	types	of	events,	business	risk	and	criticality.	A testing	program	validates	our	resiliency	capabilities	on	an	ongoing	basis,	and	an integrated	governance	model	is	designed	to	help	assure	appropriate	management reporting.

Enterprise	Compliance	is	responsible	for	coordinating	the	compliance	risk component	of	PNC's	Operational	Risk	framework.	Compliance	issues	are identified	and	tracked	through	enterprise-wide	monitoring	and	tracking programs.	Key	compliance	risk	issues	are	escalated	through	a	comprehensive risk	reporting	process	at	both	a	business	and	enterprise	level	and	incorporated,	as appropriate,	into	the	development	and	assessment	of	the	firm's	operational	risk profile.	The	Compliance,	Conflicts	&	Ethics	Policy	Committee,	chaired	by	the Chief	Compliance	Officer,	provides	oversight	for	compliance,	conflicts	and ethics	programs	and	strategies	across	PNC.	This	committee	also	oversees	the compliance	processes	related	to	fiduciary	and	investment	risk.	In	order	to	help understand	and	where	appropriate	proactively	address	emerging	regulatory issues,	Enterprise	Compliance	communicates	regularly	with	various

regulators	with	supervisory	or	regulatory	responsibilities	with	respect	to	PNC,	its subsidiaries	or	businesses	and	participates	in	forums	focused	on	regulatory	and compliance	matters	in	the	financial	services	industry.

PNC	uses	insurance	where	appropriate	to	help	mitigate	the	effects	of	operational risk	events.	In	2012,	PNC	implemented	a	Network	Security	&	Privacy	Liability program	to	address	associated	risks.	The	purchase	of	insurance	protects	against accidental	losses,	which,	in	the	aggregate,	may	affect	personnel,	financial objectives,	or	our	ability	to	meet	responsibilities	to	various	stakeholder	groups. While	certain	corporate	risks	are	retained	through	a	subsidiary,	various	insurers provide	the	balance	of	coverage.	Uncertainty,	related	to	insurer	coverage determinations,	may	result	in	reduced	benefit	received	from	insurance mitigation.	Oversight	of	insurance	purchased	is	provided	by	Risk	committees within	the	governance	structure.

On	a	quarterly	basis,	an	enterprise	operational	risk	report	is	developed	to	report key	operational	risks	to	senior	management	and	the	Board	of	Directors.	The report	encompasses	key	operational	risk	management	conclusions,	including	the overall	operational	risk	level,	risk	management	effectiveness	and	outlook, grounded	in	quantitative	measures	and	qualitative	factors.	Key	enterprise operational	risks	are	also	included	in	the	enterprise	risk	report.	In	addition, operational	risk	is	an	integrated	part	of	the	quarterly	business-specific	risk reports.

# Model	Risk	Management

PNC	relies	on	quantitative	models	to	measure	risks	and	to	estimate	certain financial	values.	Models	may	be	used	in	such	processes	as	determining	the pricing	of	various	products,	grading	and	granting	loans,	measuring	interest	rate risks	and	other	market	risks,	predicting	losses,	and	assessing	capital	adequacy, as	well	as	to	estimate	the	value	of	financial	instruments	and	balance	sheet	items. There	are	risks	involved	in	the	use	of	models	as	they	have	the	potential	to provide	inaccurate	output	or	results,	could	be	used	for	purposes	other	than	those for	which	they	have	been	designed,	or	may	be	operated	in	an	uncontrolled environment	where	unauthorized	changes	can	take	place	and	where	other	control risks	exist.	Model	Risk	Management	is	responsible	for	policies	and	procedures describing	how	model	risk	is	evaluated	and	managed,	and	the	application	of	the governance	process	to	implement	these	practices	throughout	the	enterprise.	The Model	Risk	Management	Committee,	a	subcommittee	of	the	Enterprise	Risk Management	Committee,	oversees	all	aspects	of	model	risk,	including	PNC's compliance	with	regulatory	requirements,	and	approves	exceptions	to	policy when	appropriate.

To	better	manage	our	business,	our	practices	around	the	use	of	models,	and	to comply	with	regulatory	guidance	and	requirements,	we	have	in	place	policies and	procedures	that	define	our	governance	processes	for	assessing	and controlling

model	risk.	These	processes	focus	on	identifying,	reporting,	and	remediating	any problems	with	the	soundness,	accuracy,	improper	use,	or	operating	environment of	our	models.	We	recognize	that	models	must	be	monitored	over	time	to	ensure their	continued	accuracy	and	functioning,	and	our	policies	also	address	the	type and	frequency	of	monitoring	that	is	appropriate	according	to	the	importance	of each	model.

There	are	a	number	of	practices	we	undertake	to	identify	and	control	model	risk. A	primary	consideration	is	that	models	be	well	understood	by	those	who	use them	as	well	as	by	other	parties.	Our	policies	require	detailed	written	model documentation	for	significant	models	to	assist	in	making	their	use	transparent and	understood	by	users,	independent	reviewers,	and	regulatory	and	auditing bodies.	The	documentation	must	include	details	on	the	data	and	methods	used	to develop	each	model,	assumptions	utilized	within	the	model,	and	a	description	of model	limitations	and	circumstances	in	which	a	model	should	not	be	relied upon.

Our	modeling	methods	and	data	are	reviewed	by	independent	model	reviewers not	involved	in	the	development	of	the	model	to	identify	possible	errors	or	areas where	the	soundness	of	the	model	could	be	in	question.	Issues	identified	by	the independent	reviewer	are	tracked	and	reported	using	our	existing	governance structure	until	the	issue	has	been	fully	remediated.	It	is	important	that	models operate	in	a	controlled	environment	where	access	to	code	or	the	ability	to	make changes	is	limited	to	those	so	authorized.	Additionally,	proper	back-up	and recovery	mechanisms	are	needed	for	the	ongoing	functioning	of	models.	Our	use of	independent	model	control	reviewers	aids	in	the	evaluation	of	the	existing control	mechanisms	to	help	ensure	that	controls	are	appropriate	and	are functioning	properly.

# Liquidity	Risk	Management

Liquidity	risk	has	two	fundamental	components.	The	first	is	potential	loss assuming	we	were	unable	to	meet	our	funding	requirements	at	a	reasonable	cost. The	second	is	the	potential	inability	to	operate	our	businesses	because	adequate contingent	liquidity	is	not	available	in	a	stressed	environment.	We	manage liquidity	risk	at	the	consolidated	company	level	(bank,	parent	company,	and nonbank	subsidiaries	combined)	to	help	ensure	that	we	can	obtain	cost-effective funding	to	meet	current	and	future	obligations	under	both	normal	"business	as usual"	and	stressful	circumstances,	and	to	help	ensure	that	we	maintain	an appropriate	level	of	contingent	liquidity.

Spot	and	forward	funding	gap	analyses	are	used	to	measure	and	monitor consolidated	liquidity	risk.	Funding	gaps	represent	the	difference	in	projected sources	of	liquidity	available	to	offset	projected	uses.	We	calculate	funding	gaps for	the	overnight,	thirty-day,	ninety-day,	one	hundred	eighty-day	and	one-year time	intervals.	Management	also	monitors	liquidity	through	a	series	of	early warning	indicators	that	may	indicate	a	potential	market,	or	PNC-specific, liquidity	stress

event.	Finally,	management	performs	a	set	of	liquidity	stress	tests	and	maintains a	contingency	funding	plan	to	address	a	potential	liquidity	crisis.	In	the	most severe	liquidity	stress	simulation,	we	assume	that	PNC's	liquidity	position	is under	pressure,	while	the	market	in	general	is	under	systemic	pressure.	The simulation	considers,	among	other	things,	the	impact	of	restricted	access	to	both secured	and	unsecured	external	sources	of	funding,	accelerated	run-off	of customer	deposits,	valuation	pressure	on	assets,	and	heavy	demand	to	fund contingent	obligations.	Risk	limits	are	established	within	our	Liquidity	Risk Policy.	Management's	Asset	and	Liability	Committee	regularly	reviews compliance	with	the	established	limits.

Parent	company	liquidity	guidelines	are	designed	to	help	ensure	that	sufficient liquidity	is	available	to	meet	our	parent	company	obligations	over	the succeeding	24-month	period.	Risk	limits	for	parent	company	liquidity	are established	within	our	Enterprise	Capital	and	Liquidity	Management	Policy.	The Board	of	Directors'	Risk	Committee	regularly	reviews	compliance	with	the established	limits.

# Bank	Level	Liquidity	–	Uses

Obligations	requiring	the	use	of	liquidity	can	generally	be	characterized	as	either contractual	or	discretionary.	At	the	bank	level,	primary	contractual	obligations include	funding	loan	commitments,	satisfying	deposit	withdrawal	requests	and maturities	and	debt	service	related	to	bank	borrowings.	As	of	December	31, 2012,	there	were	approximately	$17.2	billion	of	bank	borrowings	with contractual	maturities	of	less	than	one	year.	We	also	maintain	adequate	bank liquidity	to	meet	future	potential	loan	demand	and	provide	for	other	business needs,	as	necessary.	See	the	Bank	Level	Liquidity	–	Sources	section	below.

# Bank	Level	Liquidity	–	Sources

Our	largest	source	of	bank	liquidity	on	a	consolidated	basis	is	the	deposit	base that	comes	from	our	retail	and	commercial	businesses.	Total	deposits	increased to	$213.1	billion	at	December	31,	2012	from	$188.0	billion	at	December	31, 2011,	primarily	due	to	the	RBC	Bank	(USA)	acquisition.	Liquid	assets	and unused	borrowing	capacity	from	a	number	of	sources	are	also	available	to maintain	our	liquidity	position.	Borrowed	funds	come	from	a	diverse	mix	of short	and	long-term	funding	sources.

At	December	31,	2012,	our	liquid	assets	consisted	of	short-term	investments (Federal	funds	sold,	resale	agreements,	trading	securities,	and	interest-earning deposits	with	banks)	totaling	$7.5	billion	and	securities	available	for	sale	totaling $51.1	billion.	Of	our	total	liquid	assets	of	$58.6	billion,	we	had	$25.6	billion pledged	as	collateral	for	borrowings,	trust,	and	other	commitments.	The	level	of liquid	assets	fluctuates	over	time	based	on	many	factors,	including	market conditions,	loan	and	deposit	growth	and	active	balance	sheet	management, including	securities	purchases	to	manage	duration.

In	addition	to	the	customer	deposit	base,	which	has	historically	provided	the single	largest	source	of	relatively	stable	and	low-cost	funding,	the	bank	also obtains	liquidity	through	the	issuance	of	traditional	forms	of	funding	including long-term	debt	(senior	notes	and	subordinated	debt	and	FHLB	advances)	and short-term	borrowings	(Federal	funds	purchased,	securities	sold	under repurchase	agreements,	commercial	paper	issuances,	and	other	short-term borrowings).

PNC	Bank,	N.A.	is	authorized	by	its	board	to	offer	up	to	$20	billion	in	senior and	subordinated	unsecured	debt	obligations	with	maturities	of	more	than	nine months.	Through	December	31,	2012,	PNC	Bank,	N.A.	had	issued	$10.4	billion of	debt	under	this	program,	including	the	following	during	2012: •	$100	million	of	senior	bank	notes	issued	March	8,	2012	and	due April	8,	2015.	Interest	is	paid	semi-annually	at	a	fixed	rate	of	1.07%, •	$1.0	billion	of	senior	extendible	floating	rate	bank	notes	issued June	20,	2012	with	an	initial	maturity	date	of	July	20,	2013,	subject	to the	holder's	monthly	option	to	extend,	and	a	final	maturity	date	of June	20,	2014.	Interest	is	paid	at	the	3-month	LIBOR	rate,	reset quarterly,	plus	a	spread	of	22.5	basis	points,	which	spread	is	subject	to four	potential	one	basis	point	increases	in	the	event	of	certain extensions	of	maturity	by	the	holder,

•	$900	million	of	senior	extendible	floating	rate	bank	notes	issued	to	an affiliate	on	June	27,	2012	with	an	initial	maturity	date	of	July	27,	2013,

subject	to	the	holder's	monthly	option	to	extend,	and	a	final	maturity date	of	April	27,	2014.	Interest	is	paid	at	the	3-month	LIBOR	rate, reset	quarterly,	plus	a	spread	of	22.5	basis	points,

•	$500	million	of	senior	extendible	floating	rate	bank	notes	issued	to	an affiliate	on	June	27,	2012	with	an	initial	maturity	date	of	July	27,	2013, subject	to	the	holder's	monthly	option	to	extend,	and	a	final	maturity date	of	January	27,	2014.	Interest	is	paid	at	the	3-month	LIBOR	rate, reset	quarterly,	plus	a	spread	of	22.5	basis	points,	and •	$1.0	billion	of	subordinated	notes	issued	October	22,	2012	and	due November	1,	2022.	Interest	is	paid	semi-annually	at	a	fixed	rate	of 2.70%.

See	Capital	and	Liquidity	Actions	in	the	Executive	Summary	section	of	this Item	7	for	additional	information	regarding	our	2013	issuances	under	this program,	which	totaled	$1.8	billion.

Total	senior	and	subordinated	debt	increased	to	$7.6	billion	at	December	31, 2012	from	$4.1	billion	at	December	31,	2011	due	to	issuances.

PNC	Bank,	N.A.	is	a	member	of	the	FHLB-Pittsburgh	and	as	such	has	access	to advances	from	FHLB-Pittsburgh	secured	generally	by	residential	mortgage	and other	mortgage-related

loans.	At	December	31,	2012,	our	unused	secured	borrowing	capacity	was	$10.5 billion	with	FHLB-Pittsburgh.	Total	FHLB	borrowings	increased	to	$9.4	billion at	December	31,	2012	from	$7.0	billion	at	December	31,	2011	due	to	$13.5 billion	in	new	borrowings	partially	offset	by	$11.0	billion	in	maturities.

PNC	Bank,	N.A.	has	the	ability	to	offer	up	to	$10.0	billion	of	its	commercial paper	to	provide	additional	liquidity.	As	of	December	31,	2012,	there	was	$2.4 billion	outstanding	under	this	program.	Commercial	paper	on	our	Consolidated Balance	Sheet	also	includes	$6.1	billion	of	commercial	paper	issued	by	Market Street	Funding	LLC,	a	consolidated	VIE.

PNC	Bank,	N.A.	can	also	borrow	from	the	Federal	Reserve	Bank	of	Cleveland's (Federal	Reserve	Bank)	discount	window	to	meet	short-term	liquidity requirements.	The	Federal	Reserve	Bank,	however,	is	not	viewed	as	the	primary means	of	funding	our	routine	business	activities,	but	rather	as	a	potential	source of	liquidity	in	a	stressed	environment	or	during	a	market	disruption.	These potential	borrowings	are	secured	by	securities	and	commercial	loans.	At December	31,	2012,	our	unused	secured	borrowing	capacity	was	$28.6	billion with	the	Federal	Reserve	Bank.

# Parent	Company	Liquidity	–	Uses

Obligations	requiring	the	use	of	liquidity	can	generally	be	characterized	as	either contractual	or	discretionary.	The	parent	company's	contractual	obligations consist	primarily	of	debt	service	related	to	parent	company	borrowings	and funding	non-bank	affiliates.	As	of	December	31,	2012,	there	were	approximately $300	million	of	parent	company	borrowings	with	maturities	of	less	than	one year.

Additionally,	the	parent	company	maintains	adequate	liquidity	to	fund discretionary	activities	such	as	paying	dividends	to	PNC	shareholders,	share repurchases,	and	acquisitions.	See	the	Parent	Company	Liquidity	–	Sources section	below.	In	March	2012,	we	used	approximately	$3.6	billion	of	parent company	cash	to	acquire	both	RBC	Bank	(USA)	and	a	credit	card	portfolio	from RBC	Bank	(Georgia),	National	Association.	Additionally,	in	June	2012,	we	used $1.4	billion	of	parent	company	cash	to	purchase	senior	extendible	floating	rate bank	notes	issued	by	PNC	Bank,	N.A	noted	above.

See	Supervision	and	Regulation	in	Item	1	of	this	Report	for	information regarding	the	Federal	Reserve's	CCAR	process,	including	its	impact	on	our ability	to	take	certain	capital	actions,	including	plans	to	pay	or	increase	common stock	dividends,	reinstate	or	increase	common	stock	repurchase	programs,	or redeem	preferred	stock	or	other	regulatory	capital	instruments.

See	Capital	and	Liquidity	Actions	in	the	Executive	Summary	section	of	this Item	7	for	additional	information	regarding	our	2012	and	2013	capital	activities.

# Parent	Company	Liquidity	–	Sources

The	principal	source	of	parent	company	liquidity	is	the	dividends	it	receives from	its	subsidiary	bank,	which	may	be	impacted	by	the	following: •	Bank-level	capital	needs, •	Laws	and	regulations, •	Corporate	policies,

•	Contractual	restrictions,	and •	Other	factors.

The	amount	available	for	dividend	payments	by	PNC	Bank,	N.A.	to	the	parent company	without	prior	regulatory	approval	was	approximately	$1.5	billion	at December	31,	2012.	There	are	statutory	and	regulatory	limitations	on	the	ability of	national	banks	to	pay	dividends	or	make	other	capital	distributions	or	to extend	credit	to	the	parent	company	or	its	non-bank	subsidiaries.	See	Note	22 Regulatory	Matters	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8 of	this	Report	for	a	further	discussion	of	these	limitations.	Dividends	may	also be	impacted	by	the	bank's	capital	needs	and	by	contractual	restrictions.	We provide	additional	information	on	certain	contractual	restrictions	under	the "Trust	Preferred	Securities"	section	of	the	Off-Balance	Sheet	Arrangements	And Variable	Interest	Entities	section	of	this	Item	7	and	in	Note	14	Capital	Securities of	Subsidiary	Trusts	and	Perpetual	Trust	Securities	in	the	Notes	To	Consolidated Financial	Statements	in	Item	8	of	this	Report.

In	addition	to	dividends	from	PNC	Bank,	N.A.,	other	sources	of	parent	company liquidity	include	cash	and	investments,	as	well	as	dividends	and	loan	repayments from	other	subsidiaries	and	dividends	or	distributions	from	equity	investments. As	of	December	31,	2012,	the	parent	company	had	approximately	$3.4	billion	in funds	available	from	its	cash	and	investments.

We	can	also	generate	liquidity	for	the	parent	company	and	PNC's	non-bank subsidiaries	through	the	issuance	of	debt	securities	and	equity	securities, including	certain	capital	securities,	in	public	or	private	markets	and	commercial paper.	We	have	an	effective	shelf	registration	statement	pursuant	to	which	we can	issue	additional	debt,	equity	and	other	capital	instruments.	Total	senior	and subordinated	debt	and	hybrid	capital	instruments	decreased	to	$11.5	billion	at December	31,	2012	from	$16.0	billion	at	December	31,	2011	primarily	due	to $4.0	billion	in	maturities	and	$2.3	billion	in	redemptions	partially	offset	by	$1.5 billion	in	new	borrowings.

During	2012	we	issued	the	following	securities	under	our	shelf	registration statement:

2022.	Interest	is	paid	semi-annually	at	a	fixed	rate	of	3.30%.	The offering	resulted	in	gross	proceeds	to	us,	before	offering	related expenses,	of	$990	million,

•	Sixty	million	depositary	shares,	each	representing	a	1/4,000 	interest	in a	share	of	our	Fixed-to-Floating	Rate	Non-Cumulative	Perpetual Preferred	Stock, th

Series	P,	issued	April	24,	2012,	resulting	in	gross	proceeds	to	us, before	commissions	and	expenses,	of	$1.5	billion, •	Eighteen	million	depositary	shares,	each	representing	a	1/4,000 interest	in	a	share	of	our	5.375%	Non-Cumulative	Perpetual	Preferred Stock,	Series	Q,	issued	September	21,	2012,	resulting	in	gross proceeds	to	us,	before	commissions	and	expenses,	of	$450	million.	On October	9,	2012,	pursuant	to	the	underwriting	agreement	for	this offering,	we	issued	an	additional	1.2	million	depositary	shares	in satisfaction	of	an	option	granted	to	the	underwriters	in	the	agreement	to cover	over-allotments,	resulting	in	additional	gross	proceeds	of	$30 million,	and th

•	On	November	9,	2012,	PNC	issued	$500.1	million	of	its	parent company	Senior	Notes	due	November	9,	2022	(the	"Senior	Notes"), which	were	sold	in	a	secondary	public	offering	made	in	connection with	the	remarketing	of	PNC's	Remarketable	8.729%	Junior Subordinated	Notes	due	2043	(the	"Subordinated	Notes")	owned	by the	National	City	Preferred	Capital	Trust	I	(the	"Trust").	In	the remarketing,	the	Trust	sold	the	Subordinated	Notes	and	PNC exchanged	with	the	purchasers	of	the	Subordinated	Notes	the	Senior Notes.	The	Senior	Notes	were	then	sold	by	the	purchasers	in	the secondary	public	offering.	The	Senior	Notes	bore	interest	at	8.729% from	and	including	June	10,	2012,	to	but	excluding	November	9,	2012, and	thereafter	bear	interest	at	2.854%	per	annum.	The	proceeds	of	the remarketing	were	used	by	the	Trust	to	purchase	$500.1	million	of PNC's	Non-Cumulative	Perpetual	Preferred	Stock,	Series	M	(the "Preferred	Stock")	on	December	10,	2012.	PNC	redeemed	all	of	the Preferred	Stock	from	the	Trust	immediately	upon	its	issuance,	and	the Trust	in	turn	redeemed	all	$500.0	million	outstanding	of	its	12% Fixed-to-Floating	Rate	Normal	APEX	and	$.1	million	Common Securities	of	the	Trust.	After	the	closing	of	these	transactions, including	the	redemption	of	the	Normal	APEX,	only	the	Senior	Notes due	November	9,	2022	remain	outstanding.

The	parent	company,	through	its	subsidiary	PNC	Funding	Corp,	has	the	ability to	offer	up	to	$3.0	billion	of	commercial	paper	to	provide	additional	liquidity.	As of	December	31,	2012,	there	were	no	issuances	outstanding	under	this	program.

Note	19	Equity	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of this	Report	describes	our	February	2010	redemption	of	all	75,792	shares	of	our Fixed	Rate	Cumulative	Perpetual	Preferred	Shares,	Series	N	(Series	N	Preferred Stock)	that	had	been	issued	on	December	31,	2008	to	the	US	Treasury	under	the Troubled	Asset	Relief	Program	(TARP)	Capital	Purchase	Program,	the acceleration	of	the	accretion	of	the	remaining	issuance	discount	on	the	Series	N Preferred	Stock	in	the	first	quarter	of	2010	(and	a	corresponding	reduction	in retained	earnings	of	$250	million

in	the	first	quarter	of	2010),	and	the	exchange	by	the	US	Treasury	of	the	TARP warrant	issued	to	it	on	December	31,	2008	into	warrants,	each	to	purchase	one share	of	PNC	common	stock	at	an	exercise	price	of	$67.33,	sold	by	the	US Treasury	in	a	secondary	public	offering	in	May	2010.	These	common	stock warrants	will	expire	December	31,	2018.

# Status	of	Credit	Ratings

The	cost	and	availability	of	short-term	and	long-term	funding,	as	well	as collateral	requirements	for	certain	derivative	instruments,	is	influenced	by	PNC's debt	ratings.

In	general,	rating	agencies	base	their	ratings	on	many	quantitative	and qualitative	factors,	including	capital	adequacy,	liquidity,	asset	quality,	business mix,	level	and	quality	of	earnings,	and	the	current	legislative	and	regulatory environment,	including	implied	government	support.	In	addition,	rating	agencies themselves	have	been	subject	to	scrutiny	arising	from	the	financial	crisis	and could	make	or	be	required	to	make	substantial	changes	to	their	ratings	policies and	practices,	particularly	in	response	to	legislative	and	regulatory	changes, including	as	a	result	of	provisions	in	Dodd-Frank.	Potential	changes	in	the legislative	and

regulatory	environment	and	the	timing	of	those	changes	could	impact	our ratings,	which	as	noted	above,	could	impact	our	liquidity	and	financial condition.	A	decrease,	or	potential	decrease,	in	credit	ratings	could	impact	access to	the	capital	markets	and/or	increase	the	cost	of	debt,	and	thereby	adversely affect	liquidity	and	financial	condition.

| Senior	debt | A3 | A- | A+ |
| :--- | :--- | :--- | :--- |
| Subordinated\tdebt | Baa1 | BBB+ | A |
| Preferred\tstock | Baa3 | BBB | \tBBB- |
| PNC\tBank,\tN.A. |  |  |  |
| Subordinated\tdebt | A3 | A- | A |
| Long-term\tdeposits | A2 | A | AA- |
| Short-term\tdeposits | P-1 | A-1 | F1+ |

# Commitments

The	following	tables	set	forth	contractual	obligations	and	various	other	commitments	as	of	December	31,	2012	representing	required	and	potential	cash	outflows.

# Table	46:	Contractual	Obligations

|  |  |  | Payment	Due	By	Period | Payment	Due	By	Period |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012\t–\tin\tmillions | Total | Less\tthan\none\tyear | One\tto\nthree\nyears | Four\tto\nfive\nyears | After\tfive\nyears |
| Remaining\tcontractual\tmaturities\tof\ttime\tdeposits\t(a) | \t\t $26,091 | $18,155 | $4,223 | $1,598 | $2,115 |
| Borrowed\tfunds\t(a)\t(b) | \t 40,907 | \t 21,647 | 6,501 | \t 5,005 | 7,754 |
| Minimum\tannual\trentals\ton\tnoncancellable\tleases | 2,790 | 397 | 668 | 472 | 1,253 |
| Nonqualified\tpension\tand\tpostretirement\tbenefits | 581 | 66 | 133 | 121 | 261 |
| Purchase\tobligations\t(c) | 683 | 395 | 201 | 56 | 31 |
| Total\tcontractual\tcash\tobligations | \t\t $71,052 | $40,660 | $11,726 | $7,252 | $11,414 |
| (a)\nIncludes\tpurchase\taccounting\tadjustments. |  |  |  |  |  |

(a) Includes	purchase	accounting	adjustments.

(b) Includes	basis	adjustment	relating	to	accounting	hedges.

(c) Includes	purchase	obligations	for	goods	and	services	covered	by	noncancellable	contracts	and	contracts	including	cancellation	fees.

We	had	unrecognized	tax	benefits	of	$176	million	at	December	31,	2012.	This liability	for	unrecognized	tax	benefits	represents	an	estimate	of	tax	positions	that we	have	taken	in	our	tax	returns	which	ultimately	may	not	be	sustained	upon examination	by	taxing	authorities.	Since	the	ultimate	amount	and	timing	of	any future	cash	settlements	cannot	be	predicted	with	reasonable	certainty,	this estimated	liability	has	been	excluded	from	the	contractual	obligations	table.	See Note	21	Income	Taxes	in	the	Notes	To	Consolidated	Financial	Statements	in Item	8	of	this	Report	for	additional	information.

Our	contractual	obligations	totaled	$72.0	billion	at	December	31,	2011.	The decline	in	the	comparison	is	primarily	attributable	to	decreases	in	the	remaining contractual	maturities	of	time	deposits,	partially	offset	by	increases	in	borrowed funds.	See	Funding	and	Capital	Sources	in	the	Consolidated	Balance	Sheet Review	section	of	this	Item	7	for	additional	information	regarding	our	funding sources.

# Table	47:	Other	Commitments	(a)

|  |  |  | Amount	Of	Commitment	Expiration	By	Period | Amount	Of	Commitment	Expiration	By	Period |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012\t–\tin\tmillions | Total\nAmounts\nCommitted | Less\tthan\none\tyear | One\tto\nthree\nyears | Four\tto\nfive\tyears | After\nfive\nyears |
| Net\tunfunded\tcredit\tcommitments | \t\t $120,592 | $51,017 | $38,038 | $31,060 | $477 |
| Standby\tletters\tof\tcredit\t(b) | 11,467 | 5,200 | 4,823 | 1,417 | 27 |
| Reinsurance\tagreements\t(c) | 5,846 | 2,835 | 66 | 33 | \t 2,912 |
| Other\tcommitments\t(d) | 918 | 602 | 255 | 58 | 3 |
| Total\tcommitments | \t\t $138,823 | $59,654 | $43,182 | $32,568 | $3,419 |
| (a) |  |  |  |  |  |

(a) Other	commitments	are	funding	commitments	that	could	potentially	require	performance	in	the	event	of	demands	by	third	parties	or	contingent	events.	Loan	commitments	are	reported	net	of	syndications, assignments	and	participations.

(b) Includes	$7.5	billion	of	standby	letters	of	credit	that	support	remarketing	programs	for	customers'	variable	rate	demand	notes.

(c) Reinsurance	agreements	are	with	third-party	insurers	related	to	insurance	sold	to	our	customers.	Balances	represent	estimates	based	on	availability	of	financial	information.

(d) Includes	unfunded	commitments	related	to	private	equity	investments	of	$182	million	and	other	investments	of	$3	million	that	are	not	on	our	Consolidated	Balance	Sheet.	Also	includes	commitments	related	to	tax credit	investments	of	$685	million	and	other	direct	equity	investments	of	$48	million	that	are	included	in	Other	liabilities	on	our	Consolidated	Balance	Sheet.

# MARKET	RISK	MANAGEMENT

Market	risk	is	the	risk	of	a	loss	in	earnings	or	economic	value	due	to	adverse movements	in	market	factors	such	as	interest	rates,	credit	spreads,	foreign exchange	rates,	and	equity	prices.	We	are	exposed	to	market	risk	primarily	by our	involvement	in	the	following	activities,	among	others:

•	Traditional	banking	activities	of	taking	deposits	and	extending	loans, •	Equity	and	other	investments	and	activities	whose	economic	values	are directly	impacted	by	market	factors,	and

•	Fixed	income,	equities,	derivatives,	and	foreign	exchange	activities,	as a	result	of	customer	activities	and	underwriting.

We	have	established	enterprise-wide	policies	and	methodologies	to	identify, measure,	monitor,	and	report	market	risk.	Market	Risk	Management	provides independent	oversight	by	monitoring	compliance	with	these	limits	and guidelines,	and	reporting	significant	risks	in	the	business	to	the	Risk	Committee of	the	Board.

# Market	Risk	Management	–	Interest	Rate	Risk

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

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

Sensitivity	results	and	market	interest	rate	benchmarks	for	the	fourth	quarters	of 2012	and	2011	follow:

# Table	48:	Interest	Sensitivity	Analysis

|  | Fourth<br>Quarter<br>2012 | Fourth<br>Quarter<br>2011 |
| :--- | :--- | :--- |
| Net\tInterest\tIncome\tSensitivity\tSimulation |  |  |
| Effect\ton\tnet\tinterest\tincome\tin\tfirst\tyear |  |  |
| from\tgradual\tinterest\trate\tchange\tover |  |  |
| following\t12\tmonths\tof: |  |  |
| 100\tbasis\tpoint\tincrease | 2.0% | 2.3% |
| 100\tbasis\tpoint\tdecrease\t(a) | (1.3)% | (1.5)% |
| Effect\ton\tnet\tinterest\tincome\tin\tsecond\tyear |  |  |
| from\tgradual\tinterest\trate\tchange\tover |  |  |
| the\tpreceding\t12\tmonths\tof: |  |  |
| 100\tbasis\tpoint\tincrease | 6.8% | 7.1% |
| 100\tbasis\tpoint\tdecrease\t(a) | (4.8)% | (4.4)% |
| Duration\tof\tEquity\tModel\t(a) |  |  |
| Base\tcase\tduration\tof\tequity\t(in\tyears): | (7.3) | (6.2) |
| Key\tPeriod-End\tInterest\tRates |  |  |
| One-month\tLIBOR | .21% | .30% |
| Three-year\tswap | .50% | .82% |

(a) Given	the	inherent	limitations	in	certain	of	these	measurement	tools	and	techniques,	results	become less	meaningful	as	interest	rates	approach	zero.

In	addition	to	measuring	the	effect	on	net	interest	income	assuming	parallel changes	in	current	interest	rates,	we	routinely	simulate	the	effects	of	a	number	of nonparallel	interest	rate	environments.	The	following	Net	Interest	Income Sensitivity	to	Alternative	Rate	Scenarios	(Fourth	Quarter	2012)	table	reflects	the percentage	change	in	net	interest	income	over	the	next	two	12-month	periods assuming	(i)	the	PNC	Economist's	most	likely	rate	forecast,	(ii)	implied	market forward	rates,	and	(iii)	Yield	Curve	Slope	Flattening	(a	100	basis	point	yield curve	slope	flattening	between	1-month	and	ten-year	rates	superimposed	on current	base	rates)	scenario.

# Table	49:	Net	Interest	Income	Sensitivity	to	Alternative	Rate	Scenarios (Fourth	Quarter	2012)

|  | PNC<br>Economist | Market<br>Forward | Slope<br>Flattening |
| :--- | :--- | :--- | :--- |
| First\tyear\tsensitivity | .03% | .50% | (1.03)% |
| Second\tyear\tsensitivity | 1.44% | 2.12% | (3.92)% |

All	changes	in	forecasted	net	interest	income	are	relative	to	results	in	a	base	rate scenario	where	current	market	rates	are	assumed	to	remain	unchanged	over	the forecast	horizon.

When	forecasting	net	interest	income,	we	make	assumptions	about	interest	rates and	the	shape	of	the	yield	curve,	the	volume	and	characteristics	of	new	business, and	the	behavior	of	existing	on-	and	off-balance	sheet	positions.	These assumptions	determine	the	future	level	of	simulated	net	interest	income	in	the base	interest	rate	scenario	and	the	other	interest	rate	scenarios	presented	in	the above	table.	These	simulations	assume	that	as	assets	and	liabilities	mature,	they are	replaced	or	repriced	at	then	current	market	rates.	We	also	consider	forward projections	of	purchase	accounting	accretion	when	forecasting	net	interest income.

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

# Table	50:	Alternate	Interest	Rate	Scenarios:	One	Year	Forward

The	fourth	quarter	2012	interest	sensitivity	analyses	indicate	that	our Consolidated	Balance	Sheet	is	positioned	to	benefit	from	an	increase	in	interest rates	and	an	upward	sloping	interest	rate	yield	curve.	We	believe	that	we	have the	deposit	funding	base	and	balance	sheet	flexibility	to	adjust,	where appropriate	and	permissible,	to	changing	interest	rates	and	market	conditions.

# Market	Risk	Management	–	Trading	Risk

Our	trading	activities	are	primarily	customer-driven	trading	in	fixed	income securities,	derivatives	and	foreign	exchange	contracts,	as	well	as	the	daily	mark- to-market	impact	from	the	credit	valuation	adjustment	(CVA)	on	the	customer derivatives	portfolio.	They	also	include	the	underwriting	of	fixed	income	and equity	securities.

We	use	value-at-risk	(VaR)	as	the	primary	means	to	measure	and	monitor	market risk	in	trading	activities.	We	calculate	a	diversified	VaR	at	a	95%	confidence interval.	VaR	is	used	to	estimate	the	probability	of	portfolio	losses	based	on	the statistical	analysis	of	historical	market	risk	factors.	A	diversified	VaR	reflects empirical	correlations	across	different	asset	classes.

PNC	began	to	include	the	daily	mark-to-market	impact	from	the	CVA	in determining	the	diversified	VaR	measure	during	the	first	quarter	of	2012	due	to enhancements	in	our	models,	and	comparative	periods	are	stated	on	a	similar basis.	During	2012,	our	95%	VaR	ranged	between	$1.1	million	and	$5.3	million, averaging	$3.2	million.	During	2011,	our	95%	VaR	ranged	between	$.7	million and	$4.8	million,	averaging	$2.4	million.

To	help	ensure	the	integrity	of	the	models	used	to	calculate	VaR	for	each portfolio	and	enterprise-wide,	we	use	a	process	known	as	backtesting.	The backtesting	process	consists	of	comparing	actual	observations	of	trading-related gains	or	losses	against	the	VaR	levels	that	were	calculated	at	the	close	of	the prior	day.	This	assumes	that	market	exposures	remain	constant	throughout	the day	and	that	recent	historical	market	variability	is	a	good	predictor	of	future variability.	Our	actual	trading	related	activity	includes	customer	revenue	and intraday	hedging	which	helps	to	reduce	trading	losses,	and	may	reduce	the number	of	instances	of	actual	losses	exceeding	the	prior	day	VaR	measure. There	were	two	such	instances	during	both	2012	and	2011	under	our	diversified VaR	measure.	We	use	a	500	day	look	back	period	for	backtesting	and	include customer	related	revenue.

The	following	graph	shows	a	comparison	of	enterprise-wide	trading-related gains	and	losses	against	prior	day	diversified	VaR	for	the	period	indicated.

# Table	51:	Enterprise-Wide	Trading-Related	Gains/Losses	Versus	Value	at	Risk

# Total	trading	revenue	was	as	follows:

# Table	52:	Trading	Revenue

| In	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| Net\tinterest\tincome | $38 | $43 |
| Noninterest\tincome | \t 272 | \t 225 |
| Total\ttrading\trevenue | $310 | $268 |
| Securities\tunderwriting\tand\ttrading\t(a) | $100 | $81 |
| Foreign\texchange | 92 | 88 |
| Financial\tderivatives\tand\tother | \t 118 | 99 |
| Total\ttrading\trevenue | $310 | $268 |
| (a) |  |  |

(a) Includes	changes	in	fair	value	for	certain	loans	accounted	for	at	fair	value.

The	trading	revenue	disclosed	above	includes	results	from	providing	investing and	risk	management	services	to	our	customers	as	well	as	results	from	hedges	of customer	activity.	Trading	revenue	excludes	the	impact	of	economic	hedging activities	which	we	transact	to	manage	risk	primarily	related	to	residential	and commercial	mortgage	servicing	rights	and	residential	and	commercial	mortgage loans	held-for-sale.	Derivatives	used	for	economic	hedges	are	not	designated	as accounting	hedges	because	the	contracts	they	are	hedging	are	typically	also carried	at	fair	value	on	the	balance	sheet,	resulting	in	symmetrical	accounting treatment	for	both	the	hedging	instrument	and	the	hedged	item.	Economic	hedge results,	along	with	the	associated	hedged	items,	are	reported	in	the	respective income	statement	line	items,	as	appropriate.

Trading	revenue	for	2012	increased	$42	million	compared	with	2011	due	to higher	derivatives,	foreign	exchange	and	fixed	income	client	sales,	higher underwriting	activity,	improved	client-related	trading	results	and	the	reduced impact	of	counterparty	credit	risk	on	valuations	of	derivative	positions.

# Market	Risk	Management	–	Equity	And	Other Investment	Risk

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

The	primary	risk	measurement	for	equity	and	other	investments	is	economic capital.	Economic	capital	is	a	common	measure	of	risk	for	credit,	market	and operational	risk.	It	is	an	estimate	of	the	potential	value	depreciation	over	a	one year	horizon	commensurate	with	solvency	expectations	of	an	institution	rated single-A	by	the	credit	rating	agencies.	Given	the	illiquid	nature	of	many	of	these types	of	investments,	it	can	be	a	challenge	to	determine	their	fair	values.	See Note	9	Fair	Value	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8 of	this	Report	for	additional	information.

Various	PNC	business	units	manage	our	equity	and	other	investment	activities. Our	businesses	are	responsible	for	making	investment	decisions	within	the approved	policy	limits	and	associated	guidelines.

A	summary	of	our	equity	investments	follows:

# Table	53:	Equity	Investments	Summary

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| BlackRock | $5,614 | $5,291 |
| Tax\tcredit\tinvestments | 2,965 | 2,646 |
| Private\tequity | 1,802 | 1,491 |
| Visa | 251 | 456 |
| Other | 245 | 250 |
| Total | $10,877 | $10,134 |

PNC	owned	approximately	36	million	common	stock	equivalent	shares	of BlackRock	equity	at	December	31,	2012,	accounted	for	under	the	equity method.	The	primary	risk	measurement,	similar	to	other	equity	investments,	is economic	capital.	The	Business	Segments	Review	section	of	this	Item	7	includes additional	information	about	BlackRock.

# Tax	Credit	Investments

Included	in	our	equity	investments	are	tax	credit	investments	which	are accounted	for	under	the	equity	method.	These	investments,	as	well	as	equity investments	held	by	consolidated	partnerships,	totaled	$3.0	billion	at December	31,	2012	and	$2.6	billion	at	December	31,	2011.	These	equity investment	balances	include	unfunded	commitments	totaling	$685	million	and $420	million,	respectively.	These	unfunded	commitments	are	included	in	Other Liabilities	on	our	Consolidated	Balance	Sheet.

Note	3	Loan	Sale	and	Servicing	Activities	and	Variable	Interest	Entities	in	the Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	has	further information	on	Tax	Credit	Investments.

# Private	Equity

The	private	equity	portfolio	is	an	illiquid	portfolio	comprised	of	mezzanine	and equity	investments	that	vary	by	industry,	stage	and	type	of	investment.

Private	equity	investments	carried	at	estimated	fair	value	totaled	$1.8	billion	at December	31,	2012	and	$1.5	billion	at	December	31,	2011.	As	of	December	31, 2012,	$1.2	billion	was	invested	directly	in	a	variety	of	companies	and	$.6	billion was	invested	indirectly	through	various	private	equity	funds.	Included	in	direct investments	are	investment	activities	of	two	private	equity	funds	that	are consolidated	for	financial	reporting	purposes.	The	noncontrolling	interests	of these	funds	totaled	$266	million	as	of	December	31,	2012.	The	indirect	private equity	funds	are	not	redeemable,	but	PNC	receives	distributions	over	the	life	of the	partnership	from	liquidation	of	the	underlying	investments	by	the	investee. See	Item	1	Business	–	Supervision	and	Regulation	and	Item	1A	Risk	Factors	of this	Report	for	discussion	of	potential	impacts	of	the	Volcker	Rule	provisions	of Dodd-Frank	on	our	holding	interests	in	and	sponsorship	of	private	equity	or hedge	funds.

Our	unfunded	commitments	related	to	private	equity	totaled	$182	million	at December	31,	2012	compared	with	$247	million	at	December	31,	2011.

In	2012,	we	sold	9	million	of	Visa	Class	B	common	shares	and	entered	into swap	agreements	with	the	purchaser	of	the	shares.	See	Note	9	Fair	Value	and Note	17	Financial	Derivatives	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	for	additional	information.	At	December	31, 2012,	our	investment	in	Visa	Class	B	common	shares	totaled	approximately 14	million	shares	and	was	recorded	at	$251	million.	Based	on	the	December	31, 2012	closing	price	of	$151.58	for	the	Visa	Class	A	common	shares,	the	fair value	of	our	total	investment	was	approximately	$916	million	at	the	current conversion	rate	which	reflects	adjustments	in	respect	of	all	litigation	funding	by Visa	to	date.	The	Visa	Class	B	common	shares	that	we	own	are	transferable	only under	limited	circumstances	(including

those	applicable	to	the	sales	in	2012)	until	they	can	be	converted	into	shares	of the	publicly	traded	class	of	stock,	which	cannot	happen	until	the	settlement	of	all of	the	specified	litigation.	It	is	expected	that	Visa	will	continue	to	adjust	the conversion	rate	of	Visa	Class	B	common	shares	to	Class	A	common	shares	in connection	with	any	settlements	of	the	specified	litigation	in	excess	of	any amounts	then	in	escrow	for	that	purpose	and	will	also	reduce	the	conversion	rate to	the	extent	that	it	adds	any	funds	to	the	escrow	in	the	future.

Note	24	Commitments	and	Guarantees	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	this	Report	has	further	information	on	our	Visa indemnification	obligation.

# Other	Investments

We	also	make	investments	in	affiliated	and	non-affiliated	funds	with	both traditional	and	alternative	investment	strategies.	The	economic	values	could	be driven	by	either	the	fixed-income	market	or	the	equity	markets,	or	both.	At December	31,	2012,	other	investments	totaled	$245	million	compared	with	$250 million	at	December	31,	2011.	We	recognized	net	gains	related	to	these investments	of	$55	million	during	2012,	compared	with	$1	million	during	2011.

Given	the	nature	of	these	investments,	if	market	conditions	affecting	their valuation	were	to	worsen,	we	could	incur	future	losses.

Our	unfunded	commitments	related	to	other	investments	totaled	$3	million	at both	December	31,	2012	and	December	31,	2011.

# Impact	of	Inflation

Our	assets	and	liabilities	are	primarily	financial	in	nature	and	typically	have varying	maturity	dates.	Accordingly,	future	changes	in	prices	do	not	affect	the obligations	to	pay	or	receive	fixed	and	determinable	amounts	of	money. However,	during	periods	of	inflation,	there	may	be	a	subsequent	impact affecting	certain	fixed	costs	or	expenses,	an	erosion	of	consumer	and	customer purchasing	power,	and	fluctuations	in	the	need	or	demand	for	our	products	and services.	Should	significant	levels	of	inflation	occur,	our	business	could potentially	be	impacted	by,	among	other	things,	reducing	our	tolerance	for extending	credit	or	causing	us	to	incur	additional	credit	losses	resulting	from possible	increased	default	rates.

# Financial	Derivatives

We	use	a	variety	of	financial	derivatives	as	part	of	the	overall	asset	and	liability risk	management	process	to	help	manage	exposure	to	interest	rate,	market	and credit	risk	inherent	in	our	business	activities.	Substantially	all	such	instruments are	used	to	manage	risk	related	to	changes	in	interest	rates.	Interest	rate	and	total return	swaps,	interest	rate	caps	and	floors,	swaptions,	options,	forwards	and futures	contracts	are	the	primary	instruments	we	use	for	interest	rate	risk management.	We	also	enter	into	derivatives	with	customers	to	facilitate	their	risk management	activities.

Financial	derivatives	involve,	to	varying	degrees,	interest	rate,	market	and	credit risk.	For	interest	rate	swaps	and	total	return	swaps,	options	and	futures	contracts, only	periodic	cash	payments	and,	with	respect	to	options,	premiums	are exchanged.	Therefore,	cash	requirements	and	exposure	to	credit	risk	are significantly	less	than	the	notional	amount	on	these	instruments.

Statements	in	Item	8	of	this	Report,	which	is	incorporated	here	by	reference.

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

Further	information	on	our	financial	derivatives	is	presented	in	Note	1 Accounting	Policies	and	Note	17	Financial	Derivatives	in	the	Notes	To Consolidated	Financial

The	following	table	summarizes	the	notional	or	contractual	amounts	and	net	fair	value	of	financial	derivatives	at	December	31,	2012	and	December		31,	2011.

# Table	54:	Financial	Derivatives	Summary

|  | December	31,	2012 |  | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- | :--- | :--- |
|  | Notional/ | Net\tFair | Notional/ | Net\tFair |
|  | Contractual | Value | Contractual | Value |
| In\tmillions | Amount | (a) | Amount | (a) |
| Derivatives\tdesignated\tas\thedging\tinstruments\tunder\tGAAP |  |  |  |  |
| Total\tderivatives\tdesignated\tas\thedging\tinstruments | $29,270 | $1,720 | $29,234\t\t\t $1,772 | $29,234\t\t\t $1,772 |
| Derivatives\tnot\tdesignated\tas\thedging\tinstruments\tunder\tGAAP |  |  |  |  |
| Total\tderivatives\tused\tfor\tresidential\tmortgage\tbanking\tactivities | $166,819 | $588 | $196,991\t\t\t $ | 565 |
| Total\tderivatives\tused\tfor\tcommercial\tmortgage\tbanking\tactivities | 4,606 | (23) | 2,720 | (21) |
| Total\tderivatives\tused\tfor\tcustomer-related\tactivities | \t 163,848 | 30 | \t 158,095 | (132) |
| Total\tderivatives\tused\tfor\tother\trisk\tmanagement\tactivities | 1,813 | (357) | 4,289 | (327) |
| Total\tderivatives\tnot\tdesignated\tas\thedging\tinstruments | $337,086 | $238 | $362,095\t\t\t $ | 85 |
| Total\tDerivatives | $366,356 | $1,958 | $391,329\t\t\t $1,857 | $391,329\t\t\t $1,857 |
| (a)\nRepresents\tthe\tnet\tfair\tvalue\tof\tassets\tand\tliabilities. |  |  |  |  |

(a) Represents	the	net	fair	value	of	assets	and	liabilities.

# Summary	Results

Net	income	for	2011	was	$3.1	billion,	or	$5.64	per	diluted	common	share, compared	with	$3.4	billion,	or	$5.74	per	diluted	common	share,	for	2010.	The decrease	from	2010	was	primarily	due	to	an	$850	million,	or	6%,	reduction	in total	revenue,	a	$492	million,	or	6%,	increase	in	noninterest	expense	and	the impact	of	the	$328	million	after-tax	gain	on	the	sale	of	GIS	recognized	in	2010, partially	offset	by	a	$1.3	billion,	or	54%,	decrease	in	the	provision	for	credit losses	in	2011.	In	addition,	2010	net	income	attributable	to	common shareholders	was	also	impacted	by	a	noncash	reduction	of	$250	million	in connection	with	the	redemption	of	TARP	preferred	stock.

Net	interest	income	was	$8.7	billion	for	2011	down	from	$9.2	billion	in	2010. The	net	interest	margin	decreased	to	3.92%	in	2011	compared	with	4.14%	for 2010,	primarily	due	to	the	impact	of	lower	purchase	accounting	accretion,	a decline	in	the	rate	on	average	loan	balances	and	the	low	interest	rate environment	partially	offset	by	lower	funding	costs.

Noninterest	income	was	$5.6	billion	for	2011	and	$5.9	billion	for	2010. Noninterest	income	for	2011	reflected	higher	asset	management	fees	and	other income,	higher	residential	mortgage	banking	revenue,	and	lower	net	other-than- temporary	impairments	(OTTI),	that	were	offset	by	a	decrease	in	corporate service	fees	primarily	due	to	a	reduction	in	the	value	of	commercial	mortgage servicing	rights,	lower	service	charges	on	deposits	from	the	impact	of Regulation	E	rules	pertaining	to	overdraft	fees,	a	decrease	in	net	gains	on	sales	of securities	and	lower	consumer	services	fees	due,	in	part,	to	a	decline	in interchange	fees	on	individual	debit	card	transactions	in	the	fourth	quarter partially	offset	by	higher	transaction	volumes	throughout	2011.

Asset	management	revenue,	including	BlackRock,	increased	$34	million	to	$1.1 billion	in	2011	compared	to	2010.	The	increase	was	driven	by	strong	sales performance	by	our	Asset	Management	Group	and	somewhat	higher	equity earnings	from	our	BlackRock	investment.	Discretionary	assets	under management	at	December	31,	2011	totaled	$107	billion	compared	with	$108 billion	at	December	31,	2010.

For	2011,	consumer	services	fees	totaled	$1.2	billion	compared	with	$1.3	billion in	2010.	The	decrease	was	due	to	lower	interchange	rates	on	debit	card transactions,	lower	brokerage	related	revenue,	and	lower	ATM	related	fees, partially	offset	by	higher	volumes	of	customer-initiated	transactions	including debit	and	credit	cards.	The	Dodd-Frank	limits	on	interchange	rates	were	effective October	1,	2011	and	had	a	negative	impact	on	revenues	of	approximately	$75 million	in	the	fourth	quarter	of	2011.

Corporate	services	revenue	totaled	$.9	billion	in	2011	and	$1.1	billion	in	2010. Lower	values	of	commercial	mortgage	servicing	rights,	largely	driven	by	lower interest	rates	and	higher	loan	prepayment	rates,	and	lower	special	servicing	fees drove	the	decline.

Residential	mortgage	revenue	totaled	$713	million	in	2011	compared	with	$699 million	in	2010.	Higher	loan	sales	revenue	drove	the	comparison,	largely	offset by	lower	net	hedging	gains	on	mortgage	servicing	rights	and	lower	servicing fees.	Loan	sales	revenue	included	the	impact	of	a	decrease	in	the	provision	for residential	mortgage	repurchase	reserves,	which	decreased	to	$102	million	in 2011	compared	to	$120	million	in	2010.

Service	charges	on	deposits	totaled	$534	million	for	2011	and	$705	million	for 2010.	The	decline	resulted	primarily	from	the	impact	of	Regulation	E	rules pertaining	to	overdraft	fees.

Net	gains	on	sales	of	securities	totaled	$249	million	in	2011	and	$426	million	for 2010.	The	net	credit	component	of	OTTI	of	securities	recognized	in	earnings	was a	loss	of	$152	million	in	2011,	compared	with	a	loss	of	$325	million	in	2010.

Gains	on	BlackRock	related	transactions	included	a	fourth	quarter	2010	pretax gain	of	$160	million	from	our	sale	of	7.5	million	BlackRock	common	shares	as part	of	a	BlackRock	secondary	common	stock	offering.

Other	noninterest	income	totaled	$1.1	billion	for	2011	compared	with	$.9	billion for	2010.

The	provision	for	credit	losses	declined	to	$1.2	billion	in	2011	compared	with $2.5	billion	for	2010	as	overall	credit	quality	continued	to	improve	due	to	slowly improving	economic	conditions	and	actions	we	took	to	reduce	exposure	levels during	2011.

Noninterest	expense	was	$9.1	billion	for	2011	and	$8.6	billion	for	2010. Noninterest	expense	for	2011	included	$324	million	of	residential	mortgage foreclosure-related	expenses	primarily	as	a	result	of	ongoing	governmental matters,	a	noncash	charge	of	$198	million	for	the	unamortized	discount	related	to redemption	of	trust	preferred	securities,	and	$42	million	for	integration	costs. The	comparable	amounts	for	2010	were	$71	million,	zero	and	$387	million, respectively.

Our	effective	income	tax	rate	was	24.5%	for	2011	and	25.5%	for	2010.	The	low effective	tax	rates	were	primarily	attributable	to	the	impact	of	tax-exempt	income and	tax	credits.

Loans	increased	$8.4	billion,	or	6%,	to	$159.0	billion	as	of	December	31,	2011 compared	with	December	31,	2010.	Growth	in	commercial	loans	of	$10.5 billion,	auto	loans	of	$2.2	billion,	and	education	loans	of	$.4	billion	was	partially offset	by	declines	of	$1.7	billion	in	commercial	real	estate	loans,	$1.5	billion	of residential	real	estate	loans	and	$1.1	billion	of	home	equity	loans	compared	with December	31,	2010.	Commercial	loans	increased	due	to	a	combination	of	new client	acquisition	and	improved	utilization.	Auto	loans	increased	due	to	the expansion	of	sales	force	and	product	introduction	to	acquired	markets,	as	well	as overall	increases	in	auto	sales.	Education	loans	increased	due	to	portfolio purchases	in	2011.	Commercial	and	residential	real	estate	along	with	home equity	loans	declined	due	to	loan	demand	being	outpaced	by	paydowns, refinancing,	and	charge-offs.

Average	total	loans	decreased	$1.8	billion	or	1%,	to	$152.0	billion,	in	2011 compared	with	2010	primarily	as	loan	growth	during	the	second	half	of	2011	was offset	by	loan	decreases	during	the	first	half	of	2011.	The	decrease	in	average total	loans	primarily	reflected	declines	in	commercial	real	estate	of	$3.7	billion and	residential	real	estate	of	$2.8	billion,	partially	offset	by	a	$5.1	billion increase	in	commercial	loans.	Commercial	real	estate	loans	declined	due	to	loan sales,	paydowns,	and	charge-offs.	The	decrease	in	residential	real	estate	was impacted	by	portfolio	management	activities,	paydowns	and	net	charge-offs. Commercial	loans	increased	due	to	a	combination	of	new	client	acquisition	and improved	utilization.	Loans	represented	68%	of	average	interest-earning	assets for	2011	and	for	2010.

The	total	loan	balance	above	includes	purchased	impaired	loans	of	$6.7	billion, or	4%	of	total	loans,	at	December	31,	2011,	and	$7.8	billion,	or	5%	of	total loans,	at	December	31,	2010.

The	carrying	amount	of	investment	securities	totaled	$60.6	billion	at December	31,	2011,	a	decrease	of	$3.6	billion,	or	6%,	from	$64.3	billion	at December	31,	2010.	The	decline	resulted	from	principal	payments	and	net	sales activity	related	to	US	Treasury	and	government	agency	and	non-agency residential	mortgage-backed	securities.	Investment	securities	represented	22%	of total	assets	at	December	31,	2011	and	24%	of	total	assets	at	December	31,	2010.

Average	investment	securities	increased	$1.7	billion,	to	$59.7	billion,	in	2011 compared	with	2010.	Average	securities	held	to	maturity	increased	$2.3	billion, to	$9.4	billion,	in	2011	compared	to	2010.	This	increase	was	partially	offset	by the	decrease	in	average	securities	available	for	sale	of	$.6	billion,	to	$50.3 billion,	in	2011	compared	with	2010.	The	increase	in	average	securities	held	to maturity	was	primarily	a	result	of	transfers	totaling	$6.3	billion	from	securities available	for	sale	to	securities	held	to	maturity	during	the	second	and	third quarters	of	2011.	The	transfers	were	completed	in	order	to	reduce	the	impact	of price	volatility	on	accumulated	other	comprehensive	income	and	certain	capital measures,	and	considered	potential	changes	to	regulatory	capital	requirements under	the	proposed	Basel	III	capital	standards.

At	December	31,	2011,	the	securities	available	for	sale	portfolio	included	a	net unrealized	loss	of	$41	million,	which	represented	the	difference	between	fair value	and	amortized	cost.	The	comparable	amount	at	December	31,	2010	was	a net	unrealized	loss	of	$861	million.	The	expected	weighted-average	life	of investment	securities	(excluding	corporate	stocks	and	other)	was	3.7	years	at December	31,	2011	and	4.7	years	at	December	31,	2010.

Loans	held	for	sale	totaled	$2.9	billion	at	December	31,	2011	compared	with $3.5	billion	at	December	31,	2010.	We	stopped	originating	commercial mortgage	loans	held	for	sale	designated	at	fair	value	in	2008	and	have	pursued opportunities	to	reduce	these	positions	at	appropriate	prices.	At	December	31, 2011,	the	balance	relating	to	these	loans	was	$843	million,	compared	to	$877 million	at	December	31,	2010.	We	sold	$25	million	in	unpaid	principal	balances of	these	commercial	mortgage	loans	held	for	sale	carried	at	fair	value	in	2011 and	sold	$241	million	in	2010.

We	sold	$2.4	billion	of	commercial	mortgages	held	for	sale	carried	at	the	lower of	cost	or	market	to	government	agencies	in	2011	compared	to	$2.1	billion	in 2010.	The	increase	in	these	loans	to	$451	million	at	December	31,	2011, compared	to	$330	million	at	December	31,	2010,	was	due	to	an	increase	in	loans awaiting	sales	to	government	agencies.

Residential	mortgage	loan	origination	volume	was	$11.4	billion	in	2011. Substantially	all	such	loans	were	originated	under	agency	or	FHA	standards.	We sold	$11.9	billion	of	loans	and	recognized	related	gains	of	$282	million	during 2011.	The	comparable	amounts	for	2010	were	$10.0	billion	and	$231	million, respectively.

# Asset	Quality

Overall	credit	quality	continued	to	improve	during	2011.	Nonperforming	assets declined	$967	million,	or	19%,	to	$4.2	billion	as	of	December	31,	2011	from December	31,	2010.	Accruing	loans	past	due	increased	$12	million,	or	less	than 1%,	during	2011	to	$4.5	billion	at	year	end	primarily	attributable	to	government insured	or	guaranteed	loans.	Net	charge-offs	declined	significantly	to	$1.6	billion at	December	31,	2011,	down	44%	from	2010	net	charge-offs	of	$2.9	billion.

At	December	31,	2011,	our	largest	nonperforming	asset	was	$28	million	in	the Accommodation	and	Food	Services	Industry	and	our	average	nonperforming loan	associated	with	commercial	lending	was	under	$1	million.

Goodwill	and	other	intangible	assets	totaled	$10.1	billion	at	December	31,	2011 and	$10.8	billion	at	December,	31,	2010.	Goodwill	increased	$.1	billion,	to	$8.3 billion,	at	December	31,	2011	compared	with	the	December	31,	2010	balance primarily	due	to	the	BankAtlantic	and	Flagstar	branch	acquisitions	and	the correction	of	amounts	for	an	acquisition	affecting	prior	periods.	The	$.7	billion decline	in	other	intangible	assets	from	December	31,	2010	included	$.2	billion and	$.4	billion	declines	in	commercial	and	residential	mortgage	servicing	rights, respectively.

# Funding	Sources

Total	deposits	increased	$4.6	billion,	or	2%,	at	December	31,	2011	compared with	December	31,	2010	due	to	an	increase	in	money	market	and	demand deposits,	partially	offset	by	net	redemptions	of	retail	certificates	of	deposit.

Average	total	deposits	were	$183.0	billion	for	2011	compared	with	$181.9 billion	for	2010.	Average	deposits	remained	essentially	flat	from	2010	primarily as	a	result	of	decreases	of	$8.9	billion	in	average	retail	certificates	of	deposit	and $.8	billion	in	average	time	deposits	in	foreign	offices	and	other	time,	which	were offset	by	increases	of	$6.6	billion	in	average	noninterest-bearing	deposits,	$2.5 billion	in	average	interest-bearing	demand	deposits	and	$1.2	billion	in	average savings	deposits.

Total	borrowed	funds	decreased	$2.8	billion	to	$36.7	billion	at	December	31, 2011	compared	to	December	31,	2010.	The	decline	from	December	31,	2010 was	primarily	due	to	maturities	of	federal	funds	purchased	and	repurchase agreements,	bank	notes	and	senior	debt,	and	subordinated	debt	partially	offset	by issuances	of	FHLB	borrowings	and	senior	notes.

Average	borrowed	funds	were	$35.7	billion	for	2011	compared	with	$40.2 billion	for	2010.	Maturities	of	FHLB	borrowings	drove	the	decline	compared	to 2010.

# Shareholders'	Equity

Total	shareholders'	equity	increased	$3.8	billion,	to	$34.1	billion,	at December	31,	2011	compared	with	December	31,	2010	and	included	the	impact of	the	following:

•	An	increase	of	$2.4	billion	to	retained	earnings, •	The	third	quarter	2011	issuance	of	$1.0	billion	of	preferred	stock which	contributed	to	the	increase	in	capital	surplus	–	preferred	stock from	$.6	billion	at	December	31,	2010	to	$1.6	billion	at	December	31, 2011,	and

•	A	$.3	billion	decline	in	accumulated	other	comprehensive	loss primarily	due	to	net	unrealized	gains	on	securities	and	cash	flow	hedge derivatives,	offset	by	an	increase	in	accumulated	other	comprehensive losses	related	to	the	change	in	the	funded	status	of	our	pension	and other	postretirement	benefit	plans.

# Risk-Based	Capital

Regulatory	capital	ratios	at	December	31,	2011	were	10.3%	for	Tier	1	common, 11.1%	for	leverage,	12.6%	for	Tier	1	risk-based	and	15.8%	for	total	risk-based capital.	At	December	31,	2010,	the	regulatory	capital	ratios	were	9.8%	for	Tier	1 common,	10.2%	for	leverage,	12.1%	for	Tier	1	risk-based	and	15.6%	for	total risk-based	capital.	The	Tier	1	common	capital	ratio	increased	when	compared with	December	31,	2010	due	to	the	retention	of	earnings	partially	offset	by higher	risk-weighted	assets	primarily	from	loan	growth.	The	increase	in	Tier	1 risk-based	capital	ratio	resulted	from	the	issuance	of	preferred	stock	in	July	2011 and	retention	of	earnings	somewhat	offset	by	the	redemption	of	trust	preferred securities	in	November	2011	and	higher	risk-weighted	assets.

# GLOSSARY	OF	TERMS

Accretable	net	interest	(Accretable	yield)	–	The	excess	of	cash	flows	expected	to be	collected	on	a	purchased	impaired	loan	over	the	carrying	value	of	the	loan. The	accretable	net	interest	is	recognized	into	interest	income	over	the	remaining life	of	the	loan	using	the	constant	effective	yield	method.

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

Annualized	–	Adjusted	to	reflect	a	full	year	of	activity.

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

# Basis	point	–	One	hundredth	of	a	percentage	point.

Carrying	value	of	purchased	impaired	loans	–	The	net	value	on	the	balance	sheet which	represents	the	recorded	investment	less	any	valuation	allowance.

Cash	recoveries	–	Cash	recoveries	used	in	the	context	of	purchased	impaired loans	represent	cash	payments	from	customers	that	exceeded	the	recorded investment	of	the	designated	impaired	loan.

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

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

Commercial	mortgage	banking	activities	–	Includes	commercial	mortgage servicing,	originating	commercial	mortgages	for	sale	and	related	hedging activities.	Commercial	mortgage	banking	activities	revenue	includes	commercial mortgage	servicing	(including	net	interest	income	and	noninterest	income	from loan	servicing	and	ancillary	services,	net	of	commercial	mortgage	servicing rights	amortization,	and	commercial	mortgage	servicing	rights	valuations),	and revenue	derived	from	commercial	mortgage	loans	intended	for	sale	and	related hedges	(including	loan	origination	fees,	net	interest	income,	valuation adjustments	and	gains	or	losses	on	sales).

Common	shareholders'	equity	to	total	assets	–	Common	shareholders'	equity divided	by	total	assets.	Common	shareholders'	equity	equals	total	shareholders' equity	less	the	liquidation	value	of	preferred	stock.

Core	net	interest	income	–	Total	net	interest	income	less	purchase	accounting accretion.

Credit	derivatives	–	Contractual	agreements,	primarily	credit	default	swaps,	that provide	protection	against	a	credit	event	of	one	or	more	referenced	credits.	The nature	of	a	credit	event	is	established	by	the	protection	buyer	and	protection seller	at	the	inception	of	a	transaction,	and	such	events	include	bankruptcy, insolvency	and	failure	to	meet	payment	obligations	when	due.	The	buyer	of	the credit	derivative	pays	a	periodic	fee	in	return	for	a	payment	by	the	protection seller	upon	the	occurrence,	if	any,	of	a	credit	event.

Credit	spread	–	The	difference	in	yield	between	debt	issues	of	similar	maturity. The	excess	of	yield	attributable	to	credit	spread	is	often	used	as	a	measure	of relative	creditworthiness,	with	a	reduction	in	the	credit	spread	reflecting	an improvement	in	the	borrower's	perceived	creditworthiness.

Derivatives	–	Financial	contracts	whose	value	is	derived	from	changes	in publicly	traded	securities,	interest	rates,	currency	exchange	rates	or	market indices.	Derivatives	cover	a	wide	assortment	of	financial	contracts,	including	but not	limited	to	forward	contracts,	futures,	options	and	swaps.

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

Earning	assets	–	Assets	that	generate	income,	which	include:	Federal	funds	sold; resale	agreements;	trading	securities;	interest-earning	deposits	with	banks;	loans held	for	sale;	loans;	investment	securities;	and	certain	other	assets.

Economic	capital	–	Represents	the	amount	of	resources	that	a	business	or business	segment	should	hold	to	guard	against	potentially	large	losses	that	could cause	insolvency	and	is	based	on	a	measurement	of	economic	risk.	The economic	capital	measurement	process	involves	converting	a	risk	distribution	to the	capital	that	is	required	to	support	the	risk,	consistent	with	our	target	credit rating.	As	such,	economic	risk	serves	as	a	"common	currency"	of	risk	that allows	us	to	compare	different	risks	on	a	similar	basis.

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

# Efficiency	–	Noninterest	expense	divided	by	total	revenue.

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

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

Foreign	exchange	contracts	–	Contracts	that	provide	for	the	future	receipt	and delivery	of	foreign	currency	at	previously	agreed-upon	terms.

Funds	transfer	pricing	–	A	management	accounting	methodology	designed	to recognize	the	net	interest	income	effects	of	sources	and	uses	of	funds	provided by	the	assets	and	liabilities	of	a	business	segment.	We	assign	these	balances LIBOR-based	funding	rates	at	origination	that	represent	the	interest	cost	for	us	to raise/invest	funds	with	similar	maturity	and	repricing	structures.

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

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

Home	price	index	(HPI)	–	A	broad	measure	of	the	movement	of	single-family house	prices	in	the	U.S.

Interest	rate	floors	and	caps	–	Interest	rate	protection	instruments	that	involve payment	from	the	protection	seller	to	the	protection	buyer	of	an	interest differential,	which	represents	the	difference	between	a	short-term	rate	(e.g., three-month	LIBOR)	and	an	agreed-upon	rate	(the	strike	rate)	applied	to	a notional	principal	amount.

Interest	rate	swap	contracts	–	Contracts	that	are	entered	into	primarily	as	an asset/liability	management	strategy	to	reduce	interest	rate	risk.	Interest	rate	swap contracts	are	exchanges	of	interest	rate	payments,	such	as	fixed-rate	payments	for floating-rate	payments,	based	on	notional	principal	amounts.

Intrinsic	value	–	The	difference	between	the	price,	if	any,	required	to	be	paid	for stock	issued	pursuant	to	an	equity	compensation	arrangement	and	the	fair	market value	of	the	underlying	stock.

Investment	securities	–	Collectively,	securities	available	for	sale	and	securities held	to	maturity.

Leverage	ratio	–	Tier	1	risk-based	capital	divided	by	adjusted	average	total assets.

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

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

Loss	given	default	(LGD)	–	An	estimate	of	loss,	net	of	recovery	based	on collateral	type,	collateral	value,	loan	exposure,	or	the	guarantor(s)	quality	and guaranty	type	(full	or	partial).	Each	loan	has	its	own	LGD.	The	LGD	risk	rating measures	the	percentage	of	exposure	of	a	specific	credit	obligation	that	we expect	to	lose	if	default	occurs.	LGD	is	net	of	recovery,	through	either liquidation	of	collateral	or	deficiency	judgments	rendered	from	foreclosure	or bankruptcy	proceedings.

Net	interest	margin	–	Annualized	taxable-equivalent	net	interest	income	divided by	average	earning	assets.

Nonaccretable	difference	–	Contractually	required	payments	receivable	on	a purchased	impaired	loan	in	excess	of	the	cash	flows	expected	to	be	collected.

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

Nonperforming	assets	–	Nonperforming	assets	include	nonperforming	loans	and OREO	and	foreclosed	assets,	but	exclude	certain	government	insured	or guaranteed	loans,	loans	held	for	sale,	loans	accounted	for	under	fair	value	option and	purchased	impaired	loans.	We	do	not	accrue	interest	income	on	assets classified	as	nonperforming.

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

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

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

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

Other	real	estate	owned	(OREO)	and	foreclosed	assets	–	Assets	taken	in settlement	of	troubled	loans	primarily	through	deed-in-lieu	of	foreclosure	or foreclosure.	Foreclosed	assets	include	real	and	personal	property,	equity interests	in	corporations,	partnerships,	and	limited	liability	companies.

Other-than-temporary	impairment	(OTTI)	–	When	the	fair	value	of	a	security	is less	than	its	amortized	cost	basis,	an	assessment	is	performed	to	determine whether	the	impairment	is	other-than-temporary.	If	we	intend	to	sell	the	security or	more	likely	than	not	will	be	required	to	sell	the	security	before	recovery	of	its amortized	cost	basis	less	any	current-period	credit	loss,	an	other-than-temporary impairment	is	considered	to	have	occurred.	In	such	cases,	an	other-than- temporary	impairment	is	recognized	in	earnings	equal	to	the	entire	difference between	the	investment's	amortized	cost	basis	and	its	fair	value	at	the	balance sheet	date.	Further,	if	we	do	not	expect	to	recover	the	entire	amortized	cost	of	the security,	an	other-than-temporary	impairment	is	considered	to	have	occurred. However	for	debt	securities,	if	we	do	not	intend	to	sell	the	security	and	it	is	not more	likely	than	not	that	we	will	be	required	to	sell	the	security	before	its recovery,	the	other-than-temporary	loss	is	separated	into	(a)	the	amount representing	the	credit	loss,	and	(b)	the	amount	related	to	all	other	factors.	The other-than-temporary	impairment	related	to	credit	losses	is	recognized	in earnings	while	the	amount	related	to	all	other	factors	is	recognized	in	other comprehensive	income,	net	of	tax.

Parent	company	liquidity	coverage	–	Liquid	assets	divided	by	funding obligations	within	a	two	year	period.

Pretax	earnings	–	Income	from	continuing	operations	before	income	taxes	and noncontrolling	interests.

Pretax,	pre-provision	earnings	from	continuing	operations	–Total	revenue	less noninterest	expense,	both	from	continuing	operations.

Primary	client	relationship	–	A	corporate	banking	client	relationship	with	annual revenue	generation	of	$10,000	to	$50,000	or	more,	and	for	Asset	Management Group,	a	client	relationship	with	annual	revenue	generation	of	$10,000	or	more.

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

Purchase	accounting	accretion	–	Accretion	of	the	discounts	and	premiums	on acquired	assets	and	liabilities.	The	purchase	accounting	accretion	is	recognized in	net	interest	income	over	the	weighted-average	life	of	the	financial	instruments using	the	constant	effective	yield	method.	Accretion	for	purchased	impaired loans	includes	any	cash	recoveries	received	in	excess	of	the	recorded	investment.

Purchased	impaired	loans	–	Acquired	loans	determined	to	be	credit	impaired under	FASB	ASC	310-30	(AICPA	SOP	03-3).	Loans	are	determined	to	be impaired	if	there	is	evidence	of	credit	deterioration	since	origination	and	for which	it	is	probable	that	all	contractually	required	payments	will	not	be collected.

Recorded	investment	(purchased	impaired	loans)	–	The	initial	investment	of	a purchased	impaired	loan	plus	interest	accretion	and	less	any	cash	payments	and writedowns	to	date.	The	recorded	investment	excludes	any	valuation	allowance which	is	included	in	our	allowance	for	loan	and	lease	losses.

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

Residential	development	loans	–	Project-specific	loans	to	commercial	customers for	the	construction	or	development	of	residential	real	estate	including	land, single	family	homes,	condominiums	and	other	residential	properties.

Residential	mortgage	servicing	rights	hedge	gains/(losses),	net	–	We	have elected	to	measure	acquired	or	originated	residential	mortgage	servicing	rights (MSRs)	at	fair	value	under	GAAP.	We	employ	a	risk	management	strategy designed	to	protect	the	economic	value	of	MSRs	from	changes	in	interest	rates. This	strategy	utilizes	securities	and	a	portfolio	of	derivative	instruments	to	hedge changes	in	the	fair	value	of

MSRs	arising	from	changes	in	interest	rates.	These	financial	instruments	are expected	to	have	changes	in	fair	value	which	are	negatively	correlated	to	the change	in	fair	value	of	the	MSR	portfolio.	Net	MSR	hedge	gains/(losses) represent	the	change	in	the	fair	value	of	MSRs,	exclusive	of	changes	due	to	time decay	and	payoffs,	combined	with	the	change	in	the	fair	value	of	the	associated securities	and	derivative	instruments.

Return	on	average	assets	–	Annualized	net	income	divided	by	average	assets.

Return	on	average	capital	–	Annualized	net	income	divided	by	average	capital.

Return	on	average	common	shareholders'	equity	–	Annualized	net	income attributable	to	common	shareholders,	divided	by	average	common	shareholders' equity.

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

Securitization	–	The	process	of	legally	transforming	financial	assets	into securities.

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

Swaptions	–	Contracts	that	grant	the	purchaser,	for	a	premium	payment,	the right,	but	not	the	obligation,	to	enter	into	an	interest	rate	swap	agreement	during a	specified	period	or	at	a	specified	date	in	the	future.

Taxable-equivalent	interest	–	The	interest	income	earned	on	certain	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	yields	and	margins	for	all	interest- earning	assets,	we	use	interest	income	on	a	taxable-equivalent	basis	in calculating	average	yields	and	net	interest	margins	by	increasing	the	interest income	earned	on	tax-exempt	assets	to	make	it	fully	equivalent	to	interest	income earned	on	other	taxable	investments.	This	adjustment	is	not	permitted	under GAAP	on	the	Consolidated	Income	Statement.

Tier	1	common	capital	–	Tier	1	risk-based	capital,	less	preferred	equity,	less trust	preferred	capital	securities,	and	less	noncontrolling	interests.

Tier	1	common	capital	ratio	–	Tier	1	common	capital	divided	by	period-end risk-weighted	assets.

Tier	1	risk-based	capital	–	Total	shareholders'	equity,	plus	trust	preferred	capital securities,	plus	certain	noncontrolling	interests	that	are	held	by	others;	less goodwill	and	certain	other	intangible	assets	(net	of	eligible	deferred	taxes relating	to	taxable	and	nontaxable	combinations),	less	equity	investments	in nonfinancial	companies	less	ineligible	servicing	assets	and	less	net	unrealized holding	losses	on	available	for	sale	equity	securities.	Net	unrealized	holding gains	on	available	for	sale	equity	securities,	net	unrealized	holding	gains	(losses) on	available	for	sale	debt	securities	and	net	unrealized	holding	gains	(losses)	on cash	flow	hedge	derivatives	are	excluded	from	total	shareholders'	equity	for	Tier 1	risk-based	capital	purposes.

Tier	1	risk-based	capital	ratio	–	Tier	1	risk-based	capital	divided	by	period-end risk-weighted	assets.

Total	equity	–	Total	shareholders'	equity	plus	noncontrolling	interests.

Total	return	swap	–	A	non-traditional	swap	where	one	party	agrees	to	pay	the other	the	"total	return"	of	a	defined	underlying	asset	(e.g.,	a	loan),	usually	in return	for	receiving	a	stream	of	LIBOR-based	cash	flows.	The	total	returns	of	the asset,	including	interest	and	any	default	shortfall,	are	passed	through	to	the counterparty.	The	counterparty	is	therefore	assuming	the	credit	and	economic risk	of	the	underlying	asset.

Total	risk-based	capital	–	Tier	1	risk-based	capital	plus	qualifying	subordinated debt	and	trust	preferred	securities,	other	noncontrolling	interest	not	qualified	as Tier	1,	eligible	gains	on	available	for	sale	equity	securities	and	the	allowance	for loan	and	lease	losses,	subject	to	certain	limitations.

Total	risk-based	capital	ratio	–	Total	risk-based	capital	divided	by	period-end risk-weighted	assets.

Transaction	deposits	–	The	sum	of	interest-bearing	money	market	deposits, interest-bearing	demand	deposits,	and	noninterest-bearing	deposits.

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

Value-at-risk	(VaR)	–	A	statistically-based	measure	of	risk	that	describes	the amount	of	potential	loss	which	may	be	incurred	due	to	severe	and	adverse market	movements.	The	measure	is	of	the	maximum	loss	which	should	not	be exceeded	on	95	out	of	100	days	for	a	95%	VaR.

Watchlist	–	A	list	of	criticized	loans,	credit	exposure	or	other	assets	compiled	for internal	monitoring	purposes.	We	define	criticized	exposure	for	this	purpose	as exposure	with	an	internal	risk	rating	of	other	assets	especially	mentioned, substandard,	doubtful	or	loss.

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

# CAUTIONARY	STATEMENT	REGARDING	FORWARD- LOOKING	INFORMATION

We	make	statements	in	this	Report,	and	we	may	from	time	to	time	make	other statements,	regarding	our	outlook	for	earnings,	revenues,	expenses,	capital	levels and	ratios,	liquidity	levels,	asset	levels,	asset	quality,	financial	position,	and other	matters	regarding	or	affecting	PNC	and	its	future	business	and	operations that	are	forward-looking	statements	within	the	meaning	of	the	Private	Securities Litigation	Reform	Act.	Forward-looking	statements	are	typically	identified	by words	such	as	"believe,"	"plan,"	"expect,"	"anticipate,"	"see,"	"look,"	"intend," "outlook,"	"project,"	"forecast,"	"estimate,"	"goal,"	"will,"	"should"	and	other similar	words	and	expressions.	Forward-looking	statements	are	subject	to numerous	assumptions,	risks	and	uncertainties,	which	change	over	time.

Forward-looking	statements	speak	only	as	of	the	date	made.	We	do	not	assume any	duty	and	do	not	undertake	to	update	forward-looking	statements.	Actual results	or	future	events	could	differ,	possibly	materially,	from	those	anticipated in	forward-looking	statements,	as	well	as	from	historical	performance.

Our	forward-looking	statements	are	subject	to	the	following	principal	risks	and uncertainties.

•	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	liquidity	and	other	functioning	of	U.S.	and	global financial	markets.

– 	The	impact	on	financial	markets	and	the	economy	of	any	changes	in the	credit	ratings	of	U.S.	Treasury	obligations	and	other	U.S. government-backed	debt,	as	well	as	issues	surrounding	the	level	of U.S.	and	European	government	debt	and	concerns	regarding	the creditworthiness	of	certain	sovereign	governments,	supranationals	and financial	institutions	in	Europe.

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

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

– 	Slowing	or	failure	of	the	current	moderate	economic	expansion.

– 	Continued	effects	of	aftermath	of	recessionary	conditions	and	uneven spread	of	positive	impacts	of	recovery	on	the	economy	and	our counterparties,	including	adverse	impacts	on	levels	of	unemployment, loan	utilization	rates,	delinquencies,	defaults	and	counterparty	ability	to meet	credit	and	other	obligations.

– 	Changes	in	customer	preferences	and	behavior,	whether	due	to changing	business	and	economic	conditions,	legislative	and	regulatory initiatives,	or	other	factors.

•	Our	forward-looking	financial	statements	are	subject	to	the	risk	that economic	and	financial	market	conditions	will	be	substantially	different than	we	are	currently	expecting.	These	statements	are	based	on	our	current view	that	the	moderate	economic	expansion	will	persist	and	interest	rates will	remain	very	low	in	2013,	despite	drags	from	Federal	fiscal	restraint	and a	European	recession.	These	forward-looking	statements	also	do	not,	unless otherwise	indicated,	take	into	account	the	impact	of	potential	legal	and regulatory	contingencies.

•	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	(particularly	those	implementing	the	Basel Capital	Accords),	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 on	the	ongoing	development,	validation	and	regulatory	approval	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	resulting	from	legislative	and	regulatory	reforms,	including major	reform	of	the	regulatory	oversight	structure	of	the	financial services	industry	and	changes	to	laws	and	regulations	involving	tax, pension,	bankruptcy,	consumer	protection,	and	other	industry	aspects, and	changes	in	accounting	policies	and	principles.	We	will	be impacted	by	extensive	reforms	provided	for	in	the	Dodd-Frank	Wall Street	Reform	and	Consumer	Protection	Act	(the	"Dodd-Frank	Act") and	otherwise	growing	out	of	the	recent	financial	crisis,	the	precise nature,	extent	and	timing	of	which,	and	their	impact	on	us,	remains uncertain.

– 	Changes	to	regulations	governing	bank	capital	and	liquidity	standards, including	due	to	the	Dodd-Frank	Act	and	to	Basel-related	initiatives.

– 	Unfavorable	resolution	of	legal	proceedings	or	other	claims	and regulatory	and	other	governmental	investigations	or	other	inquiries.	In addition	to	matters	relating	to	PNC's	business	and	activities,	such matters	may	include	proceedings,	claims,	investigations,	or	inquiries relating	to	pre-acquisition	business	and	activities	of	acquired companies,	such	as	National	City.	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	third-party	insurance,	derivatives,	and capital	management	techniques,	and	to	meet	evolving	regulatory	capital standards.	In	particular,	our	results	currently	depend	on	our	ability	to manage	elevated	levels	of	impaired	assets.

•	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. •	Our	2012	acquisition	of	RBC	Bank	(USA)	presents	us	with	risks	and uncertainties	related	to	the	integration	of	the	acquired	businesses	into	PNC, including:

– 	Anticipated	benefits	of	the	transaction,	including	cost	savings	and strategic	gains,	may	be	significantly	harder	or	take	longer	to	achieve than	expected	or	may	not	be	achieved	in	their	entirety	as	a	result	of unexpected	factors	or	events.

– 	Our	ability	to	achieve	anticipated	results	from	this	transaction	is dependent	also	on	the	extent	of	credit	losses	in	the	acquired	loan portfolios	and	the	extent	of	deposit	attrition,	in	part	related	to	the	state of	economic	and	financial	markets.	Also,	litigation	and	regulatory	and other	governmental	investigations	that	may	be	filed	or	commenced relating	to	the	pre-acquisition	business	and	activities	of	RBC	Bank (USA)	could	impact	the	timing	or	realization	of	anticipated	benefits	to PNC.

– 	Integration	of	RBC	Bank	(USA)'s	business	and	operations	into	PNC may	take	longer	than	anticipated	or	be	substantially	more	costly	than anticipated	or	have	unanticipated	adverse	results	relating	to	RBC	Bank (USA)'s	or	PNC's	existing	businesses.	PNC's	ability	to	integrate	RBC Bank	(USA)	successfully	may	be	adversely	affected	by	the	fact	that this	transaction	results	in	PNC	entering	several	geographic	markets where	PNC	did	not	previously	have	any	meaningful	retail	presence. •	In	addition	to	the	RBC	Bank	(USA)	transaction,	we	grow	our	business	in part	by	acquiring	from	time	to	time	other

financial	services	companies,	financial	services	assets	and	related	deposits and	other	liabilities.	These	other	acquisitions	often	present	risks	and uncertainties	analogous	to	those	presented	by	the	RBC	Bank	(USA) transaction.	Acquisition	risks	include	those	presented	by	the	nature	of	the business	acquired	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.	Industry	restructuring	in	the	current environment	could	also	impact	our	business	and	financial	performance through	changes	in	counterparty	creditworthiness	and	performance	and	in the	competitive	and	regulatory	landscape.	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,	dislocations,	terrorist	activities	or	international hostilities	through	impacts	on	the	economy	and	financial	markets	generally or	on	us	or	our	counterparties	specifically.

We	provide	greater	detail	regarding	these	as	well	as	other	factors	elsewhere	in this	Report,	including	in	the	Risk	Factors	and	Risk	Management	sections	and	the Legal	Proceedings	and	Commitments	and	Guarantees	Notes	of	the	Notes	To Consolidated	Financial	Statements	in	this	Report.	Our	forward-looking statements	may	also	be	subject	to	other	risks	and	uncertainties,	including	those discussed	elsewhere	in	this	Report	or	in	our	other	filings	with	the	SEC.

# ITEM	7A	–	QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES ABOUT	MARKET	RISK

This	information	is	set	forth	in	the	Risk	Management	section	of	Item	7	and	in Note	1	Accounting	Policies,	Note	9	Fair	Value,	and	Note	17	Financial Derivatives	in	the	Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this Report.

# ITEM	8	–	FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY DATA

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

To	the	Board	of	Directors	and	Shareholders	of	The	PNC	Financial	Services Group,	Inc.

In	our	opinion,	the	accompanying	consolidated	balance	sheets	and	the	related consolidated	statements	of	income	and	comprehensive	income,	of	changes	in equity,	and	of	cash	flows	present	fairly,	in	all	material	respects,	the	financial position	of	The	PNC	Financial	Services	Group,	Inc.	and	its	subsidiaries	at December	31,	2012	and	December	31,	2011,	and	the	results	of	their	operations and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31, 2012	in	conformity	with	accounting	principles	generally	accepted	in	the	United States	of	America.	Also	in	our	opinion,	the	Company	maintained,	in	all	material respects,	effective	internal	control	over	financial	reporting	as	of	December	31, 2012,	based	on	criteria	established	in	Internal	Control	–	Integrated	Framework issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway Commission	(COSO).	The	Company's	management	is	responsible	for	these financial	statements,	for	maintaining	effective	internal	control	over	financial reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over financial	reporting,	included	in	Management's	Report	on	Internal	Control	over Financial	Reporting	under	Item	9A.	Our	responsibility	is	to	express	opinions	on these	financial	statements	and	on	the	Company's	internal	control	over	financial reporting	based	on	our	integrated	audits.	We	conducted	our	audits	in	accordance with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United States).	Those	standards	require	that	we	plan	and	perform	the	audits	to	obtain reasonable	assurance	about	whether	the	financial	statements	are	free	of	material misstatement	and	whether	effective	internal	control	over	financial	reporting	was maintained	in	all	material	respects.	Our	audits	of	the	financial	statements included	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and disclosures	in	the	financial	statements,	assessing	the	accounting	principles	used and	significant	estimates	made	by	management,	and

evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal control	over	financial	reporting	included	obtaining	an	understanding	of	internal control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness exists,	and	testing	and	evaluating	the	design	and	operating	effectiveness	of internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and the	preparation	of	financial	statements	for	external	purposes	in	accordance	with generally	accepted	accounting	principles.	A	company's	internal	control	over financial	reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the transactions	and	dispositions	of	the	assets	of	the	company;	(ii)	provide reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit preparation	of	financial	statements	in	accordance	with	generally	accepted accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are being	made	only	in	accordance	with	authorizations	of	management	and	directors of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance with	the	policies	or	procedures	may	deteriorate.

/s/	PricewaterhouseCoopers	LLP

Pittsburgh,	Pennsylvania February	28,	2013

# CONSOLIDATED	INCOME	STATEMENT

|  |  | Year	ended	December	31 |  |
| :--- | :--- | :--- | :--- |
| In\tmillions,\texcept\tper\tshare\tdata | 2012 | 2011 | 2010 |
| Interest\tIncome |  |  |  |
| Loans | $8,284 | $7,595 | $8,276 |
| Investment\tsecurities | 2,035 | 2,161 | 2,389 |
| Other | 415 | 438 | 485 |
| Total\tinterest\tincome | \t 10,734 | \t 10,194 | \t 11,150 |
| Interest\tExpense |  |  |  |
| Deposits | 386 | 668 | 963 |
| Borrowed\tfunds | 708 | 826 | 957 |
| Total\tinterest\texpense | 1,094 | 1,494 | 1,920 |
| Net\tinterest\tincome | 9,640 | 8,700 | 9,230 |
| Noninterest\tIncome |  |  |  |
| Asset\tmanagement | 1,169 | 1,088 | 1,054 |
| Consumer\tservices | 1,136 | 1,243 | 1,261 |
| Corporate\tservices | 1,166 | 898 | 1,082 |
| Residential\tmortgage | 284 | 713 | 699 |
| Service\tcharges\ton\tdeposits | 573 | 534 | 705 |
| Net\tgains\ton\tsales\tof\tsecurities | 204 | 249 | 426 |
| Other-than-temporary\timpairments | (79) | (420) | (608) |
| Less:\tNoncredit\tportion\tof\tother-than-temporary\timpairments\t(a) | 32 | (268) | (283) |
| Net\tother-than-temporary\timpairments | (111) | (152) | (325) |
| Gains\ton\tBlackRock\ttransactions |  |  | 160 |
| Other | 1,451 | 1,053 | 884 |
| Total\tnoninterest\tincome | 5,872 | 5,626 | 5,946 |
| Total\trevenue | \t 15,512 | \t 14,326 | \t 15,176 |
| Provision\tFor\tCredit\tLosses | 987 | 1,152 | 2,502 |
| Noninterest\tExpense |  |  |  |
| Personnel | 4,617 | 3,966 | 3,906 |
| Occupancy | 827 | 738 | 730 |
| Equipment | 735 | 661 | 668 |
| Marketing | 279 | 249 | 266 |
| Other | 4,124 | 3,491 | 3,043 |
| Total\tnoninterest\texpense | \t 10,582 | 9,105 | 8,613 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes\tand\tnoncontrolling\tinterests | 3,943 | 4,069 | 4,061 |
| Income\ttaxes | 942 | 998 | 1,037 |
| Income\tfrom\tcontinuing\toperations\tbefore\tnoncontrolling\tinterests | 3,001 | 3,071 | 3,024 |
| Income\tfrom\tdiscontinued\toperations\t(net\tof\tincome\ttaxes\tof\tzero,\tzero,\tand\t$338) |  |  | 373 |
| Net\tincome | 3,001 | 3,071 | 3,397 |
| Less:\tNet\tincome\t(loss)\tattributable\tto\tnoncontrolling\tinterests | (12) | 15 | (15) |
| \t\t\t\t\t\t\t\t\tPreferred\tstock\tdividends | 177 | 56 | 146 |
| \t\t\t\t\t\t\t\t\tPreferred\tstock\tdiscount\taccretion\tand\tredemptions | 4 | 2 | 255 |
| Net\tincome\tattributable\tto\tcommon\tshareholders | $2,832 | $2,998 | $3,011 |
| Earnings\tPer\tCommon\tShare |  |  |  |
| From\tcontinuing\toperations |  |  |  |
| Basic | $5.36 | $5.70 | $5.08 |
| Diluted | $5.30 | $5.64 | $5.02 |
| From\tnet\tincome |  |  |  |
| Basic | $5.36 | $5.70 | $5.80 |
| Diluted | $5.30 | $5.64 | $5.74 |
| Average\tCommon\tShares\tOutstanding |  |  |  |
| Basic | 526 | 524 | 517 |
| Diluted | 529 | 526 | 520 |
| (a)\nIncluded\tin\taccumulated\tother\tcomprehensive\tincome\t(loss). |  |  |  |

(a) Included	in	accumulated	other	comprehensive	income	(loss).

See	accompanying	Notes	To	Consolidated	Financial	Statements.

# CONSOLIDATED	STATEMENT	OF	COMPREHENSIVE	INCOME

|  | Year	ended	December	31 | Year	ended	December	31 |  |
| :--- | :--- | :--- | :--- |
| In\tmillions | 2012 | 2011 | 2010 |
| Net\tincome | $3,001 | $3,071 | \t3,397 |
| Other\tcomprehensive\tincome,\tbefore\ttax\tand\tnet\tof\treclassifications\tinto\tNet\tincome: |  |  |  |
| Net\tunrealized\tgains\ton\tnon-OTTI\tsecurities | 760 | 948 | \t1,357 |
| Net\tunrealized\tgains\t(losses)\ton\tOTTI\tsecurities | 971 | (145) | 275 |
| Net\tunrealized\tgains\t(losses)\ton\tcash\tflow\thedge\tderivatives | (220) | 307 | 561 |
| Pension\tand\tother\tpostretirement\tbenefit\tplan\tadjustments | (35) | (593) | 260 |
| Other | 10 | (4) | (20) |
| Other\tcomprehensive\tincome,\tbefore\ttax\tand\tnet\tof\treclassifications\tinto\tNet\tincome | \t 1,486 | 513 | \t2,433 |
| Income\ttax\texpense\trelated\tto\titems\tof\tother\tcomprehensive\tincome | (547) | (187) | (902) |
| Other\tcomprehensive\tincome,\tafter\ttax\tand\tnet\tof\treclassifications\tinto\tNet\tincome\t(a) | 939 | 326 | \t1,531 |
| Comprehensive\tincome | \t 3,940 | \t 3,397 | \t4,928 |
| Less:\tComprehensive\tincome\t(loss)\tattributable\tto\tnoncontrolling\tinterests | (12) | 15 | (15) |
| Comprehensive\tincome\tattributable\tto\tPNC | $3,952 | $3,382 | \t4,943 |
| (a) |  |  |  |

(a) Other	comprehensive	income	for	2010	also	includes	the	cumulative	effect	of	adopting	ASU	2009-17	on	Accumulated	other	comprehensive	income.

# CONSOLIDATED	BALANCE	SHEET

| In	millions,	except	par	value | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Assets |  |  |
| Cash\tand\tdue\tfrom\tbanks\t(includes\t$4\tand\t$7\tfor\tVIEs)\t(a) | $5,220 | $4,105 |
| Federal\tfunds\tsold\tand\tresale\tagreements\t(includes\t$256\tand\t$732\tmeasured\tat\tfair\tvalue)\t(b) | 1,463 | 2,205 |
| Trading\tsecurities | 2,096 | 2,513 |
| Interest-earning\tdeposits\twith\tbanks\t(includes\t$6\tand\t$325\tfor\tVIEs)\t(a) | 3,984 | 1,169 |
| Loans\theld\tfor\tsale\t(includes\t$2,868\tand\t$2,258\tmeasured\tat\tfair\tvalue)\t(b) | 3,693 | 2,936 |
| Investment\tsecurities\t(includes\t$9\tand\t$109\tfor\tVIEs)\t(a) | 61,406 | 60,634 |
| Loans\t(includes\t$7,781\tand\t$6,096\tfor\tVIEs)\t(includes\t$244\tand\t$104\tmeasured\tat\tfair\tvalue)\t(a)\t(b) | 185,856 | 159,014 |
| Allowance\tfor\tloan\tand\tlease\tlosses\t(includes\t$(75)\tand\t$(91)\tfor\tVIEs)\t(a) | (4,036) | (4,347) |
| Net\tloans | 181,820 | 154,667 |
| Goodwill | 9,072 | 8,285 |
| Other\tintangible\tassets | 1,797 | 1,859 |
| Equity\tinvestments\t(includes\t$1,429\tand\t$1,643\tfor\tVIEs)\t(a) | 10,877 | 10,134 |
| Other\t(includes\t$1,281\tand\t$1,205\tfor\tVIEs)\t(includes\t$319\tand\t$210\tmeasured\tat\tfair\tvalue)\t(a)\t(b) | 23,679 | 22,698 |
| Total\tassets | $305,107 | $271,205 |
| Liabilities |  |  |
| Deposits |  |  |
| Noninterest-bearing | $69,980 | $59,048 |
| Interest-bearing | 143,162 | 128,918 |
| Total\tdeposits | 213,142 | 187,966 |
| Borrowed\tfunds |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | 3,327 | 2,984 |
| Federal\tHome\tLoan\tBank\tborrowings | 9,437 | 6,967 |
| Bank\tnotes\tand\tsenior\tdebt | 10,429 | 11,793 |
| Subordinated\tdebt | 7,299 | 8,321 |
| Commercial\tpaper\t(includes\t$6,045\tand\t$4,271\tfor\tVIEs)\t(a) | 8,453 | 4,271 |
| Other\t(includes\t$257\tand\t$505\tfor\tVIEs)\t(a) | 1,962 | 2,368 |
| Total\tborrowed\tfunds | 40,907 | 36,704 |
| Allowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit |  |  |
|  | 250 | 240 |
| Accrued\texpenses\t(includes\t$132\tand\t$155\tfor\tVIEs)\t(a) | 4,449 | 4,175 |
| Other\t(includes\t$976\tand\t$734\tfor\tVIEs)\t(a) | 4,594 | 4,874 |
| Total\tliabilities | 263,342 | 233,959 |
| Equity |  |  |
| Preferred\tstock\t(c) |  |  |
| Common\tstock\t($5\tpar\tvalue,\tauthorized\t800\tshares,\tissued\t538\tand\t537\tshares) | 2,690 | 2,683 |
| Capital\tsurplus\t–\tpreferred\tstock | 3,590 | 1,637 |
| Capital\tsurplus\t–\tcommon\tstock\tand\tother | 12,193 | 12,072 |
| Retained\tearnings | 20,265 | 18,253 |
| Accumulated\tother\tcomprehensive\tincome\t(loss) | 834 | (105) |
| Common\tstock\theld\tin\ttreasury\tat\tcost:\t10\tand\t10\tshares | (569) | (487) |
| Total\tshareholders'\tequity | 39,003 | 34,053 |
| Noncontrolling\tinterests | 2,762 | 3,193 |
| Total\tequity | 41,765 | 37,246 |
| Total\tliabilities\tand\tequity | $305,107 | $271,205 |
| (a) |  |  |

(a) Amounts	represent	the	assets	or	liabilities	of	consolidated	variable	interest	entities	(VIEs).

(b) Amounts	represent	items	for	which	the	Corporation	has	elected	the	fair	value	option.

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

# CONSOLIDATED	STATEMENT	OF	CHANGES	IN	EQUITY

|  | Shares |  | Capital | Surplus	- |  | Accumulated |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Outstanding |  | Surplus\t- | Common |  | Other |  |  |  |
|  | Common | Common | Preferred | Stock\tand | Retained | Comprehensive | Treasury | Noncontrolling | Total |
| In\tmillions | Stock | Stock | Stock | Other | Earnings | Income\t(Loss) | Stock | Interests | Equity |
| Balance\tat\tDecember\t31,\t2009\t(a) | 462 | $2,354 | $7,974 | $8,945 | $13,144 | $(1,962)\t\t $ | (513) | $2,625 | \t $32,567 |
| Cumulative\teffect\tof\tadopting\tASU\t2009-17 |  |  |  |  | (92) | (13) |  |  | (105) |
| Balance\tat\tJanuary\t1,\t2010 | 462 | $2,354 | $7,974 | $8,945 | $13,052 | $(1,975)\t\t $ | (513) | $2,625 | \t $32,462 |
| Net\tincome\t(loss) |  |  |  |  | 3,412 |  |  | (15) | 3,397 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax |  |  |  |  |  | 1,544 |  |  | 1,544 |
| Cash\tdividends\tdeclared |  |  |  |  |  |  |  |  |  |
| Common |  |  |  |  | (204) |  |  |  | (204) |
| Preferred |  |  |  |  | (146) |  |  |  | (146) |
| Redemption\tof\tpreferred\tstock\tand\tnoncontrolling\tinterest |  |  |  |  |  |  |  |  |  |
| Series\tN\t(TARP) |  |  | (7,579) |  |  |  |  |  | (7,579) |
| Preferred\tstock\tdiscount\taccretion |  |  | 252 |  | (252) |  |  |  |  |
| Other |  |  |  | (1) | (3) |  |  |  | (4) |
| Common\tstock\tactivity\t(b) | 65 | 328 |  | 3,113 |  |  |  |  | 3,441 |
| Treasury\tstock\tactivity | (1) |  |  | (62) |  |  | (59) |  | (121) |
| Other |  |  |  | 62 |  |  |  | (14) | 48 |
| Balance\tat\tDecember\t31,\t2010\t(a) | 526 | $2,682 | $647 | $12,057 | $15,859 | $(431)\t\t $ | (572) | $2,596 | \t $32,838 |
| Net\tincome |  |  |  |  | 3,056 |  |  | 15 | 3,071 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax |  |  |  |  |  | 326 |  |  | 326 |
| Cash\tdividends\tdeclared |  |  |  |  |  |  |  |  |  |
| Common |  |  |  |  | (604) |  |  |  | (604) |
| Preferred |  |  |  |  | (56) |  |  |  | (56) |
| Preferred\tstock\tdiscount\taccretion |  |  | 2 |  | (2) |  |  |  |  |
| Common\tstock\tactivity | 1 | 1 |  | 10 |  |  |  |  | 11 |
| Treasury\tstock\tactivity\t(c) |  |  |  | (36) |  |  | 85 |  | 49 |
| Preferred\tstock\tissuance\t–\tSeries\tO\t(d) |  |  | 988 |  |  |  |  |  | 988 |
| Other |  |  |  | 41 |  |  |  | 582 | 623 |
| Balance\tat\tDecember\t31,\t2011\t(a) | 527 | $2,683 | $1,637 | $12,072 | $18,253 | $(105)\t\t $ | (487) | $3,193 | \t $37,246 |
| Net\tincome |  |  |  |  | 3,013 |  |  | (12) | 3,001 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax |  |  |  |  |  | 939 |  |  | 939 |
| Cash\tdividends\tdeclared |  |  |  |  |  |  |  |  |  |
| Common |  |  |  |  | (820) |  |  |  | (820) |
| Preferred |  |  |  |  | (177) |  |  |  | (177) |
| Preferred\tstock\tdiscount\taccretion |  |  | 4 |  | (4) |  |  |  |  |
| Common\tstock\tactivity | 1 | 7 |  | 45 |  |  |  |  | 52 |
| Treasury\tstock\tactivity\t(c) |  |  |  | 51 |  |  | (82) |  | (31) |
| Preferred\tstock\tissuance\t–\tSeries\tP\t(e) |  |  | 1,482 |  |  |  |  |  | 1,482 |
| Preferred\tstock\tissuance\t–\tSeries\tQ\t(f) |  |  | 467 |  |  |  |  |  | 467 |
| Other |  |  |  | 25 |  |  |  | (419) | (394) |
| Balance\tat\tDecember\t31,\t2012\t(a)\t(g) | 528 | $2,690 | $3,590 | $12,193 | $20,265 | $834 | \t $(569) | $2,762 | \t $41,765 |
| (a) |  |  |  |  |  |  |  |  |  |

(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) Includes	63.9	million	common	shares	issuance,	the	net	proceeds	of	which	were	used	together	with	other	available	funds	to	redeem	the	Series	N	(TARP)	Preferred	Stock,	for	a	$3.4	billion	net	increase	in	total equity.

(c) Net	treasury	stock	activity	totaled	less	than	.5	million	shares	issued	or	redeemed.

(g) 5,001	Series	M	preferred	shares	with	a	$1	par	value	were	issued	and	redeemed	on	December	10,	2012.

# CONSOLIDATED	STATEMENT	OF	CASH	FLOWS

|  |  | Year	ended	December	31 |  |
| :--- | :--- | :--- | :--- |
| In\tmillions | 2012 | 2011 | 2010 |
| Operating\tActivities |  |  |  |
| Net\tincome | $3,001 | $3,071 | $3,397 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\t(used)\tby\toperating\tactivities |  |  |  |
| Provision\tfor\tcredit\tlosses | 987 | 1,152 | 2,502 |
| Depreciation\tand\tamortization | 1,159 | 1,140 | 1,059 |
| Deferred\tincome\ttaxes | 570 | 840 | 1,019 |
| Net\tgains\ton\tsales\tof\tsecurities | (204) | (249) | (426) |
| Net\tother-than-temporary\timpairments | 111 | 152 | 325 |
| Charge\tfor\tgoodwill\timpairment | 45 |  |  |
| Gains\ton\tsales\tof\tVisa\tClass\tB\tcommon\tshares | (267) |  |  |
| Mortgage\tservicing\trights\tvaluation\tadjustment | 284 | 726 | 434 |
| Gain\ton\tsale\tof\tPNC\tGlobal\tInvestment\tServicing |  |  | (639) |
| Gains\ton\tBlackRock\ttransactions |  |  | (160) |
| Noncash\tcharges\ton\ttrust\tpreferred\tsecurities\tredemptions | 295 | 198 |  |
| Undistributed\tearnings\tof\tBlackRock | (302) | (262) | (291) |
| Net\tchange\tin |  |  |  |
| Trading\tsecurities\tand\tother\tshort-term\tinvestments | 1,350 | 330 | 468 |
| Loans\theld\tfor\tsale | (1,125) | 77 | (1,154) |
| Other\tassets | 1,928 | (4,142) | 753 |
| Accrued\texpenses\tand\tother\tliabilities | (697) | 3,330 | (1,571) |
| Other | (308) | (328) | (904) |
| Net\tcash\tprovided\t(used)\tby\toperating\tactivities | 6,827 | 6,035 | 4,812 |
| Investing\tActivities |  |  |  |
| Sales |  |  |  |
| Securities\tavailable\tfor\tsale | 9,358 | 20,533 | 23,343 |
| BlackRock\tstock\tvia\tsecondary\tcommon\tstock\toffering |  |  | 1,198 |
| Loans | 1,611 | 1,770 | 1,868 |
| Repayments/maturities |  |  |  |
| Securities\tavailable\tfor\tsale | 9,195 | 6,074 | 7,730 |
| Securities\theld\tto\tmaturity | 3,174 | 2,859 | 2,433 |
| Purchases |  |  |  |
| Securities\tavailable\tfor\tsale | (17,164) | (25,551) | (36,653) |
| Securities\theld\tto\tmaturity | (1,479) | (1,607) | (1,296) |
| Loans | (1,796) | (2,401) | (4,275) |
| Net\tchange\tin |  |  |  |
| Federal\tfunds\tsold\tand\tresale\tagreements | 732 | 1,487 | (1,313) |
| Interest-earning\tdeposits\twith\tbanks | (2,526) | 441 | 2,684 |
| Loans | (14,333) | (10,224) | 7,855 |
| Net\tcash\treceived\tfrom\t(paid\tfor)\tacquisition\tand\tdivestiture\tactivity | (4,130) | 430 | 2,202 |
| Purchases\tof\tcorporate\tand\tbank\towned\tlife\tinsurance | – | (200) | (800) |
| Other\t(a) | 97 | (160) | 753 |
| Net\tcash\tprovided\t(used)\tby\tinvesting\tactivities | (17,261) | (6,549) | 5,729 |

(continued	on	following	page)

|  | Year	ended	December	31 | Year	ended	December	31 |  |
| :--- | :--- | :--- | :--- |
| In\tmillions | 2012 | 2011 | 2010 |
| Financing\tActivities |  |  |  |
| Net\tchange\tin |  |  |  |
| Noninterest-bearing\tdeposits | $7,149 | $8,909 | $5,872 |
| Interest-bearing\tdeposits | 902 | (4,863) | (8,844) |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | (2) | (1,151) | 152 |
| Federal\tHome\tLoan\tborrowings | (1,000) | 1,000 | (280) |
| Commercial\tpaper | 4,762 | 227 | 1,929 |
| Other\tborrowed\tfunds | (279) | (789) | (1,549) |
| Sales/issuances |  |  |  |
| Federal\tHome\tLoan\tborrowings | 13,000 | 1,000 |  |
| Bank\tnotes\tand\tsenior\tdebt | 2,093 | 1,244 | 3,230 |
| Subordinated\tdebt | 995 |  |  |
| Commercial\tpaper | 16,480 | 9,565 | 4,424 |
| Other\tborrowed\tfunds | 1,011 | 460 | 396 |
| Preferred\tstock | 2,449 | 988 |  |
| Common\tand\ttreasury\tstock | 158 | 72 | 3,486 |
| Repayments/maturities |  |  |  |
| Federal\tHome\tLoan\tborrowings | (10,500) | (1,076) | (4,373) |
| Bank\tnotes\tand\tsenior\tdebt | (4,037) | (2,612) | (2,808) |
| Subordinated\tdebt | (1,769) | (1,942) | (257) |
| Commercial\tpaper | (17,060) | (8,236) | (3,638) |
| Other\tborrowed\tfunds | (1,090) | (741) | (1,039) |
| Preferred\tstock\t–\tTARP |  |  | (7,579) |
| Redemption\tof\tnoncontrolling\tinterest\tand\tother\tpreferred\tstock | (500) |  | (100) |
| Acquisition\tof\ttreasury\tstock | (216) | (73) | (204) |
| Preferred\tstock\tcash\tdividends\tpaid | (177) | (56) | (146) |
| Common\tstock\tcash\tdividends\tpaid | (820) | (604) | (204) |
| Net\tcash\tprovided\t(used)\tby\tfinancing\tactivities | 11,549 | 1,322 | (11,532) |
| Net\tIncrease\t(Decrease)\tIn\tCash\tAnd\tDue\tFrom\tBanks | 1,115 | 808 | (991) |
| Cash\tand\tdue\tfrom\tbanks\tat\tbeginning\tof\tperiod | 4,105 | 3,297 | 4,288 |
| Cash\tand\tdue\tfrom\tbanks\tat\tend\tof\tperiod | $5,220 | $4,105 | $3,297 |
| Supplemental\tDisclosures |  |  |  |
| Interest\tpaid | $1,208 | $1,517 | $1,871 |
| Income\ttaxes\tpaid | 39 | 842 | 752 |
| Income\ttaxes\trefunded | 16 | 41 | 54 |
| Non-cash\tInvesting\tand\tFinancing\tItems |  |  |  |
| Transfer\tfrom\t(to)\tloans\tto\t(from)\tloans\theld\tfor\tsale,\tnet | 665 | 926 | 890 |
| Transfer\tfrom\tloans\tto\tforeclosed\tassets | 1,042 | 822 | 1,218 |

(a) Includes	the	impact	of	the	consolidation	of	variable	interest	entities	as	of	January	1,	2010.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# BUSINESS

PNC	is	one	of	the	largest	diversified	financial	services	companies	in	the	United States	and	is	headquartered	in	Pittsburgh,	Pennsylvania.

PNC	has	businesses	engaged	in	retail	banking,	corporate	and	institutional banking,	asset	management,	and	residential	mortgage	banking,	providing	many of	its	products	and	services	nationally,	as	well	as,	products	and	services	in PNC's	primary	geographic	markets	located	in	Pennsylvania,	Ohio,	New	Jersey, Michigan,	Illinois,	Maryland,	Indiana,	North	Carolina,	Florida,	Kentucky, Washington,	D.C.,	Delaware,	Alabama,	Virginia,	Georgia,	Missouri,	Wisconsin and	South	Carolina.	PNC	also	provides	certain	products	and	services internationally.

# NOTE	1	ACCOUNTING	POLICIES

# BASIS	OF	FINANCIAL	STATEMENT	PRESENTATION

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

We	prepared	these	consolidated	financial	statements	in	accordance	with accounting	principles	generally	accepted	in	the	United	States	of	America (GAAP).	We	have	eliminated	intercompany	accounts	and	transactions.	We	have also	reclassified	certain	prior	year	amounts	to	conform	to	the	2012	presentation. These	reclassifications	did	not	have	a	material	impact	on	our	consolidated financial	condition	or	results	of	operations.	We	evaluate	the	materiality	of identified	errors	in	the	financial	statements	using	both	an	income	statement	and	a balance	sheet	approach,	based	on	relevant	quantitative	and	qualitative	factors. Net	income	includes	certain	adjustments	to	correct	immaterial	errors	related	to previously	reported	periods.

As	described	in	Note	2	Acquisition	and	Divestiture	Activity,	on	March	2,	2012, PNC	acquired	100%	of	the	issued	and	outstanding	common	stock	of	RBC	Bank (USA),	the	US	retail	banking	subsidiary	of	Royal	Bank	of	Canada.	As	part	of	the acquisition,	PNC	also	purchased	a	credit	card	portfolio	from	RBC	Bank (Georgia),	National	Association.	The	transactions	added	approximately	$18.1 billion	of	deposits	and	$14.5	billion	of	loans	to	PNC's	Consolidated	Balance Sheet.	In	addition,	see	discussion	of	the	July	1,	2010	sale	of	PNC	Global Investment	Servicing	Inc.	The	Consolidated	Income	Statement	and	related	Notes To	Consolidated	Financial	Statements	reflect	the	global	investment	servicing business	as	discontinued	operations	for	2010.

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

# USE	OF	ESTIMATES

We	prepared	these	consolidated	financial	statements	using	financial	information available	at	the	time,	which	requires	us	to	make	estimates	and	assumptions	that affect	the	amounts	reported.	Our	most	significant	estimates	pertain	to	our	fair value	measurements,	allowances	for	loan	and	lease	losses	and	unfunded	loan commitments	and	letters	of	credit,	and	accretion	on	purchased	impaired	loans. Actual	results	may	differ	from	the	estimates	and	the	differences	may	be	material to	the	consolidated	financial	statements.

# INVESTMENT	IN	BLACKROCK,	INC.

We	account	for	our	investment	in	the	common	stock	and	Series	B	Preferred Stock	of	BlackRock	(deemed	to	be	in-substance	common	stock)	under	the equity	method	of	accounting.	In	May	2012,	we	exchanged	2	million	shares	of Series	B	Preferred	Stock	of	BlackRock	for	an	equal	number	of	shares	of BlackRock	common	stock.	The	exchange	transaction	had	no	impact	on	the carrying	value	of	our	investment	in	BlackRock	or	our	use	of	the	equity	method of	accounting.	The	investment	in	BlackRock	is	reflected	on	our	Consolidated Balance	Sheet	in	Equity	investments,	while	our	equity	in	earnings	of	BlackRock is	reported	on	our	Consolidated	Income	Statement	in	Asset	management revenue.

As	described	in	Note	16	Stock	Based	Compensation	Plans,	we	also	hold	shares of	BlackRock	Series	C	Preferred	Stock	pursuant	to	our	obligation	to	partially fund	a	portion	of	certain	BlackRock	long-term	incentive	plan	(LTIP)	programs. Since	these	preferred	shares	are	not	deemed	to	be	in	substance	common	stock, we	have	elected	to	account	for	these	preferred	shares	at	fair	value	and	the changes	in	fair	value	will	offset	the	impact	of	marking-to-market	the	obligation to	deliver	these	shares	to	BlackRock.	Our	investment	in	the	BlackRock	Series	C Preferred	Stock	is	included	on	our	Consolidated	Balance	Sheet	in	Other	assets. Our	obligation	to	transfer	these	shares	to	BlackRock	is	classified	as	a	derivative not	designated	as	a	hedging	instrument	under	GAAP	as	disclosed	in	Note	17 Financial	Derivatives.

In	September	2011,	we	delivered	approximately	1.3	million	shares	of	the BlackRock	Series	C	Preferred	Stock	to	BlackRock	in	connection	with	our obligation.

On	January	31,	2013,	we	transferred	an	additional	205,350	shares	to	BlackRock in	connection	with	our	obligation.	After	this	transfer,	we	hold	approximately 1.3	million	shares	of	BlackRock	Series	C	Preferred	Stock	which	are	available	to fund	our	obligation	in	connection	with	the	BlackRock	LTIP	programs.

# BUSINESS	COMBINATIONS

We	record	the	net	assets	of	companies	that	we	acquire	at	their	estimated	fair value	at	the	date	of	acquisition	and	we	include	the	results	of	operations	of	the acquired	companies	on	our	Consolidated	Income	Statement	from	the	date	of acquisition.	We	recognize,	as	goodwill,	the	excess	of	the	acquisition	price	over the	estimated	fair	value	of	the	net	assets	acquired.

# SPECIAL	PURPOSE	ENTITIES

Special	purpose	entities	(SPEs)	are	defined	as	legal	entities	structured	for	a particular	purpose.	We	use	special	purpose	entities	in	various	legal	forms	to conduct	normal	business	activities.	We	review	the	structure	and	activities	of special	purpose	entities	for	possible	consolidation	under	the	applicable	GAAP guidance.

A	variable	interest	entity	(VIE)	is	a	corporation,	partnership,	limited	liability company,	or	any	other	legal	structure	used	to	conduct	activities	or	hold	assets that	either:

•	Does	not	have	equity	investors	with	voting	rights	that	can	directly	or indirectly	make	decisions	about	the	entity's	activities	through	those voting	rights	or	similar	rights,	or

•	Has	equity	investors	that	do	not	provide	sufficient	equity	for	the	entity to	finance	its	activities	without	additional	subordinated	financial support.

A	VIE	often	holds	financial	assets,	including	loans	or	receivables,	real	estate	or other	property.

VIEs	are	assessed	for	consolidation	under	ASC	810	Consolidations	when	we hold	a	variable	interest	in	these	entities.	We	consolidate	a	VIE	if	we	are	its primary	beneficiary.	The	primary	beneficiary	of	a	VIE	is	determined	to	be	the party	that	meets	both	of	the	following	criteria:	(i)	has	the	power	to	make decisions	that	most	significantly	affect	the	economic	performance	of	the	VIE; and	(ii)	has	the	obligation	to	absorb	losses	or	the	right	to	receive	benefits	that	in either	case	could	potentially	be	significant	to	the	VIE.	Upon	consolidation	of	a VIE,	we	recognize	all	of	the	VIE's	assets,	liabilities	and	noncontrolling	interests on	our	Consolidated	Balance	Sheet.	See	Note	3	Loan	Sale	and	Servicing Activities	and	Variable	Interest	Entities	for	information	about	VIEs	that	we	do not	consolidate	but	in	which	we	hold	a	significant	variable	interest.

On	January	1,	2010,	we	adopted	Accounting	Standard	Update	(ASU)	2009-17, Consolidations	(Topic	810):	Improvements	to	Financial	Reporting	by Enterprises	Involved	with	Variable	Interest	Entities.	This	guidance	replaces previous	guidance	by	requiring	an	enterprise	to	perform	a	qualitative	analysis	as opposed	to	a	quantitative	analysis	to	determine	if	it	is	the	primary	beneficiary	of a	VIE.	The	qualitative	analysis	considers	the	purpose	and	the	design	of	the	VIE as	well	as	the	risks	that	the	VIE	was	designed	to	either	create	or	pass	through	to variable	interest	holders.	This	guidance	also

removed	the	former	scope	exception	for	qualifying	special-purpose	entities, contained	new	criteria	for	determining	the	primary	beneficiary	of	a	VIE,	and increased	the	frequency	of	required	reassessments	to	determine	whether	an	entity is	the	primary	beneficiary	of	a	VIE.	As	a	result	of	the	adoption	of	ASU	2009-17, we	consolidated	Market	Street	Funding	LLC	(Market	Street),	a	credit	card securitization	trust,	and	certain	Low	Income	Housing	Tax	Credit	(LIHTC) investments.

We	earn	interest	and	noninterest	income	from	various	sources,	including: •	Lending,

•	Securities	portfolio,

•	Asset	management,

•	Certain	private	equity	activities,	and

•	Securities	and	derivatives	trading	activities,	including	foreign exchange.

# We	earn	fees	and	commissions	from:

•	Issuing	loan	commitments,	standby	letters	of	credit	and	financial guarantees,

•	Selling	various	insurance	products,

•	Providing	treasury	management	services,

•	Providing	merger	and	acquisition	advisory	and	related	services,	and •	Participating	in	certain	capital	markets	transactions.

Revenue	earned	on	interest-earning	assets	including	unearned	income	and	the amortization/accretion	of	premiums	or	discounts	recognized	on	acquired	loans	is recognized	based	on	the	constant	effective	yield	of	the	financial	instrument,	or based	on	other	applicable	accounting	guidance.

Asset	management	fees	are	generally	based	on	a	percentage	of	the	fair	value	of the	assets	under	management.	The	caption	Asset	management	also	includes	our share	of	the	earnings	of	BlackRock	recognized	under	the	equity	method	of accounting.	This	caption	also	includes	any	performance	fees	which	are	generally based	on	a	percentage	of	the	returns	on	such	assets	and	are	recorded	as	earned.

Service	charges	on	deposit	accounts	are	recognized	when	earned.	Brokerage	fees and	gains	and	losses	on	the	sale	of	securities	and	certain	derivatives	are recognized	on	a	trade-date	basis.

We	record	private	equity	income	or	loss	based	on	changes	in	the	valuation	of	the underlying	investments	or	when	we	dispose	of	our	interest.

We	recognize	gain/(loss)	on	changes	in	the	fair	value	of	certain	financial instruments	where	we	have	elected	the	fair

value	option.	These	financial	instruments	include	certain	commercial	and residential	mortgage	loans	originated	for	sale,	certain	residential	mortgage portfolio	loans,	resale	agreements	and	our	investment	in	BlackRock	Series	C preferred	stock.	We	also	recognize	gain/(loss)	on	changes	in	the	fair	value	of residential	mortgage	servicing	rights	(MSRs),	which	are	measured	at	fair	value.

We	recognize	revenue	from	servicing	residential	mortgages,	commercial mortgages	and	other	consumer	loans	as	earned	based	on	the	specific	contractual terms.	These	revenues,	as	well	as	impairment	on	servicing	rights,	are	reported	on the	Consolidated	Income	Statement	in	the	line	items	Residential	mortgage, Corporate	services	and	Consumer	services.	We	recognize	revenue	from securities,	derivatives	and	foreign	exchange	trading,	as	well	as	securities underwriting	activities,	as	these	transactions	occur	or	as	services	are	provided. We	recognize	gains	from	the	sale	of	loans	upon	receipt	of	cash.

When	appropriate,	revenue	is	reported	net	of	associated	expenses	in	accordance with	GAAP.

# CASH	AND	CASH	EQUIVALENTS

Cash	and	due	from	banks	are	considered	"cash	and	cash	equivalents"	for financial	reporting	purposes.

# INVESTMENTS

We	hold	interests	in	various	types	of	investments.	The	accounting	for	these investments	is	dependent	on	a	number	of	factors	including,	but	not	limited	to, items	such	as:

•	Ownership	interest,

•	Our	plans	for	the	investment,	and

•	The	nature	of	the	investment.

# DEBT	SECURITIES

Debt	securities	are	recorded	on	a	trade-date	basis.	We	classify	debt	securities	as held	to	maturity	and	carry	them	at	amortized	cost	if	we	have	the	positive	intent and	ability	to	hold	the	securities	to	maturity.	Debt	securities	that	we	purchase	for short-term	appreciation,	trading	purposes	or	those	with	non-bifurcated	embedded derivatives	are	carried	at	fair	value	and	classified	as	Trading	securities	on	our Consolidated	Balance	Sheet.	Realized	and	unrealized	gains	and	losses	on	trading securities	are	included	in	Other	noninterest	income.

Debt	securities	not	classified	as	held	to	maturity	or	trading	are	designated	as securities	available	for	sale	and	carried	at	fair	value	with	unrealized	gains	and losses,	net	of	income	taxes,	reflected	in	Accumulated	other	comprehensive income	(loss).

On	at	least	a	quarterly	basis,	we	review	all	debt	securities	that	are	in	an unrealized	loss	position	for	other	than	temporary	impairment	(OTTI).	An investment	security	is	deemed	impaired	if	the	fair	value	of	the	investment	is	less than	its	amortized	cost.	Amortized	cost	includes	adjustments	(if	any)	made	to	the cost	basis	of	an	investment	for	accretion,	amortization,	previous	other-than- temporary	impairments	and

hedging	gains	and	losses.	After	an	investment	security	is	determined	to	be impaired,	we	evaluate	whether	the	decline	in	value	is	other-than-temporary.	As part	of	this	evaluation,	we	take	into	consideration	whether	we	intend	to	sell	the security	or	whether	it	is	more	likely	than	not	that	we	will	be	required	to	sell	the security	before	expected	recovery	of	its	amortized	cost.	We	also	consider whether	or	not	we	expect	to	receive	all	of	the	contractual	cash	flows	from	the investment	based	on	factors	that	include,	but	are	not	limited	to:	the creditworthiness	of	the	issuer	and,	in	the	case	of	securities	collateralized	by consumer	and	commercial	loan	assets,	the	historical	and	projected	performance of	the	underlying	collateral.	In	addition,	we	may	also	evaluate	the	business	and financial	outlook	of	the	issuer,	as	well	as	broader	industry	and	sector performance	indicators.	Declines	in	the	fair	value	of	available	for	sale	debt securities	that	are	deemed	other-than-temporary	and	are	attributable	to	credit deterioration	are	recognized	on	our	Consolidated	Income	Statement	in	the	period in	which	the	determination	is	made.	Declines	in	fair	value	which	are	deemed other-than-temporary	and	attributable	to	factors	other	than	credit	deterioration are	recognized	in	Accumulated	other	comprehensive	income	(loss)	on	our Consolidated	Balance	Sheet.

We	include	all	interest	on	debt	securities,	including	amortization	of	premiums and	accretion	of	discounts	on	investment	securities,	in	net	interest	income	using the	constant	effective	yield	method.	Effective	yields	reflect	either	the	effective interest	rate	implicit	in	the	security	at	the	date	of	acquisition	or	the	effective interest	rate	determined	based	on	significantly	improved	cash	flows	subsequent to	impairment.	We	compute	gains	and	losses	realized	on	the	sale	of	available	for sale	debt	securities	on	a	specific	security	basis.	These	securities	gains/(losses)	are included	in	the	caption	Net	gains	on	sales	of	securities	on	the	Consolidated Income	Statement.

In	certain	situations,	management	may	elect	to	transfer	certain	debt	securities from	the	securities	available	for	sale	to	the	held	to	maturity	classification.	In	such cases,	any	unrealized	gain	or	loss	included	in	Accumulated	other	comprehensive income	(loss)	at	the	time	of	transfer	is	amortized	over	the	remaining	life	of	the security	as	a	yield	adjustment	such	that	only	the	remaining	initial discount/premium	from	the	purchase	date	is	recognized	in	income.

# EQUITY	SECURITIES	AND	PARTNERSHIP	INTERESTS

We	account	for	equity	securities	and	equity	investments	other	than	BlackRock and	private	equity	investments	under	one	of	the	following	methods: •	Marketable	equity	securities	are	recorded	on	a	trade-date	basis	and	are accounted	for	based	on	the	securities'	quoted	market	prices	from	a national	securities	exchange.	Those	purchased	with	the	intention	of recognizing	short-term	profits	are	classified	as	trading	and	included	in trading	securities	on	our	Consolidated	Balance	Sheet.	Both	realized and	unrealized	gains	and	losses	on	trading	securities

are	included	in	Noninterest	income.	Marketable	equity	securities	not classified	as	trading	are	designated	as	securities	available	for	sale	with unrealized	gains	and	losses,	net	of	income	taxes,	reflected	in Accumulated	other	comprehensive	income	(loss).	Any	unrealized losses	that	we	have	determined	to	be	other-than-temporary	on securities	classified	as	available	for	sale	are	recognized	in	current period	earnings.

•	For	investments	in	limited	partnerships,	limited	liability	companies	and other	investments	that	are	not	required	to	be	consolidated,	we	use either	the	equity	method	or	the	cost	method	of	accounting.	We	use	the equity	method	for	general	and	limited	partner	ownership	interests	and limited	liability	companies	in	which	we	are	considered	to	have significant	influence	over	the	operations	of	the	investee	and	when	the net	asset	value	of	our	investment	reflects	our	economic	interest	in	the underlying	investment.	Under	the	equity	method,	we	record	our	equity ownership	share	of	net	income	or	loss	of	the	investee	in	Noninterest income.	We	use	the	cost	method	for	all	other	investments.	Under	the cost	method,	there	is	no	change	to	the	cost	basis	unless	there	is	an other-than-temporary	decline	in	value	or	dividends	are	received.	If	the decline	is	determined	to	be	other-than-temporary,	we	write	down	the cost	basis	of	the	investment	to	a	new	cost	basis	that	represents realizable	value.	The	amount	of	the	write-down	is	accounted	for	as	a loss	included	in	Other	noninterest	income.	Distributions	received	from the	income	of	an	investee	on	cost	method	investments	are	included	in Noninterest	income.	Investments	described	above	are	included	in	the caption	Equity	investments	on	the	Consolidated	Balance	Sheet.

# PRIVATE	EQUITY	INVESTMENTS

We	report	private	equity	investments,	which	include	direct	investments	in companies,	affiliated	partnership	interests	and	indirect	investments	in	private equity	funds,	at	estimated	fair	value.	These	estimates	are	based	on	available information	and	may	not	necessarily	represent	amounts	that	we	will	ultimately realize	through	distribution,	sale	or	liquidation	of	the	investments.	Fair	value	of publicly	traded	direct	investments	are	determined	using	quoted	market	prices and	are	subject	to	various	discount	factors	for	legal	or	contractual	sales restrictions,	when	appropriate.	The	valuation	procedures	applied	to	direct investments	in	private	companies	include	techniques	such	as	multiples	of adjusted	earnings	of	the	entity,	independent	appraisals,	anticipated	financing	and sale	transactions	with	third	parties,	or	the	pricing	used	to	value	the	entity	in	a recent	financing	transaction.	We	value	affiliated	partnership	interests	based	on the	underlying	investments	of	the	partnership	using	procedures	consistent	with those	applied	to	direct	investments.	We	value	indirect	investments	in	private equity	funds	based	on	net	asset	value	as	provided	in	the

financial	statements	that	we	receive	from	their	managers.	Due	to	the	time	lag	in our	receipt	of	the	financial	information	and	based	on	a	review	of	investments and	valuation	techniques	applied,	adjustments	to	the	manager-provided	values are	made	when	available	recent	portfolio	company	information	or	market information	indicates	significant	changes	in	value	from	that	provided	by	the manager	of	the	fund.	We	include	all	private	equity	investments	on	the Consolidated	Balance	Sheet	in	the	caption	Equity	investments.	Changes	in	the fair	value	of	private	equity	investments	are	recognized	in	noninterest	income.

We	consolidate	affiliated	partnerships	when	we	are	the	general	partner	and	have determined	that	we	have	control	of	the	partnership	or	are	the	primary	beneficiary if	the	entity	is	a	VIE.	The	portion	we	do	not	own	is	reflected	in	the	caption Noncontrolling	interests	on	the	Consolidated	Balance	Sheet.

Loans	are	classified	as	held	for	investment	when	management	has	both	the	intent and	ability	to	hold	the	loan	for	the	foreseeable	future,	or	until	maturity	or	payoff. Management's	intent	and	view	of	the	foreseeable	future	may	change	based	on changes	in	business	strategies,	the	economic	environment,	market	conditions	and the	availability	of	government	programs.

Measurement	of	delinquency	status	is	based	on	the	contractual	terms	of	each loan.	Loans	that	are	30	days	or	more	past	due	in	terms	of	payment	are	considered delinquent.

Except	as	described	below,	loans	held	for	investment	are	stated	at	the	principal amounts	outstanding,	net	of	unearned	income,	unamortized	deferred	fees	and costs	on	originated	loans,	and	premiums	or	discounts	on	purchased	loans. Interest	on	performing	loans	(excluding	purchased	impaired	loans,	which	is further	discussed	below)	is	accrued	based	on	the	principal	amount	outstanding and	recorded	in	interest	income	as	earned	using	the	constant	effective	yield method.	Loan	origination	fees,	direct	loan	origination	costs,	and	loan	premiums and	discounts	are	deferred	and	accreted	or	amortized	into	net	interest	income, over	periods	not	exceeding	the	contractual	life	of	the	loan.

When	loans	are	redesignated	from	held	for	investment	to	held	for	sale,	specific reserves	and	allocated	pooled	reserves	included	in	the	allowance	for	loan	and lease	losses	(ALLL)	are	charged-off	to	reduce	the	basis	of	the	loans	to	the	lower of	cost	or	estimated	fair	value	less	cost	to	sell.

In	addition	to	originating	loans,	we	also	acquire	loans	through	portfolio purchases	or	acquisitions	of	other	financial	services	companies.	For	certain acquired	loans	that	have	experienced	a	deterioration	of	credit	quality,	we	follow the	guidance	contained	in	ASC	310-30	Loans	and	Debt	Securities	Acquired	with Deteriorated	Credit	Quality.	Under	this	guidance,	acquired	purchased	impaired loans	are	to	be	recorded	at	fair

value	without	the	carryover	of	any	existing	valuation	allowances.	Evidence	of credit	quality	deterioration	may	include	information	and	statistics	regarding bankruptcy	events,	updated	borrower	credit	scores,	such	as	Fair	Isaac Corporation	scores	(FICO),	past	due	status,	and	updated	loan-to-value	(LTV) ratios.	We	review	the	loans	acquired	for	evidence	of	credit	quality	deterioration and	determine	if	it	is	probable	that	we	will	be	unable	to	collect	all	contractual amounts	due,	including	both	principal	and	interest.	When	both	conditions	exist, we	estimate	the	amount	and	timing	of	undiscounted	expected	cash	flows	at acquisition	for	each	loan	either	individually	or	on	a	pool	basis.	We	estimate	the cash	flows	expected	to	be	collected	using	internal	models	that	incorporate management's	best	estimate	of	current	key	assumptions,	such	as	default	rates, loss	severity	and	payment	speeds.	Collateral	values	are	also	incorporated	into cash	flow	estimates.	Late	fees,	which	are	contractual	but	not	expected	to	be collected,	are	excluded	from	expected	future	cash	flows.

The	accretable	yield	is	calculated	based	upon	the	difference	between	the undiscounted	expected	future	cash	flows	of	the	loans	and	the	recorded investment	in	the	loans.	This	amount	is	accreted	into	income	over	the	life	of	the loan	or	pool	using	the	constant	effective	yield	method.	Subsequent	decreases	in expected	cash	flows	that	are	attributable,	at	least	in	part,	to	credit	quality	are recognized	as	impairments	through	a	charge	to	the	provision	for	credit	losses resulting	in	an	increase	in	the	ALLL.	Subsequent	increases	in	expected	cash flows	are	recognized	as	a	recovery	of	previously	recorded	ALLL	or prospectively	through	an	adjustment	of	the	loan's	or	pool's	yield	over	its remaining	life.

The	nonaccretable	yield	represents	the	difference	between	the	expected undiscounted	cash	flows	of	the	loans	and	the	total	contractual	cash	flows (including	principal	and	future	interest	payments)	at	acquisition	and	throughout the	remaining	lives	of	the	loans.

# LEASES

We	provide	financing	for	various	types	of	equipment	including	aircraft,	energy and	power	systems	and	vehicles	through	a	variety	of	lease	arrangements.	Direct financing	leases	are	carried	at	the	aggregate	of	lease	payments	plus	estimated residual	value	of	the	leased	property,	less	unearned	income.	Leveraged	leases,	a form	of	financing	lease,	are	carried	net	of	nonrecourse	debt.	We	recognize income	over	the	term	of	the	lease	using	the	constant	effective	yield	method. Lease	residual	values	are	reviewed	for	other-than-temporary	impairment	at	least annually.	Gains	or	losses	on	the	sale	of	leased	assets	are	included	in	Other noninterest	income	while	valuation	adjustments	on	lease	residuals	are	included in	Other	noninterest	expense.

# LOAN	SALES,	LOAN	SECURITIZATIONS	AND	RETAINED	INTERESTS

We	recognize	the	sale	of	loans	or	other	financial	assets	when	the	transferred assets	are	legally	isolated	from	our	creditors	and	the	appropriate	accounting criteria	are	met.	We	have	sold	mortgage,	credit	card	and	other	loans	through securitization	transactions.	In	a	securitization,	financial	assets	are	transferred into	trusts	or	to	SPEs	in	transactions	to	effectively	legally	isolate	the	assets	from PNC.	Where	the	transferor	is	a	depository	institution,	legal	isolation	is accomplished	through	compliance	with	specific	rules	and	regulations	of	the relevant	regulatory	authorities.	Where	the	transferor	is	not	a	depository institution,	legal	isolation	is	accomplished	through	utilization	of	a	two-step securitization	structure.

ASC	Topic	860	Accounting	For	Transfers	of	Financial	Assets	requires	a	true	sale legal	analysis	to	address	several	relevant	factors,	such	as	the	nature	and	level	of recourse	to	the	transferor,	and	the	amount	and	nature	of	retained	interests	in	the loans	sold.	The	analytical	conclusion	as	to	a	true	sale	is	never	absolute	and unconditional,	but	contains	qualifications	based	on	the	inherent	equitable	powers of	a	bankruptcy	court,	as	well	as	the	unsettled	state	of	the	common	law,	or powers	of	the	FDIC	as	a	conservator	or	receiver.	Once	the	legal	isolation	test	has been	met,	other	factors	concerning	the	nature	and	extent	of	the	transferor's control	and	the	rights	of	the	transferee	over	the	transferred	assets	are	taken	into account	in	order	to	determine	whether	derecognition	of	assets	is	warranted.

In	a	securitization,	the	trust	or	SPE	issues	beneficial	interests	in	the	form	of senior	and	subordinated	securities	backed	or	collateralized	by	the	assets	sold	to the	trust.	The	senior	classes	of	the	asset-backed	securities	typically	receive investment	grade	credit	ratings	at	the	time	of	issuance.	These	ratings	are generally	achieved	through	the	creation	of	lower-rated	subordinated	classes	of asset-backed	securities,	as	well	as	subordinated	or	residual	interests.	In	certain cases,	we	may	retain	a	portion	or	all	of	the	securities	issued,	interest-only	strips, one	or	more	subordinated	tranches,	servicing	rights	and,	in	some	cases,	cash reserve	accounts.	Securitized	loans	are	removed	from	the	balance	sheet	and	a	net gain	or	loss	is	recognized	in	noninterest	income	at	the	time	of	initial	sale.	Gains or	losses	recognized	on	the	sale	of	the	loans	depend	on	the	fair	value	of	the	loans sold	and	the	retained	interests	at	the	date	of	sale.	We	generally	estimate	the	fair value	of	the	retained	interests	based	on	the	present	value	of	future	expected	cash flows	using	assumptions	as	to	discount	rates,	interest	rates,	prepayment	speeds, credit	losses	and	servicing	costs,	if	applicable.

With	the	exception	of	loan	sales	to	certain	US	government	chartered	entities,	our loan	sales	and	securitizations	are	generally	structured	without	recourse	to	us except	for	representations	and	warranties	and	with	no	restrictions	on	the	retained interests.	We	originate,	sell	and	service	mortgage

loans	under	the	Federal	National	Mortgage	Association	(FNMA)	Delegated Underwriting	and	Servicing	(DUS)	program.	Under	the	provisions	of	the	DUS program,	we	participate	in	a	loss-sharing	arrangement	with	FNMA.	We participated	in	a	similar	program	with	the	Federal	Home	Loan	Mortgage Corporation	(FHLMC).	When	we	are	obligated	for	loss-sharing	or	recourse,	our policy	is	to	record	such	liabilities	initially	at	fair	value	and	subsequently	reserve for	estimated	losses	in	accordance	with	guidance	contained	in	applicable	GAAP. Refer	to	Note	24	Commitments	and	Guarantees	for	more	information	about	our obligations	related	to	sales	of	loans	under	these	programs.

On	January	1,	2010,	we	adopted	ASU	2009-16	Transfers	and	Servicing	(Topic 860):	Accounting	For	Transfers	of	Financial	Assets.	This	guidance	removed	the concept	of	a	qualifying	special-purpose	entity	under	previous	GAAP.	The guidance	further	clarified	that	an	entity	must	consider	all	arrangements	or agreements	made	contemporaneously	with	or	in	contemplation	of	a	transfer	even if	not	entered	into	at	the	time	of	the	transfer	when	applying	surrender	of	control conditions.	Additionally,	this	guidance	established	conditions	for	accounting	and reporting	for	transfer	of	a	portion	of	a	financial	asset,	modified	the	asset sale/derecognition	criteria,	and	changed	how	retained	interests	are	initially measured.

We	designate	loans	as	held	for	sale	when	we	have	the	intent	to	sell	them.	We transfer	loans	to	the	Loans	held	for	sale	category	at	the	lower	of	cost	or estimated	fair	value	less	cost	to	sell.	At	the	time	of	transfer,	write-downs	on	the loans	are	recorded	as	charge-offs.	We	establish	a	new	cost	basis	upon	transfer. Any	subsequent	lower-of-cost-or-market	adjustment	is	determined	on	an individual	loan	basis	and	is	recognized	as	a	valuation	allowance	with	any charges	included	in	Other	noninterest	income.	Gains	or	losses	on	the	sale	of these	loans	are	included	in	Other	noninterest	income	when	realized.

We	have	elected	to	account	for	certain	commercial	mortgage	loans	held	for	sale at	fair	value.	The	changes	in	the	fair	value	of	these	loans	are	measured	and recorded	in	Other	noninterest	income	each	period.	See	Note	9	Fair	Value	for additional	information.	Also,	we	elected	to	account	for	residential	real	estate loans	held	for	sale,	which	were	not	purchased	impaired	loans,	at	fair	value.

Interest	income	with	respect	to	loans	held	for	sale	classified	as	performing	is accrued	based	on	the	principal	amount	outstanding	and	the	loan's	contractual interest	rate.

In	certain	circumstances,	loans	designated	as	held	for	sale	may	be	transferred	to held	for	investment	based	on	a	change	in	strategy.	We	transfer	these	loans	at	the lower	of	cost	or	estimated	fair	value;	however,	any	loans	held	for	sale	and designated	at	fair	value	will	remain	at	fair	value	for	the	life	of	the	loan.

# NONPERFORMING	ASSETS

Nonperforming	assets	include	nonaccrual	loans	and	leases,	including nonperforming	troubled	debt	restructurings	(TDRs)	and	other	real	estate	owned and	foreclosed	assets.

Nonperforming	loans	are	those	loans	that	have	deteriorated	in	credit	quality	to the	extent	that	full	collection	of	contractual	principal	and	interest	is	not	probable. When	a	loan	is	determined	to	be	nonperforming	(and	as	a	result	is	impaired),	the accrual	of	interest	is	ceased	and	the	loan	is	classified	as	nonaccrual.	The	current year	accrued	and	uncollected	interest	is	reversed	out	of	net	interest	income.

Additionally,	any	prior	year	accrued	and	uncollected	interest	is	charged-off.

A	loan	acquired	and	accounted	for	under	ASC	310-30	Loans	and	Debt	Securities Acquired	with	Deteriorated	Credit	Quality	is	reported	as	an	accruing	loan	and	a performing	asset	due	to	the	accretion	of	interest	income.

We	generally	classify	Commercial	Lending	(Commercial,	Commercial	Real Estate,	and	Equipment	Lease	Financing)	loans	as	nonaccrual	(and	therefore nonperforming)	when	we	determine	that	the	collection	of	interest	or	principal	is not	probable	or	when	delinquency	of	interest	or	principal	payments	has	existed for	90	days	or	more	and	the	loans	are	not	well-secured	and/or	in	the	process	of collection.	A	loan	is	considered	well-secured	when	the	collateral	in	the	form	of liens	on	(or	pledges	of)	real	or	personal	property,	including	marketable securities,	has	a	realizable	value	sufficient	to	discharge	the	debt	in	full,	including accrued	interest.	Such	factors	that	would	lead	to	nonperforming	status	would include,	but	are	not	limited	to,	the	following:

•	Deterioration	in	the	financial	position	of	the	borrower	resulting	in	the loan	moving	from	accrual	to	cash	basis	accounting,

•	The	collection	of	principal	or	interest	is	90	days	or	more	past	due unless	the	asset	is	well-secured	and/or	in	the	process	of	collection, •	Reasonable	doubt	exists	as	to	the	certainty	of	the	borrower's	future debt	service	ability,	whether	90	days	have	passed	or	not, •	The	borrower	has	filed	or	will	likely	file	for	bankruptcy,

•	The	bank	advances	additional	funds	to	cover	principal	or	interest, •	We	are	in	the	process	of	liquidating	the	assets	of	a	commercial borrower,	or

•	We	are	pursuing	remedies	under	a	guarantee.

We	charge-off	commercial	nonaccrual	loans	when	we	determine	that	a	specific loan,	or	portion	thereof,	is	uncollectible.	This	determination	is	based	on	the specific	facts	and	circumstances	of	the	individual	loan.	In	making	this determination,	we	consider	the	viability	of	the	business	or	project	as	a	going concern,	the	past	due	status	when	the	asset	is	not	well-secured,	the	expected	cash flows	to	repay	the	loan,	the	value	of	the	collateral,	and	the	ability	and	willingness of	any	guarantors	to	perform.

Effective	in	the	second	quarter	of	2011,	the	commercial	nonaccrual	policy	was applied	to	certain	small	business	credit	card	balances.	This	change	resulted	in loans	being	placed	on	nonaccrual	status	when	they	become	90	days	or	more	past due.	We	continue	to	charge-off	these	loans	at	180	days	past	due.

Additionally,	in	general,	for	smaller	dollar	commercial	loans	of	$1	million	or less,	a	partial	or	full	charge-off	will	occur	at	120	days	past	due	for	term	loans	and 180	days	past	due	for	revolvers.

Home	equity	installment	loans,	lines	of	credit,	and	residential	real	estate	loans that	are	not	well-secured	and/or	not	in	the	process	of	collection	are	charged-off	at 180	days	past	due	to	the	estimated	fair	value	of	the	collateral	less	costs	to	sell.

A	consumer	loan	is	considered	well-secured	when	the	collateral	in	the	form	of liens	on	(or	pledges	of)	real	or	personal	property,	including	marketable securities,	has	a	realizable	value	sufficient	to	discharge	the	debt	in	full,	including accrued	interest.	Starting	in	the	first	quarter	of	2012,	home	equity	installment loans	and	lines	of	credit,	whether	well-secured	or	not,	are	classified	as nonaccrual	at	90	days	past	due	instead	of	the	prior	policy	of	nonaccrual classification	at	180	days	past	due.	Well-secured	residential	real	estate	loans	are classified	as	nonaccrual	at	180	days	past	due.

Most	consumer	loans	and	lines	of	credit,	not	secured	by	residential	real	estate, are	charged	off	after	120	to	180	days	past	due.	Generally,	they	are	not	placed	on nonaccrual	status	as	permitted	by	regulatory	guidance.

If	payment	is	received	while	a	loan	is	nonperforming,	generally	the	payment	is first	applied	to	the	recorded	investment;	once	this	principal	obligation	has	been fulfilled,	payments	are	applied	to	recover	any	charged-off	amounts	related	to	the impaired	loan	that	might	exist.	Finally,	if	both	principal	and	any	charge-offs have	been	recovered,	then	the	payment	will	be	recorded	as	interest	income.

A	TDR	is	a	loan	whose	terms	have	been	restructured	in	a	manner	that	grants	a concession	to	a	borrower	experiencing	financial	difficulty.	TDRs	may	include restructuring	certain	terms	of	loans,	receipts	of	assets	from	debtors	in	partial satisfaction	of	loans,	or	a	combination	thereof.

In	April	2011,	the	FASB	issued	ASU	2011-02	Receivables	(Topic	310):	A Creditor's	Determination	of	Whether	a	Restructuring	Is	a	Troubled	Debt Restructuring.	The	ASU	clarifies	when	a	loan	restructuring	constitutes	a	troubled debt	restructuring	(TDR).	This	ASU	(i)	eliminates	the	sole	use	of	the	borrowers' effective	interest	rate	test	to	determine	if	a	concession	has	occurred	on	the	part	of the	creditor,	(ii)	requires	a	restructuring	with	below	market	terms	to	be considered	in	determining	classification	as	a	TDR,	(iii)	specifies	that	a	borrower not	currently	in	default	may	still

be	experiencing	financial	difficulty	when	payment	default	is	"probable	in	the foreseeable	future,"	and	(iv)	specifies	that	a	delay	in	payment	should	be considered	along	with	all	other	factors	in	determining	classification	as	a	TDR. We	identified	as	TDRs	certain	loans	for	which	the	allowance	for	credit	losses had	previously	been	measured	under	a	general	allowance	for	credit	losses methodology.	Upon	identifying	those	loans	as	TDRs,	we	accounted	for	them	as impaired	under	the	guidance	in	ASC	310-10-35.

See	Note	5	Asset	Quality	and	Note	7	Allowances	for	Loan	and	Lease	Losses and	Unfunded	Loan	Commitments	and	Letters	of	Credit	for	additional	TDR information.

Nonaccrual	loans	are	generally	not	returned	to	accrual	status	until	the	obligation is	brought	current	and	the	borrower	has	performed	in	accordance	with	the contractual	terms	for	a	reasonable	period	of	time	and	collection	of	the	contractual principal	and	interest	is	no	longer	in	doubt.

Foreclosed	assets	are	comprised	of	any	asset	seized	or	property	acquired	through a	foreclosure	proceeding	or	acceptance	of	a	deed-in-lieu	of	foreclosure.	Other real	estate	owned	is	comprised	principally	of	commercial	real	estate	and residential	real	estate	properties	obtained	in	partial	or	total	satisfaction	of	loan obligations.	After	obtaining	a	foreclosure	judgment,	or	in	some	jurisdictions	the initiation	of	proceedings	under	a	power	of	sale	in	the	loan	instruments,	the property	will	be	sold.	When	we	are	awarded	title,	we	transfer	the	loan	to foreclosed	assets	included	in	Other	assets	on	our	Consolidated	Balance	Sheet. Property	obtained	in	satisfaction	of	a	loan	is	initially	recorded	at	estimated	fair value	less	cost	to	sell.	Based	upon	the	estimated	fair	value	less	cost	to	sell,	the recorded	investment	of	the	loan	is	adjusted	and,	typically,	a	charge-off	or recovery	is	recognized	to	the	Allowance	for	Loan	and	Lease	Losses	(ALLL).	We estimate	fair	values	primarily	based	on	appraisals,	or	sales	agreements	with	third parties.	Anticipated	recoveries	and	government	guarantees	are	also	considered	in evaluating	the	potential	impairment	of	loans	at	the	date	of	transfer.

Subsequently,	foreclosed	assets	are	valued	at	the	lower	of	the	amount	recorded at	acquisition	date	or	estimated	fair	value	less	cost	to	sell.	Valuation	adjustments on	these	assets	and	gains	or	losses	realized	from	disposition	of	such	property	are reflected	in	Other	noninterest	expense.

See	Note	5	Asset	Quality	and	Note	7	Allowances	for	Loan	and	Lease	Losses and	Unfunded	Loan	Commitments	and	Letters	of	Credit	for	additional information.

# ALLOWANCE	FOR	LOAN	AND	LEASE	LOSSES

We	maintain	the	ALLL	at	a	level	that	we	believe	to	be	appropriate	to	absorb estimated	probable	credit	losses	incurred	in	the	loan	and	lease	portfolios	as	of the	balance	sheet	date.	Our	determination	of	the	allowance	is	based	on	periodic evaluations	of	these	loan	and	lease	portfolios	and	other	relevant	factors.	This evaluation	is	inherently	subjective	as	it	requires	material	estimates,	all	of	which may	be	susceptible	to	significant	change,	including,	among	others: •	Probability	of	default	(PD),

•	Outstanding	balance	of	the	loan,

While	our	reserve	methodologies	strive	to	reflect	all	relevant	risk	factors,	there continues	to	be	uncertainty	associated	with,	but	not	limited	to,	potential imprecision	in	the	estimation	process	due	to	the	inherent	time	lag	of	obtaining information	and	normal	variations	between	estimates	and	actual	outcomes.	We provide	additional	reserves	that	are	designed	to	provide	coverage	for	losses attributable	to	such	risks.	The	ALLL	also	includes	factors	which	may	not	be directly	measured	in	the	determination	of	specific	or	pooled	reserves.	Such qualitative	factors	may	include:

•	Changes	in	risk	selection	and	underwriting	standards,	and •	Timing	of	available	information,	including	the	performance	of	first	lien positions.

In	determining	the	appropriateness	of	the	ALLL,	we	make	specific	allocations	to impaired	loans	and	allocations	to	portfolios	of	commercial	and	consumer	loans.

Nonperforming	loans	are	considered	impaired	under	ASC	310,	Receivables	and are	evaluated	for	a	specific	reserve.	Specific	reserve	allocations	are	determined as	follows:

•	For	commercial	nonperforming	loans	and	TDRs	greater	than	or	equal to	a	defined	dollar	threshold,	specific	reserves	are	based	on	an	analysis of	the	present	value	of	the	loan's	expected	future	cash	flows,	the	loan's observable	market	price	or	the	fair	value	of	the	collateral. •	For	commercial	nonperforming	loans	and	TDRs	below	the	defined dollar	threshold,	the	loans	are	aggregated	for	purposes	of	measuring specific	reserve	impairment	using	the	applicable	loan's	LGD percentage	multiplied	by	the	balance	of	the	loan.

•	Consumer	nonperforming	loans	are	collectively	reserved	for	unless classified	as	TDRs,	for	which	specific	reserves	are	based	on	an analysis	of	the	present	value	of	the	loan's	expected	future	cash	flows. •	For	purchased	impaired	loans,	subsequent	decreases	to	the	net	present value	of	expected	cash	flows	will	generally	result	in	an	impairment charge	to	the	provision	for	credit	losses,	resulting	in	an	increase	to	the ALLL.

When	applicable,	this	process	is	applied	across	all	the	loan	classes	in	a	similar manner.	However,	as	previously	discussed,	certain	consumer	loans	and	lines	of credit,	not	secured	by	residential	real	estate,	are	charged	off	instead	of	being classified	as	nonperforming.

Our	credit	risk	management	policies,	procedures	and	practices	are	designed	to promote	sound	lending	standards	and	prudent	credit	risk	management.	We	have policies,	procedures	and	practices	that	address	financial	statement	requirements, collateral	review	and	appraisal	requirements,	advance	rates	based	upon	collateral types,	appropriate	levels	of	exposure,	cross-border	risk,	lending	to	specialized industries	or	borrower	type,	guarantor	requirements,	and	regulatory	compliance.

# ALLOWANCE	FOR	UNFUNDED	LOAN	COMMITMENTS	AND	LETTERS	OF CREDIT

We	maintain	the	allowance	for	unfunded	loan	commitments	and	letters	of	credit at	a	level	we	believe	is	appropriate	to	absorb	estimated	probable	credit	losses	on these	unfunded	credit	facilities	as	of	the	balance	sheet	date.	We	determine	the allowance	based	on	periodic	evaluations	of	the	unfunded	credit	facilities, including	an	assessment	of	the	probability	of	commitment	usage,	credit	risk factors,	and,	solely	for	commercial	lending,	the	terms	and	expiration	dates	of	the unfunded	credit	facilities.	The	reserve	for	unfunded	loan	commitments	is estimated	in	a	manner	similar	to	the	methodology	used	for	determining	reserves for	funded	exposures.	The	allowance	for	unfunded	loan	commitments	and	letters of	credit	is	recorded	as	a	liability	on	the	Consolidated	Balance	Sheet.	Net adjustments	to	the	allowance	for	unfunded	loan	commitments	and	letters	of credit	are	included	in	the	provision	for	credit	losses.

# MORTGAGE	AND	OTHER	SERVICING	RIGHTS

We	provide	servicing	under	various	loan	servicing	contracts	for	commercial, residential	and	other	consumer	loans.	These	contracts	are	either	purchased	in	the open	market	or	retained	as	part	of	a	loan	securitization	or	loan	sale.	All	newly acquired	or	originated	servicing	rights	are	initially	measured	at	fair	value.	Fair value	is	based	on	the	present	value	of	the	expected	future	cash	flows,	including assumptions	as	to:

•	Deposit	balances	and	interest	rates	for	escrow	and	commercial	reserve earnings,

•	Discount	rates,

•	Stated	note	rates,

•	Estimated	prepayment	speeds,	and •	Estimated	servicing	costs.

For	subsequent	measurements	of	these	assets,	we	have	elected	to	utilize	either the	amortization	method	or	fair	value	measurement	based	upon	the	asset	class and	our	risk	management	strategy	for	managing	these	assets.	For	commercial mortgage	loan	servicing	rights,	we	use	the	amortization	method.	This	election was	made	based	on	the	unique	characteristics	of	the	commercial	mortgage	loans underlying	these	servicing	rights	with	regard	to	market	inputs	used	in determining	fair	value	and	how	we	manage	the	risks	inherent	in	the	commercial mortgage	servicing	rights	assets.	Specific	risk	characteristics	of	commercial mortgages	include	loan	type,	currency	or	exchange	rate,	interest	rates,	expected cash	flows	and	changes	in	the	cost	of	servicing.	We	record	these	servicing	assets as	Other	intangible	assets	and	amortize	them	over	their	estimated	lives	based	on estimated	net	servicing	income.	On	a	quarterly	basis,	we	test	the	assets	for impairment	by	categorizing	the	pools	of	assets	underlying	the	servicing	rights into	various	strata.	If	the	estimated	fair	value	of	the	assets	is	less	than	the carrying	value,	an	impairment	loss	is	recognized	and	a	valuation	reserve	is established.

For	servicing	rights	related	to	residential	real	estate	loans,	we	apply	the	fair	value method.	This	election	was	made	to	be	consistent	with	our	risk	management strategy	to	hedge	changes	in	the	fair	value	of	these	assets.	We	manage	this	risk by	hedging	the	fair	value	of	this	asset	with	derivatives	and	securities	which	are expected	to	increase	in	value	when	the	value	of	the	servicing	right	declines.	The fair	value	of	these	servicing	rights	is	estimated	by	using	a	cash	flow	valuation model	which	calculates	the	present	value	of	estimated	future	net	servicing	cash flows,	taking	into	consideration	actual	and	expected	mortgage	loan	prepayment rates,	discount	rates,	servicing	costs,	and	other	economic	factors	which	are determined	based	on	current	market	conditions.

Revenue	from	the	various	loan	servicing	contracts	for	commercial,	residential and	other	consumer	loans	is	reported	on	the	Consolidated	Income	Statement	in line	items	Corporate	services,	Residential	mortgage	and	Consumer	services.

# FAIR	VALUE	OF	FINANCIAL	INSTRUMENTS

The	fair	value	of	financial	instruments	and	the	methods	and	assumptions	used	in estimating	fair	value	amounts	and	financial	assets	and	liabilities	for	which	fair value	was	elected	are	detailed	in	Note	9	Fair	Value.

We	assess	goodwill	for	impairment	at	least	annually,	in	the	fourth	quarter,	or when	events	or	changes	in	circumstances	indicate	the	assets	might	be	impaired. Finite-lived	intangible	assets	are	amortized	to	expense	using	accelerated	or straight-line	methods	over	their	respective	estimated	useful	lives.	We	review finite-lived	intangible	assets	for	impairment	when	events	or	changes	in circumstances	indicate	that	the	asset's	carrying	amount	may	not	be	recoverable from	undiscounted	future	cash	flows	or	that	it	may	exceed	its	fair	value.

# DEPRECIATION	AND	AMORTIZATION

For	financial	reporting	purposes,	we	depreciate	premises	and	equipment,	net	of salvage	value,	principally	using	the	straight-line	method	over	their	estimated useful	lives.

We	use	estimated	useful	lives	for	furniture	and	equipment	ranging	from	one	to 10	years,	and	depreciate	buildings	over	an	estimated	useful	life	of	up	to	40	years. We	amortize	leasehold	improvements	over	their	estimated	useful	lives	of	up	to 15	years	or	the	respective	lease	terms,	whichever	is	shorter.

We	purchase,	as	well	as	internally	develop	and	customize,	certain	software	to enhance	or	perform	internal	business	functions.	Software	development	costs incurred	in	the	planning	and	post-development	project	stages	are	charged	to Noninterest	expense.	Costs	associated	with	designing	software	configuration	and interfaces,	installation,	coding	programs	and	testing	systems	are	capitalized	and amortized	using	the	straight-line	method	over	periods	ranging	from	one	to	seven years.

# REPURCHASE	AND	RESALE	AGREEMENTS

Repurchase	and	resale	agreements	are	treated	as	collateralized	financing transactions	and	are	carried	at	the	amounts	at	which	the	securities	will	be subsequently	reacquired	or	resold,	including	accrued	interest,	as	specified	in	the respective	agreements.	Our	policy	is	to	take	possession	of	securities	purchased under	agreements	to	resell.	We	monitor	the	market	value	of	securities	to	be repurchased	and	resold	and	additional	collateral	may	be	obtained	where considered	appropriate	to	protect	against	credit	exposure.	We	have	elected	to account	for	structured	resale	agreements	at	fair	value.

# OTHER	COMPREHENSIVE	INCOME

Other	comprehensive	income	consists,	on	an	after-tax	basis,	primarily	of unrealized	gains	or	losses,	excluding	OTTI	attributable	to	credit	deterioration,	on investment	securities	classified	as	available	for	sale,	unrealized	gains	or	losses	on derivatives	designated	as	cash	flow	hedges,	and	changes	in	pension	and	other postretirement	benefit	plan	liability	adjustments.	Details	of	each	component	are included	in	Note	20	Other	Comprehensive	Income.

# TREASURY	STOCK

We	record	common	stock	purchased	for	treasury	at	cost.	At	the	date	of subsequent	reissue,	the	treasury	stock	account	is	reduced	by	the	cost	of	such stock	on	the	first-in,	first-out	basis.

# DERIVATIVE	INSTRUMENTS	AND	HEDGING	ACTIVITIES

We	use	a	variety	of	financial	derivatives	as	part	of	our	overall	asset	and	liability risk	management	process	to	help	manage	interest	rate,	market	and	credit	risk inherent	in	our	business	activities.	Interest	rate	and	total	return	swaps,	swaptions, interest	rate	caps	and	floors	and	futures	contracts	are	the	primary	instruments	we use	for	interest	rate	risk	management.

Financial	derivatives	involve,	to	varying	degrees,	interest	rate,	market	and	credit risk.	We	manage	these	risks	as	part	of	our	asset	and	liability	management process	and	through	credit	policies	and	procedures.	We	seek	to	minimize counterparty	credit	risk	by	entering	into	transactions	with	only	high-quality institutions,	establishing	credit	limits,	and	generally	requiring	bilateral	netting and	collateral	agreements.

We	recognize	all	derivative	instruments	at	fair	value	as	either	Other	assets	or Other	liabilities	on	the	Consolidated	Balance	Sheet	and	the	related	cash	flows	in the	Operating	Activities	section	of	the	Consolidated	Statement	Of	Cash	Flows. Adjustments	for	counterparty	credit	risk	are	included	in	the	determination	of	fair value.	The	accounting	for	changes	in	the	fair	value	of	a	derivative	instrument depends	on	whether	it	has	been	designated	and	qualifies	as	part	of	a	hedging relationship.	For	derivatives	not	designated	as	an	accounting	hedge,	changes	in fair	value	are	recognized	in	Noninterest	income.

We	utilize	a	net	presentation	for	derivative	instruments	on	the	Consolidated Balance	Sheet	taking	into	consideration	the	effects	of	legally	enforceable	master netting	agreements.	Cash	collateral	exchanged	with	counterparties	is	also	netted against	the	applicable	derivative	exposures	by	offsetting	obligations	to	return,	or rights	to	reclaim,	cash	collateral	against	the	fair	values	of	the	net	derivatives being	collateralized.

For	those	derivative	instruments	that	are	designated	and	qualify	as	accounting hedges,	we	designate	the	hedging	instrument,	based	on	the	exposure	being hedged,	as	a	fair	value	hedge,	a	cash	flow	hedge	or	a	hedge	of	the	net	investment in	a	foreign	operation.

We	formally	document	the	relationship	between	the	hedging	instruments	and hedged	items,	as	well	as	the	risk	management	objective	and	strategy,	before undertaking	an	accounting	hedge.	To	qualify	for	hedge	accounting,	the derivatives	and	related	hedged	items	must	be	designated	as	a	hedge	at	inception of	the	hedge	relationship.	For	accounting	hedge	relationships,	we	formally assess,	both	at	the	inception	of	the	hedge	and	on	an	ongoing	basis,	if	the derivatives	are	highly	effective	in	offsetting	designated	changes	in	the	fair	value or	cash	flows	of	the	hedged	item.	If	it	is	determined	that	the	derivative instrument	is	not	highly	effective,	hedge	accounting	is	discontinued.

For	derivatives	that	are	designated	as	fair	value	hedges	(i.e.,	hedging	the exposure	to	changes	in	the	fair	value	of	an	asset	or	a	liability	attributable	to	a particular	risk,	such	as	changes	in	LIBOR),	changes	in	the	fair	value	of	the hedging	instrument	are	recognized	in	earnings	and	offset	by	also	recognizing	in earnings	the	changes	in	the	fair	value	of	the	hedged	item	attributable	to	the hedged	risk.	To	the	extent	the	change	in	fair	value	of	the	derivative	does	not offset	the	change	in	fair	value	of	the	hedged	item,	the	difference	or ineffectiveness	is	reflected	in	the	Consolidated	Income	Statement	in	the	same financial	statement	category	as	the	hedged	item.

For	derivatives	designated	as	cash	flow	hedges	(i.e.,	hedging	the	exposure	to variability	in	expected	future	cash	flows),	the	effective	portions	of	the	gain	or loss	on	derivatives	are	reported	as	a	component	of	Accumulated	other comprehensive	income	(loss)	and	subsequently	reclassified	to	interest	income	in the	same	period	or	periods	during	which	the	hedged	transaction	affects	earnings. The	change	in	fair	value	attributable	to	the	ineffective	portion	of	the	hedging instrument	is	recognized	immediately	in	Noninterest	income.

For	derivatives	designated	as	a	hedge	of	net	investment	in	a	foreign	operation, the	effective	portions	of	the	gain	or	loss	on	the	derivatives	are	reported	as	a component	of	Accumulated	other	comprehensive	income	(loss).	The	change	in fair	value	of	any	ineffectiveness	of	the	hedging	instrument	is	recognized immediately	in	Noninterest	income.

We	discontinue	hedge	accounting	when	it	is	determined	that	the	derivative	no longer	qualifies	as	an	effective	hedge;	the	derivative	expires	or	is	sold, terminated	or	exercised;	or	the	derivative	is	de-designated	as	a	fair	value	or	cash flow	hedge	or,	for	a	cash	flow	hedge,	it	is	no	longer	probable	that	the	forecasted transaction	will	occur	by	the	end	of	the	originally	specified	time	period.	If	we determine	that	the	derivative	no	longer	qualifies	as	a	fair	value	or	cash	flow hedge	and	hedge	accounting	is	discontinued,	the	derivative	will	continue	to	be recorded	on	the	balance	sheet	at	its	fair	value	with	changes	in	fair	value	included in	current	earnings.	For	a	discontinued	fair	value	hedge,	the	previously	hedged item	is	no	longer	adjusted	for	changes	in	fair	value.

When	hedge	accounting	is	discontinued	because	it	is	no	longer	probable	that	a forecasted	transaction	will	occur,	the	derivative	will	continue	to	be	recorded	on the	balance	sheet	at	its	fair	value	with	changes	in	fair	value	included	in	current earnings,	and	the	gains	and	losses	in	Accumulated	other	comprehensive	income (loss)	will	be	recognized	immediately	into	earnings.	When	we	discontinue	hedge accounting	because	the	hedging	instrument	is	sold,	terminated	or	no	longer designated,	the	amount	reported	in	Accumulated	other	comprehensive	income (loss)	up	to	the	date	of	sale,	termination	or	de-designation	continues	to	be reported	in	Other	comprehensive	income	or	loss	until	the	forecasted	transaction affects	earnings.	We	did	not	terminate	any	cash	flow	hedges	in	2012,	2011	or 2010	due	to	a	determination	that	a	forecasted	transaction	was	no	longer	probable of	occurring.

We	purchase	or	originate	financial	instruments	that	contain	an	embedded derivative.	At	the	inception	of	the	transaction,	we	assess	if	the	economic characteristics	of	the	embedded	derivative	are	clearly	and	closely	related	to	the economic	characteristics	of	the	host	contract,	whether	the	hybrid	financial instrument	is	measured	at	fair	value	with	changes	in	fair	value	reported	in earnings,	and	whether	a	separate	instrument	with	the	same	terms	as	the embedded	derivative	would	be	a	derivative.	If	the	embedded	derivative	does	not meet	all	of	these	conditions,	the	embedded	derivative	is	recorded	separately from	the	host	contract	with	changes	in	fair	value	recorded	in	earnings,	unless	we elect	to	account	for	the	hybrid	instrument	at	fair	value.

We	have	elected	on	an	instrument-by-instrument	basis,	fair	value	measurement for	certain	financial	instruments	with	embedded	derivatives.

We	enter	into	commitments	to	originate	residential	and	commercial	mortgage loans	for	sale.	We	also	enter	into	commitments	to	purchase	or	sell	commercial and	residential	real	estate	loans.	These	commitments	are	accounted	for	as	free- standing	derivatives	which	are	recorded	at	fair	value	in	Other	assets	or	Other liabilities	on	the	Consolidated	Balance	Sheet.	Any	gain	or	loss	from	the	change in	fair	value	after	the	inception	of	the	commitment	is	recognized	in	noninterest income.

We	account	for	income	taxes	under	the	asset	and	liability	method.	Deferred	tax assets	and	liabilities	are	determined	based	on	differences	between	the	financial reporting	and	tax	bases	of	assets	and	liabilities	and	are	measured	using	the enacted	tax	rates	and	laws	that	we	expect	will	apply	at	the	time	when	we	believe the	differences	will	reverse.	The	recognition	of	deferred	tax	assets	requires	an assessment	to	determine	the	realization	of	such	assets.	Realization	refers	to	the incremental	benefit	achieved	through	the	reduction	in	future	taxes	payable	or refunds	receivable	from	the	deferred	tax	assets,	assuming	that	the	underlying deductible	differences	and	carryforwards	are	the	last	items	to	enter	into	the determination	of	future	taxable	income.	We	establish	a	valuation	allowance	for tax	assets	when	it	is	more	likely	than	not	that	they	will	not	be	realized,	based upon	all	available	positive	and	negative	evidence.

# EARNINGS	PER	COMMON	SHARE

Basic	earnings	per	common	share	is	calculated	using	the	two-class	method	to determine	income	attributable	to	common	shareholders.	Unvested	share-based payment	awards	that	contain	nonforfeitable	rights	to	dividends	or	dividend equivalents	are	considered	participating	securities	under	the	two-class	method. Income	attributable	to	common	shareholders	is	then	divided	by	the	weighted- average	common	shares	outstanding	for	the	period.

Diluted	earnings	per	common	share	is	calculated	under	the	more	dilutive	of either	the	treasury	method	or	the	two-class

method.	For	the	diluted	calculation,	we	increase	the	weighted-average	number	of shares	of	common	stock	outstanding	by	the	assumed	conversion	of	outstanding convertible	preferred	stock	and	debentures	from	the	beginning	of	the	year	or date	of	issuance,	if	later,	and	the	number	of	shares	of	common	stock	that	would be	issued	assuming	the	exercise	of	stock	options	and	warrants	and	the	issuance of	incentive	shares	using	the	treasury	stock	method.	These	adjustments	to	the weighted-average	number	of	shares	of	common	stock	outstanding	are	made	only when	such	adjustments	will	dilute	earnings	per	common	share.	See	Note	18 Earnings	Per	Share	for	additional	information.

In	October	2012,	the	Financial	Accounting	Standards	Board	(FASB)	issued Accounting	Standards	Update	(ASU)	2012-06,	Business	Combinations	(Topic 805):	Subsequent	Accounting	for	an	Indemnification	Asset	Recognized	at	the Acquisition	Date	as	a	Result	of	a	Government-Assisted	Acquisition	of	a

Financial	Institution.	This	ASU	impacts	all	entities	that	recognize	an indemnification	asset	in	purchase	accounting	for	a	government-assisted acquisition	of	a	financial	institution.	The	effective	date	of	ASU	2012-06	was January	1,	2013.	However,	since	we	currently	do	not	have	any	of	these	assets, this	ASU	did	not	have	an	effect	on	our	results	of	operations	or	financial	position.

In	July	2012,	the	FASB	issued	ASU	2012-02,	Intangibles—Goodwill	and	Other (Topic	350):	Testing	Indefinite-Lived	Intangible	Assets	for	Impairment.	This

ASU	simplifies	the	testing	for	indefinite	lived	intangible	assets	impairment	by allowing	an	entity	to	first	assess	qualitative	factors	to	determine	whether	it	is more	likely	than	not	that	the	fair	value	of	an	indefinite	lived	intangible	asset	is less	than	its	carrying	amount	before	proceeding	to	the	quantitative	impairment test.	The	effective	date	of	this	ASU	was	January	1,	2013.	However,	since	we currently	do	not	have	any	indefinite	lived	intangibles,	this	ASU	did	not	have	an effect	on	our	results	of	operations	or	financial	position.

In	December	2011,	the	FASB	issued	ASU	2011-11,	Balance	Sheet	(Topic	210): Disclosures	about	Offsetting	Assets	and	Liabilities	and	then	amended	the	scope of	ASU	2011-11	in	January	2013	through	the	issuance	of	ASU	2013-01,	Balance Sheet	(Topic	210):	Clarifying	the	Scope	of	Disclosures	about	Offsetting	Assets and	Liabilities.	This	guidance	applies	to	all	entities	that	have	derivative instruments,	repurchase	agreements	and	reverse	repurchase	agreements,	or securities	lending	agreements	that	are	either	(i)	offset	in	accordance	with	either ASC	210-20-45	or	ASC	815-10-45	or	(ii)	subject	to	an	enforceable	master netting	arrangement	or	similar	agreement,	and	requires	an	entity	to	disclose information	about	offsetting	to	enable	users	of	its	financial	statements	to understand	the	effect	of	those	arrangements	on	its	financial	position.	The disclosures	are	required	for	quarterly	and	annual	reporting	periods	beginning	on or	after	January	1,	2013,	are	to	be	applied	retrospectively	for	all	comparative periods	presented,

and	will	be	provided	in	the	first	quarter	2013.	We	adopted	ASU	2011-11	on January	1,	2013	for	our	derivatives	that	we	offset	in	accordance	with	ASC	815- 10-45	and	for	our	repurchase/resale	arrangements	under	enforceable	master netting	arrangements,	which	we	do	not	currently	offset	on	our	Consolidated Balance	Sheet.	The	new	guidance	did	not	change	the	accounting	for	these arrangements	or	require	them	to	be	offset	and	thus	had	no	impact	on	our statement	of	financial	position.

In	December	2011,	the	FASB	also	finalized	ASU	2011-10,	Property,	Plant,	and Equipment	(Topic	360)	–	Derecognition	of	in	Substance	Real	Estate	–	a	Scope Clarification	(a	consensus	of	the	FASB	Emerging	Issues	Task	Force).	This	ASU clarified	that	the	guidance	in	ASC	360-20	applies	to	a	parent	that	ceases	to	have a	controlling	financial	interest	(as	described	in	ASC	810-10)	in	a	subsidiary	that is	in	substance	real	estate	as	a	result	of	default	on	the	subsidiary's	nonrecourse debt.	The	amendments	within	this	update	should	be	applied	on	a	prospective basis	and	are	effective	for	fiscal	years,	and	interim	periods	within	those	years, beginning	on	or	after	June	15,	2012.	We	adopted	ASU	2011-10	on	January	1, 2013.	There	was	no	material	impact	to	our	results	of	operations	or	financial position	upon	adoption	of	ASU	2011-10	on	January	1,	2013.

In	September	2011,	the	FASB	issued	ASU	2011-08,	Intangibles	–	Goodwill	and Other	(Topic	350)	:	Testing	Goodwill	for	Impairment.	The	ASU	permits	an entity	to	first	assess	qualitative	factors	to	determine	whether	it	is	more	likely than	not	that	the	fair	value	of	a	reporting	unit	is	less	than	its	carrying	amount.	If an	entity	qualitatively	determines	the	fair	value	of	a	reporting	unit	is	greater	than its	carrying	amount,	it	is	not	required	to	perform	the	Step	1	quantitative	goodwill impairment	test	for	the	reporting	unit.	ASU	2011-08	is	effective	for	annual	and interim	goodwill	impairment	tests	performed	for	fiscal	years	beginning	after December	15,	2011.	We	did	not	utilize	this	guidance	in	our	2012	annual goodwill	impairment	test.	The	adoption	of	this	ASU	did	not	have	a	financial impact	since	the	method	for	determining	the	amount	of	impairment	(Step	2) remained	unchanged.

In	June	2011,	the	FASB	issued	ASU	2011-05	Comprehensive	Income	(Topic 220):	Presentation	of	Comprehensive	Income.	This	ASU	required	an	entity	to present	each	component	of	net	income	along	with	total	net	income,	each component	of	other	comprehensive	income	along	with	total	other	comprehensive income,	and	a	total	amount	for	comprehensive	income	either	in	a	single continuous	statement	of	comprehensive	income	or	in	two	separate	but consecutive	statements.	In	both	presentation	options,	the	tax	effect	for	each component	must	be	presented	in	the	statement	in	which	other	comprehensive income	is	presented	or	disclosed	in	the	notes	to	the	financial	statements.	This ASU	did	not	change	the	items	that	must	be	reported	in	other	comprehensive income	or	when	an	item	of	other	comprehensive	income	must	be	reclassified	to net	income.	In	December	2011,	the	FASB	issued	ASU	2011-12,

Comprehensive	Income	(Topic	220):	Deferral	of	the	Effective	Date	for Amendments	to	the	Presentation	of	Reclassifications	of	Items	Out	of Accumulated	Other	Comprehensive	Income	in	ASU	2011-05.	This	ASU	deferred those	changes	in	ASU	2011-05	that	relate	to	the	presentation	of	reclassification adjustments	pending	further	Board	deliberation.	We	adopted	ASU	2011-05	and ASU	2011-12	on	January	1,	2012.	Our	2012	financial	statements	and	disclosures continue	to	report	reclassifications	out	of	accumulated	other	comprehensive income	consistent	with	the	presentation	requirements	in	effect	before	ASU	2011- 05.	See	the	Consolidated	Statement	of	Comprehensive	Income,	Consolidated Statement	of	Changes	in	Equity	and	Note	20	Other	Comprehensive	Income	for additional	information.	In	February	2013,	the	FASB	issued	ASU	2013-02, Comprehensive	Income	(Topic	220):	Reporting	of	Amounts	Reclassified	Out	of Accumulated	Other	Comprehensive	Income.	This	ASU	requires	companies	to present	information	about	reclassification	adjustments	from	accumulated	other comprehensive	income	in	a	single	note	or	on	the	face	of	the	financial	statements. Additionally,	companies	are	to	disclose	by	component	reclassifications	out	of accumulated	other	comprehensive	income	and	their	effects	on	the	respective	line items	on	net	income	and	other	disclosures	currently	required	under	U.S.	GAAP. ASU	2013-02	is	effective	for	annual	and	interim	reporting	periods	beginning after	December	15,	2012	and	we	will	present	these	disclosures	in	the	first	quarter of	2013.

In	May	2011,	the	FASB	issued	ASU	2011-04	Fair	Value	Measurement	(Topic 820),	Amendments	to	Achieve	Common	Fair	Value	Measurement	and	Disclosure Requirements	in	U.S.	GAAP	and	International	Financial	Reporting	Standards (IFRS).	This	ASU	provides	guidance	to	clarify	the	concept	of	highest	and	best use	valuation	premise,	how	a	principal	market	is	determined,	and	the	application of	the	fair	value	measurement	for	instruments	with	offsetting	market	or counterparty	credit	risks.	It	also	extends	the	prohibition	on	blockage	factors	to	all fair	value	hierarchy	levels.	This	ASU	required	additional	disclosures	for	the following:	(i)	quantitative	information	about	the	significant	unobservable	inputs used	in	all	Level	3	financial	instruments,	(ii)	the	valuation	processes	used	by	the reporting	entity	as	well	as	a	narrative	description	of	the	sensitivity	of	the	fair value	measurement	to	changes	in	unobservable	inputs,	(iii)	a	reporting	entity's use	of	a	nonfinancial	asset	in	a	way	that	differs	from	the	asset's	highest	and	best use	if	the	fair	value	of	the	asset	is	reported,	(iv)	the	categorization	by	level	of	the fair	value	hierarchy	for	items	that	are	not	measured	at	fair	value	in	financial statements,	and	(v)	any	transfers	between	Level	1	and	2	and	the	reason	for	those transfers.	The	adoption	of	this	new	guidance	did	not	have	a	material	effect	on our	results	of	operations	or	financial	position.	We	adopted	ASU	2011-04	on January	1,	2012.	See	Note	9	Fair	Value	for	additional	information.

In	April	2011,	the	FASB	issued	ASU	2011-03	Transfers	and	Servicing	(Topic 860),	Reconsideration	of	Effective	Control	for	Repurchase	Agreements.	This ASU	removes	from	the	assessment	of	effective	control	(i)	the	criterion	requiring the	transferor	to	have	the	ability	to	repurchase	or	redeem	the	financial	assets	on substantially	the	agreed	terms,	even	in	the	event	of	default	by	the	transferee,	and (ii)	the	collateral	maintenance	implementation	guidance	related	to	that	criterion. Other	criteria	applicable	to	the	assessment	of	effective	control	have	not	been changed	by	this	ASU.	The	adoption	of	ASU	2011-03	on	January	1,	2012	did	not have	a	material	effect	on	our	results	of	operations	or	financial	position.

# NOTE	2	ACQUISITION	AND	DIVESTITURE	ACTIVITY

On	March	2,	2012,	PNC	acquired	100%	of	the	issued	and	outstanding	common stock	of	RBC	Bank	(USA),	the	US	retail	banking	subsidiary	of	Royal	Bank	of Canada.	As	part	of	the	acquisition,	PNC	also	purchased	a	credit	card	portfolio from	RBC	Bank	(Georgia),	National	Association.	PNC	paid	$3.6	billion	in	cash as	consideration	for	the	acquisition	of	both	RBC	Bank	(USA)	and	the	credit	card portfolio.	The	transactions	added	approximately	$18.1	billion	of	deposits	and $14.5	billion	of	loans	to	PNC's	Consolidated	Balance	Sheet.

RBC	Bank	(USA),	based	in	Raleigh,	North	Carolina,	operated	more	than	400 branches	in	North	Carolina,	Florida,	Alabama,	Georgia,	Virginia	and	South Carolina.	The	primary	reasons	for	the	acquisition	of	RBC	were	to	enhance shareholder	value,	to	improve	PNC's	competitive	position	in	the	financial services	industry,	and	to	further	expand	PNC's	existing	branch	network	in	the states	where	it	currently	operates	as	well	as	expanding	into	new	markets.

The	RBC	Bank	(USA)	transactions	noted	above	were	accounted	for	using	the acquisition	method	of	accounting	and,	as	such,	assets	acquired,	liabilities assumed	and	consideration	exchanged	were	recorded	at	their	estimated	fair	value on	the	acquisition	date.	All	acquired	loans	were	also	recorded	at	fair	value.	No allowance	for	loan	losses	was	carried	over	and	no	allowance	was	created	at acquisition.	In	connection	with	the	acquisition,	the	assets	acquired,	and	the liabilities	assumed,	were	recorded	at	fair	value	on	the	date	of	acquisition,	as summarized	in	the	following	table:

# Table	55:	RBC	Bank	(USA)	Purchase	Accounting	(a)	(b)

# In	millions

| other	short-term	investments | 1,493 |
| :--- | :--- |
| Loans\theld\tfor\tsale | 97 |
| Investment\tsecurities | 2,349 |
| Net\tloans | 14,512 |
| Other\tintangible\tassets | 180 |
| Equity\tinvestments | 35 |
| Other\tassets | 3,383 |
| Deposits | (18,094) |
| Other\tborrowed\tfunds | (1,321) |
| Other\tliabilities | (290) |
| Total\tfair\tvalue\tof\tidentifiable\tnet\tassets | 2,649 |
| Goodwill | $950 |

(a) The	table	above	has	been	updated	to	reflect	certain	immaterial	adjustments,	including	final	purchase price	settlement.

(b) These	amounts	include	assets	and	deposits	related	to	Smartstreet,	which	was	sold	effective October	26,	2012.

(c) These	items	are	considered	as	non-cash	activity	for	the	Consolidated	Statement	of	Cash	Flows.

In	many	cases	the	determination	of	estimated	fair	values	required	management	to make	certain	estimates	about	discount	rates,	future	expected	cash	flows,	market conditions	and	other	future	events	that	are	highly	subjective	in	nature.	The	most significant	of	these	determinations	related	to	the	fair	valuation	of	acquired	loans. See	Note	6	Purchased	Loans	for	further	discussion	of	the	accounting	for purchased	impaired	and	purchased	non-impaired	loans,	including	the determination	of	fair	value	for	acquired	loans.

The	amount	of	goodwill	recorded	reflects	the	increased	market	share	and	related synergies	that	are	expected	to	result	from	the	acquisition,	and	represents	the excess	purchase	price	over	the	estimated	fair	value	of	the	net	assets	acquired	by PNC.	The	goodwill	was	assigned	primarily	to	PNC's	Retail	Banking	and Corporate	&	Institutional	Banking	segments,	and	is	not	deductible	for	income tax	purposes.	Other	intangible	assets	acquired,	as	of	March	2,	2012	consisted	of the	following:

# Table	56:	RBC	Bank	(USA)	Intangible	Assets

(a) Intangible	asset	accounted	for	at	fair	value.

See	Note	10	Goodwill	and	Other	Intangible	Assets	for	further	discussion	of	the accounting	for	goodwill	and	other	intangible	assets.

The	estimated	amount	of	RBC	Bank	(USA)	revenue	and	net	income	(excluding integration	costs)	included	in	PNC's	consolidated	income	statement	for	2012 was	$1.0	billion	and	$273	million,	respectively.	Upon	closing	and	conversion	of the	RBC	Bank	(USA)	transaction,	subsequent	to	March	2,	2012,	separate	records for	RBC	Bank	(USA)	as	a	stand-alone	business	have	not	been	maintained	as	the operations	of	RBC	Bank	(USA)	have	been	fully	integrated	into	PNC.	RBC	Bank (USA)	revenue	and	earnings	disclosed	above	reflect	management's	best estimate,	based	on	information	available	at	the	reporting	date.

The	following	table	presents	certain	unaudited	pro	forma	information	for illustrative	purposes	only,	for	2012	and	2011	as	if	RBC	Bank	(USA)	had	been acquired	on	January	1,	2011.	The	unaudited	estimated	pro	forma	information combines	the	historical	results	of	RBC	Bank	(USA)	with	the	Company's consolidated	historical	results	and	includes	certain	adjustments	reflecting	the estimated	impact	of	certain	fair	value	adjustments	for	the	respective	periods.	The pro	forma	information	is	not	indicative	of	what	would	have	occurred	had	the acquisition	taken	place	on	January	1,	2011.	In	particular,	no	adjustments	have been	made	to	eliminate	the	impact	of	other-than-temporary	impairment	losses and	losses	recognized	on	the	sale	of	securities	that	may	not	have	been	necessary had	the	investment	securities	been	recorded	at	fair	value	as	of	January	1,	2011. The	unaudited	pro	forma	information	does	not	consider	any	changes	to	the provision	for	credit	losses	resulting	from	recording	loan	assets	at	fair	value. Additionally,	the	pro	forma	financial	information	does	not	include	the	impact	of possible	business	model	changes	and	does	not	reflect	pro	forma	adjustments	to conform	accounting	policies	between	RBC	Bank	(USA)	and	PNC.	Additionally, PNC	expects	to	achieve	further	operating	cost	savings	and	other	business synergies,	including	revenue	growth,	as	a	result	of	the	acquisition	that	are	not reflected	in	the	pro	forma	amounts	that	follow.	As	a	result,	actual	results	will differ	from	the	unaudited	pro	forma	information	presented.

# Table	57:	RBC	Bank	(USA)	and	PNC	Unaudited	Pro	Forma	Results

|  | For	the	Year	Ended	December	31 | For	the	Year	Ended	December	31 |
| :--- | :--- | :--- |
| In\tmillions | \t\t\t\t\t\t\t\t\t\t\t\t2012 | \t\t\t\t\t\t\t\t\t\t\t\t2011 |
| Total\trevenues | $15,721 | $15,421 |
| Net\tincome | 2,989 | 2,911 |

In	connection	with	the	RBC	Bank	(USA)	acquisition	and	other	prior acquisitions,	PNC	recognized	$267	million	of	integration	charges	in	2012.	PNC recognized	$42	million	of	integration

charges	in	2011	in	connection	with	prior	acquisitions.	The	integration	charges are	included	in	the	table	above.

Effective	October	26,	2012,	PNC	divested	certain	deposits	and	assets	of	the Smartstreet	business	unit,	which	was	acquired	by	PNC	as	part	of	the	RBC	Bank (USA)	acquisition,	to	Union	Bank,	N.A.	Smartstreet	is	a	nationwide	business focused	on	homeowner	or	community	association	managers	and	had approximately	$1	billion	of	assets	and	deposits	as	of	September	30,	2012.	The gain	on	sale	was	immaterial	and	resulted	in	a	reduction	of	goodwill	and	core deposit	intangibles	of	$46	million	and	$13	million,	respectively.	Results	from operations	of	Smartstreet	from	March	2,	2012	through	October	26,	2012	are included	in	our	Consolidated	Income	Statement.

Effective	December	9,	2011,	PNC	acquired	27	branches	in	the	northern metropolitan	Atlanta,	Georgia	area	from	Flagstar	Bank,	FSB,	a	subsidiary	of Flagstar	Bancorp,	Inc.	The	fair	value	of	the	assets	acquired	totaled approximately	$211.8	million,	including	$169.3	million	in	cash,	$24.3	million	in fixed	assets	and	$18.2	million	of	goodwill	and	intangible	assets.	We	also assumed	approximately	$210.5	million	of	deposits	associated	with	these branches.	No	deposit	premium	was	paid	and	no	loans	were	acquired	in	the transaction.	Our	Consolidated	Income	Statement	includes	the	impact	of	the branch	activity	subsequent	to	our	December	9,	2011	acquisition.

Effective	June	6,	2011,	we	acquired	19	branches	in	the	greater	Tampa,	Florida area	from	BankAtlantic,	a	subsidiary	of	BankAtlantic	Bancorp,	Inc.	The	fair value	of	the	assets	acquired	totaled	$324.9	million,	including	$256.9	million	in cash,	$26.0	million	in	fixed	assets	and	$42.0	million	of	goodwill	and	intangible assets.	We	also	assumed	approximately	$324.5	million	of	deposits	associated with	these	branches.	A	$39.0	million	deposit	premium	was	paid	and	no	loans were	acquired	in	the	transaction.	Our	Consolidated	Income	Statement	includes the	impact	of	the	branch	activity	subsequent	to	our	June	6,	2011	acquisition.

On	July	1,	2010,	we	sold	PNC	Global	Investment	Servicing	Inc.	(GIS),	a	leading provider	of	processing,	technology	and	business	intelligence	services	to	asset managers,	broker-dealers	and	financial	advisors	worldwide,	for	$2.3	billion	in cash	pursuant	to	a	definitive	agreement	entered	into	on	February	2,	2010.	This transaction	resulted	in	a	pretax	gain	of	$639	million,	net	of	transaction	costs,	in the	third	quarter	of	2010.	This	gain	and	results	of	operations	of	GIS	through June	30,	2010	are	presented	as	Income	from	discontinued	operations,	net	of income	taxes,	on	our	Consolidated	Income	Statement.	As	part	of	the	sale agreement,	PNC	has	agreed	to	provide	certain	transitional	services	on	behalf	of GIS	until	completion	of	related	systems	conversion	activities.

# NOTE	3	LOAN	SALE	AND	SERVICING	ACTIVITIES	AND VARIABLE	INTEREST	ENTITIES

# LOAN	SALE	AND	SERVICING	ACTIVITIES

We	have	transferred	residential	and	commercial	mortgage	loans	in	securitization or	sales	transactions	in	which	we	have	continuing	involvement.	These	transfers have	occurred	through	Agency	securitization,	Non-agency	securitization,	and loan	sale	transactions.	Agency	securitizations	consist	of	securitization transactions	with	Federal	National	Mortgage	Association	(FNMA),	Federal Home	Loan	Mortgage	Corporation	(FHLMC),	and	Government	National Mortgage	Association	(GNMA)	(collectively,	the	Agencies).	FNMA	and FHLMC	generally	securitize	our	transferred	loans	into	mortgage-backed securities	for	sale	into	the	secondary	market	through	special	purpose	entities (SPEs)	that	they	sponsor.	We,	as	an	authorized	GNMA	issuer/servicer,	pool Federal	Housing	Administration	(FHA)	and	Department	of	Veterans	Affairs (VA)	insured	loans	into	mortgage-backed	securities	for	sale	into	the	secondary market.	In	Non-agency	securitizations,	we	have	transferred	loans	into securitization	SPEs.	In	other	instances,	third-party	investors	have	also	purchased our	loans	in	loan	sale	transactions	and	in	certain	instances	have	subsequently sold	these	loans	into	securitization	SPEs.	Securitization	SPEs	utilized	in	the Agency	and	Non-agency	securitization	transactions	are	variable	interest	entities (VIEs).

Our	continuing	involvement	in	the	FNMA,	FHLMC,	and	GNMA	securitizations, Non-agency	securitizations,	and	loan	sale	transactions	generally	consists	of servicing,	repurchases	of	previously	transferred	loans	under	certain	conditions and	loss	share	arrangements,	and,	in	limited	circumstances,	holding	of	mortgage- backed	securities	issued	by	the	securitization	SPEs.

Depending	on	the	transaction,	we	may	act	as	the	master,	primary,	and/or	special servicer	to	the	securitization	SPEs	or	third-party	investors.	Servicing responsibilities	typically	consist	of	collecting	and	remitting	monthly	borrower principal	and	interest	payments,	maintaining	escrow	deposits,	performing	loss mitigation	and	foreclosure	activities,	and,	in	certain	instances,	funding	of servicing	advances.	Servicing	advances,	which	are	reimbursable,	are	recognized in	Other	assets	at	cost	and	are	made	for	principal	and	interest	and	collateral protection.

We	earn	servicing	and	other	ancillary	fees	for	our	role	as	servicer	and,	depending on	the	contractual	terms	of	the	servicing	arrangement,	we	can	be	terminated	as servicer	with	or	without	cause.	At	the	consummation	date	of	each	type	of	loan transfer,	we	recognize	a	servicing	asset	at	fair	value.	Servicing	assets	are recognized	in	Other	intangible	assets	on	our	Consolidated	Balance	Sheet	and when	subsequently	accounted	for	at	fair	value	are	classified	within	Level	3	of	the fair	value	hierarchy.	See	Note	9	Fair	Value	and	Note	10	Goodwill	and	Other Intangible	Assets	for	further	discussion	of	our	residential	and	commercial servicing	assets.

Certain	loans	transferred	to	the	Agencies	contain	removal	of	account	provisions (ROAPs).	Under	these	ROAPs,	we	hold	an	option	to	repurchase	at	par	individual delinquent	loans	that	meet	certain	criteria.	When	we	have	the	unilateral	ability	to repurchase	a	delinquent	loan,	effective	control	over	the	loan	has	been	regained and	we	recognize	an	asset	(in	either	Loans	or	Loans	held	for	sale)	and	a corresponding	liability	(in	Other	borrowed	funds)	on	the	balance	sheet	regardless of	our	intent	to	repurchase	the	loan.	At	December	31,	2012	and	December	31, 2011,	the	balance	of	our	ROAP	asset	and	liability	totaled	$190	million	and	$265 million,	respectively.

The	Agency	and	Non-agency	mortgage-backed	securities	issued	by	the securitization	SPEs	that	are	purchased	and	held	on	our	balance	sheet	are typically	purchased	in	the	secondary	market.	PNC	does	not	retain	any	credit	risk on	its	Agency	mortgage-backed	security	positions	as	FNMA,	FHLMC,	and	the US	Government	(for	GNMA)	guarantee	losses	of	principal	and	interest. Substantially	all	of	the	Non-agency	mortgage-backed	securities	acquired	and held	on	our	balance	sheet	are	senior	tranches	in	the	securitization	structure.

We	also	have	involvement	with	certain	Agency	and	Non-agency	commercial securitization	SPEs	where	we	have	not	transferred	commercial	mortgage	loans. These	SPEs	were	sponsored	by	independent	third-parties	and	the	loans	held	by these	entities	were	purchased	exclusively	from	other	third-parties.	Generally,	our involvement	with	these	SPEs	is	as	servicer	with	servicing	activities	consistent with	those	described	above.

We	recognize	a	liability	for	our	loss	exposure	associated	with	contractual obligations	to	repurchase	previously	transferred	loans	due	to	breaches	of representations	and	warranties	and	also	for	loss	sharing	arrangements	(recourse obligations)	with	the	Agencies.	Other	than	providing	temporary	liquidity	under servicing	advances	and	our	loss	exposure	associated	with	our	repurchase	and recourse	obligations,	we	have	not	provided	nor	are	we	required	to	provide	any type	of	credit	support,	guarantees,	or	commitments	to	the	securitization	SPEs	or third-party	investors	in	these	transactions.	See	Note	24	Commitments	and Guarantees	for	further	discussion	of	our	repurchase	and	recourse	obligations.

The	following	table	provides	information	related	to	certain	financial	information	associated	with	PNC's	loan	sale	and	servicing	activities:

# Table	58:	Certain	Financial	Information	and	Cash	Flows	Associated	with	Loan	Sale	and	Servicing	Activities

| In	millions | Residential<br>Mortgages | Commercial<br>Mortgages	(a) | Home	Equity<br>Loans/Lines	(b) |
| :--- | :--- | :--- | :--- |
| FINANCIAL\tINFORMATION\t–\tDecember\t31,\t2012 |  |  |  |
| Servicing\tportfolio\t(c) | $119,262 | $153,193 | $5,353 |
| Carrying\tvalue\tof\tservicing\tassets\t(d) | 650 | 420 |  |
| Servicing\tadvances\t(e) | 582 | 505 | 5 |
| Repurchase\tand\trecourse\tobligations\t(f) | 614 | 43 | 58 |
| Carrying\tvalue\tof\tmortgage-backed\tsecurities\theld\t(g) | 5,445 | 1,533 |  |
| FINANCIAL\tINFORMATION\t–\tDecember\t31,\t2011 |  |  |  |
| Servicing\tportfolio\t(c) | $118,058 | $155,813 | $5,661 |
| Carrying\tvalue\tof\tservicing\tassets\t(d) | 647 | 468 | 1 |
| Servicing\tadvances\t(e) | 563 | 510 | 8 |
| Repurchase\tand\trecourse\tobligations\t(f) | 83 | 47 | 47 |
| Carrying\tvalue\tof\tmortgage-backed\tsecurities\theld\t(g) | 4,654 | 1,839 |  |

The	following	table	provides	information	related	to	the	cash	flows	associated	with	PNC's	loan	sale	and	servicing	activities:

| In	millions | Residential<br>Mortgages | Commercial<br>Mortgages	(a) | Home	Equity<br>Loans/Lines	(b) |
| :--- | :--- | :--- | :--- |
| CASH\tFLOWS\t–\tYear\tended\tDecember\t31,\t2012 |  |  |  |
| Sales\tof\tloans\t(h) | $13,783 | $2,172 |  |
| Repurchases\tof\tpreviously\ttransferred\tloans\t(i) | 1,500 |  | $21 |
| Servicing\tfees\t(j) | 383 | 180 | 22 |
| Servicing\tadvances\trecovered/(funded),\tnet | (19) | 6 | 3 |
| Cash\tflows\ton\tmortgage-backed\tsecurities\theld\t(g) | 1,220 | 536 |  |
| CASH\tFLOWS\t–\tYear\tended\tDecember\t31,\t2011 |  |  |  |
| Sales\tof\tloans\t(h) | $11,920 | $2,351 |  |
| Repurchases\tof\tpreviously\ttransferred\tloans\t(i) | 1,683 |  | $42 |
| Servicing\tfees\t(j) | 355 | 179 | 22 |
| Servicing\tadvances\trecovered/(funded),\tnet | (30) | (95) | 12 |
| Cash\tflows\ton\tmortgage-backed\tsecurities\theld\t(g) | 586 | 419 |  |
| (a) |  |  |  |

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

(b) These	activities	were	part	of	an	acquired	brokered	home	equity	lending	business	in	which	PNC	is	no	longer	engaged.	See	Note	24	Commitments	and	Guarantees	for	further	information.

(c) For	our	continuing	involvement	with	residential	mortgage	and	home	equity	loan/line	transfers,	amount	represents	outstanding	balance	of	loans	transferred	and	serviced.	For	commercial	mortgages,	amount represents	overall	servicing	portfolio	in	which	loans	have	been	transferred	by	us	or	third	parties	to	VIEs.

(d) See	Note	9	Fair	Value	and	Note	10	Goodwill	and	Other	Intangible	Assets	for	further	information.

(e) Pursuant	to	certain	contractual	servicing	agreements,	represents	outstanding	balance	of	funds	advanced	(i)	to	investors	for	monthly	collections	of	borrower	principal	and	interest,	(ii)	for	borrower	draws	on	unused home	equity	lines	of	credit,	and	(iii)	for	collateral	protection	associated	with	the	underlying	mortgage	collateral.

(f) Represents	liability	for	our	loss	exposure	associated	with	loan	repurchases	for	breaches	of	representations	and	warranties	for	our	Residential	Mortgage	Banking	and	Non-Strategic	Assets	Portfolio	segments,	and our	commercial	mortgage	loss	share	arrangements	for	our	Corporate	&	Institutional	Banking	segment.	See	Note	24	Commitments	and	Guarantees	for	further	information.

(g) Represents	securities	held	where	PNC	transferred	to	and/or	services	loans	for	a	securitization	SPE	and	we	hold	securities	issued	by	that	SPE.

(h) There	were	no	gains	or	losses	recognized	on	the	transaction	date	for	sales	of	residential	mortgage	loans	as	these	loans	are	recognized	on	the	balance	sheet	at	fair	value.	For	transfers	of	commercial	mortgage	loans not	recognized	on	the	balance	sheet	at	fair	value,	gains/losses	recognized	on	sales	of	these	loans	were	insignificant	for	the	periods	presented.

(i) Includes	government	insured	or	guaranteed	loans	repurchased	through	the	exercise	of	our	ROAP	option	and	loans	repurchased	due	to	breaches	of	origination	covenants	or	representations	and	warranties	made	to purchasers.

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

# VARIABLE	INTEREST	ENTITIES	(VIES)

We	are	involved	with	various	entities	in	the	normal	course	of	business	that	are	deemed	to	be	VIEs.	We	assess	VIEs	for	consolidation	based	upon	the	accounting	policies described	in	Note	1	Accounting	Policies.	The	following	provides	a	summary	of	VIEs,	including	those	that	we	have	consolidated	and	those	in	which	we	hold	variable interests	but	have	not	consolidated	into	our	financial	statements	as	of	December	31,	2012	and	December	31,	2011.

# Table	59:	Consolidated	VIEs	–	Carrying	Value	(a)	(b)

| December	31,	2012<br>In	millions | Market	Street | Credit	Card<br>Securitization	Trust	(c) | Tax	Credit<br>Investments | Total |
| :--- | :--- | :--- | :--- | :--- |
| Assets |  |  |  |  |
| Cash\tand\tdue\tfrom\tbanks |  |  | $4 | $4 |
| Interest-earning\tdeposits\twith\tbanks |  |  | 6 | 6 |
| Investment\tsecurities | $9 |  |  | 9 |
| Loans | 6,038 | $1,743 |  | 7,781 |
| Allowance\tfor\tloan\tand\tlease\tlosses |  | (75) |  | (75) |
| Equity\tinvestments |  |  | 1,429 | 1,429 |
| Other\tassets | 536 | 31 | 714 | 1,281 |
| Total\tassets | $6,583 | $1,699 | $2,153 | $10,435 |
| Liabilities |  |  |  |  |
| Commercial\tpaper | $6,045 |  |  | $6,045 |
| Other\tborrowed\tfunds |  |  | $257 | 257 |
| Accrued\texpenses |  |  | 132 | 132 |
| Other\tliabilities | 529 |  | 447 | 976 |
| Total\tliabilities | $6,574 |  | $836 | $7,410 |

| December	31,	2011<br>In	millions | December	31,	2011<br>In	millions | Market	Street | Credit	Card<br>Securitization	Trust | Tax	Credit<br>Investments	(b) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Assets |  |  |  |  |  |
| Cash\tand\tdue\tfrom\tbanks | Cash\tand\tdue\tfrom\tbanks |  |  | $7 | $7 |
| Interest-earning\tdeposits\twith\tbanks | Interest-earning\tdeposits\twith\tbanks |  | $317 | 8 | 325 |
| Investment\tsecurities | Investment\tsecurities | $109 |  |  | 109 |
| Loans | Loans | 4,163 | 1,933 |  | \t 6,096 |
| Allowance\tfor\tloan\tand\tlease\tlosses | Allowance\tfor\tloan\tand\tlease\tlosses |  | (91) |  | (91) |
| Equity\tinvestments | Equity\tinvestments |  |  | 1,643 | \t 1,643 |
| Other\tassets | Other\tassets | 360 | 7 | 838 | \t 1,205 |
| Total\tassets | Total\tassets | $4,632 | $2,166 | $2,496 | $9,294 |
| Liabilities |  |  |  |  |  |
| Commercial\tpaper | Commercial\tpaper | $4,271 |  |  | $4,271 |
| Other\tborrowed\tfunds | Other\tborrowed\tfunds |  | $287 | $218 | 505 |
| Accrued\texpenses | Accrued\texpenses |  | 50 | 105 | 155 |
| Other\tliabilities | Other\tliabilities | 355 |  | 379 | 734 |
| Total\tliabilities | Total\tliabilities | $4,626 | $337 | $702 | $5,665 |
| (a) | Amounts\trepresent\tcarrying\tvalue\ton\tPNC's\tConsolidated\tBalance\tSheet. |  |  |  |  |

(a) Amounts	represent	carrying	value	on	PNC's	Consolidated	Balance	Sheet.

(b) Difference	between	total	assets	and	total	liabilities	represents	the	equity	portion	of	the	VIE	or	intercompany	assets	and	liabilities	which	are	eliminated	in	consolidation.

(c) During	the	first	quarter	of	2012,	the	last	securitization	series	issued	by	the	SPE	matured,	resulting	in	the	zero	balance	of	liabilities	at	December	31,	2012.

# Table	60:	Assets	and	Liabilities	of	Consolidated	VIEs	(a)

| In	millions | Aggregate<br>Assets | Aggregate<br>Liabilities |
| :--- | :--- | :--- |
| December\t31,\t2012 |  |  |
| Market\tStreet | $7,796 | $7,796 |
| Credit\tCard\tSecuritization\tTrust | 1,782 |  |
| Tax\tCredit\tInvestments | 2,162 | 853 |
| December\t31,\t2011 |  |  |
| Market\tStreet | $5,490 | $5,491 |
| Credit\tCard\tSecuritization\tTrust | 2,175 | 494 |
| Tax\tCredit\tInvestments | 2,503 | 723 |
| (a) |  |  |

(a) Amounts	in	this	table	differ	from	total	assets	and	liabilities	in	the	preceding	"Consolidated	VIEs—Carrying	Value"	table	due	to	the	elimination	of	intercompany	assets	and	liabilities	in	the	preceding	table.

# Table	61:	Non-Consolidated	VIEs

| In	millions | Aggregate<br>Assets | Aggregate<br>Liabilities | PNC<br>Risk	of<br>Loss | Carrying<br>Value	of<br>Assets | Carrying<br>Value	of<br>Liabilities |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012 |  |  |  |  |  |
| Commercial\tMortgage-Backed\tSecuritizations\t(a) | $72,370 | $72,370 | $1,829 | \t\t$1,829(c) |  |
| Residential\tMortgage-Backed\tSecuritizations\t(a) | 42,719 | 42,719 | \t 5,456 | \t\t\t 5,456(c) | \t\t$90(e) |
| Tax\tCredit\tInvestments\tand\tOther\t(b) | 5,960 | 2,101 | \t 1,283 | \t\t\t 1,283(d) | 623(e) |
| Total | $121,049 | $117,190 | $8,568 | \t\t$8,568 | \t\t$713 |

| In	millions | Aggregate<br>Assets | Aggregate<br>Liabilities | PNC<br>Risk	of<br>Loss | Carrying<br>Value	of<br>Assets | Carrying<br>Value	of<br>Liabilities |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2011 |  |  |  |  |  |
| Commercial\tMortgage-Backed\tSecuritizations\t(a) | $75,961 | $75,961 | $2,079 | \t\t$2,079(c) |  |
| Residential\tMortgage-Backed\tSecuritizations\t(a) | 44,315 | 44,315 | \t 4,667 | \t\t\t 4,667(c) | \t\t$99(e) |
| Tax\tCredit\tInvestments\tand\tOther\t(b) | 5,395 | 2,384 | 837 | 837(d) | 352(e) |
| Total | $125,671 | $122,660 | $7,583 | \t\t$7,583 | \t\t$451 |

(a) Amounts	reflect	involvement	with	securitization	SPEs	where	PNC	transferred	to	and/or	services	loans	for	a	SPE	and	we	hold	securities	issued	by	that	SPE.	Asset	amounts	equal	outstanding	liability	amounts	of	the SPEs	due	to	limited	availability	of	SPE	financial	information.	We	also	invest	in	other	mortgage	and	asset-backed	securities	issued	by	third-party	VIEs	with	which	we	have	no	continuing	involvement.	Further information	on	these	securities	is	included	in	Note	8	Investment	Securities	and	values	disclosed	represent	our	maximum	exposure	to	loss	for	those	securities'	holdings.

(b) Aggregate	assets	and	aggregate	liabilities	are	based	on	limited	availability	of	financial	information	associated	with	certain	acquired	partnerships.

(c) Included	in	Trading	securities,	Investment	securities,	Other	intangible	assets,	and	Other	assets	on	our	Consolidated	Balance	Sheet.

(d) Included	in	Equity	investments	on	our	Consolidated	Balance	Sheet.

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

# MARKET	STREET

Market	Street	Funding	LLC	(Market	Street),	owned	by	an	independent	third- party,	is	a	multi-seller	asset-backed	commercial	paper	conduit	that	primarily purchases	assets	or	makes	loans	secured	by	interests	in	pools	of	receivables	from US	corporations.	Market	Street	funds	the	purchases	of	assets	or	loans	by	issuing commercial	paper.	Market	Street	is	supported	by	pool-specific	credit enhancements,	liquidity	facilities,	and	a	program-level	credit	enhancement. Generally,	Market	Street	mitigates	its	potential	interest	rate	risk	by	entering	into agreements	with	its	borrowers	that	reflect	interest	rates	based	upon	its	weighted- average	commercial	paper	cost	of	funds.	During	2011	and	2012,	Market	Street met	all	of	its	funding	needs	through	the	issuance	of	commercial	paper.

PNC	Bank,	National	Association,	(PNC	Bank,	N.A.)	provides	certain administrative	services,	the	program-level	credit	enhancement	and	liquidity facilities	to	Market	Street	in	exchange	for	fees	negotiated	based	on	market	rates. The	program-level	credit	enhancement	covers	net	losses	in	the	amount	of	10%	of commitments,	excluding	explicitly	rated	AAA/Aaa	facilities.	Coverage	is	a	cash collateral	account	funded	by	a	loan	facility.	This	facility	expires	in	June	2017.	At December	31,	2012,	$1.2	billion	was	outstanding	on	this	facility.

Although	the	commercial	paper	obligations	at	December	31,	2012	and December	31,	2011	were	supported	by	Market	Street's	assets,	PNC	Bank,	N.A. may	be	obligated	to	fund	Market	Street	under	the	$11.9	billion	of	liquidity facilities	for

events	such	as	commercial	paper	market	disruptions,	borrower	bankruptcies, collateral	deficiencies	or	covenant	violations.	Our	credit	risk	under	the	liquidity facilities	is	secondary	to	the	risk	of	first	loss	absorbed	by	Market	Street borrowers	through	over-collateralization	of	assets	and	losses	absorbed	by	deal- specific	credit	enhancement	provided	by	a	third	party.	The	deal-specific	credit enhancement	is	generally	structured	to	cover	a	multiple	of	expected	losses	for the	pool	of	assets	and	is	sized	to	meet	rating	agency	standards	for	comparably structured	transactions.

Through	the	credit	enhancement	and	liquidity	facility	arrangements,	PNC	Bank, N.A.	has	the	power	to	direct	the	activities	of	Market	Street	that	most significantly	affect	its	economic	performance	and	these	arrangements	expose PNC	Bank,	N.A.	to	expected	losses	or	residual	returns	that	are	potentially significant	to	Market	Street.	Therefore,	PNC	Bank,	N.A.	consolidates	Market Street.	PNC	Bank,	N.A.	is	not	required	to	nor	have	we	provided	additional financial	support	to	Market	Street,	and	Market	Street	creditors	have	no	direct recourse	to	PNC	Bank,	N.A.

# CREDIT	CARD	SECURITIZATION	TRUST

We	were	the	sponsor	of	several	credit	card	securitizations	facilitated	through	a trust.	This	bankruptcy-remote	SPE	was	established	to	purchase	credit	card receivables	from	the	sponsor	and	to	issue	and	sell	asset-backed	securities	created by	it	to	independent	third-parties.	The	SPE	was	financed	primarily	through	the sale	of	these	asset-backed	securities.	These	transactions	were	originally structured	to	provide	liquidity	and	to	afford	favorable	capital	treatment.

Our	continuing	involvement	in	these	securitization	transactions	consisted primarily	of	holding	certain	retained	interests	and	acting	as	the	primary	servicer. For	each	securitization	series	that	was	outstanding,	our	retained	interests	held were	in	the	form	of	a	pro-rata	undivided	interest,	or	sellers'	interest,	in	the transferred	receivables,	subordinated	tranches	of	asset-backed	securities, interest-only	strips,	discount	receivables,	and	subordinated	interests	in	accrued interest	and	fees	in	securitized	receivables.	We	consolidated	the	SPE	as	we	were deemed	the	primary	beneficiary	of	the	entity	based	upon	our	level	of	continuing involvement.	Our	role	as	primary	servicer	gave	us	the	power	to	direct	the activities	of	the	SPE	that	most	significantly	affect	its	economic	performance	and our	holding	of	retained	interests	gave	us	the	obligation	to	absorb	expected	losses, or	the	ability	to	receive	residual	returns	that	could	be	potentially	significant	to the	SPE.	The	underlying	assets	of	the	consolidated	SPE	were	restricted	only	for payment	of	the	beneficial	interests	issued	by	the	SPE.	We	were	not	required	to nor	did	we	provide	additional	financial	support	to	the	SPE.	Additionally, creditors	of	the	SPE	have	no	direct	recourse	to	PNC.

During	the	first	quarter	of	2012,	the	last	series	issued	by	the	SPE,	Series	2007-1, matured.	At	December	31,	2012,	the	SPE	continued	to	exist	and	we	consolidated the	entity	as	we

continued	to	be	the	primary	beneficiary	of	the	SPE	through	our	holding	of seller's	interest	and	our	role	as	the	primary	servicer.

We	make	certain	equity	investments	in	various	tax	credit	limited	partnerships	or limited	liability	companies	(LLCs).	The	purpose	of	these	investments	is	to achieve	a	satisfactory	return	on	capital	and	to	assist	us	in	achieving	goals associated	with	the	Community	Reinvestment	Act.

Also,	we	are	a	national	syndicator	of	affordable	housing	equity.	In	these syndication	transactions,	we	create	funds	in	which	our	subsidiaries	are	the general	partner	or	managing	member	and	sell	limited	partnership	or	non- managing	member	interests	to	third	parties.	In	some	cases	PNC	may	also purchase	a	limited	partnership	or	non-managing	member	interest	in	the	fund.	The purpose	of	this	business	is	to	generate	income	from	the	syndication	of	these funds,	generate	servicing	fees	by	managing	the	funds,	and	earn	tax	credits	to reduce	our	tax	liability.	General	partner	or	managing	member	activities	include selecting,	evaluating,	structuring,	negotiating,	and	closing	the	fund	investments in	operating	limited	partnerships	or	LLCs,	as	well	as	oversight	of	the	ongoing operations	of	the	fund	portfolio.

Typically,	the	general	partner	or	managing	member	will	be	the	party	that	has	the right	to	make	decisions	that	will	most	significantly	impact	the	economic performance	of	the	entity.	However,	certain	partnership	or	LLC	agreements provide	the	limited	partner	or	non-managing	member	the	ability	to	remove	the general	partner	or	managing	member	without	cause.	This	results	in	the	limited partner	or	non-managing	member	being	the	party	that	has	the	right	to	make decisions	that	will	most	significantly	impact	the	economic	performance	of	the entity.	The	primary	sources	of	losses	and	benefits	for	these	investments	are	the tax	credits,	tax	benefits	due	to	passive	losses	on	the	investments,	and development	and	operating	cash	flows.	We	have	consolidated	investments	in which	we	are	the	general	partner	or	managing	member	and	have	a	limited partnership	interest	or	non-managing	member	interest	that	provides	us	the	power to	direct	the	activities	that	most	significantly	impact	the	entity's	performance and	have	a	limited	partnership	interest	or	non-managing	member	interest	that could	absorb	losses	or	receive	benefits	that	could	be	potentially	significant.	The assets	are	primarily	included	in	Equity	investments	and	Other	assets	on	our Consolidated	Balance	Sheet	with	the	liabilities	classified	in	Other	borrowed funds,	Accrued	expenses,	and	Other	liabilities	and	the	third	party	investors' interests	included	in	the	Equity	section	as	Noncontrolling	interests.	Neither creditors	nor	equity	investors	in	these	investments	have	any	recourse	to	our general	credit.	We	have	not	provided	financial	or	other	support	to	the	limited partnership	or	LLC	that	we	are	not	contractually	obligated	to	provide.	The consolidated	aggregate	assets	and	liabilities	of	these	investments	are	provided	in the	Consolidated	VIEs	table	and	reflected	in	the	"Other"	business	segment.

For	tax	credit	investments	in	which	we	do	not	have	the	right	to	make	decisions that	will	most	significantly	impact	the	economic	performance	of	the	entity,	we are	not	the	primary	beneficiary	and	thus	they	are	not	consolidated.	These investments	are	disclosed	in	the	Non-Consolidated	VIEs	table.	The	table	also reflects	our	maximum	exposure	to	loss.	Our	maximum	exposure	to	loss	is	equal to	our	legally	binding	equity	commitments	adjusted	for	recorded	impairment	and partnership	results.	We	use	the	equity	method	to	account	for	our	investment	in these	entities	with	the	investments	reflected	in	Equity	investments	on	our Consolidated	Balance	Sheet.	In	addition,	we	increase	our	recognized	investments and	recognize	a	liability	for	all	legally	binding	unfunded	equity	commitments. These	liabilities	are	reflected	in	Other	liabilities	on	our	Consolidated	Balance Sheet.

# RESIDENTIAL	AND	COMMERCIAL	MORTGAGE-BACKED	SECURITIZATIONS

In	connection	with	each	Agency	and	Non-agency	securitization	discussed	above, we	evaluate	each	SPE	utilized	in	these	transactions	for	consolidation.	In performing	these	assessments,	we	evaluate	our	level	of	continuing	involvement in	these	transactions	as	the	nature	of	our	involvement	ultimately	determines whether	or	not	we	hold	a	variable	interest	and/or	are	the	primary	beneficiary	of the	SPE.	Factors	we	consider	in	our	consolidation	assessment	include	the significance	of	(i)	our	role	as	servicer,	(ii)	our	holdings	of	mortgage-backed securities	issued	by	the	securitization	SPE,	and	(iii)	the	rights	of	third-party variable	interest	holders.

The	first	step	in	our	assessment	is	to	determine	whether	we	hold	a	variable interest	in	the	securitization	SPE.	We	hold	variable	interests	in	Agency	and	Non- agency	securitization	SPEs	through	our	holding	of	mortgage-backed	securities issued	by	the	SPEs	and/or	our	recourse	obligations.	Each	SPE	in	which	we	hold	a variable	interest	is	evaluated	to	determine	whether	we	are	the	primary beneficiary	of	the	entity.	For	Agency	securitization	transactions,	our	contractual role	as	servicer	does	not	give	us	the	power	to	direct	the	activities	that	most significantly	affect	the	economic	performance	of	the	SPEs.	Thus,	we	are	not	the primary	beneficiary	of	these	entities.	For	Non-agency	securitization	transactions, we	would	be	the	primary	beneficiary	to	the	extent	our	servicing	activities	give	us the	power	to	direct	the	activities	that	most	significantly	affect	the	economic performance	of	the	SPE	and	we	hold	a	more	than	insignificant	variable	interest in	the	entity.	At	December	31,	2012,	our	level	of	continuing	involvement	in Non-agency	securitization	SPEs	did	not	result	in	PNC	being	deemed	the	primary beneficiary	of	any	of	these	entities.	Details	about	the	Agency	and	Non-agency securitization	SPEs	where	we	hold	a	variable	interest	and	are	not	the	primary beneficiary	are	included	in	the	Non-Consolidated	VIEs	table.	Our	maximum exposure	to	loss	as	a	result	of	our	involvement	with	these	SPEs	is	the	carrying value	of	the	mortgage-backed	securities,	servicing	assets,	servicing	advances, and	our	liabilities	associated	with	our	recourse	obligations.	Creditors	of	the securitization	SPEs	have	no	recourse	to	PNC's	assets	or	general	credit.

# NOTE	4	LOANS	AND	COMMITMENTS	TO	EXTEND	CREDIT

Loans	outstanding	were	as	follows:

# Table	62:	Loans	Outstanding

(a) Net	of	unearned	income,	net	deferred	loan	fees,	unamortized	discounts	and	premiums,	and	purchase discounts	and	premiums	totaling	$2.7	billion	and	$2.3	billion	at	December	31,	2012	and December	31,	2011,	respectively.

(b) Future	accretable	yield	related	to	purchased	impaired	loans	is	not	included	in	loans	outstanding. In	the	normal	course	of	business,	we	originate	or	purchase	loan	products	with contractual	features,	when	concentrated,	that	may	increase	our	exposure	as	a holder	of	those	loan	products.	Possible	product	features	that	may	create	a concentration	of	credit	risk	would	include	a	high	original	or	updated	LTV	ratio, terms	that	may	expose	the	borrower	to	future	increases	in	repayments	above increases	in	market	interest	rates,	below-market	interest	rates	and	interest-only loans,	among	others.	We	also	originate	home	equity	loans	and	lines	of	credit	that are	concentrated	in	our	primary	geographic	markets.

We	originate	interest-only	loans	to	commercial	borrowers.	This	is	usually	to match	our	borrowers'	asset	conversion	to	cash	expectations	(i.e.,	working	capital lines,	revolvers).	These	products	are	standard	in	the	financial	services	industry and	are	considered	during	the	underwriting	process	to	mitigate	the	increased	risk that	may	result	in	borrowers	not	being	able	to	make	interest	and	principal payments	when	due.	We	do	not	believe	that	these	product	features	create	a concentration	of	credit	risk.

At	December	31,	2012,	we	pledged	$23.2	billion	of	commercial	loans	to	the Federal	Reserve	Bank	and	$37.3	billion	of	residential	real	estate	and	other	loans to	the	Federal	Home	Loan	Bank	as	collateral	for	the	contingent	ability	to	borrow, if	necessary.	The	comparable	amounts	at	December	31,	2011	were	$21.8	billion and	$27.7	billion,	respectively.

# Table	63:	Net	Unfunded	Credit	Commitments

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Commercial\tand\tcommercial\treal\testate | $78,703 | $64,955 |
| Home\tequity\tlines\tof\tcredit | 19,814 | 18,317 |
| Credit\tcard | 17,381 | 16,216 |
| Other | 4,694 | 3,783 |
| Total\t(a) | $120,592 | $103,271 |
| (a) |  |  |

(a) Excludes	standby	letters	of	credit.	See	Note	24	Commitments	and	Guarantees	for	additional information	on	standby	letters	of	credit.

Commitments	to	extend	credit	represent	arrangements	to	lend	funds	or	provide liquidity	subject	to	specified	contractual	conditions.	At	December	31,	2012, commercial	commitments	reported	above	exclude	$22.5	billion	of	syndications, assignments	and	participations,	primarily	to	financial	institutions.	The comparable	amount	at	December	31,	2011	was	$20.2	billion.

Commitments	generally	have	fixed	expiration	dates,	may	require	payment	of	a fee,	and	contain	termination	clauses	in	the	event	the	customer's	credit	quality deteriorates.	Based	on	our	historical	experience,	most	commitments	expire unfunded,	and	therefore	cash	requirements	are	substantially	less	than	the	total commitment.

# NOTE	5	ASSET	QUALITY

We	closely	monitor	economic	conditions	and	loan	performance	trends	to	manage	and	evaluate	our	exposure	to	credit	risk.	Trends	in	delinquency	rates	may	be	a	key indicator,	among	other	considerations,	of	credit	risk	within	the	loan	portfolios.	The	measurement	of	delinquency	status	is	based	on	the	contractual	terms	of	each	loan. Loans	that	are	30	days	or	more	past	due	in	terms	of	payment	are	considered	delinquent.	Loan	delinquencies	exclude	loans	held	for	sale	and	purchased	impaired	loans, but	include	government	insured	or	guaranteed	loans.

The	trends	in	nonperforming	assets	represent	another	key	indicator	of	the	potential	for	future	credit	losses.	Nonperforming	assets	include	nonperforming	loans,	certain TDRs,	and	other	real	estate	owned	(OREO)	and	foreclosed	assets,	but	exclude	certain	government	insured	or	guaranteed	loans,	loans	held	for	sale,	loans	accounted	for under	the	fair	value	option	and	purchased	impaired	loans.	See	Note	6	Purchased	Loans	for	further	information.

See	Note	1	Accounting	Policies	for	additional	delinquency,	nonperforming,	and	charge-off	information.

The	following	tables	display	the	delinquency	status	of	our	loans	and	our	nonperforming	assets	at	December	31,	2012	and	December	31,	2011,	respectively.

# Table	64:	Age	Analysis	of	Past	Due	Accruing	Loans	(a)

| In	millions | Current	or	Less<br>Than	30	Days<br>Past	Due | 30-<br>59	Days<br>Past	Due | 89	Days<br>Past<br>Due | 90	Days<br>Or	More<br>Past	Due | Total	Past<br>Due	(b) | Nonperforming<br>Loans | Purchased<br>Impaired | Total	Loans |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012 |  |  |  |  |  |  |  |  |
| Commercial | $81,930 | $115 | $55 | $42 | $212 | $590 | $308 | $83,040 |
| Commercial\treal\testate | 16,735 | 100 | 57 | 15 | 172 | 807 | 941 | 18,655 |
| Equipment\tlease\tfinancing | 7,214 | 17 | 1 | 2 | 20 | 13 |  | 7,247 |
| Home\tequity\t(c) | 32,174 | 117 | 58 |  | 175 | 951 | 2,620 | 35,920 |
| Residential\treal\testate\t(d) | 8,534 | 278 | 146 | \t 1,901 | 2,325 | 845 | 3,536 | 15,240 |
| Credit\tcard | 4,205 | 34 | 23 | 36 | 93 | 5 |  | 4,303 |
| Other\tconsumer\t(e) | 20,663 | 258 | 131 | 355 | 744 | 43 | 1 | 21,451 |
| Total | $171,455 | $919 | $471 | $2,351 | $3,741 | $3,254 | $7,406 | $185,856 |
| Percentage\tof\ttotal\tloans | 92.26% | .49% | .25% | 1.26% | 2.00% | 1.75% | 3.99% | 100.00% |
| December\t31,\t2011 |  |  |  |  |  |  |  |  |
| Commercial | $64,437 | $122 | $47 | $49 | $218 | $899 | $140 | $65,694 |
| Commercial\treal\testate | 14,010 | 96 | 35 | 6 | 137 | 1,345 | 712 | 16,204 |
| Equipment\tlease\tfinancing | 6,367 | 22 | 5 |  | 27 | 22 |  | 6,416 |
| Home\tequity\t(c) | 29,288 | 173 | 114 | 221 | 508 | 529 | 2,764 | 33,089 |
| Residential\treal\testate\t(d) | 7,935 | 302 | 176 | \t 2,281 | 2,759 | 726 | 3,049 | 14,469 |
| Credit\tcard | 3,857 | 38 | 25 | 48 | 111 | 8 |  | 3,976 |
| Other\tconsumer\t(e) | 18,355 | 265 | 145 | 368 | 778 | 31 | 2 | 19,166 |
| Total | $144,249 | $1,018 | $547 | $2,973 | $4,538 | $3,560 | $6,667 | $159,014 |
| Percentage\tof\ttotal\tloans | 90.72% | .64% | .34% | 1.87% | 2.85% | 2.24% | 4.19% | 100.00% |
| (a)\nAmounts\tin\ttable\trepresent\trecorded\tinvestment. |  |  |  |  |  |  |  |  |

(b) 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	are	currently	accreting interest	income	over	the	expected	life	of	the	loans.	Also	excluded	are	loans	held	for	sale	and	loans	accounted	for	under	the	fair	value	option.

(d) Past	due	loan	amounts	at	December	31,	2012	include	government	insured	or	guaranteed	residential	real	estate	mortgages,	totaling	$.1	billion	for	30	to	59	days	past	due,	$.1	billion	for	60	to	89	days	past	due	and $1.9	billion	for	90	days	or	more	past	due.	Past	due	loan	amounts	at	December	31,	2011	include	government	insured	or	guaranteed	residential	real	estate	mortgages	totaling	$.1	billion	for	30	to	59	days	past	due,	$.1 billion	for	60	to	89	days	past	due	and	$2.1	billion	for	90	days	or	more	past	due.

(e) Past	due	loan	amounts	at	December	31,	2012	include	government	insured	or	guaranteed	other	consumer	loans	totaling	$.2	billion	for	30	to	59	days	past	due,	$.1	billion	for	60	to	89	days	past	due	and	$.3	billion	for 90	days	or	more	past	due.	Past	due	loan	amounts	at	December	31,	2011	include	government	insured	or	guaranteed	other	consumer	loans	totaling	$.2	billion	for	30	to	59	days	past	due,	$.1	billion	for	60	to	89	days past	due	and	$.3	billion	for	90	days	or	more	past	due.

# Table	65:	Nonperforming	Assets

| Dollars	in	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Nonperforming\tloans |  |  |
| Commercial\tlending |  |  |
| Commercial | $590 | $899 |
| Commercial\treal\testate | 807 | 1,345 |
| Equipment\tlease\tfinancing | 13 | 22 |
| Total\tcommercial\tlending | 1,410 | 2,266 |
| Consumer\tlending\t(a) |  |  |
| Home\tequity\t(b) | 951 | 529 |
| Residential\treal\testate\t(c) | 845 | 726 |
| Credit\tcard | 5 | 8 |
| Other\tconsumer | 43 | 31 |
| Total\tconsumer\tlending\t(d) | 1,844 | 1,294 |
| Total\tnonperforming\tloans\t(e) | 3,254 | 3,560 |
| OREO\tand\tforeclosed\tassets |  |  |
| Other\treal\testate\towned\t(OREO)\t(f) | 507 | 561 |
| Foreclosed\tand\tother\tassets | 33 | 35 |
| Total\tOREO\tand\tforeclosed\tassets | 540 | 596 |
| Total\tnonperforming\tassets | $3,794 | $4,156 |
| Nonperforming\tloans\tto\ttotal\tloans | 1.75% | 2.24% |
| Nonperforming\tassets\tto\ttotal\tloans,\tOREO\tand\tforeclosed\tassets | 2.04 | 2.60 |
| Nonperforming\tassets\tto\ttotal\tassets | 1.24 | 1.53 |
| Interest\ton\tnonperforming\tloans |  |  |
| Computed\ton\toriginal\tterms | $212 | $278 |
| Recognized\tprior\tto\tnonperforming\tstatus | 30 | 47 |
| (a) |  |  |

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

(c) Nonperforming	residential	real	estate	excludes	loans	of	$69	million	and	$61	million	accounted	for	under	the	fair	value	option	as	of	December	31,	2012	and	December	31,	2011,	respectively.

(d) Pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012,	nonperforming	consumer	loans,	primarily	home	equity	and	residential	mortgage,	increased	$288	million	in	2012	related	to	changes	in	treatment of	certain	loans	classified	as	TDRs,	net	of	charge-offs,	resulting	from	bankruptcy	where	no	formal	reaffirmation	was	provided	by	the	borrower	and	therefore	a	concession	has	been	granted	based	upon	discharge from	personal	liability.	Charge-offs	have	been	taken	where	the	fair	value	less	costs	to	sell	the	collateral	was	less	than	the	recorded	investment	of	the	loan	and	were	$128.1	million.	Of	these	loans,	approximately 78%	were	current	on	their	payments	at	December	31,	2012.

(e) Nonperforming	loans	exclude	certain	government	insured	or	guaranteed	loans,	loans	held	for	sale,	loans	accounted	for	under	the	fair	value	option	and	purchased	impaired	loans.

(f) OREO	excludes	$380	million	and	$280	million	at	December	31,	2012	and	December	31,	2011,	respectively,	related	to	residential	real	estate	that	was	acquired	by	us	upon	foreclosure	of	serviced	loans	because	they are	insured	by	the	Federal	Housing	Administration	(FHA)	or	guaranteed	by	the	Department	of	Veterans	Affairs	(VA).

Nonperforming	loans	also	include	loans	whose	terms	have	been	restructured	in	a manner	that	grants	a	concession	to	a	borrower	experiencing	financial	difficulties. In	accordance	with	applicable	accounting	guidance,	these	loans	are	considered TDRs.	See	Note	1	Accounting	Policies	and	the	TDR	section	of	this	Note	5	for additional	information.	For	the	year	ended	December	31,	2012,	$3.1	billion	of loans	held	for	sale,	loans	accounted	for	under	the	fair	value	option,	pooled purchased	impaired	loans,	as	well	as	certain	consumer	government	insured	or guaranteed	loans	which	were	evaluated	for	TDR	consideration,	are	not	classified as	TDRs.	The	comparable	amount	for	the	year	ended	December	31,	2011	was $2.7	billion.

Total	nonperforming	loans	in	the	Nonperforming	Assets	table	above	include TDRs	of	$1.6	billion	at	December	31,	2012	and	$1.1	billion	at	December	31, 2011.	TDRs	returned	to	performing	(accruing)	status	totaled	$1.0	billion	and $.8	billion	at	December	31,	2012	and	December	31,	2011,	respectively,	and	are excluded	from	nonperforming	loans.	These	loans	have	demonstrated	a	period	of at	least	six	months	of	consecutive	performance	under	the	restructured	terms.	At December	31,	2012	and	December	31,	2011,	remaining	commitments	to	lend additional	funds	to	debtors	in	a	commercial	or	consumer	TDR	were	immaterial.

# Additional	Asset	Quality	Indicators

We	have	two	overall	portfolio	segments	–	Commercial	Lending	and	Consumer Lending.	Each	of	these	two	segments	is	comprised	of	one	or	more	loan	classes. Classes	are	characterized	by	similarities	in	initial	measurement,	risk	attributes and	the	manner	in	which	we	monitor	and	assess	credit	risk.	The	commercial segment	is	comprised	of	the	commercial,	commercial	real	estate,	equipment lease	financing,	and	commercial	purchased	impaired	loan	classes.	The	consumer segment	is	comprised	of	the	home	equity,	residential	real	estate,	credit	card, other	consumer,	and	consumer	purchased	impaired	loan	classes.	Asset	quality indicators	for	each	of	these	loan	classes	are	discussed	in	more	detail	below.

# COMMERCIAL	LENDING	ASSET	CLASSES

# Commercial	Loan	Class

For	commercial	loans,	we	monitor	the	performance	of	the	borrower	in	a disciplined	and	regular	manner	based	upon	the	level	of	credit	risk	inherent	in	the loan.	To	evaluate	the	level	of	credit	risk,	we	assign	internal	risk	ratings reflecting	the	borrower's	PD	and	LGD.	This	two-dimensional	credit	risk	rating methodology	provides	risk	granularity	in	the	monitoring	process	on	an	ongoing basis.	These	ratings	are	reviewed	and	updated	on	a	risk-adjusted	basis,	generally at	least	once	per	year.	Additionally,	on	an	annual	basis,	we	update	PD	rates related	to	each	rating	grade	based	upon	internal	historical	data,	augmented	by market	data.	For	small	balance	homogenous	pools	of	commercial	loans, mortgages	and	leases,	we	apply	statistical	modeling	to	assist	in	determining	the probability	of	default	within	these	pools.	Further,	on	a	periodic	basis,	we	update our	LGD	estimates	associated	with	each	rating	grade	based	on	historical	data. The	combination	of	the	PD	and	LGD	ratings	assigned	to	a	commercial	loan, capturing	both	the	expectations	of	default	and	loss	severity	in	event	of	default, reflects	the	relative	estimated	likelihood	of	loss	for	that	loan	at	the	reporting date.	In	general,	loans	with	better	PD	and	LGD	have	a	lower	likelihood	of	loss. Conversely,	loans	with	worse	PD	and	LGD	have	a	higher	likelihood	of	loss.	The loss	amount	also	considers	exposure	at	date	of	default	(EAD),	which	we	also periodically	update	based	on	historical	data.

Based	upon	the	amount	of	exposure	and	our	risk	ratings,	we	follow	a	formal schedule	of	written	periodic	review.	On	a	quarterly	basis,	we	conduct	formal reviews	of	a	market	or	business	unit's	loan	portfolio,	focusing	on	those	loans which	we	perceive	to	be	of	higher	risk,	based	upon	PDs	and	LGDs,	or weakening	credit	quality.	If	circumstances	warrant,	it	is	our	practice	to	review any	customer	obligation	and	its	level	of	credit	risk	more	frequently.	We	attempt to	proactively	manage	our	loans	by	using	various	procedures	that	are	customized to	the	risk	of	a	given	loan,	including	ongoing	outreach,	contact,	and	assessment of	obligor	financial	conditions,	collateral	inspection	and	appraisal.

# Commercial	Real	Estate	Loan	Class

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

As	with	the	commercial	class,	a	formal	schedule	of	periodic	review	is	performed to	also	assess	market/geographic	risk	and	business	unit/industry	risk.	Often	as	a result	of	these	overviews,	more	in-depth	reviews	and	increased	scrutiny	are placed	on	areas	of	higher	risk,	including	adverse	changes	in	risk	ratings, deteriorating	operating	trends,	and/or	areas	that	concern	management.	The	goal of	these	reviews	is	to	assess	risk	and	take	actions	to	mitigate	our	exposure	to such	risks.

# Equipment	Lease	Financing	Loan	Class

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

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

# Commercial	Purchased	Impaired	Loans	Class

The	credit	impacts	of	purchased	impaired	loans	are	primarily	determined through	the	estimation	of	expected	cash	flows.	Commercial	cash	flow	estimates are	influenced	by	a	number	of	credit	related	items,	which	include	but	are	not limited	to:	estimated	collateral	values,	receipt	of	additional	collateral,	secondary trading	prices,	circumstances	of	possible	and/or	ongoing	liquidation,	capital availability,	business	operations	and	payment	patterns.

We	attempt	to	proactively	manage	these	factors	by	using	various	procedures	that are	customized	to	the	risk	of	a	given	loan.	These	procedures	include	a	review	by our	Special	Asset	Committee	(SAC),	ongoing	outreach,	contact,	and	assessment of	obligor	financial	conditions,	collateral	inspection	and	appraisal.

See	Note	6	Purchased	Loans	for	additional	information.

# Table	66:	Commercial	Lending	Asset	Quality	Indicators	(a)

|  | Pass | Special |  |  | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Rated\t(b) | Mention\t(c) | Substandard\t(d) | Doubtful\t(e) | Loans |
| December\t31,\t2012 |  |  |  |  |  |
| Commercial | $78,048 | $1,939 | $2,600 | $145 | $82,732 |
| Commercial\treal\testate | 14,898 | 804 | 1,802 | 210 | 17,714 |
| Equipment\tlease\tfinancing | 7,062 | 68 | 112 | 5 | 7,247 |
| Purchased\timpaired\tloans | 49 | 60 | 852 | 288 | 1,249 |
| Total\tcommercial\tlending\t(f) | $100,057 | $2,871 | $5,366 | $648 | $108,942 |
| December\t31,\t2011 |  |  |  |  |  |
| Commercial | $60,649 | $1,831 | $2,817 | $257 | $65,554 |
| Commercial\treal\testate | 11,478 | 791 | 2,823 | 400 | 15,492 |
| Equipment\tlease\tfinancing | 6,210 | 48 | 153 | 5 | 6,416 |
| Purchased\timpaired\tloans | 107 | 35 | 542 | 168 | 852 |
| Total\tcommercial\tlending\t(f) | $78,444 | $2,705 | $6,335 | $830 | $88,314 |
| (a)\nBased\tupon\tPDs\tand\tLGDs. |  |  |  |  |  |

(a) Based	upon	PDs	and	LGDs.

(b) Pass	Rated	loans	include	loans	not	classified	as	"Special	Mention",	"Substandard",	or	"Doubtful".

(c) Special	Mention	rated	loans	have	a	potential	weakness	that	deserves	management's	close	attention.	If	left	uncorrected,	these	potential	weaknesses	may	result	in	deterioration	of	repayment	prospects	at	some	future date.	These	loans	do	not	expose	us	to	sufficient	risk	to	warrant	a	more	adverse	classification	at	this	time.

(d) Substandard	rated	loans	have	a	well-defined	weakness	or	weaknesses	that	jeopardize	the	collection	or	liquidation	of	debt.	They	are	characterized	by	the	distinct	possibility	that	we	will	sustain	some	loss	if	the deficiencies	are	not	corrected.

(e) Doubtful	rated	loans	possess	all	the	inherent	weaknesses	of	a	Substandard	rated	loan	with	the	additional	characteristics	that	the	weakness	makes	collection	or	liquidation	in	full	improbable	due	to	existing	facts, conditions,	and	values.

(f) Loans	are	included	above	based	on	their	contractual	terms	as	"Pass",	"Special	Mention",	"Substandard"	or	"Doubtful".

# CONSUMER	LENDING	ASSET	CLASSES

# Home	Equity	and	Residential	Real	Estate	Loan	Classes

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

Delinquency/Delinquency	Rates:	We	monitor	trending	of delinquency/delinquency	rates	for	home	equity	and	residential	real	estate	loans. See	the	Asset	Quality	section	of	this	Note	5	for	additional	information.

Nonperforming	Loans:	We	monitor	trending	of	nonperforming	loans	for	home equity	and	residential	real	estate	loans.	See	the	Asset	Quality	section	of	this	Note 5	for	additional	information.

Credit	Scores:	We	use	a	national	third-party	provider	to	update	FICO	credit scores	for	home	equity	loans	and	lines	of	credit	and	residential	real	estate	loans on	at	least	a	quarterly	basis.	The	updated	scores	are	incorporated	into	a	series	of credit	management	reports,	which	are	utilized	to	monitor	the	risk	in	the	loan classes.

LTV	(inclusive	of	combined	loan-to-value	(CLTV)	ratios	for	second	lien positions):	At	least	semi-annually,	we	update	the	property	values	of	real	estate collateral	and	calculate	an	updated	LTV	ratio.	For	open-end	credit	lines	secured by	real	estate	in	regions	experiencing	significant	declines	in	property	values, more	frequent	valuations	may	occur.	We	examine	LTV	migration	and	stratify LTV	into	categories	to	monitor	the	risk	in	the	loan	classes.

Historically,	we	used,	and	we	continue	to	use,	a	combination	of	original	LTV and	updated	LTV	for	internal	risk	management	reporting	and	risk	management purposes	(e.g.,	line	management,	loss	mitigation	strategies).	In	addition	to	the fact	that	estimated	property	values	by	their	nature	are	estimates,	given	certain data	limitations	it	is	important	to	note	that	updated	LTVs	may	be	based	upon management's	assumptions	(e.g.,	if	an	updated	LTV	is	not	provided	by	the	third- party	service	provider,	home	price	index	(HPI)	changes	will	be	incorporated	in arriving	at	management's	estimate	of	updated	LTV).

Geography:	Geographic	concentrations	are	monitored	to	evaluate	and	manage exposures.	Loan	purchase	programs	are	sensitive	to,	and	focused	within,	certain regions	to	manage	geographic	exposures	and	associated	risks.

A	combination	of	updated	FICO	scores,	originated	and	updated	LTV	ratios	and geographic	location	assigned	to	home	equity	loans	and	lines	of	credit	and residential	real	estate	loans	are	used	to	monitor	the	risk	in	the	loan	classes.	Loans with	higher	FICO	scores	and	lower	LTVs	tend	to	have	a	lower	level	of	risk. Conversely,	loans	with	lower	FICO	scores,	higher	LTVs,	and	in	certain geographic	locations	tend	to	have	a	higher	level	of	risk.

In	the	following	table,	we	provide	information	on	home	equity	and	residential real	estate	outstanding	balances	and	recorded	investment.	See	Note	4	Loans	and Commitments	to	Extend	Credit	for	additional	information.

# Table	67:	Home	Equity	and	Residential	Real	Estate	Balances

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Home\tequity\tand\tresidential\treal\testate |  |  |
| loans\t-\texcluding\tpurchased\timpaired |  |  |
| loans\t(a) | $44,700 | $41,014 |
| Home\tequity\tand\tresidential\treal\testate |  |  |
| loans\t-\tpurchased\timpaired\tloans\t(a) | 6,639 | 6,533 |
| Government\tinsured\tor\tguaranteed |  |  |
| residential\treal\testate\tmortgages\t(a) | 2,231 | 2,884 |
| Purchase\taccounting,\tdeferred\tfees\tand |  |  |
| other\taccounting\tadjustments | (2,410) | (2,873) |
| Total\thome\tequity\tand\tresidential\treal |  |  |
| estate\tloans\t(b) | $51,160 | $47,558 |
| (a)\nRepresents\toutstanding\tbalance. |  |  |

(a) Represents	outstanding	balance.

(b) Represents	recorded	investment.

# Table	68:	Consumer	Real	Estate	Secured	Asset	Quality	Indicators	–	Excluding	Purchased	Impaired	Loans	(a)	(b)

|  | Home	Equity |  | Residential<br>Real	Estate |  |
| :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012\t-\tin\tmillions | 1st\tLiens | 2nd\tLiens |  | Total |
| Current\testimated\tLTV\tratios\t(c)\t(d) |  |  |  |  |
| Greater\tthan\tor\tequal\tto\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | $600\t\t\t\t $ | 3,293 | $856 | $4,749 |
| Less\tthan\tor\tequal\tto\t660\t(e)\t(f) | 86 | 756 | 210 | 1,052 |
| Missing\tFICO | 16 | 14 | 16 | 46 |
| Greater\tthan\tor\tequal\tto\t100%\tto\tless\tthan\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 907 | 2,960 | 1,108 | 4,975 |
| Less\tthan\tor\tequal\tto\t660\t(e)\t(f) | 139 | 541 | 250 | 930 |
| Missing\tFICO | 25 | 13 | 16 | 54 |
| Greater\tthan\tor\tequal\tto\t90%\tto\tless\tthan\t100%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 901 | 1,614 | 796 | 3,311 |
| Less\tthan\tor\tequal\tto\t660 | 117 | 230 | 164 | 511 |
| Missing\tFICO | 47 | 33 | 21 | 101 |
| Less\tthan\t90%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 8,472 | 9,883 | 4,744 | \t 23,099 |
| Less\tthan\tor\tequal\tto\t660 | 980 | 1,492 | 925 | 3,397 |
| Missing\tFICO | 987 | 225 | 517 | 1,729 |
| Missing\tLTV\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 |  | 1 |  | 1 |
| Less\tthan\tor\tequal\tto\t660 |  | 7 | 1 | 8 |
| Missing\tFICO |  |  | 737 | 737 |
| Total\thome\tequity\tand\tresidential\treal\testate\tloans | $13,277 | \t\t $21,062 | $10,361 | $44,700 |

|  | Home	Equity	(g) |  | Residential	Real<br>Estate |  |
| :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2011\t-\tin\tmillions | 1st\tLiens | 2nd\tLiens |  | Total |
| Current\testimated\tLTV\tratios\t(c)\t(d) |  |  |  |  |
| Greater\tthan\tor\tequal\tto\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | $481 | $3,222 | $1,845 | $5,548 |
| Less\tthan\tor\tequal\tto\t660\t(e)\t(f) | 78 | 747 | 463 | 1,288 |
| Missing\tFICO | 1 | 9 | 289 | 299 |
| Greater\tthan\tor\tequal\tto\t100%\tto\tless\tthan\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 706 | 2,940 | 1,336 | 4,982 |
| Less\tthan\tor\tequal\tto\t660\t(e)\t(f) | 127 | 582 | 349 | 1,058 |
| Missing\tFICO | 1 | 5 | 53 | 59 |
| Greater\tthan\tor\tequal\tto\t90%\tto\tless\tthan\t100%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 660 | 1,587 | 760 | 3,007 |
| Less\tthan\tor\tequal\tto\t660 | 98 | 255 | 200 | 553 |
| Missing\tFICO | 8 | 15 | 12 | 35 |
| Less\tthan\t90%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 6,588 | 9,747 | 3,152 | \t 19,487 |
| Less\tthan\tor\tequal\tto\t660 | 821 | 1,405 | 799 | 3,025 |
| Missing\tFICO | 679 | 218 | 32 | 929 |
| Missing\tLTV\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 |  | 11 |  | 11 |
| Less\tthan\tor\tequal\tto\t660 |  | 2 |  | 2 |
| Missing\tFICO |  |  | 731 | 731 |
| Total\thome\tequity\tand\tresidential\treal\testate\tloans | $10,248 | $20,745 | $10,021 | $41,014 |

(a) Excludes	purchased	impaired	loans	of	approximately	$6.6	billion	and	$6.5	billion	in	outstanding	balances,	certain	government	insured	or	guaranteed	residential	real	estate	mortgages	of	approximately	$2.2	billion and	$2.9	billion,	and	loans	held	for	sale	at	December	31,	2012	and	December	31,	2011,	respectively.	See	the	Consumer	Real	Estate	Secured	Asset	Quality	Indicators—Purchased	Impaired	Loans	table	that	follows for	additional	information	on	purchased	impaired	loans.

(b) Amounts	shown	represent	outstanding	balance.

(c) Based	upon	updated	LTV	(inclusive	of	CLTV	for	second	lien	positions).

(d) Updated	LTV	(inclusive	of	CLTV	for	second	lien	positions)	are	estimated	using	modeled	property	values.	These	ratios	are	updated	semi-annually.	The	related	estimates	and	inputs	are	based	upon	an	approach	that uses	a	combination	of	third-party	automated	valuation	models	(AVMs),	HPI	indices,	property	location,	internal	and	external	balance	information,	origination	data	and	management	assumptions.	In	cases	where	we are	in	an	originated	second	lien	position,	we	generally	utilize	origination	balances	provided	by	a	third-party	which	do	not	include	an	amortization	assumption	when	calculating	updated	LTV.	Accordingly,	the results	of	these	calculations	do	not	represent	actual	appraised	loan	level	collateral	or	updated	LTV	based	upon	a	current	first	lien	balance,	and	as	such,	are	necessarily	imprecise	and	subject	to	change	as	we	enhance our	methodology.

(e) Higher	risk	loans	are	defined	as	loans	with	both	an	updated	FICO	score	of	less	than	or	equal	to	660	and	an	updated	LTV	greater	than	or	equal	to	100%.

(f) The	following	states	have	the	highest	percentage	of	higher	risk	loans	at	December	31,	2012:	New	Jersey	14%,	Illinois	12%,	Pennsylvania	10%,	Ohio	10%,	Florida	9%,	California	9%,	and	Maryland	5%.	The remainder	of	the	states	have	lower	than	5%	of	the	high	risk	loans	individually,	and	collectively	they	represent	approximately	31%	of	the	higher	risk	loans.	At	December	31,	2011,	the	states	with	the	highest percentage	of	higher	risk	loans	were	as	follows:	Pennsylvania	13%,	New	Jersey	13%,	Illinois	10%,	Ohio	9%,	Florida	8%,	California	8%,	Maryland	5%,	and	Michigan	5%.	The	remainder	of	the	states	had	lower	than 3%	of	the	high	risk	loans	individually,	and	collectively	they	represented	approximately	29%	of	the	higher	risk	loans.

(g) In	the	second	quarter	of	2012,	we	made	changes	to	the	assumptions	used	to	determine	home	equity	first	and	second	lien	positions.	This	resulted	in	an	increase	in	Home	equity	2nd	liens	of	$2.4	billion	and	a corresponding	decrease	in	Home	equity	1st	liens	as	of	December	31,	2011.

# Table	69:	Consumer	Real	Estate	Secured	Asset	Quality	Indicators	–	Purchased	Impaired	Loans	(a)

|  | Home	Equity	(b)	(c) | Home	Equity	(b)	(c) | Residential	Real	Estate	(b)	(c) |  |
| :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012\t-\tin\tmillions | 1st\tLiens | 2nd\tLiens |  | Total |
| Current\testimated\tLTV\tratios\t(d)\t(e) |  |  |  |  |
| Greater\tthan\tor\tequal\tto\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | $16 | $736 | $477 | $1,229 |
| Less\tthan\tor\tequal\tto\t660 | 15 | 384 | 308 | 707 |
| Missing\tFICO |  | 21 | 11 | 32 |
| Greater\tthan\tor\tequal\tto\t100%\tto\tless\tthan\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 21 | 442 | 461 | 924 |
| Less\tthan\tor\tequal\tto\t660 | 17 | 210 | 307 | 534 |
| Missing\tFICO |  | 13 | 13 | 26 |
| Greater\tthan\tor\tequal\tto\t90%\tto\tless\tthan\t100%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 10 | 119 | 217 | 346 |
| Less\tthan\tor\tequal\tto\t660 | 12 | 66 | 196 | 274 |
| Missing\tFICO |  | 3 | 6 | 9 |
| Less\tthan\t90%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 53 | 387 | 733 | \t 1,173 |
| Less\tthan\tor\tequal\tto\t660 | 96 | 321 | 843 | \t 1,260 |
| Missing\tFICO | 1 | 18 | 32 | 51 |
| Missing\tLTV\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Missing\tFICO | 20 | 7 | 47 | 74 |
| Total\thome\tequity\tand\tresidential\treal\testate\tloans | $261 | $2,727 | $3,651 | $6,639 |

|  | Home	Equity	(b)	(c)	(f) |  | Residential	Real<br>Estate	(b)	(c) |  |
| :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2011\t-\tin\tmillions | 1st\tLiens | 2nd\tLiens |  | Total |
| Current\testimated\tLTV\tratios\t(d)\t(e) |  |  |  |  |
| Greater\tthan\tor\tequal\tto\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | $15 | $833 | $361 | $1,209 |
| Less\tthan\tor\tequal\tto\t660 | 15 | 513 | 681 | \t 1,209 |
| Missing\tFICO |  | 23 | 38 | 61 |
| Greater\tthan\tor\tequal\tto\t100%\tto\tless\tthan\t125%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 17 | 509 | 229 | 755 |
| Less\tthan\tor\tequal\tto\t660 | 16 | 286 | 375 | 677 |
| Missing\tFICO |  | 19 | 7 | 26 |
| Greater\tthan\tor\tequal\tto\t90%\tto\tless\tthan\t100%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 10 | 127 | 116 | 253 |
| Less\tthan\tor\tequal\tto\t660 | 11 | 79 | 208 | 298 |
| Missing\tFICO |  | 5 | 4 | 9 |
| Less\tthan\t90%\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 | 46 | 423 | 404 | 873 |
| Less\tthan\tor\tequal\tto\t660 | 72 | 366 | 679 | \t 1,117 |
| Missing\tFICO | 1 | 17 | 22 | 40 |
| Missing\tLTV\tand\tupdated\tFICO\tscores: |  |  |  |  |
| Greater\tthan\t660 |  |  | 1 | 1 |
| Less\tthan\tor\tequal\tto\t660 |  | 1 | 1 | 2 |
| Missing\tFICO |  | 1 | 2 | 3 |
| Total\thome\tequity\tand\tresidential\treal\testate\tloans | $203 | $3,202 | $3,128 | $6,533 |
| (a) |  |  |  |  |

(a) Amounts	shown	represent	outstanding	balance.	See	Note	6	Purchased	Loans	for	additional	information.

(b) For	the	estimate	of	cash	flows	utilized	in	our	purchased	impaired	loan	accounting,	other	assumptions	and	estimates	are	made,	including	amortization	of	first	lien	balances,	pre-payment	rates,	etc.,	which	are	not reflected	in	this	table.

(c) The	following	states	have	the	highest	percentage	of	loans	at	December	31,	2012:	California	21%,	Florida	14%,	Illinois	11%,	Ohio	7%,	Michigan	5%,	North	Carolina	5%	and	Georgia	at	5%,	respectively.	The remainder	of	the	states	have	lower	than	a	4%	concentration	of	purchased	impaired	loans	individually,	and	collectively	they	represent	approximately	32%	of	the	purchased	impaired	portfolio.	At	December	31, 2011,	the	states	with	the	highest	percentage	of	loans	were	as	follows:	California	22%,	Florida	13%,	Illinois	12%,	Ohio	9%,	Michigan	5%	and	New	York	4%.	The	remainder	of	the	states	have	lower	than	a	4% concentration	of	purchased	impaired	loans	individually,	and	collectively	they	represent	approximately	35%	of	the	purchased	impaired	portfolio.

(d) Based	upon	updated	LTV	(inclusive	of	CLTV	for	second	lien	positions).

(e) Updated	LTV	(inclusive	of	CLTV	for	second	lien	positions)	are	estimated	using	modeled	property	values.	These	ratios	are	updated	semi-annually.	The	related	estimates	and	inputs	are	based	upon	an	approach	that uses	a	combination	of	third-party	AVMs,	HPI	indices,	property	location,	internal	and	external	balance	information,	origination	data	and	management	assumptions.	In	cases	where	we	are	in	an	originated	second	lien position,	we	generally	utilize	origination	balances	provided	by	a	third-party	which	do	not	include	an	amortization	assumption	when	calculating	updated	LTV.	Accordingly,	the	results	of	these	calculations	do	not represent	actual	appraised	loan	level	collateral	or	updated	LTV	based	upon	a	current	first	lien	balance,	and	as	such,	are	necessarily	imprecise	and	subject	to	change	as	we	enhance	our	methodology.

(f) In	the	second	quarter	of	2012,	we	made	changes	to	the	assumptions	used	to	determine	lien	position.	This	resulted	in	a	decrease	in	Home	equity	1st	liens	of	$65	million	and	a	corresponding	increase	in	Home	equity 2nd	liens	as	of	December	31,	2011.

# Credit	Card	and	Other	Consumer	Loan	Classes

We	monitor	a	variety	of	asset	quality	information	in	the	management	of	the credit	card	and	other	consumer	loan	classes.	Other	consumer	loan	classes include	education,	automobile,	and	other	secured	and	unsecured	lines	and	loans. Along	with	the	trending	of	delinquencies	and	losses	for	each	class,	FICO	credit score	updates	are	obtained	on	a	monthly	basis	for	credit	cards,	and	at	least quarterly	for	other	consumer	loans,	as	well	as	a	variety	of	credit	bureau attributes.	Loans	with	high	FICO	scores	tend	to	have	a	lower	likelihood	of	loss. Conversely,	loans	with	low	FICO	scores	tend	to	have	a	higher	likelihood	of	loss.

# Consumer	Purchased	Impaired	Loans	Class

Estimates	of	the	expected	cash	flows	primarily	determine	the	credit	impacts	of consumer	purchased	impaired	loans.	Consumer	cash	flow	estimates	are influenced	by	a	number	of	credit	related	items,	which	include,	but	are	not limited	to:	estimated	real	estate	values,	payment	patterns,	updated	FICO	scores, the	current	economic	environment,	updated	LTV	ratios	and	the	date	of origination.	These	key	factors	are	monitored	to	help	ensure	that	concentrations of	risk	are	mitigated	and	cash	flows	are	maximized.

# Table	70:	Credit	Card	and	Other	Consumer	Loan	Classes	Asset	Quality	Indicators

(a) At	December	31,	2012,	we	had	$36	million	of	credit	card	loans	that	are	higher	risk	(i.e.,	loans	with	both	updated	FICO	scores	less	than	660	and	in	late	stage	(90+	days)	delinquency	status).	The	majority	of	the December	31,	2012	balance	related	to	higher	risk	credit	card	loans	is	geographically	distributed	throughout	the	following	areas:	Ohio	18%,	Pennsylvania	14%,	Michigan	12%,	Illinois	8%,	Indiana	6%,	Florida	6%, New	Jersey	5%,	Kentucky	4%,	and	North	Carolina	4%.	All	other	states,	none	of	which	comprise	more	than	3%,	make	up	the	remainder	of	the	balance.	At	December	31,	2011,	we	had	$49	million	of	credit	card loans	that	are	higher	risk.	The	majority	of	the	December	31,	2011	balance	related	to	higher	risk	credit	card	loans	is	geographically	distributed	throughout	the	following	areas:	Ohio	20%,	Michigan	14%, Pennsylvania	13%,	Illinois	7%,	Indiana	7%,	Florida	6%	and	Kentucky	5%.	All	other	states,	none	of	which	comprise	more	than	4%,	make	up	the	remainder	of	the	balance.

(b) Other	consumer	loans	for	which	updated	FICO	scores	are	used	as	an	asset	quality	indicator	include	nongovernment	guaranteed	or	insured	education	loans,	automobile	loans	and	other	secured	and	unsecured	lines and	loans.	Other	consumer	loans	(or	leases)	for	which	other	internal	credit	metrics	are	used	as	an	asset	quality	indicator	include	primarily	government	guaranteed	or	insured	education	loans,	as	well	as	consumer loans	to	high	net	worth	individuals	and	pools	of	auto	loans	(and	leases)	financed	for	PNC	clients	via	securitization	facilities.	Other	internal	credit	metrics	may	include	delinquency	status,	geography,	loan	to	value, asset	concentrations,	loss	coverage	multiples,	net	loss	rates	or	other	factors	as	well	as	servicer	quality	reviews	associated	with	the	securitizations	or	other	factors.

(c) Credit	card	loans	and	other	consumer	loans	with	no	FICO	score	available	or	required	refers	to	new	accounts	issued	to	borrowers	with	limited	credit	history,	accounts	for	which	we	cannot	obtain	an	updated	FICO (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	portfolio	and,	when	necessary,	takes	actions	to mitigate	the	credit	risk.

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

# TROUBLED	DEBT	RESTRUCTURINGS	(TDRS)

A	TDR	is	a	loan	whose	terms	have	been	restructured	in	a	manner	that	grants	a concession	to	a	borrower	experiencing	financial	difficulties.	TDRs	typically result	from	our	loss	mitigation	activities	and	include	rate	reductions,	principal forgiveness,	postponement/reduction	of	scheduled	amortization,	extensions,	and bankruptcy	discharges	where	no	formal	reaffirmation	was	provided	by	the borrower	and	therefore	a	concession	has	been	granted	based	upon	discharge from	personal	liability,	which	are	intended	to	minimize	economic	loss	and	to avoid	foreclosure	or	repossession	of	collateral.	In	those	situations	where principal	is	forgiven,	the	amount	of	such	principal	forgiveness	is	immediately charged	off.

Some	TDRs	may	not	ultimately	result	in	the	full	collection	of	principal	and interest,	as	restructured,	and	result	in	potential	incremental	losses.	These potential	incremental	losses	have	been	factored	into	our	overall	ALLL	estimate. The	level	of	any	subsequent	defaults	will	likely	be	affected	by	future	economic conditions.	Once	a	loan	becomes	a	TDR,	it	will	continue	to	be	reported	as	a	TDR until	it	is	ultimately	repaid	in	full,	the	collateral	is	foreclosed	upon,	or	it	is	fully charged	off.	We	held	specific	reserves	in	the	ALLL	of	$587	million	and	$580 million	at	December	31,	2012	and	December		31,	2011,	respectively,	for	the total	TDR	portfolio.

| In	millions | Dec.	31<br>2012 | Dec.	31<br>2011 |
| :--- | :--- | :--- |
| Total\tconsumer\tlending\t(a) | $2,318 | $1,798 |
| Total\tcommercial\tlending | 541 | 405 |
| Total\tTDRs | $2,859 | $2,203 |
| Nonperforming | $1,589 | $1,141 |
| Accruing\t(b) | \t 1,037 | 771 |
| Credit\tcard\t(c) | 233 | 291 |
| Total\tTDRs | $2,859 | $2,203 |

(a) Pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012,	additional	troubled	debt restructurings	related	to	changes	in	treatment	of	certain	loans	of	$366	million	in	2012,	net	of	charge- offs,	resulting	from	bankruptcy	where	no	formal	reaffirmation	was	provided	by	the	borrower	and therefore	a	concession	has	been	granted	based	upon	discharge	from	personal	liability	were	added	to the	consumer	lending	population.	The	additional	TDR	population	increased	nonperforming	loans	by $288	million.	Charge-offs	have	been	taken	where	the	fair	value	less	costs	to	sell	the	collateral	was less	than	the	recorded	investment	of	the	loan	and	were	$128.1	million.	Of	these	nonperforming loans,	approximately	78%	were	current	on	their	payments	at	December	31,	2012.

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

(c) Includes	credit	cards	and	certain	small	business	and	consumer	credit	agreements	whose	terms	have been	restructured	and	are	TDRs.	However,	since	our	policy	is	to	exempt	these	loans	from	being placed	on	nonaccrual	status	as	permitted	by	regulatory	guidance	as	generally	these	loans	are directly	charged	off	in	the	period	that	they	become	180	days	past	due,	these	loans	are	excluded	from nonperforming	loans.

The	following	table	quantifies	the	number	of	loans	that	were	classified	as	TDRs as	well	as	the	change	in	the	recorded	investments	as	a	result	of	the	TDR classification	during	the	years	ended	December	31,	2012	and	2011.	Additionally, the	table	provides	information	about	the	types	of	TDR	concessions.	The Principal	Forgiveness	TDR	category	includes	principal	forgiveness	and	accrued interest	forgiveness.	These	types	of	TDRs	result	in	a	write	down	of	the	recorded investment	and	a	charge-off	if	such	action	has	not	already	taken	place.	The	Rate Reduction	TDR	category	includes	reduced	interest	rate	and	interest	deferral.	The TDRs	within	this	category	would	result	in	reductions	to	future	interest	income. The	Other	TDR	category	primarily	includes	postponement/reduction	of scheduled	amortization,	as	well	as	contractual	extensions.

In	some	cases,	there	have	been	multiple	concessions	granted	on	one	loan.	When there	have	been	multiple	concessions	granted,	the	principal	forgiveness	TDR	was prioritized	for	purposes	of	determining	the	inclusion	in	the	table	below.	For example,	if	there	is	principal	forgiveness	in	conjunction	with	lower	interest	rate and	postponement	of	amortization,	the	type	of	concession	will	be	reported	as Principal	Forgiveness.	Second	in	priority	would	be	rate	reduction.	For	example, if	there	is	an	interest	rate	reduction	in	conjunction	with	postponement	of amortization,	the	type	of	concession	will	be	reported	as	a	Rate	Reduction.

# Table	72:	Financial	Impact	and	TDRs	by	Concession	Type	(a)

| During	the	year	ended	December	31,	2012<br>Dollars	in	millions | Number<br>of	Loans | Recorded<br>Investment	(b) | Principal<br>Forgiveness | Rate<br>Reduction | Other | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Commercial\tlending |  |  |  |  |  |  |
| Commercial | 212 | $355 | $13 | $90\t\t\t $198 | $90\t\t\t $198 | $301 |
| Commercial\treal\testate | 67 | 201 | 23 | 43 | \t 118 | 184 |
| Equipment\tlease\tfinancing | 10 | 24 | 2 | 2 | 12 | 16 |
| Total\tcommercial\tlending | 289 | 580 | 38 | 135 | \t 328 | 501 |
| Consumer\tlending |  |  |  |  |  |  |
| Home\tequity | 4,813 | 313 |  | 200 | \t 110 | 310 |
| Residential\treal\testate | 754 | 147 |  | 60 | 83 | 143 |
| Credit\tcard | \t13,306 | 93 |  | 90 |  | 90 |
| Other\tconsumer | 835 | 20 |  | 2 | 19 | 21 |
| Total\tconsumer\tlending | \t19,708 | 573 |  | 352 | \t 212 | 564 |
| Total\tTDRs | \t19,997 | $1,153 | $38 | $487\t\t\t $540 | $487\t\t\t $540 | $1,065 |
| During\tthe\tyear\tended\tDecember\t31,\t2011\t(e)\nDollars\tin\tmillions |  |  |  |  |  |  |
| Commercial\tlending |  |  |  |  |  |  |
| Commercial | 599 | $129 | $19 | $33\t\t\t $ | 60 | $112 |
| Commercial\treal\testate | 78 | 286 | 83 | 123 | 54 | 260 |
| Equipment\tlease\tfinancing\t(d) | 2 | 1 |  |  |  |  |
| Total\tcommercial\tlending | 679 | 416 | 102 | 156 | \t 114 | 372 |
| Consumer\tlending |  |  |  |  |  |  |
| Home\tequity | 4,013 | 321 |  | 281 | 39 | 320 |
| Residential\treal\testate | 1,590 | 376 |  | 236 | \t 115 | 351 |
| Credit\tcard | \t11,761 | 87 |  | 84 |  | 84 |
| Other\tconsumer | 472 | 13 |  | 1 | 12 | 13 |
| Total\tconsumer\tlending | \t17,836 | 797 |  | 602 | \t 166 | 768 |
| Total\tTDRs | \t18,515 | $1,213 | $102 | $758\t\t\t $280 | $758\t\t\t $280 | $1,140 |

(a) Impact	of	partial	charge-offs	at	TDR	date	are	included	in	this	table.

(b) Represents	the	recorded	investment	of	the	loans	as	of	the	quarter	end	prior	to	the	TDR	designation,	and	excludes	immaterial	amounts	of	accrued	interest	receivable.

(c) Represents	the	recorded	investment	of	the	TDRs	as	of	the	quarter	end	the	TDR	occurs,	and	excludes	immaterial	amounts	of	accrued	interest	receivable.

(d) During	2011,	the	Post-TDR	amounts	for	the	Equipment	lease	financing	loan	class	total	less	than	$1	million.

(e) Includes	loans	modified	during	2011	that	were	determined	to	be	TDRs	under	the	requirements	of	ASU	2011-02,	which	was	adopted	on	July	1,	2011	and	prospectively	applied	to	all	modifications	entered	into	on and	after	January	1,	2011.

TDRs	may	result	in	charge-offs	and	interest	income	not	being	recognized.	At	or around	the	time	of	modification,	there	was	$22	million	in	recorded	investment	of commercial	TDRs,	$10	million	in	recorded	investment	of	commercial	real	estate TDRs	and	$5	million	of	equipment	lease	financing	TDRs	charged	off	during 2012.	Comparable	amounts	for	2011	were	$26	million,	$15	million	and	zero respectively.	For	residential	real	estate	TDRs,	there	was	$7	million	of	recorded investment	charged	off	during	2012,	related	to	modifications	in	which	principal was	partially	deferred	and	deemed	uncollectible.	The	comparable	amount	for 2011	was	$17	million.	Charge-offs	around	the	time	of	modification	related	to home	equity,	credit	card,	and	other	consumer	TDR	portfolios	were	immaterial for	both	periods.

A	financial	effect	of	rate	reduction	TDRs	is	that	interest	income	is	not recognized.	Interest	income	not	recognized	that	otherwise	would	have	been earned	in	the	year	ended

December	31,	2012	and	2011	related	to	both	commercial	TDRs	and	consumer TDRs	was	not	material.

Pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012,	management compiled	TDR	information	related	to	changes	in	treatment	of	certain	loans where	a	borrower	has	been	discharged	from	personal	liability	in	bankruptcy	and has	not	formally	reaffirmed	its	loan	obligation	to	PNC.	This	information	has been	reflected	in	period	end	balance	disclosures	for	the	year	ended	December	31, 2012.	Because	of	the	timing	of	the	compilation	of	the	TDR	information	and	the fact	that	it	covers	several	periods,	$366	million	of	TDRs,	net	of	$128.1	million of	charge-offs,	related	to	this	new	regulatory	guidance,	has	not	been	reflected	as part	of	2012	activity	included	in	Table	72:	Financial	Impact	and	TDRs	by Concession	Type	and	Table	73:	TDRs	which	have	Subsequently	Defaulted.

After	a	loan	is	determined	to	be	a	TDR,	we	continue	to	track	its	performance under	its	most	recent	restructured	terms.	In	the	following	table,	we	consider	a TDR	to	have	subsequently	defaulted	when	it	becomes	60	days	past	due	after	the most	recent	date	the	loan	was	restructured.	The	following	table

presents	the	recorded	investment	of	loans	that	were	classified	as	TDRs	or	were subsequently	modified	during	each	12-month	period	prior	to	the	reporting periods	preceding	January	1,	2012	and	January	1,	2011,	respectively,	in	the	table below	and	subsequently	defaulted	during	these	reporting	periods.

# Table	73:	TDRs	which	have	Subsequently	Defaulted

(a) Includes	loans	modified	during	2011	that	were	determined	to	be	TDRs	under	the	requirements	of	ASU	2011-02,	which	was	adopted	on	July	1,	2011	and	prospectively	applied	to	all	modifications	entered	into	on and	after	January	1,	2011.

(b) During	the	year	ended	December	31,	2011,	there	were	no	loans	classified	as	TDRs	in	the	Equipment	lease	financing	loan	class	that	have	subsequently	defaulted.

The	impact	to	the	ALLL	for	commercial	lending	TDRs	is	the	effect	of	moving	to the	specific	reserve	methodology	from	the	quantitative	reserve	methodology	for those	loans	that	were	not	already	put	on	nonaccrual	status.	There	is	an	impact	to the	ALLL	as	a	result	of	the	concession	made,	which	generally	results	in	the expectation	of	fewer	future	cash	flows.	The	decline	in	expected	cash	flows, consideration	of	collateral	value,	and/or	the	application	of	a	present	value discount	rate,	when	compared	to	the	recorded	investment,	results	in	a	charge-off or	increased	ALLL.	As	TDRs	are	individually	evaluated	under	the	specific reserve	methodology,	which	builds	in	expectations	of	future	performance, subsequent	defaults	do	not	generally	have	a	significant	additional	impact	to	the ALLL.

For	consumer	lending	TDRs,	the	ALLL	is	calculated	using	a	discounted	cash flow	model,	which	leverages	subsequent	default,	prepayment,	and	severity	rate assumptions	based	on	historically	observed	data.	Similar	to	the	commercial lending	specific	reserve	methodology,	the	reduced	expected	cash	flows	resulting from	the	concessions	granted	impact	the	consumer	lending	ALLL.	The	decline	in expected	cash	flows,	consideration	of	collateral	value,	and/or	the	application	of	a present	value	discount	rate,	when	compared	to	the	recorded	investment,	results	in a	charge-off	or	increased	ALLL.

# IMPAIRED	LOANS

Impaired	loans	include	commercial	nonperforming	loans	and	consumer	and commercial	TDRs,	regardless	of	nonperforming	status.	Excluded	from	impaired loans	are	nonperforming	leases,	loans	held	for	sale,	smaller	balance homogeneous	type	loans	and	purchased	impaired	loans.	See	Note	6	Purchased Loans	for	additional	information.	Nonperforming	equipment	lease	financing loans	of	$12	million	and	$22	million	at	December	31,	2012	and	December	31, 2011,	respectively,	are

excluded	from	impaired	loans	pursuant	to	authoritative	lease	accounting guidance.	We	did	not	recognize	interest	income	on	nonperforming	impaired loans	while	they	were	in	impaired	loan	status	during	2012	and	2011.	The following	table	provides	further	detail	on	impaired	loans	individually	evaluated for	impairment	and	the	associated	ALLL.	Certain	commercial	impaired	loans	do not	have	a	related	ALLL	as	the	valuation	of	these	impaired	loans	exceeded	the recorded	investment.

# Table	74:	Impaired	Loans

| In	millions | Unpaid<br>Principal<br>Balance | Recorded<br>Investment<br>(a) | Associated<br>Allowance<br>(b) | Recorded<br>Investment<br>(a) |
| :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2012 |  |  |  |  |
| Impaired\tloans\twith\tan\tassociated\tallowance |  |  |  |  |
| Commercial | $824 | $523 | $150 | $653 |
| Commercial\treal\testate | 851 | 594 | 143 | 778 |
| Home\tequity\t(c) | \t 1,239 | 1,134 | 328 | 891 |
| Residential\treal\testate\t(c) | \t 1,094 | 894 | 168 | 777 |
| Credit\tcard\t(c) | 204 | 204 | 48 | 227 |
| Other\tconsumer\t(c) | 104 | 86 | 3 | 63 |
| Total\timpaired\tloans\twith\tan\tassociated\tallowance | $4,316 | $3,435 | $840 | $3,389 |
| Impaired\tloans\twithout\tan\tassociated\tallowance |  |  |  |  |
| Commercial | $362 | $126 |  | $157 |
| Commercial\treal\testate | 562 | 355 |  | 400 |
| Total\timpaired\tloans\twithout\tan\tassociated\tallowance | $924 | $481 |  | $557 |
| Total\timpaired\tloans | $5,240 | $3,916 | $840 | $3,946 |
| December\t31,\t2011 |  |  |  |  |
| Impaired\tloans\twith\tan\tassociated\tallowance |  |  |  |  |
| Commercial | $1,125 | $785 | $241 | $979 |
| Commercial\treal\testate | \t 1,452 | 1,043 | 318 | 1,247 |
| Home\tequity | 774 | 762 | 292 | 702 |
| Residential\treal\testate | 853 | 730 | 193 | 609 |
| Credit\tcard | 258 | 258 | 53 | 281 |
| Other\tconsumer | 48 | 48 | 3 | 39 |
| Total\timpaired\tloans\twith\tan\tassociated\tallowance | $4,510 | $3,626 | $1,100 | $3,857 |
| Impaired\tloans\twithout\tan\tassociated\tallowance |  |  |  |  |
| Commercial | $347 | $125 |  | $104 |
| Commercial\treal\testate | 592 | 342 |  | 413 |
| Total\timpaired\tloans\twithout\tan\tassociated\tallowance | $939 | $467 |  | $517 |
| Total\timpaired\tloans | $5,449 | $4,093 | $1,100 | $4,374 |

(a) Recorded	investment	in	a	loan	includes	the	unpaid	principal	balance	plus	accrued	interest	and	net	accounting	adjustments,	less	any	charge-offs.	Recorded	investment	does	not	include	any	associated	valuation allowance.	Average	recorded	investment	is	for	the	years	ended	December	31,	2012	and	December	31,	2011.

(b) Associated	allowance	amounts	include	$587	million	and	$580	million	for	TDRs	at	December	31,	2012	and	December	31,	2011,	respectively.

(c) Pursuant	to	regulatory	guidance	issued	in	the	third	quarter	of	2012,	the	impact	of	TDRs	where	no	formal	reaffirmation	was	provided	by	the	borrower	and	therefore	a	concession	has	been	granted	based	upon discharge	from	personal	liability	in	bankruptcy	is	included	in	the	table.	A	portion	of	these	loans	have	been	written	down	to	collateral	value.

# NOTE	6	PURCHASED	LOANS

# PURCHASED	IMPAIRED	LOANS

Purchased	impaired	loans	are	accounted	for	under	ASC	310-30,	which	addresses accounting	for	differences	between	contractual	cash	flows	and	cash	flows expected	to	be	collected	from	the	initial	investment	in	loans	if	those	differences are	attributable,	at	least	in	part,	to	credit	quality.	Several	factors	were	considered when	evaluating	whether	a	loan	was	considered	a	purchased	impaired	loan, including	the	delinquency	status	of	the	loan,	updated	borrower	credit	status, geographic	information,	and	updated	loan-to-values	(LTV).	GAAP	allows purchasers	to	aggregate	purchased	impaired	loans	acquired	in	the	same	fiscal quarter	into	one	or	more	pools,	provided	that	the	loans	have	common	risk characteristics.	A	pool	is	then	accounted	for	as	a	single	asset	with	a	single composite	interest	rate	and	an	aggregate	expectation	of	cash	flows.	Purchased impaired	loans	with	homogeneous	consumer,	residential	real	estate	and	smaller balance	commercial	loans	with	common	risk	characteristics	are	aggregated	into pools	where	appropriate.	Commercial	loans	with	a	total	commitment	greater	than a	defined	threshold	are	accounted	for	individually.	The	excess	of	cash	flows

expected	at	acquisition	over	the	estimated	fair	value	is	referred	to	as	the accretable	yield	and	is	recognized	as	interest	income	over	the	remaining	life	of the	loan	using	the	constant	effective	yield	method.	The	difference	between contractually	required	payments	at	acquisition	and	the	cash	flows	expected	to	be collected	at	acquisition	is	referred	to	as	the	nonaccretable	difference.	Subsequent changes	in	the	expected	cash	flows	of	individual	or	pooled	purchased	impaired loans	from	the	date	of	acquisition	will	either	impact	the	accretable	yield	or	result in	an	impairment	charge	to	provision	for	credit	losses	in	the	period	in	which	the changes	become	probable.	Decreases	to	the	net	present	value	of	expected	cash flows	will	generally	result	in	an	impairment	charge	recorded	as	a	provision	for credit	losses,	resulting	in	an	increase	to	the	allowance	for	loan	and	lease	losses, and	a	reclassification	from	accretable	yield	to	nonaccretable	difference. Prepayments	and	interest	rate	decreases	for	variable	rate	notes	are	treated	as	a reduction	of	cash	flows	expected	to	be	collected	and	a	reduction	of	projections	of contractual	cash	flows	such	that	the	nonaccretable	difference	is	not	affected. Thus,	for	decreases	in	cash	flows	expected	to	be	collected	resulting	from prepayments	and	interest	rate	decreases	for	variable	rate	notes,	the	effect	will	be to	reduce	the	yield	prospectively.

The	following	table	provides	purchased	impaired	loans	at	December	31,	2012	and	December	31,	2011:

# Table	75:	Purchased	Impaired	Loans	–	Balances

|  | December	31,	2012	(a) | December	31,	2012	(a) | December	31,	2011	(b) | December	31,	2011	(b) |
| :--- | :--- | :--- | :--- | :--- |
|  | Recorded | Outstanding | Recorded | Outstanding |
| In\tmillions | Investment | Balance | Investment | Balance |
| Commercial\tLending |  |  |  |  |
| Commercial | $308 | $524 | $140 | $245 |
| Commercial\treal\testate | 941 | 1,156 | 712 | 743 |
| Total\tCommercial\tLending | 1,249 | 1,680 | 852 | 988 |
| Consumer\tLending |  |  |  |  |
| Consumer | 2,621 | 2,988 | 2,766 | 3,405 |
| Residential\treal\testate | 3,536 | 3,651 | 3,049 | 3,128 |
| Total\tConsumer\tLending | 6,157 | 6,639 | 5,815 | 6,533 |
| Total | $7,406 | $8,319 | $6,667 | $7,521 |

As	of	December	31,	2011,	the	allowance	for	loan	and	lease	losses	related	to purchased	impaired	loans	was	$998	million.	During	2012,	$173	million	of provision	and	$74	million	of	charge-offs	were	recorded	on	purchased	impaired loans.	At	December	31,	2012,	the	allowance	for	loan	and	lease	losses	was	$1.1 billion	on	$6.0	billion	of	purchased	impaired	loans	while	the	remaining	$1.4 billion	of	purchased	impaired	loans	required	no	allowance	as	the	net	present value	of	expected	cash	flows	equaled	or	exceeded	the	recorded	investment.	If any	allowance	for	loan	losses	is	recognized	on	a	purchased	impaired	pool,	which is	accounted	for	as	a	single	asset,	the

entire	balance	of	that	pool	would	be	disclosed	as	requiring	an	allowance. Subsequent	increases	in	the	net	present	value	of	cash	flows	will	result	in	a recovery	of	any	previously	recorded	allowance	for	loan	and	lease	losses,	to	the extent	applicable,	and/or	a	reclassification	from	non-accretable	difference	to accretable	yield,	which	will	be	recognized	prospectively.	Disposals	of	loans, which	may	include	sales	of	loans	or	foreclosures,	result	in	removal	of	the	loan from	the	purchased	impaired	loan	portfolio.	The	cash	flow	re-estimation	process is	completed	quarterly	to	evaluate	the	appropriateness	of	the	allowance associated	with	the	purchased	impaired	loans.

Activity	for	the	accretable	yield	for	2012	follows:

# Table	77:	RBC	Bank	(USA)	Acquisition	–	Purchased	Loans	Balances	(a)

As	of	March	2,	2012,	loans	were	classified	as	purchased	impaired	or	purchased non-impaired	and	had	a	fair	value	of	$2.0	billion	and	$12.5	billion,	respectively, and	an	outstanding	balance	of	$3.0	billion	and	$13.7	billion,	respectively.

# RBC	Bank	(USA)	Purchased	Non-Impaired	Loans

Other	purchased	loans	acquired	in	the	RBC	Bank	(USA)	acquisition	were	recorded	at	fair	value	as	provided	in	the	table	below.	The	difference	between	the	acquisition date	fair	value	and	the	outstanding	balance	represents	the	fair	value	adjustment	for	a	loan	and	includes	both	credit	and	interest	rate	considerations.	Fair	values	were determined	by	discounting	both	principal	and	interest	cash	flows	expected	to	be	collected	using	a	market	discount	rate	for	similar	instruments	with	adjustments	that management	believes	a	market	participant	would	consider	in	determining	fair	value.	Fair	value	adjustments	may	be	discounts	(or	premiums)	to	a	loan's	cost	basis	and	are accreted	(or	amortized)	to	net	interest	income	(or	expense)	over	the	loan's	remaining	life	in	accordance	with	ASC	310-20.	Fair	value	adjustments	for	revolving	loans	are accreted	(or	amortized)	using	a	straight	line	method.	Term	loans	are	accreted	(or	amortized)	using	the	constant	effective	yield	method.

# Table	79:	Purchased	Non-Impaired	Loans	–	Fair	Value	(a)

|  |  |  | Equipment |  | Residential | Card	and |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| As\tof\tMarch\t2,\t2012 |  | Commercial | Lease | Home | Real | Other |  |
| In\tmillions | Commercial | Real\tEstate | Finance | Equity | Estate | Consumer | Total |
| Outstanding\tBalance | $6,298 | $2,340 | $92 | $3,346 | $1,202 | $385\t\t\t $13,663 | $385\t\t\t $13,663 |
| Less:\tFair\tvalue\tadjustment | 344 | 239 | 6 | 519 | 34 | 9 | 1,151 |
| Fair\tvalue\tof\tloans\tacquired | $5,954 | $2,101 | $86 | $2,827 | $1,168 | $376\t\t\t $12,512 | $376\t\t\t $12,512 |
| (a) |  |  |  |  |  |  |  |

(a) The	table	above	has	been	updated	to	reflect	certain	immaterial	adjustments.

The	table	below	details	contractually	required	payments,	cash	flows	not	expected	to	be	collected	and	cash	flows	expected	to	be	collected	on	other	purchased	loans acquired	in	connection	with	the	RBC	Bank	(USA)	transaction.

# Table	80:	Purchased	Non-Impaired	Loans	–	Cash	Flows(a)

|  |  |  | Equipment |  | Residential | Card	and |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| As\tof\tMarch\t2,\t2012 |  | Commercial | Lease | Home | Real | Other |  |
| In\tmillions | Commercial | Real\tEstate | Finance | Equity | Estate | Consumer | Total |
| Contractually\trequired\trepayments\tincluding\tinterest\t(b) | $6,857 | $2,473 | $101 | $5,003 | $1,869 | $414\t\t\t $16,717 | $414\t\t\t $16,717 |
| Less:\tContractual\tcash\tflows\tnot\texpected\tto\tbe\tcollected | 102 | 129 | 6 | \t 1,501 | 538 | 189 | 2,465 |
| Cash\tflows\texpected\tto\tbe\tcollected | $6,755 | $2,344 | $95 | $3,502 | $1,331 | $225\t\t\t $14,252 | $225\t\t\t $14,252 |
| (a) |  |  |  |  |  |  |  |

(b) Denotes	required	payments	based	on	a	loan's	contractual	schedule	assuming	no	loss	or	prepayment.

# NOTE	7	ALLOWANCES	FOR	LOAN	AND	LEASE	LOSSES	AND UNFUNDED	LOAN	COMMITMENTS	AND	LETTERS	OF	CREDIT

We	maintain	the	ALLL	and	the	Allowance	for	Unfunded	Loan	Commitments and	Letters	of	Credit	at	levels	that	we	believe	to	be	appropriate	to	absorb estimated	probable	credit	losses	incurred	in	the	portfolios	as	of	the	balance	sheet date.	We	use	the	two	main	portfolio	segments	–	Commercial	Lending	and Consumer	Lending	–	and	we	develop	and	document	the	ALLL	under	separate methodologies	for	each	of	these	segments	as	further	discussed	and	presented below.

# ALLOWANCE	FOR	LOAN	AND	LEASE	LOSSES	COMPONENTS

For	all	loans,	except	purchased	impaired	loans,	the	ALLL	is	the	sum	of	three components:	(i)	asset	specific/individual	impaired	reserves,	(ii)	quantitative (formulaic	or	pooled)	reserves,	and	(iii)	qualitative	(judgmental)	reserves.	See Note	6	Purchased	Loans	for	additional	ALLL	information.	The	reserve calculation	and	determination	process	is	dependent	on	the	use	of	key assumptions.	Key	reserve	assumptions	and	estimation	processes	react	to	and	are influenced	by	observed	changes	in	loan	portfolio	performance	experience,	the financial	strength	of	the	borrower,	and	economic	conditions.	Key	reserve assumptions	are	periodically	updated.	During	the	third	quarter	of	2012,	PNC increased	the	amount	of	internally	observed	data	used	in	estimating	the	key commercial	lending	assumptions	of	PD	and	LGD.

# ASSET	SPECIFIC/INDIVIDUAL	COMPONENT

Commercial	nonperforming	loans	and	all	TDRs	are	considered	impaired	and	are evaluated	for	a	specific	reserve.	See	Note	1	Accounting	Policies	for	additional information.

# COMMERCIAL	LENDING	QUANTITATIVE	COMPONENT

The	estimates	of	the	quantitative	component	of	ALLL	for	incurred	losses	within the	commercial	lending	portfolio	segment	are	determined	through	statistical	loss modeling	utilizing	PD,	LGD,	and	outstanding	balance	of	the	loan.	Based	upon loan	risk	ratings	we	assign	PDs	and	LGDs.	Each	of	these	statistical	parameters	is determined	based	on	internal	historical	data	and	market	data.	PD	is	influenced	by such	factors	as	liquidity,	industry,	obligor	financial	structure,	access	to	capital, and	cash	flow.	LGD	is	influenced	by	collateral	type,	original	and/or	updated LTV,	and	guarantees	by	related	parties.

# CONSUMER	LENDING	QUANTITATIVE	COMPONENT

Quantitative	estimates	within	the	consumer	lending	portfolio	segment	are calculated	using	a	roll-rate	model	based	on	statistical	relationships,	calculated from	historical	data	that	estimate	the	movement	of	loan	outstandings	through	the various	stages	of	delinquency	and	ultimately	charge-off.

# Qualitative	Component

While	our	reserve	methodologies	strive	to	reflect	all	relevant	risk	factors,	there continues	to	be	uncertainty	associated	with,	but	not	limited	to,	potential imprecision	in	the	estimation	process	due	to	the	inherent	time	lag	of	obtaining information	and	normal	variations	between	estimates	and	actual	outcomes.	We provide	additional	reserves	that	are	designed	to	provide	coverage	for	losses attributable	to	such	risks.	The	ALLL	also	includes	factors	which	may	not	be directly	measured	in	the	determination	of	specific	or	pooled	reserves.	Such qualitative	factors	include:

# ALLOWANCE	FOR	RBC	BANK	(USA)	PURCHASED NON-IMPAIRED	LOANS

ALLL	for	RBC	Bank	(USA)	purchased	non-impaired	loans	is	determined	based upon	the	methodologies	described	above	compared	to	the	remaining	acquisition date	fair	value	discount	that	has	yet	to	be	accreted	into	interest	income.	After making	the	comparison,	an	ALLL	is	recorded	for	the	amount	greater	than	the discount,	or	no	ALLL	is	recorded	if	the	discount	is	greater.

# ALLOWANCE	FOR	PURCHASED	IMPAIRED	LOANS

ALLL	for	purchased	impaired	loans	is	determined	in	accordance	with	ASC	310- 30	by	comparing	the	net	present	value	of	the	cash	flows	expected	to	be	collected to	the	Recorded	Investment	for	a	given	loan	(or	pool	of	loans).	In	cases	where the	net	present	value	of	expected	cash	flows	is	lower	than	Recorded	Investment, ALLL	is	established.	Cash	flows	expected	to	be	collected	represent management's	best	estimate	of	the	cash	flows	expected	over	the	life	of	a	loan	(or pool	of	loans).	For	large	balance	commercial	loans,	cash	flows	are	separately estimated	and	compared	to	the	Recorded	Investment	at	the	loan	level.	For smaller	balance	pooled	loans,	cash	flows	are	estimated	using	cash	flow	models and	compared	at	the	risk	pool	level,	which	was	defined	at	acquisition	based	on risk	characteristics	of	the	loan.	Our	cash	flow	models	use	loan	data	including, but	not	limited	to,	delinquency	status	of	the	loan,	updated	borrower	FICO	credit scores,	geographic	information,	historical	loss	experience,	and	updated	LTVs,	as well	as	estimates	for	unemployment	rates,	home	prices	and	other	economic factors	to	determine	estimated	cash	flows.

# Table	81:	Rollforward	of	Allowance	for	Loan	and	Lease	Losses	and	Associated	Loan	Data

| In	millions | Commercial<br>Lending | Consumer<br>Lending | Total |
| :--- | :--- | :--- | :--- |
| December\t31,\t2012 |  |  |  |
| Allowance\tfor\tLoan\tand\tLease\tLosses |  |  |  |
| January\t1 | $1,995 | $2,352 | $4,347 |
| Charge-offs | (804) | (1,066) | (1,870) |
| Recoveries | 445 | 136 | 581 |
| Net\tcharge-offs | (359) | (930) | (1,289) |
| Provision\tfor\tcredit\tlosses | 138 | 849 | 987 |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | (1) | (9) | (10) |
| Other | 1 |  | 1 |
| December\t31 | $1,774 | $2,262 | $4,036 |
| TDRs\tindividually\tevaluated\tfor\timpairment | $40 | $547 | $587 |
| Other\tloans\tindividually\tevaluated\tfor\timpairment | 253 |  | 253 |
| Loans\tcollectively\tevaluated\tfor\timpairment | 1,242 | 857 | 2,099 |
| Purchased\timpaired\tloans | 239 | 858 | 1,097 |
| December\t31 | $1,774 | $2,262 | $4,036 |
| Loan\tPortfolio |  |  |  |
| TDRs\tindividually\tevaluated\tfor\timpairment | $541 | $2,318 | $2,859 |
| Other\tloans\tindividually\tevaluated\tfor\timpairment | 1,057 |  | 1,057 |
| Loans\tcollectively\tevaluated\tfor\timpairment | \t 106,095 | \t 68,439 | \t 174,534 |
| Purchased\timpaired\tloans | 1,249 | 6,157 | 7,406 |
| December\t31 | $108,942 | $76,914 | $185,856 |
| Portfolio\tSegment\tALLL\tas\ta\tpercentage\tof\ttotal\tALLL | 44% | 56% | 100% |
| Ratio\tof\tthe\tallowance\tfor\tloan\tand\tlease\tlosses\tto\ttotal\tloans | 1.63% | 2.94% | 2.17% |
| December\t31,\t2011 |  |  |  |
| Allowance\tfor\tLoan\tand\tLease\tLosses |  |  |  |
| January\t1 | $2,567 | $2,320 | $4,887 |
| Charge-offs | (1,199) | (1,065) | (2,264) |
| Recoveries | 487 | 138 | 625 |
| Net\tcharge-offs | (712) | (927) | (1,639) |
| Provision\tfor\tcredit\tlosses | 177 | 975 | 1,152 |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | (36) | (16) | (52) |
| Other | (1) |  | (1) |
| December\t31 | $1,995 | $2,352 | $4,347 |
| TDRs\tindividually\tevaluated\tfor\timpairment | $39 | $541 | $580 |
| Other\tloans\tindividually\tevaluated\tfor\timpairment | 520 |  | 520 |
| Loans\tcollectively\tevaluated\tfor\timpairment | 1,207 | 1,042 | 2,249 |
| Purchased\timpaired\tloans | 229 | 769 | 998 |
| December\t31 | $1,995 | $2,352 | $4,347 |
| Loan\tPortfolio |  |  |  |
| TDRs\tindividually\tevaluated\tfor\timpairment | $405 | $1,798 | $2,203 |
| Other\tloans\tindividually\tevaluated\tfor\timpairment | 1,890 |  | 1,890 |
| Loans\tcollectively\tevaluated\tfor\timpairment | 85,167 | \t 63,087 | \t 148,254 |
| Purchased\timpaired\tloans | 852 | 5,815 | 6,667 |
| December\t31 | $88,314 | $70,700 | $159,014 |
| Portfolio\tsegment\tALLL\tas\ta\tpercentage\tof\ttotal\tALLL | 46% | 54% | 100% |
| Ratio\tof\tthe\tallowance\tfor\tloan\tand\tlease\tlosses\tto\ttotal\tloans | 2.26% | 3.33% | 2.73% |

(continued	from	previous	page)

| In	millions | Commercial<br>Lending | Consumer<br>Lending | Total |
| :--- | :--- | :--- | :--- |
| December\t31,\t2010 |  |  |  |
| Allowance\tfor\tLoan\tand\tLease\tLosses |  |  |  |
| January\t1 | $3,345 | $1,727 | $5,072 |
| Charge-offs | (2,017) | (1,475) | (3,492) |
| Recoveries | 427 | 129 | 556 |
| Net\tcharge-offs | (1,590) | (1,346) | (2,936) |
| Provision\tfor\tcredit\tlosses | 704 | 1,798 | 2,502 |
| Adoption\tof\tASU\t2009-17,\tConsolidations |  | 141 | 141 |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 108 |  | 108 |
| December\t31 | $2,567 | $2,320 | $4,887 |
| TDRs\tindividually\tevaluated\tfor\timpairment | $24 | $485 | $509 |
| Other\tloans\tindividually\tevaluated\tfor\timpairment | 835 |  | 835 |
| Loans\tcollectively\tevaluated\tfor\timpairment | 1,419 | 1,227 | 2,646 |
| Purchased\timpaired\tloans | 289 | 608 | 897 |
| December\t31 | $2,567 | $2,320 | $4,887 |
| Loan\tPortfolio |  |  |  |
| TDRs\tindividually\tevaluated\tfor\timpairment | $200 | $1,422 | $1,622 |
| Other\tloans\tindividually\tevaluated\tfor\timpairment | 2,888 |  | 2,888 |
| Loans\tcollectively\tevaluated\tfor\timpairment | 75,014 | \t 63,291 | \t 138,305 |
| Purchased\timpaired\tloans | 1,402 | 6,378 | 7,780 |
| December\t31 | $79,504 | $71,091 | $150,595 |
| Portfolio\tsegment\tALLL\tas\ta\tpercentage\tof\ttotal\tALLL | 53% | 47% | 100% |
| Ratio\tof\tthe\tallowance\tfor\tloan\tand\tlease\tlosses\tto\ttotal\tloans | 3.23% | 3.26% | 3.25% |

Net	interest	income	less	the	provision	for	credit	losses	was	$8.7	billion	for	2012	compared	with	$7.5	billion	for	2011	and	$6.7	billion	for	2010.

We	maintain	the	allowance	for	unfunded	loan	commitments	and	letters	of	credit	at	a	level	we	believe	is	appropriate	to	absorb	estimated	probable	credit	losses	on	these unfunded	credit	facilities	as	of	the	balance	sheet	date.	See	Note	1	Accounting	Policies	for	additional	information.

# Table	82:	Rollforward	of	Allowance	for	Unfunded	Loan	Commitments	and	Letters	of	Credit

| In	millions | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| January\t1 | \t\t $240 | $188 | $296 |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 10 | 52 | (108) |
| December\t31 | \t\t $250 | $240 | $188 |

# NOTE	8	INVESTMENT	SECURITIES

# Table	83:	Investment	Securities	Summary

|  | Amortized |  | Unrealized |  | Fair |
| :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Cost | Gains |  | Losses | Value |
| December\t31,\t2012 |  |  |  |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | \t\t $2,868 | \t\t $245 |  |  | $3,113 |
| Residential\tmortgage-backed |  |  |  |  |  |
| Agency | \t 25,844 | 952 |  | $(12) | \t 26,784 |
| Non-agency | 6,102 | 314 |  | (309) | 6,107 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency | 602 | 31 |  |  | 633 |
| Non-agency | 3,055 | 210 |  | (1) | 3,264 |
| Asset-backed | 5,667 | 65 |  | (79) | 5,653 |
| State\tand\tmunicipal | 2,197 | 111 |  | (21) | 2,287 |
| Other\tdebt | 2,745 | 103 |  | (4) | 2,844 |
| Total\tdebt\tsecurities | \t 49,080 | \t 2,031 |  | (426) | \t 50,685 |
| Corporate\tstocks\tand\tother | 367 |  |  |  | 367 |
| Total\tsecurities\tavailable\tfor\tsale | \t\t $49,447 | \t\t $2,031 |  | $(426) | $51,052 |
| SECURITIES\tHELD\tTO\tMATURITY |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | \t\t $230 | \t\t $47 |  |  | $277 |
| Residential\tmortgage-backed\t(agency) | 4,380 | 202 |  |  | 4,582 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency | 1,287 | 87 |  |  | 1,374 |
| Non-agency | 2,582 | 85 |  |  | 2,667 |
| Asset-backed | 858 | 5 |  |  | 863 |
| State\tand\tmunicipal | 664 | 61 |  |  | 725 |
| Other\tdebt | 353 | 19 |  |  | 372 |
| Total\tsecurities\theld\tto\tmaturity | \t\t $10,354 | \t\t $506 |  |  | $10,860 |
| December\t31,\t2011 |  |  |  |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | \t\t $3,369 | \t\t $348 |  |  | $3,717 |
| Residential\tmortgage-backed |  |  |  |  |  |
| Agency | \t 26,081 | 772 |  | $(61) | \t 26,792 |
| Non-agency | 6,673 | 152 |  | (1,268) | 5,557 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency | 1,101 | 39 |  |  | 1,140 |
| Non-agency | 2,693 | 80 |  | (17) | 2,756 |
| Asset-backed |  |  |  |  |  |
|  | 3,854 | 31 |  | (216) | 3,669 |
| State\tand\tmunicipal | 1,779 | 75 |  | (47) | 1,807 |
| Other\tdebt | 2,691 | 83 |  | (12) | 2,762 |
| Total\tdebt\tsecurities | \t 48,241 | \t 1,580 |  | (1,621) | \t 48,200 |
| Corporate\tstocks\tand\tother | 368 |  |  |  | 368 |
| Total\tsecurities\tavailable\tfor\tsale | \t\t $48,609 | \t\t $1,580 |  | $(1,621) | $48,568 |
| SECURITIES\tHELD\tTO\tMATURITY |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | \t\t $221 | \t\t $40 |  |  | $261 |
| Residential\tmortgage-backed\t(agency) | 4,761 | 131 |  | $(1) | 4,891 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency | 1,332 | 50 |  |  | 1,382 |
| Non-agency | 3,467 | 108 |  | (2) | 3,573 |
| Asset-backed | 1,251 | 14 |  | (3) | 1,262 |
| State\tand\tmunicipal | 671 | 31 |  |  | 702 |
| Other\tdebt | 363 | 16 |  |  | 379 |
| Total\tsecurities\theld\tto\tmaturity | \t\t $12,066 | \t\t $390 |  | $(6) | $12,450 |

|  | Amortized |  | Unrealized |  | Fair |
| :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Cost | Gains |  | Losses | Value |
| December\t31,\t2010 |  |  |  |  |  |
| SECURITIES\tAVAILABLE\tFOR\tSALE |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | \t\t $5,575 | \t\t $157 |  | $(22) | $5,710 |
| Residential\tmortgage-backed |  |  |  |  |  |
| Agency | \t 31,697 | 443 |  | (420) | \t 31,720 |
| Non-agency | 8,193 | 230 |  | (1,190) | 7,233 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency | 1,763 | 40 |  | (6) | 1,797 |
| Non-agency | 1,794 | 73 |  | (11) | 1,856 |
| Asset-backed | 2,780 | 40 |  | (238) | 2,582 |
| State\tand\tmunicipal | 1,999 | 30 |  | (72) | 1,957 |
| Other\tdebt | 3,992 | 102 |  | (17) | 4,077 |
| Total\tdebt\tsecurities | \t 57,793 | \t 1,115 |  | (1,976) | \t 56,932 |
| Corporate\tstocks\tand\tother | 378 |  |  |  | 378 |
| Total\tsecurities\tavailable\tfor\tsale | \t\t $58,171 | \t\t $1,115 |  | $(1,976) | $57,310 |
| SECURITIES\tHELD\tTO\tMATURITY |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |
| Commercial\tmortgage-backed\t(non-agency) | \t\t $4,316 | \t\t $178 |  | $(4) | $4,490 |
| Asset-backed | 2,626 | 51 |  | (1) | 2,676 |
| Other\tdebt | 10 | 1 |  |  | 11 |
| Total\tsecurities\theld\tto\tmaturity | \t\t $6,952 | \t\t $230 |  | $(5) | $7,177 |

The	fair	value	of	investment	securities	is	impacted	by	interest	rates,	credit spreads,	market	volatility	and	liquidity	conditions.	Net	unrealized	gains	and losses	in	the	securities	available	for	sale	portfolio	are	included	in	shareholders' equity	as	accumulated	other	comprehensive	income	or	loss,	net	of	tax,	unless credit-related.	Securities	held	to	maturity	are	carried	at	amortized	cost.	At December	31,	2012,	accumulated	other	comprehensive	income	included	pretax gains	of	$89	million	from	derivatives	used	to	hedge	the	purchase	of	investment securities	classified	as	held	to	maturity.	The	gains	will	be	accreted	into	interest income	as	an	adjustment	of	yield	on	the	securities.

During	2011,	we	transferred	securities	with	a	fair	value	of	$6.3	billion	from available	for	sale	to	held	to	maturity.	The	securities	were	reclassified	at	fair	value at	the	time	of	transfer	and	represented	a	non-cash	transaction.	Accumulated	other comprehensive	income	included	net	pretax	unrealized	gains	of	$183	million	on the	securities	at	transfer,	which	are	being	accreted	over	the	remaining	life	of	the related	securities	as	an	adjustment	of	yield	in	a	manner	consistent	with	the amortization	of	the	net	premium	on	the	same	transferred	securities,	resulting	in no	impact	on	net	income.	The	transfers	were	completed	in	order	to	reduce	the impact	of	price	volatility	on	accumulated	other	comprehensive	income	and

certain	capital	measures,	and	considered	potential	changes	to	regulatory	capital requirements	under	the	proposed	Basel	III	capital	standards.

The	gross	unrealized	loss	on	debt	securities	held	to	maturity	was	less	than	$1 million	at	December	31,	2012	and	$6	million	at	December	31,	2011,	with	$73 million	and	$522	million	of	positions	in	a	continuous	loss	position	for	less	than 12	months	at	December	31,	2012	and	December	31,	2011,	respectively.	The	fair value	on	debt	securities	held	to	maturity	that	were	in	a	continuous	loss	position for	12	months	or	more	was	$56	million	and	$85	million	at	December	31,	2012 and	December	31,	2011,	respectively.

The	following	table	presents	gross	unrealized	loss	and	fair	value	of	securities available	for	sale	at	December	31,	2012	and	December	31,	2011.	The	securities are	segregated	between	investments	that	have	been	in	a	continuous	unrealized loss	position	for	less	than	twelve	months	and	twelve	months	or	more	based	on the	point	in	time	the	fair	value	declined	below	the	amortized	cost	basis.	The	table includes	debt	securities	where	a	portion	of	other-than-temporary	impairment (OTTI)	has	been	recognized	in	accumulated	other	comprehensive	income	(loss).

# Table	84:	Gross	Unrealized	Loss	and	Fair	Value	of	Securities	Available	for	Sale

|  | Unrealized	loss	position	less | Unrealized	loss	position	less | Unrealized	loss	position | Unrealized	loss	position |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Unrealized\nLoss | than\t12\tmonths\nFair\nValue | Unrealized\nLoss | 12\tmonths\tor\tmore\nFair\nValue | Total\nUnrealized\nLoss | Fair\nValue |
| December\t31,\t2012 |  |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |  |
| Residential\tmortgage-backed |  |  |  |  |  |  |
| Agency | \t\t $(9) | \t\t $1,128 | $(3) | \t\t $121 | $(12) | \t\t $1,249 |
| Non-agency | (3) | 219 | (306) | 3,185 | (309) | 3,404 |
| Commercial\tmortgage-backed |  |  |  |  |  |  |
| Agency |  |  |  |  |  |  |
| Non-agency | (1) | 60 |  |  | (1) | 60 |
| Asset-backed | (1) | 370 | (78) | 625 | (79) | 995 |
| State\tand\tmunicipal | (2) | 240 | (19) | 518 | (21) | 758 |
| Other\tdebt | (2) | 61 | (2) | 15 | (4) | 76 |
| Total | \t\t $(18) | \t\t $2,078 | $(408) | \t\t $ 4,464 | $(426) | \t\t $6,542 |
| December\t31,\t2011 |  |  |  |  |  |  |
| Debt\tsecurities |  |  |  |  |  |  |
| Residential\tmortgage-backed |  |  |  |  |  |  |
| Agency | \t\t $(24) | \t\t $2,165 | $(37) | \t\t $408 | $(61) | \t\t $2,573 |
| Non-agency | (26) | 273 | (1,242) | 4,378 | (1,268) | 4,651 |
| Commercial\tmortgage-backed |  |  |  |  |  |  |
| Non-agency | (17) | 483 |  |  | (17) | 483 |
| Asset-backed | (13) | 1,355 | (203) | 764 | (216) | 2,119 |
| State\tand\tmunicipal | (6) | 512 | (41) | 318 | (47) | 830 |
| Other\tdebt | (5) | 240 | (7) | 289 | (12) | 529 |
| Total | \t\t $(91) | \t\t $5,028 | $(1,530) | \t\t $ 6,157 | $ (1,621) | \t\t $11,185 |

# Evaluating	Investment	Securities	for	Other-than-Temporary	Impairments

For	the	securities	in	the	preceding	table,	as	of	December	31,	2012	we	do	not intend	to	sell	and	believe	we	will	not	be	required	to	sell	the	securities	prior	to recovery	of	the	amortized	cost	basis.

On	at	least	a	quarterly	basis,	we	conduct	a	comprehensive	security-level assessment	on	all	securities	in	an	unrealized	loss	position	to	determine	if	OTTI exists.	An	unrealized	loss	exists	when	the	current	fair	value	of	an	individual security	is	less	than	its	amortized	cost	basis.	An	OTTI	loss	must	be	recognized for	a	debt	security	in	an	unrealized	loss	position	if

we	intend	to	sell	the	security	or	it	is	more	likely	than	not	we	will	be	required	to sell	the	security	prior	to	recovery	of	its	amortized	cost	basis.	In	this	situation,	the amount	of	loss	recognized	in	income	is	equal	to	the	difference	between	the	fair value	and	the	amortized	cost	basis	of	the	security.	Even	if	we	do	not	expect	to sell	the	security,	we	must	evaluate	the	expected	cash	flows	to	be	received	to determine	if	we	believe	a	credit	loss	has	occurred.	In	the	event	of	a	credit	loss, only	the	amount	of	impairment	associated	with	the	credit	loss	is	recognized	in income.	The	portion	of	the	unrealized	loss	relating	to	other	factors,	such	as liquidity	conditions	in	the	market	or	changes	in	market	interest	rates,	is	recorded in	accumulated	other	comprehensive	income	(loss).

The	security-level	assessment	is	performed	on	each	security,	regardless	of	the classification	of	the	security	as	available	for	sale	or	held	to	maturity.	Our assessment	considers	the	security	structure,	recent	security	collateral performance	metrics	if	applicable,	external	credit	ratings,	failure	of	the	issuer	to make	scheduled	interest	or	principal	payments,	our	judgment	and	expectations	of future	performance,	and	relevant	independent	industry	research,	analysis	and forecasts.	Results	of	the	periodic	assessment	are	reviewed	by	a	cross-functional senior	management	team	representing	Asset	&	Liability	Management,	Finance, and	Market	Risk	Management.	The	senior	management	team	considers	the results	of	the	assessments,	as	well	as	other	factors,	in	determining	whether	the impairment	is	other-than-temporary.

For	debt	securities,	a	critical	component	of	the	evaluation	for	OTTI	is	the identification	of	credit-impaired	securities,	where	management	does	not	expect to	receive	cash	flows	sufficient	to	recover	the	entire	amortized	cost	basis	of	the security.	The	paragraphs	below	describe	our	process	for	identifying	credit impairment	for	our	most	significant	categories	of	securities	not	backed	by	the US	government	or	its	agencies.

# Non-Agency	Residential	Mortgage-Backed	Securities	and	Asset-Backed Securities	Collateralized	by	First-Lien	and	Second-Lien	Non-Agency Residential	Mortgage	Loans

Potential	credit	losses	on	these	securities	are	evaluated	on	a	security	by	security basis.	Collateral	performance	assumptions	are	developed	for	each	security	after reviewing	collateral	composition	and	collateral	performance	statistics.	This includes	analyzing	recent	delinquency	roll	rates,	loss	severities,	voluntary prepayments,	and	various	other	collateral	and	performance	metrics.	This information	is	then	combined	with	general	expectations	on	the	housing	market, employment,	and	other	economic	factors	to	develop	estimates	of	future performance.

Security	level	assumptions	for	prepayments,	loan	defaults,	and	loss	given	default are	applied	to	every	security	using	a	third-party	cash	flow	model.	The	third-party cash	flow	model	then	generates	projected	cash	flows	according	to	the	structure of	each	security.	Based	on	the	results	of	the	cash	flow	analysis,	we	determine whether	we	will	recover	the	amortized	cost	basis	of	our	security.

The	following	table	provides	detail	on	the	significant	assumptions	used	to determine	credit	impairment	for	non-agency	residential	mortgage-backed	and asset-backed	securities	collateralized	by	first-lien	and	second-lien	non-agency residential	mortgage	loans.

# Table	85:	Credit	Impairment	Assessment	Assumptions—Non-Agency Residential	Mortgage-Backed	and	Asset-Backed	Securities	(a)

| December	31,	2012 | Range | average	(b) |
| :--- | :--- | :--- |
| Long-term\tprepayment\trate\t(annual\tCPR) |  |  |
| Prime | 7\t-\t20% | 14% |
| Alt-A | 5\t-\t12 | 6 |
| Option\tARM | 3\t-\t6 | 3 |
| Remaining\tcollateral\texpected\tto\tdefault |  |  |
| Prime | 0\t-\t51% | 19% |
| Alt-A | 2\t-\t61 | 33 |
| Option\tARM | \t19\t-\t73 | 52 |
| Loss\tseverity |  |  |
| Prime | \t25\t-\t72% | 46% |
| Alt-A | \t30\t-\t85 | 60 |
| Option\tARM | \t40\t-\t70 | 60 |
| (a)\nCollateralized\tby\tfirst\tand\tsecond-lien\tnon-agency\tresidential\tmortgage\tloans. |  |  |

(a) Collateralized	by	first	and	second-lien	non-agency	residential	mortgage	loans.

(b) Calculated	by	weighting	the	relevant	assumption	for	each	individual	security	by	the	current outstanding	cost	basis	of	the	security.

# Non-Agency	Commercial	Mortgage-Backed	Securities

Credit	losses	on	these	securities	are	measured	using	property-level	cash	flow projections	and	forward-looking	property	valuations.	Cash	flows	are	projected using	a	detailed	analysis	of	net	operating	income	(NOI)	by	property	type	which, in	turn,	is	based	on	the	analysis	of	NOI	performance	over	the	past	several business	cycles	combined	with	PNC's	economic	outlook	for	the	current	cycle. Loss	severities	are	based	on	property	price	projections,	which	are	calculated using	capitalization	rate	projections.	The	capitalization	rate	projections	are	based on	a	combination	of	historical	capitalization	rates	and	expected	capitalization rates	implied	by	current	market	activity,	our	outlook	and	relevant	independent industry	research,	analysis	and	forecasts.	Securities	exhibiting	weaker performance	within	the	model	are	subject	to	further	analysis.	This	analysis	is performed	at	the	loan	level,	and	includes	assessing	local	market	conditions, reserves,	occupancy,	rent	rolls	and	master/special	servicer	details.

During	2012	and	2011,	the	OTTI	credit	losses	recognized	in	noninterest	income	related	to	estimated	credit	losses	on	securities	that	we	do	not	expect	to	sell	were	as follows:

# Table	86:	Summary	of	OTTI	Credit	Losses	Recognized	in	Earnings

The	following	table	presents	a	rollforward	of	the	cumulative	OTTI	credit	losses	recognized	in	earnings	for	all	debt	securities	for	which	a	portion	of	an	OTTI	loss	was recognized	in	accumulated	other	comprehensive	income	(loss):

# Table	88:	Rollforward	of	Cumulative	OTTI	Credit	Losses	Recognized	in	Earnings

| In	millions | Non-<br>agency<br>residential<br>mortgage-<br>backed | Non-<br>agency<br>commercial<br>mortgage-<br>backed | Asset-<br>backed | Other<br>debt | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2010 | $(709) | $(11) | $(223) | $(12) | $(955) |
| Loss\twhere\timpairment\twas\tnot\tpreviously\trecognized | (18) |  | (3) | (1) | (22) |
| Additional\tloss\twhere\tcredit\timpairment\twas\tpreviously\trecognized | (112) |  | (18) |  | (130) |
| Reduction\tdue\tto\tcredit\timpaired\tsecurities\tsold | 11 | 5 |  |  | 16 |
| December\t31,\t2011 | (828) | (6) | (244) | (13) | (1,091) |
| Loss\twhere\timpairment\twas\tnot\tpreviously\trecognized | (9) |  |  | (1) | (10) |
| Additional\tloss\twhere\tcredit\timpairment\twas\tpreviously\trecognized | (90) |  | (11) |  | (101) |
| Reduction\tdue\tto\tcredit\timpaired\tsecurities\tsold | 1 |  |  |  | 1 |
| December\t31,\t2012 | $(926) | $(6) | $(255) | $(14) | $(1,201) |

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

# Table	89:	Gains	(Losses)	on	Sales	of	Securities	Available	for	Sale

| In	millions | Proceeds | Gross<br>Gains | Gross<br>Losses | Net<br>Gains | Tax<br>Expense |
| :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tyear\tended\tDecember\t31 |  |  |  |  |  |
| 2012 | $9,441 | $214 | $(10) | $204\t\t\t $ | 71 |
| 2011 | \t 21,039 | \t 406 | (157) | \t 249 | 87 |
| 2010 | \t 23,783 | \t 490 | (64) | \t 426 | 149 |

The	following	table	presents,	by	remaining	contractual	maturity,	the	amortized	cost,	fair	value	and	weighted-average	yield	of	debt	securities	at	December	31,	2012.

# Table	90:	Contractual	Maturity	of	Debt	Securities

| December	31,	2012<br>Dollars	in	millions | 1	Year	or	Less | After	1	Year<br>through	5	Years | After	5	Years<br>through	10	Years | After	10	Years | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Securities\tAvailable\tfor\tSale |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | $2 | $1,096 | $1,321 | $449 | $2,868 |
| Residential\tmortgage-backed |  |  |  |  |  |
| Agency |  | 22 | 488 | 25,334 | \t 25,844 |
| Non-agency |  | 2 | 17 | 6,083 | 6,102 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency | 1 | 550 | 51 |  | 602 |
| Non-agency |  | 174 | 106 | 2,775 | 3,055 |
| Asset-backed |  | 1,063 | 1,511 | 3,093 | 5,667 |
| State\tand\tmunicipal | 24 | 51 | 447 | 1,675 | 2,197 |
| Other\tdebt | 390 | 1,389 | 575 | 391 | 2,745 |
| Total\tdebt\tsecurities\tavailable\tfor\tsale | $417 | $4,347 | $4,516 | $39,800 | $49,080 |
| Fair\tvalue | $420 | $4,490 | $4,729 | $41,046 | $50,685 |
| Weighted-average\tyield,\tGAAP\tbasis | 2.83% | 2.57% | 2.44% | 3.37% | 3.21% |
| Securities\tHeld\tto\tMaturity |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies |  |  |  | $230 | $230 |
| Residential\tmortgage-backed\t(agency) |  |  |  | 4,380 | 4,380 |
| Commercial\tmortgage-backed |  |  |  |  |  |
| Agency |  | $318 | $964 | 5 | 1,287 |
| Non-agency | $1 | 53 |  | 2,528 | 2,582 |
| Asset-backed |  | 124 | 64 | 670 | 858 |
| State\tand\tmunicipal | 25 | 25 | 279 | 335 | 664 |
| Other\tdebt |  | 1 | 352 |  | 353 |
| Total\tdebt\tsecurities\theld\tto\tmaturity | $26 | $521 | $1,659 | $8,148 | $10,354 |
| Fair\tvalue | $26 | $538 | $1,777 | $8,519 | $10,860 |
| Weighted-average\tyield,\tGAAP\tbasis | 1.73% | 3.39% | 3.44% | 4.03% | 3.90% |

Based	on	current	interest	rates	and	expected	prepayment	speeds,	the	weighted- average	expected	maturity	of	mortgage	and	other	asset-backed	debt	securities were	as	follows	as	of	December	31,	2012:

# Table	91:	Weighted-Average	Expected	Maturity	of	Mortgage	and	Other	Asset- Backed	Debt	Securities

|  | December	31<br>2012 |
| :--- | :--- |
| Agency\tresidential\tmortgage-backed\tsecurities | \t 3.3\tyears |
| Non-agency\tresidential\tmortgage-backed\tsecurities | \t 5.4\tyears |
| Agency\tcommercial\tmortgage-backed\tsecurities | \t 4.7\tyears |
| Non-agency\tcommercial\tmortgage-backed\tsecurities | \t 2.6\tyears |
| Asset-backed\tsecurities | \t 4.1\tyears |

Weighted-average	yields	are	based	on	historical	cost	with	effective	yields weighted	for	the	contractual	maturity	of	each	security.	At	December	31,	2012, there	were	no	securities	of	a	single	issuer,	other	than	FNMA	and	FHLMC,	which exceeded	10%	of	total	shareholders'	equity.

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

# Table	92:	Fair	Value	of	Securities	Pledged	and	Accepted	as	Collateral

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Pledged\tto\tothers | $25,648 | $20,109 |
| Accepted\tfrom\tothers:\nPermitted\tby\tcontract\tor\tcustom\tto\nsell\tor\trepledge | 1,015 | 1,796 |
| Permitted\tamount\trepledged\tto\tothers | 685 | 892 |

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

# NOTE	9	FAIR	VALUE

# FAIR	VALUE	MEASUREMENT

Fair	value	is	defined	in	GAAP	as	the	price	that	would	be	received	to	sell	an	asset or	the	price	that	would	be	paid	to	transfer	a	liability	on	the	measurement	date. The	standard	focuses	on	the	exit	price	in	the	principal	or	most	advantageous market	for	the	asset	or	liability	in	an	orderly	transaction	between	market participants.	GAAP	establishes	a	fair	value	reporting	hierarchy	to	maximize	the use	of	observable	inputs	when	measuring	fair	value	and	defines	the	three	levels of	inputs	as	noted	below.

# Level	1

Fair	value	is	determined	using	a	quoted	price	in	an	active	market	for	identical assets	or	liabilities.	Level	1	assets	and	liabilities	may	include	debt	securities, equity	securities	and	listed	derivative	contracts	that	are	traded	in	an	active exchange	market	and	certain	US	Treasury	securities	that	are	actively	traded	in over-the-counter	markets.

Fair	value	is	estimated	using	inputs	other	than	quoted	prices	included	within Level	1	that	are	observable	for	assets	or	liabilities,	either	directly	or	indirectly. Level	2	assets	and	liabilities	may	include	debt	securities,	equity	securities	and listed	derivative	contracts	with	quoted	prices	that	are	traded	in	markets	that	are not	active,	and	certain	debt	and	equity	securities	and	over-the-counter	derivative contracts	whose	fair	value	is	determined	using	a	pricing	model	without significant	unobservable	inputs.	This	category	generally	includes	US government	agency	debt	securities,	agency	residential	and	commercial mortgage-backed	debt	securities,	asset-backed	debt	securities,	corporate	debt securities,	residential	mortgage	loans	held	for	sale,	corporate	trading	loans	and derivative	contracts.

Fair	value	is	estimated	using	unobservable	inputs	that	are	significant	to	the	fair value	of	the	assets	or	liabilities.	Level	3	assets	and	liabilities	may	include financial	instruments	whose	value	is	determined	using	pricing	services,	pricing models	with	internally	developed	assumptions,	discounted	cash	flow methodologies,	or	similar	techniques,	as	well	as	instruments	for	which	the determination	of	fair	value	requires	significant	management	judgment	or estimation.	This	category	generally	includes	certain	available	for	sale	and	trading securities,	commercial	mortgage	loans	held	for	sale,	certain	residential	mortgage loans	and	loans	held	for	sale,	private	equity	investments,	residential	mortgage servicing	rights,	BlackRock	Series	C	Preferred	Stock	and	certain	financial derivative	contracts.	The	available	for	sale	and	trading	securities	within	Level	3 include	non-agency	residential	mortgage-backed	securities,	auction	rate securities,	certain	private-issuer	asset-backed	securities	and	corporate	debt securities.	Assets	which	have	been	adjusted	due	to	impairment	are	accounted	for at	fair	value	on	a	nonrecurring	basis	and	consist	primarily	of	certain

nonaccrual	loans,	loans	held	for	sale,	commercial	mortgage	servicing	rights, equity	investments	and	other	assets.

We	characterize	active	markets	as	those	where	transaction	volumes	are	sufficient to	provide	objective	pricing	information,	with	reasonably	narrow	bid/ask	spreads and	where	dealer	quotes	received	do	not	vary	widely	and	are	based	on	current information.	Inactive	markets	are	typically	characterized	by	low	transaction volumes,	price	quotations	that	vary	substantially	among	market	participants	or are	not	based	on	current	information,	wide	bid/ask	spreads,	a	significant	increase in	implied	liquidity	risk	premiums,	yields,	or	performance	indicators	for observed	transactions	or	quoted	prices	compared	to	historical	periods,	a significant	decline	or	absence	of	a	market	for	new	issuance,	or	any	combination of	the	above	factors.	We	also	consider	nonperformance	risks	including	credit	risk as	part	of	our	valuation	methodology	for	all	assets	and	liabilities	measured	at	fair value.

Any	models	used	to	determine	fair	values	or	to	validate	dealer	quotes	based	on the	descriptions	below	are	subject	to	review	and	independent	testing	as	part	of our	model	validation	and	internal	control	testing	processes.	Our	Model	Risk Management	Committee	reviews	significant	models	on	at	least	an	annual	basis. In	addition,	we	have	teams,	independent	of	the	traders,	which	verify	marks	and assumptions	used	for	valuations	at	each	period	end.

Assets	and	liabilities	measured	at	fair	value,	by	their	nature,	result	in	a	higher degree	of	financial	statement	volatility.	Assets	and	liabilities	classified	within Level	3	inherently	require	the	use	of	various	assumptions,	estimates	and judgments	when	measuring	their	fair	value.	As	observable	market	activity	is commonly	not	available	to	use	when	estimating	the	fair	value	of	Level	3	assets and	liabilities,	we	must	estimate	fair	value	using	various	modeling	techniques. These	techniques	include	the	use	of	a	variety	of	inputs/assumptions	including credit	quality,	liquidity,	interest	rates	or	other	relevant	inputs	across	the	entire population	of	our	Level	3	assets	and	liabilities.	Changes	in	the	significant underlying	factors	or	assumptions	(either	an	increase	or	a	decrease)	in	any	of these	areas	underlying	our	estimates	may	result	in	a	significant	increase/decrease in	the	Level	3	fair	value	measurement	of	a	particular	asset	and/or	liability	from period	to	period.

# FINANCIAL	INSTRUMENTS	ACCOUNTED	FOR	AT	FAIR	VALUE	ON	A RECURRING	BASIS

# Securities	Available	for	Sale	and	Trading	Securities

Securities	accounted	for	at	fair	value	include	both	the	available	for	sale	and trading	portfolios.	We	primarily	use	prices	obtained	from	pricing	services,	dealer quotes,	or	recent	trades	to	determine	the	fair	value	of	securities.	As	of December	31,	2012,	84%	of	the	positions	in	these	portfolios	were	priced	by using	pricing	services	provided	by	third-party	vendors.	The	third-party	vendors use	a	variety	of	methods	when	pricing	securities	that	incorporate	relevant	market data	to	arrive	at	an	estimate	of	what	a	buyer	in	the	marketplace	would	pay	for	a security	under	current	market	conditions.	One	of	the	vendor's	prices	are	set	with reference	to	market	activity	for	highly	liquid	assets	such	as	U.S.	Treasury	and agency	securities	and	agency	residential	mortgage-backed	securities,	and	matrix pricing	for	other	asset	classes,	such	as	commercial	mortgage	and	other	asset- backed	securities.	Another	vendor	primarily	uses	discounted	cash	flow	pricing models	considering	adjustments	for	spreads	and	prepayments	for	the	instruments we	value	using	this	service,	such	as	non-agency	residential	mortgage-backed securities,	agency	adjustable	rate	mortgage	securities,	agency	collateralized mortgage	obligations	(CMOs),	commercial	mortgage-backed	securities	and municipal	bonds.	The	vendors	we	use	provide	pricing	services	on	a	global	basis and	have	quality	management	processes	in	place	to	monitor	the	integrity	of	the valuation	inputs	and	the	prices	provided	to	users,	including	procedures	to consider	and	incorporate	information	received	from	pricing	service	users	who may	challenge	a	price.	We	monitor	and	validate	the	reliability	of	vendor	pricing on	an	ongoing	basis	through	pricing	methodology	reviews,	by	performing detailed	reviews	of	the	assumptions	and	inputs	used	by	the	vendor	to	price individual	securities,	and	through	price	validation	testing.	Price	validation testing	is	performed	independent	of	the	risk-taking	function	and	involves corroborating	the	prices	received	from	third-party	vendors	with	prices	from another	third-party	source,	by	reviewing	valuations	of	comparable	instruments, by	comparison	to	internal	valuations,	or	by	reference	to	recent	sales	of	similar securities.	Securities	not	priced	by	one	of	our	pricing	vendors	may	be	valued using	a	dealer	quote.	Dealer	quotes	received	are	typically	non-binding.	Securities priced	using	a	dealer	quote	are	subject	to	corroboration	either	with	another	dealer quote,	by	comparison	to	similar	securities	priced	by	either	a	third-party	vendor	or another	dealer,	or	through	internal	valuation	in	order	to	validate	that	the	quote	is representative	of	the	market.	Security	prices	are	also	validated	through	actual cash	settlement	upon	sale	of	a	security.

A	cross-functional	team	comprised	of	representatives	from	Asset	&	Liability Management,	Finance,	and	Market	Risk	Management	oversees	the	governance of	the	processes	and	methodologies	used	to	estimate	the	fair	value	of	securities and	the	price	validation	testing	that	is	performed.	This	management	team reviews	pricing	sources	and	trends	and	the	results	of	validation	testing.

Securities	are	classified	within	the	fair	value	hierarchy	after	giving	consideration to	the	activity	level	in	the	market	for	the	security	type	and	the	observability	of the	inputs	used	to	determine	the	fair	value.	When	a	quoted	price	in	an	active market	exists	for	the	identical	security,	this	price	is	used	to	determine	fair	value and	the	security	is	classified	within	Level	1	of	the	hierarchy.	Level	1	securities include	certain	U.S.	Treasury	securities	and	exchange	traded	equities.	When	a quoted	price	in	an	active	market	for	the	identical	security	is	not	available,	fair value	is	estimated	using	either	an	alternative	market	approach,	such	as	a	recent trade	or	matrix	pricing,	or	an	income	approach,	such	as	a	discounted	cash	flow pricing	model.	If	the	inputs	to	the	valuation	are	based	primarily	on	market observable	information,	then	the	security	is	classified	within	Level	2	of	the hierarchy.	Level	2	securities	include	agency	debt	securities,	agency	residential mortgage-backed	securities,	agency	and	non-agency	commercial	mortgage- backed	securities,	asset-backed	securities	collateralized	by	non-mortgage-related consumer	loans,	municipal	securities,	and	other	debt	securities.	Level	2 securities	are	predominantly	priced	by	third	parties,	either	a	pricing	vendor	or dealer.

In	certain	cases	where	there	is	limited	activity	or	less	transparency	around	the inputs	to	the	valuation,	securities	are	classified	within	Level	3	of	the	hierarchy. Securities	classified	as	Level	3	consist	primarily	of	non-agency	residential mortgage-backed	and	asset-backed	securities	collateralized	by	first-	and	second- lien	residential	mortgage	loans.	Fair	value	for	these	securities	is	primarily estimated	using	pricing	obtained	from	third-party	vendors.	In	some	cases,	fair value	is	estimated	using	a	dealer	quote,	by	reference	to	prices	of	securities	of	a similar	vintage	and	collateral	type	or	by	reference	to	recent	sales	of	similar securities.	Market	activity	for	these	security	types	is	limited	with	little	price transparency.	As	a	result,	these	securities	are	generally	valued	by	the	third-party vendor	using	a	discounted	cash	flow	approach	that	incorporates	observable market	activity	where	available.	Significant	inputs	to	the	valuation	include prepayment	projections	and	credit	loss	assumptions	(default	rate	and	loss severity)	and	discount	rates	that	are	deemed	representative	of	current	market conditions.	The	discount	rates	used	incorporate	a	spread	over	the	benchmark curve	that	takes	into	consideration	liquidity	risk	and	potential	credit	risk	not already	included	in	the	credit	loss	assumptions.	Significant	increases	(decreases) in	any	of	those	assumptions	in	isolation	would	result	in	a	significantly	lower (higher)	fair	value	measurement.	Prepayment	estimates	generally	increase	when market	interest	rates	decline	and	decrease	when	market	interest	rates	rise.	Credit loss	estimates	are	driven	by	the	ability	of	borrowers	to	pay	their	loans	and housing	market	prices	and	are	impacted	by	changes	in	overall	macroeconomic conditions,	typically	increasing	when	economic	conditions	worsen	and decreasing	when	conditions	improve.	An	increase	in	the	estimated	prepayment rate	typically	results	in	a	decrease	in	estimated	credit	losses	and	vice	versa. Discount	rates	typically	increase	when	market	interest	rates	increase	and/or credit	and	liquidity	risks	increase	and	decrease	when	market

interest	rates	decline	and/or	credit	and	liquidity	conditions	improve.	Price validation	procedures	are	performed	and	the	results	are	reviewed	for	these	Level 3	securities	by	a	cross-functional	Asset	&	Liability	Management,	Finance,	and Market	Risk	Management	team.	Specific	price	validation	procedures	performed for	these	securities	include	comparing	current	prices	to	historical	pricing	trends by	collateral	type	and	vintage,	comparing	prices	by	product	type	to	indicative pricing	grids	published	by	market	makers,	and	by	obtaining	corroborating	prices from	another	third-party	source.

Certain	infrequently	traded	debt	securities	within	the	State	and	municipal	and Other	debt	securities	available-for-sale	and	Trading	securities	categories	are	also classified	in	Level	3.	The	significant	unobservable	inputs	used	to	estimate	the fair	value	of	these	securities	include	an	estimate	of	expected	credit	losses	and	a discount	for	liquidity	risk.	These	inputs	are	incorporated	into	the	fair	value measurement	by	either	increasing	the	spread	over	the	benchmark	curve	or	by applying	a	credit	and	liquidity	discount	to	the	par	value	of	the	security. Significant	increases	(decreases)	in	credit	and/or	liquidity	risk	could	result	in	a significantly	lower	(higher)	fair	value	estimate.

Exchange-traded	derivatives	are	valued	using	quoted	market	prices	and	are classified	as	Level	1.	However,	the	majority	of	derivatives	that	we	enter	into	are executed	over-the-counter	and	are	valued	using	internal	models.	These derivatives	are	primarily	classified	as	Level	2	as	the	readily	observable	market inputs	to	these	models	are	validated	to	external	sources.	The	external	sources	for these	inputs	include	industry	pricing	services,	or	are	corroborated	through	recent trades,	dealer	quotes,	yield	curves,	implied	volatility	or	other	market-related	data. Level	2	financial	derivatives	are	primarily	estimated	using	a	combination	of Eurodollar	future	prices	and	observable	benchmark	interest	rate	swaps	to construct	projected	discounted	cash	flows.	Financial	derivatives	that	are	priced using	significant	management	judgment	or	assumptions	are	classified	as	Level	3.

Fair	value	information	for	Level	3	financial	derivatives	is	presented	separately for	interest	rate	contracts	and	other	contracts.	Interest	rate	contracts	include residential	and	commercial	mortgage	interest	rate	lock	commitments	and	certain interest	rate	options.	Other	contracts	include	risk	participation	agreements, certain	equity	options	and	other	types	of	contracts.

Significant	unobservable	inputs	for	residential	mortgage	loan	commitments include	the	probability	of	funding	and	embedded	servicing.	The	probability	of funding	for	residential	mortgage	loan	commitments	represents	the	expected proportion	of	loan	commitments	in	the	pipeline	that	will	fund.	Additionally, embedded	in	the	market	price	of	the	underlying	loan	is	a	value	for	retaining servicing	of	the	loan	once	it	is	sold.	Significant	increases	(decreases)	in	the	fair value	of	a

residential	mortgage	loan	commitment	asset	(liability)	result	when	the probability	of	funding	increases	(decreases)	and	when	the	embedded	servicing value	increases	(decreases).

The	fair	value	of	commercial	mortgage	loan	commitment	assets	and	liabilities	as of	December	31,	2012	are	included	in	the	Insignificant	Level	3	assets,	net	of liabilities	line	item	in	Table	95:	Fair	Value	Measurement	–	Recurring Quantitative	Information	in	this	Note	9.	Significant	unobservable	inputs	for commercial	mortgage	loan	commitments	include	spread	over	the	benchmark U.S.	Treasury	interest	rate	and	the	embedded	servicing	value.	The	spread	over the	benchmark	curve	reflects	management	assumptions	regarding	credit	and liquidity	risks.	Embedded	servicing	value	reflects	the	estimated	value	for retaining	the	right	to	service	the	underlying	loan	once	it	is	sold.	Significant increases	(decreases)	in	the	fair	value	of	commercial	mortgage	loan commitments	result	when	the	spread	over	the	benchmark	curve	decreases (increases)	or	the	embedded	servicing	value	increases	(decreases).

The	fair	value	of	interest	rate	option	assets	and	liabilities	as	of	December	31, 2012	are	included	in	the	Insignificant	Level	3	assets,	net	of	liabilities	line	item	in Table	95:	Fair	Value	Measurement	–	Recurring	Quantitative	Information	in	this Note	9.	The	significant	unobservable	input	used	in	the	fair	value	measurement	of the	interest	rate	options	is	expected	interest	rate	volatility.	Significant	increases (decreases)	in	interest	rate	volatility	would	result	in	a	significantly	higher	(lower) fair	value	measurement.

The	fair	value	of	risk	participation	agreement	assets	and	liabilities	as	of December	31,	2012	are	included	in	the	Insignificant	Level	3	assets,	net	of liabilities	line	item	in	Table	95:	Fair	Value	Measurement	–	Recurring Quantitative	Information	in	this	Note	9.	The	significant	unobservable	inputs	used in	the	fair	value	measurement	of	risk	participation	agreements	are	probability	of default	and	loss	severity.	Significant	increases	(decreases)	in	probability	of default	and	loss	severity	would	result	in	a	significantly	higher	(lower)	fair	value measurement.

Significant	unobservable	inputs	for	the	other	contracts	for	derivative	liabilities include	credit	and	liquidity	discount	and	spread	over	the	benchmark	curve	that are	deemed	representative	of	current	market	conditions.	Significant	increases (decreases)	in	these	assumptions	would	result	in	significantly	lower	(higher)	fair value	measurement.

In	connection	with	the	sales	of	certain	Visa	Class	B	common	shares	in	2012,	we entered	into	swap	agreements	with	the	purchaser	of	the	shares	to	account	for future	changes	in	the	value	of	the	Class	B	common	shares	resulting	from changes	in	the	settlement	of	certain	specified	litigation	and	its	effect	on	the conversion	rate	of	Class	B	common	shares	into	Visa	Class	A	common	shares and	to	make	payments	calculated	by	reference	to	the	market	price	of	the	Class	A common	shares.	At	December	31,	2012,	the	estimated	fair	values	of	the	swap

liabilities	are	classified	as	Level	3	instruments	and	included	in	Table	95:	Fair Value	Measurement	–	Recurring	Quantitative	Information	in	this	Note	9.	The fair	values	of	the	swap	agreements	are	determined	using	a	discounted	cash	flow methodology.	The	significant	unobservable	inputs	to	the	valuations	are	estimated changes	in	the	conversion	rate	of	the	Class	B	shares	into	Class	A	shares	and	the estimated	future	price	of	the	Class	A	shares.	A	decrease	in	the	conversion	rate will	have	a	negative	impact	on	the	fair	value	of	the	swaps	and	vice	versa. Independent	of	changes	in	the	conversion	rate,	an	increase	in	the	future	Class	A share	price	will	have	a	negative	impact	on	the	fair	value	of	the	swaps	and	vice versa,	through	its	impact	on	periodic	payments	due	to	the	counterparty	until	the maturity	dates	of	the	swaps.

The	fair	values	of	our	derivatives	are	adjusted	for	nonperformance	risk	through the	calculation	of	our	Credit	Valuation	Adjustment	(CVA).	Our	CVA	is computed	using	new	loan	pricing	and	considers	externally	available	bond spreads,	in	conjunction	with	internal	historical	recovery	observations.

# Residential	Mortgage	Loans	Held	for	Sale

We	account	for	certain	residential	mortgage	loans	originated	for	sale	at	fair	value on	a	recurring	basis.	We	have	elected	to	account	for	certain	RBC	Bank	(USA) residential	mortgage	loans	held	for	sale	at	fair	value.	The	election	of	the	fair value	option	aligns	the	accounting	for	the	residential	mortgages	with	the	related hedges.	Additionally,	with	the	exception	of	repurchased	FHA	insured	loans which	are	accounted	for	at	amortized	cost,	we	have	elected	to	account	for	loans repurchased	due	to	breaches	of	representations	and	warranties	at	fair	value.

Residential	mortgage	loans	are	valued	based	on	quoted	market	prices,	where available,	prices	for	other	traded	mortgage	loans	with	similar	characteristics,	and purchase	commitments	and	bid	information	received	from	market	participants. These	loans	are	regularly	traded	in	active	markets	and	observable	pricing information	is	available	from	market	participants.	The	prices	are	adjusted	as necessary	to	include	the	embedded	servicing	value	in	the	loans	and	to	take	into consideration	the	specific	characteristics	of	certain	loans	that	are	priced	based	on the	pricing	of	similar	loans.	These	adjustments	represent	unobservable	inputs	to the	valuation	but	are	not	considered	significant	given	the	relative	insensitivity	of the	value	to	changes	in	these	inputs	to	the	fair	value	of	the	loans.	Accordingly, the	majority	of	residential	mortgage	loans	held	for	sale	are	classified	as	Level	2. This	category	also	includes	repurchased	and	temporarily	unsalable	residential mortgage	loans.	These	loans	are	repurchased	due	to	a	breach	of	representations and	warranties	in	the	loan	sales	agreement	and	typically	occur	after	the	loan	is	in default.	The	temporarily	unsalable	loans	have	an	origination	defect	that	makes them	currently	unable	to	be	sold	into	the	performing	loan	sales	market.	Because transaction	details	regarding	sales	of	this	type	of	loan	are	often	unavailable, unobservable	bid	information

from	brokers	and	investors	is	heavily	relied	upon.	Accordingly,	based	on	the significance	of	unobservable	inputs,	these	loans	are	classified	as	Level	3.

# Residential	Mortgage	Servicing	Rights

Residential	mortgage	servicing	rights	(MSRs)	are	carried	at	fair	value	on	a recurring	basis.	Assumptions	incorporated	into	the	residential	MSRs	valuation model	reflect	management's	best	estimate	of	factors	that	a	market	participant would	use	in	valuing	the	residential	MSRs.	Although	sales	of	residential	MSRs do	occur,	residential	MSRs	do	not	trade	in	an	active,	open	market	with	readily observable	prices	so	the	precise	terms	and	conditions	of	sales	are	not	available. As	a	benchmark	for	the	reasonableness	of	its	residential	MSRs	fair	value,	PNC obtained	opinions	of	value	from	independent	parties	("brokers").	These	brokers provided	a	range	(+/-	10	bps)	based	upon	their	own	discounted	cash	flow calculations	of	our	portfolio	that	reflect	conditions	in	the	secondary	market	and any	recently	executed	servicing	transactions.	PNC	compares	its	internally- developed	residential	MSRs	value	to	the	ranges	of	values	received	from	the brokers.	If	our	residential	MSRs	fair	value	falls	outside	of	the	brokers'	ranges, management	will	assess	whether	a	valuation	adjustment	is	warranted.	For	the periods	presented,	PNC's	residential	MSRs	value	did	not	fall	outside	of	the brokers'	ranges.	We	consider	our	residential	MSRs	value	to	represent	a reasonable	estimate	of	fair	value.	Due	to	the	nature	of	the	valuation	inputs, residential	MSRs	are	classified	as	Level	3.

The	significant	unobservable	inputs	used	in	the	fair	value	measurement	of residential	MSRs	are	constant	prepayment	rates	and	spread	over	the	benchmark curve.	Significant	increases	(decreases)	in	prepayment	rates	and	spread	over	the benchmark	curve	would	result	in	lower	(higher)	fair	market	value	of	residential MSRs.

# Commercial	Mortgage	Loans	Held	for	Sale

We	account	for	certain	commercial	mortgage	loans	classified	as	held	for	sale	at fair	value.	The	election	of	the	fair	value	option	aligns	the	accounting	for	the commercial	mortgages	with	the	related	hedges.

We	determine	the	fair	value	of	commercial	mortgage	loans	held	for	sale	by	using a	discounted	cash	flow	model.	Fair	value	is	determined	using	sale	valuation assumptions	that	management	believes	a	market	participant	would	use	in	pricing the	loans.	When	available,	valuation	assumptions	include	observable	inputs based	on	the	benchmark	LIBOR	interest	rate	swap	curve	and	whole	loan	sales. The	significant	unobservable	input	is	management's	assumption	of	the	spread applied	to	the	benchmark	rate.	The	spread	over	the	benchmark	curve	includes management's	assumptions	of	the	impact	of	credit	and	liquidity	risk.	Significant increases	(decreases)	in	the	spread	applied	to	the	benchmark	would	result	in	a significantly	lower	(higher)	asset	value.	The	wide	range	of	the	spread	over	the benchmark	curve	is	due	to	the	varying	risk	and	underlying	property characteristics	within	our	portfolio.	Based	on	the	significance	of	unobservable inputs,	we	classified	this	portfolio	as	Level	3.

# Equity	Investments

The	valuation	of	direct	and	indirect	private	equity	investments	requires significant	management	judgment	due	to	the	absence	of	quoted	market	prices, inherent	lack	of	liquidity	and	the	long-term	nature	of	such	investments.	The carrying	values	of	direct	and	affiliated	partnership	interests	reflect	the	expected exit	price	and	are	based	on	various	techniques	including	multiples	of	adjusted earnings	of	the	entity,	independent	appraisals,	anticipated	financing	and	sale transactions	with	third	parties,	or	the	pricing	used	to	value	the	entity	in	a	recent financing	transaction.	A	multiple	of	adjusted	earnings	calculation	is	the valuation	technique	utilized	most	frequently	and	the	multiple	of	earnings	is	the primary	and	most	significant	unobservable	input	used	in	such	calculation.	The multiple	of	earnings	is	utilized	in	conjunction	with	portfolio	company	financial results	and	our	ownership	interest	in	portfolio	company	securities	to	determine PNC's	interest	in	the	enterprise	value	of	the	portfolio	company.	Significant decreases	(increases)	in	the	multiple	of	earnings	could	result	in	a	significantly lower	(higher)	fair	value	measurement.	The	magnitude	of	the	change	in	fair	value is	dependent	on	the	significance	of	the	change	in	the	multiple	of	earnings	and	the significance	of	portfolio	company	adjusted	earnings.	Valuation	inputs	or analysis	are	supported	by	portfolio	company	or	market	documentation.	Due	to the	size,	private	and	unique	nature	of	each	portfolio	company,	lack	of	liquidity and	the	long-term	nature	of	investments,	relevant	benchmarking	is	not	always feasible.	A	valuation	committee	reviews	the	portfolio	company	valuations	on	a quarterly	basis	and	oversight	is	provided	by	senior	management	of	the	business.

We	value	indirect	investments	in	private	equity	funds	based	on	net	asset	value	as provided	in	the	financial	statements	that	we	receive	from	their	managers.	Due	to the	time	lag	in	our	receipt	of	the	financial	information	and	based	on	a	review	of investments	and	valuation	techniques	applied,	adjustments	to	the	manager- provided	value	are	made	when	available	recent	portfolio	company	information	or market	information	indicates	a	significant	change	in	value	from	that	provided	by the	manager	of	the	fund.	These	investments	are	classified	as	Level	3.

# Customer	Resale	Agreements

We	have	elected	to	account	for	structured	resale	agreements,	which	are economically	hedged	using	free-standing	financial	derivatives,	at	fair	value.	The fair	value	for	structured	resale	agreements	is	determined	using	a	model	that includes	observable	market	data	such	as	interest	rates	as	inputs.	Readily observable	market	inputs	to	this	model	can	be	validated	to	external	sources, including	yield	curves,	implied	volatility	or	other	market-related	data.	These instruments	are	classified	as	Level	2.

Loans	accounted	for	at	fair	value	consist	primarily	of	residential	mortgage	loans. These	loans	are	generally	valued	similarly	to	residential	mortgage	loans	held	for sale	and	are	classified	as	Level	2.	However,	similar	to	residential	mortgage	loans held	for	sale,	if	these	loans	are	repurchased	and	unsalable,	they	are	classified	as Level	3.	This	category	also	includes	repurchased	brokered	home	equity	loans. These	loans	are	repurchased	due	to	a	breach	of	representations	or	warranties	in the	loan	sales	agreements	and	occur	typically	after	the	loan	is	in	default.	The	fair value	price	is	based	on	bids	and	market	observations	of	transactions	of	similar vintage.	Because	transaction	details	regarding	the	credit	and	underwriting	quality are	often	unavailable,	unobservable	bid	information	from	brokers	and	investors is	heavily	relied	upon.	Accordingly,	based	on	the	significance	of	unobservable inputs,	these	loans	are	classified	as	Level	3.	The	fair	value	of	these	loans	as	of December	31,	2012	is	included	in	the	Insignificant	Level	3	assets,	net	of liabilities	line	item	in	Table	95:	Fair	Value	Measurement	–	Recurring Quantitative	Information	in	this	Note	9.	A	significant	input	to	the	valuation includes	a	credit	and	liquidity	discount	that	is	deemed	representative	of	current market	conditions.	Significant	increases	(decreases)	in	this	assumption	would result	in	a	significantly	lower	(higher)	fair	value	measurement.

# BlackRock	Series	C	Preferred	Stock

We	have	elected	to	account	for	the	shares	of	BlackRock	Series	C	Preferred Stock	received	in	a	stock	exchange	with	BlackRock	at	fair	value.	In	September 2011,	we	delivered	approximately	1.3	million	shares	of	BlackRock	Series	C Preferred	Stock	pursuant	to	our	obligation	to	partially	fund	a	portion	of	certain BlackRock	LTIP	programs.	On	January	31,	2013,	we	transferred	an	additional 205,350	shares	to	BlackRock	in	connection	with	our	obligation.	After	this transfer,	we	hold	approximately	1.3	million	shares	of	BlackRock	Series	C Preferred	Stock	which	are	available	to	fund	our	obligation	in	connection	with	the BlackRock	LTIP	programs.	The	Series	C	Preferred	Stock	economically	hedges the	BlackRock	LTIP	liability	that	is	accounted	for	as	a	derivative.	The	fair	value of	the	Series	C	Preferred	Stock	is

determined	using	a	third-party	modeling	approach,	which	includes	both observable	and	unobservable	inputs.	This	approach	considers	expectations	of	a default/liquidation	event	and	the	use	of	liquidity	discounts	based	on	our	inability to	sell	the	security	at	a	fair,	open	market	price	in	a	timely	manner.	Although dividends	are	equal	to	common	shares	and	other	preferred	series,	significant transfer	restrictions	exist	on	our	Series	C	shares	for	any	purpose	other	than	to satisfy	the	LTIP	obligation.	Due	to	the	significance	of	unobservable	inputs,	this security	is	classified	as	Level	3.	Significant	increases	(decreases)	in	the	liquidity discount	would	result	in	a	significantly	lower	(higher)	asset	value	for	the BlackRock	Series	C	and	vice	versa	for	the	BlackRock	LTIP	liability.

# Other	Assets	and	Liabilities

We	have	entered	into	a	prepaid	forward	contract	with	a	financial	institution	to mitigate	the	risk	on	a	portion	of	the	Company's	deferred	compensation, supplemental	incentive	savings	plan	liabilities	and	certain	stock	based compensation	awards	that	are	based	on	the	Company's	stock	price	and	are subject	to	market	risk.	The	prepaid	forward	contract	is	initially	valued	at	the transaction	price	and	is	subsequently	valued	by	reference	to	the	market	price	of the	Company's	stock	and	is	recorded	in	either	Other	Assets	or	Other	Liabilities at	fair	value.	In	addition,	deferred	compensation	and	supplemental	incentive savings	plan	participants	may	also	invest	based	on	fixed	income	and	equity- based	funds.	The	Company	utilizes	a	Rabbi	Trust	to	hedge	the	returns	by purchasing	the	same	funds	on	which	the	participant	returns	are	based.	The	Rabbi Trust	balances	are	recorded	in	Other	Assets	at	fair	value	using	the	quoted	market price.	These	assets	are	primarily	being	classified	in	Levels	1	and	2.	The	other asset	category	also	includes	FHLB	interests	and	the	retained	interests	related	to the	Small	Business	Administration	(SBA)	securitizations	which	are	classified	as Level	3.	All	Level	3	other	assets	are	included	in	the	Insignificant	Level	3	assets, net	of	liabilities	line	item	in	Table	95:	Fair	Value	Measurement	–	Recurring Quantitative	Information	in	this	Note	9.

Assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis,	including	instruments	for	which	PNC	has	elected	the	fair	value	option,	follow.

|  |  | December	31,	2012 |  |  |  | December	31,	2011 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Level\t1 | Level\t2 | Level\t3 | Total\nFair\tValue | Level\t1 | Level\t2 | Level\t3 | Total\nFair\tValue |
| Assets |  |  |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |  |  |
| US\tTreasury\tand\tgovernment\tagencies | $2,269 | $844 |  | $3,113 | $1,659 | $2,058 |  | $3,717 |
| Residential\tmortgage-backed |  |  |  |  |  |  |  |  |
| Agency |  | \t 26,784 |  | \t 26,784 |  | \t 26,792 |  | \t 26,792 |
| Non-agency |  |  | $6,107 | 6,107 |  |  | $5,557 | 5,557 |
| Commercial\tmortgage-backed |  |  |  |  |  |  |  |  |
| Agency |  | 633 |  | 633 |  | 1,140 |  | 1,140 |
| Non-agency |  | 3,264 |  | 3,264 |  | 2,756 |  | 2,756 |
| Asset-backed |  | 4,945 | 708 | 5,653 |  | 2,882 | 787 | 3,669 |
| State\tand\tmunicipal |  | 1,948 | 339 | 2,287 |  | 1,471 | 336 | 1,807 |
| Other\tdebt |  | 2,796 | 48 | 2,844 |  | 2,713 | 49 | 2,762 |
| Total\tdebt\tsecurities | \t 2,269 | \t 41,214 | 7,202 | \t 50,685 | \t 1,659 | \t 39,812 | 6,729 | \t 48,200 |
| Corporate\tstocks\tand\tother | 351 | 16 |  | 367 | 368 |  |  | 368 |
| Total\tsecurities\tavailable\tfor\tsale | \t 2,620 | \t 41,230 | 7,202 | \t 51,052 | \t 2,027 | \t 39,812 | 6,729 | \t 48,568 |
| Financial\tderivatives\t(a)\t(b) |  |  |  |  |  |  |  |  |
| Interest\trate\tcontracts | 5 | 8,326 | 101 | 8,432 |  | 9,150 | 60 | 9,210 |
| Other\tcontracts |  | 131 | 5 | 136 |  | 246 | 7 | 253 |
| Total\tfinancial\tderivatives | 5 | 8,457 | 106 | 8,568 |  | 9,396 | 67 | 9,463 |
| Residential\tmortgage\tloans\theld\tfor\tsale\t(c) |  | 2,069 | 27 | 2,096 |  | 1,415 |  | 1,415 |
| Trading\tsecurities\t(d) |  |  |  |  |  |  |  |  |
| Debt\t(e)\t(f) | \t 1,062 | 951 | 32 | 2,045 | \t 1,058 | 1,371 | 39 | 2,468 |
| Equity | 42 | 9 |  | 51 | 42 | 3 |  | 45 |
| Total\ttrading\tsecurities | \t 1,104 | 960 | 32 | 2,096 | \t 1,100 | 1,374 | 39 | 2,513 |
| Trading\tloans |  | 76 |  | 76 |  |  |  |  |
| Residential\tmortgage\tservicing\trights\t(g) |  |  | 650 | 650 |  |  | 647 | 647 |
| Commercial\tmortgage\tloans\theld\tfor\tsale\t(c) |  |  | 772 | 772 |  |  | 843 | 843 |
| Equity\tinvestments |  |  |  |  |  |  |  |  |
| Direct\tinvestments |  |  | 1,171 | 1,171 |  |  | 856 | 856 |
| Indirect\tinvestments\t(h) |  |  | 642 | 642 |  |  | 648 | 648 |
| Total\tequity\tinvestments |  |  | 1,813 | 1,813 |  |  | 1,504 | 1,504 |
| Customer\tresale\tagreements\t(i) |  | 256 |  | 256 |  | 732 |  | 732 |
| Loans\t(j) |  | 110 | 134 | 244 |  | 99 | 5 | 104 |
| Other\tassets |  |  |  |  |  |  |  |  |
| BlackRock\tSeries\tC\tPreferred\tStock\t(k) |  |  | 243 | 243 |  |  | 210 | 210 |
| Other | 283 | 194 | 9 | 486 | 280 | 140 | 9 | 429 |
| Total\tother\tassets | 283 | 194 | 252 | 729 | 280 | 140 | 219 | 639 |
| Total\tassets | $4,012 | $53,352 | $10,988 | $68,352 | $3,407 | $52,968 | $10,053 | $66,428 |
| Liabilities |  |  |  |  |  |  |  |  |
| Financial\tderivatives\t(b)\t(l) |  |  |  |  |  |  |  |  |
| Interest\trate\tcontracts | $1 | $6,105 | $12 | $6,118 |  | $7,065 | $6 | $7,071 |
| BlackRock\tLTIP |  |  | 243 | 243 |  |  | 210 | 210 |
| Other\tcontracts |  | 128 | 121 | 249 |  | 233 | 92 | 325 |
| Total\tfinancial\tderivatives | 1 | 6,233 | 376 | 6,610 |  | 7,298 | 308 | 7,606 |
| Trading\tsecurities\tsold\tshort\t(m) |  |  |  |  |  |  |  |  |
| Debt |  |  |  |  |  |  |  |  |
|  | 731 | 10 |  | 741 | $997 | 19 |  | 1,016 |
| Total\ttrading\tsecurities\tsold\tshort | 731 | 10 |  | 741 | 997 | 19 |  | 1,016 |
| Other\tliabilities |  | 5 |  | 5 |  | 3 |  | 3 |
| Total\tliabilities | $732 | $6,248 | $376 | $7,356 | $997 | $7,320 | $308 | $8,625 |
| (a)\nIncluded\tin\tOther\tassets\ton\tour\tConsolidated\tBalance\tSheet. |  |  |  |  |  |  |  |  |

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

(b) Amounts	at	December	31,	2012	and	December	31,	2011	are	presented	gross	and	are	not	reduced	by	the	impact	of	legally	enforceable	master	netting	agreements	that	allow	PNC	to	net	positive	and	negative positions	and	cash	collateral	held	or	placed	with	the	same	counterparty.	At	December	31,	2012	and	December	31,	2011,	respectively,	the	net	asset	amounts	were	$2.4	billion	and	$2.4	billion	and	the	net	liability amounts	were	$.6	billion	and	$.7	billion.

(c) Included	in	Loans	held	for	sale	on	our	Consolidated	Balance	Sheet.	PNC	has	elected	the	fair	value	option	for	certain	commercial	and	residential	mortgage	loans	held	for	sale.

(d) Fair	value	includes	net	unrealized	gains	of	$59	million	at	December	31,	2012	compared	with	net	unrealized	gains	of	$102	million	at	December	31,	2011.

(e) Approximately	25%	of	these	securities	are	residential	mortgage-backed	securities	and	52%	are	US	Treasury	and	government	agencies	securities	at	December	31,	2012.	Comparable	amounts	at	December	31,	2011 were	57%	and	34%,	respectively.

(f) At	December	31,	2011,	$1.1	billion	of	residential	mortgage-backed	agency	securities	with	embedded	derivatives	were	carried	in	Trading	securities.	At	December	31,	2012,	the	balance	was	zero.

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

(h) The	indirect	equity	funds	are	not	redeemable,	but	PNC	receives	distributions	over	the	life	of	the	partnership	from	liquidation	of	the	underlying	investments	by	the	investee,	which	we	expect	to	occur	over	the	next twelve	years.	The	amount	of	unfunded	contractual	commitments	related	to	indirect	equity	investments	was	$145	million	and	related	to	direct	equity	investments	was	$37	million	as	of	December	31,	2012, respectively.

(i) Included	in	Federal	funds	sold	and	resale	agreements	on	our	Consolidated	Balance	Sheet.	PNC	has	elected	the	fair	value	option	for	these	items.

(j) Included	in	Loans	on	our	Consolidated	Balance	Sheet.

(k) PNC	has	elected	the	fair	value	option	for	these	shares.

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

(m) Included	in	Other	borrowed	funds	on	our	Consolidated	Balance	Sheet.

Reconciliations	of	assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	using	Level	3	inputs	for	2012	and	2011	follow.

# Table	94:	Reconciliation	of	Level	3	Assets	and	Liabilities

|  |  | Total	realized	/	unrealized | Total	realized	/	unrealized |  |  |  |  |  |  |  | Unrealized |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | gains\tor\tlosses\tfor\tthe\tperiod\t(a) | gains\tor\tlosses\tfor\tthe\tperiod\t(a) |  |  |  |  |  |  |  | gains\t(losses)\ton |
|  |  |  |  |  |  |  |  |  |  |  | assets\tand |
|  |  |  | Included\tin |  |  |  |  |  |  |  | liabilities\theld\ton |
| Level\t3\tInstruments\tOnly\nIn\tmillions | Fair\tValue\nDec.\t31,\n2011 | Included\tin\nEarnings | Other\ncomprehensive\nincome | Purchases | Sales | Issuances | Settlements | Transfers\ninto\nLevel\t3\t(b)\t\t Level\t3\t(b) | Transfers\t Fair\tValue\nout\tof | Dec.\t31,\n2012 | Consolidated\nBalance\tSheet\tat\nDec.\t31,\t2012\t(c) |
| Assets |  |  |  |  |  |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |  |  |  |  |  |
| Residential\tmortgage-\tbacked\tnon- |  |  |  |  |  |  |  |  |  |  |  |
| agency | $5,557 | $76 | $1,178 | $49 | \t$(164) |  | $(1,047) | $458 |  | $6,107 | $(99) |
| Commercial\tmortgage-backed\tnon- |  |  |  |  |  |  |  |  |  |  |  |
| agency |  | 1 |  |  |  |  | (1) |  |  |  |  |
| Asset-backed | 787 | (7) | 142 |  | (87) |  | (127) |  |  | 708 | (11) |
| State\tand\tmunicipal | 336 |  | 21 | 6 |  |  | (4) | 20 | $(40) | 339 |  |
| Other\tdebt | 49 | (1) | 1 | 16 | (17) |  |  |  |  | 48 | (1) |
| Total\tsecurities\tavailable\tfor\tsale | 6,729 | 69 | \t 1,342 | 71 | (268) |  | (1,179) | \t 478 | (40) | 7,202 | (111) |
| Financial\tderivatives | 67 | 433 |  | 5 |  |  | (400) | 3 | (2) | 106 | 364 |
| Residential\tmortgage\tloans\theld\tfor\tsale |  |  |  |  |  |  |  | 27 |  | 27 |  |
| Trading\tsecurities\t–\tDebt | 39 | 7 |  |  |  |  | (14) |  |  | 32 | 3 |
| Residential\tmortgage\tservicing\trights | 647 | (138) |  | \t 191 |  | $117 | (167) |  |  | 650 | (123) |
| Commercial\tmortgage\tloans\theld\tfor\tsale | 843 | (5) |  |  | (26) |  | (40) |  |  | 772 | (8) |
| Equity\tinvestments |  |  |  |  |  |  |  |  |  |  |  |
| Direct\tinvestments | 856 | 91 |  | \t 399 | (175) |  |  |  |  | 1,171 | 71 |
| Indirect\tinvestments | 648 | 102 |  | 63 | (171) |  |  |  |  | 642 | 94 |
| Total\tequity\tinvestments | 1,504 | 193 |  | \t 462 | (346) |  |  |  |  | 1,813 | 165 |
| Loans | 5 |  |  | 3 |  |  | (1) | \t 127 |  | 134 |  |
| Other\tassets |  |  |  |  |  |  |  |  |  |  |  |
| BlackRock\tSeries\tC\tPreferred\tStock | 210 | 33 |  |  |  |  |  |  |  | 243 | 33 |
| Other | 9 |  |  |  |  |  |  |  |  | 9 |  |
| Total\tother\tassets | 219 | 33 |  |  |  |  |  |  |  | 252 | 33 |
| Total\tassets | $10,053 | $ 592(e) | $1,342 | $732 | \t$(640) | $117 | $(1,801) | $635 | $(42) | $10,988 | $ 323(f) |
| Total\tliabilities\t(d) | $308 | $ 134(e) |  |  | \t$3 |  | $(68) | $1 | $(2) | $376 | $69(f) |

|  |  | Total	realized	/	unrealized | Total	realized	/	unrealized |  |  |  |  |  |  | Unrealized |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | gains\tor\tlosses\tfor\tthe\tperiod\t(a) | gains\tor\tlosses\tfor\tthe\tperiod\t(a) |  |  |  |  |  |  | gains\t(losses)\ton |
|  |  |  |  |  |  |  |  |  |  | assets\tand |
|  |  |  | Included\tin |  |  |  |  |  |  | liabilities\theld\ton |
| Level\t3\tInstruments\tOnly\nIn\tmillions | Fair\tValue\nDec.\t31,\n2010 | Included\tin\nEarnings | Other\ncomprehensive\nincome | Purchases | Sales | Issuances | Settlements | Transfers\nout\tof\nLevel\t3\t(b) | Fair\tValue\nDec.\t31,\n2011 | Consolidated\nBalance\tSheet\tat\nDec.\t31,\t2011\t(c) |
| Assets |  |  |  |  |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |  |  |  |  |
| Residential\tmortgage-backed\tnon-agency | $7,233 | $(80) | $(157) | $45 | \t$(280) |  | $(1,204) |  | $5,557 | $(130) |
| Asset-backed | 1,045 | (11) | 21 | 48 |  |  | (316) |  | 787 | (21) |
| State\tand\tmunicipal | 228 |  | 10 | \t 121 |  |  | (23) |  | 336 |  |
| Other\tdebt | 73 | (2) | 3 | 3 | (3) |  | 1 | $(26) | 49 | (1) |
| Corporate\tstocks\tand\tother | 4 |  |  |  |  |  | (4) |  |  |  |
| Total\tsecurities\tavailable\tfor\tsale | 8,583 | (93) | (123) | \t 217 | (283) |  | (1,546) | (26) | 6,729 | (152) |
| Financial\tderivatives | 77 | 263 |  | 5 |  |  | (278) |  | 67 | 188 |
| Trading\tsecurities\t–\tDebt | 69 | 4 |  |  |  |  | (29) | (5) | 39 | (5) |
| Residential\tmortgage\tservicing\trights | 1,033 | (406) |  | 65 |  | $118 | (163) |  | 647 | (383) |
| Commercial\tmortgage\tloans\theld\tfor\tsale | 877 | 3 |  |  | (13) |  | (24) |  | 843 | (4) |
| Equity\tinvestments |  |  |  |  |  |  |  |  |  |  |
| Direct\tinvestments | 749 | 87 |  | \t 176 | (156) |  |  |  | 856 | 58 |
| Indirect\tinvestments | 635 | 89 |  | 66 | (142) |  |  |  | 648 | 91 |
| Total\tequity\tinvestments | 1,384 | 176 |  | \t 242 | (298) |  |  |  | 1,504 | 149 |
| Loans | 2 |  |  | 4 |  |  | (1) |  | 5 |  |
| Other\tassets |  |  |  |  |  |  |  |  |  |  |
| BlackRock\tSeries\tC |  |  |  |  |  |  |  |  |  |  |
| Preferred\tStock | 396 | (14) |  |  |  |  | (172) |  | 210 | (14) |
| Other | 11 |  |  | 1 | (2) |  | (1) |  | 9 |  |
| Total\tother\tassets | 407 | (14) |  | 1 | (2) |  | (173) |  | 219 | (14) |
| Total\tassets | $12,432 | $(67)(e) | $(123) | $534 | \t$(596) | $118 | $(2,214) | $(31) | $10,053 | $(221)(f) |
| Total\tliabilities\t(d) | $460 | $7(e) |  |  | \t$10 |  | $(169) |  | $308 | $(17)(f) |
| (a) |  |  |  |  |  |  |  |  |  |  |

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

(b) PNC's	policy	is	to	recognize	transfers	in	and	transfers	out	as	of	the	end	of	the	reporting	period.

(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) Financial	derivatives,	which	includes	$43	million	related	to	swaps	entered	into	in	connection	with	sales	of	certain	Visa	Class	B	common	shares	which	were	included	in	earnings	in	2012.

(e) Net	gains	(realized	and	unrealized)	included	in	earnings	relating	to	Level	3	assets	and	liabilities	were	$458	million	for	2012	compared	with	net	losses	(realized	and	unrealized)	of	$74	million	for	2011.	These amounts	also	included	amortization	and	accretion	of	$189	million	for	2012	compared	with	$109	million	for	2011.	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.

(f) Net	unrealized	gains	relating	to	those	assets	and	liabilities	held	at	the	end	of	the	reporting	period	were	$254	million	for	2012,	compared	with	net	unrealized	losses	of	$204	million	for	2011.	These	amounts	were included	in	Noninterest	income	on	the	Consolidated	Income	Statement.

An	instrument's	categorization	within	the	hierarchy	is	based	on	the	lowest	level of	input	that	is	significant	to	the	fair	value	measurement.	PNC	reviews	and updates	fair	value	hierarchy	classifications	quarterly.	Changes	from	one	quarter to	the	next	related	to	the	observability	of	inputs	to	a	fair	value	measurement	may result	in	a	reclassification	(transfer)	of	assets	or	liabilities	between	hierarchy levels.	PNC's	policy	is	to	recognize	transfers	in	and	transfers	out	as	of	the	end	of the	reporting	period.	During	2012,	there	were	transfers	of	securities	available	for sale	from	Level	2	to	Level	3	of	$478	million	consisting	of	mortgage-backed securities	as	a	result	of	a	ratings	downgrade	which	reduced	the	observability	of

valuation	inputs	and	certain	state	and	municipal	securities	with	valuation	inputs that	were	determined	to	be	unobservable.	Level	2	to	Level	3	transfers	also included	$127	million	and	$27	million	for	loans	and	residential	mortgage	loans held	for	sale,	respectively,	as	a	result	of	reduced	market	activity	in	the nonperforming	residential	mortgage	sales	market	which	reduced	the observability	of	valuation	inputs.	Also	during	2012,	there	was	a	transfer	out	of Level	3	securities	available	for	sale	of	$40	million	due	to	an	instrument	being reclassified	to	a	loan	and	no	longer	being	carried	at	fair	value.	During	2011, there	were	no	material	transfers	of	assets	or	liabilities	between	the	hierarchy levels.

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

# Table	95:	Fair	Value	Measurement—Recurring	Quantitative	Information

(a) Level	3	residential	mortgage-backed	non-agency	and	asset-backed	securities	with	fair	values	as	of	December	31,	2012	totaling	$5,363	million	and	$677	million,	respectively,	were	priced	by	a	third-party	vendor using	a	discounted	cash	flow	pricing	model,	that	incorporates	consensus	pricing,	where	available.	The	significant	unobservable	inputs	for	these	securities	were	provided	by	the	third-party	vendor	and	are	disclosed in	the	table.	Our	procedures	to	validate	the	prices	provided	by	the	third-party	vendor	related	to	these	securities	are	discussed	further	in	the	Fair	Value	Measurement	section	of	this	Note	9.	Certain	Level	3	residential mortgage-backed	non-agency	and	asset-backed	securities	with	fair	value	as	of	December	31,	2012	of	$744	million	and	$31	million,	respectively,	were	valued	using	a	pricing	source,	such	as	a	dealer	quote	or comparable	security	price,	for	which	the	significant	unobservable	inputs	used	to	determine	the	price	were	not	reasonably	available.

(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) The	range	on	these	indirect	equity	investments	has	not	been	disclosed	since	these	investments	are	recorded	at	their	net	asset	redemption	values.

(e) 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	loans	and	certain	financial derivative	assets	and	liabilities	and	other	assets.

(f) Consists	of	total	Level	3	assets	of	$10,988	million	and	total	Level	3	liabilities	of	$376	million.

# OTHER	FINANCIAL	ASSETS	ACCOUNTED	FOR	AT	FAIR	VALUE	ON	A NONRECURRING	BASIS

We	may	be	required	to	measure	certain	other	financial	assets	at	fair	value	on	a nonrecurring	basis.	These	adjustments	to	fair	value	usually	result	from	the application	of	lower-of-cost-or-fair	value	accounting	or	write-downs	of individual	assets	due	to	impairment	and	are	included	in	Table	96:	Fair	Value Measurements	–	Nonrecurring	and	Table	97:	Fair	Value	Measurements	– Nonrecurring	Quantitative	Information.

# Nonaccrual	Loans

The	amounts	below	for	nonaccrual	loans	represent	the	fair	value	of	those	loans which	have	been	adjusted	due	to	impairment.	The	impairment	is	primarily	based on	the	appraised	value	of	the	collateral	or	LGD	percentage.	The	LGD	percentage is	used	to	determine	the	weighted	average	loss	severity	of	the	nonaccrual	loans.

As	part	of	the	appraisal	process,	persons	ordering	or	reviewing	appraisals	are independent	of	the	asset	manager.	Appraisals	must	be	provided	by	licensed	or certified	appraisers	and	conform	to	the	Uniform	Standards	of	Professional Appraisal	Practice.	For	loans	secured	by	commercial	properties	where	the underlying	collateral	is	in	excess	of	$250,000,	appraisals	are	obtained	at	least annually.	In	certain	instances	(e.g.,	physical	changes	in	the	property),	a	more recent	appraisal	is	obtained.	Additionally,	borrower	ordered	appraisals	are	not permitted,	and	PNC	ordered	appraisals	are	regularly	reviewed.	For	loans	secured by	commercial	properties	where	the	underlying	collateral	is	$250,000	and	less, there	is	no	requirement	to	obtain	an	appraisal.	In	instances	where	an	appraisal	is not	obtained,	the	collateral	value	is	determined	consistent	with	external	third- party	appraisal	standards	by	an	internal	person	independent	of	the	asset	manager. PNC	has	a	real	estate	valuation	services	group	whose	sole	function	is	to	manage the	real	estate	appraisal	solicitation	and	evaluation	process	for	commercial	loans. All	third-party	appraisals	are	reviewed	by	this	group,	including	consideration	of comments/questions	on	the	appraisal	by	the	reviewer,	customer	relationship manager,	credit	officer,	and	underwriter.	Upon	resolving	these comments/questions	through	discussions	with	the	third-party	appraiser, adjustments	to	the	initial	appraisal	may	occur	and	be	incorporated	into	the	final issued	appraisal	report.

If	an	appraisal	is	outdated	due	to	changed	project	or	market	conditions,	or	if	the net	book	value	is	utilized,	management	uses	an	LGD	percentage	which represents	the	exposure	PNC	expects	to	lose	in	the	event	a	borrower	defaults	on an	obligation.	Accordingly,	LGD,	which	represents	the	loss	severity,	is	a function	of	collateral	recovery	rates	and	loan-to-value.	Those	rates	are established	based	upon	actual	PNC	loss	experience	and	external	market	data.	In instances	where	we	have	agreed	to	sell	the	property	to	a	third	party,	the	fair	value is	based	on	the	contractual	sales	price	adjusted	for	costs	to	sell.	In	these instances,	the	most	significant	unobservable	input	is	the	appraised	value	or	the sales	price.	The	estimated

costs	to	sell	are	incremental	direct	costs	to	transact	a	sale	such	as	broker commissions,	legal,	closing	costs	and	title	transfer	fees.	The	costs	must	be essential	to	the	sale	and	would	not	have	been	incurred	if	the	decision	to	sell	had not	been	made.	The	costs	to	sell	are	based	on	costs	associated	with	our	actual sales	of	commercial	and	residential	OREO	and	foreclosed	assets,	which	are assessed	annually.

The	amounts	below	for	loans	held	for	sale	include	the	carrying	value	of commercial	mortgage	loans	which	are	intended	to	be	sold	with	servicing retained.	The	fair	value	of	the	commercial	mortgage	loans	is	determined	using discounted	cash	flows.	Significant	observable	market	data	includes	the applicable	benchmark	U.S.	Treasury	interest	rates.	These	instruments	are classified	within	Level	3.	Significant	unobservable	inputs	include	a	spread	over the	benchmark	curve	and	the	embedded	servicing	value.	Significant	increases (decreases)	to	the	spread	over	the	benchmark	curve	would	result	in	a significantly	lower	(higher)	carrying	value	of	the	assets.	Significant	increases (decreases)	in	the	embedded	servicing	value	would	result	in	significantly	higher (lower)	carrying	value.

Loans	held	for	sale	also	includes	syndicated	commercial	loan	inventory.	The	fair value	of	the	syndicated	commercial	loan	inventory	is	primarily	determined based	on	prices	provided	by	a	third-party	vendor.	The	third-party	vendor	prices are	based	upon	dealer	quotes.	These	instruments	are	classified	within	Level	2. There	were	no	loans	held	for	sale	categorized	as	Level	2	at	December	31,	2012.

The	amounts	below	for	equity	investments	represent	the	carrying	value	of	Low Income	Housing	Tax	Credit	(LIHTC)	investments	held	for	sale	calculated	using a	discounted	cash	flow	model.	The	significant	unobservable	input	is management's	estimate	of	required	market	rate	of	return.	The	market	rate	of return	is	based	on	comparison	to	recent	LIHTC	sales	in	the	market.	Significant increases	(decreases)	in	this	input	would	result	in	a	significantly	lower	(higher) carrying	value	of	the	investments.

# Commercial	Mortgage	Servicing	Rights

Commercial	MSRs	are	periodically	evaluated	for	impairment	and	the	amounts below	reflect	an	impairment	of	two	strata	at	December	31,	2012	and	three	strata at	December	31,	2011,	respectively.	For	purposes	of	impairment,	the	commercial MSRs	are	stratified	based	on	asset	type,	which	characterizes	the	predominant risk	of	the	underlying	financial	asset.	The	fair	value	of	commercial	MSRs	is estimated	by	using	a	discounted	cash	flow	model	incorporating	unobservable inputs	for	assumptions	as	to	constant	prepayment	rates,	discount	rates	and	other factors.	Significant	increases	(decreases)	in	constant	prepayment	rates	and discount	rates	would	result	in	significantly	lower	(higher)	commercial	MSR value	determined	based	on	current	market	conditions	and	expectations.

# OREO	and	Foreclosed	Assets

The	amounts	below	for	OREO	and	foreclosed	assets	represent	the	carrying	value of	OREO	and	foreclosed	assets	for	which	valuation	adjustments	were	recorded subsequent	to	the	transfer	to	OREO	and	foreclosed	assets.	Valuation	adjustments are	based	on	the	fair	value	less	cost	to	sell	of	the	property.	Fair	value	is	based	on appraised	value	or	sales	price.

The	appraisal	process	for	OREO	and	foreclosed	properties	is	the	same	as described	above	for	nonaccrual	loans.	In	instances	where	we	have	agreed	to	sell the	property	to	a	third	party,	the	fair	value	is	based	on	the	contractual	sale	price adjusted	for	costs	to	sell.	The	significant	unobservable	inputs	for	OREO	and foreclosed	assets	are	the	appraised	value	or	the	sales	price.	The	estimated	costs	to sell	are	incremental	direct	costs	to	transact	a	sale	such	as	broker	commissions, legal,	closing	costs	and	title	transfer	fees.	The	costs	must	be	essential	to	the	sale and	would	not	have	been	incurred	if	the	decision	to	sell	had	not	been	made.	The costs	to	sell	are	based	on	costs	associated	with	our	actual	sales	of	commercial and	residential	OREO	and	foreclosed	assets,	which	are	assessed	annually.

# Long-Lived	Assets	Held	for	Sale

The	amounts	below	for	Long-lived	assets	held	for	sale	represent	the	carrying value	of	the	asset	for	which	valuation	adjustments	were	recorded	during	the current	year	and	subsequent	to	the	transfer	to	Long-lived	assets	held	for	sale. Valuation	adjustments	are	based	on	the	fair	value	of	the	property	less	an estimated	cost	to	sell.	Fair	value	is	determined	either	by	a	recent	appraisal,	recent sales	offer	or	changes	in	market	or	property	conditions.	Appraisals	are	provided by	licensed	or	certified	appraisers.	Where	we	have	agreed	to	sell	the	property	to a	third	party,	the	fair	value	is	based	on	the	contractual	sale	price.	The	significant unobservable	inputs	for	Long-lived	assets	held	for	sale	are	the	appraised	value, the	sales	price	or	the	changes	in	market	or	property	conditions.	Changes	in market	or	property	conditions	are	subjectively	determined	by	management through	observation	of	the	physical	condition	of	the	property	along	with	the condition	of	properties	in	the	surrounding	market	place.	The	availability	and recent	sales	of	similar	properties	is	also	considered.	The	range	of	fair	values	can vary	significantly	as	this	category	often	includes	smaller	properties	such	as offsite	ATM	locations	and	smaller	rural	branches	up	to	large	commercial buildings,	operation	centers	or	urban	branches.

# Table	96:	Fair	Value	Measurements	–	Nonrecurring	(a)

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Assets |  |  |
| Nonaccrual\tloans | $158 | $253 |
| Loans\theld\tfor\tsale | 315 | 130 |
| Equity\tinvestments | 12 | 1 |
| Commercial\tmortgage\tservicing\trights | 191 | 457 |
| OREO\tand\tforeclosed\tassets | 207 | 223 |
| Long-lived\tassets\theld\tfor\tsale | 24 | 17 |
| Total\tassets | $907 | $1,081 |

| Year	ended	December	31 |  | Gains	(Losses) |  |
| :--- | :--- | :--- | :--- |
| In\tmillions | 2012 | 2011 | 2010 |
| Assets |  |  |  |
| Nonaccrual\tloans | $(68) | $(49) | $81 |
| Loans\theld\tfor\tsale | (4) | (2) | (93) |
| Equity\tinvestments |  | (2) | (3) |
| Commercial\tmortgage\tservicing\trights | (5) | (157) | (40) |
| OREO\tand\tforeclosed\tassets | (73) | (71) | (103) |
| Long-lived\tassets\theld\tfor\tsale | (20) | (5) | (30) |
| Total\tassets | $(170) | $(286) | $(188) |
| (a)\nAll\tLevel\t3\tas\tof\tDecember\t31,\t2012. |  |  |  |

Quantitative	information	about	the	significant	unobservable	inputs	within	Level	3	nonrecurring	assets	follows.

# Table	97:	Fair	Value	Measurements	–	Nonrecurring	Quantitative	Information

(a) The	fair	value	of	nonaccrual	loans	included	in	this	line	item	is	determined	based	on	internal	loss	rates.	The	fair	value	of	nonaccrual	loans	where	the	fair	value	is	determined	based	on	the	appraised	value	or	sales price	is	included	within	Other,	below.

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

(c) Other	includes	nonaccrual	loans	of	$68	million,	OREO	and	foreclosed	assets	of	$207	million	and	Long-lived	assets	held	for	sale	of	$24	million	as	of	December	31,	2012.	The	fair	value	of	these	assets	is determined	based	on	appraised	value	or	sales	price,	the	range	of	which	is	not	meaningful	to	disclose.

# FINANCIAL	ASSETS	ACCOUNTED	FOR	UNDER	FAIR	VALUE	OPTION

Refer	to	the	Fair	Value	Measurement	section	of	this	Note	9	regarding	the	fair value	of	commercial	mortgage	loans	held	for	sale,	residential	mortgage	loans held	for	sale,	certain	portfolio	loans,	customer	resale	agreements,	and BlackRock	Series	C	Preferred	Stock.

Interest	income	on	these	loans	is	recorded	as	earned	and	reported	on	the Consolidated	Income	Statement	in	Other	interest	income.	The	impact	on earnings	of	offsetting	economic	hedges	is	not	reflected	in	these	amounts. Changes	in	fair	value	due	to	instrument-specific	credit	risk	for	both	2012	and 2011	were	not	material.

# Residential	Mortgage	Loans	Held	for	Sale	and	in	Portfolio

Interest	income	on	these	loans	is	recorded	as	earned	and	reported	on	the Consolidated	Income	Statement	in	Other	interest	income.	Throughout	2012	and 2011,	certain	residential	mortgage	loans	for	which	we	elected	the	fair	value option	were	subsequently	reclassified	to	portfolio	loans.	Changes	in	fair	value due	to	instrument-specific	credit	risk	for	2012	and	2011	were	not	material.

Interest	income	on	structured	resale	agreements	is	reported	on	the	Consolidated Income	Statement	in	Other	interest	income.	Changes	in	fair	value	due	to instrument-specific	credit	risk	for	2012	and	2011	were	not	material.

# Residential	Mortgage-Backed	Agency	Securities	with	Embedded	Derivatives

Interest	income	on	securities	is	reported	on	the	Consolidated	Income	Statement in	Interest	income.

The	changes	in	fair	value	included	in	Noninterest	income	for	items	for	which	we elected	the	fair	value	option	follow.

# Table	98:	Fair	Value	Option	–	Changes	in	Fair	Value	(a)

| In	millions | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Assets |  |  |  |
| Customer\tresale\tagreements | $(10) | $ (12) | $1 |
| Residential\tmortgage-backed\tagency |  |  |  |
| securities\twith\tembedded |  |  |  |
| derivatives\t(b) | 13 | 24 |  |
| Trading\tloans | 2 |  |  |
| Commercial\tmortgage\tloans\theld\tfor |  |  |  |
| sale | (5) | 3 | 16 |
| Residential\tmortgage\tloans\theld\tfor |  |  |  |
| sale | (180) | \t 172 | \t 280 |
| Residential\tmortgage\tloans\t–\tportfolio | (36) | (17) |  |
| BlackRock\tSeries\tC\tPreferred\tStock | 33 | (14) | (86) |

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

(b) These	residential	mortgage-backed	agency	securities	with	embedded	derivatives	were	carried	as Trading	securities.

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

# Table	99:	Fair	Value	Option	–	Fair	Value	and	Principal	Balances

| In	millions | Fair	Value | Principal	Balance | Difference |
| :--- | :--- | :--- | :--- |
| December\t31,\t2012 |  |  |  |
| Customer\tresale\tagreements | $256 | $237 | $19 |
| Trading\tloans | 76 | 76 |  |
| Residential\tmortgage\tloans\theld\tfor\tsale |  |  |  |
| Performing\tloans | 2,072 | 1,971 | 101 |
| Accruing\tloans\t90\tdays\tor\tmore\tpast\tdue | 8 | 14 | (6) |
| Nonaccrual\tloans | 16 | 36 | (20) |
| Total | 2,096 | 2,021 | 75 |
| Commercial\tmortgage\tloans\theld\tfor\tsale\t(a) |  |  |  |
| Performing\tloans | 766 | 889 | (123) |
| Nonaccrual\tloans | 6 | 12 | (6) |
| Total | 772 | 901 | (129) |
| Residential\tmortgage\tloans\t–\tportfolio |  |  |  |
| Performing\tloans | 58 | 116 | (58) |
| Accruing\tloans\t90\tdays\tor\tmore\tpast\tdue\t(b) | 116 | 141 | (25) |
| Nonaccrual\tloans | 70 | 207 | (137) |
| Total | $244 | $464 | $(220) |
| December\t31,\t2011 |  |  |  |
| Customer\tresale\tagreements | $732 | $686 | $46 |
| Residential\tmortgage-backed\tagency\tsecurities\twith\tembedded\tderivatives\t(c) | 1,058 | 864 | 194 |
| Residential\tmortgage\tloans\theld\tfor\tsale |  |  |  |
| Performing\tloans | 1,407 | 1,347 | 60 |
| Accruing\tloans\t90\tdays\tor\tmore\tpast\tdue | 7 | 13 | (6) |
| Nonaccrual\tloans | 1 | 3 | (2) |
| Total | 1,415 | 1,363 | 52 |
| Commercial\tmortgage\tloans\theld\tfor\tsale\t(a) |  |  |  |
| Performing\tloans | 829 | 962 | (133) |
| Nonaccrual\tloans | 14 | 27 | (13) |
| Total | 843 | 989 | (146) |
| Residential\tmortgage\tloans\t–\tportfolio |  |  |  |
| Performing\tloans | 32 | 55 | (23) |
| Accruing\tloans\t90\tdays\tor\tmore\tpast\tdue\t(b) | 10 | 14 | (4) |
| Nonaccrual\tloans | 62 | 176 | (114) |
| Total | $104 | $245 | $(141) |
| (a) |  |  |  |

(a) There	were	no	accruing	loans	90	days	or	more	past	due	within	this	category	at	December	31,	2012	or	December	31,	2011.

(b) The	majority	of	these	loans	are	government	insured	loans,	which	positively	impacts	the	fair	value.

(c) These	residential	mortgage-backed	agency	securities	with	embedded	derivatives	were	carried	as	Trading	securities.

# Table	100:	Additional	Fair	Value	Information	Related	to	Financial	Instruments

|  |  | December	31,	2012 | December	31,	2012 | December	31,	2012 | December	31,	2012 | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Carrying\nAmount | Total | Fair\tValue\nLevel\t1 | Level\t2 | Level\t3 | Carrying\nAmount | Fair\tValue |
| Assets |  |  |  |  |  |  |  |
| Cash\tand\tdue\tfrom\tbanks | $5,220 | $5,220 | $5,220 |  |  | $4,105\t\t\t $ | 4,105 |
| Short-term\tassets | 6,495 | 6,495 | $6,495 | $6,495 |  | 4,462 | 4,462 |
| Trading\tsecurities | 2,096 | 2,096 | \t 1,104 | 960\t\t\t $ | 32 | 2,513 | 2,513 |
| Investment\tsecurities | 61,406 | 61,912 | \t 2,897 | 51,789 | 7,226 | 60,634 | 61,018 |
| Trading\tloans | 76 | 76 |  | 76 |  |  |  |
| Loans\theld\tfor\tsale | 3,693 | 3,697 |  | 2,069 | 1,628 | 2,936 | 2,939 |
| Net\tloans\t(excludes\tleases) | \t 174,575 | \t 177,215 |  | 110 | \t 177,105 | \t 148,254 | \t 151,167 |
| Other\tassets | 4,265 | 4,265 | 283 | 1,917 | 2,065 | 4,019 | 4,019 |
| Mortgage\tservicing\trights | 1,070 | 1,077 |  |  | 1,077 | 1,115 | 1,118 |
| Financial\tderivatives |  |  |  |  |  |  |  |
| Designated\tas\thedging\tinstruments\tunder\tGAAP | 1,872 | 1,872 |  | 1,872 |  | 1,888 | 1,888 |
| Not\tdesignated\tas\thedging\tinstruments\tunder\tGAAP | 6,696 | 6,696 | 5 | 6,585 | 106 | 7,575 | 7,575 |
| Total\tAssets | $267,464 | $270,621 | $9,509 | $71,873\t\t\t $189,239 | $71,873\t\t\t $189,239 | $237,501\t\t\t $240,804 | $237,501\t\t\t $240,804 |
| Liabilities |  |  |  |  |  |  |  |
| Demand,\tsavings\tand\tmoney\tmarket\tdeposits | $187,051 | $187,051 | $187,051 | $187,051 |  | $156,335\t\t\t $156,335 | $156,335\t\t\t $156,335 |
| Time\tdeposits | 26,091 | 26,347 |  | 26,347 |  | 31,632 | 31,882 |
| Borrowed\tfunds | 40,907 | 42,329 | $731 | 40,505\t\t\t $ | 1,093 | 36,966 | 39,064 |
| Financial\tderivatives |  |  |  |  |  |  |  |
| Designated\tas\thedging\tinstruments\tunder\tGAAP | 152 | 152 |  | 152 |  | 116 | 116 |
| Not\tdesignated\tas\thedging\tinstruments\tunder\tGAAP | 6,458 | 6,458 | 1 | 6,081 | 376 | 7,490 | 7,490 |
| Unfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 231 | 231 |  |  | 231 | 223 | 223 |
| Total\tLiabilities | $260,890 | $262,568 | $732 | $260,136\t\t\t $ | 1,700 | $232,762\t\t\t $235,110 | $232,762\t\t\t $235,110 |

The	aggregate	fair	values	in	the	table	above	do	not	represent	the	total	market value	of	PNC's	assets	and	liabilities	as	the	table	excludes	the	following: •	real	and	personal	property,

•	lease	financing,

•	loan	customer	relationships,

•	deposit	customer	intangibles,

•	retail	branch	networks,

•	fee-based	businesses,	such	as	asset	management	and	brokerage,	and •	trademarks	and	brand	names.

We	used	the	following	methods	and	assumptions	to	estimate	fair	value	amounts for	financial	instruments.

# General

For	short-term	financial	instruments	realizable	in	three	months	or	less,	the carrying	amount	reported	on	our	Consolidated	Balance	Sheet	approximates	fair value.	Unless	otherwise	stated,	the	rates	used	in	discounted	cash	flow	analyses are	based	on	market	yield	curves.

# Cash	and	due	from	banks

The	carrying	amounts	reported	on	our	Consolidated	Balance	Sheet	for	cash	and due	from	banks	approximate	fair	values.	For	purposes	of	this	disclosure	only,

cash	and	due	from	banks	includes	the	following:

•	due	from	banks,	and

•	interest-earning	deposits	with	banks.

Cash	and	due	from	banks	are	classified	as	Level	1.

# Short-Term	Assets

The	carrying	amounts	reported	on	our	Consolidated	Balance	Sheet	for	short- term	investments	approximate	fair	values	primarily	due	to	their	short-term nature.	For	purposes	of	this	disclosure	only,	short-term	assets	include	the following:

•	federal	funds	sold	and	resale	agreements,

•	cash	collateral,

•	customers'	acceptances,	and

•	accrued	interest	receivable.

Short-term	assets	are	classified	as	Level	2.

# Securities

Securities	include	both	the	investment	securities	(comprised	of	available	for	sale and	held	to	maturity	securities)	and	trading	securities	portfolios.	We	primarily use	prices	obtained	from	pricing	services,	dealer	quotes	or	recent	trades	to determine	the	fair	value	of	securities.	As	of	December	31,	2012,	86%	of	the positions	in	these	portfolios	were	priced	by	pricing	services	provided	by	third- party	vendors.	The	third-party	vendors	use	a	variety	of	methods	when	pricing securities	that	incorporate	relevant	market	data	to	arrive	at	an	estimate	of	what	a buyer	in	the	marketplace	would	pay	for	a	security	under	current	market conditions.	One	of	the	vendor's	prices	is	set	with	reference	to	market	activity	for highly	liquid	assets,	such	as	U.S.	Treasury	and	agency	securities	and	agency mortgage-backed	securities,	and	matrix	pricing	for	other	asset	classes,	such	as commercial	mortgage	and	other	asset-backed	securities.	Another	vendor primarily	uses	pricing	models	considering	adjustments	for	ratings,	spreads, matrix	pricing	and	prepayments	for	the	instruments	we	value	using	this	service, such	as	non-agency	residential	mortgage-backed	securities,	agency	adjustable rate	mortgage	securities,	agency	CMOs,	commercial	mortgage-backed securities,	and	municipal	bonds.	Management	uses	various	methods	and techniques	to	validate	prices	obtained	from	pricing	services	and	dealers, including	reference	to	another	third-party	source,	by	reviewing	valuations	of comparable	instruments,	or	by	comparison	to	internal	valuations.

# Net	Loans	And	Loans	Held	For	Sale

Fair	values	are	estimated	based	on	the	discounted	value	of	expected	net	cash flows	incorporating	assumptions	about	prepayment	rates,	net	credit	losses	and servicing	fees.	For	purchased	impaired	loans,	fair	value	is	assumed	to	equal PNC's	carrying	value,	which	represents	the	present	value	of	expected	future principal	and	interest	cash	flows,	as	adjusted	for	any	ALLL	recorded	for	these loans.	See	Note	6	Purchased	Loans	for	additional	information.	For	revolving home	equity	loans	and	commercial	credit	lines,	this	fair	value	does	not	include any	amount	for	new	loans	or	the	related	fees	that	will	be	generated	from	the existing	customer	relationships.	Nonaccrual	loans	are	valued	at	their	estimated recovery	value.	Also	refer	to	the	Fair	Value	Measurement	and	Fair	Value	Option sections	of	this	Note	9	regarding	the	fair	value	of	commercial	and	residential mortgage	loans	held	for	sale.	Loans	are	presented	net	of	the	ALLL	and	do	not include	future	accretable	discounts	related	to	purchased	impaired	loans.

# Other	Assets

Other	assets	as	shown	in	the	preceding	table	includes	the	following: •	FHLB	and	FRB	stock,

•	equity	investments	carried	at	cost	and	fair	value,	and •	BlackRock	Series	C	Preferred	Stock.

Investments	accounted	for	under	the	equity	method,	including	our	investment	in BlackRock,	are	not	included	in	the	preceding	Table	100:	Additional	Fair	Value Information	Related	to	Financial	Instruments.

Refer	to	the	Fair	Value	Measurement	section	of	this	Note	9	regarding	the	fair value	of	equity	investments.

The	aggregate	carrying	value	of	our	investments	that	are	carried	at	cost	and FHLB	and	FRB	stock	was	$1.7	billion	at	December	31,	2012	and	was	$1.9 billion	at	December	31,	2011,	which	approximates	fair	value	at	each	date.

# Mortgage	Servicing	Assets

Fair	value	is	based	on	the	present	value	of	the	estimated	future	cash	flows, incorporating	assumptions	as	to	prepayment	rates,	discount	rates,	default	rates, escrow	balances,	interest	rates,	cost	to	service	and	other	factors.

The	key	valuation	assumptions	for	commercial	and	residential	mortgage	loan servicing	assets	at	December	31,	2012	and	December	31,	2011	are	included	in Note	10	Goodwill	and	Other	Intangible	Assets.

Refer	to	the	Fair	Value	Measurement	section	of	this	Note	9	regarding	the	fair value	of	customer	resale	agreements.

# Deposits

The	carrying	amounts	of	noninterest-bearing	and	interest-bearing	demand, interest-bearing	money	market	and	savings	deposits	approximate	fair	values.	For time	deposits,	which	include	foreign	deposits,	fair	values	are	estimated	based	on the	discounted	value	of	expected	net	cash	flows	assuming	current	interest	rates. All	deposits	are	classified	as	Level	2.

# Borrowed	Funds

The	carrying	amounts	of	Federal	funds	purchased,	commercial	paper,	repurchase agreements,	trading	securities	sold	short,	cash	collateral,	other	short-term borrowings,	acceptances	outstanding	and	accrued	interest	payable	are	considered to	be	their	fair	value	because	of	their	short-term	nature.	For	all	other	borrowed funds,	fair	values	are	estimated	using	either	prices	obtained	from	third-party vendors	or	an	internally	developed	discounted	cash	flow	approach	taking	into consideration	our	current	incremental	borrowing	rates	for	similar	instruments.

# Unfunded	Loan	Commitments	And	Letters	of	Credit

The	fair	value	of	unfunded	loan	commitments	and	letters	of	credit	is	determined from	a	market	participant's	view	including	the	impact	of	changes	in	interest rates,	credit	and	other	factors.	Because	our	obligation	on	substantially	all unfunded	loan	commitments	and	letters	of	credit	varies	with	changes	in	interest rates,	these	instruments	are	subject	to	little	fluctuation	in	fair	value	due	to changes	in	interest	rates.	We	establish	a	liability	on	these	facilities	related	to	the creditworthiness	of	our	counterparty.	These	instruments	are	classified	as	Level	3.

Refer	to	the	Fair	Value	Measurement	section	of	this	Note	9	regarding	the	fair value	of	financial	derivatives.

# NOTE	10	GOODWILL	AND	OTHER	INTANGIBLE	ASSETS

Changes	in	goodwill	by	business	segment	during	2012	and	2011	follow:

# Table	101:	Changes	in	Goodwill	by	Business	Segment	(a)

| In	millions | Retail<br>Banking | Corporate	&amp;<br>Institutional<br>Banking | Asset<br>Management<br>Group | Residential<br>Mortgage<br>Banking | Other	(b) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2010 | $5,302 | $2,728 | $62 | $43 | $14 | $8,149 |
| BankAtlantic\tbranch\tacquisition | 35 | 6 |  |  |  | 41 |
| Flagstar\tbranch\tacquisition | 17 |  |  |  |  | 17 |
| Other\t(c) | 40 | 29 | 7 |  | 2 | 78 |
| December\t31,\t2011 | $5,394 | $2,763 | $69 | $43 | $16 | $8,285 |
| RBC\tBank\t(USA)\tacquisition | 429 | 473 |  | 2 | 46 | 950 |
| SmartStreet\tdivestiture |  |  |  |  | (46) | (46) |
| Residential\tMortgage\tBanking\timpairment\tcharge |  |  |  | (45) |  | (45) |
| Other\t(c) | (29) | (22) | (5) |  | (16) | (72) |
| December\t31,\t2012 | $5,794 | $3,214 | $64 | $– | $– | $9,072 |
| (a) |  |  |  |  |  |  |

(a) The	Non-Strategic	Assets	Portfolio	business	segment	does	not	have	any	goodwill	allocated	to	it.

(b) Includes	goodwill	related	to	BlackRock.

(c) Primarily	related	to	correction	of	amounts	for	an	acquisition	affecting	prior	periods.

Changes	in	goodwill	and	other	intangible	assets	during	2012	follow:

# Table	102:	Summary	of	Changes	in	Goodwill	and	Other	Intangible	Assets

| In	millions | Goodwill | Customer-<br>Related | Servicing<br>Rights |
| :--- | :--- | :--- | :--- |
| December\t31,\t2011 | $8,285 | $742 | $1,117 |
| Additions/adjustments: |  |  |  |
| RBC\tBank\t(USA)\tacquisition | 950 | 164 | 16 |
| SmartStreet\tdivestiture | (46) | (13) |  |
| Residential\tMortgage\tBanking\nimpairment\tcharge | (45) |  |  |
| Other\t(a) | (72) |  |  |
| Change\tin\tvaluation\tallowance |  |  | 21 |
| Amortization |  | (167) | (143) |
| Mortgage\tand\tother\tloan\tservicing\nrights |  |  | 60 |
| December\t31,\t2012 | $9,072 | $726 | $1,071 |
| (a) |  |  |  |

(a) Primarily	related	to	correction	of	amounts	for	an	acquisition	affecting	prior	periods.

Assets	and	liabilities	of	acquired	entities	are	recorded	at	estimated	fair	value	as of	the	acquisition	date.

We	conduct	a	goodwill	impairment	test	on	our	reporting	units	at	least	annually, in	the	fourth	quarter,	or	more	frequently	if	events	occur	or	circumstances	have changed	significantly	from	the	annual	test	date.	The	fair	value	of	our	reporting units	is	determined	by	using	discounted	cash	flow	and,	when	applicable,	market comparability	methodologies.

Our	residential	mortgage	banking	business,	similar	to	other	residential	mortgage banking	businesses,	is	operating	in	an	unsettled	environment,	which	has	and	may continue	to	result	in	higher	operating	costs,	and	has	experienced	increased uncertainties	such	as	elevated	indemnification	and	repurchase	liabilities	and foreclosure	related	issues.	Additionally,	the	current	level	of	refinance	volumes	is not	expected	to	continue	indefinitely	given	that	interest	rates	have	been	low	for	a prolonged	period	of	time.	Step	1	of	the	annual	goodwill	impairment	test indicated	that	the	fair	value	of	the	Residential	Mortgage	Banking	reporting	unit using	a	discounted	cash	flow	approach	was	less	than	its	carrying	value.	Step	2	of the	impairment	test	was	performed	and	indicated	that	the	implied	fair	value	of goodwill	was	less	than	its	carrying	value.	An	impairment	charge	of	$45	million was	recorded	which	wrote	down	the	entire	balance	of	goodwill	in	the	Residential Mortgage	Banking	reporting	unit.	The	Residential	Mortgage	Banking	reporting unit	does	not	have	any	remaining	goodwill	as	of	December	31,	2012.

The	gross	carrying	amount,	accumulated	amortization	and	net	carrying	amount of	other	intangible	assets	by	major	category	consisted	of	the	following:

# Table	103:	Other	Intangible	Assets

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Customer-related\tand\tother\tintangibles |  |  |
| Gross\tcarrying\tamount | $1,676 | $1,525 |
| Accumulated\tamortization | (950) | (783) |
| Net\tcarrying\tamount | $726 | $742 |
| Mortgage\tand\tother\tloan\tservicing\trights |  |  |
| Gross\tcarrying\tamount | $2,071 | $2,009 |
| Valuation\tallowance | (176) | (197) |
| Accumulated\tamortization | (824) | (695) |
| Net\tcarrying\tamount | $1,071 | $1,117 |
| Total | $1,797 | $1,859 |

Our	other	intangible	assets	have	finite	lives	and	are	amortized	primarily	on	a straight-line	basis.	Core	deposit	intangibles	are	amortized	on	an	accelerated basis.

For	customer-related	and	other	intangibles,	the	estimated	remaining	useful	lives range	from	1	year	to	11	years,	with	a	weighted-average	remaining	useful	life	of 8	years.

Amortization	expense	on	existing	intangible	assets	follows:

# Table	104:	Amortization	Expense	on	Existing	Intangible	Assets

# Changes	in	commercial	mortgage	servicing	rights	(MSRs)	follow:

# Table	105:	Commercial	Mortgage	Servicing	Rights

| In	millions | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Commercial\tMortgage\tServicing\tRights\n–\tNet\tCarrying\tAmount |  |  |  |
| January\t1 | $468 | $665 | $921 |
| Additions\t(a) | 73 | 120 | 83 |
| Sale\tof\tservicing\trights\t(b) |  |  | (192) |
| Change\tin\tvaluation\tallowance | 21 | (157) | (40) |
| Amortization\texpense\t(c) | (142) | (160) | (107) |
| December\t31 | $420 | $468 | $665 |
| Commercial\tMortgage\tServicing\tRights |  |  |  |
| –\tValuation\tAllowance |  |  |  |
| January\t1 | $(197) | $(40) |  |
| Provision | (46) | (166) | $(110) |
| Recoveries | 43 | 9 | 70 |
| Other\t(c) | 24 |  |  |
| December\t31 | $(176) | $(197) | $(40) |
| (a)\nAdditions\tfor\t2012\tincluded\t$45\tmillion\tfrom\tloans\tsold\twith\tservicing\tretained\tand\t$28\tmillion |  |  |  |

(a) Additions	for	2012	included	$45	million	from	loans	sold	with	servicing	retained	and	$28	million from	purchases	of	servicing	rights	from	third	parties.	Comparable	amounts	were	$55	million	and $65	million	for	2011	and	$45	million	and	$38	million	for	2010.

(b) Reflects	the	sale	of	a	duplicative	agency	servicing	operation	in	2010.

(c) Includes	a	direct	write-down	of	servicing	rights	for	$24	million	recognized	in	the	first	quarter	of 2012	primarily	due	to	market-driven	changes	in	interest	rates.

We	recognize	as	an	other	intangible	asset	the	right	to	service	mortgage	loans	for others.	Commercial	MSRs	are	purchased	or	originated	when	loans	are	sold	with servicing	retained.	Commercial	MSRs	are	initially	recorded	at	fair	value.	These rights	are	subsequently	accounted	for	at	the	lower	of	amortized	cost	or	fair	value, and	are	substantially	amortized	in	proportion	to	and	over	the	period	of	estimated net	servicing	income	of	5	to	10	years.

Commercial	MSRs	are	periodically	evaluated	for	impairment.	For	purposes	of impairment,	the	commercial	MSRs	are	stratified	based	on	asset	type,	which characterizes	the	predominant	risk	of	the	underlying	financial	asset.	If	the carrying	amount	of	any	individual	stratum	exceeds	its	fair	value,	a	valuation reserve	is	established	with	a	corresponding	charge	to	Corporate	services	on	our Consolidated	Income	Statement.

The	fair	value	of	commercial	MSRs	is	estimated	by	using	a	discounted	cash	flow model	incorporating	inputs	for	assumptions	as	to	constant	prepayment	rates, discount	rates	and	other	factors	determined	based	on	current	market	conditions and	expectations.

# Changes	in	the	residential	MSRs	follow:

# Table	106:	Residential	Mortgage	Servicing	Rights

| In	millions | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| January\t1 | $647 | $1,033 | $1,332 |
| Additions: |  |  |  |
| From\tloans\tsold\twith |  |  |  |
| servicing\tretained | 117 | 118 | 95 |
| RBC\tBank\t(USA)\tacquisition | 16 |  |  |
| Purchases | 175 | 65 |  |
| Changes\tin\tfair\tvalue\tdue\tto: |  |  |  |
| Time\tand\tpayoffs\t(a) | (167) | (163) | (185) |
| Other\t(b) | (138) | (406) | (209) |
| December\t31 | $650 | $647 | $1,033 |
| Unpaid\tprincipal\tbalance\tof |  |  |  |
| loans\tserviced\tfor\tothers\tat |  |  |  |
| December\t31 | $119,262 | $118,058 | $125,806 |

(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,	as well	as	changes	in	assumptions	such	as	prepayments	and	servicing	costs.

We	recognize	mortgage	servicing	right	assets	on	residential	real	estate	loans when	we	retain	the	obligation	to	service	these	loans	upon	sale	and	the	servicing fee	is	more	than	adequate	compensation	or	upon	purchase	of	servicing	rights from	third	parties.	MSRs	are	subject	to	declines	in	value	principally	from	actual or	expected	prepayment	of	the	underlying	loans	and	also	defaults.	We	manage this	risk	by	economically	hedging	the	fair	value	of	MSRs	with	securities	and derivative	instruments	which	are	expected	to	increase	(or	decrease)	in	value when	the	value	of	MSRs	declines	(or	increases).

The	fair	value	of	residential	MSRs	is	estimated	by	using	a	cash	flow	valuation model	which	calculates	the	present	value	of	estimated	future	net	servicing	cash flows,	taking	into	consideration	actual	and	expected	mortgage	loan	prepayment rates,	discount	rates,	servicing	costs,	and	other	economic	factors	which	are determined	based	on	current	market	conditions.

The	fair	value	of	commercial	and	residential	MSRs	and	significant	inputs	to	the valuation	models	as	of	December	31,	2012	and	December	31,	2011	are	shown	in the	tables	below.	The	expected	and	actual	rates	of	mortgage	loan	prepayments are	significant	factors	driving	the	fair	value.	Management	uses	internal proprietary	models	to	estimate	future	commercial

mortgage	loan	prepayments	and	a	third	party	model	to	estimate	future	residential mortgage	loan	prepayments.	These	models	have	been	refined	based	on	current market	conditions	and	management	judgment.	Future	interest	rates	are	another important	factor	in	the	valuation	of	MSRs.	Management	utilizes	market	implied forward	interest	rates	to	estimate	the	future	direction	of	mortgage	and	discount rates.	The	forward	rates	utilized	are	derived	from	the	current	yield	curve	for	U.S. dollar	interest	rate	swaps	and	are	consistent	with	pricing	of	capital	markets instruments.	Changes	in	the	shape	and	slope	of	the	forward	curve	in	future periods	may	result	in	volatility	in	the	fair	value	estimate.

A	sensitivity	analysis	of	the	hypothetical	effect	on	the	fair	value	of	MSRs	to adverse	changes	in	key	assumptions	is	presented	below.	These	sensitivities	do not	include	the	impact	of	the	related	hedging	activities.	Changes	in	fair	value generally	cannot	be	extrapolated	because	the	relationship	of	the	change	in	the assumption	to	the	change	in	fair	value	may	not	be	linear.	Also,	the	effect	of	a variation	in	a	particular	assumption	on	the	fair	value	of	the	MSRs	is	calculated independently	without	changing	any	other	assumption.	In	reality,	changes	in	one factor	may	result	in	changes	in	another	(for	example,	changes	in	mortgage interest	rates,	which	drive	changes	in	prepayment	rate	estimates,	could	result	in changes	in	the	interest	rate	spread),	which	could	either	magnify	or	counteract	the sensitivities.

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

# Table	107:	Commercial	Mortgage	Loan	Servicing	Assets	–	Key	Valuation Assumptions

| Dollars	in	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Fair\tValue | $427 | $471 |
| Weighted-average\tlife\t(years) | 5.4 | 5.9 |
| Weighted-average\tconstant |  |  |
| prepayment\trate | 7.63% | 5.08% |
| Decline\tin\tfair\tvalue\tfrom\t10% |  |  |
| adverse\tchange | $8 | $6 |
| Decline\tin\tfair\tvalue\tfrom\t20% |  |  |
| adverse\tchange | $16 | $11 |
| Effective\tdiscount\trate | 7.70% | 7.92% |
| Decline\tin\tfair\tvalue\tfrom\t10% |  |  |
| adverse\tchange | $12 | $9 |
| Decline\tin\tfair\tvalue\tfrom\t20% |  |  |
| adverse\tchange | $23 | $18 |

# Table	108:	Residential	Mortgage	Loan	Servicing	Assets	–	Key	Valuation Assumptions

| Dollars	in	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Fair\tvalue | $650 | $647 |
| Weighted-average\tlife\t(years) | 4.3 | 3.6 |
| Weighted-average\tconstant |  |  |
| prepayment\trate | 18.78% | 22.10% |
| Decline\tin\tfair\tvalue\tfrom\t10% |  |  |
| adverse\tchange | $45 | $44 |
| Decline\tin\tfair\tvalue\tfrom\t20% |  |  |
| adverse\tchange | $85 | $84 |
| Weighted-average\toption\tadjusted |  |  |
| spread | 11.15% | 11.77% |
| Decline\tin\tfair\tvalue\tfrom\t10%\nadverse\tchange | $26 | $25 |
| Decline\tin\tfair\tvalue\tfrom\t20% |  |  |
| adverse\tchange | $49 | $48 |

Fees	from	mortgage	and	other	loan	servicing	comprised	of	contractually specified	servicing	fees,	including	late	fees	and	ancillary	fees,	follows:

# Table	109:	Fees	from	Mortgage	and	Other	Loan	Servicing

We	also	generate	servicing	fees	from	fee-based	activities	provided	to	others	for which	we	do	not	have	an	associated	servicing	asset.

Fees	from	commercial	MSRs,	residential	MSRs	and	other	loan	servicing	are reported	on	our	Consolidated	Income	Statement	in	the	line	items	Corporate services,	Residential	mortgage,	and	Consumer	services,	respectively.

# NOTE	11	PREMISES,	EQUIPMENT	AND	LEASEHOLD IMPROVEMENTS

Premises,	equipment	and	leasehold	improvements,	stated	at	cost	less accumulated	depreciation	and	amortization,	were	as	follows:

# Table	110:	Premises,	Equipment	and	Leasehold	Improvements

| December	31	-	in	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| Land | $782 | $690 |
| Buildings | 2,218 | 1,955 |
| Equipment | 4,590 | 3,894 |
| Leasehold\timprovements | 747 | 651 |
| Total | 8,337 | 7,190 |
| Accumulated\tdepreciation\tand\tamortization | (2,909) | (2,546) |
| Net\tbook\tvalue | $5,428 | $4,644 |

Depreciation	expense	on	premises,	equipment	and	leasehold	improvements	and amortization	expense,	primarily	for	capitalized	internally	developed	software, was	as	follows:

# Table	111:	Depreciation	and	Amortization	Expense

We	lease	certain	facilities	and	equipment	under	agreements	expiring	at	various dates	through	the	year	2081.	We	account	for	these	as	operating	leases.	Rental expense	on	such	leases	was	as	follows:

# Table	112:	Lease	Rental	Expense

| Year	ended	December	31<br>in	millions | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Continuing\toperations: | $405 | $357 | $379 |
| Discontinued\toperations: |  |  | 10 |

Required	minimum	annual	rentals	that	we	owe	on	noncancelable	leases	having initial	or	remaining	terms	in	excess	of	one	year	totaled	$2.8	billion	at December	31,	2012.	Future	minimum	annual	rentals	are	as	follows: •	2013:	$397	million,

# NOTE	12	TIME	DEPOSITS

Total	time	deposits	of	$26.1	billion	at	December	31,	2012	have	future contractual	maturities,	including	related	purchase	accounting	adjustments,	as follows:

# NOTE	13	BORROWED	FUNDS

Total	borrowed	funds	of	$40.9	billion	at	December	31,	2012	have	contractually scheduled	repayments,	including	related	purchase	accounting	adjustments,	as follows:

Included	in	the	following	table	are	balances	of	long-term	bank	notes	along	with senior	and	subordinated	notes	and	the	related	contractual	rates	and	maturity dates	at	December	31,	2012.

# Table	113:	Bank	Notes,	Senior	Debt	and	Subordinated	Debt

| Dollars	in	millions | Carrying	Value | Stated	Rate | Maturity |
| :--- | :--- | :--- | :--- |
| Bank\tnotes | $1,574 | zero-4.66% | \t2013-2043 |
| Senior\tdebt | 8,855 | \t.51%-6.70% | \t2014-2022 |
| Bank\tnotes\tand\tsenior |  |  |  |
| debt | $10,429 |  |  |
| Subordinated\tdebt |  |  |  |
| Junior | $343 | \t.88%-7.00% | \t2028-2037 |
| Other | 6,956 | \t.66%-8.11% | \t2013-2022 |
| Subordinated\tdebt | $7,299 |  |  |

Included	in	outstandings	for	the	senior	and	subordinated	notes	in	the	table	above are	basis	adjustments	of	$505	million	and	$579	million,	respectively,	related	to fair	value	accounting	hedges	as	of	December	31,	2012.

The	$343	million	of	junior	subordinated	debt	included	in	the	above	table represents	the	carrying	value	of	debt	redeemable	prior	to	maturity.	This	carrying value	and	related	net	discounts	of	$59	million	comprise	the	$402	million principal	amount	of	junior	subordinated	debentures	that	are	discussed	in	Note	14 Capital	Securities	of	Subsidiary	Trusts	and	Perpetual	Trust	Securities.

Included	in	borrowed	funds	are	FHLB	borrowings	of	$9.4	billion	at December	31,	2012,	which	are	collateralized	by	a	blanket	lien	on	residential mortgage	and	other	real	estate-related	loans.	FHLB	advances	of	$5.0	billion	have scheduled	maturities	of	less	than	one	year.	The	remainder	of	the	FHLB borrowings	have	balances	that	will	mature	from	2013	–	2030,	with	interest	rates ranging	from	zero	to	7.33%.

# NOTE	14	CAPITAL	SECURITIES	OF	SUBSIDIARY	TRUSTS	AND	PERPETUAL	TRUST	SECURITIES

At	December	31,	2012,	PNC	had	$402	million	in	principal	amount	of	outstanding	junior	subordinated	debentures	associated	with	$390	million	of	trust	preferred securities	that	were	issued	by	various	subsidiary	statutory	trusts.	These	trust	preferred	securities	represented	non-voting	preferred	beneficial	interests	in	the	assets	of	the following	Trusts:

# Table	114:	Capital	Securities	of	Subsidiary	Trusts

All	of	these	Trusts	are	wholly	owned	finance	subsidiaries	of	PNC.	In	the	event of	certain	changes	or	amendments	to	regulatory	requirements	or	federal	tax rules,	the	capital	securities	are	redeemable	in	whole.	In	accordance	with	GAAP, the	financial	statements	of	the	Trusts	are	not	included	in	PNC's	consolidated financial	statements.

At	December	31,	2012,	PNC's	junior	subordinated	debt	with	a	carrying	value	of $343	million	represented	debentures	purchased	and	held	as	assets	by	the	Trusts and	redeemable	prior	to	maturity.

The	obligations	of	the	respective	parent	of	each	Trust,	when	taken	collectively, are	the	equivalent	of	a	full	and	unconditional	guarantee	of	the	obligations	of	such Trust	under	the	terms	of	the	Capital	Securities.	Such	guarantee	is	subordinate	in right	of	payment	in	the	same	manner	as	other	junior	subordinated	debt.	There	are certain	restrictions	on	PNC's	overall	ability	to	obtain	funds	from	its	subsidiaries. For	additional	disclosure	on	these	funding	restrictions,	including

an	explanation	of	dividend	and	intercompany	loan	limitations,	see	Note	22 Regulatory	Matters.	PNC	is	also	subject	to	restrictions	on	dividends	and	other provisions	potentially	imposed	under	the	Exchange	Agreements	with	PNC Preferred	Funding	Trust	II	and	Trust	III	as	described	in	the	following	Perpetual Trust	Securities	section	and	to	other	provisions	similar	to	or	in	some	ways	more restrictive	than	those	potentially	imposed	under	those	agreements.	In	April 2012,	we	redeemed	all	of	the	underlying	capital	securities	of	PNC	Capital	Trust D	and	Yardville	Capital	Trust	III.	The	capital	securities	redeemed	totaled	$306 million.	In	May	2012,	we	redeemed	all	of	the	underlying	capital	securities	of National	City	Capital	Trust	III,	totaling	$500	million.	In	July	2012,	we	redeemed all	of	the	underlying	capital	securities	of	PNC	Capital	Trust	E	and	National	City Trust	IV.	The	capital	securities	redeemed	totaled	$968	million.	In	December 2012,	we	redeemed	all	of	the	underlying	capital	securities	of	National	City Preferred	Capital	Trust	I.	The	capital	securities	totaled	$500	million.

# Table	115:	Perpetual	Trust	Securities	Summary

We	have	issued	certain	hybrid	capital	vehicles	that	currently	qualify	as	capital	for	regulatory	purposes.

| Date | Entity	(a) | Private	Placement	(b) | Rate | Trust	Issuing	Notes	(c) |
| :--- | :--- | :--- | :--- | :--- |
| February\t2008 | PNC\tPreferred\tFunding\tLLC | $375\tmillion | \t\t 8.700% | \t PNC\tPreferred\tFunding\tTrust\tIII\t(d) |
| March\t2007 | PNC\tPreferred\tFunding\tLLC | $500\tmillion | \t\t 6.113%\t\t PNC\tPreferred\tFunding\tTrust\tII\t(e) | \t\t 6.113%\t\t PNC\tPreferred\tFunding\tTrust\tII\t(e) |
| December\t2006 | PNC\tPreferred\tFunding\tLLC | $500\tmillion | \t\t 6.517% | \t PNC\tPreferred\tFunding\tTrust\tI\t(f) |
| (a) |  |  |  |  |

(a) PNC	REIT	Corp.	owns	100%	of	the	LLC's	common	voting	securities.	As	a	result,	the	LLC	is	an	indirect	subsidiary	of	PNC	and	is	consolidated	on	PNC's	Consolidated	Balance	Sheet.

(b) Fixed-to-Floating	Rate	Non-cumulative	Exchangeable	Perpetual	Trust	Securities.

(c) The	trusts	investments	in	the	LLC's	preferred	securities	are	characterized	as	a	noncontrolling	interest	on	our	Consolidated	Balance	Sheet.	This	noncontrolling	interest	totaled	approximately	$1.3	billion	at December	31,	2012.

(d) Automatically	exchangeable	into	a	share	of	Series	J	Non-Cumulative	Perpetual	Preferred	Stock	of	PNC	(Series	J	Preferred	Stock).

(e) Automatically	exchangeable	into	a	share	of	Series	I	Non-Cumulative	Perpetual	Preferred	Stock	of	PNC	(Series	I	Preferred	Stock).

(f) Automatically	exchangeable	into	a	share	of	Series	F	Non-Cumulative	Perpetual	Preferred	Stock	of	PNC	Bank,	N.A.	(PNC	Bank	Preferred	Stock).

These	Trust	Securities	are	automatically	exchangeable	as	set	forth	above	under certain	conditions	relating	to	the	capitalization	or	the	financial	condition	of	PNC Bank,	N.A.	and	upon	the	direction	of	the	Office	of	the	Comptroller	of	the Currency.

See	Note	27	Subsequent	Events	for	additional	discussion	of	our	February	2013 announcement	of	our	March	2013	redemption	of	REIT	Preferred	Securities issued	by	PNC	Preferred	Funding	Trust	III.

# Table	116:	Summary	of	Replacement	Capital	Covenants	of	Perpetual	Trust	Securities

(a) As	of	December	31,	2012,	each	of	the	Trust	I	RCC	and	the	Trust	II	RCC	are	for	the	benefit	of	holders	of	our	$200	million	of	Floating	Rate	Junior	Subordinated	Notes	issued	in	June	1998.

# Table	117:	Summary	of	Contractual	Commitments	of	Perpetual	Trust	Securities

PNC	Preferred	Funding	Trust	III	(b) If	full	dividends	are	not	paid	in	a	dividend	period,	PNC	will	not	declare	or	pay	dividends	with	respect	to,	or	redeem, purchase	or	acquire,	any	of	its	equity	capital	securities	during	the	next	succeeding	dividend	period.	(e)

(a) Contractual	commitments	made	by	PNC	Bank,	N.A.

(b) Contractual	commitments	made	by	PNC.

(c) Applies	to	the	applicable	Trust	Securities	and	the	LLC	Preferred	Securities.

(d) Except:	(i)	in	the	case	of	dividends	payable	to	subsidiaries	of	PNC	Bank,	N.A.,	to	PNC	Bank,	N.A.	or	another	wholly-owned	subsidiary	of	PNC	Bank,	N.A.	or	(ii)	in	the	case	of	dividends	payable	to	persons	that are	not	subsidiaries	of	PNC	Bank,	N.A.,	to	such	persons	only	if,	(A)	in	the	case	of	a	cash	dividend,	(PNC	has	first	irrevocably	committed	to	contribute	amounts	at	least	equal	to	such	cash	dividend	or	(B)	in	the	case of	in-kind	dividends	payable	by	PNC	REIT	Corp.,	PNC	has	committed	to	purchase	such	in-kind	dividend	from	the	applicable	PNC	REIT	Corp.	holders	in	exchange	for	a	cash	payment	representing	the	market value	of	such	in-kind	dividend,	and	PNC	has	committed	to	contribute	such	in-kind	dividend	to	PNC	Bank,	N.A.

(e) Except	for:	(i)	purchases,	redemptions	or	other	acquisitions	of	shares	of	capital	stock	of	PNC	in	connection	with	any	employment	contract,	benefit	plan	or	other	similar	arrangement	with	or	for	the	benefit	of employees,	officers,	directors	or	consultants,	(ii)	purchases	of	shares	of	common	stock	of	PNC	pursuant	to	a	contractually	binding	requirement	to	buy	stock	existing	prior	to	the	commencement	of	the	extension period,	including	under	a	contractually	binding	stock	repurchase	plan,	(iii)	any	dividend	in	connection	with	the	implementation	of	a	shareholders'	rights	plan,	or	the	redemption	or	repurchase	of	any	rights	under	any such	plan,	(iv)	as	a	result	of	any	exchange	or	conversion	of	any	class	or	series	of	PNC's	capital	stock	for	any	other	class	or	series	of	PNC's	capital	stock,	(v)	the	purchase	of	fractional	interests	in	shares	of	PNC capital	stock	pursuant	to	the	conversion	or	exchange	provisions	of	such	stock	or	the	security	being	converted	or	exchanged	or	(vi)	any	stock	dividends	paid	by	PNC	where	the	dividend	stock	is	the	same	stock	as that	on	which	the	dividend	is	being	paid.

# NOTE	15	EMPLOYEE	BENEFIT	PLANS

# PENSION	AND	POSTRETIREMENT	PLANS

We	have	a	noncontributory,	qualified	defined	benefit	pension	plan	covering	eligible	employees.	Benefits	are	determined	using	a	cash	balance	formula	where	earnings credits	are	a	percentage	of	eligible	compensation.	Earnings	credit	percentages	for	plan	participants	on	December	31,	2009	are	frozen	at	their	level	earned	to	that	point. Earnings	credits	for	all	employees	who	become	participants	on	or	after	January	1,	2010	are	a	flat	3%	of	eligible	compensation.	Participants	at	December	31,	2009	earn interest	based	on	30-year	Treasury	securities	with	a	minimum	rate,	while	new	participants	on	or	after	January	1,	2010	are	not	subject	to	the	minimum	rate.	Pension contributions	are	based	on	an	actuarially	determined	amount	necessary	to	fund	total	benefits	payable	to	plan	participants.

We	also	maintain	nonqualified	supplemental	retirement	plans	for	certain	employees	and	provide	certain	health	care	and	life	insurance	benefits	for	qualifying	retired employees	(postretirement	benefits)	through	various	plans.	The	nonqualified	pension	and	postretirement	benefit	plans	are	unfunded.	The	Company	reserves	the	right	to terminate	plans	or	make	plan	changes	at	any	time.

PNC	acquired	RBC	Bank	(USA)	during	the	first	quarter	of	2012.	RBC	Bank	(USA)	employees	began	to	participate	in	PNC's	pension	and	401(k)	plans	upon	meeting	the plan's	eligibility	requirements.	Some	grandfathered	employees	will	also	be	eligible	for	PNC's	postretirement	medical	benefits.

We	use	a	measurement	date	of	December	31	for	plan	assets	and	benefit	obligations.	A	reconciliation	of	the	changes	in	the	projected	benefit	obligation	for	qualified pension,	nonqualified	pension	and	postretirement	benefit	plans	as	well	as	the	change	in	plan	assets	for	the	qualified	pension	plan	follows.

# Table	118:	Reconciliation	of	Changes	in	Projected	Benefit	Obligation	and	Change	in	Plan	Assets

|  | Pension |  | Pension |  | Benefits |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31\t(Measurement\tDate)\t–\tin\tmillions | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 |
| Accumulated\tbenefit\tobligation\tat\tend\tof\tyear | $4,432 | $4,095 | $357 | $289 |  |  |
| Projected\tbenefit\tobligation\tat\tbeginning\tof\tyear | $4,188 | $3,803 | $297 | $290 | $397 | $393 |
| National\tCity\tacquisition |  |  |  |  | (1) | 2 |
| RBC\tBank\t(USA)\tacquisition |  |  | 52 |  | 13 |  |
| Service\tcost | 101 | 94 | 4 | 4 | 5 | 5 |
| Interest\tcost | 191 | 196 | 14 | 13 | 16 | 19 |
| Actuarial\t(gains)/losses\tand\tchanges\tin\tassumptions | 358 | 304 | 28 | 15 | (18) | (1) |
| Participant\tcontributions |  |  |  |  | 13 | 13 |
| Federal\tMedicare\tsubsidy\ton\tbenefits\tpaid |  |  |  |  | 2 | 2 |
| Early\tRetirement\tReinsurance\tProgram\tpayments\treceived |  |  |  |  | 1 | 1 |
| Benefits\tpaid | (326) | (209) | (33) | (25) | (34) | (37) |
| Projected\tbenefit\tobligation\tat\tend\tof\tyear | $4,512 | $4,188 | $362 | $297 | $394 | $397 |
| Fair\tvalue\tof\tplan\tassets\tat\tbeginning\tof\tyear | $3,805 | $3,991 |  |  |  |  |
| Actual\treturn\ton\tplan\tassets | 530 | 23 |  |  |  |  |
| Employer\tcontribution |  |  | $33 | $25 | $19 | $22 |
| Participant\tcontributions |  |  |  |  | 13 | 13 |
| Federal\tMedicare\tsubsidy\ton\tbenefits\tpaid |  |  |  |  | 2 | 2 |
| Benefits\tpaid | (326) | (209) | (33) | (25) | (34) | (37) |
| Fair\tvalue\tof\tplan\tassets\tat\tend\tof\tyear | $4,009 | $3,805 |  |  |  |  |
| Funded\tstatus | $(503) | $(383) | $(362) | $(297) | $(394) | $(397) |
| Amounts\trecognized\ton\tthe\tconsolidated\tbalance\tsheet |  |  |  |  |  |  |
| Current\tliability |  |  | (36) | (30) | (28) | (34) |
| Noncurrent\tliability | (503) | (383) | (326) | (267) | (366) | (363) |
| Liabilities\trecognized\ton\tthe\tconsolidated\tbalance\tsheet | $(503) | $(383) | $(362) | $(297) | $(394) | $(397) |
| Amounts\trecognized\tin\taccumulated\tother\tcomprehensive\tincome\tconsist\tof: |  |  |  |  |  |  |
| Prior\tservice\tcost\t(credit) | $(31) | $(39) | $1 | $2 | $(9) | $(11) |
| Net\tactuarial\tloss | \t 1,110 | \t 1,087 | 93 | 71 | 37 | 54 |
| Amount\trecognized\tin\tAOCI | $1,079 | $1,048 | $94 | $73 | $28 | $43 |

At	December	31,	2012,	the	fair	value	of	the	qualified	pension	plan	assets	was less	than	both	the	accumulated	benefit	obligation	and	the	projected	benefit obligation.	The	nonqualified	pension	plan	is	unfunded.	Contributions	from	PNC and,	in	the	case	of	postretirement	benefit	plans,	participant	contributions	cover all	benefits	paid	under	the	nonqualified	pension	plan	and	postretirement	benefit plans.	The	postretirement	plan	provides	benefits	to	certain	retirees	that	are	at least	actuarially	equivalent	to	those	provided	by	Medicare	Part	D	and accordingly,	we	receive	a	federal	subsidy	as	shown	in	the	table.

In	March	2010,	the	Patient	Protection	and	Affordable	Care	Act	(PPACA)	was enacted.	Key	aspects	of	the	PPACA	which	are	reflected	in	our	financials	include the	excise	tax	on	high-cost	health	plans	beginning	in	2018	and	fees	for	the Transitional	Reinsurance	Program	and	the	Patient-Centered	Outcomes	Fund. These	provisions	did	not	have	a	significant	effect	on	our	postretirement	medical liability	or	cost.	The	Early	Retiree	Reinsurance	Program	(ERRP)	was	established by	the	PPACA.	Congress	appropriated	funding	of	$5	billion	for	this	temporary ERRP	to	provide	financial	assistance	to	employers,	unions,	and	state	and	local governments	to	help	them	maintain	coverage	for	early	retirees	age	55	and	older who	are	not	yet	eligible	for	Medicare,	including	their	spouses,	surviving	spouses, and	dependents.	PNC	submitted	an	application	for	reimbursement	from	the ERRP	in	2012	for	the	2010	and	2011	plan	years.	In	2012,	PNC	received reimbursement	of	$.9	million	related	to	the	2011	plan	year	and	received reimbursement	of	$.6	million	related	to	the	2010	plan	year.

# PNC	PENSION	PLAN	ASSETS

Assets	related	to	our	qualified	pension	plan	(the	Plan)	are	held	in	trust	(the Trust).	Effective	July	1,	2011,	the	trustee	is	The	Bank	of	New	York	Mellon; prior	to	that	date,	the	trustee	was	PNC	Bank,	National	Association,	(PNC	Bank, N.A).	The	Trust	is	exempt	from	tax	pursuant	to	section	501(a)	of	the	Internal Revenue	Code	(the	Code).	The	Plan	is	qualified	under	section	401(a)	of	the Code.	Plan	assets	consist	primarily	of	listed	domestic	and	international	equity securities,	U.S.	government	and	agency	securities,	corporate	debt	securities,	and real	estate	investments.	Plan	assets	as	of	December	31,	2011	included	$11 million	of	PNC	common	stock.	The	Plan	held	no	PNC	common	stock	as	of December	31,	2012.

The	PNC	Financial	Services	Group,	Inc.	Administrative	Committee	(the Administrative	Committee)	adopted	the	Pension	Plan	Investment	Policy Statement,	including	target	allocations	and	allowable	ranges,	on	August	13, 2008.	On	February	25,	2010,	the	Administrative	Committee	amended	the investment	policy	to	include	a	dynamic	asset	allocation	approach	and	also updated	target	allocation	ranges	for	certain	asset	categories.	On	March	1,	2011, the	Administrative	Committee	amended	the	investment	policy	to	update	the target	allocation	ranges	for	certain	asset	categories.

The	long-term	investment	strategy	for	pension	plan	assets	is	to: •	Meet	present	and	future	benefit	obligations	to	all	participants	and beneficiaries,

•	Cover	reasonable	expenses	incurred	to	provide	such	benefits,	including expenses	incurred	in	the	administration	of	the	Trust	and	the	Plan, •	Provide	sufficient	liquidity	to	meet	benefit	and	expense	payment requirements	on	a	timely	basis,	and

•	Provide	a	total	return	that,	over	the	long	term,	maximizes	the	ratio	of trust	assets	to	liabilities	by	maximizing	investment	return,	at	an appropriate	level	of	risk.

Under	the	dynamic	asset	allocation	strategy,	scenarios	are	outlined	in	which	the Administrative	Committee	has	the	ability	to	make	short	to	intermediate	term asset	allocation	shifts	based	on	factors	such	as	the	Plan's	funded	status,	the Administrative	Committee's	view	of	return	on	equities	relative	to	long	term expectations,	the	Administrative	Committee's	view	on	the	direction	of	interest rates	and	credit	spreads,	and	other	relevant	financial	or	economic	factors	which would	be	expected	to	impact	the	ability	of	the	Trust	to	meet	its	obligation	to beneficiaries.	Accordingly,	the	allowable	asset	allocation	ranges	have	been updated	to	incorporate	the	flexibility	required	by	the	dynamic	allocation	policy.

The	Plan's	specific	investment	objective	is	to	meet	or	exceed	the	investment policy	benchmark	over	the	long	term.	The	investment	policy	benchmark compares	actual	performance	to	a	weighted	market	index,	and	measures	the contribution	of	active	investment	management	and	policy	implementation.	This investment	objective	is	expected	to	be	achieved	over	the	long	term	(one	or	more market	cycles)	and	is	measured	over	rolling	five-year	periods.	Total	return calculations	are	time-weighted	and	are	net	of	investment-related	fees	and expenses.

The	asset	strategy	allocations	for	the	Trust	at	the	end	of	2012	and	2011,	and	the target	allocation	range	at	the	end	of	2012,	by	asset	category,	are	as	follows.

# Table	119:	Asset	Strategy	Allocations

The	asset	category	represents	the	allocation	of	Plan	assets	in	accordance	with	the investment	objective	of	each	of	the	Plan's	investment	managers.	Certain domestic	equity	investment	managers	utilize	derivatives	and	fixed	income securities	as	described	in	their	Investment	Management	Agreements	to	achieve their	investment	objective	under	the	Investment	Policy	Statement.	Other investment	managers	may	invest	in	eligible	securities	outside	of	their	assigned asset	category	to	meet	their	investment	objectives.	The	actual	percentage	of	the fair	value	of	total	Plan	assets	held	as	of	December	31,	2012	for	equity	securities, fixed	income	securities,	real	estate	and	all	other	assets	are	59%,	33%,	5%,	and 3%,	respectively.

We	believe	that,	over	the	long	term,	asset	allocation	is	the	single	greatest determinant	of	risk.	Asset	allocation	will	deviate	from	the	target	percentages	due to	market	movement,	cash	flows,	investment	manager	performance	and implementation	of	shifts	under	the	dynamic	allocation	policy.	Material deviations	from	the	asset	allocation	targets	can	alter	the	expected	return	and	risk of	the	Trust.	On	the	other	hand,	frequent	rebalancing	to	the	asset	allocation targets	may	result	in	significant	transaction	costs,	which	can	impair	the	Trust's ability	to	meet	its	investment	objective.	Accordingly,	the	Trust	portfolio	is periodically	rebalanced	to	maintain	asset	allocation	within	the	target	ranges described	above.

In	addition	to	being	diversified	across	asset	classes,	the	Trust	is	diversified within	each	asset	class.	Secondary	diversification	provides	a	reasonable	basis	for the	expectation	that	no	single	security	or	class	of	securities	will	have	a disproportionate	impact	on	the	total	risk	and	return	of	the	Trust.

The	Administrative	Committee	selects	investment	managers	for	the	Trust	based on	the	contributions	that	their	respective	investment	styles	and	processes	are expected	to	make	to	the	investment	performance	of	the	overall	portfolio.	The managers'	Investment	Objectives	and	Guidelines,	which	are	a	part	of	each manager's	Investment	Management	Agreement,	document	performance expectations	and	each	manager's	role	in	the	portfolio.	The	Administrative Committee	uses	the	Investment	Objectives	and	Guidelines	to	establish,	guide, control	and	measure	the	strategy	and	performance	for	each	manager.

The	purpose	of	investment	manager	guidelines	is	to:

•	Establish	the	investment	objective	and	performance	standards	for	each manager,

•	Provide	the	manager	with	the	capability	to	evaluate	the	risks	of	all financial	instruments	or	other	assets	in	which	the	manager's	account	is invested,	and

•	Prevent	the	manager	from	exposing	its	account	to	excessive	levels	of risk,	undesired	or	inappropriate	risk,	or	disproportionate	concentration of	risk.

The	guidelines	also	indicate	which	investments	and	strategies	the	manager	is permitted	to	use	to	achieve	its	performance	objectives,	and	which	investments and	strategies	it	is	prohibited	from	using.

Where	public	market	investment	strategies	may	include	the	use	of	derivatives and/or	currency	management,	language	is	incorporated	in	the	managers' guidelines	to	define	allowable	and	prohibited	transactions	and/or	strategies. Derivatives	are	typically	employed	by	investment	managers	to	modify risk/return	characteristics	of	their	portfolio(s),	implement	asset	allocation changes	in	a	cost-effective	manner,	or	reduce	transaction	costs.	Under	the managers'	investment	guidelines,	derivatives	may	not	be	used	solely	for speculation	or	leverage.	Derivatives	are	to	be	used	only	in	circumstances	where they	offer	the	most	efficient	economic	means	of	improving	the	risk/reward profile	of	the	portfolio.

BlackRock	receives	compensation	for	providing	investment	management services.	The	Asset	Management	Group	business	segment	also	receives compensation	for	payor-related	services,	and	received	compensation	for providing	trustee/custodian	services	prior	to	July	1,	2011.	Compensation	for such	services	is	paid	by	PNC	and	was	not	significant	for	2012,	2011	or	2010. Non-affiliate	service	providers	for	the	Trust	are	compensated	from	plan	assets.

As	further	described	in	Note	9	Fair	Value,	GAAP	establishes	the	framework	for measuring	fair	value,	including	a	hierarchy	used	to	classify	the	inputs	used	in measuring	fair	value.

A	description	of	the	valuation	methodologies	used	for	assets	measured	at	fair value	follows.	There	have	been	no	significant	changes	in	the	valuation methodologies	used	at	December	31,	2012	compared	with	those	in	place	at December	31,	2011:

•	Money	market	and	mutual	funds	are	valued	at	the	net	asset	value	of	the shares	held	by	the	pension	plan	at	year	end.

•	U.S.	government	and	agency	securities,	corporate	debt,	common	stock and	preferred	stock	are	valued	at	the	closing	price	reported	on	the active	market	on	which	the	individual	securities	are	traded.	If	quoted market	prices	are	not	available	for	the	specific	security,	then	fair	values are	estimated	by	using	pricing	models	or	quoted	prices	of	securities with	similar	characteristics.	Such	securities	are	generally	classified within	level	2	of	the	valuation	hierarchy	but	may	be	a	level	3 depending	on	the	level	of	liquidity	and	activity	in	the	market	for	the security.

•	The	collective	trust	fund	investments	are	valued	based	upon	the	units of	such	collective	trust	fund	held	by	the	plan	at	year	end	multiplied	by the	respective	unit	value.	The	unit	value	of	the	collective	trust	fund	is based	upon	significant	observable	inputs,	although	it	is	not	based	upon quoted	marked	prices	in	an	active	market.	The	underlying	investments of	the	collective	trust	funds	consist	primarily	of	equity	securities,	debt obligations,	short-term	investments,	and	other	marketable	securities. Due	to	the	nature	of	these	securities,	there	are	no	unfunded commitments	or	redemption	restrictions.

•	Limited	partnerships	are	valued	by	investment	managers	based	on recent	financial	information	used	to	estimate	fair	value.	Other investments	held	by	the	pension	plan	include	derivative	financial instruments	and	real	estate,	which	are	recorded	at	estimated	fair	value as	determined	by	third-party	appraisals	and	pricing	models,	and	group annuity	contracts,	which	are	measured	at	fair	value	by	discounting	the related	cash	flows	based	on	current	yields	of	similar	instruments	with comparable	durations	considering	the	credit-worthiness	of	the	issuer.

These	methods	may	result	in	fair	value	calculations	that	may	not	be	indicative	of net	realizable	values	or	future	fair	values.	Furthermore,	while	the	pension	plan believes	its	valuation	methods	are	appropriate	and	consistent	with	other	market participants,	the	use	of	different	methodologies	or	assumptions	to	determine	the fair	value	of	certain	financial	instruments	could	result	in	a	different	fair	value measurement	at	the	reporting	date.

The	following	table	sets	forth	by	level,	within	the	fair	value	hierarchy,	the	Plan's	assets	at	fair	value	as	of	December		31,	2012	and	2011.

# Table	120:	Pension	Plan	Assets	–	Fair	Value	Hierarchy

|  |  |  |  | Fair	Value	Measurements	Using: |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Quoted\tPrices\tin | Significant |  |
|  |  | Active\tMarkets | Other | Significant |
|  | December\t31 | For\tIdentical | Observable | Unobservable |
|  | 2012 | Assets | Inputs | Inputs |
| In\tmillions | Fair\tValue | (Level\t1) | (Level\t2) | (Level\t3) |
| Cash | $1 | $1 |  |  |
| Money\tmarket\tfunds | 92 | 90 | $2 |  |
| US\tgovernment\tand\tagency\tsecurities | 449 | 184 | 265 |  |
| Corporate\tdebt\t(a) | 875 |  | 853 | $22 |
| Common\tstock | 984 | 982 | 2 |  |
| Preferred\tstock | 15 |  | 15 |  |
| Mutual\tfunds | 20 | 4 | 16 |  |
| Interest\tin\tCollective\tFunds\t(b) | 1,415 |  | 1,327 | 88 |
| Limited\tpartnerships | 128 | 1 |  | 127 |
| Other | 30 | 2 | 28 |  |
| Total | $4,009 | $1,264 | $2,508 | $237 |

|  |  |  | Fair	Value	Measurements	Using: | Fair	Value	Measurements	Using: |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Quoted\tPrices\tin | Significant |  |
|  |  | Active\tMarkets | Other | Significant |
|  | December\t31 | For\tIdentical | Observable | Unobservable |
|  | 2011 | Assets | Inputs | Inputs |
| In\tmillions | Fair\tValue | (Level\t1) | (Level\t2) | (Level\t3) |
| Cash | $2 | $2 |  |  |
| Money\tmarket\tfunds | 137 | 135 | $2 |  |
| US\tgovernment\tand\tagency\tsecurities | 395 | 114 | 281 |  |
| Corporate\tdebt\t(a) | 799 |  | 722 | $77 |
| Common\tstock | 933 | 933 |  |  |
| Preferred\tStock | 13 | 9 | 2 | 2 |
| Mutual\tfunds | 37 |  | 37 |  |
| Interest\tin\tCollective\tFunds\t(b) | 1,314 |  | 937 | 377 |
| Limited\tpartnerships | 130 |  |  | 130 |
| Other | 45 | 2 | 16 | 27 |
| Total | $3,805 | $1,195 | $1,997 | $613 |
| (a) |  |  |  |  |

(a) Corporate	debt	includes	$115	million	and	$106	million	of	non-agency	mortgage-backed	securities	as	of	December	31,	2012	and	2011,	respectively.

(b) The	benefit	plans	own	commingled	funds	that	invest	in	equity	and	fixed	income	securities.	The	commingled	funds	that	invest	in	equity	securities	seek	to	mirror	the	performance	of	the	S&P	500	Index,	Russell	3000 Index,	Morgan	Stanley	Capital	International	ACWI	X	US	Index,	and	the	Dow	Jones	U.S.	Select	Real	Estate	Securities	Index.	The	commingled	fund	that	holds	fixed	income	securities	invests	in	domestic	investment grade	securities	and	seeks	to	mimic	the	performance	of	the	Barclays	Aggregate	Bond	Index.

During	2012	there	were	transfers	of	corporate	and	preferred	stocks	from	Level	1	to	Level	2	and	transfers	of	mutual	funds	from	Level	2	to	Level	1.	These	transfers	were not	material	and	have	been	reflected	as	if	they	were	transfers	between	levels.

The	following	summarizes	changes	in	the	fair	value	of	the	pension	plan's	Level	3	assets	during	2012	and	2011.

# Table	121:	Rollforward	of	Pension	Plan	Level	3	Assets

| In	millions | Interest	in<br>Collective<br>Funds | Corporate<br>Debt | Limited<br>Partnerships | Other | Preferred<br>Stock |
| :--- | :--- | :--- | :--- | :--- | :--- |
| January\t1,\t2012 | $377 | $77 | $130 | $27 | $2 |
| Net\trealized\tgain/(loss)\ton\tsale\tof\tinvestments | 5 | (28) | 2 |  |  |
| Net\tunrealized\tgain/(loss)\ton\tassets\theld\tat\tend\tof\tyear | (3) | 20 | (13) |  |  |
| Purchases | 89 | 30 | 30 |  |  |
| Sales | (12) | (65) | (22) |  | (2) |
| Transfers\tinto\tLevel\t3 |  | 2 |  |  |  |
| Transfers\tfrom\tLevel\t3 | (368) | (14) |  | (27) |  |
| December\t31,\t2012 | $88 | $22 | $127 | $– | $– |

| In	millions | Interest	in<br>Collective<br>Funds | Corporate<br>Debt | Limited<br>Partnerships | Other | Preferred<br>Stock |
| :--- | :--- | :--- | :--- | :--- | :--- |
| January\t1,\t2011 | $370 | $353 | $75 | $ 31 |  |
| Net\trealized\tgain/(loss)\ton\tsale\tof\tinvestments | (1) | (9) | (6) | 3 |  |
| Net\tunrealized\tgain/(loss)\ton\tassets\theld\tat\tend\tof\tyear | (19) | (12) | 55 | (4) | $(1) |
| Purchases | 27 | 29 | 16 | 4 | 3 |
| Sales |  | (184) | (10) | (7) |  |
| Transfers\tinto\tLevel\t3 |  | 30 |  |  |  |
| Transfers\tfrom\tLevel\t3 |  | (130) |  |  |  |
| December\t31,\t2011 | $377 | $77 | $130 | $ 27 | $2 |

The	transfers	of	Interest	in	Collective	Funds	from	Level	3	into	Level	2	during	2012	resulted	from	changes	in	significant	observable	inputs	as	to	the	level	of	trading activity	in	these	funds.	The	transfers	of	Corporate	Debt	and	Other	investments	into	and	from	Level	3	were	due	to	changes	in	significant	observable	inputs	during	2012.

The	following	table	provides	information	regarding	our	estimated	future	cash	flows	related	to	our	various	plans.

# Table	122:	Estimated	Cash	Flows

|  | Qualified | Nonqualified | Gross	PNC | Due	to	Medicare |
| :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Pension | Pension | Benefit\tPayments | Part\tD\tSubsidy |
| Estimated\t2013\temployer\tcontributions |  | $36 | $29 | $1 |
| Estimated\tfuture\tbenefit\tpayments |  |  |  |  |
| 2013 | $263 | $36 | $29 | $1 |
| 2014 | 277 | 35 | 34 | 1 |
| 2015 | 284 | 32 | 30 | 1 |
| 2016 | 290 | 30 | 30 | 1 |
| 2017 | 303 | 29 | 30 | 1 |
| 2018\t–\t2022 | 1,598 | 121 | 137 | 3 |

The	qualified	pension	plan	contributions	are	deposited	into	the	Trust,	and	the	qualified	pension	plan	benefit	payments	are	paid	from	the	Trust.	Although	the	Plan	is underfunded	as	of	December	31,	2012,	PNC's	required	qualified	pension	contribution	for	2013	is	expected	to	be	zero	based	on	the	funding	calculations	under	the Pension	Protection	Act	of	2006.	For	the	other	plans,	total	contributions	and	the	benefit	payments	are	the	same	and	represent	expected	benefit	amounts,	which	are	paid from	general	assets.	Postretirement	benefits	are	net	of	participant	contributions.

The	components	of	net	periodic	benefit	cost/(income)	and	other	amounts	recognized	in	Other	comprehensive	income	(OCI)	were	as	follows.

# Table	123:	Components	of	Net	Periodic	Benefit	Cost

|  |  |  |  |  |  |  |  | Postretirement | Postretirement |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Qualified\tPension\tPlan | Qualified\tPension\tPlan | Qualified\tPension\tPlan | Nonqualified\tPension\tPlan | Nonqualified\tPension\tPlan | Nonqualified\tPension\tPlan |  | Benefits | Benefits |
| Year\tended\tDecember\t31\t–\tin\tmillions | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | 2012 | 2011 | \t2010 |
| Net\tperiodic\tcost\tconsists\tof: |  |  |  |  |  |  |  |  |  |
| Service\tcost | $101 | $94 | $102 | $4 | $4 | $3 | $5 | $7 | \t$5 |
| Interest\tcost | 191 | 196 | 203 | 14 | 13 | 14 | 16 | \t 19 | \t\t 20 |
| Expected\treturn\ton\tplan\tassets | (284) | (298) | (285) |  |  |  |  |  |  |
| Amortization\tof\tprior\tservice\tcost/(credit) | (8) | (8) | (8) |  |  |  | (3) | (3) | (3) |
| Amortization\tof\tactuarial\t(gain)/loss | 89 | 19 | 34 | 6 | 5 | 3 | (1) |  |  |
| Net\tperiodic\tcost\t(benefit) | 89 | 3 | 46 | 24 | 22 | 20 | 17 | \t 23 | \t\t 22 |
| Other\tchanges\tin\tplan\tassets\tand\tbenefit\tobligations\trecognized\tin\tOther\tcomprehensive |  |  |  |  |  |  |  |  |  |
| income: |  |  |  |  |  |  |  |  |  |
| Amortization\tof\tprior\tservice\t(cost)/credit | 8 | 8 | 8 |  |  |  | 3 | 3 | 3 |
| Current\tyear\tactuarial\tloss/(gain) | 112 | 579 | (99) | 27 | 15 | 11 | (18) | (1)\t\t\t 21 | (1)\t\t\t 21 |
| Amortization\tof\tactuarial\tgain/(loss) | (89) | (19) | (34) | (6) | (5) | (3) |  | (1) |  |
| Total\trecognized\tin\tOCI | 31 | 568 | (125) | 21 | 10 | 8 | (15) | 1 | \t\t 24 |
| Total\trecognized\tin\tnet\tperiodic\tcost\tand\tOCI | $120 | $571 | $(79) | $45 | $32 | $28 | $2 | $24 | \t$46 |

The	weighted-average	assumptions	used	(as	of	the	beginning	of	each	year)	to determine	the	net	periodic	costs	shown	above	were	as	follows.

# Table	124:	Net	Periodic	Costs	–	Assumptions

The	weighted-average	assumptions	used	(as	of	the	end	of	each	year)	to	determine year	end	obligations	for	pension	and	postretirement	benefits	were	as	follows.

# Table	125:	Other	Pension	Assumptions

|  |  | At	December	31 |
| :--- | :--- | :--- |
| Year\tended\tDecember\t31 | 2012 | 2011 |
| Discount\trate |  |  |
| Qualified\tpension | \t 3.80% | \t 4.60% |
| Nonqualified\tpension | \t 3.45 | \t 4.20 |
| Postretirement\tbenefits | \t 3.60 | \t 4.40 |
| Rate\tof\tcompensation\tincrease\t(average) | \t 4.00 | \t 4.00 |
| Assumed\thealth\tcare\tcost\ttrend\trate |  |  |
| Initial\ttrend | \t 8.00 | \t 8.00 |
| Ultimate\ttrend | \t 5.00 | \t 5.00 |

The	discount	rates	are	determined	independently	for	each	plan	by	comparing	the expected	future	benefits	that	will	be	paid	under	each	plan	with	yields	available on	high	quality	corporate	bonds	of	similar	duration.	For	this	analysis,	10%	of bonds	with	the	highest	yields	and	40%	with	the	lowest	yields	were	removed	from the	bond	universe.

The	expected	return	on	plan	assets	is	a	long-term	assumption	established	by considering	historical	and	anticipated	returns	of	the	asset	classes	invested	in	by the	pension	plan	and	the	allocation	strategy	currently	in	place	among	those classes.	We	review	this	assumption	at	each	measurement	date	and	adjust	it	if warranted.	This	assumption	will	be	changed	from	7.75%	to	7.50%	for determining	2013	net	periodic	cost.

The	health	care	cost	trend	rate	assumptions	shown	in	the	preceding	tables	relate only	to	the	postretirement	benefit	plans.	A	one-percentage-point	change	in assumed	health	care	cost	trend	rates	would	have	the	following	effects.

# Table	126:	Effect	of	One	Percent	Change	in	Assumed	Health	Care	Cost

| In	millions | Increase | Decrease |
| :--- | :--- | :--- |
| Effect\ton\ttotal\tservice\tand\tinterest\tcost | $1 | $(1) |
| Effect\ton\tyear\tend\tbenefit\tobligation | $11 | $(11) |

Unamortized	actuarial	gains	and	losses	and	prior	service	costs	and	credits	are recognized	in	AOCI	each	December	31,	with	amortization	of	these	amounts through	net	periodic	benefit	cost.	The	estimated	amounts	that	will	be	amortized in	2013	are	as	follows.

# Table	127:	Estimated	Amortization	of	Unamortized	Actuarial	Gains	and Losses	–	2013

|  |  |  | 2013	Estimate |
| :--- | :--- | :--- | :--- |
| Year\tended\tDecember\t31\nIn\tmillions | Qualified\nPension | Nonqualified\nPension | Postretirement\nBenefits |
| Prior\tservice\t(credit) | $(8) |  | $(3) |
| Net\tactuarial\tloss | 86 | $8 |  |
| Total | $78 | $8 | $(3) |

# DEFINED	CONTRIBUTION	PLANS

We	have	a	qualified	defined	contribution	plan	that	covers	all	eligible	PNC employees.	Effective	January	1,	2010,	the	employer	matching	contribution under	the	PNC	Incentive	Savings	Plan	was	reduced	from	a	maximum	of	6%	to 4%	of	a	participant's	eligible	compensation.	Certain	changes	to	the	plan's eligibility	and	vesting	requirements	also	became	effective	January	1,	2010. Employees	hired	prior	to	January	1,	2010	became	100%	vested	immediately, while	employees	hired	on	or	after	January	1,	2010	become	vested	100%	after three	years	of	service.	Employee	benefits	expense	related	to	defined	contribution plans	was	$111	million	in	2012,	$105	million	in	2011	and	$90	million	in	2010. We	measure	employee	benefits	expense	as	the	fair	value	of	the	shares	and	cash contributed	to	the	plan	by	PNC.

Under	the	PNC	Incentive	Savings	Plan,	employee	contributions	up	to	4%	of eligible	compensation	as	defined	by	the	plan	are	matched	100%,	subject	to	Code limitations.	PNC	will	contribute	a	minimum	matching	contribution	of	$2,000	to employees	who	contribute	at	least	4%	of	eligible	compensation	every	pay	period during	the	year.	This	amount	is	prorated	for	certain	employees,	including	part- time	employees	and	those	who	are	eligible	for	the	company	match	for	less	than	a full	year.	Additionally,	for	participants	who	meet	the	annual	deferral	limit	or	the annual	compensation	limit	before	the	end	of	a	calendar	year,	PNC	makes	a	true- up	matching	contribution	to	ensure	that	such	participants	receive	the	full company	match	available.	Effective	January	1,	2012,	in	the	case	of	both	the minimum	and	true-up	matching	contributions,	eligible	employees	must	remain employed	on	the	last	day	of	the	applicable	plan	year	in	order	to	receive	the contribution.	Minimum	matching	contributions	made	with	respect	to	the	2011 and	2012	plan	years	are	immediately	100%	vested.	The	plan	is	a	401(k)	Plan	and includes	a	stock	ownership	(ESOP)	feature.	Employee	contributions	are	invested in	a	number	of	mutual	fund	investment	options	available	under	the	plan	at	the direction	of	the	employee.	Although	employees	were	also	historically	permitted to	direct	the	investment	of	their	contributions	into	the	PNC	common	stock	fund, this	fund	was	frozen	to	future	investments	of	such	contributions	effective January	1,	2010.	All	shares	of	PNC	common	stock	held	by	the	plan	are	part	of the	ESOP.	Effective	January	1,	2011,	employer	matching	contributions	were made	in	cash.

We	also	maintain	a	nonqualified	supplemental	savings	plan	for	certain employees,	known	as	The	PNC	Financial	Services	Group,	Inc.	Supplemental Incentive	Savings	Plan.	Effective	January	1,	2012,	the	Supplemental	Incentive Savings	Plan	was	frozen	to	new	participants	and	for	any	deferrals	of	amounts earned	on	or	after	such	date.	It	was	replaced	by	a	new	plan	called	The	PNC Financial	Services	Group,	Inc.	Deferred	Compensation	and	Incentive	Plan (DCIP).

# NOTE	16	STOCK	BASED	COMPENSATION	PLANS

We	have	long-term	incentive	award	plans	(Incentive	Plans)	that	provide	for	the granting	of	incentive	stock	options,	nonqualified	stock	options,	stock appreciation	rights,	incentive	shares/performance	units,	restricted	stock, restricted	share	units,	other	share-based	awards	and	dollar-denominated	awards to	executives	and,	other	than	incentive	stock	options,	to	non-employee	directors. Certain	Incentive	Plan	awards	may	be	paid	in	stock,	cash	or	a	combination	of stock	and	cash.	We	typically	grant	a	substantial	portion	of	our	stock-based compensation	awards	during	the	first	quarter	of	the	year.	As	of	December	31, 2012,	no	stock	appreciation	rights	were	outstanding.	Total	compensation	expense recognized	related	to	all	share-based	payment	arrangements	during	2012,	2011 and	2010	was	approximately	$101	million,	$103	million	and	$107	million, respectively.

# NONQUALIFIED	STOCK	OPTIONS

Options	are	granted	at	exercise	prices	not	less	than	the	market	value	of	common stock	on	the	grant	date.	Generally,	options	become	exercisable	in	installments after	the	grant	date.	No	option	may	be	exercisable	after	10	years	from	its	grant date.	Payment	of	the	option	exercise	price	may	be	in	cash	or	by	surrendering shares	of	common	stock	at	market	value	on	the	exercise	date.	The	exercise	price may	be	paid	in	previously	owned	shares.

# OPTION	PRICING	ASSUMPTIONS

For	purposes	of	computing	stock	option	expense,	we	estimated	the	fair	value	of stock	options	primarily	by	using	the	Black-Scholes	option-pricing	model.	Option pricing	models	require	the	use	of	numerous	assumptions,	many	of	which	are subjective.

We	used	the	following	assumptions	in	the	option	pricing	models	to	determine 2012,	2011	and	2010	option	expense:

•	The	risk-free	interest	rate	is	based	on	the	US	Treasury	yield	curve, •	The	dividend	yield	typically	represents	average	yields	over	the previous	three-year	period,	however	starting	with	the	grants	made	after the	first	quarter	of	2009,	we	used	a	yield	indicative	of	our	current dividend	rate,

•	Volatility	is	measured	using	the	fluctuation	in	month-end	closing	stock prices	over	a	period	which	corresponds	with	the	average	expected option	life,	but	in	no	case	less	than	a	five-year	period,	and •	The	expected	life	assumption	represents	the	period	of	time	that	options granted	are	expected	to	be	outstanding	and	is	based	on	a	weighted- average	of	historical	option	activity.

# Table	128:	Option	Pricing	Assumptions

# Table	129:	Stock	Option	Rollforward

|  | PNC |  | Converted	From<br>National	City | Converted	From<br>National	City |  | Total |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  |  |  | Weighted- |  |
|  |  | Weighted- | Weighted- | Weighted- |  | Weighted- | Average |  |
|  |  | Average | Average | Average |  | Average | Remaining | Aggregate |
| Year\tended\tDecember\t31,\t2012 |  | Exercise | Exercise | Exercise |  | Exercise | Contractual | Intrinsic |
| In\tthousands,\texcept\tweighted-average\tdata | Shares | Price | Shares | Price | Shares | Price | Life | Value |
| Outstanding,\tJanuary\t1 | \t17,490 | $54.48 | \t 949 | $684.40 | \t18,439 | $86.90 |  |  |
| Granted | 461 | 60.70 |  |  | 461 | 60.70 |  |  |
| Exercised | \t(2,496) | 47.48 |  |  | \t(2,496) | 47.48 |  |  |
| Cancelled | (638) | 62.24 | \t(202) | \t 696.36 | (840) | \t 214.70 |  |  |
| Outstanding,\tDecember\t31 | \t14,817 | $55.52 | \t 747 | $681.16 | \t15,564 | $85.55 | \t5.0\tyears | \t\t\t\t $105,159 |
| Vested\tand\texpected\tto\tvest,\tDecember\t31\t(a) | \t14,793 | $55.51 | \t 747 | $681.16 | \t15,540 | $85.59 | \t5.0\tyears\t\t\t\t $105,158 | \t5.0\tyears\t\t\t\t $105,158 |
| Exercisable,\tDecember\t31 | \t12,012 | $54.15 | \t 747 | $681.16 | \t12,759 | $90.86 | \t4.6\tyears | \t\t\t\t $102,539 |
| (a)\nAdjusted\tfor\testimated\tforfeitures\ton\tunvested\toptions. |  |  |  |  |  |  |  |  |

(a) Adjusted	for	estimated	forfeitures	on	unvested	options.

To	determine	stock-based	compensation	expense,	the	grant-date	fair	value	is applied	to	the	options	granted	with	a	reduction	for	estimated	forfeitures.	We recognize	compensation	expense	for	stock	options	on	a	straight-line	basis	over the	pro	rata	vesting	period.

Cash	received	from	option	exercises	under	all	Incentive	Plans	for	2012,	2011 and	2010	was	approximately	$118	million,	$41	million	and	$15	million, respectively.	The	actual	tax	benefit	realized	for	tax	deduction	purposes	from option	exercises	under	all	Incentive	Plans	for	2012,	2011	and	2010	was approximately	$41	million,	$14	million	and	$5	million,	respectively.

There	were	no	options	granted	in	excess	of	market	value	in	2012,	2011	or	2010. Shares	of	common	stock	available	during	the	next	year	for	the	granting	of options	and	other	awards	under	the	Incentive	Plans	were	29,192,854	at December	31,	2012.	Total	shares	of	PNC	common	stock	authorized	for	future issuance	under	equity	compensation	plans	totaled	30,537,674	shares	at December	31,	2012,	which	includes	shares	available	for	issuance	under	the Incentive	Plans	and	the	Employee	Stock	Purchase	Plan	(ESPP)	as	described below.

During	2012,	we	issued	approximately	1.7	million	shares	from	treasury	stock	in connection	with	stock	option	exercise	activity.	As	with	past	exercise	activity,	we currently	intend	to	utilize	primarily	treasury	stock	for	any	future	stock	option exercises.	Awards	granted	to	non-employee	directors	in	2012,	2011	and	2010 include	25,620,	27,090	and	29,040	deferred	stock	units,	respectively,	awarded under	the	Outside	Directors	Deferred	Stock	Unit	Plan.	A	deferred	stock	unit	is	a phantom	share	of	our	common	stock,	which	requires	liability	accounting treatment	until	such	awards	are	paid	to	the	participants	as	cash.	As	there	are	no vesting	or	service	requirements	on	these	awards,	total	compensation	expense	is recognized	in	full	on	awarded	deferred	stock	units	on	the	date	of	grant.

# INCENTIVE/PERFORMANCE	UNIT	SHARE	AWARDS	AND	RESTRICTED STOCK/UNIT	AWARDS

The	fair	value	of	nonvested	incentive/performance	unit	share	awards	and restricted	stock/unit	awards	is	initially	determined	based	on	prices	not	less	than the	market	value	of	our	common	stock	price	on	the	date	of	grant.	The	value	of certain	incentive/performance	unit	share	awards	is	subsequently	remeasured based	on	the	achievement	of	one	or	more	financial	and	other	performance	goals generally	over	a	three-year	period.	The	Personnel	and	Compensation	Committee of	the	Board	of	Directors	approves	the	final	award	payout	with	respect	to incentive/performance	unit	share	awards.	Restricted	stock/unit

awards	have	various	vesting	periods	generally	ranging	from	36	months	to	60 months.

Beginning	in	2012,	we	incorporated	several	risk-related	performance	changes	to certain	incentive	compensation	programs.	In	addition	to	achieving	certain financial	performance	metrics	relative	to	our	peers,	the	final	payout	amount	will be	subject	to	a	negative	adjustment	if	PNC	fails	to	meet	certain	risk-related performance	metrics	as	specified	in	the	award	agreement.	However,	the	P&CC has	the	discretion	to	reduce	any	or	all	of	this	negative	adjustment	under	certain circumstances.	These	awards	have	a	three-year	performance	period	and	are payable	in	either	stock	or	a	combination	of	stock	and	cash.	Additionally, performance-based	restricted	share	units	were	granted	in	2012	to	certain	of	our executives	in	lieu	of	stock	options,	with	generally	the	same	terms	and	conditions as	the	2011	awards	of	the	same.

The	weighted-average	grant-date	fair	value	of	incentive/performance	unit	share awards	and	restricted	stock/unit	awards	granted	in	2012,	2011	and	2010	was $60.68,	$63.25	and	$54.59	per	share,	respectively.	We	recognize	compensation expense	for	such	awards	ratably	over	the	corresponding	vesting	and/or performance	periods	for	each	type	of	program.

# Table	130:	Nonvested	Incentive/Performance	Unit	Share	Awards	and Restricted	Stock/Unit	Awards	–	Rollforward

| Shares	in	thousands | Nonvested<br>Incentive/<br>Performance<br>Unit	Shares | Weighted-<br>Average<br>Grant<br>Date	Fair<br>Value | Nonvested<br>Restricted<br>Stock/<br>Unit<br>Shares | Weighted-<br>Average<br>Grant<br>Date	Fair<br>Value |
| :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2011 | 830 | $61.68 | 2,512 | $54.87 |
| Granted | 465 | 60.70 | 1,534 | 60.67 |
| Vested | (100) | 64.21 | (831) | 45.47 |
| Forfeited | (76) | 60.27 | (154) | 60.51 |
| December\t31,\t2012 | 1,119 | $61.14 | 3,061 | $60.04 |

In	the	chart	above,	the	unit	shares	and	related	weighted-average	grant-date	fair value	of	the	incentive/performance	awards	exclude	the	effect	of	dividends	on	the underlying	shares,	as	those	dividends	will	be	paid	in	cash.

At	December	31,	2012,	there	was	$86	million	of	unrecognized	deferred compensation	expense	related	to	nonvested	share-based	compensation arrangements	granted	under	the	Incentive	Plans.	This	cost	is	expected	to	be recognized	as	expense	over	a	period	of	no	longer	than	five	years.	The	total	fair value	of	incentive/performance	unit	share	and	restricted	stock/unit	awards	vested during	2012,	2011	and	2010	was	approximately	$55	million,	$52	million	and $39	million,	respectively.

# LIABILITY	AWARDS

We	granted	cash-payable	restricted	share	units	to	certain	executives.	The	grants were	made	primarily	as	part	of	an	annual	bonus	incentive	deferral	plan.	While there	are	time-based	and	other	vesting	criteria,	there	are	no	market	or performance	criteria	associated	with	these	awards.	Compensation	expense recognized	related	to	these	awards	was	recorded	in	prior	periods	as	part	of annual	cash	bonus	criteria.	As	of	December	31,	2012,	there	were	804,389	of these	cash-payable	restricted	share	units	outstanding.

A	summary	of	all	nonvested,	cash-payable	restricted	share	unit	activity	follows:

# Table	131:	Nonvested	Cash-Payable	Restricted	Share	Unit	–	Rollforward

| In	thousands | Nonvested<br>Cash-<br>Payable<br>Restricted<br>Share<br>Units | Aggregate<br>Intrinsic<br>Value |
| :--- | :--- | :--- |
| Outstanding\tat\tDecember\t31,\t2011 | 1,052 |  |
| Granted | 543 |  |
| Vested | (652) |  |
| Forfeited | (23) |  |
| Outstanding\tat\tDecember\t31,\t2012 | 920 | $53,631 |

The	total	of	all	share-based	liability	awards	paid	out	during	2012,	2011	and	2010 was	approximately	$39	million,	$34	million	and	$9	million,	respectively.

# EMPLOYEE	STOCK	PURCHASE	PLAN

As	of	December	31,	2012,	our	ESPP	had	approximately	1.3	million	shares available	for	issuance.	Full-time	employees	with	six	months	and	part-time employees	with	12	months	of	continuous	employment	with	a	participating	PNC entity	are	eligible	to	participate	in	the	ESPP	at	the	commencement	of	the	next six-month	offering	period.	Eligible	participants	may	purchase	our	common	stock at	95%	of	the	fair	market	value	on	the	last	day	of	each	six-month	offering	period. No	charge	to	earnings	is	recorded	with	respect	to	the	ESPP.

# Table	132:	Employee	Stock	Purchase	Plan	–	Summary

# BLACKROCK	LTIP	AND	EXCHANGE	AGREEMENTS

BlackRock	adopted	the	2002	LTIP	program	to	help	attract	and	retain	qualified professionals.	At	that	time,	PNC	agreed	to	transfer	up	to	4	million	shares	of BlackRock	common	stock	to	fund	a	portion	of	the	2002	LTIP	program	and future	LTIP

programs	approved	by	BlackRock's	board	of	directors,	subject	to	certain conditions	and	limitations.	Approximately	1.1	million	shares	of	BlackRock common	stock	were	transferred	by	PNC	and	distributed	to	LTIP	participants	in connection	with	the	2002	LTIP	program.

As	previously	reported,	PNC	entered	into	an	Exchange	Agreement	with BlackRock	on	December	26,	2008.	On	that	same	date,	BlackRock	entered	into an	Exchange	Agreement	with	Merrill	Lynch	in	anticipation	of	the	consummation of	the	merger	of	Bank	of	America	Corporation	and	Merrill	Lynch	that	occurred on	January	1,	2009.	The	PNC	and	Merrill	Lynch	Exchange	Agreements restructured	PNC's	and	Merrill	Lynch's	respective	ownership	of	BlackRock common	and	preferred	equity.	The	transactions	that	resulted	from	our	agreement restructured	PNC's	ownership	of	BlackRock	equity	without	altering,	to	any meaningful	extent,	PNC's	economic	interest	in	BlackRock.	PNC	continues	to	be subject	to	the	limitations	on	its	voting	rights	in	its	existing	agreements	with BlackRock.

The	exchange	contemplated	by	these	agreements	was	completed	on	February	27, 2009.	On	that	date,	PNC's	obligation	to	deliver	its	BlackRock	common	shares	to BlackRock	under	LTIP	programs	was	also	replaced	with	an	obligation	to	deliver shares	of	BlackRock's	Series	C	Preferred	Stock	as	part	of	the	exchange agreement.	PNC	acquired	2.9	million	shares	of	Series	C	Preferred	Stock	from BlackRock	in	exchange	for	common	shares.

For	the	2007	LTIP	programs,	BlackRock	achieved	the	earnings	performance goals	as	required	and	the	awards	vested	on	September	29,	2011.	On	that	date, PNC	transferred	approximately	1.3	million	shares	of	BlackRock	Series	C Preferred	Stock	to	BlackRock.	Upon	transfer,	Other	assets	and	Other	liabilities on	our	Consolidated	Balance	Sheet	were	reduced	by	$172	million,	representing the	fair	value	of	the	shares	transferred.

PNC	accounts	for	its	BlackRock	Series	C	Preferred	Stock	at	fair	value,	which offsets	the	impact	of	marking-to-market	the	obligation	to	deliver	these	shares	to BlackRock.	The	fair	value	of	the	BlackRock	Series	C	Preferred	Stock	is	included on	our	Consolidated	Balance	Sheet	in	the	caption	Other	assets.	Additional information	regarding	the	valuation	of	the	BlackRock	Series	C	Preferred	Stock is	included	in	Note	9	Fair	Value.

# NOTE	17	FINANCIAL	DERIVATIVES

We	use	derivative	financial	instruments	(derivatives)	primarily	to	help	manage exposure	to	interest	rate,	market	and	credit	risk	and	reduce	the	effects	that changes	in	interest	rates	may	have	on	net	income,	fair	value	of	assets	and liabilities,	and	cash	flows.	We	also	enter	into	derivatives	with	customers	to facilitate	their	risk	management	activities.

Derivatives	represent	contracts	between	parties	that	usually	require	little	or	no initial	net	investment	and	result	in	one	party	delivering	cash	or	another	type	of asset	to	the	other	party	based	on	a	notional	amount	and	an	underlying	as specified	in	the	contract.	Derivative	transactions	are	often	measured	in	terms	of notional	amount,	but	this	amount	is	generally	not	exchanged	and	it	is	not recorded	on	the	balance	sheet.	The	notional	amount	is	the	basis	to	which	the underlying	is	applied	to	determine	required	payments	under	the	derivative contract.	The	underlying	is	a	referenced	interest	rate	(commonly	LIBOR), security	price,	credit	spread	or	other	index.	Residential	and	commercial	real estate	loan	commitments	associated	with	loans	to	be	sold	also	qualify	as derivative	instruments.

All	derivatives	are	carried	on	our	Consolidated	Balance	Sheet	at	fair	value. Derivative	balances	are	presented	on	a	net	basis	taking	into	consideration	the effects	of	legally	enforceable	master	netting	agreements.	Cash	collateral exchanged	with	counterparties	is	also	netted	against	the	applicable	derivative	fair values.

Further	discussion	on	how	derivatives	are	accounted	for	is	included	in	Note	1 Accounting	Policies.

# DERIVATIVES	DESIGNATED	IN	HEDGE	RELATIONSHIPS

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

# Fair	Value	Hedges

We	enter	into	receive-fixed,	pay-variable	interest	rate	swaps	to	hedge	changes	in the	fair	value	of	outstanding	fixed-rate	debt	and	borrowings	caused	by fluctuations	in	market	interest	rates.	The	specific	products	hedged	may	include bank	notes,	Federal	Home	Loan	Bank	borrowings,	and	senior	and	subordinated debt.	We	also	enter	into	pay-fixed,	receive-variable	interest	rate	swaps,	and	zero- coupon	swaps	to	hedge	changes	in	the

fair	value	of	fixed	rate	and	zero-coupon	investment	securities	caused	by fluctuations	in	market	interest	rates.	The	specific	products	hedged	include	US Treasury,	government	agency	and	other	debt	securities.	For	these	hedge relationships,	we	use	statistical	regression	analysis	to	assess	hedge	effectiveness at	both	the	inception	of	the	hedge	relationship	and	on	an	ongoing	basis.	There were	no	components	of	derivative	gains	or	losses	excluded	from	the	assessment of	hedge	effectiveness.

The	ineffective	portion	of	the	change	in	value	of	our	fair	value	hedge	derivatives resulted	in	net	losses	of	$54	million	for	2012	compared	with	net	losses	of	$17 million	for	2011	and	net	losses	of	$31	million	for	2010.

# Cash	Flow	Hedges

We	enter	into	receive-fixed,	pay-variable	interest	rate	swaps	to	modify	the interest	rate	characteristics	of	designated	commercial	loans	from	variable	to fixed	in	order	to	reduce	the	impact	of	changes	in	future	cash	flows	due	to	market interest	rate	changes.	For	these	cash	flow	hedges,	any	changes	in	the	fair	value	of the	derivatives	that	are	effective	in	offsetting	changes	in	the	forecasted	interest cash	flows	are	recorded	in	Accumulated	other	comprehensive	income	and	are reclassified	to	interest	income	in	conjunction	with	the	recognition	of	interest receipts	on	the	loans.	In	the	12	months	that	follow	December	31,	2012,	we expect	to	reclassify	from	the	amount	currently	reported	in	Accumulated	other comprehensive	income	net	derivative	gains	of	$264	million	pretax,	or	$171 million	after-tax,	in	association	with	interest	receipts	on	the	hedged	loans.	This amount	could	differ	from	amounts	actually	recognized	due	to	changes	in	interest rates,	hedge	de-designations,	and	the	addition	of	other	hedges	subsequent	to December	31,	2012.	The	maximum	length	of	time	over	which	forecasted	loan cash	flows	are	hedged	is	8	years.	We	use	statistical	regression	analysis	to	assess the	effectiveness	of	these	hedge	relationships	at	both	the	inception	of	the	hedge relationship	and	on	an	ongoing	basis.

We	also	periodically	enter	into	forward	purchase	and	sale	contracts	to	hedge	the variability	of	the	consideration	that	will	be	paid	or	received	related	to	the purchase	or	sale	of	investment	securities.	The	forecasted	purchase	or	sale	is consummated	upon	gross	settlement	of	the	forward	contract	itself.	As	a	result, hedge	ineffectiveness,	if	any,	is	typically	minimal.	Gains	and	losses	on	these forward	contracts	are	recorded	in	Accumulated	other	comprehensive	income	and are	recognized	in	earnings	when	the	hedged	cash	flows	affect	earnings.	In	the	12 months	that	follow	December	31,	2012,	we	expect	to	reclassify	from	the	amount currently	reported	in	Accumulated	other	comprehensive	income,	net	derivative gains	of	$78	million	pretax,	or	$51	million	after-tax,	as	adjustments	of	yield	on investment	securities.	The	maximum	length	of	time	we	are	hedging	forecasted purchases	is	three	months.	With	respect	to	forecasted	sale	of	securities,	there were	no	amounts	in	Accumulated	other	comprehensive	income	at	December	31, 2012.

There	were	no	components	of	derivative	gains	or	losses	excluded	from	the assessment	of	hedge	effectiveness	related	to	either	cash	flow	hedge	strategy.

During	2012	and	2011,	there	were	no	gains	or	losses	from	cash	flow	hedge derivatives	reclassified	to	earnings	because	it	became	probable	that	the	original forecasted	transaction	would	not	occur.	The	amount	of	cash	flow	hedge ineffectiveness	recognized	in	income	for	2012	and	2011	was	not	material	to PNC's	results	of	operations.

# Net	Investment	Hedges

We	enter	into	foreign	currency	forward	contracts	to	hedge	non-U.S.	Dollar (USD)	net	investments	in	foreign	subsidiaries	against	adverse	changes	in	foreign exchange	rates.	We	assess	whether	the	hedging	relationship	is	highly	effective	in achieving	offsetting	changes	in	the	value	of	the	hedge	and	hedged	item	by qualitatively	verifying	that	the	critical	terms	of	the	hedge	and	hedged	item	match at	the	inception	of	the	hedging	relationship	and	on	an	ongoing	basis.	There	were no	components	of	derivative	gains	or	losses	excluded	from	the	assessment	of	the hedge	effectiveness.

During	2012	and	2011,	there	was	no	net	investment	hedge	ineffectiveness.

Further	detail	regarding	the	notional	amounts,	fair	values	and	gains	and	losses recognized	related	to	derivatives	used	in	fair	value,	cash	flow,	and	net	investment hedge	strategies	is	presented	in	the	tables	that	follow.

# DERIVATIVES	NOT	DESIGNATED	IN	HEDGE	RELATIONSHIPS

We	also	enter	into	derivatives	that	are	not	designated	as	accounting	hedges	under GAAP.

The	majority	of	these	derivatives	are	used	to	manage	risk	related	to	residential and	commercial	mortgage	banking	activities	and	are	considered	economic hedges.	Although	these	derivatives	are	used	to	hedge	risk,	they	are	not designated	as	accounting	hedges	because	the	contracts	they	are	hedging	are typically	also	carried	at	fair	value	on	the	balance	sheet,	resulting	in	symmetrical accounting	treatment	for	both	the	hedging	instrument	and	the	hedged	item.

Our	residential	mortgage	banking	activities	consist	of	originating,	selling	and servicing	mortgage	loans.	Residential	mortgage	loans	that	will	be	sold	in	the secondary	market,	and	the	related	loan	commitments,	which	are	considered derivatives,	are	accounted	for	at	fair	value.	Changes	in	the	fair	value	of	the	loans and	commitments	due	to	interest	rate	risk	are	hedged	with	forward	contracts	to sell	mortgage-backed	securities,	as	well	as	US	Treasury	and	Eurodollar	futures and	options.	Gains	and	losses	on	the	loans	and	commitments	held	for	sale	and the	derivatives	used	to	economically	hedge	them	are	included	in	Residential mortgage	noninterest	income	on	the	Consolidated	Income	Statement.

We	typically	retain	the	servicing	rights	related	to	residential	mortgage	loans	that we	sell.	Residential	mortgage	servicing	rights	are	accounted	for	at	fair	value	with changes	in	fair	value	influenced	primarily	by	changes	in	interest	rates.

Derivatives	used	to	hedge	the	fair	value	of	residential	mortgage	servicing	rights include	interest	rate	futures,	swaps,	options	(including	caps,	floors,	and swaptions),	and	forward	contracts	to	purchase	mortgage-backed	securities.	Gains and	losses	on	residential	mortgage	servicing	rights	and	the	related	derivatives used	for	hedging	are	included	in	Residential	mortgage	noninterest	income.

Certain	commercial	mortgage	loans	held	for	sale	are	accounted	for	at	fair	value. These	loans,	and	the	related	loan	commitments,	which	are	considered derivatives,	are	accounted	for	at	fair	value.	In	addition	we	originate	loans	for	sale into	the	secondary	market	that	are	carried	at	the	lower	of	cost	or	fair	value. Derivatives	used	to	economically	hedge	these	loans	and	commitments	from changes	in	fair	value	due	to	interest	rate	risk	and	credit	risk	include	forward	loan sale	contracts,	interest	rate	swaps,	and	credit	default	swaps.	Gains	and	losses	on the	commitments,	loans	and	derivatives	are	included	in	Other	noninterest income.	Derivatives	used	to	economically	hedge	the	change	in	value	of commercial	mortgage	servicing	rights	include	interest	rate	swaps	and	futures. Gains	or	losses	on	these	derivatives	are	included	in	Corporate	Services noninterest	income.

The	residential	and	commercial	mortgage	loan	commitments	associated	with loans	to	be	sold	which	are	accounted	for	as	derivatives	are	valued	based	on	the estimated	fair	value	of	the	underlying	loan	and	the	probability	that	the	loan	will fund	within	the	terms	of	the	commitment.	The	fair	value	also	takes	into	account the	fair	value	of	the	embedded	servicing	right.

We	offer	derivatives	to	our	customers	in	connection	with	their	risk	management needs.	These	derivatives	primarily	consist	of	interest	rate	swaps,	interest	rate caps,	floors,	swaptions,	foreign	exchange	contracts,	and	equity	contracts.	We primarily	manage	our	market	risk	exposure	from	customer	transactions	by entering	into	a	variety	of	hedging	transactions	with	third-party	dealers.	Gains	and losses	on	customer-related	derivatives	are	included	in	Other	noninterest	income.

The	derivatives	portfolio	also	includes	derivatives	used	for	other	risk management	activities.	These	derivatives	are	entered	into	based	on	stated	risk management	objectives	and	include	credit	default	swaps	(CDS)	used	to	mitigate the	risk	of	economic	loss	on	a	portion	of	our	loan	exposure.	We	also	sold	loss protection	to	mitigate	the	net	premium	cost	and	the	impact	of	mark-to-market accounting	on	CDS	purchases	to	hedge	the	loan	portfolio.	The	fair	values	of these	derivatives	typically	are	based	on	related	credit	spreads.	Gains	and	losses on	the	derivatives	entered	into	for	other	risk	management	are	included	in	Other noninterest	income.

Included	in	the	customer,	mortgage	banking	risk	management,	and	other	risk management	portfolios	are	written	interest-rate	caps	and	floors	entered	into	with customers	and	for	risk	management	purposes.	We	receive	an	upfront	premium from	the	counterparty	and	are	obligated	to	make	payments	to	the	counterparty	if the	underlying	market	interest	rate	rises	above	or	falls	below	a	certain	level designated	in	the	contract.	Our	ultimate	obligation	under	written	options	is	based on	future	market	conditions	and	is	only	quantifiable	at	settlement.

In	connection	with	sales	of	a	portion	of	our	Visa	Class	B	common	shares	in 2012,	we	entered	into	swap	agreements	with	the	purchaser	in	which	we	will	make or	receive	payments	based	on	subsequent	changes	in	the	conversion	rate	of	Class B	into	Class	A	common	shares	and	to	make	payments	calculated	by	reference	to the	market	price	of	the	Class	A	common	shares.	The	fair	value	of	the	swaps, included	in	Other	liabilities	on	our	Consolidated	Balance	Sheet,	was	$43	million at	December	31,	2012.

Further	detail	regarding	the	derivatives	not	designated	in	hedging	relationships	is presented	in	the	tables	that	follow.

# DERIVATIVE	COUNTERPARTY	CREDIT	RISK

By	entering	into	derivative	contracts	we	are	exposed	to	credit	risk.	We	seek	to minimize	credit	risk	through	internal	credit	approvals,	limits,	monitoring procedures,	executing	master	netting	agreements	and	collateral	requirements.	We generally	enter	into	transactions	with	counterparties	that	carry	high	quality	credit ratings.	Nonperformance	risk	including	credit	risk	is	included	in	the determination	of	the	estimated	net	fair	value.

We	generally	have	established	agreements	with	our	major	derivative	dealer counterparties	that	provide	for	exchanges	of	marketable	securities	or	cash	to collateralize	either	party's	positions.	At	December	31,	2012,	we	held	cash,	U.S. government	securities	and	mortgage-backed	securities	totaling	$1.2	billion	under these	agreements.	We	pledged	cash	and	U.S.	government	securities	of	$978 million	under	these	agreements.	To	the	extent	not	netted	against	derivative	fair values	under	a	master	netting	agreement,	the	receivable	for	cash	pledged	is included	in	Other	assets	and	the	obligation	for	cash	held	is	included	in	Other borrowed	funds	on	our	Consolidated	Balance	Sheet.

The	credit	risk	associated	with	derivatives	executed	with	customers	is	essentially the	same	as	that	involved	in	extending	loans	and	is	subject	to	normal	credit policies.	We	may	obtain	collateral	based	on	our	assessment	of	the	customer's credit	quality.

We	periodically	enter	into	risk	participation	agreements	to	share	some	of	the credit	exposure	with	other	counterparties	related	to	interest	rate	derivative contracts	or	to	take	on	credit	exposure	to	generate	revenue.	We	will make/receive	payments	under	these	agreements	if	a	customer	defaults	on	its obligation	to	perform	under	certain	derivative	swap	contracts.	Risk	participation agreements	are	included	in	the	derivatives	table	that	follows.	Our	exposure related	to	risk	participations	where	we	sold	protection	is	discussed	in	the	Credit Derivatives	section	below.

# CONTINGENT	FEATURES

Some	of	PNC's	derivative	instruments	contain	provisions	that	require	PNC's debt	to	maintain	an	investment	grade	credit	rating	from	each	of	the	major	credit rating	agencies.	If	PNC's	debt	ratings	were	to	fall	below	investment	grade,	it would	be	in	violation	of	these	provisions,	and	the	counterparties	to	the	derivative instruments	could	request	immediate	payment	or	demand	immediate	and ongoing	full	overnight	collateralization	on	derivative	instruments	in	net	liability positions.

The	aggregate	fair	value	of	all	derivative	instruments	with	credit-risk-related contingent	features	that	were	in	a	net	liability	position	on	December	31,	2012 was	$1.1	billion	for	which	PNC	had	posted	collateral	of	$942	million	in	the normal	course	of	business.	The	maximum	amount	of	collateral	PNC	would	have been	required	to	post	if	the	credit-risk-related	contingent	features	underlying these	agreements	had	been	triggered	on	December	31,	2012,	would	be	an additional	$139	million.

# Table	133:	Derivatives	Total	Notional	or	Contractual	Amounts	and	Fair	Values

|  |  | December	31,	2012 |  |  | December	31,	2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Notional/\nContract\nAmount | Asset\nFair\nValue\t(a) | Liability\nFair\nValue\t(b) | Notional/\nContract\nAmount | Asset\nFair\nValue\t(a) | Liability\nFair\nValue\t(b) |
| Derivatives\tdesignated\tas\thedging\tinstruments\tunder\tGAAP |  |  |  |  |  |  |
| Interest\trate\tcontracts: |  |  |  |  |  |  |
| Cash\tflow\thedges: |  |  |  |  |  |  |
| Receive\tfixed\tswaps\t(c) | $13,428 | $504 |  | $13,902 | $529 |  |
| Forward\tpurchase\tcommitments | 250 | 1 |  | 2,733 | 43 |  |
| Subtotal | $13,678 | $505 |  | $16,635 | $572 |  |
| Fair\tvalue\thedges: |  |  |  |  |  |  |
| Receive\tfixed\tswaps\t(c) | $12,394 | $1,365 |  | $10,476 | $1,316 |  |
| Pay\tfixed\tswaps\t(c)\t(d) | 2,319 | 2 | $144 | 1,797 |  | $116 |
| Subtotal | $14,713 | $1,367 | $144 | $12,273 | $1,316 | $116 |
| Foreign\texchange\tcontracts: |  |  |  |  |  |  |
| Net\tinvestment\thedge | 879 |  | 8 | 326 |  |  |
| Total\tderivatives\tdesignated\tas\thedging\tinstruments | $29,270 | $1,872 | $152 | $29,234 | $1,888 | $116 |
| Derivatives\tnot\tdesignated\tas\thedging\tinstruments\tunder\tGAAP |  |  |  |  |  |  |
| Derivatives\tused\tfor\tresidential\tmortgage\tbanking\tactivities: |  |  |  |  |  |  |
| Residential\tmortgage\tservicing |  |  |  |  |  |  |
| Interest\trate\tcontracts: |  |  |  |  |  |  |
| Swaps | $59,607 | $2,204 | $ 1,790 | $98,406 | $3,127 | $2,673 |
| Swaptions | 5,890 | 209 | 119 | 10,312 | 216 | 167 |
| Futures\t(e) | 49,816 |  |  | 63,616 |  |  |
| Future\toptions | 34,350 | 5 | 2 | 8,000 |  |  |
| Mortgage-backed\tsecurities\tcommitments | 3,429 | 3 | 1 | 5,287 | 47 | 14 |
| Subtotal | $153,092 | $2,421 | $ 1,912 | $185,621 | $3,390 | $2,854 |
| Loan\tsales |  |  |  |  |  |  |
| Interest\trate\tcontracts: |  |  |  |  |  |  |
| Futures\t(e) | $702 |  |  | $634 |  |  |
| Bond\toptions | 900 | $3 |  | 1,250 | $3 |  |
| Mortgage-backed\tsecurities\tcommitments | 8,033 | 5 | $14 | 5,840 | 16 | $39 |
| Residential\tmortgage\tloan\tcommitments | 4,092 | 85 |  | 3,646 | 49 |  |
| Subtotal | $13,727 | $93 | $14 | $11,370 | $68 | $39 |
| Subtotal | $166,819 | $2,514 | $ 1,926 | $196,991 | $3,458 | $2,893 |
| Derivatives\tused\tfor\tcommercial\tmortgage\tbanking\tactivities |  |  |  |  |  |  |
| Interest\trate\tcontracts: |  |  |  |  |  |  |
| Swaps | $1,222 | $56 | $84 | $1,180 | $43 | $77 |
| Swaptions |  |  |  | 450 | 3 |  |
| Futures\t(e) | 2,030 |  |  |  |  |  |
| Commercial\tmortgage\tloan\tcommitments | 1,259 | 12 | 9 | 995 | 8 | 3 |
| Subtotal | $4,511 | $68 | $93 | $2,625 | $54 | $80 |
| Credit\tcontracts: |  |  |  |  |  |  |
| Credit\tdefault\tswaps | 95 | 2 |  | 95 | 5 |  |
| Subtotal | $4,606 | $70 | $93 | $2,720 | $59 | $80 |

|  | December	31,	2012 | December	31,	2012 |  |  | December	31,	2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Notional/\nContract\nAmount | Asset\nFair\nValue\t(a) | Liability\nFair\nValue\t(b) | Notional/\nContract\nAmount | Asset\nFair\nValue\t(a) | Liability\nFair\nValue\t(b) |
| Derivatives\tused\tfor\tcustomer-related\tactivities: |  |  |  |  |  |  |
| Interest\trate\tcontracts: |  |  |  |  |  |  |
| Swaps | $127,567 | $3,869 | $ 3,917 | $122,088 | $3,649 | $3,863 |
| Caps/floors\t–\tSold | 4,588 |  | 1 | 5,861 |  | 6 |
| Caps/floors\t–\tPurchased | 4,187 | 21 |  | 5,601 | 19 |  |
| Swaptions | 2,285 | 82 | 35 | 1,713 | 136 | 73 |
| Futures\t(e) | 9,113 |  |  | 6,982 |  |  |
| Mortgage-backed\tsecurities\tcommitments | 1,736 | 2 | 2 | 487 |  | 1 |
| Subtotal | $149,476 | $3,974 | $ 3,955 | $142,732 | $3,804 | $3,943 |
| Foreign\texchange\tcontracts | 10,737 | 126 | 112 | 11,920 | 231 | 222 |
| Equity\tcontracts | 105 | 1 | 3 | 184 | 5 | 8 |
| Credit\tcontracts: |  |  |  |  |  |  |
| Risk\tparticipation\tagreements | 3,530 | 5 | 6 | 3,259 | 6 | 5 |
| Subtotal | $163,848 | $4,106 | $ 4,076 | $158,095 | $4,046 | $4,178 |
| Derivatives\tused\tfor\tother\trisk\tmanagement\tactivities: |  |  |  |  |  |  |
| Interest\trate\tcontracts: |  |  |  |  |  |  |
| Swaps | $601 | $4 |  | $1,704 | $5 | $39 |
| Swaptions |  |  |  | 225 | 1 |  |
| Futures\t(e) | 274 |  |  | 1,740 |  |  |
| Subtotal | $875 | $4 |  | $3,669 | $6 | $39 |
| Foreign\texchange\tcontracts | 17 |  | $3 | 25 |  | 4 |
| Equity\tcontracts | 8 | 2 | 2 |  |  |  |
| Credit\tcontracts: |  |  |  |  |  |  |
| Credit\tdefault\tswaps | 15 |  |  | 209 | 6 |  |
| Other\tcontracts\t(f) | 898 |  | 358 | 386 |  | 296 |
| Subtotal | $1,813 | $6 | $363 | $4,289 | $12 | $339 |
| Total\tderivatives\tnot\tdesignated\tas\thedging\tinstruments | $337,086 | $6,696 | $ 6,458 | $362,095 | $7,575 | $7,490 |
| Total\tGross\tDerivatives | $366,356 | $8,568 | $ 6,610 | $391,329 | $9,463 | $7,606 |
| Less:\tLegally\tenforceable\tmaster\tnetting\tagreements |  | 5,107 | 5,107 |  | 6,052 | 6,052 |
| Less:\tCash\tcollateral |  | 1,031 | 914 |  | 1,051 | 843 |
| Total\tNet\tDerivatives |  | $2,430 | $589 |  | $2,360 | $711 |
| (a)\nIncluded\tin\tOther\tassets\ton\tour\tConsolidated\tBalance\tSheet. |  |  |  |  |  |  |

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

(c) The	floating	rate	portion	of	interest	rate	contracts	is	based	on	money-market	indices.	As	a	percent	of	notional	amount,	51%	were	based	on	1-month	LIBOR	and	49%	on	3-month	LIBOR	at	December	31,	2012 compared	with	57%	and	43%,	respectively,	at	December	31,	2011.

(d) Includes	zero-coupon	swaps.

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

(f) Includes	PNC's	obligation	to	fund	a	portion	of	certain	BlackRock	LTIP	programs,	a	forward	purchase	commitment	for	certain	loans	upon	conversion	from	a	variable	rate	to	a	fixed	rate,	and	the	swaps	entered	into in	connection	with	sales	of	a	portion	of	Visa	Class	B	common	shares	in	2012.

Gains	(losses)	on	derivative	instruments	and	related	hedged	items	follow:

# Table	134:	Derivatives	Designated	in	GAAP	Hedge	Relationships	–	Fair	Value	Hedges

|  |  |  | December	31,	2012 |  | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Gain\t(Loss) |  | Gain\t(Loss) |
|  |  |  | Gain | on\tRelated | Gain | on\tRelated |
|  |  |  | (Loss)\ton | Hedged | (Loss)\ton | Hedged |
|  |  |  | Derivatives | Items | Derivatives | Items |
|  |  |  | Recognized | Recognized | Recognized | Recognized |
| Year\tended |  |  | in\tIncome | in\tIncome | in\tIncome | in\tIncome |
| In\tmillions | Hedged\tItems | Location | Amount | Amount | Amount | Amount |
| Interest\trate\tcontracts | US\tTreasury\tand | Investment\tsecurities |  |  |  |  |
|  | Government\tAgencies | (interest\tincome) |  |  |  |  |
|  | Securities |  | $(26) | $23 | $(153) | $162 |
| Interest\trate\tcontracts | Other\tDebt\tSecurities | Investment\tsecurities |  |  |  |  |
|  |  | (interest\tincome) | (1) | 1 | (23) | 23 |
| Interest\trate\tcontracts | Subordinated\tdebt | Borrowed\tfunds |  |  |  |  |
|  |  | (interest\texpense) | (30) | (9) | 214 | (229) |
| Interest\trate\tcontracts | Bank\tnotes\tand | Borrowed\tfunds |  |  |  |  |
|  | senior\tdebt | (interest\texpense) | 68 | (80) | 265 | (276) |
| Total |  |  | $11 | $(65) | $303 | $(320) |

# Table	135:	Derivatives	Designated	in	GAAP	Hedge	Relationships	–	Cash	Flow	Hedges

| Year	ended	In	millions | Gain	(Loss)	on	Derivatives<br>Recognized	in	OCI<br>(Effective	Portion) | Gain	(Loss)	Reclassified	from<br>Accumulated	OCI	into	Income<br>(Effective	Portion) | Gain	(Loss)	Reclassified	from<br>Accumulated	OCI	into	Income<br>(Effective	Portion) | Gain	(Loss)	Recognized	in<br>Income	on	Derivatives<br>(Ineffective	Portion)	(a) | Gain	(Loss)	Recognized	in<br>Income	on	Derivatives<br>(Ineffective	Portion)	(a) |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amount | Location | Amount | Location | Amount |
| December\t31,\t2012\tInterest\trate\tcontracts | $312 | Interest\tincome | $456 | Interest\tincome |  |
|  |  | Noninterest\tincome | 76 |  |  |
| December\t31,\t2011\tInterest\trate\tcontracts |  |  |  | Interest |  |
|  | $805 | Interest\tincome | $455 | income |  |
|  |  | Noninterest |  |  |  |
|  |  | income | 43 |  |  |
| (a) |  |  |  |  |  |

(a) The	amount	of	cash	flow	hedge	ineffectiveness	recognized	in	income	was	not	material	for	the	periods	presented.

# Table	136:	Derivatives	Designated	in	GAAP	Hedge	Relationships	–	Net	Investment	Hedges	(a)

(a) The	loss	recognized	in	Accumulated	other	comprehensive	income	was	less	than	$1	million	as	of	December	31,	2011.

Gains	(losses)	on	derivative	instruments	not	designated	in	hedge	relationships:

# Table	137:	Gains	(Losses)	on	Derivatives	Not	Designated	as	Hedging	Instruments	under	GAAP

|  | Year	ended	December	31 |  |
| :--- | :--- | :--- |
| In\tmillions | 2012 | 2011 |
| Derivatives\tused\tfor\tresidential\tmortgage\tbanking\tactivities: |  |  |
| Residential\tmortgage\tservicing |  |  |
| Interest\trate\tcontracts | $269 | $571 |
| Loan\tsales |  |  |
| Interest\trate\tcontracts | 127 | 54 |
| Gains\t(losses)\tincluded\tin\tresidential\tmortgage\tbanking\tactivities\t(a) | $396 | $625 |
| Derivatives\tused\tfor\tcommercial\tmortgage\tbanking\tactivities: |  |  |
| Interest\trate\tcontracts\t(b)\t(c) | $35 | $5 |
| Credit\tcontracts\t(c) | (3) | 6 |
| Gains\t(losses)\tfrom\tcommercial\tmortgage\tbanking\tactivities | $32 | $11 |
| Derivatives\tused\tfor\tcustomer-related\tactivities: |  |  |
| Interest\trate\tcontracts | $106 | $78 |
| Foreign\texchange\tcontracts | 83 | 104 |
| Equity\tcontracts | (4) | (3) |
| Credit\tcontracts | (3) | 2 |
| Gains\t(losses)\tfrom\tcustomer-related\tactivities\t(c) | $182 | $181 |
| Derivatives\tused\tfor\tother\trisk\tmanagement\tactivities: |  |  |
| Interest\trate\tcontracts | $(11) | $(43) |
| Foreign\texchange\tcontracts | (2) | (2) |
| Credit\tcontracts | (1) | (1) |
| Other\tcontracts\t(d) | (94) | 11 |
| Gains\t(losses)\tfrom\tother\trisk\tmanagement\tactivities\t(c) | $(108) | $(35) |
| Total\tgains\t(losses)\tfrom\tderivatives\tnot\tdesignated\tas\thedging\tinstruments | $502 | $782 |
| (a)\nIncluded\tin\tResidential\tmortgage\tnoninterest\tincome. |  |  |

(a) Included	in	Residential	mortgage	noninterest	income.

(b) Included	in	Corporate	services	noninterest	income.

(c) Included	in	Other	noninterest	income.

(d) Includes	PNC's	obligation	to	fund	a	portion	of	certain	BlackRock	LTIP	programs,	a	forward	purchase	commitment	for	certain	loans	upon	conversion	from	a	variable	rate	to	a	fixed	rate,	and	the	swaps	entered	into in	connection	with	sales	of	a	portion	of	Visa	Class	B	common	shares	in	2012.

# CREDIT	DERIVATIVES

The	credit	derivative	underlying	is	based	on	the	credit	risk	of	a	specific	entity,	entities,	or	an	index.	As	discussed	above,	we	enter	into	credit	derivatives,	specifically credit	default	swaps	and	risk	participation	agreements,	as	part	of	our	commercial	mortgage	banking	hedging	activities	and	for	customer	and	other	risk	management purposes.	Detail	regarding	credit	default	swaps	and	risk	participations	sold	follows.

# Table	138:	Credit	Default	Swaps

|  | December	31,	2012 | December	31,	2012 |  | December	31,	2011 | December	31,	2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions | Notional\nAmount | Fair\nValue | Weighted-\nAverage\nRemaining\nMaturity\nIn\tYears | Notional\nAmount | Fair\nValue | Weighted-\nAverage\nRemaining\nMaturity\nIn\tYears |
| Credit\tDefault\tSwaps\t–\tSold\t(a) |  |  |  |  |  |  |
| Single\tname |  |  |  | $45 | $2 | 1.8 |
| Index\ttraded |  |  |  | 49 |  | 2.0 |
| Total |  |  |  | $94 | $2 | 1.9 |
| Credit\tDefault\tSwaps\t–\tPurchased |  |  |  |  |  |  |
| Single\tname | $50 |  | 5.8 | $150 | $5 | 3.8 |
| Index\ttraded | 60 | $2 | 36.1 | 60 | 4 | 37.2 |
| Total | $110 | $2 | 22.4 | $210 | $9 | 13.3 |
| Total | $110 | $2 | 22.4 | $304 | $11 | 9.8 |
| (a) |  |  |  |  |  |  |

(a) There	were	no	credit	default	swaps	sold	as	of	December	31,	2012.

The	notional	amount	of	these	credit	default	swaps	by	credit	rating	follows:

# Table	139:	Credit	Ratings	of	Credit	Default	Swaps

| Investment	grade	(b) |  | $84 |
| :--- | :--- | :--- |
| Subinvestment\tgrade\t(c) |  | 10 |
| Total |  | $94 |
| Credit\tDefault\tSwaps\t–\tPurchased |  |  |
| Investment\tgrade\t(b) | $95 | $145 |
| Subinvestment\tgrade\t(c) | 15 | 65 |
| Total | $110 | $210 |
| Total | $110 | $304 |

(b) Investment	grade	with	a	rating	of	BBB-/Baa3	or	above	based	on	published	rating	agency information.

(c) Subinvestment	grade	with	a	rating	below	BBB-/Baa3	based	on	published	rating	agency	information.

# Risk	Participation	Agreements

We	have	sold	risk	participation	agreements	with	terms	ranging	from	less	than	1 year	to	24	years.	We	will	be	required	to	make	payments	under	these	agreements if	a	customer	defaults	on	its	obligation	to	perform	under	certain	derivative	swap contracts	with	third	parties.

# Table	141:	Risk	Participation	Agreements	Sold

| Dollars	in	millions | Notional<br>Amount | Estimated<br>Net	Fair	Value | Remaining	Maturity<br>In	Years |
| :--- | :--- | :--- | :--- |
| December\t31,\t2012 | $2,053 | $(6) | 6.6 |
| December\t31,\t2011 | $1,568 | $(5) | 7.5 |

Based	on	our	internal	risk	rating	process	of	the	underlying	third	parties	to	the swap	contracts,	the	percentages	of	the	exposure	amount	of	risk	participation agreements	sold	by	internal	credit	rating	follow:

# Table	142:	Internal	Credit	Ratings	of	Risk	Participation	Agreements	Sold

The	referenced/underlying	assets	for	these	credit	default	swaps	follow:

# NOTE	18	EARNINGS	PER	SHARE

# Table	143:	Basic	and	Diluted	Earnings	per	Common	Share

| In	millions,	except	per	share	data | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Basic |  |  |  |
| Net\tincome\tfrom\tcontinuing\toperations | $3,001 | $3,071 | \t\t $3,024 |
| Less: |  |  |  |
| Net\tincome\t(loss)\tattributable\tto\tnoncontrolling\tinterests | (12) | 15 | (15) |
| Preferred\tstock\tdividends\tand\tdiscount\taccretion\tand\tredemptions | 181 | 58 | 401 |
| Dividends\tand\tundistributed\tearnings\tallocated\tto\tnonvested\trestricted\tshares | 14 | 12 | 10 |
| Net\tincome\tfrom\tcontinuing\toperations\tattributable\tto\tbasic\tcommon\tshares | $2,818 | $2,986 | \t\t $2,628 |
| Net\tincome\tfrom\tdiscontinued\toperations\tattributable\tto\tcommon\tshares |  |  | 372 |
| Net\tincome\tattributable\tto\tbasic\tcommon\tshares | $2,818 | $2,986 | \t\t $3,000 |
| Basic\tweighted-average\tcommon\tshares\toutstanding | 526 | 524 | 517 |
| Basic\tearnings\tper\tcommon\tshare\tfrom\tcontinuing\toperations | $5.36 | $5.70 | \t\t $5.08 |
| Basic\tearnings\tper\tcommon\tshare\tfrom\tdiscontinued\toperations |  |  | .72 |
| Basic\tearnings\tper\tcommon\tshare\t(a) | $5.36 | $5.70 | \t\t $5.80 |
| Diluted |  |  |  |
| Net\tincome\tfrom\tcontinuing\toperations\tattributable\tto\tbasic\tcommon\tshares | $2,818 | $2,986 | \t\t $2,628 |
| Less: |  |  |  |
| BlackRock\tcommon\tstock\tequivalents | 14 | 19 | 17 |
| Net\tincome\tfrom\tcontinuing\toperations\tattributable\tto\tdiluted\tcommon\tshares | $2,804 | $2,967 | \t\t $2,611 |
| Net\tincome\tfrom\tdiscontinued\toperations\tattributable\tto\tcommon\tshares |  |  | 372 |
| Net\tincome\tattributable\tto\tdiluted\tcommon\tshares | $2,804 | $2,967 | \t\t $2,983 |
| Basic\tweighted-average\tcommon\tshares\toutstanding | 526 | 524 | 517 |
| Dilutive\tpotential\tcommon\tshares\t(b)\t(c) | 3 | 2 | 3 |
| Diluted\tweighted-average\tcommon\tshares\toutstanding | 529 | 526 | 520 |
| Diluted\tearnings\tper\tcommon\tshare\tfrom\tcontinuing\toperations | $5.30 | $5.64 | \t\t $5.02 |
| Diluted\tearnings\tper\tcommon\tshare\tfrom\tdiscontinued\toperations |  |  | .72 |
| Diluted\tearnings\tper\tcommon\tshare\t(a) | $5.30 | $5.64 | \t\t $5.74 |
| (a) |  |  |  |

(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	(participating	securities).

(b) Excludes	number	of	stock	options	considered	to	be	anti-dilutive	of	4	million	for	2012,	8	million	for	2011	and	11	million	for	2010.

(c) Excludes	number	of	warrants	considered	to	be	anti-dilutive	of	17	million	for	2012,	17	million	for	2011	and	22	million	for	2010.

# NOTE	19	EQUITY

# PREFERRED	STOCK

The	following	table	provides	the	number	of	preferred	shares	issued	and outstanding,	the	liquidation	value	per	share	and	the	number	of	authorized preferred	shares	that	are	available	for	future	use.

# Table	144:	Preferred	Stock	–	Authorized,	Issued	and	Outstanding

| December	31<br>Shares	in	thousands | value	per<br>share | 2012 | 2011 |
| :--- | :--- | :--- | :--- |
| Authorized |  |  |  |
| $1\tpar\tvalue |  | \t16,588 | \t16,588 |
| Issued\tand\toutstanding |  |  |  |
| Series\tB | $40 | 1 | 1 |
| Series\tK | 10,000 | 50 | 50 |
| Series\tL | \t 100,000 | 2 | 2 |
| Series\tO | \t 100,000 | 10 | 10 |
| Series\tP | \t 100,000 | 15 |  |
| Series\tQ | \t 100,000 | 5 |  |
| Total\tissued\tand\toutstanding |  | 83 | 63 |

Our	Series	B	preferred	stock	is	cumulative	and	is	not	redeemable	at	our	option. Annual	dividends	on	Series	B	preferred	stock	total	$1.80	per	share.	Holders	of Series	B	preferred	stock	are	entitled	to	8	votes	per	share,	which	is	equal	to	the number	of	full	shares	of	common	stock	into	which	the	Series	B	Preferred	Stock is	convertible.

Our	Series	K	preferred	stock	was	issued	in	May	2008	in	connection	with	our issuance	of	$500	million	of	Depositary	Shares,	each	representing	a	fractional interest	in	a	share	of	the	Fixed-to-Floating	Non-Cumulative	Perpetual	Preferred Stock,	Series	K.	Dividends	are	payable	if	and	when	declared	each	May	21	and November	21	until	May	21,	2013.	After	that	date,	dividends	will	be	payable each	21 	of	August,	November,	February	and	May.	Dividends	will	be	paid	at	a rate	of	8.25%	prior	to	May	21,	2013	and	at	a	rate	of	three-month	LIBOR	plus 422	basis	points	beginning	May	21,	2013.	The	Series	K	preferred	stock	is redeemable	at	our	option	on	or	after	May	21,	2013. st

Our	9.875%	Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series	L was	issued	in	connection	with	the	National	City	transaction	in	exchange	for National	City's	Fixed-to-Floating	Rate	Non-Cumulative	Preferred	Stock,	Series F.	Dividends	on	the	Series	L	preferred	stock	are	payable	if	and	when	declared each	1 	of	February,	May,	August	and	November.	Dividends	will	be	paid	at	a rate	of	9.875%	prior	to	February	1,	2013	and	at	a	rate	of	three-month	LIBOR plus	633	basis	points	beginning	February	1,	2013.	The	Series	L	is	redeemable	at PNC's	option,	subject	to	Federal	Reserve	approval,	if	then	applicable,	on	or	after February	1,	2013	at	a	redemption	price	per	share	equal	to	the	liquidation preference	plus	any	declared	but	unpaid	dividends. st

Our	Series	O	preferred	stock	was	issued	on	July	27,	2011,	when	we	issued	one million	depositary	shares,	each	representing	a	1/100 	interest	in	a	share	of	our Fixed-to-Floating	Rate	Non-Cumulative	Perpetual	Preferred	Stock,	Series	O	for gross	proceeds	before	commissions	and	expenses	of	$1	billion.	Dividends	are payable	when,	as,	and	if	declared	by	our	board	of	directors	or	an	authorized committee	of	our	board,	semi-annually	on	February	1	and	August	1	of	each	year until	August	1,	2021	at	a	rate	of	6.75%.	After	that	date,	dividends	will	be payable	on	February	1,	May	1,	August	1	and	November	1	of	each	year	beginning on	November	1,	2021	at	a	rate	of	three-month	LIBOR	plus	3.678%	per	annum. The	Series	O	preferred	stock	is	redeemable	at	our	option	on	or	after	August	1, 2021	and	at	our	option	within	90	days	of	a	regulatory	capital	treatment	event	as defined	in	the	designations. th

Our	Series	P	preferred	stock	was	issued	on	April	24,	2012,	when	we	issued 60	million	depositary	shares,	each	representing	a	1/4,000 	interest	in	a	share	of our	Fixed-to-Floating	Rate	Non-Cumulative	Perpetual	Preferred	Stock,	Series	P for	gross	proceeds	before	commissions	and	expenses	of	$1.5	billion.	Dividends are	payable	when,	as,	and	if	declared	by	our	board	of	directors	or	an	authorized committee	of	our	board,	quarterly	on	February	1,	May	1,	August	1	and November	1	of	each	year.	Dividends	are	paid	for	each	dividend	period	to,	but excluding,	May	1,	2022	at	a	rate	of	6.125%	and	for	each	dividend	period	from and	including	May	1,	2022	at	a	rate	of	three-month	LIBOR	plus	4.0675%	per annum.	The	Series	P	preferred	stock	is	redeemable	at	our	option	on	or	after May	1,	2022	and	at	our	option	within	90	days	of	a	regulatory	capital	treatment event	as	defined	in	the	designations. th

Our	Series	Q	preferred	stock	was	issued	on	September	21,	2012,	when	we	issued 18	million	depositary	shares,	each	representing	a	1/4,000 	interest	in	a	share	of our	5.375%	Non-Cumulative	Perpetual	Preferred	Stock,	Series	Q	for	gross proceeds	before	commissions	and	expenses	of	$450	million.	Dividends	are payable	when,	as,	and	if	declared	by	our	board	of	directors	or	an	authorized committee	of	our	board,	quarterly	on	March	1,	June	1,	September	1	and December	1	of	each	year	at	a	rate	of	5.375%.	The	Series	Q	preferred	stock	is redeemable	at	our	option	on	or	after	December	1,	2017	and	at	our	option	within 90	days	of	a	regulatory	capital	treatment	event	as	defined	in	the	designations.	We issued	additional	Series	Q	Preferred	Stock	on	October	9,	2012,	in	connection with	the	issuance	of	an	additional	1.2	million	depositary	shares	for	gross proceeds	before	commissions	and	expenses	of	$30	million,	when	the underwriters	exercised	a	portion	of	their	over-allotment	option. th

We	have	authorized	but	unissued	Series	H,	I,	and	J	preferred	stock.	As	described in	Note	14	Capital	Securities	of	Subsidiary	Trusts	and	Perpetual	Trust	Securities, under	the	terms	of	two	of	the	hybrid	capital	vehicles	we	issued	that	currently qualify	as	capital	for	regulatory	purposes	(the	Trust

II	Securities	and	the	Trust	III	Securities),	these	Trust	Securities	are	automatically exchangeable	into	shares	of	PNC	preferred	stock	(Series	I	and	Series	J, respectively)	in	each	case	under	certain	conditions	relating	to	the	capitalization or	the	financial	condition	of	PNC	Bank,	N.A.	and	upon	the	direction	of	the Office	of	the	Comptroller	of	the	Currency.	The	Series	preferred	stock	of	PNC REIT	Corp.	is	also	automatically	exchangeable	under	similar	conditions	into shares	of	PNC	Series	H	preferred	stock.

As	a	part	of	the	National	City	transaction,	we	established	the	PNC	Non- Cumulative	Perpetual	Preferred	Stock,	Series	M	(the	Series	M	Preferred	Stock), which	mirrored	in	all	material	respects	the	former	National	City	Non- Cumulative	Perpetual	Preferred	Stock,	Series	E.	On	December	10,	2012,	PNC issued	$500.1	million	(5,001	shares)	of	the	Series	M	Preferred	Stock	as	required under	a	Stock	Purchase	Contract	Agreement	between	PNC	and	National	City Preferred	Capital	Trust	I	(the	"Trust")	dated	January	30,	2008.	PNC	immediately redeemed	all	$500.1	million	of	the	Series	M	Preferred	Stock	from	the	Trust	and the	Trust	in	turn	redeemed	all	$500.0	million	outstanding	of	its	12%	Fixed-to- Floating	Rate	Normal	APEX	and	all	$.1	million	of	its	Common	Securities.

The	replacement	capital	covenants	with	respect	to	the	Normal	APEX	Securities, our	Series	M	shares	and	our	6,000,000	of	Depositary	Shares	(each	representing 1/4,000th	of	an	interest	in	a	share	of	our	9.875%	Fixed-to-Floating	Rate	Non- Cumulative	Preferred	Stock,	Series	L)	were	terminated	on	November	5,	2010	as a	result	of	a	successful	consent	solicitation.

In	connection	with	the	redemption	of	the	Series	N	Preferred	Stock,	we accelerated	the	accretion	of	the	remaining	issuance	discount	on	the	Series	N Preferred	Stock,	recorded	a	corresponding	reduction	in	retained	earnings	of	$250 million	during	the	first	quarter	of	2010	and	paid	dividends	of	$89	million	to	the US	Treasury.	This	resulted	in	a	noncash	reduction	in	net	income	attributable	to common	shareholders	and	related	basic	and	diluted	earnings	per	share.

# WARRANTS

We	have	outstanding	16,885,192	warrants,	each	to	purchase	one	share	of	PNC common	stock	at	an	exercise	price	of	$67.33	per	share.	These	warrants	were	sold by	the	US	Treasury	in	a	secondary	public	offering	that	closed	on	May	5,	2010 after	the	US	Treasury	exchanged	its	TARP	Warrant	(issued	on	December	31, 2008	under	the	TARP	Capital	Purchase	Program	in	relation	to	the	Series	N preferred	stock	referred	to	above)	for	16,885,192	warrants.	These	warrants expire	December	31,	2018.

# OTHER	SHAREHOLDERS'	EQUITY	MATTERS

We	have	a	dividend	reinvestment	and	stock	purchase	plan.	Holders	of	preferred stock	and	PNC	common	stock	may	participate	in	the	plan,	which	provides	that additional	shares	of	common	stock	may	be	purchased	at	market	value	with reinvested	dividends	and	voluntary	cash	payments.	Common	shares	issued pursuant	to	this	plan	were:	422,642	shares	in	2012,	379,459	shares	in	2011	and 149,088	shares	in	2010.

At	December	31,	2012,	we	had	reserved	approximately	108.4	million	common shares	to	be	issued	in	connection	with	certain	stock	plans	and	the	conversion	of certain	debt	and	equity	securities.

Effective	October	4,	2007,	our	Board	of	Directors	approved	a	stock	repurchase program	to	purchase	up	to	25	million	shares	of	PNC	common	stock	on	the	open market	or	in	privately	negotiated	transactions.	A	maximum	of	21.551	million shares	remained	available	for	repurchase	under	this	program	at	December	31, 2012.	This	program	will	remain	in	effect	until	fully	utilized	or	until	modified, superseded	or	terminated.	We	repurchased	3.2	million	shares	in	2012	and	did	not repurchase	any	shares	during	2011	or	2010	under	this	program.

# NOTE	20	OTHER	COMPREHENSIVE	INCOME

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

# Table	145:	Other	Comprehensive	Income

| Net	unrealized	gains	on	non-OTTI<br>securities | Pretax | Tax | After-tax |
| :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2009\n2010\tactivity | $(1,207) | $447 | $(760) |
| Cumulative\teffect\tof\tadopting\tFASB\tASU |  |  |  |
| 2009-17,\tConsolidations | (20) | 7 | (13) |
| Decrease\tin\tnet\tunrealized\tlosses\tfor\tnon- |  |  |  |
| OTTI\tsecurities | 1,803 | (665) | \t 1,138 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 426 | (156) | 270 |
| Net\tunrealized\tgains\ton\tnon-OTTI\tsecurities | 1,357 | (502) | 855 |
| Balance\tat\tDecember\t31,\t2010 | 150 | (55) | 95 |
| 2011\tactivity |  |  |  |
| Increase\tin\tnet\tunrealized\tgains\tfor\tnon- |  |  |  |
| OTTI\tsecurities | 1,232 | (451) | 781 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 284 | (104) | 180 |
| Net\tunrealized\tgains\ton\tnon-OTTI\tsecurities | 948 | (347) | 601 |
| Balance\tat\tDecember\t31,\t2011 | 1,098 | (402) | 696 |
| 2012\tactivity\nIncrease\tin\tnet\tunrealized\tgains\tfor\tnon-\nOTTI\tsecurities | 970 | (356) | 614 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 210 | (77) | 133 |
| Net\tunrealized\tgains\ton\tnon-OTTI\tsecurities | 760 | (279) | 481 |
| Balance\tat\tDecember\t31,\t2012 | $1,858 | $(681) | $1,177 |
| Net\tunrealized\tgains\t(losses)\ton |  |  |  |
| OTTI\tsecurities |  |  |  |
| Balance\tat\tDecember\t31,\t2009 | $(1,296) | $480 | $(816) |
| 2010\tactivity |  |  |  |
| Net\tincrease\tin\tOTTI\tlosses\ton\tdebt |  |  |  |
| securities | (50) | 14 | (36) |
| Less:\tNet\tOTTI\tlosses\trealized\tin\tnet |  |  |  |
| income | (325) | 119 | (206) |
| Net\tunrealized\tgains\t(losses)\ton |  |  |  |
| OTTI\tsecurities | 275 | (105) | 170 |
| Balance\tat\tDecember\t31,\t2010 | (1,021) | 375 | (646) |

|  | Pretax | Tax | After-<br>tax |
| :--- | :--- | :--- | :--- |
| 2011\tactivity |  |  |  |
| Net\tincrease\tin\tOTTI\tlosses\ton\tdebt |  |  |  |
| securities | (331) | 121 | (210) |
| Less:\tNet\tlosses\trealized\ton\tsales\tof |  |  |  |
| securities | (34) | 12 | (22) |
| Less:\tNet\tOTTI\tlosses\trealized\tin\tnet |  |  |  |
| income | (152) | 56 | (96) |
| Net\tunrealized\tgains\t(losses)\ton\nOTTI\tsecurities | (145) | 53 | (92) |
| Balance\tat\tDecember\t31,\t2011 | (1,166) | 428 | (738) |
| 2012\tactivity |  |  |  |
| Net\tdecrease\tin\tOTTI\tlosses\ton\tdebt |  |  |  |
| securities | 854 | (313) | 541 |
| Less:\tNet\tlosses\trealized\ton\tsales\tof |  |  |  |
| securities | (6) | 2 | (4) |
| Less:\tNet\tOTTI\tlosses\trealized\tin\tnet |  |  |  |
| income | (111) | 41 | (70) |
| Net\tunrealized\tgains\t(losses)\ton\tOTTI\nsecurities | 971 | (356) | 615 |
| Balance\tat\tDecember\t31,\t2012 | $(195) | $72 | $(123) |
| Net\tunrealized\tgains\t(losses)\ton\tcash |  |  |  |
| flow\thedge\tderivatives |  |  |  |
| Balance\tat\tDecember\t31,\t2009\n2010\tactivity | $263 | $(97) | $166 |
| Increase\tin\tnet\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives | 948 | (347) | 601 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 387 | (142) | 245 |
| Net\tunrealized\tgains\t(losses)\ton\tcash\tflow |  |  |  |
| hedge\tderivatives | 561 | (205) | 356 |
| Balance\tat\tDecember\t31,\t2010 | 824 | (302) | 522 |
| 2011\tactivity |  |  |  |
| Increase\tin\tnet\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives | 805 | (294) | 511 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 498 | (182) | 316 |
| Net\tunrealized\tgains\t(losses)\ton\tcash\tflow |  |  |  |
| hedge\tderivatives | 307 | (112) | 195 |
| Balance\tat\tDecember\t31,\t2011 | 1,131 | (414) | 717 |
| 2012\tactivity |  |  |  |
| Increase\tin\tnet\tunrealized\tgains\ton\tcash |  |  |  |
| flow\thedge\tderivatives | 312 | (114) | 198 |
| Less:\tnet\tgains\trealized\tin\tnet\tincome | 532 | (195) | 337 |
| Net\tunrealized\tgains\t(losses)\ton\tcash\tflow |  |  |  |
| hedge\tderivatives | (220) | 81 | (139) |
| Balance\tat\tDecember\t31,\t2012 | $911 | $(333) | $578 |

|  | Pretax | Tax | After-tax |
| :--- | :--- | :--- | :--- |
| Pension\tand\tother\tpostretirement\tbenefit |  |  |  |
| plan\tadjustments |  |  |  |
| Balance\tat\tDecember\t31,\t2009 | $(858) | $316 | $(542) |
| 2010\tActivity | 260 | (98) | 162 |
| Balance\tat\tDecember\t31,\t2010 | (598) | \t 218 | (380) |
| 2011\tActivity | (593) | \t 218 | (375) |
| Balance\tat\tDecember\t31,\t2011 | (1,191) | \t 436 | (755) |
| 2012\tActivity | (35) | 13 | (22) |
| Balance\tat\tDecember\t31,\t2012 | $(1,226) | $449 | $(777) |
| Other\t(a) |  |  |  |
| Balance\tat\tDecember\t31,\t2009 | $(27) | $17 | $(10) |
| 2010\tActivity |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | (18) | 6 | (12) |
| BlackRock\tdeferred\ttax\tadjustments |  | 1 | 1 |
| SBA\tI/O\tstrip\tvaluation\tadjustments | (2) | 1 | (1) |
| Total\t2010\tactivity | (20) | 8 | (12) |
| Balance\tat\tDecember\t31,\t2010 | (47) | 25 | (22) |
| 2011\tActivity |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | (4) | 1 | (3) |
| Total\t2011\tactivity | (4) | 1 | (3) |
| Balance\tat\tDecember\t31,\t2011 | (51) | 26 | (25) |
| 2012\tActivity |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | 10 | (3) | 7 |
| BlackRock\tdeferred\ttax\tadjustments |  | (3) | (3) |
| Total\t2012\tactivity | 10 | (6) | 4 |
| Balance\tat\tDecember\t31,\t2012 | $(41) | $20 | $(21) |

(a) Consists	of	foreign	currency	translation	adjustments,	deferred	tax	adjustments	on	BlackRock's	other comprehensive	income,	and	for	2010	interest-only	strip	valuation	adjustments.

The	accumulated	balances	related	to	each	component	of	other	comprehensive income	(loss)	are	as	follows:

# Table	146:	Accumulated	Other	Comprehensive	Income	(Loss)	Components

| At	December	31	–	In	millions | Pretax | After-tax | Pretax | After-<br>tax |
| :--- | :--- | :--- | :--- | :--- |
| Net\tunrealized\tgains\ton\tnon- |  |  |  |  |
| OTTI\tsecurities | $1,858 | $1,177 | $1,098 | $696 |
| Net\tunrealized\tgains\t(losses)\ton |  |  |  |  |
| OTTI\tsecurities | (195) | (123) | (1,166) | (738) |
| Net\tunrealized\tgains\t(losses)\ton |  |  |  |  |
| cash\tflow\thedge\tderivatives | 911 | 578 | 1,131 | 717 |
| Pension\tand\tother\tpostretirement |  |  |  |  |
| benefit\tplan\tadjustments | (1,226) | (777) | (1,191) | (755) |
| Other | (41) | (21) | (51) | (25) |
| Accumulated\tother |  |  |  |  |
| comprehensive\tincome\t(loss) | $1,307 | $834 | $(179) | $(105) |

# NOTE	21	INCOME	TAXES

The	components	of	income	taxes	from	continuing	operations	are	as	follows:

# Table	147:	Income	Taxes	from	Continuing	Operations

| In	millions | 2012 | 2011 | 2010 |
| :--- | :--- | :--- | :--- |
| Current |  |  |  |
| Federal | $343 | $191 | $(207) |
| State | 29 | (33) | 43 |
| Total\tcurrent | \t 372 | \t 158 | (164) |
| Deferred |  |  |  |
| Federal | \t 522 | \t 783 | \t 1,193 |
| State | 48 | 57 | 8 |
| Total\tdeferred | \t 570 | \t 840 | \t 1,201 |
| Total | $942 | $998 | $1,037 |

Significant	components	of	deferred	tax	assets	and	liabilities	are	as	follows:

# Table	148:	Deferred	Tax	Assets	and	Liabilities

| December	31	–	in	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets |  |  |
| Allowance\tfor\tloan\tand\tlease\tlosses | $1,681 | $1,896 |
| Compensation\tand\tbenefits | 790 | 677 |
| Unrealized\tlosses\ton\tloans | 284 | 7 |
| Loss\tand\tcredit\tcarryforward | 766 | 243 |
| Residential\tmortgage\trepurchase\treserves | 231 | 32 |
| Other | \t 1,254 | 998 |
| Total\tgross\tdeferred\ttax\tassets | \t 5,006 | \t 3,853 |
| Valuation\tallowance | (54) | (14) |
| Total\tdeferred\ttax\tassets | \t 4,952 | \t 3,839 |
| Deferred\ttax\tliabilities |  |  |
| Leasing | \t 1,396 | \t 1,150 |
| Goodwill\tand\tintangibles | 363 | 431 |
| Fixed\tassets | 398 | 256 |
| Net\tunrealized\tgains\ton\tsecurities\tand\tfinancial\ninstruments | 939 | 389 |
| BlackRock\tbasis\tdifference | \t 1,874 | \t 1,736 |
| Other | 543 | \t 1,015 |
| Total\tdeferred\ttax\tliabilities | \t 5,513 | \t 4,977 |
| Net\tdeferred\ttax\tliability | $561 | $1,138 |

A	reconciliation	between	the	statutory	and	effective	tax	rates	follows:

# Table	149:	Reconciliation	of	Statutory	and	Effective	Tax	Rates

The	net	operating	loss	carryforwards	at	December	31,	2012	and	2011	follow:

# Table	150:	Net	Operating	Loss	Carryforwards	and	Tax	Credit	Carryforwards

The	federal	net	operating	loss	carryforwards	expire	from	2027	to	2032.	The	state net	operating	loss	carryforwards	will	expire	from	2013	to	2031.	The	majority	of the	tax	credit	carryforwards	expire	in	2032.

The	federal	net	operating	loss	carryforwards	and	tax	credit	carryforwards	above are	substantially	from	the	acquisition	of	RBC	Bank	(USA)	and	are	subject	to	a federal	annual	Section	382	limitation	of	$119	million	under	the	Internal	Revenue Code	of	1986,	as	amended;	and	acquired	state	operating	loss	carryforwards	of $1.3	billion	are	subject	to	similar	limitations	that	exist	for	state	tax	purposes.	The company	also	has	built-in-loss	carryforwards	remaining	at	December	31,	2012	of approximately	$277	million	from	that	same	acquisition	which	are	subject	to	the same	annual	limitation.	It	is	anticipated	that	the	company	will	be	able	to	fully utilize	its	carryforwards	for	federal	tax	purposes,	but	a	valuation	allowance	has been	recorded	against	certain	state	tax	carryforwards	as	reflected	above.

At	December	31,	2012	and	2011,	there	were	no	undistributed	earnings	of	non- US	subsidiaries	for	which	deferred	US	income	taxes	had	not	been	provided.

Retained	earnings	at	both	December	31,	2012	and	2011	included	$117	million	in allocations	for	bad	debt	deductions	of	former	thrift	subsidiaries	for	which	no income	tax	has	been	provided.	Under	current	law,	if	certain	subsidiaries	use these	bad	debt	reserves	for	purposes	other	than	to	absorb	bad	debt	losses,	they will	be	subject	to	Federal	income	tax	at	the	current	corporate	tax	rate.

The	Company	had	unrecognized	tax	benefits	of	$176	million	at	December	31, 2012	and	$209	million	at	December	31,	2011.	At	December	31,	2012,	$98 million	of	unrecognized	tax	benefits,	if	recognized,	would	favorably	impact	the effective	income	tax	rate.

A	reconciliation	of	the	beginning	and	ending	balance	of	the	liability	for unrecognized	tax	benefits	is	as	follows:

# Table	151:	Changes	in	Liability	for	Unrecognized	Tax	Benefits

It	is	reasonably	possible	that	the	liability	for	unrecognized	tax	benefits	could increase	or	decrease	in	the	next	twelve	months	due	to	completion	of	tax authorities'	exams	or	the	expiration	of	statutes	of	limitations.	Management estimates	that	the	liability	for	unrecognized	tax	benefits	could	decrease	by	$110 million	within	the	next	twelve	months.

Examinations	are	substantially	completed	for	PNC's	consolidated	federal	income tax	returns	for	2007	and	2008	and	there	are	no	outstanding	unresolved	issues. The	Internal	Revenue	Service	(IRS)	is	currently	examining	PNC's	2009	and 2010	returns.	National	City's	consolidated	federal	income	tax	returns	through 2008	have	been	audited	by	the	IRS.	Certain	adjustments	remain	under	review	by the	IRS	Appeals	Division	for	years	2003	through	2008.

PNC	files	tax	returns	in	most	states	and	some	non-U.S.	jurisdictions	each	year and	is	under	continuous	examination	by	various	state	taxing	authorities.	With few	exceptions,	we	are	no	longer	subject	to	state	and	local	and	non-U.S.	income tax	examinations	by	taxing	authorities	for	periods	before	2003.	For	all	open audits,	any	potential	adjustments	have	been	considered	in	establishing	our reserve	for	unrecognized	tax	benefits	as	of	December	31,	2012.

Our	policy	is	to	classify	interest	and	penalties	associated	with	income	taxes	as income	tax	expense.	For	2012,	we	had	expense	of	$4	million	of	gross	interest and	penalties	increasing	income	tax	expense.	The	total	accrued	interest	and penalties	at	December	31,	2012	and	December	31,	2011	was	$93	million	and $81	million,	respectively.

# NOTE	22	REGULATORY	MATTERS

We	are	subject	to	the	regulations	of	certain	federal,	state,	and	foreign	agencies and	undergo	periodic	examinations	by	such	regulatory	authorities.

The	ability	to	undertake	new	business	initiatives	(including	acquisitions),	the access	to	and	cost	of	funding	for	new	business	initiatives,	the	ability	to	pay dividends,	the	ability	to	repurchase	shares	or	other	capital	instruments,	the	level of	deposit	insurance	costs,	and	the	level	and	nature	of	regulatory	oversight depend,	in	large	part,	on	a	financial	institution's	capital	strength.	The	minimum US	regulatory	capital	ratios	under	Basel	I	are	4%	for	Tier	1	risk-based,	8%	for total	risk-based	and	4%	for	leverage.	To	qualify	as	"well	capitalized,"	regulators require	banks	to	maintain	capital	ratios	of	at	least	6%	for	Tier	1	risk-based,	10% for	total	risk-based	and	5%	for	leverage.	To	be	"well	capitalized,"	a	bank holding	company	must	maintain	capital	ratios	of	at	least	6%	Tier	1	risk-based and	10%	for	total	risk-based.	At	December	31,	2012	and	December	31,	2011, PNC	and	PNC	Bank,	N.A.	met	the	"well	capitalized"	capital	ratio	requirements based	on	US	regulatory	capital	ratio	requirements	under	Basel	I.

The	following	table	sets	forth	regulatory	capital	ratios	for	PNC	and	its	bank subsidiary,	PNC	Bank,	N.A.

# Table	152:	Regulatory	Capital

| Dollars	in	millions | 2012 | 2011 | 2012 | 2011 |
| :--- | :--- | :--- | :--- | :--- |
| Risk-based\tcapital |  |  |  |  |
| Tier\t1 |  |  |  |  |
| PNC | $30,226 | $29,073 | \t11.6% | \t12.6% |
| PNC\tBank,\tN.A.\nTotal | \t 28,352 | \t 25,536 | \t11.3 | \t11.4 |
| PNC | \t 38,234 | \t 36,548 | \t14.7 | \t15.8 |
| PNC\tBank,\tN.A. | \t 35,756 | \t 32,322 | \t14.2 | \t14.4 |
| Leverage |  |  |  |  |
| PNC | \t 30,226 | \t 29,073 | \t10.4 | \t11.1 |
| PNC\tBank,\tN.A. | \t 28,352 | \t 25,536 | \t10.1 | \t10.0 |

The	principal	source	of	parent	company	cash	flow	is	the	dividends	it	receives from	its	subsidiary	bank,	which	may	be	impacted	by	the	following: •	Capital	needs,

•	Laws	and	regulations,

•	Corporate	policies,

•	Contractual	restrictions,	and

•	Other	factors.

Also,	there	are	statutory	and	regulatory	limitations	on	the	ability	of	national banks	to	pay	dividends	or	make	other	capital	distributions.	The	amount	available for	dividend	payments	to	the	parent	company	by	PNC	Bank,	N.A.	without	prior regulatory	approval	was	approximately	$1.5	billion	at	December	31,	2012.

Under	federal	law,	a	bank	subsidiary	generally	may	not	extend	credit	to,	or engage	in	other	types	of	covered	transactions	(including	the	purchase	of	assets) with,	the	parent	company	or	its	non-bank	subsidiaries	on	terms	and	under circumstances	that	are	not	substantially	the	same	as	comparable	transactions with	nonaffiliates.	A	bank	subsidiary	may	not	extend	credit	to,	or	engage	in	a covered	transaction	with,	the	parent	company	or	a	non-bank	subsidiary	if	the aggregate	amount	of	the	bank's	extensions	of	credit	and	other	covered transactions	with	the	parent	company	or	non-bank	subsidiary	exceeds	10%	of	the capital	stock	and	surplus	of	such	bank	subsidiary	or	the	aggregate	amount	of	the bank's	extensions	of	credit	and	other	covered	transactions	with	the	parent company	and	all	non-bank	subsidiaries	exceeds	20%	of	the	capital	and	surplus	of such	bank	subsidiary.	Such	extensions	of	credit,	with	limited	exceptions,	must be	at	least	fully	collateralized	in	accordance	with	specified	collateralization thresholds,	with	the	thresholds	varying	based	on	the	type	of	assets	serving	as collateral.	In	certain	circumstances,	federal	regulatory	authorities	may	impose more	restrictive	limitations.

Federal	Reserve	Board	regulations	require	depository	institutions	to	maintain cash	reserves	with	a	Federal	Reserve	Bank	(FRB).	At	December	31,	2012,	the balance	outstanding	at	the	FRB	was	$3.5	billion.

# NOTE	23	LEGAL	PROCEEDINGS

We	establish	accruals	for	legal	proceedings,	including	litigation	and	regulatory and	governmental	investigations	and	inquiries,	when	information	related	to	the loss	contingencies	represented	by	those	matters	indicates	both	that	a	loss	is probable	and	that	the	amount	of	loss	can	be	reasonably	estimated.	Any	such accruals	are	adjusted	thereafter	as	appropriate	to	reflect	changed	circumstances. When	we	are	able	to	do	so,	we	also	determine	estimates	of	possible	losses	or ranges	of	possible	losses,	whether	in	excess	of	any	related	accrued	liability	or where	there	is	no	accrued	liability,	for	disclosed	legal	proceedings	("Disclosed Matters,"	which	are	those	matters	disclosed	in	this	Note	23).	For	Disclosed Matters	where	we	are	able	to	estimate	such	possible	losses	or

ranges	of	possible	losses,	as	of	December	31,	2012,	we	estimate	that	it	is reasonably	possible	that	we	could	incur	losses	in	an	aggregate	amount	of	up	to approximately	$450	million.	The	estimates	included	in	this	amount	are	based	on our	analysis	of	currently	available	information	and	are	subject	to	significant judgment	and	a	variety	of	assumptions	and	uncertainties.	As	new	information	is obtained	we	may	change	our	estimates.	Due	to	the	inherent	subjectivity	of	the assessments	and	unpredictability	of	outcomes	of	legal	proceedings,	any	amounts accrued	or	included	in	this	aggregate	amount	may	not	represent	the	ultimate	loss to	us	from	the	legal	proceedings	in	question.	Thus,	our	exposure	and	ultimate losses	may	be	higher,	and	possibly	significantly	so,	than	the	amounts	accrued	or this	aggregate	amount.

The	aggregate	estimated	amount	provided	above	does	not	include	an	estimate	for every	Disclosed	Matter,	as	we	are	unable,	at	this	time,	to	estimate	the	losses	that it	is	reasonably	possible	that	we	could	incur	or	ranges	of	such	losses	with	respect to	some	of	the	matters	disclosed	for	one	or	more	of	the	following	reasons.	In	our experience,	legal	proceedings	are	inherently	unpredictable.	In	many	legal proceedings,	various	factors	exacerbate	this	inherent	unpredictability,	including, among	others,	one	or	more	of	the	following:	the	proceeding	is	in	its	early	stages; the	damages	sought	are	unspecified,	unsupported	or	uncertain;	it	is	unclear whether	a	case	brought	as	a	class	action	will	be	allowed	to	proceed	on	that	basis or,	if	permitted	to	proceed	as	a	class	action,	how	the	class	will	be	defined;	the plaintiff	is	seeking	relief	other	than	or	in	addition	to	compensatory	damages;	the matter	presents	meaningful	legal	uncertainties,	including	novel	issues	of	law;	we have	not	engaged	in	meaningful	settlement	discussions;	discovery	has	not started	or	is	not	complete;	there	are	significant	facts	in	dispute;	and	there	are	a large	number	of	parties	named	as	defendants	(including	where	it	is	uncertain how	damages	or	liability,	if	any,	will	be	shared	among	multiple	defendants). Generally,	the	less	progress	that	has	been	made	in	the	proceedings	or	the	broader the	range	of	potential	results,	the	harder	it	is	for	us	to	estimate	losses	or	ranges	of losses	that	it	is	reasonably	possible	we	could	incur.	Therefore,	as	the	estimated aggregate	amount	disclosed	above	does	not	include	all	of	the	Disclosed	Matters, the	amount	disclosed	above	does	not	represent	our	maximum	reasonably possible	loss	exposure	for	all	of	the	Disclosed	Matters.	The	estimated	aggregate amount	also	does	not	reflect	any	of	our	exposure	to	matters	not	so	disclosed,	as discussed	below	under	"Other."

We	include	in	some	of	the	descriptions	of	individual	Disclosed	Matters	certain quantitative	information	related	to	the	plaintiff's	claim	against	us	as	alleged	in the	plaintiff's	pleadings	or	other	public	filings	or	otherwise	publicly	available information.	While	information	of	this	type	may	provide	insight	into	the potential	magnitude	of	a	matter,	it	does	not	necessarily	represent	our	estimate	of reasonably	possible	loss	or	our	judgment	as	to	any	currently	appropriate	accrual.

Some	of	our	exposure	in	Disclosed	Matters	may	be	offset	by	applicable insurance	coverage.	We	do	not	consider	the	possible	availability	of	insurance coverage	in	determining	the	amounts	of	any	accruals	(although	we	record	the amount	of	related	insurance	recoveries	that	are	deemed	probable	up	to	the amount	of	the	accrual)	or	in	determining	any	estimates	of	possible	losses	or ranges	of	possible	losses.

# Interchange	Litigation

Beginning	in	June	2005,	a	series	of	antitrust	lawsuits	were	filed	against	Visa ®, MasterCard ®,	and	several	major	financial	institutions,	including	cases	naming National	City	(since	merged	into	PNC)	and	its	subsidiary,	National	City	Bank	of Kentucky	(since	merged	into	National	City	Bank	which	in	turn	was	merged	into PNC	Bank,	N.A.).	The	cases	have	been	consolidated	for	pretrial	proceedings	in the	United	States	District	Court	for	the	Eastern	District	of	New	York	under	the caption	In	re	Payment	Card	Interchange	Fee	and	Merchant-Discount	Antitrust Litigation	(Master	File	No.	1:05-md-1720-JG-JO).	Those	cases	naming	National City	were	brought	as	class	actions	on	behalf	of	all	persons	or	business	entities who	have	accepted	Visa ®	or	Master	Card ®.	The	plaintiffs,	merchants	operating commercial	businesses	throughout	the	U.S.	and	trade	associations,	allege,	among other	things,	that	the	defendants	conspired	to	fix	the	prices	for	general	purpose card	network	services	and	otherwise	imposed	unreasonable	restraints	on	trade, resulting	in	the	payment	of	inflated	interchange	fees,	in	violation	of	the	antitrust laws.	In	January	2009,	the	plaintiffs	filed	amended	and	supplemental	complaints adding,	among	other	things,	allegations	that	the	restructuring	of	Visa	and MasterCard,	each	of	which	included	an	initial	public	offering,	violated	the antitrust	laws.	In	their	complaints,	the	plaintiffs	seek,	among	other	things, injunctive	relief,	unspecified	damages	(trebled	under	the	antitrust	laws)	and attorneys'	fees.

In	July	2012,	the	parties	entered	into	a	memorandum	of	understanding	with	the class	plaintiffs	and	an	agreement	in	principle	with	certain	individual	plaintiffs with	respect	to	a	settlement	of	these	cases,	under	which	the	defendants	will collectively	pay	approximately	$6.6	billion	to	the	class	and	individual	settling plaintiffs	and	have	agreed	to	changes	in	the	terms	applicable	to	their	respective card	networks	(including	an	eight-month	reduction	in	default	credit	interchange rates).	The	parties	entered	into	a	definitive	agreement	with	respect	to	this settlement	in	October	2012.	The	court	granted	preliminary	approval	of	this settlement	in	November	2012.	The	settlement	remains	subject	to,	among	other things,	final	court	approval.	As	a	result	of	the	previously	funded	litigation escrow	(described	in	Note	24	Commitments	and	Guarantees),	which	will	cover substantially	all	of	our	share	of	the	Visa	portion,	we	anticipate	no	material financial	impact	from	the	monetary	amount	of	this	settlement.

National	City	and	National	City	Bank	entered	into	judgment	and	loss	sharing agreements	with	Visa	and	certain	other	banks	with	respect	to	all	of	the	above referenced	litigation.	All	of	the

litigation	against	Visa	is	also	subject	to	the	indemnification	obligations	described in	Note	24	Commitments	and	Guarantees.	PNC	Bank,	N.A.	is	not	named	a defendant	in	any	of	the	Visa	or	MasterCard	related	antitrust	litigation	nor	was	it initially	a	party	to	the	judgment	or	loss	sharing	agreements,	but	it	has	been subject	to	these	indemnification	obligations	and	became	responsible	for	National City	Bank's	position	in	the	litigation	and	responsibilities	under	the	agreements upon	completion	of	the	merger	of	National	City	Bank	into	PNC	Bank,	N.A.	In March	2011,	we	entered	into	a	MasterCard	Settlement	and	Judgment	Sharing Agreement	with	MasterCard	and	other	financial	institution	defendants	and	an Omnibus	Agreement	Regarding	Interchange	Litigation	Sharing	and	Settlement Sharing	with	Visa,	MasterCard	and	other	financial	institution	defendants.	If	there is	a	resolution	of	all	claims	against	all	defendants,	the	Omnibus	Agreement,	in substance,	apportions	that	resolution	into	a	Visa	portion	and	a	MasterCard portion,	with	the	Visa	portion	being	two-thirds	and	the	MasterCard	portion	being one-third.	This	apportionment	only	applies	in	the	case	of	either	a	global settlement	involving	all	defendants	or	an	adverse	judgment	against	the defendants,	to	the	extent	that	damages	either	are	related	to	the	merchants'	inter- network	conspiracy	claims	or	are	otherwise	not	attributed	to	specific	MasterCard or	Visa	conduct	or	damages.	The	MasterCard	portion	(or	any	MasterCard-related liability	not	subject	to	the	Omnibus	Agreement)	will	then	be	apportioned	under the	MasterCard	Settlement	and	Judgment	Sharing	Agreement	among MasterCard	and	PNC	and	the	other	financial	institution	defendants	that	are parties	to	this	agreement.	The	responsibility	for	the	Visa	portion	(or	any	Visa- related	liability	not	subject	to	the	Omnibus	Agreement)	will	be	apportioned under	the	pre-existing	indemnification	responsibilities	and	judgment	and	loss sharing	agreements.

# CBNV	Mortgage	Litigation

Between	2001	and	2003,	on	behalf	of	either	individual	plaintiffs	or	proposed classes	of	plaintiffs,	several	separate	lawsuits	were	filed	in	state	and	federal courts	against	Community	Bank	of	Northern	Virginia	(CBNV)	and	other defendants	asserting	claims	arising	from	second	mortgage	loans	made	to	the plaintiffs.	CBNV	was	merged	into	one	of	Mercantile	Bankshares	Corporation's banks	before	PNC	acquired	Mercantile	in	2007.	The	state	lawsuits	were	removed to	federal	court	and,	with	the	lawsuits	that	had	been	filed	in	federal	court,	were consolidated	for	pre-trial	proceedings	in	a	multidistrict	litigation	(MDL) proceeding	in	the	United	States	District	Court	for	the	Western	District	of Pennsylvania,	currently	under	the	caption	In	re:	Community	Bank	of	Northern Virginia	Lending	Practices	Litigation	(No.	03-0425	(W.D.	Pa.),	MDL No.	1674).	In	January	2008,	the	Pennsylvania	district	court	issued	an	order sending	back	to	the	General	Court	of	Justice,	Superior	Court	Division,	for	Wake County,	North	Carolina	the	claims	of	two	proposed	class	members.	These	claims are	asserted	in	a	case	originally	filed	in	2001	and	captioned	Bumpers,	et	al.	v. Community	Bank	of	Northern	Virginia	(01-CVS-011342).

MDL	Proceedings	in	Pennsylvania.	In	October	2011,	the	plaintiffs	filed	a	joint consolidated	amended	class	action	complaint	covering	all	of	the	class	action lawsuits	pending	in	this	proceeding.	The	amended	complaint	names	CBNV, another	bank,	and	purchasers	of	loans	originated	by	CBNV	and	the	other	bank (including	the	Residential	Funding	Company,	LLC)	as	defendants.	(In	May 2012,	the	Residential	Funding	Company,	LLC	filed	for	bankruptcy	protection under	Chapter	11.)	The	principal	allegations	in	the	amended	complaint	are	that	a group	of	persons	and	entities	collectively	characterized	as	the	"Shumway/Bapst Organization"	referred	prospective	second	residential	mortgage	loan	borrowers to	CBNV	and	the	other	bank,	that	CBNV	and	the	other	bank	charged	these borrowers	improper	title	and	loan	fees	at	loan	closings,	that	the	disclosures provided	to	the	borrowers	at	loan	closings	were	inaccurate,	and	that	CBNV	and the	other	bank	paid	some	of	the	loan	fees	to	the	Shumway/Bapst	Organization	as purported	"kickbacks"	for	the	referrals.	The	amended	complaint	asserts	claims for	violations	of	the	Real	Estate	Settlement	Procedures	Act	(RESPA),	the	Truth in	Lending	Act	(TILA),	as	amended	by	the	Home	Ownership	and	Equity Protection	Act	(HOEPA),	and	the	Racketeer	Influenced	and	Corrupt Organizations	Act	(RICO).

The	amended	complaint	seeks	to	certify	a	class	of	all	borrowers	who	obtained	a second	residential	non-purchase	money	mortgage	loan,	secured	by	their	principal dwelling,	from	either	CBNV	or	the	other	defendant	bank,	the	terms	of	which made	the	loan	subject	to	HOEPA.	The	plaintiffs	allege	that	there	are approximately	50,000	members	of	this	class.	They	seek,	among	other	things, unspecified	damages	(including	treble	damages	under	RICO	and	RESPA), rescission	of	loans,	declaratory	and	injunctive	relief,	interest,	and	attorneys'	fees. In	November	2011,	the	defendants	filed	a	motion	to	dismiss	the	amended complaint,	which	was	argued	in	October	2012.	The	court	has	not	yet	ruled	on this	motion.

North	Carolina	Proceedings.	The	plaintiffs	in	Bumpers	make	similar	allegations to	those	included	in	the	amended	complaint	in	the	MDL	proceedings.	Following the	remand	to	North	Carolina	state	court,	the	plaintiffs	in	Bumpers	sought	to represent	a	class	of	North	Carolina	borrowers	in	state	court	proceedings	in	North Carolina.	The	plaintiffs	claim	that	this	class	consists	of	approximately	650 borrowers.	The	district	court	in	Pennsylvania	handling	the	MDL	proceedings enjoined	class	proceedings	in	Bumpers	in	March	2008.	In	April	2008,	the	North Carolina	superior	court	granted	the	Bumpers	plaintiffs'	motion	for	summary judgment	on	their	individual	claims	and	awarded	them	approximately	$11,000 each	plus	interest.	CBNV	appealed	the	grant	of	the	motion	for	summary judgment.	In	September	2011,	the	North	Carolina	Court	of	Appeals	affirmed	in part	and	reversed	in	part	the	granting	of	the	plaintiffs'	motion	for	summary judgment.	The	court	affirmed	the	judgment	on	the	plaintiffs'	claim	that	they	paid a	loan	discount	fee	but	were	not	provided	a	loan	discount.	It	reversed	the judgment	on	the	plaintiffs'	claim	that	they	were	overcharged	for	settlement services	and	remanded	that	claim

for	trial.	The	court	also	held	that,	in	light	of	the	Pennsylvania	district	court's injunction	against	class	proceedings	having	been	vacated	in	September	2010,	the trial	court	may	on	remand	consider	the	issue	of	class	certification.	In	August 2012,	the	North	Carolina	Supreme	Court	granted	our	petition	for	discretionary review	of	the	decision	of	the	North	Carolina	Court	of	Appeals.	The	appeal	was argued	in	January	2013.	The	court	has	not	yet	decided	the	appeal.

# Overdraft	Litigation

Beginning	in	October	2009,	PNC	Bank,	National	City	Bank	and	RBC	Bank (USA)	have	been	named	in	lawsuits	brought	as	class	actions	relating	to	the manner	in	which	they	charged	overdraft	fees	on	ATM	and	debit	transactions	to customers	and	related	matters.

Status	of	MDL	Cases.	Three	pending	lawsuits	naming	PNC	Bank,	one	naming National	City	Bank	and	two	naming	RBC	Bank	(USA),	along	with	similar lawsuits	against	numerous	other	banks,	have	been	consolidated	for	pre-trial proceedings	in	the	United	States	District	Court	for	the	Southern	District	of Florida	(the	"MDL	Court")	under	the	caption	In	re	Checking	Account	Overdraft Litigation	(MDL	No.	2036,	Case	No.	1:09-MD-02036-JLK	).	A	consolidated amended	complaint	was	filed	in	December	2010	that	consolidated	all	of	the claims	in	these	four	MDL	Court	cases.	The	first	case	against	RBC	Bank	(USA) pending	in	the	MDL	Court	(Dasher	v.	RBC	Bank	(10-cv-22190-JLK))	was	filed in	July	2010	in	the	United	States	District	Court	for	the	Southern	District	of Florida.	The	other	case	against	RBC	Bank	(USA)	(Avery	v.	RBC	Bank	(Case No.	10-cv-329))	was	originally	filed	in	North	Carolina	state	court	in	July	2010 and	was	removed	to	the	United	States	District	Court	for	the	Eastern	District	of North	Carolina	before	being	transferred	to	the	MDL	Court.	An	amended complaint	was	filed	in	Avery	in	August	2010.

All	of	the	cases	now	pending	in	the	MDL	Court	seek	to	certify	multi-state classes	of	customers	for	the	common	law	claims	described	below	(covering	all states	in	which	PNC	Bank,	National	City	Bank	and	RBC	Bank	(USA)	had	retail branch	operations	during	the	class	periods),	and	subclasses	of	PNC	Bank customers	with	accounts	in	Pennsylvania	and	New	Jersey	branches,	of	National City	Bank	customers	with	accounts	in	Illinois	branches,	and	of	RBC	Bank (USA)	customers	with	accounts	in	North	Carolina	branches,	with	each	subclass being	asserted	for	purposes	of	claims	under	those	states'	consumer	protection statutes.	No	class	periods	are	stated	in	any	of	the	complaints,	other	than	for	the applicable	statutes	of	limitations,	which	vary	by	state	and	claim.

PNC	Bank's	motion	to	dismiss	the	consolidated	amended	complaint	with	respect to	the	cases	pending	against	it	and	National	City	Bank	in	the	MDL	Court	was denied	in	March	2011.	In	December	2011,	the	plaintiffs	in	cases	pending	against PNC	Bank	and	National	City	Bank	in	the	MDL	Court	moved	for	class certification.	In	light	of	the	settlement	of	a

separate	lawsuit	on	behalf	of	National	City	Bank	customers,	the	National	City Bank	plaintiffs	did	not	move	for	class	certification	on	behalf	of	National	City Bank	customers.	As	to	PNC	Bank,	the	plaintiffs	moved	for	class	certification	in accordance	with	their	consolidated	amended	complaint,	except	that	they	did	not seek	a	class	as	to	the	conversion	claims	described	below.	In	May	2012,	the	court granted	plaintiffs'	motion	for	class	certification.

In	June	2012,	PNC	Bank	reached	an	agreement	to	settle	the	three	cases	pending against	it	in	the	MDL	Court	for	$90	million.	This	settlement	received preliminary	approval	of	the	court	in	January	2013,	and	remains	subject	to, among	other	things,	notice	to	the	class	and	final	court	approval.

The	customer	agreements	with	the	RBC	Bank	(USA)	plaintiffs	contain arbitration	provisions.	RBC	Bank	(USA)'s	original	motion	in	Dasher	to	compel arbitration	under	these	provisions	was	denied	by	the	MDL	Court.	This	denial	was appealed	to	the	United	States	Court	of	Appeals	for	the	Eleventh	Circuit.	While this	appeal	was	pending,	the	United	States	Supreme	Court	issued	its	decision	in AT&T	Mobility	v.	Concepcion,	following	which	the	court	of	appeals	vacated	the MDL	Court's	denial	of	the	arbitration	motion	and	remanded	to	the	MDL	Court for	further	consideration	in	light	of	the	Concepcion	decision.	RBC	Bank	(USA)'s motion	to	compel	arbitration,	now	covering	both	Dasher	and	Avery,	was	denied in	January	2013.	We	have	appealed	the	denial	of	the	motion	to	the	United	States Court	of	Appeals	for	the	Eleventh	Circuit.

Status	of	Non-MDL	Case.	In	December	2010,	an	additional	lawsuit	(Henry	v. PNC	Bank,	National	Association	(No.	GD-10-022974))	was	filed	in	the	Court	of Common	Pleas	of	Allegheny	County,	Pennsylvania	on	behalf	of	all	current citizens	of	Pennsylvania	who	are	domiciled	in	Pennsylvania	who	had	or	have	a PNC	checking	or	debit	account	used	primarily	for	personal,	family	or	household purposes	and	who	incurred	overdraft	and	related	fees	on	transactions	resulting from	the	methodology	of	posting	transactions	from	December	8,	2004	through August	14,	2010.	We	filed	preliminary	objections	seeking	dismissal	of	each	of the	claims	in	this	lawsuit	in	March	2011.	In	January	2012,	the	court	ruled	on	our preliminary	objections,	dismissing	several	claims	but	overruling	our	objections with	respect	to	claims	for	breach	of	contract	and	the	duty	of	good	faith	and	fair dealing	and	for	violation	of	Pennsylvania's	consumer	protection	statute.

Nature	of	Claims.	The	complaints	in	each	of	these	lawsuits	allege	that	the	banks engaged	in	unlawful	practices	in	assessing	overdraft	fees	arising	from	electronic point-of-sale	and	ATM	debits.	The	principal	practice	challenged	in	these lawsuits	is	the	banks'	purportedly	common	policy	of	posting	debit	transactions on	a	daily	basis	from	highest	amount	to	lowest	amount,	thereby	allegedly inflating	the	number	of	overdraft	fees	assessed.	Other	practices	challenged include	the	failure	to	decline	to	honor	debit	card	transactions	where	the	account has	insufficient	funds	to	cover	the	transactions.

In	the	consolidated	amended	complaint	against	PNC	Bank	in	the	MDL	Court, the	plaintiffs	asserted	claims	for	breach	of	the	covenant	of	good	faith	and	fair dealing;	unconscionability;	conversion;	unjust	enrichment;	and	violation	of	the consumer	protection	statutes	of	Pennsylvania,	Illinois	and	New	Jersey.	In	the Dasher	and	Avery	complaints,	the	plaintiffs	assert	the	same	claims,	except	the state	consumer	protection	statutory	claims	relate	to	the	North	Carolina	statute and	the	Avery	complaint	does	not	make	claims	for	breach	of	the	covenant	of good	faith	and	fair	dealing	or	for	conversion.	In	the	Henry	case,	the	remaining claims	are	for	breach	of	contract	and	the	duty	of	good	faith	and	fair	dealing	and for	violation	of	Pennsylvania's	consumer	protection	statute.	In	their	complaints, the	plaintiffs	seek,	among	other	things,	restitution	of	overdraft	fees	paid, unspecified	actual	and	punitive	damages	(with	actual	damages,	in	some	cases, trebled	under	state	law),	pre-judgment	interest,	attorneys'	fees,	and	declaratory relief	finding	the	overdraft	policies	to	be	unfair	and	unconscionable.

# Fulton	Financial

In	2009,	Fulton	Financial	Advisors,	N.A.	filed	lawsuits	against	PNC	Capital Markets,	LLC	and	NatCity	Investments,	Inc.	in	the	Court	of	Common	Pleas	of Lancaster	County,	Pennsylvania	arising	out	of	Fulton's	purchase	of	auction	rate certificates	(ARCs)	through	PNC	and	NatCity.	Each	of	the	lawsuits	alleges violations	of	the	Pennsylvania	Securities	Act,	negligent	misrepresentation, negligence,	breach	of	fiduciary	duty,	common	law	fraud,	and	aiding	and	abetting common	law	fraud	in	connection	with	the	purchase	of	the	ARCs	by	Fulton. Specifically,	Fulton	alleges	that,	as	a	result	of	the	decline	of	financial	markets	in 2007	and	2008,	the	market	for	ARCs	became	illiquid;	that	PNC	and	NatCity knew	or	should	have	known	of	the	increasing	threat	of	the	ARC	market becoming	illiquid;	and	that	PNC	and	NatCity	did	not	inform	Fulton	of	this increasing	threat,	but	allowed	Fulton	to	continue	to	purchase	ARCs,	to	Fulton's detriment.	In	its	complaints,	Fulton	alleges	that	it	then	held	ARCs	purchased through	PNC	for	a	price	of	more	than	$123	million	and	purchased	through NatCity	for	a	price	of	more	than	$175	million.	In	each	complaint,	Fulton	seeks, among	other	things,	unspecified	actual	and	punitive	damages,	rescission, attorneys'	fees	and	interest.

In	the	case	against	PNC	(Fulton	Financial	Advisors,	N.A.	v.	PNC	Capital Markets,	LLC	(CI	09-10838)),	PNC	filed	preliminary	objections	to	Fulton's complaint,	which	were	denied.	NatCity	removed	the	case	against	it	to	the	United States	District	Court	for	the	Eastern	District	of	Pennsylvania	(Fulton	Financial Advisors,	N.A.	v.	NatCity	Investments,	Inc.	(No.	5:09-cv-04855)),	and	in November	2009	filed	a	motion	to	dismiss	the	complaint.	The	court	has	not	yet ruled	on	this	motion.

In	October	2010,	the	Federal	Home	Loan	Bank	of	Chicago	brought	a	lawsuit	in the	Circuit	Court	of	Cook	County,

Illinois,	against	numerous	financial	companies,	including	The	PNC	Financial Services	Group,	Inc.,	as	successor	in	interest	to	National	City	Corporation,	and PNC	Investments	LLC,	as	successor	in	interest	to	NatCity	Investments,	Inc. (Federal	Home	Loan	Bank	of	Chicago	v.	Bank	of	America	Funding	Corp.,	et	al. (Case	No.	10CH45033)).	The	complaint	alleges	that	the	defendants	have	liability to	the	Federal	Home	Loan	Bank	of	Chicago	in	a	variety	of	capacities	(in	the	case of	the	National	City	entities,	as	underwriters)	under	Illinois	state	securities	law and	common	law	in	connection	with	the	alleged	purchase	of	private-label mortgage-backed	securities	by	the	Federal	Home	Loan	Bank.	According	to	the complaint,	the	Federal	Home	Loan	Bank	purchased	approximately	$3.3	billion	in mortgage-backed	securities	in	total	in	transactions	addressed	by	the	complaint, approximately	$345	million	of	which	was	allegedly	in	transactions	involving	the National	City	entities.	The	complaint	alleges	misrepresentations	and	omissions in	connection	with	the	sales	of	the	mortgage-backed	securities	in	question.	In	its complaint,	the	Federal	Home	Loan	Bank	seeks,	among	other	things,	rescission, unspecified	damages,	interest,	and	attorneys'	fees.	In	November	2010,	the defendants	removed	the	case	to	the	United	States	District	Court	for	the	Northern District	of	Illinois.	In	January	2011,	the	district	court	remanded	the	case	to	the Circuit	Court	of	Cook	County.	The	plaintiff	amended	its	complaint	in	March 2011	and	filed	a	corrected	amended	complaint	in	April	2011.	The	corrected amended	complaint	does	not	identify	any	additional	transaction	for	which	the plaintiff	seeks	recovery	from	PNC	nor	does	it	add	any	additional	substantive allegations.	In	May	2011,	the	defendants	filed	a	motion	to	dismiss	the	corrected amended	complaint.	The	motion	was	denied	in	September	2012.

# Weavering	Macro	Fixed	Income	Fund

In	July	2010,	PNC	completed	the	sale	of	PNC	Global	Investment	Servicing ("PNC	GIS")	to	The	Bank	of	New	York	Mellon	Corporation	("BNY	Mellon"), pursuant	to	a	stock	purchase	agreement	dated	February	1,	2010.	In	July	2009,	the liquidators	of	the	Weavering	Macro	Fixed	Income	Fund	Limited	("Weavering") issued	a	Plenary	Summons	in	the	High	Court,	Dublin,	Ireland,	in	connection	with a	European	subsidiary	of	PNC	GIS's	provision	of	administration	services	to Weavering.	The	Plenary	Summons	was	served	on	the	PNC	GIS	subsidiary	(GIS Europe)	on	or	about	June	30,	2010.	In	May	2011,	the	liquidator	served	a	Notice of	Intention	to	Proceed	and	Statement	of	Claim,	which	alleges,	among	other things,	that	GIS	Europe	breached	its	contractual	duties	to	Weavering	as	well	as an	alleged	duty	of	care	to	Weavering,	and	investors	in	Weavering,	and	makes claims	of	breach	of	the	administration	and	accounting	services	agreement, negligence,	gross	negligence,	breach	of	duty,	misrepresentation	and	negligent misstatement.	The	statement	of	claim	further	alleges	that	investors	in	Weavering lost	approximately	€282,000,000	and	that,	in	addition,	expended	approximately €98,000,000	in	brokerage	and	exchange	commissions,	interest,	and	fees	as	a result	of	the	transactions	at	issue.	The	statement	of	claim	seeks,	among	other things,	damages,	costs,	and	interest.	In

January	2012,	upon	application	by	GIS	Europe,	the	court	issued	a	judgment ordering	a	hearing	on	certain	preliminary	issues	(a	"modular	trial").	In	March 2012,	the	plaintiff	appealed	this	judgment	to	the	Supreme	Court	of	Ireland.	In December	2012,	the	Supreme	Court	reversed	the	order	of	the	High	Court	and directed	that	no	modular	trial	take	place	at	this	stage	of	the	proceedings.	We	now expect	that	the	matter	will	proceed	with	full	discovery	and	various	pre-trial	steps, after	which	it	will	be	set	for	trial.

In	May	2011,	BNY	Mellon	provided	notice	to	PNC	of	an	indemnification	claim pursuant	to	the	stock	purchase	agreement	related	to	this	litigation.	PNC's responsibility	for	this	litigation	is	subject	to	the	terms	and	limitations	included	in the	indemnification	provisions	of	the	stock	purchase	agreement.

In	December	2008,	a	lawsuit	was	filed	as	a	class	action	against	National	City Bank	in	the	Court	of	Common	Pleas	of	Cuyahoga	County,	Ohio	(DK&D Properties,	LLC	v.	National	City	Bank	(Case	no.	08	cv	680078))	alleging	breach of	contract	arising	from	the	use	of	the	365/360	method	of	interest	computation	in certain	commercial	promissory	notes.	The	plaintiffs	sought	to	certify	a	class consisting	of	certain	Ohio	commercial	borrowers	of	National	City	Bank.	The plaintiffs	alleged	that	they	obtained	fixed	or	variable	rate	commercial	loans	from National	City	Bank	pursuant	to	promissory	notes	or	loan	agreements	setting forth	annual	or	per	annum	interest	rates,	that	the	bank's	use	of	the	365/360 method	of	calculation	of	interest	caused	the	borrower	to	pay	interest	over	a calendar	year	at	a	higher	rate	than	the	per	annum	rate	stated	in	the	promissory notes,	and	that	this	was	a	breach	of	the	terms	of	the	promissory	notes.	The plaintiffs	sought	declaratory	and	injunctive	relief,	compensatory	damages, prejudgment	interest,	and	attorneys'	fees.

In	December	2011,	the	court	granted	National	City	Bank's	motion	to	stay	the case	pending	the	decision	of	the	Ohio	Supreme	Court	in	JNT	Properties,	LLC	v. KeyBank	National	Association	(Case	No.	11-1392),	which,	although	neither PNC	Bank	nor	National	City	Bank	were	parties,	presented	many	of	the	same issues	as	those	in	DK&D	Properties.	In	November	2012,	following	the	decision of	the	Ohio	Supreme	Court	in	JNT	Properties,	the	plaintiffs	voluntarily dismissed	their	complaint	without	prejudice.

# False	Claims	Act	Lawsuit

PNC	Bank	was	named	as	a	defendant,	along	with	other	lenders,	in	a	qui	tam lawsuit	brought	in	the	U.S.	District	Court	for	the	Northern	District	of	Georgia	by two	individuals	on	behalf	of	the	United	States	under	the	federal	False	Claims	Act (United	States	ex	rel.	Bibby	&	Donnelly	v.	Wells	Fargo,	et	al.	(1:06-CV-0547- AT)).	The	lawsuit	was	originally	filed	under	seal,	with	a	second	amended complaint	filed	in	June	2011.	The	second	amended	complaint	was	unsealed	by the	district	court	in	October	2011.	In	the	second	amended	complaint,	the

plaintiffs,	who	alleged	that	they	are	officers	of	a	mortgage	broker,	allege	that several	mortgage	originators,	including	entities	affiliated	with	PNC	Bank's predecessor,	National	City	Bank,	made	false	statements	to	the	U.S.	Department of	Veterans	Affairs	in	order	to	obtain	loan	guarantees	by	the	VA	under	its Interest	Rate	Reduction	Refinancing	Loans	(IRRRL)	program.	Under	that program,	the	VA	guarantees	refinancing	loans	made	to	veterans	if	the	loans	meet program	requirements,	one	of	which	limits	the	type	and	amount	of	fees	that	can be	charged	to	borrowers	by	lenders.	The	plaintiffs	alleged,	among	other	things, that	the	defendants	charged	impermissible	fees	to	borrowers	under	the	VA program	and	then	made	false	statements	to	the	VA	concerning	such	fees	in violation	of	the	civil	False	Claims	Act.	The	plaintiffs	alleged	that,	by	doing	so, National	City	Bank	and	the	other	defendants	caused	the	VA	to	pay,	among	other costs,	amounts	in	respect	of	the	loan	guarantees	to	which	the	defendants	were	not entitled.	On	their	behalf	and	on	behalf	of	the	United	States,	the	plaintiffs	sought, among	other	things,	unspecified	damages	equal	to	the	loss	the	defendants allegedly	caused	the	United	States	(including	treble	damages	under	the	False Claims	Act),	statutory	civil	penalties	between	$5,500	and	$11,000	per	false claim	made	by	the	defendants,	injunctive	relief	against	submission	of	false claims	to	the	United	States	and	imposing	unallowable	charges	against	veterans participating	in	the	IRRRL	program,	and	attorneys'	fees.	In	April	2012,	PNC Bank	reached	an	agreement	with	the	plaintiffs	to	settle	this	lawsuit.	In	October 2012,	the	United	States	provided	its	consent	to	the	settlement.	The	settlement became	final	in	December	2012.	The	amount	of	the	settlement	was	not	material to	PNC	and	had	been	previously	fully	accrued.

# Captive	Mortgage	Reinsurance	Litigation

In	December	2011,	a	lawsuit	(White,	et	al.	v.	The	PNC	Financial	Services Group,	Inc.,	et	al.	(Civil	Action	No.	11-7928))	was	filed	against	PNC	(as successor	in	interest	to	National	City	Corporation	and	several	of	its	subsidiaries) and	several	mortgage	insurance	companies	in	the	United	States	District	Court	for the	Eastern	District	of	Pennsylvania.	This	lawsuit,	which	was	brought	as	a	class action,	alleges	that	National	City	structured	its	program	of	reinsurance	of	private mortgage	insurance	in	such	a	way	as	to	avoid	a	true	transfer	of	risk	from	the mortgage	insurers	to	National	City's	captive	reinsurer.	The	plaintiffs	allege	that the	payments	from	the	mortgage	insurers	to	the	captive	reinsurer	constitute kickbacks,	referral	payments,	or	unearned	fee	splits	prohibited	under	the	Real Estate	Settlement	Procedures	Act	(RESPA),	as	well	as	common	law	unjust enrichment.	The	plaintiffs	claim,	among	other	things,	that	from	the	beginning	of 2004	until	the	end	of	2010	National	City's	captive	reinsurer	collected	from	the mortgage	insurance	company	defendants	at	least	$219	million	as	its	share	of borrowers'	private	mortgage	insurance	premiums	and	that	its	share	of	paid claims	during	this	period	was	approximately	$12	million.	The	plaintiffs	seek	to certify	a	nationwide	class	of	all	persons	who	obtained	residential	mortgage	loans originated,	funded	or	originated	through	correspondent	lending	by	National	City or	any	of	its

subsidiaries	or	affiliates	between	January	1,	2004	and	the	present	and,	in connection	with	these	mortgage	loans,	purchased	private	mortgage	insurance	and whose	residential

mortgage	loans	were	included	within	National	City's	captive	mortgage reinsurance	arrangements.	Plaintiffs	seek,	among	other	things,	statutory	damages under	RESPA	(which	include	treble	damages),	restitution	of	reinsurance premiums	collected,	disgorgement	of	profits,	and	attorneys'	fees.	In	August 2012,	the	district	court	directed	the	plaintiffs	to	file	an	amended	complaint, which	the	plaintiffs	filed	in	September	2012.	In	November	2012,	we	filed	a motion	to	dismiss	the	amended	complaint.

# Residential	Mortgage-Backed	Securities	Indemnification	Demands

We	have	received	indemnification	demands	from	several	entities	sponsoring residential	mortgage-backed	securities	and	their	affiliates	where	purchasers	of the	securities	have	brought	litigation	against	the	sponsors	and	other	parties involved	in	the	securitization	transactions.	National	City	Mortgage	had	sold whole	loans	to	the	sponsors	or	their	affiliates	that	were	allegedly	included	in certain	of	these	securitization	transactions.	According	to	the	indemnification demands,	the	plaintiffs'	claims	in	these	lawsuits	are	based	on	alleged misstatements	and	omissions	in	the	offering	documents	for	these	transactions. The	indemnification	demands	assert	that	agreements	governing	the	sale	of	these loans	or	the	securitization	transactions	to	which	National	City	Mortgage	is	a party	require	us	to	indemnify	the	sponsors	and	their	affiliates	for	losses	suffered in	connection	with	these	lawsuits.	At	present,	there	has	been	no	determination that	the	parties	seeking	indemnification	have	any	liability	to	the	plaintiffs	in these	lawsuits.

# Other	Regulatory	and	Governmental	Inquiries

PNC	is	the	subject	of	investigations,	audits	and	other	forms	of	regulatory	and governmental	inquiry	covering	a	broad	range	of	issues	in	our	banking,	securities and	other	financial	services	businesses,	in	some	cases	as	part	of	reviews	of specified	activities	at	multiple	industry	participants.	Over	the	last	few	years,	we have	experienced	an	increase	in	regulatory	and	governmental	investigations, audits	and	other	inquiries.	Areas	of	current	regulatory	or	governmental	inquiry with	respect	to	PNC	include	consumer	financial	protection,	fair	lending, mortgage	origination	and	servicing,	mortgage-related	insurance	and	reinsurance, municipal	finance	activities,	and	participation	in	government	insurance	or guarantee	programs,	some	of	which	are	described	below.	These	inquiries, including	those	described	below,	may	lead	to	administrative,	civil	or	criminal proceedings,	and	possibly	result	in	remedies	including	fines,	penalties, restitution,	or	alterations	in	our	business	practices,	and	in	additional	expenses and	collateral	costs.

•	One	area	of	significant	regulatory	and	governmental	focus	has	been mortgage	lending	and	servicing.	Numerous	federal	and	state governmental,	legislative

and	regulatory	authorities	are	investigating	practices	in	this	area.	PNC has	received	inquiries	from,	or	is	the	subject	of	investigations	by,	a broad	range	of	governmental,	legislative	and	regulatory	authorities relating	to	our	activities	in	this	area	and	is	cooperating	with	these investigations	and	inquiries.	As	a	result	of	the	number	and	range	of authorities	conducting	the	investigations	and	inquiries,	as	well	as	the nature	of	these	types	of	investigations	and	inquiries,	among	other factors,	PNC	cannot	at	this	time	predict	the	ultimate	overall	cost	to	or effect	on	PNC	from	potential	governmental,	legislative	or	regulatory actions	arising	out	of	these	investigations	and	inquiries.

•	In	April	2011,	as	a	result	of	a	publicly-disclosed	interagency horizontal	review	of	residential	mortgage	servicing	operations	at fourteen	federally	regulated	mortgage	servicers,	PNC	entered into	a	consent	order	with	the	Board	of	Governors	of	the	Federal Reserve	System	and	PNC	Bank	entered	into	a	consent	order	with the	Office	of	the	Comptroller	of	the	Currency.	Collectively, these	consent	orders	describe	certain	foreclosure-related practices	and	controls	that	the	regulators	found	to	be	deficient and	require	PNC	and	PNC	Bank	to,	among	other	things,	develop and	implement	plans	and	programs	to	enhance	PNC's	residential mortgage	servicing	and	foreclosure	processes,	retain	an independent	consultant	to	review	certain	residential	mortgage foreclosure	actions,	take	certain	remedial	actions,	and	oversee compliance	with	the	orders	and	the	new	plans	and	programs.	The two	orders	do	not	foreclose	the	potential	for	civil	money penalties	from	either	of	these	regulators,	although	the	range	of potential	penalties	communicated	to	PNC	by	the	regulators	in connection	with	the	agreements	described	below	is	not	material to	PNC.

In	connection	with	these	orders,	PNC	established	a	Compliance Committee	of	the	Boards	of	PNC	and	PNC	Bank	to	monitor	and coordinate	PNC's	and	PNC	Bank's	implementation	of	the commitments	under	the	orders.	PNC	and	PNC	Bank	are executing	Action	Plans	designed	to	meet	the	requirements	of	the orders.	Consistent	with	the	orders,	PNC	also	engaged	an independent	consultant	to	conduct	a	review	of	certain	residential foreclosure	actions,	including	those	identified	through	borrower complaints,	and	identify	whether	any	remedial	actions	for borrowers	are	necessary.	This	review	was	on-going	throughout 2012.

In	early	2013,	PNC	and	PNC	Bank,	along	with	twelve	other residential	mortgage	servicers,	reached	agreements	with	the	OCC and	the	Federal	Reserve	to	amend	these	consent	orders.	Pursuant to	the	amended	consent	orders,	in	order	to	accelerate	the remediation	process,	PNC	agreed	to	make	a	payment	of approximately	$70	million	for	distribution	to	potentially	affected borrowers	in	the	review	population	and	to	provide	approximately $111	million	in	additional	loss	mitigation	or	other	foreclosure prevention	relief,	which	may	be	satisfied	pursuant	to	the amended	consent	orders	by	a	variety	of	borrower	relief	actions	or by	additional	cash	payments	or	resource	commitments	to borrower	counseling	or	education.	Fulfillment	of	these commitments	will	satisfy	all	of	PNC's	and	PNC	Bank's obligations	under	the	consent	orders	in	connection	with	the independent	foreclosure	review.	We	do	not	expect	any	additional financial	charges	related	to	the	amendment	to	the	consent	orders to	be	material.	PNC's	and	PNC	Bank's	obligations	to	comply with	the	remaining	provisions	of	the	consent	orders	remain.

•	On	February	9,	2012,	the	Department	of	Justice,	other	federal regulators	and	49	state	attorneys	general	announced	agreements	with the	five	largest	mortgage	servicers.	Written	agreements	were	filed	with the	U.S.	District	Court	for	the	Southern	District	of	New	York	in	March 2012.	Under	these	agreements,	the	mortgage	servicers	will	make	cash payments	to	federal	and	state	governments,	provide	various	forms	of financial	relief	to	borrowers,	and	implement	new	mortgage	servicing standards.	These	governmental	authorities	are	continuing	their	review of,	and	have	engaged	in	discussions	with,	other	mortgage	servicers, including	PNC,	that	were	subject	to	the	interagency	horizontal	review, which	could	result	in	the	imposition	of	substantial	payments	and	other forms	of	relief	(similar	to	that	agreed	to	by	the	five	largest	servicers) on	some	or	all	of	these	mortgage	servicers,	including	PNC.	Whether and	to	what	extent	any	such	relief	may	be	imposed	on	PNC	and	other smaller	servicers	is	not	yet	known.

•	PNC	has	received	subpoenas	from	the	U.S.	Attorney's	Office	for	the Southern	District	of	New	York	concerning	National	City	Bank's lending	practices	in	connection	with	loans	insured	by	the	Federal Housing	Administration	(FHA)	as	well	as	certain	non-FHA-insured loan	origination,	sale	and	securitization	practices.	The	U.S.	Attorney's Office	inquiry	is	in	its	early	stage	and	PNC	is	cooperating	with	the investigation.

•	The	SEC	previously	commenced	investigations	of	activities	of	National City	prior	to	its	acquisition	by	PNC.	The	SEC	has	requested,	and	we	have provided	to	the	SEC,	documents	concerning,	among	other	things,	National City's	capital-raising	activities,	loan	underwriting	experience,	allowance for	loan	losses,	marketing	practices,	dividends,	bank	regulatory	matters and	the	sale	of	First	Franklin	Financial	Corporation.	In	February	2013,	the SEC	staff	informed	PNC	that	it	had	completed	its	investigation	and	does not	intend	to	recommend	enforcement	action.

Our	practice	is	to	cooperate	fully	with	regulatory	and	governmental investigations,	audits	and	other	inquiries,	including	those	described	in	this	Note 23.

In	addition	to	the	proceedings	or	other	matters	described	above,	PNC	and persons	to	whom	we	may	have	indemnification	obligations,	in	the	normal	course of	business,	are	subject	to	various	other	pending	and	threatened	legal proceedings	in	which	claims	for	monetary	damages	and	other	relief	are	asserted. We	do	not	anticipate,	at	the	present	time,	that	the	ultimate	aggregate	liability,	if any,	arising	out	of	such	other	legal	proceedings	will	have	a	material	adverse effect	on	our	financial	position.	However,	we	cannot	now	determine	whether	or not	any	claims	asserted	against	us	or	others	to	whom	we	may	have indemnification	obligations,	whether	in	the	proceedings	or	other	matters described	above	or	otherwise,	will	have	a	material	adverse	effect	on	our	results of	operations	in	any	future	reporting	period,	which	will	depend	on,	among	other things,	the	amount	of	the	loss	resulting	from	the	claim	and	the	amount	of	income otherwise	reported	for	the	reporting	period.

See	Note	24	Commitments	and	Guarantees	for	additional	information	regarding the	Visa	indemnification	and	our	other	obligations	to	provide	indemnification, including	to	current	and	former	officers,	directors,	employees	and	agents	of	PNC and	companies	we	have	acquired,	including	National	City.

# NOTE	24	COMMITMENTS	AND	GUARANTEES

# EQUITY	FUNDING	AND	OTHER	COMMITMENTS

Our	unfunded	commitments	at	December	31,	2012	included	private	equity investments	of	$182	million,	and	other	investments	of	$3	million.

# STANDBY	LETTERS	OF	CREDIT

We	issue	standby	letters	of	credit	and	have	risk	participations	in	standby	letters of	credit	issued	by	other	financial	institutions,	in	each	case	to	support	obligations of	our	customers	to	third	parties,	such	as	insurance	requirements	and	the facilitation	of	transactions	involving	capital	markets	product	execution.	Net outstanding	standby	letters	of	credit	and	internal	credit	ratings	were	as	follows:

# Table	153:	Net	Outstanding	Standby	Letters	of	Credit

| Dollars	in	billions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Net\toutstanding\tstandby\tletters\tof |  |  |
| credit | $11.5 | $10.8 |
| Internal\tcredit\tratings\t(as\ta |  |  |
| percentage\tof\tportfolio): |  |  |
| Pass\t(a) | 95% | 94% |
| Below\tpass\t(b) | 5% | 6% |
| (a)\nIndicates\tthat\texpected\trisk\tof\tloss\tis\tcurrently\tlow. |  |  |

(a) Indicates	that	expected	risk	of	loss	is	currently	low. (b) Indicates	a	higher	degree	of	risk	of	default.

If	the	customer	fails	to	meet	its	financial	or	performance	obligation	to	the	third party	under	the	terms	of	the	contract	or	there	is	a	need	to	support	a	remarketing program,	then	upon	the	request	of	the	guaranteed	party,	subject	to	the	terms	of the	letter	of	credit,	we	would	be	obligated	to	make	payment	to	them.	The	standby letters	of	credit	and	risk	participations	in	standby	letters	of	credit	and	bankers' acceptances	outstanding	on	December	31,	2012	had	terms	ranging	from	less	than 1	year	to	7	years.	The	aggregate	maximum	amount	of	future	payments	PNC could	be	required	to	make	under	outstanding	standby	letters	of	credit	and	risk participations	in	standby	letters	of	credit	and	bankers'	acceptances	was	$14.7 billion	at	December	31,	2012,	of	which	$7.5	billion	support	remarketing programs.

As	of	December	31,	2012,	assets	of	$1.8	billion	secured	certain	specifically identified	standby	letters	of	credit.	Recourse	provisions	from	third	parties	of $3.2	billion	were	also	available	for	this	purpose	as	of	December	31,	2012.	In addition,	a	portion	of	the	remaining	standby	letters	of	credit	and	letter	of	credit risk	participations	issued	on	behalf	of	specific	customers	is	also	secured	by collateral	or	guarantees	that	secure	the	customers'	other	obligations	to	us.	The carrying	amount	of	the	liability	for	our	obligations	related	to	standby	letters	of credit	and	risk	participations	in	standby	letters	of	credit	and	bankers' acceptances	was	$247	million	at	December	31,	2012.

# STANDBY	BOND	PURCHASE	AGREEMENTS	AND	OTHER	LIQUIDITY FACILITIES

We	enter	into	standby	bond	purchase	agreements	to	support	municipal	bond obligations.	At	December	31,	2012,	the	aggregate	of	our	commitments	under these	facilities	was	$587	million.	We	also	enter	into	certain	other	liquidity facilities	to	support	individual	pools	of	receivables	acquired	by	commercial paper	conduits.	At	December	31,	2012,	our	total	commitments	under	these facilities	were	$145	million.

# INDEMNIFICATIONS

We	are	a	party	to	numerous	acquisition	or	divestiture	agreements	under	which we	have	purchased	or	sold,	or	agreed	to	purchase	or	sell,	various	types	of	assets. These	agreements	can	cover	the	purchase	or	sale	of: •	Entire	businesses,

•	Loan	portfolios,

# •	Branch	banks,

•	Partial	interests	in	companies,	or •	Other	types	of	assets.

These	agreements	generally	include	indemnification	provisions	under	which	we indemnify	the	third	parties	to	these	agreements	against	a	variety	of	risks	to	the indemnified	parties	as	a	result	of	the	transaction	in	question.	When	PNC	is	the seller,	the	indemnification	provisions	will	generally	also	provide	the	buyer	with protection	relating	to	the	quality	of	the	assets	we	are	selling	and	the	extent	of	any liabilities	being	assumed	by	the	buyer.	Due	to	the	nature	of	these	indemnification provisions,	we	cannot	quantify	the	total	potential	exposure	to	us	resulting	from them.

We	provide	indemnification	in	connection	with	securities	offering	transactions	in which	we	are	involved.	When	we	are	the	issuer	of	the	securities,	we	provide indemnification	to	the	underwriters	or	placement	agents	analogous	to	the indemnification	provided	to	the	purchasers	of	businesses	from	us,	as	described above.	When	we	are	an	underwriter	or	placement	agent,	we	provide	a	limited indemnification	to	the	issuer	related	to	our	actions	in	connection	with	the offering	and,	if	there	are	other	underwriters,	indemnification	to	the	other underwriters	intended	to	result	in	an	appropriate	sharing	of	the	risk	of participating	in	the	offering.	Due	to	the	nature	of	these	indemnification provisions,	we	cannot	quantify	the	total	potential	exposure	to	us	resulting	from them.

In	the	ordinary	course	of	business,	we	enter	into	certain	types	of	agreements	that include	provisions	for	indemnifying	third	parties.	We	also	enter	into	certain	types of	agreements,	including	leases,	assignments	of	leases,	and	subleases,	in	which we	agree	to	indemnify	third	parties	for	acts	by	our	agents,	assignees	and/or sublessees,	and	employees.	We	also	enter	into	contracts	for	the	delivery	of technology	service	in	which	we	indemnify	the	other	party	against	claims	of patent	and	copyright	infringement	by	third	parties.	Due	to	the	nature	of	these indemnification	provisions,	we	cannot	calculate	our	aggregate	potential	exposure under	them.

In	the	ordinary	course	of	business,	we	enter	into	contracts	with	third	parties under	which	the	third	parties	provide	services	on	behalf	of	PNC.	In	many	of these	contracts,	we	agree	to	indemnify	the	third	party	service	provider	under certain	circumstances.	The	terms	of	the	indemnity	vary	from	contract	to	contract and	the	amount	of	the	indemnification	liability,	if	any,	cannot	be	determined.

We	are	a	general	or	limited	partner	in	certain	asset	management	and	investment limited	partnerships,	many	of	which	contain	indemnification	provisions	that would	require	us	to	make	payments	in	excess	of	our	remaining	unfunded commitments.	While	in	certain	of	these	partnerships	the	maximum	liability	to	us is	limited	to	the	sum	of	our	unfunded	commitments	and	partnership	distributions received	by	us,	in	the	others	the	indemnification	liability	is	unlimited.	As	a result,	we	cannot	determine	our	aggregate	potential	exposure	for	these indemnifications.

In	some	cases,	indemnification	obligations	of	the	types	described	above	arise under	arrangements	entered	into	by	predecessor	companies	for	which	we	become responsible	as	a	result	of	the	acquisition.

Pursuant	to	their	bylaws,	PNC	and	its	subsidiaries	provide	indemnification	to directors,	officers	and,	in	some	cases,	employees	and	agents	against	certain liabilities	incurred	as	a	result	of	their	service	on	behalf	of	or	at	the	request	of PNC	and	its	subsidiaries.	PNC	and	its	subsidiaries	also	advance	on	behalf	of covered	individuals	costs	incurred	in	connection	with	certain	claims	or proceedings,	subject	to	written	undertakings	by	each	such	individual	to	repay	all amounts	advanced	if	it	is	ultimately	determined	that	the	individual	is	not	entitled to	indemnification.	We	generally	are	responsible	for	similar	indemnifications and	advancement	obligations	that	companies	we	acquire	had	to	their	officers, directors	and	sometimes	employees	and	agents	at	the	time	of	acquisition.	We advanced	such	costs	on	behalf	of	several	such	individuals	with	respect	to pending	litigation	or	investigations	during	2012.	It	is	not	possible	for	us	to determine	the	aggregate	potential	exposure	resulting	from	the	obligation	to provide	this	indemnity	or	to	advance	such	costs.

# VISA	INDEMNIFICATION

Our	payment	services	business	issues	and	acquires	credit	and	debit	card transactions	through	Visa	U.S.A.	Inc.	card	association	or	its	affiliates	(Visa).

In	October	2007,	Visa	completed	a	restructuring	and	issued	shares	of	Visa	Inc. common	stock	to	its	financial	institution	members	(Visa	Reorganization)	in contemplation	of	its	initial	public	offering	(IPO).	As	part	of	the	Visa Reorganization,	we	received	our	proportionate	share	of	a	class	of	Visa	Inc. common	stock	allocated	to	the	US	members.	Prior	to	the	IPO,	the	US	members, which	included	PNC,	were	obligated	to	indemnify	Visa	for	judgments	and settlements	related	to	the	specified	litigation.

As	a	result	of	the	acquisition	of	National	City,	we	became	party	to	judgment	and loss	sharing	agreements	with	Visa	and	certain	other	banks.	The	judgment	and loss	sharing	agreements	were	designed	to	apportion	financial	responsibilities arising	from	any	potential	adverse	judgment	or	negotiated	settlements	related	to the	specified	litigation.

In	July	2012,	Visa	funded	$150	million	into	their	litigation	escrow	account	and reduced	the	conversion	rate	of	Visa	B	to	A	shares.	We	continue	to	have	an obligation	to	indemnify	Visa	for	judgments	and	settlements	for	the	remaining specified	litigation,	therefore	we	may	have	additional	exposure	to	the	specified Visa	litigation.

As	discussed	in	Note	3	Loan	Sale	and	Servicing	Activities	and	Variable	Interest Entities,	PNC	has	sold	commercial	mortgage,	residential	mortgage	and	home equity	loans	directly

or	indirectly	through	securitization	and	loan	sale	transactions	in	which	we	have continuing	involvement.	One	form	of	continuing	involvement	includes	certain recourse	and	loan	repurchase	obligations	associated	with	the	transferred	assets.

We	originate,	close	and	service	certain	multi-family	commercial	mortgage	loans which	are	sold	to	FNMA	under	FNMA's	DUS	program.	We	participated	in	a similar	program	with	the	FHLMC.

We	maintain	a	reserve	for	estimated	losses	based	upon	our	exposure.	The	reserve for	losses	under	these	programs	totaled	$43	million	and	$47	million	as	of December	31,	2012	and	December	31,	2011,	respectively,	and	is	included	in Other	liabilities	on	our	Consolidated	Balance	Sheet.	If	payment	is	required under	these	programs,	we	would	not	have	a	contractual	interest	in	the	collateral underlying	the	mortgage	loans	on	which	losses	occurred,	although	the	value	of the	collateral	is	taken	into	account	in	determining	our	share	of	such	losses.	Our exposure	and	activity	associated	with	these	recourse	obligations	are	reported	in the	Corporate	&	Institutional	Banking	segment.

# Table	154:	Analysis	of	Commercial	Mortgage	Recourse	Obligations

| In	millions | 2012 | 2011 |
| :--- | :--- | :--- |
| January\t1 | $47 | $54 |
| Reserve\tadjustments,\tnet | 4 | 1 |
| Losses\t–\tloan\trepurchases\tand\tsettlements | (8) | (8) |
| December\t31 | $43 | $47 |

# RESIDENTIAL	MORTGAGE	LOAN	AND	HOME	EQUITY	REPURCHASE OBLIGATIONS

While	residential	mortgage	loans	are	sold	on	a	non-recourse	basis,	we	assume certain	loan	repurchase	obligations	associated	with	mortgage	loans	we	have	sold to	investors.	These	loan	repurchase	obligations	primarily	relate	to	situations where	PNC	is	alleged	to	have	breached	certain	origination	covenants	and representations	and	warranties	made	to	purchasers	of	the	loans	in	the	respective purchase	and	sale	agreements.	Residential	mortgage	loans	covered	by	these	loan repurchase	obligations	include	first	and	second-lien	mortgage	loans	we	have	sold through	Agency	securitizations,	Non-agency	securitizations,	and	loan	sale transactions.	As	discussed	in	Note	3	Loans	Sale	and	Servicing	Activities	and

Variable	Interest	Entities,	Agency	securitizations	consist	of	mortgage	loan	sale transactions	with	FNMA,	FHLMC,	and	the	GNMA	program,	while	Non-agency securitizations	consist	of	mortgage	loan	sale	transactions	with	private	investors. Mortgage	loan	sale	transactions	that	are	not	part	of	a	securitization	may	involve FNMA,	FHLMC	or	private	investors.	Our	historical	exposure	and	activity associated	with	Agency	securitization	repurchase	obligations	has	primarily	been related	to	transactions	with	FNMA	and	FHLMC,	as	indemnification	and repurchase	losses	associated	with	FHA	and	VA-insured	and	uninsured	loans pooled	in	GNMA	securitizations	historically	have	been	minimal.	Repurchase obligation	activity	associated	with	residential	mortgages	is	reported	in	the Residential	Mortgage	Banking	segment.

PNC's	repurchase	obligations	also	include	certain	brokered	home	equity loans/lines	that	were	sold	to	a	limited	number	of	private	investors	in	the	financial services	industry	by	National	City	prior	to	our	acquisition	of	National	City.	PNC is	no	longer	engaged	in	the	brokered	home	equity	lending	business,	and	our exposure	under	these	loan	repurchase	obligations	is	limited	to	repurchases	of loans	sold	in	these	transactions.	Repurchase	activity	associated	with	brokered home	equity	loans/lines	is	reported	in	the	Non-Strategic	Assets	Portfolio segment.

Loan	covenants	and	representations	and	warranties	are	established	through	loan sale	agreements	with	various	investors	to	provide	assurance	that	PNC	has	sold loans	that	are	of	sufficient	investment	quality.	Key	aspects	of	such	covenants	and representations	and	warranties	include	the	loan's	compliance	with	any	applicable loan	criteria	established	for	the	transaction,	including	underwriting	standards, delivery

of	all	required	loan	documents	to	the	investor	or	its	designated	party,	sufficient collateral	valuation,	and	the	validity	of	the	lien	securing	the	loan.	As	a	result	of alleged	breaches	of	these	contractual	obligations,	investors	may	request	PNC	to indemnify	them	against	losses	on	certain	loans	or	to	repurchase	loans.

Indemnification	and	repurchase	liabilities	are	initially	recognized	when	loans	are sold	to	investors	and	are	subsequently	evaluated	by	management.	Initial recognition	and	subsequent	adjustments	to	the	indemnification	and	repurchase liability	for	the	sold	residential	mortgage	portfolio	are	recognized	in	Residential mortgage	revenue	on	the	Consolidated	Income	Statement.	Since	PNC	is	no longer	engaged	in	the	brokered	home	equity	lending	business,	only	subsequent adjustments	are	recognized	to	the	home	equity	loans/lines	indemnification	and repurchase	liability.	These	adjustments	are	recognized	in	Other	noninterest income	on	the	Consolidated	Income	Statement.

Management's	subsequent	evaluation	of	these	indemnification	and	repurchase liabilities	is	based	upon	trends	in	indemnification	and	repurchase	requests,	actual loss	experience,	risks	in	the	underlying	serviced	loan	portfolios,	and	current economic	conditions.	As	part	of	its	evaluation,	management	considers	estimated loss	projections	over	the	life	of	the	subject	loan	portfolio.	At	December	31,	2012 and	December	31,	2011,	the	total	indemnification	and	repurchase	liability	for estimated	losses	on	indemnification	and	repurchase	claims	totaled	$672	million and	$130	million,	respectively,	and	was	included	in	Other	liabilities	on	the Consolidated	Balance	Sheet.	An	analysis	of	the	changes	in	this	liability	during 2012	and	2011	follows:

# Table	155:	Analysis	of	Indemnification	and	Repurchase	Liability	for	Asserted	Claims	and	Unasserted	Claims

|  |  | 2012 |  |  | 2011 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| In\tmillions | Residential\nMortgages\t(a) | Home\nEquity\nLoans/\nLines\t(b) | Total | Residential\nMortgages\t(a) | Home\nEquity\nLoans/\nLines\t(b) | Total |
| January\t1 | $83 | $47 | $130 | $144 | $150 | $294 |
| Reserve\tadjustments,\tnet | 32 | 12 | 44 | 14 |  | 14 |
| RBC\tBank\t(USA)\tacquisition | 26 |  | 26 |  |  |  |
| Losses\t–\tloan\trepurchases\tand\tsettlements | (40) | (8) | (48) | (34) | (22) | (56) |
| March\t31 | $101 | $51 | $152 | $124 | $128 | $252 |
| Reserve\tadjustments,\tnet | 438 | 15 | \t 453 | 21 | 3 | 24 |
| Losses\t–\tloan\trepurchases\tand\tsettlements | (77) | (5) | (82) | (50) | (76) | (126) |
| June\t30 | $462 | $61 | $523 | $95 | $55 | $150 |
| Reserve\tadjustments,\tnet | 37 | 4 | 41 | 31 |  | 31 |
| Losses\t–\tloan\trepurchases\tand\tsettlements | (78) | (3) | (81) | (41) | (4) | (45) |
| September\t30 | $421 | $62 | $483 | $85 | $51 | $136 |
| Reserve\tadjustments,\tnet | 254 | (2) | \t 252 | 36 | 1 | 37 |
| Losses\t–\tloan\trepurchases\tand\tsettlements | (61) | (2) | (63) | (38) | (5) | (43) |
| December\t31 | $614 | $58 | $672 | $83 | $47 | $130 |
| (a) |  |  |  |  |  |  |

(a) Repurchase	obligation	associated	with	sold	loan	portfolios	of	$105.8	billion	and	$121.4	billion	at	December	31,	2012	and	December	31,	2011,	respectively.

(b) Repurchase	obligation	associated	with	sold	loan	portfolios	of	$4.3	billion	and	$4.5	billion	at	December	31,	2012	and	December	31,	2011,	respectively.	PNC	is	no	longer	engaged	in	the	brokered	home	equity lending	business,	which	was	acquired	with	National	City.

Management	believes	our	indemnification	and	repurchase	liabilities appropriately	reflect	the	estimated	probable	losses	on	indemnification	and repurchase	claims	for	all	loans	sold	and	outstanding	as	of	December	31,	2012 and	2011.	In	making	these	estimates,	we	consider	the	losses	that	we	expect	to incur	over	the	life	of	the	sold	loans.	While	management	seeks	to	obtain	all relevant	information	in	estimating	the	indemnification	and	repurchase	liability, the	estimation	process	is	inherently	uncertain	and	imprecise,	and,	accordingly,	it is	reasonably	possible	that	future	indemnification	and	repurchase	losses	could	be more	or	less	than	our	established	liability.	Factors	that	could	affect	our	estimate include	the	volume	of	valid	claims	driven	by	investor	strategies	and	behavior, our	ability	to	successfully	negotiate	claims	with	investors,	housing	prices,	and other	economic	conditions.	At	December	31,	2012,	we	estimate	that	it	is reasonably	possible	that	we	could	incur	additional	losses	in	excess	of	our accrued	indemnification	and	repurchase	liability	of	up	to	approximately	$332 million	for	our	portfolio	of	residential	mortgage	loans	sold.	At	December	31, 2012,	the	reasonably	possible	loss	above	our	accrual	for	our	portfolio	of	home equity	loans/lines	sold	was	not	material.	This	estimate	of	potential	additional losses	in	excess	of	our	liability	is	based	on	assumed	higher	repurchase	claims and	lower	claim	rescissions	than	our	current	assumptions.

# Reinsurance	Agreements

We	have	two	wholly-owned	captive	insurance	subsidiaries	which	provide reinsurance	to	third-party	insurers	related	to	insurance	sold	to	our	customers. These	subsidiaries	enter	into	various	types	of	reinsurance	agreements	with	third- party	insurers	where	the	subsidiary	assumes	the	risk	of	loss	through	either	an excess	of	loss	or	quota	share	agreement	up	to	100%	reinsurance.	In	excess	of	loss agreements,	these	subsidiaries	assume	the	risk	of	loss	for	an	excess	layer	of coverage	up	to	specified	limits,	once	a	defined	first	loss	percentage	is	met.	In quota	share	agreements,	the	subsidiaries	and	third-party	insurers	share	the responsibility	for	payment	of	all	claims.

These	subsidiaries	provide	reinsurance	for	accidental	death	&	dismemberment, credit	life,	accident	&	health,	lender	placed	hazard,	and	borrower	and	lender paid	mortgage	insurance	with	an	aggregate	maximum	exposure	up	to	the specified	limits	for	all	reinsurance	contracts	as	follows:

# Table	156:	Reinsurance	Agreements	Exposure	(a)

| In	millions | December	31<br>2012 | December	31<br>2011 |
| :--- | :--- | :--- |
| Accidental\tDeath\t&amp;\tDismemberment | $2,049 | $2,255 |
| Credit\tLife,\tAccident\t&amp;\tHealth | 795 | 951 |
| Lender\tPlaced\tHazard\t(b) | 2,774 | 2,899 |
| Borrower\tand\tLender\tPaid\tMortgage |  |  |
| Insurance | 228 | 327 |
| Maximum\tExposure | $5,846 | $6,432 |
| Percentage\tof\treinsurance\tagreements: |  |  |
| Excess\tof\tLoss\t–\tMortgage\tInsurance | 3% | 4% |
| Quota\tShare | 97% | 96% |
| Maximum\tExposure\tto\tQuota\tShare |  |  |
| Agreements\twith\t100% |  |  |
| Reinsurance | $794 | $950 |
| (a)\nReinsurance\tagreements\texposure\tbalances\trepresent\testimates\tbased\ton\tavailability\tof\tfinancial |  |  |

(a) Reinsurance	agreements	exposure	balances	represent	estimates	based	on	availability	of	financial information	from	insurance	carriers.

(b) Through	the	purchase	of	catastrophe	reinsurance	connected	to	the	Lender	Placed	Hazard	Exposure, should	a	catastrophic	event	occur,	PNC	will	benefit	from	this	reinsurance.	No	credit	for	the catastrophe	reinsurance	protection	is	applied	to	the	aggregate	exposure	figure.

A	rollforward	of	the	reinsurance	reserves	for	probable	losses	for	2012	and	2011 follows:

# Table	157:	Reinsurance	Reserves	–	Rollforward

There	were	no	changes	to	the	terms	of	existing	agreements,	nor	were	any	new relationships	entered	into	or	existing	relationships	exited.

There	is	a	reasonable	possibility	that	losses	could	be	more	than	or	less	than	the amount	reserved	due	to	ongoing	uncertainty	in	various	economic,	social	and other	factors	that	could	impact	the	frequency	and	severity	of	claims	covered	by these	reinsurance	agreements.	At	December	31,	2012,	the	reasonably	possible loss	above	our	accrual	was	not	material.

We	enter	into	repurchase	and	resale	agreements	where	we	transfer	investment securities	to/from	a	third	party	with	the	agreement	to	repurchase/resell	those investment	securities	at	a	future	date	for	a	specified	price.	These	transactions	are accounted	for	as	collateralized	borrowings/financings.

# NOTE	25	PARENT	COMPANY

Summarized	financial	information	of	the	parent	company	is	as	follows:

# Table	158:	Parent	Company	–	Income	Statement

# Table	159:	Parent	Company	–	Balance	Sheet

Commercial	paper	and	all	other	debt	issued	by	PNC	Funding	Corp,	a	wholly owned	finance	subsidiary,	is	fully	and	unconditionally	guaranteed	by	the	parent company.	In	addition,	in	connection	with	certain	affiliates'	commercial	and residential	mortgage	servicing	operations,	the	parent	company	has	committed	to maintain	such	affiliates'	net	worth	above	minimum	requirements.

# Table	160:	Parent	Company	–	Interest	Paid	and	Income	Tax	Refunds (Payments)

# NOTE	26	SEGMENT	REPORTING

We	have	six	reportable	business	segments: •	Retail	Banking

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

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

We	have	allocated	the	allowances	for	loan	and	lease	losses	and	for	unfunded loan	commitments	and	letters	of	credit	based	on	our	assessment	of	risk	in	each business	segment's	loan	portfolio.	Our	allocation	of	the	costs	incurred	by operations	and	other	shared	support	areas	not	directly	aligned	with	the businesses	is	primarily	based	on	the	use	of	services.	Key	reserve	assumptions and	estimation	processes	react	to	and	are	influenced	by	observed	changes	in	loan portfolio	performance	experience,	the	financial	strength	of	the	borrower,	and economic	conditions.	Key	reserve	assumptions	are	periodically	updated.	During the	third	quarter	of	2012,	PNC

increased	the	amount	of	internally	observed	data	used	in	estimating	the	key commercial	lending	assumptions	of	PDs	and	LGDs.	Prior	periods	are	not presented	on	a	comparable	basis	as	it	is	not	practicable	to	do	so.

Total	business	segment	financial	results	differ	from	consolidated	income	from continuing	operations	before	noncontrolling	interests,	which	itself	excludes	the earnings	and	revenue	attributable	to	GIS	through	June	30,	2010	and	the	related third	quarter	2010	after-tax	gain	on	the	sale	of	GIS	that	are	reflected	in discontinued	operations.	The	impact	of	these	differences	is	reflected	in	the "Other"	category	in	the	business	segment	tables.	"Other"	includes	residual activities	that	do	not	meet	the	criteria	for	disclosure	as	a	separate	reportable business,	such	as	gains	or	losses	related	to	BlackRock	transactions,	integration costs,	asset	and	liability	management	activities	including	net	securities	gains	or losses,	other-than-temporary	impairment	of	investment	securities	and	certain trading	activities,	exited	businesses,	alternative	investments	including	private equity,	intercompany	eliminations,	most	corporate	overhead,	tax	adjustments that	are	not	allocated	to	business	segments	and	differences	between	business segment	performance	reporting	and	financial	statement	reporting	(GAAP), including	the	presentation	of	net	income	attributable	to	noncontrolling	interests as	the	segments'	results	exclude	their	portion	of	net	income	attributable	to noncontrolling	interests.	Assets,	revenue	and	earnings	attributable	to	foreign activities	were	not	material	in	the	periods	presented	for	comparative	purposes.

# BUSINESS	SEGMENT	PRODUCTS	AND	SERVICES

Retail	Banking	provides	deposit,	lending,	brokerage,	investment	management, and	cash	management	services	to	consumer	and	small	business	customers	within our	primary	geographic	markets.	Our	customers	are	serviced	through	our	branch network,	call	centers,	online	banking	and	mobile	channels.	The	branch	network is	located	primarily	in	Pennsylvania,	Ohio,	New	Jersey,	Michigan,	Illinois, Maryland,	Indiana,	North	Carolina,	Florida,	Kentucky,	Washington,	D.C., Delaware,	Alabama,	Virginia,	Georgia,	Missouri,	Wisconsin	and	South	Carolina.

Corporate	&	Institutional	Banking	provides	lending,	treasury	management	and capital	markets-related	products	and	services	to	mid-sized	corporations, government	and	not-for-profit	entities	and	selectively	to	large	corporations. Lending	products	include	secured	and	unsecured	loans,	letters	of	credit	and equipment	leases.	Treasury	management	services	include	cash	and	investment management,	receivables	management,	disbursement	services,	funds	transfer services,	information	reporting	and	global	trade	services.	Capital	markets-related products	and	services	include	foreign	exchange,	derivatives,	loan	syndications, mergers	and	acquisitions	advisory	and	related	services	to	middle-market companies,	our	multi-seller	conduit,	securities	underwriting	and	securities	sales and	trading.	Corporate	&	Institutional	Banking	also	provides	commercial	loan servicing,	and	real	estate	advisory	and

technology	solutions	for	the	commercial	real	estate	finance	industry. Corporate	&	Institutional	Banking	provides	products	and	services	generally within	our	primary	geographic	markets,	with	certain	products	and	services offered	nationally	and	internationally.

Residential	Mortgage	Banking	directly	originates	primarily	first	lien	residential mortgage	loans	on	a	nationwide	basis	with	a	significant	presence	within	the	retail banking	footprint,	and	also	originates	loans	through	majority	owned	affiliates. Mortgage	loans	represent	loans	collateralized	by	one-to-four-family	residential real	estate.	These	loans	are	typically	underwritten	to	government	agency	and/or third-party	standards,	and	sold,	servicing	retained,	to	secondary	mortgage conduits	of	FNMA,	FHLMC,	Federal	Home	Loan	Banks	and	third-party investors,	or	are	securitized	and	issued	under	the	GNMA	program.	The	mortgage servicing	operation	performs	all	functions	related	to	servicing	mortgage	loans, primarily	those	in	first	lien	position,	for	various	investors	and	for	loans	owned	by PNC.	Certain	loan	applications	are	brokered	by	majority	owned	affiliates	to others.

BlackRock	is	a	leader	in	investment	management,	risk	management	and advisory	services	for	institutional	and	retail	clients	worldwide.	BlackRock provides	diversified	investment	management	services	to	institutional	clients, intermediary	and	individual	investors	through	various	investment	vehicles. Investment	management	services	primarily	consist	of	the	management	of	equity, fixed	income,	multi-asset	class,	alternative	investment	and	cash	management products.	BlackRock	offers	its	investment	products	in	a	variety	of	vehicles, including	open-end	and	closed-end	mutual	funds,	iShares ®	exchange-traded funds	(ETFs),	collective	investment	trusts	and	separate	accounts.	In	addition, BlackRock	provides	market	risk	management,	financial	markets	advisory	and enterprise	investment	system	services	to	a	broad	base	of	clients.	Financial markets	advisory	services	include	valuation	services	relating	to	illiquid securities,	dispositions	and	workout	assignments	(including	long-term	portfolio liquidation	assignments),	risk	management	and	strategic	planning	and	execution.

We	hold	an	equity	investment	in	BlackRock,	which	is	a	key	component	of	our diversified	revenue	strategy.	BlackRock	is	a	publicly	traded	company,	and additional	information	regarding	its	business	is	available	in	its	filings	with	the Securities	and	Exchange	Commission	(SEC).	At	December	31,	2012,	our economic	interest	in	BlackRock	was	22%.

# Table	162:	Results	Of	Businesses

| Year	ended	December	31<br>In	millions | Retail<br>Banking | Corporate<br>&amp;<br>Institutional<br>Banking | Asset<br>Management<br>Group | Residential<br>Mortgage<br>Banking | BlackRock | Non-<br>Strategic<br>Assets<br>Portfolio | Other | Consolidated |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2012 |  |  |  |  |  |  |  |  |
| Income\tStatement |  |  |  |  |  |  |  |  |
| Net\tinterest\tincome | $4,314 | $3,991 | $297 | $209 |  | $830 | $(1) | $9,640 |
| Noninterest\tincome | 2,012 | 1,598 | 676 | 317 | $512 | 13 | 744 | 5,872 |
| Total\trevenue | 6,326 | 5,589 | 973 | 526 | 512 | 843 | 743 | 15,512 |
| Provision\tfor\tcredit\tlosses\t(benefit) | 800 |  | 11 | (5) |  | 181 |  | 987 |
| Depreciation\tand\tamortization | 194 | 141 | 41 | 11 |  |  | 320 | 707 |
| Other\tnoninterest\texpense | 4,392 | 1,887 | 691 | 981 |  | 287 | 1,637 | 9,875 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes |  |  |  |  |  |  |  |  |
| and\tnoncontrolling\tinterests | 940 | 3,561 | 230 | (461) | 512 | 375 | (1,214) | 3,943 |
| Income\ttaxes\t(benefit) | 344 | 1,233 | 85 | (153) | 117 | 138 | (822) | 942 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | $596 | $2,328 | $145 | $(308) | $395 | $237 | $(392) | $3,001 |
| Inter-segment\trevenue | $1 | $33 | $12 | $7 | $15 | $(10) | $(58) |  |
| Average\tAssets\t(a) | $72,573 | $102,962 | $6,735 | $11,529 | $5,857 | $12,050 | $83,319 | $295,025 |
| 2011 |  |  |  |  |  |  |  |  |
| Income\tStatement |  |  |  |  |  |  |  |  |
| Net\tinterest\tincome | $3,804 | $3,465 | $280 | $201 |  | $913 | $37 | $8,700 |
| Noninterest\tincome | 1,773 | 1,237 | 649 | 751 | $464 | 47 | 705 | 5,626 |
| Total\trevenue | 5,577 | 4,702 | 929 | 952 | 464 | 960 | 742 | 14,326 |
| Provision\tfor\tcredit\tlosses\t(benefit) | 891 | (124) | (24) | 5 |  | 366 | 38 | 1,152 |
| Depreciation\tand\tamortization | 186 | 144 | 41 | 10 |  |  | 278 | 659 |
| Other\tnoninterest\texpense | 3,917 | 1,688 | 646 | 787 |  | 275 | 1,133 | 8,446 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes |  |  |  |  |  |  |  |  |
| and\tnoncontrolling\tinterests | 583 | 2,994 | 266 | 150 | 464 | 319 | (707) | 4,069 |
| Income\ttaxes\t(benefit) | 212 | 1,054 | 98 | 61 | 103 | 119 | (649) | 998 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | $371 | $1,940 | $168 | $89 | $361 | $200 | $(58) | $3,071 |
| Inter-segment\trevenue | $1 | $20 | $13 | $7 | $16 | $(10) | $(47) |  |
| Average\tAssets\t(a) | $66,448 | $81,043 | $6,719 | $11,270 | $5,516 | $13,119 | $81,220 | $265,335 |
| 2010 |  |  |  |  |  |  |  |  |
| Income\tStatement |  |  |  |  |  |  |  |  |
| Net\tinterest\tincome | $3,849 | $3,604 | $288 | $262 |  | $1,229 | $(2) | $9,230 |
| Noninterest\tincome | 1,958 | 1,351 | 628 | 741 | $462 | (93) | 899 | 5,946 |
| Total\trevenue | 5,807 | 4,955 | 916 | 1,003 | 462 | 1,136 | 897 | 15,176 |
| Provision\tfor\tcredit\tlosses | 1,103 | 303 | 20 | 5 |  | 976 | 95 | 2,502 |
| Depreciation\tand\tamortization | 218 | 148 | 41 | 3 |  |  | 287 | 697 |
| Other\tnoninterest\texpense | 3,838 | 1,675 | 606 | 560 |  | 250 | 987 | 7,916 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes |  |  |  |  |  |  |  |  |
| and\tnoncontrolling\tinterests | 648 | 2,829 | 249 | 435 | 462 | (90) | (472) | 4,061 |
| Income\ttaxes\t(benefit) | 237 | 1,000 | 91 | 159 | 111 | (33) | (528) | 1,037 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | $411 | $1,829 | $158 | $276 | $351 | $(57) | $56 | $3,024 |
| Inter-segment\trevenue | $1 | $21 | $13 | $12 | $22 | $(12) | $(57) |  |
| Average\tAssets\t(a) | $67,428 | $77,540 | $6,954 | $9,247 | $5,428 | $17,517 | $80,788 | $264,902 |
| (a)\nPeriod-end\tbalances\tfor\tBlackRock. |  |  |  |  |  |  |  |  |

# NOTE	27	SUBSEQUENT	EVENTS

•$250	million	of	floating	rate	senior	notes	with	a	maturity	date	of	January	28,	2016.	Interest	is	payable	at	the	3-month	LIBOR	rate,	reset	quarterly,	plus	a spread	of	.31%	on	January	28,	April	28,	July	28,	and	October	28	of	each	year,	beginning	on	April	28,	2013.

•$750	million	of	subordinated	notes	with	a	maturity	date	of	January	30,	2023.	Interest	is	payable	semi-annually,	at	a	fixed	rate	of	2.950%,	on	January	30	and July	30	of	each	year,	beginning	on	July	30,	2013.

On	January	31,	2013,	we	transferred	205,350	shares	of	BlackRock	Series	C	Preferred	Stock	to	BlackRock	in	connection	with	our	LTIP	obligation.	After	this	transfer,	we hold	approximately	1.3	million	shares	of	BlackRock	Series	C	Preferred	Stock	which	are	available	to	fund	a	portion	of	awards	under	the	BlackRock	LTIP	programs.

On	February	7,	2013,	we	announced	that	on	March	15,	2013	we	will	redeem	all	$375	million	of	Fixed-To-Floating	Rate	Non-cumulative	Exchangeable	Perpetual	Trust Securities	issued	by	PNC	Preferred	Funding	Trust	III	(REIT	Preferred	Securities)	with	a	current	distribution	rate	of	8.7%.	The	redemption	price	will	be	$100,000	per security.	The	previously	declared	regular	first	quarter	distribution	on	the	securities	is	payable	on	March	15,	2013	to	holders	of	record	on	March	1,	2013.

# STATISTICAL	INFORMATION	(UNAUDITED)

# Selected	Quarterly	Financial	Data

| Dollars	in	millions,<br>except	per	share	data | Fourth | 2012	(a)<br>Third | Second | First | Fourth | 2011<br>Third | Second | First |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Summary\tOf\tOperations |  |  |  |  |  |  |  |  |
| Interest\tincome | $2,671 | $2,670 | $2,796 | $2,597 | $2,534 | $2,530 | $2,547 | $2,583 |
| Interest\texpense | 247 | 271 | 270 | 306 | 335 | 355 | 397 | 407 |
| Net\tinterest\tincome | \t 2,424 | \t 2,399 | \t 2,526 | \t 2,291 | \t 2,199 | \t 2,175 | \t 2,150 | \t 2,176 |
| Noninterest\tincome\t(b) | \t 1,645 | \t 1,689 | \t 1,097 | \t 1,441 | \t 1,350 | \t 1,369 | \t 1,452 | \t 1,455 |
| Total\trevenue | \t 4,069 | \t 4,088 | \t 3,623 | \t 3,732 | \t 3,549 | \t 3,544 | \t 3,602 | \t 3,631 |
| Provision\tfor\tcredit\tlosses | 318 | 228 | 256 | 185 | 190 | 261 | 280 | 421 |
| Noninterest\texpense | \t 2,829 | \t 2,650 | \t 2,648 | \t 2,455 | \t 2,719 | \t 2,140 | \t 2,176 | \t 2,070 |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes\tand\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | 922 | \t 1,210 | 719 | \t 1,092 | 640 | \t 1,143 | \t 1,146 | \t 1,140 |
| Income\ttaxes | 203 | 285 | 173 | 281 | 147 | 309 | 234 | 308 |
| Net\tincome | 719 | 925 | 546 | 811 | 493 | 834 | 912 | 832 |
| Less:\tNet\tincome\t(loss)\tattributable\tto\tnoncontrolling\tinterests | 1 | (14) | (5) | 6 | 17 | 4 | (1) | (5) |
| Preferred\tstock\tdividends\tand\tdiscount\taccretion | 54 | 63 | 25 | 39 | 25 | 4 | 25 | 4 |
| Net\tincome\tattributable\tto\tcommon\tshareholders | $664 | $876 | $526 | $766 | $451 | $826 | $888 | $833 |
| Per\tCommon\tShare\tData |  |  |  |  |  |  |  |  |
| Book\tvalue | $67.05 | $66.41 | $64.00 | $63.26 | $61.52 | $61.92 | $60.02 | $58.01 |
| Basic\tearnings\tfrom\tnet\tincome\t(c) | 1.26 | 1.66 | 1.00 | 1.45 | .86 | 1.57 | 1.69 | 1.59 |
| Diluted\tearnings\tfrom\tnet\tincome\t(c) | 1.24 | 1.64 | .98 | 1.44 | .85 | 1.55 | 1.67 | 1.57 |
| (a) |  |  |  |  |  |  |  |  |

(b) Noninterest	income	included	private	equity	gains/(losses)	and	net	gains	on	sales	of	securities	in	each	quarter	as	follows:

|  |  | 2012 |  |  |  | 2011 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| in\tmillions | Fourth | Third | Second | First | Fourth | Third | Second | First |
| Private\tequity\tgains/(losses) | $43 | $25 | $47 | $50 | $4 | $46 | $42 | $53 |
| Net\tgains\ton\tsales\tof\tsecurities | 45 | 40 | 62 | \t 57 | 62 | 68 | 82 | \t 37 |
| (c) |  |  |  |  |  |  |  |  |

(c) The	sum	of	the	quarterly	amounts	for	2012	and	2011	does	not	equal	the	respective	year's	amount	because	the	quarterly	calculations	are	based	on	a	changing	number	of	average	shares.

# Average	Consolidated	Balance	Sheet	And	Net	Interest	Analysis

|  |  | 2012 |  |  | 2011 |  |  | 2010 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Taxable-equivalent\tbasis\nDollars\tin\tmillions | Average\nBalances | Interest\nIncome/\nExpense | Average\nYields/\nRates | Average\nBalances | Interest\nIncome/\nExpense | Average\nYields/\nRates | Average\nBalances | Interest\nIncome/\nExpense | Average\nYields/\nRates |
| Assets |  |  |  |  |  |  |  |  |  |
| Interest-earning\tassets: |  |  |  |  |  |  |  |  |  |
| Investment\tsecurities |  |  |  |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |  |  |  |
| Residential\tmortgage-backed |  |  |  |  |  |  |  |  |  |
| Agency | $26,522 | $815 | 3.07% | $25,892 | $894 | 3.45% | $23,437 | $911 | 3.89% |
| Non-agency | 6,506 | 350 | 5.38 | 7,413 | 394 | 5.31 | 9,240 | 558 | 6.04 |
| Commercial\tmortgage-backed | 3,682 | 156 | 4.24 | 3,461 | 158 | 4.57 | 3,679 | 191 | 5.19 |
| Asset-backed | 5,227 | 106 | 2.03 | 3,402 | 84 | 2.47 | 2,240 | 83 | 3.71 |
| US\tTreasury\tand\tgovernment\tagencies | 2,733 | 55 | 2.01 | 4,308 | 114 | 2.65 | 7,549 | 211 | 2.80 |
| State\tand\tmunicipal | 1,920 | 91 | 4.74 | 2,002 | 91 | 4.55 | 1,445 | 79 | 5.47 |
| Other\tdebt | 3,019 | 82 | 2.72 | 3,350 | 87 | 2.60 | 2,783 | 79 | 2.84 |
| Corporate\tstocks\tand\tother | 350 |  |  | 428 |  |  | 448 |  |  |
| Total\tsecurities\tavailable\tfor\tsale | 49,959 | 1,655 | 3.31 | 50,256 | 1,822 | 3.63 | 50,821 | 2,112 | 4.16 |
| Securities\theld\tto\tmaturity |  |  |  |  |  |  |  |  |  |
| Residential\tmortgage-backed | 4,423 | 156 | 3.53 | 2,424 | 83 | 3.42 |  |  |  |
| Commercial\tmortgage-backed | 4,288 | 195 | 4.55 | 4,444 | 220 | 4.95 | 3,711 | 206 | 5.55 |
| Asset-backed | 892 | 17 | 1.91 | 1,985 | 43 | 2.17 | 3,409 | 89 | 2.61 |
| US\tTreasury\tand\tgovernment\tagencies | 226 | 9 | 3.98 | 87 | 3 | 3.45 |  |  |  |
| State\tand\tmunicipal | 670 | 28 | 4.18 | 271 | 12 | 4.43 | 8 |  |  |
| Other | 358 | 10 | 2.79 | 221 | 7 | 3.17 | 41 | 6 | 14.63 |
| Total\tsecurities\theld\tto\tmaturity | 10,857 | 415 | 3.82 | 9,432 | 368 | 3.90 | 7,169 | 301 | 4.20 |
| Total\tinvestment\tsecurities | 60,816 | 2,070 | 3.40 | 59,688 | 2,190 | 3.67 | 57,990 | 2,413 | 4.16 |
| Loans |  |  |  |  |  |  |  |  |  |
| Commercial | 76,654 | 3,447 | 4.50 | 59,437 | 2,924 | 4.92 | 54,339 | 2,888 | 5.31 |
| Commercial\treal\testate | 18,115 | 1,005 | 5.55 | 16,767 | 879 | 5.24 | 20,435 | 1,045 | 5.11 |
| Equipment\tlease\tfinancing | 6,674 | 307 | 4.60 | 6,219 | 309 | 4.97 | 6,276 | 325 | 5.18 |
| Consumer | 59,752 | 2,801 | 4.69 | 54,669 | 2,673 | 4.89 | 55,015 | 2,865 | 5.21 |
| Residential\treal\testate | 15,423 | 832 | 5.39 | 14,924 | 883 | 5.92 | 17,709 | 1,209 | 6.83 |
| Total\tloans | \t 176,618 | 8,392 | 4.75 | \t 152,016 | 7,668 | 5.04 | \t 153,774 | 8,332 | 5.42 |
| Loans\theld\tfor\tsale | 2,977 | 168 | 5.64 | 2,768 | 193 | 6.97 | 2,871 | 263 | 9.16 |
| Federal\tfunds\tsold\tand\tresale\tagreements | 1,594 | 22 | 1.38 | 2,297 | 33 | 1.44 | 1,899 | 37 | 1.95 |
| Other | 6,549 | 226 | 3.45 | 7,571 | 214 | 2.83 | 8,215 | 185 | 2.25 |
| Total\tinterest-earning\tassets/interest\tincome | \t 248,554 | 10,878 | 4.38 | \t 224,340 | 10,298 | 4.59 | \t 224,749 | 11,230 | 5.00 |
| Noninterest-earning\tassets: |  |  |  |  |  |  |  |  |  |
| Allowance\tfor\tloan\tand\tlease\tlosses | (4,157) |  |  | (4,656) |  |  | (5,144) |  |  |
| Cash\tand\tdue\tfrom\tbanks | 3,877 |  |  | 3,565 |  |  | 3,569 |  |  |
| Other | 46,751 |  |  | 42,086 |  |  | 41,728 |  |  |
| Total\tassets | $295,025 |  |  | $265,335 |  |  | $264,902 |  |  |
| Liabilities\tand\tEquity |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tliabilities: |  |  |  |  |  |  |  |  |  |
| Interest-bearing\tdeposits |  |  |  |  |  |  |  |  |  |
| Money\tmarket | $65,933 | $138 | .21% | $58,765 | $184 | .31% | $58,264 | $261 | .45% |
| Demand | 34,342 | 14 | .04 | 27,563 | 23 | .08 | 25,025 | 33 | .13 |
| Savings | 9,863 | 9 | .09 | 8,185 | 15 | .18 | 7,005 | 13 | .19 |
| Retail\tcertificates\tof\tdeposit | 26,609 | 210 | .79 | 34,009 | 428 | 1.26 | 42,933 | 628 | 1.46 |
| Time\tdeposits\tin\tforeign\toffices\tand\tother\ttime | 3,195 | 15 | .47 | 2,815 | 18 | .64 | 3,598 | 28 | .78 |
| Total\tinterest-bearing\tdeposits | \t 139,942 | 386 | .28 | \t 131,337 | 668 | .51 | \t 136,825 | 963 | .70 |
| Borrowed\tfunds |  |  |  |  |  |  |  |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements | 4,542 | 10 | .22 | 4,469 | 7 | .16 | 4,309 | 13 | .30 |
| Federal\tHome\tLoan\tBank\tborrowings | 9,678 | 72 | .74 | 5,305 | 53 | 1.00 | 7,996 | 71 | .89 |
| Bank\tnotes\tand\tsenior\tdebt | 10,275 | 236 | 2.30 | 11,202 | 252 | 2.25 | 12,790 | 320 | 2.50 |
| Subordinated\tdebt | 7,019 | 320 | 4.56 | 8,942 | 456 | 5.10 | 9,647 | 505 | 5.23 |
| Commercial\tpaper | 8,383 | 23 | .27 | 3,234 | 9 | .28 | 2,707 | 9 | .33 |
| Other | 1,947 | 47 | 2.41 | 2,574 | 49 | 1.90 | 2,731 | 41 | 1.50 |
| Total\tborrowed\tfunds | 41,844 | 708 | 1.69 | 35,726 | 826 | 2.31 | 40,180 | 959 | 2.39 |
| Total\tinterest-bearing\tliabilities/interest\texpense | \t 181,786 | 1,094 | .60 | \t 167,063 | 1,494 | .89 | \t 177,005 | 1,922 | 1.09 |
| Noninterest-bearing\tliabilities\tand\tequity: |  |  |  |  |  |  |  |  |  |
| Noninterest-bearing\tdeposits | 61,610 |  |  | 51,707 |  |  | 45,076 |  |  |
| Allowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | 237 |  |  | 203 |  |  | 239 |  |  |
| Accrued\texpenses\tand\tother\tliabilities | 11,350 |  |  | 11,040 |  |  | 11,015 |  |  |
| Equity | 40,042 |  |  | 35,322 |  |  | 31,567 |  |  |
| Total\tliabilities\tand\tequity | $295,025 |  |  | $265,335 |  |  | $264,902 |  |  |
| Interest\trate\tspread |  |  | 3.78 |  |  | 3.70 |  |  | 3.91 |
| Impact\tof\tnoninterest-bearing\tsources |  |  | .16 |  |  | .22 |  |  | .23 |
| Net\tinterest\tincome/margin |  | $9,784 | 3.94% |  | $8,804 | 3.92% |  | $9,308 | 4.14% |

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,	with	changes	in	fair	value	recorded	in	trading	noninterest income,	are	included	in	noninterest-earning	assets	and	noninterest-bearing	liabilities.	The	interest-earning	deposits	with	the	Federal	Reserve	are	included	in	the	"Other"	interest-earning	assets	category.

Interest	income	includes	the	effects	of	taxable-equivalent	adjustments	using	a	marginal	federal	income	tax	rate	of	35%	to	increase	tax-exempt	interest	income	to	a	taxable-equivalent	basis.	The	taxable-equivalent adjustments	to	interest	income	for	the	years	ended	December	31,	2012,	2011,	and	2010	were	$144	million,	$104	million,	and	$81	million,	respectively.

# Analysis	Of	Year-To-Year	Changes	In	Net	Interest	Income

|  | 2012/2011 | 2012/2011 | 2012/2011 | 2011/2010 | 2011/2010 | 2011/2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ | Increase/(Decrease)\tin\tIncome/ |  |
|  | Expense\tDue\tto\tChanges\tin: | Expense\tDue\tto\tChanges\tin: |  | Expense\tDue\tto\tChanges\tin: | Expense\tDue\tto\tChanges\tin: |  |
| Taxable-equivalent\tbasis\t–\tin\tmillions | Volume | Rate | Total | Volume | Rate | Total |
| Interest-Earning\tAssets |  |  |  |  |  |  |
| Investment\tsecurities |  |  |  |  |  |  |
| Securities\tavailable\tfor\tsale |  |  |  |  |  |  |
| Residential\tmortgage-backed |  |  |  |  |  |  |
| Agency | \t\t $21 | \t\t $(100) | \t\t $(79) | \t\t $91 | \t\t $(108) | \t\t $(17) |
| Non-agency | (49) | 5 | (44) | (102) | (62) | (164) |
| Commercial\tmortgage-backed | 10 | (12) | (2) | (11) | (22) | (33) |
| Asset-backed | 39 | (17) | 22 | 35 | (34) | 1 |
| US\tTreasury\tand\tgovernment\tagencies | (35) | (24) | (59) | (87) | (10) | (97) |
| State\tand\tmunicipal | (4) | 4 |  | 27 | (15) | 12 |
| Other\tdebt | (9) | 4 | (5) | 15 | (7) | 8 |
| Total\tsecurities\tavailable\tfor\tsale | (11) | (156) | (167) | (24) | (266) | (290) |
| Securities\theld\tto\tmaturity |  |  |  |  |  |  |
| Residential\tmortgage-backed | 70 | 3 | 73 | 83 |  | 83 |
| Commercial\tmortgage-backed | (8) | (17) | (25) | 38 | (24) | 14 |
| Asset-backed | (22) | (4) | (26) | (33) | (13) | (46) |
| US\tTreasury\tand\tgovernment\tagencies | 6 |  | 6 | 3 |  | 3 |
| State\tand\tmunicipal | 17 | (1) | 16 | 12 |  | 12 |
| Other | 4 | (1) | 3 | 9 | (8) | 1 |
| Total\tsecurities\theld\tto\tmaturity | 55 | (8) | 47 | 90 | (23) | 67 |
| Total\tinvestment\tsecurities | 41 | (161) | (120) | 69 | (292) | (223) |
| Loans |  |  |  |  |  |  |
| Commercial | 790 | (267) | 523 | 258 | (222) | 36 |
| Commercial\treal\testate | 73 | 53 | 126 | (192) | 26 | (166) |
| Equipment\tlease\tfinancing | 22 | (24) | (2) | (3) | (13) | (16) |
| Consumer | 241 | (113) | 128 | (18) | (174) | (192) |
| Residential\treal\testate | 29 | (80) | (51) | (176) | (150) | (326) |
| Total\tloans | 1,185 | (461) | 724 | (93) | (571) | (664) |
| Loans\theld\tfor\tsale | 14 | (39) | (25) | (9) | (61) | (70) |
| Federal\tfunds\tsold\tand\tresale\tagreements | (10) | (1) | (11) | 7 | (11) | (4) |
| Other | (31) | 43 | 12 | (15) | 44 | 29 |
| Total\tinterest-earning\tassets | \t\t $1,069 | \t\t $(489) | \t\t $580 | \t\t $(20) | \t\t $(912) | \t\t $(932) |
| Interest-Bearing\tLiabilities |  |  |  |  |  |  |
| Interest-bearing\tdeposits |  |  |  |  |  |  |
| Money\tmarket | \t\t $20 | \t\t $(66) | \t\t $(46) | \t\t $2 | \t\t $(79) | \t\t $(77) |
| Demand | 4 | (13) | (9) | 3 | (13) | (10) |
| Savings | 2 | (8) | (6) | 3 | (1) | 2 |
| Retail\tcertificates\tof\tdeposit | (80) | (138) | (218) | (120) | (80) | (200) |
| Time\tdeposits\tin\tforeign\toffices\tand\tother\ttime | 2 | (5) | (3) | (5) | (5) | (10) |
| Total\tinterest-bearing\tdeposits | 41 | (323) | (282) | (38) | (257) | (295) |
| Borrowed\tfunds |  |  |  |  |  |  |
| Federal\tfunds\tpurchased\tand\trepurchase\tagreements |  | 3 | 3 |  | (6) | (6) |
| Federal\tHome\tLoan\tBank\tborrowings | 36 | (17) | 19 | (26) | 8 | (18) |
| Bank\tnotes\tand\tsenior\tdebt | (22) | 6 | (16) | (38) | (30) | (68) |
| Subordinated\tdebt | (91) | (45) | (136) | (36) | (13) | (49) |
| Commercial\tpaper | 14 |  | 14 | 1 | (1) |  |
| Other | (13) | 11 | (2) | (2) | 10 | 8 |
| Total\tborrowed\tfunds | 127 | (245) | (118) | (102) | (31) | (133) |
| Total\tinterest-bearing\tliabilities | 121 | (521) | (400) | (100) | (328) | (428) |
| Change\tin\tnet\tinterest\tincome | \t\t $953 | \t\t $27 | \t\t $980 | \t\t $(17) | \t\t $(487) | \t\t $(504) |

Changes	attributable	to	rate/volume	are	prorated	into	rate	and	volume	components.

# LOANS	OUTSTANDING

(c) Nonperforming	residential	real	estate	excludes	loans	of	$69	million	and	$61	million	accounted	for	under	the	fair	value	option	as	of	December	31,	2012	and	December	31,	2011,	respectively.	The	comparable balances	for	prior	periods	presented	were	not	material.

(d) Effective	in	the	second	quarter	2011,	the	commercial	nonaccrual	policy	was	applied	to	certain	small	business	credit	card	balances.	This	change	resulted	in	loans	being	placed	on	nonaccrual	status	when	they become	90	days	or	more	past	due.	We	continue	to	charge	off	these	loans	at	180	days	past	due.

(e) Pursuant	to	regulatory	guidance,	issued	in	the	third	quarter	of	2012,	nonperforming	consumer	loans,	primarily	home	equity	and	residential	mortgage,	increased	$288	million	in	2012	related	to	changes	in	treatment of	certain	loans	classified	as	TDRs,	net	of	charge-offs,	resulting	from	bankruptcy	where	no	formal	reaffirmation	was	provided	by	the	borrower	and

therefore	a	concession	has	been	granted	based	upon	discharge	from	personal	liability.	Charge-offs	have	been	taken	where	the	fair	value	less	costs	to	sell	the	collateral	was	less	than	the	recorded	investment	of	the loan	and	were	$128.1	million.	Of	these	loans,	approximately	78%	were	current	on	their	payments	at	December	31,	2012.

(f) Includes	TDRs	of	$1,589	million	at	December	31,	2012,	$1,141	million	at	December	31,	2011,	$784	million	at	December	31,	2010,	$440	million	at	December	31,	2009,	and	zero	at	December	31,	2008, respectively.	Nonperforming	loans	exclude	certain	government	insured	or	guaranteed	loans,	loans	held	for	sale,	loans	accounted	for	under	the	fair	value	option	and	purchased	impaired	loans.

(g) OREO	excludes	$380	million,	$280	million,	$178	million,	$112	million	and	$81	million	at	December	31,	2012,	December	31,	2011,	December	31,	2010,	December	31,	2009	and	December	31,	2008,	respectively, related	to	residential	real	estate	that	was	acquired	by	us	upon	foreclosure	of	serviced	loans	because	they	are	insured	by	the	Federal	Housing	Administration	(FHA)	or	guaranteed	by	the	Department	of	Veterans Affairs	(VA).

(h) Amounts	include	certain	government	insured	or	guaranteed	consumer	loans	totaling	$2,236	million,	$2,474	million,	$2,167	million,	$1,814	million	and	$926	million	at	December	31,	2012,	December	31, 2011,	December	31,	2010,	December	31,	2009	and	December	31,	2008,	respectively.	Past	due	loan	amounts	exclude	purchased	impaired	loans	as	they	are	considered	current	loans	due	to	the	accretion	of	interest income.

# SUMMARY	OF	LOAN	LOSS	EXPERIENCE

| Year	ended	December	31	–	dollars	in	millions | 2012 | 2011 | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Allowance\tfor\tloan\tand\tlease\tlosses\t–\tJanuary\t1 | $4,347 | $4,887 | $5,072 | $3,917 | $830 |
| Charge-offs |  |  |  |  |  |
| Commercial | (474) | (700) | (1,227) | (1,276) | (301) |
| Commercial\treal\testate | (314) | (464) | (670) | (510) | (165) |
| Equipment\tlease\tfinancing | (16) | (35) | (120) | (149) | (3) |
| Consumer\t(a) | (956) | (912) | (1,069) | (961) | (143) |
| Residential\treal\testate | (110) | (153) | (406) | (259) | (6) |
| Total\tcharge-offs | (1,870) | (2,264) | (3,492) | (3,155) | (618) |
| Recoveries |  |  |  |  |  |
| Commercial | 300 | 332 | 294 | 181 | 53 |
| Commercial\treal\testate | 115 | 105 | 77 | 38 | 10 |
| Equipment\tlease\tfinancing | 30 | 50 | 56 | 27 | 1 |
| Consumer\t(a) | 137 | 127 | 110 | 105 | 15 |
| Residential\treal\testate | (1) | 11 | 19 | 93 |  |
| Total\trecoveries | 581 | 625 | 556 | 444 | 79 |
| Net\tcharge-offs | (1,289) | (1,639) | (2,936) | (2,711) | (539) |
| Provision\tfor\tcredit\tlosses\t(b) | 987 | 1,152 | 2,502 | 3,930 | \t 1,517 |
| Acquired\tallowance\t–\tNational\tCity |  |  |  | (112) | \t 2,224 |
| Other | 1 | (1) |  |  | 20 |
| Adoption\tof\tASU\t2009-17,\tConsolidations |  |  | 141 |  |  |
| Net\tchange\tin\tallowance\tfor\tunfunded\tloan\tcommitments\tand\tletters\tof\tcredit | (10) | (52) | 108 | 48 | (135) |
| Allowance\tfor\tloan\tand\tlease\tlosses\t–\tDecember\t31 | $4,036 | $4,347 | $4,887 | $5,072 | $3,917 |
| Allowance\tas\ta\tpercent\tof\tDecember\t31: |  |  |  |  |  |
| Loans | 2.17% | 2.73% | 3.25% | 3.22% | 2.23% |
| Nonperforming\tloans | 124 | 122 | 109 | 89 | 236 |
| As\ta\tpercent\tof\taverage\tloans |  |  |  |  |  |
| Net\tcharge-offs | .73 | 1.08 | 1.91 | 1.64 | .74 |
| Provision\tfor\tcredit\tlosses | .56 | .76 | 1.63 | 2.37 | 2.09 |
| Allowance\tfor\tloan\tand\tlease\tlosses | 2.28 | 2.86 | 3.18 | 3.06 | 5.38 |
| Allowance\tas\ta\tmultiple\tof\tnet\tcharge-offs | 3.13x | 2.65x | 1.66x | 1.87x | 7.27x |
| (a)\nIncludes\thome\tequity,\tcredit\tcard\tand\tother\tconsumer. |  |  |  |  |  |

(a) Includes	home	equity,	credit	card	and	other	consumer.

(b) Amount	for	2008	included	a	$504	million	conforming	provision	for	credit	losses	related	to	National	City.

The	following	table	presents	the	assignment	of	the	allowance	for	loan	and	lease	losses	and	the	categories	of	loans	as	a	percentage	of	total	loans.	Changes	in	the allocation	over	time	reflect	the	changes	in	loan	portfolio	composition,	risk	profile	and	refinements	to	reserve	methodologies.	For	purposes	of	this	presentation,	a	portion of	the	allowance	for	loan	and	lease	losses	has	been	assigned	to	loan	categories	based	on	the	relative	specific	and	pool	allocation	amounts	to	provide	coverage	for probable	losses	not	covered	in	specific,	pool	and	consumer	reserve	methodologies	related	to	qualitative	and	measurement	factors.	At	December	31,	2012,	the	portion	of the	reserves	for	these	factors	was	$42	million.

# ALLOCATION	OF	ALLOWANCE	FOR	LOAN	AND	LEASE	LOSSES

| December	31 |  | Loans	to |  | Loans	to |  | Loans	to |  | Loans	to |  | Loans	to |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Dollars\tin\tmillions | Allowance | Total\tLoans | Allowance | Total\tLoans | Allowance | Total\tLoans | Allowance | Total\tLoans | Allowance | Total\tLoans |
| Commercial | $1,131 | 44.7% | $1,180 | 41.3% | $1,387 | 36.7% | $1,869 | 34.8% | $1,668 | 39.4% |
| Commercial\treal\testate | 589 | 10.0 | 753 | 10.2 | 1,086 | 11.9 | 1,305 | 14.7 | 833 | 14.7 |
| Equipment\tlease\tfinancing | 54 | 3.9 | 62 | 4.0 | 94 | 4.2 | 171 | 3.9 | 179 | 3.7 |
| Consumer\t(a) | 1,415 | 33.2 | 1,458 | 35.4 | 1,227 | 36.6 | 957 | 34.0 | 929 | 29.9 |
| Residential\treal\testate | 847 | 8.2 | 894 | 9.1 | 1,093 | 10.6 | 770 | 12.6 | 308 | 12.3 |
| Total | $4,036 | 100.0% | $4,347 | 100.0% | $4,887 | 100.0% | $5,072 | 100.0% | $3,917 | 100.0% |
| (a)\nIncludes\thome\tequity,\tcredit\tcard\tand\tother\tconsumer. |  |  |  |  |  |  |  |  |  |  |

# SELECTED	LOAN	MATURITIES	AND	INTEREST	SENSITIVITY

| December	31,	2012<br>In	millions | 1	Year<br>or	Less | 1	Through<br>5	Years | After<br>5	Years | Gross<br>Loans |
| :--- | :--- | :--- | :--- | :--- |
| Commercial | $22,804 | $48,428 | $11,808 | $83,040 |
| Commercial\treal\testate\t–\tReal |  |  |  |  |
| estate\tprojects | 6,575 | 8,070 | 4,010 | 18,655 |
| Total | $29,379 | $56,498 | $15,818 | $101,695 |
| Loans\twith: |  |  |  |  |
| Predetermined\trate | $5,458 | $11,320 | $7,855 | $24,633 |
| Floating\tor\tadjustable\trate | \t 23,921 | \t 45,178 | 7,963 | 77,062 |
| Total | $29,379 | $56,498 | $15,818 | $101,695 |

At	December	31,	2012,	we	had	no	pay-fixed	interest	rate	swaps	designated	to commercial	loans	as	part	of	fair	value	hedge	strategies.	At	December	31,	2012, $13.4	billion	notional	amount	of	receive-fixed	interest	rate	swaps	were designated	as	part	of	cash	flow	hedging	strategies	that	converted	the	floating	rate (1	month	and	3	month	LIBOR)	on	the	underlying	commercial	loans	to	a	fixed rate	as	part	of	risk	management	strategies.

Time	deposits	in	foreign	offices	totaled	$2.0	billion	at	December	31,	2012, substantially	all	of	which	were	in	denominations	of	$100,000	or	more.

The	following	table	sets	forth	maturities	of	domestic	time	deposits	of	$100,000 or	more:

|  | Domestic |
| :--- | :--- |
|  | Certificates |
| December\t31,\t2012\t–\tin\tmillions | of\tDeposit |
| Three\tmonths\tor\tless | $1,719 |
| Over\tthree\tthrough\tsix\tmonths | 1,190 |
| Over\tsix\tthrough\ttwelve\tmonths | 1,731 |
| Over\ttwelve\tmonths | 2,691 |
| Total | $7,331 |

# COMMON	STOCK	PRICES/DIVIDENDS	DECLARED

The	table	below	sets	forth	by	quarter	the	range	of	high	and	low	sale	and	quarter- end	closing	prices	for	The	PNC	Financial	Services	Group,	Inc.	common	stock and	the	cash	dividends	declared	per	common	share.

|  | High | Low | Close | Declared |
| :--- | :--- | :--- | :--- | :--- |
| 2012\tQuarter |  |  |  |  |
| First | $64.79 | $56.88 | $64.49 | $.35 |
| Second | \t 67.89 | \t 55.60 | \t 61.11 | .40 |
| Third | \t 67.04 | \t 56.76 | \t 63.10 | .40 |
| Fourth | \t 65.73 | \t 53.36 | \t 58.31 | .40 |
| Total |  |  |  | $1.55 |
| 2011\tQuarter |  |  |  |  |
| First | $65.19 | $59.67 | $62.99 | $.10 |
| Second | \t 64.37 | \t 55.56 | \t 59.61 | .35 |
| Third | \t 61.21 | \t 42.70 | \t 48.19 | .35 |
| Fourth | \t 58.70 | \t 44.74 | \t 57.67 | .35 |
| Total |  |  |  | $1.15 |

# ITEM	9	–	CHANGES	IN	AND	DISAGREEMENTS	WITH ACCOUNTANTS	ON	ACCOUNTING	AND FINANCIAL	DISCLOSURE

# ITEM	9A	–	CONTROLS	AND	PROCEDURES

# (a) Management's	Report	on	Internal	Control	over	Financial	Reporting

The	management	of	The	PNC	Financial	Services	Group,	Inc.	and subsidiaries	(PNC)	is	responsible	for	establishing	and	maintaining	adequate internal	control	over	financial	reporting,	as	such	term	is	defined	in	the Exchange	Act	Rule	13a-15(f).

Because	of	inherent	limitations,	internal	control	over	financial	reporting may	not	prevent	or	detect	misstatements.	Also,	projections	of	any evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that controls	may	become	inadequate	because	of	changes	in	conditions,	or	that the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

We	performed	an	evaluation	under	the	supervision	and	with	the participation	of	our	management,	including	the	Chairman	and	Chief Executive	Officer	and	the	Executive	Vice	President	and	Chief	Financial Officer,	of	the	effectiveness	of	PNC's	internal	control	over	financial reporting	as	of	December	31,	2012.	This	assessment	was	based	on	criteria for	effective	internal	control	over	financial	reporting	described	in	Internal Control-Integrated	Framework	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission.	Based	on	this	assessment, management	concluded	that	PNC	maintained	effective	internal	control	over financial	reporting	as	of	December	31,	2012.

PricewaterhouseCoopers	LLP,	the	independent	registered	public	accounting firm	that	audited	our	consolidated	financial	statements	as	of	and	for	the year	ended	December	31,	2012	included	in	this	Report,	has	also	audited	the effectiveness	of	PNC's	internal	control	over	financial	reporting	as	of December	31,	2012.	The	report	of	PricewaterhouseCoopers	LLP	is	included under	Item	8	of	this	Annual	Report	on	Form	10-K.

# (b) Disclosure	Controls	and	Procedures	and	Changes	in	Internal	Control over	Financial	Reporting

As	of	December	31,	2012,	we	performed	an	evaluation	under	the supervision	and	with	the	participation	of	our	management,	including	the Chairman	and	Chief	Executive	Officer	and	the	Executive	Vice	President and	Chief	Financial	Officer,	of	the	effectiveness	of	the	design

and	operation	of	our	disclosure	controls	and	procedures	and	of	changes	in our	internal	control	over	financial	reporting.

Based	on	that	evaluation,	our	Chairman	and	Chief	Executive	Officer	and our	Executive	Vice	President	and	Chief	Financial	Officer	concluded	that our	disclosure	controls	and	procedures	(as	defined	in	Rule	13a-15(e)	under the	Securities	and	Exchange	Act	of	1934,	as	amended)	were	effective	as	of December	31,	2012,	and	that	there	has	been	no	change	in	PNC's	internal control	over	financial	reporting	that	occurred	during	the	fourth	quarter	of 2012	that	has	materially	affected,	or	is	reasonably	likely	to	materially affect,	our	internal	control	over	financial	reporting.

# ITEM	9B	–	OTHER	INFORMATION

None.

# Part	III

# ITEM	10	–	DIRECTORS,	EXECUTIVE	OFFICERS	AND CORPORATE	GOVERNANCE

Certain	of	the	information	regarding	our	directors	(or	nominees	for	director), executive	officers	and	Audit	Committee	(and	Audit	Committee	financial experts),	required	by	this	item	is	included	under	the	captions	"Election	of Directors	(Item	1),"	and	"Corporate	Governance	–	Board	committees	–	Audit Committee,"	and	"Director	and	Executive	Officer	Relationships	–	Family relationships"	in	our	Proxy	Statement	to	be	filed	for	the	2013	annual	meeting	of shareholders	and	is	incorporated	herein	by	reference.

Information	regarding	our	compliance	with	Section	16(a)	of	the	Securities Exchange	Act	of	1934	is	included	under	the	caption	"Director	and	Executive Officer	Relationships	–	Section	16(a)	beneficial	ownership	reporting compliance"	in	our	Proxy	Statement	to	be	filed	for	the	2013	annual	meeting	of shareholders	and	is	incorporated	herein	by	reference.

Additional	information	regarding	our	executive	officers	and	our	directors	is included	in	Part	I	of	this	Report	under	the	captions	"Executive	Officers	of	the Registrant"	and	"Directors	of	the	Registrant."

Certain	information	regarding	our	PNC	Code	of	Business	Conduct	and	Ethics required	by	this	item	is	included	under	the	caption	"Corporate	Governance	–	Our code	of	ethics"	in	our	Proxy	Statement	to	be	filed	for	the	2013	annual	meeting	of shareholders	and	is	incorporated	herein	by	reference.	Our	PNC	Code	of	Business Conduct	and	Ethics	is	available	on	our	corporate	website	at www.pnc.com/corporate	governance.	In	addition,	any	future	amendments	to,	or waivers	from,	a	provision	of	the	PNC	Code	of	Business	Conduct	and	Ethics	that applies	to	our	directors	or	executive	officers	(including	the	Chairman	and	Chief Executive	Officer,	the	Chief	Financial	Officer	and	the	Controller)	will	be	posted at	this	internet	address.

# ITEM	11	–	EXECUTIVE	COMPENSATION

The	information	required	by	this	item	is	included	under	the	captions	"Corporate Governance	–	Board	committees	–	Personnel	and	Compensation	Committee	–

Compensation	committee	interlocks	and	insider	participation,"	"Director Compensation,"	"Compensation	Discussion	and	Analysis,"	"Compensation Committee	Report,"	"Compensation	and	Risk,"	"Compensation	Tables,"	and "Change	in	Control	and	Termination	of	Employment"	in	our	Proxy	Statement	to be	filed	for	the	2013	annual	meeting	of	shareholders	and	is	incorporated	herein by	reference.	In	accordance	with	Item	407(e)	(5)	of	Regulation	S-K,	the information	set	forth	under	the	caption	"Compensation	Committee	Report"	in such	Proxy	Statement	will	be	deemed	to	be	furnished	in	this	Report	and	will	not be	deemed	to	be	incorporated	by	reference	into	any	filing	under	the	Securities Act	or	the	Exchange	Act	as	a	result	of	furnishing	the	disclosure	in	this	manner.

# ITEM	12	–	SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER MATTERS

The	information	required	by	this	item	regarding	security	ownership	of	certain beneficial	owners	and	management	is	included	under	the	caption	"Security Ownership	of	Directors	and	Executive	Officers"	in	our	Proxy	Statement	to	be filed	for	the	2013	annual	meeting	of	shareholders	and	is	incorporated	herein	by reference.

Information	regarding	our	compensation	plans	under	which	PNC	equity securities	are	authorized	for	issuance	as	of	December	31,	2012	is	included	in	the table	which	follows.	Also	included	in	the	notes	to	the	table	is	information regarding	awards	or	portions	of	awards	under	our	2006	Incentive	Award	Plan that,	by	their	terms,	are	payable	only	in	cash.	Additional	information	regarding these	plans	is	included	in	Note	16	Stock-Based	Compensation	Plans	in	the	Notes To	Consolidated	Financial	Statements	in	Item	8	of	this	Report.

# Equity	Compensation	Plan	Information	At	December	31,	2012

|  | (a)<br>Number	of	securities<br>to	be	issued	upon<br>exercise	of<br>outstanding	options,<br>warrants	and	rights | (b)<br>Weighted-<br>average<br>exercise	price<br>of	outstanding<br>options,	warrants<br>and	rights | (c)<br>Number	of	securities<br>remaining	available<br>for	future	issuance<br>under	equity<br>compensation	plans<br>(excluding	securities<br>reflected	in	column	(a)) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby\tsecurity\tholders |  |  |  |
| 1997\tLong-Term\tIncentive\tAward\tPlan\t(Note\t1) |  |  | 1,945,317 |
| Stock\tOptions | 3,522,804 | $63.24 |  |
| 2006\tIncentive\tAward\tPlan\t(Note\t2\tand\tNote\t3) |  |  |  |
| Stock\tOptions | 11,242,923 | $53.01 | 27,247,537 |
| Incentive\tPerformance\tUnit\tAwards\t(Note\t4) | 598,405 | N/A |  |
| Stock-Payable\tRestricted\tStock\tUnits\t(Note\t5) | 695,383 | N/A |  |
| 1996\tExecutive\tIncentive\tAward\tPlan |  |  |  |
| Incentive\tAwards |  | N/A | (Note\t6) |
| Employee\tStock\tPurchase\tPlan\t(Note\t7) |  |  | 1,344,820 |
| Total\tapproved\tby\tsecurity\tholders | 16,059,515 |  | 30,537,674 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders\t(Note\t8) |  |  |  |
| Former\tNational\tCity\tCorporation\tEquity-Based\tCompensation\tPlans,\tincluding\tstock |  |  |  |
| options | 1,818,244 | $681.16 |  |
| Former\tSterling\tFinancial\tCorporation\tStock\tOption\tPlan | 51,041 | $74.44 |  |
| Total\tnot\tapproved\tby\tsecurity\tholders | 1,869,285 |  |  |
| Total | 17,928,800 |  | 30,537,674 |

Note	1	–	After	shareholder	approval	of	the	2006	Incentive	Award	Plan	at	the 2006	annual	meeting	of	PNC's	shareholders	on	April	25,	2006	(see	Note	2 below),	no	further	grants	were	permitted	under	the	1997	Long-Term	Incentive Award	Plan,	other	than	for	the	exercise	of	options	still	subject	to	a	reload feature.	As	of	December	31,	2012,	the	number	of	remaining	shares	reserved under	this	plan	for	that	purpose	was	1,945,317.

Note	2	–	The	2006	Incentive	Award	Plan	was	adopted	by	the	Board	on February	15,	2006	and	approved	by	the	PNC	shareholders	at	the	2006	annual meeting	on	April	25,	2006.	The	plan	initially	authorized	up	to	40,000,000	shares of	common	stock	for	issuance	under	the	plan,	subject	to	adjustment	in	certain circumstances.	If	and	to	the	extent	that	stock	options	and	stock	appreciation rights	("SARs")	granted	under	the	plan,	or	granted	under	the	prior	plan	and outstanding	on	the	approval	date	of	the	plan,	terminate,	expire	or	are	cancelled, forfeited,	exchanged	or	surrendered	after	the	effective	date	of	the	plan	without being	exercised	or	if	any	share	awards,	share	units,	dividend	equivalents	or	other share-based	awards	are	forfeited	or	terminated,	or	otherwise	not	paid	in	full, after	the	effective	date	of	the	plan,	the	shares	subject	to	such	grants	become available	again	for	purposes	of	the	plan.	Shares	available	for	issuance	under	this plan	are	also	reduced	by	the	number	of	any	shares	used	in	payment	of	bonuses under	the	1996	Executive	Incentive	Award	Plan.

The	plan	was	most	recently	amended	and	restated	incorporating	amendments adopted	by	the	Board	and	approved	by	PNC's	shareholders	at	the	2011	annual meeting	of	shareholders,	effective	as	of	March	11,	2011.	These	amendments incorporate,	among	other	things,	an	increase	to	the	overall	limit	on	the	number	of shares	that	may	be	awarded	under	the	plan	to	46,000,000,	and	a	new	requirement that	each	award	of	a	share	(other	than	pursuant	to	a	stock	option	or	SAR)	granted after	that	effective	date	will	reduce	the	aggregate	plan	limit	by	2.5	shares,	while each	award	of	a	share	pursuant	to	a	stock	option	or	SAR	will	reduce	the aggregate	plan	limit	by	one	share.

Note	3	–	Under	the	2006	Incentive	Award	Plan,	awards	or	portions	of	awards that,	by	their	terms,	are	payable	only	in	cash	do	not	reduce	the	number	of	shares that	remain	available	for	issuance	under	the	plan	(the	number	in	column	(c)). During	2012,	a	total	of	543,959	cash-payable	share	units	plus	cash-payable dividend	equivalents	with	respect	to	418,665	of	those	share	units	were	granted under	the	plan.	This	number	includes	an	incremental	change	in	the	cash-payable portion	of	the	2010,	2011	and	2012	incentive	performance	unit	award	grants described	in	Note	4	below	(net	of	forfeitures),	a	separate	2012	incentive performance	unit	award	grant	payable	solely	in	cash,	and	2012	grants	of	share units	(all	of	which	include	rights	to	cash	dividend	equivalents)	payable	solely	in cash.	Payments	are	subject	to	the	conditions	of	the	individual	grants,	including, where	applicable,	the	achievement	of	any	performance	goals	or	service requirement	established	for	such

grants.	The	comparable	amount	for	2010	was	367,365	cash-payable	share	units plus	cash-payable	dividend	equivalents	with	respect	to	211,573	cash-payable restricted	share	units,	and	the	comparable	amount	for	2011	was	560,544	cash- payable	share	units	plus	cash-payable	dividend	equivalents	with	respect	to 505,866	cash-payable	restricted	share	units.

Note	4	–	These	incentive	performance	unit	awards	provide	for	the	issuance	of shares	of	common	stock	(up	to	a	target	number	of	shares)	based	on	the	degree	to which	corporate	performance	goals	established	by	the	Personnel	and Compensation	Committee	have	been	achieved,	subject	to	potential	negative adjustment	based	on	certain	risk-related	performance	metrics,	and,	if	a	premium level	of	such	performance	is	achieved,	for	further	payment	in	cash.	The	numbers in	column	(a)	of	this	table	for	these	awards	reflect	the	maximum	number	of shares	that	could	be	issued	pursuant	to	grants	outstanding	at	December	31,	2012 upon	achievement	of	the	performance	goals	and	other	conditions	of	the	grants. At	the	premium	level	of	performance,	a	further	maximum	payout	of	cash equivalents	for	the	same	number	of	share	units,	plus	the	incremental	change described	in	Note	3,	could	also	be	payable	subject	to	the	other	conditions	of	the grants.	Grants	under	the	2006	Incentive	Award	Plan	were	made	in	the	first quarter	of	2010,	2011,	and	2012.

Note	5	–	These	stock-payable	restricted	stock	units	include	2011	and	2012 grants	of	performance-based	restricted	share	units	(with	the	units	payable	solely in	stock	and	related	dividend	equivalents	payable	solely	in	cash)	that	have	a service	condition,	an	internal	risk-related	performance	condition	and	a	market condition	and	also	include	grants	of	other	stock-payable	restricted	share	units, some	of	which	are	time-based	and	some	of	which	also	include	related	dividend equivalents	payable	solely	in	cash.	The	number	in	column	(a)	includes	the maximum	number	of	shares	that	could	be	issued	pursuant	to	grants	of	this	type of	award	outstanding	at	December	31,	2012	upon	achievement	of	the performance	and	market	conditions,	where	applicable,	and	other	conditions	of the	grants.	Cash-payable	dividend	equivalents	were	granted	with	respect	to	most of	these	stock-payable	restricted	stock	units.	Where	stock-payable	restricted share	units	include	a	fractional	share	interest,	such	fractional	share	interest	is payable	only	in	cash	share	equivalents.	During	2012,	a	total	of	21	cash	share equivalents	were	paid	in	the	aggregate	for	fractional	share	interests.

Note	6	–	The	1996	Executive	Incentive	Award	Plan	is	a	shareholder-approved plan	that	enables	PNC	to	pay	annual	bonuses	to	its	senior	executive	officers based	upon	the	achievement	of	specified	levels	of	performance.	The	plan	as amended	and	restated	as	of	January	1,	2007	was	adopted	by	the	Board	on February	14,	2007	and	approved	by	the	PNC	shareholders	at	the	2007	annual meeting	on	April	24,	2007.	The	plan	does	not	specify	a	fixed	share	amount	for awards	under	the	plan.	Rather,	it	provides	for	maximum	bonus	awards

for	a	given	period	(generally	a	year)	for	each	individual	plan	participant	of	0.2% of	incentive	income	for	that	period.	Incentive	income	is	based	on	PNC's consolidated	pre-tax	net	income	as	further	adjusted	for	the	impact	of	changes	in tax	law,	extraordinary	items,	discontinued	operations,	acquisition	and	merger integration	costs,	and	for	the	impact	of	PNC's	obligation	to	fund	certain BlackRock	long-term	incentive	programs.	Although	the	size	of	awards	under	the plan	is	dollar-denominated,	payment	may	be	made	in	cash,	in	stock,	or	in	a combination	of	cash	and	stock.

Note	7	–	The	purchase	price	for	shares	sold	under	the	plan	represents	95%	of	the fair	market	value	on	the	last	day	of	each	six-month	offering	period.

Note	8	–	The	plans	in	this	section	of	the	table	reflect	awards	under	pre- acquisition	plans	of	National	City	Corporation	and	Sterling	Financial Corporation,	respectively.	National	City	was	merged	into	PNC	on	December	31, 2008	and	Sterling	was	merged	into	PNC	on	April	4,	2008.	Pursuant	to	the respective	merger	agreements	for	these	acquisitions,	common	shares	of	National City	or	Sterling,	as	the	case	may	be,	issuable	upon	the	exercise	or	settlement	of various	equity	awards	granted	under	the	National	City	or	Sterling	plans	were converted	into	corresponding	awards	covering	PNC	common	stock.	Additional information	is	included	in	Note	16	Stock-Based	Compensation	Plans	in	the Notes	To	Consolidated	Financial	Statements	in	Item	8	of	this	Report	and	in	Note 16	Stock-Based	Compensation	Plans	in	the	Notes	To	Consolidated	Financial Statements	in	Item	8	of	our	2008	10-K.

# ITEM	13	–	CERTAIN	RELATIONSHIPS	AND	RELATED

# TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

The	information	required	by	this	item	is	included	under	the	captions	"Director and	Executive	Officer	Relationships	–	Director	independence,	–	Transactions with	directors,	–	Indemnification	and	advancement	of	costs,	and	–	Related

person	transactions	policies	and	procedures"	in	our	Proxy	Statement	to	be	filed for	the	2013	annual	meeting	of	shareholders	and	is	incorporated	herein	by reference.

# ITEM	14	–	PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

The	information	required	by	this	item	is	included	under	the	caption	"Ratification of	Independent	Registered	Public	Accounting	Firm	(Item	2)	–	Audit	and	non- audit	fees"	in	our	Proxy	Statement	to	be	filed	for	the	2013	annual	meeting	of shareholders	and	is	incorporated	herein	by	reference.

# PART	IV

# ITEM	15	–	EXHIBITS,	FINANCIAL	STATEMENT	SCHEDULES

# Financial	Statements,	Financial	Statement	Schedules

Our	consolidated	financial	statements	required	in	response	to	this	Item	are incorporated	by	reference	from	Item	8	of	this	Report.

Audited	consolidated	financial	statements	of	BlackRock,	Inc.	as	of December	31,	2012	and	2011	and	for	each	of	the	three	years	in	the	period	ended December	31,	2012	are	filed	with	this	Report	as	Exhibit	99.2	and	incorporated herein	by	reference.

# Exhibits

Our	exhibits	listed	on	the	Exhibit	Index	on	pages	E-1	through	E-8	of	this	Form 10-K	are	filed	with	this	Report	or	are	incorporated	herein	by	reference.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by	the undersigned,	thereunto	duly	authorized.

# (Registrant)

Richard	J.	Johnson

Executive	Vice	President	and	Chief	Financial	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	The	PNC	Financial Services	Group,	Inc.	and	in	the	capacities	indicated	on	February	28,	2013.

George	P.	Long,	III,	Attorney-in-Fact,	pursuant	to Powers	of	Attorney	filed	herewith

# EXHIBIT	INDEX

Incorporated	herein	by	reference	to	Exhibit	10.21	of	the Corporation's	2006	Form	10-K*

+ Incorporated	document	references	to	filings	by	the	Corporation	are	to	SEC	File	No.	001-09718,	to	filings	by	National	City	Corporation	are	to	SEC	File	No.	001- 10074,	to	filings	by	BlackRock	through	its	second	quarter	2006	Form	10-Q	(referred	to	herein	as	Old	BlackRock)	are	to	BlackRock	Holdco	2,	Inc.	SEC	File No.	001-15305,	and	to	filings	by	BlackRock,	Inc.	are	to	SEC	File	No.	001-33099.

* Denotes	management	contract	or	compensatory	plan.

You	can	obtain	copies	of	these	Exhibits	electronically	at	the	SEC's	website	at	www.sec.gov	or	by	mail	from	the	Public	Reference	Section	of	the	SEC	at	100	F	Street, N.E.,	Washington,	D.C.	20549	at	prescribed	rates.	The	Exhibits	are	also	available	as	part	of	this	Form	10-K	on	PNC's	corporate	website	at	www.pnc.com/secfilings. Shareholders	and	bondholders	may	also	obtain	copies	of	Exhibits	without	charge	by	contacting	Shareholder	Relations	at	(800)	843-2206	or	via	e-mail	at investor.relations@pnc.com.	The	Interactive	Data	File	(XBRL)	exhibit	is	only	available	electronically.


by what percentage did the potential maximum exposure decrease by the end of 2012?
     decrease_2012_2013 = 4 - 3.9
 percent_change = decrease_2012_2013 / 4
 answer = percent_change * 100