3Q21 Basel III Pillar 3 Disclosures

The PNC Financial Services Group, Inc.

Basel III Pillar 3 Report: Standardized Approach

September 30, 2021

Page References

		Pillar 3		September 30,	2020
Pillar 3 Disclosure	Description		2021
Report		Form 10-Q	Form 10-K
Introduction			3
	Forward-Looking Statements		3	43	91
	Basis of Consolidation		3		101
	Basel III Overview		3		2, 81, 174
Capital			4
	Summary of Capital		4		36, 141, 143
	Restrictions on Transfer of Funds or Total Capital		4		174
	Capital Adequacy		4
	Capital Ratios		5	59
	Table 1: Capital Ratios		5	35	82
	Table 2: Standardized Risk-Weighted Assets		6
Credit Risk			6
	Credit Risk Management		6	20	61, 64
	Summary of Credit Exposures		7	9, 10, 21, 22,	48, 49, 64, 66,
				24, 25, 56, 59,	67, 68, 69, 88,
				88, 102	101, 119, 122,
					159, 190
	Table 3: Loan Exposures by Remaining Contractual		7
	Maturity
Credit Risk Mitigation			8
Counterparty Credit			8	88	159
Risk	Counterparty Credit Risk Mitigation		8
	Collateral		8	92	159
	Table 4: Counterparty Credit Risk Exposures		9
Securitization			9		133
	Summary of Accounting Policies for Securitization		9		101, 133
	Activities
	Risk Management		9	56, 59	119, 122, 159
	Table 5: Securitization Exposures by Underlying Asset		10
	Type
	Regulatory Treatment of Securitizations		10
	Table 6: Capital Requirements of Securitization		10
	Exposures by Risk-Weighting

Equities Not Subject to the Market Risk Rule

	10		83, 101, 147
Summary of Equity Investment Exposures	11	36, 69	83, 133
Table 7: Book Value and Fair Value of Equity	11
Exposures Not Subject to Market Risk Rule
Table 8: Capital Requirements of Equity Investment	11
Exposures by Risk-Weighting

Market Risk Capital	12
Governance of Covered Positions	12
Valuation Policies, Procedures & Methodologies	12	78	16, 147
Value at Risk (VaR) Models	12
Table 9: VaR-Based Metrics	13
Back Testing	13
Model Validation	14
Stress Testing	14
Securitization Positions	14
Interest Rate Risk for	14	36	83
Non-Trading Activities
Supplementary	14
Leverage Ratio
Table 10: Supplementary Leverage Ratio	15
Glossary of Terms	15	104	196

PNC Pillar 3 Standardized Disclosures as of September 30, 2021

INTRODUCTION

The PNC Financial Services Group, Inc. (PNC) is one of the largest diversified financial services companies in the United States (U.S.) and is headquartered in Pittsburgh, Pennsylvania. PNC has businesses engaged in retail banking, including residential mortgage, corporate and institutional banking and asset management, providing many of its products and services nationally. Our retail branch network is located coast to coast. We also have strategic international offices in four countries outside the U.S. At September 30, 2021, consolidated total assets, total deposits and total shareholders' equity were $553.5 billion, $448.9 billion and $56.3 billion, respectively.

PNC is a bank holding company registered under the Bank Holding Company Act of 1956 and a financial holding company under the Gramm-Leach-Bliley Act. PNC provides its products and services primarily through PNC Bank, National Association (PNC Bank) and BBVA USA.

This report (Pillar 3 Report) provides information about PNC's capital structure, risk exposures, risk assessment processes, risk- weighted assets and overall capital adequacy and should be read in conjunction with PNC's Securities and Exchange Commission (SEC) filings, including the Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K) and Quarterly Report on Form 10-Q for the period ended September 30, 2021 (September 30, 2021 Form 10-Q). These SEC filings are available at www.pnc.com/secfilings. The Pillar 3 Report and other regulatory disclosures, including PNC Bank's Call Report, are available at http://www.pnc.com/regulatorydisclosures. BBVA USA's Call Report is available on their Investor Relations website.

Acquisition of BBVA USA Bancshares, Inc.

On June 1, 2021, PNC acquired BBVA USA Bancshares Inc. (BBVA), a U.S. financial holding company conducting its business operations primarily through its U.S. banking subsidiary, BBVA USA. PNC paid $11.5 billion in cash as consideration for the acquisition.

On October 8, 2021, BBVA USA merged into PNC Bank. As of October 12, 2021, PNC has converted approximately 2.6 million customers, 9,000 employees and over 600 branches across seven states. PNC's third quarter results reflect the full quarter benefit of BBVA's acquired business operations. PNC's balance sheet at September 30, 2021 includes BBVA's balances.

Forward-Looking Statements

This disclosure may contain forward-looking statements, which 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. See the Cautionary Statement Regarding Forward-Looking Information in PNC's September 30, 2021 Form 10-Q for more information. Also see all risks and uncertainties disclosed in PNC's SEC filings, including its 2020 Form 10-K, and subsequent reports on Forms 10-K,10-Q and 8-K, Proxy Statements on Schedule 14A, and, if applicable, its registration statements under the Securities Act of 1933, as amended, all of which are or will upon filing be accessible on PNC's website at www.pnc.com/secfilings and on the SEC's website at www.sec.gov.

Basis of Consolidation

Our consolidated financial statements include the accounts of the parent company and its subsidiaries, most of which are wholly- owned, certain partnership interests and variable interest entities that are required to be consolidated under accounting principles generally accepted in the United States of America (GAAP). We have eliminated intercompany accounts and transactions. The basis for consolidation for regulatory capital calculations is the same as that used in the presentation of PNC's consolidated financial statements, which is described in further detail in Note 1 Accounting Policies of our 2020 Form 10-K. Consistent with the regulatory capital rules, the minimum capital requirement for our consolidated insurance underwriting subsidiaries under applicable law is deducted from our regulatory capital.

Basel III Overview

PNC and BBVA USA are subject to the regulatory capital requirements established by the Board of Governors of the Federal Reserve System (Federal Reserve). PNC Bank is subject to the regulatory capital requirements established by the Office of the Comptroller of the Currency (OCC). For additional information regarding regulatory capital requirements, see the Banking Regulation and Supervision section of Part I, Item 1 - Business of our 2020 Form 10-K.

The Basel III regulatory capital ratios of PNC, PNC Bank and BBVA USA as of September 30, 2021 exceeded the applicable minimum levels. For additional information regarding regulatory capital requirements, see the Banking Regulation and Supervision

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PNC Pillar 3 Standardized Disclosures as of September 30, 2021

section of Item 1 - Business, Capital Management portion of the Liquidity and Capital Management section of Risk Management in Item 7 and Note 20 Regulatory Matters of our 2020 Form 10-K.

The disclosures by PNC in this Pillar 3 Report include those required by the standardized approach. PNC is the top-tier entity within the PNC organization to which the standardized approach applies. In addition, PNC has more than $1 billion in aggregate quarterly average trading assets and trading liabilities, and is subject to the market risk capital rule as amended (the "Market Risk Rule"). This Pillar 3 Report also includes PNC's required disclosures under the Market Risk Rule.

CAPITAL

Summary of Capital

PNC's regulatory capital structure consists of the following capital instruments:

Common Stock

PNC has $5 par value common stock. At September 30, 2021, there were 800 million shares authorized, and 543 million shares issued, of which 120 million shares were held in treasury at cost. Holders of PNC common stock are entitled to receive dividends when declared by PNC's Board of Directors out of funds legally available for this purpose. See Part II, Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in our 2020 Form 10-K for additional information on our common stock.

Preferred Stock

See Note 12 Equity in our 2020 Form 10-K for information on our preferred stock.

Trust Preferred Capital Securities

At September 30, 2021, PNC had $206 million in principal amount of an outstanding junior subordinated debenture associated with $200 million of trust preferred securities that were issued by a subsidiary statutory trust. See Note 10 Borrowed Funds in our 2020 Form 10-K for additional information on these instruments.

Qualifying Subordinated Debt

PNC had $3.7 billion in subordinated debt that qualified as Tier 2 capital for the Basel III ratio at September 30, 2021. The interest rates on our subordinated debt range from 2.70% to 4.20% and maturities range from 2022 through 2029.

Restrictions on Transfer of Funds or Total Capital

Federal law and regulations place a variety of restrictions on the ability of PNC to transfer funds or total capital among entities within the PNC group. See Note 20 Regulatory Matters in our 2020 Form 10-K for additional information on these restrictions.

Capital Adequacy

PNC's overall capital planning objective is to maintain sufficient capital resources, both in terms of quantity and quality, to cover all of the firm's risks and allow the firm to operate effectively through a range of economic environments. PNC's internal capital adequacy process (CAP) supports this overall objective by taking into account capital stress testing results, capital and liquidity positions and other risk considerations. In addition, PNC's CAP has a sound risk management infrastructure, including but not limited to, the thorough review and consideration of alternative economic scenarios as well as other risks. The Board of Directors, its Risk Committee, and senior management use the firm's CAP results to assess the level of capital that is appropriate for the firm to maintain in light of the range of risks facing the firm, the firm's business strategy, and its risk appetite. Sound capital stress testing practices and methodologies are a key component of PNC's CAP.

In addition to the CAP, PNC is subject to the Federal Reserve's capital plan rule, annual capital stress testing requirements and Comprehensive Capital Analysis and Review (CCAR) process, as well as the applicable Dodd-Frank capital stress testing requirements of the Federal Reserve and the OCC. As part of the CCAR process, the Federal Reserve undertakes a supervisory assessment of PNC's capital adequacy. This assessment is based on a review of a comprehensive capital plan submitted by PNC 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 macroeconomic scenarios, including supervisory severely adverse scenario provided by the Federal Reserve.

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PNC Pillar 3 Standardized Disclosures as of September 30, 2021

Capital Ratios

The Basel III Total risk-based capital ratio includes $20 million of nonqualifying trust preferred capital securities that are subject to a phase-out period that runs through 2021. All current period capital ratios are calculated using the regulatory capital methodology applicable to us during 2021. These Basel III capital ratios may be impacted by any additional regulatory guidance or analysis by PNC as to the application of the rules to PNC. Fully implemented Basel III results, in Table 1, are presented as estimates. PNC utilizes the fully implemented Basel III capital ratios to assess the impact to its capital position as if the impact of CECL had been fully phased in at September 30, 2021.

At September 30, 2021, PNC, PNC Bank and BBVA USA were considered "well capitalized," based on applicable U.S. regulatory capital ratio requirements. To qualify as "well capitalized," PNC must have Basel III capital ratios of at least 6% for Tier 1 risk-based capital and 10% for Total risk-based capital, and PNC Bank and BBVA USA must have Basel III capital ratios of at least 6.5% for Common equity Tier 1 risk-based capital, 8% for Tier 1 risk-based capital, 10% for Total risk-based capital and a Leverage ratio of at least 5%. For PNC Bank's capital ratios, see PNC Bank's Call Report for the period ended September 30, 2021. For BBVA USA's capital ratios, see BBVA USA's Call Report for the period ended September 30, 2021.

The Basel III capital rule also includes a capital conservation buffer requirement above the minimum risk-based capital ratio requirements that banking organizations must meet in order to avoid limitations on capital distributions (including dividends and repurchases of any Tier 1 capital instrument, including common and qualifying preferred stock) and certain discretionary incentive compensation payments. In 2021, PNC, PNC Bank and BBVA USA are required to maintain a Common equity Tier 1 capital ratio of at least 7.0%, a Tier 1 capital ratio of at least 8.5%, and a Total risk-based capital ratio of at least 10.5% to avoid limitations on capital distributions and certain discretionary incentive compensation payments. At September 30, 2021, each of PNC, PNC Bank and BBVA USA were above these ratio requirements.

In the third quarter of 2020, the Federal Reserve, OCC and FDIC also adopted a final rule that revises the definition of "eligible retained income" for purposes of the stress capital buffer (SCB) and other Basel III capital buffers. This revision is designed to phase in the potential application of these buffers more gradually, especially in periods when banking organizations are distributing all or a substantial majority of their net income. Under the final rule, eligible retained income is the greater of (i) the banking organization's net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (ii) the average of the banking organization's net income over the preceding four quarters. PNC's eligible retained income at September 30, 2021 was $3.4 billion.

See Note 4 Loans and Related Allowance for Credit Losses of our September 30, 2021 Form 10-Q on additional information about the effects of COVID-19 related loan modifications on delinquency status, which impacts our risk-weighted calculations.

The following table outlines the Basel III ratios for PNC as of September 30, 2021:

Table 1: Capital Ratios (a)

September 30, 2021

In millions		Basel III		Fully Implemented
		(estimated)
Consolidated PNC
Regulatory capital
Common equity Tier 1 capital	$	40,038	$	38,976
Tier 1 capital	$	45,047	$	43,985
Total capital	$	52,982	$	52,547
Risk-weighted assets
Basel III standardized approach risk-weighted assets	$	389,911	$	389,887
Average quarterly adjusted total assets	$	547,840	$	546,777

Risk-based capital and leverage ratios
Common equity Tier 1	10.3 %	10.0 %
Tier 1	11.6 %	11.3 %
Total	13.6 %	13.5 %
Leverage	8.2 %	8.0 %

1. See Table 29: Basel III Capital in the Capital Management portion of the Liquidity and Capital Management section of Risk Management in our September 30, 2021 Form 10-Q for additional information on the elements of, and adjustments and deductions to, our consolidated regulatory capital.

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