Investment Securities

6 Months Ended

Jun. 30, 2013

Investment Securities Disclosure [Abstract]

Note 8 Investment Securities

Table 80: Investment Securities Summary

			Amortized		Unrealized						Fair
In millions			Cost		Gains			Losses			Value
June 30, 2013

Securities Available for Sale
Debt securities
	U.S. Treasury and government agencies		$	2,052		$	158			$	2,210
	Residential mortgage-backed
		Agency		23,915			514	$	(181)		24,248
		Non-agency		5,816			292		(256)		5,852
	Commercial mortgage-backed
		Agency		574			22		(1)		595
		Non-agency		3,560			135		(16)		3,679
	Asset-backed			6,036			57		(59)		6,034
	State and municipal			2,193			64		(40)		2,217
	Other debt			2,733			60		(26)		2,767
		Total debt securities		46,879			1,302		(579)		47,602
Corporate stocks and other				297							297
	Total securities available for sale		$	47,176		$	1,302	$	(579)	$	47,899
Securities Held to Maturity
Debt securities
	U.S. Treasury and government agencies		$	234		$	21			$	255
	Residential mortgage-backed (agency)			3,773			84	$	(32)		3,825
	Commercial mortgage-backed
		Agency		1,262			57				1,319
		Non-agency		2,193			42		(4)		2,231
	Asset-backed			1,100			3		(3)		1,100
	State and municipal			639			19				658
	Other debt			349			12				361
	Total securities held to maturity		$	9,550		$	238	$	(39)	$	9,749

December 31, 2012

Securities Available for Sale
Debt securities
	U.S. Treasury and government agencies		$	2,868		$	245			$	3,113
	Residential mortgage-backed
		Agency		25,844			952	$	(12)		26,784
		Non-agency		6,102			314		(309)		6,107
	Commercial mortgage-backed
		Agency		602			31				633
		Non-agency		3,055			210		(1)		3,264
	Asset-backed			5,667			65		(79)		5,653
	State and municipal			2,197			111		(21)		2,287
	Other debt			2,745			103		(4)		2,844
		Total debt securities		49,080			2,031		(426)		50,685
Corporate stocks and other				367							367
	Total securities available for sale		$	49,447		$	2,031	$	(426)	$	51,052
Securities Held to Maturity
Debt securities
	U.S. Treasury and government agencies		$	230		$	47			$	277
	Residential mortgage-backed (agency)			4,380			202				4,582
	Commercial mortgage-backed
		Agency		1,287			87				1,374
		Non-agency		2,582			85				2,667
	Asset-backed			858			5				863
	State and municipal			664			61				725
	Other debt			353			19				372
	Total securities held to maturity		$	10,354		$	506			$	10,860

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 June 30, 2013, accumulated other comprehensive income included pretax gains of $73 million from derivatives that hedged 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.

The gross unrealized loss on debt securities held to maturity was $39 million at June 30, 2013 and less than $1 million at December 31, 2012, with $1.6 billion and $73 million of positions in a continuous loss position for less than 12 months at June 30, 2013 and December 31, 2012, respectively. The fair value of debt securities held to maturity that were in a continuous loss position for 12 months or more was $35 million and $56 million at June 30, 2013 and December 31, 2012, respectively.

Table 81: Gross Unrealized Loss and Fair Value of Securities Available for Sale presents gross unrealized loss and fair value of securities available for sale at June 30, 2013 and December 31, 2012. 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 81: Gross Unrealized Loss and Fair Value of Securities Available for Sale

				Unrealized loss position less					Unrealized loss position 12
In millions				than 12 months					months or more				Total
				Unrealized			Fair		Unrealized		Fair		Unrealized		Fair
				Loss			Value		Loss		Value		Loss		Value
June 30, 2013
Debt securities
	Residential mortgage-backed
		Agency			$	(176)	$	8,046	$	(5)	$	163	$	(181)	$	8,209
		Non-agency				(53)		1,563		(203)		1,877		(256)		3,440
	Commercial mortgage-backed
		Agency				(1)		32						(1)		32
		Non-agency				(16)		1,039						(16)		1,039
	Asset-backed					(8)		1,055		(51)		228		(59)		1,283
	State and municipal					(22)		818		(18)		274		(40)		1,092
	Other debt					(25)		867		(1)		16		(26)		883
			Total		$	(301)	$	13,420	$	(278)	$	2,558	$	(579)	$	15,978

December 31, 2012
Debt securities
	Residential mortgage-backed
		Agency			$	(9)	$	1,128	$	(3)	$	121	$	(12)	$	1,249
		Non-agency				(3)		219		(306)		3,185		(309)		3,404
	Commercial mortgage-backed
		Non-agency				(1)		60						(1)		60
	Asset-backed					(1)		370		(78)		625		(79)		995
	State and municipal					(2)		240		(19)		518		(21)		758
	Other debt					(2)		61		(2)		15		(4)		76
			Total		$	(18)	$	2,078	$	(408)	$	4,464	$	(426)	$	6,542

Evaluating Investment Securities for Other-than-Temporary Impairments

For the securities in the preceding table, as of June 30, 2013 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. For those securities in an unrealized loss position we 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 U.S. 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 expect that 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 82: Credit Impairment Assessment Assumptions - Non-Agency Residential Mortgage-Backed and Asset-Backed Securities (a)

						Weighted-
June 30, 2013			Range			average (b)
Long-term prepayment rate (annual CPR)
	Prime			7-20	%	14	%
	Alt-A			5-12		6
	Option ARM			3-6		3
Remaining collateral expected to default
	Prime			1-45	%	18	%
	Alt-A			7-57		33
	Option ARM			16-69		48
Loss severity
	Prime			25-71	%	43	%
	Alt-A			30-85		56
	Option ARM			40-70		59
(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 the second quarter and first six months of 2013 and 2012, respectively, the OTTI credit losses recognized in noninterest income and the OTTI noncredit losses recognized in accumulated other comprehensive income (loss), net of tax, on securities that we do not expect to sell were as follows:

Table 83: Other-Than-Temporary Impairments

			Three months ended June 30					Six months ended June 30
In millions			2013			2012			2013		2012
Credit portion of OTTI losses
	Available for sale securities:
		Non-agency residential mortgage-backed		$	(3)	$	(31)		$	(10)	$	(63)
		Asset-backed			(1)		(3)			(4)		(8)
		Other debt										(1)
Total credit portion of OTTI losses					(4)		(34)			(14)		(72)
Noncredit portion of OTTI (losses) recoveries					(6)		2			3		24
Total OTTI losses				$	(10)	$	(32)			(11)		(48)

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 84: Rollforward of Cumulative OTTI Credit Losses Recognized in Earnings

		Non-agency			Non-agency
		residential			commercial
In millions		mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the three months ended June 30, 2013
March 31, 2013			$	(887)		$	(6)		$	(258)		$	(14)	$	(1,165)
Additional loss where credit impairment was
	previously recognized			(3)						(1)					(4)
Reduction due to credit impaired securities sold or matured				5											5
June 30, 2013			$	(885)		$	(6)		$	(259)		$	(14)	$	(1,164)

		Non-agency			Non-agency
		residential			commercial
In millions		mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the three months ended June 30, 2012
March 31, 2012			$	(859)		$	(6)		$	(249)		$	(14)	$	(1,128)
Loss where impairment was not previously recognized				(1)											(1)
Additional loss where credit impairment was
	previously recognized			(30)						(3)					(33)
June 30, 2012			$	(890)		$	(6)		$	(252)		$	(14)	$	(1,162)

	Non-agency			Non-agency
	residential			commercial
In millions	mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the six months ended June 30, 2013
December 31, 2012		$	(926)		$	(6)		$	(255)		$	(14)	$	(1,201)
Additional loss where credit impairment was previously recognized			(10)						(4)					(14)
Reduction due to credit impaired securities sold or matured			51											51
June 30, 2013		$	(885)		$	(6)		$	(259)		$	(14)	$	(1,164)

	Non-agency			Non-agency
	residential			commercial
In millions	mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the six months ended June 30, 2012
December 31, 2011		$	(828)		$	(6)		$	(244)		$	(13)	$	(1,091)
Loss where impairment was not previously recognized			(2)									(1)		(3)
Additional loss where credit impairment was previously recognized			(61)						(8)					(69)
Reduction due to credit impaired securities sold or matured			1											1
June 30, 2012		$	(890)		$	(6)		$	(252)		$	(14)	$	(1,162)

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table.

Table 85: Gains (Losses) on Sales of Securities Available for Sale

			Gross		Gross		Net		Tax
In millions	Proceeds		Gains		Losses		Gains		Expense
For the six months ended June 30
2013	$	3,877	$	98	$	(23)	$	75	$	26
2012		6,607		129		(10)		119		42

The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at June 30, 2013.

Table 86: Contractual Maturity of Debt Securities

June 30, 2013					After 1 Year			After 5 Years			After 10
Dollars in millions		1 Year or Less			through 5 Years			through 10 Years			Years			Total
Securities Available for Sale
U.S. Treasury and government agencies		$	1		$	1,082		$	804		$	165		$	2,052
Residential mortgage-backed
	Agency		1			33			513			23,368			23,915
	Non-agency					12			2			5,802			5,816
Commercial mortgage-backed
	Agency		10			528			36						574
	Non-agency		75			59			105			3,321			3,560
Asset-backed			5			1,088			2,138			2,805			6,036
State and municipal			12			116			389			1,676			2,193
Other debt			524			1,337			529			343			2,733
	Total debt securities available for sale	$	628		$	4,255		$	4,516		$	37,480		$	46,879
Fair value		$	635		$	4,356		$	4,658		$	37,953		$	47,602
Weighted-average yield, GAAP basis			2.72	%		2.45	%		2.38	%		3.30	%		3.13	%
Securities Held to Maturity
U.S. Treasury and government agencies											$	234		$	234
Residential mortgage-backed (agency)												3,773			3,773
Commercial mortgage-backed
	Agency				$	423		$	834			5			1,262
	Non-agency					51						2,142			2,193
Asset-backed						60			80			960			1,100
State and municipal						34			282			323			639
Other debt						1			348						349
Total debt securities held to maturity					$	569		$	1,544		$	7,437		$	9,550
Fair value					$	583		$	1,607		$	7,559		$	9,749
Weighted-average yield, GAAP basis						3.32	%		3.42	%		3.82	%		3.72	%

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 June 30, 2013:

Table 87: Weighted-Average Expected Maturity of Mortgage and Other Asset-Backed Debt Securities

June 30, 2013		Years
Agency residential mortgage-backed securities		4.6
Non-agency residential mortgage-backed securities		5.9
Agency commercial mortgage-backed securities		4.2
Non-agency commercial mortgage-backed securities		2.4
Asset-backed securities		3.8

Weighted-average yields are based on historical cost with effective yields weighted for the contractual maturity of each security. At June 30, 2013, there were no securities of a single issuer, other than FNMA, that 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 88: Fair Value of Securities Pledged and Accepted as Collateral

		June 30			December 31
In millions		2013			2012
Pledged to others			$	23,058		$	25,648
Accepted from others:
	Permitted by contract or custom to sell or repledge			1,122			1,015
	Permitted amount repledged to others			888			685

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.