As described in Note 15 Employee Benefit Plans in our 2012 Form 10-K, 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. 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.

The components of our net periodic pension and post-retirement benefit cost for the first six months of 2013 and 2012, respectively, were as follows:

Table 106: Net Periodic Pension and Postretirement Benefits Costs

	Qualified Pension Plan				Nonqualified Retirement Plans					Postretirement Benefits

Three months ended June 30
In millions	2013		2012			2013		2012			2013		2012
Net periodic cost consists of:
Service cost	$	29	$	25		$	1	$	1		$	2	$	2
Interest cost		43		48			3		4			4		4
Expected return on plan assets		(72)		(71)
Amortization of prior service credit		(2)		(2)								(1)		(1)
Amortization of actuarial losses/(gains)		21		22			2		1					(1)
Net periodic cost/(benefit)	$	19	$	22		$	6	$	6		$	5	$	4

	Qualified Pension Plan				Nonqualified Retirement Plans					Postretirement Benefits

Six months ended June 30
In millions	2013		2012			2013		2012			2013		2012
Net periodic cost consists of:
Service cost	$	57	$	51		$	2	$	2		$	3	$	3
Interest cost		85		96			6		7			8		8
Expected return on plan assets		(144)		(142)
Amortization of prior service credit		(4)		(4)								(2)		(2)
Amortization of actuarial losses		43		44			4		3
Net periodic cost/(benefit)	$	37	$	45		$	12	$	12		$	9	$	9

As more fully described in Note 16 Stock Based Compensation Plans in our 2012 Form 10-K, 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 June 30, 2013, no stock appreciation rights were outstanding.

Total compensation expense recognized related to all share-based payment arrangements during the first six months of 2013 and 2012 was $84 million and $56 million, respectively.

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.

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 very subjective. The option pricing assumptions used by PNC are as follows:

Table 107: Option Pricing Assumptions

Weighted-average for the six months ended
June 30		2013			2012
Risk-free interest rate		.9	%		1.1	%
Dividend yield		2.5			2.3
Volatility		34.0			35.1
Expected life		6.5	yrs.		5.9	yrs.
Grant-date fair value	$	16.35		$	16.22

The following table represents the stock option activity for the first six months of 2013.

Table 108: Stock Option Rollforward

					PNC Options
					Converted From
					National City
		PNC			Options			Total
			Weighted-Average			Weighted-Average			Weighted-Average
In thousands, except weighted-average data		Shares	Exercise Price		Shares	Exercise Price		Shares	Exercise Price
Outstanding at December 31, 2012		14,817	$	55.52	747	$	681.16	15,564	$	85.55
	Granted	161		63.87				161		63.87
	Exercised	(2,492)		44.84				(2,492)		44.84
	Cancelled	(475)		57.64	(19)		462.07	(494)		73.25
Outstanding at June 30, 2013		12,011	$	57.76	728	$	686.89	12,739	$	93.72
Exercisable at June 30, 2013		10,253	$	56.84	728	$	686.89	10,981	$	98.61

During the first six months of 2013, we issued approximately 2 million shares from treasury stock in connection with stock option exercise activity. As with past exercise activity, we currently intend to utilize treasury stock primarily for any future stock option exercises.

The fair value of nonvested incentive/performance unit share awards and restricted stock/share unit awards is initially determined based on prices not less than the market value of our common stock 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 (“P&CC”) of the Board of Directors approves the final award payout with respect to incentive/performance unit share awards. Restricted stock/share unit awards have various vesting periods generally ranging from 36 months to 60 months.

Beginning in 2013, we incorporated several enhanced risk-related performance changes to certain long-term incentive compensation programs. In addition to achieving certain financial performance metrics on both an absolute basis and relative to our peers, final payout amounts 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 either a three-year or a four-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 2013 to certain executives as part of annual bonus deferral criteria. These units, payable solely in stock, vest ratably over a four-year period and contain the same risk-related discretionary criteria noted in the paragraph above.

In the following table, 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.

Table 109: Nonvested Incentive/Performance Unit Share Awards and Restricted Stock/Share Unit Awards - Rollforward

					Nonvested
		Nonvested	Weighted-		Restricted	Weighted-
		Incentive/	Average		Stock/	Average
		Performance	Grant Date		Share	Grant Date
Shares in thousands		Unit Shares	Fair Value		Units	Fair Value
December 31, 2012		1,119	$	61.14	3,061	$	60.04
	Granted	885		63.86	1,123		63.49
	Vested/Released	(326)		58.26	(611)		55.07
	Forfeited	(20)		59.36	(125)		61.76
June 30, 2013		1,658	$	63.18	3,448	$	61.98

At June 30, 2013, there was $179 million of unamortized share-based compensation expense related to nonvested equity compensation arrangements granted under the Incentive Plans. This unamortized cost is expected to be recognized as expense over a period of no longer than five years.

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 June 30, 2013, there were 829,615 of these cash-payable restricted share units outstanding.

A summary of all nonvested, cash-payable restricted share unit activity follows:

Table 110: Nonvested Cash-Payable Restricted Share Units - Rollforward
		Nonvested
		Cash-Payable		Aggregate
		Restricted		Intrinsic
In thousands		Share Units		Value
Outstanding at December 31, 2012		920
	Granted	485
	Vested and Released	(457)
	Forfeited	(2)
Outstanding at June 30, 2013		946	$	68,944