Certain Employee Benefit and Stock Based Compensation Plans

6 Months Ended

Jun. 30, 2015

Certain Employee Benefit and Stock Based Compensation Plans

Note 10 Certain Employee Benefit And Stock Based Compensation Plans

Pension And Postretirement Plans

As described in Note 13 Employee Benefit Plans in our 2014 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. PNC reserves the right to terminate plans or make plan changes at any time.

The components of our net periodic pension and postretirement benefit cost for the first six months of 2015 and 2014, respectively, were as follows:

Table 89: Net Periodic Pension and Postretirement Benefits Costs

	Qualified Pension Plan				Nonqualified Retirement Plans					Postretirement Benefits

Three months ended June 30
In millions	2015		2014			2015		2014			2015		2014
Net periodic cost consists of:
Service cost	$	26	$	26		$	1	$	1		$	2	$	1
Interest cost		45		47			3		3			3		4
Expected return on plan assets		(74)		(72)
Amortization of prior service credit		(2)		(2)
Amortization of actuarial losses		8					1		1
Net periodic cost/(benefit)	$	3	$	(1)		$	5	$	5		$	5	$	5

	Qualified Pension Plan				Nonqualified Retirement Plans					Postretirement Benefits

Six months ended June 30
In millions	2015		2014			2015		2014			2015		2014
Net periodic cost consists of:
Service cost	$	53	$	51		$	1	$	2		$	3	$	2
Interest cost		89		94			6		6			7		8
Expected return on plan assets		(148)		(144)
Amortization of prior service credit		(4)		(4)
Amortization of actuarial losses		15					3		2
Net periodic cost/(benefit)	$	5	$	(3)		$	10	$	10		$	10	$	10

Stock Based Compensation Plans

As more fully described in Note 14 Stock Based Compensation Plans in our 2014 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, 2015, no stock appreciation rights were outstanding.

Total compensation expense recognized related to all share-based payment arrangements during the first six months of 2015 and 2014 was $88 million and $104 million, respectively. At June 30, 2015, there was $252 million of unamortized share-based compensation expense related to nonvested equity compensation arrangements, including liability awards granted under the Incentive Plans. This unamortized cost is expected to be recognized as expense over a period of no longer than five years.

Nonqualified Stock Options

Beginning in 2014, PNC discontinued the use of stock options as a standard element of our long-term equity incentive compensation programs under our Incentive Plans. Additional information regarding PNC stock options is more fully described in Note 14 Stock Based Compensation Plans in our 2014 Form 10-K.

The following table represents the stock option activity for the first six months of 2015.

Table 90: 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, 2014		6,701	$	56.41	343	$	585.23	7,044	$	82.17
	Granted (a)
	Exercised	(1,533)		59.42				(1,533)		59.42
	Cancelled	(28)		44.42	(14)		474.12	(42)		187.83
Outstanding at June 30, 2015		5,140	$	55.58	329	$	590.02	5,469	$	87.73
Exercisable at June 30, 2015		5,092	$	55.50	329	$	590.02	5,421	$	87.94
(a) PNC did not grant any stock options in the first six months of 2015.

During the first six months of 2015, we issued approximately 1.1 million common 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.

Incentive/Performance Unit Share Awards and Restricted Stock/Share Unit Awards

Information on incentive/performance unit share awards and restricted stock/share unit awards is more fully described in Note 14 Stock Based Compensation Plans in our 2014 Form 10-K.

Table 91: 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, 2014		1,837	$	69.84	3,652	$	69.03
	Granted	649		90.35	1,019		92.17
	Vested/Released	(682)		66.17	(1,149)		61.17
	Forfeited	(24)		70.15	(90)		76.96
June 30, 2015		1,780	$	78.72	3,432	$	78.41

In the preceding 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 if and when the underlying unit shares are released to the participants.

Liability Awards

A summary of all nonvested, cash-payable incentive/performance units and restricted share unit activity follows:

Table 92: Nonvested Cash-Payable Incentive/Performance Units and Restricted Share Units – Rollforward

		Cash-Payable
		Incentive/	Cash-Payable
		Performance	Restricted
In thousands		Units	Share Units	Total
Outstanding at December 31, 2014		177	658	835
	Granted	81	347	428
	Vested and Released	(98)	(349)	(447)
	Forfeited	(43)	(4)	(47)
Outstanding at June 30, 2015		117	652	769

Included in the preceding table are cash-payable restricted share units granted to certain executives. These grants were made primarily as part of an annual bonus incentive deferral plan. While there are time-based and other vesting criteria, there are generally no market or performance criteria associated with these awards. Prior to the 2015 grant, compensation expense recognized related to these awards was recorded in prior periods as part of the annual cash bonus process. Due to certain requisite service period changes in the award agreements starting with the 2015 grant (for the 2014 performance year), compensation expense is recognized ratably over a four year period commensurate with the performance year plus the three years of service-based vesting requirements. As of June 30, 2015, the aggregate intrinsic value of all outstanding nonvested cash-payable incentive/performance units and restricted share units was approximately $74 million.