The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:

The Consolidated Financial Highlights accompanying this news release include additional information regarding reconciliations of non-GAAP financial measures to reported (GAAP) amounts. This information supplements results as reported in accordance with GAAP and should not be viewed in isolation from, or as a substitute for, GAAP results. Fee income, a non-GAAP financial measure, refers to noninterest income in the following categories: asset management, consumer services, corporate services, residential mortgage and service charges on deposits. Information in this news release, including the financial tables, is unaudited.

Total revenue for the first quarter of 2020 decreased $92 million compared with the fourth quarter as lower noninterest income was partially offset by higher net interest income. In the comparison with first quarter 2019, total revenue increased $231 million due to higher noninterest income and net interest income.

Net interest income for the first quarter of 2020 increased $23 million compared with the fourth quarter primarily due to lower rates on deposits and borrowings and higher loan and securities balances partially offset by lower loan and other earning asset yields and one less day in the first quarter. Net interest income increased $36 million compared with the first quarter of 2019 as lower rates on borrowings and deposits, higher loan and securities balances and one additional day in first quarter 2020 were substantially offset by lower yields on loans, securities and other earning assets. The net interest margin increased to 2.84 percent for the first quarter of 2020 from 2.78 percent for the fourth quarter due to lower rates on deposits and borrowings and higher securities yields partially offset by lower loan yields. The margin decreased from 2.98 percent in the first quarter of 2019 as a result of lower yields on earning assets partially offset by lower funding costs.

Noninterest income for the first quarter of 2020 decreased $115 million compared with the fourth quarter. Asset management revenue, including PNC's equity investment in BlackRock, decreased $122 million reflecting the impact of BlackRock's previously announced charitable contribution and lower average equity markets. Consumer services decreased $13 million and service charges on deposits declined $17 million due to seasonally lower transaction volumes and activity as well as fees waived related to the economic impact of COVID-19. Corporate services grew $27 million as a result of higher merger and acquisition advisory fees and a higher benefit from commercial mortgage servicing rights valuation, net of economic hedge. Residential mortgage revenue increased $123 million due to a higher benefit from residential mortgage servicing rights valuation, net of economic hedge, as well as higher loan sales revenue and servicing fees. Other noninterest income decreased $113 million primarily due to negative valuation adjustments of private equity investments in the first quarter compared with positive valuations in the fourth quarter and the impact of a fourth quarter gain on the sale of proprietary mutual funds partially offset by higher net securities gains, which were $182 million in the first quarter.

Noninterest income for the first quarter of 2020 increased $195 million compared with the first quarter of 2019. Asset management revenue decreased $55 million reflecting BlackRock's charitable contribution and the impact of 2019 sales of PNC's retirement recordkeeping business and proprietary mutual funds. Consumer services increased $6 million and included higher brokerage revenue. Corporate services grew $64 million primarily due to higher treasury management product revenue, a higher benefit from commercial mortgage servicing rights valuation, net of economic hedge, and higher merger and acquisition advisory fees. Residential mortgage revenue increased $145 million due to higher results from residential mortgage servicing rights valuation, net of economic hedge, and higher loan sales revenue. Service charges on deposits were stable as higher transaction volumes were offset by a reduction of customer fees charged. Other noninterest income increased $35 million reflecting higher net securities gains partially offset by negative valuation adjustments of private equity investments in the first quarter of 2020.

Noninterest expense for the first quarter of 2020 decreased $35 million compared with the first quarter of 2019 primarily due to lower personnel expense reflecting lower incentive compensation partially offset by business growth.

The effective tax rate was 13.7 percent for the first quarter of 2020, 15.1 percent for the fourth quarter of 2019 and 16.3 percent for the first quarter of 2019. The decline in the effective tax rate in the first quarter of 2020 was primarily due to the benefit from resolution of certain tax matters and the impact of lower pretax earnings.

CONSOLIDATED BALANCE SHEET REVIEW

Average total assets were $412.4 billion in the first quarter of 2020 compared with $411.4 billion in the fourth quarter of 2019 and $385.9 billion in the first quarter of 2019. Total assets were $445.5 billion at March 31, 2020, $410.3 billion at December 31, 2019and $392.8 billion at March 31, 2019. Assets at March 31, 2020 reflected increases in commercial lending balances near quarter end driven by the economic impact of COVID-19.

Total loans at March 31, 2020 increased $24.8 billion compared with December 31, 2019. Commercial lending balances increased $24.1 billion reflecting higher utilization of loan commitments near quarter end driven by the economic impact of COVID-19 on customer liquidity needs. Unfunded commercial lending commitments declined to $116.0 billion at March 31, 2020 from $131.8 billion at December 31, 2019. Consumer lending balances increased $.7 billion.

Average loans for the first quarter of 2020 grew $4.7 billion compared with the fourth quarter. Average commercial lending balances increased $3.3 billion primarily in PNC's corporate banking, real estate and business credit businesses. Average consumer lending balances increased $1.4 billion due to growth in auto, residential mortgage, credit card and unsecured installment loans.

First quarter 2020 period end and average loans increased $32.3 billion and $15.0 billion, respectively, compared with first quarter 2019 driven by overall growth in both commercial and consumer lending, and higher utilization by commercial customers at the end of first quarter 2020.

Average investment securities for the first quarter of 2020 increased $.9 billion and period end balances increased $3.7 billion compared with the fourth quarter primarily due to net purchases of agency residential mortgage-backed securities, corporate debt securities and commercial mortgage-backed securities. Effective January 1, 2020 upon adoption of Accounting Standards Update 2019-04, $16.2 billion of debt securities were transferred from held to maturity to available for sale. First quarter 2020 average and period-end investment securities increased $2.1 billion and $6.7 billion, respectively, compared with the first quarter of 2019 primarily due to net increases in agency residential mortgage-backed securities. Net unrealized gains on available for sale securities were $2.9 billion at March 31, 2020, $1.4 billion at December 31, 2019 and $.5 billion at March 31, 2019.

Average balances held with the Federal Reserve Bank were $17.3 billion in the first quarter of 2020, $23.0 billion in the fourth quarter of 2019 and $14.7 billion in the first quarter of 2019. Balances held with the Federal Reserve were $19.6 billion at March 31, 2020, $23.2 billion at December 31, 2019 and $15.0 billion at March 31, 2019.

Average deposits for the first quarter of 2020 increased $2.0 billion compared with the fourth quarter due to growth in consumer deposits partially offset by seasonal declines in commercial deposits. Deposits at March 31, 2020 increased $16.7 billion compared with December 31, 2019 as higher commercial deposits near quarter end reflected liquidity maintained by customers due to the economic impact of COVID-19. First quarter 2020 average and period-end deposits increased $22.5 billion and $34.0 billion, respectively, compared with first quarter 2019 driven by overall deposit and customer growth as well as liquidity maintained by customers at the end of first quarter 2020.

Average borrowed funds for the first quarter of 2020 decreased $2.8 billion compared with the fourth quarter due to lower Federal Home Loan Bank borrowings partially offset by higher bank notes and senior debt. Borrowed funds at March 31, 2020 increased $13.1 billion compared with December 31, 2019 reflecting higher Federal Home Loan Bank borrowings, bank notes and senior debt, and repurchase agreements in part related to enhanced liquidity to meet customer needs caused by the economic impact of COVID-19. Average borrowed funds for the first quarter of 2020 decreased $2.6 billion compared with the first quarter of 2019, and period-end borrowed funds increased $13.5 billion.

PNC maintained a strong capital position. Common shareholders' equity at March 31, 2020 was stable with December 31, 2019. An increase in accumulated other comprehensive income of $1.7 billion and first quarter net income were offset by share repurchases and dividends and the day-one effect of adoption of the CECL accounting standard of $.7 billion.

PNC returned $1.9 billion of capital to shareholders in the first quarter through repurchases of 10.1 million common shares for $1.4 billion and dividends on common shares of $.5 billion. PNC has purchased a total of 24.0 million shares for $3.4 billion under current share repurchase programs of up to $5.3 billion for the four-quarter period ending with the second quarter of 2020. These programs include an additional $1.0 billion in common shares for which PNC received approval in January 2020.

PNC announced on March 16, 2020 a temporary suspension of its common stock repurchase program through June 30, 2020 in conjunction with the Federal Reserve's effort to support the U.S. economy during the COVID-19 outbreak.

On April 2, 2020, the PNC board of directors declared a quarterly cash dividend on common stock of $1.15 per share effective with the May 5, 2020 dividend payment date.

For information regarding PNC's Basel III capital ratios, see Capital Ratios in the Consolidated Financial Highlights. The 2019 Tailoring Rules became effective for PNC as of January 1, 2020. PNC elected a five-year transition provision effective March 31, 2020 to delay for two years the full impact of CECL on regulatory capital, followed by a three-year transition period. The March 31, 2020 fully implemented ratio reflects the full impact of CECL and excludes the benefits of phase-ins.

Provision for credit losses was $914 million in the first quarter of 2020, an increase of $693 million compared with the fourth quarter of 2019. PNC adopted the CECL accounting standard effective January 1, 2020 and the reasonable and supportable forecasts of future macroeconomic scenarios used in the estimation of expected credit losses were materially affected by the adverse economic impact of COVID-19, resulting in a significant increase in the provision. Loan portfolio growth also contributed to higher reserve levels. Provision for credit losses was $506 million for the commercial portfolio, $399 million for the consumer portfolio and $9 million for other assets and securities.

Net loan charge-offs for the first quarter of 2020 increased slightly by $3 million compared with the fourth quarter as increases in commercial loan, credit card and auto loan charge-offs were partially offset by higher recoveries. Compared with first quarter 2019, net loan charge-offs increased $76 million due to higher commercial net charge-offs of $47 million and higher consumer net charge-offs of $29 million. Net charge-offs were .35 percent of average loans on an annualized basis for both the first quarter of 2020 and fourth quarter of 2019 and .24 percent for the first quarter of 2019.

Nonperforming assets at March 31, 2020 were essentially stable with December 31, 2019. Higher nonperforming loans in the commercial and auto portfolios were partially offset by lower nonperforming home equity and residential mortgage loans. Nonperforming assets decreased $30 million compared with March 31, 2019 due to lower nonperforming home equity and residential mortgage loans and lower other real estate owned and foreclosed assets partially offset by higher nonperforming commercial and auto loans. Nonperforming assets to total assets were .39 percent at March 31, 2020, .43 percent at December 31, 2019 and .45 percent at March 31, 2019.

Overall delinquencies at March 31, 2020 decreased $21 million, or 1 percent, compared with December 31, 2019. Loans past due 30 to 59 days increased $27 million driven by residential mortgage loans. Loans past due 60 to 89 days increased $3 million and loans past due 90 days or more decreased $51 million. Overall delinquencies at March 31, 2020 increased $47 million, or 3 percent, compared with March 31, 2019 reflecting higher auto and credit card past due loans. Loans past due 30 to 59 days increased $54 million, loans past due 60 to 89 days increased $49 million and loans past due 90 days or more decreased $56 million.

The allowance for credit losses for loans and leases and off-balance sheet credit exposures was $4.4 billion at March 31, 2020. This reflects the January 1, 2020 transition adjustment of $.6 billion for adoption of the CECL accounting standard that was added to the December 31, 2019 allowance for loan and lease losses and off-balance sheet credit exposures of $3.1 billion. At March 31, 2020, the allowance for credit losses for loans and leases and off-balance sheet credit exposures to total loans was 1.66 percent.

Retail Banking earnings for the first quarter of 2020 decreased compared to the fourth and first quarters of 2019. Noninterest income increased in both comparisons due to higher residential mortgage revenue attributable to a higher benefit from residential mortgage servicing rights valuation, net of economic hedge, and increased loan sales revenue. Additionally, noninterest income increased due to the impact of negative derivative fair value adjustments related to Visa Class B common shares in the fourth and first quarters of 2019. Compared with the fourth quarter, these increases were partially offset by seasonal declines in service charges on deposits and consumer services, including merchant services and debit card fees, and fees waived related to the economic impact of COVID-19. In the comparison with first quarter 2019, growth in consumer services primarily attributable to debit card and brokerage fees contributed to the increase in noninterest income. Provision for credit losses for the first quarter of 2020, which was calculated under the CECL accounting standard, increased in both comparisons primarily due to the significant economic impact of COVID-19and loan growth. Noninterest expense increased in both comparisons reflecting higher customer-related transaction costs and personnel expense and, compared with first quarter 2019, higher equipment costs and ATM expense resulting from enhanced checking product benefits.

• Average loans increased 2 percent compared with the fourth quarter and 8 percent compared with the first quarter of 2019 due to growth in residential mortgage, auto and credit card loans partially offset by lower education loans driven by continued runoff in the government guaranteed education loan portfolio.
• Average deposits increased 1 percent compared with the fourth quarter and 5 percent compared with first quarter 2019 due to increases in savings and demand deposits partially offset by lower money market deposits reflecting a shift to relationship-based savings products.
• Net loan charge-offs were $166 million for the first quarter of 2020 compared with $154 million in the fourth quarter of 2019 and $132 million in the first quarter of 2019.
• Residential mortgage loan origination volume was $3.2 billion for the first quarter of 2020 compared with $3.5 billion for the fourth quarter of 2019 and $1.7 billion for the first quarter of 2019. Approximately 36 percent of first quarter 2020 volume was for home purchase transactions compared with 40 percent and 56 percent for the fourth and first quarters of 2019, respectively.
• The third party residential mortgage servicing portfolio was $118 billion at March 31, 2020 compared with $120 billion at December 31, 2019 and $123 billion at March 31, 2019. Residential mortgage loan servicing acquisitions were $2 billion for first quarter 2020 compared with $3 billion for the fourth quarter of 2019 and $1 billion for the first quarter of 2019.
• Approximately 71 percent of consumer customers used non-teller channels for the majority of their transactions during the first quarter of 2020 and the fourth quarter of 2019 compared with 68 percent in the first quarter of 2019.
• Deposit transactions via ATM and mobile channels were 59 percent of total deposit transactions in the first quarter of 2020 compared with 58 percent in the fourth quarter of 2019 and 57 percent in the first quarter of 2019.

Corporate & Institutional Banking earnings for the first quarter of 2020 decreased compared to both the fourth and first quarters of 2019. Noninterest income increased in both comparisons primarily due to higher capital markets-related revenue and higher revenue from commercial mortgage banking activities. Higher treasury management product revenue also contributed to the increase compared with the first quarter of 2019. Provision for credit losses in the first quarter of 2020, which was calculated under the CECL accounting standard, increased in both comparisons primarily due to the significant economic impact of COVID-19and portfolio growth, including new loans and higher utilization. Noninterest expense increased compared with the first quarter of 2019 largely due to investments in strategic initiatives and variable costs associated with increased business activity.

• Average loans increased 2 percent compared with the fourth quarter of 2019 and 6 percent compared with the first quarter of 2019 due to broad growth across PNC's corporate banking, business credit and real estate businesses, including higher utilization of loan commitments primarily driven by the economic impact of COVID-19.
• Average deposits were largely unchanged from the fourth quarter reflecting lower than usual seasonal declines offset by liquidity maintained by customers due to the economic impact of COVID-19. Average deposits increased 11 percent over the first quarter of 2019.
• Net loan charge-offs were $50 million in the first quarter of 2020 compared with $47 million in the fourth quarter of 2019 and $5 million in the first quarter of 2019.

Asset Management Group earnings for the first quarter of 2020 decreased compared with the fourth quarter of 2019 and increased compared with the first quarter of 2019. Noninterest income decreased compared with the fourth quarter as a result of a gain on the sale of proprietary mutual funds in the fourth quarter and the impact of lower average equity markets. Noninterest income decreased compared with first quarter 2019 due to lower revenue related to the 2019 sales of the retirement recordkeeping business and proprietary mutual funds. Noninterest expense decreased in both comparisons due to the impact of the 2019 divestitures.

Client assets under administration at March 31, 2020 included discretionary client assets under management of $136 billion and nondiscretionary client assets under administration of $128 billion. Discretionary client assets under management decreased $18 billion compared with December 31, 2019 and $22 billion compared with March 31, 2019 primarily driven by declines in theequity markets, and the fourth quarter sale of proprietary mutual funds in the March 31, 2019 comparison.

Other, including BlackRock

The "Other, including BlackRock" category, for the purposes of this release, includes earnings and gains or losses related to PNC's equity investment in BlackRock, and residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain runoff consumer loan portfolios, private equity investments, intercompany eliminations, certain corporate overhead, tax adjustments that are not allocated to business segments, exited businesses, and differences between business segment performance reporting and financial statement reporting under generally accepted accounting principles.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.