`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, DC 20549
`FORM 10-K
`Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
`For the fiscal year ended December 31, 2013
`Commission file number 001-09718
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`
`(Exact name of registrant as specified in its charter)
`
`Pennsylvania
`
`
`(State or other jurisdiction of incorporation or organization)
`
`
`One PNC Plaza
`249 Fifth Avenue
`Pittsburgh, Pennsylvania 15222-2707
`(Address of principal executive offices, including zip code)
`Registrant’s telephone number, including area code - (412) 762-2000
`Securities registered pursuant to Section 12(b) of the Act:
`
`25-1435979
`(I.R.S. Employer Identification No.)
`
`
`
`
`
`
`
`
`
`
`
`Title of Each Class
`
`Common Stock, par value $5.00
`Depositary Shares Each Representing a 1/4,000 Interest in a Share of Fixed-to-Floating
`Rate Non-Cumulative Perpetual Preferred Stock, Series P
`Depositary Shares Each Representing a 1/4,000 Interest in a Share of 5.375%
`Non-Cumulative Perpetual Preferred Stock, Series Q
`Warrants (expiring December 31, 2018) to purchase Common Stock
`
`
`
`
`
`
`
`
`
`Name of Each Exchange
`on Which Registered
`
` New York Stock Exchange
`New York Stock Exchange
`
`
`
`New York Stock Exchange
`
`
` New York Stock Exchange
`
`Securities registered pursuant to Section 12(g) of the Act:
`$1.80 Cumulative Convertible Preferred Stock - Series B, par value $1.00
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X
`Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
`1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
`such filing requirements for the past 90 days. Yes X No
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
`required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
`shorter period that the registrant was required to submit and post such files). Yes X No
`Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
`contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
`or any amendment to this Form 10-K.
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
`See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
`Large accelerated filer X
` Accelerated filer
` Non-accelerated filer
` Smaller reporting company
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X
`The aggregate market value of the registrant’s outstanding voting common stock held by nonaffiliates on June 30, 2013, determined using the per
`share closing price on that date on the New York Stock Exchange of $72.92, was approximately $38.6 billion. There is no non-voting common equity
`of the registrant outstanding.
`Number of shares of registrant’s common stock outstanding at February 19, 2014: 534,064,610
`DOCUMENTS INCORPORATED BY REFERENCE
`Portions of the definitive Proxy Statement of The PNC Financial Services Group, Inc. to be filed pursuant to Regulation 14A for the 2014 annual
`meeting of shareholders (Proxy Statement) are incorporated by reference into Part III of this Form 10-K.
`
`
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 1/954
`
`
`
`Table of Contents
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K
`
`Item 6
`Item 7
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`TABLE OF CONTENTS
`
`
`PART I
`
` Business.
`Item 1
`Item 1A Risk Factors.
`Item 1B Unresolved Staff Comments.
`Item 2
` Properties.
`Item 3
` Legal Proceedings.
`Item 4
` Mine Safety Disclosures.
`Executive Officers of the Registrant
`Directors of the Registrant
`PART II
`Item 5
` Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
` Common Stock Performance Graph
` Selected Financial Data.
` Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).
`Executive Summary
`Consolidated Income Statement Review
`Consolidated Balance Sheet Review
`Off-Balance Sheet Arrangements And Variable Interest Entities
`Fair Value Measurements
`European Exposure
`Business Segments Review
`Critical Accounting Estimates And Judgments
`Status Of Qualified Defined Benefit Pension Plan
`Recourse And Repurchase Obligations
`Risk Management
`2012 Versus 2011
`Glossary Of Terms
`Cautionary Statement Regarding Forward-Looking Information
`
`Item 7A Quantitative and Qualitative Disclosures About Market Risk.
`Item 8
` Financial Statements and Supplementary Data.
` Report of Independent Registered Public Accounting Firm
` Consolidated Income Statement
` Consolidated Statement of Comprehensive Income
` Consolidated Balance Sheet
` Consolidated Statement Of Changes In Equity
` Consolidated Statement Of Cash Flows
` Notes To Consolidated Financial Statements
`Note 1 Accounting Policies
`Note 2 Acquisition and Divestiture Activity
`
`
`
`
`
`
`
`
`
`
`
`
`
` Page
`
`
` 1
` 13
` 24
` 24
` 24
` 24
` 24
` 26
`
`
` 26
` 27
` 28
` 30
` 30
` 35
` 38
` 48
` 49
` 49
` 50
` 61
` 66
` 67
` 71
` 96
` 99
` 104
` 105
` 106
` 106
` 107
` 108
` 109
` 110
` 111
` 113
` 113
` 124
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 2/954
`
`
`
`Table of Contents
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K (continued)
`
`TABLE OF CONTENTS (Continued)
`
`
`Item 8
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` Financial Statements and Supplementary Data. (continued)
`Note 3 Loan Sale and Servicing Activities and Variable Interest Entities
`Note 4 Loans and Commitments to Extend Credit
`Note 5 Asset Quality
`Note 6 Purchased Loans
`Note 7 Allowances for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit
`Note 8 Investment Securities
`Note 9 Fair Value
`Note 10 Goodwill and Other Intangible Assets
`Note 11 Premises, Equipment and Leasehold Improvements
`Note 12 Time Deposits
`Note 13 Borrowed Funds
`Note 14 Capital Securities of Subsidiary Trusts and Perpetual Trust Securities
`Note 15 Employee Benefit Plans
`Note 16 Stock Based Compensation Plans
`Note 17 Financial Derivatives
`Note 18 Earnings Per Share
`Note 19 Equity
`Note 20 Other Comprehensive Income
`Note 21 Income Taxes
`Note 22 Regulatory Matters
`Note 23 Legal Proceedings
`Note 24 Commitments and Guarantees
`Note 25 Parent Company
`Note 26 Segment Reporting
`Note 27 Subsequent Events
`
` Statistical Information (Unaudited)
` Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
`Item 9
`Item 9A Controls and Procedures.
`Item 9B Other Information.
`PART III
` Directors, Executive Officers and Corporate Governance.
`Item 10
` Executive Compensation.
`Item 11
` Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
`Item 12
` Certain Relationships and Related Transactions, and Director Independence.
`Item 13
` Principal Accounting Fees and Services.
`Item 14
`PART IV
`Item 15
` Exhibits, Financial Statement Schedules.
`SIGNATURES
`EXHIBIT INDEX
`
`
`Page
`
`
`125
`130
`131
`145
`146
`149
`154
`172
`175
`176
`176
`177
`179
`186
`189
`197
`198
`200
`202
`203
`204
`212
`218
`219
`222
`222
`229
`229
`230
`
`230
`230
`230
`233
`233
`
`233
`234
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 3/954
`
`
`
`Table of Contents
`
`Description
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K (continued)
`
`MD&A TABLE REFERENCE
`
`Table
`1 Summary Financial Results
`2 Summarized Average Balance Sheet
`3 Results Of Businesses – Summary
`4 Net Interest Income and Net Interest Margin
`5 Noninterest Income
`6 Summarized Balance Sheet Data
`7 Details Of Loans
`8 Accretion – Purchased Impaired Loans
`9 Purchased Impaired Loans – Accretable Yield
`10 Valuation of Purchased Impaired Loans
`11 Weighted Average Life of the Purchased Impaired Portfolios
`12 Accretable Difference Sensitivity – Total Purchased Impaired Loans
`13 Net Unfunded Credit Commitments
`Investment Securities
`14
`15 Loans Held For Sale
`16 Details Of Funding Sources
`17 Shareholders’ Equity
`18 Basel I Risk-Based Capital
`19 Estimated Pro forma Fully Phased-In Basel III Tier 1 Common Capital Ratio
`20 Pro forma Transitional Basel III Tier 1 Common Capital Ratio
`21 Fair Value Measurements – Summary
`22 Summary of European Exposure
`23 Retail Banking Table
`24 Corporate & Institutional Banking Table
`25 Asset Management Group Table
`26 Residential Mortgage Banking Table
`27 BlackRock Table
`28 Non-Strategic Assets Portfolio Table
`29 Pension Expense – Sensitivity Analysis
`30 Analysis of Quarterly Residential Mortgage Repurchase Claims by Vintage
`31 Analysis of Quarterly Residential Mortgage Unresolved Asserted Indemnification and Repurchase Claims
`32 Analysis of Residential Mortgage Indemnification and Repurchase Claim Settlement Activity
`33 Analysis of Home Equity Unresolved Asserted Indemnification and Repurchase Claims
`34 Analysis of Home Equity Indemnification and Repurchase Claim Settlement Activity
`35 Nonperforming Assets By Type
`36 OREO and Foreclosed Assets
`37 Change in Nonperforming Assets
`38 Accruing Loans Past Due 30 To 59 Days
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Page
` 32
` 34
` 35
` 35
` 36
` 38
` 39
` 40
` 40
` 41
` 41
` 42
` 42
` 43
` 44
` 45
` 45
` 46
` 47
` 48
` 49
` 49
` 51
` 53
` 56
` 58
` 60
` 60
` 67
` 68
` 68
` 69
` 70
` 70
` 75
` 76
` 76
` 77
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 4/954
`
`
`
`Table of Contents
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K (continued)
`
`Description
`
`MD&A TABLE REFERENCE (Continued)
`
`Table
`39 Accruing Loans Past Due 60 To 89 Days
`40 Accruing Loans Past Due 90 Days Or More
`41 Home Equity Lines of Credit – Draw Period End Dates
`42 Consumer Real Estate Related Loan Modifications
`43 Consumer Real Estate Related Loan Modifications Re-Default by Vintage
`44 Summary of Troubled Debt Restructurings
`45 Loan Charge-Offs And Recoveries
`46 Allowance for Loan and Lease Losses
`47 Credit Ratings as of December 31, 2013 for PNC and PNC Bank, N.A.
`48 Contractual Obligations
`49 Other Commitments
`Interest Sensitivity Analysis
`50
`51 Net Interest Income Sensitivity to Alternative Rate Scenarios (Fourth Quarter 2013)
`52 Alternate Interest Rate Scenarios: One Year Forward
`53 Enterprise-Wide Gains/Losses Versus Value-at-Risk
`54 Customer-Related Trading Revenue
`55 Equity Investments Summary
`56 Financial Derivatives Summary
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Page
` 77
` 78
` 79
` 80
` 80
` 82
` 82
` 84
` 91
` 91
` 91
` 92
` 92
` 93
` 93
` 93
` 94
` 96
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 5/954
`
`
`
`Table of Contents
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K (continued)
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE
`
`Description
`Table
`57 Certain Financial Information and Cash Flows Associated with Loan Sale and Servicing Activities
`58 Principal Balance, Delinquent Loans (Loans 90 Days or More Past Due), and Net Charge-offs Related to Serviced Loans
`59 Consolidated VIEs – Carrying Value
`60 Non-Consolidated VIEs
`61 Loans Summary
`62 Net Unfunded Credit Commitments
`63 Analysis of Loan Portfolio
`64 Nonperforming Assets
`65 Commercial Lending Asset Quality Indicators
`66 Home Equity and Residential Real Estate Balances
`67 Home Equity and Residential Real Estate Asset Quality Indicators – Excluding Purchased Impaired Loans
`68 Home Equity and Residential Real Estate Asset Quality Indicators – Purchased Impaired Loans
`69 Credit Card and Other Consumer Loan Classes Asset Quality Indicators
`70 Summary of Troubled Debt Restructurings
`71 Financial Impact and TDRs by Concession Type
`72 TDRs which have Subsequently Defaulted
`Impaired Loans
`73
`74 Purchased Impaired Loans – Balances
`75 Purchased Impaired Loans – Accretable Yield
`76 Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data
`77 Rollforward of Allowance for Unfunded Loan Commitments and Letters of Credit
`Investment Securities Summary
`78
`79 Gross Unrealized Loss and Fair Value of Securities Available for Sale
`80 Credit Impairment Assessment Assumptions – Non-Agency Residential Mortgage-Backed and Asset-Backed Securities
`81 Other-Than-Temporary Impairments
`82 Rollforward of Cumulative OTTI Credit Losses Recognized in Earnings
`83 Gains (Losses) on Sales of Securities Available for Sale
`84 Contractual Maturity of Debt Securities
`85 Weighted-Average Expected Maturity of Mortgage and Other Asset-Backed Debt Securities
`86 Fair Value of Securities Pledged and Accepted as Collateral
`87 Fair Value Measurements – Summary
`88 Reconciliation of Level 3 Assets and Liabilities
`89 Fair Value Measurements – Recurring Quantitative Information
`90 Fair Value Measurements – Nonrecurring
`91 Fair Value Measurements – Nonrecurring Quantitative Information
`92 Fair Value Option – Changes in Fair Value
`93 Fair Value Option – Fair Value and Principal Balances
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Page
` 126
` 127
` 127
` 128
` 130
` 131
` 132
` 133
` 135
` 136
` 137
` 138
` 139
` 140
` 141
` 143
` 144
` 145
` 145
` 147
` 148
` 149
` 151
` 152
` 152
` 153
` 153
` 153
` 154
` 154
` 160
` 161
` 163
` 166
` 167
` 168
` 169
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 6/954
`
`
`
`Table of Contents
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K (continued)
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE (Continued)
`
`Description
`Table
`94 Additional Fair Value Information Related to Financial Instruments
`95 Changes in Goodwill by Business Segment
`96 Other Intangible Assets
`97 Amortization Expense on Existing Intangible Assets
`98 Summary of Changes in Customer-Related and Other Intangible Assets
`99 Commercial Mortgage Servicing Rights
`100 Residential Mortgage Servicing Rights
`101 Commercial Mortgage Loan Servicing Rights – Key Valuation Assumptions
`102 Residential Mortgage Loan Servicing Rights – Key Valuation Assumptions
`103 Fees from Mortgage and Other Loan Servicing
`104 Premises, Equipment and Leasehold Improvements
`105 Depreciation and Amortization Expense
`106 Lease Rental Expense
`107 Bank Notes, Senior Debt and Subordinated Debt
`108 Capital Securities of Subsidiary Trust
`109 Perpetual Trust Securities Summary
`110 Summary of Replacement Capital Covenants of Perpetual Trust Securities
`111 Summary of Contractual Commitments of Perpetual Trust Securities
`112 Reconciliation of Changes in Projected Benefit Obligation and Change in Plan Assets
`113 Asset Strategy Allocations
`114 Pension Plan Assets – Fair Value Hierarchy
`115 Rollforward of Pension Plan Level 3 Assets
`116 Estimated Cash Flows
`117 Components of Net Periodic Benefit Cost
`118 Net Periodic Costs – Assumptions
`119 Other Pension Assumptions
`120 Effect of One Percent Change in Assumed Health Care Cost
`121 Estimated Amortization of Unamortized Actuarial Gains and Losses – 2014
`122 Option Pricing Assumptions
`123 Stock Option Rollforward
`124 Nonvested Incentive/Performance Unit Share Awards and Restricted Stock/Share Unit Awards – Rollforward
`125 Nonvested Cash-Payable Restricted Share Units – Rollforward
`126 Employee Stock Purchase Plan – Summary
`127 Total Gross Derivatives
`128 Derivatives Designated As Hedging Instruments under GAAP
`129 Gains (Losses) on Derivatives and Related Hedged Items – Fair Value Hedges
`130 Gains (Losses) on Derivatives and Related Cash Flows – Cash Flow Hedges
`131 Gains (Losses) on Derivatives – Net Investment Hedges
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Page
` 170
` 172
` 173
` 173
` 173
` 173
` 174
` 175
` 175
` 175
` 175
` 175
` 175
` 176
` 177
` 177
` 178
` 178
` 179
` 180
` 182
` 183
` 183
` 184
` 184
` 184
` 185
` 185
` 186
` 186
` 187
` 188
` 188
` 189
` 190
` 190
` 191
` 191
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 7/954
`
`
`
`Table of Contents
`
`THE PNC FINANCIAL SERVICES GROUP, INC.
`Cross-Reference Index to 2013 Form 10-K (continued)
`
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABLE REFERENCE (Continued)
`
`Description
`Table
`132 Derivatives Not Designated As Hedging Instruments under GAAP
`133 Gains (Losses) on Derivatives Not Designated As Hedging Instruments under GAAP
`134 Credit Default Swaps
`135 Credit Ratings of Credit Default Swaps
`136 Referenced/Underlying Assets of Credit Default Swaps
`137 Risk Participation Agreements Sold
`Internal Credit Ratings of Risk Participation Agreements Sold
`138
`139 Derivative Assets and Liabilities Offsetting
`140 Basic and Diluted Earnings per Common Share
`141 Preferred Stock – Authorized, Issued and Outstanding
`142 Terms of Outstanding Preferred Stock
`143 Other Comprehensive Income
`144 Accumulated Other Comprehensive Income (Loss) Components
`145 Components of Income Taxes
`146 Deferred Tax Assets and Liabilities
`147 Reconciliation of Statutory and Effective Tax Rates
`148 Net Operating Loss Carryforwards and Tax Credit Carryforwards
`149 Changes in Liability for Unrecognized Tax Benefits
`150 Basel I Regulatory Capital
`151 Net Outstanding Standby Letters of Credit
`152 Analysis of Commercial Mortgage Recourse Obligations
`153 Analysis of Indemnification and Repurchase Liability for Asserted Claims and Unasserted Claims
`154 Reinsurance Agreements Exposure
`155 Reinsurance Reserves – Rollforward
`156 Resale and Repurchase Agreements Offsetting
`157 Parent Company – Income Statement
`158 Parent Company – Balance Sheet
`159 Parent Company – Interest Paid and Income Tax Refunds (Payments)
`160 Parent Company – Statement of Cash Flows
`161 Results Of Businesses
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Page
` 192
` 194
` 194
` 195
` 195
` 195
` 195
` 196
` 197
` 198
` 198
` 200
` 201
` 202
` 202
` 202
` 202
` 203
` 204
` 212
` 214
` 215
` 216
` 216
` 217
` 218
` 218
` 218
` 219
` 221
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 8/954
`
`
`
`Table of Contents
`
`the acquisition of RBC Bank (USA) were to enhance shareholder
`value, to improve PNC’s competitive position in the financial services
`industry, and to further expand PNC’s existing branch network in the
`states where it already operated as well as expanding into new
`markets.
`
`2012 SALE OF SMARTSTREET
`Effective October 26, 2012, PNC divested certain deposits and assets
`of the Smartstreet business unit, which was acquired by PNC as part
`of the RBC Bank (USA) acquisition, to Union Bank, N.A. Smartstreet is
`a nationwide business focused on homeowner or community
`association managers and had approximately $1 billion of assets and
`deposits as of September 30, 2012. The gain on sale was immaterial and
`we reduced goodwill and core deposit intangibles by $46 million and
`$13 million, respectively.
`
`REVIEW OF BUSINESS SEGMENTS
`In addition to the following information relating to our lines of
`business, we incorporate the information under the captions Business
`Segment Highlights and Business Segments Review in Item 7 of this
`Report here by reference. Also, we include the financial and other
`information by business in Note 26 Segment Reporting in the Notes
`To Consolidated Financial Statements in Item 8 of this Report here by
`reference.
`
`PART I
`Forward-Looking Statements: From time to time, The PNC Financial Services Group, Inc. (PNC or the Corporation) has made and may
`continue to make written or oral forward-looking statements regarding our outlook for earnings, revenues, expenses, capital and liquidity
`levels and ratios, asset levels, asset quality, financial position and other matters regarding or affecting PNC and its future business and
`operations or the impact of legal, regulatory or supervisory matters on our business operations or performance. This Annual Report on Form 10-
`K (the Report or Form 10-K) also includes forward-looking statements. With respect to all such forward-looking statements, you should review
`our Risk Factors discussion in Item 1A, our Risk Management, Critical Accounting Estimates And Judgments, and Cautionary Statement
`Regarding Forward-Looking Information sections included in Item 7, and Note 23 Legal Proceedings and Note 24 Commitments and
`Guarantees in the Notes To Consolidated Financial Statements included in Item 8 of this Report. See page 99 for a glossary of certain terms
`used in this Report.
`ITEM 1 – BUSINESS
`BUSINESS OVERVIEW
`Headquartered in Pittsburgh, Pennsylvania, we are one of the largest
`diversified financial services companies in the United States. We have
`businesses engaged in retail banking, corporate and institutional
`banking, asset management, and residential mortgage banking,
`providing many of our products and services nationally, as well as
`other products and services in our primary geographic markets located
`in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland,
`Indiana, North Carolina, Florida, Kentucky, Washington, D.C.,
`Delaware, Alabama, Virginia, Missouri, Georgia, Wisconsin and South
`Carolina. We also provide certain products and services
`internationally. At December 31, 2013, our consolidated total assets,
`total deposits and total shareholders’ equity were $320.3 billion, $220.9
`billion and $42.4 billion, respectively.
`
`We were incorporated under the laws of the Commonwealth of
`Pennsylvania in 1983 with the consolidation of Pittsburgh National
`Corporation and Provident National Corporation. Since 1983, we have
`diversified our geographical presence, business mix and product
`capabilities through internal growth, strategic bank and non-bank
`acquisitions and equity investments, and the formation of various
`non-banking subsidiaries.
`
`2012 RBC BANK (USA) ACQUISITION
`On March 2, 2012, we acquired 100% of the issued and outstanding
`common stock of RBC Bank (USA), the U.S. retail banking subsidiary
`of Royal Bank of Canada. As part of the acquisition, PNC also
`purchased a credit card portfolio from RBC Bank (Georgia), National
`Association. PNC paid $3.6 billion in cash as the consideration for the
`acquisition of both RBC Bank (USA) and the credit card portfolio. The
`transaction added approximately $18.1 billion in deposits, $14.5 billion
`of loans and $1.1 billion of goodwill and intangible assets to PNC’s
`Consolidated Balance Sheet. Our Consolidated Income Statement
`includes the impact of business activity associated with the RBC Bank
`(USA) acquisition subsequent to March 2, 2012. Note 2 Acquisition
`and Divestiture Activity in Item 8 of our 2012 Form 10-K includes
`additional details related to the RBC Bank (USA) transactions.
`
`RBC Bank (USA), based in Raleigh, North Carolina, operated more
`than 400 branches in North Carolina, Florida, Alabama, Georgia,
`Virginia and South Carolina. The primary reasons for
`
`
`
`Assets, revenue and earnings attributable to foreign activities were
`not material in the periods presented. Business segment results for
`periods prior to 2013 have been reclassified to reflect current
`methodologies and current business and management structure and to
`present those periods on the same basis.
`
`Retail Banking provides deposit, lending, brokerage, investment
`management and cash management services to consumer and small
`business customers within our primary geographic markets. Our
`customers are serviced through our branch network, ATMs, call
`centers, online banking and mobile channels. The branch network is
`located primarily in Pennsylvania, Ohio, New Jersey, Michigan,
`Illinois, Maryland, Indiana, North Carolina, Florida, Kentucky,
`Washington, D.C., Delaware, Alabama, Virginia, Missouri, Georgia,
`Wisconsin and South Carolina.
`
`Our core strategy is to acquire and retain customers who maintain their
`primary checking and transaction relationships with PNC. We also
`seek revenue growth by deepening our
`
`The PNC Financial Services Group, Inc. – Form 10-K 1
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 9/954
`
`
`
`high quality banking advice and trust and investment management
`services to our high net worth, ultra high net worth and institutional
`client sectors through a broad array of products and services. Asset
`Management Group’s primary goals are to service our clients, grow
`the business and deliver solid financial performance with prudent risk
`and expense management.
`
`Residential Mortgage Banking directly originates first lien residential
`mortgage loans, on a nationwide basis with a significant presence
`within the retail banking footprint, and originates loans through
`majority owned affiliates. Mortgage loans represent loans
`collateralized by one-to-four-family residential real estate. These loans
`are typically underwritten to government agency and/or third-party
`standards, and sold, servicing retained, to secondary mortgage
`conduits of Federal National Mortgage Association (FNMA), Federal
`Home Loan Mortgage Corporation (FHLMC), Federal Home Loan
`Banks and third-party investors, or are securitized and issued under
`the Government National Mortgage Association (GNMA) program, as
`described in more detail in Note 3 Loan Sale and Servicing Activities
`and Variable Interest Entities in Item 8 of this Report and included here
`by reference. The mortgage servicing operation performs all functions
`related to servicing mortgage loans, primarily those in first lien
`position, for various investors and for loans owned by PNC. Certain
`loan applications are brokered by majority owned affiliates to others.
`
`Residential Mortgage Banking is focused on adding value to the PNC
`franchise by building stronger customer relationships, providing
`quality investment loans and delivering acceptable returns consistent
`with our desired risk appetite. A strategic priority for PNC is to build a
`stronger residential mortgage business offering seamless delivery to
`customers while improving efficiencies. Our national distribution
`capability provides volume that drives economies of scale, risk
`dispersion and cost-effective extension of the retail banking footprint
`for cross-selling opportunities.
`
`BlackRock is a leader in investment management, risk management
`and advisory services for institutional and retail clients worldwide.
`BlackRock provides diversified investment management services to
`institutional clients, intermediary investors and individual investors
`through various investment vehicles. Investment management
`services primarily consist of the management of equity, fixed income,
`multi-asset class, alternative investment and cash management
`products. BlackRock offers its investment products in a variety of
`vehicles, including open-end and closed-end mutual funds, iShares
`®
`exchange-traded funds (ETFs), collective investment trusts and
`separate accounts. In addition, BlackRock provides market risk
`management, financial markets advisory and enterprise investment
`system services to a broad base of clients. Financial markets advisory
`services include valuation services relating to illiquid securities,
`dispositions and workout assignments (including long-term portfolio
`liquidation assignments), risk management and strategic planning and
`execution.
`
`Table of Contents
`
`share of our customers’ financial assets, such as savings and liquidity
`deposits, loans and investable assets, including retirement assets. A
`strategic priority for PNC is to redefine the retail banking business in
`response to changing customer preferences. A key element of this
`strategy is to expand the use of lower-cost alternative distribution
`channels while continuing to optimize the traditional branch network.
`In addition, we have a disciplined process to continually improve the
`engagement of both our employees and customers, which is a strong
`indicator of customer growth, retention and relationship expansion.
`
`Corporate & Institutional Banking provides lending, treasury
`management, and capital markets-related products and services to mid-
`sized and large corporations, government and not-for-profit entities.
`Lending products include secured and unsecured loans, letters of
`credit and equipment leases. Treasury management services include
`cash and investment management, receivables management,
`disbursement services, funds transfer services, information reporting
`and global trade services. Capital markets-related products and
`services include foreign exchange, derivatives, securities, loan
`syndications and mergers and acquisitions advisory and related
`services to middle-market companies. We also provide commercial
`loan servicing, and real estate advisory and technology solutions, for
`the commercial real estate finance industry. Products and services are
`generally provided within our primary geographic markets, with certain
`products and services offered nationally and internationally.
`
`Corporate & Institutional Banking is focused on becoming a premier
`provider of financial services in each of the markets we serve. The
`value proposition to our customers is driven by providing a broad
`range of competitive and high quality products and services by a team
`fully committed to delivering the comprehensive resources of PNC to
`help each client succeed. Our primary goals are to achieve market
`share growth and enhanced returns by means of expansion and
`retention of customer relationships and prudent risk and expense
`management.
`
`Asset Management Group includes personal wealth management for
`high net worth and ultra high net worth clients and institutional asset
`management. Wealth management products and services include
`investment and retirement planning, customized investment
`management, private banking, tailored credit solutions, and trust
`management and administration for individuals and their families.
`Institutional asset management provides investment management,
`custody administration and retirement administration services.
`Institutional clients include corporations, unions, municipalities, non-
`profits, foundations and endowments, primarily located in our
`geographic footprint.
`
`Asset Management Group is focused on being one of the premier
`bank-held individual and institutional asset managers in each of the
`markets it serves. The business seeks to deliver
`
` 2
`
` The PNC Financial Services Group, Inc. – Form 10-K
`
`Source: PNC FINANCIAL SERVICES GROUP, INC., 10-K, 3/3/2014
`
`CHASE EX. 1013 - p. 10/954
`
`
`
`Table of Contents
`
`We hold an equity investment in BlackRock, which is a key
`component of our diversified revenue strategy. BlackRock is a publicly
`traded company, and additional information regarding its business is
`available in its filings with the Securities and Exchange Commission
`(SEC).
`
`Non-Strategic Assets Portfolio includes a consumer portfolio of
`mainly residential mortgage and brokered home equity loans and lines
`of credit, and a small commercial loan and lease portfolio. We obtained
`a significant portion of these non-strategic assets through
`acquisitions of other companies.
`
`SUBSIDIARIES
`Our corporate legal structure at December 31, 2013 consisted of one
`domestic subsidiary bank, including its subsidiaries, and
`approxim