PNC REPORTS FULL YEAR 2021 NET INCOME OF $5.7 BILLION, $12.70 DILUTED EPS OR $14.18 AS ADJUSTED

Fourth quarter net income was $1.3 billion, $2.86 diluted EPS or $3.68 as adjusted

Generated full year record revenue; closed, converted and integrated BBVA USA

PITTSBURGH, Jan. 18, 2022 /PRNewswire/ -- The PNC Financial Services Group, Inc. (NYSE: PNC) today reported:

			For the quarter				For the year
In millions, except per share data and as noted			4Q21	3Q21			2021	2020		Fourth Quarter Highlights
										▪ Diluted EPS as adjusted was $3.68, excluding $438 million of pre-tax integration costs related to BBVA USA ▪ Approximately 95% of integration costs incurred to date ▪ Revenue decreased 1% linked quarter, reflecting lower noninterest income which included the negative impact of $47 million of integration costs ▪ Expenses increased 6% linked quarter, including integration expenses of $391 million and higher personnel costs ▪ Provision recapture of $327 million ▪ Average loans decreased 1% linked quarter as commercial loan growth was more than offset by $4.7 billion of PPP loan forgiveness ▪ Average deposits declined modestly linked quarter due to legacy BBVA USA commercial deposit outflows reflecting the impact of strategic repricing decisions ▪ Net loan charge-offs of $124 million or 0.17% of annualized average loans
Financial Results
Revenue			$ 5,127	$ 5,197			$ 19,211	$ 16,901
Noninterest expense			3,791	3,587			13,002	10,297
Pretax, pre-provision earnings (non-GAAP)			1,336	1,610			6,209	6,604
Integration costs			438	243			798	7
Pretax, pre-provision earnings excluding integration costs (non-GAAP)			1,774	1,853			7,007	6,611
Provision for (recapture of) credit losses			(327)	(203)			(779)	3,175
Net income from continuing operations			1,306	1,490			5,725	3,003
Per Common Share
Diluted earnings from continuing operations - as reported			$ 2.86	$ 3.30			$ 12.70	$ 6.36
Impact from integration costs (non-GAAP)			0.82	0.45			1.48	0.01
Diluted earnings from continuing operations - as adjusted (non-GAAP)			3.68	3.75			14.18	6.37
Book value			120.61	121.16			120.61	119.11
Tangible book value (non-GAAP)			94.11	94.82			94.11	97.43
Balance Sheet & Credit Quality
Average loans (in billions)			$ 288.9	$ 291.3			$ 268.7	$ 252.6
Average deposits (in billions)			452.8	454.4			418.9	333.8
Net loan charge-offs			124	81			657	832
Allowance for credit losses to total loans			1.92%	2.07%			1.92%	2.46%
Selected Ratios
Return on average common equity			9.61%	10.95%			10.78%	15.21%
Return on average assets			0.92	1.06			1.09	1.68
Net interest margin (non-GAAP)			2.27	2.27			2.29	2.53
Noninterest income to total revenue			44	45			45	41
Efficiency			74	69			68	61
Efficiency excluding integration costs (non- GAAP)			66	64			64	61
Common Equity Tier 1 capital ratio			10.2	10.3			10.2	12.2
Diluted earnings as adjusted is a non-GAAP measure calculated by excluding post-tax integration costs for BBVA USA. See this and other non-GAAP financial measures in the consolidated financial highlights accompanying this release. In May 2020, PNC divested its entire 22.4% equity investment in BlackRock Inc. The after-tax gain on sale of $4.3 billion and BlackRock's historical results are reported as 2020 discontinued operations.

From Bill Demchak, PNC Chairman, President and Chief Executive Officer:

"2021 was a pivotal year for PNC. We delivered solid financial results, closed and converted BBVA USA in less than a year, launched our overdraft solution Low Cash ModeSM and announced an $88 billion plan to expand economic opportunities for minorities and low- and moderate-income individuals and communities. While the acquisition of BBVA USA significantly increased our loan and deposit balances, we also organically grew revenue, and maintained solid credit quality metrics and a strong capital position. We continue to execute on our strategic priorities through our Main Street model, by building and deepening relationships in new and existing markets."

BBVA USA

• PNC acquired BBVA USA on June 1, 2021, adding approximately 2.6 million customers, 9,000 employees and over 600 branches across seven states. Full year 2021 financial results include the addition of BBVA USA operations since June 1, 2021.

• Since the announcement of the acquisition, PNC has incurred $925 million of merger and integration costs, including $120 million in write-offs of capitalized items, or approximately 95% of the $980 million expected.

Income Statement Highlights
Fourth quarter 2021 compared with third quarter 2021

• Net income of $1.3 billion decreased $184 million, or 12%.

• Total revenue of $5.1 billion decreased $70 million, or 1%.

• Net interest income of $2.9 billion increased $6 million primarily driven by higher securities balances.

• Noninterest income of $2.3 billion decreased $76 million, or 3%, and included the negative impact of $47 million of integration costs.

• Noninterest expense of $3.8 billion increased $204 million, or 6%, including integration expenses of $391 million and higher personnel costs which reflected an increase to PNC's minimum wage.

• The fourth quarter of 2021 included a provision recapture of $327 million, reflecting continued improvements in the economic environment. The third quarter included a provision recapture of $203 million.

• The effective tax rate was 21.5% for the fourth quarter, 17.8% for the third quarter and 18.1% for full year 2021.

Balance Sheet Highlights
Fourth quarter 2021 compared with third quarter 2021 or December 31, 2021 compared with September 30, 2021

• Average loans of $288.9 billion decreased $2.4 billion, or 1%, driven by Paycheck Protection Program (PPP) loan forgiveness of $4.7 billion.

• Credit quality performance:

• Average deposits of $452.8 billion decreased $1.6 billion, as growth in commercial and consumer deposits was more than offset by legacy BBVA USA commercial deposit outflows reflecting the impact of strategic repricing decisions in the third quarter.

• Average investment securities of $127.8 billion increased $7.3 billion, or 6%.

• Average Federal Reserve Bank balances of $75.1 billion decreased $5.0 billion, primarily reflecting increased securities purchases.

• PNC maintained strong capital and liquidity positions.

Earnings Summary
In millions, except per share data		4Q21		3Q21		4Q20
Net income		$ 1,306		$ 1,490		$ 1,456
Net income attributable to diluted common shares - as reported		$ 1,214		$ 1,408		$ 1,387
Net income attributable to diluted common shares - as adjusted (non-GAAP)		$ 1,560		$ 1,600		$ 1,393
Diluted earnings per common share - as reported		$ 2.86		$ 3.30		$ 3.26
Diluted earnings per common share - as adjusted (non-GAAP)		$ 3.68		$ 3.75		$ 3.27
Average diluted common shares outstanding		424		426		426
Cash dividends declared per common share		$ 1.25		$ 1.25		$ 1.15
See non-GAAP financial measures included in the consolidated financial highlights accompanying this news release

Fourth quarter 2021 net income of $1.3 billion, or $2.86 per diluted common share, included integration costs of $438 million pretax resulting from the acquisition of BBVA USA. Excluding the impact of integration costs, adjusted diluted earnings per common share was $3.68.

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.

CONSOLIDATED REVENUE REVIEW
Revenue						Change	Change
						4Q21 vs	4Q21 vs
In millions	4Q21		3Q21		4Q20	3Q21	4Q20
Net interest income	$ 2,862		$ 2,856		$ 2,424	—	18%
Noninterest income	2,265		2,341		1,784	(3)%	27%
Total revenue	$ 5,127		$ 5,197		$ 4,208	(1)%	22%

Total revenue for the fourth quarter of 2021 decreased $70 million compared with the third quarter of 2021 due to lower noninterest income. Compared with the fourth quarter of 2020 total revenue increased $919 million primarily due to the acquisition of BBVA USA and growth in noninterest income.

Net interest income of $2.9 billion for the fourth quarter of 2021 increased $6 million compared to the third quarter of 2021 primarily driven by higher securities balances. In comparison with the fourth quarter of 2020, net interest income increased $438 million as a result of higher interest earning assets, partially offset by lower securities yields.

The net interest margin was 2.27% for both the fourth and third quarter of 2021 and 2.32% in the fourth quarter of 2020. Compared to the fourth quarter of 2020, the decrease was driven by lower securities yields.

Noninterest Income						Change	Change
						4Q21 vs	4Q21 vs
In millions	4Q21		3Q21		4Q20	3Q21	4Q20
Asset management	$ 251		$ 248		$ 221	1%	14%
Consumer services	508		496		387	2%	31%
Corporate services	839		842		650	—	29%
Residential mortgage	101		147		99	(31)%	2%
Service charges on deposits	126		159		134	(21)%	(6)%
Other	440		449		293	(2)%	50%
	$ 2,265		$ 2,341		$ 1,784	(3)%	27%

Noninterest income for the fourth quarter of 2021 decreased $76 million compared with the third quarter of 2021. Asset management revenue grew $3 million primarily as a result of higher average equity markets. Consumer services increased $12 million due to higher brokerage fees and increased credit card activity. Corporate services decreased $3 million and included continued strong merger and acquisition advisory fees and $17 million of integration costs related to treasury management fee waivers for BBVA USA customers during conversion. Residential mortgage revenue decreased $46 million due to lower results from residential mortgage servicing rights valuation, net of economic hedge, and lower loan sales revenue. Service charges on deposits decreased $33 million primarily due to the impact of converting BBVA USA customers to PNC products and overdraft pricing structure as well as conversion-related fee waivers of $11 million. Other noninterest income decreased $9 million, reflecting lower private equity revenue and integration costs of $19 million related to BBVA USA lease exits. In addition, the fourth quarter included a positive Visa Class B derivative fair value adjustment of $1 million compared to a negative Visa Class B derivative fair value adjustment of $169 million in the third quarter.

Noninterest income for the fourth quarter of 2021 increased $481 million compared with the fourth quarter of 2020. Asset management revenue grew $30 million as a result of higher average equity markets and the benefit of BBVA USA. Consumer services increased $121 million driven by the addition of BBVA USA customers, growth in transaction volumes and higher brokerage fees. Corporate services increased $189 million driven by higher merger and acquisition advisory fees, increased treasury management product revenue and the benefit of BBVA USA. Service charges on deposits decreased $8 million as the addition of BBVA USA was more than offset by the impact of Low Cash Mode^SM and conversion-related fee waivers. Other noninterest income increased $147 million and included higher private equity revenue.

CONSOLIDATED EXPENSE REVIEW
Noninterest Expense						Change	Change
						4Q21 vs	4Q21 vs
In millions	4Q21		3Q21		4Q20	3Q21	4Q20
Personnel	$ 2,038		$ 1,986		$ 1,521	3%	34%
Occupancy	260		248		215	5%	21%
Equipment	437		355		296	23%	48%
Marketing	97		103		64	(6)%	52%
Other	959		895		612	7%	57%
	$ 3,791		$ 3,587		$ 2,708	6%	40%

Noninterest expense for the fourth quarter of 2021 increased $204 million compared with the third quarter of 2021. Integration expenses were $391 million in the fourth quarter of 2021 and $235 million in the third quarter of 2021. Excluding the impact of integration expenses, noninterest expense was $3,400 million and $3,352 million, respectively, for the fourth and third quarter of 2021, increasing primarily due to personnel costs, reflecting higher employee benefits expense and an increase to PNC's minimum wage. In addition, personnel costs related to incentive compensation remained elevated during the fourth quarter of 2021 due to continued high levels of business activity.

Noninterest expense increased $1,083 million in comparison with the fourth quarter of 2020 primarily driven by operating and integration expenses related to the BBVA USA acquisition, and increased business activity.

The effective tax rate was 21.5% for the fourth quarter of 2021, 17.8% for the third quarter of 2021 and 17.0% for the fourth quarter of 2020. The full year 2021 effective tax rate was 18.1%.

CONSOLIDATED BALANCE SHEET REVIEW

Average total assets were $560.3 billion in the fourth quarter of 2021 compared with $559.2 billion in the third quarter of 2021 and $465.0 billion in the fourth quarter of 2020. Compared to the fourth quarter of 2020, the increase was primarily driven by the BBVA USA acquisition.

Loans						Change	Change
	December 31, 2021		September 30, 2021		December 31, 2020	12/31/21 vs	12/31/21 vs
In billions						09/30/21	12/31/20
Average
Commercial	$ 193.8		$ 196.3		$ 170.3	(1)%	14%
Consumer	95.1		95.0		75.5	—	26%
Average loans	$ 288.9		$ 291.3		$ 245.8	(1)%	18%
Quarter end
Commercial	$ 193.1		$ 195.2		$ 167.2	(1)%	15%
Consumer	95.3

95.0

74.7

—

28%

Total loans

$ 288.4

$ 290.2

$ 241.9

(1)%

19%

Average loans for the fourth quarter of 2021 were $288.9 billion, decreasing $2.4 billion compared to the third quarter of 2021. Average commercial loans decreased $2.5 billion driven by PPP loan forgiveness of $4.7 billion, partially offset by growth in PNC corporate banking and business credit businesses. Average consumer loans of $95.1 billion increased modestly driven by growth in residential mortgage loans largely offset by declines in home equity and auto loans.

Average loans for the fourth quarter of 2021 increased $43.1 billion compared to the fourth quarter of 2020, reflecting the acquisition of BBVA USA.

Fourth quarter 2021 average and period-end PPP loans outstanding were $4.6 billion and $3.4 billion, respectively.

Investment Securities

Change