As described in Note 14 Employee Benefit Plans in our 2011 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 or make plan changes at any time.

PNC acquired RBC Bank (USA) during the first quarter of 2012. RBC Bank (USA) employees will become eligible to participate in PNC's pension and postretirement medical benefits upon attainment of certain criteria.

The components of our net periodic pension and post-retirement benefit cost for the first nine months of 2012 and 2011 were as follows:

Table 110: Net Periodic Pension and Postretirement Benefits Costs

	Qualified Pension Plan				Nonqualified Retirement Plans					Postretirement Benefits

Three months ended September 30
In millions	2012		2011			2012		2011			2012		2011
Net periodic cost consists of:
Service cost	$	25	$	24		$	1	$	1		$	1	$	1
Interest cost		47		49			3		3			4		5
Expected return on plan assets		(70)		(75)
Amortization of prior service cost		(2)		(2)										(1)
Amortization of actuarial losses		22		5			2		1
Net periodic cost (benefit)	$	22	$	1		$	6	$	5		$	5	$	5

	Qualified Pension Plan				Nonqualified Retirement Plans					Postretirement Benefits

Nine months ended September 30
In millions	2012		2011			2012		2011			2012		2011
Net periodic cost consists of:
Service cost	$	76	$	71		$	3	$	3		$	4	$	5
Interest cost		143		147			10		10			12		14
Expected return on plan assets		(212)		(224)
Amortization of prior service cost		(6)		(6)								(2)		(2)
Amortization of actuarial losses		66		14			5		3
Net periodic cost (benefit)	$	67	$	2		$	18	$	16		$	14	$	17

As more fully described in Note 15 Stock Based Compensation Plans in our 2011 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 September 30, 2012, no stock appreciation rights were outstanding.

Total compensation expense recognized related to all share-based payment arrangements during the first nine months of 2012 and 2011 was $84 million and $63 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.

Table 111: Option Pricing Assumptions

Weighted-average for the nine months ended
September 30		2012			2011
Risk-free interest rate		1.1	%		2.8	%
Dividend yield		2.3			0.6
Volatility		35.1			34.7
Expected life		5.9	yrs.		5.9	yrs.
Grant-date fair value	$	16.22		$	22.82

Table 112: 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, 2011		17,490	$	54.48	949	$	684.40	18,439	$	86.90
	Granted	461		60.70				461		60.70
	Exercised	(2,383)		47.67				(2,383)		47.67
	Cancelled	(604)		62.37	(192)		711.50	(796)		218.72
Outstanding at September 30, 2012		14,964	$	55.44	757	$	677.55	15,721	$	85.42
Exercisable at September 30, 2012		12,099	$	54.07	757	$	677.55	12,856	$	90.81

During the first nine months of 2012, we issued approximately 1.7 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/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 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/unit awards have various vesting periods generally ranging from 36 months to 60 months.

Beginning in 2012, we incorporated several risk-related performance changes to certain incentive performance unit awards made under our long-term incentive compensation programs. In addition to achieving certain financial performance metrics relative to our peers, the final payout amount 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 a three-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 2012 to certain of our executives in lieu of stock options, with generally the same terms and conditions as the 2011 awards of the same.

Table 113: Nonvested Incentive/Performance Unit Share Awards and Restricted Stock/Unit Awards - Rollforward

					Nonvested
		Nonvested	Weighted-		Restricted	Weighted-
		Incentive/	Average		Stock/	Average
		Performance	Grant Date		Unit	Grant Date
Shares in thousands		Unit Shares	Fair Value		Shares	Fair Value
December 31, 2011		830	$	61.68	2,512	$	54.87
	Granted	465		60.70	1,455		61.03
	Vested/Released	(100)		64.21	(789)		45.44
	Forfeited	(34)		62.44	(115)		60.86
September 30, 2012		1,161	$	61.05	3,063	$	60.00

In the table above, 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.

At September 30, 2012, there was $100 million of unrecognized deferred compensation expense related to nonvested share-based compensation arrangements granted under the Incentive Plans. This 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 service-related 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 September 30, 2012, there were 812,464 of these cash-payable restricted share units outstanding.

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

Table 114: Nonvested Cash-Payable Restricted Share Unit - Rollforward
		Nonvested
		Cash-Payable		Aggregate
		Restricted		Intrinsic
In thousands		Unit Shares		Value
Outstanding at December 31, 2011		1,052
	Granted	543
	Vested and Released	(646)
	Forfeited	(15)
Outstanding at September 30, 2012		934	$	58,920