Fair Value

12 Months Ended

Dec. 31, 2015

Note 7 Fair Value

Fair Value Measurement

PNC measures certain financial assets and liabilities at fair value in accordance with GAAP. Fair value is defined in GAAP as the price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date. GAAP focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. GAAP also establishes a fair value hierarchy to maximize the use of observable inputs when measuring fair value and defines the three levels of inputs as noted below.

Level 1

Fair value is determined using a quoted price in an active market for identical assets or liabilities. Level 1 assets and liabilities may include debt securities, equity securities and listed derivative contracts that are traded in an active exchange market and certain U.S. Treasury securities that are actively traded in over-the-counter markets.

Level 2

Fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly. The majority of Level 2 assets and liabilities include debt securities, equity securities and listed derivative contracts with quoted prices that are traded in markets that are not active, and certain debt and equity securities and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable inputs.

Level 3

Fair value is estimated using unobservable inputs that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models and discounted cash flow methodologies, or similar techniques for which the significant valuation inputs are not observable and the determination of fair value requires significant management judgment or estimation.

Certain assets which have been adjusted due to impairment are accounted for at lower of amortized cost or fair value on a nonrecurring basis and consist primarily of certain nonaccrual loans, OREO and foreclosed assets and long-lived assets held for sale. These assets, which are generally classified as Level 3, are included in Table 77 in this Note 7.

We characterize active markets as those where transaction volumes are sufficient to provide objective pricing information, with reasonably narrow bid/ask spreads and where dealer quotes received do not vary widely and are based on current information. Inactive markets are typically characterized by low transaction volumes, price quotations that vary substantially among market participants or are not based on current information, wide bid/ask spreads, a significant increase in implied liquidity risk premiums, yields, or performance indicators for observed transactions or quoted prices compared to historical periods, a significant decline or absence of a market for new issuance, or any combination of the above factors. We also consider nonperformance risks including credit risk as part of our valuation methodology for all assets and liabilities measured at fair value.

Any models used to determine fair values or to validate dealer quotes based on the descriptions below are subject to review and independent testing as part of our model validation and internal control testing processes. Our Model Risk Management Committee reviews significant models on at least an annual basis. In addition, the Valuation Committee approves valuation methodologies and reviews the results of independent valuation reviews and processes for assets and liabilities measured at fair value on a recurring basis.

Assets and liabilities measured at fair value, by their nature, result in a higher degree of financial statement volatility. Assets and liabilities classified within Level 3 inherently require the use of various assumptions, estimates and judgments when measuring their fair value. As observable market activity is commonly not available to use when estimating the fair value of Level 3 assets and liabilities, we must estimate fair value using various modeling techniques. These techniques include the use of a variety of inputs/assumptions including credit quality, liquidity, interest rates or other relevant inputs across the entire population of our Level 3 assets and liabilities. Changes in the significant underlying factors or assumptions (either an increase or a decrease) in any of these areas underlying our estimates may result in a significant increase/decrease in the Level 3 fair value measurement of a particular asset and/or liability from period to period.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Securities Available for Sale and Trading Securities

Securities accounted for at fair value include both the available for sale and trading portfolios. We primarily use prices obtained from pricing services, dealer quotes, or recent trades to determine the fair value of securities. As of December 31, 2015, 87% of the positions in these portfolios were priced by using pricing services provided by third-party vendors. The third-party vendors use a variety of methods when pricing securities that incorporate relevant market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. One of the vendor’s prices are set with reference to market activity for highly liquid assets, such as U.S. Treasury and agency securities and agency residential mortgage-backed securities, and matrix pricing for other asset classes, such as commercial mortgage-backed and other asset-backed securities. Another vendor primarily uses discounted cash flow pricing models considering adjustments for spreads and prepayments for the instruments we value using this service, such as non-agency residential mortgage-backed securities, agency adjustable rate mortgage securities, agency collateralized mortgage obligations (CMOs), commercial mortgage-backed securities and municipal bonds. The vendors we use provide pricing services on a global basis and have quality management processes in place to monitor the integrity of the valuation inputs and the prices provided to users, including procedures to consider and incorporate information received from pricing service users who may challenge a price. We monitor and validate the reliability of vendor pricing on an ongoing basis through pricing methodology reviews, by performing detailed reviews of the assumptions and inputs used by the vendor to price individual securities, and through price validation testing. Price validation testing is performed independent of the risk-taking function and involves corroborating the prices received from third-party vendors with prices from another third-party source, by reviewing valuations of comparable instruments, by comparison to internal valuations, or by reference to recent sales of similar securities. Securities not priced by one of our pricing vendors may be valued using a dealer quote. Dealer quotes received are typically non-binding. Securities priced using a dealer quote are subject to corroboration either with another dealer quote, by comparison to similar securities priced by either a third-party vendor or another dealer, or through internal valuation in order to validate that the quote is representative of the market. Security prices are also validated through actual cash settlement upon sale of a security.

Securities are classified within the fair value hierarchy after giving consideration to the activity level in the market for the security type and the observability of the inputs used to determine the fair value. When a quoted price in an active market exists for the identical security, this price is used to determine fair value and the security is classified within Level 1 of the hierarchy. Level 1 securities include certain U.S. Treasury securities and exchange-traded equities. When a quoted price in an active market for the identical security is not available, fair value is estimated using either an alternative market approach, such as a recent trade or matrix pricing, or an income approach, such as a discounted cash flow pricing model. If the inputs to the valuation are based primarily on market observable information, then the security is classified within Level 2 of the hierarchy. Level 2 securities include agency debt securities, agency residential mortgage-backed securities, agency and non-agency commercial mortgage-backed securities, certain non-agency residential mortgage-backed securities, asset-backed securities collateralized by non-mortgage-related consumer loans, municipal securities, and other debt securities. Level 2 securities are predominantly priced by third parties, either a pricing vendor or dealer.

In certain cases where there is limited activity or less transparency around the inputs to the valuation, securities are classified within Level 3 of the hierarchy. Securities classified as Level 3 consist primarily of non-agency residential mortgage-backed and asset-backed securities collateralized by first- and second-lien residential mortgage loans. Fair value for these securities is primarily estimated using pricing obtained from third-party vendors. In some cases, fair value is estimated using a dealer quote, by reference to prices of securities of a similar vintage and collateral type or by reference to recent sales of similar securities. Market activity for these security types is limited with little price transparency. As a result, these securities are generally valued by the third-party vendor using a discounted cash flow approach that incorporates observable market activity where available. Significant inputs to the valuation include prepayment projections and credit loss assumptions (default rate and loss severity) and discount rates that are deemed representative of current market conditions. The discount rates used incorporate a spread over the benchmark curve that takes into consideration liquidity risk and potential credit risk not already included in the credit loss assumptions. Significant increases (decreases) in any of those assumptions in isolation would result in a significantly lower (higher) fair value measurement. Prepayment estimates generally increase when market interest rates decline and decrease when market interest rates rise. Credit loss estimates are driven by the ability of borrowers to pay their loans and housing market prices and are impacted by changes in overall macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice versa. Discount rates typically increase when market interest rates increase and/or credit and liquidity risks increase. Similarly, discount rates typically decrease when market interest rates decline and/or credit and liquidity conditions improve. Price validation procedures performed for these securities include comparing current prices to historical pricing trends by collateral type and vintage, and by obtaining corroborating prices from another third-party source.

Certain infrequently traded debt securities within the State and municipal and Other debt securities available-for-sale and Trading securities categories are also classified in Level 3 and are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 (for the 2015 period). The significant unobservable inputs used to estimate the fair value of these securities include an estimate of expected credit losses and a discount for liquidity risk. These inputs are incorporated into the fair value measurement by either increasing the spread over the benchmark curve or by applying a credit and liquidity discount to the par value of the security. Significant increases (decreases) in credit and/or liquidity risk could result in a significantly lower (higher) fair value estimate.

Financial Derivatives

Exchange-traded derivatives are valued using quoted market prices and are classified as Level 1. However, the majority of derivatives that we enter into are executed over-the-counter and are valued using internal models. These derivatives are primarily classified as Level 2 as the readily observable market inputs to these models are validated to external sources. The external sources for these inputs include industry pricing services, or are corroborated through recent trades, dealer quotes, yield curves, implied volatility or other market-related data. Level 2 financial derivatives are primarily estimated using a combination of Eurodollar future prices and observable benchmark interest rate swaps to construct projected discounted cash flows. Financial derivatives that are priced using significant management judgment or assumptions are classified as Level 3.

Fair value information for Level 3 financial derivatives is presented separately for interest rate contracts and other contracts. Interest rate contracts include residential and commercial mortgage interest rate lock commitments and certain interest rate options. Other contracts include risk participation agreements, swaps related to the sale of certain Visa Class B common shares and other types of contracts.

The fair values of residential mortgage loan commitment assets as of December 31, 2015 and 2014 are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 in this Note 7. Significant unobservable inputs for these commitments include the probability of funding and embedded servicing. The probability of funding for residential mortgage loan commitments represents the expected proportion of loan commitments in the pipeline that will fund. Additionally, embedded in the market price of the underlying loan is a value for retaining servicing of the loan once it is sold. Significant increases (decreases) in the fair value of a residential mortgage loan commitment asset (liability) result when the probability of funding increases (decreases) and when the embedded servicing value increases (decreases).

The fair values of commercial mortgage loan commitment assets and liabilities as of December 31, 2015 and 2014 are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 in this Note 7. Significant unobservable inputs for these commitments include spread over the benchmark interest rate and the estimated servicing cash flows for loans sold to the agencies with servicing retained. The spread over the benchmark curve reflects management assumptions regarding credit and liquidity risks. Significant increases (decreases) in the fair value of commercial mortgage loan commitments result when the spread over the benchmark curve decreases (increases) or the estimated servicing cash flows for loans sold to the agencies with servicing retained increases (decreases).

The fair values of interest rate option assets and liabilities as of December 31, 2015 and 2014 are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 in this Note 7. The significant unobservable input used in the fair value measurement of the interest rate options is expected interest rate volatility. Significant increases (decreases) in interest rate volatility would result in a significantly higher (lower) fair value measurement.

The fair values of risk participation agreement assets and liabilities as of December 31, 2015 and 2014 are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 in this Note 7. The significant unobservable inputs used in the fair value measurement of risk participation agreements are probability of default and loss severity. Significant increases (decreases) in probability of default and loss severity would result in a significantly higher (lower) fair value measurement.

In connection with the sales of portions of our Visa Class B common shares, we entered into swap agreements with the purchasers of the shares to account for any future risk of converting Class B common shares to Class A common shares and to account for the corresponding change in value to the Class B shares. These adjustments result from resolution of the specified litigation or the changes in the amount in the litigation escrow account funded by Visa as well as from changes in the estimated litigation resolution date (see Note 20 Legal Proceedings and Note 21 Commitments and Guarantees for additional information). These swaps also require payments calculated by reference to the market price of the Class A common shares and a fixed rate of interest. The swaps are classified as Level 3 instruments and the fair values of the liability positions totaled $104 million at December 31, 2015 and $135 million at December 31, 2014, respectively. The fair values of the swap agreements are determined using a discounted cash flow methodology. The significant unobservable inputs to the valuations are estimated changes in the conversion rate of the Class B common shares into Class A common shares and the estimated growth rate of the Class A share price. A decrease in the conversion rate will have a negative impact on the fair value of the swaps and vice versa. Independent of changes in the conversion rate, an increase in the estimated growth rate of the Class A share price will have a negative impact on the fair value of the swaps and vice versa, through its impact on periodic payments due to the counterparty until the maturity dates of the swaps.

The fair values of our derivatives include a credit valuation adjustment (CVA) to reflect our own and our counterparties’ nonperformance risk. Our CVA is computed using new loan pricing and considers externally available bond spreads, in conjunction with internal historical recovery observations.

Residential Mortgage Loans Held for Sale

We account for certain residential mortgage loans originated for sale at fair value on a recurring basis. The election of the fair value option aligns the accounting for the residential mortgages with the related hedges. Additionally, we have elected to account for loans repurchased due to breaches of representations and warranties at fair value.

Residential mortgage loans are valued based on quoted market prices, where available, prices for other traded mortgage loans with similar characteristics, and purchase commitments and bid information received from market participants. The prices are adjusted as necessary to include the embedded servicing value in the loans and to take into consideration the specific characteristics of certain loans that are priced based on the pricing of similar loans. These adjustments represent unobservable inputs to the valuation but are not considered significant given the relative insensitivity of the value to changes in these inputs to the fair value of the loans. Accordingly, the majority of residential mortgage loans held for sale are classified as Level 2. This category also includes repurchased and temporarily unsalable residential mortgage loans. These loans are repurchased due to a breach of representations and warranties in the loan sales agreement and typically occur after the loan is in default. The temporarily unsalable loans have an origination defect that makes them currently unable to be sold into the performing loan sales market. Because transaction details regarding sales of this type of loan are often unavailable, unobservable bid information from brokers and investors is heavily relied upon. Accordingly, based on the significance of unobservable inputs, these loans are classified as Level 3.

Residential Mortgage Servicing Rights

Residential MSRs are carried at fair value on a recurring basis. Assumptions incorporated into the residential MSRs valuation model reflect management’s best estimate of factors that a market participant would use in valuing the residential MSRs. Although sales of residential MSRs do occur, residential MSRs do not trade in an active, open market with readily observable prices so the precise terms and conditions of sales are not available. As a benchmark for the reasonableness of its residential MSRs fair value, PNC obtained opinions of value from independent parties (“brokers”). These brokers provided a range (+/- 10 bps) based upon their own discounted cash flow calculations of our portfolio that reflect conditions in the secondary market and any recently executed servicing transactions. PNC compares its internally-developed residential MSRs value to the ranges of values received from the brokers. If our residential MSRs fair value falls outside of the brokers’ ranges, management will assess whether a valuation adjustment is warranted. For the periods presented, PNC’s residential MSRs value did not fall outside of the brokers’ ranges. We consider our residential MSRs value to represent a reasonable estimate of fair value. Due to the nature of the unobservable valuation inputs, residential MSRs are classified as Level 3.

The significant unobservable inputs used in the fair value measurement of residential MSRs are constant prepayment rates and spread over the benchmark curve. Significant increases (decreases) in prepayment rates and spread over the benchmark curve would result in lower (higher) fair market value of residential MSRs.

Commercial Mortgage Servicing Rights

Commercial MSRs are carried at fair value on a recurring basis. Assumptions incorporated into the commercial valuation model reflect management’s best estimate of factors that a market participant would use in valuing the commercial MSRs. Although sales of commercial MSRs do occur, commercial MSRs do not trade in an active, open market with readily observable prices so the precise terms and conditions of sales are not available. Due to the nature of the valuation inputs and the limited availability of market pricing, commercial MSRs are classified as Level 3.

The fair value of commercial MSRs is estimated by using a discounted cash flow model incorporating unobservable inputs for assumptions such as constant prepayment rates, discount rates and other factors. Significant increases/(decreases) in constant prepayment rates and discount rates would result in significantly lower/(higher) commercial MSR value determined based on current market conditions and expectations.

Commercial Mortgage Loans Held for Sale

We account for certain commercial mortgage loans classified as held for sale in whole loan transactions at fair value. In addition, as of September 1, 2014, we have elected to apply the fair value option to commercial mortgage loans held for sale to agencies. This election applies to all new commercial mortgage loans held for sale originated for sale to the agencies effective on or after September 1, 2014. The election of the fair value option aligns the accounting for the commercial mortgages with the related commitments to sell the loans.

We determine the fair value of commercial mortgage loans held for sale based upon discounted cash flows. Fair value is determined using sale valuation assumptions that management believes a market participant would use in pricing the loans. Valuation assumptions may include observable inputs based on the benchmark interest rate swap curves, whole loan sales and agency sales transactions. The significant unobservable inputs are management’s assumption of the spread applied to the benchmark rate and the estimated servicing cash flows for loans sold to the agencies with servicing retained. The spread over the benchmark curve includes management’s assumptions of the impact of credit and liquidity risk. Significant increases (decreases) in the spread applied to the benchmark would result in a significantly lower (higher) asset value. The wide range of the spread over the benchmark curve is due to the varying risk and underlying property characteristics within our portfolio. Significant increases (decreases) in the estimated servicing cash flows would result in significantly higher (lower) asset value. Based on the significance of unobservable inputs, we classified this portfolio as Level 3.

Equity Investments – Direct Investments

The valuation of direct and indirect private equity investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments. The carrying values of direct and affiliated partnership interests reflect the expected exit price and are based on various techniques including multiples of adjusted earnings of the entity, independent appraisals, anticipated financing and sale transactions with third parties, or the pricing used to value the entity in a recent financing transaction. A multiple of adjusted earnings calculation is the valuation technique utilized most frequently and the multiple of earnings is the primary and most significant unobservable input used in such calculation. The multiple of earnings is utilized in conjunction with portfolio company financial results and our ownership interest in portfolio company securities to determine PNC’s interest in the enterprise value of the portfolio company. Significant decreases (increases) in the multiple of earnings could result in a significantly lower (higher) fair value measurement. The magnitude of the change in fair value is dependent on the significance of the change in the multiple of earnings and the significance of portfolio company adjusted earnings. Valuation inputs or analysis are supported by portfolio company or market documentation. Due to the size, private and unique nature of each portfolio company, lack of liquidity and the long-term nature of investments, relevant benchmarking is not always feasible. A valuation committee reviews the portfolio company valuations on a quarterly basis and oversight is provided by senior management of the business. These investments are classified as Level 3.

Unfunded commitments related to direct investments totaled $23 million and $28 million at December 31, 2015 and December 31, 2014, respectively. Outstanding contractual obligations to existing direct investments totaled $11 million and $9 million at December 31, 2015 and December 31, 2014, respectively. During 2015, $5 million of financial support was provided to existing direct investments compared to $39 million during 2014.

Equity Investments – Indirect Investments

We value indirect investments in private equity funds based on net asset value (NAV) as provided in the financial statements that we receive from their managers. Due to the time lag in our receipt of the financial information and based on a review of investments and valuation techniques applied, adjustments to the manager-provided value are made when available recent portfolio company information or market information indicates a significant change in value from that provided by the manager of the fund. In accordance with ASC 820-10, these investments are not classified in the fair value hierarchy.

These indirect investments are not redeemable, however PNC receives distributions over the life of the partnerships from liquidation of the underlying investments by the investee, which we expect to occur over the next twelve years. The forced sale or restructuring of these investments would likely result in PNC receiving less value than it would otherwise have received in the ordinary course of business. Unfunded commitments related to indirect investments totaled $103 million and $112 million at of December 31, 2015 and December 31, 2014, respectively. During 2015, $17 million of financial support was provided to indirect investments to satisfy capital calls for commitments. The comparable amount was $24 million during 2014.

Customer Resale Agreements

We have elected to account for structured resale agreements, which are economically hedged using free-standing financial derivatives, at fair value. The fair value for structured resale agreements is determined using a model that includes observable market data such as interest rates as inputs. Readily observable market inputs to this model can be validated to external sources, including yield curves, implied volatility or other market-related data. These instruments are classified as Level 2.

Loans

Loans accounted for at fair value consist primarily of residential mortgage loans. These loans are generally valued similarly to residential mortgage loans held for sale and are classified as Level 2. However, similar to residential mortgage loans held for sale, if these loans are repurchased and unsalable, they are classified as Level 3. In addition, repurchased VA loans, where only a portion of the principal will be reimbursed, are classified as Level 3. The fair value is determined using a discounted cash flow calculation based on our historical loss rate. Due to the unobservable nature of this pool level approach, these loans are classified as Level 3.

Additionally, we have elected to account for certain home equity lines of credit at fair value. These loans are classified as Level 3. This category also includes repurchased brokered home equity loans. These loans are repurchased due to a breach of representations or warranties in the loan sales agreement and occur typically after the loan is in default. Similar to existing loans classified as Level 3 due to being repurchased and unsalable, the fair value price is based on bids and market observations of transactions of similar vintage. Because transaction details regarding the credit and underwriting quality are often unavailable, unobservable bid information from brokers and investors is heavily relied upon. Accordingly, based on the significance of unobservable inputs, these loans are classified as Level 3. The fair value of these loans is included in the Loans – Home equity line item in Table 76 in this Note 7.

Significant inputs to the valuation of residential mortgage loans include credit and liquidity discount, cumulative default rate, loss severity and gross discount rate and are deemed representative of current market conditions. Significant increases (decreases) in an assumption would result in a significantly lower (higher) fair value measurement.

BlackRock Series C Preferred Stock

We have elected to account for the shares of BlackRock Series C Preferred Stock received in a stock exchange with BlackRock at fair value. As of both December 31, 2015 and December 31, 2014, we hold approximately 1.3 million shares of BlackRock Series C Preferred Stock, which are available to fund our obligation in connection with the BlackRock LTIP programs. See Note 24 Subsequent Events for information on the February 1, 2016 transfer of 0.5 million shares of the Series C Preferred Stock to BlackRock to satisfy a portion of our LTIP obligation. The Series C Preferred Stock economically hedges the BlackRock LTIP liability that is accounted for as a derivative. The fair value of the Series C Preferred Stock is determined using a third-party modeling approach, which includes both observable and unobservable inputs. This approach considers expectations of a default/liquidation event and the use of liquidity discounts based on our inability to sell the security at a fair, open market price in a timely manner. Although dividends are equal to common shares and other preferred series, significant transfer restrictions exist on our Series C shares for any purpose other than to satisfy the BlackRock LTIP obligation. Due to the significance of unobservable inputs, this security is classified as Level 3. Significant increases (decreases) in the liquidity discount would result in a significantly lower (higher) asset value for the BlackRock Series C and vice versa for the BlackRock LTIP liability.

Other Assets and Liabilities

We have entered into a prepaid forward contract with a financial institution to mitigate the risk on a portion of PNC’s deferred compensation, supplemental incentive savings plan liabilities and certain stock based compensation awards that are based on PNC’s stock price and are subject to market risk. The prepaid forward contract is initially valued at the transaction price and is subsequently valued by reference to the market price of PNC’s stock and is recorded in either Other Assets or Other Liabilities at fair value and is classified as Level 2.

In addition, deferred compensation and supplemental incentive savings plan participants may also invest based on fixed income and equity-based funds. PNC utilizes a Rabbi Trust to hedge the returns by purchasing similar funds on which the participant returns are based. The Rabbi Trust balances are recorded in Other Assets at fair value using the quoted market price. These assets are primarily being classified in Levels 1 and 2. The other asset category also includes FHLB interests and the retained interests related to the Small Business Administration (SBA) securitizations which are classified as Level 3, and certain trading loans which are classified as level 2. The other liabilities category includes a contingent liability which is classified as Level 3.

All Level 3 other assets and liabilities are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 in this Note 7.

Other Borrowed Funds

We have elected to account for other borrowed funds at fair value consisting of the related liability for transferred loans over which PNC regained effective control pursuant to ASC 860. These other borrowed funds are classified as either Level 2 or Level 3 consistent with the corresponding loans described above. All Level 3 amounts are included in the Insignificant Level 3 assets, net of liabilities line item in Table 76 in this Note 7.

Other borrowed funds also included certain liabilities consisting primarily of secured debt at fair value. As of December 31, 2015, this secured debt was no longer outstanding due to repurchases. These other borrowed funds were classified as Level 3. Significant unobservable inputs for these borrowed funds include credit and liquidity discount and spread over the benchmark curve. Significant increases (decreases) in these input assumptions would result in significantly lower (higher) fair value measurement.

Table 74: Fair Value Measurements - Recurring Basis Summary

					December 31, 2015								December 31, 2014
											Total								Total
In millions				Level 1		Level 2		Level 3		Fair Value			Level 1	Level 2		Level 3		Fair Value
Assets
	Securities available for sale
		U.S. Treasury and government agencies		$	9,267	$	607			$	9,874	$	4,795	$	627			$	5,422
		Residential mortgage-backed
			Agency				24,820				24,820				18,043				18,043
			Non-agency				143	$	4,008		4,151				144	$	4,798		4,942
		Commercial mortgage-backed
			Agency				1,918				1,918				2,187				2,187
			Non-agency				4,903				4,903				4,162				4,162
		Asset-backed					4,941		482		5,423				4,624		563		5,187
		State and municipal					2,041		15		2,056				1,904		134		2,038
		Other debt					1,996		30		2,026				1,783		30		1,813
			Total debt securities		9,267		41,369		4,535		55,171		4,795		33,474		5,525		43,794
		Corporate stocks and other			527		62				589		426		15				441
			Total securities available for sale		9,794		41,431		4,535		55,760		5,221		33,489		5,525		44,235
	Financial derivatives (a) (b)
		Interest rate contracts					4,626		29		4,655		4		4,874		40		4,918
		Other contracts					284		2		286				314		2		316
			Total financial derivatives				4,910		31		4,941		4		5,188		42		5,234
	Residential mortgage loans held for sale (c)						838		5		843				1,255		6		1,261
	Trading securities (d)
		Debt (e)			987		727		3		1,717		1,340		960		32		2,332
		Equity			9						9		21						21
			Total trading securities		996		727		3		1,726		1,361		960		32		2,353
	Residential mortgage servicing rights								1,063		1,063						845		845
	Commercial mortgage servicing rights								526		526						506		506
	Commercial mortgage loans held for sale (c)								641		641						893		893
	Equity investments - direct investments								1,098		1,098						1,152		1,152
	Equity investments - indirect investments (f)										347								469
	Customer resale agreements (g)						137				137				155				155
	Loans (h)						565		340		905				637		397		1,034
	Other assets (a)
		BlackRock Series C Preferred Stock (i)							357		357						375		375
		Other			254		199		7		460		190		256		15		461
			Total other assets		254		199		364		817		190		256		390		836
		Total assets		$	11,044	$	48,807	$	8,606	$	68,804	$	6,776	$	41,940	$	9,788	$	58,973
Liabilities
	Financial derivatives (b) (j)
		Interest rate contracts		$	1	$	3,124	$	7	$	3,132			$	3,260	$	12	$	3,272
		BlackRock LTIP							357		357						375		375
		Other contracts					204		109		313				241		139		380
			Total financial derivatives		1		3,328		473		3,802				3,501		526		4,027
	Trading securities sold short (k)
		Debt			960		27				987	$	1,479		11				1,490
			Total trading securities sold short		960		27				987		1,479		11				1,490
	Other borrowed funds (k)						81		12		93				92		181		273
	Other liabilities (j)								10		10						9		9
		Total liabilities		$	961	$	3,436	$	495	$	4,892	$	1,479	$	3,604	$	716	$	5,799
(a)		Included in Other assets on the Consolidated Balance Sheet.
(b)		Amounts at December 31, 2015 and December 31, 2014, are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow PNC to net positive and negative positions and cash collateral held or placed with the same counterparty. At December 31, 2015 and December 31, 2014, the net asset amounts were $1.8 billion and $2.6 billion, respectively, and the net liability amounts were $.6 billion and $1.4 billion, respectively.
(c)		Included in Loans held for sale on the Consolidated Balance Sheet. PNC has elected the fair value option for certain residential and commercial mortgage loans held for sale.
(d)		Fair value includes net unrealized gains of $23 million at December 31, 2015 compared with net unrealized gains of $54 million at December 31, 2014.
(e)		Approximately 28% of these securities are residential mortgage-backed securities and 57% are U.S. Treasury and government agencies securities at December 31, 2015. Comparable amounts at December 31, 2014 were 34% and 57%, respectively.
(f)		In accordance with ASC 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the Consolidated Balance Sheet.
(g)		Included in Federal funds sold and resale agreements on the Consolidated Balance Sheet. PNC has elected the fair value option for these items.
(h)		Included in Loans on the Consolidated Balance Sheet.
(i)		PNC has elected the fair value option for these shares.
(j)		Included in Other liabilities on the Consolidated Balance Sheet.
(k)		Included in Other borrowed funds on the Consolidated Balance Sheet.

Reconciliations of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for 2015 and 2014 follow.

Table 75: Reconciliation of Level 3 Assets and Liabilities

Year Ended December 31, 2015

																														Unrealized
								Total realized / unrealized																						gains (losses)
								gains or losses for the period (a)																						on assets and
												Included																		liabilities held on
Level 3 Instruments					Fair Value							in Other										Transfers			Transfers			Fair Value		Consolidated
	Only				Dec. 31,				Included in			comprehensive										into			out of			Dec. 31,		Balance Sheet
In millions					2014				Earnings			income		Purchases		Sales		Issuances		Settlements		Level 3			Level 3			2015		at Dec. 31, 2015 (b)
Assets
	Securities available
		for sale
		Residential mortgage-
			backed non-agency			$	4,798		$	114		$	(58)							$	(846)							$	4,008	$	(2)
		Commercial mortgage
			backed non-agency							8											(8)
		Asset-backed					563			20											(101)								482		(2)
		State and municipal					134						(1)								(118)								15
		Other debt					30			2			(1)	$	13	$	(7)				(7)								30
			Total securities
				available for sale			5,525			144			(60)		13		(7)				(1,080)								4,535		(4)
	Financial derivatives						42			135					3						(149)								31		126
	Residential mortgage
		loans held for sale					6			1					25		(4)					$	6		$	(29)	(c)		5		1
	Trading securities - Debt						32														(29)								3
	Residential mortgage
		servicing rights					845			2					316			$	78		(178)								1,063		5
	Commercial mortgage
		servicing rights					506			(9)					55				63		(89)								526		(10)
	Commercial mortgage
		loans held for sale					893			76							(56)		4,163		(4,435)								641		(5)
	Equity investments -
		direct investments					1,152			120					274		(448)												1,098		86
	Loans						397			23					114		(26)				(122)		25	(c)		(71)	(d)		340		12
	Other assets
		BlackRock Series C
			Preferred Stock				375			(18)																			357		(18)
		Other					15										(7)				(1)								7
			Total other assets				390			(18)							(7)				(1)								364		(18)
				Total assets		$	9,788		$	474	(e)	$	(60)	$	800	$	(548)	$	4,304	$	(6,083)	$	31		$	(100)		$	8,606	$	193	(f)
Liabilities
	Financial derivatives (g)					$	526		$	22						$	1			$	(76)							$	473	$	4
	Other borrowed funds						181			(3)								$	92		(258)								12
	Other liabilities						9			1																			10
				Total liabilities		$	716		$	20	(e)					$	1	$	92	$	(334)							$	495	$	4	(f)


Year Ended December 31, 2014

																													Unrealized
								Total realized / unrealized																					gains (losses)
							gains or losses for the period (a)																						on assets and
											Included																		liabilities held
Level 3 Instruments					Fair Value						in Other											Transfers			Transfers		Fair Value		on Consolidated
	Only				Dec. 31,			Included in			comprehensive											into			out of		Dec. 31,		Balance Sheet
In millions					2013			Earnings			income		Purchases		Sales		Issuances		Settlements			Level 3			Level 3		2014		at Dec. 31, 2014 (b)
Assets
	Securities available
		for sale
		Residential mortgage-
			backed non-agency		$	5,358		$	120		$	64							$	(821)		$	77	(h)			$	4,798	$	(10)
		Commercial mortgage-
			backed non-agency						1											(1)
		Asset-backed				641			13			23								(114)								563		(1)
		State and municipal				333			(2)			15								(198)					$	(14)		134
		Other debt				38			1				$	1	$	(8)				(2)								30
			Total securities
				available for sale		6,370			133			102		1		(8)				(1,136)			77			(14)		5,525		(11)
	Financial derivatives					36			226					3						(223)								42		142
	Residential mortgage
		loans held for sale				8			1					15		(3)				(1)			11			(25)	(c)	6		1
	Trading securities - Debt					32			2											(31)			29	(h)				32		2
	Residential mortgage
		servicing rights				1,087			(238)					45			$	85		(134)								845		(231)
	Commercial mortgage
		servicing rights							(53)					43				53		463	(i)							506		(53)
	Commercial mortgage
		loans held for sale				586			38									1,790		(1,521)								893		6
	Equity investments -
		direct investments				1,069			184					306		(407)												1,152		134
	Loans					527			74					120		(153)				(86)			20	(c)		(105)	(d)	397		46
	Other assets
		BlackRock Series C
			Preferred Stock			332			43																			375		43
		Other				8																	7					15
			Total other assets			340			43														7					390		43
				Total assets	$	10,055		$	410	(e)	$	102	$	533	$	(571)	$	1,928	$	(2,669)		$	144		$	(144)	$	9,788	$	79	(f)
Liabilities
	Financial derivatives (g)				$	439		$	222						$	1			$	(136)							$	526	$	(51)
	Other borrowed funds					199			5								$	57		(80)								181
	Other liabilities																			9								9
				Total liabilities	$	638		$	227	(e)					$	1	$	57	$	(207)							$	716	$	(51)	(f)
(a)			Losses for assets are bracketed while losses for liabilities are not.
(b)			The amount of the total gains or losses for the period included in earnings that is attributable to the change in unrealized gains or losses related to those assets and liabilities held at the end of the reporting period.
(c)			Primarily reflects the reclassification of residential mortgage loans from held for sale to portfolio loans.
(d)			Reflects transfers out of Level 3 due to the transfer of residential mortgage loans to OREO.
(e)			Net gains (realized and unrealized) included in earnings relating to Level 3 assets and liabilities were $454 million for 2015 compared with net gains (realized and unrealized) of $183 million for 2014. These amounts also included amortization and accretion of $147 million for 2015 compared with $146 million for 2014. The amortization and accretion amounts were included in Interest income on the Consolidated Income Statement, and the remaining net gains/(losses) (realized and unrealized) were included in Noninterest income on the Consolidated Income Statement.
(f)			Net unrealized losses relating to those assets and liabilities held at the end of the reporting period were $189 million for 2015, compared with net unrealized gains of $130 million for 2014. These amounts were included in Noninterest income on the Consolidated Income Statement.
(g)			Includes swaps entered into in connection with sales of certain Visa Class B common shares.
(h)			Reflects transfers from Level 2 to Level 3 due to valuation inputs that were deemed to be unobservable.
(i)			Settlements relating to commercial MSRs include $552 million, which represents the fair value as of January 1, 2014 as a result of an irrevocable election to measure all classes of commercial MSRs at fair value. Refer to Note 8 Goodwill and Intangible Assets for additional information on commercial MSRs.

An instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Changes from one quarter to the next related to the observability of inputs to a fair value measurement may result in a reclassification (transfer) of assets or liabilities between hierarchy levels. PNC’s policy is to recognize transfers in and transfers out as of the end of the reporting period.

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities follows.

Table 76: Fair Value Measurements - Recurring Quantitative Information

December 31, 2015

Level 3 Instruments Only

Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted Average)

Residential mortgage-backed

non-agency securities

4,008

Priced by a third-party vendor

Constant prepayment rate (CPR)

1.0%-24.2% (7.0%)

(a)

using a discounted cash flow

Constant default rate (CDR)

0.0%-16.7% (5.4%)

(a)

pricing model (a)

Loss severity

10.0%-98.5% (53.3%)

(a)

Spread over the benchmark curve (b)

241bps weighted average

(a)

Asset-backed securities

482

Priced by a third-party vendor

Constant prepayment rate (CPR)

1.0%-14.0% (6.3%)

(a)

using a discounted cash flow

Constant default rate (CDR)

1.7%-13.9% (6.8%)

(a)

pricing model (a)

Loss severity

24.2%-100% (77.5%)

(a)

Spread over the benchmark curve (b)

324bps weighted average

(a)

Residential mortgage servicing rights

1,063

Discounted cash flow

Constant prepayment rate (CPR)

0.3%-46.5% (10.6%)

Spread over the benchmark curve (b)

559bps-1,883bps (893bps)

Commercial mortgage servicing

526

Discounted cash flow

Constant prepayment rate (CPR)

3.9%-26.5% (5.7%)

rights

Discount rate

2.6%-7.7% (7.5%)

Commercial mortgage loans held

641

Discounted cash flow

Spread over the benchmark curve (b)

85bps-4,270bps (547bps)

for sale

Estimated servicing cash flows

0.0%-7.0% (0.9%)

Equity investments - Direct investments

1,098

Multiple of adjusted earnings

Multiple of earnings

4.2x-14.1x (7.6x)

Loans - Residential real estate

123

Consensus pricing (c)

Cumulative default rate

2.0%-100% (85.1%)

Loss severity

0.0%-100% (27.3%)

Discount rate

4.9%-7.0% (5.2%)

116

Discounted cash flow

Loss severity

8.0% weighted average

Discount rate

3.9% weighted average

Loans - Home equity

101

Consensus pricing (c)

Credit and Liquidity discount

26.0%-99.0% (54.0%)

BlackRock Series C Preferred Stock

357

Consensus pricing (c)

Liquidity discount

20.0%

BlackRock LTIP

(357)

Consensus pricing (c)

Liquidity discount

20.0%

Swaps related to sales of certain Visa

(104)

Discounted cash flow

Estimated conversion factor of

Class B common shares

Class B shares into Class A shares

164.3%

(d)

Estimated growth rate of Visa

Class A share price

16.3%

Insignificant Level 3 assets, net of

liabilities (e)

Total Level 3 assets, net of liabilities (f)

8,111

December 31, 2014

Level 3 Instruments Only

Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted Average)

Residential mortgage-backed

non-agency securities

4,798

Priced by a third-party vendor

Constant prepayment rate (CPR)

1.0%-28.9% (6.8%)

(a)

using a discounted cash flow

Constant default rate (CDR)

0.0%-16.7% (5.6%)

(a)

pricing model (a)

Loss severity

6.1%-100.0% (53.1%)

(a)

Spread over the benchmark curve (b)

249bps weighted average

(a)

Asset-backed securities

563

Priced by a third-party vendor

Constant prepayment rate (CPR)

1.0%-15.7% (5.9%)

(a)

using a discounted cash flow

Constant default rate (CDR)

1.7%-13.9% (7.6%)

(a)

pricing model (a)

Loss severity

14.6%-100.0% (73.5%)

(a)

Spread over the benchmark curve (b)

352bps weighted average

(a)

State and municipal securities

132

Discounted cash flow

Spread over the benchmark curve (b)

55bps-165bps (67bps)

Consensus pricing (c)

Credit and Liquidity discount

0.0%-20.0% (14.9%)

Other debt securities

Consensus pricing (c)

Credit and Liquidity discount

7.0%-95.0% (88.6%)

Trading securities - Debt

Consensus pricing (c)

Credit and Liquidity discount

0.0%-15.0% (8.0%)

Residential mortgage servicing rights

845

Discounted cash flow

Constant prepayment rate (CPR)

3.8%-32.7% (11.2%)

Spread over the benchmark curve (b)

889bps-1,888bps (1,036bps)

Commercial mortgage servicing rights

506

Discounted cash flow

Constant prepayment rate (CPR)

7.0%-16.8% (8.0%)

Discount rate

2.5%-8.6% (6.6%)

Commercial mortgage loans held

for sale

893

Discounted cash flow

Spread over the benchmark curve (b)

37bps-4,025bps (549bps)

Estimated servicing cash flows

0.0%-2.0% (1.2%)

Equity investments - Direct investments

1,152

Multiple of adjusted earnings

Multiple of earnings

3.2x-13.9x (7.7x)

Loans - Residential real estate

114

Consensus pricing (c)

Cumulative default rate

2.0%-100.0% (90.5%)

Loss severity

0.0%-100.0% (35.6%)

Discount rate

5.4%-7.0% (6.4%)

154

Discounted cash flow

Loss severity

8.0% weighted average

Discount rate

3.4% weighted average

Loans - Home equity

129

Consensus pricing (c)

Credit and Liquidity discount

26.0%-99.0% (51.0%)

BlackRock Series C Preferred Stock

375

Consensus pricing (c)

Liquidity discount

20.0%

BlackRock LTIP

(375)

Consensus pricing (c)

Liquidity discount

20.0%

Swaps related to sales of certain

(135)

Discounted cash flow

Estimated conversion factor of

Visa Class B common shares

Class B shares into Class A shares

41.1%

Estimated growth rate of Visa Class

A share price

14.8%

Other borrowed funds - non-agency

securitization

(166)

Consensus pricing (c)

Credit and Liquidity discount

0.0%-99.0% (18.0%)

Spread over the benchmark curve (b)

113bps

Insignificant Level 3 assets, net of

liabilities (e)

Total Level 3 assets, net of liabilities (f)

9,072

(a)

Level 3 residential mortgage-backed non-agency and asset-backed securities with fair values as of December 31, 2015 totaling $3,379 million and $448 million, respectively, were priced by a third-party vendor using a discounted cash flow pricing model that incorporates consensus pricing, where available. The comparable amounts as of December 31, 2014 were $4,081 million and $532 million, respectively. The significant unobservable inputs for these securities were provided by the third-party vendor and are disclosed in the table. Our procedures to validate the prices provided by the third-party vendor related to these securities are discussed further in the Fair Value Measurement section of this Note 7. Certain Level 3 residential mortgage-backed non-agency and asset-backed securities with fair values as of December 31, 2015 of $629 million and $34 million, respectively, were valued using a pricing source, such as a dealer quote or comparable security price, for which the significant unobservable inputs used to determine the price were not reasonably available. The comparable amounts as of December 31, 2014 were $717 million and $31 million, respectively.

(b)

The assumed yield spread over the benchmark curve for each instrument is generally intended to incorporate non-interest-rate risks, such as credit and liquidity risks.

(c)

Consensus pricing refers to fair value estimates that are generally internally developed using information such as dealer quotes or other third-party provided valuations or comparable asset prices.

(d)

This conversion factor reflects the 4-for-1 split of Visa Class A common shares, which occurred during the first quarter of 2015.

(e)

Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes certain financial derivative assets and liabilities, trading securities (for the 2015 period), state and municipal securities (for the 2015 period), other debt securities (for 2015 period), residential mortgage loans held for sale, other assets, other borrowed funds (ROAPs) and other liabilities. For additional information, please see the Fair Value Measurement discussion included in this Note 7.

(f)

Consisted of total Level 3 assets of $8,606 million and total Level 3 liabilities of $495 million as of December 31, 2015 and $9,788 million and $716 million as of December 31, 2014, respectively.

Financial Assets Accounted for at Fair Value on a Nonrecurring Basis

We may be required to measure certain financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower of amortized cost or fair value accounting or write-downs of individual assets due to impairment and are included in Table 77 and Table 78.

Nonaccrual Loans

Nonaccrual loans represent the fair value of those loans which have been adjusted due to impairment. The impairment is primarily based on the appraised value of the collateral or LGD percentage. The LGD percentage is used to determine the weighted average loss severity of the nonaccrual loans.

As part of the appraisal process, persons ordering or reviewing appraisals are independent of the asset manager. Appraisals must be provided by licensed or certified appraisers and conform to the Uniform Standards of Professional Appraisal Practice. For loans secured by commercial properties where the underlying collateral is in excess of $250,000, appraisals are obtained at least annually. In certain instances (e.g., physical changes in the property), a more recent appraisal is obtained. Additionally, borrower ordered appraisals are not permitted, and PNC ordered appraisals are regularly reviewed. For loans secured by commercial properties where the underlying collateral is $250,000 and less, there is no requirement to obtain an appraisal. In instances where an appraisal is not obtained, the collateral value is determined consistent with external third-party appraisal standards by an internal person independent of the asset manager. PNC has a real estate valuation services group whose sole function is to manage the real estate appraisal solicitation and evaluation process for commercial loans. All third-party appraisals are reviewed by this group, including consideration of comments/questions on the appraisal by the reviewer, customer relationship manager, credit officer, and underwriter. Upon resolving these comments/questions through discussions with the third-party appraiser, adjustments to the initial appraisal may occur and be incorporated into the final issued appraisal report.

If an appraisal is outdated due to changed project or market conditions, or if the net book value is utilized, management uses an LGD percentage which represents the exposure PNC expects to lose in the event a borrower defaults on an obligation. Accordingly, LGD, which represents the loss severity, is a function of collateral recovery rates and loan-to-value. Those rates are established based upon actual PNC loss experience and external market data. In instances where we have agreed to sell the property to a third party, the fair value is based on the contractual sales price adjusted for costs to sell. In these instances, the most significant unobservable input is the appraised value or the sales price. The estimated costs to sell are incremental direct costs to transact a sale such as broker commissions, legal, closing costs and title transfer fees. The costs must be essential to the sale and would not have been incurred if the decision to sell had not been made. The costs to sell are based on costs associated with our actual sales of commercial and residential OREO and foreclosed assets, which are assessed annually.

Loans Held for Sale

Loans held for sale includes syndicated commercial loan inventory. The fair value of the syndicated commercial loan inventory is primarily determined based on prices provided by a third-party vendor. The third-party vendor prices are based upon dealer quotes. For nonrecurring fair value measurements, these instruments are classified within Level 2.

Prior to September 1, 2014, loans held for sale also included the carrying value of commercial mortgage loans which are intended to be sold to agencies with servicing retained. The fair value of the commercial mortgage loans held for sale is determined using discounted cash flows. Significant observable market data includes the applicable benchmark interest rates. These instruments are classified within Level 3. Significant unobservable inputs include a spread over the benchmark curve and the estimated servicing cash flows for loans sold to the agencies with servicing retained. Significant increases (decreases) to the spread over the benchmark curve would result in a significantly lower (higher) carrying value of the assets. Significant increases (decreases) in the estimated servicing cash flows for loans sold to the agencies with servicing retained would result in significantly higher (lower) carrying value.

Refer to the Fair Value Measurement section of this Note 7 for information on commercial mortgages held for sale to agencies subsequent to our September 1, 2014 election of fair value option.

Equity Investments

Equity investments represent the carrying value of Low Income Housing Tax Credit (LIHTC) investments held for sale calculated using a discounted cash flow model. The significant unobservable input is management’s estimate of required market rate of return. The market rate of return is based on comparison to recent LIHTC sales in the market. Significant increases (decreases) in this input would result in a significantly lower (higher) carrying value of the investments.

OREO and Foreclosed Assets

OREO and foreclosed assets represent the carrying value of OREO and foreclosed assets for which valuation adjustments were recorded subsequent to the transfer to OREO and foreclosed assets. Valuation adjustments are based on the fair value less cost to sell of the property. Fair value is based on appraised value or sales price.

The appraisal process for OREO and foreclosed properties is the same as described above for nonaccrual loans. In instances where we have agreed to sell the property to a third party, the fair value is based on the contractual sale price adjusted for costs to sell. The significant unobservable inputs for OREO and foreclosed assets are the appraised value or the sales price. The estimated costs to sell are incremental direct costs to transact a sale such as broker commissions, legal, closing costs and title transfer fees. The costs must be essential to the sale and would not have been incurred if the decision to sell had not been made. The costs to sell are based on costs associated with our sales of commercial and residential OREO and foreclosed assets, which are assessed annually.

Long-Lived Assets Held for Sale

Long-lived assets held for sale represent the carrying value of the asset for which valuation adjustments were recorded during the current year and subsequent to the transfer to Long-lived assets held for sale. Valuation adjustments are based on the fair value of the property less an estimated cost to sell. Fair value is determined either by a recent appraisal, recent sales offer or changes in market or property conditions. Appraisals are provided by licensed or certified appraisers. Where we have agreed to sell the property to a third party, the fair value is based on the contractual sale price. The significant unobservable inputs for Long-lived assets held for sale are the appraised value, the sales price or the changes in market or property conditions. Changes in market or property conditions are subjectively determined by management through observation of the physical condition of the property along with the condition of properties in the surrounding market place. The availability and recent sales of similar properties is also considered. The range of fair values can vary significantly as this category often includes smaller properties such as offsite ATM locations and smaller rural branches up to large commercial buildings, operation centers or urban branches.

Table 77: Fair Value Measurements - Nonrecurring

						Fair Value
					December 31		December 31
In millions					2015		2014
Assets (a)
	Nonaccrual loans				$	30	$	54
	Loans held for sale (b)							8
	Equity investments					5		17
	OREO and foreclosed assets					137		168
	Long-lived assets held for sale					23		22
		Total assets			$	195	$	269

Year ended December 31				Gains (Losses)
In millions				2015		2014		2013
Assets
	Nonaccrual loans		$	(44)	$	(19)	$	(8)
	Loans held for sale (b)							(7)
	Equity investments			(3)		(2)		(1)
	Commercial mortgage servicing rights (c)							88
	OREO and foreclosed assets			(18)		(19)		(26)
	Long-lived assets held for sale			(20)		(14)		(40)
		Total assets	$	(85)	$	(54)	$	6
(a)		All Level 3 as of December 31, 2015 and 2014 except for $8 million included in Loans held for sale which was categorized as Level 2 as of December 31, 2014.
(b)		As of September 1, 2014, PNC elected to account for agency loans held for sale at fair value. Accordingly, beginning on September 1, 2014, all new commercial mortgage loans held for sale originated for sale to the agencies are measured at fair value on a recurring basis.
(c)		As of January 1, 2014, PNC made an irrevocable election to subsequently measure all classes of commercial MSRs at fair value. Accordingly, beginning with the first quarter of 2014, commercial MSRs are measured at fair value on a recurring basis.

Quantitative information about the significant unobservable inputs within Level 3 nonrecurring assets follows.

Table 78: Fair Value Measurements - Nonrecurring Quantitative Information

Level 3 Instruments Only

Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted Average)

December 31, 2015

Assets

Nonaccrual loans (a)

LGD percentage (b)

Loss severity

8.1%-73.3% (58.6%)

Equity investments

Discounted cash flow

Market rate of return

5.0%

Other (c)

170

Fair value of property or collateral

Appraised value/sales price

Not meaningful

Total assets

195

December 31, 2014

Assets

Nonaccrual loans (a)

LGD percentage (b)

Loss severity

2.9%-68.5% (42.1%)

Equity investments

Discounted cash flow

Market rate of return

6.0%

Other (c)

215

Fair value of property or collateral

Appraised value/sales price

Not meaningful

Total assets

261

(a)

The fair value of nonaccrual loans included in this line item is determined based on internal loss rates. The fair value of nonaccrual loans where the fair value is determined based on the appraised value or sales price is included within Other, below.

(b)

LGD percentage represents the amount that PNC expects to lose in the event a borrower defaults on an obligation.

(c)

Other included Nonaccrual loans of $10 million, OREO and foreclosed assets of $137 million and Long-lived assets held for sale of $23 million as of December 31, 2015. Comparably, as of December 31, 2014, Other included Nonaccrual loans of $25 million, OREO and foreclosed assets of $168 million and Long-lived assets held for sale of $22 million. The fair value of these assets is determined based on appraised value or sales price, the range of which is not meaningful to disclose.

Financial Instruments Accounted For Under Fair Value Option

We elect the fair value option to account for certain financial instruments. For more information on these financial instruments for which the fair value option election has been made, please refer to the Fair Value Measurement section of this Note 7. These financial instruments are initially measured at fair value, gains and losses from initial measurement and any changes in fair value are subsequently recognized in earnings. Additional information about the financial instruments for which we elected the fair value option follows.

Customer Resale Agreements

Interest income on structured resale agreements is reported on the Consolidated Income Statement in Other interest income. Changes in fair value due to instrument-specific credit risk for 2015 and 2014 were not material.

Commercial Mortgage Loans Held for Sale

Interest income on these loans is recorded as earned and reported on the Consolidated Income Statement in Other interest income. Changes in fair value due to instrument-specific credit risk for both 2015 and 2014 were not material.

Residential Mortgage Loans Held for Sale

Interest income on these loans is recorded as earned and reported on the Consolidated Income Statement in Other interest income. Throughout 2015 and 2014, certain residential mortgage loans for which we elected the fair value option were subsequently reclassified to portfolio loans. Changes in fair value due to instrument-specific credit risk for 2015 and 2014 were not material.

Residential Mortgage Loans – Portfolio

Interest income on these loans is recorded as earned and reported on the Consolidated Income Statement in either Loan interest income or Other interest income. Interest income on the Home Equity Lines of Credit for which we elected the fair value option during first quarter 2013 is reported on the Consolidated Income Statement in Loan interest income.

Other Assets

Interest income on trading loans is reported on the Consolidated Income Statement in Other interest income. Changes in value on the prepaid forward contract are reported on the Consolidated Income Statement in Other noninterest expense.

Other Borrowed Funds

Interest expense on the Other borrowed funds for which we have elected the fair value option is reported on the Consolidated Income Statement in Borrowed funds interest expense.

The changes in fair value for items for which we elected the fair value option and are included in Noninterest income and Noninterest expense on the Consolidated Income Statement are as follows.

Table 79: Fair Value Option - Changes in Fair Value (a)


Year ended December 31			Gains (Losses)
In millions			2015		2014		2013
Assets
	Customer resale agreements		$	(2)	$	(3)	$	(7)
	Commercial mortgage loans held for sale			96		50		(10)
	Residential mortgage loans held for sale			152		212		213
	Residential mortgage loans – portfolio			43		157		60
	BlackRock Series C Preferred Stock			(18)		43		122
	Other assets			12		2		3
Liabilities
	Other borrowed funds			4		(5)		(9)
(a)		The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.

Fair values and aggregate unpaid principal balances of items for which we elected the fair value option follow.

Table 80: Fair Value Option - Fair Value and Principal Balances

							Aggregate Unpaid
In millions				Fair Value			Principal Balance		Difference
December 31, 2015
Assets
	Customer resale agreements				$	137	$	133	$	4
	Residential mortgage loans held for sale
		Performing loans				832		804		28
		Accruing loans 90 days or more past due				4		4
		Nonaccrual loans				7		8		(1)
			Total			843		816		27
	Commercial mortgage loans held for sale (a)
		Performing loans				639		659		(20)
		Nonaccrual loans				2		3		(1)
			Total			641		662		(21)
	Residential mortgage loans - portfolio
		Performing loans				204		260		(56)
		Accruing loans 90 days or more past due				475		478		(3)
		Nonaccrual loans				226		361		(135)
			Total			905		1,099		(194)
	Other assets					164		159		5
Liabilities
	Other borrowed funds				$	93	$	95	$	(2)
December 31, 2014
Assets
	Customer resale agreements				$	155	$	148	$	7
	Residential mortgage loans held for sale
		Performing loans				1,236		1,176		60
		Accruing loans 90 days or more past due				9		9
		Nonaccrual loans				16		17		(1)
			Total			1,261		1,202		59
	Commercial mortgage loans held for sale (a)
		Performing loans				873		908		(35)
		Nonaccrual loans				20		64		(44)
			Total			893		972		(79)
	Residential mortgage loans - portfolio
		Performing loans				194		256		(62)
		Accruing loans 90 days or more past due				570		573		(3)
		Nonaccrual loans				270		449		(179)
		Total				1,034		1,278		(244)
	Other assets					37		37
Liabilities
	Other borrowed funds				$	273	$	312	$	(39)
(a)	There were no accruing loans 90 days or more past due within this category at December 31, 2015 or December 31, 2014.

Additional Fair Value Information Related to Other Financial Instruments

The following table presents the carrying amounts and estimated fair values, including the level within the fair value hierarchy, of all other financial instruments that are not measured on the consolidated financial statements at fair value as of December 31, 2015 and December 31, 2014.

Table 81: Additional Fair Value Information Related to Other Financial Instruments

		Carrying		Fair Value
In millions		Amount			Total		Level 1		Level 2		Level 3
December 31, 2015
Assets
Cash and due from banks		$	4,065	$	4,065	$	4,065
Short-term assets			32,959		32,959			$	32,959
Securities held to maturity			14,768		15,002		298		14,698	$	6
Loans held for sale			56		56				22		34
Net loans (excludes leases)			195,579		197,611						197,611
Other assets			1,817		2,408				1,786		622	(a)
	Total assets	$	249,244	$	252,101	$	4,363	$	49,465	$	198,273

Liabilities
Demand, savings and money market deposits		$	228,492	$	228,492			$	228,492
Time deposits			20,510		20,471				20,471
Borrowed funds			53,761		54,002				52,578	$	1,424
Unfunded loan commitments and letters of credit			245		245						245
	Total liabilities	$	303,008	$	303,210			$	301,541	$	1,669
December 31, 2014
Assets
Cash and due from banks		$	4,360	$	4,360	$	4,360
Short-term assets			34,380		34,380			$	34,380
Securities held to maturity			11,588		11,984		292		11,683	$	9
Loans held for sale			108		108				56		52
Net loans (excludes leases)			192,573		194,564						194,564
Other assets			1,879		2,544				1,802		742	(a)
	Total assets	$	244,888	$	247,940	$	4,652	$	47,921	$	195,367

Liabilities
Demand, savings and money market deposits		$	210,838	$	210,838			$	210,838
Time deposits			21,396		21,392				21,392
Borrowed funds			55,329		56,011				54,574	$	1,437
Unfunded loan commitments and letters of credit			240		240						240
	Total liabilities	$	287,803	$	288,481			$	286,804	$	1,677
(a)	Represents estimated fair value of Visa Class B common shares, which was estimated solely based upon the December 31, 2015 and December 31, 2014 closing price for the Visa Class A common shares, respectively, and the Visa Class B common share conversion rate, which reflects adjustments in respect of all litigation funding by Visa as of that date. The transfer restrictions on the Visa Class B common shares could impact the aforementioned estimate, until they can be converted to Class A common shares. See Note 21 Commitments and Guarantees for additional information.

The aggregate fair values in the preceding table represent only a portion of the total market value of PNC’s assets and liabilities as, in accordance with the guidance related to fair values of financial instruments, Table 81 excludes the following:

financial instruments recorded at fair value on a recurring basis,
real and personal property,
lease financing,
loan customer relationships,
deposit customer intangibles,
mortgage servicing rights,
retail branch networks,
fee-based businesses, such as asset management and brokerage, and
trademarks and brand names.

We used the following methods and assumptions to estimate the fair value amounts for financial instruments included in Table 81.

General

For short-term financial instruments realizable in three months or less, the carrying amount reported on our Consolidated Balance Sheet approximates fair value. Unless otherwise stated, the rates used in discounted cash flow analyses are based on market yield curves.

Cash and due from banks

The carrying amounts reported on our Consolidated Balance Sheet for cash and due from banks approximate fair values. For purposes of this disclosure only, cash and due from banks includes the following:

due from banks, and
non-interest-earning deposits with banks.

Short-Term Assets

The carrying amounts reported on our Consolidated Balance Sheet for short-term investments approximate fair values primarily due to their short-term nature. For purposes of this disclosure only, short-term assets include the following:

federal funds sold and resale agreements,
cash collateral,
customers’ acceptances,
accrued interest receivable, and
interest-earning deposits with banks.

Securities held to maturity

We primarily use prices obtained from pricing services, dealer quotes or recent trades to determine the fair value of securities. As of December 31, 2015, 95% of the positions in the held to maturity portfolio were priced by pricing services provided by third-party vendors. Refer to the Fair Value Measurement section of this Note 7 for additional information relating to our pricing processes and procedures.

Net Loans And Loans Held For Sale

Fair values are estimated based on the discounted value of expected net cash flows incorporating assumptions about prepayment rates, net credit losses and servicing fees. For revolving home equity loans and commercial credit lines, this fair value does not include any amount for new loans or the related fees that will be generated from the existing customer relationships. Nonaccrual loans are valued at their estimated recovery value. Loans are presented net of the ALLL and do not include future accretable discounts related to purchased impaired loans.

Other Assets

Other assets as shown in Table 81 includes equity investments carried at cost as well as FHLB and FRB stock. The aggregate carrying value of our FHLB and FRB stock was $1.8 billion at both December 31, 2015 and December 31, 2014, which approximates fair value at each date.

Investments accounted for under the equity method, including our investment in BlackRock, are not included in Table 81.

Deposits

For deposits with no defined maturity, such as noninterest-bearing and interest-bearing demand and interest-bearing money market and savings deposits, carrying values approximate fair values. For time deposits, fair values are estimated by discounting contractual cash flows using current market rates for instruments with similar maturities. The value of long-term relationships with depositors was not taken into account in estimating fair values.

Borrowed Funds

For short-term borrowings, including Federal funds purchased, commercial paper, repurchase agreements, and certain other short-term borrowings and payables, carrying values approximated fair values. For long-term borrowed funds, quoted market prices are used, when available, to estimate fair value. When quoted market prices are not available, fair value is estimated based on current market interest rates and credit spreads for debt with similar terms and maturities.

Unfunded Loan Commitments And Letters Of Credit

The fair value of unfunded loan commitments and letters of credit is determined from a market participant’s view including the impact of changes in interest rates and credit. Because our obligation on substantially all unfunded loan commitments and letters of credit varies with changes in interest rates, these instruments are subject to little fluctuation in fair value due to changes in interest rates. We establish a liability on these facilities related to the creditworthiness of our counterparty.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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