PNC FINANCIAL SERVICES GROUP INC
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
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Fair Value Measurements – Recurring Quantitative Information
Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities follows:
Table 68: Fair Value Measurements – Recurring Quantitative Information
June 30, 2024
| Level 3 Instruments OnlyDollars in millions | Fair Value | Valuation Techniques | Unobservable Inputs | Range (Weighted-Average) (a) |
|---|---|---|---|---|
| Commercial mortgage loans held for sale | $4 | Discounted cash flow | Spread over the benchmark curve (b) | 575bps - 1,090bps (985bps) |
| Residential mortgage-backed non-agency securities | 624 | Priced by a third-party vendor using a discounted cash flow pricing model | Constant prepayment rate | 1.0% - 27.9% (2.9%) |
| Constant default rate | 0.0% - 12.0% (1.9%) | |||
| Loss severity | 10.0% - 77.4% (42.2%) | |||
| Spread over the benchmark curve (b) | 272bps weighted-average | |||
| Asset-backed securities | 96 | Priced by a third-party vendor using a discounted cash flow pricing model | Constant prepayment rate | 1.0% - 28.0% (4.5%) |
| Constant default rate | 0.0% - 8.1% (1.6%) | |||
| Loss severity | 30.0% - 100.0% (48.7%) | |||
| Spread over the benchmark curve (b) | 227bps weighted-average | |||
| Loans - Residential real estate - Uninsured | 532 | Consensus pricing (c) | Cumulative default rate | 3.6% - 100.0% (57.4%) |
| Loss severity | 0.0% - 100.0% (5.1%) | |||
| Discount rate | 5.5% - 7.5% (5.8%) | |||
| Loans - Residential real estate | 71 | Discounted cash flow | Loss severity | 6.0% weighted-average |
| Discount rate | 8.0% weighted-average | |||
| Loans - Home equity - First-lien | 16 | Consensus pricing (c) | Cumulative default rate | 3.6% - 100.0% (58.6%) |
| Loss severity | 0.0% - 100.0% (12.9%) | |||
| Discount rate | 5.5% - 7.5% (6.1%) | |||
| Loans - Home equity | 82 | Consensus pricing (c) | Credit and liquidity discount | 0.0% - 100.0% (42.1%) |
| Equity investments | 2,030 | Multiple of adjusted earnings | Multiple of earnings | 5.0x - 27.0x (10.3x) |
| Residential mortgage servicing rights | 2,657 | Discounted cash flow | Constant prepayment rate | 0.0% - 40.7% (6.3%) |
| Spread over the benchmark curve (b) | 336bps - 2,338bps (764bps) | |||
| Commercial mortgage servicing rights | 1,082 | Discounted cash flow | Constant prepayment rate | 5.1% - 8.3% (5.3%) |
| Discount rate | 8.1% - 10.3% (10.0%) | |||
| Financial derivatives - Swaps related to sales of certain Visa Class B common shares | (180) | Discounted cash flow | Estimated conversion factor of Visa Class B shares into Class A shares | 1.59 weighted-average |
| Estimated annual growth rate of Visa Class A share price | 16.0% | |||
| Estimated litigation resolution date | Q1 2026 | |||
| Insignificant Level 3 assets, net of liabilities (d) | 66 | |||
| Total Level 3 assets, net of liabilities (e) | $7,080 | |||
80 The PNC Financial Services Group, Inc. –Form 10-Q
December 31, 2023
| Level 3 Instruments OnlyDollars in millions | Fair Value | Valuation Techniques | Unobservable Inputs | Range (Weighted-Average) (a) |
|---|---|---|---|---|
| Commercial mortgage loans held for sale | $11 | Discounted cash flow | Spread over the benchmark curve (b) | 575bps - 3,610bps (1,647bps) |
| Residential mortgage-backed non-agency securities | 696 | Priced by a third-party vendor using a discounted cash flow pricing model | Constant prepayment rate | 1.0% - 27.9% (3.7%) |
| Constant default rate | 0.0% - 12.0% (2.7%) | |||
| Loss severity | 10.0% - 69.0% (41.2%) | |||
| Spread over the benchmark curve (b) | 285bps weighted-average | |||
| Asset-backed securities | 102 | Priced by a third-party vendor using a discounted cash flow pricing model | Constant prepayment rate | 1.0% - 28.0% (5.1%) |
| Constant default rate | 0.0% - 4.3% (1.7%) | |||
| Loss severity | 20.0% - 100.0% (49.5%) | |||
| Spread over the benchmark curve (b) | 248bps weighted-average | |||
| Loans - Residential real estate - Uninsured | 546 | Consensus pricing (c) | Cumulative default rate | 3.6% - 100.0% (59.1%) |
| Loss severity | 0.0% - 100.0% (5.4%) | |||
| Discount rate | 5.5% - 7.5% (5.8%) | |||
| Loans - Residential real estate | 75 | Discounted cash flow | Loss severity | 6.0% weighted-average |
| Discount rate | 7.8% weighted-average | |||
| Loans - Home equity - First-lien | 18 | Consensus pricing (c) | Cumulative default rate | 3.6% - 100.0% (60.9%) |
| Loss severity | 0.0% - 100.0% (14.4%) | |||
| Discount rate | 5.5% - 7.5% (6.2%) | |||
| Loans - Home equity | 87 | Consensus pricing (c) | Credit and liquidity discount | 0.3% - 100.0% (43.8%) |
| Equity investments | 1,952 | Multiple of adjusted earnings | Multiple of earnings | 4.5x - 26.7x (10.1x) |
| Residential mortgage servicing rights | 2,654 | Discounted cash flow | Constant prepayment rate | 0.0% - 33.6% (6.4%) |
| Spread over the benchmark curve (b) | 337bps - 1,668bps (765bps) | |||
| Commercial mortgage servicing rights | 1,032 | Discounted cash flow | Constant prepayment rate | 5.3% - 9.7% (5.5%) |
| Discount rate | 7.6% - 10.0% (9.6%) | |||
| Financial derivatives - Swaps related to sales of certain Visa Class B common shares | (145) | Discounted cash flow | Estimated conversion factor of Visa Class B shares into Class A shares | 1.59 weighted-average |
| Estimated annual growth rate of Visa Class A share price | 16.0% | |||
| Estimated litigation resolution date | Q3 2024 | |||
| Insignificant Level 3 assets, net of liabilities (d) | 22 | |||
| Total Level 3 assets, net of liabilities (e) | $7,050 | |||
(a)Unobservable inputs were weighted by the relative fair value of the instruments.
(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)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, other securities, residential mortgage loans held for sale, other assets, other borrowed funds and other liabilities.
(e)Consisted of total Level 3 assets of $7.5 billion and total Level 3 liabilities of $0.4 billion as of June 30, 2024 and $7.4 billion and $0.4 billion as of December 31, 2023, 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 69. For more information regarding the valuation methodologies of our financial assets measured at fair value on a nonrecurring basis, see Note 14 Fair Value in our 2023 Form 10-K.
The PNC Financial Services Group, Inc. –Form 10-Q 81
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