PNC FINANCIAL SERVICES GROUP INC

Funding Sources

Table 11: Details of Funding Sources

Deposits are considered an attractive source of funding due to their stability and relatively low cost to fund. Compared to December 31, 2022, our funding source composition has shifted and now includes lower deposit balances and higher borrowed funds, contributing to higher funding costs.

Total deposits decreased as a result of lower consumer and commercial deposits, reflecting the impact of competitive pricing dynamics and inflationary pressures. In addition, noninterest-bearing balances decreased due to the continued shift into interest-bearing deposits as a result of the elevated interest rate environment. A portion of that shift included an increase in total brokered deposits compared with 2022. Our total brokered deposit balances of $11.0 billion in 2023 and $9.5 billion in 2022, were significantly below both our internal and regulatory guidelines and limits.

The PNC Financial Services Group, Inc. –2023 Form 10-K 47

Borrowed funds increased due to parent company senior debt issuances and higher FHLB borrowings.

The level and composition of borrowed funds fluctuates over time based on many factors, including market conditions, capital considerations, and funding needs, which are primarily driven by changes in loan, deposit and investment securities balances. While our largest source of liquidity on a consolidated basis is the customer deposit base generated by our banking businesses, we also manage our borrowed funds to provide a reliable source of liquidity for our banking and other activities, considering our LCR and NSFR requirements and other internal and external guidelines and constraints. See the Liquidity and Capital Management portion of the Risk Management section of this Item 7 for additional information regarding our 2023 liquidity and capital activities. See Note 9 Borrowed Funds for additional information related to our borrowings. See Average Consolidated Balance Sheet and Net Interest Analysis and Analysis of Year-to-Year Changes in Net Interest Income in the Statistical Information section of this Report for additional information on year-over-year volume and related funding cost changes.

Shareholders’ Equity

Total shareholders’ equity was $51.1 billion at December 31, 2023, an increase of $5.3 billion compared to December 31, 2022, as increases related to net income of $5.6 billion, an improvement in AOCI of $2.5 billion and net preferred stock issuances of $0.5 billion were partially offset by dividends paid of $2.8 billion and common share repurchases of $0.6 billion.