PNC FINANCIAL SERVICES GROUP INC

PNC utilizes sensitivities of NII and EVE to a set of interest rate scenarios to identify and measure its short-term and long-term structural interest rate risks.

NII sensitivity results for the fourth quarters of 2023 and 2022 follow:

Table 31: Net Interest Income Sensitivity Analysis

(a)The effect on NII in the first year from a 100 basis point instantaneous increase or decrease is not materially different from the 200 basis point scenarios as disclosed above.

When forecasting net interest income, we make certain key assumptions that can materially impact the resulting sensitivities, including the following:

Future Balance Sheet Composition: Our balance sheet composition is dynamic and based on our forecasted expectations. As of the fourth quarter 2023, the projected balance sheet composition by the end of year one is generally consistent with the spot composition as of the fourth quarter 2023.

Deposit Betas: Deposit pricing changes are primarily driven by changes in the Federal Funds rate, with the relationship between deposit rates and Federal Funds rate defined as deposit beta. We define cumulative deposit beta as the change in deposit rate paid on interest bearing non-maturity deposits divided by the change in the upper level of the stated Federal Funds rate range since the first quarter of 2022, the start of the current rising rate cycle. As of December 2023, PNC’s cumulative deposit beta was 44%, an increase from 31% at December 2022. For interest rate risk modeling, PNC uses dynamic beta models to adjust assumed repricing sensitivity depending on market rate levels as well as other factors. The dynamic beta assumptions reflect historical experience and future expectations. Our scenario assumes that deposit betas slightly increase from current levels. Actual deposit rate paid may differ from modeled projections due to variables such as competition for deposits and customer behavior.

The PNC Financial Services Group, Inc. –2023 Form 10-K 73

Asset Prepayments: PNC includes prepayment assumptions for both loan and investment portfolios. Mortgage and Home Equity portfolios utilize an industry standard model to drive estimated prepayments that increase in lower rate environments. Commercial and consumer loan portfolios assume static constant prepayment rates that are consistent across rate scenarios, as those portfolios historically do not exhibit significantly different prepayment behaviors based upon the level of market rates.

Impact of Derivatives: PNC uses interest rate derivatives to hedge floating rate commercial loans. PNC had $33.3 billion in receive fix / pay float swaps as of December 31, 2023, with a weighted average duration of 2.3 years and an average fixed rate of 2.1%. As of December 31, 2023 PNC also had collars in place, reflecting $12.5 billion of caps and $12.5 billion of floors, that are used to hedge these commercial loans. Additionally, PNC utilizes receive fix / pay float swaps as a means of hedging fixed rate debt. See Note 15 Financial Derivatives for additional information on how we use derivatives to hedge commercial loans and fixed rate debt.