PNC FINANCIAL SERVICES GROUP INC

Net Interest Income

Table 3: Summarized Average Balances and Net Interest Income (a)

(a)Interest income calculated as taxable-equivalent interest income. To provide more meaningful comparisons of interest income and yields for all interest-earning assets, as well as net interest margins, we use interest income on a taxable-equivalent basis in calculating average yields and net interest margins by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on taxable investments. This adjustment is not permitted under GAAP on the Consolidated Income Statement. For more information, see Reconciliation of Taxable-Equivalent Net Interest Income (non-GAAP) in the Statistical Information (Unaudited) section in Item 8 of this Report.

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

Changes in net interest income and margin result from the interaction of the volume and composition of interest-earning assets and related yields, interest-bearing liabilities and related rates paid, and noninterest-bearing sources of funding. See the Statistical Information (Unaudited) – Average Consolidated Balance Sheet and Net Interest Analysis and Analysis Of Year-To-Year Changes In Net Interest Income in Item 8 of this Report for additional information.

Net interest income increased $0.9 billion, or 7% in 2023 compared with 2022. The increase was due to higher interest-earning asset yields and balances, partially offset by higher funding costs. Net interest margin increased 11 basis points, reflecting higher yields on interest-earning assets, partially offset by increased funding costs.

Average investment securities increased $3.2 billion, or 2%, primarily reflecting an increase in agency residential mortgage-backed securities. Average investment securities represented 28% of average interest-earning assets in both 2023 and 2022.

Average loans increased $15.8 billion, or 5%, reflecting growth in both commercial and consumer loans. Average loans represented 64% of average interest-earning assets in 2023 compared to 62% in 2022.

Average interest-earning deposits with banks decreased $4.4 billion, or 11%, primarily due to lower deposits and higher loan balances, partially offset by higher borrowed funds.

Average interest-bearing deposits increased $16.4 billion, or 5%, reflecting a continued shift from noninterest-bearing to interest-bearing deposits as deposit rates have risen. In total, average interest-bearing deposits represented 82% of average interest-bearing liabilities in 2023 compared to 88% in 2022.

Average borrowed funds increased $24.8 billion, or 58%, primarily due to higher FHLB borrowings and parent company senior debt issuances.

Further details regarding average loans and deposits are included in the Business Segments Review section of this Item 7.