PNC FINANCIAL SERVICES GROUP INC

Table 2: Balance Sheet Highlights and Other Selected Ratios

(a)The Executive Summary and Consolidated Balance Sheet Review portions of this Financial Review provide information regarding items impacting the comparability of the periods presented.

Income Statement Highlights

Net income of $1.3 billion, or $3.10 per diluted common share, for the first quarter of 2024 increased $461 million, or 52%, compared to $0.9 billion, or $1.85 per diluted common share, for the fourth quarter of 2023, due to lower noninterest expense and a lower provision for credit losses, partially offset by lower net interest and noninterest income.

•For the three months ended March 31, 2024 compared to the three months ended December 31, 2023:

•Total revenue decreased $216 million, or 4%, to $5.1 billion.

•Net interest income of $3.3 billion decreased $139 million, or 4%, primarily due to increased funding costs, lower loan balances and one fewer day in the quarter.

•Net interest margin declined 9 basis points to 2.57%, primarily as a result of higher funding costs.

•Noninterest income decreased $77 million, or 4%, primarily due to lower capital markets and advisory activity and seasonal declines in card and cash management fees. The first quarter also included negative Visa Class B-1 derivative fair value adjustments of $7 million. Visa Class B-1 derivative fair value adjustments were negative $100 million in the fourth quarter of 2023.

•Provision for credit losses of $155 million in the first quarter of 2024 reflected portfolio activity and improved macroeconomic factors. The fourth quarter of 2023 included a provision for credit losses of $232 million.

•Noninterest expense decreased $740 million, or 18%, to $3.3 billion, driven by lower or stable expenses across all categories, reflecting a continued focus on expense management. The first quarter of 2024 included an additional pre-tax expense of $130 million related to the increase in the FDIC’s expected losses. The fourth quarter of 2023 included $515 million pertaining to the FDIC special assessment as well as $150 million of workforce reduction charges.

Net income decreased $350 million, or 21%, compared to $1.7 billion, or $3.98 per diluted common share, for the first quarter of 2023 driven by lower net interest and noninterest income, partially offset by a lower provision for credit losses.

•For the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

•Total revenue decreased $458 million, or 8%, to $5.1 billion.

•Net interest income decreased $321 million, or 9%, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs.

•Net interest margin decreased 27 basis points, primarily as a result of higher funding costs.

•Noninterest income decreased $137 million, or 7%, and included a decline in private equity revenue and residential and commercial mortgage revenue, partially offset by growth in card and cash management and asset management and brokerage fees. Visa Class B-1 derivative fair value adjustments were negative $45 million in the first quarter of 2023.

•Provision for credit losses of $155 million for the first three months of 2024 reflected portfolio activity and improved macroeconomic factors. The first three months of 2023 included a provision for credit losses of $235 million.

•Noninterest expense was stable compared to the first three months of 2023. The first quarter of 2024 included an additional pre-tax expense of $130 million related to the increase in the FDIC’s expected losses.

For additional detail, see the Consolidated Income Statement Review section of this Financial Review.

The PNC Financial Services Group, Inc. –Form 10-Q 3

Balance Sheet Highlights

Our balance sheet was strong and well positioned at March 31, 2024. In comparison to December 31, 2023:

•Total assets of $566.2 billion increased modestly primarily due to higher balances held with the Federal Reserve Bank, partially offset by lower securities and loan balances.

•Total loans decreased $1.7 billion, or 1%, to $319.8 billion.

•Total commercial loans decreased $0.7 billion, to $218.8 billion, driven by paydowns outpacing new production and lower utilization of loan commitments.

•Total consumer loans declined $1.0 billion to $100.9 billion, as paydowns outpaced new originations and draws on existing accounts.

•Investment securities decreased $2.1 billion, or 2%, to $130.5 billion, primarily due to prepayments and maturities outpacing purchases.

•Interest-earning deposits with banks, primarily with the Federal Reserve Bank, increased $9.8 billion, or 22%, to $53.6 billion, primarily due to an increase in deposits and a decrease in securities and loans balances.

•Total deposits increased $4.2 billion, to $425.6 billion, reflecting higher commercial and consumer deposits. Noninterest-bearing deposit balances decreased driven by a decline in commercial noninterest-bearing balances. Interest-bearing deposits increased reflecting higher commercial and consumer interest-bearing balances.

•Borrowed funds were largely stable at $72.7 billion, as parent company senior debt issuances were offset by lower FHLB borrowings.

For additional detail, see the Consolidated Balance Sheet Review section of this Financial Review.

Credit Quality Highlights

The first quarter of 2024 reflected stable credit quality performance.

•At March 31, 2024 compared to December 31, 2023:

•Overall loan delinquencies of $1.3 billion decreased $109 million, or 8%, driven by lower consumer and commercial loan delinquencies.

•The ACL related to loans, which consists of the ALLL and the allowance for unfunded lending related commitments, totaled $5.4 billion and $5.5 billion at March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024, this reserve was driven by improved macroeconomic factors as well as portfolio activity. ACL to total loans was 1.68% and 1.70% at March 31, 2024 and December 31, 2023, respectively.

•Nonperforming assets increased $199 million, or 9%, to $2.4 billion, primarily due to higher commercial real estate nonperforming loans.

•Net charge-offs of $243 million, or 0.30% of average loans, in the first quarter of 2024 increased $43 million compared to the fourth quarter of 2023 primarily due to higher commercial net loan charge-offs.

For additional detail see the Credit Risk Management portion of the Risk Management section of this Financial Review.

Capital and Liquidity Highlights

We maintained our strong capital and liquidity positions.

•Common shareholders’ equity of $45.1 billion at March 31, 2024, increased $0.2 billion, compared to December 31, 2023 due to the benefit of net income, partially offset by common dividends paid, a decline in AOCI and common share repurchases.

•In the first quarter of 2024, PNC returned $0.8 billion of capital to shareholders, reflecting more than $0.6 billion of dividends on common shares and more than $0.1 billion of common share repurchases, representing 0.9 million shares.

•Consistent with the SCB framework, which allows for capital return in amounts in excess of the SCB minimum levels, our Board of Directors has authorized a repurchase framework under the previously approved repurchase program of up to 100 million common shares, of which approximately 44% were still available for repurchase at March 31, 2024. In light of the Federal banking agencies proposed rules to adjust the Basel III capital framework, second quarter 2024 share repurchase activity is expected to approximate recent quarterly average share repurchase levels. PNC continues to evaluate the potential impact of the proposed rules and may adjust share repurchase activity depending on market and economic conditions, as well as other factors. PNC’s SCB for the four-quarter period beginning October 1, 2023 is the regulatory minimum of 2.5%.

•On April 3, 2024, the PNC Board of Directors declared a quarterly cash dividend on common stock of $1.55 per share to be paid on May 6, 2024 to shareholders of record at the close of business April 15, 2024.

•Our CET1 ratio increased to 10.1% at March 31, 2024 from 9.9% at December 31, 2023.

•PNC elected a five-year transition provision effective March 31, 2020 to delay through December 31, 2021 the full impact of the CECL standard on regulatory capital, followed by a three-year transition period. Effective for the first quarter of 2022, PNC is now in the three-year transition period, and the full impact of the CECL standard is being

4 The PNC Financial Services Group, Inc. –Form 10-Q phased-in to regulatory capital through December 31, 2024. The fully implemented ratios reflect the full impact of CECL and exclude the benefits of this transition provision. The estimated CET1 fully implemented ratio was 10.0% at March 31, 2024 compared to 9.8% at December 31, 2023.

See the Liquidity and Capital Management portion of the Risk Management section of this Financial Review for more detail on our liquidity and capital actions as well as our capital ratios.

PNC’s ability to take certain capital actions, including returning capital to shareholders, is subject to PNC meeting or exceeding an SCB established by the Federal Reserve Board in connection with the Federal Reserve Board’s CCAR process. For additional information, see Capital Management in the Risk Management section in this Financial Review and the Supervision and Regulation section in our 2023 Form 10-K.

Business Outlook

Statements regarding our business outlook are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking financial statements are subject to the risk that economic and financial market conditions will be substantially different than those we are currently expecting. These statements are based on our views that:

•PNC’s baseline forecast is for slower economic growth in 2024 as consumer spending growth slows and higher interest rates remain a drag on the economy. The ongoing strength of the labor market will continue to support consumer spending. The FOMC is indicating that it will start to cut the federal funds rate later this year, with rate cuts supporting economic growth toward the end of 2024.

•Real GDP growth this year will be close to its trend of 2% and the unemployment rate will increase modestly to just above 4% by the end of 2024. Inflation will continue to slow as wage pressures abate, moving back to the Federal Reserve’s 2% long-term objective by the end of 2025.

•PNC expects the federal funds rate to remain unchanged between 5.25% and 5.50% through at least the first half of 2024, with federal funds rate cuts starting in the third quarter as inflationary pressures ease further. PNC expects two federal funds rate cuts in 2024, with the rate ending this year in a range between 4.75% and 5.00%.

For the second quarter of 2024, compared to the first quarter of 2024, we expect:

•Average loans to be stable,

•Net interest income to be down approximately 1%,

•Fee income to be up 1% to 2%,

•Other noninterest income to be $150 million to $200 million,

•Revenue to be stable,

•Core noninterest expense to be up 2% to 4%, and

•Net loan charge-offs to be $225 million to $275 million.

For the full year 2024, compared to the full year of 2023, we expect:

•Average loans to be up approximately 1%,

•Net interest income to be down 4% to 5%,

•Noninterest income to be up 4% to 6%,

•Revenue to be stable to down 2%,

•Core noninterest expense to be stable, and

•The effective tax rate to be approximately 18.5%.

Core noninterest expense guidance excludes an additional pre-tax expense of $130 million related to the increase in the FDIC’s expected losses in the first quarter of 2024, and $515 million pertaining to the FDIC special assessment as well as $150 million of workforce reduction charges incurred in the fourth quarter of 2023. See the Statistical Information (Unaudited) – Reconciliation of Core Noninterest Expense (non-GAAP) section of this Report. Other noninterest income, noninterest income and revenue guidance excludes net securities gains and Visa activity.

We are unable to provide a meaningful or accurate reconciliation of forward-looking non-GAAP measures, without unreasonable effort, to their most directly comparable GAAP financial measures. This is due to the inherent difficulty of forecasting the timing and amounts necessary for the reconciliation when such amounts are subject to events that cannot be reasonably predicted, as noted in our Cautionary Statement. Accordingly, we cannot address the probable significance of unavailable information.

See the Cautionary Statement Regarding Forward-Looking Information section in this Financial Review and Item 1A Risk Factors included in our 2023 Form 10-K for other factors that could cause future events to differ, perhaps materially, from those anticipated in these forward-looking statements.

The PNC Financial Services Group, Inc. –Form 10-Q 5