PNC FINANCIAL SERVICES GROUP INC

Our Consolidated Income Statement is presented in Item 1 of this Report.

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

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 1 of this Report.

(b)Interest income from Interest-earning deposits with banks primarily includes interest earned on our balances held with the Federal Reserve Bank and is reported as Other interest income on our Consolidated Income Statement.

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 section of this Report for additional information.

Net interest income decreased $139 million, or 4%, for the first quarter of 2024 compared to the fourth quarter of 2023, primarily due to increased funding costs, lower loan balances and one fewer day in the quarter. Net interest income decreased $321 million, or 9%, for the first three months of 2024 compared to the same period in 2023, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs. Net interest margin declined 9 basis points compared to the fourth quarter of 2023 and 27 basis points compared to the first quarter of 2023, primarily as a result of higher funding costs.

Average investment securities of $135.4 billion in the first quarter of 2024 declined $2.0 billion, or 1%, and $8.0 billion, or 6%, from the fourth quarter of 2023 and the first quarter of 2023, respectively. In both comparisons, limited purchase activity was more than offset by portfolio paydowns and maturities. Average investment securities represented 26% of average interest-earning assets for the first quarter of 2024 compared to 27% for the fourth quarter of 2023, and 28% for the first quarter of 2023.

Average loans for the first quarter of 2024 decreased $4.0 billion, compared to the fourth quarter of 2023, due to lower commercial and consumer loans. Compared to the first quarter of 2023, average loans decreased $4.9 billion, or 2%, primarily due to lower commercial loans. Average loans represented 63% of average interest-earning assets for both the first quarter of 2024 and the fourth quarter of 2023, compared to 64% for the first quarter of 2023.

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

Average interest-earning deposits with banks for the first quarter of 2024 increased $5.6 billion, or 13%, compared to the fourth quarter of 2023 driven by lower loan balances and higher borrowed funds, partially offset by lower deposits. Compared to the first quarter of 2023, average interest-earning deposits with banks increased $14.2 billion, or 42%, primarily due to higher borrowed funds and lower securities and loan balances, partially offset by lower deposits.

Average interest-bearing deposits increased $1.9 billion and $6.2 billion, compared to the fourth quarter of 2023 and the first quarter of 2023, respectively. The increase in both comparisons reflected the impact of the higher interest rate environment. In total, average interest-bearing deposits represented 81% of average interest-bearing liabilities for both the first quarter of 2024 and the fourth quarter of 2023, compared to 83% for the first quarter of 2023.

Average borrowed funds of $75.6 billion in the first quarter of 2024 increased $2.7, billion, or 4%, compared to the fourth quarter of 2023 and $12.6 billion, or 20%, compared to the first quarter of 2023. In both comparisons, the increase was driven primarily by parent company senior debt issuances.

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