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 $1.5 billion, or $3.39 per diluted common share, for the second quarter of 2024 increased $133 million, or 10%, compared to $1.3 billion, or $3.10 per diluted common share, for the first quarter of 2024, primarily due to higher noninterest and net interest income, partially offset by a higher provision for credit losses.

•For the three months ended June 30, 2024 compared to the three months ended March 31, 2024:

•Total revenue increased $266 million, or 5%, to $5.4 billion.

•Net interest income of $3.3 billion increased $38 million, or 1%, reflecting higher yields on interest-earning assets.

•Net interest margin increased 3 basis points to 2.60%.

•Noninterest income increased $228 million, or 12%, and included the impact of a $754 million gain resulting from PNC’s participation in the Visa exchange program, as well as a securities loss of $497 million related to the repositioning of the investment securities portfolio. The second quarter of 2024 also included Visa Class B derivative fair value adjustments, primarily related to the extension of anticipated litigation resolution timing, of negative $116 million. The first quarter of 2024 included negative $7 million of Visa Class B derivative fair value adjustments.

•Provision for credit losses of $235 million in the second quarter of 2024 primarily reflected the impact of portfolio activity. The first quarter of 2024 included a provision for credit losses of $155 million.

•Noninterest expense increased $23 million, or 1%, to $3.4 billion. The modest increase was driven by higher marketing and equipment expenses, partially offset by seasonally lower incentive compensation. Other noninterest expense included a $120 million pre-tax expense in the second quarter of 2024 related to a PNC Foundation contribution. The first quarter of 2024 included a $130 million pre-tax expense related to the increase in the FDIC’s expected losses.

Net income of $2.8 billion, or $6.48 per diluted common share, for the first six months of 2024 decreased $373 million, or 12%, compared to $3.2 billion, or $7.34 per diluted common share, for the first six months of 2023 driven by lower net interest income, partially offset by higher noninterest income.

•For the six months ended June 30, 2024 compared to the six months ended June 30, 2023:

•Total revenue decreased $340 million, or 3%, to $10.6 billion.

•Net interest income decreased $529 million, or 7%, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs.

•Net interest margin decreased 23 basis points.

•Noninterest income increased $189 million, or 5%, reflecting an increase in all categories. The first six months of 2024 included the impact of a $754 million gain resulting from PNC’s participation in the Visa exchange program, as well as a securities loss of $497 million related to the repositioning of the investment securities portfolio.

•Provision for credit losses of $390 million in the first six months of 2024 reflected the impact of portfolio activity and improved macroeconomic factors. The first six months of 2023 included a provision for credit losses of $381 million.

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

•Noninterest expense was stable compared to the first six months of 2023, and reflected PNC’s continued focus on expense management. Other noninterest expense included a $120 million pre-tax expense in the second quarter of 2024 related to a PNC Foundation contribution, as well as a $130 million pre-tax expense in the first quarter of 2024 related to the increase in the FDIC’s expected losses.

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

Balance Sheet Highlights

Our balance sheet was well positioned at June 30, 2024. In comparison to December 31, 2023:

•Total assets of $556.5 billion decreased primarily due to lower balances held with the Federal Reserve Bank, partially offset by higher securities balances.

•Total loans were stable at $321.4 billion.

•Total commercial loans increased $1.3 billion to $220.8 billion, primarily due to new production.

•Total consumer loans declined $1.4 billion to $100.6 billion, as paydowns outpaced originations and the utilization of loan commitments.

•Investment securities increased $6.1 billion, or 5%, to $138.6 billion, due to increased net purchase activity, primarily of U.S. Treasury securities, partially offset by portfolio paydowns and maturities. During the second quarter of 2024, PNC took actions to reposition the investment securities portfolio. For additional details, see Investment Securities in the Consolidated Balance Sheet Review section of this Financial Review.

•Interest-earning deposits with banks, primarily with the Federal Reserve Bank, decreased $10.8 billion, or 25%, to $33.0 billion, primarily due to higher securities balances and lower deposits.

•Total deposits decreased $5.0 billion, to $416.4 billion, reflecting lower consumer and commercial deposits. Noninterest-bearing deposit balances decreased primarily driven by a decline in commercial balances. Interest-bearing deposits increased modestly reflecting higher commercial balances, partially offset by lower consumer balances.

•Borrowed funds decreased to $71.4 billion, due to lower FHLB borrowings, partially offset by parent company senior debt issuances.

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

Credit Quality Highlights

The second quarter of 2024 reflected relatively stable credit quality performance.

•At June 30, 2024 compared to December 31, 2023:

•Overall loan delinquencies of $1.3 billion decreased $112 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 June 30, 2024 and December 31, 2023, respectively. The decrease in the comparison was driven by improved macroeconomic factors as well as portfolio activity. ACL to total loans was 1.67% and 1.70% at June 30, 2024 and December 31, 2023, respectively.

•Nonperforming assets increased $321 million, or 14%, to $2.5 billion, primarily due to higher commercial real estate nonperforming loans.

•Net loan charge-offs of $262 million, or 0.33% of average loans, in the second quarter of 2024 increased $19 million compared to the first quarter of 2024 primarily due to higher commercial real estate 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 $46.4 billion at June 30, 2024 increased $1.5 billion compared to December 31, 2023, due to the benefit of net income and an improvement in AOCI, partially offset by common dividends paid and common shares repurchased.

•In the second quarter of 2024, PNC returned $0.7 billion of capital to shareholders, reflecting $0.6 billion of dividends on common shares and $0.1 billion of common share repurchases, representing 0.7 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 43% were still available for repurchase at June 30, 2024. In light of the Federal banking agencies’ proposed rules to adjust the Basel III capital framework, third 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

4 The PNC Financial Services Group, Inc. –Form 10-Q depending on market and economic conditions, as well as other factors. Based on the results of the Federal Reserve’s 2024 annual stress test, PNC’s SCB for the four-quarter period beginning October 1, 2024 will remain at the regulatory minimum of 2.5%.

•On July 2, 2024, the PNC Board of Directors raised the quarterly cash dividend on common stock to $1.60 per share, an increase of 5 cents per share. The dividend is payable on August 5, 2024 to shareholders of record at the close of business July 15, 2024.

•Our CET1 ratio increased to 10.2% at June 30, 2024 from 9.9% at December 31, 2023.

•PNC elected a five-year transition provision effective March 31, 2020 to delay until 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 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 10.1% at June 30, 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, the Recent Regulatory Developments 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 and do not take into account potential legal and regulatory contingencies. These statements are based on our views that:

•Job and income gains will continue to support consumer spending growth this year, but PNC’s baseline forecast is for slower economic growth in 2024 as higher interest rates remain a drag on the economy.

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

•With slowing inflation PNC expects two federal funds rate cuts of 25 basis points each at the FOMC’s September and December meetings, with the rate ending this year in a range between 4.75% and 5.00%. PNC expects multiple federal funds rate cuts in 2025 as inflation continues to ease.

Consistent with the forward guidance we provided on July 16, 2024, for the third quarter of 2024, compared to the second quarter of 2024, we expect:

•Average loans to be stable,

•Net interest income to be up 1% to 2%,

•Fee income to be up 1% to 2%,

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

•Noninterest expense to be down 1% to stable,

•Core noninterest expense to be up 3% to 4%, and

•Net loan charge-offs to be $250 million to $300 million.

Consistent with the forward guidance we provided on July 16, 2024, for the full year 2024, compared to the full year of 2023, we expect:

•Average loans to be down less than 1%,

•Net interest income to be down approximately 4%,

•Noninterest income, to be up 5% to 7%,

•Noninterest income, excluding significant items, to be up 3% to 5%,

•Revenue to be stable to down 1%,

•Revenue, excluding significant items, to be down 1% to 2%,

•Noninterest expense to be down approximately 4%,

•Core noninterest expense to be down approximately 1%, and

•The effective tax rate to be approximately 18.5%.

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

Significant items in the second quarter of 2024 are composed of a $754 million gain resulting from PNC’s participation in the Visa exchange program, a $497 million securities loss related to the repositioning of the investment securities portfolio and a negative $116 million Visa Class B derivative fair value adjustment. See the Statistical Information (Unaudited) – Reconciliation of Noninterest income guidance, excluding significant items (non-GAAP) and Reconciliation of Revenue guidance, excluding significant items (non-GAAP) section of this Report. Other noninterest income, noninterest income and revenue guidance does not forecast net securities gains or losses and other Visa activity.

Core noninterest expense excludes the pre-tax impacts of the $120 million expense in the second quarter of 2024 related to a contribution to the PNC Foundation, $130 million related to the increase in the FDIC’s expected losses in the first quarter of 2024, and, for the fourth quarter of 2023, $515 million pertaining to the FDIC special assessment and $150 million of workforce reduction charges. See the Statistical Information (Unaudited) – Reconciliation of Core Noninterest Expense (non-GAAP) section of this Report.

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, except for full year Noninterest income and Revenue guidance, adjusted for $141 million in significant items incurred in the second quarter of 2024, and full year Core noninterest expense guidance adjusted for $250 million in non-core expenses incurred in the first half of 2024. This is due to the inherent difficulty of forecasting the timing and amounts necessary for thereconciliation, 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.

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