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 1 of this Report.

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.

The PNC Financial Services Group, Inc. –Form 10-Q 7

Net interest income increased $38 million, or 1%, and net interest margin increased 3 basis points compared to the first quarter of 2024, reflecting higher yields on interest-earning assets. In the year-to-date comparison, net interest income decreased $529 million, or 7%, and net interest margin decreased 23 basis points, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs.

Average investment securities increased $5.9 billion, or 4%, compared to the first quarter of 2024 reflecting net purchase activity, primarily of U.S. Treasury securities, partially offset by portfolio paydowns and maturities. Average investment securities decreased $3.8 billion, or 3%, in the year-to-date comparison as net purchase activity was more than offset by portfolio paydowns and maturities. Average investment securities represented 28% of average interest-earning assets for the second quarter of 2024 compared to 26% for the first quarter of 2024, and 27% for the first six months of 2024 compared to 28% for the first six months of 2023.

Average loans were stable for the second quarter of 2024 compared to the first quarter of 2024, and included a modest decline in consumer balances reflecting lower residential real estate and home equity loans. Compared to the first six months of 2023, average loans decreased $4.8 billion, or 1%, primarily due to lower average utilization of commercial loan commitments. Average loans represented 63% of average interest-earning assets for both the second and first quarters of 2024, and 63% for the first six months of 2024 compared to 64% for the first six months of 2023.

Average interest-earning deposits with banks for the second quarter of 2024 decreased $7.1 billion, or 15%, compared to the first quarter of 2024, primarily reflecting net securities purchases. In the year-to-date comparison, average interest-earning deposits with banks increased $11.9 billion, or 36%, due to higher borrowed funds and lower loan and securities balances, partially offset by lower deposits.

Average interest-bearing deposits for the second quarter of 2024 were relatively stable compared to the first quarter of 2024, and included a modest decline in commercial balances reflecting seasonal declines in corporate deposits. Average interest-bearing deposits increased $7.3 billion, or 2%, in the year-to-date comparison. In total, average interest-bearing deposits represented 81% of average interest-bearing liabilities for both the second and first quarters of 2024, and 81% for the first six months of 2024 compared to 83%, for the first six months of 2023.

Average borrowed funds increased $1.9 billion, or 2%, and $12.2 billion, or 19%, in the quarterly and year-to-date comparisons, respectively. In both comparisons, the increase reflected parent company senior debt issuances.

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