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.

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

Income Statement Highlights

Net income of $1.5 billion, or $3.49 per diluted common share, for the third quarter of 2024 increased $28 million, or 2%, compared to $1.5 billion, or $3.39 per diluted common share, for the second quarter of 2024 primarily due to higher net interest income, partially offset by lower noninterest income.

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

•Total revenue of $5.4 billion was stable.

•Net interest income of $3.4 billion increased $108 million, or 3%, driven by higher yields on interest-earning assets.

•Net interest margin increased 4 basis points to 2.64%.

•Noninterest income decreased $87 million, or 4%, as lower other noninterest income was partially offset by strong capital markets and advisory revenue. Other noninterest income included Visa derivative fair value adjustments of negative $128 million, primarily related to litigation escrow funding. The second quarter of 2024 included the benefit of $141 million of significant items.

•Provision for credit losses of $243 million in the third quarter of 2024 primarily reflected the impact of portfolio activity. The second quarter of 2024 included a provision for credit losses of $235 million.

•Noninterest expense decreased $30 million to $3.3 billion as increased personnel costs, reflecting higher variable compensation related to increased business activity, were more than offset by a PNC Foundation contribution expense of $120 million in the second quarter of 2024.

Net income of $4.3 billion, or $9.98 per diluted common share, for the first nine months of 2024 decreased $438 million, or 9%, compared to $4.8 billion, or $10.94 per diluted common share, for the first nine months of 2023 primarily driven by lower net interest income and a higher provision for credit losses, partially offset by higher noninterest income.

•For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023:

•Total revenue decreased $141 million, to $16.0 billion.

•Net interest income decreased $537 million, or 5%, as the benefit of higher interest-earning asset yields was more than offset by increased funding costs.

•Net interest margin decreased 18 basis points.

•Noninterest income increased $396 million, or 7%, primarily driven by higher capital markets and advisory fees.

•Provision for credit losses of $633 million in the first nine months of 2024 reflected the impact of portfolio activity partially offset by an improved macroeconomic outlook. The first nine months of 2023 included a provision for credit losses of $510 million.

•Noninterest expense increased $80 million compared to the first nine months of 2023 primarily due to a $130 million pre-tax expense in the first quarter of 2024 related to the increase in the FDIC’s expected losses, as well as a second quarter PNC Foundation contribution expense.

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

Balance Sheet Highlights

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

•Total assets of $564.9 billion were stable reflecting higher securities balances, partially offset by lower balances held with the Federal Reserve Bank.

•Total loans of $321.4 billion were stable.

•Total commercial loans increased $1.2 billion to $220.7 billion due to new production, largely related to multifamily agency warehouse lending.

•Total consumer loans decreased $1.3 billion to $100.7 billion, as growth in automobile loans was more than offset by declines in the remaining portfolios as paydowns outpaced originations as well as lower utilization.

•Investment securities increased $11.6 billion, or 9%, to $144.2 billion due to increased net purchase activity, primarily of U.S. Treasury securities, partially offset by portfolio paydowns and maturities.

•Interest-earning deposits with banks, primarily with the Federal Reserve Bank, decreased $8.8 billion, or 20%, to $35.0 billion, driven by higher securities balances and lower borrowed funds.

•Total deposits increased $2.5 billion, or 1%, to $424.0 billion reflecting higher interest-bearing deposits, partially offset by lower noninterest-bearing deposits. Interest-bearing deposits increased reflecting higher commercial balances, partially offset by lower consumer balances. Noninterest-bearing deposit balances decreased due to a decline in both commercial and consumer balances.

•Borrowed funds decreased $4.7 billion, or 6%, to $68.1 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.

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

Credit Quality Highlights

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

•At September 30, 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 $5.3 billion and $5.5 billion at September 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 1.65% and 1.70% at September 30, 2024 and December 31, 2023, respectively.

•Nonperforming assets increased $0.4 billion, or 18%, to $2.6 billion, primarily due to higher commercial real estate nonperforming loans.

•Net loan charge-offs of $286 million, or 0.36% of average loans, in the third quarter of 2024 increased $24 million compared to the second quarter of 2024, primarily due to lower commercial recoveries.

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 $49.4 billion at September 30, 2024 increased $4.5 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 third quarter of 2024, PNC returned $0.8 billion of capital to shareholders, including more than $0.6 billion of dividends on common shares and more than $0.1 billion of common share repurchases.

•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 September 30, 2024. Fourth quarter 2024 share repurchase activity is expected to approximate recent quarterly average share repurchase levels. PNC 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, 2024 is the regulatory minimum of 2.5%.

•On October 3, 2024, the PNC Board of Directors declared a quarterly cash dividend on common stock of $1.60 per share to be paid on November 5, 2024 to shareholders of record at the close of business October 16, 2024.

•Our CET1 ratio increased to 10.3% at September 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 10.3% at September 30, 2024 compared to 9.8% at December 31, 2023.

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 on our liquidity and capital actions as well as our capital ratios, 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 in the near term, but PNC’s baseline forecast is for slower economic growth at the end of 2024 and in the first half of 2025 as high interest rates remain a drag on the economy.

•Real GDP growth this year will trend close to 2%, and the unemployment rate will remain somewhat above 4% through the rest of 2024 and in 2025. 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 additional federal funds rate cuts of 25 basis points each at the FOMC’s remaining

The PNC Financial Services Group, Inc. –Form 10-Q 5 meetings in 2024, with the rate ending this year in a range between 4.25% and 4.50%. PNC expects several federal funds rate cuts in 2025 as inflation continues to ease.

Consistent with the forward guidance we provided on October 15, 2024, for the fourth quarter of 2024, compared to the third quarter of 2024, we expect:

•Average loans to be stable,

•Net interest income to be up approximately 1%,

•Fee income to be down 5% to 7%,

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

•Total revenue to be stable,

•Noninterest expense to be up 2% to 3%,

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

Other noninterest income and total revenue guidance does not forecast net securities gains or losses and other 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.

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