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What changed in FNB CORP/PA/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FNB CORP/PA/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+552 added−553 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-24)

Top changes in FNB CORP/PA/'s 2023 10-K

552 paragraphs added · 553 removed · 334 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

83 edited+40 added−33 removed212 unchanged
Biggest changeCertain financial information concerning these subsidiaries, along with the parent company and intercompany eliminations, are included in the “Parent and Other” category in Note 25, “Business Segments” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. Market Area and Competition We operate in seven states and the District of Columbia.
Biggest changeCertain financial information concerning these subsidiaries, along with the parent company and intercompany eliminations, are included in the “Parent and Other” category in Note 25, “Business Segments” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 5 Table of Contents Recent Events FNBPA, in both its own capacity and as successor by merger to Yadkin Bank, has entered into an agreement with the DOJ and the State of North Carolina to resolve their fair lending allegations related to their assessment of mortgage lending activities in the Winston-Salem and Charlotte, NC, markets that began prior to Yadkin’s merger with FNBPA in March 2017.
Also, under the "About Us" portion of our website under the heading Investors you may click on Corporate Governance to view the following: (i) our Code of Conduct and Code of Ethics; (ii) our Corporate Governance Guidelines; (iii) the charter of each active committee of our Board of Directors; and (iv) Policy With Respect to Related Persons Transactions.
Also, under the "About Us" portion of our website under the heading Investors you may click on Corporate Governance to view the following: (i) our Code of Conduct and Code of Ethics; (ii) our Corporate Governance Guidelines; (iii) the charter of each active committee of our Board of Directors; and (iv) our Policy With Respect to Related Persons Transactions.
Our Manager of Diversity and Inclusion and the Diversity Council work with our leadership to support both corporate and employee initiatives promoting an inclusive culture and workplace environment that attracts, retains and develops the best talent from a broad spectrum to create a diverse, highly productive workforce, throughout our organization.
Our Manager of Diversity and Inclusion and the Diversity Council work with our leadership to support both corporate and employee initiatives promoting an inclusive culture and a workplace environment that attracts, retains and develops the best talent from a broad spectrum to create a diverse, highly productive workforce throughout our organization.
A bank is subject to any state requirement that the bank has been organized and operating for a minimum period of time and the requirement that the bank holding company, after the proposed transaction, controls no more than 10% of the total amount of deposits of IDIs in the U.S. and no more than 30% or such lesser or greater amount set by the state law of such deposits in that state.
A bank is subject to any state requirement that the bank has been organized and operating in for a minimum period of time and the requirement that the bank holding company, after the proposed transaction, controls no more than 10% of the total amount of deposits of IDIs in the U.S. and no more than 30% or such lesser or greater amount set by the state law of such deposits in that state.
This includes parental and caregiver leave, monetary contributions to employee Health Savings Accounts, adoption assistance and back-up child-care programs built to provide employees with the financial support and time away from work that they need to focus on their new family members. Safety . Employee and customer safety remain paramount concerns for us.
This includes parental and caregiver leave, monetary employer contributions to employee Health Savings Accounts, adoption assistance and back-up child-care programs built to provide employees with the financial support and time away from work that they need to focus on their new family members. Safety . Employee and customer safety remain paramount concerns for us.
Transactions with Affiliates. Pursuant to Sections 23A and 23B of the Federal Reserve Act, as implemented by Regulation W, banks are subject to restrictions that limit certain types of transactions between banks and their non-bank affiliates. In general, banks are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other transactions involving non-bank affiliates.
Pursuant to Sections 23A and 23B of the Federal Reserve Act, as implemented by Regulation W, banks are subject to restrictions that limit certain types of transactions between banks and their non-bank affiliates. In general, banks are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other transactions involving non-bank affiliates.
Our executive compensation program is overseen by the Compensation Committee of our Board of Directors, in collaboration with a leading independent compensation advisory firm. In addition, the oversight and review of our company-wide compensation philosophy and programs are conducted by the Management Compensation Committee, in consultation with our Board of Directors.
Our executive compensation program is overseen by the Compensation Committee of our Board of Directors, in collaboration with a leading independent compensation advisory firm. In addition, the oversight and review of our company-wide compensation philosophy and programs are conducted by the Management Compensation Committee.
Among other things, these laws and regulations: • require banks to disclose credit terms in meaningful and consistent ways; • prohibit discrimination against an applicant in any consumer or business credit transaction; • prohibit discrimination in housing-related lending activities; • require banks to collect and report applicant and borrower data regarding loans for home purchases or improvement projects; • require lenders to provide borrowers with more detailed information regarding the nature and cost of real estate settlements; • prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; • prescribe possible penalties for violations of the requirements of consumer protection statutes and regulations; • require prescribed consumer disclosures and the adoption of error resolution procedures and other consumer protection protocols with respect to electronic fund transfers; and • prohibit unfair, deceptive or abusive acts and practices in connection with consumer loans, the collection of debt, and the provision of other consumer financial products and services.
Among other things, these laws and regulations: • require banks to disclose credit terms in meaningful and consistent ways; • prohibit discrimination against an applicant in any consumer or business credit transaction; 17 Table of Contents • prohibit discrimination in housing-related lending activities; • require banks to collect and report applicant and borrower data regarding loans for home purchases or improvement projects; • require lenders to provide borrowers with more detailed information regarding the nature and cost of real estate settlements; • prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; • prescribe possible penalties for violations of the requirements of consumer protection statutes and regulations; • require prescribed consumer disclosures and the adoption of error resolution procedures and other consumer protection protocols with respect to electronic fund transfers; and • prohibit unfair, deceptive or abusive acts and practices in connection with consumer loans, the collection of debt, and the provision of other consumer financial products and services.
Notable aspects of the rule include: (i) defining the operative prongs of the definition of a “deposit broker;” (ii) the identification of a number of business relationships in which the agent or nominee is automatically not deemed to be a "deposit broker" because their "primary purpose" is not the placement of funds with depository institutions; (iii) the establishment of a more transparent application process for entities that seek to rely upon the "primary purpose" exception, but do not qualify for one of the identified business relationships to which the exception is automatically applicable; and (iv) the clarification that third parties that have an exclusive deposit-placement arrangement 10 Table of Contents with one IDI are not considered a "deposit broker." The final rule took effect on April 1, 2021, and full compliance was required by January 1, 2022.
Notable aspects of the rule include: (i) defining the operative prongs of the definition of a “deposit broker;” (ii) the identification of a number of business relationships in which the agent or nominee is automatically not deemed to be a "deposit broker" because their "primary purpose" is not the placement of funds with depository institutions; (iii) the establishment of a more transparent application process for entities that seek to rely upon the "primary purpose" exception, but do not qualify for one of the identified business relationships to which the exception is automatically applicable; and (iv) the clarification that third parties that have an exclusive deposit-placement arrangement with one IDI are not considered a "deposit broker." The final rule took effect on April 1, 2021, and full compliance was required by January 1, 2022.
On September 9, 2022, the U.S. banking agencies issued a press release reaffirming “their commitment to implementing enhanced regulatory capital requirements that align with the final set of ‘Basel III’ standards” and stating that they “are currently developing a joint proposed rule for issuance as soon as possible.” 13 Table of Contents Stress Testing As part of the regulatory relief provided by the Economic Growth Act, the asset threshold requiring IDIs to conduct and report to their primary federal bank regulators annual company-run stress tests was raised from $10 billion to $250 billion in total consolidated assets and makes the requirement “periodic” rather than annual.
On September 9, 2022, the U.S. banking agencies issued a press release reaffirming “their commitment to implementing enhanced regulatory capital requirements that align with the final set of ‘Basel III’ standards” and stating that they “are currently developing a joint proposed rule for issuance as soon as possible.” Stress Testing As part of the regulatory relief provided by the Economic Growth Act, the asset threshold requiring IDIs to conduct and report to their primary federal bank regulators annual company-run stress tests was raised from $10 billion to $250 billion in total consolidated assets and makes the requirement “periodic” rather than annual.
The most direct competition for deposits comes from commercial banks, savings banks and credit unions. Competition for deposits comes from non-depository competitors such as financial technology companies, mutual funds, securities and brokerage firms and insurance companies.
The most direct competition for deposits comes from commercial banks, savings banks and credit unions. Competition for deposits also comes from non-depository competitors such as financial technology companies, mutual funds, securities and brokerage firms and insurance companies.
In the interim, the FRB announced on September 29, 2022 that six of the largest U.S. banking organizations will participate in a climate scenario analysis pilot program in order to assess the resilience of such organizations under various hypothetical scenarios involving physical and transition climate related risks on specific residential and commercial real estate in their portfolios for the purpose of using scenarios on current policies and policies targeting zero emissions by 2050.
Also, the FRB announced on September 29, 2022 that six of the largest U.S. banking organizations will participate in a climate scenario analysis pilot program in order to assess the resilience of such organizations under various hypothetical scenarios involving physical and transition climate-related risks on specific residential and commercial real estate in their portfolios for the purpose of using scenarios on current policies and policies targeting zero emissions by 2050.
On January 1, 2021, Congress passed the National Defense Authorization Act (NDAA), which enacted the most significant overhaul of the BSA and related anti-money laundering laws since the USA PATRIOT Act.
On January 1, 2021, Congress passed the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and related anti-money laundering laws since the USA PATRIOT Act.
The final regulation directs stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation paid to current or former executive officers in the event of material non-compliance with any financial reporting requirement under the securities laws, even if there was no misconduct or failure of oversight on the part of an individual executive officer, and to disclose their clawback policies and their actions under those policies.
The final regulation directed stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation paid to current or former executive officers in the event of material non-compliance with any financial reporting requirement under the securities laws, even if there was no misconduct or failure of oversight on the part of an individual executive officer, and to disclose their clawback policies and their actions under those policies.
The definition of a "covered cyber-incident" will be determined by CISA rulemaking, but the Act provides that, at a minimum, an incident must be reported if it: (1) causes a "substantial loss of confidentiality, integrity or availability" of information or a "serious impact on the safety and resiliency of operational systems and processes"; (2) causes a "disruption of business or industrial operations, including due to a denial of service attack, ransomware attack or exploitation of a zero day vulnerability"; or (3) involves "unauthorized access or disruption of business or industrial operations" due to a "compromise of a cloud service provider, managed service provider or other third-party data hosting provider or by a supply chain compromise".
The definition of a "covered cyber-incident" will be determined by CISA rulemaking, but the Act provides that, at a minimum, an incident must be reported if it: (1) causes a "substantial loss of confidentiality, integrity or availability" of information or a "serious impact on the safety and resiliency of 16 Table of Contents operational systems and processes"; (2) causes a "disruption of business or industrial operations, including due to a denial of service attack, ransomware attack or exploitation of a zero day vulnerability"; or (3) involves "unauthorized access or disruption of business or industrial operations" due to a "compromise of a cloud service provider, managed service provider or other third-party data hosting provider or by a supply chain compromise".
As of December 31, 2022, our Community Banking segment operated in seven states and the District of Columbia. Our branch network spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina.
As of December 31, 2023, our Community Banking segment operated in seven states and the District of Columbia. Our branch network spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina.
As of December 31, 2022, FNB had three business segments, with the largest being the Community Banking segment consisting of a regional community bank. The Wealth Management segment consists of a federally chartered trust company, a registered investment advisor and a subsidiary that offers broker-dealer services through a third-party networking arrangement with a non-affiliated licensed broker-dealer entity.
As of December 31, 2023, FNB had three business segments, with the largest being the Community Banking segment consisting of a regional community bank. The Wealth Management segment consists of a federally chartered trust company, a registered investment advisor and a subsidiary that offers broker-dealer services through a third-party networking arrangement with a non-affiliated licensed broker-dealer entity.
Accordingly, banking organizations not subject to the advanced approaches capital rule may deduct from CET1 capital any amount of MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions that individually exceeds 25% of CET1 capital. Management believes that as of December 31, 2022, FNB and FNBPA meet all capital adequacy requirements under Basel III.
Accordingly, banking organizations not subject to the advanced approaches capital rule may deduct from CET1 capital any amount of MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions that individually exceeds 25% of CET1 capital. Management believes that as of December 31, 2023, FNB and FNBPA meet all capital adequacy requirements under Basel III.
The rules adopted by the SEC under SOX have several requirements, including having these officers certify that: they are 21 Table of Contents responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.
The rules adopted by the SEC under SOX have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on the "About Us" portion of our website under the heading Investor Information (accessible by clicking on the SEC Filings link) as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC and at the SEC’s website, www.sec.gov.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on the "About Us" portion of our website under the heading Investor Information (accessible by clicking on the SEC Filings link) as soon as reasonably 3 Table of Contents practicable after we electronically file such reports with, or furnish them to, the SEC and at the SEC’s website, www.sec.gov.
In 2022, the CFPB has taken an increasingly aggressive approach and expanded its reach and has made it clear that the CFPB is interpreting its statutory authorities broadly to expand the CFPB's ability to pursue violations of the consumer financial and fair lending laws in consumer financial markets, including issuing guidance indicating certain bank overdraft and mortgage lending practices constitute violations of the Unfair, Deceptive or Abusive Acts or Practices statute.
In 2022, and continuing into 2023, the CFPB has taken an increasingly aggressive approach and expanded its reach and has made it clear that the CFPB is interpreting its statutory authorities broadly to expand the CFPB's ability to pursue violations of the consumer financial and fair lending laws in consumer financial markets, including issuing guidance indicating certain bank overdraft and mortgage lending practices constitute violations of the Unfair, Deceptive or Abusive Acts or Practices statute.
The membership composition of the Diversity Council reflects the diversity within our organization. In addition, the membership represents every region in the organization, and various lines of business and position levels. Engagement. We regularly seek feedback from our employees and in 2022 participated in several regional Top Workplace surveys.
The membership composition of the Diversity Council reflects the diversity within our organization. In addition, the membership represents every region in the organization, and various lines of business and position levels. Engagement. We regularly seek feedback from our employees and in 2023 participated in several regional Top Workplace surveys.
Banks' non-affiliated service providers are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt 15 Table of Contents or degrade, covered services provided to such bank for as much as four hours.
Banks' non-affiliated service providers are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.
No material portion of the business of the Wealth Management segment has been obtained from a single customer or small group of customers, and the loss of any one customer’s business or the business of a small group of customers by the Wealth Management segment would not have a material adverse effect on the Wealth Management segment or on FNB.
No material portion of the business of the Wealth Management segment has been obtained from a single customer or small group of customers, and the loss of any one customer’s business or the business of a small group of customers by the Wealth Management segment would not have a material adverse effect on the Wealth Management segment specifically or on FNB generally.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (for example, recourse obligations, direct credit 12 Table of Contents substitutes and residual interests) are multiplied by a risk-weight factor assigned by the regulations based on the risks believed inherent in the type of asset.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (for example, recourse obligations, direct credit substitutes and residual interests) are multiplied by a risk-weight factor assigned by the regulations based on the risks believed inherent in the type of asset.
Incentive compensation and sales practices, particularly in connection with certain products and services that are viewed as high-risk from a supervisory perspective, such as cross-selling and overdraft services, continue to be priority issues on the examination and supervision agendas of the CFPB and the federal banking agencies.
Incentive compensation and sales practices, particularly in connection with certain products and services that are viewed as high-risk from a supervisory perspective, such as cross-selling and overdraft services, continue to be priority issues on the examination and supervision 20 Table of Contents agendas of the CFPB and the federal banking agencies.
Internet Information Our website is at http://www.fnb-online.com and information regarding FNB and investor relations is located under the heading "About Us." We use our website to distribute company information, including as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.
Internet Information Our website is at www.fnbcorporation.com and information regarding FNB and investor relations is located under the heading "About Us." We use our website to distribute company information, including as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.
Employees complete quarterly and annual job specific training, including regulatory and compliance requirements and ethical standards, to maintain and increase knowledge of standards required of the financial services industry. Additionally, we provide employees various avenues to confidentially and anonymously report unethical behavior without repercussions to them, such as FNB’s Ethics Hotline.
Employees complete quarterly and annual training, including regulatory and compliance requirements and ethical standards, to maintain and increase knowledge of standards required of the financial services industry. Additionally, we provide employees various avenues to confidentially and anonymously report perceived unethical behavior without repercussions to them, such as FNB’s Ethics Hotline.
That statement noted the recent volatility and exposure of vulnerabilities in the 22 Table of Contents digital asset sector and indicated that the agencies are continuing to assess whether or how the digital asset-related activities of banking organizations can be conducted in a safe and sound manner and in compliance with all applicable laws and regulations.
That statement noted the recent volatility and exposure of vulnerabilities in the digital asset sector and indicated that the agencies are continuing to assess whether or how the digital asset-related activities of banking organizations can be conducted in a safe and sound manner and in compliance with all applicable laws and regulations.
This team, chaired by FNB’s Chairman, President and Chief Executive Officer, regularly meets to promote compensation programs that are fair and equitable, to achieve a performance-driven work culture that generates company growth and to reward employees for focusing on customer needs, while avoiding inappropriate conduct regarding our clients, and demonstrating appropriate risk management behaviors. Values & Training.
This team, chaired by FNB’s Chairman, President and Chief Executive Officer, regularly meets to promote compensation programs that are fair and equitable, to achieve a performance-driven work culture that generates company growth and to reward employees for focusing on customer needs, while avoiding inappropriate conduct regarding our clients, and demonstrating appropriate risk management behaviors. 7 Table of Contents Values & Training.
In addition, a financial holding company’s operating entities, including its subsidiary broker-dealers, investment managers, investment advisory companies, 8 Table of Contents insurance companies and banks, as applicable, are subject to the jurisdiction of various federal and state “functional” regulators and self-regulatory organizations, such as FINRA.
In addition, a financial holding company’s operating entities, including its subsidiary broker-dealers, investment managers, investment advisory companies, insurance companies and banks, as applicable, are subject to the jurisdiction of various federal and state “functional” regulators and self-regulatory organizations, such as FINRA.
The GLB Act also permits national banks, such as FNBPA, to engage in activities considered financial in nature through a financial subsidiary, subject to certain conditions and limitations and with the approval of the OCC (see discussion under the caption “Financial Holding Company Status and Activities” ).
The GLB Act also permits national banks, such as FNBPA, to engage in activities considered financial in nature through a financial 9 Table of Contents subsidiary, subject to certain conditions and limitations and with the approval of the OCC (see discussion under the caption “Financial Holding Company Status and Activities” ).
FNBIA also may be subject to certain state securities laws and regulations. 20 Table of Contents Additional legislation, changes in or new rules promulgated by the SEC and other federal and state regulatory authorities and self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules, may directly affect the method of operation and profitability of FNBIA.
FNBIA also may be subject to certain state securities laws and regulations. Additional legislation, changes in or new rules promulgated by the SEC and other federal and state regulatory authorities and self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules, may directly affect the method of operation and profitability of FNBIA.
The guidelines also provide that bank holding companies, depending on the types, quality and quantity of risk associated with its activities (e.g., acquisitions, internal growth), will be expected to maintain strong capital positions above the minimum supervisory levels without significant reliance on intangible assets. Our leverage ratio at December 31, 2022 was 8.64%.
The guidelines also provide that bank holding companies, depending on the types, quality and quantity of risk associated with its activities (e.g., acquisitions, internal growth), will be expected to maintain strong capital positions above the minimum supervisory levels without significant reliance on intangible assets. Our leverage ratio at December 31, 2023 was 8.72%.
The FDIC has set the target designated reserve ratio at 2% since 2010. Assessment rates, which declined for all banks when the reserve ratio first surpassed 1.15% in the third quarter of 2016, increased for all insurance depository institutions by 2 basis points in the first quarter of 2023.
The FDIC has set the target designated reserve ratio at 2% since 2010. Assessment rates, which 10 Table of Contents declined for all banks when the reserve ratio first surpassed 1.15% in the third quarter of 2016, increased for all insurance depository institutions by 2 basis points in the first quarter of 2023.
The statutory 7 Table of Contents and regulatory framework that governs FNB and our affiliates is generally intended to protect depositors and customers, the federal DIF, the U.S. banking and financial system, and financial markets as a whole; however, this framework is not specifically for the protection of stockholders.
The statutory and regulatory framework that governs FNB and our affiliates is generally intended to protect depositors and customers, the federal DIF, the U.S. banking and financial system, and financial markets as a whole; however, this framework is not specifically for the protection of stockholders.
Fair lending laws include the Equal Credit Opportunity Act (ECOA) 14 Table of Contents and the Fair Housing Act, which outlaw discrimination in credit and residential real estate transactions on the basis of prohibited factors including, among others, race, color, national origin, gender, and religion.
Fair lending laws include the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act, which outlaw discrimination in credit and residential real estate transactions on the basis of prohibited factors including, among others, race, color, national origin, gender, and religion.
We generally post and make accessible before or promptly following the first time we use financially-related press releases, including earnings releases and 3 Table of Contents supplemental financial information, various SEC filings, including annual, quarterly and current reports and proxy statements, presentation materials associated with earnings and other investor calls or events on our corporate website.
We generally post and make accessible before or promptly following the first time we use financially-related press releases, including earnings releases and supplemental financial information, various SEC filings, including annual, quarterly and current reports and proxy statements, presentation materials associated with earnings and other investor calls or events on our corporate website.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Banking Act) generally permits bank holding companies to acquire banks in any state and preempts all state laws restricting the ownership by a holding company of banks in more than one state.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Banking Act) generally permits bank holding companies to acquire banks in any state and preempts all state laws restricting the ownership by a holding company of 19 Table of Contents banks in more than one state.
Prompt Corrective Action FDICIA, among other things, classifies IDIs into five capital categories (well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the respective federal regulatory agencies to implement systems for “prompt corrective action” for IDIs that do not meet minimum capital requirements within such categories.
Prompt Corrective Action FDICIA, among other things, classifies IDIs into five capital categories (well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the respective federal regulatory 14 Table of Contents agencies to implement systems for “prompt corrective action” for IDIs that do not meet minimum capital requirements within such categories.
Our Wealth Management operations are conducted through three subsidiaries of FNBPA. FNTC provides a broad range of personal and corporate fiduciary services, including the administration of decedent and trust estates. As of December 31, 2022, the fair value of trust assets under management was approximately $7.8 billion.
Our Wealth Management operations are conducted through three subsidiaries of FNBPA. FNTC provides a broad range of personal and corporate fiduciary services, including the administration of decedent and trust estates. As of December 31, 2023, the fair value of trust assets under management was approximately $8.6 billion.
We are committed to building a diverse and inclusive workforce and have found great success cultivating and fostering mutually beneficial partnerships with job and recruiting centers, colleges and universities, including historically black colleges and universities, and diversity-focused organizations that help us to identify and attract diverse candidates.
We are committed to building a diverse and inclusive workforce and have found great success cultivating and fostering mutually beneficial partnerships with job and recruiting centers, colleges and universities, including historically black colleges and universities, diverse student groups within universities, and diversity-focused organizations that help us to identify and attract top candidates.
Information on our website is not incorporated by reference into this document and should not be considered part of this Report. Our common stock is traded on the NYSE under the symbol “FNB”.
Information on our website is not incorporated by reference into this document and should not be considered part of this Report. Our common stock is traded on the NYSE under the symbol “FNB”. 23 Table of Contents
As of December 31, 2022, we have three reportable business segments: Community Banking, Wealth Management and Insurance, with the remaining operations described in Other . As of December 31, 2022, we have 348 Community Banking branches in Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington, D.C. and Virginia.
As of December 31, 2023, we have three reportable business segments: Community Banking, Wealth Management and Insurance, with the remaining operations described in Other . As of December 31, 2023, we have 346 Community Banking branches in Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington, D.C. and Virginia.
In addition, the provisions 11 Table of Contents of the Volcker Rule apply similar restrictions on transactions between a bank and any “covered fund” that the bank advises or sponsors. Transactions with Insiders.
In addition, the provisions of the Volcker Rule apply similar restrictions on transactions between a bank and any “covered fund” that the bank advises or sponsors. Transactions with Insiders.
We consider the 4 Table of Contents Community Banking segment an important source of revenue opportunity through the cross-selling of products and services offered by our other business segments.
We consider the Community Banking segment an important source of revenue opportunity through the cross-selling of products and services offered by our other business segments.
In fact, in the midst of rising inflation and pressure to raise interest rates, in its FOMC policy statement issued on January 26, 2022, the FRB strongly signaled that it would soon be time to raise the target range for the Federal funds rate, and the FOMC has since increased the target Federal funds rate several times to a range of 4.25% to 4.50% as of December 31, 2022.
In fact, in the midst of rising inflation and pressure to raise interest rates, in its FOMC policy statement issued on January 26, 2022, the FRB strongly signaled that it would soon be time to raise the target range for the Federal funds rate, and the FOMC has since increased the target Federal funds rate eleven times during 2022 and 2023 to a range of 5.25% to 5.50% as of December 31, 2023.
Under these guidelines, FNBPA was considered well-capitalized as of December 31, 2022.
Under these guidelines, FNBPA was considered well-capitalized as of December 31, 2023.
The Economic Growth Act also enacted several important changes in some compliance areas, for which the banking agencies have issued guidance documents and implementing regulations, including: • Prohibiting the federal banking regulators from imposing higher capital standards on high volatility commercial real estate exposures (HVCRE) unless they are for acquisition, development or construction (ADC) loans, and clarifying ADC status; • Requiring the federal banking regulators to amend the LCR Rule such that all qualifying investment-grade, liquid and readily-marketable municipal securities are treated as level 2B liquid assets, making them more attractive investment alternatives; • Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000; and • Directing the CFPB to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to mortgage assumption transactions and construction-to-permanent home loans, as well as the extent to which lenders can rely on model disclosures that do not reflect recent regulatory changes.
This resulted in FNB and FNBPA no longer being subject to Dodd-Frank Act stress testing requirements, however we continue to voluntarily perform capital stress testing consistent with the safety and soundness expectations of our banking regulators. 8 Table of Contents The Economic Growth Act also enacted several important changes in some compliance areas, for which the banking agencies have issued guidance documents and implementing regulations, including: • Prohibiting the federal banking regulators from imposing higher capital standards on high volatility commercial real estate exposures (HVCRE) unless they are for acquisition, development or construction (ADC) loans, and clarifying ADC status; • Requiring the federal banking regulators to amend the LCR Rule such that all qualifying investment-grade, liquid and readily-marketable municipal securities are treated as level 2B liquid assets, making them more attractive investment alternatives; • Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000; and • Directing the CFPB to provide guidance on the applicability of the TILA-RESPA Integrated Disclosure rule to mortgage assumption transactions and construction-to-permanent home loans, as well as the extent to which lenders can rely on model disclosures that do not reflect recent regulatory changes.
In July 2020, the OCC amended the Volcker Rule regulations to streamline the “covered funds” portion addressing the treatment of certain foreign funds, and permitting banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker Rule was intended to address.
Compliance with the revised Volcker Rule regulations was required on January 1, 2021. 11 Table of Contents In July 2020, the OCC amended the Volcker Rule regulations to streamline the “covered funds” portion addressing the treatment of certain foreign funds, and permitting banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker Rule was intended to address.
The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. At December 31, 2022, our CET1, tier 1 and total capital ratios under these guidelines were 9.82%, 10.13% and 12.06%, respectively. At December 31, 2022, we had $332.9 million of capital securities and subordinated debt that qualified as tier 2 capital.
The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. At December 31, 2023, our CET1, tier 1 and total capital ratios under these guidelines were 10.04%, 10.33% and 12.16%, respectively. At December 31, 2023, we had $298.4 million of capital securities and subordinated debt that qualified as tier 2 capital.
No material portion of the loans or deposits of the Community Banking segment has been obtained from a single customer or small group of customers, and the loss of any one customer’s loans or deposits or a small group of customers’ loans or deposits by the Community Banking segment would not have a material adverse effect on the Community Banking segment or on FNB.
No material portion of the business of the Insurance segment has been obtained from a single customer or small group of customers, and the loss of any one customer’s business or the business of a small group of customers by the Insurance segment would not have a material adverse effect on the Insurance segment specifically or on FNB generally.
Failure to comply with these sanctions could have serious legal and reputational consequences. 16 Table of Contents Consumer Protection Statutes and Regulations In addition to the consumer regulations promulgated by the FRB, OCC and state agencies, and the regulations issued by the CFPB pursuant to its authority under the Dodd-Frank Act, FNBPA is subject to various federal consumer protection statutes including the TILA, Truth in Savings Act, Equal Credit Opportunity Act (ECOA), Fair Housing Act, RESPA, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Electronic Fund Transfer Act and Home Mortgage Disclosure Act, and regulations and guidance promulgated thereunder by the CFPB and the federal banking agencies.
Consumer Protection Statutes and Regulations In addition to the consumer regulations promulgated by the FRB, OCC and state agencies, and the regulations issued by the CFPB pursuant to its authority under the Dodd-Frank Act, FNBPA is subject to various federal consumer protection statutes including the TILA, Truth in Savings Act, Equal Credit Opportunity Act (ECOA), Fair Housing Act, RESPA, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Electronic Fund Transfer Act and Home Mortgage Disclosure Act, CRA and regulations and guidance promulgated thereunder by the CFPB and the federal banking agencies.
We have a Manager of Diversity and Inclusion, possessing over 20 years of professional experience, and an active Diversity Council engaged in proactive-leadership and strategies and initiatives to promote diversity, equity and inclusion in our culture that supports our mission to build a workforce in which all employees can learn, grow and prosper.
We have a Manager of Diversity and Inclusion with over 20 years of professional experience who works directly with FNB’s Diversity Council and together they are collectively engaged in proactive-leadership, strategies, and initiatives to promote diversity, equity and inclusion in our culture that supports our mission to build a workforce in which all employees can learn, grow and prosper.
Other Laws and Regulations Pertaining to Banks and Financial Services Companies FNB, FNBPA and our subsidiaries and affiliates are also subject to a variety of other laws and regulations in addition to those already discussed herein with respect to the operation of our businesses, including but not limited to Expedited Funds Availability (and its implementing Regulation CC), Reserve Requirements (and its implementing Regulation D), Margin Stock Loans (and its implementing Regulation U), Right To Financial Privacy Act, Flood Disaster Protection Act, Homeowners Protection Act, Servicemembers Civil Relief Act, Telephone Consumer Protection Act, CAN-SPAM Act, Children’s Online Privacy Protection Act, and the John Warner National Defense Authorization Act.
Representatives of the Arizona Department of Insurance periodically determine whether Penn-Ohio has maintained required reserves, established adequate deposits under a reinsurance agreement and complied with reporting requirements under the applicable Arizona statutes. 21 Table of Contents Other Laws and Regulations Pertaining to Banks and Financial Services Companies FNB, FNBPA and our subsidiaries and affiliates are also subject to a variety of other laws and regulations in addition to those already discussed herein with respect to the operation of our businesses, including but not limited to Expedited Funds Availability (and its implementing Regulation CC), Reserve Requirements (and its implementing Regulation D), Margin Stock Loans (and its implementing Regulation U), Right To Financial Privacy Act, Flood Disaster Protection Act, Homeowners Protection Act, Servicemembers Civil Relief Act, Telephone Consumer Protection Act, CAN-SPAM Act, Children’s Online Privacy Protection Act, and the John Warner National Defense Authorization Act.
Our scores in the overall engagement focus area continue to help us achieve external recognition as an employer of choice. Compensation. Our compensation philosophy is to create a program that supports our mission and values.
Our outstanding scores continue to help us achieve external recognition as an employer of choice. Compensation. Our compensation philosophy is to maintain a program that supports our mission and values.
This support may be required at times when the parent holding company may not be able to provide such support. 18 Table of Contents In addition, if FNBPA was no longer “well-capitalized” and “well-managed” within the meaning of the BHC Act and FRB rules (which take into consideration capital ratios, examination ratings and other factors), the expedited processing of certain types of FRB applications would not be available to us.
In addition, if FNBPA was no longer “well-capitalized” and “well-managed” within the meaning of the BHC Act and FRB rules (which take into consideration capital ratios, examination ratings and other factors), the expedited processing of certain types of FRB applications would not be available to us.
As of December 31, 2022, we had total assets of $44 billion, loans of $30 billion and deposits of $35 billion. See Item 7, MD&A, and Item 8, “Financial Statements and Supplementary Data,” of this Report. Mergers and Acquisitions Howard Bancorp, Inc.
As of December 31, 2023, we had total assets of $46 billion, loans of $32 billion and deposits of $35 billion. See Item 7, MD&A, and Item 8, “Financial Statements and Supplementary Data,” of this Report.
The following discussion is general in nature and seeks to highlight some of the more significant of these regulatory requirements, but does not purport to be complete or to describe all of the laws and regulations that apply to us and our subsidiaries. 9 Table of Contents Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 The Dodd-Frank Act continues to have a broad impact on the financial services industry by imposing significant regulatory and compliance requirements including, among other things: • enhanced authority over troubled and failing banks and their holding companies; • increased capital and liquidity requirements; • increased regulatory examination fees; • increased assessments banks must pay the FDIC for federal deposit insurance; and • specific provisions designed to improve supervision and oversight of bank safety and soundness and consumer practices, by imposing restrictions and limitations on the scope and type of banking and financial activities.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 The Dodd-Frank Act continues to have a broad impact on the financial services industry by imposing significant regulatory and compliance requirements including, among other things: • enhanced authority over troubled and failing banks and their holding companies; • increased capital and liquidity requirements; • increased regulatory examination fees; • increased assessments banks must pay the FDIC for federal deposit insurance; and • specific provisions designed to improve supervision and oversight of bank safety and soundness and consumer practices, by imposing restrictions and limitations on the scope and type of banking and financial activities.
As climate-related supervisory guidance is formalized, and relevant risk areas and corresponding control expectations are further refined, we may be required to expend significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such requirements. In addition, states are considering taking similar actions on climate-related financial risks, including certain states in which we operate.
As climate-related supervisory guidance is formalized, and relevant risk areas and corresponding control expectations are further refined, we may be required to expend 22 Table of Contents significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such requirements.
Blocked assets (such as property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.
Blocked assets (such as property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.
In addition, the TCJA disallows the deduction of FDIC deposit insurance premium payments for banking organizations with total consolidated assets of $50 billion or more. For banks with less than $50 billion in total consolidated assets, such as FNBPA, the premium deduction is phased-out based on the proportion of the bank’s assets exceeding $10 billion. Brokered Deposits.
For banks with less than $50 billion in total consolidated assets, such as FNBPA, the premium deduction is phased-out based on the proportion of the bank’s assets exceeding $10 billion.
Under the proposed rule, the agencies would evaluate bank performance across the varied activities they conduct and the communities in which they operate, and tailor CRA evaluations and data collection based on bank size and type.
On May 5, 2022, the federal banking agencies issued a joint notice of proposed rulemaking to revise the regulations implementing the CRA. Under the proposed rule, the agencies would evaluate bank performance across the varied activities they conduct and the communities in which they operate, and tailor CRA evaluations and data collection based on bank size and type.
In addition, the ability of FNB and FNBPA to pay dividends may be affected by the various minimum capital requirements previously described in the “Capital and Operational Requirements,” “Basel III Capital Rules” and “Stress Testing” discussions herein, and the capital and non-capital standards established under FDICIA, as described above.
In addition to dividends from FNBPA, other sources of parent company liquidity for FNB include cash, short-term investments and issuance of debt instruments, as well as dividends and loan repayments from other subsidiaries. 18 Table of Contents In addition, the ability of FNB and FNBPA to pay dividends may be affected by the various minimum capital requirements previously described in the “Capital and Operational Requirements,” “Basel III Capital Rules” and “Stress Testing” discussions herein, and the capital and non-capital standards established under FDICIA, as described above.
The current Presidential Administration has indicated a focus on prioritizing enforcement of the federal anti-discrimination laws, and as a result, the CFPB may adopt more strict anti-discrimination enforcement policies in the area of fair lending, loan servicing, collections and other consumer-related areas and in October 2021, the DOJ announced an initiative to combat redlining through utilization of its fair lending prosecutorial authority and announced the settlement of a number of bank prosecutions in 2022 concerning redlining and other violations of the fair lending laws.
The current Presidential Administration has indicated a focus on prioritizing enforcement of the federal anti-discrimination laws, and as a result, the CFPB may adopt more strict anti-discrimination enforcement policies in the area of fair lending, loan servicing, collections and other consumer-related areas.
Capital and Operational Requirements The FRB, OCC and FDIC issued substantially similar risk-based and leverage capital guidelines applicable to U.S. banking organizations. In addition, these regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels, due to its financial condition or actual or anticipated growth.
In addition, these regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels, due to its financial condition or actual or anticipated growth.
SBA. Tecum is not an affiliate or a subsidiary of FNB. Waubank Securities LLC is a limited broker-dealer subsidiary which passively participates in corporate and municipal underwritings. We have three companies that issued TPS to third-party investors: F.N.B.
Waubank Securities LLC is a limited broker-dealer subsidiary which passively participates in corporate and municipal underwritings. We have four companies that issued TPS to third-party investors: F.N.B. Statutory Trust II, Yadkin Valley Statutory Trust I, FNB Financial Services Capital Trust I and Patapsco Statutory Trust I, the last three of which were assumed in acquisitions.
The FOMC signaled that future increases may be appropriate in order to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels. FRB monetary policies have had a significant effect on the operating results of all financial institutions in the past and may continue to do so in the future.
The FOMC signaled that current FRB direction is to begin lowering rates at some point during 2024 as inflation returns to more normalized levels. FRB monetary policies have had a significant effect on the operating results of all financial institutions in the past and may continue to do so in the future.
In addition to establishing the minimum regulatory capital requirements, the capital regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a capital conservation buffer consisting of 2.5% of CET1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
In assessing an institution’s capital adequacy, the OCC takes into consideration not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary. 13 Table of Contents In addition to establishing the minimum regulatory capital requirements, the capital regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a capital conservation buffer consisting of 2.5% of CET1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
The federal banking agencies, either independently or on an interagency basis, are expected to adopt a more formal climate risk management framework for larger banking organizations.
The federal banking agencies, either independently or on an interagency basis, are expected to adopt a more formal climate risk management framework for larger banking organizations. In October 2023, the OCC issued its Risk Management: Principles for Climate-Related Financial Risk Management for Large Financial Institutions governing financial institutions with consolidated assets over $100 billion.
We focus resources on programs to develop leaders and promote internal advancement within the organization. This includes a mentor program, succession planning and leadership programs, administered by our dedicated training department team to further develop the talent that our recruitment efforts have attracted. In addition, we offer tuition reimbursement for employees seeking post-secondary education, including college and graduate school. Diversity.
We focus resources on programs to develop leaders and promote internal advancement within the organization. This includes mentoring and coaching programs, succession planning reviews, and leadership development programs, administered by our dedicated learning and development team to further develop the talent that our recruitment efforts have attracted.
In addition to posting positions with these organizations, all members of our talent acquisition team hold the designation of Certified Diversity Recruiter, and our leaders participate in events hosted by these partners to further our brand as an employer of choice. 6 Table of Contents Employee Development.
All members of our talent acquisition team hold the designation of Certified Diversity Recruiter, and our leaders participate in events hosted by these partners to further our brand as an employer of choice. We use internally created digital marketing developed algorithms and data tools to increase job posting visibility within diverse job boards.
F.N.B. Capital Corporation, LLC (FNBCC) was formed as a merchant banking subsidiary to offer mezzanine financing options for small- to medium-sized businesses that need financial assistance beyond the parameters of typical commercial bank lending products. FNBCC has a 21.9% funding commitment in Tecum Capital Partners, L.P. (formerly known as F.N.B. Capital Partners, L.P.) (Tecum), a SBIC licensed by the U.S.
Other We also operate other non-banking subsidiaries which are not considered to be reportable segments of FNB. F.N.B. Capital Corporation, LLC (FNBCC) was formed as a merchant banking subsidiary to offer mezzanine financing options for small- to medium-sized businesses that need financial assistance beyond the parameters of typical commercial bank lending products.
Bank and financial holding companies and banks seeking to engage in mergers authorized by the Interstate Banking Act must be at least adequately capitalized as of the date that the application is filed, and the resulting institution must be well-capitalized and well-managed upon consummation of the transaction. 19 Table of Contents Pursuant to the Dodd-Frank Act, national and state-chartered banks may open an initial branch in a state other than its home state (e.g., a host state) by establishing a de novo branch at any location in such host state at which a bank chartered in such host state could establish a branch.
Bank and financial holding companies and banks seeking to engage in mergers authorized by the Interstate Banking Act must be at least adequately capitalized as of the date that the application is filed, and the resulting institution must be well-capitalized and well-managed upon consummation of the transaction.
Federal banking law limits a national bank’s ability to extend credit to one person or group of related persons to an amount that does not exceed certain thresholds. Among other things, the Dodd-Frank Act expanded the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements and securities lending and borrowing transactions.
Federal banking law limits a national bank’s ability to extend credit to one person or group of related persons to an amount that does not exceed certain thresholds.
In addition, we have repeatedly been named to JUST Capital’s select annual list of companies engaged in business behavior that matters, based, in part, on an assessment of our employee practices relative to income inequality, racial equity and employee opportunity. As of January 31, 2023, FNB and our subsidiaries had 3,916 full-time and 274 part-time employees. Recruitment.
FNB has also repeatedly been named to JUST Capital’s prestigious annual list of companies that demonstrate just business behavior based on our performance in categories that matter most to the American public and is, in part, an assessment of our employee practices relative to benefits, income inequality, racial equity and employee opportunity.
No material portion of the business of the Insurance segment has been obtained from a single customer or small group of customers, and the loss of any one customer’s business or the business of a small group of customers by the Insurance segment would not have a material adverse effect on the Insurance segment or on FNB. 5 Table of Contents Other We also operate other non-banking subsidiaries which are not considered to be reportable segments of FNB.
Specific information requirements vary based on loan type, risk profile and secondary investor requirements where applicable. 4 Table of Contents No material portion of the loans or deposits of the Community Banking segment has been obtained from a single customer or small group of customers, and the loss of any one customer’s loans or deposits or a small group of customers’ loans or deposits by the Community Banking segment would not have a material adverse effect on the Community Banking segment specifically or on FNB generally.
The Dodd-Frank Act may have a material impact on FNB and FNBPA's operations, particularly through increased compliance costs resulting from evolving future consumer and fair lending regulations. Dividend Restrictions Our primary source of funds for cash distributions to our stockholders, and funds used to pay principal and interest on our indebtedness, is dividends received from FNBPA.
The Dodd-Frank Act may have a material impact on FNB and FNBPA's operations, particularly through increased compliance costs resulting from evolving future consumer and fair lending regulations. Community Reinvestment Act Federal Regulators issued a joint final rule that makes extensive amendments to the regulations that implement the CRA.
The changes resulting from the Dodd-Frank Act continue to impact our profitability, including limitations on fee income opportunities, increased compliance costs, imposition of more stringent capital, liquidity and leverage requirements that affect our business. We cannot predict what effect any newly implemented, presently contemplated or future changes in the laws or regulations or their interpretations may have on us.
Among other things, the Dodd-Frank Act expanded the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements and securities lending and borrowing transactions. 12 Table of Contents The changes resulting from the Dodd-Frank Act continue to impact our profitability, including limitations on fee income opportunities, increased compliance costs, imposition of more stringent capital, liquidity and leverage requirements that affect our business.
Many of the amendments require the UST and FinCEN to promulgate rules. On September 29, 2022, FinCEN issued a final regulation implementing the BSA amendments included in the NDAA with respect to beneficial ownership.
Many of the amendments require the UST and FinCEN to promulgate rules. On September 29, 2022, FinCEN issued a final regulation implementing the beneficial owner information (BOI) reporting requirements. On December 22, 2023, FinCEN published a final rule that establishes standards for financial institutions and government entities to access BOI reported to FinCEN.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDuring periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations. • Future changes to our eligibility to participate in the programs offered by the GSEs and other secondary purchasers, or the loan criteria of the GSEs and other secondary purchasers could also result in a lower volume of corresponding loan originations and sales.
Biggest changeDuring periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations. • Future changes to our eligibility to participate in the programs offered by the government-sponsored entities (GSEs) and other secondary purchasers, or the loan criteria of the GSEs and other secondary purchasers could also result in a lower volume of corresponding loan originations and sales. • The estimates of revenues produced by the models we use to assess the impact of interest rates on mortgage-related revenues are dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may differ from actual subsequent experience. 24 Table of Contents Our financial condition and results of operations could be adversely affected if we must further increase our provision for credit losses or if our ACL is not sufficient to absorb actual losses.
You should carefully consider each of the following risks and all of the other information set forth in this Report.
You should carefully consider each of the following risks and all the other information set forth in this Report.
If our originations of mortgage loans decrease, resulting in fewer loans that are available to be sold to investors, this would result in a decrease in mortgage revenues and a corresponding decrease in non-interest income. • Mortgage loan production levels are sensitive to changes in economic conditions and activity, strengths or weaknesses in the housing market, changes in FRB monetary policies, interest rate fluctuations and the availability of an active secondary market or originations could shift to adjustable rate products which may be held in the portfolio.
If our originations of mortgage loans decrease, resulting in fewer loans that are available to be sold to investors, this would result in a decrease in mortgage revenues and a corresponding decrease in non-interest income. • Mortgage loan production levels are sensitive to changes in economic conditions and activity, strengths or weaknesses in the housing market, changes in FRB monetary policies, interest rate fluctuations and the availability of an active secondary market or originations that could shift to adjustable-rate products which may be held in the portfolio.
The banking and financial services industry continually encounters technological change, especially in the systems that are used to deliver products to, and execute transactions on behalf of, customers, and if we fail to continue to invest in technological improvements as they become appropriate or necessary, our ability to compete effectively could be severely impaired.
The banking and financial services industry continually encounters technological change, especially in the systems that are used to deliver products to, and execute transactions on behalf of customers. If we fail to continue to invest in technological improvements as they become appropriate or necessary, our ability to compete effectively could be severely impaired.
As technology advances, the ability to initiate transactions and access data has also become more widely distributed among mobile devices, personal computers, automated teller machines, remote deposit capture sites and similar access points, some of which are not controlled or secured by us.
As technology advances, the ability and speed to initiate transactions and access data has also become more widely distributed among mobile devices, personal computers, automated teller machines, remote deposit capture sites and similar access points, some of which are not controlled or secured by us.
Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market price of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts. 7.
Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market price of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts.
In addition, if we decide to raise additional equity capital, it could be dilutive to our existing stockholders. We are dependent on dividends from our subsidiaries to meet our financial obligations and pay dividends to stockholders. We are a holding company and conduct almost all of our operations through our subsidiaries.
In addition, if we decide to raise additional equity capital, it could be dilutive to our existing stockholders. We are dependent on dividends from our subsidiaries to meet our financial obligations and pay dividends to stockholders. We are a holding company and conduct almost all our operations through our subsidiaries.
Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our revenues and profitability. We are subject to environmental, social and governance risks that could adversely affect our reputation and the market price of our securities.
Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our revenues and profitability. We are subject to environmental, social and governance (ESG) risks that could adversely affect our reputation and the market price of our securities.
Challenging macroeconomic, recessionary and employment conditions in the market areas we serve could result in the following consequences, any of which could have a material adverse effect on our business, financial condition and results of operations: • demand for our loans, deposits and services may decline; • loan delinquencies, problem assets, foreclosures and charge-offs may increase; • weak economic conditions could limit the demand for loans by creditworthy borrowers, limiting our capacity to leverage our retail deposits and maintain our net interest income; • collateral for our loans may decline in value; and • the amount of our low-cost or non-interest-bearing deposits may decrease.
Challenging macroeconomic, recessionary and employment conditions in the market areas we serve could result in the following consequences, any of which could have a material adverse effect on our business, financial condition and results of operations, such as: demand for our loans, deposits and services may decline; loan delinquencies, problem assets, foreclosures and charge-offs may increase; weak economic conditions could limit the demand for loans by creditworthy borrowers, limiting our capacity to leverage our retail deposits and maintain our net interest income; collateral for our loans may decline in value; and the amount of our low-cost or non-interest-bearing deposits may decrease.
Adverse developments with respect to the financial services industry or sociopolitical events and circumstances may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us.
Adverse developments with respect to our financial services activities, the financial services industry or sociopolitical events and circumstances may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us.
We engage in a variety of businesses in diverse markets and rely on systems, employees, service providers and counterparties to properly process a high volume of transactions. Like all businesses, we are subject to operational risk, which represents the risk of loss resulting from inadequate or failed internal processes in our systems, human error and external events.
We engage in a variety of businesses and rely on systems, employees, service providers and counterparties to properly process a high volume of transactions. Like all businesses, we are subject to operational risk, which represents the risk of loss resulting from inadequate or failed internal processes in our systems, human error and external events.
In certain circumstances, we will not be able to make a capital distribution unless the FRB has approved such distribution, including if the dividend could not be fully funded by our net income over the last four quarters (net of dividends paid), our prospective rate of earnings retention appears inconsistent with our capital needs, asset quality, and overall financial condition, or we will not be able to continue meeting minimum required capital ratios.
In certain circumstances, we will not be able to make a capital distribution unless the FRB approves such distribution, including if the dividend could not be fully funded by our net income over the last four quarters (net of dividends paid), our prospective rate of earnings retention appears inconsistent with our capital needs, asset quality, and overall financial condition, or we will not be able to continue meeting the minimum required capital ratios.
Operational Risk Our failure to continue to recruit and retain qualified banking professionals could adversely affect our ability to compete successfully and affect our profitability. Our continued success and future growth depends heavily on our ability to attract and retain highly skilled, diverse and motivated banking professionals.
Operational Risk Our failure to continue to recruit and retain qualified banking professionals could adversely affect our ability to compete successfully and affect our profitability. Our continued success and future growth depend heavily on our ability to attract and retain highly skilled, diverse and motivated banking professionals.
Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity. Any contraction of economic activity, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.
Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity. Any contraction of economic activity, including an economic recession or an inflationary environment, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.
Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.
Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws may limit the amount that can be recovered on these loans.
Such scenarios may include the following: • changes in interest rates or interest rate spreads can affect the difference between the interest that FNBPA can earn on assets and the interest that FNBPA has to pay on liabilities, which impacts FNBPA’s overall net interest income and profitability; • such changes can affect the ability of borrowers to meet obligations under variable or adjustable-rate loans and other debt instruments and can, in turn, affect our loss rates on those assets; • such changes may decrease the demand for interest rate-based products or services, including bank loans and deposit products and the subordinated notes offered by our subsidiary, FNB Financial Services, LP; • such changes can also affect our ability to hedge various forms of market and interest rate risks and may decrease the profitability or increase the risk associated with such hedges; and • movements in interest rates also affect mortgage repayment speeds and could result in impairments of MSAs or otherwise affect the profitability of such assets.
Such scenarios may include the following: • changes in interest rates or interest rate spreads can affect the difference between the interest earned on assets and the interest paid on liabilities, which impacts FNBPA’s overall net interest income and profitability; • such changes can affect the ability of borrowers to meet obligations under variable or adjustable-rate loans and other debt instruments and can, in turn, affect our loss rates on those assets; • such changes may decrease the demand for interest rate-based products or services, including bank loans and deposit products and the subordinated notes offered by our subsidiary, FNB Financial Services, LP; • such changes can also affect our ability to hedge various forms of market and interest rate risks and may decrease the profitability or increase the risk associated with such hedges; and • movements in interest rates also affect mortgage repayment speeds and could result in impairments of MSAs or otherwise affect the profitability of such assets.
These competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings.
These competitive pressures from our peers, as well as any adoption by our regulators of new rules or supervisory guidance, including the new rules proposed by the CFPB, or more aggressive examination and enforcement policies in respect of banks’ overdraft protection practices, could cause us to modify our program and practices in ways that may have a negative impact on our revenue and earnings.
The OCC has the authority to prohibit FNBPA from paying dividends if it determines such payment would be an unsafe and unsound banking practice. Likewise, our state-based entities are subject to state laws governing dividend practices and payments. Regulatory authorities may restrict our ability to pay dividends on and repurchase our common stock.
The OCC has the authority to prohibit FNBPA from paying dividends if it determines such payment would be an unsafe and unsound banking practice. Likewise, our state-based entities are subject to state laws governing dividend practices and payments. Regulatory authorities may restrict our ability to pay dividends on, and make repurchases of, our common stock.
Our Articles of Incorporation and By-laws contain certain anti-takeover provisions that may discourage or may make more difficult or expensive a tender offer, change in control or takeover attempt that is opposed by our Board of Directors.
Certain provisions of our Articles of Incorporation and By-laws and Pennsylvania law may discourage takeovers. Our Articles of Incorporation and By-laws contain certain anti-takeover provisions that may discourage or may make more difficult or expensive a tender offer, change in control or takeover attempt that is opposed by our Board of Directors.
If we experience a material deterioration in our financial condition, liquidity, capital, results of operations or risk profile, our regulators may not permit us to make future payments on our TPS or preferred stock, which would also prevent us from paying any dividends on our common stock. 27 Table of Contents 4.
If we experience a material deterioration in our financial condition, liquidity, capital, results of operations or risk profile, our regulators may not permit us to make future payments on our TPS, which would also prevent us from paying any dividends on our common stock. 4.
Changes in regulations or the regulatory environment could adversely affect the banking and financial services industry as a whole and could limit our growth and the return to investors by restricting such activities as, for example: • the payment of dividends and stock repurchases; • balance sheet growth; • investments; • loans and interest rates; • assessments of fees, such as overdraft and electronic transfer interchange fees; • the provision of securities, insurance, brokerage or trust services; • mergers with or acquisitions of other institutions or branches; • the types of deposit and non-deposit activities in which our subsidiaries may engage; and • offering of new products and services.
Changes in regulations or the regulatory environment could adversely affect the banking and financial services industry as a whole and could limit our growth and the return to investors by restricting such activities as, the payment of dividends and stock repurchases, balance sheet growth, investments, loans and interest rates, assessments of fees, such as overdraft and interchange fees, the provision of 32 Table of Contents securities, insurance, brokerage or trust services, mergers with or acquisitions of other institutions or branches, the types of deposit and non-deposit activities in which our subsidiaries may engage, and offering of new products and services.
Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition. Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.
Changes and instability in economic conditions and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition. Our financial performance depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.
In response to this increased congressional and regulatory scrutiny of the financial services industry, and in anticipation of possible enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have modified their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.
In response to this increased governmental scrutiny of the financial services industry, and in anticipation of possible enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations including FNB have modified their overdraft protection programs, including by discontinuing the imposition of overdraft transaction fees.
In the case of commercial and industrial loans, collateral often consists of accounts receivable, inventory and equipment, which may not yield substantial recovery of principal losses incurred, and is susceptible to deterioration or other loss in advance of liquidation of such collateral.
In the case of commercial and industrial loans, collateral often consists of accounts receivable, inventory, property and equipment, which may not yield substantial recovery of principal losses incurred, and is susceptible to deterioration, declining valuations, or other losses in advance of liquidation of such collateral.
A U.S. government debt default, threatened debt default, or downgrade of the sovereign credit ratings of the U.S. by credit rating agencies, could have an adverse impact on financial markets, interest rates and economic conditions in the U.S. and worldwide.
A U.S. government debt default, threatened or wide spread perception of a potential debt default, or downgrade of the sovereign credit ratings of the U.S. by credit rating agencies, could have an adverse impact on financial markets, interest rates and economic conditions in the U.S. and worldwide.
A debt default or further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could also adversely affect the ability of the U.S. government to support the financial stability of Fannie Mae, Freddie Mac and the FHLBs, with which FNB does business, obtains financing, engages with for sales of mortgages, and in whose securities FNB invests.
A debt default or further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could also adversely affect the ability of the U.S. government to support the financial stability of Fannie Mae, Freddie Mac and the FHLBs, with which we do business, obtains financing, engages with for sales of mortgages, and in whose securities we invest.
Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business, and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.
Further, we may be exposed to negative publicity (e.g., traditional and social media) based on the identity and activities of those to whom we lend and with which we otherwise do business, and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.
The availability of additional capital or financing will depend on a variety of factors, many of which are outside of our control, such as market conditions, the general availability of credit, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, marketability of our stock, as well as the possibility that lenders and investors could develop a negative perception of our long- or short-term financial prospects if we incur large credit losses or if the level of business activity decreases due to economic conditions.
The availability of additional capital or financing will depend on a variety of factors, many of which are outside of our control, including market conditions, credit availability, our credit ratings and credit capacity, marketability of our stock, and the possibility that lenders and investors could develop a negative perception of our long- or short-term financial prospects if we incur large credit losses or if the level of business activity decreases due to economic conditions.
It is possible that we could have exposure to liability and suffer losses as a result of a security breach or cyber-attack that occurred through no fault of ours. Although we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case.
It is possible that we could have exposure to liability and suffer losses as a result of a security breach or cyber-attack that occurred through no fault of ours. Although we maintain specific “cyber” insurance coverage, the amount or form of coverage may not be adequate in any particular case.
Our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism and other physical security threats, computer viruses or compromises, ransomware attacks, misplaced or lost 30 Table of Contents data, programming and/or human errors or other similar events.
Our current facilities and systems, as well as those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism and other physical security threats, computer viruses or compromises, ransomware attacks, misplaced or lost data, programming and/or human errors or other similar events.
We have outstanding TPS and Series E preferred stock that are senior to the common stock and could adversely affect our ability to declare or pay dividends or distributions on our common stock.
We have outstanding TPS that are senior to our common stock and could adversely affect our ability to declare or pay dividends or distributions on our common stock.
Depending on enactment dates, these law changes may be retroactive to previous periods and as a result could negatively affect our current and future financial performance.
Depending on enactment dates, these law changes may be retroactive to previous periods which could negatively affect our current and future financial performance.
Overnight rates on Repo transactions are used by the FRB to calculate SOFR, the benchmark interest rate that is replacing LIBOR on loans and other financial contracts. A disruption in the Repo markets could affect interest rates paid on SOFR-benchmarked loans and payments on swaps and other financial contracts that use SOFR as a benchmark rate.
Overnight rates on Repo transactions are used by the 31 Table of Contents FRB to calculate SOFR. A disruption in the Repo markets could affect interest rates paid on SOFR-benchmarked loans and payments on swaps and other financial contracts that use SOFR as a benchmark rate.
The banking and financial services industry continually undergoes technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better compete for and serve customers and reduce costs.
The banking and financial services industry continually undergoes technological changes, with frequent introductions of new technology-driven products and services, including recent and rapid developments in artificial intelligence. The effective use of technology increases efficiency and enables financial institutions to better compete for and serve customers and reduce costs.
In addition, some of our commercial borrowers have more than one loan outstanding with us, which means that an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss.
Some of our commercial borrowers have multiple loans outstanding with us, which means that an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss.
The monetary, tax and other policies of the U.S. Government and its agencies also have a significant impact on interest rates and overall financial market performance. An important function of the FRB is to regulate the national supply of bank credit and certain interest rates through implementation of certain monetary policies.
The monetary, tax and other policies of the U.S. Government and its agencies also have a significant impact on interest rates and overall financial market performance. The FRB regulates the national supply of bank credit and certain interest rates through the implementation of certain monetary policies and actions.
Instability and uncertainty in the commercial and residential real estate markets, headwinds for lease rates and landlord cash flows, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.
Instability and uncertainty in the commercial and residential real estate markets, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.
The risk of non-payment is affected by credit risks of a particular borrower, changes in economic conditions that impact certain geographic markets or industries, fluctuations in interest rates on adjustable-rate loans, the duration of the loan, and in the case of a collateralized loan, uncertainties as to the future value of the collateral. 23 Table of Contents Generally, commercial loans and leases present a greater risk of non-payment by a borrower than other types of loans.
The risk of non-payment is affected by credit risks of a particular borrower, changes in economic conditions that impact certain geographic markets or industries, fluctuations in interest rates on adjustable-rate loans, the duration of the loan, and in the case of a collateralized loan, uncertainties as to the future value of the collateral.
Reputational Risk Our key assets include our brand and reputation and our business may be affected by how we are perceived in the market place. Our brand and our reputation are our key assets.
Reputation Risk Our key assets include our brand and reputation and our business may be affected by how we are perceived by the public. Our brand and our reputation are our key assets.
The leadership of the federal banking agencies, including the FRB and the OCC, have emphasized that their supervisory charge is not to regulate climate concerns, but rather focus on climate-related risks that are faced by banking organizations of all types and sizes, specifically including physical and transition risks, and are in the process of enhancing supervisory expectations regarding banks' risk management practices.
The leadership of the federal banking agencies, including the FRB and the OCC, have emphasized that their supervisory charge is not to regulate climate concerns, but rather focus on climate-related risks that are faced by banking organizations of all types and sizes, specifically including physical and transition risks, and are in the process of enhancing supervisory expectations through the implementation of climate related regulations and guidelines governing banks' risk management practices, which will likely result in increased compliance costs and other compliance-related risks.
Our preferred sources for funding are deposits and customer repurchase agreements, which are low cost and stable sources of funding for us. We compete with commercial banks, savings banks and credit unions, as well as non-depository competitors such as mutual funds, fintechs, securities and brokerage firms and insurance companies, for deposits and customer repurchase agreements.
Our preferred sources for funding are deposits and customer repurchase agreements, which are low cost and stable sources of funding for us. We compete with commercial banks, savings banks and credit unions, as well as numerous non-depository competitors for deposits and customer repurchase agreements.
FNB, FNBPA and other affiliates are exposed to many different industries and counterparties and they routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients.
Financial institutions are interrelated as a result of trading, clearing, counterparty and other relationships. FNB, FNBPA and other affiliates are exposed to many different industries and counterparties and they routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients.
We anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future. We may at some point, however, need to raise additional capital to support continued growth, whether such growth occurs organically or through acquisitions.
While we anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future, we may, at some point need to raise additional capital to support current operations or continued growth.
Hurricanes, tornadoes, excessive rainfall, droughts or other adverse weather events could negatively affect the local economies in the markets of our footprint, or disrupt our operations in those markets, which could have an adverse effect on our business or results of operations. The economy of the markets in our footprint is affected, from time to time, by adverse weather events.
Hurricanes, tornadoes, excessive rainfall, droughts or other adverse weather events, and public health emergencies could negatively affect the local economies in the markets of our footprint, or disrupt our operations in those markets, which could have an adverse effect on our business or results of operations.
Due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB announced in January 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the Federal funds rate over time. The FOMC has since increased the target range seven times throughout 2022.
Due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB announced in January 2022 that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time, which it did from March 2022 to July 2023.
The total carrying value of the AFS securities portfolio as of December 31, 2022 was $3.3 billion and the estimated duration of the portfolio was approximately 3.5 years. The nature of fixed-income securities is such that changes in market interest rates impact the value of these assets.
We maintain an investment portfolio consisting of various high-quality liquid fixed-income securities. The total carrying value of the AFS securities portfolio as of December 31, 2023 was $3.3 billion and the estimated duration of the portfolio was approximately 3 years. The nature of fixed-income securities is such that changes in market interest rates impact the value of these assets.
Risks arising from ESG matters may adversely affect, among other things, our reputation and the market price of our securities.
Risks arising from ESG matters, including shifts in investor approaches related to ESG, may adversely affect, among other things, our reputation and the market price of our securities.
Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to predict how climate change may impact our financial condition and operations; however, as a banking organization, the physical effects of climate change may present certain unique risks to us. 34 Table of Contents We could be adversely affected by changes in the law, especially changes in the regulation of the banking industry.
Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to predict how climate change may impact our financial condition and operations; however, as a banking organization, the physical effects of climate change may present certain unique risks to us.
Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks.
As a result of uncertain domestic political conditions, including potential future federal government shutdowns, possible reductions in federal government spending, and the possibility of the federal government defaulting on its obligations for a period of time, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks.
Any complications caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to comply with applicable laws and regulations or to conform to our internal controls and risk management procedures, and failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business.
Any complications caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor (including zero-day attacks associated with vulnerabilities in third-party software that were not previously known), failure of a vendor to comply with applicable laws and regulations or to conform to our internal controls and risk management procedures, and failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. 30 Table of Contents There may be risks resulting from the extensive use of models in our business.
Liquidity risk is the potential that we will be unable to meet our obligations as they come due, capitalize on growth opportunities as they arise, or pay regular dividends on our common stock because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances.
Liquidity risk is the potential that we will be unable to meet our obligations as they come due, capitalize on growth opportunities as they arise, or pay regular dividends on our common stock because of illiquid assets or an inability to obtain satisfactory funding.
We are subject to a variety of risks arising from environmental, social and governance matters or “ESG” matters. ESG matters include climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we otherwise do business.
We are subject to a variety of risks arising from ESG matters. ESG matters include climate risk, hiring practices, the diversity of our work force, and equitable treatment of our employees, customers and third parties with whom we otherwise do business.
Certain investors are beginning to incorporate the business risks of climate change and the adequacy of companies’ responses to the risks posed by climate change and other ESG matters into their investment theses.
Certain investors have incorporated the business risks of climate change and the adequacy of companies’ responses to the risks posed by climate change into their investment theses.
Even if a weather event does not cause any physical damage in our markets, a significant weather event could affect the market value of property within our footprint, particularly agricultural interests, which are highly sensitive to excessive rainfall or droughts. The impacts of the pandemic on our business, financial condition and results of operations are likely to continue to change.
Even if a weather event does not cause any physical damage in our markets, it could affect the market value of property within our footprint, particularly agricultural interests, which are highly sensitive to excessive rainfall or droughts. 6.
This, in turn, could have an adverse effect on our ability to attract and retain customers and employees and could have a negative impact on the market price for our securities. Investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations to address ESG matters when making investment and operational decisions.
Such negative publicity could adversely impact our relationships and reputation with our existing and prospective customers and potentially have an adverse effect on our ability to attract and retain customers and employees and could have a negative impact on the market price for our securities. 27 Table of Contents Investors may consider the steps taken and resources allocated by financial institutions and other commercial organizations to address ESG matters when making investment decisions.
Accordingly, the pandemic and related dynamics could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels. 6. Legal and Compliance Risk Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
Legal and Compliance Risk Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
Dividends on our common stock will be payable only if, when and as authorized and declared by our Board of Directors. In addition, banking laws and regulations and our banking regulators may limit our ability to pay dividends and make share repurchases.
Dividends on our common stock will be payable only if, when and as authorized and declared by our Board of Directors; however, our ability to pay dividends and make stock repurchases may be limited due to banking laws and regulations and limitations imposed by our banking regulators (including OCC limiting dividends from FNBPA).
Generally, any sustained period of decreased economic activity or higher interest rates could reduce demand for mortgage loans and refinancings. In addition, our results of operations are affected by the amount of non-interest expense associated with mortgage banking activities, such as salaries, commissions and employee benefits, occupancy, equipment and data processing expense and other operating costs.
In addition, our results of operations are affected by the amount of non-interest expense associated with mortgage banking activities, such as salaries, commissions and employee benefits, occupancy, equipment and data processing expense and other operating costs.
Determination of the allowance is inherently subjective and is based on factors that are susceptible to significant change. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the ACL.
Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, suspected fraud, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the ACL.
Liquidity is needed to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.
Our ability to implement our business strategy will depend on our liquidity and ability to obtain funding for loan originations, working capital and other general purposes. Liquidity is needed to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures.
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
The timing of and prospects for any such action are uncertain at this time. The loss of these revenue streams and the higher cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
They typically involve larger loan balances and are particularly sensitive to economic conditions. The borrower’s ability to repay usually depends on the successful operation of its business and income stream.
Generally, commercial loans and leases present a greater risk of non-payment by a borrower than other types of loans. They typically involve larger loan balances and are particularly sensitive to economic conditions. The borrower’s ability to repay usually depends on the successful operation of its business and income stream.
We are also exposed to operational risk through our outsourcing arrangements, and the effect the changes in circumstances or capabilities of our outsourcing vendors can have on our ability to continue to perform operational functions necessary to our business. We outsource certain data processing and online and mobile banking services to third-party providers.
We are also exposed to operational risk through our outsourcing arrangements, and the effect the changes in circumstances or capabilities of our outsourcing vendors can have on our ability to continue to perform operational functions necessary to our business. External and internal risk has proliferated in recent years.
We do not have any significant assets other than cash and the stock of our subsidiaries. Accordingly, we depend on dividends from our subsidiaries to meet our financial obligations and to pay dividends to stockholders. Our right to participate in any distribution of earnings or assets of our subsidiaries is subject to the prior claims of creditors of such subsidiaries.
We do not have any significant assets other than cash and the stock of our subsidiaries. Accordingly, we depend on dividends from our subsidiaries, in 26 Table of Contents particular FNBPA, to meet our financial obligations and to pay dividends to stockholders.
These third parties provide key components of our business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access.
We rely on certain external vendors to provide products, information systems and services necessary, including our core processing system, to maintain our day-to-day operations. These third parties provide key components of our business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access.
Our financial condition and results of operations could be adversely affected if we must further increase our provision for credit losses or if our ACL is not sufficient to absorb actual losses. There is no precise method of predicting loan losses. We can give no assurance that our ACL will be sufficient to absorb actual loan losses.
There is no precise method of predicting loan losses. We can give no assurance that our ACL will be sufficient to absorb actual loan losses. Excess loan losses could have a material adverse effect on our financial condition and results of operations.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations, and any related economic downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.
Interest rate risk may also result from timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, hedging activity and the potential exercise of explicit or embedded options. 25 Table of Contents Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations, and any related economic downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.
If we are unable to attract and maintain sufficient levels of deposits and customer repurchase agreements to fund our loan growth and liquidity objectives, we may be subject to paying higher funding costs by raising interest rates that are paid on deposits and customer repurchase agreements or cause us to source funds from third-party providers which may be higher cost funding. 26 Table of Contents Our growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.
If a significant portion of our deposits were to be withdrawn within a short period of time or if we are unable to attract and maintain sufficient levels of deposits and customer repurchase agreements to fund our loan growth and liquidity objectives, we may be subject to paying higher funding costs by raising interest rates that are paid on deposits and customer repurchase agreements or cause us to source funds from third-party providers which may be higher cost funding, impacting our net interest margin and overall profitability.
Various factors, such as economic conditions, regulatory and other governmental concerns, and competition, may impede or prohibit the opening of new retail branches or optimizing our existing branch network. Further, we may be unable to attract and retain experienced bankers, which could adversely affect our organic growth.
Various factors, such as economic conditions, regulatory and other governmental concerns and competition, may impede or prohibit the opening of new retail branches or optimizing our existing branch network. If we are not able to continue our historical levels of growth, we may not be able to maintain our historical revenue trends.
As cyber threats continue to evolve and increase, we may be required to spend significant additional resources to continue to modify or enhance our protective and preventative measures or to investigate and remediate any information security vulnerabilities.
As cyber threats continue to evolve and increase, we may be required to spend significant additional resources to continue to modify or enhance our protective and preventative measures or to investigate and remediate any information security vulnerabilities. O ur day-to-day operations rely heavily on the proper functioning of products, information systems and services provided by third-party, external vendors.
Adverse economic developments, specifically including inflation-related impacts, may have a negative effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases.
Adverse economic developments, specifically including inflation-related impacts, may have a negative effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases. According to the FRB’s October 2023 Financial Stability Report, commercial real estate (CRE) values remained elevated relative to fundamentals, even as prices continued to decline.
As of December 31, 2022, the target range for the Federal funds rate had been increased to 4.25% - 4.50% and the FOMC signaled that future increases may be appropriate in order to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels. 25 Table of Contents Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; and (iii) the average duration of our mortgage portfolio and other interest-earning assets.
Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; and (iii) the average duration of our mortgage portfolio and other interest-earning assets.
Our business could be adversely affected by difficult economic conditions in the regions in which we operate. We operate in seven states and the District of Columbia. Most of our customers are individuals and small- and medium-sized businesses that are dependent upon their regional economies.
We operate in seven states and the District of Columbia. Most of our customers are individuals and small- and medium-sized businesses that are dependent upon their regional economies. The economic conditions in these local markets may be different from, and in some instances worse than, economic conditions in the U.S. as a whole.
We cannot predict whether, or to what extent, damage caused by future weather conditions will affect our operations, customers or the economies in our markets.
The economy of the markets in our footprint is affected, from time to time, by adverse weather events and other disruptions, including as a result of public health issues. We cannot predict whether, or to what extent, damage caused by future weather conditions or other disruptions will affect our operations, customers or the economies in our markets.
Excess loan losses could have a material adverse effect on our financial condition and results of operations. The level of the ACL reflects the judgment and estimates of management regarding the amount and timing of future cash flows, current fair value of the underlying collateral and other qualitative risk factors that may affect the loan.
The level of the ACL reflects the judgment and estimates of management regarding the amount and timing of future cash flows, current fair value of the underlying collateral and other qualitative risk factors that may affect the loan. Determination of the allowance is inherently subjective and is based on factors that are susceptible to significant change.
Despite our effort to modify our overdraft practices to conform to recent regulatory guidance and expectations, we may remain subject to regulatory criticism and negative public reaction through our continued offering of these products and services. 35 Table of Contents Certain provisions of our Articles of Incorporation and By-laws and Pennsylvania law may discourage takeovers.
Despite our effort to modify our overdraft practices to conform to recent regulatory guidance and expectations, and industry 33 Table of Contents practices, we may remain subject to regulatory criticism or potential enforcement action, particularly in view of the CFPB's aggressive interpretations and guidance regarding bank overdraft practices, and potentially subject to negative public reaction through our continued offering of certain of these products and services.
Based on the duration of our AFS securities portfolio, a one percent decrease in market rates is projected to increase the market value of the AFS securities portfolio by approximately $118.1 million, while a one percent increase in market rates is projected to decrease the market value of the AFS securities portfolio by approximately $115.4 million.
Based on the duration of our AFS securities portfolio, a one percent increase or decrease in market rates is projected to positively or negatively impact the market value of the AFS securities portfolio by approximately $100.1 million. Increases or decreases in market interest rates are expected to further increase or decrease our AOCI (loss) and thereby decrease stockholders’ equity.
Increased attention to ESG matters also has caused public officials, including certain state attorneys general, treasurers, and legislators, to take various actions to impact the extent to which ESG principles are considered by private investors.
Increased attention to ESG matters also has caused public officials, including certain state attorneys general, treasurers, and legislators, to take various actions to impact the extent to which ESG principles are considered by private investors, including actions to limit business with government entities or the initiation of an investigation or enforcement action because of what is perceived to be, depending on the governmental authority, either our unwarranted focus or lack of focus on ESG matters. 5.
We compete against many institutions with greater financial resources both within our industry and in other industries to attract these qualified individuals.
We compete against many institutions with greater financial resources both within our industry and in other industries to attract these qualified individuals. Our failure to recruit and retain adequate talent could reduce our ability to compete successfully and adversely affect our business and profitability. The financial soundness of other financial institutions may adversely affect FNB, FNBPA and other affiliates.
Compliance with heightened capital standards may reduce our ability to generate or originate revenue-producing assets and thereby restrict revenue generation from banking and non-banking operations. If we fail to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected.
Changes to present capital and liquidity requirements could restrict our activities and require us to maintain additional capital. Compliance with heightened capital standards may reduce our ability to generate or originate revenue-producing assets and thereby restrict revenue generation from banking and non-banking operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFollowing is a table that shows the branches/retail offices, by state, and the branches/retail offices owned and leased for the Community Banking segment: December 31, 2022 Community Banking Pennsylvania 184 Ohio 28 Maryland 31 West Virginia 2 North Carolina 96 South Carolina 5 Washington, D.C. 1 Virginia 1 Total number of branches/retail offices 348 Total branches/retail offices owned 194 Total branches/retail offices leased 154
Biggest changeFor additional information regarding the lease commitments, see Note 11, “Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 39 Table of Contents Following is a table that shows the branches/retail offices, by state, and the branches/retail offices owned and leased for the Community Banking segment: December 31, 2023 Community Banking Pennsylvania 184 Ohio 27 Maryland 31 West Virginia 2 North Carolina 93 South Carolina 6 Washington, D.C. 1 Virginia 2 Total number of branches/retail offices 346 Total branches/retail offices owned 192 Total branches/retail offices leased 154
Additionally, we lease other office space in Harrisburg and Hermitage, Pennsylvania, and in Raleigh, North Carolina which houses various support departments. 37 Table of Contents The operating leases for the branches/retail offices of the Community Banking segment expire at various dates through the year 2051 and generally include options to renew.
Additionally, we lease other office space in Harrisburg and Hermitage, Pennsylvania, and in Raleigh, North Carolina which houses various support departments. The operating leases for the branches/retail offices of the Community Banking segment expire at various dates through the year 2051 and generally include options to renew.
We have other operating leases that have not commenced, including the lease, with a related party, of the future new FNB headquarters building in Pittsburgh, Pennsylvania. For additional information regarding the lease commitments, see Note 11, “Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
We have other operating leases that have not commenced, including the lease, with a related party, of the future new FNB headquarters building in Pittsburgh, Pennsylvania. During 2023, several floors of the FNB headquarters building have been made available to FNB for the purpose of constructing our office spaces, and we commenced the lease of those floors.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeCalabrese, Jr. 60 Chief Financial Officer of FNB; Executive Vice President of FNBPA Gary L. Guerrieri 62 Chief Credit Officer of FNB; Executive Vice President of FNBPA James G. Orie 64 Chief Legal Officer and Corporate Secretary of FNB; Executive Vice President of FNBPA James L. Dutey 49 Corporate Controller and Senior Vice President of FNB David B.
Biggest changeCalabrese, Jr. 61 Chief Financial Officer Gary L. Guerrieri 63 Chief Credit Officer James G. Orie 65 Chief Legal Officer and Corporate Secretary James L. Dutey 50 Corporate Controller and Principal Accounting Officer David B. Mitchell, II 66 Chief Wholesale Banking Officer Barry C.
The executive officers are elected by our Board of Directors, subject in certain cases to the terms of an employment agreement between the officer and us. 39 Table of Contents PART II.
The executive officers are elected by our Board of Directors, subject in certain cases to the terms of an employment agreement between the officer and us. 41 Table of Contents PART II.
ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 38 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The name, age and principal occupation for each of our executive officers as of January 31, 2023 are set forth below: Name Age Principal Occupation Vincent J. Delie, Jr. 58 President and Chief Executive Officer of FNB; Chief Executive Officer of FNBPA Vincent J.
ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 40 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The name, age and principal occupation for each of our executive officers as of January 31, 2024 are set forth below: Name Age Principal Occupation Vincent J. Delie, Jr. 59 Chairman, President and Chief Executive Officer Vincent J.
Mitchell, II 65 Chief Wholesale Banking Officer of FNBPA Barry C. Robinson 59 Chief Consumer Banking Officer of FNBPA There are no family relationships among any of the above executive officers, and there is no arrangement or understanding between any of the above executive officers and any other person pursuant to which he was selected as an officer.
Robinson 60 Chief Consumer Banking Officer There are no family relationships among any of the above executive officers, and there is no arrangement or understanding between any of the above executive officers and any other person pursuant to which he was selected as an officer.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis stock performance graph assumes $100 was invested on December 31, 2017, and the cumulative return is measured as of each subsequent fiscal year end. F.N.B. Corporation Five-Year Stock Performance Total Return, Including Stock and Cash Dividends Source: S & P Global Market Intelligence 40 Table of Contents
Biggest changeThis stock performance graph assumes $100 was invested on December 31, 2018, and the cumulative return is measured as of each subsequent fiscal year end. F.N.B. Corporation Five-Year Stock Performance Total Return, Including Stock and Cash Dividends Source: S & P Global Market Intelligence 42 Table of Contents
We did not purchase any of our own equity securities during the fourth quarter of 2022. STOCK PERFORMANCE GRAPH Comparison of Total Return on F.N.B.
We did not purchase any of our own equity securities during the fourth quarter of 2023. STOCK PERFORMANCE GRAPH Comparison of Total Return on F.N.B.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the NYSE under the symbol “FNB.” As of January 31, 2023, there were 15,244 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the NYSE under the symbol “FNB.” As of January 31, 2024, there were 14,596 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe major categories of the Consolidated Statements of Income and their respective impact to the increase (decrease) in net income are presented in the following table: TABLE 2 Year Ended December 31 $ Change % Change (in thousands, except per share data) 2022 2021 Net interest income $ 1,119,780 $ 906,476 $ 213,304 23.5 % Provision for credit losses 64,206 629 63,577 10,108 Non-interest income 323,553 330,419 (6,866) (2.1) Non-interest expense 826,392 733,168 93,224 12.7 Income taxes 113,626 98,496 15,130 15.4 Net income 439,109 404,602 34,507 8.5 Less: Preferred stock dividends 8,041 8,041 — — Net income available to common stockholders $ 431,068 $ 396,561 $ 34,507 8.7 % Earnings per common share – Basic $ 1.23 $ 1.24 $ (0.01) (0.8) % Earnings per common share – Diluted 1.22 1.23 (0.01) (0.8) Cash dividends per common share 0.48 0.48 — — The following table presents selected financial ratios and other relevant data used to analyze our performance: TABLE 3 Year Ended December 31 2022 2021 Return on average equity 8.02 % 8.04 % Return on average tangible common equity (2) 15.31 15.53 Return on average assets 1.05 1.05 Return on average tangible assets (2) 1.14 1.14 Book value per common share (1) $ 15.39 $ 15.81 Tangible book value per common share (1) (2) 8.27 8.59 Equity to assets (1) 12.93 % 13.03 % Average equity to average assets 13.05 13.04 Common equity to assets (1) 12.68 12.76 Tangible equity to tangible assets (1) (2) 7.50 7.65 Tangible common equity to tangible assets (1) (2) 7.24 7.36 Common equity tier 1 capital ratio (1) 9.82 9.92 Dividend payout ratio 39.54 39.20 (1) Period-end (2) Non-GAAP 50 Table of Contents The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities: TABLE 4 Year Ended December 31 2022 2021 2020 (dollars in thousands) Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Assets Interest-earning assets: Interest-bearing deposits with banks $ 2,174,415 $ 24,005 1.10 % $ 2,723,493 $ 3,732 0.14 % $ 470,466 $ 1,910 0.41 % Federal funds sold 500 29 5.81 — — — — — — Taxable investment securities (1) 6,126,544 115,956 1.89 5,131,473 85,633 1.67 5,038,547 106,266 2.11 Tax-exempt investment securities (1) (2) 1,010,819 34,508 3.41 1,091,130 37,408 3.43 1,132,307 40,121 3.54 Loans held for sale 189,360 8,151 4.30 227,181 8,276 3.64 212,328 9,817 4.62 Loans and leases (2) (3) 27,829,166 1,113,593 4.00 25,075,559 880,609 3.51 25,211,191 984,662 3.91 Total interest-earning assets (2) 37,330,804 1,296,242 3.47 34,248,836 1,015,658 2.97 32,064,839 1,142,776 3.56 Cash and due from banks 429,741 386,648 359,936 Allowance for credit losses (377,252) (363,462) (350,309) Premises and equipment 405,023 338,644 336,117 Other assets 4,166,392 3,992,426 4,196,847 Total assets $ 41,954,708 $ 38,603,092 $ 36,607,430 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing demand $ 14,951,905 78,599 0.53 $ 13,866,846 18,676 0.13 $ 12,161,766 57,224 0.47 Savings 3,976,285 8,512 0.21 3,442,809 664 0.02 2,890,440 2,822 0.10 Certificates and other time 3,004,482 21,410 0.71 3,208,586 27,875 0.87 4,261,738 72,825 1.71 Total interest-bearing deposits 21,932,672 108,521 0.49 20,518,241 47,215 0.23 19,313,944 132,871 0.69 Short-term borrowings 1,427,361 24,535 1.72 1,660,070 26,675 1.61 2,515,558 38,504 1.53 Long-term borrowings 836,154 32,118 3.84 924,090 24,344 2.63 1,473,708 36,849 2.50 Total interest-bearing liabilities 24,196,187 165,174 0.68 23,102,401 98,234 0.43 23,303,210 208,224 0.89 Non-interest-bearing demand 11,639,499 10,090,117 8,004,557 Total deposits and borrowings 35,835,686 0.46 33,192,518 0.30 31,307,767 0.66 Other liabilities 643,179 377,386 395,363 Total liabilities 36,478,865 33,569,904 31,703,130 Stockholders’ equity 5,475,843 5,033,188 4,904,300 Total liabilities and stockholders’ equity $ 41,954,708 $ 38,603,092 $ 36,607,430 Net interest-earning assets $ 13,134,617 $ 11,146,435 $ 8,761,629 Net interest income (FTE) (2) 1,131,068 917,424 934,552 Tax-equivalent adjustment (11,288) (10,948) (12,470) Net interest income $ 1,119,780 $ 906,476 $ 922,082 Net interest spread 2.79 % 2.54 % 2.67 % Net interest margin (2) 3.03 % 2.68 % 2.91 % (1) The average balances and yields earned on securities are based on historical cost.
Biggest changeIn comparison, the results for 2022 included provision for credit losses of $64.2 million including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions, the impact of $7.0 million of branch consolidation expenses and $45.3 million of merger-related expenses. 51 Table of Contents The major categories of the Consolidated Statements of Income and their respective impact to the increase (decrease) in net income are presented in the following table: TABLE 2 Year Ended December 31 $ Change % Change (in thousands, except per share data) 2023 2022 Net interest income $ 1,316,504 $ 1,119,780 $ 196,724 17.6 % Provision for credit losses 71,754 64,206 7,548 11.8 Non-interest income 254,332 323,553 (69,221) (21.4) Non-interest expense 915,436 826,392 89,044 10.8 Income taxes 98,795 113,626 (14,831) (13.1) Net income 484,851 439,109 45,742 10.4 Less: Preferred stock dividends 8,041 8,041 — — Net income available to common stockholders $ 476,810 $ 431,068 $ 45,742 10.6 % Earnings per common share – Basic $ 1.32 $ 1.23 $ 0.09 7.3 % Earnings per common share – Diluted 1.31 1.22 0.09 7.4 Cash dividends per common share 0.48 0.48 — — The following table presents selected financial ratios and other relevant data used to analyze our performance: TABLE 3 Year Ended December 31 2023 2022 Return on average equity 8.29 % 8.02 % Return on average tangible common equity (1) 15.45 15.31 Return on average assets 1.09 1.05 Return on average tangible assets (1) 1.19 1.14 Book value per common share $ 16.56 $ 15.39 Tangible book value per common share (1) 9.47 8.27 Equity to assets 13.11 % 12.93 % Average equity to average assets 13.12 13.05 Common equity to assets 12.88 12.68 Tangible equity to tangible assets (1) 8.03 7.50 Tangible common equity to tangible assets (1) 7.79 7.24 Common equity tier 1 capital ratio 10.04 9.82 Dividend payout ratio 36.51 39.54 (1) Non-GAAP 52 Table of Contents The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities: TABLE 4 Year Ended December 31 2023 2022 2021 (dollars in thousands) Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Assets Interest-earning assets: Interest-bearing deposits with banks $ 1,053,176 $ 40,860 3.88 % $ 2,174,415 $ 24,005 1.10 % $ 2,723,493 $ 3,732 0.14 % Federal funds sold — — — 500 29 5.81 — — — Taxable investment securities (1) 6,099,052 148,374 2.43 6,126,544 115,956 1.89 5,131,473 85,633 1.67 Tax-exempt investment securities (1) (2) 1,052,416 36,476 3.46 1,010,819 34,508 3.41 1,091,130 37,408 3.43 Loans held for sale 131,985 9,496 7.19 189,360 8,151 4.30 227,181 8,276 3.64 Loans and leases (2) (3) 31,372,574 1,749,786 5.58 27,829,166 1,113,593 4.00 25,075,559 880,609 3.51 Total interest-earning assets (2) 39,709,203 1,984,992 5.00 37,330,804 1,296,242 3.47 34,248,836 1,015,658 2.97 Cash and due from banks 435,271 429,741 386,648 Allowance for credit losses (409,342) (377,252) (363,462) Premises and equipment 456,844 405,023 338,644 Other assets 4,417,627 4,166,392 3,992,426 Total assets $ 44,609,603 $ 41,954,708 $ 38,603,092 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing demand $ 14,296,571 283,914 1.99 $ 14,951,905 78,599 0.53 $ 13,866,846 18,676 0.13 Savings 3,766,920 37,338 0.99 3,976,285 8,512 0.21 3,442,809 664 0.02 Certificates and other time 5,176,674 173,680 3.36 3,004,482 21,410 0.71 3,208,586 27,875 0.87 Total interest-bearing deposits 23,240,165 494,932 2.13 21,932,672 108,521 0.49 20,518,241 47,215 0.23 Short-term borrowings 2,075,751 77,883 3.75 1,427,361 24,535 1.72 1,660,070 26,675 1.61 Long-term borrowings 1,685,554 83,332 4.94 836,154 32,118 3.84 924,090 24,344 2.63 Total interest-bearing liabilities 27,001,470 656,147 2.43 24,196,187 165,174 0.68 23,102,401 98,234 0.43 Non-interest-bearing demand 10,900,280 11,639,499 10,090,117 Total deposits and borrowings 37,901,750 1.73 35,835,686 0.46 33,192,518 0.30 Other liabilities 856,771 643,179 377,386 Total liabilities 38,758,521 36,478,865 33,569,904 Stockholders’ equity 5,851,082 5,475,843 5,033,188 Total liabilities and stockholders’ equity $ 44,609,603 $ 41,954,708 $ 38,603,092 Net interest-earning assets $ 12,707,733 $ 13,134,617 $ 11,146,435 Net interest income (FTE) (2) 1,328,845 1,131,068 917,424 Tax-equivalent adjustment (12,341) (11,288) (10,948) Net interest income $ 1,316,504 $ 1,119,780 $ 906,476 Net interest spread 2.57 % 2.79 % 2.54 % Net interest margin (2) 3.35 % 3.03 % 2.68 % (1) The average balances and yields earned on securities are based on historical cost.
(2) The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis.
(2) The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis (non-GAAP).
Specifically, the following considerations are incorporated into the ACL calculation: • a third-party macroeconomic forecast scenario; • a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and • the historical through the cycle default mean calculated using an expanded period to include a prior recessionary period.
Specifically, the following considerations are incorporated into the ACL calculation: • a third-party macroeconomic forecast scenario; • a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and • the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period.
Fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. We use significant and complex estimates, assumptions and judgments when assets and liabilities are required to be recorded at or adjusted to fair value.
Fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. We use significant and complex estimates, assumptions and judgments when certain assets and liabilities are required to be recorded at or adjusted to fair value.
Management has determined that no credit loss exists on securities AFS. Securities, like loans, are subject to similar interest rate and credit risk. In addition, by their nature, securities classified as AFS are also subject to fair value risks that could negatively affect the level of liquidity available to us, as well as stockholders’ equity.
Management has determined that no credit loss exists on securities AFS. Securities, like loans, are subject to interest rate and credit risk. In addition, by their nature, securities classified as AFS are also subject to fair value risks that could negatively affect the level of liquidity available to us, as well as stockholders’ equity.
In the event of a prolonged economic downturn or deterioration in the economic outlook, interim quantitative assessments of our goodwill balance could be required in future periods. Any impairment charge would not affect our capital ratios, tangible common equity, tangible book value per share or liquidity position.
In the event of a prolonged economic downturn or deterioration in the economic outlook, interim quantitative assessments of our goodwill balance could be required in future periods. Any impairment charge would not directly affect our capital ratios, tangible common equity, tangible book value per share or liquidity position.
Provision for Credit Losses The provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses inherent in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period.
Provision for Credit Losses Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period.
In these simulations, our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. The ALCO regularly reviews earnings simulations over multiple years under various interest rate scenarios.
In these simulations, our current financial position is combined with assumptions regarding future business activities to calculate net interest income under various hypothetical rate scenarios. The ALCO regularly reviews earnings simulations over multiple years under various interest rate scenarios.
Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from historic tax credits, tax-exempt income on investments and loans and income from BOLI.
Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from tax credits, tax-exempt income on investments and loans and income from BOLI.
Risk Factors and the Risk Management sections in this Annual Report on Form 10-K (including the MD&A section), our subsequent 2023 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other subsequent filings with the SEC, which are available on our corporate website at https://www.fnb-online.com/about-us/investor-information/reports-and-filings or the SEC's website at www.sec.gov.
Risk Factors and the Risk Management sections in this Annual Report on Form 10-K (including the MD&A section), our subsequent 2024 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other subsequent filings with the SEC, which are available on our corporate website at https://www.fnb-online.com/about-us/investor-information/reports-and-filings or the SEC's website at www.sec.gov.
Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies. The following repricing gap analysis as of December 31, 2022 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time.
Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies. The following repricing gap analysis as of December 31, 2023 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time.
We also performed a qualitative analysis through year-end and concluded that it was not more-likely-than-not that the fair value of one or more of our reporting units was below its respective carrying amount, and therefore no triggering event has occurred, as of December 31, 2022.
We also performed a qualitative analysis through year-end and concluded that it was not more-likely-than-not that the fair value of one or more of our reporting units was below its respective carrying amount, and therefore no triggering event has occurred, as of December 31, 2023.
For additional information on repricing of floating interest rates, see the Market Risk section of MD&A, which is included in Item 7 of this Report. Non-Performing Assets Non-performing loans include non-accrual loans and non-performing TDRs. Past due loans are reviewed monthly to identify loans for non-accrual status.
For additional information on repricing of floating interest rates, see the Market Risk section of MD&A, which is included in Item 7 of this Report. Non-Performing Assets Non-performing loans include non-accrual loans. Past due loans are reviewed monthly to identify loans for non-accrual status.
Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and adequate levels of liquidity.
Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and appropriate levels of liquidity.
EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective 70 Table of Contents does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest.
EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest.
Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast.
Such factors are used to adjust the quantitative output based on historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast.
Capital Resources The access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight depend, in part, on our capital position.
Capital Resources Our capital position, in part depends on the access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight.
In connection with the preparation of the year-end 2022 financial statements, we completed our annual goodwill impairment test as of October 1, 2022. No impairment was identified in any of our reporting units.
In connection with the preparation of the year-end 2023 financial statements, we completed our annual goodwill impairment test as of October 1, 2023. No impairment was identified in any of our reporting units.
Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital.
Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk 72 Table of Contents management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital.
Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. As of December 31, 2022, we had 348 branches throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington D.C. and Virginia.
Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. As of December 31, 2023, we had 346 branches throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington D.C. and Virginia.
LIQUIDITY Our goal in liquidity management is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding.
LIQUIDITY Our primary liquidity management goal is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding.
Asset/liability models require certain assumptions to be made, such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits, 72 Table of Contents which may differ from actual experience. These business assumptions are based upon our experience, business plans, economic and market trends and available industry data.
Asset/liability models require certain assumptions to be made, such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits, which may differ from actual experience. These business assumptions are based upon our experience, business plans, economic and market trends and available industry data.
The growth in the commercial and industrial loans category was led by activity in the Cleveland, Pittsburgh and North Carolina markets, while the growth in residential mortgages reflected growth in adjustable-rate mortgages and the continued success of our Physicians First mortgage program, which is a digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.
The growth in the commercial and industrial loans category was led by activity in the Cleveland, Pittsburgh and North Carolina markets, while the growth in residential mortgages reflected growth in adjustable-rate mortgages and jumbo mortgages retained on the balance sheet and the continued success of our Physicians First mortgage program, which is a digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.
At December 31, 2022 and 2021, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment.
At December 31, 2023 and 2022, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment.
A change in the value of securities HTM could also negatively affect the level of stockholders’ equity if there was a decline in the underlying creditworthiness of the issuers. A CECL methodology is applied to securities HTM. As of December 31, 2022, securities HTM had a CECL ACL of $0.23 million.
A change in the value of securities HTM could also negatively affect the level of stockholders’ equity if there was a decline in the underlying creditworthiness of the issuers. A CECL methodology is applied to securities HTM. As of December 31, 2023, securities HTM had a CECL ACL of $0.28 million.
Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the 42 Table of Contents Consolidated Financial Statements.
Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the Consolidated Financial Statements.
Taxable-equivalent amounts for the 2022, 2021 and 2020 periods were calculated using a federal statutory income tax rate of 21%. 45 Table of Contents OVERVIEW FNB, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in seven states and the District of Columbia.
Taxable-equivalent amounts for 2023, 2022 and 2021 were calculated using a federal statutory income tax rate of 21%. 47 Table of Contents OVERVIEW FNB, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in seven states and the District of Columbia.
For additional information relating to investment activity, see Note 4, “Securities” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 65 Table of Contents Deposits Our primary source of funds is deposits. These deposits are provided by business, consumer and municipal customers who we serve within our footprint.
For additional information relating to investment activity, see Note 4, “Securities” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 67 Table of Contents Deposits Our primary source of funds is deposits. Our diversified and granular deposit base are provided by business, consumer and municipal customers who we serve within our footprint.
Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance. FINANCIAL SUMMARY For the full-year of 2022, net income available to common stockholders was $431.1 million, or $1.22 per diluted common share.
Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance. FINANCIAL SUMMARY For the full year of 2023, net income available to common stockholders was $476.8 million, or $1.31 per diluted common share.
In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs. We currently also have excess cash to meet our pledging requirements. At December 31, 2022, we have $1.7 billion of cash and salable unpledged government and agency securities to total assets, or 3.9%.
In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs. We currently have excess cash to meet our pledging requirements. At December 31, 2023, we have $1.8 billion of cash and salable unpledged government and agency securities representing 3.8% of total assets.
We used the net proceeds from the sale of the notes for general corporate purposes, which may include repayment of the $300 million in 2.200% senior notes due February 2023, investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness.
We used the net proceeds from the sale of the notes for general corporate purposes, including repayment of the $300 million in 2.200% senior notes that matured in February 2023, investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness.
Our forward-looking statements are subject to the following principal risks and uncertainties: • Our business, financial results and balance sheet values are affected by business, economic and political circumstances, including, but not limited to: (i) developments with respect to the U.S. and global financial markets; (ii) actions by the FRB, FDIC, CFPB, UST, OCC and other governmental agencies, especially those that impact money supply, market interest rates or otherwise affect business activities of the financial services industry; (iii) a slowing of the U.S. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S. • Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards. • Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues.
Our forward-looking statements are subject to the following principal risks and uncertainties: • Our business, financial results and balance sheet values are affected by business, economic and political circumstances, including, but not limited to: (i) developments with respect to the U.S. and global financial markets; (ii) supervision, regulation, enforcement and other actions by several governmental agencies, including the FRB, FDIC, FSOC, DOJ, CFPB, UST, OCC and HUD, state attorney generals and other governmental agencies whose actions may affect, among other things, our consumer and mortgage lending and deposit practices, capital structure, investment practices, dividend policy, annual FDIC insurance premium assessment and growth, money supply, market interest rates or otherwise affect business activities of the financial services industry; (iii) a slowing of the U.S. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S. • Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards. • Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues.
The risks identified here are not exclusive or the types of risks we may confront and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A.
We caution that the risks identified here are not exhaustive of the types of risks that may adversely impact us and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A.
Adjustments to historical loss information, where applicable, are made for differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters and other relevant factors.
Adjustments are made to the calculation of expected losses to address differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters and other relevant factors.
We may issue additional preferred or common stock to maintain our well-capitalized status. 67 Table of Contents CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS The following table sets forth contractual obligations of principal that represent required and potential cash outflows as of December 31, 2022: TABLE 27 (in millions) Total Deposits without a stated maturity $ 31,158 Certificates and other time deposits 3,612 Operating leases 165 Long-term borrowings 1,093 Total $ 36,028 The following table sets forth the amount of commitments to extend credit and standby letters of credit as of December 31, 2022: TABLE 28 (in millions) Total Commitments to extend credit $ 13,250 Standby letters of credit 207 Total $ 13,457 Commitments to extend credit and standby letters of credit do not necessarily represent future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon.
We may issue additional preferred or common stock to maintain our well-capitalized status. 69 Table of Contents CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS The following table sets forth contractual obligations of principal that represent required and potential cash outflows as of December 31, 2023: TABLE 27 (in millions) Total Deposits without a stated maturity $ 28,496 Certificates and other time deposits 6,215 Operating leases 266 Long-term borrowings 1,971 Total $ 36,948 The following table sets forth the amount of commitments to extend credit and standby letters of credit as of December 31, 2023: TABLE 28 (in millions) Total Commitments to extend credit $ 13,656 Standby letters of credit 257 Total $ 13,913 Commitments to extend credit and standby letters of credit do not necessarily represent future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon.
Since inception, we repurchased 11.0 million shares at a weighted average share price of $11.33 for $124.4 million under this repurchase program, with $175.6 million remaining for repurchase. The repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions. The purchases will be funded from available working capital.
Since inception, we repurchased 14.1 million shares at a weighted average share price of $11.39 for $160.9 million under this repurchase program, with $139.1 million remaining for repurchase. The repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions. The purchases will be funded from available working capital.
Short-term borrowings, made up of customer repurchase agreements (also referred to as securities sold under repurchase agreements), FHLB advances and subordinated notes, decreased to $1.4 billion at December 31, 2022 from $1.5 billion at December 31, 2021, primarily due to a $100.0 million decline in short-term FHLB borrowings. 66 Table of Contents Following is a summary of selected information relating to short-term FHLB borrowings: TABLE 26 At or for the Year Ended December 31 2022 2021 2020 (dollars in millions) FHLB Advances (Short-term) Balance at year-end $ 930 $ 1,030 $ 1,280 Maximum month-end balance 930 1,280 2,055 Average balance during year 933 1,113 1,699 Weighted average interest rates: At year-end 2.18 % 2.14 % 1.97 % During the year 2.18 2.13 1.83 For additional information relating to deposits and short-term borrowings, see Note 13, “Deposits” and Note 14, “Short-Term Borrowings” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
Short-term borrowings, made up of customer repurchase agreements (also referred to as securities sold under repurchase agreements), FHLB advances and subordinated notes, increased to $2.5 billion at December 31, 2023 from $1.4 billion at December 31, 2022, primarily due to a $970.0 million increase in short-term FHLB borrowings, as we increased liquidity due to the bank failures in early 2023. 68 Table of Contents Following is a summary of selected information relating to short-term FHLB borrowings: TABLE 26 At or for the Year Ended December 31 2023 2022 2021 (dollars in millions) FHLB Advances (Short-term) Balance at year-end $ 1,900 $ 930 $ 1,030 Maximum month-end balance 2,245 930 1,280 Average balance during year 1,562 933 1,113 Weighted average interest rates: At year-end 5.64 % 2.18 % 2.14 % During the year 4.08 2.18 2.13 For additional information relating to deposits and short-term borrowings, see Note 13, “Deposits” and Note 14, “Short-Term Borrowings” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
The following table indicates the respective contractual maturities and weighted-average yields of debt securities HTM, shown at amortized cost, as of December 31, 2022: TABLE 22 (dollars in millions) Amount Weighted Average Yield Obligations of U.S.
As of December 31, 2023 and 2022, we did not hold any trading securities. 65 Table of Contents The following table indicates the respective contractual maturities and weighted-average yields of debt securities HTM, shown at amortized cost, as of December 31, 2023: TABLE 22 (dollars in millions) Amount Weighted Average Yield Obligations of U.S.
The LCR and MCH ratios are presented in the following table: TABLE 29 December 31 2022 2021 Internal Limit Liquidity coverage ratio 1.7 times 2.4 times > 1 time Months of cash on hand 13.6 months 16.9 months > 12 months Management has concluded that our cash levels remain appropriate given the current market environment.
The LCR and MCH ratios and Parent company cash on hand are presented in the following table: TABLE 29 December 31 2023 2022 Internal Limit Liquidity coverage ratio 2.0 times 1.7 times > 1 time Months of cash on hand 13.0 months 13.6 months > 12 months Parent company cash on hand (millions) $ 375.4 $ 654.3 n/a Management has concluded that our cash levels remain appropriate given the current market environment.
These developments could include: ◦ Policies and priorities of the current U.S. presidential administration, including legislative and regulatory reforms, different approaches to supervisory or enforcement priorities, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes, employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles. ◦ Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards. ◦ Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC. 41 Table of Contents ◦ Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries.
These developments could include: ◦ Policies and priorities of the current U.S. presidential administration, including legislative and regulatory reforms, more aggressive approaches to supervisory or enforcement priorities with consumer and antidiscrimination lending laws by the federal banking regulatory agencies and the DOJ, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes, 43 Table of Contents employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles. ◦ Ability to continue to attract, develop and retain key talent. ◦ Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards. ◦ Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC. ◦ Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries.
Insurance commissions and fees of $24.3 million for 2022 decreased $1.3 million, or 5.0%, from $25.5 million in 2021, with the reduction primarily driven by lower title insurance fees resulting from slowing mortgage demand in the current interest rate environment.
Insurance commissions and fees of $23.1 million decreased $1.1 million, or 4.7%, from $24.3 million, with the reduction primarily driven by lower title insurance fees resulting from slowing mortgage demand in the current interest rate environment.
For our ACL calculation at December 31, 2022, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which declines 3.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which declines 0.9% over our R&S forecast period, (iii) S&P Volatility, which decreases 41.0% in 2023 and 8.1% in 2024 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historic levels.
For our ACL calculation at December 31, 2023, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which increases 5.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 0.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 4.0% in 2024 and 2.9% in 2025 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below historical through-the-cycle period.
These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to FNB. ◦ Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies. ◦ Business and operating results are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques. ◦ The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL. ◦ A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns. • The COVID-19 pandemic and the federal, state, and local regulatory and governmental actions implemented in response to COVID-19 have resulted in increased volatility of the financial markets and national and local economic conditions, supply chain challenges, rising inflationary pressures, increased levels of unemployment and business failures, and the potential to have a material impact on, among other things, our business, financial condition, results of operations, liquidity, or on our management, employees, customers and critical vendors and suppliers.
These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, including financial and other types of commitments, and in additional expenses and collateral costs, and may cause reputational harm to FNB. ◦ Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies. ◦ Business and operating results are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques. ◦ The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL. ◦ A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns. ◦ Increased funding costs and market volatility due to market illiquidity and competition for funding.
The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of December 31, 2022.
The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of December 31, 2023. The measures do not reflect management's potential actions.
Forty-eight percent of our net loans and leases are indexed to short-term LIBOR, SOFR and Prime that reprice within the next three months. Our cash position related to increased deposits has also been a significant factor in our asset sensitivity metrics.
Forty-eight percent of our net loans and leases reprice within the next three months and are indexed to short-term SOFR, Prime and other indices which benefit from higher rates. Our cash position has also been a significant factor in our asset sensitivity metrics.
In particular, we have made use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase adjustable-rate loans. Total variable and adjustable-rate loans were 60.2% of total net loans and leases as of December 31, 2022 and 61.3% as of December 31, 2021.
We continue to make use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase our level of adjustable-rate loans. Total variable and adjustable-rate loans were 62.2% of total net loans and leases as of December 31, 2023 and 60.2% as of December 31, 2022.
We establish a valuation allowance when it is more likely than not that we will not be able to realize a benefit from our DTAs, or when future deductibility is uncertain.
We establish a valuation allowance when it is more likely than not that we will not be able to realize a benefit from our DTAs, or when future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’s assessments of realizable DTAs.
Our ability to anticipate, react quickly and continue to respond to technological changes and potential additional COVID-19 challenges can also impact our ability to respond to customer needs and meet competitive demands. • Business and operating results can also be affected by widespread natural and other disasters, pandemics and post-pandemic return to normalcy, global events, including the Ukraine-Russia conflict, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks or international hostilities through impacts on the economy and financial markets generally, or on us or our counterparties specifically. • Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation.
Our ability to anticipate, react quickly and continue to respond to technological changes and significant adverse industry and economic events can also impact our ability to respond to customer needs and meet competitive demands. • Business and operating results can also be affected by difficult to predict uncertainties, such as widespread natural and other disasters, wars, pandemics, including post-pandemic return to normalcy, global events and geopolitical instability, including the Ukraine-Russia conflict, and the emerging military conflict in Israel and Gaza, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks, international hostilities or other extraordinary events which are beyond our control and may significantly impact the U.S. or global economy and financial markets generally, or us or our counterparties, customers or third-party vendors specifically. • Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation.
Interest income on an FTE basis (non-GAAP) of $1.3 billion for 2022, increased $280.6 million or 27.6% from 2021, resulting from the 2022 interest rate increases by the FOMC and an increase in interest-earning assets of $3.1 billion.
Interest income on an FTE basis (non-GAAP) of $2.0 billion for 2023, increased $688.8 million or 53.1% from 2022, resulting from the interest rate increases by the FOMC and an increase in interest-earning assets of $2.4 billion.
Our liquidity position has been positively impacted by our ability to generate growth in relationship-based accounts. Organic growth in low-cost transaction deposits was complemented by management’s strategy of deposit gathering efforts focused on attracting new customer relationships and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities.
Organic growth in low-cost transaction deposits was complemented by management’s continued strategy of deposit gathering efforts focused on attracting new customer relationships across our geographic footprint and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities.
Expected recoveries do not exceed the aggregate of the amounts previously charged-off and expected to be charged-off. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates.
The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates.
Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee. As noted above, we have a Risk Management Council comprised of senior management.
Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, and our aggregate risk profile, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee.
TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured.
Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured.
There currently is $175.6 million of the authorized amount remaining for future repurchase activity. • The ratio of the ACL to total loans and leases was 1.33%, compared to 1.38%, a reflection of the strong loan growth.
There currently is $139.1 million of the authorized amount remaining for future repurchase activity. • The ratio of the ACL to total loans and leases was 1.25%, compared to 1.33%, reflecting net loan growth and charge-off activity.
Securities commissions and fees of $23.7 million for 2022 increased $1.5 million, or 6.8% from $22.2 million in 2021, due to increased annuity sales activity, as the increasing interest rate environment provided attractive annuity rates, with revenue contributions across the geographic footprint, most notably in the Carolina and Cleveland regions.
Securities commissions and fees of $27.7 million increased $4.0 million, or 16.9%, from $23.7 million, due to increased annuity sales activity, as the increasing interest rate environment provided attractive annuity rates, combined with revenue contributions across the geographic footprint, most notably in the Pittsburgh and Carolina regions.
Management believes items such as merger expenses, initial provision for non-PCD loans acquired, branch consolidation costs, loss on early debt extinguishment, COVID-19 expenses and gains on sale of Visa class B shares are not organic to run our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities.
Management believes items such as merger expenses, FDIC special assessment, realized loss on securities restructuring, valuation allowance on auto loans held-for-sale, initial provision for non-PCD loans acquired and branch consolidation costs are not organic to run our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities.
Salaries and employee benefits of $426.2 million for 2022 increased $7.9 million, or 1.9%, from $418.3 million in 2021, related to normal merit increases and the acquired Howard and Union expense bases. Our total full-time equivalent employees were 4,018 and 3,884 at December 31, 2022 and 2021, respectively.
Salaries and employee benefits of $461.7 million increased $35.4 million, or 8.3%, from $426.2 million, related to normal merit increases, production-related commissions and the addition of the acquired Union expense base. Our total full-time equivalent employees were 4,123 and 4,018 at December 31, 2023 and 2022, respectively.
TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.
These modifications result from loss mitigation activities and could include a term extension, interest rate reduction, principal forgiveness, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.
Treasury: Maturing after five years but within ten years $ — 5.25 % Obligations of U.S. government agencies: Maturing after ten years 1 5.25 Obligations of U.S. government-sponsored entities: Maturing after one year but within five years 52 5.03 States of the U.S. and political subdivisions: Maturing within one year 1 2.62 Maturing after one year but within five years 36 2.84 Maturing after five years but within ten years 170 3.13 Maturing after ten years 818 3.73 Other debt securities: Maturing after five years but within ten years 12 4.23 Residential mortgage-backed securities: Agency mortgage-backed securities 1,178 1.94 Agency collateralized mortgage obligations 953 1.87 Commercial mortgage-backed securities 866 3.53 Total $ 4,087 2.72 % The weighted average yields for tax-exempt debt securities are computed on an FTE basis using the federal statutory tax rate of 21.0%. 64 Table of Contents The amortized cost of AFS and HTM securities are summarized in the following table: TABLE 23 December 31 2022 2021 $ Change % Change (in millions) Securities Available for Sale: U.S.
Treasury: Maturing after five years but within ten years $ — 5.25 % Obligations of U.S. government agencies: Maturing after five years but within ten years 1 7.48 Obligations of U.S. government-sponsored entities: Maturing after one year but within five years 68 5.11 States of the U.S. and political subdivisions: Maturing within one year 2 2.31 Maturing after one year but within five years 57 2.65 Maturing after five years but within ten years 201 3.39 Maturing after ten years 757 3.69 Other debt securities: Maturing after five years but within ten years 15 6.13 Residential mortgage-backed securities: Agency mortgage-backed securities 1,057 2.09 Agency collateralized mortgage obligations 824 1.87 Commercial mortgage-backed securities 929 3.89 Total $ 3,911 2.93 % The weighted average yields for tax-exempt debt securities are computed on an FTE basis using the federal statutory tax rate of 21.0%. 66 Table of Contents The amortized cost of AFS and HTM securities are summarized in the following table: TABLE 23 December 31 2023 2022 $ Change % Change (in millions) Securities Available for Sale: U.S.
Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. 57 Table of Contents Following is a summary of loans and leases: TABLE 12 December 31 2022 2021 $ Change % Change (in millions) Commercial real estate $ 11,526 $ 9,899 $ 1,627 16.4 % Commercial and industrial 7,131 5,977 1,154 19.3 Commercial leases 519 495 24 4.8 Other 114 94 20 21.3 Total commercial loans and leases 19,290 16,465 2,825 17.2 Direct installment 2,784 2,376 408 17.2 Residential mortgages 5,297 3,654 1,643 45.0 Indirect installment 1,553 1,227 326 26.6 Consumer lines of credit 1,331 1,246 85 6.8 Total consumer loans 10,965 8,503 2,462 29.0 Total loans and leases $ 30,255 $ 24,968 $ 5,287 21.2 % Total loans and leases increased $5.3 billion, or 21.2%, to $30.3 billion at December 31, 2022, compared to $25.0 billion at December 31, 2021, reflecting a commercial loans and leases increase of $2.8 billion or 17.2%, and an increase in consumer loans of $2.5 billion or 29.0%.
Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. 59 Table of Contents Following is a summary of loans and leases: TABLE 13 December 31 2023 2022 $ Change % Change (in millions) Commercial real estate $ 12,305 $ 11,526 $ 779 6.8 % Commercial and industrial 7,482 7,131 351 4.9 Commercial leases 599 519 80 15.4 Other 110 114 (4) (3.5) Total commercial loans and leases 20,496 19,290 1,206 6.3 Direct installment 2,741 2,784 (43) (1.5) Residential mortgages 6,640 5,297 1,343 25.4 Indirect installment 1,149 1,553 (404) (26.0) Consumer lines of credit 1,297 1,331 (34) (2.6) Total consumer loans 11,827 10,965 862 7.9 Total loans and leases $ 32,323 $ 30,255 $ 2,068 6.8 % Total loans and leases increased $2.1 billion, or 6.8%, to $32.3 billion at December 31, 2023, compared to $30.3 billion at December 31, 2022, reflecting a commercial loans and leases increase of $1.2 billion or 6.3%, and an increase in consumer loans of $861.5 million or 7.9%.
The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months. The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the cash on hand.
The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the existing cash on hand.
Excluding significant items totaling $52.3 million in 2022 and $4.4 million in 2021, operating non-interest expense (non-GAAP) increased $45.4 million, or 6.2%. The variances in significant individual non-interest expense items are further explained in the following paragraphs.
Excluding significant items totaling $48.8 million in 2023 and $52.3 million in 2022, operating non-interest expense (non-GAAP) increased $92.5 million, or 11.9%. The 2023 compared to 2022 variances in significant individual non-interest expense items are further explained in the following paragraphs.
These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions and judgments.
Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions and judgments.
The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to: • assess the quality of the information they receive; • understand the businesses, investments and financial, accounting, legal, regulatory and strategic considerations, and the risks that FNB faces; • oversee and assess how senior management evaluates risk; and • assess appropriately the quality of our enterprise-wide risk management process. 74 Table of Contents RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP Reconciliations of non-GAAP operating measures and key performance indicators discussed in this Report to the most directly comparable GAAP financial measures are included in the following tables.
The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to: • assess the quality of the information they receive; • understand the businesses, investments and financial, accounting, legal, regulatory and strategic considerations, and the risks that FNB faces; • oversee and assess how senior management evaluates risk; and • assess appropriately the quality of our enterprise-wide risk management processes.
Trust services of $39.0 million for 2022 increased $1.7 million, or 4.5%, from the same period of 2021, primarily driven by strong organic revenue production, partially offset by the market value of assets under management decreasing $346.8 million, or 4.2%, to $7.8 billion at December 31, 2022 given overall market conditions.
Trust services of $42.5 million increased $3.5 million, or 8.9%, from the same period of 2022, primarily driven by strong organic revenue production, as well as the market value of assets under management increasing $789.8 million, or 10.1%, to $8.6 billion at December 31, 2023 given overall market conditions.
Periodically, the valuation allowance is reviewed and adjusted based on management’s assessments of realizable DTAs. 44 Table of Contents See Note 1, “Summary of Significant Accounting Policies” and Note 20, “Income Taxes” in the Notes to Consolidated Financial Statements for further discussion of accounting for income taxes.
See Note 1, “Summary of Significant Accounting Policies” and Note 20, “Income Taxes” in the Notes to Consolidated Financial Statements for further discussion of accounting for income taxes.
Growth in total average consumer loans totaled $1.8 billion, or 22.5%, and was due to an increase in residential mortgage loans of $1.1 billion, or 31.5%, direct home equity installment loans of $533.8 million, or 24.9%, and indirect installment loans of $162.1 million, or 13.3%. • Total average securities were $7.1 billion, compared to $6.2 billion, an increase of $914.8 million, or 14.7%. • Total average deposits grew $3.0 billion, or 9.7%, led by growth of $1.5 billion, or 15.4%, in non-interest-bearing deposits, $1.1 billion, or 7.8%, in interest-bearing demand deposits and $533.5 million, or 15.5%, in savings deposits, driven by solid organic growth in customer relationships, as well as the Howard and Union acquisitions.
Growth in total average consumer loans totaled $1.6 billion, or 16.5%, and was due to an increase in residential mortgage loans of $1.4 billion, or 31.3%, indirect installment loans of $134.8 million, or 9.8%, and direct home equity installment loans of $68.6 million, or 2.6%. • Total average investment securities were $7.2 billion, compared to $7.1 billion, an increase of $14.1 million, or 0.2%. • Total average deposits grew $568.3 million, or 1.7%, led by an increase in average time deposits of $2.2 billion, or 72.3%, offset by declines of $739.2 million, or 6.4% in non-interest-bearing deposits, $655.3 million, or 4.4%, in interest-bearing demand deposits and $209.4 million, or 5.3%, in savings deposits.
We believe certain charges such as merger expenses, initial provision for non-PCD loans acquired, branch consolidation costs, service charge refunds and COVID-19 expenses are not organic costs to run our operations and facilities.
We believe certain charges such as merger expenses, FDIC special assessment, loss on securities restructuring, valuation allowance on auto loans held-for-sale, initial provision for non-PCD loans acquired and branch consolidation costs are not organic costs to run our operations and facilities.
These include external factors such as the shape of the yield curve and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits.
These include external factors such as the shape of the yield curve, the competitive landscape and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits. 74 Table of Contents We recognize that all asset/liability models have some inherent shortcomings.
Interest expense of $165.2 million for 2022 increased $66.9 million, or 68.1%, from 2021 primarily due to an increase in rates paid and an increase in average interest-bearing deposits. The growth in average deposits reflected inflows from the Howard and Union acquisitions and solid organic growth in new and existing customer relationships.
Interest expense of $656.1 million for 2023 increased $491.0 million, or 297.2%, from 2022 primarily due to the higher interest rate environment and an increase in average interest-bearing deposits. The growth in average deposits reflected solid organic growth in new and existing customer relationships and the additions from the Union acquisition.
The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates. For example, if a product’s rate is estimated to increase by 50% as much as the market rates, then 50% of the account balance was placed in this category.
The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates.
The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the periods indicated: TABLE 5 2022 vs 2021 2021 vs 2020 (in thousands) Volume Rate Net Volume Rate Net Interest Income (1) Interest-bearing deposits with banks $ (752) $ 21,025 $ 20,273 $ 3,087 $ (1,265) $ 1,822 Federal funds sold 15 14 29 — — — Securities (2) 14,637 12,786 27,423 1,405 (24,751) (23,346) Loans held for sale (1,004) 879 (125) 1,433 (2,974) (1,541) Loans and leases (2) 88,865 144,119 232,984 (13,799) (90,254) (104,053) Total interest income (2) 101,761 178,823 280,584 (7,874) (119,244) (127,118) Interest Expense (1) Deposits: Interest-bearing demand 1,021 58,902 59,923 2,576 (41,124) (38,548) Savings 91 7,757 7,848 94 (2,252) (2,158) Certificates and other time (1,192) (5,273) (6,465) (11,465) (33,485) (44,950) Short-term borrowings (3,747) 1,607 (2,140) (12,380) 551 (11,829) Long-term borrowings (2,325) 10,099 7,774 (13,558) 1,053 (12,505) Total interest expense (6,152) 73,092 66,940 (34,733) (75,257) (109,990) Net change (2) $ 107,913 $ 105,731 $ 213,644 $ 26,859 $ (43,987) $ (17,128) (1) The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes.
The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the periods indicated: TABLE 5 2023 vs 2022 2022 vs 2021 (in thousands) Volume Rate Net Volume Rate Net Interest Income (1) Interest-bearing deposits with banks $ (12,302) $ 29,157 $ 16,855 $ (752) $ 21,025 $ 20,273 Federal funds sold (15) (14) (29) 15 14 29 Securities (2) 1,914 32,472 34,386 14,637 12,786 27,423 Loans held for sale (2,672) 4,017 1,345 (1,004) 879 (125) Loans and leases (2) 150,443 485,750 636,193 88,865 144,119 232,984 Total interest income (2) 137,368 551,382 688,750 101,761 178,823 280,584 Interest Expense (1) Deposits: Interest-bearing demand (506) 205,821 205,315 1,021 58,902 59,923 Savings 3,537 25,289 28,826 91 7,757 7,848 Certificates and other time 47,577 104,693 152,270 (1,192) (5,273) (6,465) Short-term borrowings 20,955 32,393 53,348 (3,747) 1,607 (2,140) Long-term borrowings 39,254 11,960 51,214 (2,325) 10,099 7,774 Total interest expense 110,817 380,156 490,973 (6,152) 73,092 66,940 Net change (2) $ 26,551 $ 171,226 $ 197,777 $ 107,913 $ 105,731 $ 213,644 (1) The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes.
AOCI reduced the tangible book value per common share by $0.99 as of December 31, 2022, compared to $0.19 at the end of 2021, primarily due to the increase in unrealized losses on AFS securities resulting from the higher interest rate environment. • The CET1 regulatory capital ratio was 9.82%, down from 9.92%, primarily due to the significant loan growth in 2022.
AOCI reduced the tangible book value per common share (non-GAAP) by $0.65 as of December 31, 2023, compared to $0.99 at the end of 2022, primarily due to the impact of higher interest rates on the fair value of AFS securities. • The CET1 regulatory capital ratio was 10.04%, benefiting from retained earnings growth, compared to 9.82%.
The following table presents information regarding the provision for credit loss expense and net charge-offs for the years 2020 through 2022: TABLE 6 2022 vs 2021 2021 vs 2020 (dollars in thousands) 2022 2021 $ Change % Change 2020 $ Change % Change Provision for credit losses (on loans and leases) $ 61,800 $ (4,853) $ 66,653 1,373 % $ 121,756 $ (126,609) (104) % Provision for unfunded loan commitments 2,230 5,472 (3,242) (59) 1,046 4,426 423 Provision for credit losses $ 64,030 $ 619 $ 63,411 10,244 % $ 122,802 $ (122,183) (99) % Net loan charge-offs $ 16,151 $ 13,949 $ 2,202 16 % $ 59,808 $ (45,859) (77) % Net loan charge-offs / total average loans and leases 0.06 % 0.06 % 0.24 % Provision for credit losses of $64.0 million during 2022 increased $63.6 million from 2021.
The following table presents information regarding the provision for credit loss expense and net charge-offs for the years 2021 through 2023: TABLE 6 2023 vs 2022 2022 vs 2021 (dollars in thousands) 2023 2022 $ Change % Change 2021 $ Change % Change Provision for credit losses on loans and leases $ 71,607 $ 61,800 $ 9,807 16 % $ (4,853) $ 66,653 1,373 % Provision for unfunded loan commitments 99 2,230 (2,131) (96) 5,472 (3,242) (59) Total provision for credit losses on loans and leases 71,706 64,030 7,676 12 619 63,411 10,244 Provision for securities 48 176 (128) (73) 10 166 1,660 Total provision for credit losses $ 71,754 $ 64,206 $ 7,548 12 % $ 629 $ 63,577 10,108 % Net loan charge-offs $ 67,755 $ 16,151 $ 51,604 320 % $ 13,949 $ 2,202 16 % Net loan charge-offs / total average loans and leases 0.22 % 0.06 % 0.06 % Provision for credit losses of $71.7 million during 2023 increased $7.5 million from 2022.
Comparatively, full-year 2021 net income available to common stockholders totaled $396.6 million, or $1.23 per diluted common share. On an operating basis, full-year 2022 earnings per diluted common share (non-GAAP) was $1.40, excluding $80.8 million of significant items. Operating earnings per diluted common share (non-GAAP) for the full year of 2021 was $1.24, excluding $4.4 million of significant items.
Comparatively, full-year 2022 net income available to common stockholders totaled $431.1 million, or $1.22 per diluted common share. On an operating basis, full-year 2023 earnings per diluted common share (non-GAAP) was $1.57, excluding $116.2 million (pre-tax) of significant items impacting earnings.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Refer to the MD&A in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022 for a comparison of 2021 to 2020. 56 Table of Contents FINANCIAL CONDITION The following table presents our condensed Consolidated Balance Sheets: TABLE 11 December 31 2022 2021 $ Change % Change (dollars in millions) Assets Cash and cash equivalents $ 1,674 $ 3,493 $ (1,819) (52.1) % Securities 7,362 6,889 473 6.9 Loans held for sale 124 295 (171) (58.0) Loans and leases, net 29,853 24,624 5,229 21.2 Goodwill and other intangibles 2,566 2,304 262 11.4 Other assets 2,146 1,908 238 12.5 Total Assets $ 43,725 $ 39,513 $ 4,212 10.7 % Liabilities and Stockholders’ Equity Deposits $ 34,770 $ 31,726 $ 3,044 9.6 % Borrowings 2,465 2,218 247 11.1 Other liabilities 837 419 418 99.8 Total Liabilities 38,072 34,363 3,709 10.8 Stockholders’ Equity 5,653 5,150 503 9.8 Total Liabilities and Stockholders’ Equity $ 43,725 $ 39,513 $ 4,212 10.7 % The significant increase in both assets and liabilities is primarily due to strong organic loan and deposit growth as well as the Howard and Union acquisitions.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Refer to the MD&A in our 2022 Annual Report on Form 10-K filed with the SEC on February 24, 2023 for a comparison of 2022 to 2021. 58 Table of Contents FINANCIAL CONDITION The following table presents our condensed Consolidated Balance Sheets: TABLE 12 December 31 2023 2022 $ Change % Change (dollars in millions) Assets Cash and cash equivalents $ 1,576 $ 1,674 $ (98) (5.9) % Securities 7,165 7,362 (197) (2.7) Loans held for sale 488 124 364 293.5 Loans and leases, net 31,917 29,853 2,064 6.9 Goodwill and other intangibles 2,546 2,566 (20) (0.8) Other assets 2,466 2,146 320 14.9 Total Assets $ 46,158 $ 43,725 $ 2,433 5.6 % Liabilities and Stockholders’ Equity Deposits $ 34,711 $ 34,770 $ (59) (0.2) % Borrowings 4,477 2,465 2,012 81.6 Other liabilities 920 837 83 9.9 Total Liabilities 40,108 38,072 2,036 5.3 Stockholders’ Equity 6,050 5,653 397 7.0 Total Liabilities and Stockholders’ Equity $ 46,158 $ 43,725 $ 2,433 5.6 % The increase in both assets and liabilities is primarily due to strong organic loan and borrowings growth.
Following is a summary of estimated insured and uninsured time deposits in excess of the FDIC insurance limit by remaining maturity at December 31, 2022: TABLE 25 (in millions) Insured Uninsured Total Three months or less $ 800 $ 261 $ 1,061 Three to six months 441 339 780 Six to twelve months 638 159 797 Over twelve months 865 109 974 Total $ 2,744 $ 868 $ 3,612 Short-Term Borrowings Borrowings with original maturities of one year or less are classified as short-term.
Following is a summary of estimated insured and uninsured time deposits in excess of the FDIC insurance limit by remaining maturity at December 31, 2023: TABLE 25 (in millions) Insured Uninsured Total Three months or less $ 2,014 $ 449 $ 2,463 Three to six months 1,026 368 1,394 Six to twelve months 1,443 275 1,718 Over twelve months 558 82 640 Total $ 5,041 $ 1,174 $ 6,215 Short-Term Borrowings Borrowings with original maturities of one year or less are classified as short-term.
Non-Interest Expense The breakdown of non-interest expense for the years 2020 through 2022 is presented in the following table: TABLE 8 2022 vs 2021 2021 vs 2020 (dollars in thousands) 2022 2021 $ Change % Change 2020 $ Change % Change Salaries and employee benefits $ 426,237 $ 418,328 $ 7,909 1.9 % $ 405,529 $ 12,799 3.2 % Net occupancy 68,189 58,368 9,821 16.8 71,166 (12,798) (18.0) Equipment 76,261 69,973 6,288 9.0 65,312 4,661 7.1 Amortization of intangibles 13,868 12,117 1,751 14.5 13,362 (1,245) (9.3) Outside services 72,961 70,553 2,408 3.4 69,258 1,295 1.9 Marketing 15,674 14,320 1,354 9.5 12,559 1,761 14.0 FDIC insurance 20,412 17,881 2,531 14.2 20,073 (2,192) (10.9) Bank shares and franchise taxes 13,954 12,629 1,325 10.5 14,376 (1,747) (12.2) Merger-related 45,259 1,764 43,495 2,466 — 1,764 — Other 73,577 57,235 16,342 28.6 78,714 (21,479) (27.3) Total non-interest expense $ 826,392 $ 733,168 $ 93,224 12.7 % $ 750,349 $ (17,181) (2.3) % Total non-interest expense of $826.4 million for 2022 increased $93.2 million, or 12.7%, from $733.2 million in 2021.
The following table presents non-interest income excluding significant items impacting earnings: TABLE 8 (dollars in thousands) 2023 2022 Change Change Total non-interest income, as reported $ 254,332 $ 323,553 $ (69,221) (21.4) % Significant items: Loss on securities restructuring 67,354 — Total non-interest income, excluding significant items (1) $ 321,686 $ 323,553 $ (1,867) (0.6) % (1) Non-GAAP Non-Interest Expense The breakdown of non-interest expense for the years 2021 through 2023 is presented in the following table: TABLE 9 2023 vs 2022 2022 vs 2021 (dollars in thousands) 2023 2022 $ Change % Change 2021 $ Change % Change Salaries and employee benefits $ 461,677 $ 426,237 $ 35,440 8.3 % $ 418,328 $ 7,909 1.9 % Net occupancy 70,802 68,189 2,613 3.8 58,368 9,821 16.8 Equipment 90,818 76,261 14,557 19.1 69,973 6,288 9.0 Amortization of intangibles 20,116 13,868 6,248 45.1 12,117 1,751 14.5 Outside services 83,885 72,961 10,924 15.0 70,553 2,408 3.4 Marketing 17,316 15,674 1,642 10.5 14,320 1,354 9.5 FDIC insurance 60,815 20,412 40,403 197.9 17,881 2,531 14.2 Bank shares and franchise taxes 13,609 13,954 (345) (2.5) 12,629 1,325 10.5 Merger-related 2,215 45,259 (43,044) (95.1) 1,764 43,495 2,466 Other 94,183 73,577 20,606 28.0 57,235 16,342 28.6 Total non-interest expense $ 915,436 $ 826,392 $ 89,044 10.8 % $ 733,168 $ 93,224 12.7 % Total non-interest expense of $915.4 million for 2023 increased $89.0 million, or 10.8%, from $826.4 million in 2022.
TABLE 1 Year-to-Date Results Summary 2022 2021 Reported results Net income available to common stockholders (millions) $ 431.1 $ 396.6 Net income per diluted common share 1.22 1.23 Book value per common share (period-end) 15.39 15.81 Common equity tier 1 capital ratio 9.8 % 9.9 % Operating results (non-GAAP) Operating net income available to common stockholders (millions) $ 494.9 $ 400.0 Operating net income per diluted common share 1.40 1.24 Average diluted common shares outstanding (thousands) 354,052 323,481 Significant items impacting earnings (1) (millions) Pre-tax merger-related expenses $ (45.3) $ (1.8) After-tax impact of merger-related expenses (35.8) (1.4) Pre-tax provision expense related to acquisitions (28.5) — After-tax impact of provision expense related to acquisitions (22.5) — Pre-tax branch consolidation costs (7.0) (2.6) After-tax impact of branch consolidation costs (5.5) (2.1) Total significant items pre-tax $ (80.8) $ (4.4) Total significant items after-tax $ (63.8) $ (3.5) Capital measures Common equity tier 1 9.82 % 9.92 % Tangible common equity to tangible assets (period-end) (non-GAAP) 7.24 7.36 Tangible book value per common share (period-end) (non-GAAP) $ 8.27 $ 8.59 (1) Favorable (unfavorable) impact on earnings 48 Table of Contents Industry Developments INFLATION REDUCTION ACT On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law.
TABLE 1 Year-to-Date Results Summary 2023 2022 Reported results Net income available to common stockholders (millions) $ 476.8 $ 431.1 Net income per diluted common share 1.31 1.22 Book value per common share (period-end) 16.56 15.39 Operating results (non-GAAP) Operating net income available to common stockholders (millions) $ 568.6 $ 494.9 Operating net income per diluted common share 1.57 1.40 Average diluted common shares outstanding (thousands) 362,898 354,052 Significant items impacting earnings (1) (millions) Pre-tax merger-related expenses $ (2.2) $ (45.3) After-tax impact of merger-related expenses (1.8) (35.8) Pre-tax provision expense related to acquisitions — (28.5) After-tax impact of provision expense related to acquisitions — (22.5) Pre-tax branch consolidation costs — (7.0) After-tax impact of branch consolidation costs — (5.5) Pre-tax FDIC assessment (29.9) — After-tax impact of FDIC assessment (23.7) — Pre-tax loss on securities restructuring (67.4) — After-tax loss on securities restructuring (53.2) — Pre-tax valuation allowance on auto loans held-for-sale (16.7) — After-tax valuation allowance on auto loans held-for-sale (13.2) — Total significant items pre-tax $ (116.2) $ (80.8) Total significant items after-tax $ (91.9) $ (63.8) Capital measures Common equity tier 1 10.04 % 9.82 % Tangible common equity to tangible assets (period-end) (non-GAAP) 7.79 7.24 Tangible book value per common share (period-end) (non-GAAP) $ 9.47 $ 8.27 (1) Favorable (unfavorable) impact on earnings 50 Table of Contents Industry Developments BANKING INDUSTRY DISRUPTION During the second week of March 2023, Silicon Valley Bank failed and was taken over by federal regulators.
As of December 31, 2022, 30.2% of the commercial real estate loans were owner-occupied, while the remaining 69.8% were non-owner-occupied, compared to 28.8% and 71.2%, respectively, as of December 31, 2021. As of December 31, 2022 and 2021, we had commercial construction loans of $1.7 billion at each respective date representing 5.7% and 6.9% of total loans and leases, respectively.
As of December 31, 2023 and 2022, we had commercial construction loans of $2.1 billion and $1.7 billion at each respective date, representing 6.6% and 5.7% of total loans and leases, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this item is provided in the Market Risk section of MD&A, which is included in Item 7 of this Report, and is incorporated herein by reference. 78 Table of Contents
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this item is provided in the Market Risk section of MD&A, which is included in Item 7 of this Report, and is incorporated herein by reference. 81 Table of Contents

Other FNB 10-K year-over-year comparisons