PART I – FINANCIAL INFORMATION [Glossary of Acronyms and Terms](index=4&type=section&id=Glossary%20of%20Acronyms%20and%20Terms) This section defines key financial and regulatory terms, aiding comprehension of the report's content - The glossary defines key financial and regulatory terms such as **ACL** (Allowance for credit losses), **AFS** (Available for sale), **CECL** (Current expected credit losses), **FDIC** (Federal Deposit Insurance Corporation), **GAAP** (U.S. generally accepted accounting principles), **MD&A** (Management's Discussion and Analysis), **SEC** (Securities and Exchange Commission), **SOFR** (Secured Overnight Financing Rate), and **TDR** (Troubled debt restructuring)[11](index=11&type=chunk) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This item presents F.N.B. Corporation's unaudited consolidated financial statements for the period ended June 30, 2023, including balance sheets, income statements, and cash flows [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show FNB's financial position at June 30, 2023, with increased total assets and equity, and decreased total deposits Consolidated Balance Sheets (Millions $) | Metric | June 30, 2023 (Millions $) | December 31, 2022 (Millions $) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------- | :--------------------------- | :---------- | :--------- | | Total Assets | 44,778 | 43,725 | 1,053 | 2.41% | | Net Loans and Leases | 30,941 | 29,853 | 1,088 | 3.64% | | Total Deposits | 33,825 | 34,770 | (945) | -2.72% | | Total Liabilities | 38,960 | 38,072 | 888 | 2.33% | | Total Stockholders' Equity | 5,818 | 5,653 | 165 | 2.92% | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Income statements reveal significant year-over-year growth in net interest income and net income for Q2 and H1 2023, despite rising expenses Consolidated Statements of Income (3 Months Ended June 30, Millions $) | Metric | 3 Months Ended June 30, 2023 ($M) | 3 Months Ended June 30, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Total Interest Income | 484 | 280 | 204 | 72.86% | | Total Interest Expense | 155 | 26 | 129 | 496.15% | | Net Interest Income | 329 | 254 | 75 | 29.53% | | Provision for credit losses | 19 | 6 | 13 | 216.67% | | Total Non-Interest Income | 81 | 82 | (1) | -1.22% | | Total Non-Interest Expense | 212 | 193 | 19 | 9.84% | | Net Income | 142 | 109 | 33 | 30.28% | | Net Income Available to Common Stockholders | 140 | 107 | 33 | 30.84% | | Diluted EPS | 0.39 | 0.30 | 0.09 | 30.00% | Consolidated Statements of Income (6 Months Ended June 30, Millions $) | Metric | 6 Months Ended June 30, 2023 ($M) | 6 Months Ended June 30, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Total Interest Income | 928 | 534 | 394 | 73.78% | | Total Interest Expense | 262 | 46 | 216 | 469.57% | | Net Interest Income | 666 | 488 | 178 | 36.48% | | Provision for credit losses | 33 | 24 | 9 | 37.50% | | Total Non-Interest Income | 160 | 160 | 0 | 0.00% | | Total Non-Interest Expense | 432 | 420 | 12 | 2.86% | | Net Income | 289 | 162 | 127 | 78.40% | | Net Income Available to Common Stockholders | 285 | 158 | 127 | 80.38% | | Diluted EPS | 0.78 | 0.45 | 0.33 | 73.33% | [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income improved significantly for Q2 and H1 2023, driven by reduced unrealized losses on available-for-sale securities Consolidated Statements of Comprehensive Income (Loss) (3 Months Ended June 30, Millions $) | Metric | 3 Months Ended June 30, 2023 ($M) | 3 Months Ended June 30, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Net Income | 142 | 109 | 33 | 30.28% | | Other Comprehensive Income (Loss) | (40) | (50) | 10 | 20.00% | | Comprehensive Income (Loss) | 102 | 59 | 43 | 72.88% | Consolidated Statements of Comprehensive Income (Loss) (6 Months Ended June 30, Millions $) | Metric | 6 Months Ended June 30, 2023 ($M) | 6 Months Ended June 30, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Net Income | 289 | 162 | 127 | 78.40% | | Other Comprehensive Income (Loss) | 2 | (190) | 192 | 101.05% | | Comprehensive Income (Loss) | 291 | (28) | 319 | 1139.29% | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased from December 2022 to June 2023, primarily due to comprehensive income, partially offset by dividends Consolidated Statements of Stockholders' Equity (Millions $) | Metric | June 30, 2023 ($M) | December 31, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Total Stockholders' Equity (End of Period) | 5,818 | 5,653 | 165 | 2.92% | | Retained Earnings (6 Months Ended) | 1,564 | 1,370 | 194 | 14.16% | | Accumulated Other Comprehensive Loss (6 Months Ended) | (355) | (357) | 2 | 0.56% | | Treasury Stock (6 Months Ended) | (188) | (167) | (21) | 12.57% | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased for H1 2023, driven by financing activities offsetting cash used in investing activities Consolidated Statements of Cash Flows (Millions $) | Metric | 6 Months Ended June 30, 2023 ($M) | 6 Months Ended June 30, 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------- | :--------- | | Net cash flows (used in) provided by operating activities | 149 | 692 | (543) | -78.47% | | Net cash flows (used in) provided by investing activities | (953) | (1,588) | 635 | 40.00% | | Net cash flows provided by (used in) financing activities | 834 | (568) | 1,402 | 246.83% | | Net Increase (Decrease) in Cash and Cash Equivalents | 30 | (1,464) | 1,494 | 102.05% | | Cash and Cash Equivalents at End of Period | 1,704 | 2,029 | (325) | -16.02% | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on FNB's accounting policies, mergers, securities, loans, and other financial statement components [NATURE OF OPERATIONS](index=11&type=section&id=NATURE%20OF%20OPERATIONS) FNB is a diversified financial services company operating across seven states, offering commercial, consumer, and wealth management solutions - F.N.B. Corporation operates in **seven states and D.C.**, with **346 branches** as of June 30, 2023[21](index=21&type=chunk) - The company provides commercial banking (corporate, small business, real estate, capital markets, lease financing), consumer banking (deposits, mortgages, lending, mobile/online services), and wealth management (asset management, private banking, insurance)[22](index=22&type=chunk) [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation, consolidation principles, and the use of estimates in FNB's financial statements - The financial statements consolidate entities where FNB has a controlling financial interest or is the primary beneficiary of a Variable Interest Entity (VIE)[23](index=23&type=chunk)[24](index=24&type=chunk) - Preparation of financial statements requires significant estimates and assumptions, particularly for **Allowance for Credit Losses (ACL)**, fair value of financial instruments, goodwill, intangible assets, income taxes, deferred tax assets, and litigation reserves[27](index=27&type=chunk) [NOTE 2. NEW ACCOUNTING STANDARDS](index=12&type=section&id=NOTE%202.%20NEW%20ACCOUNTING%20STANDARDS) FNB adopted ASU 2022-02 with no material impact and is assessing ASU 2023-02 for potential future financial statement effects - FNB adopted **ASU 2022-02** (Troubled Debt Restructurings and Vintage Disclosures) on January 1, 2023, with **no material impact** on consolidated financial statements[29](index=29&type=chunk) - FNB is reviewing **ASU 2023-02** (Tax Equity Investments) for its potential impact, with an effective date of January 1, 2024. This update expands the proportional amortization method to other tax credit structures[29](index=29&type=chunk) [NOTE 3. MERGERS AND ACQUISITIONS](index=13&type=section&id=NOTE%203.%20MERGERS%20AND%20ACQUISITIONS) FNB completed acquisitions of Howard Bancorp and UB Bancorp in 2022, expanding its market presence and adding assets and deposits - FNB acquired **Howard Bancorp, Inc.** in January 2022 for approximately **$443 million**, issuing **34,074,495 common shares**. The acquisition added **$2.4 billion in assets**, including **$1.8 billion in loans and deposits**, and resulted in **$177 million in goodwill**[31](index=31&type=chunk)[33](index=33&type=chunk)[43](index=43&type=chunk) - FNB acquired **UB Bancorp (Union)** in December 2022 for approximately **$126 million**, issuing **9,672,691 common shares**. The acquisition added **$1.1 billion in assets**, including **$0.7 billion in loans and $1.0 billion in deposits**, and resulted in **$38 million in goodwill and $41 million in core deposit intangibles**[36](index=36&type=chunk)[39](index=39&type=chunk)[43](index=43&type=chunk) Acquired Assets & Liabilities (Millions $) | Acquired Assets & Liabilities (in millions) | Howard | Union | | :---------------------------------------- | :----- | :---- | | Fair value of consideration paid | $443 | $126 | | Cash and cash equivalents | $75 | $113 | | Securities | $321 | $212 | | Loans | $1,780 | $652 | | Core deposit and other intangible assets | $19 | $41 | | Fixed and other assets | $156 | $59 | | Deposits | $1,831 | $956 | | Borrowings | $247 | $30 | | Other liabilities | $7 | $3 | | Goodwill recognized | $177 | $38 | [NOTE 4. SECURITIES](index=15&type=section&id=NOTE%204.%20SECURITIES) FNB's debt securities portfolio experienced unrealized losses due to rising interest rates, with most securities backed by the U.S. government Debt Securities AFS (Millions $) | Debt Securities AFS (in millions) | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Amortized Cost | $3,519 | $3,622 | | Fair Value | $3,177 | $3,275 | | Gross Unrealized Losses | $(343) | $(348) | Debt Securities HTM (Millions $) | Debt Securities HTM (in millions) | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Amortized Cost | $3,988 | $4,087 | | Fair Value | $3,587 | $3,687 | | Gross Unrealized Losses | $(402) | $(403) | - Unrealized losses on AFS and HTM portfolios are primarily due to increased market interest rates, with **84.6% of securities backed or sponsored by the U.S. government**, indicating temporary losses not reflecting expected credit losses[47](index=47&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) - The municipal bond portfolio (**$1.1 billion**) has an average rating of **AA**, with **100% rated A or better**, and **61% having formal credit enhancement**. The corporate bond portfolio (**$46.7 million**) primarily consists of subordinated debentures of banks[56](index=56&type=chunk)[58](index=58&type=chunk) [NOTE 5. LOANS AND LEASES](index=20&type=section&id=NOTE%205.%20LOANS%20AND%20LEASES) Total loans and leases increased to $31.35 billion, with commercial real estate and residential mortgages as largest segments, and non-performing loans rising Loan Category (Millions $) | Loan Category (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :-------------------------- | :------------ | :---------------- | :---------- | :--------- | | Commercial real estate | $11,689 | $11,526 | $163 | 1.41% | | Commercial and industrial | $7,248 | $7,131 | $117 | 1.64% | | Residential mortgages | $6,089 | $5,297 | $792 | 14.95% | | Total loans and leases | $31,354 | $30,255 | $1,099 | 3.63% | - Non-performing loans and leases increased to **$143 million** at June 30, 2023, from **$113 million** at December 31, 2022, primarily due to a single commercial and industrial loan downgraded to non-accrual status[77](index=77&type=chunk) Non-Performing Assets (Millions $) | Non-Performing Assets (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :---------------------------------- | :------------ | :---------------- | :---------- | :--------- | | Non-accrual loans | $143 | $113 | $30 | 26.55% | | Other real estate owned | $5 | $6 | $(1) | -16.67% | | Total non-performing assets | $148 | $119 | $29 | 24.37% | - Loan modifications for borrowers experiencing financial difficulty primarily involved term extensions, with a total amortized cost basis of **$14.5 million** for the three months ended June 30, 2023, and **$18.4 million** for the six months ended June 30, 2023[80](index=80&type=chunk)[81](index=81&type=chunk) [NOTE 6. ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES](index=31&type=section&id=NOTE%206.%20ALLOWANCE%20FOR%20CREDIT%20LOSSES%20ON%20LOANS%20AND%20LEASES) ACL on loans and leases increased to $412.7 million due to loan growth and a specific reserve, with stable coverage ratio ACL on Loans and Leases (Millions $) | Metric (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :------------------- | :------------ | :---------------- | :---------- | :--------- | | ACL on loans and leases | $412.7 | $401.7 | $11.0 | 2.74% | | ACL coverage ratio | 1.32% | 1.33% | -0.01% | -0.75% | Provision for Credit Losses and Net Charge-offs (3 Months Ended June 30, Millions $) | Metric (in millions) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($M) | Change (%) | | :------------------- | :----------------------------- | :----------------------------- | :---------- | :--------- | | Total provision for credit losses | $18.5 | $6.4 | $12.1 | 189.06% | | Net charge-offs | $8.7 | $(0.4) | $9.1 | 2275.00% | Provision for Credit Losses and Net Charge-offs (6 Months Ended June 30, Millions $) | Metric (in millions) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($M) | Change (%) | | :------------------- | :----------------------------- | :----------------------------- | :---------- | :--------- | | Total provision for credit losses | $32.6 | $24.4 | $8.2 | 33.61% | | Net charge-offs | $21.9 | $1.5 | $20.4 | 1360.00% | - The increase in provision for credit losses was primarily due to loan growth and a **$13 million specific reserve** for a single commercial and industrial loan downgraded to non-performing status[98](index=98&type=chunk) [NOTE 7. LOAN SERVICING](index=34&type=section&id=NOTE%207.%20LOAN%20SERVICING) FNB's mortgage servicing rights (MSRs) increased in fair value, highly sensitive to interest rate changes, with no valuation allowance Mortgage Loans Sold with Servicing Retained (Millions $) | Metric (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :------------------- | :------------ | :---------------- | :---------- | :--------- | | Mortgage loans sold with servicing retained | $5,435 | $5,242 | $193 | 3.68% | Mortgage Servicing Rights (MSRs) (Millions $) | Metric (in millions) | June 30, 2023 | June 30, 2022 | Change ($M) | Change (%) | | :------------------- | :------------ | :------------ | :---------- | :--------- | | MSRs Balance at end of period | $55.7 | $50.7 | $5.0 | 9.86% | | MSRs Fair value, end of period | $72.1 | $64.1 | $8.0 | 12.48% | - The fair value of MSRs is highly sensitive to changes in prepayment rates, which are inversely related to interest rates. An increase in interest rates generally increases MSR fair value, while a decrease reduces it[103](index=103&type=chunk)[105](index=105&type=chunk) [NOTE 8. LEASES](index=35&type=section&id=NOTE%208.%20LEASES) FNB holds operating and finance leases for branches and equipment, with new operating leases expected to commence in 2023 Lease Assets and Liabilities (Millions $) | Lease Type (in millions) | Right-of-Use Assets (June 30, 2023) | Lease Liabilities (June 30, 2023) | | :----------------------- | :---------------------------------- | :-------------------------------- | | Operating leases | $134.7 | $144.7 | | Finance leases | $28.7 | $29.5 | - FNB expects to add approximately **$76.4 million** in right-of-use assets and **$97.8 million** in other liabilities from new operating leases, including a new headquarters building, commencing throughout the remainder of 2023[107](index=107&type=chunk) Lease Cost (Millions $) | Lease Cost (in millions) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $8 | $8 | $16 | $16 | | Finance lease cost | $1 | $0 | $2 | $0 | | Total lease cost | $10 | $9 | $20 | $18 | [NOTE 9. VARIABLE INTEREST ENTITIES](index=37&type=section&id=NOTE%209.%20VARIABLE%20INTEREST%20ENTITIES) FNB holds interests in unconsolidated VIEs, primarily TPS and Affordable Housing Tax Credit Partnerships, with a maximum exposure to loss of $153 million Unconsolidated VIEs (Millions $) | Unconsolidated VIEs (in millions) | Total Assets (June 30, 2023) | Maximum Exposure to Loss (June 30, 2023) | | :-------------------------------- | :--------------------------- | :--------------------------------------- | | Trust preferred securities | $1 | $0 | | Affordable housing tax credit partnerships | $117 | $117 | | Other investments | $36 | $36 | | Total | $154 | $153 | - FNB's investments in Affordable Housing Tax Credit Partnerships are accounted for using the proportional amortization method, impacting the provision for income taxes[118](index=118&type=chunk)[120](index=120&type=chunk) [NOTE 10. BORROWINGS](index=38&type=section&id=NOTE%2010.%20BORROWINGS) Total borrowings significantly increased to $4.372 billion, driven by FHLB advances to maintain liquidity, and senior note issuance Borrowing Type (Millions $) | Borrowing Type (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :--------------------------- | :------------ | :---------------- | :---------- | :--------- | | Short-term borrowings | $2,391 | $1,372 | $1,019 | 74.27% | | Long-term borrowings | $1,981 | $1,093 | $888 | 81.24% | | Total borrowings | $4,372 | $2,465 | $1,907 | 77.36% | - The increase in borrowings is primarily due to increased **FHLB advances**, with **$2.0 billion in short-term** and **$1.2 billion in long-term advances** at June 30, 2023, utilized to maintain additional liquidity following banking industry disruption[123](index=123&type=chunk)[126](index=126&type=chunk) - FNB issued **$350 million of 5.150% fixed-rate senior notes** in August 2022 and repurchased **$15.0 million in other subordinated debt** in Q2 2023[124](index=124&type=chunk)[125](index=125&type=chunk) [NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=41&type=section&id=NOTE%2011.%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) FNB uses derivatives, mainly interest rate contracts, to manage interest rate risk and facilitate customer transactions, not for trading - FNB uses derivative instruments to reduce the effects of interest rate changes on net income and cash flows, and to facilitate customer transactions, not for trading or speculative purposes[133](index=133&type=chunk) Gross Derivatives (Millions $) | Gross Derivatives (in millions) | Notional Amount (June 30, 2023) | Fair Value Asset (June 30, 2023) | Fair Value Liability (June 30, 2023) | | :------------------------------ | :------------------------------ | :------------------------------- | :--------------------------------- | | Subject to master netting arrangements | $7,375 | $96 | $8 | | Not subject to master netting arrangements | $6,469 | $7 | $380 | | Total | $13,844 | $103 | $388 | - Derivatives designated as cash flow hedges (interest rate contracts) initially report gains/losses in OCI, then reclassify to earnings. Non-designated derivatives (interest rate swaps, lock commitments, forward delivery, credit risk contracts) impact current period earnings[134](index=134&type=chunk)[137](index=137&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) [NOTE 12. COMMITMENTS, CREDIT RISK AND CONTINGENCIES](index=44&type=section&id=NOTE%2012.%20COMMITMENTS,%20CREDIT%20RISK%20AND%20CONTINGENCIES) FNB has off-balance sheet commitments totaling $13.416 billion and is involved in legal proceedings, with no material adverse effect anticipated Off-Balance Sheet Credit Risk (Millions $) | Off-Balance Sheet Credit Risk (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :---------------------------------------- | :------------ | :---------------- | :---------- | :--------- | | Commitments to extend credit | $13,416 | $13,250 | $166 | 1.25% | | Standby letters of credit | $230 | $207 | $23 | 11.11% | - The **AULC** for non-cancellable commitments was **$21.0 million** at June 30, 2023, slightly down from **$21.4 million** at December 31, 2022[154](index=154&type=chunk) - FNB is routinely involved in legal proceedings and regulatory matters; while significant monetary damages or sanctions may be sought, management does not believe they will have a material adverse effect on financial position or liquidity, though they could impact net income in a given period[156](index=156&type=chunk)[157](index=157&type=chunk) [NOTE 13. STOCK INCENTIVE PLANS](index=45&type=section&id=NOTE%2013.%20STOCK%20INCENTIVE%20PLANS) FNB issues restricted stock awards to employees, with $13 million in stock-based compensation expense for H1 2023 - FNB granted **1,354,017 restricted stock units** during the six months ended June 30, 2023, and had **3,674,862 unvested units** outstanding at period-end[158](index=158&type=chunk)[161](index=161&type=chunk) Stock-based Compensation (Millions $) | Metric (in millions) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $13 | $12 | | Tax benefit | $3 | $3 | | Fair value of units vested | $30 | $21 | - All outstanding stock options (**107,823** at June 30, 2023) were assumed from acquisitions and are fully vested, with an intrinsic value of **$0.2 million**[164](index=164&type=chunk)[165](index=165&type=chunk) [NOTE 14. INCOME TAXES](index=47&type=section&id=NOTE%2014.%20INCOME%20TAXES) Income tax expense increased to $72 million for H1 2023 due to higher pre-tax earnings, with a slightly decreased effective tax rate Income Taxes (Millions $) | Metric (in millions) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total income taxes | $37 | $28 | $72 | $42 | | Effective tax rate | 20.5% | 20.1% | 20.0% | 20.4% | | Statutory federal tax rate | 21.0% | 21.0% | 21.0% | 21.0% | - The effective tax rate is lower than the statutory rate due to tax-exempt income, tax credits, and income from BOLI. The decrease in the effective tax rate for the six months ended June 30, 2023, was primarily due to higher deduction levels from employee stock compensation vesting[166](index=166&type=chunk) [NOTE 15. OTHER COMPREHENSIVE INCOME (LOSS)](index=48&type=section&id=NOTE%2015.%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) Accumulated other comprehensive loss improved slightly to $(355) million, driven by changes in unrealized gains/losses on securities Other Comprehensive Income (Loss) (Millions $) | Metric (in millions) | 6 Months Ended June 30, 2023 | | :------------------- | :----------------------------- | | Balance at beginning of period | $(357) | | Other comprehensive (loss) income before reclassifications | $(5) | | Amounts reclassified from AOCI | $7 | | Net current period other comprehensive (loss) income | $2 | | Balance at end of period | $(355) | - Amounts reclassified from AOCI related to debt securities AFS are included in net securities gains, while those from derivative instruments in cash flow hedge programs are generally included in interest income on loans and leases[168](index=168&type=chunk) [NOTE 16. EARNINGS PER COMMON SHARE](index=48&type=section&id=NOTE%2016.%20EARNINGS%20PER%20COMMON%20SHARE) FNB reported significant year-over-year growth in basic and diluted EPS for Q2 and H1 2023, reaching $0.78 diluted EPS for H1 Earnings Per Common Share (Millions $) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders ($M) | $140 | $107 | $285 | $158 | | Basic EPS | $0.39 | $0.30 | $0.79 | $0.45 | | Diluted EPS | $0.39 | $0.30 | $0.78 | $0.45 | - Basic EPS is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding, while diluted EPS adjusts for the dilutive effect of potential common shares[169](index=169&type=chunk)[170](index=170&type=chunk) [NOTE 17. CASH FLOW INFORMATION](index=49&type=section&id=NOTE%2017.%20CASH%20FLOW%20INFORMATION) Supplemental cash flow information for H1 2023 includes $238 million in interest paid and $67 million in income taxes paid Cash Flow Information (Millions $) | Metric (in millions) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------- | :----------------------------- | :----------------------------- | | Interest paid | $238 | $45 | | Income taxes paid | $67 | $35 | | Transfers of loans to OREO | $1 | $1 | | Loans transferred to portfolio from held for sale | $26 | $0 | - No restricted cash was held as of June 30, 2023, or 2022[172](index=172&type=chunk) [NOTE 18. BUSINESS SEGMENTS](index=49&type=section&id=NOTE%2018.%20BUSINESS%20SEGMENTS) FNB operates in Community Banking, Wealth Management, and Insurance segments, with Community Banking being the largest contributor to income - FNB operates in three reportable segments: **Community Banking** (commercial and consumer banking), **Wealth Management** (fiduciary, brokerage, investment advisory), and **Insurance** (commercial and personal insurance brokerage, reinsurer)[174](index=174&type=chunk)[176](index=176&type=chunk) Segment Performance (3 Months Ended June 30, 2023, Millions $) | Segment Performance (3 Months Ended June 30, 2023, in millions) | Community Banking | Wealth Management | Insurance | Parent and Other | Consolidated | | :------------------------------------------------------------ | :---------------- | :---------------- | :-------- | :--------------- | :----------- | | Interest income | $483 | $0 | $0 | $1 | $484 | | Net interest income | $336 | $0 | $0 | $(7) | $329 | | Non-interest income | $57 | $18 | $7 | $(1) | $81 | | Net income (loss) | $143 | $4 | $1 | $(6) | $142 | | Total assets | $44,629 | $39 | $32 | $78 | $44,778 | Segment Performance (6 Months Ended June 30, 2023, Millions $) | Segment Performance (6 Months Ended June 30, 2023, in millions) | Community Banking | Wealth Management | Insurance | Parent and Other | Consolidated | | :------------------------------------------------------------ | :---------------- | :---------------- | :-------- | :--------------- | :----------- | | Interest income | $925 | $0 | $0 | $3 | $928 | | Net interest income | $680 | $0 | $0 | $(14) | $666 | | Non-interest income | $112 | $36 | $14 | $(2) | $160 | | Net income (loss) | $290 | $8 | $4 | $(13) | $289 | | Total assets | $44,629 | $39 | $32 | $78 | $44,778 | [NOTE 19. FAIR VALUE MEASUREMENTS](index=52&type=section&id=NOTE%2019.%20FAIR%20VALUE%20MEASUREMENTS) FNB measures assets and liabilities at fair value using Level 1 and Level 2 inputs for recurring items, and Level 3 for non-recurring items Assets Measured at Fair Value (June 30, 2023, Millions $) | Assets Measured at Fair Value (June 30, 2023, in millions) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------------------- | :------ | :------ | :------ | :---- | | Debt securities available for sale | $306 | $2,871 | $0 | $3,177 | | Loans held for sale | $0 | $82 | $0 | $82 | | Derivative financial instruments | $0 | $103 | $0 | $103 | | Total assets measured at fair value on a recurring basis | $306 | $3,056 | $0 | $3,362 | Liabilities Measured at Fair Value (June 30, 2023, Millions $) | Liabilities Measured at Fair Value (June 30, 2023, in millions) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------------------------ | :------ | :------ | :------ | :---- | | Derivative financial instruments | $0 | $386 | $2 | $388 | | Total liabilities measured at fair value on a recurring basis | $0 | $386 | $2 | $388 | Assets Measured at Fair Value on a Non-Recurring Basis (June 30, 2023, Millions $) | Assets Measured at Fair Value on a Non-Recurring Basis (June 30, 2023, in millions) | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------------------------------------------------------- | :------ | :------ | :------ | :---- | | Collateral dependent loans | $0 | $0 | $47 | $47 | | Other assets - SBA servicing asset | $0 | $0 | $2 | $2 | | Other real estate owned | $0 | $0 | $2 | $2 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses FNB's financial performance for Q2 and H1 2023, covering income, balance sheet, capital, liquidity, and market risk [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION](index=56&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20INFORMATION) This section warns that forward-looking statements are subject to various economic, regulatory, competitive, and operational risks and uncertainties - Forward-looking statements are subject to risks including U.S. and global financial market developments, governmental regulation, economic slowdowns, inflation, tariffs, and sociopolitical environments[195](index=195&type=chunk) - Other risks include managing business risks, competition, technological changes, unpredictable events (disasters, pandemics, geopolitical instability, cyber-attacks), and legal/regulatory developments (e.g., changes in accounting standards, capital requirements, enforcement actions)[195](index=195&type=chunk)[200](index=200&type=chunk) [APPLICATION OF CRITICAL ACCOUNTING POLICIES](index=57&type=section&id=APPLICATION%20OF%20CRITICAL%20ACCOUNTING%20POLICIES) FNB's critical accounting policies and estimates remain unchanged since December 31, 2022, as detailed in its 2022 Annual Report - No significant changes in critical accounting policies or the assumptions and judgments used in applying them have occurred since December 31, 2022[198](index=198&type=chunk) [USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS](index=57&type=section&id=USE%20OF%20NON-GAAP%20FINANCIAL%20MEASURES%20AND%20KEY%20PERFORMANCE%20INDICATORS) FNB uses non-GAAP measures like operating net income and tangible book value to provide clearer insights into performance and trends - Non-GAAP measures (e.g., operating net income, tangible book value, efficiency ratio FTE) are used to supplement GAAP results, providing insights into operating performance and trends, and facilitating peer comparisons[199](index=199&type=chunk) - Management believes certain items like merger expenses, initial provision for non-PCD loans, and branch consolidation costs are not organic to operations and are excluded from operating non-GAAP measures[202](index=202&type=chunk) [FINANCIAL SUMMARY](index=58&type=section&id=FINANCIAL%20SUMMARY) FNB reported strong Q2 2023 performance with increased net income, diluted EPS, tangible book value, and an improved efficiency ratio Financial Summary (Millions $) | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--------------------------------------- | :------ | :------ | :--------- | | Net income available to common stockholders ($M) | $140.4 | $107.1 | 31.09% | | Net income per diluted common share | $0.39 | $0.30 | 30.00% | | Operating net income per diluted common share (non-GAAP) | $0.39 | $0.31 | 25.81% | | Book value per common share (period-end) | $15.92 | $15.19 | 4.81% | | Tangible book value per common share (non-GAAP) | $8.79 | $8.10 | 8.52% | | Common equity tier 1 | 10.1% | 9.7% | 4.12% | | Efficiency ratio (non-GAAP) | 50.0% | 55.2% | -9.42% | - Net interest income increased **$75.6 million (29.8%)** YoY, driven by earning asset growth and higher interest rates, but decreased **2.2%** QoQ due to accelerating deposit costs and migration to time deposits[207](index=207&type=chunk) - Period-end total loans and leases increased **$3.3 billion (11.8%)** YoY, with organic growth across diverse geographic footprint. On a linked-quarter basis, loans increased **$680.6 million (2.2%)**[210](index=210&type=chunk) - Period-end deposits decreased **$365.4 million (1.1%)** QoQ due to seasonal outflows and inflationary pressures. **77%** of deposits were FDIC-insured or collateralized[210](index=210&type=chunk) - The ratio of loans to deposits was **92.7%** (vs. 87.0% prior year), and non-interest-bearing deposits comprised **32%** of total deposits (vs. 34% prior year), reflecting a shift in funding mix[210](index=210&type=chunk) [Industry Developments](index=61&type=section&id=Industry%20Developments) The banking industry experienced disruption in March 2023, leading to federal intervention, while FNB maintained stable deposits and ample liquidity - Failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in March-May 2023 led to federal government intervention, including full depositor protection and the creation of the **Bank Term Funding Program (BTFP)** for additional liquidity[212](index=212&type=chunk)[213](index=213&type=chunk) - FNB did not participate in the BTFP, maintaining stable deposit balances due to a granular deposit base (average customer deposit account balance **~$29,000**) and ample liquidity (estimated **140% coverage** of uninsured/non-collateralized deposits)[214](index=214&type=chunk) - The banking industry transitioned from **LIBOR to SOFR** as the primary benchmark interest rate, with FNB ceasing LIBOR-based loan originations by January 1, 2022, and completing remediation efforts for existing LIBOR-based loans by June 30, 2023[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) [RESULTS OF OPERATIONS](index=62&type=section&id=RESULTS%20OF%20OPERATIONS) FNB's Q2 and H1 2023 results show significant net income and EPS growth, driven by net interest income, offset by increased expenses [Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022](index=62&type=section&id=Three%20Months%20Ended%20June%2030,%202023%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202022) Q2 2023 net income available to common stockholders increased 31.0% to $140.4 million, driven by higher net interest income Results of Operations (3 Months Ended June 30, Millions $) | Metric | Q2 2023 ($M) | Q2 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :----------- | :----------- | :---------- | :--------- | | Net income available to common stockholders | $140.4 | $107.1 | $33.3 | 31.09% | | Diluted EPS | $0.39 | $0.30 | $0.09 | 30.00% | | Net interest income | $329.2 | $253.7 | $75.5 | 29.76% | | Provision for credit losses | $18.5 | $6.4 | $12.1 | 189.06% | | Non-interest income | $80.3 | $82.2 | $(1.9) | -2.31% | | Non-interest expense | $212.0 | $192.8 | $19.2 | 9.96% | - Net interest margin (FTE) increased **61 basis points to 3.37%**, as earning asset yields rose **189 basis points**, partially offset by a **134 basis-point increase** in total cost of funds[225](index=225&type=chunk) - Loan growth was strong, with average loans and leases increasing **$3.8 billion (14.0%)**, led by commercial real estate, commercial and industrial loans, and residential mortgages[228](index=228&type=chunk) - Interest expense increased **$127.9 million** due to higher rates on interest-bearing liabilities (up **187 bps to 2.32%**) and growth in average interest-bearing deposits and borrowings[231](index=231&type=chunk) - Non-interest expense increase was primarily driven by a **$10.1 million (9.7%) rise** in salaries and employee benefits due to production-related commissions, Union acquisition expense base, and merit increases[239](index=239&type=chunk) [Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022](index=69&type=section&id=Six%20Months%20Ended%20June%2030,%202023%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030,%202022) H1 2023 net income available to common stockholders surged 80.2% to $284.9 million, with strong net interest income growth Results of Operations (6 Months Ended June 30, Millions $) | Metric | H1 2023 ($M) | H1 2022 ($M) | Change ($M) | Change (%) | | :--------------------------------- | :----------- | :----------- | :---------- | :--------- | | Net income available to common stockholders | $284.9 | $158.1 | $126.8 | 80.20% | | Diluted EPS | $0.78 | $0.45 | $0.33 | 73.33% | | Net interest income | $665.9 | $487.8 | $178.1 | 36.51% | | Provision for credit losses | $32.6 | $24.4 | $8.2 | 33.61% | | Non-interest income | $159.7 | $160.5 | $(0.8) | -0.50% | | Non-interest expense | $431.9 | $420.2 | $11.7 | 2.78% | - Net interest margin (FTE) increased **77 basis points to 3.46%**, with earning asset yields rising **187 basis points to 4.81%**, primarily due to higher yields on variable-rate loans, investment securities, and interest-bearing deposits[253](index=253&type=chunk)[256](index=256&type=chunk) - Average loans and leases increased **$4.0 billion (14.9%)**, driven by organic origination and acquired Union loans, particularly in commercial and industrial, commercial real estate, and residential mortgages[256](index=256&type=chunk) - Interest expense increased **$215.2 million (461.9%)** due to the higher interest rate environment and a **$943.1 million (4.3%) increase** in average interest-bearing deposits, with time deposits increasing **$1.6 billion (55.3%)** as customer preferences shifted[258](index=258&type=chunk) - Operating non-interest expense (non-GAAP) increased **$44.3 million (11.5%)**, primarily due to annual merit increases, reduced salary deferrals, the Union acquisition expense base, and higher FDIC insurance costs[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) [FINANCIAL CONDITION](index=77&type=section&id=FINANCIAL%20CONDITION) Total assets increased to $44.778 billion, driven by loan growth, while deposits decreased and borrowings significantly increased Financial Condition (Millions $) | Metric (in millions) | June 30, 2023 | December 31, 2022 | Change ($M) | Change (%) | | :------------------- | :------------ | :---------------- | :---------- | :--------- | | Total Assets | $44,778 | $43,725 | $1,053 | 2.41% | | Net Loans and Leases | $30,941 | $29,853 | $1,088 | 3.64% | | Total Deposits | $33,825 | $34,770 | $(945) | -2.72% | | Borrowings | $4,372 | $2,465 | $1,907 | 77.36% | | Non-performing assets | $148 | $119 | $29 | 24.37% | - Loan growth was led by residential mortgages (up **$792 million, 15.0%**) and commercial and industrial loans (up **$117 million, 1.6%**), particularly in Pittsburgh, Cleveland, and North Carolina markets[275](index=275&type=chunk)[276](index=276&type=chunk) - The increase in non-performing assets was primarily due to a single commercial and industrial loan downgraded to non-performing status during the quarter[277](index=277&type=chunk) - Total deposits decreased due to normal seasonal declines in public funds, seasonal income tax payments, and inflationary pressures, with a shift towards certificates of deposits[281](index=281&type=chunk) [Capital Resources and Regulatory Matters](index=80&type=section&id=Capital%20Resources%20and%20Regulatory%20Matters) FNB maintains a strong capital base, exceeding regulatory requirements, with an active share repurchase program and CECL phase-in - FNB and FNBPA exceeded all regulatory capital requirements and were considered "**well-capitalized**" at June 30, 2023[288](index=288&type=chunk)[292](index=292&type=chunk) Capital Ratios (June 30, 2023) | Capital Ratios (June 30, 2023) | F.N.B. Corporation | FNBPA | Minimum Capital Requirements plus Capital Conservation Buffer | | :----------------------------- | :----------------- | :------ | :---------------------------------------------------------- | | Total capital ratio | 12.33% | 12.72% | 10.50% | | Tier 1 capital ratio | 10.35% | 10.69% | 8.50% | | Common equity tier 1 ratio | 10.05% | 10.46% | 7.00% | | Leverage ratio | 8.68% | 8.96% | 4.00% | - FNB has **$139.1 million** remaining for common stock repurchases under its existing **$300 million** program[285](index=285&type=chunk) - FNB elected to phase in the **CECL impact** on regulatory capital, with a total deferred impact of approximately **$34.4 million (10 basis points)** on CET1 capital as of June 30, 2023[289](index=289&type=chunk)[290](index=290&type=chunk) - Stress tests indicate that regulatory capital ratios would remain above requirements and liquidity levels would be maintained even under severely adverse economic scenarios[291](index=291&type=chunk) [LIQUIDITY](index=82&type=section&id=LIQUIDITY) FNB maintained ample liquidity despite deposit decreases, with high deposit insurance coverage and significant unused borrowing capacity - Total deposits decreased **$945.1 million (2.7%)** from December 31, 2022, and **$592 million (1.7%)** from March 8, 2023, due to seasonal declines, tax payments, and inflationary pressures, with a shift to time deposits[300](index=300&type=chunk)[301](index=301&type=chunk) - FNB maintained ample liquidity, with approximately **76% of deposits insured by the FDIC or collateralized**, and unused wholesale borrowing capacity of **$15.279 billion**, covering **1.9 times** uninsured and non-collateralized deposits[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) Parent Company Liquidity Metrics | Parent Company Liquidity Metrics | June 30, 2023 | December 31, 2022 | Internal Limit | | :------------------------------- | :------------ | :---------------- | :------------- | | Liquidity coverage ratio | 2.7 times | 1.7 times | > 1 time | | Months of cash on hand | 16.7 months | 13.6 months | > 12 months | - FNB has **$2.2 billion** in cash and salable unpledged government and agency securities (**4.9% of total assets**), exceeding its policy minimum of **3.0%**[302](index=302&type=chunk)[303](index=303&type=chunk) [MARKET RISK](index=84&type=section&id=MARKET%20RISK) FNB manages interest rate risk through asset/liability policies, benefiting from rising rates with a positive cumulative repricing gap - FNB is primarily exposed to interest rate risk, managed through asset/liability policies, derivative instruments, and measures like earnings simulation, Economic Value of Equity (EVE), and gap analysis[305](index=305&type=chunk)[306](index=306&type=chunk)[308](index=308&type=chunk) Repricing Gap (Millions $) | Repricing Gap (in millions) | Within 1 Month | 2-3 Months | 4-6 Months | 7-12 Months | Total 1 Year | | :-------------------------- | :------------- | :--------- | :--------- | :---------- | :----------- | | Assets | $15,620 | $1,302 | $1,372 | $2,118 | $20,412 | | Liabilities | $8,434 | $1,051 | $1,056 | $2,326 | $12,867 | | Off-balance sheet | $(1,000) | $400 | $(200) | $(200) | $(1,000) | | Period Gap | $6,186 | $651 | $116 | $(408) | $6,545 | | Cumulative Gap to Assets | 15.5% | 17.1% | 17.4% | 16.4% | | - The positive cumulative repricing gap of **16.4%** at June 30, 2023 (up from **8.4%** at Dec 31, 2022) indicates a greater amount of repricing earning assets than interest-bearing liabilities over the next 12 months, benefiting from higher rates[310](index=310&type=chunk) Net Interest Income Change (12 months) | Net Interest Income Change (12 months) | June 30, 2023 | December 31, 2022 | ALCO Limits | | :------------------------------------- | :------------ | :---------------- | :---------- | | +300 basis points | 14.2% | 5.5% | n/a | | +200 basis points | 9.4% | 3.3% | (5.0)% | | +100 basis points | 4.7% | 1.1% | (5.0)% | | -100 basis points | 1.3% | 1.2% | (5.0)% | | -200 basis points | 2.0% | 0.9% | (5.0)% | - FNB's asset-sensitive position, with **47% of net loans and leases indexed to short-term rates**, has benefited from FOMC rate increases. Management aims for a more neutral position given market expectations[315](index=315&type=chunk)[317](index=317&type=chunk) [RISK MANAGEMENT](index=87&type=section&id=RISK%20MANAGEMENT) FNB's risk management framework addresses seven major risk categories, guided by a risk appetite statement and Board oversight - FNB identifies seven major risk categories: credit, market, liquidity, reputational, operational, legal and compliance, and strategic risk[319](index=319&type=chunk) - The Board of Directors adopted a risk appetite statement, monitored by **Key Risk Indicators (KRIs)**, to guide operations and optimize shareholder value within acceptable risk levels[320](index=320&type=chunk) - A governance structure involving the Board's Risk Committee and the senior management-level Risk Management Council ensures oversight and alignment of risk, capital, and performance[321](index=321&type=chunk) - Specialized departments (e.g., Enterprise-Wide Risk Management, Fraud Risk, Loan Review, Model Risk Management, Third-Party Risk Management, Anti-Money Laundering, Appraisal Review, Compliance, Information and Cyber Security) report to the Chief Risk Officer to implement risk management strategies[323](index=323&type=chunk) [RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP](index=89&type=section&id=RECONCILIATIONS%20OF%20NON-GAAP%20FINANCIAL%20MEASURES%20AND%20KEY%20PERFORMANCE%20INDICATORS%20TO%20GAAP) This section provides detailed reconciliations of FNB's non-GAAP financial measures and key performance indicators to comparable GAAP measures - Reconciliations are provided for non-GAAP measures including operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, tangible equity to tangible assets, tangible common equity to tangible assets, and efficiency ratio (FTE)[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk)[337](index=337&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=92&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item refers to the Market Risk section within Item 2 for detailed disclosures on FNB's exposure to market risk - Information on quantitative and qualitative disclosures about market risk is incorporated by reference from the "Market Risk" section of Item 2, Management's Discussion and Analysis[338](index=338&type=chunk) [Item 4. Controls and Procedures](index=92&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal controls over financial reporting - FNB's management, including the CEO and CFO, evaluated disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2023[339](index=339&type=chunk) - No material changes to internal controls over financial reporting occurred during the fiscal quarter ended June 30, 2023[341](index=341&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=93&type=section&id=Item%201.%20Legal%20Proceedings) This item refers to Note 12 of the Consolidated Financial Statements for information on FNB's legal and regulatory matters - Information on legal proceedings is incorporated by reference from Note 12, "Commitments, Credit Risk and Contingencies," in the Notes to the Consolidated Financial Statements[342](index=342&type=chunk) [Item 1A. Risk Factors](index=93&type=section&id=Item%201A.%20Risk%20Factors) This section highlights additional risk factors from recent banking industry disruption, including potential for enhanced regulation and increased FDIC assessments - Recent banking sector volatility (SVB, Signature Bank, First Republic Bank failures) may lead to enhanced government regulation and supervision, including potential changes to liquidity risk management, deposit concentrations, capital adequacy, and stress testing requirements[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk) - FNB may experience increases in **FDIC insurance assessments** due to losses incurred by the Deposit Insurance Fund (DIF) from recent bank failures, potentially impacting results of operations and financial condition[347](index=347&type=chunk)[348](index=348&type=chunk) - Liquidity risk could impair FNB's ability to fund operations and meet obligations, especially if deposits are withdrawn rapidly or if the company cannot attract sufficient low-cost funding, potentially leading to higher funding costs or realized losses from selling securities[349](index=349&type=chunk) - Increased regulatory scrutiny and enforcement posture from U.S. government authorities could result in investigations, fines, penalties, or other adverse effects on FNB's business, financial condition, results of operations, or reputation[350](index=350&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=95&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) FNB repurchased 2,288,558 common shares in May 2023 at $10.80 per share, with $139.1 million remaining for repurchases Unregistered Sales of Equity Securities and Use of Proceeds | Period | Total shares purchased | Average price paid per share | Maximum dollar value of shares that may yet be purchased under programs | | :----------------------- | :--------------------- | :--------------------------- | :-------------------------------------------------------------------- | | May 1 - May 31, 2023 | 2,288,558 | $10.80 | $139,135,297 | | Total (Q2 2023) | 2,288,558 | $10.80 | | [Item 3. Defaults Upon Senior Securities](index=95&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[355](index=355&type=chunk) [Item 4. Mine Safety Disclosures](index=95&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to FNB's operations - Not Applicable[355](index=355&type=chunk) [Item 5. Other Information](index=95&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported[356](index=356&type=chunk) [Item 6. Exhibits](index=96&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including certifications and XBRL instance documents - Exhibits include certifications (Sarbanes-Oxley Act Sections 302 and 906) and Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File)[357](index=357&type=chunk) SIGNATURES [SIGNATURES](index=97&type=section&id=SIGNATURES) The report is duly signed by F.N.B. Corporation's Chairman, President and CEO, CFO, and Corporate Controller as of August 4, 2023 - The report is signed by Vincent J. Delie, Jr. (Chairman, President and CEO), Vincent J. Calabrese, Jr. (CFO), and James L. Dutey (Corporate Controller) on August 4, 2023[360](index=360&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net income of $140.4 million for Q2 2023, translating to $0.39 per diluted common share, marking a 39% increase year-to-date [105] - Total deposits decreased by $365 million, or 1.1%, to $33.8 billion, primarily due to seasonal outflows and tax-related payments [8][101] - The CET1 ratio remained solid at 10%, with tangible book value per share increasing to $8.79, up $0.13 from the previous quarter [9][111] Business Line Data and Key Metrics Changes - Consumer loans increased by $517 million, driven by strong seasonal contributions from the Physicians First mortgage program [24] - Commercial loans and leases grew by $164 million, reflecting a 0.8% increase, with improved loan spreads [24] - Noninterest income is expected to be between $315 million and $325 million for the full year, with Q3 projected around $80 million [10] Market Data and Key Metrics Changes - The loan-to-deposit ratio increased to 92.7%, indicating strong loan growth relative to deposits [25] - The average total loan increased by 2.1% linked quarter to over $31 billion, with commercial loan balances benefiting from solid production [20] - The company experienced a 12% year-over-year loan growth while adhering to conservative underwriting guidelines [21] Company Strategy and Development Direction - The company is focused on enhancing its product suite and digital capabilities, including the launch of the Common Application to streamline customer interactions [4][120] - There is an emphasis on maintaining a diversified portfolio and proactive credit risk management to navigate economic downturns [6][22] - The company aims to capitalize on market disruptions and continue driving shareholder value through strategic investments and operational efficiencies [111] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage risks and maintain asset quality metrics near historical lows despite economic challenges [23][107] - The company anticipates a flat deposit balance for the remainder of 2023, with expectations for seasonal municipal deposits to support noninterest-bearing accounts [26][28] - Management noted that the competitive landscape for deposits has intensified, but they expect to maintain a favorable mix of noninterest-bearing deposits above pre-COVID levels [8][101] Other Important Information - The company repurchased 2.3 million shares at a weighted average price of $10.80 during the quarter [9] - Noninterest expense totaled $212 million, a decrease of nearly 4% from the previous quarter, reflecting effective cost management [124] - The effective tax rate is expected to be between 20% and 21% for the full year [27] Q&A Session Summary Question: What is the outlook for noninterest-bearing deposits? - Management indicated that they expect noninterest-bearing deposits to remain above pre-COVID levels, targeting a ratio around the mid-30s [28][130] Question: How does the company plan to manage expenses moving forward? - The company continues to focus on cost savings and efficiency, actively renegotiating contracts to mitigate inflationary impacts [15][30] Question: What are the expectations for loan growth and credit events? - Management stated that they are proactively managing the loan portfolio and do not anticipate significant changes in risk management practices despite expectations of potential credit events [58][135] Question: How is the company positioned in the current competitive landscape? - The company believes its diversified franchise and strong customer relationships have allowed it to weather recent banking disruptions effectively [44][68]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 For the quarterly period ended March 31, 2023 ☐ Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the transition period from to Commission file number 001-31940 F.N.B. CORPORATION (Exact name of registrant as specified in its charter) FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 | Pennsylvania | | | | 25-1255406 | | --- | --- | - ...

Financial Performance - Total assets increased to $43,725 million in 2022, up from $39,513 million in 2021, representing a growth of 5.6%[433]. - Net loans and leases rose to $29,853 million in 2022, compared to $24,624 million in 2021, marking an increase of 21.5%[433]. - Total deposits grew to $34,770 million in 2022, up from $31,726 million in 2021, reflecting a 9.6% increase[433]. - Net interest income after provision for credit losses was $1,056 million in 2022, compared to $906 million in 2021, an increase of 16.5%[435]. - Net income available to common stockholders reached $431 million in 2022, up from $397 million in 2021, a growth of 8.6%[435]. - Non-interest income totaled $323 million in 2022, slightly down from $330 million in 2021, a decrease of 2.1%[435]. - Total non-interest expense increased to $826 million in 2022, compared to $733 million in 2021, representing a rise of 12.7%[435]. - Comprehensive income for 2022 was $144 million, down from $382 million in 2021, a decrease of 62.3%[436]. - Net income for the year ended December 31, 2022, was $439 million, an increase of 8.4% from $405 million in 2021[438]. Credit Losses and Allowances - As of December 31, 2022, F.N.B. Corporation's net loan and lease portfolio was $30.3 billion, with an associated allowance for credit losses (ACL) of $402 million[420]. - The ACL is based on management's evaluation of lifetime credit losses, incorporating quantitative reserves, asset-specific reserves, and qualitative reserves[420]. - The qualitative reserve in the ACL captures factors such as regulatory, legal, and technological environments, competition, and forecast uncertainty[420]. - The overall ACL was compared to historical losses and peer data to ensure it reflects a reasonable estimate of lifetime losses[422]. - The corporation recorded a provision for credit losses of $64 million in 2022, a significant increase from $1 million in 2021[438]. - The allowance for credit losses on loans and leases increased to $402 million in 2022 from $344 million in 2021, reflecting a rise of 16.9%[433]. - The total allowance for credit losses on loans and leases and allowance for unfunded loan commitments was $423.1 million at December 31, 2022[585]. - The ending ACL coverage ratio was 1.33% at December 31, 2022, compared to 1.38% at December 31, 2021[585]. Acquisitions - The acquisition of Howard Bancorp, completed on January 22, 2022, was valued at approximately $443 million, enhancing the company's presence in the Mid-Atlantic Region with assets of about $2.4 billion[525]. - The acquisition of Union, completed on December 9, 2022, was valued at approximately $126 million, adding low-cost granular deposits and increasing the company's presence in North Carolina with assets of about $1.1 billion[530]. - Goodwill recognized from the Howard acquisition amounted to $177 million, while goodwill from the Union acquisition was $37 million, both recorded in the Community Banking business segment[527][533]. - The company incurred merger expenses of $31 million related to the Howard acquisition and $14.3 million for the Union acquisition[527][533]. Internal Controls and Audit - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2022, concluding it was effective based on the COSO criteria[425]. - The independent auditor expressed an unqualified opinion on the consolidated financial statements for the three years ended December 31, 2022, affirming compliance with U.S. GAAP[415]. - F.N.B. Corporation has maintained effective internal control over financial reporting, as confirmed by the independent auditor's assessment[425]. - The audit included evaluating the design and effectiveness of controls over the ACL process, ensuring management's assessments were supported[421]. Securities and Investments - The amortized cost of available-for-sale (AFS) debt securities as of December 31, 2022, was $3.622 billion, with unrealized losses of $348 million[539]. - The total amortized cost of held-to-maturity (HTM) debt securities was $4,087 million, with a fair value of $3,687 million, reflecting unrealized losses of $403 million[541]. - The fair value of available-for-sale (AFS) debt securities in an unrealized loss position totaled $1,868 million as of December 31, 2022, with unrealized losses of $138 million[545]. - The municipal bond portfolio had a carrying amount of $1.1 billion as of December 31, 2022, with an average rating of AA and 100% of the portfolio rated A or better[547]. Loan Portfolio and Performance - Total loans and leases amounted to $30,255 million as of December 31, 2022, compared to $24,968 million in 2021, reflecting a growth of 21%[570]. - Total consumer loans reached $10,965 million in 2022, showing an increase from $2,864 million in 2021[564]. - Non-performing loans increased to $113 million in 2022 from $88 million in 2021, representing a 28.4% increase[569]. - The ratio of non-performing loans and leases to total loans and leases was 0.37% in 2022, compared to 0.35% in 2021[569]. - The company utilizes delinquency transition matrices to forecast credit risk, analyzing payment activity, FICO scores, and external factors like unemployment[566]. Goodwill and Intangible Assets - Goodwill increased to $2,477 million at the end of 2022, up from $2,262 million at the end of 2021, reflecting an increase of 9.5% due to acquisitions[598]. - The company recorded amortization expense of $14 million for intangible assets in 2022, compared to $12 million in 2021, a rise of 16.7%[600]. - Core deposit intangibles are amortized over ten years using accelerated methods, while customer renewal lists are amortized over eight to thirteen years[488]. Cash Flows and Investments - Net cash flows provided by operating activities increased significantly to $1,218 million in 2022 from $530 million in 2021[438]. - The net cash flows used in investing activities were $3,055 million in 2022, compared to $153 million in 2021, indicating a substantial increase in cash outflows[438]. - The corporation's financing activities resulted in a net cash flow of $18 million in 2022, a decrease from $1,733 million in 2021[438].

Financial Data and Key Metrics Changes - The company reported operating earnings per share of $1.40 for the full year 2022, marking one of the highest levels in its history [5][95] - Total revenue grew by 10% linked quarter to $416 million, with net interest income as the primary driver [92] - The net interest margin expanded from 3.19% to 3.53% quarter-over-quarter [92][119] - Total assets reached nearly $44 billion, with a 5% increase linked quarter [93] Business Line Data and Key Metrics Changes - Total loans grew by $5.3 billion year-over-year, representing a 21% increase, driven by both organic growth and acquisitions [95][102] - Non-interest income totaled $80.6 million for the fourth quarter, a decrease of 2.2% compared to the prior quarter, primarily due to lower mortgage banking operations income [120] - The Physicians First Program accounted for 25% of retail mortgage production in 2022, with the portfolio growing to $1.2 billion by year-end [97][83] Market Data and Key Metrics Changes - The company maintained a favorable deposit mix, with 34% of total deposits being non-interest bearing [94][113] - Total cumulative deposit betas ended the year at 16.3%, below the forecasted 20% [103] - Average deposits totaled $33.9 billion for the fourth quarter, reflecting a 1% increase [146] Company Strategy and Development Direction - The company plans to continue focusing on generating positive operating leverage and efficiently deploying capital to optimize risk-adjusted returns for shareholders [11][105] - The company aims to maintain a disciplined credit culture while navigating changing economic cycles [114] - The company is committed to expanding its digital delivery channels and enhancing customer relationships through analytics [134][115] Management's Comments on Operating Environment and Future Outlook - Management noted that pipelines have softened globally, with a year-over-year decrease of about 15%, reflecting economic uncertainty [14] - The company expects loan growth in the mid-single digits on a year-over-year basis for 2023 [105] - Management expressed confidence in the company's ability to execute its strategic plan despite economic challenges [142] Other Important Information - The company closed two acquisitions in 2022, enhancing its market position in key areas [95][97] - The efficiency ratio for the full year was reported at 52%, with a goal to keep it below 50% in 2023 [9][41] - The company returned $220 million to shareholders through dividends and share repurchase programs [96] Q&A Session Summary Question: What are the strongest growth areas geographically? - Management highlighted that the Carolinas have produced significant net loan growth, contributing roughly 40% over the last three years [17][66] Question: What is the company's strategy regarding capital management and potential buybacks? - The company remains committed to optimizing shareholder value and will evaluate share buybacks as it builds past the 10% CET1 ratio [130][131] Question: How is the company managing deposit costs in the current environment? - The company is actively managing interest-bearing deposit costs and utilizing analytics to drive deposit growth [34][134] Question: What are the expectations for mortgage activity in the coming year? - Management expects to outperform the market in mortgage production, despite a general industry decline [74][83]

[PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Glossary of Acronyms and Terms](index=4&type=section&id=Glossary%20of%20Acronyms%20and%20Terms) This section provides a glossary of acronyms and terms used throughout the report, defining key financial and regulatory terminology for clarity - The glossary defines various acronyms and terms, including financial concepts like Allowance for Credit Losses (ACL), Available for Sale (AFS), Held to Maturity (HTM), and regulatory bodies such as the Federal Reserve Board (FRB) and Securities and Exchange Commission (SEC)[9](index=9&type=chunk) [ITEM 1. FINANCIAL STATEMENTS](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of F.N.B. Corporation and its subsidiaries for the period ended September 30, 2022, including balance sheets, income statements, comprehensive income statements, stockholders' equity statements, cash flow statements, and accompanying notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show the financial position of F.N.B. Corporation as of September 30, 2022, compared to December 31, 2021, highlighting changes in assets, liabilities, and stockholders' equity Consolidated Balance Sheet Highlights (September 30, 2022 vs. December 31, 2021) | Metric | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Total Assets | 42,590 | 39,513 | 3,077 | 7.8% | | Net Loans and Leases | 28,395 | 24,624 | 3,771 | 15.3% | | Total Deposits | 33,893 | 31,726 | 2,167 | 6.8% | | Total Liabilities | 37,184 | 34,363 | 2,821 | 8.2% | | Total Stockholders' Equity | 5,406 | 5,150 | 256 | 5.0% | | Cash and Cash Equivalents | 2,276 | 3,493 | (1,217) | (34.8%) | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income detail the company's revenues, expenses, and net income for the three and nine months ended September 30, 2022, compared to the same periods in 2021 Consolidated Statements of Income Highlights (Three Months Ended Sep 30) | Metric | Sep 30, 2022 (Millions $) | Sep 30, 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Total Interest Income | 343 | 256 | 87 | 34.0% | | Total Interest Expense | 46 | 24 | 22 | 91.7% | | Net Interest Income | 297 | 232 | 65 | 28.0% | | Provision for credit losses | 12 | (2) | 14 | 700.0% | | Total Non-Interest Income | 83 | 88 | (5) | (5.7%) | | Total Non-Interest Expense | 195 | 184 | 11 | 6.0% | | Net Income | 138 | 111 | 27 | 24.3% | | Net Income Available to Common Stockholders | 136 | 109 | 27 | 24.8% | | Diluted EPS | 0.38 | 0.34 | 0.04 | 11.8% | Consolidated Statements of Income Highlights (Nine Months Ended Sep 30) | Metric | Sep 30, 2022 (Millions $) | Sep 30, 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Total Interest Income | 877 | 760 | 117 | 15.4% | | Total Interest Expense | 92 | 77 | 15 | 19.5% | | Net Interest Income | 785 | 683 | 102 | 14.9% | | Provision for credit losses | 36 | 3 | 33 | 1100.0% | | Total Non-Interest Income | 243 | 251 | (8) | (3.2%) | | Total Non-Interest Expense | 615 | 551 | 64 | 11.6% | | Net Income | 300 | 306 | (6) | (2.0%) | | Net Income Available to Common Stockholders | 294 | 300 | (6) | (2.0%) | | Diluted EPS | 0.83 | 0.93 | (0.10) | (10.8%) | [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the net income and other comprehensive income (loss) components, such as unrealized gains/losses on available-for-sale securities and derivative instruments, for the three and nine months ended September 30, 2022 and 2021 Comprehensive Income (Loss) Highlights (Three Months Ended Sep 30) | Metric | Sep 30, 2022 (Millions $) | Sep 30, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Net income | 138 | 111 | 27 | | Other Comprehensive Income (Loss) | (126) | (6) | (120) | | Comprehensive Income (Loss) | 12 | 105 | (93) | Comprehensive Income (Loss) Highlights (Nine Months Ended Sep 30) | Metric | Sep 30, 2022 (Millions $) | Sep 30, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Net income | 300 | 306 | (6) | | Other Comprehensive Income (Loss) | (316) | (13) | (303) | | Comprehensive Income (Loss) | (16) | 293 | (309) | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section details the changes in stockholders' equity, including preferred stock, common stock, additional paid-in capital, retained earnings, accumulated other comprehensive loss, and treasury stock, for the three and nine months ended September 30, 2022 and 2021 Stockholders' Equity Highlights (Nine Months Ended Sep 30, 2022) | Metric | Balance at Beginning of Period (Millions $) | Comprehensive Income (Loss) (Millions $) | Dividends Declared (Millions $) | Issuance of Common Stock (Millions $) | Repurchase of Common Stock (Millions $) | Restricted Stock Compensation (Millions $) | Balance at End of Period (Millions $) | |:---|:---|:---|:---|:---|:---|:---|:---|\n| Preferred Stock | 107 | — | (6) | — | — | — | 107 | | Common Stock | 3 | — | — | 1 | — | — | 4 | | Additional Paid-In Capital | 4,109 | — | — | 443 | — | 13 | 4,565 | | Retained Earnings | 1,110 | 300 | (135) | (1) | — | — | 1,275 | | Accumulated Other Comprehensive Loss | (62) | (316) | — | — | — | — | (378) | | Treasury Stock | (117) | — | — | (7) | (43) | — | (167) | | Total | 5,150 | (16) | (141) | 436 | (43) | 13 | 5,406 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows provide a breakdown of cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022, compared to the same period in 2021 Cash Flow Highlights (Nine Months Ended Sep 30) | Activity | Sep 30, 2022 (Millions $) | Sep 30, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Net cash flows provided by (used in) operating activities | 1,041 | 384 | 657 | | Net cash flows provided by (used in) investing activities | (2,413) | 624 | (3,037) | | Net cash flows provided by (used in) financing activities | 155 | 1,719 | (1,564) | | Net Increase (Decrease) in Cash and Cash Equivalents | (1,217) | 2,727 | (3,944) | | Cash and Cash Equivalents at End of Period | 2,276 | 4,110 | (1,834) | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information and explanations for the figures presented in the consolidated financial statements, covering significant accounting policies, new accounting standards, mergers, securities, loans, credit losses, loan servicing, leases, variable interest entities, borrowings, derivative instruments, commitments, stock incentive plans, income taxes, other comprehensive income, earnings per share, cash flow information, business segments, and fair value measurements [NATURE OF OPERATIONS](index=11&type=section&id=NATURE%20OF%20OPERATIONS) F.N.B. Corporation is a diversified financial services company headquartered in Pittsburgh, Pennsylvania, operating across seven states and Washington D.C., offering commercial banking, consumer banking, and wealth management solutions through its subsidiary network - F.N.B. Corporation operates in seven states and Washington D.C., with **338 branches** as of September 30, 2022[18](index=18&type=chunk) - The company provides commercial banking (corporate, small business, real estate, capital markets, lease financing), consumer banking (deposits, mortgages, consumer lending, digital services), and wealth management (asset management, private banking, insurance)[19](index=19&type=chunk) [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation for the consolidated financial statements, including consolidation principles, the use of estimates, and adherence to GAAP, noting that certain disclosures are condensed or omitted per SEC regulations - The financial statements consolidate subsidiaries where FNB has a controlling financial interest, including voting interest entities (over 50% voting shares) and Variable Interest Entities (VIEs) where FNB is the primary beneficiary[20](index=20&type=chunk)[21](index=21&type=chunk) - Material estimates susceptible to significant changes include the Allowance for Credit Losses (ACL), fair value of financial instruments, goodwill and other intangible assets, income taxes, deferred tax assets, and litigation reserves[25](index=25&type=chunk) [NOTE 2. NEW ACCOUNTING STANDARDS](index=12&type=section&id=NOTE%202.%20NEW%20ACCOUNTING%20STANDARDS) This note summarizes new accounting pronouncements, specifically ASU 2022-02 on Troubled Debt Restructuring and Charge-offs, which FNB plans to adopt on January 1, 2023, with no material expected impact - FNB plans to adopt ASU 2022-02, 'Troubled Debt Restructurings and Vintage Disclosures,' on **January 1, 2023**[27](index=27&type=chunk) - The adoption of ASU 2022-02 is not expected to have a material impact on FNB's consolidated financial statements[27](index=27&type=chunk) [NOTE 3. MERGERS AND ACQUISITIONS](index=12&type=section&id=NOTE%203.%20MERGERS%20AND%20ACQUISITIONS) This note details the completed acquisition of Howard Bancorp, Inc. in January 2022, which enhanced FNB's Mid-Atlantic presence, and the pending acquisition of UB Bancorp, expected to close in late 2022 - FNB completed the acquisition of Howard Bancorp, Inc. on **January 22, 2022**, valued at approximately **$443 million**, issuing **34,074,495 shares** of common stock[28](index=28&type=chunk) Howard Bancorp Acquisition - Fair Value of Assets Acquired and Liabilities Assumed | Category | Fair Value (Millions $) | |:---|:---|\n| Fair value of consideration paid | 443 | | Total identifiable assets acquired | 2,355 | | Total liabilities assumed | 2,085 | | Fair value of net identifiable assets acquired | 270 | | Goodwill recognized | 173 | - FNB incurred **$30.6 million** in merger expenses for the Howard acquisition during the first nine months of 2022[31](index=31&type=chunk) - FNB entered a definitive merger agreement to acquire UB Bancorp for approximately **$119 million**, expecting to issue **9.8 million shares** of common stock, with completion anticipated in late 2022[35](index=35&type=chunk) [NOTE 4. SECURITIES](index=14&type=section&id=NOTE%204.%20SECURITIES) This note provides details on available-for-sale (AFS) and held-to-maturity (HTM) debt securities, including their amortized cost, fair value, unrealized gains/losses, contractual maturities, and credit quality indicators Debt Securities Available for Sale (AFS) (September 30, 2022) | Category | Amortized Cost (Millions $) | Gross Unrealized Gains (Millions $) | Gross Unrealized Losses (Millions $) | Fair Value (Millions $) | |:---|:---|:---|:---|:---|\n| U.S. Treasury | 279 | — | (23) | 256 | | U.S. government agencies | 116 | 1 | — | 117 | | U.S. government-sponsored entities | 284 | — | (23) | 261 | | Residential mortgage-backed securities | 2,585 | — | (283) | 2,302 | | Commercial mortgage-backed securities | 442 | — | (35) | 407 | | States of the U.S. and political subdivisions | 33 | — | (4) | 29 | | Other debt securities | 21 | — | (1) | 20 | | **Total debt securities AFS** | **3,760** | **1** | **(369)** | **3,392** | Debt Securities Held to Maturity (HTM) (September 30, 2022) | Category | Amortized Cost (Millions $) | Gross Unrealized Gains (Millions $) | Gross Unrealized Losses (Millions $) | Fair Value (Millions $) | |:---|:---|:---|:---|:---|\n| U.S. government agencies | 1 | — | — | 1 | | Residential mortgage-backed securities | 2,175 | — | (260) | 1,915 | | Commercial mortgage-backed securities | 668 | — | (50) | 618 | | States of the U.S. and political subdivisions | 971 | — | (160) | 811 | | Other debt securities | 5 | — | (1) | 4 | | **Total debt securities HTM** | **3,820** | **—** | **(471)** | **3,349** | - Unrealized losses on AFS and HTM portfolios are primarily due to increased market interest rates, with **85.8%** backed or sponsored by the U.S. government as of September 30, 2022[40](index=40&type=chunk) - The municipal bond portfolio (carrying amount **$1.0 billion**) has an average rating of **AA**, with **100%** rated A or better, and **61%** have formal credit enhancement[47](index=47&type=chunk) - The ACL for the HTM portfolio was **$0.12 million** at September 30, 2022, with no ACL for AFS securities, and no securities were past due or on non-accrual[51](index=51&type=chunk) [NOTE 5. LOANS AND LEASES](index=19&type=section&id=NOTE%205.%20LOANS%20AND%20LEASES) This note provides a detailed breakdown of the loan and lease portfolio by segment, credit quality indicators, non-performing assets, and troubled debt restructurings (TDRs) Loans and Leases by Portfolio Segment (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Commercial real estate | 10,841 | 9,899 | 942 | 9.5% | | Commercial and industrial | 6,709 | 5,977 | 732 | 12.2% | | Commercial leases | 503 | 495 | 8 | 1.6% | | Other commercial | 127 | 94 | 33 | 35.1% | | **Total commercial loans and leases** | **18,180** | **16,465** | **1,715** | **10.4%** | | Direct installment | 2,797 | 2,376 | 421 | 17.7% | | Residential mortgages | 4,959 | 3,654 | 1,305 | 35.7% | | Indirect installment | 1,529 | 1,227 | 302 | 24.6% | | Consumer lines of credit | 1,315 | 1,246 | 69 | 5.5% | | **Total consumer loans** | **10,600** | **8,503** | **2,097** | **24.7%** | | **Total loans and leases, net of unearned income** | **28,780** | **24,968** | **3,812** | **15.3%** | - PPP loans decreased significantly from **$336.6 million** at December 31, 2021, to **$43.7 million** at September 30, 2022[56](index=56&type=chunk) Non-Performing Assets (September 30, 2022 vs. December 31, 2021) | Metric | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Non-accrual loans | 88 | 88 | — | | Total non-performing loans and leases | 88 | 88 | — | | Other real estate owned (OREO) | 6 | 8 | (2) | | **Total non-performing assets** | **94** | **96** | **(2)** | | Non-performing loans and leases / total loans and leases | 0.30% | 0.35% | (0.05%) | | Non-performing assets + 90 days past due / total loans and leases + OREO | 0.36% | 0.41% | (0.05%) | Troubled Debt Restructurings (TDRs) (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Accruing TDRs | 63 | 60 | 3 | | Non-accrual TDRs | 30 | 32 | (2) | | **Total TDRs** | **93** | **92** | **1** | [NOTE 6. ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES](index=26&type=section&id=NOTE%206.%20ALLOWANCE%20FOR%20CREDIT%20LOSSES%20ON%20LOANS%20AND%20LEASES) This note details the changes in the Allowance for Credit Losses (ACL) on loans and leases, and the Allowance for Unfunded Loan Commitments (AULC), driven by loan growth, macroeconomic forecasts, and the Howard acquisition Changes in ACL on Loans and Leases (Nine Months Ended Sep 30, 2022) | Category | Balance at Beginning of Period (Millions $) | Net (Charge Offs) Recoveries (Millions $) | Provision for Credit Losses (Millions $) | PCD Loans and Leases at Acquisition (Millions $) | Balance at End of Period (Millions $) | |:---|:---|:---|:---|:---|:---|\n| Commercial loans and leases | 261.2 | (2.1) | 3.0 | 7.8 | 269.9 | | Consumer loans | 83.1 | (2.2) | 32.3 | 2.2 | 115.4 | | **Total ACL on loans and leases** | **344.3** | **(4.3)** | **35.3** | **10.0** | **385.3** | | AULC | 19.1 | — | 0.2 | — | 19.3 | | **Total ACL and AULC** | **363.4** | **(4.3)** | **35.5** | **10.0** | **404.6** | - The ACL on loans and leases increased by **$41.1 million (11.9%)** to **$385.3 million** at September 30, 2022, primarily due to the Howard acquisition, significant loan growth, and CECL-related model impacts from a forecasted macroeconomic slowdown and lower prepayment speed assumptions[85](index=85&type=chunk) - Net charge-offs for the nine months ended September 30, 2022, were **$4.3 million**, down from **$12.5 million** in the same period of 2021[85](index=85&type=chunk) - The ACL coverage ratio was **1.34%** at September 30, 2022, compared to **1.38%** at December 31, 2021[85](index=85&type=chunk) [NOTE 7. LOAN SERVICING](index=30&type=section&id=NOTE%207.%20LOAN%20SERVICING) This note covers mortgage loan servicing activities, including the unpaid principal balance of loans serviced for others, net gains/losses from loan sales, mortgage servicing fees, and changes in mortgage servicing rights (MSRs), along with sensitivity analysis to interest rate changes Mortgage Loan Servicing Highlights (September 30, 2022 vs. December 31, 2021) | Metric | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Mortgage loans sold with servicing retained | 5,160 | 4,855 | 305 | | MSRs Balance at end of period | 51.7 | 44.4 | 7.3 | | MSRs Fair value, end of period | 69.6 | 46.0 | 23.6 | - Net losses from loan sales for the nine months ended September 30, 2022, were **$9 million**, compared to net gains of **$36 million** in the prior year[88](index=88&type=chunk) - The fair value of MSRs is highly sensitive to changes in prepayment rates and discount rates; an increase in interest rates generally increases MSR fair value[90](index=90&type=chunk) [NOTE 8. LEASES](index=31&type=section&id=NOTE%208.%20LEASES) This note provides information on FNB's operating and finance leases, including right-of-use assets, lease liabilities, lease expense components, and future lease maturities - As of September 30, 2022, FNB had operating lease right-of-use assets of **$134.2 million** and liabilities of **$144.5 million**, and finance lease right-of-use assets of **$22.5 million** and liabilities of **$22.9 million**[93](index=93&type=chunk) Total Lease Cost (Nine Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Operating lease cost | 24 | 21 | | Variable lease cost | 3 | 3 | | **Total lease cost** | **27** | **24** | - FNB has uncommenced operating lease agreements, primarily for administrative office space including a new headquarters, expected to add approximately **$69.2 million** in right-of-use assets and **$90.6 million** in liabilities, commencing in 2023[95](index=95&type=chunk) [NOTE 9. VARIABLE INTEREST ENTITIES](index=32&type=section&id=NOTE%209.%20VARIABLE%20INTEREST%20ENTITIES) This note discusses FNB's interests in unconsolidated Variable Interest Entities (VIEs), including trust preferred securities (TPS) and affordable housing tax credit partnerships, detailing their assets, liabilities, and FNB's maximum exposure to losses Unconsolidated VIEs - Maximum Exposure to Loss (September 30, 2022) | Category | Total Assets (Millions $) | Total Liabilities (Millions $) | Maximum Exposure to Loss (Millions $) | |:---|:---|:---|:---|\n| Trust preferred securities | 1 | 72 | — | | Affordable housing tax credit partnerships | 121 | 35 | 121 | | Other investments | 29 | 5 | 29 | | **Total** | **151** | **112** | **150** | - FNB makes equity investments as a limited partner in affordable housing projects (LIHTC partnerships) to support Community Reinvestment Act initiatives and earn returns, accounting for them using the proportional amortization method[106](index=106&type=chunk) Impact of LIHTC Investments on Provision for Income Taxes (Nine Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Amortization of LIHTC investments | 11 | 10 | | Low-income housing tax credits | (11) | (11) | | Other tax benefits | (2) | (2) | | **Total impact on provision for income taxes** | **(2)** | **(3)** | [NOTE 10. BORROWINGS](index=34&type=section&id=NOTE%2010.%20BORROWINGS) This note provides a summary of FNB's short-term and long-term borrowings, including details on senior notes, subordinated notes, junior subordinated debt, and available credit lines Short-Term Borrowings (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Securities sold under repurchase agreements | 333 | 376 | (43) | | Federal Home Loan Bank advances | 930 | 1,030 | (100) | | Subordinated notes | 132 | 130 | 2 | | **Total short-term borrowings** | **1,395** | **1,536** | **(141)** | Long-Term Borrowings (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Senior notes | 647 | 299 | 348 | | Subordinated notes | 66 | 68 | (2) | | Junior subordinated debt | 72 | 67 | 5 | | Other subordinated debt | 274 | 248 | 26 | | **Total long-term borrowings** | **1,059** | **682** | **377** | - During Q3 2022, FNB issued **$350 million** of **5.150% fixed-rate senior notes** due 2025, with net proceeds of **$347.4 million**, for general corporate purposes including potential repayment of existing debt[113](index=113&type=chunk) - FNBPA has **$9.4 billion** in available credit with the FHLB, of which **$0.9 billion** was utilized as short-term borrowings at September 30, 2022[114](index=114&type=chunk) [NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=36&type=section&id=NOTE%2011.%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) This note describes FNB's use of derivative instruments for interest rate risk management and customer transactions, detailing notional amounts, fair values, and the impact on financial statements, including cash flow hedges and non-designated derivatives Gross Derivatives Notional Amounts and Fair Values (September 30, 2022) | Category | Notional Amount (Millions $) | Fair Value Asset (Millions $) | Fair Value Liability (Millions $) | |:---|:---|:---|:---|\n| Interest rate contracts – designated | 1,980 | — | 1 | | Interest rate swaps – not designated | 5,318 | 83 | 1 | | Interest rate swaps – not designated (not subject to master netting) | 5,318 | 1 | 418 | | Interest rate lock commitments – not designated | 195 | — | 19 | | Forward delivery commitments – not designated | 263 | 3 | — | | Credit risk contracts – not designated | 442 | — | — | | **Total** | **13,516** | **87** | **439** | - The change in fair value of derivative liabilities from December 31, 2021, is attributed to a significant increase in interest rates during 2022[123](index=123&type=chunk) - FNB uses interest rate derivative agreements as cash flow hedges to modify interest rate characteristics of commercial loans and FHLB advances, with gains/losses initially reported in other comprehensive income[128](index=128&type=chunk) - As of September 30, 2022, FNB expects to reclassify net derivative losses of **$17.6 million ($13.6 million net of tax)** from AOCI into earnings over the next twelve months[132](index=132&type=chunk) [NOTE 12. COMMITMENTS, CREDIT RISK AND CONTINGENCIES](index=39&type=section&id=NOTE%2012.%20COMMITMENTS,%20CREDIT%20RISK%20AND%20CONTINGENCIES) This note outlines FNB's off-balance sheet credit risk, including commitments to extend credit and standby letters of credit, and discusses legal proceedings and loss contingencies Off-Balance Sheet Credit Risk (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Commitments to extend credit | 12,920 | 11,228 | 1,692 | | Standby letters of credit | 210 | 194 | 16 | - The Allowance for Unfunded Loan Commitments (AULC) was **$19.4 million** at September 30, 2022, up from **$19.2 million** at December 31, 2021[146](index=146&type=chunk) - FNB is routinely involved in legal actions and regulatory examinations; management believes that judgments, sanctions, or settlements will not have a material adverse effect on financial position or liquidity, though they could affect net income in a given period[148](index=148&type=chunk)[149](index=149&type=chunk) [NOTE 13. STOCK INCENTIVE PLANS](index=40&type=section&id=NOTE%2013.%20STOCK%20INCENTIVE%20PLANS) This note details FNB's stock incentive plans, including restricted stock awards and stock options, summarizing activity, compensation expense, and shares outstanding - FNB granted **1,266,821 restricted stock units** during the nine months ended September 30, 2022, including **297,508 performance-based units**[150](index=150&type=chunk) Restricted Stock Units Activity (Nine Months Ended Sep 30, 2022) | Metric | Units | |:---|:---|\n| Unvested units outstanding at beginning of period | 4,680,786 | | Granted | 1,266,821 | | Acquired | 60,300 | | Net adjustment due to performance | 244,258 | | Vested | (1,683,372) | | Forfeited/expired/canceled | (219,058) | | Dividend reinvestment | 137,976 | | **Unvested units outstanding at end of period** | **4,487,711** | Stock-Based Compensation Expense (Nine Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Stock-based compensation expense | 15 | 17 | | Tax benefit related to stock-based compensation expense | 3 | 4 | | Fair value of units vested | 21 | 16 | - As of September 30, 2022, FNB had **167,948 fully vested stock options** outstanding from acquisitions, with a weighted average exercise price of **$9.03**[158](index=158&type=chunk)[159](index=159&type=chunk) [NOTE 14. INCOME TAXES](index=42&type=section&id=NOTE%2014.%20INCOME%20TAXES) This note presents FNB's income tax expense, effective tax rates, and deferred income taxes, highlighting the impact of tax-exempt income and the Howard acquisition Income Tax Expense and Effective Tax Rate (Nine Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Total income taxes | 77 | 74 | | Statutory tax rate | 21.0% | 21.0% | | Effective tax rate | 20.5% | 19.5% | - The increase in the effective tax rate for the nine months ended September 30, 2022, was primarily due to higher state income taxes and increased FDIC insurance deduction disallowance[161](index=161&type=chunk) - Net deferred tax assets increased to **$150.4 million** at September 30, 2022, from **$43.4 million** at December 31, 2021, driven by the Howard acquisition and unrealized losses on debt securities[162](index=162&type=chunk) [NOTE 15. OTHER COMPREHENSIVE INCOME (LOSS)](index=43&type=section&id=NOTE%2015.%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note details the changes in Accumulated Other Comprehensive Income (AOCI), net of tax, by component, including unrealized gains/losses on debt securities available for sale, derivative instruments, and pension/postretirement benefit obligations Changes in AOCI (Nine Months Ended Sep 30, 2022) | Component | Balance at Beginning of Period (Millions $) | Other Comprehensive (Loss) Income before Reclassifications (Millions $) | Amounts Reclassified from AOCI (Millions $) | Net Current Period Other Comprehensive (Loss) Income (Millions $) | Balance at End of Period (Millions $) | |:---|:---|:---|:---|:---|:---|\n| Debt Securities Available for Sale | 8 | (294) | — | (294) | (286) | | Derivative Instruments | (22) | (30) | 6 | (24) | (46) | | Pension and Postretirement Obligations | (48) | 2 | — | 2 | (46) | | **Total** | **(62)** | **(322)** | **6** | **(316)** | **(378)** | [NOTE 16. EARNINGS PER COMMON SHARE](index=43&type=section&id=NOTE%2016.%20EARNINGS%20PER%20COMMON%20SHARE) This note provides the computation of basic and diluted earnings per common share, including the weighted average common shares outstanding and the dilutive effect of potential common shares Earnings Per Common Share (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | |:---|:---|:---|\n| Net income available to common stockholders (Millions $) | 294 | 300 | | Basic weighted average common shares outstanding | 348,868,423 | 320,023,695 | | Diluted weighted average common shares outstanding | 352,786,125 | 323,635,655 | | Basic EPS | $0.84 | $0.94 | | Diluted EPS | $0.83 | $0.93 | - In January 2022, FNB issued **34.1 million common shares** as part of the Howard acquisition, impacting weighted average shares outstanding[167](index=167&type=chunk) [NOTE 17. CASH FLOW INFORMATION](index=44&type=section&id=NOTE%2017.%20CASH%20FLOW%20INFORMATION) This note provides supplemental cash flow information, including interest and income taxes paid, and non-cash investing and financing activities Supplemental Cash Flow Information (Nine Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Interest paid on deposits and other borrowings | 88 | 82 | | Income taxes paid | 56 | 53 | | Transfers of loans to other real estate owned | 1 | 3 | [NOTE 18. BUSINESS SEGMENTS](index=44&type=section&id=NOTE%2018.%20BUSINESS%20SEGMENTS) This note presents financial information for FNB's three reportable segments: Community Banking, Wealth Management, and Insurance, along with a 'Parent and Other' category for reconciliation - FNB operates in three reportable segments: Community Banking (commercial and consumer banking), Wealth Management (fiduciary, brokerage, investment advisory), and Insurance (commercial and personal insurance brokerage, reinsurer)[171](index=171&type=chunk)[172](index=172&type=chunk) Segment Net Income (Three Months Ended Sep 30) | Segment | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Community Banking | 138 | 111 | | Wealth Management | 4 | 4 | | Insurance | 2 | 1 | | Parent and Other | (6) | (5) | | **Consolidated Net Income** | **138** | **111** | Segment Net Income (Nine Months Ended Sep 30) | Segment | 2022 (Millions $) | 2021 (Millions $) | |:---|:---|:---|\n| Community Banking | 295 | 307 | | Wealth Management | 13 | 12 | | Insurance | 4 | 2 | | Parent and Other | (12) | (15) | | **Consolidated Net Income** | **300** | **306** | [NOTE 19. FAIR VALUE MEASUREMENTS](index=47&type=section&id=NOTE%2019.%20FAIR%20VALUE%20MEASUREMENTS) This note provides fair value measurements for assets and liabilities on a recurring and non-recurring basis, categorized into Level 1, Level 2, and Level 3 inputs, and details the fair value of financial instruments Assets Measured at Fair Value on a Recurring Basis (September 30, 2022) | Category | Level 1 (Millions $) | Level 2 (Millions $) | Level 3 (Millions $) | Total (Millions $) | |:---|:---|:---|:---|:---|\n| Debt securities available for sale | 256 | 3,135 | 1 | 3,392 | | Loans held for sale | — | 117 | — | 117 | | Derivative financial instruments | — | 87 | — | 87 | | **Total assets measured at fair value** | **256** | **3,339** | **1** | **3,596** | Liabilities Measured at Fair Value on a Recurring Basis (September 30, 2022) | Category | Level 1 (Millions $) | Level 2 (Millions $) | Level 3 (Millions $) | Total (Millions $) | |:---|:---|:---|:---|:---|\n| Derivative financial instruments | — | 420 | 19 | 439 | | **Total liabilities measured at fair value** | **—** | **420** | **19** | **439** | - There were no transfers of assets or liabilities between fair value hierarchy levels during the first nine months of 2022 or 2021[181](index=181&type=chunk) Fair Value of Financial Instruments (September 30, 2022) | Financial Assets (Millions $) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |:---|:---|:---|:---|:---|:---|\n| Cash and cash equivalents | 2,276 | 2,276 | 2,276 | — | — | | Debt securities available for sale | 3,392 | 3,392 | 256 | 3,135 | 1 | | Debt securities held to maturity | 3,820 | 3,349 | — | 3,349 | — | | Net loans and leases, including loans held for sale | 28,544 | 26,768 | — | 117 | 26,651 | | Loan servicing rights | 54 | 72 | — | — | 72 | | Derivative assets | 87 | 87 | — | 87 | — | | Accrued interest receivable | 101 | 101 | 101 | — | — | | **Financial Liabilities (Millions $)** | **Carrying Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** | | Deposits | 33,893 | 33,804 | 30,994 | 2,810 | — | | Short-term borrowings | 1,395 | 1,386 | 1,386 | — | — | | Long-term borrowings | 1,059 | 1,034 | — | — | 1,034 | | Derivative liabilities | 439 | 439 | — | 420 | 19 | | Accrued interest payable | 14 | 14 | 14 | — | — | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=52&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides an overview and analysis of FNB's financial condition and results of operations for the three and nine months ended September 30, 2022, compared to 2021, including forward-looking statements, critical accounting policies, non-GAAP measures, financial summaries, industry developments, and detailed discussions of operating results, financial condition, liquidity, and market risk [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION](index=52&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20INFORMATION) This section warns readers that the report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, regulatory actions, competition, technological changes, global events, and acquisition-related challenges, which could cause actual results to differ materially - Forward-looking statements are subject to risks including U.S. and global financial market developments, actions by regulatory agencies (FRB, FDIC, UST, OCC), economic slowdowns, inflation, tariffs, and sociopolitical environments[192](index=192&type=chunk) - Key risks also include competition, technological changes, widespread disasters (e.g., COVID-19, Ukraine-Russia conflict), system failures, cyber-attacks, legal/regulatory developments, and challenges in integrating acquisitions like UB Bancorp[192](index=192&type=chunk)[193](index=193&type=chunk) [APPLICATION OF CRITICAL ACCOUNTING POLICIES](index=54&type=section&id=APPLICATION%20OF%20CRITICAL%20ACCOUNTING%20POLICIES) This section states that there have been no significant changes in FNB's critical accounting policies or the assumptions and judgments used since December 31, 2021 - No significant changes in critical accounting policies or related assumptions and judgments have occurred since December 31, 2021[195](index=195&type=chunk) [USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS](index=54&type=section&id=USE%20OF%20NON-GAAP%20FINANCIAL%20MEASURES%20AND%20KEY%20PERFORMANCE%20INDICATORS) This section explains FNB's use of non-GAAP financial measures and key performance indicators to supplement GAAP results, providing useful insights into operating performance and trends, with reconciliations provided later in the report - FNB uses non-GAAP measures like operating net income, operating EPS, return on average tangible common equity (ROATCE), tangible book value per common share, and efficiency ratio to assess underlying business performance[196](index=196&type=chunk) - Merger expenses, initial provision for non-PCD loans acquired, and branch consolidation costs are considered significant items impacting earnings, excluded from operating results as they are not organic to core operations[198](index=198&type=chunk) - Net interest margin and efficiency ratio are calculated on a taxable-equivalent basis (FTE) using a **21% federal statutory income tax rate** for peer comparison[199](index=199&type=chunk) [FINANCIAL SUMMARY](index=55&type=section&id=FINANCIAL%20SUMMARY) This section provides a high-level summary of FNB's financial performance for the third quarter and year-to-date periods, highlighting record revenues, strong operating earnings, loan and deposit growth, and favorable asset quality Financial Summary (Third Quarter 2022 vs. Third Quarter 2021) | Metric | Q3 2022 | Q3 2021 | Change | |:---|:---|:---|:---|\n| Net income available to common stockholders (Millions $) | $135.5 | $109.5 | +$26.0 | | Diluted EPS | $0.38 | $0.34 | +$0.04 | | Operating diluted EPS (non-GAAP) | $0.39 | $0.34 | +$0.05 | | Total revenue (Millions $) | $379.6 | $321.3 | +$58.3 (18.2%) | | Net interest income (Millions $) | $297.1 | $232.4 | +$64.7 (27.8%) | | Efficiency ratio (non-GAAP) | 49.4% | 55.4% | -600 bps | | ROATCE (non-GAAP) | 19% | 16.8% | +220 bps | - Period-end total loans and leases increased **$4.1 billion (16.4%)** YoY, including **$1.8 billion** from the Howard acquisition; consumer loans grew **27.5%**, and commercial loans grew **10.8%**[204](index=204&type=chunk) - Total average deposits grew **$2.8 billion (9.0%)** YoY, with non-interest-bearing deposits increasing **13.9%** and comprising **35%** of total deposits[204](index=204&type=chunk)[205](index=205&type=chunk) - The ACL on loans and leases totaled **$385 million**, up from **$344 million**, driven by loan growth, CECL model impacts, and the Howard acquisition; the ACL coverage ratio was **1.34%**[206](index=206&type=chunk) [Industry Developments](index=58&type=section&id=Industry%20Developments) This section discusses recent industry developments, including the Inflation Reduction Act's potential impact on corporate alternative minimum tax and stock repurchases, and the ongoing transition from LIBOR to SOFR - The Inflation Reduction Act (IRA) introduces a **15% corporate alternative minimum tax (AMT)** for companies with over **$1 billion** in net income, effective after December 31, 2022[208](index=208&type=chunk) - The IRA also imposes a **1% excise tax** on stock repurchases by covered corporations after December 31, 2022[209](index=209&type=chunk) - FNB is transitioning away from LIBOR, with SOFR as the primary replacement index; adjustable-rate mortgage loans and commercial loans are increasingly indexed to SOFR[212](index=212&type=chunk)[213](index=213&type=chunk) - As of September 30, 2022, **$8.3 billion** of FNB's loan portfolio was LIBOR-indexed, a decline of **$2.3 billion** from December 31, 2021; FNB is reviewing legal contracts for LIBOR transition on debt instruments[214](index=214&type=chunk)[215](index=215&type=chunk) [RESULTS OF OPERATIONS](index=59&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of FNB's operating results, comparing the three and nine months ended September 30, 2022, to the corresponding periods in 2021, focusing on net interest income, provision for credit losses, non-interest income, non-interest expense, and income taxes [Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021](index=59&type=section&id=Three%20Months%20Ended%20September%2030,%202022%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030,%202021) For the third quarter of 2022, FNB reported record revenue and increased net income available to common stockholders, driven by higher net interest income from earning asset growth and rising interest rates, despite a higher provision for credit losses and a decline in non-interest income Key Financial Highlights (Three Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Net interest income | 297.1 | 232.4 | 64.7 | 27.8% | | Provision for credit losses | 11.2 | (1.8) | 13.0 | 719.5% | | Non-interest income | 82.5 | 88.9 | (6.4) | (7.2%) | | Non-interest expense | 195.1 | 184.2 | 10.8 | 5.9% | | Net income available to common stockholders | 135.5 | 109.5 | 26.0 | 23.7% | | Diluted EPS | 0.38 | 0.34 | 0.04 | 11.8% | - Net interest income (FTE, non-GAAP) increased **$65.0 million (27.7%)** to **$300.0 million**, with average earning assets up **8.9%** and net interest margin (FTE, non-GAAP) increasing **47 basis points** to **3.19%**[224](index=224&type=chunk) - Provision for credit losses increased by **$13.0 million** to **$11.2 million**, reflecting significant loan growth and CECL model impacts from a forecasted macroeconomic slowdown[230](index=230&type=chunk) - Total non-interest income decreased **$6.4 million (7.2%)** due to declines in mortgage banking operations, capital markets, and SBA premium income, partially offset by increased service charges and FRB dividends[232](index=232&type=chunk)[235](index=235&type=chunk)[237](index=237&type=chunk) - Total non-interest expense increased **$10.8 million (5.9%)**, primarily due to normal merit increases, acquired Howard expense base, technology investments, and merger-related costs[239](index=239&type=chunk)[240](index=240&type=chunk)[242](index=242&type=chunk) [Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021](index=65&type=section&id=Nine%20Months%20Ended%20September%2030,%202022%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030,%202021) For the first nine months of 2022, net income available to common stockholders slightly decreased, but operating net income increased. This period saw significant growth in net interest income, a substantial increase in provision for credit losses (including Howard acquisition impact), and higher non-interest expense due to merger-related and branch consolidation costs Key Financial Highlights (Nine Months Ended Sep 30) | Metric | 2022 (Millions $) | 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Net interest income | 784.9 | 683.2 | 101.7 | 14.9% | | Provision for credit losses | 35.6 | 3.0 | 32.6 | 1094.0% | | Non-interest income | 242.9 | 251.4 | (8.5) | (3.4%) | | Non-interest expense | 615.3 | 551.6 | 63.7 | 11.5% | | Net income available to common stockholders | 293.6 | 300.1 | (6.5) | (2.2%) | | Diluted EPS | 0.83 | 0.93 | (0.10) | (10.8%) | | Operating diluted EPS (non-GAAP) | 0.96 | 0.94 | 0.02 | 2.1% | - Net interest income (FTE, non-GAAP) increased **$101.6 million (14.7%)** to **$793.1 million**, driven by higher interest rates and a **$3.1 billion (9.3%)** increase in earning assets[254](index=254&type=chunk) - Provision for credit losses increased to **$35.5 million**, including **$19.1 million** for non-PCD loans from the Howard acquisition and significant loan growth[260](index=260&type=chunk) - Total non-interest income decreased **$8.5 million (3.4%)**, mainly due to reduced mortgage banking and capital markets income, partially offset by higher service charges and wealth management contributions[261](index=261&type=chunk)[265](index=265&type=chunk) - Total non-interest expense increased **$63.7 million (11.5%)**, with operating non-interest expense (non-GAAP) up **5.5%** after excluding **$32.8 million** in merger-related costs and **$4.2 million** in branch consolidation costs[268](index=268&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) [FINANCIAL CONDITION](index=73&type=section&id=FINANCIAL%20CONDITION) This section analyzes FNB's financial condition, including changes in assets, liabilities, and equity, detailed lending activity, non-performing assets, troubled debt restructured loans, allowance for credit losses, deposits, capital resources, regulatory matters, liquidity, and market risk [Lending Activity](index=73&type=section&id=Lending%20Activity) FNB's loan and lease portfolio experienced significant growth, particularly in commercial and industrial loans and residential mortgages, driven by activity in key markets and specialized programs Loans and Leases Summary (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Commercial real estate | 10,841 | 9,899 | 942 | 9.5% | | Commercial and industrial | 6,709 | 5,977 | 732 | 12.2% | | Total commercial loans and leases | 18,180 | 16,465 | 1,715 | 10.4% | | Residential mortgages | 4,959 | 3,654 | 1,305 | 35.7% | | Total consumer loans | 10,600 | 8,503 | 2,097 | 24.7% | | **Total loans and leases** | **28,780** | **24,968** | **3,812** | **15.3%** | - Commercial and industrial loan growth was led by the Cleveland, Pittsburgh, and North Carolina markets[279](index=279&type=chunk) - Residential mortgage growth reflected customer preferences for adjustable-rate mortgages and the success of the Physician's First mortgage program[279](index=279&type=chunk) [Non-Performing Assets](index=74&type=section&id=Non-Performing%20Assets) Non-performing assets slightly decreased, driven by a reduction in other real estate owned (OREO), while non-performing loans and leases remained stable Non-Performing Assets Summary (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Total non-performing loans and leases | 88 | 88 | — | | Other real estate owned | 6 | 8 | (2) | | **Non-performing assets** | **94** | **96** | **(2)** | [Troubled Debt Restructured Loans](index=75&type=section&id=Troubled%20Debt%20Restructured%20Loans) Total troubled debt restructurings (TDRs) remained stable, with a slight increase in accruing TDRs and a decrease in non-accrual TDRs Troubled Debt Restructurings (TDRs) Summary (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | |:---|:---|:---|:---|\n| Accruing TDRs | 63 | 60 | 3 | | Non-accrual TDRs | 30 | 32 | (2) | | **Total TDRs** | **93** | **92** | **1** | [Allowance for Credit Losses on Loans and Leases](index=75&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Loans%20and%20Leases) The Allowance for Credit Losses (ACL) increased due to significant loan growth, macroeconomic forecasts, and the Howard acquisition, while net charge-offs remained well below historical levels - The ACL on loans and leases increased by **$41.1 million (11.9%)** to **$385.3 million** at September 30, 2022, driven by loan growth, CECL model impacts from a forecasted macroeconomic slowdown, and the Howard acquisition[284](index=284&type=chunk) - Net charge-offs for the nine months ended September 30, 2022, were **$4.3 million**, compared to **$12.5 million** in the same period of 2021[284](index=284&type=chunk) - The ACL as a percentage of non-performing loans increased from **392%** at December 31, 2021, to **440%** at September 30, 2022[284](index=284&type=chunk) [Deposits](index=76&type=section&id=Deposits) Total deposits increased, primarily driven by growth in non-interest-bearing and interest-bearing demand balances due to the Howard acquisition and expanded customer relationships, with a shift in customer preferences towards certificates of deposit as interest rates rise Deposits Summary (September 30, 2022 vs. December 31, 2021) | Category | Sep 30, 2022 (Millions $) | Dec 31, 2021 (Millions $) | Change (Millions $) | % Change | |:---|:---|:---|:---|:---|\n| Non-interest-bearing demand | 11,752 | 10,789 | 963 | 8.9% | | Interest-bearing demand | 15,251 | 14,409 | 842 | 5.8% | | Savings | 3,991 | 3,669 | 322 | 8.8% | | Certificates and other time deposits | 2,899 | 2,859 | 40 | 1.4% | | **Total deposits** | **33,893** | **31,726** | **2,167** | **6.8%** | - Deposit growth was primarily due to the Howard acquisition and expansion of customer relationships, with non-interest-bearing deposits representing **34.7%** of total deposits[286](index=286&type=chunk) - Customer preferences are beginning to shift back to certificates of deposit as interest rates increase[286](index=286&type=chunk) [Capital Resources and Regulatory Matters](index=76&type=section&id=Capital%20Resources%20and%20Regulatory%20Matters) FNB maintains a strong capital base, exceeding all regulatory capital requirements and remaining 'well-capitalized.' The company has an active share repurchase program and is phasing in the impact of CECL on regulatory capital - FNB's Board of Directors approved an additional **$150 million** for its share repurchase program, bringing the total authorization to **$300 million**, with **$175.6 million** remaining[291](index=291&type=chunk) - Both FNB and FNBPA exceeded all regulatory capital requirements and were considered 'well-capitalized' as of September 30, 2022[294](index=294&type=chunk) F.N.B. Corporation Capital Ratios (September 30, 2022) | Capital Ratio | Actual Ratio | Minimum Capital Requirements plus Capital Conservation Buffer | |:---|:---|:---|\n| Total capital | 11.96% | 10.50% | | Tier 1 capital | 10.04% | 8.50% | | Common equity tier 1 | 9.72% | 7.00% | | Leverage | 8.42% | 4.00% | - FNB elected to temporarily delay the impact of CECL on regulatory capital, phasing in **25% annually** starting January 1, 2022; the total deferred impact on CET1 capital was approximately **$51.6 million (15 basis points)** as of September 30, 2022[295](index=295&type=chunk) [LIQUIDITY](index=79&type=section&id=LIQUIDITY) FNB maintains strong liquidity through diverse funding sources, including deposits and wholesale credit availability, actively managing cash flows and monitoring liquidity ratios to meet operational and contingency needs - The parent company's cash position was **$633.9 million** at September 30, 2022, up **$338.5 million** from year-end, primarily due to **$347.7 million** net proceeds from a Senior Debt offering[302](index=302&type=chunk) Liquidity Metrics (September 30, 2022 vs. December 31, 2021) | Metric | Sep 30, 2022 | Dec 31, 2021 | Internal Limit | |:---|:---|:---|:---|\n| Liquidity coverage ratio | 1.6 times | 2.4 times | > 1 time | | Months of cash on hand | 13.3 months | 16.9 months | > 12 months | - Total deposits increased **$2.2 billion (6.8%)** from December 31, 2021, with non-interest-bearing demand deposits rising **$1.0 billion (8.9%)** and representing **34.7%** of total deposits[305](index=305&type=chunk) - FNBPA has **$15.9 billion** in unused wholesale credit availability and **$306 million** in salable unpledged government and agency securities at September 30, 2022[309](index=309&type=chunk) [MARKET RISK](index=81&type=section&id=MARKET%20RISK) FNB is primarily exposed to interest rate risk, which is managed through asset/liability strategies, derivative instruments, and continuous monitoring of repricing risk, basis risk, yield curve risk, and options risk using earnings simulations and gap analysis - FNB's interest rate risk position is intended to benefit from higher interest rates, with **49%** of net loans and leases indexed to short-term LIBOR, SOFR, and Prime[323](index=323&type=chunk)[326](index=326&type=chunk) Net Interest Income Change Sensitivity (12 months) | Rate Shock | Sep 30, 2022 | Dec 31, 2021 | |:---|:---|:---|\n| +300 basis points | 9.4% | 21.6% | | +200 basis points | 6.2% | 14.4% | | +100 basis points | 3.0% | 7.0% | | -100 basis points | (0.4%) | (2.4%) | - The twelve-month cumulative repricing gap to total assets was **12.1%** at September 30, 2022, indicating a greater amount of repricing earning assets than liabilities[319](index=319&type=chunk) - FNB uses interest rate swaps with commercial borrowers to manage its interest rate risk position, effectively increasing adjustable-rate loans[326](index=326&type=chunk) [RISK MANAGEMENT](index=83&type=section&id=RISK%20MANAGEMENT) FNB's risk management framework, overseen by the Board of Directors and senior management, identifies and manages seven major risk categories (credit, market, liquidity, reputational, operational, legal/compliance, strategic) to optimize shareholder value within defined risk appetite levels - FNB identifies seven major risk categories: credit, market, liquidity, reputational, operational, legal and compliance, and strategic risk[328](index=328&type=chunk) - The Board of Directors' Risk Committee and the senior management-level Risk Management Council oversee risk management, including identifying, measuring, assessing, and monitoring enterprise-wide risk[330](index=330&type=chunk)[331](index=331&type=chunk) - The Chief Risk Officer leads multiple second-line-of-defense departments, including Enterprise-Wide Risk Management, Fraud Risk, Loan Review, Model Risk Management, Third-Party Risk Management, Anti-Money Laundering, Appraisal Review, Compliance, and Information and Cyber Security[333](index=333&type=chunk)[335](index=335&type=chunk) [RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP](index=85&type=section&id=RECONCILIATIONS%20OF%20NON-GAAP%20FINANCIAL%20MEASURES%20AND%20KEY%20PERFORMANCE%20INDICATORS%20TO%20GAAP) This section provides detailed reconciliations of FNB's non-GAAP financial measures and key performance indicators, such as operating net income, operating EPS, return on average tangible common equity, and tangible book value, to their most directly comparable GAAP financial measures Operating Net Income Available to Common Stockholders (Nine Months Ended Sep 30) | Metric | 2022 (Thousands $) | 2021 (Thousands $) | |:---|:---|:---|\n| Net income available to common stockholders | 293,608 | 300,105 | | Merger-related expense | 32,761 | 940 | | Tax benefit of merger-related expense | (6,880) | (197) | | Provision expense related to acquisition | 19,127 | — | | Tax benefit of provision expense related to acquisition | (4,017) | — | | Branch consolidation costs | 4,178 | 2,644 | | Tax benefit of branch consolidation costs | (877) | (555) | | **Operating net income available to common stockholders (non-GAAP)** | **337,900** | **302,937** | Operating Earnings Per Diluted Common Share (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | |:---|:---|:---|\n| Net income per diluted common share | $0.83 | $0.93 | | Adjustments for significant items (net of tax) | 0.13 | 0.01 | | **Operating earnings per diluted common share (non-GAAP)** | **$0.96** | **$0.94** | Return on Average Tangible Common Equity (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | |:---|:---|:---|\n| Net income available to common stockholders (annualized, Thousands $) | 392,552 | 401,239 | | Amortization of intangibles, net of tax (annualized, Thousands $) | 10,903 | 9,607 | | **Tangible net income available to common stockholders (annualized, non-GAAP, Thousands $)** | **403,455** | **410,846** | | Average tangible common equity (non-GAAP, Thousands $) | 2,883,515 | 2,588,092 | | **Return on average tangible common equity (non-GAAP)** | **13.99%** | **15.87%** | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=88&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This item refers to the Market Risk section within Management's Discussion and Analysis (Item 2) for quantitative and qualitative disclosures about market risk, which primarily focuses on interest rate risk - Information on quantitative and qualitative disclosures about market risk is incorporated by reference from the Market Risk section of Item 2, Management's Discussion and Analysis[348](index=348&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=88&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) FNB's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2022, concluding they were effective at a reasonable assurance level, with no material changes to internal controls over financial reporting during the quarter - FNB's disclosure controls and procedures were evaluated as **effective** at the reasonable assurance level as of September 30, 2022[349](index=349&type=chunk) - No material changes to internal controls over financial reporting occurred during the fiscal quarter ended September 30, 2022[351](index=351&type=chunk) - Management acknowledges that control systems provide reasonable, not absolute, assurance and can be subject to inherent limitations like faulty judgments, errors, or circumvention[350](index=350&type=chunk) [PART II – OTHER INFORMATION](index=89&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=89&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This item incorporates by reference the discussion of legal proceedings from Note 12, 'Commitments, Credit Risk and Contingencies,' indicating that FNB is routinely involved in legal actions and regulatory matters - Information on legal proceedings is incorporated by reference from Note 12, 'Commitments, Credit Risk and Contingencies,' in the Notes to the Consolidated Financial Statements[353](index=353&type=chunk) [ITEM 1A. RISK FACTORS](index=89&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines additional risk factors related to the pending acquisition of UB Bancorp, including integration challenges, potential failure to realize anticipated benefits, conditions to closing, regulatory oversight, business uncertainties, and the risk of incorrect credit risk assessments - Combining FNB and UB Bancorp may be more difficult, costly, or time-consuming than expected, potentially disrupting customer relationships or leading to loss of key employees[355](index=355&type=chunk)[356](index=356&type=chunk)[360](index=360&type=chunk) - The completion of the UB Bancorp merger is subject to customary closing conditions and regulatory oversight, which may impose unforeseen conditions or delays[357](index=357&type=chunk)[358](index=358&type=chunk) - The merger may not be accretive to earnings per share as expected, or could be dilutive, due to additional transaction/integration costs or failure to realize anticipated benefits[364](index=364&type=chunk) - Decisions regarding the credit risk of Union Bank's loan portfolio, and the adequacy of the credit mark, could be incorrect, potentially leading to increased provision for credit losses and adverse financial effects[365](index=365&type=chunk)[366](index=366&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=91&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This item states that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[367](index=367&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=91&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item indicates that there were no defaults upon senior securities - No defaults upon senior securities occurred during the reporting period[367](index=367&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=91&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item states that mine safety disclosures are not applicable to FNB Corporation - Mine safety disclosures are not applicable to F.N.B. Corporation[367](index=367&type=chunk) [ITEM 5. OTHER INFORMATION](index=91&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This item discloses an Executive Retention Life Insurance Agreement entered into with CEO Vincent J. Delie, Jr., providing for company-paid life insurance premiums and a death benefit, with specific terms for premium obligations based on employment duration and conditions - FNB entered an Executive Retention Life Insurance Agreement with CEO Vincent J. Delie, Jr., effective **November 3, 2022**[368](index=368&type=chunk) - FNB will pay an annual premium of **$182,450** on a life insurance policy owned by Mr. Delie, with a death benefit of **$2.4 million**[369](index=369&type=chunk) - FNB's premium obligation continues until Mr. Delie attains age 68, with specific conditions for termination or full payment upon voluntary termination, termination for cause, or violation of restrictive covenants[369](index=369&type=chunk) [ITEM 6. EXHIBITS](index=92&type=section&id=ITEM%206.%20EXHIBITS) This item lists all exhibits filed with the Form 10-Q, including the Executive Retention Life Insurance Agreement, CEO and CFO certifications under Sarbanes-Oxley Act, and Inline XBRL documents - Exhibits include the Executive Retention Life Insurance Agreement (10.1), CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 (31.1, 31.2) and 906 (32.1, 32.2), and various Inline XBRL documents[372](index=372&type=chunk) [SIGNATURES](index=93&type=section&id=SIGNATURES) This section contains the signatures of F.N.B. Corporation's Chairman, President and Chief Executive Officer, Chief Financial Officer, and Corporate Controller, certifying the report's submission - The report is signed by Vincent J. Delie, Jr. (Chairman, President and CEO), Vincent J. Calabrese, Jr. (CFO), and James L. Dutey (Corporate Controller) on **November 4, 2022**[375](index=375&type=chunk)

F.N.B. Corporation (NYSE:FNB) Q3 2022 Earnings Conference Call October 19, 2022 8:30 AM ET Company Participants Lisa Constantine - Manager of Investor Relations Vince Delie - Chairman, President and Chief Executive Officer Gary Guerrieri - Chief Credit Officer Vince Calabrese - Chief Financial Officer Conference Call Participants Jared Shaw - Wells Fargo Securities Daniel Tamayo - Raymond James Casey Haire - Jefferies Michael Perito - KBW Brandon King - Truist Securities Brian Martin - Janney Montgomery Ope ...

| --- | --- | |-------------------------|-------| | | | | F.N.B. Corporation | | | | | | Earnings Presentation | | | Third Quarter 2022 | | | October 19, 2022 | | | | | Cautionary Statement Regarding Forward-Looking Information 2 This document may contain statements regarding F.N.B. Corporation's outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset quality levels, financial position and other matters regarding or affecting our current or future business and ope ...

PART I – FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for F.N.B. Corporation as of June 30, 2022, and for the three and six-month periods then ended, including balance sheets, income statements, and cash flows Consolidated Balance Sheet Highlights (June 30, 2022 vs. Dec 31, 2021) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | $41,681 million | $39,513 million | | **Net Loans and Leases** | $27,666 million | $24,624 million | | **Total Deposits** | $33,480 million | $31,726 million | | **Total Liabilities** | $36,245 million | $34,363 million | | **Total Stockholders' Equity** | $5,436 million | $5,150 million | Consolidated Income Statement Highlights (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Net Interest Income** | $488 million | $451 million | | **Provision for credit losses** | $24 million | $5 million | | **Net Income** | $162 million | $195 million | | **Net Income Available to Common Stockholders** | $158 million | $191 million | | **Diluted EPS** | $0.45 | $0.59 | [Note 3. Mergers and Acquisitions](index=12&type=section&id=Note%203.%20Mergers%20and%20Acquisitions) FNB completed its acquisition of Howard Bancorp, Inc. on January 22, 2022, for approximately $443 million, resulting in the issuance of 34.1 million shares of common stock and the recognition of $172 million in goodwill - On January 22, 2022, FNB completed the acquisition of Howard Bancorp, Inc. for a total value of approximately **$443 million**[29](index=29&type=chunk) Howard Bancorp, Inc. Acquisition Details | Item | Value (in millions) | | :--- | :--- | | Fair value of consideration paid | $443 | | Fair value of identifiable assets acquired | $2,356 | | Fair value of liabilities assumed | $2,085 | | Goodwill recognized | $172 | - On May 31, 2022, FNB entered into a definitive merger agreement to acquire UB Bancorp for approximately **$119 million**, with the transaction expected to close in late 2022[36](index=36&type=chunk)[38](index=38&type=chunk) [Note 4. Securities](index=14&type=section&id=Note%204.%20Securities) As of June 30, 2022, the company held **$3.57 billion** in Available-for-Sale (AFS) debt securities and **$3.74 billion** in Held-to-Maturity (HTM) debt securities, with AFS having **$221 million** in gross unrealized losses Debt Securities Portfolio (June 30, 2022) | Portfolio | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | | :--- | :--- | :--- | :--- | :--- | | **Available for Sale (AFS)** | $3,785 million | $3,566 million | $2 million | ($221) million | | **Held to Maturity (HTM)** | $3,740 million | $3,470 million | $2 million | ($272) million | - The unrealized losses in the AFS portfolio are considered temporary and caused by interest rate movements, not expected credit losses[47](index=47&type=chunk)[48](index=48&type=chunk) [Note 5. Loans and Leases](index=19&type=section&id=Note%205.%20Loans%20and%20Leases) Total loans and leases, net of unearned income, grew to **$28.04 billion** at June 30, 2022, from **$24.97 billion** at year-end 2021, with non-performing loans at **$92 million** (**0.33%** of total loans) Loan and Lease Portfolio Composition | Loan Category | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total commercial loans and leases | $17,991 million | $16,465 million | | Total consumer loans | $10,053 million | $8,503 million | | **Total loans and leases** | **$28,044 million** | **$24,968 million** | Asset Quality Ratios | Ratio | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Non-performing loans / total loans and leases | 0.33% | 0.35% | | Non-performing assets + 90 days past due / total loans and leases + OREO | 0.39% | 0.41% | - Total Troubled Debt Restructurings (TDRs) increased slightly to **$95 million** as of June 30, 2022, from **$92 million** at December 31, 2021[74](index=74&type=chunk) [Note 6. Allowance for Credit Losses on Loans and Leases](index=26&type=section&id=Note%206.%20Allowance%20for%20Credit%20Losses%20on%20Loans%20and%20Leases) The Allowance for Credit Losses (ACL) on loans and leases increased to **$378.0 million** at June 30, 2022, from **$344.3 million** at year-end 2021, primarily due to the Howard acquisition and loan growth ACL Roll-Forward (Six Months Ended June 30, 2022) | (in millions) | Amount | | :--- | :--- | | **Beginning Balance (Dec 31, 2021)** | **$344.3** | | Net Charge-offs | ($1.5) | | Provision for Credit Losses | $25.2 | | ACL for PCD Loans at Acquisition | $10.0 | | **Ending Balance (June 30, 2022)** | **$378.0** | - The ACL coverage ratio was **1.35%** at June 30, 2022, compared to **1.38%** at December 31, 2021[88](index=88&type=chunk) [Note 18. Business Segments](index=44&type=section&id=Note%2018.%20Business%20Segments) The company operates through three reportable segments: Community Banking, Wealth Management, and Insurance, with Community Banking being the primary driver of performance, generating **$157 million** in net income for the six months ended June 30, 2022 Segment Net Income (Six Months Ended June 30, 2022) | Segment | Net Income (in millions) | | :--- | :--- | | Community Banking | $157 | | Wealth Management | $9 | | Insurance | $2 | | Parent and Other | ($6) | | **Consolidated Total** | **$162** | - The Community Banking segment holds the vast majority of the company's assets, totaling **$41.5 billion** as of June 30, 2022[175](index=175&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the second quarter and first half of 2022, highlighting record revenue of **$335.8 million** in Q2 driven by net interest income expansion from higher rates and loan growth - Q2 2022 net income available to common stockholders was **$107.1 million**, or **$0.30** per diluted share, compared to **$99.4 million**, or **$0.31** per diluted share in Q2 2021[201](index=201&type=chunk) - Revenue grew **7.5%** in Q2 2022 to a record **$335.8 million**, driven by an **11.3%** increase in net interest income due to the rising interest rate environment and strong loan growth[202](index=202&type=chunk)[205](index=205&type=chunk) - Asset quality remains strong, with annualized net recoveries of **0.01%** in Q2 2022 and an ACL to total loans ratio of **1.35%**[202](index=202&type=chunk)[207](index=207&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) For Q2 2022, net interest income grew **11.3%** year-over-year to **$253.7 million**, benefiting from higher rates and earning asset growth, while net income for the six-month period was **$162.1 million**, down from **$194.6 million** in 2021 Q2 2022 vs Q2 2021 Performance | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Net Interest Income | $253.7M | $227.9M | | Provision for Credit Losses | $6.4M | ($1.1M) | | Non-Interest Income | $82.2M | $79.8M | | Non-Interest Expense | $192.8M | $182.5M | - The net interest margin (FTE, non-GAAP) for Q2 2022 increased by **6 basis points** year-over-year to **2.76%**, as the earning asset yield increased despite reduced contributions from PPP loans[205](index=205&type=chunk)[223](index=223&type=chunk) - For the first six months of 2022, merger-related expenses of **$30.7 million** and an initial provision of **$19.1 million** for the Howard acquisition significantly impacted net income compared to the prior year[246](index=246&type=chunk) [Financial Condition](index=73&type=section&id=Financial%20Condition) As of June 30, 2022, total assets grew to **$41.7 billion**, up **5.5%** from year-end 2021, largely due to the Howard acquisition and organic growth, with net loans and leases increasing **12.4%** to **$27.7 billion** Balance Sheet Changes (June 30, 2022 vs Dec 31, 2021) | Account | Change ($) | Change (%) | | :--- | :--- | :--- | | Total Assets | +$2,168M | +5.5% | | Net Loans and Leases | +$3,042M | +12.4% | | Total Deposits | +$1,754M | +5.5% | - Non-performing assets increased by **$6 million** to **$102 million** at June 30, 2022, primarily driven by the acquisition of the Howard Bank portfolio[282](index=282&type=chunk) [Capital Resources and Regulatory Matters](index=76&type=section&id=Capital%20Resources%20and%20Regulatory%20Matters) FNB and its bank subsidiary remained 'well-capitalized' as of June 30, 2022, with the Common Equity Tier 1 (CET1) capital ratio for the corporation at **9.7%**, and the Board approved an additional **$150 million** for the share repurchase program F.N.B. Corporation Regulatory Capital Ratios | Ratio | June 30, 2022 | Dec 31, 2021 | Minimum + Buffer | | :--- | :--- | :--- | :--- | | **Common Equity Tier 1** | 9.72% | 9.92% | 7.00% | | **Tier 1 Capital** | 10.05% | 10.29% | 8.50% | | **Total Capital** | 12.00% | 12.18% | 10.50% | - The Board of Directors approved an additional **$150 million** for the share repurchase program in April 2022, with **$175.6 million** remaining for repurchase as of June 30, 2022[294](index=294&type=chunk) [Liquidity](index=79&type=section&id=Liquidity) The company maintains a strong liquidity position, with the parent company holding **$257.7 million** in cash, exceeding internal limits for its Liquidity Coverage Ratio (**2.6x**) and Months of Cash on Hand (**13.5 months**) - The parent company's cash position was **$257.7 million** at June 30, 2022, sufficient to cover over **13.5 months** of expenses and dividends, exceeding the internal limit of **12 months**[307](index=307&type=chunk)[309](index=309&type=chunk) - Total deposits increased by **$1.8 billion** since year-end 2021, with non-interest-bearing deposits now comprising **35.0%** of total deposits[310](index=310&type=chunk) FNBPA Credit Availability | Metric | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Unused wholesale credit availability | $15,717 million | $14,681 million | | Salable unpledged securities | $996 million | $836 million | [Market Risk](index=81&type=section&id=Market%20Risk) The company is primarily exposed to interest rate risk, which it manages through its Asset/Liability Committee (ALCO), with the balance sheet positioned to benefit from rising interest rates, as a +100 basis point immediate rate shock is modeled to increase net interest income by **4.8%** over 12 months Net Interest Income Sensitivity (12 Months) | Rate Shock | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | +200 bps | +9.4% | +14.4% | | +100 bps | +4.8% | +7.0% | | -100 bps | (4.0)% | (2.4)% | - The company's balance sheet is positioned to benefit from future FOMC rate increases, with **48%** of net loans and leases indexed to short-term rates that reprice within **three months**[328](index=328&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=90&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the information provided in the "Market Risk" section of Management's Discussion and Analysis (MD&A) within Item 2 of this report - Information regarding market risk is provided in the Market Risk section of the MD&A in Item 2 of this Form 10-Q[363](index=363&type=chunk) [Controls and Procedures](index=90&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022, with no material changes to internal controls over financial reporting during the quarter - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[364](index=364&type=chunk) - No changes occurred during the fiscal quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[366](index=366&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=90&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal actions incidental to the normal course of business, which management does not believe will have a material adverse effect on its financial position or liquidity - The company is routinely party to legal actions considered incidental to the normal conduct of business and does not expect them to have a material adverse effect on its financial position[148](index=148&type=chunk)[367](index=367&type=chunk) [Risk Factors](index=90&type=section&id=Item%201A.%20Risk%20Factors) This section introduces new risk factors related to the recently announced acquisition of UB Bancorp, including potential integration difficulties, unrealized benefits, regulatory delays, and business uncertainties - The success of the UB Bancorp merger depends on the ability to successfully combine and integrate the businesses without disrupting customer relationships or losing key employees[369](index=369&type=chunk)[371](index=371&type=chunk) - Completion of the merger is subject to customary closing conditions, including shareholder and regulatory approvals, which may not be received, may be delayed, or may impose unforeseen conditions[372](index=372&type=chunk)[373](index=373&type=chunk) - If the merger is not completed, FNB will have incurred substantial expenses without realizing the expected benefits, which could negatively impact prospects and stock price[375](index=375&type=chunk)[376](index=376&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=93&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended June 30, 2022, FNB repurchased **1,101,100 shares** of its common stock at an average price of **$11.77** per share, and the Board authorized an additional **$150 million** for the share repurchase program Share Repurchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | 335,000 | $11.90 | | May 2022 | 766,100 | $11.72 | | **Total** | **1,101,100** | **$11.77** | [Exhibits](index=94&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Deferred Compensation Plan, form of director restricted stock unit agreement, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as Inline XBRL data files[387](index=387&type=chunk)

F.N.B. Corporation (NYSE:FNB) Q2 2022 Earnings Conference Call July 21, 2022 8:30 AM ET Company Participants Lisa Constantine - Investor Relations Vince Delie - Chairman, President & Chief Executive Officer Gary Guerrieri - Chief Credit Officer Vince Calabrese - Chief Financial Officer Conference Call Participants Timur Braziler - Wells Fargo Securities Daniel Tamayo - Raymond James Michael Perito - KBW Russell Gunther - D.A. Davidson Brian Martin - Janney Operator Good morning and welcome to the F.N.B. Cor ...