FNB(FNB) - 2022 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Glossary of Acronyms and Terms 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] ITEM 1. FINANCIAL STATEMENTS 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 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 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) 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 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 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 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 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] - 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] NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][21] - 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] NOTE 2. NEW ACCOUNTING STANDARDS 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] - The adoption of ASU 2022-02 is not expected to have a material impact on FNB's consolidated financial statements[27] NOTE 3. MERGERS AND ACQUISITIONS 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] 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] - 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] NOTE 4. SECURITIES 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] - 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] - 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] NOTE 5. LOANS AND LEASES 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] 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 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] - 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] - The ACL coverage ratio was 1.34% at September 30, 2022, compared to 1.38% at December 31, 2021[85] NOTE 7. LOAN SERVICING 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] - 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] NOTE 8. LEASES 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] 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] NOTE 9. VARIABLE INTEREST ENTITIES 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] 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 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] - 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] NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 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] - 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] - 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] NOTE 12. COMMITMENTS, CREDIT RISK AND CONTINGENCIES 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] - 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][149] NOTE 13. STOCK INCENTIVE PLANS 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] 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][159] NOTE 14. INCOME TAXES 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] - 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] NOTE 15. OTHER COMPREHENSIVE INCOME (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 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] NOTE 17. CASH FLOW INFORMATION 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 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][172] 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 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] 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 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 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] - 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][193] APPLICATION OF CRITICAL ACCOUNTING POLICIES 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] USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS 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] - 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] - 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] FINANCIAL SUMMARY 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] - 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][205] - 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] Industry Developments 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] - The IRA also imposes a 1% excise tax on stock repurchases by covered corporations after December 31, 2022[209] - 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][213] - 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][215] RESULTS OF OPERATIONS 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 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] - 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] - 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][235][237] - 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][240][242] Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021 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] - 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] - 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][265] - 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][271][272] FINANCIAL CONDITION 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 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] - Residential mortgage growth reflected customer preferences for adjustable-rate mortgages and the success of the Physician's First mortgage program[279] Non-Performing Assets 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 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 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] - 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] - The ACL as a percentage of non-performing loans increased from 392% at December 31, 2021, to 440% at September 30, 2022[284] 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] - Customer preferences are beginning to shift back to certificates of deposit as interest rates increase[286] Capital Resources and Regulatory Matters 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] - Both FNB and FNBPA exceeded all regulatory capital requirements and were considered 'well-capitalized' as of September 30, 2022[294] 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] 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] 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] - 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] MARKET RISK 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][326] 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] - FNB uses interest rate swaps with commercial borrowers to manage its interest rate risk position, effectively increasing adjustable-rate loans[326] RISK MANAGEMENT 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] - 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][331] - 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][335] RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP 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 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] ITEM 4. CONTROLS AND PROCEDURES 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] - No material changes to internal controls over financial reporting occurred during the fiscal quarter ended September 30, 2022[351] - Management acknowledges that control systems provide reasonable, not absolute, assurance and can be subject to inherent limitations like faulty judgments, errors, or circumvention[350] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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] ITEM 1A. RISK FACTORS 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][356][360] - The completion of the UB Bancorp merger is subject to customary closing conditions and regulatory oversight, which may impose unforeseen conditions or delays[357][358] - 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] - 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][366] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item indicates that there were no defaults upon senior securities - No defaults upon senior securities occurred during the reporting period[367] ITEM 4. MINE SAFETY DISCLOSURES 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] ITEM 5. OTHER INFORMATION 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] - 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] - 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] ITEM 6. EXHIBITS 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] 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]