FNB CORP/PA/ - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022


☐			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)


Pennsylvania						25-1255406
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One North Shore Center,

12 Federal Street,

Pittsburgh,

15212

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 800-555-5455

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-accelerated Filer	☐	Smaller reporting company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Exchange on which Registered

Common Stock, par value $0.01 per share

FNB

New York Stock Exchange

Depositary Shares each representing 1/40th interest in a
share of Fixed-to-Floating Rate Non-Cumulative Perpetual
Preferred Stock, Series E

FNBPrE

New York Stock Exchange

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at	October 31, 2022
Common Stock, $0.01 Par Value	350,784,411	Shares

F.N.B. CORPORATION

FORM 10-Q

September 30, 2022

INDEX


		PAGE
PART I – FINANCIAL INFORMATION

	Glossary of Acronyms and Terms	4

Item 1.	Financial Statements

	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income (Loss)	7
	Consolidated Statements of Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	88

Item 4.	Controls and Procedures	88

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	89

Item 1A.	Risk Factors	89

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91

Item 3.	Defaults Upon Senior Securities	91

Item 4.	Mine Safety Disclosures	91

Item 5.	Other Information	91

Item 6.	Exhibits	91

Signatures		93

Glossary of Acronyms and Terms

Acronym

Description

Acronym

Description

ACL

Allowance for credit losses

Howard

Howard Bancorp, Inc.

AFS

Available for sale

HTM

Held to maturity

ALCO

Asset/Liability Committee

LGD

Loss given default

AOCI

Accumulated other comprehensive income

LIBOR

London Inter-bank Offered Rate

ASC

Accounting Standards Codification

LIHTC

Low income housing tax credit

ASU

Accounting Standards Update

MD&A

Management's Discussion and Analysis of

Financial Condition and Results of Operations

AULC

Allowance for unfunded loan commitments

MSRs

Mortgage servicing rights

BOLI

Bank owned life insurance

OCC

Office of the Comptroller of the Currency

CARES Act

Coronavirus Aid, Relief and Economic Security Act

OREO

Other real estate owned

CECL

Current expected credit losses

PCD

Purchased credit deteriorated

CET1

Common equity tier 1

PPP

Paycheck Protection Program

COVID-19

Novel coronavirus disease of 2019

R&S

Reasonable and Supportable

EVE

Economic value of equity

RRR

Reference Rate Reform

FASB

Financial Accounting Standards Board

SBA

Small Business Administration

FDIC

Federal Deposit Insurance Corporation

SEC

Securities and Exchange Commission

FHLB

Federal Home Loan Bank

SOFR

Secured Overnight Financing Rate

FNB

F.N.B. Corporation

TDR

Troubled debt restructuring

FNBPA

First National Bank of Pennsylvania

TPS

Trust preferred securities

FOMC

Federal Open Market Committee

U.S.

United States of America

FRB

Board of Governors of the Federal Reserve

System

UST

U.S. Department of the Treasury

FTE

Fully taxable equivalent

VIE

Variable interest entity

GAAP

U.S. generally accepted accounting principles

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except share and per share data)


	September 30, 2022		December 31, 2021
	(Unaudited)
Assets
Cash and due from banks	$	458	$	337
Interest-bearing deposits with banks	1,818		3,156
Cash and Cash Equivalents	2,276		3,493
Debt securities available for sale (amortized cost of $3,760 and $3,416; allowance for credit losses of $0 and $0)	3,392		3,426
Debt securities held to maturity (fair value of $3,349 and $3,506; allowance for credit losses of $0 and $0)	3,820		3,463
Loans held for sale (includes $117 and $269 measured at fair value) (1)	149		295
Loans and leases, net of unearned income of $13 and $36	28,780		24,968
Allowance for credit losses on loans and leases	(385)		(344)
Net Loans and Leases	28,395		24,624
Premises and equipment, net	421		345
Goodwill	2,435		2,262
Core deposit and other intangible assets, net	52		42
Bank owned life insurance	629		546
Other assets	1,021		1,017
Total Assets	$	42,590	$	39,513
Liabilities
Deposits:
Non-interest-bearing demand	$	11,752	$	10,789
Interest-bearing demand	15,251		14,409
Savings	3,991		3,669
Certificates and other time deposits	2,899		2,859
Total Deposits	33,893		31,726
Short-term borrowings	1,395		1,536
Long-term borrowings	1,059		682

Other liabilities	837		419
Total Liabilities	37,184		34,363
Stockholders’ Equity
Preferred stock - $0.01 par value; liquidation preference of $1,000 per share
Authorized – 20,000,000 shares
Issued – 110,877 shares	107		107
Common stock - $0.01 par value
Authorized – 500,000,000 shares
Issued – 365,205,655 and 329,464,669 shares	4		3
Additional paid-in capital	4,565		4,109
Retained earnings	1,275		1,110
Accumulated other comprehensive loss	(378)		(62)
Treasury stock – 14,449,500 and 10,531,177 shares at cost	(167)		(117)
Total Stockholders’ Equity	5,406		5,150
Total Liabilities and Stockholders’ Equity	$	42,590	$	39,513

(1)Amount represents loans for which we have elected the fair value option. See Note 19.

See accompanying Notes to Consolidated Financial Statements (unaudited)

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions, except per share data)

Unaudited


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Interest Income
Loans and leases, including fees	$	297	$	226	$	760	$	671
Securities:
Taxable	31		22		82		65
Tax-exempt	7		7		20		22

Other	8		1		15		2
Total Interest Income	343		256		877		760
Interest Expense
Deposits	31		11		54		38
Short-term borrowings	6		7		17		21
Long-term borrowings	9		6		21		18
Total Interest Expense	46		24		92		77
Net Interest Income	297		232		785		683
Provision for credit losses	12		(2)		36		3
Net Interest Income After Provision for Credit Losses	285		234		749		680
Non-Interest Income
Service charges	36		31		102		89
Trust services	10		10		30		28
Insurance commissions and fees	6		7		20		20
Securities commissions and fees	6		5		18		17
Capital markets income	10		12		25		27
Mortgage banking operations	5		8		18		31
Dividends on non-marketable equity securities	3		2		8		7
Bank owned life insurance	2		3		9		11


Other	5		10		13		21
Total Non-Interest Income	83		88		243		251
Non-Interest Expense
Salaries and employee benefits	107		105		323		314
Net occupancy	16		13		50		45
Equipment	20		18		56		52
Amortization of intangibles	3		3		10		9
Outside services	19		18		53		54
Marketing	3		4		11		11
FDIC insurance	5		4		15		13
Bank shares and franchise taxes	4		3		12		11
Merger-related	2		1		33		1

Other	16		15		52		41
Total Non-Interest Expense	195		184		615		551
Income Before Income Taxes	173		138		377		380
Income taxes	35		27		77		74
Net Income	138		111		300		306
Preferred stock dividends	2		2		6		6
Net Income Available to Common Stockholders	$	136	$	109	$	294	$	300
Earnings per Common Share
Basic	$	0.39	$	0.34	$	0.84	$	0.94
Diluted	0.38		0.34		0.83		0.93

See accompanying Notes to Consolidated Financial Statements (unaudited)

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

Unaudited


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	138	$	111	$	300	$	306
Other comprehensive income (loss):
Securities available for sale:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $(33), $(3), $(84) and $(8)	(116)		(10)		(294)		(29)


Derivative instruments:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $(4), $0, $(9) and $1	(13)		(1)		(30)		3
Reclassification adjustment for gains included in net income, net of tax expense of $1, $1, $2 and $3	2		4		6		11
Pension and postretirement benefit obligations:
Unrealized gains (losses) arising during the period, net of tax expense of $0, $1, $0 and $1	1		1		2		2
Other Comprehensive Income (Loss)	(126)		(6)		(316)		(13)
Comprehensive Income (Loss)	$	12	$	105	$	(16)	$	293

See accompanying Notes to Consolidated Financial Statements (unaudited)

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in millions, except per share data)

Unaudited


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Three Months Ended September 30, 2021
Balance at beginning of period	$	107	$	3	$	4,101	$	981	$	(46)	$	(109)	$	5,037
Comprehensive income (loss)							111		(6)				105
Dividends declared:
Preferred stock: $18.13/share							(2)						(2)
Common stock: $0.12/share							(39)						(39)
Issuance of common stock			—		—		—				(1)		(1)

Repurchase of common stock											(7)		(7)

Restricted stock compensation					5								5


Balance at end of period	$	107	$	3	$	4,106	$	1,051	$	(52)	$	(117)	$	5,098
Three Months Ended September 30, 2022
Balance at beginning of period	$	107	$	4	$	4,562	$	1,182	$	(252)	$	(167)	$	5,436
Comprehensive income (loss)							138		(126)				12
Dividends declared:
Preferred stock: $18.13/share							(2)						(2)
Common stock: $0.12/share							(43)						(43)
Issuance of common stock			—		—						—		—

Repurchase of common stock											—		—

Restricted stock compensation					3								3


Balance at end of period	$	107	$	4	$	4,565	$	1,275	$	(378)	$	(167)	$	5,406


	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total
Nine Months Ended September 30, 2021
Balance at beginning of period	$	107	$	3	$	4,087	$	869	$	(39)	$	(68)	$	4,959
Comprehensive income (loss)							306		(13)				293
Dividends declared:
Preferred stock: $54.39/share							(6)						(6)
Common stock: $0.36/share							(117)						(117)
Issuance of common stock			—		3		(1)				(6)		(4)

Repurchase of common stock											(43)		(43)

Restricted stock compensation					16								16


Balance at end of period	$	107	$	3	$	4,106	$	1,051	$	(52)	$	(117)	$	5,098
Nine Months Ended September 30, 2022
Balance at beginning of period	$	107	$	3	$	4,109	$	1,110	$	(62)	$	(117)	$	5,150
Comprehensive income (loss)							300		(316)				(16)
Dividends declared:
Preferred stock: $54.39/share							(6)						(6)
Common stock: $0.36/share							(129)						(129)
Issuance of common stock			—		1						(7)		(6)
Issuance of common stock - acquisitions			1		442								443
Repurchase of common stock											(43)		(43)

Restricted stock compensation					13								13

Balance at end of period	$	107	$	4	$	4,565	$	1,275	$	(378)	$	(167)	$	5,406

See accompanying Notes to Consolidated Financial Statements (unaudited)

F.N.B. CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

Unaudited


	Nine Months Ended September 30,
	2022		2021
Operating Activities
Net income	$	300	$	306
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation, amortization and accretion	54		(1)
Provision for credit losses	36		3
Deferred tax expense (benefit)	9		8


Loans originated for sale	(836)		(1,593)
Loans sold	1,011		1,533
Net gain on sale of loans	(29)		(39)
Net change in:
Interest receivable	(19)		14
Interest payable	4		(5)
Bank owned life insurance, excluding purchases	(4)		4
Other, net	515		154
Net cash flows provided by (used in) operating activities	1,041		384
Investing Activities
Net change in loans and leases, excluding sales and transfers	(2,012)		800
Debt securities available for sale:
Purchases	(919)		(1,207)
Sales	287		—
Maturities/payments	598		1,415
Debt securities held to maturity:
Purchases	(845)		(993)

Maturities/payments	481		652


Increase in premises and equipment	(78)		(43)
Net cash received in business acquisition	75		—


Net cash flows provided by (used in) investing activities	(2,413)		624
Financing Activities
Net change in:
Demand (non-interest bearing and interest bearing) and savings accounts	517		2,939
Time deposits	(180)		(617)
Short-term borrowings	(155)		(240)
Proceeds from issuance of long-term borrowings	367		18
Repayment of long-term borrowings	(223)		(227)
Repurchases of common stock	(43)		(43)
Cash dividends paid:
Preferred stock	(6)		(6)
Common stock	(129)		(117)
Other, net	7		12
Net cash flows provided by (used in) financing activities	155		1,719
Net Increase (Decrease) in Cash and Cash Equivalents	(1,217)		2,727
Cash and cash equivalents at beginning of period	3,493		1,383
Cash and Cash Equivalents at End of Period	$	2,276	$	4,110

See accompanying Notes to Consolidated Financial Statements (unaudited)

F.N.B. CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2022

The terms “FNB,” “the Corporation,” “we,” “us” and “our” throughout this Report mean F.N.B. Corporation and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, F.N.B. Corporation. When we refer to "FNBPA" in this Report, we mean our bank subsidiary, First National Bank of Pennsylvania, and its subsidiaries.

NATURE OF OPERATIONS

F.N.B. Corporation, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. As of September 30, 2022, we had 338 branches throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington D.C. and Virginia.

We provide a full range of commercial banking, consumer banking and wealth management solutions through our subsidiary network which is led by our largest affiliate, FNBPA, founded in 1864. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, government banking, business credit, capital markets and lease financing. Consumer banking provides a full line of consumer banking products and services, including deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance.

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our accompanying Consolidated Financial Statements and these Notes to Consolidated Financial Statements (unaudited) include subsidiaries in which we have a controlling financial interest. We own and operate FNBPA, First National Trust Company, First National Investment Services Company, LLC, F.N.B. Investment Advisors, Inc., First National Insurance Agency, LLC, Bank Capital Services, LLC, F.N.B. Capital Corporation, LLC and Waubank Securities, LLC, and include results for each of these entities in the accompanying Consolidated Financial Statements.

Companies in which we hold a controlling financial interest, or are a VIE in which we have the power to direct the activities of an entity that most significantly impact the entity’s economic performance and have an obligation to absorb losses or the right to receive benefits which could potentially be significant to the VIE, are consolidated. For a voting interest entity, a controlling financial interest is generally where we hold more than 50% of the outstanding voting shares. VIEs in which we do not hold the power to direct the activities of the entity that most significantly impact the entity’s economic performance or an obligation to absorb losses or the right to receive benefits which could potentially be significant to the VIE are not consolidated. Investments in companies that are not consolidated are accounted for using the equity method when we have the ability to exert significant influence or the cost method when we do not have the ability to exert significant influence. Investments in private investment partnerships that are accounted for under the equity method or the cost method are included in other assets and our proportional interest in the equity investments’ earnings are included in other non-interest income. Investment interests accounted for under the cost and equity methods are periodically evaluated for impairment.

The accompanying interim unaudited Consolidated Financial Statements include all adjustments that are necessary, in the opinion of management, to fairly reflect our financial position and results of operations in accordance with GAAP. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to the current period presentation. Such reclassifications had no impact on our net income and stockholders' equity. Events occurring subsequent to September 30, 2022 have been evaluated for potential recognition or disclosure in the Consolidated Financial Statements through the date of the filing of the Consolidated Financial Statements with the SEC.

Certain information and Note disclosures normally included in Consolidated Financial Statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The interim operating results are not necessarily indicative of operating results FNB expects for the full year. These interim unaudited Consolidated Financial

Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

Use of Estimates

Our accounting and reporting policies conform with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements (unaudited). Actual results could materially differ from those estimates. Material estimates that are particularly susceptible to significant changes include the ACL, fair value of financial instruments, goodwill and other intangible assets, income taxes and deferred tax assets and litigation reserves, which are listed in the critical accounting estimates. For a detailed description of our significant accounting policies and critical accounting estimates, see Note 1, "Summary of Significant Accounting Policies" and the "Application of Critical Accounting Policies" section in the MD&A, both in our 2021 Annual Report on Form 10-K.

NOTE 2. NEW ACCOUNTING STANDARDS

The following table summarizes accounting pronouncements issued by the FASB that we recently adopted or will be adopting in the future.

TABLE 2.1

Standard

Description

Financial Statements Impact

Troubled Debt Restructuring and Charge-offs

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

This Update eliminates the recognition and measurement guidance on TDRs for creditors that have adopted ASC 326 and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty.

This Update also requires public business entities to present current-period gross write-offs by year of origination in their vintage disclosures.

This Update is to be applied using a prospective method. For the transition method related to TDRs, an entity has the option to apply a modified retrospective transition method.

Early adoption of this Update is permitted. An entity is allowed to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.

We plan to adopt this Update on January 1, 2023. Adoption of this Update is not expected to have a material impact on our consolidated financial statements.

NOTE 3. MERGERS AND ACQUISITIONS

Howard Bancorp, Inc.

On January 22, 2022, we completed our acquisition of Howard, a bank holding company headquartered in Baltimore City, Maryland. The acquisition enhanced our presence in the Mid-Atlantic Region. Additionally, cost savings, efficiencies and other benefits were realized from the combined operations. On the acquisition date, Howard had assets with a net book value of approximately $2.4 billion, including $1.8 billion in both loans and deposits. The acquisition was valued at approximately $443 million and resulted in the issuance of 34,074,495 shares of our common stock in exchange for 18,930,329 shares of Howard common stock. We also acquired restricted stock units and the fully vested outstanding stock options of Howard.

The merger was accounted for in accordance with the acquisition method of accounting. Preliminary fair values for all assets and liabilities are presented below. Determining the fair value of assets and liabilities is a complex process involving significant judgment regarding estimates and assumptions used to calculate fair values. Accordingly, the initial accounting for the merger is not complete.

TABLE 3.1


(in millions)	Howard
Fair value of consideration paid	$	443
Fair value of identifiable assets acquired:
Cash and cash equivalents	75
Securities	321
Loans	1,780
Core deposit and other intangible assets	19
Fixed and other assets	160
Total identifiable assets acquired	2,355
Fair value of liabilities assumed:
Deposits	1,831
Borrowings	247
Other liabilities	7
Total liabilities assumed	2,085
Fair value of net identifiable assets acquired	270
Goodwill recognized	$	173

Goodwill related to the transaction was recorded in the Community Banking business segment and is not deductible for income tax purposes as the acquisition was accounted for as a tax-free exchange for tax purposes. We incurred merger expenses relating to the Howard acquisition of $30.6 million for the first nine months of 2022.

We analyzed the valuations assigned to the acquired assets and assumed liabilities. We have completed the review of valuations for loans, core deposit intangibles, deposits and debt. There were no changes to provisional amounts for these valuations. We continue to assess the valuation on premises and deferred taxes.

Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. We consider various factors in connection with the identification of more-than-insignificant deterioration in credit, including but not limited to nonperforming status, delinquency, risk ratings, TDR classification, Fair Isaac Corporation (FICO) scores and other qualitative factors that indicate deterioration in credit quality since origination. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment. As part of the Howard acquisition, we acquired PCD loans and leases of $186.9 million. We established an ACL at acquisition of $10.0 million with a corresponding gross-up to the amortized cost of the PCD loans and leases. The non-credit discount on the PCD loans and leases was $5.4 million and the Day 1 fair value was $171.5 million. The initial provision expense for non-PCD loans associated with the Howard acquisition was $19.1 million.

We integrated the systems and the operating activities of Howard into FNB in February 2022. Due to that integration, it is impracticable to disclose the revenue from the Howard assets acquired and income before income taxes subsequent to the acquisition.

Pending Acquisition – UB Bancorp

On May 31, 2022, FNB entered into a definitive merger agreement to acquire UB Bancorp, a bank holding company based in Greenville, North Carolina with approximately $1.2 billion in total assets. The transaction is valued at approximately $119 million. Under the terms of the merger agreement, UB Bancorp voting common shareholders will be entitled to receive 1.61 shares of FNB’s common stock for each share of UB Bancorp common stock. FNB expects to issue approximately 9.8 million shares of its common stock in exchange for approximately 6.0 million shares of UB Bancorp common stock. UB Bancorp’s banking affiliate, Union Bank, will be merged into FNBPA. The transaction is expected to be completed in late 2022. We have received all regulatory clearances and UB shareholder approval for the proposed merger to occur. During the first nine months of 2022, we incurred merger expenses of $2.2 million related to the pending UB Bancorp acquisition.

NOTE 4. SECURITIES

The amortized cost and fair value of AFS debt securities are presented in the table below. There was no ACL in the AFS portfolio at September 30, 2022 and December 31, 2021. Accrued interest receivable on AFS debt securities totaled $9.1 million and $7.3 million at September 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets. Accordingly, we have excluded accrued interest receivable from both the fair value and the amortized cost basis of AFS debt securities.

TABLE 4.1


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities AFS:
September 30, 2022
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:
Agency mortgage-backed securities	1,427		—		(147)		1,280
Agency collateralized mortgage obligations	1,158		—		(136)		1,022

Commercial mortgage-backed securities	442		—		(35)		407
States of the U.S. and political subdivisions (municipals)	33		—		(4)		29
Other debt securities	21		—		(1)		20
Total debt securities AFS	$	3,760	$	1	$	(369)	$	3,392


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities AFS:
December 31, 2021
U.S. Treasury	$	205	$	—	$	(1)	$	204
U.S. government agencies	154		1		—		155
U.S. government-sponsored entities	194		—		(2)		192
Residential mortgage-backed securities:
Agency mortgage-backed securities	1,342		19		(4)		1,357
Agency collateralized mortgage obligations	1,192		11		(17)		1,186

Commercial mortgage-backed securities	294		5		(2)		297
States of the U.S. and political subdivisions (municipals)	33		—		—		33
Other debt securities	2		—		—		2
Total debt securities AFS	$	3,416	$	36	$	(26)	$	3,426

The amortized cost and fair value of HTM debt securities are presented in the table below. The ACL for the HTM portfolio was $0.12 million and $0.05 million at September 30, 2022 and December 31, 2021, respectively. Accrued interest receivable on HTM debt securities totaled $11.9 million and $12.3 million at September 30, 2022 and December 31, 2021, respectively, and is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets. Accordingly, we have excluded accrued interest receivable from both the fair value and the amortized cost basis of HTM debt securities.

TABLE 4.2


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities HTM:
September 30, 2022

U.S. government agencies	$	1	$	—	$	—	$	1

Residential mortgage-backed securities:
Agency mortgage-backed securities	1,183		—		(143)		1,040
Agency collateralized mortgage obligations	992		—		(117)		875

Commercial mortgage-backed securities	668		—		(50)		618
States of the U.S. and political subdivisions (municipals)	971		—		(160)		811
Other debt securities	5		—		(1)		4
Total debt securities HTM	$	3,820	$	—	$	(471)	$	3,349


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities HTM:
December 31, 2021
U.S. Treasury	$	1	$	—	$	—	$	1
U.S. government agencies	1		—		—		1

Residential mortgage-backed securities:
Agency mortgage-backed securities	1,191		15		(5)		1,201
Agency collateralized mortgage obligations	930		5		(12)		923

Commercial mortgage-backed securities	323		3		(2)		324
States of the U.S. and political subdivisions (municipals)	1,017		39		—		1,056

Total debt securities HTM	$	3,463	$	62	$	(19)	$	3,506

There were no significant gross gains or gross losses realized on securities during the nine months ended September 30, 2022 or 2021. Unrealized losses on the AFS and HTM portfolios are due to the increase in market interest rates with 85.8% backed or sponsored by the U.S. government as of September 30, 2022.

As of September 30, 2022, the amortized cost and fair value of debt securities, by contractual maturities, were as follows:

TABLE 4.3


	Available for Sale				Held to Maturity
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	14	$	14	$	1	$	1
Due after one year but within five years	577		530		31		29
Due after five years but within ten years	96		94		152		136
Due after ten years	46		45		793		650
	733		683		977		816
Residential mortgage-backed securities:
Agency mortgage-backed securities	1,427		1,280		1,183		1,040
Agency collateralized mortgage obligations	1,158		1,022		992		875

Commercial mortgage-backed securities	442		407		668		618
Total debt securities	$	3,760	$	3,392	$	3,820	$	3,349

Actual maturities may differ from contractual terms because security issuers may have the right to call or prepay obligations with or without penalties. Periodic principal payments are received on residential mortgage-backed securities based on the payment patterns of the underlying collateral.

Following is information relating to securities pledged:

TABLE 4.4


(dollars in millions)	September 30, 2022			December 31, 2021
Securities pledged (carrying value):
To secure public deposits, trust deposits and for other purposes as required by law	$	6,534		$	5,660
As collateral for short-term borrowings	363			392
Securities pledged as a percent of total securities	95.6		%	87.9		%

Following are summaries of the fair values of AFS debt securities in an unrealized loss position for which an ACL has not been recorded, segregated by security type and length of time in a continuous loss position:

TABLE 4.5


	Less than 12 Months					12 Months or More					Total
(dollars in millions)	#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses
Debt Securities AFS
September 30, 2022
U.S. Treasury	5	$	212	$	(17)	1	$	44	$	(6)	6	$	256	$	(23)
U.S. government agencies	2	17		—		8	4		—		10	21		—
U.S. government-sponsored entities	11	195		(14)		3	66		(9)		14	261		(23)
Residential mortgage-backed securities:
Agency mortgage-backed securities	112	961		(94)		9	315		(53)		121	1,276		(147)
Agency collateralized mortgage obligations	59	658		(68)		14	364		(68)		73	1,022		(136)

Commercial mortgage-backed securities	18	345		(26)		3	62		(9)		21	407		(35)
States of the U.S. and political subdivisions (municipals)	9	20		(2)		5	9		(2)		14	29		(4)
Other debt securities	7	16		(1)		1	2		—		8	18		(1)
Total	223	$	2,424	$	(222)	44	$	866	$	(147)	267	$	3,290	$	(369)
	Less than 12 Months					12 Months or More					Total
(dollars in millions)	#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses
Debt Securities AFS
December 31, 2021
U.S. Treasury	3	$	151	$	(1)	—	$	—	$	—	3	$	151	$	(1)
U.S. government agencies	3	22		—		9	8		—		12	30		—
U.S. government-sponsored entities	3	99		(1)		1	24		(1)		4	123		(2)
Residential mortgage-backed securities:
Agency mortgage-backed securities	13	599		(4)		—	—		—		13	599		(4)
Agency collateralized mortgage obligations	23	659		(15)		3	68		(2)		26	727		(17)

Commercial mortgage-backed securities	5	125		(2)		—	—		—		5	125		(2)
States of the U.S. and political subdivisions (municipals)	10	24		—		—	—		—		10	24		—
Other debt securities	—	—		—		1	2		—		1	2		—
Total	60	$	1,679	$	(23)	14	$	102	$	(3)	74	$	1,781	$	(26)

We evaluated the AFS debt securities that were in an unrealized loss position at September 30, 2022. Based on the credit ratings and implied government guarantee for these securities, we concluded the loss position is temporary and caused by the

movement of interest rates and does not reflect any expected credit losses. We do not intend to sell the AFS debt securities and it is not more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis.

Credit Quality Indicators

We use credit ratings and the most recent financial information to help evaluate the credit quality of our credit-related AFS and HTM securities portfolios. Management reviews the credit profile of each issuer on an annual basis, and more frequently as needed. Based on the nature of the issuers and current conditions, we have determined that securities backed by the UST, Fannie Mae, Freddie Mac, FHLB, Ginnie Mae, and the SBA have zero expected credit loss.

Our municipal bond portfolio, with a carrying amount of $1.0 billion as of September 30, 2022 is highly rated with an average rating of AA and 100% of the portfolio having an A or better rating. All of the securities in the municipal portfolio are general obligation bonds. Geographically, municipal bonds support our primary footprint as 61% of the securities are from municipalities located in the primary states within which we conduct business. The average holding size of the securities in the municipal bond portfolio is $3.5 million. In addition to the strong stand-alone ratings, 61% of the municipal bonds have some formal credit enhancement (e.g., insurance) that strengthens the creditworthiness of the bond.

The ACL on the HTM municipal bond portfolio is calculated on each bond using:

•The bond’s underlying credit rating, time to maturity and exposure amount;

•Credit enhancements that improve the bond’s credit rating (e.g., insurance); and

•Moody’s U.S. Bond Defaults and Recoveries, 1970-2021 study.

By using these components, we derive the expected credit loss on the HTM general obligation municipal bond portfolio. We further refine the expected credit loss by factoring in economic forecast data using our Commercial and Industrial Non-Manufacturing loan portfolio forecast adjustment as derived through our assessment of the loan portfolio as a proxy for our municipal bond portfolio.

Our corporate bond portfolio, with a carrying amount of $25.6 million as of September 30, 2022 primarily consists of subordinated debentures of banks within our footprint. The average holding size of the securities in the corporate bond portfolio is $2.3 million.

The ACL on the HTM corporate bond portfolio is calculated using:

•The bond’s credit rating, time to maturity and exposure amount;

•Moody’s Annual Default Study, 02/08/2022; and

•Most recent financial statements.

By using these components, we derive the expected credit loss on the HTM corporate bond portfolio. We further refine the expected credit loss by factoring in economic forecast data using our bank-wide loan portfolio forecast adjustment as derived through our assessment of the Bank's loan portfolio as a proxy for our corporate bond portfolio.

For the year-to-date periods ending September 30, 2022 and 2021, we had no significant provision expense and no charge-offs or recoveries. The ACL on the HTM portfolio was $0.12 million, consisting of $0.06 million relating to the municipal bond portfolio and $0.06 million relating to other debt securities, as of September 30, 2022 and $0.05 million relating to the municipal bond portfolio as of December 31, 2021. The AFS securities portfolios did not have an ACL at September 30, 2022 or December 31, 2021. At September 30, 2022 and December 31, 2021, there were no securities that were past due or on non-accrual.

NOTE 5. LOANS AND LEASES

Accrued interest receivable on loans and leases, which totaled $75.5 million at September 30, 2022 and $48.9 million at December 31, 2021, is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets for both periods and not included in the following tables.

Loans and Leases by Portfolio Segment

Following is a summary of total loans and leases, net of unearned income:

TABLE 5.1



(in millions)	September 30, 2022		December 31, 2021
Commercial real estate	$	10,841	$	9,899
Commercial and industrial	6,709		5,977
Commercial leases	503		495
Other	127		94
Total commercial loans and leases	18,180		16,465
Direct installment	2,797		2,376
Residential mortgages	4,959		3,654
Indirect installment	1,529		1,227
Consumer lines of credit	1,315		1,246
Total consumer loans	10,600		8,503
Total loans and leases, net of unearned income	$	28,780	$	24,968

The remaining accretable discount included in the amortized cost of acquired loans was $30.7 million and $30.0 million at September 30, 2022 and December 31, 2021, respectively, which includes the $10 million established for Howard at the time of acquisition.

The loans and leases portfolio categories are comprised of the following types of loans, where in each case the LGD is dependent on the nature and value of the respective collateral:

•Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties where operational cash flows on owner-occupied properties or rents received by our borrowers from their tenant(s) on both a property and global basis are the primary default risk drivers, including rents paid by stand-alone business customers for owner-occupied properties;

•Commercial and industrial includes loans to businesses that are not secured by real estate where the borrower's leverage and cash flows from operations are the primary default risk drivers, except for PPP loans that are 100% guaranteed by the SBA, which provides a reduced risk of loss to us on these loans. PPP loans are included in the commercial and industrial category and comprise $43.7 million and $336.6 million of this category's outstanding balance at September 30, 2022 and December 31, 2021, respectively;

•Commercial leases consist of leases for new or used equipment where the borrower's cash flow from operations is the primary default risk driver;

•Other is comprised primarily of credit cards and mezzanine loans where the borrower's cash flow from operations is the primary default risk driver;

•Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans where the primary default risk driver is the borrower's employment status and income;

•Residential mortgages consist of conventional and jumbo mortgage loans for 1-4 family properties where the primary default risk driver is the borrower's employment status and income;

•Indirect installment is comprised of loans originated by approved third parties and underwritten by us, primarily automobile loans where the primary default risk driver is the borrower's employment status and income; and

•Consumer lines of credit include home equity lines of credit and consumer lines of credit that are either unsecured or secured by collateral other than home equity where the primary default risk driver is the borrower's employment status and income.

The loans and leases portfolio consists principally of loans to individuals and small- and medium-sized businesses within our primary market in seven states and the District of Columbia. Our primary market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina.

The following table shows occupancy information relating to commercial real estate loans:

TABLE 5.2


(dollars in millions)	September 30, 2022		December 31, 2021
Commercial real estate:
Percent owner-occupied	29.9	%	28.8	%
Percent non-owner-occupied	70.1		71.2

Credit Quality

We monitor the credit quality of our loan portfolio using several performance measures based on payment activity and borrower performance. We use an internal risk rating assigned to a commercial loan or lease at origination, summarized below.

TABLE 5.3


Rating Category			Definition
Pass			in general, the condition of the borrower and the performance of the loan is satisfactory or better

Special Mention			in general, the condition of the borrower has deteriorated, requiring an increased level of monitoring

Substandard			in general, the condition of the borrower has significantly deteriorated and the performance of the loan could further deteriorate if deficiencies are not corrected

Doubtful			in general, the condition of the borrower has significantly deteriorated and the collection in full of both principal and interest is highly questionable or improbable

The use of these internally assigned credit quality categories within the commercial loan and lease portfolio permits our use of transition matrices to establish a basis which is then impacted by quantitative inputs from our econometric model forecasts over the R&S period. Our internal credit risk grading system is based on past experiences with similarly graded loans and leases and conforms to regulatory categories. In general, loan and lease risk ratings within each category are reviewed on an ongoing basis according to our policy for each class of loans and leases. Each quarter, we analyze the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan and lease portfolio. Loans and leases within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans and leases that migrate toward the Substandard or Doubtful credit categories. Accordingly, we apply higher risk factors to Substandard and Doubtful credit categories.

The following tables summarize the designated loan rating category by loan class including term loans on an amortized cost basis by origination year:

TABLE 5.4


September 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
(in millions)
COMMERCIAL
Commercial Real Estate:
Risk Rating:
Pass	$	1,400	$	2,166	$	1,628	$	1,335	$	713	$	2,489	$	253	$	9,984
Special Mention	35		34		61		75		130		232		6		573
Substandard	4		16		12		36		29		167		20		284

Total commercial real estate	1,439		2,216		1,701		1,446		872		2,888		279		10,841
Commercial and Industrial:
Risk Rating:
Pass	1,270		1,232		714		530		346		439		1,810		6,341
Special Mention	3		8		20		49		17		37		57		191
Substandard	4		14		6		8		39		55		51		177

Total commercial and industrial	1,277		1,254		740		587		402		531		1,918		6,709
Commercial Leases:
Risk Rating:
Pass	111		153		76		73		41		33		—		487
Special Mention	2		1		—		—		1		—		—		4
Substandard	4		1		7		—		—		—		—		12

Total commercial leases	117		155		83		73		42		33		—		503
Other Commercial:
Risk Rating:
Pass	59		—		—		—		—		13		55		127



Total other commercial	59		—		—		—		—		13		55		127
Total commercial loans and leases	2,892		3,625		2,524		2,106		1,316		3,465		2,252		18,180

CONSUMER
Direct Installment:
Current	731		917		473		171		95		397		—		2,784
Past due	—		—		1		1		1		10		—		13
Total direct installment	731		917		474		172		96		407		—		2,797
Residential Mortgages:
Current	1,101		1,560		886		389		133		848		—		4,917
Past due	—		3		3		2		3		31		—		42
Total residential mortgages	1,101		1,563		889		391		136		879		—		4,959
Indirect Installment:
Current	683		394		186		102		100		49		—		1,514
Past due	2		7		2		2		1		1		—		15
Total indirect installment	685		401		188		104		101		50		—		1,529
Consumer Lines of Credit:
Current	63		18		2		3		4		132		1,078		1,300
Past due	—		—		—		—		1		12		2		15
Total consumer lines of credit	63		18		2		3		5		144		1,080		1,315
Total consumer loans	2,580		2,899		1,553		670		338		1,480		1,080		10,600
Total loans and leases	$	5,472	$	6,524	$	4,077	$	2,776	$	1,654	$	4,945	$	3,332	$	28,780


December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
(in millions)
COMMERCIAL
Commercial Real Estate:
Risk Rating:
Pass	$	1,878	$	1,782	$	1,503	$	830	$	743	$	2,171	$	183	$	9,090
Special Mention	15		21		89		105		107		175		9		521
Substandard	—		15		28		45		45		152		3		288

Total commercial real estate	1,893		1,818		1,620		980		895		2,498		195		9,899
Commercial and Industrial:
Risk Rating:
Pass	1,663		833		731		386		184		296		1,509		5,602
Special Mention	8		12		18		7		37		42		52		176
Substandard	1		4		14		57		42		17		64		199

Total commercial and industrial	1,672		849		763		450		263		355		1,625		5,977
Commercial Leases:
Risk Rating:
Pass	182		109		98		53		39		1		—		482
Special Mention	—		1		—		2		3		1		—		7
Substandard	—		2		3		1		—		—		—		6

Total commercial leases	182		112		101		56		42		2		—		495
Other Commercial:
Risk Rating:
Pass	39		—		—		—		—		3		52		94



Total other commercial	39		—		—		—		—		3		52		94
Total commercial loans and leases	3,786		2,779		2,484		1,486		1,200		2,858		1,872		16,465

CONSUMER
Direct Installment:
Current	978		538		215		125		96		412		—		2,364
Past due	—		—		1		1		—		10		—		12
Total direct installment	978		538		216		126		96		422		—		2,376
Residential Mortgages:
Current	1,280		932		392		152		212		652		—		3,620
Past due	1		1		1		3		3		25		—		34
Total residential mortgages	1,281		933		393		155		215		677		—		3,654
Indirect Installment:
Current	516		262		157		178		64		35		—		1,212
Past due	6		3		2		2		1		1		—		15
Total indirect installment	522		265		159		180		65		36		—		1,227
Consumer Lines of Credit:
Current	20		3		4		5		3		127		1,072		1,234
Past due	—		—		—		—		—		10		2		12
Total consumer lines of credit	20		3		4		5		3		137		1,074		1,246
Total consumer loans	2,801		1,739		772		466		379		1,272		1,074		8,503
Total loans and leases	$	6,587	$	4,518	$	3,256	$	1,952	$	1,579	$	4,130	$	2,946	$	24,968

We use delinquency transition matrices within the consumer and other loan classes to establish the basis for the R&S forecast portion of the credit risk. Each month, management analyzes payment and volume activity, FICO scores and Debt-to-Income (DTI) scores and other external factors such as unemployment, to determine how consumer loans are performing.

Non-Performing and Past Due

The following tables provide an analysis of the aging of loans by class.

TABLE 5.5


(in millions)	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due		Current		Total Loans and Leases		Non-accrual with No ACL
September 30, 2022
Commercial real estate	$	11	$	—	$	46	$	57	$	10,784	$	10,841	$	25
Commercial and industrial	14		—		11		25		6,684		6,709		1
Commercial leases	1		—		1		2		501		503		—
Other	—		—		1		1		126		127		—
Total commercial loans and leases	26		—		59		85		18,095		18,180		26
Direct installment	5		1		7		13		2,784		2,797		—
Residential mortgages	22		6		14		42		4,917		4,959		—
Indirect installment	12		1		2		15		1,514		1,529		—
Consumer lines of credit	8		1		6		15		1,300		1,315		—
Total consumer loans	47		9		29		85		10,515		10,600		—
Total loans and leases	$	73	$	9	$	88	$	170	$	28,610	$	28,780	$	26


(in millions)	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due		Current		Total Loans and Leases		Non-accrual with No ACL
December 31, 2021
Commercial real estate	$	11	$	—	$	48	$	59	$	9,840	$	9,899	$	20
Commercial and industrial	4		—		15		19		5,958		5,977		4
Commercial leases	1		—		1		2		493		495		—
Other	—		—		—		—		94		94		—
Total commercial loans and leases	16		—		64		80		16,385		16,465		24
Direct installment	5		—		7		12		2,364		2,376		—
Residential mortgages	20		4		10		34		3,620		3,654		—
Indirect installment	12		1		2		15		1,212		1,227		—
Consumer lines of credit	6		1		5		12		1,234		1,246		—
Total consumer loans	43		6		24		73		8,430		8,503		—
Total loans and leases	$	59	$	6	$	88	$	153	$	24,815	$	24,968	$	24

Following is a summary of non-performing assets:

TABLE 5.6


(dollars in millions)	September 30, 2022			December 31, 2021
Non-accrual loans	$	88		$	88
Total non-performing loans and leases	88			88
Other real estate owned	6			8
Total non-performing assets	$	94		$	96
Asset quality ratios:
Non-performing loans and leases / total loans and leases	0.30		%	0.35		%
Non-performing assets + 90 days past due / total loans and leases + OREO	0.36			0.41

The carrying value of residential-secured consumer OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure amounted to $1.0 million at September 30, 2022 and $1.6 million at December 31, 2021. The recorded investment of residential-secured consumer OREO for which formal foreclosure proceedings are in process at September 30, 2022 and December 31, 2021 totaled $10.9 million and $4.3 million, respectively. During 2020 and 2021, we extended the residential mortgage foreclosure moratorium beyond the requirements for government-backed loans under the CARES Act to all residential mortgage loan customers.

Approximately $46.0 million of commercial loans are collateral dependent at September 30, 2022. Repayment is expected to be substantially through the operation or sale of the collateral on the loan. These loans are primarily secured by business assets or commercial real estate.

Troubled Debt Restructurings

TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.

Following is a summary of the composition of total TDRs:

TABLE 5.7


(in millions)	September 30, 2022		December 31, 2021
Accruing	$	63	$	60
Non-accrual	30		32
Total TDRs	$	93	$	92

TDRs that are accruing and performing include loans that met the criteria for non-accrual of interest prior to restructuring for which we can reasonably estimate the timing and amount of the expected cash flows on such loans and for which we expect to fully collect the new carrying value of the loans. During the nine months ended September 30, 2022, we returned to accruing status $6.1 million in restructured residential mortgage loans that have consistently met their modified obligations for more than six months. TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate collectability of the remaining principal and interest is reasonably assured. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in potential incremental losses which are factored into the ACL.

Commercial loans over $1.0 million whose terms have been modified in a TDR are generally placed on non-accrual, individually analyzed and measured based on the fair value of the underlying collateral. Our ACL includes specific reserves for commercial TDRs. There was no specific reserve for commercial TDRs at September 30, 2022, compared to $1.5 million at December 31, 2021, and pooled reserves for individual loans of $1.1 million and $1.5 million for those same periods, respectively, based on loan segment LGD. Upon default, the amount of the recorded investment in the TDR in excess of the

fair value of the collateral, less estimated selling costs, is generally considered a confirmed loss and is charged-off against the ACL.

All other classes of loans whose terms have been modified in a TDR are pooled and measured based on the loan segment LGD. Our ACL included pooled reserves for these classes of loans of $3.8 million for September 30, 2022 and $3.9 million for December 31, 2021. Upon default of an individual loan, our charge-off policy is followed for that class of loan.

Following is a summary of TDR loans, by class, for loans that were modified during the periods indicated:

TABLE 5.8


	Three Months Ended September 30, 2022					Nine Months Ended September 30, 2022
(dollars in millions)	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate	2	$	—	$	—	14	$	5	$	4
Commercial and industrial	3	—		—		10	1		1

Total commercial loans	5	—		—		24	6		5
Direct installment	8	1		1		33	1		1
Residential mortgages	14	2		2		34	5		5

Consumer lines of credit	6	—		—		12	1		1
Total consumer loans	28	3		3		79	7		7
Total	33	$	3	$	3	103	$	13	$	12


	Three Months Ended September 30, 2021					Nine Months Ended September 30, 2021
(dollars in millions)	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate	5	$	2	$	2	21	$	20	$	20
Commercial and industrial	3	—		—		8	1		—
Other	1	—		—		1	—		—
Total commercial loans	9	2		2		30	21		20
Direct installment	8	—		—		26	1		1
Residential mortgages	12	2		2		15	2		2

Consumer lines of credit	7	—		—		31	2		2
Total consumer loans	27	2		2		72	5		5
Total	36	$	4	$	4	102	$	26	$	25

The year-to-date items in the above tables have been adjusted for loans that have been paid off and/or sold.

Following is a summary of TDRs, by class, for which there was a payment default, excluding loans that have been paid off and/or sold. Default occurs when a loan is 90 days or more past due and is within 12 months of restructuring.

TABLE 5.9


	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
(dollars in millions)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial real estate	7	$	3	10	$	3
Commercial and industrial	1	—		1	—
Total commercial loans	8	3		11	3
Direct installment	3	—		5	—
Residential mortgages	5	1		8	1


Total consumer loans	8	1		13	1
Total	16	$	4	24	$	4


	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
(dollars in millions)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment

Commercial and industrial	—	$	—	1	$	—
Total commercial loans	—	—		1	—
Direct installment	1	—		1	—
Residential mortgages	—	—		1	—


Total consumer loans	1	—		2	—
Total	1	$	—	3	$	—

NOTE 6. ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

The ACL is maintained for credit losses expected in the existing loan and lease portfolio and is presented as a reserve against loans and leases on the Consolidated Balance Sheets. Loan and lease losses are charged off against the ACL, with recoveries of amounts previously charged off credited to the ACL. Provisions for credit losses are charged to operations based on management’s periodic evaluation of the appropriate level of the ACL.

Following is a summary of changes in the ACL, by loan and lease class:

TABLE 6.1


(in millions)	Balance at Beginning of Period		Charge- Offs		Recoveries		Net (Charge- Offs) Recoveries		Provision for Credit Losses		Balance at End of Period
Three Months Ended September 30, 2022
Commercial real estate	$	157.9	$	(1.3)	$	0.5	$	(0.8)	$	(1.8)	$	155.3
Commercial and industrial	94.3		(0.8)		0.9		0.1		1.8		96.2
Commercial leases	13.7		—		—		—		0.5		14.2
Other	4.2		(0.9)		0.3		(0.6)		0.6		4.2
Total commercial loans and leases	270.1		(3.0)		1.7		(1.3)		1.1		269.9
Direct installment	34.2		(0.2)		0.1		(0.1)		2.0		36.1
Residential mortgages	47.2		(0.3)		0.2		(0.1)		4.3		51.4
Indirect installment	16.0		(1.9)		0.6		(1.3)		2.4		17.1
Consumer lines of credit	10.5		(0.3)		0.3		—		0.3		10.8
Total consumer loans	107.9		(2.7)		1.2		(1.5)		9.0		115.4
Total allowance for credit losses on loans and leases	378.0		(5.7)		2.9		(2.8)		10.1		385.3
Allowance for unfunded loan commitments	18.2		—		—		—		1.1		19.3
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments	$	396.2	$	(5.7)	$	2.9	$	(2.8)	$	11.2	$	404.6


(in millions)	Balance at Beginning of Period		Charge- Offs		Recoveries		Net (Charge- Offs) Recoveries		Provision for Credit Losses		Allowance for PCD Loans and Leases at Acquisition		Balance at End of Period















Nine Months Ended September 30, 2022
Commercial real estate	$	156.5	$	(2.9)	$	2.6	$	(0.3)	$	(5.3)	$	4.4	$	155.3
Commercial and industrial	87.4		(5.1)		4.9		(0.2)		5.6		3.4		96.2
Commercial leases	14.7		(0.1)		—		(0.1)		(0.4)		—		14.2
Other	2.6		(2.3)		0.8		(1.5)		3.1		—		4.2
Total commercial loans and leases	261.2		(10.4)		8.3		(2.1)		3.0		7.8		269.9
Direct installment	26.4		(0.4)		0.5		0.1		9.1		0.5		36.1
Residential mortgages	33.1		(0.6)		0.5		(0.1)		17.1		1.3		51.4
Indirect installment	13.5		(4.1)		1.7		(2.4)		6.0		—		17.1
Consumer lines of credit	10.1		(0.7)		0.9		0.2		0.1		0.4		10.8
Total consumer loans	83.1		(5.8)		3.6		(2.2)		32.3		2.2		115.4
Total allowance for credit losses on loans and leases	344.3		(16.2)		11.9		(4.3)		35.3		10.0		385.3
Allowance for unfunded loan commitments	19.1		—		—		—		0.2		—		19.3
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments	$	363.4	$	(16.2)	$	11.9	$	(4.3)	$	35.5	$	10.0	$	404.6


(in millions)	Balance at Beginning of Period		Charge- Offs		Recoveries		Net Charge- Offs		Provision for Credit Losses		Balance at End of Period
Three Months Ended September 30, 2021
Commercial real estate	$	176	$	(3)	$	2	$	(1)	$	(14)	$	161
Commercial and industrial	81		(2)		2		—		6		87
Commercial leases	16		—		—		—		—		16
Other	1		—		—		—		1		2
Total commercial loans and leases	274		(5)		4		(1)		(7)		266
Direct installment	27		(1)		—		(1)		—		26
Residential mortgages	33		—		—		—		—		33
Indirect installment	12		—		—		—		1		13
Consumer lines of credit	11		(1)		1		—		—		11
Total consumer loans	83		(2)		1		(1)		1		83
Total allowance for credit losses on loans and leases	357		(7)		5		(2)		(6)		349
Allowance for unfunded loan commitments	14		—		—		—		4		18
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments	$	371	$	(7)	$	5	$	(2)	$	(2)	$	367
Nine Months Ended September 30, 2021
Commercial real estate	$	181	$	(9)	$	5	$	(4)	$	(16)	$	161
Commercial and industrial	81		(11)		4		(7)		13		87
Commercial leases	17		—		1		1		(2)		16
Other	1		(2)		1		(1)		2		2
Total commercial loans and leases	280		(22)		11		(11)		(3)		266
Direct installment	26		(1)		—		(1)		1		26
Residential mortgages	34		—		—		—		(1)		33
Indirect installment	11		(3)		2		(1)		3		13
Consumer lines of credit	12		(1)		1		—		(1)		11
Total consumer loans	83		(5)		3		(2)		2		83
Total allowance for credit losses on loans and leases	363		(27)		14		(13)		(1)		349
Allowance for unfunded loan commitments	14		—		—		—		4		18
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments	$	377	$	(27)	$	14	$	(13)	$	3	$	367

Following is a summary of changes in the AULC by portfolio segment:

TABLE 6.2


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
(in millions)
Balance at beginning of period	$	18	$	14	$	19	$	14
Provision for unfunded loan commitments and letters of credit:
Commercial portfolio	1		4		—		4
Consumer portfolio	—		—		—		—






Balance at end of period	$	19	$	18	$	19	$	18

The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation:

•a third-party macroeconomic forecast scenario;

•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and

•the historical through-the-cycle mean was calculated using an expanded period to include a prior recessionary period.

At September 30, 2022 and December 31, 2021, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at September 30, 2022, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 2.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 4.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 5.5% in 2022 and 2.4% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2021 included, but were not limited to: (i) the purchase only Housing Price Index, which reflected growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflected growth of 13.0% over our R&S forecast period, (iii) S&P Volatility, which increases 15.2% in 2022 and 1.9% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels.

The ACL on loans and leases of $385.3 million at September 30, 2022 increased $41.1 million, or 11.9%, from December 31, 2021 primarily due to the Howard acquisition and the associated ACL attributable to the acquired loans and leases, significant loan growth and CECL-related model impacts from a forecasted macroeconomic slowdown and lower prepayment speed assumptions in the third quarter of 2022, partially offset by positive credit quality performance. Our ending ACL coverage ratio at September 30, 2022 was 1.34%, compared to 1.38% at December 31, 2021. Total provision for credit losses for the three months ended September 30, 2022 was $11.2 million. Net charge-offs were $2.8 million during the three months ended September 30, 2022, compared to net charge-offs of $1.6 million during the three months ended September 30, 2021, reflecting continued strong underlying portfolio credit performance. Total provision for credit losses for the nine months ended September 30, 2022 was $35.5 million and included $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition. Net charge-offs were $4.3 million during the nine months ended September 30, 2022, compared to $12.5 million during the nine months ended September 30, 2021.

NOTE 7. LOAN SERVICING

Mortgage Loan Servicing

We retain the servicing rights on certain mortgage loans sold. The unpaid principal balance of mortgage loans serviced for others is listed below:

TABLE 7.1


(in millions)	September 30, 2022		December 31, 2021
Mortgage loans sold with servicing retained	$	5,160	$	4,855

The following table summarizes activity relating to mortgage loans sold with servicing retained:

TABLE 7.2


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2021		2022		2021
Mortgage loans sold with servicing retained	$	204	$	382	$	870	$	1,406
Pre-tax net (losses) gains resulting from above loan sales (1)	(2)		10		(9)		36
Mortgage servicing fees (1)	3		3		9		9

(1) Recorded in mortgage banking operations on the Consolidated Statements of Income.

Following is a summary of activity relating to MSRs:

TABLE 7.3


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2021		2022		2021
Balance at beginning of period	$	50.7	$	40.5	$	44.4	$	35.6

Additions	2.4		4.4		10.5		15.3
Payoffs and curtailments	(0.8)		(2.8)		(3.8)		(10.4)
(Impairment charge) / recovery	—		1.0		2.5		3.8
Amortization	(0.6)		(0.6)		(1.9)		(1.8)
Balance at end of period	$	51.7	$	42.5	$	51.7	$	42.5
Fair value, beginning of period	$	64.1	$	40.8	$	46.0	$	35.6
Fair value, end of period	69.6		43.2		69.6		43.2

We had no valuation allowance for MSRs as of September 30, 2022, compared to $2.5 million at December 31, 2021.

The fair value of MSRs is highly sensitive to changes in assumptions and is determined by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and the use of independent third-party valuations. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSRs. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of MSRs and as interest rates increase, mortgage loan prepayments decline, which results in an increase in the fair value of MSRs. Measurement of fair value is limited to the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different time.

Following is a summary of the sensitivity of the fair value of MSRs to changes in key assumptions:

TABLE 7.4


(dollars in millions)	September 30, 2022			December 31, 2021
Weighted average life (months)	96.8			76.6
Constant prepayment rate (annualized)	7.1		%	11.2		%
Discount rate	9.5		%	9.5		%
Effect on fair value due to change in interest rates:
+2.00%	$	8		$	15
+1.00%	4			9
+0.50%	2			5
+0.25%	1			3
-0.25%	(1)			(3)
-0.50%	(2)			(7)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the changes in assumptions to fair value may not be linear. Also, in this table, the effects of an adverse variation in a particular assumption on the fair value of MSRs is calculated without changing any other assumptions, while, in reality, changes in one factor may result in changing another, which may magnify or contract the effect of the change.

NOTE 8. LEASES

We have operating leases primarily for certain branches, office space, land and office equipment. We have finance leases for certain branches. Our operating leases expire at various dates through the year 2046 and generally include one or more options to renew. Our finance leases expire at various dates through the year 2051 and generally include one or more options to renew. The exercise of lease renewal options is at our sole discretion. As of September 30, 2022, we had operating lease right-of-use assets and operating lease liabilities of $134.2 million and $144.5 million, respectively. We have finance lease right-of-use assets and finance lease liabilities of $22.5 million and $22.9 million, respectively.

Our operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of September 30, 2022, we have certain operating lease agreements, primarily for administrative office space, that have not yet commenced. At commencement, it is expected that these leases will add approximately $69.2 million in right-of-use assets and $90.6 million in other liabilities. These operating leases are currently expected to commence in 2023 with lease terms of up to 16 years. These operating leases include the lease, with a related party, of the future new FNB headquarters building in Pittsburgh, Pennsylvania. The related party operating lease is accounted for in a manner consistent with all other leases on the basis of the legally enforceable terms and conditions of the lease and the related party represents a VIE for which we are not the primary beneficiary.

The components of lease expense were as follows:

TABLE 8.1


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions)	2022		2021		2022		2021
Operating lease cost	$	8	$	7	$	24	$	21

Variable lease cost	1		1		3		3


Total lease cost	$	9	$	8	$	27	$	24

Other information related to leases is as follows:

TABLE 8.2


	Nine Months Ended September 30,
(dollars in millions)	2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7		$	7
Operating cash flows from finance leases	$	—		$	—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—		$	7
Finance leases	$	—		$	—
Weighted average remaining lease term (years):
Operating leases	9.51			9.05
Finance leases	21.23			24.13
Weighted average discount rate:
Operating leases	2.4		%	2.5		%
Finance leases	2.6		%	1.9		%

Maturities of lease liabilities were as follows:

TABLE 8.3


(in millions)	Operating Leases		Finance Leases		Total Leases
September 30, 2022
2022	$	7	$	—	$	7
2023	25		1		26
2024	23		1		24
2025	16		1		17
2026	14		2		16
Later years	79		25		104
Total lease payments	164		30		194
Less: imputed interest	(19)		(7)		(26)
Present value of lease liabilities	$	145	$	23	$	168

As a lessor we offer commercial leasing services to customers in need of new or used equipment primarily within our market areas of Pennsylvania, Ohio, Maryland, North Carolina, South Carolina and West Virginia. Additional information relating to commercial leasing is provided in Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements.

NOTE 9. VARIABLE INTEREST ENTITIES

We evaluate our interest in certain entities to determine if these entities meet the definition of a VIE and whether we are the primary beneficiary and required to consolidate the entity based on the variable interest we held both at inception and when there is a change in circumstances that requires a reconsideration.

Unconsolidated VIEs

The following table provides a summary of the assets and liabilities included in our Consolidated Financial Statements, as well as the maximum exposure to losses, associated with our interests related to VIEs for which we hold an interest, but are not the primary beneficiary, at September 30, 2022 and December 31, 2021.

TABLE 9.1


(in millions)	Total Assets		Total Liabilities		Maximum Exposure to Loss
September 30, 2022
Trust preferred securities (1)	$	1	$	72	$	—
Affordable housing tax credit partnerships	121		35		121
Other investments	29		5		29
Total	$	151	$	112	$	150
December 31, 2021
Trust preferred securities (1)	$	1	$	67	$	—
Affordable housing tax credit partnerships	121		34		121
Other investments	28		6		28
Total	$	150	$	107	$	149
(1) Represents our investment in unconsolidated subsidiaries.

Trust-Preferred Securities

We have certain wholly-owned trusts whose assets, liabilities, equity, income and expenses are not included within our Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing TPS, from which the proceeds are then invested in our junior subordinated debentures, which are reflected in our Consolidated Balance Sheets as subordinated notes. The TPS are the obligations of the trusts, and as such, are not consolidated within our Consolidated Financial Statements. For additional information relating to our TPS, see Note 10, “Borrowings” in the Notes to Consolidated Financial Statements.

Each issue of the junior subordinated debentures has an interest rate equal to the corresponding TPS distribution rate. We have the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the TPS will also be deferred and our ability to pay dividends on our common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to TPS are guaranteed by us to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all of our indebtedness to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by us.

Affordable Housing Tax Credit Partnerships

We make equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the LIHTC pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to support initiatives associated with the Community Reinvestment Act while earning a satisfactory return. The activities of these LIHTC partnerships include the development and operation of multi-family housing that is leased to qualifying residential tenants. These partnerships are generally located in communities where we have a banking presence and meet the definition of a VIE; however, we are not the primary beneficiary of the entities, as the general partner or managing member has both the power to direct the activities that most significantly impact the economic performance of the entities and the obligation to absorb losses beyond our own equity investment. We record our investment in LIHTC partnerships as a component of other assets and use the proportional amortization method to account for our investments in LIHTC partnerships. Amortization related to our LIHTC investments is recorded on a net basis as a component of the provision for income taxes on the Consolidated Statements of Income.

The following table presents the balances of our affordable housing tax credit investments and related unfunded commitments:

TABLE 9.2


(in millions)	September 30, 2022		December 31, 2021
LIHTC investments included in other assets	$	86	$	87
Unfunded LIHTC commitments	35		34

The following table summarizes the impact of these LIHTC investments on the provision for income taxes in our Consolidated Statements of Income:

TABLE 9.3


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2021		2022		2021
Provision for income taxes:
Amortization of LIHTC investments under proportional method	$	4	$	3	$	11	$	10
Low-income housing tax credits	(3)		(4)		(11)		(11)
Other tax benefits related to tax credit investments	(1)		—		(2)		(2)
Total impact on provision for income taxes	$	—	$	(1)	$	(2)	$	(3)

Other Investments

Other investments we also consider to be unconsolidated VIE’s include investments in Small Business Investment Companies, Historic Tax Credit investments, and other equity method investments.

NOTE 10. BORROWINGS

Following is a summary of short-term borrowings:

TABLE 10.1


(in millions)	September 30, 2022		December 31, 2021
Securities sold under repurchase agreements	$	333	$	376
Federal Home Loan Bank advances	930		1,030

Subordinated notes	132		130
Total short-term borrowings	$	1,395	$	1,536

Borrowings with original maturities of one year or less are classified as short-term. Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are sweep accounts with next-day maturities utilized by larger commercial customers to earn interest on their funds. Securities are pledged to these customers in an amount at least equal to the outstanding balance. We did not have any short-term FHLB advances with overnight maturities as of September 30, 2022 or December 31, 2021. At September 30, 2022, $930.0 million, or 100.0%, of the short-term FHLB advances were swapped to fixed rates with various maturities through 2024. This compares to $1.0 billion, or 100.0%, as of December 31, 2021.

Following is a summary of long-term borrowings:

TABLE 10.2


(in millions)	September 30, 2022		December 31, 2021

Senior notes	$	647	$	299
Subordinated notes	66		68
Junior subordinated debt	72		67
Other subordinated debt	274		248
Total long-term borrowings	$	1,059	$	682

We assumed $25 million of other subordinated debt and $5 million of junior subordinated debt from the Howard acquisition. Those additions are reflected in the balances above and in the tables below.

During the third quarter of 2022, we completed a debt offering in which we issued $350 million aggregate principal amount of 5.150% fixed-rate senior notes due in 2025. The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering costs were $347.4 million. These proceeds were used for general corporate purposes, which may include repayment of the $300 million in 2.200% Senior Notes due February 2023, investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness.

Our banking affiliate has available credit with the FHLB of $9.4 billion, of which $0.9 billion was utilized and included in short-term borrowings as of September 30, 2022. The short-term FHLB borrowings are secured by loans collateralized by residential mortgages, home equity lines of credit, commercial real estate and FHLB stock and are scheduled to mature in various amounts periodically during 2022. There were no long-term FHLB borrowings as of September 30, 2022 or December 31, 2021. Effective interest rates paid on the long-term FHLB borrowings held during 2021 ranged from 0.26% to 0.29% for the year ended December 31, 2021.

The following table provides information relating to our senior notes and other subordinated debt as of September 30, 2022. The subordinated notes are eligible for treatment as tier 2 capital for regulatory capital purposes.

TABLE 10.3


(dollars in millions)	Aggregate Principal Amount Issued		Net Proceeds (4)		Carrying Value		Stated Maturity Date	Interest Rate
2.200% Senior Notes due February 24, 2023	$	300	$	298	$	300	2/24/2023	2.200	%
5.150% Senior Notes due August 25, 2025	350		347		347		8/25/2025	5.150	%
4.950% Fixed-To-Floating Rate Subordinated Notes due 2029 (1)	120		118		119		2/14/2029	4.950	%
4.875% Subordinated Notes due 2025	100		98		99		10/2/2025	4.875	%
7.625% Subordinated Notes due August 12, 2023 (3)	38		46		30		8/12/2023	7.625	%
6.00% Fixed-To-Floating Rate Subordinated Notes due December 6, 2028 (2) (3)	25		26		26		12/6/2028	6.00	%
Total	$	933	$	933	$	921

(1) Fixed-to-floating rate until February 14, 2024, at which time the floating rate will be three-month LIBOR plus 240 basis points (bps), or an alternative rate that may replace LIBOR, as specified in the prospectus for this offering.

(2) Fixed-to-floating rate until December 6, 2023, at which time the floating rate will be three-month LIBOR plus 302 bps, or an alternative rate that may replace LIBOR, as specified in the prospectus for this offering.

(3) Assumed from an acquisition and adjusted to fair value at the time of acquisition.

(4) After deducting underwriting discounts and commissions and offering costs. For the debt assumed from acquisitions, this is the fair value of the debt at the time of the acquisition.

The junior subordinated debt is comprised of the debt securities issued by FNB, or companies we acquired, in relation to our unconsolidated subsidiary trusts (collectively, the Trusts), which are unconsolidated VIEs, and are included on the Consolidated Balance Sheets in long-term borrowings. Since third-party investors are the primary beneficiaries, the Trusts are not consolidated in our Financial Statements. We record the distributions on the junior subordinated debt issued to the Trusts as interest expense.

The following table provides information relating to the Trusts as of September 30, 2022:

TABLE 10.4


(dollars in millions)	Trust Preferred Securities		Common Securities		Junior Subordinated Debt		Stated Maturity Date	Interest Rate		Rate Reset Factor
F.N.B. Statutory Trust II	$	22	$	1	$	22	6/15/2036	4.94	%	LIBOR + 165 bps

Yadkin Valley Statutory Trust I	25		1		22		12/15/2037	4.61	%	LIBOR + 132 bps
FNB Financial Services Capital Trust I	25		1		23		9/30/2035	5.13	%	LIBOR + 146 bps
Patapsco Statutory Trust I	5		—		5		12/15/2035	4.77	%	LIBOR + 148 bps


Total	$	77	$	3	$	72

NOTE 11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate risk, primarily by managing the amount, source, and duration of our assets and liabilities, and through the use of derivative instruments. Derivative instruments are used to reduce the effects that changes in interest rates may have on net income and cash flows. We also use derivative instruments to facilitate transactions on behalf of our customers.

All derivatives are carried on the Consolidated Balance Sheets at fair value and do not take into account the effects of master netting arrangements we have with other financial institutions. Credit risk is included in the determination of the estimated fair value of derivatives. Derivative assets are reported in the Consolidated Balance Sheets in other assets and derivative liabilities are reported in other liabilities. Changes in fair value are recognized in earnings except for certain changes related to derivative instruments designated as part of a cash flow hedging relationship, which are recognized in other comprehensive income.

The following table presents notional amounts and gross fair values of our derivative assets and derivative liabilities which are not offset in the Consolidated Balance Sheets:

TABLE 11.1


	September 30, 2022						December 31, 2021
	Notional		Fair Value				Notional		Fair Value
(in millions)	Amount		Asset		Liability		Amount		Asset		Liability
Gross Derivatives
Subject to master netting arrangements:
Interest rate contracts – designated	$	1,980	$	—	$	1	$	2,080	$	1	$	—
Interest rate swaps – not designated	5,318		83		1		5,547		2		20

Total subject to master netting arrangements	7,298		83		2		7,627		3		20
Not subject to master netting arrangements:
Interest rate swaps – not designated	5,318		1		418		5,547		172		24
Interest rate lock commitments – not designated	195		—		19		482		9		—
Forward delivery commitments – not designated	263		3		—		502		1		1
Credit risk contracts – not designated	442		—		—		368		—		—

Total not subject to master netting arrangements	6,218		4		437		6,899		182		25
Total	$	13,516	$	87	$	439	$	14,526	$	185	$	45

The change in the fair value of liabilities from December 31, 2021 is due to a significant increase in interest rates during 2022.

Certain derivative exchanges have enacted a rule change which in effect results in the legal characterization of variation margin payments for certain derivative contracts as settlement of the derivatives mark-to-market exposure and not collateral.

Accordingly, we have changed our reporting of certain derivatives to record variation margin on trades cleared through these exchanges as settled. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.

We adopted RRR on October 1, 2020, and the guidance will be followed until the Update terminates on December 31, 2022. As of October 16, 2020, we changed our valuation methodology to reflect changes made by central clearinghouses that changed the discounting methodology and interest calculation of cash migration from overnight index swap (OIS) to SOFR for U.S. dollar cleared interest rate swaps to better reflect prices obtainable in the markets in which we transact. Certain of these valuation methodology changes were applied to eligible hedging relationships. Accordingly, we have updated our hedge documentation to reflect the election of certain expedients and exceptions related to our cash flow hedging programs. The change in valuation methodology was applied prospectively as a change in accounting estimate and did not have a material impact on our consolidated financial position or results of operations.

Derivatives Designated as Hedging Instruments under GAAP

Interest Rate Contracts. We entered into interest rate derivative agreements to modify the interest rate characteristics of certain commercial loans and certain of our FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges, hedging the exposure to variability in expected future cash flows. The derivative’s gain or loss, including any ineffectiveness, is initially reported as a component of other comprehensive income and subsequently reclassified into earnings in the same line item associated with the forecasted transaction when the forecasted transaction affects earnings.

The following table shows amounts reclassified from AOCI:

TABLE 11.2


	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Income	Amount of Gain (Loss) Reclassified from AOCI into Income
	Nine Months Ended September 30,					Nine Months Ended September 30,
(in millions)	2022		2021			2022		2021
Derivatives in cash flow hedging relationships:
Interest rate contracts	$	(39)	$	3	Interest income (expense)	$	(8)	$	(14)
					Other income	—		—

The following table represents gains (losses) recognized in the Consolidated Statements of Income on cash flow hedging relationships:

TABLE 11.3


	Nine months ended September 30,
	2022				2021

(in millions)	Interest Income - Loans and Leases		Interest Expense - Short-Term Borrowings		Interest Income - Loans and Leases		Interest Expense - Short-Term Borrowings
Total amounts of income and expense line items presented in the Consolidated Statements of Income (the effects of cash flow hedges are included in these line items)	$	760	$	17	$	671	$	21
The effects of cash flow hedging:
Gain (loss) on cash flow hedging relationships:
Interest rate contracts:
Amount of gain (loss) reclassified from AOCI into net income	(1)		(7)		1		(15)

As of September 30, 2022, the maximum length of time over which forecasted interest cash flows are hedged is 3.0 years. In the twelve months that follow September 30, 2022, we expect to reclassify from the amount currently reported in AOCI net derivative losses of $17.6 million ($13.6 million net of tax), in association with interest on the hedged loans and FHLB advances. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to September 30, 2022.

There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness related to these cash flow hedges. Also, during the nine months ended September 30, 2022 and 2021, there were no gains or losses from cash flow hedge derivatives reclassified to earnings because it became probable that the original forecasted transactions would not occur.

Derivatives Not Designated as Hedging Instruments under GAAP

A description of interest rate swaps, interest rate lock commitments, forward delivery commitments and credit risk contracts can be found in Note 15, "Derivative Instruments and Hedging Activities" in the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

Interest rate swap agreements with loan customers and with the offsetting counterparties are reported at fair value in other assets and other liabilities on the Consolidated Balance Sheets with any resulting gain or loss recorded in current period earnings as other income or other expense.

Risk participation agreements sold with notional amounts totaling $323.9 million as of September 30, 2022 have remaining terms ranging from five months to nineteen years. Under these agreements, our maximum exposure assuming a customer defaults on their obligation to perform under certain derivative swap contracts with third parties would be $0.1 million at September 30, 2022 and $0.2 million at December 31, 2021. The fair values of risk participation agreements purchased and sold were $0.1 million and $0.1 million, respectively, at September 30, 2022 and $0.1 million and $0.2 million, respectively at December 31, 2021.

The following table presents the effect of certain derivative financial instruments on the Consolidated Statements of Income:

TABLE 11.4


		Nine Months Ended September 30,
(in millions)	Consolidated Statements of Income Location	2022		2021
Interest rate swaps	Non-interest income - other	$	—	$	—
Interest rate lock commitments	Mortgage banking operations	—		—
Forward delivery contracts	Mortgage banking operations	2		2
Credit risk contracts	Non-interest income - other	—		—

Counterparty Credit Risk

We are party to master netting arrangements with most of our swap derivative dealer counterparties. Collateral, usually marketable securities and/or cash, is exchanged between FNB and our counterparties, and is generally subject to thresholds and transfer minimums. For swap transactions that require central clearing, we post cash to our clearing agency. Collateral positions are settled or valued daily, and adjustments to amounts received and pledged by us are made as appropriate to maintain proper collateralization for these transactions.

Certain master netting agreements contain provisions that, if violated, could cause the counterparties to request immediate settlement or demand full collateralization under the derivative instrument. If we had breached our agreements with our derivative counterparties we would be required to settle our obligations under the agreements at the termination value and would be required to pay an additional $0.1 million and $0.2 million as of September 30, 2022 and December 31, 2021, respectively, in excess of amounts previously posted as collateral with the respective counterparty.

The following table presents a reconciliation of the net amounts of derivative assets and derivative liabilities presented in the Consolidated Balance Sheets to the net amounts that would result in the event of offset:

TABLE 11.5


			Amount Not Offset in the Consolidated Balance Sheets
(in millions)	Net Amount Presented in the Consolidated Balance Sheets		Financial Instruments		Cash Collateral		Net Amount
September 30, 2022
Derivative Assets
Interest rate contracts:

Not designated	$	83	$	—	$	79	$	4

Total	$	83	$	—	$	79	$	4


Derivative Liabilities
Interest rate contracts:
Designated	$	1	$	—	$	1	$	—
Not designated	1		—		1		—
Total	$	2	$	—	$	2	$	—


December 31, 2021
Derivative Assets
Interest rate contracts:
Designated	$	1	$	—	$	1	$	—
Not designated	2		—		2		—

Total	$	3	$	—	$	3	$	—


Derivative Liabilities
Interest rate contracts:

Not designated	$	20	$	—	$	20	$	—
Total	$	20	$	—	$	20	$	—

NOTE 12. COMMITMENTS, CREDIT RISK AND CONTINGENCIES

We have commitments to extend credit and standby letters of credit that involve certain elements of credit risk in excess of the amount stated in the Consolidated Balance Sheets. Our exposure to credit loss in the event of non-performance by the customer is represented by the contractual amount of those instruments. The credit risk associated with commitments to extend credit and standby letters of credit is essentially the same as that involved in extending loans and leases to customers and is subject to normal credit policies. Since many of these commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.

Following is a summary of off-balance sheet credit risk information:

TABLE 12.1


(in millions)	September 30, 2022		December 31, 2021
Commitments to extend credit	$	12,920	$	11,228
Standby letters of credit	210		194

At September 30, 2022, funding of 71.6% of the commitments to extend credit was dependent on the financial condition of the customer. We have the ability to withdraw such commitments at our discretion. Commitments generally have fixed expiration

dates or other termination clauses and may require payment of a fee. Based on management’s credit evaluation of the customer, collateral may be deemed necessary. Collateral requirements vary and may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by us that may require payment at a future date. The credit risk involved in issuing letters of credit is actively monitored through review of the historical performance of our portfolios.

Our AULC for commitments that are not unconditionally cancellable, which is included in other liabilities on the Consolidated Balance Sheets, was $19.4 million at September 30, 2022 and $19.2 million at December 31, 2021. Additional information relating to the AULC is provided in Note 6, "Allowance for Credit Losses on Loans and Leases" in the Notes to Consolidated Financial Statements.

In addition to the above commitments, subordinated notes issued by FNB Financial Services, LP, a wholly-owned finance subsidiary, are fully and unconditionally guaranteed by FNB. These subordinated notes are included in the summaries of short-term borrowings and long-term borrowings in Note 10, “Borrowings” in the Notes to Consolidated Financial Statements.

Other Legal Proceedings

In the ordinary course of business, we may assert claims in legal proceedings against another party or parties, and we are routinely named as defendants in, or made parties to, pending and potential legal actions. Also, as regulated entities, we are subject to governmental and regulatory examinations, information-gathering requests, and may be subject to investigations and proceedings (both formal and informal). Such threatened claims, litigation, investigations, regulatory and administrative proceedings typically entail matters that are considered incidental to the normal conduct of business. Claims for significant monetary damages may be asserted in many of these types of legal actions, while claims for disgorgement, reimbursement, restitution, penalties and/or other remedial actions or sanctions may be sought in regulatory matters. In these instances, if we determine that we have meritorious defenses, we will engage in an aggressive defense. However, if management determines, in consultation with counsel, that settlement of a matter is in the best interest of FNB and our shareholders, we may do so. It is inherently difficult to predict the eventual outcomes of such matters given their complexity and the particular facts and circumstances at issue in each of these matters. However, on the basis of current knowledge and understanding, and advice of counsel, we do not believe that judgments, sanctions, settlement resolutions, regulatory actions, investigations, settlements or orders, if any, that have arisen or may arise from these matters (either individually or in the aggregate, after giving effect to applicable reserves and insurance coverage) will have a material adverse effect on our financial position or liquidity, although they could potentially have a material effect on net income in a given period.

In view of the inherent unpredictability of outcomes in litigation and governmental and regulatory matters, particularly where (i) the damages sought are indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel legal theories or a large number of parties, as a matter of course, there is considerable uncertainty surrounding the timing or ultimate resolution of litigation and governmental and regulatory matters, including a possible eventual loss, fine, restitution, penalty, business or adverse reputational impact, if any, associated with each such matter. In accordance with applicable accounting guidance, we establish accruals for litigation and governmental and regulatory matters when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. We will continue to monitor such matters for developments that could affect the amount of the accrual, and will adjust the accrual amount as appropriate. If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. We believe that our accruals for legal proceedings are appropriate and, in the aggregate, are not material to our consolidated financial position, although future accruals could have a material effect on net income in a given period.

NOTE 13. STOCK INCENTIVE PLANS

Restricted Stock

We issue restricted stock awards to key employees under our Incentive Compensation Plan (Plan). We issue time-based awards and performance-based awards under this Plan, both of which are based on a three-year vesting period. The grant date fair value of the time-based awards is equal to the price of our common stock on the grant date. The fair value of the performance-based awards is based on a Monte-Carlo simulation valuation of our common stock as of the grant date. The assumptions used for this valuation include stock price volatility, risk-free interest rate and dividend yield. We granted 1,266,821 and 1,113,314 restricted stock units during the nine months ended September 30, 2022 and 2021, respectively, including 297,508 and 325,284 performance-based restricted stock units during those same periods, respectively. As of September 30, 2022, we had available

up to 9,877,023 shares of common stock to issue under this Plan, including 7,397,956 shares registered during the second quarter of 2022.

The unvested restricted stock unit awards are eligible to receive cash dividends or dividend equivalents which are ultimately used to purchase additional shares of stock and are subject to forfeiture if the requisite service period is not completed or the specified performance criteria are not met. These awards are subject to certain accelerated vesting provisions upon retirement, death, disability or in the event of a change of control as defined in the award agreements.

The following table summarizes the activity relating to restricted stock units during the periods indicated:

TABLE 13.1


	Nine Months Ended September 30,
	2022			2021
	Units	Weighted Average Grant Price per Share		Units	Weighted Average Grant Price per Share
Unvested units outstanding at beginning of period	4,680,786	$	9.71	4,322,115	$	9.46
Granted	1,266,821	13.07		1,113,314	12.65
Acquired	60,300	9.41		—	—
Net adjustment due to performance	244,258	9.34		412,540	11.72
Vested	(1,683,372)	10.58		(1,309,476)	12.10
Forfeited/expired/canceled	(219,058)	10.95		(112,002)	10.94
Dividend reinvestment	137,976	11.91		134,600	12.26
Unvested units outstanding at end of period	4,487,711	10.31		4,561,091	9.74

The following table provides certain information related to restricted stock units:

TABLE 13.2


(in millions)	Nine Months Ended September 30,
	2022		2021
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, there was $12.1 million of unrecognized compensation cost related to unvested restricted stock units, including $1.2 million that is subject to accelerated vesting under the Plan’s immediate vesting upon retirement.

The components of the restricted stock units as of September 30, 2022 are as follows:

TABLE 13.3


(dollars in millions)	Service- Based Units		Performance- Based Units		Total
Unvested restricted stock units	2,858,668		1,629,043		4,487,711
Unrecognized compensation expense	$	11	$	1	$	12
Intrinsic value	$	33	$	19	$	52
Weighted average remaining life (in years)	1.91		1.30		1.69

Stock Options

All outstanding stock options were assumed from acquisitions and are fully vested. Upon consummation of our acquisitions, all outstanding stock options issued by the acquired companies were converted into equivalent FNB stock options. We issue shares of treasury stock or authorized but unissued shares to satisfy stock options exercised.

As of September 30, 2022, we had 167,948 stock options outstanding and exercisable at a weighted average exercise price per share of $9.03, compared to 170,529 stock options outstanding and exercisable at a weighted average exercise price per share of $8.75 as of September 30, 2021.

The intrinsic value of outstanding and exercisable stock options at September 30, 2022 was $0.4 million. The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the option exercise price.

NOTE 14. INCOME TAXES

Income Tax Expense

Federal and state income tax expense and the statutory tax rate and the actual effective tax rate consist of the following:

TABLE 14.1


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2022			2021			2022			2021
Current income taxes:
Federal taxes	$	32		$	22		$	61		$	62
State taxes	2			1			7			4
Total current income taxes	34			23			68			66
Deferred income taxes:
Federal taxes	—			4			8			7
State taxes	1			—			1			1
Total deferred income taxes	1			4			9			8
Total income taxes	$	35		$	27		$	77		$	74
Statutory tax rate	21.0		%	21.0		%	21.0		%	21.0		%
Effective tax rate	20.7			19.7			20.5			19.5

The increase in the effective tax rate for the nine months ended September 30, 2022 compared to 2021 was primarily driven by higher state income taxes and increased FDIC insurance deduction disallowance.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax purposes. Deferred tax assets and liabilities are measured based on the enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Net deferred tax assets were $150.4 million and $43.4 million at September 30, 2022 and December 31, 2021, respectively. The increase is due to the acquisition of net deferred taxes from Howard, as well as increases in the deferred tax asset related to unrealized losses on debt securities.

NOTE 15. OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents changes in AOCI, net of tax, by component:

TABLE 15.1


(in millions)	Unrealized Net Gains (Losses) on Debt Securities Available for Sale		Unrealized Net Gains (Losses) on Derivative Instruments		Unrecognized Pension and Postretirement Obligations		Total
Nine Months Ended September 30, 2022
Balance at beginning of period	$	8	$	(22)	$	(48)	$	(62)
Other comprehensive (loss) income before reclassifications	(294)		(30)		2		(322)
Amounts reclassified from AOCI	—		6		—		6
Net current period other comprehensive (loss) income	(294)		(24)		2		(316)
Balance at end of period	$	(286)	$	(46)	$	(46)	$	(378)

The amounts reclassified from AOCI related to debt securities AFS are included in net securities gains on the Consolidated Statements of Income, while the amounts reclassified from AOCI related to derivative instruments in cash flow hedge programs are generally included in interest income on loans and leases on the Consolidated Statements of Income. The tax (benefit) expense amounts reclassified from AOCI in connection with the debt securities AFS and derivative instruments reclassifications are included in income taxes on the Consolidated Statements of Income.

NOTE 16. EARNINGS PER COMMON SHARE

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding net of unvested shares of restricted stock.

Diluted earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding, adjusted for the dilutive effect of potential common shares issuable for stock options and restricted shares, as calculated using the treasury stock method. Adjustments to the weighted average number of shares of common stock outstanding are made only when such adjustments dilute earnings per common share.

The following table sets forth the computation of basic and diluted earnings per common share:

TABLE 16.1


	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per share data)	2022		2021		2022		2021
Net income	$	138	$	111	$	300	$	306
Less: Preferred stock dividends	2		2		6		6
Net income available to common stockholders	$	136	$	109	$	294	$	300
Basic weighted average common shares outstanding	350,910,562		319,512,598		348,868,423		320,023,695
Net effect of dilutive stock options, warrants and restricted stock	3,743,917		3,348,329		3,917,702		3,611,960
Diluted weighted average common shares outstanding	354,654,479		322,860,927		352,786,125		323,635,655
Earnings per common share:
Basic	$	0.39	$	0.34	$	0.84	$	0.94
Diluted	$	0.38	$	0.34	$	0.83	$	0.93

There were no anti-dilutive shares for either the three months ended or nine months ended September 30, 2022 and 2021. In January 2022, we issued 34.1 million common shares as part of the Howard acquisition.

NOTE 17. CASH FLOW INFORMATION

Following is a summary of supplemental cash flow information:

TABLE 17.1


	Nine Months Ended September 30,
(in millions)	2022		2021
Interest paid on deposits and other borrowings	$	88	$	82
Income taxes paid	56		53
Transfers of loans to other real estate owned	1		3

We did not have any restricted cash as of September 30, 2022 and 2021.

Supplemental non-cash information relating to the Howard acquisition is included in Note 3, Mergers and Acquisitions.

NOTE 18. BUSINESS SEGMENTS

We operate in three reportable segments: Community Banking, Wealth Management and Insurance.

•The Community Banking segment provides commercial and consumer banking services. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, business credit, capital markets and lease financing. Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services.

•The Wealth Management segment provides a broad range of personal and corporate fiduciary services including the administration of decedent and trust estates. In addition, it offers various alternative products, including securities brokerage (under a third-party arrangement) and investment advisory services, mutual funds and annuities.

•The Insurance segment includes a full-service insurance brokerage service offering all lines of commercial and personal insurance through major carriers. The Insurance segment also includes a reinsurer.

The following tables provide financial information for these segments of FNB. The information provided under the caption “Parent and Other” represents operations not considered to be reportable segments and/or general operating expenses of FNB, and includes the parent company, other non-bank subsidiaries and eliminations and adjustments to reconcile to the Consolidated Financial Statements.

TABLE 18.1



(in millions)	Community Banking		Wealth Management		Insurance		Parent and Other		Consolidated
At or for the Three Months Ended September 30, 2022
Interest income	$	342	$	—	$	—	$	1	$	343
Interest expense	41		—		—		5		46
Net interest income	301		—		—		(4)		297
Provision for credit losses	12		—		—		—		12
Non-interest income	62		16		7		(2)		83
Non-interest expense (1)	174		11		5		2		192
Amortization of intangibles	3		—		—		—		3
Income tax expense (benefit)	36		1		—		(2)		35
Net income (loss)	138		4		2		(6)		138
Total assets	42,458		37		33		62		42,590
Total intangibles	2,451		9		27		—		2,487
At or for the Three Months Ended September 30, 2021
Interest income	$	255	$	—	$	—	$	1	$	256
Interest expense	20		—		—		4		24
Net interest income	235		—		—		(3)		232
Provision for credit losses	(2)		—		—		—		(2)
Non-interest income	68		15		6		(1)		88
Non-interest expense (1)	164		10		5		2		181
Amortization of intangibles	3		—		—		—		3
Income tax expense (benefit)	27		1		—		(1)		27
Net income (loss)	111		4		1		(5)		111
Total assets	39,238		43		34		46		39,361
Total intangibles	2,271		9		27		—		2,307
(1) Excludes amortization of intangibles, which is presented separately.


(in millions)	Community Banking		Wealth Management		Insurance		Parent and Other		Consolidated
At or for the Nine Months Ended September 30, 2022
Interest income	$	874	$	—	$	—	$	3	$	877
Interest expense	82		—		—		10		92
Net interest income	792		—		—		(7)		785
Provision for credit losses	35		—		—		1		36
Non-interest income	179		48		20		(4)		243
Non-interest expense (1)	554		32		14		5		605
Amortization of intangibles	9		—		1		—		10
Income tax expense (benefit)	78		3		1		(5)		77
Net income (loss)	295		13		4		(12)		300
Total assets	42,458		37		33		62		42,590
Total intangibles	2,451		9		27		—		2,487
At or for the Nine Months Ended September 30, 2021
Interest income	$	759	$	—	$	—	$	1	$	760
Interest expense	67		—		—		10		77
Net interest income	692		—		—		(9)		683
Provision for credit losses	2		—		—		1		3
Non-interest income	191		45		19		(4)		251
Non-interest expense (1)	491		30		15		6		542
Amortization of intangibles	8		—		1		—		9
Income tax expense (benefit)	75		3		1		(5)		74
Net income (loss)	307		12		2		(15)		306
Total assets	39,238		43		34		46		39,361
Total intangibles	2,271		9		27		—		2,307

(1) Excludes amortization of intangibles, which is presented separately.

NOTE 19. FAIR VALUE MEASUREMENTS

Refer to Note 25 "Fair Value Measurements" to the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022 for a description of additional valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis:

TABLE 19.1


(in millions)	Level 1		Level 2		Level 3		Total
September 30, 2022
Assets Measured at Fair Value
Debt securities available for sale
U.S. Treasury	$	256	$	—	$	—	$	256
U.S. government agencies	—		117		—		117
U.S. government-sponsored entities	—		261		—		261
Residential mortgage-backed securities:
Agency mortgage-backed securities	—		1,280		—		1,280
Agency collateralized mortgage obligations	—		1,022		—		1,022

Commercial mortgage-backed securities	—		407		—		407
States of the U.S. and political subdivisions (municipals)	—		29		—		29
Other debt securities	—		19		1		20
Total debt securities available for sale	256		3,135		1		3,392
Loans held for sale	—		117		—		117





Derivative financial instruments
Trading	—		84		—		84
Not for trading	—		3		—		3
Total derivative financial instruments	—		87		—		87
Total assets measured at fair value on a recurring basis	$	256	$	3,339	$	1	$	3,596
Liabilities Measured at Fair Value
Derivative financial instruments
Trading	$	—	$	419	$	—	$	419
Not for trading	—		1		19		20
Total derivative financial instruments	—		420		19		439
Total liabilities measured at fair value on a recurring basis	$	—	$	420	$	19	$	439


(in millions)	Level 1		Level 2		Level 3		Total
December 31, 2021
Assets Measured at Fair Value
Debt securities available for sale
U.S. Treasury	$	204	$	—	$	—	$	204
U.S. government agencies	—		155		—		155
U.S. government-sponsored entities	—		192		—		192
Residential mortgage-backed securities:
Agency mortgage-backed securities	—		1,357		—		1,357
Agency collateralized mortgage obligations	—		1,186		—		1,186

Commercial mortgage-backed securities	—		297		—		297
States of the U.S. and political subdivisions (municipals)	—		33		—		33
Other debt securities	—		2		—		2
Total debt securities available for sale	204		3,222		—		3,426
Loans held for sale	—		269		—		269





Derivative financial instruments
Trading	—		174		—		174
Not for trading	—		2		9		11
Total derivative financial instruments	—		176		9		185
Total assets measured at fair value on a recurring basis	$	204	$	3,667	$	9	$	3,880
Liabilities Measured at Fair Value
Derivative financial instruments
Trading	$	—	$	44	$	—	$	44
Not for trading	—		1		—		1
Total derivative financial instruments	—		45		—		45
Total liabilities measured at fair value on a recurring basis	$	—	$	45	$	—	$	45

The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized Level 3 inputs to determine fair value:

TABLE 19.2


(in millions)	Other Debt Securities		Interest Rate Lock Commitments		Total
Nine Months Ended September 30, 2022
Balance at beginning of period	$	—	$	9	$	9




Purchases, issuances, sales and settlements:
Purchases	2		—		2
Issuances	—		—		—

Settlements	(1)		(9)		(10)


Balance at end of period	$	1	$	—	$	1
Year Ended December 31, 2021
Balance at beginning of period	$	—	$	24	$	24




Purchases, issuances, sales and settlements:

Issuances	—		9		9

Settlements	—		(24)		(24)


Balance at end of period	$	—	$	9	$	9

We review fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation attributes may result in reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in/out of Level 3 at fair value at the beginning of the period in which the changes occur. There were no transfers of assets or liabilities between the hierarchy levels during the first nine months of 2022 or 2021.

From time to time, we measure certain assets at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of the lower of cost or fair value accounting or write-downs of individual assets. Valuation methodologies used to measure these fair value adjustments were described in Note 25, "Fair Value Measurements" to the Consolidated Financial Statements included in 2021 Annual Report on Form 10-K. For assets measured at fair value on a non-recurring basis still held at the Balance Sheet date, the following table provides the hierarchy level and the fair value of the related assets or portfolios:

TABLE 19.3


(in millions)	Level 1		Level 2		Level 3		Total
September 30, 2022
Collateral dependent loans	$	—	$	—	$	17	$	17
Other assets - MSRs	—		—		—		—
Other assets - SBA servicing asset	—		—		2		2
Other real estate owned	—		—		3		3
December 31, 2021
Collateral dependent loans	$	—	$	—	$	20	$	20
Other assets - MSRs	—		—		10		10
Other assets - SBA servicing asset	—		—		3		3
Other real estate owned	—		—		2		2

The fair value amounts for collateral dependent loans and OREO in the table above were estimated at a date during the nine months or twelve months ended September 30, 2022 and December 31, 2021, respectively. Consequently, the fair value information presented is not necessarily as of the period’s end. Collateral dependent loans measured or re-measured at fair value on a non-recurring basis during the nine months ended September 30, 2022 had a carrying amount of $16.6 million,

which includes an allocated ACL of $5.8 million. The ACL includes a credit to the provision applicable to the current period fair value measurements of $2.5 million, which was a reduction to the provision for credit losses for the nine months ended September 30, 2022.

As of September 30, 2022, there was no MSRs measured at fair value on a non-recurring basis, and no related valuation allowance. There was a recovery of a prior valuation allowance of $2.5 million included in earnings for the nine months ended September 30, 2022. SBA servicing assets measured at fair value on a non-recurring basis had a carrying value of $2.2 million, which included a valuation allowance of $1.4 million, as of September 30, 2022. There was no recovery of the valuation allowance included in earnings for the nine months ended September 30, 2022.

OREO measured at fair value on a non-recurring basis during 2022 had a carrying amount of $3.2 million, which included a valuation allowance of $0.5 million, as of September 30, 2022. The valuation allowance includes a loss of $0.5 million, which was included in earnings for the nine months ended September 30, 2022.

Fair Value of Financial Instruments

Refer to Note 25, "Fair Value Measurements" to the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022 for a description of methods and assumptions that were used to estimate the fair value of each financial instrument.

The fair values of our financial instruments are as follows:

TABLE 19.4


					Fair Value Measurements
(in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
September 30, 2022
Financial Assets
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
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		—		—
December 31, 2021
Financial Assets
Cash and cash equivalents	$	3,493	$	3,493	$	3,493	$	—	$	—
Debt securities available for sale	3,426		3,426		204		3,222		—
Debt securities held to maturity	3,463		3,506		—		3,506		—
Net loans and leases, including loans held for sale	24,919		24,518		—		269		24,249
Loan servicing rights	47		49		—		—		49

Derivative assets	185		185		—		176		9
Accrued interest receivable	76		76		76		—		—
Financial Liabilities
Deposits	31,726		31,725		28,867		2,858		—
Short-term borrowings	1,536		1,536		1,536		—		—
Long-term borrowings	682		704		—		—		704
Derivative liabilities	45		45		—		45		—
Accrued interest payable	10		10		10		—		—

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A represents an overview of and highlights material changes to our financial condition and consolidated results of operations at and for the three- and nine-month periods ended September 30, 2022 and 2021. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained herein and our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022. Our results of operations for the nine months ended September 30, 2022 are not necessarily indicative of results expected for the full year.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Report may contain statements regarding our 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 operations. These statements can be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve various assumptions, risks and uncertainties which can change over time. Actual results or future events may be different from those anticipated in our forward-looking statements and may not align with historical performance and events. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance upon such statements. Forward-looking statements are typically identified by words such as "believe," "plan," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "will," "should," "project," "goal," and other similar words and expressions. We do not assume any duty to update forward-looking statements, except as required by federal securities laws.

Our forward-looking statements are subject to the following principal risks and uncertainties:

•Our business, financial results and balance sheet values are affected by business, economic and political circumstances, including, but not limited to: (i) developments with respect to the U.S. and global financial markets; (ii) actions by the FRB, FDIC, UST, OCC and other governmental agencies, especially those that impact money supply, market interest rates or otherwise affect business activities of the financial services industry; (iii) a slowing of the U.S. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S.

•Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards.

•Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues. Our ability to anticipate, react quickly and continue to respond to technological changes and COVID-19 challenges can also impact our ability to respond to customer needs and meet competitive demands.

•Business and operating results can also be affected by widespread natural and other disasters, pandemics, including the impact of the COVID-19 pandemic crisis and post-pandemic return to normalcy, global events, including the Ukraine-Russia conflict, dislocations, including shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks or international hostilities through impacts on the economy and financial markets generally, or on us or our counterparties specifically.

•Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation. Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and the ability to attract and retain talent. These developments could include:

◦Policies and priorities of the current U.S. presidential administration, including legislative and regulatory reforms, different approaches to supervisory or enforcement priorities, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes, employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.

◦Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards.

◦Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC.

◦Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to FNB.

◦Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies.

◦Business and operating results are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques.

◦The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL.

◦A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns.

•The COVID-19 pandemic and the federal, state, and local regulatory and governmental actions implemented in response to COVID-19 have resulted in increased volatility of the financial markets and national and local economic conditions, supply chain challenges, rising inflationary pressures, increased levels of unemployment and business failures, and the potential to have a material impact on, among other things, our business, financial condition, results of operations, liquidity, or on our management, employees, customers and critical vendors and suppliers. In view of the many unknowns associated with the COVID-19 pandemic, our forward-looking statements continue to be subject to various conditions that may be substantially different in the future than what we are currently experiencing or expecting, including, but not limited to, challenging headwinds for the U.S. economy and labor market and the possible change in commercial and consumer customer fundamentals, expectations and sentiments. As a result of the COVID-19 impact, including uncertainty regarding the potential impact of continuing variant mutations of the virus, U.S. government responsive measures to manage it or provide financial relief, the uncertainty regarding its duration and the success of vaccination efforts, it is possible the pandemic may have a material adverse impact on our business, operations and financial performance.

•We grow our business, in part, through acquisitions and new strategic initiatives. Risks and uncertainties include those presented by the nature of the business acquired and strategic initiative, including in some cases those associated with our entry into new businesses or new geographic or other markets and risks resulting from our unfamiliarity with those new areas, as well as risks and various uncertainties related to the acquisition transactions themselves, regulatory issues, and the integration of the acquired businesses into FNB after closing. Such risks attendant to the pending FNB-UB Bancorp merger include, but are not limited to:

•The possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where FNB and UB Bancorp do business, or as a result of other unexpected factors or events;

•Completion of the transaction is dependent on the satisfaction of customary closing conditions which cannot be assured, and the timing and completion of the transaction is dependent on various factors that cannot be predicted with precision at this point;

•The occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

•Although bank regulatory approvals and such approvals for the transaction have been obtained, completion of the transaction remains subject to bank regulatory oversight, which may cause additional significant expense or delay the consummation of the merger transaction;

•Potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction;

•The outcome of any legal proceedings that may be instituted against FNB or UB Bancorp;

•Subsequent federal legislative and regulatory actions and reforms affecting the financial institutions’ industry may substantially impact the economic benefits of the proposed merger;

•Unanticipated challenges or delays in the integration of UB Bancorp’s business into FNB’s and the conversion of UB Bancorp’s technology systems and customer data may significantly increase the expense associated with the transaction; and

•Other factors that may affect future results of FNB and UB Bancorp, including changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; the impact, extent and timing of technological changes; capital management activities; and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

The risks identified here are not exclusive or the types of risks we may confront and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A. Risk Factors and the Risk Management sections of our 2021 Annual Report on Form 10-K, our subsequent 2022 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other 2022 filings with the SEC, which are available on our corporate website at https://www.fnb-online.com/about-us/investor-information/reports-and-filings or the SEC's website at www.sec.gov. More specifically, our forward-looking statements may be subject to the evolving risks and uncertainties related to the COVID-19 pandemic and its macro-economic impact and the resulting governmental, business and societal responses to it. We have included our web address as an inactive textual reference only. Information on our website is not part of our SEC filings.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

A description of our critical accounting policies is included in the MD&A section of our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022 under the heading “Application of Critical Accounting Policies”. There have been no significant changes in critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2021.

USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS

To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends.

These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. When non-GAAP financial measures are disclosed, the SEC's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”.

Management believes items such as merger expenses, initial provision for non-PCD loans acquired and branch consolidation costs are not organic to run our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities. The merger expenses and branch consolidation costs principally represent expenses to satisfy contractual obligations of the acquired entity or closed branch without any useful ongoing benefit to us. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable-equivalent amounts for the 2022 and 2021 periods were calculated using a federal statutory income tax rate of 21%.

FINANCIAL SUMMARY

Net income available to common stockholders for the third quarter of 2022 was $135.5 million or $0.38 per diluted common share, compared to net income available to common stockholders for the third quarter of 2021 of $109.5 million or $0.34 per diluted common share. On an operating basis, earnings per diluted common share (non-GAAP) was $0.39 for the third quarter of 2022, excluding $2.1 million (pre-tax) in merger-related significant items, while the third quarter of 2021 was $0.34, excluding $0.9 million of significant items (pre-tax).

During the third quarter, we produced strong financial results that set multiple records, including total revenue of $380 million, operating earnings per share (non-GAAP) of $0.39 and an efficiency ratio (non-GAAP) of 49% as well as a strong return on average tangible common equity (ROATCE) (non-GAAP) of 19%. Ending loans and deposits grew an annualized 10% and 5%, respectively, compared to the prior quarter, and we maintained a strong deposit mix with 35% in non-interest-bearing deposits. Our asset quality continues to perform favorably with a low delinquency rate and 0.04% of net charge-offs. We continue to stay focused on changes to the economic environment and will actively monitor emerging risks to manage through potentially challenging macroeconomic conditions.

Income Statement Highlights (Third quarter of 2022 compared to third quarter of 2021, except as noted)

•Record total revenue of $379.6 million increased $58.3 million, or 18.2%.

•Net interest income increased $64.7 million, or 27.8%, to $297.1 million primarily due to the benefit of growth in earning assets, as well as the rising interest rate environment.

•On a linked-quarter basis net interest income of $297.1 million increased $43.4 million, or 17.1%, from the prior quarter total of $253.7 million, primarily due to growth in average earning assets and benefits from the higher interest rate environment.

•On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) increased 43 basis points to 3.19% as the earning asset yield increased 62 basis points and the cost of funds increased 20 basis points. During the third quarter of 2022, the FOMC raised the target federal funds rate by a total of 150 basis points, bringing the year-to-date increases to 300 basis points.

•The annualized net charge-offs to total average loans ratio was 0.04%, compared to 0.03%, with favorable asset quality performance across the loan portfolio.

•The effective tax rate was 20.7%, compared to 19.7%, with the increase due to higher pre-tax income and state income taxes.

•The efficiency ratio (non-GAAP) was a record 49.4%, a 600 basis point improvement from September 30, 2021, reflecting record revenue and continued disciplined management of expenses.

Balance Sheet Highlights (period-end balances, September 30, 2022 compared to December 31, 2021, unless otherwise

indicated)

•Period-end total loans and leases, increased $4.1 billion, or 16.4%, as compared to September 30, 2021, which includes Howard acquired loans of $1.8 billion as of the January 22, 2022 acquisition date. Consumer loans increased $2.3 billion, or 27.5%, and commercial loans and leases increased $1.8 billion, or 10.8%, which were partially offset by the decline in PPP loans. PPP loans totaled $43.7 million at September 30, 2022, compared to $694.3 million at September 30, 2021.

•On a linked-quarter basis, period-end loans and leases increased $735.7 million, or 10.4% annualized, including an increase of $546.8 million in consumer loans and $188.9 million in commercial loans and leases. Average loans and leases increased $1.2 billion, or 17.3% annualized, linked-quarter with growth of $722.9 million in consumer loans and $463.1 million in commercial loans and leases.

•Total average deposits grew $2.8 billion, or 9.0%, from the same prior-year period, led by increases in average non-interest-bearing deposits of $1.4 billion, or 13.9%, and average interest-bearing demand deposits of $1.0 billion, or 7.3%, partially offset by a decrease in average time deposits of $144.8 million, or 4.7%. Average deposit growth

reflected organic growth in new and existing customer relationships and includes Howard acquired deposits of $1.8 billion as of the January 22, 2022 acquisition date. On a linked-quarter basis, period-end deposits increased $413.0 million, or 4.9%, annualized.

•The ratio of loans to deposits was 84.9%, compared to 78.7%, as loan growth outpaced deposit growth. Additionally, the funding mix continued to improve with non-interest-bearing deposits growing to 35% of total deposits, compared to 34%.

•Total assets were $42.6 billion, compared to $39.5 billion, an increase of $3.1 billion, or 7.8%, primarily due to organic growth in loans and the Howard acquisition.

•The ratio of the ACL to total loans and leases was 1.34%, compared to 1.38%, directionally consistent with improved credit metrics. The ACL on loans and leases totaled $385 million at September 30, 2022, compared to $344 million with the increase driven by significant loan growth, CECL-related model impacts from a forecasted macroeconomic slowdown and lower prepayment speed assumptions and the initial ACL related to the Howard acquisition.

•Tangible book value per common share (non-GAAP) of $8.02, decreased $0.08, or 1.0%, compared to June 30, 2022. AOCI reduced the tangible book value per common share by $1.08 as of September 30, 2022, primarily due to the impact of higher interest rates on the fair value of AFS securities, compared to a $0.72 reduction as of June 30, 2022, offset by higher pre-tax income.

•The CET1 regulatory capital ratio was 9.7%, consistent with 9.7% at June 30, 2022, benefitting from the strong retained earnings growth in the quarter.

TABLE 1


	Three Months Ended September 30,
Quarterly Results Summary	2022			2021
Reported results
Net income available to common stockholders (millions)	$	135.5		$	109.5
Net income per diluted common share	0.38			0.34
Book value per common share (period-end)	15.11			15.65

Common equity tier 1 capital ratio	9.7		%	9.9		%
Operating results (non-GAAP)
Operating net income available to common stockholders (millions)	$	137.2		$	110.2
Operating net income per diluted common share	0.39			0.34

Average diluted common shares outstanding (thousands)	354,654			322,861
Significant items impacting earnings(1) (millions)
Pre-tax merger-related expenses	$	(2.1)		$	(0.9)
After-tax impact of merger-related expenses	(1.7)			(0.7)















Total significant items pre-tax	$	(2.1)		$	(0.9)
Total significant items after-tax	$	(1.7)		$	(0.7)
Capital measures (non-GAAP)
Tangible common equity to tangible assets (period-end)	7.02		%	7.24		%
Tangible book value per common share (period-end)	$	8.02		$	8.42

	Nine Months Ended September 30,
Year-to-Date Results Summary	2022			2021
Reported results
Net income available to common stockholders (millions)	$	293.6		$	300.1
Net income per diluted common share	0.83			0.93

Operating results (non-GAAP)
Operating net income available to common stockholders (millions)	337.9			302.9
Operating net income per diluted common share	0.96			0.94

Average diluted common shares outstanding (thousands)	352,786			323,636
Significant items impacting earnings(1) (millions)
Pre-tax merger-related expenses	$	(32.8)		$	(0.9)
After-tax impact of merger-related expenses	(25.9)			(0.7)











Pre-tax provision expense related to acquisition	(19.1)			—
After-tax impact of provision expense related to acquisition	(15.1)			—
Pre-tax branch consolidation costs	(4.2)			(2.6)
After-tax impact of branch consolidation costs	(3.3)			(2.1)


Total significant items pre-tax	$	(56.1)		$	(3.5)
Total significant items after-tax	$	(44.3)		$	(2.8)
(1) Favorable (unfavorable) impact on earnings

Industry Developments

INFLATION REDUCTION ACT

On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA introduces a 15% corporate alternative minimum tax (AMT) based primarily on consolidated adjusted GAAP net income with a minimum threshold of $1 billion. The corporate AMT provisions are effective for taxable years beginning after December 31, 2022. The details of the computation will be subject to regulations to be issued by the Department of the Treasury. Our current net income levels are well below the $1 billion threshold, but we will monitor regulatory developments and will continue to evaluate the impact, if any, of the corporate AMT.

The IRA imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year, including stock issued to employees.

LIBOR and SOFR

The United Kingdom’s Financial Conduct Authority (FCA), who is the regulator of LIBOR, announced on March 5, 2021 that they will no longer require any panel bank to continue to submit LIBOR after December 31, 2021. As it pertains to U.S. dollar LIBOR, the FCA announced that certain LIBOR tenors will continue to be published through June 30, 2023. Bank regulators, in a joint statement urged banks to stop using LIBOR altogether on new transactions by the end of 2021 to avoid the possible creation of safety and soundness risk. The FRB of New York has created a working group called the Alternative Reference Rate Committee (ARRC) to assist U.S. institutions in transitioning away from LIBOR as a benchmark interest rate. The ARRC has recommended the use of SOFR as a replacement index for LIBOR.

On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the LIBOR Act) was signed into law. The LIBOR Act establishes a uniform national approach for replacing LIBOR in legacy contracts that do not provide for the use of a clearly defined replacement benchmark rate. The LIBOR Act also directs the FRB to issue regulations to implement the legislation addressed by this Act. We are currently evaluating the impact that the LIBOR Act will have on us.

We created an internal transition team that is managing our transition away from LIBOR. This transition team is a cross-functional team composed of representatives from the commercial, retail and mortgage banking lines of business, as well as representatives of loan operations, information technology, legal, finance and other support functions. The transition team has completed an assessment of tasks needed for the transition, identified contracts that contain LIBOR language, reviewed existing contract language for the presence of appropriate fallback rate language, developed and implemented loan fallback rate language for when LIBOR is retired and identified risks associated with the transition. The transition team has chosen SOFR as the primary replacement index for LIBOR but other credit-sensitive indices are available for the benefit of our customers.

Beginning in September 2020, adjustable rate mortgage loans have been originated with SOFR as the underlying index. Their balance as of September 30, 2022 was $869.2 million, an increase of $530.7 million compared to December 31, 2021. We started originating commercial loans utilizing SOFR and other indices in the fourth quarter of 2021. As of September 30, 2022, the balance of commercial loans indexed to SOFR was $3.3 billion, including certain LIBOR loans that transitioned to SOFR during this timeframe.

Our transition team continues to work within the guidelines established by the FCA and ARRC to provide for a smooth transition away from LIBOR. As of September 30, 2022, $8.3 billion of our loan portfolio consisted of loans whose variable rate index is LIBOR, a decline of $2.3 billion as compared to December, 31, 2021. In addition, $646.1 million of LIBOR-based loans will mature prior to the June 30, 2023 conversion date.

Lastly, as of September 30, 2022, we have $76.5 million in TPS and $145.0 million in fixed-to-floating rate other subordinated debt that uses LIBOR as its base index. We are in the process of reviewing the legal contracts to address the LIBOR transition for these debt instruments by the June 30, 2023 conversion date.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Net income available to common stockholders for the three months ended September 30, 2022 was $135.5 million or $0.38 per diluted common share, compared to $109.5 million or $0.34 per diluted common share for the three months ended September 30, 2021. The results for the third quarter of 2022 reflect record revenue of $379.6 million, an increase of $58.3 million, or 18.2%. Additionally, the provision for credit losses was $11.2 million compared to a provision benefit of $1.8 million primarily due to significant loan growth and CECL-related model impacts from a forecasted macroeconomic slowdown and lower prepayment speed assumptions which result in a longer expected loan life in the third quarter of 2022. Non-interest income declined $6.4 million, or 7.2%, from record levels in the third quarter of 2021 driven by decreases in mortgage banking operations, capital markets and SBA premium income, partially offset by increases in service charges income and dividends on non-marketable equity securities. Non-interest expense for the third quarter of 2022 increased $10.8 million primarily due to occupancy and equipment and outside services.

Financial highlights are summarized below:

TABLE 2


	Three Months Ended September 30,				$		%
(in thousands, except per share data)	2022		2021		Change		Change
Net interest income	$	297,125	$	232,406	$	64,719	27.8	%
Provision for credit losses	11,188		(1,806)		12,994		719.5
Non-interest income	82,464		88,854		(6,390)		(7.2)
Non-interest expense	195,057		184,226		10,831		5.9
Income taxes	35,846		27,327		8,519		31.2
Net income	137,498		111,513		25,985		23.3
Less: Preferred stock dividends	2,010		2,010		—		—
Net income available to common stockholders	$	135,488	$	109,503	$	25,985	23.7	%
Earnings per common share – Basic	$	0.39	$	0.34	$	0.05	14.7	%
Earnings per common share – Diluted	0.38		0.34		0.04		11.8
Cash dividends per common share	0.12		0.12		—		—

The following table presents selected financial ratios and other relevant data used to analyze our performance:

TABLE 3


	Three Months Ended September 30,
	2022			2021
Return on average equity	9.91		%	8.74		%
Return on average tangible common equity (2)	18.84			16.77
Return on average assets	1.30			1.14
Return on average tangible assets (2)	1.41			1.24
Book value per common share (1)	$	15.11		$	15.65
Tangible book value per common share (1) (2)	8.02			8.42
Equity to assets (1)	12.69		%	12.95		%
Average equity to average assets	13.10			13.08
Common equity to assets (1)	12.44			12.68
Tangible equity to tangible assets (1) (2)	7.28			7.53
Tangible common equity to tangible assets (1) (2)	7.02			7.24
Common equity tier 1 capital ratio (1)	9.7			9.9
Dividend payout ratio	31.43			35.43

(1) Period-end

(2) Non-GAAP

The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:

TABLE 4


	Three Months Ended September 30,
	2022						2021
(dollars in thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	1,570,094	$	8,197	2.07	%	$	3,186,841	$	1,228	0.15	%

Taxable investment securities (1)	6,245,951		30,662		1.96		5,109,559		20,746		1.62
Tax-exempt investment securities (1)(2)	999,718		8,523		3.41		1,078,906		9,230		3.42
Loans held for sale	158,356		1,778		4.48		257,909		2,381		3.69
Loans and leases (2)(3)	28,431,137		296,470		4.14		24,729,254		224,675		3.61
Total interest-earning assets (2)	37,405,256		345,630		3.67		34,362,469		258,260		2.99
Cash and due from banks	435,258						389,659
Allowance for credit losses	(381,120)						(362,592)
Premises and equipment	411,306						343,070
Other assets	4,169,232						3,985,793
Total assets	$	42,039,932					$	38,718,399
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	14,905,755	24,044		0.64		$	13,888,928	4,487		0.13
Savings	3,986,090		2,366		0.24		3,509,325		164		0.02
Certificates and other time	2,966,630		4,725		0.63		3,111,424		5,999		0.76
Total interest-bearing deposits	21,858,475		31,135		0.57		20,509,677		10,650		0.21
Short-term borrowings	1,389,747		6,135		1.75		1,549,353		6,539		1.67
Long-term borrowings	851,432		8,319		3.88		886,637		6,045		2.70
Total interest-bearing liabilities	24,099,654		45,589		0.75		22,945,667		23,234		0.40
Non-interest-bearing demand	11,779,069						10,338,713
Total deposits and borrowings	35,878,723				0.50		33,284,380				0.28
Other liabilities	654,260						370,587
Total liabilities	36,532,983						33,654,967
Stockholders’ equity	5,506,949						5,063,432
Total liabilities and stockholders’ equity	$	42,039,932					$	38,718,399
Net interest-earning assets	$	13,305,602					$	11,416,802
Net interest income (FTE) (2)			300,041						235,026
Tax-equivalent adjustment			(2,916)						(2,620)
Net interest income			$	297,125					$	232,406
Net interest spread					2.92	%					2.59	%
Net interest margin (2)					3.19	%					2.72	%

(1)The average balances and yields earned on securities are based on historical cost.

(2)The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

(3)Average balances include non-accrual loans. Loans and leases consist of average total loans less average unearned income.

Net Interest Income

Net interest income on an FTE basis (non-GAAP) increased $65.0 million, or 27.7%, to $300.0 million for the third quarter of 2022. Average earning assets of $37.4 billion increased $3.0 billion, or 8.9%, from 2021. In addition to the growth in average earning assets, net interest income benefited from the repricing impact of the higher interest rate environment on earning asset yields, which was partially offset by the higher cost of interest-bearing deposit accounts. Additionally, PPP net interest income declined $26.3 million, equivalent to 0.23% of net interest margin, from the year-ago quarter as the PPP portfolio winds down. Average interest-bearing liabilities of $24.1 billion increased $1.2 billion, or 5.0%, from 2021, driven by an increase of $1.3 billion in average interest-bearing deposits which included organic growth in new and existing customer relationships, and inflows from the Howard acquisition, partially offset by a decrease in average borrowings of $194.8 million. Our net interest margin FTE (non-GAAP) increased 47 basis points to 3.19%, as the yield on earning assets increased 68 basis points. The total cost of funds increased 22 basis points to 0.50% with a 36 basis-point increase in interest-bearing deposit costs, as well as an increase of 118 basis points in long-term debt cost partially due to the August 2022 offering of $350 million aggregate principal amount of 5.150% fixed rate senior notes due in 2025.

The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the three months ended September 30, 2022, compared to the three months ended September 30, 2021:

TABLE 5


(in thousands)	Volume		Rate		Net
Interest Income (1)
Interest-bearing deposits with banks	$	(623)	$	7,592	$	6,969

Securities (2)	4,544		4,665		9,209
Loans held for sale	(852)		249		(603)
Loans and leases (2)	32,983		38,812		71,795
Total interest income (2)	36,052		51,318		87,370
Interest Expense (1)
Deposits:
Interest-bearing demand	233		19,324		19,557
Savings	17		2,185		2,202
Certificates and other time	(182)		(1,092)		(1,274)
Short-term borrowings	(542)		138		(404)
Long-term borrowings	(243)		2,517		2,274
Total interest expense	(717)		23,072		22,355
Net change (2)	$	36,769	$	28,246	$	65,015

(1)The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes.

(2)Interest income amounts are reflected on an FTE basis (non-GAAP) which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

Interest income on an FTE basis (non-GAAP) of $345.6 million for the third quarter of 2022, increased $87.4 million, or 33.8%, from the same quarter of 2021, primarily due to the impact of the 2022 interest rate increases by the FOMC and an increase in average earning assets of $3.0 billion. The increase in earning assets was primarily driven by a $3.7 billion, or 15.0%, increase in average loans and leases and an increase in average securities of $1.1 billion. These increases were partially funded by excess cash which decreased $1.6 billion. Commercial loan growth was led by the Cleveland, Pittsburgh and North Carolina markets. Average consumer loans increased $2.1 billion, or 25.9%, with a $1.2 billion increase in residential mortgages and a $601.4 million increase in direct installment loans driven by a combination of strong organic loan origination activity and the Howard acquisition. Average PPP loans declined $1.1 billion, or 94.3%, from the year-ago quarter as the portfolio winds down. Additionally, the net increase in the securities portfolio was a result of management's strategy to deploy excess liquidity into higher yielding securities, as average securities increased 17.1%. The yield on average earning assets (non-

GAAP) increased 68 basis points to 3.67% for the third quarter of 2022, primarily reflecting the higher yields on variable-rate loans and investment securities.

Interest expense of $45.6 million for the third quarter of 2022 increased $22.4 million, or 96.2%, from the same quarter of 2021, due to an increase in rates paid on average interest-bearing liabilities and growth in average interest-bearing deposits. Average non-interest-bearing deposits increased $1.4 billion, or 13.9%, and average interest-bearing deposits increased $1.3 billion, or 6.6%. The growth in average deposits reflected organic growth in new and existing customer relationships and inflows from the Howard acquisition. Average short-term borrowings decreased $159.6 million, or 10.3%, primarily reflecting decreases of $100.0 million and $65.6 million in short-term FHLB advances and repurchase agreements, respectively. Average long-term borrowings decreased $35.2 million, or 4.0%, primarily reflecting a decrease of $200.0 million in long-term FHLB advances, partially offset by an increase of $140.5 million in senior debt resulting from the issuance of $350 million in 5.150% fixed rate senior notes during the third quarter of 2022 and an increase of $25.3 million in subordinated debt resulting from the Howard acquisition. The rate paid on interest-bearing liabilities increased 35 basis points from 0.40% to 0.75% for the third quarter of 2022, primarily due to the FOMC interest rate actions and partially offset by management's actions taken to reduce the cost of interest-bearing liabilities.

Provision for Credit Losses

Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the provision for credit loss expense and net charge-offs:

TABLE 6


	Three Months Ended September 30,						$		%
(dollars in thousands)	2022			2021			Change		Change
Provision for credit losses (on loans and leases)	$	10,069		$	(5,668)		$	15,737	277.6	%
Provision for unfunded loan commitments	1,125			3,847			(2,722)		(70.8)
Provision for credit losses	$	11,194		$	(1,821)		$	13,015	714.7	%
Net loan charge-offs	2,812			1,591			1,221		76.7
Net loan charge-offs (annualized) / total average loans and leases	0.04		%	0.03		%

Provision for credit losses was $11.2 million during the third quarter of 2022, an increase of $13.0 million, from the same period of 2021. The third quarter of 2022 is comprised of a $10.1 million provision for loans and leases outstanding and a $1.1 million provision for unfunded loan commitments. The net increase reflects significant loan growth and CECL-related model impacts from a forecasted macroeconomic slowdown and lower prepayment speed assumptions which result in a longer expected loan life in the third quarter of 2022. The third quarter of 2022 also reflected net charge-offs of $2.8 million, or 0.04% annualized of total average loans, compared to net charge-offs of $1.6 million, or 0.03% annualized, in the third quarter of 2021. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses on Loans and Leases section of this Management’s Discussion and Analysis.

Non-Interest Income

The breakdown of non-interest income for the three months ended September 30, 2022 and 2021 is presented in the following table:

TABLE 7


	Three Months Ended September 30,				$		%
(dollars in thousands)	2022		2021		Change		Change
Service charges	$	35,954	$	31,716	$	4,238	13.4	%
Trust services	9,600		9,471		129		1.4
Insurance commissions and fees	5,790		6,776		(986)		(14.6)
Securities commissions and fees	5,747		5,465		282		5.2
Capital markets income	9,605		12,541		(2,936)		(23.4)
Mortgage banking operations	5,148		8,245		(3,097)		(37.6)
Dividends on non-marketable equity securities	3,258		1,857		1,401		75.4
Bank owned life insurance	2,645		3,279		(634)		(19.3)
Net securities gains	—		65		(65)		(100.0)

Other	4,717		9,439		(4,722)		(50.0)
Total non-interest income	$	82,464	$	88,854	$	(6,390)	(7.2)	%

Total non-interest income decreased $6.4 million, or 7.2%, to $82.5 million for the third quarter of 2022, compared to a record $88.9 million for the third quarter of 2021. The variances in the individual non-interest income items are explained in the following paragraphs.

Service charges of $36.0 million for the third quarter of 2022 increased $4.2 million, or 13.4%, from the same period of 2021, driven by interchange fees, increases in treasury management services and higher customer activity.

Capital markets income of $9.6 million for the third quarter of 2022 decreased $2.9 million, or 23.4%, from the same period of 2021, as the decline in swap fees from elevated levels in the year-ago quarter was partially offset by increased contributions from international banking and syndications.

Mortgage banking operations income of $5.1 million for the third quarter of 2022 decreased $3.1 million, or 37.6%, from the same period of 2021, as secondary market revenue and mortgage held-for-sale pipelines declined from higher levels given the sharp increase in interest rates in 2022. During the third quarter of 2022, we sold $214.2 million of residential mortgage loans, compared to $395.6 million for the same period of 2021, a decrease of 45.8%.

Dividends on non-marketable equity securities of $3.3 million for the third quarter of 2022 increased $1.4 million, or 75.4%, from the same period of 2021, reflecting an increase in the FRB dividend rate given the higher interest-rate environment.

Other non-interest income was $4.7 million and $9.4 million for the third quarters of 2022 and 2021, respectively, as SBA premium income declined $1.9 million from elevated levels and the year-ago quarter included a $2.2 million recovery on a previously written-off asset.

Non-Interest Expense

The breakdown of non-interest expense for the three months ended September 30, 2022 and 2021 is presented in the following table:

TABLE 8


	Three Months Ended September 30,				$		%
(dollars in thousands)	2022		2021		Change		Change
Salaries and employee benefits	$	106,620	$	104,899	$	1,721	1.6	%
Net occupancy	15,597		12,913		2,684		20.8
Equipment	19,242		17,664		1,578		8.9
Amortization of intangibles	3,547		3,022		525		17.4
Outside services	19,008		17,839		1,169		6.6
Marketing	3,196		3,760		(564)		(15.0)
FDIC insurance	5,221		4,380		841		19.2
Bank shares and franchise taxes	3,991		3,584		407		11.4
Merger-related	2,105		940		1,165		123.9
Other	16,530		15,225		1,305		8.6
Total non-interest expense	$	195,057	$	184,226	$	10,831	5.9	%

Total non-interest expense of $195.1 million for the third quarter of 2022 increased $10.8 million, or 5.9%, from the same period of 2021. Non-interest expense increased $9.7 million, or 5.3%, when excluding significant items of $2.1 million and $0.9 million in merger-related expenses in the third quarters of 2022 and 2021, respectively. The variances in the individual non-interest expense items are further explained in the following paragraphs.

Salaries and employee benefits of $106.6 million for the third quarter of 2022 increased $1.7 million, or 1.6%, from the same period of 2021, due primarily to normal annual merit increases and the acquired Howard expense base.

Net occupancy and equipment of $34.8 million for the third quarter of 2022 increased $4.3 million, or 13.9%, from the same period of 2021, primarily from technology-related investments and the acquired Howard expense base.

Outside services of $19.0 million for the third quarter of 2022 increased $1.2 million, or 6.6%, with higher volume-related technology and third-party costs, as well as the acquired Howard expense base.

FDIC insurance of $5.2 million for the third quarter of 2022 increased $0.8 million, or 19.2%, from the same period of 2021, primarily due to loan growth and balance sheet mix shift.

We recorded $2.1 million in merger-related costs in the third quarter of 2022 relating to the the pending UB Bancorp merger and the Howard acquisition, compared to $0.9 million in the third quarter of 2021 related to the Howard acquisition.

Other non-interest expense was $16.5 million and $15.2 million for the third quarters of 2022 and 2021, respectively, as business development expense and other operational costs increased compared to the year-ago period.

The following table presents non-interest expense excluding significant items for the three months ended September 30, 2022 and 2021:

TABLE 9


	Three Months Ended September 30,				$		%
(dollars in thousands)	2022		2021		Change		Change
Total non-interest expense, as reported	$	195,057	$	184,226	$	10,831	5.9	%
Significant items:



Merger-related	(2,105)		(940)		(1,165)
Total non-interest expense, excluding significant items (1)	$	192,952	$	183,286	$	9,666	5.3	%

(1) Non-GAAP

Income Taxes

The following table presents information regarding income tax expense and certain tax rates:

TABLE 10


	Three Months Ended September 30,
(dollars in thousands)	2022			2021
Income tax expense	$	35,846		$	27,327
Effective tax rate	20.7		%	19.7		%
Statutory federal tax rate	21.0			21.0

Both periods’ tax rates are lower than the federal statutory tax rate of 21% due to tax benefits primarily resulting from tax-exempt income on investments and loans, tax credits and income from BOLI. Income tax expense and the effective tax rate increased due to higher pre-tax income and state income taxes compared to the year-ago quarter.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Net income available to common stockholders for the first nine months of 2022 was $293.6 million or $0.83 per diluted common share, compared to $300.1 million or $0.93 per diluted common share for the first nine months of 2021. On an operating basis (non-GAAP), net income available to common stockholders for the first nine months of 2022 was $337.9 million, or $0.96, compared to $302.9 million or $0.94 per diluted common share for the first nine months of 2021. The provision for credit losses for the first nine months of 2022 totaled $35.6 million, including $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition, compared to $3.0 million in the first nine months of 2021. Non-interest income totaled $242.9 million, a decrease of $8.5 million, or 3.4%, reflecting reduced contributions from mortgage banking due to the sharp increase in interest rates in 2022 and lower capital markets income from record levels in 2021, partially offset by increased contributions from wealth management and dividends on non-marketable equity securities, as well as higher service charges reflecting increased customer activity. Non-interest expense of $615.3 million, increased $63.7 million, or 11.5%, as the first nine months of 2022 included merger-related costs of $32.8 million and branch consolidation costs of $4.2 million. The first nine months of 2021 included merger-related costs of $0.9 million and branch consolidation costs of $2.6 million.

Financial highlights are summarized below:

TABLE 11


	Nine Months Ended September 30,				$		%
(in thousands, except per share data)	2022		2021		Change		Change
Net interest income	$	784,891	$	683,200	$	101,691	14.9	%
Provision for credit losses	35,569		2,979		32,590		1,094.0
Non-interest income	242,940		251,431		(8,491)		(3.4)
Non-interest expense	615,257		551,588		63,669		11.5
Income taxes	77,367		73,929		3,438		4.7
Net income	299,638		306,135		(6,497)		(2.1)
Less: Preferred stock dividends	6,030		6,030		—		—
Net income available to common stockholders	$	293,608	$	300,105	$	(6,497)	(2.2)	%
Earnings per common share – Basic	$	0.84	$	0.94	$	(0.10)	(10.6)	%
Earnings per common share – Diluted	0.83		0.93		(0.10)		(10.8)
Cash dividends per common share	0.36		0.36		—		—

The following table presents selected financial ratios and other relevant data used to analyze our performance:

TABLE 12


	Nine Months Ended September 30,
	2022			2021
Return on average equity	7.33		%	8.17		%
Return on average tangible common equity (2)	13.99			15.87
Return on average assets	0.96			1.07
Return on average tangible assets (2)	1.05			1.16
Book value per common share (1)	$	15.11		$	15.65
Tangible book value per common share (1) (2)	8.02			8.42
Equity to assets (1)	12.69		%	12.95		%
Average equity to average assets	13.11			13.07
Common equity to assets (1)	12.44			12.68
Tangible equity to tangible assets (1) (2)	7.28			7.53
Tangible common equity to tangible assets (1) (2)	7.02			7.24
Common equity tier 1 capital ratio (1)	9.7			9.9
Dividend payout ratio	43.55			38.88

(1) Period-end

(2) Non-GAAP

TABLE 13


	Nine Months Ended September 30,
	2022						2021
(dollars in thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Assets
Interest-earning assets:
Interest-bearing deposits with banks	$	2,465,800	$	14,737	0.80	%	$	2,399,683	$	2,310	0.13	%

Taxable investment securities (1)	6,083,200		81,359		1.78		5,033,410		63,958		1.69
Tax-exempt investment securities (1)(2)	1,008,438		25,779		3.41		1,100,120		28,337		3.43
Loans held for sale	208,718		6,234		3.99		206,589		5,739		3.70
Loans and leases (2) (3)	27,313,051		757,133		3.70		25,190,510		667,835		3.54
Total interest-earning assets (2)	37,079,207		885,242		3.19		33,930,312		768,179		3.02
Cash and due from banks	427,118						376,276
Allowance for credit losses	(372,163)						(366,849)
Premises and equipment	396,804						337,262
Other assets	4,155,280						4,017,431
Total assets	$	41,686,246					$	38,294,432
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	14,946,096	37,915		0.34		$	13,683,402	14,927		0.15
Savings	3,940,100		3,106		0.11		3,394,718		510		0.02
Certificates and other time	2,961,870		12,889		0.58		3,294,084		22,623		0.92
Total interest-bearing deposits	21,848,066		53,910		0.33		20,372,204		38,060		0.25
Short-term borrowings	1,440,034		17,697		1.64		1,688,999		20,255		1.60
Long-term borrowings	758,373		20,574		3.63		977,269		18,443		2.52
Total interest-bearing liabilities	24,046,473		92,181		0.51		23,038,472		76,758		0.45
Non-interest-bearing demand	11,600,639						9,874,148
Total deposits and borrowings	35,647,112				0.35		32,912,620				0.31
Other liabilities	574,336						374,898
Total liabilities	36,221,448						33,287,518
Stockholders’ equity	5,464,798						5,006,914
Total liabilities and stockholders’ equity	$	41,686,246					$	38,294,432
Net interest-earning assets	$	13,032,734					$	10,891,840
Net interest income (FTE) (2)			793,061						691,421
Tax-equivalent adjustment			(8,170)						(8,221)
Net interest income			$	784,891					$	683,200
Net interest spread					2.68	%					2.57	%
Net interest margin (2)					2.86	%					2.72	%

(1)The average balances and yields earned on securities are based on historical cost.

(3)Average balances include non-accrual loans. Loans and leases consist of average total loans less average unearned income.

Net Interest Income

Net interest income on an FTE basis (non-GAAP) totaled $793.1 million, increasing $101.6 million, or 14.7%, as the higher interest rate environment benefited earning asset yields given the asset sensitive positioning of the balance sheet. There was growth in earning assets of $3.1 billion, or 9.3%, primarily driven by strong loan growth. The net interest margin (FTE) (non-GAAP) increased 14 basis points to 2.86%, primarily reflecting higher yields on variable-rate loans, investment securities and excess cash balances, partially offset by a 0.13% reduction related to PPP.

The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021:

TABLE 14


(in thousands)	Volume		Rate		Net
Interest Income (1)
Interest-bearing deposits with banks	$	65	$	12,362	$	12,427

Securities (2)	10,772		4,071		14,843
Loans held for sale	339		156		495
Loans and leases (2)	44,665		44,633		89,298
Total interest income (2)	55,841		61,222		117,063
Interest Expense (1)
Deposits:
Interest-bearing demand	981		22,007		22,988
Savings	58		2,538		2,596
Certificates and other time	(1,553)		(8,181)		(9,734)
Short-term borrowings	(3,167)		609		(2,558)
Long-term borrowings	(4,127)		6,258		2,131
Total interest expense	(7,808)		23,231		15,423
Net change (2)	$	63,649	$	37,991	$	101,640

(1)The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes.

Interest income on an FTE basis (non-GAAP) of $885.2 million for the first nine months of 2022, increased $117.1 million, or 15.2%, from the same period of 2021, resulting from the 2022 interest rate increases by the FOMC and an increase in earning assets of $3.1 billion. The increase in earning assets was primarily driven by a $2.1 billion, or 8.4%, increase in average loans and an increase in average securities of $958.1 million. Growth in total average commercial loans included $842.4 million, or 8.6%, in commercial real estate, partially offset by a decline of $431.0 million, or 6.3%, in commercial and industrial loans, due to average PPP loans declining $1.7 billion as the portfolio winds down. Commercial origination activity was led by the Cleveland, Pittsburgh and North Carolina markets, as well as acquired Howard loans. Average consumer loans increased $1.6 billion, or 20.5%, with an increase in residential mortgage loans of $958.4 million, or 27.9%, direct home equity installment loans of $552.2 million, or 26.4%, and indirect installment loans of $110.4 million, or 9.1%, driven by a combination of the Howard acquisition and organic loan origination activity. Additionally, the net increase in the securities portfolio was a result of management's strategy to deploy excess liquidity into higher yielding securities, as average securities increased 15.6%. For the first nine months of 2022, the yield on average earning assets (non-GAAP) increased 17 basis points to 3.19%, compared to the first nine months of 2021, reflecting the higher yields on variable-rate loans, investment securities and excess cash balances, partially offset by significant reductions in PPP contributions.

Interest expense of $92.2 million for the first nine months of 2022 increased $15.4 million, or 20.1%, from the same period of 2021, primarily due to the higher interest rate environment and an increase in average interest-bearing deposits. The growth in average deposits reflected inflows from the Howard acquisition and solid organic growth in new and existing customer

relationships. Average interest-bearing deposits increased $1.5 billion, or 7.2%, which reflects the benefit of solid organic growth in customer relationships and the addition of Howard. Average time deposits declined $332.2 million, or 10.1%, as customer preferences shifted away from higher rate certificates of deposit to lower yielding, more liquid products, however, customers' preferences are beginning to shift back to certificates of deposits as interest rates increase. Average long-term borrowings decreased $218.9 million, or 22.4%, primarily due to a decrease of $285.7 million in long-term FHLB borrowings, partially offset by increases of $47.8 million in senior debt resulting from the issuance of $350 million in 5.150% fixed rate senior notes during August 2022 and $23.4 million in subordinated debt resulting from $25.0 million acquired in the Howard acquisition. The rate paid on interest-bearing liabilities increased 6 basis points to 0.51% for the first nine months of 2022, compared to the first nine months of 2021. Similarly, the cost of interest-bearing deposits increased 8 basis points from 0.25% to 0.33%. These increases were primarily a result of the interest rate actions taken by the FOMC, combined with the issuance of senior debt in August 2022.

Provision for Credit Losses

The following table presents information regarding the provision for credit loss expense and net charge-offs:

TABLE 15


	Nine Months Ended September 30,						$		%
(dollars in thousands)	2022			2021			Change		Change
Provision for credit losses (on loans and leases)	$	35,294		$	(1,309)		$	36,603	2,796.3	%
Provision for unfunded loan commitments	206			4,275			(4,069)		(95.2)
Provision for credit losses	$	35,500		$	2,966		$	32,534	1,096.9	%
Net loan charge-offs	4,319			12,548			(8,229)		(65.6)
Net loan charge-offs (annualized) / total average loans and leases	0.02		%	0.07		%

Provision for credit losses was $35.5 million for the nine months ended September 30, 2022, an increase of $32.5 million, from the same period of 2021. The year-to-date amount for 2022 is comprised of a $35.3 million provision for loans and leases outstanding and a $0.2 million provision for unfunded loan commitments. The increase reflects $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition and significant growth in loans outstanding, partially offset by favorable asset quality performance across all loan portfolio credit metrics in 2022. Net loan charge-offs were $4.3 million during the nine months ended September 30, 2022, compared to $12.5 million during the nine months ended September 30, 2021, with both periods well below historical levels.

Non-Interest Income

The breakdown of non-interest income for the nine months ended September 30, 2022 and 2021 is presented in the following table:

TABLE 16


	Nine Months Ended September 30,				$		%
(dollars in thousands)	2022		2021		Change		Change
Service charges	$	102,162	$	89,273	$	12,889	14.4	%
Trust services	29,662		27,836		1,826		6.6
Insurance commissions and fees	19,747		20,188		(441)		(2.2)
Securities commissions and fees	17,490		16,830		660		3.9
Capital markets income	25,279		27,265		(1,986)		(7.3)
Mortgage banking operations	17,935		31,400		(13,465)		(42.9)
Dividends on non-marketable equity securities	8,178		6,516		1,662		25.5
Bank owned life insurance	9,330		10,993		(1,663)		(15.1)
Net securities gains	48		193		(145)		(75.1)

Other	13,109		20,937		(7,828)		(37.4)
Total non-interest income	$	242,940	$	251,431	$	(8,491)	(3.4)	%

Total non-interest income decreased $8.5 million, or 3.4%. The variances in significant individual non-interest income items are explained in the following paragraphs.

Service charges of $102.2 million for the first nine months of 2022 increased $12.9 million, or 14.4%, from the same period of 2021, driven by interchange fees, increases in treasury management services and higher customer activity.

Trust services of $29.7 million for the first nine months of 2022 increased $1.8 million, or 6.6%, from the same period of 2021, primarily driven by contributions across the geographic footprint, partially offset by the market value of assets under management decreasing $604.4 million, or 7.7%, to $7.2 billion at September 30, 2022.

Capital markets income of $25.3 million for the first nine months of 2022 decreased $2.0 million, or 7.3%, from the same period of 2021, as swap activity decreased from elevated levels and was partially offset by increases in international banking, syndications and debt capital markets.

Mortgage banking operations income of $17.9 million for the first nine months of 2022 decreased $13.5 million, or 42.9%, from the same period of 2021 as secondary market revenue and mortgage held-for-sale pipelines declined from elevated levels in 2021 due to the sharp increase in interest rates. During the first nine months of 2022, we sold $909.6 million of residential mortgage loans, a 36.7% decrease compared to $1.4 billion for the same period of 2021.

Dividends on non-marketable equity securities of $8.2 million for the first nine months of 2022 increased $1.7 million, or 25.5%, from the same period of 2021, reflecting an increase in FRB dividends given the higher interest-rate environment, partially offset by a decrease in FHLB dividends.

Bank owned life insurance of $9.3 million for the first nine months of 2022 decreased $1.7 million, or 15.1%, from the same period of 2021, due to higher life insurance claims in the 2021 period.

Other non-interest income was $13.1 million and $20.9 million for the first nine months of 2022 and 2021, respectively, as SBA premium income declined $4.1 million from elevated 2021 levels due to the higher interest rate environment and the prior year also included a $2.2 million recovery on a previously written-off other asset.

Non-Interest Expense

The breakdown of non-interest expense for the nine months ended September 30, 2022 and 2021 is presented in the following table:

TABLE 17


	Nine Months Ended September 30,				$		%
(dollars in thousands)	2022		2021		Change		Change
Salaries and employee benefits	$	322,679	$	314,275	$	8,404	2.7	%
Net occupancy	49,554		45,372		4,182		9.2
Equipment	55,934		51,854		4,080		7.9
Amortization of intangibles	10,323		9,096		1,227		13.5
Outside services	53,306		53,463		(157)		(0.3)
Marketing	11,080		10,593		487		4.6
FDIC insurance	15,090		13,432		1,658		12.3
Bank shares and franchise taxes	11,923		10,939		984		9.0
Merger-related	32,761		940		31,821		3,385.2
Other	52,607		41,624		10,983		26.4
Total non-interest expense	$	615,257	$	551,588	$	63,669	11.5	%

Total non-interest expense of $615.3 million for the first nine months of 2022 increased $63.7 million, an 11.5% increase from the same period of 2021. On an operating basis, non-interest expense (non-GAAP) increased $30.3 million, or 5.5%, when excluding significant items of $32.8 million in merger-related costs and $4.2 million in branch consolidation costs in the first nine months of 2022, compared to $0.9 million and $2.6 million, respectively, in the first nine months of 2021. The variances in the individual non-interest expense items are further explained in the following paragraphs.

Salaries and employee benefits of $322.7 million for the first nine months of 2022 increased $8.4 million, or 2.7%, from the same period of 2021, due to normal merit increases, higher production-related commissions and incentives and the acquired Howard expense base.

Net occupancy and equipment expense of $105.5 million for the first nine months of 2022 increased $8.3 million, or 8.5%, from the same period of 2021, primarily from technology-related investments and the acquired Howard expense base.

Amortization of intangibles of $10.3 million for the first nine months of 2022 increased $1.2 million, or 13.5%, from the same period of 2021, primarily due to additional core deposit intangibles added as a result of the Howard acquisition.

FDIC insurance of $15.1 million for the first nine months of 2022 increased $1.7 million, or 12.3%, from the same period of 2021, primarily due to loan growth and balance sheet mix shift.

Bank shares and franchise taxes of $11.9 million for the first nine months of 2022 increased $1.0 million, or 9.0%, from the same period of 2021, primarily due to an increase in the bank's capital tax base.

We recorded $32.8 million in merger-related costs for the first nine months of 2022 related to the Howard acquisition which closed on January 22, 2022 and the pending UB Bancorp acquisition, compared to $0.9 million related to the Howard acquisition in the first nine months of 2021.

Other non-interest expense was $52.6 million and $41.6 million for the first nine months of 2022 and 2021, respectively. There was $2.2 million in branch consolidation costs and an increase in business development expense and other operational costs in the first nine months of 2022. Comparatively, we had $0.5 million in branch consolidation costs and a $2.2 million mortgage recourse reserve release in the first nine months of 2021.

The following table presents non-interest expense excluding significant items for the nine months ended September 30, 2022 and 2021:

TABLE 18


	Nine Months Ended September 30,				$		%
(dollars in thousands)	2022		2021		Change		Change
Total non-interest expense, as reported	$	615,257	$	551,588	$	63,669	11.5	%
Significant items:

Branch consolidations	(4,178)		(2,644)		(1,534)

Merger-related	(32,761)		(940)		(31,821)
Total non-interest expense, excluding significant items (1)	$	578,318	$	548,004	$	30,314	5.5	%

(1) Non-GAAP

Income Taxes

The following table presents information regarding income tax expense and certain tax rates:

TABLE 19


	Nine Months Ended September 30,
(dollars in thousands)	2022			2021
Income tax expense	$	77,367		$	73,929
Effective tax rate	20.5		%	19.5		%
Statutory federal tax rate	21.0			21.0

Both periods’ tax rates are lower than the federal statutory tax rates of 21% due to tax benefits primarily resulting from tax-exempt income on investments and loans, tax credits and income from BOLI. Income tax expense was higher in 2022 due to increased state income taxes as a result of the Howard acquisition as well as increased FDIC insurance deduction disallowance. The effective tax rate is higher in 2022 for the same reasons.

FINANCIAL CONDITION

The following table presents our condensed Consolidated Balance Sheets:

TABLE 20


(dollars in millions)	September 30, 2022		December 31, 2021		$ Change		% Change
Assets
Cash and cash equivalents	$	2,276	$	3,493	$	(1,217)	(34.8)	%
Securities	7,212		6,889		323		4.7
Loans held for sale	149		295		(146)		(49.5)
Loans and leases, net	28,395		24,624		3,771		15.3
Goodwill and other intangibles	2,487		2,304		183		7.9
Other assets	2,071		1,908		163		8.5
Total Assets	$	42,590	$	39,513	$	3,077	7.8	%
Liabilities and Stockholders’ Equity
Deposits	$	33,893	$	31,726	$	2,167	6.8	%
Borrowings	2,454		2,218		236		10.6
Other liabilities	837		419		418		99.8
Total Liabilities	37,184		34,363		2,821		8.2
Stockholders’ Equity	5,406		5,150		256		5.0
Total Liabilities and Stockholders’ Equity	$	42,590	$	39,513	$	3,077	7.8	%

The increase in assets and liabilities is primarily due to strong loan and deposit growth as well as the Howard acquisition.

Lending Activity

The loan and lease portfolio consists principally of loans and leases to individuals and small- and medium-sized businesses within our primary markets in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina.

Following is a summary of loans and leases:

TABLE 21


	September 30, 2022		December 31, 2021		$ Change		% Change
(in millions)
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	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	$	28,780	$	24,968	$	3,812	15.3	%

The commercial and industrial growth was led by activity in the Cleveland, Pittsburgh and North Carolina markets while the growth in residential mortgages reflected customer preferences for adjustable-rate mortgages and the continued success of our Physician's First mortgage program, which is a fully digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.

Non-Performing Assets

Following is a summary of non-performing assets:

TABLE 22


(in millions)	September 30, 2022		December 31, 2021		$ Change		% Change
Commercial real estate	$	46	$	48	$	(2)	(4.2)	%
Commercial and industrial	11		15		(4)		(26.7)
Commercial leases	1		1		—		—
Other	1		—		1		—
Total commercial loans and leases	59		64		(5)		(7.8)
Direct installment	7		7		—		—
Residential mortgages	14		10		4		40.0
Indirect installment	2		2		—		—
Consumer lines of credit	6		5		1		20.0
Total consumer loans	29		24		5		20.8
Total non-performing loans and leases	88		88		—		—
Other real estate owned	6		8		(2)		(25.0)
Non-performing assets	$	94	$	96	$	(2)	(2.1)	%

Non-performing assets decreased $1.9 million, from $96.2 million at December 31, 2021 to $94.3 million at September 30, 2022. This reflects a decrease of $0.3 million in non-performing loans and leases and a decrease of $1.6 million in OREO.

Troubled Debt Restructured Loans

Following is a summary of accruing and non-accrual TDRs, by class:

TABLE 23


(in millions)	Accruing		Non- Accrual		Total
September 30, 2022
Commercial real estate	$	5	$	21	$	26
Commercial and industrial	—		1		1
Total commercial loans	5		22		27
Direct installment	20		3		23
Residential mortgages	32		4		36

Consumer lines of credit	6		1		7
Total consumer loans	58		8		66
Total TDRs	$	63	$	30	$	93
December 31, 2021
Commercial real estate	$	6	$	21	$	27
Commercial and industrial	—		1		1
Total commercial loans	6		22		28
Direct installment	21		4		25
Residential mortgages	27		5		32

Consumer lines of credit	6		1		7
Total consumer loans	54		10		64
Total TDRs	$	60	$	32	$	92

Allowance for Credit Losses on Loans and Leases

•a third-party macroeconomic forecast scenario;

•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and

•the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period.

At September 30, 2022 and December 31, 2021, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at September 30, 2022, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 2.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 4.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 5.5% in 2022 and 2.4% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historic levels. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2021 included, but were not limited to: (i) the purchase only Housing Price Index, which reflected growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflected growth of 13.0% over our R&S forecast period, (iii) S&P Volatility, which increases 15.2% in 2022 and 1.9% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels.

Following is a summary of certain ratios related to the ACL and loans and leases:

TABLE 24


	Nine Months Ended September 30,
	2022		2021
Net loan charge-offs (annualized) by category to average loans:
Commercial real estate	—	%	0.02	%
Commercial and industrial	—		0.04

Other commercial	0.01		—
Direct installment	—		0.01

Indirect installment	0.01		—

Net loan charge-offs (annualized)/average loans	0.02	%	0.07	%
Allowance for credit losses/total loans and leases	1.34	%	1.41	%
Allowance for credit losses/non-performing loans	439.94	%	317.04	%

The ACL on loans and leases of $385.3 million at September 30, 2022 increased $41.1 million, or 11.9%, from December 31, 2021, with the increase primarily driven by significant loan growth, a forecasted macroeconomic slowdown and lower prepayment speed assumptions and the initial ACL related to the Howard acquisition. Our ending ACL coverage ratio at September 30, 2022 was 1.34%, compared to 1.38% at December 31, 2021. Total provision for credit losses for the nine months ended September 30, 2022 was $35.6 million, compared to $3.0 million for the same period in 2021 reflecting $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition in the first quarter of 2022. Net charge-offs were $4.3 million for the nine months ended September 30, 2022, compared to $12.5 million for the first nine months of 2021, with both periods well below historical levels. The ACL as a percentage of non-performing loans for the total portfolio increased from 392% as of December 31, 2021 to 440% as of September 30, 2022.

Deposits

Our primary source of funds is deposits. These deposits are provided by business, consumer and municipal customers who we serve within our footprint.

Following is a summary of deposits:

TABLE 25


(in millions)	September 30, 2022		December 31, 2021		$ Change		% Change
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	%

Total deposits increased $2.2 billion, or 6.8%, from December 31, 2021, primarily as a result of growth in non-interest-bearing and interest-bearing demand balances due to the Howard acquisition as well as an expansion of customer relationships and higher customer balances. Customer preferences had shifted to more liquid accounts during the low-rate pandemic era, however, customers' preferences are beginning to shift back to certificates of deposits as interest rates increase. The deposit growth helped us eliminate overnight borrowings, reduce higher-cost short-term FHLB borrowings and provide cash to be used for funding loan growth.

Capital Resources and Regulatory Matters

The access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight depend, in part, on our capital position.

The assessment of capital adequacy depends on a number of factors such as expected organic growth in the Consolidated Balance Sheet, asset quality, liquidity, earnings performance and sustainability, changing competitive conditions, regulatory changes or actions, and economic forces. We seek to maintain a strong capital base to support our growth and expansion activities, to provide stability to current operations and to promote public confidence.

We have an effective shelf registration statement filed with the SEC. Pursuant to this registration statement, we may, from time to time, issue and sell in one or more offerings any combination of common stock, preferred stock, debt securities, depositary shares, warrants, stock purchase contracts or units.

On April 18, 2022, we announced that our Board of Directors approved an additional $150 million for the repurchase of our common stock through our existing share repurchase program bringing the total authorization to $300 million. Since inception, we repurchased 11.0 million shares at a weighted average share price of $11.33 for $124.4 million under this repurchase program, with $175.6 million remaining for repurchase. The repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions. The purchases will be funded from available working capital. There is no guarantee as to the exact number of shares that will be repurchased and we may discontinue purchases at any time. The Inflation Reduction Act of 2022 includes a 1% excise tax on stock repurchases beginning January 1, 2023.

Capital management is a continuous process, with capital plans and stress testing for FNB and FNBPA updated at least annually. These capital plans include assessing the adequacy of expected capital levels assuming various scenarios by projecting capital needs for a forecast period of 2-3 years beyond the current year. From time to time, we issue shares initially acquired by us as treasury stock under our various benefit plans. We may issue additional preferred or common stock to maintain our well-capitalized status.

FNB and FNBPA are subject to various regulatory capital requirements administered by the federal banking agencies (see discussion under “Enhanced Regulatory Capital Standards”). Quantitative measures established by regulators to ensure capital adequacy require FNB and FNBPA to maintain minimum amounts and ratios of total, tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined) and a minimum leverage ratio (as defined). Failure to meet minimum capital requirements could lead to initiation of certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on our Consolidated Financial Statements, dividends and future business and corporate strategies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, FNB and FNBPA must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. FNB’s and FNBPA’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

At September 30, 2022, the capital levels of both FNB and FNBPA exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered “well-capitalized” for regulatory purposes.

In December 2018, the FRB and other U.S. banking agencies approved a rule to address the impact of CECL on regulatory capital by allowing BHCs and banks, including FNB, the option to phase in the day-one impact of CECL over a three-year period. In March 2020, the FRB and other U.S. banking agencies issued a final rule that became effective on March 31, 2020, and provides BHCs and banks with an alternative option to temporarily delay the impact of CECL, relative to the incurred loss methodology for the ACL, on regulatory capital. We have elected this alternative option instead of the one described in the December 2018 rule. As a result, under the final rule, we delayed recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extended through December 31, 2021. Beginning on January 1, 2022, we were required to phase in 25% of the previously deferred capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Under the final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as the entire day-one impact at adoption plus 25% of the subsequent change in the ACL during the two-year deferral period. As of September 30, 2022, the total deferred impact on CET1 capital related to our adoption of CECL was approximately $51.6 million, or 15 basis points, which will continue to be reduced by approximately $17.2 million annually.

In this unprecedented economic and uncertain environment, we frequently run stress tests for a variety of economic situations, including severely adverse scenarios that have economic conditions like the current conditions. Under these scenarios, the results of these stress tests indicate that our regulatory capital ratios would remain above the regulatory requirements and we would be able to maintain appropriate liquidity levels, demonstrating our expected ability to continue to support our constituencies under stressful financial conditions.

Following are the capital amounts and related ratios for FNB and FNBPA:

TABLE 26


	Actual				Well-Capitalized Requirements (1)				Minimum Capital Requirements plus Capital Conservation Buffer
(dollars in millions)	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of September 30, 2022
F.N.B. Corporation
Total capital	$	3,998	11.96	%	$	3,342	10.00	%	$	3,510	10.50	%
Tier 1 capital	3,357		10.04		2,005		6.00		2,841		8.50
Common equity tier 1	3,250		9.72		n/a		n/a		2,340		7.00
Leverage	3,357		8.42		n/a		n/a		1,594		4.00
Risk-weighted assets	33,424
FNBPA
Total capital	4,160		12.48	%	3,335		10.00	%	3,502		10.50	%
Tier 1 capital	3,497		10.49		2,668		8.00		2,835		8.50
Common equity tier 1	3,417		10.25		2,168		6.50		2,334		7.00
Leverage	3,497		8.79		1,989		5.00		1,591		4.00
Risk-weighted assets	33,348
As of December 31, 2021
F.N.B. Corporation
Total capital	$	3,531	12.18	%	$	2,899	10.00	%	$	3,044	10.50	%
Tier 1 capital	2,984		10.29		1,739		6.00		2,464		8.50
Common equity tier 1	2,877		9.92		n/a		n/a		2,029		7.00
Leverage	2,984		7.99		n/a		n/a		1,493		4.00
Risk-weighted assets	28,991
FNBPA
Total capital	3,695		12.77	%	2,893		10.00	%	3,038		10.50	%
Tier 1 capital	3,098		10.71		2,314		8.00		2,459		8.50
Common equity tier 1	3,018		10.43		1,880		6.50		2,025		7.00
Leverage	3,098		8.31		1,864		5.00		1,491		4.00
Risk-weighted assets	28,930

(1) Reflects the well-capitalized standard under Regulation Y for F.N.B. Corporation and the prompt corrective action framework for FNBPA.

In accordance with Basel III Capital Rules, the minimum capital requirements plus capital conservation buffer, which are presented for each period above, represent the minimum requirements needed to avoid limitations on distributions of dividends and certain discretionary bonus payments.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act)

The Dodd-Frank Act broadly affects the financial services industry by establishing a framework for systemic risk oversight, creating a resolution authority for institutions determined to be systemically important, mandating higher capital and liquidity requirements, requiring banks to pay increased fees to regulatory agencies and containing numerous other provisions aimed at strengthening the sound operation of the financial services sector that significantly change the system of regulatory oversight as described in more detail under Part I, Item 1, “Business - Government Supervision and Regulation” included in our 2021 Annual Report on Form 10-K as filed with the SEC on February 24, 2022.

LIQUIDITY

Our goal in liquidity management is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding. Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and adequate levels of liquidity. Our Board of Directors has also established Liquidity and Contingency Funding Policies to guide management in addressing the ability to identify, measure, monitor and control both normal and stressed liquidity conditions. These policies designate our ALCO as the body responsible for meeting these objectives. The ALCO, which is comprised of members of executive management, reviews liquidity on a continuous basis and approves significant changes in strategies that affect Balance Sheet or cash flow positions. Liquidity is centrally managed daily by our Treasury Department. Liquidity sources from assets include payments from loans and investments, as well as the ability to securitize, pledge or sell loans, investment securities and other assets. Liquidity sources from liabilities are generated primarily through the banking offices of FNBPA in the form of deposits and customer repurchase agreements. FNB also has access to reliable and cost-effective wholesale sources of liquidity. Short- and long-term funds are available for use to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if we would be faced with a liquidity crisis.

The principal sources of the parent company’s liquidity are its strong existing cash resources plus dividends it receives from its subsidiaries. These dividends may be impacted by the parent’s or its subsidiaries’ capital needs, statutory laws and regulations, corporate policies, contractual restrictions, profitability and other factors. In addition, through one of our subsidiaries, we regularly issue subordinated notes, which are guaranteed by FNB. The cash position at September 30, 2022 was $633.9 million, up $338.5 million from year-end, primarily due to the $347.7 million net proceeds from a Senior Debt offering in August, part of which will be used to retire debt in February of 2023 (for additional information, see Note 10, "Borrowings" in the Notes to the Consolidated Financial Statements in this Report). Management has utilized various strategies to ensure sufficient cash on hand is available to meet the parent's funding needs.

Two metrics that are used to gauge the adequacy of the parent company’s cash position are the Liquidity Coverage Ratio (LCR) and Months of Cash on Hand (MCH). The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months. The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the cash on hand.

The LCR and MCH ratios are presented in the following table:

TABLE 27

September 30,
2022

December 31,
2021

Internal
Limit

Liquidity coverage ratio

1.6 times

2.4 times

> 1 time

Months of cash on hand

13.3 months

16.9 months

> 12 months

Management has concluded that our cash levels remain appropriate given the current market environment.

Our liquidity position has been positively impacted by our ability to generate growth in relationship-based accounts. Organic growth in low-cost transaction deposits was complemented by management’s strategy of deposit gathering efforts focused on attracting new customer relationships and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities. This year we also commenced the roll-out of the new digital eStore kiosks in all FNB branches. Total deposits increased $2.2 billion, or 6.8%, from December 31, 2021, primarily as a result of growth in non-interest-bearing demand balances, expansion of customer relationships as well as interest-bearing demand balances due to the Howard acquisition. We continue to have success growing total non-interest-bearing demand deposit accounts as they rose $1.0 billion, or 8.9%, and now represent 34.7% of total deposits, up from 34.0% as of December 31, 2021. Further, interest-bearing demand deposits increased $842.5 million, or 5.8% and savings account balances increased $322.2 million, or 8.8%. Time deposits increased $40.0 million, or 1.4%. Due to the FOMC increasing interest rates, customer time deposit balances grew in the third quarter, the first quarter of growth in 2022. Our strong liquidity position provided us the flexibility to reduce our FHLB borrowings by $100 million and eliminate Howard's overnight borrowings and retire $200 million of Howard's higher-cost FHLB borrowings.

Our cash balances held at the FRB decreased $1.3 billion from December 31, 2021 to $1.7 billion at September 30, 2022 as cash was deployed primarily to fund loans and investments.

FNBPA has significant unused wholesale credit availability sources that include the availability to borrow from the FHLB, the FRB, correspondent bank lines, access to brokered deposits and other channels. In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs. We currently also have excess cash to meet our pledging requirements. At September 30, 2022, we have $2.0 billion of cash and salable unpledged government and agency securities to total assets, or 4.8%. This compares to a policy minimum of 3.0%.

The following table presents certain information relating to FNBPA’s credit availability and salable unpledged securities:

TABLE 28


(dollars in millions)	September 30, 2022			December 31, 2021
Unused wholesale credit availability	$	15,893		$	14,681
Unused wholesale credit availability as a % of FNBPA assets	37.4		%	37.2		%
Salable unpledged government and agency securities	$	306		$	836
Salable unpledged government and agency securities as a % of FNBPA assets	0.7		%	2.1		%
Cash and salable unpledged government and agency securities as a % of FNBPA assets	4.8		%	9.8		%

The increase in unused wholesale credit availability was due to increased borrowing capacity with the FHLB.

Another metric for measuring liquidity risk is the liquidity gap analysis. The following liquidity gap analysis as of September 30, 2022 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals. Management monitors the size of the liquidity gaps so that sources and uses of funds are reasonably matched in the normal course of business and in relation to implied forward rate expectations. A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis. A positive gap position means that more assets are repricing over the next 12 months than liabilities, and net interest income would benefit if interest rates were to rise. The twelve-month cumulative gap to total assets ratio was 6.1% as of September 30, 2022, compared to 11.3% as of December 31, 2021. Management calculates this ratio at least quarterly and it is reviewed regularly by ALCO. The change in the twelve-month cumulative gap to total assets is primarily related to the active deployment of cash into loans and securities.

TABLE 29


(dollars in millions)	Within 1 Month			2-3 Months			4-6 Months			7-12 Months			Total 1 Year
Assets
Loans	$	678		$	1,321		$	1,614		$	3,013		$	6,626
Investments	1,891			147			224			450			2,712
	2,569			1,468			1,838			3,463			9,338
Liabilities
Non-maturity deposits	312			625			938			1,877			3,752
Time deposits	205			426			624			915			2,170
Borrowings	186			18			324			276			804
	703			1,069			1,886			3,068			6,726
Period Gap (Assets - Liabilities)	$	1,866		$	399		$	(48)		$	395		$	2,612
Cumulative Gap	$	1,866		$	2,265		$	2,217		$	2,612
Cumulative Gap to Total Assets	4.4		%	5.3		%	5.2		%	6.1		%

In addition, the ALCO regularly monitors various liquidity ratios and stress scenarios of our liquidity position. The stress scenarios forecast that adequate funding will be available even under severe conditions. Management believes we have sufficient liquidity available to meet our normal operating and contingency funding cash needs.

MARKET RISK

Market risk refers to potential losses arising predominately from changes in interest rates, foreign exchange rates, equity prices and commodity prices. We are primarily exposed to interest rate risk inherent in our lending and deposit-taking activities as a financial intermediary. To succeed in this capacity, we offer an extensive variety of financial products to meet the diverse needs of our customers. These products sometimes contribute to interest rate risk for us when product groups do not complement one another. For example, depositors may want short-term deposits, while borrowers may desire long-term loans.

Changes in market interest rates may result in changes in the fair value of our financial instruments, cash flows and net interest income. Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital. We use derivative financial instruments for interest rate risk management purposes and not for trading or speculative purposes.

Interest rate risk is comprised of repricing risk, basis risk, yield curve risk and options risk. Repricing risk arises from differences in the cash flow or repricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indices, which do not always change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from “embedded options” within asset and liability products as certain borrowers have the option to prepay their loans, which may be with or without penalty, when rates change, while certain depositors can redeem their certificates of deposit early, which may be with or without penalty, when rates change.

We use an asset/liability model to measure our interest rate risk. Interest rate risk measures we utilize include earnings simulation, EVE and gap analysis. Gap analysis and EVE are static measures that do not incorporate assumptions regarding future business. Gap analysis, while a helpful diagnostic tool, displays cash flows for only a single rate environment. EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. In these simulations, our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. The ALCO reviews earnings simulations over multiple years under various interest rate scenarios on a periodic basis. Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies.

The following repricing gap analysis as of September 30, 2022 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. Management utilizes the repricing gap analysis as a diagnostic tool in managing net interest income and EVE risk measures.

TABLE 30


(dollars in millions)	Within 1 Month			2-3 Months			4-6 Months			7-12 Months			Total 1 Year
Assets
Loans	$	12,303		$	950		$	945		$	1,756		$	15,954
Investments	1,901			154			324			440			2,819
	14,204			1,104			1,269			2,196			18,773
Liabilities
Non-maturity deposits	10,125			—			—			—			10,125
Time deposits	331			425			622			911			2,289
Borrowings	692			334			305			37			1,368
	11,148			759			927			948			13,782
Off-balance sheet	(650)			530			(130)			(150)			(400)
Period Gap (assets – liabilities + off-balance sheet)	$	2,406		$	875		$	212		$	1,098		$	4,591
Cumulative Gap	$	2,406		$	3,281		$	3,493		$	4,591
Cumulative Gap to Assets	6.3		%	8.6		%	9.2		%	12.1		%

The twelve-month cumulative repricing gap to total assets was 12.1% and 21.6% as of September 30, 2022 and December 31, 2021, respectively. The positive cumulative gap positions indicate that we have a greater amount of repricing earning assets than repricing interest-bearing liabilities over the subsequent twelve months. If interest rates increase as modeled, net interest income will increase and, conversely, if interest rates decrease as modeled, net interest income will decrease. The change in the cumulative repricing gap at September 30, 2022, compared to December 31, 2021, is primarily related to the active deployment of cash into longer duration loans and investment securities as well as lower projected prepayment rates on the loan and security portfolios.

The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates. For example, if a product’s rate is estimated to increase by 50% as much as the market rates, then 50% of the account balance was placed in this category.

Utilizing net interest income simulations, the following net interest income metrics were calculated using rate shocks which move market rates in an immediate and parallel fashion. The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of September 30, 2022. Using a static Balance Sheet structure, the measures do not reflect management's potential counteractions.

The following table presents an analysis of the potential sensitivity of our net interest income and EVE to changes in interest rates using rate shocks:

TABLE 31


	September 30, 2022		December 31, 2021		ALCO Limits
Net interest income change (12 months):
+ 300 basis points	9.4	%	21.6	%	n/a
+ 200 basis points	6.2		14.4		(5.0)	%
+ 100 basis points	3.0		7.0		(5.0)
- 100 basis points	(0.4)		(2.4)		(5.0)
Economic value of equity:
+ 300 basis points	(5.4)		6.6		(25.0)
+ 200 basis points	(2.4)		5.8		(15.0)
+ 100 basis points	(1.0)		3.8		(10.0)
- 100 basis points	(3.2)		(9.5)		(10.0)

We also model rate scenarios which move all rates gradually over twelve months (Rate Ramps) and model scenarios that gradually change the shape of the yield curve. The comparative percentages are based on the projected base net interest income at the respective measurement dates. Assuming a static Balance Sheet, a +100 basis point Rate Ramp increases net interest income (12 months) by 1.8% at September 30, 2022 and 3.6% at December 31, 2021. For a +200 basis point Rate Ramp, net interest income (12 months) increases by 3.7% at September 30, 2022 and 7.6% at December 31, 2021. The corresponding metrics for a minus 100 basis point Rate Ramp are 0.02% and (0.5)% at September 30, 2022 and December 31, 2021, respectively. These changes are a direct result of our managing our interest rate exposure to benefit from higher rates and our asset sensitivity.

Forty-nine percent of our net loans and leases are indexed to short-term LIBOR, SOFR and Prime that reprice within the next three months. Our cash position related to increased deposits has also been a significant factor in our asset sensitivity metrics. The deployment of cash into loans and investments, as well as a higher base net interest income due to the increase in the loan indices, are the primary factors of the change in the percentage sensitivity since December. The FOMC has increased the Federal Funds rate by 300 basis points thus far in 2022 and our balance sheet is positioned to benefit from further FOMC increases of the Federal Funds rate.

There are multiple factors that influence our interest rate risk position and impact net interest income. These include external factors such as the shape of the yield curve and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits.

Our current interest rate risk (IRR) position is intended to benefit from higher interest rates. Management continues to be proactive in managing the IRR position with the near term objective of having loan and investment cash flows reprice at a faster pace than deposit and borrowing costs during the current higher interest rate environment. In particular, we have made use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase adjustable-rate loans. Total variable and adjustable-rate loans were 59.9% of total net loans and leases as of September 30, 2022 and 61.3% as of December 31, 2021. The acquisition of Howard was the primary driver of the decline of this metric. As of September 30, 2022, the commercial swaps totaled $5.3 billion of notional principal, with $868.7 million in original notional swap principal originated during the first nine months of 2022. As mentioned earlier, we were successful in growing our transaction deposits which provides funding that is less interest rate-sensitive, as evidenced by a lower deposit re-pricing beta, than short-term time deposits and wholesale borrowings. Furthermore, we regularly sell long-term fixed-rate residential mortgages in the secondary market and have been successful in the origination of consumer and commercial loans with short-term repricing characteristics. Further, during 2022, management has adjusted our IRR position by opportunistically deploying excess cash balances into higher yielding loans and securities. We have also made use of derivatives to manage the IRR position, with the most recent transactions being the execution of received fixed / pay floating 1-month LIBOR interest rate swaps that have a remaining life of 2.8 years. For additional information regarding interest rate swaps, see Note 11, "Derivative Instruments and Hedging Activities" in the Notes to the Consolidated Financial Statements in this Report.

We recognize that all asset/liability models have some inherent shortcomings. Asset/liability models require certain assumptions to be made, such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits, which may differ from actual experience. These business assumptions are based upon our experience, business plans, economic and market trends and available industry data. While management believes that its methodology for developing such assumptions is reasonable, there can be no assurance that modeled results will be achieved. Furthermore, the metrics are based upon the Balance Sheet structure as of the valuation date and do not reflect the planned growth or management actions that could be taken.

RISK MANAGEMENT

As a financial institution, we take on a certain amount of risk in every business decision, transaction and activity. Our Board of Directors and senior management have identified seven major categories of risk: credit risk, market risk, liquidity risk, reputational risk, operational risk, legal and compliance risk and strategic risk. In its oversight role of our risk management function, the Board of Directors focuses on the strategies, analyses and conclusions of management relating to identifying, understanding and managing risks to optimize total shareholder value, while balancing prudent business and safety and soundness considerations.

The Board of Directors adopted a risk appetite statement that defines acceptable risk levels and limits under which we seek to operate in order to optimize returns. As such, the board monitors a series of KRIs, or Key Risk Indicators, for various business lines, operational units, and risk categories, providing insight into how our performance aligns with our stated risk appetite. These results are reviewed periodically by the Board of Directors and senior management to ensure adherence to our risk appetite statement, and where appropriate, adjustments are made to applicable business strategies and tactics where risks are approaching stated tolerances or for emerging risks.

We support our risk management process through a governance structure involving our Board of Directors and senior management. The joint Risk Committee of our Board of Directors and the FNBPA Board of Directors helps ensure that business decisions are executed within appropriate risk tolerances. The Risk Committee has oversight responsibilities with respect to the following:

•identification, measurement, assessment and monitoring of enterprise-wide risk;

•development of appropriate and meaningful risk metrics to use in connection with the oversight of our businesses and strategies;

•review and assessment of our policies and practices to manage our credit, market, liquidity, legal, regulatory and operating risk (including technology, operational, compliance and fiduciary risks); and

•identification and implementation of risk management best practices.

The Risk Committee serves as the primary point of contact between our Board of Directors and the Risk Management Council, which is the senior management level committee responsible for risk management. Risk appetite is an integral element of our business and capital planning processes through our Board Risk Committee and Risk Management Council. We use our risk appetite processes to promote appropriate alignment of risk, capital and performance tactics, while also considering risk

capacity and appetite constraints from both financial and non-financial risks. Our top-down risk appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions. Our Board Risk Committee, in collaboration with our Risk Management Council, approves our risk appetite on an annual basis, or more frequently, as needed to reflect changes in the risk, regulatory, economic and strategic plan environments, with the goal of ensuring that our risk appetite remains consistent with our strategic plans and business operations, regulatory environment and our shareholders' expectations. Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee.

As noted above, we have a Risk Management Council comprised of senior management. The purpose of this committee is to provide regular oversight of specific areas of risk with respect to the level of risk and risk management structure. Management has also established an Operational Risk Committee that is responsible for identifying, evaluating and monitoring operational risks across FNB, evaluating and approving appropriate remediation efforts to address identified operational risks and providing periodic reports concerning operational risks to the Risk Management Council. The Risk Management Council reports on a regular basis to the Risk Committee of our Board of Directors regarding our enterprise-wide risk profile and other significant risk management issues. Our Chief Risk Officer is responsible for the design and implementation of our enterprise-wide risk management strategy and framework through the multiple second line of defense areas, including the following departments, which all report to the Chief Risk Officer to ensure the coordinated and consistent implementation of risk management initiatives and strategies on a day-to-day basis:

•Enterprise-Wide Risk Management Department - conducts risk and control assessments across all our business and operational areas to ensure the appropriate risk identification, risk management and reporting of risks enterprise-wide.

•Fraud Risk Department - monitors for internal and external fraud risk across all of our business and operational units.

•Loan Review Department - conducts independent testing of our loan risk ratings to ensure their accuracy, which is instrumental to calculating our ACL.

•Model Risk Management Department - oversees validation and testing of all models used in managing risk across our company.

•Third-Party Risk Management Department - ensures effective risk management and oversight of third-party relationships throughout the vendor life cycle.

•Anti-Money Laundering and Bank Secrecy Act Department - monitors for compliance with money laundering risk and associated regulatory compliance requirements.

•Appraisal Review Department - facilitates independent ordering and review of real estate appraisals obtained for determining the value of real estate pledged as collateral for loans to customers.

•Compliance Department - develops policies and procedures and monitors compliance with applicable laws and regulations which govern our business operations.

•Information and Cyber Security Department - maintains a risk assessment of our information and cybersecurity risks and ensures appropriate controls are in place to manage and control such risks, using the National Institute of Standards and Technology framework for improving critical infrastructure by measuring and evaluating the effectiveness of information and cybersecurity controls. This department also oversees our disaster recovery planning and testing efforts to allow us to be capable and ready for business resumption in the event of a disaster.

As discussed in more detail under the COVID-19 section of this Report, we have in place various business and emergency continuity plans to respond to different crises and circumstances which include rapid deployment of our Crisis Management Team, Incident Management Team and Business Continuity Coordinators to activate our plans for various types of emergency circumstances. Further, our audit function performs an independent assessment of our internal controls environment and plays an integral role in testing the operation of the internal controls systems and reporting findings to management and our Audit Committee. Each of the Risk, Audit, Credit Risk and CRA Committees of our Board of Directors regularly report on risk-related matters to the full Board of Directors. In addition, both the Risk Committee of our Board of Directors and our Risk Management Council regularly assess our enterprise-wide risk profile and provide guidance on actions needed to address key and emerging risk issues.

The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to:

•assess the quality of the information they receive;

•understand the businesses, investments and financial, accounting, legal, regulatory and strategic considerations and the risks that FNB faces;

•oversee and assess how senior management evaluates risk; and

•assess appropriately the quality of our enterprise-wide risk management process.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP

Reconciliations of non-GAAP operating measures and key performance indicators discussed in this Report to the most directly comparable GAAP financial measures are included in the following tables.

TABLE 32

Operating net income available to common stockholders


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Net income available to common stockholders	$	135,488	$	109,503	$	293,608	$	300,105
Merger-related expense	2,105		940		32,761		940
Tax benefit of merger-related expense	(442)		(197)		(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)	$	137,151	$	110,246	$	337,900	$	302,937

The table above shows how operating net income available to common stockholders (non-GAAP) is derived from amounts reported in our financial statements. We believe certain charges, such as merger expenses, initial provision for non-PCD loans acquired and branch consolidation costs are not organic costs to run our operations and facilities. The merger expenses and branch consolidation costs principally represent expenses to satisfy contractual obligations of the acquired entity or closed branches without any useful ongoing benefit to us. These costs are specific to each individual transaction, and may vary significantly based on the size and complexity of the transaction.

TABLE 33

Operating earnings per diluted common share


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income per diluted common share	$	0.38	$	0.34	$	0.83	$	0.93
Merger-related expense	0.01		—		0.09		—
Tax benefit of merger-related expense	—		—		(0.02)		—











Provision expense related to acquisition	—		—		0.05		—
Tax benefit of provision expense related to acquisition	—		—		(0.01)		—
Branch consolidation costs	—		—		0.01		0.01
Tax benefit of branch consolidation costs	—		—		—		—


Operating earnings per diluted common share (non-GAAP)	$	0.39	$	0.34	$	0.96	$	0.94

TABLE 34

Return on average tangible common equity


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2022			2021			2022			2021
Net income available to common stockholders (annualized)	$	537,532		$	434,443		$	392,552		$	401,239
Amortization of intangibles, net of tax (annualized)	11,119			9,471			10,903			9,607
Tangible net income available to common stockholders (annualized) (non-GAAP)	$	548,651		$	443,914		$	403,455		$	410,846
Average total stockholders’ equity	$	5,506,949		$	5,063,432		$	5,464,798		$	5,006,914
Less: Average preferred stockholders' equity	(106,882)			(106,882)			(106,882)			(106,882)
Less: Average intangible assets (1)	(2,487,434)			(2,308,922)			(2,474,401)			(2,311,940)
Average tangible common equity (non-GAAP)	$	2,912,633		$	2,647,628		$	2,883,515		$	2,588,092
Return on average tangible common equity (non-GAAP)	18.84		%	16.77		%	13.99		%	15.87		%

(1) Excludes loan servicing rights.

TABLE 35

Return on average tangible assets


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2022			2021			2022			2021
Net income (annualized)	$	545,507		$	442,414		$	400,615		$	409,302
Amortization of intangibles, net of tax (annualized)	11,119			9,471			10,903			9,607
Tangible net income (annualized) (non-GAAP)	$	556,626		$	451,885		$	411,518		$	418,909
Average total assets	$	42,039,932		$	38,718,399		$	41,686,246		$	38,294,432
Less: Average intangible assets (1)	(2,487,434)			(2,308,922)			(2,474,401)			(2,311,940)
Average tangible assets (non-GAAP)	$	39,552,498		$	36,409,477		$	39,211,845		$	35,982,492
Return on average tangible assets (non-GAAP)	1.41		%	1.24		%	1.05		%	1.16		%

(1) Excludes loan servicing rights.

TABLE 36

Tangible book value per common share


	September 30, 2022		September 30, 2021
(dollars in thousands, except per share data)
Total stockholders’ equity	$	5,406,485	$	5,098,407
Less: Preferred stockholders’ equity	(106,882)		(106,882)
Less: Intangible assets (1)	(2,486,183)		(2,307,432)
Tangible common equity (non-GAAP)	$	2,813,420	$	2,684,093
Ending common shares outstanding	350,756,155		318,921,616
Tangible book value per common share (non-GAAP)	$	8.02	$	8.42

(1) Excludes loan servicing rights.

TABLE 37

Tangible equity to tangible assets (period-end)


	September 30, 2022			September 30, 2021
(dollars in thousands)
Total stockholders' equity	$	5,406,485		$	5,098,407
Less: Intangible assets (1)	(2,486,183)			(2,307,432)
Tangible equity (non-GAAP)	$	2,920,302		$	2,790,975
Total assets	$	42,590,050		$	39,361,110
Less: Intangible assets (1)	(2,486,183)			(2,307,432)
Tangible assets (non-GAAP)	$	40,103,867		$	37,053,678
Tangible equity / tangible assets (period-end) (non-GAAP)	7.28		%	7.53		%

(1) Excludes loan servicing rights.

TABLE 38

Tangible common equity / tangible assets (period-end)


	September 30, 2022			September 30, 2021
(dollars in thousands)
Total stockholders' equity	$	5,406,485		$	5,098,407
Less: Preferred stockholders' equity	(106,882)			(106,882)
Less: Intangible assets (1)	(2,486,183)			(2,307,432)
Tangible common equity (non-GAAP)	$	2,813,420		$	2,684,093
Total assets	$	42,590,050		$	39,361,110
Less: Intangible assets (1)	(2,486,183)			(2,307,432)
Tangible assets (non-GAAP)	$	40,103,867		$	37,053,678
Tangible common equity / tangible assets (period-end) (non-GAAP)	7.02		%	7.24		%

(1) Excludes loan servicing rights.

Key Performance Indicators

TABLE 39

Efficiency ratio


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2022			2021			2022			2021
Non-interest expense	$	195,057		$	184,226		$	615,257		$	551,588
Less: Amortization of intangibles	(3,547)			(3,022)			(10,323)			(9,096)
Less: OREO expense	(485)			(781)			(1,233)			(2,066)
Less: Merger-related expense	(2,105)			(940)			(32,761)			(940)



Less: Branch consolidation costs	—			—			(4,178)			(2,644)

Adjusted non-interest expense	$	188,920		$	179,483		$	566,762		$	536,842
Net interest income	$	297,125		$	232,406		$	784,891		$	683,200
Taxable equivalent adjustment	2,916			2,620			8,170			8,221
Non-interest income	82,464			88,854			242,940			251,431
Less: Net securities gains	—			(65)			(48)			(193)






Adjusted net interest income (FTE) + non-interest income	$	382,505		$	323,815		$	1,035,953		$	942,659
Efficiency ratio (FTE) (non-GAAP)	49.39		%	55.43		%	54.71		%	56.95		%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is provided in the Market Risk section of "MD&A," which is included in Item 2 of this Report, and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. FNB’s management, with the participation of our principal executive and financial officers, evaluated our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective as of such date at the reasonable assurance level as discussed below to ensure that information required to be disclosed by us in the reports we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS. FNB’s management, including the CEO and the CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within FNB have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. In addition, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

CHANGES IN INTERNAL CONTROLS. The CEO and the CFO have evaluated the changes to our internal controls over financial reporting that occurred during our fiscal quarter ended September 30, 2022, as required by paragraph (d) of Rules 13a–15 and 15d–15 under the Securities Exchange Act of 1934, as amended, and have concluded that there were no such changes that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required by this Item is set forth in the “Other Legal Proceedings” discussion in Note 12, "Commitments, Credit Risk and Contingencies" of the Notes to the Consolidated Financial Statements, which is incorporated herein by reference in response to this Item.

ITEM 1A. RISK FACTORS

For information regarding risk factors that could affect our results of operations, financial condition and liquidity, see the risk factors disclosed in the “Risk Factors” section of our 2021 Annual Report on Form 10-K.

The risk factors below relate to the recently announced acquisition of UB Bancorp, and its wholly-owned subsidiary, Union Bank, and are in addition to the risk factors previously disclosed in our 2021 Annual Report on Form 10-K.

Combining FNB and UB Bancorp may be more difficult, costly or time-consuming than expected, and the anticipated benefits and cost savings of the merger with UB Bancorp may not be realized.

FNB and UB Bancorp have operated and, until the completion of the merger, will continue to operate, independently from each other. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate the businesses of FNBPA and UB Bancorp, along with the timely and successful core data system conversion, within our projected timeframe in a manner that permits growth opportunities, continued seamless operations and does not materially disrupt existing customer relationships or result in decreased revenues due to loss of customers.

A number of factors could affect our ability to successfully combine our business with the business of UB Bancorp. Key employees of UB Bancorp, whose services will be needed to complete the integration process, may elect to terminate their employment as a result of, or in anticipation of, the merger. The integration process itself could be disruptive to our ongoing businesses, causing loss of momentum in one or more of our businesses or inconsistencies or changes in standards, practices, business models, controls, procedures and policies that could adversely affect our ability to maintain relationships with customers and employees. If we encounter significant difficulties in the integration process, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected. Failure to achieve the anticipated benefits of the merger in the timeframes projected by us could result in increased costs and decreased revenues. This could have a dilutive effect on the combined company’s proforma earnings per share.

Our ability to complete the merger is subject to the satisfaction (or waiver by the parties) of the closing conditions set forth in the merger agreement, some of which are outside of the parties’ control.

The merger agreement contains a number of conditions that must be fulfilled in order to complete the merger. Those conditions include: absence of any law, statute or regulation, or any order, injunction or other legal restraint or prohibition preventing the completion of the merger, the accuracy of the representations and warranties of both parties (subject to applicable materiality qualifiers), and the performance, in all material respects, by both parties of their respective covenants and agreements. There can be no assurance that the conditions to the completion of the merger will be fulfilled or that the merger will be completed.

Regulatory oversight may impose conditions that are not presently anticipated or cannot be met.

Before the merger between FNB and UB Bancorp and the merger between their bank subsidiaries may be completed, various approvals must be obtained from bank regulatory agencies and other governmental authorities. Although these bank regulatory approvals for the transaction have been obtained, completion of the transaction remains subject to bank regulatory oversight, which could have the effect of delaying completion of the merger or of imposing additional costs or limitations on us following the merger. We may elect not to consummate the merger if any governmental or regulatory entity imposes a restriction, requirement or condition on us that, individually or in the aggregate, would be reasonably likely to have a material and adverse effect on us and our subsidiaries, taken as a whole, after giving effect to the merger.

We will be subject to business uncertainties while the merger is pending, which could result in loss of key employees or customers.

Uncertainties about the effect of the merger on employees and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with us to consider changing their existing business relationships with us or cause UB Bancorp customers to seek another financial services provider. Retention of certain UB Bancorp employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business could be negatively impacted.

If the merger is not completed, we will have incurred substantial expenses without realizing the expected benefits of the merger.

We will incur substantial expenses in connection with the proposed merger with UB Bancorp, which are charged to earnings as incurred. If the merger is not completed, these expenses will still be charged to earnings even though we would not have realized the expected benefits of the merger. There can be no assurance that the merger will be completed.

Termination of the merger agreement could have a negative impact on our prospects and stock price.

The merger agreement contains a number of provisions that could permit either or both parties to abandon the merger and terminate the merger agreement. If the merger agreement is terminated, there may be various adverse consequences to us. For example, since certain matters relating to the merger (including business integration and data system conversion planning) will require substantial commitments of time and resources by our management team, our businesses may be adversely affected by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be

completed.

We may not be able to compete successfully in UB Bancorp’s market area.

Our success in UB Bancorp’s markets will depend, in part, on our ability to successfully offer products and services to customers, that UB Bancorp does not currently offer, such as larger and more complex commercial loan financing transactions and syndications, trust services, SBA loans, investment advisory, foreign exchange services, derivatives, asset-based lending, lease financing, debt and equity capital markets, wealth management, insurance brokerage, securities brokerage and investment advisory and private lending. This business strategy will require us to attract and retain qualified and experienced personnel to support those products and services. We could lose existing customers or fail to acquire new customers in this market.

The merger may not be accretive, and may be dilutive, to our earnings per share, which may negatively affect the market price of our common stock.

We currently expect the merger to be accretive to earnings per share in the first full calendar year after closing (excluding one-time charges). This expectation, however, is based on preliminary estimates which may materially change, including the currently expected timing of the merger. We may encounter additional transaction- and integration-related costs or other factors such as a delay in the closing of the merger, may fail to realize all of the benefits anticipated in the merger or may be subject to other factors that affect preliminary estimates or our ability to realize operational efficiencies. Any of these factors could cause a decrease in our earnings per share or decrease or delay the expected accretive effect of the merger and contribute to a decrease in the price of our common stock.

Our decisions regarding the credit risk associated with Union Bank’s loan portfolio could be incorrect and our credit mark may be inadequate, which may adversely affect the financial condition and results of operations of the combined company after the closing of the merger.

Before signing the merger agreement, we conducted extensive due diligence on a significant portion of the Union Bank loan portfolio. However, our review did not encompass every loan in the Union Bank loan portfolio. In accordance with customary industry practices, we evaluated the Union Bank loan portfolio based on various factors including, among other things, historical loss experience, economic risks associated with each loan category, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, and general economic conditions, both local and national. In this process, our management made various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness and financial condition of the borrowers, the value of the real estate, which is obtained from

independent appraisers, other assets serving as collateral for the repayment of the loans, the existence of any guarantees and indemnifications and the economic environment in which the borrowers operate. In addition, the effects of probable decreases in expected principal cash flows on the Union Bank loans were considered as part of our evaluation. If our assumptions and judgments turn out to be incorrect, including as a result of the fact that our due diligence review did not cover each individual loan, our estimated credit mark against the Union Bank loan portfolio in total may be insufficient to cover actual loan losses after the merger is completed, and adjustments may be necessary to allow for different economic conditions or adverse developments in the Union Bank loan portfolio. Additionally, deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside our or UB Bancorp’s control, may require an increase in the provision for credit losses. Material additions to the credit mark and/or ACL would materially decrease our net income and could result in extra regulatory scrutiny and possibly supervisory action.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

Following extensive consultation with our independent compensation and legal advisors and recognizing that a retention-based structure for our Chief Executive Officer was appropriate, the Compensation Committee of our Board of Directors authorized us to enter into an Executive Retention Life Insurance Agreement (the “Agreement”) on November 3, 2022 to be effective on the date of the issuance of the underlying insurance policy, with Vincent J. Delie, Jr., Chairman, President and Chief Executive Officer of FNB.

Under the agreement, we will pay the insurance premium on behalf of Mr. Delie during his employment on a life insurance policy to be issued and owned by Mr. Delie. The annual premium amount is $182,450 and is payable through the end of the policy year in which Mr. Delie attains age 68. The death benefit payable to Mr. Delie’s beneficiaries under the policy is $2.4 million. The Agreement and our obligation to remit premiums terminates upon Mr. Delie’s death, the date he voluntarily terminates employment prior to attaining age 68, the date Mr. Delie’s employment is terminated for Cause, as defined in the Agreement, or the date Mr. Delie violates any restrictive covenants contained in his Employment Agreement dated December 15, 2010 (or any successor agreement), provided that we are obligated to pay policy premiums in 2023 if Mr. Delie is employed by us at any time in that year and if Mr. Delie remains continuously employed by FNB through December 31, 2027 we are obligated to pay annual policy premiums through the end of the policy year in which Mr. Delie attains age 68 regardless of whether he voluntarily terminates his employment, unless he violates any applicable restrictive covenants. If we terminate Mr. Delie’s employment without Cause, as defined in the Agreement, or he terminates his employment for Good Reason upon or following a Change in Control, as each are defined in his Employment Agreement, in either case prior to his attainment of age 68, we are obligated to remit an additional premium amount needed for the life insurance policy to become fully paid-up, such that all the premium payments are complete, Mr. Delie is free of all payment obligations, and the life insurance policy will remain intact and fully paid until Mr. Delie’s death.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Executive Retention Life Insurance Agreement which is attached hereto as Exhibit 10.1.

ITEM 6. EXHIBITS

Exhibit Index


Exhibit Number						Description
10.1						Executive Retention Life Insurance Agreement, dated as of November 3, 2022, between Vincent J. Delie, Jr. and F.N.B. Corporation (filed herewith).

31.1.						Certification of Chief Executive Officer Sarbanes-Oxley Act Section 302. (filed herewith).

31.2.						Certification of Chief Financial Officer Sarbanes-Oxley Act Section 302. (filed herewith).

32.1.						Certification of Chief Executive Officer Sarbanes-Oxley Act Section 906. (furnished herewith).

32.2.						Certification of Chief Financial Officer Sarbanes-Oxley Act Section 906. (furnished herewith).

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document (filed herewith).

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

104						Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

F.N.B. Corporation

Dated:

November 4, 2022

/s/ Vincent J. Delie, Jr.

Vincent J. Delie, Jr.

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Dated:

November 4, 2022

/s/ Vincent J. Calabrese, Jr.

Vincent J. Calabrese, Jr.

Chief Financial Officer

(Principal Financial Officer)

Dated:

November 4, 2022

/s/ James L. Dutey

James L. Dutey

Corporate Controller

(Principal Accounting Officer)