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FNB CORP/PA/ - Quarter Report: 2022 March (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 March 31, 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) 
 
Pennsylvania25-1255406
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
One North Shore Center, 12 Federal Street, Pittsburgh, PA15212
(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 FilerAccelerated Filer
Non-accelerated FilerSmaller reporting company
Emerging Growth Company
1


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 ClassTrading Symbol(s)Name of Exchange on which Registered
Common Stock, par value $0.01 per shareFNBNew 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
FNBPrENew 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.
ClassOutstanding atApril 30, 2022
Common Stock, $0.01 Par Value351,470,171 Shares
2


F.N.B. CORPORATION
FORM 10-Q
March 31, 2022
INDEX
 
 PAGE
PART I – FINANCIAL INFORMATION 
Item 1.Financial Statements
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
3



Glossary of Acronyms and Terms
Acronym
Description
Acronym
Description
ACL
Allowance for credit losses
HowardHoward 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
PPPPaycheck 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
FRB
Board of Governors of the Federal Reserve
System
U.S.
United States of America
FTE
Fully taxable equivalent
UST
U.S. Department of the Treasury
GAAP
U.S. generally accepted accounting principles
VIE
Variable interest entity
4


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)
March 31,
2022
December 31,
2021
 (Unaudited) 
Assets
Cash and due from banks$436 $337 
Interest-bearing deposits with banks3,421 3,156 
Cash and Cash Equivalents3,857 3,493 
Debt securities available for sale (amortized cost of $3,600 and $3,416; allowance for credit losses of $0 and $0)
3,446 3,426 
Debt securities held to maturity (fair value of $3,364 and $3,506; allowance for credit losses of $0 and $0)
3,513 3,463 
Loans held for sale (includes $214 and $269 measured at fair value) (1)
253 295 
Loans and leases, net of unearned income of $36 and $36
26,839 24,968 
Allowance for credit losses on loans and leases(371)(344)
Net Loans and Leases26,468 24,624 
Premises and equipment, net394 345 
Goodwill2,434 2,262 
Core deposit and other intangible assets, net59 42 
Bank owned life insurance627 546 
Other assets971 1,017 
Total Assets$42,022 $39,513 
Liabilities
Deposits:
Non-interest-bearing demand$11,729 $10,789 
Interest-bearing demand15,256 14,409 
Savings3,970 3,669 
Certificates and other time deposits2,949 2,859 
Total Deposits33,904 31,726 
Short-term borrowings1,425 1,536 
Long-term borrowings713 682 
Other liabilities541 419 
Total Liabilities36,583 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 – 363,773,858 and 329,464,669 shares
4 
Additional paid-in capital4,560 4,109 
Retained earnings1,118 1,110 
Accumulated other comprehensive loss(202)(62)
Treasury stock – 12,862,828 and 10,531,177 shares at cost
(148)(117)
Total Stockholders’ Equity5,439 5,150 
Total Liabilities and Stockholders’ Equity$42,022 $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)
5


F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share data)
Unaudited
 Three Months Ended
March 31,
 20222021
Interest Income
Loans and leases, including fees$221 $221 
Securities:
Taxable24 22 
Tax-exempt7 
Other2 — 
Total Interest Income254 251 
Interest Expense
Deposits8 15 
Short-term borrowings6 
Long-term borrowings6 
Total Interest Expense20 28 
Net Interest Income234 223 
Provision for credit losses18 
Net Interest Income After Provision for Credit Losses216 217 
Non-Interest Income
Service charges31 28 
Trust services10 
Insurance commissions and fees8 
Securities commissions and fees6 
Capital markets income7 
Mortgage banking operations7 16 
Dividends on non-marketable equity securities2 
Bank owned life insurance3 
Other4 
Total Non-Interest Income
78 83 
Non-Interest Expense
Salaries and employee benefits112 107 
Net occupancy18 16 
Equipment18 17 
Amortization of intangibles3 
Outside services17 17 
Marketing3 
FDIC insurance5 
Bank shares and franchise taxes4 
Merger-related29 — 
Other18 13 
Total Non-Interest Expense
227 185 
Income Before Income Taxes67 115 
Income taxes14 22 
Net Income53 93 
Preferred stock dividends2 
Net Income Available to Common Stockholders$51 $91 
Earnings per Common Share
Basic$0.15 $0.28 
Diluted0.15 0.28 
See accompanying Notes to Consolidated Financial Statements (unaudited)
6


F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Unaudited
 
 Three Months Ended
March 31,
20222021
Net income$53 $93 
Other comprehensive income (loss):
Securities available for sale:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $(36) and $(6)
(128)(21)
Derivative instruments:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $(4) and $1
(15)
Reclassification adjustment for gains included in net income, net of tax expense of $0 and $1
2 
Pension and postretirement benefit obligations:
Unrealized gains arising during the period, net of tax expense of $0 and $0
1 
Other Comprehensive Income (Loss)(140)(12)
Comprehensive Income (Loss)$(87)$81 
See accompanying Notes to Consolidated Financial Statements (unaudited)
7


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 March 31, 2021
Balance at beginning of period$107 $$4,087 $869 $(39)$(68)$4,959 
Comprehensive income 93 (12)81 
Dividends declared:
Preferred stock: $18.13/share
(2)(2)
Common stock: $0.12/share
(39)(39)
Issuance of common stock— (1)— 
Repurchase of common stock(36)(36)
Restricted stock compensation11 11 
Balance at end of period$107 $$4,099 $921 $(51)$(105)$4,974 
Three Months Ended March 31, 2022
Balance at beginning of period$107 $3 $4,109 $1,110 $(62)$(117)$5,150 
Comprehensive income 53 (140)(87)
Dividends declared:
Preferred stock: $18.13/share
(2)(2)
Common stock: $0.12/share
(43)(43)
Issuance of common stock 1 (1) 
Issuance of common stock - acquisitions1 442 443 
Repurchase of common stock(30)(30)
Restricted stock compensation8 8 
Balance at end of period$107 $4 $4,560 $1,118 $(202)$(148)$5,439 
See accompanying Notes to Consolidated Financial Statements (unaudited)
8


F.N.B. CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
Unaudited
 
 Three Months Ended
March 31,
 20222021
Operating Activities
Net income$53 $93 
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation, amortization and accretion15 
Provision for credit losses18 
Deferred tax expense (benefit)5 (1)
Loans originated for sale(354)(566)
Loans sold410 550 
Net gain on sale of loans(15)(16)
Net change in:
   Interest receivable2 
   Interest payable(2)(4)
   Bank owned life insurance, excluding purchases(1)— 
Other, net227 151 
Net cash flows provided by operating activities358 215 
Investing Activities
Net change in loans and leases, excluding sales and transfers(74)(59)
Debt securities available for sale:
Purchases(398)(567)
Sales287 — 
Maturities/payments244 835 
Debt securities held to maturity:
Purchases(243)(365)
Maturities/payments190 188 
Increase in premises and equipment(27)(8)
Net cash received in business acquisition75 — 
Net cash flows provided by investing activities54 24 
Financing Activities
Net change in:
Demand (non-interest bearing and interest bearing) and savings accounts478 1,510 
Time deposits(131)(278)
Short-term borrowings(125)(117)
Proceeds from issuance of long-term borrowings3 
Repayment of long-term borrowings(206)(7)
Repurchases of common stock(30)(36)
Cash dividends paid:
Preferred stock(2)(2)
Common stock(43)(39)
Other, net8 11 
Net cash flows (used in) provided by financing activities(48)1,046 
Net Increase in Cash and Cash Equivalents364 1,285 
Cash and cash equivalents at beginning of period3,493 1,383 
Cash and Cash Equivalents at End of Period$3,857 $2,668 
See accompanying Notes to Consolidated Financial Statements (unaudited)
9


F.N.B. CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 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 March 31, 2022, we had 341 banking offices 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 March 31, 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
10


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
StandardDescriptionFinancial 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 are currently assessing the potential impact to 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 enhances our presence in the Mid-Atlantic Region. Additionally, cost savings, efficiencies and other benefits are expected 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.


11


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 equivalents75 
Securities321 
Loans1,780 
Core deposit and other intangible assets19 
Fixed and other assets167 
Total identifiable assets acquired2,362 
Fair value of liabilities assumed:
Deposits1,831 
Borrowings247 
Other liabilities13 
Total liabilities assumed2,091 
Fair value of net identifiable assets acquired271 
Goodwill recognized $172 
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 of $28.6 million related to the Howard acquisition for the first three months of 2022.
We continue to analyze the valuations assigned to the acquired assets and assumed liabilities. Due to the complexity in valuing the loans and the significant amount of data inputs required, the valuation of the loans is not yet final. In addition, we are reviewing third-party valuations on acquired premises and core deposit intangibles. We are also assessing the valuation on deferred taxes, deposits and debt.
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.
We integrated the systems and the operating activities of Howard into FNB in February. 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.

12


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 March 31, 2022 and December 31, 2021. Accrued interest receivable on AFS debt securities totaled $6.9 million and $7.3 million at March 31, 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:
March 31, 2022
U.S. Treasury$205 $ $(11)$194 
U.S. government agencies140 1  141 
U.S. government-sponsored entities214  (10)204 
Residential mortgage-backed securities:
Agency mortgage-backed securities1,440 1 (54)1,387 
Agency collateralized mortgage obligations1,236  (67)1,169 
Commercial mortgage-backed securities320  (12)308 
States of the U.S. and political subdivisions (municipals)33  (2)31 
Other debt securities12   12 
Total debt securities AFS$3,600 $2 $(156)$3,446 
(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 agencies154 — 155 
U.S. government-sponsored entities194 — (2)192 
Residential mortgage-backed securities:
Agency mortgage-backed securities1,342 19 (4)1,357 
Agency collateralized mortgage obligations1,192 11 (17)1,186 
Commercial mortgage-backed securities294 (2)297 
States of the U.S. and political subdivisions (municipals)33 — — 33 
Other debt securities— — 
Total debt securities AFS$3,416 $36 $(26)$3,426 
13


The amortized cost and fair value of HTM debt securities are presented in the table below. The ACL for the HTM municipal bond portfolio was $0.12 million and $0.05 million at March 31, 2022 and December 31, 2021, respectively. Accrued interest receivable on HTM debt securities totaled $11.1 million and $12.3 million at March 31, 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:
March 31, 2022
U.S. Treasury$1 $ $ $1 
U.S. government agencies1   1 
Residential mortgage-backed securities:
Agency mortgage-backed securities1,261 1 (53)1,209 
Agency collateralized mortgage obligations943  (55)888 
Commercial mortgage-backed securities328  (16)312 
States of the U.S. and political subdivisions (municipals)974 4 (30)948 
Other debt securities5   5 
Total debt securities HTM$3,513 $5 $(154)$3,364 
(in millions)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
 Value
Debt Securities HTM:
December 31, 2021
U.S. Treasury$$— $— $
U.S. government agencies— — 
Residential mortgage-backed securities:
Agency mortgage-backed securities1,191 15 (5)1,201 
Agency collateralized mortgage obligations930 (12)923 
Commercial mortgage-backed securities323 (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 three months ended March 31, 2022 or 2021.
14


As of March 31, 2022, the amortized cost and fair value of debt securities, by contractual maturities, were as follows:
TABLE 4.3
Available for SaleHeld to Maturity
(in millions)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in one year or less$$$$
Due after one year but within five years434 412 23 23 
Due after five years but within ten years106 105 141 137 
Due after ten years55 56 816 794 
604 582 981 955 
Residential mortgage-backed securities:
Agency mortgage-backed securities1,440 1,387 1,261 1,209 
Agency collateralized mortgage obligations1,236 1,169 943 888 
Commercial mortgage-backed securities320 308 328 312 
Total debt securities$3,600 $3,446 $3,513 $3,364 
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)March 31,
2022
December 31,
2021
Securities pledged (carrying value):
To secure public deposits, trust deposits and for other purposes as required by law$5,712 $5,660 
As collateral for short-term borrowings403 392 
Securities pledged as a percent of total securities87.9 %87.9 %
15


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 continuous loss position:

TABLE 4.5
Less than 12 Months12 Months or MoreTotal
(dollars in millions)#Fair
 Value
Unrealized
Losses
#Fair
 Value
Unrealized
Losses
#Fair
 Value
Unrealized
Losses
Debt Securities AFS
March 31, 2022
U.S. Treasury4 $194 $(11) $ $ 4 $194 $(11)
U.S. government agencies6 50  9 7  15 57  
U.S. government-sponsored entities11 181 (8)1 23 (2)12 204 (10)
Residential mortgage-backed securities:
Agency mortgage-backed securities101 1,346 (54)   101 1,346 (54)
Agency collateralized mortgage obligations60 952 (49)7 196 (18)67 1,148 (67)
Commercial mortgage-backed securities11 250 (10)2 31 (2)13 281 (12)
States of the U.S. and political subdivisions (municipals)12 27 (1)1 3 (1)13 30 (2)
Other debt securities5 6  1 2  6 8  
Total 210 $3,006 $(133)21 $262 $(23)231 $3,268 $(156)
Less than 12 Months12 Months or MoreTotal
(dollars in millions)#Fair
 Value
Unrealized
Losses
#Fair
 Value
Unrealized
Losses
#Fair
 Value
Unrealized
Losses
Debt Securities AFS
December 31, 2021
U.S. Treasury$151 $(1)— $— $— $151 $(1)
U.S. government agencies22 — — 12 30 — 
U.S. government-sponsored entities99 (1)24 (1)123 (2)
Residential mortgage-backed securities:
Agency mortgage-backed securities13 599 (4)— — — 13 599 (4)
Agency collateralized mortgage obligations23 659 (15)68 (2)26 727 (17)
Commercial mortgage-backed securities125 (2)— — — 125 (2)
States of the U.S. and political subdivisions10 24 — — — — 10 24 — 
Other debt securities— — — — — 
Total60 $1,679 $(23)14 $102 $(3)74 $1,781 $(26)
We evaluated the AFS debt securities that were in an unrealized loss position at March 31, 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.
16


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 March 31, 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, 60% 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, 1970-2020 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 $16.9 million as of March 31, 2022 primarily consists of subordinated debentures of banks within our footprint. The average holding size of the securities in the corporate bond portfolio is $1.7 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 March 31, 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 and $0.05 million as of March 31, 2022 and December 31, 2021, respectively. No other securities portfolios had an ACL. At March 31, 2022 and December 31, 2021, there were no securities that were past due or on non-accrual.
17


NOTE 5.    LOANS AND LEASES
Accrued interest receivable on loans and leases, which totaled $54.9 million at March 31, 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)March 31, 2022December 31, 2021
Commercial real estate$10,746 $9,899 
Commercial and industrial6,220 5,977 
Commercial leases471 495 
Other144 94 
Total commercial loans and leases17,581 16,465 
Direct installment2,568 2,376 
Residential mortgages4,188 3,654 
Indirect installment1,216 1,227 
Consumer lines of credit1,286 1,246 
Total consumer loans9,258 8,503 
Total loans and leases, net of unearned income$26,839 $24,968 
The remaining accretable discount included in the amortized cost of acquired loans was $37.1 million and $30.0 million at March 31, 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 $179.6 million and $336.6 million of this category's outstanding balance at March 31, 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;
18


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)March 31,
2022
December 31,
2021
Commercial real estate:
Percent owner-occupied29.3 %28.8 %
Percent non-owner-occupied70.7 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 CategoryDefinition
Passin general, the condition of the borrower and the performance of the loan is satisfactory or better
Special Mentionin general, the condition of the borrower has deteriorated, requiring an increased level of monitoring
Substandardin general, the condition of the borrower has significantly deteriorated and the performance of the loan could further deteriorate if deficiencies are not corrected
Doubtfulin 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.
19


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
March 31, 202220222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
(in millions)
COMMERCIAL
Commercial Real Estate:
Risk Rating:
   Pass$423 $2,123 $1,813 $1,480 $839 $2,937 $196 $9,811 
   Special Mention 44 24 93 101 306 1 569 
   Substandard  16 43 54 244 9 366 
Total commercial real estate423 2,167 1,853 1,616 994 3,487 206 10,746 
Commercial and Industrial:
Risk Rating:
   Pass426 1,444 823 697 390 475 1,576 5,831 
   Special Mention1 7 16 18 28 101 32 203 
   Substandard 8 11 14 26 62 65 186 
Total commercial and industrial427 1,459 850 729 444 638 1,673 6,220 
Commercial Leases:
Risk Rating:
   Pass22 165 98 48 40 90  463 
   Special Mention 1      1 
   Substandard  2 2  3  7 
Total commercial leases22 166 100 50 40 93  471 
Other Commercial:
Risk Rating:
   Pass57     15 72 144 
Total other commercial57     15 72 144 
Total commercial loans and leases929 3,792 2,803 2,395 1,478 4,233 1,951 17,581 
CONSUMER
Direct Installment:
   Current265 983 523 197 112 475  2,555 
   Past due  1 1 1 10  13 
Total direct installment265 983 524 198 113 485  2,568 
Residential Mortgages:
   Current237 1,470 929 418 152 935  4,141 
   Past due 4 4 2 3 34  47 
Total residential mortgages237 1,474 933 420 155 969  4,188 
Indirect Installment:
   Current127 478 235 137 149 78  1,204 
   Past due 5 2 2 1 2  12 
Total indirect installment127 483 237 139 150 80  1,216 
Consumer Lines of Credit:
   Current32 20 2 4 5 133 1,075 1,271 
   Past due     13 2 15 
Total consumer lines of credit32 20 2 4 5 146 1,077 1,286 
Total consumer loans661 2,960 1,696 761 423 1,680 1,077 9,258 
Total loans and leases$1,590 $6,752 $4,499 $3,156 $1,901 $5,913 $3,028 $26,839 
20


December 31, 202120212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
(in millions)
COMMERCIAL
Commercial Real Estate:
Risk Rating:
   Pass$1,878 $1,782 $1,503 $830 $743 $2,171 $183 $9,090 
   Special Mention15 21 89 105 107 175 521 
   Substandard— 15 28 45 45 152 288 
Total commercial real estate1,893 1,818 1,620 980 895 2,498 195 9,899 
Commercial and Industrial:
Risk Rating:
   Pass1,663 833 731 386 184 296 1,509 5,602 
   Special Mention12 18 37 42 52 176 
   Substandard14 57 42 17 64 199 
Total commercial and industrial1,672 849 763 450 263 355 1,625 5,977 
Commercial Leases:
Risk Rating:
   Pass182 109 98 53 39 — 482 
   Special Mention— — — 
   Substandard— — — — 
Total commercial leases182 112 101 56 42 — 495 
Other Commercial:
Risk Rating:
   Pass39 — — — — 52 94 
Total other commercial39 — — — — 52 94 
Total commercial loans and leases3,786 2,779 2,484 1,486 1,200 2,858 1,872 16,465 
CONSUMER
Direct Installment:
   Current978 538 215 125 96 412 — 2,364 
   Past due— — — 10 — 12 
Total direct installment978 538 216 126 96 422 — 2,376 
Residential Mortgages:
   Current1,280 932 392 152 212 652 — 3,620 
   Past due25 — 34 
Total residential mortgages1,281 933 393 155 215 677 — 3,654 
Indirect Installment:
   Current516 262 157 178 64 35 — 1,212 
   Past due— 15 
Total indirect installment522 265 159 180 65 36 — 1,227 
Consumer Lines of Credit:
   Current20 127 1,072 1,234 
   Past due— — — — — 10 12 
Total consumer lines of credit20 137 1,074 1,246 
Total consumer loans2,801 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, Fair Isaac Corporation (FICO) scores and Debt-to-Income (DTI) scores and other external factors such as unemployment, to determine how consumer loans are performing.
21


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
CurrentTotal
Loans and
Leases
Non-accrual with No ACL
March 31, 2022
Commercial real estate$16 $ $53 $69 $10,677 $10,746 $26 
Commercial and industrial6  12 18 6,202 6,220 1 
Commercial leases  1 1 470 471  
Other2  1 3 141 144  
Total commercial loans and leases24  67 91 17,490 17,581 27 
Direct installment6  7 13 2,555 2,568  
Residential mortgages21 6 20 47 4,141 4,188  
Indirect installment10  2 12 1,204 1,216  
Consumer lines of credit7 2 6 15 1,271 1,286  
Total consumer loans44 8 35 87 9,171 9,258  
Total loans and leases$68 $8 $102 $178 $26,661 $26,839 $27 

(in millions)30-89 Days
Past Due
> 90 Days
Past Due
and Still
Accruing
Non-
Accrual
Total
Past Due
CurrentTotal
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— 15 19 5,958 5,977 
Commercial leases— 493 495 — 
Other— — — — 94 94 — 
Total commercial loans and leases16 — 64 80 16,385 16,465 24 
Direct installment— 12 2,364 2,376 — 
Residential mortgages20 10 34 3,620 3,654 — 
Indirect installment12 15 1,212 1,227 — 
Consumer lines of credit12 1,234 1,246 — 
Total consumer loans43 24 73 8,430 8,503 — 
Total loans and leases$59 $$88 $153 $24,815 $24,968 $24 
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Following is a summary of non-performing assets:
TABLE 5.6
(dollars in millions)March 31,
2022
December 31,
2021
Non-accrual loans$102 $88 
Total non-performing loans
102 88 
Other real estate owned 8 
Total non-performing assets
$110 $96 
Asset quality ratios:
Non-performing loans / total loans and leases
0.38 %0.35 %
Non-performing assets + 90 days past due / total loans and leases + OREO
0.44 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 $1.4 million at March 31, 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 March 31, 2022 and December 31, 2021 totaled $9.1 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 $67.3 million of commercial loans are collateral dependent at March 31, 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)March 31,
2022
December 31,
2021
Accruing$60 $60 
Non-accrual32 32 
Total TDRs$92 $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 three months ended March 31, 2022, we returned to accruing status $2.5 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 of $1.5 million at March 31, 2022, compared to $1.5 million at December 31, 2021, and pooled reserves for individual loans of $1.3 million and $1.5 million for those same periods, respectively, based on loan segment LGD. Upon
23


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 $3.5 million for March 31, 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 March 31, 2022
(dollars in millions)Number
of
Contracts
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Commercial real estate2 $ $ 
Total commercial loans2   
Direct installment13   
Residential mortgages5 1 1 
Consumer lines of credit3   
Total consumer loans21 1 1 
Total23 $1 $1 

 Three Months Ended March 31, 2021
(dollars in millions)Number
of
Contracts
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Commercial real estate11 $17 $17 
Commercial and industrial— — 
Total commercial loans12 17 17 
Direct installment10 — — 
Residential mortgages
Consumer lines of credit10 
Total consumer loans22 
Total34 $19 $19 

24


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
March 31, 2022
(dollars in millions)Number of
Contracts
Recorded
Investment
Commercial real estate3 $ 
Total commercial loans3  
Direct installment1  
Residential mortgages1  
Total consumer loans2  
Total5 $ 

 Three Months Ended
March 31, 2021
(dollars in millions)Number of
Contracts
Recorded
Investment
Commercial and industrial$— 
Total commercial loans— 
Residential mortgages— 
Total consumer loans— 
Total$— 

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.
25


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
RecoveriesNet
Charge-
Offs
Provision for Credit LossesAllowance for PCD Loans and Leases at AcquisitionBalance at
End of
Period
Three Months Ended March 31, 2022
Commercial real estate$156.5 $(1.0)$1.4 $0.4 $4.4 $4.4 $165.7 
Commercial and industrial87.4 (3.2)1.3 (1.9)2.8 3.4 91.7 
Commercial leases14.7 (0.1) (0.1)(0.8) 13.8 
Other2.6 (0.7)0.2 (0.5)1.7  3.8 
Total commercial loans and leases261.2 (5.0)2.9 (2.1)8.1 7.8 275.0 
Direct installment26.4  0.2 0.2 4.1 0.5 31.2 
Residential mortgages33.1 (0.1)0.2 0.1 5.2 1.3 39.7 
Indirect installment13.5 (1.0)0.7 (0.3)1.0  14.2 
Consumer lines of credit10.1 (0.2)0.4 0.2 (0.2)0.4 10.5 
Total consumer loans83.1 (1.3)1.5 0.2 10.1 2.2 95.6 
Total allowance for credit losses on loans and leases344.3 (6.3)4.4 (1.9)18.2 10.0 370.6 
Allowance for unfunded loan commitments19.1    (0.3) 18.8 
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments$363.4 $(6.3)$4.4 $(1.9)$17.9 $10.0 $389.4 
(in millions)Balance at
Beginning of
Period
Charge-
Offs
RecoveriesNet
Charge-
Offs
Provision
for Credit
Losses
Balance at
End of
Period
Three Months Ended March 31, 2021
Commercial real estate$181 $(1)$$— $$184 
Commercial and industrial81 (8)(7)79 
Commercial leases17 — (1)17 
Other(1)— — 
Total commercial loans and leases280 (10)(6)281 
Direct installment26 — — — — 26 
Residential mortgages34 — — — (2)32 
Indirect installment11 (2)(1)11 
Consumer lines of credit12 — — — — 12 
Total consumer loans83 (2)(1)(1)81 
Total allowance for credit losses on loans and leases363 (12)(7)362 
Allowance for unfunded loan commitments14 — — — — 14 
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments$377 $(12)$$(7)$$376 
26


Following is a summary of changes in the AULC by portfolio segment:
TABLE 6.2
Three Months Ended
March 31,
20222021
(in millions)
Balance at beginning of period$19 $14 
Provision for unfunded loan commitments and letters of credit:
Commercial portfolio — 
Consumer portfolio — 
Balance at end of period$19 $14 
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 March 31, 2022 and December 31, 2021, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment. For our ACL calculation at March 31, 2022, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 4.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 16.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 0.3% in 2022 and 5.5% 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 reflects growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects 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 $370.6 million at March 31, 2022 increased $26.4 million, or 7.7%, from December 31, 2021 primarily due to the Howard acquisition and the associated ACL attributable to the acquired loans and leases, partially offset by positive credit quality trends. Our ending ACL coverage ratio at March 31, 2022 was 1.38%, compared to 1.38% at December 31, 2021. Total provision for credit losses for the three months ended March 31, 2022 included $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition. Net charge-offs were $1.9 million during the three months ended March 31, 2022, compared to $7.1 million during the three months ended March 31, 2021, reflecting continued strong underlying portfolio credit trends.

27


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)March 31,
2022
December 31,
2021
Mortgage loans sold with servicing retained$4,985 $4,855 

The following table summarizes activity relating to mortgage loans sold with servicing retained:
TABLE 7.2
Three Months Ended
March 31,
(in millions)20222021
Mortgage loans sold with servicing retained$351 $506 
Pretax net gains resulting from above loan sales (1)
1 17 
Mortgage servicing fees (1)
3 
(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
March 31,
(in millions)20222021
Balance at beginning of period$44.4 $35.6 
Additions4.1 5.2 
Payoffs and curtailments(1.6)(4.1)
(Impairment charge) / recovery2.3 2.5 
Amortization(0.7)(0.6)
Balance at end of period$48.5 $38.6 
Fair value, beginning of period$46.0 $35.6 
Fair value, end of period58.2 40.2 
We had a $0.2 million valuation allowance for MSRs as of March 31, 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 with 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.
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Following is a summary of the sensitivity of the fair value of MSRs to changes in key assumptions:
TABLE 7.4
(dollars in millions)March 31,
2022
December 31,
2021
Weighted average life (months)89.976.6
Constant prepayment rate (annualized)8.4 %11.2 %
Discount rate9.5 %9.5 %
Effect on fair value due to change in interest rates:
+2.00%$11 $15 
+1.00%6 
+0.50%4 
+0.25%2 
-0.25%(3)(3)
-0.50%(6)(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 March 31, 2022, we had operating lease right-of-use assets and operating lease liabilities of $136.7 million and $146.0 million, respectively. We have finance lease right-of-use assets and finance lease liabilities of $15.5 million and $15.7 million, respectively.
Our operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of March 31, 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 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 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
March 31,
(dollars in millions)20222021
Operating lease cost$8 $
Variable lease cost1 
Total lease cost$9 $
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Other information related to leases is as follows:
TABLE 8.2
Three Months Ended
March 31,
(dollars in millions)20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$7 $
Operating cash flows from finance leases$ $— 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$2 $— 
Finance leases$4 $— 
Weighted average remaining lease term (years):
Operating leases9.699.39
Finance leases23.080
Weighted average discount rate:
Operating leases2.4 %2.6 %
Finance leases2.0 %— %

Maturities of lease liabilities were as follows:
TABLE 8.3
(in millions)Operating LeasesFinance LeasesTotal Leases
March 31, 2022
2022$20 $ $20 
202323 1 24 
202421 1 22 
202515 1 16 
202612 1 13 
Later years75 16 91 
Total lease payments166 20 186 
Less: imputed interest(20)(4)(24)
Present value of lease liabilities$146 $16 $162 

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.
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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 March 31, 2022 and December 31, 2021.

TABLE 9.1
(in millions)Total AssetsTotal LiabilitiesMaximum Exposure to Loss
March 31, 2022
Trust preferred securities (1)
$1 $67 $ 
Affordable housing tax credit partnerships118 31 118 
Other investments32 5 32 
Total $151 $103 $150 
December 31, 2021
Trust preferred securities (1)
$$67 $— 
Affordable housing tax credit partnerships121 34 121 
Other investments28 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.

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The following table presents the balances of our affordable housing tax credit investments and related unfunded commitments:
TABLE 9.2
(in millions)March 31,
2022
December 31,
2021
LIHTC investments included in other assets$87 $87 
Unfunded LIHTC commitments31 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
March 31,
(in millions)20222021
Provision for income taxes:
Amortization of LIHTC investments under proportional method$4 $
Low-income housing tax credits(4)(3)
Other tax benefits related to tax credit investments(1)(1)
Total impact on provision for income taxes$(1)$(1)
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)March 31,
2022
December 31,
2021
Securities sold under repurchase agreements$363 $376 
Federal Home Loan Bank advances930 1,030 
Subordinated notes132 130 
Total short-term borrowings$1,425 $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 March 31, 2022 or December 31, 2021. At March 31, 2022, $0.9 billion, 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.

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Following is a summary of long-term borrowings:
TABLE 10.2
(in millions)March 31,
2022
December 31,
2021
Senior notes$299 $299 
Subordinated notes68 68 
Junior subordinated debt72 67 
Other subordinated debt274 248 
Total long-term borrowings$713 $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.
Our banking affiliate has available credit with the FHLB of $8.7 billion, of which $0.9 billion was utilized and included in short-term borrowings as of March 31, 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 March 31, 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 March 31, 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 ValueStated Maturity DateInterest
Rate
2.20% Senior Notes due February 24, 2023
$300 $298 $299 2/24/20232.20 %
4.95% Fixed-To-Floating Rate Subordinated Notes due 2029 (1)
120 118 119 2/14/20294.95 %
4.875% Subordinated Notes due 2025
100 98 99 10/2/20254.875 %
7.625% Subordinated Notes due August 12, 2023 (3)
38 46 30 8/12/20237.625 %
6.00% Fixed-To-Floating Rate Subordinated Notes due December 6, 2028 (2) (3)
25 26 26 12/6/20286.00 %
Total$583 $586 $573 
(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.

33


The following table provides information relating to the Trusts as of March 31, 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 $$22 6/15/20362.48 %
LIBOR + 165 bps
Yadkin Valley Statutory Trust I25 22 12/15/20372.15 %
LIBOR + 132 bps
FNB Financial Services Capital Trust I25 23 9/30/20352.46 %
LIBOR + 146 bps
Patapsco Statutory Trust I— 12/15/20352.31 %
LIBOR + 148 bps
Total$77 $$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
March 31, 2022December 31, 2021
NotionalFair ValueNotionalFair Value
(in millions)AmountAssetLiabilityAmountAssetLiability
Gross Derivatives
Subject to master netting arrangements:
Interest rate contracts – designated$1,980 $ $ $2,080 $$— 
Interest rate swaps – not designated5,469 14 10 5,547 20 
Total subject to master netting arrangements7,449 14 10 7,627 20 
Not subject to master netting arrangements:
Interest rate swaps – not designated5,469 37 145 5,547 172 24 
Interest rate lock commitments – not designated381  13 482 — 
Forward delivery commitments – not designated435 9  502 
Credit risk contracts – not designated364   368 — — 
Total not subject to master netting arrangements6,649 46 158 6,899 182 25 
Total$14,098 $60 $168 $14,526 $185 $45 
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
34


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 DerivativesLocation of Gain (Loss) Reclassified from AOCI into IncomeAmount of Gain (Loss) Reclassified from AOCI into Income
Three Months Ended
March 31,
Three Months Ended
March 31,
(in millions)2022202120222021
Derivatives in cash flow hedging relationships:
   Interest rate contracts $(19)$Interest income (expense)$(2)$(5)
Other income — 
The following table represents gains (losses) recognized in the Consolidated Statements of Income on cash flow hedging relationships:
TABLE 11.3
Three months ended March 31,
20222021
(in millions)Interest Income - Loans and LeasesInterest Expense - Short-Term BorrowingsInterest Income - Loans and LeasesInterest 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)$221 $6 $221 $
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 income2 (4)— (5)
As of March 31, 2022, the maximum length of time over which forecasted interest cash flows are hedged is 3.5 years. In the twelve months that follow March 31, 2022, we expect to reclassify from the amount currently reported in AOCI net derivative
35


losses of $11.2 million ($8.7 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 March 31, 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 three months ended March 31, 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 $249.8 million as of March 31, 2022 have remaining terms ranging from four 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 March 31, 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 March 31, 2022 and $0.1 million and $0.2 million, respectively at December 31, 2021.
The following table presents the effect of certain derivative financial instruments on the Consolidated Statements of Income:
TABLE 11.4
Three Months Ended
March 31,
(in millions)Consolidated Statements of Income Location20222021
Interest rate swapsNon-interest income - other$ $— 
Interest rate lock commitmentsMortgage banking operations — 
Forward delivery contractsMortgage banking operations9 
Credit risk contractsNon-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 March 31, 2022 and December 31, 2021, respectively, in excess of amounts previously posted as collateral with the respective counterparty.
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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
March 31, 2022
Derivative Assets
Interest rate contracts:
Not designated$14 $ $14 $ 
Total$14 $ $14 $ 
Derivative Liabilities
Interest rate contracts:
Not designated$10 $ $10 $ 
Total$10 $ $10 $ 
December 31, 2021
Derivative Assets
Interest rate contracts:
Designated$$— $$— 
Not designated— — 
Total$$— $$— 
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)March 31,
2022
December 31,
2021
Commitments to extend credit$12,069 $11,228 
Standby letters of credit204 194 
At March 31, 2022, funding of 72.9% 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,
37


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 $18.8 million at March 31, 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 495,844 and 542,136 restricted stock units during the three months ended March 31, 2022 and 2021, respectively, including 297,508 and 325,284 performance-based restricted stock units during those same periods, respectively. As of March 31, 2022, we had available up to 3,909,215 shares of common stock to issue under this Plan.
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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
Three Months Ended March 31,
20222021
UnitsWeighted
Average
Grant
Price per
Share
UnitsWeighted
Average
Grant
Price per
Share
Unvested units outstanding at beginning of period4,680,786 $9.71 4,322,115 $9.46 
Granted495,844 14.22 542,136 12.61 
Acquired60,300 9.41 — — 
Net adjustment due to performance  327,256 11.84 
Vested(216,373)8.77 (142,687)7.29 
Forfeited/expired/canceled(18,239)9.34 (8,334)7.52 
Dividend reinvestment46,696 12.85 42,310 13.43 
Unvested units outstanding at end of period5,049,014 10.22 5,082,796 10.05 
The following table provides certain information related to restricted stock units:
TABLE 13.2
(in millions)Three Months Ended
March 31,
 20222021
Stock-based compensation expense$9 $12 
Tax benefit related to stock-based compensation expense2 
Fair value of units vested3 
As of March 31, 2022, there was $7.5 million of unrecognized compensation cost related to unvested restricted stock units, including $0.9 million that is subject to accelerated vesting under the Plan’s immediate vesting upon retirement.
The components of the restricted stock units as of March 31, 2022 are as follows:
TABLE 13.3
(dollars in millions)Service-
Based
Units
Performance-
Based
Units
Total
Unvested restricted stock units2,971,430 2,077,584 5,049,014 
Unrecognized compensation expense$$$
Intrinsic value$37 $26 $63 
Weighted average remaining life (in years)1.711.521.63

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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 March 31, 2022, we had 176,602 stock options outstanding and exercisable at a weighted average exercise price per share of $8.96, compared to 182,747 stock options outstanding and exercisable at a weighted average exercise price per share of $8.86 as of March 31, 2021.
The intrinsic value of outstanding and exercisable stock options at March 31, 2022 was $0.6 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
March 31,
(dollars in millions)20222021
Current income taxes:
Federal taxes$7 $21 
State taxes2 
Total current income taxes9 23 
Deferred income taxes:
Federal taxes5 (1)
Total deferred income taxes5 (1)
Total income taxes$14 $22 
Statutory tax rate21.0 %21.0 %
Effective tax rate20.9 18.9 
The increase in the effective tax rate for the three months ended March 31, 2022 compared to 2021 was primarily due to higher state income taxes and nondeductible merger-related expenses resulting from the Howard acquisition.

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 $103.5 million and $43.4 million at March 31, 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.
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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
Three Months Ended March 31, 2022
Balance at beginning of period$$(22)$(48)$(62)
Other comprehensive (loss) income before reclassifications(128)(15)(142)
Amounts reclassified from AOCI— — 
Net current period other comprehensive (loss) income(128)(13)(140)
Balance at end of period$(120)$(35)$(47)$(202)
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
March 31,
(dollars in millions, except per share data)
20222021
Net income$53 $93 
Less: Preferred stock dividends2 
Net income available to common stockholders$51 $91 
Basic weighted average common shares outstanding344,352,853 320,975,209 
Net effect of dilutive stock options, warrants and restricted stock4,573,193 3,769,650 
Diluted weighted average common shares outstanding348,926,046 324,744,859 
Earnings per common share:
Basic$0.15 $0.28 
Diluted$0.15 $0.28 
There were no anti-dilutive shares for the three months ended March 31, 2022 and 2021. In January 2022, we issued 34.1 million common shares as part of the Howard acquisition.
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NOTE 17.    CASH FLOW INFORMATION
Following is a summary of supplemental cash flow information:
TABLE 17.1
Three Months Ended
March 31,
(in millions)20222021
Interest paid on deposits and other borrowings$21 $32 
Income taxes paid 
Transfers of loans to other real estate owned1 — 
We did not have any restricted cash as of March 31, 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.
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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
InsuranceParent and
Other
Consolidated
At or for the Three Months Ended March 31, 2022
Interest income$253 $ $ $1 $254 
Interest expense17   3 20 
Net interest income236   (2)234 
Provision for credit losses17   1 18 
Non-interest income56 16 7 (1)78 
Non-interest expense (1)
207 11 5 1 224 
Amortization of intangibles3    3 
Income tax expense (benefit)14 1  (1)14 
Net income (loss)51 4 2 (4)53 
Total assets41,896 38 33 55 42,022 
Total intangibles2,457 9 27  2,493 
At or for the Three Months Ended March 31, 2021
Interest income$251 $— $— $— $251 
Interest expense25 — — 28 
Net interest income226 — — (3)223 
Provision for credit losses— — — 
Non-interest income63 15 (1)83 
Non-interest expense (1)
165 10 182 
Amortization of intangibles— — — 
Income tax expense (benefit)22 — (1)22 
Net income (loss)93 (5)93 
Total assets38,360 40 34 41 38,475 
Total intangibles2,276 28 — 2,313 
(1) Excludes amortization of intangibles, which is presented separately.
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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 1Level 2Level 3Total
March 31, 2022
Assets Measured at Fair Value
Debt securities available for sale
U.S. Treasury$194 $ $ $194 
U.S. government agencies 141  141 
U.S. government-sponsored entities 204  204 
Residential mortgage-backed securities:
Agency mortgage-backed securities 1,387  1,387 
Agency collateralized mortgage obligations 1,169  1,169 
Commercial mortgage-backed securities 308  308 
States of the U.S. and political subdivisions (municipals) 31  31 
Other debt securities 10 2 12 
Total debt securities available for sale194 3,250 2 3,446 
Loans held for sale 214  214 
Derivative financial instruments
Trading 51  51 
Not for trading 9  9 
Total derivative financial instruments 60  60 
Total assets measured at fair value on a recurring basis$194 $3,524 $2 $3,720 
Liabilities Measured at Fair Value
Derivative financial instruments
Trading$ $155 $ $155 
Not for trading  13 13 
Total derivative financial instruments 155 13 168 
Total liabilities measured at fair value on a recurring basis$ $155 $13 $168 
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(in millions)Level 1Level 2Level 3Total
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— — 
Total debt securities available for sale204 3,222 — 3,426 
Loans held for sale— 269 — 269 
Derivative financial instruments
Trading— 174 — 174 
Not for trading— 11 
Total derivative financial instruments— 176 185 
Total assets measured at fair value on a recurring basis$204 $3,667 $$3,880 
Liabilities Measured at Fair Value
Derivative financial instruments
Trading$— $44 $— $44 
Not for trading— — 
Total derivative financial instruments— 45 — 45 
Total liabilities measured at fair value on a recurring basis$— $45 $— $45 
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The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized Level 3 inputs to determine fair value:
TABLE 19.2 
(in millions)Other
Debt
Securities
Interest
Rate
Lock
Commitments
Total
Three Months Ended March 31, 2022
Balance at beginning of period$ $9 $9 
Purchases, issuances, sales and settlements:
Purchases2  2 
Settlements (9)(9)
Balance at end of period$2 $ $2 
Year Ended December 31, 2021
Balance at beginning of period$— $24 $24 
Purchases, issuances, sales and settlements:
Issuances— 
Settlements— (24)(24)
Balance at end of period$— $$
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 three 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 1Level 2Level 3Total
March 31, 2022
Collateral dependent loans$ $ $25 $25 
Other assets - MSRs  2 2 
Other assets - SBA servicing asset  3 3 
Other real estate owned  2 2 
December 31, 2021
Collateral dependent loans$— $— $20 $20 
Other assets - MSRs— — 10 10 
Other assets - SBA servicing asset— — 
Other real estate owned— — 

The fair value amounts for collateral dependent loans and OREO in the table above were estimated at a date during the three months or twelve months ended March 31, 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 three months ended March 31, 2022 had a carrying amount of $25.0 million, which includes an
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allocated ACL of $10.9 million. The ACL includes a provision applicable to the current period fair value measurements of $2.4 million, which was included in provision for credit losses for the three months ended March 31, 2022.
MSRs measured at fair value on a non-recurring basis had a carrying value of $1.5 million, which included a valuation allowance of $0.2 million, as of March 31, 2022. The valuation allowance includes a recovery of $2.3 million included in earnings for the three months ended March 31, 2022. SBA servicing assets measured at fair value on a non-recurring basis had a carrying value of $3.1 million, which included a valuation allowance of $1.1 million, as of March 31, 2022. There was no recovery of the valuation allowance included in earnings for the three months ended March 31, 2022.
OREO measured at fair value on a non-recurring basis during 2022 had a carrying amount of $1.9 million, which included a valuation allowance of $0.2 million, as of March 31, 2022. The valuation allowance includes a loss of $0.2 million, which was included in earnings for the three months ended March 31, 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.
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The fair values of our financial instruments are as follows:
TABLE 19.4
  Fair Value Measurements
(in millions)Carrying
Amount
Fair
 Value
Level 1Level 2Level 3
March 31, 2022
Financial Assets
Cash and cash equivalents$3,857 $3,857 $3,857 $ $ 
Debt securities available for sale3,446 3,446 194 3,250 2 
Debt securities held to maturity3,513 3,364  3,359 5 
Net loans and leases, including loans held for sale26,721 26,076  214 25,862 
Loan servicing rights49 61   61 
Derivative assets60 60  60  
Accrued interest receivable80 80 80   
Financial Liabilities
Deposits33,904 33,864 30,955 2,909  
Short-term borrowings1,425 1,420 1,420   
Long-term borrowings713 722   722 
Derivative liabilities168 168  155 13 
Accrued interest payable8 8 8   
December 31, 2021
Financial Assets
Cash and cash equivalents$3,493 $3,493 $3,493 $— $— 
Debt securities available for sale3,426 3,426 204 3,222 — 
Debt securities held to maturity3,463 3,506 — 3,506 — 
Net loans and leases, including loans held for sale24,919 24,518 — 269 24,249 
Loan servicing rights47 49 — — 49 
Derivative assets185 185 — 176 
Accrued interest receivable76 76 76 — — 
Financial Liabilities
Deposits31,726 31,725 28,867 2,858 — 
Short-term borrowings1,536 1,536 1,536 — — 
Long-term borrowings682 704 — — 704 
Derivative liabilities45 45 — 45 — 
Accrued interest payable10 10 10 — — 

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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-month periods ended March 31, 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 three months ended March 31, 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:
Changes resulting from 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.
49


Changes in monetary and fiscal policies, including interest rate policies and strategies of the Federal Open Market Committee (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 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. Many of these risks and uncertainties were present in our January 2022 acquisition and integration of Howard Bancorp, Inc., including its banking subsidiary, Howard bank.
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.

50


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, average deposits, excluding Howard average deposits, loans and leases, excluding PPP loans and Howard loans as of the acquisition date, excluding PPP loans, ACL to loans and leases, excluding PPP loans, pre-provision net revenue to average tangible common equity, 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 first quarter of 2022 was $51.0 million or $0.15 per diluted common share, compared to net income available to common stockholders for the first quarter of 2021 of $91.2 million or $0.28 per diluted common share. On an operating basis, earnings per diluted common share (non-GAAP) was $0.26 for the first quarter of 2022 , excluding $47.8 million (pre-tax) in Howard merger-related significant items and $4.2 million (pre-tax) in branch consolidation costs, while the first quarter of 2021 was $0.28, the same as GAAP.
During the first quarter, we grew revenue by 3.4% largely by an expansion in net interest income and overall securities and loan growth while maintaining solid asset quality and growing loan pipelines. Loan balances, excluding PPP (non-GAAP) increased 8.2% on a linked-quarter basis, and loan balances, excluding PPP and Howard loans as of the acquisition date (non-GAAP) increased 4.3% annualized. FNB's Board of Directors approved $150 million of share repurchase authorization to be added to our share repurchase program providing additional flexibility to effectively manage capital and benefit our shareholders. Credit quality trends continue to be strong as evidenced by net charge-offs (annualized) as a percentage of average total loans of 0.03% in the 2022 first quarter.
On January 22, 2022, the acquisition of Howard was completed, adding loans and deposits with estimated fair values of $1.8 billion for both measures to the balance sheet. The acquisition-related systems conversions were successfully completed in February and integration is proceeding as planned.


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Income Statement Highlights (First quarter of 2022 compared to first quarter of 2021, except as noted)
Net interest income increased $11.2 million, or 5.0%, to $234.1 million primarily due to the benefit of growth in earning assets.
The net interest margin (FTE) (non-GAAP) declined 14 basis points to 2.61%, as the yield on earning assets decreased 26 basis points to 2.83%, primarily reflecting the lower yields on variable-rate loans and investment securities and the effect of higher average cash balances on the mix of earning assets.
Net interest income on a linked quarter totaled $234.1 million, an increase of $10.8 million, or 4.8%, from the prior quarter total of $223.3 million, primarily due to growth in average earning assets and benefits from the higher interest rate environment, partially offset by the $4.2 million decreased contribution from PPP.
On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) increased 6 basis points to 2.61% as the earning asset yield increased 3 basis points and the cost of funds decreased 3 basis points. The total impact of PPP, purchase accounting accretion, and higher cash balances on net interest margin was a decrease of 13 basis points, down slightly from 14 basis points the prior quarter.
The annualized net charge-offs to total average loans ratio was 0.03%, compared to 0.11%, with continued favorable asset quality trends across the loan portfolio.
The provision for credit losses was $18.0 million including the $19.1 million initial provision for non-PCD loans associated with the Howard acquisition, compared to a net benefit of $2.4 million in the fourth quarter of 2021 and an expense of $5.9 million in the first quarter of 2021.
Non-interest income was $78.3 million, a decrease of $4.5 million, or 5.4%, driven by lower contributions from mortgage banking due to the change in the interest rate environment, partially offset by strong contributions from wealth management and insurance commissions and fees, as well as higher card fees and service charges reflecting increased customer activity.
The effective tax rate was 20.9%, compared to 18.9%, with the increase driven by higher state income taxes and nondeductible merger-related expenses resulting from the Howard acquisition.
The efficiency ratio (non-GAAP) equaled 60.7%, compared to 58.7% reflecting lower PPP and purchase accounting accretion income.
Balance Sheet Highlights (period-end balances, March 31, 2022 compared to December 31, 2021, unless otherwise indicated)
Period-end total loans and leases increased $1.3 billion, or 5.1%, as consumer loans increased $1.4 billion, or 18.1%, and commercial loans decreased $114.2 million, or 0.6%, compared to March 31, 2021. PPP loans totaled $179.6 million at March 31, 2022, compared to $2.5 billion as of March 31, 2021.
Excluding PPP and Howard acquired loans as of the acquisition date, period-end loans and leases (non-GAAP) increased $259.7 million, or 4.3% annualized, on a linked-quarter basis, including an increase of $81.7 million in commercial loans and leases and $178.0 million in consumer loans. On a linked-quarter basis, excluding PPP loans, period-end total loans increased $2.0 billion, or 8.2%, with commercial loans and leases increasing $1.3 billion, or 7.9%, and consumer loans increasing $753.8 million, or 8.9%. PPP loans totaled $179.6 million at March 31, 2022, compared to $336.6 million as of December 31, 2021.
Total average deposits grew $3.6 billion, or 12.4%, compared to the first quarter of 2021, led by increases in average non-interest-bearing deposits of $2.0 billion, or 22.2%, and average interest-bearing demand deposits of $1.6 billion, or 11.7%, partially offset by a decrease in average time deposits of $0.6 billion, or 16.3%. Average deposit growth reflected inflows from the Howard acquisition, PPP activities and organic growth in new and existing customer relationships, as well as current customer preferences to maintain larger balances in their deposit accounts and shift balances into more liquid accounts. Excluding Howard, average deposits (non-GAAP) grew $2.3 billion, or 7.8% from the first three months of 2021.
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The ratio of loans to deposits was 79.2%, 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 $42.0 billion, compared to $39.5 billion, an increase of $2.5 billion, or 6.3%, primarily due to the Howard acquisition.
The dividend payout ratio for the first quarter of 2022 was 83.7%, compared to 42.8% for the first quarter of 2021 due to merger-related expenses in the first quarter of 2022.
The ratio of the ACL to total loans and leases was unchanged at 1.38%. The ACL on loans and leases totaled $371 million at March 31, 2022, compared to $344 million with the increase driven by the initial ACL related to the Howard acquisition.
Tangible book value per share (non-GAAP) of $8.09, increased $0.08, or 1.0% from March 31, 2021. The CET1 regulatory capital ratio increased to 10.0%, up from 9.9%. As part of the Howard acquisition, we issued 34,074,495 shares of common stock at $12.99 in exchange for 18,930,329 shares of Howard common stock.
AOCI reduced the tangible book value per common share by $0.57 as of March 31, 2022, primarily due to the impact of higher interest rates on the fair value of AFS securities, compared to a $0.16 reduction as of March 31, 2021.
During the first quarter of 2022, the Company repurchased 2.2 million shares of common stock at a weighted average share price of $13.25 for a total of $29.8 million. In April 2022, our Board of Directors approved an additional $150 million for the repurchase of our common stock to be added to our existing share repurchase program, bringing the total authorization to $300 million. Since inception, we repurchased 9.9 million shares at a weighted average share price of $11.28 for $111.4 million under this repurchase program.

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TABLE 1
Three Months Ended
March 31,
Quarterly Results Summary20222021
Reported results
Net income available to common stockholders (millions)$51.0 $91.2 
Net income per diluted common share0.15 0.28 
Book value per common share (period-end)15.19 15.27 
Pre-provision net revenue (reported) (millions)85.0 120.9 
Common equity tier 1 capital ratio10.0 %10.0 %
Operating results (non-GAAP)
Operating net income available to common stockholders (millions)$92.0 $91.2 
Operating net income per diluted common share0.26 0.28 
Tangible common equity to tangible assets (period-end)7.18 %7.06 %
Tangible book value per common share (period-end)$8.09 $8.01 
Pre-provision net revenue (operating) (millions)$117.8 $120.9 
Average diluted common shares outstanding (thousands)348,926 324,745 
Significant items impacting earnings(1) (millions)
Pre-tax merger-related expenses$(28.6)$— 
After-tax impact of merger-related expenses(22.6)— 
Pre-tax provision expense related to acquisition(19.1)— 
After-tax impact of provision expense related to acquisition(15.1)— 
Pre-tax branch consolidation costs(4.2)— 
After-tax impact of branch consolidation costs(3.3)— 
Total significant items pre-tax$(51.9)$— 
Total significant items after-tax$(41.0)$— 
(1) Favorable (unfavorable) impact on earnings

Industry Developments
LIBOR
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 have 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.
Similarly, 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. We started originating commercial loans utilizing SOFR and other indices in the fourth quarter of 2021. During the first quarter of 2022, we originated in excess of $700 million in SOFR indexed loans. In addition, approximately $80 million of residential mortgages indexed to SOFR were originated. As of March 31, 2022, we have approximately $800 million in commercial loans and $425 million of mortgage loans indexed to SOFR.
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 March 31, 2022, approximately $10 billion of our loan portfolio consisted of loans whose variable rate index is LIBOR; of these, approximately $1 billion will mature prior to June 30, 2023. In addition, it's estimated
54


that more than $1 billion of LIBOR-based loans will amortize over the next 18 months. Lastly, we have approximately $190 million of outstanding FNB issued debt that uses LIBOR as its base index.
RESULTS OF OPERATIONS

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021
Net income available to common stockholders for the first three months of 2022 was $51.0 million or $0.15 per diluted common share, compared to net income available to common stockholders for the first three months of 2021 of $91.2 million or $0.28 per diluted common share. The provision for credit losses for the first three months of 2022 totaled $18.0 million and included $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition. This compares to $5.9 million in the first three months of 2021. Non-interest income totaled $78.3 million, a decrease of $4.5 million, or 5.4%, driven by lower contributions from mortgage banking due to the increasing interest rate environment, partially offset by strong contributions from wealth management and insurance commissions and fees, as well as higher service charges reflecting increased customer activity. Non-interest expense of $227.4 million, increased $42.6 million, or 23.0%, as the first three months of 2022 included merger-related costs of $28.6 million and branch consolidation costs of $4.2 million. On an operating basis, earnings per diluted common share was $0.26, compared to $0.28.

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Financial highlights are summarized below:
TABLE 2
Three Months Ended
March 31,
$%
(in thousands, except per share data)20222021ChangeChange
Net interest income$234,076 $222,923 $11,153 5.0 %
Provision for credit losses 17,959 5,911 12,048 203.8 
Non-interest income78,322 82,805 (4,483)(5.4)
Non-interest expense227,426 184,862 42,564 23.0 
Income taxes14,015 21,720 (7,705)(35.5)
Net income52,998 93,235 (40,237)(43.2)
Less: Preferred stock dividends2,010 2,010 — — 
Net income available to common stockholders$50,988 $91,225 $(40,237)(44.1)%
Earnings per common share – Basic$0.15 $0.28 $(0.13)(46.4)%
Earnings per common share – Diluted0.15 0.28 (0.13)(46.4)
Cash dividends per common share0.12 0.12 — — 
The following table presents selected financial ratios and other relevant data used to analyze our performance:
TABLE 3
 Three Months Ended
March 31,
20222021
Return on average equity3.94 %7.62 %
Return on average tangible common equity (2)
7.49 14.95 
Return on average assets0.52 1.00 
Return on average tangible assets (2)
0.58 1.10 
Book value per common share (1)
$15.19 $15.27 
Tangible book value per common share (1) (2)
8.09 8.01 
Equity to assets (1)
12.94 %12.93 %
Average equity to average assets13.25 13.19 
Common equity to assets (1)
12.69 12.65 
Tangible equity to tangible assets (1) (2)
7.45 7.36 
Tangible common equity to tangible assets (1) (2)
7.18 7.06 
Common equity tier 1 capital ratio (1)
10.0 10.0 
Dividend payout ratio83.74 42.78 
(1) Period-end
(2) Non-GAAP
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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 March 31,
 20222021
(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$3,105,599 $1,507 0.20 %$1,557,342 $423 0.11 %
Taxable investment securities (1)
5,930,948 23,785 1.60 4,916,772 21,917 1.78 
Tax-exempt investment securities (1)(2)
1,025,284 8,732 3.41 1,127,197 9,721 3.45 
Loans held for sale259,362 2,392 3.70 164,374 1,493 3.64 
Loans and leases (2) (3)
26,238,804 219,762 3.39 25,452,831 220,777 3.51 
Total interest-earning assets (2)
36,559,997 256,178 2.83 33,218,516 254,331 3.09 
Cash and due from banks410,716 369,866 
Allowance for credit losses(360,392)(369,792)
Premises and equipment378,090 333,315 
Other assets4,132,660 4,074,810 
Total assets$41,121,071 $37,626,715 
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing demand$14,919,488 3,416 0.09 $13,357,111 5,539 0.17 
Savings3,875,020 143 0.01 3,280,324 172 0.02 
Certificates and other time2,944,377 4,126 0.57 3,516,533 9,534 1.10 
            Total interest-bearing deposits21,738,885 7,685 0.14 20,153,968 15,245 0.31 
Short-term borrowings1,509,971 5,802 1.56 1,819,822 7,040 1.57 
Long-term borrowings709,817 6,017 3.44 1,093,036 6,264 2.32 
Total interest-bearing liabilities23,958,673 19,504 0.33 23,066,826 28,549 0.50 
Non-interest-bearing demand11,255,917 9,213,181 
Total deposits and borrowings35,214,590 0.22 32,280,007 0.36 
Other liabilities457,587 385,016 
Total liabilities35,672,177 32,665,023 
Stockholders’ equity5,448,894 4,961,692 
Total liabilities and stockholders’ equity$41,121,071 $37,626,715 
Net interest-earning assets$12,601,324 $10,151,690 
Net interest income (FTE) (2)
236,674 225,782 
Tax-equivalent adjustment(2,598)(2,859)
Net interest income$234,076 $222,923 
Net interest spread2.50 %2.59 %
Net interest margin (2)
2.61 %2.75 %
(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.
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Net Interest Income
Net interest income on an FTE basis (non-GAAP) totaled $236.7 million, increasing $10.9 million, or 4.8%, primarily due to the benefit of growth in earning assets of $3.3 billion or 10.1%, partially offset by a reduced net interest margin. The net interest margin (FTE) (non-GAAP) declined 14 basis points to 2.61%, primarily reflecting lower yields on commercial loans due to lower purchase accounting and PPP accretion, and investment securities with the effect of higher average cash balances on the mix of earning assets.
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 March 31, 2022, compared to the three months ended March 31, 2021:
TABLE 5
(in thousands)VolumeRateNet
Interest Income (1)
Interest-bearing deposits with banks$605 $479 $1,084 
Securities (2)
3,850 (2,971)879 
Loans held for sale925 (26)899 
Loans and leases (2)
1,468 (2,483)(1,015)
Total interest income (2)
6,848 (5,001)1,847 
Interest Expense (1)
Deposits:
Interest-bearing demand276 (2,399)(2,123)
Savings19 (48)(29)
Certificates and other time(927)(4,481)(5,408)
Short-term borrowings(1,542)304 (1,238)
Long-term borrowings(2,178)1,931 (247)
Total interest expense(4,352)(4,693)(9,045)
Net change (2)
$11,200 $(308)$10,892 
(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 $256.2 million for the first three months of 2022, increased $1.8 million, or 0.7%, from the same period of 2021, resulting from the impact of higher short-term interest rates on cash balances, and an increase in earning assets of $3.3 billion. The increase in earning assets was primarily driven by a $1.5 billion increase in average cash and cash equivalents, an increase in average securities of $912.3 million and a $786.0 million, or 3.1%, increase in average loans. Excluding PPP loans, average total loans and leases increased $2.8 billion, or 12.2%, including growth of $1.7 billion in commercial loans and leases ($0.9 billion from Howard) and $1.1 billion in consumer loans ($0.4 billion from Howard). The increase in average commercial loans and leases, excluding PPP, included $0.8 billion, or 16.4%, in commercial and industrial loans and $0.8 billion, or 8.5%, in commercial real estate balances, driven by a combination of the Howard acquisition and organic loan origination activity. Commercial origination activity was led by the Pittsburgh and Mid-Atlantic markets. Average consumer loans increased $1.1 billion, or 14.1%, with a $655.2 million increase in residential mortgages and a $468.2 million increase in direct installment loans 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 15.1%. For the first three months of 2022, the yield on average earning assets (non-GAAP) decreased 26 basis points to 2.83%, compared to the first three months of 2021, primarily reflecting the lower yields on variable-rate loans and investment securities and the effect of higher average cash balances on the mix of earning assets.
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Interest expense of $19.5 million for the first three months of 2022 decreased $9.0 million, or 31.7%, from the same period of 2021, primarily due to a decrease in rates paid, partially offset by an increase in average interest-bearing deposits. The growth in average deposits reflected inflows from the Howard acquisition, PPP activities and organic growth in new and existing customer relationships, as well as current customer preferences to maintain larger balances in their deposit accounts and shift balances into more liquid accounts. Average interest-bearing deposits increased $1.6 billion, or 7.9%, which reflects the benefit of solid organic growth in customer relationships, the addition of Howard, as well as deposits from PPP funding and government stimulus activities. Average time deposits declined $572.2 million, or 16.3%, as customer preferences continued to shift away from higher rate certificates of deposit to lower yielding, more liquid products. Average long-term borrowings decreased $383.2 million, or 35.1%, primarily due to a decrease of $395.6 million in long-term FHLB borrowings, partially offset by the addition of Howard's $25.0 million of subordinated debt. The rate paid on interest-bearing liabilities decreased 17 basis points to 0.33% for the first three months of 2022, compared to the first three months of 2021. Similarly, the cost of interest-bearing deposits declined 17 basis points from 0.31% to 0.14%. These declines were a result of management actions taken to reduce the cost of interest-bearing liabilities given the low interest rate environment and strong growth in non-interest-bearing deposits.

Provision for Credit Losses
The following table presents information regarding the provision for credit loss expense and net charge-offs:
TABLE 6
Three Months Ended
March 31,
$%
(dollars in thousands)20222021ChangeChange
Provision for credit losses (on loans and leases)$18,236 $6,065 $12,171 200.7 %
Provision for unfunded loan commitments(340)(152)(188)123.7 
Provision for credit losses$17,896 $5,913 $11,983 202.7 %
Net loan charge-offs1,888 7,135 (5,247)(73.5)
Net loan charge-offs (annualized) / total average loans and leases0.03 %0.11 %
Provision for credit losses was $17.9 million for the three months ended March 31, 2022, an increase of $12.0 million, from the same period of 2021. The year-to-date amount for 2022 is comprised of an $18.2 million provision for loans and leases outstanding and a $0.3 million benefit for unfunded loan commitments. The increase reflects $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition offset by favorable asset quality trends across all loan portfolio credit metrics in 2022. Net loan charge-offs were $1.9 million during the three months ended March 31, 2022, compared to $7.1 million during the three months ended March 31, 2021.

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Non-Interest Income
The breakdown of non-interest income for the three months ended March 31, 2022 and 2021 is presented in the following table:
TABLE 7
Three Months Ended
March 31,
$%
(dollars in thousands)20222021ChangeChange
Service charges$31,515 $27,831 $3,684 13.2 %
Trust services10,349 9,083 1,266 13.9 
Insurance commissions and fees7,605 7,185 420 5.8 
Securities commissions and fees5,691 5,618 73 1.3 
Capital markets income7,127 7,712 (585)(7.6)
Mortgage banking operations6,667 15,733 (9,066)(57.6)
Dividends on non-marketable equity securities2,150 2,276 (126)(5.5)
Bank owned life insurance2,642 2,948 (306)(10.4)
Net securities gains 41 (41)(100.0)
Other4,576 4,378 198 4.5 
Total non-interest income$78,322 $82,805 $(4,483)(5.4)%
Total non-interest income decreased $4.5 million, to $78.3 million for the first three months of 2022, a 5.4% decrease from the same period of 2021. The variances in significant individual non-interest income items are further explained in the following paragraphs.
Service charges of $31.5 million for the first three months of 2022 increased $3.7 million, or 13.2%, as the first three months of 2021 reflected reduced customer deposit activity due to the pandemic.
Trust services of $10.3 million for the first three months of 2022 increased $1.3 million, or 13.9%, from the same period of 2021, primarily driven by record organic sales activity and the market value of assets under management increasing $0.8 billion, or 10.5%, to $7.9 billion at March 31, 2022.
Mortgage banking operations income of $6.7 million for the first three months of 2022 decreased $9.1 million, or 57.6%, from the same period of, 2021 as secondary market revenue and mortgage held-for-sale pipelines normalized from significantly elevated levels in 2021 given the sharp increase in mortgage rates. During the first three months of 2022, we sold $0.4 billion of residential mortgage loans, a 26.1% decrease compared to $0.5 billion for the same period of 2021.

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Non-Interest Expense
The breakdown of non-interest expense for the three months ended March 31, 2022 and 2021 is presented in the following table:
TABLE 8
Three Months Ended
March 31,
$%
(dollars in thousands)20222021ChangeChange
Salaries and employee benefits$112,189 $107,303 $4,886 4.6 %
Net occupancy18,189 16,163 2,026 12.5 
Equipment18,005 17,030 975 5.7 
Amortization of intangibles3,227 3,050 177 5.8 
Outside services17,033 16,929 104 0.6 
Marketing3,256 3,441 (185)(5.4)
FDIC insurance4,574 4,844 (270)(5.6)
Bank shares and franchise taxes4,027 3,779 248 6.6 
Merger-related28,629 — 28,629 — 
Other18,297 12,323 5,974 48.5 
Total non-interest expense$227,426 $184,862 $42,564 23.0 %
Total non-interest expense of $227.4 million for the first three months of 2022 increased $42.6 million, a 23.0% increase from the same period of 2021. On an operating basis, non-interest expense increased $9.8 million, or 5.3%, when excluding significant items of $28.6 million in merger-related costs and $4.2 million in branch consolidation costs in the first three months of 2022. The variances in the individual non-interest expense items are further explained in the following paragraphs.
Salaries and employee benefits of $112.2 million for the first three months of 2022 increased $4.9 million, or 4.6%, from the same period of 2021, due to annual merit increases, higher medical costs, higher employer-paid payroll taxes and the acquired Howard expense base. Included in salaries and employee benefits in the first quarter of 2022 and 2021 was $6.2 million and $5.6 million, respectively, related to normal seasonal long-term compensation expense.
Net occupancy and equipment expense of $36.2 million for the first three months of 2022 increased $3.0 million, or 9.0% from the same period of 2021. There was $1.9 million related to branch consolidation costs in the first three months of 2022.
We recorded $28.6 million in merger-related costs for the first three months of 2022 related to the Howard acquisition which closed on January 22, 2022.
Other non-interest expense was $18.3 million and $12.3 million for the first three months of 2022 and 2021, respectively. There was $2.2 million in branch consolidation costs in the first quarter of 2022 and a $2.2 million mortgage recourse reserve release in the first quarter of 2021.
The following table presents non-interest expense excluding significant items for the three months ended March 31, 2022 and 2021:
TABLE 9
Three Months Ended
March 31,
$%
(dollars in thousands)20222021ChangeChange
Total non-interest expense, as reported $227,426 $184,862 $42,564 23.0 %
Significant items:
   Branch consolidations (4,178)— (4,178)
   Merger-related(28,629)— (28,629)
Total non-interest expense, excluding significant items (1)
$194,619 $184,862 $9,757 5.3 %
(1) Non-GAAP
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Income Taxes
The following table presents information regarding income tax expense and certain tax rates:
TABLE 10
 Three Months Ended
March 31,
(dollars in thousands)20222021
Income tax expense$14,015 $21,720 
Effective tax rate20.9 %18.9 %
Statutory federal tax rate21.0 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 lower in 2022 due to lower pretax earnings primarily resulting from merger-related expenses from the Howard acquisition. The effective tax rate is higher in 2022 primarily driven by higher state income taxes and nondeductible merger-related expenses resulting from the Howard acquisition.
FINANCIAL CONDITION
The following table presents our condensed Consolidated Balance Sheets:
TABLE 11
(dollars in millions)March 31,
2022
December 31,
2021
$
Change
%
Change
Assets
Cash and cash equivalents$3,857 $3,493 $364 10.4 %
Securities6,959 6,889 70 1.0 
Loans held for sale253 295 (42)(14.2)
Loans and leases, net26,468 24,624 1,844 7.5 
Goodwill and other intangibles2,493 2,304 189 8.2 
Other assets1,992 1,908 84 4.4 
Total Assets$42,022 $39,513 $2,509 6.3 %
Liabilities and Stockholders’ Equity
Deposits$33,904 $31,726 $2,178 6.9 %
Borrowings2,138 2,218 (80)(3.6)
Other liabilities541 419 122 29.1 
Total Liabilities36,583 34,363 2,220 6.5 
Stockholders’ Equity5,439 5,150 289 5.6 
Total Liabilities and Stockholders’ Equity$42,022 $39,513 $2,509 6.3 %
The increase in assets, liabilities and stockholders' equity is primarily due to 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; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina.


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Paycheck Protection Program
The CARES Act included an allocation of $349 billion for loans to be issued by financial institutions through the SBA, utilizing the PPP. The Paycheck Protection Program and Health Care Enhancement Act (PPP/HCE Act) was signed into law on April 24, 2020. The PPP/HCE Act authorized an additional $320 billion of funding for PPP loans. Since the inception of the PPP, we originated $3.6 billion of PPP loans, including $1.0 billion during 2021, of which $179.6 million is outstanding as of March 31, 2022, net of unamortized net deferred fees of $3.3 million, which are included in the commercial and industrial category. Since inception, $3.4 billion of PPP loan balances were forgiven by the SBA.

PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. Loans closed prior to June 5, 2020, carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred until after a forgiveness determination is made, if submitted within ten months of the end of the loan forgiveness covered period. The loans are 100% guaranteed by the SBA, which provides a reduced risk of loss to us on these loans. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. This fee is recognized in interest income over the contractual life of the loan under the effective yield method, adjusted for expected prepayments on these pools of homogenous loans. We expect most of the remaining net deferred fees to be recognized by June 30, 2022 based on expected loan forgiveness activity. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act (PPP Flexibility Act) which extended the term for new PPP loans to 5 years and permitted a lender to extend a 2-year PPP loan up to a 5-year term by mutual agreement of the lender and borrower. The PPP Flexibility Act also gives the borrower the option of 24 weeks to distribute the funds, and a borrower can remain eligible for loan forgiveness by using at least 60% of the funds for payroll costs. The SBA announced that lenders will have 60 days to review PPP loan forgiveness applications and that the SBA will remit the forgiveness payments within 90 days of receipt of approved forgiveness applications.

Following is a summary of loans and leases:

TABLE 12
March 31,
2022
December 31,
2021
$
Change
%
Change
(in millions)
Commercial real estate$10,746 $9,899 $847 8.6 %
Commercial and industrial6,220 5,977 243 4.1 
Commercial leases471 495 (24)(4.8)
Other144 94 50 53.2 
Total commercial loans and leases17,581 16,465 1,116 6.8 
Direct installment2,568 2,376 192 8.1 
Residential mortgages4,188 3,654 534 14.6 
Indirect installment1,216 1,227 (11)(0.9)
Consumer lines of credit1,286 1,246 40 3.2 
Total consumer loans9,258 8,503 755 8.9 
Total loans and leases$26,839 $24,968 $1,871 7.5 %
The commercial and industrial category includes PPP loans totaling $179.6 million and $336.6 million at March 31, 2022 and December 31, 2021, respectively.

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Non-Performing Assets
Following is a summary of non-performing assets:
TABLE 13
(in millions)March 31,
2022
December 31,
2021
$
Change
%
Change
Commercial real estate$53 $48 $10.4 %
Commercial and industrial12 15 (3)(20.0)
Commercial leases1 — — 
Other1 — — 
Total commercial loans and leases67 64 4.7 
Direct installment7 — — 
Residential mortgages20 10 10 100.0 
Indirect installment2 — — 
Consumer lines of credit6 20.0 
Total consumer loans35 24 11 45.8 
Total non-performing loans and leases102 88 14 15.9 
Other real estate owned8 — — 
Non-performing assets$110 $96 $14 14.6 %
Non-performing assets increased $13.0 million, from $96.2 million at December 31, 2021 to $109.1 million at March 31, 2022. This reflects an increase of $13.7 million in non-performing loans and leases and a decrease of $0.7 million in OREO. The increase in non-performing loans was driven by the acquisition of the Howard Bank portfolio.

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Troubled Debt Restructured Loans

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

TABLE 14
(in millions)AccruingNon-
Accrual
Total
March 31, 2022
Commercial real estate$6 $22 $28 
Commercial and industrial 1 1 
Total commercial loans 6 23 29 
Direct installment21 3 24 
Residential mortgages28 5 33 
Consumer lines of credit5 1 6 
Total consumer loans54 9 63 
Total TDRs$60 $32 $92 
December 31, 2021
Commercial real estate$$21 $27 
Commercial and industrial— 
Total commercial loans 22 28 
Direct installment21 25 
Residential mortgages27 32 
Consumer lines of credit
Total consumer loans54 10 64 
Total TDRs$60 $32 $92 

Allowance for Credit Losses on Loans and Leases
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 default mean calculated using an expanded period to include a prior recessionary period.
At March 31, 2022 and December 31, 2021, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment. For our ACL calculation at March 31, 2022, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 4.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 16.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 0.3% in 2022 and 5.5% 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 reflects growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects 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.
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Following is a summary of certain ratios related to the ACL and loans and leases:
TABLE 15
Three Months Ended
March 31,
(dollars in millions)20222021
Net loan charge-offs (annualized) by category to average loans:
Commercial and industrial0.03 %0.10 %
Indirect installment 0.01 
Net loan charge-offs (annualized)/average loans0.03 %0.11 %
Allowance for credit losses/total loans and leases1.38 %1.42 %
Allowance for credit losses/non-performing loans363.33 %229.80 %
The ACL on loans and leases of $370.6 million at March 31, 2022 increased $26.4 million, or 7.7%, from December 31, 2021 with the increase driven by the initial ACL related to the Howard acquisition. Our ending ACL coverage ratio at March 31, 2022 was 1.38%, compared to 1.38% at December 31, 2021. Excluding PPP loans that do not carry an ACL due to a 100% government guarantee, the ACL to total loan and leases ratio equaled 1.39% at March 31, 2022 and 1.40% at December 31, 2021. Total provision for credit losses for the three months ended March 31, 2022 was $18.0 million, compared to $5.9 million for the first three months ended March 31, 2021. Net charge-offs were $1.9 million for the three months ended March 31, 2022, compared to $7.1 million for the three months ended March 31, 2021, reflecting COVID-19 impacts on certain segments of the loan portfolio. The ACL as a percentage of non-performing loans for the total portfolio decreased from 392% as of December 31, 2021 to 365% as of March 31, 2022 following the increase in non-performing loans during the quarter, while the total ACL increased $26.4 million, as noted above.
Deposits
As a bank holding company, 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 16
(in millions)March 31,
2022
December 31,
2021
$
Change
%
Change
Non-interest-bearing demand$11,729 $10,789 $940 8.7 %
Interest-bearing demand15,256 14,409 847 5.9 
Savings3,970 3,669 301 8.2 
Certificates and other time deposits2,949 2,859 90 3.1 
Total deposits$33,904 $31,726 $2,178 6.9 %
Total deposits increased $2.2 billion, or 6.9%, 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 continued to shift away from higher rate certificates of deposit to lower yielding, more liquid products, while maintaining larger deposit account balances. The deposit growth helped us eliminate overnight borrowings and reduce higher-cost short-term FHLB borrowings and their related swaps.

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.
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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 9.9 million shares at a weighted average share price of $11.28 for $111.4 million under this repurchase program, with $188.6 million remaining for repurchase, including the additional amount approved in April. 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.
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 March 31, 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 will be 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 March 31, 2022, the total deferred impact on CET1 capital related to our adoption of CECL was approximately $51.6 million, or 17 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.
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Following are the capital amounts and related ratios for FNB and FNBPA:
TABLE 17
 Actual
Well-Capitalized
Requirements (1)
Minimum Capital
Requirements plus Capital Conservation Buffer
(dollars in millions)AmountRatioAmountRatioAmountRatio
As of March 31, 2022
F.N.B. Corporation
Total capital$3,826 12.33 %$3,104 10.00 %$3,259 10.50 %
Tier 1 capital3,207 10.33 1,862 6.00 2,638 8.50 
Common equity tier 13,101 9.99 n/an/a2,173 7.00 
Leverage3,207 8.28 n/an/a1,550 4.00 
Risk-weighted assets31,040 
FNBPA
Total capital4,005 12.93 %3,097 10.00 %3,252 10.50 %
Tier 1 capital3,366 10.87 2,477 8.00 2,632 8.50 
Common equity tier 13,286 10.61 2,013 6.50 2,168 7.00 
Leverage3,366 8.78 1,916 5.00 1,533 4.00 
Risk-weighted assets30,967 
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 capital2,984 10.29 1,739 6.00 2,464 8.50 
Common equity tier 12,877 9.92 n/an/a2,029 7.00 
Leverage2,984 7.99 n/an/a1,493 4.00 
Risk-weighted assets28,991 
FNBPA
Total capital3,695 12.77 %2,893 10.00 %3,038 10.50 %
Tier 1 capital3,098 10.71 2,314 8.00 2,459 8.50 
Common equity tier 13,018 10.43 1,880 6.50 2,025 7.00 
Leverage3,098 8.31 1,864 5.00 1,491 4.00 
Risk-weighted assets28,930 
(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.

68


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.
FNBPA generates liquidity from its normal business operations. 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 March 31, 2022 was $274.4 million, down $21.1 million from year-end, due primarily to $29.8 million in share repurchases. 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 18
March 31,
2022
December 31,
2021
Internal
Limit
Liquidity coverage ratio 2.2 times2.4 times> 1 time
Months of cash on hand 14.8 months16.9 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.  We have also increased customer deposit relationships due to the success of the PPP. Total deposits increased $2.2 billion, or 6.9%, 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 continued to shift away from higher rate certificates of deposit to lower yielding, more liquid products, while maintaining larger deposit account balances. Our liquidity position enabled us to eliminate Howard's overnight borrowings and retire $200 million of higher-cost FHLB borrowings. Total non-interest-bearing demand deposit accounts grew $939.7 million, or 8.7%, and interest-bearing demand deposits increased $848.0 million, or 5.9%. Savings account balances increased $300.9 million, or 8.2%. Time deposits increased $89.8 million, or 3.1% as a result of the Howard acquisition. In addition, customers maintained larger balances in their deposit accounts than before the pandemic. As mentioned earlier, inflows from PPP and government stimulus were a significant factor in the deposit growth.
Our cash balances held at the FRB increased $255.9 million from December 31, 2021 to $3.3 billion at March 31, 2022.
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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 March 31, 2022, we have $4.1 billion of cash and salable unpledged government and agency securities to total assets, or 9.8%. 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 19
(dollars in millions)March 31,
2022
December 31,
2021
Unused wholesale credit availability$14,979 $14,681 
Unused wholesale credit availability as a % of FNBPA assets35.7 %37.2 %
Salable unpledged government and agency securities$831 $836 
Salable unpledged government and agency securities as a % of FNBPA assets2.0 %2.1 %
Cash and salable unpledged government and agency securities as a % of FNBPA assets9.8 %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 March 31, 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 10.0% as of March 31, 2022, compared to 11.3% as of December 31, 2021. Management calculates this ratio at least quarterly and it is reviewed monthly by ALCO.
TABLE 20
(dollars in millions)Within
1 Month
2-3
Months
4-6
Months
7-12
Months
Total
1 Year
Assets
Loans$802 $1,483 $1,687 $3,085 $7,057 
Investments3,504 158 231 445 4,338 
4,306 1,641 1,918 3,530 11,395 
Liabilities
Non-maturity deposits309 619 928 1,857 3,713 
Time deposits243 442 587 849 2,121 
Borrowings410 550 29 352 1,341 
962 1,611 1,544 3,058 7,175 
Period Gap (Assets - Liabilities)$3,344 $30 $374 $472 $4,220 
Cumulative Gap$3,344 $3,374 $3,748 $4,220 
Cumulative Gap to Total Assets8.0 %8.0 %8.9 %10.0 %
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.

70


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 fall, while certain depositors can redeem their certificates of deposit early, which may be with or without penalty, when rates rise.
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 March 31, 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 21
(dollars in millions)Within
1 Month
2-3
Months
4-6
Months
7-12
Months
Total
1 Year
Assets
Loans$12,919 $1,112 $958 $1,735 $16,724 
Investments3,508 171 347 432 4,458 
16,427 1,283 1,305 2,167 21,182 
Liabilities
Non-maturity deposits10,496 — — — 10,496 
Time deposits372 441 585 845 2,243 
Borrowings441 612 309 1,369 
11,309 1,053 592 1,154 14,108 
Off-balance sheet(650)530 — (130)(250)
Period Gap (assets – liabilities + off-balance sheet)$4,468 $760 $713 $883 $6,824 
Cumulative Gap$4,468 $5,228 $5,941 $6,824 
Cumulative Gap to Assets11.9 %14.0 %15.9 %18.2 %
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The twelve-month cumulative repricing gap to total assets was 18.2% and 21.6% as of March 31, 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 March 31, 2022, compared to December 31, 2021, is primarily related to the Howard acquisition.
The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates. For example, if a product’s rate is estimated to increase by 50% as much as the market rates, then 50% of the account balance was placed in this category.
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 March 31, 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 22
March 31,
2022
December 31,
2021
ALCO
Limits
Net interest income change (12 months):
+ 300 basis points19.7 %21.6 %n/a
+ 200 basis points13.2 14.4 (5.0)%
+ 100 basis points6.5 7.0 (5.0)
- 100 basis points(4.1)(2.4)(5.0)
Economic value of equity:
+ 300 basis points3.0 6.6 (25.0)
+ 200 basis points2.7 5.8 (15.0)
+ 100 basis points1.7 3.8 (10.0)
- 100 basis points(7.1)(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. Assuming a static Balance Sheet, a +100 basis point Rate Ramp increases net interest income (12 months) by 3.4% at March 31, 2022 and 3.6% at December 31, 2021. For a +200 basis point Rate Ramp, net interest income (12 months) increases by 6.9% at March 31, 2022. The corresponding metrics for a minus 100 basis point Rate Ramp are (1.43)% and (0.5)% at March 31, 2022 and December 31, 2021, respectively. Deposit rate assumptions are floored at zero in the negative scenarios.
The FRB's rapid and large downward interest rate moves in March 2020 as a response to the COVID-19 pandemic lowered all market interest rates, specifically Prime Rate and 1-month LIBOR. 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 increased cash position related to increased deposits has also been a significant factor in our metrics. Assuming no replacement, the estimated impact of available cash in the +200-shock scenario above accounts for 6.5% of the 13.2% total asset sensitivity. These factors were the primary drivers of the increase in asset sensitivity. Our balance sheet is positioned to benefit from the Federal Open Market Committee (FOMC) increase of the Federal Funds rate on March 16, 2022 and the significant increases currently priced into the market.
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.
Management utilizes various tactics to achieve our desired interest rate risk (IRR) position. In response to the change in interest rates, management was proactive in managing our IRR position. As mentioned earlier, we were successful in growing our transaction deposits which provides funding that is less interest rate-sensitive than short-term time deposits and wholesale borrowings. Also, we were able to lower rates on deposit products and shorten the average maturity of the certificates of
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deposit volumes. Management's focus is to opportunistically deploy cash into higher yielding customer loans. 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. 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 59.7% of total net loans and leases as of March 31, 2022 and 61.3% as of December 31, 2021. As of March 31, 2022, the commercial swaps totaled $5.5 billion of notional principal, with $376.2 million in original notional swap principal originated during the first three months of 2022. In 2021, we also executed $1.0 billion in receive fixed/pay floating 1-month LIBOR interest rate swaps with an average life of 3.6 years as a hedge to additional asset sensitivity. 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. The investment portfolio is also used, in part, to manage our IRR position.
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 so as 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'
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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 of 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, through the use of 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 circumstance. 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
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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 23
Operating net income available to common stockholders
Three Months Ended
March 31,
(in thousands)20222021
Net income available to common stockholders$50,988 $91,225 
Merger-related expense28,629 — 
Tax benefit of merger-related expense(6,012)— 
Provision expense related to acquisition19,127 — 
Tax benefit of provision expense related to acquisition(4,017)— 
Branch consolidation costs4,178 — 
Tax benefit of branch consolidation costs(877)— 
Operating net income available to common stockholders (non-GAAP)$92,016 $91,225 
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 24
Operating earnings per diluted common share
Three Months Ended
March 31,
 20222021
Net income per diluted common share$0.15 $0.28 
Merger-related expense0.08 — 
Tax benefit of merger-related expense(0.02)— 
Provision expense related to acquisition0.05 — 
Tax benefit of provision expense related to acquisition(0.01)— 
Branch consolidation costs0.01 — 
Tax benefit of branch consolidation costs— — 
Operating earnings per diluted common share (non-GAAP)$0.26 $0.28 

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TABLE 25
Return on average tangible common equity
 Three Months Ended
March 31,
(dollars in thousands)20222021
Net income available to common stockholders (annualized)$206,787 $369,970 
Amortization of intangibles, net of tax (annualized)10,339 9,773 
Tangible net income available to common stockholders (annualized) (non-GAAP)$217,126 $379,743 
Average total stockholders’ equity$5,448,894 $4,961,692 
Less: Average preferred stockholders' equity(106,882)(106,882)
Less: Average intangible assets (1)
(2,444,395)(2,315,012)
Average tangible common equity (non-GAAP)$2,897,617 $2,539,798 
Return on average tangible common equity (non-GAAP)7.49 %14.95 %
(1) Excludes loan servicing rights.

TABLE 26
Return on average tangible assets
 Three Months Ended
March 31,
(dollars in thousands)20222021
Net income (annualized)$214,935 $378,118 
Amortization of intangibles, net of tax (annualized)10,339 9,773 
Tangible net income (annualized) (non-GAAP)$225,274 $387,891 
Average total assets$41,121,071 $37,626,715 
Less: Average intangible assets (1)
(2,444,395)(2,315,012)
Average tangible assets (non-GAAP)$38,676,676 $35,311,703 
Return on average tangible assets (non-GAAP)0.58 %1.10 %
(1) Excludes loan servicing rights.

TABLE 27
Tangible book value per common share
March 31, 2022March 31, 2021
(dollars in thousands, except per share data)
Total stockholders’ equity$5,438,595 $4,973,676 
Less: Preferred stockholders’ equity(106,882)(106,882)
Less: Intangible assets (1)
(2,492,359)(2,313,478)
Tangible common equity (non-GAAP)$2,839,354 $2,553,316 
Ending common shares outstanding350,911,030 318,696,426 
Tangible book value per common share (non-GAAP)$8.09 $8.01 
(1) Excludes loan servicing rights.

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TABLE 28
Tangible equity to tangible assets (period-end)
March 31, 2022March 31, 2021
(dollars in thousands)
Total stockholders' equity$5,438,595 $4,973,676 
Less:  Intangible assets (1)
(2,492,359)(2,313,478)
Tangible equity (non-GAAP)$2,946,236 $2,660,198 
Total assets$42,021,887 $38,475,371 
Less:  Intangible assets (1)
(2,492,359)(2,313,478)
Tangible assets (non-GAAP)$39,529,528 $36,161,893 
Tangible equity / tangible assets (period-end) (non-GAAP)7.45 %7.36 %
(1) Excludes loan servicing rights.

TABLE 29
Tangible common equity / tangible assets (period-end)
March 31, 2022March 31, 2021
(dollars in thousands)
Total stockholders' equity$5,438,595 $4,973,676 
Less:  Preferred stockholders' equity(106,882)(106,882)
Less:  Intangible assets (1)
(2,492,359)(2,313,478)
Tangible common equity (non-GAAP)$2,839,354 $2,553,316 
Total assets$42,021,887 $38,475,371 
Less:  Intangible assets (1)
(2,492,359)(2,313,478)
Tangible assets (non-GAAP)$39,529,528 $36,161,893 
Tangible common equity / tangible assets (period-end) (non-GAAP)7.18 %7.06 %
(1) Excludes loan servicing rights.
TABLE 30
Allowance for credit losses / loans and leases, excluding PPP loans (period-end)
(dollars in thousands)March 31, 2022December 31, 2021
ACL - loans$370,643 $344,284 
Loans and leases$26,839,069 $24,968,702 
Less:  PPP loans outstanding(179,644)(336,578)
Loans and leases, excluding PPP loans outstanding (non-GAAP)$26,659,425 $24,632,124 
ACL loans / loans and leases, excluding PPP loans (non-GAAP)1.39 %1.40 %




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TABLE 31
Deposits, excluding Howard deposits (average)
(Dollars in thousands)March 31, 2022March 31, 2021
Deposits$32,994,802 $29,367,149 
Less: Howard deposits(1,343,891)— 
Deposits, excluding Howard deposits (non-GAAP)$31,650,911 $29,367,149 
TABLE 32
Loans and leases, excluding PPP loans and Howard loans as of the acquisition date (period-end)
Three Months Ended
March 31,
Three Months Ended December 31,
(Dollars in thousands)20222021
Loans and leases$26,839,069 $24,968,702 
Less: PPP loans outstanding(179,644)(336,578)
Less: Howard loans as of the acquisition date, excluding PPP loans outstanding(1,767,564)— 
Loans and leases, excluding PPP loans and Howard loans as of the acquisition date (non-GAAP)$24,891,861 $24,632,124 
Key Performance Indicators
TABLE 33
Pre-provision net revenue to average tangible common equity
Three Months Ended
March 31,
(dollars in thousands)20222021
Net interest income$234,076 $222,923 
Non-interest income78,322 82,805 
Less: Non-interest expense(227,426)(184,862)
Pre-provision net revenue (as reported)$84,972 $120,866 
Pre-provision net revenue (as reported) (annualized) $344,609 $490,179 
Adjustments:
Add: Merger-related expense (non-interest expense)28,629 — 
Add: Branch consolidation costs (non-interest expense)4,178 — 
Pre-provision net revenue (operating) (non-GAAP)$117,779 $120,866 
Pre-provision net revenue (operating) (annualized)
(non-GAAP)
$477,659 $490,179 
Average total shareholders’ equity$5,448,894 $4,961,692 
Less: Average preferred shareholders’ equity(106,882)(106,882)
Less: Average intangible assets (1)
(2,444,395)(2,315,012)
Average tangible common equity (non-GAAP)$2,897,617 $2,539,798 
Pre-provision net revenue (reported) / average tangible common equity (non-GAAP)11.89 %19.30 %
Pre-provision net revenue (operating) / average tangible common equity (non-GAAP)16.48 %19.30 %
(1) Excludes loan servicing rights.

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TABLE 34
Efficiency ratio
 Three Months Ended
March 31,
(dollars in thousands)20222021
Non-interest expense$227,426 $184,862 
Less: Amortization of intangibles(3,227)(3,050)
Less: OREO expense(315)(786)
Less: Merger-related expense(28,629)— 
Less: Branch consolidation costs(4,178)— 
Adjusted non-interest expense$191,077 $181,026 
Net interest income$234,076 $222,923 
Taxable equivalent adjustment2,598 2,859 
Non-interest income78,322 82,805 
Less: Net securities gains— (41)
Adjusted net interest income (FTE) + non-interest income$314,996 $308,546 
Efficiency ratio (FTE) (non-GAAP)60.66 %58.67 %
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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 March 31, 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. There were no material changes in risk factors relevant to our results of operations, financial condition or liquidity since December 31, 2021.

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ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information regarding FNB's purchases of our common stock during the quarter ended March 31, 2022. In April 2022, our Board of Directors authorized an additional $150 million available to repurchase shares of our common stock.
PeriodTotal number of shares purchased Average price paid per shareTotal number of shares purchased as part of publicly announced plans or programs
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1)
February 1 - February 28, 20221,771,204 $13.43 1,771,204 $44,597,201 
March 1 - March 31, 2022477,030 12.57 477,030 38,593,179 
Total2,248,234 $13.25 2,248,234 
(1) The number shown represents, as of the end of each period, the approximate dollar value of Common Stock that may yet be purchased under publicly-announced share repurchase authorizations. The shares may be purchased, from time-to-time, depending on market conditions. The amounts do not reflect the additional $150 million authorization that was approved subsequent to March 31, 2022.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
NONE

ITEM 4.    MINE SAFETY DISCLOSURES
Not Applicable.

ITEM 5.    OTHER INFORMATION
NONE
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ITEM 6.    EXHIBITS
Exhibit Index
Exhibit NumberDescription
31.1.
31.2.
32.1.
32.2.
101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document (filed herewith).
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
101.LABInline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
104Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).
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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: May 5, 2022 /s/ Vincent J. Delie, Jr.
  Vincent J. Delie, Jr.
  Chairman, President and Chief Executive Officer
  (Principal Executive Officer)
Dated: May 5, 2022 /s/ Vincent J. Calabrese, Jr.
  Vincent J. Calabrese, Jr.
  Chief Financial Officer
  (Principal Financial Officer)
Dated: May 5, 2022 /s/ James L. Dutey
  James L. Dutey
  Corporate Controller
  (Principal Accounting Officer)
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