What changed in this filing

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Item 1. Business

2022-02-24 compared with 2021-02-25 · 230 added, 186 removed, 425 unchanged (49% of the section changed)

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Community Banking, Wealth Management and Insurance, with the remaining operations described in Other .

As of December 31, 2020, we have 358 Community Banking offices in Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina and Virginia.

As of December 31, 2021, we have 334 Community Banking offices in Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington, D.C.

and Virginia.

As of December 31, 2021, we had total assets of $40 billion, loans of $25 billion and deposits of $32 billion.

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Our website is at http://www.fnb-online.com and information regarding FNB and investor relations is located under the heading, "About Us." We use our website to distribute company information, including as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.

We generally post and make accessible before or promptly following first use of financially-related press releases, including earnings releases and supplemental financial information, various SEC filings, including annual, quarterly and current reports and proxy statements, presentation materials associated with earnings and other investor calls or events on our corporate website.

Under some circumstances, the information may be relevant to investors but be directed to customers, in which case it may be accessed directly through our websites home page rather than “About Us-Investor Information.” Investors should monitor the Investor Relations portion of our website, in addition to following our press releases, SEC filings, public conference calls and webcasts.

We generally post and make accessible before or promptly following the first time we use financially-related press releases, including earnings releases and supplemental financial information, various SEC filings, including annual, quarterly and current reports and proxy statements, presentation materials associated with earnings and other investor calls or events on our corporate website.

Under some circumstances, the information may be relevant to investors but be directed to customers, in which case it may be accessed directly through our website's home page rather than “About Us-Investor Information.” Investors should monitor the Investor Relations portion of our website, in addition to following our press releases, SEC filings, public conference calls and webcasts.

For earnings and other conference calls or events, we generally include in our posted materials a cautionary statement regarding forward-looking and non-GAAP financial information, and we provide GAAP reconciliations when we provide non-GAAP financial information.

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Notwithstanding the foregoing, the information contained on our website as referenced in this paragraph is not incorporated by reference into this Annual Report on Form 10-K.

Also, under the "About Us" portion of our website under the heading Investor Information you may click on Corporate Governance to view the following:

Also, under the "About Us" portion of our website under the heading Investors you may click on Corporate Governance to view the following:

(i) our Code of Conduct and Code of Ethics;

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(formerly known as F.N.B.

Capital Partners, L.P.) (Tecum), a Small Business Investment Company licensed by the U.S.

Capital Partners, L.P.) (Tecum), a SBIC licensed by the U.S.

Tecum is not an affiliate or a subsidiary of FNB.

Waubank Securities LLC is a limited broker-dealer subsidiary which passively participates in corporate and municipal underwritings.

We have three companies that issued TPS to third-party investors:

Statutory Trust II, Yadkin Valley Statutory Trust I and FNB Financial Services Capital Trust I, the last two of which were acquired in conjunction with the YDKN acquisition.

Statutory Trust II, Yadkin Valley Statutory Trust I and FNB Financial Services Capital Trust I, the last two of which were assumed in an acquisition.

FNB Financial Services, Inc.

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The most direct competition for deposits comes from commercial banks, savings banks and credit unions.

Additional competition for deposits comes from non-depository competitors such as financial technology companies, mutual funds, securities and brokerage firms and insurance companies.

Competition for deposits comes from non-depository competitors such as financial technology companies, mutual funds, securities and brokerage firms and insurance companies.

In providing wealth and asset management services, as well as insurance brokerage services, our subsidiaries compete with many other financial services firms, brokerage firms, mutual fund complexes, investment management firms, trust and fiduciary service providers and insurance agencies.

Competition for loans and deposits depends on a number of factors, including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates on loans and deposits and lending limits.

Also, our ability to continue to compete effectively depends in large part on retaining and motivating our employees and our ability to attract new employees, while effectively managing compensation and other expenses.

The ability to deploy and use technology effectively is an important competitive factor in the financial services industry.

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We are committed to the attraction, retention, and development of exceptional talent.

This commitment also extends to building a diverse workforce that reflects different cultures, ethnicities and backgrounds which foster creativity, innovation, and overall success.

To support this focus on our human capital, we employ several strategies to foster an engaged workforce in a safe environment that helps to identify, promote and grow future leaders.

Our special culture has contributed to the nearly 30 workplace awards we have received over the past decade.

This commitment also extends to building a diverse workforce that reflects different cultures, ethnicities and backgrounds and which fosters creativity, innovation and overall success.

To support this focus on our human capital, we employ several strategies to provide our workforce with a safe environment that helps to identify, promote and grow future leaders.

Our special culture has contributed to the more than 35 workplace awards we have received.

In early 2021, we continued to add to this impressive list with our first-ever national recognition as an employer, having been named a Top Workplace U.S.A.

by Energage, an independent research firm, based on employee feedback.

As part of this award program, we were also named a national Top Workplace in the financial services industry.

As part of this award program, we were also named a national Top Workplace U.S.A.

in the financial services industry.

We repeated our Top Workplace U.S.A.

recognition in 2022.

In addition, we have repeatedly been named to JUST Capital’s select annual list of companies engaged in business behavior that matters, based, in part, on an assessment of our employee practices relative to income inequality, racial equity and employee opportunity.

As of January 31, 2022, FNB and our subsidiaries had 3,886 full-time and 294 part-time employees.

We are committed to building a diverse and inclusive workforce and have found great success cultivating and fostering mutually beneficial partnerships with job and recruiting centers, colleges and universities and organizations that help to identify and attract diverse candidates.

We are committed to building a diverse and inclusive workforce and have found great success cultivating and fostering mutually beneficial partnerships with job and recruiting centers, colleges and universities, including historically black colleges and universities, and diversity-focused organizations that help us to identify and attract diverse candidates.

In addition to posting positions with these organizations, our leaders participate in events hosted by these partners to further our brand as an employer of choice.

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We focus resources on programs to develop leaders and promote internal advancement within the organization.

This includes a mentor program, succession planning and a leadership program, all administered through our dedicated training department team to further develop the talent which our recruitment efforts have attracted.

This includes a mentor program, succession planning and leadership programs, administered by our dedicated training department team to further develop the talent which our recruitment efforts have attracted.

We have an active Diversity Council which takes a proactive, leadership role in promoting diversity, equity and inclusion in our culture.

The Diversity Council is responsible for promoting an inclusive culture that attracts, retains and develops the best talent from a broad spectrum to create a diverse, highly productive workforce, at all levels of the organization.

The Diversity Council is responsible for promoting an inclusive culture and workplace environment that attracts, retains and develops the best talent from a broad spectrum to create a diverse, highly productive workforce, at all levels of the organization.

The Diversity Council supports our mission to build a workforce in which employees can learn, grow and prosper, and our commitment to diversity, equity and inclusion within the workforce.

It supports both corporate and employee initiatives on diversity, equity and inclusion.

It supports both corporate and employee initiatives on diversity, equity, opportunity and inclusion.

The membership composition of the Diversity Council reflects the diversity within our organization.

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This engagement survey collects insights about employees’ experiences to help shape our future success.

The results are reviewed at

various levels of the organization up to, and including, the Board of Directors.

The results are reviewed at various levels of the organization, including the Board of Directors.

Managers create action plans targeting opportunities in areas that the survey highlights.

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The compensation program is a management tool that, when aligned with an effective communication plan, is designed to support, reinforce, and align our values, business strategy, operational and financial needs with our strategic goals.

We believe that compensation programs, through competitive base salary, short-term incentive plans, and long-term incentive plans, are essential for providing the behavior to set performance expectations, improving service quality and productivity, and recognizing contributions to our success.

The oversight and review of our compensation philosophy and programs are conducted by the Management Compensation Committee.

This team, chaired by FNB’s Chairman, President and Chief Executive Officer, regularly meets to promote compensation programs that are equitable, to achieve a performance-driven work culture that generates company growth, rewarding employees for focusing on customer needs and demonstrating appropriate risk management behaviors.

At the start of 2020 we accomplished our goal to provide a minimum starting compensation of $15/hour, which was the final phase of a commitment started in 2018 to increase the financial commitment to entry level and front-line employees.

We provide a minimum starting compensation of $15/hour for entry level and front-line employees.

We believe that compensation programs, through competitive base salary, short-term incentive plans, and long-term incentive plans, are essential for encouraging the behavior to set performance expectations, improving service quality and productivity, and recognizing contributions to our success, while also avoiding incentivizing undue risk to our financial condition.

Our executive compensation program is overseen by the Compensation Committee of our Board of Directors, in collaboration with a leading independent compensation advisory firm.

In addition, the oversight and review of our company-wide compensation philosophy and programs are conducted by the Management Compensation Committee, in consultation with our Board of Directors.

This team, chaired by FNB’s Chairman, President and Chief Executive Officer, regularly meets to promote compensation programs that are equitable, to achieve a performance-driven work culture that generates company growth and to reward employees for focusing on customer needs, while avoiding inappropriate conduct regarding our clients, and demonstrating appropriate risk management behaviors.

Values & Training.

We strive to maintain sound financial practices and governance processes through a commitment to ethical behavior, a solid reputation and a firm record of compliance and stability that these strengths create, both within our Corporation and for our customers.

Employees complete quarterly and annual job specific training, including regulatory and compliance requirements, to increase knowledge of standards required of the financial services industry.

Additionally, employees are provided various avenues to report unethical behavior without repercussions to them, such as FNB’s Ethics Hotline.

Employees are asked to report any issues that could result in financial or reputational harm to us.

Employees complete quarterly and annual job specific training, including regulatory and compliance requirements and ethical standards, to increase knowledge of standards required of the financial services industry.

Additionally, we provide employees various avenues to report unethical behavior without repercussions to them, such as FNB’s Ethics Hotline.

We encourage employees to report any issues that could result in financial or reputational harm to us.

Our commitment to the personal and professional well-being of each employee extends beyond a competitive compensation and benefits package.

Innovative employee-friendly programs and policies designed to help team members maintain a healthy, meaningful work/life balance by providing resources to support mental, physical and financial health are offered and regularly expanded.

This includes parental and caregiver leave, adoption assistance and back-up child-care programs built to provide employees with the financial support and time away from work that they need to focus on their new family members.

Employee and customer safety are key concerns for us.

The COVID-19 pandemic created unique challenges in 2020 that no organizations had faced before.

This includes parental and caregiver leave, monetary contribution to employee Health Savings Accounts, adoption assistance and back-up child-care programs built to provide employees with the financial support and time away from work that they need to focus on their new family members.

Employee and customer safety remain paramount concerns for us, especially with respect to developing our response to the ongoing COVID-19 pandemic.

Employee safety and support were key pillars to our response to the pandemic.

Highlights of the employee actions we enacted in the spring of 2020 and throughout the remainder of the year include:

• Approximately half of the workforce was mobilized to a work-from-home arrangement by sourcing and procuring the necessary equipment and tools.

• Established an employee information portal updated daily with information related to the pandemic, adjusted operational procedures, and a robust employee Q&A process.

• Provided all employees additional days off and expanded existing leave programs to assist in supporting personal or family illness and childcare.

• Increased safety protocols such as personal protection equipment, sanitization protocols, thermal scanning devices, social distancing signage, furniture modification and other measures were implemented for the safety of employees that needed to continue to work in our facilities during the national emergency .

Government Supervision and Regulation

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The financial services industry is subject to extensive regulatory oversight and, in particular, bank holding companies, banks and their affiliates (depending upon charter and business activities) are subject to supervision, regulation and examination by the FRB, OCC, FDIC, CFPB, SEC, FINRA and various state regulatory agencies.

The statutory

and regulatory framework that governs FNB and our affiliates is generally intended to protect depositors and customers, the federal insurance fund, the U.S.

The statutory and regulatory framework that governs FNB and our affiliates is generally intended to protect depositors and customers, the federal DIF, the U.S.

banking and financial system, and financial markets as a whole;

however, this framework is not specifically for the protection of security holders.

however, this framework is not specifically for the protection of stockholders.

Significant elements of the laws and regulations applicable to FNB and our affiliates are described in this section.

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Also, FNB is subject to the rules of the NYSE for listed companies.

Political, economic, industry events and other factors typically result in the banking laws, regulations and policies to be continually subject to review by Congress, state legislatures and federal and state regulatory agencies.

Political, economic, and industry events and other factors may influence changes to the banking laws, regulations and policies by the U.S.

Congress, state legislatures and federal and state regulatory agencies.

In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance, which sometimes materially changes regulatory expectations.

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Regulatory enforcement and fines have also significantly increased across the banking and financial services sector.

Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations, most of which are now in place.

Many of these changes have occurred as a result of the enactment of the Dodd-Frank Act and adoption of implementing regulations, most of which are now in place.

The OCC regulations implemented under the Economic Growth Act raised the minimum asset threshold for covered banks to conduct stress tests from $10 billion to $250 billion.

This resulted in FNB and FNBPA no longer being subject to Dodd-Frank Act stress testing requirements, however we will continue to voluntarily perform capital stress testing consistent with the safety and soundness expectations of our banking regulators.

The Economic Growth Act also enacted several important changes in some technical compliance areas, for which the banking agencies have now issued certain corresponding guidance documents and/or proposed final rules, including:

• Prohibiting federal banking regulators from imposing higher capital standards on HVCRE exposures unless they are for ADC loans, and clarifying ADC status;

• Requiring the federal banking agencies to amend the LCR Rule such that all qualifying investment-grade, liquid and readily-marketable municipal securities are treated as level 2B liquid assets, making them more attractive investment alternatives;

This resulted in FNB and FNBPA no longer being subject to Dodd-Frank Act stress testing requirements, however we continue to voluntarily perform capital stress testing consistent with the safety and soundness expectations of our banking regulators.

The Economic Growth Act also enacted several important changes in some compliance areas, for which the banking agencies have issued guidance documents and implementing regulations, including:

• Prohibiting the federal banking regulators from imposing higher capital standards on high volatility commercial real estate exposures (HVCRE) unless they are for acquisition, development or construction (ADC) loans, and clarifying ADC status;

• Requiring the federal banking regulators to amend the LCR Rule such that all qualifying investment-grade, liquid and readily-marketable municipal securities are treated as level 2B liquid assets, making them more attractive investment alternatives;

• Exempting from appraisal requirements certain transactions involving real property in rural areas and valued at less than $400,000;

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FNB is a legal entity separate and distinct from our subsidiaries.

As a financial holding company and a bank holding company, FNB is regulated under the BHC, as amended, and is subject to regulation, inspection, examination and supervision by the FRB.

Under the BHC Act, FRB is the “umbrella” regulator of a financial holding company.

In addition, a financial holding company’s operating entities, meaning its subsidiary broker-dealers, investment managers, investment advisory companies, insurance companies and banks, as applicable, are subject to the jurisdiction of various federal and state “functional” regulators and self-regulatory organizations, such as FINRA.

FNB is regulated as a bank holding company under the BHC Act, as amended, which generally restricts bank holding companies from engaging in business activities other than the business of banking and certain closely related activities.

FNB elected to become a financial holding company under the BHC Act and, as such, may engage in a broader range of financial and related activities than a bank holding company.

The ability to elect and maintain status as a financial holding company is subject to certain conditions.

As a financial holding company and a bank holding company, FNB is regulated under the BHC Act, as amended, and is subject to regulation, inspection, examination and supervision by the FRB.

Under the BHC Act, the FRB is the “umbrella” regulator of a financial holding company.

In addition, a financial holding company’s operating entities, including its subsidiary broker-dealers, investment managers, investment advisory companies, insurance companies and banks, as applicable, are subject to the jurisdiction of various federal and state “functional” regulators and self-regulatory organizations, such as FINRA.

Our subsidiary bank, FNBPA, and FNBPA’s subsidiary trust company, FNTC, are organized as national banking associations, which are subject to regulation, supervision and examination by the OCC, which is a bureau of the UST.

FNBPA is also subject to certain regulatory requirements of the CFPB, the FDIC, the FRB and other federal and state regulatory agencies,

including but not limited to requirements to maintain reserves against deposits, capital requirements, limitations regarding dividends, restrictions on the types and amounts of loans that may be granted and the interest that may be charged on loans, affiliate transactions, CRA, consumer compliance and anti-discrimination laws and unfair, deceptive or abusive acts and practices prohibitions, monitoring obligations under the federal bank secrecy act and anti-money laundering requirements, limitations on the types of investments that may be made, cybersecurity and consumer privacy requirements, activities that may be engaged in and types of services that may be offered.

In addition to banking laws, regulations and regulatory agencies, FNB and our subsidiaries are subject to various other laws and regulations and supervision and examination by other regulatory agencies, all of which directly or indirectly affect the operations and management of FNB and our ability to make distributions to our stockholders.

If we fail to comply with these or other applicable laws and regulations, we may be subject to civil monetary penalties, imposition of cease and desist orders or other written directives, removal of management and, in certain cases, criminal penalties.

FNBPA is also subject to certain regulatory requirements of the CFPB, the FDIC, the FRB and other federal and state regulatory agencies, including but not limited to, requirements to maintain reserves against deposits, capital requirements, limitations regarding dividends, restrictions on the types and amounts of loans that may be granted and the interest that may be charged on loans, affiliate transactions, CRA, consumer compliance and anti-discrimination laws and unfair, deceptive or abusive acts and practices prohibitions, monitoring obligations under the federal bank secrecy act and anti-money laundering requirements,

limitations on the types of investments that may be made, cybersecurity and consumer privacy requirements, activities that may be engaged in and types of services that may be offered.

In addition to supervision, regulation and enforcement of federal banking laws, and regulations by the federal bank regulatory agencies, FNB and our subsidiaries are subject to various other laws and regulations and supervision and examination by other regulatory agencies, all of which directly or indirectly affect the operations and management of FNB and our ability to make distributions to our stockholders.

Pursuant to the GLB Act, bank holding companies such as FNB that have qualified as financial holding companies because they are “well-capitalized” and “well managed” have broad authority to engage in activities that are financial in nature or incidental to such financial activity, including insurance underwriting and brokerage, merchant banking, securities underwriting, dealing and market-making;

and such additional activities as the FRB in consultation with the Secretary of the UST determines to be financial in nature, incidental thereto or complementary to a financial activity.

As a result of the GLB Act, a bank holding company may engage in those activities directly or through subsidiaries by qualifying as a “financial holding company.” As a financial holding company, FNB may engage directly or indirectly in activities considered financial in nature, either de novo or by acquisition, provided the FNB continues such status and gives the FRB after-the-fact notice of the new activities.

As a result of the GLB Act, a bank holding company may engage in those activities directly or through subsidiaries by qualifying as a “financial holding company.” As a financial holding company, FNB may engage directly or indirectly in activities considered financial in nature, either de novo or by acquisition, provided that FNB continues such status and gives the FRB after-the-fact notice of the new activities.

The GLB Act also permits national banks, such as FNBPA, to engage in activities considered financial in nature through a financial subsidiary, subject to certain conditions and limitations and with the approval of the OCC (see discussion under the caption, “Financial Holding Company Status and Activities” ).

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The FRB, OCC, FDIC, CFPB and SEC have broad enforcement powers and authority to approve, deny or refuse to act upon applications or notices of FNB or our subsidiaries to open new or close existing offices, conduct new activities, acquire or divest businesses or assets or reconfigure existing operations.

In addition, FNB, FNBPA, FNTC and other affiliates are subject to examination by the various federal and state regulators, which involves periodic examinations and supervisory inquiries, the reports of which are not publicly available and can affect ratings that can impact the conduct and growth of our businesses.

In addition, FNB, FNBPA, FNTC and other affiliates are subject to examination by various federal and state regulators, which involves periodic examinations and supervisory inquiries, the results of which are not publicly available and can impact the conduct and growth of our businesses.

These examinations consider not only safety and soundness principles, but also compliance with applicable laws and regulations, including anti-money laundering requirements, loan quality and administration, capital levels, asset quality and risk management ability and performance, earnings, liquidity, consumer compliance, anti-discrimination laws, unfair, deceptive or abusive acts and practices prohibitions, community reinvestment, cybersecurity and consumer privacy requirements, and various other factors.

The federal banking interagency Guidelines for Establishing Standards for Safety and Soundness set forth compliance considerations and guidance with respect to the following operations of banking organizations:

The federal banking regulators' interagency Guidelines for Establishing Standards for Safety and Soundness set forth compliance considerations and guidance with respect to the following operations of banking organizations:

(1) internal controls and information systems;

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and (9) earnings.

Significant adverse findings reporting safety and soundness or violations of laws or regulations by any of FNB’s federal bank regulators could potentially result in the imposition of significant fines, penalties, reimbursements, enforcement actions as well as limitations and prohibitions on the activities and growth of FNB and our subsidiaries.

There are numerous laws, regulations and rules governing the activities of financial institutions - including non-bank financial institutions, such as financial technology companies and marketplace lenders, which provide products and services comparable to banking organizations - financial holding companies and bank holding companies.

Significant adverse safety and soundness findings or violations of laws or regulations by any of FNB’s federal bank regulators could potentially result in the imposition of significant fines, penalties, reimbursements, enforcement actions and compliance plans as well as limitations and prohibitions on the activities and growth of FNB and our subsidiaries.

There are numerous laws, regulations and rules governing the activities of financial institutions - including non-bank financial institutions, such as financial technology companies and marketplace lenders, which provide products and services comparable to banking organizations, including - financial holding companies and bank holding companies.

The following discussion is general in nature and seeks to highlight some of the more significant of these regulatory requirements, but does not purport to be complete or to describe all of the laws and regulations that apply to us and our subsidiaries.

Legislative and Regulatory Responses to the COVID-19 Pandemic

The COVID-19 pandemic has continued to cause extensive disruptions to the global economy, to businesses, and to the lives of individuals throughout the world.

On March 27, 2020, the CARES Act was signed into law.

The CARES Act was a $2.2 trillion economic stimulus bill that was intended to provide relief in the wake of the COVID-19 pandemic.

There have also been a number of regulatory actions intended to help mitigate the adverse economic impact of the COVID-19 pandemic on borrowers, including several mandates from the federal bank regulatory agencies, requiring financial institutions to work constructively with borrowers affected by the COVID-19 pandemic.

The PPP, originally established under the CARES Act and extended under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, authorized financial institutions to make federally-guaranteed loans to qualifying small businesses and non-profit organizations.

Under the PPP, these loans carry an interest rate of 1% per annum and a maturity of two years for loans originated prior to June 5, 2020 and five years for loans originated on or after June 5, 2020.

The PPP provides that such loans may be forgiven if the borrowers meet certain requirements with respect to maintaining employee headcount and payroll

and the use of the loan proceeds after the loan is originated.

Although the PPP ended in accordance with its terms on May 31, 2021, outstanding PPP loans continue to go through the process of either (1) obtaining forgiveness from the SBA, (2) amortizing any unforgiven balance over 2 or 5 years or (3) pursuing claims under the SBA guaranty.

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

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The Dodd-Frank Act established a $250,000 deposit insurance limit for insured deposits.

Amendments to the Federal Deposit Insurance Act also revised the assessment base against which an insured depository institution’s deposit insurance premiums paid to the FDIC’s DIF are calculated.

Amendments to the FDI Act also revised the assessment base against which an IDI’s deposit insurance premiums paid to the FDIC’s DIF are calculated.

Under the amendments, the FDIC assessment base is no longer the institution’s deposit base, but rather its average consolidated total assets less its average tangible equity.

The Dodd-Frank Act requires a phase-in of the minimum designated reserve ratio for the DIF, increasing it from 1.15% to 1.35% of the estimated amount of total insured deposits which was achieved as of the third quarter of 2018.

FDIC regulations provide that, among other things, upon reaching the minimum, surcharges on insured depository institutions with total consolidated assets of $10 billion or more will cease.

The last quarterly surcharge was reflected in FNBPA’s December 2018 assessment invoice, which covered the assessment period from July 1, 2018 through September 30, 2018.

FDIC regulations provide that, among other things, upon reaching the minimum, surcharges on IDIs with total consolidated assets of $10 billion or more cease.

The last quarterly surcharge was reflected in FNBPA’s December 2018 assessment invoice.

FNBPA’s assessment invoices have not included a quarterly surcharge since that time.

In addition, the Dodd-Frank Act eliminated the requirement of the FDIC to pay dividends to depository institutions when the reserve ratio exceeds certain thresholds.

The FDIC has set the target designated reserve ratio at 2%.

In addition, the Dodd-Frank Act eliminated the requirement for the FDIC to pay dividends to depository institutions when the reserve ratio exceeds certain thresholds.

The FDIC may pay dividends to depository institutions when the reserve ratio exceeds 1.5%, but the FDIC has sole discretion to determine whether to suspend or limit the declaration or payment of dividends from the DIF.

The FDIC has set the target designated reserve ratio at 2% since 2010.

Assessment rates, which declined for all banks when the reserve ratio first surpassed 1.15% in the third quarter of 2016, are expected to remain unchanged.

Assessment rates are scheduled to decrease when the reserve ratio exceeds 2%.

The DIF and the DIF ratio were $117.9 billion and 1.29%, respectively, at December 31, 2020.

In addition, TCJA, which was signed into law on December 22, 2017, disallows the deduction of FDIC deposit insurance premium payments for banking organizations with total consolidated assets of $50 billion or more.

In addition, TCJA disallows the deduction of FDIC deposit insurance premium payments for banking organizations with total consolidated assets of $50 billion or more.

For banks with less than $50 billion in total consolidated assets, such as FNBPA, the premium deduction is phased-out based on the proportion of the bank’s assets exceeding $10 billion.

In December 2019, the FDIC issued a proposed rule to modernize its brokered deposit regulations.

The proposal would, among other things, establish a new framework for analyzing whether deposits placed through deposit placement arrangements qualify as brokered deposits.

Notable aspects of the proposed rule include language:

(i) defining the operative prongs of the definition of a “deposit broker;” (ii) creating three general tests to determine the applicability of the “primary purpose” exception;

(iii) establishing an application process for entities that wish to make use of the primary purpose exception;

and (iv) allowing wholly owned subsidiaries of insured depository institutions to make use of the “insured depository institution” (the “own bank”) exception.

The prospects and timing for the adoption of a final rule are uncertain at this time.

Brokered Deposits.

Section 29 of the FDI Act and FDIC regulations issued thereunder limit the ability of an IDI, such as FNBPA, to accept, renew or roll over brokered deposits unless the IDI is well-capitalized under the “prompt corrective action” framework described below, or unless it is adequately capitalized and obtains a waiver from the FDIC.

In addition, IDIs that are less than well-capitalized are subject to restrictions on the interest rates that they may pay on deposits.

The characterization of deposits as “brokered” may result in the imposition of higher deposit assessments on such deposits.

As mandated by the Economic Growth Act, the FDIC adopted a final rule in February 2019 to include a limited exception for reciprocal deposits for IDIs that are well-managed and well-capitalized (or adequately capitalized and have obtained a waiver from the FDIC, as mentioned above).

Under the limited exception, qualified IDIs, like FNBPA, are able to except from treatment as “brokered” deposits up to $5 billion or 20% of the institution’s total liabilities in reciprocal deposits (which is defined as deposits received by a financial institution through a deposit placement network with the same maturity (if any) in the same aggregate amount as deposits placed by the institution in other network member banks).

On December 15, 2020, the FDIC issued a final rule amending its brokered deposit regulations.

The rule sought to clarify and modernize the FDIC's regulatory framework for brokered deposits.

Notable aspects of the rule include:

(i) defining the operative prongs of the definition of a “deposit broker;” (ii) the identification of a number of business relationships in which the agent or nominee is automatically not deemed to be a "deposit broker" because their "primary purpose" is not the placement of funds with depository institutions;

(iii) the establishment of a more transparent application process for entities that seek to rely upon the "primary purpose" exception, but do not qualify for one of the identified business relationships to which the exception

is automatically applicable;

and (iv) the clarification that third parties that have an exclusive deposit-placement arrangement with one IDI are not considered a "deposit broker." The final rule took effect on April 1, 2021, and full compliance was required by January 1, 2022.

Interest on Demand Deposits.

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Volcker Rule.

Section 619 of the Dodd-Frank Act (known as the Volcker Rule) prohibits insured depository institutions and their holding companies from engaging in proprietary trading, except under limited circumstances, and prohibits them from owning equity interests in excess of three percent (3%) of Tier 1 capital in private equity and hedge funds.

In December 2013, the federal banking agencies adopted the Volcker Implementing Rules.

The Volcker Implementing Rules prohibit banking entities from (1) engaging in short-term proprietary trading for their own accounts, and (2) having certain ownership interests in and relationships with hedge funds or private equity funds, which are referred to as “covered funds.” The Volcker Implementing Rules are intended to provide greater clarity with respect to both the extent of those primary prohibitions and of the related exemptions and exclusions.

The Volcker Rule also requires each regulated entity to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule, which must include (for the largest entities) making regular reports about those activities to the entity’s regulators.

Historically, this meant that reporting requirements were tied to a bank’s total assets, where banks with assets at or below $10 billion had less stringent reporting requirements and banks with more than $10 billion had increasingly more stringent requirements, as the size of the bank increased.

Effective January 1, 2020, five federal banking agencies revised certain aspects of the Volcker Rule by specifying that compliance requirements will be based on the amount of assets and liabilities that a bank trades.

Firms with significant trading activities (i.e., those with $20 billion or more in trading assets and liabilities) will have heightened compliance obligations.

Compliance with the revised Volcker Rule were required on January 1, 2021.

In June, 2020, five federal financial regulators modified the “covered funds” portion of the Volcker Rule by streamlining the rule, addressing the treatment of certain foreign funds, and permitting banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker Rule was intended to address.

Section 619 of the Dodd-Frank Act (known as the Volcker Rule) prohibits IDIs and their holding companies from engaging in proprietary trading, except under limited circumstances, and prohibits them from owning equity interests in excess of 3% of Tier 1 capital in private equity and hedge funds.

The Volcker Rule regulations prohibit banking entities from (1) engaging in short-term proprietary trading for their own accounts, and (2) having certain ownership interests in and relationships with hedge funds or private equity funds, which are referred to as “covered funds.” The Volcker Rule regulations are intended to provide greater clarity with respect to both the extent of those primary prohibitions and of the related exemptions and exclusions.

The Volcker Rule regulations also require each regulated entity to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule, which must include (for the largest entities) making regular reports about those activities to the entity’s regulators.

Effective January 1, 2020, the Volcker Rule regulations were amended to specify that compliance requirements are based on the amount of assets and liabilities that an IDI trades.

IDIs with significant trading activities (i.e., those with $20 billion or more in trading assets and liabilities) have heightened compliance obligations.

Compliance with the revised Volcker Rule regulations was required on January 1, 2021.

On June 25, 2020, the Volcker Rule regulations were amended to streamline the “covered funds” portion addressing the treatment of certain foreign funds, and permitting banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker Rule was intended to address.

The Consumer Financial Protection Bureau.

The CFPB’s responsibility is to establish, implement and enforce laws, rules and regulations under certain federal consumer financial laws, as defined by the Dodd-Frank Act and interpreted by the CFPB, with respect to the conduct of both bank and non-bank providers of certain consumer financial products and services.

The CFPB has rulemaking and enforcement authority over many of the statutes that govern products and services banks offer to consumers.

The CFPB has rulemaking and enforcement authority under many of the statutes that govern products and services banks offer to consumers.

The CFPB has authority to prevent unfair, deceptive or abusive acts and practices in connection with the offering of consumer financial products and services.

In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the CFPB, and state attorneys general will have the authority to enforce consumer protection rules that the CFPB adopts against state-chartered institutions and against, with respect to certain non-preempted laws, national banks.

In addition, the Dodd-Frank Act permits states to adopt consumer protection regulations that are more stringent than the regulations promulgated by the CFPB, and state attorneys general have the authority to enforce consumer protection rules that the CFPB adopts against state-chartered institutions and against, with respect to certain non-preempted laws, national banks.

Compliance with any such new regulation or other precedent established by the CFPB and/or states could reduce our revenue, increase our cost of operations and compliance, and limit, prevent, or make more costly, our ability to expand into certain products and services.

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Debit Card Interchange Fees .

The FRB, pursuant to its authority under the Dodd-Frank Act, has issued rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion, adopting a per-transaction interchange cap base of $0.21 plus 0.05% of the transaction total (and an additional one cent to account for fraud protection costs).

The FRB, pursuant to its authority under the Dodd-Frank Act, issued rules regarding interchange fees charged for electronic debit transactions by payment card issuers having assets over $10 billion, adopting a per-transaction interchange cap base of $0.21 plus 0.05% of the transaction total (and an additional one cent to account for fraud protection costs).

Transactions with Affiliates.

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In general, banks are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other transactions involving non-bank affiliates.

Also, transactions between banks and their non-bank affiliates are required to be on arms-length terms and consistent with safe and sound banking practices.

Also, transactions between banks and their non-bank affiliates are required to be on arm's-length terms and consistent with safe and sound banking practices.

The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Sections 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” to include the borrowing or lending of securities or derivative transactions, and an increase in the amount of time for which collateral requirements regarding covered transactions must be maintained.

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The Dodd-Frank Act expands insider transaction limitations through the strengthening of loan restrictions to insiders and extending the types of transactions subject to the various requirements to include derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending and borrowing transactions.

The Dodd-Frank Act also places restrictions on certain asset sales to and from an insider of an institution, including requirements that such sales be on market terms and, in certain circumstances, receive the approval of the institution’s board of directors.

The Dodd-Frank Act also places restrictions on certain asset sales to and from an insider of an IDI, including requirements that such sales be on market terms and, in certain circumstances, receive the approval of the IDI’s board of directors.

Enhanced Lending Limits.

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In addition, these regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels, due to its financial condition or actual or anticipated growth.

FNB, like other bank holding companies, through December 31, 2019 was required to maintain CET1, tier 1 and total capital (the sum of tier 1 and tier 2 capital) equal to at least 7.00%, 8.50% and 10.50%, respectively, of our total risk-weighted assets (including various off-balance sheet items).

FNB, like other bank holding companies, is required to maintain CET1, tier 1 and total capital (the sum of tier 1 and tier 2 capital) equal to at least 7.00%, 8.50% and 10.50%, respectively, of our total risk-weighted assets (including various off-balance sheet items).

The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in credit and market risk profiles among banks and financial holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets.

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Increased Capital Standards and Enhanced Supervision

The Dodd-Frank Act’s regulatory capital requirements are intended to ensure that “financial institutions hold sufficient capital to absorb losses during future periods of financial distress” and requires the federal banking agencies to establish minimum leverage and risk-based capital requirements on a consolidated basis for insured depository institutions, their holding companies and non-bank financial companies that have been determined to be systemically important by the FSOC.

The Dodd-Frank Act’s regulatory capital requirements are intended to ensure that financial institutions hold sufficient capital to absorb losses during future periods of financial distress and requires the federal banking agencies to establish minimum leverage and risk-based capital requirements on a consolidated basis for IDIs, their holding companies and non-bank financial companies that have been determined to be systemically important by the FSOC.

Basel III Capital Rules

In July 2013, the FRB published Basel III establishing a new comprehensive capital framework for U.S.

The FRB and the OCC published Basel III in 2013, establishing a new comprehensive capital framework for U.S.

banking organizations.

The rules implement the Basel Committee’s December 2010 framework for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act.

Basel III substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions, including FNB and FNBPA, compared to the then-existing U.S.

Basel III substantially revised the risk-based capital requirements applicable to bank holding companies and IDIs, including FNB and FNBPA, compared to the then-existing U.S.

risk-based capital rules.

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Basel III also addresses risk weights and other issues affecting the denominator in a banking institution’s regulatory capital ratios.

Basel III, among other things, (i) introduces the concept of CET1, (ii) specifies that tier 1 capital consists of CET1 and “Additional Tier 1” capital instruments meeting specified requirements, (iii) defines CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expands the scope of the deductions/adjustments as compared to existing regulations.

Basel III, among other things, (i) introduced the concept of CET1, (ii) specified that tier 1 capital consists of CET1 and “Additional Tier 1” capital instruments meeting specified requirements, (iii) defined CET1 narrowly by requiring that most

deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expanded the scope of the deductions/adjustments as compared to existing regulations.

Basel III requires FNB and FNBPA to maintain (i) a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7% upon full implementation), (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of total capital (that is, tier 1 plus tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation) and (iv) a minimum leverage ratio of 4%, calculated as the ratio of tier 1 capital to average quarterly assets (as compared to a prior minimum leverage ratio of 3% for banking organizations that either have the highest supervisory rating or have implemented the appropriate federal regulatory authority’s risk-adjusted measure for market risk).

Under Basel III, the effects of certain accumulated other comprehensive items are not excluded;

Under Basel III, the effects of certain AOCI items are not excluded;

however, banking organizations which do not use the advanced approach, such as FNB and FNBPA, may make a one-time permanent election to continue to exclude these items.

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TPS no longer included in FNB’s tier 1 capital may nonetheless be included as a component of tier 2 capital on a permanent basis without phase-out.

With respect to FNBPA, Basel III also revises the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act, as discussed below under the caption “Prompt Corrective Action.”

With respect to FNBPA, Basel III also revises the “prompt corrective action” regulations pursuant to Section 38 of the FDI Act, as discussed below under the caption “Prompt Corrective Action.”

Basel III prescribes a standardized approach for risk weightings that expands the risk-weighting categories from the four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S.

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In addition, Basel III provides more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increases the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.

In November 2017, the federal banking agencies adopted a final rule to extend the regulatory capital treatment applicable during 2017 under Basel III for certain items, including regulatory capital deductions, risk weights, and certain minority interest limitations.

The relief provided under the final rule applies to banking organizations that are not subject to the capital rules’ advanced approaches, such as FNB.

Specifically, the final rule extends the current regulatory capital treatment of MSAs, DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, significant investments in the capital of unconsolidated financial institutions in the form of common stock, non-significant investments in the capital of unconsolidated financial institutions, significant investments in the capital of unconsolidated financial institutions that are not in the form of common stock, and CET1 minority interest, tier 1 minority interest, and total capital minority interest exceeding applicable minority interest limitations.

Management believes that, as of December 31, 2020, FNB and FNBPA meet all capital adequacy requirements under Basel III on a fully phased-in basis as if such requirements had been in effect.

In July 2019, the federal banking agencies adopted a final rule simplifying certain aspects of Basel III, the key elements of which apply solely to banking organizations that are not subject to the advanced approaches capital rules.

Under the final rule, non-advanced approaches banking organizations, such as FNB and FNBPA, apply a more simple regulatory capital treatment for MSAs;

certain DTAs;

investments in the capital of unconsolidated financial institutions than those currently applied;

and capital issued by a consolidated subsidiary of a banking organization and held by third parties (sometimes referred to as a minority interest) that is includable in regulatory capital.

Specifically, the final rule eliminates:

(i) the 10 percent CET1 capital deduction threshold that applies individually to MSAs, temporary difference DTAs, and significant investments in the capital of unconsolidated financial institutions in the form of common stock;

(ii) the aggregate 15 percent CET1 capital deduction threshold that subsequently applies on a collective basis across such items;

(iii) the 10 percent CET1 capital deduction threshold for non-significant investments in the capital of unconsolidated financial institutions;

Through subsequent rulemaking, the federal banking agencies provided certain forms of relief to banking organizations that are not subject to the capital rules’ advanced approaches, such as FNB.

For instance, non-advanced approaches institutions, such as FNB and FNBPA, are subject to a more simple regulatory capital treatment for MSAs, certain DTAs arising from temporary differences, investments in the capital of unconsolidated financial institutions and requirements for the amount of capital issued by a consolidated subsidiary of a banking organization and held by third parties (sometimes referred to as a minority interest) that is includable in regulatory capital.

In addition, certain general requirements of the capital rules have been eliminated in respect of non-advanced approaches institutions, including:

(i) the 10% CET1 capital deduction threshold that applies individually to MSAs, temporary difference DTAs, and significant investments in the capital of unconsolidated financial institutions in the form of common stock;

(ii) the aggregate 15% CET1 capital deduction threshold that subsequently applies on a collective basis across such items;

(iii) the 10% CET1 capital deduction threshold for non-significant investments in the capital of unconsolidated financial institutions;

and (iv) the deduction treatment for significant investments in the capital of unconsolidated financial institutions not in the form of common stock.

Basel III no longer has distinct treatments for significant and non-significant investments in the capital of unconsolidated financial institutions, but instead now requires that non-advanced approaches banking organizations deduct from CET1 capital any amount of MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions that individually exceeds 25 percent of CET1 capital.

In December 2019, the federal banking agencies issued a final rule on the capital treatment of HVCRE exposures.

The final rule aligns the regulatory definition of “HVCRE exposure” with the statutory definition of “HVCRE ADC” in the Economic Growth Act.

The final rule also clarifies the capital treatment for loans that finance the development of land under the revised HVCRE exposure definition and establishes the requirements for certain exclusions from HVCRE exposure capital treatment.

In December 2017, the Basel Committee on Banking Supervision published the last version of the Basel III accord, generally referred to as “Basel IV.” The Basel Committee stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets, which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios;

constraining the use of internally modelled approaches;

Accordingly, banking organizations not subject to the advanced approaches capital rule may deduct from CET1 capital any amount of MSAs, temporary difference DTAs, and investments in the capital of unconsolidated financial institutions that individually exceeds 25% of CET1 capital.

The Basel Committee on Banking Supervision published the last version of the Basel III accord in 2017, generally referred to as “Basel IV.” The Basel Committee stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets, which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios;

constraining the use of internally modeled approaches;

and complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor.

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Although it is uncertain at this time, we anticipate some, if not all, of the Basel IV accord may be incorporated into the regulatory capital requirements framework applicable to FNB and FNBPA.

Management believes that as of December 31, 2021, FNB and FNBPA meet all capital adequacy requirements under Basel III.

Current Expected Credit Loss Treatment

In June 2016, the FASB issued an accounting standard update, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the prior “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model.

We adopted CECL on January 1, 2020.

On January 1, 2020, we adopted the FASB accounting standard update, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the prior “incurred loss” model for recognizing credit losses with an “expected loss” model, referred to as the CECL model.

Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment and HTM debt securities, at the net amount expected to be collected.

The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and R&S forecasts that affect the collectability of the reported

On December 21, 2018, the federal banking agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a period of three years the day-one regulatory capital effects of the CECL model.

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The final rule also revises the agencies’ other rules to reflect the update to the accounting standards.

The final rule took effect April 1, 2019.

See Note 2, New Accounting Standards, for more information on our CECL adoption.

In February 2021, the FDIC adopted a final rule addressing the temporary deposit insurance assessment effects resulting from certain optional regulatory capital transition provisions relating to the implementation of the CECL methodology.

The final rule, which became effective on April 1, 2021, removed the double-counting of a specified portion of the CECL transitional amount, or the modified CECL transitional amount, as applicable, in the calculation of certain financial measures that are used to determine assessment rates for large and highly complex IDIs.

The impact on FNBPA has not been material.

Stress Testing

As part of the regulatory relief provided by the Economic Growth Act, the asset threshold requiring insured depository institutions to conduct and report to their primary federal bank regulators annual company-run stress tests was raised from $10 billion to $250 billion in total consolidated assets and makes the requirement “periodic” rather than annual.

As part of the regulatory relief provided by the Economic Growth Act, the asset threshold requiring IDIs to conduct and report to their primary federal bank regulators annual company-run stress tests was raised from $10 billion to $250 billion in total consolidated assets and makes the requirement “periodic” rather than annual.

The Economic Growth Act also provided that bank holding companies under $100 billion in assets were no longer subject to stress testing requirements and provided the FRB with discretion to subject bank holding companies with more than $100 billion in total assets to enhanced supervision.

Notwithstanding these amendments, the federal banking agencies indicated through interagency bank regulatory guidance that the capital planning and risk management practices of institutions with total assets less than $100 billion would continue to be reviewed through the regular supervisory process.

We will continue to monitor and stress test our capital consistent with the safety and soundness expectations of our banking regulators.

We continue to monitor and stress test our capital consistent with the safety and soundness expectations of our banking regulators.

Prompt Corrective Action

FDICIA, among other things, classifies insured depository institutions into five capital categories (well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the respective federal regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements within such categories.

FDICIA, among other things, classifies IDIs into five capital categories (well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the respective federal regulatory agencies to implement systems for “prompt corrective action” for IDIs that do not meet minimum capital requirements within such categories.

FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified.

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An “undercapitalized” bank must develop a capital restoration plan and its parent holding company must guarantee that bank’s compliance with the plan.

The liability of the parent holding company under any such guarantee is limited to the lesser of five percent of the bank’s assets at the time it became ”undercapitalized” or the amount needed to comply with the plan.

The liability of the parent holding company under any such guarantee is limited to the lesser of 5% of the bank’s assets at the time it became ”undercapitalized” or the amount needed to comply with the plan.

Furthermore, in the event of the bankruptcy of the parent holding company, the obligation under such guarantee would take priority over the parent’s general unsecured creditors.

In addition, FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness relating generally to operations and management, asset quality and executive compensation and permits regulatory action against a financial institution that does not meet such standards.

The various regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the total risk-based capital, tier 1 risk-based capital, CET1 and leverage capital ratios as the relevant capital measures.

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Under these guidelines, FNBPA was considered well-capitalized as of December 31, 2021.

When determining the adequacy of an institution’s capital, federal regulators must also take into consideration (a) concentrations of credit risk;

(b) interest rate risk (when the interest rate sensitivity of an institution’s assets does not match the sensitivity of its liabilities or its off-balance sheet position) and (c) risks from non-traditional activities, as well as an institution’s ability to manage those risks.

This evaluation is made as part of the institution’s regular safety and soundness examination.

In addition, any bank with significant trading activity, must incorporate a measure for market risk in their regulatory capital calculations.

When determining the adequacy of an IDI’s capital, federal regulators must also take into consideration (a) concentrations of credit risk;

manage those risks.

This evaluation is made as part of the IDI’s regular safety and soundness examination.

In addition, any IDI with significant trading activity, must incorporate a measure for market risk in their regulatory capital calculations.

Community Reinvestment Act and Fair Lending

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Depository institutions are periodically examined for compliance with the CRA and are assigned ratings.

In order for a financial holding company to commence any new activity permitted by the BHC Act, or to acquire any company engaged in any new

activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA.

In its most recent CRA examination, FNBPA received a “satisfactory” rating.

Furthermore, banking regulators take into account CRA ratings when considering approval of a proposed transaction.

On December 12, 2019, the OCC and the FDIC issued a proposed rule that would modernize their respective agencies’ regulations under the CRA.

The proposed rule would:

(i) clarify what activities qualify for CRA credit and (ii) require banks to identify an additional assessment area based on where they receive a significant portion of their domestic retail deposits, thus, creating two assessment areas:

a deposit-based assessment area and a facility-based assessment area.

The OCC has not adopted the final amendments to the CRA regulations, and it is not anticipated to do so until after the new Comptroller of the Currency is appointed in 2021.

In order for a financial holding company to commence any new activity permitted by the BHC Act, or to acquire any company engaged in any new activity permitted by the BHC Act, each IDI subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the CRA.

In its most recent CRA examination, FNBPA received an “outstanding” rating.

Furthermore, federal banking regulators take into account CRA ratings when considering acquisitions of control and new activities.

FNB is one of fewer than 10 percent of banks to receive the highest possible CRA rating.

The "outstanding" CRA rating reaffirms our success in fulfilling our strategic and cultural commitment to supporting traditionally underserved communities.

The federal banking agencies have expressed interest in, and the OCC has taken certain steps toward, reform of the CRA's implementing regulations;

however, the agencies have not yet agreed upon a common framework for reform and prospects for future rulemaking remain uncertain at this time.

Fair lending laws prohibit discrimination in the provision of banking services, and the enforcement of these laws has been an increasing focus for the CFPB, HUD, and other regulators.

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If a pattern or practice of lending discrimination is alleged by a regulator, then that agency may refer the matter to the DOJ for investigation.

In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations and have generally committed to strengthen their coordination efforts.

The new Presidential Administration had indicated a focus on prioritizing enforcement of the federal anti-discrimination laws, and we anticipate that such coordination will continue to occur.

FNBPA is required to have a fair lending program that is of sufficient scope to monitor the inherent fair lending risk of the institution and that appropriately remediates issues which are identified.

The DOJ and CFPB have a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations and have generally committed to strengthen their coordination efforts.

The current Presidential Administration has indicated a focus on prioritizing enforcement of the federal anti-discrimination laws, and as a result, the CFPB may adopt more strict anti-discrimination enforcement policies in the area of fair lending, loan servicing, collections and other consumer-related areas and in October 2021, the DOJ announced an initiative to combat redlining through utilization of its fair lending authorities.

FNBPA is required to have a fair lending program that is of sufficient scope to monitor fair lending and that appropriately remediates issues which are identified.

Financial Privacy

In accordance with the GLB Act, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties.

In accordance with the GLB Act, federal banking regulators adopted rules that limit the ability of banks, financial institutions and third parties that are not financial institutions but that receive non-public personal information from non-affiliated banks and financial institutions to disclose non-public information about consumers to non-affiliated third parties.

These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party.

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FNB has reviewed and assessed the SEC guidance in connection with its business operations.

On November 23, 2021, the federal financial regulatory agencies published a final rule that will impose upon banking organizations and their non-affiliated service providers new notification requirements for significant cybersecurity incidents.

Specifically, the final rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a "computer security incident" that rises to the level of a "notification incident" within the meaning attributed to those terms by the final rule.

Banks' non-affiliated service providers are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible" after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours.

The final rule will take effect on April 1, 2022, and banks and their non-affiliated service providers must be in compliance with the requirements of the rule by May 1, 2022.

Anti-Money Laundering Initiatives and the USA PATRIOT Act

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing.

The USA PATRIOT Act of 2001 (USA PATRIOT Act), which amended the Bank Secrecy Act of 1970,

substantially broadened the scope of U.S.

The USA PATRIOT Act of 2001 (USA PATRIOT Act), which amended the Bank Secrecy Act of 1970 (BSA), substantially broadened the scope of U.S.

anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the U.S.

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These regulations require financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers.

In 2016, these regulations were amended, effective May 2018, to include express requirements regarding risk-based procedures for conducting ongoing customer due diligence.

These regulations include express requirements regarding risk-based procedures for conducting ongoing customer due diligence.

Such procedures require banks to take appropriate steps to understand the nature and purpose of customer relationships.

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The failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal, including criminal law enforcement, and reputational consequences for the institution.

On January 1, 2021, Congress passed the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and related anti-money laundering laws since the USA PATRIOT Act.

Notable amendments include:

(i) significant changes to the collection of beneficial ownership information and the establishment of a beneficial ownership registry maintained by the UST’s Financial Crime Enforcement Network (FinCEN);

(ii) enhanced whistleblower provisions;

(iii) increased penalties for violations of the BSA;

(iv) improvements to existing information-sharing provisions that permit financial institutions to share information relating to suspicious activity reports with certain foreign branches, subsidiaries, and affiliates;

and (v) expanded duties and powers of FinCEN.

Many of the amendments require the UST and FinCEN to promulgate rules.

On December 8, 2021, FinCEN issued proposed regulations that would implement the amendments with respect to beneficial ownership, the first of three rulemakings to create a national database of corporate ownership.

Office of Foreign Assets Control Regulation

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jurisdiction (including property in the possession or control of U.S.

Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.

Failure to comply with these sanctions could have serious legal and reputational consequences for the institution.

Blocked assets (such as property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.

Failure to comply with these sanctions could have serious legal and reputational consequences.

Consumer Protection Statutes and Regulations

In addition to the consumer regulations promulgated by the FRB, OCC and state agencies, and the regulations that may be issued by the CFPB pursuant to its authority under the Dodd-Frank Act, FNBPA is subject to various federal consumer protection statutes including the TILA, Truth in Savings Act, Equal Credit Opportunity Act, Fair Housing Act, RESPA, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Electronic Fund Transfer Act and Home Mortgage Disclosure Act, and regulations and guidance promulgated thereunder by the CFPB and the federal banking agencies.

Among other things, these acts and regulations:

In addition to the consumer regulations promulgated by the FRB, OCC and state agencies, and the regulations issued by the CFPB pursuant to its authority under the Dodd-Frank Act, FNBPA is subject to various federal consumer protection statutes including the TILA, Truth in Savings Act, Equal Credit Opportunity Act, Fair Housing Act, RESPA, Fair Debt Collection Practices Act, Fair Credit Reporting Act, Electronic Fund Transfer Act and Home Mortgage Disclosure Act, and regulations and guidance promulgated thereunder by the CFPB and the federal banking agencies.

Among other things, these laws and regulations:

• require banks to disclose credit terms in meaningful and consistent ways;

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The CFPB has implemented a series of final consumer protection and disclosure rules related to mortgage loan origination and mortgage loan servicing designed to address the Dodd-Frank Act mortgage lending protections.

In particular, the CFPB issued a rule implementing the ability-to-repay and QM provisions of the TILA, as amended by the Dodd-Frank Act (the QM Rule).

The ability-to-repay provision requires creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending the credit based on a number of factors and consideration of financial information about the

borrower from reasonably reliable third-party documents.

In particular, the CFPB issued a rule implementing the ability-to-repay and qualified mortgage (QM) provisions of the TILA, as amended by the Dodd-Frank Act (the QM Rule).

Under the Dodd-Frank Act and the QM Rule, loans meeting the definition of QM are entitled to a presumption that the lender satisfied the ability-to-repay requirements.

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The definition of a “qualified mortgage” incorporates the statutory requirements, such as not allowing negative amortization or terms longer than 30 years.

The QM Rule also adds an explicit maximum 43% debt-to-income ratio for borrowers if the loan is to meet the QM definition, though some mortgages that meet underwriting guidelines of U.S.

The QM Rule also adds an explicit maximum 43% debt-to-income (DTI) ratio for borrowers if the loan is to meet the QM definition, though some mortgages that meet underwriting guidelines of U.S.

GSEs, the Federal Housing Administration and the U.S.

Department of Veteran Affairs may, for a period not to exceed seven years, meet the QM definition without being subject to the 43% debt-to-income limits.

Additionally, regulations governing the servicing of residential mortgages have placed additional requirements on mortgage servicers that often lengthen the process for foreclosing on residential mortgages.

Department of Veteran Affairs may, for a period not to exceed seven years, meet the QM definition without being subject to the 43% DTI limits.

However, on December 10, 2020, the CFPB issued two final rules related to QM loans.

The first rule replaces the 43% DTI threshold for QM loans and provides that, in addition to existing requirements, a loan received a conclusive presumption that the consumer had the ability to repay if the annual percentage rate (APR) does not exceed the average prime offer rate for a comparable transaction by 1.5 percentage points or more as of the date the interest rate is set.

Further, a loan receives a rebuttable presumption that the consumer had the ability to repay if the APR exceeds the average prime offer rate for a comparable transaction by 1.5 percentage points or more but by less than 2.25 percentage points.

The second rule creates a new category of “seasoned” QMs for loans that meet certain performance requirements.

The mandatory compliance date of the first rule was July 1, 2021, which was subsequently delayed by the CFPB until October 1, 2022.

The second rule will apply to covered transactions for which institutions receive an application after the compliance date for the first rule.

Additionally, CFPB regulations governing the servicing of residential mortgages have placed additional requirements on mortgage servicers that often lengthen the process for foreclosing on residential mortgages.

The CFPB also adopted integrated disclosure requirements related to mortgage originations under RESPA and TILA and each statute’s implementing regulations.

These disclosure requirements became effective in October 2015.

The CFPB issued proposed amendments to the requirements in July 2016, which were finalized in July 2017.

The CFPB also issued interpretive guidance and updated model disclosure forms in 2017.

As discussed, the CFPB has the authority to take supervisory and enforcement action against banks and other financial services companies under the agency’s jurisdiction that fail to comply with federal consumer financial laws.

As an insured depository institution with total assets of more than $10 billion, FNBPA is subject to the CFPB’s supervisory and enforcement authorities.

The Dodd-Frank Act also permits states to adopt more strict consumer protection laws and state attorneys general to enforce consumer protection rules issued by the CFPB.

The CFPB has authority to take supervisory and enforcement action against banks and other financial services companies under the agency’s jurisdiction that fail to comply with federal consumer financial laws.

As an IDI with total assets of more than $10 billion, FNBPA is subject to the CFPB’s supervisory and enforcement authorities.

The Dodd-Frank Act also permits states to adopt more stringent consumer protection laws and state attorneys general to enforce consumer protection rules issued by the

We continuously evaluate the impact of the consumer rules issued by the CFPB to determine if they will have any long-term impact on our mortgage loan origination and servicing activities.

Compliance with these rules will likely increase our overall regulatory compliance costs.

Compliance with these CFPB rules will likely increase our overall regulatory compliance costs.

The CFPB has historically been active in bringing enforcement actions against banks and other financial institutions to enforce consumer financial laws.

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We have incurred and may in the future incur additional costs in complying with these requirements.

Pursuant to the Dodd-Frank Act, the FDIC has backup enforcement authority over a depository institution holding company, such as FNB, if the conduct or threatened conduct (including any acts or omissions) of such holding company poses a risk to the DIF, although such authority may not be used if the holding company is in generally sound condition and does not pose a foreseeable and material risk to the DIF.

Pursuant to the Dodd-Frank Act, the FDIC has backup enforcement authority over a bank holding company, such as FNB, if the conduct or threatened conduct (including any acts or omissions) of such holding company poses a risk to the DIF, although such authority may not be used if the holding company is in generally sound condition and does not pose a foreseeable and material risk to the DIF.

The Dodd-Frank Act may have a material impact on FNB and FNBPA's operations, particularly through increased compliance costs resulting from possible future consumer and fair lending regulations.

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Under federal law, the amount of dividends that a national bank, such as FNBPA, may pay in a calendar year is dependent on the amount of its net income for the current year combined with its retained net income for the two preceding years.

The OCC has the authority to prohibit the payment of dividends by a national bank on the bases that paying dividends that deplete a bank's capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

The OCC has the authority to prohibit the payment of dividends by a national bank on the basis that paying dividends that deplete a bank's capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

In addition to dividends from FNBPA, other sources of parent company liquidity for FNB include cash, short-term investments and issuance of debt instruments, as well as dividends and loan repayments from other subsidiaries.

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According to the Dodd-Frank Act and FRB policy, a financial or bank holding company is expected to act as a source of financial strength to each of its subsidiary banks and to commit resources to support each such subsidiary.

the prospective rate of earnings retention appears to be consistent with our capital needs, asset quality and overall financial condition.

Consistent with the “source of strength” policy, the FRB has stated that, as a matter of prudent banking, a bank or financial holding company generally should not maintain a rate of cash dividends unless its net income has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with our capital needs, asset quality and overall financial condition.

This support may be required at times when the parent holding company may not be able to provide such support.

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A financial holding company may also engage in any activity that has been determined by rule or order to be financial in nature, incidental to such financial activity, or (with prior FRB approval) complementary to a financial activity and that does not pose substantial risk to the safety and soundness of an institution or to the financial system generally.

In addition to these activities, a financial holding company may engage in those activities permissible for a bank holding company that has not elected to be treated as a financial holding company.

to these activities, a financial holding company may engage in those activities permissible for a bank holding company that has not elected to be treated as a financial holding company.

For a bank holding company to be eligible for financial holding company status, all of its subsidiary U.S.

depository institutions must be “well-capitalized” and “well-managed.” The FRB generally must deny expanded authority to any bank holding company with a subsidiary insured depository institution that received less than a satisfactory rating on its most recent CRA review as of the time it submits its request for financial holding company status.

depository institutions must be “well-capitalized” and “well-managed.” The FRB generally must deny expanded authority to any bank holding company with a subsidiary IDI that received less than a satisfactory rating on its most recent CRA review as of the time it submits its request for financial holding company status.

If, after becoming a financial holding company and undertaking activities not permissible for a bank holding company under the BHC Act, the company fails to continue to meet any of the requirements for financial holding company status, the company must enter into an agreement with the FRB to comply with all applicable capital and management requirements.

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The BHC Act requires a bank or financial holding company to obtain the prior approval of the FRB before:

• the company may acquire direct or indirect ownership or control of any voting shares of any bank or savings and loan association, if after such acquisition the bank holding company will directly or indirectly own or control more than five percent of any class of voting securities of the institution;

• the company may acquire direct or indirect ownership or control of any voting shares of any bank or savings and loan association, if after such acquisition the bank holding company will directly or indirectly own or control more than 5% of any class of voting securities of the institution;

• any of the company’s subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank or savings and loan association;

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The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Banking Act) generally permits bank holding companies to acquire banks in any state and preempts all state laws restricting the ownership by a holding company of banks in more than one state.

A bank is subject to any state requirement that the bank has been organized and operating for a minimum period of time and the requirement that the bank holding company, after the proposed transaction, controls no more than 10 percent of the total amount of deposits of insured depository institutions in the U.S.

and no more than 30 percent or such lesser or greater amount set by the state law of such deposits in that state.

A bank is subject to any state requirement that the bank has been organized and operating for a minimum period of time and the requirement that the bank holding company, after the proposed transaction, controls no more than 10% of the total amount of deposits of IDIs in the U.S.

and no more than 30% or such lesser or greater amount set by the state law of such deposits in that state.

The Interstate Banking Act also permits:

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• a bank to establish and operate de novo interstate branches whenever the host state permits de novo branching of its own state-chartered banks.

Bank or financial holding companies and banks seeking to engage in mergers authorized by the Interstate Banking Act must be at least adequately capitalized as of the date that the application is filed, and the resulting institution must be well-capitalized and managed upon consummation of the transaction.

Bank and financial holding companies and banks seeking to engage in mergers authorized by the Interstate Banking Act must be at least adequately capitalized as of the date that the application is filed, and the resulting institution must be well-capitalized and well-managed upon consummation of the transaction.

Pursuant to the Dodd-Frank Act, national and state-chartered banks may open an initial branch in a state other than its home state (e.g., a host state) by establishing a de novo branch at any location in such host state at which a bank chartered in such host state could establish a branch.

Applications to establish such branches must still be filed with the appropriate primary federal regulator.

Applications to establish such branches must still be filed with the appropriate primary federal bank regulator.

The Change in Bank Control Act prohibits a person, entity or group of persons or entities acting in concert, from acquiring “control” of a bank holding company or bank unless the FRB has been given prior notice and has not objected to the transaction.

Under current FRB regulations, the acquisition of 10% or more (but less than 25%) of the voting stock of a corporation would, under the circumstances set forth in the regulations, create a rebuttable presumption of acquisition of control of the corporation.

Effective April 1, 2020, the FRB implemented a rule to codify and simplify its interpretations and opinions regarding regulatory presumptions of control.

The rule will likely have a meaningful impact on control determinations related to investments in banks and bank holding companies and investments by bank holding companies in non-bank companies.

Effective September 30, 2020, the FRB finalized a rule to codify and simplify its interpretations regarding regulatory presumptions of control for the purpose of the BHC Act and, on March 31, 2021, the FRB published interpretive guidance regarding the rule and related regulatory control matters.

The amended control rule thus far has had, and will likely continue to have, a meaningful impact on control determinations related to investments in banks and bank holding companies and investments by bank holding companies in non-bank companies.

Incentive Compensation

Guidelines adopted by the federal banking agencies pursuant to the Federal Deposit Insurance Act prohibit excessive compensation as an unsafe and unsound practice.

The federal banking agencies jointly adopted the Guidance on Sound Incentive Compensation Policies intended to ensure that banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

Guidelines adopted by the federal banking agencies pursuant to the FDI Act prohibit excessive compensation as an unsafe and unsound practice.

The federal banking agencies also jointly adopted the Guidance on Sound Incentive Compensation Policies intended to ensure that banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

This guidance, which covers all employees that have the ability to expose the organization to material amounts of risk, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide employee incentives that appropriately balance risk in a manner that does not encourage employees to expose their organizations to imprudent risk, (ii) be compatible with effective controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

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Any deficiencies in the compensation practices of FNB or its subsidiaries and affiliates could lead to supervisory or enforcement action.

Section 956 of the Dodd-Frank Act required the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, such as FNB, having at least $1 billion in total assets that encourage inappropriate risk-taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity.

In addition, these regulators were required to establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements.

The federal banking agencies proposed such regulations in April 2011 and issued a second proposed rule in June 2016.

The second proposed rule would apply to all banks, among other institutions, with at least $1 billion in average total consolidated assets, for which it would go beyond the Guidance on Sound Incentive Compensation Policies discussed above to prohibit certain types and features of incentive-based compensation arrangements for senior executive officers, require incentive-based compensation arrangements to adhere to certain basic principles to avoid a presumption of encouraging inappropriate risk, require appropriate board or committee oversight, establish minimum recordkeeping and mandate disclosures to the appropriate agency.

In addition, institutions with at least $50 billion in average total consolidated assets would be subject to additional compensation-related requirements and prohibitions.

The prospects for continued consideration of these proposed rules by the SEC and federal banking agencies are uncertain, but implementation of any final rules is not expected in the near term.

Section 956 of the Dodd-Frank Act requires the federal banking agencies and the SEC to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, such as FNB, having at least $1 billion in total assets that encourage inappropriate risk-taking by providing an executive officer, employee, director or principal shareholder with excessive compensation, fees, or benefits or that could lead to material financial loss to the entity.

In addition, these regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements.

The agencies have not yet finalized these rules;

however, on October 14, 2021, the SEC indicated a renewed interest in this rulemaking initiative by re-opening the comment period on a proposed rule originally issued in 2015 regarding "clawbacks" of incentive-based executive compensation.

Nevertheless, incentive compensation and sales practices, particularly in connection with certain products and services that are viewed as high-risk from a supervisory perspective, such as cross-selling and overdraft services, continue to be priority issues on the examination and supervision agendas of the CFPB and the federal banking agencies.

The scope and content of the U.S.

banking regulators' policies on executive compensation may continue to evolve.

Securities and Exchange Commission

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The principal purpose of the regulations applicable to investment advisors is the protection of investment advisory clients and the securities markets, rather than the protection of creditors and stockholders of investment advisors.

The regulations applicable to investment advisors cover all aspects of the investment

advisory business, including limitations on the ability of investment advisors to charge performance-based or non-refundable fees to clients, record-keeping, operating, marketing and reporting requirements, disclosure requirements, limitations on principal transactions between an advisor or its affiliates and advisory clients, as well as other anti-fraud prohibitions.

The regulations applicable to investment advisors cover all aspects of the investment advisory business, including limitations on the ability of investment advisors to charge performance-based or non-refundable fees to clients, record-keeping, operating, marketing and reporting requirements, disclosure requirements, limitations on principal transactions between an advisor or its affiliates and advisory clients, as well as other anti-fraud prohibitions.

FNBIA also may be subject to certain state securities laws and regulations.

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Significantly, in June 2018, the U.S.

Fifth Circuit Court of Appeals issued a mandate vacating the DOL's "fiduciary rule" and related prohibited transaction exemptions.

As a result, although FNBPA may have taken certain measures to comply with the rule on a transitional basis, FNBPA's securities brokerage and investment advisory service and activities will no longer be affected.

Separately, in June 2019, pursuant to the study conducted by the SEC that was required by the Dodd-Frank Act, the SEC adopted Regulation Best Interest, which, among other things, established a new standard of conduct for a broker-dealer to act in the best interest of a retail consumer when making a recommendation of any securities transaction or investment strategy involving securities to such consumer.

The new rule by the SEC requires us to review and possibly modify our compliance activities, which is causing us to incur some additional costs.

Fifth Circuit Court of Appeals vacated the DOL's "fiduciary rule" and related prohibited transaction exemptions.

Separately, pursuant to a study conducted by the SEC that was required by the Dodd-Frank Act, the SEC adopted Regulation Best Interest, which, among other things, established a new standard of conduct for a broker-dealer to act in the best interest of a retail consumer when making a recommendation of any securities transaction or investment strategy involving securities to such consumer.

The new rule by the SEC requires us to review and possibly modify our compliance activities, which is causing us to incur additional costs.

In addition, state laws that impose a fiduciary duty also may require monitoring, as well as require that we undertake additional compliance measures.

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and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.

Climate-Related Risk Management and Regulation

In recent years the federal banking agencies have increased their focus on climate-related risks impacting the operations of banks, the communities they serve and the broader financial system.

Accordingly, the agencies have begun to enhance their

supervisory expectations regarding the climate risk management practices of larger banking organizations, including by encouraging such banks to:

ensure that management of climate-related risk exposures has been incorporated into existing governance structures;

evaluate the potential impact of climate-related risks on the bank’s financial condition, operations and business objectives as part of its strategic planning process;

account for the effects of climate change in stress testing scenarios and systemic risk assessments;

revise expectations for credit portfolio concentrations based on climate-related factors;

consider investments in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change;

evaluate the impact of climate change on the bank’s borrowers and consider possible changes to underwriting criteria to account for climate-related risks to mortgaged properties;

incorporate climate-related financial risk into the bank’s internal reporting, monitoring and escalation processes;

and prepare for the transition risks to the bank associated with the adjustment to a low-carbon economy and related changes in laws, regulations, governmental policies, technology, and consumer behavior and expectations.

On October 21, 2021, the FSOC published a report identifying climate-related financial risks as an “emerging threat” to financial stability.

On December 16, 2021, the OCC issued proposed principles for climate-related financial risk management for national banks with more than $100 billion in total assets.

Although these risk management principles, if adopted as proposed, would not apply to FNBPA directly based upon our current size, the OCC has indicated that all banks, regardless of their size, may have material exposures to climate-related financial and other risks that require prudent management.

The federal banking agencies, either independently or on an interagency basis, are expected to adopt a more formal climate risk management framework for larger banking organizations in the coming months.

As climate-related supervisory guidance is formalized, and relevant risk areas and corresponding control expectations are further refined, we may be required to expend significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such requirements.

In addition, states are considering taking similar actions on climate-related financial risks, including certain states in which we operate.

For example, the Governor of the Commonwealth of Pennsylvania has announced the Pennsylvania Climate Action Plan of 2021, which will, in part, focus on the negative impact businesses have on greenhouse gas emissions.

Further, in October 2018, North Carolina’s Governor issued Executive Order 80, a commitment to tackle climate change and build a clean energy economy.

Additionally, in late 2019, the North Carolina Department of Environmental Quality published the Clean Energy Plan, to facilitate the use of clean energy resources throughout the state.

Once fully implemented, these measures will, in part, focus on the impact that businesses operating in the state of North Carolina have on climate change and could lead to specific requirements related to the climate risk management practices of businesses operating in the state.

Governmental Policies

The operations of FNB and our subsidiaries are affected not only by general economic conditions, but also by the policies of various regulatory authorities and the new Presidential Administration.

The operations of FNB and our subsidiaries are affected not only by general economic conditions, but also by the policies of various regulatory authorities and the current Presidential Administration.

In particular, the FRB regulates monetary policy and interest rates in order to influence general economic conditions.

These policies have a significant influence on overall growth and distribution of loans, investments and deposits and affect interest rates charged on loans or paid for deposits.

In fact, in the midst of rising inflation and pressure to raise interest rates, in its FOMC policy statement issued on January 26, 2022, the FRB strongly signaled that it will soon be time to raise the target range for the Federal funds rate.

FRB monetary policies have had a significant effect on the operating results of all financial institutions in the past and may continue to do so in the future.

In addition, the new federal bank regulatory and SEC leadership appointees by the new Presidential Administration are anticipated to result in a philosophical change in the priorities and approach to supervision, compliance and enforcement and other policies which may impact our operations.

In addition, the new federal bank regulatory and SEC leadership appointees by the current Presidential Administration are anticipated to result in a philosophical change in the priorities and approach to supervision, compliance and enforcement and other policies which may impact our operations.

In view of changing conditions in the national economy and in money markets, as well as the effect of credit policies by monetary and fiscal authorities, including the FRB, it is difficult to predict the impact of possible future changes in interest rates, deposit levels and loan demand, or their effect on our business and earnings or on the financial condition of our various customers (see discussion under Risk Factors - caption “ We could be adversely affected by changes in the law, especially changes in the regulation of the banking industry ”).

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Although the reduced tax rate generally should be favorable to us by resulting in increased earnings and capital, it decreased the value of our then-existing DTAs.

The effect of remeasuring DTAs due to the reduction in the tax rate was a significant item impacting earnings but is generally not expected to have a substantial adverse impact on our core earnings or capital over the long term.

The new Presidential Administration has announced that one if its priorities is to raise the corporate tax rate.

The effect of remeasuring DTAs due to the reduction in the tax rate was a significant item

impacting earnings but is generally not expected to have a substantial adverse impact on our core earnings or capital over the long term.

The current Presidential Administration has announced that one if its priorities is to raise the corporate tax rate.

FDIC Insurance Premiums .

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business