What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-25 · 315 added, 458 removed, 2179 unchanged (26% of the section changed)

19 unchanged sentences

Chief Financial Officer

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of F.N.B.

Opinion on the Financial Statements

6 unchanged sentences

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for credit losses in 2020.

As explained below, auditing the Company's allowance for credit losses was a critical audit matter.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill at the Community Banking reporting unit

Description of the Matter At December 31, 2020, the Company’s goodwill related to the Community Banking reporting unit was approximately $2.2 billion.

As discussed in Note 1 and Note 7 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level.

The Company's goodwill is initially assigned to its reporting units as of the acquisition date.

In 2020, management concluded under its qualitative assessment that it was more likely than not that the fair value of the Community Banking reporting unit was below its carrying amount due to a sustained decline in bank stock valuations, which was primarily attributable to the systemic uncertainty of COVID-19 and its impact on the global economy.

In response, management performed a quantitative goodwill impairment test to reach the conclusion that there was no impairment in 2020.

Auditing management's annual goodwill impairment test was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting units.

In particular, the fair value estimate was sensitive to significant assumptions, such as projected future cash flows, discount rates reflecting the risk inherent in future cash flows, long-term growth rates and an evaluation of market comparables and recent transactions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management's review of the significant assumptions described above.

To test the estimated fair value of the Company's reporting units, we performed audit procedures that, with the involvement of specialists, included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We compared the significant assumptions used by management to recent financial performance, the Company's peer group, and economic trends.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company.

Allowance for Credit Losses

Description of the Matter On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC 326):

Measurement of Credit Losses on Financial Instruments, which resulted in an increase to the allowance for credit losses (ACL) from retained earnings of $51 million.

At December 31, 2020, the Company’s net loan and lease portfolio was $25.5 billion with an associated ACL of $363 million.

As discussed in Note 1 to the consolidated financial statements, the ACL is based on management’s evaluation of current estimate of lifetime credit losses at the balance sheet date.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Allowance for Credit Losses (ACL)

Description of the Matter At December 31, 2021, the Company’s net loan and lease portfolio was $25 billion with an associated ACL of $344 million.

As discussed in Note 1 to the consolidated financial statements, the ACL is based on management’s evaluation of the current estimate of lifetime credit losses at the balance sheet date.

Management makes the estimate using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts under the CECL methodology.

2 unchanged sentences

and qualitative reserves.

The qualitative reserves include among others:

The qualitative captures the following factors, among others:

regulatory, legal and technological environments;

forecast uncertainty;

and events such as natural disasters and other relevant factors.

Auditing the ACL involves a high degree of subjectivity due to the qualitative factor adjustments.

Management’s identification and measurement of the qualitative factor adjustments is highly judgmental and could have a significant effect on the ACL.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the ACL process, which include, among others, management’s review and approval controls designed to assess the need for and level of qualitative factor adjustments to the ACL and the reliability of the data utilized to support management’s assessment.

and events such as natural disasters.

The qualitative factors are necessary for management to capture risks not addressed by the quantitative models or reflected in the data used by the quantitative models.

In many cases, qualitative factors are intended to capture the Company’s expert credit judgment and as such are especially challenging to audit.

How We Addressed the Matter in Our Audit We evaluated the design and tested the operating effectiveness of the Company’s controls over the ACL process, which include, among others, management’s review and approval controls designed to assess the need for and level of qualitative factor adjustments to the ACL and the support for management’s assessment.

To test the qualitative factor adjustments, we evaluated the appropriateness of management’s methodology and assessed the basis for the adjustments and whether all relevant risks were reflected in the ACL.

Regarding the measurement of the qualitative factors, we evaluated the completeness, accuracy and relevance of the underlying internal and external data utilized in management’s estimate and considered the existence of new or contrary information.

We evaluated the overall ACL, inclusive of the qualitative factor adjustments, and whether the amount appropriately reflects a reasonable estimate of lifetime losses by comparing the overall ACL to historical losses.

With the help of our specialists, we evaluated the conceptual soundness of the models used to develop the allowance for credit losses, including the appropriateness of the qualitative framework.

Regarding the measurement of the qualitative factors, we evaluated the relevance and reliability of the internal and external data used to inform management’s estimate and considered the existence of new or contrary information.

/s/ Ernst & Young LLP

2 unchanged sentences

February 24, 2022

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of F.N.B.

Opinion on Internal Control Over Financial Reporting

31 unchanged sentences

Debt securities available for sale (amortized cost of $ 3,416 and $ 3,380 ;

allowance for credit losses of $ 0 )

allowance for credit losses of $ 0 and $ 0 )

Debt securities held to maturity (fair value of $ 3,506 and $ 2,973 ;

allowance for credit losses of $ 0 )

allowance for credit losses of $ 0 and $ 0 )

Loans held for sale (includes $ 269 and $ 144 measured at fair value) (1)

1 unchanged sentence

24,968 25,459

Allowance for credit losses ( 363 ) ( 196 )

Allowance for credit losses on loans and leases ( 344 ) ( 363 )

Net Loans and Leases 24,624 25,096

67 unchanged sentences

Outside services 71 69 64

Marketing 14 13 13

FDIC insurance 18 20 23

Bank shares and franchise taxes 13 14 12

Merger-related 2 — —

Other 57 78 74

19 unchanged sentences

Derivative instruments:

Unrealized losses arising during the period, net of tax benefit of $( 11 ), $( 5 ) and $( 1 )

Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $ 1 , $( 11 ) and $( 5 )

4 ( 40 ) ( 17 )

Reclassification adjustment for gains (losses) included in net income, net of tax expense (benefit) of $ 4 , $ 3 and $ 0

18 ( 2 ) ( 2 )

Pension and postretirement benefit obligations:

Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $( 5 ), $ 2 and $( 1 )

( 6 ) 3 ( 2 )

Other Comprehensive Income (Loss) ( 23 ) 26 41

10 unchanged sentences

Balance at January 1, 2019 $ 107 $ 3 $ 4,049 $ 576 $ ( 106 ) $ ( 21 ) $ 4,608

Comprehensive income (loss) 373 ( 23 ) 350

Comprehensive income 387 41 428

Dividends declared:

7 unchanged sentences

Balance at December 31, 2019

107 3 4,067 798 ( 65 ) ( 27 ) 4,883

Comprehensive income 286 26 312

6 unchanged sentences

Issuance of common stock — 4 ( 3 ) 1

Repurchase of common stock ( 38 ) ( 38 )

Restricted stock compensation 16 16

Adoption of new accounting standards ( 50 ) — ( 50 )

Balance at December 31, 2020

Comprehensive income 286 26 312

107 3 4,087 869 ( 39 ) ( 68 ) 4,959

Comprehensive income (loss) 405 ( 23 ) 382

Dividends declared:

7 unchanged sentences

Restricted stock compensation 19 19

Adoption of new accounting standards ( 50 ) ( 50 )

Balance at December 31, 2021 $ 107 $ 3 $ 4,109 $ 1,110 $ ( 62 ) $ ( 117 ) $ 5,150

7 unchanged sentences

Net income $ 405 $ 286 $ 387

Adjustments to reconcile net income to net cash flows provided by operating activities:

Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:

Depreciation, amortization and accretion 10 ( 3 ) 45

19 unchanged sentences

Increase in premises and equipment ( 58 ) ( 41 ) ( 46 )

Net cash received in business combinations and divestitures — — 134

Loans sold, not originated for sale — 537 262

31 unchanged sentences

and Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina.

As of December 31, 2020, we had 358 banking offices throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina and Virginia.

As of December 31, 2021, we had 334 banking offices throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington D.C.

and Virginia.

We provide a full range of commercial banking, consumer banking, and wealth management solutions through our subsidiary network which is led by our largest affiliate, FNBPA, founded in 1864.

5 unchanged sentences

Our accompanying Consolidated Financial Statements and these Notes to Consolidated Financial Statements include subsidiaries in which we have a controlling financial interest.

We own and operate FNBPA, FNTC, First National Investment Services Company, LLC, FNBIA, FNIA, Bank Capital Services, LLC, and F.N.B.

Capital Corporation, LLC, and include results for each of these entities in the accompanying Consolidated Financial Statements.

We own and operate FNBPA, FNTC, First National Investment Services Company, LLC, FNBIA, FNIA, Bank Capital Services, LLC, F.N.B.

Capital Corporation, LLC and Waubank Securities, LLC, and include results for each of these entities in the accompanying Consolidated Financial Statements.

Companies in which we hold a controlling financial interest, or are a VIE, in which we have the power to direct the activities of an entity that most significantly impact the entity’s economic performance and have an obligation to absorb losses or the right to receive benefits which could potentially be significant to the VIE, are consolidated.

1 unchanged sentence

VIEs in which we do not hold the power to direct the activities of the entity that most significantly impact the entity’s economic performance or an obligation to absorb losses or the right to receive benefits which could potentially be significant to the VIE are not consolidated.

Investments in companies that are not consolidated are accounted for using the equity method when we have the ability to exert significant influence.

Investments in companies that are not consolidated are accounted for using the equity method when we have the ability to exert significant influence or the cost method when we do not have the ability to exert significant influence.

Investments in private investment partnerships that are accounted for under the equity method or the cost method are included in other assets and our proportional interest in the equity investments’ earnings are included in other non-interest income.

2 unchanged sentences

All significant intercompany balances and transactions have been eliminated.

Certain prior period amounts have been reclassified to conform to the current period presentation.

Certain prior period amounts have been reclassified to the current period presentation.

Such reclassifications had no impact on our net income and stockholders' equity.

4 unchanged sentences

Actual results could materially differ from those estimates.

Material estimates that are particularly susceptible to significant changes include the ACL, accounting for loans acquired in a business combination prior to January 1, 2020, fair value of financial instruments, goodwill and other intangible assets, income taxes and DTAs.

Adoption of New Accounting Standards

4 unchanged sentences

The transition adjustment was primarily driven by longer duration commercial and consumer real estate loans.

At the time of CECL adoption, we recorded a one-time cumulative-effect adjustment of $ 50.6 million as a reduction to Retained Earnings.

The ACL balance increased by $ 105 million and included a “gross-up" to PCI (PCD under CECL) loan balances and the ACL of $ 50 million.

Included in the CECL adoption impact was a Day 1 increase to our AULC of $ 10 million.

Results for reporting periods prior to January 1, 2020 continue to be reported in accordance with previously applicable GAAP.

7 unchanged sentences

We made an accounting policy election to write-off accrued interest receivable balances by reversing interest income in accordance with our non-accrual policies instead of measuring an ACL for accrued interest receivable for all classes of financing receivables and major security types.

We do not hold any securities at adoption for which OTTI had been recognized prior to January 1, 2020.

The following table illustrates the impact of the adoption of ASC 326:

January 1, 2020

(in millions) As Reported Under ASC 326 Pre-ASC 326 Adoption Impact of ASC 326 Adoption

Allowance for credit losses on debt securities held-to-maturity

States of the U.S.

and political subdivisions (municipals) $ — $ — $ —

Commercial real estate $ 138 $ 60 $ 78

Commercial and industrial 65 53 12

Commercial leases 11 11 —

Commercial other — 9 ( 9 )

Direct installment 24 13 11

Residential mortgages 32 22 10

Indirect installment 21 19 2

Consumer lines of credit 10 9 1

Allowance for credit losses on loans $ 301 $ 196 $ 105

Allowance for credit losses on off-balance sheet credit exposures $ 13 $ 3 $ 10

We did not hold any securities at adoption for which OTTI had been recognized prior to January 1, 2020.

Reference Rate Reform.

30 unchanged sentences

We determine the value of services performed based on the fee schedule in effect at the time the services are performed.

Revenues from wealth advisory and trust

services are reported in the Consolidated Statements of Income as trust services and securities commissions and fees, and in the Wealth segment as non-interest income.

Revenues from wealth advisory and trust services are reported in the Consolidated Statements of Income as trust services and securities commissions and fees, and in the Wealth segment as non-interest income.

Insurance Services.

2 unchanged sentences

Contracts are cancellable at any time and we have no performance obligation to the customers beyond the time the insurance is placed into effect.

Revenues from insurance services are reported in the Consolidated Statements of Income as insurance commissions and fees, and in the Insurance segment as non-interest income.

Revenues from insurance services are reported in the Consolidated Statements of Income as insurance commissions and fees, and in the Insurance segment in the Business Segments footnote as non-interest income.

Business Combinations

5 unchanged sentences

Debt Securities

Debt securities can be classified as trading securities can be classified as trading, HTM or AFS.

Debt securities can be classified as trading, HTM or AFS securities.

As of December 31, 2021 and 2020, we did not hold any trading debt securities.

Interest income on debt securities includes amortization of purchase premiums or accretion of discounts.

Premiums and discounts on debt securities are generally amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated.

Premiums and discounts on debt securities are generally amortized on the level-yield method without anticipating prepayments,

except for mortgage-backed securities where prepayments are anticipated.

Premiums on callable debt securities are amortized to their earliest call date.

4 unchanged sentences

Such securities are carried at amortized cost.

Beginning in 2020, for certain HTM securities we have an expectation of zero expected credit losses.

For certain HTM securities we have an expectation of zero expected credit losses.

Based on a long history with no credit losses, high credit ratings, guarantees, and/or implied risk-free characteristics, we expect the nonpayment of our UST, Fannie Mae, Freddie Mac, FHLB, Ginnie Mae and the SBA securities to be zero, and accordingly, have no ACL on those securities.

10 unchanged sentences

In performing an assessment of whether any decline in fair value is due to a credit loss, all relevant information is considered at the individual security level.

Beginning in 2020, for AFS debt securities in an unrealized loss position, we first determine whether we have the intent to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis.

For AFS debt securities in an unrealized loss position, we first determine whether we have the intent to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis.

If the criteria for intent or requirement to sell is met, the security’s amortized cost is written down to fair value and the write down is charged against the ACL with any incremental impairment reported in earnings in the Provision for Credit Losses line on the Consolidated Statements of Income.

1 unchanged sentence

We first qualitatively evaluate each security to assess whether a potential credit loss exists.

If as a result of this qualitative analysis we expect to get all of our

principal back, then we conclude that the present value of expected cash flows equals or exceeds its amortized cost and no credit loss exists.

If it was determined a potential credit loss exists, we compare the present value of cash flows expected to be collected with our amortized cost basis to measure its value.

If as a result of this qualitative analysis we expect to get all of our principal back, then we conclude that the present value of expected cash flows equals or exceeds its amortized cost and no credit loss exists.

If it was determined a potential credit loss exists, we compare the present value of cash flows expected to be collected with our amortized cost basis.

The credit loss is recorded through the ACL and limited to the amount the fair value is less than the amortized cost basis.

3 unchanged sentences

Losses are charged against the ACL when an AFS debt security is not collectible or when we believe the criteria regarding the intent or requirement to sell is met.

Prior to 2020, we evaluated our debt securities in a loss position for OTTI on a quarterly basis at the individual security level based on our intent to sell.

If we intended to sell the debt security of if it was more likely than not we would have been required to sell the security before recovery of its amortized cost basis, OTTI was recognized in earnings equal to the entire difference between the investments' amortized cost basis and its fair value.

If we did not intend to sell the debt security and if it was not more likely than not that we would be required to sell the security before recovery of its amortized cost basis, the OTTI was separated into the amount representing credit loss and the amount related to all other market factors.

The amount of credit loss would have been recognized in earnings and the amount related to other market factors would be recognized in OCI, net of tax.

We did no t recognize any OTTI during 2019 and 2018.

Securities Sold Under Agreements to Repurchase

12 unchanged sentences

In addition, ASU 2017-12 provides administrative relief by easing documentation requirements, simplifying the application of hedge accounting by expanding the application of the shortcut method, eliminating the separate measurement and reporting of hedge ineffectiveness and generally requiring the entire effect of the hedging instrument and the hedged item to be presented in the same income statement line item.

We believe these changes will provide users with more useful information about the effect of our risk management activities on the financial statements.

We believe these changes provide users with more useful information about the effect of our risk management activities on the financial statements.

Changes in fair value of a derivative instrument that has been designated and qualifies as a cash flow hedge, including any ineffectiveness, are recorded in AOCI, net of tax.

Amounts are reclassified from AOCI to the Consolidated Statements of Income in the same line item used to present the earnings effect of the hedged item in the period or periods in which the hedged transaction affects earnings.

Prior to 2019, the ineffective portion, if any, was reported in earnings immediately.

At the hedge’s inception, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in fair values or cash flows of the hedged items and whether they are expected to be highly effective in the future.

18 unchanged sentences

Interest income on loans held for sale is recorded in interest income.

We routinely IRLCs for residential mortgage loans that we intend to sell.

We routinely issue IRLCs for residential mortgage loans that we intend to sell.

These IRLCs are considered derivatives.

25 unchanged sentences

When the full collection of principal and interest is reasonably assured on a loan designated as a TDR and where the borrower would not otherwise meet the criteria for non-accrual status, we will continue to accrue interest on the loan.

Prior to 2020, we did not consider a restructured acquired loan as a TDR if the loan was accounted for as a component of a pool.

TDR classification does not include short-term assistance to borrowers who are current at the time of a natural disaster or other extreme event (e.g.

4 unchanged sentences

Allowance for Credit Losses on Loans and Leases

Beginning January 1, 2020, we estimate the ACL on loans and leases using relevant available information, from internal and external sources, relating to past events, current conditions, and R&S forecasts under the CECL methodology.

We estimate the ACL on loans and leases using relevant available information, from internal and external sources, relating to past events, current conditions, and R&S forecasts under the CECL methodology.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist.

8 unchanged sentences

Quantitative Component

We use a non-discounted cash flow factor-based approach to estimate expected credit losses that include component PD/LGD/EAD models as well as less complex estimation methods for smaller loan portfolios.

We use a non-discounted cash flow factor-based approach to estimate expected credit losses that include component probability of default (PD)/loss given default (LGD)/exposure at default (EAD) models as well as less complex estimation methods for smaller loan portfolios.

This component model is used to estimate the likelihood that a borrower will cease making payments as agreed.

24 unchanged sentences

• Forecast uncertainty and imprecision.

Prior to 2020, the allowance for credit losses was established as losses were estimated to have occurred.

Loan losses were charged-off against the allowance for credit losses when management believed the uncollectability of a loan balance was confirmed.

Subsequent recoveries, if any, were credited to the allowance for credit losses.

Prior to 2020, the ACL was established as losses were estimated to have occurred.

Loan losses were charged-off against the ACL when management believed the uncollectability of a loan balance was confirmed.

Subsequent recoveries, if any, were credited to the ACL.

Allowances for impaired commercial loans over $ 1.0 million were generally determined based on collateral values or the present value of estimated cash flows.

All other impaired loans were evaluated in the aggregate based on loan segment loss given default.

Changes in the allowance for credit losses related to impaired loans were charged or credited to the provision for credit losses.

All other impaired loans were evaluated in the aggregate based on loan segment LGD.

Changes in the ACL related to impaired loans were charged or credited to the provision for credit losses.

Liability for Credit Losses on Unfunded Lending-Related Commitments

The AULC is management's estimate of credit losses inherent in our unfunded loan commitments, such as letters of credit and home equity lines of credit, and is included in other liabilities on the Consolidated Balance Sheets.

The AULC is management's estimate of credit losses inherent in our unfunded loan commitments, such as commercial and industrial revolving loan facilities, commercial real estate construction projects, letters of credit and home equity lines of credit, and is included in other liabilities on the Consolidated Balance Sheets.

The AULC is estimated over the contractual period in which we are exposed to credit risk for obligations which are not unconditionally cancellable by us.

6 unchanged sentences

The selection of which criteria to apply, or the addition of new criteria, to a specific acquisition will be based on the facts and circumstances at the time of review, as well as the availability of information supplied by the acquiree.

Generally, more-than-insignificant deterioration in credit quality since origination would include risk

ratings of special mention or below, inconsistency of loan payments, non-accrual status at the time of acquisition, or loans modified in a TDR, in bankruptcy or for regulatory purposes.

Generally, more-than-insignificant deterioration in credit quality since origination would include risk ratings of special mention or below, inconsistency of loan payments, non-accrual status at the time of acquisition, or loans modified in a TDR, in bankruptcy or for regulatory purposes.

PCD loans are recorded at the amount paid.

2 unchanged sentences

The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized or accreted into interest income over the life of the loan.

Subsequent changes to the ACL are recorded through the provision credit losses.

Subsequent changes to the ACL are recorded through the provision for credit losses.

Prior to 2020, loans acquired in a business combination (impaired and non-impaired) were initially recorded at their acquisition-date fair values.

Fair values were based on a discounted cash flow methodology that involved assumptions and judgments as to credit risk, default rates, loss severity, collateral values, discount rates, payment speeds, prepayment risk, and liquidity risk.

The carryover of allowance for credit losses related to loans acquired in a business combination was prohibited as any credit losses in the loans were included in the determination of the fair value of the loans at the acquisition date.

The allowance for credit losses on loans acquired in a business combination reflected only those losses incurred after acquisition and represents the present value of cash flows expected at acquisition that is no longer expected to be collected.

The carryover of ACL related to loans acquired in a business combination was prohibited as any credit losses in the loans were included in the determination of the fair value of the loans at the acquisition date.

The ACL on loans acquired in a business combination reflected only those losses incurred after acquisition and represents the present value of cash flows expected at acquisition that is no longer expected to be collected.

At acquisition, we considered certain factors as indicators that an acquired loan has evidence of deterioration in credit quality and is therefore impaired.

Any loans acquired in a business combination that were not individually impaired were pooled into groups of similar loans based on various factors including borrower type, loan purpose, and collateral type.

For these pools, we used certain loan information, including outstanding principal balance, estimated expected losses, weighted average maturity, weighted average margin, and weighted average interest rate along with estimated prepayment rates, probability of default and loss given default to estimate the expected cash flow for each loan pool.

For these pools, we used certain loan information, including outstanding principal balance, estimated expected losses, weighted average maturity, weighted average margin, and weighted average interest rate along with estimated prepayment rates, PD and LGD to estimate the expected cash flow for each loan pool.

We believe analogizing to impaired loans was a more appropriate option to follow in accounting for discount accretion on nonimpaired loans acquired in a business combination other than revolving loans and therefore account for such loans in accordance with the guidance for impaired loans, excluding revolving loans.

16 unchanged sentences

For contracts that do not include a software license, the contract is accounted for as a service contract with fees paid recorded in other non-interest expense.

In the third quarter of 2018, we early adopted, on a prospective basis, ASU 2018-15 which allows for implementation costs for activities performed in cloud computing arrangements that are a service contract to be accounted for under the internal-use software guidance which allows for certain implementation costs to be capitalized depending on the nature of the costs and the project stage.

Prior to the adoption of ASU 2018-15 all implementation costs for cloud computing arrangements that were a service contract were expensed as incurred.

Other Real Estate Owned

32 unchanged sentences

SBA-guaranteed servicing rights are evaluated for impairment at least quarterly on an aggregate basis.

Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the present value of

expected net future cash flows.

Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the present value of expected net future cash flows.

If impairment exists at the pool level for residential mortgage loans or on an aggregate basis for SBA-guaranteed loans, the servicing right is written down through a valuation allowance and is charged against mortgage banking operations non-interest income or other non-interest income, respectively.

15 unchanged sentences

We do not record leases with an initial term of 12 months or less on the Consolidated Balance Sheets, instead we recognize lease expense for these leases on a straight-line basis over the lease term.

For leases that commenced before January 1, 2019, we have applied the modified retrospective transition method which resulted in comparative information not being restated.

A number of optional practical expedients were available in transition.

We elected the ‘package of practical expedients’, which permits us to not reassess our prior conclusions about lease identification, lease classification and initial direct costs.

Right-of-use assets and liabilities are initially measured at the present value of lease payments over the lease term, discounted using the interest rate implicit in the lease at the commencement date.

33 unchanged sentences

Marketing costs are generally expensed as incurred.

Marketing expense totaled $ 12.6 million, $ 13.1 million and $ 12.8 million for 2020, 2019 and 2018, respectively.

Per Share Amounts

20 unchanged sentences

Standard Description Financial Statements Impact

Credit Losses

ASU 2016-13 , Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses

ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments

ASU 2019-05, Financial Instruments-Credit Losses, (Topic 326):

Targeted Transition Relief

ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses

These Updates replace the current long-standing incurred loss impairment methodology with a methodology that reflects current expected credit losses (commonly referred to as CECL) for most financial assets measured at amortized cost and certain other instruments, including loans, HTM debt securities, net investments in leases and off-balance sheet credit exposures except for unconditionally cancellable commitments.

CECL requires loss estimates for the remaining life of the financial asset at the time the asset is originated or acquired, considering historical experience, current conditions and R&S forecasts.

In addition, the Update will require the use of a modified AFS debt security impairment model and eliminate the current accounting for PCI loans and debt securities.

On January 1, 2020, we adopted CECL using the modified retrospective method for financial assets measured at amortized cost, net investments in leases and off-balance sheet credit exposures.

While these Updates change the measurement of the ACL, it does not change the credit risk of our lending portfolios or the ultimate losses in those portfolios.

However, the CECL ACL methodology will produce higher volatility in the quarterly provision for credit losses than our prior reserve process.

We created a cross-functional management steering group to govern implementation and the Audit and Risk Committees and the Board of Directors received regular updates.

For financial assets measured at amortized cost we have implemented a new modeling platform and integrated other auxiliary models to support a calculation of expected credit losses under CECL.

We have made decisions on segmentation, a R&S forecast period, a reversion method and period and a historical loss forecast covering the remaining contractual life, adjusted for prepayments as well as other criteria.

Based on our portfolio composition and forecasts of relatively stable macroeconomic conditions over the next two years at the adoption date, we recorded an overall ACL of $ 301 million.

This reflected an increase on the originated portfolio of $ 55 million, primarily driven by our longer duration commercial and consumer real estate loans and a "gross-up" for PCI loans of $ 50 million.

There is no capital impact related to the PCI loans at adoption.

The impact for the adoption of CECL was a reduction to retained earnings of $ 51 million, which included a $ 10 million increase to the AULC.

The impact upon adoption was dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates at the time of adoption.

The impact to our AFS and HTM debt securities was immaterial.

Model development, as well as the development of policies and procedures and, internal controls were complete at the time of adoption.

Standard Description Financial Statements Impact

Reference Rate Reform

4 unchanged sentences

The following optional expedients, exceptions and elections are permitted for certain contracts that are modified because of RRR and meet certain scope guidance:

• Contract modifications may be accounted for prospectively as a continuation of existing contracts rather than a new contract without remeasurement or reassessment of significant contract amendments

• modifications of leases to be accounted for as a continuation of the existing contracts without reassessment of lease classification and discount rate or remeasurement of lease payments

• Contract modifications may be accounted for prospectively as a continuation of existing contracts rather than a new contract without re-measurement or reassessment of significant contract amendments

• modifications of leases to be accounted for as a continuation of the existing contracts without reassessment of lease classification and discount rate or re-measurement of lease payments

• to not reassess the original conclusion about whether a contract contains an embedded derivative that is clearly and closely related to the host contract

1 unchanged sentence

• modifications of certain derivatives modified to change the rate used for margining, discounting or contract price alignment.

The Updates also allow an entity to make a one-time election to sell and/or transfer to HTM securities that are affected by RRR and were classified as HTM before January 1, 2020.

For securities affected by RRR that were classified as HTM before January 1, 2020, the Updates also allow an entity to make a one-time election to sell and/or transfer these securities to AFS or Trading.

RRR Updates are effective for all entities from the beginning of an interim period that includes or is subsequent to March 12, 2020 and terminates on December 31, 2022 on a full retrospective or prospective basis.

3 unchanged sentences

We will continue to assess the impact of adoption through the termination date of these Updates on December 31, 2022.

The amortized cost and fair value of AFS debt securities for the current period are presented in the table below.

There was no ACL in the AFS portfolio during 2020.

Accrued interest receivable on AFS debt securities totaled $ 6.2 million at December 31, 2020 and is excluded from the estimate of credit losses and recorded separately in other assets in the Consolidated Balance Sheets.

The amortized cost and fair value of AFS debt securities are presented in the table below.

There was no ACL in the AFS portfolio at December 31, 2021 and December 31, 2020.

Accrued interest receivable on AFS debt securities totaled $ 7.3 million and $ 6.2 million at December 31, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets.

Accordingly, we have excluded accrued interest receivable from both the fair value and the amortized cost basis of AFS debt securities.

13 unchanged sentences

Total debt securities AFS $ 3,416 $ 36 $ ( 26 ) $ 3,426

The amortized cost and fair value of debt securities AFS for December 31, 2019 are as follows:

(in millions) Amortized

1 unchanged sentence

December 31, 2020

Treasury $ 600 $ — $ — $ 600

government agencies 172 — — 172

8 unchanged sentences

Total debt securities AFS $ 3,380 $ 84 $ ( 1 ) $ 3,463

The amortized cost and fair value of HTM debt securities for the current period are presented in the table below.

The ACL for the HTM municipal bond portfolio was $ 0.04 million at December 31, 2020.

Accrued interest receivable on HTM debt securities totaled $ 12.5 million at December 31, 2020 and is excluded from the estimate of credit losses and recorded separately in other assets in the Consolidated Balance Sheets.

The amortized cost and fair value of HTM debt securities are presented in the table below.

The ACL for the HTM municipal bond portfolio was $ 0.05 million and $ 0.04 million at December 31, 2021 and December 31, 2020, respectively.

Accrued interest receivable on HTM debt securities totaled $ 12.3 million and $ 12.5 million at December 31, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets.

Accordingly, we have excluded accrued interest receivable from both the fair value and the amortized cost basis of HTM debt securities.

(in millions) Amortized

3 unchanged sentences

government agencies 1 — — 1

government-sponsored entities 120 1 — 121

Residential mortgage-backed securities:

5 unchanged sentences

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

The amortized cost and fair value of HTM debt securities for December 31, 2019 are as follows:

(in millions) Amortized

11 unchanged sentences

Total debt securities HTM $ 2,868 $ 105 $ — $ 2,973

We did not have any sales during 2020 or 2019.

There were no significant gross gains or gross losses realized on securities during the twelve months ended December 31, 2021, 2020 or 2019.

13 unchanged sentences

Total debt securities $ 3,416 $ 3,426 $ 3,463 $ 3,506

Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties.

Periodic payments are received on residential mortgage-backed securities based on the payment patterns of the underlying collateral.

Actual maturities may differ from contractual terms because security issuers may have the right to call or prepay obligations with or without penalties.

Periodic principal payments are received on residential mortgage-backed securities based on the payment patterns of the underlying collateral.

Following is information relating to securities pledged:

5 unchanged sentences

Securities pledged as a percent of total securities 87.9 % 91.4 %

At December 31, 2020, there were no holdings of securities of any one issuer, other than U.S.

government and its agencies, in any amount greater than 10% of stockholders’ equity.

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

8 unchanged sentences

December 31, 2021

Treasury 3 $ 151 $ ( 1 ) — $ — $ — 3 $ 151 $ ( 1 )

government agencies 3 22 — 9 8 — 12 30 —

1 unchanged sentence

Residential mortgage-backed securities:

Agency mortgage-backed securities 13 599 ( 4 ) — — — 13 599 ( 4 )

Agency collateralized mortgage obligations 23 659 ( 15 ) 3 68 ( 2 ) 26 727 ( 17 )

Commercial mortgage-backed securities 5 125 ( 2 ) — — — 5 125 ( 2 )

States of the U.S.

and political subdivisions (municipals) 10 24 — — — — 10 24 —

Other debt securities — — — 1 2 — 1 2 —

12 unchanged sentences

Residential mortgage-backed securities:

Agency mortgage-backed securities 13 200 ( 1 ) 24 314 ( 2 ) 37 514 ( 3 )

Agency collateralized mortgage obligations 5 130 ( 1 ) — — — 5 130 ( 1 )

Non-agency collateralized mortgage obligations — — — — — — — — —

Commercial mortgage-backed securities 3 114 ( 2 ) — — — 3 114 ( 2 )

States of the U.S.

and political subdivisions (municipals) — — — — — — — — —

Other debt securities — — — 1 2 — 1 2 —

Total temporarily impaired debt securities AFS 32 $ 685 $ ( 4 ) 78 $ 712 $ ( 6 ) 110 $ 1,397 $ ( 10 )

Total 7 $ 168 $ ( 1 ) 17 $ 71 $ — 24 $ 239 $ ( 1 )

We evaluated the AFS debt securities that were in an unrealized loss position at December 31, 2021.

Based on the credit ratings and implied government guarantee for these securities, we concluded the loss position is temporary and caused by the movement of interest rates.

Based on the credit ratings and implied government guarantee for these securities, we concluded the loss position is temporary and caused by the movement of interest rates, and does not reflect any expected credit losses.

We do not intend to sell the AFS debt securities and it is not more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis.

Credit Quality Indicators

We use credit ratings to help evaluate the credit quality of our HTM municipal bond portfolio.

The ratings are updated quarterly with the last update on December 31, 2020.

The remainder of the HTM portfolio is backed by the UST, Fannie Mae, Freddie

Mac, FHLB, Ginnie Mae, and the SBA and we have designated these securities as having zero expected credit loss, and therefore, are not subject to an estimate of expected credit loss under CECL.

Our municipal bond portfolio with a carrying amount of $ 1.1 billion as of December 31, 2020 is highly rated with an average rating of AA and 100 % of the portfolio rated A or better, while 99 % have stand-alone ratings of A or better.

We use credit ratings and the most recent financial information to help evaluate the credit quality of our credit-related AFS and HTM securities portfolios.

Management reviews the credit profile of each issuer on a quarterly basis.

Based on the nature of the issuers and current conditions, we have determined that securities backed by the UST, Fannie Mae, Freddie Mac, FHLB, Ginnie Mae, and the SBA have zero expected credit loss.

Our municipal bond portfolio with a carrying amount of $ 1.0 billion as of December 31, 2021 is highly rated with an average rating of AA and 100 % of the portfolio having an A or better rating.

All of the securities in the municipal portfolio are general obligation bonds.

1 unchanged sentence

The average holding size of the securities in the municipal bond portfolio is $ 3.6 million.

In addition to the strong stand-alone ratings, 62 % of the municipalities have some formal credit enhancement insurance that strengthens the creditworthiness of their issue.

Management reviews the credit profile of each issuer on a quarterly basis.

The credit analysis on the municipal bond portfolio is completed on each bond using:

• The bond’s credit rating;

• Credit enhancements that improve the bond’s credit rating, for example insurance;

In addition to the strong stand-alone ratings, 61 % of the municipal bonds have some formal credit enhancement (e.g., insurance) that strengthens the creditworthiness of the bond.

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

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

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

• Moody’s U.S.

Bond Defaults and Recoveries, 1970-2019.

By using these components, we derive the expected credit loss on the general obligation bond portfolio.

We further refine the expected credit loss by factoring in economic forecast data using our Commercial and Industrial Non-Manufacturing PD adjustment as derived through our assessment of the loan portfolio.

For the year-to-date period ending December 31, 2020, we had a provision expense of $ 0.004 million, with no charge-offs or recoveries.

The ACL on the HTM portfolio as of December 31, 2020 was $ 0.04 million.

Bond Defaults and Recoveries, 1970-2020 study.

By using these components, we derive the expected credit loss on the HTM general obligation bond portfolio.

We further refine the expected credit loss by factoring in economic forecast data using our Commercial and Industrial Non-Manufacturing loan portfolio forecast adjustment as derived through our assessment of the loan portfolio as a proxy for our municipal bond portfolio.

For the year-to-date periods ending December 31, 2021 and 2020, we had no significant provision expense and no charge-offs or recoveries.

The ACL on the HTM portfolio was $ 0.05 million and $ 0.04 million as of December 31, 2021 and December 31, 2020, respectively.

No other securities portfolios had an ACL.

At December 31, 2020, there were no securities that were past due or on non-accrual.

At December 31, 2021 and December 31, 2020, there were no securities that were past due or on non-accrual.

OTHER SECURITIES

4 unchanged sentences

Federal Reserve Bank stock 123 124

Other non-marketable equity securities — 1

Total non-marketable equity securities $ 245 $ 278

6 unchanged sentences

LOANS AND LEASES

The loan and lease portfolio categories were generally unchanged with the CECL adoption.

Accrued interest receivable on loans and leases, which totaled $ 62.9 million at December 31, 2020, is excluded from the estimate of credit losses and recorded separately in other assets in the Consolidated Balance Sheets for both periods and not included in the tables below.

Upon adoption of CECL, PCD assets were adjusted to reflect the addition of a $ 50.3 million ACL and a remaining noncredit discount of $ 110.0 million included in the amortized cost.

At December 31, 2020, the remaining noncredit discount was $ 50.9 million.

Accrued interest receivable on loans and leases, which totaled $ 48.9 million at December 31, 2021 and $ 62.9 million at December 31, 2020, is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets for both periods and not included in the following tables.

Loans and Leases by Portfolio Segment

12 unchanged sentences

Total loans and leases, net of unearned income $ 24,968 $ 25,459

Upon adoption of CECL on January 1, 2020, PCD assets were adjusted to reflect the addition of a $ 50.3 million ACL and a remaining noncredit discount of $ 110.0 million included in the amortized cost.

The remaining noncredit discount was $ 30.0 million and $ 50.9 million at December 31, 2021 and December 31, 2020, respectively.

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

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

• Commercial and industrial includes loans to businesses that are not secured by real estate where the borrower's leverage and cash flows from operations are the primary default risk drivers.

PPP loans are included in the commercial and industrial category and comprise $ 2.2 billion of this category's outstanding balance at December 31, 2020.

The PPP loans are 100 % guaranteed by the SBA, which provides a reduced risk of loss to us on these loans;

• Commercial and industrial includes loans to businesses that are not secured by real estate where the borrower's leverage and cash flows from operations are the primary default risk drivers, except for PPP loans that are 100 % guaranteed by the SBA, which provides a reduced risk of loss to us on these loans.

PPP loans are included in the commercial and industrial category and comprise $ 336.6 million and $ 2.2 billion of this category's outstanding balance at December 31, 2021 and December 31, 2020, respectively;

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

11 unchanged sentences

and Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina.

During the fourth quarter of 2020, we sold $ 0.5 billion of indirect installment loans that were previously transferred to loans held for sale.

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

12 unchanged sentences

Credit Quality

Management monitors the credit quality of our loan portfolio using several performance measures based on payment activity and borrower performance.

We use an internal risk rating assigned to a commercial loan or lease, summarized below.

We monitor the credit quality of our loan portfolio using several performance measures based on payment activity and borrower performance.

We use an internal risk rating assigned to a commercial loan or lease at origination, summarized below.

Rating Category Definition

3 unchanged sentences

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

The use of these internally assigned credit quality categories within the commercial loan and lease portfolio permits management’s use of transition matrices to establish the basis for the R&S forecast portion of the credit risk.

The use of these internally assigned credit quality categories within the commercial loan and lease portfolio permits our use of transition matrices to establish a basis which is then impacted by quantitative inputs from our econometric model forecasts over the R&S period.

Our internal credit risk grading system is based on past experiences with similarly graded loans and leases and conforms to regulatory categories.

In general, loan and lease risk ratings within each category are reviewed on an ongoing basis according to our policy for each class of loans and leases.

Each quarter, management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan and lease portfolio.

Loans and leases within the

Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans and leases that migrate toward the Substandard or Doubtful credit categories.

Accordingly, management applies higher risk factors to Substandard and Doubtful credit categories.

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

Each quarter, we analyze the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan and lease portfolio.

Loans and leases within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans and leases that migrate toward the Substandard or Doubtful credit categories.

Accordingly, we apply higher risk factors to Substandard and Doubtful credit categories.

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

December 31, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total

17 unchanged sentences

Pass 39 — — — — 3 52 94

Substandard — — — — — 1 — 1

Total other commercial 39 — — — — 3 52 94

Total commercial 5,402 3,109 2,001 1,603 1,217 2,659 1,479 17,470

December 31, 2020 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total

(in millions)

Total commercial loans and leases 3,786 2,779 2,484 1,486 1,200 2,858 1,872 16,465

Direct Installment:

14 unchanged sentences

Total consumer lines of credit 20 3 4 5 3 137 1,074 1,246

Total consumer 2,163 1,320 836 678 583 1,258 1,151 7,989

Total consumer loans 2,801 1,739 772 466 379 1,272 1,074 8,503

Total loans and leases $ 6,587 $ 4,518 $ 3,256 $ 1,952 $ 1,579 $ 4,130 $ 2,946 $ 24,968

We use delinquency transition matrices within the consumer and other loan classes to establish the basis for the R&S forecast portion of the credit risk.

Each month, management analyzes payment and volume activity, FICO scores and Debt-to-Income (DTI) scores and other external factors such as unemployment, to determine how consumer loans are performing.

The following tables present the December 31, 2019 summary of our commercial loans and leases by credit quality category segregated by loans and leases originated and loans acquired, prior to the adoption of CECL:

Commercial Loan and Lease Credit Quality Categories

(in millions) Pass Special

Mention Substandard Doubtful Total

Originated Loans and Leases

December 31, 2019

December 31, 2020 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Total

(in millions)

Commercial Real Estate:

Pass $ 1,879 $ 1,854 $ 1,135 $ 927 $ 888 $ 1,911 $ 163 $ 8,757

Special Mention 9 30 80 158 70 163 4 514

Substandard 4 32 29 81 116 192 6 460

Total commercial real estate 1,892 1,916 1,244 1,166 1,074 2,266 173 9,731

Commercial and Industrial:

Pass 3,286 1,007 590 304 120 311 1,095 6,713

Special Mention 30 23 13 28 10 35 79 218

Substandard 8 26 65 44 6 37 97 283

Total commercial and industrial 3,324 1,056 668 376 136 383 1,271 7,214

Commercial Leases:

Other 20 — 1 — 21

Total originated commercial loans and leases $ 12,032 $ 323 $ 272 $ 3 $ 12,630

Loans Acquired in a Business Combination

December 31, 2019

Commercial real estate $ 1,603 $ 116 $ 127 $ — $ 1,846

Commercial and industrial 201 19 25 — 245

Total commercial loans acquired in a business combination $ 1,804 $ 135 $ 152 $ — $ 2,091

Following is a table showing the December 31, 2019 consumer loans by payment status:

Consumer Loan Credit Quality by Payment Status

(in millions) Performing Non-Performing Total

Originated Loans

December 31, 2019

Pass 178 134 83 56 5 3 — 459

Special Mention 1 1 4 4 1 2 — 13

Substandard 7 2 2 1 1 — — 13

Total commercial leases 186 137 89 61 7 5 — 485

Other Commercial:

Pass — — — — — 4 35 39

Substandard — — — — — 1 — 1

Total other commercial — — — — — 5 35 40

Total commercial loans and leases 5,402 3,109 2,001 1,603 1,217 2,659 1,479 17,470

Direct Installment:

Current 706 337 200 143 171 442 1 2,000

Past due — 1 2 1 2 14 — 20

Total direct installment 706 338 202 144 173 456 1 2,020

Residential Mortgages:

Current 1,079 707 283 378 330 603 1 3,381

Past due 1 5 7 4 6 29 — 52

Total residential mortgages 1,080 712 290 382 336 632 1 3,433

Indirect Installment:

Consumer lines of credit 1,086 6 1,092

Total originated consumer loans $ 7,728 $ 39 $ 7,767

Loans Acquired in a Business Combination

December 31, 2019

Direct installment $ 63 $ — $ 63

Residential mortgages 379 — 379

Current 372 260 332 147 67 27 — 1,205

Past due 1 3 4 2 2 1 — 13

Total indirect installment 373 263 336 149 69 28 — 1,218

Consumer Lines of Credit:

Total consumer loans acquired in a business combination $ 800 $ 1 $ 801

Current 4 7 8 3 5 127 1,146 1,300

Past due — — — — — 15 3 18

Total consumer lines of credit 4 7 8 3 5 142 1,149 1,318

Total consumer loans 2,163 1,320 836 678 583 1,258 1,151 7,989

Total loans and leases $ 7,565 $ 4,429 $ 2,837 $ 2,281 $ 1,800 $ 3,917 $ 2,630 $ 25,459

We use delinquency transition matrices within the consumer and other loan classes to establish the basis for the R&S forecast portion of the credit risk.

Each month, management analyzes payment and volume activity, Fair Isaac Corporation (FICO) scores and Debt-to-Income (DTI) scores and other external factors such as unemployment, to determine how consumer loans are performing.

Non-Performing and Past Due

6 unchanged sentences

Leases Non-accrual with No ACL

Loans and Leases

December 31, 2021

15 unchanged sentences

Past Due Current Total

Originated Loans and Leases

Leases Non-accrual with No ACL

December 31, 2020

9 unchanged sentences

Total consumer loans 49 16 38 103 7,886 7,989 —

Total originated loans and leases $ 63 $ 5 $ 77 $ 145 $ 20,252 $ 20,397

(in millions) 30-89 Days

Past Due ≥ 90 Days

Accruing Non-

Accrual Total

(1) (2) Current (Discount)/

Premium Total

Loans Acquired in a Business Combination

December 31, 2019

Commercial real estate $ 12 $ 28 $ 3 $ 43 $ 1,942 $ ( 139 ) $ 1,846

Commercial and industrial 2 3 — 5 259 ( 19 ) 245

Total commercial loans 14 31 3 48 2,201 ( 158 ) 2,091

Direct installment 3 — — 3 60 — 63

Residential mortgages 8 4 — 12 382 ( 15 ) 379

Consumer lines of credit 7 2 1 10 357 ( 8 ) 359

Total consumer loans 18 6 1 25 799 ( 23 ) 801

Total loans acquired in a business combination $ 32 $ 37 $ 4 $ 73 $ 3,000 $ ( 181 ) $ 2,892

(1) Prior to the adoption of CECL on January 1, 2020, loans acquired in a business combination were considered performing upon acquisition, regardless of whether the customer was contractually delinquent, if we could reasonably estimate the timing and amount of expected cash flows on such loans.

In these instances, we did not consider acquired contractually delinquent loans to be non-accrual or non-performing and continued to recognize interest income on these loans using the accretion method.

After the adoption of CECL on January 1, 2020 loans acquired in a business combination are considered non-accrual or non-performing when, due to credit deterioration or other factors, we determine we are no longer able to reasonably estimate the timing and amount of expected cash flows on such loans.

We do not recognize interest income on loans acquired in a business combination considered non-accrual or non-performing.

(2) Past due information for loans acquired in a business combination is based on the contractual balance outstanding at December 31, 2019.

Total loans and leases $ 72 $ 16 $ 170 $ 258 $ 25,201 $ 25,459 $ 52

Following is a summary of non-performing assets:

2 unchanged sentences

Non-accrual loans $ 88 $ 170

Troubled debt restructurings — 22

Total non-performing loans

4 unchanged sentences

0.35 % 0.67 %

Non-performing loans assets + 90 days past due + OREO / total loans and leases + OREO

Non-performing assets + 90 days past due + OREO / total loans and leases + OREO

The carrying value of residential-secured consumer OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure amounted to $ 1.6 million at December 31, 2021 and $ 2.5 million at December 31, 2020.

The recorded investment of residential-secured consumer OREO for which formal foreclosure proceedings are in process at December 31, 2021 and December 31, 2020 totaled $ 4.3 million and $ 8.2 million, respectively.

During 2020, we extended the residential mortgage foreclosure moratorium beyond the requirements for government-backed loans, under the CARES Act, to all residential mortgage loan customers.

During 2020 and 2021, we extended the residential mortgage foreclosure moratorium beyond the requirements for government-backed loans, under the CARES Act, to all residential mortgage loan customers.

Approximately $ 50.6 million of commercial loans are collateral dependent at December 31, 2021.

5 unchanged sentences

Consistent with the CARES Act and interagency bank regulatory guidance which allows temporary relief for current borrowers affected by COVID-19, we are working with borrowers and granting certain modifications through programs related to COVID-19 relief.

As of December 31, 2020, we had $ 397 million in loans that have been granted short-term modifications as a result of financial disruptions associated with the COVID-19 pandemic.

As of December 31, 2021, we had $ 21 million in loans that have been granted short-term modifications as a result of financial disruptions associated with the COVID-19 pandemic, compared to $ 397 million as of December 31, 2020 and $ 2.4 billion as of June 30, 2020, the highest point during the pandemic.

Also, consistent with the CARES Act and the interagency bank regulatory guidelines, such modifications are not included in our TDR totals.

10 unchanged sentences

Commercial loans over $ 1.0 million whose terms have been modified in a TDR are generally placed on non-accrual, individually analyzed and measured based on the fair value of the underlying collateral.

Our ACL includes specific reserves for commercial TDRs of $ 2.8 million at December 31, 2020, compared to less than $ 0.5 million at December 31, 2019, and pooled reserves for individual loans of $ 2.5 million and $ 0.8 million for those same periods, respectively, based on loan segment LGD.

Our ACL includes specific reserves for commercial TDRs of $ 1.5 million at December 31, 2021, compared to $ 2.8 million at December 31, 2020, and pooled reserves for individual loans of $ 1.5 million and $ 2.5 million for those same periods, respectively, based on loan segment LGD.

Upon default, the amount of the recorded investment in the TDR in excess of the fair value of the collateral, less estimated selling costs, is generally considered a confirmed loss and is charged-off against the ACL.

All other classes of loans whose terms have been modified in a TDR are pooled and measured based on the loan segment LGD.

Our ACL included pooled reserves for these classes of loans of $ 4.1 million for both December 31, 2020 and 2019.

Our ACL included pooled reserves for these classes of loans of $ 3.9 million for December 31, 2021 and $ 4.1 million for December 31, 2020.

Upon default of an individual loan, our charge-off policy is followed for that class of loan.

22 unchanged sentences

Contracts Recorded

Commercial real estate 8 $ 3

Commercial and industrial 2 —

Total commercial loans 10 3

Direct installment 12 —

Residential mortgages 4 —

Consumer lines of credit 4 —

Total consumer loans 20 —

Following is a summary of originated TDRs, by class, for which there was a payment default, excluding loans that have been paid off and/or sold.

Year Ended December 31 2019

(dollars in millions) Number

Investment Number

Contracts Recorded

6 unchanged sentences

Total consumer loans 2 — 20 —

Total 3 $ — 30 $ 3

Loans Acquired in a Business Combination

Prior to January 1, 2020, all loans acquired in a business combination were initially recorded at fair value at the acquisition date with no associated ACL.

Refer to the Loans Acquired in a Business Combination section in Note 1 to the Consolidated Financial Statements.

ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES

Beginning January 1, 2020, the former incurred loss method was replaced with the CECL method to calculate estimated loan loss.

The ACL addresses credit losses expected in the existing loan and lease portfolio and is presented as a reserve against loans and leases on the Consolidated Balance Sheets.

The ACL is maintained for credit losses expected in the existing loan and lease portfolio and is presented as a reserve against loans and leases on the Consolidated Balance Sheets.

Loan and lease losses are charged off against the ACL, with recoveries of amounts previously charged off credited to the ACL.

1 unchanged sentence

Included in Table 6.1 is the impact to the ACL from our CECL (ASC 326) adoption on January 1, 2020.

All prior periods are presented using the incurred loss method which was the accounting method in place at the time of the respective financial statements.

Beginning January 1, 2020, the former incurred loss method was replaced with the CECL method to calculate estimated loan losses.

The CECL model takes into consideration the expected credit losses over the expected life of the loan compared to the incurred loss model under the prior standard.

At the time of CECL adoption, we recorded a one-time cumulative-effect adjustment of $ 50.6 million as a reduction to Retained Earnings.

The ACL balance increased by $ 105 million and included a “gross-up" to PCI (PCD under CECL) loan balances and the ACL of $ 50 million.

Included in the CECL adoption impact was a Day 1 increase to our AULC of $ 10 million.

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

3 unchanged sentences

Offs Provision

Losses Balance at

Year Ended December 31, 2021

Commercial real estate $ 180.5 $ ( 8.8 ) $ 6.3 $ ( 2.5 ) $ ( 21.5 ) $ 156.5

Commercial and industrial 81.2 ( 15.7 ) 6.6 ( 9.1 ) 15.3 87.4

Commercial leases 17.3 ( 0.2 ) 0.9 0.7 ( 3.3 ) 14.7

Other 1.4 ( 2.3 ) 1.3 ( 1.0 ) 2.2 2.6

Total commercial loans and leases 280.4 ( 27.0 ) 15.1 ( 11.9 ) ( 7.3 ) 261.2

Direct installment 26.0 ( 1.4 ) 1.0 ( 0.4 ) 0.8 26.4

Residential mortgages 33.7 ( 1.0 ) 0.6 ( 0.4 ) ( 0.2 ) 33.1

Indirect installment 11.2 ( 3.1 ) 2.2 ( 0.9 ) 3.2 13.5

Consumer lines of credit 11.8 ( 1.7 ) 1.4 ( 0.3 ) ( 1.4 ) 10.1

Total consumer loans 82.7 ( 7.2 ) 5.2 ( 2.0 ) 2.4 83.1

Total allowance for credit losses on loans and leases 363.1 ( 34.2 ) 20.3 ( 13.9 ) ( 4.9 ) 344.3

Allowance for unfunded loan commitments 13.6 — — — 5.5 19.1

Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments $ 376.7 $ ( 34.2 ) $ 20.3 $ ( 13.9 ) $ 0.6 $ 363.4

(in millions) Balance at

of Year Charge-

Offs Recoveries Net

Offs Provision

Losses ASC 326 Adoption Impact Initial ACL on PCD Loans Balance at

24 unchanged sentences

Balance at end of period $ 19 $ 14

This expected loss model takes into consideration the expected credit losses over the expected life of the loan compared to the incurred loss model under the prior standard.

At the time of CECL adoption, we recorded a one-time cumulative-effect adjustment of $ 50.6 million as a reduction to Retained Earnings.

The ACL balance increased by $ 105 million and included a “gross-up" to PCI loan balances and the ACL of $ 50 million.

Included in the CECL adoption impact was a Day 1 increase to our AULC of $ 10 million.

The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates.

5 unchanged sentences

Beginning in March 2020, the broader economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic resulting in notable adverse changes to forecasted economic variables utilized in our ACL modeling process.

Based on these changes, we utilized a third-party pandemic recessionary scenario through September 30, 2020 for ACL modeling purposes.

For December 31, 2020, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment.

This scenario captures forecasted macroeconomic variables as of mid-December to ensure our ACL calculation considers the most recently available macroeconomic data in a quickly evolving environment at quarter-end.

Macroeconomic variables that we utilized from this scenario for our ACL calculation as of December 31, 2020 included but were not limited to:

(i) gross domestic product, which reflects growth of 4 % in 2021, (ii) the Dow Jones Total Stock Market Index, which grows steadily throughout the R&S forecast period, (iii) unemployment, which steadily declines and averages 6 % over the R&S forecast period and (iv) the Volatility Index, which remains stable over the R&S.

The ACL of $ 363.1 million at December 31, 2020 increased $ 167.2 million, or 85.4 %, from December 31, 2019 and reflects the Day 1 CECL adoption increase to the ACL of $ 105.3 million on January 1, 2020.

The additional increase was primarily attributed to qualitative adjustments such as economic modeling uncertainty given the COVID-related environment and loan deferral activity as prescribed in the CARES Act and by the banking regulators.

Our ending ACL coverage ratio at December 31, 2020 was 1.43 %.

Total provision for credit losses for the year ended December 31, 2020 was $ 122.8 million.

Net charge-offs were $ 59.8 million during 2020, compared to $ 28.3 million during 2019, with the increase primarily due to commercial charge-offs within portfolios and industries most impacted by COVID-19 such as retail or hospitality-related commercial real estate.

While elevated from 2019, net charge-offs of 24 basis points of average loans for 2020 remained at historically reasonable levels.

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

Based on these changes, we utilized a third-party pandemic recessionary scenario from the first quarter of 2020 through the third quarter of 2020 for ACL modeling purposes.

At December 31, 2021 and December 31, 2020, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment.

For our ACL calculation at December 31, 2021, the macroeconomic variables that we utilized included, but were not limited to:

(i) the purchase only Housing Price Index, which reflects growth of 6.3 % over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 13.0 % over our R&S forecast period, (iii) S&P Volatility, which increases 15.2 % in 2022 and 1.9 % in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels.

Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2020 included, but were not limited to:

While we have not changed our ACL modeling methodology, we continually assess our key macroeconomic variables and their correlation to our historical and expected portfolio performance.

Beginning with the third quarter of 2021, we changed certain macroeconomic variables used for ACL modeling purposes as the new variables better correlate to our historical performance over the economic cycles.

The ACL on loans and leases of $ 344.3 million at December 31, 2021 decreased $ 18.8 million, or 5.2 %, from December 31, 2020 due to the improving macroeconomic environment and positive credit quality trends.

Our ending ACL coverage ratio was 1.38 % at December 31, 2021, compared to 1.43 % at December 31, 2020.

Total provision for credit losses on loans and leases for the year ended December 31, 2021 was a net benefit of $ 4.9 million, compared to expense of $ 121.8 million for the year ended December 31, 2020.

Net charge-offs on loans and leases were $ 13.9 million during 2021, compared to $ 59.8 million during 2020, when the commercial charge-offs were elevated in those portfolios and industries most impacted by COVID-19, such as retail and hospitality-related commercial real estate.

The AULC was $ 19.1 million at December 31, 2021 and included provision expense for unfunded loan commitments and letters of credit of $ 5.5 million for the year ended December 31, 2021.

Following is a summary of changes in the ACL, by loan and lease class for 2019.

We adopted CECL on January 1, 2020.

(in millions) Balance at

16 unchanged sentences

Loans acquired in a business combination 7 ( 9 ) 2 ( 7 ) 7 7

Total allowance for credit losses $ 180 $ ( 42 ) $ 14 $ ( 28 ) $ 44 $ 196

Year Ended December 31, 2018

Commercial real estate $ 50 $ ( 7 ) $ 3 $ ( 4 ) $ 9 $ 55

Commercial and industrial 52 ( 20 ) 2 ( 18 ) 15 49

Commercial leases 5 ( 3 ) — ( 3 ) 6 8

Other 2 ( 4 ) — ( 4 ) 4 2

Total commercial loans and leases 109 ( 34 ) 5 ( 29 ) 34 114

Direct installment 21 ( 17 ) 2 ( 15 ) 8 14

Residential mortgages 16 — — — 4 20

Indirect installment 12 ( 9 ) 4 ( 5 ) 8 15

Consumer lines of credit 10 ( 3 ) — ( 3 ) 3 10

Total consumer loans 59 ( 29 ) 6 ( 23 ) 23 59

Total allowance on originated loans and leases 168 ( 63 ) 11 ( 52 ) 57 173

Loans acquired in a business combination 7 ( 7 ) 3 ( 4 ) 4 7

Total allowance for credit losses $ 175 $ ( 70 ) $ 14 $ ( 56 ) $ 61 $ 180

Following is a summary of the individual and collective ACL and corresponding loan and lease balances by class:

Allowance for Credit Losses Loans and Leases Outstanding

(in millions) Individually

Impairment Collectively

Impairment Loans and

Leases Individually

Impairment Collectively

December 31, 2019

Commercial real estate $ 2 $ 58 $ 7,114 $ 13 $ 7,101

Commercial and industrial 2 51 5,063 17 5,046

Commercial leases — 11 432 — 432

Other — 2 21 — 21

Total commercial loans and leases 4 122 12,630 30 12,600

Direct installment — 13 1,758 — 1,758

Residential mortgages — 22 2,995 — 2,995

Indirect installment — 19 1,922 — 1,922

Consumer lines of credit — 9 1,092 — 1,092

Total consumer loans — 63 7,767 — 7,767

Total $ 4 $ 185 $ 20,397 $ 30 $ 20,367

The above table excludes loans acquired in a business combination that were pooled into groups of loans for evaluating impairment.

Total allowance for credit losses on loans and leases $ 180 $ ( 42 ) $ 14 $ ( 28 ) $ 44 $ 196

LOAN SERVICING

9 unchanged sentences

Mortgage loans sold with servicing retained $ 1,762 $ 1,636 $ 1,381

Pretax gains resulting from above loan sales (1)

Pretax net gains resulting from above loan sales (1)

Mortgage servicing fees (1)

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

Following is a summary activity relating to MSRs:

Following is a summary of activity relating to MSRs:

Year Ended December 31 2021 2020 2019

8 unchanged sentences

Fair value, end of period 46.0 35.6 45.2

We had a $ 2.5 million valuation allowance for MSRs as of December 31, 2021, compared to $ 7.3 million at December 31, 2020.

The fair value of MSRs is highly sensitive to changes in assumptions and is determined by estimating the present value of the asset’s future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and with the use of independent third-party valuations.

15 unchanged sentences

Also, in this table, the effects of an adverse variation in a particular assumption on the fair value of MSRs is calculated without changing any other assumptions, while in reality, changes in one factor may result in changing another, which may magnify or contract the effect of the change.

We had a $ 7.3 million valuation allowance for MSRs as of December 31, 2020, compared to $ 1.5 million at December 31, 2019.

SBA-Guaranteed Loan Servicing

11 unchanged sentences

SBA servicing fees (1)

(1) Recorded in non-interest income.

(1) Recorded in other non-interest income on the Consolidated Statements of Income.

Following is a summary of the activity in SBA servicing rights:

4 unchanged sentences

Payoffs, curtailments and amortization ( 1 ) ( 1 ) ( 1 )

Impairment charge — — ( 1 )

Balance at end of period $ 3 $ 3 $ 3

1 unchanged sentence

Fair value, end of period 3 3 3

We had a valuation allowance for SBA servicing rights of $ 1.1 million as of December 31, 2021 and December 31, 2020.

Following is a summary of key assumptions and the sensitivity of the SBA servicing rights to changes in these assumptions.

11 unchanged sentences

20% adverse change ( 0.2 ) ( 0.1 )

We had a valuation allowance for SBA servicing rights as of December 31, 2020 of $ 1.1 million, compared to $ 1.2 million at December 31, 2019.

Other Loan Servicing

During the fourth quarter of 2020, we sold $ 0.5 billion in indirect auto loans with servicing retained.

The servicing asset totaled $ 0.7 million at December 31, 2020.

The servicing asset for $ 0.5 billion in indirect auto loans sold in 2020 with servicing retained totaled $ 0.3 million at December 31, 2021, compared to $ 0.7 million at December 31, 2020.

PREMISES AND EQUIPMENT

5 unchanged sentences

Equipment 344 311

Finance leases 12 —

Accumulated depreciation ( 299 ) ( 267 )

14 unchanged sentences

Balance at December 31, 2021 $ 2,231 $ 8 $ 23 $ 2,262

There were no changes to goodwill during 2020.

The addition of goodwill for the Insurance segment in 2019 was the result of the FNIA acquisitions of a Maryland-based insurance agency on December 17, 2018 and a North Carolina-based insurance agency on June 17, 2019.

There were no changes to goodwill during 2021 and 2020.

The following table shows a summary of core deposit intangibles and customer renewal lists:

19 unchanged sentences

We completed this test in 2021 and 2020 and determined that our intangible assets are not impaired.

OPERATING LEASES

We have operating leases primarily for certain branches, office space, land, and office equipment.

We have finance leases for certain branches.

Our operating leases expire at various dates through the year 2046 and generally include one or more options to renew.

Our finance leases expire at various dates through the year 2051 and generally include one or more options to renew.

The exercise of lease renewal options is at our sole discretion.

As of December 31, 2021, we had operating lease right-of-use assets and operating lease liabilities of $ 139.7 million and $ 148.6 million, respectively.

We have finance lease right-of-use assets and finance lease liabilities of $ 11.9 million and $ 12.0 million, respectively.

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

As of December 31, 2021, we have certain operating lease agreements, primarily for administrative office space, that have not yet commenced.

At commencement, it is expected that these leases will add approximately $ 18.2 million in right-of-use assets and other liabilities.

These operating leases are currently expected to commence in 2021 with lease terms of 16 years.

At commencement, it is expected that these leases will add approximately $ 69.2 million in right-of-use assets and $ 90.6 million in other liabilities.

These operating leases are currently expected to commence in 2023 with lease terms of up to 16 years.

These operating leases include the lease, with a related party, of the future new FNB headquarters building in Pittsburgh, Pennsylvania.

The related party operating the lease is accounted for in a manner consistent with all other leases on the basis of the legally enforceable terms and conditions of the lease and represents a VIE for which we are not the primary beneficiary.

The components of lease expense were as follows:

5 unchanged sentences

Total lease cost $ 33 $ 31 $ 32

Rental expense totaled $ 33.2 million for 2018.

Other information related to leases is as follows:

3 unchanged sentences

Operating cash flows from operating leases $ 27 $ 26

Operating cash flows from finance leases $ — $ —

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ 23 $ 20

Finance leases $ 12 $ —

Weighted average remaining lease term (years):

Operating leases 9.83 9.45

Finance leases 23.09 0

Weighted average discount rate:

Operating leases 2.4 % 2.6 %

Maturities of operating lease liabilities were as follows:

(in millions) December 31,

Finance leases 1.9 % — %

Maturities of lease liabilities were as follows:

(in millions) Operating Leases Finance Leases Total Leases

December 31, 2021

2022 $ 26 $ — $ 26

Later years 75 15 90

7 unchanged sentences

Unconsolidated VIEs

The following tables provide a summary of the assets and liabilities included in our Consolidated Financial Statements, as well as the maximum exposure to losses, associated with our interests related to VIEs for which we hold an interest, but are not the primary beneficiary, at December 31, 2020 and December 31, 2019.

The following table provides a summary of the assets and liabilities included in our Consolidated Financial Statements, as well as the maximum exposure to losses, associated with our interests related to VIEs for which we hold an interest, but are not the primary beneficiary, at December 31, 2021 and December 31, 2020.

(in millions) Total Assets Total Liabilities Maximum Exposure to Loss

30 unchanged sentences

Investments that do not meet the requirements of the proportional amortization method are recognized using the equity method.

Amortization related to investments under the proportional amortization method are recorded on a net basis as a component of the provision of income taxes on the Consolidated Statements of Income, while write-downs and losses related to investments under the equity method are included in non-interest expense.

Amortization related to investments under the proportional amortization method is recorded on a net basis as a component of the provision for income taxes on the Consolidated Statements of Income, while write-downs and losses related to investments under the equity method are included in non-interest expense.

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

14 unchanged sentences

Other tax benefits related to tax credit investments ( 2 ) ( 2 ) ( 2 )

Total provision for income taxes $ ( 3 ) $ ( 3 ) $ ( 2 )

Total impact on provision for income taxes $ ( 4 ) $ ( 3 ) $ ( 3 )

Other Investments

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

Other investments we also consider to be unconsolidated VIE’s include investments in SBIC's, Historic Tax Credit investments, and other equity method investments.

Following is a summary of deposits:

20 unchanged sentences

Federal Home Loan Bank advances 1,030 1,280

Federal funds purchased — 575

Subordinated notes 130 121

3 unchanged sentences

Securities are pledged to these customers in an amount at least equal to the outstanding balance.

We did no t have any short-term FHLB advances with overnight maturities as of December 31,

2020 or December 31, 2019.

At December 31, 2020, $ 1.3 billion, or 100.0 %, of the short-term FHLB advances were swapped to a fixed rate with maturities in 2021.

We did no t have any short-term FHLB advances with overnight maturities as of December 31, 2021 or December 31, 2020.

At December 31, 2021, $ 1.0 billion, or 100.0 %, of the short-term FHLB advances were swapped to fixed rates with maturities through 2024.

This compares to $ 1.3 billion, or 100.0 %, as of December 31, 2020.

During the second half of 2020, we terminated hedges related to $ 225.0 million of higher-rate short-term FHLB borrowings, which resulted in hedge termination costs of $ 8.9 million reported in other non-interest income on the Consolidated Statements of Income.

During 2020, we terminated hedges related to $ 225.0 million of higher-rate short-term FHLB borrowings, which resulted in hedge termination costs of $ 8.9 million reported in other non-interest income on the Consolidated Statements of Income.

The following represents weighted average interest rates on short-term borrowings:

15 unchanged sentences

Later years 215

Total $ 1,095

Federal Home Loan Bank advances

Our banking affiliate has available credit with the FHLB of $ 8.3 billion, of which $ 1.7 billion was utilized as of December 31, 2020.

Our banking affiliate has available credit with the FHLB of $ 8.6 billion, of which $ 1.0 billion was utilized and included in short-term borrowings as of December 31, 2021.

These advances are secured by loans collateralized by residential mortgages, home equity lines of credit, commercial real estate and FHLB stock and are scheduled to mature in various amounts periodically through the year 2022.

Effective interest rates paid on the long-term advances ranged from 0.30 % to 0.34 % for the year ended December 31, 2020 and 1.62 % to 2.71 % for the year ended December 31, 2019.

During the second half of 2020, we reduced higher-rate outstanding long-term FHLB borrowings by $ 490.0 million, which resulted in a loss on early debt extinguishment of $ 16.7 million reported in other non-interest income on the Consolidated Statements of Income.

Effective interest rates paid on the long-term advances held during the year ranged from 0.26 % to 0.29 % for the year ended December 31, 2021 and 0.30 % to 0.34 % for the year ended December 31, 2020.

During 2020, we reduced higher-rate outstanding long-term FHLB borrowings by $ 490.0 million, which resulted in a loss on early debt extinguishment of $ 16.7 million reported in non-interest income on the Consolidated Statements of Income.

Subordinated notes

31 unchanged sentences

Total $ 72 $ 3 $ 67

During the first half of 2019, we redeemed $ 44.0 million of TPS that we previously assumed through various acquisitions.

Other senior and subordinated debt

During the first quarter of 2020, we completed a debt offering in which we issued $ 300 million aggregate principal amount of senior notes due in 2023.

During 2020, we completed a debt offering in which we issued $ 300 million aggregate principal amount of senior notes due in 2023.

The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering costs were $ 297.9 million.

14 unchanged sentences

Total $ 558 $ 560 $ 547

(1) Assumed from YDKN and adjusted to fair value at the time of acquisition.

(1) Assumed from a prior acquisition and adjusted to fair value at the time of acquisition.

(2) After deducting underwriting discounts and commissions and offering costs.

For the debt assumed from YDKN, this is the fair value of the debt at the time of the acquisition.

During the first half of 2019, we repurchased and retired $ 9.5 million and redeemed $ 15.5 million in higher interest rate other subordinated debt assumed in the 2017 YDKN acquisition.

For the debt assumed from a prior acquisition, this is the fair value of the debt at the time of the acquisition.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

7 unchanged sentences

Derivative assets are reported in the Consolidated Balance Sheets in other assets and derivative liabilities are reported in other liabilities.

Changes in fair value are recognized in earnings except for certain changes related to derivative instruments designated as part of a cash flow hedging relationship.

Changes in fair value are recognized in earnings except for certain changes related to derivative instruments designated as part of a cash flow hedging relationship, which are recognized in other comprehensive income.

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

18 unchanged sentences

The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument.

The fair value of interest rate swaps - not designated has increased from December 31, 2019 primarily due to the significantly lower interest rate environment since year-end.

We adopted RRR on October 1, 2020, and the guidance will be followed until the Update terminates on December 31, 2022.

9 unchanged sentences

The derivative’s gain or loss, including any ineffectiveness, is initially reported as a component of OCI and subsequently reclassified into earnings in the same line item associated with the forecasted transaction when the forecasted transaction affects earnings.

Prior to 2019, any ineffective portion of the gain or loss was reported in earnings immediately.

The following table shows amounts reclassified from AOCI:

25 unchanged sentences

This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to December 31, 2021.

During the third quarter of 2020, we voluntarily terminated $ 225.0 million of interest rate contracts associated with cash flow hedge programs to take advantage of strong deposit growth and reduce higher-cost debt.

During the third quarter of 2020, we terminated $ 225.0 million of notional value of interest rate contracts - designated subject to master netting arrangements.

There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness related to these cash flow hedges.

23 unchanged sentences

We will make/receive payments under these agreements if a customer defaults on their obligation to perform under certain derivative swap contracts.

Risk participation agreements sold with notional amounts totaling $ 294.4 million as of December 31, 2020 have remaining terms ranging from one month to twenty years .

Risk participation agreements sold with notional amounts totaling $ 247.8 million as of December 31, 2021 have remaining terms ranging from seven months to nineteen years .

Under these agreements, our maximum exposure assuming a customer defaults on their obligation to perform under certain derivative swap contracts with third parties would be $ 0.2 million and $ 0.6 million at December 31, 2021 and 2020, respectively.

17 unchanged sentences

Consolidated Balance Sheets

(in millions) Net Amount

(in millions) Amount

the Consolidated Balance

6 unchanged sentences

Designated $ 1 $ — $ 1 $ —

Not designated 2 — 2 —

Total $ 3 $ — $ 3 $ —

25 unchanged sentences

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Based on management’s credit evaluation of the customer,

collateral may be deemed necessary.

Based on management’s credit evaluation of the customer, collateral may be deemed necessary.

Collateral requirements vary and may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

1 unchanged sentence

The credit risk involved in issuing letters of credit is actively monitored through review of the historical performance of our portfolios.

Our AULC for commitments that are not unconditionally cancellable, which is included in other liabilities on the Consolidated Balance Sheets was $ 13.7 million at December 31, 2020.

Our AULC for commitments that are not unconditionally cancellable, which is included in other liabilities on the Consolidated Balance Sheets was $ 19.2 million and $ 13.7 million at December 31, 2021 and 2020, respectively.

Additional information relating to the AULC is provided in Note 6, "Allowance for Credit Losses on Loans and Leases" in the Notes to Consolidated Financial Statements.

In addition to the above commitments, subordinated notes issued by FNB Financial Services, LP, a wholly-owned finance subsidiary, are fully and unconditionally guaranteed by FNB.

4 unchanged sentences

Such threatened claims, litigation, investigations, regulatory and administrative proceedings typically entail matters that are considered incidental to the normal conduct of business.

Claims for significant monetary damages may be asserted in many of these types of legal actions, while claims for disgorgement, restitution, penalties and/or other remedial actions or sanctions may be sought in regulatory matters.

Claims for significant monetary damages may be asserted in many of these types of legal actions, while claims for disgorgement, reimbursement, restitution, penalties and/or other remedial actions or sanctions may be sought in regulatory matters.

In these instances, if we determine that we have meritorious defenses, we will engage in an aggressive defense.

1 unchanged sentence

It is inherently difficult to predict the eventual outcomes of such matters given their complexity and the particular facts and circumstances at issue in each of these matters.

However, on the basis of current knowledge and understanding, and advice of counsel, we do not believe that judgments, sanctions, settlements or orders, if any, that may arise from these matters (either individually or in the aggregate, after giving effect to applicable reserves and insurance coverage) will have a material adverse effect on our financial position or liquidity, although they could have a material effect on net income in a given period.

In view of the inherent unpredictability of outcomes in litigation and governmental and regulatory matters, particularly where (i) the damages sought are indeterminate, (ii) the proceedings are in the early stages, or (iii) the matters involve novel legal theories or a large number of parties, as a matter of course, there is considerable uncertainty surrounding the timing or ultimate resolution of litigation and governmental and regulatory matters, including a possible eventual loss, fine, penalty, business or adverse reputational impact, if any, associated with each such matter.

However, on the basis of current knowledge and understanding, and advice of counsel, we do not believe that judgments, sanctions, settlement resolutions, regulatory actions, investigations, settlements or orders, if any, that have or may arise from these matters (either individually or in the aggregate, after giving effect to applicable reserves and insurance coverage) will have a material adverse effect on our financial position or liquidity, although they could potentially have a material effect on net income in a given period.

business or adverse reputational impact, if any, associated with each such matter.

In accordance with applicable accounting guidance, we establish accruals for litigation and governmental and regulatory matters when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable.

11 unchanged sentences

We issued 1,113,314 and 2,004,895 restricted stock units during 2021 and 2020, respectively, including 325,284 and 571,932 performance-based restricted stock units during those same periods, respectively.

As of December 31, 2020, we had available up to 5,504,721 shares of common stock to issue under this Plan, which includes 4,640,000 additional shares registered during the third quarter of 2020.

As of December 31, 2021, we had available up to 4,125,588 shares of common stock to issue under this Plan.

The unvested restricted stock unit awards are eligible to receive cash dividends or dividend equivalents which are ultimately used to purchase additional shares of stock and are subject to forfeiture if the requisite service period is not completed or the specified performance criteria are not met.

9 unchanged sentences

Vested ( 1,320,646 ) 12.07 ( 613,581 ) 14.41 ( 655,208 ) 13.15

Forfeited/expired ( 203,058 ) 12.54 ( 332,814 ) 12.72 ( 214,743 ) 13.39

Forfeited/expired/canceled ( 143,238 ) 10.65 ( 203,058 ) 12.54 ( 332,814 ) 12.72

Dividend reinvestment 181,266 12.17 228,212 8.14 108,008 11.84

7 unchanged sentences

As of December 31, 2021, there was $ 9.0 million of unrecognized compensation cost related to unvested restricted stock units including $ 0.7 million that is subject to accelerated vesting under the Plan’s immediate vesting upon retirement.

Stock-based compensation expense increased $ 5.0 million, or 44 %, compared to 2019 as we made a change to long-term stock-based compensation retirement vesting that resulted in accelerated grant date expense recognition for certain 2020 awards, with full expense recognition on grant date instead of recognizing the same expense amount over a 36 -month vesting period.

These awards are not released until the three -year service period is complete or the specified performance criteria is met over the three -year period.

The components of the restricted stock units as of December 31, 2021 are as follows:

33 unchanged sentences

The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the option exercise price.

As of December 31, 2020, there were no longer any outstanding warrants.

The warrants that were previously issued have been exercised or expired in 2018 and 2019.

RETIREMENT PLANS

1 unchanged sentence

The RIP covered employees who satisfied minimum age and length of service requirements.

Although not required, during 2020, we made a $ 5.0 million contribution to the RIP.

We also sponsor two supplemental non-qualified retirement plans that have been frozen.

3 unchanged sentences

When a participant retires, the benefit under the BRP is a monthly benefit equal to the participant's aggregate target benefit percentage multiplied by the participant’s highest average monthly cash compensation, including bonuses, during five consecutive calendar years within the last ten calendar years of employment before 2009.

This monthly benefit is reduced by

the monthly benefit the participant receives from the Social Security Administration, the RIP, the ERISA Excess Retirement Plan and the annuity equivalent of the automatic contributions paid to participants under the qualified 401(k) defined contribution plan and the ERISA Excess Lost Match Plan.

This monthly benefit is reduced by the monthly benefit the participant receives from the Social Security Administration, the RIP, the ERISA Excess Retirement Plan and the annuity equivalent of the automatic contributions paid to participants under the qualified 401(k) defined contribution plan and the ERISA Excess Lost Match Plan.

The following tables provide information relating to the accumulated benefit obligation, change in benefit obligation, change in plan assets, the plans’ funded status and the amount included in the Consolidated Balance Sheets for the qualified and non-qualified plans described above (collectively, the Plans):

28 unchanged sentences

Actuarial loss amortization 3 3 2

Total pension income ( 4 ) ( 2 ) ( 3 )

Other changes in plan assets and benefit obligations recognized in other comprehensive income:

Current year actuarial loss 10 1 6

Total pension cost ( 5 ) ( 4 ) ( 2 )

Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:

Current year actuarial (gain) loss ( 18 ) 10 1

Amortization of actuarial loss ( 3 ) ( 3 ) ( 2 )

Total amount recognized in other comprehensive income 7 ( 1 ) 4

Total amount recognized in net periodic benefit cost and other comprehensive income $ 3 $ ( 3 ) $ 1

Total amount recognized in other comprehensive (loss) income ( 21 ) 7 ( 1 )

Total amount recognized in net periodic benefit cost (gain) and other comprehensive (loss) income $ ( 26 ) $ 3 $ ( 3 )

The plans have an actuarial measurement date of December 31.

7 unchanged sentences

The change in plan assets reflects benefits paid from the qualified pension plans of $ 9.9 million and $ 10.0 million for 2021 and 2020, respectively.

We made contributions to the RIP of $ 5.0 million, $ 5.0 million and $ 4.0 million during 2020, 2019 and 2018, respectively .

We made contributions to the RIP of $ 5.0 million during both 2020 and 2019.

We did no t make a contribution to the RIP in 2021.

For the non-qualified pension plans, the change in plan assets reflects benefits paid from and contributions made to the plans in the same amount.

10 unchanged sentences

Under this plan, we match 100 % of the first 6 % that the employee defers.

During the second quarter of 2018, we made a one-time discretionary contribution of $ 0.9 million to the vast majority of our employees following the tax reform that was enacted in December 2017.

Additionally, we may provide a performance-based company contribution of up to 3 % if we exceed annual financial goals.

29 unchanged sentences

Other large-cap U.S.

companies 67 — — 67

Other equity 1 — — 1

1 unchanged sentence

equity index funds:

large-cap equity index funds

small-cap equity index funds 5 — — 5

2 unchanged sentences

equity funds:

mid-cap 14 — — 14

small-cap 5 — — 5

Other 5 — — 5

1 unchanged sentence

government agencies — 44 — 44

Corporate bonds — — — —

Fixed income mutual funds:

9 unchanged sentences

Other large-cap U.S.

companies 60 — — 60

Other equity 1 — — 1

1 unchanged sentence

equity index funds:

large-cap equity index funds

small-cap equity index funds 5 — — 5

2 unchanged sentences

equity funds:

mid-cap 13 — — 13

small-cap 5 — — 5

Other 5 — — 5

1 unchanged sentence

government agencies — 45 — 45

Corporate bonds — 1 — 1

Fixed income mutual funds:

23 unchanged sentences

Affordable housing cost amortization, net of tax benefits 2.2 2.5 1.4

Tax Cuts and Jobs Act revaluation of net deferred tax assets — — ( 0.4 )

Other items 0.7 1.5 1.1

1 unchanged sentence

The effective tax rates in 2021, 2020 and 2019, respectively, were lower than the 21 % statutory federal tax rate primarily due to the tax benefits resulting from renewable energy investment and historic tax credits, tax-exempt income on investments and loans and income from BOLI.

For the years ended December 31, 2020, 2019 and 2018, we recognized net investment tax credits of $ 8.3 million, $ 7.9 million and $ 6.5 million, respectively, using the flow-through method of accounting for income tax credits.

For the years ended December 31, 2021, 2020 and 2019, we recognized net investment tax credits, under IRC section 48, of $ 0.0 million , $ 8.3 million and $ 7.9 million, respectively, using the flow-through method of accounting for income tax credits.

Deferred Income Taxes

21 unchanged sentences

Amortizable intangibles ( 11 ) ( 13 )

Pension and other defined benefit plans ( 4 ) —

Lease financing ( 33 ) ( 32 )

16 unchanged sentences

As of December 31, 2021, $ 2.5 million of these tax benefits would affect the effective tax rate if recognized.

potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

To the extent interest is not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

2 unchanged sentences

We are no longer subject to U.S.

federal income tax examinations for years prior to 2017.

With limited exception, we are no longer subject to state income tax examinations for years prior to 2017.

federal income tax examinations for years prior to 2018, with the exception of an outstanding refund request on an amended 2017 federal tax return filing.

We are no longer subject to state income tax examinations for years prior to 2018, with the exception of an outstanding refund request on an amended 2017 state tax return filing.

We anticipate that a reduction in the unrecognized tax benefit of up to $ 0.1 million may occur in the next twelve months from the expiration of statutes of limitations which would result in a reduction in income taxes.

3 unchanged sentences

Debt Securities

for Sale Unrealized Net

Gains (Losses) on

for Sale Unrealized

Net Gains (Losses) on

Instruments Unrecognized

8 unchanged sentences

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

However, due to the voluntary termination of a few cash flow hedges in 2020, a portion of the amount reclassified from AOCI is included in non-interest income on the Consolidated Statements of Income.

The tax (benefit) expense amounts reclassified from AOCI in connection with the debt securities AFS and derivative instruments reclassifications are included in income taxes on the Consolidated Statements of Income.

53 unchanged sentences

Corporation and the prompt corrective action framework for FNBPA.

Due to usable vault cash, FNBPA was not required to maintain aggregate cash reserves with the FRB at December 31, 2020.

Although, we do maintain deposits for various services such as check clearing.

The FRB eliminated the reserve requirement for thousands of depository institutions, although FNBPA still maintains deposits with the FRB for various services such as check clearing.

Certain limitations exist under applicable law and regulations by regulatory agencies regarding dividend distributions to a parent by our subsidiaries.

13 unchanged sentences

Loans transferred to portfolio from held for sale — — 110

We did no t have any restricted cash as of December 31, 2021, 2020 or 2019.

BUSINESS SEGMENTS

5 unchanged sentences

• The Wealth Management segment provides a broad range of personal and corporate fiduciary services including the administration of decedent and trust estates.

In addition, it offers various alternative products, including securities brokerage and investment advisory services, mutual funds and annuities.

In addition, it offers various alternative products, including securities brokerage (under a third-party arrangement) and investment advisory services, mutual funds and annuities.

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

The Insurance segment also includes a reinsurer.

We also previously operated a Consumer Finance segment, which is no longer a reportable segment.

This segment primarily made installment loans to individuals and purchased installment sales finance contracts from retail merchants.

On August 31, 2018, as part of our strategy to enhance the overall positioning of our consumer banking operations, we sold 100 percent of the issued and outstanding capital stock of Regency to Mariner Finance, LLC.

This transaction was completed to accomplish several strategic objectives, including enhancing the credit risk profile of the consumer loan portfolio, offering additional liquidity and selling a non-strategic business segment that no longer fits with our core business.

Regency's financial information is included in the Consumer Finance segment in the 2018 table that follows.

The following tables provide financial information for these segments of FNB.

30 unchanged sentences

Total intangibles 2,279 9 28 — 2,316

(in millions) Community

Banking Wealth

ment Insurance Consumer

Finance Parent

Other Consolidated

At or for the Year Ended December 31, 2019

40 unchanged sentences

We use prices from independent pricing services and, to a lesser extent, indicative (non-binding) quotes from independent brokers, to measure the fair value of AFS securities.

We validate prices received from pricing services or brokers using a variety of methods, including, but not limited to, comparison to secondary pricing services, corroboration of pricing by reference to other independent market data such as secondary broker quotes and relevant benchmark indices, and review of pricing information by corporate personnel familiar with market liquidity and other market-related conditions.

We validate prices received from pricing services or brokers using a variety of methods, including, but not limited to, comparison to secondary pricing services, corroboration of pricing by

reference to other independent market data such as secondary broker quotes and relevant benchmark indices, and review of pricing information by corporate personnel familiar with market liquidity and other market-related conditions.

Derivative Financial Instruments

6 unchanged sentences

However, as of December 31, 2021 and 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our non-IRLC derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we have determined that our derivative

valuations in their entirety are classified in Level 2 of the fair value hierarchy.

As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The fair value of IRLCs is based upon the estimated fair value of the underlying mortgage loan, including the expected cash flows related to MSRs and the estimated percentage of IRLCs that will result in a closed mortgage loan, and is classified as Level 3.

16 unchanged sentences

Other Real Estate Owned

OREO is comprised principally of commercial and residential real estate properties obtained in partial or total satisfaction of loan obligations.

OREO is comprised principally of commercial and residential real estate properties obtained in partial or total satisfaction of loan obligations and these properties are subject to federal regulatory holding period requirements.

OREO acquired in settlement of indebtedness is recorded at fair value less costs to sell.

Subsequently, these assets are carried at the lower of carrying value or fair value less costs to sell.

Subsequently, these assets are carried at the lower of

carrying value or fair value less costs to sell.

Accordingly, it may be necessary to record non-recurring fair value adjustments.

42 unchanged sentences

Debt securities available for sale

Treasury $ 600 $ — $ — $ 600

government agencies — 172 — 172

47 unchanged sentences

Collateral dependent loans $ — $ — $ 20 $ 20

Other real estate owned — — 3 3

Other assets - SBA servicing asset — — 3 3

Other assets - MSRs — — 10 10

December 31, 2019

Impaired loans $ — $ — $ 5 $ 5

Other real estate owned — — 4 4

Other assets - SBA servicing asset — — 3 3

Other real estate owned — — 2 2

December 31, 2020

Collateral dependent loans $ — $ — $ 45 $ 45

Other assets - MSRs — — 36 36

The fair value amounts for collateral dependent loans and OREO in the table above were estimated at a date during the twelve months ended December 31, 2020 and 2019.

Other assets - SBA servicing asset — — 3 3

Other real estate owned — — 3 3

The fair value amounts for collateral dependent loans and OREO in the table above were estimated at a date during the twelve months ended December 31, 2021 and 2020, respectively.

Consequently, the fair value information presented is not necessarily as of the period’s end.

MSRs measured at fair value on a non-recurring basis of $ 42.9 million had a valuation allowance of $ 7.3 million, bringing the December 31, 2020 carrying value to $ 35.6 million.

The valuation allowance includes a provision expense included in 2020 earnings of $ 5.8 million.

SBA servicing assets measured at fair value on a non-recurring basis of $ 4.0 million

had a valuation allowance of $ 1.1 million, bringing the December 31, 2020 carrying value to $ 2.9 million.

The valuation allowance includes provision income included in 2020 earnings of $ 0.1 million.

Collateral dependent loans measured or re-measured at fair value on a non-recurring basis during 2021 had a carrying amount of $ 19.6 million which includes an allocated ACL of $ 10.0 million.

The ACL includes a provision applicable to the current period fair value measurements of $ 36.0 million, which was included in provision for credit losses for 2020.

OREO measured at fair value on a non-recurring basis during 2020 had a carrying amount of $ 4.4 million and was written down to $ 2.8 million, resulting in a loss of $ 1.6 million, which was included in earnings for 2020.

The ACL includes a provision

applicable to the current period fair value measurements of $ 0.5 million, which was included in provision for credit losses for 2021.

MSRs measured at fair value on a non-recurring basis had a carrying value of $ 10.3 million, which included a valuation allowance of $ 2.5 million, as of December 31, 2021.

The valuation allowance includes a recovery of $ 4.8 million included in earnings for 2021.

SBA servicing assets measured at fair value on a non-recurring basis had a carrying value of $ 3.2 million, which included a valuation allowance of $ 1.1 million as of December 31, 2021.

The valuation allowance includes a recovery of $ 0.1 million included in earnings for 2021.

OREO measured at fair value on a non-recurring basis during 2021 had a carrying amount of $ 1.5 million which included a valuation allowance of $ 0.5 million, as of December 31, 2021.

The valuation allowance includes a loss of $ 0.5 million, which was included in earnings for 2021.

Fair Value of Financial Instruments

28 unchanged sentences

Management believes that fair value estimates may not be comparable to other financial institutions due to the wide range of permitted valuation techniques and numerous estimates which must be made.

Further, because the disclosed fair value amounts were estimated as of the Balance Sheet date, the amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

Further, because the disclosed fair value amounts were estimated as of the Balance Sheet date, the

amounts actually realized or paid upon maturity or settlement of the various financial instruments could be significantly different.

The fair values of our financial instruments are as follows:

59 unchanged sentences

Interest income 13 6 —

Other income — — 5

Total Income 233 310 181

18 unchanged sentences

Investing Activities

Proceeds from sale of securities available for sale — — 1

Net decrease in advances to subsidiaries — — 20

Net increase in advances to subsidiaries ( 78 ) — —

Payment for further investment in subsidiaries ( 12 ) ( 270 ) ( 47 )

Net cash received in business combinations — — 123

Net cash flows (used in) provided by investing activities ( 270 ) ( 47 ) 122

Net cash flows used in investing activities ( 90 ) ( 270 ) ( 47 )

Financing Activities

Net decrease in advance from affiliate — — ( 19 )

Net decrease in short-term borrowings — — ( 1 )

Decrease in long-term debt ( 2 ) ( 4 ) ( 77 )

10 unchanged sentences

Interest $ 25 $ 26 $ 20

QUARTERLY EARNINGS SUMMARY (UNAUDITED)

(Dollars in millions, except per share data)

Quarter Ended 2020

30 June 30 Mar.

Total interest income $ 270 $ 273 $ 281 $ 306

Total interest expense 36 46 52 74

Net interest income 234 227 229 232

Provision for credit losses 18 27 30 48

Total non-interest income 68 80 77 69

Total non-interest expense 199 180 176 195

Net income 72 83 84 47

Net income available to common stockholders 70 81 82 45

Per Common Share

Basic earnings per share $ 0.22 $ 0.25 $ 0.25 $ 0.14

Diluted earnings per share 0.22 0.25 0.25 0.14

Quarter Ended 2019

Total interest income $ 306 $ 314 $ 317 $ 310

Total interest expense 80 84 87 79

Net interest income 226 230 230 231

Provision for credit losses 7 12 11 14

Other non-interest income 74 80 75 65

Total non-interest expense 177 178 175 166

Net income 95 103 95 94

Net income available to common stockholders 93 101 93 92

Per Common Share

Basic earnings per share $ 0.29 $ 0.31 $ 0.29 $ 0.28

Diluted earnings per share 0.29 0.31 0.29 0.28

MERGERS AND ACQUISITIONS

Howard Bancorp, Inc.

On January 22, 2022, we completed our acquisition of Howard, a bank holding company headquartered in Baltimore City, Maryland.

The acquisition enhances our presence in the Mid-Atlantic Region.

Additionally, cost savings, efficiencies and other benefits are expected from the combined operations.

On the acquisition date, Howard had assets with a net book value of approximately $ 2.4 billion, including $ 1.8 billion in loans, and deposits with a net book value of approximately $ 1.8 billion.

The acquisition was valued at approximately $ 443 million and resulted in the issuance of 34,074,495 shares of our common stock in exchange for 18,930,329 shares of Howard common stock.

We also acquired restricted stock units and the fully vested

outstanding stock options of Howard.

The merger will be accounted for in accordance with the acquisition method of accounting.

Preliminary fair values for all assets and liabilities are not reported herein as we are undertaking a comprehensive review and determination of the fair values of the assets and liabilities of Howard to ensure that they conform to the measurement and reporting guidance set forth for the accounting for business combinations.

Determining the fair value of assets and liabilities, especially in the loan portfolio, is a complex process involving significant judgment regarding estimates and assumptions used to calculate fair values.

Accordingly, the initial accounting for the merger is not complete.

Goodwill related to the transaction is expected to be recorded in the Community Banking business segment and will not be deductible for income tax purposes as the acquisition is accounted for as a tax-free exchange for tax purposes.

We incurred merger expenses of $ 1.8 million related to the Howard acquisition for the year ended December 31, 2021.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data