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and global financial markets;
−Removed: (ii) actions by the FRB, FDIC, CFPB, UST, OCC and other governmental agencies, especially those that impact money supply, market interest rates or otherwise affect business activities of the financial services industry;
+Added: (ii) supervision, regulation, enforcement and other actions by several governmental agencies, including the FRB, FDIC, FSOC, DOJ, CFPB, UST, OCC and HUD, state attorney generals and other governmental agencies whose actions may affect, among other things, our consumer and mortgage lending and deposit practices, capital structure, investment practices, dividend policy, annual FDIC insurance premium assessment and growth, money supply, market interest rates or otherwise affect business activities of the financial services industry;
(iii) a slowing of the U.S.
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• Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues.
−Removed: Our ability to anticipate, react quickly and continue to respond to technological changes and potential additional COVID-19 challenges can also impact our ability to respond to customer needs and meet competitive demands.
−Removed: • Business and operating results can also be affected by widespread natural and other disasters, pandemics and post-pandemic return to normalcy, global events, including the Ukraine-Russia conflict, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks or international hostilities through impacts on the economy and financial markets generally, or on us or our counterparties specifically.
+Added: Our ability to anticipate, react quickly and continue to respond to technological changes and significant adverse industry and economic events can also impact our ability to respond to customer needs and meet competitive demands.
+Added: • Business and operating results can also be affected by difficult to predict uncertainties, such as widespread natural and other disasters, wars, pandemics, including post-pandemic return to normalcy, global events and geopolitical instability, including the Ukraine-Russia conflict, and the emerging military conflict in Israel and Gaza, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks, international hostilities or other extraordinary events which are beyond our control and may significantly impact the U.S.
+Added: or global economy and financial markets generally, or us or our counterparties, customers or third-party vendors specifically.
• Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation.
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◦ Policies and priorities of the current U.S.
−Removed: presidential administration, including legislative and regulatory reforms, different approaches to supervisory or enforcement priorities, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes, employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.
+Added: presidential administration, including legislative and regulatory reforms, more aggressive approaches to supervisory or enforcement priorities with consumer and antidiscrimination lending laws by the federal banking regulatory agencies and the DOJ, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes,
+Added: employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.
+Added: ◦ Ability to continue to attract, develop and retain key talent.
◦ Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards.
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◦ Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries.
−Removed: These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to FNB.
+Added: These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, including financial and other types of commitments, and in additional expenses and collateral costs, and may cause reputational harm to FNB.
◦ Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies.
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◦ A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns.
−Removed: • The COVID-19 pandemic and the federal, state, and local regulatory and governmental actions implemented in response to COVID-19 have resulted in increased volatility of the financial markets and national and local economic conditions, supply chain challenges, rising inflationary pressures, increased levels of unemployment and business failures, and the potential to have a material impact on, among other things, our business, financial condition, results of operations, liquidity, or on our management, employees, customers and critical vendors and suppliers.
−Removed: In view of the many unknowns associated with the COVID-19 pandemic, our forward-looking statements continue to be subject to various conditions that may be substantially different in the future than what we are currently experiencing or expecting, including, but not limited to, challenging headwinds for the U.S.
−Removed: economy and labor market and the possible change in commercial and consumer customer fundamentals, expectations and sentiments.
−Removed: As a result of the COVID-19 impact, including uncertainty regarding the potential impact of continuing variant mutations of the virus, U.S.
−Removed: government responsive measures to manage it or provide financial relief, the uncertainty regarding its duration and the success of vaccination efforts, it is possible the pandemic may have a material adverse impact on our business, operations and financial performance.
−Removed: The risks identified here are not exclusive or the types of risks we may confront and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A.
+Added: ◦ Increased funding costs and market volatility due to market illiquidity and competition for funding.
+Added: We caution that the risks identified here are not exhaustive of the types of risks that may adversely impact us and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A.
Risk Factors and the Risk Management sections in this Annual Report on Form 10-K (including the MD&A section), our subsequent 2024 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other subsequent filings with the SEC, which are available on our corporate website at https://www.fnb-online.com/about-us/investor-information/reports-and-filings or the SEC's website at www.sec.gov.
−Removed: More specifically, our forward-looking statements may be subject to the evolving risks and uncertainties related to the COVID-19 pandemic and its macro-economic impact and the resulting governmental, business and societal responses to it.
We have included our web address as an inactive textual reference only.
−Removed: Information on our website is not part of this Report.
+Added: Information on our website is not part of our SEC filings.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
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These policies, along with the disclosures presented in the Notes to Consolidated Financial Statements, provide information on how we value significant assets and liabilities in the Consolidated Financial Statements, how we determine those values and how we record transactions in the Consolidated Financial Statements.
−Removed: Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the
−Removed: Consolidated Financial Statements.
−Removed: Management currently views the determination of the ACL, fair value of financial instruments, goodwill and other intangible assets, income taxes and DTAs and litigation reserves to be critical accounting policies.
+Added: Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the Consolidated Financial Statements.
+Added: Management currently views the determination of the ACL, fair value of financial instruments, goodwill and other intangible assets, and income taxes and DTAs to be critical accounting policies.
Allowance for Credit Losses
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and the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period.
−Removed: Adjustments to historical loss information, where applicable, are made for differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments;
+Added: Adjustments are made to the calculation of expected losses to address differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments;
and events such as natural disasters and other relevant factors.
−Removed: Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast.
+Added: Such factors are used to adjust the quantitative output based on historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast.
To the extent the lives of the loans in the portfolio extend beyond the period for which a R&S forecast can be made, the model reverts over 12 months on a straight-line basis back to the historical rates of default and severity of loss over the remaining life of the loans.
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Fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date.
−Removed: We use significant and complex estimates, assumptions and judgments when assets and liabilities are required to be recorded at or adjusted to fair value.
+Added: We use significant and complex estimates, assumptions and judgments when certain assets and liabilities are required to be recorded at or adjusted to fair value.
Where available, fair value and information used to record valuation adjustments for certain assets or liabilities is based on either quoted market prices or are provided by independent third-party sources, including appraisers and valuation specialists.
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The value of goodwill and other identifiable intangibles is dependent upon our ability to provide high quality, cost-effective services in the face of competition.
−Removed: As such, these values are supported ultimately by revenue that is driven by the volume of business transacted.
+Added: As such, these values are supported ultimately by revenue that is driven by the volume of
+Added: business transacted.
A decline in earnings as a result of a lack of growth or our inability to deliver cost-effective services over sustained periods can lead to impairment in value, which could result in additional expense and adversely impact earnings in future periods.
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In the event of a prolonged economic downturn or deterioration in the economic outlook, interim quantitative assessments of our goodwill balance could be required in future periods.
−Removed: Any impairment charge would not affect our capital ratios, tangible common equity, tangible book value per share or liquidity position.
+Added: Any impairment charge would not directly affect our capital ratios, tangible common equity, tangible book value per share or liquidity position.
See Note 1, “Summary of Significant Accounting Policies” and Note 10, “Goodwill and Other Intangible Assets” in the Notes to Consolidated Financial Statements for further discussion of accounting for goodwill and other intangible assets.
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See Note 1, “Summary of Significant Accounting Policies” and Note 20, “Income Taxes” in the Notes to Consolidated Financial Statements for further discussion of accounting for income taxes.
−Removed: Litigation Reserves
−Removed: The Corporation is involved in various pending and threatened legal proceedings in which claims for monetary damages and other relief are asserted.
−Removed: These claims result from ordinary business activities relating to our current and/or former operations.
−Removed: Although the ultimate outcome for any asserted claim cannot be predicted with certainty, we believe that the Corporation has valid defenses for all asserted claims.
−Removed: In accordance with applicable accounting guidance, when a loss is considered probable and reasonably estimable, we, in conjunction with internal and outside counsel handling the matter, record a liability in the amount of our best estimate for the ultimate loss.
−Removed: We continue to monitor the matter for further developments that could affect the amount of the accrued liability that has previously been established.
−Removed: Litigation expense represents a key area of judgment and is subject to uncertainty and factors outside of our control.
−Removed: Significant judgment is required in making these estimates and our financial liabilities may ultimately be more or less than the current estimate.
−Removed: See our policy on establishing accruals for litigation in Note 17, "Commitments, Credit Risk and Contingencies" in the Notes to Consolidated Financial Statements.
Recent Accounting Pronouncements and Developments
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USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS
−Removed: To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers.
+Added: To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, net loan charge-offs, excluding an isolated commercial loan charge-off due to alleged fraud to total average loans and leases, operating non-interest income, operating non-interest expense, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers.
Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities.
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Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”.
−Removed: Management believes items such as merger expenses, initial provision for non-PCD loans acquired, branch consolidation costs, loss on early debt extinguishment, COVID-19 expenses and gains on sale of Visa class B shares are not organic to run our operations and facilities.
+Added: Management believes items such as merger expenses, FDIC special assessment, realized loss on securities restructuring, valuation allowance on auto loans held-for-sale, initial provision for non-PCD loans acquired and branch consolidation costs are not organic to run our operations and facilities.
These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities.
−Removed: The merger expenses and branch consolidation costs principally represent expenses to satisfy contractual obligations of the acquired entity or closed branch without any useful ongoing benefit to us.
These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.
−Removed: Similarly, gains derived from the sale of Visa class B stock and losses on FHLB debt extinguishment and related hedge terminations are not organic to our operations.
−Removed: The COVID-19 expenses represent special Company initiatives to support our employees and the communities we serve during an unprecedented time of a pandemic.
To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP).
−Removed: Taxable-equivalent amounts for the 2022, 2021 and 2020 periods were calculated using a federal statutory income tax rate of 21%.
+Added: Taxable-equivalent amounts for 2023, 2022 and 2021 were calculated using a federal statutory income tax rate of 21%.
FNB, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in seven states and the District of Columbia.
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Comparatively, full-year 2022 net income available to common stockholders totaled $431.1 million, or $1.22 per diluted common share.
−Removed: On an operating basis, full-year 2022 earnings per diluted common share (non-GAAP) was $1.40, excluding $80.8 million of significant items.
−Removed: Operating earnings per diluted common share (non-GAAP) for the full year of 2021 was $1.24, excluding $4.4 million of significant items.
−Removed: During 2022, we grew loans by $5.3 billion bringing total assets to nearly $44 billion through a strategic combination of footprint-wide organic growth and two value-adding acquisitions.
−Removed: Our full-year operating earnings per diluted common share (non-GAAP) of $1.40 was the highest level in recent company history, led by record revenue of $1.4 billion.
−Removed: As a result of our strong profitability and focus on shareholder value creation, we returned over $220 million to shareholders through common dividends and our active share repurchase program.
−Removed: The steadfast focus on our disciplined credit culture was evidenced by total delinquencies ending the year at 71 basis points, net charge-offs of 6 basis points for the full year, and a reserve coverage ratio of 1.33% at year end.
−Removed: The strength of our balance sheet coupled with the momentum produced by our consistent performance puts us in an advantageous position as we continue to navigate changing economic conditions.
−Removed: In January 2022, we acquired Howard, located in Baltimore City, Maryland, including its wholly-owned bank subsidiary, Howard Bank, adding loans and deposits of $1.8 billion for both measures to the balance sheet.
−Removed: In December 2022, we acquired Union, located in Greenville, North Carolina, including its wholly-owned bank subsidiary, Union Bank, adding loans and deposits with estimated fair values of $651 million and $956 million, respectively.
+Added: On an operating basis, full-year 2023 earnings per diluted common share (non-GAAP) was $1.57, excluding $116.2 million (pre-tax) of significant items impacting earnings.
+Added: Operating earnings per diluted common share (non-GAAP) for the full year of 2022 was $1.40, excluding $80.8 million (pre-tax) of significant items impacting earnings.
+Added: The beginning of 2023 started with the banking industry disruption caused by the Silicon Valley Bank and Signature Bank failures.
+Added: We were well-positioned to meet the needs of our customers and communities through those challenges given our strategic focus to maintain a diversified and granular deposit base, conservative and prudent balance sheet management for the long-term, and sound risk management policies and governance as we achieved full year operating earnings per diluted common share (non-GAAP) totaling a record $1.57, record revenue of $1.6 billion and tangible book value per common share (non-GAAP) growth of $1.20, or 14.5%, year-over-year, to an all-time high of $9.47.
+Added: Total average deposits grew $568.3 million, or 1.7%, and we ended the year with approximately 78% of total deposits insured by the FDIC or collateralized.
+Added: As part of our strategy to optimize the balance sheet and improve future earnings, in the fourth quarter of 2023, we completed the sale of $648.7 million of AFS investment securities and transferred $355 million of indirect auto loans to held-for-sale as part of our ongoing proactive balance sheet management strategy.
+Added: The sale of AFS investment securities resulted in a realized loss (pre-tax) of $67.4 million.
+Added: We reinvested proceeds from the sale of those investment securities with an average yield of 1.08% into investment securities with yields approximately 350 basis points higher with a similar duration and convexity profile.
+Added: The transfer of the indirect auto loans to held-for-sale resulted in a negative valuation allowance impact of $16.7 million (pre-tax) recognized in other non-interest expense due primarily to changes in interest rates from time of origination.
+Added: The sale of these loans closed in February 2024 with the proceeds used to repay borrowings that have a similar yield to the sold loans.
+Added: The transfer to held-for-sale benefited the loan-to-deposit ratio by approximately 100 basis points.
+Added: The cumulative impact of these balance sheet actions has a tangible book value earn back period of less than one year, versus an earn-back period of five years for a stock buyback, an alternative use of capital, and significantly higher earnings accretion from the repositioned investment securities yields.
+Added: We also announced the February 2024 redemption of all $110 million of Series E preferred stock.
Income Statement Highlights (2023 compared to 2022)
• Record total revenue of $1.6 billion, an increase of $127.5 million, or 8.8%, led to net income available to common stockholders of $476.8 million, an increase of $45.7 million, or 10.6%, and operating net income available to common stockholders (non-GAAP) of $568.6 million, an increase of $73.7 million, or 14.9%.
−Removed: • Earnings per diluted common share was $1.22, compared to $1.23, a decrease of 0.8%, as average diluted common shares outstanding increased 30.6 million shares, primarily due to the Howard and Union acquisitions.
+Added: • Earnings per diluted common share was $1.31, compared to $1.22, an increase of 7.4%.
• Operating earnings per diluted common share (non-GAAP) was $1.57, compared to $1.40, an increase of 12.1%.
−Removed: • Net interest income was $1.1 billion, compared to $906.5 million, up 23.5%, as the higher interest rate environment benefited earning asset yields given the asset sensitive positioning of the balance sheet and higher yields on new loan originations and investment securities purchases.
+Added: • Net interest income was $1.3 billion, compared to $1.1 billion, up 17.6%, primarily due to the benefit of growth in earning assets, the impact from the higher interest rate environment and deposit growth accompanied by prudent management of deposit betas.
• Net interest margin (FTE) (non-GAAP) increased 32 basis points to 3.35% from 3.03%.
The FOMC raised the target federal funds rate by a total of 100 basis points in 2023.
−Removed: The yield on earning assets (non-GAAP) increased 50 basis points to 3.47%, reflecting variable-rate loans that repriced upwards in 2022, as well as higher yields on new loan originations, investment securities and excess cash balances, partially offset by significant reductions in PPP contributions.
−Removed: The cost of funds increased 16 basis points to 0.46% due to the cost of interest-bearing deposits increasing 26 basis points to 0.49%, and long-term debt increasing 121 basis points primarily from the August 2022 offering of $350 million in senior notes.
−Removed: These increases in the cost of interest-bearing deposits and borrowings were partially offset by strong growth in non-interest-bearing deposits.
−Removed: • Non-interest income was $323.6 million, decreasing $6.9 million, or 2.1%, compared to a record level of $330.4 million in the prior year, primarily due to decreases in mortgage banking operations income and SBA premium income, with both being impacted by the higher interest rate environment, partially offset by an increase in service charges and wealth management revenues.
+Added: The yield on earning assets (non-GAAP) increased 153 basis points to 5.00%, primarily reflecting higher yields on loans, investment securities and interest-bearing deposits
+Added: with banks due to the impact of the higher interest rate environment.
+Added: The cost of funds increased 127 basis points to 1.73% due to the costs of interest-bearing deposits increasing 164 basis points to 2.13%, short-term borrowings increasing 203 basis points and long-term debt increasing 110 basis points primarily from the August 2022 offering of $350 million in senior notes, partially offset by the maturity of $300 million in 2.20% fixed-rate senior notes in February of 2023.
+Added: • The provision for credit losses totaled $71.8 million, compared to $64.2 million which included $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions in 2022.
+Added: The provision for credit losses for 2023 was primarily due to loan growth, the previously disclosed $31.9 million isolated commercial loan that was charged off in the third quarter of 2023 due to alleged fraud and other charge-off activity.
+Added: • Non-interest income was $254.3 million, decreasing $69.2 million, or 21.4%, compared to $323.6 million, primarily due to a $67.4 million realized loss (pre-tax) on investment securities restructuring.
+Added: On an operating basis (non-GAAP), non-interest income totaled $321.7 million, when adjusting for the investment securities restructuring and decreases in service charges, capital markets income and other non-interest income, partially offset by an increase in wealth management revenues, interchange and card transaction fees and dividends on non-marketable equity securities.
• Non-interest expense was $915.4 million, compared to $826.4 million.
Excluding significant items totaling $48.8 million in 2023 and $52.3 million in 2022, operating non-interest expense (non-GAAP) increased $92.5 million, or 11.9%.
−Removed: Occupancy and equipment increased $16.1 million, or 12.6%, primarily from technology-related investments and the acquired Howard and Union expense bases.
−Removed: • The provision for credit losses totaled $64.2 million, compared to $0.6 million, including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions in 2022.
−Removed: The increase was also due to coverage for significant loan growth, as well as CECL-related model impacts from forecasted macroeconomic slowdown and lower prepayment speed assumptions.
−Removed: • Net charge-offs totaled $16.2 million, or 0.06% of total average loans, compared to $13.9 million, or 0.06%, in 2021.
−Removed: • Income tax expense increased $15.1 million, or 15.4%, primarily due to higher pre-tax earnings.
−Removed: The effective tax rate was 20.6%, compared to 19.6% in 2021.
−Removed: The increase was driven by higher pre-tax earnings, higher state income taxes and increased FDIC insurance deduction disallowance.
−Removed: • The efficiency ratio (non-GAAP) was 52.1%, compared to 57.2%.
+Added: Salaries and employee benefits increased $35.4 million, or 8.3%, due to normal merit increases, production-related commissions and the addition of the acquired Union expense base.
+Added: Occupancy and equipment increased $17.2 million, or 11.9%, primarily from technology-related investments.
+Added: • FDIC insurance expense of $60.8 million included a $29.9 million FDIC special assessment.
+Added: The special assessment was considered a significant item impacting earnings as it reflected replenishment of the FDIC's DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.
+Added: • The efficiency ratio (non-GAAP) remained at a favorable level of 51.2%, compared to 52.1%.
+Added: • Income tax expense decreased $14.8 million, or 13.1%.
+Added: The effective tax rate was 16.9%, compared to 20.6%, primarily due to renewable energy investment tax credits recognized in 2023 as part of a solar project financing transaction originated by our commercial leasing business.
• Return on average tangible common equity ratio (non-GAAP) was 15.5%, compared to 15.3%.
Balance Sheet Highlights (period-end balances, 2023 compared to 2022, unless otherwise indicated)
−Removed: • Total assets were $43.7 billion, compared to $39.5 billion, an increase of $4.2 billion, or 10.7%, primarily from organic growth in loans and the Howard and Union acquisitions.
−Removed: • Period-end total loans and leases, increased $5.3 billion, or 21.2%, which includes Howard acquired loans ($1.8 billion as of the January 22, 2022 acquisition date) and the Union acquired loans ($651 million as of the December 9, 2022 acquisition date).
−Removed: Commercial loans and leases increased $2.8 billion, or 17.2%, even with the decline in PPP loans, and consumer loans increased $2.5 billion, or 29.0%.
−Removed: PPP loans totaled $25.7 million at December 31, 2022, compared to $336.6 million at December 31, 2021.
−Removed: FNB’s strong organic loan growth in 2022 was driven by our strategy to grow high-quality loans across our diverse geographic footprint.
−Removed: • Average loans totaled $27.8 billion, an increase of $2.8 billion, or 11.0%, due to healthy organic growth across our footprint.
−Removed: Growth in average commercial loans totaled $927.0 million, or 5.5%, including growth of $964.9 million, or 9.9%, in commercial real estate partially offset by a decline of $113.9 million, or 1.7%, in commercial and industrial loans, reflecting average PPP loans declining $1.4 billion.
−Removed: Growth in total average consumer loans totaled $1.8 billion, or 22.5%, and was due to an increase in residential mortgage loans of $1.1 billion, or 31.5%, direct home equity installment loans of $533.8 million, or 24.9%, and indirect installment loans of $162.1 million, or 13.3%.
−Removed: • Total average securities were $7.1 billion, compared to $6.2 billion, an increase of $914.8 million, or 14.7%.
−Removed: • Total average deposits grew $3.0 billion, or 9.7%, led by growth of $1.5 billion, or 15.4%, in non-interest-bearing deposits, $1.1 billion, or 7.8%, in interest-bearing demand deposits and $533.5 million, or 15.5%, in savings deposits, driven by solid organic growth in customer relationships, as well as the Howard and Union acquisitions.
−Removed: Average time deposits declined $204.1 million, or 6.4%, as customer preferences had shifted to more liquid accounts, however, customers' preferences are beginning to shift back to time deposits as interest rates increase.
−Removed: • The ratio of loans to deposits was 87.0%, compared to 78.7%, as loan growth outpaced deposit growth.
−Removed: Additionally, the deposit funding mix remained stable with non-interest-bearing deposits totaling 34% of total deposits.
−Removed: Cash and cash equivalents balances decreased $1.8 billion to $1.7 billion due primarily to funding the organic growth of loans and leases as well as the growth in investment securities.
+Added: • Total assets were $46.2 billion, compared to $43.7 billion, an increase of $2.4 billion, or 5.6%, primarily from organic growth in loans.
+Added: • Average loans totaled $31.4 billion, an increase of $3.5 billion, or 12.7%, due to healthy organic growth across our footprint, as well as adding the Union loans to portfolio balances.
+Added: Growth in average commercial loans totaled $1.9 billion, or 10.7%, including growth of $1.0 billion, or 9.3%, in commercial real estate and $793.7 million, or 12.2%, in commercial and industrial loans.
+Added: Growth in total average consumer loans totaled $1.6 billion, or 16.5%, and was due to an increase in residential mortgage loans of $1.4 billion, or 31.3%, indirect installment loans of $134.8 million, or 9.8%, and direct home equity installment loans of $68.6 million, or 2.6%.
+Added: • Total average investment securities were $7.2 billion, compared to $7.1 billion, an increase of $14.1 million, or 0.2%.
+Added: • Total average deposits grew $568.3 million, or 1.7%, led by an increase in average time deposits of $2.2 billion, or 72.3%, offset by declines of $739.2 million, or 6.4% in non-interest-bearing deposits, $655.3 million, or 4.4%, in interest-bearing demand deposits and $209.4 million, or 5.3%, in savings deposits.
+Added: The increase in average time deposits offset the decline in other deposit categories as customers continue to migrate deposit balances into higher-yielding deposit products.
+Added: • The ratio of loans to deposits was 93.1%, compared to 87.0%, as loan growth outpaced deposit growth on a year-over-year basis.
+Added: • The ratio of non-performing loans plus OREO to total loans and lease plus OREO decreased 5 basis points to 0.34%.
+Added: Total delinquency decreased 1 basis point to 0.70%, compared to 0.71%.
+Added: Both measures continue to remain at historically low levels.
+Added: • Net charge-offs totaled $67.7 million, or 0.22% of total average loans, compared to $16.2 million, or 0.06%.
+Added: Excluding the previously mentioned charge-off, net charge-offs would have been $35.9 million, or 0.11% of total average loans (non-GAAP), remaining at historically low levels.
• The dividend payout ratio for 2023 was 36.5%, compared to 39.5%.
−Removed: • We repurchased nearly 3.3 million shares of our common stock at a weighted average share price of $12.77 for $42.8 million.
−Removed: In April 2022, our Board of Directors approved an additional $150 million for the repurchase of our common stock to be added to our existing share repurchase program, bringing the total authorization to $300 million.
+Added: • During 2023, we repurchased nearly 3.1 million shares of our common stock at a weighted average share price of $11.61 for $36.5 million.
There currently is $139.1 million of the authorized amount remaining for future repurchase activity.
−Removed: • The ratio of the ACL to total loans and leases was 1.33%, compared to 1.38%, a reflection of the strong loan growth.
−Removed: The ACL on loans and leases totaled $402 million at December 31, 2022, compared to $344 million with the increase driven by significant loan growth, CECL-related model impacts from forecasted macroeconomic slowdown and lower prepayment speed assumptions, as well as the initial ACL related to the Howard and Union acquisitions.
−Removed: • Tangible book value per share (non-GAAP) of $8.27 decreased 3.7% from year-end 2021.
−Removed: AOCI reduced the tangible book value per common share by $0.99 as of December 31, 2022, compared to $0.19 at the end of 2021, primarily due to the increase in unrealized losses on AFS securities resulting from the higher interest rate environment.
−Removed: • The CET1 regulatory capital ratio was 9.82%, down from 9.92%, primarily due to the significant loan growth in 2022.
+Added: • The ratio of the ACL to total loans and leases was 1.25%, compared to 1.33%, reflecting net loan growth and charge-off activity.
+Added: The ACL on loans and leases totaled $406 million at December 31, 2023, compared to $402 million with the increase reflecting net loan growth.
+Added: • Tangible book value per common share (non-GAAP) of $9.47 increased 14.5% from year-end 2022.
+Added: AOCI reduced the tangible book value per common share (non-GAAP) by $0.65 as of December 31, 2023, compared to $0.99 at the end of 2022, primarily due to the impact of higher interest rates on the fair value of AFS securities.
+Added: • The CET1 regulatory capital ratio was 10.04%, benefiting from retained earnings growth, compared to 9.82%.
Year-to-Date Results Summary 2023 2022
3 unchanged sentences
Book value per common share (period-end) 16.56 15.39
−Removed: Common equity tier 1 capital ratio 9.8 % 9.9 %
Operating results (non-GAAP)
9 unchanged sentences
After-tax impact of branch consolidation costs — (5.5)
+Added: Pre-tax FDIC assessment (29.9) —
+Added: After-tax impact of FDIC assessment (23.7) —
+Added: Pre-tax loss on securities restructuring (67.4) —
+Added: After-tax loss on securities restructuring (53.2) —
+Added: Pre-tax valuation allowance on auto loans held-for-sale (16.7) —
+Added: After-tax valuation allowance on auto loans held-for-sale (13.2) —
Total significant items pre-tax $ (116.2) $ (80.8)
6 unchanged sentences
Industry Developments
−Removed: INFLATION REDUCTION ACT
−Removed: On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law.
−Removed: The IRA introduces a 15% corporate alternative minimum tax (AMT) based primarily on consolidated adjusted GAAP net income with a minimum threshold of $1 billion.
−Removed: The corporate AMT provisions are effective for taxable years beginning after December 31, 2022.
−Removed: The details of the computation will be subject to regulations to be issued by the UST.
−Removed: Our current net income levels are well below the $1 billion threshold, but we will monitor regulatory developments and will continue to evaluate the impact, if any, of the corporate AMT.
−Removed: The IRA imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022.
−Removed: The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year, including stock issued to employees.
−Removed: LIBOR and SOFR
−Removed: The FCA, who is the regulator of LIBOR, announced on March 5, 2021 that they will no longer require any panel bank to continue to submit LIBOR after December 31, 2021.
−Removed: As it pertains to U.S.
−Removed: Dollar LIBOR, the FCA announced that certain LIBOR tenors will continue to be published through June 30, 2023.
−Removed: Bank regulators, in a joint statement urged banks to stop using LIBOR altogether on new transactions by the end of 2021 to avoid the possible creation of safety and soundness risk.
−Removed: The FRB of New York has created a working group called the ARRC to assist U.S.
−Removed: institutions in transitioning away from LIBOR as a benchmark interest rate.
−Removed: The ARRC has recommended the use of SOFR as a replacement index for LIBOR.
−Removed: On March 15, 2022, the Adjustable Interest Rate Act (the LIBOR Act) was signed into law.
−Removed: The LIBOR Act establishes a uniform national approach for replacing LIBOR in legacy contracts that do not provide for the use of a clearly defined replacement benchmark rate.
−Removed: The LIBOR Act also directs the FRB to issue regulations to implement the legislation addressed by this Act.
−Removed: We have LIBOR exposure in various agreements, including variable rate loans, derivatives and debt we issued and acquired.
−Removed: We created an internal transition team that is managing our transition away from LIBOR.
−Removed: This transition team is a cross-functional team composed of representatives from the commercial, retail and mortgage banking lines of business, as well as representatives from loan operations, information technology, legal, finance and other support functions.
−Removed: The transition team determined that the primary index to be utilized for loans will be SOFR-based.
−Removed: Beginning in September 2020, adjustable rate mortgage loans have been originated with SOFR as the underlying index.
−Removed: We started originating commercial loans utilizing SOFR and other indices in the fourth quarter of 2021 and, effective January 1, 2022, ceased origination of LIBOR-based loans.
−Removed: For all existing LIBOR-based loans, remediation efforts are scheduled to be completed by June 30, 2023.
−Removed: Our transition team continues to work within the guidelines established by the FCA and ARRC to provide for a smooth transition away from LIBOR.
+Added: BANKING INDUSTRY DISRUPTION
+Added: During the second week of March 2023, Silicon Valley Bank failed and was taken over by federal regulators.
+Added: The size of the bank, being over $200 billion in assets, made it the second largest U.S.
+Added: bank to ever fail.
+Added: Subsequently, that week, Signature Bank with assets over $100 billion, was also closed by federal regulators.
+Added: On May 1, 2023, it was announced that First Republic Bank was another bank closed by federal regulators.
+Added: While these failures were idiosyncratic in nature, these events called into question the stability of the entire banking sector and sparked customer fears of potential loss of deposit balances exceeding the FDIC's $250,000 insurance limit.
+Added: While the high-profile bank failures had a diminishing effect on public confidence of the banking system, the federal government took mitigating action.
+Added: To strengthen public confidence, the federal government announced that all depositors of Silicon Valley Bank and Signature Bank would be protected with any losses to the DIF recovered by a special assessment on banks.
+Added: We recognized the special assessment of $29.9 million in non-interest expense in the fourth quarter of 2023.
+Added: In addition to those actions, the FRB made available additional funding to eligible depository institutions to help assure banks the ability to meet the needs of all their depositors.
+Added: This action bolstered the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.
+Added: The additional funding was made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions and other eligible depository institutions pledging U.S.
+Added: Treasuries, agency debt and mortgage-backed securities and other qualifying assets as collateral.
+Added: These assets are valued at par.
+Added: The BTFP is an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress.
+Added: Advances can be requested under the BTFP until March 11, 2024.
+Added: As of December 31, 2023, we have not participated in this program.
+Added: Additionally, our total deposit balances have remained stable as a result of our granular deposit base with our average customer deposit account balance at approximately $30,000 (below the peer median) and our median consumer deposit account balance at approximately $5,600 as of December 31, 2023.
+Added: FDIC-insured or collateralized deposits represented approximately 78% of our total deposits at December 31, 2023, which was higher than our peer median (based on peer data as of September 30, 2023) and we had ample liquidity to fund up to an estimated 146% of our uninsured and non-collateralized deposits.
RESULTS OF OPERATIONS
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
−Removed: Net income available to common stockholders for 2022 was $431.1 million or $1.22 per diluted common share, compared to net income available to common stockholders for 2021 of $396.6 million or $1.23 per diluted common share.
−Removed: Operating earnings per diluted common share (non-GAAP) was $1.40 for 2022 compared to $1.24 for 2021.
−Removed: The results for 2022 included net interest income of $1.1 billion, a 23.5% increase from 2021, driven by strong earning asset growth and a significantly higher interest rate environment, provision for credit losses of $64.2 million including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions, $7.0 million of branch consolidation expenses and $45.3 million of merger-related expenses.
−Removed: In comparison, the results for 2021 included the impact of $2.6 million of branch consolidation expenses and $1.8 million of merger-related expenses.
−Removed: Average diluted common shares outstanding increased 30.6 million shares, or 9.5%, to 354.1 million shares for 2022 primarily from our acquisitions of Howard and Union.
+Added: Net income available to common stockholders was $476.8 million or $1.31 per diluted common share, compared to net income available to common stockholders of $431.1 million or $1.22 per diluted common share.
+Added: Operating earnings per diluted common share (non-GAAP) was $1.57 compared to $1.40.
+Added: The results for 2023 included net interest income of $1.3 billion, a 17.6% increase, driven by strong earning asset growth and a higher interest rate environment, provision for credit losses of $71.8 million, including $31.9 million in provision for the previously disclosed commercial loan fully charged-off during the third quarter of 2023 due to alleged fraud, the sale of $648.7 million in AFS investment securities resulting in a realized loss (pre-tax) of $67.4 million, $29.9 million of FDIC special assessment expense, a negative valuation allowance of $16.7 million (pre-tax) on auto loans held-for-sale and $2.2 million of merger-related expenses.
+Added: In comparison, the results for 2022 included provision for credit losses of $64.2 million including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions, the impact of $7.0 million of branch consolidation expenses and $45.3 million of merger-related expenses.
The major categories of the Consolidated Statements of Income and their respective impact to the increase (decrease) in net income are presented in the following table:
19 unchanged sentences
Book value per common share $ 16.56 $ 15.39
−Removed: $ 15.39 $ 15.81
Tangible book value per common share (1)
Equity to assets 13.11 % 12.93 %
−Removed: 12.93 % 13.03 %
Average equity to average assets 13.12 13.05
4 unchanged sentences
Dividend payout ratio 36.51 39.54
−Removed: (1) Period-end
The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:
49 unchanged sentences
(2) The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%.
−Removed: The yield on earning assets and the net interest margin are presented on an FTE basis.
+Added: The yield on earning assets and the net interest margin are presented on an FTE basis (non-GAAP).
We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
1 unchanged sentence
Net Interest Income
−Removed: Net interest income on an FTE basis (non-GAAP) of $1.1 billion for 2022 increased $213.6 million, or 23.3%, from $917.4 million for 2021 as the higher interest rate environment benefited earning asset yields given the asset sensitive positioning of the balance sheet and higher yields on new loan originations and investment securities purchases.
−Removed: Average interest-earning assets of $37.3 billion increased $3.1 billion, or 9.0%, from 2021, primarily driven by an increase of $2.8 billion in average loans and leases which included organic growth combined with loans added from the Howard and Union acquisitions.
−Removed: Average interest-bearing liabilities of $24.2 billion increased $1.1 billion, or 4.7%, from 2021, driven by an increase of $1.4 billion in average interest-bearing deposits which included organic growth in new and existing customer relationships, and inflows from the Howard and Union acquisitions, partially offset by a decrease in average borrowings of $320.6 million.
−Removed: Our net interest margin FTE (non-GAAP) was 3.03% for 2022, compared to 2.68% for 2021, as the yield on earning assets increased 50 basis points to 3.47%, reflecting variable-rate loans that repriced upwards in 2022, as well as higher yields on new loan originations, investment securities and excess cash balances, partially offset by significant reductions in PPP contributions.
−Removed: The total cost of funds increased 16 basis points to 0.46%, due to a 26 basis point increase in interest-bearing deposit costs and long-term debt increasing 121 basis points primarily from the August 2022 offering of $350 million aggregate principal amount of 5.150% fixed-rate senior notes due in 2025, partially offset by strong growth in average non-interest-bearing deposits which increased $1.5 billion, or 15.4%.
+Added: Net interest income on an FTE basis (non-GAAP) of $1.3 billion increased $197.8 million, or 17.5%, from $1.1 billion as the higher interest rate environment benefited earning asset yields given the asset sensitive positioning of the balance sheet and higher yields on new loan originations, which was partially offset by the higher cost of interest-bearing deposits given that customer preferences are migrating toward higher yielding deposit products and the current competitive banking industry.
+Added: Average interest-earning assets of $39.7 billion increased $2.4 billion, or 6.4%, primarily driven by an increase of $3.5 billion in average loans and leases which included organic loan origination activity and acquired Union loans offset by a decline in interest-bearing deposits with banks.
+Added: Average interest-bearing liabilities of $27.0 billion increased $2.8 billion, or 11.6%, driven by an increase of $1.3 billion in average interest-bearing deposits which included organic growth in new and existing customer relationships and acquired Union deposits, and an increase in average borrowings of $1.5 billion.
+Added: Our net interest margin FTE (non-GAAP) was 3.35%, compared to 3.03%, as the yield on earning assets increased 153 basis points to 5.00%, reflecting variable-rate loans that repriced upwards in 2023, as well as higher yields on new loan originations, investment securities and interest-bearing deposits with banks due to the impact of the higher interest rate environment.
+Added: The total cost of funds increased 127 basis points to 1.73%, primarily due to a 164 basis point increase in interest-bearing deposit costs.
+Added: The rates paid on short-term and long-term borrowings increased 203 and 110 basis points, respectively, due to the higher interest rate environment.
+Added: Additionally, average non-interest-bearing deposits decreased $739.2 million, or 6.4% as customers shifted balances into higher yielding deposit products.
The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the periods indicated:
23 unchanged sentences
Interest income on an FTE basis (non-GAAP) of $2.0 billion for 2023, increased $688.8 million or 53.1% from 2022, resulting from the interest rate increases by the FOMC and an increase in interest-earning assets of $2.4 billion.
−Removed: The increase in earning assets was primarily driven by a $2.8 billion, or 11.0%, increase in average loans and an increase in average securities of $914.8 million.
−Removed: Growth in total average commercial loans included $964.9 million, or 9.9%, in commercial real estate, partially offset by a decline of $113.9 million, or 1.7%, in commercial and industrial loans, reflecting average PPP loans declining $1.4 billion.
−Removed: Commercial loan origination activity was led by the Cleveland, Pittsburgh and South Carolina markets, with the acquired Howard and Union loans also adding to portfolio balances.
−Removed: Average consumer loans increased $1.8 billion, or
−Removed: 22.5%, with an increase in residential mortgage loans of $1.1 billion, or 31.5%, direct home equity installment loans of $533.8 million, or 24.9%, and indirect installment loans of $162.1 million, or 13.3%, driven by a combination of the Howard and Union acquisitions and organic loan origination activity.
−Removed: Additionally, the net increase in the securities portfolio was a result of management's strategy to deploy excess liquidity into higher yielding securities, as average securities increased $914.8 million, or 14.7%.
−Removed: For 2022, the yield on average earning assets (non-GAAP) increased 50 basis points to 3.47%, compared to 2021, reflecting variable-rate loans that repriced upwards in 2022, as well as higher yields on new loan originations, investment securities and excess cash balances, partially offset by significant reductions in PPP contributions.
−Removed: Interest expense of $165.2 million for 2022 increased $66.9 million, or 68.1%, from 2021 primarily due to an increase in rates paid and an increase in average interest-bearing deposits.
−Removed: The growth in average deposits reflected inflows from the Howard and Union acquisitions and solid organic growth in new and existing customer relationships.
−Removed: Average interest-bearing deposits increased $1.4 billion, or 6.9%, which reflects the benefit of solid organic growth in customer relationships and the addition of Howard and Union.
−Removed: Average time deposits declined $204.1 million, or 6.4%, as customer preferences had shifted away from higher rate certificates of deposit to lower yielding, more liquid products, however, customers' preferences are beginning to shift back to certificates of deposits as interest rates increase.
−Removed: Average long-term borrowings decreased $87.9 million, or 9.5%, primarily due to a decrease of $234.5 million in long-term FHLB borrowings, partially offset by increases of $123.5 million in senior debt resulting from the issuance of $350 million in 5.150% fixed rate senior notes during August 2022 and $25.8 million in subordinated debt resulting from $25.0 million acquired in the Howard acquisition and $31.0 million acquired in the Union acquisition.
−Removed: The rate paid on interest-bearing liabilities increased 25 basis points to 0.68% for 2022, compared to 0.43% for 2021.
−Removed: Similarly, the cost of interest-bearing deposits increased 26 basis points from 0.23% to 0.49%.
−Removed: These increases were primarily a result of the interest rate actions taken by the FOMC, combined with the issuance of senior debt in August 2022.
+Added: The increase in earning assets was primarily driven by a $3.5 billion, or 12.7%, increase in average loans, partially offset by a decrease of $1.1 billion, or 51.6%, in average interest-bearing deposits with banks.
+Added: Growth in total average commercial loans included $1.0 billion, or 9.3%, in commercial real estate loans and an increase of $793.7 million, or 12.2%, in commercial and industrial loans driven by a combination of organic loan origination activity led by the Cleveland, Pittsburgh and South Carolina markets as well as
+Added: adding the acquired Union loans.
+Added: Average consumer loans increased $1.6 billion, or 16.5%, with an increase in residential mortgage loans of $1.4 billion, or 31.3%, reflecting adjustable-rate mortgages held in portfolio on the balance sheet and the continued success of the Physicians First mortgage program, which is a program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.
+Added: Additionally, indirect installment loans increased $134.8 million, or 9.8%, and direct home equity installment loans increased $68.6 million, or 2.6%, driven by organic loan origination activity throughout 2023.
+Added: Additionally, the net increase in investment securities interest income was a result of replacing maturing securities with higher yielding securities, as the average total securities portfolio yield increased 48 basis points.
+Added: Interest expense of $656.1 million for 2023 increased $491.0 million, or 297.2%, from 2022 primarily due to the higher interest rate environment and an increase in average interest-bearing deposits.
+Added: The growth in average deposits reflected solid organic growth in new and existing customer relationships and the additions from the Union acquisition.
+Added: Average interest-bearing deposits increased $1.3 billion, or 6.0%, which reflects the benefit of solid organic growth in customer relationships and the acquired Union deposits.
+Added: Average time deposits increased $2.2 billion, or 72.3%, as customer preferences had shifted given interest rate increases.
+Added: Average short-term borrowings increased $648.4 million, or 45.4%, primarily due to an increase in short-term FHLB borrowings of $629.2 million.
+Added: Average long-term borrowings increased $849.4 million, or 101.6%, primarily due to an increase of $857.0 million in long-term FHLB borrowings, as we have maintained additional liquidity following the banking industry disruption in early 2023.
+Added: Additionally, senior debt decreased $29.8 million resulting from the issuance of $350 million in 5.150% fixed-rate senior notes during August 2022, partially offset by the maturity of $300 million in 2.20% fixed-rate senior notes in February 2023.
+Added: The rate paid on interest-bearing liabilities increased 175 basis points to 2.43% for 2023, compared to 2022, as the cost of interest-bearing deposits increased 164 basis points from 0.49% to 2.13%.
+Added: These increases were primarily due to increased deposit competition and market trends resulting from the interest rate actions taken by the FOMC and the industry disruption in early 2023, combined with the issuance of senior debt in August 2022, partially offset by the maturity in February of 2023.
Provision for Credit Losses
−Removed: The provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses inherent in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period.
+Added: Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period.
The following table presents information regarding the provision for credit loss expense and net charge-offs for the years 2021 through 2023:
3 unchanged sentences
Provision for unfunded loan commitments 99 2,230 (2,131) (96) 5,472 (3,242) (59)
−Removed: Provision for credit losses $ 64,030 $ 619 $ 63,411 10,244 % $ 122,802 $ (122,183) (99) %
+Added: Total provision for credit losses on loans and leases 71,706 64,030 7,676 12 619 63,411 10,244
+Added: Provision for securities 48 176 (128) (73) 10 166 1,660
+Added: Total provision for credit losses $ 71,754 $ 64,206 $ 7,548 12 % $ 629 $ 63,577 10,108 %
Net loan charge-offs $ 67,755 $ 16,151 $ 51,604 320 % $ 13,949 $ 2,202 16 %
1 unchanged sentence
Provision for credit losses of $71.7 million during 2023 increased $7.5 million from 2022.
−Removed: The 2022 provision for credit losses is comprised of a $61.8 million provision for loans and leases outstanding and a $2.2 million provision for unfunded loan commitments.
−Removed: The increase reflects $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions, significant loan growth, as well as CECL-related model impacts from forecasted macroeconomic slowdown and lower prepayment speed assumptions.
−Removed: The provision for unfunded loan commitments was down from a slight year-over-year decline in expected loss in certain segments that also experienced higher utilization.
−Removed: Net charge-offs of $16.2 million for 2022 increased $2.2 million from 2021, with both years at historically low levels of 0.06% of total average loans and leases.
+Added: The provision for credit losses in 2022 included $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions.
+Added: The 2023 provision for credit losses was primarily due to loan growth, normal charge-off activity and $31.9 million in provision for the previously disclosed commercial loan that was fully charged-off during the third quarter of 2023 due to alleged fraud.
+Added: Our non-performing loan coverage position remains strong at 378%.
+Added: Net charge-offs of $67.7 million for 2023 increased $51.6 million from 2022.
+Added: Excluding the previously mentioned charge-off, net charge-offs would have been $35.9 million, or 0.11% of total average loans (non-GAAP), remaining at historically low levels.
+Added: The ACL was $405.6 million, an increase of $3.9 million, with the ratio of the ACL to total loans and leases decreasing 8 basis points to 1.25%, reflecting strong loan growth and the
+Added: previously mentioned charge-off activity.
For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses section of this MD&A.
4 unchanged sentences
Service charges $ 81,892 $ 86,895 $ (5,003) (5.8) % $ 73,779 $ 13,116 17.8 %
+Added: Interchange and card transaction fees 52,752 50,803 1,949 3.8 47,956 2,847 5.9
Trust services 42,490 39,033 3,457 8.9 37,370 1,663 4.5
5 unchanged sentences
Bank owned life insurance 11,945 11,942 3 — 14,866 (2,924) (19.7)
−Removed: Net securities gains 48 193 (145) (75.1) 282 (89) (31.6)
−Removed: Loss on debt extinguishment — — — — (16,655) 16,655 n/m
+Added: Net securities gains (losses) (67,432) 48 (67,480) n/m 193 (145) (75.1)
Other 12,790 18,970 (6,180) (32.6) 25,771 (6,801) (26.4)
2 unchanged sentences
Total non-interest income of $254.3 million for 2023 decreased $69.2 million, or 21.4%, from $323.6 million in 2022.
−Removed: The variances in significant individual non-interest income items are further explained in the following paragraphs.
−Removed: Service charges of $137.7 million for 2022 increased $16.0 million, or 13.1%, from $121.7 million in 2021, driven by interchange fees, increases in treasury management services and higher customer activity.
−Removed: Trust services of $39.0 million for 2022 increased $1.7 million, or 4.5%, from the same period of 2021, primarily driven by strong organic revenue production, partially offset by the market value of assets under management decreasing $346.8 million, or 4.2%, to $7.8 billion at December 31, 2022 given overall market conditions.
−Removed: Insurance commissions and fees of $24.3 million for 2022 decreased $1.3 million, or 5.0%, from $25.5 million in 2021, with the reduction primarily driven by lower title insurance fees resulting from slowing mortgage demand in the current interest rate environment.
−Removed: Securities commissions and fees of $23.7 million for 2022 increased $1.5 million, or 6.8% from $22.2 million in 2021, due to increased annuity sales activity, as the increasing interest rate environment provided attractive annuity rates, with revenue contributions across the geographic footprint, most notably in the Carolina and Cleveland regions.
−Removed: Capital markets income of $35.3 million for 2022 decreased $1.5 million, or 4.1%, from $36.8 million for 2021, as swap activity decreased from elevated levels which was partially offset by an increase in syndications revenue.
−Removed: Mortgage banking operations income of $20.6 million for 2022 decreased $16.7 million, or 44.7%, from $37.4 million for 2021, as secondary market revenue and mortgage held-for-sale pipelines declined from elevated levels in 2021 due to the sharp increase in interest rates and declining gain on sale margins.
−Removed: Additionally, we are currently holding adjustable-rate mortgage originations in our portfolio.
+Added: Excluding significant items totaling $67.4 million in 2023, operating non-interest income (non-GAAP) decreased $1.9 million, or 0.6%.
+Added: The 2023 compared to 2022 variances in significant individual non-interest income items are further explained in the following paragraphs.
+Added: Service charges of $81.9 million decreased $5.0 million, or 5.8%, from $86.9 million, with strong treasury management services and higher customer activity largely offsetting the impact of overdraft practice changes that we implemented in the first quarter of 2023.
+Added: Trust services of $42.5 million increased $3.5 million, or 8.9%, from the same period of 2022, primarily driven by strong organic revenue production, as well as the market value of assets under management increasing $789.8 million, or 10.1%, to $8.6 billion at December 31, 2023 given overall market conditions.
+Added: Insurance commissions and fees of $23.1 million decreased $1.1 million, or 4.7%, from $24.3 million, with the reduction primarily driven by lower title insurance fees resulting from slowing mortgage demand in the current interest rate environment.
+Added: Securities commissions and fees of $27.7 million increased $4.0 million, or 16.9%, from $23.7 million, due to increased annuity sales activity, as the increasing interest rate environment provided attractive annuity rates, combined with revenue contributions across the geographic footprint, most notably in the Pittsburgh and Carolina regions.
+Added: Capital markets income of $27.1 million decreased $8.2 million, or 23.2%, from $35.3 million, reflecting increased contributions from international banking and debt capital markets offset by decreases in swap fees and syndications as commercial customer transactions have slowed in this macroeconomic environment.
+Added: Mortgage banking operations income of $20.7 million increased slightly by 0.2%, from $20.6 million.
During 2023, we sold $1.0 billion of originated residential mortgage loans, a decrease of 10.9% compared to $1.1 billion for 2022.
−Removed: During 2022, we also recognized a $2.5 million favorable interest-rate related valuation adjustment on MSRs, compared to a $4.8 million favorable adjustment in 2021.
−Removed: Dividends on non-marketable equity securities of $12.0 million for 2022 increased $3.4 million, or 39.2%, from $8.6 million for 2021, reflecting an increase to the FHLB dividend rate.
−Removed: Income from BOLI of $11.9 million for 2022 decreased $2.9 million, or 19.7%, from $14.9 million in 2021, primarily due to higher life insurance claims in the prior year.
−Removed: Other non-interest income was $19.0 million and $25.8 million for 2022 and 2021, respectively, as SBA premium income declined $6.2 million from elevated levels due to the higher interest rate environment leading to lower market premiums and correspondingly lower sold loan volumes.
+Added: Rate volatility compressed gain on sale margins which were mostly offset by growing mortgage held for sale pipelines.
+Added: Full year mortgage originations increased 4.4% from 2022.
+Added: Net servicing income increased $3.5 million, or 60.6%, due to low prepayment speeds with rising rates and a larger servicing book.
+Added: An impairment charge increased $2.7 million in 2023 from 2022.
+Added: Dividends on non-marketable equity securities of $21.3 million increased $9.3 million, or 77.9%, from $12.0 million, reflecting higher FHLB dividends due to additional borrowings and an increase in the average dividend rate.
+Added: We had net securities losses of $67.4 million primarily due to the sale of $648.7 million of AFS securities in the fourth quarter of 2023 as part of a balance sheet optimization strategy.
+Added: Other non-interest income was $12.8 million and $19.0 million for 2023 and 2022, respectively, due to other miscellaneous income fluctuations and from the decline in Small Business Investment Company (SBIC) funds income, reflecting normal fluctuations based on the performance of the underlying portfolio companies.
+Added: The following table presents non-interest income excluding significant items impacting earnings:
+Added: (dollars in thousands) 2023 2022 Change Change
+Added: Total non-interest income, as reported $ 254,332 $ 323,553 $ (69,221) (21.4) %
+Added: Significant items:
+Added: Loss on securities restructuring 67,354 —
+Added: Total non-interest income, excluding significant items (1)
+Added: $ 321,686 $ 323,553 $ (1,867) (0.6) %
Non-Interest Expense
15 unchanged sentences
Excluding significant items totaling $48.8 million in 2023 and $52.3 million in 2022, operating non-interest expense (non-GAAP) increased $92.5 million, or 11.9%.
−Removed: The variances in significant individual non-interest expense items are further explained in the following paragraphs.
−Removed: Salaries and employee benefits of $426.2 million for 2022 increased $7.9 million, or 1.9%, from $418.3 million in 2021, related to normal merit increases and the acquired Howard and Union expense bases.
+Added: The 2023 compared to 2022 variances in significant individual non-interest expense items are further explained in the following paragraphs.
+Added: Salaries and employee benefits of $461.7 million increased $35.4 million, or 8.3%, from $426.2 million, related to normal merit increases, production-related commissions and the addition of the acquired Union expense base.
Our total full-time equivalent employees were 4,123 and 4,018 at December 31, 2023 and 2022, respectively.
−Removed: Net occupancy and equipment expense of $144.5 million for 2022 increased $16.1 million, or 12.6%, from $128.3 million in 2021, primarily from technology-related investments and the acquired Howard and Union expense bases, as well as non-operating expenses (non-GAAP) related to branch consolidation costs of $4.1 million for 2022 and $2.1 million in 2021.
−Removed: Amortization of intangibles of $13.9 million for 2022 increased $1.8 million, or 14.5%, from the same period of 2021, primarily due to additional core deposit intangibles added as a result of our acquisitions in 2022.
−Removed: FDIC insurance expense of $20.4 million for 2022 increased $2.5 million, or 14.2%, from 2021, primarily due to loan growth and a shift in the balance sheet mix.
−Removed: We recorded $45.3 million in merger-related costs in 2022 related to the Howard and Union acquisitions compared to $1.8 million related to the Howard acquisition in 2021.
−Removed: Other non-interest expense was $73.6 million and $57.2 million for 2022 and 2021, respectively, driven by $2.8 million in branch consolidation costs and an increase in business development expense and other operational costs in 2022.
−Removed: Comparatively, we had $0.5 million in branch consolidation costs and a $2.2 million mortgage recourse reserve release in 2021.
+Added: Equipment expense of $161.6 million increased $17.2 million, or 11.9%, from $144.5 million, primarily from continued technology-related investments, the acquired Union expense base and the impact of the inflationary macroeconomic environment.
+Added: Amortization of intangibles of $20.1 million increased $6.2 million, or 45.1%, from the same period of 2022, primarily due to additional core deposit intangibles added as a result of our Union acquisition in December 2022.
+Added: Outside services increased $10.9 million, or 15.0%, with higher volume-related technology and third-party costs, including the impact of the inflationary macroeconomic environment.
+Added: FDIC insurance expense of $60.8 million increased $40.4 million, or 197.9%, primarily due to a $29.9 million FDIC special assessment to replenish the FDIC's DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank, as well as the previously announced FDIC assessment rate increase which was effective in the first quarter of 2023.
+Added: We recorded $2.2 million in merger-related costs in 2023 related to the Union acquisition compared to $45.3 million related to the Howard and Union acquisitions in 2022.
+Added: Other non-interest expense was $94.2 million and $73.6 million for 2023 and 2022, respectively, with the increase primarily driven by a $16.7 million valuation allowance on auto loans held-for-sale in 2023, resulting from changes in interest rates from time of origination in conjunction with our balance sheet optimization strategy.
+Added: We had $2.8 million in branch consolidation costs in 2022 in other non-interest expense.
The following table presents non-interest expense excluding significant items impacting earnings:
4 unchanged sentences
Merger-related (2,215) (45,259) 43,044
+Added: FDIC special assessment (29,938) — (29,938)
+Added: Valuation allowance on auto loans held-for-sale (16,687) — (16,687)
Total non-interest expense, excluding significant items (1)
6 unchanged sentences
Statutory federal tax rate 21.0 21.0 21.0
−Removed: Our income tax expense for 2022 increased $15.1 million, or 15.4% from 2021.
−Removed: The effective tax rate was 20.6% for 2022, compared to 19.6% for 2021, primarily resulting from higher pre-tax earnings, higher state income taxes from acquisitions and increased FDIC insurance deduction disallowance.
−Removed: Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from historic tax credits, tax-exempt income on investments and loans and income from BOLI.
+Added: Our income tax expense for 2023 decreased $14.8 million, or 13.1% from 2022.
+Added: The effective tax rate was 16.9% for 2023, compared to 20.6% for 2022, primarily due to the recording of renewable energy investment tax credits in 2023, offset slightly by higher pre-tax earnings in 2023.
+Added: Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from tax credits, tax-exempt income on investments and loans and income from BOLI.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
18 unchanged sentences
Total Liabilities and Stockholders’ Equity $ 46,158 $ 43,725 $ 2,433 5.6 %
−Removed: The significant increase in both assets and liabilities is primarily due to strong organic loan and deposit growth as well as the Howard and Union acquisitions.
+Added: The increase in both assets and liabilities is primarily due to strong organic loan and borrowings growth.
Lending Activity
21 unchanged sentences
Total loans and leases $ 32,323 $ 30,255 $ 2,068 6.8 %
−Removed: Total loans and leases increased $5.3 billion, or 21.2%, to $30.3 billion at December 31, 2022, compared to $25.0 billion at December 31, 2021, reflecting a commercial loans and leases increase of $2.8 billion or 17.2%, and an increase in consumer loans of $2.5 billion or 29.0%.
−Removed: The increase included Howard acquired loans ($1.8 billion as of the January 22, 2022, acquisition date) and Union acquired loans ($651 million as of the December 9, 2022 acquisition date).
−Removed: Our strong organic loan growth in 2022 was primarily attributable to growth across our diverse footprint, with the largest increases noted in the Cleveland, Pittsburgh and South Carolina markets.
+Added: Total loans and leases increased $2.1 billion, or 6.8%, to $32.3 billion at December 31, 2023, compared to $30.3 billion at December 31, 2022, reflecting a commercial loans and leases increase of $1.2 billion or 6.3%, and an increase in consumer loans of $861.5 million or 7.9%.
+Added: Our organic loan growth in 2023 was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
As of December 31, 2023, 29.0% of the commercial real estate loans were owner-occupied, while the remaining 71.0% were non-owner-occupied, compared to 30.2% and 69.8%, respectively, as of December 31, 2022.
−Removed: As of December 31, 2022 and 2021, we had commercial construction loans of $1.7 billion at each respective date representing 5.7% and 6.9% of total loans and leases, respectively.
+Added: As of December 31, 2023 and 2022, we had commercial construction loans of $2.1 billion and $1.7 billion at each respective date, representing 6.6% and 5.7% of total loans and leases, respectively.
Additionally, as of December 31, 2023 and 2022, we had residential construction loans of $360.6 million and $379.4 million, respectively, representing 1.1% and 1.3% of total loans and leases, respectively.
−Removed: The increase in construction loans reflects the continued shortage of existing homes available for sale relative to strong homebuying demand.
+Added: Our commercial real estate portfolio included $8.7 billion of non-owner occupied loans, of which 21.7% represented office space.
+Added: Our top 25 non-owner occupied commercial real estate loans averaged approximately $31 million per exposure although the office space was comprised of mid-sized offices located outside of metropolitan business districts with 40% of the office portfolio averaging less than $5 million per exposure.
Commercial and industrial loans are 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.
−Removed: PPP loans, included in the commercial and industrial loans category, have declined significantly and totaled $25.7 million and $336.6 million at December 31, 2022 and 2021, respectively.
−Removed: The growth in the commercial and industrial loans category was led by activity in the Cleveland, Pittsburgh and North Carolina markets, while the growth in residential mortgages reflected growth in adjustable-rate mortgages and the continued success of our Physicians First mortgage program, which is a digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.
+Added: The growth in the commercial and industrial loans category was led by activity in the Cleveland, Pittsburgh and North Carolina markets, while the growth in residential mortgages reflected growth in adjustable-rate mortgages and jumbo mortgages retained on the balance sheet and the continued success of our Physicians First mortgage program, which is a digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.
Within our primary lending footprint, certain industries are more predominant given the geographic location of these lending markets.
2 unchanged sentences
As of December 31, 2023 and 2022, there were no concentrations of loans relating to any industry in excess of 10% of total loans.
+Added: The decrease in indirect installment loans is primarily due to the transfer of $355 million of indirect auto loans to held-for-sale in December 2023.
+Added: The transfer resulted in a negative valuation allowance of $16.7 million (pre-tax) recognized in other non-interest expense due primarily to changes in interest rates from time of origination.
+Added: The sale of these loans closed in the first quarter of 2024 with the proceeds used to repay borrowings that have a similar yield to the sold loans.
Additional information relating to originated loans and loans acquired in business combinations is provided in Note 3, “Mergers and Acquisitions” and Note 6, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
20 unchanged sentences
Non-Performing Assets
−Removed: Non-performing loans include non-accrual loans and non-performing TDRs.
+Added: Non-performing loans include non-accrual loans.
Past due loans are reviewed monthly to identify loans for non-accrual status.
3 unchanged sentences
Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured.
−Removed: TDRs are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress.
−Removed: Non-accrual loans of $113.4 million at December 31, 2022 increased 29.1% compared to December 31, 2021, representing a $25.5 million increase, however they were still at relatively low levels.
−Removed: This increase is primarily attributed to the migration of a commercial and industrial credit during the fourth quarter of 2022.
−Removed: Following is a summary of non-performing loans and leases, by class:
+Added: Non-accrual loans of $107.2 million at December 31, 2023 decreased $6.2 million, or 5.5%, compared to December 31, 2022, with both periods remaining at relatively low levels.
+Added: Following is a summary of non-performing loans and leases, by class, OREO and non-performing assets:
December 31 2023 2022 $
10 unchanged sentences
Total non-performing loans and leases $ 107 $ 113 (6) (5.3)
−Removed: Following is a summary of non-performing assets:
−Removed: December 31 2022 2021
−Removed: (dollars in millions)
−Removed: Non-accrual loans $ 113 $ 88
−Removed: Total non-performing loans and leases 113 88
Other real estate owned 3 6 (3) (50.0)
1 unchanged sentence
Non-performing loans / total loans and leases 0.33 % 0.37 %
−Removed: Non-performing loans + OREO / total loans and leases + OREO 0.39 0.39
+Added: Non-performing loans plus OREO / total loans and leases plus OREO 0.34 0.39
Non-performing assets / total assets 0.24 0.27
−Removed: Troubled Debt Restructured Loans
−Removed: TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties.
−Removed: TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.
−Removed: TDRs that are accruing and performing include loans for which we can reasonably estimate the timing and amount of the expected cash flows on such loans and for which we expect to fully collect the new carrying value of the loans.
−Removed: TDRs that are accruing and non-performing are comprised of loans that have not demonstrated a consistent repayment pattern on the modified terms for more than six months, however it is expected that we will collect all future principal and interest payments.
−Removed: TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured.
−Removed: Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in incremental losses which are factored into the ACL estimate.
−Removed: Additional information related to our TDRs is included in Note 6, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
−Removed: In March 2022, the FASB issued ASU No.
−Removed: 2022-02, Financial Instruments - Credit Losses (Topic 326):
−Removed: Troubled Debt Restructurings and Vintage Disclosure .
−Removed: We will adopt the ASU on its effective date, January 1, 2023.
−Removed: The ASU eliminates TDR accounting for entities that have adopted Update 2016-13, while enhancing disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty.
−Removed: Adoption of this Update is not expected to have a material impact on our consolidated financial statements.
−Removed: Following is a summary of accruing and non-accrual TDRs, by class:
−Removed: (in millions) Accruing Non-Accrual Total
−Removed: December 31, 2022
−Removed: Commercial real estate $ 5 $ 15 $ 20
−Removed: Commercial and industrial — 1 1
−Removed: Total commercial loans 5 16 21
−Removed: Direct installment 19 3 22
−Removed: Residential mortgages 33 4 37
−Removed: Consumer lines of credit 6 1 7
−Removed: Total consumer loans 58 8 66
−Removed: Total TDRs $ 63 $ 24 $ 87
−Removed: December 31, 2021
−Removed: Commercial real estate $ 6 $ 21 $ 27
−Removed: Commercial and industrial — 1 1
−Removed: Total commercial loans 6 22 28
−Removed: Direct installment 21 4 25
−Removed: Residential mortgages 27 5 32
−Removed: Consumer lines of credit 6 1 7
−Removed: Total consumer loans 54 10 64
−Removed: Total TDRs $ 60 $ 32 $ 92
Following is a summary of loans and leases 90 days or more past due on which interest accruals continue:
9 unchanged sentences
Recorded during the year — — —
+Added: Loan Modifications
+Added: During the period, there are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties.
+Added: These modifications result from loss mitigation activities and could include a term extension, interest rate reduction, principal forgiveness, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.
+Added: For additional information relating to loan modifications, see Note 6, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
+Added: Prior to the adoption of ASU 2022-02, below is the table relating to the TDR disclosures as of December 31, 2022.
+Added: Following is a summary of accruing and non-accrual TDRs, by class:
+Added: (in millions) Accruing Non-Accrual Total
+Added: December 31, 2022
+Added: Commercial real estate $ 5 $ 15 $ 20
+Added: Commercial and industrial — 1 1
+Added: Total commercial loans 5 16 21
+Added: Direct installment 19 3 22
+Added: Residential mortgages 33 4 37
+Added: Consumer lines of credit 6 1 7
+Added: Total consumer loans 58 8 66
+Added: Total TDRs $ 63 $ 24 $ 87
Allowance for Credit Losses on Loans and Leases
7 unchanged sentences
For our ACL calculation at December 31, 2023, the macroeconomic variables that we utilized included, but were not limited to:
−Removed: (i) the purchase only Housing Price Index, which declines 3.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which declines 0.9% over our R&S forecast period, (iii) S&P Volatility, which decreases 41.0% in 2023 and 8.1% in 2024 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historic levels.
+Added: (i) the purchase only Housing Price Index, which increases 5.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 0.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 4.0% in 2024 and 2.9% in 2025 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below historical through-the-cycle period.
Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2022 included, but were not limited to:
−Removed: (i) the purchase only Housing Price Index, which reflected growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflected growth of 13.0% over our R&S forecast period, (iii) S&P Volatility, which increases 15.2% in 2022 and 1.9% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels.
+Added: (i) the purchase only Housing Price Index, which declines 3.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which declines 0.9% over our R&S forecast period, (iii) S&P Volatility, which decreases 41.0% in 2023 and 8.1% in 2024 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels.
Following is a summary of certain data related to the ACL and loans and leases:
−Removed: Net Loan Charge-Offs (Recoveries) Net Loan Charge-Offs to Average Loans
+Added: Net Loan Charge-Offs (Recoveries) Net Loan Charge-Offs to Average Loans ACL at
Year Ended December 31 2023 2022 2023 2022 2023
19 unchanged sentences
Consumer portfolio (0.2) — —
−Removed: ASC 326 adoption impact:
−Removed: Commercial portfolio — — 8
−Removed: Consumer portfolio — — 2
Balance at end of period $ 21.5 $ 21.4 $ 19.1
−Removed: The ACL on loans and leases of $401.7 million at December 31, 2022 increased $57.4 million, or 16.7%, from December 31, 2021 with the increase primarily driven by significant loan growth, a forecasted macroeconomic slowdown and lower prepayment speed assumptions, as well as the initial ACL related to the Howard and Union acquisitions.
+Added: The ACL on loans and leases of $405.6 million at December 31, 2023 increased $3.9 million, or 1.0%, from December 31, 2022, primarily due to loan growth, offset by charge-off activity and improvements in classified and non-performing loans.
Our ending ACL coverage ratio at December 31, 2023 was 1.25%, compared to 1.33% at December 31, 2022.
−Removed: Total provision for credit losses during 2022 was $64.2 million, compared to $0.6 million for the same period in 2021, reflecting $19.1 million of initial provision for non-PCD loans associated with the Howard acquisition in the first quarter of 2022 and $9.4 million related to the Union acquisition in the fourth quarter of 2022, and coverage for significant loan growth, as well as CECL-related model impacts from forecasted macroeconomic slowdown and lower prepayment speed assumptions.
−Removed: Net charge-offs were $16.2 million, or 0.06%, of total average loans, compared to $13.9 million, or 0.06%, in 2021, with both periods below historical levels.
−Removed: The ACL as a percentage of non-performing loans for the total portfolio decreased from 392% as of December 31, 2021 to 354% as of December 31, 2022.
−Removed: Total provision for credit losses during 2021 was $0.6 million.
−Removed: Net charge-offs were $13.9 million, or 0.06%, of total average loans, compared to $59.8 million, or 0.24%, in 2020, reflecting COVID-19 impacts on certain segments of the loan portfolio in 2020.
−Removed: The provision for credit losses during 2020 was $122.8 million, which reflected COVID-19 related macroeconomic impacts and life-of-loan CECL reserving requirements in 2020.
−Removed: Net charge-offs totaled $59.8 million or 0.24% of total average loans, compared to $28.3 million or 0.12% in 2019, reflecting COVID-19 impacts on certain segments of the loan portfolio.
+Added: Total provision for credit losses during 2023 was $71.8 million, compared to $64.2 million for the same period in 2022, with the year-ago period including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions.
+Added: The year-over-year increase was driven primarily by loan growth and charge-off activity and $31.9 million in provision for the previously disclosed commercial loan that was downgraded to non-performing status in the second quarter of 2023 and was fully charged-off during the third quarter of 2023 due to alleged fraud.
+Added: Net charge-offs were $67.7 million, or 0.22%, of total average loans, compared to $16.2 million, or 0.06%, in 2022.
+Added: Excluding the previously mentioned commercial charge-off, net charge-offs would have been $35.9 million, or 0.11% of total average loans (non-GAAP), remaining at historically low levels.
+Added: The ACL as a percentage of non-performing loans for the total portfolio increased from 354% as of December 31, 2022 to 378% as of December 31, 2023.
+Added: The AULC was $21.5 million at December 31, 2023 and included provision expense for unfunded loan commitments and letters of credit of $0.1 million for the year ended December 31, 2023.
+Added: Comparatively, the AULC was $21.4 million at December 31, 2022 and included provision expense for unfunded loan commitments and letters of credit of $2.3 million for the year ended December 31, 2022.
Following is a summary of the allocation of the ACL and the percentage of loans in each category to total loans:
13 unchanged sentences
Total $ 406 100 % $ 402 100 %
−Removed: During 2022, the ACL allocated to commercial and industrial loans increased primarily due to loan growth, macroeconomic forecast model adjustments and the Howard and Union acquisitions;
−Removed: the ACL allocated to direct installment loans increased primarily due to macroeconomic forecast model and prepay speed adjustments;
−Removed: and the ACL allocated to residential mortgage loans increased due to new loan volume, as well as macroeconomic forecast model and prepay speed adjustments.
−Removed: During 2021, the ACL allocated to commercial real estate decreased primarily due to the improving macroeconomic environment and positive credit quality trends for this portfolio.
Investment Activity
4 unchanged sentences
Management has determined that no credit loss exists on securities AFS.
−Removed: Securities, like loans, are subject to similar interest rate and credit risk.
+Added: Securities, like loans, are subject to interest rate and credit risk.
In addition, by their nature, securities classified as AFS are also subject to fair value risks that could negatively affect the level of liquidity available to us, as well as stockholders’ equity.
3 unchanged sentences
As of December 31, 2023, debt securities classified as AFS and HTM totaled $3.3 billion and $3.9 billion, respectively.
−Removed: During 2022, debt securities AFS decreased by $150.4 million and debt securities HTM increased by $623.3 million from December 31, 2021.
+Added: During 2023, debt securities AFS decreased by $21.7 million and debt securities HTM decreased by $175.3 million from December 31, 2022.
+Added: AFS securities comprised 45% of the total securities portfolio and HTM securities comprised 55% of the total securities portfolio.
As of December 31, 2023 and 2022, we did not hold any trading securities.
5 unchanged sentences
government agencies:
−Removed: Maturing after ten years 1 5.25
+Added: Maturing after five years but within ten years 1 7.48
Obligations of U.S.
31 unchanged sentences
Debt Securities Held to Maturity:
−Removed: Treasury $ — $ 1 $ (1) n/m
government agencies $ 1 $ 1 $ — — %
−Removed: government-sponsored entities 52 — 52 n/m
+Added: government-sponsored entities 68 52 16 30.8
Residential mortgage-backed securities:
4 unchanged sentences
and political subdivisions 1,017 1,025 (8) (0.8)
−Removed: Other debt securities 12 — 12 n/m
+Added: Other debt securities 15 12 3 25.0
Total debt securities held to maturity $ 3,911 $ 4,087 $ (176) (4.3) %
n/m - not meaningful
−Removed: The growth in the HTM commercial mortgage-backed securities sector during the period was driven by our focus on longer duration and stable cash flows for new securities purchases.
+Added: We completed the sale of $648.7 million of AFS investment securities in December 2023, which resulted in a realized loss (pre-tax) of $67.4 million in the fourth quarter of 2023.
+Added: We reinvested proceeds from the sale of those investment securities with an average yield of 1.08% into investment securities with yields approximately 350 basis points higher with a similar duration and convexity profile.
For additional information relating to investment activity, see Note 4, “Securities” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
Our primary source of funds is deposits.
−Removed: These deposits are provided by business, consumer and municipal customers who we serve within our footprint.
+Added: Our diversified and granular deposit base are provided by business, consumer and municipal customers who we serve within our footprint.
Following is a summary of deposits:
6 unchanged sentences
Total deposits $ 34,711 $ 34,770 $ (59) (0.2) %
−Removed: Total deposits increased $3.0 billion, or 9.6%, from December 31, 2021, primarily as a result of growth in non-interest-bearing and interest-bearing demand balances from organic growth in new and existing customer relationships and inflows from the Howard and Union acquisitions.
−Removed: Customer preferences had shifted to more liquid accounts during the low-rate pandemic era, however, customers' preferences are beginning to shift back to certificates of deposits as interest rates increase.
−Removed: The deposit growth helped us eliminate overnight borrowings, reduce higher-cost short-term FHLB borrowings and provide funding for loan growth.
+Added: Total deposits decreased slightly by $59.0 million, or 0.2%, from December 31, 2022, primarily due to the banking industry disruption in March 2023 and inflationary pressures on customers.
+Added: We ended 2023 with approximately 78% of all deposits insured by the FDIC or collateralized.
+Added: The mix of non-interest-bearing deposits to total deposits equaled 29.4% at December 31, 2023, compared to 34.3% at December 31, 2022 as customers continue to migrate deposits into higher-yielding deposit products.
Following is a summary of estimated insured and uninsured time deposits in excess of the FDIC insurance limit by remaining maturity at December 31, 2023:
7 unchanged sentences
Borrowings with original maturities of one year or less are classified as short-term.
−Removed: Short-term borrowings, made up of customer repurchase agreements (also referred to as securities sold under repurchase agreements), FHLB advances and subordinated notes, decreased to $1.4 billion at December 31, 2022 from $1.5 billion at December 31, 2021, primarily due to a $100.0 million decline in short-term FHLB borrowings.
+Added: Short-term borrowings, made up of customer repurchase agreements (also referred to as securities sold under repurchase agreements), FHLB advances and subordinated notes, increased to $2.5 billion at December 31, 2023 from $1.4 billion at December 31, 2022, primarily due to a $970.0 million increase in short-term FHLB borrowings, as we increased liquidity due to the bank failures in early 2023.
Following is a summary of selected information relating to short-term FHLB borrowings:
6 unchanged sentences
Weighted average interest rates:
−Removed: 2.18 % 2.14 % 1.97 %
+Added: At year-end 5.64 % 2.18 % 2.14 %
During the year 4.08 2.18 2.13
−Removed: 2.18 2.13 1.83
For additional information relating to deposits and short-term borrowings, see Note 13, “Deposits” and Note 14, “Short-Term Borrowings” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
Capital Resources
−Removed: The access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight depend, in part, on our capital position.
+Added: Our capital position, in part depends on the access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight.
The assessment of capital adequacy depends on a number of factors such as expected organic growth in the Consolidated Balance Sheet, asset quality, liquidity, earnings performance and sustainability, changing competitive conditions, regulatory changes or actions and economic forces.
4 unchanged sentences
The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering expenses were $347.4 million.
−Removed: We used the net proceeds from the sale of the notes for general corporate purposes, which may include repayment of the $300 million in 2.200% senior notes due February 2023, investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness.
+Added: We used the net proceeds from the sale of the notes for general corporate purposes, including repayment of the $300 million in 2.200% senior notes that matured in February 2023, investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness.
On April 18, 2022, we announced that our Board of Directors approved an additional $150 million for the repurchase of our common stock through our existing share repurchase program bringing the total authorization to $300 million.
26 unchanged sentences
For additional information relating to commitments to extend credit and standby letters of credit, see Note 17, “Commitments, Credit Risk and Contingencies” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
−Removed: Our goal in liquidity management is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding.
−Removed: Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and adequate levels of liquidity.
+Added: Our primary liquidity management goal is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding.
+Added: Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and appropriate levels of liquidity.
Our Board of Directors has also established Liquidity and Contingency Funding Policies to guide management in addressing the ability to identify, measure, monitor and control both normal and stressed liquidity conditions.
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FNB also has access to reliable and cost-effective wholesale sources of liquidity.
−Removed: Short- and long-term funds are available for use to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if we would be faced with a liquidity crisis.
+Added: Short- and long-term funds are available for use to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if faced with a liquidity crisis.
+Added: Our strong liquidity position is a result of management utilizing various strategies to ensure sufficient cash on hand is available to meet the parent's funding needs.
The principal sources of the parent company’s liquidity are its strong existing cash resources plus dividends and interest it receives from its subsidiaries.
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In addition, through one of our subsidiaries, we regularly issue subordinated notes, which are guaranteed by FNB.
−Removed: The cash position at December 31, 2022 was $654.3 million, up $358.9 million from year-end 2021, primarily due to the $347.7 million net proceeds from a Senior Debt offering in August, part of which will be used to retire debt in February of 2023 (for additional information, see Note 10, "Borrowings" in the Notes to the Consolidated Financial Statements in this Report).
−Removed: Management has utilized various strategies to ensure sufficient cash on hand is available to meet the parent's funding needs.
+Added: During the third quarter of 2022, we completed a Senior Debt offering for $347.7 million in net proceeds.
+Added: A portion of these proceeds were used to retire $300 million of debt that matured in February of 2023 (for additional information, see Note 10, "Borrowings" in the Notes to the Consolidated Financial Statements in this Report).
+Added: The parent company's cash position at December 31, 2023 was
+Added: $375.4 million, down $278.9 million from December 31, 2022, primarily due to the repayment of the Senior Notes that matured in February 2023.
+Added: Additionally, in May, we purchased and retired $15 million par value of the 7.625% Subordinated Notes due August 12, 2023.
Two metrics that are used to gauge the adequacy of the parent company’s cash position are the LCR and MCH.
The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months.
−Removed: The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the cash on hand.
−Removed: The LCR and MCH ratios are presented in the following table:
+Added: The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the existing cash on hand.
+Added: The LCR and MCH ratios and Parent company cash on hand are presented in the following table:
December 31 2023 2022 Internal
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Months of cash on hand 13.0 months 13.6 months > 12 months
+Added: Parent company cash on hand (millions) $ 375.4 $ 654.3 n/a
Management has concluded that our cash levels remain appropriate given the current market environment.
−Removed: Our liquidity position has been positively impacted by our ability to generate growth in relationship-based accounts.
−Removed: Organic growth in low-cost transaction deposits was complemented by management’s strategy of deposit gathering efforts focused on attracting new customer relationships and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities.
−Removed: This year we also commenced the roll-out of the new digital eStore kiosks in all FNB branches.
−Removed: Total deposits increased $3.0 billion, or 9.6%, from December 31, 2021, primarily as a result of growth in non-interest-bearing demand balances, expansion of customer relationships as well as interest-bearing demand balances due to the Howard and Union acquisitions.
−Removed: We continue to have success growing total non-interest-bearing demand deposit accounts as they rose $1.1 billion, or 10.4%, and now represent 34.3% of total deposits, up from 34.0% as of December 31, 2021.
−Removed: Further, interest-bearing demand deposits increased $691.0 million, or 4.8% and savings account balances increased $473.5 million, or 12.9%, while time deposits increased $752.7 million, or 26.3%, of which $386.4 million is attributable to the Howard and Union acquisitions as of the closing date of the respective acquisitions.
−Removed: Customer preferences had shifted to more liquid accounts during the low-rate pandemic eras, however, customers' preferences have begun to shift back to certificates of deposits as interest rates have increased.
−Removed: Our strong liquidity position provided us the flexibility to reduce our FHLB borrowings by $100 million and eliminate Howard's overnight borrowings and retire $200 million of Howard's higher-cost FHLB borrowings.
−Removed: Our cash balances held at the FRB decreased $1.9 billion from year-end 2021 to $1.1 billion at December 31, 2022 as cash was deployed primarily to fund loans and investments.
−Removed: FNBPA has significant unused wholesale credit availability sources that include the availability to borrow from the FHLB, the FRB, correspondent bank lines, access to brokered deposits and other channels.
+Added: On January 12, 2024, the Board of Directors announced the redemption of all $110 million of our Perpetual Preferred Stock, Series E, which was paid on February 15, 2024.
+Added: After the redemption, our liquidity remains appropriate with liquidity metrics continuing to be within policy limits.
+Added: Over time, our liquidity position has been positively impacted by FNBPA's ability to generate growth in relationship-based accounts.
+Added: Organic growth in low-cost transaction deposits was complemented by management’s continued strategy of deposit gathering efforts focused on attracting new customer relationships across our geographic footprint and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities.
+Added: Consistent with industry trends, we have experienced a shift in deposits from non-interest-bearing-deposits and checking into certificates of deposits (CDs).
+Added: The March 2023 banking disruption caused an acceleration of this shift.
+Added: We ended 2023 with approximately 78% of deposits insured by the FDIC or collateralized, an improvement from approximately 74% at December 31, 2022.
+Added: Non-interest-bearing demand deposit accounts decreased $1.7 billion, compared to December 31, 2022.
+Added: Interest-bearing demand deposits decreased $290.8 million and savings account balances decreased $677.8 million, while time deposits increased $2.6 billion, compared to December 31, 2022, as customers' preferences have shifted to CDs as interest rates have increased substantially.
+Added: Our cash balances held at the FRB were $1.1 billion at December 31, 2023, a slight decrease of $17.5 million from December 31, 2022.
+Added: Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity.
+Added: Our liquidity position was strong throughout 2023.
+Added: Our contingency funding policy and periodic liquidity stress testing of multiple stress scenarios was particularly valuable as we successfully managed our liquidity during the March banking industry disruption.
+Added: We continue to have ample unused borrowing capacity that could cover 1.9 times of the uninsured deposit and non-collateralized deposit balances as of December 31, 2023.
+Added: A portion of this capacity includes the FRB's Discount Window and their BTFP.
+Added: We have no borrowings under either facility.
+Added: Additional sources of unused wholesale credit availability for FNBPA include the ability to borrow from the FHLB, correspondent bank lines, and access to other channels.
In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs.
−Removed: We currently also have excess cash to meet our pledging requirements.
−Removed: At December 31, 2022, we have $1.7 billion of cash and salable unpledged government and agency securities to total assets, or 3.9%.
+Added: We currently have excess cash to meet our pledging requirements.
+Added: At December 31, 2023, we have $1.8 billion of cash and salable unpledged government and agency securities representing 3.8% of total assets.
This compares to a policy minimum of 3.0%.
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Cash and salable unpledged government and agency securities as a % of FNBPA assets 3.8 % 3.9 %
−Removed: The increase in unused wholesale credit availability was due to increased borrowing capacity with the FHLB.
Another metric for measuring liquidity risk is the liquidity gap analysis.
−Removed: The following liquidity gap analysis as of December 31, 2022 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities
−Removed: over future time intervals.
+Added: The following liquidity gap analysis as of December 31, 2023 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals.
Management monitors the size of the liquidity gaps so that sources and uses of funds are reasonably matched in the normal course of business and in relation to implied forward rate expectations.
A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis.
−Removed: A positive gap position means that more assets are repricing over the next 12 months than liabilities, and net interest income would benefit if interest rates were to rise.
+Added: A positive gap position means that more assets are expected to mature over the next 12 months than liabilities.
The twelve-month cumulative gap to total assets ratio was (2.6)% as of December 31, 2023, compared to 3.8% as of December 31, 2022.
+Added: The change in the twelve-month cumulative gap to total assets was primarily related to the active management of deposit pricing across the deposit product maturity tenors which reduced our asset sensitivity.
Management calculates this ratio at least quarterly and it is reviewed regularly by ALCO.
−Removed: The change in the twelve-month cumulative gap to total assets is primarily related to the active deployment of cash into loans and securities.
(dollars in millions) Within
9 unchanged sentences
Cumulative Gap to Total Assets (1.4) % (2.2) % (3.1) % (2.6) %
−Removed: In addition, the ALCO regularly monitors various liquidity ratios and stress scenarios of our liquidity position.
+Added: In addition, the ALCO regularly monitors various liquidity ratios, stress scenarios of our liquidity position and assumptions considering market disruptions, lending demand, deposit behavior, and funding availability.
The stress scenarios forecast that adequate funding will be available even under severe conditions.
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Changes in market interest rates may result in changes in the fair value of our financial instruments, cash flows and net interest income.
−Removed: Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital.
+Added: Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk
+Added: management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital.
We use derivative financial instruments for interest rate risk management purposes and not for trading or speculative purposes.
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EVE’s long-term horizon helps identify changes in optionality and longer-term positions.
−Removed: However, EVE’s liquidation perspective
−Removed: does not translate into the earnings-based measures that are the focus of managing and valuing a going concern.
+Added: However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern.
Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest.
−Removed: In these simulations, our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios.
+Added: In these simulations, our current financial position is combined with assumptions regarding future business activities to calculate net interest income under various hypothetical rate scenarios.
The ALCO regularly reviews earnings simulations over multiple years under various interest rate scenarios.
13 unchanged sentences
Cumulative Gap $ 3,940 $ 4,773 $ 4,264 $ 4,243
−Removed: Cumulative Gap to Assets 3.6 % 4.2 % 5.3 % 8.4 %
−Removed: The twelve-month cumulative repricing gap to total assets was 8.4% and 21.6% as of December 31, 2022 and 2021, respectively.
+Added: Cumulative Gap to Earning Assets 9.6 % 11.6 % 10.4 % 10.3 %
+Added: The twelve-month cumulative repricing gap to total assets was 10.3% and 8.4% as of December 31, 2023 and December 31, 2022, respectively.
The positive cumulative gap positions indicate that we have a greater amount of repricing earning assets than repricing interest-bearing liabilities over the subsequent twelve months.
−Removed: If interest rates increase as modeled, net interest income will increase and, conversely, if interest rates decrease as modeled, net interest income will decrease.
−Removed: The change in the cumulative repricing gap at December 31, 2022, compared to December 31, 2021, is primarily related to the active deployment of cash into longer duration loans and investment securities as well as lower projected prepayment rates on the loan and security portfolios.
+Added: The change in the cumulative repricing gap at December 31, 2023, compared to December 31, 2022, is primarily related to customers moving into higher yielding deposit products and shorter-term time deposits.
The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates.
For example, if a product’s rate is estimated to increase by 50% as much as the market rates, then 50% of the account balance was placed in this category.
−Removed: Using a static Balance Sheet structure, and utilizing net interest income simulations, the following net interest income metrics were calculated using rate shocks which move market rates in an immediate and parallel fashion.
+Added: We model rate scenarios which move all rates gradually over twelve months (Rate Ramps).
+Added: We also model rate scenarios which move all rates in an immediate and parallel fashion (Rate Shocks) and model scenarios that gradually change the shape of the yield curve.
+Added: Using a static Balance Sheet structure, and utilizing net interest income simulations, the following table presents an analysis of the potential sensitivity of our net interest income on changes in interest Rate Ramps and EVE to changes in interest rates using Rate Shocks.
The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of December 31, 2023.
The measures do not reflect management's potential actions.
−Removed: The following table presents an analysis of the potential sensitivity of our net interest income and EVE to changes in interest rates using rate shocks:
December 31, 2023 2022 ALCO
−Removed: Net interest income change (12 months):
+Added: Net interest income change over 12 months (Rate Ramps):
+ 300 basis points 5.8 % 3.4 % n/a
2 unchanged sentences
– 100 basis points (2.0) 0.6 (5.0)
−Removed: Economic value of equity:
– 200 basis points (4.1) 0.6 (5.0)
+Added: Economic value of equity (Rate Shocks):
+ 300 basis points 4.6 (6.8) (25.0)
1 unchanged sentence
+ 100 basis points 1.6 (1.4) (10.0)
−Removed: We also model rate scenarios which move all rates gradually over twelve months (Rate Ramps) and model scenarios that gradually change the shape of the yield curve.
−Removed: The comparative percentages are based on the projected base net interest income at the respective measurement dates.
−Removed: Assuming a static Balance Sheet, a +100 basis point Rate Ramp increases net interest income (12 months) by 0.5% at December 31, 2022 and 3.6% at December 31, 2021.
−Removed: For a +200 basis point Rate Ramp, net interest income (12 months) increases by 2.0% at December 31, 2022 and 7.6% at December 31, 2021.
−Removed: The corresponding metrics for a minus 100 basis point Rate Ramp are 0.6% and (0.5)% at December 31, 2022 and 2021, respectively.
−Removed: These changes are a direct result of our managing our interest rate exposure to benefit from higher rates.
−Removed: Management has reduced our exposure to higher interest rates over the course of 2022 as prospects for additional FRB interest rate increases has moderated.
−Removed: Forty-eight percent of our net loans and leases are indexed to short-term LIBOR, SOFR and Prime that reprice within the next three months.
−Removed: Our cash position related to increased deposits has also been a significant factor in our asset sensitivity metrics.
−Removed: The deployment of cash into loans and investments, as well as a higher base net interest income due to the increase in the loan indices, are the primary factors of the change in the percentage sensitivity since December.
−Removed: The FOMC increased the Federal Funds rate by 425 basis points in 2022 and our balance sheet is positioned to benefit, in the near term, from further FOMC increases of the Federal Funds rate.
−Removed: There are multiple factors that influence our interest rate risk position and impact net interest income.
−Removed: These include external factors such as the shape of the yield curve and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits.
−Removed: Management continues to be proactive in managing our interest rate risk (IRR) position with the near-term objective of having loan and investment cash flows reprice at a faster pace than deposit and borrowing costs during the current higher interest rate environment.
−Removed: In particular, we have made use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase adjustable-rate loans.
+Added: – 100 basis points (2.5) (2.0) (10.0)
+Added: – 200 basis points (8.0) (5.8) (15.0)
+Added: Management continues to be proactive in managing our interest rate risk (IRR) position with the intention to manage to a more neutral position given the current market expectations for future rates.
+Added: During 2023, management has adjusted the IRR position by managing cash balances, originating higher yielding loans, strategically meeting our customers' preferences for higher yielding deposit products, in particular, shorter term time deposits, and utilizing borrowings of varying maturities.
+Added: We also utilize derivatives to manage the IRR position.
+Added: We continue to make use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase our level of adjustable-rate loans.
Total variable and adjustable-rate loans were 62.2% of total net loans and leases as of December 31, 2023 and 60.2% as of December 31, 2022.
−Removed: As of December 31, 2022, the commercial swaps totaled $5.3 billion of notional principal, with $1.2 billion in original notional swap principal originated during 2022.
−Removed: As mentioned earlier, we were successful in growing our transaction deposits which provides funding that is less interest rate-sensitive, as evidenced by a lower deposit re-pricing beta, than short-term time deposits and wholesale borrowings.
+Added: As of December 31, 2023, the commercial swaps totaled $5.7 billion of notional principal, with $945 million in original notional swap principal originated during 2023, up from $5.3 billion at December 31, 2022.
Furthermore, we regularly sell long-term fixed-rate residential mortgages in the secondary market and have been successful in the origination of consumer and commercial loans with short-term repricing characteristics.
−Removed: Further, during 2022, management has adjusted our IRR position by opportunistically deploying excess cash balances into higher yielding loans and securities.
−Removed: We have also made use of derivatives to manage the IRR position, with the most recent transactions being the execution of received fixed / pay floating 1-month LIBOR and SOFR interest rate swaps that have a remaining life of 2.5 years.
For additional information regarding interest rate swaps, see Note 16, "Derivative Instruments and Hedging Activities" in the Notes to the Consolidated Financial Statements in this Report.
+Added: Assuming a static Balance Sheet, a +100 basis point Rate Shock increases net interest income (12 months) by 3.4% at December 31, 2023 and 1.1% at December 31, 2022.
+Added: For a +200 basis point Rate Shock, net interest income (12 months) increases by 6.7% at December 31, 2023 and 3.3% at December 31, 2022.
+Added: The corresponding metrics for a minus 100 basis point Rate Shock are (3.6)% and 1.2% at December 31, 2023 and December 31, 2022, respectively.
+Added: These results use historical long-term deposit rate beta assumptions that are regularly analyzed and adjusted as necessary for both rising and falling rate scenarios.
+Added: The drivers of the change in net interest income in the rate scenarios include the mix shift of deposit products, the pace of deposit repricing and assumed betas and loan prepayments.
+Added: The FOMC increased the Federal Funds rate 425 basis points in 2022 and 100 basis points in the first seven months of 2023.
+Added: Forty-eight percent of our net loans and leases reprice within the next three months and are indexed to short-term SOFR, Prime and other indices which benefit from higher rates.
+Added: Our cash position has also been a significant factor in our asset sensitivity metrics.
+Added: Projected base net interest income has decreased from year-end as deposit rates have increased faster than asset repricing indices.
+Added: There are multiple factors that influence our interest rate risk position and impact net interest income.
+Added: These include external factors such as the shape of the yield curve, the competitive landscape and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits.
We recognize that all asset/liability models have some inherent shortcomings.
−Removed: Asset/liability models require certain assumptions to be made, such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits,
−Removed: which may differ from actual experience.
+Added: Asset/liability models require certain assumptions to be made, such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits, which may differ from actual experience.
These business assumptions are based upon our experience, business plans, economic and market trends and available industry data.
1 unchanged sentence
Furthermore, the metrics are based upon the Balance Sheet structure as of the valuation date and do not reflect the planned growth or management actions that could be taken.
+Added: CREDIT RATINGS
+Added: Our credit ratings affect the cost and availability of short- and long-term funding and collateral requirements for certain derivative instruments.
+Added: Credit ratings are subject to ongoing review by rating agencies, which consider a number of factors, including our financial strength, performance, prospects and operations as well as factors not under our control.
+Added: Other factors that influence our credit ratings include changes to the rating agencies’ methodologies for our industry or certain security types;
+Added: the rating agencies’ assessment of the general operating environment for financial services companies;
+Added: our relative positions in the markets in which we compete;
+Added: our various risk exposures and risk management policies and activities;
+Added: pending litigation and other contingencies;
+Added: our reputation;
+Added: our liquidity position, diversity of funding sources and funding costs;
+Added: the current and expected level and volatility of our earnings;
+Added: our capital position and capital management practices;
+Added: our corporate governance;
+Added: current or future regulatory and legislative initiatives;
+Added: and the agencies’ views on whether the U.S.
+Added: government would provide meaningful support to us or our subsidiaries in a crisis.
+Added: Credit rating downgrades or negative watch warnings could negatively impact our reputation with lenders, investors and other third parties, which could also impair our ability to compete in certain markets or engage in certain transactions.
+Added: In particular, holders of deposits which exceed FDIC insurance limits may perceive such a downgrade or warning negatively and withdraw all or a portion of such deposits.
+Added: The following table presents the credit ratings for FNB and FNBPA as of December 31, 2023:
+Added: Moody's Standard & Poor's Kroll
+Added: Issuer credit rating Baa2 BBB- A-
+Added: Senior debt Baa3 BBB- A-
+Added: Subordinated debt Baa2 n/a BBB+
+Added: First National Bank of Pennsylvania
+Added: Baseline credit assessment Baa1 n/a n/a
+Added: Issuer credit rating n/a BBB- A
+Added: Senior debt n/a n/a A
+Added: Subordinated debt n/a n/a A-
+Added: Bank deposits A2/P-1 n/a A
+Added: Short-term borrowings n/a A-2 K1
+Added: Outlook for F.N.B.
+Added: Corporation and First National Bank of Pennsylvania Negative Stable Stable
+Added: n/a - not applicable
+Added: On August 27,2023, Moody's affirmed our ratings and changed their outlook to negative as part of their review of 27 banks.
RISK MANAGEMENT
As a financial institution, we take on a certain amount of risk in every business decision, transaction and activity.
+Added: Accordingly, we have designed an Enterprise Risk Management Framework and risk management practices to help manage enterprise risks.
Our Board of Directors and senior management have identified seven major categories of risk:
−Removed: credit risk, market risk, liquidity risk, reputational risk, operational risk, legal and compliance risk and strategic risk.
+Added: credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, reputation risk and strategic risk.
In its oversight role of our risk management function, the Board of Directors focuses on the strategies, analyses and conclusions of management relating to identifying, understanding and managing risks to optimize total shareholder value, while balancing prudent business and safety and soundness considerations.
−Removed: The Board of Directors adopted a risk appetite statement that defines acceptable risk levels and limits under which we seek to operate in order to optimize returns.
−Removed: As such, the board monitors a series of KRIs, or Key Risk Indicators, for various business lines, operational units, and risk categories, providing insight into how our performance aligns with our stated risk appetite.
−Removed: These results are reviewed periodically by the Board of Directors and senior management to ensure adherence to our risk appetite statement, and where appropriate, adjustments are made to applicable business strategies and tactics where risks are approaching stated tolerances or for emerging risks.
−Removed: We support our risk management process through a governance structure involving our Board of Directors and senior management.
−Removed: The joint Risk Committee of our Board of Directors and the FNBPA Board of Directors helps ensure that business decisions are executed within appropriate risk tolerances.
−Removed: The Risk Committee has oversight responsibilities with respect to the following:
−Removed: • identification, measurement, assessment and monitoring of enterprise-wide risk;
−Removed: • development of appropriate and meaningful risk metrics to use in connection with the oversight of our businesses and strategies;
−Removed: • review and assessment of our policies and practices to manage our credit, market, liquidity, legal, regulatory and operating risk (including technology, operational, compliance and fiduciary risks);
−Removed: • identification and implementation of risk management best practices.
−Removed: The Risk Committee serves as the primary point of contact between our Board of Directors and the Risk Management Council, which is the senior management level committee responsible for risk management.
−Removed: Risk appetite is an integral element of our business and capital planning processes through our Board Risk Committee and Risk Management Council.
+Added: We support our risk management processes and business oversight through the three lines of defense and a governance structure at the Board of Directors and management levels.
+Added: The lines of defense model consists of:
+Added: • First Line of Defense - make each of our businesses and enterprise support areas that generate risk and are principally responsible for owning and managing the day-to-day risk-taking activities in accordance with the risk frameworks.
+Added: • Second Line of Defense - consists of Risk Management and Compliance Departments responsible for developing risk frameworks, overseeing risk-taking activities and identifying, assessing, monitoring and reporting on enterprise aggregate risks.
+Added: • Third Line of Defense - is Internal Audit and provides independent assurance on the effectiveness of controls and risk management practices across our first and second lines of defense.
+Added: Our Board of Directors is responsible for the oversight of management on behalf of our stockholders.
+Added: The Board of Directors has assistance in carrying out its duties and may delegate authority through the following standing Board Committees:
+Added: • Audit Committee - provides oversight of our internal and external audit processes.
+Added: In addition, monitors the integrity of the consolidated financial statements, internal controls over financial reporting, qualifications and independence of our audit function.
+Added: • Nominating and Corporate Governance Committee - responsible for selecting and recommending nominees for election to the FNB and FNBPA Boards of Directors.
+Added: • Compensation Committee - reviews performance and compensation of senior management and reviews and implements compensation and benefit matters having corporate-wide significance.
+Added: • Executive Committee - joint session of the FNB and FNBPA Board of Directors to cover special matters, as deemed necessary, in between regularly scheduled board meetings.
+Added: • Risk Committee - provides oversight of our risk management and assessment processes, including the review and approval of risk management policies, procedures and practices, to identify, assess, monitor and report material risks.
+Added: • Credit Fair Lending and CRA Committee - responsible for providing oversight of credit and lending strategies an objectives.
+Added: The Risk Committee serves as the primary point of contact between our Board of Directors and the Risk Management Council (RMC), which is the senior management level committee responsible for identifying, assessing, monitoring and reporting on enterprise-wide risks.
+Added: The Risk Committee and RMC are supported by other risk management committees, including Credit Risk Committees, Operational Risk Committee, Compliance Risk Committee and ALCO.
+Added: Risk appetite is an integral element of our enterprise risk management framework and of our business and capital planning processes through our Board Risk Committee and Risk Management Council.
We use our risk appetite processes to promote appropriate alignment of risk, capital and performance tactics, while also considering risk capacity and appetite constraints from both financial and non-financial risks.
−Removed: Our top-down risk appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions.
+Added: The Board of Directors adopted an enterprise risk appetite that defines acceptable risk limits under which we seek to operate in pursuit of optimizing returns.
+Added: As such, we monitor a series of Key Risk Indicators for various business lines and operation units to measure performance alignment with our stated risk appetite.
+Added: Our top-down risk
+Added: appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions.
Our Board Risk Committee, in collaboration with our Risk Management Council, approves our risk appetite on an annual basis, or more frequently, as needed to reflect changes in the risk, regulatory, economic and strategic plan environments, with the goal of ensuring that our risk appetite remains consistent with our strategic plans and business operations, regulatory environment and our shareholders' expectations.
−Removed: Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee.
−Removed: As noted above, we have a Risk Management Council comprised of senior management.
−Removed: The purpose of this committee is to provide regular oversight of specific areas of risk with respect to the level of risk and risk management structure.
−Removed: Management has also established an Operational Risk Committee that is responsible for identifying, evaluating and monitoring operational risks across FNB, evaluating and approving appropriate remediation efforts to address identified operational risks and providing periodic reports concerning operational risks to the Risk Management Council.
−Removed: The Risk Management Council reports on a regular basis to the Risk Committee of our Board of Directors regarding our enterprise-wide risk profile and other significant risk management issues.
−Removed: Our Chief Risk Officer is responsible for the design and implementation of our enterprise-wide risk management strategy and framework through the multiple second line of defense areas, including the following departments, which all report to the Chief Risk Officer, to ensure the coordinated and consistent implementation of risk management initiatives and strategies on a day-to-day basis:
−Removed: • Enterprise-Wide Risk Management Department - conducts risk and control assessments across all our business and operational areas to ensure the appropriate risk identification, risk management and reporting of risks enterprise-wide.
−Removed: • Fraud Risk Department - monitors for internal and external fraud risk across all of our business and operational units.
−Removed: • Loan Review Department - conducts independent testing of our loan risk ratings to ensure their accuracy, which is instrumental to calculating our ACL.
−Removed: • Model Risk Management Department - oversees validation and testing of all models used in managing risk across our company.
−Removed: • Third-Party Risk Management Department - ensures effective risk management and oversight of third-party relationships throughout the vendor life cycle.
−Removed: • Anti-Money Laundering and Bank Secrecy Act Department - monitors for compliance with money laundering risk and associated regulatory compliance requirements.
−Removed: • Appraisal Review Department - facilitates independent ordering and review of real estate appraisals obtained for determining the value of real estate pledged as collateral for loans to customers.
−Removed: • Compliance Department - develops policies and procedures and monitors compliance with applicable laws and regulations which govern our business operations.
−Removed: • Information and Cyber Security Department - maintains a risk assessment of our information and cybersecurity risks and ensures appropriate controls are in place to manage and control such risks, using the National Institute of Standards and Technology framework for improving critical infrastructure by measuring and evaluating the effectiveness of information and cybersecurity controls.
−Removed: This department also oversees our disaster recovery planning and testing efforts to allow us to be capable and ready for business resumption in the event of a disaster.
−Removed: As discussed in more detail under the COVID-19 section of this Report, we have in place various business and emergency continuity plans to respond to different crises and circumstances which include rapid deployment of our Crisis Management Team, Incident Management Team and Business Continuity Coordinators to activate our plans for various types of emergency circumstances.
−Removed: Further, our audit function performs an independent assessment of our internal controls environment and plays an integral role in testing the operation of the internal controls systems and reporting findings to management and our Audit Committee.
−Removed: Each of the Risk, Audit, Credit Risk and CRA Committees of our Board of Directors regularly report on risk-related matters to the full Board of Directors.
−Removed: In addition, both the Risk Committee of our Board of Directors and our Risk Management Council regularly assess our enterprise-wide risk profile and provide guidance on actions needed to address key and emerging risk issues.
+Added: Our Enterprise Risk Management Framework provides the practices to identify, assess, control and monitor and report on risk across the organization.
+Added: Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, and our aggregate risk profile, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee.
The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to:
2 unchanged sentences
• oversee and assess how senior management evaluates risk;
−Removed: • assess appropriately the quality of our enterprise-wide risk management process.
+Added: • assess appropriately the quality of our enterprise-wide risk management processes.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP
6 unchanged sentences
Tax benefit of merger-related expense (465) (9,504) (370)
−Removed: COVID-19 expense — — 11,276
−Removed: Tax benefit of COVID-19 expense — — (2,368)
−Removed: Gain on sale of Visa class B stock — — (13,818)
−Removed: Tax expense of gain on sale of Visa class B stock — — 2,902
−Removed: Loss on FHLB debt extinguishment and related hedge terminations — — 25,611
−Removed: Tax benefit of loss on FHLB debt extinguishment and related hedge terminations — — (5,378)
Provision expense related to acquisitions — 28,515 —
2 unchanged sentences
Tax benefit of branch consolidation costs — (1,473) (555)
−Removed: Service charge refunds — — 3,780
−Removed: Tax benefit of service charge refunds — — (794)
+Added: FDIC special assessment 29,938 — —
+Added: Tax benefit of FDIC special assessment (6,287) — —
+Added: Loss on securities restructuring 67,354 — —
+Added: Tax benefit of loss on securities restructuring (14,144) — —
+Added: Valuation allowance on auto loans held-for-sale 16,687 — —
+Added: Tax benefit of valuation allowance on auto loans held-for-sale (3,504) — —
Operating net income available to common stockholders (non-GAAP) $ 568,604 $ 494,893 $ 400,044
The table above shows how operating net income available to common stockholders (non-GAAP) is derived from amounts reported in our financial statements.
−Removed: We believe certain charges such as merger expenses, initial provision for non-PCD loans acquired, branch consolidation costs, service charge refunds and COVID-19 expenses are not organic costs to run our operations and facilities.
−Removed: The merger expenses and branch consolidation costs principally represent expenses to satisfy contractual obligations of the acquired entity or closed branches without any useful ongoing benefit to us.
+Added: We believe certain charges such as merger expenses, FDIC special assessment, loss on securities restructuring, valuation allowance on auto loans held-for-sale, initial provision for non-PCD loans acquired and branch consolidation costs are not organic costs to run our operations and facilities.
These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.
−Removed: Similarly, gains on sale of Visa class B stock and losses on FHLB debt extinguishment and related hedge terminations are not organic to our operations.
−Removed: The COVID-19 expenses represent special company initiatives to support our front-line employees and the communities we serve during an unprecedented time of a pandemic.
Operating earnings per diluted common share
3 unchanged sentences
Tax benefit of merger-related expense — (0.03) —
−Removed: COVID-19 expense — — 0.03
−Removed: Tax benefit of COVID-19 expense — — (0.01)
−Removed: Gain on sale of Visa class B stock — — (0.04)
−Removed: Tax expense of gain on sale of Visa class B stock — — 0.01
−Removed: Loss on FHLB debt extinguishment and related hedge terminations — — 0.08
−Removed: Tax benefit of loss on FHLB debt extinguishment and related hedge terminations — — (0.02)
Provision expense related to acquisitions — 0.08 —
2 unchanged sentences
Tax benefit of branch consolidation costs — — —
−Removed: Service charge refunds — — 0.01
−Removed: Tax benefit of service charge refunds — — —
+Added: FDIC special assessment 0.08 — —
+Added: Tax benefit of FDIC special assessment (0.02) — —
+Added: Loss on securities restructuring 0.19 — —
+Added: Tax benefit of loss on securities restructuring (0.04) — —
+Added: Valuation allowance on auto loans held-for-sale 0.05 — —
+Added: Tax benefit of valuation allowance on auto loans held-for-sale (0.01) — —
Operating earnings per diluted common share (non-GAAP) $ 1.57 $ 1.40 $ 1.24
12 unchanged sentences
(1) Excludes loan servicing rights.
+Added: Operating return on average tangible common equity
+Added: (dollars in thousands) 2023 2022 2021
+Added: Operating net income available to common stockholders (annualized) $ 568,604 $ 494,893 $ 400,044
+Added: Amortization of intangibles, net of tax (annualized) 15,892 10,956 9,573
+Added: Tangible operating net income available to common stockholders (annualized) (non-GAAP) $ 584,496 $ 505,849 $ 409,617
+Added: Average total stockholders' equity $ 5,851,082 $ 5,475,843 $ 5,033,188
+Added: Average preferred stockholders' equity (106,882) (106,882) (106,882)
+Added: Average intangible assets (1)
+Added: (2,556,119) (2,481,533) (2,310,419)
+Added: Average tangible common equity (non-GAAP) $ 3,188,081 $ 2,887,428 $ 2,615,887
+Added: Operating return on average tangible common equity (non-GAAP) 18.33 % 17.52 % 15.66 %
+Added: (1) Excludes loan servicing rights.
Return on average tangible assets
21 unchanged sentences
(1) Excludes loan servicing rights.
−Removed: Tangible equity to tangible assets (period-end)
+Added: Tangible equity to tangible assets
December 31 2023 2022
8 unchanged sentences
Tangible assets (non-GAAP) $ 43,611,340 $ 41,158,944
−Removed: Tangible equity / tangible assets (period-end) (non-GAAP) 7.50 % 7.65 %
+Added: Tangible equity to tangible assets (non-GAAP) 8.03 % 7.50 %
(1) Excludes loan servicing rights.
−Removed: Tangible common equity / tangible assets (period-end)
+Added: Tangible common equity to tangible assets
December 31 2023 2022
9 unchanged sentences
Tangible assets (non-GAAP) $ 43,611,340 $ 41,158,944
−Removed: Tangible common equity / tangible assets (period-end) (non-GAAP) 7.24 % 7.36 %
+Added: Tangible common equity to tangible assets (non-GAAP) 7.79 % 7.24 %
(1) Excludes loan servicing rights.
+Added: Net loan charge-offs, excluding isolated commercial loan charge-off due to alleged fraud to total average loans and leases
+Added: Year Ended December 31 2023
+Added: (dollars in thousands)
+Added: Net loan charge-offs $ 67,755
+Added: Isolated commercial loan charge-off (31,900)
+Added: Net loan charge-offs, excluding isolated commercial loan charge-off (non-GAAP) $ 35,855
+Added: Total average loans and leases $ 31,372,574
+Added: Net loan charge-offs / total average loans and leases 0.22 %
+Added: Net loan charge-offs, excluding isolated commercial loan charge-off to total average loans and leases (non-GAAP) 0.11 %
+Added: Operating non-interest income
+Added: Year Ended December 31 2023 2022
+Added: (dollars in thousands)
+Added: Non-interest income $ 254,332 $ 323,553
+Added: Loss on securities restructuring 67,354 —
+Added: Operating non-interest income (non-GAAP) $ 321,686 $ 323,553
+Added: Operating non-interest expense
+Added: Year Ended December 31 2023 2022
+Added: (dollars in thousands) $ 915,436 $ 826,392
+Added: Non-interest expense
+Added: Branch consolidations — (7,016)
+Added: Merger-related (2,215) (45,259)
+Added: FDIC special assessment (29,938) —
+Added: Valuation allowance on auto loans held-for-sale (16,687) —
+Added: Operating non-interest expense (non-GAAP) $ 866,596 $ 774,117
Key Performance Indicator s
6 unchanged sentences
Merger-related expense (2,215) (45,259) (1,764)
−Removed: COVID-19 expense — — (11,276)
Branch consolidation costs — (7,016) (2,644)
−Removed: Tax credit-related project impairment — — (4,101)
+Added: FDIC special assessment (29,938) — —
+Added: Valuation allowance on auto loans held-for-sale (16,687) — —
Adjusted non-interest expense $ 844,965 $ 758,557 $ 714,045
2 unchanged sentences
Non-interest income 254,332 323,553 330,419
−Removed: Net securities gains (48) (193) (282)
−Removed: Gain on sale of Visa class B stock — — (13,818)
−Removed: Loss on FHLB debt extinguishment and related hedge terminations — — 25,611
−Removed: Service charge refunds — — 3,780
+Added: Net securities losses (gains) 67,432 (48) (193)
Adjusted net interest income (FTE) + non-interest income $ 1,650,609 $ 1,454,573 $ 1,247,650
3 unchanged sentences
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.