FNB CORP/PA/ 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MD&A represents an overview of and highlights material changes to our financial condition and consolidated results of operations at and for the nine-month periods ended September 30, 2024 and 2023. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained herein and our 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024. Our results of operations for the nine months ended September 30, 2024 are not necessarily indicative of results expected for the full year. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This Report may contain statements regarding our outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset quality levels, financial position and other matters regarding or affecting our current or future business and operations. These statements can be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve various assumptions, risks and uncertainties which can change over time. Actual results or future events may be different from those anticipated in our forward-looking statements and may not align with historical performance and events. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance upon such statements. Forward-looking statements are typically identified by words such as "believe," "plan," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "will," "should," "project," "goal," and other similar words and expressions. We do not assume any duty to update forward-looking statements, except as required by federal securities laws. Our forward-looking statements are subject to the following principal risks and uncertainties: • Our business, financial results and balance sheet values are affected by business, regulatory, economic and political circumstances, including, but not limited to: (i) developments with respect to the U.S. and global financial markets; (ii) supervision, regulation, enforcement and other actions by several governmental agencies, including the FRB, FDIC, Financial Stability Oversight Council (FSOC), DOJ, CFPB, UST, OCC and Department of Housing and Urban Development (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, growth opportunities, money supply, market interest rates or otherwise affect business activities of the financial services industry; (iii) a slowing of the U.S. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S. • Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards. • Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues. Our ability to anticipate, react quickly and continue to respond to technological changes and significant adverse industry and economic events can also impact our ability to respond to customer needs and meet competitive demands. • Business and operating results can also be affected by difficult to predict uncertainties, such as widespread natural and other disasters, wars, pandemics, global events and geopolitical instability, including the Ukraine-Russia conflict and the potential for broader conflict in the Middle East, 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. or global economy and financial markets generally, or us or our counterparties, customers or third-party vendors specifically. • Our ability to take certain capital actions, including returning capital to shareholders, is subject to us meeting or exceeding minimum capital levels. Our regulatory capital ratios in the future will depend upon, among other things, our financial performance, the scope and terms of capital regulations then in effect and management actions affecting the composition of our balance sheet. • Historically we have grown our business in part through acquisitions, new strategic and business initiatives and new products. Potential risks and uncertainties include those presented by the nature of the business acquired, the strategic or business initiative or the new product, including in some cases those associated with our entry into new business lines or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, increased scrutiny associated with the regulatory 58 approval process, other regulatory issues stemming from such acquisitions or new initiatives or product lines, the integration of the acquired businesses into us after closing or any failure to execute strategic, risk management or operational plans. • Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation. Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and the ability to attract and retain talent. These developments could include: ◦ Policies and priorities of the current U.S. presidential administration, including legislative and regulatory reforms, more aggressive approaches to supervisory or enforcement priorities with consumer and anti-discrimination 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, employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles. ◦ Ability to continue to attract, develop and retain key talent. ◦ Changes to laws and regulations, including changes affecting the oversight of the financial services industry along with changes in enforcement and interpretation of such laws and regulations, and changes to accounting standards governing bank capital requirements, loan loss reserves and liquidity standards. ◦ Changes in governmental monetary and fiscal policies, including interest rate policies and strategies of the FOMC. ◦ Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries. These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, including financial and other types of commitments, and in additional expenses and collateral costs, and may cause reputational harm to us. ◦ Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies. ◦ Business and operating results that are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques. ◦ The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL. ◦ A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns. ◦ Increased funding costs and market volatility due to market illiquidity and competition for funding. 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 of our 2023 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 2024 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. We have included our web address as an inactive textual reference only. Information on our website is not part of our SEC filings. APPLICATION OF CRITICAL ACCOUNTING POLICIES A description of our critical accounting policies is included in the MD&A section of our 2023 Annual Report on Form 10-K filed with the SEC on February 26, 2024 under the heading “Application of Critical Accounting Policies”. There have been no significant changes in critical accounting policies or the assumptions and judgments utilized in applying these policies since December 31, 2023. 59 USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible common equity to tangible assets, pre-provision net revenue (reported), operating pre-provision net revenue , operating non-interest expense, net loan charge-offs, excluding an isolated commercial loan charge-off due to alleged fraud (annualized) to total average loans and leases, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends. These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. When non-GAAP financial measures are disclosed, the SEC's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”. Management believes items such as merger expenses, preferred deemed dividend at redemption, FDIC special assessment, software impairment, loss on indirect auto loan sales 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. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction. To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable-equivalent amounts for 2024 and 2023 were calculated using a federal statutory income tax rate of 21%. FINANCIAL SUMMARY Net income available to common stockholders for the third quarter of 2024 was $110.1 million or $0.30 per diluted common share, compared to net income available to common stockholders for the third quarter of 2023 of $143.3 million or $0.40 per diluted common share. On an operating basis, earnings per diluted common share (non-GAAP) was $0.34 for the third quarter of 2024, excluding $0.04 per share of significant items impacting earnings, while the third quarter of 2023 was $0.40. Our third quarter operating earnings per diluted common share (non-GAAP) totaled $0.34 with significant tangible book value per share (non-GAAP) growth of 15% year-over-year to a record $10.33, strong sequential annualized revenue growth of 9%, with record non-interest income of $90 million, and a solid operating return on average tangible common equity (non-GAAP) of 14%. We had robust linked-quarter deposit growth of $1.8 billion, or 5%, highlighting our ability to leverage our significant client relationships, digital and data analytics capabilities as part of our Clicks-to-Bricks strategy and our diverse geographic footprint to manage the loan-to-deposit ratio which improved nearly 500 basis points from last quarter to 91.7%. Our capital levels reached all-time highs with a tangible common equity ratio (non-GAAP) at 8.2% and CET1 ratio at 10.4%. Our credit metrics ended the quarter at solid levels with the reserve coverage ratio up slightly given our proactive approach to credit risk management. Income Statement Highlights (third quarter of 2024 compared to third quarter of 2023, except as noted) • Net interest income totaled $323.3 million, an increase of $7.4 million, or 2.4%, from the prior quarter, primarily due to improved earning asset yields and loan growth, as well as lower short-term borrowing levels, offsetting the higher cost of interest-bearing deposits. • On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) remained stable with a 1 basis point decline to 3.08%, reflecting an 8 basis point increase in the total yield on earning assets (non-GAAP) and a 10 basis point increase 60 in the total cost of funds. In September 2024, the FOMC lowered the targeted Federal Funds interest rate by 50 basis points. • The provision for credit losses was $23.4 million , an increase of $3.2 million from the prior quarter, with net charge-offs of $21.5 million compared to $7.8 million in the prior quarter. • Non-interest income totaled a record $89.7 million, an increase of 10.0% from the year-ago quarter, benefiting from our diversified business model and related revenue generation. • Pre-provision net revenue (non-GAAP) totaled $163.6 million, a 7.7% decrease from the prior quarter. On an operating basis, pre-provision net revenue (non-GAAP) totaled $178.8 million, a 0.5% increase from the prior quarter, driven by continued strong non-interest income generation and growth in net interest income, offset by an increase in non-interest expense. • Non-interest expense totaled $249.4 million, compared to $226.6 million in the prior quarter, including $15.3 million (pre-tax) of significant items in the third quarter of 2024 and $0.8 million in the second quarter of 2024. When adjusting for the significant items, non-interest expense increased $8.4 million, or 3.7%, linked-quarter on an operating basis (non-GAAP). • The efficiency ratio (non-GAAP) remained at a solid level of 55.2%, compared to 51.7% for the year-ago quarter and 54.4% for the prior quarter. Balance Sheet Highlights • Period-end total loans and leases increased $1.6 billion, or 4.9%, compared to September 30, 2023. Commercial loans and leases increased $1.0 billion, or 5.1%, and consumer loans increased $530.9 million, or 4.4%. Our loan growth was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint. • On a linked-quarter basis, period-end total loans and leases decreased $39.6 million, or 0.1%, with an increase in commercial loans and leases of $92.6 million and a decrease in consumer loans of $132.2 million. In September 2024, we sold $431 million of performing indirect auto loans as part of our balance sheet repositioning actions. The related loss on sale of $11.6 million is reflected as a significant item impacting earnings in other non-interest expense. The loan sale positively impacted the loan-to-deposit ratio by approximately 120 basis points and the CET1 regulatory capital ratio by approximately 10 basis points. Excluding the indirect auto loan sale, period-end total loans and leases increased $391.4 million, or 1.2%. • Period-end total deposits increased $2.2 billion, or 6.2%, compared to September 30, 2023, driven by an increase of $1.9 billion in shorter-term time deposits and $1.5 billion in interest-bearing demand deposits offsetting the decline in non-interest-bearing demand deposits of $833.2 million and savings deposits of $357.6 million as customers continued to opt for higher-yielding deposit products given the interest rate environment. • On a linked-quarter basis, period-end total deposits increased $1.8 billion, or 5.1%, with an increase in interest-bearing deposits of $1.3 billion, or 8.9%, and shorter-term time deposits of $783.4 million, offsetting the slight decline in non-interest-bearing demand deposits of $191.5 million and savings deposits of $117.0 million. The mix of non-interest-bearing deposits to total deposits equaled 27% at September 30, 2024, compared to 29% at the prior quarter-end, reflecting the strong interest-bearing deposit growth and fairly stable non-interest-bearing deposit balances. • The loan-to-deposit ratio was 92% at September 30, 2024, compared to the prior quarter at 96%, reflecting $1.8 billion of linked-quarter deposit growth and the previously mentioned indirect auto loan sale. • The ratio of non-performing loans plus OREO to total loans and leases plus OREO totaled 0.39%, compared to 0.33% in the prior quarter. Total delinquency increased 16 basis points to 0.79%, compared to 0.63% at September 30, 2023. While these two metrics increased compared to the prior periods shown, the overall asset quality metrics continue to remain near historically low levels. • The third quarter of 2024 reflected net charge-offs of $21.5 million, or 0.25% annualized of total average loans, compared to $37.7 million, or 0.47% annualized, in the third quarter of 2023. 61 • The ACL on loans and leases was $420.2 million, an increase of $19.5 million compared to September 30, 2023, with the ratio of the ACL to total loans and leases stable at 1.25%. • Tangible book value per common share (non-GAAP) of $10.33, increased $1.31, or 14.5%, compared to September 30, 2023. AOCI reduced the tangible book value per common share (non-GAAP) by $0.43 as of September 30, 2024, primarily due to the impact of higher interest rates on the fair value of AFS securities, compared to a $1.06 reduction as of September 30, 2023, an improvement of $0.63 on a year-over-year basis. • Our capital levels reached all-time highs with the tangible common equity ratio (non-GAAP) at 8.2% and the CET1 regulatory capital ratio at 10.4%. 62 TABLE 1 Three Months Ended September 30, Quarterly Results Summary 2024 2023 Reported results Net income available to common stockholders (millions) $ 110.1 $ 143.3 Net income per diluted common share 0.30 0.40 Book value per common share 17.38 16.13 Operating results (non-GAAP) Operating net income available to common stockholders (millions) 122.2 143.3 Operating net income per diluted common share 0.34 0.40 Average diluted common shares outstanding (thousands) 362,426 361,778 Significant items impacting earnings (1) (millions) Pre-tax software impairment $ (3.7) $ — After-tax impact of software impairment (2.9) — Pre-tax loss on indirect auto loan sale (11.6) — After-tax impact of loss on indirect auto loan sale (9.1) — Total significant items pre-tax $ (15.3) $ — Total significant items after-tax $ (12.0) $ — Capital measures Common equity tier 1 10.44 % 10.17 % Tangible common equity to tangible assets (non-GAAP) 8.17 7.54 Tangible book value per common share (non-GAAP) $ 10.33 $ 9.02 Nine Months Ended September 30, Year-to-Date Results Summary 2024 2023 Reported results Net income available to common stockholders (millions) $ 349.5 $ 428.1 Net income per diluted common share 0.96 1.18 Operating results (non-GAAP) Operating net income available to common stockholders (millions) 368.5 429.9 Operating net income per diluted common share 1.02 1.18 Average diluted common shares outstanding (thousands) 362,583 363,105 Significant items impacting earnings (1) (millions) Preferred dividend equivalent at redemption $ (4.0) $ — Pre-tax merger-related expenses — (2.2) After-tax impact of merger-related expenses — (1.8) Pre-tax branch consolidation costs (1.2) — After-tax impact of branch consolidation costs (0.9) — Pre-tax FDIC assessment (5.2) — After-tax impact of FDIC assessment (4.1) — Pre-tax software impairment (3.7) — After-tax impact of software impairment (2.9) — Pre-tax loss on indirect auto loan sales (9.0) — After-tax impact of loss on indirect auto loan sales (7.1) — Total significant items after-tax $ (19.0) $ (1.8) (1) Favorable (unfavorable) impact on earnings 63 RESULTS OF OPERATIONS Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023 Net income available to common stockholders for the three months ended September 30, 2024 was $110.1 million or $0.30 per diluted common share, compared to $143.3 million or $0.40 per diluted common share for the three months ended September 30, 2023. On an operating basis, third quarter of 2024 earnings per diluted common share (non-GAAP) was $0.34, excluding the $11.6 million loss on indirect auto loan sale and $3.7 million software impairment. By comparison, third quarter of 2023 earnings per diluted common share (non-GAAP) was $0.40 on an operating basis. Net interest income totaled $323.3 million, a slight decrease of $3.3 million, or 1.0%, primarily due to higher deposit costs resulting from balance migration to higher yielding deposit products, partially offset by growth in earning assets and higher earning asset yields. The net interest margin (FTE) (non-GAAP) decreased 18 basis points to 3.08%. The yield on earning assets (non-GAAP) increased 40 basis points to 5.51%, driven by a 50 basis point increase on investment securities to 3.33% which benefited from the balance sheet restructuring in late 2023 and a 34 basis point increase in yields on loans to 6.03%. Total cost of funds increased 63 basis points to 2.56%, with a 72 basis point increase in interest-bearing deposit costs to 3.08% and an increase of 66 basis points in total borrowing costs. The provision for credit losses was $23.4 million, compared to $25.9 million. Non-interest income increased $8.1 million, or 10.0%, reflecting increased service charges income, mortgage banking operations income, wealth management revenues, bank owned life insurance and dividends on non-marketable equity securities, offset by reduced capital markets income and interchange and card transaction fees. Non-interest expense for the third quarter of 2024 increased $31.4 million, or 14.4%. Excluding significant items impacting earnings of $15.3 million, operating non-interest expense increased $16.2 million, or 7.4%, on an operating basis (non-GAAP). The biggest drivers of the non-interest expense increase were salaries and benefits expense with an increase of $12.7 million, or 11.2%, primarily from higher production-related commissions and normal annual merit increases, net occupancy and equipment expense with an increase of $4.3 million, or 10.3%, largely due to $3.7 million of software impairment and other non-interest expense, reflecting the $11.6 million loss on the indirect auto loan sale. Income taxes of $30.0 million increased $11.1 million, or 58.8%, as we had a reduction in 2023 income taxes due to renewable energy investment tax credits recognized in the third quarter of 2023 as part of a solar project financing transaction. Financial highlights are summarized below: TABLE 2 Three Months Ended September 30, $ % (in thousands, except per share data) 2024 2023 Change Change Net interest income $ 323,329 $ 326,581 $ (3,252) (1.0) % Provision for credit losses 23,438 25,934 (2,496) (9.6) Non-interest income 89,688 81,551 8,137 10.0 Non-interest expense 249,431 217,998 31,433 14.4 Income taxes 30,045 18,919 11,126 58.8 Net income 110,103 145,281 (35,178) (24.2) Less: Preferred stock dividends — 2,010 (2,010) (100.0) Net income available to common stockholders $ 110,103 $ 143,271 $ (33,168) (23.2) % Earnings per common share – Basic $ 0.30 $ 0.40 $ (0.10) (25.0) % Earnings per common share – Diluted 0.30 0.40 (0.10) (25.0) Cash dividends per common share 0.12 0.12 — — 64 The following table presents selected financial ratios and other relevant data used to analyze our performance: TABLE 3 Three Months Ended September 30, 2024 2023 Return on average equity 7.10 % 9.80 % Return on average tangible common equity (1) 12.43 18.15 Return on average assets 0.92 1.28 Return on average tangible assets (1) 1.01 1.39 Book value per common share $ 17.38 $ 16.13 Tangible book value per common share (1) 10.33 9.02 Equity to assets 13.02 % 12.96 % Average equity to average assets 13.01 13.04 Common equity to assets 13.02 12.72 Tangible common equity to tangible assets (1) 8.17 7.54 Common equity tier 1 capital ratio 10.44 10.17 Dividend payout ratio 39.58 30.34 (1) Non-GAAP 65 The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities: TABLE 4 Three Months Ended September 30, 2024 2023 (dollars in thousands) Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Assets Interest-earning assets: Interest-bearing deposits with banks $ 1,003,513 $ 11,276 4.47 % $ 1,223,226 $ 12,835 4.16 % Taxable investment securities (1) 6,177,736 48,317 3.13 6,046,294 37,140 2.46 Tax-exempt investment securities (1)(2) 1,023,050 8,816 3.45 1,051,475 9,107 3.46 Loans held for sale 300,326 5,729 7.61 109,568 2,416 8.80 Loans and leases (2)(3) 33,802,701 511,564 6.03 31,739,561 454,780 5.69 Total interest-earning assets (2) 42,307,326 585,702 5.51 40,170,124 516,278 5.11 Cash and due from banks 414,536 445,341 Allowance for credit losses (427,826) (415,722) Premises and equipment 501,588 461,598 Other assets 4,620,414 4,432,826 Total assets $ 47,416,038 $ 45,094,167 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing demand $ 15,215,815 108,762 2.84 $ 13,997,552 75,840 2.15 Savings 3,281,732 10,406 1.26 3,676,239 9,875 1.07 Certificates and other time 7,234,412 79,868 4.39 5,698,129 53,293 3.71 Total interest-bearing deposits 25,731,959 199,036 3.08 23,371,920 139,008 2.36 Short-term borrowings 2,345,960 29,934 5.06 2,245,089 23,207 4.09 Long-term borrowings 2,314,914 30,473 5.24 1,974,017 24,565 4.94 Total interest-bearing liabilities 30,392,833 259,443 3.39 27,591,026 186,780 2.69 Non-interest-bearing demand 9,867,006 10,772,923 Total deposits and borrowings 40,259,839 2.56 38,363,949 1.93 Other liabilities 985,545 850,382 Total liabilities 41,245,384 39,214,331 Stockholders’ equity 6,170,654 5,879,836 Total liabilities and stockholders’ equity $ 47,416,038 $ 45,094,167 Net interest-earning assets $ 11,914,493 $ 12,579,098 Net interest income (FTE) (2) 326,259 329,498 Tax-equivalent adjustment (2,930) (2,917) Net interest income $ 323,329 $ 326,581 Net interest spread 2.12 % 2.42 % Net interest margin (2) 3.08 % 3.26 % (1) The average balances and yields earned on securities are based on historical cost. (2) The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis (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. (3) Average loans and leases consist of average total loans, including non-accrual loans, less average unearned income. 66 Net Interest Income Net interest income on an FTE basis (non-GAAP) decreased $3.2 million, or 1.0%, to $326.3 million for the third quarter of 2024, primarily due to higher deposit costs resulting from the continued deposit balance migration to higher yielding products as well as increased total average borrowings, partially offset by growth in earning assets and higher earning asset yields. Average earning assets of $42.3 billion increased $2.1 billion, or 5.3%, driven by an increase in average loans and leases from the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint. Average interest-bearing liabilities of $30.4 billion increased $2.8 billion, or 10.2%, driven by an increase of $2.4 billion in average interest-bearing deposits and an increase in average borrowings of $441.8 million to support strong loan growth. Our net interest margin FTE (non-GAAP) decreased 18 basis points on a year-over-year basis to 3.08%, as the total cost of funds increased 63 basis points to 2.56% which more than offset the increase in the yield on earning assets (non-GAAP) of 40 basis points to 5.51%. The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the three months ended September 30, 2024, compared to the three months ended September 30, 2023: TABLE 5 (in thousands) Volume Rate Net Interest Income (1) Interest-bearing deposits with banks $ (2,355) $ 796 $ (1,559) Securities (2) 592 10,294 10,886 Loans held for sale 2,317 996 3,313 Loans and leases (2) 30,747 26,037 56,784 Total interest income (2) 31,301 38,123 69,424 Interest Expense (1) Deposits: Interest-bearing demand 13,300 19,622 32,922 Savings 284 247 531 Certificates and other time 14,848 11,727 26,575 Short-term borrowings 1,981 4,746 6,727 Long-term borrowings 4,285 1,623 5,908 Total interest expense 34,698 37,965 72,663 Net change (2) $ (3,397) $ 158 $ (3,239) (1) The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes. (2) Interest income amounts are reflected on an FTE basis (non-GAAP) which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. Interest income on an FTE basis (non-GAAP) of $585.7 million for the third quarter of 2024, increased $69.4 million, or 13.4%, from the same quarter of 2023, resulting from the interest rate increases by the FOMC and an increase in average earning assets of $2.1 billion. The increase in earning assets was primarily driven by a $2.1 billion, or 6.5%, increase in average loans and leases, partially offset by a decrease of $219.7 million in average cash balances. Average commercial loan growth of $1.2 billion, or 6.2%, was led by increases of $972.8 million in commercial real estate, $213.8 million in commercial and industrial loans and $62.1 million in commercial leases. The increase in average commercial loans and leases was driven by activity across the footprint, with over half of the year-over-year growth in North and South Carolina. The increase in commercial real estate included fundings on previously originated projects. Average consumer loans increased $819.7 million, or 6.9%, with a $1.4 billion increase in residential mortgages largely due to the continued successful execution in key markets by our expanded mortgage banker team and long-standing strategy of serving the purchase market. This growth was partially offset by a decrease in average indirect auto loans of $528.4 million reflecting the sale of $332 million of such loans that closed in the first quarter of 2024 and $431 million that closed in September of 2024, partially offset by new organic growth in the portfolio. The yield on average earning assets (non-GAAP) increased 40 basis points to 5.51% for the third quarter of 2024, 67 primarily due to higher yields on loans and investment securities, which benefited from the balance sheet restructuring in late 2023 and a 34 basis point increase in yields on loans to 6.03%. Interest expense of $259.4 million for the third quarter of 2024 increased $72.7 million from the same quarter of 2023, primarily due to the higher interest rate environment and an increase in average interest-bearing deposits and borrowings. Average interest-bearing deposits increased $2.4 billion, or 10.1%, while average non-interest-bearing deposits decreased $905.9 million, or 8.4%, and average savings deposits of $394.5 million as customers continued to migrate balances into higher-yielding products. The growth in average total deposits reflected organic growth in new and existing customer relationships. Average short-term borrowings increased $100.9 million, or 4.5%, primarily reflecting an increase of $149.5 million in Federal Funds purchased, partially offset by a decrease of $62.3 million in repurchase agreements. Average long-term borrowings increased $340.9 million, or 17.3%, primarily reflecting an increase in long-term FHLB advances as we have maintained additional liquidity following the banking industry disruption in early 2023 and in a continued effort to support strong loan growth. The rate paid on interest-bearing liabilities increased 70 basis points from 2.69% to 3.39%. The total cost of funds increased 63 basis points to 2.56% with a 72 basis point increase in interest-bearing deposit costs to 3.08%, and an increase of 66 basis points in total borrowing costs to fund the strong loan growth. Since the current interest rate increases began in March 2022, our total cumulative spot deposit beta equaled 40% at August 31, 2024. Provision for Credit Losses Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the provision for credit loss expense and net charge-offs: TABLE 6 Three Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Provision for credit losses on loans and leases $ 22,850 $ 25,597 $ (2,747) (10.7) % Provision for unfunded loan commitments 601 364 237 65.1 Total provision for credit losses on loans and leases 23,451 25,961 (2,510) (9.7) Provision for securities (13) (27) 14 n/m Total provision for credit losses $ 23,438 $ 25,934 $ (2,496) (9.6) % Net loan charge-offs $ 21,450 $ 37,699 $ (16,249) (43.1) % Net loan charge-offs (annualized) / total average loans and leases 0.25 % 0.47 % n/m - not meaningful Provision for credit losses was $23.4 million during the third quarter of 2024, a decrease of $2.5 million from the same period of 2023. The third quarter of 2024 is comprised of a $22.9 million provision for loans and leases outstanding and a $0.6 million provision for unfunded loan commitments. The third quarter of 2024 reflected net charge-offs of $21.5 million, or 0.25% annualized of total average loans, compared to $37.7 million, or 0.47% annualized, in the third quarter of 2023. During the third quarter of 2023, there was a $31.9 million isolated commercial loan that was charged off due to alleged fraud. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses on Loans and Leases section of this Management’s Discussion and Analysis. 68 Non-Interest Income The breakdown of non-interest income for the three months ended September 30, 2024 and 2023 is presented in the following table: TABLE 7 Three Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Service charges $ 24,024 $ 21,245 $ 2,779 13.1 % Interchange and card transaction fees 12,922 13,521 (599) (4.4) Trust services 11,120 10,526 594 5.6 Insurance commissions and fees 5,118 5,047 71 1.4 Securities commissions and fees 7,876 6,577 1,299 19.8 Capital markets income 6,194 7,077 (883) (12.5) Mortgage banking operations 5,540 3,914 1,626 41.5 Dividends on non-marketable equity securities 6,560 5,779 781 13.5 Bank owned life insurance 6,470 3,196 3,274 102.4 Net securities gains (losses) (28) (55) 27 — Other 3,892 4,724 (832) (17.6) Total non-interest income $ 89,688 $ 81,551 $ 8,137 10.0 % Total non-interest income increased by $8.1 million, or 10.0%, to $89.7 million for the third quarter of 2024, compared to $81.6 million for the third quarter of 2023. The variances in the individual non-interest income items are explained in the following paragraphs. Service charges of $24.0 million increased $2.8 million, or 13.1%, with strong treasury management activity and higher consumer transaction levels. Wealth management revenues increased $1.9 million, or 11.1%, as securities commissions and fees and trust income increased 19.8% and 5.6%, respectively, through continued strong contributions across the geographic footprint and a $949.3 million, or 11.1%, increase in the market value of assets under management to $9.5 billion. Capital markets income decreased $0.9 million, or 12.5%, reflecting lower commercial customer transaction activity. Mortgage banking operations income increased $1.6 million, or 41.5%, driven by improved gain on sale, partially offset by an MSR impairment of $2.8 million in the third quarter of 2024 reflecting accelerating prepayment speed assumptions given the recent declines in mortgage rates at the end of the quarter. During the third quarter of 2024, we sold $339.2 million of residential mortgage loans, compared to $334.4 million for the same period of 2023. Bank owned life insurance increased $3.3 million, or 102.4%, reflecting higher life insurance claims. 69 Non-Interest Expense The breakdown of non-interest expense for the three months ended September 30, 2024 and 2023 is presented in the following table: TABLE 8 Three Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Salaries and employee benefits $ 126,066 $ 113,351 $ 12,715 11.2 % Net occupancy 22,384 18,241 4,143 22.7 Equipment 23,469 23,332 137 0.6 Amortization of intangibles 4,376 5,040 (664) (13.2) Outside services 24,383 20,796 3,587 17.2 Marketing 6,023 5,419 604 11.1 FDIC insurance 10,064 8,266 1,798 21.8 Bank shares and franchise taxes 3,931 3,927 4 0.1 Other 28,735 19,626 9,109 46.4 Total non-interest expense $ 249,431 $ 217,998 $ 31,433 14.4 % Total non-interest expense of $249.4 million for the third quarter of 2024 increased $31.4 million, or 14.4%, from the same period of 2023. Non-interest expense increased $16.2 million, or 7.4%, when excluding significant items of $15.3 million in the third quarter of 2024. The variances in the individual non-interest expense items are explained in the following paragraphs. Salaries and employee benefits of $126.1 million increased $12.7 million, or 11.2%, primarily from normal annual merit increases and higher production-related commissions from strong non-interest income activity, as well as strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure. Net occupancy and equipment of $45.9 million increased $4.3 million, or 10.3%, largely due to the $3.7 million software impairment. Outside services of $24.4 million increased $3.6 million, or 17.2%, due to higher volume-related technology and third-party costs. FDIC insurance of $10.1 million increased $1.8 million, or 21.8%, primarily due to loan growth and balance sheet mix shift. Other non-interest expense of $28.7 million increased $9.1 million, or 46.4%, primarily due to the $11.6 million loss on the indirect auto loan sale during the third quarter of 2024. The following table presents non-interest expense excluding significant items for the three months ended September 30, 2024 and 2023: TABLE 9 Three Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Total non-interest expense, as reported $ 249,431 $ 217,998 $ 31,433 14.4 % Significant items: Software impairment (3,690) — (3,690) Loss on indirect auto loan sale (11,572) — (11,572) Total non-interest expense, excluding significant items (1) $ 234,169 $ 217,998 $ 16,171 7.4 % (1) Non-GAAP 70 Income Taxes The following table presents information regarding income tax expense and certain tax rates: TABLE 10 Three Months Ended September 30, (dollars in thousands) 2024 2023 Income tax expense $ 30,045 $ 18,919 Effective tax rate 21.4 % 11.5 % Statutory federal tax rate 21.0 21.0 Income tax expense was higher due to the recording of renewable energy investment tax credits recognized in the third quarter of 2023 as part of a solar project financing transaction. The increase was also attributable, to a lesser extent, from lower stock compensation vesting deductions, higher disallowance of FDIC premium deductions, and higher levels of proportional amortization for certain tax credit investments resulting from the adoption of FASB ASU 2023-02 on January 1, 2024. The effective tax rate increased for the three months ended September 30, 2024 as a result of these items. Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023 Net income available to common stockholders for the first nine months of 2024 was $349.5 million or $0.96 per diluted common share, compared to $428.1 million or $1.18 per diluted common share for the first nine months of 2023. On an operating basis (non-GAAP), net income available to common stockholders for the first nine months of 2024 was $368.5 million, or $1.02 per diluted common share, compared to $429.9 million or $1.18 per diluted common share for the first nine months of 2023. Net interest income totaled $958.2 million, a decrease of $34.3 million, or 3.5%, compared to $992.5 million. The net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.11%, as the total cost of funds increased 87 basis points to 2.46% with a 100-basis point increase in interest-bearing deposit costs to 2.95%, as well as an increase of 29 basis points in long-term debt costs. These funding cost increases were partially offset by an increase in the yield on earning assets (non-GAAP) of 54 basis points to 5.45%, primarily due to higher yields on loans and investment securities. The provision for credit losses for the first nine months of 2024 totaled $57.5 million, compared to $58.5 million. Non-interest income totaled $265.5 million, a 10.0% increase compared to $241.2 million, reflecting increased mortgage banking operations income, continued strong wealth management revenues, and higher levels of service charges and dividends on non-marketable equity securities, partially offset by lower capital markets income and insurance commissions and fees. Non-interest expense totaled $713.1 million, increasing $63.3 million, or 9.7%. On an operating basis (non-GAAP), non-interest expense totaled $694.1 million, an increase of $46.4 million, or 7.2%, compared to the first nine months of 2023. Salaries and benefits increased $28.6 million, or 8.2%, due largely to normal annual merit increases and higher production-related commissions from strong non-interest income activity. Additionally, net occupancy and equipment expense increased $13.1 million, or 11.0%, due to the $3.7 million software impairment, combined with technology-related investments. FDIC insurance increased $9.6 million, or 41.5%, primarily due to incremental FDIC special assessment expense of $5.2 million to further replenish the FDIC's Deposit Insurance Fund after the 2023 bank failures, as well as loan growth and balance sheet mix changes. 71 Financial highlights are summarized below: TABLE 11 Nine Months Ended September 30, $ % (in thousands, except per share data) 2024 2023 Change Change Net interest income $ 958,227 $ 992,479 $ (34,252) (3.5) % Provision for credit losses 57,517 58,511 (994) (1.7) Non-interest income 265,472 241,249 24,223 10.0 Non-interest expense 713,139 649,870 63,269 9.7 Income taxes 97,572 91,169 6,403 7.0 Net income 355,471 434,178 (78,707) (18.1) Less: Preferred stock dividends 6,005 6,030 (25) (0.4) Net income available to common stockholders $ 349,466 $ 428,148 $ (78,682) (18.4) % Earnings per common share – Basic $ 0.97 $ 1.19 $ (0.22) (18.5) % Earnings per common share – Diluted 0.96 1.18 (0.22) (18.6) Cash dividends per common share 0.36 0.36 — — The following table presents selected financial ratios and other relevant data used to analyze our performance: TABLE 12 Nine Months Ended September 30, 2024 2023 Return on average equity 7.81 % 9.98 % Return on average tangible common equity (1) 13.63 18.68 Return on average assets 1.02 1.31 Return on average tangible assets (1) 1.11 1.43 Book value per common share $ 17.38 $ 16.13 Tangible book value per common share (1) 10.33 9.02 Equity to assets 13.02 % 12.96 % Average equity to average assets 13.07 13.12 Common equity to assets 13.02 12.72 Tangible common equity to tangible assets (1) 8.17 7.54 Common equity tier 1 capital ratio 10.44 10.17 Dividend payout ratio 37.51 30.50 (1) Non-GAAP 72 The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities: TABLE 13 Nine Months Ended September 30, 2024 2023 (dollars in thousands) Average Balance Interest Income/ Expense Yield/ Rate Average Balance Interest Income/ Expense Yield/ Rate Assets Interest-earning assets: Interest-bearing deposits with banks $ 915,076 $ 28,661 4.18 % $ 1,093,206 $ 32,619 3.99 % Taxable investment securities (1) 6,151,500 141,706 3.07 6,114,577 107,860 2.35 Tax-exempt investment securities (1)(2) 1,032,573 26,698 3.45 1,055,505 27,473 3.47 Loans held for sale 216,403 12,534 7.73 109,282 5,854 7.15 Loans and leases (2) (3) 33,148,858 1,482,613 5.97 31,070,965 1,276,718 5.49 Total interest-earning assets (2) 41,464,410 1,692,212 5.45 39,443,535 1,450,524 4.91 Cash and due from banks 404,234 438,456 Allowance for credit losses (417,393) (410,701) Premises and equipment 485,378 454,738 Other assets 4,588,437 4,388,894 Total assets $ 46,525,066 $ 44,314,922 Liabilities Interest-bearing liabilities: Deposits: Interest-bearing demand $ 14,812,493 301,716 2.72 $ 14,170,285 191,992 1.81 Savings 3,351,144 30,541 1.22 3,846,225 26,832 0.93 Certificates and other time 6,728,312 217,137 4.31 4,966,835 116,074 3.12 Total interest-bearing deposits 24,891,949 549,394 2.95 22,983,345 334,898 1.95 Short-term borrowings 2,461,925 90,472 4.90 2,051,516 54,992 3.58 Long-term borrowings 2,179,733 85,364 5.23 1,589,842 58,695 4.94 Total interest-bearing liabilities 29,533,607 725,230 3.28 26,624,703 448,585 2.25 Non-interest-bearing demand 9,908,989 11,061,043 Total deposits and borrowings 39,442,596 2.46 37,685,746 1.59 Other liabilities 999,327 813,745 Total liabilities 40,441,923 38,499,491 Stockholders’ equity 6,083,143 5,815,431 Total liabilities and stockholders’ equity $ 46,525,066 $ 44,314,922 Net interest-earning assets $ 11,930,803 $ 12,818,832 Net interest income (FTE) (2) 966,982 1,001,939 Tax-equivalent adjustment (8,755) (9,460) Net interest income $ 958,227 $ 992,479 Net interest spread 2.17 % 2.66 % Net interest margin (2) 3.11 % 3.39 % (1) The average balances and yields earned on securities are based on historical cost. (2) The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis (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. (3) Average loans and leases consist of average total loans, including non-accrual loans, less average unearned income. 73 Net Interest Income Net interest income on an FTE basis (non-GAAP) totaled $967.0 million, decreasing $35.0 million, or 3.5%, primarily due to higher interest-bearing deposit costs from continued balance migration to higher yielding deposit products in the current interest rate environment and higher total average borrowings, partially offset by growth in earning assets and higher earning asset yields. Average earning assets grew $2.0 billion, or 5.1%, primarily driven by loan growth. Total average commercial loans increased $1.2 billion, or 6.1%. Average consumer loans increased $873.5 million, or 7.7%, with an increase in average residential mortgage loans of $1.3 billion, or 22.9%, largely due to the continued successful execution in key markets by our expanded mortgage banker team and long-standing strategy of serving the purchase market. Partially offsetting the growth in average residential mortgage loans, average indirect installment loans decreased $431.4 million, or 28.1%, reflecting the $332 million sale that closed in the first quarter of 2024 and $431 million sale that closed in September of 2024. Additionally, we reinvested the proceeds of the AFS securities sold in December 2023 as part of our balance sheet repositioning with an average yield of 1.08% into securities with yields approximately 350 basis points higher and a similar duration and convexity profile. For interest-bearing liabilities, average time deposits increased $1.8 billion, or 35.5%, given the continued migration into higher-yielding deposit products. Total average borrowings increased $1.0 billion due to maintaining additional liquidity on the balance sheet following the banking industry disruption in 2023 and to support strong loan growth. The net interest margin (FTE) (non-GAAP) decreased 28 basis points to 3.11%. The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023: TABLE 14 (in thousands) Volume Rate Net Interest Income (1) Interest-bearing deposits with banks $ (5,287) $ 1,329 $ (3,958) Securities (2) 208 32,863 33,071 Loans held for sale 3,405 3,275 6,680 Loans and leases (2) 90,352 115,543 205,895 Total interest income (2) 88,678 153,010 241,688 Interest Expense (1) Deposits: Interest-bearing demand 23,210 86,514 109,724 Savings 806 2,903 3,709 Certificates and other time 46,805 54,258 101,063 Short-term borrowings 16,529 18,951 35,480 Long-term borrowings 22,494 4,175 26,669 Total interest expense 109,844 166,801 276,645 Net change (2) $ (21,166) $ (13,791) $ (34,957) (1) The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes. (2) Interest income amounts are reflected on an FTE basis (non-GAAP) which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. 74 Provision for Credit Losses The following table presents information regarding the provision for credit loss expense and net charge-offs: TABLE 15 Nine Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Provision for credit losses on loans and leases $ 56,672 $ 58,514 $ (1,842) (3.1) % Provision for unfunded loan commitments 869 (71) 940 1,323.9 Total provision for credit losses on loans and leases 57,541 58,443 (902) (1.5) Provision for securities (24) 68 (92) (135.3) Total provision for credit losses $ 57,517 $ 58,511 $ (994) (1.7) % Net loan charge-offs $ 42,076 $ 59,596 $ (17,520) (29.4) % Net loan charge-offs (annualized) / total average loans and leases 0.17 % 0.26 % The provision for credit losses was $57.5 million, compared to $58.5 million in the first nine months of 2023. The provision for credit losses for the first nine months of 2024 was primarily due to loan growth and charge-off activity. The provision for credit losses in the first nine months of 2023 was primarily due to loan growth, CECL-related model impacts from forecasted macroeconomic conditions and charge-off activity, including a $31.9 million isolated commercial loan that was charged off due to alleged fraud. Our non-performing loan coverage position remains strong at 327%. The first nine months of 2024 reflected net charge-offs of $42.1 million, or 0.17% annualized of total average loans, compared to $59.6 million, or 0.26% annualized, in the first nine months of 2023. The ACL on loans and leases was $420.2 million, an increase of $19.5 million, with the ratio of the ACL to total loans and leases remaining stable at 1.25%. Non-Interest Income The breakdown of non-interest income for the nine months ended September 30, 2024 and 2023 is presented in the following table: TABLE 16 Nine Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Service charges $ 67,925 $ 62,043 $ 5,882 9.5 % Interchange and card transaction fees 38,627 39,419 (792) (2.0) Trust services 34,019 31,767 2,252 7.1 Insurance commissions and fees 17,843 18,830 (987) (5.2) Securities commissions and fees 24,011 20,980 3,031 14.4 Capital markets income 17,668 19,754 (2,086) (10.6) Mortgage banking operations 20,410 13,676 6,734 49.2 Dividends on non-marketable equity securities 19,648 15,354 4,294 28.0 Bank owned life insurance 13,232 9,016 4,216 46.8 Net securities gains (losses) (31) (78) 47 — Other 12,120 10,488 1,632 15.6 Total non-interest income $ 265,472 $ 241,249 $ 24,223 10.0 % 75 Total non-interest income increased by $24.2 million, or 10.0%. The variances in significant individual non-interest income items are explained in the following paragraphs. Service charges increased $5.9 million, or 9.5%, primarily due to strong treasury management activity and higher consumer transaction levels. Wealth management revenues increased $5.3 million, or 10.0%, as securities commissions and fees and trust income increased 14.4% and 7.1%, respectively, through continued strong contributions across the geographic footprint. Additionally, the market value of assets under management increased $949.3 million, or 11.1%, to $9.5 billion. Capital markets decreased $2.1 million, or 10.6%, reflecting lower commercial customer transaction activity. Mortgage banking operations income increased $6.7 million, or 49.2%, driven by improved gain on sale from strong production volumes, partially offset by an MSR impairment of $2.8 million in the third quarter of 2024 reflecting accelerating prepayment speed assumptions given the recent declines in mortgage rates. During the first nine months of 2024, we sold $993.3 million of residential mortgage loans, a 28.5% increase compared to $772.7 million for the same period of 2023. Dividends on non-marketable equity securities increased $4.3 million, or 28.0%, reflecting higher FHLB dividends due to additional borrowings. Bank owned life insurance increased $4.2 million, or 46.8%, reflecting higher life insurance claims. Non-Interest Expense The breakdown of non-interest expense for the nine months ended September 30, 2024 and 2023 is presented in the following table: TABLE 17 Nine Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Salaries and employee benefits $ 376,109 $ 347,544 $ 28,565 8.2 % Net occupancy 60,611 52,300 8,311 15.9 Equipment 71,576 66,749 4,827 7.2 Amortization of intangibles 13,197 15,203 (2,006) (13.2) Outside services 70,513 60,733 9,780 16.1 Marketing 15,460 13,063 2,397 18.3 FDIC insurance 32,680 23,102 9,578 41.5 Bank shares and franchise taxes 11,987 12,025 (38) (0.3) Merger-related — 2,215 (2,215) (100.0) Other 61,006 56,936 4,070 7.1 Total non-interest expense $ 713,139 $ 649,870 $ 63,269 9.7 % Total non-interest expense of $713.1 million for the first nine months of 2024 increased $63.3 million, a 9.7% increase from the same period of 2023. On an operating basis, non-interest expense (non-GAAP) totaled $694.1 million and increased $46.4 million, or 7.2%, when adjusting for significant items of $19.1 million and $2.2 million in the first nine months of 2024 and 2023, respectively. See Table 18 in this section for a list of the significant items. The variances in the individual non-interest expense items are further explained in the following paragraphs. Salaries and employee benefits increased $28.6 million, or 8.2%, related to normal annual merit increases and higher production-related commissions from strong non-interest income activity, as well as strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure. Included in salaries and employee benefits in the first quarter of 2024 and 2023 were $6.9 million and $6.7 million, respectively, related to normal seasonal long-term compensation expense. 76 Net occupancy and equipment expense of $132.2 million increased $13.1 million, or 11.0%, primarily from continued technology-related investments, in addition to a $3.7 million software impairment. Amortization of intangibles of $13.2 million decreased $2.0 million, or 13.2%, as certain intangibles have been fully amortized. Outside services increased $9.8 million, or 16.1%, with higher volume-related technology and third-party costs. Marketing expense of $15.5 million increased $2.4 million, or 18.3%, primarily due to the opportunistic timing of marketing campaigns related to our successful deposit initiatives. FDIC insurance increased $9.6 million, or 41.5%, primarily due to special assessment expense of $5.2 million in 2024 to further replenish the FDIC's Deposit Insurance Fund associated with protecting uninsured depositors following the failed banks in early 2023 based on updated loss information provided by the FDIC, as well as loan growth and balance sheet mix changes. Other non-interest expense was $61.0 million and $56.9 million for the first nine months of 2024 and 2023, respectively, with the increase primarily related to the $9.0 million loss on indirect auto loan sales which completed in the first and third quarters of 2024 offset by various miscellaneous items. The following table presents non-interest expense excluding significant items impacting earnings: TABLE 18 Nine Months Ended September 30, $ % (dollars in thousands) 2024 2023 Change Change Total non-interest expense, as reported $ 713,139 $ 649,870 $ 63,269 9.7 % Significant items: Branch consolidations (1,194) — (1,194) Merger-related — (2,215) 2,215 FDIC special assessment (5,212) — (5,212) Software impairment (3,690) — (3,690) Loss on indirect auto loan sales (8,969) — (8,969) Total non-interest expense, excluding significant items (1) $ 694,074 $ 647,655 $ 46,419 7.2 % (1) Non-GAAP Income Taxes The following table presents information regarding income tax expense and certain tax rates: TABLE 19 Nine Months Ended September 30, (dollars in thousands) 2024 2023 Income tax expense $ 97,572 $ 91,169 Effective tax rate 21.5 % 17.4 % Statutory federal tax rate 21.0 21.0 Income tax expense was higher in 2024 due to the recording of renewable energy investment tax credits recognized in the third quarter of 2023 as part of a solar project financing transaction. The increase was also attributable, to a lesser extent, from lower stock compensation vesting deductions, higher disallowance of FDIC premium deductions, and higher levels of proportional amortization for certain tax credit investments resulting from the adoption of FASB ASU 2023-02 on January 1, 2024. The effective tax rate increased for the nine months ended September 30, 2024 as a result of these items. 77 FINANCIAL CONDITION The following table presents our condensed Consolidated Balance Sheets: TABLE 20 (dollars in millions) September 30, 2024 December 31, 2023 $ Change % Change Assets Cash and cash equivalents $ 2,078 $ 1,576 $ 502 31.9 % Securities 7,314 7,165 149 2.1 Loans held for sale 193 488 (295) (60.5) Loans and leases, net 33,297 31,917 1,380 4.3 Goodwill and other intangibles 2,534 2,546 (12) (0.5) Other assets 2,560 2,466 94 3.8 Total Assets $ 47,976 $ 46,158 $ 1,818 3.9 % Liabilities and Stockholders’ Equity Deposits $ 36,771 $ 34,711 $ 2,060 5.9 % Borrowings 4,077 4,477 (400) (8.9) Other liabilities 879 920 (41) (4.5) Total Liabilities 41,727 40,108 1,619 4.0 Stockholders’ Equity 6,249 6,050 199 3.3 Total Liabilities and Stockholders’ Equity $ 47,976 $ 46,158 $ 1,818 3.9 % Lending Activity The loan and lease portfolio consists principally of loans and leases to individuals and small- and medium-sized businesses within our primary markets in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. Loans held for sale declined $295 million, or 60.5%, from December 31, 2023 due primarily to the sale of $332 million of indirect auto loans that closed in the first quarter of 2024. Following is a summary of loans and leases: TABLE 21 September 30, 2024 December 31, 2023 $ Change % Change (in millions) Commercial real estate $ 12,812 $ 12,305 $ 507 4.1 % Commercial and industrial 7,541 7,482 59 0.8 Commercial leases 709 599 110 18.4 Other 120 110 10 9.1 Total commercial loans and leases 21,182 20,496 686 3.3 Direct installment 2,693 2,741 (48) (1.8) Residential mortgages 7,789 6,640 1,149 17.3 Indirect installment 706 1,149 (443) (38.6) Consumer lines of credit 1,347 1,297 50 3.9 Total consumer loans 12,535 11,827 708 6.0 Total loans and leases $ 33,717 $ 32,323 $ 1,394 4.3 % 78 The growth in commercial loans and leases was across our footprint. Our commercial real estate portfolio included $9.1 billion of non-owner-occupied loans of which 18.7% represented office loans. Our top 25 non-owner-occupied commercial real estate loans averaged approximately $23 million per exposure with the office component primarily made up of mid-sized offices located outside of central business districts with 43% of the office portfolio averaging less than $5 million per exposure. For consumer lending, average residential mortgages increased $1.3 billion, compared to September 2023, primarily driven by seasonal growth in mortgage originations in the second quarter of 2024. Non-Performing Assets Following is a summary of non-performing assets: TABLE 22 (in millions) September 30, 2024 December 31, 2023 $ Change % Change Commercial real estate $ 49 $ 42 $ 7 16.7 % Commercial and industrial 48 39 9 23.1 Commercial leases 3 3 — — Other 2 — 2 — Total commercial loans and leases 102 84 18 21.4 Direct installment 6 5 1 20.0 Residential mortgages 14 10 4 40.0 Indirect installment 2 2 — — Consumer lines of credit 5 6 (1) (16.7) Total consumer loans 27 23 4 17.4 Total non-performing loans and leases 129 107 22 20.6 Other real estate owned 2 3 (1) (33.3) Total non-performing assets $ 131 $ 110 $ 21 19.1 % Non-performing assets increased $21.1 million, from $110.0 million at December 31, 2023 to $131.1 million at September 30, 2024, remaining at or near historically low levels. Allowance for Credit Losses on Loans and Leases The CECL model takes into consideration the expected credit losses over the life of the loan at the time the loan is originated. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation: • a third-party macroeconomic forecast scenario; • a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and • the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period. At September 30, 2024 and December 31, 2023, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at September 30, 2024, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which increases 6.5% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 12.7% over our R&S forecast period, (iii) S&P Volatility, which increases 8.0% in 2024 and 4.7% in 2025 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below the historical through-the-cycle period. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2023 included, but were not limited to: (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 79 (iv) bankruptcies, which increase steadily over the R&S forecast period but average below the historical through the cycle period. Following is a summary of certain data related to the ACL and loans and leases: TABLE 23 Net Loan Charge-Offs Net Loan Charge-Offs to Average Loans ACL at Nine Months Ended September 30, Nine Months Ended September 30, September 30, 2024 2023 2024 2023 2024 (dollars in millions) Commercial real estate $ 22.0 $ 5.7 0.09 % 0.03 % $ 184.9 Commercial and industrial 9.7 45.5 0.04 0.20 78.4 Commercial leases 0.2 — — — 21.6 Other commercial 2.0 2.6 0.01 0.01 4.0 Direct installment 0.2 — — — 29.2 Residential mortgages 0.1 0.4 — — 84.2 Indirect installment 7.5 5.3 0.03 0.02 9.0 Consumer lines of credit 0.4 0.1 — — 8.9 Total net loan charge-offs on loans and leases, net loan charge-offs (annualized)/average loans $ 42.1 $ 59.6 0.17 % 0.26 % $ 420.2 Allowance for credit losses/total loans and leases 1.25 % 1.25 % Allowance for credit losses/non-performing loans 326.65 % 353.73 % The ACL on loans and leases of $420.2 million at September 30, 2024 increased $14.6 million, or 3.6%, from December 31, 2023. Our ending ACL coverage ratio was stable at 1.25% at both September 30, 2024 and December 31, 2023. Total provision for credit losses for the nine months ended September 30, 2024 was $57.5 million, compared to $58.5 million for the same period in 2023. Net charge-offs were $42.1 million for the nine months ended September 30, 2024, compared to $59.6 million for the first nine months of 2023. When excluding the impact of the previously disclosed $31.9 million isolated commercial loan that was charged-off during the third quarter of 2023, net charge-offs would have been $27.7 million, or 0.12% annualized of total average loans (non-GAAP). Net charge-offs for both years remain at historically low levels. The ACL as a percentage of non-performing loans for the total portfolio decreased to 327% as of September 30, 2024, compared to 378% as of December 31, 2023. Deposits Our primary source of funds is deposits. 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: TABLE 24 (in millions) September 30, 2024 December 31, 2023 $ Change % Change Non-interest-bearing demand $ 9,870 $ 10,222 $ (352) (3.4) % Interest-bearing demand 15,999 14,809 1,190 8.0 Savings 3,231 3,465 (234) (6.8) Certificates and other time deposits 7,671 6,215 1,456 23.4 Total deposits $ 36,771 $ 34,711 $ 2,060 5.9 % 80 Total deposits increased $2.1 billion, or 5.9%, from December 31, 2023, however we continued to experience balance migration into higher-yielding deposit products. We ended the quarter with approximately 78% of all deposits insured by the FDIC or collateralized. Capital Resources and Regulatory Matters Our capital position depends in part 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. We seek to maintain a strong capital base to support our growth and expansion activities, to provide stability to current operations and to promote public confidence. Pursuant to and in compliance with applicable SEC laws, rules and regulations, we may, from time to time, issue and sell in one or more offerings any combination of common stock, preferred stock, debt securities, depositary shares, warrants, stock purchase contracts or units. Since inception of our $300 million stock purchase program, we repurchased 14.4 million shares at a weighted average share price of $11.43 for $164.3 million, with $135.7 million remaining for repurchase. Any repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions. The purchases will be funded from available working capital. There is no guarantee as to the exact number of shares that will be repurchased and we may discontinue purchases at any time. The Inflation Reduction Act of 2022 includes a 1% excise tax on stock repurchases beginning January 1, 2023. On February 15, 2024, we redeemed all our Series E, 7.25% Fixed Rate / Floating Rate Non-Cumulative Perpetual Preferred Stock in the amount of $111 million. The preferred stock is no longer outstanding and dividends will no longer accrue on such securities. Capital management is a continuous process, with capital plans and stress testing for FNB and FNBPA updated at least annually. These capital plans include assessing the adequacy of expected capital levels assuming various scenarios by projecting capital needs for a forecast period of 2-3 years beyond the current year. From time to time, we issue shares initially acquired by us as treasury stock under our various benefit plans. We may issue additional preferred or common stock to maintain our well-capitalized status. FNB and FNBPA are subject to various regulatory capital requirements administered by the federal banking agencies. Quantitative measures established by regulators to ensure capital adequacy require FNB and FNBPA to maintain minimum amounts and ratios of total, tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of leverage ratio (as defined). Failure to meet minimum capital requirements could lead to initiation of certain mandatory, and possibly additional discretionary actions, by regulators that, if undertaken, could have a direct material effect on our Consolidated Financial Statements, dividends and future business and corporate strategies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, FNB and FNBPA must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. FNB’s and FNBPA’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. At September 30, 2024, the capital levels of both FNB and FNBPA exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered “well-capitalized” for regulatory purposes. In December 2018, the FRB and other U.S. banking agencies approved a rule to address the impact of CECL on regulatory capital by allowing bank holding companies (BHCs) and banks, including FNB, the option to phase in the day-one impact of CECL over a three-year period. In March 2020, the FRB and other U.S. banking agencies issued a final rule that became effective on March 31, 2020, and provides BHCs and banks with an alternative option to temporarily delay the impact of CECL, relative to the incurred loss methodology for the ACL, on regulatory capital. We have elected this alternative option instead of the one described in the December 2018 rule. As a result, under the final rule, we delayed recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extended through December 31, 2021. Beginning on January 1, 2022, we were required to phase in 25% of the previously deferred capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025. Under the final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as 81 the entire day-one impact at adoption plus 25% of the subsequent change in the ACL during the two-year deferral period. As of September 30, 2024, the total deferred impact on CET1 capital related to our adoption of CECL was approximately $17.2 million, or 5 basis points, which will be eliminated in 2025. In this unprecedented economic and uncertain environment, we frequently run stress tests for a variety of economic situations, including severely adverse scenarios that have economic conditions like the current conditions. Under these scenarios, the results of these stress tests indicate that our regulatory capital ratios would remain above the regulatory requirements and we would be able to maintain appropriate liquidity levels, demonstrating our expected ability to continue to support our customers and communities under stressful financial conditions. Following are the capital amounts and related ratios for FNB and FNBPA: TABLE 25 Actual Well-Capitalized Requirements (1) Minimum Capital Requirements plus Capital Conservation Buffer (dollars in millions) Amount Ratio Amount Ratio Amount Ratio As of September 30, 2024 F.N.B. Corporation Total capital $ 4,582 12.28 % $ 3,732 10.00 % $ 3,918 10.50 % Tier 1 capital 3,898 10.44 2,239 6.00 3,172 8.50 Common equity tier 1 3,898 10.44 n/a n/a 2,612 7.00 Leverage 3,898 8.63 n/a n/a 1,806 4.00 Risk-weighted assets 37,319 FNBPA Total capital $ 4,740 12.79 % $ 3,707 10.00 % $ 3,892 10.50 % Tier 1 capital 3,912 10.55 2,965 8.00 3,151 8.50 Common equity tier 1 3,832 10.34 2,409 6.50 2,595 7.00 Leverage 3,912 8.71 2,245 5.00 1,796 4.00 Risk-weighted assets 37,067 As of December 31, 2023 F.N.B. Corporation Total capital $ 4,456 12.16 % $ 3,664 10.00 % $ 3,847 10.50 % Tier 1 capital 3,786 10.33 2,198 6.00 3,114 8.50 Common equity tier 1 3,680 10.04 n/a n/a 2,565 7.00 Leverage 3,786 8.72 n/a n/a 1,736 4.00 Risk-weighted assets 36,641 FNBPA Total capital $ 4,559 12.50 % $ 3,647 10.00 % $ 3,829 10.50 % Tier 1 capital 3,769 10.34 2,917 8.00 3,100 8.50 Common equity tier 1 3,689 10.12 2,370 6.50 2,553 7.00 Leverage 3,769 8.71 2,164 5.00 1,731 4.00 Risk-weighted assets 36,466 (1) Reflects the well-capitalized standard under Regulation Y for F.N.B. Corporation and the prompt corrective action framework for FNBPA. In accordance with Basel III Capital Rules, the minimum capital requirements plus capital conservation buffer, which are presented for each period above, represent the minimum requirements needed to avoid limitations on distributions of dividends and certain discretionary bonus payments. 82 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) The Dodd-Frank Act broadly affects the financial services industry by establishing a framework for systemic risk oversight, creating a resolution authority for institutions determined to be systemically important, mandating higher capital and liquidity requirements, requiring banks to pay increased fees to regulatory agencies and containing numerous other provisions aimed at strengthening the sound operation of the financial services sector that significantly change the system of regulatory oversight as described in more detail under Part I, Item 1, “Business - Government Supervision and Regulation” included in our 2023 Annual Report on Form 10-K as filed with the SEC on February 26, 2024. LIQUIDITY 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. 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. These policies designate our ALCO as the body responsible for meeting these objectives. The ALCO, which is comprised of members of executive management, reviews liquidity on a continuous basis and approves significant changes in strategies that affect Balance Sheet or cash flow positions. Liquidity is centrally managed daily by our Treasury Department. Parent Company Liquidity The parent company’s funding requirements primarily consist of shareholder dividends, debt service, income taxes, operating expenses, funding of non-bank subsidiaries, and stock repurchases. The parent company’s funding sources primarily consist of dividends and interest received from the Bank and other direct subsidiaries, net taxes collected from subsidiaries included in the consolidated tax returns, fees for services provided to subsidiaries and the issuance of debt instruments. The dividends received from the Bank and other direct subsidiaries may be impacted by the parent’s or its subsidiaries’ capital and liquidity needs, statutory laws and regulations, corporate policies, contractual restrictions, profitability and other factors. In addition, through one of our subsidiaries, we regularly issue subordinated notes, which are guaranteed by FNB. Management utilizes various strategies to ensure sufficient cash on hand is available to meet the parent company's funding needs. During the third quarter of 2022, we completed a Senior Debt offering for $347.7 million in net proceeds. A portion of these proceeds was used to retire debt that matured in February 2023 (for additional information, see Note 9, "Borrowings" in the Notes to the Consolidated Financial Statements in this Report). We have historically been opportunistic when accessing the capital markets, and we will continue with that strategy. The parent company's cash position at September 30, 2024 was $286.8 million, down $88.6 million from year-end, primarily due to the redemption of all $111 million of our Series E, 7.25% Fixed Rate / Floating Rate Non-Cumulative Perpetual Preferred Stock in February 2024. The Board of Directors declared the redemption of the preferred stock given its higher relative cost of capital and our strong capital position. Our regulatory CET1 ratio and Total Capital ratios were 10.4% and 12.3%, respectively, at September 30, 2024 with the Total Capital ratio reflecting the completed preferred stock redemption. Two metrics that are used to gauge the adequacy of the parent company’s cash position are the Liquidity Coverage Ratio (LCR) and Months of Cash on Hand (MCH). The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months. The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the existing cash on hand. The LCR and MCH ratios and Parent company cash on hand are presented in the following table: TABLE 26 September 30, 2024 December 31, 2023 Internal Limit Liquidity coverage ratio 1.1 times 2.0 times > 1 time Months of cash on hand 6.0 months 13.0 months > 12 months Parent company cash on hand (millions) $ 286.8 $ 375.4 n/a As previously mentioned, our parent company cash on hand declined from December 31, 2023 due to the preferred stock redemption. The decrease in the LCR and MCH at September 30, 2024 are due to the scheduled maturity of $350 million in 83 senior debt due in August of 2025, which is considered a cash outflow for the ratio calculations. Assuming we replace the maturing senior debt, the ratios would be 2.8 times LCR and 15.3 MCH. Management has concluded that our cash levels remain appropriate given the current market environment. Bank Liquidity Bank-level liquidity sources from assets include payments from loans and investments, as well as the ability to securitize, pledge or sell loans, investment securities and other assets. Liquidity sources from liabilities are generated primarily through the banking offices of FNBPA in the form of deposits and customer repurchase agreements. The Bank also has access to reliable and cost-effective wholesale sources of liquidity. Short- and long-term funds are available for use to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if faced with a liquidity crisis. Over time, our liquidity position has been positively impacted by FNBPA's ability to generate growth in relationship-based accounts. Organic growth in low-cost transaction deposits has been 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 our data analytics capabilities. These strategies helped management successfully grow total deposits by $2.1 billion, when compared to December 31, 2023. These efforts resulted in time deposits and interest-bearing demand deposits increasing $1.5 billion and $1.2 billion, respectively, when compared to December 31, 2023. Non-interest-bearing demand deposits decreased $351.8 million and savings account balances declined $233.9 million compared to December 31, 2023 as customers continue to migrate deposits into higher-yielding deposit products. The mix of non-interest-bearing deposits to total deposits remained consistent with the prior quarter at 27%. At September 30, 2024, approximately 78% of our deposits were insured by the FDIC or collateralized, stable with December 31, 2023. The liquidity position of FNBPA was further strengthened by the sale of $431 million of indirect auto loans in the third quarter of 2024. Our cash balances held at the FRB were $1.5 billion at September 30, 2024 and $1.1 billion at December 31, 2023. Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity. The following table presents certain information relating to FNBPA’s credit availability and salable unpledged securities: TABLE 27 (dollars in millions) September 30, 2024 December 31, 2023 Unused wholesale credit availability $ 16,011 $ 15,899 Unused wholesale credit availability as a % of FNBPA assets 33.6 % 34.6 % Salable unpledged government and agency securities $ 783 $ 657 Salable unpledged government and agency securities as a % of FNBPA assets 1.6 % 1.4 % Cash and salable unpledged government and agency securities as a % of FNBPA assets 4.7 % 3.8 % Our bank-level liquidity position has remained strong throughout 2024. The strong deposit generation noted earlier provided management the flexibility to reduce short- and long-term borrowings by a combined $400 million. Our contingency funding policy and periodic liquidity stress testing of multiple stress scenarios is particularly valuable as we successfully manage our liquidity. We continue to have ample unused borrowing capacity that could cover 2.0 times the uninsured deposit and non-collateralized deposit balances as of September 30, 2024. A portion of this capacity includes the FRB's Discount Window. We have no borrowings under this facility. Additional sources of unused wholesale credit availability for FNBPA include the ability to borrow from the FHLB, correspondent bank lines, and access to other funding channels. In addition to credit availability, FNBPA also has salable unpledged government and agency securities that could be utilized to meet funding needs and has excess cash to meet its pledging requirements. At September 30, 2024, FNBPA has $783 million of cash and salable unpledged government and agency securities representing 4.7% of total assets. This compares to a policy minimum of 3.0%. Another metric for measuring liquidity risk is the liquidity gap analysis. The following liquidity gap analysis as of September 30, 2024 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals. Management calculates this ratio at least quarterly and it is reviewed regularly by ALCO. Management monitors the size of the liquidity gaps so that sources and uses of funds are reasonably matched in the normal course of business and in relation to implied forward rate expectations. A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis. A positive gap position means that more assets are 84 expected to mature over the next 12 months than liabilities. The allocation of non-maturity deposits and customer repurchase agreements to the twelve-month categories is based on the estimated lives of each product. TABLE 28 (dollars in millions) Within 1 Month 2-3 Months 4-6 Months 7-12 Months Total 1 Year Assets Loans $ 1,133 $ 1,871 $ 2,061 $ 3,620 $ 8,685 Investments 1,570 178 258 646 2,652 2,703 2,049 2,319 4,266 11,337 Liabilities Non-maturity deposits 310 620 931 1,861 3,722 Time deposits 841 2,146 2,502 1,658 7,147 Borrowings 995 259 521 745 2,520 2,146 3,025 3,954 4,264 13,389 Period Gap (Assets - Liabilities) $ 557 $ (976) $ (1,635) $ 2 $ (2,052) Cumulative Gap $ 557 $ (419) $ (2,054) $ (2,052) Cumulative Gap to Total Assets 1.2 % (0.9) % (4.3) % (4.3) % The twelve-month cumulative gap to total assets ratio was (4.3)% as of September 30, 2024, compared to (2.6)% as of December 31, 2023. The change in the twelve-month cumulative gap to total assets was primarily related to management's shorter-term time deposit pricing that effectively reduced the average maturity of new time deposits, which reduced our asset sensitivity. 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. Management believes we have sufficient liquidity available to meet our normal operating and contingency funding cash needs. MARKET RISK Market risk refers to potential losses arising predominately from changes in interest rates, foreign exchange rates, equity prices and commodity prices. Interest rate risk is comprised of repricing risk, basis risk, yield curve risk and options risk. We are primarily exposed to interest rate risk inherent in our lending and deposit-taking activities as a financial intermediary. To succeed in this capacity, we offer an extensive variety of financial products to meet the diverse needs of our customers. These products sometimes contribute to interest rate risk for us when product groups do not complement one another. For example, depositors may want short-term deposits, while borrowers may desire long-term loans. Changes in market interest rates may result in changes in the fair value of our financial instruments, cash flows and net interest income. Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital. We use derivative financial instruments for interest rate risk management purposes and not for trading or speculative purposes. We use an asset/liability model to measure our interest rate risk. Interest rate risk measures we utilize include earnings simulation, EVE and gap analysis. Gap analysis and EVE are static measures that do not incorporate assumptions regarding future business. Gap analysis, while a helpful diagnostic tool, displays cash flows for only a single rate environment. EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. In these simulations, our current financial position is combined with assumptions regarding future business 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. Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies. 85 The following repricing gap analysis as of September 30, 2024 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing. The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category below 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. Management utilizes the repricing gap analysis as a diagnostic tool in managing net interest income and EVE risk measures. TABLE 29 (dollars in millions) Within 1 Month 2-3 Months 4-6 Months 7-12 Months Total 1 Year Assets Loans $ 15,570 $ 1,224 $ 896 $ 1,703 $ 19,393 Investments 1,579 183 314 662 2,738 17,149 1,407 1,210 2,365 22,131 Liabilities Non-maturity deposits 8,953 — — — 8,953 Time deposits 933 2,144 2,499 1,653 7,229 Borrowings 688 474 761 701 2,624 10,574 2,618 3,260 2,354 18,806 Off-balance sheet (1,200) — 250 500 (450) Period Gap (Assets – Liabilities + Off-balance sheet) $ 5,375 $ (1,211) $ (1,800) $ 511 $ 2,875 Cumulative Gap $ 5,375 $ 4,164 $ 2,364 $ 2,875 Cumulative Gap to Earning Assets 12.6 % 9.8 % 5.5 % 6.7 % The twelve-month cumulative repricing gap to total assets was 6.7% and 10.3% as of September 30, 2024 and December 31, 2023, respectively, primarily as a result of management's deposit pricing actions on shorter-term time deposits which effectively reduced the average maturity of new time deposits. 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. The change in the cumulative repricing gap at September 30, 2024, compared to December 31, 2023, is primarily related to customers moving into shorter-term time deposits and the increase in short-term and variable-rate borrowings. In addition to the repricing gap analysis above, we model rate scenarios which move all rates gradually over twelve months (Rate Ramps). 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. 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 to changes in interest rates using Rate Ramps and the sensitivity of EVE 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 September 30, 2024. The calculated results do not reflect management's potential actions. 86 TABLE 30 September 30, 2024 December 31, 2023 ALCO Limits Net interest income change over 12 months (Rate Ramps): + 200 basis points 3.7 % 3.9 % (10.0) % + 100 basis points 1.9 2.0 (10.0) - 100 basis points (2.0) (2.0) (10.0) - 200 basis points (4.0) (4.1) (10.0) Economic value of equity (Rate Shocks): + 300 basis points 6.9 4.6 (25.0) + 200 basis points 5.3 3.2 (15.0) + 100 basis points 3.4 1.6 (10.0) - 100 basis points (4.5) (2.5) (10.0) - 200 basis points (10.4) (8.0) (15.0) There are multiple factors that influence our interest rate risk position and impact net interest income. These include external factors such as the shape of the yield curve, the competitive landscape and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing and re-pricing of loans and deposits. Our current interest rate risk position is modestly asset sensitive. A key driver of this position resulted from the origination of consumer and commercial loans with short-term repricing characteristics, some of which have been swapped to a fixed rate. Total variable and adjustable-rate loans were 63.5% and 62.2% of total net loans and leases at September 30, 2024 and December 31, 2023, respectively. 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. Furthermore, we regularly sell long-term fixed-rate residential mortgages in the secondary market. 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 interest rates. During the first nine months of 2024, management adjusted the IRR position by slightly extending the duration of the investment securities portfolio, originating adjustable-rate mortgage loans with longer-duration fixed-rate reset periods, strategically meeting our customers' preferences for higher yielding deposit products, with shorter-term time deposits, and utilizing borrowings of variable rates and varying maturities. As a result, the net interest income change over 12 months shown above in both the up and down rate ramp scenarios is closer to neutral compared to December 31, 2023. We also utilize derivatives to manage the IRR position. These positions are used to protect the fair value of assets and liabilities by converting the contractual interest rate on a specified amount (i.e., notional amounts) to another interest rate index or to hedge the variability in cash flows attributable to the contractually specified interest rate by converting the variable rate index into a fixed rate. The volume, maturity and mix of derivative positions change periodically as we adjust our broader interest rate risk management objectives, and the balance sheet positions to be hedged. We currently have $1.2 billion (notional) of receive-fixed interest rate swaps designated as cash flow hedges for variable rate commercial loans that have an average rate of 1.37% and average maturity of 9.7 months with the last hedge scheduled to expire in May 2026. Additionally, we have a $0.2 million (notional) interest rate collar on variable rate commercial loans with strike rates between 2.8525% and 5.50% that matures in April 2026. We also designated $0.1 billion (notional) of interest rate swaps as hedges of variable rate short-term debt maturing in November 2024. Derivative financial instruments are also offered to enable commercial customers to meet their financing and investing objectives and for their risk management purposes. We typically enter into offsetting third-party contracts with reputable counterparties with substantially matching terms to economically hedge the exposure related to these derivatives. At September 30, 2024, the commercial customer-related interest rate swaps totaled $5.9 billion (notional), up from $5.7 billion (notional) at December 31, 2023. For additional information regarding interest rate swaps, see Note 10, "Derivative Instruments and Hedging Activities" in the Notes to Consolidated Financial Statements in this Report. In addition to the rate ramp scenarios for net interest income changes shown above, we also model immediate interest rate shock scenarios. 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. Assuming a static Balance Sheet, a +100 basis point Rate Shock increases net interest income (12 months) by 3.1% at September 30, 2024 and 3.4% at December 31, 2023. For a +200 basis point Rate 87 Shock, net interest income (12 months) increases by 5.9% at September 30, 2024 and 6.7% at December 31, 2023. The corresponding metrics for a minus 200 basis point Rate Shock are (7.2)% and (7.7)% at September 30, 2024 and December 31, 2023, respectively, compared to a minus 100 basis point Rate Shock of (3.4)% and (3.6)% at September 30, 2024 and December 31, 2023, respectively. The drivers of the change in net interest income in the rate shock scenarios include the mix shift of deposit products into shorter-term time deposits, the pace of deposit repricing and assumed betas and loan prepayments. These results reflect a more neutral net interest income change over 12 months in both the up and down rate shock scenarios compared to December 31, 2023, consistent with the rate ramp results. We recognize that all asset/liability models have some inherent shortcomings. Asset/liability models require certain assumptions to be made, such as prepayment rates on interest-earning assets and repricing impact on non-maturity deposits, which may differ from actual experience. These business assumptions are based upon our experience, business plans, economic and market trends and available industry data. While management believes that its methodology for developing such assumptions is reasonable, there can be no assurance that modeled results will be achieved. Furthermore, the metrics are based upon the static Balance Sheet structure as of the valuation date and do not reflect planned growth or management actions that could be taken. CREDIT RATINGS Our credit ratings affect the cost and availability of short- and long-term funding and collateral requirements for certain derivative instruments. 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. Other factors that influence our credit ratings include changes to the rating agencies’ methodologies for our industry or certain security types; the rating agencies’ assessment of the general operating environment for financial services companies; our relative positions in the markets in which we compete; our various risk exposures and risk management policies and activities; pending litigation and other contingencies; our reputation; our liquidity position, diversity of funding sources and funding costs; the current and expected level and volatility of our earnings; our capital position and capital management practices; our corporate governance; current or future regulatory and legislative initiatives; and the agencies’ views on whether the U.S. government would provide meaningful support to us or our subsidiaries in a crisis. 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. 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. 88 The following table presents the credit ratings for FNB and FNBPA as of September 30, 2024: TABLE 31 Moody's Standard & Poor's Kroll F.N.B. Corporation Issuer credit rating Baa2 BBB- A- Senior debt Baa2 BBB- A- Subordinated debt Baa2 n/a BBB+ First National Bank of Pennsylvania Baseline credit assessment Baa1 n/a n/a Issuer credit rating Baa1 BBB A Senior debt n/a n/a A Subordinated debt n/a n/a A- Bank deposits A2/P-1 n/a A Short-term borrowings n/a A-2 K1 Outlook for F.N.B. Corporation and First National Bank of Pennsylvania Negative Stable Stable n/a - not applicable RISK MANAGEMENT As a financial institution, we take on a certain amount of risk in every business decision, transaction and activity. 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: 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. 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. The lines of defense model consists of: • First Line of Defense - consists of our businesses and enterprise support areas that engage in risk-taking activities and are principally responsible for owning and managing the day-to-day risk-taking activities in accordance with the risk frameworks. • 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. • 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. Our Board of Directors is responsible for the oversight of management on behalf of our stockholders. The Board of Directors has assistance in carrying out its duties and may delegate authority through the following standing Board Committees: • Audit Committee - provides oversight of our internal and external audit processes. In addition, monitors the integrity of the consolidated financial statements, internal controls over financial reporting, qualifications and independence of our audit function. 89 • Nominating and Corporate Governance Committee - responsible for selecting and recommending nominees for election to the FNB and FNBPA Boards of Directors. • Compensation Committee - reviews performance and compensation of senior management and reviews and implements compensation and benefit matters having corporate-wide significance. • 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. • 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. • Credit Fair Lending and CRA Committee - responsible for providing oversight of credit and lending strategies and objectives. 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. The Risk Committee and RMC are supported by other risk management committees, including Credit Risk Committees, Operational Risk Committee, Compliance Risk Committee and ALCO. 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. 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. 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. Our top-down risk appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions. Our Board Risk Committee, in collaboration with our Risk Management Council, approves our risk appetite on an annual basis, or more frequently, as needed to reflect changes in the risk, regulatory, economic and strategic plan environments, with the goal of ensuring that our risk appetite remains consistent with our strategic plans and business operations, regulatory environment and our shareholders' expectations. Our Enterprise Risk Management Framework provides the practices to identify, assess, control and monitor and report on risk across the organization. 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. We continue to assess our risk management practices on an ongoing basis and are making investments as necessary to position ourselves for continued growth and heightened regulatory risk management expectations for large banking institutions over $50 billion. The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to: • assess the quality of the information they receive; • understand the businesses, investments and financial, accounting, legal, regulatory and strategic considerations, and the risks that FNB faces; • oversee and assess how senior management evaluates risk; and • assess appropriately the quality of our enterprise-wide risk management processes. 90 RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO GAAP Reconciliations of non-GAAP operating measures and key performance indicators discussed in this Report to the most directly comparable GAAP financial measures are included in the following tables. TABLE 32 Operating net income available to common stockholders Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Net income available to common stockholders $ 110,103 $ 143,271 $ 349,466 $ 428,148 Preferred dividend at redemption — — 3,995 — Merger-related expense — — — 2,215 Tax benefit of merger-related expense — — — (465) Branch consolidation costs — — 1,194 — Tax benefit of branch consolidation costs — — (251) — FDIC special assessment — — 5,212 — Tax benefit of FDIC special assessment — — (1,095) — Software impairment 3,690 — 3,690 — Tax benefit of software impairment (775) — (775) — Loss on indirect auto loan sales 11,572 — 8,969 — Tax benefit of loss on indirect auto loan sales (2,430) — (1,883) — Operating net income available to common stockholders (non-GAAP) $ 122,160 $ 143,271 $ 368,522 $ 429,898 The table above shows how operating net income available to common stockholders (non-GAAP) is derived from amounts reported in our financial statements. We believe certain charges, such as merger expenses, preferred deemed dividend at redemption, FDIC special assessment, software impairment, loss on indirect auto loan sales 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. TABLE 33 Operating earnings per diluted common share Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Earnings per diluted common share $ 0.30 $ 0.40 $ 0.96 $ 1.18 Preferred dividend at redemption — — 0.01 — Merger-related expense — — — 0.01 Tax benefit of merger-related expense — — — — Branch consolidation costs — — — — Tax benefit of branch consolidation costs — — — — FDIC special assessment — — 0.01 — Tax benefit of FDIC special assessment — — — — Software impairment 0.01 — 0.01 — Tax benefit of software impairment — — — — Loss on indirect auto loan sales 0.03 — 0.02 — Tax benefit of loss on indirect auto loan sales (0.01) — (0.01) — Operating earnings per diluted common share (non-GAAP) $ 0.34 $ 0.40 $ 1.02 $ 1.18 91 TABLE 34 Return on average tangible common equity Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2024 2023 2024 2023 Net income available to common stockholders (annualized) $ 438,019 $ 568,414 $ 466,806 $ 572,432 Amortization of intangibles, net of tax (annualized) 13,753 15,798 13,926 16,058 Tangible net income available to common stockholders (annualized) (non-GAAP) $ 451,772 $ 584,212 $ 480,732 $ 588,490 Average total stockholders’ equity $ 6,170,654 $ 5,879,836 $ 6,083,143 $ 5,815,431 Less: Average preferred stockholders' equity — (106,882) (17,554) (106,882) Less: Average intangible assets (1) (2,535,769) (2,553,738) (2,539,822) (2,558,610) Average tangible common equity (non-GAAP) $ 3,634,885 $ 3,219,216 $ 3,525,767 $ 3,149,939 Return on average tangible common equity (non-GAAP) 12.43 % 18.15 % 13.63 % 18.68 % (1) Excludes loan servicing rights. TABLE 35 Operating return on average tangible common equity Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2024 2023 2024 2023 Operating net income available to common stockholders (annualized) $ 485,984 $ 568,412 $ 492,259 $ 574,772 Amortization of intangibles, net of tax (annualized) 13,753 15,798 13,926 16,058 Tangible operating net income available to common stockholders (annualized) (non-GAAP) $ 499,737 $ 584,210 $ 506,185 $ 590,830 Average total stockholders' equity $ 6,170,654 $ 5,879,836 $ 6,083,143 $ 5,815,431 Less: Average preferred stockholders' equity — (106,882) (17,554) (106,882) Less: Average intangible assets (1) (2,535,769) (2,553,738) (2,539,822) (2,558,610) Average tangible common equity (non-GAAP) $ 3,634,885 $ 3,219,216 $ 3,525,767 $ 3,149,939 Operating return on average tangible common equity (non-GAAP) 13.75 % 18.15 % 14.36 % 18.76 % (1) Excludes loan servicing rights. 92 TABLE 36 Return on average tangible assets Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2024 2023 2024 2023 Net income (annualized) $ 438,019 $ 576,385 $ 474,826 $ 580,495 Amortization of intangibles, net of tax (annualized) 13,753 15,798 13,926 16,058 Tangible net income (annualized) (non-GAAP) $ 451,772 $ 592,183 $ 488,752 $ 596,553 Average total assets $ 47,416,038 $ 45,094,167 $ 46,525,066 $ 44,314,922 Less: Average intangible assets (1) (2,535,769) (2,553,738) (2,539,822) (2,558,610) Average tangible assets (non-GAAP) $ 44,880,269 $ 42,540,429 $ 43,985,244 $ 41,756,312 Return on average tangible assets (non-GAAP) 1.01 % 1.39 % 1.11 % 1.43 % (1) Excludes loan servicing rights. TABLE 37 Tangible book value per common share September 30, 2024 September 30, 2023 (dollars in thousands, except per share data) Total stockholders’ equity $ 6,248,456 $ 5,894,280 Less: Preferred stockholders’ equity — (106,882) Less: Intangible assets (1) (2,533,856) (2,551,266) Tangible common equity (non-GAAP) $ 3,714,600 $ 3,236,132 Ending common shares outstanding 359,585,544 358,828,542 Tangible book value per common share (non-GAAP) $ 10.33 $ 9.02 (1) Excludes loan servicing rights. TABLE 38 Tangible common equity to tangible assets September 30, 2024 September 30, 2023 (dollars in thousands) Total stockholders' equity $ 6,248,456 $ 5,894,280 Less: Preferred stockholders' equity — (106,882) Less: Intangible assets (1) (2,533,856) (2,551,266) Tangible common equity (non-GAAP) $ 3,714,600 $ 3,236,132 Total assets $ 47,975,574 $ 45,495,958 Less: Intangible assets (1) (2,533,856) (2,551,266) Tangible assets (non-GAAP) $ 45,441,718 $ 42,944,692 Tangible common equity to tangible assets (non-GAAP) 8.17 % 7.54 % (1) Excludes loan servicing rights. 93 TABLE 39 Operating non-interest expense Three Months Ended September 30, Three Months Ended Nine Months Ended September 30, 2024 2023 June 30, 2024 2024 2023 (dollars in thousands) Non-interest expense $ 249,431 $ 217,998 $ 226,612 $ 713,139 $ 649,870 Branch consolidations — — — (1,194) — Merger-related — — — — (2,215) FDIC special assessment — — (804) (5,212) — Software impairment (3,690) — — (3,690) — Loss on indirect auto loan sales (11,572) — — (8,969) — Operating non-interest expense (non-GAAP) $ 234,169 $ 217,998 $ 225,808 $ 694,074 $ 647,655 TABLE 40 Net loan charge-offs, excluding isolated commercial loan charge-off due to alleged fraud (annualized) / total average loans and leases Nine Months Ended September 30, (dollars in thousands) 2023 Net loan charge-offs $ 59,596 Less: Isolated commercial loan charge-off (31,900) Net loan charge-offs, excluding isolated commercial loan charge-off (non-GAAP) $ 27,696 Total average loans and leases $ 31,070,965 Net loan charge-offs (annualized) / total average loans and leases 0.26 % Net loan charge-offs, excluding isolated commercial loan charge-off (annualized) / total average loans and leases (non-GAAP) 0.12 % Key Performance Indicator s TABLE 41 Pre-provision net revenue: Three Months Ended (Dollars in thousands) September 30, 2024 June 30, 2024 Net interest income $ 323,329 $ 315,890 Non-interest income 89,688 87,922 Less: Non-interest expense (249,431) (226,612) Pre-provision net revenue (reported) (non-GAAP) $ 163,586 $ 177,200 Pre-provision net revenue (reported) (annualized) (non-GAAP) $ 650,789 $ 712,695 Adjustments: Add: FDIC special assessment (non-interest expense) $ — $ 804 Add: Software impairment (non-interest expense) 3,690 — Add: Loss on indirect auto loan sales (non-interest expense) 11,572 — Operating pre-provision net revenue (non-GAAP) $ 178,848 $ 178,004 Operating pre-provision net revenue (annualized) (non-GAAP) $ 711,505 $ 715,928 94 TABLE 42 Efficiency ratio Three Months Ended September 30, Three Months Ended (dollars in thousands) 2024 2023 June 30, 2024 Non-interest expense $ 249,431 $ 217,998 $ 226,612 Less: Amortization of intangibles (4,376) (5,040) (4,379) Less: OREO expense (354) (317) (200) Less: Merger-related expense — — — Less: Branch consolidation costs — — — Less: FDIC special assessment — — (804) Less: Software impairment (3,690) — — Less: Loss on indirect auto loan sales (11,572) — — Adjusted non-interest expense $ 229,439 $ 212,641 $ 221,229 Net interest income $ 323,329 $ 326,581 $ 315,890 Taxable equivalent adjustment 2,930 2,917 2,915 Non-interest income 89,688 81,551 87,922 Less: Net securities (gains) losses 28 55 3 Adjusted net interest income (FTE) + non-interest income $ 415,975 $ 411,104 $ 406,730 Efficiency ratio (FTE) (non-GAAP) 55.16 % 51.72 % 54.39 % 95 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this item is provided in the Market Risk section of "MD&A," which is included in Item 2 of this Report, and is incorporated herein by reference.