Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This MD&A represents an overview of and highlights material changes to our financial condition and consolidated results of operations at and for the six-month periods ended June 30, 2025 and 2024. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained herein and our 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025. Our results of operations for the six months ended June 30, 2025 are not necessarily indicative of results expected for the full year.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‑looking statements are those that do not relate to historical facts and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond our control. Forward-looking statements may relate to various matters, including our financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “positioned,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar words or expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make.
There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:
• the credit risk associated with the substantial amount of commercial loans and leases in our loan portfolio;
• the volatility of the mortgage banking business;
• changes in market interest rates and the unpredictability of monetary, tax and other policies of government agencies, including tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions;
• the impact of changes in interest rates on the value of our investment securities portfolios;
• changes in our ability to obtain liquidity as and when needed to fund our obligations as they come due, including as a result of adverse changes to our credit ratings;
• the risk associated with uninsured deposit account balances;
• regulatory limits on our ability to receive dividends from our subsidiaries and pay dividends to our shareholders;
• our ability to recruit and retain qualified banking professionals;
• the financial soundness of other financial institutions and the impact of volatility in the banking sector on us;
• changes and instability in economic conditions and financial markets, in the regions in which we operate or otherwise, including a contraction of economic activity, economic downturn or uncertainty and international conflict;
• our ability to continue to invest in technological improvements as they become appropriate or necessary;
• any interruption in or breach in security of our information systems, or other cybersecurity risks;
• risks associated with reliance on third-party vendors;
• risks associated with the use of models, estimations and assumptions in our business;
• the effects of adverse weather events and public health emergencies;
• the risks associated with acquiring other banks and financial services businesses, including integration into our existing operations;
• the extensive federal and state regulations, supervision and examination governing almost every aspect of our operations, and potential expenses associated with complying with such regulations;
• our ability to comply with the consent orders entered into by FNBPA with the DOJ and the North Carolina State Department of Justice, and related costs and potential reputational harm;
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• changes in federal, state or local tax rules and regulations or interpretations, or accounting policies, standards and interpretations;
• the effects of climate change and related legislative and regulatory initiatives; and
• any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above.
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 2024 Annual Report on Form 10-K (including the MD&A section), our subsequent 2025 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other 2025 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.
You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to us. We do not undertake, and specifically disclaims any obligation, to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
A description of our critical accounting policies is included in the MD&A section of our 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025 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, 2024.
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 shareholders, operating earnings per diluted common share, return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible common equity to tangible assets, operating non-interest expense, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. 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. 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 certain items (e.g., FDIC special assessment) are not organic to running 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 2025 and 2024 were calculated using a federal statutory income tax rate of 21%.
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FINANCIAL SUMMARY
Net income available to common shareholders for the second quarter of 2025 was $130.7 million, or $0.36 per diluted common share. Comparatively, second quarter of 2024 net income available to common shareholders totaled $123.0 million ($123.7 million on an operating basis (non-GAAP)), or $0.34 per diluted common share.
We reported strong second quarter results, generating earnings per diluted common share of $0.36 with record revenue of $438.2 million, a 6.5% linked-quarter increase, principally driven by growth in net interest income and non-interest income. Our CET1 ratio of 10.8% and tangible common equity to tangible assets ratio (non-GAAP) of 8.5% were both at record levels, tangible book value per common share (non-GAAP) increased 13% year-over-year, while we still produced a solid return on tangible common equity ratio (non-GAAP) of 13.6%. Balance sheet growth was solid with linked-quarter annualized average loan and deposit growth of 5.3% and 1.7%, respectively, benefiting from our diverse geographic footprint. Our consistent underwriting standards and proactive credit risk management actions led to continued strong credit results for the quarter with non-performing loans declining $44 million, or 27.5%, from the prior quarter.
Income Statement Highlights
• Net interest income totaled a record $347.2 million, an increase of $23.4 million, or 7.2%, from the prior quarter, primarily due to higher yields on earning assets, lower cost of funds and one more day in the current quarter.
• On a linked-quarter basis, the net interest margin (FTE) (non-GAAP) increased 16 basis points to 3.19%, reflecting a 10 basis point improvement in the total yield on earning assets (non-GAAP) and a 6 basis point improvement in the total cost of funds.
• The provision for credit losses was $25.6 million, an increase of $8.1 million from the prior quarter, with net charge-offs of $21.8 million, or 0.25% annualized of total average loans, compared to $12.5 million, or 0.15% annualized, in the prior quarter, reflecting continued proactive management of the loan portfolio.
• Non-interest income totaled a record $91.0 million, an increase of 3.5% from the year-ago quarter, benefiting from our diversified business model and related revenue generation, including a 34.1% and 5.2% increase in capital markets and wealth management revenue, respectively.
• The efficiency ratio (non-GAAP) remained at a solid level of 54.8%, compared to 54.4% for the year-ago quarter and down from the seasonally higher 58.5% in the prior quarter.
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Balance Sheet Highlights
• Period-end total loans and leases increased $922.3 million, or 2.7%, compared to June 30, 2024. Consumer loans increased $812.9 million, or 6.4%, net of a $431 million indirect auto loan sale that closed in the third quarter of 2024, and commercial loans and leases increased $109.4 million, or 0.5%. 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, average loans and leases increased $451.7 million, or 5.3% annualized, as average consumer loans increased $365.4 million, or 11.4% annualized, and average commercial loans and leases increased $86.3 million, or 1.6% annualized.
• Period-end total deposits increased $2.8 billion, or 7.9%, compared to June 30, 2024, driven by an increase of $2.6 billion in interest-bearing demand deposits and $625.5 million in shorter-term time deposits, offsetting the decline of $276.9 million in savings deposits and $189.5 million in non-interest-bearing demand deposits, as customers migrated into higher-yielding deposit products.
• On a linked-quarter basis, average deposits increased $155.6 million, or 1.7% annualized, due to organic growth in new and existing customer relationships. The ratio of non-interest-bearing demand deposits to total deposits was stable at 26% at June 30, 2025, compared to the prior quarter-end.
• The loan-to-deposit ratio was 92% at June 30, 2025, stable compared to the prior quarter at 92%, and meaningfully lower compared to 96% at June 30, 2024.
• The ratio of non-performing loans plus OREO to total loans and leases plus OREO decreased 14 basis points from the prior quarter at 0.34%. Total delinquency decreased 1 basis point to 0.62%, compared to 0.63% at June 30, 2024, and declined 13 basis points from the prior quarter. The overall asset quality metrics continue to remain at solid levels, reflecting continued proactive management of the loan portfolio.
• The ACL on loans and leases was $432.1 million, an increase of $13.3 million compared to June 30, 2024, with the ratio of the ACL to total loans and leases remaining relatively stable at 1.25%.
• Tangible book value per common share (non-GAAP) of $11.14, increased $1.26, or 12.8%, compared to June 30, 2024. AOCI reduced the tangible book value per common share (non-GAAP) by $0.26 as of June 30, 2025, primarily due to the impact of unrealized losses on AFS securities, compared to a reduction of $0.67 as of June 30, 2024, and $0.34 as of March 31, 2025.
• Record capital levels with the CET1 capital ratio at 10.8% and the tangible common equity to tangible assets ratio (non-GAAP) at 8.47%.
• During the second quarter of 2025, we repurchased 0.7 million shares of common stock at a weighted average share price of $13.85 for $10.0 million while maintaining strong capital and supporting loan growth in the quarter.
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TABLE 1
Three Months Ended
June 30,
Quarterly Results Summary 2025 2024
Reported results
Net income available to common shareholders (millions) $ 130.7 $ 123.0
Earnings per diluted common share 0.36 0.34
Book value per common share 18.17 16.94
Operating results (non-GAAP)
Operating net income available to common shareholders (millions) 130.7 123.7
Operating earnings per diluted common share 0.36 0.34
Average diluted common shares outstanding (thousands) 362,259 362,701
Significant items impacting earnings (1) (millions)
Pre-tax FDIC assessment $ — $ (0.8)
After-tax impact of FDIC assessment — (0.6)
Total significant items pre-tax $ — $ (0.8)
Total significant items after-tax $ — $ (0.6)
Capital measures
CET1 capital ratio 10.79 % 10.19 %
Tangible common equity to tangible assets (non-GAAP) 8.47 7.86
Tangible book value per common share (non-GAAP) $ 11.14 $ 9.88
Six Months Ended
June 30,
Year-to-Date Results Summary 2025 2024
Reported results
Net income available to common shareholders (millions) $ 247.2 $ 239.4
Earnings per diluted common share 0.68 0.66
Operating results (non-GAAP)
Operating net income available to common shareholders (millions) 247.2 246.4
Operating earnings per diluted common share 0.68 0.68
Average diluted common shares outstanding (thousands) 362,664 362,660
Significant items impacting earnings (1) (millions)
Preferred dividend equivalent at redemption $ — $ (4.0)
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 loss on indirect auto loan sales — 2.6
After-tax impact of loss on indirect auto loan sales — 2.1
Total significant items after-tax $ — $ (6.9)
(1) Favorable (unfavorable) impact on earnings
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RESULTS OF OPERATIONS
Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024
Net income available to common shareholders for the three months ended June 30, 2025 was $130.7 million or $0.36 per diluted common share, compared to $123.0 million, or $0.34 per diluted common share, for the three months ended June 30, 2024. On an operating basis, second quarter of 2025 earnings per diluted common share (non-GAAP) was $0.36, with no significant items impacting earnings. By comparison, second quarter of 2024 earnings per diluted common share (non-GAAP) was $0.34 on an operating basis, excluding $0.8 million (pre-tax) of FDIC insurance special assessment expense.
Net interest income totaled $347.2 million, an increase of $31.3 million, or 9.9%, reflecting growth in earning assets and lower interest-bearing deposit costs. The net interest margin (FTE) (non-GAAP) increased 10 basis points to 3.19%. The provision for credit losses was $25.6 million, compared to $20.2 million. Non-interest income increased $3.1 million, or 3.5%, reflecting increases in wealth management revenue, capital markets income and other non-interest income. Non-interest expense for the second quarter of 2025 increased $19.6 million, or 8.7%. The biggest drivers of the non-interest expense increase were salaries and benefits expense increasing $8.9 million, or 7.4%, primarily reflecting strategic hiring associated with our efforts to grow market share and continued investments in our risk management infrastructure, as well as higher production-related compensation and normal annual merit increases. Net occupancy and equipment expense increased $4.3 million, or 10.1%, largely from technology-related investments and de novo branch expansions, and other non-interest expense increased $4.3 million, or 19.9%, reflecting the impact of Community Uplift, a mortgage down payment assistance program that was enhanced and expanded in conjunction with our previously announced DOJ settlement agreement. Income taxes of $35.7 million increased $1.7 million, or 5.1%.
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Financial highlights are summarized below:
TABLE 2
Three Months Ended
June 30, $ %
(dollars in thousands, except per share data) 2025 2024 Change Change
Net interest income $ 347,196 $ 315,890 $ 31,306 9.9 %
Provision for credit losses 25,601 20,189 5,412 26.8
Non-interest income 91,015 87,922 3,093 3.5
Non-interest expense 246,225 226,612 19,613 8.7
Income taxes 35,715 33,974 1,741 5.1
Net income $ 130,670 $ 123,037 $ 7,633 6.2 %
Earnings per common share – Basic $ 0.36 $ 0.34 $ 0.02 5.9 %
Earnings per common share – Diluted 0.36 0.34 0.02 5.9
Cash dividends per common share 0.12 0.12 — —
The following table presents selected financial ratios and other relevant data used to analyze our performance:
TABLE 3
Three Months Ended
June 30,
2025 2024
Return on average equity 8.09 % 8.20 %
Return on average tangible common equity (1)
13.57 14.54
Return on average assets 1.07 1.06
Return on average tangible assets (1)
1.15 1.16
Equity to assets 13.12 12.76
Average equity to average assets 13.19 12.99
Tangible common equity to tangible assets (1)
8.47 7.86
CET1 capital ratio 10.79 10.19
Dividend payout ratio 33.34 35.42
Book value per common share $ 18.17 $ 16.94
Tangible book value per common share (1)
11.14 9.88
(1) Non-GAAP
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The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:
TABLE 4
Three Months Ended June 30,
2025 2024
(dollars in thousands) Average
Balance Interest
Income/
Expense Yield/
Rate Average
Balance Interest
Income/
Expense Yield/
Rate
Assets
Interest-bearing deposits with banks $ 1,723,351 $ 17,788 4.14 % $ 868,390 $ 8,207 3.80 %
Taxable investment securities (1)
6,587,352 56,955 3.46 6,154,907 47,564 3.09
Tax-exempt investment securities (1)(2)
1,004,672 8,737 3.48 1,033,552 8,911 3.45
Loans held for sale 225,509 4,156 7.37 110,855 2,519 9.09
Loans and leases (2)(3)
34,502,493 498,078 5.79 33,255,738 492,902 5.96
Total interest-earning assets (2)
44,043,377 585,714 5.33 41,423,442 560,103 5.43
Cash and due from banks 395,418 387,374
Allowance for credit losses (437,130) (414,372)
Premises and equipment 555,889 484,851
Other assets 4,548,082 4,590,486
Total assets $ 49,105,636 $ 46,471,781
Liabilities
Deposits:
Interest-bearing demand $ 16,989,336 108,618 2.56 $ 14,662,774 98,211 2.69
Savings 3,081,518 6,862 0.89 3,360,593 10,136 1.21
Certificates and other time 7,241,453 65,710 3.64 6,645,682 71,613 4.33
Total interest-bearing deposits 27,312,307 181,190 2.66 24,669,049 179,960 2.93
Short-term borrowings 1,876,526 20,132 4.29 2,640,985 32,837 4.99
Long-term borrowings 2,741,561 34,123 4.99 2,164,983 28,501 5.29
Total interest-bearing liabilities 31,930,394 235,445 2.96 29,475,017 241,298 3.29
Non-interest-bearing demand deposits 9,812,486 9,921,073
Total deposits and borrowings 41,742,880 2.26 39,396,090 2.46
Other liabilities 883,637 1,037,452
Total liabilities 42,626,517 40,433,542
Shareholders’ equity 6,479,119 6,038,239
Total liabilities and shareholders’ equity $ 49,105,636 $ 46,471,781
Net interest-earning assets $ 12,112,983 $ 11,948,425
Net interest income (FTE) (2)
350,269 318,805
Tax-equivalent adjustment (3,073) (2,915)
Net interest income $ 347,196 $ 315,890
Net interest spread 2.37 % 2.14 %
Net interest margin (2)
3.19 % 3.09 %
(1) The average balances and yields earned on investment 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.
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Net Interest Income
Net interest income on an FTE basis (non-GAAP) increased $31.5 million, or 9.9%, to $350.3 million for the second quarter of 2025, primarily due to growth in earning assets as well as decreased total average borrowings and lower deposit costs. Average earning assets of $44.0 billion increased $2.6 billion, or 6.3%, 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 $31.9 billion increased $2.5 billion, or 8.3%, driven by an increase of $2.6 billion in average interest-bearing deposits, which supported the growth in earning assets. Our net interest margin FTE (non-GAAP) increased 10 basis points on a year-over-year basis to 3.19%. The yield on earning assets (non-GAAP) decreased 10 basis points to 5.33%, driven by a 17 basis point decline in yields on loans to 5.79%, reflecting reduced interest rate levels as the FOMC lowered the target Federal Funds interest rate by 100 basis points in the latter half of 2024, offset by a 32-basis point increase in yields on investment securities to 3.46%. Second quarter net interest income included $2.2 million in purchase accounting accretion from the pay-off of a previously acquired loan adding 2 basis points to net interest margin. Total cost of funds decreased 20 basis points to 2.26% with a 27 basis point decrease in interest-bearing deposit costs to 2.66% and a 42 basis point decrease in total borrowing costs, inclusive of the December 2024 senior note offering of $500 million.
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 June 30, 2025, compared to the three months ended June 30, 2024:
TABLE 5
(in thousands) Volume Rate Net
Interest Income (1)
Interest-bearing deposits with banks $ 8,791 $ 790 $ 9,581
Investment securities (2)
3,806 5,411 9,217
Loans held for sale 2,111 (474) 1,637
Loans and leases (2)
18,808 (13,632) 5,176
Total interest income (2)
33,516 (7,905) 25,611
Interest Expense (1)
Deposits:
Interest-bearing demand 21,600 (11,193) 10,407
Savings (1,711) (1,563) (3,274)
Certificates and other time 4,968 (10,871) (5,903)
Short-term borrowings (9,529) (3,176) (12,705)
Long-term borrowings 7,199 (1,577) 5,622
Total interest expense 22,527 (28,380) (5,853)
Net change (2)
$ 10,989 $ 20,475 $ 31,464
(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 second quarter of 2025, increased $25.6 million, or 4.6%, from the same quarter of 2024, resulting from an increase in average earning assets of $2.6 billion. The increase in earning assets was primarily driven by a $1.2 billion, or 3.7%, increase in average loans and leases and an increase of $855.0 million in average interest-bearing deposits with banks. Average commercial loan growth of $357.8 million, or 1.7%, was led by increases of $120.4 million in commercial and industrial loans, $117.2 million in commercial leases and $103.5 million in commercial real estate loans. The increase in average commercial loans and leases was driven by activity across the footprint, including the Charlotte and Cleveland markets. The increase in commercial real estate included fundings on previously originated construction projects. Average consumer loans increased $889.0 million, or 7.2%, with a $1.2 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
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auto loans of $388.1 million reflecting the sale of $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) decreased 10 basis points to 5.33% for the second quarter of 2025, primarily due to a 17 basis point decrease in yields on loans to 5.79%, offset by a 32 basis point increase in yields on investment securities to 3.46%, benefiting from balance sheet restructuring activities in 2024.
Interest expense of $235.4 million for the second quarter of 2025 decreased $5.9 million from the same quarter of 2024, primarily due to lower overall cost of funds and lower average borrowings. Average interest-bearing deposits increased $2.6 billion, or 10.7%, while average non-interest-bearing demand deposits decreased $108.6 million, or 1.1%, and average savings deposits decreased $279.1 million, or 8.3%, as customers migrated balances into higher-yielding products. The growth in average total deposits reflected organic growth in new and existing customer relationships. Average short-term borrowings decreased $764.5 million, or 28.9%, primarily reflecting a decrease of $885.9 million in short-term FHLB borrowings, partially offset by a $170.1 million increase in Federal Funds purchased. Average long-term borrowings increased $576.6 million, or 26.6%, primarily reflecting the December 2024 issuance of $500 million in senior notes due in 2030. The total cost of funds decreased 20 basis points to 2.26% with a 27 basis point decrease in interest-bearing deposit costs to 2.66%, and a decrease of 42 basis points in total borrowing costs.
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
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Provision for credit losses on loans and leases $ 24,959 $ 20,312 $ 4,647 22.9 %
Provision for unfunded loan commitments
694 (119) 813 683.2
Total provision for credit losses on loans and leases 25,653 20,193 5,460 27.0
Provision for investment securities (52) (4) (48) n/m
Total provision for credit losses $ 25,601 $ 20,189 $ 5,412 26.8 %
Net loan charge-offs $ 21,783 $ 7,849 $ 13,934 177.5 %
Net loan charge-offs (annualized) / total average loans and leases 0.25 % 0.09 %
n/m - not meaningful
Provision for credit losses on loans and leases was $25.7 million during the second quarter of 2025, an increase of $5.5 million from the same period of 2024. The second quarter of 2025 is comprised of a $25.0 million provision for loans and leases outstanding and a $0.7 million provision for unfunded loan commitments. The second quarter of 2025 reflected net charge-offs of $21.8 million, or 0.25% annualized of total average loans, compared to $7.8 million, or 0.09% annualized, in the second quarter of 2024, reflecting continued proactive management of the loan portfolio and the utilization of previously established reserves. 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 MD&A.
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Non-Interest Income
The breakdown of non-interest income for the three months ended June 30, 2025 and 2024 is presented in the following table:
TABLE 7
Three Months Ended
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Service charges $ 22,930 $ 23,332 $ (402) (1.7) %
Interchange and card transaction fees 13,254 13,005 249 1.9
Trust services 11,591 11,475 116 1.0
Insurance commissions and fees 5,108 5,973 (865) (14.5)
Securities commissions and fees 8,882 7,980 902 11.3
Capital markets income 6,897 5,143 1,754 34.1
Mortgage banking operations 6,306 6,956 (650) (9.3)
Dividends on non-marketable equity securities 6,168 6,895 (727) (10.5)
Bank owned life insurance 3,838 3,419 419 12.3
Net securities gains (losses) 58 (3) 61 —
Other 5,983 3,747 2,236 59.7
Total non-interest income $ 91,015 $ 87,922 $ 3,093 3.5 %
Total non-interest income increased by $3.1 million, or 3.5%, to a record of $91.0 million for the second quarter of 2025, compared to $87.9 million for the second quarter of 2024. The variances in the individual non-interest income items are explained in the following paragraphs.
Wealth management revenues increased $1.0 million, or 5.2%, as securities commissions and fees and trust services income increased 11.3% and 1.0%, respectively, through continued strong contributions across the geographic footprint and a $0.9 billion, or 6.7%, increase in the market value of assets under administration to $14.4 billion.
Capital markets income increased $1.8 million, or 34.1%, driven by record debt capital markets income and contributions from international banking, customer swap activity and syndications.
Other non-interest income increased $2.2 million, or 59.7%, primarily due to gains on the disposition of leased equipment.
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Non-Interest Expense
The breakdown of non-interest expense for the three months ended June 30, 2025 and 2024 is presented in the following table:
TABLE 8
Three Months Ended
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Salaries and employee benefits $ 129,842 $ 120,917 $ 8,925 7.4 %
Net occupancy 19,299 18,632 667 3.6
Equipment 27,988 24,335 3,653 15.0
Outside services 25,317 23,250 2,067 8.9
Marketing 5,017 4,006 1,011 25.2
FDIC insurance 8,922 9,954 (1,032) (10.4)
Bank shares and franchise taxes 3,960 3,930 30 0.8
Other 25,880 21,588 4,292 19.9
Total non-interest expense $ 246,225 $ 226,612 $ 19,613 8.7 %
Total non-interest expense of $246.2 million for the second quarter of 2025 increased $19.6 million, or 8.7%, from the same period of 2024. Non-interest expense increased $20.4 million, or 9.0%, when excluding significant items of $0.8 million of FDIC special assessment expense in the same quarter of 2024. The variances in the individual non-interest expense items are explained in the following paragraphs.
Salaries and employee benefits of $129.8 million increased $8.9 million, or 7.4%, primarily reflecting strategic hiring associated with our efforts to grow market share and continued investments in our risk management infrastructure as well as higher production-related compensation and normal annual merit increases.
Net occupancy and equipment of $47.3 million increased $4.3 million, or 10.1%, largely from technology-related investments and de novo branch expansion.
Other non-interest expense of $25.9 million increased $4.3 million, or 19.9%, primarily due to the impact of Community Uplift, a mortgage down payment assistance program that was enhanced and expanded in conjunction with our previously announced settlement agreement with the DOJ.
The following table presents non-interest expense excluding significant items for the three months ended June 30, 2025 and 2024:
TABLE 9
Three Months Ended June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Total non-interest expense, as reported $ 246,225 $ 226,612 $ 19,613 8.7 %
Significant items:
FDIC special assessment — (804) 804
Total non-interest expense, excluding significant items (1)
$ 246,225 $ 225,808 $ 20,417 9.0 %
(1) Non-GAAP
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Income Taxes
The following table presents information regarding income tax expense and certain tax rates:
TABLE 10
Three Months Ended
June 30,
(dollars in thousands) 2025 2024
Income tax expense $ 35,715 $ 33,974
Effective tax rate 21.5 % 21.6 %
Statutory federal tax rate 21.0 21.0
Income tax expense was higher for the second quarter of 2025 primarily due to higher pre-tax earnings. The effective tax rate, however, decreased slightly as a result of an increase in net tax credits.
Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024
Net income available to common shareholders for the first six months of 2025 was $247.2 million, or $0.68 per diluted common share, compared to $239.4 million, or $0.66 per diluted common share for the first six months of 2024. On an operating basis (non-GAAP), net income available to common shareholders for the first six months of 2025 was $247.2 million, or $0.68 per diluted common share, compared to $246.4 million or $0.68 per diluted common share for the first six months of 2024. Net interest income totaled $671.0 million, an increase of $36.1 million, or 5.7%, compared to $634.9 million, reflecting growth in earning assets partially offset by balance growth in higher yielding deposit products. The net interest margin (FTE) (non-GAAP) decreased 2 basis points to 3.11%, as the yield on earning assets (non-GAAP) declined 13 basis points to 5.28%, driven by a 21 basis point decline in yields on loans to 5.73%, offset by a 33 basis point increase in yields on investment securities to 3.43%, benefiting from balance sheet restructuring activities in 2024. Total cost of funds decreased 11 basis points to 2.29% with a 17 basis point decrease in interest-bearing deposit costs to 2.71% and a decrease of 26 basis points in total borrowing costs. The provision for credit losses for the first six months of 2025 totaled $43.1 million, compared to $34.1 million. Net charge-offs for the first six months of 2025 totaled $34.3 million, or 0.20% annualized of total average loans, compared to $20.6 million, or 0.13% annualized. Non-interest income totaled $178.8 million, compared to $175.8 million, reflecting increased service charges, wealth management revenues and elevated life insurance claims on bank owned life insurance. Non-interest expense totaled $493.0 million, increasing $29.3 million, or 6.3%. On an operating basis (non-GAAP), non-interest expense increased $33.1 million, or 7.2%, compared to the first six months of 2024 as the year-ago quarter included significant items impacting earnings of $3.8 million. S alaries and benefits increased $14.9 million, or 6.0%, primarily reflecting strategic hiring associated with our efforts to grow market share and continued investments in our risk management infrastructure as well as higher production-related compensation. Additionally, net occupancy and equipment expense increased $6.6 million, or 7.6%, and outside services increased $5.5 million, or 12.0%, offset by an FDIC insurance expense decline of $5.2 million.
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Financial highlights are summarized below:
TABLE 11
Six Months Ended
June 30, $ %
(dollars in thousands, except per share data) 2025 2024 Change Change
Net interest income $ 671,041 $ 634,898 $ 36,143 5.7 %
Provision for credit losses 43,090 34,079 9,011 26.4
Non-interest income 178,781 175,784 2,997 1.7
Non-interest expense 493,036 463,708 29,328 6.3
Income taxes 66,511 67,527 (1,016) (1.5)
Net income 247,185 245,368 1,817 0.7
Less: Preferred stock dividends — 6,005 (6,005) (100.0)
Net income available to common shareholders $ 247,185 $ 239,363 $ 7,822 3.3 %
Earnings per common share – Basic $ 0.68 $ 0.66 $ 0.02 3.0 %
Earnings per common share – Diluted 0.68 0.66 0.02 3.0
Cash dividends per common share 0.24 0.24 — —
The following table presents selected financial ratios and other relevant data used to analyze our performance:
TABLE 12
Six Months Ended
June 30,
2025 2024
Return on average equity 7.76 % 8.17 %
Return on average tangible common equity (1)
13.11 14.27
Return on average assets 1.02 1.07
Return on average tangible assets (1)
1.10 1.17
Equity to assets 13.12 12.76
Average equity to average assets 13.17 13.11
Tangible common equity to tangible assets (1)
8.47 7.86
CET1 capital ratio 10.79 10.19
Dividend payout ratio 35.42 36.56
Book value per common share $ 18.17 $ 16.94
Tangible book value per common share (1)
11.14 9.88
(1) Non-GAAP
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The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:
TABLE 13
Six Months Ended June 30,
2025 2024
(dollars in thousands) Average
Balance Interest
Income/
Expense Yield/
Rate Average
Balance Interest
Income/
Expense Yield/
Rate
Assets
Interest-bearing deposits with banks $ 1,732,129 $ 34,861 4.06 % $ 870,372 $ 17,385 4.02 %
Taxable investment securities (1)
6,512,930 111,590 3.43 6,138,237 93,388 3.04
Tax-exempt investment securities (1)(2)
1,007,379 17,501 3.47 1,037,388 17,883 3.45
Loans held for sale 214,605 8,040 7.49 173,981 6,805 7.84
Loans and leases (2) (3)
34,277,885 976,142 5.73 32,818,345 971,049 5.94
Total interest-earning assets (2)
43,744,928 1,148,134 5.28 41,038,323 1,106,510 5.41
Cash and due from banks 394,636 399,027
Allowance for credit losses (433,039) (412,119)
Premises and equipment 547,190 477,183
Other assets 4,541,924 4,572,271
Total assets $ 48,795,639 $ 46,074,685
Liabilities
Deposits:
Interest-bearing demand $ 16,945,425 217,445 2.59 $ 14,608,616 192,953 2.66
Savings 3,138,622 14,995 0.96 3,386,231 20,135 1.20
Certificates and other time 7,232,714 134,578 3.75 6,472,481 137,270 4.26
Total interest-bearing deposits 27,316,761 367,018 2.71 24,467,328 350,358 2.88
Short-term borrowings 1,626,785 34,235 4.23 2,520,544 60,538 4.82
Long-term borrowings 2,784,543 69,784 5.05 2,111,400 54,891 5.23
Total interest-bearing liabilities 31,728,089 471,037 2.99 29,099,272 465,787 3.22
Non-interest-bearing demand deposits 9,730,677 9,930,212
Total deposits and borrowings 41,458,766 2.29 39,029,484 2.40
Other liabilities 910,946 1,006,295
Total liabilities 42,369,712 40,035,779
Shareholders’ equity 6,425,927 6,038,906
Total liabilities and shareholders’ equity $ 48,795,639 $ 46,074,685
Net interest-earning assets $ 12,016,839 $ 11,939,051
Net interest income (FTE) (2)
677,097 640,723
Tax-equivalent adjustment (6,056) (5,825)
Net interest income $ 671,041 $ 634,898
Net interest spread 2.29 % 2.19 %
Net interest margin (2)
3.11 % 3.13 %
(1) The average balances and yields earned on investment 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.
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Net Interest Income
Net interest income on an FTE basis (non-GAAP) totaled $677.1 million, increasing $36.4 million, or 5.7%, reflecting growth in earning assets partially offset by balance growth in higher yielding deposit products. Average earning assets grew $2.7 billion, or 6.6%, primarily driven by loan growth. Additionally, we reinvested the proceeds of the AFS securities sold in November 2024 as part of our balance sheet repositioning with an average yield of 1.41% into securities yielding 4.78% with a similar duration and convexity profile. Average interest-bearing demand deposits increased $2.3 billion, or 16.0%, with customers migrating into higher-yielding deposit products. Total average borrowings decreased $220.6 million primarily due to a decrease in FHLB borrowings, partially offset by an increase in senior debt. The net interest margin (FTE) (non-GAAP) decreased 2 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 six months ended June 30, 2025, compared to the six months ended June 30, 2024:
TABLE 14
(in thousands) Volume Rate Net
Interest Income (1)
Interest-bearing deposits with banks $ 17,306 $ 170 $ 17,476
Investment securities (2)
6,212 11,608 17,820
Loans held for sale 3,896 (2,661) 1,235
Loans and leases (2)
25,556 (20,463) 5,093
Total interest income (2)
52,970 (11,346) 41,624
Interest Expense (1)
Deposits:
Interest-bearing demand 41,254 (16,762) 24,492
Savings (1,944) (3,196) (5,140)
Certificates and other time 15,931 (18,623) (2,692)
Short-term borrowings (21,981) (4,322) (26,303)
Long-term borrowings 16,526 (1,633) 14,893
Total interest expense 49,786 (44,536) 5,250
Net change (2)
$ 3,184 $ 33,190 $ 36,374
(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 $1.1 billion, increased $41.6 million, or 3.8%, resulting from growth in average earning assets of $2.7 billion. The increase in earning assets was primarily driven by a $1.5 billion, or 4.4%, increase in average loans and leases and an increase of $861.8 million in average interest-bearing deposits with banks. Average commercial loan growth of $542.1 million, or 2.6%, included increases of $311.8 million in commercial real estate, $103.0 million in commercial and industrial loans and $112.4 million in commercial leases. The increase in average commercial loans and leases was driven by activity across the footprint, including the South Carolina and eastern North Carolina markets with strong contributions from our commercial leasing team. The increase in commercial real estate included fundings on previously originated construction projects. Average consumer loans increased $917.5 million, or 7.6%, with a $1.3 billion increase in residential mortgages largely due to the continued successful execution in key markets and long-standing strategy of serving the purchase market. Average indirect installment loans decreased $383.3 million, or 33.2%, reflecting the $431 million sale that closed in the third quarter of 2024, partially offset by new organic growth in the portfolio. The yield on average earning assets (non-GAAP) decreased 13 basis points to 5.28%, driven by a 21 basis point decline in yields on loans to 5.73%, partially offset by a 33 basis point increase in yields on investment securities to 3.43%.
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Interest expense of $471.0 million increased $5.3 million primarily due to an increase in average interest-bearing deposits. Average total deposits increased $2.6 billion, or 7.7%, reflecting robust organic growth in new and existing customer relationships. The growth in average interest-bearing demand deposits of $2.3 billion and average time deposits of $760.2 million more than offset the decline in average savings deposits of $247.6 million and average non-interest-bearing demand deposits of $199.5 million as customers migrated balances into higher-yielding products. The funding mix has slightly shifted with non-interest-bearing demand deposits comprising 26% of total deposits at June 30, 2025, compared to 29% at June 30, 2024. Average short-term borrowings decreased $893.8 million, or 35.5%, primarily reflecting a decrease in FHLB borrowings. Average long-term borrowings increased $673.1 million, or 31.9%, primarily reflecting the December 2024 issuance of $500 million aggregate principal amount of senior notes. The total cost of funds decreased 11 basis points to 2.29%, with a decrease of 26 basis points in total borrowing costs and a 17 basis point decrease in interest-bearing deposit costs to 2.71%.
Provision for Credit Losses
The following table presents information regarding the provision for credit loss expense and net charge-offs:
TABLE 15
Six Months Ended
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Provision for credit losses on loans and leases $ 43,578 $ 33,821 $ 9,757 28.8 %
Provision for unfunded loan commitments (432) 268 (700) (261.2)
Total provision for credit losses on loans and leases 43,146 34,089 9,057 26.6
Provision for investment securities (56) (10) (46) 460.0
Total provision for credit losses $ 43,090 $ 34,079 $ 9,011 26.4 %
Net loan charge-offs $ 34,322 $ 20,626 $ 13,696 66.4 %
Net loan charge-offs (annualized) / total average loans and leases 0.20 % 0.13 %
The provision for credit losses on loans and leases was $43.1 million, compared to $34.1 million for the first six months of 2024. The provision for credit losses for the first six months of 2025 was primarily due to loan growth and net charge-off activity. The first six months of 2025 included net charge-offs of $34.3 million, or 0.20% annualized of total average loans, compared to $20.6 million, or 0.13% annualized, in the first six months of 2024, reflecting continued proactive management of the loan portfolio. The ACL on loans and leases was $432.1 million, an increase of $13.3 million, with the ratio of the ACL to total loans and leases remaining relatively stable at 1.25%.
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Non-Interest Income
The breakdown of non-interest income for the six months ended June 30, 2025 and 2024 is presented in the following table:
TABLE 16
Six Months Ended
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Service charges $ 45,285 $ 43,901 $ 1,384 3.2 %
Interchange and card transaction fees 25,624 25,705 (81) (0.3)
Trust services 23,991 22,899 1,092 4.8
Insurance commissions and fees 10,901 12,725 (1,824) (14.3)
Securities commissions and fees 17,702 16,135 1,567 9.7
Capital markets income 12,220 11,474 746 6.5
Mortgage banking operations 13,299 14,870 (1,571) (10.6)
Dividends on non-marketable equity securities 11,728 13,088 (1,360) (10.4)
Bank owned life insurance 9,188 6,762 2,426 35.9
Net securities gains (losses) 58 (3) 61 —
Other 8,785 8,228 557 6.8
Total non-interest income $ 178,781 $ 175,784 $ 2,997 1.7 %
Total non-interest income increased $3.0 million, or 1.7%. The variances in significant individual non-interest income items are explained in the following paragraphs.
Service charges increased $1.4 million, or 3.2%, primarily due to strong treasury management activity and higher consumer transaction volumes.
Wealth management revenues increased $2.7 million, or 6.8%, to a record $20.5 million as securities commissions and fees and trust services income increased 9.7% and 4.8%, respectively, through continued strong contributions across the geographic footprint. Additionally, the market value of assets under administration increased $0.9 billion, or 6.7%, to $14.4 billion.
Insurance commissions and fees decreased $1.8 million, or 14.3%, primarily due to lower contingent fees during the first six months of 2025.
Mortgage banking operations income decreased $1.6 million, or 10.6%, from net hedging impacts. During the first six months of 2025, we sold $690.0 million of residential mortgage loans, a 5.5% increase compared to $654.1 million for the same period of 2024.
Dividends on non-marketable equity securities decreased $1.4 million, or 10.4%, reflecting lower FHLB dividends resulting from a lower average balance of FHLB stock.
BOLI increased $2.4 million due to elevated life insurance claims.
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Non-Interest Expense
The breakdown of non-interest expense for the six months ended June 30, 2025 and 2024 is presented in the following table:
TABLE 17
Six Months Ended
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Salaries and employee benefits $ 264,977 $ 250,043 $ 14,934 6.0 %
Net occupancy 39,057 38,227 830 2.2
Equipment 53,873 48,107 5,766 12.0
Outside services 51,658 46,130 5,528 12.0
Marketing 9,590 9,437 153 1.6
FDIC insurance 17,405 22,616 (5,211) (23.0)
Bank shares and franchise taxes 8,096 8,056 40 0.5
Other 48,380 41,092 7,288 17.7
Total non-interest expense $ 493,036 $ 463,708 $ 29,328 6.3 %
Total non-interest expense of $493.0 million for the first six months of 2025 increased $29.3 million, a 6.3% increase from the same period of 2024. On an operating basis, non-interest expense (non-GAAP) increased $33.1 million, or 7.2%, when adjusting for significant items of $3.8 million in the first six months of 2024. See Table 18 i n this section for a list of the significant items impacting earnings. The variances in the individual non-interest expense items are further explained in the following paragraphs.
Salaries and employee benefits increased $14.9 million, or 6.0%, primarily reflecting strategic hiring associated with our efforts to grow market share and continued investments in our risk management infrastructure, as well as higher production-related compensation and normal annual merit increases.
Net occupancy and equipment expense of $92.9 million increased $6.6 million, or 7.6%, largely from technology-related investments and increased occupancy costs including de novo branch expansion.
Outside services increased $5.5 million, or 12.0%, with higher volume-related technology and third-party costs associated with ongoing investments in our ERM Framework.
FDIC insurance decreased $5.2 million, or 23.0%, 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 loss information provided by the FDIC.
Other non-interest expense was $48.4 million and $41.1 million for the first six months of 2025 and 2024, respectively. The increase was primarily due to the impact of Community Uplift, a mortgage down payment assistance program that was enhanced and expanded in conjunction with our previously announced settlement agreement with the DOJ. Additionally, the first six months of 2024 included a $2.6 million reduction to the previously estimated loss on the indirect auto loan sale that closed in the first quarter of 2024.
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The following table presents non-interest expense excluding significant items impacting earnings:
TABLE 18
Six Months Ended
June 30, $ %
(dollars in thousands) 2025 2024 Change Change
Total non-interest expense, as reported $ 493,036 $ 463,708 $ 29,328 6.3 %
Significant items:
Branch consolidations — (1,194) 1,194
FDIC special assessment — (5,212) 5,212
Reduction in previously estimated loss on indirect auto loan sale — 2,603 (2,603)
Total non-interest expense, excluding significant items (1)
$ 493,036 $ 459,905 $ 33,131 7.2 %
(1) Non-GAAP
Income Taxes
The following table presents information regarding income tax expense and certain tax rates:
TABLE 19
Six Months Ended
June 30,
(dollars in thousands) 2025 2024
Income tax expense $ 66,511 $ 67,527
Effective tax rate 21.2 % 21.6 %
Statutory federal tax rate 21.0 21.0
Income tax expense was slightly lower for the six months ended June 30, 2025. Although pretax income increased slightly, the impact on income tax expense was partially offset by the recognition of tax-exempt benefits associated with BOLI and increased net LIHTC.
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FINANCIAL CONDITION
The following table presents our condensed Consolidated Balance Sheets:
TABLE 20
(dollars in millions) June 30,
2025 December 31,
2024 $
Change %
Change
Assets
Cash and cash equivalents $ 2,427 $ 2,419 $ 8 0.3 %
Investment securities 7,695 7,445 250 3.4
Loans held for sale 296 218 78 35.8
Loans and leases, net 34,247 33,516 731 2.2
Goodwill and other intangibles 2,524 2,529 (5) (0.2)
Other assets 2,536 2,498 38 1.5
Total Assets $ 49,725 $ 48,625 $ 1,100 2.3 %
Liabilities and Shareholders’ Equity
Deposits $ 37,748 $ 37,107 $ 641 1.7 %
Borrowings 4,568 4,268 300 7.0
Other liabilities 885 948 (63) (6.6)
Total Liabilities 43,201 42,323 878 2.1
Shareholders’ Equity 6,524 6,302 222 3.5
Total Liabilities and Shareholders’ Equity $ 49,725 $ 48,625 $ 1,100 2.3 %
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.
Following is a summary of loans and leases:
TABLE 21
(dollars in millions) June 30,
2025 December 31,
2024 $
Change %
Change
Commercial real estate $ 12,686 $ 12,705 $ (19) (0.1) %
Commercial and industrial 7,556 7,550 6 0.1
Commercial leases 774 765 9 1.2
Other 182 144 38 26.4
Total commercial loans and leases 21,198 21,164 34 0.2
Direct installment 2,671 2,676 (5) (0.2)
Residential mortgages 8,595 7,986 609 7.6
Indirect installment 780 739 41 5.5
Consumer lines of credit 1,435 1,374 61 4.4
Total consumer loans 13,481 12,775 706 5.5
Total loans and leases $ 34,679 $ 33,939 $ 740 2.2 %
Our commercial real estate portfolio included $8.9 billion of non-owner-occupied loans of which 18.4% represented office loans. Our top 25 non-owner-occupied commercial real estate loans averaged approximately $23 million per exposure with the
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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, residential mortgages increased $0.6 billion, compared to December 31, 2024, largely due to the continued successful execution in key markets and long-standing strategy of serving the purchase market.
Non-Performing Assets
Following is a summary of non-performing assets:
TABLE 22
(dollars in millions) June 30,
2025 December 31,
2024 $
Change %
Change
Commercial real estate $ 47 $ 88 $ (41) (46.6) %
Commercial and industrial 53 51 2 3.9
Commercial leases 3 3 — —
Other 2 2 — —
Total commercial loans and leases 105 144 (39) (27.1)
Direct installment 2 2 — —
Residential mortgages 4 7 (3) (42.9)
Indirect installment 2 2 — —
Consumer lines of credit 4 4 — —
Total consumer loans 12 15 (3) (20.0)
Total non-performing loans and leases 117 159 (42) (26.4)
Other real estate owned 2 3 (1) (33.3)
Total non-performing assets $ 119 $ 162 $ (43) (26.5) %
Non-performing assets decreased $43.6 million, from $162.4 million at December 31, 2024 to $118.8 million at June 30, 2025, due to proactive credit risk management of the portfolio with levels 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 June 30, 2025 and December 31, 2024, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at June 30, 2025, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which increases 5.6% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which decreases 1.3% over our R&S forecast period, (iii) S&P Volatility, which increases 87.7% in 2025 and decreases 22.7% in 2026 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, 2024 included, but were not limited to: (i) the purchase only Housing Price Index, which increases 7.4% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 3.9% over our R&S forecast period, (iii) S&P Volatility, which increases 34.9% in 2025 and 2.5% in 2026 and
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(iv) personal and business 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
Six Months Ended
June 30, Six Months Ended
June 30, June 30,
(dollars in millions) 2025 2024 2025 2024 2025
Commercial real estate $ 10.0 $ 9.1 0.06 % 0.06 % $ 179.5
Commercial and industrial 17.4 6.1 0.10 0.04 88.3
Commercial leases 0.2 0.1 — — 21.6
Other commercial 1.7 1.0 0.01 0.01 4.6
Direct installment 0.3 0.2 — — 26.6
Residential mortgages 1.6 0.1 0.01 — 95.4
Indirect installment 2.7 3.9 0.02 0.02 9.3
Consumer lines of credit 0.4 0.1 — — 6.8
Total net loan charge-offs on loans and leases, net loan charge-offs (annualized)/average loans $ 34.3 $ 20.6 0.20 % 0.13 % $ 432.1
Allowance for credit losses/total loans and leases 1.25 % 1.24 %
Allowance for credit losses/non-performing loans 370.72 % 388.11 %
The ACL on loans and leases of $432.1 million at June 30, 2025 increased $9.3 million, or 2.2%, from December 31, 2024. Our ending ACL coverage ratio was stable at 1.25% at both June 30, 2025 and December 31, 2024. The ACL as a percentage of non-performing loans for the total portfolio increased to 371% as of June 30, 2025, compared to 265% as of December 31, 2024.
Total provision for credit losses for the six months ended June 30, 2025 was $43.1 million, compared to $34.1 million for the same period in 2024. Net charge-offs were $34.3 million for the six months ended June 30, 2025, compared to $20.6 million for the first six months of 2024.
We continue to closely review our loan portfolio for tariff impacts as tariffs continue to evolve and remain uncertain. Our actions include granular monitoring of credit line utilization and industry concentrations, by portfolio and country. For example, during the first quarter of 2025, we highlighted that we estimated that less than 5% of the exposures would have high direct impacts from tariffs and concluded that FNB remained well positioned at this point in time, with manageable exposure to the most heavily tariff-impacted businesses and consumer portfolios. We will continue to diligently monitor our loan portfolio and engage in active dialogue with our customers. A wider credit quality impact could result from a slowing or a recessionary macroeconomic environment, which we monitor via our ongoing quarterly stress testing process.
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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
(dollars in millions) June 30,
2025 December 31,
2024 $
Change %
Change
Non-interest-bearing demand $ 9,872 $ 9,761 $ 111 1.1 %
Interest-bearing demand 17,292 16,668 624 3.7
Savings 3,071 3,178 (107) (3.4)
Certificates and other time deposits 7,513 7,500 13 0.2
Total deposits $ 37,748 $ 37,107 $ 641 1.7 %
Total deposits increased $640.8 million, or 1.7%, from December 31, 2024, due to growth in new and existing customer relationships. We ended the quarter with approximately 77% 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. On December 11, 2024, we completed a registered debt offering in which we issued $500 million aggregate principal amount of 5.722% fixed rate / floating rate senior notes due in 2030. The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering costs were $496.7 million. These proceeds were used for general corporate purposes, which included investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness.
Since inception of our $300 million stock purchase program, we repurchased 15.8 million shares at a weighted average share price of $11.63 for $184.3 million, with $115.7 million remaining for repurchase under this program. During the second quarter of 2025, we repurchased 0.7 million shares at a weighted average share price of $13.85 for $10.0 million. 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 requires a 1% excise tax on stock repurchases.
On February 15, 2024, we redeemed all our 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
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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 June 30, 2025, 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 this volatile economic and uncertain environment, we frequently run stress tests for a variety of economic situations, including severely adverse scenarios. 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 June 30, 2025
F.N.B. Corporation
Total capital $ 4,753 12.50 % $ 3,804 10.00 % $ 3,994 10.50 %
Tier 1 capital 4,104 10.79 2,282 6.00 3,233 8.50
CET1 4,104 10.79 n/a n/a 2,662 7.00
Leverage 4,104 8.78 n/a n/a 1,870 4.00
Risk-weighted assets 38,035
FNBPA
Total capital $ 4,941 13.08 % $ 3,777 10.00 % $ 3,966 10.50 %
Tier 1 capital 4,119 10.90 3,022 8.00 3,211 8.50
CET1 4,039 10.69 2,455 6.50 2,644 7.00
Leverage 4,119 8.86 2,324 5.00 1,859 4.00
Risk-weighted assets 37,773
As of December 31, 2024
F.N.B. Corporation
Total capital $ 4,635 12.35 % $ 3,755 10.00 % $ 3,942 10.50 %
Tier 1 capital 3,971 10.58 2,253 6.00 3,191 8.50
CET1 3,971 10.58 n/a n/a 2,628 7.00
Leverage 3,971 8.75 n/a n/a 1,816 4.00
Risk-weighted assets 37,546
FNBPA
Total capital $ 4,794 12.86 % $ 3,728 10.00 % $ 3,914 10.50 %
Tier 1 capital 3,962 10.63 2,982 8.00 3,169 8.50
CET1 3,882 10.41 2,423 6.50 2,610 7.00
Leverage 3,962 8.78 2,257 5.00 1,806 4.00
Risk-weighted assets 37,280
(1) Reflects the well-capitalized standard under Regulation Y for F.N.B. Corporation and the prompt corrective action framework for FNBPA.
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In accordance with Basel III Capital Rules, the minimum capital requirements plus capital conservation buffer, which are presented for each period above, represent the minimum requirements needed to avoid limitations on distributions of dividends and certain discretionary bonus payments.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act)
The Dodd-Frank Act broadly affects the financial services industry by establishing a framework for systemic risk oversight, creating a resolution authority for institutions determined to be systemically important, mandating higher capital and liquidity requirements, requiring banks to pay increased fees to regulatory agencies and containing numerous other provisions aimed at strengthening the sound operation of the financial services sector that significantly change the system of regulatory oversight as described in more detail under Part I, Item 1, “Business - Government Supervision and Regulation” included in our 2024 Annual Report on Form 10-K as filed with the SEC on February 27, 2025.
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 FNBPA 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 FNBPA 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 fourth quarter of 2024, we successfully completed an offering of fixed to floating rate senior notes maturing in December 2030 for $496.7 million in net proceeds. The issuance was met with strong investor interest and was priced with a coupon of 5.722%, a spread of 165 basis points above the yield of a comparable term Treasury Note. We have historically been opportunistic when accessing the capital markets, and we expect to continue with that strategy. The parent company's cash position at June 30, 2025 was $755.7 million, decreasing $47.7 million since December 31, 2024, primarily due to the redemption of UB Bancorp Subordinated Debt for $25.0 million in May and the repurchase of 1.466 million shares of FNB stock for $20.0 million, at an average cost of $13.66.
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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
June 30,
2025 December 31,
2024 Internal
Limit
Liquidity coverage ratio 1.5 times 1.5 times > 1 time
Months of cash on hand 13.1 months 13.7 months > 12 months
Parent company cash on hand (millions) $ 755.7 $ 803.4 n/a
As previously mentioned, our parent company cash on hand increased materially due to the issuance of senior debt during the fourth quarter of 2024. The LCR at June 30, 2025 includes the scheduled maturity of $350 million in senior debt due in August 2025 and $100 million of subordinated debt scheduled to mature in October 2025, which are considered cash outflows for the ratio calculations. The MCH decreased from December 31, 2024 primarily due to the smaller cash balance on hand. The projected LCR and MCH after the maturity of the senior and subordinated debt in 2025 improves to 2.5 times and 16.1 months, respectively. 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. FNBPA 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 deposit 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 $640.8 million, or 1.7%, when compared to December 31, 2024. Interest-bearing demand deposits, non-interest-bearing demand deposits and time deposits increased $623.7 million, $111.4 million and $12.8 million, respectively, when compared to December 31, 2024, through these efforts. Savings account balances declined $107.2 million compared to December 31, 2024. The mix of non-interest-bearing demand deposits to total deposits remained stable with the prior quarter at 26%. Our loan to deposit ratio stood at 92% at June 30, 2025, compared to 91% at December 31, 2024.
At June 30, 2025, approximately 77% of our deposits were insured by the FDIC or collateralized, consistent with December 31, 2024 levels. Our cash balances held at the FRB were $1.9 billion at June 30, 2025 and $2.0 billion at December 31, 2024. Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity.
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The following table presents certain information relating to FNBPA’s credit availability and salable unpledged investment securities:
TABLE 27
(dollars in millions) June 30,
2025 December 31,
2024
Unused wholesale credit availability $ 15,929 $ 16,056
Unused wholesale credit availability as a % of FNBPA assets 32.2 % 33.2 %
Salable unpledged government and agency securities $ 1,247 $ 927
Salable unpledged government and agency securities as a % of FNBPA assets 2.5 % 1.9 %
Cash and salable unpledged government and agency securities as a % of FNBPA assets 6.4 % 6.0 %
Our bank-level liquidity position remains strong. Our contingency funding policy and periodic liquidity stress testing of multiple stress scenarios is particularly valuable as we successfully manage our liquidity. A portion of our available borrowing capacity includes capacity at 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 excess cash and salable unpledged government and agency securities that could be utilized to meet funding needs. At June 30, 2025, FNBPA has $3.1 billion of cash and salable unpledged government and agency securities representing 6.4% of total assets, an improvement from $2.9 billion and 6.0% at December 31, 2024. 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 June 30, 2025 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 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 $ 1,000 $ 1,775 $ 1,994 $ 3,413 $ 8,182
Investments 2,032 254 263 580 3,129
3,032 2,029 2,257 3,993 11,311
Liabilities
Non-maturity deposits 325 650 975 1,950 3,900
Time deposits 1,170 2,094 2,203 1,676 7,143
Borrowings 1,362 613 569 32 2,576
2,857 3,357 3,747 3,658 13,619
Period Gap (Assets - Liabilities) $ 175 $ (1,328) $ (1,490) $ 335 $ (2,308)
Cumulative Gap $ 175 $ (1,153) $ (2,643) $ (2,308)
Cumulative Gap to Total Assets 0.4 % (2.3) % (5.3) % (4.6) %
The twelve-month cumulative gap to total assets ratio was (4.6)% as of June 30, 2025, compared to (5.0)% as of December 31, 2024. The improvement in the twelve-month cumulative gap to total assets was primarily related to management's shorter-term time deposit offerings, 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.
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Management believes we have sufficient liquidity available to meet our normal operating and contingency funding cash needs for the next twelve months and thereafter for the foreseeable future.
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 possess different cash flow characteristics. 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, among other strategies, for interest rate risk management 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.
The following repricing gap analysis as of June 30, 2025 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.
TABLE 29
(dollars in millions) Within
1 Month 2-3
Months 4-6
Months 7-12
Months Total
1 Year
Assets
Loans $ 15,740 $ 1,147 $ 978 $ 1,651 $ 19,516
Investments 2,044 265 317 575 3,201
17,784 1,412 1,295 2,226 22,717
Liabilities
Non-maturity deposits 10,123 — — — 10,123
Time deposits 1,260 2,092 2,201 1,671 7,224
Borrowings 1,342 1,079 211 17 2,649
12,725 3,171 2,412 1,688 19,996
Off-balance sheet (1,900) — 250 400 (1,250)
Period Gap (Assets – Liabilities + Off-balance sheet) $ 3,159 $ (1,759) $ (867) $ 938 $ 1,471
Cumulative Gap $ 3,159 $ 1,400 $ 533 $ 1,471
Cumulative Gap to Earning Assets 7.1 % 3.1 % 1.2 % 3.3 %
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Management utilizes the repricing gap analysis as a diagnostic tool in managing net interest income and EVE risk measures. Repricing gap analysis, while useful, has some limitations in measuring interest rate risk. 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, thereby creating our current asset sensitive position. As a result of management's strategies to reduce its asset sensitive position, the twelve-month cumulative repricing gap to total assets was 3.3% as of June 30, 2025, down from 4.5% at December 31, 2024. Specific pricing actions included an emphasis on originating shorter-term time deposits so more interest-bearing liabilities will mature in less than 12 months, hence reducing the repricing gap differential.
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 Rate Shocks 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 June 30, 2025. The calculated results do not reflect management's potential actions.
TABLE 30
June 30,
2025 December 31,
2024 ALCO
Limits
Net interest income change over 12 months (Rate Ramps):
+ 200 basis points 2.3 % 3.0 % (10.0) %
+ 100 basis points 1.2 1.5 (10.0)
- 100 basis points (1.2) (1.5) (10.0)
- 200 basis points (2.5) (3.1) (10.0)
Net interest income change over 12 months (Rate Shocks):
+ 200 basis points 3.0 3.9 (10.0)
+ 100 basis points 1.6 2.0 (10.0)
- 100 basis points (1.9) (2.2) (10.0)
- 200 basis points (4.0) (4.6) (10.0)
Economic value of equity (Rate Shocks):
+ 300 basis points 4.3 4.5 (25.0)
+ 200 basis points 3.2 3.3 (15.0)
+ 100 basis points 2.1 1.9 (10.0)
- 100 basis points (3.1) (3.2) (10.0)
- 200 basis points (7.5) (6.9) (15.0)
There are multiple factors that influence our interest rate risk position and impact net interest income, including 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 slightly 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 63.0% and 62.9% of total net loans and leases at June 30, 2025 and December 31, 2024, respectively. Forty-six 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 lower short-term interest rates. During the first six months of 2025, management adjusted the IRR position by purchasing investment securities with an average duration of 4.0 years, originating adjustable-rate mortgage loans with longer-duration fixed-rate reset periods, strategically meeting our customers' preferences for deposit products with shorter-term time deposits and maintaining borrowings with 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, as intended, closer to neutral when compared to December 31, 2024.
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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. During the fourth quarter of 2024, we executed $1.0 billion notional balance receive-fixed interest rate swaps designated as cash flow hedges for variable rate commercial loans at an average rate of 3.9% and average maturity of 42.3 months. During the second quarter of 2025, we executed $250 million (notional) at a rate of 3.7% and a maturity of 24 months. At June 30, 2025, we have a total of $1.95 billion (notional) of these cash flow hedges at an average rate of 3.0% and average maturity of 23.0 months with $500 million (notional) of this total maturing in 2025 at an average rate of 0.7%. Additionally, we have a $200.0 million (notional) interest rate collar on variable rate commercial loans with strike rates between 2.8525% and 5.50% that matures in April 2026. These actions lowered our asset sensitivity.
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 June 30, 2025, the commercial customer-related interest rate swaps totaled $6.1 billion (notional), up from $5.9 billion (notional) at December 31, 2024. 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.
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 other 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.
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The following table presents the credit ratings for FNB and FNBPA as of June 30, 2025:
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 ERM Framework and risk management practices to identify, assess, monitor and report the material risks known throughout the organization in pursuit of our business strategies. Our Board of Directors and senior management have identified seven major categories of risk: credit risk, market risk, liquidity risk, operational risk, 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 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 operational activities in accordance with the risk frameworks.
• Second Line of Defense - consists of the Risk Management Department responsible for developing risk frameworks and identifying, assessing, overseeing and controlling enterprise aggregate risks independent from the First Line of Defense.
• Third Line of Defense - is Internal Audit and develops and executes a risk-based audit plan to provide assurance on the compliance and effectiveness of controls and risk management practices throughout the organization independent from the First and Second Lines of Defense.
Our Board of Directors is responsible for the oversight of management on behalf of our shareholders. 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.
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• 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 and approves the ERM Framework including the review and approval of risk management policies and practices, to identify, assess, monitor and report material risks.
• Credit Risk, Fair Lending and Community Reinvestment Act 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, the Operational Risk Committee, the Compliance Risk Committee and the ALCO.
Risk appetite is an integral element of our ERM Framework and of our business and capital planning processes through our Board Risk Committee and RMC. 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 operations 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 RMC, 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 strategic plans and business operations remain consistent with our risk appetite given the current economic and regulatory environments, as well as shareholders' expectations.
Our ERM Framework provides the practices to identify, assess, control, 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 with average total consolidated assets of $50 billion or more.
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 shareholders
Three Months Ended
June 30, Six Months Ended
June 30,
(in thousands) 2025 2024 2025 2024
Net income available to common shareholders $ 130,670 $ 123,037 $ 247,185 $ 239,363
Preferred dividend at redemption — — — 3,995
Branch consolidation costs — — — 1,194
Tax benefit of branch consolidation costs — — — (251)
FDIC special assessment — 804 — 5,212
Tax benefit of FDIC special assessment — (169) — (1,095)
Reduction of previous estimated loss on indirect auto loan sale — — — (2,603)
Tax expense of reduction of previous estimated loss on indirect auto loan sale — — — 547
Operating net income available to common shareholders (non-GAAP) $ 130,670 $ 123,672 $ 247,185 $ 246,362
The table above shows how operating net income available to common shareholders (non-GAAP) is derived from amounts reported in our financial statements. We believe certain charges, such as preferred dividend at redemption, FDIC special assessment, loss related to indirect auto loan sale 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
June 30, Six Months Ended
June 30,
2025 2024 2025 2024
Earnings per diluted common share $ 0.36 $ 0.34 $ 0.68 $ 0.66
Preferred dividend at redemption — — — 0.01
Branch consolidation costs — — — —
Tax benefit of branch consolidation costs — — — —
FDIC special assessment — — — 0.01
Tax benefit of FDIC special assessment — — — —
Reduction of previous estimated loss on indirect auto loan sale — — — (0.01)
Tax expense of reduction of previous estimated loss on indirect auto loan sale — — — —
Operating earnings per diluted common share (non-GAAP) $ 0.36 $ 0.34 $ 0.68 $ 0.68
91
TABLE 34
Return on average tangible common equity
Three Months Ended
June 30, Six Months Ended
June 30,
(dollars in thousands) 2025 2024 2025 2024
Net income available to common shareholders (annualized) $ 524,116 $ 494,851 $ 498,467 $ 481,357
Amortization of intangibles, net of tax (annualized) 12,607 13,913 12,614 14,014
Tangible net income available to common shareholders (annualized) (non-GAAP) $ 536,723 $ 508,764 $ 511,081 $ 495,371
Average total shareholders’ equity $ 6,479,119 $ 6,038,239 $ 6,425,927 $ 6,038,906
Less: Average preferred shareholders' equity — — — (26,427)
Less: Average intangible assets (1)
(2,525,338) (2,539,710) (2,526,481) (2,541,871)
Average tangible common equity (non-GAAP) $ 3,953,781 $ 3,498,529 $ 3,899,446 $ 3,470,608
Return on average tangible common equity (non-GAAP) 13.57 % 14.54 % 13.11 % 14.27 %
(1) Excludes loan servicing rights.
TABLE 35
Return on average tangible assets
Three Months Ended
June 30, Six Months Ended
June 30,
(dollars in thousands) 2025 2024 2025 2024
Net income (annualized) $ 524,116 $ 494,851 $ 498,467 $ 493,431
Amortization of intangibles, net of tax (annualized) 12,607 13,913 12,614 14,014
Tangible net income (annualized) (non-GAAP) $ 536,723 $ 508,764 $ 511,081 $ 507,445
Average total assets $ 49,105,636 $ 46,471,781 $ 48,795,639 $ 46,074,685
Less: Average intangible assets (1)
(2,525,338) (2,539,710) (2,526,481) (2,541,871)
Average tangible assets (non-GAAP) $ 46,580,298 $ 43,932,071 $ 46,269,158 $ 43,532,814
Return on average tangible assets (non-GAAP) 1.15 % 1.16 % 1.10 % 1.17 %
(1) Excludes loan servicing rights.
92
TABLE 36
Tangible book value per common share
(dollars in thousands, except per share data) June 30, 2025 June 30, 2024
Total shareholders’ equity $ 6,523,791 $ 6,089,634
Less: Intangible assets (1)
(2,524,005) (2,537,532)
Tangible common equity (non-GAAP) $ 3,999,786 $ 3,552,102
Ending common shares outstanding 359,123,010 359,558,026
Tangible book value per common share (non-GAAP) $ 11.14 $ 9.88
(1) Excludes loan servicing rights.
TABLE 37
Tangible common equity to tangible assets
(dollars in thousands) June 30, 2025 June 30, 2024
Total shareholders' equity $ 6,523,791 $ 6,089,634
Less: Intangible assets (1)
(2,524,005) (2,537,532)
Tangible common equity (non-GAAP) $ 3,999,786 $ 3,552,102
Total assets $ 49,724,837 $ 47,714,742
Less: Intangible assets (1)
(2,524,005) (2,537,532)
Tangible assets (non-GAAP) $ 47,200,832 $ 45,177,210
Tangible common equity to tangible assets (non-GAAP) 8.47 % 7.86 %
(1) Excludes loan servicing rights.
TABLE 38
Operating non-interest expense
Three Months Ended
June 30, Six Months Ended
June 30,
(in thousands) 2025 2024 2025 2024
Non-interest expense $ 246,225 $ 226,612 $ 493,036 $ 463,708
Branch consolidations — — — (1,194)
FDIC special assessment — (804) — (5,212)
Reduction of previous estimated loss on indirect auto loan sale — — — 2,603
Operating non-interest expense (non-GAAP) $ 246,225 $ 225,808 $ 493,036 $ 459,905
93
TABLE 39
Efficiency ratio
Three Months Ended
June 30, Six Months Ended
June 30,
(dollars in thousands) 2025 2024 2025 2024
Non-interest expense $ 246,225 $ 226,612 $ 493,036 $ 463,708
Less: Amortization of intangibles (3,979) (4,379) (7,918) (8,821)
Less: OREO expense (316) (200) (631) (390)
Less: Branch consolidation costs — — — (1,194)
Less: FDIC special assessment — (804) — (5,212)
Add: Reduction of previous estimated loss on indirect auto loan sale — — — 2,603
Adjusted non-interest expense $ 241,930 $ 221,229 $ 484,487 $ 450,694
Net interest income $ 347,196 $ 315,890 $ 671,041 $ 634,898
Taxable equivalent adjustment 3,073 2,915 6,056 5,825
Non-interest income 91,015 87,922 178,781 175,784
Less: Net securities (gains) losses (58) 3 (58) 3
Adjusted net interest income (FTE) + non-interest income $ 441,226 $ 406,730 $ 855,820 $ 816,510
Efficiency ratio (FTE) (non-GAAP) 54.83 % 54.39 % 56.61 % 55.20 %
94
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.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.