# FNB CORP/PA/ (FNB) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from FNB CORP/PA/'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/37808/000003780822000005/fnb-20211231.htm
Accession: 0000037808-22-000005
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/FNB/
All MD&A years: /company/FNB/mda/
Next year: /company/FNB/mda/fy2022/ (FY 2022)

ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

    OPERATIONS

MD&A represents an overview of and highlights material changes to our financial condition and consolidated results of operations. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes presented in Item 8 of this Report. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any future period.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Report may contain statements regarding our outlook for earnings, revenues, expenses, tax rates, capital and liquidity levels and ratios, asset quality levels, financial position and other matters regarding or affecting our current or future business and operations. These statements can be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‑looking statements involve various assumptions, risks and uncertainties which can change over time. Actual results or future events may be different from those anticipated in our forward-looking statements and may not align with historical performance and events. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance upon such statements. Forward-looking statements are typically identified by words such as "believe," "plan," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "will," "should," "project," "goal," and other similar words and expressions. We do not assume any duty to update forward-looking statements, except as required by federal securities laws.

Our forward-looking statements are subject to the following principal risks and uncertainties:

•Our business, financial results and balance sheet values are affected by business, economic and political circumstances, including, but not limited to: (i) developments with respect to the U.S. and global financial markets; (ii) actions by the FRB, FDIC, UST, OCC and other governmental agencies, especially those that impact money supply, market interest rates or otherwise affect business activities of the financial services industry; (iii) a slowing of the U.S. economic environment; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S.

•Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards.

•Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues. Our ability to anticipate, react quickly and continue to respond to technological changes and COVID-19 challenges can also impact our ability to respond to customer needs and meet competitive demands.

•Business and operating results can also be affected by widespread natural and other disasters, pandemics, including the ongoing COVID-19 pandemic crisis, dislocations, risks associated with a post-pandemic return to normalcy, including shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks or international hostilities through impacts on the economy and financial markets generally, or on us or our counterparties specifically.

•Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation. Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and the ability to attract and retain talent. These developments could include:

◦Changes resulting from the current U.S. presidential administration, including legislative and regulatory reforms, different approaches to supervisory or enforcement priorities, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes, employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.

◦Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards.

◦Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. These matters may result in monetary judgments or settlements or other

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remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to FNB.

◦Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies.

◦The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL.

◦A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns.

•The COVID-19 pandemic and the federal, state, and local regulatory and governmental actions implemented in response to COVID-19 have resulted in an increased volatility of the financial markets and national and local economic conditions, increased levels of unemployment and business failures, and the potential to have a material impact on, among other things, our business, financial condition, results of operations, liquidity, or on our management, employees, customers and critical vendors and suppliers. In view of the many unknowns associated with the COVID-19 pandemic, our forward-looking statements continue to be subject to various conditions that may be substantially different in the future than what we are currently experiencing or expecting, including, but not limited to, a prolonged recovery of the U.S. economy and labor market and the possible change in commercial and consumer customer fundamentals, expectations and sentiments. As a result, the COVID-19 impact, including uncertainty regarding the potential impact of continuing variant mutations of the virus, U.S. government responsive measures to manage it or provide financial relief, the uncertainty regarding its duration and the success of vaccination efforts, it is possible the pandemic may have a material adverse impact on our business, operations and financial performance.

•Our acquisition of Howard presents us with risks and uncertainties related to the integration of the acquired business into FNB including:

◦The business of Howard going forward may not perform as we project or in a manner consistent with historical performance. As a result, the anticipated benefits, including estimated cost savings, of the transaction may be significantly more difficult or take longer to achieve than expected or may not be achieved in their entirety as a result of unexpected factors or events, including those that are outside of our control.

◦The integration of Howard including its banking subsidiary, Howard Bank, with that of FNB and FNBPA may be more difficult to achieve than anticipated or have unanticipated adverse results.

◦In addition to the Howard transaction, we grow our business in part through acquisitions and new strategic initiatives. Risks and uncertainties include those presented by the nature of the business acquired and strategic initiative, including in some cases those associated with our entry into new businesses or new geographic or other markets and risks resulting from our inexperience in those new areas, as well as risks and uncertainties related to the acquisition transactions themselves, regulatory issues, and the integration of the acquired businesses into FNB after closing.

The risks identified here are not exclusive or the types of risks we may confront and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A. Risk Factors and the Risk Management sections in this Annual Report on Form 10-K (including the MD&A section), our subsequent 2022 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other subsequent filings with the SEC, which are available on our corporate website at https://www.fnb-online.com/about-us/investor-information/reports-and-filings. More specifically, our forward-looking statements may be subject to the evolving risks and uncertainties related to the COVID-19 pandemic and its macro-economic impact and the resulting governmental, business and societal responses to it. We have included our web address as an inactive textual reference only. Information on our website is not part of this Report.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our Consolidated Financial Statements are prepared in accordance with GAAP. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions and judgments. Certain policies inherently are based to a greater extent on estimates, assumptions and judgments of management and, as such, have a greater possibility of producing results that could be

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materially different than originally reported. For example, on January 1, 2020, we adopted CECL. Under the CECL methodology, the ACL represents the expected lifetime credit losses on loans and leases that we do not expect to collect.

The most significant accounting policies followed by FNB are presented in Note 1, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. These policies, along with the disclosures presented in the Notes to Consolidated Financial Statements, provide information on how we value significant assets and liabilities in the Consolidated Financial Statements, how we determine those values and how we record transactions in the Consolidated Financial Statements.

Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the Consolidated Financial Statements. Management currently views the determination of the ACL, fair value of financial instruments, goodwill and other intangible assets, income taxes and DTAs and litigation reserves to be critical accounting policies.

Allowance for Credit Losses

The ACL is a valuation account that is deducted from the amortized cost basis of loans and leases resulting in the net amount expected to be collected. We charge off loans against the ACL in accordance with our policies or if a loss confirming event occurs. Expected recoveries do not exceed the aggregate of the amounts previously charged-off and expected to be charged-off. 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. Adjustments to historical loss information, where applicable, are made for differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters and other relevant factors. Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a R&S forecast can be made, the model reverts over 12 months on a straight-line basis back to the historical rates of default and severity of loss over the remaining life of the loans.

Determining the appropriateness of the ACL is complex and requires significant management judgment about the effect of matters that are inherently uncertain. Due to those significant management judgments and the factors included in the calculation, significant changes to the ACL level could occur in future periods.

The Provision for Credit Losses section in the Results of Operations includes a discussion of the factors affecting changes in the ACL during the current period. See Note 1, “Summary of Significant Accounting Policies” and Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements for further information on the ACL.

Fair Value of Financial Instruments

We use fair value measurements to record fair value adjustments to certain financial assets and liabilities and determine fair value disclosures. Additionally, from time to time we may be required to record at fair value other assets on a non-recurring basis, such as loans held for sale, certain impaired loans, MSRs, OREO and certain other assets. The accounting guidance for fair value measurements includes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Judgment is required to determine which level of the three-level hierarchy certain assets or liabilities measured at fair value are classified.

Fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. We use significant and complex estimates, assumptions and judgments when assets and liabilities are required to be recorded at, or adjusted to reflect, fair value. Where available, fair value and information used to record valuation adjustments for certain assets or liabilities is based on either quoted market prices or are provided by independent third-party sources, including appraisers and valuation specialists. When such third-party information is not available, we may estimate fair value by using cash flow and other financial modeling techniques. Our assumptions about what a market participant would use in pricing an asset or liability is developed based on the best information available in the circumstances. These estimates are inherently subjective and can result in significant changes in the

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fair value estimates over the life of the asset or liability. Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility.

See Note 1, “Summary of Significant Accounting Policies” and Note 25, “Fair Value Measurements” in the Notes to Consolidated Financial Statements for further discussion of accounting for financial instruments.

Goodwill and Other Intangible Assets

As a result of acquisitions, we have recorded goodwill and other identifiable intangible assets on our Consolidated Balance Sheets. Goodwill represents the cost of acquired companies in excess of the fair value of net assets, including identifiable intangible assets, at the acquisition date. Our recorded goodwill relates to value inherent in our Community Banking, Wealth Management and Insurance segments.

The value of goodwill and other identifiable intangibles is dependent upon our ability to provide high quality, cost-effective services in the face of competition. As such, these values are supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or our inability to deliver cost-effective services over sustained periods can lead to impairment in value, which could result in additional expense and adversely impact earnings in future periods.

Goodwill and other intangibles are subject to impairment testing at the reporting unit level, which must be conducted at least annually. We perform annual impairment testing during the fourth quarter, or more frequently if impairment indicators exist. We also continue to monitor other intangibles for impairment and to evaluate carrying amounts, as necessary.

In connection with the preparation of the year-end 2021 financial statements, we completed our annual goodwill impairment test as of October 1, 2021. No impairment was identified in any of our reporting units. We also performed a qualitative analysis through year-end and concluded that it was not more-likely-than-not that the fair value of one or more of our reporting units was below its respective carrying amount, and therefore no triggering event has occurred, as of December 31, 2021.

Inputs and assumptions used in estimating fair value include projected future cash flows, discount rates reflecting the risk inherent in future cash flows, long-term growth rates, anticipated cost savings and an evaluation of market comparables and recent transactions. Goodwill assessments are highly sensitive to economic projections and the related assumptions and estimates used by management. In the event of a prolonged economic downturn or deterioration in the economic outlook, interim quantitative assessments of our goodwill balance could be required in future periods. Any impairment charge would not affect our capital ratios, tangible common equity, tangible book value per share or liquidity position.

See Note 1, “Summary of Significant Accounting Policies” and Note 9, “Goodwill and Other Intangible Assets” in the Notes to Consolidated Financial Statements for further discussion of accounting for goodwill and other intangible assets.

Income Taxes and Deferred Tax Assets

We are subject to the income tax laws of federal, state and other taxing jurisdictions where we conduct business. The laws are complex and subject to different interpretations by the taxpayer and various taxing authorities. In determining the provision for income taxes, management must make judgments and estimates about the application of these inherently complex tax statutes, related regulations and case law. In the process of preparing our tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the taxing authorities or based on management’s ongoing assessment of the facts and evolving case law.

We determine deferred income taxes using the balance sheet method. Under this method, the net DTA or DTL is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes the effect of enacted changes in tax rates and laws in the period in which they occur. That effect would be included in income in the reporting period that includes the enactment date of the change. See the Results of Operations, Income Taxes section later in this MD&A for further tax-related discussion.

On a quarterly basis, management assesses the reasonableness of our effective tax rate based on management’s current best estimate of pretax earnings and the applicable taxes for the full year. DTAs and DTLs are assessed on an annual basis, or sooner, if business events or circumstances warrant. DTAs represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, and from operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax

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deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies.

We establish a valuation allowance when it is more likely than not that we will not be able to realize a benefit from our DTAs, or when future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’s assessments of realizable DTAs.

See Note 1, “Summary of Significant Accounting Policies” and Note 19, “Income Taxes” in the Notes to Consolidated Financial Statements for further discussion of accounting for income taxes.

Litigation Reserves

The Corporation is involved in various pending and threatened legal proceedings in which claims for monetary damages and other relief are asserted. These claims result from ordinary business activities relating to our current and/or former operations. Although the ultimate outcome for any asserted claim cannot be predicted with certainty, we believe that the Corporation has valid defenses for all asserted claims. In accordance with applicable accounting guidance, when a loss is considered probable and reasonably estimable, we, in conjunction with internal and outside counsel handling the matter, record a liability in the amount of our best estimate for the ultimate loss. We continue to monitor the matter for further developments that could affect the amount of the accrued liability that has previously been established.

Litigation expense represents a key area of judgment and is subject to uncertainty and factors outside of our control. Significant judgment is required in making these estimates and our financial liabilities may ultimately be more or less than the current estimate. See our policy on establishing accruals for litigation in Note 16, "Commitments, Credit Risk and Contingencies" in the Notes to Consolidated Financial Statements.

Recent Accounting Pronouncements and Developments

Note 2, “New Accounting Standards” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report, discusses new accounting pronouncements adopted by us in 2021 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted.

USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS

To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, ACL to loans and leases, excluding PPP loans, pre-provision net revenue to average tangible common equity, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends.

These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. When non-GAAP financial measures are disclosed, the SEC's Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”.

Management believes items such as merger expenses, branch consolidation costs, loss on early debt extinguishment, COVID-19 expenses and gains on sale of Visa class B shares are not organic to run our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities. The merger expenses and branch consolidation charges principally represent expenses to satisfy contractual obligations of the acquired entity or closed branch without any useful ongoing benefit to us. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction. Similarly, gains derived from the sale of Visa class B stock and losses on FHLB debt extinguishment and related hedge terminations are not organic to our operations. The

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COVID-19 expenses represent special Company initiatives to support our employees and the communities we serve during an unprecedented time of a pandemic.

To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable- equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable-equivalent amounts for the 2021, 2020 and 2019 periods were calculated using a federal statutory income tax rate of 21%.

OVERVIEW

FNB, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating 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. and Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina. As of December 31, 2021, we had 334 banking offices throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington D.C. and Virginia. We provide a full range of commercial banking, consumer banking, insurance and wealth management solutions through our subsidiary network which is led by our largest affiliate, FNBPA. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, government banking, business credit, capital markets and lease financing. Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance.

FINANCIAL SUMMARY

For the full-year of 2021, net income available to common stockholders was $396.6 million, or $1.23 per diluted common share, the highest earnings per share since 2004. Comparatively, full-year 2020 net income available to common stockholders totaled $278.0 million, or $0.85 per diluted common share. On an operating basis, full-year 2021 earnings per diluted common share (non-GAAP) was $1.24, excluding $4.4 million of significant items. Operating earnings per diluted common share (non-GAAP) for the full year of 2020 was $0.96, excluding $45.6 million of significant items.

Income Statement Highlights (2021 compared to 2020)

•Record total revenue of $1.2 billion, an increase of $20.3 million, or 1.7%, combined with lower expenses and a reduction in the provision for credit losses of $0.6 million, led to record operating net income available to common stockholders (non-GAAP) of $400.0 million, an increase of $86.1 million, or 27.4%.

•Earnings per diluted common share was $1.23, compared to $0.85, an increase of 44.7%.

•Operating earnings per diluted common share (non-GAAP) was $1.24, compared to $0.96, an increase of 29.2%.

•Net interest income was $906.5 million, compared to $922.1 million, down 1.7%.

•Net interest margin (FTE) (non-GAAP) declined 23 basis points to 2.68% from 2.91%, as the total impact of PPP, purchase accounting accretion and higher cash balances reduced the margin by 2 basis points for 2021, compared to a benefit of 23 basis points in the prior year.

•Non-interest income reached a record level of $330.4 million, compared to $294.6 million, due to continued broad-based contributions from our fee businesses. On an operating basis, non-interest income increased $20.3 million, or 6.5%, when excluding significant items impacting earnings of $15.6 million in 2020.

•Non-interest expense was $733.2 million, compared to $750.3 million. Excluding significant items totaling $4.4 million in 2021 and $30.0 million in 2020, operating non-interest expense was well-controlled and increased $8.4 million, or 1.2%.

•The provision for credit losses totaled $0.6 million, compared to $122.8 million, reflecting improved credit quality trends throughout 2021 and pandemic-related impacts on macroeconomic forecasts used in the ACL model in 2020.

•Net charge-offs totaled $13.9 million, or 0.06% of total average loans, compared to $59.8 million, or 0.24%, in 2020, reflecting COVID-19 impacts on certain segments of the loan portfolio in 2020.

•Income tax expense increased $41.0 million, or 71.3%, primarily due to higher pre-tax earnings.

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•The effective tax rate was 19.6%, compared to 16.7%, reflecting benefits from renewable energy tax credits recognized in 2020.

•The efficiency ratio (non-GAAP) was 57.2%, compared to 56.1%, reflecting the low interest rate environment and higher non-interest expense from operations.

•Return on average tangible common equity ratio (non-GAAP) of 15.53%, compared to 11.66%.

Balance Sheet Highlights (period-end balances, 2021 compared to 2020, unless otherwise indicated)

•Total assets were $39.5 billion, compared to $37.4 billion, an increase of $2.2 billion, or 5.8%, from higher cash and cash equivalents balances related to significant deposit growth, primarily due to the PPP and government stimulus activities.

•Total reported period-end loans and leases decreased $489.9 million, or 1.9%, due to a commercial loan decrease of $1.0 billion, or 5.8%, driven by PPP loan forgiveness. Period-end total loans and leases, excluding PPP loans, increased $1.3 billion, or 5.7%, as commercial loans increased $817.2 million, or 5.3%, and consumer loans increased $514.7 million, or 6.4%, (inclusive of the sale of $0.5 billion in indirect auto loans in November 2020).

•Average loans totaled $25.1 billion, a decrease of $135.6 million, or 0.5%, due to PPP loan forgiveness and the sale of $0.5 billion of indirect auto installment loans in November 2020. Growth in average commercial loans totaled $167.3 million, or 1.0%, including growth of $171.4 million, or 1.8%, in commercial real estate and a decline of $50.3 million, or 0.8%, in commercial and industrial loans from PPP loan forgiveness.

•PPP loans originations totaled $3.6 billion since program inception in the second quarter of 2020 with $3.3 billion forgiven as of December 31, 2021 resulting in $336.6 million remaining at December 31, 2021. There were $2.2 billion of PPP loans outstanding at December 31, 2020.

•Total average deposits grew $3.3 billion, or 12.0%, including an increase in average non-interest-bearing deposits of $2.1 billion, or 26.1%, and an increase in average interest-bearing demand deposits of $1.7 billion, or 14.0%, partially offset by a managed decrease in average time deposits of $1.1 billion, or 24.7%. Average deposit growth reflects inflows from the PPP and government stimulus activities, solid organic growth in customer relationships, as well as current customer preferences to maintain larger balances in their deposit accounts than before the pandemic.

•The ratio of loans to deposits was 78.7%, compared to 87.4%, as deposit growth outpaced loan growth. Additionally, the deposit funding mix continued to improve with non-interest-bearing deposits totaling 34% of total deposits, compared to 31%. Cash and cash equivalents balances increased $2.1 billion to $3.5 billion due primarily to PPP loan activity and deposits from government stimulus inflows.

•The dividend payout ratio for 2021 was 39.20%, compared to 56.45%.

•We repurchased nearly 3.6 million shares at a weighted average share price of $11.86 for $43.2 million under the existing $150 million share repurchase program, with $68.4 million remaining for repurchase.

•The ratio of the allowance for loan losses to total loans and leases was 1.38%, compared to 1.43%. Excluding PPP loans that do not carry an ACL due to a 100% government guarantee, the ACL to total loans and leases ratio equaled 1.40% at December 31, 2021, compared to 1.56%. The ACL on loans and leases totaled $344 million at December 31, 2021, compared to $363 million.

•Tangible book value per share (non-GAAP) of $8.59 increased 9% from year-end 2020.

•The CET1 regulatory capital ratio increased to 9.9%, up from 9.8%.

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TABLE 1

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[[/GREPCENT_TABLE]]

Industry Developments

LIBOR

The United Kingdom’s Financial Conduct Authority (FCA), who is the regulator of LIBOR, announced on March 5, 2021 that they will no longer require any panel bank to continue to submit LIBOR after December 31, 2021. As it pertains to U.S. dollar LIBOR, the FCA announced that certain LIBOR tenors will continue to be published through June 30, 2023. Bank regulators, in a joint statement have urged banks to stop using LIBOR altogether on new transactions by the end of 2021 to avoid the possible creation of safety and soundness risk. The FRB of New York has created a working group called the ARRC to assist U.S. institutions in transitioning away from LIBOR as a benchmark interest rate. The ARRC has recommended the use of the SOFR as a replacement index for LIBOR.

Similarly, we created an internal transition team that is managing our transition away from LIBOR. This transition team is a cross-functional team composed of representatives from the commercial, retail and mortgage banking lines of business, as well as representatives of loan operations, information technology, legal, finance and other support functions. The transition team has completed an assessment of tasks needed for the transition, identified contracts that contain LIBOR language, has reviewed existing contract language for the presence of appropriate fallback rate language, developed and implemented loan fallback rate language for when LIBOR is retired and identified risks associated with the transition. The transition team has chosen SOFR and other credit-sensitive indices as a replacement to LIBOR. These selected indices are available for the benefit of our customers and are utilized in all new floating rate agreements. We started originating commercial loans in the fourth quarter of

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2021 utilizing SOFR and other indices. Residential mortgage loans indexed to SOFR have been originated since October of 2020.

Our transition team continues to work within the guidelines established by the FCA and ARRC to provide for a smooth transition away from LIBOR. As of December 31, 2021, approximately $10.5 billion of our loan portfolio consisted of loans whose variable rate index is LIBOR, of which $1.3 billion will mature prior to June 30, 2023, and there were $373 million of SOFR-based loans, inclusive of mortgage originations, on the balance sheet. It's estimated that an additional $1.5 billion in LIBOR-based loans will amortize over the next 18 months. Finally, we have approximately $190 million of outstanding FNB issued debt that uses LIBOR as its base index.

RESULTS OF OPERATIONS

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net income available to common stockholders for 2021 was $396.6 million or $1.23 per diluted common share, compared to net income available to common stockholders for 2020 of $278.0 million or $0.85 per diluted common share. Operating earnings per diluted common share (non-GAAP) was $1.24 for 2021 compared to $0.96 for 2020. The results for 2021 included the impact of $2.6 million of branch consolidation expenses and $1.8 million of merger-related expenses. In comparison, the results for 2020 included the impact of $45.6 million of significant items, including loss on debt extinguishment and related hedge termination of $25.6 million related to the prepayment of higher-rate FHLB borrowings given continued strong deposit growth; branch consolidation costs of $18.7 million resulting from our branch optimization efforts and continued customer migration to digital channels; COVID-19 related expenses of $11.3 million, including $2.5 million in contributions to our FNB Foundation to continue to support our communities as they dealt with the ongoing pandemic; and service charge refunds of $3.8 million, partially offset by a $13.8 million gain on the sale of all of the FNBPA's holdings of Visa Class B shares. Average diluted common shares outstanding decreased 2.0 million shares, or 0.6%, to 323.5 million shares for 2021.

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The major categories of the Consolidated Statements of Income and their respective impact to the increase (decrease) in net income are presented in the following table:

TABLE 2

[[GREPCENT_TABLE]]
[["","Year Ended December 31","","$ Change","","% Change"],["(in thousands, except per share data)","2021","","2020"],["Net interest income","$","906,476","","","$","922,082","","","$","(15,606)","","","(1.7)","%"],["Provision for credit losses","629","","","122,798","","","(122,169)","","","(99.5)"],["Non-interest income","330,419","","","294,556","","","35,863","","","12.2"],["Non-interest expense","733,168","","","750,349","","","(17,181)","","","(2.3)"],["Income taxes","98,496","","","57,485","","","41,011","","","71.3"],["Net income","404,602","","","286,006","","","118,596","","","41.5"],["Less: Preferred stock dividends","8,041","","","8,041","","","\u2014","","","\u2014"],["Net income available to common stockholders","$","396,561","","","$","277,965","","","$","118,596","","","42.7","%"],["Earnings per common share \u2013 Basic","$","1.24","","","$","0.86","","","$","0.38","","","44.2","%"],["Earnings per common share \u2013 Diluted","1.23","","","0.85","","","0.38","","","44.7"],["Cash dividends per common share","0.48","","","0.48","","","\u2014","","","\u2014"]]
[[/GREPCENT_TABLE]]

The following table presents selected financial ratios and other relevant data used to analyze our performance:

TABLE 3

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020"],["Return on average equity","8.04","%","","5.83","%"],["Return on average tangible common equity (2)","15.53","","","11.66"],["Return on average assets","1.05","","","0.78"],["Return on average tangible assets (2)","1.14","","","0.87"],["Book value per common share (1)","$","15.81","","","$","15.09"],["Tangible book value per common share (1) (2)","8.59","","","7.88"],["Equity to assets (1)","13.03","%","","13.28","%"],["Average equity to average assets","13.04","","","13.40"],["Common equity to assets (1)","12.76","","","12.99"],["Tangible equity to tangible assets (1) (2)","7.65","","","7.54"],["Tangible common equity to tangible assets (1) (2)","7.36","","","7.24"],["Common equity tier 1 capital ratio","9.9","","","9.8"],["Dividend payout ratio","39.20","","","56.45"]]
[[/GREPCENT_TABLE]]

(1) Period-end

(2) 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

[[GREPCENT_TABLE]]
[["","Year Ended December 31"],["","2021","","2020","","2019"],["(dollars in thousands)","Average Balance","","Interest Income/ Expense","","Yield/ Rate","","Average Balance","","Interest Income/ Expense","","Yield/ Rate","","Average Balance","","Interest Income/ Expense","","Yield/ Rate"],["Assets"],["Interest-earning assets:"],["Interest-bearing deposits with banks","$","2,723,493","","","$","3,732","","","0.14","%","","$","470,466","","","$","1,910","","","0.41","%","","$","73,834","","","$","4,404","","","5.96","%"],["Taxable investment securities (1)","5,131,473","","","85,633","","","1.67","","","5,038,547","","","106,266","","","2.11","","","5,296,830","","","126,101","","","2.38"],["Tax-exempt investment securities (1) (2)","1,091,130","","","37,408","","","3.43","","","1,132,307","","","40,121","","","3.54","","","1,121,026","","","40,155","","","3.58"],["Loans held for sale","227,181","","","8,276","","","3.64","","","212,328","","","9,817","","","4.62","","","102,344","","","5,386","","","5.26"],["Loans and leases (2) (3)","25,075,559","","","880,609","","","3.51","","","25,211,191","","","984,662","","","3.91","","","22,776,639","","","1,085,094","","","4.76"],["Total interest-earning assets (2)","34,248,836","","","1,015,658","","","2.97","","","32,064,839","","","1,142,776","","","3.56","","","29,370,673","","","1,261,140","","","4.29"],["Cash and due from banks","386,648","","","","","","","359,936","","","","","","","382,144"],["Allowance for credit losses","(363,462)","","","","","","","(350,309)","","","","","","","(191,171)"],["Premises and equipment","338,644","","","","","","","336,117","","","","","","","330,920"],["Other assets","3,992,426","","","","","","","4,196,847","","","","","","","3,958,197"],["Total assets","$","38,603,092","","","","","","","$","36,607,430","","","","","","","$","33,850,763"],["Liabilities"],["Interest-bearing liabilities:"],["Deposits:"],["Interest-bearing demand","$","13,866,846","","","18,676","","","0.13","","","$","12,161,766","","","57,224","","","0.47","","","$","10,123,701","","","104,236","","","1.03"],["Savings","3,442,809","","","664","","","0.02","","","2,890,440","","","2,822","","","0.10","","","2,532,456","","","8,535","","","0.34"],["Certificates and other time","3,208,586","","","27,875","","","0.87","","","4,261,738","","","72,825","","","1.71","","","5,268,208","","","103,852","","","1.97"],["Total interest-bearing deposits","20,518,241","","","47,215","","","0.23","","","19,313,944","","","132,871","","","0.69","","","17,924,365","","","216,623","","","1.21"],["Short-term borrowings","1,660,070","","","26,675","","","1.61","","","2,515,558","","","38,504","","","1.53","","","3,551,135","","","79,990","","","2.24"],["Long-term borrowings","924,090","","","24,344","","","2.63","","","1,473,708","","","36,849","","","2.50","","","1,108,135","","","33,167","","","2.99"],["Total interest-bearing liabilities","23,102,401","","","98,234","","","0.43","","","23,303,210","","","208,224","","","0.89","","","22,583,635","","","329,780","","","1.46"],["Non-interest-bearing demand","10,090,117","","","","","","","8,004,557","","","","","","","6,128,196"],["Total deposits and borrowings","33,192,518","","","","","0.30","","","31,307,767","","","","","0.66","","","28,711,831","","","","","1.15"],["Other liabilities","377,386","","","","","","","395,363","","","","","","","381,467"],["Total liabilities","33,569,904","","","","","","","31,703,130","","","","","","","29,093,298"],["Stockholders\u2019 equity","5,033,188","","","","","","","4,904,300","","","","","","","4,757,465"],["Total liabilities and stockholders\u2019 equity","$","38,603,092","","","","","","","$","36,607,430","","","","","","","$","33,850,763"],["Net interest-earning assets","$","11,146,435","","","","","","","$","8,761,629","","","","","","","$","6,787,038"],["Net interest income (FTE) (2)","","","917,424","","","","","","","934,552","","","","","","","931,360"],["Tax-equivalent adjustment","","","(10,948)","","","","","","","(12,470)","","","","","","","(14,121)"],["Net interest income","","","$","906,476","","","","","","","$","922,082","","","","","","","$","917,239"],["Net interest spread","","","","","2.54","%","","","","","","2.67","%","","","","","","2.83","%"],["Net interest margin (2)","","","","","2.68","%","","","","","","2.91","%","","","","","","3.17","%"]]
[[/GREPCENT_TABLE]]

(1)The average balances and yields earned on securities are based on historical cost.

(2)The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis. 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 balances include non-accrual loans. Loans and leases consist of average total loans less average unearned income.

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Net Interest Income

Net interest income on an FTE basis (non-GAAP) of $917.4 million for 2021 decreased $17.1 million, or 1.8%, from $934.6 million for 2020 as the low interest rate environment impacted earning asset yields. Average interest-earning assets of $34.2 billion increased $2.2 billion, or 6.8% from 2020, which included $3.6 billion of PPP loan originations since program inception in the second quarter of 2020, $3.3 billion in total PPP loan forgiveness and a $2.3 billion increase in average cash balances largely due to the continued impact from government stimulus and PPP activity. The growth in average earning assets was offset by the repricing impact on earning asset yields from lower interest rates, mitigated by the improved funding mix with reductions in higher-cost borrowings and the cost of interest-bearing deposits. Average interest-bearing liabilities of $23.1 billion decreased $200.8 million, or 0.9%, from 2020, driven by a decrease in average borrowings of $1.4 billion, partially offset by an increase of $1.2 billion in average interest-bearing deposits which included deposits for PPP funding and government stimulus activities, organic growth in new and existing customer relationships, as well as recent customer preferences to maintain larger deposit account balances than before the pandemic. Our net interest margin FTE (non-GAAP) was 2.68% for 2021, compared to 2.91% for 2020, as the yield on earning assets decreased 59 basis points to 2.97%, primarily reflecting the impact of reductions in short-term benchmark interest rates on variable-rate loans, significantly lower yields on investment securities and the effect of higher average cash balances on the mix of earning assets. Partially offsetting the lower earning asset yields, the total cost of funds improved 36 basis points to 0.30%, due to a 46 basis point reduction in interest-bearing deposit costs and an improved funding mix, as average non-interest-bearing deposits increased $2.1 billion, or 26.1%.

The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the periods indicated:

TABLE 5

[[GREPCENT_TABLE]]
[["","2021 vs 2020","","2020 vs 2019"],["(in thousands)","Volume","","Rate","","Net","","Volume","","Rate","","Net"],["Interest Income (1)"],["Interest-bearing deposits with banks","$","3,087","","","$","(1,265)","","","$","1,822","","","$","1,608","","","$","(4,102)","","","$","(2,494)"],["Securities (2)","1,405","","","(24,751)","","","(23,346)","","","(7,809)","","","(12,060)","","","(19,869)"],["Loans held for sale","1,433","","","(2,974)","","","(1,541)","","","3,246","","","1,185","","","4,431"],["Loans and leases (2)","(13,799)","","","(90,254)","","","(104,053)","","","103,916","","","(204,348)","","","(100,432)"],["Total interest income (2)","(7,874)","","","(119,244)","","","(127,118)","","","100,961","","","(219,325)","","","(118,364)"],["Interest Expense (1)"],["Deposits:"],["Interest-bearing demand","2,576","","","(41,124)","","","(38,548)","","","12,858","","","(59,870)","","","(47,012)"],["Savings","94","","","(2,252)","","","(2,158)","","","652","","","(6,365)","","","(5,713)"],["Certificates and other time","(11,465)","","","(33,485)","","","(44,950)","","","(18,803)","","","(12,224)","","","(31,027)"],["Short-term borrowings","(12,380)","","","551","","","(11,829)","","","(22,010)","","","(19,476)","","","(41,486)"],["Long-term borrowings","(13,558)","","","1,053","","","(12,505)","","","8,872","","","(5,190)","","","3,682"],["Total interest expense","(34,733)","","","(75,257)","","","(109,990)","","","(18,431)","","","(103,125)","","","(121,556)"],["Net change (2)","$","26,859","","","$","(43,987)","","","$","(17,128)","","","$","119,392","","","$","(116,200)","","","$","3,192"]]
[[/GREPCENT_TABLE]]

(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 $1.0 billion for 2021, decreased $127.1 million or 11.1% from 2020, resulting in part, from the 42 basis point decline in average 1-month LIBOR in 2021 compared to 2020, partially offset by an increase in interest-earning assets of $2.2 billion. The increase in interest-earning assets was primarily driven by an increase in average cash balances of $2.3 billion, partially offset by a $135.6 million, or 0.5%, decrease in average total loans due to PPP loan forgiveness and the sale of $0.5 billion of indirect auto installment loans in November 2020. Average commercial loan growth totaled $167.3 million, or 1.0%, including growth of $171.4 million, or 1.8%, in commercial real estate and a decline of $50.3 million, or 0.8%, in commercial and industrial loans entirely from PPP loan forgiveness. Commercial loan growth was

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led by healthy origination activity in the Pittsburgh, Harrisburg and Carolina markets. Average consumer loans declined by $302.9 million, or 3.6%, with an increase direct installment balances of $215.3 million, or 11.2%, and residential mortgage loans of $8.2 million, or 0.2%, offset by decreases in indirect auto installment loans of $412.8 million, or 25.3%, due to the sale of $0.5 billion of indirect auto loans in November 2020, as well as a decrease in consumer lines of credit of $113.6 million, or 8.2%. Excluding PPP loans, period-end total loans and leases increased $1.3 billion, or 5.7%, including growth of $817.2 million, or 5.3%, in commercial loans and leases and $514.7 million, or 6.4%, in consumer loans. Additionally, average securities increased $51.7 million, or 0.8%, as a result of management's strategy to deploy excess liquidity into higher yielding investments. The yield on average interest-earning assets (non-GAAP) decreased 59 basis points to 2.97% for 2021, compared to 3.56% for 2020, reflecting the impact of significant reductions in the short-term benchmark interest rates on variable-rate loans, significantly lower yields on investment securities and the effect of higher average cash balances on the mix of earning assets.

Interest expense of $98.2 million for 2021 decreased $110.0 million, or 52.8%, from 2020 primarily due to a decrease in rates paid, partially offset by an increase in average interest-bearing deposits. Average interest-bearing deposits increased $1.2 billion, or 6.2%, which reflects the benefit of solid organic growth in customer relationships, as well as deposits for PPP funding and government stimulus activities. Average time deposits had a managed decline of $1.1 billion, or 24.7%, as customer preferences shifted to more liquid accounts. Average long-term borrowings decreased $549.6 million, or 37.3%, primarily due to a decrease of $582.5 million in long-term FHLB borrowings, partially offset by an increase of $44.5 million in senior debt. The rate paid on interest-bearing liabilities decreased 46 basis points to 0.43% for 2021, compared to 0.89% for 2020, due to the interest rate actions taken by the FOMC and our actions taken to reduce the cost of interest-bearing liabilities given the low interest rate environment and strong growth in non-interest-bearing deposits.

Provision for Credit Losses

The provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses inherent in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the provision for credit loss expense and net charge-offs for the years 2019 through 2021:

TABLE 6

[[GREPCENT_TABLE]]
[["","","","2021 vs 2020","","","","2020 vs 2019"],["(dollars in thousands)","2021","","2020","","$ Change","","% Change","","2019","","$ Change","","% Change"],["Provision for credit losses (on loans and leases)","$","(4,853)","","","$","121,756","","","$","(126,609)","","","(104.0)","%","","$","44,561","","","$","77,195","","","173.2","%"],["Provision for unfunded loan commitments","5,472","","","1,046","","","4,426","","","423.1","","","\u2014","","","1,046","","","n/m"],["Provision for credit losses","$","619","","","$","122,802","","","$","(122,183)","","","(99.5)","%","","$","44,561","","","$","78,241","","","175.6","%"],["Net loan charge-offs","$","13,949","","","$","59,808","","","$","(45,859)","","","(76.7)","%","","$","28,334","","","$","31,474","","","111.1","%"],["Net loan charge-offs / total average loans and leases","0.06","%","","0.24","%","","","","","","0.12","%"],["n/m - not meaningful"]]
[[/GREPCENT_TABLE]]

Provision for credit losses of $0.6 million during 2021 decreased $122.2 million from 2020. The 2021 provision for credit losses is comprised of a $4.9 million net benefit on provision for loans and leases outstanding and a $5.5 million provision for unfunded loan commitments. The decrease reflects favorable asset quality trends across all loan portfolio credit metrics in 2021 and COVID-19 impacts on certain segments of the loan portfolio in 2020, as well as the improving macroeconomic forecasts in 2021. The increase for the provision for unfunded loan commitments was partially driven by new commercial and industrial revolving loan commitments with only a moderate increase in utilization levels compared to 2020, in addition to new commercial real estate construction projects that have yet to draw or were minimally drawn on at December 31, 2021. Net charge-offs of $13.9 million for 2021 decreased $45.9 million from 2020, reflecting COVID-19 impacts on certain segments of the loan portfolio in 2020. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses section of this MD&A.

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Non-Interest Income

The breakdown of non-interest income for the years 2019 through 2021 is presented in the following table:

TABLE 7

[[GREPCENT_TABLE]]
[["","","","","","2021 vs 2020","","","","","2020 vs 2019"],["(dollars in thousands)","2021","","2020","","$ Change","","% Change","","","2019","","$ Change","","% Change"],["Service charges","$","121,735","","","$","108,146","","","$","13,589","","","12.6","%","","","$","124,285","","","$","(16,139)","","","(13.0)","%"],["Trust services","37,370","","","31,249","","","6,121","","","19.6","","","","27,885","","","3,364","","","12.1"],["Insurance commissions and fees","25,522","","","24,212","","","1,310","","","5.4","","","","20,463","","","3,749","","","18.3"],["Securities commissions and fees","22,207","","","17,441","","","4,766","","","27.3","","","","17,088","","","353","","","2.1"],["Capital markets income","36,812","","","39,337","","","(2,525)","","","(6.4)","","","","33,224","","","6,113","","","18.4"],["Mortgage banking operations","37,355","","","49,665","","","(12,310)","","","(24.8)","","","","31,689","","","17,976","","","56.7"],["Dividends on non-marketable equity securities","8,588","","","13,736","","","(5,148)","","","(37.5)","","","","18,641","","","(4,905)","","","(26.3)"],["Bank owned life insurance","14,866","","","13,835","","","1,031","","","7.5","","","","11,794","","","2,041","","","17.3"],["Net securities gains","193","","","282","","","(89)","","","(31.6)","","","","70","","","212","","","302.9"],["Loss on debt extinguishment","\u2014","","","(16,655)","","","16,655","","","\u2014","","","","\u2014","","","(16,655)","","","\u2014"],["Other","25,771","","","13,308","","","12,463","","","93.7","","","","9,127","","","4,181","","","45.8"],["Total non-interest income","$","330,419","","","$","294,556","","","$","35,863","","","12.2","%","","","$","294,266","","","$","290","","","0.1","%"]]
[[/GREPCENT_TABLE]]

Total non-interest income of $330.4 million for 2021 increased $35.9 million, or 12.2%, from $294.6 million in 2020. On an operating basis, non-interest income increased $20.3 million, or 6.5%, when excluding significant items impacting earnings of $15.6 million in 2020. The variances in significant individual non-interest income items are further explained in the following paragraphs.

Service charges on loans and deposits of $121.7 million for 2021 increased $13.6 million, or 12.6%, from $108.1 million in 2020, primarily reflecting reduced customer activity in 2020 due to the pandemic. Additionally, we recorded service charge refunds of $3.8 million in 2020.

Trust services of $37.4 million for 2021 increased $6.1 million, or 19.6%, from the same period of 2020, primarily driven by strong organic revenue production and the market value of assets under management increasing $1.1 billion, or 15.2%, to $8.2 billion at December 31, 2021.

Insurance commissions and fees of $25.5 million for 2021 increased $1.3 million, or 5.4%, from $24.2 million in 2020, primarily from organic revenue growth across our footprint.

Securities commissions and fees of $22.2 million for 2021 increased $4.8 million, or 27.3% from $17.4 million in 2020, due to strong activity levels across the footprint, largely impacted by reduced COVID-19 restrictions.

Capital markets income of $36.8 million for 2021 decreased $2.5 million, or 6.4%, from $39.3 million for 2020, due to lower customer swap activity compared to the record levels in the beginning of 2020 given heightened volatility in interest rates last year.

Mortgage banking operations income of $37.4 million for 2021 decreased $12.3 million, or 24.8%, from $49.7 million for 2020, as secondary market revenue and mortgage held-for-sale pipelines declined from significantly elevated levels in 2020. During 2021, we sold $1.8 billion of residential mortgage loans, an increase of 5.3% compared to $1.7 billion for 2020, however margins on sold production have normalized from the significantly elevated levels in 2020. During 2021, we also recognized a $4.8 million favorable interest-rate related valuation adjustment on MSRs, compared to a $5.8 million unfavorable adjustment in 2020.

Dividends on non-marketable equity securities of $8.6 million for 2021 decreased $5.1 million, or 37.5%, from $13.7 million for 2020, primarily due to a decrease in the FHLB dividend rate and lower levels of FHLB borrowings given the strong growth in deposits.

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Income from BOLI of $14.9 million for 2021 increased $1.0 million, or 7.5%, from $13.8 million in 2020, primarily due to life insurance claims.

The early termination of $490.0 million in higher-rate long-term FHLB borrowings resulted in a loss on debt extinguishment of $16.7 million in 2020.

Other non-interest income was $25.8 million and $13.3 million for 2021 and 2020, respectively, reflecting higher contributions from SBA premium income and improved SBIC fund performance, as well as a $2.2 million recovery on a previously written-off asset in 2021. In 2020, we recorded a $13.8 million gain on the sale of all of FNBPA's Visa Class B shares, partially offset by $9.0 million in hedge termination costs associated with the early termination of certain higher-rate FHLB borrowings.

The following table presents non-interest income excluding significant items impacting earnings:

TABLE 8

[[GREPCENT_TABLE]]
[["","","","","","$","","%"],["(dollars in thousands)","2021","","2020","","Change","","Change"],["Total non-interest income, as reported","$","330,419","","","$","294,556","","","$","35,863","","","12.2","%"],["Significant items:"],["Gain on sale of Visa class B stock","\u2014","","","(13,818)","","","13,818"],["Loss on FHLB debt extinguishment and related hedge terminations","\u2014","","","25,611","","","(25,611)"],["Service charge refunds","\u2014","","","3,780","","","(3,780)"],["Total non-interest income, excluding significant items (1)","$","330,419","","","$","310,129","","","$","20,290","","","6.5","%"]]
[[/GREPCENT_TABLE]]

(1) Non-GAAP

Non-Interest Expense

The breakdown of non-interest expense for the years 2019 through 2021 is presented in the following table:

TABLE 9

[[GREPCENT_TABLE]]
[["","","","","","2021 vs 2020","","","","","2020 vs 2019"],["(dollars in thousands)","2021","","2020","","$ Change","","% Change","","","2019","","$ Change","","% Change"],["Salaries and employee benefits","$","418,328","","","$","405,529","","","$","12,799","","","3.2","%","","","$","375,084","","","$","30,445","","","8.1","%"],["Net occupancy","58,368","","","71,166","","","(12,798)","","","(18.0)","","","","58,416","","","12,750","","","21.8"],["Equipment","69,973","","","65,312","","","4,661","","","7.1","","","","61,903","","","3,409","","","5.5"],["Amortization of intangibles","12,117","","","13,362","","","(1,245)","","","(9.3)","","","","14,167","","","(805)","","","(5.7)"],["Outside services","70,553","","","69,258","","","1,295","","","1.9","","","","64,006","","","5,252","","","8.2"],["Marketing","14,320","","","12,559","","","1,761","","","14.0","","","","13,066","","","(507)","","","(3.9)"],["FDIC insurance","17,881","","","20,073","","","(2,192)","","","(10.9)","","","","23,294","","","(3,221)","","","(13.8)"],["Bank shares and franchise taxes","12,629","","","14,376","","","(1,747)","","","(12.2)","","","","12,493","","","1,883","","","15.1"],["Merger-related","1,764","","","\u2014","","","1,764","","","\u2014","","","","\u2014","","","\u2014","","","\u2014"],["Other","57,235","","","78,714","","","(21,479)","","","(27.3)","","","","73,699","","","5,015","","","6.8"],["Total non-interest expense","$","733,168","","","$","750,349","","","$","(17,181)","","","(2.3)","%","","","$","696,128","","","$","54,221","","","7.8","%"]]
[[/GREPCENT_TABLE]]

Total non-interest expense of $733.2 million for 2021 decreased $17.2 million, or 2.3%, from $750.3 million in 2020. Excluding significant items totaling $4.4 million in 2021 and $30.0 million in 2020, operating non-interest expense was well-controlled and increased $8.4 million, or 1.2%. The variances in significant individual non-interest expense items are further explained in the following paragraphs.

Salaries and employee benefits of $418.3 million for 2021 increased $12.8 million, or 3.2%, from $405.5 million in 2020, primarily related to normal merit increases and higher production and performance-related commissions and incentives corresponding to strong production levels from mortgage banking and our fee-based businesses. We also recorded branch

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consolidation costs of $1.4 million in 2020. Additionally, we recorded $3.1 million relating to COVID-19 expenses in 2020. Our total full-time equivalent employees were 3,884 and 4,077 at December 31, 2021 and 2020, respectively.

Net occupancy and equipment expense of $128.3 million for 2021 decreased $8.1 million, or 6.0%, from $136.5 million in 2020, primarily due to branch consolidation costs of $2.1 million for 2021 and $15.7 million in 2020. On an operating basis, net occupancy and equipment expense was $126.2 million for 2021 and $120.8 million for 2020, an increase of $5.5 million, or 4.5%, primarily due to expansion in key regions such as the Mid-Atlantic and South Carolina, and continued investment in digital technology during 2021.

Outside services expense of $70.6 million for 2021 increased $1.3 million, or 1.9%, from $69.3 million in 2020, due to various minor increases related to third-party technology providers and other consulting engagements.

Marketing expense of $14.3 million for 2021 increased $1.8 million, or 14.0%, from $12.6 million in 2020, as a result of fewer marketing campaigns in 2020 due to the pandemic.

FDIC insurance expense of $17.9 million for 2021 decreased $2.2 million, or 10.9%, from 2020, primarily from a lower FDIC assessment rate due to increased subordinated debt at FNBPA and improved liquidity metrics.

Bank shares and franchise taxes expense of $12.6 million for 2021 decreased $1.7 million, or 12.2%, from $14.4 million in 2020, due to the recognition of state tax credits in 2021.

We recorded $1.8 million in merger-related costs in 2021 related to the Howard acquisition.

Other non-interest expense was $57.2 million and $78.7 million for 2021 and 2020, respectively. During 2021 and 2020, we recorded approximately $0.5 million and $2.1 million, respectively, in branch consolidation costs in other non-interest expense. In 2021, we recorded $2.2 million related to a mortgage recourse reserve release and in 2020, we recorded an impairment charge of $4.1 million from renewable energy investment tax credit transactions. The related renewable energy investment tax credits were recognized as a benefit to income taxes in 2020. Also during 2020, we recorded $6.8 million in COVID-19 related expenses.

The following table presents non-interest expense excluding significant items impacting earnings:

TABLE 10

[[GREPCENT_TABLE]]
[["","","","","","$","","%"],["(dollars in thousands)","2021(2)","","2020","","Change","","Change"],["Total non-interest expense, as reported","$","733,168","","","$","750,349","","","$","(17,181)","","","(2.3)","%"],["Significant items:"],["Branch consolidations","(2,644)","","","(18,745)","","","16,101"],["COVID-19 expense","\u2014","","","(11,276)","","","11,276"],["Merger-related","(1,764)","","","\u2014","","","(1,764)"],["Total non-interest expense, excluding significant items (1)","$","728,760","","","$","720,328","","","$","8,432","","","1.2","%"]]
[[/GREPCENT_TABLE]]

(1) Non-GAAP

(2) COVID-19 expenses not deemed to be a significant item impacting earnings in 2021.

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Income Taxes

The following table presents information regarding income tax expense and certain tax rates:

TABLE 11

[[GREPCENT_TABLE]]
[["Year ended December 31","2021","","2020","","2019"],["(dollars in thousands)"],["Income tax expense","$","98,496","","","$","57,485","","","$","83,567"],["Effective tax rate","19.6","%","","16.7","%","","17.7","%"],["Statutory federal tax rate","21.0","%","","21.0","%","","21.0","%"]]
[[/GREPCENT_TABLE]]

Our income tax expense for 2021 increased $41.0 million, or 71.3% from 2020. The effective tax rate was 19.6% for 2021, compared to 16.7% for 2020, primarily resulting from higher pre-tax earnings in 2021 and the recording of renewable energy investment tax credits in 2020. Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from renewable energy investment and historic tax credits, tax-exempt income on investments and loans and income from BOLI.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Refer to the MD&A in our 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021 for a comparison of the years ended 2020 versus 2019.

FINANCIAL CONDITION

The following table presents our condensed Consolidated Balance Sheets:

TABLE 12

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","$ Change","","% Change"],["(dollars in millions)"],["Assets"],["Cash and cash equivalents","$","3,493","","","$","1,383","","","$","2,110","","","152.6","%"],["Securities","6,889","","","6,331","","","558","","","8.8"],["Loans held for sale","295","","","154","","","141","","","91.6"],["Loans and leases, net","24,624","","","25,096","","","(472)","","","(1.9)"],["Goodwill and other intangibles","2,304","","","2,316","","","(12)","","","(0.5)"],["Other assets","1,908","","","2,074","","","(166)","","","(8.0)"],["Total Assets","$","39,513","","","$","37,354","","","$","2,159","","","5.8","%"],["Liabilities and Stockholders\u2019 Equity"],["Deposits","$","31,726","","","$","29,122","","","$","2,604","","","8.9","%"],["Borrowings","2,218","","","2,899","","","(681)","","","(23.5)"],["Other liabilities","419","","","374","","","45","","","12.0"],["Total Liabilities","34,363","","","32,395","","","1,968","","","6.1"],["Stockholders\u2019 Equity","5,150","","","4,959","","","191","","","3.9"],["Total Liabilities and Stockholders\u2019 Equity","$","39,513","","","$","37,354","","","$","2,159","","","5.8","%"]]
[[/GREPCENT_TABLE]]

Cash and cash equivalents increased in 2021 primarily due to deposit growth of $2.6 billion from continued customer expansion in our footprint and government stimulus programs including PPP.

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

Paycheck Protection Program

The CARES Act included an allocation of $349 billion for loans to be issued by financial institutions through the SBA, utilizing the PPP. The Paycheck Protection Program and Health Care Enhancement Act (PPP/HCE Act) was signed into law on April 24, 2020. The PPP/HCE Act authorized an additional $320 billion of funding for PPP loans. Since the inception of the PPP, we originated $3.6 billion of PPP loans, including $1.0 billion during 2021, of which $336.6 million is outstanding as of December 31, 2021, net of unamortized net deferred fees of $10.1 million, which are included in the commercial and industrial category. During 2021, $3.3 billion of PPP loan balances were forgiven by the SBA.

PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. Loans closed prior to June 5, 2020, carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred until after a forgiveness determination is made, if submitted within ten months of the end of the loan forgiveness covered period. The loans are 100% guaranteed by the SBA, which provides a reduced risk of loss to us on these loans. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. This fee is recognized in interest income over the contractual life of the loan under the effective yield method, adjusted for expected prepayments on these pools of homogenous loans. We expect most of the remaining net deferred fees to be recognized by June 30, 2022 based on expected loan forgiveness activity. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act (PPP Flexibility Act) which extended the term for new PPP loans to 5 years and permitted a lender to extend a 2-year PPP loan up to a 5-year term by mutual agreement of the lender and borrower. The PPP Flexibility Act also gives the borrower the option of 24 weeks to distribute the funds, and a borrower can remain eligible for loan forgiveness by using at least 60% of the funds for payroll costs. The SBA announced that lenders will have 60 days to review PPP loan forgiveness applications and that the SBA will remit the forgiveness payments within 90 days of receipt of approved forgiveness applications.

Following is a summary of loans and leases:

TABLE 13

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","$ Change","","% Change"],["(in millions)"],["Commercial real estate","$","9,899","","","$","9,731","","","$","168","","","1.7","%"],["Commercial and industrial","5,977","","","7,214","","","(1,237)","","","(17.1)","%"],["Commercial leases","495","","","485","","","10","","","2.1","%"],["Other","94","","","40","","","54","","","135.0","%"],["Total commercial loans and leases","16,465","","","17,470","","","(1,005)","","","(5.8)","%"],["Direct installment","2,376","","","2,020","","","356","","","17.6","%"],["Residential mortgages","3,654","","","3,433","","","221","","","6.4","%"],["Indirect installment","1,227","","","1,218","","","9","","","0.7","%"],["Consumer lines of credit","1,246","","","1,318","","","(72)","","","(5.5)","%"],["Total consumer loans","8,503","","","7,989","","","514","","","6.4","%"],["Total loans and leases","$","24,968","","","$","25,459","","","$","(491)","","","(1.9)","%"]]
[[/GREPCENT_TABLE]]

The commercial and industrial category includes PPP loans totaling $336.6 million and $2.2 billion at December 31, 2021 and December 31, 2020, respectively.

Additional information relating to originated loans and loans acquired in a business combination is provided in Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.

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Total loans and leases decreased $489.9 million, or 1.9%, to $25.0 billion at December 31, 2021, compared to $25.5 billion at December 31, 2020, reflecting a commercial loan decline of $1.0 billion or 5.8%, and an increase in consumer loans of $514.7 million or 6.4%. Excluding PPP, total loans and leases increased $1.3 billion, or 5.7%, as commercial loans increased $817.2 million, or 5.3%, and consumer loans increased $514.7 million, or 6.4%. Since the inception of the PPP, we originated $3.6 billion of PPP loans, including $1.0 billion during 2021, with $336.6 million outstanding as of December 31, 2021.

As of December 31, 2021, 28.8% of the commercial real estate loans were owner-occupied, while the remaining 71.2% were non-owner-occupied, compared to 28.1% and 71.9%, respectively, as of December 31, 2020. As of December 31, 2021 and 2020, we had commercial construction loans of $1.7 billion at each respective date representing 6.9% and 6.8% of total loans and leases, respectively. Additionally, as of December 31, 2021 and 2020, we had residential construction loans of $300.6 million and $191.5 million, respectively, representing 1.2% and 0.8% of total loans and leases, respectively. The increase in construction loans reflects the continued shortage of existing homes available for sale relative to strong homebuying demand.

Within our primary lending footprint, certain industries are more predominant given the geographic location of these lending markets. We strive to maintain a diverse commercial loan portfolio by avoiding undue concentrations or exposures to any particular sector, and we actively monitor our commercial loan portfolio to ensure that our industry mix is consistent with our risk appetite and within targeted thresholds. Several factors are taken into consideration when determining these thresholds, including recent economic and market trends. As of December 31, 2021 and 2020, there were no concentrations of loans relating to any industry in excess of 10% of total loans.

Following is a summary of the maturity distribution of certain loan categories with fixed and floating interest rates as of December 31, 2021:

TABLE 14

[[GREPCENT_TABLE]]
[["(in millions)","Within 1 Year","","1-5 Years","","Over 5 Years Through 15 years","","After 15 Years","","Total"],["Commercial loans and leases","$","2,674","","","$","7,816","","","$","5,227","","","$","748","","","$","16,465"],["Residential mortgages","11","","","52","","","399","","","3,192","","","3,654"],["Total","$","2,685","","","$","7,868","","","$","5,626","","","$","3,940","","","$","20,119"],["Interest rates for loans with maturities over one year:"],["Fixed","","","$","2,403","","","$","1,232","","","$","2,298","","","$","5,933"],["Floating","","","5,465","","","4,394","","","1,642","","","11,501"]]
[[/GREPCENT_TABLE]]

For additional information relating to lending activity, see Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. For additional information on repricing of floating interest rates, see the Market Risk section of MD&A, which is included in Item 7 of this Report.

Non-Performing Assets

Non-performing loans include non-accrual loans and non-performing TDRs. Past due loans are reviewed monthly to identify loans for non-accrual status. We place a loan on non-accrual status and discontinue interest accruals on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days, unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days. When a loan is placed on non-accrual status, all unpaid accrued interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured. TDRs are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress.

During 2021, non-accrual loans decreased nearly 50% compared to December 31, 2020, representing an $82.4 million reduction. This largely reflects the actions we took in late 2020 to better position our loan portfolio, at which time we proactively took risk off the table during a challenging macroeconomic environment. Examples of actions we took included an indirect auto loan sale of $0.5 billion and exiting of commercial loans in COVID-19 sensitive industries, primarily within the hotel and lodging sector.

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During 2020, non-performing assets increased $52.1 million. This reflects an increase of $88.9 million in non-accrual loans and a decrease of $15.2 million in OREO. Loans in COVID-19 sensitive industries, primarily within the hotel and lodging sector, contributed to the increase in non-accrual loans at the end of 2020. The decrease in OREO was largely driven by the sale of multiple pieces of real estate.

During the first half of 2020, we saw significant macroeconomic changes due to the COVID-19 pandemic. Stay-at-home orders and non-essential business closures in many of our markets temporarily suspended the income generation of some of our borrowers. Government stimulus and support programs generated through the CARES Act, such as the PPP, began to assist our borrowers through the difficult financial disruptions. We continued to offer these programs during the pandemic. We offered short-term modifications to our customers to assist them through this period. We had over 15,000 customers take advantage of our deferral programs.

The loan deferral programs can be extended on an individual basis. Total deferrals at December 31, 2021 were approximately $21 million, or less than one percent, of total loans and leases (excluding PPP loans) as of December 31, 2021, down from approximately $397 million, or 1.7%, of total loans and leases (excluding PPP loans) on deferral as of December 31, 2020 and $2.4 billion as of June 30, 2020, the highest point during the pandemic.

As long as the borrower was not experiencing financial difficulties immediately prior to COVID-19, short-term modifications, such as principal and interest deferments, are not required to be included in TDRs. These modifications will be closely monitored for any future deterioration and included in the non-performing tables as the probability of collection deteriorates.

Following is a summary of non-performing loans and leases, by class:

TABLE 15

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","$ Change","","% Change"],["(in millions)"],["Commercial real estate","$","48","","","$","85","","","$","(37)","","","(43.5)","%"],["Commercial and industrial","15","","","44","","","(29)","","","(65.9)","%"],["Commercial leases","1","","","2","","","(1)","","","(50.0)","%"],["Other","\u2014","","","1","","","(1)","","","(100.0)","%"],["Total commercial loans and leases","64","","","132","","","(68)","","","(51.5)","%"],["Direct installment","7","","","11","","","(4)","","","(36.4)","%"],["Residential mortgages","10","","","18","","","(8)","","","(44.4)","%"],["Indirect installment","2","","","2","","","\u2014","","","\u2014","%"],["Consumer lines of credit","5","","","7","","","(2)","","","(28.6)","%"],["Total consumer loans","24","","","38","","","(14)","","","(36.8)","%"],["Total non-performing loans and leases","$","88","","","$","170","","","$","(82)","","","(48.2)","%"]]
[[/GREPCENT_TABLE]]

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Following is a summary of non-performing assets:

TABLE 16

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in millions)"],["Non-accrual loans","$","88","","","$","170"],["Troubled debt restructurings","\u2014","","","\u2014"],["Total non-performing loans and leases","88","","","170"],["Other real estate owned","8","","","10"],["Total non-performing assets","$","96","","","$","181"],["Non-performing loans / total loans and leases","0.35","%","","0.67","%"],["Non-performing loans + OREO / total loans and leases + OREO","0.39","%","","0.71","%"],["Non-performing assets / total assets","0.24","%","","0.48","%"]]
[[/GREPCENT_TABLE]]

After the adoption of CECL on January 1, 2020, all non-accrual loans and TDRs are included in non-accrual loans in the above table.

Troubled Debt Restructured Loans

TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.

TDRs that are accruing and performing include loans for which we can reasonably estimate the timing and amount of the expected cash flows on such loans and for which we expect to fully collect the new carrying value of the loans. TDRs that are accruing and non-performing are comprised of loans that have not demonstrated a consistent repayment pattern on the modified terms for more than six months, however it is expected that we will collect all future principal and interest payments. TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in incremental losses which are factored into the ACL estimate. Additional information related to our TDRs is included in Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.

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Following is a summary of accruing and non-accrual TDRs, by class:

TABLE 17

[[GREPCENT_TABLE]]
[["(in millions)","Accruing","","Non-Accrual","","Total"],["December 31, 2021"],["Commercial real estate","$","6","","","$","21","","","$","27"],["Commercial and industrial","\u2014","","","1","","","1"],["Total commercial loans","6","","","22","","","28"],["Direct installment","21","","","4","","","25"],["Residential mortgages","27","","","5","","","32"],["Consumer lines of credit","6","","","1","","","7"],["Total consumer loans","54","","","10","","","64"],["Total TDRs","$","60","","","$","32","","","$","92"],["December 31, 2020"],["Commercial real estate","$","4","","","$","18","","","$","22"],["Commercial and industrial","1","","","3","","","4"],["Total commercial loans","5","","","21","","","26"],["Direct installment","23","","","4","","","27"],["Residential mortgages","24","","","7","","","31"],["Consumer lines of credit","6","","","1","","","7"],["Total consumer loans","53","","","12","","","65"],["Total TDRs","$","58","","","$","33","","","$","91"]]
[[/GREPCENT_TABLE]]

Following is a summary of loans and leases 90 days or more past due on which interest accruals continue:

TABLE 18

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in millions)"],["Total loans and leases 90 days or more past due","$","6","","","$","16"],["As a percentage of total loans and leases","0.02","%","","0.06","%"]]
[[/GREPCENT_TABLE]]

Prior to the adoption of CECL on January 1, 2020, loans acquired in a business combination that were 90 days or more past due were considered to be accruing since we could reasonably estimate future cash flows and we expected to fully collect the carrying value of these loans.

Following is a table showing the amounts of contractual interest income and actual interest income related to non-performing loans:

TABLE 19

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","2019"],["(in millions)"],["Gross interest income:"],["Per contractual terms","$","9","","","$","13","","","$","13"],["Recorded during the year","\u2014","","","\u2014","","","\u2014"]]
[[/GREPCENT_TABLE]]

Allowance for Credit Losses on Loans and Leases

On January 1, 2020, we adopted CECL which changed how we calculate the ACL as more fully described in Note 1 to the Notes to Consolidated Financial Statements. The CECL model takes into consideration the expected credit losses over the life of the loan at the time the loan is originated, compared to the incurred loss model under the prior standard. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current

62

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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.

COVID-19 Impacts on the ACL

Beginning in March 2020, the broader economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic resulting in notable adverse changes to forecasted economic variables utilized in our ACL modeling process. Based on these changes, we utilized a third-party pandemic recessionary scenario from the first quarter of 2020 through the third quarter of 2020 for ACL modeling purposes. At December 31, 2020 and December 31, 2021, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment. For our ACL calculation at December 31, 2021, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which reflects growth of 6.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which reflects growth of 13.0% over our R&S forecast period, (iii) S&P Volatility, which increases 15.2% in 2022 and 1.9% in 2023 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historic levels. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2020 included, but were not limited to: (i) gross domestic product, which reflects growth of 4% in 2021, (ii) the Dow Jones Total Stock Market Index, which grows steadily throughout the R&S forecast period, (iii) unemployment, which steadily declines and averages 6% over the R&S forecast period and (iv) the Volatility Index, which remains stable over the R&S forecast period. While we have not changed our ACL modeling methodology, we continually assess our key macroeconomic variables and their correlation to our historical and expected portfolio performance. Beginning with the third quarter of 2021, we changed certain macroeconomic variables used for ACL modeling purposes as the new variables better correlate to our historical performance over the economic cycles.

Following is a summary of certain ratios related to the ACL and loans and leases:

TABLE 20

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020"],["(dollars in millions)"],["Net loan charge-offs by category to average loans:"],["Commercial real estate","0.01","%","","0.10","%"],["Commercial and industrial","0.04","","","0.10"],["Other commercial","\u2014","","","0.01"],["Indirect installment","0.01","","","0.02"],["Consumer lines of credit","\u2014","","","0.01"],["Net loan charge-offs/average loans","0.06","%","","0.24","%"],["Allowance for credit losses/total loans and leases","1.38","%","","1.43","%"],["Allowance for credit losses/non-performing loans","391.25","%","","212.64","%"]]
[[/GREPCENT_TABLE]]

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Following is a summary of changes in the AULC by portfolio segment:

TABLE 21

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020"],["(in millions)"],["Balance at beginning of period","$","14","","","$","3"],["Provision for unfunded loan commitments and letters of credit:"],["Commercial portfolio","5","","","1"],["Consumer portfolio","\u2014","","","\u2014"],["ASC 326 adoption impact:"],["Commercial portfolio","\u2014","","","8"],["Consumer portfolio","\u2014","","","2"],["Balance at end of period","$","19","","","$","14"]]
[[/GREPCENT_TABLE]]

The ACL on loans and leases of $344.3 million at December 31, 2021 decreased $18.8 million, or 5.2%, from December 31, 2020 due to the improving macroeconomic environment and positive credit quality trends. Our ending ACL coverage ratio at December 31, 2021 was 1.38%, compared to 1.43% at December 31, 2020. Excluding PPP loans that do not carry an ACL due to a 100% government guarantee, the ACL to total loan and leases ratio equaled 1.40% at December 31, 2021 and 1.56% at December 31, 2020, directionally consistent with improved credit metrics. Total provision for credit losses during 2021 was $0.6 million. Net charge-offs were $13.9 million, or 0.06%, of total average loans, compared to $59.8 million, or 0.24%, in 2020, reflecting COVID-19 impacts on certain segments of the loan portfolio in 2020. The ACL as a percentage of non-performing loans for the total portfolio increased from 213% as of December 31, 2020 to 392% as of December 31, 2021 following the decrease in non-performing loans during the quarter, while the total ACL decreased $18.8 million, as noted above.

The ACL on loans and leases of $363.1 million at December 31, 2020 increased $167.2 million or 85.4% from December 31, 2019, primarily due to the adoption of CECL, as discussed above, combined with qualitative adjustments, such as economic modeling uncertainty given the COVID-19 related environment and loan deferral activity as prescribed in the CARES Act and by the banking regulators. The ratio of the ACL to total loans and leases was 1.43% and 0.84% at December 31, 2020 and 2019, respectively, with the 2020 figure reflecting the adoption of CECL and COVID-19 impacts. Excluding PPP loans that do not carry an ACL due to a 100% government guarantee, the ACL to total loans and leases ratio equaled 1.56% at December 31, 2020. The provision for credit losses during 2020 was $122.8 million, which reflected COVID-19 related macroeconomic impacts and life-of-loan CECL reserving requirements in 2020. Net charge-offs totaled $59.8 million or 0.24% of total average loans, compared to $28.3 million or 0.12% in 2019, reflecting COVID-19 impacts on certain segments of the loan portfolio.

The provision for credit losses during 2019 was $44.6 million, which covered net charge-offs and supported organic loan growth.

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Following is a summary of the allocation of the ACL and the percentage of loans in each category to total loans:

TABLE 22

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in millions)","Allowance","","% of Loans","","Allowance","","% of Loans"],["Commercial real estate","$","157","","","40","%","","$","181","","","38","%"],["Commercial and industrial","87","","","24","","","81","","","29"],["Commercial leases","15","","","2","","","17","","","2"],["Other","3","","","\u2014","","","1","","","\u2014"],["Commercial loans and leases","261","","","66","","","280","","","69"],["Direct installment","26","","","9","","","26","","","8"],["Residential mortgages","33","","","15","","","34","","","13"],["Indirect installment","14","","","5","","","11","","","5"],["Consumer lines of credit","10","","","5","","","12","","","5"],["Consumer loans","83","","","34","","","83","","","31"],["Total","$","344","","","100","%","","$","363","","","100","%"]]
[[/GREPCENT_TABLE]]

With the adoption of CECL on January 1, 2020, we no longer separately reflect an ACL on loans acquired in a business combination. The ACL on those loans are reflected in their respective loan categories.

During 2021, the ACL allocated to commercial real estate decreased primarily due to the improving macroeconomic environment and positive credit quality trends for this portfolio.

During 2020, the ACL allocated to commercial real estate and commercial and industrial loans increased primarily due to the impacts of CECL and adverse macroeconomic conditions, as previously discussed, and also to support loan growth.

Investment Activity

Investment activities serve to generate net interest income while supporting interest rate sensitivity and liquidity positions. Securities purchased with the intent and ability to hold until maturity are categorized as securities HTM and carried at amortized cost. All other securities are categorized as securities AFS and are recorded at fair value. AFS debt securities in unrealized loss positions are evaluated for impairment related to credit loss at least quarterly. Management has determined that no credit loss exists on securities AFS. Securities, like loans, are subject to similar interest rate and credit risk. In addition, by their nature, securities classified as AFS are also subject to fair value risks that could negatively affect the level of liquidity available to us, as well as stockholders’ equity. A change in the value of securities HTM could also negatively affect the level of stockholders’ equity if there was a decline in the underlying creditworthiness of the issuers. A CECL methodology is applied to securities HTM. As of December 31, 2021, a CECL reserve of $0.05 million was recorded.

As of December 31, 2021, debt securities classified as AFS and HTM totaled $3.4 billion and $3.5 billion, respectively. During 2021, debt securities AFS decreased by $37.5 million and debt securities HTM increased by $595.8 million from December 31, 2020. As of December 31, 2021 and 2020, we did not hold any trading securities.

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The following table indicates the respective contractual maturities and weighted-average yields of debt securities HTM, shown at amortized cost, as of December 31, 2021:

TABLE 23

[[GREPCENT_TABLE]]
[["(dollars in millions)","Amount","","Weighted Average Yield"],["Obligations of U.S. Treasury:"],["Maturing after five years but within ten years","$","1","","","5.25","%"],["Obligations of U.S. government agencies:"],["Maturing after ten years","1","","","2.35"],["States of the U.S. and political subdivisions:"],["Maturing within one year","1","","","2.31"],["Maturing after one year but within five years","21","","","2.38"],["Maturing after five years but within ten years","141","","","2.92"],["Maturing after ten years","854","","","3.64"],["Residential mortgage-backed securities:"],["Agency mortgage-backed securities","1,191","","","1.62"],["Agency collateralized mortgage obligations","930","","","1.52"],["Commercial mortgage-backed securities","323","","","1.95"],["Total","$","3,463","","","2.18","%"]]
[[/GREPCENT_TABLE]]

The weighted average yields for tax-exempt debt securities are computed on an FTE basis using the federal statutory tax rate of 21.0%.

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The amortized cost of AFS and HTM securities are summarized in the following table:

TABLE 24

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","$ Change","","% Change"],["(in millions)"],["Securities Available for Sale:"],["U.S. Treasury","$","205","","","$","600","","","$","(395)","","","(65.8)","%"],["U.S. government agencies","154","","","172","","","(18)","","","(10.5)"],["U.S. government-sponsored entities","194","","","160","","","34","","","21.3"],["Residential mortgage-backed securities:"],["Agency mortgage-backed securities","1,342","","","959","","","383","","","39.9"],["Agency collateralized mortgage obligations","1,192","","","1,094","","","98","","","9.0"],["Commercial mortgage-backed securities","294","","","361","","","(67)","","","(18.6)"],["States of the U.S. and political subdivisions","33","","","32","","","1","","","3.1"],["Other debt securities","2","","","2","","","\u2014","","","\u2014"],["Total debt securities available for sale","$","3,416","","","$","3,380","","","$","36","","","1.1","%"],["Debt Securities Held to Maturity:"],["U.S. Treasury","$","1","","","$","1","","","$","\u2014","","","\u2014","%"],["U.S. government agencies","1","","","1","","","\u2014","","","\u2014"],["U.S. government-sponsored entities","\u2014","","","120","","","(120)","","","(100.0)"],["Residential mortgage-backed securities:"],["Agency mortgage-backed securities","1,191","","","769","","","422","","","54.9"],["Agency collateralized mortgage obligations","930","","","562","","","368","","","65.5"],["Commercial mortgage-backed securities","323","","","307","","","16","","","5.2"],["States of the U.S. and political subdivisions","1,017","","","1,108","","","(91)","","","(8.2)"],["Total debt securities held to maturity","$","3,463","","","$","2,868","","","$","595","","","20.7","%"]]
[[/GREPCENT_TABLE]]

The increase in U.S. Treasury securities in 2020 is a result of our strategic reduction in other investment categories, as reinvestment opportunities were less attractive in the low interest rate environment. For additional information relating to investment activity, see Note 3, “Securities” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.

Deposits

As a bank holding company, our primary source of funds is deposits. These deposits are provided by business, consumer and municipal customers who we serve within our footprint.

Following is a summary of deposits:

TABLE 25

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","$ Change","","% Change"],["(in millions)"],["Non-interest-bearing demand","$","10,789","","","$","9,042","","","$","1,747","","","19.3","%"],["Interest-bearing demand","14,409","","","13,157","","","1,252","","","9.5"],["Savings","3,669","","","3,261","","","408","","","12.5"],["Certificates and other time deposits","2,859","","","3,662","","","(803)","","","(21.9)"],["Total deposits","$","31,726","","","$","29,122","","","$","2,604","","","8.9","%"]]
[[/GREPCENT_TABLE]]

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Total deposits increased $2.6 billion, or 8.9%, from December 31, 2020, primarily as a result of growth in non-interest-bearing and interest-bearing demand balances due to an expansion of customer relationships and higher customer balances, which were aided by inflows from the PPP and government stimulus activity. Customer preferences continued to shift away from higher rate certificates of deposit to lower yielding, more liquid products, and maintained larger deposit account balances than before the pandemic. The deposit growth helped us eliminate overnight borrowings and reduce higher-cost short-term FHLB borrowings and their related swaps.

Following is a summary of estimated insured and uninsured time deposits in excess of the FDIC insurance limit by remaining maturity at December 31, 2021:

TABLE 26

[[GREPCENT_TABLE]]
[["(in millions)","Insured","","Uninsured","","Total"],["Three months or less","$","631","","","$","76","","","$","707"],["Three to six months","529","","","51","","","580"],["Six to twelve months","684","","","76","","","760"],["Over twelve months","722","","","90","","","812"],["Total","$","2,566","","","$","293","","","$","2,859"]]
[[/GREPCENT_TABLE]]

Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term. Short-term borrowings, made up of customer repurchase agreements (also referred to as securities sold under repurchase agreements), FHLB advances and subordinated notes, decreased to $1.5 billion at December 31, 2021 from $1.8 billion at December 31, 2020, primarily due to a $250.0 million decline in short-term FHLB borrowings.

Following is a summary of selected information relating to short-term FHLB borrowings:

TABLE 27

[[GREPCENT_TABLE]]
[["At or for the Year Ended December 31","2021","","2020","","2019"],["(dollars in millions)"],["FHLB Advances (Short-term)"],["Balance at year-end","$","1,030","","","$","1,280","","","$","2,255"],["Maximum month-end balance","1,280","","","2,055","","","2,620"],["Average balance during year","1,113","","","1,699","","","1,797"],["Weighted average interest rates:"],["At year-end","2.14","%","","1.97","%","","1.90","%"],["During the year","2.13","","","1.83","","","2.35"]]
[[/GREPCENT_TABLE]]

For additional information relating to deposits and short-term borrowings, see Note 12, “Deposits” and Note 13, “Short-Term Borrowings” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.

Capital Resources

The access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight depend, in part, on our capital position.

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.

We have an effective shelf registration statement filed with the SEC. Pursuant to this registration statement, we may, from time to time, issue and sell in one or more offerings any combination of common stock, preferred stock, debt securities, depositary

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shares, warrants, stock purchase contracts or units. On February 24, 2020, we completed an offering of $300.0 million of 2.20% fixed rate senior notes due in 2023 under this registration statement. The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering expenses were $297.9 million. We used the net proceeds from the sale of the notes for general corporate purposes, which included investments at the holding company level, capital to support the growth of FNBPA, repurchase of our common shares and refinancing of outstanding indebtedness.

On September 23, 2019 we announced that our Board of Directors approved a share repurchase program for the repurchase of up to an aggregate of $150 million of our common stock. The 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. As of December 31, 2021, we repurchased 7.6 million shares at a weighted average share price of $10.69 for $81.6 million under this repurchase program, with $68.4 million remaining for repurchase.

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. Both FNB and FNBPA are subject to various regulatory capital requirements administered by federal banking agencies. For additional information, see Note 22, “Regulatory Matters” in the Notes to the Consolidated Financial Statements, which is included in Item 8 of this Report. 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.

CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

The following table sets forth contractual obligations of principal that represent required and potential cash outflows as of December 31, 2021:

TABLE 28

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","Total"],["Deposits without a stated maturity","","","","","","","","","$","28,867"],["Certificates and other time deposits","","","","","","","","","2,859"],["Operating leases","","","","","","","","","170"],["Long-term borrowings","","","","","","","","","682"],["Total","","","","","","","","","$","32,578"]]
[[/GREPCENT_TABLE]]

The following table sets forth the amount of commitments to extend credit and standby letters of credit as of December 31, 2021:

TABLE 29

[[GREPCENT_TABLE]]
[["(in millions)","","","","","","","","","Total"],["Commitments to extend credit","","","","","","","","","$","11,228"],["Standby letters of credit","","","","","","","","","194"],["Total","","","","","","","","","$","11,422"]]
[[/GREPCENT_TABLE]]

Commitments to extend credit and standby letters of credit do not necessarily represent future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon. Additionally, we can terminate a significant portion of these commitments at our discretion. For additional information relating to commitments to extend credit and standby letters of credit, see Note 16, “Commitments, Credit Risk and Contingencies” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.

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LIQUIDITY

Our goal in liquidity management is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding. Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and adequate levels of liquidity. 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.

FNBPA generates liquidity from its normal business operations. 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. FNB also has access to reliable and cost-effective wholesale sources of liquidity. Short- and long-term funds are used to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if we would be faced with a liquidity crisis.

The principal sources of the parent company’s liquidity are its strong existing cash resources plus dividends it receives from its subsidiaries. These dividends may be impacted by the parent’s or its subsidiaries’ capital 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. The cash position at December 31, 2021 was $295.4 million, down $84.2 million from December 31, 2020, due primarily to $43.2 million in share repurchases. Management has utilized various strategies to ensure sufficient cash on hand is available to meet the parent's funding needs.

Two metrics that are used to gauge the adequacy of the parent company’s cash position are the LCR and MCH. The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months. The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the cash on hand.

The LCR and MCH ratios are presented in the following table:

TABLE 30

[[GREPCENT_TABLE]]
[["December 31","2021","","2020","","Internal Limit"],["Liquidity coverage ratio","2.4 times","","2.7 times",""," 1 time"],["Months of cash on hand","16.9 months","","22.2 months",""," 12 months"]]
[[/GREPCENT_TABLE]]

Management has concluded that our cash levels remain appropriate given the current market environment.

Our liquidity position has been positively impacted by our ability to generate growth in relationship-based accounts. Organic growth in low-cost transaction deposits was complemented by management’s strategy of deposit gathering efforts focused on attracting new customer relationships and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities. We have also increased customer deposit relationships due to the success of the PPP. Total deposits were $31.7 billion at December 31, 2021, an increase of $2.6 billion, or 8.9%, from December 31, 2020. Total non-interest-bearing demand deposit accounts grew $1.7 billion, or 19.3%, and interest-bearing demand deposits increased $1.3 billion, or 9.5%. Savings account balances increased $407.6 million, or 12.5%. Time deposits declined $802.9 million, or 21.9%, as customer preferences continued to shift away from longer term certificates of deposit to lower yielding, more liquid products. In addition, customers maintained larger balances in their deposit accounts than before the pandemic. As mentioned earlier, inflows from PPP and government stimulus checks were a significant factor in the deposit growth.

As a result of the strong deposit activity, total borrowings were reduced by $681.0 million and our cash balances held at the FRB increased $2.1 billion from year-end 2020 to $3.0 billion at December 31, 2021.

FNBPA has significant unused wholesale credit availability sources that include the availability to borrow from the FHLB, the FRB, correspondent bank lines, access to brokered deposits and other channels. In addition to credit availability, FNBPA also

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possesses salable unpledged government and agency securities that could be utilized to meet funding needs. We currently also have excess cash to meet our pledging requirements. At December 31, 2021, we have $3.8 billion of cash and salable unpledged government and agency securities to total assets, or 9.8%. This compares to a policy minimum of 3.0%.

The following table presents certain information relating to FNBPA's credit availability and salable unpledged securities:

TABLE 31

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in millions)"],["Unused wholesale credit availability","$","14,681","","","$","16,434"],["Unused wholesale credit availability as a % of FNBPA assets","37.2","%","","44.1","%"],["Salable unpledged government and agency securities","$","836","","","$","546"],["Salable unpledged government and agency securities as a % of FNBPA assets","2.1","%","","1.5","%"],["Cash and salable unpledged government and agency securities as a % of FNBPA assets","9.8","%","","3.8","%"]]
[[/GREPCENT_TABLE]]

The decrease in unused wholesale credit availability of $1.8 billion was due to the expiration of the Paycheck Protection Program Liquidity Facility (PPPLF) as the FRB ceased lending money under this program, effective July 30, 2021. We had availability of $2.2 billion at December 31, 2020 and $0 at December 31, 2021. We never borrowed under this facility. Unused funding availability, absent the decline in PPPLF, grew by $405 million. Our strong cash position would also be available to meet our pledging requirements.

Another metric for measuring liquidity risk is the liquidity gap analysis. The following liquidity gap analysis as of December 31, 2021 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals. Management seeks to limit the size of the liquidity gaps so that sources and uses of funds are reasonably matched in the normal course of business. A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis. The twelve-month cumulative gap to total assets ratio was 11.3% as of December 31, 2021, compared to 8.2% as of December 31, 2020. Management calculates this ratio at least quarterly and it is reviewed monthly by ALCO.

TABLE 32

[[GREPCENT_TABLE]]
[["(dollars in millions)","Within 1 Month","","2-3 Months","","4-6 Months","","7-12 Months","","Total 1 Year"],["Assets"],["Loans","$","766","","","$","1,448","","","$","1,715","","","$","2,998","","","$","6,927"],["Investments","3,252","","","270","","","313","","","592","","","4,427"],["","4,018","","","1,718","","","2,028","","","3,590","","","11,354"],["Liabilities"],["Non-maturity deposits","382","","","817","","","1,166","","","2,143","","","4,508"],["Time deposits","241","","","467","","","582","","","763","","","2,053"],["Borrowings","110","","","149","","","30","","","57","","","346"],["","733","","","1,433","","","1,778","","","2,963","","","6,907"],["Period Gap (Assets - Liabilities)","$","3,285","","","$","285","","","$","250","","","$","627","","","$","4,447"],["Cumulative Gap","$","3,285","","","$","3,570","","","$","3,820","","","$","4,447"],["Cumulative Gap to Total Assets","8.3","%","","9.0","%","","9.7","%","","11.3","%"]]
[[/GREPCENT_TABLE]]

In addition, the ALCO regularly monitors various liquidity ratios and stress scenarios of our liquidity position. The stress scenarios forecast that adequate funding will be available even under severe conditions. Management believes we have sufficient liquidity available to meet our normal operating and contingency funding cash needs.

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MARKET RISK

Market risk refers to potential losses arising predominately from changes in interest rates, foreign exchange rates, equity prices and commodity prices. We are primarily exposed to interest rate risk inherent in our lending and deposit-taking activities as a financial intermediary. To succeed in this capacity, we offer an extensive variety of financial products to meet the diverse needs of our customers. These products sometimes contribute to interest rate risk for us when product groups do not complement one another. For example, depositors may want short-term deposits, while borrowers may desire long-term loans.

Changes in market interest rates may result in changes in the fair value of our financial instruments, cash flows and net interest income. Subject to its ongoing oversight, the Board of Directors has given ALCO the responsibility for market risk management, which involves devising policy guidelines, risk measures and limits, and managing the amount of interest rate risk and its effect on net interest income and capital. We use derivative financial instruments for interest rate risk management purposes and not for trading or speculative purposes.

Interest rate risk is comprised of repricing risk, basis risk, yield curve risk and options risk. Repricing risk arises from differences in the cash flow or repricing between asset and liability portfolios. Basis risk arises when asset and liability portfolios are related to different market rate indices, which do not always change by the same amount. Yield curve risk arises when asset and liability portfolios are related to different maturities on a given yield curve; when the yield curve changes shape, the risk position is altered. Options risk arises from “embedded options” within asset and liability products as certain borrowers have the option to prepay their loans, which may be with or without penalty, when rates fall, while certain depositors can redeem their certificates of deposit early, which may be with or without penalty, when rates rise.

We use an asset/liability model to measure our interest rate risk. Interest rate risk measures we utilize include earnings simulation, economic value of equity (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 to calculate net interest income under various hypothetical rate scenarios. The ALCO reviews earnings simulations over multiple years under various interest rate scenarios on a periodic basis. 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 December 31, 2021 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. Management utilizes the repricing gap analysis as a diagnostic tool in managing net interest income and EVE risk measures.

TABLE 33

[[GREPCENT_TABLE]]
[["(dollars in millions)","Within 1 Month","","2-3 Months","","4-6 Months","","7-12 Months","","Total 1 Year"],["Assets"],["Loans","$","10,696","","","$","2,782","","","$","1,007","","","$","1,638","","","$","16,123"],["Investments","3,258","","","274","","","446","","","572","","","4,550"],["","13,954","","","3,056","","","1,453","","","2,210","","","20,673"],["Liabilities"],["Non-maturity deposits","9,821","","","\u2014","","","\u2014","","","\u2014","","","9,821"],["Time deposits","367","","","466","","","580","","","759","","","2,172"],["Borrowings","547","","","606","","","8","","","12","","","1,173"],["","10,735","","","1,072","","","588","","","771","","","13,166"],["Off-balance sheet","(400)","","","530","","","\u2014","","","\u2014","","","130"],["Period Gap (assets - liabilities + off-balance sheet)","$","2,819","","","$","2,514","","","$","865","","","$","1,439","","","$","7,637"],["Cumulative Gap","$","2,819","","","$","5,333","","","$","6,198","","","$","7,637"],["Cumulative Gap to Assets","8.0","%","","15.1","%","","17.6","%","","21.6","%"]]
[[/GREPCENT_TABLE]]

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The twelve-month cumulative repricing gap to total assets was 21.6% and 19.6% as of December 31, 2021 and 2020, respectively. The positive cumulative gap positions indicate that we have a greater amount of repricing earning assets than repricing interest-bearing liabilities over the subsequent twelve months. If interest rates increase as modeled, net interest income will increase and, conversely, if interest rates decrease as modeled, net interest income will decrease. The change in the cumulative repricing gap at December 31, 2021, compared to December 31, 2020, is primarily related to growth in deposits. As mentioned earlier, inflows from PPP and government stimulus checks were a significant factor of growth in non-interest-bearing balances.

The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates. For example, if a product’s rate is estimated to increase by 50% as much as the market rates, then 50% of the account balance was placed in this category.

Utilizing net interest income simulations, the following net interest income metrics were calculated using rate shocks which move market rates in an immediate and parallel fashion. The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of December 31, 2021. Using a static Balance Sheet structure, the measures do not reflect management's potential counteractions.

The following table presents an analysis of the potential sensitivity of our net interest income and EVE to changes in interest rates using rate shocks:

TABLE 34

[[GREPCENT_TABLE]]
[["December 31,","2021","","2020","","ALCO Limits"],["Net interest income change (12 months):"],["+ 300 basis points","21.6","%","","17.9","%","","n/a"],["+ 200 basis points","14.4","","","12.0","","","(5.0)","%"],["+ 100 basis points","7.0","","","5.9","","","(5.0)"],["\u2013 100 basis points","(2.4)","","","(0.4)","","","(5.0)"],["Economic value of equity:"],["+ 300 basis points","6.6","","","8.8","","","(25.0)"],["+ 200 basis points","5.8","","","7.1","","","(15.0)"],["+ 100 basis points","3.8","","","4.5","","","(10.0)"],["\u2013 100 basis points","(9.5)","","","(9.4)","","","(10.0)"]]
[[/GREPCENT_TABLE]]

We also model rate scenarios which move all rates gradually over twelve months (Rate Ramps) and model scenarios that gradually change the shape of the yield curve. Assuming a static Balance Sheet, a +100 basis point Rate Ramp increases net interest income (12 months) by 3.6%, or $30.6 million, at December 31, 2021 and 3.2% at December 31, 2020. The corresponding metrics for a minus 100 basis point Rate Ramp are (0.5)% and 0.4% at December 31, 2021 and 2020, respectively. Deposit rate assumptions are floored at zero in the negative scenarios.

The FRB's rapid and large downward interest rate moves in March 2020 as a response to the COVID-19 pandemic lowered all market interest rates, specifically Prime Rate and 1-month LIBOR. Fifty percent of our net loans and leases are indexed to Prime, one-month LIBOR and one-month term SOFR. Our increased cash position related to increased deposits has also been a significant factor in our metrics. Assuming no replacement, the estimated impact of available cash in the +200-shock scenario above accounts for 5.0% of the 14.4% total asset sensitivity. These factors were the primary drivers of the increase in asset sensitivity. In this historically low-rate environment, our strategy is to remain asset sensitive to benefit from future increases in interest rates.

There are multiple factors that influence our interest rate risk position and impact net interest income. These include external factors such as the shape of the yield curve and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits.

Management utilizes various tactics to achieve our desired interest rate risk (IRR) position. In response to the change in interest rates, management was proactive in managing our IRR position. As mentioned earlier, we were successful in growing our transaction deposits which provides funding that is less interest rate-sensitive than short-term time deposits and wholesale

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borrowings. Also, we were able to lower rates on deposit products and shorten the average maturity of the certificates of deposit volumes. This continues to be a focus of management. Furthermore, management took advantage of the interest rate environment to reduce borrowing costs. Management has reduced the level of borrowings by $678 million this year. On the lending side, we regularly sell long-term fixed-rate residential mortgages in the secondary market and have been successful in the origination of consumer and commercial loans with short-term repricing characteristics. In particular, we have made use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase adjustable-rate loans. Total variable and adjustable-rate loans were 61.3% of total net loans and leases as of December 31, 2021 and 56.0% as of December 31, 2020. As of December 31, 2021, the commercial swaps totaled $5.5 billion of notional principal, with $1.5 billion in original notional swap principal originated during 2021. This year, we also executed $1.0 billion in receive fixed/pay floating 1-month LIBOR interest rate swaps with an average life of 3.6-years as a hedge to additional asset sensitivity. For additional information regarding interest rate swaps, see Note 15, “Derivative Instruments and Hedging Activities” in the Notes to the Consolidated Financial Statements in this Report. The investment portfolio is also used, in part, to manage our IRR position.

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 Balance Sheet structure as of the valuation date and do not reflect the planned growth or management actions that could be taken.

RISK MANAGEMENT

As a financial institution, we take on a certain amount of risk in every business decision, transaction and activity. Our Board of Directors and senior management have identified seven major categories of risk: credit risk, market risk, liquidity risk, reputational risk, operational risk, legal and compliance 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 so as to optimize total shareholder value, while balancing prudent business and safety and soundness considerations.

The Board of Directors adopted a risk appetite statement that defines acceptable risk levels and limits under which we seek to operate in order to optimize returns. As such, the board monitors a series of KRIs, or Key Risk Indicators, for various business lines, operational units, and risk categories, providing insight into how our performance aligns with our stated risk appetite. These results are reviewed periodically by the Board of Directors and senior management to ensure adherence to our risk appetite statement, and where appropriate, adjustments are made to applicable business strategies and tactics where risks are approaching stated tolerances or for emerging risks.

We support our risk management process through a governance structure involving our Board of Directors and senior management. The joint Risk Committee of our Board of Directors and the FNBPA Board of Directors helps ensure that business decisions are executed within appropriate risk tolerances. The Risk Committee has oversight responsibilities with respect to the following:

•identification, measurement, assessment and monitoring of enterprise-wide risk;

•development of appropriate and meaningful risk metrics to use in connection with the oversight of our businesses and strategies;

•review and assessment of our policies and practices to manage our credit, market, liquidity, legal, regulatory and operating risk (including technology, operational, compliance and fiduciary risks); and

•identification and implementation of risk management best practices.

The Risk Committee serves as the primary point of contact between our Board of Directors and the Risk Management Council, which is the senior management level committee responsible for risk management. Risk appetite is an integral element of our business and capital planning processes through our Board Risk Committee and Risk Management Council. We use our risk appetite processes to promote appropriate alignment of risk, capital and performance tactics, while also considering risk capacity and appetite constraints from both financial and non-financial risks. Our top-down risk appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions. Our Board Risk Committee, in collaboration with our Risk Management Council, approves our risk appetite on an annual basis, or more frequently, as needed

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to reflect changes in the risk, regulatory, economic and strategic plan environments, with the goal of ensuring that our risk appetite remains consistent with our strategic plans and business operations, regulatory environment and our shareholders' expectations. Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee.

As noted above, we have a Risk Management Council comprised of senior management. The purpose of this committee is to provide regular oversight of specific areas of risk with respect to the level of risk and risk management structure. Management has also established an Operational Risk Committee that is responsible for identifying, evaluating and monitoring operational risks across FNB, evaluating and approving appropriate remediation efforts to address identified operational risks and providing periodic reports concerning operational risks to the Risk Management Council. The Risk Management Council reports on a regular basis to the Risk Committee of our Board of Directors regarding our enterprise-wide risk profile and other significant risk management issues. Our Chief Risk Officer is responsible for the design and implementation of our enterprise-wide risk management strategy and framework through the multiple second line of defense areas, including the following departments, which all report to the Chief Risk Officer to ensure the coordinated and consistent implementation of risk management initiatives and strategies on a day-to-day basis:

•Enterprise-Wide Risk Management Department - conducts risk and control assessments across all of our business and operational areas to ensure the appropriate risk identification, risk management and reporting of risks enterprise-wide.

•Fraud Risk Department - monitors for internal and external fraud risk across all of our business and operational units.

•Loan Review Department - conducts independent testing of our loan risk ratings to ensure their accuracy, which is instrumental to calculating our ACL.

•Model Risk Management Department - oversees validation and testing of all models used in managing risk across our company.

•Third-Party Risk Management Department - ensures effective risk management and oversight of third-party relationships throughout the vendor life cycle.

•Anti-Money Laundering and Bank Secrecy Act Department - monitors for compliance with money laundering risk and associated regulatory compliance requirements.

•Community Reinvestment Department - monitors for compliance with the requirements of the CRA.

•Appraisal Review Department - facilitates independent ordering and review of real estate appraisals obtained for determining the value of real estate pledged as collateral for loans to customers.

•Compliance Department - develops policies and procedures and monitors compliance with applicable laws and regulations which govern our business operations.

•Information and Cyber Security Department - maintains a risk assessment of our information and cybersecurity risks and ensures appropriate controls are in place to manage and control such risks, through the use of the National Institute of Standards and Technology framework for improving critical infrastructure by measuring and evaluating the effectiveness of information and cybersecurity controls. This department also oversees our disaster recovery planning and testing efforts to ensure we are capable and ready for business resumption in the event of a disaster.

As discussed in more detail under the COVID-19 section of this Report, we have in place various business and emergency continuity plans to respond to different crises and circumstances which include rapid deployment of our Crisis Management Team, Incident Management Team and Business Continuity Coordinators to activate our plans for various types of emergency circumstance. Further, our audit function performs an independent assessment of our internal controls environment and plays an integral role in testing the operation of the internal controls systems and reporting findings to management and our Audit Committee. Each of the Risk, Audit, Credit Risk and CRA Committees of our Board of Directors regularly report on risk-related matters to the full Board of Directors. In addition, both the Risk Committee of our Board of Directors and our Risk Management Council regularly assess our enterprise-wide risk profile and provide guidance on actions needed to address key and emerging risk issues.

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;

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•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 process.

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 35

Operating net income available to common stockholders

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020","","2019"],["(in thousands)"],["Net income available to common stockholders","$","396,561","","","$","277,965","","","$","379,208"],["Merger-related expense","1,764","","","\u2014","","","\u2014"],["Tax benefit of merger-related expense","(370)","","","\u2014","","","\u2014"],["COVID-19 expense","\u2014","","","11,276","","","\u2014"],["Tax benefit of COVID-19 expense","\u2014","","","(2,368)","","","\u2014"],["Gain on sale of Visa class B stock","\u2014","","","(13,818)","","","\u2014"],["Tax expense of gain on sale of Visa class B stock","\u2014","","","2,902","","","\u2014"],["Loss on FHLB debt extinguishment and related hedge terminations","\u2014","","","25,611","","","\u2014"],["Tax benefit of loss on FHLB debt extinguishment and related hedge terminations","\u2014","","","(5,378)","","","\u2014"],["Branch consolidation costs","2,644","","","18,745","","","4,505"],["Tax benefit of branch consolidation costs","(555)","","","(3,936)","","","(946)"],["Service charge refunds","\u2014","","","3,780","","","4,279"],["Tax benefit of service charge refunds","\u2014","","","(794)","","","(899)"],["Operating net income available to common stockholders (non-GAAP)","$","400,044","","","$","313,985","","","$","386,147"]]
[[/GREPCENT_TABLE]]

The table above shows how operating net income available to common stockholders (non-GAAP) is derived from amounts reported in our financial statements. We believe certain charges such as merger expenses, branch consolidation costs, service charge refunds, COVID-19 expenses are not organic costs to run our operations and facilities. The merger expenses and branch consolidation charges principally represent expenses to satisfy contractual obligations of the acquired entity or closed branches without any useful ongoing benefit to us. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction. Similarly, gains on sale of Visa class B stock and losses on FHLB debt extinguishment and related hedge terminations are not organic to our operations. The COVID-19 expenses represent special company initiatives to support our front-line employees and the communities we serve during an unprecedented time of a pandemic.

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TABLE 36

Operating earnings per diluted common share

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020","","2019"],["Net income per diluted common share","$","1.23","","","$","0.85","","","$","1.16"],["Merger-related expense","0.01","","","\u2014","","","\u2014"],["Tax benefit of merger-related expense","\u2014","","","\u2014","","","\u2014"],["COVID-19 expense","\u2014","","","0.03","","","\u2014"],["Tax benefit of COVID-19 expense","\u2014","","","(0.01)","","","\u2014"],["Gain on sale of Visa class B stock","\u2014","","","(0.04)","","","\u2014"],["Tax expense of gain on sale of Visa class B stock","\u2014","","","0.01","","","\u2014"],["Loss on FHLB debt extinguishment and related hedge terminations","\u2014","","","0.08","","","\u2014"],["Tax benefit of loss on FHLB debt extinguishment and related hedge terminations","\u2014","","","(0.02)","","","\u2014"],["Branch consolidation costs","0.01","","","0.06","","","0.01"],["Tax benefit of branch consolidation costs","\u2014","","","(0.01)","","","\u2014"],["Service charge refunds","\u2014","","","0.01","","","0.01"],["Tax benefit of service charge refunds","\u2014","","","\u2014","","","\u2014"],["Operating earnings per diluted common share (non-GAAP)","$","1.24","","","$","0.96","","","$","1.18"]]
[[/GREPCENT_TABLE]]

TABLE 37

Return on average tangible common equity

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020","","2019"],["(dollars in thousands)"],["Net income available to common stockholders","$","396,561","","","$","277,965","","","$","379,208"],["Amortization of intangibles, net of tax","9,573","","","10,556","","","11,192"],["Tangible net income available to common stockholders (non-GAAP)","$","406,134","","","$","288,521","","","$","390,400"],["Average total stockholders\u2019 equity","$","5,033,188","","","$","4,904,300","","","$","4,757,465"],["Less: Average preferred stockholders\u2019 equity","(106,882)","","","(106,882)","","","(106,882)"],["Less: Average intangible assets (1)","(2,310,419)","","","(2,322,981)","","","(2,331,630)"],["Average tangible common equity (non-GAAP)","$","2,615,887","","","$","2,474,437","","","$","2,318,953"],["Return on average tangible common equity (non-GAAP)","15.53","%","","11.66","%","","16.84","%"]]
[[/GREPCENT_TABLE]]

(1) Excludes loan servicing rights.

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TABLE 38

Return on average tangible assets

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020","","2019"],["(dollars in thousands)"],["Net income","$","404,602","","","$","286,006","","","$","387,249"],["Amortization of intangibles, net of tax","9,573","","","10,556","","","11,192"],["Tangible net income (non-GAAP)","$","414,175","","","$","296,562","","","$","398,441"],["Average total assets","$","38,603,092","","","$","36,607,430","","","$","33,850,763"],["Less: Average intangible assets (1)","(2,310,419)","","","(2,322,981)","","","(2,331,630)"],["Average tangible assets (non-GAAP)","$","36,292,673","","","$","34,284,449","","","$","31,519,133"],["Return on average tangible assets (non-GAAP)","1.14","%","","0.87","%","","1.26","%"]]
[[/GREPCENT_TABLE]]

(1) Excludes loan servicing rights.

TABLE 39

Tangible book value per common share

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in thousands, except per share data)"],["Total stockholders\u2019 equity","$","5,149,864","","","$","4,958,903"],["Less: Preferred stockholders\u2019 equity","(106,882)","","","(106,882)"],["Less: Intangible assets (1)","(2,304,410)","","","(2,316,527)"],["Tangible common equity (non-GAAP)","$","2,738,572","","","$","2,535,494"],["Ending common shares outstanding","318,933,492","","","321,629,529"],["Tangible book value per common share (non-GAAP)","$","8.59","","","$","7.88"]]
[[/GREPCENT_TABLE]]

(1) Excludes loan servicing rights.

TABLE 40

Tangible equity to tangible assets (period-end)

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in thousands)"],["Total stockholders' equity","$","5,149,864","","","$","4,958,903"],["Less: Intangible assets (1)","(2,304,410)","","","(2,316,527)"],["Tangible equity (non-GAAP)","$","2,845,454","","","$","2,642,376"],["Total assets","$","39,513,318","","","$","37,354,351"],["Less: Intangible assets (1)","(2,304,410)","","","(2,316,527)"],["Tangible assets (non-GAAP)","$","37,208,908","","","$","35,037,824"],["Tangible equity / tangible assets (period-end) (non-GAAP)","7.65","%","","7.54","%"]]
[[/GREPCENT_TABLE]]

(1) Excludes loan servicing rights.

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TABLE 41

Tangible common equity / tangible assets (period-end)

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in thousands)"],["Total stockholders' equity","$","5,149,864","","","$","4,958,903"],["Less: Preferred stockholders' equity","(106,882)","","","(106,882)"],["Less: Intangible assets (1)","(2,304,410)","","","(2,316,527)"],["Tangible common equity (non-GAAP)","$","2,738,572","","","$","2,535,494"],["Total assets","$","39,513,318","","","$","37,354,351"],["Less: Intangible assets (1)","(2,304,410)","","","(2,316,527)"],["Tangible assets (non-GAAP)","$","37,208,908","","","$","35,037,824"],["Tangible common equity / tangible assets (period-end) (non-GAAP)","7.36","%","","7.24","%"]]
[[/GREPCENT_TABLE]]

 (1) Excludes loan servicing rights.

TABLE 42

Allowance for credit losses / loans and leases, excluding PPP (period-end)

[[GREPCENT_TABLE]]
[["December 31","2021","","2020"],["(dollars in thousands)"],["ACL - loans","$","344,284","","","$","363,107"],["Loans and leases","$","24,968,702","","","$","25,458,645"],["Less: PPP loans outstanding","(336,578)","","","(2,158,452)"],["Loans and leases, excluding PPP loans outstanding (non-GAAP)","$","24,632,124","","","$","23,300,193"],["ACL loans / loans and leases, excluding PPP (non-GAAP)","1.40","%","","1.56","%"]]
[[/GREPCENT_TABLE]]

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Key Performance Indicators

TABLE 43

Pre-provision net revenue to average tangible common equity

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020","","2019"],["(dollars in thousands)"],["Net interest income","$","906,476","","","$","922,082","","","$","917,239"],["Non-interest income","330,419","","","294,556","","","294,266"],["Less: Non-interest expense","(733,168)","","","(750,349)","","","(696,128)"],["Pre-provision net revenue (as reported)","$","503,727","","","$","466,289","","","$","515,377"],["Adjustments:"],["Add: Branch consolidation costs (non-interest income)","$","\u2014","","","$","\u2014","","","$","1,722"],["Add: Service charge refunds (non-interest income)","\u2014","","","3,780","","","4,279"],["Less: Gain on sale of Visa class B stock (non-interest income)","\u2014","","","(13,818)","","","\u2014"],["Add: Loss on FHLB debt extinguishment and related hedge terminations (non-interest income)","\u2014","","","25,611","","","\u2014"],["Add: Merger-related expense (non-interest expense)","1,764","","","\u2014","","","\u2014"],["Add: COVID-19 expense (non-interest expense)","\u2014","","","11,276","","","\u2014"],["Add: Branch consolidation costs (non-interest expense)","2,644","","","18,745","","","2,783"],["Add: Tax credit-related impairment project (non-interest expense)","\u2014","","","4,101","","","3,213"],["Pre-provision net revenue (operating) (non-GAAP)","$","508,135","","","$","515,984","","","$","527,374"],["Average total shareholders\u2019 equity","$","5,033,188","","","$","4,904,300","","","$","4,757,465"],["Less: Average preferred shareholders\u2019 equity","(106,882)","","","(106,882)","","","(106,882)"],["Less: Average intangible assets (1)","(2,310,419)","","","(2,322,981)","","","(2,331,630)"],["Average tangible common equity (non-GAAP)","$","2,615,887","","","$","2,474,437","","","$","2,318,953"],["Pre-provision net revenue (reported) / average tangible common equity (non-GAAP)","19.26","%","","18.84","%","","22.22","%"],["Pre-provision net revenue (operating) / average tangible common equity (non-GAAP)","19.42","%","","20.85","%","","22.74","%"],["(1) Excludes loan servicing rights"]]
[[/GREPCENT_TABLE]]

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TABLE 44

Efficiency ratio

[[GREPCENT_TABLE]]
[["Year Ended December 31","2021","","2020","","2019"],["(dollars in thousands)"],["Non-interest expense","$","733,168","","","$","750,349","","","$","696,128"],["Less: Amortization of intangibles","(12,117)","","","(13,362)","","","(14,167)"],["Less: OREO expense","(2,598)","","","(4,434)","","","(4,652)"],["Less: Merger-related expense","(1,764)","","","\u2014","","","\u2014"],["Less: COVID-19 expense","\u2014","","","(11,276)","","","\u2014"],["Less: Branch consolidation costs","(2,644)","","","(18,745)","","","(2,783)"],["Less: Tax credit-related project impairment","\u2014","","","(4,101)","","","(3,213)"],["Adjusted non-interest expense","$","714,045","","","$","698,431","","","$","671,313"],["Net interest income","$","906,476","","","$","922,082","","","$","917,239"],["Taxable equivalent adjustment","10,948","","","12,470","","","14,121"],["Non-interest income","330,419","","","294,556","","","294,266"],["Less: Net securities gains","(193)","","","(282)","","","(70)"],["Less: Gain on sale of Visa class B stock","\u2014","","","(13,818)","","","\u2014"],["Add: Loss on FHLB debt extinguishment and related hedge terminations","\u2014","","","25,611","","","\u2014"],["Add: Branch consolidation costs","\u2014","","","\u2014","","","1,722"],["Add: Service charge refunds","\u2014","","","3,780","","","4,279"],["Adjusted net interest income (FTE) + non-interest income","$","1,247,650","","","$","1,244,399","","","$","1,231,557"],["Efficiency ratio (FTE) (non-GAAP)","57.23","%","","56.13","%","","54.51","%"]]
[[/GREPCENT_TABLE]]