# FNB CORP/PA/ (FNB) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from FNB CORP/PA/'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/37808/000003780824000006/fnb-20231231.htm Accession: 0000037808-24-000006 Filing date: 2024-02-26 Report date: 2023-12-31 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/ Previous year: /company/FNB/mda/fy2022/ (FY 2022) Next year: /company/FNB/mda/fy2024/ (FY 2024) 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) supervision, regulation, enforcement and other actions by several governmental agencies, including the FRB, FDIC, FSOC, DOJ, CFPB, UST, OCC and HUD, state attorney generals and other governmental agencies whose actions may affect, among other things, our consumer and mortgage lending and deposit practices, capital structure, investment practices, dividend policy, annual FDIC insurance premium assessment and growth, money supply, market interest rates or otherwise affect business activities of the financial services industry; (iii) a slowing of the U.S. economy in general and regional and local economies within our market area; (iv) inflation concerns; (v) the impacts of tariffs or other trade policies of the U.S. or its global trading partners; and (vi) the sociopolitical environment in the U.S. •Business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through effective use of systems and controls, third-party insurance, derivatives, and capital management techniques, and to meet evolving regulatory capital and liquidity standards. •Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues. Our ability to anticipate, react quickly and continue to respond to technological changes and significant adverse industry and economic events can also impact our ability to respond to customer needs and meet competitive demands. •Business and operating results can also be affected by difficult to predict uncertainties, such as widespread natural and other disasters, wars, pandemics, including post-pandemic return to normalcy, global events and geopolitical instability, including the Ukraine-Russia conflict, and the emerging military conflict in Israel and Gaza, shortages of labor, supply chain disruptions and shipping delays, terrorist activities, system failures, security breaches, significant political events, cyber-attacks, international hostilities or other extraordinary events which are beyond our control and may significantly impact the U.S. or global economy and financial markets generally, or us or our counterparties, customers or third-party vendors specifically. •Legal, regulatory and accounting developments could have an impact on our ability to operate and grow our businesses, financial condition, results of operations, competitive position, and reputation. Reputational impacts could affect matters such as business generation and retention, liquidity, funding, and the ability to attract and retain talent. These developments could include: ◦Policies and priorities of the current U.S. presidential administration, including legislative and regulatory reforms, more aggressive approaches to supervisory or enforcement priorities with consumer and antidiscrimination lending laws by the federal banking regulatory agencies and the DOJ, changes affecting oversight of the financial services industry, regulatory obligations or restrictions, consumer protection, taxes, 43 Table of Contents      employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles. ◦Ability to continue to attract, develop and retain key talent. ◦Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards. ◦Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC. ◦Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries. These matters may result in monetary judgments or settlements, enforcement actions or other remedies, including fines, penalties, restitution or alterations in our business practices, including financial and other types of commitments, and in additional expenses and collateral costs, and may cause reputational harm to 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. ◦Business and operating results are affected by our ability to effectively identify and manage risks inherent in our businesses, including, where appropriate, through effective use of policies, processes, systems and controls, third-party insurance, derivatives, and capital and liquidity management techniques. ◦The impact on our financial condition, results of operations, financial disclosures and future business strategies related to the impact on the ACL due to changes in forecasted macroeconomic conditions as a result of applying the “current expected credit loss” accounting standard, or CECL. ◦A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns. ◦Increased funding costs and market volatility due to market illiquidity and competition for funding. We caution that the risks identified here are not exhaustive of the types of risks that may adversely impact us and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A. Risk Factors and the Risk Management sections in this Annual Report on Form 10-K (including the MD&A section), our subsequent 2024 Quarterly Reports on Form 10-Q (including the risk factors and risk management discussions) and our other subsequent filings with the SEC, which are available on our corporate website at https://www.fnb-online.com/about-us/investor-information/reports-and-filings or the SEC's website at www.sec.gov. We have included our web address as an inactive textual reference only. Information on our website is not part of our SEC filings. APPLICATION OF CRITICAL ACCOUNTING POLICIES 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 materially different than originally reported. 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, and income taxes and DTAs to be critical accounting policies. 44 Table of Contents      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 are made to the calculation of expected losses to address differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters and other relevant factors. Such factors are used to adjust the quantitative output based on historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a R&S forecast can be made, the model reverts over 12 months on a straight-line basis back to the historical rates of default and severity of loss over the remaining life of the loans. 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 6, “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 certain assets and liabilities are required to be recorded at or adjusted to fair value. Where available, fair value and information used to record valuation adjustments for certain assets or liabilities is based on either quoted market prices or are provided by independent third-party sources, including appraisers and valuation specialists. 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 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 26, “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 45 Table of Contents      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 2023 financial statements, we completed our annual goodwill impairment test as of October 1, 2023. 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, 2023. 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 directly affect our capital ratios, tangible common equity, tangible book value per share or liquidity position. See Note 1, “Summary of Significant Accounting Policies” and Note 10, “Goodwill and Other Intangible Assets” in the Notes to Consolidated Financial Statements for further discussion of accounting for goodwill and other intangible assets. 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 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 20, “Income Taxes” in the Notes to Consolidated Financial Statements for further discussion of accounting for income taxes. 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 2023 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted. 46 Table of Contents      USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common stockholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible equity to tangible assets, the ratio of tangible common equity to tangible assets, net loan charge-offs, excluding an isolated commercial loan charge-off due to alleged fraud to total average loans and leases, operating non-interest income, operating non-interest expense, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. 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, FDIC special assessment, realized loss on securities restructuring, valuation allowance on auto loans held-for-sale, initial provision for non-PCD loans acquired and branch consolidation costs are not organic to run our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction. To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable-equivalent amounts for 2023, 2022 and 2021 were calculated using a federal statutory income tax rate of 21%. 47 Table of Contents      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.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. As of December 31, 2023, we had 346 branches 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 2023, net income available to common stockholders was $476.8 million, or $1.31 per diluted common share. Comparatively, full-year 2022 net income available to common stockholders totaled $431.1 million, or $1.22 per diluted common share. On an operating basis, full-year 2023 earnings per diluted common share (non-GAAP) was $1.57, excluding $116.2 million (pre-tax) of significant items impacting earnings. Operating earnings per diluted common share (non-GAAP) for the full year of 2022 was $1.40, excluding $80.8 million (pre-tax) of significant items impacting earnings. The beginning of 2023 started with the banking industry disruption caused by the Silicon Valley Bank and Signature Bank failures. We were well-positioned to meet the needs of our customers and communities through those challenges given our strategic focus to maintain a diversified and granular deposit base, conservative and prudent balance sheet management for the long-term, and sound risk management policies and governance as we achieved full year operating earnings per diluted common share (non-GAAP) totaling a record $1.57, record revenue of $1.6 billion and tangible book value per common share (non-GAAP) growth of $1.20, or 14.5%, year-over-year, to an all-time high of $9.47. Total average deposits grew $568.3 million, or 1.7%, and we ended the year with approximately 78% of total deposits insured by the FDIC or collateralized. As part of our strategy to optimize the balance sheet and improve future earnings, in the fourth quarter of 2023, we completed the sale of $648.7 million of AFS investment securities and transferred $355 million of indirect auto loans to held-for-sale as part of our ongoing proactive balance sheet management strategy. The sale of AFS investment securities resulted in a realized loss (pre-tax) of $67.4 million. We reinvested proceeds from the sale of those investment securities with an average yield of 1.08% into investment securities with yields approximately 350 basis points higher with a similar duration and convexity profile. The transfer of the indirect auto loans to held-for-sale resulted in a negative valuation allowance impact of $16.7 million (pre-tax) recognized in other non-interest expense due primarily to changes in interest rates from time of origination. The sale of these loans closed in February 2024 with the proceeds used to repay borrowings that have a similar yield to the sold loans. The transfer to held-for-sale benefited the loan-to-deposit ratio by approximately 100 basis points. The cumulative impact of these balance sheet actions has a tangible book value earn back period of less than one year, versus an earn-back period of five years for a stock buyback, an alternative use of capital, and significantly higher earnings accretion from the repositioned investment securities yields. We also announced the February 2024 redemption of all $110 million of Series E preferred stock. Income Statement Highlights (2023 compared to 2022) •Record total revenue of $1.6 billion, an increase of $127.5 million, or 8.8%, led to net income available to common stockholders of $476.8 million, an increase of $45.7 million, or 10.6%, and operating net income available to common stockholders (non-GAAP) of $568.6 million, an increase of $73.7 million, or 14.9%. •Earnings per diluted common share was $1.31, compared to $1.22, an increase of 7.4%. •Operating earnings per diluted common share (non-GAAP) was $1.57, compared to $1.40, an increase of 12.1%. •Net interest income was $1.3 billion, compared to $1.1 billion, up 17.6%, primarily due to the benefit of growth in earning assets, the impact from the higher interest rate environment and deposit growth accompanied by prudent management of deposit betas. •Net interest margin (FTE) (non-GAAP) increased 32 basis points to 3.35% from 3.03%. The FOMC raised the target federal funds rate by a total of 100 basis points in 2023. The yield on earning assets (non-GAAP) increased 153 basis points to 5.00%, primarily reflecting higher yields on loans, investment securities and interest-bearing deposits 48 Table of Contents      with banks due to the impact of the higher interest rate environment. The cost of funds increased 127 basis points to 1.73% due to the costs of interest-bearing deposits increasing 164 basis points to 2.13%, short-term borrowings increasing 203 basis points and long-term debt increasing 110 basis points primarily from the August 2022 offering of $350 million in senior notes, partially offset by the maturity of $300 million in 2.20% fixed-rate senior notes in February of 2023. •The provision for credit losses totaled $71.8 million, compared to $64.2 million which included $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions in 2022. The provision for credit losses for 2023 was primarily due to loan growth, the previously disclosed $31.9 million isolated commercial loan that was charged off in the third quarter of 2023 due to alleged fraud and other charge-off activity. •Non-interest income was $254.3 million, decreasing $69.2 million, or 21.4%, compared to $323.6 million, primarily due to a $67.4 million realized loss (pre-tax) on investment securities restructuring. On an operating basis (non-GAAP), non-interest income totaled $321.7 million, when adjusting for the investment securities restructuring and decreases in service charges, capital markets income and other non-interest income, partially offset by an increase in wealth management revenues, interchange and card transaction fees and dividends on non-marketable equity securities. •Non-interest expense was $915.4 million, compared to $826.4 million. Excluding significant items totaling $48.8 million in 2023 and $52.3 million in 2022, operating non-interest expense (non-GAAP) increased $92.5 million, or 11.9%. Salaries and employee benefits increased $35.4 million, or 8.3%, due to normal merit increases, production-related commissions and the addition of the acquired Union expense base. Occupancy and equipment increased $17.2 million, or 11.9%, primarily from technology-related investments. •FDIC insurance expense of $60.8 million included a $29.9 million FDIC special assessment. The special assessment was considered a significant item impacting earnings as it reflected replenishment of the FDIC's DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. •The efficiency ratio (non-GAAP) remained at a favorable level of 51.2%, compared to 52.1%. •Income tax expense decreased $14.8 million, or 13.1%. The effective tax rate was 16.9%, compared to 20.6%, primarily due to renewable energy investment tax credits recognized in 2023 as part of a solar project financing transaction originated by our commercial leasing business. •Return on average tangible common equity ratio (non-GAAP) was 15.5%, compared to 15.3%. Balance Sheet Highlights (period-end balances, 2023 compared to 2022, unless otherwise indicated) •Total assets were $46.2 billion, compared to $43.7 billion, an increase of $2.4 billion, or 5.6%, primarily from organic growth in loans. •Average loans totaled $31.4 billion, an increase of $3.5 billion, or 12.7%, due to healthy organic growth across our footprint, as well as adding the Union loans to portfolio balances. Growth in average commercial loans totaled $1.9 billion, or 10.7%, including growth of $1.0 billion, or 9.3%, in commercial real estate and $793.7 million, or 12.2%, in commercial and industrial loans. Growth in total average consumer loans totaled $1.6 billion, or 16.5%, and was due to an increase in residential mortgage loans of $1.4 billion, or 31.3%, indirect installment loans of $134.8 million, or 9.8%, and direct home equity installment loans of $68.6 million, or 2.6%. •Total average investment securities were $7.2 billion, compared to $7.1 billion, an increase of $14.1 million, or 0.2%. •Total average deposits grew $568.3 million, or 1.7%, led by an increase in average time deposits of $2.2 billion, or 72.3%, offset by declines of $739.2 million, or 6.4% in non-interest-bearing deposits, $655.3 million, or 4.4%, in interest-bearing demand deposits and $209.4 million, or 5.3%, in savings deposits. The increase in average time deposits offset the decline in other deposit categories as customers continue to migrate deposit balances into higher-yielding deposit products. •The ratio of loans to deposits was 93.1%, compared to 87.0%, as loan growth outpaced deposit growth on a year-over-year basis. 49 Table of Contents      •The ratio of non-performing loans plus OREO to total loans and lease plus OREO decreased 5 basis points to 0.34%. Total delinquency decreased 1 basis point to 0.70%, compared to 0.71%. Both measures continue to remain at historically low levels. •Net charge-offs totaled $67.7 million, or 0.22% of total average loans, compared to $16.2 million, or 0.06%. Excluding the previously mentioned charge-off, net charge-offs would have been $35.9 million, or 0.11% of total average loans (non-GAAP), remaining at historically low levels. •The dividend payout ratio for 2023 was 36.5%, compared to 39.5%. •During 2023, we repurchased nearly 3.1 million shares of our common stock at a weighted average share price of $11.61 for $36.5 million. There currently is $139.1 million of the authorized amount remaining for future repurchase activity. •The ratio of the ACL to total loans and leases was 1.25%, compared to 1.33%, reflecting net loan growth and charge-off activity. The ACL on loans and leases totaled $406 million at December 31, 2023, compared to $402 million with the increase reflecting net loan growth. •Tangible book value per common share (non-GAAP) of $9.47 increased 14.5% from year-end 2022. AOCI reduced the tangible book value per common share (non-GAAP) by $0.65 as of December 31, 2023, compared to $0.99 at the end of 2022, primarily due to the impact of higher interest rates on the fair value of AFS securities. •The CET1 regulatory capital ratio was 10.04%, benefiting from retained earnings growth, compared to 9.82%. TABLE 1 [[GREPCENT_TABLE]] [["Year-to-Date Results Summary","","2023","","2022"],["Reported results"],["Net income available to common stockholders (millions)","","$","476.8","","","$","431.1"],["Net income per diluted common share","","1.31","","","1.22"],["Book value per common share (period-end)","","16.56","","","15.39"],["Operating results (non-GAAP)"],["Operating net income available to common stockholders (millions)","","$","568.6","","","$","494.9"],["Operating net income per diluted common share","","1.57","","","1.40"],["Average diluted common shares outstanding (thousands)","","362,898","","","354,052"],["Significant items impacting earnings (1) (millions)"],["Pre-tax merger-related expenses","","$","(2.2)","","","$","(45.3)"],["After-tax impact of merger-related expenses","","(1.8)","","","(35.8)"],["Pre-tax provision expense related to acquisitions","","\u2014","","","(28.5)"],["After-tax impact of provision expense related to acquisitions","","\u2014","","","(22.5)"],["Pre-tax branch consolidation costs","","\u2014","","","(7.0)"],["After-tax impact of branch consolidation costs","","\u2014","","","(5.5)"],["Pre-tax FDIC assessment","","(29.9)","","","\u2014"],["After-tax impact of FDIC assessment","","(23.7)","","","\u2014"],["Pre-tax loss on securities restructuring","","(67.4)","","","\u2014"],["After-tax loss on securities restructuring","","(53.2)","","","\u2014"],["Pre-tax valuation allowance on auto loans held-for-sale","","(16.7)","","","\u2014"],["After-tax valuation allowance on auto loans held-for-sale","","(13.2)","","","\u2014"],["Total significant items pre-tax","","$","(116.2)","","","$","(80.8)"],["Total significant items after-tax","","$","(91.9)","","","$","(63.8)"],["Capital measures"],["Common equity tier 1","","10.04","%","","9.82","%"],["Tangible common equity to tangible assets (period-end) (non-GAAP)","","7.79","","","7.24"],["Tangible book value per common share (period-end) (non-GAAP)","","$","9.47","","","$","8.27"],["(1) Favorable (unfavorable) impact on earnings"]] [[/GREPCENT_TABLE]] 50 Table of Contents      Industry Developments BANKING INDUSTRY DISRUPTION During the second week of March 2023, Silicon Valley Bank failed and was taken over by federal regulators. The size of the bank, being over $200 billion in assets, made it the second largest U.S. bank to ever fail. Subsequently, that week, Signature Bank with assets over $100 billion, was also closed by federal regulators. On May 1, 2023, it was announced that First Republic Bank was another bank closed by federal regulators. While these failures were idiosyncratic in nature, these events called into question the stability of the entire banking sector and sparked customer fears of potential loss of deposit balances exceeding the FDIC's $250,000 insurance limit. While the high-profile bank failures had a diminishing effect on public confidence of the banking system, the federal government took mitigating action. To strengthen public confidence, the federal government announced that all depositors of Silicon Valley Bank and Signature Bank would be protected with any losses to the DIF recovered by a special assessment on banks. We recognized the special assessment of $29.9 million in non-interest expense in the fourth quarter of 2023. In addition to those actions, the FRB made available additional funding to eligible depository institutions to help assure banks the ability to meet the needs of all their depositors. This action bolstered the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. The additional funding was made available through the creation of a new Bank Term Funding Program (BTFP), offering loans of up to one year in length to banks, savings associations, credit unions and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities and other qualifying assets as collateral. These assets are valued at par. The BTFP is an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress. Advances can be requested under the BTFP until March 11, 2024. As of December 31, 2023, we have not participated in this program. Additionally, our total deposit balances have remained stable as a result of our granular deposit base with our average customer deposit account balance at approximately $30,000 (below the peer median) and our median consumer deposit account balance at approximately $5,600 as of December 31, 2023. FDIC-insured or collateralized deposits represented approximately 78% of our total deposits at December 31, 2023, which was higher than our peer median (based on peer data as of September 30, 2023) and we had ample liquidity to fund up to an estimated 146% of our uninsured and non-collateralized deposits. RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net income available to common stockholders was $476.8 million or $1.31 per diluted common share, compared to net income available to common stockholders of $431.1 million or $1.22 per diluted common share. Operating earnings per diluted common share (non-GAAP) was $1.57 compared to $1.40. The results for 2023 included net interest income of $1.3 billion, a 17.6% increase, driven by strong earning asset growth and a higher interest rate environment, provision for credit losses of $71.8 million, including $31.9 million in provision for the previously disclosed commercial loan fully charged-off during the third quarter of 2023 due to alleged fraud, the sale of $648.7 million in AFS investment securities resulting in a realized loss (pre-tax) of $67.4 million, $29.9 million of FDIC special assessment expense, a negative valuation allowance of $16.7 million (pre-tax) on auto loans held-for-sale and $2.2 million of merger-related expenses. In comparison, the results for 2022 included provision for credit losses of $64.2 million including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions, the impact of $7.0 million of branch consolidation expenses and $45.3 million of merger-related expenses. 51 Table of Contents      The major categories of the Consolidated Statements of Income and their respective impact to the increase (decrease) in net income are presented in the following table: TABLE 2 [[GREPCENT_TABLE]] [["","Year Ended December 31","","$ Change","","% Change"],["(in thousands, except per share data)","2023","","2022"],["Net interest income","$","1,316,504","","","$","1,119,780","","","$","196,724","","","17.6","%"],["Provision for credit losses","71,754","","","64,206","","","7,548","","","11.8"],["Non-interest income","254,332","","","323,553","","","(69,221)","","","(21.4)"],["Non-interest expense","915,436","","","826,392","","","89,044","","","10.8"],["Income taxes","98,795","","","113,626","","","(14,831)","","","(13.1)"],["Net income","484,851","","","439,109","","","45,742","","","10.4"],["Less: Preferred stock dividends","8,041","","","8,041","","","\u2014","","","\u2014"],["Net income available to common stockholders","$","476,810","","","$","431,068","","","$","45,742","","","10.6","%"],["Earnings per common share \u2013 Basic","$","1.32","","","$","1.23","","","$","0.09","","","7.3","%"],["Earnings per common share \u2013 Diluted","1.31","","","1.22","","","0.09","","","7.4"],["Cash dividends per common share","0.48","","","0.48","","","\u2014","","","\u2014"]] [[/GREPCENT_TABLE]] The following table presents selected financial ratios and other relevant data used to analyze our performance: TABLE 3 [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["Return on average equity","8.29","%","","8.02","%"],["Return on average tangible common equity (1)","15.45","","","15.31"],["Return on average assets","1.09","","","1.05"],["Return on average tangible assets (1)","1.19","","","1.14"],["Book value per common share","$","16.56","","","$","15.39"],["Tangible book value per common share (1)","9.47","","","8.27"],["Equity to assets","13.11","%","","12.93","%"],["Average equity to average assets","13.12","","","13.05"],["Common equity to assets","12.88","","","12.68"],["Tangible equity to tangible assets (1)","8.03","","","7.50"],["Tangible common equity to tangible assets (1)","7.79","","","7.24"],["Common equity tier 1 capital ratio","10.04","","","9.82"],["Dividend payout ratio","36.51","","","39.54"]] [[/GREPCENT_TABLE]] (1) Non-GAAP 52 Table of Contents      The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities: TABLE 4 [[GREPCENT_TABLE]] [["","Year Ended December 31"],["","2023","","2022","","2021"],["(dollars in thousands)","Average Balance","","Interest Income/ Expense","","Yield/ Rate","","Average Balance","","Interest Income/ Expense","","Yield/ Rate","","Average Balance","","Interest Income/ Expense","","Yield/ Rate"],["Assets"],["Interest-earning assets:"],["Interest-bearing deposits with banks","$","1,053,176","","","$","40,860","","","3.88","%","","$","2,174,415","","","$","24,005","","","1.10","%","","$","2,723,493","","","$","3,732","","","0.14","%"],["Federal funds sold","\u2014","","","\u2014","","","\u2014","","","500","","","29","","","5.81","","","\u2014","","","\u2014","","","\u2014"],["Taxable investment securities (1)","6,099,052","","","148,374","","","2.43","","","6,126,544","","","115,956","","","1.89","","","5,131,473","","","85,633","","","1.67"],["Tax-exempt investment securities (1) (2)","1,052,416","","","36,476","","","3.46","","","1,010,819","","","34,508","","","3.41","","","1,091,130","","","37,408","","","3.43"],["Loans held for sale","131,985","","","9,496","","","7.19","","","189,360","","","8,151","","","4.30","","","227,181","","","8,276","","","3.64"],["Loans and leases (2) (3)","31,372,574","","","1,749,786","","","5.58","","","27,829,166","","","1,113,593","","","4.00","","","25,075,559","","","880,609","","","3.51"],["Total interest-earning assets (2)","39,709,203","","","1,984,992","","","5.00","","","37,330,804","","","1,296,242","","","3.47","","","34,248,836","","","1,015,658","","","2.97"],["Cash and due from banks","435,271","","","","","","","429,741","","","","","","","386,648"],["Allowance for credit losses","(409,342)","","","","","","","(377,252)","","","","","","","(363,462)"],["Premises and equipment","456,844","","","","","","","405,023","","","","","","","338,644"],["Other assets","4,417,627","","","","","","","4,166,392","","","","","","","3,992,426"],["Total assets","$","44,609,603","","","","","","","$","41,954,708","","","","","","","$","38,603,092"],["Liabilities"],["Interest-bearing liabilities:"],["Deposits:"],["Interest-bearing demand","$","14,296,571","","","283,914","","","1.99","","","$","14,951,905","","","78,599","","","0.53","","","$","13,866,846","","","18,676","","","0.13"],["Savings","3,766,920","","","37,338","","","0.99","","","3,976,285","","","8,512","","","0.21","","","3,442,809","","","664","","","0.02"],["Certificates and other time","5,176,674","","","173,680","","","3.36","","","3,004,482","","","21,410","","","0.71","","","3,208,586","","","27,875","","","0.87"],["Total interest-bearing deposits","23,240,165","","","494,932","","","2.13","","","21,932,672","","","108,521","","","0.49","","","20,518,241","","","47,215","","","0.23"],["Short-term borrowings","2,075,751","","","77,883","","","3.75","","","1,427,361","","","24,535","","","1.72","","","1,660,070","","","26,675","","","1.61"],["Long-term borrowings","1,685,554","","","83,332","","","4.94","","","836,154","","","32,118","","","3.84","","","924,090","","","24,344","","","2.63"],["Total interest-bearing liabilities","27,001,470","","","656,147","","","2.43","","","24,196,187","","","165,174","","","0.68","","","23,102,401","","","98,234","","","0.43"],["Non-interest-bearing demand","10,900,280","","","","","","","11,639,499","","","","","","","10,090,117"],["Total deposits and borrowings","37,901,750","","","","","1.73","","","35,835,686","","","","","0.46","","","33,192,518","","","","","0.30"],["Other liabilities","856,771","","","","","","","643,179","","","","","","","377,386"],["Total liabilities","38,758,521","","","","","","","36,478,865","","","","","","","33,569,904"],["Stockholders\u2019 equity","5,851,082","","","","","","","5,475,843","","","","","","","5,033,188"],["Total liabilities and stockholders\u2019 equity","$","44,609,603","","","","","","","$","41,954,708","","","","","","","$","38,603,092"],["Net interest-earning assets","$","12,707,733","","","","","","","$","13,134,617","","","","","","","$","11,146,435"],["Net interest income (FTE) (2)","","","1,328,845","","","","","","","1,131,068","","","","","","","917,424"],["Tax-equivalent adjustment","","","(12,341)","","","","","","","(11,288)","","","","","","","(10,948)"],["Net interest income","","","$","1,316,504","","","","","","","$","1,119,780","","","","","","","$","906,476"],["Net interest spread","","","","","2.57","%","","","","","","2.79","%","","","","","","2.54","%"],["Net interest margin (2)","","","","","3.35","%","","","","","","3.03","%","","","","","","2.68","%"]] [[/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 (non-GAAP). We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. (3)Average loans and leases consist of average total loans, including non-accrual loans, less average unearned income. 53 Table of Contents      Net Interest Income Net interest income on an FTE basis (non-GAAP) of $1.3 billion increased $197.8 million, or 17.5%, from $1.1 billion as the higher interest rate environment benefited earning asset yields given the asset sensitive positioning of the balance sheet and higher yields on new loan originations, which was partially offset by the higher cost of interest-bearing deposits given that customer preferences are migrating toward higher yielding deposit products and the current competitive banking industry. Average interest-earning assets of $39.7 billion increased $2.4 billion, or 6.4%, primarily driven by an increase of $3.5 billion in average loans and leases which included organic loan origination activity and acquired Union loans offset by a decline in interest-bearing deposits with banks. Average interest-bearing liabilities of $27.0 billion increased $2.8 billion, or 11.6%, driven by an increase of $1.3 billion in average interest-bearing deposits which included organic growth in new and existing customer relationships and acquired Union deposits, and an increase in average borrowings of $1.5 billion. Our net interest margin FTE (non-GAAP) was 3.35%, compared to 3.03%, as the yield on earning assets increased 153 basis points to 5.00%, reflecting variable-rate loans that repriced upwards in 2023, as well as higher yields on new loan originations, investment securities and interest-bearing deposits with banks due to the impact of the higher interest rate environment. The total cost of funds increased 127 basis points to 1.73%, primarily due to a 164 basis point increase in interest-bearing deposit costs. The rates paid on short-term and long-term borrowings increased 203 and 110 basis points, respectively, due to the higher interest rate environment. Additionally, average non-interest-bearing deposits decreased $739.2 million, or 6.4% as customers shifted balances into higher yielding deposit products. The following table provides certain information regarding changes in net interest income on an FTE basis (non-GAAP) attributable to changes in the average volumes and yields earned on interest-earning assets and the average volume and rates paid for interest-bearing liabilities for the periods indicated: TABLE 5 [[GREPCENT_TABLE]] [["","2023 vs 2022","","2022 vs 2021"],["(in thousands)","Volume","","Rate","","Net","","Volume","","Rate","","Net"],["Interest Income (1)"],["Interest-bearing deposits with banks","$","(12,302)","","","$","29,157","","","$","16,855","","","$","(752)","","","$","21,025","","","$","20,273"],["Federal funds sold","(15)","","","(14)","","","(29)","","","15","","","14","","","29"],["Securities (2)","1,914","","","32,472","","","34,386","","","14,637","","","12,786","","","27,423"],["Loans held for sale","(2,672)","","","4,017","","","1,345","","","(1,004)","","","879","","","(125)"],["Loans and leases (2)","150,443","","","485,750","","","636,193","","","88,865","","","144,119","","","232,984"],["Total interest income (2)","137,368","","","551,382","","","688,750","","","101,761","","","178,823","","","280,584"],["Interest Expense (1)"],["Deposits:"],["Interest-bearing demand","(506)","","","205,821","","","205,315","","","1,021","","","58,902","","","59,923"],["Savings","3,537","","","25,289","","","28,826","","","91","","","7,757","","","7,848"],["Certificates and other time","47,577","","","104,693","","","152,270","","","(1,192)","","","(5,273)","","","(6,465)"],["Short-term borrowings","20,955","","","32,393","","","53,348","","","(3,747)","","","1,607","","","(2,140)"],["Long-term borrowings","39,254","","","11,960","","","51,214","","","(2,325)","","","10,099","","","7,774"],["Total interest expense","110,817","","","380,156","","","490,973","","","(6,152)","","","73,092","","","66,940"],["Net change (2)","$","26,551","","","$","171,226","","","$","197,777","","","$","107,913","","","$","105,731","","","$","213,644"]] [[/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 $2.0 billion for 2023, increased $688.8 million or 53.1% from 2022, resulting from the interest rate increases by the FOMC and an increase in interest-earning assets of $2.4 billion. The increase in earning assets was primarily driven by a $3.5 billion, or 12.7%, increase in average loans, partially offset by a decrease of $1.1 billion, or 51.6%, in average interest-bearing deposits with banks. Growth in total average commercial loans included $1.0 billion, or 9.3%, in commercial real estate loans and an increase of $793.7 million, or 12.2%, in commercial and industrial loans driven by a combination of organic loan origination activity led by the Cleveland, Pittsburgh and South Carolina markets as well as 54 Table of Contents      adding the acquired Union loans. Average consumer loans increased $1.6 billion, or 16.5%, with an increase in residential mortgage loans of $1.4 billion, or 31.3%, reflecting adjustable-rate mortgages held in portfolio on the balance sheet and the continued success of the Physicians First mortgage program, which is a program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals. Additionally, indirect installment loans increased $134.8 million, or 9.8%, and direct home equity installment loans increased $68.6 million, or 2.6%, driven by organic loan origination activity throughout 2023. Additionally, the net increase in investment securities interest income was a result of replacing maturing securities with higher yielding securities, as the average total securities portfolio yield increased 48 basis points. Interest expense of $656.1 million for 2023 increased $491.0 million, or 297.2%, from 2022 primarily due to the higher interest rate environment and an increase in average interest-bearing deposits. The growth in average deposits reflected solid organic growth in new and existing customer relationships and the additions from the Union acquisition. Average interest-bearing deposits increased $1.3 billion, or 6.0%, which reflects the benefit of solid organic growth in customer relationships and the acquired Union deposits. Average time deposits increased $2.2 billion, or 72.3%, as customer preferences had shifted given interest rate increases. Average short-term borrowings increased $648.4 million, or 45.4%, primarily due to an increase in short-term FHLB borrowings of $629.2 million. Average long-term borrowings increased $849.4 million, or 101.6%, primarily due to an increase of $857.0 million in long-term FHLB borrowings, as we have maintained additional liquidity following the banking industry disruption in early 2023. Additionally, senior debt decreased $29.8 million resulting from the issuance of $350 million in 5.150% fixed-rate senior notes during August 2022, partially offset by the maturity of $300 million in 2.20% fixed-rate senior notes in February 2023. The rate paid on interest-bearing liabilities increased 175 basis points to 2.43% for 2023, compared to 2022, as the cost of interest-bearing deposits increased 164 basis points from 0.49% to 2.13%. These increases were primarily due to increased deposit competition and market trends resulting from the interest rate actions taken by the FOMC and the industry disruption in early 2023, combined with the issuance of senior debt in August 2022, partially offset by the maturity in February of 2023. Provision for Credit Losses Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the provision for credit loss expense and net charge-offs for the years 2021 through 2023: TABLE 6 [[GREPCENT_TABLE]] [["","","","2023 vs 2022","","","","2022 vs 2021"],["(dollars in thousands)","2023","","2022","","$ Change","","% Change","","2021","","$ Change","","% Change"],["Provision for credit losses on loans and leases","$","71,607","","","$","61,800","","","$","9,807","","","16","%","","$","(4,853)","","","$","66,653","","","1,373","%"],["Provision for unfunded loan commitments","99","","","2,230","","","(2,131)","","","(96)","","","5,472","","","(3,242)","","","(59)"],["Total provision for credit losses on loans and leases","71,706","","","64,030","","","7,676","","","12","","","619","","","63,411","","","10,244"],["Provision for securities","48","","","176","","","(128)","","","(73)","","","10","","","166","","","1,660"],["Total provision for credit losses","$","71,754","","","$","64,206","","","$","7,548","","","12","%","","$","629","","","$","63,577","","","10,108","%"],["Net loan charge-offs","$","67,755","","","$","16,151","","","$","51,604","","","320","%","","$","13,949","","","$","2,202","","","16","%"],["Net loan charge-offs / total average loans and leases","0.22","%","","0.06","%","","","","","","0.06","%"]] [[/GREPCENT_TABLE]] Provision for credit losses of $71.7 million during 2023 increased $7.5 million from 2022. The provision for credit losses in 2022 included $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions. The 2023 provision for credit losses was primarily due to loan growth, normal charge-off activity and $31.9 million in provision for the previously disclosed commercial loan that was fully charged-off during the third quarter of 2023 due to alleged fraud. Our non-performing loan coverage position remains strong at 378%. Net charge-offs of $67.7 million for 2023 increased $51.6 million from 2022. Excluding the previously mentioned charge-off, net charge-offs would have been $35.9 million, or 0.11% of total average loans (non-GAAP), remaining at historically low levels. The ACL was $405.6 million, an increase of $3.9 million, with the ratio of the ACL to total loans and leases decreasing 8 basis points to 1.25%, reflecting strong loan growth and the 55 Table of Contents      previously mentioned charge-off activity. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses section of this MD&A. Non-Interest Income The breakdown of non-interest income for the years 2021 through 2023 is presented in the following table: TABLE 7 [[GREPCENT_TABLE]] [["","","","","","2023 vs 2022","","","","","2022 vs 2021"],["(dollars in thousands)","2023","","2022","","$ Change","","% Change","","","2021","","$ Change","","% Change"],["Service charges","$","81,892","","","$","86,895","","","$","(5,003)","","","(5.8)","%","","","$","73,779","","","$","13,116","","","17.8","%"],["Interchange and card transaction fees","52,752","","","50,803","","","1,949","","","3.8","","","","47,956","","","2,847","","","5.9"],["Trust services","42,490","","","39,033","","","3,457","","","8.9","","","","37,370","","","1,663","","","4.5"],["Insurance commissions and fees","23,104","","","24,253","","","(1,149)","","","(4.7)","","","","25,522","","","(1,269)","","","(5.0)"],["Securities commissions and fees","27,734","","","23,715","","","4,019","","","16.9","","","","22,207","","","1,508","","","6.8"],["Capital markets income","27,103","","","35,295","","","(8,192)","","","(23.2)","","","","36,812","","","(1,517)","","","(4.1)"],["Mortgage banking operations","20,692","","","20,646","","","46","","","0.2","","","","37,355","","","(16,709)","","","(44.7)"],["Dividends on non-marketable equity securities","21,262","","","11,953","","","9,309","","","77.9","","","","8,588","","","3,365","","","39.2"],["Bank owned life insurance","11,945","","","11,942","","","3","","","\u2014","","","","14,866","","","(2,924)","","","(19.7)"],["Net securities gains (losses)","(67,432)","","","48","","","(67,480)","","","n/m","","","193","","","(145)","","","(75.1)"],["Other","12,790","","","18,970","","","(6,180)","","","(32.6)","","","","25,771","","","(6,801)","","","(26.4)"],["Total non-interest income","$","254,332","","","$","323,553","","","$","(69,221)","","","(21.4)","%","","","$","330,419","","","$","(6,866)","","","(2.1)","%"],["n/m - not meaningful"]] [[/GREPCENT_TABLE]] Total non-interest income of $254.3 million for 2023 decreased $69.2 million, or 21.4%, from $323.6 million in 2022. Excluding significant items totaling $67.4 million in 2023, operating non-interest income (non-GAAP) decreased $1.9 million, or 0.6%. The 2023 compared to 2022 variances in significant individual non-interest income items are further explained in the following paragraphs. Service charges of $81.9 million decreased $5.0 million, or 5.8%, from $86.9 million, with strong treasury management services and higher customer activity largely offsetting the impact of overdraft practice changes that we implemented in the first quarter of 2023. Trust services of $42.5 million increased $3.5 million, or 8.9%, from the same period of 2022, primarily driven by strong organic revenue production, as well as the market value of assets under management increasing $789.8 million, or 10.1%, to $8.6 billion at December 31, 2023 given overall market conditions. Insurance commissions and fees of $23.1 million decreased $1.1 million, or 4.7%, from $24.3 million, with the reduction primarily driven by lower title insurance fees resulting from slowing mortgage demand in the current interest rate environment. Securities commissions and fees of $27.7 million increased $4.0 million, or 16.9%, from $23.7 million, due to increased annuity sales activity, as the increasing interest rate environment provided attractive annuity rates, combined with revenue contributions across the geographic footprint, most notably in the Pittsburgh and Carolina regions. Capital markets income of $27.1 million decreased $8.2 million, or 23.2%, from $35.3 million, reflecting increased contributions from international banking and debt capital markets offset by decreases in swap fees and syndications as commercial customer transactions have slowed in this macroeconomic environment. Mortgage banking operations income of $20.7 million increased slightly by 0.2%, from $20.6 million. During 2023, we sold $1.0 billion of originated residential mortgage loans, a decrease of 10.9% compared to $1.1 billion for 2022. Rate volatility compressed gain on sale margins which were mostly offset by growing mortgage held for sale pipelines. Full year mortgage originations increased 4.4% from 2022. Net servicing income increased $3.5 million, or 60.6%, due to low prepayment speeds with rising rates and a larger servicing book. An impairment charge increased $2.7 million in 2023 from 2022. 56 Table of Contents      Dividends on non-marketable equity securities of $21.3 million increased $9.3 million, or 77.9%, from $12.0 million, reflecting higher FHLB dividends due to additional borrowings and an increase in the average dividend rate. We had net securities losses of $67.4 million primarily due to the sale of $648.7 million of AFS securities in the fourth quarter of 2023 as part of a balance sheet optimization strategy. Other non-interest income was $12.8 million and $19.0 million for 2023 and 2022, respectively, due to other miscellaneous income fluctuations and from the decline in Small Business Investment Company (SBIC) funds income, reflecting normal fluctuations based on the performance of the underlying portfolio companies. The following table presents non-interest income excluding significant items impacting earnings: TABLE 8 [[GREPCENT_TABLE]] [["(dollars in thousands)","2023","","2022","","Change","","Change"],["Total non-interest income, as reported","$","254,332","","","$","323,553","","","$","(69,221)","","","(21.4)","%"],["Significant items:"],["Loss on securities restructuring","67,354","","","\u2014"],["Total non-interest income, excluding significant items (1)","$","321,686","","","$","323,553","","","$","(1,867)","","","(0.6)","%"],["(1) Non-GAAP"]] [[/GREPCENT_TABLE]] Non-Interest Expense The breakdown of non-interest expense for the years 2021 through 2023 is presented in the following table: TABLE 9 [[GREPCENT_TABLE]] [["","","","","","2023 vs 2022","","","","","2022 vs 2021"],["(dollars in thousands)","2023","","2022","","$ Change","","% Change","","","2021","","$ Change","","% Change"],["Salaries and employee benefits","$","461,677","","","$","426,237","","","$","35,440","","","8.3","%","","","$","418,328","","","$","7,909","","","1.9","%"],["Net occupancy","70,802","","","68,189","","","2,613","","","3.8","","","","58,368","","","9,821","","","16.8"],["Equipment","90,818","","","76,261","","","14,557","","","19.1","","","","69,973","","","6,288","","","9.0"],["Amortization of intangibles","20,116","","","13,868","","","6,248","","","45.1","","","","12,117","","","1,751","","","14.5"],["Outside services","83,885","","","72,961","","","10,924","","","15.0","","","","70,553","","","2,408","","","3.4"],["Marketing","17,316","","","15,674","","","1,642","","","10.5","","","","14,320","","","1,354","","","9.5"],["FDIC insurance","60,815","","","20,412","","","40,403","","","197.9","","","","17,881","","","2,531","","","14.2"],["Bank shares and franchise taxes","13,609","","","13,954","","","(345)","","","(2.5)","","","","12,629","","","1,325","","","10.5"],["Merger-related","2,215","","","45,259","","","(43,044)","","","(95.1)","","","","1,764","","","43,495","","","2,466"],["Other","94,183","","","73,577","","","20,606","","","28.0","","","","57,235","","","16,342","","","28.6"],["Total non-interest expense","$","915,436","","","$","826,392","","","$","89,044","","","10.8","%","","","$","733,168","","","$","93,224","","","12.7","%"]] [[/GREPCENT_TABLE]] Total non-interest expense of $915.4 million for 2023 increased $89.0 million, or 10.8%, from $826.4 million in 2022. Excluding significant items totaling $48.8 million in 2023 and $52.3 million in 2022, operating non-interest expense (non-GAAP) increased $92.5 million, or 11.9%. The 2023 compared to 2022 variances in significant individual non-interest expense items are further explained in the following paragraphs. Salaries and employee benefits of $461.7 million increased $35.4 million, or 8.3%, from $426.2 million, related to normal merit increases, production-related commissions and the addition of the acquired Union expense base. Our total full-time equivalent employees were 4,123 and 4,018 at December 31, 2023 and 2022, respectively. Equipment expense of $161.6 million increased $17.2 million, or 11.9%, from $144.5 million, primarily from continued technology-related investments, the acquired Union expense base and the impact of the inflationary macroeconomic environment. 57 Table of Contents      Amortization of intangibles of $20.1 million increased $6.2 million, or 45.1%, from the same period of 2022, primarily due to additional core deposit intangibles added as a result of our Union acquisition in December 2022. Outside services increased $10.9 million, or 15.0%, with higher volume-related technology and third-party costs, including the impact of the inflationary macroeconomic environment. FDIC insurance expense of $60.8 million increased $40.4 million, or 197.9%, primarily due to a $29.9 million FDIC special assessment to replenish the FDIC's DIF associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank, as well as the previously announced FDIC assessment rate increase which was effective in the first quarter of 2023. We recorded $2.2 million in merger-related costs in 2023 related to the Union acquisition compared to $45.3 million related to the Howard and Union acquisitions in 2022. Other non-interest expense was $94.2 million and $73.6 million for 2023 and 2022, respectively, with the increase primarily driven by a $16.7 million valuation allowance on auto loans held-for-sale in 2023, resulting from changes in interest rates from time of origination in conjunction with our balance sheet optimization strategy. We had $2.8 million in branch consolidation costs in 2022 in other non-interest expense. The following table presents non-interest expense excluding significant items impacting earnings: TABLE 10 [[GREPCENT_TABLE]] [["","","","","","$","","%"],["(dollars in thousands)","2023","","2022","","Change","","Change"],["Total non-interest expense, as reported","$","915,436","","","$","826,392","","","$","89,044","","","10.8","%"],["Significant items:"],["Branch consolidations","\u2014","","","(7,016)","","","7,016"],["Merger-related","(2,215)","","","(45,259)","","","43,044"],["FDIC special assessment","(29,938)","","","\u2014","","","(29,938)"],["Valuation allowance on auto loans held-for-sale","(16,687)","","","\u2014","","","(16,687)"],["Total non-interest expense, excluding significant items (1)","$","866,596","","","$","774,117","","","$","92,479","","","11.9","%"]] [[/GREPCENT_TABLE]] (1) Non-GAAP Income Taxes The following table presents information regarding income tax expense and certain tax rates: TABLE 11 [[GREPCENT_TABLE]] [["Year ended December 31","2023","","2022","","2021"],["(dollars in thousands)"],["Income tax expense","$","98,795","","","$","113,626","","","$","98,496"],["Effective tax rate","16.9","%","","20.6","%","","19.6","%"],["Statutory federal tax rate","21.0","","","21.0","","","21.0"]] [[/GREPCENT_TABLE]] Our income tax expense for 2023 decreased $14.8 million, or 13.1% from 2022. The effective tax rate was 16.9% for 2023, compared to 20.6% for 2022, primarily due to the recording of renewable energy investment tax credits in 2023, offset slightly by higher pre-tax earnings in 2023. Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from tax credits, tax-exempt income on investments and loans and income from BOLI. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Refer to the MD&A in our 2022 Annual Report on Form 10-K filed with the SEC on February 24, 2023 for a comparison of 2022 to 2021. 58 Table of Contents      FINANCIAL CONDITION The following table presents our condensed Consolidated Balance Sheets: TABLE 12 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","$ Change","","% Change"],["(dollars in millions)"],["Assets"],["Cash and cash equivalents","$","1,576","","","$","1,674","","","$","(98)","","","(5.9)","%"],["Securities","7,165","","","7,362","","","(197)","","","(2.7)"],["Loans held for sale","488","","","124","","","364","","","293.5"],["Loans and leases, net","31,917","","","29,853","","","2,064","","","6.9"],["Goodwill and other intangibles","2,546","","","2,566","","","(20)","","","(0.8)"],["Other assets","2,466","","","2,146","","","320","","","14.9"],["Total Assets","$","46,158","","","$","43,725","","","$","2,433","","","5.6","%"],["Liabilities and Stockholders\u2019 Equity"],["Deposits","$","34,711","","","$","34,770","","","$","(59)","","","(0.2)","%"],["Borrowings","4,477","","","2,465","","","2,012","","","81.6"],["Other liabilities","920","","","837","","","83","","","9.9"],["Total Liabilities","40,108","","","38,072","","","2,036","","","5.3"],["Stockholders\u2019 Equity","6,050","","","5,653","","","397","","","7.0"],["Total Liabilities and Stockholders\u2019 Equity","$","46,158","","","$","43,725","","","$","2,433","","","5.6","%"]] [[/GREPCENT_TABLE]] The increase in both assets and liabilities is primarily due to strong organic loan and borrowings growth. Lending Activity The loan and lease portfolio consists principally of loans and leases to individuals and small- and medium-sized businesses within our primary markets in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. 59 Table of Contents      Following is a summary of loans and leases: TABLE 13 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","$ Change","","% Change"],["(in millions)"],["Commercial real estate","$","12,305","","","$","11,526","","","$","779","","","6.8","%"],["Commercial and industrial","7,482","","","7,131","","","351","","","4.9"],["Commercial leases","599","","","519","","","80","","","15.4"],["Other","110","","","114","","","(4)","","","(3.5)"],["Total commercial loans and leases","20,496","","","19,290","","","1,206","","","6.3"],["Direct installment","2,741","","","2,784","","","(43)","","","(1.5)"],["Residential mortgages","6,640","","","5,297","","","1,343","","","25.4"],["Indirect installment","1,149","","","1,553","","","(404)","","","(26.0)"],["Consumer lines of credit","1,297","","","1,331","","","(34)","","","(2.6)"],["Total consumer loans","11,827","","","10,965","","","862","","","7.9"],["Total loans and leases","$","32,323","","","$","30,255","","","$","2,068","","","6.8","%"]] [[/GREPCENT_TABLE]] Total loans and leases increased $2.1 billion, or 6.8%, to $32.3 billion at December 31, 2023, compared to $30.3 billion at December 31, 2022, reflecting a commercial loans and leases increase of $1.2 billion or 6.3%, and an increase in consumer loans of $861.5 million or 7.9%. Our organic loan growth in 2023 was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint. As of December 31, 2023, 29.0% of the commercial real estate loans were owner-occupied, while the remaining 71.0% were non-owner-occupied, compared to 30.2% and 69.8%, respectively, as of December 31, 2022. As of December 31, 2023 and 2022, we had commercial construction loans of $2.1 billion and $1.7 billion at each respective date, representing 6.6% and 5.7% of total loans and leases, respectively. Additionally, as of December 31, 2023 and 2022, we had residential construction loans of $360.6 million and $379.4 million, respectively, representing 1.1% and 1.3% of total loans and leases, respectively. Our commercial real estate portfolio included $8.7 billion of non-owner occupied loans, of which 21.7% represented office space. Our top 25 non-owner occupied commercial real estate loans averaged approximately $31 million per exposure although the office space was comprised of mid-sized offices located outside of metropolitan business districts with 40% of the office portfolio averaging less than $5 million per exposure. Commercial and industrial loans are loans to businesses that are not secured by real estate where the borrower's leverage and cash flows from operations are the primary default risk drivers. The growth in the commercial and industrial loans category was led by activity in the Cleveland, Pittsburgh and North Carolina markets, while the growth in residential mortgages reflected growth in adjustable-rate mortgages and jumbo mortgages retained on the balance sheet and the continued success of our Physicians First mortgage program, which is a digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals. Within our primary lending footprint, certain industries are more predominant given the geographic location of these lending markets. 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, 2023 and 2022, there were no concentrations of loans relating to any industry in excess of 10% of total loans. The decrease in indirect installment loans is primarily due to the transfer of $355 million of indirect auto loans to held-for-sale in December 2023. The transfer resulted in a negative valuation allowance of $16.7 million (pre-tax) recognized in other non-interest expense due primarily to changes in interest rates from time of origination. The sale of these loans closed in the first quarter of 2024 with the proceeds used to repay borrowings that have a similar yield to the sold loans. Additional information relating to originated loans and loans acquired in business combinations is provided in Note 3, “Mergers and Acquisitions” and Note 6, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 60 Table of Contents      Following is a summary of the maturity distribution of loan categories with fixed and floating interest rates as of December 31, 2023: TABLE 14 [[GREPCENT_TABLE]] [["(in millions)","Within 1 Year","","1-5 Years","","Over 5 Years Through 15 years","","After 15 Years","","Total"],["Commercial real estate","$","1,796","","","$","5,405","","","$","4,514","","","$","590","","","$","12,305"],["Commercial and industrial","1,401","","","4,936","","","929","","","216","","","7,482"],["Commercial leases","39","","","333","","","223","","","4","","","599"],["Other","\u2014","","","103","","","7","","","\u2014","","","110"],["Total commercial loans and leases","3,236","","","10,777","","","5,673","","","810","","","20,496"],["Direct installment","14","","","201","","","1,557","","","969","","","2,741"],["Residential mortgages","11","","","62","","","369","","","6,198","","","6,640"],["Indirect installment","18","","","662","","","469","","","\u2014","","","1,149"],["Consumer lines of credit","92","","","36","","","253","","","916","","","1,297"],["Total consumer loans","135","","","961","","","2,648","","","8,083","","","11,827"],["Total","$","3,371","","","$","11,738","","","$","8,321","","","$","8,893","","","$","32,323"],["Loans with maturities over one year:"],["Fixed","","","$","3,795","","","$","3,936","","","$","4,512","","","$","12,243"],["Floating","","","7,943","","","4,385","","","4,381","","","16,709"]] [[/GREPCENT_TABLE]] For additional information relating to lending activity, see Note 6, “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. 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. Non-accrual loans of $107.2 million at December 31, 2023 decreased $6.2 million, or 5.5%, compared to December 31, 2022, with both periods remaining at relatively low levels. 61 Table of Contents      Following is a summary of non-performing loans and leases, by class, OREO and non-performing assets: TABLE 15 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","$ Change","","% Change"],["(in millions)"],["Commercial real estate","$","42","","","$","39","","","$","3","","","7.7","%"],["Commercial and industrial","39","","","44","","","(5)","","","(11.4)"],["Commercial leases","3","","","1","","","2","","","200.0"],["Total commercial loans and leases","84","","","84","","","\u2014","","","\u2014"],["Direct installment","5","","","7","","","(2)","","","(28.6)"],["Residential mortgages","10","","","14","","","(4)","","","(28.6)"],["Indirect installment","2","","","1","","","1","","","100.0"],["Consumer lines of credit","6","","","7","","","(1)","","","(14.3)"],["Total consumer loans","23","","","29","","","(6)","","","(20.7)"],["Total non-performing loans and leases","$","107","","","$","113","","","(6)","","","(5.3)"],["Other real estate owned","3","","","6","","","(3)","","","(50.0)"],["Total non-performing assets","$","110","","","$","119","","","$","(9)","","","(7.6)","%"],["Non-performing loans / total loans and leases","0.33","%","","0.37","%"],["Non-performing loans plus OREO / total loans and leases plus OREO","0.34","","","0.39"],["Non-performing assets / total assets","0.24","","","0.27"]] [[/GREPCENT_TABLE]] Following is a summary of loans and leases 90 days or more past due on which interest accruals continue: TABLE 16 [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(dollars in millions)"],["Total loans and leases 90 days or more past due","$","12","","","$","12"],["As a percentage of total loans and leases","0.04","%","","0.04","%"]] [[/GREPCENT_TABLE]] Following is a table showing the amounts of contractual interest income and actual interest income related to non-performing loans: TABLE 17 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","2021"],["(in millions)"],["Gross interest income:"],["Per contractual terms","$","14","","","$","11","","","$","9"],["Recorded during the year","\u2014","","","\u2014","","","\u2014"]] [[/GREPCENT_TABLE]] Loan Modifications During the period, there are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. These modifications result from loss mitigation activities and could include a term extension, interest rate reduction, principal forgiveness, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. For additional information relating to loan modifications, see Note 6, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 62 Table of Contents      Prior to the adoption of ASU 2022-02, below is the table relating to the TDR disclosures as of December 31, 2022. Following is a summary of accruing and non-accrual TDRs, by class: TABLE 18 [[GREPCENT_TABLE]] [["(in millions)","Accruing","","Non-Accrual","","Total"],["December 31, 2022"],["Commercial real estate","$","5","","","$","15","","","$","20"],["Commercial and industrial","\u2014","","","1","","","1"],["Total commercial loans","5","","","16","","","21"],["Direct installment","19","","","3","","","22"],["Residential mortgages","33","","","4","","","37"],["Consumer lines of credit","6","","","1","","","7"],["Total consumer loans","58","","","8","","","66"],["Total TDRs","$","63","","","$","24","","","$","87"]] [[/GREPCENT_TABLE]] Allowance for Credit Losses on Loans and Leases The CECL model takes into consideration the expected credit losses over the life of the loan at the time the loan is originated. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation: •a third-party macroeconomic forecast scenario; •a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and •the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period. At December 31, 2023 and 2022, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at December 31, 2023, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which increases 5.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 0.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 4.0% in 2024 and 2.9% in 2025 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below historical through-the-cycle period. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2022 included, but were not limited to: (i) the purchase only Housing Price Index, which declines 3.7% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which declines 0.9% over our R&S forecast period, (iii) S&P Volatility, which decreases 41.0% in 2023 and 8.1% in 2024 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below historical levels. 63 Table of Contents      Following is a summary of certain data related to the ACL and loans and leases: TABLE 19 [[GREPCENT_TABLE]] [["","Net Loan Charge-Offs (Recoveries)","","Net Loan Charge-Offs to Average Loans","","ACL at"],["Year Ended December 31","2023","","2022","","2023","","2022","","2023"],["(dollars in millions)"],["Commercial real estate","$","8.0","","","$","8.4","","","0.03","%","","0.03","%","","$","166.6"],["Commercial and industrial","47.4","","","1.5","","","0.15","","","0.01","","","87.8"],["Commercial leases","\u2014","","","0.1","","","\u2014","","","\u2014","","","21.2"],["Other commercial","3.5","","","2.4","","","0.01","","","0.01","","","3.7"],["Direct installment","\u2014","","","(0.1)","","","\u2014","","","\u2014","","","33.8"],["Residential mortgages","0.2","","","0.1","","","\u2014","","","\u2014","","","70.5"],["Indirect installment","8.4","","","3.9","","","0.03","","","0.01","","","12.8"],["Consumer lines of credit","0.2","","","(0.1)","","","\u2014","","","\u2014","","","9.2"],["Total net loan charge-offs on loans and leases; net loan charge-offs/average loans","$","67.7","","","$","16.2","","","0.22","%","","0.06","%","","$","405.6"],["Allowance for credit losses/total loans and leases","","","","","1.25","%","","1.33","%"],["Allowance for credit losses/non-performing loans","","","","","378.46","%","","354.26","%"]] [[/GREPCENT_TABLE]] Following is a summary of changes in the AULC by portfolio segment: TABLE 20 [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022","","2021"],["(in millions)"],["Balance at beginning of period","$","21.4","","","$","19.1","","","$","13.6"],["Provision for unfunded loan commitments and letters of credit:"],["Commercial portfolio","0.3","","","2.3","","","5.5"],["Consumer portfolio","(0.2)","","","\u2014","","","\u2014"],["Balance at end of period","$","21.5","","","$","21.4","","","$","19.1"]] [[/GREPCENT_TABLE]] The ACL on loans and leases of $405.6 million at December 31, 2023 increased $3.9 million, or 1.0%, from December 31, 2022, primarily due to loan growth, offset by charge-off activity and improvements in classified and non-performing loans. Our ending ACL coverage ratio at December 31, 2023 was 1.25%, compared to 1.33% at December 31, 2022. Total provision for credit losses during 2023 was $71.8 million, compared to $64.2 million for the same period in 2022, with the year-ago period including $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions. The year-over-year increase was driven primarily by loan growth and charge-off activity and $31.9 million in provision for the previously disclosed commercial loan that was downgraded to non-performing status in the second quarter of 2023 and was fully charged-off during the third quarter of 2023 due to alleged fraud. Net charge-offs were $67.7 million, or 0.22%, of total average loans, compared to $16.2 million, or 0.06%, in 2022. Excluding the previously mentioned commercial charge-off, net charge-offs would have been $35.9 million, or 0.11% of total average loans (non-GAAP), remaining at historically low levels. The ACL as a percentage of non-performing loans for the total portfolio increased from 354% as of December 31, 2022 to 378% as of December 31, 2023. The AULC was $21.5 million at December 31, 2023 and included provision expense for unfunded loan commitments and letters of credit of $0.1 million for the year ended December 31, 2023. Comparatively, the AULC was $21.4 million at December 31, 2022 and included provision expense for unfunded loan commitments and letters of credit of $2.3 million for the year ended December 31, 2022. 64 Table of Contents      Following is a summary of the allocation of the ACL and the percentage of loans in each category to total loans: TABLE 21 [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(dollars in millions)","Allowance","","% of Loans","","Allowance","","% of Loans"],["Commercial real estate","$","167","","","38","%","","$","162","","","38","%"],["Commercial and industrial","88","","","23","","","102","","","24"],["Commercial leases","21","","","2","","","14","","","2"],["Other","4","","","\u2014","","","4","","","\u2014"],["Commercial loans and leases","279","","","63","","","282","","","64"],["Direct installment","34","","","8","","","36","","","9"],["Residential mortgages","71","","","21","","","56","","","18"],["Indirect installment","13","","","4","","","17","","","5"],["Consumer lines of credit","9","","","4","","","11","","","4"],["Consumer loans","126","","","37","","","120","","","36"],["Total","$","406","","","100","%","","$","402","","","100","%"]] [[/GREPCENT_TABLE]] 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 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, 2023, securities HTM had a CECL ACL of $0.28 million. As of December 31, 2023, debt securities classified as AFS and HTM totaled $3.3 billion and $3.9 billion, respectively. During 2023, debt securities AFS decreased by $21.7 million and debt securities HTM decreased by $175.3 million from December 31, 2022. AFS securities comprised 45% of the total securities portfolio and HTM securities comprised 55% of the total securities portfolio. As of December 31, 2023 and 2022, we did not hold any trading securities. 65 Table of Contents      The following table indicates the respective contractual maturities and weighted-average yields of debt securities HTM, shown at amortized cost, as of December 31, 2023: TABLE 22 [[GREPCENT_TABLE]] [["(dollars in millions)","Amount","","Weighted Average Yield"],["Obligations of U.S. Treasury:"],["Maturing after five years but within ten years","$","\u2014","","","5.25","%"],["Obligations of U.S. government agencies:"],["Maturing after five years but within ten years","1","","","7.48"],["Obligations of U.S. government-sponsored entities:"],["Maturing after one year but within five years","68","","","5.11"],["States of the U.S. and political subdivisions:"],["Maturing within one year","2","","","2.31"],["Maturing after one year but within five years","57","","","2.65"],["Maturing after five years but within ten years","201","","","3.39"],["Maturing after ten years","757","","","3.69"],["Other debt securities:"],["Maturing after five years but within ten years","15","","","6.13"],["Residential mortgage-backed securities:"],["Agency mortgage-backed securities","1,057","","","2.09"],["Agency collateralized mortgage obligations","824","","","1.87"],["Commercial mortgage-backed securities","929","","","3.89"],["Total","$","3,911","","","2.93","%"]] [[/GREPCENT_TABLE]] The weighted average yields for tax-exempt debt securities are computed on an FTE basis using the federal statutory tax rate of 21.0%. 66 Table of Contents      The amortized cost of AFS and HTM securities are summarized in the following table: TABLE 23 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","$ Change","","% Change"],["(in millions)"],["Securities Available for Sale:"],["U.S. Treasury","$","422","","","$","278","","","$","144","","","51.8","%"],["U.S. government agencies","78","","","107","","","(29)","","","(27.1)"],["U.S. government-sponsored entities","227","","","283","","","(56)","","","(19.8)"],["Residential mortgage-backed securities:"],["Agency mortgage-backed securities","814","","","1,360","","","(546)","","","(40.1)"],["Agency collateralized mortgage obligations","946","","","1,110","","","(164)","","","(14.8)"],["Commercial mortgage-backed securities","905","","","430","","","475","","","110.5"],["States of the U.S. and political subdivisions","30","","","33","","","(3)","","","(9.1)"],["Other debt securities","38","","","21","","","17","","","81.0"],["Total debt securities available for sale","$","3,460","","","$","3,622","","","$","(162)","","","(4.5)","%"],["Debt Securities Held to Maturity:"],["U.S. government agencies","$","1","","","$","1","","","$","\u2014","","","\u2014","%"],["U.S. government-sponsored entities","68","","","52","","","16","","","30.8"],["Residential mortgage-backed securities:"],["Agency mortgage-backed securities","1,057","","","1,178","","","(121)","","","(10.3)"],["Agency collateralized mortgage obligations","824","","","953","","","(129)","","","(13.5)"],["Commercial mortgage-backed securities","929","","","866","","","63","","","7.3"],["States of the U.S. and political subdivisions","1,017","","","1,025","","","(8)","","","(0.8)"],["Other debt securities","15","","","12","","","3","","","25.0"],["Total debt securities held to maturity","$","3,911","","","$","4,087","","","$","(176)","","","(4.3)","%"],["n/m - not meaningful"]] [[/GREPCENT_TABLE]] We completed the sale of $648.7 million of AFS investment securities in December 2023, which resulted in a realized loss (pre-tax) of $67.4 million in the fourth quarter of 2023. We reinvested proceeds from the sale of those investment securities with an average yield of 1.08% into investment securities with yields approximately 350 basis points higher with a similar duration and convexity profile. For additional information relating to investment activity, see Note 4, “Securities” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. 67 Table of Contents      Deposits Our primary source of funds is deposits. Our diversified and granular deposit base are provided by business, consumer and municipal customers who we serve within our footprint. Following is a summary of deposits: TABLE 24 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","$ Change","","% Change"],["(in millions)"],["Non-interest-bearing demand","$","10,222","","","$","11,916","","","$","(1,694)","","","(14.2)","%"],["Interest-bearing demand","14,809","","","15,100","","","(291)","","","(1.9)"],["Savings","3,465","","","4,142","","","(677)","","","(16.3)"],["Certificates and other time deposits","6,215","","","3,612","","","2,603","","","72.1"],["Total deposits","$","34,711","","","$","34,770","","","$","(59)","","","(0.2)","%"]] [[/GREPCENT_TABLE]] Total deposits decreased slightly by $59.0 million, or 0.2%, from December 31, 2022, primarily due to the banking industry disruption in March 2023 and inflationary pressures on customers. We ended 2023 with approximately 78% of all deposits insured by the FDIC or collateralized. The mix of non-interest-bearing deposits to total deposits equaled 29.4% at December 31, 2023, compared to 34.3% at December 31, 2022 as customers continue to migrate deposits into higher-yielding deposit products. Following is a summary of estimated insured and uninsured time deposits in excess of the FDIC insurance limit by remaining maturity at December 31, 2023: TABLE 25 [[GREPCENT_TABLE]] [["(in millions)","Insured","","Uninsured","","Total"],["Three months or less","$","2,014","","","$","449","","","$","2,463"],["Three to six months","1,026","","","368","","","1,394"],["Six to twelve months","1,443","","","275","","","1,718"],["Over twelve months","558","","","82","","","640"],["Total","$","5,041","","","$","1,174","","","$","6,215"]] [[/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, increased to $2.5 billion at December 31, 2023 from $1.4 billion at December 31, 2022, primarily due to a $970.0 million increase in short-term FHLB borrowings, as we increased liquidity due to the bank failures in early 2023. 68 Table of Contents      Following is a summary of selected information relating to short-term FHLB borrowings: TABLE 26 [[GREPCENT_TABLE]] [["At or for the Year Ended December 31","2023","","2022","","2021"],["(dollars in millions)"],["FHLB Advances (Short-term)"],["Balance at year-end","$","1,900","","","$","930","","","$","1,030"],["Maximum month-end balance","2,245","","","930","","","1,280"],["Average balance during year","1,562","","","933","","","1,113"],["Weighted average interest rates:"],["At year-end","5.64","%","","2.18","%","","2.14","%"],["During the year","4.08","","","2.18","","","2.13"]] [[/GREPCENT_TABLE]] For additional information relating to deposits and short-term borrowings, see Note 13, “Deposits” and Note 14, “Short-Term Borrowings” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. Capital Resources Our capital position, in part depends on the access to, and cost of, funding for new business initiatives, the ability to engage in expanded business activities, the ability to pay dividends and the level and nature of regulatory oversight. The assessment of capital adequacy depends on a number of factors such as expected organic growth in the Consolidated Balance Sheet, asset quality, liquidity, earnings performance and sustainability, changing competitive conditions, regulatory changes or actions and economic forces. 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 shares, warrants, stock purchase contracts or units. On August 25, 2022, we completed an offering of $350 million of 5.150% fixed-rate senior notes due in 2025 under this registration statement. The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering expenses were $347.4 million. We used the net proceeds from the sale of the notes for general corporate purposes, including repayment of the $300 million in 2.200% senior notes that matured in February 2023, investments at the holding company level, capital to support the growth of FNBPA and refinancing of outstanding indebtedness. On April 18, 2022, we announced that our Board of Directors approved an additional $150 million for the repurchase of our common stock through our existing share repurchase program bringing the total authorization to $300 million. Since inception, we repurchased 14.1 million shares at a weighted average share price of $11.39 for $160.9 million under this repurchase program, with $139.1 million remaining for repurchase. The repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions. The purchases will be funded from available working capital. There is no guarantee as to the exact number of shares that will be repurchased and we may discontinue purchases at any time. The Inflation Reduction Act of 2022 includes a 1% excise tax on stock repurchases beginning January 1, 2023. Capital management is a continuous process with capital plans and stress testing for FNB and FNBPA updated at least annually. These capital plans include assessing the adequacy of expected capital levels assuming various scenarios by projecting capital needs for a forecast period of 2-3 years beyond the current year. Both FNB and FNBPA are subject to various regulatory capital requirements administered by federal banking agencies. For additional information, see Note 23, “Regulatory Matters” in the Notes to the Consolidated Financial Statements, which is included in Item 8 of this Report. From time to time, we issue shares initially acquired by us as treasury stock under our various benefit plans. We may issue additional preferred or common stock to maintain our well-capitalized status. 69 Table of Contents      CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS The following table sets forth contractual obligations of principal that represent required and potential cash outflows as of December 31, 2023: TABLE 27 [[GREPCENT_TABLE]] [["(in millions)","","","","","","","","","Total"],["Deposits without a stated maturity","","","","","","","","","$","28,496"],["Certificates and other time deposits","","","","","","","","","6,215"],["Operating leases","","","","","","","","","266"],["Long-term borrowings","","","","","","","","","1,971"],["Total","","","","","","","","","$","36,948"]] [[/GREPCENT_TABLE]] The following table sets forth the amount of commitments to extend credit and standby letters of credit as of December 31, 2023: TABLE 28 [[GREPCENT_TABLE]] [["(in millions)","","","","","","","","","Total"],["Commitments to extend credit","","","","","","","","","$","13,656"],["Standby letters of credit","","","","","","","","","257"],["Total","","","","","","","","","$","13,913"]] [[/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 17, “Commitments, Credit Risk and Contingencies” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. LIQUIDITY Our primary liquidity management goal is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding. Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and appropriate levels of liquidity. Our Board of Directors has also established Liquidity and Contingency Funding Policies to guide management in addressing the ability to identify, measure, monitor and control both normal and stressed liquidity conditions. These policies designate our ALCO as the body responsible for meeting these objectives. The ALCO, which is comprised of members of executive management, reviews liquidity on a continuous basis and approves significant changes in strategies that affect Balance Sheet or cash flow positions. Liquidity is centrally managed daily by our Treasury Department. 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 available for use to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if faced with a liquidity crisis. Our strong liquidity position is a result of management utilizing various strategies to ensure sufficient cash on hand is available to meet the parent's funding needs. The principal sources of the parent company’s liquidity are its strong existing cash resources plus dividends and interest it receives from its subsidiaries. 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. During the third quarter of 2022, we completed a Senior Debt offering for $347.7 million in net proceeds. A portion of these proceeds were used to retire $300 million of debt that matured in February of 2023 (for additional information, see Note 10, "Borrowings" in the Notes to the Consolidated Financial Statements in this Report). The parent company's cash position at December 31, 2023 was 70 Table of Contents      $375.4 million, down $278.9 million from December 31, 2022, primarily due to the repayment of the Senior Notes that matured in February 2023. Additionally, in May, we purchased and retired $15 million par value of the 7.625% Subordinated Notes due August 12, 2023. Two metrics that are used to gauge the adequacy of the parent company’s cash position are the LCR and MCH. The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months. The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the existing cash on hand. The LCR and MCH ratios and Parent company cash on hand are presented in the following table: TABLE 29 [[GREPCENT_TABLE]] [["December 31","2023","","2022","","Internal Limit"],["Liquidity coverage ratio","2.0 times","","1.7 times",""," 1 time"],["Months of cash on hand","13.0 months","","13.6 months",""," 12 months"],["Parent company cash on hand (millions)","$","375.4","","","$","654.3","","","n/a"]] [[/GREPCENT_TABLE]] Management has concluded that our cash levels remain appropriate given the current market environment. On January 12, 2024, the Board of Directors announced the redemption of all $110 million of our Perpetual Preferred Stock, Series E, which was paid on February 15, 2024. After the redemption, our liquidity remains appropriate with liquidity metrics continuing to be within policy limits. Over time, our liquidity position has been positively impacted by FNBPA's ability to generate growth in relationship-based accounts. Organic growth in low-cost transaction deposits was complemented by management’s continued strategy of deposit gathering efforts focused on attracting new customer relationships across our geographic footprint and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities. Consistent with industry trends, we have experienced a shift in deposits from non-interest-bearing-deposits and checking into certificates of deposits (CDs). The March 2023 banking disruption caused an acceleration of this shift. We ended 2023 with approximately 78% of deposits insured by the FDIC or collateralized, an improvement from approximately 74% at December 31, 2022. Non-interest-bearing demand deposit accounts decreased $1.7 billion, compared to December 31, 2022. Interest-bearing demand deposits decreased $290.8 million and savings account balances decreased $677.8 million, while time deposits increased $2.6 billion, compared to December 31, 2022, as customers' preferences have shifted to CDs as interest rates have increased substantially. Our cash balances held at the FRB were $1.1 billion at December 31, 2023, a slight decrease of $17.5 million from December 31, 2022. Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity. Our liquidity position was strong throughout 2023. Our contingency funding policy and periodic liquidity stress testing of multiple stress scenarios was particularly valuable as we successfully managed our liquidity during the March banking industry disruption. We continue to have ample unused borrowing capacity that could cover 1.9 times of the uninsured deposit and non-collateralized deposit balances as of December 31, 2023. A portion of this capacity includes the FRB's Discount Window and their BTFP. We have no borrowings under either facility. Additional sources of unused wholesale credit availability for FNBPA include the ability to borrow from the FHLB, correspondent bank lines, and access to other channels. In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs. We currently have excess cash to meet our pledging requirements. At December 31, 2023, we have $1.8 billion of cash and salable unpledged government and agency securities representing 3.8% of total assets. This compares to a policy minimum of 3.0%. 71 Table of Contents      The following table presents certain information relating to FNBPA's credit availability and salable unpledged securities: TABLE 30 [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(dollars in millions)"],["Unused wholesale credit availability","$","15,899","","","$","15,669"],["Unused wholesale credit availability as a % of FNBPA assets","34.6","%","","35.9","%"],["Salable unpledged government and agency securities","$","657","","","$","592"],["Salable unpledged government and agency securities as a % of FNBPA assets","1.4","%","","1.4","%"],["Cash and salable unpledged government and agency securities as a % of FNBPA assets","3.8","%","","3.9","%"]] [[/GREPCENT_TABLE]] Another metric for measuring liquidity risk is the liquidity gap analysis. The following liquidity gap analysis as of December 31, 2023 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals. Management monitors the size of the liquidity gaps so that sources and uses of funds are reasonably matched in the normal course of business and in relation to implied forward rate expectations. A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis. A positive gap position means that more assets are expected to mature over the next 12 months than liabilities. The twelve-month cumulative gap to total assets ratio was (2.6)% as of December 31, 2023, compared to 3.8% as of December 31, 2022. The change in the twelve-month cumulative gap to total assets was primarily related to the active management of deposit pricing across the deposit product maturity tenors which reduced our asset sensitivity. Management calculates this ratio at least quarterly and it is reviewed regularly by ALCO. TABLE 31 [[GREPCENT_TABLE]] [["(dollars in millions)","Within 1 Month","","2-3 Months","","4-6 Months","","7-12 Months","","Total 1 Year"],["Assets"],["Loans","$","1,170","","","$","1,643","","","$","1,840","","","$","3,373","","","$","8,026"],["Investments","1,203","","","513","","","230","","","460","","","2,406"],["","2,373","","","2,156","","","2,070","","","3,833","","","10,432"],["Liabilities"],["Non-maturity deposits","294","","","589","","","883","","","1,766","","","3,532"],["Time deposits","1,120","","","1,348","","","1,391","","","1,723","","","5,582"],["Borrowings","1,621","","","562","","","223","","","135","","","2,541"],["","3,035","","","2,499","","","2,497","","","3,624","","","11,655"],["Period Gap (Assets - Liabilities)","$","(662)","","","$","(343)","","","$","(427)","","","$","209","","","$","(1,223)"],["Cumulative Gap","$","(662)","","","$","(1,005)","","","$","(1,432)","","","$","(1,223)"],["Cumulative Gap to Total Assets","(1.4)","%","","(2.2)","%","","(3.1)","%","","(2.6)","%"]] [[/GREPCENT_TABLE]] In addition, the ALCO regularly monitors various liquidity ratios, stress scenarios of our liquidity position and assumptions considering market disruptions, lending demand, deposit behavior, and funding availability. The stress scenarios forecast that adequate funding will be available even under severe conditions. Management believes we have sufficient liquidity available to meet our normal operating and contingency funding cash needs. MARKET RISK Market risk refers to potential losses arising predominately from changes in interest rates, foreign exchange rates, equity prices and commodity prices. 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 72 Table of Contents      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 change, while certain depositors can redeem their certificates of deposit early, which may be with or without penalty, when rates change. We use an asset/liability model to measure our interest rate risk. Interest rate risk measures we utilize include earnings simulation, EVE and gap analysis. Gap analysis and EVE are static measures that do not incorporate assumptions regarding future business. Gap analysis, while a helpful diagnostic tool, displays cash flows for only a single rate environment. EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. In these simulations, our current financial position is combined with assumptions regarding future business activities to calculate net interest income under various hypothetical rate scenarios. The ALCO regularly reviews earnings simulations over multiple years under various interest rate scenarios. Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies. The following repricing gap analysis as of December 31, 2023 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 32 [[GREPCENT_TABLE]] [["(dollars in millions)","Within 1 Month","","2-3 Months","","4-6 Months","","7-12 Months","","Total 1 Year"],["Assets"],["Loans","$","14,070","","","$","2,194","","","$","889","","","$","1,556","","","$","18,709"],["Investments","1,214","","","517","","","302","","","453","","","2,486"],["","15,284","","","2,711","","","1,191","","","2,009","","","21,195"],["Liabilities"],["Non-maturity deposits","7,801","","","\u2014","","","\u2014","","","\u2014","","","7,801"],["Time deposits","1,221","","","1,346","","","1,388","","","1,718","","","5,673"],["Borrowings","1,322","","","632","","","212","","","112","","","2,278"],["","10,344","","","1,978","","","1,600","","","1,830","","","15,752"],["Off-balance sheet","(1,000)","","","100","","","(100)","","","(200)","","","(1,200)"],["Period Gap (Assets - Liabilities + Off-balance sheet)","$","3,940","","","$","833","","","$","(509)","","","$","(21)","","","$","4,243"],["Cumulative Gap","$","3,940","","","$","4,773","","","$","4,264","","","$","4,243"],["Cumulative Gap to Earning Assets","9.6","%","","11.6","%","","10.4","%","","10.3","%"]] [[/GREPCENT_TABLE]] The twelve-month cumulative repricing gap to total assets was 10.3% and 8.4% as of December 31, 2023 and December 31, 2022, respectively. The positive cumulative gap positions indicate that we have a greater amount of repricing earning assets than repricing interest-bearing liabilities over the subsequent twelve months. The change in the cumulative repricing gap at December 31, 2023, compared to December 31, 2022, is primarily related to customers moving into higher yielding deposit products and shorter-term time deposits. The allocation of non-maturity deposits and customer repurchase agreements to the one-month maturity category above is based on the estimated sensitivity of each product to changes in market rates. For example, if a product’s rate is estimated to increase by 50% as much as the market rates, then 50% of the account balance was placed in this category. 73 Table of Contents      We model rate scenarios which move all rates gradually over twelve months (Rate Ramps). We also model rate scenarios which move all rates in an immediate and parallel fashion (Rate Shocks) and model scenarios that gradually change the shape of the yield curve. Using a static Balance Sheet structure, and utilizing net interest income simulations, the following table presents an analysis of the potential sensitivity of our net interest income on changes in interest Rate Ramps and EVE to changes in interest rates using Rate Shocks. The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of December 31, 2023. The measures do not reflect management's potential actions. TABLE 33 [[GREPCENT_TABLE]] [["December 31,","2023","","2022","","ALCO Limits"],["Net interest income change over 12 months (Rate Ramps):"],["+ 300 basis points","5.8","%","","3.4","%","","n/a"],["+ 200 basis points","3.9","","","2.0","","","(5.0)","%"],["+ 100 basis points","2.0","","","0.5","","","(5.0)"],["\u2013 100 basis points","(2.0)","","","0.6","","","(5.0)"],["\u2013 200 basis points","(4.1)","","","0.6","","","(5.0)"],["Economic value of equity (Rate Shocks):"],["+ 300 basis points","4.6","","","(6.8)","","","(25.0)"],["+ 200 basis points","3.2","","","(4.0)","","","(15.0)"],["+ 100 basis points","1.6","","","(1.4)","","","(10.0)"],["\u2013 100 basis points","(2.5)","","","(2.0)","","","(10.0)"],["\u2013 200 basis points","(8.0)","","","(5.8)","","","(15.0)"]] [[/GREPCENT_TABLE]] Management continues to be proactive in managing our interest rate risk (IRR) position with the intention to manage to a more neutral position given the current market expectations for future rates. During 2023, management has adjusted the IRR position by managing cash balances, originating higher yielding loans, strategically meeting our customers' preferences for higher yielding deposit products, in particular, shorter term time deposits, and utilizing borrowings of varying maturities. We also utilize derivatives to manage the IRR position. We continue to make use of interest rate swaps to commercial borrowers (commercial swaps) to manage our IRR position as the commercial swaps effectively increase our level of adjustable-rate loans. Total variable and adjustable-rate loans were 62.2% of total net loans and leases as of December 31, 2023 and 60.2% as of December 31, 2022. As of December 31, 2023, the commercial swaps totaled $5.7 billion of notional principal, with $945 million in original notional swap principal originated during 2023, up from $5.3 billion at December 31, 2022. Furthermore, we regularly sell long-term fixed-rate residential mortgages in the secondary market and have been successful in the origination of consumer and commercial loans with short-term repricing characteristics. For additional information regarding interest rate swaps, see Note 16, "Derivative Instruments and Hedging Activities" in the Notes to the Consolidated Financial Statements in this Report. Assuming a static Balance Sheet, a +100 basis point Rate Shock increases net interest income (12 months) by 3.4% at December 31, 2023 and 1.1% at December 31, 2022. For a +200 basis point Rate Shock, net interest income (12 months) increases by 6.7% at December 31, 2023 and 3.3% at December 31, 2022. The corresponding metrics for a minus 100 basis point Rate Shock are (3.6)% and 1.2% at December 31, 2023 and December 31, 2022, respectively. These results use historical long-term deposit rate beta assumptions that are regularly analyzed and adjusted as necessary for both rising and falling rate scenarios. The drivers of the change in net interest income in the rate scenarios include the mix shift of deposit products, the pace of deposit repricing and assumed betas and loan prepayments. The FOMC increased the Federal Funds rate 425 basis points in 2022 and 100 basis points in the first seven months of 2023. Forty-eight percent of our net loans and leases reprice within the next three months and are indexed to short-term SOFR, Prime and other indices which benefit from higher rates. Our cash position has also been a significant factor in our asset sensitivity metrics. Projected base net interest income has decreased from year-end as deposit rates have increased faster than asset repricing indices. There are multiple factors that influence our interest rate risk position and impact net interest income. These include external factors such as the shape of the yield curve, the competitive landscape and expectations regarding future interest rates, as well as internal factors regarding product offerings, product mix and pricing of loans and deposits. 74 Table of Contents      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. CREDIT RATINGS Our credit ratings affect the cost and availability of short- and long-term funding and collateral requirements for certain derivative instruments. Credit ratings are subject to ongoing review by rating agencies, which consider a number of factors, including our financial strength, performance, prospects and operations as well as factors not under our control. Other factors that influence our credit ratings include changes to the rating agencies’ methodologies for our industry or certain security types; the rating agencies’ assessment of the general operating environment for financial services companies; our relative positions in the markets in which we compete; our various risk exposures and risk management policies and activities; pending litigation and other contingencies; our reputation; our liquidity position, diversity of funding sources and funding costs; the current and expected level and volatility of our earnings; our capital position and capital management practices; our corporate governance; current or future regulatory and legislative initiatives; and the agencies’ views on whether the U.S. government would provide meaningful support to us or our subsidiaries in a crisis. Credit rating downgrades or negative watch warnings could negatively impact our reputation with lenders, investors and other third parties, which could also impair our ability to compete in certain markets or engage in certain transactions. In particular, holders of deposits which exceed FDIC insurance limits may perceive such a downgrade or warning negatively and withdraw all or a portion of such deposits. The following table presents the credit ratings for FNB and FNBPA as of December 31, 2023: TABLE 34 [[GREPCENT_TABLE]] [["","Moody's","","Standard & Poor's","","Kroll"],["F.N.B. Corporation"],["Issuer credit rating","Baa2","","BBB-","","A-"],["Senior debt","Baa3","","BBB-","","A-"],["Subordinated debt","Baa2","","n/a","","BBB+"],["First National Bank of Pennsylvania"],["Baseline credit assessment","Baa1","","n/a","","n/a"],["Issuer credit rating","n/a","","BBB-","","A"],["Senior debt","n/a","","n/a","","A"],["Subordinated debt","n/a","","n/a","","A-"],["Bank deposits","A2/P-1","","n/a","","A"],["Short-term borrowings","n/a","","A-2","","K1"],["Outlook for F.N.B. Corporation and First National Bank of Pennsylvania","Negative","","Stable","","Stable"],["n/a - not applicable"]] [[/GREPCENT_TABLE]] On August 27,2023, Moody's affirmed our ratings and changed their outlook to negative as part of their review of 27 banks. 75 Table of Contents      RISK MANAGEMENT As a financial institution, we take on a certain amount of risk in every business decision, transaction and activity. Accordingly, we have designed an Enterprise Risk Management Framework and risk management practices to help manage enterprise risks. Our Board of Directors and senior management have identified seven major categories of risk: credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, reputation risk and strategic risk. In its oversight role of our risk management function, the Board of Directors focuses on the strategies, analyses and conclusions of management relating to identifying, understanding and managing risks to optimize total shareholder value, while balancing prudent business and safety and soundness considerations. We support our risk management processes and business oversight through the three lines of defense and a governance structure at the Board of Directors and management levels. The lines of defense model consists of: •First Line of Defense - make each of our businesses and enterprise support areas that generate risk and are principally responsible for owning and managing the day-to-day risk-taking activities in accordance with the risk frameworks. •Second Line of Defense - consists of Risk Management and Compliance Departments responsible for developing risk frameworks, overseeing risk-taking activities and identifying, assessing, monitoring and reporting on enterprise aggregate risks. •Third Line of Defense - is Internal Audit and provides independent assurance on the effectiveness of controls and risk management practices across our first and second lines of defense. Our Board of Directors is responsible for the oversight of management on behalf of our stockholders. The Board of Directors has assistance in carrying out its duties and may delegate authority through the following standing Board Committees: •Audit Committee - provides oversight of our internal and external audit processes. In addition, monitors the integrity of the consolidated financial statements, internal controls over financial reporting, qualifications and independence of our audit function. •Nominating and Corporate Governance Committee - responsible for selecting and recommending nominees for election to the FNB and FNBPA Boards of Directors. •Compensation Committee - reviews performance and compensation of senior management and reviews and implements compensation and benefit matters having corporate-wide significance. •Executive Committee - joint session of the FNB and FNBPA Board of Directors to cover special matters, as deemed necessary, in between regularly scheduled board meetings. •Risk Committee - provides oversight of our risk management and assessment processes, including the review and approval of risk management policies, procedures and practices, to identify, assess, monitor and report material risks. •Credit Fair Lending and CRA Committee - responsible for providing oversight of credit and lending strategies an objectives. The Risk Committee serves as the primary point of contact between our Board of Directors and the Risk Management Council (RMC), which is the senior management level committee responsible for identifying, assessing, monitoring and reporting on enterprise-wide risks. The Risk Committee and RMC are supported by other risk management committees, including Credit Risk Committees, Operational Risk Committee, Compliance Risk Committee and ALCO. Risk appetite is an integral element of our enterprise risk management framework and of our business and capital planning processes through our Board Risk Committee and Risk Management Council. We use our risk appetite processes to promote appropriate alignment of risk, capital and performance tactics, while also considering risk capacity and appetite constraints from both financial and non-financial risks. The Board of Directors adopted an enterprise risk appetite that defines acceptable risk limits under which we seek to operate in pursuit of optimizing returns. As such, we monitor a series of Key Risk Indicators for various business lines and operation units to measure performance alignment with our stated risk appetite. Our top-down risk 76 Table of Contents      appetite process serves as a limit for undue risk-taking for bottom-up planning from our various business functions. Our Board Risk Committee, in collaboration with our Risk Management Council, approves our risk appetite on an annual basis, or more frequently, as needed to reflect changes in the risk, regulatory, economic and strategic plan environments, with the goal of ensuring that our risk appetite remains consistent with our strategic plans and business operations, regulatory environment and our shareholders' expectations. Our Enterprise Risk Management Framework provides the practices to identify, assess, control and monitor and report on risk across the organization. Reports relating to our risk appetite and strategic plans, and our ongoing monitoring thereof, and our aggregate risk profile, are regularly presented to our various management level risk oversight and planning committees and periodically reported up through our Board Risk Committee. The Board of Directors believes that our enterprise-wide risk management process is effective and enables the Board of Directors to: •assess the quality of the information they receive; •understand the businesses, investments and financial, accounting, legal, regulatory and strategic considerations, and the risks that FNB faces; •oversee and assess how senior management evaluates risk; and •assess appropriately the quality of our enterprise-wide risk management processes. 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","2023","","2022","","2021"],["(in thousands)"],["Net income available to common stockholders","$","476,810","","","$","431,068","","","$","396,561"],["Merger-related expense","2,215","","","45,259","","","1,764"],["Tax benefit of merger-related expense","(465)","","","(9,504)","","","(370)"],["Provision expense related to acquisitions","\u2014","","","28,515","","","\u2014"],["Tax benefit of provision expense related to acquisitions","\u2014","","","(5,988)","","","\u2014"],["Branch consolidation costs","\u2014","","","7,016","","","2,644"],["Tax benefit of branch consolidation costs","\u2014","","","(1,473)","","","(555)"],["FDIC special assessment","29,938","","","\u2014","","","\u2014"],["Tax benefit of FDIC special assessment","(6,287)","","","\u2014","","","\u2014"],["Loss on securities restructuring","67,354","","","\u2014","","","\u2014"],["Tax benefit of loss on securities restructuring","(14,144)","","","\u2014","","","\u2014"],["Valuation allowance on auto loans held-for-sale","16,687","","","\u2014","","","\u2014"],["Tax benefit of valuation allowance on auto loans held-for-sale","(3,504)","","","\u2014","","","\u2014"],["Operating net income available to common stockholders (non-GAAP)","$","568,604","","","$","494,893","","","$","400,044"]] [[/GREPCENT_TABLE]] The table above shows how operating net income available to common stockholders (non-GAAP) is derived from amounts reported in our financial statements. We believe certain charges such as merger expenses, FDIC special assessment, loss on securities restructuring, valuation allowance on auto loans held-for-sale, initial provision for non-PCD loans acquired and branch consolidation costs are not organic costs to run our operations and facilities. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction. 77 Table of Contents      TABLE 36 Operating earnings per diluted common share [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022","","2021"],["Net income per diluted common share","$","1.31","","","$","1.22","","","$","1.23"],["Merger-related expense","0.01","","","0.13","","","0.01"],["Tax benefit of merger-related expense","\u2014","","","(0.03)","","","\u2014"],["Provision expense related to acquisitions","\u2014","","","0.08","","","\u2014"],["Tax benefit of provision expense related to acquisitions","\u2014","","","(0.02)","","","\u2014"],["Branch consolidation costs","\u2014","","","0.02","","","0.01"],["Tax benefit of branch consolidation costs","\u2014","","","\u2014","","","\u2014"],["FDIC special assessment","0.08","","","\u2014","","","\u2014"],["Tax benefit of FDIC special assessment","(0.02)","","","\u2014","","","\u2014"],["Loss on securities restructuring","0.19","","","\u2014","","","\u2014"],["Tax benefit of loss on securities restructuring","(0.04)","","","\u2014","","","\u2014"],["Valuation allowance on auto loans held-for-sale","0.05","","","\u2014","","","\u2014"],["Tax benefit of valuation allowance on auto loans held-for-sale","(0.01)","","","\u2014","","","\u2014"],["Operating earnings per diluted common share (non-GAAP)","$","1.57","","","$","1.40","","","$","1.24"]] [[/GREPCENT_TABLE]] TABLE 37 Return on average tangible common equity [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022","","2021"],["(dollars in thousands)"],["Net income available to common stockholders","$","476,810","","","$","431,068","","","$","396,561"],["Amortization of intangibles, net of tax","15,892","","","10,956","","","9,573"],["Tangible net income available to common stockholders (non-GAAP)","$","492,702","","","$","442,024","","","$","406,134"],["Average total stockholders\u2019 equity","$","5,851,082","","","$","5,475,843","","","$","5,033,188"],["Less: Average preferred stockholders\u2019 equity","(106,882)","","","(106,882)","","","(106,882)"],["Less: Average intangible assets (1)","(2,556,119)","","","(2,481,533)","","","(2,310,419)"],["Average tangible common equity (non-GAAP)","$","3,188,081","","","$","2,887,428","","","$","2,615,887"],["Return on average tangible common equity (non-GAAP)","15.45","%","","15.31","%","","15.53","%"]] [[/GREPCENT_TABLE]] (1) Excludes loan servicing rights. TABLE 38 Operating return on average tangible common equity [[GREPCENT_TABLE]] [["(dollars in thousands)","2023","","2022","","2021"],["Operating net income available to common stockholders (annualized)","$","568,604","","","$","494,893","","","$","400,044"],["Amortization of intangibles, net of tax (annualized)","15,892","","","10,956","","","9,573"],["Tangible operating net income available to common stockholders (annualized) (non-GAAP)","$","584,496","","","$","505,849","","","$","409,617"],["Average total stockholders' equity","$","5,851,082","","","$","5,475,843","","","$","5,033,188"],["Less: Average preferred stockholders' equity","(106,882)","","","(106,882)","","","(106,882)"],["Less: Average intangible assets (1)","(2,556,119)","","","(2,481,533)","","","(2,310,419)"],["Average tangible common equity (non-GAAP)","$","3,188,081","","","$","2,887,428","","","$","2,615,887"],["Operating return on average tangible common equity (non-GAAP)","18.33","%","","17.52","%","","15.66","%"]] [[/GREPCENT_TABLE]] (1) Excludes loan servicing rights. 78 Table of Contents      TABLE 39 Return on average tangible assets [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022","","2021"],["(dollars in thousands)"],["Net income","$","484,851","","","$","439,109","","","$","404,602"],["Amortization of intangibles, net of tax","15,892","","","10,956","","","9,573"],["Tangible net income (non-GAAP)","$","500,743","","","$","450,065","","","$","414,175"],["Average total assets","$","44,609,603","","","$","41,954,708","","","$","38,603,092"],["Less: Average intangible assets (1)","(2,556,119)","","","(2,481,533)","","","(2,310,419)"],["Average tangible assets (non-GAAP)","$","42,053,484","","","$","39,473,175","","","$","36,292,673"],["Return on average tangible assets (non-GAAP)","1.19","%","","1.14","%","","1.14","%"]] [[/GREPCENT_TABLE]] (1) Excludes loan servicing rights. TABLE 40 Tangible book value per common share [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(dollars in thousands, except per share data)"],["Total stockholders\u2019 equity","$","6,049,969","","","$","5,653,364"],["Less: Preferred stockholders\u2019 equity","(106,882)","","","(106,882)"],["Less: Intangible assets (1)","(2,546,353)","","","(2,566,029)"],["Tangible common equity (non-GAAP)","$","3,396,734","","","$","2,980,453"],["Ending common shares outstanding","358,829,417","","","360,470,110"],["Tangible book value per common share (non-GAAP)","$","9.47","","","$","8.27"]] [[/GREPCENT_TABLE]] (1) Excludes loan servicing rights. TABLE 41 Tangible equity to tangible assets [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(dollars in thousands)"],["Total stockholders' equity","$","6,049,969","","","$","5,653,364"],["Less: Intangible assets (1)","(2,546,353)","","","(2,566,029)"],["Tangible equity (non-GAAP)","$","3,503,616","","","$","3,087,335"],["Total assets","$","46,157,693","","","$","43,724,973"],["Less: Intangible assets (1)","(2,546,353)","","","(2,566,029)"],["Tangible assets (non-GAAP)","$","43,611,340","","","$","41,158,944"],["Tangible equity to tangible assets (non-GAAP)","8.03","%","","7.50","%"]] [[/GREPCENT_TABLE]] (1) Excludes loan servicing rights. 79 Table of Contents      TABLE 42 Tangible common equity to tangible assets [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(dollars in thousands)"],["Total stockholders' equity","$","6,049,969","","","$","5,653,364"],["Less: Preferred stockholders' equity","(106,882)","","","(106,882)"],["Less: Intangible assets (1)","(2,546,353)","","","(2,566,029)"],["Tangible common equity (non-GAAP)","$","3,396,734","","","$","2,980,453"],["Total assets","$","46,157,693","","","$","43,724,973"],["Less: Intangible assets (1)","(2,546,353)","","","(2,566,029)"],["Tangible assets (non-GAAP)","$","43,611,340","","","$","41,158,944"],["Tangible common equity to tangible assets (non-GAAP)","7.79","%","","7.24","%"]] [[/GREPCENT_TABLE]]  (1) Excludes loan servicing rights. TABLE 43 Net loan charge-offs, excluding isolated commercial loan charge-off due to alleged fraud to total average loans and leases [[GREPCENT_TABLE]] [["Year Ended December 31","2023"],["(dollars in thousands)"],["Net loan charge-offs","$","67,755"],["Less: Isolated commercial loan charge-off","(31,900)"],["Net loan charge-offs, excluding isolated commercial loan charge-off (non-GAAP)","$","35,855"],["Total average loans and leases","$","31,372,574"],["Net loan charge-offs / total average loans and leases","0.22","%"],["Net loan charge-offs, excluding isolated commercial loan charge-off to total average loans and leases (non-GAAP)","0.11","%"]] [[/GREPCENT_TABLE]] TABLE 44 Operating non-interest income [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(dollars in thousands)"],["Non-interest income","$","254,332","","","$","323,553"],["Loss on securities restructuring","67,354","","","\u2014"],["Operating non-interest income (non-GAAP)","$","321,686","","","$","323,553"]] [[/GREPCENT_TABLE]] 80 Table of Contents      TABLE 45 Operating non-interest expense [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(dollars in thousands)","$","915,436","","","$","826,392"],["Non-interest expense"],["Branch consolidations","\u2014","","","(7,016)"],["Merger-related","(2,215)","","","(45,259)"],["FDIC special assessment","(29,938)","","","\u2014"],["Valuation allowance on auto loans held-for-sale","(16,687)","","","\u2014"],["Operating non-interest expense (non-GAAP)","$","866,596","","","$","774,117"]] [[/GREPCENT_TABLE]] Key Performance Indicators TABLE 46 Efficiency ratio [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022","","2021"],["(dollars in thousands)"],["Non-interest expense","$","915,436","","","$","826,392","","","$","733,168"],["Less: Amortization of intangibles","(20,116)","","","(13,868)","","","(12,117)"],["Less: OREO expense","(1,515)","","","(1,692)","","","(2,598)"],["Less: Merger-related expense","(2,215)","","","(45,259)","","","(1,764)"],["Less: Branch consolidation costs","\u2014","","","(7,016)","","","(2,644)"],["Less: FDIC special assessment","(29,938)","","","\u2014","","","\u2014"],["Less: Valuation allowance on auto loans held-for-sale","(16,687)","","","\u2014","","","\u2014"],["Adjusted non-interest expense","$","844,965","","","$","758,557","","","$","714,045"],["Net interest income","$","1,316,504","","","$","1,119,780","","","$","906,476"],["Taxable equivalent adjustment","12,341","","","11,288","","","10,948"],["Non-interest income","254,332","","","323,553","","","330,419"],["Less: Net securities losses (gains)","67,432","","","(48)","","","(193)"],["Adjusted net interest income (FTE) + non-interest income","$","1,650,609","","","$","1,454,573","","","$","1,247,650"],["Efficiency ratio (FTE) (non-GAAP)","51.19","%","","52.15","%","","57.23","%"]] [[/GREPCENT_TABLE]]