FNB CORPPA
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
FNB$17.90+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0000037808-24-000006
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0000037808-25-000071
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 272 previous paragraphs and 272 current paragraphs.
134 unchanged; 71 reworded; 63 added; 65 removed; 2 previous and 4 current paragraphs rearranged.
Tables are not compared: 46 previous and 43 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (63)
Current report
This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‑looking statements are those that do not relate to historical facts and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond our control. Forward-looking statements may relate to various matters, including our financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar words or expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make.
Current report
There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:
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•the credit risk associated with the substantial amount of commercial loans and leases in our loan portfolio;
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•the volatility of the mortgage banking business;
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•changes in market interest rates and the unpredictability of monetary, tax and other policies of government agencies;
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•the impact of changes in interest rates on the value of our securities portfolios;
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•changes in our ability to obtain liquidity as and when needed to fund our obligations as they come due, including as a result of adverse changes to our credit ratings;
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•the risk associated with uninsured deposit account balances;
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•regulatory limits on our ability to receive dividends from our subsidiaries and pay dividends to our shareholders;
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•our ability to recruit and retain qualified banking professionals;
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•the financial soundness of other financial institutions and the impact of volatility in the banking sector on us;
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•changes and instability in economic conditions and financial markets, in the regions in which we operate or otherwise, including a contraction of economic activity;
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•our ability to continue to invest in technological improvements as they become appropriate or necessary;
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•any interruption in or breach in security of our information systems, or other cybersecurity risks;
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•risks associated with reliance on third-party vendors;
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•risks associated with the use of models, estimations and assumptions in our business;
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•the effects of adverse weather events and public health emergencies;
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•the risks associated with acquiring other banks and financial services business, including integration into our existing operations;
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•the extensive federal and state regulation, supervision and examination governing almost every aspect of our operations, and potential expenses associated with complying with such regulations;
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•our ability to comply with the consent orders entered into by FNBPA with the DOJ and the North Carolina State Department of Justice, and related costs and potential reputational harm;
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•changes in federal, state or local tax rules and regulations or interpretations, or accounting policies, standards and interpretations;
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•the effects of climate change and related legislative and regulatory initiatives; and
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•any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above.
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You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to us. We do not undertake, and specifically disclaim any obligation, to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Current report
We achieved solid corporate performance in 2024 by, among other things, exceeding peer performance on loan growth, deposit growth, and deposit cost management amidst an uncertain interest rate environment. We achieved new milestones and set new records, notably in the areas of non-interest income, capital, and deposit market share. Additionally, in 2024, we grew to nearly $49 billion in total assets and achieved a record market capitalization ending the year at $5.3 billion. For 2024, tangible book value per share (non-GAAP) grew 11% year-over-year, to a record $10.49 and operating return on average tangible common equity (non-GAAP) equaled 14.5%. We also achieved full-year non-interest income of $316 million and record full-year operating non-interest income (non-GAAP) of $350 million, demonstrating the impact of our diversified business model and robust suite of products and services. We further strengthened our liquidity and capital position improving the loan-to-deposit ratio over 500 basis points from the peak in 2024 through strong deposit gathering initiatives and achieved higher capital ratios with a record CET1 ratio of 10.6%, and a tangible common equity to tangible assets (non-GAAP) ratio of 8.2%. We benefited from our geographic footprint, investments in technology, strong balance sheet and high caliber front-line bankers to generate year-over-year loan growth of 5.0% and robust deposit growth of 6.9%. Our credit metrics ended the year at solid levels in a changing economic environment with total delinquencies at 0.83% and net charge-offs at 0.19% for the full year 2024.
Current report
•Total revenue of $1.6 billion, an increase of $26.0 million, or 1.7%. Total revenue on an operating basis was essentially flat (down 0.5%) as net interest income was impacted by lags in interest rate resets for interest bearing deposits compared to interest rate resets on loans related to the FOMC’s interest rate cuts. During the fourth quarter of 2024, the FOMC lowered the target federal funds rate by a total of 50 basis points, bringing the full-year decrease to 100 basis points.
Current report
•Net interest income was $1.3 billion, down 2.7%, primarily due to higher interest-bearing deposit costs from continued balance growth in higher yielding deposit products and the impact of the FOMC's interest rate cuts in 2024.
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•Net interest margin (FTE) (non-GAAP) decreased 26 basis points to 3.09% from 3.35%. The yield on earning assets (non-GAAP) increased 42 basis points to 5.42%. However, the cost of funds increased 72 basis points to 2.45% with the costs of interest-bearing deposits increasing 83 basis points to 2.96%, short-term borrowings increasing 105 basis points and long-term debt increasing 24 basis points.
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•Non-interest expense was $961.3 million, compared to $915.4 million. Excluding significant items, operating non-interest expense (non-GAAP) increased $75.7 million, or 8.7%. Salaries and employee benefits increased $42.4 million, or 9.2%, due to normal annual merit increases, higher production-related commissions given the strong non-interest income activity, strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure, and elevated employer-paid healthcare costs. Outside services increased $12.3 million, or 14.6%, due to higher volume-related technology and third-party costs. Occupancy and equipment increased $15.0 million, or 9.3%, primarily from technology-related investments and the move to the new Pittsburgh headquarters.
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•Earnings per diluted common share was $1.27, compared to $1.31, a decrease of 3.1%.
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•Operating earnings per diluted common share (non-GAAP) was $1.39, compared to $1.57, a decrease of 11.5%.
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•In the fourth quarter of 2024, we recognized renewable energy investment tax credits of $28.4 million as a benefit to income taxes from a solar project financing transaction. A related non-credit valuation impairment of $10.4 million (pre-tax) was recognized on the financing receivable in other non-interest expense.
Current report
•During 2024, we sold $231.4 million of AFS securities as part of a proactive balance sheet management strategy. We reinvested the proceeds from the sale of these AFS securities with an average yield of 1.41% into securities yielding 4.78% with a similar duration and convexity profile.
Current report
•Period-end total loans and leases increased $1.6 billion, or 5.0%. Consumer loans increased $949.0 million, or 8.0%, even with a $431 million indirect auto loan sale that closed in September 2024, and commercial loans and leases increased $667.2 million, or 3.3%. Our loan growth was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
Current report
•Period-end total deposits increased $2.4 billion, or 6.9%, driven by an increase of $1.9 billion in interest-bearing demand deposits and $1.3 billion in shorter-term time deposits more than offsetting the decline in non-interest-bearing demand deposits of $461.3 million and savings deposits of $286.7 million as customers continued to opt for higher-yielding deposit products given the interest rate environment.
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•The mix of non-interest-bearing demand deposits to total deposits equaled 26% at December 31, 2024, compared to 29% at the prior year end, reflecting the strong interest-bearing deposit growth and fairly stable non-interest-bearing demand deposit balances.
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•In December 2024, we issued $500 million aggregate principal amount of fixed rate / floating rate senior notes maturing in December 2030. The senior notes bear interest at 5.722% per annum until December 11, 2029. Starting on December 11, 2029, the senior notes will bear interest at a floating rate per annum equal to compounded SOFR plus 1.93%. The new debt will be used for general corporate purposes and serve as a replacement for $450 million of senior and subordinated note maturities occurring in 2025.
Current report
•The ratio of non-performing loans plus OREO to total loans and leases plus OREO increased 14 basis points to 0.48%. Total delinquency increased 13 basis points to 0.83%, compared to 0.70%. Overall, asset quality metrics continue to remain at solid levels. Net charge-offs totaled $62.7 million, or 0.19% of total average loans, compared to $67.7 million, or 0.22%.
Current report
•On February 15, 2024, we redeemed all our outstanding Series E Perpetual Preferred Stock and paid the final preferred dividend of $2.0 million on the redemption date. The excess of the redemption value over the carrying value on the Series E Perpetual Preferred Stock of $4.0 million was considered a significant item impacting earnings.
Current report
Net income available to common shareholders was $459.3 million or $1.27 per diluted common share, compared to net income available to common shareholders of $476.8 million or $1.31 per diluted common share. Operating net income available to common shareholders (non-GAAP) was $505.2 million, or $1.39 per diluted common share (non-GAAP), compared to operating net income available to common shareholders (non-GAAP) of $568.6 million, or $1.57 per diluted common share (non-GAAP). The results for 2024 included net interest income of $1.3 billion, a 2.7% decrease, with the decline driven by the FOMC’s rate cuts, record non-interest income of $350.4 million on an operating basis (non-GAAP), provision for credit losses of $79.8 million with stable asset quality, and non-interest expenses of $942.3 million on an operating basis (non-GAAP), an increase of $75.7 million or 8.7%, driven primarily by higher salaries and employee benefits expense. During 2024, significant items impacting earnings of $45.8 million (see Table 1) were recognized. In comparison, the 2023 results included net interest income of $1.3 billion, 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, non-interest income of $321.7 million on an operating basis benefiting from our diversified business model and related revenue generation, and operating non-interest expenses (non-GAAP) of $866.6 million. During 2023, significant items impacting earnings of $91.9 million (see Table 1) were recognized.
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Removed paragraphs (65)
Previous report
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.
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Our forward-looking statements are subject to the following principal risks and uncertainties:
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•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.
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•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.
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•Competition can have an impact on customer acquisition, growth and retention, and on credit spreads, deposit gathering and product pricing, which can affect market share, loans, deposits and revenues. 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.
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•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.
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•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:
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◦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, employee benefits, compensation practices, pension, bankruptcy and other industry aspects, and changes in accounting policies and principles.
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◦Ability to continue to attract, develop and retain key talent.
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◦Changes to regulations or accounting standards governing bank capital requirements, loan loss reserves and liquidity standards.
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◦Changes in monetary and fiscal policies, including interest rate policies and strategies of the FOMC.
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◦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.
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◦Results of the regulatory examination and supervision process, including our failure to satisfy requirements imposed by the federal bank regulatory agencies or other governmental agencies.
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◦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.
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◦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.
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◦A failure or disruption in or breach of our operational or security systems or infrastructure, or those of third parties, including as a result of cyber-attacks or campaigns.
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◦Increased funding costs and market volatility due to market illiquidity and competition for funding.
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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.
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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.
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•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%.
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•Earnings per diluted common share was $1.31, compared to $1.22, an increase of 7.4%.
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•Operating earnings per diluted common share (non-GAAP) was $1.57, compared to $1.40, an increase of 12.1%.
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•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.
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•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 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.
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•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.
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•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.
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•Return on average tangible common equity ratio (non-GAAP) was 15.5%, compared to 15.3%.
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•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%.
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•Total average investment securities were $7.2 billion, compared to $7.1 billion, an increase of $14.1 million, or 0.2%.
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•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.
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•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.
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•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.
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•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.
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Industry Developments
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BANKING INDUSTRY DISRUPTION
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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.
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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.
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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.
Previous report
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.
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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.
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Previous wording
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.
Current wording
This 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.
Previous wording
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.
Current wording
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 elsewhere in this Report.
Previous wording
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.
Current wording
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,” Note 5, “Loans and Leases” and
Previous wording
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.
Current wording
To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use certain non-GAAP financial measures, such as operating net income available to common shareholders, operating earnings per diluted common share, return on average tangible common equity, operating return on average tangible common equity, return on average tangible assets, tangible book value per common share, the ratio of tangible common equity to tangible assets, 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.
Previous wording
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”.
Current wording
These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”.
Previous wording
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.
Current wording
Management believes certain items (e.g. merger expenses, FDIC special assessment and realized loss on investment securities restructuring) are not organic to running our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.
Previous wording
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.
Current wording
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, 2024, we had 349 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.
Previous wording
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.
Current wording
For 2024, net income available to common shareholders was $459.3 million, or $1.27 per diluted common share. Comparatively, net income available to common shareholders for 2023 totaled $476.8 million, or $1.31 per diluted common share. On an operating basis, 2024 earnings per diluted common share (non-GAAP) was $1.39, excluding $0.12 per diluted common share (non-GAAP) of significant items impacting earnings. Operating earnings per diluted common share (non-GAAP) for 2023 was $1.57, excluding $0.26 per diluted common share of significant items impacting earnings.
Previous wording
•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.
Current wording
•The provision for credit losses totaled $79.8 million, compared to $71.8 million. The provision for credit losses increase for 2024 was primarily due to loan growth and net charge-off activity. The provision for credit losses increase 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.
Previous wording
•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.
Current wording
•Non-interest income was $316.4 million, increasing $62.1 million, or 24.4%, compared to $254.3 million, primarily due to increases in service charges, wealth management, mortgage banking operations, dividends on non-marketable equity securities and other non-interest income, partially offset by decreases in interchange and card transaction fees, insurance commissions and fees and capital markets income. Additionally, we recognized a $34.0 million realized loss (pre-tax) on an investment securities restructuring in 2024 compared to a $67.4 million realized loss (pre-tax) on an investment securities restructuring in 2023. On an operating basis (non-GAAP), non-interest income totaled a record $350.4 million, compared to $321.7 million.
Previous wording
•The efficiency ratio (non-GAAP) remained at a favorable level of 51.2%, compared to 52.1%.
Current wording
•The efficiency ratio (non-GAAP) remained at a favorable level of 55.6%, compared to 51.2%.
Previous wording
•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.
Current wording
•Income tax expense decreased $8.4 million, or 8.5%. The effective tax rate was 16.3%, compared to 16.9%, primarily due to renewable energy investment tax credits recognized in 2024 and 2023 as part of solar project financing transactions originated by our commercial leasing business.
Previous wording
Balance Sheet Highlights (period-end balances, 2023 compared to 2022, unless otherwise indicated)
Current wording
Balance Sheet Highlights (2024 compared to 2023, unless otherwise indicated)
Previous wording
•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.
Current wording
•Total assets were $48.6 billion, compared to $46.2 billion, an increase of $2.5 billion, or 5.3%, primarily from organic growth in loans of $1.6 billion and increased cash and cash equivalents of $0.8 billion.
Previous wording
•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.
Current wording
•The ratio of loans to deposits was 91.5%, compared to 93.1%, as deposit growth outpaced loan growth on a year-over-year basis.
Previous wording
•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.
Current wording
•The ACL on loans and leases totaled $423 million at December 31, 2024, compared to $406 million with the increase reflecting net loan growth. The ratio of the ACL to total loans and leases was stable at 1.25%.
Previous wording
•The dividend payout ratio for 2023 was 36.5%, compared to 39.5%.
Current wording
•The dividend payout ratio for 2024 was 38.0%, compared to 36.5%.
Previous wording
•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.
Current wording
•Book value per common share of $17.52 increased 5.8%, and tangible book value per common share (non-GAAP) of $10.49 increased $1.02, or 10.8%. AOCI reduced the tangible book value per common share (non-GAAP) by $0.47 as of December 31, 2024, compared to $0.65 at the end of 2023, primarily due to the impact of higher interest rates on the fair value of AFS securities, partially offset by the 2024 securities repositioning.
Previous wording
•The CET1 regulatory capital ratio was 10.04%, benefiting from retained earnings growth, compared to 9.82%.
Current wording
•The CET1 regulatory risk-based capital ratio was 10.58% at December 31, 2024, benefiting from retained earnings growth, compared to 10.04% at December 31, 2023.
Previous wording
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.
Current wording
Net interest income on an FTE basis (non-GAAP) of $1.3 billion decreased $36.7 million, or 2.8%. These decreases were primarily due to higher interest-bearing deposit costs from balance growth in higher yielding deposit products, the FOMC cutting the federal funds target rate by 100 basis points during 2024 and higher total average borrowings, partially offset by growth in earning assets and higher earning asset yields. Average interest-earning assets of $41.8 billion increased $2.1 billion, or 5.2%, primarily driven by an increase of $1.9 billion in average loans and leases, which included organic loan origination activity and an indirect auto loan sale. Average interest-bearing liabilities of $29.8 billion increased $2.8 billion, or 10.4%, driven by an increase of $2.2 billion in average interest-bearing deposits, which included organic growth in new and existing customer relationships, and an increase in average borrowings of $0.6 billion. Net interest margin FTE (non-GAAP) was 3.09% compared to 3.35%. The yield on earning assets increased 42 basis points to 5.42%, reflecting variable-rate loans that repriced upwards in 2024, 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 72 basis points to 2.45%, primarily due to an 83 basis point increase in interest-bearing deposit costs. The rates paid on short-term and long-term borrowings increased 105 and 24 basis points, respectively, due to the higher interest rate environment throughout much of 2024. Additionally, average non-interest-bearing demand deposits decreased $1.0 billion, or 9.2%, as customers shifted balances into higher yielding deposit products.
Previous wording
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 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.
Current wording
Interest income on an FTE basis (non-GAAP) of $2.3 billion for 2024, increased $278.8 million, or 14.0%, from 2023, resulting from the higher interest rate environment for much of 2024 until the FOMC began cutting the federal funds target rate by 100 basis points between September 2024 and December 2024 and an increase in interest-earning assets of $2.1 billion. The increase in earning assets was primarily driven by a $1.9 billion, or 6.2%, increase in average loans and $65.6 million, or 0.9%, increase in average securities, partially offset by a decrease of $36.9 million, or 3.5%, in average interest-bearing deposits with banks. Growth in total average commercial loans included $867.0 million, or 7.4%, in commercial real estate loans and an increase of $189.3 million, or 2.6%, in commercial and industrial loans driven by a combination of organic loan origination activity led by the Cleveland, Pittsburgh and South Carolina markets and fundings on previously originated commercial real estate projects. Average consumer loans increased $808.6 million, or 7.0%, with an increase in residential mortgage loans of $1.3 billion, or 22.4%, 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. This growth was partially offset by a decrease in indirect installment loans of $511.0 million, or 33.7%, reflecting the auto loan sales that closed in the first and third quarters of 2024. Also, the net increase in investment securities interest income was primarily the result of balance sheet repositioning actions, as the average total securities portfolio yield increased 60 basis points.
Previous wording
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.
Current wording
Interest expense of $971.7 million for 2024 increased $315.6 million, or 48.1%, from 2023 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 resulting from numerous deposit gathering initiatives. Average interest-bearing deposits increased $2.2 billion, or 9.5%, which reflected the benefit of solid organic growth in customer relationships. Average time deposits increased $1.8 billion, or 33.9%, as customers continued to migrate balances into higher-yielding products. Average long-term borrowings increased $607.0 million, or 36.0%, primarily due to an increase of $638.2 million in long-term FHLB borrowings. Additionally, during the fourth quarter of 2024, we issued $500 million aggregate principal amount of senior notes due in 2030. The rate paid on interest-bearing liabilities increased 83 basis points to 3.26% for 2024, compared to 2023, as the cost of interest-bearing deposits increased 83 basis points from 2.13% to 2.96%.
Previous wording
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:
Current wording
Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the provision for credit loss expense and net charge-offs for the years 2022 through 2024:
Previous wording
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 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.
Current wording
Provision for credit losses of $79.8 million during 2024 increased $8.0 million from 2023. The provision for credit losses in 2024 was primarily due to loan growth and charge-off activity, while the provision for credit losses in 2023 was primarily due to loan growth, CECL-related model impacts from forecasted macroeconomic conditions and charge-off activity, including a $31.9 million isolated commercial loan that was charged-off due to alleged fraud. Our non-performing loan coverage position remains strong at 265%. For 2024, net charge-offs were $62.7 million, or 0.19% of total average loans, compared to 2023 net charge-offs of $67.8 million, or 0.22% of total average loans. The ACL was $422.8 million as of December 31, 2024, an increase of $17.2 million from December 31, 2023, with the ratio of the ACL to total loans and leases remaining stable at 1.25%. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses section of this MD&A.
Previous wording
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.
Current wording
Total non-interest income increased $62.1 million, or 24.4%. Excluding significant items totaling $34.0 million in 2024 and $67.4 million in 2023, operating non-interest income (non-GAAP) increased $28.7 million, or 8.9%, to a record level. The variances in significant individual non-interest income items between 2024 and 2023 are explained in the following paragraphs.
Previous wording
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.
Current wording
Dividends on non-marketable equity securities increased $3.8 million, or 17.8%, reflecting higher FHLB dividends primarily due to additional borrowings combined with a higher dividend rate.
Previous wording
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.
Current wording
Total non-interest expense increased $45.9 million, or 5.0%. Excluding significant items totaling $19.1 million in 2024 and $48.8 million in 2023, operating non-interest expense (non-GAAP) increased $75.7 million, or 8.7%. The variances in significant individual non-interest expense items between 2024 and 2023 are explained in the following paragraphs.
Previous wording
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.
Current wording
Outside services increased $12.3 million, or 14.6%, with higher volume-related technology and third-party costs associated with ongoing investments in our enterprise risk management framework and digital banking capabilities.
Previous wording
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.
Current wording
Our income tax expense for 2024 decreased $8.4 million, or 8.5%, from 2023. The effective tax rate was 16.3% for 2024, compared to 16.9% for 2023, primarily due to the recording of higher levels of renewable energy investment tax credits and lower pre-tax earnings in 2024. 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.
Previous wording
The increase in both assets and liabilities is primarily due to strong organic loan and borrowings growth.
Current wording
The increase in both assets and liabilities is primarily due to solid organic loan growth and robust deposit growth.
Previous wording
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.
Current wording
The loan and lease portfolio consists principally of loans and leases to individuals and small- and medium-sized businesses within our primary markets in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. Loans held for sale declined $270 million, or 55.3%, from December 31, 2023 due primarily to the sale of $332 million of indirect auto loans that closed in the first quarter of 2024.
Previous wording
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.
Current wording
Total loans and leases increased $1.6 billion, or 5.0%, to $33.9 billion at December 31, 2024, compared to $32.3 billion at December 31, 2023, reflecting an increase in consumer loans of $949.0 million, or 8.0%, and commercial loans and leases increased $667.2 million or 3.3%. Our organic loan growth in 2024 was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
Previous wording
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.
Current wording
As of both December 31, 2024 and 2023, 29.0% of the commercial real estate loans were owner-occupied, while the remaining 71.0% were non-owner-occupied. As of December 31, 2024 and 2023, we had commercial construction loans of $2.4 billion and $2.1 billion, respectively, representing 7.2% and 6.6% of total loans and leases, respectively. Additionally, as of December 31, 2024 and 2023, we had residential construction loans of $277.0 million and $360.6 million, respectively, representing 0.8% and 1.1% of total loans and leases, respectively. Our commercial real estate portfolio included $9.0 billion of non-owner occupied loans, of which 18.7% represented office loans. Our top 25 non-owner occupied commercial real estate loans averaged approximately $22 million per exposure with the office component comprised of mid-sized offices primarily located outside of central business districts with 43% of the office portfolio averaging less than $5 million per exposure.
Previous wording
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.
Current wording
The decrease in indirect installment loans is primarily due to the sale of $431 million of indirect auto loans that closed in the third quarter of 2024.
Previous wording
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.
Current wording
Non-accrual loans of $159.6 million at December 31, 2024 increased $52.4 million, or 48.9%, compared to December 31, 2023, attributed to a small number of commercial real estate loans, with both periods remaining at relatively low levels.
Previous wording
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.
Current wording
At December 31, 2024 and 2023, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at December 31, 2024, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which increases 7.4% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 3.9% over our R&S forecast period, (iii) S&P Volatility, which increases 34.9% in 2025 and 2.5% in 2026 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below the historical through-the-cycle period. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2023 included, but were not limited to: (i) the purchase only Housing Price Index, which increases 5.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 0.1% over our R&S forecast period, (iii) S&P Volatility, which decreases 4.0% in 2024 and 2.9% in 2025 and (iv) bankruptcies, which increase steadily over the R&S forecast period but average below the historical through the cycle period.
Previous wording
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.
Current wording
The ACL on loans and leases of $422.8 million at December 31, 2024 increased $17.2 million, or 4.3%, from December 31, 2023. Our ending ACL coverage ratio at both December 31, 2024 and December 31, 2023 was 1.25%. Total provision for credit losses during 2024 was $79.8 million, compared to $71.8 million for the same period in 2023. The year-over-year increase was driven primarily by loan growth and an increase in substandard commercial real estate loans. Net charge-offs were $62.7 million, or 0.19%, of total average loans, compared to $67.7 million, or 0.22%, in 2023. The ACL as a percentage of non-performing loans for the total portfolio decreased from 378% as of December 31, 2023 to 265% remaining at an adequate level as of December 31, 2024.
Previous wording
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.
Current wording
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 shareholders’ equity. A change in the value of securities HTM could also negatively affect the level of shareholders’ 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, 2024, securities HTM had a CECL ACL of $0.25 million.
Previous wording
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.
Current wording
As of December 31, 2024, AFS securities comprised 47% of the total securities portfolio and HTM securities comprised 53% of the total securities portfolio. As of December 31, 2024 and 2023, we did not hold any trading securities.
Previous wording
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.
Current wording
We completed the sale of $231.4 million of AFS investment securities in November 2024, which resulted in a realized loss (pre-tax) of $34.0 million in the fourth quarter of 2024. We reinvested proceeds from the sale of those investment securities with an average yield of 1.41% into investment securities yielding 4.78% with a similar duration and convexity profile. In December 2023, we completed the sale of $648.7 million of AFS investment securities, resulting 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.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Note 6, “Allowance for Credit Losses on Loans and Leases” in the Notes to Consolidated Financial Statements for further information on the ACL.
Current report — wording carried from elsewhere
As of December 31, 2024, debt securities classified as AFS and HTM totaled $3.5 billion and $4.0 billion, respectively. During 2024, debt securities AFS increased by $213.1 million and debt securities HTM increased by $67.1 million from December 31,
Current report — wording carried from elsewhere
Bank-level liquidity sources from assets include payments from loans and investments, as well as the ability to securitize, pledge or sell loans, investment securities and other assets. Liquidity sources from liabilities are generated primarily through the banking offices of FNBPA in the form of deposits and customer repurchase agreements. The Bank also has access to reliable and cost-effective wholesale sources of liquidity. Short- and long-term funds are available for use to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if faced with a liquidity crisis.
Current report — wording carried from elsewhere
At December 31, 2024, approximately 77% of our deposits were insured by the FDIC or collateralized, stable with December 31, 2023. Our cash balances held at the FRB were $2.0 billion at December 31, 2024 and $1.1 billion at December 31, 2023. Management will continue to evaluate appropriate levels of liquidity based on expected loan and deposit growth and other balance sheet activity.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The LCR and MCH ratios and Parent company cash on hand are presented in the following table:
Previous report — wording carried elsewhere
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.