F.N.B. Corporation Reports Fourth Quarter and Full Year 2022 Earnings

^{Non-GAAP measures referenced in this release are used by management to measure performance in operating the business that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release. For more information regarding our use of non-GAAP measures, please refer to the discussion herein under the caption, Use of Non-GAAP Financial Measures and Key Performance Indicators.}

Fourth Quarter 2022 Results – Comparison to Prior-Year Quarter
(All comparisons refer to the fourth quarter of 2021, except as noted)

Net interest income totaled $334.9 million, an increase of $111.6 million, or 50.0%, compared to $223.3 million, as total average earning assets increased $2.9 billion, or 8.2%, including a $4.6 billion increase in average loans and leases from organic origination activity and acquired Howard and Union loans, as well as a $786.1 million increase in average investment securities. These increases were partially funded by excess cash, which decreased by $2.4 billion. In addition to the growth in average earning assets, net interest income benefited from the repricing impact of the higher interest rate environment on earning asset yields, which was partially offset by the higher cost of interest-bearing deposit accounts.

The net interest margin (FTE) (non-GAAP) increased 98 basis points to 3.53%, as the yield on earning assets (non-GAAP) increased 149 basis points to 4.29%, primarily due to higher yields on loans and investment securities reflecting the higher interest rate environment. The total cost of funds increased 55 basis points to 0.80% with an 81 basis point increase in interest-bearing deposit costs to 0.98%, as well as an increase of 123 basis points in long-term debt cost, partially due to the August 2022 offering of $350 million aggregate principal amount of 5.150% fixed rate senior notes due in 2025.

Average loans and leases totaled $29.4 billion, an increase of $4.6 billion, or 18.7%, including growth of $2.4 billion in consumer loans and $2.2 billion in commercial loans and leases. The increase in average commercial loans and leases included $1.2 billion, or 12.3%, in commercial real estate balance growth and $951.7 million, or 15.9%, in commercial and industrial loan growth driven by a combination of organic loan origination activity and the Howard and Union acquisitions. Organic commercial growth since the year-ago quarter was led by the Pittsburgh, Cleveland and North Carolina markets. The increase in average consumer loans included a $1.5 billion increase in residential mortgages reflecting adjustable-rate mortgages which we currently hold in portfolio, the continued success of the Physicians First mortgage program and a $479.4 million increase in direct home equity installment loans driven by a combination of strong organic loan origination activity and the Howard and Union acquisitions. Average PPP loans declined $471.4 million, or 93.8%, from the year-ago quarter as the portfolio winds down.

Average deposits totaled $33.9 billion with growth in average non-interest-bearing demand deposits of $1.0 billion, or 9.5%, average interest-bearing demand deposits of $557.9 million, or 3.9%, average savings deposits of $498.1 million, or 13.9% and average time deposits of $176.0 million, or 6.0%. The increase in average deposits reflected organic growth in new and existing customer relationships and inflows from the Howard and Union acquisitions. The funding mix was consistent with the year-ago quarter levels with non-interest-bearing deposits comprising 34% of total deposits at quarter-end.

Non-interest income totaled $80.6 million, an increase of $1.6 million, or 2.1%, compared to the fourth quarter of 2021. Service charges increased $3.1 million, or 9.5%, driven by interchange fees, increases in treasury management services and higher customer activity. Capital markets income totaled $10.0 million, an increase of $0.5 million, or 4.9%, led by an increase in syndications and solid contributions from swap fees and international banking. Mortgage banking operations income decreased $3.2 million as secondary market revenue and mortgage held-for-sale pipelines declined from 2021 levels given the sharp increase in mortgage rates in 2022 and adjustable-rate mortgage originations being held in portfolio.

Non-interest expense totaled $211.1 million, increasing $29.6 million, or 16.3%. On an operating basis (non-GAAP), non-interest expense totaled $195.8 million, an increase of $15.0 million, or 8.3%, compared to the fourth quarter of 2021. Net occupancy and equipment increased $7.8 million, or 25.2%, primarily from the acquired Howard and Union expense bases, as well as $2.2 million of branch consolidation costs in the fourth quarter of 2022. Outside services increased $2.6 million, or 15.0%, with higher volume-related technology and third-party costs, as well as the acquired Howard and Union expense bases. The efficiency ratio (non-GAAP) equaled a record 45.8%, compared to 58.1%, reflecting the strong operating leverage gained from the record levels of net interest income combined with disciplined expense management.

The ratio of non-performing loans and other real estate owned (OREO) to total loans and OREO increased 1 basis point to 0.39%. Total delinquency increased 10 basis points to 0.71%, compared to 0.61% at December 31, 2021, and continues to remain at a historically low level.

The provision for credit losses was $28.6 million, compared to a net benefit of $2.4 million in the fourth quarter of 2021, including $9.4 million of initial provision for non-purchase credit deteriorated (non-PCD) loans associated with the Union acquisition. The additional increase in provision for credit losses was primarily due to loan growth, CECL-related model impacts from forecasted macroeconomic conditions, and charge-off activity. The fourth quarter of 2022 reflected net charge-offs of $11.9 million, or 0.16% annualized, of total average loans, compared to $1.4 million, or 0.02% annualized, in the fourth quarter of 2021. While slightly elevated from recent quarters, net charge-offs remain at historically low levels. The ratio of the allowance for credit losses (ACL) to total loans and leases decreased 5 basis points to 1.33%, reflecting the strong loan growth.

The effective tax rate was 20.6%, compared to 20.0% in the fourth quarter of 2021.

The CET1 regulatory capital ratio was 9.8% (estimated), compared to 9.9% at December 31, 2021. Tangible book value per common share (non-GAAP) was $8.27 at December 31, 2022, a decrease of $0.32, or 3.7%, from $8.59 at December 31, 2021. AOCI reduced the current quarter tangible book value per common share by $0.99, compared to a reduction of $0.19 at the end of 2021, primarily due to the increase in unrealized losses on AFS securities resulting from the higher interest rate environment.

Fourth Quarter 2022 Results – Comparison to Prior Quarter
(All comparisons refer to the third quarter of 2022, except as noted)

Net interest income totaled $334.9 million, an increase of $37.8 million, or 12.7%, from the prior quarter total of $297.1 million, primarily due to growth in average earning assets and benefits from the higher interest rate environment. The resulting net interest margin (FTE) (non-GAAP) increased 34 basis points to 3.53% driven by the higher yields on new loan originations and investment securities purchases, as well as the asset sensitive position of the balance sheet in conjunction with the continued FOMC interest rate hikes.

Total average earning assets increased $672.1 million, or 1.8%, to $38.1 billion. The total yield on earning assets (non-GAAP) increased 62 basis points to 4.29%, due to benefits from the asset sensitive positioning of the balance sheet, including higher yields on variable-rate loans, investment securities and interest-bearing deposits with banks. The total cost of funds increased 30 basis points to 0.80%, as total long-term debt increased 41 basis points to 4.29% and the cost of interest-bearing deposits increased 41 basis points to 0.98%.

Average loans and leases totaled $29.4 billion, an increase of $929.5 million, or 3.3%, as average commercial loans and leases increased $482.5 million, or 2.7%, and average consumer loans increased $447.0 million, or 4.3%, compared to the third quarter of 2022. Average commercial loans and leases included growth of $283.7 million, or 4.3%, in commercial and industrial loans and $153.5 million, or 1.4%, in commercial real estate. The organic quarterly growth in commercial loans and leases was led by the Cleveland, Pittsburgh and key Pennsylvania markets. Consumer loan growth reflected average residential mortgages increasing $361.5 million, or 7.6%, and average indirect auto balances increasing $80.5 million, or 5.5%. The consumer loan growth was driven by organic loan origination activity, reflecting growth in adjustable-rate mortgages and the continued success of the Physicians First mortgage program.

Average deposits totaled $33.9 billion, increasing $301.0 million, or 0.9%, with increases in interest-bearing demand deposits of $63.4 million, or 0.4%, time deposits of $164.3 million, or 5.5% and savings balances of $97.6 million, or 2.4%, partially offset by a slight decline in non-interest-bearing deposits of $24.3 million, or 0.2%. The loan-to-deposit ratio was 87.0% at December 31, 2022, compared to 84.9% at September 30, 2022, reflecting strong loan growth in the fourth quarter of 2022.

Non-interest income totaled $80.6 million, a $1.9 million, or 2.2%, decrease from the prior quarter.   Mortgage banking operations income decreased $2.4 million, or 47.3%, reflecting a decline in sold mortgage volume and lower gain on sale margins. Insurance commissions and fees decreased $1.3 million, or 22.2%, reflecting seasonality in the fourth quarter. Dividends on non-marketable equity securities increased $0.5 million, or 15.9%, due to an increase in the FHLB dividend rate. Capital markets income was $10.0 million, an increase of $0.4 million, or 4.3%, with solid contributions from syndications, swap fees and international banking.

Non-interest expense totaled $211.1 million, an increase of $16.1 million, or 8.2%. On an operating basis (non-GAAP), non-interest expense increased $2.8 million, or 1.5%, compared to the prior quarter. Net occupancy and equipment increased $4.1 million, or 11.8%, reflecting the addition of the Union expense base, and $2.2 million related to branch consolidation costs in the fourth quarter. Other non-interest expense increased $4.4 million, or 26.9%, primarily from charitable contributions that qualified for Pennsylvania bank shares tax credits. Marketing increased $1.4 million, or 43.7%, due to the timing of digital advertising spend and campaigns. Salaries and employee benefits decreased $3.1 million, or 2.9%, due to lower medical costs and seasonally lower production and performance-related incentives. The efficiency ratio (non-GAAP) equaled 45.8%, compared to 49.4%, reflecting the well-managed operating expense levels and strong revenue growth.

The ratio of non-performing loans and OREO to total loans and OREO increased 7 basis points to 0.39%, continuing to remain at historically low levels. Total delinquency increased 12 basis points to 0.71%, compared to 0.59% at September 30, 2022, also remaining at historically low levels.

The provision for credit losses was $28.6 million, compared to $11.2 million, including $9.4 million of initial provision for non-PCD loans associated with the Union acquisition. The additional increase in provision for credit losses was driven by strong loan growth, CECL-related model impacts from forecasted macroeconomic conditions, and charge-off activity. The fourth quarter of 2022 reflected net charge-offs of $11.9 million, or 0.16% annualized, of total average loans, compared to $2.8 million, or 0.04% annualized. While slightly elevated from recent quarters, net charge-offs remain at historically low levels. The ratio of the ACL to total loans and leases was 1.33% at December 31, 2022, compared to 1.34% at September 30, 2022.

The effective tax rate was 20.6%, compared to 20.7% for the third quarter of 2022.

The CET1 regulatory capital ratio was 9.8% (estimated), increasing from 9.7% at September 30, 2022, benefiting from the strong retained earnings growth in the quarter. Tangible book value per common share (non-GAAP) was $8.27 at December 31, 2022, an increase of $0.25 per share from September 30, 2022. AOCI reduced the current quarter-end tangible book value per common share by $0.99 reflecting unrealized losses on AFS securities caused by the higher interest rate environment, a $0.09 improvement compared to a reduction of $1.08 at the end of the prior quarter.

December 31, 2022 Full-Year Results – Comparison to 2021 Full-Year Period

Net interest income totaled $1.1 billion, increasing $213.3 million, or 23.5%, as the higher interest rate environment benefited earning asset yields given the asset sensitive positioning of the balance sheet and the higher yields on new loan originations and investment securities purchases. The net interest margin (FTE) (non-GAAP) increased 35 basis points to 3.03%. The yield on earning assets (non-GAAP) increased 50 basis points to 3.47%, reflecting higher yields on variable-rate loans, investment securities and excess cash balances, partially offset by significant reductions in PPP contributions. The cost of funds increased 16 basis points to 0.46% due to the cost of interest-bearing deposits increasing 26 basis points to 0.49%, and long-term debt increasing 121 basis points primarily from the August 2022 offering of $350 million in senior notes. These increases were partially offset by strong growth in non-interest-bearing deposits.

Average loans totaled $27.8 billion, an increase of $2.8 billion, or 11.0%, including growth of $1.8 billion in consumer loans and $927.0 million in commercial loans and leases. Growth in total average commercial loans included $964.9 million, or 9.9%, in commercial real estate growth, partially offset by a decline of $113.9 million, or 1.7%, in commercial and industrial loans reflecting average PPP loans declining $1.4 billion. The healthy organic growth in full-year 2022 is primarily attributable to growth across our diverse footprint, with the largest increases noted in the Cleveland, Pittsburgh, and South Carolina markets. Growth in total average consumer loans was due to an increase in residential mortgage loans of $1.1 billion, or 31.5%, direct home equity installment loans of $533.8 million, or 24.9%, and indirect installment loans of $162.1 million, or 13.3%. Full-year average loan growth also benefited from the addition of the Howard-acquired loans in January 2022.

Average deposits totaled $33.6 billion, increasing $3.0 billion, or 9.7%, led by growth of $1.5 billion, or 15.4%, in non-interest-bearing deposits, $1.1 billion, or 7.8%, in interest-bearing demand deposits and $533.5 million, or 15.5% in savings deposits, driven by solid organic growth in customer relationships, as well as the Howard and Union acquisitions. Average time deposits declined $204.1 million, or 6.4%, as customer preferences had shifted to more liquid accounts, however, customers' preferences are starting to shift back to time deposits as interest rates increase.

Non-interest income totaled $323.6 million, decreasing $6.9 million, or 2.1%. Mortgage banking operations income decreased $16.7 million, or 44.7%, as secondary market revenue and mortgage held-for-sale pipelines declined from elevated levels in 2021 due to the sharp increase in interest rates throughout 2022 and the return of gain on sale margins to historical levels. Other non-interest income declined $6.8 million, or 26.4%, as Small Business Administration (SBA) premium income declined $6.2 million from elevated levels due to the higher interest rate environment leading to lower sold loan volumes and lower market premiums. Bank-owned life insurance decreased $2.9 million, or 19.7%, primarily due to higher life insurance claims in the prior year. Capital markets decreased $1.5 million, or 4.1%, as swap activity decreased from elevated levels, which was partially offset by an increase in syndications revenue. Service charges increased $16.0 million, or 13.1%, driven by interchange fees, increases in treasury management services and higher customer activity. Wealth management revenues increased $3.2 million, or 5.3%, as securities commissions and fees and trust income increased 6.8% and 4.5%, respectively, through contributions across the geographic footprint and an increase in assets under management.

Non-interest expense totaled $826.4 million, an increase of $93.2 million, or 12.7%, from 2021. Excluding significant items totaling $52.3 million in 2022 and $4.4 million in 2021, operating non-interest expense (non-GAAP) increased $45.4 million, or 6.2%. Occupancy and equipment increased $16.1 million, or 12.6%, primarily from technology-related investments and the acquired Howard and Union expense bases. Salaries and employee benefits increased $7.9 million, or 1.9%, related to normal merit increases and the acquired Howard and Union expense bases. FDIC insurance increased $2.5 million, or 14.2%, primarily due to loan growth and balance sheet mix shift. Other non-interest expense increased $16.3 million, or 28.6%, primarily due to increases in business development and other operational costs, as well as branch consolidation costs of $2.8 million in 2022. The efficiency ratio (non-GAAP) equaled 52.1% on a full-year basis, compared to 57.2% for 2021.

The provision for credit losses was $64.2 million. Excluding $28.5 million of initial provision for non-PCD loans associated with the Howard and Union acquisitions, provision for credit losses was $35.7 million, on an operating basis (non-GAAP), compared to $0.6 million in 2021 driven primarily by significant loan growth as well as CECL-related model impacts from forecasted macroeconomic conditions and lower prepayment speed assumptions. Net charge-offs totaled $16.2 million, or 0.06% of total average loans, compared to $13.9 million, or 0.06%, in 2021.

The effective tax rate was 20.6% for 2022, compared to 19.6% in 2021. The increase was driven by higher pre-tax earnings, higher state income taxes and increased FDIC insurance deduction disallowance.

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 equity, 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, provision for credit losses, excluding the initial provision for non-PCD loans associated with the Howard and Union acquisitions, pre-provision net revenue to average tangible common equity, efficiency ratio, and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends.

These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. When non-GAAP financial measures are disclosed, the Securities and Exchange Commission's (SEC) 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 release under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP.”

Management believes items such as merger expenses, 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. The merger expenses and branch consolidation costs principally represent expenses to satisfy contractual obligations of the acquired entity or closed branch without any useful ongoing benefit to us. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable-equivalent amounts for the 2022 and 2021 periods were calculated using a federal statutory income tax rate of 21%.

Cautionary Statement Regarding Forward-Looking Information
This document may contain statements regarding F.N.B. Corporation’s 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.

FNB’s forward-looking statements are subject to the following principal risks and uncertainties: