FNB US Equity☆

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

OPERATIONS

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

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

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

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

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

•Business and operating results can also be affected by widespread natural and other disasters, pandemics, including the ongoing COVID-19 pandemic crisis, dislocations, terrorist activities, system failures, security breaches, significant political events, cyber-attacks or international hostilities through impacts on the economy and financial markets generally, or on us or our counterparties specifically.

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

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

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

◦Unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries. These matters may result in monetary judgments or settlements or other remedies, including fines, penalties, restitution or alterations in our business practices, and in additional expenses and collateral costs, and may cause reputational harm to FNB.

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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.

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

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

•The COVID-19 pandemic and the federal, state and local regulatory and governmental actions implemented in response to COVID-19 have resulted in significant deterioration and disruption in financial markets, national and local economic conditions and record levels of unemployment and business failures, and could have a material impact on, among other things, our business, financial condition, results of operations or liquidity, or on our management, employees, customers and critical vendors and suppliers. In view of the many unknowns associated with the COVID-19 pandemic, our forward-looking statements continue to be subject to various conditions that may be substantially different than what we are currently expecting, including, but not limited to, a weakened U.S. economic recovery, prolonged economic recovery, deterioration of commercial and consumer customer fundamentals and sentiments, and impairment of the recovery of the U.S. labor market. As a result, the COVID-19 outbreaks and its consequences, including responsive measures to manage it or provide relief and the uncertainty regarding its duration, may possibly have a material adverse impact on our business, operations and financial performance.

The risks identified here are not exclusive or the types of risks we may confront and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A. Risk Factors and Risk Management sections in this Annual Report on Form 10-K (including the MD&A section), our subsequent 2021 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-relations-shareholder-services. More specifically, our forward-looking statements may be subject to the evolving risks and uncertainties related to the COVID-19 pandemic and its macro-economic impact and the resulting governmental, business and societal responses to it. We have included our web address as an inactive textual reference only. Information on our website is not part of this Report.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our Consolidated Financial Statements are prepared in accordance with GAAP. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions and judgments. Certain policies inherently are based to a greater extent on estimates, assumptions and judgments of management and, as such, have a greater possibility of producing results that could be materially different than originally reported. For example, on January 1, 2020, we adopted CECL. Under the CECL methodology, the ACL represents the expected lifetime credit losses on loans and leases that we do not expect to collect.

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

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

Allowance for Credit Losses

The ACL is a valuation account that is deducted from the amortized cost basis of loans and leases resulting in the net amount expected to be collected. We charge off loans against the ACL in accordance with our policies or if a loss confirming event occurs. Expected recoveries do not exceed the aggregate of the amounts previously charged-off and expected to be charged-off.

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The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation: a third-party macroeconomic forecast scenario; a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period. Adjustments to historical loss information, where applicable, are made for differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters and other relevant factors. Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a R&S forecast can be made, the model reverts over 12 months on a straight-line basis back to the historical rates of default and severity of loss over the remaining life of the loans.

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

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

Fair Value of Financial Instruments

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

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

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

Goodwill and Other Intangible Assets

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

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

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

In connection with the preparation of the year-end 2020 financial statements, we completed our annual goodwill impairment test as of October 1, 2020 which included certain assumption updates to market levels. The excess of fair values over carrying values, or cushion, of our reporting units as a percentage of their carrying value ranged from 11% in our Community Banking reporting unit to greater than 50% in our Wealth and Insurance reporting units, resulting in the conclusion that the goodwill assigned to each reporting unit, as of October 1, 2020, was not impaired. We also performed a qualitative analysis and concluded that it was not more-likely-than-not that the fair value of one or more of our reporting units was below its respective carrying amount, and therefore no triggering event has occurred, as of December 31, 2020. If economic conditions deteriorate, or the pandemic’s effects prolong or worsen, it may be more-likely-than-not that the fair value of one or more of our reporting units falls below its respective carrying amount, which would require us to perform a quantitative goodwill impairment test before our next annual assessment. Any impairment charge would not affect our capital ratios, tangible common equity, tangible book value per share or liquidity position.

Inputs and assumptions used in estimating fair value include projected future cash flows, discount rates reflecting the risk inherent in future cash flows, long-term growth rates, anticipated cost savings and an evaluation of market comparables and recent transactions. We considered the sensitivity of significant assumptions in our impairment analysis including consideration of changes in estimated future cash flows and change in the discount rate for each reporting unit. The hypothetical sensitivity of the estimated fair value of our Community Banking reporting unit to an immediate and isolated increase of 100 basis points in the discount rate assumption at October 1, 2020, without consideration of any offsetting or simultaneous effects of other key assumptions, would not result in impairment, but could reduce the excess fair value over the carrying value below 5%. The purpose of this sensitivity is to provide an indication of the isolated impacts of hypothetical alternative assumptions on modeled fair value estimates and is not considered probable.

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

Income Taxes and Deferred Tax Assets

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

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

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

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

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

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Litigation Reserves

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

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

Recent Accounting Pronouncements and Developments

Note 2, “New Accounting Standards” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report, discusses new accounting pronouncements adopted by us in 2020 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted.

USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS

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

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

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

To provide more meaningful 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 2020, 2019 and 2018 periods were calculated using a federal statutory income tax rate of 21%.

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OVERVIEW

FNB, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; and Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina. As of December 31, 2020, we had 358 banking offices throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina and South Carolina. 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, business credit, capital markets and lease financing. Consumer banking products and services include deposit products, mortgage lending, consumer lending and a complete suite of mobile and online banking services. Wealth management services include asset management, private banking and insurance.

FINANCIAL SUMMARY

For the full year of 2020, net income available to common stockholders was $278.0 million, or $0.85 per diluted common share. Comparatively, full-year 2019 net income available to common stockholders totaled $379.2 million, or $1.16 per diluted common share. On an operating basis, full-year 2020 earnings per diluted common share (non-GAAP) was $0.96, excluding $0.11 for significant items. Operating earnings per diluted common share (non-GAAP) for the full year of 2019 was $1.18, excluding $0.02 for significant items. The results for 2020 reflect the pre-tax impact of $45.6 million of significant items, including loss on debt extinguishment and related hedge termination of $25.6 million related to the prepayment of higher-rate FHLB borrowings given continued strong deposit growth; branch consolidation costs of $18.7 million resulting from our branch optimization efforts and continued customer migration to digital channels; COVID-19 related expenses of $11.3 million, including $2.5 million in contributions to our FNB Foundation to continue to support our communities as they deal with the ongoing pandemic; and service charge refunds of $3.8 million, partially offset by a gain on the sale of all of FNBPA's holdings of Visa Class B shares of $13.8 million. Operating results for 2020 also included the successful adoption of the CECL accounting standard and elevated reserve levels to address the impact of COVID-19 on the ACL, both of which weighed on the earnings trajectory compared to 2019. Although 2020 earnings were impacted by COVID-19, total revenue was at a record level of $1.2 billion, a testament to executing our strategic initiatives while facing a near-zero interest rate environment.

Income Statement Highlights (2020 compared to 2019)

•Record total revenue was $1.2 billion.

•Net income available to common stockholders was $278.0 million, compared to $379.2 million, down 26.7%.

•Operating net income available to common stockholders (non-GAAP) was $314.0 million, compared to $386.1 million, down 18.7%.

•Earnings per diluted common share was $0.85, compared to $1.16, a decrease of 26.7%.

•Operating earnings per diluted common share (non-GAAP) was $0.96, compared to $1.18, a decrease of 18.6%.

•Net interest income was $922.1 million, compared to $917.2 million.

•Net interest margin (FTE) (non-GAAP) declined 26 basis points to 2.91% from 3.17%, primarily from the impact of lower interest rates.

•Non-interest income was $294.6 million, compared to $294.3 million.

•Non-interest expense was $750.3 million, compared to $696.1 million.

•The termination of $715 million in higher-rate FHLB borrowings, with a rate of 2.49% resulted in a loss on early debt extinguishment and related hedge termination costs of $25.6 million.

•There was a $13.8 million gain on the sale of all of FNBPA's holdings of Visa Class B shares.

•The provision for credit losses totaled $122.8 million, compared to $44.6 million, which reflected COVID-19 related macroeconomic impacts and the life-of-loan CECL reserving requirements in 2020.

•Net charge-offs totaled $59.8 million, or 0.24% of total average loans, compared to $28.3 million, or 0.12%, in 2019, reflecting COVID-19 impacts on certain segments of the loan portfolio.

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•Income tax expense decreased $26.1 million, or 31.2%, primarily due to lower pre-tax earnings and significant items.

•The effective tax rate was 16.7%, compared to 17.7%, with both years impacted by renewable energy tax credits.

•The efficiency ratio (non-GAAP) was 56.1%, compared to 54.5%, reflecting the low interest rate environment and higher non-interest expense from operations.

•Return on average tangible common equity ratio (non-GAAP) of 11.66%, compared to 16.84%.

Balance Sheet Highlights (period-end balances, 2020 compared to 2019, unless otherwise indicated)

•Total assets were $37.4 billion, compared to $34.6 billion, an increase of $2.7 billion, or 7.9%, primarily due to the origination of PPP loans during 2020, of which $2.2 billion was outstanding as of December 31, 2020.

•Growth in total average loans was $2.4 billion, or 10.7%, reflecting commercial loan growth of $2.5 billion, or 17.4%, and a $54.9 million, or 0.6%, decrease in average consumer loans reflecting the sale of $0.5 billion in indirect auto loans in 2020. Average net PPP loans were $1.6 billion in 2020, with the majority of loans originated in the second quarter of 2020.

•Total average deposits grew $3.3 billion, or 13.6%, including an increase in average non-interest-bearing deposits of $1.9 billion, or 30.6%, and an increase in average interest-bearing demand deposits of $2.0 billion, or 20.1%, partially offset by a managed decrease in average time deposits of $1.0 billion, or 19.1%. Average deposit growth reflects inflows from the PPP and government stimulus activities, in addition to organic growth in new and existing customer relationships.

•We issued $300 million of 2.20% fixed rate senior notes due 2023.

•The ratio of loans to deposits was 87.4%, compared to 94.0%, as deposit growth outpaced loan growth. Additionally, the funding mix continued to improve with non-interest-bearing deposits totaling 31% of total deposits, compared to 26%.

•The dividend payout ratio for 2020 was 56.45% compared to 41.45%.

•The delinquency ratio was 1.02%, compared to 0.94%.

•We repurchased nearly 4.0 million shares at a weighted average share price of $9.63 for $38.4 million under the existing $150 million share repurchase program.

•The ratio of the allowance for loan losses to total loans and leases was 1.43%, compared to 0.84%. Excluding PPP loans that do not carry an ACL due to a 100% government guarantee, the ACL to total loans and leases ratio equaled 1.56% at December 31, 2020.

•Tangible book value per share (non-GAAP) of $7.88 increased 5% from year-end 2019.

•Tangible common equity to tangible assets (non-GAAP) of 7.24%, decreased 34 basis points from year-end 2019 due primarily to the PPP loan impact and the 2020 Day 1 CECL adoption impact of 16 basis points.

•The CET1 ratio of 9.84 is the strongest in our history.

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TABLE 1

Reported results

Net income available to common stockholders (millions) $ 278.0 $ 379.2

Net income per diluted common share 0.85 1.16

Book value per common share (period-end) 15.09 14.70

Pre-provision net revenue (reported) (millions) 466.3 515.4

Operating results (non-GAAP)

Operating net income available to common stockholders (millions) 314.0 386.1

Operating net income per diluted common share 0.96 1.18

Tangible common equity to tangible assets (period-end) 7.24 % 7.58 %

Tangible book value per common share (period-end) $ 7.88 $ 7.53

Pre-provision net revenue (operating) (millions) 516.0 527.4

Average diluted common shares outstanding (thousands) 325,488 326,061

Significant items impacting earnings (1) (millions)

Pre-tax COVID-19 expense $ (11.3) $ —

After-tax impact of COVID-19 expense (8.9) —

Pre-tax gain on sale of Visa class B stock 13.8 —

After-tax impact of gain on sale of Visa class B stock 10.9 —

Pre-tax loss on FHLB debt extinguishment and related hedge terminations (25.6) —

Pre-tax branch consolidation costs (18.7) (4.5)

After-tax impact of branch consolidation costs (14.8) (3.6)

Pre-tax service charge refunds (3.8) (4.3)

After-tax impact of service charge refunds (3.0) (3.4)

Total significant items pre-tax $ (45.6) $ (8.8)

Total significant items after-tax $ (36.0) $ (7.0)

(1) Favorable (unfavorable) impact on earnings

Industry Developments

COVID-19

The COVID-19 pandemic has had an immense human and economic impact on the global economy. On March 22, 2020, the UST announced that financial institution employees are part of the critical infrastructure workforce and stated that these employees have a “special responsibility to maintain your normal work schedule.” As a result, financial institutions were confronted with the challenge of protecting the health and safety of their employees, while also ensuring that critical financial services such as providing consumer and commercial access to banking and lending services, maintaining core systems and the integrity and security of data, continuing the processing of payments and services, such as clearing and settlement services, wholesale funding, insurance services and capital markets activities, for the duration of the pandemic crisis period.

Our crisis and risk management processes were critical to our preparedness for the COVID-19 pandemic since we had the necessary plans in place and had conducted a pandemic emergency event scenario (involving key management and operations employees) in the fourth quarter of 2019 to test the efficacy of our pandemic response plans and to improve these plans. We were well positioned to continue providing critical financial services to our customers through multiple channels such as interactive teller machines, automated teller machines, our mobile application, and our interactive website. We adjusted our physical retail locations by focusing on “drive up” services and closed our lobbies, reverting to “by appointment only” practices, while maintaining appropriate health, sanitization, social distancing and other safety protocols consistent with the Centers for Disease Control and Prevention (CDC) and state guidelines. Based on the available COVID-19 federal data, we began to re-open our branch lobbies to customers in July 2020 while adhering to CDC safety measures, including employee and customer safety (i.e., masks), social distancing and cleaning protocols, while continuing to regularly monitor and adjust branch hours based on local COVID-19 conditions and circumstances.

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We leveraged our information technology infrastructure by making accommodations to give employees the ability to work remotely where appropriate. Our executive and senior management worked rotating schedules or from remote offices or home in order to mitigate the risk of wide-spread occurrence of the COVID-19 contagion among this group. With respect to our other employees, approximately half of our workforce worked remotely. We will continue to actively monitor case levels and consider guidance from government agencies to determine when we activate further "return-to-the workplace" schedules. Our remote and rotational working arrangements and implementation of CDC health and safety protocols have not impaired our ability to continue to operate our business. We do rely on some third parties for certain services. At this time, we have not experienced a disruption in those services.

To protect our customers and communities from economic disruption, we:

•developed a formal loan deferral program and other measures to support customers who may be enduring financial hardships;

•extended the residential mortgage foreclosure moratorium beyond the requirements for government-backed loans, under the CARES Act, to all residential mortgage loan customers; and

•actively participated in the SBA PPP, which authorized financial institutions to make federally guaranteed loans that are eligible to be forgiven to qualifying small businesses and nonprofits on the terms set forth in the CARES Act and related regulations.

We continue to evaluate other COVID-19 related FRB and federal government relief and stimulus programs to determine their suitability for our customers and communities.

COVID-19 has had a significant impact on the provision for credit losses during 2020. The uncertainty in the market, a significant increase in unemployment, and adverse economic forecasts all point to the volatility of the expected additional losses in the loan portfolio. We would expect inherent volatility in the COVID-19 impact on our provision for credit losses for the duration of the current COVID-19 pandemic environment and immediate periods following the mitigation of the pandemic crisis.

The federal banking regulators have in place certain measures to assist financial institutions in meeting the needs of our customers during this time. Some of these that impact us are as follows:

•As part of Section 4013 of the CARES Act and in accordance with federal interagency bank regulatory guidance, financial institutions have been granted temporary relief from reporting TDRs caused by COVID-19. To be eligible for TDR relief, a loan modification must be due to impacts from COVID-19, not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the national emergency. Interagency bank regulatory guidance encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and will not criticize financial institutions for working with borrowers in a safe and sound manner. Loan modification programs are considered positive actions that can mitigate adverse effects on borrowers due to COVID-19. Institutions generally do not need to categorize COVID-19-related loan modifications as TDRs if the loan modifications are short-term in nature and are made on a good-faith basis in response to COVID-19 to borrowers who were current at the time the modification program was implemented. For borrowers who were current prior to COVID-19 that have requested and been granted a concession while experiencing a hardship during the pandemic, we will not be including those modifications as past due or a TDR at the time of the concession. As of June 30, 2020, approximately $2.4 billion, or 10%, of our loan portfolio was approved during the initial deferment request window. Over 98% of the $2.4 billion of loans in deferment were current and in good standing at December 31, 2019. As of December 31, 2020, total deferrals decreased to $397 million or 1.7% of total loans and leases (excluding PPP loans).

•The regulatory agencies have agreed to allow an option to delay the effects of CECL on regulatory capital by two years for those financial institutions that adopt in 2020. This delay will be followed by a three-year transition period of 75%, 50%, and 25% respectively. We adopted CECL in January 2020 and have elected this option.

•The FRB initiated a facility to provide liquidity to financial institutions participating and funding loans for the PPP. The non-recourse loans are available to institutions eligible to make PPP loans, with the SBA-guaranteed loans pledged as collateral to the FRB. Financial institutions can also pledge PPP loans to the discount window. Each liquidity option is set at different rates and terms. PPP loans pledged to the PPPLF may be excluded from leverage ratio calculations. We have not utilized this facility, as we have ample liquidity.

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As we continue to manage through the COVID-19 challenges and meet the needs of our various constituents, our focus continues to be on our four key pillars. The pillars are: employee protection and assistance; operational response and preparedness; customer and community support; and risk management and actions taken to preserve shareholder value given the extreme challenges presented.

LIBOR

The United Kingdom’s Financial Conduct Authority (FCA), who is the regulator of LIBOR, anticipates LIBOR to retire on December 31, 2021, for one-week and two-month LIBOR rates, and June 30, 2023 for all other LIBOR rates. The FRB of New York has created a working group called the ARRC to assist U.S. institutions with a successful transition away from using LIBOR as a benchmark interest rate. Similarly, we created an internal working group that is managing our transition away from LIBOR. This working group is a cross-functional team composed of representatives from the commercial, retail and mortgage banking lines of business, as well as loan operations, information technology, legal, finance and other support functions. The committee has completed an assessment of tasks needed for the transition, identified contracts that contain LIBOR language, is in process of reviewing existing contract language for the presence of robust fallback language, developed loan fallback language for when LIBOR is retired and identified risks associated with the transition. The financial impact regarding pricing, valuation and operations of the transition is not yet known. Our transition team will work within the guidelines established by the FCA and ARRC to provide for a smooth transition away from LIBOR.

During the third quarter of 2020, we finalized the transition of new adjustable rate mortgages away from the LIBOR index to SOFR, which is the alternative rate recommended by ARRC. The effective date for this change was October 1, 2020. We also changed our valuation methodology to reflect changes made by central clearinghouses to their discounting methodology and interest calculation of cash margin to SOFR for U.S. dollar cleared interest rate swaps. The effective date for this change was October 16, 2020.

RESULTS OF OPERATIONS

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

Net income available to common stockholders for 2020 was $278.0 million or $0.85 per diluted common share, compared to net income available to common stockholders for 2019 of $379.2 million or $1.16 per diluted common share. Operating earnings per diluted common share (non-GAAP) was $0.96 for 2020 compared to $1.18 for 2019. The results for 2020 included the impact of $45.6 million of significant items, including loss on debt extinguishment and related hedge termination of $25.6 million related to the prepayment of higher-rate FHLB borrowings given continued strong deposit growth; branch consolidation costs of $18.7 million resulting from our branch optimization efforts and continued customer migration to digital channels; COVID-19 related expenses of $11.3 million, including $2.5 million in contributions to our FNB Foundation to continue to support our communities as they deal with the ongoing pandemic; and service charge refunds of $3.8 million, partially offset by a $13.8 million gain on the sale of all of the FNBPA's holdings of Visa Class B shares.In comparison, the results for 2019 included $4.5 million of branch consolidation costs and $4.3 million of service charge refunds. Average diluted common shares outstanding decreased 0.6 million shares, or 0.2%, to 325.5 million shares for 2020.

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

TABLE 2

Year EndedDecember 31 $Change %Change

(in thousands, except per share data) 2020 2019

Less: Preferred stock dividends 8,041 8,041 — —

Earnings per common share – Basic $ 0.86 $ 1.17 $ (0.31) (26.5) %

Cash dividends per common share 0.48 0.48 — —

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

TABLE 3

Return on average equity 5.83 % 8.14 %

Return on average tangible common equity (2) 11.66 16.84

Return on average assets 0.78 1.14

Return on average tangible assets (2) 0.87 1.26

Book value per common share (1) $ 15.09 $ 14.70

Tangible book value per common share (1) (2) 7.88 7.53

Average equity to average assets 13.40 14.05

Tangible equity to tangible assets (1) (2) 7.54 7.91

Tangible common equity to tangible assets (1) (2) 7.24 7.58

(1) Period-end

(2) Non-GAAP

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The following table provides information regarding the average balances and yields earned on interest-earning assets (non-GAAP) and the average balances and rates paid on interest-bearing liabilities:

TABLE 4

Year Ended December 31

Assets

Interest-earning assets:

Liabilities

Interest-bearing liabilities:

Deposits:

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

(2)The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

(3)Average balances include non-accrual loans. Loans and leases consist of average total loans less average unearned income.

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Net Interest Income

Net interest income on an FTE basis (non-GAAP) of $934.6 million for 2020 decreased $3.2 million, or 0.3%, from $931.4 million for 2019. Average interest-earning assets increased $2.7 billion, or 9.2%, and average interest-bearing liabilities increased $0.7 billion, or 3.2%, from 2019, due to organic growth in loans and deposits and benefits from our expanded banking footprint in our southeastern markets. Our net interest margin FTE (non-GAAP) was 2.91% for 2020, compared to 3.17% for 2019, reflecting the impact of lower interest rates as average 1-month LIBOR for the full year of 2020 declined to 0.52% from 2.22% for the full year of 2019. The FOMC lowered the target Federal Funds rate by 150 basis points in 2020.

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

TABLE 5

(in thousands) Volume Rate Net Volume Rate Net

Interest Income (1)

Interest Expense (1)

Deposits:

(1)The amount of change not solely due to rate or volume changes was allocated between the change due to rate and the change due to volume based on the net size of the rate and volume changes.

(2)Interest income amounts are reflected on an FTE basis (non-GAAP) which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

Interest income on an FTE basis (non-GAAP) of $1.1 billion for 2020, decreased $118.4 million or 9.4% from 2019, resulting from the decrease in benchmark interest rates, partially offset by an increase in interest-earning assets of $2.7 billion. The increase in interest-earning assets was primarily driven by a $2.4 billion, or 10.7%, increase in average total loans due to PPP activity and solid origination activity across the footprint. Average commercial loan growth totaled $2.5 billion, or 17.4%, including growth of $1.7 billion, or 33.8%, in commercial and industrial loans. Commercial loan growth was led by strong commercial activity in the Pittsburgh, Cleveland, South Carolina, and Mid-Atlantic regions. Average consumer loans declined by $54.9 million, or 0.6%, reflecting a decline of $133.4 million, or 8.8%, in consumer credit lines and $317.6 million, or 16.3%, in indirect auto installment loans due to the sale of $0.5 billion of indirect auto loans in November 2020 partially offset by increases in residential mortgage loans of $226.7 million, or 7.0%, and direct installment balances of $169.4 million, or 9.6%. Additionally, the net reduction in the securities portfolio was a result of management's strategy to deploy excess liquidity into higher yielding loans, as average securities decreased $247.0 million, or 3.8%, given historically low and unattractive interest rates available for reinvestment purposes. The yield on average interest-earning assets (non-GAAP) decreased 73 basis points to 3.56% for 2020 compared to 4.29% for 2019, primarily due to the lower interest rate environment.

Interest expense of $208.2 million for 2020 decreased $121.6 million, or 36.9%, from 2019 primarily due to a decrease in rates paid, partially offset by an increase in average interest-bearing deposits and borrowings. Average interest-bearing deposits increased $1.4 billion, or 7.8%, which reflects the benefit of organic growth, as well as deposits for PPP funding and

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government stimulus activities. Average long-term borrowings increased $365.6 million, or 33.0%, primarily due to increases of $254.3 million in senior debt and $117.1 million in long-term FHLB borrowings. The funding of both fixed and adjustable longer-term borrowings was opportunistically transacted to take advantage of the lower interest rate environment and add liquidity to support loan growth. These actions included the first quarter of 2020 issuance of $300 million of 2.20% fixed rate senior notes due in 2023 and the termination of $715 million of higher-rate FHLB borrowings during 2020. During the first quarter of 2019, we issued $120.0 million of 4.950% fixed-to-floating rate subordinated notes due in 2029. The rate paid on interest-bearing liabilities decreased 57 basis points to 0.89% for 2020, compared to 1.46% for 2019, due to reduced costs on interest-bearing deposits and lower borrowing costs.

Provision for Credit Losses

The provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb probable life-of-loan losses inherent in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the credit loss expense and net charge-offs for the years 2018 through 2020:

TABLE 6

(dollars in thousands) 2020 2019 $Change %Change 2018 $Change %Change

Net loan charge-offs / total average loans and leases 0.24 % 0.12 % 0.26 %

Provision for credit losses on loans and leases of $121.8 million during 2020 increased $77.2 million from 2019, which reflected CECL adoption worsening economic conditions associated with COVID-19 that required additional provision in 2020. Net charge-offs of $59.8 million for 2020 increased $31.5 million from 2019, primarily due to COVID-19 impacts on certain segments of the loan portfolio in 2020. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses section of this MD&A.

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Non-Interest Income

The breakdown of non-interest income for the years 2018 through 2020 is presented in the following table:

TABLE 7

(dollars in thousands) 2020 2019 $Change %Change 2018 $Change %Change

Loss on debt extinguishment (16,655) — (16,655) — — — —

Total non-interest income of $294.6 million for 2020 increased $0.3 million, or 0.1%, from $294.3 million in 2019. On an operating basis, non-interest income increased $9.9 million, or 3.3%, when excluding significant items impacting earnings of $15.6 million and $6.0 million in 2020 and 2019, respectively. The variances in significant individual non-interest income items are further explained in the following paragraphs.

Service charges on loans and deposits of $108.1 million for 2020 decreased $16.1 million, or 13.0%, from $124.3 million in 2019, as there were noticeably lower customer transaction volumes in the COVID-19 environment, although volumes have steadily increased in the second half of 2020. Additionally, we recorded service charge refunds of $3.8 million and $4.3 million in 2020 and 2019, respectively.

Trust services of $31.2 million for 2020 increased $3.4 million, or 12.1%, from the same period of 2019, primarily driven by strong organic revenue production, and the market value of assets under management increasing $1.0 billion, or 17.0%, to $7.1 billion at December 31, 2020.

Insurance commissions and fees of $24.2 million for 2020 increased $3.7 million, or 18.3%, from $20.5 million in 2019, primarily due to new business in the Carolina regions of our footprint, as well as organic growth in commercial lines.

Capital markets income of $39.3 million for 2020 increased $6.1 million, or 18.4%, from $33.2 million for 2019, reflecting our strong relationships with new and existing commercial customers and a volatile interest rate environment.

Mortgage banking operations income of $49.7 million for 2020 increased $18.0 million, or 56.7%, from $31.7 million for 2019, due to increased saleable volume and meaningfully expanding margins. During 2020, we sold $1.7 billion of residential mortgage loans, an increase of 19.5% compared to $1.4 billion for 2019, excluding portfolio bulk sales of $110.1 million and $151.8 million during 2019. The higher origination and secondary market revenues were partially offset by $4.7 million higher MSR impairment related to unfavorable interest-rate valuation adjustments and $9.8 million of higher MSR amortization due to higher prepayment speeds.

Dividends on non-marketable equity securities of $13.7 million for 2020 decreased $4.9 million, or 26.3%, from $18.6 million for 2019, primarily due to a decrease in the FHLB dividend rate and the impact of lower levels of FHLB borrowings given the strong growth in deposits.

Income from BOLI of $13.8 million for 2020 increased $2.0 million, or 17.3%, from $11.8 million in 2019, primarily due to life insurance claims.

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

Other non-interest income was $13.3 million and $9.1 million for 2020 and 2019, respectively. In 2020, we recorded a $13.8 million gain on the sale of all of FNBPA's Visa Class B shares, partially offset by $9.0 million in hedge termination costs associated with the early termination of certain higher-rate FHLB borrowings.

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

TABLE 8

$ %

(dollars in thousands) 2020 2019 Change Change

Significant items:

Gain on sale of Visa class B stock (13,818) — (13,818)

Loss on FHLB debt extinguishment and related hedge terminations 25,611 — 25,611

Loss on fixed assets related to branch consolidations — 1,722 (1,722)

(1) Non-GAAP

Non-Interest Expense

The breakdown of non-interest expense for the years 2018 through 2020 is presented in the following table:

TABLE 9

(dollars in thousands) 2020 2019 $Change %Change 2018 $Change %Change

Total non-interest expense of $750.3 million for 2020 increased $54.2 million, or 7.8%, from $696.1 million in 2019. On an operating basis, non-interest expense increased $27.0 million, or 3.9%. The variances in significant individual non-interest expense items are further explained in the following paragraphs.

Salaries and employee benefits of $405.5 million for 2020 increased $30.4 million, or 8.1%, from $375.1 million in 2019, primarily related to production-related commissions, normal merit increases and stock-based compensation. During 2020, we made a change to long-term stock-based compensation retirement vesting to become more aligned with current practices at other banks resulting in accelerated grant date expense recognition for certain 2020 awards, with full expense recognition on the grant date instead of recognizing the same expense amount over a 36-month vesting period. These awards are not released until the three-year service period is complete or the specified performance criteria is met over the three-year period. We recorded branch consolidation costs of $1.4 million and $0.5 million in 2020 and 2019, respectively. Additionally, we recorded $3.1

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million relating to COVID-19 expenses in 2020. Our total full-time equivalent employees were 4,077 and 4,066 at December 31, 2020 and 2019, respectively.

Net occupancy and equipment expense of $136.5 million for 2020 increased $16.2 million, or 13.4%, from $120.3 million in 2019, primarily due to branch consolidation costs of $15.7 million for 2020 and $2.2 million in 2019. On an operating basis, net occupancy and equipment expense was $120.8 million for 2020 and $118.1 million for 2019, an increase of $2.6 million, or 2.2%.

Outside services expense of $69.3 million for 2020 increased $5.3 million, or 8.2%, from $64.0 million in 2019, primarily due to increases in data processing costs and the investments in our digital platform.

FDIC insurance expense of $20.1 million for 2020 decreased $3.2 million, or 13.8%, from 2019, primarily from a lower FDIC assessment rate due to increased subordinated debt at FNBPA and improved liquidity metrics.

Bank shares and franchise taxes expense of $14.4 million for 2020 increased $1.9 million, or 15.1%, from $12.5 million in 2019, primarily due to the 2020 capital base increase and higher tax credits in 2019.

Other non-interest expense was $91.3 million and $86.8 million for 2020 and 2019, respectively. During 2020, we recorded $6.8 million in COVID-19 related expenses. The COVID-19 related expenses included a $2.5 million contribution to our foundation for relief assistance to our communities, benefiting food banks and providing funding for essential medical supplies. These items were partially offset by decreases in several other items in other non-interest expense, including marketing and business development expenses, which were somewhat impacted by the COVID-19 operating environment. Additionally, in 2020 and 2019, we recorded an impairment charge of $4.1 million and $3.2 million, respectively, from renewable energy investment tax credit transactions. The related renewable energy investment tax credits were recognized as a benefit to income taxes.

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

TABLE 10

$ %

(dollars in thousands) 2020 2019 Change Change

Significant items:

(1) Non-GAAP

Income Taxes

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

TABLE 11

(dollars in thousands)

Statutory federal tax rate 21.0 % 21.0 % 21.0 %

Our income tax expense for 2020 decreased $26.1 million or 31.2% from 2019. The effective tax rate was 16.7% for 2020, compared to 17.7% and 17.6% for 2019 and 2018, respectively, primarily resulting from lower pre-tax earnings and significant items in 2020. Effective tax rates are lower than the 21.0% federal statutory rate due to the tax benefits resulting from renewable energy investment and historic tax credits, tax-exempt income on investments and loans and income from BOLI.

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Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Refer to the MD&A in our 2019 Annual Report on Form 10-K filed with the SEC on February 27, 2020 for a comparison of the years ended 2019 versus 2018.

FINANCIAL CONDITION

The following table presents our condensed Consolidated Balance Sheets:

TABLE 12

December 31 $Change %Change

Assets

Liabilities and Stockholders’ Equity

Our cash position increased in 2020 due to continued customer expansion in our footprint, government stimulus programs and the strategic reduction in our investment portfolio, as reinvestment opportunities were less attractive in the low interest rate environment. The investment portfolio allocation shifted as exposure to prepayment sensitive securities was reduced.

Lending Activity

The loan and lease portfolio consists principally of loans and leases to individuals and small- and medium-sized businesses within our primary markets in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; and Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina. During 2020, we originated $2.6 billion of PPP loans and during November 2020, we sold $0.5 billion of indirect installment loans.

Paycheck Protection Program

The CARES Act included an allocation of $349 billion for loans to be issued by financial institutions through the SBA, utilizing the PPP. The Paycheck Protection Program and Health Care Enhancement Act (PPP/HCE Act) was passed by Congress on April 23, 2020 and signed into law on April 24, 2020. The PPP/HCE Act authorized an additional $320 billion of funding for PPP loans. As of December 31, 2020, we had approximately $2.2 billion of PPP loans outstanding, net of unamortized net deferred fees of $32.1 million, which are included in the commercial and industrial category. During 2020, $0.4 billion of PPP loan balances were forgiven by the SBA.

PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. Loans closed prior to June 5, 2020, carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred until after a forgiveness determination is made, if submitted within ten months of the end of the loan forgiveness Covered Period. The loans are 100% guaranteed by the SBA, which provides a

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reduced risk of loss to us on these loans. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. This fee is recognized in interest income over the contractual life of the loan under the effective yield method, adjusted for expected prepayments on these pools of homogenous loans. We expect most of the remaining $32.1 million of net deferred fees to be recognized by September 30, 2021 based on expected loan forgiveness activity. On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act (PPP Flexibility Act) which extended the term for new PPP loans to 5 years and permitted a lender to extend a 2-year PPP loan up to a 5-year term by mutual agreement of the lender and borrower. The PPP Flexibility Act also gives the borrower the option of 24 weeks to distribute the funds, and a borrower can remain eligible for loan forgiveness by using at least 60% of the funds for payroll costs. The SBA announced that lenders will have 60 days to review PPP loan forgiveness applications and that the SBA will remit the forgiveness payments within 90 days of receipt of approved forgiveness applications.

Following is a summary of loans and leases:

TABLE 13

(in millions)

The loans and leases portfolio categories are comprised of the following:

•Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties.

•Commercial and industrial includes loans to businesses that are not secured by real estate.

•Commercial leases consist of leases for new or used equipment.

•Other is comprised primarily of credit cards and mezzanine loans.

•Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans.

•Residential mortgages consist of conventional and jumbo mortgage loans for 1-4 family properties.

•Indirect installment is comprised of loans originated by approved third parties and underwritten by us, primarily automobile loans.

•Consumer lines of credit include home equity lines of credit and consumer lines of credit that are either unsecured or secured by collateral other than home equity.

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

Total loans and leases increased $2.2 billion, or 9.3%, to $25.5 billion at December 31, 2020, compared to $23.3 billion at December 31, 2019, reflecting commercial loan growth of $2.7 billion or 18.7%, and a decrease in consumer loans of $0.6 billion or 6.8%. The commercial loan growth was primarily attributed to $2.6 billion of PPP loans originated, while the decline in consumer loans was primarily due to the sale of $0.5 billion in indirect auto loans.

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Total loans and leases increased $1.1 billion, or 5.1%, to $23.3 billion at December 31, 2019, compared to $22.2 billion at December 31, 2018, led by strong commercial loan activity, combined with increases in the residential mortgage and indirect installment portfolios.

As of December 31, 2020, 28.1% of the commercial real estate loans were owner-occupied, while the remaining 71.9% were non-owner-occupied, compared to 30.6% and 69.4%, respectively, as of December 31, 2019. As of December 31, 2020 and 2019, we had commercial construction loans of $1.7 billion and $1.3 billion, respectively, representing 6.8% and 5.5% of total loans and leases, respectively. Additionally, as of December 31, 2020 and 2019, we had residential construction loans of $191.5 million and $297.3 million, respectively, representing 0.8% and 1.2% of total loans and leases, respectively.

Within our primary lending footprint, certain industries are more predominant given the geographic location of these lending markets. We strive to maintain a diverse commercial loan portfolio by avoiding undue concentrations or exposures to any particular sector, and we actively monitor our commercial loan portfolio to ensure that our industry mix is consistent with our risk appetite and within targeted thresholds. Several factors are taken into consideration when determining these thresholds, including recent economic and market trends. As of December 31, 2020 and 2019, there were no concentrations of loans relating to any industry in excess of 10% of total loans.

Following is a summary of the maturity distribution of certain loan categories with fixed and floating interest rates as of December 31, 2020:

TABLE 14

(in millions) Within1 Year 1-5Years Over5 Years Total

Interest rates for loans with maturities over one year:

For additional information relating to lending activity, see Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.

Non-Performing Assets

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

During 2020, non-performing assets increased $52.1 million. This reflects an increase of $88.9 million in non-accrual loans and a decrease of $15.2 million in OREO. Loans in COVID-19 sensitive industries, primarily within the hotel and lodging sector, contributed to the increase in non-accrual loans at the end of 2020. Prior to the adoption of CECL, acquired PCD loans were excluded from our non-performing disclosures. PCD loans that meet the definition of non-accrual are now included in the disclosures and resulted in a $54 million CECL adoption Day 1 increase in non-accrual loans compared to December 31, 2019. The decrease in OREO was largely driven by the sale of multiple pieces of real estate.

During the first half of 2020, we saw significant macroeconomic changes due to the COVID-19 pandemic. Stay-at-home orders and non-essential business closures in many of our markets temporarily suspended the income generation of some of our borrowers. Government stimulus and support programs generated through the CARES Act, such as the PPP, began to assist our borrowers through the difficult financial disruptions. We continued to offer these programs during the second half of 2020. We

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offered short-term modifications to our customers to assist them through this period. The programs our customers have taken advantage of are:

•Existing customers who were current prior to the start of the pandemic, can elect to defer loan principal and interest payments or interest payments for up to 90 days without late fees but will continue to accrue interest. During 2020, approximately 6,100 commercial customers have elected this option.

•Mortgage and consumer loan customers have up to a 90-day payment deferral option, depending on their loan type. During 2020, approximately 9,500 of these customers have elected this option.

•SBA disaster relief assistance, including the PPP.

The loan deferral programs can be extended on an individual basis. Total deferrals at December 31, 2020 were approximately $397 million, or 1.7%, of total loans and leases (excluding PPP loans) on deferral as of December 31, 2020, down from $2.4 billion, or 10.2% as of June 30, 2020.

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

During 2019, non-performing assets decreased $6.9 million. This reflects an increase of $2.2 million in non-accrual loans and decreases of $0.3 million in TDRs and $9.4 million in OREO. The increase in non-accrual loans is attributable to the migration of three commercial credit relationships to non-accrual during 2019. The decrease in OREO reflects sales activity of the remaining Florida land projects totaling $13.2 million.

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

TABLE 15

(in millions)

Commercial leases 2 1 2 2 4

Indirect installment 2 3 2 2 2

Consumer lines of credit 7 7 7 6 4

(1) Prior to 2020, does not include loans acquired in a business combination at fair value.

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Following is a summary of non-performing assets:

TABLE 16

(dollars in millions)

Troubled debt restructurings — 22 21 23 20

Non-performing loans / total loans and leases 0.67 % 0.44 % 0.45 % 0.47 % 0.58 %

After the adoption of CECL, all non-accrual loans and TDRs are included in the non-accrual loans line in the above table.

Troubled Debt Restructured Loans

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

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

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

TABLE 17

(in millions) Accruing Non-Accrual Total

Commercial real estate $ 4 $ 18 $ 22

Commercial and industrial 1 3 4

Total commercial loans 5 21 26

Direct installment 23 4 27

Residential mortgages 24 7 31

Consumer lines of credit 6 1 7

Commercial real estate $ 3 $ 5 $ 8

Commercial and industrial 1 3 4

Total commercial loans 4 8 12

Direct installment 18 3 21

Residential mortgages 14 3 17

Consumer lines of credit 5 1 6

Total consumer loans 37 7 44

Commercial real estate $ 3 $ 2 $ 5

Commercial and industrial 1 — 1

Total commercial loans 4 2 6

Direct installment 17 4 21

Residential mortgages 13 3 16

Consumer lines of credit 5 — 5

Total consumer loans 35 7 42

Commercial real estate $ 3 $ 4 $ 7

Commercial and industrial 3 — 3

Total commercial loans 6 4 10

Direct installment 19 3 22

Residential mortgages 15 2 17

Consumer lines of credit 4 1 5

Total consumer loans 38 6 44

Commercial real estate $ — $ 4 $ 4

Commercial and industrial — 2 2

Total commercial loans — 6 6

Direct installment 19 2 21

Residential mortgages 15 1 16

Consumer lines of credit 4 — 4

Total consumer loans 38 3 41

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

TABLE 18

(dollars in millions)

Total loans and leases 90 days or more past due $ 16 $ 42 $ 58 $ 99 $ 50

As a percentage of total loans and leases 0.06 % 0.18 % 0.26 % 0.47 % 0.33 %

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

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

TABLE 19

(in millions)

Gross interest income:

Recorded during the year — — 1 1 1

Allowance for Credit Losses on Loans and Leases

On January 1, 2020, we adopted CECL which changed how we calculate the ACL as more fully described in Note 1 to the Notes to Consolidated Financial Statements. This expected credit loss model takes into consideration the expected credit losses over the life of the loan at the time the loan is originated compared to the incurred loss model under the prior standard. At the time of the adoption, we recorded a one-time cumulative-effect adjustment of $50.6 million as a reduction to Retained Earnings. The ACL balance increased by $105 million and included a “gross-up" of PCD loan balances and the ACL of $50 million. Included in the CECL adoption impact was a Day 1 increase of $10 million to our AULC.

The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation:

•a third-party macroeconomic forecast scenario;

•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and

•the historical through the cycle default mean calculated using an expanded period to include a prior recessionary period.

COVID-19 Impacts on the ACL

Starting in March 2020, the broader economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic resulting in notable adverse changes to forecasted economic variables utilized in our ACL modeling process. Based on these changes, we utilized a third-party pandemic recessionary scenario through September 30, 2020 for ACL modeling purposes. For December 31, 2020, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment. This scenario captures forecasted macroeconomic variables as of mid-December to ensure our ACL calculation considers the most recently available macroeconomic data in a quickly evolving environment at quarter-end. Macroeconomic variables that we utilized from this scenario for our ACL calculation as of December 31, 2020 included but were not limited to: (i) gross domestic product, which reflects growth of up to 4% in 2021, (ii) the Dow Jones Total Stock Market Index, which grows steadily throughout the R&S period, (iii) unemployment, which steadily declines and averages 6% over the R&S period and (iv) the Volatility Index, which remains stable over the R&S period.

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Following is a summary of changes in the ACL related to loans and leases:

TABLE 20

(dollars in millions)

Charge-offs:

Commercial real estate (31) (4) (7) (2) (7)

Commercial leases (1) — (3) (1) (1)

Commercial loans and leases (68) (17) (34) (34) (30)

Direct installment (1) (1) (17) (12) (10)

Residential mortgages (2) (2) — — —

Indirect installment (8) (11) (9) (10) (8)

Consumer lines of credit (2) (2) (3) (2) (2)

Loans acquired in a business combination — (9) (7) (2) (1)

Recoveries:

Commercial real estate 7 4 3 2 4

Commercial and industrial 7 4 2 2 2

Other 1 — — 1 —

Commercial loans and leases 15 8 5 5 6

Direct installment 1 — 2 2 2

Residential mortgages 1 — — — —

Indirect installment 4 4 4 4 2

Loans acquired in a business combination — 2 3 5 1

ASC 326 adoption impact 55 — — — —

Initial ACL on PCD loans 50 — — — —

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

TABLE 21

(in millions)

Balance at beginning of period $ 3

Provision for unfunded loan commitments and letters of credit:

Commercial portfolio 1

Consumer portfolio —

ASC 326 adoption impact:

Commercial portfolio 8

Consumer portfolio 2

Balance at end of period $ 14

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

The ACL at December 31, 2019 increased $16.2 million or 9.0% from December 31, 2018, in response to growth in originated loans and some migration in the commercial and indirect portfolios. The provision for credit losses during 2019 was $44.6 million, which covered net charge-offs and supported organic loan growth.

The ACL at December 31, 2018 increased $4.3 million or 2.4% from December 31, 2017, in response to growth in originated loans and leases and a small increase in originated criticized commercial loans. The provision for credit losses during 2018 was $61.2 million, which covered net charge-offs and supported organic loan growth. The amount of provision expense that resulted from the small increase in originated criticized commercial loans was offset by a provision benefit received through a decline in the overall delinquency and non-performing loan level in 2018. Net charge-offs were $56.0 million, or 0.26% of average loans, compared to $43.8 million, or 0.22% of average loans, in 2017, with the increase primarily due to $13.4 million, or 6 basis points, relating to the sale of a small portfolio of non-performing loans in the second quarter of 2018 and the sale of Regency in the third quarter of 2018.

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

TABLE 22

Loans acquired in a business combination — — 7 12 7 18 7 27 7 16

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

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

During 2019, the ACL allocated to commercial real estate and commercial and industrial loans increased to support organic loan growth and $2.6 million of additional specific reserves, and indirect installment increased due to an increase in early stage delinquency. Additionally, the increases in residential mortgages and commercial leases support organic loan growth.

During 2018, the ACL allocated to commercial real estate, commercial and industrial, commercial leases, residential mortgages and indirect installment loans all increased to support organic loan growth. The ACL allocated to direct installment loans decreased as a result of the sale of Regency. The ACL allocated to other loans acquired in a business combination decreased due to improved credit quality.

Investment Activity

Investment activities serve to generate net interest income while supporting interest rate sensitivity and liquidity positions. Securities purchased with the intent and ability to hold until maturity are categorized as securities HTM and carried at amortized cost. All other securities are categorized as securities AFS and are recorded at fair value. Securities, like loans, are subject to similar interest rate and credit risk. In addition, by their nature, securities classified as AFS are also subject to fair value risks that could negatively affect the level of liquidity available to us, as well as stockholders’ equity. A change in the value of securities HTM could also negatively affect the level of stockholders’ equity if there was a decline in the underlying creditworthiness of the issuers and an OTTI is deemed to have occurred or if there was a change in our intent and ability to hold the securities to maturity.

As of December 31, 2020, debt securities classified as AFS and HTM totaled $3.5 billion and $2.9 billion, respectively. During 2020, debt securities AFS increased by $174.1 million and debt securities HTM decreased by $407.8 million from December 31, 2019. As of December 31, 2020 and 2019, we did not hold any trading securities.

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The following table indicates the respective maturities and weighted-average yields of debt securities as of December 31, 2020:

TABLE 23

(dollars in millions) Amount WeightedAverageYield

Obligations of U.S. Treasury:

Maturing within one year $ 600 0.08 %

Maturing after five years but within ten years 1 5.25

Obligations of U.S. government agencies:

Maturing after one year but within five years 6 1.79

Maturing after five years but within ten years 83 1.10

Maturing after ten years 84 0.83

Obligations of U.S. government-sponsored entities:

Maturing within one year 160 1.43

Maturing after one year but within five years 96 1.31

Maturing after five years but within ten years 25 0.58

States of the U.S. and political subdivisions:

Maturing within one year 4 2.96

Maturing after one year but within five years 32 2.12

Maturing after five years but within ten years 165 3.01

Maturing after ten years 939 3.64

Other debt securities:

Maturing after five years but within ten years 2 1.03

Residential mortgage-backed securities:

Agency mortgage-backed securities 1,763 2.02

Agency collateralized mortgage obligations 1,686 1.92

Commercial mortgage-backed securities 685 2.40

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

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

TABLE 24

(in millions)

Securities Available for Sale:

U.S. Treasury $ 600 $ — $ —

U.S. government-sponsored entities 160 225 317

Residential mortgage-backed securities:

Commercial mortgage-backed securities 361 341 229

States of the U.S. and political subdivisions 32 11 21

Other debt securities 2 2 2

Total debt securities available for sale $ 3,380 $ 3,275 $ 3,401

Debt Securities Held to Maturity:

U.S. Treasury $ 1 $ 1 $ 1

U.S. government agencies 1 1 2

U.S. government-sponsored entities 120 175 215

Residential mortgage-backed securities:

Agency collateralized mortgage obligations 562 721 794

Commercial mortgage-backed securities 307 308 126

States of the U.S. and political subdivisions 1,108 1,120 1,080

Total debt securities held to maturity $ 2,868 $ 3,275 $ 3,254

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

Deposits

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

Following is a summary of deposits:

TABLE 25

(in millions)

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Total deposits increased during 2020, as a result of growth in non-interest-bearing and interest-bearing balances due to an expansion of customer relationships and higher customer balances, which were aided by inflows from the PPP and government stimulus activity. During the year, customer preferences shifted away from higher rate certificates of deposit to lower yielding, more liquid products. The deposit growth helped us eliminate overnight borrowings and substantially reduce other short-term borrowings.

Following is a summary of time deposits of $100,000 or more by remaining maturity at December 31, 2020:

TABLE 26

(in millions) Certificatesof Deposit OtherTimeDeposits Total

Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term. Short-term borrowings, made up of customer repurchase agreements (also referred to as securities sold under repurchase agreements), FHLB advances, federal funds purchased and subordinated notes, decreased to $1.8 billion at December 31, 2020 from $3.2 billion at December 31, 2019, due to a $1.0 billion decline in short-term FHLB borrowings and the elimination of the $0.6 billion in federal funds purchased position.

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

TABLE 27

(dollars in millions)

FHLB Advances (Short-term)

Weighted average interest rates:

Federal Funds Purchased

Balance at year-end $ — $ 575 $ 1,535

Weighted average interest rates:

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

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Capital Resources

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

The assessment of capital adequacy depends on a number of factors such as expected organic growth in the Consolidated Balance Sheet, asset quality, liquidity, earnings performance and sustainability, changing competitive conditions, regulatory changes or actions and economic forces. We seek to maintain a strong capital base to support our growth and expansion activities, to provide stability to current operations and to promote public confidence.

We have an effective shelf registration statement filed with the SEC. Pursuant to this registration statement, we may, from time to time, issue and sell in one or more offerings any combination of common stock, preferred stock, debt securities, depositary shares, warrants, stock purchase contracts or units. On February 24, 2020, we completed an offering of $300.0 million of 2.20% fixed rate senior notes due in 2023 under this registration statement. The net proceeds of the debt offering after deducting underwriting discounts and commissions and offering expenses were $297.9 million. We used the net proceeds from the sale of the notes for general corporate purposes, which included investments at the holding company level, capital to support the growth of FNBPA, repurchase of our common shares and refinancing of outstanding indebtedness.

On February 14, 2019, we completed an offering of $120.0 million of 4.950% fixed-to-floating rate subordinated notes due in 2029 under this registration statement. The subordinated notes are treated as tier 2 capital for regulatory capital purposes. The net proceeds of this debt offering after deducting underwriting discounts and commissions and offering expenses were $118.2 million. We used the net proceeds from the sale of the subordinated notes to redeem higher-rate long-term borrowings and for general corporate purposes.

On September 23, 2019 we announced that our Board of Directors approved a share repurchase program for the repurchase of up to an aggregate of $150 million of our common stock. The repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions. The purchases will be funded from available working capital. There is no guarantee as to the exact number of shares that will be repurchased and we may discontinue purchases at any time. During 2020, we repurchased 4.0 million shares at a weighted average share price of $9.63 for $38.4 million under this repurchase program.

Capital management is a continuous process with capital plans and stress testing for FNB and FNBPA updated at least annually. These capital plans include assessing the adequacy of expected capital levels assuming various scenarios by projecting capital needs for a forecast period of 2-3 years beyond the current year. Both FNB and FNBPA are subject to various regulatory capital requirements administered by federal banking agencies. For additional information, see Note 22, “Regulatory Matters” in the Notes to the Consolidated Financial Statements, which is included in Item 8 of this Report. From time to time, we issue shares initially acquired by us as treasury stock under our various benefit plans. We may issue additional preferred or common stock in order to maintain our well-capitalized status.

CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

The following table sets forth contractual obligations of principal that represent required and potential cash outflows as of December 31, 2020:

TABLE 28

(in millions) Within1 Year 1-3Years 3-5Years After5 Years Total

Deposits without a stated maturity $ 25,460 $ — $ — $ — $ 25,460

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The following table sets forth the amounts and expected maturities of commitments to extend credit and standby letters of credit as of December 31, 2020:

TABLE 29

(in millions) Within1 Year 1-3Years 3-5Years After5 Years Total

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

LIQUIDITY

Our goal in liquidity management is to satisfy the cash flow requirements of customers and the operating cash needs of FNB with cost-effective funding. Our Board of Directors has established an Asset/Liability Management Policy to guide management in achieving and maintaining earnings performance consistent with long-term goals, while maintaining acceptable levels of interest rate risk, a “well-capitalized” Balance Sheet and adequate levels of liquidity. Our Board of Directors has also established Liquidity and Contingency Funding Policies to guide management in addressing the ability to identify, measure, monitor and control both normal and stressed liquidity conditions. These policies designate our ALCO as the body responsible for meeting these objectives. The ALCO, which is comprised of members of executive management, reviews liquidity on a continuous basis and approves significant changes in strategies that affect Balance Sheet or cash flow positions. Liquidity is centrally managed daily by our Treasury Department.

FNBPA generates liquidity from its normal business operations. Liquidity sources from assets include payments from loans and investments, as well as the ability to securitize, pledge or sell loans, investment securities and other assets. Liquidity sources from liabilities are generated primarily through the banking offices of FNBPA in the form of deposits and customer repurchase agreements. FNB also has access to reliable and cost-effective wholesale sources of liquidity. Short- and long-term funds are used to help fund normal business operations, and unused credit availability can be utilized to serve as contingency funding if we would be faced with a liquidity crisis.

The principal sources of the parent company’s liquidity are its strong existing cash resources plus dividends it receives from its subsidiaries. These dividends may be impacted by the parent’s or its subsidiaries’ capital needs, statutory laws and regulations, corporate policies, contractual restrictions, profitability and other factors. In addition, through one of our subsidiaries, we regularly issue subordinated notes, which are guaranteed by FNB. Management has utilized various strategies to ensure sufficient cash on hand is available to meet the parent's funding needs. On February 24, 2020, we completed a senior debt offering whereby we issued $300.0 million aggregate principal amount of 2.20% senior notes due in 2023. The proceeds from this transaction were used for general corporate purposes and were the primary factor resulting in an increase in our MCH liquidity metric as shown below.

Starting in March 2020, management incorporated potential liquidity impacts related to COVID-19 into our daily analysis. Management concluded that our cash levels remain appropriate given the current market environment. Two metrics that are used to gauge the adequacy of the parent company’s cash position are the LCR and MCH. The LCR is defined as the sum of cash on hand plus projected cash inflows over the next 12 months divided by projected cash outflows over the next 12 months. The MCH is defined as the number of months of corporate expenses and dividends that can be covered by the cash on hand.

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

TABLE 30

Liquidity coverage ratio 2.7 times 2.2 times > 1 time

Months of cash on hand 22.2 months 15.2 months > 12 months

Our liquidity position has been positively impacted by our ability to generate growth in relationship-based accounts. Organic growth in low-cost transaction deposits was complemented by management’s strategy of deposit gathering efforts focused on attracting new customer relationships and deepening relationships with existing customers, in part through internal lead generation efforts leveraging data analytics capabilities. Total deposits were $29.1 billion at December 31, 2020, an increase of $4.3 billion, or 17.5%, from December 31, 2019. Total non-interest-bearing demand deposit accounts grew $2.7 billion, or 41.6%, total interest-bearing demand deposit accounts grew $2.1 billion, or 19.1%, savings accounts grew $0.6 billion, or 24.2%, and time deposits decreased $1.1 billion, or 22.5%. As mentioned earlier, inflows from PPP and government stimulus checks were a significant factor in the deposit growth.

The significant increase in customer deposits, along with the proceeds from the sale of $0.5 billion in indirect auto loans, resulted in a $1.7 billion reduction in borrowings. The reduction in borrowings included the termination of $715 million in FHLB advances that had a rate of 2.49%. Finally, our cash held at the FRB was $0.8 billion at December 31, 2020, an increase of $0.7 billion as we shifted from a Federal Funds Purchased position of $0.6 billion at December 31, 2019 to an excess cash position held at the FRB at December 31, 2020.

FNBPA has significant unused wholesale credit availability sources that include the availability to borrow from the FHLB, the FRB, correspondent bank lines, access to brokered deposits, the PPPLF and other channels. In addition to credit availability, FNBPA also possesses salable unpledged government and agency securities that could be utilized to meet funding needs. We currently also have excess cash to meet our pledging requirements. The ALCO is currently targeting a 1% guideline level for salable unpledged government and agency securities due to an elevated influx of related deposits, in part related to the PPP, combined with a strategic decline of $234 million of investment securities, which represents 0.6% of total assets.

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

TABLE 31

(dollars in millions)

Unused wholesale credit availability $ 16,434 $ 11,154

Unused wholesale credit availability as a % of FNBPA assets 44.1 % 32.3 %

Salable unpledged government and agency securities $ 546 $ 1,788

The PPPLF accounted for 42% of the $5.2 billion increase in availability since December 31, 2019. This funding source has been extended to March 31, 2021. We also had $828.3 million, or 2.4% of total assets, in excess cash available to meet our pledging requirements.

Another metric for measuring liquidity risk is the liquidity gap analysis. The following liquidity gap analysis as of December 31, 2020 compares the difference between our cash flows from existing earning assets and interest-bearing liabilities over future time intervals. Management seeks to limit the size of the liquidity gaps so that sources and uses of funds are reasonably matched in the normal course of business. A reasonably matched position lays a better foundation for dealing with additional funding needs during a potential liquidity crisis. The twelve-month cumulative gap to total assets ratio was 8.2% as of December 31, 2020 compared to (0.3)% as of December 31, 2019. Management calculates this ratio at least quarterly and it is reviewed monthly by ALCO.

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TABLE 32

(dollars in millions) Within1 Month 2-3Months 4-6Months 7-12Months Total1 Year

Assets

Liabilities

Cumulative Gap to Total Assets 3.8 % 4.5 % 5.3 % 8.2 %

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

MARKET RISK

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

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

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

We use an asset/liability model to measure our interest rate risk. Interest rate risk measures we utilize include earnings simulation, EVE and gap analysis. Gap analysis and EVE are static measures that do not incorporate assumptions regarding future business. Gap analysis, while a helpful diagnostic tool, displays cash flows for only a single rate environment. EVE’s long-term horizon helps identify changes in optionality and longer-term positions. However, EVE’s liquidation perspective does not translate into the earnings-based measures that are the focus of managing and valuing a going concern. Net interest income simulations explicitly measure the exposure to earnings from changes in market rates of interest. In these simulations, our current financial position is combined with assumptions regarding future business to calculate net interest income under various hypothetical rate scenarios. The ALCO reviews earnings simulations over multiple years under various interest rate scenarios on a periodic basis. Reviewing these various measures provides us with a comprehensive view of our interest rate risk profile, which provides the basis for balance sheet management strategies.

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The following repricing gap analysis as of December 31, 2020 compares the difference between the amount of interest-earning assets and interest-bearing liabilities subject to repricing over a period of time. Management utilizes the repricing gap analysis as a diagnostic tool in managing net interest income and EVE risk measures.

TABLE 33

(dollars in millions) Within1 Month 2-3Months 4-6Months 7-12Months Total1 Year

Assets

Liabilities

The twelve-month cumulative repricing gap to total assets was 19.6% and 7.0% as of December 31, 2020 and 2019, respectively. The positive cumulative gap positions indicate that we have a greater amount of repricing earning assets than repricing interest-bearing liabilities over the subsequent twelve months. If interest rates increase as modeled, net interest income will increase and, conversely, if interest rates decrease as modeled, net interest income will decrease. The change in the cumulative repricing gap at December 31, 2020, compared to December 31, 2019, is primarily related to growth and changes in the mix of loans, deposits and borrowings. Strong commercial loan growth, a large portion of which was swapped to adjustable rates, and the increased cash flow from the loan and investment portfolios, were partially offset by growth in and repricing of certain interest-bearing non-maturity deposit balances and the repayment of FHLB advances. The funding and redemption of both fixed and adjustable borrowings that were swapped to a fixed rate was opportunistically transacted to take advantage of the lower interest rate environment and add liquidity to support loan growth.

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

Utilizing net interest income simulations, the following net interest income metrics were calculated using rate shocks which move market rates in an immediate and parallel fashion. The variance percentages represent the change between the net interest income and EVE calculated under the particular rate scenario compared to the net interest income and EVE that was calculated assuming market rates as of December 31, 2020. Using a static Balance Sheet structure, the measures do not reflect all of management's potential counteractions.

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

TABLE 34

Net interest income change (12 months):

Economic value of equity:

We also model rate scenarios which move all rates gradually over twelve months (Rate Ramps) and model scenarios that gradually change the shape of the yield curve. Assuming a static Balance Sheet, a +100 basis point Rate Ramp increases net interest income (12 months) by 3.2% and 1.5% at December 31, 2020 and 2019, respectively. The corresponding metrics for a minus 100 basis point Rate Ramp are 0.4% and (2.0)% at December 31, 2020 and 2019, respectively.