ITEM 1A. RISK FACTORS
We are subject to numerous risks, many of which are inherent to our business. For information about how our risk oversight and management process operates, see Item 7 of this Report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management.” The following discussion highlights certain material risks that, based on the information currently known to us, could affect us and our business, financial condition, results of operations and cash flows. You should carefully consider each of the following risks and all the other information set forth in this Report. If any of the following risks and uncertainties develop into actual events or if the circumstances described in the risks and uncertainties occur or continue to occur, these events or circumstances could have a material adverse effect on our business, financial condition, results of operations, cash flows, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings. These events could also have a negative effect on the trading price of our securities.
In addition, the risks and uncertainties we face involve certain factors that are subject to change, and are not limited to those described below. This discussion is intended to highlight risks that we believe are important factors to consider when evaluating
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our business and an investment in our securities. Additional risks and uncertainties not presently known or that we currently believe to be immaterial may also adversely affect our business.
1. Credit Risk
Our results of operations are significantly affected by the ability of our borrowers to repay their loans.
Lending money is an essential part of the banking business. However, for various reasons, borrowers do not always repay their loans. The risk of non-payment is affected by credit risks of a particular borrower, changes in economic conditions that impact certain geographic markets or industries, fluctuations in interest rates on adjustable-rate loans, the duration of the loan, and in the case of a collateralized loan, uncertainties as to the future value of the collateral.
Generally, commercial loans and leases present a greater risk of non-payment by a borrower than other types of loans. They typically involve larger loan balances and are particularly sensitive to economic conditions. The borrower’s ability to repay usually depends on the successful operation of its business and income stream. Some of our commercial borrowers have multiple loans outstanding with us, which means that an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss. In the case of commercial and industrial loans, collateral often consists of accounts receivable, inventory, property and equipment, which may not yield substantial recovery of principal losses incurred, and is susceptible to deterioration, declining valuations, or other losses in advance of liquidation of such collateral. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws may limit the amount that can be recovered on these loans. For additional information, see Item 7 of this Report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Lending Activity.”
Our mortgage banking profitability could be significantly reduced if we are not able to originate and resell a high volume of mortgage loans.
Mortgage banking is generally considered a volatile source of income because it depends largely on the volume of loans we originate and sell in the secondary market. If our originations of mortgage loans decrease, resulting in fewer loans that are available to be sold to investors, this would result in a decrease in mortgage revenues and a corresponding decrease in non-interest income.
•Mortgage loan production levels are sensitive to changes in economic conditions and activity, strengths or weaknesses in the housing market, changes in FRB monetary policies, interest rate fluctuations and the availability of an active secondary market or originations that could shift to adjustable-rate products which may be held in the portfolio. Generally, any sustained period of decreased economic activity or higher interest rates could reduce demand for mortgage loans and refinancings, while, conversely, any sustained period of increased economic activity and decreasing interest rates could increase the demand for mortgage loans and loan repayments. In addition, our results of operations are affected by the amount of non-interest expense associated with mortgage banking activities, such as salaries, commissions and employee benefits, occupancy, equipment and data processing expense and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations.
•Future changes to our eligibility to participate in the programs offered by the GSE and other secondary purchasers, or the loan criteria of the GSE and other secondary purchasers could also result in a lower volume of corresponding loan originations and sales.
•The estimates of revenues produced by the models we use to assess the impact of interest rates on mortgage-related revenues are dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may differ from actual subsequent experience.
Our financial condition and results of operations could be adversely affected if we must further increase our provision for credit losses or if our ACL is not sufficient to absorb actual losses.
There is no precise method of predicting loan losses. Our ACL may not be sufficient to absorb actual loan losses that we experience. Excess loan losses could have a material adverse effect on our financial condition and results of operations.
The level of the ACL incorporates the judgment and estimates of our management regarding the amount and timing of future cash flows, current fair value of the underlying collateral and other qualitative risk factors that may affect our loan portfolio. Determination of the allowance is inherently subjective and is based on factors that are susceptible to significant change. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, suspected fraud, identification of additional problem loans and other factors, both within and outside of our control, may require an
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increase in the ACL. In addition, bank regulatory agencies periodically review our ACL and may require an increase in the provision for credit losses or the recognition of additional loan charge-offs, based on judgments different from those of our management. In addition, if charge-offs in future periods exceed the ACL, we will need additional provisions to increase the ACL. Any increases in the ACL will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations. For additional discussion relating to this matter, refer to Item 7 of this Report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Allowance for Credit Losses."
2. Market Risk
Our business and financial performance is impacted significantly by market interest rates and changes in those rates. The monetary, tax and other policies of governmental agencies, including the UST and the FRB, have a direct impact on interest rates and overall financial market performance over which we have no control and which may not be able to be predicted with reasonable accuracy.
As a result of the high percentage of our assets and liabilities that are in the form of interest-bearing or interest-related instruments, changes in interest rates, in the shape of the yield curve or in spreads between different market interest rates can have a material effect on our business, profitability and the value of our financial assets and liabilities. Such scenarios may include the following:
•changes in interest rates or interest rate spreads can affect the difference between the interest earned on assets and the interest paid on liabilities, which impacts FNBPA’s overall net interest income and profitability;
•such changes can affect the ability of borrowers to meet obligations under variable or adjustable-rate loans and other debt instruments and can, in turn, affect our loss rates on those assets;
•such changes may decrease the demand for interest rate-based products or services, including bank loans and deposit products and the subordinated notes offered by our subsidiary, FNB Financial Services, LP;
•such changes can affect our ability to hedge various forms of market and interest rate risks and may decrease the profitability or increase the risk associated with such hedges; and
•movements in interest rates affect mortgage repayment speeds and could result in impairments of mortgage servicing assets or otherwise affect the profitability of such assets.
The monetary, tax and other policies of the U.S. Government and its agencies also have a significant impact on interest rates and overall financial market performance. The FRB regulates the national supply of bank credit and certain interest rates through the implementation of certain monetary policies and actions. The timing, extent, and frequency of interest rate changes is uncertain.
Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits; (ii) the fair value of our financial assets and liabilities; and (iii) the average duration of our mortgage portfolio and other interest-earning assets. If the interest rates paid on deposits and other borrowings decrease at a slower rate than the interest rates received on loans and other investments, or vice versa, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. A reduction in interest rates could result in unanticipated or adverse changes in depositor behavior, which could negatively affect our broader asset and liability management strategy. Interest rate risk may also result from timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, hedging activity and the potential exercise of explicit or embedded options.
Our interest rate risk modeling techniques and assumptions may not fully predict or capture the impact of actual or future interest rate changes on our balance sheet. Any substantial, unexpected, or prolonged change in market interest rates, or if the assumptions used for our models are substantially different than actual events, could result in material adverse effects on our financial condition and results of operations, and any related economic downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.
Changes in interest rates could reduce the value of our AFS securities holdings which would increase our accumulated other comprehensive loss and thereby negatively impact shareholders’ equity.
We maintain an investment portfolio consisting of various high-quality liquid fixed-income securities. The nature of fixed-income securities is such that changes in market interest rates impact the value of these assets. Increases or decreases in market interest rates are expected to further increase or decrease our AOCI (loss) and thereby decrease or increase shareholders’ equity.
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Further, the FRB and the OCC may consider increases in AOCI when evaluating our regulatory capital position, although current capital regulations permit AOCI to be excluded from capital for institutions of our size.
3. Liquidity Risk
Liquidity risk could impair our ability to fund operations and meet our obligations as they become due.
Our ability to implement our business strategy will depend on our liquidity and ability to obtain funding for loan originations, working capital and other general purposes. Liquidity is needed to fund various obligations, including credit commitments to borrowers, mortgage and other loan originations, withdrawals by depositors, repayment of borrowings, dividends to shareholders, operating expenses and capital expenditures. Liquidity risk is the potential that we will be unable to meet our obligations as they come due, capitalize on growth opportunities as they arise, or pay regular dividends on our common stock because of illiquid assets or an inability to obtain satisfactory funding. Our preferred sources for funding are deposits and customer repurchase agreements, which are low cost and stable sources of funding for us. We compete with commercial banks, savings banks and credit unions, as well as numerous non-depository competitors for deposits and customer repurchase agreements. If a significant portion of our deposits were to be withdrawn within a short period of time or if we are unable to attract and maintain sufficient levels of deposits and customer repurchase agreements to fund our loan growth and liquidity objectives, we may be subject to paying higher funding costs by raising interest rates that are paid on deposits and customer repurchase agreements or cause us to source funds from third-party providers which may be higher cost funding, impacting our net interest margin and overall profitability. Additionally, our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Because our AFS investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated. However, the sale of all or a material portion of our securities portfolio to increase liquidity in the face of withdrawals would cause the realization of significant losses that would, in turn, reduce our regulatory capital position.
The proportion of our deposit account balances that exceed FDIC insurance limits may expose FNBPA to enhanced liquidity risk in times of financial distress.
Bank failures can result from the sudden withdrawal of high volumes ofdeposits that exceed FDIC insured limits.As a result, many large depositors across the industry have withdrawn deposits in excess of applicable deposit insurance limits and deposited these funds in larger financial institutions they deem less likely to be affected by this condition. In many instances, this has resulted in depositors moving these funds into money market mutual funds or other similar securities accounts in an effort to diversify the risk of potential bank failure(s).
Uninsured deposits historically have been viewed by the FDIC as less stable than insured deposits. The federal banking agencies, including the FDIC and OCC, issued an interagency policy statement in July 2023, noting that banks should maintain actionable contingency funding plans that take into account a range of possible stress scenarios, assess the stability of their funding and maintain a broad range of funding sources, ensure that collateral is available for borrowing, and review and revise contingency funding plans periodically and more frequently as market conditions and strategic initiatives change.
If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated. Under such circumstances, we may be required to access funding from sources such as the FRB’s discount window in order to manage our liquidity risk.
We are dependent on dividends from our subsidiaries to meet our financial obligations and pay dividends to shareholders.
We are a holding company and conduct almost all our operations through our subsidiaries. We do not have any significant assets other than cash and the stock of our subsidiaries. Accordingly, we depend on dividends from our subsidiaries, in particular FNBPA, to meet our financial obligations and to pay dividends to shareholders. Our right to participate in any distribution of earnings or assets of our subsidiaries is subject to the prior claims of creditors of such subsidiaries. Under federal law, the amount of dividends that a national bank, such as FNBPA, may pay in a calendar year is generally limited to the amount of our net income for the current year combined with our retained net income for the two preceding years. Likewise, our state incorporated entities are subject to state laws governing dividend practices and payments.
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Regulatory authorities may restrict our ability to pay dividends on, and make repurchases of, our common stock.
Dividends on our common stock will be payable only if, when and as authorized and declared by our Board of Directors; however, our ability to pay dividends and make stock repurchases may be limited due to banking laws and regulations and limitations imposed by our banking regulators (including the OCC limiting dividends from FNBPA). In certain circumstances, we will not be able to make a capital distribution unless the FRB approves such distribution, including if the dividend could not be fully funded by our net income over the last four quarters (net of dividends paid), our prospective rate of earnings retention appears inconsistent with our capital needs, asset quality, and overall financial condition, or we will not be able to continue meeting the minimum required capital ratios. As a bank holding company, we also are required to consult with the FRB before increasing dividends or redeeming or repurchasing capital instruments. Additionally, the FRB could prohibit or limit our payment of dividends if it determines that payment of the dividend would constitute an unsafe or unsound practice. There can be no assurance that we will declare and pay any dividends or repurchase any shares of our common stock in the future.
We have outstanding securities senior to common stock which could limit our ability to pay dividends on our common stock.
We have outstanding TPS that are senior to our common stock and could adversely affect our ability to declare or pay dividends or distributions on our common stock. The terms of the TPS prohibit us from declaring or paying dividends or making distributions on our junior capital stock, including the common stock, or purchasing, acquiring, or making a liquidation payment on any junior capital stock, if: (1) an event of default has occurred and is continuing under the junior subordinated debentures underlying the TPS, (2) we are in default with respect to a guarantee payment under the guarantee of the related TPS, or (3) we have given notice of our election to defer interest payments, but the related deferral period has not yet commenced or a deferral period is continuing. If we experience a material deterioration in our financial condition, liquidity, capital, results of operations or risk profile, our regulators may not permit us to make future payments on our TPS, which would also prevent us from paying any dividends on our common stock.
Our growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.
We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations (see Item 1 of this Report, “Business – Government Supervision and Regulation”). As a financial holding company, we seek to maintain capital sufficient to meet the “well-capitalized” standard set by regulators. While we anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future, we may in the future need to raise additional capital to support current operations or continued growth.
The availability of additional capital or financing will depend on a variety of factors, many of which are outside of our control, including market conditions, credit availability, our credit ratings and credit capacity, marketability of our capital stock, and the possibility that lenders and investors could develop a negative perception of our long- or short-term financial prospects if we incur large credit losses or if the level of business activity decreases due to economic conditions. As such, we may be forced to delay raising capital, issue shorter-term securities than desired or bear an unattractive cost of capital, which could decrease profitability, significantly reduce financial flexibility and adversely affect our ability to grow organically or through acquisitions. In addition, if we decide to raise additional equity capital, it could be dilutive to our existing shareholders.
4. Reputation Risk
Our key assets include our brand and reputation and our business may be affected by how we are perceived by the public.
Our brand and our reputation are our key assets. Our ability to attract and retain banking, insurance, wealth management and corporate clients and employees is highly dependent upon external perceptions of our culture, level of service, security, trustworthiness, business practices and financial condition. Negative perceptions or publicity regarding these matters could damage our reputation among existing customers and corporate clients and employees, which could make it difficult for us to attract new clients and employees and retain existing ones. Adverse developments with respect to our financial services activities, the financial services industry or sociopolitical events and circumstances may also, by association, negatively impact our reputation, or result in greater regulatory or legislative scrutiny or litigation against us. Although we monitor developments for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely affect our revenues and profitability.
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Increasing, complex, evolving and conflicting federal government policies, regulatory, stakeholder, and other third-party expectations on sustainability, human capital and social governance (Corporate Responsibility) practices could adversely affect our reputation, expose us to government investigations and enforcement actions, litigation and our access to capital and the market price of our securities.
We are subject to a variety of risks arising from various Corporate Responsibility matters, which include, among other things, environmental sustainability, human capital and human resource practices, and human rights. Risks arising from such matters may adversely affect, among other things, our reputation and the market price of our securities.
While we engage in various initiatives to help manage our sustainability and governance profile and respond to stakeholder expectations, which continue to evolve, such initiatives can be costly and may not have the desired effect. Moreover, stakeholder expectations are not uniform, and advocates with varying expectations on Corporate Responsibility matters have increasingly resulted in a range of activism to promote their positions.
On January 20, 2025, the U.S. administration issued an Executive Order requiring all federal agencies to terminate any policies, programs, mandates, guidance, regulations, and other actions and orders establishing DEI-based preferences, and to enforce federal civil rights laws to combat such preferences, mandates, policies, programs and activities of entities operating in the private sector. Further, the Executive Order directs federal agencies to take appropriate action to discourage private sector DEI-based initiatives. While the enforceability of the Executive Order and the steps that various federal agencies may take in response to it are uncertain at this time, the Executive Order signals a material shift in federal DEI policy that reasonably can be expected to have implications for the private sector, including the banking industry. In this regard, any scrutiny by federal government authorities of our human capital and strategic businesses practices, or those of the banking sector generally, may have a material adverse effect on us. Please refer to Item 1 – “Business – Human Capital.”
Navigating varying expectations of federal government policymakers and our various stakeholders expose us to potential inherent costs, and any failure to successfully navigate such expectations may expose us to negative publicity, shareholder activism, and litigation or other engagement from stakeholders who have differing viewpoints, as well as the potential for civil investigations and enforcement by federal governmental authorities. We could be required to incur significant costs responding to any such activity and our relationships and reputation with our existing and prospective customers and third parties with which we do business could be affected as well. This could have an adverse effect on our ability to attract and retain customers and employees and could have a negative impact on the market price for our securities. Certain of our customers, suppliers, or other stakeholders are also subject to such expectations and risks, which may result in additional or augmented risks to us.
5. Operational Risk
Our failure to continue to recruit and retain qualified banking professionals could adversely affect our ability to compete successfully and affect our profitability.
Our continued success and future growth depend heavily on our ability to attract and retain highly skilled and motivated banking professionals. We compete against many institutions with greater financial resources both within our industry and in other industries to attract these qualified individuals. Our failure to recruit and retain adequate talent could reduce our ability to compete successfully and adversely affect our business and profitability.
The financial soundness of other financial institutions may adversely affect FNB, FNBPA and other affiliates.
Financial institutions are interrelated as a result of trading, clearing, counterparty and other relationships. FNB, FNBPA and our affiliates are exposed to many different industries and counterparties and they routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients. Many of these types of transactions expose FNB, FNBPA and our affiliates to credit risk in the event of default of the counterparty or client. In addition, FNBPA and our affiliates’ credit risks may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices that are not sufficient to recover the full amount of the loan or derivative exposure that we are due.
Changes and instability in economic conditions and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition.
Our financial performance depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies. Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity. Any contraction of economic activity, including an economic downturn or recession or an inflationary environment, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings. In particular, interest rates are highly sensitive to many factors that are
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beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the FRB. New appointments to the FRB, or increased political pressures on the FRB, could impact monetary policy, which will directly impact our liquidity, results of operations, financial condition and capital position.
Adverse economic developments, specifically including inflation-related impacts, may have a negative effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases. Credit performance over the medium-and long-term is susceptible to economic and market forces and therefore forecasts remain uncertain, with some degree of instability in the CRE markets expected in the coming quarters as loans are refinanced in markets with higher vacancy rates under current economic conditions. Instability and uncertainty in the commercial and residential real estate markets, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.
Macroeconomic and geopolitical challenges and uncertainties affecting the stability of regions and countries around the globe could have a negative impact on our business, financial condition and results of operations. Existing and future geopolitical instability and related activities, such as U.S. and foreign tariff policies could adversely affect our businesses, financial condition and results of operations.
Our business could be adversely affected by difficult economic conditions in the regions in which we operate.
We operate in seven states and the District of Columbia. Most of our customers are individuals and small- and medium-sized businesses that are dependent upon their regional economies. The economic conditions in these local markets may be different from, and in some instances worse than, economic conditions in the U.S. as a whole. Challenging macroeconomic, recessionary and employment conditions in the market areas we serve could result in the following consequences, among others, any of which could have a material adverse effect on our business, financial condition and results of operations: demand for our loans, deposits and services may decline; loan delinquencies, problem assets, foreclosures and charge-offs may increase; weak economic conditions could limit the demand for loans by creditworthy borrowers, limiting our capacity to leverage our retail deposits and maintain our net interest income; collateral for our loans may decline in value; and the amount of our low-cost or non-interest-bearing deposits may decrease.
Global trade policies, including changing tariffs and the imposition of new or increased tariffs and related uncertainty thereof, could have a material adverse effect on our business, results of operations or financial condition.
There continues to be significant uncertainty about the future relationship between the U.S. and other countries, including with respect to trade policies, treaties, government regulations, sanctions, tariffs, and application thereof. For example, in April 2025, the U.S. government began imposing “reciprocal” tariffs intended to address trade deficits and inconsistent economic treatment of importation between the U.S. and other countries. In response, China, among others, has announced retaliatory tariffs against certain imports from the U.S., among other measures. Although we are continuing to evaluate the impact of these evolving developments, we cannot provide any assurance about the ultimate outcome or impact of these developments or other changes in trade policies, including the imposition or application of new or increased tariffs between the U.S. and other countries. Furthermore, changes to trade policies, retaliatory measures, or prolonged uncertainty in trade relationships could increase the cost of, and reduce demand for, our products and services, or customers’ ability to service debt, which would adversely impact our business. In addition, political tensions as a result of trade policies could reduce trade volume, investment and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, which could adversely affect our business, results of operations and financial condition.
The banking and financial services industry continually encounters technological change, especially in the systems that are used to deliver products to, and execute transactions on behalf of, customers. If we fail to continue to invest in technological improvements as they become appropriate or necessary, our ability to compete effectively could be severely impaired.
The banking and financial services industry continually undergoes technological changes, with frequent introductions of new technology-driven products and services, including recent and rapid developments in AI. The effective use of technology increases efficiency and enables financial institutions to better compete for and serve customers and reduce costs. Our future success will depend, in part, on our ability to conveniently address customer needs by using secure technology to provide products and services that will satisfy customer demands, as well as create additional efficiencies in our operations. Many of our larger competitors have greater resources to invest in technological improvements, and we may not effectively implement new technology-driven products and services or do so as quickly as our competitors. Failure to successfully keep pace with technological change affecting the banking and financial services industry could negatively affect our revenue and profitability.
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In addition, transactions utilizing digital assets, including cryptocurrencies, stablecoins and other similar assets, have increased over the course of the last several years. Certain characteristics of digital asset transactions, including their speed and anonymity are appealing to certain consumers notwithstanding the various risks posed by such transactions. Accordingly, digital asset service providers - which, at present are not subject to the same extensive regulation as banking organizations and other financial institutions - have become active competitors for our customers' banking business. The process of eliminating banks as intermediaries, known as "disintermediation," could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. On July 18, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the “GENIUS Act,” was signed into U.S. law, establishing a federal licensing and supervisory framework for payment stablecoins and their issuers. Compliance with these requirements involves maintaining adequate asset reserves, extensive reporting obligations, independent audits, and increased supervisory oversight. The GENIUS Act may accelerate and increase the competition that non-traditional financial institutions pose to banks’ payment services, but may also create opportunities for banks to hold stablecoin reserve assets, custody stablecoins, or issue stablecoins. Any potential involvement in issuing or supporting payment stablecoins could expose us to regulatory compliance risks, increased operational costs, and evolving legal uncertainties.
Extensive use of models, AI and generative AI technologies presents operational, regulatory and reputational risks.
We rely heavily on a broad range of quantitative models, advanced analytics, AI, and generative AI technologies across multiple areas of our operations, including credit decisioning, fraud detection, risk monitoring, customer engagement, productivity enhancement and internal operational processes. In addition, we are making strategic investments in AI initiatives, including generative AI, to, among other things, recommend relevant content across our products, enhance our advertising tools, develop new products, streamline and customize the customer experience and develop new features for existing markets. The development and use of AI presents potential risks and challenges to our business and may require significant additional investments in infrastructure, personnel and trainings. There can be no assurance that the usage of AI will enhance our products or services or be beneficial to our business or customers, including our efficiency or profitability. As these technologies become more integrated into our business model, our dependence on the accuracy, quality and completeness of underlying data and on the soundness of model design, governance, assumptions and controls continues to increase. Generative AI systems, in particular, may sometimes produce inaccurate, incomplete, biased or misleading outputs, or results that are difficult to interpret, explain or reproduce. Errors, limitations or failures involving models or AI tools could adversely affect decision‐making, risk identification, customer interactions, operational performance or the accuracy of financial, regulatory or risk reporting. Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.
The expanded use of AI and generative AI also introduces heightened risks related to privacy, cybersecurity, data usage, intellectual property, consumer protection and fair lending, as well as potential exposure to evolving federal and state regulatory frameworks, litigation or other legal liability. Regulators are increasingly focused on AI transparency, model explainability, bias mitigation and governance standards, and new rules or supervisory expectations may require additional investment, modification of our systems or changes to how we apply these technologies. We may incur operational, compliance or legal risk if AI‐enabled tools behave in unintended ways or if our governance, monitoring and validation practices do not keep pace with technological developments. Additionally, if we fail to keep pace with AI advancements, or if competitors are able to deploy AI more effectively, our competitive position may be harmed. Any failure to appropriately manage risks associated with our extensive use of models, AI and generative AI could result in regulatory criticism, operational disruption, reputational harm or adverse effects on our business, financial condition or results of operations.
An interruption in or breach in security of our information systems, or other cybersecurity risks, could result in a loss of customer business, increased compliance and remediation costs, civil litigation or governmental regulatory action, and have an adverse effect on our results of operations, financial condition and cash flows.
As part of our business, we collect, process and retain sensitive and confidential client and customer information in both paper and electronic form and rely heavily on communications and information systems for these functions. This information includes non-public, personally-identifiable information that is protected under applicable federal and state laws and regulations. Additionally, certain of these data processing functions are not handled by us directly, but are outsourced to third-party providers. We have experienced cyber-attacks in the past, none of which have had a material impact on our business or operations, and expect to continue to be the target of cyber-attacks. Our current facilities and systems, as well as those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism and other physical security threats, computer viruses or compromises, ransomware attacks, social engineering attacks, misplaced or lost data, programming and/or human errors or other similar events, any of which could be enhanced or facilitated by AI. While we have policies, procedures and practices designed to prevent or limit the effect of the failure, interruption, or security breach of our communications and
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information systems, we cannot ensure that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. Any security breach involving the misappropriation, loss or other unauthorized disclosure of our confidential business, employee or customer information, whether originating with us, our vendors or retail businesses, could severely damage our reputation, expose us to the risks of civil litigation and liability, require the payment of regulatory fines or penalties or undertaking of costly remediation efforts with respect to third parties affected by a security breach, disrupt our operations, and have a material adverse effect on our business, financial condition and results of operations.
The cost of our day-to-day cybersecurity monitoring and protection systems and controls may increase over time. We may also need to expend substantial resources to comply with the data security breach notification requirements adopted by banking regulators and the states, which have varying levels of individual, consumer, regulatory or law enforcement notification and remediation requirements in certain circumstances in the event of a security breach.
Cybersecurity risks continue to grow and, as a result, the cyber-resilience of banking organizations is of increased importance to federal and state banking agencies and other regulators. New or revised laws and regulations may significantly impact our current and planned privacy, data protection and information security-related practices, the collection, use, sharing, retention and safeguarding of consumer and employee information, and current or planned business activities. Compliance with current, proposed, or future privacy, data protection and information security laws to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could materially and adversely affect our profitability.
As technology advances, the ability and speed to initiate transactions and access data has also become more widely distributed among mobile devices, personal computers, automated teller machines, remote deposit capture sites and similar access points, some of which are not controlled or secured by us. It is possible that we could have exposure to liability and suffer losses as a result of a security breach or cyber-attack that occurred through systems that are not controlled by us. Although we maintain specific “cyber” insurance coverage, the amount or form of coverage may not be adequate in any particular case. As cyber threats continue to evolve and increase, we may be required to spend significant additional resources to continue to modify or enhance our protective and preventative measures or to investigate and remediate any information security vulnerabilities.
Our day-to-day operations rely heavily on the proper functioning of products, information systems and services provided by third-party vendors.
We rely on certain external vendors to provide products, information systems and services necessary, including our core processing system, to maintain our day-to-day operations. These third parties provide key components of our business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. Any complications caused by these third parties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor (including zero-day attacks associated with vulnerabilities in third-party software that were not previously known), failure of a vendor to comply with applicable laws and regulations or to conform to our internal controls and risk management procedures, and failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business.
There may be risks resulting from the extensive use of models in our business.
We rely on quantitative models to measure risks and to estimate certain financial values. Models may be used in such processes as determining the pricing of various products, developing presentations made to market analysts and others, creating loans and extending credit, measuring interest rate and other market risks, predicting losses, assessing capital adequacy, developing strategic planning initiatives, capital stress testing and calculating regulatory capital levels, as well as to estimate the value of financial instruments and balance sheet items. Poorly designed or implemented models present the risk that our business decisions based on information incorporating models will be adversely affected due to the inadequacy of such information. For example, operational errors in the development or implementation of models, use of models beyond the scope of the assumptions and limitations for the models to work appropriately, or reliance on biased or erroneous outputs generated by AI could lead to errors that can adversely affect managerial decisions and business judgments. Also, information we provide to the public or to our regulators based on poorly designed or implemented models could be inaccurate or misleading. Certain decisions that regulators make, including those related to capital distributions and dividends to our shareholders, could be adversely affected due to the regulator’s perception that the quality of the models used to generate our relevant information is insufficient.
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Our asset valuations may include methodologies, estimations and assumptions that are subject to differing interpretations which, along with market factors such as volatility in one or more markets or industries, could result in changes to asset valuations that may materially adversely affect our results of operations or financial condition.
We must use estimates, assumptions and judgments when assets are measured and reported at fair value. Assets carried at fair value inherently result in a higher degree of financial statement volatility. Because the assets are carried at fair value, a decline in their value may cause us to incur losses even if the assets in question present minimal risk. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party resources, when available. When such third-party information is not available, we estimate fair value primarily by using cash flow and other financial modeling techniques utilizing assumptions such as credit quality, liquidity, interest rates and other relevant inputs. Changes in underlying factors or assumptions in any of the areas underlying these estimates could materially impact our future financial condition and results of operations.
Hurricanes, tornadoes, excessive rainfall, droughts or other adverse weather events, and public health emergencies could negatively affect the local economies in the markets of our footprint, or disrupt our operations in those markets, which could have an adverse effect on our business or results of operations.
The economy of the markets in our footprint is affected, from time to time, by adverse weather events and other disruptions, including as a result of public health issues. We cannot predict whether, or to what extent, damage caused by future weather conditions or other disruptions will affect our operations, customers or the economies in our markets. Weather events could cause a disruption in our day-to-day business activities in branches within our markets, a decline in loan originations, destruction or decline in the value of properties securing our loans, or an increase in the risks of delinquencies, foreclosures, and loan losses. Even if a weather event does not cause any physical damage in our markets, it could affect the market value of property within our footprint.
We grow our business in part by acquiring other banks and financial services businesses from time to time. Acquisitions present a number of risks and uncertainties related both to the acquisition transactions themselves and to the integration of the acquired businesses with us after closing.
Acquisitions of other banks and financial services companies or of financial assets and deposits and other liabilities present risks and uncertainties to us in addition to those presented by the nature of the business acquired, which may materially and adversely affect our results of operations. Our ability to analyze the risks presented by prospective acquisitions, as well as our ability to prepare in advance of closing for integration, may be limited to the extent that we cannot gather necessary or desirable information with respect to the business we are acquiring. We may also make certain assumptions related to an acquisition that may prove to be inaccurate that limit the anticipated benefits (such as cost savings from synergies or strategic gains or be able to offer enhanced product sets) or make the acquisition more expensive or take longer to complete and integrate than anticipated. Prior to closing an acquisition, prospective acquisition targets are also subject to their own risks that we cannot manage or control.
Our ability to complete an acquisition may be dependent on regulatory agencies with responsibilities for reviewing or approving the transaction, which could delay, restrictively condition or result in denial of an acquisition, or otherwise limit the benefits of the acquisition. Changes in regulatory rules or standards or the application of those rules or standards, or future regulatory initiatives designed to mitigate risk or promote competition may also limit our ability to complete an acquisition (see discussion in Part I, Business under Government Supervision and Regulation, Expansion and Acquisitions). Further, once an acquisition is completed, it may be difficult for us to integrate the acquired business with our operations and we may not see the anticipated benefits of any such acquisition.
6. Legal and Compliance Risk
We could be adversely affected by changes in the law, especially changes in the regulation of the banking industry.
We operate in a highly regulated environment and our businesses are subject to supervision, regulation, enforcement and prosecution by numerous governmental agencies, including at the federal and state levels. Regulations are generally intended to provide protection for depositors, borrowers and other customers, as well as the stability of the financial services industry, rather than for investors in our securities. We are subject to changes in federal and state law, regulations, governmental policies, agency supervisory and enforcement policies and priorities, and tax laws and accounting principles. Changes in regulations or the regulatory environment could adversely affect the banking and financial services industry as a whole and could limit our growth and returns to investors by restricting such activities as the payment of dividends and stock repurchases, balance sheet growth, investments, loans and interest rates, assessments of fees, such as overdraft and interchange fees, the provision of securities, insurance, brokerage or trust services, mergers with or acquisitions of other institutions or branches, the types of deposit and non-deposit activities in which our subsidiaries may engage, and offering of new products and services.
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Under regulatory capital adequacy guidelines and other regulatory requirements, FNB and FNBPA must meet guidelines subject to qualitative judgments by regulators about components, risk weightings and other factors. On July 27, 2023, the federal banking agencies, including the OCC, issued a proposed rule to implement the final components of the Basel III Capital Rules. Among other things, the proposed rule would substantially change the existing calculation of risk-weighted assets and require banking organizations to use revised models for such calculations. While the proposed rule would not apply to FNB or FNBPA directly based upon our current asset size, many of the principles included in this proposed rulemaking could result in increased supervisory expectations and closer regulatory scrutiny for institutions that experience substantial growth. The federal banking agencies are likely to substantially revise and re-propose this rule, which may result in changes to capital and liquidity requirements that are currently applicable to us. Changes to present capital and liquidity requirements could restrict our activities and require us to maintain additional capital. Compliance with heightened capital standards may reduce our ability to generate or originate revenue-producing assets and thereby restrict revenue generation from banking and non-banking operations. If we fail to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected.
In response to several large bank failures in the spring of 2023, the federal banking agencies have engaged in rulemaking that could increase compliance costs should we grow in excess of $50 billion in average total assets, including the FDIC adopting resolution planning requirements for IDIs with $50 billion or more in average total assets. While the FDIC has intended that it intends to revisit these requirements in 2026 and does not intend to impose these requirements on IDIs that become subject to them before a rule is finalized, it is uncertain how and to what extent the revisions to the FDIC’s rules would mitigate potential adverse impacts to FNBPA should its average total assets exceed $50 billion over four consecutive quarters.
We are subject to supervision and examination by U.S. government authorities and may become subject to investigations, enforcement actions, fines, and other adverse effects.
Our business operations are subject to extensive supervision, examination and regulation by a number of U.S. federal and state regulatory authorities, including the FRB, OCC and FDIC. These authorities have broad powers to conduct examinations of our operations, enforce compliance with applicable laws and impose enforcement actions, fines and other actions for violations. Recently, the federal banking agencies have signaled a desire to remove excessive regulatory, supervisory and examination burdens, while prioritizing efforts to focus supervision on material financial risks. On October 7, 2025, the OCC, together with the FDIC, issued a notice of proposed rulemaking to codify the elimination of reputation risk from their supervisory programs, which would, among other things, prohibit the OCC from criticizing or taking adverse action against an institution on the basis of reputation risk, and to prohibit politicized debanking. In addition, the OCC, together with the FDIC issued a notice of proposed rulemaking that would define the term “unsafe or unsound practice” for purposes of section 8 of the Federal Deposit Insurance Act and revise the supervisory framework for the issuance of matters requiring attention and other supervisory communications. On November 18, 2025, the FRB issued a Statement of Supervisory Operating Principles intended to focus FRB examiners on material financial risks threatening the safety and soundness of banks, reduce duplication between exams from different supervisors, and streamline the remediation of issues cited by supervisors. Changes resulting from these new supervisory practices may create opportunities for us or for our competitors to streamline compliance programs to focus on meeting the agencies’ more targeted expectations. However, shifts in supervisory priorities and practices, whether in the short-term or long-term, could expose us to regulatory compliance risks, increased operational costs, and evolving legal uncertainties.
Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
A U.S. government debt default, threatened or wide-spread perception of a potential debt default, or downgrade of the sovereign credit ratings of the U.S. by credit rating agencies, could have an adverse impact on financial markets, interest rates and economic conditions in the U.S. and worldwide, which could have an adverse effect on our financial position or results of operations.
Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the U.S. Many of our investment securities are issued by the U.S. government and government agencies and sponsored enterprises. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, possible reductions in federal government spending, and the possibility of the federal government defaulting on its obligations for a period of time, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide, which could adversely impact us.
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In addition to affecting the price and liquidity of U.S. government securities, a government default or threat of default could disrupt the market for or affect the pricing of repurchase agreements in U.S. government securities (Repos), a type of secured financing transaction used by many financial institutions, including FNBPA, to manage short-term funding needs, invest short-term cash balances and manage inventories of government securities. Overnight rates on Repo transactions are used by the FRB to calculate SOFR. A disruption in the Repo markets could affect interest rates paid on SOFR-benchmarked loans and payments on swaps and other financial contracts that use SOFR as a benchmark rate.
A debt default or further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could also adversely affect the ability of the U.S. government to support the financial stability of Fannie Mae, Freddie Mac and the FHLBs, with which we do business, obtains financing, engages with for sales of mortgages, and in whose securities we invest.
Our financial condition and results of operations may be adversely affected by changes in accounting policies, standards and interpretations.
The FASB, regulatory agencies and other bodies that establish accounting standards periodically change the financial accounting and reporting standards governing the preparation of our financial statements. Additionally, those bodies that establish and interpret the accounting standards (such as the FASB, SEC and banking regulators) may change prior interpretations or positions on how these standards should be applied. Changes resulting from these new standards may result in materially different financial results and may require that we change how we process, analyze and report financial information and that we change financial reporting controls.
Certain provisions of our Articles of Incorporation and By-laws and Pennsylvania law may discourage takeovers.
Our Articles of Incorporation and By-laws contain certain anti-takeover provisions that may discourage or may make more difficult or expensive a tender offer, change in control or takeover attempt that is opposed by our Board of Directors. In particular, consistent with Pennsylvania law, our Articles of Incorporation and By-laws:
•require shareholders to give us advance notice to nominate candidates for election to our Board of Directors or to solicit proxies in support of such candidates, or to make shareholder proposals at a shareholders’ meeting;
•permit our Board of Directors to issue, without approval of our common shareholders unless otherwise required by law, preferred stock with such terms as our Board of Directors may determine;
•provide that a special meeting may only be called by shareholders holding not less than 25% of all votes entitled to be cast on each issue at the proposed special meeting; and
•require the vote of the holders of at least 75% of our voting shares for shareholder amendments to our By-laws.
In the case of a proposed business combination with a shareholder owning more than 10% of the voting shares of FNB (an "interested shareholder"), the vote of the holders of at least two-thirds of the voting shares not owned by such shareholder is required to approve the business combination. A majority of FNB's disinterested directors have exclusive authority to determine whether a shareholder is an interested shareholder, the extent of such shareholder's beneficial ownership, whether any shareholder is an affiliate or associate of an interested shareholder, and whether any securities to be issued in the transaction exceed applicable fair market value thresholds.
The aforementioned voting requirement does not apply if any one of several conditions is satisfied:
•a majority of FNB's disinterested directors approve the transaction;
•FNB has had fewer than 300 shareholders of record during the prior three years;
•the interested shareholder has beneficially owned at least 80% of FNB's outstanding voting shares for at least five years; or
•the interested shareholder beneficially owns at least 90% of the outstanding voting shares (excluding shares acquired directly from FNB without the approval of a majority of the disinterested directors).
The voting requirement is also inapplicable where the affiliated transaction satisfies specified "fair price" and procedural protections, including payment of consideration meeting minimum value standards, use of cash or matching consideration previously paid by the interested shareholder, maintenance of regular dividend practices, restrictions on additional acquisitions of voting share by the interested shareholder, the distribution of a proxy or information statement at least 25 days prior to consummation of the transaction unless otherwise approved by a majority of the disinterested directors, and affiliated transactions wherein the interested shareholder became an interested shareholder inadvertently.
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These provisions of our Articles of Incorporation and By-laws and of Pennsylvania law could discourage potential acquisition proposals and could delay or prevent a change in control, even though the holders of a majority of our stock may consider such proposals desirable. Such provisions could also make it more difficult for third parties to remove and replace members of our Board of Directors. Moreover, these provisions could diminish the opportunities for shareholders to participate in certain tender offers, including tender offers at prices above the then-current market price of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts.
We have experienced and may experience future increases in our FDIC insurance assessments due to the bank failures that affect the FDIC's insurance fund.
The losses incurred by the DIF in connection with the resolution of large bank failures are required by law to be recovered through one or more special assessments on depository institutions and, potentially, their holding companies if the FDIC determines such action to be appropriate and the Secretary of the UST concurs with the FDIC’s determination. For example, special assessments were imposed in connection with the failures of SIVB and SBNY. FNBPA recognized and expensed an initial special assessment of $29.9 million and $5.2 million in 2023 and 2024, respectively. On December 16, 2025, the FDIC indicated that the special assessment would be fully recovered in the eighth assessment quarter and issued an interim final rule amending the special assessment to reduce the special assessment rate for the eighth and final collection quarter, resulting in a $5.6 million reduction to the FDIC special assessment for FNBPA in 2025. Any additional increase in our assessment fees could have a materially adverse effect on our results of operations and financial condition.
Adverse changes to our credit ratings could limit our access to funding and increase our borrowing costs.
Credit ratings are subject to ongoing review by rating agencies, which consider a number of factors, including our financial strength, performance, prospects and operations as well as factors not under our control. Other factors that influence our credit ratings include changes to the rating agencies’ methodologies for our industry or certain security types; the rating agencies’ assessment of the general operating environment for financial services companies; our relative positions in the markets in which we compete; our various risk exposures and risk management policies and activities; pending litigation and other contingencies; our reputation; our liquidity position, diversity of funding sources and funding costs; the current and expected level and volatility of our earnings; our capital position and capital management practices; our corporate governance; current or future regulatory and legislative initiatives; and the agencies’ views on whether the U.S. government would provide meaningful support to FNB or its subsidiaries in a crisis. Rating agencies could make adjustments to our credit ratings at any time, and there can be no assurance that they will maintain our ratings at current levels or that downgrades will not occur.
Any downgrade in our credit ratings could potentially adversely affect the cost and other terms upon which we are able to borrow or obtain funding, increase our cost of capital and/or limit our access to capital markets. Credit rating downgrades or negative watch warnings could negatively impact our reputation with lenders, investors and other third parties, which could also impair our ability to compete in certain markets or engage in certain transactions. In particular, holders of deposits which exceed FDIC insurance limits may perceive such a downgrade or warning negatively and withdraw all or a portion of such deposits. While certain aspects of a credit rating downgrade are quantifiable, the impact that such a downgrade would have on our liquidity, business and results of operations in future periods is inherently uncertain and would depend on a number of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency pre-downgrade, individual client behavior and future mitigating actions we might take.
We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.
The CRA, ECOA, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The CRA requires the OCC, in connection with its examination of a national bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution. All institutions insured by the FDIC must publicly disclose their rating. Our efforts to maintain a “Satisfactory” or better rating may increase our costs.
The fair lending laws prohibit discrimination in the provision of banking services on the basis of prohibited factors including, among others, race, color, national origin, gender, and religion. The enforcement of these laws has been an increasing focus for the CFPB and other regulators.
Under the fair lending laws, we may be liable if our policies result in a disparate treatment of or have a disparate impact on a protected class of applicants or borrowers and may also be subject to investigation by the DOJ. A successful challenge to our performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and restrictions on expansion activity. Private parties may also have the ability to challenge our performance under fair lending laws in private class action litigation.
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The consent orders entered into by FNBPA with the DOJ and the North Carolina State Department of Justice will cause us to incur additional compliance costs, may harm our reputation and may restrict our ability to engage in certain business activities and transactions, and our failure to comply with the terms of such consent orders may subject us to further enforcement actions.
On February 5, 2024, FNBPA announced its entry into consent orders (together, the "Consent Orders") with the DOJ and the North Carolina State Department of Justice. The Consent Orders resolve allegations that, from 2017 to 2021, FNBPA-(including as a successor in interest to Yadkin Bank, which FNBPA acquired in 2017) committed violations of the Fair Housing Act and the ECOA (Regulation B), as well as the North Carolina Unfair and Deceptive Practices Act, within the Charlotte, North Carolina, and Winston-Salem, North Carolina assessment areas. The Consent Orders were approved by the U.S. District Court for the Middle District of North Carolina on February 13, 2024.
We are committed to full compliance with the Consent Orders; however, achieving such compliance will require attention from our management, and will cause us to bear costs to implement their terms. Actions taken to achieve compliance with the Consent Orders may affect our business or financial performance, and may require us to reallocate resources away from existing operations or to alter our business practices, operations, products and services, and risk management practices. Our failure to comply with the requirements of the Consent Orders could cause us to incur additional significant compliance costs or subject us to additional enforcement action, and any deficiencies in our compliance practices, as well as the terms of the Consent Orders, could result in additional inquiries, investigations or enforcement actions. Further, the existence of the Consent Orders may adversely affect our reputation in the communities we serve and among third parties with which we conduct business. In addition, the existence of the Consent Orders may adversely impact our CRA rating.
Under the regulatory framework governing proposed business combinations, an institution’s compliance with the fair lending laws, whether the institution is subject to an open or pending enforcement action, and the institution's CRA rating are significant factors for the federal banking agencies in determining whether a proposed transaction is consistent with safe and sound banking principles. The Consent Orders will be in effect for a minimum of five years, which term could be longer depending upon the extent and timing of the requisite loan subsidies that will be paid by FNBPA to qualified applicants. Accordingly, our ability to pursue strategic growth initiatives involving combinations with other banking organizations may be limited. In view of the OCC's reinstatement of the streamlined bank merger application and expedited review process, it is anticipated that future qualified bank acquisition transactions may be approved in a more expeditious and timely manner.
Our financial condition and results of operations may be adversely affected by changes in federal, state or local tax rules and regulations, or interpretations.
We are subject to legislative tax rate changes that could increase our effective tax rates. Depending on enactment dates, these law changes may be retroactive to previous periods which could negatively affect our current and future financial performance.
Our future effective tax rates could be affected by additional changes in the federal tax rates and in tax rates in jurisdictions where our income is earned, by changes in or our interpretation of tax rules and regulations in the jurisdictions in which we do business, by unexpected negative changes in business and market conditions that could reduce certain tax benefits, or by changes in the valuation of our DTAs and DTLs. Changes in statutory tax rates or DTAs and DTLs may adversely affect our profitability and results of operations in future periods.
Significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions that could adversely impact our business, results of operations and financial condition.
The current U.S. administration has commenced efforts to implement significant changes to the size and scope of the federal government and reform its operations to achieve stated goals that include reducing the federal budget deficit and national debt, improving the efficiency of government operations, and promoting innovation and economic growth. To date, these efforts have been carried out through a mix of executive actions aimed at eliminating or modifying federal agency and federal program funding, reducing the size of the federal workforce, reducing or altering the scope of activities conducted by, and possibly eliminating, various federal agencies and bureaus, and encouraging the use of AI and other advanced technologies within the public and private sectors. These changes may have varied effects on the economy that are difficult to predict. For instance, the delivery of government services and the distribution of federal program funds and benefits may be disrupted or, in some cases, eliminated as a result of funding cuts or recasting of federal agency mandates. Further, a substantial reduction of the federal workforce or a prolonged federal government shutdown could adversely affect regional and local economies, both directly and indirectly, particularly in geographies with significant concentrations of federal employees and contractors. It is possible that such comprehensive changes to the federal government or federal government shutdowns may be materially adverse to the regional and local economies where we conduct business and to our customers, which could be materially adverse to our business, financial condition and results of operations.
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7. Strategic Risk
If we are not able to continue our historical levels of growth, we may not be able to maintain our historical revenue trends.
To achieve our past levels of growth, we have focused on both organic growth and acquisitions. We may not be able to sustain our historical rate of growth or may not be able to grow at all. More specifically, we may not be able to obtain the financing necessary to fund additional growth. Various factors, such as economic conditions, regulatory and other governmental concerns and competition, may impede or prohibit the opening of new retail branches or optimizing our existing branch network. If we are not able to continue our historical levels of growth, we may not be able to maintain our historical revenue trends.
ITEM 1B. UNRESOLVED STAFF COMMENTS
NONE.
ITEM 1C. CYBERSECURITY
Our Information Security Department uses the National Institute of Standards and Technology framework for improving critical infrastructure by measuring and evaluating the effectiveness of information and cybersecurity controls. We have various processes for risk assessment, vulnerability management, threat management, independent penetration testing, security architecture, access management, network security management, security event monitoring and security awareness.
The Information Security Department reports to the Chief Information Security Officer (CISO) and then directly to the Chief Risk Officer, to ensure the coordinated and consistent implementation of risk management initiatives and strategies on a day-to-day basis. An Information Technology (IT) and Information Security Risk Assessment is conducted to identify further opportunities for improvement and are presented to Enterprise Risk Management and the Board Risk Committee. The Board Risk Committee is primarily responsible for overseeing risk management, including risks associated with cybersecurity and potential threats thereto. In addition, the Chief Risk Officer regularly reports to our Risk Management Council, which is comprised of our senior leadership, ensuring direct involvement by our management in assessing and managing cybersecurity risk. See “Risk Management” in section of MD&A for an overview of our risk management framework.
We believe our management has the appropriate expertise, background and depth of experience to manage risks arising from cybersecurity threats including applicable knowledge gained through industry experience, education, ongoing internal and external training and regular discussions with consultants and peers with applicable knowledge and expertise. See the following details of certain cybersecurity personnel.
The CISO has served FNB since 2016, and has a career over 25 years in information technology, enterprise risk and information security controls. The CISO is a Certified Information Systems Security Professional (CISSP), has a Bachelor’s degree in Criminal Justice with a minor in Computer Science and is supported by several managers including the following:
•Director of Information Technology Risk and Compliance - CISSP with over 20 years of Information Technology, Data Center and Security Engineering experience.
•Manager of Cyber Security - CISSP with over 20 years of Information Technology and Systems Engineering experience.
•Manager of Security Architecture - CISSP with over 20 years of experience in Information Technology networking, network security and security engineering.
•Manager of Security Access Management - A+, Network+ and Server+ certifications with over 20 years experience in Information Technology and Systems Administration.
The CISO chairs an Information Security Committee made up of other risk professionals, Information Technology and line of business leaders to maintain an understanding and balance between security and business functionality.
A summary of our processes involved in evaluating the effectiveness of information and cybersecurity controls is below.
Risk Assessment Process. On an annual basis, a risk assessment and maturity analysis is performed for the FNB environment based on various frameworks such as CRI 2.0. FFIEC, CIS and NIST CSF. The risk assessment takes into consideration a combination of risks related to the identification, prevention, detection, response, and recovery from cyber events. The risk
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assessment considers the inherent risk and controls implemented in the FNB environment and measures the residual risk to ensure it is within the FNB risk tolerance.
Vulnerability Management Process. Regular internal and external vulnerability scanning is conducted at varying intervals to proactively identify configuration weaknesses, missing patches and other vulnerabilities in the FNB information systems environment. Identified vulnerabilities are classified and scored based on their Common Vulnerability Scoring System, known exploitation or malware impacting the vulnerability, and the age of the vulnerability in the environment. We prioritize the patching and remediation of critical and severe vulnerabilities. We also evaluate the effectiveness of our Security Awareness Program, including results from simulated phishing exercises, to measure user susceptibility and identify areas requiring enhanced training and control focus.
Threat Management Process. In addition to regular and routine vulnerability scanning, we rely on various threat intelligence feeds for the identification and awareness of potential threats that could impact the FNB environment. With the assistance of third-party vendors, threats are integrated into our monitoring solutions, email filtering, web-browsing controls, malware detection, and perimeter firewalls to proactively prevent, detect and deter threats with the capability to impact the FNB environment.
Independent Penetration Testing. On an annual basis, we engage with an independent third-party provider to perform various penetration tests of the environment. The penetration tests review our customer-facing applications, our response to social engineering activities, overall external attack surface and internal vulnerabilities. Penetration test issues are prioritized by risk level and subject to ongoing tracking and escalation to ensure that remediation efforts are completed effectively and verified before closure.
Security Architecture. To ensure the secure configuration, design, and implementation of our internally hosted and third-party hosted systems, security architecture reviews are conducted. Architecture reviews involve asking a structured set of questions and collecting the required documentation for any proposed system changes or new implementations. The responses and materials are then reviewed collaboratively with internal IT teams and relevant third-party vendors to confirm that the design aligns with policy requirements, follows strong security practices and implements appropriate access controls.
Access Management. Utilizing a least privilege, need-to-know access methodology, access is controlled through a centralized user access management function responsible for the provisioning, transfer and deprovisioning of users’ access. Access management also performs routine reviews of application and systems access to ensure access remains appropriate. For third-party hosted environments, access management works with security architecture to ensure single sign-on controls are employed or additional factors are utilized to prevent unauthorized access to these environments.
Network Security Management. The security of the FNB network infrastructure is maintained via:
•internal and perimeter firewalls with intrusion detection,
•the use of some network segmentation to isolate access to certain applications and systems,
•VLANs or virtual local area networks,
•email filtering to identify spam, malware, and phishing messages in received email messages,
•malware detection,
•data loss prevention controls to prevent the theft, or mass exfiltration of data,
•Virtual Private Networks to control remote access to our network,
•intrusion detection capabilities,
•network access controls to prevent unauthorized assets from connecting to the network, and
•web filtering.
Security Event Monitoring. A centralized security monitoring team is responsible for the response to alerts generated from a consolidated log collection system. Log collection occurs from various assets and hosted environments. The monitoring tool is third-party provided SIEM, and enables threat identification, detects suspicious activity in the environment using the MITRE Att&ck® framework, performs user behavior analytics, and endpoint detection and response. Alerts are investigated to ascertain whether a cyber incident is occurring or not.
Security Awareness. Annual security training is conducted for all employees, and routine phishing tests are administered routinely. We also post articles regarding common cybersecurity schemes on our intranet for our employees’ awareness.
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We have a Third-Party Risk Management department that established policies and procedures to follow when utilizing third-party vendors and ensures that key risk components are mitigated based on our standards. Third-party vendors are thoroughly vetted, approved and inventoried before partnership begins.
To date, we have not experienced cybersecurity incidents that have materially affected our business strategy, results of operations or financial condition. For additional information regarding cybersecurity threats, see Item 1 of this Report, “Business – Cybersecurity” and Item 1A of this Report, “Risk Factors—5. Operational Risk—An interruption in or breach in security of our information systems, or other cybersecurity risks, could result in a loss of customer business, increased compliance and remediation costs, civil litigation or governmental regulatory action, and have an adverse effect on our results of operations, financial condition and cash flows.”
ITEM 2. PROPERTIES
Our principal offices and the FNBPA’s headquarters are located at 626 Washington Place, Pittsburgh, Pennsylvania, which we own with a noncontrolling interest as a limited partner. As of December 31, 2025, we operated approximately 355 bank branch offices located throughout Pennsylvania, Ohio, South Carolina, North Carolina, Virginia, West Virginia, Maryland and Washington DC. We do not own or lease any single physical property that we consider to be materially important to our financial condition or results from operations. Our retail branches, ATMs, ITMs, eStore, loan and mortgage production offices and administrative offices remain important to our ability to deliver financial services to a large portion of our clients. For many years, we have consolidated, relocated or opened branch locations in response to changing utilization patterns, community needs and regulatory considerations. We expect that long-term trend to continue. We consider our properties to be suitable and adequate for operating our banking business. Notes 8 and 10 to our Consolidated Financial Statements include additional information regarding investments in premises and equipment and leased properties.
Following is a table that shows the branches/retail offices, by state, and the branches/retail offices owned and leased for the Community Banking segment:
December 31, 2025 Community Banking
Pennsylvania 185
Maryland 30
West Virginia 2
North Carolina 95
South Carolina 7
Washington, D.C. 1
Virginia 7
Total number of branches/retail offices 355
Total branches/retail offices owned 186
Total branches/retail offices leased 169
ITEM 3. LEGAL PROCEEDINGS
The information required by this item is set forth in Note 16, "Commitments, Credit Risk and Contingencies" under the heading “Other Legal and Regulatory Proceedings” in the Notes to Consolidated Financial Statements, contained in Part II, in Item 8 of this Report, is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Stock. Our common stock is listed on the NYSE under the symbol “FNB.” As of January 31, 2026, there were 13,171 holders of record of our common stock.
Dividends.Our Board declared cash dividends totaling $0.48 per share on our common stock in both 2025 and 2024. Holders of our common stock are entitled to receive cash dividends when declared by our Board of Directors out of legally available funds. The Board of Directors presently intends to continue the policy of paying quarterly cash dividends, however, there can be no assurance as to the timing or amount of future dividends. The payment of dividends is a decision of our Board based upon then-existing circumstances, including our rate of growth, profitability, our future earnings, existing and anticipated capital requirements, financial condition, regulatory constraints and such other factors as the Board determines relevant.
Share Repurchases.The following table provides information regarding FNB's purchases of our common stock as defined by Rule 10b-18(a)(3) of the Exchange Act during the quarter ended December 31, 2025.
.
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STOCK PERFORMANCE GRAPH
Comparison of Total Return on F.N.B. Corporation’s Common Stock with Certain Averages
The following five-year performance graph compares the cumulative total shareholder return (assuming reinvestment of dividends) on our common stock (t), the S&P MidCap 400 Index (n), KBW NASDAQ Regional Banking Index (p) and Russell 1000 Index (l). This stock performance graph assumes $100 was invested on December 31, 2020, and the cumulative return is measured as of each subsequent fiscal year end.
F.N.B. Corporation Five-Year Stock Performance
Total Return, Including Stock and Cash Dividends
Source: S & P Global Market Intelligence
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) represents an overview of and highlights material changes to our financial condition and consolidated results of operations. This MD&A should be read in conjunction with the Consolidated Financial Statements and Notes presented in Item 8 of this Report. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any future period.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‐looking statements are those that do not relate to historical facts and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond our control. Forward-looking statements may relate to various matters, including our financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “enable,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “positioned,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar words or expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they
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are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make.
There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:
•the credit risk associated with the substantial amount of commercial loans and leases in our loan portfolio;
•the volatility of the mortgage banking business;
•changes in market interest rates, U.S. federal government shutdowns and the unpredictability of monetary, tax and other policies of government agencies, including tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions;
•the impact of changes in interest rates on the value of our investment securities portfolios;
•changes in our ability to obtain liquidity as and when needed to fund our obligations as they come due, including as a result of adverse changes to our credit ratings;
•the risk associated with uninsured deposit account balances;
•regulatory limits on our ability to receive dividends from our subsidiaries and pay dividends to our shareholders;
•our ability to recruit and retain qualified banking professionals;
•the financial soundness of other financial institutions and the impact of volatility in the banking sector on us;
•changes and instability in economic conditions and financial markets, in the regions in which we operate or otherwise, including a contraction of economic activity, economic downturn or uncertainty and international conflict;
•our ability to continue to invest in technological improvements as they become appropriate or necessary;
•any interruption in or breach in security of our information systems, or other cybersecurity risks;
•risks associated with reliance on third-party vendors and AI;
•risks associated with the use of models, estimations and assumptions in our business;
•the effects of adverse weather events and public health emergencies;
•the risks associated with acquiring other banks and financial services businesses, including integration into our existing operations;
•the extensive federal and state regulations, supervision and examination governing almost every aspect of our operations, and potential expenses associated with complying with such regulations;
•our ability to comply with the consent orders entered into by FNBPA with the DOJ and the North Carolina State Department of Justice, and related costs and potential reputational harm;
•changes in federal, state or local tax rules and regulations or interpretations, or accounting policies, standards and interpretations;
•the effects of climate change and related legislative and regulatory initiatives; and
•any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above.
We caution that the risks identified here are not exhaustive of the types of risks that may adversely impact us and actual results may differ materially from those expressed or implied as a result of these risks and uncertainties, including, but not limited to, the risk factors and other uncertainties described under Item 1A. Risk Factors and elsewhere in this Report.
You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to us. We do not undertake, and specifically disclaim any obligation, to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
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APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our Consolidated Financial Statements are prepared in accordance with GAAP. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions and judgments. Certain policies inherently are based to a greater extent on estimates, assumptions and judgments of management and, as such, have a greater possibility of producing results that could be materially different than originally reported.
The most significant accounting policies followed by FNB are presented in Note 1, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report. These policies, along with the disclosures presented in the Notes to Consolidated Financial Statements, provide information on how we value significant assets and liabilities in the Consolidated Financial Statements, how we determine those values and how we record transactions in the Consolidated Financial Statements.
Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the Consolidated Financial Statements. Management currently views the determination of the ACL, fair value of financial instruments, goodwill and other intangible assets, and income taxes and DTAs to be critical accounting policies.
Allowance for Credit Losses
The ACL is a valuation account that is deducted from the amortized cost basis of loans and leases resulting in the net amount expected to be collected. We charge off loans against the ACL in accordance with our policies or if a loss-confirming event occurs. Expected recoveries do not exceed the aggregate of the amounts previously charged-off and expected to be charged-off. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation: a third-party macroeconomic forecast scenario; a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period. Adjustments are made to the calculation of expected losses to address differences in current loan-specific risk characteristics such as differences in lending policies and procedures, underwriting standards, experience and depth of relevant personnel, the quality of our credit review function, concentrations of credit, external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters and other relevant factors. Such factors are used to adjust the quantitative output based on historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a R&S forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a R&S forecast can be made, the model reverts over 12 months on a straight-line basis back to the historical rates of default and severity of loss over the remaining life of the loans.
Determining the appropriateness of the ACL is complex and requires significant management judgment about the effect of matters that are inherently uncertain. Due to those significant management judgments and the factors included in the calculation, significant changes to the ACL level could occur in future periods.
The Provision for Credit Losses section in the Results of Operations includes a discussion of the factors affecting changes in the ACL during the current period. See Note 1, “Summary of Significant Accounting Policies,” Note 5, “Loans and Leases” and Note 6, “Allowance for Credit Losses on 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.
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Fair value represents the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. We use significant and complex estimates, assumptions and judgments when certain assets and liabilities are required to be recorded at or adjusted to fair value. Where available, fair value and information used to record valuation adjustments for certain assets or liabilities is based on either quoted market prices or are provided by independent third-party sources, including appraisers and valuation specialists. When such third-party information is not available, we may estimate fair value by using cash flow and other financial modeling techniques. Our assumptions about what a market participant would use in pricing an asset or liability is developed based on the best information available at the time of measurement. These estimates are inherently subjective and can result in significant changes in the fair value estimates especially given fluctuations in interest rates over the life of the asset or liability. Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility.
See Note 1, “Summary of Significant Accounting Policies” and Note 25, “Fair Value Measurements” in the Notes to Consolidated Financial Statements for further discussion of accounting for financial instruments.
Goodwill and Other Intangible Assets
As a result of acquisitions, we have recorded goodwill and other identifiable intangible assets on our Consolidated Balance Sheets. Goodwill represents the cost of acquired companies in excess of the fair value of net assets, including identifiable intangible assets, at the acquisition date. Our recorded goodwill relates to value inherent in our Community Banking, Wealth Management and Insurance segments.
The value of goodwill and other identifiable intangibles is dependent upon our ability to provide high quality, cost-effective services in the face of competition. As such, these values are supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or our inability to deliver cost-effective services over sustained periods can lead to impairment in value, which could result in additional expense and adversely impact earnings in future periods.
Goodwill and other intangibles are subject to impairment testing at the reporting unit level, which must be conducted at least annually. We perform annual impairment testing during the fourth quarter, or more frequently if impairment indicators exist. We also continue to monitor other intangibles for impairment and to evaluate carrying amounts, as necessary.
In connection with the preparation of the year-end 2025 financial statements, we completed our annual goodwill impairment test as of October 1, 2025. No impairment was identified in any of our reporting units. We also performed a qualitative analysis through year-end and concluded that it was not more-likely-than-not that the fair value of one or more of our reporting units was below its respective carrying amount, and therefore no triggering event has occurred, as of December 31, 2025.
Inputs and assumptions used in estimating fair value included projected future cash flows, discount rates reflecting the risk inherent in future cash flows, long-term growth rates, anticipated cost savings and an evaluation of market comparables and recent transactions. Goodwill assessments are highly sensitive to economic projections and the related assumptions and estimates used by management. In the event of a prolonged economic downturn or deterioration in the economic outlook, interim quantitative assessments of our goodwill balance could be required in future periods. Any impairment charge would not directly affect our regulatory capital ratios, tangible common equity, tangible book value per share or liquidity position.
See Note 1, “Summary of Significant Accounting Policies” and Note 9, “Goodwill and Other Intangible Assets” in the Notes to Consolidated Financial Statements for further discussion of accounting for goodwill and other intangible assets.
Income Taxes and Deferred Tax Assets
We are subject to the income tax laws of federal, state and other taxing jurisdictions where we conduct business. The laws are complex and subject to different interpretations by the taxpayer and various taxing authorities. In determining the provision for income taxes, management must make judgments and estimates about the application of these inherently complex tax statutes, related regulations and case law. In the process of preparing our tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the taxing authorities or based on management’s ongoing assessment of the facts and evolving case law.
We determine deferred income taxes using the balance sheet method. Under this method, the net DTA or DTL is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes the effect of enacted changes in tax rates and laws in the period in which they occur. That effect would be included in income in the reporting period
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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.
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 2025 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 shareholders, 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 common equity to tangible assets, operating non-interest income, operating non-interest expense, efficiency ratio and net interest margin (FTE) to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to assess their performance and trends.
These non-GAAP financial measures should be viewed as supplemental in nature, and not as a substitute for, or superior to, our reported results prepared in accordance with GAAP. Reconciliations of non-GAAP operating measures to the most directly comparable GAAP financial measures are included later in this Report under the heading “Reconciliations of Non-GAAP Financial Measures and Key Performance Indicators to GAAP”.
Management believes certain items (e.g., merger expenses, FDIC special assessment and realized loss on investment securities restructuring) are not organic to running our operations and facilities. These items are considered significant items impacting earnings as they are deemed to be outside of ordinary banking activities. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.
To facilitate peer comparisons of net interest margin and efficiency ratio, we use net interest income on a taxable-equivalent basis in calculating net interest margin by increasing the interest income earned on tax-exempt assets (loans and investments) to make it fully equivalent to interest income earned on taxable investments (this adjustment is not permitted under GAAP). Taxable-equivalent amounts for 2025, 2024 and 2023 were calculated using a federal statutory income tax rate of 21%.
OVERVIEW
FNB, headquartered in Pittsburgh, Pennsylvania, is a diversified financial services company operating in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. As of December 31, 2025, we had 355 branches throughout Pennsylvania, Ohio, Maryland, West Virginia, North Carolina, South Carolina, Washington D.C. and Virginia. We provide a full range of commercial banking, consumer banking, insurance and wealth management solutions
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through our subsidiary network which is led by our largest affiliate, FNBPA. Commercial banking solutions include corporate banking, small business banking, investment real estate financing, government banking, business credit, capital markets and equipment 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 2025, net income available to common shareholders was $565.4 million, or $1.56 per diluted common share. Comparatively, net income available to common shareholders for 2024 totaled $459.3 million, or $1.27 per diluted common share. On an operating basis, 2025 earnings per diluted common share (non-GAAP) was $1.59, excluding $0.03 per diluted common share (non-GAAP) of significant items impacting earnings. Operating earnings per diluted common share (non-GAAP) for 2024 was $1.39, excluding $0.12 per diluted common share of significant items impacting earnings.
We achieved multiple records for the full year of 2025, including total revenue of $1.8 billion, operating net income available to common shareholders (non-GAAP) of $577 million and operating earnings per diluted common share (non-GAAP) of $1.59 and all-time revenue highs for seven of our fee-based businesses. Our strong profitability and capital generation resulted in tangible book value per share (non-GAAP) of $11.87, a 13% increase from December 31, 2024. Additionally, total assets crossed $50 billion at the end of 2025. Throughout 2025, we remained focused on positioning the balance sheet for continued future success including managing loan concentrations and improving the loan-to-deposit ratio to 89.7%. Our investments in technology, AI and data analytics are driving automation, efficiency, and the flexibility to continue reinvesting in revenue‐generating businesses and an enhanced omnichannel customer experience, all while delivering positive operating leverage. Our financial results reflect disciplined execution of our strategy: diversifying revenue, allocating capital wisely, maintaining a resilient, well‐underwritten loan portfolio, and strengthening our role as our clients’ primary bank through continued eStore and digital innovation.
Income Statement Highlights (2025 compared to 2024)
•Total revenue of $1.8 billion, an increase of $168.2 million, or 10.5%, and a new record level.
•Net interest income was $1.4 billion, up $115.3 million, or 9.0%, reflecting growth in average earning assets and lower interest-bearing deposit and borrowing costs, partially offset by lower yields on earning assets.
•Net interest margin (FTE) (non-GAAP) increased 10 basis points to 3.19% from 3.09%. The cost of funds decreased 23 basis points to 2.22% with the cost of interest-bearing deposits decreasing 31 basis points to 2.65%, short-term borrowings decreasing 71 basis points and long-term debt decreasing 19 basis points. These decreases more than offset the yield reduction on earning assets (non-GAAP) by 13 basis points to 5.29%. The FOMC lowered the target federal funds rate by 75 basis points during 2025.
•The provision for credit losses totaled $86.0 million, compared to $79.8 million, with the increase primarily due to loan growth and net charge-off activity.
•Non-interest income totaled a record $369.3 million, increasing $52.9 million, or 16.7%, compared to $316.4 million. On an operating basis (non-GAAP), non-interest income increased $18.9 million, or 5.4%, when excluding the $34.0 million realized loss (pre-tax) on an investment securities restructuring in 2024. The strong performance in 2025 was due to the continued successful execution of our diversified fee-based business initiatives with the largest increases in wealth management, capital markets income and other non-interest income.
•Non-interest expense was $1.0 billion, compared to $961.3 million. Excluding significant items, operating non-interest expense (non-GAAP) increased $53.1 million, or 5.6%. Salaries and employee benefits increased $26.2 million, or 5.2%, due to normal annual merit increases, higher production-related commissions given the strong non-interest income activity, strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure. Outside services increased $11.1 million, or 11.5%, due to higher volume-related technology and third-party costs. Occupancy and equipment increased $8.8 million, or 5.0%, primarily from technology-related investments and higher occupancy costs. Significant items of $14.4 million (pre-tax) reflected a $20.0 million contribution to the FNB Foundation, demonstrating a continued commitment and strong support of the communities we serve, and a reduction in our FDIC special assessment of $5.6 million (pre-tax).
•Earnings per diluted common share was $1.56, compared to $1.27, an increase of 22.8%. Operating earnings per diluted common share (non-GAAP) was $1.59, compared to $1.39, an increase of 14.4%.
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•The efficiency ratio (non-GAAP) remained at a favorable level of 54.8%, compared to 55.6%.
•We recognized investment tax credits of $37.2 million as a benefit to income taxes in the fourth quarter of 2025 from a renewable energy project financing transaction which is a core element of our Equipment Finance business strategy. A related non-credit valuation impairment of $4.4 million (pre-tax) was recognized on the financing receivable in other non-interest expense. Comparatively in the prior year, we recognized investment tax credits of $28.4 million as a benefit to income taxes from a renewable energy project financing transaction. A related non-credit valuation impairment of $10.4 million (pre-tax) was recognized on the financing receivable in other non-interest expense in 2024.
•Income tax expense increased $13.6 million, or 15.0%. The effective tax rate was 15.5%, compared to 16.3%.
Balance Sheet Highlights (2025 compared to 2024, unless otherwise indicated)
•Total assets were $50.2 billion, compared to $48.6 billion, an increase of $1.6 billion, or 3.3%, primarily from organic growth in loans of $838.3 million and increased investment securities of $398.3 million.
•Period-end total loans and leases increased $838.3 million, or 2.5%. Consumer loans increased $1.1 billion, or 8.4%, partially offset by the transfer of approximately $200 million of performing residential mortgage loans to held for sale in December 2025. Commercial loans and leases decreased $239.2 million, or 1.1%, due to higher loan balance attrition from secondary market activity. Our overall loan growth was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
•Period-end total deposits increased $1.7 billion, or 4.5%, driven by an increase of $1.7 billion in interest-bearing demand deposits and $153.0 million in non-interest-bearing demand deposits more than offsetting the decline of $191.8 million in time deposits and $39.8 million in savings deposits. The mix of non-interest-bearing demand deposits to total deposits equaled 26% at December 31, 2025 and December 31, 2024.
•The ratio of loans to deposits improved to 89.7%, compared to 91.5% at December 31, 2024.
•Total borrowings decreased $350.1 million due to various long-term debt maturities and redemptions in addition to deposit growth to cover our funding needs. During 2025, $350.0 million in senior debt issued in August 2022 matured, $25.0 million in other subordinated debt was redeemed and $100.0 million in other subordinated debt issued in October 2015 matured.
•The ratio of non-performing loans plus OREO to total loans and leases plus OREO decreased 17 basis points to 0.31% and total delinquency decreased 12 basis points to 0.71%. Overall, asset quality metrics continue to remain at solid levels, reflecting continued proactive management of the loan portfolio. Net charge-offs totaled $70.5 million, or 0.20% of total average loans, compared to $62.7 million, or 0.19%.
•The ACL on loans and leases totaled $439 million at December 31, 2025, compared to $423 million with the increase reflecting net loan growth. The ratio of the ACL to total loans and leases was stable at 1.26%, compared to 1.25% at December 31, 2024.
•The dividend payout ratio for 2025 was 30.8%, compared to 38.0%.
•Book value per common share of $18.92 increased 8.0%, and tangible book value per common share (non-GAAP) of $11.87 increased $1.38, or 13.2%. AOCI reduced the tangible book value per common share (non-GAAP) by $0.18 as of December 31, 2025, compared to $0.47 at the end of 2024, primarily due to the impact of unrealized losses on AFS securities.
•The CET1 capital ratio was a record of 11.36% at December 31, 2025, benefiting from increased retained earnings growth, compared to 10.58% at December 31, 2024.
•During 2025, we repurchased $50 million, or 3.3 million shares, of our common stock at a weighted average share price of $14.92 while maintaining capital above stated operating levels and supporting loan growth.
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TABLE 1
Reported results
Net income available to common shareholders (millions) $ 565.4 $ 459.3
Earnings per diluted common share 1.56 1.27
Operating results (non-GAAP)
Operating net income available to common shareholders (millions) $ 576.7 $ 505.2
Operating earnings per diluted common share 1.59 1.39
Average diluted common shares outstanding (thousands) 361,954 362,638
Significant items impacting earnings (1) (millions)
Preferred dividend equivalent at redemption $ — $ (4.0)
FNB Foundation contribution (pre-tax) (20.0) —
FNB Foundation contribution (after-tax) (15.8) —
Branch consolidation costs (pre-tax) — (1.2)
Branch consolidation costs (after-tax) — (0.9)
FDIC assessment (pre-tax) 5.6 (5.2)
FDIC assessment (after-tax) 4.5 (4.1)
Realized loss on investment securities restructuring (pre-tax) — (34.0)
Realized loss on investment securities restructuring (after-tax) — (26.8)
Software impairment (pre-tax) — (3.7)
Software impairment (after-tax) — (2.9)
Loss related to indirect auto loan sales (pre-tax) — (9.0)
Loss related to indirect auto loan sales (after-tax) — (7.1)
Total significant items (after-tax) $ (11.3) $ (45.8)
Capital measures
Tangible common equity to tangible assets (non-GAAP) 8.89 8.18
Tangible book value per common share (non-GAAP) $ 11.87 $ 10.49
(1) Favorable (unfavorable) impact on earnings
RESULTS OF OPERATIONS
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Net income available to common shareholders was $565.4 million or $1.56 per diluted common share, compared to net income available to common shareholders of $459.3 million or $1.27 per diluted common share. Operating net income available to common shareholders (non-GAAP) was $576.7 million, or $1.59 per diluted common share (non-GAAP), compared to $505.2 million, or $1.39 per diluted common share (non-GAAP). The results for 2025 included record net interest income of $1.4 billion, a 9.0% increase, record non-interest income of $369.3 million, provision for credit losses of $86.0 million with stable asset quality, and non-interest expense of $995.4 million on an operating basis (non-GAAP). During 2025, significant items impacting earnings of $11.3 million (see Table 1) were recognized. In comparison, the 2024 results included net interest income of $1.3 billion, provision for credit losses of $79.8 million, non-interest income of $350.4 million on an operating basis (non-GAAP) and operating non-interest expense (non-GAAP) of $942.3 million. During 2024, significant items impacting earnings of $45.8 million (see Table 1) were recognized.
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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
(dollars in thousands, except per share data) 2025 2024
Earnings per common share – Basic $ 1.57 $ 1.27 $ 0.30 23.6 %
Cash dividends per common share 0.48 0.48 — —
(1) In 2024, we redeemed all our 7.25% Fixed Rate / Floating Rate Non-Cumulative Perpetual Preferred Stock. The preferred stock is no longer outstanding and dividends will no longer accrue on such securities.
The following table presents selected financial ratios and other relevant data used to analyze our performance:
TABLE 3
Return on average equity 8.66 % 7.59 %
Return on average tangible common equity (1) 14.42 13.21
Return on average assets 1.15 0.99
Return on average tangible assets (1) 1.24 1.08
Average equity to average assets 13.27 13.10
Tangible common equity to tangible assets (1) 8.89 8.18
Book value per common share $ 18.92 $ 17.52
Tangible book value per common share (1) 11.87 10.49
(1) 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
Liabilities
Deposits:
(1)The average balances and yields earned on investment securities are based on historical cost.
(2)The interest income amounts are reflected on an FTE basis (non-GAAP), which adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21%. The yield on earning assets and the net interest margin are presented on an FTE basis (non-GAAP). We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
(3)Average loans and leases consist of average total loans, including non-accrual loans, less average unearned income.
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Net Interest Income
Net interest income on an FTE basis (non-GAAP) totaled $1.4 billion, increasing $115.9 million, or 9.0%, reflecting growth in earning assets and a lower cost of funds, partially offset by lower yields on earning assets. Average earning assets grew $2.4 billion, or 5.8%, primarily driven by growth in loans, investment securities and interest-bearing deposits with banks. Additionally, we reinvested the proceeds of the AFS securities sold in November 2024 as part of our balance sheet repositioning with an average yield of 1.41% into securities yielding 4.78% with a similar duration and convexity profile. Total cost of funds decreased 23 basis points to 2.22%, with a 31 basis point decrease in interest-bearing deposit costs to 2.65% and a 42 basis point decrease in total borrowing costs. The yield on earning assets (non-GAAP) decreased 13 basis points to 5.29%, driven by a 19 basis point decline in yields on loans to 5.73%, partially offset by a 32 basis point increase in yields on investment securities to 3.51%, which benefited from the previously mentioned balance sheet restructuring actions. The net interest margin (FTE) (non-GAAP) increased 10 basis points to 3.19%. The FOMC lowered the target federal funds rate by 75 basis points during 2025 and by 100 basis points during 2024.
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 $2.3 billion, increased $74.0 million, or 3.3%, resulting from growth in average earning assets of $2.4 billion. The yield on average earning assets (non-GAAP) decreased 13 basis points to 5.29%, driven by a 19 basis point decline in yields on loans to 5.73%, partially offset by a 32 basis point increase in yields on investment securities to 3.51% benefiting from balance sheet repositioning actions in 2024.
Interest expense of $929.8 million decreased $41.9 million primarily due to a 23 basis point reduction in the cost of funds, partially offset by growth in average interest-bearing deposits. Average total deposits increased $2.3 billion, or 6.5%, reflecting robust organic growth in new and existing customer relationships. The decrease in total cost of funds is comprised of a 42 basis point decrease in total borrowing costs to 4.64% and a 31 basis point decrease in interest-bearing deposit costs to 2.65%.
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Provision for Credit Losses
Provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan and lease portfolio, after giving consideration to charge-offs and recoveries for the period. The following table presents information regarding the provision for credit losses expense and net charge-offs for the years 2023 through 2025:
TABLE 6
(dollars in thousands) 2025 2024 $Change %Change 2023 $Change %Change
Net loan charge-offs / total average loans and leases 0.20 % 0.19 % 0.22 %
Provision for credit losses of $86.0 million during 2025 increased $6.2 million from 2024. The provision for credit losses in 2025 and 2024 was primarily due to loan growth and charge-off activity. Our non-performing loan coverage position remains strong at 418%. For 2025, net charge-offs were $70.5 million, or 0.20% of total average loans, compared to 2024 net charge-offs of $62.7 million, or 0.19% of total average loans. The ACL was $439.5 million as of December 31, 2025, an increase of $16.7 million from December 31, 2024, with the ratio of the ACL to total loans and leases increasing 1 basis point to 1.26%. For additional information relating to the allowance and provision for credit losses, refer to the Allowance for Credit Losses on Loans and Leases section of this MD&A.
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Non-Interest Income
The breakdown of non-interest income for the years 2023 through 2025 is presented in the following table:
TABLE 7
(dollars in thousands) 2025 2024 $Change %Change 2023 $Change %Change
n/m - not meaningful
Total non-interest income for 2025 was a record level and increased $52.9 million, or 16.7%. Excluding significant items totaling $34.0 million in 2024, operating non-interest income (non-GAAP) increased $18.9 million, or 5.4%. The variances in significant individual non-interest income line items between 2025 and 2024 are explained in the following paragraphs.
Service charges increased $1.5 million, or 1.6%, with strong treasury management activity and higher consumer transaction volumes.
Wealth management revenues increased $7.0 million, or 9.1%, as securities commissions and fees and trust services income increased 15.1% and 5.0%, respectively, through continued strong contributions across the geographic footprint. Additionally, the market value of assets under administration increased $0.7 billion, or 4.7%, to $14.9 billion at December 31, 2025.
Insurance commissions and fees decreased $2.2 million, or 9.8%, primarily due to lower contingent fees during 2025.
Capital markets income increased $2.4 million, or 9.9%, driven by debt capital markets and international banking income, as well as contributions from customer swap activity, syndications, public finance and advisory services.
Mortgage banking operations income increased $0.7 million, or 2.7%, driven by improved gain on sale from strong production volumes partially offset by a net MSR fair value recovery of $2.7 million in the fourth quarter of 2024. During 2025, we sold $1.5 billion of originated residential mortgage loans, an increase of 9.5% compared to $1.4 billion for 2024.
Dividends on non-marketable equity securities decreased $1.5 million, or 6.1%, related to a decrease in average FHLB stock tied to lower FHLB borrowings slightly offset by a higher average rate.
BOLI increased $1.9 million, or 11.5%, reflecting higher life insurance claims.
Net securities losses decreased $34.1 million in 2025 due to sales of AFS securities totaling $231.4 million in the fourth quarter of 2024 as part of balance sheet restructuring activities. These realized losses were significant items impacting earnings.
Other non-interest income increased $8.2 million, or 52.8%, primarily due to a $5.4 million recovery on an other asset previously written off as part of the 2017 Yadkin Financial Corporation acquisition as well as gains on the disposition of leased equipment.
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The following table presents non-interest income excluding significant items impacting earnings:
TABLE 8
$ %
(dollars in thousands) 2025 2024 Change Change
Significant items:
Realized loss on investment securities restructuring — 33,980 (33,980)
(1) Non-GAAP
Non-Interest Expense
The breakdown of non-interest expense for the years 2023 through 2025 is presented in the following table:
TABLE 9
(dollars in thousands) 2025 2024 $Change %Change 2023 $Change %Change
Total non-interest expense increased $48.4 million, or 5.0%. Excluding significant items totaling $14.4 million in 2025 and $19.1 million in 2024, operating non-interest expense (non-GAAP) increased $53.1 million, or 5.6%. The variances in significant individual non-interest expense items between 2025 and 2024 are explained in the following paragraphs.
Salaries and employee benefits increased $26.2 million, or 5.2%, primarily related to normal annual merit increases, higher production-related commissions, strategic hiring associated with our focus to grow market share and continued investments in our risk management infrastructure. Our total full-time equivalent employees were 4,205 and 4,192 at December 31, 2025 and 2024, respectively.
Net occupancy and equipment expense increased $8.8 million, or 5.0%, primarily from continued technology-related investments and increased occupancy expenses including de novo branch expansion.
Outside services increased $11.1 million, or 11.5%, with higher volume-related technology and third-party costs.
FDIC insurance expense decreased $13.1 million, or 31.6%, primarily due to the FDIC's updated estimate of its special assessment to replenish the FDIC's Deposit Insurance Fund associated with protecting uninsured depositors following the failed banks in early 2023. The updated estimate resulted in a $5.6 million reduction to the FDIC special assessment in 2025 compared to additional expense of $5.2 million in 2024.
Other non-interest expense was $124.6 million and $108.5 million for 2025 and 2024, respectively. The increase was primarily due to the $20.0 million FNB Foundation contribution, the impact of Community Uplift, a mortgage down payment assistance program that was enhanced and expanded in conjunction with our previously announced settlement agreement with the DOJ in 2025 and a $9.0 million loss on the indirect auto loan sales in 2024. Also included were financing receivable non-credit
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impairments from renewable energy investment tax credit transactions of $4.4 million (pre-tax) and $10.4 million (pre-tax) in 2025 and 2024, respectively.
The following table presents non-interest expense excluding significant items impacting earnings:
TABLE 10
(dollars in thousands) 2025 2024 $Change %Change
Significant items:
Branch consolidation costs — (1,194) 1,194
Loss related to indirect auto loan sales — (8,969) 8,969
(1) Non-GAAP
Income Taxes
The following table presents information regarding income tax expense and certain tax rates:
TABLE 11
(dollars in thousands)
Our income tax expense for 2025 increased $13.6 million, or 15.0%, from 2024. This increase is primarily attributable to higher pre-tax earnings, partially offset by investment tax credits recognized as part of renewable energy project financing transactions. The effective tax rate was 15.5% for 2025, compared to 16.3% for 2024, primarily due to higher levels of investment tax credits in 2025. Effective tax rates are lower than the 21% federal statutory rate due to the tax benefits resulting from tax credits, tax-exempt income on investments and loans and income from BOLI.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Refer to the MD&A in our 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025 for a comparison of 2024 to 2023.
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FINANCIAL CONDITION
The following table presents our condensed Consolidated Balance Sheets:
TABLE 12
(dollars in millions)
Assets
Liabilities and Shareholders’ Equity
The increase in both assets and liabilities is primarily due to solid organic loan growth in the current macroeconomic environment and robust deposit growth.
The increase in earning assets was primarily driven by a $0.8 billion, or 2.5%, increase in loans and leases, an increase of $109 million in interest-bearing deposits with banks and an increase in investment securities of $398 million. Consumer loans increased $1.1 billion, or 8.4%, with a $0.9 billion increase in residential mortgages largely due to the continued successful execution in key markets and our long-standing strategy of serving the purchase market. Indirect installment loans increased $28 million, or 3.8%, reflecting the auto loan sales that closed in the first and third quarters of 2024, partially offset by new organic growth in the portfolio. Commercial loans declined $240 million, or 1.1%, primarily in the commercial leases and commercial and industrial loans categories.
The growth in interest-bearing demand deposits of $1.7 billion and non-interest-bearing demand deposits of $153 million more than offset the decline in time deposits of $192 million and savings deposits of $40 million. The funding mix has remained stable with non-interest-bearing demand deposits comprising 26% of total deposits at both December 31, 2025 and December 31, 2024. Short-term borrowings increased $761 million, or 60.6% and long-term borrowings decreased $1.1 billion, or 36.9%, primarily reflecting the maturity of $350 million in senior notes in August 2025 and a decrease in FHLB borrowings given our organic deposit growth.
Lending Activity
The loan and lease portfolio consists principally of loans and leases to individuals and small- and medium-sized businesses within our primary markets in seven states and the District of Columbia. Our market coverage spans several major metropolitan areas including: Pittsburgh, Pennsylvania; Baltimore, Maryland; Cleveland, Ohio; Washington, D.C.; Charlotte, Raleigh, Durham and the Piedmont Triad (Winston-Salem, Greensboro and High Point) in North Carolina; and Charleston, South Carolina. Loans held for sale increased $297 million, or 136.2%, from December 31, 2024, primarily from the transfer of approximately $200 million of performing residential mortgage loans to held for sale in anticipation of a loan sale expected to close in the first quarter of 2026 as part of balance sheet management actions.
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Following is a summary of loans and leases:
TABLE 13
(dollars in millions)
Total loans and leases increased $0.8 billion, or 2.5%, to $34.8 billion at December 31, 2025, compared to $33.9 billion at December 31, 2024, reflecting an increase in consumer loans of $1.1 billion, or 8.4%, while commercial loans and leases decreased slightly by $239.2 million or 1.1% due to higher loan balance attrition from secondary market activity. Our organic loan growth in 2025 was driven by the continued success of our strategy to grow high-quality loans and deepen customer relationships across our diverse geographic footprint.
As of December 31, 2025, 30.9% of the commercial real estate loans were owner-occupied, while the remaining 69.1% were non-owner-occupied, compared to 29.0% and 71.0%, respectively, as of December 31, 2024. As of December 31, 2025 and 2024, we had commercial construction loans of $2.3 billion and $2.4 billion, respectively, representing 6.5% and 7.2% of total loans and leases, respectively. We strategically decreased our commercial real estate concentration organically over the past two years. Our commercial real estate portfolio included $8.5 billion of non-owner occupied loans, of which 18.0% represented office loans. Our top 25 non-owner occupied commercial real estate loans averaged approximately $23 million per exposure with the office component primarily made up of mid-sized offices located outside of central business districts and 42% of the office portfolio averaging less than $5 million per exposure. Additionally, as of December 31, 2025 and 2024, we had residential construction loans of $287.8 million and $277.0 million, respectively, representing 0.8% for both periods of total loans and leases.
Commercial and industrial loans are loans to businesses that are not secured by real estate where the borrower's leverage and cash flows from operations are the primary default risk drivers. The growth in the commercial and industrial loans category was led by activity in the Cleveland, Pittsburgh and North Carolina markets, while the growth in residential mortgages reflected growth in adjustable-rate mortgages and jumbo mortgages retained on the balance sheet and the continued success of our Physicians First mortgage program, which is a digital program that provides a bundled suite of specialized products to meet the personal and professional needs of physicians, dentists, veterinarians and other healthcare professionals.
Within our primary lending footprint, certain industries are more predominant given the geographic location of these lending markets. We strive to maintain a diverse commercial loan portfolio by avoiding undue concentrations or exposures to any particular sector, and we actively monitor our commercial loan portfolio to ensure that our industry mix is consistent with our risk appetite and within targeted thresholds. Several factors are taken into consideration when determining these thresholds, including recent economic and market trends. As of December 31, 2025 and 2024, there were no concentrations of loans relating to any industry in excess of 10% of total loans.
Additional information relating to originated loans and loans acquired in business combinations is provided in Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
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Following is a summary of the maturity distribution of loan categories with fixed and floating interest rates as of December 31, 2025:
TABLE 14
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. For additional information on repricing of floating interest rates, see the Market Risk section of MD&A, which is included in Item 7 of this Report.
Non-Performing Assets
Non-performing loans include non-accrual loans. Past due loans are reviewed monthly to identify loans for non-accrual status. We place a loan on non-accrual status and discontinue interest accruals on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days, unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days. When a loan is placed on non-accrual status, all unpaid accrued interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured.
Non-accrual loans of $105.2 million at December 31, 2025 decreased $54.3 million, or 34.0%, compared to December 31, 2024, attributed to a small number of commercial real estate loans, with both periods remaining at relatively low levels.
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Following is a summary of non-performing loans and leases, by class, OREO and non-performing assets:
TABLE 15
(dollars in millions)
Commercial real estate $ 45 $ 88 $ (43) (48.9) %
Commercial leases 3 3 — —
Other 2 2 — —
Total commercial loans and leases 85 144 (59) (41.0)
Indirect installment 1 2 (1) (50.0)
Consumer lines of credit 3 4 (1) (25.0)
Total non-performing loans and leases 105 159 (54) (34.0)
Other real estate owned 3 3 — —
Non-performing loans / total loans and leases 0.30 % 0.47 %
Non-performing loans plus OREO / total loans and leases plus OREO 0.31 0.48
Non-performing assets / total assets 0.22 0.33
Following is a summary of loans and leases 90 days or more past due on which interest accruals continue:
TABLE 16
(dollars in millions)
Total loans and leases 90 days or more past due $ 13 $ 14
As a percentage of total loans and leases 0.04 % 0.04 %
Following is a table showing the amounts of contractual interest income and actual interest income related to non-performing loans:
TABLE 17
(in millions)
Gross interest income:
Per contractual terms $ 20 $ 24 $ 14
Recorded during the year — — —
Loan Modifications
During the period, there are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. These modifications result from loss mitigation activities and could include a term extension, interest rate reduction, principal forgiveness, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.
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For additional information relating to loan modifications, see Note 5, “Loans and Leases” in the Notes to Consolidated Financial Statements, which is included in Item 8 of this Report.
Allowance for Credit Losses on Loans and Leases
The CECL model takes into consideration the expected credit losses over the life of the loan at the time the loan is originated. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation:
•a third-party macroeconomic forecast scenario;
•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and
•the historical through-the-cycle default mean calculated using an expanded period to include a prior recessionary period.
At December 31, 2025 and 2024, we utilized a third-party consensus macroeconomic forecast reflecting the current and projected macroeconomic environment. For our ACL calculation at December 31, 2025, the macroeconomic variables that we utilized included, but were not limited to: (i) the purchase only Housing Price Index, which increases 4.3% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which decreases 0.5% over our R&S forecast period, (iii) S&P Volatility, which decreases 2.2% in 2026 and 7.9% in 2027 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below the historical through-the-cycle period. While we have not changed our ACL modeling methodology, we continually assess our key macroeconomic variables and their correlation to our historical and expected portfolio performance. During the quarter ended September 30, 2025, we changed certain macroeconomic variables used for ACL modeling purposes as we believe the new variables better correlate to our historical performance over the economic cycles. Macroeconomic variables that we utilized for our ACL calculation as of December 31, 2024 included, but were not limited to: (i) the purchase only Housing Price Index, which increases 7.4% over our R&S forecast period, (ii) a Commercial Real Estate Price Index, which increases 3.9% over our R&S forecast period, (iii) S&P Volatility, which increases 34.9% in 2025 and 2.5% in 2026 and (iv) personal and business bankruptcies, which increase steadily over the R&S forecast period but average below the historical through the cycle period.
Following is a summary of certain data related to the ACL and loans and leases:
TABLE 18
Net Loan Charge-Offs (Recoveries) Net Loan Charge-Offs to Average Loans ACL at
(dollars in millions)
Residential mortgages 1.9 1.4 — — 92.4
Consumer lines of credit 0.6 0.7 — — 7.0
Allowance for credit losses/total loans and leases 1.26 % 1.25 %
Allowance for credit losses/non-performing loans 417.66 % 264.98 %
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The ACL on loans and leases of $439.5 million at December 31, 2025 increased $16.7 million, or 4.0%, from December 31, 2024. Our ending ACL coverage ratio was 1.26% December 31, 2025 compared to 1.25% at December 31, 2024. Total provision for credit losses during 2025 was $86.0 million, compared to $79.8 million for the same period in 2024. The year-over-year increase was driven primarily by loan growth and net charge-offs. Net charge-offs were $70.5 million, or 0.20%, of total average loans, compared to $62.7 million, or 0.19%, in 2024. The ACL as a percentage of non-performing loans for the total portfolio increased from 265% as of December 31, 2024 to 418% as of December 31, 2025.
Following is a summary of changes in the AULC by portfolio segment:
TABLE 19
(in millions)
Balance at beginning of period $ 21.4 $ 21.5 $ 21.4
Provision for unfunded loan commitments and letters of credit:
Commercial portfolio (1.1) 0.1 0.3