F.N.B. Corporation 2022 Form 10-K Summary
Business context and reporting period
F.N.B. Corporation is a Pittsburgh-based diversified financial services holding company operating through Community Banking, Wealth Management, Insurance and other activities across seven states and the District of Columbia. This annual report covers the fiscal year ended December 31, 2022; it is not a quarterly report. At year-end, FNB reported $43.7 billion in assets, $30.3 billion in loans and leases, $34.8 billion in deposits, and 348 branches.
FNB completed the Howard Bancorp acquisition in January 2022 and the UB Bancorp (Union Bank) acquisition in December 2022. These transactions expanded its Mid-Atlantic and North Carolina presence and contributed to balance-sheet growth.
Financial results and key metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $1.443 billion, up 16.7% | $1.237 billion |
| Net income available to common stockholders | $431.1 million; diluted EPS $1.22 | $396.6 million; diluted EPS $1.23 |
| Operating net income available to common stockholders (non-GAAP) | $494.9 million; operating diluted EPS $1.40 | $400.0 million; operating diluted EPS $1.24 |
| Net interest income | $1.120 billion | $906.5 million |
| Net interest margin (FTE, non-GAAP) | 3.03% | 2.68% |
| Provision for credit losses | $64.2 million | $0.6 million |
| Net charge-offs / average loans | $16.2 million / 0.06% | $13.9 million / 0.06% |
| Return on average assets | 1.05% | 1.05% |
| Efficiency ratio (non-GAAP) | 52.1% | 57.2% |
Net interest income benefited from rising rates, loan growth and the company’s asset-sensitive balance sheet. Total non-interest income declined 2.1% to $323.6 million, with lower mortgage banking and SBA premium income partly offset by higher service charges and wealth management revenue. Non-interest expense rose 12.7% to $826.4 million; excluding identified significant items, operating expense (non-GAAP) increased 6.2%.
Cash and cash equivalents fell $1.8 billion to $1.7 billion, largely as cash funded loan and securities growth. Cash flows were $1.218 billion from operating activities, negative $3.055 billion from investing activities and positive $18 million from financing activities, producing a net cash decrease of $1.819 billion.
Balance sheet, capital and liquidity
- Total assets increased 10.7% to $43.7 billion. Loans and leases grew 21.2% to $30.3 billion, including acquired balances and organic growth; deposits rose 9.6% to $34.8 billion.
- Period-end loans-to-deposits increased to 87.0% from 78.7%. Non-interest-bearing deposits were 34% of total deposits.
- The allowance for credit losses on loans and leases was $401.7 million, or 1.33% of loans, versus $344.3 million, or 1.38%, a year earlier. Non-performing loans were 0.37% of loans, compared with 0.35%.
- FNB’s CET1 ratio was 9.82%, versus 9.92%; its total capital ratio was 12.06% and leverage ratio 8.64%. FNB and its bank subsidiary were reported as well-capitalized.
- Total borrowings were $2.465 billion, including $1.093 billion of long-term borrowings. FNB issued $350 million of 5.150% senior notes due 2025; $300 million of 2.200% senior notes were due in February 2023.
- Parent-company liquidity coverage ratio was 1.7 times and months of cash on hand were 13.6, above stated internal limits of greater than 1.0 times and greater than 12 months. FNBPA reported $15.7 billion of unused wholesale credit availability.
Material changes, outlook and risks
Reported common earnings increased 8.7%, while diluted EPS edged down 0.8%, primarily because average diluted shares increased 9.5%, largely from acquisition-related stock issuance. Operating EPS (non-GAAP) increased 12.9%. 2022 included $80.8 million of pre-tax significant items: $45.3 million of merger costs, $28.5 million of initial provision for acquired non-PCD loans, and $7.0 million of branch consolidation costs.
Rising interest rates supported margin expansion, but contributed to lower mortgage originations and mortgage banking revenue. AFS securities’ year-end fair value was $3.275 billion against $3.622 billion amortized cost; unrealized losses were attributed primarily to higher rates, and management reported no credit loss on the AFS portfolio. Accumulated other comprehensive loss widened to $357 million from $62 million, reducing tangible book value per common share to $8.27 from $8.59.
The filing provides no specific numerical earnings or revenue guidance. Management described the balance sheet and performance momentum as positioning FNB to navigate changing conditions. It noted the Federal Reserve’s 425-basis-point rate increase during 2022 and stated that the balance sheet was positioned to benefit in the near term from further increases. Risks include deposit-cost competition and funding mix changes, recession and inflation effects on borrowers, commercial real estate and collateral values, interest-rate and securities valuation exposure, acquisition integration and valuation, cyber and third-party operational risk, and evolving consumer and banking regulation. The company had no investments in digital assets. Pending legal matters were described as ordinary-course matters; management did not expect them, in aggregate, to materially affect financial position or liquidity, while noting they could materially affect earnings in a period.
Important facts for investors to verify
- Reconcile reported earnings with non-GAAP operating earnings and review the nature and recurrence of the $80.8 million of significant items.
- Track deposit retention, deposit pricing, uninsured deposit levels, and the 87.0% loans-to-deposits ratio as rates and competition evolve.
- Assess loan growth and credit quality, including rising non-performing loans, the commercial and industrial credit migration noted in Q4, and assumptions supporting the $401.7 million allowance.
- Review securities duration, unrealized losses, AOCI and capital sensitivity to further rate changes; distinguish AFS from HTM accounting and liquidity implications.
- Monitor acquisition integration, final purchase accounting for Union, realized cost savings, and the effect of added shares on per-share results.
- Check refinancing or repayment of the $300 million notes due February 2023 and the effects of new senior debt costs.
- Review the full audited statements, regulatory capital disclosures, legal contingencies and liquidity assumptions. The auditor issued an unqualified opinion, identified the allowance for credit losses as a critical audit matter, and reported effective internal control over financial reporting.