MD&A represents an overview of and highlights material changes to our financial
condition and consolidated results of operations at and for the three- and
six-month periods ended June 30, 2020 and 2019. This MD&A should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
contained herein and our   2019 Annual Report on Form 10-K   filed with the SEC
on February 27, 2020. Our results of operations for the six months ended
June 30, 2020 are not necessarily indicative of results expected for the full
year.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We make statements in this Report and may from time-to-time make other
statements regarding our outlook for earnings, revenues, expenses, tax rates,
capital and liquidity levels and ratios, asset quality levels, financial
position and other matters regarding or affecting our current or future business
and operations. These statements can be considered "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve various assumptions, risks and
uncertainties which can change over time. Actual results or future events may be
different from those anticipated in our forward-looking statements and may not
align with historical performance and events. As forward-looking statements
involve significant risks and uncertainties, caution should be exercised against
placing undue reliance upon such statements. Forward-looking statements are
typically identified by words such as "believe," "plan," "expect," "anticipate,"
"intend," "outlook," "estimate," "forecast," "will," "should," "project,"
"goal," and other similar words and expressions. We do not assume any duty to
update forward-looking statements, except as required by federal securities
laws.
Our forward-looking statements are subject to the following principal risks and
uncertainties:
•Our business, financial results and balance sheet values are affected by
business and economic circumstances, including, but not limited to: (i)
developments with respect to the U.S. and global financial markets; (ii) actions
by the FRB, UST, OCC and other governmental agencies, especially those that
impact money supply, market interest rates or otherwise affect business
activities of the financial services industry; (iii) a slowing of U.S. economic
environment; and (iv) the impacts of tariffs or other trade policies of the U.S.
or its global trading partners.
•Business and operating results are affected by our ability to identify and
effectively manage risks inherent in our businesses, including, where
appropriate, through effective use of systems and controls, third-party
insurance, derivatives, and capital management techniques, and to meet evolving
regulatory capital and liquidity standards.
•Competition can have an impact on customer acquisition, growth and retention,
and on credit spreads, deposit gathering and product pricing, which can affect
market share, deposits and revenues. Our ability to anticipate and continue to
respond to technological changes and COVID-19 challenges can also impact our
ability to respond to customer needs and meet competitive demands.
•Business and operating results can also be affected by widespread natural and
other disasters, pandemics, including the COVID-19 pandemic crisis,
dislocations, terrorist activities, system failures, security breaches,
significant political events, cyberattacks or international hostilities through
impacts on the economy and financial markets generally, or on us or our
counterparties specifically.
•Legal, regulatory and accounting developments could have an impact on our
ability to operate and grow our businesses, financial condition, results of
operations, competitive position, and reputation. Reputational impacts could
affect matters such as business generation and retention, liquidity, funding,
and the ability to attract and retain management. These developments could
include:
•Changes resulting from a U.S. presidential administration or legislative and
regulatory reforms, including changes affecting oversight of the financial
services industry, consumer protection, pension, bankruptcy and other industry
aspects, and changes in accounting policies and principles.
•Changes to regulations governing bank capital and liquidity standards.
•Unfavorable resolution of legal proceedings or other claims and regulatory and
other governmental investigations or other inquiries. These matters may result
in monetary judgments or settlements or other remedies, including fines,
penalties, restitution or alterations in our business practices, and in
additional expenses and collateral costs, and may cause reputational harm to
FNB.
•Results of the regulatory examination and supervision process, including our
failure to satisfy requirements imposed by the federal bank regulatory agencies
or other governmental agencies.
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•The impact on our financial condition, results of operations, financial
disclosures and future business strategies related to the implementation of the
new FASB ASU 2016-13 Financial Instruments - Credit Losses commonly referred to
as the "current expected credit loss" standard, or CECL.
•A failure or disruption in or breach of our operational or security systems or
infrastructure, or those of third parties, including as a result of
cyber-attacks or campaigns.
•The COVID-19 pandemic and the regulatory and governmental actions implemented
in response to COVID-19 have resulted in significant deterioration and
disruption in financial markets, national and local economic conditions and
record levels of unemployment and could have a material impact on, among other
things, our business, financial condition, results of operations or liquidity,
or on our management, employees, customers and critical vendors and suppliers.
In view of the many unknowns associated with the COVID-19 pandemic, our
forward-looking statements continue to be subject to various conditions that may
be substantially different than what we are currently expecting, including, but
not limited to, a weakened U.S. economic recovery, deterioration of commercial
and consumer customer fundamentals and sentiments, impairment of the recovery of
the U.S. labor market. As a result, the COVID-19 outbreaks and its consequences,
including responsive measures to manage it, may possibly have a material adverse
impact on our business, operations and financial performance.
The risks identified here are not exclusive. Actual results may differ
materially from those expressed or implied as a result of these risks and
uncertainties, including, but not limited to, the risk factors and other
uncertainties described under Item 1A. Risk Factors and Risk Management sections
of our   2019 Annual Report on Form 10-K   (including the MD&A section), our
subsequent 2020 Quarterly Reports on Form 10-Q (including the risk factors and
risk management discussions) and our other subsequent filings with the SEC,
which are available on our corporate website at
https://www.fnb-online.com/about-us/investor-relations-shareholder-services.
More specifically, our forward-looking statements may be subject to the evolving
risks and uncertainties related to the COVID-19 pandemic and its macro-economic
impact and the resulting governmental, business and societal responses to it. We
have included our web address as an inactive textual reference only. Information
on our website is not part of this Report.

APPLICATION OF CRITICAL ACCOUNTING POLICIES
A description of our critical accounting policies is included in the MD&A
section of our   2019 Annual Report on Form 10-K   filed with the SEC on
February 27, 2020 under the heading "Application of Critical Accounting
Policies". On January 1, 2020, we adopted CECL. Under the CECL methodology, the
ACL represents the expected lifetime credit losses on loans and leases that we
don't expect to collect. Additionally, see our critical accounting policy on
goodwill and other intangible assets.

Allowance for Credit Losses
The ACL is a valuation account that is deducted from the loans and leases
amortized cost basis 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 mean
calculated using an expanded period to include a prior recessionary period.

Adjustments to historical loss information, where applicable, are made for
differences in current loan-specific risk characteristics such as differences in
lending policies and procedures, underwriting standards, experience and depth of
relevant personnel, the quality of our credit review function, concentrations of
credit, external factors such as the regulatory, legal and technological
environments; competition; and events such as natural disasters and other
relevant factors. Such factors are used to adjust the historical probabilities
of default and severity of loss so that they reflect management's expectation of
future conditions based on a R&S forecast. To the extent the lives of the loans
in the portfolio extend beyond the period for which a R&S forecast can be made,
the model reverts over 12 months on a straight-line basis back to the historical
rates of default and severity of loss over the remaining life of the loans.

Determining the appropriateness of the ACL is complex and requires significant
management judgment about the effect of matters that are inherently uncertain.
Due to those significant management judgments and the factors included in the
calculation, significant changes to the ACL level could occur in future periods.
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See Note 1, "Summary of Significant Accounting Policies" and the Financial
Condition, Allowance for Credit Losses section later in this MD&A for further
allowance for credit losses information.
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 impairment testing during the fourth quarter of each year,
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 second quarter 2020 financial
statements, we concluded that it was more likely than not that the fair value of
our Community Banking reporting unit was below its carrying amount due to a
sustained decline in bank stock valuations, which was primarily attributable to
the systemic near-term uncertainty of COVID-19 and its full impact on the global
economy causing an unprecedented shock in interest rates and equity valuations.
Therefore, we performed an interim quantitative assessment of our Community
Banking reporting unit as of June 30, 2020. Based on the results of the interim
quantitative impairment assessments, there were no impairments for the periods
presented. Although not impaired, the fair value of our Community Banking
reporting unit declined since the last interim quantitative assessment at March
31, 2020. The June 30, 2020 interim quantitative assessment for our Community
Banking reporting unit, with $2.2 billion of allocated goodwill, resulted in an
excess fair value over its carrying amount of less than 5%.

As margins for fair value over carrying amount decline, the risk of future
impairment increases if any assumptions, estimates, or market factors change in
the future. We expect COVID-19 will continue to have a significant impact during
the remainder of 2020 resulting in lower revenue growth and compressed net
interest margins. Given the uncertainty related to the severity and length of
the pandemic, and the impact across the financial services industry, we may be
required to record impairment in the future. Any impairment charge would not
affect our capital ratios, tangible common equity or liquidity position.
Determining fair values of each reporting unit, of its individual assets and
liabilities, and also of other identifiable intangible
assets requires considering market information that is publicly available, as
well as the use of significant estimates and
assumptions. These estimates and assumptions could have a significant impact on
whether or not an impairment charge is
recognized and also the magnitude of any such charge. Inputs and assumptions
used in estimating fair value include projected future cash flows, discount
rates reflecting the risk inherent in future cash flows, long-term growth rates
and an evaluation of market comparables and recent transactions.

See Note 1, "Summary of Significant Accounting Policies" and Note 7, "Goodwill
and Other Intangible Assets" in the Notes to
Consolidated Financial Statements for further discussion of accounting for
goodwill and other intangible assets.

USE OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS
To supplement our Consolidated Financial Statements presented in accordance with
GAAP, we use certain non-GAAP financial measures, such as operating net income
available to common stockholders, operating earnings per diluted common share,
return on average tangible common equity, return on average tangible assets,
tangible book value per common share, the ratio of tangible equity to tangible
assets, the ratio of tangible common equity to tangible assets, allowance for
credit losses to loans and leases, excluding PPP, pre-provision net revenue to
average tangible common equity, efficiency ratio and net interest margin (FTE)
to provide information useful to investors in understanding our operating
performance and trends, and to facilitate comparisons with the performance of
our peers. Management uses these measures internally to assess and better
understand our underlying business performance and trends related to core
business activities. The non-GAAP financial measures and key performance
indicators we use may differ from the non-GAAP financial measures and key
performance indicators other financial institutions use to assess their
performance and trends.
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These non-GAAP financial measures should be viewed as supplemental in nature,
and not as a substitute for or superior to, our reported results prepared in
accordance with GAAP. When non-GAAP financial measures are disclosed, the SEC's
Regulation G requires: (i) the presentation of the most directly comparable
financial measure calculated and presented in accordance with GAAP and (ii) a
reconciliation of the differences between the non-GAAP financial measure
presented and the most directly comparable financial measure calculated and
presented in accordance with GAAP. Reconciliations of non-GAAP operating
measures to the most directly comparable GAAP financial measures are included
later in this report under the heading "Reconciliations of Non-GAAP Financial
Measures and Key Performance Indicators to GAAP".
Management believes charges such as branch consolidation costs and COVID-19
expenses are not organic costs to run our operations and facilities. These
charges are considered significant items impacting earnings as they are deemed
to be outside of ordinary banking activities. The branch consolidation charges
principally represent expenses to satisfy contractual obligations of the closed
branches without any useful ongoing benefit to us. These costs are specific to
each individual transaction, and may vary significantly based on the size and
complexity of the transaction. The COVID-19 expenses represent special Company
initiatives to support our front-line employees and the communities we serve
during an unprecedented time of a pandemic.
To provide more meaningful comparisons of net interest margin and efficiency
ratio, we use net interest income on a taxable-equivalent basis in calculating
net interest margin by increasing the interest income earned on tax-exempt
assets (loans and investments) to make it fully equivalent to interest income
earned on taxable investments (this adjustment is not permitted under GAAP).
Taxable-equivalent amounts for the 2020 and 2019 periods were calculated using a
federal statutory income tax rate of 21%.

FINANCIAL SUMMARY
Net income available to common stockholders for the second quarter of 2020 was
$81.6 million or $0.25 per diluted common share, compared to net income
available to common stockholders for the second quarter of 2019 of $93.2 million
or $0.29 per diluted common share. The results for the second quarter of 2020
reflect the impact of $2.6 billion of loans originated through the PPP, as well
as expenses related to COVID-19 of $2.0 million and an estimated $17.1 million
of incremental provision for credit losses due to the COVID-19 related impacts
on our ACL modeling results.
The COVID-19 pandemic continued to have a significant impact on our second
quarter financial results, as presented in the preceding paragraph, as well as
our overall operations. Our previous and ongoing investments in technology and
digital platforms enabled us to quickly meet customers' needs in the pandemic
environment. The technology, as well as other measures such as our business
continuity planning, helped us protect the health and safety of our employees
who were there for our customers when they needed us most.
In this unprecedented and uncertain economic environment, we frequently run
stress tests for a variety of economic situations, including severely adverse
scenarios that have economic conditions similar to the current conditions. Under
these scenarios, the results of these stress tests indicate that our regulatory
capital ratios would remain above the regulatory requirements and we would be
able to maintain appropriate liquidity levels, demonstrating our expected
ability to continue to support our constituencies under stressful financial
conditions. See the Industry Developments section of this MD&A for more detailed
information on COVID-19 impacts to our business activities and results of
operations.
Income Statement Highlights (Second quarter of 2020 compared to second quarter
of 2019, except as noted)
•Total revenue of $305.6 million, compared to $305.2 million, up 0.1%.

•Net income available to common stockholders was $81.6 million, compared to $93.2 million, down 12.4%.



•Earnings per diluted common share were $0.25, compared to $0.29, down 13.8%.
•Net interest margin (FTE) (non-GAAP) declined 32 basis points to 2.88% from
3.20%, driven by the impact of FOMC interest rate actions. The FOMC lowered its
target rate by 2.25% between July 2019 and March 2020 including lowering the
target Fed Funds rate range to 0.00% to 0.25% on March 16, 2020, largely
attributable to the impact of COVID-19.
•Non-interest income increased $2.8 million, or 3.7%, led by an $8.9 million, or
117.4%, increase in mortgage banking income and a $2.6 million, or 26.8%,
increase in capital markets. Service charges decreased $8.1 million, or 25.4%,
largely due to significantly lower transaction volumes in the COVID-19
environment. However, customer transaction volumes began to increase late in the
quarter.
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•Provision for credit losses of $30.2 million exceeded net charge-offs of $8.5
million and reflected COVID-19 related impacts on our ACL modeling results.
•The annualized net charge-offs to total average loans ratio improved 3 basis
points to 0.13%, compared to 0.16%.
•Income tax expense decreased $7.5 million, or 32.0%, and the effective tax rate
was 16.0%, compared to 19.7%, primarily due to renewable energy investment tax
credits recognized during the second quarter of 2020.
•The efficiency ratio (non-GAAP) improved 73 basis points to 53.74%, compared to
54.47%.
•Return on average tangible common equity ratio (non-GAAP) was 13.84%, compared
to 16.84%.
Balance Sheet Highlights (period-end balances, June 30, 2020 compared to
December 31, 2019, unless otherwise indicated)
•Total assets were $37.7 billion, compared to $34.6 billion, an increase of $3.1
billion, or 9.0%, primarily due to the origination of $2.6 billion of PPP loans.
•Growth in total average loans compared to the second quarter of 2019 was $2.8
billion, or 12.5%, with average commercial loan growth of $2.8 billion, or
19.5%, primarily from PPP loan activity, and average consumer loan growth of
$59.1 million, or 0.7%.
•Total average deposits grew $3.4 billion, or 14.3%, compared to the second
quarter of 2019, primarily due to inflows from the PPP and government stimulus
checks, in addition to organic growth in customer relationships. This includes
an increase in average non-interest-bearing deposits of $2.1 billion, or 34.2%,
and an increase in interest-bearing demand deposits of $2.1 billion, or 21.4%,
partially offset by a decrease in average time deposits of $1.1 billion, or
19.7%, largely from a managed decline in brokered CD balances.
•The ratio of loans to deposits was 92.1%, compared to 94.0%, as deposit growth
outpaced loan growth.
•Additionally, the dividend payout ratio for the second quarter of 2020 was
48.14%, compared to 42.19%.
•The ratio of the ACL to total loans and leases increased to 1.40% from 0.84% at
December 31, 2019, representing the impact of CECL adoption and an estimated $55
million of incremental provision for credit losses due to the COVID-19 related
impacts on our ACL modeling results in the first six months of 2020. Excluding
PPP loans that do not carry an ACL due to a 100% government guarantee, the ACL
loans to total loan and leases ratio (non-GAAP) equaled 1.54%, or an impact of
14 basis points.
•Tangible book value per share (non-GAAP) of $7.63 increased 7% from June 30,
2019.
•The ratio of tangible common equity to tangible assets (non-GAAP) decreased 35
basis points to 6.97%, with net PPP loan balances impacting the June 30, 2020
TCE ratio by 52 basis points. The June 30, 2020 metric also includes the Day 1
CECL adoption impact of $50.6 million, or 14 basis points, as well as
incremental provision for credit losses related to the estimated impact of
COVID-19 on our ACL modeling results.

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TABLE 1
Quarterly Results Summary                                                     2Q20               2Q19
Reported results
Net income available to common stockholders (millions)                     $   81.6          $    93.2
Net income per diluted common share                                            0.25               0.29
Book value per common share (period-end)                                      14.82              14.30
Pre-provision net revenue (reported) (millions)                               129.7              130.0
Operating results (non-GAAP)
Operating net income available to common stockholders (millions)               83.2               95.4
Operating net income per diluted common share                                  0.26               0.29
Tangible common equity to tangible assets (period-end)                         6.97  %            7.32  %
Tangible book value per common share (period-end)                          $   7.63          $    7.11
Pre-provision net revenue (operating) (millions)                           $  135.7          $   132.9
Average Diluted Common Shares Outstanding (thousands)                       325,153            325,949

Significant items impacting earnings1 (millions)



Pre-tax COVID-19 expense                                                   $   (2.0)         $       -
After-tax impact of COVID-19 expense                                           (1.6)                 -

Pre-tax branch consolidation costs                                                -               (2.9)
After-tax impact of branch consolidation costs                                    -               (2.3)

Other unusual or outsized items impacting earnings1 (millions) Pre-tax estimated provision for COVID - impacted ACL modeling results

                                                                       (17.1)                 -
After-tax impact of estimated provision for COVID - impacted ACL
modeling results                                                              (13.5)                 -
Pre-tax MSR impairment                                                         (0.3)              (1.3)
After-tax MSR impairment                                                       (0.3)              (1.0)

Total significant, unusual or outsized items pre-tax                       $  (19.4)         $    (4.2)
Total significant, unusual or outsized items after-tax                     

$ (15.4) $ (3.3)


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Year-to-Date Results Summary                                                  2020               2019
Reported results
Net income available to common stockholders (millions)                     $  127.0          $   185.3
Net income per diluted common share                                            0.39               0.57
Pre-provision net revenue (reported) (millions)                               235.9              260.2
Operating results (non-GAAP)
Operating net income available to common stockholders (millions)              136.7              188.9
Operating net income per diluted common share                                  0.42               0.58
Pre-provision net revenue (operating) (millions)                              252.2              264.8
Average Diluted Common Shares Outstanding (thousands)                       325,716            325,697

Significant items impacting earnings1 (millions)



Pre-tax COVID-19 expense                                                   $   (4.0)         $       -
After-tax impact of COVID-19 expense                                           (3.1)                 -

Pre-tax branch consolidation costs                                             (8.3)              (4.5)
After-tax impact of branch consolidation costs                                 (6.5)              (3.6)

Other unusual or outsized items impacting earnings1 (millions) Pre-tax estimated provision for COVID - impacted ACL modeling results

                                                                       (55.0)                 -

After-tax impact of estimated provision for COVID - impacted ACL modeling results

                                                              (43.4)                 -
Pre-tax MSR impairment                                                         (8.0)              (2.6)
After-tax MSR impairment                                                       (6.3)              (2.1)

Pre-tax change in retirement vesting of certain new 2020 stock grants

                                                                         (5.6)                 -

After-tax change in retirement vesting of certain new 2020 stock grants

                                                                         (4.4)                 -
Total significant, unusual or outsized items pre-tax                       $  (80.9)         $    (7.1)
Total significant, unusual or outsized items after-tax                     $  (63.7)         $    (5.7)
(1) Favorable (unfavorable) impact on earnings



Industry Developments

COVID-19
The COVID-19 pandemic has had an immense human and economic impact on the global
economy. On March 22, 2020, the UST announced that financial institution
employees are part of the critical infrastructure workforce and stated that
these employees have a "special responsibility to maintain your normal work
schedule." As a result, financial institutions were confronted with the
challenge of protecting the health and safety of their employees, while also
ensuring that critical financial services such as providing consumer access to
banking and lending services, maintaining core systems and the integrity and
security of data, continuing the processing of payments and services, such as
payment, clearing and settlement services, wholesale funding, insurance services
and capital markets activities, for the duration of the pandemic crisis period.
Our crisis and risk management processes were critical to our preparedness for
the COVID-19 pandemic since we had the necessary plans in place and had
conducted a pandemic emergency event scenario (involving key management and
operations employees) in the fourth quarter of 2019 to test the efficacy of our
pandemic response plans and to improve these plans. We are well-positioned to
continue to provide critical financial services to our customers through
multiple channels such as interactive teller machines, automated teller
machines, our mobile application, and our interactive website. We adjusted our
physical retail locations by focusing on "drive up" services and closed our
lobbies, reverting to "by appointment only" practices, while maintaining
appropriate health, sanitization, social distancing and other safety protocols
consistent with the Centers for Disease Control and Prevention (CDC) and state
guidelines. Starting in July, we re-opened the majority of our branch lobbies to
customers, adhering to stringent safety measures including social distancing and
cleaning protocols.
We leveraged our information technology infrastructure by making accommodations
to give employees the ability to work remotely where appropriate. Our executive
and senior management worked rotating schedules or from remote offices or home
in order to mitigate the risk of wide-spread occurrence of the COVID-19
contagion among this group. With respect to our other employees, approximately
half of our workforce worked remotely. We will continue to actively monitor case
levels and consider guidance from government agencies to determine when we
activate further "return-to-work" schedules. Our remote
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and rotational working arrangements and implementation of CDC health and safety
protocols have not impaired our ability to continue to operate our business. We
do rely on some third parties for certain services such as armored cars for cash
exchanges. At this time, we have not experienced a disruption in our core data
processor system provider.
To protect our customers and communities from economic disruption, we:
•developed a formal loan deferral program and other measures to support
customers who may be enduring financial hardships; and
•actively participated in the SBA PPP which, authorized financial institutions
to make federally guaranteed loans that are eligible to be forgiven to
qualifying small businesses and nonprofits on the terms set forth in the CARES
Act and related regulations.
We continue to evaluate other COVID-19 related FRB and federal government relief
and stimulus programs to determine their suitability for our customers and
communities.
COVID-19 has had a significant impact on the provision for credit losses for the
first half of 2020 after the adoption of CECL. The uncertainty in the market, a
significant increase in unemployment, and adverse economic forecasts all point
to the volatility of the expected additional losses in the loan portfolio. We
would expect inherent volatility in the COVID-19 impact on our provision for
credit losses for the duration of the current COVID-19 pandemic environment and
immediate periods following the mitigation of the pandemic crisis.
The federal banking regulators have offered certain measures to assist financial
institutions during this time. Some of these that impact us are as follows:
•As part of Section 4013 of the CARES Act and in accordance with federal bank
regulatory interagency guidance, financial institutions have been granted
temporary relief from reporting TDRs caused by COVID-19.  To be eligible for TDR
relief, a loan modification must be due to impacts from COVID-19, not more than
30 days past due as of December 31, 2019 and executed between March 1, 2020 and
the earlier of December 31, 2020 or 60 days after the end of the national
emergency.  Interagency guidance encourages financial institutions to work
prudently with borrowers who are or may be unable to meet their contractual
payment obligations because of the effects of COVID-19, and will not criticize
financial institutions for working with borrowers in a safe and sound manner.
Loan modification programs are considered positive actions that can mitigate
adverse effects on borrowers due to COVID-19. Institutions generally do not need
to categorize COVID-19-related loan modifications as TDRs if the loan
modifications are short-term in nature and are made on a good faith basis in
response to COVID-19 to borrowers who were current at the time the modification
program was implemented. For borrowers who were current prior to COVID-19 that
have requested and been granted a concession while experiencing a hardship
during the pandemic, we will not be including those modifications as past due or
a TDR at the time of the concession. As of June 30, 2020, approximately $2.4
billion, or 10%, of our loan portfolio was approved during the initial deferment
request window. Over 98% of the $2.4 billion of loans in deferment were current
and in good standing at December 31, 2019.
•The regulatory agencies have agreed to allow an option to delay the effects of
CECL on regulatory capital by two years for those financial institutions that
adopt in 2020.  This delay will be followed by a three-year transition period of
75%, 50%, and 25% respectively.  We adopted CECL in January 2020 and have
elected this option.
•The FRB initiated a facility to provide liquidity to financial institutions
participating and funding loans for the PPP.  The non-recourse loans are
available to institutions eligible to make PPP loans, with the SBA-guaranteed
loans pledged as collateral to the FRB.  Financial institutions can also pledge
PPP loans to the discount window.  Each liquidity option is set at different
rates and terms. PPP loans pledged to the PPPLF may be excluded from leverage
ratio calculations.  Strong core deposit growth has satisfied our liquidity
needs during the second quarter, but the PPPLF remains a liquidity option.
As we look ahead and move into the next phase of COVID-19 recovery, we will
continue to focus our response on four key pillars in an effort to meet the
needs of each of our constituents. The pillars are: employee protection and
assistance; operational response and preparedness; customer and community
support; and risk management and actions taken to preserve shareholder value
given the extreme challenges presented.


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LIBOR


The United Kingdom's Financial Conduct Authority (FCA), who is the regulator of
LIBOR, expects LIBOR to cease to exist by the end of 2021. The FRB of New York
has created a working group called the Alternative Reference Rate Committee
(ARRC) that will help U.S. institutions transition away from using LIBOR as a
benchmark interest rate. Similarly, we created an internal working group that is
managing our transition away from LIBOR. This working group is a
cross-functional team composed of representatives from the commercial, retail
and mortgage banking lines of business, loan operations, information technology,
legal, finance and other support functions. The committee has completed an
assessment of tasks needed for the transition, identified contracts that contain
LIBOR language, is in process of reviewing existing contract language, developed
loan fallback language for when LIBOR ceases to exist and identified risks
associated with the transition. The financial impact regarding pricing,
valuation and operations of the transition is not yet known. Our transition team
will work within the guidelines established by the FCA and ARRC to allow a
smooth transition away from LIBOR.


                                       66
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RESULTS OF OPERATIONS



Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30,
2019
Net income available to common stockholders for the three months ended June 30,
2020 was $81.6 million or $0.25 per diluted common share, compared to net income
available to common stockholders for the three months ended June 30, 2019 of
$93.2 million or $0.29 per diluted common share. The results for the second
quarter of 2020 reflect a provision for credit losses of $30.2 million,
including an estimated $17.1 million of incremental provision due to the
COVID-19 related impacts on our ACL modeling results, and COVID-19 related
expenses of $2.0 million. The second quarter of 2019 included $2.9 million in
branch consolidation costs.
Financial highlights are summarized below:
TABLE 2
                                                      Three Months Ended
                                                           June 30,                                            $            %
(in thousands, except per share data)               2020               2019              Change              Change
Net interest income                             $ 227,961          $ 230,407          $  (2,446)                (1.1) %
Provision for credit losses                        30,177             11,478             18,699                162.9
Non-interest income                                77,628             74,840              2,788                  3.7
Non-interest expense                              175,932            175,237                695                  0.4
Income taxes                                       15,870             23,345             (7,475)               (32.0)
Net income                                         83,610             95,187            (11,577)               (12.2)
Less: Preferred stock dividends                     2,010              2,010                  -                    -

Net income available to common stockholders $ 81,600 $ 93,177 $ (11,577)

               (12.4) %
Earnings per common share - Basic               $    0.25          $    0.29          $   (0.04)               (13.8) %
Earnings per common share - Diluted                  0.25               0.29              (0.04)               (13.8)
Cash dividends per common share                      0.12               0.12                  -                    -


The following table presents selected financial ratios and other relevant data
used to analyze our performance:
TABLE 3
                                                        Three Months Ended
                                                             June 30,
                                                        2020           2019
Return on average equity                                 6.89  %       8.09  %
Return on average tangible common equity (2)            13.84         16.84
Return on average assets                                 0.91          1.13
Return on average tangible assets (2)                    1.01          1.25
Book value per common share (1)                     $   14.82       $ 14.30
Tangible book value per common share (1) (2)             7.63          7.11
Equity to assets (1)                                    12.98  %      14.02 

%


Average equity to average assets                        13.25         14.00
Common equity to assets (1)                             12.70         13.70
Tangible equity to tangible assets (1) (2)               7.27          7.66
Tangible common equity to tangible assets (1) (2)        6.97          7.32
Dividend payout ratio                                   48.14         42.19


(1) Period-end
(2) Non-GAAP

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The following table provides information regarding the average balances and
yields earned on interest-earning assets (non-GAAP) and the average balances and
rates paid on interest-bearing liabilities:
TABLE 4
                                                                                          Three Months Ended June 30,
                                                                       2020                                                                                   2019
                                                                       Interest                                                    Interest
                                                   Average             Income/             Yield/              Average             Income/             Yield/
(dollars in thousands)                             Balance             Expense              Rate               Balance             Expense              Rate
Assets
Interest-earning assets:
Interest-bearing deposits with banks           $    300,164          $     154               0.21  %       $     66,324          $     988

5.97 %



Taxable investment securities (1)                 5,083,104             27,340               2.15             5,296,831             31,740          

2.40


Tax-exempt investment securities (1)(2)           1,115,976             10,010               3.59             1,121,655             10,062               3.59
Loans held for sale                                 106,368              1,055               3.97                89,671              1,063               4.75
Loans and leases (2)(3)                          25,602,178            245,438               3.85            22,759,878            275,921               4.86
Total interest-earning assets (2)                32,207,790            283,997               3.54            29,334,359            319,774               4.37
Cash and due from banks                             339,054                                                     365,824
Allowance for credit losses                        (347,227)                                                   (190,182)
Premises and equipment                              333,322                                                     329,381
Other assets                                      4,286,739                                                   3,891,734
Total assets                                   $ 36,819,678                                                $ 33,731,116
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing demand                        $ 11,889,774             14,172               0.48          $  9,794,796             25,132               1.03
Savings                                           2,844,104                564               0.08             2,519,657              2,163               0.34
Certificates and other time                       4,396,779             19,731               1.80             5,472,936             27,122          

1.99


      Total interest-bearing deposits            19,130,657             34,467               0.72            17,787,389             54,417               1.23
Short-term borrowings                             2,631,009              8,319               1.27             3,716,627             22,140               2.37
Long-term borrowings                              1,630,902             10,099               2.49             1,082,384              9,270               3.44
Total interest-bearing liabilities               23,392,568             52,885               0.91            22,586,400             85,827               1.52
Non-interest-bearing demand                       8,143,171                                                   6,069,106
Total deposits and borrowings                    31,535,739                                  0.67            28,655,506                                  1.20
Other liabilities                                   404,280                                                     354,885
Total liabilities                                31,940,019                                                  29,010,391
Stockholders' equity                              4,879,659                                                   4,720,725
Total liabilities and stockholders' equity     $ 36,819,678                                                $ 33,731,116
Net interest-earning assets                    $  8,815,222                                                $  6,747,959
Net interest income (FTE) (2)                                          231,112                                                     233,947
Tax-equivalent adjustment                                               (3,151)                                                     (3,540)
Net interest income                                                  $ 227,961                                                   $ 230,407
Net interest spread                                                                          2.63  %                                                     2.85  %
Net interest margin (2)                                                                      2.88  %                                                     3.20  %


(1)The average balances and yields earned on securities are based on historical
cost.
(2)The interest income amounts are reflected on an FTE basis (non-GAAP), which
adjusts for the tax benefit of income on certain tax-exempt loans and
investments using the federal statutory tax rate of 21%. The yield on earning
assets and the net interest margin are presented on an FTE basis. We believe
this measure to be the preferred industry measurement of net interest income and
provides relevant comparison between taxable and non-taxable amounts.
(3)Average balances include non-accrual loans. Loans and leases consist of
average total loans less average unearned income.
                                       68
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Net Interest Income
Net interest income on an FTE basis (non-GAAP) decreased $2.8 million, or 1.2%,
from $233.9 million for the second quarter of 2019 to $231.1 million for the
second quarter of 2020. Average interest-earning assets of $32.2 billion
increased $2.9 billion, or 9.8%, from 2019, due to solid origination activity
across our footprint and the benefit from PPP activity. Average interest-bearing
liabilities of $23.4 billion increased $0.8 billion, or 3.6%, from 2019, driven
by deposits for PPP funding and government stimulus funding, as well as solid
organic growth in customer relationships, partially offset by reduced levels of
borrowings. Our net interest margin FTE (non-GAAP) was 2.88% for the second
quarter of 2020, compared to 3.20% for the same period of 2019, reflecting a 32
basis point decrease primarily due to actions taken by the FOMC, which lowered
its target Fed Funds rate to 0-0.25% from 2.25%-2.50% between July 2019 and
March 2020.
The following table provides certain information regarding changes in net
interest income on an FTE basis (non-GAAP) attributable to changes in the
average volumes and yields earned on interest-earning assets and the average
volume and rates paid for interest-bearing liabilities for the three months
ended June 30, 2020, compared to the three months ended June 30, 2019:
TABLE 5
(in thousands)                             Volume           Rate            

Net


Interest Income (1)
Interest-bearing deposits with banks     $    120       $    (954)      $   (834)

Securities (2)                             (1,117)         (3,335)        (4,452)
Loans held for sale                           169            (177)            (8)
Loans and leases (2)                       27,797         (58,280)       (30,483)
Total interest income (2)                  26,969         (62,746)       (35,777)
Interest Expense (1)
Deposits:
Interest-bearing demand                     3,576         (14,536)       (10,960)
Savings                                       150          (1,749)        (1,599)
Certificates and other time                (5,210)         (2,181)        (7,391)
Short-term borrowings                         (99)        (13,722)       (13,821)
Long-term borrowings                        3,236          (2,407)           829
Total interest expense                      1,653         (34,595)       (32,942)
Net change (2)                           $ 25,316       $ (28,151)      $ (2,835)



(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 $284.0 million for the second
quarter of 2020, increased $35.8 million or 11.2% from the same quarter of 2019,
primarily due to increased interest-earning assets of $2.9 billion. The increase
in interest-earning assets was primarily driven by a $2.8 billion, or 12.5%,
increase in average loans and leases, which included $2.6 billion of PPP
commercial loans originated during the second quarter of 2020. Average
commercial loan growth totaled $2.8 billion, or 19.5%. Excluding the PPP loans,
commercial loan origination activity remained solid with organic growth in the
Pennsylvania, Cleveland, North and South Carolina, and Mid-Atlantic (Greater
Baltimore-Washington D.C. markets) regions. Average consumer loan growth was
$59.1 million, or 0.7%, with growth in residential mortgage loans of $190.6
million, or 5.8%, and direct installment loans of $165.4 million, or 9.5%,
partially offset by declines in consumer lending heavily impacted by COVID-19 as
indirect auto loans decreased $162.1 million, or 8.3%, and consumer lines of
credit decreased $134.8 million, or 8.8%. Additionally, average securities
decreased $219.4 million, or 3.4%, due to higher loan growth in 2020 and less
attractive reinvestment yields. The yield on average interest-earning assets
(non-GAAP) decreased 83 basis points from 4.37% for the second quarter of 2019
to 3.54% for the second quarter of 2020, reflecting lower interest rates in a
COVID-19 environment.
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Interest expense of $52.9 million for the second quarter of 2020 decreased $32.9
million, or 38.4%, from the same quarter of 2019, due to a decrease in rates
paid on average interest-bearing liabilities and growth in average
interest-bearing deposits over the same quarter of 2019. Average
interest-bearing deposits increased $1.3 billion, or 7.6%, and average
non-interest-bearing deposits increased $2.1 billion, or 34.2%. The growth in
non-interest-bearing deposits and interest-bearing deposits was driven by
deposits for PPP funding and government stimulus activities, as well as solid
organic growth in customer relationships. Average short-term borrowings
decreased $1.1 billion, or 29.2%, primarily as a result of a decrease of $1.5
billion in federal funds purchased, partially offset by increases of $348.5
million in short-term FHLB advances and $80.8 million in customer repurchase
accounts. Average long-term borrowings increased $548.5 million, or 50.7%,
primarily resulting from increases of $256.5 million in long-term FHLB advances
and $298.1 million in subordinated debt. The funding of both fixed and
adjustable borrowings was opportunistically transacted to take advantage of the
lower interest rate environment and add liquidity to support loan growth. The
rate paid on interest-bearing liabilities decreased 61 basis points from 1.52%
to 0.91% for the second quarter of 2020, primarily due to the interest rate
actions made by the FOMC.

Provision for Credit Losses
Provision for credit losses is determined based on management's estimates of the
appropriate level of allowance for credit losses needed to absorb probable
life-of-loan losses in the loan and lease portfolio, after giving consideration
to charge-offs and recoveries for the period. The following table presents
information regarding the credit loss expense and net charge-offs:
TABLE 6
                                                        Three Months Ended
                                                             June 30,                                          $            %
(dollars in thousands)                                2020              2019             Change              Change

Provision for credit losses (on loans and leases) $ 30,177 $ 11,478 $ 18,699

                162.9  %
Net loan charge-offs                                  8,489             9,021              (532)                (5.9)
Net loan charge-offs (annualized) / total average
loans and leases                                       0.13  %           0.16  %



Provision for credit losses of $30.2 million during the second quarter of 2020
increased 162.9% from the same period of 2019, driven by an estimated $17.1
million of incremental provision due to the COVID-19 related impacts on our ACL
modeling results. Net loan charge-offs were $8.5 million, a decrease of $0.5
million. For additional information relating to the allowance and provision for
credit losses, refer to the Allowance for Credit Losses section of this
Management's Discussion and Analysis.
Non-Interest Income
The breakdown of non-interest income for the three months ended June 30, 2020
and 2019 is presented in the following table:
TABLE 7
                                                     Three Months Ended
                                                          June 30,                                           $            %
(dollars in thousands)                             2020              2019             Change              Change
Service charges                                 $ 23,938          $ 32,068          $ (8,130)                (25.4) %
Trust services                                     7,350             7,018               332                   4.7
Insurance commissions and fees                     5,835             4,411             1,424                  32.3
Securities commissions and fees                    3,763             4,671              (908)                (19.4)
Capital markets income                            12,515             9,867             2,648                  26.8
Mortgage banking operations                       16,550             7,613             8,937                 117.4
Dividends on non-marketable equity securities      2,766             4,135            (1,369)                (33.1)
Bank owned life insurance                          3,924             3,103               821                  26.5
Net securities gains                                  97                 -                97                     -
Other                                                890             1,954            (1,064)                (54.5)
Total non-interest income                       $ 77,628          $ 74,840          $  2,788                   3.7  %


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Total non-interest income increased $2.8 million, to $77.6 million for the
second quarter of 2020, a 3.7% increase from the same period of 2019. Excluding
significant, unusual or outsized items, non-interest income increased $1.3
million, or 1.7%. The variances in the individual non-interest income items are
further explained in the following paragraphs.
Service charges on loans and deposits of $23.9 million for the second quarter of
2020 decreased $8.1 million, or 25.4%, from the same period of 2019, primarily
due to noticeably lower transaction volumes given COVID-19, although customer
transaction volume began to increase late in the quarter.
Trust services of $7.4 million for the second quarter of 2020 increased $0.3
million, or 4.7%, from the same period of 2019, primarily driven by strong
organic revenue production, partially offset by market valuation impacts. We
continued to generate strong organic growth in accounts and services, while the
market value of assets under management decreased $4.4 million, or 0.1%, to $6.1
billion at June 30, 2020.
Insurance commissions and fees of $5.8 million for the second quarter of 2020
increased $1.4 million, or 32.3%, from the same period of 2019, primarily due to
the benefit of new business in North and South Carolina, as well as organic
growth in commercial lines.
Securities commissions and fees of $3.8 million for the second quarter of 2020
decreased $0.9 million, or 19.4%, from the same period of 2019, primarily as a
result of lower activity due to COVID-19.
Capital markets income of $12.5 million for the second quarter of 2020 increased
$2.6 million, or 26.8%, from the same period of 2019, reflecting record
customer-related interest-rate derivative activity across our footprint.
Mortgage banking operations income of $16.6 million for the second quarter of
2020 increased $8.9 million, or 117.4%, from the same period of 2019, primarily
due to increased saleable volume and expanding margins. During the second
quarter of 2020, we sold $437.7 million of residential mortgage loans, compared
to $334.6 million for the same period of 2019, an increase of 30.8%.
Additionally, the mortgage banking results included a $0.3 million unfavorable
interest rate-related valuation adjustment on MSRs in the second quarter of 2020
compared to an unfavorable $1.3 million valuation adjustment in the second
quarter of 2019.
Dividends on non-marketable equity securities of $2.8 million for the second
quarter of 2020 decreased $1.4 million, or 33.1%, from the same period of 2019,
primarily due to a decrease in the FHLB dividend rate and lower levels of FHLB
borrowings given the strong growth in deposits.
BOLI income of $3.9 million for the second quarter of 2020 increased $0.8
million, or 26.5%, from the same period of 2019, primarily due to life insurance
claims.
Other non-interest income was $0.9 million and $2.0 million for the second
quarter of 2020 and 2019, respectively. The second quarter of 2019 included
losses on fixed assets related to branch consolidations of $0.5 million.
The following table presents non-interest income excluding significant, unusual
or outsized items for the three months ended June 30, 2019:
TABLE 8
                                                     Three Months Ended
                                                          June 30,                                         $           %
(dollars in thousands)                             2020              2019             Change            Change

Total non-interest income, as reported $ 77,628 $ 74,840

         $ 2,788                 3.7  %

Significant item:



  Loss on fixed assets related to branch
consolidations                                         -               546             (546)
  MSR impairment                                     334             1,255             (921)
Total non-interest income, excluding
significant item and other unusual or outsized
items(1)                                        $ 77,962          $ 76,641          $ 1,321                 1.7  %


(1) Non-GAAP


                                       71

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Non-Interest Expense
The breakdown of non-interest expense for the three months ended June 30, 2020
and 2019 is presented in the following table:
TABLE 9
                                       Three Months Ended
                                            June 30,                                $         %
(dollars in thousands)                2020            2019          Change       Change

Salaries and employee benefits $ 93,992 $ 94,289 $ (297)

      (0.3) %
Net occupancy                        13,594          15,593        (1,999)       (12.8)
Equipment                            15,610          15,473           137          0.9
Amortization of intangibles           3,343           3,479          (136)        (3.9)
Outside services                     17,000          16,110           890          5.5

FDIC insurance                        5,371           6,013          (642)       (10.7)
Bank shares and franchise taxes       4,029           3,130           899         28.7

Other                                22,993          21,150         1,843          8.7
Total non-interest expense        $ 175,932       $ 175,237       $   695          0.4  %


Total non-interest expense of $175.9 million for the second quarter of 2020
increased $0.7 million, or 0.4%, from the same period of 2019. Non-interest
expense increased $1.0 million, or 0.6%, when excluding $2.0 million of COVID-19
expenses in the second quarter of 2020 and $2.3 million of branch consolidation
costs in the second quarter of 2019. In the second quarter of 2020, we also
recognized an impairment of $4.1 million from a renewable energy investment tax
credit transaction, while the related renewable energy investment tax credits
were recognized during the quarter as a benefit to income taxes. The variances
in the individual non-interest expense items are further explained in the
following paragraphs.
Salaries and employee benefits of $94.0 million for the second quarter of 2020
decreased $0.3 million, or 0.3%, from the same period of 2019, as higher
production-related commissions were more than offset by higher
production-related salary deferrals from loan origination activities.
Additionally, we recorded $0.6 million in COVID-19 expenses during the second
quarter of 2020.
Net occupancy and equipment expense of $29.2 million for the second quarter of
2020 decreased $1.9 million, or 6.0%, from $31.1 million from the same period of
2019, primarily due to branch consolidation costs of $2.2 million included in
the second quarter of 2019.
Outside services expense of $17.0 million for the second quarter of 2020
increased $0.9 million, or 5.5%, from the same period of 2019, primarily due to
increases in check card fees and data processing fees of $0.5 million and $0.4
million, respectively.
FDIC insurance of $5.4 million for the second quarter of 2020 decreased $0.6
million, or 10.7%, from the same period of 2019. Subordinated debt issued by
FNBPA allows for an expense reduction through the use of an Unsecured Debt
Adjustment (UDA) in the FDIC calculator.
Bank shares and franchise taxes of $4.0 million for the second quarter of 2020
increased $0.9 million, or 28.7%, from the same period of 2019, primarily due to
capital base increases.
Other non-interest expense was $23.0 million and $21.2 million for the second
quarter of 2020 and 2019, respectively. During the second quarter of 2020, we
recorded an impairment charge of $4.1 million from a renewable energy investment
tax credit transaction. The related renewable energy investment tax credits were
recognized during the quarter as a benefit to income taxes. These items were
partially offset by decreases in several other items in other non-interest
expense, including marketing, business development expenses and miscellaneous
losses, which were somewhat impacted by the COVID-19 operating environment.

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The following table presents non-interest expense excluding significant, unusual
or outsized items for the six months ended June 30, 2020 and 2019:
TABLE 10
                                                             Three Months Ended June 30,                                  $           %
(dollars in thousands)                                         2020                  2019             Change            Change
Total non-interest expense, as reported                  $     175,932           $ 175,237          $   695                0.4  %

Significant items and other unusual or outsized items:



  Branch consolidations                                              -              (2,325)           2,325
  COVID-19 expense                                              (1,989)                  -           (1,989)

Total non-interest expense, excluding significant items and other unusual or outsized items (1)

$     173,943           $ 172,912          $ 1,031                0.6  %


(1) Non-GAAP

Income Taxes
The following table presents information regarding income tax expense and
certain tax rates:
TABLE 11
                                 Three Months Ended
                                      June 30,
(dollars in thousands)          2020           2019
Income tax expense           $ 15,870       $ 23,345
Effective tax rate               16.0  %        19.7  %
Statutory federal tax rate       21.0           21.0


Both periods' tax rates are lower than the federal statutory tax rates of 21%
due to tax benefits primarily resulting from tax-exempt income on investments
and loans, tax credits and income from BOLI. The lower effective tax rate in
2020 is due to lower pre-tax income levels and the impact from renewable energy
investment tax credits realized in the second quarter of 2020.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019
Net income available to common stockholders for the first six months of 2020 was
$93.2 million or $0.39 per diluted common share, compared to net income
available to common stockholders for the first six months of 2019 of $185.3
million or $0.57 per diluted common share. The results for the first six months
of 2020 reflect a provision for credit losses of $78.0 million, including an
estimated $55.0 million of incremental provision due to the COVID-19 related
impacts on our ACL modeling results. Additionally, our first six months of 2020
results included branch consolidation costs of $8.3 million, MSR impairment of
$8.0 million, retirement vesting changes for certain 2020 stock grants of $5.6
million, and COVID-19 related expenses of $4.0 million. The results for the
first six months of 2019 included branch consolidation costs of $4.5 million and
MSR impairment of $2.6 million. These significant, unusual, or outsized items
totaled $64 million, negatively impacting earnings by $0.20 per share. 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:

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TABLE 12
                                                      Six Months Ended
                                                          June 30,                                             $            %
(in thousands, except per share data)              2020               2019              Change              Change
Net interest income                            $ 460,592          $ 461,000          $    (408)                 (0.1) %
Provision for credit losses                       78,015             25,107             52,908                 210.7
Non-interest income                              146,154            140,225              5,929                   4.2
Non-interest expense                             370,824            340,979             29,845                   8.8
Income taxes                                      26,880             45,825            (18,945)                (41.3)
Net income                                       131,027            189,314            (58,287)                (30.8)
Less: Preferred stock dividends                    4,020              4,020                  -                     -

Net income available to common stockholders $ 127,007 $ 185,294

$ (58,287)                (31.5) %
Earnings per common share - Basic              $    0.39          $    0.57          $   (0.18)                (31.6) %
Earnings per common share - Diluted                 0.39               0.57              (0.18)                (31.6)
Cash dividends per common share                     0.24               0.24                  -                     -


The following table presents selected financial ratios and other relevant data
used to analyze our performance:
TABLE 13
                                                        Six Months Ended
                                                            June 30,
                                                       2020          2019
Return on average equity                               5.40  %       8.15  %

Return on average tangible common equity (2) 10.89 17.11 Return on average assets

                               0.74          1.14
Return on average tangible assets (2)                  0.82          1.26
Book value per common share (1)                     $ 14.82       $ 14.30
Tangible book value per common share (1) (2)           7.63          7.11
Equity to assets (1)                                  12.98  %      14.02  %
Average equity to average assets                      13.65         13.96
Common equity to assets (1)                           12.70         13.70
Tangible equity to tangible assets (1) (2)             7.27          7.66
Tangible common equity to tangible assets (1) (2)      6.97          7.32
Dividend payout ratio                                 61.76         42.37


(1) Period-end
(2) Non-GAAP
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The following table provides information regarding the average balances and
yields earned on interest-earning assets (non-GAAP) and the average balances and
rates paid on interest-bearing liabilities:
TABLE 14
                                                                                           Six Months Ended June 30,
                                                                       2020                                                                                   2019
                                                                      Interest                                                     Interest
                                                  Average             Income/             Yield/               Average             Income/             Yield/
(dollars in thousands)                            Balance             Expense              Rate                Balance             Expense              Rate
Assets

Interest-earning assets: Interest-bearing deposits with banks $ 231,807 $ 1,380

                1.20  %       $     60,279          $   1,450

4.85 %



Taxable investment securities (1)                5,190,350             58,675                2.26             5,370,269             64,590         

2.41


Tax-exempt investment securities (1)(2)          1,120,871             20,078                3.58             1,115,212             19,981                3.58
Loans held for sale                                 91,413              2,040                4.47                61,469              1,571                5.13
Loans and leases (2) (3)                        24,555,651            511,265                4.18            22,570,742            546,071                4.87
Total interest-earning assets (2)               31,190,092            593,438                3.82            29,177,971            633,663                4.37
Cash and due from banks                            357,080                                                      371,703
Allowance for credit losses                       (327,361)                                                    (186,850)
Premises and equipment                             334,458                                                      330,711
Other assets                                     4,183,187                                                    3,877,715
Total assets                                  $ 35,737,456                                                 $ 33,571,250
Liabilities
Interest-bearing liabilities:
Deposits:
Interest-bearing demand                       $ 11,462,755             39,316                0.69          $  9,723,662             48,695                1.01
Savings                                          2,731,250              2,391                0.18             2,514,929              4,233                0.34
Certificates and other time                      4,533,167             42,226                1.87             5,410,633             51,866         

1.93


      Total interest-bearing deposits           18,727,172             83,933                0.90            17,649,224            104,794                1.20
Short-term borrowings                            2,968,033             22,080                1.49             4,012,589             47,950                2.39
Long-term borrowings                             1,544,217             20,381                2.65               873,185             12,800                2.96
Total interest-bearing liabilities              23,239,422            126,394                1.09            22,534,998            165,544                1.48
Non-interest-bearing demand                      7,220,074                                                    5,981,427
Total deposits and borrowings                   30,459,496                                   0.83            28,516,425                                   1.17
Other liabilities                                  400,897                                                      368,152
Total liabilities                               30,860,393                                                   28,884,577
Stockholders' equity                             4,877,063                                                    4,686,673
Total liabilities and stockholders' equity    $ 35,737,456                                                 $ 33,571,250
Net interest-earning assets                   $  7,950,670                                                 $  6,642,973
Net interest income (FTE) (2)                                         467,044                                                      468,119
Tax-equivalent adjustment                                              (6,452)                                                      (7,119)
Net interest income                                                 $ 460,592                                                    $ 461,000
Net interest spread                                                                          2.73  %                                                      2.89  %
Net interest margin (2)                                                                      3.01  %                                                      3.23  %


(1)The average balances and yields earned on securities are based on historical
cost.
(2)The interest income amounts are reflected on an FTE basis (non-GAAP), which
adjusts for the tax benefit of income on certain tax-exempt loans and
investments using the federal statutory tax rate of 21%. The yield on earning
assets and the net interest margin are presented on an FTE basis. We believe
this measure to be the preferred industry measurement of net interest income and
provides relevant comparison between taxable and non-taxable amounts.
(3)Average balances include non-accrual loans. Loans and leases consist of
average total loans less average unearned income.
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Net Interest Income
Net interest income totaled $460.6 million, increasing $0.4 million, or 0.1%.
The net interest margin (FTE) (non-GAAP) declined 22 basis points to 3.01%,
primarily due to the impact of lower interest rates as year-to-date average
1-month LIBOR declined to 0.90% from 2.47% for the first half of 2019.
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 six months ended
June 30, 2020, compared to the six months ended June 30, 2019:
TABLE 15
(in thousands)                             Volume           Rate            

Net


Interest Income (1)
Interest-bearing deposits with banks     $    965       $  (1,035)      $    (70)

Securities (2)                             (1,502)         (4,316)        (5,818)
Loans held for sale                           634            (165)           469
Loans and leases (2)                       38,590         (73,396)       (34,806)
Total interest income (2)                  38,687         (78,912)       (40,225)
Interest Expense (1)
Deposits:
Interest-bearing demand                     8,511         (17,890)        (9,379)
Savings                                       639          (2,481)        (1,842)
Certificates and other time                (8,261)         (1,379)        (9,640)
Short-term borrowings                     (10,085)        (15,785)       (25,870)
Long-term borrowings                        8,473            (892)         7,581
Total interest expense                       (723)        (38,427)       (39,150)
Net change (2)                           $ 39,410       $ (40,485)      $ (1,075)


(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 $593.4 million for the first six
months of 2020, decreased $40.2 million, or 6.3%, from the same period of 2019,
resulting from the decrease in benchmark interest rates, partially offset by an
increase in interest-earning assets of $2.0 billion. The increase in
interest-earning assets was primarily driven by a $2.0 billion, or 8.8%,
increase in average total loans due to PPP activity and solid origination
activity across the footprint. Average commercial loan growth totaled $1.9
billion, or 13.3%, including growth of $1.4 billion, or 28.9%, in commercial and
industrial loans. Commercial loan growth was led by strong commercial activity
in the Pennsylvania, North Carolina, and Mid-Atlantic regions. Average consumer
loan growth of $112.7 million, or 1.3%, was led by increases in residential
mortgage loans of $214.7 million, or 6.7%, and direct installment balances of
$132.1 million, or 7.5%, partially offset by a decline of $129.9 million, or
8.4%, in consumer credit lines and $104.1 million, or 5.3%, in indirect
installment loans. Additionally, the net reduction in the securities portfolio
was a result of management's strategy to deploy excess liquidity into higher
yielding loans, as average securities decreased $174.3 million, or 2.7%. For the
first six months of 2020, the yield on average interest-earning assets
(non-GAAP) decreased 55 basis points to 3.82%, compared to the first six months
of 2019, primarily due to actions taken to reduce the cost of interest-bearing
deposits given the low interest rate environment.
Interest expense of $126.4 million for the first six months of 2020 decreased
$39.2 million, or 23.6%, from the same period of 2019 primarily due to a
decrease in rates paid, partially offset by an increase in average
interest-bearing deposits and borrowings. Average interest-bearing deposits
increased $1.1 billion, or 6.1%, which reflects the benefit of organic growth,
as well as deposits for PPP funding and government stimulus activities. Average
long-term borrowings increased $671.0 million, or 76.8%, which reflects
increases of $467.1 million in long-term FHLB borrowings, $209.7 million in
senior debt and $17.9 million in subordinated debt, partially offset by a
decrease of $24.9 million in junior subordinated debt. The funding of both
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fixed and adjustable longer-term borrowings was opportunistically transacted to
take advantage of the lower interest rate environment and add liquidity to
support loan growth. During the first quarter of 2020, we issued $300 million of
2.20% fixed rate senior notes due in 2023. During the first quarter of 2019, we
issued $120.0 million of 4.950% fixed-to-floating rate subordinated notes due in
2029. We used part of the proceeds from the 2019 issuance to redeem higher-rate
debt including $78.0 million in junior subordinated debt and $25.0 million in
other subordinated debt. The rate paid on interest-bearing liabilities decreased
39 basis points to 1.09% for the first six months of 2020, compared to the first
six months of 2019 due to reduced costs on interest-bearing deposits and lower
borrowing costs.

Provision for Credit Losses
The following table presents information regarding the provision for credit
losses and net charge-offs:
TABLE 16
                                                     Six Months Ended
                                                         June 30,                                          $            %
(dollars in thousands)                            2020              2019             Change              Change
Provision for credit losses (on loans and
leases)                                        $ 78,005          $ 25,107          $ 52,898                210.7  %
Net loan charge-offs                             14,172            16,600            (2,428)               (14.6)
Net loan charge-offs (annualized) / total
average loans and leases                           0.12  %           0.15  %


Provision for credit losses for the six months ended June 30, 2020 was $78.0
million, an increase of $52.9 million from the year-ago quarter, and included an
estimated $55.0 million of incremental provision due to COVID-19 related impacts
on our ACL modeling results. Net charge-offs of $14.2 million during the six
months ended June 30, 2020, compared to $16.6 million during the six months
ended June 30, 2019.
Non-Interest Income
The breakdown of non-interest income for the six months ended June 30, 2020 and
2019 is presented in the following table:
TABLE 17
                                                             Six Months Ended
                                                                 June 30,                                           $            %
(dollars in thousands)                                    2020               2019             Change              Change
Service charges                                       $  54,066          $  62,285          $ (8,219)               (13.2) %
Trust services                                           15,312             13,802             1,510                 10.9
Insurance commissions and fees                           12,387              9,308             3,079                 33.1
Securities commissions and fees                           8,302              9,016              (714)                (7.9)
Capital markets income                                   23,628             15,903             7,725                 48.6
Mortgage banking operations                              15,517             11,518             3,999                 34.7
Dividends on non-marketable equity securities             7,444              9,158            (1,714)               (18.7)
Bank owned life insurance                                 7,101              5,944             1,157                 19.5
Net securities gains                                        150                  -               150                    -
Other                                                     2,247              3,291            (1,044)               (31.7)
Total non-interest income                             $ 146,154          $ 140,225          $  5,929                  4.2  %


Total non-interest income increased $5.9 million, to $146.2 million for the
first six months of 2020, a 4.2% increase from the same period of 2019.
Excluding significant, unusual or outsized items, non-interest income increased
$9.6 million, or 6.7%. The variances in significant individual non-interest
income items are further explained in the following paragraphs.
Service charges on loans and deposits of $54.1 million for the first six months
of 2020 decreased $8.2 million, or 13.2%, as there were noticeably lower
customer transaction volumes in the COVID-19 environment, although volumes began
to increase late in the second quarter of 2020.
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Trust services of $15.3 million for the first six months of 2020 increased $1.5
million, or 10.9%, from the same period of 2019, primarily driven by strong
organic revenue production even though the market value of assets under
management decreased $4.4 million, or 0.1%, to $6.1 billion at June 30, 2020.
Insurance commissions and fees of $12.4 million for the first six months of 2020
increased $3.1 million, or 33.1%, from the same period of 2019, primarily due to
new business in the Carolina regions of our footprint, as well as organic growth
in commercial lines.
Securities commissions and fees of $8.3 million for the first six months of 2020
decreased $0.7 million, or 7.9%, from the same period of 2019, primarily as a
result of lower activity due to COVID-19.
Capital markets income of $23.6 million for the first six months of 2020
increased $7.7 million, or 48.6%, from $15.9 million for the same period of
2019. The significant increase was primarily due to record customer-related
interest rate derivative activity for the first six months of 2020 in a volatile
rate environment.
Mortgage banking operations income of $15.5 million for the first six months of
2020 increased $4.0 million, or 34.7%, from the same period of 2019, due to
increased saleable volume and expanding margins. During the first six months of
2020, we sold $697.6 million of residential mortgage loans, a 32.0% increase
compared to $528.6 million, excluding the $110.1 million portfolio bulk sale,
for the same period of 2019. The higher origination and secondary marketing
revenues were partially offset by $5.4 million higher MSR impairment related to
unfavorable interest-rate valuation adjustments and $4.6 million of higher MSR
amortization due to higher prepayment speeds.
Dividends on equity securities of $7.4 million for the first six months of 2020
decreased $1.7 million, or 18.7%, from the same period of 2019, primarily due to
a decrease in the FHLB dividend rate and lower levels of FHLB borrowings given
the strong growth in deposits.
Income from BOLI of $7.1 million for the first six months of 2020 increased $1.2
million, or 19.5%, primarily due to life insurance claims.
Other non-interest income was $2.2 million and $3.3 million for the first six
months of 2020 and 2019, respectively. During the first six months of 2019, we
recognized $1.3 million in net gains on equity investments, compared to a net
loss of $0.6 million for the first six months of 2020.
The following table presents non-interest income excluding significant, and
other unusual or outsized items for the six months ended June 30, 2020 and 2019:
TABLE 18
                                                       Six Months Ended
                                                           June 30,                                          $            %
(dollars in thousands)                              2020               2019             Change             Change

Total non-interest income, as reported $ 146,154 $ 140,225 $ 5,929

                  4.2  %
Significant items and other unusual or outsized
items:

  Loss on fixed assets related to branch
consolidations                                          -              1,722           (1,722)
  MSR impairment                                    8,007              2,600            5,407

Total non-interest income, excluding
significant items and other unusual or outsized
items(1)                                        $ 154,161          $ 144,547          $ 9,614                  6.7  %


(1) Non-GAAP

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Non-Interest Expense
The breakdown of non-interest expense for the six months ended June 30, 2020 and
2019 is presented in the following table:
TABLE 19
                                        Six Months Ended
                                            June 30,                                $         %
(dollars in thousands)                2020            2019          Change        Change

Salaries and employee benefits $ 197,797 $ 185,573 $ 12,224

       6.6  %
Net occupancy                        35,042          30,658          4,384        14.3
Equipment                            31,656          30,298          1,358         4.5
Amortization of intangibles           6,682           6,958           (276)       (4.0)
Outside services                     33,896          30,855          3,041         9.9

FDIC insurance                       10,926          11,963         (1,037)       (8.7)
Bank shares and franchise taxes       8,121           6,597          1,524        23.1

Other                                46,704          38,077          8,627        22.7
Total non-interest expense        $ 370,824       $ 340,979       $ 29,845         8.8  %


Total non-interest expense of $370.8 million for the first six months of 2020
increased $29.8 million, an 8.8% increase from the same period of 2019.
Non-interest expense increased $14.8 million, or 4.4%, when excluding
significant, unusual or outsized items, including $4.0 million of expenses
associated with COVID-19, $8.3 million of branch consolidation costs, and $5.6
million of retirement vesting changes for certain 2020 stock awards, compared to
$2.8 million of branch consolidation costs in the first six months of 2019. The
variances in the individual non-interest expense items are further explained in
the following paragraphs.
Salaries and employee benefits of $197.8 million for the first six months of
2020 increased $12.2 million or 6.6% from the same period of 2019, primarily
related to production-related commissions, normal merit increases and
stock-based compensation. We made a change to long-term stock-based compensation
vesting that resulted in accelerated grant date expense recognition for certain
2020 awards, with full expense recognition on grant date instead of recognizing
the same expense amount over a 36-month vesting period. These awards are not
released until the three-year service period is complete or the specified
performance criteria is met over the three-year period. Additionally, we
recorded $1.5 million relating to COVID-19 expenses.
Net occupancy and equipment expense of $66.7 million for the first six months of
2020 increased $5.7 million, or 9.4%, from $61.0 million from the same period of
2019, primarily due to $8.3 million of branch consolidation costs, compared to
$2.2 million in the first six months of 2019.
Outside services expense of $33.9 million for the first six months of 2020
increased $3.0 million, or 9.9%, from the first six months of 2019, primarily
due to increases in data processing costs.
FDIC insurance expense of $10.9 million for the first six months of 2020
decreased $1.0 million, or 8.7%, from the first six months of 2019, primarily
due to increased subordinated debt at FNBPA.
Bank shares and franchise taxes of $8.1 million for the first six months of 2020
increased $1.5 million, or 23.1%, from the first six months of 2019, primarily
due to the capital base increase and higher tax credits in 2019.
Other non-interest expense was $46.7 million and $38.1 million for the first six
months of 2020 and 2019, respectively. During the first six months of 2020, we
recorded $8.3 million more in loan-related expenses, including an impairment
charge of $4.1 million from a renewable energy investment tax credit
transaction. The related renewable energy investment tax credits were recognized
during the 2020 period as a benefit to income taxes. The first six months of
2020 also included $2.1 million in COVID-19-related expenses which included a
$1.0 million contribution to our foundation for relief assistance to our
communities, benefiting food banks and providing funding for essential medical
supplies. These items were partially offset by decreases in several other items
in other non-interest expense, including marketing and business development
expenses, which were somewhat impacted by the COVID-19 operating environment.
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The following table presents non-interest expense excluding significant, unusual
or outsized items for the six months ended June 30, 2020 and 2019:
TABLE 20
                                                                Six Months Ended
                                                                    June 30,                                          $           %
(dollars in thousands)                                       2020               2019             Change             Change
Total non-interest expense, as reported                  $ 370,824          $ 340,979          $ 29,845                8.8  %

Significant items and other unusual or outsized items:



  Branch consolidations                                     (8,262)            (2,783)           (5,479)
  COVID-19 expense                                          (3,951)                 -            (3,951)

Retirement vesting changes for certain 2020 stock grants - salaries and benefits

                              (5,579)                 -            (5,579)

Total non-interest expense, excluding significant items and other unusual or outsized items (1)

$ 353,032          $ 338,196          $ 14,836                4.4  %


(1) Non-GAAP

Income Taxes
The following table presents information regarding income tax expense and
certain tax rates:
TABLE 21
                                  Six Months Ended
                                      June 30,
(dollars in thousands)          2020           2019
Income tax expense           $ 26,880       $ 45,825
Effective tax rate               17.0  %        19.5  %
Statutory federal tax rate       21.0           21.0


Both periods' tax rates are lower than the federal statutory tax rates of 21%
due to tax benefits primarily resulting from tax-exempt income on investments
and loans, tax credits and income from BOLI. The lower effective tax rate in the
first six months of 2020 compared to 2019 was primarily due to lower pretax
income levels and renewable energy investment tax credits realized in the second
quarter of 2020.


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FINANCIAL CONDITION
The following table presents our condensed Consolidated Balance Sheets:
TABLE 22
                                                   June 30,          December 31,             $                  %
(dollars in millions)                                2020                2019               Change             Change
Assets
Cash and cash equivalents                         $    931          $        599          $   332                 55.4  %
Securities                                           6,351                 6,564             (213)                (3.2)
Loans held for sale                                    108                    51               57                111.8
Loans and leases, net                               25,797                23,093            2,704                 11.7
Goodwill and other intangibles                       2,323                 2,329               (6)                (0.3)
Other assets                                         2,211                 1,979              232                 11.7
Total Assets                                      $ 37,721          $     34,615          $ 3,106                  9.0  %
Liabilities and Stockholders' Equity
Deposits                                          $ 28,395          $     24,786          $ 3,609                 14.6  %
Borrowings                                           4,041                 4,556             (515)               (11.3)
Other liabilities                                      388                   390               (2)                (0.5)
Total liabilities                                   32,824                29,732            3,092                 10.4
Stockholders' equity                                 4,897                 4,883               14                  0.3

Total Liabilities and Stockholders' Equity $ 37,721 $ 34,615 $ 3,106

                  9.0  %



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

Following is a summary of loans and leases:



TABLE 23
                                      June 30,                                 $            %
                                        2020         December 31, 2019       Change       Change
(in millions)
Commercial real estate               $  9,305       $          8,960       $   345         3.9  %
Commercial and industrial               7,709                  5,308         2,401        45.2
Commercial leases                         497                    432            65        15.0
Other                                      40                     21            19        90.5
Total commercial loans and leases      17,551                 14,721         2,830        19.2
Direct installment                      1,947                  1,821           126         6.9
Residential mortgages                   3,520                  3,374           146         4.3
Indirect installment                    1,767                  1,922          (155)       (8.1)
Consumer lines of credit                1,377                  1,451           (74)       (5.1)
Total consumer loans                    8,611                  8,568            43         0.5
Total loans and leases               $ 26,162       $         23,289       $ 2,873        12.3  %


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Non-Performing Assets
Following is a summary of non-performing assets:
TABLE 24
                                         June 30,                                 $            %
(in millions)                              2020         December 31, 2019       Change      Change
Commercial real estate                  $     77       $            32         $  45        140.6  %
Commercial and industrial                     58                    29            29        100.0
Commercial leases                              3                     1             2        200.0
Other                                          1                     1             -            -
Total commercial loans and leases            139                    63            76        120.6
Direct installment                            10                    13            (3)       (23.1)
Residential mortgages                         13                    17            (4)       (23.5)
Indirect installment                           2                     3            (1)       (33.3)
Consumer lines of credit                       6                     7            (1)       (14.3)
Total consumer loans                          31                    40            (9)       (22.5)
Total non-performing loans and leases        170                   103            67         65.0
Other real estate owned                       21                    26            (5)       (19.2)
Non-performing assets                   $    191       $           129         $  62         48.1  %


Non-performing assets increased $62.0 million, from $128.6 million at
December 31, 2019 to $190.5 million at June 30, 2020. This reflects an increase
of $67.2 million in non-performing loans and leases and a decrease of $5.2
million in OREO. Prior to the adoption of CECL, acquired PCD loans were excluded
from our non-performing disclosures. PCD loans that meet the definition of
non-accrual are now included in the disclosures and resulted in a $54 million
increase in non-accrual loans in the first six months of 2020 compared to
December 31, 2019. The decrease in OREO was largely driven by the sale of
multiple pieces of real estate.
During the first quarter and into the second quarter of 2020, we've seen
significant macroeconomic changes due to the COVID-19 pandemic. Stay-at-home
orders and non-essential business closures in many of our markets temporarily
suspended the income generation of some of our borrowers. Government stimulus
and support programs generated through the CARES Act, such as the PPP, began to
assist our borrowers through the difficult financial disruptions. We offered
short-term modifications to our customers to assist them through this period.
The programs our customers have taken advantage of are:
•Existing customers who were current prior to the start of the pandemic, can
elect to defer loan principal and interest payments or interest payments for up
to 90 days without late fees but will continue to accrue interest. As of June
30, 2020, approximately 5,800 commercial customers have elected this option.
•Mortgage and consumer loan customers have up to a 90-day payment deferral
option, depending on their loan type. As of June 30, 2020, approximately 8,900
of these customers have elected this option.
•SBA disaster relief assistance, including the PPP.
The loan deferral programs can be extended for up to an additional 90 days on an
individual basis. Most of the deferrals for our borrowers have expired in July
2020. We are currently working with customers on deferral to determine if they
will resume normal payments or require an additional deferment.
As long as the borrower was not experiencing financial difficulties immediately
prior to COVID-19, short-term modifications, such as principal and interest
deferments, are not being included in non-performing loans or TDRs. These
modifications will be closely monitored for any future deterioration and
included in the tables as the probability of collection deteriorates. As of
June 30, 2020, we had $2.4 billion in loans that have been granted short-term
modifications as a result of financial disruptions associated with the COVID-19
pandemic.
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Troubled Debt Restructured Loans
Following is a summary of accruing and non-accrual TDRs, by class:

TABLE 25
                                             Non-
(in millions)                Accruing      Accrual       Total

June 30, 2020 Commercial real estate $ 5 $ 18 $ 23 Commercial and industrial 1

             4          5
Total commercial loans            6            22         28
Direct installment               24             5         29
Residential mortgages            26             6         32

Consumer lines of credit          7             1          8
Total consumer loans             57            12         69
Total TDRs                  $    63       $    34       $ 97

December 31, 2019 Commercial real estate $ 3 $ 5 $ 8 Commercial and industrial 1

             3          4
Total commercial loans            4             8         12
Direct installment               18             3         21
Residential mortgages            14             3         17

Consumer lines of credit          5             1          6
Total consumer loans             37             7         44
Total TDRs                  $    41       $    15       $ 56



Allowance for Credit Losses
On January 1, 2020, we adopted CECL which changed how we calculate the ACL as
more fully described in Note 1 to the Notes to Consolidated Financial Statements
(unaudited). This expected credit loss model takes into consideration the
expected losses over the life of the loan at the time the loan is originated
compared to the incurred loss model under the prior standard. At the time of the
adoption, we recorded a one-time cumulative-effect adjustment of $50.6 million
as a reduction to Retained Earnings. The ACL balance increased by $105 million
and included a "gross-up" to PCI loan balances and the ACL of $50 million.
Included in the CECL adoption impact was an increase of $10 million to our AULC.
The model used to calculate the ACL is dependent on the portfolio composition
and credit quality, as well as historical experience, current conditions and
forecasts of economic conditions and interest rates. Specifically, the following
considerations are incorporated into the ACL calculation:
•a third-party macroeconomic forecast scenario;
•a 24-month R&S forecast period for macroeconomic factors with a reversion to
the historical mean on a straight-line basis over a 12-month period; and
•the historical through the cycle mean calculated using an expanded period to
include a prior recessionary period.
COVID-19 Impacts
Starting in March 2020, the broader economy experienced a significant
deterioration in the macroeconomic environment driven by the COVID-19 pandemic
resulting in notable adverse changes to forecasted economic variables utilized
in our ACL modeling process. Based on these changes, we are utilizing a
third-party pandemic recessionary macroeconomic forecast scenario for ACL
modeling purposes. This scenario captures forecasted macroeconomic variables as
of June 11, 2020 to ensure our ACL calculation considers the most recently
available macroeconomic data in a quickly evolving environment at quarter-end.
Macroeconomic variables that we utilized from this scenario include but are not
limited to: (i) GDP, which reflects a contraction of up to 12.0% from the
beginning of 2020 with average annual increases not occurring until mid-2021,
(ii) the
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Dow Jones Industrial Average, which remains below peak levels throughout the R&S
period, (iii) unemployment, which averages 11% over the R&S period and (iv) the
Volatility Index, which remains elevated in 2020 before declining to
pre-pandemic levels in 2021.
The ACL of $365.0 million at June 30, 2020 increased $169.1 million, or 86.3%,
from December 31, 2019 and reflects the immediate Day 1 CECL adoption increase
to the ACL of $105.3 million on January 1, 2020. Our ending ACL coverage ratio
at June 30, 2020 was 1.40%. Excluding PPP loans that do not carry an ACL due to
a 100% government guarantee, the ACL to total loan and leases ratio equaled
1.54%, or an impact of 14 basis points. As of June 30, 2020, total loans in
deferral related to the COVID-19 pandemic totaled $2.4 billion. Over 98% of the
$2.4 billion of loans in deferment were current and in good standing at December
31, 2019. Total provision for credit losses for the six months ended June 30,
2020 was $78.0 million and included an estimated $55 million of incremental
provision due to COVID-19 related impacts on our ACL modeling results. Net
charge-offs were $14.2 million during the six months ended June 30, 2020,
compared to $16.6 million during the six months ended June 30, 2019, with the
decrease primarily due to lower commercial charge-offs. The ACL as a percentage
of non-performing loans for the total portfolio increased from 190% as of
December 31, 2019 to 215% as of June 30, 2020, as provision exceeded charge-offs
and included ACL reserve build, while the level of non-performing loans
increased.

Deposits


As a bank holding company, our primary source of funds is deposits. These
deposits are provided by businesses, municipalities and individuals located
within the markets served by our Community Banking subsidiary.
Following is a summary of deposits:
TABLE 26
                                        June 30,                                 $            %
(in millions)                             2020         December 31, 2019       Change       Change
Non-interest-bearing demand            $  8,650       $          6,384       $ 2,266        35.5  %
Interest-bearing demand                  12,510                 11,049         1,461        13.2
Savings                                   2,969                  2,625           344        13.1
Certificates and other time deposits      4,266                  4,728          (462)       (9.8)
Total deposits                         $ 28,395       $         24,786       $ 3,609        14.6  %


Total deposits increased $3.6 billion, or 14.6%, from December 31, 2019,
primarily as a result of growth in transaction deposits (including
non-interest-bearing demand, interest-bearing demand and savings) that reflects
the inflow of funds from the PPP and government stimulus activity, in addition
to organic growth in customer relationships. This growth was partially offset by
a managed decline of $462.0 million, or 9.8%, in time deposits. Generating
growth in relationship-based transaction deposits remains a key focus for us and
will help us manage to lower levels of short-term borrowings.

Capital Resources and Regulatory Matters
The access to, and cost of, funding for new business initiatives, the ability to
engage in expanded business activities, the ability to pay dividends and the
level and nature of regulatory oversight depend, in part, on our capital
position.
The assessment of capital adequacy depends on a number of factors such as
expected organic growth in the Consolidated Balance Sheet, asset quality,
liquidity, earnings performance, changing competitive conditions, regulatory
changes or actions, and economic forces. We seek to maintain a strong capital
base to support our growth and expansion activities, to provide stability to
current operations and to promote public confidence.
We have an effective shelf registration statement filed with the SEC. Pursuant
to this registration statement, we may, from time to time, issue and sell in one
or more offerings any combination of common stock, preferred stock, debt
securities, depositary shares, warrants, stock purchase contracts or units. On
February 14, 2019, we completed an offering of $120.0 million 4.950%
fixed-to-floating rate subordinated notes due in 2029 under this registration
statement. The subordinated notes are treated as tier 2 capital for regulatory
capital purposes. The net proceeds of the debt offering after deducting
underwriting discounts and commissions and offering expenses were $118.2
million. We used the net proceeds from the sale of the subordinated notes to
redeem higher-rate long-term borrowings and for general corporate purposes.
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On February 24, 2020, we completed an offering of $300.0 million of 2.20% fixed
rate senior notes due in 2023 under this registration statement. The net
proceeds of the debt offering after deducting underwriting discounts and
commissions and offering expenses were $297.9 million. We will use the net
proceeds from the sale of the notes for general corporate purposes, which may
include investments at the holding company level, capital to support the growth
of FNBPA, repurchase of our common shares and refinancing of outstanding
indebtedness.
On September 23, 2019, we announced that our Board of Directors approved a share
repurchase program for the repurchase of up to an aggregate of $150 million of
our common stock. The repurchases will be made from time to time on the open
market at prevailing market prices or in privately negotiated transactions. The
purchases will be funded from available working capital. The repurchase program
is expected to continue through the end of 2020, although we have temporarily
suspended repurchase activity due to COVID-19 and the uncertainty in
macroeconomic conditions. There is no guarantee as to the exact number of shares
that will be repurchased and we may discontinue purchases at any time.
Capital management is a continuous process, with capital plans and stress
testing for FNB and FNBPA updated at least annually. These capital plans include
assessing the adequacy of expected capital levels assuming various scenarios by
projecting capital needs for a forecast period of 2-3 years beyond the current
year. From time to time, we issue shares initially acquired by us as treasury
stock under our various benefit plans. We may issue additional preferred or
common stock in order to maintain our well-capitalized status.
FNB and FNBPA are subject to various regulatory capital requirements
administered by the federal banking agencies (see discussion under "Enhanced
Regulatory Capital Standards"). Quantitative measures established by regulators
to ensure capital adequacy require FNB and FNBPA to maintain minimum amounts and
ratios of total, tier 1 and common equity tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and minimum leverage ratio (as
defined). Failure to meet minimum capital requirements could lead to initiation
of certain mandatory, and possibly additional discretionary actions, by
regulators that, if undertaken, could have a direct material effect on our
Consolidated Financial Statements, dividends and future business and corporate
strategies. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, FNB and FNBPA must meet specific capital guidelines
that involve quantitative measures of assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices.
FNB's and FNBPA's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
At June 30, 2020, the capital levels of both FNB and FNBPA exceeded all
regulatory capital requirements and their regulatory capital ratios were above
the minimum levels required to be considered "well-capitalized" for regulatory
purposes.
In December 2018, the FRB and other U.S. banking agencies approved a final rule
to address the impact of CECL on regulatory capital by allowing BHCs and banks,
including FNB, the option to phase in the day-one impact of CECL over a
three-year period. In March 2020, the FRB and other U.S. banking agencies issued
an interim final rule that became effective on March 31, 2020, and that provides
BHCs and banks with an alternative option to temporarily delay the estimate of
the impact of CECL, relative to the incurred loss methodology for estimating the
ACL, on regulatory capital. We have elected this alternative option instead of
the one described in the December 2018 rule. As a result, under the interim
final rule, we will delay recognizing the estimated impact of CECL on regulatory
capital until after a two-year deferral period, which for us extends through
December 31, 2021. Beginning on January 1, 2022, we will be required to phase in
25% of the previously deferred estimated capital impact of CECL, with an
additional 25% to be phased in at the beginning of each subsequent year until
fully phased in by the first quarter of 2025. Under the interim final rule, the
estimated impact of CECL on regulatory capital that we will defer and later
phase in is calculated as the entire day-one impact at adoption plus 25% of the
subsequent change in the ACL during the two-year deferral period. During the
first and second quarter of 2020, the total deferred impact on Common Equity
Tier 1 capital related to our adoption of CECL was approximately $61.5 million
and $67.3 million, respectively.
In this unprecedented economic and uncertain environment, we frequently run
stress tests for a variety of economic situations, including severely adverse
scenarios that have economic conditions similar to the current conditions. Under
these scenarios, the results of these stress tests indicate that our regulatory
capital ratios would remain above the regulatory requirements and we would be
able to maintain appropriate liquidity levels, demonstrating our expected
ability to continue to support our constituencies under stressful financial
conditions.

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Following are the capital amounts and related ratios for FNB and FNBPA:
TABLE 27
                                                                                                 Well-Capitalized                                                   Minimum Capital
                                                Actual                                           Requirements (1)                                    Requirements plus Capital Conservation Buffer
(dollars in millions)                 Amount             Ratio             Amount             Ratio              Amount             Ratio
As of June 30, 2020
F.N.B. Corporation
Total capital                       $ 3,280               11.91  %       $ 2,754                10.00  %       $ 2,892               10.50  %
Tier 1 capital                        2,688                9.76            1,653                 6.00            2,341                8.50
Common equity tier 1                  2,582                9.37                 n/a                  n/a         1,928                7.00
Leverage                              2,688                7.78                 n/a                  n/a         1,382                4.00
Risk-weighted assets                 27,542
FNBPA
Total capital                         3,367               12.25  %         2,749                10.00  %         2,886               10.50  %
Tier 1 capital                        2,919               10.62            2,199                 8.00            2,337                8.50
Common equity tier 1                  2,839               10.33            1,787                 6.50            1,924                7.00
Leverage                              2,919                8.47            1,724                 5.00            1,379                4.00
Risk-weighted assets                 27,490
As of December 31, 2019
F.N.B. Corporation
Total capital                       $ 3,174               11.81  %       $ 2,687                10.00  %       $ 2,821               10.50  %
Tier 1 capital                        2,632                9.79            1,612                 6.00            2,284                8.50
Common equity tier 1                  2,525                9.40                 n/a                  n/a         1,881                7.00
Leverage                              2,632                8.20                 n/a                  n/a         1,283                4.00
Risk-weighted assets                 26,866
FNBPA
Total capital                         3,039               11.34  %         2,681                10.00  %         2,815               10.50  %
Tier 1 capital                        2,841               10.60            2,144                 8.00            2,279                8.50
Common equity tier 1                  2,761               10.30            1,742                 6.50            1,876                7.00
Leverage                              2,841                8.87            1,601                 5.00            1,281                4.00
Risk-weighted assets                 26,806

(1) Reflects the well-capitalized standard under Regulation Y for F.N.B. Corporation and the prompt corrective action framework for FNBPA.



In accordance with Basel III Capital Rules, the minimum capital requirements
plus capital conservation buffer, which are presented for each period above,
represent the minimum requirements needed to avoid limitations on distributions
of dividends and certain discretionary bonus payments.
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank
Act)
The Dodd-Frank Act broadly affects the financial services industry by
establishing a framework for systemic risk oversight, creating a resolution
authority for institutions determined to be systemically important, mandating
higher capital and liquidity requirements, requiring banks to pay increased fees
to regulatory agencies and containing numerous other provisions aimed at
strengthening the sound operation of the financial services sector that
significantly change the system of regulatory oversight as described in more
detail under Part I, Item 1, "Business - Government Supervision and Regulation"
included in our   2019 Annual Report on Form 10-K   as filed with the SEC on
February 27, 2020. Certain aspects of the Dodd-Frank Act remain subject to
regulatory rulemaking and amendments to such previously promulgated rules,
thereby making it difficult to anticipate with certainty the impact to us or the
financial services industry resulting from this rulemaking process.
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LIQUIDITY


Our goal in liquidity management is to satisfy the cash flow requirements of
customers and the operating cash needs of FNB with cost-effective funding. Our
Board of Directors has established an Asset/Liability Management Policy to guide
management in achieving and maintaining earnings performance consistent with
long-term goals, while maintaining acceptable levels of interest rate risk, a
"well-capitalized" Balance Sheet and adequate levels of liquidity. Our Board of
Directors has also established Liquidity and Contingency Funding Policies to
guide management in addressing the ability to identify, measure, monitor and
control both normal and stressed liquidity conditions. These policies designate
our Asset/Liability Committee as the body responsible for meeting these
objectives. The ALCO, which is comprised of members of executive management,
reviews liquidity on a continuous basis and approves significant changes in
strategies that affect Balance Sheet or cash flow positions. Liquidity is
centrally managed daily by our Treasury Department.
FNBPA generates liquidity from its normal business operations. Liquidity sources
from assets include payments from loans and investments, as well as the ability
to securitize, pledge or sell loans, investment securities and other assets.
Liquidity sources from liabilities are generated primarily through the banking
offices of FNBPA in the form of deposits and customer repurchase agreements. FNB
also has access to reliable and cost-effective wholesale sources of liquidity.
Short- and long-term funds are used to help fund normal business operations, and
unused credit availability can be utilized to serve as contingency funding if we
would be faced with a liquidity crisis.
The principal sources of the parent company's liquidity are its strong existing
cash resources plus dividends it receives from its subsidiaries. These dividends
may be impacted by the parent's or its subsidiaries' capital needs, statutory
laws and regulations, corporate policies, contractual restrictions,
profitability and other factors. In addition, through one of our subsidiaries,
we regularly issue subordinated notes, which are guaranteed by FNB. Management
has utilized various strategies to ensure sufficient cash on hand is available
to meet the parent's funding needs.  On February 24, 2020, we completed a senior
debt offering whereby we issued $300.0 million aggregate principal amount of
2.20% senior notes due in 2023. The proceeds from this transaction are for
general corporate purposes and were the primary factor resulting in an increase
in our Months of Cash on Hand (MCH) liquidity metric as shown below.
Starting in March 2020, management incorporated potential liquidity impacts
related to COVID-19 into our daily analysis. Management concluded that our cash
levels remain appropriate given the current market environment. Two metrics that
are used to gauge the adequacy of the parent company's cash position are the LCR
and MCH. The LCR is defined as the sum of cash on hand plus projected cash
inflows over the next 12 months divided by projected cash outflows over the next
12 months. The MCH is defined as the number of months of corporate expenses and
dividends that can be covered by the cash on hand.
The LCR and MCH ratios are presented in the following table:
TABLE 28
                             June 30,                                 Internal
                               2020          December 31, 2019          limit
Liquidity coverage ratio       2.6 times               2.2 times         > 1 time
Months of cash on hand       19.2 months             15.2 months      > 12 months


Our liquidity position has been positively impacted by our ability to generate
growth in relationship-based accounts. Organic growth in low-cost transaction
deposits was complemented by management's strategy of heightened deposit
gathering efforts focused on attracting new customer relationships and deepening
relationships with existing customers, in part through internal lead generation
efforts leveraging data analytics capabilities.  Total deposits were $28.4
billion at June 30, 2020, an increase of $3.6 billion, or 29.3% annualized, from
December 31, 2019. Total non-interest-bearing demand deposit accounts grew by
$2.3 billion, or 71.4% annualized, and interest-bearing demand increased by $1.5
billion, or 26.6% annualized. Savings account balances increased $344.1 million,
or 26.4% annualized. Time deposits declined $462.3 million, or 19.7% annualized.
As mentioned earlier, inflows from PPP and government stimulus checks were a
significant factor in the deposit growth during the second quarter.
FNBPA has significant unused wholesale credit availability sources that include
the availability to borrow from the FHLB, the FRB, correspondent bank lines,
access to brokered deposits, the PPPLF and multiple other channels. In addition
to credit availability, FNBPA also possesses salable unpledged government and
agency securities that could be utilized to meet funding needs. The ALCO minimum
guideline level for salable unpledged government and agency securities is 3.0%.
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The following table presents certain information relating to FNBPA's credit
availability and salable unpledged securities:
TABLE 29
                                                                      June 30,         December 31,
(dollars in millions)                                                   2020               2019
Unused wholesale credit availability                                $  15,694          $  11,154
Unused wholesale credit availability as a % of FNBPA assets              41.7  %            32.3  %
Salable unpledged government and agency securities                  $   

1,255 $ 1,788 Salable unpledged government and agency securities as a % of FNBPA assets

                                                                    3.3  %             5.2  %


The PPPLF accounted for $2.5 billion of the increase in availability since
December 31, 2019. This funding source terminates on September 30, 2020.
Another metric for measuring liquidity risk is the liquidity gap analysis. The
following liquidity gap analysis as of June 30, 2020 compares the difference
between our cash flows from existing earning assets and interest-bearing
liabilities over future time intervals. Management seeks to limit the size of
the liquidity gaps so that sources and uses of funds are reasonably matched in
the normal course of business. A reasonably matched position lays a better
foundation for dealing with additional funding needs during a potential
liquidity crisis. The twelve-month cumulative gap to total assets ratio improved
to 2.2% as of June 30, 2020 from (0.3)% as of December 31, 2019. Management
calculates this ratio at least quarterly and it is reviewed monthly by ALCO.
TABLE 30
                                     Within         2-3           4-6           7-12         Total
(dollars in millions)                1 Month       Months        Months        Months        1 Year
Assets
Loans                               $  758       $ 1,419       $ 1,828       $ 3,360       $ 7,365
Investments                            956           257           345           625         2,183
                                     1,714         1,676         2,173         3,985         9,548
Liabilities
Non-maturity deposits                  584         1,167           996         1,573         4,320
Time deposits                          215           497         1,003         1,321         3,036
Borrowings                             572           212           180           409         1,373
                                     1,371         1,876         2,179         3,303         8,729
Period Gap (Assets - Liabilities)   $  343       $  (200)      $    (6)      $   682       $   819
Cumulative Gap                      $  343       $   143       $   137       $   819
Cumulative Gap to Total Assets         0.9  %        0.4  %        0.4  %   

2.2 %




In addition, the ALCO regularly monitors various liquidity ratios and stress
scenarios of our liquidity position. The stress scenarios forecast that adequate
funding will be available even under severe conditions. Management believes we
have sufficient liquidity available to meet our normal operating and contingency
funding cash needs.
MARKET RISK
Market risk refers to potential losses arising predominately from changes in
interest rates, foreign exchange rates, equity prices and commodity prices. We
are primarily exposed to interest rate risk inherent in our lending and
deposit-taking activities as a financial intermediary. To succeed in this
capacity, we offer an extensive variety of financial products to meet the
diverse needs of our customers. These products sometimes contribute to interest
rate risk for us when product groups do not complement one another. For example,
depositors may want short-term deposits, while borrowers may desire long-term
loans.
Changes in market interest rates may result in changes in the fair value of our
financial instruments, cash flows and net interest income. Subject to its
ongoing oversight, the Board of Directors has given ALCO the responsibility for
market risk management, which involves devising policy guidelines, risk measures
and limits, and managing the amount of interest rate risk
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and its effect on net interest income and capital. We use derivative financial
instruments for interest rate risk management purposes and not for trading or
speculative purposes.
Interest rate risk is comprised of repricing risk, basis risk, yield curve risk
and options risk. Repricing risk arises from differences in the cash flow or
repricing between asset and liability portfolios. Basis risk arises when asset
and liability portfolios are related to different market rate indexes, which do
not always change by the same amount. Yield curve risk arises when asset and
liability portfolios are related to different maturities on a given yield curve;
when the yield curve changes shape, the risk position is altered. Options risk
arises from "embedded options" within asset and liability products as certain
borrowers have the option to prepay their loans, which may be with or without
penalty, when rates fall, while certain depositors can redeem their certificates
of deposit early, which may be with or without penalty, when rates rise.
We use an asset/liability model to measure our interest rate risk. Interest rate
risk measures we utilize include earnings simulation, EVE and gap analysis. Gap
analysis and EVE are static measures that do not incorporate assumptions
regarding future business. Gap analysis, while a helpful diagnostic tool,
displays cash flows for only a single rate environment. EVE's long-term horizon
helps identify changes in optionality and longer-term positions. However, EVE's
liquidation perspective does not translate into the earnings-based measures that
are the focus of managing and valuing a going concern. Net interest income
simulations explicitly measure the exposure to earnings from changes in market
rates of interest. In these simulations, our current financial position is
combined with assumptions regarding future business to calculate net interest
income under various hypothetical rate scenarios. The ALCO reviews earnings
simulations over multiple years under various interest rate scenarios on a
periodic basis. Reviewing these various measures provides us with a
comprehensive view of our interest rate risk profile, which provides the basis
for balance sheet management strategies.
The following repricing gap analysis as of June 30, 2020 compares the difference
between the amount of interest-earning assets and interest-bearing liabilities
subject to repricing over a period of time. Management utilizes the repricing
gap analysis as a diagnostic tool in managing net interest income and EVE risk
measures.
TABLE 31
                                     Within              2-3               4-6              7-12              Total
(dollars in millions)                1 Month           Months            Months            Months            1 Year
Assets
Loans                              $ 11,211          $  1,246          $  1,303          $  2,421          $ 16,181
Investments                             966               262               481               615             2,324
                                     12,177             1,508             1,784             3,036            18,505
Liabilities
Non-maturity deposits                 8,403                 -                 -                 -             8,403
Time deposits                           325               497             1,001             1,316             3,139
Borrowings                            1,915             1,274                60                19             3,268
                                     10,643             1,771             1,061             1,335            14,810
Off-balance sheet                       300             1,005               (50)              (50)            1,205
Period Gap (assets - liabilities +
off-balance sheet)                 $  1,834          $    742          $    673          $  1,651          $  4,900
Cumulative Gap                     $  1,834          $  2,576          $  3,249          $  4,900
Cumulative Gap to Assets                5.5  %            7.8  %            9.8  %           14.8  %


The twelve-month cumulative repricing gap to total assets was 14.8% and 7.0% as
of June 30, 2020 and December 31, 2019, respectively. The positive cumulative
gap positions indicate that we have a greater amount of repricing earning assets
than repricing interest-bearing liabilities over the subsequent twelve months.
If interest rates increase as modeled, net interest income will increase and,
conversely, if interest rates decrease as modeled, net interest income will
decrease. The change in the cumulative repricing gap at June 30, 2020 compared
to December 31, 2019, is primarily related to growth and changes in the mix of
loans, deposits and borrowings. Strong commercial and industrial loan growth, a
portion of which was swapped to adjustable rates and the increased cash flow
from the loan and investment portfolios, were partially offset by growth in and
repricing of certain interest-bearing non-maturity deposit balances and the
funding of FHLB advances. The funding of both fixed and adjustable borrowings
was opportunistically transacted to take advantage of the lower interest rate
environment and add liquidity to support loan growth.
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The allocation of non-maturity deposits and customer repurchase agreements to
the one-month maturity category above is based on the estimated sensitivity of
each product to changes in market rates. For example, if a product's rate is
estimated to increase by 50% as much as the market rates, then 50% of the
account balance was placed in this category.
Utilizing net interest income simulations, the following net interest income
metrics were calculated using rate shocks which move market rates in an
immediate and parallel fashion. The variance percentages represent the change
between the net interest income and EVE calculated under the particular rate
scenario versus the net interest income and EVE that was calculated assuming
market rates as of June 30, 2020. Using a static Balance Sheet structure, the
measures do not reflect all of management's potential counteractions.
The following table presents an analysis of the potential sensitivity of our net
interest income and EVE to changes in interest rates using rate shocks:
TABLE 32
                                           June 30,                              ALCO
                                             2020        December 31, 2019      Limits
Net interest income change (12 months):
+ 300 basis points                           15.4  %                 6.5  %       n/a
+ 200 basis points                           10.3                    4.6         (5.0) %
+ 100 basis points                            5.0                    2.5         (5.0)
- 100 basis points                            0.8                   (4.1)        (5.0)
Economic value of equity:
+ 300 basis points                            8.2                   (2.0)       (25.0)
+ 200 basis points                            6.8                   (0.5)       (15.0)
+ 100 basis points                            4.2                    0.2        (10.0)
- 100 basis points                           (8.2)                  (3.8)       (10.0)


We also model rate scenarios which move all rates gradually over twelve months
(Rate Ramps) and model scenarios that gradually change the shape of the yield
curve. Assuming a static Balance Sheet, a +100 basis point Rate Ramp increases
net interest income (12 months) by 2.5% at June 30, 2020 and 1.5% at
December 31, 2019. The corresponding metrics for a -100 basis point Rate Ramp
are 0.4% and (2.0)% at June 30, 2020 and December 31, 2019, respectively.

Our strategy is generally to manage to a neutral interest rate risk position.
Consistent with prior quarters, we desired to remain slightly asset-sensitive.
There are multiple factors that influence our interest rate risk position and
impact Net Interest Income. These include external factors such as the shape of
the yield curve and expectations regarding future interest rates, as well as
internal factors regarding product offerings, product mix and pricing of loans
and deposits.
Management utilizes various tactics to achieve our desired interest rate risk
(IRR) position. In response to the change in interest rates, management was
proactive in addressing our IRR position. As mentioned earlier, we were
successful in growing our transaction deposits which provides funding that is
less interest rate-sensitive than short-term time deposits and wholesale
borrowings. Also, we were able to lower rates on deposit products and shorten
the term of the certificates of deposit volumes. This continues to be an intense
focus of management. Further, during the first six months of 2020, management
took advantage of the interest rate environment to reduce borrowing costs. On
the lending side, we regularly sell long-term fixed-rate residential mortgages
to the secondary market and have been successful in the origination of consumer
and commercial loans with short-term repricing characteristics. In particular,
we have made use of interest rate swaps to commercial borrowers (commercial
swaps) to manage our IRR position as the commercial swaps effectively increase
adjustable-rate loans. Total variable and adjustable-rate loans were 53.4% and
59.1% of total loans as of June 30, 2020 and December 31, 2019, respectively,
with 78.9% of these loans, or 42.1% of total loans, tied to the Prime or
one-month LIBOR rates. As of June 30, 2020, the commercial swaps totaled $4.3
billion of notional principal, with $858.8 million in original notional swap
principal originated during the first six months of 2020. For additional
information regarding interest rate swaps, see Note 11 in this Report. The
investment portfolio is also used, in part, to manage our IRR position. These
purchases are predominately fixed rate in nature in which we seek to minimize
prepayment risk.
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We recognize that all asset/liability models have some inherent shortcomings.
Asset/liability models require certain assumptions to be made, such as
prepayment rates on interest-earning assets and repricing impact on non-maturity
deposits, which may differ from actual experience. These business assumptions
are based upon our experience, business plans, economic and market trends and
available industry data. While management believes that its methodology for
developing such assumptions is reasonable, there can be no assurance that
modeled results will be achieved. Furthermore, the metrics are based upon the
Balance Sheet structure as of the valuation date and do not reflect the planned
growth or management actions that could be taken.

RISK MANAGEMENT
As a financial institution, we take on a certain amount of risk in every
business decision, transaction and activity. Our Board of Directors and senior
management have identified seven major categories of risk: credit risk, market
risk, liquidity risk, reputational risk, operational risk, legal and compliance
risk and strategic risk. In its oversight role of our risk management function,
the Board of Directors focuses on the strategies, analyses and conclusions of
management relating to identifying, understanding and managing risks so as to
optimize total stockholder value, while balancing prudent business and safety
and soundness considerations.
The Board of Directors adopted a risk appetite statement that defines acceptable
risk levels and limits under which we seek to operate in order to optimize
returns. As such, the board monitors a series of KRIs, or Key Risk Indicators,
for various business lines, operational units, and risk categories, providing
insight into how our performance aligns with our stated risk appetite. These
results are reviewed periodically by the Board of Directors and senior
management to ensure adherence to our risk appetite statement, and where
appropriate, adjustments are made to applicable business strategies and tactics
where risks are approaching stated tolerances or for emerging risks.
We support our risk management process through a governance structure involving
our Board of Directors and senior management. The joint Risk Committee of our
Board of Directors and the FNBPA Board of Directors helps ensure that business
decisions are executed within appropriate risk tolerances. The Risk Committee
has oversight responsibilities with respect to the following:

•identification, measurement, assessment and monitoring of enterprise-wide risk;
•development of appropriate and meaningful risk metrics to use in connection
with the oversight of our businesses and strategies;
•review and assessment of our policies and practices to manage our credit,
market, liquidity, legal, regulatory and operating risk (including technology,
operational, compliance and fiduciary risks); and
•identification and implementation of risk management best practices.
The Risk Committee serves as the primary point of contact between our Board of
Directors and the Risk Management Council, which is the senior management level
committee responsible for risk management. Risk appetite is an integral element
of our business and capital planning processes through our Board Risk Committee
and Risk Management Council. We use our risk appetite processes to promote
appropriate alignment of risk, capital and performance tactics, while also
considering risk capacity and appetite constraints from both financial and
non-financial risks. Our top-down risk appetite process serves as a limit for
undue risk-taking for bottom-up planning from our various business functions.
Our Board Risk Committee, in collaboration with our Risk Management Council,
approves our risk appetite on an annual basis, or more frequently, as needed to
reflect changes in the risk, regulatory, economic and strategic plan
environments, with the goal of ensuring that our risk appetite remains
consistent with our strategic plans and business operations, regulatory
environment and our shareholders' expectations. Reports relating to our risk
appetite and strategic plans, and our ongoing monitoring thereof, are regularly
presented to our various management level risk oversight and planning committees
and periodically reported up through our Board Risk Committee.
As noted above, we have a Risk Management Council comprised of senior
management. The purpose of this committee is to provide regular oversight of
specific areas of risk with respect to the level of risk and risk management
structure. Management has also established an Operational Risk Committee that is
responsible for identifying, evaluating and monitoring operational risks across
FNB, evaluating and approving appropriate remediation efforts to address
identified operational risks and providing periodic reports concerning
operational risks to the Risk Management Council. The Risk Management Council
reports on a regular basis to the Risk Committee of our Board of Directors
regarding our enterprise-wide risk profile and other significant risk management
issues. Our Chief Risk Officer is responsible for the design and implementation
of our enterprise-wide risk management strategy and framework through the
multiple second line of defense areas, including the following departments:
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Enterprise-Wide Risk Management, Fraud Risk, Loan Review, Model Risk Management,
Third-Party Risk Management, Anti-Money Laundering and Bank Secrecy Act,
Community Reinvestment Act, Appraisal Review, Compliance and Information and
Cyber Security. All second line of defense departments report to the Chief Risk
Officer to ensure the coordinated and consistent implementation of risk
management initiatives and strategies on a day-to-day basis. Our Enterprise-Wide
Risk Management Department conducts risk and control assessments across all of
our business and operational areas to ensure the appropriate risk
identification, risk management and reporting of risks enterprise-wide. The
Fraud Risk Department monitors for internal and external fraud risk across all
of our business and operational units. The Loan Review Department conducts
independent testing of our loan risk ratings to ensure their accuracy, which is
instrumental to calculating our ACL. Our Model Risk Management Department
oversees validation and testing of all models used in managing risk across our
company. Our Third-Party Risk Management Department ensures effective risk
management and oversight of third-party relationships throughout the vendor life
cycle. The Anti-Money Laundering and Bank Secrecy Act Department monitors for
compliance with money laundering risk and associated regulatory compliance
requirements. Our Community Reinvestment Department monitors for compliance with
the requirements of the Community Reinvestment Act. The Appraisal Review
Department facilitates independent ordering and review of real estate appraisals
obtained for determining the value of real estate pledged as collateral for
loans to customers. Our Compliance Department is responsible for developing
policies and procedures and monitoring compliance with applicable laws and
regulations which govern our business operations. Our Information and Cyber
Security Department is responsible for maintaining a risk assessment of our
information and cyber security risks and ensuring appropriate controls are in
place to manage and control such risks, through the use of the National
Institute of Standards and Technology framework for improving critical
infrastructure by measuring and evaluating the effectiveness of information and
cyber security controls. As discussed in more detail under the COVID-19 section
of this Report, we have in place various business and emergency continuity plans
to respond to different crisis and circumstances which include rapid deployment
of our Crisis Management Team, Incident Management Team and Business Continuity
Coordinators to activate the our plans for various type of emergency
circumstance. Further, our audit function performs an independent assessment of
our internal controls environment and plays an integral role in testing the
operation of the internal controls systems and reporting findings to management
and our Audit Committee. Each of the Risk, Audit and Credit Risk and CRA
Committees of our Board of Directors regularly report on risk-related matters to
the full Board of Directors. In addition, both the Risk Committee of our Board
of Directors and our Risk Management Council regularly assess our
enterprise-wide risk profile and provide guidance on actions needed to address
key and emerging risk issues.
The Board of Directors believes that our enterprise-wide risk management process
is effective and enables the Board of Directors to:

•assess the quality of the information they receive; •understand the businesses, investments and financial, accounting, legal, regulatory and strategic considerations and the risks that FNB faces; •oversee and assess how senior management evaluates risk; and •assess appropriately the quality of our enterprise-wide risk management process.


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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE INDICATORS TO
GAAP
Reconciliations of non-GAAP operating measures and key performance indicators
discussed in this Report to the most directly comparable GAAP financial measures
are included in the following tables.
TABLE 33
Operating Net Income Available to Common Stockholders
                                                             Three Months Ended                                    Six Months Ended
                                                                  June 30,                                             June 30,
(in thousands)                                             2020              2019               2020                  2019
Net income available to common stockholders             $ 81,600          $ 

93,177 $ 127,007 $ 185,294



COVID-19 expense                                           1,989                 -              3,951                        -
Tax benefit of COVID-19 expense                             (418)                -               (830)                       -

Branch consolidation costs                                     -             2,871              8,262                    4,505
Tax benefit of branch consolidation costs                      -              (603)            (1,735)                    (946)

Operating net income available to common stockholders (non-GAAP)

$ 83,171          $ 

95,445 $ 136,655 $ 188,853




The table above shows how operating net income available to common stockholders
(non-GAAP) is derived from amounts reported in our financial statements. We
believe certain charges, such as branch consolidation costs and COVID-19
expense, are not organic costs to run our operations and facilities. The branch
consolidation charges principally represent expenses to satisfy contractual
obligations of the closed branches without any useful ongoing benefit to us.
These costs are specific to each individual transaction, and may vary
significantly based on the size and complexity of the transaction. The COVID-19
expenses represent special Company initiatives to support our front-line
employees and the communities we serve during an unprecedented time of a
pandemic.
TABLE 34
Operating Earnings per Diluted Common Share
                                                                  Three Months Ended                             Six Months Ended
                                                                       June 30,                                      June 30,
                                                                 2020              2019            2020             2019
Net income per diluted common share                          $    0.25

$ 0.29 $ 0.39 $ 0.57



COVID-19 expense                                                  0.01                -            0.01                 -
Tax benefit of COVID-19 expense                                      -                -               -                 -

Branch consolidation costs                                           -             0.01            0.03              0.01
Tax benefit of branch consolidation costs                            -                -           (0.01)                -

Operating earnings per diluted common share (non-GAAP) $ 0.26

$ 0.29 $ 0.42 $ 0.58


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TABLE 35
Return on Average Tangible Common Equity
                                                          Three Months Ended                                         Six Months Ended
                                                               June 30,                                                  June 30,
(dollars in thousands)                                 2020                 2019                 2020                   2019
Net income available to common stockholders
(annualized)                                      $   328,193          $   

373,733 $ 255,409 $ 373,660 Amortization of intangibles, net of tax (annualized)

                                           10,623               11,024               10,615                    11,085
Tangible net income available to common
stockholders (annualized) (non-GAAP)              $   338,816          $   

384,757 $ 266,024 $ 384,745 Average total stockholders' equity

$ 4,879,659          $ 

4,720,725 $ 4,877,063 $ 4,686,673 Less: Average preferred stockholders' equity (106,882)

            (106,882)            (106,882)                 (106,882)
Less: Average intangible assets (1)                (2,324,696)          (2,329,625)          (2,326,299)               (2,330,619)

Average tangible common equity (non-GAAP) $ 2,448,081 $ 2,284,218 $ 2,443,882 $ 2,249,172 Return on average tangible common equity (non-GAAP)

                                              13.84  %             16.84  %             10.89  %                  17.11  %


(1) Excludes loan servicing rights.
TABLE 36
Return on Average Tangible Assets
                                                          Three Months Ended                                           Six Months Ended
                                                               June 30,                                                    June 30,
(dollars in thousands)                                2020                  2019                  2020                    2019
Net income (annualized)                          $    336,278          $   

381,796 $ 263,494 $ 381,765 Amortization of intangibles, net of tax (annualized)

                                           10,623                11,024                10,615                    11,085

Tangible net income (annualized) (non-GAAP) $ 346,901 $ 392,820 $ 274,109 $ 392,850 Average total assets

$ 36,819,678          $ 

33,731,116 $ 35,737,456 $ 33,571,250 Less: Average intangible assets (1)

                (2,324,696)           (2,329,625)           (2,326,299)               (2,330,619)
Average tangible assets (non-GAAP)               $ 34,494,982          $ 

31,401,491 $ 33,411,157 $ 31,240,631 Return on average tangible assets (non-GAAP)

             1.01  %               1.25  %               0.82  %                   1.26  %


(1) Excludes loan servicing rights.



TABLE 37
Tangible Book Value per Common Share
                                                          Three Months 

Ended

June 30,
(dollars in thousands, except per share data)          2020               

2019


Total stockholders' equity                        $  4,896,827       $  

4,753,189


Less: Preferred stockholders' equity                  (106,882)          

(106,882)


Less: Intangible assets (1)                         (2,323,028)        

(2,336,071)


Tangible common equity (non-GAAP)                 $  2,466,917       $  

2,310,236


Ending common shares outstanding                   323,205,925        

324,807,131

Tangible book value per common share (non-GAAP) $ 7.63 $

7.11

(1) Excludes loan servicing rights.


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TABLE 38
Tangible equity to tangible assets (period-end)
                                                                              Three Months Ended
                                                                                   June 30,
(dollars in thousands)                                                    2020                  2019
Total stockholders' equity                                           $  4,896,827          $  4,753,189
Less:  Intangible assets (1)                                           (2,323,028)           (2,336,071)
Tangible equity (non-GAAP)                                           $  2,573,799          $  2,417,118
Total assets                                                         $ 37,720,827          $ 33,903,440
Less:  Intangible assets (1)                                           (2,323,028)           (2,336,071)
Tangible assets (non-GAAP)                                           $ 35,397,799          $ 31,567,369
Tangible equity / tangible assets (period-end) (non-GAAP)                    7.27  %               7.66  %


(1) Excludes loan servicing rights.
TABLE 39
Tangible common equity / tangible assets (period-end)
                                                                               Three Months Ended
                                                                                    June 30,
(dollars in thousands)                                                     2020                  2019
Total stockholders' equity                                            $  4,896,827          $  4,753,189
Less:  Preferred stockholders' equity                                     (106,882)             (106,882)
Less:  Intangible assets (1)                                            (2,323,028)           (2,336,071)
Tangible common equity (non-GAAP)                                     $  2,466,917          $  2,310,236
Total assets                                                          $ 37,720,827          $ 33,903,440
Less:  Intangible assets (1)                                            (2,323,028)           (2,336,071)
Tangible assets (non-GAAP)                                            $ 35,397,799          $ 31,567,369
Tangible common equity / tangible assets (period-end) (non-GAAP)              6.97  %               7.32  %


(1) Excludes loan servicing rights.
TABLE 40
Allowance for credit losses / loans and leases, excluding PPP loans (period-end)
                                                                              Three Months Ended
                                                                                   June 30,
(dollars in thousands)                                                               2020
ACL - loans                                                                  $          364,993
Loans and leases                                                             $       26,161,982
Less:  PPP loans outstanding                                                

(2,480,772)


Loans and leases, excluding PPP loans outstanding (non-GAAP)                 $       23,681,210
ACL loans / loans and leases, excluding PPP loans (non-GAAP)                               1.54  %













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Key Performance Indicators
TABLE 41
Pre-provision net revenue to average tangible common equity
                                                       Three Months Ended                                         Six Months Ended
                                                            June 30,                                                  June 30,
(dollars in thousands)                              2020                 2019                 2020                   2019
Net interest income                            $   227,961          $  

230,407 $ 460,592 $ 461,000 Non-interest income

                                 77,628               74,840              146,154                   140,225
Less: Non-interest expense                        (175,932)            (175,237)            (370,824)                 (340,979)

Pre-provision net revenue (as reported) $ 129,657 $ 130,010 $ 235,922 $ 260,246 Pre-provision net revenue (as reported) (annualized)

$   521,478          $   521,469          $   474,436          $        524,805
Adjustments:
Add: Branch consolidation costs (non-interest
income)                                        $         -          $       

546 $ - $ 1,722



Add: COVID-19 expense (non-interest expense)         1,989                    -                3,951                         -

Add: Branch consolidation costs (non-interest
expense)                                                 -                2,325                8,262                     2,783
Add: Tax credit-related impairment project
(non-interest expense)                               4,101                    -                4,101                         -
Pre-provision net revenue (operating)
(non-GAAP)                                     $   135,747          $   132,881          $   252,236          $        264,751
Pre-provision net revenue (operating)
(annualized)
(non-GAAP)                                     $   545,972          $   

532,984 $ 507,244 $ 533,889 Average total shareholders' equity

$ 4,879,659          $ 

4,720,725 $ 4,877,063 $ 4,686,673 Less: Average preferred shareholders' equity (106,882)

            (106,882)            (106,882)                 (106,882)
Less: Average intangible assets (1)             (2,324,696)          (2,329,625)          (2,326,299)               (2,330,619)

Average tangible common equity (non-GAAP) $ 2,448,081 $ 2,284,218 $ 2,443,882 $ 2,249,172 Pre-provision net revenue (reported) / average tangible common equity (non-GAAP)

                    21.30  %             22.83  %             19.41  %                  23.33  %
Pre-provision net revenue (operating) /
average tangible common equity (non-GAAP)            22.30  %             23.33  %             20.76  %                  23.74  %

(1) Excludes loan servicing rights.


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TABLE 42
Efficiency ratio
                                                             Three Months Ended                                     Six Months Ended
                                                                  June 30,                                              June 30,
(dollars in thousands)                                     2020               2019               2020                  2019
Non-interest expense                                   $ 175,932          $

175,237 $ 370,824 $ 340,979 Less: Amortization of intangibles

                         (3,343)            (3,479)            (6,682)                  (6,958)
Less: OREO expense                                          (639)              (954)            (2,286)                  (2,023)

Less: COVID-19 expense                                    (1,989)                 -             (3,951)                       -

Less: Branch consolidation costs                               -             (2,325)            (8,262)                  (2,783)
Less: Tax credit-related project impairment               (4,101)                 -             (4,101)                       -
Adjusted non-interest expense                          $ 165,860          $ 168,479          $ 345,542          $       329,215
Net interest income                                    $ 227,961          $ 230,407          $ 460,592          $       461,000
Taxable equivalent adjustment                              3,151              3,540              6,452                    7,119
Non-interest income                                       77,628             74,840            146,154                  140,225
Less: Net securities gains                                   (97)                 -               (150)                       -

Add: Branch consolidation costs                                -                546                  -                    1,722

Adjusted net interest income (FTE) + non-interest
income                                                 $ 308,643          $ 

309,333 $ 613,048 $ 610,066 Efficiency ratio (FTE) (non-GAAP)

                          53.74  %           54.47  %           56.36  %                 53.96  %

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