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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate risk, primarily by managing the amount, source, and duration of our assets and liabilities, and through the use of derivative instruments. Derivative instruments are used to reduce the effects that changes in interest rates may have on net income and cash flows. We also use derivative instruments to facilitate transactions on behalf of our customers. All derivatives are carried on the Consolidated Balance Sheets at fair value and do not take into account the effects of master netting arrangements we have with other financial institutions. Credit risk is included in the determination of the estimated fair value of derivatives. Derivative assets are reported in the Consolidated Balance Sheets in other assets while derivative liabilities are reported in other liabilities. Cash flow activity relating to derivative assets and derivative liabilities is reported in the other, net line in operating activities on the Consolidated Statements of Cash Flows. Changes in fair value are recognized in earnings except for certain changes related to derivative instruments designated as part of a cash flow hedging relationship, which are recognized in other comprehensive income. The following table presents notional amounts and gross fair values of our derivative assets and derivative liabilities which are not offset in the Consolidated Balance Sheets: TABLE 10.1
| September 30, 2025 |  | December 31, 2024
| Notional |  | Fair Value |  | Notional |  | Fair Value
(in millions) | Amount |  | Assets |  | Liabilities |  | Amount |  | Assets |  | Liabilities
Gross Derivatives |  |  |  |  |  |  |  |  |  |  |
Subject to master netting arrangements: |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts – designated | $ | 1,900 |  |  | $ | 14 |  |  | $ | — |  |  | $ | 2,400 |  |  | $ | — |  |  | $ | 6 |
Interest rate swaps – not designated | 6,014 |  |  | 49 |  |  | 56 |  |  | 5,901 |  |  | 96 |  |  | 16 |
Total subject to master netting arrangements | 7,914 |  |  | 63 |  |  | 56 |  |  | 8,301 |  |  | 96 |  |  | 22 |
Not subject to master netting arrangements: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps – not designated | 6,014 |  |  | 57 |  |  | 161 |  |  | 5,901 |  |  | 16 |  |  | 287 |
Interest rate lock commitments – not designated | 333 |  |  | 6 |  |  | — |  |  | 417 |  |  | 1 |  |  | 4 |
Forward delivery commitments – not designated | 407 |  |  | 1 |  |  | 1 |  |  | 486 |  |  | 4 |  |  | — |
Credit risk contracts – not designated | 820 |  |  | — |  |  | — |  |  | 819 |  |  | — |  |  | — |
Total not subject to master netting arrangements | 7,574 |  |  | 64 |  |  | 162 |  |  | 7,623 |  |  | 21 |  |  | 291 |
Total | $ | 15,488 |  |  | $ | 127 |  |  | $ | 218 |  |  | $ | 15,924 |  |  | $ | 117 |  |  | $ | 313 |
Certain derivative exchanges have enacted a rule change which in effect results in the legal characterization of variation margin payments for certain derivative contracts as settlement of the derivatives mark-to-market exposure and not collateral. Accordingly, we have changed our reporting of certain derivatives to record variation margin on trades cleared through these exchanges as settled. The daily settlement of the derivative exposure does not change or reset the contractual terms of the instrument. Derivatives Designated as Hedging Instruments under GAAP Interest Rate Contracts. We entered into interest rate derivative agreements to modify the interest rate characteristics of certain commercial loans and certain of our FHLB advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes. These agreements are designated as cash flow hedges, in the form of interest rate swaps and collars, hedging the exposure to variability in expected future cash flows. The derivative’s gain or loss, including any ineffectiveness, is initially reported as a component of other comprehensive income and subsequently reclassified into earnings in the same line item associated with the forecasted transaction when the forecasted transaction affects earnings. The following table shows amounts reclassified from AOCI: TABLE 10.2
| Amount of Gain (Loss) Recognized in OCI on Derivatives |  | Location of Gain (Loss) Reclassified from AOCI into Income |  | Amount of Gain (Loss) Reclassified from AOCI into Income
| Nine Months Ended September 30, |  |  |  | Nine Months Ended September 30,
(in millions) | 2025 |  | 2024 |  |  |  | 2025 |  | 2024
Derivatives in cash flow hedging relationships: |  |  |  |  |  |  |  |  |
Interest rate contracts | $ | 14 |  |  | $ | (7) |  |  | Interest income (expense) |  | $ | (19) |  |  | $ | (30) |
The following table represents gains (losses) recognized in the Consolidated Statements of Income on cash flow hedging relationships: TABLE 10.3
| Nine months ended September 30,
| 2025 |  | 2024
(in millions) | Interest Income - Loans and Leases |  | Interest Expense - Short-Term Borrowings |  | Interest Income - Loans and Leases |  | Interest Expense - Short-Term Borrowings
Total amounts of income and expense line items presented in the Consolidated Statements of Income (the effects of cash flow hedges are included in these line items) | $ | 1,492 |  |  | $ | 52 |  |  | $ | 1,491 |  |  | $ | 90 |
The effects of cash flow hedging: |  |  |  |  |  |  |
Gain (loss) on cash flow hedging relationships: |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into net income | (19) |  |  | — |  |  | (37) |  |  | 7 |
As of September 30, 2025, the maximum length of time over which forecasted interest cash flows are hedged is 4.3 years. In the twelve months that follow September 30, 2025, we expect to reclassify from the amount currently reported in AOCI net derivative gains of $3.2 million ($2.5 million net of tax), in association with interest on the hedged loans. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to September 30, 2025. There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness related to these cash flow hedges. Also, during the nine months ended September 30, 2025 and 2024, there were no gains or losses from cash flow hedge derivatives reclassified to earnings because it became probable that the original forecasted transactions would not occur. Derivatives Not Designated as Hedging Instruments under GAAP A description of interest rate swaps, interest rate lock commitments, forward delivery commitments and credit risk contracts can be found in Note 15, "Derivative Instruments and Hedging Activities" in the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025. Interest rate swap agreements with loan customers and with the offsetting counterparties are reported at fair value in other assets and other liabilities on the Consolidated Balance Sheets with any resulting gain or loss recorded in current period earnings as other income or other expense. Risk participation agreements sold with notional amounts totaling $623 million as of September 30, 2025 have remaining terms ranging from three months to 16 years. Under these agreements, our maximum exposure assuming a customer defaults on their obligation to perform under certain derivative swap contracts with third parties would be $0 at both September 30, 2025 and December 31, 2024. The fair values of risk participation agreements purchased and sold were $0.2 million and $0.1 million, respectively, at September 30, 2025, and $0.1 million and $0, respectively, at December 31, 2024. The following table presents the effect of certain derivative financial instruments on the Consolidated Statements of Income: TABLE 10.4
|  |  | Nine Months Ended September 30,
(in millions) | Consolidated Statements of Income Location |  | 2025 |  | 2024
Interest rate swaps | Non-interest income - other |  | $ | — |  |  | $ | — |
Interest rate lock commitments | Mortgage banking operations |  | — |  |  | — |
Forward delivery contracts | Mortgage banking operations |  | (3) |  |  | 3 |
Credit risk contracts | Non-interest income - other |  | — |  |  | — |
Counterparty Credit Risk We are party to master netting arrangements with most of our swap derivative dealer counterparties. Collateral, usually marketable securities and/or cash, is exchanged between FNB and our counterparties, and is generally subject to thresholds and transfer minimums. For swap transactions that require central clearing, we post cash and securities to our clearing agency. Collateral positions are settled or valued daily, and adjustments to amounts received and pledged by us are made as appropriate to maintain proper collateralization for these transactions. Certain master netting agreements contain provisions that, if violated, could cause the counterparties to request immediate settlement or demand full collateralization under the derivative instrument. If we had breached our agreements with our derivative counterparties we would be required to settle our obligations under the agreements at the termination value and would be required to pay $0.9 million as of September 30, 2025 and $0.2 million as of December 31, 2024, in excess of amounts previously posted as collateral with the respective counterparty. The following table presents a reconciliation of the net amounts of derivative assets and derivative liabilities presented in the Consolidated Balance Sheets to the net amounts that would result in the event of offset: Swap derivative transactions with customers are generally secured by rights to non-financial collateral, such as real and personal property, which is not shown in the table below. TABLE 10.5
|  |  |  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |
(in millions) | Gross Amount Recognized |  | Gross Amount Offset in the Consolidated Balance Sheets |  | Net Amount Presented in the Consolidated Balance Sheets |  | Financial Instruments Available for Offset |  | Collateral Received/Pledged |  | Net Amount
September 30, 2025 |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  |  |  |  |  |  |  |  |  |  |
Subject to master netting arrangement | $ | 63 |  |  | $ | — |  |  | $ | 63 |  |  | $ | 43 |  |  | $ | 20 |  |  | $ | — |
Not subject to master netting arrangement | 57 |  |  | — |  |  | 57 |  |  |  |  |  |  |
Total | $ | 120 |  |  | $ | — |  |  | $ | 120 |  |  |  |  |  |  |
Derivative Liabilities |  |  |  |  |  |  |  |  |  |  |
Subject to master netting arrangement | $ | 56 |  |  | $ | — |  |  | $ | 56 |  |  | $ | 43 |  |  | $ | 12 |  |  | $ | 1 |
Not subject to master netting arrangement | 161 |  |  | — |  |  | 161 |  |  |  |  |  |  |
Total | $ | 217 |  |  | $ | — |  |  | $ | 217 |  |  |  |  |  |  |
December 31, 2024 |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  |  |  |  |  |  |  |  |  |  |
Subject to master netting arrangement | $ | 96 |  |  | $ | — |  |  | $ | 96 |  |  | $ | 16 |  |  | $ | 80 |  |  | $ | — |
Not subject to master netting arrangement | 16 |  |  | — |  |  | 16 |  |  |  |  |  |  |
Total | $ | 112 |  |  | $ | — |  |  | $ | 112 |  |  |  |  |  |  |
Derivative Liabilities |  |  |  |  |  |  |  |  |  |  |
Subject to master netting arrangement | $ | 22 |  |  | $ | — |  |  | $ | 22 |  |  | $ | 16 |  |  | $ | 6 |  |  | $ | — |
Not subject to master netting arrangement | 287 |  |  | — |  |  | 287 |  |  |  |  |  |  |
Total | $ | 309 |  |  | $ | — |  |  | $ | 309 |  |  |  |  |  |  |

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