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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 20212022
Commission File Number: 1-10853
_____________________________
TRUIST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
_____________________________________________ | | | | | | | | | | | |
North Carolina | 56-0939887 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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214 North Tryon Street | | |
Charlotte, | North Carolina | 28202 |
(Address of principal executive offices) | (Zip Code) |
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Registrant’s telephone number, including area code: | (336) | 733-2000 |
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Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, $5 par value | | TFC | | New York Stock Exchange |
Depositary Shares each representing 1/4,000th interest in a share of Series I Perpetual Preferred Stock | | TFC.PI | | New York Stock Exchange |
5.853% Fixed-to-Floating Rate Normal Preferred Purchase Securities each representing 1/100th interest in a share of Series J Perpetual Preferred Stock | | TFC.PJ | | New York Stock Exchange |
Depositary Shares each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock | | TFC.PO | | New York Stock Exchange |
Depositary Shares each representing 1/1,000th interest in a share of Series R Non-Cumulative Perpetual Preferred Stock | | TFC.PR | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At September 30, 2021, 1,334,891,5262022, 1,326,766,288 shares of the registrant’s common stock, $5 par value, were outstanding.
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TABLE OF CONTENTS | |
TRUIST FINANCIAL CORPORATION | |
FORM 10-Q | |
September 30, 20212022 | |
| | | Page No. | |
PART I - Financial Information | |
| | Glossary of Defined Terms | | |
| | Forward-Looking Statements | | |
Item 1. | | Financial Statements | | |
| | Consolidated Balance Sheets (Unaudited) | | |
| | Consolidated Statements of Income (Unaudited) | | |
| | Consolidated Statements of Comprehensive Income (Unaudited) | | |
| | Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) | | |
| | Consolidated Statements of Cash Flows (Unaudited) | | |
| | Notes to Consolidated Financial Statements (Unaudited) | | |
| | Note 1. Basis of Presentation | | |
| | Note 2. Business Combinations | | |
| | Note 3. Securities Financing Activities | | |
| | Note 4. Investment Securities | | |
| | Note 5. Loans and ACL | | |
| | Note 6. Goodwill and Other Intangible Assets | | |
| | Note 7. Loan Servicing | | |
| | Note 8. Other Assets and Liabilities | | |
| | Note 9. Borrowings | | |
| | Note 10. Shareholders’ Equity | | |
| | Note 11. AOCI | | |
| | Note 12. Income Taxes | | |
| | Note 13. Benefit Plans | | |
| | Note 14. Commitments and Contingencies | | |
| | Note 15. Fair Value Disclosures | | |
| | Note 16. Derivative Financial Instruments | | |
| | Note 17. Computation of EPS | | |
| | Note 18. Operating Segments | | |
Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | |
| | Regulatory Considerations | | |
| | Executive Overview | | |
| | Analysis of Results of Operations | | |
| | Analysis of Financial Condition | | |
| | Risk Management | | |
| | Liquidity | | |
| | Capital | | |
| | Share Repurchase activity | | |
| | Critical Accounting Policies | | |
Item 3. | | Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management in MD&A) | | |
Item 4. | | Controls and Procedures | | |
PART II - Other Information | |
Item 1. | | Legal Proceedings | | |
Item 1A. | | Risk Factors | | |
Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | |
Item 3. | | Defaults Upon Senior Securities - (none) | | |
Item 4. | | Mine Safety Disclosures - (not applicable) | | |
Item 5. | | Other Information - (none to be reported) | | |
Item 6. | | Exhibits | | |
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Glossary of Defined Terms
The following terms may be used throughout this report, including the consolidated financial statements and related notes. | | | | | |
Term | Definition |
ACL | Allowance for credit losses |
AFS | Available-for-sale |
Agency MBS | Mortgage-backed securities issued by a U.S. government agency or GSE |
ALLL | Allowance for loan and lease losses |
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ARRC | Alternative Reference Rates Committee of the FRB and the Federal Reserve Bank of New York |
AOCI | Accumulated other comprehensive income (loss) |
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BB&T | BB&T Corporation and subsidiaries (changed to “Truist Financial Corporation” effective with the Merger) |
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Board | Truist’s Board of Directors |
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C&CB | Corporate and Commercial Banking, an operating segment |
CARES Act | The Coronavirus Aid, Relief, and Economic Security Act |
CB&W | Consumer Banking and Wealth, an operating segment |
CCAR | Comprehensive Capital Analysis and Review |
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CDI | Core deposit intangible |
CECL | Current expected credit loss model |
CEO | Chief Executive Officer |
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CFO | Chief Financial Officer |
CET1 | Common equity tier 1 |
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CFPB | Consumer Financial Protection Bureau |
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Company | Truist Financial Corporation and its subsidiaries (interchangeable with “Truist” below), formerly BB&T Corporation |
COVID-19 | Coronavirus disease 2019 |
CRA | Community Reinvestment Act of 1977 |
CRE | Commercial real estate |
CRO | Chief Risk Officer |
CVA | Credit valuation adjustment |
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DIF | Deposit Insurance Fund administered by the FDIC |
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DTA | Deferred tax asset |
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EPS | Earnings per common share |
EVEESG | Economic value of equityEnvironmental, Social, and Governance |
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Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
FDIC | Federal Deposit Insurance Corporation |
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FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation |
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FNMA | Federal National Mortgage Association |
FRB | Board of Governors of the Federal Reserve System |
FTE | Full-time equivalent employee |
GAAP | Accounting principles generally accepted in the United States of America |
GDP | Gross Domestic Product |
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Grandbridge | Grandbridge Real Estate Capital, LLC |
GSE | U.S. government-sponsored enterprise |
HFI | Held for investment |
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HQLA | High-quality liquid assets |
HTM | |
| Held-to-maturity |
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IH | Insurance Holdings, an operating segment |
IPV | Independent price verification |
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ISDA | International Swaps and Derivatives Association, Inc. |
LCR | Liquidity Coverage Ratio |
LHFS | Loans held for sale |
LIBOR | London Interbank Offered Rate |
LOCOM | Lower of cost or market |
Market Risk Rule | Market risk capital requirements issued jointly by the OCC, U.S. Treasury, FRB, and FDIC |
MBS | Mortgage-backed securities |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Merger | Merger of BB&T and SunTrust effective December 6, 2019 |
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MRM | Model Risk Management |
MSR | Mortgage servicing right |
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NA | Not applicable |
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NIM | Net interest margin, computed on a TE basis |
NM | Not meaningful |
NPA | Nonperforming asset |
NPL | Nonperforming loan |
NSFR | Net stable funding ratio |
NYSE | New York Stock Exchange |
OAS | Option adjusted spread |
OCC | Office of the Comptroller of the Currency |
Truist Financial Corporation 1
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Term | Definition |
OCI | Other comprehensive income (loss) |
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OPEB | Other post-employment benefit |
OREO | Other real estate owned |
OT&C | Other, Treasury and Corporate |
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Parent Company | Truist Financial Corporation, the parent company of Truist Bank and other subsidiaries |
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Truist Financial Corporation 1
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Term | Definition |
PCD | Purchased credit deteriorated loans |
PCI | Purchased credit impaired loans |
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PPP | Paycheck Protection Program, established by the CARES Act |
Re-REMICs | Re-securitizations of Real Estate Mortgage Investment Conduits |
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ROU assets | Right-of-use assets |
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RUFC | Reserve for unfunded lending commitments |
S&P | Standard & Poor’s |
SBIC | Small Business Investment Company |
SCB | Stress Capital Buffer |
SEC | Securities and Exchange Commission |
SOFR | Secured Overnight Financing Rate |
SunTrust | SunTrust Banks, Inc. |
Tailoring Rules | The final rules changing the applicability thresholds for regulatory capital and liquidity requirements, issued by the OCC, FRB, and FDIC, together with the final rules changing the applicability thresholds for enhanced prudential standards issued by the FRB |
TCFD | Task Force on Climate-Related Financial Disclosures |
TDR | Troubled debt restructuring |
TE | Taxable-equivalent |
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TRS | Total Return Swap |
Truist | Truist Financial Corporation and its subsidiaries (interchangeable with the “Company” above), formerly BB&T Corporation |
Truist Bank | Truist Bank, formerly Branch Banking and Trust Company |
U.S. | United States of America |
U.S. Treasury | United States Department of the Treasury |
UPB | Unpaid principal balance |
USAA | United Services Automobile Association |
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VaR | Value-at-risk |
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VIE | Variable interest entity |
2 Truist Financial Corporation
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of Truist. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” “would,” “could,” and other similar expressions are intended to identify these forward-looking statements.
Forward-looking statements are not based on historical facts but instead represent management’s expectations and assumptions regarding Truist’s business, the economy, and other future conditions. Such statements involve inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As such, Truist’s actual results may differ materially from those contemplated by forward-looking statements. While there can be no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those contemplated by forward-looking statements include the following, without limitation, as well as the risks and uncertainties more fully discussed in Part I, Item 1A-Risk Factors in Truist’s Form 10-K for the year ended December 31, 2020:2021:
•residual risks and uncertainties relating to the Merger of heritage BB&T and heritage SunTrust, including the ability to successfully integrate the companies or to realize the anticipated benefits of the Merger;
•expenses relating to the Merger and integration of heritage BB&Tapplication and heritage SunTrust;data center decommissioning;
•deposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
•the COVID-19 pandemic disrupted the global economy and adversely impacted Truist’s financial condition and results of operations, including through increased expenses, reduced fee income and net interest margin, decreased demand for certain types of loans, and increases in the allowance for credit losses; thea resurgence of the pandemic, in recent monthswhether due to new variants of the coronavirus or other factors, could reintroduce or prolong these negative impacts and also adversely affect Truist’s capital and liquidity position or cost of capital, impair the ability of borrowers to repay outstanding loans, cause an outflow of deposits, and impair goodwill or other assets;
•Truist is subject to credit risk by lending or committing to lend money, and may have more credit risk and higher credit losses to the extent that loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;
•changes in the interest rate environment, including the replacement of LIBOR as an interest rate benchmark, and potentially negative interest rates, which could adversely affect Truist’s revenue and expenses, the value of assets and obligations, and the availability and cost of capital, cash flows, and liquidity;
•inability to access short-term funding or liquidity, loss of client deposits or changes in Truist’s credit ratings, which could increase the cost of funding or limit access to capital markets;
•risk management oversight functions may not identify or address risks adequately, and management may not be able to effectively manage credit risk;
•risks resulting from the extensive use of models in Truist’s business, which may impact decisions made by management and regulators;
•failure to execute on strategic or operational plans, including the ability to successfully complete or integrate mergers and acquisitions;
•increased competition, including from (i) new or existing competitors that could have greater financial resources or be subject to different regulatory standards, and (ii) products and services offered by non-bank financial technology companies, may reduce Truist’s client base, cause Truist to lower prices for its products and services in order to maintain market share or otherwise adversely impact Truist’s businesses or results of operations;
•failure to maintain or enhance Truist’s competitive position with respect to new products, services and technology, whether it fails to anticipate client expectations or because its technological developments fail to perform as desired or do not achieve market acceptance or regulatory approval or for other reasons, may cause Truist to lose market share or incur additional expense;
•negative public opinion, which could damage Truist’s reputation;
•increased scrutiny regarding Truist’s consumer sales practices, training practices, incentive compensation design, and governance;
•regulatory matters, litigation or other legal actions, which may result in, among other things, costs, fines, penalties, restrictions on Truist’s business activities, reputational harm, negative publicity, or other adverse consequences;
•evolving legislative, accounting and regulatory standards, including with respect to climate, capital, and liquidity requirements, and results of regulatory examinations may adversely affect Truist’s financial condition and results of operations;
•the monetary and fiscal policies of the federal government and its agencies, including in response to rising inflation, could have a material adverse effect on the economy and Truist’s profitability;
•accounting policies and processes require management to make estimates about matters that are uncertain, including the potential write down to goodwill if there is an elongated period of decline in market value for Truist’s stock and adverse economic conditions are sustained over a period of time;
•general economic or business conditions, either globally, nationally or regionally, may be less favorable than expected, including as a result of supply chain disruptions, inflationary pressures and labor shortages, and instability in global geopolitical matters or volatility in financial markets could result in, among other things, slower deposit or asset growth, a deterioration in credit quality, or a reduced demand for credit, insurance, or other services;
•risks related to originating and selling mortgages, including repurchase and indemnity demands from purchasers related to representations and warranties on loans sold, which could result in an increase in the amount of losses for loan repurchases;
•risks relating to Truist’s role as a loan servicer, including an increase in the scope or costs of the services Truist is required to perform, without any corresponding increase in servicing fees or a breach of Truist’s obligations as servicer;
•Truist’s success depends on hiring and retaining key personnel,teammates, and if these individuals leave or change roles without effective replacements, Truist’s operations and integration activities could be adversely impacted, which could be exacerbated in the increased work-from-home environment caused by the COVID-19 pandemic as Truist continues to integrate the management teams of heritage BB&T and heritage SunTrust;job markets may be less constrained by physical geography;
•fraud or misconduct by internal or external parties, which Truist may not be able to prevent, detect, or mitigate;
•security risks, including denial of service attacks, hacking, social engineering attacks targeting Truist’s teammates and clients, malware intrusion, data corruption attempts, system breaches, cyber attacks,cyber-attacks, which have increased in frequency with current geopolitical tensions, identity theft, ransomware attacks, and physical security risks, such as natural disasters, environmental conditions, and intentional acts of destruction, could result in the disclosure of confidential information, adversely affect Truist’s business or reputation or create significant legal or financial exposure; and
•widespread outages of operational, communication, or other systems, whether internal or provided by third parties, natural or other disasters (including acts of terrorism and pandemics), and the effects of climate change, including physical risks, such as more frequent and intense weather events, and risks related to the transition to a lower carbon economy, such as regulatory or technological changes or shifts in market dynamics or consumer preferences, could have an adverse effect on Truist’s financial condition and results of operations, lead to material disruption of Truist’s operations or the ability or willingness of clients to access Truist’s products and services.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, Truist undertakes no obligation to revise or update any forward-looking statements.
Truist Financial Corporation 3
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES | | Unaudited (Dollars in millions, except per share data, shares in thousands) | Unaudited (Dollars in millions, except per share data, shares in thousands) | September 30, 2021 | | December 31, 2020 | | Unaudited (Dollars in millions, except per share data, shares in thousands) | Sep 30, 2022 | | Dec 31, 2021 | |
| Assets | Assets | | | Assets | | |
Cash and due from banks | Cash and due from banks | $ | 4,656 | | | $ | 5,029 | | | Cash and due from banks | $ | 5,031 | | | $ | 5,085 | | |
Interest-bearing deposits with banks | Interest-bearing deposits with banks | 15,171 | | | 13,839 | | | Interest-bearing deposits with banks | 17,194 | | | 15,210 | | |
Securities borrowed or purchased under resale agreements | 1,919 | | | 1,745 | | | |
Securities borrowed or purchased under agreements to resell | | Securities borrowed or purchased under agreements to resell | 2,568 | | | 4,028 | | |
Trading assets at fair value | Trading assets at fair value | 6,972 | | | 3,872 | | | Trading assets at fair value | 5,864 | | | 4,423 | | |
AFS securities at fair value | AFS securities at fair value | 151,038 | | | 120,788 | | | AFS securities at fair value | 72,978 | | | 153,123 | | |
| LHFS (including $4,799 and $4,955 at fair value, respectively) | 5,133 | | | 6,059 | | | |
Loans and leases | 285,522 | | | 299,734 | | | |
HTM securities ($48,975 and $1,495 at fair value, respectively) | | HTM securities ($48,975 and $1,495 at fair value, respectively) | 58,754 | | | 1,494 | | |
LHFS (including $1,868 and $3,544 at fair value, respectively) | | LHFS (including $1,868 and $3,544 at fair value, respectively) | 2,304 | | | 4,812 | | |
Loans and leases (including $19 and $23 at fair value, respectively) | | Loans and leases (including $19 and $23 at fair value, respectively) | 314,335 | | | 289,513 | | |
ALLL | ALLL | (4,702) | | | (5,835) | | | ALLL | (4,205) | | | (4,435) | | |
Loans and leases, net of ALLL | Loans and leases, net of ALLL | 280,820 | | | 293,899 | | | Loans and leases, net of ALLL | 310,130 | | | 285,078 | | |
Premises and equipment | Premises and equipment | 3,719 | | | 3,870 | | | Premises and equipment | 3,585 | | | 3,700 | | |
Goodwill | Goodwill | 24,891 | | | 24,447 | | | Goodwill | 26,810 | | | 26,098 | | |
CDI and other intangible assets | CDI and other intangible assets | 2,930 | | | 2,984 | | | CDI and other intangible assets | 3,726 | | | 3,408 | | |
MSRs at fair value | 2,584 | | | 2,023 | | | |
Other assets (including $4,002 and $4,891 at fair value, respectively) | 30,051 | | | 30,673 | | | |
Loan servicing rights at fair value | | Loan servicing rights at fair value | 3,797 | | | 2,633 | | |
Other assets (including $2,027 and $3,436 at fair value, respectively) | | Other assets (including $2,027 and $3,436 at fair value, respectively) | 35,697 | | | 32,149 | | |
Total assets | Total assets | $ | 529,884 | | | $ | 509,228 | | | Total assets | $ | 548,438 | | | $ | 541,241 | | |
Liabilities | Liabilities | | | Liabilities | | |
Noninterest-bearing deposits | Noninterest-bearing deposits | $ | 143,595 | | | $ | 127,629 | | | Noninterest-bearing deposits | $ | 144,826 | | | $ | 145,892 | | |
Interest-bearing deposits | Interest-bearing deposits | 262,262 | | | 253,448 | | | Interest-bearing deposits | 271,166 | | | 270,596 | | |
Short-term borrowings (including $1,735 and $1,115 at fair value, respectively) | 5,226 | | | 6,092 | | | |
Short-term borrowings (including $1,905 and $1,731 at fair value, respectively) | | Short-term borrowings (including $1,905 and $1,731 at fair value, respectively) | 25,687 | | | 5,292 | | |
Long-term debt | Long-term debt | 37,837 | | | 39,597 | | | Long-term debt | 31,172 | | | 35,913 | | |
Other liabilities (including $601 and $555 at fair value, respectively) | 12,064 | | | 11,550 | | | |
Other liabilities (including $3,407 and $586 at fair value, respectively) | | Other liabilities (including $3,407 and $586 at fair value, respectively) | 14,776 | | | 14,277 | | |
Total liabilities | Total liabilities | 460,984 | | | 438,316 | | | Total liabilities | 487,627 | | | 471,970 | | |
| Shareholders’ Equity | Shareholders’ Equity | | | Shareholders’ Equity | | |
Preferred stock | Preferred stock | 6,673 | | | 8,048 | | | Preferred stock | 6,673 | | | 6,673 | | |
Common stock, $5 par value | Common stock, $5 par value | 6,674 | | | 6,745 | | | Common stock, $5 par value | 6,634 | | | 6,639 | | |
Additional paid-in capital | Additional paid-in capital | 34,977 | | | 35,843 | | | Additional paid-in capital | 34,487 | | | 34,565 | | |
Retained earnings | Retained earnings | 22,114 | | | 19,455 | | | Retained earnings | 25,344 | | | 22,998 | | |
AOCI, net of deferred income taxes | AOCI, net of deferred income taxes | (1,538) | | | 716 | | | AOCI, net of deferred income taxes | (12,350) | | | (1,604) | | |
Noncontrolling interests | Noncontrolling interests | — | | | 105 | | | Noncontrolling interests | 23 | | | — | | |
Total shareholders’ equity | Total shareholders’ equity | 68,900 | | | 70,912 | | | Total shareholders’ equity | 60,811 | | | 69,271 | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 529,884 | | | $ | 509,228 | | | Total liabilities and shareholders’ equity | $ | 548,438 | | | $ | 541,241 | | |
Common shares outstanding | Common shares outstanding | 1,334,892 | | | 1,348,961 | | | Common shares outstanding | 1,326,766 | | | 1,327,818 | | |
Common shares authorized | Common shares authorized | 2,000,000 | | | 2,000,000 | | | Common shares authorized | 2,000,000 | | | 2,000,000 | | |
Preferred shares outstanding | Preferred shares outstanding | 223 | | | 280 | | | Preferred shares outstanding | 223 | | | 223 | | |
Preferred shares authorized | Preferred shares authorized | 5,000 | | | 5,000 | | | Preferred shares authorized | 5,000 | | | 5,000 | | |
The accompanying notes are an integral part of these consolidated financial statements.
4 Truist Financial Corporation
CONSOLIDATED STATEMENTS OF INCOME
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Unaudited (Dollars in millions, except per share data, shares in thousands) | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | |
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| | | | | | | | | | |
Interest Income | | | | | | | | | | |
Interest and fees on loans and leases | | $ | 2,825 | | | $ | 3,174 | | | $ | 8,728 | | | $ | 10,327 | | | |
Interest on securities | | 548 | | | 393 | | | 1,488 | | | 1,331 | | | |
Interest on other earning assets | | 53 | | | 56 | | | 147 | | | 279 | | | |
Total interest income | | 3,426 | | | 3,623 | | | 10,363 | | | 11,937 | | | |
Interest Expense | | | | | | | | | | |
Interest on deposits | | 33 | | | 96 | | | 116 | | | 718 | | | |
Interest on long-term debt | | 151 | | | 152 | | | 446 | | | 635 | | | |
Interest on other borrowings | | 9 | | | 13 | | | 38 | | | 124 | | | |
Total interest expense | | 193 | | | 261 | | | 600 | | | 1,477 | | | |
Net Interest Income | | 3,233 | | | 3,362 | | | 9,763 | | | 10,460 | | | |
Provision for credit losses | | (324) | | | 421 | | | (710) | | | 2,158 | | | |
Net Interest Income After Provision for Credit Losses | | 3,557 | | | 2,941 | | | 10,473 | | | 8,302 | | | |
Noninterest Income | | | | | | | | | | |
Insurance income | | 645 | | | 518 | | | 1,961 | | | 1,648 | | | |
Wealth management income | | 356 | | | 324 | | | 1,042 | | | 945 | | | |
Service charges on deposits | | 276 | | | 247 | | | 787 | | | 754 | | | |
Residential mortgage income | | 179 | | | 221 | | | 396 | | | 807 | | | |
Investment banking and trading income | | 301 | | | 244 | | | 958 | | | 636 | | | |
Card and payment related fees | | 225 | | | 200 | | | 650 | | | 558 | | | |
Lending related fees | | 74 | | | 77 | | | 268 | | | 210 | | | |
Operating lease income | | 57 | | | 72 | | | 191 | | | 232 | | | |
Commercial real estate related income | | 78 | | | 55 | | | 259 | | | 148 | | | |
Income from bank-owned life insurance | | 43 | | | 46 | | | 139 | | | 135 | | | |
Securities gains (losses) | | — | | | 104 | | | — | | | 402 | | | |
Other income | | 131 | | | 102 | | | 316 | | | 119 | | | |
Total noninterest income | | 2,365 | | | 2,210 | | | 6,967 | | | 6,594 | | | |
Noninterest Expense | | | | | | | | | | |
Personnel expense | | 2,187 | | | 2,058 | | | 6,536 | | | 6,038 | | | |
Professional fees and outside processing | | 372 | | | 323 | | | 1,063 | | | 859 | | | |
Net occupancy expense | | 187 | | | 233 | | | 578 | | | 697 | | | |
Software expense | | 251 | | | 221 | | | 707 | | | 647 | | | |
Amortization of intangibles | | 145 | | | 170 | | | 431 | | | 513 | | | |
Equipment expense | | 154 | | | 127 | | | 389 | | | 363 | | | |
Marketing and customer development | | 94 | | | 75 | | | 226 | | | 215 | | | |
Operating lease depreciation | | 47 | | | 56 | | | 144 | | | 204 | | | |
Loan-related expense | | 52 | | | 59 | | | 161 | | | 177 | | | |
Regulatory costs | | 43 | | | 34 | | | 99 | | | 93 | | | |
Merger-related and restructuring charges | | 172 | | | 236 | | | 610 | | | 552 | | | |
Loss (gain) on early extinguishment of debt | | — | | | — | | | (3) | | | 235 | | | |
Other expense | | 91 | | | 163 | | | 475 | | | 471 | | | |
Total noninterest expense | | 3,795 | | | 3,755 | | | 11,416 | | | 11,064 | | | |
Earnings | | | | | | | | | | |
Income before income taxes | | 2,127 | | | 1,396 | | | 6,024 | | | 3,832 | | | |
Provision for income taxes | | 423 | | | 255 | | | 1,189 | | | 670 | | | |
Net income | | 1,704 | | | 1,141 | | | 4,835 | | | 3,162 | | | |
Noncontrolling interests | | — | | | 3 | | | (3) | | | 9 | | | |
Net income available to the bank holding company | | 1,704 | | | 1,138 | | | 4,838 | | | 3,153 | | | |
Preferred stock dividends and other | | 88 | | | 70 | | | 329 | | | 197 | | | |
Net income available to common shareholders | | $ | 1,616 | | | $ | 1,068 | | | $ | 4,509 | | | $ | 2,956 | | | |
Basic EPS | | $ | 1.21 | | | $ | 0.79 | | | $ | 3.37 | | | $ | 2.20 | | | |
Diluted EPS | | 1.20 | | | 0.79 | | | 3.34 | | | 2.18 | | | |
Basic weighted average shares outstanding | | 1,334,825 | | | 1,347,916 | | | 1,339,558 | | | 1,346,605 | | | |
Diluted weighted average shares outstanding | | 1,346,854 | | | 1,358,122 | | | 1,351,712 | | | 1,357,174 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Unaudited (Dollars in millions, except per share data, shares in thousands) | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 | | |
Interest Income | | | | | | | | | | |
Interest and fees on loans and leases | | $ | 3,490 | | | $ | 2,825 | | | $ | 9,032 | | | $ | 8,728 | | | |
Interest on securities | | 709 | | | 548 | | | 2,024 | | | 1,488 | | | |
Interest on other earning assets | | 170 | | | 53 | | | 343 | | | 147 | | | |
Total interest income | | 4,369 | | | 3,426 | | | 11,399 | | | 10,363 | | | |
Interest Expense | | | | | | | | | | |
Interest on deposits | | 331 | | | 33 | | | 462 | | | 116 | | | |
Interest on long-term debt | | 190 | | | 151 | | | 459 | | | 446 | | | |
Interest on other borrowings | | 103 | | | 9 | | | 143 | | | 38 | | | |
Total interest expense | | 624 | | | 193 | | | 1,064 | | | 600 | | | |
Net Interest Income | | 3,745 | | | 3,233 | | | 10,335 | | | 9,763 | | | |
Provision for credit losses | | 234 | | | (324) | | | 310 | | | (710) | | | |
Net Interest Income After Provision for Credit Losses | | 3,511 | | | 3,557 | | | 10,025 | | | 10,473 | | | |
Noninterest Income | | | | | | | | | | |
Insurance income | | 725 | | | 645 | | | 2,277 | | | 1,961 | | | |
Investment banking and trading income | | 222 | | | 316 | | | 738 | | | 1,064 | | | |
Wealth management income | | 334 | | | 356 | | | 1,014 | | | 1,042 | | | |
Service charges on deposits | | 263 | | | 276 | | | 769 | | | 787 | | | |
Card and payment related fees | | 241 | | | 225 | | | 699 | | | 650 | | | |
Residential mortgage income | | 72 | | | 179 | | | 235 | | | 396 | | | |
Lending related fees | | 80 | | | 74 | | | 265 | | | 268 | | | |
Operating lease income | | 66 | | | 57 | | | 190 | | | 191 | | | |
Commercial mortgage income | | 50 | | | 54 | | | 108 | | | 134 | | | |
Income from bank-owned life insurance | | 49 | | | 43 | | | 150 | | | 139 | | | |
Securities gains (losses) | | (1) | | | — | | | (71) | | | — | | | |
Other income | | 1 | | | 140 | | | 118 | | | 335 | | | |
Total noninterest income | | 2,102 | | | 2,365 | | | 6,492 | | | 6,967 | | | |
Noninterest Expense | | | | | | | | | | |
Personnel expense | | 2,116 | | | 2,187 | | | 6,269 | | | 6,536 | | | |
Professional fees and outside processing | | 352 | | | 372 | | | 1,064 | | | 1,063 | | | |
Software expense | | 225 | | | 251 | | | 691 | | | 707 | | | |
Net occupancy expense | | 176 | | | 187 | | | 565 | | | 578 | | | |
Amortization of intangibles | | 140 | | | 145 | | | 420 | | | 431 | | | |
Equipment expense | | 122 | | | 154 | | | 354 | | | 389 | | | |
Marketing and customer development | | 105 | | | 94 | | | 282 | | | 226 | | | |
Operating lease depreciation | | 45 | | | 47 | | | 140 | | | 144 | | | |
Loan-related expense | | 46 | | | 52 | | | 137 | | | 161 | | | |
Regulatory costs | | 52 | | | 43 | | | 131 | | | 99 | | | |
Merger-related and restructuring charges | | 62 | | | 172 | | | 399 | | | 610 | | | |
Loss (gain) on early extinguishment of debt | | — | | | — | | | (39) | | | (3) | | | |
Other expense | | 172 | | | 91 | | | 454 | | | 475 | | | |
Total noninterest expense | | 3,613 | | | 3,795 | | | 10,867 | | | 11,416 | | | |
Earnings | | | | | | | | | | |
Income before income taxes | | 2,000 | | | 2,127 | | | 5,650 | | | 6,024 | | | |
Provision for income taxes | | 363 | | | 423 | | | 1,065 | | | 1,189 | | | |
Net income | | 1,637 | | | 1,704 | | | 4,585 | | | 4,835 | | | |
Noncontrolling interests | | 4 | | | — | | | 6 | | | (3) | | | |
Net income available to the bank holding company | | 1,633 | | | 1,704 | | | 4,579 | | | 4,838 | | | |
Preferred stock dividends and other | | 97 | | | 88 | | | 262 | | | 329 | | | |
Net income available to common shareholders | | $ | 1,536 | | | $ | 1,616 | | | $ | 4,317 | | | $ | 4,509 | | | |
Basic EPS | | $ | 1.16 | | | $ | 1.21 | | | $ | 3.25 | | | $ | 3.37 | | | |
Diluted EPS | | 1.15 | | | 1.20 | | | 3.22 | | | 3.34 | | | |
Basic weighted average shares outstanding | | 1,326,539 | | | 1,334,825 | | | 1,328,569 | | | 1,339,558 | | | |
Diluted weighted average shares outstanding | | 1,336,659 | | | 1,346,854 | | | 1,339,071 | | | 1,351,712 | | | |
The accompanying notes are an integral part of these consolidated financial statements.
Truist Financial Corporation 5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES | | | | Unaudited (Dollars in millions) | Unaudited (Dollars in millions) | Three Months Ended September 30, | | Nine Months Ended September 30, | Unaudited (Dollars in millions) | Three Months Ended September 30, | | Nine Months Ended September 30, |
2021 | | 2020 | | 2021 | | 2020 | | Unaudited (Dollars in millions) | 2022 | | 2021 | | 2022 | | 2021 | |
| | Net income | Net income | $ | 1,704 | | | $ | 1,141 | | | $ | 4,835 | | | $ | 3,162 | | | Net income | $ | 1,637 | | | $ | 1,704 | | | $ | 4,585 | | | $ | 4,835 | | |
OCI, net of tax: | OCI, net of tax: | | | | | | | | | OCI, net of tax: | | | | | | | | |
Net change in net pension and postretirement costs | Net change in net pension and postretirement costs | (55) | | | (11) | | | (22) | | | 18 | | | Net change in net pension and postretirement costs | 6 | | | (55) | | | 19 | | | (22) | | |
Net change in cash flow hedges | Net change in cash flow hedges | 5 | | | 8 | | | 51 | | | 30 | | | Net change in cash flow hedges | (139) | | | 5 | | | (85) | | | 51 | | |
Net change in AFS securities | Net change in AFS securities | (438) | | | (375) | | | (2,283) | | | 1,267 | | | Net change in AFS securities | (3,051) | | | (438) | | | (10,889) | | | (2,283) | | |
Net change in HTM securities | | Net change in HTM securities | 80 | | | — | | | 216 | | | — | | |
Other, net | Other, net | (2) | | | 1 | | | — | | | (1) | | | Other, net | (6) | | | (2) | | | (7) | | | — | | |
Total OCI, net of tax | Total OCI, net of tax | (490) | | | (377) | | | (2,254) | | | 1,314 | | | Total OCI, net of tax | (3,110) | | | (490) | | | (10,746) | | | (2,254) | | |
Total comprehensive income | Total comprehensive income | $ | 1,214 | | | $ | 764 | | | $ | 2,581 | | | $ | 4,476 | | | Total comprehensive income | $ | (1,473) | | | $ | 1,214 | | | $ | (6,161) | | | $ | 2,581 | | |
Income Tax Effect of Items Included in OCI: | Income Tax Effect of Items Included in OCI: | | | Income Tax Effect of Items Included in OCI: | | |
Net change in net pension and postretirement costs | Net change in net pension and postretirement costs | $ | (13) | | | $ | (4) | | | $ | (3) | | | $ | 5 | | | Net change in net pension and postretirement costs | $ | 1 | | | $ | (13) | | | $ | 6 | | | $ | (3) | | |
Net change in cash flow hedges | Net change in cash flow hedges | 2 | | | 2 | | | 16 | | | 9 | | | Net change in cash flow hedges | (42) | | | 2 | | | (26) | | | 16 | | |
Net change in AFS securities | Net change in AFS securities | (133) | | | (114) | | | (701) | | | 389 | | | Net change in AFS securities | (927) | | | (133) | | | (3,307) | | | (701) | | |
Net change in HTM securities | | Net change in HTM securities | 25 | | | — | | | 65 | | | — | | |
| Total income taxes related to OCI | Total income taxes related to OCI | $ | (144) | | | $ | (116) | | | $ | (688) | | | $ | 403 | | | Total income taxes related to OCI | $ | (943) | | | $ | (144) | | | $ | (3,262) | | | $ | (688) | | |
The accompanying notes are an integral part of these consolidated financial statements.
6 Truist Financial Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES | | Unaudited (Dollars in millions, shares in thousands) | Unaudited (Dollars in millions, shares in thousands) | Shares of Common Stock | | Preferred Stock | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | AOCI | | Noncontrolling Interests | | Total Shareholders’ Equity | | Unaudited (Dollars in millions, shares in thousands) | Shares of Common Stock | | Preferred Stock | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | AOCI | | Noncontrolling Interests | | Total Shareholders’ Equity | |
Balance, July 1, 2020 | 1,347,609 | | | $ | 7,143 | | | $ | 6,738 | | | $ | 35,676 | | | $ | 18,373 | | | $ | 847 | | | $ | 106 | | | $ | 68,883 | | | |
Net income | — | | | — | | | — | | | — | | | 1,138 | | | — | | | 3 | | | 1,141 | | | |
OCI | — | | | — | | | — | | | — | | | — | | | (377) | | | — | | | (377) | | | |
| Issued in connection with equity awards, net | 509 | | | — | | | 3 | | | (6) | | | — | | | — | | | — | | | (3) | | | |
Issued in connection with preferred stock offerings | — | | | 905 | | | — | | | — | | | — | | | — | | | — | | | 905 | | | |
| Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (607) | | | — | | | — | | | (607) | | | |
Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (70) | | | — | | | — | | | (70) | | | |
Equity-based compensation expense | — | | | — | | | — | | | 104 | | | — | | | — | | | — | | | 104 | | | |
| Other, net | — | | | — | | | — | | | — | | | — | | | — | | | (3) | | | (3) | | | |
Balance, September 30, 2020 | 1,348,118 | | | $ | 8,048 | | | $ | 6,741 | | | $ | 35,774 | | | $ | 18,834 | | | $ | 470 | | | $ | 106 | | | $ | 69,973 | | | |
Balance, July 1, 2021 | Balance, July 1, 2021 | 1,334,770 | | | $ | 6,673 | | | $ | 6,674 | | | $ | 34,898 | | | $ | 21,139 | | | $ | (1,048) | | | $ | — | | | $ | 68,336 | | | Balance, July 1, 2021 | 1,334,770 | | | $ | 6,673 | | | $ | 6,674 | | | $ | 34,898 | | | $ | 21,139 | | | $ | (1,048) | | | $ | — | | | $ | 68,336 | | |
Net income | Net income | — | | | — | | | — | | | — | | | 1,704 | | | — | | | — | | | 1,704 | | | Net income | — | | | — | | | — | | | — | | | 1,704 | | | — | | | — | | | 1,704 | | |
OCI | OCI | — | | | — | | | — | | | — | | | — | | | (490) | | | — | | | (490) | | | OCI | — | | | — | | | — | | | — | | | — | | | (490) | | | — | | | (490) | | |
| Issued in connection with equity awards, net | Issued in connection with equity awards, net | 122 | | | — | | | — | | | (4) | | | (1) | | | — | | | — | | | (5) | | | Issued in connection with equity awards, net | 122 | | | — | | | — | | | (4) | | | (1) | | | — | | | — | | | (5) | | |
| Cash dividends declared on common stock | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (640) | | | — | | | — | | | (640) | | | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (640) | | | — | | | — | | | (640) | | |
Cash dividends declared on preferred stock | Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (88) | | | — | | | — | | | (88) | | | Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (88) | | | — | | | — | | | (88) | | |
Equity-based compensation expense | Equity-based compensation expense | — | | | — | | | — | | | 83 | | | — | | | — | | | — | | | 83 | | | Equity-based compensation expense | — | | | — | | | — | | | 83 | | | — | | | — | | | — | | | 83 | | |
| | Balance, September 30, 2021 | Balance, September 30, 2021 | 1,334,892 | | | $ | 6,673 | | | $ | 6,674 | | | $ | 34,977 | | | $ | 22,114 | | | $ | (1,538) | | | $ | — | | | $ | 68,900 | | | Balance, September 30, 2021 | 1,334,892 | | | $ | 6,673 | | | $ | 6,674 | | | $ | 34,977 | | | $ | 22,114 | | | $ | (1,538) | | | $ | — | | | $ | 68,900 | | |
Balance, July 1, 2022 | | Balance, July 1, 2022 | 1,326,393 | | | $ | 6,673 | | | $ | 6,632 | | | $ | 34,410 | | | $ | 24,500 | | | $ | (9,240) | | | $ | 24 | | | $ | 62,999 | | |
Net income | | Net income | — | | | — | | | — | | | — | | | 1,633 | | | — | | | 4 | | | 1,637 | | |
OCI | | OCI | — | | | — | | | — | | | — | | | — | | | (3,110) | | | — | | | (3,110) | | |
| Issued in connection with equity awards, net | | Issued in connection with equity awards, net | 373 | | | — | | | 2 | | | (5) | | | (1) | | | — | | | — | | | (4) | | |
| Cash dividends declared on common stock | | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (691) | | | — | | | — | | | (691) | | |
Cash dividends declared on preferred stock | | Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (97) | | | — | | | — | | | (97) | | |
Equity-based compensation expense | | Equity-based compensation expense | — | | | — | | | — | | | 82 | | | — | | | — | | | — | | | 82 | | |
Other, net | | Other, net | — | | | — | | | — | | | — | | | — | | | — | | | (5) | | | (5) | | |
Balance, September 30, 2022 | | Balance, September 30, 2022 | 1,326,766 | | | $ | 6,673 | | | $ | 6,634 | | | $ | 34,487 | | | $ | 25,344 | | | $ | (12,350) | | | $ | 23 | | | $ | 60,811 | | |
| Balance, January 1, 2020 | 1,342,166 | | | $ | 5,102 | | | $ | 6,711 | | | $ | 35,609 | | | $ | 19,806 | | | $ | (844) | | | $ | 174 | | | $ | 66,558 | | | |
Net income | — | | | — | | | — | | | — | | | 3,153 | | | — | | | 9 | | | 3,162 | | | |
OCI | — | | | — | | | — | | | — | | | — | | | 1,314 | | | — | | | 1,314 | | | |
| Issued in connection with equity awards, net | 5,952 | | | — | | | 30 | | | (115) | | | (2) | | | — | | | — | | | (87) | | | |
Issued in connection with preferred stock offerings | — | | | 3,449 | | | — | | | — | | | — | | | — | | | — | | | 3,449 | | | |
| Redemption of preferred stock | — | | | (503) | | | — | | | — | | | 3 | | | — | | | — | | | (500) | | | |
Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (1,817) | | | — | | | — | | | (1,817) | | | |
Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (200) | | | — | | | — | | | (200) | | | |
Equity-based compensation expense | — | | | — | | | — | | | 280 | | | — | | | — | | | — | | | 280 | | | |
Cumulative effect adjustment for new accounting standards | — | | | — | | | — | | | — | | | (2,109) | | | — | | | — | | | (2,109) | | | |
Other, net | — | | | — | | | — | | | — | | | — | | | — | | | (77) | | | (77) | | | |
Balance, September 30, 2020 | 1,348,118 | | | $ | 8,048 | | | $ | 6,741 | | | $ | 35,774 | | | $ | 18,834 | | | $ | 470 | | | $ | 106 | | | $ | 69,973 | | | |
Balance, January 1, 2021 | Balance, January 1, 2021 | 1,348,961 | | | $ | 8,048 | | | $ | 6,745 | | | $ | 35,843 | | | $ | 19,455 | | | $ | 716 | | | $ | 105 | | | $ | 70,912 | | | Balance, January 1, 2021 | 1,348,961 | | | $ | 8,048 | | | $ | 6,745 | | | $ | 35,843 | | | $ | 19,455 | | | $ | 716 | | | $ | 105 | | | $ | 70,912 | | |
Net income | Net income | — | | | — | | | — | | | — | | | 4,838 | | | — | | | (3) | | | 4,835 | | | Net income | — | | | — | | | — | | | — | | | 4,838 | | | — | | | (3) | | | 4,835 | | |
OCI | OCI | — | | | — | | | — | | | — | | | — | | | (2,254) | | | — | | | (2,254) | | | OCI | — | | | — | | | — | | | — | | | — | | | (2,254) | | | — | | | (2,254) | | |
| Issued in connection with equity awards, net | Issued in connection with equity awards, net | 5,719 | | | — | | | 28 | | | (118) | | | (3) | | | — | | | — | | | (93) | | | Issued in connection with equity awards, net | 5,719 | | | — | | | 28 | | | (118) | | | (3) | | | — | | | — | | | (93) | | |
| Repurchase of common stock | Repurchase of common stock | (19,788) | | | — | | | (99) | | | (1,017) | | | — | | | — | | | — | | | (1,116) | | | Repurchase of common stock | (19,788) | | | — | | | (99) | | | (1,017) | | | — | | | — | | | — | | | (1,116) | | |
Redemption of preferred stock | Redemption of preferred stock | — | | | (1,375) | | | — | | | — | | | (40) | | | — | | | — | | | (1,415) | | | Redemption of preferred stock | — | | | (1,375) | | | — | | | — | | | (40) | | | — | | | — | | | (1,415) | | |
Cash dividends declared on common stock | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (1,847) | | | — | | | — | | | (1,847) | | | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (1,847) | | | — | | | — | | | (1,847) | | |
Cash dividends declared on preferred stock | Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (289) | | | — | | | — | | | (289) | | | Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (289) | | | — | | | — | | | (289) | | |
Equity-based compensation expense | Equity-based compensation expense | — | | | — | | | — | | | 269 | | | — | | | — | | | — | | | 269 | | | Equity-based compensation expense | — | | | — | | | — | | | 269 | | | — | | | — | | | — | | | 269 | | |
| Other, net | Other, net | — | | | — | | | — | | | — | | | — | | | — | | | (102) | | | (102) | | | Other, net | — | | | — | | | — | | | — | | | — | | | — | | | (102) | | | (102) | | |
Balance, September 30, 2021 | Balance, September 30, 2021 | 1,334,892 | | | $ | 6,673 | | | $ | 6,674 | | | $ | 34,977 | | | $ | 22,114 | | | $ | (1,538) | | | $ | — | | | $ | 68,900 | | | Balance, September 30, 2021 | 1,334,892 | | | $ | 6,673 | | | $ | 6,674 | | | $ | 34,977 | | | $ | 22,114 | | | $ | (1,538) | | | $ | — | | | $ | 68,900 | | |
Balance, January 1, 2022 | | Balance, January 1, 2022 | 1,327,818 | | | $ | 6,673 | | | $ | 6,639 | | | $ | 34,565 | | | $ | 22,998 | | | $ | (1,604) | | | $ | — | | | $ | 69,271 | | |
Net income | | Net income | — | | | — | | | — | | | — | | | 4,579 | | | — | | | 6 | | | 4,585 | | |
OCI | | OCI | — | | | — | | | — | | | — | | | — | | | (10,746) | | | — | | | (10,746) | | |
| Issued in connection with equity awards, net | | Issued in connection with equity awards, net | 4,056 | | | — | | | 21 | | | (112) | | | (4) | | | — | | | — | | | (95) | | |
| Repurchase of common stock | | Repurchase of common stock | (5,108) | | | — | | | (26) | | | (224) | | | — | | | — | | | — | | | (250) | | |
| Cash dividends declared on common stock | | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (1,967) | | | — | | | — | | | (1,967) | | |
Cash dividends declared on preferred stock | | Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (262) | | | — | | | — | | | (262) | | |
Equity-based compensation expense | | Equity-based compensation expense | — | | | — | | | — | | | 258 | | | — | | | — | | | — | | | 258 | | |
| Other, net | | Other, net | — | | | — | | | — | | | — | | | — | | | — | | | 17 | | | 17 | | |
Balance, September 30, 2022 | | Balance, September 30, 2022 | 1,326,766 | | | $ | 6,673 | | | $ | 6,634 | | | $ | 34,487 | | | $ | 25,344 | | | $ | (12,350) | | | $ | 23 | | | $ | 60,811 | | |
|
The accompanying notes are an integral part of these consolidated financial statements.
Truist Financial Corporation 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES | | | | Unaudited Nine Months Ended September 30, (Dollars in millions) | | 2021 | | 2020 | | |
Unaudited (Dollars in millions) | | Unaudited (Dollars in millions) | | Nine Months Ended September 30, | |
| | 2022 | | 2021 | |
Cash Flows From Operating Activities: | Cash Flows From Operating Activities: | | | | | | Cash Flows From Operating Activities: | | | | | |
Net income | Net income | | $ | 4,835 | | | $ | 3,162 | | | Net income | | $ | 4,585 | | | $ | 4,835 | | |
Adjustments to reconcile net income to net cash from operating activities: | Adjustments to reconcile net income to net cash from operating activities: | | | | | | Adjustments to reconcile net income to net cash from operating activities: | | | | | |
Provision for credit losses | Provision for credit losses | | (710) | | | 2,158 | | | Provision for credit losses | | 310 | | | (710) | | |
| Depreciation | Depreciation | | 610 | | | 694 | | | Depreciation | | 581 | | | 610 | | |
| Amortization of intangibles | Amortization of intangibles | | 431 | | | 513 | | | Amortization of intangibles | | 420 | | | 431 | | |
Equity-based compensation expense | | 269 | | | 280 | | | |
| Securities (gains) losses | Securities (gains) losses | | — | | | (402) | | | Securities (gains) losses | | 71 | | | — | | |
Net change in operating assets and liabilities: | Net change in operating assets and liabilities: | | | | | | Net change in operating assets and liabilities: | | | | | |
LHFS | LHFS | | 156 | | | 1,144 | | | LHFS | | 1,676 | | | 156 | | |
MSRs | | (206) | | | 639 | | | |
Loan servicing rights | | Loan servicing rights | | (850) | | | (206) | | |
Pension asset | Pension asset | | (456) | | | (417) | | | Pension asset | | (526) | | | (456) | | |
Derivative assets and liabilities | Derivative assets and liabilities | | 905 | | | (3,064) | | | Derivative assets and liabilities | | 3,850 | | | 905 | | |
Trading assets | Trading assets | | (3,100) | | | 1,063 | | | Trading assets | | (1,441) | | | (3,100) | | |
Other assets and other liabilities | Other assets and other liabilities | | 896 | | | (299) | | | Other assets and other liabilities | | (247) | | | 896 | | |
| Other, net | Other, net | | (545) | | | (442) | | | Other, net | | (882) | | | (276) | | |
Net cash from operating activities | Net cash from operating activities | | 3,085 | | | 5,029 | | | Net cash from operating activities | | 7,547 | | | 3,085 | | |
Cash Flows From Investing Activities: | Cash Flows From Investing Activities: | | | | | | Cash Flows From Investing Activities: | | | | | |
Proceeds from sales of AFS securities | Proceeds from sales of AFS securities | | 137 | | | 5,219 | | | Proceeds from sales of AFS securities | | 3,311 | | | 137 | | |
Proceeds from maturities, calls and paydowns of AFS securities | Proceeds from maturities, calls and paydowns of AFS securities | | 25,424 | | | 14,917 | | | Proceeds from maturities, calls and paydowns of AFS securities | | 10,619 | | | 25,424 | | |
Purchases of AFS securities | Purchases of AFS securities | | (59,578) | | | (28,242) | | | Purchases of AFS securities | | (9,025) | | | (59,578) | | |
| Proceeds from maturities, calls and paydowns of HTM securities | | Proceeds from maturities, calls and paydowns of HTM securities | | 4,006 | | | — | | |
Purchases of HTM securities | | Purchases of HTM securities | | (3,020) | | | — | | |
Originations and purchases of loans and leases, net of sales and principal collected | Originations and purchases of loans and leases, net of sales and principal collected | | 14,503 | | | (4,328) | | | Originations and purchases of loans and leases, net of sales and principal collected | | (24,135) | | | 14,503 | | |
Net cash received (paid) for FHLB stock | Net cash received (paid) for FHLB stock | | 116 | | | 599 | | | Net cash received (paid) for FHLB stock | | (609) | | | 116 | | |
Net cash received (paid) for securities borrowed or purchased under agreements to resell | | Net cash received (paid) for securities borrowed or purchased under agreements to resell | | 1,460 | | | (174) | | |
| Net cash paid for premises and equipment | | (314) | | | (716) | | | |
Net cash received (paid) for mergers, acquisitions and divestitures | | 390 | | | (1,811) | | | |
Net cash received (paid) for asset acquisitions, business combinations, and divestitures | | Net cash received (paid) for asset acquisitions, business combinations, and divestitures | | (1,325) | | | 390 | | |
| Other, net | Other, net | | (600) | | | 275 | | | Other, net | | (491) | | | (740) | | |
Net cash from investing activities | Net cash from investing activities | | (19,922) | | | (14,087) | | | Net cash from investing activities | | (19,209) | | | (19,922) | | |
Cash Flows From Financing Activities: | Cash Flows From Financing Activities: | | | | Cash Flows From Financing Activities: | | | |
Net change in deposits | Net change in deposits | | 24,790 | | | 38,263 | | | Net change in deposits | | (490) | | | 24,790 | | |
Net change in short-term borrowings | Net change in short-term borrowings | | (866) | | | (11,972) | | | Net change in short-term borrowings | | 20,395 | | | (866) | | |
Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | | 4,626 | | | 26,570 | | | Proceeds from issuance of long-term debt | | 3,461 | | | 4,626 | | |
Repayment of long-term debt | Repayment of long-term debt | | (5,873) | | | (27,667) | | | Repayment of long-term debt | | (6,991) | | | (5,873) | | |
Repurchase of common stock | Repurchase of common stock | | (1,116) | | | — | | | Repurchase of common stock | | (250) | | | (1,116) | | |
Net proceeds from preferred stock issued | | — | | | 3,449 | | | |
| Redemption of preferred stock | Redemption of preferred stock | | (1,415) | | | (500) | | | Redemption of preferred stock | | — | | | (1,415) | | |
Cash dividends paid on common stock | Cash dividends paid on common stock | | (1,847) | | | (1,817) | | | Cash dividends paid on common stock | | (1,967) | | | (1,847) | | |
Cash dividends paid on preferred stock | Cash dividends paid on preferred stock | | (289) | | | (200) | | | Cash dividends paid on preferred stock | | (262) | | | (289) | | |
Net cash received (paid) for hedge unwinds | Net cash received (paid) for hedge unwinds | | — | | | 1,111 | | | Net cash received (paid) for hedge unwinds | | (198) | | | — | | |
Other, net | Other, net | | (214) | | | (136) | | | Other, net | | (106) | | | (214) | | |
Net cash from financing activities | Net cash from financing activities | | 17,796 | | | 27,101 | | | Net cash from financing activities | | 13,592 | | | 17,796 | | |
Net Change in Cash and Cash Equivalents | Net Change in Cash and Cash Equivalents | | 959 | | | 18,043 | | | Net Change in Cash and Cash Equivalents | | 1,930 | | | 959 | | |
Cash and Cash Equivalents, January 1 | Cash and Cash Equivalents, January 1 | | 18,868 | | | 19,065 | | | Cash and Cash Equivalents, January 1 | | 20,295 | | | 18,868 | | |
Cash and Cash Equivalents, September 30 | Cash and Cash Equivalents, September 30 | | $ | 19,827 | | | $ | 37,108 | | | Cash and Cash Equivalents, September 30 | | $ | 22,225 | | | $ | 19,827 | | |
Supplemental Disclosure of Cash Flow Information: | Supplemental Disclosure of Cash Flow Information: | | | | Supplemental Disclosure of Cash Flow Information: | | | |
Net cash paid (received) during the period for: | Net cash paid (received) during the period for: | | | Net cash paid (received) during the period for: | | |
Interest expense | Interest expense | | $ | 655 | | | $ | 1,555 | | | Interest expense | | $ | 982 | | | $ | 655 | | |
Income taxes | Income taxes | | 745 | | | 94 | | | Income taxes | | 422 | | | 745 | | |
| Noncash investing activities: | | Noncash investing activities: | | |
| Transfer of AFS securities to HTM | | Transfer of AFS securities to HTM | | 59,436 | | | — | | |
| |
The accompanying notes are an integral part of these consolidated financial statements.
8 Truist Financial Corporation
NOTE 1. Basis of Presentation
General
See the Glossary of Defined Terms at the beginning of this Report for terms used herein. These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q, and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flow activity required in accordance with GAAP. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made. The year-end consolidated balance sheet data was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The information contained in the financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 20202021 should be referred to in connection with these unaudited interim consolidated financial statements. There were no significant changes to the Company’s accounting policies from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 20202021 that could have a material effect on the Company’s financial statements.
Reclassifications
Certain amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses.expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL; determination of fair value for financial instruments; valuation of MSRs; goodwill, intangiblesecurities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other purchase accounting related adjustments;intangible assets; income taxes; and pension and postretirement benefit plan obligations and expenses; and tax assets, liabilities, and expense.obligations.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
| | | | | | | | |
Standard / Adoption Date | Description | Effects on the Financial Statements |
|
| | |
| | |
Standards Not Yet Adopted |
Troubled Debt Restructurings and Vintage Disclosures January 1, 2023 | Eliminates TDRs, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Additionally, requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases. | Truist is actively engaged with its lines of business to establish reporting mechanisms consistent with the requirements of this standard. While implementation efforts are ongoing, the Company does not expect the implementation of this standard to have a material impact. |
Fair Value Hedging – Portfolio Layer Method January 1, 2023 | Introduces the portfolio layer method, which expands the current single-layer method to allow multiple hedged layers of a single closed portfolio. Additionally, expands the scope of the portfolio layer method to include non-prepayable assets, specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. | Truist is continuing to evaluate the use of the portfolio layer method in its hedging programs, although future use of the standard is dependent on its asset-liability management strategies in the context of the then current interest rate outlook. Truist does not believe adoption of the standard will have a material impact on its active last-of-layer hedges. |
There were no standards adopted during the current year that had a material effect on the Company’s financial statements, and no standards not yet adopted by the Company that are expected to have a material effect on the Company’s financial statements.Truist Financial Corporation 9
NOTE 2. Business Combinations
On JulyMarch 1, 2021,2022, Truist acquired Constellation Affiliated Partners,expanded its presence in the title insurance market by acquiring Kensington Vanguard National Land Services, one of the nation’s largest independent full-service national title insurance agencies, which resulted in approximately $543$199 million of goodwill and $418$138 million of identifiable intangible assets in the IH segment. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The intangible assets are being amortized on an accelerated basis over a term of 15.015 years based upon the estimated duration of economic benefits received. Goodwill of $456$131 million and identifiable intangible assets of $277$110 million are deductible for tax purposes.
On August 10, 2021,September 1, 2022, Truist announced it will acquire Service Finance, LLC for $2.0 billionbroadened the selection of products and services offered by its wholesale insurance broker by acquiring BenefitMall, one of the nation’s leading benefit wholesale general insurance agencies, which resulted in cash consideration, which is expected to closeapproximately $510 million of goodwill and $336 million of identifiable intangible assets in the fourth quarterIH segment. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of 2021.the acquisition. The intangible assets are being amortized over a term of 15 years based upon the estimated duration of economic benefits received. Identifiable intangible assets of $80 million and an immaterial amount of goodwill are deductible for tax purposes.
Truist Financial Corporation 9
NOTE 3. Securities Financing Activities
Securities purchased under resale agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently sold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. At September 30, 2021 and December 31, 2020, the total market value of collateral held was $1.9 billion and $1.7 billion, of which $188 million and $27 million was repledged, respectively. The following table presents securities borrowed or purchased under resale agreements:agreements to resell: | (Dollars in millions) | (Dollars in millions) | | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | | Sep 30, 2022 | | Dec 31, 2021 |
Securities purchased under agreements to resell | | Securities purchased under agreements to resell | | $ | 1,665 | | | $ | 3,460 | |
Securities borrowed | | Securities borrowed | | 903 | | | 568 | |
Total securities borrowed or purchased under agreements to resell | | Total securities borrowed or purchased under agreements to resell | | $ | 2,568 | | | $ | 4,028 | |
| Securities purchased under resale agreements | | $ | 1,302 | | | $ | 1,158 | | |
Securities borrowed | | 617 | | | 587 | | |
Total securities borrowed or purchased under resale agreements | | $ | 1,919 | | | $ | 1,745 | | |
Fair value of collateral permitted to be resold or repledged | | Fair value of collateral permitted to be resold or repledged | | $ | 2,533 | | | $ | 4,005 | |
Fair value of securities resold or repledged | | Fair value of securities resold or repledged | | 792 | | | 1,141 | |
|
For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions. Refer to “Note 14. Commitments and Contingencies” for additional information related to pledged securities. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity: | | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
(Dollars in millions) | (Dollars in millions) | Overnight and Continuous | | Up to 30 days | | | Total | | Overnight and Continuous | | Up to 30 days | | | Total | (Dollars in millions) | Overnight and Continuous | | Up to 30 days | | | Total | | Overnight and Continuous | | Up to 30 days | | | Total |
| | U.S. Treasury | U.S. Treasury | $ | 1,533 | | | $ | 7 | | | | $ | 1,540 | | | $ | 305 | | | $ | 31 | | | | $ | 336 | | U.S. Treasury | $ | 873 | | | $ | 10 | | | | $ | 883 | | | $ | 749 | | | $ | 409 | | | | $ | 1,158 | |
State and Municipal | | State and Municipal | 244 | | | — | | | | 244 | | | — | | | — | | | | — | |
GSE | GSE | 98 | | | 32 | | | | 130 | | | 45 | | | 9 | | | | 54 | | GSE | 46 | | | 6 | | | | 52 | | | 53 | | | 25 | | | | 78 | |
Agency MBS - residential | Agency MBS - residential | 473 | | | 173 | | | | 646 | | | 442 | | | 6 | | | | 448 | | Agency MBS - residential | 593 | | | 70 | | | | 663 | | | 720 | | | 141 | | | | 861 | |
Corporate and other debt securities | Corporate and other debt securities | 172 | | | 112 | | | | 284 | | | 204 | | | 179 | | | | 383 | | Corporate and other debt securities | 142 | | | 209 | | | | 351 | | | 213 | | | 125 | | | | 338 | |
Total securities sold under agreements to repurchase | Total securities sold under agreements to repurchase | $ | 2,276 | | | $ | 324 | | | | $ | 2,600 | | | $ | 996 | | | $ | 225 | | | | $ | 1,221 | | Total securities sold under agreements to repurchase | $ | 1,898 | | | $ | 295 | | | | $ | 2,193 | | | $ | 1,735 | | | $ | 700 | | | | $ | 2,435 | |
|
There were no securities financing transactions subject to legally enforceable master netting arrangements that were eligible for balance sheet netting for the periods presented.
10 Truist Financial Corporation
NOTE 4. Investment Securities
The following tables summarize the Company’s AFS and HTM securities: | September 30, 2021 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | | |
| Gains | | Losses | | | |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | |
| | Gains | | Losses | | |
AFS securities: | AFS securities: | | | | | | | | | | AFS securities: | | | | | | | | | |
U.S. Treasury | U.S. Treasury | | $ | 9,700 | | | $ | 18 | | | $ | 21 | | | $ | 9,697 | | | U.S. Treasury | | $ | 10,909 | | | $ | — | | | $ | 855 | | | $ | 10,054 | | |
GSE | GSE | | 1,829 | | | 47 | | | 2 | | | 1,874 | | | GSE | | 322 | | | — | | | 35 | | | 287 | | |
Agency MBS - residential | Agency MBS - residential | | 133,933 | | | 954 | | | 1,826 | | | 133,061 | | | Agency MBS - residential | | 66,825 | | | 1 | | | 10,232 | | | 56,594 | | |
Agency MBS - commercial | Agency MBS - commercial | | 3,083 | | | 30 | | | 40 | | | 3,073 | | | Agency MBS - commercial | | 2,907 | | | — | | | 421 | | | 2,486 | | |
States and political subdivisions | States and political subdivisions | | 422 | | | 38 | | | 2 | | | 458 | | | States and political subdivisions | | 426 | | | 8 | | | 38 | | | 396 | | |
Non-agency MBS | Non-agency MBS | | 2,856 | | | 1 | | | 11 | | | 2,846 | | | Non-agency MBS | | 3,983 | | | — | | | 845 | | | 3,138 | | |
Other | Other | | 29 | | | — | | | — | | | 29 | | | Other | | 23 | | | — | | | — | | | 23 | | |
Total AFS securities | Total AFS securities | | $ | 151,852 | | | $ | 1,088 | | | $ | 1,902 | | | $ | 151,038 | | | Total AFS securities | | $ | 85,395 | | | $ | 9 | | | $ | 12,426 | | | $ | 72,978 | | |
HTM securities: | | HTM securities: | | | | | | | | | |
| Agency MBS - residential | | Agency MBS - residential | | $ | 58,754 | | | $ | — | | | $ | 9,779 | | | $ | 48,975 | | |
| | December 31, 2020 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | | |
| Gains | | Losses | | | |
December 31, 2021 (Dollars in millions) | | December 31, 2021 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | |
| | Gains | | Losses | | |
AFS securities: | AFS securities: | | | | | | | | | | AFS securities: | | | | | | | | | |
U.S. Treasury | U.S. Treasury | | $ | 1,721 | | | $ | 25 | | | $ | — | | | $ | 1,746 | | | U.S. Treasury | | $ | 9,892 | | | $ | 9 | | | $ | 106 | | | $ | 9,795 | | |
GSE | GSE | | 1,840 | | | 77 | | | — | | | 1,917 | | | GSE | | 1,667 | | | 33 | | | 2 | | | 1,698 | | |
Agency MBS - residential | Agency MBS - residential | | 111,589 | | | 1,975 | | | 23 | | | 113,541 | | | Agency MBS - residential | | 135,886 | | | 656 | | | 2,500 | | | 134,042 | | |
Agency MBS - commercial | Agency MBS - commercial | | 2,987 | | | 72 | | | 2 | | | 3,057 | | | Agency MBS - commercial | | 2,928 | | | 18 | | | 64 | | | 2,882 | | |
States and political subdivisions | States and political subdivisions | | 447 | | | 47 | | | 1 | | | 493 | | | States and political subdivisions | | 382 | | | 39 | | | 1 | | | 420 | | |
| Non-agency MBS | | Non-agency MBS | | 4,305 | | | — | | | 47 | | | 4,258 | | |
Other | Other | | 34 | | | — | | | — | | | 34 | | | Other | | 28 | | | — | | | — | | | 28 | | |
Total AFS securities | Total AFS securities | | $ | 118,618 | | | $ | 2,196 | | | $ | 26 | | | $ | 120,788 | | | Total AFS securities | | $ | 155,088 | | | $ | 755 | | | $ | 2,720 | | | $ | 153,123 | | |
HTM securities: | | HTM securities: | | | | | | | | | |
| Agency MBS - residential | | Agency MBS - residential | | $ | 1,494 | | | $ | 1 | | | $ | — | | | $ | 1,495 | | |
|
10In 2022, Truist Financial Corporationtransferred $59.4 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies. Management determined that it has both the positive intent and ability to hold these securities to maturity. On the date of transfer, the difference between the par value and the fair value of these securities, which was recorded as a loss in AOCI, resulted in a net discount of $3.7 billion, inclusive of $510 million of basis adjustment gains from terminated fair value hedges attributable to the transferred securities. The discount will be accreted and unrealized loss in AOCI will be amortized, offsetting within interest income over the remaining life of the securities using the interest method. There were no gains or losses recognized as a result of this transfer.
CertainThe amortized cost and estimated fair value of certain MBS securities issued by FNMA and FHLMC that exceeded 10% of shareholders’ equity at September 30, 2021. The FNMA investments had total amortized cost and fair value of $42.1 billion and $41.7 billion, respectively. The FHLMC investments had total amortized cost and fair value of $44.8 billion and $44.2 billion, respectively.are shown in the table below:
| | | | | | | | | | | | | | |
| | September 30, 2022 |
(Dollars in millions) | | Amortized Cost | | Fair Value |
FNMA | | $ | 43,028 | | | $ | 36,065 | |
FHLMC | | 43,545 | | | 36,239 | |
Truist Financial Corporation 11
The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may be shorter than the contractual maturities because borrowers may have the right to prepay their obligations with or without penalties. | | | Amortized Cost | | Fair Value | | | Amortized Cost | | Fair Value | |
September 30, 2021 (Dollars in millions) | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years | | Total | | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years | | Total | | |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years | | Total | | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years | | Total | |
AFS securities: | AFS securities: | | | AFS securities: | | |
U.S. Treasury | U.S. Treasury | $ | 276 | | | $ | 8,446 | | | $ | 978 | | | $ | — | | | $ | 9,700 | | | $ | 276 | | | $ | 8,441 | | | $ | 980 | | | $ | — | | | $ | 9,697 | | | U.S. Treasury | $ | 1,085 | | | $ | 8,912 | | | $ | 883 | | | $ | 29 | | | $ | 10,909 | | | $ | 1,067 | | | $ | 8,196 | | | $ | 766 | | | $ | 25 | | | $ | 10,054 | | |
GSE | GSE | 432 | | | 1,237 | | | — | | | 160 | | | 1,829 | | | 437 | | | 1,274 | | | — | | | 163 | | | 1,874 | | | GSE | — | | | 4 | | | 14 | | | 304 | | | 322 | | | — | | | 4 | | | 13 | | | 270 | | | 287 | | |
Agency MBS - residential | Agency MBS - residential | — | | | 1 | | | 317 | | | 133,615 | | | 133,933 | | | — | | | 1 | | | 327 | | | 132,733 | | | 133,061 | | | Agency MBS - residential | — | | | 8 | | | 543 | | | 66,274 | | | 66,825 | | | — | | | 7 | | | 507 | | | 56,080 | | | 56,594 | | |
Agency MBS - commercial | Agency MBS - commercial | — | | | 1 | | | 23 | | | 3,059 | | | 3,083 | | | — | | | 1 | | | 23 | | | 3,049 | | | 3,073 | | | Agency MBS - commercial | — | | | 8 | | | 72 | | | 2,827 | | | 2,907 | | | — | | | 8 | | | 66 | | | 2,412 | | | 2,486 | | |
States and political subdivisions | States and political subdivisions | 38 | | | 95 | | | 118 | | | 171 | | | 422 | | | 39 | | | 98 | | | 135 | | | 186 | | | 458 | | | States and political subdivisions | 3 | | | 74 | | | 160 | | | 189 | | | 426 | | | 3 | | | 71 | | | 156 | | | 166 | | | 396 | | |
Non-agency MBS | Non-agency MBS | — | | | — | | | — | | | 2,856 | | | 2,856 | | | — | | | — | | | — | | | 2,846 | | | 2,846 | | | Non-agency MBS | — | | | — | | | — | | | 3,983 | | | 3,983 | | | — | | | — | | | — | | | 3,138 | | | 3,138 | | |
Other | Other | 1 | | | 6 | | | — | | | 22 | | | 29 | | | 1 | | | 6 | | | — | | | 22 | | | 29 | | | Other | 5 | | | 1 | | | — | | | 17 | | | 23 | | | 5 | | | 1 | | | — | | | 17 | | | 23 | | |
Total AFS securities | Total AFS securities | $ | 747 | | | $ | 9,786 | | | $ | 1,436 | | | $ | 139,883 | | | $ | 151,852 | | | $ | 753 | | | $ | 9,821 | | | $ | 1,465 | | | $ | 138,999 | | | $ | 151,038 | | | Total AFS securities | $ | 1,093 | | | $ | 9,007 | | | $ | 1,672 | | | $ | 73,623 | | | $ | 85,395 | | | $ | 1,075 | | | $ | 8,287 | | | $ | 1,508 | | | $ | 62,108 | | | $ | 72,978 | | |
HTM securities: | | HTM securities: | | |
| Agency MBS - residential | | Agency MBS - residential | $ | — | | | $ | — | | | $ | — | | | $ | 58,754 | | | $ | 58,754 | | | $ | — | | | $ | — | | | $ | — | | | $ | 48,975 | | | $ | 48,975 | | |
|
The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position: | | | Less than 12 months | | 12 months or more | | Total | | Less than 12 months | | 12 months or more | | Total |
September 30, 2021 (Dollars in millions) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
AFS securities: | | AFS securities: | | | | | | | | | | | |
U.S. Treasury | | U.S. Treasury | $ | 2,759 | | | $ | 185 | | | $ | 7,291 | | | $ | 670 | | | $ | 10,050 | | | $ | 855 | |
GSE | | GSE | 214 | | | 20 | | | 73 | | | 15 | | | 287 | | | 35 | |
Agency MBS - residential | | Agency MBS - residential | 36,328 | | | 5,556 | | | 20,178 | | | 4,676 | | | 56,506 | | | 10,232 | |
Agency MBS - commercial | | Agency MBS - commercial | 884 | | | 97 | | 1,600 | | | 324 | | | 2,484 | | | 421 | |
States and political subdivisions | | States and political subdivisions | 275 | | | 35 | | | 19 | | | 3 | | | 294 | | | 38 | |
Non-agency MBS | | Non-agency MBS | 1,680 | | | 444 | | | 1,457 | | | 401 | | | 3,137 | | | 845 | |
Other | | Other | 18 | | | — | | | — | | | — | | | 18 | | | — | |
Total | | Total | $ | 42,158 | | | $ | 6,337 | | | $ | 30,618 | | | $ | 6,089 | | | $ | 72,776 | | | $ | 12,426 | |
HTM securities: | | HTM securities: | | | | | | | | | | | |
| Agency MBS - residential | | Agency MBS - residential | $ | 30,842 | | | $ | 5,773 | | | $ | 18,133 | | | $ | 4,006 | | | $ | 48,975 | | | $ | 9,779 | |
| | | | | Less than 12 months | | 12 months or more | | Total |
December 31, 2021 (Dollars in millions) | | December 31, 2021 (Dollars in millions) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
| AFS securities: | AFS securities: | | | | | | | | | | | | AFS securities: | | | | | | | | | | | |
U.S. Treasury | U.S. Treasury | $ | 6,247 | | | $ | 21 | | | $ | — | | | $ | — | | | $ | 6,247 | | | $ | 21 | | U.S. Treasury | $ | 8,412 | | | $ | 88 | | | $ | 582 | | | $ | 18 | | | $ | 8,994 | | | $ | 106 | |
GSE | GSE | 95 | | | 2 | | | — | | | — | | | 95 | | | 2 | | GSE | 104 | | | 2 | | | — | | | — | | | 104 | | | 2 | |
Agency MBS - residential | Agency MBS - residential | 95,852 | | | 1,812 | | | 443 | | | 14 | | | 96,295 | | | 1,826 | | Agency MBS - residential | 101,262 | | | 2,377 | | | 2,638 | | | 123 | | | 103,900 | | | 2,500 | |
Agency MBS - commercial | Agency MBS - commercial | 1,943 | | | 34 | | 257 | | | 6 | | | 2,200 | | | 40 | | Agency MBS - commercial | 1,749 | | | 50 | | | 413 | | | 14 | | | 2,162 | | | 64 | |
States and political subdivisions | States and political subdivisions | 24 | | | 1 | | | 22 | | | 1 | | | 46 | | | 2 | | States and political subdivisions | — | | | — | | | 22 | | | 1 | | | 22 | | | 1 | |
Non-agency MBS | Non-agency MBS | 2,183 | | | 11 | | | — | | | — | | | 2,183 | | | 11 | | Non-agency MBS | 4,258 | | | 47 | | | — | | | — | | | 4,258 | | | 47 | |
Other | Other | 22 | | | — | | | — | | | — | | | 22 | | | — | | Other | 6 | | | — | | | — | | | — | | | 6 | | | — | |
Total | Total | $ | 106,366 | | | $ | 1,881 | | | $ | 722 | | | $ | 21 | | | $ | 107,088 | | | $ | 1,902 | | Total | $ | 115,791 | | | $ | 2,564 | | | $ | 3,655 | | | $ | 156 | | | $ | 119,446 | | | $ | 2,720 | |
| | | Less than 12 months | | 12 months or more | | Total | |
December 31, 2020 (Dollars in millions) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | |
| AFS securities: | | | | | | | | | | | | |
U.S. Treasury | $ | 17 | | | $ | — | | | $ | — | | | $ | — | | | $ | 17 | | | $ | — | | |
| Agency MBS - residential | 4,028 | | | 21 | | | 203 | | | 2 | | | 4,231 | | | 23 | | |
Agency MBS - commercial | 463 | | | 2 | | | 4 | | | — | | | 467 | | | 2 | | |
States and political subdivisions | 20 | | | — | | | 32 | | | 1 | | | 52 | | | 1 | | |
Other | 6 | | | — | | | — | | | — | | | 6 | | | — | | |
Total | $ | 4,534 | | | $ | 23 | | | $ | 239 | | | $ | 3 | | | $ | 4,773 | | | $ | 26 | | |
|
At September 30, 20212022 and December 31, 2020, 02021, no ACL was established for AFS or HTM securities. Substantially all of the unrealized losses on the securities portfolio, including non-agency MBS, were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. HTM debt securities consist of residential agency MBS. Accordingly, the Company does not expect to incur any credit losses on investment securities.
The following table presents gross securities gains and losses recognized in earnings: | | | | (Dollars in millions) | (Dollars in millions) | | Three Months Ended September 30, | | Nine Months Ended September 30, | (Dollars in millions) | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | (Dollars in millions) | | 2022 | | 2021 | | 2022 | | 2021 | |
| | Gross realized gains | Gross realized gains | | $ | — | | | $ | 104 | | | $ | — | | | $ | 404 | | | Gross realized gains | | $ | — | | | $ | — | | | $ | 13 | | | $ | — | | |
Gross realized losses | Gross realized losses | | — | | | — | | | — | | | (2) | | | Gross realized losses | | (1) | | | — | | | (84) | | | — | | |
| Securities gains (losses), net | Securities gains (losses), net | | $ | — | | | $ | 104 | | | $ | — | | | $ | 402 | | | Securities gains (losses), net | | $ | (1) | | | $ | — | | | $ | (71) | | | $ | — | | |
|
12 Truist Financial Corporation 11
NOTE 5. Loans and ACL
The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonaccrualnonperforming status regardless of delinquency because collection of principal and interest is reasonably assured. The past due status of loans that received a deferral under the CARES Act is generally frozen during the deferral period. In certain limited circumstances, accommodation programs result in the delinquency status being reset to current. | | | Accruing | | | Accruing | |
September 30, 2021 (Dollars in millions) | | Current | | 30-89 Days Past Due | | 90 Days Or More Past Due | | Nonperforming | | Total | |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | | Current | | 30-89 Days Past Due | | 90 Days Or More Past Due (1) | | Nonperforming | | Total |
Commercial: | Commercial: | | | | | | | | | | | Commercial: | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | | $ | 128,448 | | | $ | 131 | | | $ | 2 | | | $ | 411 | | | $ | 128,992 | | Commercial and industrial | | $ | 152,966 | | | $ | 162 | | | $ | 44 | | | $ | 443 | | | $ | 153,615 | |
CRE | CRE | | 24,285 | | | 4 | | | — | | | 20 | | | 24,309 | | CRE | | 22,472 | | | 15 | | | 1 | | | 5 | | | 22,493 | |
Commercial construction | Commercial construction | | 5,680 | | | 2 | | | — | | | 7 | | | 5,689 | | Commercial construction | | 5,565 | | | 3 | | | — | | | — | | | 5,568 | |
Lease financing | | 4,767 | | | 4 | | | 16 | | | 12 | | | 4,799 | | |
| Consumer: | Consumer: | | Consumer: | |
Residential mortgage | Residential mortgage | | 45,038 | | | 495 | | | 852 | | | 306 | | | 46,691 | | Residential mortgage | | 53,934 | | | 534 | | | 834 | | | 227 | | | 55,529 | |
Residential home equity and direct | Residential home equity and direct | | 24,988 | | | 81 | | | 7 | | | 146 | | | 25,222 | | Residential home equity and direct | | 25,357 | | | 122 | | | 12 | | | 166 | | | 25,657 | |
Indirect auto | Indirect auto | | 26,189 | | | 560 | | | 2 | | | 172 | | | 26,923 | | Indirect auto | | 27,387 | | | 591 | | | 1 | | | 260 | | | 28,239 | |
Indirect other | Indirect other | | 11,094 | | | 53 | | | 2 | | | 6 | | | 11,155 | | Indirect other | | 12,575 | | | 97 | | | 6 | | | 5 | | | 12,683 | |
Student | Student | | 5,635 | | | 456 | | | 968 | | | — | | | 7,059 | | Student | | 4,624 | | | 381 | | | 775 | | | — | | | 5,780 | |
Credit card | Credit card | | 4,623 | | | 37 | | | 23 | | | — | | | 4,683 | | Credit card | | 4,683 | | | 52 | | | 36 | | | — | | | 4,771 | |
| Total | Total | | $ | 280,747 | | | $ | 1,823 | | | $ | 1,872 | | | $ | 1,080 | | | $ | 285,522 | | Total | | $ | 309,563 | | | $ | 1,957 | | | $ | 1,709 | | | $ | 1,106 | | | $ | 314,335 | |
(1)Includes government guaranteed loans of $808 million in the residential mortgage portfolio and $770 million in the student portfolio. | | (1)Includes government guaranteed loans of $808 million in the residential mortgage portfolio and $770 million in the student portfolio. |
| | | Accruing | | | Accruing | |
December 31, 2020 (Dollars in millions) | | Current | | 30-89 Days Past Due | | 90 Days Or More Past Due | | Nonperforming | | Total | |
December 31, 2021 (Dollars in millions) | | December 31, 2021 (Dollars in millions) | | Current | | 30-89 Days Past Due | | 90 Days Or More Past Due (1) | | Nonperforming | | Total |
Commercial: | Commercial: | | | | | | | | | | | Commercial: | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | | $ | 137,726 | | | $ | 83 | | | $ | 13 | | | $ | 532 | | | $ | 138,354 | | Commercial and industrial | | $ | 138,225 | | | $ | 130 | | | $ | 13 | | | $ | 394 | | | $ | 138,762 | |
CRE | CRE | | 26,506 | | | 14 | | | — | | | 75 | | | 26,595 | | CRE | | 23,902 | | | 20 | | | — | | | 29 | | | 23,951 | |
Commercial construction | Commercial construction | | 6,472 | | | 5 | | | — | | | 14 | | | 6,491 | | Commercial construction | | 4,962 | | | 2 | | | — | | | 7 | | | 4,971 | |
Lease financing | | 5,206 | | | 6 | | | — | | | 28 | | | 5,240 | | |
| Consumer: | Consumer: | | | | | | | | | | Consumer: | | | | | | | | | |
Residential mortgage | Residential mortgage | | 45,333 | | | 782 | | | 841 | | | 316 | | | 47,272 | | Residential mortgage | | 46,033 | | | 514 | | | 1,009 | | | 296 | | | 47,852 | |
Residential home equity and direct | Residential home equity and direct | | 25,751 | | | 98 | | | 10 | | | 205 | | | 26,064 | | Residential home equity and direct | | 24,809 | | | 107 | | | 9 | | | 141 | | | 25,066 | |
Indirect auto | Indirect auto | | 25,498 | | | 495 | | | 2 | | | 155 | | | 26,150 | | Indirect auto | | 25,615 | | | 607 | | | 1 | | | 218 | | | 26,441 | |
Indirect other | Indirect other | | 11,102 | | | 68 | | | 2 | | | 5 | | | 11,177 | | Indirect other | | 10,811 | | | 64 | | | 3 | | | 5 | | | 10,883 | |
Student | Student | | 5,823 | | | 618 | | | 1,111 | | | — | | | 7,552 | | Student | | 5,357 | | | 555 | | | 868 | | | — | | | 6,780 | |
Credit card | Credit card | | 4,759 | | | 51 | | | 29 | | | — | | | 4,839 | | Credit card | | 4,735 | | | 45 | | | 27 | | | — | | | 4,807 | |
| Total | Total | | $ | 294,176 | | | $ | 2,220 | | | $ | 2,008 | | | $ | 1,330 | | | $ | 299,734 | | Total | | $ | 284,449 | | | $ | 2,044 | | | $ | 1,930 | | | $ | 1,090 | | | $ | 289,513 | |
(1)Includes government guaranteed loans of $978 million in the residential mortgage portfolio and $864 million in the student portfolio. | | (1)Includes government guaranteed loans of $978 million in the residential mortgage portfolio and $864 million in the student portfolio. |
12 Truist Financial Corporation 13
The following table presentstables present the amortized cost basis of loans by origination year and credit quality indicator: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2021 (Dollars in millions) | Amortized Cost Basis by Origination Year | | Revolving Credit | | Loans Converted to Term | | Other (1) | | | |
2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | | | Total | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial: | | | | | | | | | | | | | | | | | | | | |
Pass | $ | 25,433 | | | $ | 17,587 | | | $ | 14,278 | | | $ | 9,315 | | | $ | 5,670 | | | $ | 10,042 | | | $ | 41,570 | | | $ | — | | | $ | (390) | | | $ | 123,505 | | |
Special mention | 186 | | | 231 | | | 402 | | | 253 | | | 97 | | | 92 | | | 973 | | | — | | | — | | | 2,234 | | |
Substandard | 302 | | | 314 | | | 493 | | | 213 | | | 71 | | | 289 | | | 1,160 | | | — | | | — | | | 2,842 | | |
Nonperforming | 36 | | | 26 | | | 70 | | | 46 | | | 18 | | | 59 | | | 157 | | | — | | | (1) | | | 411 | | |
Total | 25,957 | | | 18,158 | | | 15,243 | | | 9,827 | | | 5,856 | | | 10,482 | | | 43,860 | | | — | | | (391) | | | 128,992 | | |
CRE: | | | | | | | | | | | | | | | | | | | | |
Pass | 2,825 | | | 3,405 | | | 5,516 | | | 3,794 | | | 2,051 | | | 2,442 | | | 671 | | | — | | | (61) | | | 20,643 | | |
Special mention | 57 | | | 107 | | | 486 | | | 317 | | | 51 | | | 129 | | | — | | | — | | | — | | | 1,147 | | |
Substandard | 305 | | | 310 | | | 633 | | | 551 | | | 402 | | | 298 | | | — | | | — | | | — | | | 2,499 | | |
Nonperforming | 2 | | | 1 | | | — | | | 2 | | | 3 | | | 12 | | | — | | | — | | | — | | | 20 | | |
Total | 3,189 | | | 3,823 | | | 6,635 | | | 4,664 | | | 2,507 | | | 2,881 | | | 671 | | | — | | | (61) | | | 24,309 | | |
Commercial construction: | | | | | | | | | | | | | | | | | | | | |
Pass | 836 | | | 1,125 | | | 1,676 | | | 681 | | | 138 | | | 99 | | | 661 | | | — | | | 7 | | | 5,223 | | |
Special mention | — | | | 26 | | | 140 | | | 102 | | | — | | | — | | | — | | | — | | | — | | | 268 | | |
Substandard | 6 | | | 6 | | | 40 | | | 74 | | | 65 | | | — | | | — | | | — | | | — | | | 191 | | |
Nonperforming | — | | | 1 | | | 1 | | | — | | | 4 | | | — | | | — | | | — | | | 1 | | | 7 | | |
Total | 842 | | | 1,158 | | | 1,857 | | | 857 | | | 207 | | | 99 | | | 661 | | | — | | | 8 | | | 5,689 | | |
Lease financing: | | | | | | | | | | | | | | | | | | | | |
Pass | 970 | | | 1,232 | | | 811 | | | 525 | | | 528 | | | 707 | | | — | | | — | | | (62) | | | 4,711 | | |
Special mention | 1 | | | — | | | — | | | — | | | 3 | | | 2 | | | — | | | — | | | — | | | 6 | | |
Substandard | — | | | 1 | | | 29 | | | 2 | | | 2 | | | 36 | | | — | | | — | | | — | | | 70 | | |
Nonperforming | — | | | 2 | | | 3 | | | 4 | | | — | | | 2 | | | — | | | — | | | 1 | | | 12 | | |
Total | 971 | | | 1,235 | | | 843 | | | 531 | | | 533 | | | 747 | | | — | | | — | | | (61) | | | 4,799 | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Residential mortgage: | | | | | | | | | | | | | | | | | | | | |
Performing | 12,741 | | | 7,355 | | | 4,360 | | | 2,237 | | | 2,719 | | | 16,872 | | | — | | | — | | | 101 | | | 46,385 | | |
Nonperforming | — | | | 3 | | | 22 | | | 27 | | | 22 | | | 232 | | | — | | | — | | | — | | | 306 | | |
Total | 12,741 | | | 7,358 | | | 4,382 | | | 2,264 | | | 2,741 | | | 17,104 | | | — | | | — | | | 101 | | | 46,691 | | |
Residential home equity and direct: | | | | | | | | | | | | | | | | | | | | |
Performing | 4,061 | | | 3,028 | | | 2,015 | | | 829 | | | 241 | | | 482 | | | 10,946 | | | 3,405 | | | 69 | | | 25,076 | | |
Nonperforming | 1 | | | 3 | | | 4 | | | 2 | | | 1 | | | 7 | | | 50 | | | 78 | | | — | | | 146 | | |
Total | 4,062 | | | 3,031 | | | 2,019 | | | 831 | | | 242 | | | 489 | | | 10,996 | | | 3,483 | | | 69 | | | 25,222 | | |
Indirect auto: | | | | | | | | | | | | | | | | | | | | |
Performing | 8,950 | | | 7,705 | | | 5,106 | | | 2,612 | | | 1,426 | | | 778 | | | — | | | — | | | 174 | | | 26,751 | | |
Nonperforming | 9 | | | 37 | | | 54 | | | 38 | | | 21 | | | 18 | | | — | | | — | | | (5) | | | 172 | | |
Total | 8,959 | | | 7,742 | | | 5,160 | | | 2,650 | | | 1,447 | | | 796 | | | — | | | — | | | 169 | | | 26,923 | | |
Indirect other: | | | | | | | | | | | | | | | | | | | | |
Performing | 3,747 | | | 3,083 | | | 1,901 | | | 1,086 | | | 527 | | | 779 | | | — | | | — | | | 26 | | | 11,149 | | |
Nonperforming | — | | | 3 | | | 2 | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 6 | | |
Total | 3,747 | | | 3,086 | | | 1,903 | | | 1,086 | | | 527 | | | 780 | | | — | | | — | | | 26 | | | 11,155 | | |
| | | | | | | | | | | | | | | | | | | | |
Student | — | | | 22 | | | 94 | | | 79 | | | 66 | | | 6,765 | | | — | | | — | | | 33 | | | 7,059 | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Credit card | — | | | — | | | — | | | — | | | — | | | — | | | 4,653 | | | 30 | | | — | | | 4,683 | | |
Total | $ | 60,468 | | | $ | 45,613 | | | $ | 38,136 | | | $ | 22,789 | | | $ | 14,126 | | | $ | 40,143 | | | $ | 60,841 | | | $ | 3,513 | | | $ | (107) | | | $ | 285,522 | | |
| | | | | | | | | | | | | | | | | | | | |
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Truist Financial Corporation 13
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December 31, 2020 (Dollars in millions) | Amortized Cost Basis by Origination Year | | Revolving Credit | | Loans Converted to Term | | Other (1) | | | |
2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | | Total | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial: | | | | | | | | | | | | | | | | | | | | |
Pass | $ | 34,858 | | | $ | 18,881 | | | $ | 13,312 | | | $ | 7,713 | | | $ | 5,174 | | | $ | 8,888 | | | $ | 42,780 | | | $ | 231 | | | $ | (579) | | | $ | 131,258 | | |
Special mention | 471 | | | 434 | | | 343 | | | 98 | | | 120 | | | 157 | | | 1,808 | | | 5 | | | (1) | | | 3,435 | | |
Substandard | 461 | | | 445 | | | 339 | | | 121 | | | 144 | | | 256 | | | 1,353 | | | 12 | | | (2) | | | 3,129 | | |
Nonperforming | 38 | | | 92 | | | 48 | | | 29 | | | 25 | | | 61 | | | 233 | | | 4 | | | 2 | | | 532 | | |
Total | 35,828 | | | 19,852 | | | 14,042 | | | 7,961 | | | 5,463 | | | 9,362 | | | 46,174 | | | 252 | | | (580) | | | 138,354 | | |
CRE: | | | | | | | | | | | | | | | | | | | | |
Pass | 4,563 | | | 6,600 | | | 4,427 | | | 2,752 | | | 1,473 | | | 2,096 | | | 617 | | | — | | | (69) | | | 22,459 | | |
Special mention | 171 | | | 599 | | | 585 | | | 116 | | | 77 | | | 141 | | | — | | | — | | | — | | | 1,689 | | |
Substandard | 410 | | | 776 | | | 438 | | | 281 | | | 182 | | | 280 | | | 5 | | | — | | | — | | | 2,372 | | |
Nonperforming | 1 | | | 15 | | | 1 | | | 9 | | | 6 | | | 43 | | | — | | | — | | | — | | | 75 | | |
Total | 5,145 | | | 7,990 | | | 5,451 | | | 3,158 | | | 1,738 | | | 2,560 | | | 622 | | | — | | | (69) | | | 26,595 | | |
Commercial construction: | | | | | | | | | | | | | | | | | | | | |
Pass | 1,052 | | | 2,141 | | | 1,889 | | | 232 | | | 27 | | | 110 | | | 534 | | | — | | | 2 | | | 5,987 | | |
Special mention | — | | | 108 | | | 64 | | | 1 | | | — | | | — | | | 2 | | | — | | | — | | | 175 | | |
Substandard | 70 | | | 106 | | | 73 | | | 59 | | | 6 | | | 1 | | | — | | | — | | | — | | | 315 | | |
Nonperforming | 1 | | | 3 | | | — | | | 7 | | | — | | | — | | | — | | | 3 | | | — | | | 14 | | |
Total | 1,123 | | | 2,358 | | | 2,026 | | | 299 | | | 33 | | | 111 | | | 536 | | | 3 | | | 2 | | | 6,491 | | |
Lease financing: | | | | | | | | | | | | | | | | | | | | |
Pass | 1,377 | | | 1,139 | | | 775 | | | 746 | | | 241 | | | 760 | | | — | | | — | | | 27 | | | 5,065 | | |
Special mention | 1 | | | 39 | | | 20 | | | 5 | | | — | | | 7 | | | — | | | — | | | — | | | 72 | | |
Substandard | — | | | 34 | | | 3 | | | 4 | | | 3 | | | 31 | | | — | | | — | | | — | | | 75 | | |
Nonperforming | 2 | | | 5 | | | 3 | | | 9 | | | 4 | | | 5 | | | — | | | — | | | — | | | 28 | | |
Total | 1,380 | | | 1,217 | | | 801 | | | 764 | | | 248 | | | 803 | | | — | | | — | | | 27 | | | 5,240 | | |
Consumer: | | | | | | | | | | | | | | | | | | | | |
Residential mortgage: | | | | | | | | | | | | | | | | | | | | |
Performing | 8,197 | | | 6,729 | | | 3,735 | | | 4,374 | | | 5,424 | | | 18,333 | | | — | | | — | | | 164 | | | 46,956 | | |
Nonperforming | 3 | | | 13 | | | 16 | | | 13 | | | 14 | | | 257 | | | — | | | — | | | — | | | 316 | | |
Total | 8,200 | | | 6,742 | | | 3,751 | | | 4,387 | | | 5,438 | | | 18,590 | | | — | | | — | | | 164 | | | 47,272 | | |
Residential home equity and direct: | | | | | | | | | | | | | | | | | | | | |
Performing | 4,513 | | | 3,126 | | | 1,416 | | | 481 | | | 214 | | | 557 | | | 13,886 | | | 1,619 | | | 47 | | | 25,859 | | |
Nonperforming | 1 | | | 4 | | | 2 | | | 1 | | | 1 | | | 7 | | | 87 | | | 101 | | | 1 | | | 205 | | |
Total | 4,514 | | | 3,130 | | | 1,418 | | | 482 | | | 215 | | | 564 | | | 13,973 | | | 1,720 | | | 48 | | | 26,064 | | |
Indirect auto: | | | | | | | | | | | | | | | | | | | | |
Performing | 10,270 | | | 7,436 | | | 4,015 | | | 2,401 | | | 1,220 | | | 506 | | | — | | | — | | | 147 | | | 25,995 | | |
Nonperforming | 13 | | | 50 | | | 44 | | | 27 | | | 15 | | | 12 | | | — | | | — | | | (6) | | | 155 | | |
Total | 10,283 | | | 7,486 | | | 4,059 | | | 2,428 | | | 1,235 | | | 518 | | | — | | | — | | | 141 | | | 26,150 | | |
Indirect other: | | | | | | | | | | | | | | | | | | | | |
Performing | 4,433 | | | 3,019 | | | 1,706 | | | 826 | | | 431 | | | 718 | | | — | | | — | | | 39 | | | 11,172 | | |
Nonperforming | 1 | | | 1 | | | 1 | | | — | | | — | | | 2 | | | — | | | — | | | — | | | 5 | | |
Total | 4,434 | | | 3,020 | | | 1,707 | | | 826 | | | 431 | | | 720 | | | — | | | — | | | 39 | | | 11,177 | | |
| | | | | | | | | | | | | | | | | | | | |
Student | 22 | | | 110 | | | 95 | | | 81 | | | 64 | | | 7,185 | | | — | | | — | | | (5) | | | 7,552 | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Credit card | — | | | — | | | — | | | — | | | — | | | — | | | 4,802 | | | 37 | | | — | | | 4,839 | | |
Total | $ | 70,929 | | | $ | 51,905 | | | $ | 33,350 | | | $ | 20,386 | | | $ | 14,865 | | | $ | 40,413 | | | $ | 66,107 | | | $ | 2,012 | | | $ | (233) | | | $ | 299,734 | | |
(1)Includes certain deferred fees and costs, unapplied payments, and other adjustments.
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September 30, 2022 (Dollars in millions) | Amortized Cost Basis by Origination Year | | Revolving Credit | | Loans Converted to Term | | Other (1) | | | |
2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | | | | Total | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial: | | | | | | | | | | | | | | | | | | | | |
Pass | $ | 34,437 | | | $ | 23,704 | | | $ | 11,578 | | | $ | 9,002 | | | $ | 6,036 | | | $ | 10,704 | | | $ | 53,833 | | | $ | — | | | $ | (158) | | | $ | 149,136 | | |
Special mention | 133 | | | 289 | | | 217 | | | 127 | | | 62 | | | 45 | | | 455 | | | — | | | — | | | 1,328 | | |
Substandard | 249 | | | 325 | | | 401 | | | 435 | | | 224 | | | 202 | | | 872 | | | — | | | — | | | 2,708 | | |
Nonperforming | 47 | | | 66 | | | 5 | | | 44 | | | 49 | | | 34 | | | 198 | | | — | | | — | | | 443 | | |
Total | 34,866 | | | 24,384 | | | 12,201 | | | 9,608 | | | 6,371 | | | 10,985 | | | 55,358 | | | — | | | (158) | | | 153,615 | | |
CRE: | | | | | | | | | | | | | | | | | | | | |
Pass | 4,634 | | | 3,711 | | | 2,386 | | | 4,094 | | | 2,444 | | | 2,598 | | | 719 | | | — | | | (57) | | | 20,529 | | |
Special mention | 62 | | | 50 | | | 75 | | | 262 | | | 232 | | | 24 | | | — | | | — | | | — | | | 705 | | |
Substandard | 110 | | | 110 | | | 104 | | | 452 | | | 316 | | | 162 | | | — | | | — | | | — | | | 1,254 | | |
Nonperforming | — | | | 1 | | | — | | | 1 | | | — | | | 3 | | | — | | | — | | | — | | | 5 | | |
Total | 4,806 | | | 3,872 | | | 2,565 | | | 4,809 | | | 2,992 | | | 2,787 | | | 719 | | | — | | | (57) | | | 22,493 | | |
Commercial construction: | | | | | | | | | | | | | | | | | | | | |
Pass | 1,104 | | | 1,352 | | | 989 | | | 360 | | | 281 | | | 78 | | | 1,100 | | | — | | | (2) | | | 5,262 | | |
Special mention | 27 | | | 1 | | | 92 | | | 27 | | | 53 | | | — | | | 33 | | | — | | | — | | | 233 | | |
Substandard | 26 | | | 2 | | | 21 | | | 3 | | | 21 | | | — | | | — | | | — | | | — | | | 73 | | |
Nonperforming | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
Total | 1,157 | | | 1,355 | | | 1,102 | | | 390 | | | 355 | | | 78 | | | 1,133 | | | — | | | (2) | | | 5,568 | | |
| | | | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | |
Residential mortgage: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 11,946 | | | 17,500 | | | 6,270 | | | 3,140 | | | 1,406 | | | 13,672 | | | — | | | — | | | — | | | 53,934 | | |
30 - 89 days past due | 59 | | | 38 | | | 29 | | | 35 | | | 36 | | | 337 | | | — | | | — | | | — | | | 534 | | |
90 days or more past due | 4 | | | 14 | | | 60 | | | 67 | | | 100 | | | 589 | | | — | | | — | | | — | | | 834 | | |
Nonperforming | 1 | | | 4 | | | 8 | | | 14 | | | 17 | | | 183 | | | — | | | — | | | — | | | 227 | | |
Total | 12,010 | | | 17,556 | | | 6,367 | | | 3,256 | | | 1,559 | | | 14,781 | | | — | | | — | | | — | | | 55,529 | | |
Residential home equity and direct: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 4,464 | | | 3,476 | | | 1,682 | | | 969 | | | 362 | | | 342 | | | 10,310 | | | 3,755 | | | (3) | | | 25,357 | | |
30 - 89 days past due | 14 | | | 13 | | | 7 | | | 7 | | | 3 | | | 2 | | | 53 | | | 23 | | | — | | | 122 | | |
90 days or more past due | — | | | — | | | — | | | — | | | — | | | — | | | 10 | | | 2 | | | — | | | 12 | | |
Nonperforming | 2 | | | 9 | | | 6 | | | 7 | | | 2 | | | 7 | | | 50 | | | 83 | | | — | | | 166 | | |
Total | 4,480 | | | 3,498 | | | 1,695 | | | 983 | | | 367 | | | 351 | | | 10,423 | | | 3,863 | | | (3) | | | 25,657 | | |
Indirect auto: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 9,745 | | | 7,738 | | | 4,574 | | | 2,868 | | | 1,459 | | | 1,003 | | | — | | | — | | | — | | | 27,387 | | |
30 - 89 days past due | 88 | | | 161 | | | 112 | | | 105 | | | 64 | | | 61 | | | — | | | — | | | — | | | 591 | | |
90 days or more past due | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | |
Nonperforming | 20 | | | 68 | | | 53 | | | 57 | | | 35 | | | 27 | | | — | | | — | | | — | | | 260 | | |
Total | 9,854 | | | 7,967 | | | 4,739 | | | 3,030 | | | 1,558 | | | 1,091 | | | — | | | — | | | — | | | 28,239 | | |
Indirect other: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 5,067 | | | 2,976 | | | 1,875 | | | 1,102 | | | 663 | | | 892 | | | — | | | — | | | — | | | 12,575 | | |
30 - 89 days past due | 29 | | | 23 | | | 17 | | | 14 | | | 8 | | | 6 | | | — | | | — | | | — | | | 97 | | |
90 days or more past due | 4 | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | 6 | | |
Nonperforming | — | | | — | | | 2 | | | 1 | | | — | | | 2 | | | — | | | — | | | — | | | 5 | | |
Total | 5,100 | | | 3,000 | | | 1,895 | | | 1,117 | | | 671 | | | 900 | | | — | | | — | | | — | | | 12,683 | | |
Student: | | | | | | | | | | | | | | | | | | | | |
Current | — | | | — | | | 17 | | 73 | | 59 | | 4,451 | | | — | | | — | | | 24 | | 4,624 | | |
30 - 89 days past due | — | | | — | | | — | | | 1 | | | 1 | | 379 | | | — | | | — | | | 0 | | 381 | | |
90 days or more past due | — | | | — | | | — | | | 1 | | | 1 | | 773 | | | — | | | — | | | 0 | | 775 | | |
| | | | | | | | | | | | | | | | | | | | |
Total | — | | | — | | | 17 | | 75 | | 61 | | 5,603 | | | — | | | — | | | 24 | | 5,780 | | |
Credit card: | | | | | | | | | | | | | | | | | | | | |
Current | | | | | | | | | | | | | 4,666 | | | 17 | | | — | | | 4,683 | | |
30 - 89 days past due | | | | | | | | | | | | | 50 | | | 2 | | | — | | | 52 | | |
90 days or more past due | | | | | | | | | | | | | 35 | | | 1 | | | — | | | 36 | | |
| | | | | | | | | | | | | | | | | | | | |
Total | — | | | — | | | — | | | — | | | — | | | — | | | 4,751 | | | 20 | | | — | | | 4,771 | | |
Total | $ | 72,273 | | | $ | 61,632 | | | $ | 30,581 | | | $ | 23,268 | | | $ | 13,934 | | | $ | 36,576 | | | $ | 72,384 | | | $ | 3,883 | | | $ | (196) | | | $ | 314,335 | | |
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14 Truist Financial Corporation
ACL | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2021 (Dollars in millions) | Amortized Cost Basis by Origination Year | | Revolving Credit | | Loans Converted to Term | | Other (1) | | | |
2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | | | Total | |
Commercial: | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial: | | | | | | | | | | | | | | | | | | | | |
Pass | $ | 35,530 | | | $ | 17,430 | | | $ | 14,105 | | | $ | 8,994 | | | $ | 5,633 | | | $ | 9,424 | | | $ | 43,035 | | | $ | — | | | $ | (169) | | | $ | 133,982 | | |
Special mention | 195 | | | 221 | | | 326 | | | 317 | | | 46 | | | 70 | | | 691 | | | — | | | — | | | 1,866 | | |
Substandard | 352 | | | 356 | | | 395 | | | 197 | | | 91 | | | 335 | | | 794 | | | — | | | — | | | 2,520 | | |
Nonperforming | 50 | | | 19 | | | 49 | | | 42 | | | 16 | | | 34 | | | 184 | | | — | | | — | | | 394 | | |
Total | 36,127 | | | 18,026 | | | 14,875 | | | 9,550 | | | 5,786 | | | 9,863 | | | 44,704 | | | — | | | (169) | | | 138,762 | | |
CRE: | | | | | | | | | | | | | | | | | | | | |
Pass | 4,836 | | | 2,946 | | | 5,109 | | | 3,201 | | | 1,774 | | | 2,131 | | | 762 | | | — | | | (61) | | | 20,698 | | |
Special mention | 13 | | | 118 | | | 483 | | | 247 | | | 44 | | | 83 | | | — | | | — | | | — | | | 988 | | |
Substandard | 321 | | | 264 | | | 523 | | | 528 | | | 321 | | | 279 | | | — | | | — | | | — | | | 2,236 | | |
Nonperforming | 1 | | | 1 | | | 11 | | | — | | | 9 | | | 7 | | | — | | | — | | | — | | | 29 | | |
Total | 5,171 | | | 3,329 | | | 6,126 | | | 3,976 | | | 2,148 | | | 2,500 | | | 762 | | | — | | | (61) | | | 23,951 | | |
Commercial construction: | | | | | | | | | | | | | | | | | | | | |
Pass | 1,113 | | | 1,179 | | | 1,259 | | | 419 | | | 44 | | | 95 | | | 558 | | | — | | | 12 | | | 4,679 | | |
Special mention | — | | | 14 | | | 72 | | | 50 | | | — | | | — | | | — | | | — | | | — | | | 136 | | |
Substandard | 7 | | | 13 | | | 45 | | | 67 | | | 17 | | | — | | | — | | | — | | | — | | | 149 | | |
Nonperforming | — | | | — | | | 1 | | | — | | | 5 | | | — | | | — | | | — | | | 1 | | | 7 | | |
Total | 1,120 | | | 1,206 | | | 1,377 | | | 536 | | | 66 | | | 95 | | | 558 | | | — | | | 13 | | | 4,971 | | |
| | | | | | | | | | | | | | | | | | | | |
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Consumer: | | | | | | | | | | | | | | | | | | | | |
Residential mortgage: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 17,271 | | | 6,798 | | | 3,642 | | | 1,753 | | | 2,237 | | | 14,240 | | | — | | | — | | | 92 | | | 46,033 | | |
30 - 89 days past due | 58 | | | 31 | | | 32 | | | 40 | | | 31 | | | 322 | | | — | | | — | | | — | | | 514 | | |
90 or more days past due | 3 | | | 44 | | | 91 | | | 133 | | | 95 | | | 643 | | | — | | | — | | | — | | | 1,009 | | |
Nonperforming | 1 | | | 5 | | | 18 | | | 27 | | | 20 | | | 226 | | | — | | | — | | | (1) | | | 296 | | |
Total | 17,333 | | | 6,878 | | | 3,783 | | | 1,953 | | | 2,383 | | | 15,431 | | | — | | | — | | | 91 | | | 47,852 | | |
Residential home equity and direct: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 4,962 | | | 2,630 | | | 1,717 | | | 691 | | | 189 | | | 425 | | | 10,757 | | | 3,388 | | | 50 | | | 24,809 | | |
30 - 89 days past due | 8 | | | 8 | | | 10 | | | 3 | | | 1 | | | 3 | | | 53 | | | 21 | | | — | | | 107 | | |
90 days or more past due | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 4 | | | — | | | 9 | | |
Nonperforming | 2 | | | 3 | | | 4 | | | 1 | | | — | | | 7 | | | 48 | | | 75 | | | 1 | | | 141 | | |
Total | 4,972 | | | 2,641 | | | 1,731 | | | 695 | | | 190 | | | 435 | | | 10,863 | | | 3,488 | | | 51 | | | 25,066 | | |
Indirect auto: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 10,699 | | | 6,691 | | | 4,293 | | | 2,158 | | | 1,081 | | | 504 | | | — | | | — | | | 189 | | | 25,615 | | |
30 - 89 days past due | 119 | | | 138 | | | 145 | | | 97 | | | 56 | | | 52 | | | — | | | — | | | — | | | 607 | | |
90 days or more past due | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | | |
Nonperforming | 28 | | | 48 | | | 61 | | | 41 | | | 21 | | | 19 | | | — | | | — | | | — | | | 218 | | |
Total | 10,846 | | | 6,877 | | | 4,499 | | | 2,296 | | | 1,158 | | | 576 | | | — | | | — | | | 189 | | | 26,441 | | |
Indirect other: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Current | 4,333 | | | 2,724 | | | 1,638 | | | 937 | | | 455 | | | 691 | | | — | | | — | | | 33 | | | 10,811 | | |
30 - 89 days past due | 14 | | | 15 | | | 15 | | | 12 | | | 4 | | | 4 | | | — | | | — | | | — | | | 64 | | |
90 days or more past due | 1 | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3 | | |
Nonperforming | 1 | | | 1 | | | 1 | | | — | | | — | | | 2 | | | — | | | — | | | — | | | 5 | | |
Total | 4,349 | | | 2,741 | | | 1,655 | | | 949 | | | 459 | | | 697 | | | — | | | — | | | 33 | | | 10,883 | | |
Student: | | | | | | | | | | | | | | | | | | | | |
Current | — | | | 21 | | | 88 | | | 73 | | | 61 | | | 5,122 | | | — | | | — | | | (8) | | | 5,357 | | |
30 - 89 days past due | — | | | — | | | 1 | | | 1 | | | 1 | | | 552 | | | — | | | — | | | — | | | 555 | | |
90 days or more past due | — | | | — | | | — | | | — | | | 1 | | | 867 | | | — | | | — | | | — | | | 868 | | |
| | | | | | | | | | | | | | | | | | | | |
Total | — | | | 21 | | | 89 | | | 74 | | | 63 | | | 6,541 | | | — | | | — | | | (8) | | | 6,780 | | |
Credit card: | | | | | | | | | | | | | | | | | | | | |
Current | | | | | | | | | | | | | 4,711 | | | 24 | | | — | | | 4,735 | | |
30 - 89 days past due | | | | | | | | | | | | | 43 | | | 2 | | | — | | | 45 | | |
90 days or more past due | | | | | | | | | | | | | 26 | | | 1 | | | — | | | 27 | | |
| | | | | | | | | | | | | | | | | | | | |
Total | — | | | — | | | — | | | — | | | — | | | — | | | 4,780 | | | 27 | | | — | | | 4,807 | | |
Total | $ | 79,918 | | | $ | 41,719 | | | $ | 34,135 | | | $ | 20,029 | | | $ | 12,253 | | | $ | 36,138 | | | $ | 61,667 | | | $ | 3,515 | | | $ | 139 | | | $ | 289,513 | | |
(1)Includes certain deferred fees and costs and other adjustments.
The following tables present activity in the ACL: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(Dollars in millions) | | Balance at Jul 1, 2020 | | | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (2) | | Balance at Sep 30, 2020 |
Commercial: | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 2,137 | | | | | $ | (112) | | | $ | 20 | | | $ | 140 | | | $ | — | | | $ | 2,185 | |
CRE | | 391 | | | | | (44) | | | — | | | 155 | | | — | | | 502 | |
Commercial construction | | 134 | | | | | (19) | | | 2 | | | 17 | | | — | | | 134 | |
Lease financing | | 59 | | | | | (44) | | | 4 | | | 34 | | | — | | | 53 | |
Consumer: | | | | | | | | | | | | | | |
Residential mortgage | | 431 | | | | | (4) | | | 3 | | | (6) | | | — | | | 424 | |
Residential home equity and direct | | 697 | | | | | (52) | | | 16 | | | 43 | | | — | | | 704 | |
Indirect auto | | 1,190 | | | | | (72) | | | 22 | | | 49 | | | — | | | 1,189 | |
Indirect other | | 213 | | | | | (8) | | | 4 | | | 13 | | | — | | | 222 | |
Student | | 123 | | | | | (6) | | | — | | | 11 | | | 2 | | | 130 | |
Credit card | | 327 | | | | | (44) | | | 8 | | | 29 | | | — | | | 320 | |
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ALLL | | 5,702 | | | | | (405) | | | 79 | | | 485 | | | 2 | | | 5,863 | |
RUFC | | 431 | | | | | — | | | — | | | (64) | | | (1) | | | 366 | |
ACL | | $ | 6,133 | | | | | $ | (405) | | | $ | 79 | | | $ | 421 | | | $ | 1 | | | $ | 6,229 | |
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(Dollars in millions) | | Balance at Jul 1, 2021 | | | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (2) | | Balance at Sep 30, 2021 |
Commercial: | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,757 | | | | | $ | (57) | | | $ | 21 | | | $ | (180) | | | $ | — | | | $ | 1,541 | |
CRE | | 440 | | | | | (1) | | | 1 | | | (70) | | | — | | | 370 | |
Commercial construction | | 69 | | | | | — | | | 1 | | | (11) | | | — | | | 59 | |
Lease financing | | 47 | | | | | — | | | 21 | | | (37) | | | — | | | 31 | |
Consumer: | | | | | | | | | | | | | | |
Residential mortgage | | 321 | | | | | (7) | | | 3 | | | (6) | | | — | | | 311 | |
Residential home equity and direct | | 694 | | | | | (51) | | | 20 | | | (18) | | | — | | | 645 | |
Indirect auto | | 1,116 | | | | | (73) | | | 22 | | | 6 | | | — | | | 1,071 | |
Indirect other | | 181 | | | | | (13) | | | 5 | | | 21 | | | — | | | 194 | |
Student | | 129 | | | | | (6) | | | 1 | | | 1 | | | 1 | | | 126 | |
Credit card | | 367 | | | | | (31) | | | 9 | | | 9 | | | — | | | 354 | |
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ALLL | | 5,121 | | | | | (239) | | | 104 | | | (285) | | | 1 | | | 4,702 | |
RUFC | | 315 | | | | | — | | | — | | | (39) | | | — | | | 276 | |
ACL | | $ | 5,436 | | | | | $ | (239) | | | $ | 104 | | | $ | (324) | | | $ | 1 | | | $ | 4,978 | |
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(Dollars in millions) | | Balance at Jan 1, 2020 (1) | | | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (2) | | Balance at Sep 30, 2020 |
Commercial: | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 560 | | | | | $ | (274) | | | $ | 58 | | | $ | 937 | | | $ | 904 | | | $ | 2,185 | |
CRE | | 150 | | | | | (59) | | | 4 | | | 325 | | | 82 | | | 502 | |
Commercial construction | | 52 | | | | | (22) | | | 10 | | | 78 | | | 16 | | | 134 | |
Lease financing | | 10 | | | | | (50) | | | 4 | | | (5) | | | 94 | | | 53 | |
Consumer: | | | | | | | | | | | | | | |
Residential mortgage | | 176 | | | | | (50) | | | 7 | | | 26 | | | 265 | | | 424 | |
Residential home equity and direct | | 107 | | | | | (185) | | | 46 | | | 282 | | | 454 | | | 704 | |
Indirect auto | | 304 | | | | | (294) | | | 63 | | | 298 | | | 818 | | | 1,189 | |
Indirect other | | 60 | | | | | (46) | | | 18 | | | 40 | | | 150 | | | 222 | |
Student | | — | | | | | (20) | | | 1 | | | 24 | | | 125 | | | 130 | |
Credit card | | 122 | | | | | (147) | | | 22 | | | 148 | | | 175 | | | 320 | |
PCI | | 8 | | | | | — | | | — | | | — | | | (8) | | | — | |
ALLL | | 1,549 | | | | | (1,147) | | | 233 | | | 2,153 | | | 3,075 | | | 5,863 | |
RUFC | | 340 | | | | | — | | | — | | | 5 | | | 21 | | | 366 | |
ACL | | $ | 1,889 | | | | | $ | (1,147) | | | $ | 233 | | | $ | 2,158 | | | $ | 3,096 | | | $ | 6,229 | |
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Truist Financial Corporation 15
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(Dollars in millions) | | Balance at Jan 1, 2021 | | | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (2) | | Balance at Sep 30, 2021 |
Commercial: | | | | | | | | | | | | | | |
Commercial and industrial | | $ | 2,156 | | | | | $ | (181) | | | $ | 60 | | | $ | (494) | | | $ | — | | | $ | 1,541 | |
CRE | | 573 | | | | | (5) | | | 6 | | | (204) | | | — | | | 370 | |
Commercial construction | | 81 | | | | | (2) | | | 3 | | | (23) | | | — | | | 59 | |
Lease financing | | 48 | | | | | (8) | | | 24 | | | (33) | | | — | | | 31 | |
Consumer: | | | | | | | | | | | | | | |
Residential mortgage | | 368 | | | | | (22) | | | 10 | | | (45) | | | — | | | 311 | |
Residential home equity and direct | | 714 | | | | | (163) | | | 58 | | | 36 | | | — | | | 645 | |
Indirect auto | | 1,198 | | | | | (247) | | | 71 | | | 49 | | | — | | | 1,071 | |
Indirect other | | 208 | | | | | (41) | | | 18 | | | 9 | | | — | | | 194 | |
Student | | 130 | | | | | (12) | | | 1 | | | 3 | | | 4 | | | 126 | |
Credit card | | 359 | | | | | (113) | | | 28 | | | 80 | | | — | | | 354 | |
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ALLL | | 5,835 | | | | | (794) | | | 279 | | | (622) | | | 4 | | | 4,702 | |
RUFC | | 364 | | | | | — | | | — | | | (88) | | | — | | | 276 | |
ACL | | $ | 6,199 | | | | | $ | (794) | | | $ | 279 | | | $ | (710) | | | $ | 4 | | | $ | 4,978 | |
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ACL
The following tables present activity in the ACL:
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(Dollars in millions) | | Balance at Jul 1, 2021 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (1) | | Balance at Sep 30, 2021 |
Commercial: | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,804 | | | $ | (57) | | | $ | 42 | | | $ | (217) | | | $ | — | | | $ | 1,572 | |
CRE | | 440 | | | (1) | | | 1 | | | (70) | | | — | | | 370 | |
Commercial construction | | 69 | | | — | | | 1 | | | (11) | | | — | | | 59 | |
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Consumer: | | | | | | | | | | | | |
Residential mortgage | | 321 | | | (7) | | | 3 | | | (6) | | | — | | | 311 | |
Residential home equity and direct | | 694 | | | (51) | | | 20 | | | (18) | | | — | | | 645 | |
Indirect auto | | 1,116 | | | (73) | | | 22 | | | 6 | | | — | | | 1,071 | |
Indirect other | | 181 | | | (13) | | | 5 | | | 21 | | | — | | | 194 | |
Student | | 129 | | | (6) | | | 1 | | | 1 | | | 1 | | | 126 | |
Credit card | | 367 | | | (31) | | | 9 | | | 9 | | | — | | | 354 | |
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ALLL | | 5,121 | | | (239) | | | 104 | | | (285) | | | 1 | | | 4,702 | |
RUFC | | 315 | | | — | | | — | | | (39) | | | — | | | 276 | |
ACL | | $ | 5,436 | | | $ | (239) | | | $ | 104 | | | $ | (324) | | | $ | 1 | | | $ | 4,978 | |
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(Dollars in millions) | | Balance at Jul 1, 2022 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (1) | | Balance at Sep 30, 2022 |
Commercial: | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,357 | | | $ | (51) | | | $ | 43 | | | $ | (48) | | | $ | — | | | $ | 1,301 | |
CRE | | 237 | | | — | | | — | | | (3) | | | — | | | 234 | |
Commercial construction | | 50 | | | — | | | 2 | | | (5) | | | — | | | 47 | |
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Consumer: | | | | | | | | | | | | |
Residential mortgage | | 327 | | | (4) | | | 3 | | | 50 | | | — | | | 376 | |
Residential home equity and direct | | 588 | | | (86) | | | 23 | | | 44 | | | — | | | 569 | |
Indirect auto | | 952 | | | (103) | | | 21 | | | 96 | | | — | | | 966 | |
Indirect other | | 228 | | | (26) | | | 6 | | | 61 | | | — | | | 269 | |
Student | | 100 | | | (7) | | | — | | | — | | | — | | | 93 | |
Credit card | | 348 | | | (42) | | | 8 | | | 36 | | | — | | | 350 | |
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ALLL | | 4,187 | | | (319) | | | 106 | | | 231 | | | — | | | 4,205 | |
RUFC | | 247 | | | — | | | — | | | 3 | | | — | | | 250 | |
ACL | | $ | 4,434 | | | $ | (319) | | | $ | 106 | | | $ | 234 | | | $ | — | | | $ | 4,455 | |
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(Dollars in millions) | | Balance at Jan 1, 2021 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (1) | | Balance at Sep 30, 2021 |
Commercial: | | | | | | | | | | | | |
Commercial and industrial | | $ | 2,204 | | | $ | (189) | | | $ | 84 | | | $ | (527) | | | $ | — | | | $ | 1,572 | |
CRE | | 573 | | | (5) | | | 6 | | | (204) | | | — | | | 370 | |
Commercial construction | | 81 | | | (2) | | | 3 | | | (23) | | | — | | | 59 | |
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Consumer: | | | | | | | | | | | | |
Residential mortgage | | 368 | | | (22) | | | 10 | | | (45) | | | — | | | 311 | |
Residential home equity and direct | | 714 | | | (163) | | | 58 | | | 36 | | | — | | | 645 | |
Indirect auto | | 1,198 | | | (247) | | | 71 | | | 49 | | | — | | | 1,071 | |
Indirect other | | 208 | | | (41) | | | 18 | | | 9 | | | — | | | 194 | |
Student | | 130 | | | (12) | | | 1 | | | 3 | | | 4 | | | 126 | |
Credit card | | 359 | | | (113) | | | 28 | | | 80 | | | — | | | 354 | |
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ALLL | | 5,835 | | | (794) | | | 279 | | | (622) | | | 4 | | | 4,702 | |
RUFC | | 364 | | | — | | | — | | | (88) | | | — | | | 276 | |
ACL | | $ | 6,199 | | | $ | (794) | | | $ | 279 | | | $ | (710) | | | $ | 4 | | | $ | 4,978 | |
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16 Truist Financial Corporation
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(Dollars in millions) | | Balance at Jan 1, 2022 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (1) | | Balance at Sep 30, 2022 |
Commercial: | | | | | | | | | | | | |
Commercial and industrial | | $ | 1,426 | | | $ | (99) | | | $ | 73 | | | $ | (99) | | | $ | — | | | $ | 1,301 | |
CRE | | 350 | | | (2) | | | 7 | | | (121) | | | — | | | 234 | |
Commercial construction | | 52 | | | (1) | | | 4 | | | (8) | | | — | | | 47 | |
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Consumer: | | | | | | | | | | | | |
Residential mortgage | | 308 | | | (8) | | | 13 | | | 63 | | | — | | | 376 | |
Residential home equity and direct | | 615 | | | (229) | | | 63 | | | 120 | | | — | | | 569 | |
Indirect auto | | 1,022 | | | (282) | | | 70 | | | 156 | | | — | | | 966 | |
Indirect other | | 195 | | | (63) | | | 18 | | | 119 | | | — | | | 269 | |
Student | | 117 | | | (17) | | | — | | | (7) | | | — | | | 93 | |
Credit card | | 350 | | | (123) | | | 26 | | | 97 | | | — | | | 350 | |
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ALLL | | 4,435 | | | (824) | | | 274 | | | 320 | | | — | | | 4,205 | |
RUFC | | 260 | | | — | | | — | | | (10) | | | — | | | 250 | |
ACL | | $ | 4,695 | | | $ | (824) | | | $ | 274 | | | $ | 310 | | | $ | — | | | $ | 4,455 | |
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(1)Balance is prior to the adoption of CECL.
(2)Includes the adoption of CECL,amounts for the ALLL for PCD acquisitions, and other activity.
The commercial ALLL decreased $312$62 million and $857$246 million and the consumer ALLL increased $78 million and $16 million for the three and nine months ended September 30, 2021,2022, respectively. The decreasesdecrease in the commercial ALLL primarily reflects continued strong commercial portfolio performance and loan growth concentrated in higher quality loans, partially offset by a moderately slower economic outlook. The increase in the consumer ALLL was primarily driven by loan growth, normalizing loss trends in certain consumer portfolios, and a moderately slower economic outlook. Considerations for both the three and nine month periods are due to an improvingmoderately slower economic outlook include the potential impacts related to Hurricane Ian, and lower loan balances.risks associated with inflation, rising rates, supply chain disruption, geopolitical events, and recession.
The consumer ALLL decreased $94RUFC increased $3 million and $271decreased $10 million for the three and nine months ended September 30, 2021,2022, respectively. The decrease for the three-month period reflects an improving economic outlook slightly offset by loan growth primarily in the residential mortgage portfolio. The decrease for the nine-month period reflects an improving economic outlook and lower loan balances primarily in the residential mortgage and home equity and direct portfolios.
The RUFC decreased $39 million and $88 million for the three and nine months ended September 30, 2021, respectively. The decreases reflect an improving economic outlook.
The quantitative models have been designed to estimate losses using macro-economic forecasts over a reasonable and supportable forecast period of two years, followed by a reversion to long-term historical loss conditions over a one-year period. These macro-economic forecasts include a numberForecasts of key economicmacroeconomic variables utilizedused in loss forecasting that include, but are not limited to, unemployment trends, US real GDP, corporate credit spreads, rental rates, property values, the primary 30-year mortgage rate, home price indices, and used car prices.
The primary economic forecast incorporates a third-party baseline forecast that is adjusted to reflect Truist’s interest rate outlook. Management also considers optimistic and pessimistic third-party macro-economic forecasts in order to capture uncertainty in the economic environment. These forecasts, along with the primary economic forecast, are weighted 40% baseline, 30% optimistic, and 30% pessimistic in the September 30, 2021 ACL.2022 ACL, unchanged since December 31, 2021. While the scenario weightings were unchanged, each forecast scenario reflected a moderate deterioration in certain economic variables over the reasonable and supportable forecast period when compared to the prior period. The primary economic forecast shaping the ACL estimate at September 30, 20212022 included GDP growth in the high singlelow-single digits through 2021, then slowing to the low single digits in 2022, and an improving unemployment rate tostarting in the mid singlelow-single digits throughwith a slight increase towards mid-single digits by the end of 2021 followed by continued improvement through the remainder of the reasonable and supportable forecast period.
Quantitative models have certain limitations with respect to estimating expected losses, particularly in times of rapidly changing macro-economic conditions and forecasts. As a result, management believes that the qualitative component of the ACL, which incorporates management’s expert judgment related to expected future credit losses, will continue to be an important component of the ACL for the foreseeable future. The September 30, 20212022 ACL estimate includes adjustments to addressconsider the impact of current and expected events or risks not captured by the loss forecasting models, including imprecisionthe outcomes of which are uncertain and may not be completely considered by quantitative models. Refer to “Note 1. Basis of Presentation” in future economic forecasts, uncertainty aroundTruist’s Annual Report on Form 10-K for the return of consumer and business confidence once stimulus ceases, and the impact of government relief programs and client accommodations on expected losses.year ended December 31, 2021 for additional information.
16 Truist Financial Corporation 17
PCD Loan Activity
For PCD loans, the initial estimate of expected credit losses is recognized in the ALLL on the date of acquisition using the same methodology as other loans held for investment. The following table provides a summary of purchased student loans with credit deterioration at acquisition: | | | | | |
Nine Months Ended September 30, 2021 (Dollars in millions) | |
Par value | $ | 286 | |
ALLL at acquisition | (4) | |
Non-credit premium (discount) | 1 | |
Purchase price | $ | 283 | |
NPAs
The following table provides a summary of nonperforming loans and leases, excluding LHFS. Interest income recognized on nonperforming loans HFI was immaterial for the nine months ended September 30, 2021 and 2020, respectively.LHFS: | | | | September 30, 2021 | | December 31, 2020 | | | September 30, 2022 | | December 31, 2021 | |
| | Recorded Investment | | Recorded Investment | | | Recorded Investment | | Recorded Investment | |
(Dollars in millions) | (Dollars in millions) | Without an ALLL | | With an ALLL | | Without an ALLL | | With an ALLL | | (Dollars in millions) | Without an ALLL | | With an ALLL | | Without an ALLL | | With an ALLL | |
Commercial: | Commercial: | | | | Commercial: | | | |
Commercial and industrial | Commercial and industrial | $ | 129 | | | $ | 282 | | | $ | 82 | | | $ | 450 | | | Commercial and industrial | $ | 91 | | | $ | 352 | | | $ | 125 | | | $ | 269 | | |
CRE | CRE | 1 | | | 19 | | | 63 | | | 12 | | | CRE | — | | | 5 | | | 12 | | | 17 | | |
Commercial construction | Commercial construction | 4 | | | 3 | | | — | | | 14 | | | Commercial construction | — | | | — | | | — | | | 7 | | |
Lease financing | — | | | 12 | | | — | | | 28 | | | |
| Consumer: | Consumer: | | | Consumer: | | |
Residential mortgage | Residential mortgage | 4 | | | 302 | | | 4 | | | 312 | | | Residential mortgage | 3 | | | 224 | | | 4 | | | 292 | | |
Residential home equity and direct | Residential home equity and direct | 3 | | | 143 | | | 2 | | | 203 | | | Residential home equity and direct | 2 | | | 164 | | | 3 | | | 138 | | |
Indirect auto | Indirect auto | 7 | | | 165 | | | 1 | | | 154 | | | Indirect auto | 3 | | | 257 | | | 1 | | | 217 | | |
Indirect other | Indirect other | — | | | 6 | | | — | | | 5 | | | Indirect other | — | | | 5 | | | — | | | 5 | | |
| Total | Total | $ | 148 | | | $ | 932 | | | $ | 152 | | | $ | 1,178 | | | Total | $ | 99 | | | $ | 1,007 | | | $ | 145 | | | $ | 945 | | |
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The following table presents a summary of nonperforming assets and residential mortgage loans in the process of foreclosure.foreclosure: | (Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 | | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 | |
| Nonperforming loans and leases HFI | Nonperforming loans and leases HFI | $ | 1,080 | | | $ | 1,330 | | | Nonperforming loans and leases HFI | $ | 1,106 | | | $ | 1,090 | | |
Nonperforming LHFS | Nonperforming LHFS | 76 | | | 5 | | | Nonperforming LHFS | 72 | | | 22 | | |
Foreclosed real estate | Foreclosed real estate | 9 | | | 20 | | | Foreclosed real estate | 4 | | | 8 | | |
Other foreclosed property | Other foreclosed property | 39 | | | 32 | | | Other foreclosed property | 58 | | | 43 | | |
Total nonperforming assets | Total nonperforming assets | $ | 1,204 | | | $ | 1,387 | | | Total nonperforming assets | $ | 1,240 | | | $ | 1,163 | | |
| Residential mortgage loans in the process of foreclosure | Residential mortgage loans in the process of foreclosure | $ | 157 | | | $ | 140 | | | Residential mortgage loans in the process of foreclosure | $ | 265 | | | $ | 135 | | |
Truist Financial Corporation 17
TDRs
The following table presents a summary of TDRs: | (Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 |
| Performing TDRs: | Performing TDRs: | | | | Performing TDRs: | | | |
Commercial: | Commercial: | | | | Commercial: | | | |
Commercial and industrial | Commercial and industrial | $ | 144 | | | $ | 78 | | Commercial and industrial | $ | 165 | | | $ | 147 | |
CRE | CRE | 8 | | | 47 | | CRE | 5 | | | 5 | |
Commercial construction | | Commercial construction | 1 | | | — | |
| Lease financing | 56 | | | 60 | | |
Consumer: | Consumer: | | Consumer: | |
Residential mortgage | Residential mortgage | 712 | | | 648 | | Residential mortgage | 1,144 | | | 692 | |
Residential home equity and direct | Residential home equity and direct | 105 | | | 88 | | Residential home equity and direct | 78 | | | 98 | |
Indirect auto | Indirect auto | 390 | | | 392 | | Indirect auto | 425 | | | 389 | |
Indirect other | Indirect other | 7 | | | 6 | | Indirect other | 7 | | | 7 | |
Student | Student | 23 | | | 5 | | Student | 29 | | | 25 | |
Credit card | Credit card | 30 | | | 37 | | Credit card | 19 | | | 27 | |
Total performing TDRs | Total performing TDRs | 1,475 | | | 1,361 | | Total performing TDRs | 1,873 | | | 1,390 | |
Nonperforming TDRs | Nonperforming TDRs | 159 | | | 164 | | Nonperforming TDRs | 187 | | | 152 | |
Total TDRs | Total TDRs | $ | 1,634 | | | $ | 1,525 | | Total TDRs | $ | 2,060 | | | $ | 1,542 | |
ALLL attributable to TDRs | ALLL attributable to TDRs | $ | 108 | | | $ | 132 | | ALLL attributable to TDRs | $ | 120 | | | $ | 102 | |
The primary type of modification for newly designated TDRs is summarized in the tables below. New TDR balances represent the recorded investment at the end of the quarter in which the modification was made. The prior quarter balance represents recorded investment at the beginning of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| As of / For the Three Months Ended September 30, 2021 | | As of / For the Nine Months Ended September 30, 2021 |
(Dollars in millions) | Type of Modification | | Prior Quarter Loan Balance | | ALLL at Period End | | Type of Modification | | Prior Quarter Loan Balance | | ALLL at Period End |
Rate | | Structure | | | | Rate | | Structure | | |
Newly designated TDRs: | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 8 | | | $ | 17 | | | $ | 27 | | | $ | 3 | | | $ | 35 | | | $ | 116 | | | $ | 168 | | | $ | 15 | |
CRE | — | | | — | | | — | | | — | | | — | | | 10 | | | 12 | | | 1 | |
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Lease financing | — | | | 3 | | | 3 | | | 1 | | | — | | | 3 | | | 3 | | | 1 | |
Consumer: | | | | | | | | | | | | | | | |
Residential mortgage | 33 | | | 24 | | | 57 | | | 3 | | | 122 | | | 163 | | | 285 | | | 12 | |
Residential home equity and direct | 2 | | | 8 | | | 10 | | | — | | | 6 | | | 41 | | | 48 | | | 2 | |
Indirect auto | 39 | | | 8 | | | 48 | | | 4 | | | 82 | | | 53 | | | 142 | | | 16 | |
Indirect other | — | | | 1 | | | 1 | | | — | | | 2 | | | 2 | | | 3 | | | — | |
Student | — | | | 10 | | | 10 | | | — | | | — | | | 18 | | | 18 | | | — | |
Credit card | 3 | | | — | | | 3 | | | 1 | | | 9 | | | — | | | 10 | | | 4 | |
Re-modification of previously designated TDRs | 23 | | | 9 | | | | | | | 51 | | | 37 | | | | | |
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| As of / For the Three Months Ended September 30, 2020 | | As of / For the Nine Months Ended September 30, 2020 |
| Type of Modification | | Prior Quarter Loan Balance | | ALLL at Period End | | Type of Modification | | Prior Quarter Loan Balance | | ALLL at Period End |
(Dollars in millions) | Rate | | Structure | | | | Rate | | Structure | | |
Newly designated TDRs: | | | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 13 | | | $ | 49 | | | $ | 70 | | | $ | 9 | | | $ | 46 | | | $ | 53 | | | $ | 118 | | | $ | 12 | |
CRE | 4 | | | 10 | | | 15 | | | 2 | | | 28 | | | 11 | | | 32 | | | 4 | |
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Lease financing | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | | | — | |
Consumer: | | | | | | | | | | | | | | | |
Residential mortgage | 157 | | | 17 | | | 174 | | | 8 | | | 297 | | | 58 | | | 359 | | | 17 | |
Residential home equity and direct | 3 | | | 3 | | | 6 | | | — | | | 31 | | | 13 | | | 45 | | | 1 | |
Indirect auto | 20 | | | 4 | | | 25 | | | 5 | | | 98 | | | 26 | | | 129 | | | 17 | |
Indirect other | 1 | | | 1 | | | 1 | | | — | | | 3 | | | 1 | | | 3 | | | — | |
Student | — | | | 1 | | | 1 | | | — | | | — | | | 5 | | | 5 | | | — | |
Credit card | 6 | | | — | | | 6 | | | 2 | | | 24 | | | — | | | 23 | | | 8 | |
Re-modification of previously designated TDRs | 10 | | | 5 | | | | | | | 36 | | | 11 | | | | | |
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Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.
18 Truist Financial Corporation
The amount of modified loans that were classified as TDRs during the previous 12 months and experienced a payment default for the three and nine months ended September 30, 2021 and 2020 was immaterial. Payment default is defined as movement of the TDR to nonperforming status, foreclosure, or charge-off, whichever occurs first. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| As of / For the Three Months Ended September 30, 2022 | | As of / For the Nine Months Ended September 30, 2022 |
(Dollars in millions) | Type of Modification | | Prior Quarter Loan Balance | | Related ALLL at Period End | | Type of Modification | | Prior Quarter Loan Balance | | Related ALLL at Period End |
Rate | | Structure | | | | Rate | | Structure | | |
Newly designated TDRs: | | | | | | | | | | | | | | |
Commercial | $ | 66 | | | $ | — | | | $ | 66 | | | $ | 9 | | | $ | 66 | | | $ | 9 | | | $ | 77 | | | $ | 9 | |
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Consumer | 123 | | | 117 | | | 236 | | | 12 | | | 368 | | | 505 | | | 858 | | | 41 | |
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Credit card | 2 | | | — | | | 2 | | | 1 | | | 6 | | | — | | | 6 | | | 3 | |
Re-modification of previously designated TDRs | 43 | | | 50 | | | | | | | 73 | | | 90 | | | | | |
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| As of / For the Three Months Ended September 30, 2021 | | As of / For the Nine Months Ended September 30, 2021 |
| Type of Modification | | Prior Quarter Loan Balance | | Related ALLL at Period End | | Type of Modification | | Prior Quarter Loan Balance | | Related ALLL at Period End |
(Dollars in millions) | Rate | | Structure | | | | Rate | | Structure | | |
Newly designated TDRs: | | | | | | | | | | | | | | | |
Commercial | $ | 8 | | | $ | 20 | | | $ | 30 | | | $ | 4 | | | $ | 35 | | | $ | 129 | | | $ | 183 | | | $ | 17 | |
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Consumer | 74 | | | 51 | | | 126 | | | 7 | | | 212 | | | 277 | | | 496 | | | 30 | |
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Credit card | 3 | | | — | | | 3 | | | 1 | | | 9 | | | — | | | 10 | | | 4 | |
Re-modification of previously designated TDRs | 23 | | | 9 | | | | | | | 51 | | | 37 | | | | | |
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Unearned Income, Discounts, and Net Deferred Loan Fees and Costs
The following table presents additional information about loans and leases: | (Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 | | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 | |
| Unearned income, discounts and net deferred loan fees and costs | $ | 1,142 | | | $ | 2,219 | | | |
Unearned income, discounts, and net deferred loan fees and costs | | Unearned income, discounts, and net deferred loan fees and costs | $ | 230 | | | $ | 849 | | |
Truist Financial Corporation 19
NOTE 6. Goodwill and Other Intangible Assets
The Company performed a qualitative assessment of current events and circumstances, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, and a comparison of management’s forecast and assumptions to those used in its October 1, 20202021 quantitative impairment test, concluding that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of September 30, 2021,2022, and therefore no triggering event occurred that required a quantitative goodwill impairment test. SeeRefer to “Note 1. Basis of Presentation” and “Note 7. Goodwill and Other Intangible Assets” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for additional information.
The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. The adjustmentsActivity during 2022 reflects the acquisition of BenefitMall and Kensington Vanguard National Land Services. Activity during 2021 primarily reflects the acquisitions of Service Finance, LLC, and Constellation Affiliated Partners. Refer to “Note 2. Business Combinations” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 to CB&W reflectfor additional information on the divestiture of certain businesses. Refer toacquisitions and “Note 18. Operating Segments” for additional information on segments. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(Dollars in millions) | CB&W | | C&CB | | IH | | Total | | | | |
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Goodwill, January 1, 2020 | $ | 14,040 | | | $ | 8,125 | | | $ | 1,989 | | | $ | 24,154 | | | | | |
Mergers and acquisitions | — | | | — | | | 450 | | | 450 | | | | | |
Adjustments and other | 1,801 | | | (1,958) | | | — | | | (157) | | | | | |
Goodwill, December 31, 2020 | 15,841 | | | 6,167 | | | 2,439 | | | 24,447 | | | | | |
Mergers and acquisitions | — | | | — | | | 556 | | | 556 | | | | | |
Adjustments and other | (139) | | | (18) | | | 45 | | | (112) | | | | | |
Goodwill, September 30, 2021 | $ | 15,702 | | | $ | 6,149 | | | $ | 3,040 | | | $ | 24,891 | | | | | |
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(Dollars in millions) | CB&W | | C&CB | | IH | | Total | | | | |
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Goodwill, January 1, 2021 | $ | 15,841 | | | $ | 6,167 | | | $ | 2,439 | | | $ | 24,447 | | | | | |
Mergers and acquisitions | 1,168 | | | — | | | 556 | | | 1,724 | | | | | |
Adjustments and other | (139) | | | (18) | | | 84 | | | (73) | | | | | |
Goodwill, December 31, 2021 | 16,870 | | | 6,149 | | | 3,079 | | | 26,098 | | | | | |
Mergers and acquisitions | — | | | — | | | 697 | | | 697 | | | | | |
Adjustments and other | — | | | — | | | 15 | | | 15 | | | | | |
Goodwill, September 30, 2022 | $ | 16,870 | | | $ | 6,149 | | | $ | 3,791 | | | $ | 26,810 | | | | | |
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The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets: | | | | September 30, 2021 | | December 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2022 | | December 31, 2021 |
(Dollars in millions) | (Dollars in millions) | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | (Dollars in millions) | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
CDI | CDI | | $ | 2,563 | | | $ | (1,097) | | | $ | 1,466 | | | $ | 2,600 | | | $ | (852) | | | $ | 1,748 | | CDI | | $ | 2,472 | | | $ | (1,328) | | | $ | 1,144 | | | $ | 2,563 | | | $ | (1,190) | | | $ | 1,373 | |
Other, primarily client relationship intangibles | Other, primarily client relationship intangibles | | 2,499 | | | (1,035) | | | 1,464 | | | 2,217 | | | (981) | | | 1,236 | | Other, primarily client relationship intangibles | | 3,824 | | | (1,242) | | | 2,582 | | | 3,116 | | | (1,081) | | | 2,035 | |
Total | Total | | $ | 5,062 | | | $ | (2,132) | | | $ | 2,930 | | | $ | 4,817 | | | $ | (1,833) | | | $ | 2,984 | | Total | | $ | 6,296 | | | $ | (2,570) | | | $ | 3,726 | | | $ | 5,679 | | | $ | (2,271) | | | $ | 3,408 | |
|
In 2022, Truist redeemed a noncontrolling equity interest in SunTrust Merchant Services, LLC, and paid cash of $175 million in exchange for the rights to certain merchant banking relationships, including relationships previously referred by Truist to SunTrust Merchant Services, LLC. Upon completion of this transaction, Truist recognized a gain on the redemption of noncontrolling equity interest of $74 million and $282 million of other intangibles representing the fair value of acquired contractual relationships as of the transaction date. The intangible assets are being amortized over a term of 12 years based upon the estimated duration of economic benefits received.
20 Truist Financial Corporation 19
NOTE 7. Loan Servicing
The Company acquires servicing rights, and retains servicing rights related to certain of its sales or securitizations of residential mortgages, commercial mortgages, and commercial mortgageother consumer loans. Servicing rights on residential and commercial mortgages are capitalized by the Company as MSRsLoan servicing rights on the Consolidated Balance Sheets. Income earned by the Company on its residential MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs. Income earned by the Company on its commercial mortgageloan servicing rights is derived primarily from contractually specified servicing fees, late fees, net of curtailment costs, and other ancillary fees.
Residential Mortgage Activities
The following tables summarize residential mortgage servicing activities: | | | | | | | | | | | | | | | | | |
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(Dollars in millions) | | Sep 30, 2021 | | Dec 31, 2020 | | | |
UPB of residential mortgage loan servicing portfolio | | $ | 248,546 | | | $ | 239,034 | | | | |
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | | 198,119 | | | 188,341 | | | | |
Mortgage loans sold with recourse | | 269 | | | 328 | | | | |
Maximum recourse exposure from mortgage loans sold with recourse liability | | 171 | | | 201 | | | | |
Indemnification, recourse and repurchase reserves | | 89 | | | 93 | | | | |
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As of / For the Nine Months Ended September 30, (Dollars in millions) | | 2021 | | 2020 | | | |
UPB of residential mortgage loans sold from LHFS | | $ | 30,148 | | | $ | 36,069 | | | | |
Pre-tax gains recognized on mortgage loans sold and held for sale | | 347 | | | 828 | | | | |
Servicing fees recognized from mortgage loans serviced for others | | 437 | | | 480 | | | | |
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.31 | % | | 0.32 | % | | | |
Weighted average interest rate on mortgage loans serviced for others | | 3.49 | | | 3.92 | | | | |
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(Dollars in millions) | | Sep 30, 2022 | | Dec 31, 2021 | | | |
UPB of residential mortgage loan servicing portfolio | | $ | 275,526 | | | $ | 246,727 | | | | |
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | | 218,740 | | | 196,011 | | | | |
Mortgage loans sold with recourse | | 205 | | | 244 | | | | |
Maximum recourse exposure from mortgage loans sold with recourse liability | | 129 | | | 155 | | | | |
Indemnification, recourse and repurchase reserves | | 57 | | | 74 | | | | |
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As of / For the Nine Months Ended September 30, (Dollars in millions) | | 2022 | | 2021 | | | |
UPB of residential mortgage loans sold from LHFS | | $ | 22,971 | | | $ | 30,148 | | | | |
Pre-tax gains recognized on mortgage loans sold and held for sale | | 62 | | | 347 | | | | |
Servicing fees recognized from mortgage loans serviced for others | | 462 | | | 437 | | | | |
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.30 | % | | 0.31 | % | | | |
Weighted average interest rate on mortgage loans serviced for others | | 3.45 | | | 3.49 | | | | |
The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value: | | | | | | | | | | | | | | | | |
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Nine Months Ended September 30, (Dollars in millions) | | 2021 | | 2020 | | |
Residential MSRs, carrying value, January 1 | | $ | 1,778 | | | $ | 2,371 | | | |
Acquired | | 355 | | | — | | | |
Additions | | 476 | | | 490 | | | |
Change in fair value due to changes in valuation inputs or assumptions: | | | | | | |
Prepayment speeds | | 12 | | | (612) | | | |
OAS | | 238 | | | 53 | | | |
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Realization of expected net servicing cash flows, passage of time and other | | (550) | | | (539) | | | |
Residential MSRs, carrying value, September 30 | | $ | 2,309 | | | $ | 1,763 | | | |
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(Dollars in millions) | | 2022 | | 2021 | | |
Residential MSRs, carrying value, January 1 | | $ | 2,305 | | | $ | 1,778 | | | |
Acquired | | 321 | | | 355 | | | |
Additions | | 372 | | | 476 | | | |
Change in fair value due to changes in valuation inputs or assumptions: | | | | | | |
Prepayment speeds | | 795 | | | 12 | | | |
OAS | | (24) | | | 238 | | | |
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Realization of expected net servicing cash flows, passage of time and other | | (306) | | | (550) | | | |
Residential MSRs, carrying value, September 30 | | $ | 3,463 | | | $ | 2,309 | | | |
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The sensitivity of the fair value of the Company’s residential MSRs to changes in key assumptions is presented in the following table: | | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
| | Range | | Weighted Average | | Range | | Weighted Average | | Range | | Weighted Average | | Range | | Weighted Average |
(Dollars in millions) | (Dollars in millions) | Min | | Max | | Min | | Max | | (Dollars in millions) | Min | | Max | | Min | | Max | |
| | | Prepayment speed | Prepayment speed | 11.3 | % | | 15.3 | % | | 14.2 | % | | 12.8 | % | | 30.8 | % | | 15.4 | % | Prepayment speed | 8.4 | % | | 11.0 | % | | 8.9 | % | | 11.4 | % | | 15.3 | % | | 13.8 | % |
Effect on fair value of a 10% increase | Effect on fair value of a 10% increase | | $ | (119) | | | $ | (89) | | Effect on fair value of a 10% increase | | $ | (108) | | | $ | (113) | |
Effect on fair value of a 20% increase | Effect on fair value of a 20% increase | | (228) | | | (171) | | Effect on fair value of a 20% increase | | (209) | | | (216) | |
OAS | OAS | 1.8 | % | | 10.1 | % | | 4.0 | % | | 3.5 | % | | 13.7 | % | | 7.3 | % | OAS | 1.6 | % | | 11.7 | % | | 4.2 | % | | 1.5 | % | | 10.7 | % | | 4.2 | % |
Effect on fair value of a 10% increase | Effect on fair value of a 10% increase | | $ | (36) | | | $ | (45) | | Effect on fair value of a 10% increase | | $ | (57) | | | $ | (37) | |
Effect on fair value of a 20% increase | Effect on fair value of a 20% increase | | (71) | | | (88) | | Effect on fair value of a 20% increase | | (112) | | | (73) | |
Composition of loans serviced for others: | Composition of loans serviced for others: | | | | | | | Composition of loans serviced for others: | | | | | | |
Fixed-rate residential mortgage loans | Fixed-rate residential mortgage loans | | 99.2 | % | | 98.8 | % | Fixed-rate residential mortgage loans | | 99.5 | % | | 99.3 | % |
Adjustable-rate residential mortgage loans | Adjustable-rate residential mortgage loans | | 0.8 | | | 1.2 | | Adjustable-rate residential mortgage loans | | 0.5 | | | 0.7 | |
Total | Total | | | | | 100.0 | % | | | | | | 100.0 | % | Total | | | | | 100.0 | % | | | | | | 100.0 | % |
Weighted average life | Weighted average life | | | | | 5.1 years | | | | | | 4.8 years | Weighted average life | | | | | 6.9 years | | | | | | 5.2 years |
20 Truist Financial Corporation
The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in one assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change. See “Note 15. Fair Value Disclosures” for additional information on the valuation techniques used.
Truist Financial Corporation 21
Commercial Mortgage Activities
The following table summarizes commercial mortgage servicing activities for the periods presented:activities: | | (Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 |
| UPB of CRE mortgages serviced for others | UPB of CRE mortgages serviced for others | $ | 37,437 | | | $ | 36,670 | | UPB of CRE mortgages serviced for others | $ | 36,263 | | | $ | 37,960 | |
CRE mortgages serviced for others covered by recourse provisions | CRE mortgages serviced for others covered by recourse provisions | 10,146 | | | 9,019 | | CRE mortgages serviced for others covered by recourse provisions | 9,832 | | | 10,243 | |
Maximum recourse exposure from CRE mortgages sold with recourse liability | Maximum recourse exposure from CRE mortgages sold with recourse liability | 2,922 | | | 2,624 | | Maximum recourse exposure from CRE mortgages sold with recourse liability | 2,819 | | | 2,958 | |
Recorded reserves related to recourse exposure | Recorded reserves related to recourse exposure | 18 | | | 18 | | Recorded reserves related to recourse exposure | 15 | | | 16 | |
CRE mortgages originated during the year-to-date period | CRE mortgages originated during the year-to-date period | 6,490 | | | 6,739 | | CRE mortgages originated during the year-to-date period | 5,778 | | | 9,380 | |
Commercial MSRs at fair value | Commercial MSRs at fair value | 275 | | | 245 | | Commercial MSRs at fair value | 302 | | | 280 | |
| |
Other Servicing Activities
The Company had $32 million and $48 million of other loan servicing rights at fair value as of September 30, 2022 and December 31, 2021, respectively.
NOTE 8. Other Assets and Liabilities
Lessee Operating and Finance Leases
The Company leases certain assets, consisting primarily of real estate, and assesses at contract inception whether a contract is, or contains, a lease. The following tables present additional information on leases, excluding leases related to the lease financing businesses: | | | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
(Dollars in millions) | (Dollars in millions) | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases | (Dollars in millions) | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
ROU assets | ROU assets | $ | 1,207 | | | $ | 25 | | | $ | 1,333 | | | $ | 36 | | ROU assets | $ | 1,116 | | | $ | 21 | | | $ | 1,168 | | | $ | 22 | |
Lease liabilities | Lease liabilities | 1,694 | | | 31 | | | 1,896 | | | 42 | | Lease liabilities | 1,477 | | | 24 | | | 1,600 | | | 26 | |
Weighted average remaining term | Weighted average remaining term | 6.7 years | | 6.4 years | | 6.9 years | | 6.3 years | Weighted average remaining term | 6.3 years | | 5.8 years | | 6.6 years | | 6.4 years |
Weighted average discount rate | Weighted average discount rate | 2.4 | % | | 3.6 | % | | 2.4 | % | | 4.8 | % | Weighted average discount rate | 2.4 | % | | 3.4 | % | | 2.3 | % | | 3.5 | % |
| | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in millions) | (Dollars in millions) | 2021 | | 2020 | | 2021 | | 2020 | (Dollars in millions) | 2022 | | 2021 | | 2022 | | 2021 | |
| Operating lease costs | Operating lease costs | $ | 71 | | | $ | 87 | | | $ | 241 | | | $ | 280 | | Operating lease costs | $ | 81 | | | $ | 71 | | | $ | 241 | | | $ | 241 | | |
Lessor Operating Leases
The Company’s two primary lessor businesses are equipment financing and structured real estate with income recorded in Operating lease income on the Consolidated Statements of Income.
The following table presents a summary of assets under operating leases and activity related to assets under operating leases. This table excludes subleases on assets included in premises and equipment. | (Dollars in millions) | (Dollars in millions) | | | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | | | Sep 30, 2022 | | Dec 31, 2021 |
| Assets held under operating leases (1) | Assets held under operating leases (1) | | | $ | 1,932 | | | $ | 2,144 | | Assets held under operating leases (1) | | | $ | 2,215 | | | $ | 2,110 | |
| Accumulated depreciation | Accumulated depreciation | | | (405) | | | (517) | | Accumulated depreciation | | | (552) | | | (539) | |
Net | Net | | | $ | 1,527 | | | $ | 1,627 | | Net | | | $ | 1,663 | | | $ | 1,571 | |
(1) Includes certain land parcels subject to operating leases that have indefinite lives.
The carrying value of assets previously under operating leases was immaterial.
Bank-Owned Life Insurance
Bank-owned life insurance consists of life insurance policies held on certain teammates for which the Company is the beneficiary. These policies provide the Company an efficient form of funding for retirement and other employee benefits costs. The carrying value of bank-owned life insurance was $6.5$7.6 billion at September 30, 20212022 and $7.3 billion at December 31, 2020.
2021.
22 Truist Financial Corporation 21
NOTE 9. Borrowings
The following table presents a summary of short-term borrowings: | (Dollars in millions) | (Dollars in millions) | | Sep 30, 2021 | | Dec 31, 2020 | | (Dollars in millions) | | Sep 30, 2022 | | Dec 31, 2021 | |
| | Federal funds purchased | Federal funds purchased | | $ | 8 | | | | $ | 79 | | | Federal funds purchased | | $ | 3,725 | | | | $ | — | | |
Securities sold under agreements to repurchase | Securities sold under agreements to repurchase | | 2,600 | | | | 1,221 | | | Securities sold under agreements to repurchase | | 2,193 | | | | 2,435 | | |
FHLB advances | FHLB advances | | — | | | | 2,649 | | | FHLB advances | | 16,900 | | | | — | | |
Collateral in excess of derivative exposures | Collateral in excess of derivative exposures | | 310 | | | | 385 | | | Collateral in excess of derivative exposures | | 358 | | | | 318 | | |
Master notes | Master notes | | 573 | | | | 621 | | | Master notes | | 606 | | | | 808 | | |
Other short-term borrowings | | 1,735 | | | | 1,137 | | | |
Securities sold short | | Securities sold short | | 1,905 | | | | 1,731 | | |
| Total short-term borrowings | Total short-term borrowings | | $ | 5,226 | | | | $ | 6,092 | | | Total short-term borrowings | | $ | 25,687 | | | | $ | 5,292 | | |
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The following table presents a summary of long-term debt: | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | | | | | | | | | | Sep 30, 2021 | | Dec 31, 2020 |
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Truist Financial Corporation: | | | | | | | | | | | | | |
Fixed rate senior notes | | | | | | | | | | | $ | 14,365 | | | $ | 15,984 | |
Floating rate senior notes | | | | | | | | | | | 1,348 | | | 900 | |
Fixed rate subordinated notes | | | | | | | | | | | 1,266 | | | 1,283 | |
Capital notes | | | | | | | | | | | 619 | | | 615 | |
Structured notes (1) | | | | | | | | | | | 84 | | | 108 | |
Truist Bank: | | | | | | | | | | | | | |
Fixed rate senior notes | | | | | | | | | | | 10,604 | | | 11,907 | |
Floating rate senior notes | | | | | | | | | | | 2,400 | | | 1,567 | |
Fixed rate subordinated notes | | | | | | | | | | | 5,099 | | | 5,142 | |
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FHLB advances | | | | | | | | | | | 867 | | | 878 | |
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Other long-term debt (2) | | | | | | | | | | | 1,185 | | | 1,014 | |
Nonbank subsidiaries: | | | | | | | | | | | | | |
Other long-term debt (3) | | | | | | | | | | | — | | | 199 | |
Total long-term debt | | | | | | | | | | | $ | 37,837 | | | $ | 39,597 | |
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(Dollars in millions) | | | | | | | | | | | Sep 30, 2022 | | Dec 31, 2021 |
Truist Financial Corporation: | | | | | | | | | | | | | |
Fixed rate senior notes (1) | | | | | | | | | | | $ | 12,585 | | | $ | 13,271 | |
Floating rate senior notes (1) | | | | | | | | | | | 999 | | | 1,348 | |
Fixed rate subordinated notes (2) | | | | | | | | | | | 1,874 | | | 1,254 | |
Capital Notes (2) | | | | | | | | | | | 624 | | | 620 | |
Structured notes (3) | | | | | | | | | | | 11 | | | 11 | |
Truist Bank: | | | | | | | | | | | | | |
Fixed rate senior notes (1) | | | | | | | | | | | 6,992 | | | 9,545 | |
Floating rate senior notes (1) | | | | | | | | | | | 1,749 | | | 2,399 | |
Fixed rate subordinated notes (2) | | | | | | | | | | | 4,766 | | | 5,043 | |
| | | | | | | | | | | |
FHLB advances | | | | | | | | | | | 2 | | | 863 | |
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Other long-term debt (4) | | | | | | | | | | | 1,277 | | | 1,263 | |
Nonbank subsidiaries: | | | | | | | | | | | | | |
Other long-term debt (5) | | | | | | | | | | | 293 | | | 296 | |
Total long-term debt | | | | | | | | | | | $ | 31,172 | | | $ | 35,913 | |
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(1)Prior period was revised to reclassify certain floating rate senior notes that were reported as fixed rate senior notes at December 31, 2021.
(2)Subordinated and capital notes with a remaining maturity of one year or greater qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.
(3)Consist of notes with various terms that include fixed or floating rate interest or returns that are linked to an equity index.
(2)(4)Includes debt associated with finance leases, tax credit investments, and other.
(3)(5)Includes debt associated with structured real estate leases.
The Company does not consolidate certain wholly-owned trusts which were formed for the sole purpose of issuing trust preferred securities. The proceeds from the trust preferred securities issuances were invested in capital notes of the Parent Company. The Parent Company’s obligations constitute a full and unconditional guarantee of the trust preferred securities.
22 Truist Financial Corporation
NOTE 10. Shareholders’ Equity
Common Stock
The following table presents thetotal dividends declared per share of common stock: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
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Cash dividends declared per share | | $ | 0.48 | | | $ | 0.45 | | | $ | 1.38 | | | $ | 1.35 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
Cash dividends declared per share | | $ | 0.52 | | | $ | 0.48 | | | $ | 1.48 | | | $ | 1.38 | | | |
Share Repurchase Activity
As of September 30, 2021, the Board of Directors had authorized theTruist’s share repurchase of up to $4.2 billion of the Company’s common stock through September 30, 2022. For the nine months ended September 30, 2021, the Company repurchased $1.1 billion of common stock, which represented 19.8 million shares. Repurchased shares revert to the status of authorized and unissued shares. At September 30, 2021, Truist had remaining authorization to repurchase $3.1 billion of common stock under the Board approved repurchase plan. The amount of share repurchasesactivity is dependent on capital deployment through organic growth and acquisitions, giving consideration to economic and regulatory conditions.
Preferred Stock
During The Board of Directors has authorized the first quarterrepurchase of 2021,up to $4.1 billion of the Company’s common stock from October 1, 2022 through September 30, 2023. For the nine months ended September 30, 2022, the Company redeemed all 18,000 outstanding sharesrepurchased $250 million of its perpetual preferredcommon stock, series F and the corresponding depositary shares representing fractional interests in such series for $450which represented 5.1 million and all 20,000 outstanding shares of its perpetual preferred stock series G and the corresponding depositary shares representing fractional interests in such series for $500 million.
During the second quarter of 2021, the Company redeemed all 18,600 outstanding shares of its perpetual preferred stock series H and the corresponding depositary shares representing fractional interests in such series for $465 million.shares.
Truist Financial Corporation 23
NOTE 11. AOCI
AOCI includes the after-tax change in unrecognized net costs related to defined benefit pension and OPEB plans as well as unrealized gains and losses on cash flow hedges, AFS securities, and HTM securities transferred from AFS securities. | | Three Months Ended September 30, 2021 and 2020 (Dollars in millions) | Pension and OPEB Costs | | Cash Flow Hedges | | AFS Securities | | Other, net | | Total | |
AOCI balance, July 1, 2020 | $ | (1,093) | | | $ | (79) | | | $ | 2,022 | | | $ | (3) | | | $ | 847 | | |
OCI before reclassifications, net of tax | (25) | | | — | | | (380) | | | 1 | | | (404) | | |
Amounts reclassified from AOCI: | | | | | | | | | | |
Before tax | 18 | | | 10 | | | 7 | | | — | | | 35 | | |
Tax effect | 4 | | | 2 | | | 2 | | | — | | | 8 | | |
Amounts reclassified, net of tax | 14 | | | 8 | | | 5 | | | — | | | 27 | | |
Total OCI, net of tax | (11) | | | 8 | | | (375) | | | 1 | | | (377) | | |
AOCI balance, September 30, 2020 | $ | (1,104) | | | $ | (71) | | | $ | 1,647 | | | $ | (2) | | | $ | 470 | | |
(Dollars in millions) | | (Dollars in millions) | Pension and OPEB Costs | | Cash Flow Hedges | | AFS Securities | | HTM Securities | | Other, net | | Total |
AOCI balance, July 1, 2021 | AOCI balance, July 1, 2021 | $ | (842) | | | $ | (18) | | | $ | (191) | | | $ | 3 | | | $ | (1,048) | | AOCI balance, July 1, 2021 | $ | (842) | | | $ | (18) | | | $ | (191) | | | $ | — | | | $ | 3 | | | $ | (1,048) | |
OCI before reclassifications, net of tax | OCI before reclassifications, net of tax | (59) | | | — | | | (496) | | | (2) | | | (557) | | OCI before reclassifications, net of tax | (59) | | | — | | | (496) | | | — | | | (2) | | | (557) | |
Amounts reclassified from AOCI: | Amounts reclassified from AOCI: | | | | | | | | | | Amounts reclassified from AOCI: | | | | | | | | | |
Before tax | Before tax | 6 | | | 7 | | | 75 | | | — | | | 88 | | Before tax | 6 | | | 7 | | | 75 | | | — | | | — | | | 88 | |
Tax effect | Tax effect | 2 | | | 2 | | | 17 | | | — | | | 21 | | Tax effect | 2 | | | 2 | | | 17 | | | — | | | — | | | 21 | |
Amounts reclassified, net of tax | Amounts reclassified, net of tax | 4 | | | 5 | | | 58 | | | — | | | 67 | | Amounts reclassified, net of tax | 4 | | | 5 | | | 58 | | | — | | | — | | | 67 | |
Total OCI, net of tax | Total OCI, net of tax | (55) | | | 5 | | | (438) | | | (2) | | | (490) | | Total OCI, net of tax | (55) | | | 5 | | | (438) | | | — | | | (2) | | | (490) | |
AOCI balance, September 30, 2021 | AOCI balance, September 30, 2021 | $ | (897) | | | $ | (13) | | | $ | (629) | | | $ | 1 | | | $ | (1,538) | | AOCI balance, September 30, 2021 | $ | (897) | | | $ | (13) | | | $ | (629) | | | $ | — | | | $ | 1 | | | $ | (1,538) | |
AOCI balance, July 1, 2022 | | AOCI balance, July 1, 2022 | $ | (73) | | | $ | 45 | | | $ | (6,476) | | | $ | (2,736) | | | $ | — | | | $ | (9,240) | |
OCI before reclassifications, net of tax | | OCI before reclassifications, net of tax | — | | | (140) | | | (3,047) | | | — | | | (6) | | | (3,193) | |
| Nine Months Ended September 30, 2021 and 2020 (Dollars in millions) | Pension and OPEB Costs | | Cash Flow Hedges | | AFS Securities | | Other, net | | Total | |
Amounts reclassified from AOCI: | | Amounts reclassified from AOCI: | | | | | | | | | |
Before tax | | Before tax | 6 | | | 1 | | | (6) | | | 105 | | | — | | | 106 | |
Tax effect | | Tax effect | — | | | — | | | (2) | | | 25 | | | — | | | 23 | |
Amounts reclassified, net of tax | | Amounts reclassified, net of tax | 6 | | | 1 | | | (4) | | | 80 | | | — | | | 83 | |
Total OCI, net of tax | | Total OCI, net of tax | 6 | | | (139) | | | (3,051) | | | 80 | | | (6) | | | (3,110) | |
AOCI balance, September 30, 2022 | | AOCI balance, September 30, 2022 | $ | (67) | | | $ | (94) | | | $ | (9,527) | | | $ | (2,656) | | | $ | (6) | | | $ | (12,350) | |
| (Dollars in millions) | | (Dollars in millions) | Pension and OPEB Costs | | Cash Flow Hedges | | AFS Securities | | HTM Securities | | Other, net | | Total |
| AOCI balance, January 1, 2020 | $ | (1,122) | | | $ | (101) | | | $ | 380 | | | $ | (1) | | | $ | (844) | | |
OCI before reclassifications, net of tax | (26) | | | — | | | 1,411 | | | (1) | | | 1,384 | | |
Amounts reclassified from AOCI: | | | | | | | | | | |
Before tax | 58 | | | 39 | | | (189) | | | — | | | (92) | | |
Tax effect | 14 | | | 9 | | | (45) | | | — | | | (22) | | |
Amounts reclassified, net of tax | 44 | | | 30 | | | (144) | | | — | | | (70) | | |
Total OCI, net of tax | 18 | | | 30 | | | 1,267 | | | (1) | | | 1,314 | | |
AOCI balance, September 30, 2020 | (1,104) | | | (71) | | | 1,647 | | | (2) | | | 470 | | |
AOCI balance, January 1, 2021 | AOCI balance, January 1, 2021 | $ | (875) | | | $ | (64) | | | $ | 1,654 | | | $ | 1 | | | $ | 716 | | AOCI balance, January 1, 2021 | $ | (875) | | | $ | (64) | | | $ | 1,654 | | | $ | — | | | $ | 1 | | | $ | 716 | |
OCI before reclassifications, net of tax | OCI before reclassifications, net of tax | (40) | | | — | | | (2,510) | | | — | | | (2,550) | | OCI before reclassifications, net of tax | (40) | | | — | | | (2,510) | | | — | | | — | | | (2,550) | |
Amounts reclassified from AOCI: | Amounts reclassified from AOCI: | | | | | | | | | | Amounts reclassified from AOCI: | | | | | | | | | |
Before tax | Before tax | 24 | | | 67 | | | 296 | | | — | | | 387 | | Before tax | 24 | | | 67 | | | 296 | | | — | | | — | | | 387 | |
Tax effect | Tax effect | 6 | | | 16 | | | 69 | | | — | | | 91 | | Tax effect | 6 | | | 16 | | | 69 | | | — | | | — | | | 91 | |
Amounts reclassified, net of tax | Amounts reclassified, net of tax | 18 | | | 51 | | | 227 | | | — | | | 296 | | Amounts reclassified, net of tax | 18 | | | 51 | | | 227 | | | — | | | — | | | 296 | |
Total OCI, net of tax | Total OCI, net of tax | (22) | | | 51 | | | (2,283) | | | — | | | (2,254) | | Total OCI, net of tax | (22) | | | 51 | | | (2,283) | | | — | | | — | | | (2,254) | |
AOCI balance, September 30, 2021 | AOCI balance, September 30, 2021 | $ | (897) | | | $ | (13) | | | $ | (629) | | | $ | 1 | | | $ | (1,538) | | AOCI balance, September 30, 2021 | $ | (897) | | | $ | (13) | | | $ | (629) | | | $ | — | | | $ | 1 | | | $ | (1,538) | |
AOCI balance, January 1, 2022 | | AOCI balance, January 1, 2022 | $ | (86) | | | $ | (9) | | | $ | (1,510) | | | $ | — | | | $ | 1 | | | $ | (1,604) | |
OCI before reclassifications, net of tax | | OCI before reclassifications, net of tax | 2 | | | (94) | | | (10,956) | | | — | | | (7) | | | (11,055) | |
AFS Securities transferred to HTM, net of tax | | AFS Securities transferred to HTM, net of tax | — | | | — | | | 2,872 | | | (2,872) | | | — | | | — | |
Amounts reclassified from AOCI: | | Amounts reclassified from AOCI: | | | | | | | | | |
Before tax | | Before tax | 22 | | | 12 | | | 87 | | | 281 | | — | | | 402 | |
Tax effect | | Tax effect | 5 | | | 3 | | | 20 | | | 65 | | — | | | 93 | |
Amounts reclassified, net of tax | | Amounts reclassified, net of tax | 17 | | | 9 | | | 67 | | | 216 | | | — | | | 309 | |
Total OCI, net of tax | | Total OCI, net of tax | 19 | | | (85) | | | (10,889) | | | 216 | | | (7) | | | (10,746) | |
AOCI balance, September 30, 2022 | | AOCI balance, September 30, 2022 | $ | (67) | | | $ | (94) | | | $ | (9,527) | | | $ | (2,656) | | | $ | (6) | | | $ | (12,350) | |
Primary income statement location of amounts reclassified from AOCI | Primary income statement location of amounts reclassified from AOCI | Other expense | | Net interest income and Other expense | | Securities gains (losses) and Net interest income | | Net interest income | | Primary income statement location of amounts reclassified from AOCI | Other expense | | Net interest income and Other expense | | Securities gains (losses) and Net interest income | | Net interest income | | Net interest income | |
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24 Truist Financial Corporation
NOTE 12. Income Taxes
For the three months ended September 30, 20212022 and 2020,2021, the provision for income taxes was $423$363 million and $255$423 million, respectively, representing effective tax rates of 19.9%18.2% and 18.3%19.9%, respectively. For the nine months ended September 30, 20212022 and 2020,2021, the provision for income taxes was $1.2$1.1 billion and $670 million,$1.2 billion, respectively, representing effective tax rates of 19.7%18.8% and 17.5%19.7%, respectively. The higherlower effective tax rate for the three and nine months ended September 30, 20212022 was primarily due to higher pre-tax income without a correspondingdriven by an increase in beneficialdiscrete tax items.benefits recognized in the current year and changes in the full year forecasted effective tax rate. The Company calculated the provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period.
24 Truist Financial Corporation
NOTE 13. Benefit Plans
The components of net periodic (benefit) cost for defined benefit pension plans are summarized in the following table: | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in millions) | (Dollars in millions) | Income Statement Location | 2021 | | 2020 | | 2021 | | 2020 | (Dollars in millions) | Income Statement Location | 2022 | | 2021 | | 2022 | | 2021 |
Service cost | Service cost | Personnel expense | $ | 148 | | | $ | 141 | | | $ | 463 | | | $ | 377 | | Service cost | Personnel expense | $ | 139 | | | $ | 148 | | | $ | 418 | | | $ | 463 | |
Interest cost | Interest cost | Other expense | 80 | | | 78 | | | 239 | | | 234 | | Interest cost | Other expense | 87 | | | 80 | | | 263 | | | 239 | |
Estimated return on plan assets | Estimated return on plan assets | Other expense | (250) | | | (217) | | | (748) | | | (650) | | Estimated return on plan assets | Other expense | (269) | | | (250) | | | (808) | | | (748) | |
Amortization and other | Amortization and other | Other expense | 9 | | | 20 | | | 26 | | | 58 | | Amortization and other | Other expense | 10 | | | 9 | | | 27 | | | 26 | |
Net periodic (benefit) cost | Net periodic (benefit) cost | | $ | (13) | | | $ | 22 | | | $ | (20) | | | $ | 19 | | Net periodic (benefit) cost | | $ | (33) | | | $ | (13) | | | $ | (100) | | | $ | (20) | |
Truist makes contributions to the qualified pension plans in amounts betweenup to the minimum required for funding and the maximum amount deductible for federal income tax purposes. Discretionary contributions totaling $403$351 million were made to the Truist pension plan during the nine months ended September 30, 2021. There are no required contributions for the remainder of 2021.2022.
NOTE 14. Commitments and Contingencies
Truist utilizes a variety of financial instruments to mitigate exposure to risks and meet the financing needs of clients and to mitigate exposure to risks.provide investment opportunities for clients. These financial instruments include commitments to extend credit, letters of credit and financial guarantees, derivatives, and derivatives.other investments. Truist also has commitments to fund certain affordable housing investments and contingent liabilities related to certain sold loans.
Tax Credit and Certain Equity Investments
The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. Truist receives tax credits related to these investments, for which the Company typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. The following table summarizes certain tax credit and certain equity investments: | (Dollars in millions) | (Dollars in millions) | Balance Sheet Location | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | Balance Sheet Location | Sep 30, 2022 | | Dec 31, 2021 |
| Investments in affordable housing projects: | Investments in affordable housing projects: | | | | | Investments in affordable housing projects: | | | | |
Carrying amount | Carrying amount | Other assets | $ | 3,911 | | | $ | 3,823 | | Carrying amount | Other assets | $ | 4,342 | | | $ | 4,107 | |
Amount of future funding commitments included in carrying amount | Amount of future funding commitments included in carrying amount | Other liabilities | 1,157 | | | 1,057 | | Amount of future funding commitments included in carrying amount | Other liabilities | 1,544 | | | 1,285 | |
Lending exposure | Lending exposure | NA | 580 | | | 546 | | Lending exposure | Loans and leases for funded amounts | 1,308 | | | 763 | |
| Renewable energy investments: | Renewable energy investments: | | Renewable energy investments: | |
Carrying amount | Carrying amount | Other assets | 215 | | | 167 | | Carrying amount | Other assets | 271 | | | 257 | |
Amount of future funding commitments not included in carrying amount | Amount of future funding commitments not included in carrying amount | NA | 189 | | | 76 | | Amount of future funding commitments not included in carrying amount | NA | 398 | | | 71 | |
Private equity and certain other equity method investments: | Private equity and certain other equity method investments: | | Private equity and certain other equity method investments: | |
Carrying amount | Carrying amount | Other assets | 1,758 | | | 1,574 | | Carrying amount | Other assets | 1,867 | | | 1,822 | |
Amount of future funding commitments not included in carrying amount | Amount of future funding commitments not included in carrying amount | NA | 474 | | | 471 | | Amount of future funding commitments not included in carrying amount | NA | 396 | | | 411 | |
Truist Financial Corporation 25
The following table presents a summary of tax credits and amortization associated with the Company’s tax credit investment activity: | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(Dollars in millions) | (Dollars in millions) | Income Statement Location | 2021 | | 2020 | | 2021 | | 2020 | | (Dollars in millions) | Income Statement Location | 2022 | | 2021 | | 2022 | | 2021 | |
| Tax credits: | Tax credits: | | | Tax credits: | | |
Investments in affordable housing projects | Investments in affordable housing projects | Provision for income taxes | $ | 121 | | | $ | 116 | | | $ | 360 | | | $ | 347 | | | Investments in affordable housing projects | Provision for income taxes | $ | 137 | | | $ | 121 | | | $ | 392 | | | $ | 360 | | |
Other community development investments | Other community development investments | Provision for income taxes | 24 | | | 23 | | | 70 | | | 68 | | | Other community development investments | Provision for income taxes | 26 | | | 24 | | | 73 | | | 70 | | |
Renewable energy investments | Renewable energy investments | NA (1) | 36 | | | 32 | | | 96 | | | 134 | | | Renewable energy investments | NA (1) | 31 | | | 36 | | | 92 | | | 96 | | |
Amortization and other changes in carrying amount: | Amortization and other changes in carrying amount: | | | Amortization and other changes in carrying amount: | | |
Investments in affordable housing projects | Investments in affordable housing projects | Provision for income taxes | $ | 117 | | | $ | 119 | | | $ | 353 | | | $ | 346 | | | Investments in affordable housing projects | Provision for income taxes | $ | 143 | | | $ | 117 | | | $ | 391 | | | $ | 353 | | |
Other community development investments | Other community development investments | Other noninterest income | 21 | | | 19 | | | 59 | | | 57 | | | Other community development investments | Other noninterest income | 21 | | | 21 | | | 60 | | | 59 | | |
Renewable energy investments | Renewable energy investments | Other noninterest income | 1 | | | 1 | | | 3 | | | 3 | | | Renewable energy investments | Other noninterest income | 4 | | | 1 | | | — | | | 3 | | |
(1)Tax credits received for these investments are recorded as a reduction to the carrying value of these investments.
Truist Financial Corporation 25
Letters of Credit and Financial Guarantees
In the normal course of business, Truist utilizes certain financial instruments to meet the financing needs of clients and to mitigate exposure to risks. Such financial instruments include commitments to extend credit and certain contractual agreements, including standby letters of credit and financial guarantee arrangements.
The following is a summary of selected notional amounts of off-balance sheet financial instruments: | (Dollars in millions) | (Dollars in millions) | September 30, 2021 | December 31, 2020 | (Dollars in millions) | Sep 30, 2022 | Dec 31, 2021 |
| | Commitments to extend, originate, or purchase credit | Commitments to extend, originate, or purchase credit | $ | 202,167 | | | $ | 186,731 | | Commitments to extend, originate, or purchase credit | $ | 214,549 | | | $ | 198,658 | |
Residential mortgage loans sold with recourse | Residential mortgage loans sold with recourse | 269 | | | 328 | | Residential mortgage loans sold with recourse | 205 | | | 244 | |
CRE mortgages serviced for others covered by recourse provisions | CRE mortgages serviced for others covered by recourse provisions | 10,146 | | | 9,019 | | CRE mortgages serviced for others covered by recourse provisions | 9,832 | | | 10,243 | |
Other loans serviced for others covered by recourse provisions | | Other loans serviced for others covered by recourse provisions | 667 | | | 588 | |
Letters of credit | Letters of credit | 5,074 | | | 5,066 | | Letters of credit | 6,027 | | | 5,568 | |
| |
Total Return Swaps
The Company facilitates matched book TRS transactions on behalf of clients, whereby a VIE purchases reference assets identified by a client and the Company enters into a TRS with the VIE, with a mirror-image TRS facing the client. The Company provides senior financing to the VIE in the form of demand notes to fund the purchase of the reference assets. Reference assets are typically fixed income instruments primarily composed of syndicated bank loans. The TRS contracts pass through interest and other cash flows on the reference assets to the third party clients, along with exposing those clients to decreases in value on the assets and providing them with the rights to appreciation on the assets. The terms of the TRS contracts require the third parties to post initial margin collateral, as well as ongoing margin as the fair values of the underlying reference assets change. The following table provides a summary of the TRS transactions with VIE purchases. VIE assets include trading loans and bonds: | | | | | | | | | | | | | | |
(Dollars in millions) | | Sep 30, 2022 | | Dec 31, 2021 |
Total return swaps: | | | | |
VIE assets | | $ | 1,568 | | | $ | 1,519 | |
Trading loans and bonds | | 1,527 | | | 1,491 | |
VIE liabilities | | 118 | | | 50 | |
The Company concluded that the associated VIEs should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, that could potentially be significant. At September 30, 2021, the Company’s Consolidated Balance Sheet reflected $1.6 billion of assets and $133 million of other liabilities of the VIEs. At December 31, 2020, the Company’s Consolidated Balance Sheet reflected $1.3 billion of assets and $41 million of other liabilities of the VIEs. VIE assets include trading loans and bonds totaling $1.5 billion and $1.3 billion at September 30, 2021 and December 31, 2020, respectively. The activities of the VIEs are restricted to buying and selling the reference assets and the risks/benefits of any such assets owned by the VIEs are passed to the third party clients via the TRS contracts. For additional information on TRS contracts and the related VIEs, see “Note 16. Derivative Financial Instruments.”
26 Truist Financial Corporation
Pledged Assets
Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, certain derivative agreements, and borrowings or borrowing capacity, as well as to fund certain obligations related to nonqualified defined benefit and defined contribution retirement plans and for other purposes as required or permitted by law. Assets pledged to the FHLB and FRB are subject to applicable asset discounts when determining borrowing capacity. The Company obtainshas capacity for secured financing from both the FRB and FHLB and letters of credit from the FRB and FHLB. The Company’s letters of credit from the FHLB can be used to secure various client deposits, including public fund relationships. Excluding assets related to employeenonqualified benefit plans, the majority of the agreements governing the pledged assets do not permit the other party to sell or repledge the collateral. The following table provides the total carrying amount of pledged assets by asset type: | (Dollars in millions) | (Dollars in millions) | | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | | Sep 30, 2022 | | Dec 31, 2021 |
| Pledged securities | Pledged securities | | $ | 25,914 | | | $ | 24,974 | | Pledged securities | | $ | 26,834 | | | $ | 29,678 | |
| Pledged loans: | Pledged loans: | | Pledged loans: | |
FRB | FRB | | 72,030 | | | 75,615 | | FRB | | 70,471 | | | 73,349 | |
FHLB | FHLB | | 66,040 | | | 69,994 | | FHLB | | 65,483 | | | 64,698 | |
Unused borrowing capacity: | Unused borrowing capacity: | | Unused borrowing capacity: | |
FRB | FRB | | 51,457 | | | 52,831 | | FRB | | 49,525 | | | 52,170 | |
FHLB | FHLB | | 52,459 | | | 52,274 | | FHLB | | 28,548 | | | 49,244 | |
26 Truist Financial Corporation
Litigation and Regulatory Matters
Truist and/or its subsidiaries are routinely named as defendants in or parties to numerous actual or threatened legal proceedings, including private, civil litigation and regulatory investigations or enforcement matters, arising from the ordinary conduct of its regular business activities. The matters range from individual actions involving a single plaintiff to class action lawsuits with multiplemany class members and can involve claims for substantial amounts.or indeterminate alleged damages or for injunctive or other relief. Investigations may involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations.organizations, and could result in fines, penalties, restitution, and/or alterations in Truist’s business practices. These legal proceedings are at varying stages of adjudication, arbitration, or investigation and may consist of a variety of claims, including common law tort and contract claims, as well as statutory antitrust, securities, and consumer protection claims. The ultimate resolution of any proceeding and the timing of such resolution is uncertain and inherently difficult to predict. It is possible that the ultimate resolution of these matters, including those described below, if unfavorable, may be material to the consolidated financial position, consolidated results of operations, or consolidated cash flows of Truist.Truist, or cause significant reputational consequences.
Truist establishes accruals for legal matters when potential losses associated with the actions become probable and the amount of loss can be reasonably estimated. There is no assurance that the ultimate resolution of these matters will not significantly exceed the amounts that Truist has accrued. Accruals for legal matters are based on management’s best judgment after consultation with counsel and others.
The Company estimates reasonably possible losses, in excess of amounts accrued, of up to approximately $200 million as of September 30, 2021.2022. This estimate isdoes not represent Truist’s maximum loss exposure, and actual losses may vary significantly. In addition, the matters underlying this estimate will change from time to time. Estimated losses are based upon currently available information and involvesinvolve considerable judgment, given that claims often include significant legal uncertainties, damages alleged by plaintiffs are often unspecified or overstated, discovery may not have started or may not be complete, and material facts may be disputed or unsubstantiated, among other factors. In addition,
For certain matters, Truist may be unable to estimate the matters underlying this estimate will change from time to time and actual losses may vary significantly from this estimate. Asloss or range of loss, even if it believes that a result, the Company does not believe that an estimate ofloss is probable or reasonably possible, losses can be madeuntil developments in the case provide additional information sufficient to support such an estimate. Such matters are not accrued for certain matters. Such mattersand are not reflected in the estimate provided herein.of reasonably possible losses.
The following is a description of a certain legal proceedingproceedings in which Truist is involved:
Bickerstaff v. SunTrust Bank
This class action case was filed in the Fulton County State Court on July 12, 2010, and an amended complaint was filed on August 9, 2010. Plaintiff asserts that all overdraft fees charged to his account which related to debit card and ATM transactions are actually interest charges and therefore subject to the usury laws of Georgia. Plaintiff has brought claims for violations of civil and criminal usury laws, conversion, and money had and received.received, and seeks damages on a class-wide basis, including refunds of challenged overdraft fees and pre-judgment interest. On October 6, 2017, the trial court granted plaintiff’s motion for class certification and defined the class as “Every Georgia citizen who had or has one or more accounts with SunTrust Bank and who, from July 12, 2006, to October 6, 2017 (i) had at least one overdraft of $500.00 or less resulting from an ATM or debit card transaction (the “Transaction”); (ii) paid any Overdraft Fees as a result of the Transaction; and (iii) did not receive a refund of those Fees,” and the granting of a certified class was affirmed on appeal. On April 8, 2020, theThe Company previously filed a motion seekingto amend the class definition in which it sought to narrow the scope of thisthe class and on May 29, 2020, it filed a renewed motionmotions to compel arbitration ofagainst certain class members, which the claims of some of the class members.court found were premature. On February 9, 2021,September 22, 2022, the trial court denied both motions as premature but heldentered a scheduling order holding that the issues could be raised againcourt will consider such motions after the conclusion of discovery which is currently underway.completed. The Company believescontinues to believe that the underlying claims are without merit.
United Services Automobile Association v. Truist Bank
USAA filed a lawsuit on July 29, 2022 against the Company in the United States District Court for the Eastern District of Texas alleging that the Company’s mobile remote deposit capture systems infringe certain patents held by USAA. The complaint seeks damages, including for alleged willful infringement and a corresponding request that the amount of actual damages be trebled, as well as injunctive and other equitable relief. The Company filed its answer and affirmative defenses on October 11, 2022, denying USAA’s claims, including its claims of willful infringement. Also on October 11, 2022, the Company filed a petition for inter partes review challenging the validity of one of the patents asserted in the lawsuit.
Truist Financial Corporation 27
NOTE 15. Fair Value Disclosures
Recurring Fair Value Measurements
Accounting standards define fair value as the price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level measurement hierarchy:
•Level 1: Quoted prices for identical instruments in active markets
•Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets
•Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable
The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis: | September 30, 2021 (Dollars in millions) | | Total | | Level 1 | | Level 2 | | Level 3 | | Netting Adjustments (1) | |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | | Total | | Level 1 | | Level 2 | | Level 3 | | Netting Adjustments (1) | |
Assets: | Assets: | | | | | | | | | | Assets: | | | | | | | | | | |
Trading assets: | Trading assets: | | Trading assets: | | |
U.S. Treasury | U.S. Treasury | | $ | 2,414 | | | $ | — | | | $ | 2,414 | | | $ | — | | | $ | — | | U.S. Treasury | | $ | 1,243 | | | $ | — | | | $ | 1,243 | | | $ | — | | | $ | — | | |
GSE | GSE | | 184 | | | — | | | 184 | | | — | | | — | | GSE | | 408 | | | — | | | 408 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 973 | | | — | | | 973 | | | — | | | — | | Agency MBS - residential | | 1,041 | | | — | | | 1,041 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 5 | | | — | | | 5 | | | — | | | — | | Agency MBS - commercial | | 60 | | | — | | | 60 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 67 | | | — | | | 67 | | | — | | | — | | States and political subdivisions | | 393 | | | — | | | 393 | | | — | | | — | | |
| Corporate and other debt securities | Corporate and other debt securities | | 1,031 | | | — | | | 1,031 | | | — | | | — | | Corporate and other debt securities | | 595 | | | — | | | 595 | | | — | | | — | | |
Loans | Loans | | 1,943 | | | — | | | 1,943 | | | — | | | — | | Loans | | 1,787 | | | — | | | 1,787 | | | — | | | — | | |
Other | Other | | 355 | | | 294 | | | 61 | | | — | | | — | | Other | | 337 | | | 278 | | | 59 | | | — | | | — | | |
Total trading assets | Total trading assets | | 6,972 | | | 294 | | | 6,678 | | | — | | | — | | Total trading assets | | 5,864 | | | 278 | | | 5,586 | | | — | | | — | | |
AFS securities: | AFS securities: | | | | AFS securities: | | | | |
U.S. Treasury | U.S. Treasury | | 9,697 | | | — | | | 9,697 | | | — | | | — | | U.S. Treasury | | 10,054 | | | — | | | 10,054 | | | — | | | — | | |
GSE | GSE | | 1,874 | | | — | | | 1,874 | | | — | | | — | | GSE | | 287 | | | — | | | 287 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 133,061 | | | — | | | 133,061 | | | — | | | — | | Agency MBS - residential | | 56,594 | | | — | | | 56,594 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 3,073 | | | — | | | 3,073 | | | — | | | — | | Agency MBS - commercial | | 2,486 | | | — | | | 2,486 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 458 | | | — | | | 458 | | | — | | | — | | States and political subdivisions | | 396 | | | — | | | 396 | | | — | | | — | | |
Non-agency MBS | Non-agency MBS | | 2,846 | | | — | | | 2,846 | | | — | | | — | | Non-agency MBS | | 3,138 | | | — | | | 3,138 | | | — | | | — | | |
Other | Other | | 29 | | | — | | | 29 | | | — | | | — | | Other | | 23 | | | — | | | 23 | | | — | | | — | | |
Total AFS securities | Total AFS securities | | 151,038 | | | — | | | 151,038 | | | — | | | — | | Total AFS securities | | 72,978 | | | — | | | 72,978 | | | — | | | — | | |
LHFS at fair value | LHFS at fair value | | 4,799 | | | — | | | 4,799 | | | — | | | — | | LHFS at fair value | | 1,868 | | | — | | | 1,868 | | | — | | | — | | |
MSRs at fair value | | 2,584 | | | — | | | — | | | 2,584 | | | — | | |
Loans and leases | | Loans and leases | | 19 | | | — | | | — | | | 19 | | | — | | |
Loan servicing rights at fair value | | Loan servicing rights at fair value | | 3,797 | | | — | | | — | | | 3,797 | | | — | | |
Other assets: | Other assets: | | Other assets: | | |
Derivative assets | Derivative assets | | 2,976 | | | 676 | | | 3,893 | | | 38 | | | (1,631) | | Derivative assets | | 1,140 | | | 397 | | | 3,001 | | | 6 | | | (2,264) | | |
Equity securities | Equity securities | | 1,026 | | | 940 | | | 86 | | | — | | | — | | Equity securities | | 887 | | | 783 | | | 104 | | | — | | | — | | |
| Total assets | Total assets | | $ | 169,395 | | | $ | 1,910 | | | $ | 166,494 | | | $ | 2,622 | | | $ | (1,631) | | Total assets | | $ | 86,553 | | | $ | 1,458 | | | $ | 83,537 | | | $ | 3,822 | | | $ | (2,264) | | |
Liabilities: | Liabilities: | | | | | | | | | | Liabilities: | | | | | | | | | | |
Derivative liabilities | Derivative liabilities | | $ | 601 | | | $ | 304 | | | $ | 3,132 | | | $ | 28 | | | $ | (2,863) | | Derivative liabilities | | $ | 3,407 | | | $ | 449 | | | $ | 5,219 | | | $ | 77 | | | $ | (2,338) | | |
Securities sold short | Securities sold short | | 1,735 | | | 12 | | | 1,723 | | | — | | | — | | Securities sold short | | 1,905 | | | 297 | | | 1,608 | | | — | | | — | | |
Total liabilities | Total liabilities | | $ | 2,336 | | | $ | 316 | | | $ | 4,855 | | | $ | 28 | | | $ | (2,863) | | Total liabilities | | $ | 5,312 | | | $ | 746 | | | $ | 6,827 | | | $ | 77 | | | $ | (2,338) | | |
| |
28 Truist Financial Corporation
| December 31, 2020 (Dollars in millions) | | Total | | Level 1 | | Level 2 | | Level 3 | | Netting Adjustments (1) | |
December 31, 2021 (Dollars in millions) | | December 31, 2021 (Dollars in millions) | | Total | | Level 1 | | Level 2 | | Level 3 | | Netting Adjustments (1) | |
Assets: | Assets: | | | | | | | | | | Assets: | | | | | | | | | | |
Trading assets: | Trading assets: | | Trading assets: | | |
U.S. Treasury | U.S. Treasury | | $ | 793 | | | $ | — | | | $ | 793 | | | $ | — | | | $ | — | | U.S. Treasury | | $ | 125 | | | $ | — | | | $ | 125 | | | $ | — | | | $ | — | | |
GSE | GSE | | 164 | | | — | | | 164 | | | — | | | — | | GSE | | 306 | | | — | | | 306 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 599 | | | — | | | 599 | | | — | | | — | | Agency MBS - residential | | 1,016 | | | — | | | 1,016 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 21 | | | — | | | 21 | | | — | | | — | | Agency MBS - commercial | | 13 | | | — | | | 13 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 34 | | | — | | | 34 | | | — | | | — | | States and political subdivisions | | 91 | | | — | | | 91 | | | — | | | — | | |
| Corporate and other debt securities | Corporate and other debt securities | | 545 | | | — | | | 545 | | | — | | | — | | Corporate and other debt securities | | 738 | | | — | | | 738 | | | — | | | — | | |
Loans | Loans | | 1,586 | | | — | | | 1,586 | | | — | | | — | | Loans | | 1,791 | | | — | | | 1,791 | | | — | | | — | | |
Other | Other | | 130 | | | 123 | | | 7 | | | — | | | — | | Other | | 343 | | | 285 | | | 58 | | | — | | | — | | |
Total trading assets | Total trading assets | | 3,872 | | | 123 | | | 3,749 | | | — | | | — | | Total trading assets | | 4,423 | | | 285 | | | 4,138 | | | — | | | — | | |
AFS securities: | AFS securities: | | | | | | | | | | AFS securities: | | | | | | | | | | |
U.S. Treasury | U.S. Treasury | | 1,746 | | | — | | | 1,746 | | | — | | | — | | U.S. Treasury | | 9,795 | | | — | | | 9,795 | | | — | | | — | | |
GSE | GSE | | 1,917 | | | — | | | 1,917 | | | — | | | — | | GSE | | 1,698 | | | — | | | 1,698 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 113,541 | | | — | | | 113,541 | | | — | | | — | | Agency MBS - residential | | 134,042 | | | — | | | 134,042 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 3,057 | | | — | | | 3,057 | | | — | | | — | | Agency MBS - commercial | | 2,882 | | | — | | | 2,882 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 493 | | | — | | | 493 | | | — | | | — | | States and political subdivisions | | 420 | | | — | | | 420 | | | — | | | — | | |
| Non-agency MBS | | Non-agency MBS | | 4,258 | | | — | | | 4,258 | | | — | | | — | | |
Other | Other | | 34 | | | — | | | 34 | | | — | | | — | | Other | | 28 | | | — | | | 28 | | | — | | | — | | |
Total AFS securities | Total AFS securities | | 120,788 | | | — | | | 120,788 | | | — | | | — | | Total AFS securities | | 153,123 | | | — | | | 153,123 | | | — | | | — | | |
LHFS at fair value | LHFS at fair value | | 4,955 | | | — | | | 4,955 | | | — | | | — | | LHFS at fair value | | 3,544 | | | — | | | 3,544 | | | — | | | — | | |
MSRs at fair value | | 2,023 | | | — | | | — | | | 2,023 | | | — | | |
Loans and leases | | Loans and leases | | 23 | | | — | | | — | | | 23 | | | — | | |
Loan servicing rights at fair value | | Loan servicing rights at fair value | | 2,633 | | | — | | | — | | | 2,633 | | | — | | |
Other assets: | Other assets: | | | | | | | | | | Other assets: | | | | | | | | | | |
Derivative assets | Derivative assets | | 3,837 | | | 752 | | | 4,903 | | | 186 | | | (2,004) | | Derivative assets | | 2,370 | | | 887 | | | 3,110 | | | 30 | | | (1,657) | | |
Equity securities | Equity securities | | 1,054 | | | 996 | | | 58 | | | — | | | — | | Equity securities | | 1,066 | | | 967 | | | 99 | | | — | | | — | | |
| Total assets | Total assets | | $ | 136,529 | | | $ | 1,871 | | | $ | 134,453 | | | $ | 2,209 | | | $ | (2,004) | | Total assets | | $ | 167,182 | | | $ | 2,139 | | | $ | 164,014 | | | $ | 2,686 | | | $ | (1,657) | | |
Liabilities: | Liabilities: | | | | | | | | | | Liabilities: | | | | | | | | | | |
Derivative liabilities | Derivative liabilities | | $ | 555 | | | $ | 386 | | | $ | 3,263 | | | $ | 14 | | | $ | (3,108) | | Derivative liabilities | | $ | 586 | | | $ | 438 | | | $ | 3,056 | | | $ | 42 | | | $ | (2,950) | | |
Securities sold short | Securities sold short | | 1,115 | | | 3 | | | 1,112 | | | — | | | — | | Securities sold short | | 1,731 | | | 8 | | | 1,723 | | | — | | | — | | |
Total liabilities | Total liabilities | | $ | 1,670 | | | $ | 389 | | | $ | 4,375 | | | $ | 14 | | | $ | (3,108) | | Total liabilities | | $ | 2,317 | | | $ | 446 | | | $ | 4,779 | | | $ | 42 | | | $ | (2,950) | | |
|
(1)Refer to “Note 16. Derivative Financial Instruments” for additional discussion on netting adjustments.
At September 30, 20212022 and December 31, 2020,2021, investments totaling $490$394 million and $387$440 million, respectively, have been excluded from the table above as they are valued based on net asset value as a practical expedient. These investments primarily consist of certain SBIC funds.
For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see “Note 18. Fair Value Disclosures” of the Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Truist Financial Corporation 29
Activity for Level 3 assets and liabilities is summarized below: | | Three Months Ended September 30, 2021 and 2020 (Dollars in millions) | | Non-agency MBS | | MSRs | | Net Derivatives | | Private Equity Investments | |
Balance at July 1, 2020 | | $ | — | | | $ | 2,077 | | | $ | 203 | | | $ | — | | |
Total realized and unrealized gains (losses): | | | |
Included in earnings | | — | | | (54) | | | 128 | | | — | | |
| Issuances | | — | | | 192 | | | 229 | | | — | | |
| Settlements | | — | | | (224) | | | (346) | | | — | | |
| Balance at September 30, 2020 | | $ | — | | | $ | 1,991 | | | $ | 214 | | | $ | — | | |
Three Months Ended September 30, 2022 and 2021 (Dollars in millions) | | Three Months Ended September 30, 2022 and 2021 (Dollars in millions) | | Loans and Leases | | Loan Servicing Rights | | Net Derivatives | |
Balance at July 1, 2021 | Balance at July 1, 2021 | | $ | — | | | $ | 2,231 | | | $ | 38 | | | $ | — | | Balance at July 1, 2021 | | $ | — | | | $ | 2,231 | | | $ | 38 | | |
Total realized and unrealized gains (losses): | Total realized and unrealized gains (losses): | | | Total realized and unrealized gains (losses): | | | |
Included in earnings | Included in earnings | | — | | | 78 | | | 6 | | | — | | Included in earnings | | — | | | 78 | | | 6 | | |
| Purchases | Purchases | | — | | | 303 | | | — | | | — | | Purchases | | — | | | 303 | | | — | | |
Issuances | Issuances | | — | | | 145 | | | 77 | | | — | | Issuances | | — | | | 145 | | | 77 | | |
Sales | Sales | | — | | | (1) | | | — | | | — | | Sales | | — | | | (1) | | | — | | |
Settlements | Settlements | | — | | | (172) | | | (111) | | | — | | Settlements | | — | | | (172) | | | (111) | | |
| Balance at September 30, 2021 | Balance at September 30, 2021 | | $ | — | | | $ | 2,584 | | | $ | 10 | | | $ | — | | Balance at September 30, 2021 | | $ | — | | | $ | 2,584 | | | $ | 10 | | |
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2021 | | $ | — | | | $ | 78 | | | $ | 21 | | | $ | — | | |
Balance at July 1, 2022 | | Balance at July 1, 2022 | | $ | 20 | | | $ | 3,466 | | | $ | (36) | | |
Total realized and unrealized gains (losses): | | Total realized and unrealized gains (losses): | | | |
Included in earnings | | Included in earnings | | — | | | 190 | | | (61) | | |
| Nine Months Ended September 30, 2021 and 2020 (Dollars in millions) | | Non-agency MBS | | MSRs | | Net Derivatives | | Private Equity Investments | |
Purchases | | Purchases | | — | | | 126 | | | — | | |
Issuances | | Issuances | | — | | | 130 | | | (30) | | |
Sales | | Sales | | — | | | (6) | | | — | | |
Settlements | | Settlements | | — | | | (109) | | | 56 | | |
Other | | Other | | (1) | | | — | | | — | | |
| Balance at September 30, 2022 | | Balance at September 30, 2022 | | $ | 19 | | | $ | 3,797 | | | $ | (71) | | |
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2022 | | Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2022 | | $ | — | | | $ | 189 | | | $ | (48) | | |
| Nine Months Ended September 30, 2022 and 2021 (Dollars in millions) | | Nine Months Ended September 30, 2022 and 2021 (Dollars in millions) | | Loans and Leases | | Loan Servicing Rights | | Net Derivatives | |
| Balance at January 1, 2020 | | $ | 368 | | | $ | 2,618 | | | $ | 19 | | | $ | 440 | | |
Total realized and unrealized gains (losses): | | | | | | | |
Included in earnings | | 306 | | | (616) | | | 365 | | | 2 | | |
Included in unrealized net holding gains (losses) in OCI | | (178) | | | — | | | — | | | — | | |
Purchases | | — | | | — | | | — | | | 27 | | |
Issuances | | — | | | 523 | | | 655 | | | — | | |
Sales | | (481) | | | — | | | — | | | — | | |
Settlements | | (15) | | | (534) | | | (825) | | | (21) | | |
| Transfers out of level 3 and other | | — | | | — | | | — | | | (448) | | |
| Balance at September 30, 2020 | | $ | — | | | $ | 1,991 | | | $ | 214 | | | $ | — | | |
Balance at January 1, 2021 | Balance at January 1, 2021 | | $ | — | | | $ | 2,023 | | | $ | 172 | | | $ | — | | Balance at January 1, 2021 | | $ | — | | | $ | 2,023 | | | $ | 172 | | |
Total realized and unrealized gains (losses): | Total realized and unrealized gains (losses): | | | Total realized and unrealized gains (losses): | | | | |
Included in earnings | Included in earnings | | — | | | 260 | | | (77) | | | — | | Included in earnings | | — | | | 260 | | | (77) | | |
| Purchases | Purchases | | — | | | 355 | | | — | | | — | | Purchases | | — | | | 355 | | | — | | |
Issuances | Issuances | | — | | | 532 | | | 254 | | | — | | Issuances | | — | | | 532 | | | 254 | | |
Sales | Sales | | — | | | (1) | | | — | | | — | | Sales | | — | | | (1) | | | — | | |
Settlements | Settlements | | — | | | (585) | | | (339) | | | — | | Settlements | | — | | | (585) | | | (339) | | |
| Balance at September 30, 2021 | Balance at September 30, 2021 | | $ | — | | | $ | 2,584 | | | $ | 10 | | | $ | — | | Balance at September 30, 2021 | | $ | — | | | $ | 2,584 | | | $ | 10 | | |
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2021 | | $ | — | | | $ | 260 | | | $ | 16 | | | $ | — | | |
Balance at January 1, 2022 | | Balance at January 1, 2022 | | $ | 23 | | | $ | 2,633 | | | $ | (12) | | |
Total realized and unrealized gains (losses): | | Total realized and unrealized gains (losses): | | | |
Included in earnings | | Included in earnings | | — | | | 807 | | | (324) | | |
| Purchases | | Purchases | | — | | | 321 | | | — | | |
Issuances | | Issuances | | — | | | 411 | | | 10 | | |
Sales | | Sales | | — | | | (7) | | | — | | |
Settlements | | Settlements | | — | | | (368) | | | 255 | | |
| Other | | Other | | (4) | | | — | | | — | | |
Balance at September 30, 2022 | | Balance at September 30, 2022 | | $ | 19 | | | $ | 3,797 | | | $ | (71) | | |
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2022 | | Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2022 | | $ | — | | | $ | 807 | | | $ | (55) | | |
Primary income statement location of realized gains (losses) included in earnings | Primary income statement location of realized gains (losses) included in earnings | | Securities gains (losses) | | Residential mortgage income and Commercial real estate related income | | Residential mortgage income and Commercial real estate related income | | Other income | Primary income statement location of realized gains (losses) included in earnings | | Other income | | Residential mortgage income and Commercial mortgage income | | Residential mortgage income and Commercial mortgage income | |
During 2020, Truist sold non-agency MBS previously categorized as Level 3 that represented ownership interests in various tranches of Re-REMIC trusts. Additionally during 2020, as a result of a change in control of the funds’ manager, the Company deconsolidated certain SBIC funds for which it had previously concluded that it was the primary beneficiary.
Refer to “Note 7. Loan Servicing” for additional information on valuation techniques and inputs for MSRs.
30 Truist Financial Corporation
Fair Value Option
The following table details the fair value and UPB of LHFScertain loans that were elected to be measured at fair value. Trading loans, included in other trading assets, were also elected to be measured at fair value.value: | | | | September 30, 2021 | | December 31, 2020 | | | September 30, 2022 | | December 31, 2021 |
(Dollars in millions) | (Dollars in millions) | | Fair Value | | UPB | | Difference | | Fair Value | | UPB | | Difference | (Dollars in millions) | | Fair Value | | UPB | | Difference | | Fair Value | | UPB | | Difference |
| | Trading loans | Trading loans | | $ | 1,943 | | | $ | 1,912 | | | $ | 31 | | | $ | 1,586 | | | $ | 1,619 | | | $ | (33) | | Trading loans | | $ | 1,787 | | | $ | 1,906 | | | $ | (119) | | | $ | 1,791 | | | $ | 1,784 | | | $ | 7 | |
Loans and leases | | Loans and leases | | 19 | | | 20 | | | (1) | | | 23 | | | 35 | | | (12) | |
LHFS at fair value | LHFS at fair value | | 4,799 | | | 4,700 | | | 99 | | | 4,955 | | | 4,736 | | | 219 | | LHFS at fair value | | 1,868 | | | 1,931 | | | (63) | | | 3,544 | | | 3,450 | | | 94 | |
|
30 Truist Financial Corporation
Nonrecurring Fair Value Measurements
The following table provides information about certain assets measured at fair value on a nonrecurring basis still held as of period end. The carrying values represent end of period values, which approximate the fair value measurements that occurred on the various measurement dates throughout the period. These assets are considered to be Level 3 assets. | (Dollars in millions) | (Dollars in millions) | | Sep 30, 2021 | | | Dec 31, 2020 | | (Dollars in millions) | | Sep 30, 2022 | | | Dec 31, 2021 | |
Carrying value: | Carrying value: | | | | | Carrying value: | | | | |
LHFS | LHFS | | $ | 255 | | | | $ | 979 | | | LHFS | | $ | 361 | | | | $ | 101 | | |
Loans and leases | Loans and leases | | 122 | | | | 142 | | | Loans and leases | | 429 | | | | 443 | | |
Other | Other | | 102 | | | | 92 | | | Other | | 64 | | | | 100 | | |
|
The following table provides information about valuation adjustments for certain assets measured at fair value on a nonrecurring basis. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end. | Nine Months Ended September 30, (Dollars in millions) | | 2021 | | 2020 | |
| | | Nine Months Ended September 30, | |
(Dollars in millions) | | (Dollars in millions) | | 2022 | | 2021 | |
Valuation adjustments: | Valuation adjustments: | | Valuation adjustments: | | |
LHFS | LHFS | | $ | (27) | | | $ | (52) | | LHFS | | $ | (9) | | | $ | (27) | | |
Loans and leases | Loans and leases | | (41) | | | (38) | | Loans and leases | | (280) | | | (349) | | |
Other | Other | | (156) | | | (137) | | Other | | (440) | | | (156) | | |
LHFS with valuation adjustments in the table above consisted primarily of residential mortgages and commercial loans that were valued using market prices and measured at the lower of cost or market. LHFS as of December 31, 2020 includes the small ticket loan and lease portfolio that was sold during the first quarter of 2021.LOCOM. The table above excludes $79$75 million and $125 million$1.2 billion of LHFS carried at cost at September 30, 20212022 and December 31, 2020,2021, respectively, that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. The Company held $76 million in nonperforming LHFS at September 30, 2021 and $5 million of nonperforming LHFS at December 31, 2020. LHFS that were 90 days or more past due and still accruing interest were not material at September 30, 2021.
Loans and leases consists of larger commercial loans and leases that do not share similar risk characteristics. Theseare collateral-dependent and other secured loans and leases that have been charged-off to the fair value of the collateral. Valuation adjustments for loans and leases are collateral dependent and may be subject to liquidity adjustments.primarily recorded in the Provision for credit losses in the Consolidated statement of income. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for additional discussion of individually evaluated loans and leases.
Other includes foreclosed real estate, other foreclosed property, ROU assets, premises and equipment, and OREO, and consists primarily of residential homes, commercial properties, vacant lots, and automobiles. ROU assets are measured based on the fair value of the assets, which considers the potential for sublease income. The remaining assets are measured at the lower of cost or fair value,LOCOM, less costs to sell.
Truist Financial Corporation 31
Financial Instruments Not Recorded at Fair Value
For financial instruments not recorded at fair value, estimates of fair value are based on relevant market data and information about the instruments. Values obtained relate to trading without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various instruments.
An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets. In addition, changes in assumptions could significantly affect these fair value estimates. Financial assets and liabilities not recorded at fair value are summarized below: | | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
(Dollars in millions) | (Dollars in millions) | Fair Value Hierarchy | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | (Dollars in millions) | Fair Value Hierarchy | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| | Financial assets: | Financial assets: | | | | | | | | | Financial assets: | |
| HTM securities | | HTM securities | Level 2 | | $ | 58,754 | | | $ | 48,975 | | | $ | 1,494 | | | $ | 1,495 | |
Loans and leases HFI, net of ALLL | Loans and leases HFI, net of ALLL | Level 3 | | $ | 280,820 | | | $ | 281,198 | | | $ | 293,899 | | | $ | 295,461 | | Loans and leases HFI, net of ALLL | Level 3 | | 310,111 | | | 301,437 | | | 285,055 | | | 284,914 | |
Financial liabilities: | Financial liabilities: | | | | | | Financial liabilities: | | | | | |
Time deposits | Time deposits | Level 2 | | 16,675 | | | 16,810 | | | 21,941 | | | 22,095 | | Time deposits | Level 2 | | 14,454 | | | 14,521 | | | 15,886 | | | 16,017 | |
Long-term debt | Long-term debt | Level 2 | | 37,837 | | | 38,491 | | | 39,597 | | | 40,864 | | Long-term debt | Level 2 | | 31,172 | | | 29,568 | | | 35,913 | | | 36,251 | |
| |
The carrying value of the RUFC, which approximates the fair value of unfunded commitments, was $276$250 million and $364$260 million at September 30, 20212022 and December 31, 2020,2021, respectively.
32 Truist Financial Corporation 31
NOTE 16. Derivative Financial Instruments
Impact of Derivatives on the Consolidated Balance Sheets
The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company. Truist held 0 cash flow hedges as of September 30, 2021 and December 31, 2020.Company: | | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 | |
| | Notional Amount | | Fair Value | | Notional Amount | | Fair Value | | Notional Amount | | Fair Value | | Notional Amount | | Fair Value | |
(Dollars in millions) | (Dollars in millions) | | Assets | | Liabilities | | Assets | | Liabilities | (Dollars in millions) | | Assets | | Liabilities | | Assets | | Liabilities | |
Cash flow hedges: | | Cash flow hedges: | | | | | | | | | | | | |
Interest rate contracts: | | Interest rate contracts: | | | | | | | | | | | | |
| | | | Swaps hedging commercial loans | | Swaps hedging commercial loans | $ | 7,250 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
Fair value hedges: | Fair value hedges: | | | | | | | Fair value hedges: | | | | | | | |
Interest rate contracts: | Interest rate contracts: | | | | | | | Interest rate contracts: | | | | | | | |
| Swaps hedging long-term debt | | Swaps hedging long-term debt | 14,893 | | | — | | | (80) | | | 12,690 | | | — | | | (6) | | |
| Swaps hedging AFS securities | Swaps hedging AFS securities | $ | 24,006 | | | $ | — | | | $ | (4) | | | $ | 17,765 | | | $ | — | | | $ | — | | Swaps hedging AFS securities | 7,097 | | | — | | | — | | | 12,711 | | | — | | | (2) | | |
| Total | | Total | 21,990 | | | — | | | (80) | | | 25,401 | | | — | | | (8) | | |
Not designated as hedges: | Not designated as hedges: | | | | | | | | | | | | Not designated as hedges: | | | | | | | | | | | | |
Client-related and other risk management: | Client-related and other risk management: | | | | | | | | | | | | Client-related and other risk management: | | | | | | | | | | | | |
Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | |
Swaps | Swaps | 149,428 | | | 2,103 | | | (731) | | | 156,338 | | | 3,399 | | | (862) | | Swaps | 154,257 | | | 540 | | | (2,830) | | | 150,223 | | | 1,716 | | | (733) | | |
| Options | Options | 24,939 | | | 36 | | | (21) | | | 25,386 | | | 45 | | | (18) | | Options | 28,266 | | | 160 | | | (166) | | | 23,659 | | | 43 | | | (30) | | |
Forward commitments | Forward commitments | 8,426 | | | 7 | | | (9) | | | 4,847 | | | 9 | | | (11) | | Forward commitments | 2,435 | | | 27 | | | (5) | | | 2,404 | | | 2 | | | (5) | | |
Other | Other | 2,582 | | | — | | | — | | | 2,573 | | | — | | | — | | Other | 4,925 | | | 1 | | | (1) | | | 2,927 | | | — | | | — | | |
Equity contracts | Equity contracts | 30,431 | | | 1,484 | | | (1,779) | | | 31,152 | | | 1,856 | | | (2,297) | | Equity contracts | 37,582 | | | 653 | | | (938) | | | 34,232 | | | 1,582 | | | (2,089) | | |
Credit contracts: | Credit contracts: | | Credit contracts: | | |
Trading assets | | Trading assets | 120 | | | — | | | — | | | — | | | — | | | — | | |
Loans and leases | Loans and leases | 815 | | | — | | | (2) | | | 1,056 | | | — | | | (5) | | Loans and leases | 519 | | | — | | | — | | | 570 | | | — | | | (2) | | |
Risk participation agreements | Risk participation agreements | 8,413 | | | 1 | | | (4) | | | 7,802 | | | 1 | | | (13) | | Risk participation agreements | 6,342 | | | — | | | (1) | | | 8,145 | | | — | | | (4) | | |
Total return swaps | Total return swaps | 1,424 | | | 1 | | | (27) | | | 1,296 | | | 13 | | | (33) | | Total return swaps | 1,525 | | | 87 | | | — | | | 1,445 | | | 3 | | | (19) | | |
| Foreign exchange contracts | Foreign exchange contracts | 16,224 | | | 175 | | | (145) | | | 12,066 | | | 189 | | | (219) | | Foreign exchange contracts | 18,793 | | | 763 | | | (725) | | | 16,102 | | | 160 | | | (156) | | |
Commodity | Commodity | 4,536 | | | 697 | | | (689) | | | 2,872 | | | 130 | | | (124) | | Commodity | 6,142 | | | 834 | | | (840) | | | 4,641 | | | 475 | | | (468) | | |
| Total | Total | 247,218 | | | 4,504 | | | (3,407) | | | 245,388 | | | 5,642 | | | (3,582) | | Total | 260,906 | | | 3,065 | | | (5,506) | | | 244,348 | | | 3,981 | | | (3,506) | | |
Mortgage banking: | Mortgage banking: | | | | | | | | | | | | Mortgage banking: | | | | | | | | | | | | |
Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | |
Swaps | Swaps | 634 | | | — | | | — | | | 687 | | | — | | | — | | Swaps | 572 | | | — | | | — | | | 441 | | | — | | | — | | |
| Interest rate lock commitments | Interest rate lock commitments | 4,928 | | | 38 | | | (16) | | | 8,609 | | | 186 | | | (3) | | Interest rate lock commitments | 1,869 | | | 6 | | | (61) | | | 4,163 | | | 30 | | | (7) | | |
When issued securities, forward rate agreements and forward commitments | When issued securities, forward rate agreements and forward commitments | 9,082 | | | 63 | | | (2) | | | 11,691 | | | 6 | | | (73) | | When issued securities, forward rate agreements and forward commitments | 3,716 | | | 158 | | | — | | | 6,913 | | | 7 | | | (15) | | |
Other | Other | 308 | | | 1 | | | — | | | 466 | | | — | | | — | | Other | 106 | | | 1 | | | — | | | 424 | | | 1 | | | — | | |
| Total | Total | 14,952 | | | 102 | | | (18) | | | 21,453 | | | 192 | | | (76) | | Total | 6,263 | | | 165 | | | (61) | | | 11,941 | | | 38 | | | (22) | | |
MSRs: | MSRs: | | | | | | | | | | | | MSRs: | | | | | | | | | | | | |
Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | |
Swaps | Swaps | 38,329 | | | — | | | (3) | | | 36,161 | | | — | | | (5) | | Swaps | 22,327 | | | 10 | | | — | | | 12,837 | | | — | | | — | | |
| Options | Options | 101 | | | 1 | | | — | | | 101 | | | — | | | — | | Options | 13,599 | | | 160 | | | (47) | | | 101 | | | 1 | | | — | | |
When issued securities, forward rate agreements and forward commitments | When issued securities, forward rate agreements and forward commitments | 3,644 | | | — | | | (32) | | | 1,314 | | | 7 | | | — | | When issued securities, forward rate agreements and forward commitments | 2,470 | | | 3 | | | (48) | | | 3,927 | | | 7 | | | — | | |
Other | Other | 1,682 | | | — | | | — | | | 760 | | | — | | | — | | Other | 1,265 | | | 1 | | | (3) | | | 2,017 | | | — | | | — | | |
Total | Total | 43,756 | | | 1 | | | (35) | | | 38,336 | | | 7 | | | (5) | | Total | 39,661 | | | 174 | | | (98) | | | 18,882 | | | 8 | | | — | | |
Total derivatives not designated as hedges | Total derivatives not designated as hedges | 305,926 | | | 4,607 | | | (3,460) | | | 305,177 | | | 5,841 | | | (3,663) | | Total derivatives not designated as hedges | 306,830 | | | 3,404 | | | (5,665) | | | 275,171 | | | 4,027 | | | (3,528) | | |
Total derivatives | Total derivatives | $ | 329,932 | | | 4,607 | | | (3,464) | | | $ | 322,942 | | | 5,841 | | | (3,663) | | Total derivatives | $ | 336,070 | | | 3,404 | | | (5,745) | | | $ | 300,572 | | | 4,027 | | | (3,536) | | |
Gross amounts in the Consolidated Balance Sheets: | Gross amounts in the Consolidated Balance Sheets: | | | | | | | | | | Gross amounts in the Consolidated Balance Sheets: | | | | | | | | | | |
Amounts subject to master netting arrangements | Amounts subject to master netting arrangements | | (1,314) | | | 1,314 | | | | | (1,561) | | | 1,561 | | Amounts subject to master netting arrangements | | (1,621) | | | 1,621 | | | | | (1,312) | | | 1,312 | | |
Cash collateral (received) posted for amounts subject to master netting arrangements | Cash collateral (received) posted for amounts subject to master netting arrangements | | | (317) | | | 1,549 | | | | | (443) | | | 1,547 | | Cash collateral (received) posted for amounts subject to master netting arrangements | | | (643) | | | 717 | | | | | (345) | | | 1,638 | | |
| Net amount | Net amount | | | $ | 2,976 | | | $ | (601) | | | | | $ | 3,837 | | | $ | (555) | | Net amount | | | $ | 1,140 | | | $ | (3,407) | | | | | $ | 2,370 | | | $ | (586) | | |
|
32 Truist Financial Corporation 33
The following table presents the offsetting of derivative instruments including financial instrument collateral related to legally enforceable master netting agreements and amounts held or pledged as collateral. U.S. GAAP does not permit netting of non-cash collateral balances in the Consolidated Balance Sheets: | September 30, 2021 (Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount | |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount |
Derivative assets: | Derivative assets: | | Derivative assets: | |
Derivatives subject to master netting arrangement or similar arrangement | Derivatives subject to master netting arrangement or similar arrangement | $ | 3,714 | | | $ | (1,631) | | | $ | 2,083 | | | $ | (3) | | | $ | 2,080 | | Derivatives subject to master netting arrangement or similar arrangement | $ | 2,907 | | | $ | (1,915) | | | $ | 992 | | | $ | — | | | $ | 992 | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | 521 | | | — | | | 521 | | | — | | | 521 | | Derivatives not subject to master netting arrangement or similar arrangement | 100 | | | — | | | 100 | | | — | | | 100 | |
Exchange traded derivatives | Exchange traded derivatives | 372 | | | — | | | 372 | | | — | | | 372 | | Exchange traded derivatives | 397 | | | (349) | | | 48 | | | — | | | 48 | |
Total derivative assets | Total derivative assets | $ | 4,607 | | | $ | (1,631) | | | $ | 2,976 | | | $ | (3) | | | $ | 2,973 | | Total derivative assets | $ | 3,404 | | | $ | (2,264) | | | $ | 1,140 | | | $ | — | | | $ | 1,140 | |
Derivative liabilities: | Derivative liabilities: | | Derivative liabilities: | |
Derivatives subject to master netting arrangement or similar arrangement | Derivatives subject to master netting arrangement or similar arrangement | $ | (3,221) | | | $ | 2,863 | | | $ | (358) | | | $ | 53 | | | $ | (305) | | Derivatives subject to master netting arrangement or similar arrangement | $ | (4,538) | | | $ | 1,989 | | | $ | (2,549) | | | $ | 28 | | | $ | (2,521) | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | (242) | | | — | | | (242) | | | — | | | (242) | | Derivatives not subject to master netting arrangement or similar arrangement | (758) | | | — | | | (758) | | | — | | | (758) | |
Exchange traded derivatives | Exchange traded derivatives | (1) | | | — | | | (1) | | | — | | | (1) | | Exchange traded derivatives | (449) | | | 349 | | | (100) | | | — | | | (100) | |
Total derivative liabilities | Total derivative liabilities | $ | (3,464) | | | $ | 2,863 | | | $ | (601) | | | $ | 53 | | | $ | (548) | | Total derivative liabilities | $ | (5,745) | | | $ | 2,338 | | | $ | (3,407) | | | $ | 28 | | | $ | (3,379) | |
| December 31, 2020 (Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount | |
December 31, 2021 (Dollars in millions) | | December 31, 2021 (Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount |
Derivative assets: | Derivative assets: | | Derivative assets: | |
Derivatives subject to master netting arrangement or similar arrangement | Derivatives subject to master netting arrangement or similar arrangement | $ | 4,383 | | | $ | (1,618) | | | $ | 2,765 | | | $ | (2) | | | $ | 2,763 | | Derivatives subject to master netting arrangement or similar arrangement | $ | 2,752 | | | $ | (1,221) | | | $ | 1,531 | | | $ | (1) | | | $ | 1,530 | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | 705 | | | — | | | 705 | | | (1) | | | 704 | | Derivatives not subject to master netting arrangement or similar arrangement | 388 | | | — | | | 388 | | | — | | | 388 | |
Exchange traded derivatives | Exchange traded derivatives | 753 | | | (386) | | | 367 | | | — | | | 367 | | Exchange traded derivatives | 887 | | | (436) | | | 451 | | | — | | | 451 | |
Total derivative assets | Total derivative assets | $ | 5,841 | | | $ | (2,004) | | | $ | 3,837 | | | $ | (3) | | | $ | 3,834 | | Total derivative assets | $ | 4,027 | | | $ | (1,657) | | | $ | 2,370 | | | $ | (1) | | | $ | 2,369 | |
Derivative liabilities: | Derivative liabilities: | | Derivative liabilities: | |
Derivatives subject to master netting arrangement or similar arrangement | Derivatives subject to master netting arrangement or similar arrangement | $ | (3,103) | | | $ | 2,722 | | | $ | (381) | | | $ | 35 | | | $ | (346) | | Derivatives subject to master netting arrangement or similar arrangement | $ | (2,873) | | | $ | 2,514 | | | $ | (359) | | | $ | 66 | | | $ | (293) | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | (174) | | | — | | | (174) | | | — | | | (174) | | Derivatives not subject to master netting arrangement or similar arrangement | (225) | | | — | | | (225) | | | — | | | (225) | |
Exchange traded derivatives | Exchange traded derivatives | (386) | | | 386 | | | — | | | — | | | — | | Exchange traded derivatives | (438) | | | 436 | | | (2) | | | — | | | (2) | |
Total derivative liabilities | Total derivative liabilities | $ | (3,663) | | | $ | 3,108 | | | $ | (555) | | | $ | 35 | | | $ | (520) | | Total derivative liabilities | $ | (3,536) | | | $ | 2,950 | | | $ | (586) | | | $ | 66 | | | $ | (520) | |
|
The following table presents the carrying value of hedged items in fair value hedging relationships: | | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
| | | Hedge Basis Adjustment | | | Hedge Basis Adjustment | | | Hedge Basis Adjustment | | | Hedge Basis Adjustment |
(Dollars in millions) | (Dollars in millions) | | Hedged Asset / Liability Basis | | Items Currently Designated | | Discontinued Hedges | | Hedged Asset / Liability Basis | | Items Currently Designated | | Discontinued Hedges | (Dollars in millions) | | Hedged Asset / Liability Basis | | Items Currently Designated | | Discontinued Hedges | | Hedged Asset / Liability Basis | | Items Currently Designated | | Discontinued Hedges |
| | | AFS securities (1) | AFS securities (1) | | $ | 116,770 | | | $ | (495) | | | $ | 43 | | | $ | 100,988 | | | $ | (33) | | | $ | 50 | | AFS securities (1) | | $ | 39,822 | | | $ | (662) | | | $ | (4) | | | $ | 108,758 | | | $ | (400) | | | $ | (150) | |
Loans and leases | Loans and leases | | 394 | | | — | | | 16 | | | 470 | | | — | | | 18 | | Loans and leases | | 361 | | | — | | | 10 | | | 382 | | | — | | | 12 | |
| Long-term debt | Long-term debt | | 22,490 | | | — | | | 700 | | | 27,725 | | | — | | | 930 | | Long-term debt | | 24,456 | | | (839) | | | 240 | | | 27,361 | | | (137) | | | 629 | |
|
(1)The amortized cost of AFS securities was $117.8$47.2 billion at September 30, 20212022 and $99.4$110.6 billion at December 31, 2020.2021.
34 Truist Financial Corporation 33
Impact of Derivatives on the Consolidated Statements of Income and Comprehensive Income
Derivatives Designated as Hedging Instruments under GAAP
No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing.
The following table summarizes amounts related to cash flow hedges, which consist of interest rate contracts.contracts: | | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in millions) | | (Dollars in millions) | 2022 | | 2021 | | 2022 | | 2021 | |
Pre-tax gain (loss) recognized in OCI: | | Pre-tax gain (loss) recognized in OCI: | | |
Commercial loans | | Commercial loans | $ | (182) | | | $ | — | | | $ | (123) | | | $ | — | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(Dollars in millions) | 2021 | | 2020 | | 2021 | | 2020 | | |
| Total | | Total | $ | (182) | | | $ | — | | | $ | (123) | | | $ | — | | |
Pre-tax gain (loss) reclassified from AOCI into interest expense: | Pre-tax gain (loss) reclassified from AOCI into interest expense: | | | Pre-tax gain (loss) reclassified from AOCI into interest expense: | | |
| Deposits | Deposits | $ | — | | | $ | (2) | | | $ | (2) | | | $ | (8) | | | Deposits | $ | — | | | $ | — | | | $ | — | | | $ | (2) | | |
Short-term borrowings | Short-term borrowings | — | | | (5) | | | (12) | | | (13) | | | Short-term borrowings | — | | | — | | | — | | | (12) | | |
Long-term debt | Long-term debt | (7) | | | (3) | | | (17) | | | (18) | | | Long-term debt | (1) | | | (7) | | | (12) | | | (17) | | |
| Total | Total | $ | (7) | | | $ | (10) | | | $ | (31) | | | $ | (39) | | | Total | $ | (1) | | | $ | (7) | | | $ | (12) | | | $ | (31) | | |
Pre-tax gain (loss) reclassified from AOCI into other expense: (1) | Pre-tax gain (loss) reclassified from AOCI into other expense: (1) | | | Pre-tax gain (loss) reclassified from AOCI into other expense: (1) | | |
Deposits | Deposits | $ | — | | | $ | — | | | $ | (12) | | | $ | — | | | Deposits | $ | — | | | $ | — | | | $ | — | | | $ | (12) | | |
Short-term borrowings | Short-term borrowings | — | | | — | | | (20) | | | — | | | Short-term borrowings | — | | | — | | | — | | | (20) | | |
Long-term debt | Long-term debt | — | | | — | | | (4) | | | — | | | Long-term debt | — | | | — | | | — | | | (4) | | |
| Total | Total | $ | — | | | $ | — | | | $ | (36) | | | $ | — | | | Total | $ | — | | | $ | — | | | $ | — | | | $ | (36) | | |
|
(1)Represents the accelerated amortization of amounts reclassified from AOCI, where management determined that the forecasted transaction is probable of not occurring.
The following table summarizes the impact on net interest income related to fair value hedges: | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
(Dollars in millions) | (Dollars in millions) | 2021 | | 2020 | | 2021 | | 2020 | | (Dollars in millions) | 2022 | | 2021 | | 2022 | | 2021 | |
| AFS securities: | AFS securities: | | | AFS securities: | | |
Amounts related to interest settlements | Amounts related to interest settlements | $ | (15) | | | $ | — | | | $ | (39) | | | $ | — | | | Amounts related to interest settlements | $ | 36 | | | $ | (15) | | | $ | 40 | | | $ | (39) | | |
Recognized on derivatives | Recognized on derivatives | 81 | | | — | | | 442 | | | — | | | Recognized on derivatives | 157 | | | 81 | | | 631 | | | 442 | | |
Recognized on hedged items | Recognized on hedged items | (83) | | | (3) | | | (448) | | | (7) | | | Recognized on hedged items | (142) | | | (83) | | | (586) | | | (448) | | |
Net income (expense) recognized | Net income (expense) recognized | (17) | | | (3) | | | (45) | | | (7) | | | Net income (expense) recognized | 51 | | | (17) | | | 85 | | | (45) | | |
Loans and leases: | Loans and leases: | | | Loans and leases: | | |
Amounts related to interest settlements | — | | | (1) | | | — | | | (1) | | | |
Recognized on derivatives | — | | | — | | | — | | | (3) | | | |
| Recognized on hedged items | Recognized on hedged items | (1) | | | — | | | (2) | | | 1 | | | Recognized on hedged items | (1) | | | (1) | | | (2) | | | (2) | | |
Net income (expense) recognized | Net income (expense) recognized | (1) | | | (1) | | | (2) | | | (3) | | | Net income (expense) recognized | (1) | | | (1) | | | (2) | | | (2) | | |
| Long-term debt: | Long-term debt: | | | Long-term debt: | | |
Amounts related to interest settlements | Amounts related to interest settlements | — | | | 78 | | | — | | | 182 | | | Amounts related to interest settlements | (23) | | | — | | | (4) | | | — | | |
Recognized on derivatives | Recognized on derivatives | — | | | (99) | | | — | | | 831 | | | Recognized on derivatives | (445) | | | — | | | (912) | | | — | | |
Recognized on hedged items | Recognized on hedged items | 73 | | | 112 | | | 227 | | | (817) | | | Recognized on hedged items | 482 | | | 73 | | | 1,050 | | | 227 | | |
Net income (expense) recognized | Net income (expense) recognized | 73 | | | 91 | | | 227 | | | 196 | | | Net income (expense) recognized | 14 | | | 73 | | | 134 | | | 227 | | |
Net income (expense) recognized, total | Net income (expense) recognized, total | $ | 55 | | | $ | 87 | | | $ | 180 | | | $ | 186 | | | Net income (expense) recognized, total | $ | 64 | | | $ | 55 | | | $ | 217 | | | $ | 180 | | |
34 Truist Financial Corporation
The following table presents information about the Company’s terminated cash flow and fair value hedges: | (Dollars in millions) | (Dollars in millions) | | Sep 30, 2021 | | Dec 31, 2020 | | (Dollars in millions) | | Sep 30, 2022 | | Dec 31, 2021 | |
| Cash flow hedges: | Cash flow hedges: | | | Cash flow hedges: | | |
| Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2022) | | $ | (13) | | | $ | (64) | | | |
Net unrecognized after-tax gain (loss) on active hedges recorded in AOCI | | Net unrecognized after-tax gain (loss) on active hedges recorded in AOCI | | $ | (118) | | | $ | — | | |
Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2029) | | Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2029) | | 24 | | | (9) | | |
Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months | Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months | | (13) | | | (42) | | | Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months | | (11) | | | (9) | | |
| Maximum time period over which Truist is hedging a portion of the variability in future cash flows for forecasted transactions excluding those transactions relating to the payment of variable interest on existing instruments | | Maximum time period over which Truist is hedging a portion of the variability in future cash flows for forecasted transactions excluding those transactions relating to the payment of variable interest on existing instruments | | 5 years | | N/A | |
Fair value hedges: | Fair value hedges: | | | Fair value hedges: | | |
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2029) | | $ | 641 | | | $ | 862 | | | |
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2030) (1) | | Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2030) (1) | | $ | 703 | | | $ | 767 | | |
Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months | Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months | | 223 | | | 292 | | | Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months | | 173 | | | 231 | | |
| |
(1)Includes deferred gains that are recorded in AOCI as a result of the reclassification to HTM of previously hedged securities of $469 million at September 30, 2022.
Truist Financial Corporation 35
Derivatives Not Designated as Hedging Instruments under GAAP
The Company also enters into derivatives that are not designated as accounting hedges under GAAP to economically hedge certain risks as well as in a trading capacity with its clients.
The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges: | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in millions) | (Dollars in millions) | Income Statement Location | 2021 | | 2020 | | 2021 | | 2020 | | (Dollars in millions) | Income Statement Location | 2022 | | 2021 | | 2022 | | 2021 | |
| Client-related and other risk management: | Client-related and other risk management: | | | | | | Client-related and other risk management: | | | | | |
Interest rate contracts | Interest rate contracts | Investment banking and trading income and other income | $ | 28 | | | $ | 14 | | | $ | 142 | | | $ | (13) | | | Interest rate contracts | Investment banking and trading income and other income | $ | 59 | | | $ | 28 | | | $ | 187 | | | $ | 142 | | |
Foreign exchange contracts | Foreign exchange contracts | Investment banking and trading income and other income | 73 | | | (50) | | | 107 | | | 31 | | | Foreign exchange contracts | Investment banking and trading income and other income | 202 | | | 73 | | | 381 | | | 107 | | |
Equity contracts | Equity contracts | Investment banking and trading income and other income | 2 | | | 3 | | | (18) | | | (4) | | | Equity contracts | Investment banking and trading income and other income | (57) | | | 2 | | | (50) | | | (18) | | |
Credit contracts | Credit contracts | Investment banking and trading income and other income | 13 | | | (68) | | | (48) | | | 238 | | | Credit contracts | Investment banking and trading income and other income | (7) | | | 13 | | | 84 | | | (48) | | |
Commodity contracts | Commodity contracts | Investment banking and trading income | 1 | | | 1 | | | 6 | | | 5 | | | Commodity contracts | Investment banking and trading income | 9 | | | 1 | | | 9 | | | 6 | | |
Mortgage banking: | Mortgage banking: | | | | | | Mortgage banking: | | | | | |
Interest rate contracts | Interest rate contracts | Residential mortgage income | (18) | | | (137) | | | (15) | | | (285) | | | Interest rate contracts | Residential mortgage income | 94 | | | (18) | | | 572 | | | (15) | | |
Interest rate contracts | Interest rate contracts | Commercial real estate related income | — | | | 1 | | | (1) | | | 1 | | | Interest rate contracts | Commercial mortgage income | 6 | | | — | | | 5 | | | (1) | | |
MSRs: | MSRs: | | | | | | MSRs: | | | | | |
Interest rate contracts | Interest rate contracts | Residential mortgage income | (48) | | | (3) | | | (162) | | | 534 | | | Interest rate contracts | Residential mortgage income | (175) | | | (48) | | | (789) | | | (162) | | |
Interest rate contracts | Interest rate contracts | Commercial real estate related income | (1) | | | — | | | (8) | | | 22 | | | Interest rate contracts | Commercial mortgage income | (9) | | | (1) | | | (23) | | | (8) | | |
Total | Total | | $ | 50 | | | $ | (239) | | | $ | 3 | | | $ | 529 | | | Total | | $ | 122 | | | $ | 50 | | | $ | 376 | | | $ | 3 | | |
Credit Derivative Instruments
As part of the Company’s corporate and investment banking business, the Company enters into contracts that are, in form or substance, written guarantees; specifically, risk participations, TRS, and credit default swaps. The Company accounts for these contracts as derivatives.
Truist has entered into risk participation agreements to share the credit exposure with other financial institutions on client-related interest rate derivative contracts. Under these agreements, the Company has guaranteed payment to a dealer counterparty in the event the counterparty experiences a loss on the derivative due to a failure to pay by the counterparty’s client. The Company manages its payment risk on its risk participations by monitoring the creditworthiness of the underlying client through the normal credit review process that the Company would have performed had it entered into a derivative directly with the obligors. At September 30, 2021,2022, the remaining terms on these risk participations ranged from less than one year to 1016 years. The potential future exposure represents the Company’s maximum estimated exposure to written risk participations, as measured by projecting a maximum value of the guaranteed derivative instruments based on scenario simulations and assuming 100% default by all obligors on the maximum value.
Truist Financial Corporation 35
The Company has also entered into TRS contracts on loans.loans and bonds. To mitigate its credit risk, the Company typically receives initial margin from the counterparty upon entering into the TRS and variation margin if the fair value of the underlying reference assets deteriorates. For additional information on the Company’s TRS contracts, see “Note 14. Commitments and Contingencies.”
The Company enters into credit default swaps to hedge credit risk associated with certain loans and leases. The Company accounts for these contracts as derivatives, and accordingly, recognizes these contracts at fair value.
The following table presents additional information related to interest rate derivative risk participation agreements and total return swaps: | (Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 |
| Risk participation agreements: | Risk participation agreements: | | Risk participation agreements: | |
| Maximum potential amount of exposure | Maximum potential amount of exposure | $ | 563 | | | $ | 530 | | Maximum potential amount of exposure | $ | 260 | | | $ | 521 | |
Total return swaps: | Total return swaps: | | Total return swaps: | |
| Cash collateral held | Cash collateral held | 292 | | | 374 | | Cash collateral held | 406 | | | 290 | |
36 Truist Financial Corporation
The following table summarizes collateral positions with counterparties: | (Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 |
| Dealer and other counterparties: | Dealer and other counterparties: | | | | Dealer and other counterparties: | |
Cash and other collateral received from counterparties | Cash and other collateral received from counterparties | $ | 319 | | | $ | 446 | | Cash and other collateral received from counterparties | $ | 591 | | | $ | 346 | |
Derivatives in a net gain position secured by collateral received | Derivatives in a net gain position secured by collateral received | 474 | | | 585 | | Derivatives in a net gain position secured by collateral received | 680 | | | 506 | |
Unsecured positions in a net gain with counterparties after collateral postings | Unsecured positions in a net gain with counterparties after collateral postings | 155 | | | 49 | | Unsecured positions in a net gain with counterparties after collateral postings | 89 | | | 143 | |
Cash collateral posted to dealer counterparties | 1,603 | | | 1,524 | | |
Cash collateral posted to counterparties | | Cash collateral posted to counterparties | 746 | | | 1,704 | |
Derivatives in a net loss position secured by collateral | Derivatives in a net loss position secured by collateral | 1,703 | | | 1,604 | | Derivatives in a net loss position secured by collateral | 840 | | | 2,591 | |
Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade | Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade | 5 | | | 3 | | Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade | — | | | 3 | |
Central counterparties clearing: | Central counterparties clearing: | | Central counterparties clearing: | |
Cash collateral, including initial margin, posted to central clearing parties | Cash collateral, including initial margin, posted to central clearing parties | 37 | | | 172 | | Cash collateral, including initial margin, posted to central clearing parties | 52 | | | 31 | |
Derivatives in a net loss position | Derivatives in a net loss position | 32 | | | 90 | | Derivatives in a net loss position | 18 | | | 18 | |
Derivatives in a net gain position | Derivatives in a net gain position | 18 | | | 5 | | Derivatives in a net gain position | 124 | | | — | |
Securities pledged to central counterparties clearing | Securities pledged to central counterparties clearing | 1,193 | | | 1,281 | | Securities pledged to central counterparties clearing | 782 | | | 904 | |
NOTE 17. Computation of EPS
Basic and diluted EPS calculations are presented in the following table: | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in millions, except per share data, shares in thousands) | (Dollars in millions, except per share data, shares in thousands) | 2021 | | 2020 | | 2021 | | 2020 | | (Dollars in millions, except per share data, shares in thousands) | 2022 | | 2021 | | 2022 | | 2021 | |
Net income available to common shareholders | Net income available to common shareholders | $ | 1,616 | | | $ | 1,068 | | | $ | 4,509 | | | $ | 2,956 | | | Net income available to common shareholders | $ | 1,536 | | | $ | 1,616 | | | $ | 4,317 | | | $ | 4,509 | | |
Weighted average number of common shares | Weighted average number of common shares | 1,334,825 | | | 1,347,916 | | | 1,339,558 | | | 1,346,605 | | | Weighted average number of common shares | 1,326,539 | | | 1,334,825 | | | 1,328,569 | | | 1,339,558 | | |
Effect of dilutive outstanding equity-based awards | Effect of dilutive outstanding equity-based awards | 12,029 | | | 10,206 | | | 12,154 | | | 10,569 | | | Effect of dilutive outstanding equity-based awards | 10,120 | | | 12,029 | | | 10,502 | | | 12,154 | | |
Weighted average number of diluted common shares | Weighted average number of diluted common shares | 1,346,854 | | | 1,358,122 | | | 1,351,712 | | | 1,357,174 | | | Weighted average number of diluted common shares | 1,336,659 | | | 1,346,854 | | | 1,339,071 | | | 1,351,712 | | |
Basic EPS | Basic EPS | $ | 1.21 | | | $ | 0.79 | | | $ | 3.37 | | | $ | 2.20 | | | Basic EPS | $ | 1.16 | | | $ | 1.21 | | | $ | 3.25 | | | $ | 3.37 | | |
Diluted EPS | Diluted EPS | $ | 1.20 | | | $ | 0.79 | | | $ | 3.34 | | | $ | 2.18 | | | Diluted EPS | $ | 1.15 | | | $ | 1.20 | | | $ | 3.22 | | | $ | 3.34 | | |
Anti-dilutive awards | Anti-dilutive awards | 5 | | | 1,647 | | | 3 | | | 3,267 | | | Anti-dilutive awards | — | | | 5 | | | 85 | | | 3 | | |
NOTE 18. Operating Segments
Truist operates and measures business activity across 3three segments: Consumer BankingCB&W, C&CB, and Wealth, Corporate and Commercial Banking, and Insurance Holdings,IH, with functional activities included in Other, Treasury and Corporate.OT&C. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. For additional information, see “Note 21. Operating Segments” of the Annual Report on Form 10-K for the year ended December 31, 2020.2021.
36 Truist Financial Corporation 37
The following table presents results by segment: | Three Months Ended September 30, (Dollars in millions) | Three Months Ended September 30, (Dollars in millions) | CB&W | | C&CB | | IH | | OT&C (1) | | Total | | Three Months Ended September 30, (Dollars in millions) | CB&W | | C&CB | | IH | | OT&C (1) | | Total | |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | |
Net interest income (expense) | Net interest income (expense) | $ | 1,667 | | | $ | 1,858 | | | $ | 1,124 | | | $ | 1,234 | | | $ | 27 | | | $ | 31 | | | $ | 415 | | | $ | 239 | | | $ | 3,233 | | | $ | 3,362 | | | Net interest income (expense) | $ | 1,685 | | | $ | 1,665 | | | $ | 1,601 | | | $ | 1,126 | | | $ | 40 | | | $ | 27 | | | $ | 419 | | | $ | 415 | | | $ | 3,745 | | | $ | 3,233 | | |
Net intersegment interest income (expense) | Net intersegment interest income (expense) | 369 | | | 333 | | | 49 | | | 49 | | | (2) | | | (7) | | | (416) | | | (375) | | | — | | | — | | | Net intersegment interest income (expense) | 960 | | | 485 | | | 22 | | | 158 | | | (7) | | | 1 | | | (975) | | | (644) | | | — | | | — | | |
Segment net interest income | Segment net interest income | 2,036 | | | 2,191 | | | 1,173 | | | 1,283 | | | 25 | | | 24 | | | (1) | | | (136) | | | 3,233 | | | 3,362 | | | Segment net interest income | 2,645 | | | 2,150 | | | 1,623 | | | 1,284 | | | 33 | | | 28 | | | (556) | | | (229) | | | 3,745 | | | 3,233 | | |
Allocated provision for credit losses | Allocated provision for credit losses | (5) | | | 181 | | | (264) | | | 311 | | | 1 | | | — | | | (56) | | | (71) | | | (324) | | | 421 | | | Allocated provision for credit losses | 283 | | | (5) | | | (50) | | | (264) | | | 1 | | | 1 | | | — | | | (56) | | | 234 | | | (324) | | |
Segment net interest income after provision | Segment net interest income after provision | 2,041 | | | 2,010 | | | 1,437 | | | 972 | | | 24 | | | 24 | | | 55 | | | (65) | | | 3,557 | | | 2,941 | | | Segment net interest income after provision | 2,362 | | | 2,155 | | | 1,673 | | | 1,548 | | | 32 | | | 27 | | | (556) | | | (173) | | | 3,511 | | | 3,557 | | |
Noninterest income | Noninterest income | 1,032 | | | 997 | | | 753 | | | 608 | | | 652 | | | 524 | | | (72) | | | 81 | | | 2,365 | | | 2,210 | | | Noninterest income | 882 | | | 1,028 | | | 604 | | | 752 | | | 734 | | | 652 | | | (118) | | | (67) | | | 2,102 | | | 2,365 | | |
Amortization of intangibles | Amortization of intangibles | 78 | | | 103 | | | 37 | | | 45 | | | 30 | | | 17 | | | — | | | 5 | | | 145 | | | 170 | | | Amortization of intangibles | 76 | | | 78 | | | 32 | | | 37 | | | 31 | | | 30 | | | 1 | | | — | | | 140 | | | 145 | | |
Other noninterest expense | Other noninterest expense | 1,855 | | | 1,834 | | | 783 | | | 800 | | | 507 | | | 429 | | | 505 | | | 522 | | | 3,650 | | | 3,585 | | | Other noninterest expense | 1,876 | | | 1,907 | | | 763 | | | 767 | | | 609 | | | 507 | | | 225 | | | 469 | | | 3,473 | | | 3,650 | | |
Income (loss) before income taxes | Income (loss) before income taxes | 1,140 | | | 1,070 | | | 1,370 | | | 735 | | | 139 | | | 102 | | | (522) | | | (511) | | | 2,127 | | | 1,396 | | | Income (loss) before income taxes | 1,292 | | | 1,198 | | | 1,482 | | | 1,496 | | | 126 | | | 142 | | | (900) | | | (709) | | | 2,000 | | | 2,127 | | |
Provision (benefit) for income taxes | Provision (benefit) for income taxes | 268 | | | 252 | | | 295 | | | 149 | | | 34 | | | 25 | | | (174) | | | (171) | | | 423 | | | 255 | | | Provision (benefit) for income taxes | 306 | | | 265 | | | 318 | | | 315 | | | 31 | | | 31 | | | (292) | | | (188) | | | 363 | | | 423 | | |
Segment net income (loss) | Segment net income (loss) | $ | 872 | | | $ | 818 | | | $ | 1,075 | | | $ | 586 | | | $ | 105 | | | $ | 77 | | | $ | (348) | | | $ | (340) | | | $ | 1,704 | | | $ | 1,141 | | | Segment net income (loss) | $ | 986 | | | $ | 933 | | | $ | 1,164 | | | $ | 1,181 | | | $ | 95 | | | $ | 111 | | | $ | (608) | | | $ | (521) | | | $ | 1,637 | | | $ | 1,704 | | |
| Identifiable assets (period end) | $ | 161,116 | | | $ | 166,640 | | | $ | 177,578 | | | $ | 191,625 | | | $ | 9,454 | | | $ | 6,999 | | | $ | 181,736 | | | $ | 133,919 | | | $ | 529,884 | | | $ | 499,183 | | | |
| | Nine Months Ended September 30, (Dollars in millions) | Nine Months Ended September 30, (Dollars in millions) | CB&W | | C&CB | | IH | | OT&C (1) | | Total | | Nine Months Ended September 30, (Dollars in millions) | CB&W | | C&CB | | IH | | OT&C (1) | | Total | |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | |
Net interest income (expense) | Net interest income (expense) | $ | 5,110 | | | $ | 5,564 | | | $ | 3,511 | | | $ | 4,116 | | | $ | 76 | | | $ | 99 | | | $ | 1,066 | | | $ | 681 | | | $ | 9,763 | | | $ | 10,460 | | | Net interest income (expense) | $ | 4,780 | | | $ | 5,103 | | | $ | 3,972 | | | $ | 3,518 | | | $ | 94 | | | $ | 76 | | | $ | 1,489 | | | $ | 1,066 | | | $ | 10,335 | | | $ | 9,763 | | |
Net intersegment interest income (expense) | Net intersegment interest income (expense) | 1,162 | | | 1,033 | | | 115 | | | (207) | | | (10) | | | (28) | | | (1,267) | | | (798) | | | — | | | — | | | Net intersegment interest income (expense) | 2,325 | | | 1,102 | | | 263 | | | 346 | | | (9) | | | 1 | | | (2,579) | | | (1,449) | | | — | | | — | | |
Segment net interest income | Segment net interest income | 6,272 | | | 6,597 | | | 3,626 | | | 3,909 | | | 66 | | | 71 | | | (201) | | | (117) | | | 9,763 | | | 10,460 | | | Segment net interest income | 7,105 | | | 6,205 | | | 4,235 | | | 3,864 | | | 85 | | | 77 | | | (1,090) | | | (383) | | | 10,335 | | | 9,763 | | |
Allocated provision for credit losses | Allocated provision for credit losses | 91 | | | 887 | | | (698) | | | 1,244 | | | 1 | | | 7 | | | (104) | | | 20 | | | (710) | | | 2,158 | | | Allocated provision for credit losses | 556 | | | 91 | | | (228) | | | (698) | | | 2 | | | 1 | | | (20) | | | (104) | | | 310 | | | (710) | | |
Segment net interest income after provision | Segment net interest income after provision | 6,181 | | | 5,710 | | | 4,324 | | | 2,665 | | | 65 | | | 64 | | | (97) | | | (137) | | | 10,473 | | | 8,302 | | | Segment net interest income after provision | 6,549 | | | 6,114 | | | 4,463 | | | 4,562 | | | 83 | | | 76 | | | (1,070) | | | (279) | | | 10,025 | | | 10,473 | | |
Noninterest income | Noninterest income | 2,877 | | | 3,074 | | | 2,254 | | | 1,684 | | | 1,983 | | | 1,679 | | | (147) | | | 157 | | | 6,967 | | | 6,594 | | | Noninterest income | 2,723 | | | 2,874 | | | 1,859 | | | 2,251 | | | 2,304 | | | 1,984 | | | (394) | | | (142) | | | 6,492 | | | 6,967 | | |
Amortization of intangibles | Amortization of intangibles | 236 | | | 316 | | | 113 | | | 130 | | | 80 | | | 53 | | | 2 | | | 14 | | | 431 | | | 513 | | | Amortization of intangibles | 228 | | | 235 | | | 97 | | | 112 | | | 94 | | | 81 | | | 1 | | | 3 | | | 420 | | | 431 | | |
Other noninterest expense | Other noninterest expense | 5,544 | | | 5,584 | | | 2,324 | | | 2,481 | | | 1,451 | | | 1,280 | | | 1,666 | | | 1,206 | | | 10,985 | | | 10,551 | | | Other noninterest expense | 5,584 | | | 5,628 | | | 2,236 | | | 2,277 | | | 1,729 | | | 1,451 | | | 898 | | | 1,629 | | | 10,447 | | | 10,985 | | |
Income (loss) before income taxes | Income (loss) before income taxes | 3,278 | | | 2,884 | | | 4,141 | | | 1,738 | | | 517 | | | 410 | | | (1,912) | | | (1,200) | | | 6,024 | | | 3,832 | | | Income (loss) before income taxes | 3,460 | | | 3,125 | | | 3,989 | | | 4,424 | | | 564 | | | 528 | | | (2,363) | | | (2,053) | | | 5,650 | | | 6,024 | | |
Provision (benefit) for income taxes | Provision (benefit) for income taxes | 768 | | | 680 | | | 896 | | | 330 | | | 125 | | | 102 | | | (600) | | | (442) | | | 1,189 | | | 670 | | | Provision (benefit) for income taxes | 825 | | | 736 | | | 863 | | | 954 | | | 139 | | | 124 | | | (762) | | | (625) | | | 1,065 | | | 1,189 | | |
Segment net income (loss) | Segment net income (loss) | $ | 2,510 | | | $ | 2,204 | | | $ | 3,245 | | | $ | 1,408 | | | $ | 392 | | | $ | 308 | | | $ | (1,312) | | | $ | (758) | | | $ | 4,835 | | | $ | 3,162 | | | Segment net income (loss) | $ | 2,635 | | | $ | 2,389 | | | $ | 3,126 | | | $ | 3,470 | | | $ | 425 | | | $ | 404 | | | $ | (1,601) | | | $ | (1,428) | | | $ | 4,585 | | | $ | 4,835 | | |
| Identifiable assets (period end) | Identifiable assets (period end) | $ | 161,116 | | | $ | 166,640 | | | $ | 177,578 | | | $ | 191,625 | | | $ | 9,454 | | | $ | 6,999 | | | $ | 181,736 | | | $ | 133,919 | | | $ | 529,884 | | | $ | 499,183 | | | Identifiable assets (period end) | $ | 170,111 | | | $ | 160,803 | | | $ | 197,869 | | | $ | 177,751 | | | $ | 11,533 | | | $ | 9,454 | | | $ | 168,925 | | | $ | 181,876 | | | $ | 548,438 | | | $ | 529,884 | | |
| | | |
(1)Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure.
38 Truist Financial Corporation 37
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MD&A is intended to assist readers in their analysis of the accompanying Consolidated Financial Statements and supplemental financial information. It should be read in conjunction with the Consolidated Financial Statements, the accompanying Notes to the Consolidated Financial Statements in this Form 10-Q, other information contained in this document, as well as with Truist’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.
A description of certain factors that may affect our future results and risk factors is set forth in Part I, Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021.
Regulatory Considerations
The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the stability of the financial system, rather than for the protection of shareholders and creditors. Truist is subject to banking laws and regulations, and various other laws and regulations, which affect the operations and management of Truist and its ability to make distributions to shareholders. Truist and its subsidiaries are also subject to supervision and examination by multiple regulators. The descriptions below summarize updates since the filing of the Annual Report on Form 10-K for the year ended December 31, 20202021 to state and federal laws to which Truist is subject. These descriptions do not summarize all possible or proposed changes in current laws or regulations and are not intended to be a substitute for the related statues or regulatory provisions. Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for additional disclosures.
Supplementary Leverage Ratio
The temporary exclusionIn March 2022, the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain contracts under certain circumstances with a SOFR-based rate to be established in a forthcoming FRB rule that incorporates a spread adjustment specified in the statute. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provision of U.S. Treasury securities and deposits at the FRB from the calculation of the supplementary leverage ratio expired as scheduled on March 31, 2021. This temporary relief previously benefited the Company’s supplementary leverage ratio by approximately 20 basis points. The FRB also announced plans to invite public comment on several potential supplementary leverage ratio modifications to ensure that the supplementary leverage ratio remains effective in an environment of higher reserves, though such proposal had not been published as of the date of this report.
Stress Capital Buffer
The FRB assigned Truist an SCB of 2.5%, which is effective from October 1, 2021 to September 30, 2022, at which point a revised SCB will be calculated and provided to Truist.
The FRB has lifted the restrictions on capital distributions for large banking organizations, including Truist, that had been in place due to the uncertainty caused by the COVID-19 pandemic. Going forward, Truist is subject to the normal restrictions on capital distributions under the SCB framework and applicable law.
Security-Based Swap Dealer Registrationany state or local law, statute, rule, regulation, or standard.
In November 2021, Truist Bank conditionally registered withOctober 2022, the SEC asFDIC adopted a security-based swap dealer. As a result, Truist Bank’s security-based swaps businessfinal rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning on January 1, 2023. This rule is now subjectexpected to requirements that are similar toincrease regulatory premiums by approximately $100 million annually. The FDIC also concurrently maintained the CFTC rules applicable to swap dealers, including trade reporting, business conduct standards, recordkeeping, margin, and potentially mandatory clearing and exchange trading requirements.Designated Reserve Ratio for the DIF at 2%.
Resolution Plans
Executive Overview
The FDIC issued a policy statement in June 2021 announcing that it will resume requiring bank level resolution plans for large banks, including Truist Bank, and bank-level resolution plans will have more streamlined content requirements. Truist Bank will be required to submit a bank-level resolution plan every three years. During theOur third quarter Truist Bank was informed by the FDIC that its next resolution plan will be due on or before December 1, 2022. The FDIC also clarified the content requirements2022 performance reflects strong progress in many areas of the next resolution plan Truist Bank is required to submit.business, as we delivered strong broad-based loan growth, significant margin expansion and continued exceptional asset quality. Overall financial results were mixed, however, as the challenging market environment impacted our capital markets related revenue.
Truist submitted its inaugural resolution planWe continue to remain highly confident in Truist’s trajectory given the FRBdiversity of our business mix, our strong markets, conservative risk culture, and FDIC in September 2021, which is currently under review.
Lifting of Consent Orderthe substantial opportunities that lie ahead post integration.
In JuneJuly 2022, Truist launched Truist One Banking, a first-of-its-kind approach to the checking account experience, designed to address clients’ direct feedback. Additionally during the quarter, we launched Truist Assist, an AI-enhanced virtual assistant within the mobile banking app and online banking platform; combining innovative technology with personalized human touch to enhance the client experience. We also announced the expansion of digital investment offerings with Truist Invest, a robo advisor, and Truist Invest Pro, a hybrid investing solution that combines automated investing with access to a team of financial advisors.
38 Truist Financial Corporation
ESG
Our 2021 Environmental, Social, and Governance and Corporate Social Responsibility Report highlights the FDIC terminatedsignificant steps we’ve taken to meet and exceed our goals, including the consent order between SunTrust Bankdiversity of our senior leadership and supporting our clients and communities to transition to a lower carbon economy. We will shift our TCFD Report publication to spring 2023, to align with the release of the 2022 Environmental, Social, and Governance and Corporate Social Responsibility Report. Outlined below are significant updates to our ESG efforts during the first nine-months of 2022.
Environmental
•Truist has joined the Partnership for Carbon Accounting Financials, and set 2030 goals to reduce Scope 1 and Scope 2 emissions by 35% each, and to reduce water consumption by 25%, relative to 2019.
•We announced our goal to achieve net zero greenhouse gas emissions by 2050, supporting our clients’ transition to a low-carbon economy.
Social
•Guided by our purpose to inspire and build better lives and communities, we are investing in revenue producing businesses and enterprise technology and have increased our minimum wage to $22 per hour effective October 1, 2022, positioning Truist as a leader in the industry.
•With 16.5% of senior leadership roles being held by ethnically diverse teammates, we have exceeded our original goal and we aspire for continued growth in this area.
•Together with the Truist Foundation and the FRB relatingTruist Charitable Fund, we’ve committed $120 million to certain identified legacy compliance issues. help historically underserved small businesses gain access to capital and technical assistance.
•Truist Bank,continues to be ahead of schedule with regard to our $60 billion Community Benefits Plan commitment.
•Our company purpose continues to drive our actions to care for our teammates, clients, and the communities we serve, and this was even more apparent in the aftermath of Hurricane Ian, when our teammates acted quickly to support each other and our local communities through humanitarian aid and volunteer efforts.
Governance
•Michael B. Maguire was named CFO effective September 15, 2022. Mr. Maguire succeeds Daryl Bible, whose retirement was announced in May and who will remain at Truist during a transition period. Mr. Maguire will oversee accounting, tax, treasury, financial planning and analysis, investor relations, and other responsibilities. Prior to his current role, Maguire led the company’s consumer finance businesses, including LightStream, Service Finance, Sheffield Financial, Dealer Retail Services, and its student loan unit. Previously, Mr. Maguire served as successorthe head of enterprise partnerships and investments at Truist. Prior to SunTrust Bank, committed to complythat, Mr. Maguire spent 16 years as an investment banker at Truist Securities.
•Clarke R. Starnes III, CRO of Truist, has been given additional leadership responsibilities, including oversight of the corporate function responsible for procurement, third-party risk management, supplier diversity, and unclaimed property and escheatment businesses, and the finance-risk data analytics office tasked with the obligations inimplementation of the orderdata management framework for Risk, Finance, and ESG. In addition, the Corporate Security group and the Wholesale and Retail Credit Risk modeling team will join the Risk Management Organization led by Mr. Starnes. Mr. Starnes has been designated the additional officer title of Vice Chair in connection with these new responsibilities.
•Truist was named a Top 100 performer within the FDIC’snew 2022 JUST Capital Workforce Equity and FRB’s approvalMobility Ranking.
•Truist made several leadership changes during the first quarter of 2022 that are discussed in the Merger.executive overview section of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.
Truist Financial Corporation 39
Executive Overview
Truist had solid financial performance in the third quarter of 2021 that was driven by strong fee income from a diverse business mix - including wealth, insurance brokerage, investment banking, and positive trends in a number of other businesses given improving economic conditions. Improving economic conditions also led to strong credit performance and a benefit from the provision for credit losses. The Company achieved a significant milestone in early October with the successful migration of approximately 7 million clients (primarily heritage BB&T) to the new Truist technology ecosystem. In addition, Truist completed the retail mortgage origination conversion and accelerated the roll-out of the new Truist digital app during the third quarter of 2021. Truist continues to reaffirm its commitment to achieving $1.6 billion in net cost saves on a run rate basis by the fourth quarter of 2022. Truist also continues to closely monitor the COVID-19 pandemic and its effects on stakeholders and the financial markets and is actively supporting teammates, clients, and communities.
Integration Efforts
Major milestones during 2021 include:
•Completed the Wealth brokerage and trust transitions.
•Completed the mortgage systems transition, enabling clients to get the best of both heritage SunTrust and heritage BB&T to meet their homeownership needs.
•Continued to activate the Integrated Relationship Management approach. Truist’s Integrated Relationship Management approach is designed to deepen client relationships and bring the full breadth and depth of Truist’s products and services to meet clients’ financial needs.
•Introduced the new Truist digital app; migrated approximately 7 million clients to the new Truist digital banking experience, with nearly half of clients beginning to use the app
•Converted heritage BB&T retail and commercial clients to the new Truist technology ecosystem, the most significant milestone to date.
Supporting Clients
Truist continues to work closely with clients as they navigate through the continuing challenges from the COVID-19 pandemic. Truist supported clients by being the sixth largest amongst commercial banks in the second round of PPP funding, assisting clients with the forgiveness process, and continuing to support clients as they transition from payment relief programs. Truist originated approximately $17 billion of PPP loans. As of September 30, 2021, Truist had $3.5 billion of PPP loans outstanding.
Supporting Teammates
Truist offered a voluntary separation and retirement program to eligible teammates in June 2021. Nearly 2,000 teammates elected to participate in the voluntary program designed to provide tenured teammates flexibility on how they want to manage their career. Approximately 50% of those that elected to participate had separation dates of September 30, 2021. While Truist is hiring in some areas and rightsizing in others through natural attrition, planned staffing reductions, and the voluntary separation and retirement program, Truist is actively supporting all teammates affected by reductions with opportunities and tools for internal placement, severance payments, and outplacement assistance and coaching. The Company recognized $189 million of merger-related and restructuring charges in 2021 related to the voluntary separation and retirement program.
Truist has made progress towards the commitment to increase racially and ethnically diverse teammates among senior leadership roles to more than 15% by 2023 with current progress at 14.2% as of September 30, 2021. For early career program hiring in 2021, 54% of seats at Truist were filled by candidates from various diverse backgrounds. Truist teammates have received $24 million through Truist Momentum, a workplace financial wellness program that educates, equips, and inspires teammates to manage their money based on what matters most to them.
Supporting Communities
Truist continued to fulfill its purpose in meaningful ways in the community in the third quarter through a number of unique and creative initiatives. Truist expanded its partnership with EVERFI bringing literacy tools to elementary schools across the nation. Truist showed leadership as the first top-10 bank to join BlackRock’s philanthropic Emergency Savings Initiative. Truist Community Capital provided over $300 million in equity in the third quarter to support communities through investments in affordable housing, access to healthy foods and education, and investments in job creation and small businesses. Truist continued to make solid progress towards the Company’s $60 billion Community Benefits Plan, ending August 2021 at 112% of the annual target. In July, Truist also released its second annual Corporate Social Responsibility and Environmental, Social and Governance report to outline its advancements and commitments with regard to diversity, equity, and inclusion; environmental sustainability and climate change; governance; community involvement; and financial inclusion.
40 Truist Financial Corporation
Executive Leadership changes
During the third quarter Truist announced its new executive leadership structure effective September 1, 2021. As previously announced as part of the Merger, William H. Rogers, Jr. succeeded Kelly S. King as CEO on September 12, 2021 and Kelly S. King transitioned to the role of executive chairman through March 12, 2022. The other members of the executive leadership team and their roles are:
Daryl N. Bible - Chief Financial Officer
Scott Case - Chief Information Officer
Hugh S. (Beau) Cummins, III - Vice Chair
Ellen M. Fitzsimmons - Chief Legal Officer and Head of Public Affairs
John Howard - Chief Insurance Officer
Michael B. Maguire - Chief National Consumer Finance Services and Payments Officer
Kimberly Moore-Wright - Chief Teammate Officer and Head of Enterprise Diversity
Brant J. Standridge - Chief Retail Community Banking Officer
Clarke R. Starnes III - Chief Risk Officer
Joseph M. Thompson - Chief Wealth Officer
David H. Weaver - Chief Commercial Community Banking Officer
Dontá L. Wilson - Chief Digital and Client Experience Officer
Financial Results
Net income available to common shareholders for the third quarter of 2021 totaled $1.62022 of $1.5 billion up 51%,was down 5.0% compared with the third quarter of last year.2021. On a diluted per common share basis, earnings for the third quarter of 20212022 were $1.20, an increase$1.15, a decrease of $0.41$0.05, or 4.2%, compared to the third quarter of 2020.2021. Truist’s results of operations for the third quarter of 20212022 produced an annualized return on average assets of 1.28%1.19% and an annualized return on average common shareholders’ equity of 10.2%10.7% compared to prior year returns of 0.91%1.28% and 6.9%10.2%, respectively.
Results for the third quarter of 2022 included merger-related and restructuring charges of $62 million ($48 million after-tax) and incremental operating expenses related to the Merger of $90 million ($69 million after-tax). Results for the third quarter of 2021 included merger-related and restructuring charges of $172 million ($132 million after-tax), incremental operating expenses related to the Merger of $191 million ($147 million after-tax), and a one-time professional fee expense of $30 million ($23 million after-tax). Results for the third quarter of 2020 included $236 million ($181 million after-tax) of merger-related and restructuring charges, $152$191 million ($115147 million after-tax) of incremental operating expenses related to the Merger, securities gains of $104 million ($80 million after-tax), and a charitable contributionone-time professional fee to develop an ongoing program to identify, prioritize, and roadmap teammate generated revenue growth and expense savings opportunities beyond the Merger of $50$30 million ($3823 million after-tax)after tax).
Truist’s revenue for the third quarter of 2021 was $5.6 billion. On a TE basis, revenue was also $5.6$5.9 billion for the third quarter of 2021,2022, an increase of $25$259 million, or 0.4%4.6%, compared to the same period in 2020. Excluding securities gains of $104 million from the third quarter of 2020, adjusted taxable equivalent revenues increased $129 million, or 2.3%, compared to the earlier quarter.
2021. TE net interest income for the third quarter of 20212022 was down $130up $522 million, or 3.8%16%, compared to the earlier quarter primarily due to strong loan growth, higher market interest rates coupled with well controlled deposit costs and solid deposit growth. These increases were partially offset by lower purchase accounting accretion and lower rates on earning assets, and a decrease in loans. These decreases were partially offset by growth in the securities portfolio, lower funding costs, higher fees on PPP loans, and fewer interest deferrals on COVID-19 loan accommodations.revenue. Average earning assets increased $26.4$20.6 billion, or 6.1%4.5%, compared to the earlier quarter. The increasequarter primarily due to growth in average earning assets reflects a $66.4 billion, or 83%, increase in average securities, while average total loans and leases decreased $25.4of $21.5 billion, or 8.0%7.4%. Average deposits increased $17.4 billion, or 4.3%, and average other earning assets decreased $16.5short-term borrowings increased $12.0 billion or 46%. The growth in average earning assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $30.5 billion, or 8.2%, compared to the earlier quarter, while average long-term debt and short-term borrowings decreased $3.6$5.9 billion, or 8.8%, and $849 million, or 14%, respectively.16%.
Net interest margin was 2.81%3.12%, down 29up 31 basis points compared to the same period in 2020.earlier quarter. The yield on the total loan portfolio for the third quarter of 20212022 was 3.90%4.49%, down 14up 59 basis points compared to the earlier quarter, primarily reflecting the impact ofhigher market interest rates, partially offset by lower purchase accounting accretion and a lower rate environment.PPP revenue. The yield on the average securities portfolio was 1.50%1.95%, down 47up 45 basis points compared to the earlier quarter primarily due to lower yieldsthe higher rate environment.
The average cost of total deposits was 0.31%, up 28 basis points compared to the earlier quarter. The average cost of short-term borrowings was 2.34%, up 166 basis points compared to the earlier quarter. The average cost of long-term debt was 2.43%, up 82 basis points compared to the earlier quarter. The increase in rates on new purchases.deposits and other funding sources was largely attributable to the higher rate environment.
The provision for credit losses was $234 million, compared to a benefit of $324 million compared to a cost of $421 million for the same period in 2020.earlier quarter. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includesincluded a reserve release due to the improving economic outlook.credit environment during that period. Net charge-offs for the third quarter of 20212022 totaled $135$213 million compared to $326$135 million in the earlier quarter. The third quarter of 2020 included $97 million of charge-offs related to the implementation of CECL, which required a gross up of loan carrying values in connection with the establishment of an allowance on PCD loans. The net charge-off ratio for the current quarter of 0.19%0.27% was down 23up eight basis points compared to the third quarter 2020, due primarily to the additional losses on PCD loans taken in the earlier quarter and lower actual net losses in the commercial portfolio.primarily driven by normalizing trends across certain consumer portfolios.
Truist Financial Corporation 41
Noninterest income for the third quarter of 2021 increased $1552022 decreased $263 million, or 7.0%, compared to the same period in 2020. Noninterest income for the third quarter of 2020 included $104 million of securities gains on available-for-sale securities. Excluding securities gains, noninterest income increased $259 million, or 12%11%, compared to the earlier quarter. InsuranceOther income increased $127decreased $139 million due to acquisitions, as well as organic growth. Investment bankingvaluation changes from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, and tradinglower investment income increased $57 million due to strong merger and acquisition activityvaluation marks from the Company’s SBIC and loan syndications. Wealth management income increased $32 million due to higher valuations of assets under management.other strategic investments. Residential mortgage banking income decreased $42$107 million, primarily dueor 60%, as lower production income (due to lower production related revenues as a result of lower gain on sale margins and refinance volumes resulting from the higher rate environment) was partially offset by higher servicing income (due to lower prepayments and servicing portfolio purchases). Investment banking and trading income decreased $94 million, or 30%, due to increaseslower bond and equity originations and merger and acquisition fees, partially offset by higher trading income. These decreases were partially offset by an increase of $80 million, or 12%, in the valuation of mortgage servicing rights and lower prepayment rates. Additionally, there were increases in service charges on deposit accounts, otherinsurance income and card and payment related fees due to improved economic activity.organic growth and acquisitions.
Noninterest expense for the third quarter of 20212022 was up $40down $182 million, or 1.1%4.8%, compared to the same period in 2020.earlier quarter. Merger-related and restructuring charges decreased $64$110 million primarily due to facilities impairments in the earlier quarter, whileand incremental operating expenses related to the Merger increased $39decreased $101 million primarily reflected in professional fees and outside processing.due to diminishing integration-related activities. The currentearlier quarter also includesincluded a $30 million professional fee to develop an ongoing program to identify, prioritize, and roadmap teammate generated revenue growth and expense savings opportunities beyond the Merger. The earlier quarter included $50 million for charitable contributions to the
40 Truist Charitable Fund (other expense). Financial Corporation
Excluding the aforementioned items and changes inthe amortization of intangibles, adjusted noninterest expense was up $110increased $64 million, or 3.5%2.0%, compared to the earlier quarter. Additionally, increasesOther expense increased $81 million ($87 million, or 104%, on an adjusted basis) primarily due to increased operational losses and teammate travel expenses. Professional fees and outside processing expenses decreased $20 million, but was up $70 million, or 33%, on an adjusted basis due to increased project spend for enterprise technology investments and increased call center staffing. Equipment expense decreased $32 million ($38 million, or 25%, on an adjusted basis) primarily due to laptop purchases in personnelthe prior period. Software expense decreased $26 million ($24 million, or 9.6%, on an adjusted basis) primarily due to lower maintenance expense and decommissioned software. Personnel expense decreased $71 million ($32 million, or 1.5%, on an adjusted basis) due to lower other employee benefits as a result of $129 million werethe decrease in noninterest income for post-retirement benefits and lower incentives, partially offset by a declinehigher salaries due to annual merit increases, investments in net occupancy expense of $46 millionrevenue producing businesses and other expense of $72 million.enterprise technology, as well as additional personnel costs for acquisitions.
The provision for income taxes was $423$363 million for the third quarter of 2021,2022, compared to $255$423 million for the same period in 2020. This produced anearlier quarter. The effective tax rate for the third quarter of 2021 of 19.9%2022 was 18.2%, compared to 18.3%19.9% for the earlier quarter. The higherdecrease in the effective tax rate iswas primarily due to higher pre-tax incomedriven by an increase in discrete tax benefits and changes in the current quarter without a corresponding increase in beneficialfull year forecasted effective tax items.rate.
Truist’s total assets at September 30, 20212022 were $529.9$548.4 billion, an increase of $20.7$7.2 billion, or 4.1%1.3%, compared to December 31, 2020.2021. Total loans and leases at September 30, 2022, were $316.6 billion, an increase of $22.3 billion, or 7.6% compared with December 31, 2021. The increase in total assets was primarily a resultloans reflects strong production during the second and third quarters of strong deposit growth,this year across most industry verticals and product groups in the deploymentcommercial and industrial portfolio and the majority of which led to an increase in AFS securities of $30.3 billion, which was partially offset by a $15.1 billion decline in total loans and leases.
the consumer portfolios. Total deposits at September 30, 20212022 were $405.9$416.0 billion, an increasea decrease of $24.8 billion,$496 million, or 6.5%0.1%, compared to December 31, 2020. Deposit growth was strong during the first nine months of 2021 resulting from fiscal and monetary stimulus, partially offset by the maturity of higher-cost personal accounts.2021.
Asset quality remains excellent, reflecting Truist’s prudent risk culture and diverse portfolio, improving economic conditions, and the ongoing effects of government stimulus. As of September 30, 2021, nonperforming assets were 0.23% of total assets, down four basis points from December 31, 2020. The allowance for loan and lease loss coverage ratio was 4.35x nonperformingportfolio. Nonperforming loans and leases held for investment were 0.35% of loans and leases held for investment at September 30, 2022, down one basis point compared to 4.39x at December 31, 2020.June 30, 2022. The ALLL ratio was 1.34% compared to 1.38% for second quarter 2022. The ALLL coverage ratio was 4.98X annualized net charge-offs, versus 6.54X for second quarter 2022.
Truist maintained strong capital and liquidity.liquidity levels relative to the company’s risk profile. As of September 30, 2021,2022, the CET1 ratio was 10.1%9.1% and the average LCR was 114%. For the nine months ended September 30, 2021, Truist completed $1.1 billion of share repurchases and redeemed $1.4 billion of preferred stock. Additionally, the Company had $5.8 billion of senior long term debt maturities and redemptions, partially offset by $4.5 billion of issuances. Truist increased the common dividend 7% during the third quarter to $0.48 per share, resulting in dividend and total payout ratios for the third quarter of 2021 of 40%2022 was 111%. In October 2021,The decline in the CET1 ratio compared to June 30, 2022 primarily reflects the BenefitMall acquisition and strong loan growth. Truist declaredincreased its quarterly common dividends of $0.48dividend 8% to $0.52 per share for the fourth quarter of 2021.
Truist continues to target a CET1 ratio of approximately 9.75% over the near-term. As previously communicated, the Company expects to be able to, with appropriate approvals from its Board of Directors, deploy approximately $4 billion to $5 billion of capital (either in the form of share repurchases or acquisitions) between 3Q21 and 3Q22. During the third quarter of 2021,2022, resulting in a dividend payout ratio of 45% for the third quarter of 2022. Truist completedentered into an agreement to purchase BankDirect Capital Finance, the acquisitioninsurance premium finance unit of Constellation Affiliated Partners and announced the acquisition of Service Finance, LLC, reducing the amount of capital deployment available for acquisitions or share repurchasesTexas Capital Bancshares, which is anticipated to approximately $1 billion to $2 billion through 3Q22. Truist resumed repurchasing shares and expects to consume approximately $500 million of this capacity via share repurchasesclose in the fourth quarter of 2021 reflecting the Company’s strong capital position,2022. This will add approximately $3.2 billion in loans and the reduced integration risk with successful migrationdeploys 15 basis points of heritage BB&T retailcapital. The acquisition will add scale and commercial clientsproduct offerings to the Truist ecosystem.our existing premium finance business.
42 Truist Financial Corporation
Analysis of Results of Operations
Net Interest Income and NIM
Third Quarter 20212022 compared to Third Quarter 20202021
NetTE net interest income for the third quarter of 20212022 was down $130up $522 million, or 3.8%16%, compared to the earlier quarter primarily due to strong loan growth, higher market interest rates coupled with well controlled deposit costs and solid deposit growth. These increases were partially offset by lower purchase accounting accretion and lower rates on earning assets, and a decrease in loans. These decreases were partially offset by growth in the securities portfolio, lower funding costs, higher fees on Payroll Protection Program loans, and fewer interest deferrals on COVID-19 loan accommodations.PPP revenue. Average earning assets increased $26.4$20.6 billion, or 6.1%4.5%, compared to the earlier quarter. The increasequarter primarily due to growth in average earning assets reflects a $66.4 billion, or 83%, increase in average securities, while average total loans and leases decreased $25.4of $21.5 billion, or 8.0%7.4%. Average deposits increased $17.4 billion, or 4.3%, and average other earning assets decreased $16.5short-term borrowings increased $12.0 billion or 46%. The growth in average earning assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $30.5 billion, or 8.2%, compared to the earlier quarter, while average long-term debt and short-term borrowings decreased $3.6$5.9 billion, or 8.8%, and $849 million, or 14%, respectively.16%.
Net interest margin was 2.81%3.12%, down 29up 31 basis points compared to the earlier quarter. The yield on the total loan portfolio for the third quarter of 20212022 was 3.90%4.49%, down 14up 59 basis points compared to the earlier quarter, primarily reflecting the impact ofhigher market interest rates, partially offset by lower purchase accounting accretion and a lower rate environment.PPP revenue. The yield on the average securities portfolio was 1.50%1.95%, down 47up 45 basis points compared to the earlier quarter primarily due to lower yields on new purchases.the higher rate environment.
The average cost of total deposits was 0.03%0.31%, down sevenup 28 basis points compared to the earlier quarter. The average rate oncost of short-term borrowings was 0.68%2.34%, down 17up 166 basis points compared to the earlier quarter. The average rate oncost of long-term debt was 1.61%2.43%, up 1382 basis points compared to the earlier quarter. The lowerincrease in rates on deposits and short-term borrowings reflect the lower rate environment. The higher rates on long-term debtother funding sources was duelargely attributable to the runoff of lowerhigher rate FHLB advances.environment.
Truist Financial Corporation 41
Nine Months of 20212022 compared to Nine Months of 20202021
NetTE net interest income for the nine months ended September 30, 20212022 was down $710up $580 million, or 6.7%5.9%, compared to the prior period primarily due to higher market interest rates coupled with well controlled deposit costs and solid deposit growth, growth in the securities and lending portfolios and lower premium amortization, partially offset by lower purchase accounting accretion and lower rates on earning assets, and a decrease in loans. These decreases were partially offset by growth in the securities portfolio, lower funding costs, higher fees on Payroll Protection Program loans, and fewer interest deferrals on COVID-19 loan accommodations.PPP revenue. Average earning assets increased $21.8$22.4 billion, or 5.0%4.9%, compared to the prior period. The increase in average earning assets reflects a $57.9$14.1 billion, or 75%10%, increase in average securities, whilea $7.2 billion, or 2.5%, increase in average total loans and leases, decreased $22.4and a $576 million, or 11%, increase in average interest earning trading assets. Average deposits increased $25.6 billion, or 7.1%6.5%, and average other earning assets decreased $14.3short-term borrowings increased $5.3 billion, or 42%. The growth in average earning assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $34.9 billion, or 9.7%87%, compared to the prior period, while average long-term debt and short-term borrowings decreased $10.3$4.7 billion, or 22%, and $5.3 billion, or 46%, respectively.13%.
Net interest margin was 2.90%2.93% for the nine months ended September 30, 2021, down 362022, up three basis points compared to the prior period. The yield on the total loan portfolio for the nine months ended September 30, 20212022 was 4.00%4.04%, down 39up four basis points compared to the prior period, reflecting the impact ofhigher market interest rates, partially offset by lower purchase accounting accretion and the lower rate environment.PPP revenue. The yield on the average securities portfolio was 1.48%1.82% for the nine months ended September 30, 2021, down 832022, up 34 basis points compared to the prior period primarily due to lower yields on new purchases and premium amortization.the higher rate environment.
The average cost of total deposits was 0.04%0.15% for the nine months ended September 30, 2021, down 232022, up 11 basis points compared to the prior period. The average ratecost on short-term borrowings was 0.84%1.68% for the nine months ended September 30, 2021, down 622022, up 84 basis points compared to the prior period. The average ratecost on long-term debt was 1.59%1.88% for the nine months ended September 30, 2021, down 192022, up 29 basis points compared to the prior period. The lowerincrease in rates on interest-bearing liabilities reflectdeposits and other funding sources was largely attributable to the lowerhigher rate environment.
As of September 30, 2022, the remaining unamortized fair value marks on the loan and lease portfolio, deposits, and long-term debt were $826 million, $1 million, and $94 million, respectively. As of December 31, 2021, the remaining unamortized fair value marks on the loan and lease portfolio, deposits and long-term debt were $1.5$1.3 billion, $9$7 million, and $157 million, respectively. As of December 31, 2020, the remaining unamortized fair value marks on the loan and lease portfolio, deposits and long-term debt were $2.4 billion, $19 million, and $216$139 million, respectively.
The remaining unamortized fair value mark on loans and leases consists of $807$510 million for consumer loans and leases, and $733$316 million for commercial loans and leases. These amounts will be recognized over the remaining contractual lives of the underlying instruments or as paydowns occur.
The major components of net interest income and the related annualized yields as well as the variances between the periods caused by changes in interest rates versus changes in volumes are summarized below.
42 Truist Financial Corporation 43
| | Table 1-1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) | Table 1-1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) | Table 1-1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) |
| Three Months Ended September 30, (Dollars in millions) | Three Months Ended September 30, (Dollars in millions) | Average Balances (5) | | Annualized Yield/Rate | | Income/Expense | | Incr. (Decr.) | | Change due to | Three Months Ended September 30, (Dollars in millions) | Average Balances (5) | | Annualized Yield/Rate | | Income/Expense | | Incr. (Decr.) | | Change due to |
2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | Rate | | Volume | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | Rate | | Volume |
Assets | Assets | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | |
Total securities, at amortized cost: (2) | Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | | Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | |
U.S. Treasury | U.S. Treasury | $ | 9,699 | | | $ | 2,218 | | | 0.72 | % | | 1.78 | % | | $ | 18 | | | $ | 10 | | | $ | 8 | | | $ | (9) | | | $ | 17 | | U.S. Treasury | $ | 10,925 | | | $ | 9,699 | | | 0.93 | % | | 0.72 | % | | $ | 26 | | | $ | 18 | | | $ | 8 | | | $ | 6 | | | $ | 2 | |
GSE | GSE | 1,830 | | | 1,842 | | | 2.31 | | | 2.33 | | | 10 | | | 10 | | | — | | | — | | | — | | GSE | 305 | | | 1,830 | | | 2.56 | | | 2.31 | | | 1 | | | 10 | | | (9) | | | 1 | | | (10) | |
Agency MBS | Agency MBS | 132,890 | | | 75,232 | | | 1.53 | | | 1.95 | | | 509 | | | 366 | | | 143 | | | (93) | | | 236 | | Agency MBS | 129,703 | | | 132,890 | | | 2.02 | | | 1.53 | | | 655 | | | 509 | | | 146 | | | 159 | | | (13) | |
States and political subdivisions | States and political subdivisions | 425 | | | 499 | | | 3.52 | | | 5.03 | | | 4 | | | 7 | | | (3) | | | (2) | | | (1) | | States and political subdivisions | 395 | | | 425 | | | 3.92 | | | 3.52 | | | 4 | | | 4 | | | — | | | — | | | — | |
Non-agency MBS | Non-agency MBS | 1,398 | | | — | | | 2.20 | | | — | | | 8 | | | — | | | 8 | | | — | | | 8 | | Non-agency MBS | 4,016 | | | 1,398 | | | 2.32 | | | 2.20 | | | 24 | | | 8 | | | 16 | | | — | | | 16 | |
Other | Other | 30 | | | 37 | | | 1.90 | | | 1.99 | | | — | | | 1 | | | (1) | | | — | | | (1) | | Other | 52 | | | 30 | | | 3.94 | | | 1.90 | | | — | | | — | | | — | | | — | | | — | |
| Total securities | Total securities | 146,272 | | | 79,828 | | | 1.50 | | | 1.97 | | | 549 | | | 394 | | | 155 | | | (104) | | | 259 | | Total securities | 145,396 | | | 146,272 | | | 1.95 | | | 1.50 | | | 710 | | | 549 | | | 161 | | | 166 | | | (5) | |
Interest earning trading assets | Interest earning trading assets | 5,809 | | | 4,056 | | | 2.81 | | | 3.23 | | | 41 | | | 32 | | | 9 | | | (5) | | | 14 | | Interest earning trading assets | 5,446 | | | 5,809 | | | 4.49 | | | 2.81 | | | 62 | | | 41 | | | 21 | | | 24 | | | (3) | |
Other earning assets (3) | Other earning assets (3) | 19,331 | | | 35,819 | | | 0.25 | | | 0.26 | | | 13 | | | 24 | | | (11) | | | (1) | | | (10) | | Other earning assets (3) | 19,631 | | | 19,331 | | | 2.24 | | | 0.25 | | | 109 | | | 13 | | | 96 | | | 96 | | | — | |
Loans and leases, net of unearned income: (4) | Loans and leases, net of unearned income: (4) | | | | | | | | | | | | | | | | | Loans and leases, net of unearned income: (4) | | | | | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | 130,025 | | | 143,452 | | | 3.00 | | | 3.02 | | | 981 | | | 1,087 | | | (106) | | | (7) | | | (99) | | Commercial and industrial | 152,123 | | | 134,942 | | | 4.08 | | | 3.01 | | | 1,564 | | | 1,023 | | | 541 | | | 398 | | | 143 | |
CRE | CRE | 24,849 | | | 27,761 | | | 2.86 | | | 2.88 | | | 181 | | | 203 | | | (22) | | | (1) | | | (21) | | CRE | 22,245 | | | 24,849 | | | 4.32 | | | 2.86 | | | 245 | | | 181 | | | 64 | | | 84 | | | (20) | |
Commercial Construction | Commercial Construction | 5,969 | | | 6,861 | | | 2.96 | | | 3.26 | | | 42 | | | 55 | | | (13) | | | (5) | | | (8) | | Commercial Construction | 5,284 | | | 5,969 | | | 4.83 | | | 2.96 | | | 62 | | | 42 | | | 20 | | | 26 | | | (6) | |
Lease financing | 4,917 | | | 5,626 | | | 3.39 | | | 3.71 | | | 42 | | | 52 | | | (10) | | | (4) | | | (6) | | |
| | Residential mortgage | Residential mortgage | 45,369 | | | 51,500 | | | 3.96 | | | 4.47 | | | 450 | | | 576 | | | (126) | | | (62) | | | (64) | | Residential mortgage | 53,271 | | | 45,369 | | | 3.59 | | | 3.96 | | | 478 | | | 450 | | | 28 | | | (45) | | | 73 | |
Residential home equity and direct | Residential home equity and direct | 25,242 | | | 26,726 | | | 5.67 | | | 5.86 | | | 360 | | | 394 | | | (34) | | | (13) | | | (21) | | Residential home equity and direct | 25,394 | | | 25,242 | | | 5.64 | | | 5.67 | | | 361 | | | 360 | | | 1 | | | (2) | | | 3 | |
Indirect auto | Indirect auto | 26,830 | | | 24,732 | | | 5.99 | | | 6.51 | | | 405 | | | 405 | | | — | | | (33) | | | 33 | | Indirect auto | 28,057 | | | 26,830 | | | 5.40 | | | 5.99 | | | 382 | | | 405 | | | (23) | | | (41) | | | 18 | |
Indirect other | Indirect other | 11,112 | | | 11,530 | | | 6.54 | | | 7.05 | | | 183 | | | 204 | | | (21) | | | (14) | | | (7) | | Indirect other | 12,300 | | | 11,112 | | | 6.46 | | | 6.54 | | | 200 | | | 183 | | | 17 | | | (2) | | | 19 | |
Student | Student | 7,214 | | | 7,446 | | | 4.02 | | | 4.30 | | | 74 | | | 80 | | | (6) | | | (4) | | | (2) | | Student | 5,958 | | | 7,214 | | | 5.64 | | | 4.02 | | | 85 | | | 74 | | | 11 | | | 25 | | | (14) | |
Credit card | Credit card | 4,632 | | | 4,810 | | | 9.01 | | | 9.03 | | | 105 | | | 109 | | | (4) | | | — | | | (4) | | Credit card | 4,755 | | | 4,632 | | | 9.97 | | | 9.01 | | | 119 | | | 105 | | | 14 | | | 11 | | | 3 | |
| Total loans and leases HFI | Total loans and leases HFI | 286,159 | | | 310,444 | | | 3.92 | | | 4.06 | | | 2,823 | | | 3,165 | | | (342) | | | (143) | | | (199) | | Total loans and leases HFI | 309,387 | | | 286,159 | | | 4.49 | | | 3.92 | | | 3,496 | | | 2,823 | | | 673 | | | 454 | | | 219 | |
LHFS | LHFS | 4,179 | | | 5,247 | | | 2.69 | | | 2.78 | | | 28 | | | 37 | | | (9) | | | (1) | | | (8) | | LHFS | 2,489 | | | 4,179 | | | 4.81 | | | 2.69 | | | 30 | | | 28 | | | 2 | | | 17 | | | (15) | |
Total loans and leases | Total loans and leases | 290,338 | | | 315,691 | | | 3.90 | | | 4.04 | | | 2,851 | | | 3,202 | | | (351) | | | (144) | | | (207) | | Total loans and leases | 311,876 | | | 290,338 | | | 4.49 | | | 3.90 | | | 3,526 | | | 2,851 | | | 675 | | | 471 | | | 204 | |
Total earning assets | Total earning assets | 461,750 | | | 435,394 | | | 2.98 | | | 3.34 | | | 3,454 | | | 3,652 | | | (198) | | | (254) | | | 56 | | Total earning assets | 482,349 | | | 461,750 | | | 3.63 | | | 2.98 | | | 4,407 | | | 3,454 | | | 953 | | | 757 | | | 196 | |
Nonearning assets | Nonearning assets | 64,935 | | | 65,432 | | | | | | | | | | | | | | | Nonearning assets | 63,257 | | | 64,935 | | | | | | | | | | | | | | |
Total assets | Total assets | $ | 526,685 | | | $ | 500,826 | | | | | | | | | | | | | | | Total assets | $ | 545,606 | | | $ | 526,685 | | | | | | | | | | | | | | |
Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | | | | | | | | | | | | | | | | | Liabilities and Shareholders’ Equity | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | Interest-bearing deposits: | | | | | | | | | | | | | | | | | Interest-bearing deposits: | | | | | | | | | | | | | | | | |
Interest-checking | Interest-checking | $ | 107,802 | | | $ | 96,707 | | | 0.05 | | | 0.06 | | | 14 | | | 15 | | | (1) | | | (3) | | | 2 | | Interest-checking | $ | 111,645 | | | $ | 107,802 | | | 0.56 | | | 0.05 | | | 158 | | | 14 | | | 144 | | | 143 | | | 1 | |
Money market and savings | Money market and savings | 136,094 | | | 123,598 | | | 0.03 | | | 0.06 | | | 9 | | | 19 | | | (10) | | | (12) | | | 2 | | Money market and savings | 147,659 | | | 136,094 | | | 0.43 | | | 0.03 | | | 159 | | | 9 | | | 150 | | | 149 | | | 1 | |
Time deposits | Time deposits | 17,094 | | | 27,940 | | | 0.23 | | | 0.89 | | | 10 | | | 62 | | | (52) | | | (34) | | | (18) | | Time deposits | 14,751 | | | 17,094 | | | 0.40 | | | 0.23 | | | 14 | | | 10 | | | 4 | | | 6 | | | (2) | |
| Total interest-bearing deposits (6) | Total interest-bearing deposits (6) | 260,990 | | | 248,245 | | | 0.05 | | | 0.15 | | | 33 | | | 96 | | | (63) | | | (49) | | | (14) | | Total interest-bearing deposits (6) | 274,055 | | | 260,990 | | | 0.48 | | | 0.05 | | | 331 | | | 33 | | | 298 | | | 298 | | | — | |
Short-term borrowings | Short-term borrowings | 5,360 | | | 6,209 | | | 0.68 | | | 0.85 | | | 9 | | | 13 | | | (4) | | | (2) | | | (2) | | Short-term borrowings | 17,392 | | | 5,360 | | | 2.34 | | | 0.68 | | | 103 | | | 9 | | | 94 | | | 49 | | | 45 | |
Long-term debt | Long-term debt | 37,329 | | | 40,919 | | | 1.61 | | | 1.48 | | | 151 | | | 152 | | | (1) | | | 13 | | | (14) | | Long-term debt | 31,381 | | | 37,329 | | | 2.43 | | | 1.61 | | | 190 | | | 151 | | | 39 | | | 67 | | | (28) | |
Total interest-bearing liabilities | Total interest-bearing liabilities | 303,679 | | | 295,373 | | | 0.25 | | | 0.35 | | | 193 | | | 261 | | | (68) | | | (38) | | | (30) | | Total interest-bearing liabilities | 322,828 | | | 303,679 | | | 0.77 | | | 0.25 | | | 624 | | | 193 | | | 431 | | | 414 | | | 17 | |
Noninterest-bearing deposits (6) | Noninterest-bearing deposits (6) | 141,738 | | | 123,966 | | | | | | | | | | | | | | | | Noninterest-bearing deposits (6) | 146,041 | | | 141,738 | | | | | | | | | | | | | | | |
Other liabilities | Other liabilities | 11,915 | | | 11,853 | | | | | | | | | | | | | | | | Other liabilities | 13,227 | | | 11,915 | | | | | | | | | | | | | | | |
Shareholders’ equity | Shareholders’ equity | 69,353 | | | 69,634 | | | | | | | | | | | | | | | | Shareholders’ equity | 63,510 | | | 69,353 | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 526,685 | | | $ | 500,826 | | | | | | | | | | | | | | | | Total liabilities and shareholders’ equity | $ | 545,606 | | | $ | 526,685 | | | | | | | | | | | | | | | |
Average interest-rate spread | Average interest-rate spread | | | | | 2.73 | % | | 2.99 | % | | | | | | | | | | | Average interest-rate spread | | | | | 2.86 | % | | 2.73 | % | | | | | | | | | | |
NIM/net interest income - taxable equivalent | NIM/net interest income - taxable equivalent | | | | | 2.81 | % | | 3.10 | % | | $ | 3,261 | | | $ | 3,391 | | | $ | (130) | | | $ | (216) | | | $ | 86 | | NIM/net interest income - taxable equivalent | | | | | 3.12 | % | | 2.81 | % | | $ | 3,783 | | | $ | 3,261 | | | $ | 522 | | | $ | 343 | | | $ | 179 | |
Taxable-equivalent adjustment | Taxable-equivalent adjustment | | | | | | | | | $ | 28 | | | $ | 29 | | | | | | | | Taxable-equivalent adjustment | | | | | | | | | $ | 38 | | | $ | 28 | | | | | | | |
(1) Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs, and dividends.
(2) Total securities include AFS and HTM securities.
(3) Includes cash equivalents, interest-bearing deposits with banks, FHLB stock and other earning assets.
(4) Fees, which are not material for any of the periods shown, are included for rate calculation purposes. NPLs are included in the average balances.
(5) Represents daily average balances. Excludes basis adjustments for fair value hedges.
(6) Total deposit costs were 0.03%0.31% and 0.10%0.03% for the three months ended September 30, 20212022 and 2020,2021, respectively.
44 Truist Financial Corporation 43
| | | Table 1-2: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) | Table 1-2: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) | | Table 1-2: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) | |
| Nine Months Ended September 30, (Dollars in millions) | Nine Months Ended September 30, (Dollars in millions) | Average Balances (5) | | Annualized Yield/Rate | | Income/Expense | | Incr. (Decr.) | | Change due to | | Nine Months Ended September 30, (Dollars in millions) | Average Balances (5) | | Annualized Yield/Rate | | Income/Expense | | Incr. (Decr.) | | Change due to | |
2021 | | 2020 | | | 2021 | | 2020 | | | 2021 | | 2020 | | | Rate | | Volume | | Nine Months Ended September 30, (Dollars in millions) | 2022 | | 2021 | | | 2022 | | | 2022 | | 2021 | Incr. (Decr.) | | | | Rate | | Volume | |
Assets | Assets | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | |
Total securities, at amortized cost: (2) | Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | | | | | | Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | | | | | |
U.S. Treasury | U.S. Treasury | $ | 6,872 | | | $ | 2,243 | | | | 0.74 | % | | 1.86 | % | | | $ | 38 | | | $ | 31 | | | | $ | 7 | | | $ | (28) | | | $ | 35 | | | U.S. Treasury | $ | 10,457 | | | $ | 6,872 | | | | 0.84 | % | | 0.74 | % | | | $ | 66 | | | $ | 38 | | | | $ | 28 | | | $ | 6 | | | $ | 22 | | |
GSE | GSE | 1,837 | | | 1,847 | | | | 2.32 | | | 2.33 | | | | 32 | | | 32 | | | | — | | | — | | | — | | | GSE | 557 | | | 1,837 | | | | 2.19 | | | 2.32 | | | | 8 | | | 32 | | | | (24) | | | (2) | | | (22) | | |
Agency MBS | Agency MBS | 125,157 | | | 72,152 | | | | 1.49 | | | 2.29 | | | | 1,401 | | | 1,240 | | | | 161 | | | (533) | | | 694 | | | Agency MBS | 133,338 | | | 125,157 | | | | 1.87 | | | 1.49 | | | | 1,870 | | | 1,401 | | | | 469 | | | 373 | | | 96 | | |
States and political subdivisions | States and political subdivisions | 435 | | | 512 | | | | 3.53 | | | 4.04 | | | | 12 | | | 16 | | | | (4) | | | (2) | | | (2) | | | States and political subdivisions | 380 | | | 435 | | | | 3.82 | | | 3.53 | | | | 11 | | | 12 | | | | (1) | | | 1 | | | (2) | | |
Non-agency MBS | Non-agency MBS | 477 | | | 115 | | | | 2.18 | | | 16.78 | | | | 8 | | | 15 | | | | (7) | | | (21) | | | 14 | | | Non-agency MBS | 4,112 | | | 477 | | | | 2.29 | | | 2.18 | | | | 71 | | | 8 | | | | 63 | | | — | | | 63 | | |
Other | Other | 32 | | | 37 | | | | 1.90 | | | 2.44 | | | | — | | | 1 | | | | (1) | | | (1) | | | — | | | Other | 51 | | | 32 | | | | 3.46 | | | 1.90 | | | | 1 | | | — | | | | 1 | | | 1 | | | — | | |
| Total securities | Total securities | 134,810 | | | 76,906 | | | | 1.48 | | | 2.31 | | | | 1,491 | | | 1,335 | | | | 156 | | | (585) | | | 741 | | | Total securities | 148,895 | | | 134,810 | | | | 1.82 | | | 1.48 | | | | 2,027 | | | 1,491 | | | | 536 | | | 379 | | | 157 | | |
Interest earning trading assets | Interest earning trading assets | 5,208 | | | 4,695 | | | | 2.80 | | | 3.85 | | | | 110 | | | 135 | | | | (25) | | | (39) | | | 14 | | | Interest earning trading assets | 5,784 | | | 5,208 | | | | 3.67 | | | 2.80 | | | | 160 | | | 110 | | | | 50 | | | 37 | | | 13 | | |
Other earning assets (3) | Other earning assets (3) | 19,453 | | | 33,708 | | | | 0.26 | | | 0.57 | | | | 38 | | | 144 | | | | (106) | | | (60) | | | (46) | | | Other earning assets (3) | 19,924 | | | 19,453 | | | | 1.24 | | | 0.26 | | | | 184 | | | 38 | | | | 146 | | | 145 | | | 1 | | |
Loans and leases, net of unearned income: (4) | Loans and leases, net of unearned income: (4) | | | | | | | | | | | | | | Loans and leases, net of unearned income: (4) | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | 133,218 | | | 142,731 | | | | 3.06 | | | 3.47 | | | | 3,045 | | | 3,710 | | | | (665) | | | (425) | | | (240) | | | Commercial and industrial | 145,566 | | | 138,146 | | | | 3.42 | | | 3.08 | | | | 3,725 | | | 3,188 | | | | 537 | | | 361 | | | 176 | | |
CRE | CRE | 25,563 | | | 27,538 | | | | 2.86 | | | 3.46 | | | | 553 | | | 717 | | | | (164) | | | (116) | | | (48) | | | CRE | 22,765 | | | 25,563 | | | | 3.52 | | | 2.86 | | | | 606 | | | 553 | | | | 53 | | | 117 | | | (64) | | |
Commercial Construction | Commercial Construction | 6,293 | | | 6,673 | | | | 2.98 | | | 3.92 | | | | 135 | | | 192 | | | | (57) | | | (46) | | | (11) | | | Commercial Construction | 5,196 | | | 6,293 | | | | 3.80 | | | 2.98 | | | | 140 | | | 135 | | | | 5 | | | 33 | | | (28) | | |
Lease financing | 4,928 | | | 5,872 | | | | 3.86 | | | 4.24 | | | | 143 | | | 187 | | | | (44) | | | (16) | | | (28) | | | |
| | Residential mortgage | Residential mortgage | 44,931 | | | 52,288 | | | | 4.25 | | | 4.53 | | | | 1,431 | | | 1,778 | | | | (347) | | | (106) | | | (241) | | | Residential mortgage | 50,180 | | | 44,931 | | | | 3.58 | | | 4.25 | | | | 1,346 | | | 1,431 | | | | (85) | | | (241) | | | 156 | | |
Residential home equity and direct | Residential home equity and direct | 25,378 | | | 27,161 | | | | 5.74 | | | 6.08 | | | | 1,089 | | | 1,237 | | | | (148) | | | (68) | | | (80) | | | Residential home equity and direct | 25,136 | | | 25,378 | | | | 5.43 | | | 5.74 | | | | 1,020 | | | 1,089 | | | | (69) | | | (59) | | | (10) | | |
Indirect auto | Indirect auto | 26,547 | | | 24,809 | | | | 6.25 | | | 6.68 | | | | 1,240 | | | 1,240 | | | | — | | | (83) | | | 83 | | | Indirect auto | 26,888 | | | 26,547 | | | | 5.47 | | | 6.25 | | | | 1,101 | | | 1,240 | | | | (139) | | | (155) | | | 16 | | |
Indirect other | Indirect other | 10,920 | | | 11,255 | | | | 6.79 | | | 7.19 | | | | 555 | | | 606 | | | | (51) | | | (33) | | | (18) | | | Indirect other | 11,549 | | | 10,920 | | | | 6.36 | | | 6.79 | | | | 549 | | | 555 | | | | (6) | | | (37) | | | 31 | | |
Student | Student | 7,375 | | | 7,622 | | | | 3.96 | | | 4.75 | | | | 219 | | | 271 | | | | (52) | | | (43) | | | (9) | | | Student | 6,310 | | | 7,375 | | | | 4.54 | | | 3.96 | | | | 214 | | | 219 | | | | (5) | | | 30 | | | (35) | | |
Credit card | Credit card | 4,610 | | | 5,097 | | | | 8.99 | | | 9.34 | | | | 310 | | | 356 | | | | (46) | | | (13) | | | (33) | | | Credit card | 4,721 | | | 4,610 | | | | 9.29 | | | 8.99 | | | | 328 | | | 310 | | | | 18 | | | 10 | | | 8 | | |
| Total loans and leases HFI | Total loans and leases HFI | 289,763 | | | 311,046 | | | | 4.02 | | | 4.42 | | | | 8,720 | | | 10,294 | | | | (1,574) | | | (949) | | | (625) | | | Total loans and leases HFI | 298,311 | | | 289,763 | | | | 4.04 | | | 4.02 | | | | 9,029 | | | 8,720 | | | | 309 | | | 59 | | | 250 | | |
LHFS | LHFS | 4,485 | | | 5,575 | | | | 2.61 | | | 3.00 | | | | 88 | | | 126 | | | | (38) | | | (15) | | | (23) | | | LHFS | 3,167 | | | 4,485 | | | | 3.82 | | | 2.61 | | | | 91 | | | 88 | | | | 3 | | | 33 | | | (30) | | |
Total loans and leases | Total loans and leases | 294,248 | | | 316,621 | | | | 4.00 | | | 4.39 | | | | 8,808 | | | 10,420 | | | | (1,612) | | | (964) | | | (648) | | | Total loans and leases | 301,478 | | | 294,248 | | | | 4.04 | | | 4.00 | | | | 9,120 | | | 8,808 | | | | 312 | | | 92 | | | 220 | | |
Total earning assets | Total earning assets | 453,719 | | | 431,930 | | | | 3.08 | | | 3.72 | | | | 10,447 | | | 12,034 | | | | (1,587) | | | (1,648) | | | 61 | | | Total earning assets | 476,081 | | | 453,719 | | | | 3.22 | | | 3.08 | | | | 11,491 | | | 10,447 | | | | 1,044 | | | 653 | | | 391 | | |
Nonearning assets | Nonearning assets | 64,444 | | | 65,780 | | | | | | | | | | | | | | | | | | | | Nonearning assets | 64,673 | | | 64,444 | | | | | | | | | | | | | | | | | | | |
Total assets | Total assets | $ | 518,163 | | | $ | 497,710 | | | | | | | | | | | | | | | | | | | | Total assets | $ | 540,754 | | | $ | 518,163 | | | | | | | | | | | | | | | | | | | |
Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | | | | | | | | | | | | | | | | | | | | | | Liabilities and Shareholders’ Equity | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits: | Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | | Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | | | |
Interest-checking | Interest-checking | $ | 106,234 | | | $ | 93,205 | | | | 0.06 | | | 0.28 | | | | 44 | | | 199 | | | | (155) | | | (178) | | | 23 | | | Interest-checking | $ | 112,058 | | | $ | 106,234 | | | | 0.26 | | | 0.06 | | | | 215 | | | 44 | | | | 171 | | | 168 | | | 3 | | |
Money market and savings | Money market and savings | 133,167 | | | 123,536 | | | | 0.03 | | | 0.27 | | | | 27 | | | 254 | | | | (227) | | | (245) | | | 18 | | | Money market and savings | 145,953 | | | 133,167 | | | | 0.20 | | | 0.03 | | | | 220 | | | 27 | | | | 193 | | | 190 | | | 3 | | |
Time deposits | Time deposits | 18,609 | | | 32,157 | | | | 0.32 | | | 1.10 | | | | 45 | | | 265 | | | | (220) | | | (138) | | | (82) | | | Time deposits | 14,840 | | | 18,609 | | | | 0.25 | | | 0.32 | | | | 27 | | | 45 | | | | (18) | | | (10) | | | (8) | | |
| Total interest-bearing deposits (6) | Total interest-bearing deposits (6) | 258,010 | | | 248,898 | | | | 0.06 | | | 0.39 | | | | 116 | | | 718 | | | | (602) | | | (561) | | | (41) | | | Total interest-bearing deposits (6) | 272,851 | | | 258,010 | | | | 0.23 | | | 0.06 | | | | 462 | | | 116 | | | | 346 | | | 348 | | | (2) | | |
Short-term borrowings | Short-term borrowings | 6,081 | | | 11,350 | | | | 0.84 | | | 1.46 | | | | 38 | | | 124 | | | | (86) | | | (41) | | | (45) | | | Short-term borrowings | 11,356 | | | 6,081 | | | | 1.68 | | | 0.84 | | | | 143 | | | 38 | | | | 105 | | | 56 | | | 49 | | |
Long-term debt | Long-term debt | 37,339 | | | 47,643 | | | | 1.59 | | | 1.78 | | | | 446 | | | 635 | | | | (189) | | | (63) | | | (126) | | | Long-term debt | 32,646 | | | 37,339 | | | | 1.88 | | | 1.59 | | | | 459 | | | 446 | | | | 13 | | | 74 | | | (61) | | |
Total interest-bearing liabilities | Total interest-bearing liabilities | 301,430 | | | 307,891 | | | | 0.27 | | | 0.64 | | | | 600 | | | 1,477 | | | | (877) | | | (665) | | | (212) | | | Total interest-bearing liabilities | 316,853 | | | 301,430 | | | | 0.45 | | | 0.27 | | | | 1,064 | | | 600 | | | | 464 | | | 478 | | | (14) | | |
Noninterest-bearing deposits (6) | Noninterest-bearing deposits (6) | 136,118 | | | 110,375 | | | | | | | | | | | | | | | | | | | | Noninterest-bearing deposits (6) | 146,862 | | | 136,118 | | | | | | | | | | | | | | | | | | | |
Other liabilities | Other liabilities | 11,262 | | | 12,133 | | | | | | | | | | | | | | | | | | | | Other liabilities | 12,448 | | | 11,262 | | | | | | | | | | | | | | | | | | | |
Shareholders’ equity | Shareholders’ equity | 69,353 | | | 67,311 | | | | | | | | | | | | | | | | | | | | Shareholders’ equity | 64,591 | | | 69,353 | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 518,163 | | | $ | 497,710 | | | | | | | | | | | | | | | | | | | | Total liabilities and shareholders’ equity | $ | 540,754 | | | $ | 518,163 | | | | | | | | | | | | | | | | | | | |
Average interest-rate spread | Average interest-rate spread | | | | | | 2.81 | % | | 3.08 | % | | | | | | | | | | | | | | Average interest-rate spread | | | | | | 2.77 | % | | 2.81 | % | | | | | | | | | | | | | |
NIM/net interest income - taxable equivalent | NIM/net interest income - taxable equivalent | | | | | | 2.90 | % | | 3.26 | % | | | $ | 9,847 | | | $ | 10,557 | | | | $ | (710) | | | $ | (983) | | | $ | 273 | | | NIM/net interest income - taxable equivalent | | | | | | 2.93 | % | | 2.90 | % | | | $ | 10,427 | | | $ | 9,847 | | | | $ | 580 | | | $ | 175 | | | $ | 405 | | |
Taxable-equivalent adjustment | Taxable-equivalent adjustment | | | | | | | | | | | $ | 84 | | | $ | 97 | | | | | | | | | | Taxable-equivalent adjustment | | | | | | | | | | | $ | 92 | | | $ | 84 | | | | | | | | | |
(1)Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs, and dividends.
(2)Total securities include AFS and HTM securities.
(3)Includes cash equivalents, interest-bearing deposits with banks, FHLB stock and other earning assets.
(4)Fees, which are not material for any of the periods shown, are included for rate calculation purposes. NPLs are included in the average balances.
(5)Represents daily average balances. Excludes basis adjustments for fair value hedges.
(6)Total deposit costs were 0.04%0.15% and 0.27%0.04% for the nine months ended September 30, 20212022 and 2020,2021, respectively.
44 Truist Financial Corporation 45
Provision for Credit Losses
Third Quarter 20212022 compared to Third Quarter 20202021
The provision for credit losses was a benefit of $324$234 million, compared to a costbenefit of $421$324 million for the earlier quarter. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includesincluded a reserve release due to the improving economic outlook.credit environment during that period. Net charge-offs for the third quarter of 20212022 totaled $135$213 million compared to $326$135 million in the earlier quarter. The third quarter of 2020 included $97 million of charge-offs related to the implementation of CECL, which required a gross up of loan carrying values in connection with the establishment of an allowance on PCD loans. The net charge-off ratio for the current quarter of 0.19%0.27% was down 23up eight basis points compared to the third quarter 2020, due primarily to the additional losses on PCD loans taken in the earlier quarter and lower actual net losses in the commercial portfolio.primarily driven by normalizing trends across certain consumer portfolios.
Nine Months of 20212022 compared to Nine Months of 20202021
The provision for credit losses was a benefit of $710$310 million for the nine months ended September 30, 2021,2022, compared to a costbenefit of $2.2 billion$710 million for the prior period. The current period provision expense primarily reflects growth in the loan portfolio and a moderately slower economic outlook, partially offset by a decline in the ALLL ratio, whereas the prior period included significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current period includesa reserve releasesrelease due to the improving economic outlook.credit environment during that period. Net charge-offs for the nine months ended September 30, 20212022 totaled $515$550 million compared to $914$515 million in the earlierprior period. The 2020 period included the previously mentioned $97 million of charge-offs related to the implementation of CECL. The net charge-off ratio for the current yearperiod of 0.24%0.25% was down 15up one basis points compared to the prior period, primarily driven by lower losses across all portfolios, partially driven byperiod.
Refer to “Note 5. Loans and ACL” for additional losses on PCD loans taken in 2020, combined with higher recoveries.discussion over the ACL.
Noninterest Income
Noninterest income is a significant contributor to Truist’s financial results. Management focuses on diversifying its sources of revenue to reduce Truist’s reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates. | | Table 2: Noninterest Income | Table 2: Noninterest Income | | Table 2: Noninterest Income | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| (Dollars in millions) | (Dollars in millions) | 2021 | | 2020 | | % Change | | 2021 | | 2020 | | | % Change | | (Dollars in millions) | 2022 | | 2021 | | % Change | | 2022 | | 2021 | | | % Change | |
| | Insurance income | Insurance income | $ | 645 | | | $ | 518 | | | 24.5 | % | | $ | 1,961 | | | $ | 1,648 | | | | 19.0 | % | | Insurance income | $ | 725 | | | $ | 645 | | | 12.4 | % | | $ | 2,277 | | | $ | 1,961 | | | | 16.1 | % | |
Investment banking and trading income | | Investment banking and trading income | 222 | | | 316 | | | (29.7) | | | 738 | | | 1,064 | | | | (30.6) | | |
Wealth management income | Wealth management income | 356 | | | 324 | | | 9.9 | | | 1,042 | | | 945 | | | | 10.3 | | | Wealth management income | 334 | | | 356 | | | (6.2) | | | 1,014 | | | 1,042 | | | | (2.7) | | |
Service charges on deposits | Service charges on deposits | 276 | | | 247 | | | 11.7 | | | 787 | | | 754 | | | | 4.4 | | | Service charges on deposits | 263 | | | 276 | | | (4.7) | | | 769 | | | 787 | | | | (2.3) | | |
Card and payment related fees | | Card and payment related fees | 241 | | | 225 | | | 7.1 | | | 699 | | | 650 | | | | 7.5 | | |
Residential mortgage income | Residential mortgage income | 179 | | | 221 | | | (19.0) | | | 396 | | | 807 | | | | (50.9) | | | Residential mortgage income | 72 | | | 179 | | | (59.8) | | | 235 | | | 396 | | | | (40.7) | | |
Investment banking and trading income | 301 | | | 244 | | | 23.4 | | | 958 | | | 636 | | | | 50.6 | | | |
Card and payment related fees | 225 | | | 200 | | | 12.5 | | | 650 | | | 558 | | | | 16.5 | | | |
Lending related fees | Lending related fees | 74 | | | 77 | | | (3.9) | | | 268 | | | 210 | | | | 27.6 | | | Lending related fees | 80 | | | 74 | | | 8.1 | | | 265 | | | 268 | | | | (1.1) | | |
Operating lease income | Operating lease income | 57 | | | 72 | | | (20.8) | | | 191 | | | 232 | | | | (17.7) | | | Operating lease income | 66 | | | 57 | | | 15.8 | | | 190 | | | 191 | | | | (0.5) | | |
Commercial real estate related income | 78 | | | 55 | | | 41.8 | | | 259 | | | 148 | | | | 75.0 | | | |
Commercial mortgage income | | Commercial mortgage income | 50 | | | 54 | | | (7.4) | | | 108 | | | 134 | | | | (19.4) | | |
Income from bank-owned life insurance | Income from bank-owned life insurance | 43 | | | 46 | | | (6.5) | | | 139 | | | 135 | | | | 3.0 | | | Income from bank-owned life insurance | 49 | | | 43 | | | 14.0 | | | 150 | | | 139 | | | | 7.9 | | |
Securities gains (losses) | Securities gains (losses) | — | | | 104 | | | NM | | — | | | 402 | | | | NM | | Securities gains (losses) | (1) | | | — | | | NM | | (71) | | | — | | | | NM | |
Other income | Other income | 131 | | | 102 | | | 28.4 | | 316 | | | 119 | | | | 165.5 | | Other income | 1 | | | 140 | | | (99.3) | | | 118 | | | 335 | | | | (64.8) | | |
Total noninterest income | Total noninterest income | $ | 2,365 | | | $ | 2,210 | | | 7.0 | | | $ | 6,967 | | | $ | 6,594 | | | | 5.7 | | | Total noninterest income | $ | 2,102 | | | $ | 2,365 | | | (11.1) | | | $ | 6,492 | | | $ | 6,967 | | | | (6.8) | | |
|
Third Quarter 20212022 compared to Third Quarter 20202021
Noninterest income for the third quarter of 2021 increased $1552022 decreased $263 million, or 7.0%11%, compared to the earlier quarter. NoninterestOther income for the third quarter of 2020 included $104 million of securities gains on available-for-sale securities. Excluding securities gains, noninterest income increased $259 million, or 12%, compared to the earlier quarter. Insurance income increased $127decreased $139 million due to acquisitions, as well as organic growth. Investment bankingvaluation changes from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, and tradinglower investment income increased $57 million due to strong merger and acquisition activityvaluation marks from the Company’s SBIC and loan syndications. Wealth management income increased $32 million due to higher valuations of assets under management. Service charges on deposit accounts and card and payment related fees increased $29 million and $25 million, respectively, due to increased economic activity.other strategic investments. Residential mortgage banking income decreased $42$107 million, primarily dueor 60%, as lower production income (due to lower production related revenues as a result of lower gain on sale margins and refinance volumes resulting from the higher rate environment) was partially offset by higher servicing income (due to lower prepayments and servicing portfolio purchases). Investment banking and trading income decreased $94 million, or 30%, due to increaseslower bond and equity originations and merger and acquisition fees, partially offset by higher trading income. These decreases were partially offset by an increase of $80 million, or 12%, in the valuation of mortgage servicing rights and lower prepayment rates. Otherinsurance income increased $29 million primarily due to investment income (primarily valuation gains) from the Company’s SBIC investments.organic growth and acquisitions.
46 Truist Financial Corporation 45
Nine Months of 20212022 compared to Nine Months of 20202021
Noninterest income for the nine months ended September 30, 2021 increased $3732022 decreased $475 million, or 5.7%6.8%, compared to the prior period. Other income forThe current period includes net securities losses of $71 million and the nine months ended September 30, 2021 includesgain on the redemption of noncontrolling equity interest (other income) of $74 million. The earlier period included a gain of $37 million gain from the divestiture of certain businesses whereas(other income). Excluding the aforementioned items, noninterest income for the nine months ended September 30, 2020 included $402 million of securities gains on available-for-sale securities. Excluding securities gains and the divestiture gain, noninterest income increased $738was down $441 million, or 12%6.4%, compared to the prior period. Investment banking and trading income increased $322decreased $326 million, or 31%, due to strong investment banking income from loan syndications andlower high-yield bond originations, equity originations, merger and acquisition fees as well asand loan syndications. Excluding the impact from CVA recoveries in the current period compared to losses in the earlier period. Insuranceaforementioned gains, other income increased $313decreased $254 million, due to acquisitions, as well as organic growth. Other income increased $197 millionor 85%, primarily due to higher valuations of $96 million forvaluation changes from assets held for certain post-retirement benefits, which is largelyprimarily offset by higher benefitslower personnel expense, included in personnel expense. In addition, other income increased $94 million related to increasedand lower investment income (primarily valuations gains)and valuation marks from the Company’s SBIC and Truist Venturesother strategic investments. Commercial real-estate related income increased $111 million primarily due to client-related structured real estate transactions. Wealth management increased $97 million due to higher valuations of assets under management. Card and payment related fees and service charges on deposits increased $92 million and $33 million, respectively, due to increased economic activity. Lending related fees increased $58 million due to gains from the sale of finance leases and noninterest loan fees due to higher unused line fees. Residential mortgage banking income decreased $411$161 million, primarily dueor 41%, as lower production income (due to lower production related revenues as a result of lower gain on sale margins and refinance volumes resulting from the higher rate environment) was partially offset by higher servicing income (due to lower prepayments and servicing portfolio purchases). Insurance income increased $316 million, or 16%, due to an increase in the valuation of mortgage servicing rights. Operating lease income decreased $41acquisitions and continued organic growth. Card and payment related fees increased $49 million, or 7.5%, due to declines in the lease portfolio.first quarter 2022 acquisition of certain merchant services relationships and increased activity.
Noninterest Expense
The following table provides a breakdown of Truist’s noninterest expense: | | Table 3: Noninterest Expense | Table 3: Noninterest Expense | Table 3: Noninterest Expense |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (Dollars in millions) | (Dollars in millions) | 2021 | | 2020 | | % Change | | 2021 | | 2020 | | | % Change | | (Dollars in millions) | 2022 | | 2021 | | % Change | | 2022 | | 2021 | | | % Change | |
| | | Personnel expense | Personnel expense | $ | 2,187 | | | $ | 2,058 | | | 6.3 | % | | $ | 6,536 | | | $ | 6,038 | | | | 8.2 | % | | Personnel expense | $ | 2,116 | | | $ | 2,187 | | | (3.2) | % | | $ | 6,269 | | | $ | 6,536 | | | | (4.1) | % | |
Professional fees and outside processing | Professional fees and outside processing | 372 | | | 323 | | | 15.2 | | | 1,063 | | | 859 | | | | 23.7 | | | Professional fees and outside processing | 352 | | | 372 | | | (5.4) | | | 1,064 | | | 1,063 | | | | 0.1 | | |
Software expense | | Software expense | 225 | | | 251 | | | (10.4) | | | 691 | | | 707 | | | | (2.3) | | |
Net occupancy expense | Net occupancy expense | 187 | | | 233 | | | (19.7) | | | 578 | | | 697 | | | | (17.1) | | | Net occupancy expense | 176 | | | 187 | | | (5.9) | | | 565 | | | 578 | | | | (2.2) | | |
Software expense | 251 | | | 221 | | | 13.6 | | | 707 | | | 647 | | | | 9.3 | | | |
Amortization of intangibles | Amortization of intangibles | 145 | | | 170 | | | (14.7) | | | 431 | | | 513 | | | | (16.0) | | | Amortization of intangibles | 140 | | | 145 | | | (3.4) | | | 420 | | | 431 | | | | (2.6) | | |
Equipment expense | Equipment expense | 154 | | | 127 | | | 21.3 | | | 389 | | | 363 | | | | 7.2 | | | Equipment expense | 122 | | | 154 | | | (20.8) | | | 354 | | | 389 | | | | (9.0) | | |
Marketing and customer development | Marketing and customer development | 94 | | | 75 | | | 25.3 | | | 226 | | | 215 | | | | 5.1 | | | Marketing and customer development | 105 | | | 94 | | | 11.7 | | | 282 | | | 226 | | | | 24.8 | | |
Operating lease depreciation | Operating lease depreciation | 47 | | | 56 | | | (16.1) | | | 144 | | | 204 | | | | (29.4) | | | Operating lease depreciation | 45 | | | 47 | | | (4.3) | | | 140 | | | 144 | | | | (2.8) | | |
Loan-related expense | Loan-related expense | 52 | | | 59 | | | (11.9) | | | 161 | | | 177 | | | | (9.0) | | | Loan-related expense | 46 | | | 52 | | | (11.5) | | | 137 | | | 161 | | | | (14.9) | | |
Regulatory costs | Regulatory costs | 43 | | | 34 | | | 26.5 | | | 99 | | | 93 | | | | 6.5 | | | Regulatory costs | 52 | | | 43 | | | 20.9 | | | 131 | | | 99 | | | | 32.3 | | |
Merger-related and restructuring charges | Merger-related and restructuring charges | 172 | | | 236 | | | (27.1) | | | 610 | | | 552 | | | | 10.5 | | | Merger-related and restructuring charges | 62 | | | 172 | | | (64.0) | | | 399 | | | 610 | | | | (34.6) | | |
Loss (gain) on early extinguishment of debt | Loss (gain) on early extinguishment of debt | — | | | — | | | — | | | (3) | | | 235 | | | | (101.3) | | | Loss (gain) on early extinguishment of debt | — | | | — | | | — | | (39) | | | (3) | | | | NM | |
| Other expense | Other expense | 91 | | | 163 | | | (44.2) | | | 475 | | | 471 | | | | 0.8 | | | Other expense | 172 | | | 91 | | | 89.0 | | | 454 | | | 475 | | | | (4.4) | | |
Total noninterest expense | Total noninterest expense | $ | 3,795 | | | $ | 3,755 | | | 1.1 | | | $ | 11,416 | | | $ | 11,064 | | | | 3.2 | | | Total noninterest expense | $ | 3,613 | | | $ | 3,795 | | | (4.8) | | | $ | 10,867 | | | $ | 11,416 | | | | (4.8) | | |
|
Third Quarter 20212022 compared to Third Quarter 20202021
Noninterest expense for the third quarter of 20212022 was up $40down $182 million, or 1.1%4.8%, compared to the earlier quarter. Merger-related and restructuring charges decreased $64$110 million primarily due to facilities impairments in the earlier quarter, whileand incremental operating expenses related to the Merger increased $39decreased $101 million primarily reflected in professional fees and outside processing.due to diminishing integration-related activities. The currentearlier quarter also includesincluded a $30 million professional fee to develop an ongoing program to identify, prioritize, and roadmap teammate generated revenue growth and expense savings opportunities beyond the Merger. The earlier quarter included $50 million for charitable contributions to the Truist Charitable Fund (other expense). merger.
Excluding the aforementioned items and changes inthe amortization of intangibles, adjusted noninterest expense was up $110increased $64 million, or 3.5%2.0%, compared to the earlier quarter. PersonnelOther expense increased $129$81 million ($87 million, or 104%, on an adjusted basis) primarily due to higher incentiveincreased operational losses and teammate travel expenses. Professional fees and outside processing expenses decreased $20 million, but was up $70 million, or 33%, on an adjusted basis due to variable compensation from higher revenuesincreased project spend for enterprise technology investments and improved overall performance relativeincreased call center staffing. Equipment expense decreased $32 million ($38 million, or 25%, on an adjusted basis) primarily due to targets, higher medical insurance claims,laptop purchases in the prior period. Software expense decreased $26 million ($24 million, or 9.6%, on an adjusted basis) primarily due to lower maintenance expense and personnel cost relateddecommissioned software. Personnel expense decreased $71 million ($32 million, or 1.5%, on an adjusted basis) due to acquired companies,lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits and lower incentives, partially offset by lower equity based compensation. Additionally, net occupancy expense decreased $46 million primarilyhigher salaries due to branchannual merit increases, investments in revenue producing businesses and property consolidations. Other expense also includes a decrease of $42 millionenterprise technology, as well as additional personnel costs for non-service-related pension cost components.acquisitions.
46 Truist Financial Corporation 47
Nine Months of 20212022 compared to Nine Months of 20202021
Noninterest expense for the nine months ended September 30, 20212022 was up $352down $549 million, or 3.2%4.8%, compared to the earlier period. Merger-related and restructuring charges increased $58decreased $211 million due to diminishing integration-related activities and other incrementallower costs in connection with the voluntary separation and retirement program, partially offset by higher costs for client day one conversions. Incremental operating expenses related to the Merger increased $201 million.decreased $147 million, primarily reflected in lower personnel and professional fees and outside processing expenses. The current period alsoincludes a $39 million gain on the redemption of FHLB advances. The prior period includes $200 million for charitable contributions to the Truist Foundation and the Truist Charitable Fund (other expense), $36 million of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges the previously mentioned(other expense), a $30 million professional fee to develop an ongoing program to identify, prioritize, and roadmap teammate generated revenue growth and expense savings opportunities beyond the merger, and a small gain on the early extinguishment of debt, whereas the earlier period included a $235 million loss on the early extinguishment of debt and a $50 million charitable contribution. debt.
Excluding the aforementioned items and changes inthe amortization of intangibles, adjusted noninterest expense increased $197$122 million, or 2.1%1.3%, compared to the earlier period. Other expense was up $213 million, or 94%, on an adjusted basis primarily due to increased operational losses and teammate travel expenses. Professional fees and outside processing expenses was stable, but was up $112 million, or 17%, on an adjusted basis due to increased project spend for enterprise technology investments and increased call center staffing. Marketing and customer development expense increased $56 million ($66 million or 31% on an adjusted basis) due to increased spend to continue to build and strengthen Truist’s brand. Personnel expense increased $498decreased $267 million ($179 million, or 2.8% on an adjusted basis) primarily driven by higher incentive expenses due to variable compensation from higher revenues and improved overall performance relative to targets, higherlower other employee benefits due toas a result of the previously mentioned increasedecrease in noninterest income higher medical insurance claims,for post-retirement benefits, lower incentives expenses, and personnel cost related to acquired companies. These increases in personnel expense werelower defined benefit costs, partially offset by lowerhigher salaries due to fewer FTEs. Softwareadditional personnel costs for acquisitions, annual merit increases, and investments in revenue producing businesses and enterprise technology. Equipment expense increased $60decreased $35 million due to higher spending($43 million, or 11% on certain projects. Other expense includes decreases of $125 million for non-service-related pension cost components. There was also a decrease of $119 million from net occupancy expensean adjusted basis) primarily due to branch and property consolidations and a decrease in operating lease depreciation of $60 million due to valuation adjustments takenlaptop purchases in the prior year.period. Net occupancy expense decreased $13 million ($39 million, or 6.8% on an adjusted basis) primarily due to consolidations of branches and other facilities.
Merger-Related and Restructuring Charges
The following table presents a summary of merger-related and restructuring charges and the related accruals:accruals. The 2022 and 2021 merger-related and restructuring costs primarily reflect charges as a result of the Merger, including costs for severance and other benefits, costs related to exiting facilities, and other restructuring initiatives. | | Table 4: Merger-Related and Restructuring Accrual Activity | Table 4: Merger-Related and Restructuring Accrual Activity | Table 4: Merger-Related and Restructuring Accrual Activity |
| | Three Months Ended September 30, 2021 | | | Nine Months Ended September 30, 2021 | | | Three Months Ended September 30, 2022 | | | Nine Months Ended September 30, 2022 | |
| (Dollars in millions) | (Dollars in millions) | Accrual at Jul 1, 2021 | | Expense | | Utilized | | Accrual at Sep 30, 2021 | | | Accrual at Jan 1, 2021 | | Expense | | Utilized | | Accrual at Sep 30, 2021 | | (Dollars in millions) | Accrual at Jul 1, 2022 | | Expense | | Utilized | | Accrual at Sep 30, 2022 | | | Accrual at Jan 1, 2022 | | Expense | | Utilized | | Accrual at Sep 30, 2022 | |
Severance and personnel-related (1) | $ | 152 | | | $ | 77 | | | $ | (154) | | | $ | 75 | | | | $ | 36 | | | $ | 269 | | | $ | (230) | | | $ | 75 | | | |
Severance and personnel-related | | Severance and personnel-related | $ | 28 | | | $ | 8 | | | $ | (20) | | | $ | 16 | | | | $ | 77 | | | $ | 74 | | | $ | (135) | | | $ | 16 | | |
Occupancy and equipment | Occupancy and equipment | 5 | | | 3 | | | (8) | | | — | | | | — | | | 110 | | | (110) | | | — | | | Occupancy and equipment | — | | | 4 | | | (4) | | | — | | | | — | | | 119 | | | (119) | | | — | | |
Professional services | Professional services | 28 | | | 79 | | | (69) | | | 38 | | | | 16 | | | 197 | | | (175) | | | 38 | | | Professional services | 24 | | | 19 | | | (30) | | | 13 | | | | 37 | | | 119 | | | (143) | | | 13 | | |
Systems conversion and related costs | Systems conversion and related costs | — | | | 9 | | | (9) | | | — | | | | — | | | 22 | | | (22) | | | — | | | Systems conversion and related costs | 1 | | | 15 | | | (15) | | | 1 | | | | — | | | 46 | | | (45) | | | 1 | | |
Other | Other | 10 | | | 4 | | | (4) | | | 10 | | | | 11 | | | 12 | | | (13) | | | 10 | | | Other | 2 | | | 16 | | | (11) | | | 7 | | | | 12 | | | 41 | | | (46) | | | 7 | | |
Total (2) | $ | 195 | | | $ | 172 | | | $ | (244) | | | $ | 123 | | | | $ | 63 | | | $ | 610 | | | $ | (550) | | | $ | 123 | | | |
Total (1) | | Total (1) | $ | 55 | | | $ | 62 | | | $ | (80) | | | $ | 37 | | | | $ | 126 | | | $ | 399 | | | $ | (488) | | | $ | 37 | | |
|
(1)Includes $189 million of restructuring charges for the nine months ended September 30, 2021 related to the Company’s voluntary separation and retirement program.
(2)Related to the Merger, the Company recognized $170$39 million and $344 million of expensesexpense, respectively, for the three months ended September 30, 2021 and $578 million for the nine months ended September 30, 2021.2022. At September 30, 2021,2022, the Company had an accrual of $117$26 million related to the Merger. The remaining expense and accrual relate to other restructuring activities.
Segment Results
Truist operates and measures business activity across three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings, with functional activities included in Other, Treasury, and Corporate. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. See “Note 18. Operating Segments” herein and “Note 21. Operating Segments” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for additional disclosures related to Truist’s reportable business segments, including additional details related to results of operations. Fluctuations in noninterest income and noninterest expense are more fully discussed in the Noninterest Income and Noninterest Expense sections above.
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Table 5: Net Income by Reportable Segment |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
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| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | |
(Dollars in millions) | 2021 | | 2020 | | | | % Change | | 2021 | | 2020 | | | | % Change | | | | | | | | | | | | | | |
Consumer Banking and Wealth | $ | 872 | | | $ | 818 | | | | | 6.6 | % | | $ | 2,510 | | | $ | 2,204 | | | | | 13.9 | % | | | | | | | | | | | | | | |
Corporate and Commercial Banking | 1,075 | | | 586 | | | | | 83.4 | | 3,245 | | | 1,408 | | | | | 130.5 | | | | | | | | | | | | | | | |
Insurance Holdings | 105 | | | 77 | | | | | 36.4 | | | 392 | | | 308 | | | | | 27.3 | | | | | | | | | | | | | | | |
Other, Treasury & Corporate | (348) | | | (340) | | | | | 2.4 | | | (1,312) | | | (758) | | | | | 73.1 | | | | | | | | | | | | | | | |
Truist Financial Corporation | $ | 1,704 | | | $ | 1,141 | | | | | 49.3 | | | $ | 4,835 | | | $ | 3,162 | | | | | 52.9 | | | | | | | | | | | | | | | |
48 Truist Financial Corporation 47
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Table 5: Net Income by Reportable Segment |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | |
(Dollars in millions) | 2022 | | 2021 | | | | % Change | | 2022 | | 2021 | | | | % Change | | | | | | | | | | | | | | |
Consumer Banking and Wealth | $ | 986 | | | $ | 933 | | | | | 5.7 | % | | $ | 2,635 | | | $ | 2,389 | | | | | 10.3 | % | | | | | | | | | | | | | | |
Corporate and Commercial Banking | 1,164 | | | 1,181 | | | | | (1.4) | | | 3,126 | | | 3,470 | | | | | (9.9) | | | | | | | | | | | | | | | |
Insurance Holdings | 95 | | | 111 | | | | | (14.4) | | | 425 | | | 404 | | | | | 5.2 | | | | | | | | | | | | | | | |
Other, Treasury & Corporate | (608) | | | (521) | | | | | (16.7) | | | (1,601) | | | (1,428) | | | | | (12.1) | | | | | | | | | | | | | | | |
Truist Financial Corporation | $ | 1,637 | | | $ | 1,704 | | | | | (3.9) | | | $ | 4,585 | | | $ | 4,835 | | | | | (5.2) | | | | | | | | | | | | | | | |
Third Quarter 20212022 compared to Third Quarter 20202021
Consumer Banking and Wealth
CB&W net income was $872$986 million for the third quarter of 2021,2022, an increase of $54$53 million compared to the earlier quarter. Segment net interest income decreased $155increased $495 million primarily due to a decline in thedriven by favorable funding credit provided on deposits attributable to the higher rate environment and higher average loan balances, partially offset by decreased loan spreads and lower purchase accounting accretion, and a decline in average loans.accretion. The allocated provision for credit losses decreased $186increased $288 million which reflects the impact of an allowance release during the current quarter and an allowance build during the earlier quarter. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includesreflecting a reserve release due toin the improving economic outlook. Noninterest incomeearlier quarter and higher loan growth and increased $35 million due to increases in wealth management income due to favorable market conditionscharge-offs in the current quarter. Noninterest income decreased $146 million compared to earlier quarter card and related feeprimarily due to a decrease in residential mortgage income and service charges on deposits,as well as a decline in wealth income attributed to market declines. These decreases were partially offset by lower residential mortgage incomehigher card and payment fees driven by lower gain on sale margins and volumes.higher consumer spend. Noninterest expense was stabledecreased $33 million compared to the earlier quarter.quarter primarily due to lower merger-related and restructuring charges, net occupancy, and incentive expense, partially offset by increased operational losses.
CB&W average loans and leases held for investment decreased $6.8increased $7.7 billion, or 4.9%5.8%, for the third quarter of 20212022 compared to the earlier quarter, primarily driven by loweran increase in residential mortgage balances due to correspondent channel production and home equitylower prepayments. In addition, indirect other increased primarily due to growth from Service Finance, recreational lending, and Sheffield portfolios, partially offset by runoff in other partnership lending programs. Residential home equity and direct increased indirect auto lending. primarily due to growth from the LightStream portfolio. These increases were partially offset by lower mortgage warehouse lending as well as runoff in student loans.
Average total deposits increased $23$6.2 billion, or 10.4%2.5%, for the third quarter of 20212022 compared to the earlier quarter, primarily due to the impact of fiscaldriven by increases in noninterest bearing deposits, money market and monetary stimulus.savings, and interest bearing checking, partially offset by a decline in time deposits.
Corporate and Commercial Banking
C&CB net income was $1.1$1.2 billion for the third quarter of 2021, an increase2022, a decrease of $489$17 million compared to the earlier quarter. Segment net interest income decreased $110increased $339 million primarily due to reducedhigher funding credit on deposits and higher average loan balances, partially offset by lower purchase accounting accretion and a decline in average loans, partially offset by higher spreads on loans.lower PPP revenue. The allocated provision for credit losses decreased $575increased $214 million primarily reflecting an allowance release in the earlier quarter and higher loan growth in the current quarter, whereasquarter. Noninterest income decreased $148 million compared to the earlier quarter included an allowance build. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includes a reserve release due to the improving economic outlook. Noninterest income increased $145 million driven by investment banking income, commercial real estate income, and higher investment income (primarily valuation gains) from SBIC investments. Noninterest expense decreased $25 million primarily due to lower operating losses, operating lease depreciation,investment banking revenue as well as lower income from the Company’s SBIC and lower allocated corporate expenses in the current quarter,other strategic investments, partially offset by higher restructuring charges intrading income. Noninterest expense was stable compared to the currentearlier quarter.
C&CB average loans held for investment decreased $17.6increased $17.3 billion, or 10.5%12%, for the third quarter of 20212022 compared to the earlier quarter, primarily due to PPP loan forgiveness and lower line utilizationincreases in commercial and industrial loans, partially offset by decreases in average PPP loans (commercial and industrial) and average commercial real estate and dealer floor plan. construction loans.
Average total deposits increased $8.8decreased $5.8 billion, or 6.2%3.8%, for the third quarter of 20212022 compared to the earlier quarter, primarily due to the impact of fiscaldeclines in average interest bearing checking and monetary stimulus.money market and savings.
Insurance Holdings
IH net income was $105$95 million for the third quarter of 2021, an increase2022, a decrease of $28$16 million compared to the earlier quarter. Noninterest income increased $128$82 million primarily due to acquisitionscontinued organic growth and higher property and casualty insurance production from strong organic growth.acquisitions. Noninterest expense increased $91$103 million primarily due to higher performance-based incentives, and amortizationin addition to the impact of intangibles related to acquisitions.
48 Truist Financial Corporation
Other, Treasury & Corporate
OT&C generated a net loss of $348$608 million in the third quarter of 2021,2022, compared to a net loss of $340$521 million in the earlier quarter. Segment netNet interest income increased $135decreased $327 million primarily due to lower nethigher funding creditscredit on liabilitiesdeposits to other segments, andpartially offset by higher earnings in the securities portfolio from purchasesthe higher rate environment. Noninterest income decreased $51 million primarily due to utilize excess liquidity. The allocated provisionvaluation changes from assets held for credit losses increased $15certain post-retirement benefits, which is primarily offset by lower personnel expense. Noninterest expense decreased $243 million which primarily reflects a smaller release in the reserve for unfunded commitments in the current quarter compared to the earlier quarter. Noninterest income decreased $153 million primarily due to a gain on sale of securities in the earlier quarter. Noninterest expense decreased $22 millionquarter primarily due to lower mergermerger-related and restructuring charges and incremental operating expenses related charges in the current quarter and charitable contributions to the Truist Foundationmerger as well as lower personnel expense due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits and the Truist Charitable Fund in the earlier quarter,lower incentives, partially offset by higher incentive expense driven by executive incentive compensationan increase in professional fees and higher accruals reflecting the job regradingoutside processing due to increased project in the fourth quarter 2020.spend for enterprise technology investments.
Truist Financial Corporation 49
Nine Months of 20212022 compared to Nine Months of 20202021
Consumer Banking and Wealth
CB&W net income was $2.5$2.6 billion for the nine months ended September 30, 2021,2022, an increase of $306$246 million, or 10%, compared to the same period of the prior year. Segment net interest income decreased $325increased $900 million primarily due to reducedfavorable funding credit on deposits attributable to the higher rate environment and higher average loan and deposit balances, partially offset by decreased loan spreads and lower purchase accounting accretion, and a decline in average loans.accretion. The allocated provision for credit losses decreased $796increased $465 million primarily due to an allowancea reserve release that was primarily driven by an improving economic outlookin the prior year and lower netloan growth and increased charge offs in the auto, home equity, card, and mortgage portfolios as well as lower loan balances.current year. Noninterest income decreased $197$151 million primarily due to lowera decrease in residential mortgage income driven by lower gain on sale margins and volumes, partially offset by increased revenues in wealth management and card and payment related activities resulting from improving economic conditions as well as gains from the divestiture of certain businesses.income. Noninterest expense decreased $120$51 million primarily due to lower salary expense, pension costs, amortization of intangibles,net occupancy and occupancyincentive expenses as well as lower merger-related and restructuring charges, partially offset by increased incentives tied to performance and related benefits expense in the current year.operational losses.
CB&W average loans and leases decreased $7.6held for investment increased $3.2 billion, or 5.4%2.4%, atfor the nine months ended September 30, 2021,2022 compared to the same period of the prior year driven primarily by an increase in residential mortgage loans due to correspondent channel production and lower prepayments. In addition, indirect other consumer increased primarily due to growth from Service Finance, recreational lending, and Sheffield portfolios, partially offset by runoff in other partnership lending programs. These increases were partially offset by lower mortgage warehouse lending as well as runoff in student loans.
CB&W average total deposits increased $14.1 billion, or 5.9%, for the nine months ended September 30, 2022 compared to the same period of the prior year primarily due to lower residential mortgage loansincreases in average noninterest bearing deposits, money market and home equity lending,savings, and interest bearing checking, partially offset by increased mortgage warehouse and indirect auto lending. Average total deposits were up $25.7 billion, or 12%,a decline in time deposits.
CB&W had 2,119 banking offices at September 30, 2021,2022, a decrease of 399 offices compared to September 30, 2021. The decrease in offices was driven primarily by the consolidation of branches as a result of the Merger.
Truist Wealth had assets under management of $173.9 billion as of September 30, 2022, a decrease of $28.8 billion, or 14%, compared to the same period of the prior year primarily due to the impact of fiscal and monetary stimulus.market declines, partially offset by net organic asset flows.
Corporate and Commercial Banking
C&CB net income was $3.2$3.1 billion for the nine months ended September 30, 2021, an increase2022, a decrease of $1.8 billion$344 million, or 9.9%, compared to the same period of the prior year. Segment net interest income decreased $283increased $371 million primarily due to reducedhigher funding credit on deposits and increases to noninterest bearing deposit balances, partially offset by lower fee income associated with PPP loan forgiveness and lower purchase accounting accretion, and a decline in average loans.accretion. The allocated provision for credit losses decreased $1.9 billionincreased $470 million which reflects anlower allowance release drivenreleases in the current period compared to the prior period, partially offset by an improving economic outlook, lower net charge offs primarilycharge-offs in the commercial and industrial portfolio as well as lower loan balances.current period. Noninterest income increased $570decreased $392 million primarily due to strong investment bankinglower high-yield bond originations, equity originations, merger and trading income, commercial real-estate related income, increased lending relatedacquisition fees income from strategic investments, and increased service charges on deposits.loan syndications. Noninterest expense decreased $174$56 million primarily due to lower incentive expense tied to lower revenues as well as lower merger-related and restructuring charges and incremental operating lease depreciation, lower allocated corporate expenses a reductionrelated to the Merger given diminishing integration-related activities in LIHTC liability mark accretion, and reduced salary and equity based compensation expense,the current period, partially offset by higher incentives tied to performance and increased professional fees and outside processing expense.investments in revenue producers.
C&CB average loans and leases decreased $14held for investment increased $6.8 billion, or 8.3%4.4%, atfor the nine months ended September 30, 2021,2022 compared to the same period of the prior year. Excluding a $6.7 billion decrease in average PPP loans, average loans held for investment were up $13.5 billion, or 9.2%, primarily driven by an increase in the commercial and industrial portfolio loans due to higher revolver utilization, partially offset by a decrease in average commercial real estate and commercial construction loans.
C&CB average total deposits increased $552 million, or 0.4%, for the nine months ended September 30, 2022 compared to the same period of the prior year primarily due to lower line utilizationan increase in commercial loans, commercial real estate, and dealer floor plan. Average totalaverage noninterest bearing deposits, were up $12.5 billion, or 9.3%, at September 30, 2021, compared to the same period of the prior year, primarily due to the impact of fiscal and monetary stimulus.partially offset by a decrease in interest bearing deposits.
Truist Financial Corporation 49
Insurance Holdings
IH net income was $392$425 million for the nine months ended September 30, 2021,2022, an increase of $84$21 million, or 5.2%, compared to the same period of the prior year. Noninterest income increased $304$320 million, or 16%, primarily due to higher propertyacquisitions and casualty insurance production as well as acquisitions.organic growth. Noninterest expense increased $198$291 million, or 19%, primarily due to commissions on higher production and higher salaries in the current year.year along with higher amortization of intangibles and operating expenses related to acquisitions.
Other, Treasury, and Corporate
OT&C generated a net loss of $1.3$1.6 billion in the nine months ended September 30, 2021,2022, compared to a net loss of $758 million$1.4 billion in the same period of the prior year. Segment net interest income decreased $84$707 million due to higher funding credit on deposits to other segments, partially offset by higher earnings in the securities portfolio from the higher rate environment and growth in the securities portfolio. Noninterest income decreased $252 million primarily due to valuation changes from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, and losses on the sale of securities in the current year. Noninterest expense decreased $733 million primarily due to lower net funding credits to other segmentspersonnel expense due to lower market rates partially offset by lower interest expense on borrowings. The allocated provision for credit losses decreased $124 million which primarily reflects changes in the reserve for unfunded commitmentsother employee benefits as well as an allowance release in the current year resulting from the improving economic outlook. Noninterest income decreased $304 million primarily due to a gain on the sale of non-agency MBS in the same periodresult of the prior year, partially offset bydecrease in noninterest income from assets held for certain post-employment benefits. Noninterest expense increased $448 million primarily due topost-retirement benefits and lower incentives, charitable contributions to the Truist Foundation and the Truist Charitable Fund as well as higherin the prior year, and lower merger-related and restructuring charges and incremental operating expenses related to the Merger and higher restructuring charges in the current year, partially offset by the loss on early extinguishment of long-term debt in the same period of the prior year.Merger.
50 Truist Financial Corporation
Analysis of Financial Condition
Investment Activities
The securities portfolio totaled $151.0$131.7 billion at September 30, 2021,2022, compared to $120.8$154.6 billion at December 31, 2020.2021. The increasedecrease includes paydowns and maturities of $14.6 billion, as well as market declines of $14.2 billion, partially offset by purchases. In the first quarter of 2022, Truist transferred $59.4 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies. As of September 30, 2022, 41% of the investment securities portfolio was due primarily to increases in U.S. Treasury securities and MBS resulting from strong deposit growth resulting from fiscal and monetary stimulus.held-to-maturity based on amortized cost.
As of September 30, 2021,2022, approximately 2.9%5.7% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 1.9%4.6% as of December 31, 2020.2021. The effective duration of the securities portfolio was 5.66.8 years at September 30, 2021,2022, compared to 4.05.8 years at December 31, 2020.2021, excluding the impact of unsettled security purchases at period end. The increase in duration was driven by higher rates, resulting in slower prepayments and longer average lives for the MBS portfolio.
U.S. Treasury, GSE, and Agency MBS represents 98%97% of the total securities portfolio as of September 30, 20212022 and more than 99% at December 31, 2020.2021. While the overwhelming majority of the portfolio remains in agency MBS securities, the Company also holds AAA rated non-agency MBS as the risk adjusted returns for these securities are more attractive than agency MBS.
50 Truist Financial Corporation
Lending Activities
The following table presents the composition of average loans and leases: | Table 6: Average Loans and Leases | Table 6: Average Loans and Leases | Table 6: Average Loans and Leases |
For the Three Months Ended (Dollars in millions) | For the Three Months Ended (Dollars in millions) | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | Dec 31, 2020 | | Sep 30, 2020 | For the Three Months Ended (Dollars in millions) | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | | $ | 130,025 | | | $ | 133,646 | | | $ | 136,051 | | | $ | 139,223 | | | $ | 143,452 | | Commercial and industrial | | $ | 152,123 | | | $ | 145,558 | | | $ | 138,872 | | | $ | 134,804 | | | $ | 134,942 | |
CRE | CRE | | 24,849 | | | 25,645 | | | 26,211 | | | 27,030 | | | 27,761 | | CRE | | 22,245 | | | 22,508 | | | 23,555 | | | 24,396 | | | 24,849 | |
Commercial construction | Commercial construction | | 5,969 | | | 6,359 | | | 6,557 | | | 6,616 | | | 6,861 | | Commercial construction | | 5,284 | | | 5,256 | | | 5,046 | | | 5,341 | | | 5,969 | |
Lease financing | | 4,917 | | | 4,893 | | | 4,975 | | | 5,401 | | | 5,626 | | |
| Consumer: | Consumer: | | Consumer: | |
Residential mortgage | Residential mortgage | | 45,369 | | | 43,605 | | | 45,823 | | | 48,847 | | | 51,500 | | Residential mortgage | | 53,271 | | | 49,237 | | | 47,976 | | | 47,185 | | | 45,369 | |
Residential home equity and direct | Residential home equity and direct | | 25,242 | | | 25,238 | | | 25,658 | | | 26,327 | | | 26,726 | | Residential home equity and direct | | 25,394 | | | 25,124 | | | 24,883 | | | 25,146 | | | 25,242 | |
Indirect auto | Indirect auto | | 26,830 | | | 26,444 | | | 26,363 | | | 25,788 | | | 24,732 | | Indirect auto | | 28,057 | | | 26,496 | | | 26,088 | | | 26,841 | | | 26,830 | |
Indirect other | Indirect other | | 11,112 | | | 10,797 | | | 10,848 | | | 11,291 | | | 11,530 | | Indirect other | | 12,300 | | | 11,471 | | | 10,860 | | | 10,978 | | | 11,112 | |
Student | Student | | 7,214 | | | 7,396 | | | 7,519 | | | 7,519 | | | 7,446 | | Student | | 5,958 | | | 6,331 | | | 6,648 | | | 6,884 | | | 7,214 | |
Credit card | Credit card | | 4,632 | | | 4,552 | | | 4,645 | | | 4,818 | | | 4,810 | | Credit card | | 4,755 | | | 4,728 | | | 4,682 | | | 4,769 | | | 4,632 | |
| Total average loans and leases HFI | Total average loans and leases HFI | | $ | 286,159 | | | $ | 288,575 | | | $ | 294,650 | | | $ | 302,860 | | | $ | 310,444 | | Total average loans and leases HFI | | $ | 309,387 | | | $ | 296,709 | | | $ | 288,610 | | | $ | 286,344 | | | $ | 286,159 | |
Average loans and leases held for investment for the third quarter of 20212022 were $286.2$309.4 billion, down $2.4up $12.7 billion, or 0.8%4.3%, compared to the second quarter of 2021.2022.
Average commercial loans decreased $4.8increased $6.3 billion, or 2.8%3.7%, as $1.5due to broad-based growth of $6.6 billion, of average growthor 4.5%, within the core commercial and industrial portfolio was more than offset by a $4.0 billion decrease in average Paycheck Protection Program loans (commercial and industrial), a $1.1 billion decrease in average dealer floor plan loans (commercial and industrial), a $796 million decrease in average CRE loans, and a $390 million decrease in average commercial construction loans. Approximately $600 million of senior care facility loans were transferred primarily from CRE to commercial and industrial at the beginning of August, which impacted the variances noted above.portfolio.
Average consumer loans increased $2.3$6.3 billion, or 2.0%5.3%, primarily due to a $1.8$4.0 billion increase in residential mortgages due to increased capacity, lower prepayments, and the decision to balance sheet certain production from the correspondent channel a $386 million increase inproduction and lower prepayments. In addition, indirect auto loansincreased $1.6 billion primarily due to solid growth in the prime automobile segment of the portfolio and a $315indirect other increased $829 million increase in other indirect loans primarily due to growth from the Service Finance, recreational lending and Sheffield portfolios, partially offset by runoff in recreational and power sports lending.other partnership lending programs. Residential home equity and direct loans were up slightlyincreased $270 million, primarily due to solid growth from the LightStream more than offsetting the declineportfolio. These increases were partially offset by $373 million of runoff in home equity linesstudent loans.
At September 30, 2022 and December 31, 2021, 52% of credit.loans and leases HFI were variable rate.
Truist Financial Corporation 51
COVID-19 Lending ActivitiesAsset Quality
The CARES Act created the PPP, which has temporarily expanded the Small Business Administration’s business loan guarantee program. The carrying value of PPP loans was $3.5 billion as of September 30, 2021. The CARES Act additionally includes provisions that were designed to encourage financial institutions to support borrowers impacted by COVID-19. These modifications are generally not considered a TDR. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures related to modifications and TDRs. Payment relief assistance includes forbearance, deferrals, extension and re-aging programs, along with certain other modification strategies. The following table provides a summary of accommodations as of September 30, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
|
Table 7: Client Accommodations (1) |
| Active Accommodations | | Exited Accommodations | | |
September 30, 2021 (Dollars in millions) | Total Count | | Outstanding Balance | | Outstanding Balance | | % Paid-off or Current (2) | | Types of Accommodations |
Commercial | 324 | | | $ | 4 | | | $ | 17,297 | | | 98 | % | | Clients may elect to defer loan or lease payments for up to 90 days without late fees being incurred but with finance charges continuing to accrue. |
Consumer | 13,715 | | | 553 | | | 8,292 | | | 87 | | | Clients may elect to defer loan payments for time periods that generally range from 30 to 90 days without late fees being incurred but with finance charges generally continuing to accrue. The Company’s residential mortgage forbearance program generally provides up to 180 days of relief. Additional relief may be provided in certain circumstances. |
Credit card | 454 | | | 2 | | | 156 | | | 88 | | | Clients may elect to defer payments for up to 90 days without late fees being incurred but with finance charges accruing. In addition, Truist provided credit card clients with 5% cash back on qualifying card purchases for certain important basic needs. |
Total | 14,493 | | | $ | 559 | | | $ | 25,745 | | | | | |
tables summarize asset quality information:(1)Excludes approximately 9,000 client accommodations related to government guaranteed loans totaling approximately $1.2 billion.
(2)Calculated based on accommodation count; includes loans that are less than 30 days past due.
The following table provides a summary of the Company’s exposure related to loans that have exited accommodations: | | | | | |
| |
Table 8: Accommodations Exposure |
September 30, 2021 (Dollars in millions) | Exposure |
Current | $ | 24,513 | |
Past due and still accruing | 492 | |
Nonperforming | 740 | |
Total | $ | 25,745 | |
The following table provides a summary of exposure to industries that management believes were more vulnerable during the COVID-19 pandemic. These selected industry exposures represent 8.8% of loans held for investment at September 30, 2021. Truist is actively managing these portfolios and will continue to make underwriting or risk acceptance adjustments as appropriate. | | | | | | | | | | | |
| | | |
Table 9: Selected Credit Exposures |
September 30, 2021 (Dollars in billions) | Outstanding Balance | | Percentage of Loans HFI |
Senior Care | $ | 6.7 | | | 2.4 | % |
Hotels, Resorts & Cruise Lines | 5.7 | | | 2.0 | |
Acute Care Facilities | 4.9 | | | 1.7 | |
Oil & Gas Portfolio | 3.8 | | | 1.3 | |
Restaurants | 2.4 | | | 0.8 | |
Sensitive Retail | 1.7 | | | 0.6 | |
Total | $ | 25.2 | | | 8.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 7: Asset Quality | | |
(Dollars in millions) | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | |
NPAs: | | | | | | | | | | | |
NPLs: | | | | | | | | | | | |
Commercial and industrial | $ | 443 | | | $ | 393 | | | $ | 330 | | | $ | 394 | | | $ | 423 | | | |
CRE | 5 | | | 19 | | | 27 | | | 29 | | | 20 | | | |
Commercial construction | — | | | — | | | — | | | 7 | | | 7 | | | |
| | | | | | | | | | | |
Residential mortgage | 227 | | | 269 | | | 315 | | | 296 | | | 306 | | | |
Residential home equity and direct | 166 | | | 159 | | | 141 | | | 141 | | | 146 | | | |
Indirect auto | 260 | | | 244 | | | 227 | | | 218 | | | 172 | | | |
Indirect other | 5 | | | 6 | | | 4 | | | 5 | | | 6 | | | |
| | | | | | | | | | | |
Total NPLs HFI | 1,106 | | | 1,090 | | | 1,044 | | | 1,090 | | | 1,080 | | | |
Loans held for sale | 72 | | | 33 | | | 39 | | | 22 | | | 76 | | | |
Total nonaccrual loans and leases | 1,178 | | | 1,123 | | | 1,083 | | | 1,112 | | | 1,156 | | | |
Foreclosed real estate | 4 | | | 3 | | | 3 | | | 8 | | | 9 | | | |
Other foreclosed property | 58 | | | 47 | | | 49 | | | 43 | | | 39 | | | |
Total nonperforming assets | $ | 1,240 | | | $ | 1,173 | | | $ | 1,135 | | | $ | 1,163 | | | $ | 1,204 | | | |
TDRs: | | | | | | | | | | | |
Performing TDRs: | | | | | | | | | | | |
Commercial and industrial | $ | 165 | | | $ | 105 | | | $ | 104 | | | $ | 147 | | | $ | 200 | | | |
CRE | 5 | | | 5 | | | 5 | | | 5 | | | 8 | | | |
Commercial construction | 1 | | | 1 | | | 1 | | | — | | | — | | | |
| | | | | | | | | | | |
Residential mortgage - government guaranteed | 839 | | | 761 | | | 622 | | | 480 | | | 507 | | | |
Residential mortgage - nonguaranteed | 305 | | | 281 | | | 244 | | | 212 | | | 205 | | | |
Residential home equity and direct | 78 | | | 84 | | | 91 | | | 98 | | | 105 | | | |
Indirect auto | 425 | | | 401 | | | 392 | | | 389 | | | 390 | | | |
Indirect other | 7 | | | 6 | | | 6 | | | 7 | | | 7 | | | |
| | | | | | | | | | | |
Student - nonguaranteed | 29 | | | 27 | | | 25 | | | 25 | | | 23 | | | |
Credit card | 19 | | | 22 | | | 25 | | | 27 | | | 30 | | | |
Total performing TDRs | 1,873 | | | 1,693 | | | 1,515 | | | 1,390 | | | 1,475 | | | |
Nonperforming TDRs | 187 | | | 204 | | | 189 | | | 152 | | | 159 | | | |
Total TDRs | $ | 2,060 | | | $ | 1,897 | | | $ | 1,704 | | | $ | 1,542 | | | $ | 1,634 | | | |
Loans 90 days or more past due and still accruing: | | | | | | | | | | | |
Commercial and industrial | $ | 44 | | | $ | 27 | | | $ | 22 | | | $ | 13 | | | $ | 18 | | | |
CRE | 1 | | | 3 | | | — | | | — | | | — | | | |
Commercial construction | — | | | 3 | | | — | | | — | | | — | | | |
| | | | | | | | | | | |
Residential mortgage - government guaranteed | 808 | | | 884 | | | 996 | | | 978 | | | 823 | | | |
Residential mortgage - nonguaranteed | 26 | | | 27 | | | 31 | | | 31 | | | 29 | | | |
Residential home equity and direct | 12 | | | 10 | | | 12 | | | 9 | | | 7 | | | |
Indirect auto | 1 | | | 1 | | | 1 | | | 1 | | | 2 | | | |
Indirect other | 6 | | | 3 | | | 2 | | | 3 | | | 2 | | | |
Student - government guaranteed | 770 | | | 796 | | | 818 | | | 864 | | | 965 | | | |
Student - nonguaranteed | 5 | | | 5 | | | 4 | | | 4 | | | 3 | | | |
Credit card | 36 | | | 28 | | | 28 | | | 27 | | | 23 | | | |
| | | | | | | | | | | |
Total loans 90 days or more past due and still accruing | $ | 1,709 | | | $ | 1,787 | | | $ | 1,914 | | | $ | 1,930 | | | $ | 1,872 | | | |
Loans 30-89 days past due and still accruing: | | | | | | | | | | | |
Commercial and industrial | $ | 162 | | | $ | 223 | | | $ | 280 | | | $ | 130 | | | $ | 135 | | | |
CRE | 15 | | | 10 | | | 13 | | | 20 | | | 4 | | | |
Commercial construction | 3 | | | 4 | | | 1 | | | 2 | | | 2 | | | |
| | | | | | | | | | | |
Residential mortgage - government guaranteed | 234 | | | 233 | | | 216 | | | 256 | | | 264 | | | |
Residential mortgage - nonguaranteed | 300 | | | 302 | | | 326 | | | 258 | | | 231 | | | |
Residential home equity and direct | 122 | | | 156 | | | 142 | | | 107 | | | 81 | | | |
Indirect auto | 591 | | | 584 | | | 529 | | | 607 | | | 560 | | | |
Indirect other | 97 | | | 78 | | | 65 | | | 64 | | | 53 | | | |
Student - government guaranteed | 375 | | | 447 | | | 476 | | | 549 | | | 451 | | | |
Student - nonguaranteed | 6 | | | 6 | | | 6 | | | 6 | | | 5 | | | |
Credit card | 52 | | | 48 | | | 47 | | | 45 | | | 37 | | | |
| | | | | | | | | | | |
Total loans 30-89 days past due and still accruing | $ | 1,957 | | | $ | 2,091 | | | $ | 2,101 | | | $ | 2,044 | | | $ | 1,823 | | | |
52 Truist Financial Corporation
Asset Quality
The following tables summarize asset quality information: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Table 10: Asset Quality | | |
| | | | | | | | | | | |
(Dollars in millions) | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | Dec 31, 2020 | | Sep 30, 2020 | | |
NPAs: | | | | | | | | | | | |
NPLs: | | | | | | | | | | | |
Commercial and industrial | $ | 411 | | | $ | 397 | | | $ | 451 | | | $ | 532 | | | $ | 507 | | | |
CRE | 20 | | | 25 | | | 58 | | | 75 | | | 52 | | | |
Commercial construction | 7 | | | 12 | | | 13 | | | 14 | | | 7 | | | |
Lease financing | 12 | | | 5 | | | 23 | | | 28 | | | 32 | | | |
Residential mortgage | 306 | | | 302 | | | 290 | | | 316 | | | 205 | | | |
Residential home equity and direct | 146 | | | 165 | | | 172 | | | 205 | | | 180 | | | |
Indirect auto | 172 | | | 148 | | | 158 | | | 155 | | | 137 | | | |
Indirect other | 6 | | | 6 | | | 6 | | | 5 | | | 4 | | | |
| | | | | | | | | | | |
Total NPLs HFI | 1,080 | | | 1,060 | | | 1,171 | | | 1,330 | | | 1,124 | | | |
Loans held for sale | 76 | | | 78 | | | 72 | | | 5 | | | 130 | | | |
Total nonaccrual loans and leases | 1,156 | | | 1,138 | | | 1,243 | | | 1,335 | | | 1,254 | | | |
Foreclosed real estate | 9 | | | 13 | | | 18 | | | 20 | | | 30 | | | |
Other foreclosed property | 39 | | | 41 | | | 38 | | | 32 | | | 30 | | | |
Total nonperforming assets | $ | 1,204 | | | $ | 1,192 | | | $ | 1,299 | | | $ | 1,387 | | | $ | 1,314 | | | |
TDRs: | | | | | | | | | | | |
Performing TDRs: | | | | | | | | | | | |
Commercial and industrial | $ | 144 | | | $ | 144 | | | $ | 142 | | | $ | 78 | | | $ | 84 | | | |
CRE | 8 | | | 24 | | | 47 | | | 47 | | | 36 | | | |
Commercial construction | — | | | — | | | — | | | — | | | 1 | | | |
Lease financing | 56 | | | 58 | | | 59 | | | 60 | | | 1 | | | |
Residential mortgage | 712 | | | 727 | | | 733 | | | 648 | | | 640 | | | |
Residential home equity and direct | 105 | | | 107 | | | 109 | | | 88 | | | 71 | | | |
Indirect auto | 390 | | | 389 | | | 399 | | | 392 | | | 336 | | | |
Indirect other | 7 | | | 7 | | | 7 | | | 6 | | | 5 | | | |
Student | 23 | | | 13 | | | 8 | | | 5 | | | 5 | | | |
Credit card | 30 | | | 32 | | | 35 | | | 37 | | | 38 | | | |
Total performing TDRs | 1,475 | | | 1,501 | | | 1,539 | | | 1,361 | | | 1,217 | | | |
Nonperforming TDRs | 159 | | | 190 | | | 207 | | | 164 | | | 140 | | | |
Total TDRs | $ | 1,634 | | | $ | 1,691 | | | $ | 1,746 | | | $ | 1,525 | | | $ | 1,357 | | | |
Loans 90 days or more past due and still accruing: (1) | | | | | | | | | | | |
Commercial and industrial | $ | 2 | | | $ | 14 | | | $ | 14 | | | $ | 13 | | | $ | 6 | | | |
CRE | — | | | — | | | — | | | — | | | 8 | | | |
| | | | | | | | | | | |
Lease financing | 16 | | | — | | | — | | | — | | | — | | | |
Residential mortgage | 852 | | | 976 | | | 975 | | | 841 | | | 573 | | | |
Residential home equity and direct | 7 | | | 7 | | | 11 | | | 10 | | | 5 | | | |
Indirect auto | 2 | | | 2 | | | 2 | | | 2 | | | 8 | | | |
Indirect other | 2 | | | 1 | | | 1 | | | 2 | | | 3 | | | |
Student | 968 | | | 1,046 | | | 1,037 | | | 1,111 | | | 570 | | | |
Credit card | 23 | | | 22 | | | 32 | | | 29 | | | 24 | | | |
| | | | | | | | | | | |
Total loans 90 days or more past due and still accruing | $ | 1,872 | | | $ | 2,068 | | | $ | 2,072 | | | $ | 2,008 | | | $ | 1,197 | | | |
Loans 30-89 days past due and still accruing: (1) | | | | | | | | | | | |
Commercial and industrial | $ | 131 | | | $ | 128 | | | $ | 117 | | | $ | 83 | | | $ | 155 | | | |
CRE | 4 | | | 7 | | | 9 | | | 14 | | | 7 | | | |
Commercial construction | 2 | | | 1 | | | 4 | | | 5 | | | — | | | |
Lease financing | 4 | | | 18 | | | 35 | | | 6 | | | 9 | | | |
Residential mortgage | 495 | | | 543 | | | 577 | | | 782 | | | 796 | | | |
Residential home equity and direct | 81 | | | 73 | | | 82 | | | 98 | | | 103 | | | |
Indirect auto | 560 | | | 428 | | | 328 | | | 495 | | | 321 | | | |
Indirect other | 53 | | | 47 | | | 45 | | | 68 | | | 52 | | | |
Student | 456 | | | 548 | | | 556 | | | 618 | | | 666 | | | |
Credit card | 37 | | | 31 | | | 35 | | | 51 | | | 39 | | | |
| | | | | | | | | | | |
Total loans 30-89 days past due and still accruing | $ | 1,823 | | | $ | 1,824 | | | $ | 1,788 | | | $ | 2,220 | | | $ | 2,148 | | | |
(1)The past due status of loans that received a deferral under the CARES Act is generally frozen during the deferral period.
Truist Financial Corporation 53
Nonperforming assets totaled $1.2 billion at September 30, 2021,2022, up $12$67 million compared to June 30, 2021.2022 due to an increase in the commercial and industrial portfolio and nonperforming loans held for sale. Nonperforming loans and leases represented 0.40%held for investment were 0.35% of total loans and leases upheld for investment at September 30, 2022, down one basis point compared to June 30, 2021.2022.
Performing TDRs were down $26up $180 million compared to the prior quarter primarily due to declinesincreases in the government guaranteed residential mortgage and CREthe commercial and industrial portfolios.
Loans 90 days or more past due and still accruing totaled $1.9$1.7 billion at September 30, 2021,2022, down $196$78 million, compared to the prior quarter. The ratio of loans 90 days or more past due and still accruingfive basis points, as a percentage of loans and leases was 0.66% at September 30, 2021, down six basis points fromcompared with the prior quarter. Thequarter primarily due to a decline in loans 90 days or more past due and still accruing was primarily ingovernment guaranteed residential mortgages and student loans.mortgages. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.03%0.04% at September 30, 2021, down one basis point2022, flat from June 30, 2021.2022.
Loans 30-89 days past due and still accruing of $1.8$2.0 billion at September 30, 20212022 were stabledown $134 million, or seven basis points as a percentage of loans and leases, compared to the prior quarter.quarter primarily due to declines in the commercial and industrial and student loan portfolios.
Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 10.7. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to “Note 5. Loans and ACL” for the amortized cost basis of loans by origination year and credit quality indicator as well as additional disclosures related to these potential problem loans.NPLs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 11: Asset Quality Ratios | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
As of / For the Three Months Ended | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | Dec 31, 2020 | | Sep 30, 2020 | | | | | | | | | |
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.64 | % | | 0.64 | % | | 0.61 | % | | 0.74 | % | | 0.70 | % | | | | | | | | | |
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.66 | | | 0.72 | | | 0.71 | | | 0.67 | | | 0.39 | | | | | | | | | | |
NPLs as a percentage of loans and leases HFI | 0.38 | | | 0.37 | | | 0.40 | | | 0.44 | | | 0.37 | | | | | | | | | | |
NPLs as a percentage of total loans and leases (1) | 0.40 | | | 0.39 | | | 0.42 | | | 0.44 | | | 0.40 | | | | | | | | | | |
NPAs as a percentage of: | | | | | | | | | | | | | | | | | | |
Total assets (1) | 0.23 | | | 0.23 | | | 0.25 | | | 0.27 | | | 0.26 | | | | | | | | | | |
Loans and leases HFI plus foreclosed property | 0.40 | | | 0.39 | | | 0.42 | | | 0.46 | | | 0.39 | | | | | | | | | | |
Net charge-offs as a percentage of average loans and leases HFI | 0.19 | | | 0.20 | | | 0.33 | | | 0.27 | | | 0.42 | | | | | | | | | | |
ALLL as a percentage of loans and leases HFI | 1.65 | | | 1.79 | | | 1.94 | | | 1.95 | | | 1.91 | | | | | | | | | | |
Ratio of ALLL to: | | | | | | | | | | | | | | | | | | |
Net charge-offs | 8.79x | | 8.98x | | 5.87x | | 7.15x | | 4.52x | | | | | | | | | |
NPLs | 4.35x | | 4.83x | | 4.84x | | 4.39x | | 5.22x | | | | | | | | | |
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding PPP and other government guaranteed (2) | 0.03 | % | | 0.04 | % | | 0.04 | % | | 0.04 | % | | 0.03 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | |
Applicable ratios are annualized. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 8: Asset Quality Ratios | | | | | | | | | |
| Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | | | | | | | | |
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.62 | % | | 0.69 | % | | 0.72 | % | | 0.71 | % | | 0.64 | % | | | | | | | | | |
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.54 | | | 0.59 | | | 0.66 | | | 0.67 | | | 0.66 | | | | | | | | | | |
NPLs as a percentage of loans and leases HFI | 0.35 | | | 0.36 | | | 0.36 | | | 0.38 | | | 0.38 | | | | | | | | | | |
NPLs as a percentage of total loans and leases (1) | 0.37 | | | 0.37 | | | 0.37 | | | 0.38 | | | 0.40 | | | | | | | | | | |
NPAs as a percentage of: | | | | | | | | | | | | | | | | | | |
Total assets (1) | 0.23 | | | 0.22 | | | 0.21 | | | 0.21 | | | 0.23 | | | | | | | | | | |
Loans and leases HFI plus foreclosed property | 0.37 | | | 0.38 | | | 0.38 | | | 0.39 | | | 0.40 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
ALLL as a percentage of loans and leases HFI | 1.34 | | | 1.38 | | | 1.44 | | | 1.53 | | | 1.65 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Ratio of ALLL to NPLs | 3.80x | | 3.84x | | 3.99x | | 4.07x | | 4.35x | | | | | | | | | |
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding PPP and other government guaranteed (2) | 0.04 | % | | 0.04 | % | | 0.04 | % | | 0.03 | % | | 0.03 | % | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | |
(1)Includes LHFS.
(2)This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage, student, and PPP loans. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio such that it might not be reflectivebecause collection of asset collectabilityprincipal and interest is reasonably assured or the ratio might not be comparable to other periods presented or to other portfolios that do not have government guarantees.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 9: Asset Quality Ratios (Continued) | | | | | | | | | |
For the Three Months Ended | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | | | | | | | | |
Net charge-offs as a percentage of average loans and leases HFI: | | | | | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | | 0.02 | % | | 0.01 | % | | 0.04 | % | | 0.09 | % | | 0.04 | % | | | | | | | | | |
CRE | | (0.01) | | | (0.10) | | | 0.01 | | | 0.07 | | | — | | | | | | | | | | |
Commercial construction | | (0.10) | | | (0.08) | | | (0.02) | | | (0.10) | | | (0.06) | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | |
Residential mortgage | | 0.01 | | | (0.02) | | | (0.03) | | | (0.02) | | | 0.04 | | | | | | | | | | |
Residential home equity and direct | | 1.01 | | | 1.04 | | | 0.61 | | | 0.49 | | | 0.49 | | | | | | | | | | |
Indirect auto | | 1.15 | | | 0.77 | | | 1.23 | | | 1.01 | | | 0.75 | | | | | | | | | | |
Indirect other | | 0.66 | | | 0.43 | | | 0.48 | | | 0.39 | | | 0.26 | | | | | | | | | | |
Student | | 0.40 | | | 0.30 | | | 0.33 | | | 0.65 | | | 0.31 | | | | | | | | | | |
Credit card | | 2.80 | | | 2.63 | | | 2.77 | | | 2.31 | | | 1.90 | | | | | | | | | | |
Total | | 0.27 | | | 0.22 | | | 0.25 | | | 0.25 | | | 0.19 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Ratio of ALLL to net charge-offs | | 4.98x | | 6.54x | | 5.78x | | 6.14x | | 8.79x | | | | | | | | | |
Ratios are annualized, as applicable.
54 Truist Financial Corporation 53
The following table presents activity related to NPAs: | Table 12: Rollforward of NPAs | | |
Table 10: Rollforward of NPAs | | Table 10: Rollforward of NPAs | |
(Dollars in millions) | (Dollars in millions) | | 2021 | | 2020 | | (Dollars in millions) | | 2022 | | 2021 | |
Balance, January 1 | Balance, January 1 | | $ | 1,387 | | | $ | 684 | | | Balance, January 1 | | $ | 1,163 | | | $ | 1,387 | | |
New NPAs (1) | New NPAs (1) | | 1,580 | | | 2,467 | | | New NPAs (1) | | 1,452 | | | 1,580 | | |
Advances and principal increases | Advances and principal increases | | 280 | | | 255 | | | Advances and principal increases | | 307 | | | 280 | | |
Disposals of foreclosed assets (2)(1) | Disposals of foreclosed assets (2)(1) | | (297) | | | (333) | | | Disposals of foreclosed assets (2)(1) | | (331) | | | (297) | | |
Disposals of NPLs (3)(2) | Disposals of NPLs (3)(2) | | (203) | | | (521) | | | Disposals of NPLs (3)(2) | | (80) | | | (203) | | |
Charge-offs and losses | Charge-offs and losses | | (279) | | | (443) | | | Charge-offs and losses | | (332) | | | (279) | | |
Payments | Payments | | (775) | | | (553) | | | Payments | | (590) | | | (775) | | |
Transfers to performing status | Transfers to performing status | | (445) | | | (258) | | | Transfers to performing status | | (364) | | | (445) | | |
Other, net | Other, net | | (44) | | | 16 | | | Other, net | | 15 | | | (44) | | |
Ending balance, September 30 | Ending balance, September 30 | | $ | 1,204 | | | $ | 1,314 | | | Ending balance, September 30 | | $ | 1,240 | | | $ | 1,204 | | |
(1)For 2020, includes approximately $500 million of loans previously classified as PCI that would have otherwise been nonperforming as of December 31, 2019.
(2)Includes charge-offs and losses recorded upon sale of $95$87 million and $99$95 million for the nine months ended September 30, 20212022 and 2020,2021, respectively.
(3)(2)Includes a net gain upon sale of $1 million and charge-offs and losses recorded upon sale of $1 million and $126 million for the nine months ended September 30, 20212022 and 2020,2021, respectively.
TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near term and a concession has been granted to the borrower. As a result, Truist works with borrowers to prevent further difficulties and to improve the likelihood of recovery on a loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR. In accordance with the CARES Act, Truist implemented loan modification programs in response to the COVID-19 pandemic in order to provide borrowers with flexibility with respect to repayment terms. Payment relief assistance provided by Truist includes forbearance, deferrals, extension, and re-aging programs, along with certain other modification strategies. The Company adopted certain provisions of the CARES Act and other regulatory guidance that provide relief from the requirement to apply TDR accounting to (1) certain modifications of federally backed mortgages upon request from the borrower, and (2) certain modifications of other non-federally backed mortgages for borrowers impacted by the COVID-19 pandemic that were less than 30 days past due at December 31, 2019. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for the policies related to TDRs and COVID-19 loan modifications.
TDRs identified by SunTrust prior to the Merger date are not included in Truist’s TDR disclosure because all such loans were recorded at fair value and a new accounting basis was established as of the Merger date. Subsequent modifications are evaluated for potential treatment as TDRs in accordance with Truist’s accounting policies.
The following table provides a summary of performing TDR activity: | Table 13: Rollforward of Performing TDRs | | |
Table 11: Rollforward of Performing TDRs | | Table 11: Rollforward of Performing TDRs | |
(Dollars in millions) | (Dollars in millions) | | 2021 | | 2020 | | (Dollars in millions) | | 2022 | | 2021 | |
Balance, January 1 | Balance, January 1 | | $ | 1,361 | | | $ | 980 | | | Balance, January 1 | | $ | 1,390 | | | $ | 1,361 | | |
Inflows | Inflows | | 548 | | | 599 | | | Inflows | | 842 | | | 548 | | |
Payments and payoffs (1) | Payments and payoffs (1) | | (283) | | | (113) | | | Payments and payoffs (1) | | (196) | | | (283) | | |
Charge-offs | Charge-offs | | (33) | | | (34) | | | Charge-offs | | (25) | | | (33) | | |
Transfers to nonperforming TDRs (2) | Transfers to nonperforming TDRs (2) | | (31) | | | (66) | | | Transfers to nonperforming TDRs (2) | | (45) | | | (31) | | |
Removal due to the passage of time | Removal due to the passage of time | | (10) | | | (6) | | | Removal due to the passage of time | | (72) | | | (10) | | |
Non-concessionary re-modifications | Non-concessionary re-modifications | | (15) | | | (2) | | | Non-concessionary re-modifications | | (1) | | | (15) | | |
| Transferred to LHFS, sold and other | Transferred to LHFS, sold and other | | (62) | | | (141) | | | Transferred to LHFS, sold and other | | (20) | | | (62) | | |
Balance, September 30 | Balance, September 30 | | $ | 1,475 | | | $ | 1,217 | | | Balance, September 30 | | $ | 1,873 | | | $ | 1,475 | | |
|
(1)Includes scheduled principal payments, prepayments, and payoffs of amounts outstanding.
(2)Represent loans that no longer meet the requirements necessary to reflect the loan in accruing status.
Truist Financial Corporation 55
The following table provides further details regarding the payment status of TDRs outstanding at September 30, 2021:outstanding: | Table 14: Payment Status of TDRs (1) | |
September 30, 2021 (Dollars in millions) | Current | | Past Due 30-89 Days | | Past Due 90 Days Or More | | Total | |
Table 12: Payment Status of TDRs (1) | | Table 12: Payment Status of TDRs (1) |
September 30, 2022 (Dollars in millions) | | September 30, 2022 (Dollars in millions) | Current | | Past Due 30-89 Days | | Past Due 90 Days Or More | | Total |
Performing TDRs: | Performing TDRs: | | | | | | | | | | | | | | Performing TDRs: | | | | | | | | | | | | | |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | $ | 144 | | | 100.0 | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | 144 | | Commercial and industrial | $ | 163 | | | 98.8 | % | | $ | 1 | | | 0.6 | % | | $ | 1 | | | 0.6 | % | | $ | 165 | |
CRE | CRE | 8 | | | 100.0 | | | — | | | — | | | — | | | — | | | 8 | | CRE | 5 | | | 100.0 | | | — | | | — | | | — | | | — | | | 5 | |
Commercial construction | | Commercial construction | 1 | | | 100.0 | | | — | | | — | | | — | | | — | | | 1 | |
| Lease financing | 56 | | | 100.0 | | | — | | | — | | | — | | | — | | | 56 | | |
Consumer: | Consumer: | | Consumer: | |
Residential mortgage | 482 | | | 67.7 | | | 81 | | | 11.4 | | | 149 | | | 20.9 | | | 712 | | |
Residential mortgage - government guaranteed | | Residential mortgage - government guaranteed | 439 | | | 52.4 | | | 90 | | | 10.7 | | | 310 | | | 36.9 | | | 839 | |
Residential mortgage - nonguaranteed | | Residential mortgage - nonguaranteed | 268 | | | 87.8 | | | 28 | | | 9.2 | | | 9 | | | 3.0 | | | 305 | |
Residential home equity and direct | Residential home equity and direct | 101 | | | 96.2 | | | 4 | | | 3.8 | | | — | | | — | | | 105 | | Residential home equity and direct | 76 | | | 97.4 | | | 2 | | | 2.6 | | | — | | | — | | | 78 | |
Indirect auto | Indirect auto | 320 | | | 82.1 | | | 70 | | | 17.9 | | | — | | | — | | | 390 | | Indirect auto | 355 | | | 83.5 | | | 70 | | | 16.5 | | | — | | | — | | | 425 | |
Indirect other | Indirect other | 6 | | | 85.7 | | | 1 | | | 14.3 | | | — | | | — | | | 7 | | Indirect other | 6 | | | 85.7 | | | 1 | | | 14.3 | | | — | | | — | | | 7 | |
Student | 22 | | | 95.7 | | | 1 | | | 4.3 | | | — | | | — | | | 23 | | |
| Student - nonguaranteed | | Student - nonguaranteed | 26 | | | 89.7 | | | 2 | | | 6.9 | | | 1 | | | 3.4 | | | 29 | |
Credit card | Credit card | 26 | | | 86.7 | | | 3 | | | 10.0 | | | 1 | | | 3.3 | | | 30 | | Credit card | 16 | | | 84.2 | | | 2 | | | 10.5 | | | 1 | | | 5.3 | | | 19 | |
Total performing TDRs | Total performing TDRs | 1,165 | | | 78.9 | | | 160 | | | 10.9 | | | 150 | | | 10.2 | | | 1,475 | | Total performing TDRs | 1,355 | | | 72.3 | | | 196 | | | 10.5 | | | 322 | | | 17.2 | | | 1,873 | |
Nonperforming TDRs | Nonperforming TDRs | 49 | | | 30.8 | | | 17 | | | 10.7 | | | 93 | | | 58.5 | | | 159 | | Nonperforming TDRs | 78 | | | 41.7 | | | 29 | | | 15.5 | | | 80 | | | 42.8 | | | 187 | |
Total TDRs | Total TDRs | $ | 1,214 | | | 74.3 | | | $ | 177 | | | 10.8 | | | $ | 243 | | | 14.9 | | | $ | 1,634 | | Total TDRs | $ | 1,433 | | | 69.6 | | | $ | 225 | | | 10.9 | | | $ | 402 | | | 19.5 | | | $ | 2,060 | |
(1)Past due performing TDRs are included in past due disclosures and nonperforming TDRs are included in NPL disclosures.
5654 Truist Financial Corporation
ACL
Activity related to the ACL is presented in the following tables: | | Table 15: Activity in ACL | | |
Table 13: Activity in ACL | | Table 13: Activity in ACL | |
| | For the Three Months Ended | | For the Nine Months Ended | | | For the Three Months Ended | | Nine Months Ended September 30, | |
(Dollars in millions) | (Dollars in millions) | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | Dec 31, 2020 | | Sep 30, 2020 | | 2021 | | 2020 | | (Dollars in millions) | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | 2022 | | 2021 | |
Balance, beginning of period | Balance, beginning of period | $ | 5,436 | | | $ | 6,011 | | | $ | 6,199 | | | $ | 6,229 | | | $ | 6,133 | | | $ | 6,199 | | | $ | 1,889 | | | Balance, beginning of period | $ | 4,434 | | | $ | 4,423 | | | $ | 4,695 | | | $ | 4,978 | | | $ | 5,436 | | | $ | 4,695 | | | $ | 6,199 | | |
CECL adoption - impact to retained earnings before tax | — | | | — | | | — | | | — | | | — | | | — | | | 2,762 | | | |
CECL adoption - reserves on PCD assets | — | | | — | | | — | | | — | | | — | | | — | | | 378 | | | |
| Provision for credit losses | Provision for credit losses | (324) | | | (434) | | | 48 | | | 177 | | | 421 | | | (710) | | | 2,158 | | | Provision for credit losses | 234 | | | 171 | | | (95) | | | (103) | | | (324) | | | 310 | | | (710) | | |
| Charge-offs: | Charge-offs: | | | | | | | | | | | | | | | Charge-offs: | | | | | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | (57) | | | (51) | | | (73) | | | (84) | | | (112) | | | (181) | | | (274) | | | Commercial and industrial | (51) | | | (17) | | | (31) | | | (54) | | | (57) | | | (99) | | | (189) | | |
CRE | CRE | (1) | | | — | | | (4) | | | (19) | | | (44) | | | (5) | | | (59) | | | CRE | — | | | (1) | | | (1) | | | (5) | | | (1) | | | (2) | | | (5) | | |
Commercial construction | Commercial construction | — | | | — | | | (2) | | | (8) | | | (19) | | | (2) | | | (22) | | | Commercial construction | — | | | — | | | (1) | | | — | | | — | | | (1) | | | (2) | | |
Lease financing | — | | | (2) | | | (6) | | | (4) | | | (44) | | | (8) | | | (50) | | | |
| Residential mortgage | Residential mortgage | (7) | | | (4) | | | (11) | | | (6) | | | (4) | | | (22) | | | (50) | | | Residential mortgage | (4) | | | (2) | | | (2) | | | (1) | | | (7) | | | (8) | | | (22) | | |
Residential home equity and direct | Residential home equity and direct | (51) | | | (57) | | | (55) | | | (46) | | | (52) | | | (163) | | | (185) | | | Residential home equity and direct | (86) | | | (85) | | | (58) | | | (51) | | | (51) | | | (229) | | | (163) | | |
Indirect auto | Indirect auto | (73) | | | (69) | | | (105) | | | (84) | | | (72) | | | (247) | | | (294) | | | Indirect auto | (103) | | | (77) | | | (102) | | | (89) | | | (73) | | | (282) | | | (247) | | |
Indirect other | Indirect other | (13) | | | (11) | | | (17) | | | (14) | | | (8) | | | (41) | | | (46) | | | Indirect other | (26) | | | (18) | | | (19) | | | (16) | | | (13) | | | (63) | | | (41) | | |
Student | Student | (6) | | | (3) | | | (3) | | | (3) | | | (6) | | | (12) | | | (20) | | | Student | (7) | | | (4) | | | (6) | | | (12) | | | (6) | | | (17) | | | (12) | | |
Credit card | Credit card | (31) | | | (42) | | | (40) | | | (35) | | | (44) | | | (113) | | | (147) | | | Credit card | (42) | | | (40) | | | (41) | | | (37) | | | (31) | | | (123) | | | (113) | | |
| Total charge-offs | Total charge-offs | (239) | | | (239) | | | (316) | | | (303) | | | (405) | | | (794) | | | (1,147) | | | Total charge-offs | (319) | | | (244) | | | (261) | | | (265) | | | (239) | | | (824) | | | (794) | | |
Recoveries: | Recoveries: | | | | | | | | | | | | | | | Recoveries: | | | | | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | 21 | | | 20 | | | 19 | | | 34 | | | 20 | | | 60 | | | 58 | | | Commercial and industrial | 43 | | | 13 | | | 17 | | | 23 | | | 42 | | | 73 | | | 84 | | |
CRE | CRE | 1 | | | 4 | | | 1 | | | 1 | | | — | | | 6 | | | 4 | | | CRE | — | | | 6 | | | 1 | | | — | | | 1 | | | 7 | | | 6 | | |
Commercial construction | Commercial construction | 1 | | | 1 | | | 1 | | | 1 | | | 2 | | | 3 | | | 10 | | | Commercial construction | 2 | | | 1 | | | 1 | | | 1 | | | 1 | | | 4 | | | 3 | | |
Lease financing | 21 | | | 3 | | | — | | | — | | | 4 | | | 24 | | | 4 | | | |
| Residential mortgage | Residential mortgage | 3 | | | 5 | | | 2 | | | 3 | | | 3 | | | 10 | | | 7 | | | Residential mortgage | 3 | | | 4 | | | 6 | | | 2 | | | 3 | | | 13 | | | 10 | | |
Residential home equity and direct | Residential home equity and direct | 20 | | | 20 | | | 18 | | | 20 | | | 16 | | | 58 | | | 46 | | | Residential home equity and direct | 23 | | | 20 | | | 20 | | | 21 | | | 20 | | | 63 | | | 58 | | |
Indirect auto | Indirect auto | 22 | | | 27 | | | 22 | | | 24 | | | 22 | | | 71 | | | 63 | | | Indirect auto | 21 | | | 26 | | | 23 | | | 21 | | | 22 | | | 70 | | | 71 | | |
Indirect other | Indirect other | 5 | | | 7 | | | 6 | | | 5 | | | 4 | | | 18 | | | 18 | | | Indirect other | 6 | | | 6 | | | 6 | | | 6 | | | 5 | | | 18 | | | 18 | | |
Student | Student | 1 | | | — | | | — | | | — | | | — | | | 1 | | | 1 | | | Student | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | | |
Credit card | Credit card | 9 | | | 10 | | | 9 | | | 10 | | | 8 | | | 28 | | | 22 | | | Credit card | 8 | | | 9 | | | 9 | | | 9 | | | 9 | | | 26 | | | 28 | | |
Total recoveries | Total recoveries | 104 | | | 97 | | | 78 | | | 98 | | | 79 | | | 279 | | | 233 | | | Total recoveries | 106 | | | 85 | | | 83 | | | 83 | | | 104 | | | 274 | | | 279 | | |
Net charge-offs | Net charge-offs | (135) | | | (142) | | | (238) | | | (205) | | | (326) | | | (515) | | | (914) | | | Net charge-offs | (213) | | | (159) | | | (178) | | | (182) | | | (135) | | | (550) | | | (515) | | |
Other | Other | 1 | | | 1 | | | 2 | | | (2) | | | 1 | | | 4 | | | (44) | | | Other | — | | | (1) | | | 1 | | | 2 | | | 1 | | | — | | | 4 | | |
Balance, end of period | Balance, end of period | $ | 4,978 | | | $ | 5,436 | | | $ | 6,011 | | | $ | 6,199 | | | $ | 6,229 | | | $ | 4,978 | | | $ | 6,229 | | | Balance, end of period | $ | 4,455 | | | $ | 4,434 | | | $ | 4,423 | | | $ | 4,695 | | | $ | 4,978 | | | $ | 4,455 | | | $ | 4,978 | | |
ALLL (excluding PCD loans) | $ | 4,577 | | | $ | 4,979 | | | $ | 5,506 | | | $ | 5,668 | | | $ | 5,675 | | | | |
ALLL for PCD loans | 125 | | | 142 | | | 156 | | | 167 | | | 188 | | | | |
| ACL: | | ACL: | | |
ALLL | | ALLL | $ | 4,205 | | | $ | 4,187 | | | $ | 4,170 | | | $ | 4,435 | | | $ | 4,702 | | | $ | 4,205 | | | $ | 4,702 | | |
RUFC | RUFC | 276 | | | 315 | | | 349 | | | 364 | | | 366 | | | | RUFC | 250 | | | 247 | | | 253 | | | 260 | | | 276 | | | 250 | | | 276 | | |
Total ACL | Total ACL | $ | 4,978 | | | $ | 5,436 | | | $ | 6,011 | | | $ | 6,199 | | | $ | 6,229 | | | | Total ACL | $ | 4,455 | | | $ | 4,434 | | | $ | 4,423 | | | $ | 4,695 | | | $ | 4,978 | | | $ | 4,455 | | | $ | 4,978 | | |
|
Net charge-offs during the third quarter totaled $135$213 million, down $7 millionor 0.27% as a percentage of average loans, and were up five basis points compared to the prior quarter. The net charge-off ratio was 0.19%, down one basis point compared to the prior quarter.quarter, primarily driven by normalizing trends and seasonality across certain consumer loan portfolios.
The allowance for credit losses was $5.0$4.5 billion and includes $4.7$4.2 billion for the allowance for loan and lease losses and $276$250 million for the reserve for unfunded commitments. The ALLL ratio was 1.65%1.34% compared to 1.79%1.38% at June 30, 2021.2022. The decline in the ALLL ratio was due to strong portfolio performance and growth in higher quality loans, partially offset by a moderately slower economic outlook. The ALLL covered nonperforming loans and leases held for investment 4.35X3.80X compared to 4.83X3.84X at June 30, 2021.2022. At September 30, 2021,2022, the ALLL was 8.79X4.98X annualized net charge-offs, compared to 8.98X6.54X at June 30, 2021.2022.
Truist Financial Corporation 5755
The following table presents an allocation of the ALLL. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases. | Table 16: Allocation of ALLL by Category | |
| September 30, 2021 | | December 31, 2020 | |
Table 14: Allocation of ALLL by Category | | Table 14: Allocation of ALLL by Category |
| | | September 30, 2022 | | December 31, 2021 |
(Dollars in millions) | (Dollars in millions) | Amount | | % ALLL in Each Category | | % Loans in Each Category | | Amount | | % ALLL in Each Category | | % Loans in Each Category | (Dollars in millions) | Amount | | % ALLL in Each Category | | % Loans in Each Category | | Amount | | % ALLL in Each Category | | % Loans in Each Category |
Commercial and industrial | Commercial and industrial | $ | 1,541 | | | 32.7 | % | | 45.2 | % | | $ | 2,156 | | | 37.0 | % | | 46.2 | % | Commercial and industrial | $ | 1,301 | | | 31.0 | % | | 48.8 | % | | $ | 1,426 | | | 32.2 | % | | 47.9 | % |
CRE | CRE | 370 | | | 7.9 | | | 8.5 | | | 573 | | | 9.8 | | | 8.9 | | CRE | 234 | | | 5.6 | | | 7.2 | | | 350 | | | 7.9 | | | 8.3 | |
Commercial construction | Commercial construction | 59 | | | 1.3 | | | 2.0 | | | 81 | | | 1.4 | | | 2.2 | | Commercial construction | 47 | | | 1.1 | | | 1.8 | | | 52 | | | 1.2 | | | 1.7 | |
Lease financing | 31 | | | 0.7 | | | 1.7 | | | 48 | | | 0.8 | | | 1.7 | | |
| Residential mortgage | Residential mortgage | 311 | | | 6.6 | | | 16.4 | | | 368 | | | 6.3 | | | 15.8 | | Residential mortgage | 376 | | | 8.9 | | | 17.7 | | | 308 | | | 6.9 | | | 16.5 | |
Residential home equity and direct | Residential home equity and direct | 645 | | | 13.7 | | | 8.8 | | | 714 | | | 12.2 | | | 8.7 | | Residential home equity and direct | 569 | | | 13.5 | | | 8.2 | | | 615 | | | 13.9 | | | 8.7 | |
Indirect auto | Indirect auto | 1,071 | | | 22.8 | | | 9.4 | | | 1,198 | | | 20.5 | | | 8.7 | | Indirect auto | 966 | | | 23.0 | | | 9.0 | | | 1,022 | | | 23.0 | | | 9.1 | |
Indirect other | Indirect other | 194 | | | 4.1 | | | 3.9 | | | 208 | | | 3.6 | | | 3.7 | | Indirect other | 269 | | | 6.4 | | | 4.0 | | | 195 | | | 4.4 | | | 3.8 | |
Student | Student | 126 | | | 2.7 | | | 2.5 | | | 130 | | | 2.2 | | | 2.5 | | Student | 93 | | | 2.2 | | | 1.8 | | | 117 | | | 2.6 | | | 2.3 | |
Credit card | Credit card | 354 | | | 7.5 | | | 1.6 | | | 359 | | | 6.2 | | | 1.6 | | Credit card | 350 | | | 8.3 | | | 1.5 | | | 350 | | | 7.9 | | | 1.7 | |
Total ALLL | Total ALLL | 4,702 | | | 100.0 | % | | 100.0 | % | | 5,835 | | | 100.0 | % | | 100.0 | % | Total ALLL | 4,205 | | | 100.0 | % | | 100.0 | % | | 4,435 | | | 100.0 | % | | 100.0 | % |
RUFC | RUFC | 276 | | | | | 364 | | | | RUFC | 250 | | | | | 260 | | | |
Total ACL | Total ACL | $ | 4,978 | | | | | $ | 6,199 | | | | Total ACL | $ | 4,455 | | | | | $ | 4,695 | | | |
Truist monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. Truist also receives notification when the first lien holder, whether Truist or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, Truist obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.
Truist has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by Truist. Truist estimates credit losses on second lien loans where the first lien is delinquent based on historical experience; the increased risk of loss on these credits is reflected in the ALLL. As of September 30, 2021,2022, Truist held or serviced the first lien on 30%32% of its second lien positions.
Other Assets
The components of other assets are presented in the following table: | Table 17: Other Assets as of Period End | | | |
Table 15: Other Assets as of Period End | | Table 15: Other Assets as of Period End | | |
(Dollars in millions) | (Dollars in millions) | September 30, 2021 | | December 31, 2020 | | (Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 | |
| Bank-owned life insurance | Bank-owned life insurance | $ | 6,512 | | | $ | 6,479 | | | Bank-owned life insurance | $ | 7,595 | | | $ | 7,281 | | |
Tax credit and other private equity investments | Tax credit and other private equity investments | 6,012 | | | 5,685 | | | Tax credit and other private equity investments | 6,572 | | | 6,309 | | |
Prepaid pension assets | Prepaid pension assets | 4,814 | | | 4,358 | | | Prepaid pension assets | 6,464 | | | 5,938 | | |
DTAs | | DTAs | 2,607 | | | — | | |
Derivative assets | Derivative assets | 2,976 | | | 3,837 | | | Derivative assets | 1,140 | | | 2,370 | | |
Accrued income | 1,841 | | | 1,934 | | | |
Accounts receivable | Accounts receivable | 1,910 | | | 1,833 | | | Accounts receivable | 2,492 | | | 2,244 | | |
Leased assets and related assets | Leased assets and related assets | 1,846 | | | 1,810 | | | Leased assets and related assets | 2,244 | | | 2,092 | | |
Accrued income | | Accrued income | 1,996 | | | 1,791 | | |
ROU assets | ROU assets | 1,207 | | | 1,333 | | | ROU assets | 1,116 | | | 1,168 | | |
Prepaid expenses | Prepaid expenses | 1,091 | | | 1,247 | | | Prepaid expenses | 1,120 | | | 1,152 | | |
Equity securities at fair value | Equity securities at fair value | 1,026 | | | 1,054 | | | Equity securities at fair value | 887 | | | 1,066 | | |
Structured real estate | 322 | | | 390 | | | |
FHLB stock | 48 | | | 164 | | | |
| Other | Other | 446 | | | 549 | | | Other | 1,464 | | | 738 | | |
Total other assets | Total other assets | $ | 30,051 | | | $ | 30,673 | | | Total other assets | $ | 35,697 | | | $ | 32,149 | | |
|
58 Truist Financial Corporation
Funding Activities
Deposits
The following table presents average deposits: | Table 18: Average Deposits | |
Table 16: Average Deposits | | Table 16: Average Deposits |
Three Months Ended (Dollars in millions) | Three Months Ended (Dollars in millions) | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | Dec 31, 2020 | | Sep 30, 2020 | Three Months Ended (Dollars in millions) | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 |
Noninterest-bearing deposits | Noninterest-bearing deposits | | $ | 141,738 | | | $ | 137,892 | | | $ | 128,579 | | | $ | 127,103 | | | $ | 123,966 | | Noninterest-bearing deposits | | $ | 146,041 | | | $ | 148,610 | | | $ | 145,933 | | | $ | 146,492 | | | $ | 141,738 | |
Interest checking | Interest checking | | 107,802 | | | 106,121 | | | 104,744 | | | 99,866 | | | 96,707 | | Interest checking | | 111,645 | | | 112,375 | | | 112,159 | | | 110,506 | | | 107,802 | |
Money market and savings | Money market and savings | | 136,094 | | | 134,029 | | | 129,303 | | | 124,692 | | | 123,598 | | Money market and savings | | 147,659 | | | 148,632 | | | 141,500 | | | 137,676 | | | 136,094 | |
Time deposits | Time deposits | | 17,094 | | | 18,213 | | | 20,559 | | | 23,605 | | | 27,940 | | Time deposits | | 14,751 | | | 14,133 | | | 15,646 | | | 16,292 | | | 17,094 | |
| Total average deposits | Total average deposits | | $ | 402,728 | | | $ | 396,255 | | | $ | 383,185 | | | $ | 375,266 | | | $ | 372,211 | | Total average deposits | | $ | 420,096 | | | $ | 423,750 | | | $ | 415,238 | | | $ | 410,966 | | | $ | 402,728 | |
56 Truist Financial Corporation
Average deposits for the third quarter of 20212022 were $402.7$420.1 billion, an increasea decrease of $6.5$3.7 billion, or 1.6%0.9%, compared to the prior quarter. The decrease in deposits was primarily driven by the impacts of monetary tightening, as well as higher consumer spending and seasonal patterns. Average noninterest bearing deposits grew 2.8%decreased 1.7% compared to the prior quarter and represented 35.2%34.8% of total deposits for the third quarter of 2021, compared to 34.8% for the prior quarter.2022. Average interest checking and money market and savings grew 1.6% and 1.5%interest checking deposits declined 0.7% and 0.6%, respectively, compared to the prior quarter.
Average time deposits decreased 6.1%increased 4.4% primarily due to the maturityan increase in negotiable certificates of higher-cost personal accounts.deposit.
Borrowings
At September 30, 2021,2022, short-term borrowings totaled $5.2$25.7 billion, a decreasean increase of $866 million$20.4 billion compared to December 31, 2020, due2021. The increase in short-term borrowings was primarily to a decreasefund $22.3 billion of $2.6 billion in short-term FHLB advances, partially offset by an increase of $1.4 billion in securities sold under agreements to repurchase.
strong loan growth since year-end. Average short-term borrowings were $5.4$11.4 billion, or 1.2%2.4% of total funding, for the third quarter of 2021,nine months ended September 30, 2022, as compared to $6.2$6.1 billion, or 1.5%1.4%, for the prior year. Average short-term borrowings decreased as a percentage of funding sources due to strong deposit growth.
Long-term debt provides funding and, to a lesser extent, regulatory capital, and primarily consists of senior and subordinated notes issued by Truist and Truist Bank. Long-term debt totaled $37.8$31.2 billion at September 30, 2021,2022, a decrease of $1.8$4.7 billion compared to December 31, 2020.2021. During 2021,the nine months ended September 30, 2022, the Company had $5.8maturities and redemptions of $5.9 billion of senior long termand $300 million of subordinated long-term debt maturities and redemptions, partially offset by $2.3redeemed $800 million of FHLB advances, which resulted in a gain on early extinguishment of long-term debt of $39 million. The Company issued $2.4 billion fixed-to-floating rate senior notes with an interest rate between 4.12% and 4.26% due July 28, 2026 to June 6, 2028 and $1.0 billion fixed-to-floating rate subordinated notes with an interest rate of issuances4.92% due July 28, 2033. The average cost of fixedlong-term debt was 1.88% for the nine months ended September 30, 2022, up 29 basis points compared to the same period in 2021.
In October 2022, Truist issued $750 million fixed-to-floating rate senior notes with an interest rate of 1.27% to 1.89% maturing between 2027 to 20295.90% due October 28, 2026 and issuances of $2.3 billion in variable$750 million fixed-to-floating rate senior notes maturing between 2024 and 2025. FHLB advances represented 2.3%with an interest rate of total outstanding long-term debt at September 30, 2021, compared to 2.2% at December 31, 2020. The average cost of long-term debt was 1.59% for the nine months ended September 30, 2021, down 19 basis points compared to the same period in 2020.6.123% due October 28, 2033.
Shareholders’ Equity
Total shareholders’ equity was $68.9$60.8 billion at September 30, 2021,2022, a decrease of $2.0$8.5 billion from December 31, 2020.2021. This decreasedecline includes a decrease of $2.3$10.7 billion in AOCI redemptions of $1.4 billion in preferred stock for Series F, G, and H, $2.1$2.2 billion in dividends, and $1.1 billion in repurchases of common stock, partially offset by $4.8$4.6 billion in net income. Truist’s book value per common share at September 30, 20212022 was $46.62,$40.79, compared to $46.52$47.14 at December 31, 2020.
Refer to “Note 10. Shareholders’ Equity” for additional disclosures related to preferred stock redemptions.2021.
Risk Management
Truist maintains a comprehensive risk management framework supported by people, processes, and systems to identify, measure, monitor, manage, and report significant risks arising from its exposures and business activities. Effective risk management involves optimizing risk and return while operating in a safe and sound manner, and promoting compliance with applicable laws and regulations. The Company’s risk management framework promotes the execution of business strategies and objectives in alignment with its risk appetite.
Truist has developed and employs a risk taxonomy that further guides business functions in identifying, measuring, responding to, monitoring, and reporting on possible exposures to the organization. The risk taxonomy drives internal risk conversations and enables Truist to clearly and transparently communicate to stakeholders the level of potential risk the Company faces, both presently and in the future, and the Company’s position on managing risk to acceptable levels.
Truist Financial Corporation 59
Truist is committed to fostering a culture that supports identification and escalation of risks across the organization. All teammates are responsible for upholding the Company’s purpose, mission, and values, and are encouraged to speak up if there is any activity or behavior that is inconsistent with the Company’s culture. The Truist code of ethics guides the Company’s decision making and informs teammates on how to act in the absence of specific guidance.
Truist seeks an appropriate return for the risk taken in its business operations. Risk-taking activities are evaluated and prioritized to identify those that present attractive risk-adjusted returns, while preserving asset value and capital.
Compensation decisions take into account a teammate’s adherence to and successful implementation of Truist’s risk values and associated policies and procedures. The Company’s compensation structure supports its core values and sound risk management practices in an effort to promote judicious risk-taking behavior.
Truist Financial Corporation 57
Truist employs a comprehensive change management program to manage the residual risks associated with integrating heritage BB&T and heritage SunTrust. TheWhile integration activities are largely complete, the Board and Executive Leadership oversee the change management program, which is designed to ensure key decisions are reviewed and that there is appropriate oversight of application and data center decommissioning and residual integration activities.activities, achieved through Truist’s risk management process.
Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for additional disclosures under the section titled “Risk Management.”
Market Risk
Market risk is the risk to current or anticipated earnings, capital, or economic value arising from changes in the market value of portfolios, securities, or other financial instruments. Market risk results from changes in the level, volatility, or correlations among financial market risk factors or prices, including interest rates, credit spreads, foreign exchange rates, equity, and commodity prices.
Effective management of market risk is essential to achieving Truist’s strategic financial objectives. Truist’s most significant market risk exposure is to interest rate risk in its balance sheet; however, market risk also results from underlying product liquidity risk, price risk, and volatility risk in Truist’s business units. Interest rate risk results from differences between the timing of rate changes and the timing of cash flows associated with assets and liabilities (re-pricing risk); from changing rate relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options inherently embedded in bank products (options risk).
The primary objectives of effective market risk management are to minimize adverse effects from changes in market risk factors on net interest income, net income, and capital, and to offset the risk of price changes for certain assets and liabilities recorded at fair value. At Truist, market risk management also includes the enterprise-wide IPV function.
Interest Rate Market Risk
As a financial institution, Truist is exposed to interest rate risk both on itsfrom assets, liabilities, and on its liabilities.off-balance sheet positions. To keep net interest margin as stable as possible, Truist actively manages its interest rate risk exposure through the strategic repricing of its assets and liabilities, taking into account the volumes, maturities, and mix, with the goal of keeping net interest margin as stable as possible.mix. Truist primarily uses three methods to measure and monitor its interest rate risk: (i) simulations of possible changes to net interest income over the next two years based on gradual changes in interest rates; (ii) analysis of interest rate shock scenarios; and (iii) analysis of economic value of equity based on changes in interest rates.
The Company’s simulation model takes into account assumptions related to prepayment trends, using a combination of market data and internal historical experiences for deposits and loans, as well as scheduled maturities and payments, and the expected outlook for the economy and interest rates. These assumptions are reviewed and adjusted monthly to reflect changes in current interest rates compared to the rates applicable to Truist’s assets and liabilities. The model also considers Truist’s current and prospective liquidity position, current balance sheet volumes, and projected growth and/or contractions, accessibility of funds for short-term needs and capital maintenance.
Deposit betas (the sensitivity of deposit rate changes relative to market rate changes) are an important assumption in the interest rate risk modeling process. Truist applies an average deposit beta (the sensitivity of deposit rate changes relativeassumptions to market rate changes) of approximately 50% to its non-maturity interest-bearing deposit accounts when determining its interest rate sensitivity. Non-maturity, interest-bearing deposit accounts include interest checking accounts, savings accounts, and money market accounts that do not have a contractual maturity. Truist utilizes a tiered deposit beta assumption framework that accounts for historically observed behaviors of clients and the Company. As interest rates rise, the deposit beta assumptions also rise to reflect increasing competition among banks as well as increased client demand for interest-bearing deposits. Based on the Federal funds target range at September 30, 2022 of 3.00% to 3.25%, Truist applies an average deposit beta of approximately 50% for any additional increases in the Federal funds rate. Truist also regularly conducts sensitivity analyses on other key variables, including noninterest-bearing deposits, to determine the impact these variables could have on the Company’s interest rate risk position. The predictive value of the simulation model depends upon the accuracy of the assumptions, but management believes that it provides helpful information for the management of interest rate risk.
6058 Truist Financial Corporation
The following table shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next 12 months assuming a gradual change in interest rates as described below. | | Table 19: Interest Sensitivity Simulation Analysis | |
Table 17: Interest Sensitivity Simulation Analysis | | Table 17: Interest Sensitivity Simulation Analysis |
Interest Rate Scenario | Interest Rate Scenario | | Annualized Hypothetical Percentage Change in Net Interest Income | Interest Rate Scenario | | Annualized Hypothetical Percentage Change in Net Interest Income |
Gradual Change in Prime Rate (bps) | Gradual Change in Prime Rate (bps) | | Prime Rate | | Gradual Change in Prime Rate (bps) | | Prime Rate | |
| Sep 30, 2021 | | Sep 30, 2020 | | Sep 30, 2021 | | Sep 30, 2020 | | Sep 30, 2022 | | Sep 30, 2021 | | Sep 30, 2022 | | Sep 30, 2021 |
Up 100 | Up 100 | | 4.25 | % | | 4.25 | % | | 4.08 | % | | 3.43 | % | Up 100 | | 7.25 | % | | 4.25 | % | | 0.37 | % | | 4.08 | % |
Up 50 | Up 50 | | 3.75 | | | 3.75 | | | 3.15 | | | 2.68 | | Up 50 | | 6.75 | | | 3.75 | | | 0.39 | | | 3.15 | |
No Change | No Change | | 3.25 | | | 3.25 | | | — | | | — | | No Change | | 6.25 | | | 3.25 | | | — | | | — | |
Down 25 (1) | | 3.00 | | | 3.00 | | | (1.22) | | | (1.62) | | |
Down 50 (1) | Down 50 (1) | | 2.75 | | | 2.75 | | | (1.71) | | | (1.94) | | Down 50 (1) | | 5.75 | | | 2.75 | | | (1.77) | | | (1.71) | |
Down 100 (1) | | Down 100 (1) | | 5.25 | | | 2.25 | | | (2.43) | | | (1.94) | |
(1)The Down 2550 and 50 rates are floored at100 rate scenarios incorporate a floor of one basis point and may not reflect Down 25 and 50 basis points for all rate indices.point.
Rate sensitivity increaseddecreased compared to prior periods, primarily driven by excess liquidityhigher starting rates, higher deposit betas as rates increase and hedging changes partially offset by an increase inmove into the investment securities portfolio.highest beta tiers, and the addition of forward starting swaps.
Management considers how the interest rate risk position could be impacted by changes in balance sheet mix. Liquidity in the banking industry has been very strong during the current economic cycle. Much of this liquidity increase has resulted in growth in noninterest-bearing demand deposits. Consistent with the industry, Truist has seen a significant increase in this funding source. The behavior of these deposits is one of the most important assumptions used in determining the interest rate risk position of Truist. A decrease in the amount of these deposits in the future would reduce the asset sensitivity of Truist’s balance sheet because the Company wouldmay increase interest-bearing funds to offset the loss of this advantageous funding source. Alternatively, the Company may reduce the size of its investment portfolio to offset the loss of noninterest-bearing demand deposits to limit the impact on the balance sheet’s asset sensitivity.
The following table shows the results of Truist’s interest-rate sensitivity position assuming the loss of additional demand deposits and an associated increase in managed rate deposits versus current projections under various interest rate scenarios. For purposes of this analysis, Truist modeled the incremental beta of managed rate deposits for the replacement of the demand deposits at 100%. | | Table 20: Deposit Mix Sensitivity Analysis | |
Table 18: Deposit Mix Sensitivity Analysis | | Table 18: Deposit Mix Sensitivity Analysis |
Gradual Change in Rates (bps) | Gradual Change in Rates (bps) | | Base Scenario at September 30, 2021 (1) | | Results Assuming a Decrease in Noninterest-Bearing Demand Deposits | Gradual Change in Rates (bps) | | Base Scenario at September 30, 2022 (1) | | Results Assuming a Decrease in Noninterest-Bearing Demand Deposits |
| td0 Billion | | $40 Billion | | td0 Billion | | $40 Billion |
Up 100 | Up 100 | | 4.08 | % | | 3.22 | % | | 2.37 | % | Up 100 | | 0.37 | % | | (0.29) | % | | (0.96) | % |
Up 50 | Up 50 | | 3.15 | | | 2.52 | | | 1.90 | | Up 50 | | 0.39 | | | (0.10) | | | (0.58) | |
(1)The base scenario is equal to the annualized hypothetical percentage change in net interest income at September 30, 20212022 as presented in the preceding table.
Truist also uses an EVE analysis to focus on longer-term projected changes in asset and liability values given potential changes in interest rates. This measure allows Truist to analyze interest rate risk that falls outside the net interest income simulation period. The EVE model is a discounted cash flow of the portfolio of assets, liabilities, and derivative instruments. The difference in the present value of assets minus the present value of liabilities is defined as EVE.
The following table shows the effect that the indicated changes in interest rates would have on EVE: | | | | | | | | | | | | | | | | | | |
Table 21: EVE Simulation Analysis |
Change in Interest Rates (bps) | | | | Hypothetical Percentage Change in EVE |
| | | | | Sep 30, 2021 | | Sep 30, 2020 |
| | | | | | | | |
Up 100 | | | | | | (5.1) | % | | 7.4 | % |
No Change | | | | | | — | | | — | |
| | | | | | | | |
Down 100 | | | | | | (3.5) | | | (6.8) | |
| | | | | | | | |
| | | | | | | | |
Truist uses financial instruments including derivatives to manage interest rate risk related to securities, commercial loans, MSRs, and mortgage banking operations, long-term debt, and other funding sources. Truist hedges a portion of its AFS securities to reduce mark-to-market volatility within AOCI and also to increase its overall asset sensitivity position. As of September 30, 2021, the Company had $24.0 billion of pay-fixed swaps associated with this hedging program that are accounted for as fair value hedges. In the third quarter of 2021, this hedging program reduced net interest income by $17 million. Truist also useshas utilized derivatives to facilitate transactions on behalf of its clients and as part of associated hedging activities. As of September 30, 2021,2022, Truist had derivative financial instruments outstanding with notional amounts totaling $329.9$336.1 billion, with an associated net negative fair value of $2.4$2.3 billion. See “Note 16. Derivative Financial Instruments” for additional disclosures.
Truist Financial Corporation 61LIBOR Transition
LIBOR in its current form will no longer be available after 2021. For most tenors of U.S. dollar LIBOR, the administrator of LIBOR extended publication until June 30, 2023. Tenors used infrequently by Truist, including one week and two month U.S. dollar LIBOR and all non-U.S. dollar LIBOR, will ceaseceased publication at December 31, 2021, based on this guidance. Truist has U.S. dollar LIBOR-based contracts that extend beyond June 30, 2023. In accordance with regulatory guidance, production of new U.S. dollarthe October 20, 2021 interagency Joint Statement on Managing the LIBOR contracts will cease before the end of 2021.transition. To prepare for the transition to an alternative reference rate, management formed a cross-functional project team to address the LIBOR transition. The project team performed an assessment to identify the potential risks related to the transition from LIBOR to a new index. The project teamindex or multiple indices and provides updates to Executive Leadership and the Board. As of September 30, 2022, Truist had outstanding LIBOR-based instruments that mature after June 30, 2023, including loan and lease exposures totaling approximately $148 billion, notional derivative exposure totaling approximately $135 billion, long-term debt of $1.1 billion, and preferred stock of $1.5 billion. These amounts are inclusive of remediated contracts, which contain adequate fallback language for the transition.
Contract fallback language for existing loans and leases is under reviewhas largely been reviewed and certain contracts will need updated provisions forrequire amendments to support the transition. The Company has plans for impactedtransition away from LIBOR. Impacted lines of business to remediatehave started remediating these contracts train impacted teammates, and provide timely notice to impacted clients.include standardized fallback language, or amending contracts to new reference rates at maturities or based on client request. Current fallback language used for new, renewed, and modifiedto remediate contracts that mature after June 30, 2023 is generally consistent with ARRC recommendations and includes use of “hardwired fallback” language, which will transition loans to a SOFR based rate after June 30, 2023.
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The progress and approach to remediation will vary based on the type of contract and existing language used in the agreement. For commercial lending and general consumer lending, a significant number of remaining LIBOR contracts will require client outreach and remediation. Through mid-2022, the Company’s primary focus was contract remediation for maturities earlier than June 30, 2023 and expanding usage of alternative reference rates. Efforts have shifted to amend and remediate contracts, excluding mortgage and student loans, that mature post June 30, 2023 ($139 billion), which will continue to be the focus during the remainder of 2022. Truist has determined that adjustable rate mortgage products ($3.6 billion) have consistent and adequate fallback language to transition away from LIBOR in line with industry expectations; therefore, these contracts will not require remediation. Remediation of student loans ($5.2 billion) will follow pending guidance from the Department of Education on the replacement rate for payment allowances on certain student loans and recent guidance from the CFPB to allow transition to “comparable rates,” in the private student loan portfolio, where appropriate.LIBOR is used directly. Certain derivatives without a clearly defined or practicable replacement benchmark rate will use the recent Federal legislation to replace LIBOR with a SOFR-based rate that will be established by FRB rulemaking and following the ISDA Protocol for transition. This legislation will also provide additional administrative benefit for a small portion of the commercial and consumer lending portfolios where contracts do not contain fallback language and have not yet been remediated, providing a remediation path to a SOFR based rate.
Training has been provided for impacted teammates and will continue during 2022. Truist will continue to provide timely notices and information to impacted clients about the transition during 2022 and the first half of 2023. Truist continues to manage the impact of these contracts and other financial instruments, systems implications, hedging strategies, and related operational and market risks on established project plans for business and operational readiness forto support the transition. Market risks associated
As of December 31, 2021, Truist ceased entering into new contracts with this change are dependenta LIBOR reference rate for all product offerings, except on the alternative reference rates available and market conditions at transition. In 2020, Truist began offering SOFR-based lending solutions to wholesale and consumer clients and entered into SOFR-based derivative contracts.a limited basis, as permissible. The Company hasis actively been using SOFR as a reference rate in various loan contracts and has originated approximately $3$80 billion of loans, issued $8.4 billion of long-term debt, and has $91 billion in notional derivative exposure using this alternative reference rate as of September 30, 2021 using this alternative reference rate.2022. Alternatives, such as SOFR, may react differently from LIBOR in times of economic stress. Truist expects SOFR to become a more commonly-usedbe the primary pricing benchmark used across the industry and will continue to offer additional SOFR based productsproducts. Market risks associated with the transition to alternative reference rates are dependent on market conditions as loans are transitioned to alternative reference rates during 2021. Other2022 and early 2023. Additional alternative reference rates, such as Bloomberg Short Term Bank Yield will be supported based on market demand. Other emerging credit sensitive rates will be evaluated as additional alternatives for LIBOR.LIBOR based on market developments. For a further discussion of the various risks associated with the potential cessation of LIBOR and the transition to alternative reference rates, refer to the section titled “Item1A. Risk Factors” in the Form 10-K for the year ended December 31, 2020.2021.
Market risk from trading activities
As a financial intermediary, Truist provides its clients access to derivatives, foreign exchange and securities markets, which generate market risks. Trading market risk is managed using a comprehensive risk management approach, which includes measuring risk using VaR, stress testing, and sensitivity analysis. Risk metrics are monitored against a suite of limits on a daily basis at both the trading desk level and at the aggregate portfolio level, which is intended to ensure that exposures are in line with Truist’s risk appetite.
Truist is also subject to risk-based capital guidelines for market risk under the Market Risk Rule.
Covered Trading Positions
Covered positions subject to the Market Risk Rule include trading assets and liabilities, specifically those held for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements or to lock in arbitrage profits. Truist’s trading portfolio of covered positions results primarily from market making and underwriting services for the Company’s clients, as well as associated risk mitigating hedging activity. The trading portfolio, measured in terms of VaR, consists primarily of four sub-portfolios of covered positions: (i) credit trading, (ii) fixed income securities, (iii) interest rate derivatives, and (iv) equity derivatives. As a market maker across different asset classes, Truist’s trading portfolio also contains other sub-portfolios, including foreign exchange, loan trading, and commodity derivatives; however, these portfolios do not generate material trading risk exposures.
Valuation policies and methodologies exist for all trading positions. Additionally, these positions are subject to independent price verification. See “Note 16. Derivative Financial Instruments,” “Note 15. Fair Value Disclosures,” and “Critical Accounting Policies” herein for discussion of valuation policies and methodologies.
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Securitizations
As of September 30, 2021,2022, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule was $38$23 million, all of which were non-agency asset backed securities positions. Consistent with the Market Risk Rule requirements, the Company performs pre-purchase due diligence on each securitization position to identify the characteristics including, but not limited to, deal structure and the asset quality of the underlying assets, that materially affect valuation and performance. Securitization positions are subject to Truist’s comprehensive risk management framework, which includes daily monitoring against a suite of limits. There were no off-balance sheet securitization positions during the reporting period.
Correlation Trading Positions
The trading portfolio of covered positions did not contain any correlation trading positions as of September 30, 2021.2022.
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VaR-Based Measures
VaR measures the potential loss of a given position or portfolio of positions at a specified confidence level and time horizon. Truist utilizes a historical VaR methodology to measure and aggregate risks across its covered trading positions. For risk management purposes, the VaR calculation is based on a historical simulation approach and measures the potential trading losses using a one-day holding period at a one-tail, 99% confidence level. For Market Risk Rule purposes, the Company calculates VaR using a 10-day holding period and a 99% confidence level. Due to inherent limitations of the VaR methodology, such as the assumption that past market behavior is indicative of future market performance, VaR is only one of several tools used to measure and manage market risk. Other tools used to actively manage market risk include stress testing, scenario analysis, and stop loss limits.
The trading portfolio’s VaR profile is influenced by a variety of factors, including the size and composition of the portfolio, market volatility, and the correlation between different positions. A portfolio of trading positions is typically less risky than the sum of the risk from each of the individual sub-portfolios, because, under normal market conditions, risk within each category partially offsets the exposure to other risk categories. The following table summarizes certain VaR-based measures for the three months and nine months ended September 30, 20212022 and 2020. In the third quarter of 2021,2021. Average one and ten dayten-day VaR measures declinedfor the three months ended September 30, 2022 increased from the same period of last year, primarily driven by higher market volatility in 2022. Maximum one and ten-day VaR measures for the nine months ended September 30, 2022 were lower than last year as heightened market volatility experienced during March 2020 aged out of the 12-monthwas used for measuring VaR look-back window. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 22: VaR-based Measures | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | | | | | |
(Dollars in millions) | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period |
VaR-based Measures: | | | | | | | | | | | | | | | |
Maximum | $ | 6 | | | $ | 3 | | | $ | 65 | | | $ | 11 | | | $ | 68 | | | $ | 16 | | | $ | 65 | | | $ | 11 | |
Average | 5 | | | 2 | | | 31 | | | 6 | | | 16 | | | 5 | | | 23 | | | 5 | |
Minimum | 3 | | | 2 | | | 13 | | | 3 | | | 3 | | | 1 | | | 3 | | | 1 | |
Period-end | 6 | | | 3 | | | 46 | | | 8 | | | 6 | | | 3 | | | 46 | | | 8 | |
VaR by Risk Class: | | | | | | | | | | | | | | | |
Interest Rate Risk | | | 2 | | | | | 1 | | | | | 2 | | | | | 1 | |
Credit Spread Risk | | | 4 | | | | | 10 | | | | | 4 | | | | | 10 | |
Equity Price Risk | | | 2 | | | | | 2 | | | | | 2 | | | | | 2 | |
Foreign Exchange Risk | | | — | | | | | — | | | | | — | | | | | — | |
Portfolio Diversification | | | (5) | | | | | (6) | | | | | (5) | | | | | (6) | |
Period-end | | | 3 | | | | | 8 | | | | | 3 | | | | | 8 | |
until March 2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 19: VaR-based Measures | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
(Dollars in millions) | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period |
VaR-based Measures: | | | | | | | | | | | | | | | |
Maximum | $ | 27 | | | $ | 7 | | | $ | 6 | | | $ | 3 | | | $ | 38 | | | $ | 14 | | | $ | 68 | | | $ | 16 | |
Average | 18 | | | 5 | | | 5 | | | 2 | | | 17 | | | 5 | | | 16 | | | 5 | |
Minimum | 13 | | | 4 | | | 3 | | | 2 | | | 6 | | | 3 | | | 3 | | | 1 | |
Period-end | 20 | | | 6 | | | 6 | | | 3 | | | 20 | | | 6 | | | 6 | | | 3 | |
VaR by Risk Class: | | | | | | | | | | | | | | | |
Interest Rate Risk | | | 8 | | | | | 2 | | | | | 8 | | | | | 2 | |
Credit Spread Risk | | | 7 | | | | | 4 | | | | | 7 | | | | | 4 | |
Equity Price Risk | | | 2 | | | | | 2 | | | | | 2 | | | | | 2 | |
Foreign Exchange Risk | | | — | | | | | — | | | | | — | | | | | — | |
Portfolio Diversification | | | (11) | | | | | (5) | | | | | (11) | | | | | (5) | |
Period-end | | | 6 | | | | | 3 | | | | | 6 | | | | | 3 | |
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Stressed VaR-based measures
Stressed VaR, another component of market risk capital, is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio. The following table summarizes Stressed VaR-based measures: | Table 23: Stressed VaR-based Measures - 10 Day Holding Period | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
Table 20: Stressed VaR-based Measures - 10 Day Holding Period | | Table 20: Stressed VaR-based Measures - 10 Day Holding Period | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
(Dollars in millions) | (Dollars in millions) | 2021 | | 2020 | | 2021 | | 2020 | (Dollars in millions) | 2022 | | 2021 | | 2022 | | 2021 |
Maximum | Maximum | $ | 82 | | | $ | 65 | | | $ | 91 | | | $ | 65 | | Maximum | $ | 91 | | | $ | 82 | | | $ | 109 | | | $ | 91 | |
Average | Average | 52 | | | 31 | | | 55 | | | 31 | | Average | 65 | | | 52 | | | 69 | | | 55 | |
Minimum | Minimum | 31 | | | 14 | | | 26 | | | 13 | | Minimum | 48 | | | 31 | | | 40 | | | 26 | |
Period-end | Period-end | 57 | | | 46 | | | 57 | | | 46 | | Period-end | 65 | | | 57 | | | 65 | | | 57 | |
Compared to the prior year, periods, stressed VaR measures increased in the third quarter of 2021 primarily due to the normalization ofhigher market making inventory levels this year compared to the same periods of 2020 when inventory levels were lower due to the market volatility.in 2022.
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Specific Risk Measures
Specific risk is a measure of idiosyncratic risk that could result from risk factors other than broad market movements (e.g. default or event risks). The Market Risk Rule provides fixed risk weights under a standardized measurement method while also allowing a model-based approach, subject to regulatory approval. Truist utilizes the standardized measurement method to calculate the specific risk component of market risk regulatory capital. As such, incremental risk capital requirements do not apply.
VaR Model Backtesting
In accordance with the Market Risk Rule, the Company evaluates the accuracy of its VaR model through daily backtesting by comparing aggregate daily trading gains and losses (excluding fees, commissions, reserves, net interest income, and intraday trading) from covered positions with the corresponding daily VaR-based measures generated by the model. As illustrated in the following graph, thereVaR measures briefly increased in the first quarter of 2022 due to the increase in market volatility that normalized towards the end of the quarter. There were no Company-wide VaR backtesting exceptions during the twelve months ended September 30, 2021.2022. The total number of Company-wide VaR backtesting exceptions over the preceding twelve months is used to determine the multiplication factor for the VaR-based capital requirement under the Market Risk Rule. The capital multiplication factor increases from a minimum of three to a maximum of four, depending on the number of exceptions. All Company-wide VaR backtesting exceptions are thoroughly reviewed in the context of VaR model use and performance. There was no change in the capital multiplication factor over the preceding twelve months.
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Model Risk Management
MRM is responsible for the independent model validation of all decision tools and models including trading market risk models. The validation activities are conducted in accordance with MRM policy, which incorporates regulatory guidance related to the evaluation of model conceptual soundness, ongoing monitoring, and outcomes analysis. As part of ongoing monitoring efforts, the performance of all trading risk models are reviewed regularly to preemptively address emerging developments in financial markets, assess evolving modeling approaches, and to identify potential model enhancement.
Stress Testing
The Company uses a comprehensive range of stress testing techniques to help monitor risks across trading desks and to augment standard daily VaR and other risk limits reporting. The stress testing framework is designed to quantify the impact of extreme, but plausible, stress scenarios that could lead to large unexpected losses. Stress tests include simulations for historical repeats and hypothetical risk factor shocks. All trading positions within each applicable market risk category (interest rate risk, equity risk, foreign exchange rate risk, credit spread risk, and commodity price risk) are included in the Company’s comprehensive stress testing framework. Management reviews stress testing scenarios on an ongoing basis and makes updates, as necessary, which is intended to ensure that both current and emerging risks are captured appropriately. Management also utilizes stress analyses to support the Company’s capital adequacy assessment standards. See the “Capital” section of MD&A for additional discussion of capital adequacy.
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Liquidity
Liquidity represents the continuing ability to meet funding needs, including deposit withdrawals, repayment of borrowings and other liabilities, and funding of loan commitments. In addition to the level of liquid assets, such as cash, cash equivalents, and AFS securities, other factors affect the ability to meet liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity, growing core deposits, loan repayment, and the ability to securitize or package loans for sale.
Truist monitors the ability to meet client demand for funds under both normal and stressed market conditions. In considering its liquidity position, management evaluates Truist’s funding mix based on client core funding, client rate-sensitive funding, and national markets funding. In addition, management evaluates exposure to rate-sensitive funding sources that mature in one year or less. Management also measures liquidity needs against 30 days of stressed cash outflows for Truist and Truist Bank. To ensure a strong liquidity position and compliance with regulatory requirements, management maintains a liquid asset buffer of cash on hand and highly liquid unencumbered securities. As
Internal Liquidity Stress Testing
Liquidity stress testing is designed to ensure that Truist and Truist Bank have sufficient liquidity for a variety of September 30, 2021institution-specific and December 31, 2020,market-wide adverse scenarios. Each liquidity stress test scenario applies defined assumptions to execute sources and uses of liquidity over varying planning horizons. The types of expected liquidity uses during a stressed event may include deposit attrition, contractual maturities, reductions in unsecured and secured funding, and increased draws on unfunded commitments. To mitigate liquidity outflows, Truist has identified sources of liquidity; however, access to these sources of liquidity could be affected within a stressed environment.
Truist maintains a liquidity buffer of cash on hand and highly liquid unencumbered securities that is sufficient to meet the projected net stressed cash-flow needs and maintain compliance with regulatory requirements. The liquidity buffer consists of unencumbered highly liquid assets and Truist’s liquid assetliquidity buffer is substantially the same in composition to what qualifies as HQLA under the LCR Rule.
Contingency Funding Plan
Truist has a percentcontingency funding plan designed to ensure that liquidity sources are sufficient to meet ongoing obligations and commitments, particularly in the event of total assets, was 24.5%a liquidity contraction. This plan is designed to examine and 20.2%, respectively.quantify the organization’s liquidity under the various internal liquidity stress scenarios and is periodically tested to assess the plan’s reliability. Additionally, the plan provides a framework for management and other teammates to follow in the event of a liquidity contraction or in anticipation of such an event. The plan addresses authority for activation and decision making, liquidity options, and the responsibilities of key departments in the event of a liquidity contraction.
LCR and HQLA
The LCR rule directs large U.S. banking organizations to hold unencumbered high-quality liquid assetsrequires that Truist and Truist Bank maintain an amount of eligible HQLA that is sufficient to withstand projected 30-daymeet its estimated total net cash outflows as defined underover a prospective 30 calendar-day period of stress. Eligible HQLA, for purposes of calculating the LCR, is the amount of unencumbered HQLA that satisfy operational requirements of the LCR rule. As of January 1, 2020, Truist isand Truist Bank are subject to the Category III reduced LCR requirements. Truist held average weighted eligible HQLA of $88.6 billion and Truist’s average LCR was 114%111% for the three months ended September 30, 2021, well above the regulatory minimum of 100%.2022.
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Effective July 2021, Truist became subject to final rules implementing the NSFR, which are designed to ensure that banking organizations maintain a stable, long-term funding profile in relation to their asset composition and off-balance sheet activities. At September 30, 2021,2022, the Company was compliant with this requirement.
The ability to raise funding at competitive prices is affected by the rating agencies’ viewsSources of the Parent Company’s and Truist Bank’s credit quality, liquidity, capital, and earnings. Management meets with the rating agencies on a regular basis to discuss current outlooks. During the nine months ended September 30, 2021, Fitch Ratings, S&P Global Ratings, DBRS Morningstar, and Moody’s Investors Service all affirmed their ratings and provided updates to their rating outlooks for the Company and the Bank as further detailed below.Funds
On May 7, 2021, Fitch Ratings affirmedManagement believes current sources of liquidity are sufficient to meet Truist’s on- and off-balance sheet obligations. Truist funds its balance sheet through diverse sources of funding including client deposits, secured and unsecured capital markets funding, and shareholders’ equity. Truist Bank’s primary source of funding is client deposits. Continued access to client deposits is highly dependent on public confidence in the ratingsstability of the Parent Company and Truist Bank and revised the rating outlookits ability to “stable” from “negative.” The revisionreturn funds to the rating outlook reflects the rating agency’s view that the Company’s diverse business model and strategy execution will drive stable earnings performance that supports its credit ratings. The revised rating outlook also reflects increased confidence in a U.S. economic recovery, which reduces the likelihood of the downside scenario that was contemplatedclients when Fitch Ratings revised the ratings outlook to “negative” in April 2020.requested.
On May 24, 2021, S&P Global Ratings affirmed the ratings of the Parent Company and Truist Bank maintains a number of diverse funding sources to meet its liquidity requirements. These sources include unsecured borrowings from the capital markets through the issuance of senior or subordinated bank notes, institutional CDs, overnight and revised the rating outlookterm Federal funds markets, and retail brokered CDs. Truist Bank also maintains access to “positive” from “stable”, citing the stabilization in U.S. economic trendssecured borrowing sources including FHLB advances, repurchase agreements, and the easing industry risk inFRB discount window. Available investment securities could be pledged to create additional secured borrowing capacity. The following table presents a summary of Truist Bank’s available secured borrowing capacity and eligible cash at the U.S. banking system. The rating agency also noted that the positive outlook reflects the view that, as a merged entity, Truist’s better geographic diversity, increased market position, improved earnings power, and higher technology spending provide a sustainable competitive advantage, and that the financial and credit positives of the merged entity could outweigh the operational risks of integrating two large regional banks.FRB:
| | | | | | | | | | | |
Table 21: Selected Liquidity Sources | | |
(Dollars in millions) | Sep 30, 2022 | | Dec 31, 2021 |
Unused borrowing capacity: | | | |
FRB | $ | 49,525 | | | $ | 52,170 | |
FHLB | 28,548 | | | 49,244 | |
Available investment securities (after haircuts) | 96,894 | | | 116,600 | |
Available secured borrowing capacity | 174,967 | | | 218,014 | |
Eligible cash at the FRB | 16,699 | | | 14,714 | |
Total | $ | 191,666 | | | $ | 232,728 | |
On June 10,At September 30, 2022, Truist Bank’s available secured borrowing capacity represented approximately 3.7 times the amount of wholesale funding maturities in one-year or less. FHLB unused borrowing capacity was $28.5 billion at September 30, 2022, down from $49.2 billion at December 31, 2021 DBRS Morningstar confirmed the ratings of the Parent Company and Truist Bank and revised the trend for all ratingsprimarily due to “positive” from “stable,” citing substantial progress to date with the Merger integration and the rating agency’s view that the impact of the economic fallout from the coronavirus pandemic on Truist’s asset quality and capital will continue to be manageable.increases in short-term borrowings.
On July 12, 2021, Moody’s Investors Service upgraded Truist Bank’s long-term subordinated debt rating to A2 from A3, and downgraded Truist Bank’s long-term bank deposit rating to Aa3 from Aa2. The rating actions were driven by revisions to the rating agency’s advanced loss given failure analysis within its updated methodology published on July 9, 2021.
See the “Liquidity” section of MD&A in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding credit ratings.
Parent Company
The Parent Company serves as the primary source of capital for the operating subsidiaries. The Parent Company’s assets consist primarily of cash on deposit with Truist Bank, equity investments in subsidiaries, advances to subsidiaries, and notes receivable from subsidiaries. The principal obligations of the Parent Company are payments on long-term debt. The main sources of funds for the Parent Company are dividends and management fees from subsidiaries, repayments of advances to subsidiaries, and proceeds from the issuance of equity and long-term debt. The primary uses of funds by the Parent Company are investments in subsidiaries, advances to subsidiaries, dividend payments to common and preferred shareholders, repurchases of common stock, and payments on long-term debt.
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See “Note 22. Parent Company Financial Information” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for additional information regarding dividends from subsidiaries and debt transactions.
Access to funding at the Parent Company is more sensitive to market disruptions. Therefore, Truist prudently manages cash levels at the Parent Company to cover a minimum of one year of projected cash outflows which includes unfunded external commitments, debt service, common and preferred dividends and scheduled debt maturities, without the benefit of any new cash inflows. Truist maintains a significant buffer above the projected one year of cash outflows. In determining the buffer, Truist considers cash requirements for common and preferred dividends, unfunded commitments to affiliates, serving as a source of strength to Truist Bank, and being able to withstand sustained market disruptions that could limit access to the capital markets. At September 30, 20212022 and December 31, 2020,2021, the Parent Company had 3632 months and 4335 months, respectively, of cash on hand to satisfy projected cash outflows, and 2022 months and 2219 months, respectively, when including the payment of common stock dividends.
Truist BankCredit Ratings
Truist carefully manages liquidity risk at Truist Bank. Truist Bank’s primary sourceCredit ratings are forward-looking opinions of funding is client deposits. Continued accessrating agencies as to client deposits is highly dependent on public confidence in the stability of Truist Bank and itsCompany’s ability to return funds to clients when requested.
Truist Bank maintains a number of diverse funding sources to meet its liquidity requirements. These sources include unsecured borrowings fromfinancial commitments and repay its securities and obligations in accordance with their terms of issuance. Credit ratings influence both borrowing costs and access to the capital markets throughmarkets. The Company’s credit ratings are continuously monitored by the issuance of senior or subordinated bank notes, institutional CDs, overnightrating agencies and term Federal funds markets,are subject to change at any time. As Truist seeks to maintain high-quality credit ratings, management meets with the major rating agencies on a regular basis to provide financial and retail brokered CDs. Truist Bank also maintains accessbusiness updates and to secured borrowing sources including FHLB advances, repurchase agreements,discuss current outlooks and the FRB discount window. The following table presents a summary of Truist Bank’s available secured borrowing capacity and eligible cash at the FRB:
| | | | | | | | | | | |
Table 24: Liquidity Sources | | |
(Dollars in millions) | Sep 30, 2021 | | Dec 31, 2020 |
Unused borrowing capacity: | | | |
FRB | $ | 51,457 | | | $ | 52,831 | |
FHLB | 52,459 | | | 52,274 | |
AFS securities | 120,462 | | | 93,623 | |
Available secured borrowing capacity | 224,378 | | | 198,728 | |
Eligible cash at the FRB | 14,674 | | | 13,437 | |
Total | $ | 239,052 | | | $ | 212,165 | |
At September 30, 2021, Truist Bank’s available secured borrowing capacity represented approximately 10.8 times the amount of wholesale funding maturities in one-year or less.trends.
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Contractual Obligations, Commitments, Contingent Liabilities,Recent changes in the Company’s credit ratings and Off-Balance Sheet Arrangementsoutlooks include:
On August 15, 2022, DBRS Morningstar upgraded the ratings of Truist, including the Long-Term Issuer Rating to “AA (low)” from “A (high).” DBRS Morningstar also upgraded the ratings of Truist Bank, including the Long-Term Issuer Rating to “AA” from “AA (low).” The trend for all ratings was revised to “Stable” from “Positive.” The rating actions reflected the scale, quality, and diversity of Truist’s franchise; the completion of the Merger integration; Truist’s diversified products and geography; and the Company’s sound balance sheet fundamentals and conservative risk profile.
Refer to
After the end of the third quarter, on October 21, 2022, Fitch Ratings affirmed the ratings of Truist and Truist Bank, including the long-term and short-term issuer default ratings at “A+” and “F1,” respectively, for both entities. Fitch Ratings also maintained a “stable” ratings outlook for all ratings. In affirming the ratings, Fitch cited Truist’s diverse business model, conservative credit culture, and the completion of the Merger integration.
See Item 1A, “Risk Factors” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20202021 for discussion with respect to Truist’s quantitativeadditional information regarding factors that influence credit ratings and qualitative disclosures about its fixed and determinable contractual obligations. Truist’s commitments include investmentspotential risks that could materialize in affordable housing projects throughout its market area, renewable energy credits, private equity funds, derivative contracts to manage various financial risks, as well as other commitments. Refer to “Note 14. Commitments and Contingencies,” “Note 15. Fair Value Disclosures,” and “Note 16. Derivative Financial Instruments”the event of downgrade in this Form 10-Q, and “Note 16. Commitments and Contingencies” of the Annual Report on Form 10-K for further discussion of these commitments.Company’s credit ratings.
Capital
The maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. Truist’s principal goals related to the maintenance of capital are to provide adequate capital to support Truist’s risk profile consistent with the Board-approved risk appetite, provide financial flexibility to support future growth and client needs, comply with relevant laws, regulations, and supervisory guidance, achieve optimal credit ratings for Truist and its subsidiaries, remain a source of strength for its subsidiaries, and provide a competitive return to shareholders. Risk-based capital ratios, which include CET1 capital, Tier 1 capital, and Total capital are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.
Truist regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plans and stress testing results to the banking regulators. Management regularly monitors the capital position of Truist on both a consolidated and bank-level basis. In this regard, management’s overriding policyobjective is to maintain capital at levels that are in excess of internal capital targets, which are above the regulatory “well capitalized” minimums. Management evaluateshas implemented stress capital ratio minimum targets to evaluate whether capital ratios calculated after the effect of alternative capital actions are likely to remain above minimums specified by the FRB for the annual CCAR process. Breaches of stressed minimum targets prompt a review of the planned capital actions included in Truist’s capital plan. | Table 25: Capital Requirements | |
Table 22: Capital Requirements | | Table 22: Capital Requirements |
| | Minimum Capital | | Well Capitalized | | Minimum Capital Plus Stress Capital Buffer (1) | | | Minimum Capital | | Well Capitalized | | Minimum Capital Plus Stress Capital Buffer (1) | |
| | | Truist | | Truist Bank | | | | Minimum Capital | Truist | | Truist Bank | | Minimum Capital Plus Stress Capital Buffer (1) |
CET1 | CET1 | 4.5 | % | | NA | | 6.5 | % | | 7.2 | % | | CET1 | 4.5 | % | | NA | 6.5 | % | | 7.0 | % | |
Tier 1 capital | Tier 1 capital | 6.0 | | | 6.0 | % | | 8.0 | | | 8.7 | | | Tier 1 capital | 6.0 | | | 6.0 | % | | 8.0 | | | 8.5 | | |
Total capital | Total capital | 8.0 | | | 10.0 | | | 10.0 | | | 10.7 | | | Total capital | 8.0 | | | 10.0 | | | 10.0 | | | 10.5 | | |
Leverage ratio | Leverage ratio | 4.0 | | | NA | | 5.0 | | | NA | | Leverage ratio | 4.0 | | | NA | | 5.0 | | | NA | |
Supplementary leverage ratio | Supplementary leverage ratio | 3.0 | | | NA | | NA | | NA | | Supplementary leverage ratio | 3.0 | | | NA | | NA | | NA | |
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(1)Reflects a SCB of 2.7%2.5% applicable to Truist throughas of September 30, 2021.
Truist completed2022. Truist’s SCB, received in the 2021 CCAR process, and received a SCB of 2.5% for the periodis effective from October 1, 2021 to September 30, 2022. Under the 2022 CCAR process, Truist increased the common dividend 7% during the third quarter of 2021 to $0.48 per share. Truist continues to target a CET1 ratio of approximately 9.75% over the near-term. As previously communicated, the Company expects to be able to, with appropriate approvalswas notified its SCB requirement would remain 2.5% from its Board of Directors, deploy approximately $4 billion to $5 billion of capital (either in the form of share repurchases or acquisitions) between 3Q21 and 3Q22. During the third quarter of 2021, Truist completed the acquisition of Constellation Affiliated Partners and announced the acquisition of Service Finance, LLC, reducing the amount of capital deployment available for acquisitions or share repurchases to approximately $1 billion to $2 billionOctober 1, 2022 through 3Q22. Truist resumed repurchasing shares and expects to consume approximately $500 million of this capacity via share repurchases in the fourth quarter of 2021 reflecting the Company’s strong capital position, and the reduced integration risk with successful migration of heritage BB&T retail and commercial clients to the Truist ecosystem.September 30, 2023.
Truist Financial Corporation 6765
Truist’s capital ratios are presented in the following table: | | Table 26: Capital Ratios - Truist Financial Corporation | |
| Table 23: Capital Ratios - Truist Financial Corporation | | Table 23: Capital Ratios - Truist Financial Corporation |
(Dollars in millions, except per share data, shares in thousands) | (Dollars in millions, except per share data, shares in thousands) | | Sep 30, 2021 | | Dec 31, 2020 | (Dollars in millions, except per share data, shares in thousands) | | Sep 30, 2022 | | Dec 31, 2021 |
Risk-based: | Risk-based: | | (preliminary) | | | Risk-based: | | (preliminary) | | |
CET1 capital to risk-weighted assets | CET1 capital to risk-weighted assets | | 10.1 | % | | 10.0 | % | CET1 capital to risk-weighted assets | | 9.1 | % | | 9.6 | % |
Tier 1 capital to risk-weighted assets | Tier 1 capital to risk-weighted assets | | 11.9 | | | 12.1 | | Tier 1 capital to risk-weighted assets | | 10.7 | | | 11.3 | |
Total capital to risk-weighted assets | Total capital to risk-weighted assets | | 13.9 | | | 14.5 | | Total capital to risk-weighted assets | | 12.6 | | | 13.2 | |
Leverage ratio | Leverage ratio | | 9.0 | | | 9.6 | | Leverage ratio | | 8.5 | | | 8.7 | |
Supplementary leverage ratio | Supplementary leverage ratio | | 7.8 | | | 8.7 | | Supplementary leverage ratio | | 7.3 | | | 7.4 | |
Non-GAAP capital measure (1): | Non-GAAP capital measure (1): | | | | | Non-GAAP capital measure (1): | | | | |
Tangible common equity per common share | Tangible common equity per common share | | $ | 26.34 | | | $ | 26.78 | | Tangible common equity per common share | | $ | 18.36 | | | $ | 25.47 | |
Calculation of tangible common equity (1): | Calculation of tangible common equity (1): | | | | | Calculation of tangible common equity (1): | | | | |
Total shareholders’ equity | Total shareholders’ equity | | $ | 68,900 | | | $ | 70,912 | | Total shareholders’ equity | | $ | 60,811 | | | $ | 69,271 | |
Less: | Less: | | | | | Less: | | | | |
Preferred stock | Preferred stock | | 6,673 | | | 8,048 | | Preferred stock | | 6,673 | | | 6,673 | |
Noncontrolling interests | Noncontrolling interests | | — | | | 105 | | Noncontrolling interests | | 23 | | | — | |
Goodwill and intangible assets, net of deferred taxes | Goodwill and intangible assets, net of deferred taxes | | 27,066 | | | 26,629 | | Goodwill and intangible assets, net of deferred taxes | | 29,752 | | | 28,772 | |
Tangible common equity | Tangible common equity | | $ | 35,161 | | | $ | 36,130 | | Tangible common equity | | $ | 24,363 | | | $ | 33,826 | |
Risk-weighted assets | Risk-weighted assets | | $ | 383,073 | | | $ | 379,153 | | Risk-weighted assets | | $ | 421,873 | | | $ | 390,886 | |
Common shares outstanding at end of period | Common shares outstanding at end of period | | 1,334,892 | | | 1,348,961 | | Common shares outstanding at end of period | | 1,326,766 | | | 1,327,818 | |
(1)Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses these measures to assess the quality of capital and returns relative to balance sheet risk. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.
Capital ratios remained strong compared to the regulatory requirements for well capitalized banks. ForTruist declared common dividends of $0.52 per share during the nine months endedthird quarter of 2022, an increase of 8% compared to the prior quarter. The dividend payout ratio for the third quarter of 2022 was 45%. Truist did not repurchase any shares in the third quarter of 2022.
Truist CET1 ratio was 9.1% as of September 30, 2021,Truist paid $1.8 billion in common stock dividends or $1.38 per share,2022. The decline compared to the June 30, 2022 CET1 ratio primarily reflects the BenefitMall acquisition and completed $1.1 billion in common share repurchases. The dividend and total payout ratios for the nine months ended September 30, 2021 were 41% and 66%, respectively. Truist also redeemed $1.4 billion of preferred stock to optimize the Company’s capital position.strong loan growth.
Share Repurchase Activity | | | | | | | | | | | | | | | | | | | | | | | |
Table 27:24: Share Repurchase Activity |
(Dollars in millions, except per share data, shares in thousands) | Total Number of Shares RepurchasedPurchased (1) | | Average Price Paid Per Share (2) | | Total Number of Shares Repurchased Pursuant to Publicly-Announced PlanPurchased as part of Publicly Announced Plans (3) | | Maximum RemainingApproximate Dollar Value of Shares Available for Repurchase Pursuant to Publicly-Announced Planthat may yet be Purchased Under the Plans (3) |
July 20211, 2022 to July 31, 2022 | — | | | $ | — | | | — | | | $ | 3,0652,315 | |
August 20211, 2022 to August 31, 2022 | — | | | — | | | — | | | 3,0652,315 | |
September 20211, 2022 to September 30, 2022 | — | | | — | | | — | | | 3,0652,315 | |
Total | — | | | — | | | — | | | |
(1)Includes shares exchanged or surrendered in connection with the exercise of equity-based awards under equity-based compensation plans.
(2)Excludes commissions.
(3)Pursuant to the 2020 Repurchase Plan, announced in December 2020 and amended in June 2021, authorizing up to $2.0$4.2 billion of share repurchases beginning inthrough September 30, 2022; the first quarterunused capacity of 2021.$2.3 billion expired September 30, 2022. In June 2021,July 2022, the Board of Directors increased,approved, effective JulyOctober 1, 2021, the previous2022, new repurchase authority to effectuate repurchases up to an additional $2.2aggregate of $4.1 billion in shares of the Company’s common stock through September 30, 2022 (up to $4.2 billion in aggregate amount). With the additional authorization, the Company has $3.1 billion remaining for share repurchases.2023.
6866 Truist Financial Corporation
Critical Accounting Policies
The accounting and reporting policies of Truist are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Truist’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities, and amounts reported for revenues and expenses. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations, and related disclosures. The more critical policiesMaterial estimates that are particularly susceptible to significant change include accounting for the ACL, determiningdetermination of the ACL; determination of fair value of financial instruments,for securities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other intangible assets,assets; income taxes,taxes; and benefit obligations associated with pension and postretirement benefit plans.obligations. Understanding Truist’s accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. The critical accounting policies are discussed in MD&A in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1. Basis of Presentation” in Form 10-K for the year ended December 31, 2020.2021. Disclosures regarding the effects of new accounting pronouncements are included in the “Note 1. Basis of Presentation” in this report. Except for the item noted below, thereThere have been no other changes to the significant accounting policies during 2021.2022.
Intangible Assets
The Company performed a qualitative assessment of current events and circumstances, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, and a comparison of management’s forecast and assumptions to those used in its October 1, 2020 quantitative impairment test, concluding that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of September 30, 2021, and therefore no triggering event occurred that required a quantitative goodwill impairment test. If economic conditions deteriorate, or the COVID-19 pandemic’s effects prolong or worsen, it may be more-likely-than-not that the fair value of one or more of Truist’s reporting units falls below its respective carrying amount, which would require a quantitative goodwill impairment test.
Truist Financial Corporation 69
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the management of the Company, under the supervision and with the participation of the Company’s CEO and CFO, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective.effective as of the end of the period covered by the report.
Changes in Internal Control over Financial Reporting
Management of Truist is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the Litigation and Regulatory Matters section in “Note 14. Commitments and Contingencies,” which is incorporated by reference into this item.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. Additional risks and uncertainties not currently known to Truist or that management has deemed to be immaterial also may materially adversely affect Truist’s business, financial condition, or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Refer to the Share Repurchase Activity section in the MD&A, which is incorporated by reference into this item.
70 Truist Financial Corporation 67
ITEM 6. EXHIBITS | | | | | | | | | | | | | | | |
| Exhibit No. | | Description | | Location |
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| 3.1 | | Amended and Restated Bylaws of Truist Financial Corporation. | | |
| 3.2 | | Amended and Restated Bylaws of Truist Financial Corporation.Corporation | | |
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| 10.1 | | Employment Agreement byForm of Executive Severance and between BB&T Insurance Holdings, Inc. and John Howard. | | |
| 10.2 | | First Amendment to Employment Agreement with John Howard.Noncompetition Agreement. | | |
| 11 | | Statement re computation of earnings per share. | | |
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| 31.1 | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | |
| 31.2 | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | |
| 32 | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | |
| 101.INS | | XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | | Filed herewith. |
| 101.SCH | | XBRL Taxonomy Extension Schema. | | Filed herewith. |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase. | | Filed herewith. |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase. | | Filed herewith. |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. | | Filed herewith. |
| 101.DEF | | XBRL Taxonomy Definition Linkbase. | | Filed herewith. |
| 104 | | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits101). | | Filed herewith. |
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68 Truist Financial Corporation 71
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | | | | | | | |
| | | TRUIST FINANCIAL CORPORATION (Registrant) |
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Date: | November 1, 2021October 31, 2022 | | By: | /s/ Daryl N. BibleMichael B. Maguire |
| | | | Daryl N. BibleMichael B. Maguire |
| | | | Senior Executive Vice President and Chief Financial Officer |
| | | | (Principal Financial Officer) |
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Date: | November 1, 2021October 31, 2022 | | By: | /s/ Cynthia B. Powell |
| | | | Cynthia B. Powell |
| | | | Executive Vice President and Corporate Controller |
| | | | (Principal Accounting Officer) |
72 Truist Financial Corporation 69