0000092230us-gaap:IntersegmentEliminationMembertfc:ConsumerBankingAndWealthMember2023-01-012023-03-31
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: March 31, 20222023
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.) |
| | | |
214 North Tryon Street | | |
Charlotte, | North Carolina | 28202 |
(Address of principal executive offices) | (Zip Code) |
| | |
Registrant’s telephone number, including area code: | (336) | 733-2000 |
|
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 March 31, 2022, 1,331,413,8962023, 1,331,917,887 shares of the registrant’s common stock, $5 par value, were outstanding.
| | | | | | | | | | |
| | | | |
TABLE OF CONTENTS | |
TRUIST FINANCIAL CORPORATION | |
FORM 10-Q | |
March 31, 20222023 | |
| | | 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, Divestitures, and Noncontrolling Interests | | |
| | 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 | | |
| | | | |
| |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | |
| | | | |
| | | | |
| | | | |
| |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | |
| | | | |
| | | | |
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 |
| |
ARRC | Alternative Reference Rates Committee of the FRB and the Federal Reserve Bank of New York |
AOCI | Accumulated other comprehensive income (loss) |
| |
BB&T | BB&T Corporation and subsidiaries (changed to “Truist Financial Corporation” effective with the Merger) |
| |
| |
| |
| |
| |
Board | Truist’s Board of Directors |
| |
| |
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 |
| |
| |
CDI | Core deposit intangible |
CECL | Current expected credit loss model |
CEO | Chief Executive Officer |
| |
CFO | Chief Financial Officer |
CET1 | Common equity tier 1 |
| |
CFPB | Consumer Financial Protection Bureau |
| |
Company | Truist Financial Corporation and its subsidiaries (interchangeable with “Truist” below) |
COVID-19 | Coronavirus disease 2019 |
| |
CRE | Commercial real estate |
CRO | Chief Risk Officer |
| |
CVADEI | Credit valuation adjustmentDiversity, Equity & Inclusion |
| |
| |
DTA | |
| |
| Deferred tax asset |
| |
| |
| |
| |
| |
| |
EPS | Earnings per common share |
ESG | Environmental, Social, and Governance |
| |
| |
Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
FDIC | Federal Deposit Insurance Corporation |
| |
| |
FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation |
| |
FNMA | Federal National Mortgage Association |
FRB | Board of Governors of the Federal Reserve System |
| |
GAAP | Accounting principles generally accepted in the United States of America |
GDP | Gross Domestic Product |
| |
| |
Grandbridge | Grandbridge Real Estate Capital, LLC |
GSE | U.S. government-sponsored enterprise |
HFI | Held for investment |
| |
HQLA | High-quality liquid assets |
HTM | Held-to-maturity |
| |
IH | Insurance Holdings, an operating segment |
IPV | Independent price verification |
| |
| |
ISDA | International Swaps and Derivatives Association, Inc. |
LCR | Liquidity Coverage Ratio |
LHFS | Loans held for sale |
LIBOR | London Interbank Offered Rate |
LIBOR Act | Adjustable Interest Rate (LIBOR) Act |
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 |
| |
MRMMRO | Model Risk ManagementOversight |
MSR | Mortgage servicing right |
| |
NA | Not applicable |
| |
| |
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 |
OCI | Other comprehensive income (loss) |
| |
OPEB | Other post-employment benefit |
OREO | Other real estate owned |
OT&C | Other, Treasury and Corporate |
| |
Parent Company | Truist Financial Corporation, the parent company of Truist Bank and other subsidiaries |
| |
PCD | Purchased credit deteriorated loans |
| |
| |
PPP | Paycheck Protection Program, established by the CARES Act |
| |
| |
| |
ROU assets | Right-of-use assets |
| |
| |
Truist Financial Corporation 1
| | | | | |
Term | Definition |
ROU assets | Right-of-use assets |
| |
| |
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. |
| |
TBVPS | Tangible book value per common share |
TCFD | Task Force on Climate-Related Financial Disclosures |
TDR | Troubled debt restructuring |
TE | Taxable-equivalent |
| |
TRS | Total Return Swap |
Truist | Truist Financial Corporation and its subsidiaries (interchangeable with the “Company” above) |
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 |
| |
VaR | Value-at-risk |
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, 2021:2022:
•residual risks and uncertainties relating tochanges in the Merger of heritage BB&T and heritage SunTrust,interest rate environment, including the ability to realize the anticipated benefitsreplacement of the Merger;
•expenses relating to the Merger and application and 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 netLIBOR as an interest margin, decreased demand for certain types of loans, and increases in the allowance for credit losses; a resurgence of the pandemic, whether due to new variants of the coronavirus or other factors,rate benchmark, could reintroduce or prolong these negative impacts and also adversely affect Truist’s capitalrevenue and liquidity position orexpenses, the value of assets and obligations, including our portfolio of investment securities, and the availability and cost of capital, impair the ability of borrowers to repay outstanding loans, cause an outflow of deposits,cash flows, and impair goodwill or other assets;liquidity;
•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, which could adversely affect Truist’s revenuecollateral, and expenses,may suffer losses if the value of assets and obligations, and the availability and cost of capital, cash flows, and liquidity;collateral declines in stressed market conditions;
•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;markets, or negatively affect Truist’s overall liquidity or capitalization;
•Truist may be impacted by actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets and increased expenses, including FDIC insurance premiums, and could affect our ability to attract and retain depositors and to borrow or raise capital;
•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, including due to an outbreak or escalation of hostilities, 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;
•the monetary and fiscal policies of the federal government and its agencies, including in response to higher inflation, could have a material adverse effect on the economy and Truist’s profitability;
•unexpected outflows of uninsured deposits may require us to sell investment securities at a loss;
•a loss of value of our investment portfolio could negatively impact market perceptions of us and could lead to deposit withdrawals;
•the effects of COVID-19 adversely impacted the Company’s operations and financial performance and similar adverse impacts resulting from pandemics could occur in future periods;
•risk management oversight functions may not identify or address risks adequately, and management may not be able to effectively manage credit risk;
•there are risks resulting from the extensive use of models in Truist’s business, which may impact decisions made by management and regulators;
•failuredeposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
•Truist could fail 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 or compliance costs, 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,reputation and governance;adversely impact business and revenues, including the effects of social media on market perceptions of Truist and banks generally;
•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;
•Truist faces substantial legal and operational risks in safeguarding personal information;
•evolving legislative, accounting and regulatory standards, including with respect to climate, capital, and liquidity requirements, which may become more stringent in light of recent market events, and results of regulatory examinations may adversely affect Truist’s financial condition and results of operations;
•the monetaryincreased scrutiny regarding Truist’s consumer sales practices, training practices, incentive compensation design, and fiscal policies of the federal governmentgovernance could damage its reputation and its agencies, including in response to rising inflation, could have a material adverse effect on profitability;adversely impact business and revenues;
•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, 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;
•Truist faces 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;
•there are 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 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 job markets may be less constrained by physical geography;
•Truist’s operations rely on its ability, and the ability of key external parties, to maintain appropriate-staffed workforces, and on the competence, trustworthiness, health and safety of teammates;
•Truist faces the risk of 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,cyberattacks, 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) | Mar 31, 2022 | | Dec 31, 2021 | | Unaudited (Dollars in millions, except per share data, shares in thousands) | Mar 31, 2023 | | Dec 31, 2022 | |
| Assets | Assets | | | Assets | | |
Cash and due from banks | Cash and due from banks | $ | 5,516 | | | $ | 5,085 | | | Cash and due from banks | $ | 4,629 | | | $ | 5,379 | | |
Interest-bearing deposits with banks | Interest-bearing deposits with banks | 23,606 | | | 15,210 | | | Interest-bearing deposits with banks | 32,967 | | | 16,042 | | |
Securities borrowed or purchased under agreements to resell | Securities borrowed or purchased under agreements to resell | 2,322 | | | 4,028 | | | Securities borrowed or purchased under agreements to resell | 3,637 | | | 3,181 | | |
Trading assets at fair value | Trading assets at fair value | 5,920 | | | 4,423 | | | Trading assets at fair value | 4,601 | | | 4,905 | | |
AFS securities at fair value | AFS securities at fair value | 84,753 | | | 153,123 | | | AFS securities at fair value | 71,858 | | | 71,801 | | |
HTM securities (fair value of $59,124 and $1,495 at fair value, respectively) | 61,662 | | | 1,494 | | | |
LHFS (including $3,364 and $3,544 at fair value, respectively) | 4,167 | | | 4,812 | | | |
Loans and leases (including $21 and $23 at fair value, respectively) | 290,081 | | | 289,513 | | | |
HTM securities (fair value of $48,097 and $47,791, respectively) | | HTM securities (fair value of $48,097 and $47,791, respectively) | 56,932 | | | 57,713 | | |
LHFS (including $1,911 and $1,065 at fair value, respectively) | | LHFS (including $1,911 and $1,065 at fair value, respectively) | 2,160 | | | 1,444 | | |
Loans and leases (including $17 and $18 at fair value, respectively) | | Loans and leases (including $17 and $18 at fair value, respectively) | 327,673 | | | 325,991 | | |
ALLL | ALLL | (4,170) | | | (4,435) | | | ALLL | (4,479) | | | (4,377) | | |
Loans and leases, net of ALLL | Loans and leases, net of ALLL | 285,911 | | | 285,078 | | | Loans and leases, net of ALLL | 323,194 | | | 321,614 | | |
Premises and equipment | Premises and equipment | 3,662 | | | 3,700 | | | Premises and equipment | 3,519 | | | 3,605 | | |
Goodwill | Goodwill | 26,284 | | | 26,098 | | | Goodwill | 27,014 | | | 27,013 | | |
CDI and other intangible assets | CDI and other intangible assets | 3,693 | | | 3,408 | | | CDI and other intangible assets | 3,535 | | | 3,672 | | |
Loan servicing rights at fair value | Loan servicing rights at fair value | 3,013 | | | 2,633 | | | Loan servicing rights at fair value | 3,303 | | | 3,758 | | |
Other assets (including $3,137 and $3,436 at fair value, respectively) | 33,470 | | | 32,149 | | | |
Other assets (including $1,549 and $1,582 at fair value, respectively) | | Other assets (including $1,549 and $1,582 at fair value, respectively) | 37,005 | | | 35,128 | | |
Total assets | Total assets | $ | 543,979 | | | $ | 541,241 | | | Total assets | $ | 574,354 | | | $ | 555,255 | | |
Liabilities | Liabilities | | | Liabilities | | |
Noninterest-bearing deposits | Noninterest-bearing deposits | $ | 150,446 | | | $ | 145,892 | | | Noninterest-bearing deposits | $ | 128,719 | | | $ | 135,742 | | |
Interest-bearing deposits | Interest-bearing deposits | 277,882 | | | 270,596 | | | Interest-bearing deposits | 276,278 | | | 277,753 | | |
Short-term borrowings (including $1,717 and $1,731 at fair value, respectively) | 5,147 | | | 5,292 | | | |
Short-term borrowings (including $1,789 and $1,551 at fair value, respectively) | | Short-term borrowings (including $1,789 and $1,551 at fair value, respectively) | 23,678 | | | 23,422 | | |
Long-term debt | Long-term debt | 33,773 | | | 35,913 | | | Long-term debt | 69,895 | | | 43,203 | | |
Other liabilities (including $1,482 and $586 at fair value, respectively) | 11,687 | | | 14,277 | | | |
Other liabilities (including $2,589 and $2,971 at fair value, respectively) | | Other liabilities (including $2,589 and $2,971 at fair value, respectively) | 13,390 | | | 14,598 | | |
Total liabilities | Total liabilities | 478,935 | | | 471,970 | | | Total liabilities | 511,960 | | | 494,718 | | |
Shareholders’ Equity | Shareholders’ Equity | | | Shareholders’ Equity | | |
Preferred stock | Preferred stock | 6,673 | | | 6,673 | | | Preferred stock | 6,673 | | | 6,673 | | |
Common stock, $5 par value | Common stock, $5 par value | 6,657 | | | 6,639 | | | Common stock, $5 par value | 6,660 | | | 6,634 | | |
Additional paid-in capital | Additional paid-in capital | 34,539 | | | 34,565 | | | Additional paid-in capital | 34,582 | | | 34,544 | | |
Retained earnings | Retained earnings | 23,687 | | | 22,998 | | | Retained earnings | 27,038 | | | 26,264 | | |
AOCI, net of deferred income taxes | AOCI, net of deferred income taxes | (6,535) | | | (1,604) | | | AOCI, net of deferred income taxes | (12,581) | | | (13,601) | | |
Noncontrolling interests | Noncontrolling interests | 23 | | | — | | | Noncontrolling interests | 22 | | | 23 | | |
Total shareholders’ equity | Total shareholders’ equity | 65,044 | | | 69,271 | | | Total shareholders’ equity | 62,394 | | | 60,537 | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 543,979 | | | $ | 541,241 | | | Total liabilities and shareholders’ equity | $ | 574,354 | | | $ | 555,255 | | |
Common shares outstanding | Common shares outstanding | 1,331,414 | | | 1,327,818 | | | Common shares outstanding | 1,331,918 | | | 1,326,829 | | |
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 | | | 223 | | | 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 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | |
| | | | | | |
| | | | |
Unaudited (Dollars in millions, except per share data, shares in thousands) | | Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest Income | | | | | | | | | | |
Interest and fees on loans and leases | | $ | 2,644 | | | $ | 3,002 | | | | | | | |
Interest on securities | | 640 | | | 443 | | | | | | | |
Interest on other earning assets | | 73 | | | 49 | | | | | | | |
Total interest income | | 3,357 | | | 3,494 | | | | | | | |
Interest Expense | | | | | | | | | | |
Interest on deposits | | 32 | | | 47 | | | | | | | |
Interest on long-term debt | | 132 | | | 148 | | | | | | | |
Interest on other borrowings | | 10 | | | 14 | | | | | | | |
Total interest expense | | 174 | | | 209 | | | | | | | |
Net Interest Income | | 3,183 | | | 3,285 | | | | | | | |
Provision for credit losses | | (95) | | | 48 | | | | | | | |
Net Interest Income After Provision for Credit Losses | | 3,278 | | | 3,237 | | | | | | | |
Noninterest Income | | | | | | | | | | |
Insurance income | | 727 | | | 626 | | | | | | | |
Investment banking and trading income | | 261 | | | 346 | | | | | | | |
Wealth management income | | 343 | | | 341 | | | | | | | |
Service charges on deposits | | 252 | | | 258 | | | | | | | |
Card and payment related fees | | 212 | | | 200 | | | | | | | |
Residential mortgage income | | 89 | | | 100 | | | | | | | |
Lending related fees | | 85 | | | 100 | | | | | | | |
Operating lease income | | 58 | | | 68 | | | | | | | |
Commercial mortgage income | | 32 | | | 33 | | | | | | | |
Income from bank-owned life insurance | | 51 | | | 50 | | | | | | | |
Securities gains (losses) | | (69) | | | — | | | | | | | |
Other income | | 101 | | | 75 | | | | | | | |
Total noninterest income | | 2,142 | | | 2,197 | | | | | | | |
Noninterest Expense | | | | | | | | | | |
Personnel expense | | 2,051 | | | 2,142 | | | | | | | |
Professional fees and outside processing | | 363 | | | 350 | | | | | | | |
Software expense | | 232 | | | 210 | | | | | | | |
Net occupancy expense | | 208 | | | 209 | | | | | | | |
Amortization of intangibles | | 137 | | | 144 | | | | | | | |
Equipment expense | | 118 | | | 113 | | | | | | | |
Marketing and customer development | | 84 | | | 66 | | | | | | | |
Operating lease depreciation | | 48 | | | 50 | | | | | | | |
Loan-related expense | | 44 | | | 54 | | | | | | | |
Regulatory costs | | 35 | | | 25 | | | | | | | |
Merger-related and restructuring charges | | 216 | | | 141 | | | | | | | |
Loss (gain) on early extinguishment of debt | | — | | | (3) | | | | | | | |
Other expense | | 138 | | | 109 | | | | | | | |
Total noninterest expense | | 3,674 | | | 3,610 | | | | | | | |
Earnings | | | | | | | | | | |
Income before income taxes | | 1,746 | | | 1,824 | | | | | | | |
Provision for income taxes | | 330 | | | 351 | | | | | | | |
Net income | | 1,416 | | | 1,473 | | | | | | | |
Noncontrolling interests | | 1 | | | (4) | | | | | | | |
Net income available to the bank holding company | | 1,415 | | | 1,477 | | | | | | | |
Preferred stock dividends and other | | 88 | | | 143 | | | | | | | |
Net income available to common shareholders | | $ | 1,327 | | | $ | 1,334 | | | | | | | |
Basic EPS | | $ | 1.00 | | | $ | 0.99 | | | | | | | |
Diluted EPS | | 0.99 | | | 0.98 | | | | | | | |
Basic weighted average shares outstanding | | 1,329,037 | | | 1,345,666 | | | | | | | |
Diluted weighted average shares outstanding | | 1,341,563 | | | 1,358,932 | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Unaudited (Dollars in millions, except per share data, shares in thousands) | | | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 | | |
Interest Income | | | | | | | | | | |
Interest and fees on loans and leases | | | | | | $ | 4,656 | | | $ | 2,644 | | | |
Interest on securities | | | | | | 752 | | | 640 | | | |
Interest on other earning assets | | | | | | 377 | | | 73 | | | |
Total interest income | | | | | | 5,785 | | | 3,357 | | | |
Interest Expense | | | | | | | | | | |
Interest on deposits | | | | | | 1,125 | | | 32 | | | |
Interest on long-term debt | | | | | | 514 | | | 132 | | | |
Interest on other borrowings | | | | | | 278 | | | 10 | | | |
Total interest expense | | | | | | 1,917 | | | 174 | | | |
Net Interest Income | | | | | | 3,868 | | | 3,183 | | | |
Provision for credit losses | | | | | | 502 | | | (95) | | | |
Net Interest Income After Provision for Credit Losses | | | | | | 3,366 | | | 3,278 | | | |
Noninterest Income | | | | | | | | | | |
Insurance income | | | | | | 813 | | | 727 | | | |
Wealth management income | | | | | | 339 | | | 343 | | | |
Investment banking and trading income | | | | | | 261 | | | 261 | | | |
Service charges on deposits | | | | | | 249 | | | 252 | | | |
Card and payment related fees | | | | | | 230 | | | 212 | | | |
Mortgage banking income | | | | | | 142 | | | 121 | | | |
Lending related fees | | | | | | 106 | | | 85 | | | |
Operating lease income | | | | | | 67 | | | 58 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Securities gains (losses) | | | | | | — | | | (69) | | | |
Other income | | | | | | 27 | | | 152 | | | |
Total noninterest income | | | | | | 2,234 | | | 2,142 | | | |
Noninterest Expense | | | | | | | | | | |
Personnel expense | | | | | | 2,181 | | | 2,051 | | | |
Professional fees and outside processing | | | | | | 314 | | | 363 | | | |
Software expense | | | | | | 214 | | | 232 | | | |
Net occupancy expense | | | | | | 183 | | | 208 | | | |
Amortization of intangibles | | | | | | 136 | | | 137 | | | |
Equipment expense | | | | | | 110 | | | 118 | | | |
Marketing and customer development | | | | | | 78 | | | 84 | | | |
Operating lease depreciation | | | | | | 46 | | | 48 | | | |
| | | | | | | | | | |
Regulatory costs | | | | | | 75 | | | 35 | | | |
Merger-related and restructuring charges | | | | | | 63 | | | 216 | | | |
| | | | | | | | | | |
Other expense | | | | | | 291 | | | 182 | | | |
Total noninterest expense | | | | | | 3,691 | | | 3,674 | | | |
Earnings | | | | | | | | | | |
Income before income taxes | | | | | | 1,909 | | | 1,746 | | | |
Provision for income taxes | | | | | | 394 | | | 330 | | | |
Net income | | | | | | 1,515 | | | 1,416 | | | |
Noncontrolling interests | | | | | | 2 | | | 1 | | | |
| | | | | | | | | | |
Preferred stock dividends and other | | | | | | 103 | | | 88 | | | |
Net income available to common shareholders | | | | | | $ | 1,410 | | | $ | 1,327 | | | |
Basic EPS | | | | | | $ | 1.06 | | | $ | 1.00 | | | |
Diluted EPS | | | | | | 1.05 | | | 0.99 | | | |
Basic weighted average shares outstanding | | | | | | 1,328,602 | | | 1,329,037 | | | |
Diluted weighted average shares outstanding | | | | | | 1,339,480 | | | 1,341,563 | | | |
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 March 31, | | Unaudited (Dollars in millions) | | Three Months Ended March 31, |
2022 | | 2021 | | Unaudited (Dollars in millions) | | 2023 | | 2022 | |
| | Net income | Net income | $ | 1,416 | | | $ | 1,473 | | | Net income | | $ | 1,515 | | | $ | 1,416 | | |
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 | 8 | | | 35 | | | Net change in net pension and postretirement costs | | (14) | | | 8 | | |
Net change in cash flow hedges | Net change in cash flow hedges | 5 | | | 36 | | | Net change in cash flow hedges | | 125 | | | 5 | | |
Net change in AFS securities | Net change in AFS securities | (4,989) | | | (2,304) | | | Net change in AFS securities | | 853 | | | (4,989) | | |
Net change in HTM securities | Net change in HTM securities | 44 | | | — | | | Net change in HTM securities | | 55 | | | 44 | | |
Other, net | Other, net | 1 | | | 1 | | | Other, net | | 1 | | | 1 | | |
Total OCI, net of tax | Total OCI, net of tax | (4,931) | | | (2,232) | | | Total OCI, net of tax | | 1,020 | | | (4,931) | | |
Total comprehensive income | $ | (3,515) | | | $ | (759) | | | |
Total OCI | | Total OCI | | $ | 2,535 | | | $ | (3,515) | | |
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 | $ | 2 | | | $ | 11 | | | Net change in net pension and postretirement costs | | $ | (3) | | | $ | 2 | | |
Net change in cash flow hedges | Net change in cash flow hedges | 1 | | | 11 | | | Net change in cash flow hedges | | 38 | | | 1 | | |
Net change in AFS securities | Net change in AFS securities | (1,513) | | | (707) | | | Net change in AFS securities | | 262 | | | (1,513) | | |
Net change in HTM securities | Net change in HTM securities | 13 | | | — | | | Net change in HTM securities | | 15 | | | 13 | | |
Other, net | — | | | — | | | |
| Total income taxes related to OCI | Total income taxes related to OCI | $ | (1,497) | | | $ | (685) | | | Total income taxes related to OCI | | $ | 312 | | | $ | (1,497) | | |
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, January 1, 2021 | 1,348,961 | | | $ | 8,048 | | | $ | 6,745 | | | $ | 35,843 | | | $ | 19,455 | | | $ | 716 | | | $ | 105 | | | $ | 70,912 | | | |
Net income | — | | | — | | | — | | | — | | | 1,477 | | | — | | | (4) | | | 1,473 | | | |
OCI | — | | | — | | | — | | | — | | | — | | | (2,232) | | | — | | | (2,232) | | | |
| Issued in connection with equity awards, net | 5,388 | | | — | | | 27 | | | (111) | | | — | | | — | | | — | | | (84) | | | |
| Repurchase of common stock | (9,504) | | | — | | | (48) | | | (458) | | | — | | | — | | | — | | | (506) | | | |
Redemption of preferred stock | — | | | (924) | | | — | | | — | | | (26) | | | — | | | — | | | (950) | | | |
Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (605) | | | — | | | — | | | (605) | | | |
Cash dividends declared on preferred stock | — | | | — | | | — | | | — | | | (117) | | | — | | | — | | | (117) | | | |
Equity-based compensation expense | — | | | — | | | — | | | 86 | | | — | | | — | | | — | | | 86 | | | |
| Other, net | — | | | — | | | — | | | — | | | — | | | — | | | (101) | | | (101) | | | |
Balance, March 31, 2021 | 1,344,845 | | | $ | 7,124 | | | $ | 6,724 | | | $ | 35,360 | | | $ | 20,184 | | | $ | (1,516) | | | $ | — | | | $ | 67,876 | | | |
Balance, January 1, 2022 | Balance, January 1, 2022 | 1,327,818 | | | $ | 6,673 | | | $ | 6,639 | | | $ | 34,565 | | | $ | 22,998 | | | $ | (1,604) | | | $ | — | | | $ | 69,271 | | | Balance, January 1, 2022 | 1,327,818 | | | $ | 6,673 | | | $ | 6,639 | | | $ | 34,565 | | | $ | 22,998 | | | $ | (1,604) | | | $ | — | | | $ | 69,271 | | |
Net income | Net income | — | | | — | | | — | | | — | | | 1,415 | | | — | | | 1 | | | 1,416 | | | Net income | — | | | — | | | — | | | — | | | 1,415 | | | — | | | 1 | | | 1,416 | | |
OCI | OCI | — | | | — | | | — | | | — | | | — | | | (4,931) | | | — | | | (4,931) | | | OCI | — | | | — | | | — | | | — | | | — | | | (4,931) | | | — | | | (4,931) | | |
| Issued in connection with equity awards, net | Issued in connection with equity awards, net | 3,596 | | | — | | | 18 | | | (106) | | | (1) | | | — | | | — | | | (89) | | | Issued in connection with equity awards, net | 3,596 | | | — | | | 18 | | | (106) | | | (1) | | | — | | | — | | | (89) | | |
| Cash dividends declared on common stock | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (637) | | | — | | | — | | | (637) | | | Cash dividends declared on common stock | — | | | — | | | — | | | — | | | (637) | | | — | | | — | | | (637) | | |
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 | — | | | — | | | — | | | 80 | | | — | | | — | | | — | | | 80 | | | Equity-based compensation expense | — | | | — | | | — | | | 80 | | | — | | | — | | | — | | | 80 | | |
| Other, net | Other, net | — | | | — | | | — | | | — | | | — | | | — | | | 22 | | | 22 | | | Other, net | — | | | — | | | — | | | — | | | — | | | — | | | 22 | | | 22 | | |
Balance, March 31, 2022 | Balance, March 31, 2022 | 1,331,414 | | | $ | 6,673 | | | $ | 6,657 | | | $ | 34,539 | | | $ | 23,687 | | | $ | (6,535) | | | $ | 23 | | | $ | 65,044 | | | Balance, March 31, 2022 | 1,331,414 | | | $ | 6,673 | | | $ | 6,657 | | | $ | 34,539 | | | $ | 23,687 | | | $ | (6,535) | | | $ | 23 | | | $ | 65,044 | | |
Balance, January 1, 2023 | | Balance, January 1, 2023 | 1,326,829 | | | $ | 6,673 | | | $ | 6,634 | | | $ | 34,544 | | | $ | 26,264 | | | $ | (13,601) | | | $ | 23 | | | $ | 60,537 | | |
Net income | | Net income | — | | | — | | | — | | | — | | | 1,513 | | | — | | | 2 | | | 1,515 | | |
OCI | | OCI | — | | | — | | | — | | | — | | | — | | | 1,020 | | | — | | | 1,020 | | |
| Issued in connection with equity awards, net | | Issued in connection with equity awards, net | 5,089 | | | — | | | 26 | | | (45) | | | (1) | | | — | | | — | | | (20) | | |
| 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 | — | | | — | | | — | | | — | | | (103) | | | — | | | — | | | (103) | | |
Equity-based compensation expense | | Equity-based compensation expense | — | | | — | | | — | | | 83 | | | — | | | — | | | — | | | 83 | | |
| Other, net | | Other, net | — | | | — | | | — | | | — | | | 56 | | | — | | | (3) | | | 53 | | |
Balance, March 31, 2023 | | Balance, March 31, 2023 | 1,331,918 | | | $ | 6,673 | | | $ | 6,660 | | | $ | 34,582 | | | $ | 27,038 | | | $ | (12,581) | | | $ | 22 | | | $ | 62,394 | | |
|
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 (Dollars in millions) | Unaudited (Dollars in millions) | | Three Months Ended March 31, | | Unaudited (Dollars in millions) | | Three Months Ended March 31, |
| 2022 | | 2021 | | | 2023 | | 2022 | |
Cash Flows From Operating Activities: | Cash Flows From Operating Activities: | | | | | | Cash Flows From Operating Activities: | | | | | |
Net income | Net income | | $ | 1,416 | | | $ | 1,473 | | | Net income | | $ | 1,515 | | | $ | 1,416 | | |
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 | | (95) | | | 48 | | | Provision for credit losses | | 502 | | | (95) | | |
| Depreciation | Depreciation | | 195 | | | 201 | | | Depreciation | | 180 | | | 195 | | |
| Amortization of intangibles | Amortization of intangibles | | 137 | | | 144 | | | Amortization of intangibles | | 136 | | | 137 | | |
| Securities (gains) losses | Securities (gains) losses | | 69 | | | — | | | Securities (gains) losses | | — | | | 69 | | |
Net change in operating assets and liabilities: | Net change in operating assets and liabilities: | | | | | | Net change in operating assets and liabilities: | | | | | |
LHFS | LHFS | | 180 | | | (510) | | | LHFS | | (846) | | | 180 | | |
Loan servicing rights | Loan servicing rights | | (380) | | | (342) | | | Loan servicing rights | | 27 | | | (380) | | |
Pension asset | Pension asset | | (410) | | | (452) | | | Pension asset | | (1,346) | | | (410) | | |
Derivative assets and liabilities | Derivative assets and liabilities | | 986 | | | 1,060 | | | Derivative assets and liabilities | | (12) | | | 986 | | |
Trading assets | Trading assets | | (1,497) | | | (1,222) | | | Trading assets | | 304 | | | (1,497) | | |
Other assets and other liabilities | Other assets and other liabilities | | (558) | | | (915) | | | Other assets and other liabilities | | (490) | | | (558) | | |
| Other, net | Other, net | | (231) | | | 482 | | | Other, net | | 148 | | | (231) | | |
Net cash from operating activities | Net cash from operating activities | | (188) | | | (33) | | | Net cash from operating activities | | 118 | | | (188) | | |
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 | | 3,127 | | | 60 | | | Proceeds from sales of AFS securities | | 4 | | | 3,127 | | |
Proceeds from maturities, calls and paydowns of AFS securities | Proceeds from maturities, calls and paydowns of AFS securities | | 5,259 | | | 8,862 | | | Proceeds from maturities, calls and paydowns of AFS securities | | 1,279 | | | 5,259 | | |
Purchases of AFS securities | Purchases of AFS securities | | (7,219) | | | (15,601) | | | Purchases of AFS securities | | (140) | | | (7,219) | | |
Proceeds from maturities, calls and paydowns of HTM securities | Proceeds from maturities, calls and paydowns of HTM securities | | 857 | | | — | | | Proceeds from maturities, calls and paydowns of HTM securities | | 858 | | | 857 | | |
Purchases of HTM securities | Purchases of HTM securities | | (3,020) | | | — | | | 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 | | (134) | | | 8,249 | | | Originations and purchases of loans and leases, net of sales and principal collected | | (1,835) | | | (134) | | |
| Net cash received (paid) for FHLB stock | | Net cash received (paid) for FHLB stock | | (1,147) | | | (1) | | |
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 | | 1,706 | | | 396 | | | Net cash received (paid) for securities borrowed or purchased under agreements to resell | | (456) | | | 1,706 | | |
| Net cash received (paid) for asset acquisitions, business combinations, and divestitures | Net cash received (paid) for asset acquisitions, business combinations, and divestitures | | (488) | | | 1,130 | | | Net cash received (paid) for asset acquisitions, business combinations, and divestitures | | — | | | (488) | | |
| Other, net | Other, net | | (122) | | | 23 | | | Other, net | | (613) | | | (121) | | |
Net cash from investing activities | Net cash from investing activities | | (34) | | | 3,119 | | | Net cash from investing activities | | (2,050) | | | (34) | | |
Cash Flows From Financing Activities: | Cash Flows From Financing Activities: | | | | Cash Flows From Financing Activities: | | | |
Net change in deposits | Net change in deposits | | 11,842 | | | 14,489 | | | Net change in deposits | | (8,498) | | | 11,842 | | |
Net change in short-term borrowings | Net change in short-term borrowings | | (145) | | | (203) | | | Net change in short-term borrowings | | 224 | | | (145) | | |
Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | | 66 | | | 1,299 | | | Proceeds from issuance of long-term debt | | 35,029 | | | 66 | | |
Repayment of long-term debt | Repayment of long-term debt | | (1,699) | | | (3,032) | | | Repayment of long-term debt | | (8,444) | | | (1,699) | | |
Repurchase of common stock | | — | | | (506) | | | |
| Redemption of preferred stock | | — | | | (950) | | | |
| Cash dividends paid on common stock | Cash dividends paid on common stock | | (637) | | | (605) | | | Cash dividends paid on common stock | | (691) | | | (637) | | |
Cash dividends paid on preferred stock | Cash dividends paid on preferred stock | | (88) | | | (117) | | | Cash dividends paid on preferred stock | | (103) | | | (88) | | |
Net cash received (paid) for hedge unwinds | Net cash received (paid) for hedge unwinds | | (198) | | | — | | | Net cash received (paid) for hedge unwinds | | (378) | | | (198) | | |
Other, net | Other, net | | (92) | | | (197) | | | Other, net | | (32) | | | (92) | | |
Net cash from financing activities | Net cash from financing activities | | 9,049 | | | 10,178 | | | Net cash from financing activities | | 17,107 | | | 9,049 | | |
Net Change in Cash and Cash Equivalents | Net Change in Cash and Cash Equivalents | | 8,827 | | | 13,264 | | | Net Change in Cash and Cash Equivalents | | 15,175 | | | 8,827 | | |
Cash and Cash Equivalents, January 1 | Cash and Cash Equivalents, January 1 | | 20,295 | | | 18,868 | | | Cash and Cash Equivalents, January 1 | | 21,421 | | | 20,295 | | |
Cash and Cash Equivalents, March 31 | Cash and Cash Equivalents, March 31 | | $ | 29,122 | | | $ | 32,132 | | | Cash and Cash Equivalents, March 31 | | $ | 36,596 | | | $ | 29,122 | | |
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 | | $ | 156 | | | $ | 248 | | | Interest expense | | $ | 1,667 | | | $ | 156 | | |
Income taxes | Income taxes | | 40 | | | 28 | | | Income taxes | | 23 | | | 40 | | |
| Noncash investing activities: | Noncash investing activities: | | | Noncash investing activities: | | | |
| Transfer of AFS securities to HTM | Transfer of AFS securities to HTM | | 59,436 | | | — | | | 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, 20212022 should be referred to in connection with these unaudited interim consolidated financial statements. The Company updated its accounting policies in connection with recently adopted accounting standards. There were no other 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, 20212022 that could have a material effect on the Company’s financial statements.
Reclassifications
In the first quarter of 2023, the Company reclassified certain portfolios within the consumer portfolio segment to delineate home equity from other consumer portfolios. Additionally, during the first quarter of 2023, Truist reorganized Prime Rate Premium Finance Corporation, which includes AFCO Credit Corporation and CAFO Holding Company, into the C&CB segment from the IH segment. Prior periods were revised to conform to the current presentation. Certain other 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 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 securities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other intangible assets; income taxes; and pension and postretirement benefit obligations.
Loan Modifications
In certain circumstances, the Company enters into agreements to modify the terms of loans to borrowers that are experiencing financial difficulty. The scope of these loan modifications varies from portfolio to portfolio but generally falls into one of the following categories:
•Renewals: represent the renewal of a loan where the Company has concluded that the borrower is experiencing financial difficulty. Commercial renewals result in an extension of the maturity date of the loan (or in some cases a contraction of the loan term), and other significant terms of the loan (e.g., interest rate, collateral, guarantor support, etc.) are re-evaluated in connection with the renewal event.
•Term extensions: represent an adjustment to the maturity date of the loan that typically results in a reduction to the borrower’s scheduled payment over the remainder of the loan.
•Capitalizations: represents the capitalization of forborne loan payments and/or other amounts advanced on behalf of the borrower into the principal balance of a residential mortgage loan.
•Payment delays: provide the borrower with a temporary postponement of loan payments that is considered other-than-insignificant, which has been defined as a payment delay that exceeds 90 days, or three payment cycles, over a rolling 12-month period. These postponed loan payments may result in an extension of the ultimate maturity date of the loan or may be capitalized into the principal balance of the loan in certain circumstances.
•Combinations: in certain circumstances more than one type of a modification is provided to a borrower (e.g., interest rate reduction and term extension).
•Other: represents other types of loan modifications that are not considered significant for disclosure purposes.
The Company has identified borrowers that are included in the Loan Modifications disclosures in “Note 5. Loans and ACL” as follows:
•Commercial: the Company evaluates all modifications of loans to commercial borrowers that are rated substandard or worse and includes the modifications in its disclosure to the extent that the modification is considered other-than-insignificant.
•Consumer and credit card: loan modifications to consumer and credit borrowers are generally limited to borrowers that are experiencing financial difficulty. As a result, the Company evaluates all modifications of consumer and credit card loans and includes them in the disclosure to the extent that they are considered other-than insignificant.
Truist Financial Corporation 9
Refer to the Annual Report on Form 10-K for the year ended December 31, 2022 for accounting policies related to prior period, including the Company’s TDR policies.
ALLL
The ALLL represents management’s best estimate of expected future credit losses related to its loan and lease portfolio at the balance sheet date. The Company’s ALLL estimation process gives consideration to relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The quantitative models used to forecast expected credit losses use portfolio balances, macroeconomic forecast data, portfolio composition and loan attributes as the primary inputs. Loss estimates are informed by historical loss experience that includes losses incurred on loans that were previously modified by the Company. As a result, the Company has concluded that aside from the limited circumstances where principal forgiveness is granted to a borrower, the financial effect of loan modifications is already inherently included in the ALLL.
Income Taxes
The Company’s provision for income taxes is based on income and expense reported for financial statement purposes after adjustments for permanent differences such as interest income from lending to tax-exempt entities, tax credits, and amortization expense related to qualified tax credit investments. In computing the provision for income taxes, the Company evaluates the technical merits of its income tax positions based on current legislative, judicial, and regulatory guidance. The proportional amortization method of accounting is used on affordable housing and other qualified tax credit investments, such that the initial cost of the investment giving rise to tax credits is amortized in proportion to the allocation of tax credits in each period as a component of the provision for income taxes. Truist includes the initial investment cash flows and subsequent credits within operating activities in the Consolidated Statement of Cash Flows.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
| | | | | | | | |
Standard / Adoption Date | Description | Effects on the Financial Statements |
|
| | |
| | Standards Adopted During the Current Year |
Standards Not Yet Adopted |
Troubled Debt Restructurings and Vintage Disclosures January 1, 2023
| Eliminates the accounting guidance for 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 evaluatingadopted this standard.standard on a modified-retrospective basis. Upon adoption, Truist expects the newly requiredCompany eliminated the separate ACL estimation process for loans classified as TDRs. The adoption of this standard did not have a material impact on the financial statements. The Company’s revised disclosures to bein accordance with the new standard are included in the“Note 5. Loans and ACL footnote.ACL.” |
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 under the method (previously named, last-of-layer method).
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 and specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. | The adoption of this standard did not have a material impact on the Company’s active last-of-layer hedges. |
Investments in Tax Credit Structures January 1, 2023 | Allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Previously, reporting entities were only permitted to apply the proportional amortization method only to qualifying tax equity investments in low-income housing tax credit structures. | Truist is evaluatingearly adopted this standard on a modified-retrospective basis. The adoption of this standard did not have a material impact on the use of the portfolio layer method in its hedging programs.financial statements. Refer to “Note 14. Commitments and Contingencies” for additional information regarding tax credit investments. |
| | |
|
| | |
10 Truist Financial Corporation 9
NOTE 2. Business Combinations, Divestitures, and Noncontrolling Interests
Noncontrolling Interest
On March 1, 2022, Truist acquired Kensington Vanguard National Land Services, oneApril 3, 2023, the Company completed its sale of a 20% stake of the country's largest independent full-service national title insurance agencies,common equity in Truist Insurance Holdings, LLC to an investor group led by Stone Point Capital, LLC for $1.95 billion, with the proceeds, net of tax, recognized as an increase to shareholders’ equity. In connection with the transaction, the noncontrolling interest holder received profit interests representing 3.75% coverage on Truist Insurance Holdings’ fully diluted equity value at transaction close, and certain consent and exit rights commensurate with a noncontrolling investor. The transaction allows Truist to maintain strategic flexibility and future upside in Truist Insurance Holdings, which resultedwill continue to benefit from Truist’s operations, access to capital, and client relationships, while creating additional opportunities for growth of Truist Insurance Holdings through the support of a strong blue-chip investor in approximately $187 million of goodwill and $148 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 over a term of 15 years based upon the estimated economic benefits received. Goodwill of $129 million and identifiable intangible assets of $110 million are deductible for tax purposes.Stone Point Capital.
NOTE 3. Securities Financing Activities
Securities purchased under 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. The following table presents securities borrowed or purchased under agreements to resell: | (Dollars in millions) | (Dollars in millions) | | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 |
| Securities purchased under agreements to resell | Securities purchased under agreements to resell | | $ | 1,678 | | | $ | 3,460 | | Securities purchased under agreements to resell | | $ | 2,685 | | | $ | 2,415 | |
Securities borrowed | Securities borrowed | | 644 | | | 568 | | Securities borrowed | | 952 | | | 766 | |
Total securities borrowed or purchased under agreements to resell | Total securities borrowed or purchased under agreements to resell | | $ | 2,322 | | | $ | 4,028 | | Total securities borrowed or purchased under agreements to resell | | $ | 3,637 | | | $ | 3,181 | |
| Fair value of collateral held available to be resold or repledged | | $ | 2,316 | | | $ | 4,005 | | |
Fair value of securities repledged | | 342 | | | 1,141 | | |
Fair value of collateral permitted to be resold or repledged | | Fair value of collateral permitted to be resold or repledged | | $ | 3,520 | | | $ | 3,058 | |
Fair value of securities resold or repledged | | Fair value of securities resold or repledged | | 657 | | | 864 | |
|
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: | | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(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 | $ | 439 | | | $ | 41 | | | | $ | 480 | | | $ | 749 | | | $ | 409 | | | | $ | 1,158 | | U.S. Treasury | $ | 631 | | | $ | 10 | | | | $ | 641 | | | $ | 318 | | | $ | — | | | | $ | 318 | |
State and Municipal | | State and Municipal | 297 | | | — | | | | 297 | | | 272 | | | — | | | | 272 | |
GSE | GSE | 81 | | | 31 | | | | 112 | | | 53 | | | 25 | | | | 78 | | GSE | 23 | | | — | | | | 23 | | | 74 | | | — | | | | 74 | |
Agency MBS - residential | Agency MBS - residential | 973 | | | 338 | | | | 1,311 | | | 720 | | | 141 | | | | 861 | | Agency MBS - residential | 666 | | | 6 | | | | 672 | | | 1,019 | | | 26 | | | | 1,045 | |
Corporate and other debt securities | Corporate and other debt securities | 150 | | | 314 | | | | 464 | | | 213 | | | 125 | | | | 338 | | Corporate and other debt securities | 185 | | | 304 | | | | 489 | | | 369 | | | 50 | | | | 419 | |
Total securities sold under agreements to repurchase | Total securities sold under agreements to repurchase | $ | 1,643 | | | $ | 724 | | | | $ | 2,367 | | | $ | 1,735 | | | $ | 700 | | | | $ | 2,435 | | Total securities sold under agreements to repurchase | $ | 1,802 | | | $ | 320 | | | | $ | 2,122 | | | $ | 2,052 | | | $ | 76 | | | | $ | 2,128 | |
|
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 11
NOTE 4. Investment Securities
The following tables summarize the Company’s AFS and HTM securities: | March 31, 2022 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | | |
| Gains | | Losses | | | |
March 31, 2023 (Dollars in millions) | | March 31, 2023 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | |
| | Gains | | Losses | | |
AFS securities: | AFS securities: | | | | | | | | | | AFS securities: | | | | | | | | | |
U.S. Treasury | U.S. Treasury | | $ | 9,891 | | | $ | — | | | $ | 479 | | | $ | 9,412 | | | U.S. Treasury | | $ | 11,083 | | | $ | 2 | | | $ | 644 | | | $ | 10,441 | | |
GSE | GSE | | 257 | | | — | | | 12 | | | 245 | | | GSE | | 332 | | | — | | | 31 | | | 301 | | |
Agency MBS - residential | Agency MBS - residential | | 71,956 | | | 37 | | | 3,755 | | | 68,238 | | | Agency MBS - residential | | 64,382 | | | 1 | | | 9,208 | | | 55,175 | | |
Agency MBS - commercial | Agency MBS - commercial | | 2,831 | | | 2 | | | 174 | | | 2,659 | | | Agency MBS - commercial | | 2,872 | | | — | | | 474 | | | 2,398 | | |
States and political subdivisions | States and political subdivisions | | 366 | | | 19 | | | 15 | | | 370 | | | States and political subdivisions | | 425 | | | 17 | | | 17 | | | 425 | | |
Non-agency MBS | Non-agency MBS | | 4,149 | | | — | | | 346 | | | 3,803 | | | Non-agency MBS | | 3,884 | | | — | | | 786 | | | 3,098 | | |
Other | Other | | 26 | | | — | | | — | | | 26 | | | Other | | 20 | | | — | | | — | | | 20 | | |
Total AFS securities | Total AFS securities | | $ | 89,476 | | | $ | 58 | | | $ | 4,781 | | | $ | 84,753 | | | Total AFS securities | | $ | 82,998 | | | $ | 20 | | | $ | 11,160 | | | $ | 71,858 | | |
HTM securities: | HTM securities: | | | | | | | | | | HTM securities: | | | | | | | | | |
| Agency MBS - residential | Agency MBS - residential | | $ | 61,662 | | | $ | — | | | $ | 2,538 | | | $ | 59,124 | | | Agency MBS - residential | | $ | 56,932 | | | $ | — | | | $ | 8,835 | | | $ | 48,097 | | |
| | December 31, 2021 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | | |
| Gains | | Losses | | | |
December 31, 2022 (Dollars in millions) | | December 31, 2022 (Dollars in millions) | | Amortized Cost | | Gross Unrealized | | Fair Value | |
| | Gains | | Losses | | |
AFS securities: | AFS securities: | | | | | | | | | | AFS securities: | | | | | | | | | |
U.S. Treasury | U.S. Treasury | | $ | 9,892 | | | $ | 9 | | | $ | 106 | | | $ | 9,795 | | | U.S. Treasury | | $ | 11,080 | | | $ | — | | | $ | 785 | | | $ | 10,295 | | |
GSE | GSE | | 1,667 | | | 33 | | | 2 | | | 1,698 | | | GSE | | 339 | | | — | | | 36 | | | 303 | | |
Agency MBS - residential | Agency MBS - residential | | 135,886 | | | 656 | | | 2,500 | | | 134,042 | | | Agency MBS - residential | | 65,377 | | | — | | | 10,152 | | | 55,225 | | |
Agency MBS - commercial | Agency MBS - commercial | | 2,928 | | | 18 | | | 64 | | | 2,882 | | | Agency MBS - commercial | | 2,887 | | | — | | | 463 | | | 2,424 | | |
States and political subdivisions | States and political subdivisions | | 382 | | | 39 | | | 1 | | | 420 | | | States and political subdivisions | | 425 | | | 15 | | | 24 | | | 416 | | |
Non-agency MBS | Non-agency MBS | | 4,305 | | | — | | | 47 | | | 4,258 | | | Non-agency MBS | | 3,927 | | | — | | | 810 | | | 3,117 | | |
Other | Other | | 28 | | | — | | | — | | | 28 | | | Other | | 21 | | | — | | | — | | | 21 | | |
Total AFS securities | Total AFS securities | | $ | 155,088 | | | $ | 755 | | | $ | 2,720 | | | $ | 153,123 | | | Total AFS securities | | $ | 84,056 | | | $ | 15 | | | $ | 12,270 | | | $ | 71,801 | | |
HTM securities: | HTM securities: | | | | | | | | | | HTM securities: | | | | | | | | | |
| Agency MBS - residential | Agency MBS - residential | | $ | 1,494 | | | $ | 1 | | | $ | — | | | $ | 1,495 | | | Agency MBS - residential | | $ | 57,713 | | | $ | — | | | $ | 9,922 | | | $ | 47,791 | | |
|
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. Management determined that it has both the positive intentThe amortized cost and ability to hold these securities to maturity. On the date of transfer, the difference between the par value and theestimated 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.
Certaincertain MBS securities issued by FNMA and FHLMC that exceeded 10% of shareholders’ equity at March 31, 2022. The FNMA investments had total amortized cost and fair value of $45.2 billion and $43.0 billion, respectively. The FHLMC investments had total amortized cost and fair value of $45.7 billion and $43.4 billion, respectively.are shown in the table below:
| | | | | | | | | | | | | | |
| | March 31, 2023 |
(Dollars in millions) | | Amortized Cost | | Fair Value |
FNMA | | $ | 41,783 | | | $ | 35,517 | |
FHLMC | | 42,308 | | | 35,747 | |
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 | |
March 31, 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 | | |
March 31, 2023 (Dollars in millions) | | March 31, 2023 (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 | $ | 309 | | | $ | 8,602 | | | $ | 980 | | | $ | — | | | $ | 9,891 | | | $ | 307 | | | $ | 8,188 | | | $ | 917 | | | $ | — | | | $ | 9,412 | | | U.S. Treasury | $ | 2,587 | | | $ | 8,448 | | | $ | 19 | | | $ | 29 | | | $ | 11,083 | | | $ | 2,528 | | | $ | 7,869 | | | $ | 18 | | | $ | 26 | | | $ | 10,441 | | |
GSE | GSE | — | | | — | | | — | | | 257 | | | 257 | | | — | | | — | | | — | | | 245 | | | 245 | | | GSE | — | | | 7 | | | 11 | | | 314 | | | 332 | | | — | | | 7 | | | 10 | | | 284 | | | 301 | | |
Agency MBS - residential | Agency MBS - residential | — | | | 1 | | | 633 | | | 71,322 | | | 71,956 | | | — | | | 1 | | | 624 | | | 67,613 | | | 68,238 | | | Agency MBS - residential | — | | | 65 | | | 580 | | | 63,737 | | | 64,382 | | | — | | | 62 | | | 547 | | | 54,566 | | | 55,175 | | |
Agency MBS - commercial | Agency MBS - commercial | — | | | 8 | | | 15 | | | 2,808 | | | 2,831 | | | — | | | 8 | | | 14 | | | 2,637 | | | 2,659 | | | Agency MBS - commercial | 1 | | | 7 | | | 71 | | | 2,793 | | | 2,872 | | | 1 | | | 7 | | | 68 | | | 2,322 | | | 2,398 | | |
States and political subdivisions | States and political subdivisions | 15 | | | 76 | | | 124 | | | 151 | | | 366 | | | 15 | | | 76 | | | 129 | | | 150 | | | 370 | | | States and political subdivisions | 3 | | | 94 | | | 139 | | | 189 | | | 425 | | | 3 | | | 93 | | | 148 | | | 181 | | | 425 | | |
Non-agency MBS | Non-agency MBS | — | | | — | | | — | | | 4,149 | | | 4,149 | | | — | | | — | | | — | | | 3,803 | | | 3,803 | | | Non-agency MBS | — | | | — | | | — | | | 3,884 | | | 3,884 | | | — | | | — | | | — | | | 3,098 | | | 3,098 | | |
Other | Other | — | | | 6 | | | — | | | 20 | | | 26 | | | — | | | 6 | | | — | | | 20 | | | 26 | | | Other | 6 | | | — | | | 14 | | | — | | | 20 | | | 6 | | | — | | | 14 | | | — | | | 20 | | |
Total AFS securities | Total AFS securities | $ | 324 | | | $ | 8,693 | | | $ | 1,752 | | | $ | 78,707 | | | $ | 89,476 | | | $ | 322 | | | $ | 8,279 | | | $ | 1,684 | | | $ | 74,468 | | | $ | 84,753 | | | Total AFS securities | $ | 2,597 | | | $ | 8,621 | | | $ | 834 | | | $ | 70,946 | | | $ | 82,998 | | | $ | 2,538 | | | $ | 8,038 | | | $ | 805 | | | $ | 60,477 | | | $ | 71,858 | | |
HTM securities: | HTM securities: | | | HTM securities: | | |
| Agency MBS - residential | Agency MBS - residential | $ | — | | | $ | — | | | $ | — | | | $ | 61,662 | | | $ | 61,662 | | | $ | — | | | $ | — | | | $ | — | | | $ | 59,124 | | | $ | 59,124 | | | Agency MBS - residential | $ | — | | | $ | — | | | $ | — | | | $ | 56,932 | | | $ | 56,932 | | | $ | — | | | $ | — | | | $ | — | | | $ | 48,097 | | | $ | 48,097 | | |
|
12 Truist Financial Corporation 11
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 |
March 31, 2022 (Dollars in millions) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | |
| March 31, 2023 (Dollars in millions) | | March 31, 2023 (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 | $ | 8,793 | | | $ | 431 | | | $ | 602 | | | $ | 48 | | | $ | 9,395 | | | $ | 479 | | U.S. Treasury | $ | 1,267 | | | $ | 27 | | | $ | 8,977 | | | $ | 617 | | | $ | 10,244 | | | $ | 644 | |
GSE | GSE | 209 | | | 12 | | | — | | | — | | | 209 | | | 12 | | GSE | 112 | | | 5 | | | 175 | | | 26 | | | 287 | | | 31 | |
Agency MBS - residential | Agency MBS - residential | 54,565 | | | 2,940 | | | 9,386 | | | 815 | | | 63,951 | | | 3,755 | | Agency MBS - residential | 1,267 | | | 65 | | | 53,717 | | | 9,143 | | | 54,984 | | | 9,208 | |
Agency MBS - commercial | Agency MBS - commercial | 909 | | | 40 | | 1,672 | | | 134 | | | 2,581 | | | 174 | | Agency MBS - commercial | 318 | | | 24 | | 2,066 | | | 450 | | | 2,384 | | | 474 | |
States and political subdivisions | States and political subdivisions | 206 | | | 13 | | | 21 | | | 2 | | | 227 | | | 15 | | States and political subdivisions | 42 | | | 1 | | | 210 | | | 16 | | | 252 | | | 17 | |
Non-agency MBS | Non-agency MBS | 3,803 | | | 346 | | | — | | | — | | | 3,803 | | | 346 | | Non-agency MBS | — | | | — | | | 3,098 | | | 786 | | | 3,098 | | | 786 | |
Other | Other | 21 | | | — | | | — | | | — | | | 21 | | | — | | Other | 5 | | | — | | | 15 | | | — | | | 20 | | | — | |
Total | Total | $ | 68,506 | | | $ | 3,782 | | | $ | 11,681 | | | $ | 999 | | | $ | 80,187 | | | $ | 4,781 | | Total | $ | 3,011 | | | $ | 122 | | | $ | 68,258 | | | $ | 11,038 | | | $ | 71,269 | | | $ | 11,160 | |
HTM securities: | HTM securities: | | | | | | | | | | | | HTM securities: | | | | | | | | | | | |
| Agency MBS - residential | Agency MBS - residential | $ | 39,486 | | | $ | 1,388 | | | $ | 19,638 | | | $ | 1,150 | | | $ | 59,124 | | | $ | 2,538 | | Agency MBS - residential | $ | — | | | $ | — | | | $ | 48,097 | | | $ | 8,835 | | | $ | 48,097 | | | $ | 8,835 | |
| | | | Less than 12 months | | 12 months or more | | Total | | Less than 12 months | | 12 months or more | | Total |
December 31, 2021 (Dollars in millions) | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | |
December 31, 2022 (Dollars in millions) | | December 31, 2022 (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 | $ | 8,412 | | | $ | 88 | | | $ | 582 | | | $ | 18 | | | $ | 8,994 | | | $ | 106 | | U.S. Treasury | $ | 2,069 | | | $ | 49 | | | $ | 8,186 | | | $ | 736 | | | $ | 10,255 | | | $ | 785 | |
GSE | GSE | 104 | | | 2 | | | — | | | — | | | 104 | | | 2 | | GSE | 180 | | | 14 | | | 114 | | | 22 | | | 294 | | | 36 | |
Agency MBS - residential | Agency MBS - residential | 101,262 | | | 2,377 | | | 2,638 | | | 123 | | | 103,900 | | | 2,500 | | Agency MBS - residential | 25,041 | | | 3,263 | | | 30,050 | | | 6,889 | | | 55,091 | | | 10,152 | |
Agency MBS - commercial | Agency MBS - commercial | 1,749 | | | 50 | | | 413 | | | 14 | | | 2,162 | | | 64 | | Agency MBS - commercial | 790 | | | 92 | | | 1,631 | | | 371 | | | 2,421 | | | 463 | |
States and political subdivisions | States and political subdivisions | — | | | — | | | 22 | | | 1 | | | 22 | | | 1 | | States and political subdivisions | 251 | | | 21 | | | 20 | | | 3 | | | 271 | | | 24 | |
Non-agency MBS | Non-agency MBS | 4,258 | | | 47 | | | — | | | — | | | 4,258 | | | 47 | | Non-agency MBS | — | | | — | | | 3,117 | | | 810 | | | 3,117 | | | 810 | |
Other | Other | 6 | | | — | | | — | | | — | | | 6 | | | — | | Other | 21 | | | — | | | — | | | — | | | 21 | | | — | |
Total | Total | $ | 115,791 | | | $ | 2,564 | | | $ | 3,655 | | | $ | 156 | | | $ | 119,446 | | | $ | 2,720 | | Total | $ | 28,352 | | | $ | 3,439 | | | $ | 43,118 | | | $ | 8,831 | | | $ | 71,470 | | | $ | 12,270 | |
HTM securities: | | HTM securities: | | | | | | | | | | | |
| Agency MBS - residential | | Agency MBS - residential | $ | 29,369 | | | $ | 5,613 | | | $ | 18,422 | | | $ | 4,309 | | | $ | 47,791 | | | $ | 9,922 | |
|
At March 31, 20222023 and December 31, 2021, 02022, 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 consistsconsist of residential agency MBS. Accordingly, the Company does not expect to incur any credit losses on HTM investment securities.
The following table presents gross securities gains and losses recognized in earnings: | | | | (Dollars in millions) | (Dollars in millions) | | Three Months Ended March 31, | | (Dollars in millions) | | | Three Months Ended March 31, |
| 2022 | | 2021 | | (Dollars in millions) | | | 2023 | | 2022 | |
| | Gross realized gains | Gross realized gains | | $ | 13 | | | $ | — | | | Gross realized gains | | | $ | — | | | $ | 13 | | |
Gross realized losses | Gross realized losses | | (82) | | | — | | | Gross realized losses | | | — | | | (82) | | |
| Securities gains (losses), net | Securities gains (losses), net | | $ | (69) | | | $ | — | | | Securities gains (losses), net | | | $ | — | | | $ | (69) | | |
|
12 Truist Financial Corporation 13
NOTE 5. Loans and ACL
In the first quarter of 2023, the Company adopted the Troubled Debt Restructurings and Vintage Disclosures accounting standard. Certain newly required disclosures in this footnote are presented as of and for the period ended March 31, 2023 only as the adoption of this guidance did not impact the prior periods. As such, disclosures were provided related to TDRs as of December 31, 2022 and for the three months ended March 31, 2022 under prior accounting standards. Refer to “Note 1. Basis of Presentation” for additional information.
The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonperforming 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 | |
March 31, 2022 (Dollars in millions) | | Current | | 30-89 Days Past Due | | 90 Days Or More Past Due (1) | | Nonperforming | | Total | |
March 31, 2023 (Dollars in millions) | | March 31, 2023 (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 | | $ | 140,428 | | | $ | 280 | | | $ | 22 | | | $ | 330 | | | $ | 141,060 | | Commercial and industrial | | $ | 166,663 | | | $ | 125 | | | $ | 35 | | | $ | 394 | | | $ | 167,217 | |
CRE | CRE | | 22,734 | | | 13 | | | — | | | 27 | | | 22,774 | | CRE | | 22,519 | | | 34 | | | — | | | 117 | | | 22,670 | |
Commercial construction | Commercial construction | | 5,219 | | | 1 | | | — | | | — | | | 5,220 | | Commercial construction | | 5,947 | | | 3 | | | — | | | 1 | | | 5,951 | |
| Consumer: | Consumer: | | Consumer: | |
Residential mortgage | Residential mortgage | | 46,287 | | | 542 | | | 1,027 | | | 315 | | | 48,171 | | Residential mortgage | | 55,057 | | | 491 | | | 674 | | | 233 | | | 56,455 | |
Residential home equity and direct | | 24,558 | | | 142 | | | 12 | | | 141 | | | 24,853 | | |
Home equity | | Home equity | | 10,370 | | | 65 | | | 10 | | | 132 | | | 10,577 | |
Indirect auto | Indirect auto | | 24,999 | | | 529 | | | 1 | | | 227 | | | 25,756 | | Indirect auto | | 26,498 | | | 511 | | | — | | | 270 | | | 27,279 | |
Indirect other | | 10,972 | | | 65 | | | 2 | | | 4 | | | 11,043 | | |
Other consumer | | Other consumer | | 27,523 | | | 164 | | | 10 | | | 45 | | | 27,742 | |
Student | Student | | 5,210 | | | 482 | | | 822 | | | — | | | 6,514 | | Student | | 4,046 | | | 356 | | | 594 | | | — | | | 4,996 | |
Credit card | Credit card | | 4,615 | | | 47 | | | 28 | | | — | | | 4,690 | | Credit card | | 4,692 | | | 56 | | | 38 | | | — | | | 4,786 | |
| Total | Total | | $ | 285,022 | | | $ | 2,101 | | | $ | 1,914 | | | $ | 1,044 | | | $ | 290,081 | | Total | | $ | 323,315 | | | $ | 1,805 | | | $ | 1,361 | | | $ | 1,192 | | | $ | 327,673 | |
(1)Includes government guaranteed loans of $996 million in the residential mortgage portfolio and $818 million in the student portfolio. | |
(1)Includes government guaranteed loans of $649 million in the residential mortgage portfolio and $590 million in the student portfolio. | | (1)Includes government guaranteed loans of $649 million in the residential mortgage portfolio and $590 million in the student portfolio. |
| | | Accruing | | | Accruing | |
December 31, 2021 (Dollars in millions) | | Current | | 30-89 Days Past Due | | 90 Days Or More Past Due (1) | | Nonperforming | | Total | |
December 31, 2022 (Dollars in millions) | | December 31, 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 | | $ | 138,225 | | | $ | 130 | | | $ | 13 | | | $ | 394 | | | $ | 138,762 | | Commercial and industrial | | $ | 163,604 | | | $ | 256 | | | $ | 49 | | | $ | 398 | | | $ | 164,307 | |
CRE | CRE | | 23,902 | | | 20 | | | — | | | 29 | | | 23,951 | | CRE | | 22,568 | | | 25 | | | 1 | | | 82 | | | 22,676 | |
Commercial construction | Commercial construction | | 4,962 | | | 2 | | | — | | | 7 | | | 4,971 | | Commercial construction | | 5,844 | | | 5 | | | — | | | — | | | 5,849 | |
| Consumer: | Consumer: | | | | | | | | | | Consumer: | | | | | | | | | |
Residential mortgage | Residential mortgage | | 46,033 | | | 514 | | | 1,009 | | | 296 | | | 47,852 | | Residential mortgage | | 55,005 | | | 614 | | | 786 | | | 240 | | | 56,645 | |
Residential home equity and direct | | 24,809 | | | 107 | | | 9 | | | 141 | | | 25,066 | | |
Home equity | | Home equity | | 10,661 | | | 68 | | | 12 | | | 135 | | | 10,876 | |
Indirect auto | Indirect auto | | 25,615 | | | 607 | | | 1 | | | 218 | | | 26,441 | | Indirect auto | | 27,015 | | | 646 | | | 1 | | | 289 | | | 27,951 | |
Indirect other | | 10,811 | | | 64 | | | 3 | | | 5 | | | 10,883 | | |
Other consumer | | Other consumer | | 27,289 | | | 187 | | | 13 | | | 44 | | | 27,533 | |
Student | Student | | 5,357 | | | 555 | | | 868 | | | — | | | 6,780 | | Student | | 4,179 | | | 402 | | | 706 | | | — | | | 5,287 | |
Credit card | Credit card | | 4,735 | | | 45 | | | 27 | | | — | | | 4,807 | | Credit card | | 4,766 | | | 64 | | | 37 | | | — | | | 4,867 | |
| Total | Total | | $ | 284,449 | | | $ | 2,044 | | | $ | 1,930 | | | $ | 1,090 | | | $ | 289,513 | | Total | | $ | 320,931 | | | $ | 2,267 | | | $ | 1,605 | | | $ | 1,188 | | | $ | 325,991 | |
(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 $759 million in the residential mortgage portfolio and $702 million in the student portfolio. | | (1)Includes government guaranteed loans of $759 million in the residential mortgage portfolio and $702 million in the student portfolio. |
14 Truist Financial Corporation 13
The following tables present the amortized cost basis of loans by origination year and credit quality indicator: | March 31, 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 | | |
March 31, 2023 (Dollars in millions) | | March 31, 2023 (Dollars in millions) | Amortized Cost Basis by Origination Year | | Revolving Credit | | Loans Converted to Term | | Other(1) | | |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total | |
Commercial: | Commercial: | | | | | | | | | | Commercial: | | | | | | | | | |
Commercial and industrial: | Commercial and industrial: | | | Commercial and industrial: | | |
Pass | Pass | $ | 10,993 | | | $ | 30,955 | | | $ | 15,100 | | | $ | 11,947 | | | $ | 7,874 | | | $ | 13,160 | | | $ | 46,584 | | | $ | — | | | $ | (65) | | | $ | 136,548 | | | Pass | $ | 9,673 | | | $ | 41,280 | | | $ | 19,702 | | | $ | 10,213 | | | $ | 7,556 | | | $ | 13,686 | | | $ | 59,715 | | | $ | — | | | $ | (217) | | | $ | 161,608 | | |
Special mention | Special mention | 104 | | | 227 | | | 303 | | | 212 | | | 279 | | | 100 | | | 530 | | | — | | | — | | | 1,755 | | | Special mention | 56 | | | 585 | | | 357 | | | 113 | | | 83 | | | 137 | | | 643 | | | — | | | — | | | 1,974 | | |
Substandard | Substandard | 98 | | | 334 | | | 361 | | | 375 | | | 238 | | | 256 | | | 765 | | | — | | | — | | | 2,427 | | | Substandard | 65 | | | 745 | | | 375 | | | 166 | | | 452 | | | 440 | | | 998 | | | — | | | — | | | 3,241 | | |
Nonperforming | Nonperforming | 4 | | | 42 | | | 11 | | | 62 | | | 10 | | | 43 | | | 158 | | | — | | | — | | | 330 | | | Nonperforming | 1 | | | 55 | | | 50 | | | 41 | | | 22 | | | 57 | | | 168 | | | — | | | — | | | 394 | | |
Total | Total | 11,199 | | | 31,558 | | | 15,775 | | | 12,596 | | | 8,401 | | | 13,559 | | | 48,037 | | | — | | | (65) | | | 141,060 | | | Total | 9,795 | | | 42,665 | | | 20,484 | | | 10,533 | | | 8,113 | | | 14,320 | | | 61,524 | | | — | | | (217) | | | 167,217 | | |
Gross charge-offs | | Gross charge-offs | — | | | 9 | | | 15 | | | 1 | | | 3 | | | 15 | | | 32 | | | — | | | — | | | 75 | | |
CRE: | CRE: | | | CRE: | | |
Pass | Pass | 971 | | | 4,396 | | | 2,744 | | | 4,951 | | | 3,093 | | | 3,405 | | | 882 | | | — | | | (50) | | | 20,392 | | | Pass | 1,042 | | | 5,649 | | | 3,269 | | | 2,302 | | | 3,426 | | | 3,902 | | | 834 | | | — | | | (74) | | | 20,350 | | |
Special mention | Special mention | 9 | | | 37 | | | 93 | | | 140 | | | 164 | | | 99 | | | — | | | — | | | — | | | 542 | | | Special mention | 6 | | | 273 | | | 113 | | | 74 | | | 289 | | | 208 | | | — | | | — | | | — | | | 963 | | |
Substandard | Substandard | 64 | | | 212 | | | 207 | | | 463 | | | 450 | | | 417 | | | — | | | — | | | — | | | 1,813 | | | Substandard | 38 | | | 223 | | | 47 | | | 33 | | | 526 | | | 372 | | | 1 | | | — | | | — | | | 1,240 | | |
Nonperforming | Nonperforming | 1 | | | 1 | | | 1 | | | 11 | | | 1 | | | 12 | | | — | | | — | | | — | | | 27 | | | Nonperforming | — | | | 37 | | | 3 | | | 2 | | | — | | | 75 | | | — | | | — | | | — | | | 117 | | |
Total | Total | 1,045 | | | 4,646 | | | 3,045 | | | 5,565 | | | 3,708 | | | 3,933 | | | 882 | | | — | | | (50) | | | 22,774 | | | Total | 1,086 | | | 6,182 | | | 3,432 | | | 2,411 | | | 4,241 | | | 4,557 | | | 835 | | | — | | | (74) | | | 22,670 | | |
Gross charge-offs | | Gross charge-offs | — | | | 2 | | | — | | | — | | | — | | | 4 | | | — | | | — | | | — | | | 6 | | |
Commercial construction: | Commercial construction: | | | Commercial construction: | | |
Pass | Pass | 417 | | | 1,219 | | | 1,124 | | | 896 | | | 346 | | | 164 | | | 832 | | | — | | | — | | | 4,998 | | | Pass | 219 | | | 1,628 | | | 1,618 | | | 636 | | | 219 | | | 157 | | | 1,021 | | | — | | | — | | | 5,498 | | |
Special mention | Special mention | 4 | | | — | | | 14 | | | 66 | | | — | | | — | | | — | | | — | | | — | | | 84 | | | Special mention | 37 | | | 84 | | | 36 | | | 176 | | | — | | | — | | | 1 | | | — | | | — | | | 334 | | |
Substandard | Substandard | 1 | | | 4 | | | 22 | | | 33 | | | 61 | | | 17 | | | — | | | — | | | — | | | 138 | | | Substandard | 1 | | | 39 | | | 6 | | | 19 | | | — | | | 53 | | | — | | | — | | | — | | | 118 | | |
Nonperforming | Nonperforming | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Nonperforming | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | — | | | — | | | 1 | | |
Total | Total | 422 | | | 1,223 | | | 1,160 | | | 995 | | | 407 | | | 181 | | | 832 | | | — | | | — | | | 5,220 | | | Total | 257 | | | 1,751 | | | 1,660 | | | 831 | | | 220 | | | 210 | | | 1,022 | | | — | | | — | | | 5,951 | | |
| | Consumer: | Consumer: | | | Consumer: | | |
Residential mortgage: | Residential mortgage: | | | Residential mortgage: | | |
| Current | Current | $ | 2,066 | | | $ | 17,749 | | | $ | 6,519 | | | $ | 3,238 | | | $ | 1,621 | | | $ | 15,094 | | | $ | — | | | $ | — | | | $ | — | | | $ | 46,287 | | | Current | 649 | | | 13,827 | | | 17,194 | | | 6,076 | | | 3,037 | | | 14,274 | | | — | | | — | | | — | | | 55,057 | | |
30 - 89 days past due | 30 - 89 days past due | 10 | | | 66 | | | 43 | | | 35 | | | 35 | | | 353 | | | — | | | — | | | — | | | 542 | | | 30 - 89 days past due | 2 | | | 33 | | | 57 | | | 25 | | | 29 | | | 345 | | | — | | | — | | | — | | | 491 | | |
90 days or more past due | 90 days or more past due | 1 | | | 4 | | | 52 | | | 93 | | | 128 | | | 749 | | | — | | | — | | | — | | | 1,027 | | | 90 days or more past due | — | | | 11 | | | 29 | | | 50 | | | 56 | | | 528 | | | — | | | — | | | — | | | 674 | | |
Nonperforming | Nonperforming | — | | | 4 | | | 7 | | | 21 | | | 27 | | | 256 | | | — | | | — | | | — | | | 315 | | | Nonperforming | — | | | 6 | | | 11 | | | 9 | | | 12 | | | 195 | | | — | | | — | | | — | | | 233 | | |
Total | Total | 2,077 | | | 17,823 | | | 6,621 | | | 3,387 | | | 1,811 | | | 16,452 | | | — | | | — | | | — | | | 48,171 | | | Total | 651 | | | 13,877 | | | 17,291 | | | 6,160 | | | 3,134 | | | 15,342 | | | — | | | — | | | — | | | 56,455 | | |
Residential home equity and direct: | | | |
Gross charge-offs | | Gross charge-offs | — | | | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | |
Home equity: | | Home equity: | | |
| Current | Current | 1,481 | | | 4,361 | | | 2,268 | | | 1,447 | | | 560 | | | 476 | | | 10,534 | | | 3,446 | | | (15) | | | 24,558 | | | Current | | 6,506 | | | 3,864 | | | — | | | 10,370 | | |
30 - 89 days past due | 30 - 89 days past due | 1 | | | 12 | | | 8 | | | 9 | | | 3 | | | 4 | | | 67 | | | 38 | | | — | | | 142 | | | 30 - 89 days past due | | 44 | | | 21 | | | — | | | 65 | | |
90 days or more past due | 90 days or more past due | — | | | 1 | | | — | | | — | | | — | | | — | | | 6 | | | 5 | | | — | | | 12 | | | 90 days or more past due | | 6 | | | 4 | | | — | | | 10 | | |
Nonperforming | Nonperforming | — | | | 3 | | | 3 | | | 4 | | | 1 | | | 7 | | | 42 | | | 81 | | | — | | | 141 | | | Nonperforming | | 46 | | | 86 | | | — | | | 132 | | |
Total | Total | 1,482 | | | 4,377 | | | 2,279 | | | 1,460 | | | 564 | | | 487 | | | 10,649 | | | 3,570 | | | (15) | | | 24,853 | | | Total | — | | | — | | | — | | | — | | | — | | | — | | | 6,602 | | | 3,975 | | | — | | | 10,577 | | |
Gross charge-offs | | Gross charge-offs | — | | | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | — | | | 2 | | |
Indirect auto: | Indirect auto: | | | Indirect auto: | | |
| Current | | Current | 2,077 | | | 10,757 | | | 6,504 | | | 3,667 | | | 2,147 | | | 1,339 | | | — | | | — | | | 7 | | | 26,498 | | |
30 - 89 days past due | | 30 - 89 days past due | 6 | | | 147 | | | 130 | | | 82 | | | 70 | | | 76 | | | — | | | — | | | — | | | 511 | | |
| Nonperforming | | Nonperforming | — | | | 57 | | | 71 | | | 49 | | | 48 | | | 45 | | | — | | | — | | | — | | | 270 | | |
Total | | Total | 2,083 | | | 10,961 | | | 6,705 | | | 3,798 | | | 2,265 | | | 1,460 | | | — | | | — | | | 7 | | | 27,279 | | |
Gross charge-offs | | Gross charge-offs | — | | | 39 | | | 34 | | | 17 | | | 16 | | | 21 | | | — | | | — | | | — | | | 127 | | |
Other consumer: | | Other consumer: | | |
| Current | Current | 2,369 | | | 9,794 | | | 5,938 | | | 3,775 | | | 1,860 | | | 1,263 | | | — | | | — | | | — | | | 24,999 | | | Current | 2,915 | | | 10,324 | | | 5,181 | | | 2,777 | | | 1,563 | | | 1,690 | | | 3,053 | | | 20 | | | — | | | 27,523 | | |
30 - 89 days past due | 30 - 89 days past due | 5 | | | 139 | | | 116 | | | 116 | | | 75 | | | 78 | | | — | | | — | | | — | | | 529 | | | 30 - 89 days past due | 4 | | | 71 | | | 36 | | | 20 | | | 16 | | | 12 | | | 4 | | | 1 | | | — | | | 164 | | |
90 days or more past due | 90 days or more past due | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 90 days or more past due | — | | | 8 | | | 1 | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 10 | | |
Nonperforming | Nonperforming | — | | | 42 | | | 51 | | | 60 | | | 39 | | | 35 | | | — | | | — | | | — | | | 227 | | | Nonperforming | — | | | 4 | | | 15 | | | 10 | | | 6 | | | 9 | | | — | | | 1 | | | — | | | 45 | | |
Total | Total | 2,374 | | | 9,976 | | | 6,105 | | | 3,951 | | | 1,974 | | | 1,376 | | | — | | | — | | | — | | | 25,756 | | | Total | 2,919 | | | 10,407 | | | 5,233 | | | 2,807 | | | 1,585 | | | 1,711 | | | 3,058 | | | 22 | | | — | | | 27,742 | | |
Indirect other: | | | |
| Current | 1,433 | | | 3,869 | | | 2,405 | | | 1,424 | | | 812 | | | 1,029 | | | — | | | — | | | — | | | 10,972 | | | |
30 - 89 days past due | 2 | | | 18 | | | 16 | | | 13 | | | 8 | | | 8 | | | — | | | — | | | — | | | 65 | | | |
90 days or more past due | — | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2 | | | |
Nonperforming | — | | | — | | | — | | | 3 | | | — | | | 1 | | | — | | | — | | | — | | | 4 | | | |
Total | 1,435 | | | 3,888 | | | 2,422 | | | 1,440 | | | 820 | | | 1,038 | | | — | | | — | | | — | | | 11,043 | | | |
Gross charge-offs | | Gross charge-offs | — | | | 45 | | | 25 | | | 14 | | | 10 | | | 5 | | | 6 | | | — | | | — | | | 105 | | |
Student: | Student: | | | Student: | | |
Current | Current | — | | | — | | | 20 | | | 82 | | | 66 | | | 5,041 | | | — | | | — | | | 1 | | | 5,210 | | | Current | — | | | — | | | — | | | 16 | | 66 | | 3,964 | | | — | | | — | | | — | | | 4,046 | | |
30 - 89 days past due | 30 - 89 days past due | — | | | — | | | — | | | — | | | 1 | | | 481 | | | — | | | — | | | — | | | 482 | | | 30 - 89 days past due | — | | | — | | | — | | | — | | | 1 | | 355 | | | — | | | — | | | — | | | 356 | | |
90 days or more past due | 90 days or more past due | — | | | — | | | — | | | — | | | 1 | | | 821 | | | — | | | — | | | — | | | 822 | | | 90 days or more past due | — | | | — | | | — | | | — | | | 1 | | 593 | | | — | | | — | | | — | | | 594 | | |
| Total | Total | — | | | — | | | 20 | | | 82 | | | 68 | | | 6,343 | | | — | | | — | | | 1 | | | 6,514 | | | Total | — | | | — | | | — | | | 16 | | | 68 | | | 4,912 | | | — | | | — | | | — | | | 4,996 | | |
Gross charge-offs | | Gross charge-offs | — | | | — | | | — | | | — | | | — | | | 5 | | | — | | | — | | | — | | | 5 | | |
Credit card: | Credit card: | | | Credit card: | | |
Current | Current | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 4,591 | | | 21 | | | 3 | | | 4,615 | | | Current | | 4,675 | | | 17 | | | — | | | 4,692 | | |
30 - 89 days past due | 30 - 89 days past due | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 45 | | | 2 | | | — | | | 47 | | | 30 - 89 days past due | | 54 | | | 2 | | | — | | | 56 | | |
90 days or more past due | 90 days or more past due | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 27 | | | 1 | | | — | | | 28 | | | 90 days or more past due | | 36 | | | 2 | | | — | | | 38 | | |
| Total | Total | — | | | — | | | — | | | — | | | — | | | — | | | 4,663 | | | 24 | | | 3 | | | 4,690 | | | Total | — | | | — | | | — | | | — | | | — | | | — | | | 4,765 | | | 21 | | | — | | | 4,786 | | |
Gross charge-offs | | Gross charge-offs | — | | | — | | | — | | | — | | | — | | | — | | | 50 | | | 1 | | | — | | | 51 | | |
Total | Total | $ | 20,034 | | | $ | 73,491 | | | $ | 37,427 | | | $ | 29,476 | | | $ | 17,753 | | | $ | 43,369 | | | $ | 65,063 | | | $ | 3,594 | | | $ | (126) | | | $ | 290,081 | | | Total | $ | 16,791 | | | $ | 85,843 | | | $ | 54,805 | | | $ | 26,556 | | | $ | 19,626 | | | $ | 42,512 | | | $ | 77,806 | | | $ | 4,018 | | | $ | (284) | | | $ | 327,673 | | |
Gross charge-offs | | Gross charge-offs | $ | — | | | $ | 95 | | | $ | 75 | | | $ | 32 | | | $ | 29 | | | $ | 50 | | | $ | 90 | | | $ | 1 | | | $ | — | | | $ | 372 | | |
| | |
14 Truist Financial Corporation 15
| 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 | | |
December 31, 2022 (Dollars in millions) | | December 31, 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: | | | Commercial: | | |
Commercial and industrial: | Commercial and industrial: | | | Commercial and industrial: | | |
Pass | Pass | $ | 35,530 | | | $ | 17,430 | | | $ | 14,105 | | | $ | 8,994 | | | $ | 5,633 | | | $ | 9,424 | | | $ | 43,035 | | | $ | — | | | $ | (169) | | | $ | 133,982 | | | Pass | $ | 45,890 | | | $ | 21,642 | | | $ | 11,219 | | | $ | 8,258 | | | $ | 4,977 | | | $ | 9,686 | | | $ | 57,854 | | | $ | — | | | $ | (199) | | | $ | 159,327 | | |
Special mention | Special mention | 195 | | | 221 | | | 326 | | | 317 | | | 46 | | | 70 | | | 691 | | | — | | | — | | | 1,866 | | | Special mention | 243 | | | 302 | | | 143 | | | 160 | | | 61 | | | 88 | | | 721 | | | — | | | — | | | 1,718 | | |
Substandard | Substandard | 352 | | | 356 | | | 395 | | | 197 | | | 91 | | | 335 | | | 794 | | | — | | | — | | | 2,520 | | | Substandard | 518 | | | 387 | | | 113 | | | 413 | | | 249 | | | 187 | | | 997 | | | — | | | — | | | 2,864 | | |
Nonperforming | Nonperforming | 50 | | | 19 | | | 49 | | | 42 | | | 16 | | | 34 | | | 184 | | | — | | | — | | | 394 | | | Nonperforming | 47 | | | 53 | | | 10 | | | 28 | | | 46 | | | 27 | | | 187 | | | — | | | — | | | 398 | | |
Total | Total | 36,127 | | | 18,026 | | | 14,875 | | | 9,550 | | | 5,786 | | | 9,863 | | | 44,704 | | | — | | | (169) | | | 138,762 | | | Total | 46,698 | | | 22,384 | | | 11,485 | | | 8,859 | | | 5,333 | | | 9,988 | | | 59,759 | | | — | | | (199) | | | 164,307 | | |
CRE: | CRE: | | | CRE: | | |
Pass | Pass | 4,836 | | | 2,946 | | | 5,109 | | | 3,201 | | | 1,774 | | | 2,131 | | | 762 | | | — | | | (61) | | | 20,698 | | | Pass | 6,141 | | | 3,595 | | | 2,220 | | | 3,846 | | | 2,092 | | | 2,265 | | | 757 | | | — | | | (70) | | | 20,846 | | |
Special mention | Special mention | 13 | | | 118 | | | 483 | | | 247 | | | 44 | | | 83 | | | — | | | — | | | — | | | 988 | | | Special mention | 106 | | | 118 | | | 74 | | | 229 | | | 281 | | | 5 | | | 18 | | | — | | | — | | | 831 | | |
Substandard | Substandard | 321 | | | 264 | | | 523 | | | 528 | | | 321 | | | 279 | | | — | | | — | | | — | | | 2,236 | | | Substandard | 106 | | | 99 | | | 35 | | | 422 | | | 121 | | | 134 | | | — | | | — | | | — | | | 917 | | |
Nonperforming | Nonperforming | 1 | | | 1 | | | 11 | | | — | | | 9 | | | 7 | | | — | | | — | | | — | | | 29 | | | Nonperforming | — | | | 3 | | | — | | | — | | | 77 | | | 2 | | | — | | | — | | | — | | | 82 | | |
Total | Total | 5,171 | | | 3,329 | | | 6,126 | | | 3,976 | | | 2,148 | | | 2,500 | | | 762 | | | — | | | (61) | | | 23,951 | | | Total | 6,353 | | | 3,815 | | | 2,329 | | | 4,497 | | | 2,571 | | | 2,406 | | | 775 | | | — | | | (70) | | | 22,676 | | |
Commercial construction: | Commercial construction: | | | Commercial construction: | | |
Pass | Pass | 1,113 | | | 1,179 | | | 1,259 | | | 419 | | | 44 | | | 95 | | | 558 | | | — | | | 12 | | | 4,679 | | | Pass | 1,501 | | | 1,500 | | | 825 | | | 290 | | | 212 | | | 71 | | | 1,056 | | | — | | | — | | | 5,455 | | |
Special mention | Special mention | — | | | 14 | | | 72 | | | 50 | | | — | | | — | | | — | | | — | | | — | | | 136 | | | Special mention | 80 | | | — | | | 93 | | | — | | | — | | | — | | | 35 | | | — | | | — | | | 208 | | |
Substandard | Substandard | 7 | | | 13 | | | 45 | | | 67 | | | 17 | | | — | | | — | | | — | | | — | | | 149 | | | Substandard | 114 | | | — | | | 18 | | | 1 | | | 53 | | | — | | | — | | | — | | | — | | | 186 | | |
Nonperforming | — | | | — | | | 1 | | | �� | | | 5 | | | — | | | — | | | — | | | 1 | | | 7 | | | |
| Total | Total | 1,120 | | | 1,206 | | | 1,377 | | | 536 | | | 66 | | | 95 | | | 558 | | | — | | | 13 | | | 4,971 | | | Total | 1,695 | | | 1,500 | | | 936 | | | 291 | | | 265 | | | 71 | | | 1,091 | | | — | | | — | | | 5,849 | | |
| Consumer: | Consumer: | | | Consumer: | | |
Residential mortgage: | Residential mortgage: | | | Residential mortgage: | | |
| Current | Current | 17,271 | | | 6,798 | | | 3,642 | | | 1,753 | | | 2,237 | | | 14,240 | | | — | | | — | | | 92 | | | 46,033 | | | Current | 13,824 | | | 17,340 | | | 6,167 | | | 3,084 | | | 1,384 | | | 13,206 | | | — | | | — | | | — | | | 55,005 | | |
30 - 89 days past due | 30 - 89 days past due | 58 | | | 31 | | | 32 | | | 40 | | | 31 | | | 322 | | | — | | | — | | | — | | | 514 | | | 30 - 89 days past due | 55 | | | 61 | | | 32 | | | 37 | | | 43 | | | 386 | | | — | | | — | | | — | | | 614 | | |
90 or more days past due | 90 or more days past due | 3 | | | 44 | | | 91 | | | 133 | | | 95 | | | 643 | | | — | | | — | | | — | | | 1,009 | | | 90 or more days past due | 5 | | | 31 | | | 62 | | | 62 | | | 91 | | | 535 | | | — | | | — | | | — | | | 786 | | |
Nonperforming | Nonperforming | 1 | | | 5 | | | 18 | | | 27 | | | 20 | | | 226 | | | — | | | — | | | (1) | | | 296 | | | Nonperforming | 4 | | | 6 | | | 10 | | | 12 | | | 17 | | | 191 | | | — | | | — | | | — | | | 240 | | |
Total | Total | 17,333 | | | 6,878 | | | 3,783 | | | 1,953 | | | 2,383 | | | 15,431 | | | — | | | — | | | 91 | | | 47,852 | | | Total | 13,888 | | | 17,438 | | | 6,271 | | | 3,195 | | | 1,535 | | | 14,318 | | | — | | | — | | | — | | | 56,645 | | |
Residential home equity and direct: | | | |
Home equity: | | Home equity: | | |
| Current | Current | 4,962 | | | 2,630 | | | 1,717 | | | 691 | | | 189 | | | 425 | | | 10,757 | | | 3,388 | | | 50 | | | 24,809 | | | Current | | 6,843 | | | 3,818 | | | — | | | 10,661 | | |
30 - 89 days past due | 30 - 89 days past due | 8 | | | 8 | | | 10 | | | 3 | | | 1 | | | 3 | | | 53 | | | 21 | | | — | | | 107 | | | 30 - 89 days past due | | 48 | | | 20 | | | — | | | 68 | | |
90 days or more past due | 90 days or more past due | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 4 | | | — | | | 9 | | | 90 days or more past due | | 9 | | | 3 | | | — | | | 12 | | |
Nonperforming | Nonperforming | 2 | | | 3 | | | 4 | | | 1 | | | — | | | 7 | | | 48 | | | 75 | | | 1 | | | 141 | | | Nonperforming | | 44 | | | 91 | | | — | | | 135 | | |
Total | Total | 4,972 | | | 2,641 | | | 1,731 | | | 695 | | | 190 | | | 435 | | | 10,863 | | | 3,488 | | | 51 | | | 25,066 | | | Total | — | | | — | | | — | | | — | | | — | | | — | | | 6,944 | | | 3,932 | | | — | | | 10,876 | | |
Indirect auto: | Indirect auto: | | | Indirect auto: | | |
| Current | Current | 10,699 | | | 6,691 | | | 4,293 | | | 2,158 | | | 1,081 | | | 504 | | | — | | | — | | | 189 | | | 25,615 | | | Current | 11,646 | | | 7,141 | | | 4,105 | | | 2,461 | | | 1,096 | | | 559 | | | — | | | — | | | 7 | | | 27,015 | | |
30 - 89 days past due | 30 - 89 days past due | 119 | | | 138 | | | 145 | | | 97 | | | 56 | | | 52 | | | — | | | — | | | — | | | 607 | | | 30 - 89 days past due | 147 | | | 174 | | | 111 | | | 100 | | | 60 | | | 54 | | | — | | | — | | | — | | | 646 | | |
90 days or more past due | 90 days or more past due | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | | | 90 days or more past due | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | |
Nonperforming | Nonperforming | 28 | | | 48 | | | 61 | | | 41 | | | 21 | | | 19 | | | — | | | — | | | — | | | 218 | | | Nonperforming | 41 | | | 77 | | | 56 | | | 56 | | | 34 | | | 25 | | | — | | | — | | | — | | | 289 | | |
Total | Total | 10,846 | | | 6,877 | | | 4,499 | | | 2,296 | | | 1,158 | | | 576 | | | — | | | — | | | 189 | | | 26,441 | | | Total | 11,835 | | | 7,392 | | | 4,272 | | | 2,617 | | | 1,190 | | | 638 | | | — | | | — | | | 7 | | | 27,951 | | |
Indirect other: | | | |
Other consumer: | | Other consumer: | | |
| Current | Current | 4,333 | | | 2,724 | | | 1,638 | | | 937 | | | 455 | | | 691 | | | — | | | — | | | 33 | | | 10,811 | | | Current | 11,270 | | | 5,805 | | | 3,167 | | | 1,814 | | | 865 | | | 1,061 | | | 3,278 | | | 29 | | | — | | | 27,289 | | |
30 - 89 days past due | 30 - 89 days past due | 14 | | | 15 | | | 15 | | | 12 | | | 4 | | | 4 | | | — | | | — | | | — | | | 64 | | | 30 - 89 days past due | 68 | | | 44 | | | 26 | | | 20 | | | 10 | | | 7 | | | 10 | | | 2 | | | — | | | 187 | | |
90 days or more past due | 90 days or more past due | 1 | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3 | | | 90 days or more past due | 8 | | | 1 | | | 1 | | | 1 | | | — | | | — | | | 2 | | | — | | | — | | | 13 | | |
Nonperforming | Nonperforming | 1 | | | 1 | | | 1 | | | — | | | — | | | 2 | | | — | | | — | | | — | | | 5 | | | Nonperforming | 4 | | | 11 | | | 8 | | | 9 | | | 2 | | | 8 | | | 2 | | | — | | | — | | | 44 | | |
Total | Total | 4,349 | | | 2,741 | | | 1,655 | | | 949 | | | 459 | | | 697 | | | — | | | — | | | 33 | | | 10,883 | | | Total | 11,350 | | | 5,861 | | | 3,202 | | | 1,844 | | | 877 | | | 1,076 | | | 3,292 | | | 31 | | | — | | | 27,533 | | |
Student: | Student: | | | Student: | | |
Current | Current | — | | | 21 | | | 88 | | | 73 | | | 61 | | | 5,122 | | | — | | | — | | | (8) | | | 5,357 | | | Current | — | | | — | | | 17 | | | 71 | | | 57 | | | 4,034 | | | — | | | — | | | — | | | 4,179 | | |
30 - 89 days past due | 30 - 89 days past due | — | | | — | | | 1 | | | 1 | | | 1 | | | 552 | | | — | | | — | | | — | | | 555 | | | 30 - 89 days past due | — | | | — | | | — | | | 1 | | | 1 | | | 400 | | | — | | | — | | | — | | | 402 | | |
90 days or more past due | 90 days or more past due | — | | | — | | | — | | | — | | | 1 | | | 867 | | | — | | | — | | | — | | | 868 | | | 90 days or more past due | — | | | — | | | — | | | 1 | | | 1 | | | 704 | | | — | | | — | | | — | | | 706 | | |
| Total | Total | — | | | 21 | | | 89 | | | 74 | | | 63 | | | 6,541 | | | — | | | — | | | (8) | | | 6,780 | | | Total | — | | | — | | | 17 | | | 73 | | | 59 | | | 5,138 | | | — | | | — | | | — | | | 5,287 | | |
Credit card: | Credit card: | | | Credit card: | | |
Current | Current | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 4,711 | | | 24 | | | — | | | 4,735 | | | Current | | 4,750 | | | 16 | | | — | | | 4,766 | | |
30 - 89 days past due | 30 - 89 days past due | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 43 | | | 2 | | | — | | | 45 | | | 30 - 89 days past due | | 63 | | | 1 | | | — | | | 64 | | |
90 days or more past due | 90 days or more past due | 0 | | 0 | | 0 | | 0 | | 0 | | 0 | | 26 | | | 1 | | | — | | | 27 | | | 90 days or more past due | | 36 | | | 1 | | | — | | | 37 | | |
| Total | Total | — | | | — | | | — | | | — | | | — | | | — | | | 4,780 | | | 27 | | | — | | | 4,807 | | | Total | — | | | — | | | — | | | — | | | — | | | — | | | 4,849 | | | 18 | | | — | | | 4,867 | | |
Total | Total | $ | 79,918 | | | $ | 41,719 | | | $ | 34,135 | | | $ | 20,029 | | | $ | 12,253 | | | $ | 36,138 | | | $ | 61,667 | | | $ | 3,515 | | | $ | 139 | | | $ | 289,513 | | | Total | $ | 91,819 | | | $ | 58,390 | | | $ | 28,512 | | | $ | 21,376 | | | $ | 11,830 | | | $ | 33,635 | | | $ | 76,710 | | | $ | 3,981 | | | $ | (262) | | | $ | 325,991 | | |
(1)Includes certain deferred fees and costs unapplied payments, and other adjustments.
16 Truist Financial Corporation 15
ACL
The following tables present activity in the ACL:
| | (Dollars in millions) | | Balance at Jan 1, 2021 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (1) | | Balance at Mar 31, 2021 | |
Commercial: | | |
Commercial and industrial | | $ | 2,204 | | | $ | (79) | | | $ | 19 | | | $ | (8) | | | $ | — | | | $ | 2,136 | | |
CRE | | 573 | | | (4) | | | 1 | | | (26) | | | — | | | 544 | | |
Commercial construction | | 81 | | | (2) | | | 1 | | | (3) | | | — | | | 77 | | |
| Consumer: | | |
Residential mortgage | | 368 | | | (11) | | | 2 | | | (16) | | | — | | | 343 | | |
Residential home equity and direct | | 714 | | | (55) | | | 18 | | | 30 | | | — | | | 707 | | |
Indirect auto | | 1,198 | | | (105) | | | 22 | | | 61 | | | — | | | 1,176 | | |
Indirect other | | 208 | | | (17) | | | 6 | | | (10) | | | — | | | 187 | | |
Student | | 130 | | | (3) | | | — | | | 2 | | | 2 | | | 131 | | |
Credit card | | 359 | | | (40) | | | 9 | | | 33 | | | — | | | 361 | | |
| ALLL | | 5,835 | | | (316) | | | 78 | | | 63 | | | 2 | | | 5,662 | | |
RUFC | | 364 | | | — | | | — | | | (15) | | | — | | | 349 | | |
ACL | | $ | 6,199 | | | $ | (316) | | | $ | 78 | | | $ | 48 | | | $ | 2 | | | $ | 6,011 | | |
| (Dollars in millions) | | Balance at Jan 1, 2022 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other (1) | | Balance at Mar 31, 2022 | |
Commercial: | | | |
Commercial and industrial | | $ | 1,426 | | | $ | (31) | | | $ | 17 | | | $ | (93) | | | $ | — | | | $ | 1,319 | | |
CRE | | 350 | | | (1) | | | 1 | | | (67) | | | — | | | 283 | | |
Commercial construction | | 52 | | | (1) | | | 1 | | | 1 | | | — | | | 53 | | |
| Consumer: | | |
Residential mortgage | | 308 | | | (2) | | | 6 | | | (2) | | | — | | | 310 | | |
Residential home equity and direct | | 615 | | | (58) | | | 20 | | | (3) | | | — | | | 574 | | |
Indirect auto | | 1,022 | | | (102) | | | 23 | | | 14 | | | — | | | 957 | | |
Indirect other | | 195 | | | (19) | | | 6 | | | 29 | | | — | | | 211 | | |
Student | | 117 | | | (6) | | | — | | | 3 | | | 1 | | | 115 | | |
Credit card | | 350 | | | (41) | | | 9 | | | 30 | | | — | | | 348 | | |
| ALLL | | 4,435 | | | (261) | | | 83 | | | (88) | | | 1 | | | 4,170 | | |
RUFC | | 260 | | | — | | | — | | | (7) | | | — | | | 253 | | |
ACL | | $ | 4,695 | | | $ | (261) | | | $ | 83 | | | $ | (95) | | | $ | 1 | | | $ | 4,423 | | |
| (Dollars in millions) | | (Dollars in millions) | | Balance at Jan 1, 2022 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other(1) | | Balance at Mar 31, 2022 |
Commercial: | | Commercial: | |
Commercial and industrial | | Commercial and industrial | | $ | 1,426 | | | $ | (31) | | | $ | 17 | | | $ | (93) | | | $ | — | | | $ | 1,319 | |
CRE | | CRE | | 350 | | | (1) | | | 1 | | | (67) | | | — | | | 283 | |
Commercial construction | | Commercial construction | | 52 | | | (1) | | | 1 | | | 1 | | | — | | | 53 | |
| Consumer: | | Consumer: | |
Residential mortgage | | Residential mortgage | | 308 | | | (2) | | | 6 | | | (2) | | | — | | | 310 | |
Home equity | | Home equity | | 96 | | | (1) | | | 5 | | | (12) | | | — | | | 88 | |
Indirect auto | | Indirect auto | | 1,022 | | | (102) | | | 23 | | | 14 | | | — | | | 957 | |
Other consumer | | Other consumer | | 714 | | | (76) | | | 21 | | | 38 | | | — | | | 697 | |
Student | | Student | | 117 | | | (6) | | | — | | | 3 | | | 1 | | | 115 | |
Credit card | | Credit card | | 350 | | | (41) | | | 9 | | | 30 | | | — | | | 348 | |
| ALLL | | ALLL | | 4,435 | | | (261) | | | 83 | | | (88) | | | 1 | | | 4,170 | |
RUFC | | RUFC | | 260 | | | — | | | — | | | (7) | | | — | | | 253 | |
ACL | | ACL | | $ | 4,695 | | | $ | (261) | | | $ | 83 | | | $ | (95) | | | $ | 1 | | | $ | 4,423 | |
| (Dollars in millions) | | (Dollars in millions) | | Balance at Jan 1, 2023 | | Charge-Offs | | Recoveries | | Provision (Benefit) | | Other(1) | | Balance at Mar 31, 2023 |
Commercial: | | Commercial: | | | | | | | | | | | | |
Commercial and industrial | | Commercial and industrial | | $ | 1,409 | | | $ | (75) | | | $ | 13 | | | $ | 151 | | | $ | (1) | | | $ | 1,497 | |
CRE | | CRE | | 224 | | | (6) | | | 1 | | | 32 | | | — | | | 251 | |
Commercial construction | | Commercial construction | | 46 | | | — | | | 1 | | | 40 | | | — | | | 87 | |
| Consumer: | | Consumer: | | | | | | | | | | | |
Residential mortgage | | Residential mortgage | | 399 | | | (1) | | | 2 | | | 13 | | | (81) | | | 332 | |
Home equity | | Home equity | | 90 | | | (2) | | | 6 | | | (7) | | | — | | | 87 | |
Indirect auto | | Indirect auto | | 981 | | | (127) | | | 26 | | | 100 | | | 13 | | | 993 | |
Other consumer | | Other consumer | | 770 | | | (105) | | | 17 | | | 98 | | | (1) | | | 779 | |
Student | | Student | | 98 | | | (5) | | | — | | | 5 | | | — | | | 98 | |
Credit card | | Credit card | | 360 | | | (51) | | | 9 | | | 40 | | | (3) | | | 355 | |
| ALLL | | ALLL | | 4,377 | | | (372) | | | 75 | | | 472 | | | (73) | | | 4,479 | |
RUFC | | RUFC | | 272 | | | — | | | — | | | 10 | | | — | | | 282 | |
ACL | | ACL | | $ | 4,649 | | | $ | (372) | | | $ | 75 | | | $ | 482 | | | $ | (73) | | | $ | 4,761 | |
| |
(1)Includes the amounts for the ALLL for PCD acquisitions, the impact of adopting the Troubled Debt Restructurings and Vintage Disclosures accounting standard, and other activity.
The commercial ALLL decreased $173increased $156 million and the consumer ALLL decreased $90$49 million for the three months ended March 31, 2022.2023. The increase in the commercial ALLL primarily reflects loan growth and increased economic uncertainty. The decrease reflects a continued favorable credit environment temperedin the consumer ALLL was primarily driven by the impact of the Troubled Debt Restructurings and Vintage Disclosures accounting standard, under which reasonable expectations of TDRs are no longer considered, partially offset by increased economic uncertainty. Considerations for the increased economic uncertainty include the potential impacts related to the risks associated with inflation, supply chain disruption, rising rates, geopolitical events, and geopolitical events.
The RUFC decreased $7 million for the three months ended March 31, 2022. The decrease reflects a continued favorable credit environment.recession.
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, USU.S. 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 March 31, 20222023 ACL, unchanged since December 31, 2021.2022. While the scenario weightings were unchanged, each forecast scenario reflected 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 March 31, 20222023 included GDP growth in the mid-single digits followed by a decline to the low-single digits through the end of 2022 and an unemployment rate starting in the low-single digits with improvement through the end of the reasonable and supportable period.near mid-single digits.
16 Truist Financial Corporation 17
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 March 31, 20222023 ACL estimate includes adjustments to consider the impact of current and expected events or risks not captured by the loss forecasting models, the outcomes of which are uncertain and may not be completely considered by quantitative models. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20212022 for additional information.
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 three months ended March 31, 2022 and 2021, respectively.LHFS: | | | | March 31, 2022 | | December 31, 2021 | | | March 31, 2023 | | December 31, 2022 | |
| | 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 | $ | 139 | | | $ | 191 | | | $ | 125 | | | $ | 269 | | | Commercial and industrial | $ | 68 | | | $ | 326 | | | $ | 120 | | | $ | 278 | | |
CRE | CRE | 18 | | | 9 | | | 12 | | | 17 | | | CRE | 11 | | | 106 | | | 75 | | | 7 | | |
Commercial construction | Commercial construction | — | | | — | | | — | | | 7 | | | Commercial construction | — | | | 1 | | | — | | | — | | |
| Consumer: | Consumer: | | | Consumer: | | |
Residential mortgage | Residential mortgage | 5 | | | 310 | | | 4 | | | 292 | | | Residential mortgage | — | | | 233 | | | 4 | | | 236 | | |
Residential home equity and direct | 3 | | | 138 | | | 3 | | | 138 | | | |
Home equity | | Home equity | 1 | | | 131 | | | 2 | | | 171 | | |
Indirect auto | Indirect auto | 3 | | | 224 | | | 1 | | | 217 | | | Indirect auto | — | | | 270 | | | 3 | | | 286 | | |
Indirect other | — | | | 4 | | | — | | | 5 | | | |
Other consumer | | Other consumer | — | | | 45 | | | — | | | 6 | | |
| Total | Total | $ | 168 | | | $ | 876 | | | $ | 145 | | | $ | 945 | | | Total | $ | 80 | | | $ | 1,112 | | | $ | 204 | | | $ | 984 | | |
| | | |
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) | Mar 31, 2022 | | Dec 31, 2021 | | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 | |
Nonperforming loans and leases HFI | | Nonperforming loans and leases HFI | $ | 1,192 | | | $ | 1,188 | | |
| Nonperforming loans and leases HFI | $ | 1,044 | | | $ | 1,090 | | | |
Nonperforming LHFS | 39 | | | 22 | | | |
Foreclosed real estate | Foreclosed real estate | 3 | | | 8 | | | Foreclosed real estate | 3 | | | 4 | | |
Other foreclosed property | Other foreclosed property | 49 | | | 43 | | | Other foreclosed property | 66 | | | 58 | | |
Total nonperforming assets | Total nonperforming assets | $ | 1,135 | | | $ | 1,163 | | | Total nonperforming assets | $ | 1,261 | | | $ | 1,250 | | |
| Residential mortgage loans in the process of foreclosure | Residential mortgage loans in the process of foreclosure | $ | 208 | | | $ | 135 | | | Residential mortgage loans in the process of foreclosure | $ | 226 | | | $ | 248 | | |
Loan Modifications
The following table summarizes the period-end amortized cost basis of loans to borrowers experiencing financial difficulty that were modified during the period, disaggregated by class of financing receivable and type of modification granted. This table includes modification activity that occurred on or after January 1, 2023. The volume of payment delay modifications is expected to increase throughout 2023 as the cumulative period over which such modifications are evaluated gradually extends to a full 12-month rolling period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2023 (Dollars in millions) | Renewals | | Term Extensions | | Capitalizations | | Payment Delays | | Combination - Interest Rate Reduction and Term Extension | | Combination - Capitalization and Term Extension | | Combination - Capitalization, Interest Rate and Term Extension | | Other | | Total Modified Loans | | Percentage of Total Class of Financing Receivable | | | | | |
Commercial: | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 390 | | | $ | 51 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 441 | | | 0.26 | % | | | | | |
CRE | 103 | | | — | | | — | | | 71 | | | — | | | — | | | — | | | — | | | 174 | | | 0.77 | | | | | | |
Commercial construction | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 0.02 | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | | | | | | | | |
Residential mortgage | — | | | 29 | | | 32 | | | 25 | | | 1 | | | 92 | | | 20 | | | 4 | | | 203 | | | 0.36 | | | | | | |
Home equity | — | | | — | | | — | | | — | | | 2 | | | — | | | — | | | 1 | | | 3 | | | 0.03 | | | | | | |
Indirect auto | — | | | 5 | | | — | | | 5 | | | 5 | | | — | | | — | | | 6 | | | 21 | | | 0.08 | | | | | | |
Other consumer | — | | | 5 | | | — | | | — | | | 1 | | | — | | | — | | | 1 | | | 7 | | | 0.03 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Credit card | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5 | | | 5 | | | 0.10 | | | | | | |
Total | $ | 494 | | | $ | 90 | | | $ | 32 | | | $ | 101 | | | $ | 9 | | | $ | 92 | | | $ | 20 | | | $ | 17 | | | $ | 855 | | | 0.26 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
18 Truist Financial Corporation
The table above excludes trial modifications totaling $64 million as of March 31, 2023. Such modifications will be included in the modification activity disclosure if the borrower successfully completes the trial period and the loan modification is finalized.
As of March 31, 2023, Truist had $353 million in unfunded lending commitments related to the modified obligations summarized in the table above.
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty: | | | | | | | | | | | | | | | | | | | | | | |
For the Three Months Ended March 31, 2023 | | | | | | | | | | | | | | |
Loan Type | | Financial Effect | | | | | | | | | | | | | | |
Renewals | | | | | | | | | | | | | | |
Commercial and industrial | | Extended weighted average term by 4 months and increased the weighted average interest rate by 0.4%. | | | | | | | | | | | | | | |
CRE | | Extended weighted average term by 9 months and increased the weighted average interest rate by 0.1%. | | | | | | | | | | | | | | |
Commercial construction | | Extended weighted average term by 5 months. | | | | | | | | | | | | | | |
Term Extensions | | | | | | | | | | | | | | |
Commercial and industrial | | Extended weighted average term by 3 months. | | | | | | | | | | | | | | |
Residential mortgage | | Extended weighted average term by 158 months. | | | | | | | | | | | | | | |
Indirect auto | | Extended weighted average term by 25 months. | | | | | | | | | | | | | | |
Other Consumer | | Extended weighted average term by 25 months. | | | | | | | | | | | | | | |
Capitalizations | | | | | | | | | | | | | | |
Residential mortgage | | Capitalized $19 thousand on a weighted average basis into the outstanding balance of the loan. | | | | | | | | | | | | | | |
Payment Delays | | | | | | | | | | | | | | |
CRE | | Provided 233 days of payment deferral on a weighted average basis. | | | | | | | | | | | | | | |
Residential mortgage | | Provided 195 days of payment deferral on a weighted average basis. | | | | | | | | | | | | | | |
Indirect auto | | Provided 129 days of payment deferral on a weighted average basis. | | | | | | | | | | | | | | |
Combination - Interest Rate Adjustment and Term Extension | | | | | | | | | | | | | | |
Residential mortgage | | Extended weighted average term by 97 months and decreased the weighted average interest rate by 0.8%. | | | | | | | | | | | | | | |
Home equity | | Extended weighted average term by 318 months and decreased the weighted average interest rate by 2.3%. | | | | | | | | | | | | | | |
Indirect auto | | Extended weighted average term by 11 months and decreased the weighted average interest rate by 7%. | | | | | | | | | | | | | | |
Other consumer | | Extended weighted average term by 101 months and decreased the weighted average interest rate by 3%. | | | | | | | | | | | | | | |
Combination - Capitalization and Term Extension | | | | | | | | | | | | | | |
Residential mortgage | | Extended weighted average term by 111 months and capitalized $31 thousand on a weighted average basis into the outstanding loan balance. | | | | | | | | | | | | | | |
Combination - Capitalization, Interest Rate and Term Extension | | | | | | | | | | | | | | |
Residential mortgage | | Extended weighted average term by 82 months, decreased weighted average interest rate by 0.3% and capitalized $23 thousand on a weighted average basis into the outstanding loan balance. | | | | | | | | | | | | | | |
Upon Truist’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
Truist Financial Corporation 19
Truist closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table summarizes the delinquency status of loans that were modified during the quarter: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payment Status (Amortized Cost Basis) | | |
March 31, 2023 (Dollars in millions) | Current | | 30-89 Days Past Due | | 90 Days or More Past Due | | Total | | |
Commercial: | | | | | | | | | |
Commercial and industrial | $ | 406 | | | $ | 1 | | | $ | 34 | | | $ | 441 | | | |
CRE | 174 | | | — | | | — | | | 174 | | | |
Commercial construction | 1 | | | — | | | — | | | 1 | | | |
Consumer: | | | | | | | | | |
Residential mortgage | 153 | | | 33 | | | 17 | | | 203 | | | |
Home equity | 3 | | | — | | | — | | | 3 | | | |
Indirect auto | 19 | | | 1 | | | 1 | | | 21 | | | |
Other consumer | 7 | | | — | | | — | | | 7 | | | |
| | | | | | | | | |
Credit card | 3 | | | 1 | | | 1 | | | 5 | | | |
Total | $ | 766 | | | $ | 36 | | | $ | 53 | | | $ | 855 | | | |
Total nonaccrual loans included above | $ | 131 | | | $ | 10 | | | $ | 39 | | | $ | 180 | | | |
The following table provides the amortized cost basis of financing receivables that were modified during the quarter that were in payment default: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
March 31, 2023 (Dollars in millions) | Renewals | | Term Extensions | | Capitalizations | | Payment Delays | | Combination - Capitalization and Term Extension | | Combination - Capitalization, Interest Rate and Term Extension | | Other | | Total | | |
Commercial: | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 34 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | 34 | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | | | | | |
Residential mortgage | — | | | 2 | | | 1 | | | 5 | | | 6 | | | 2 | | | 1 | | | 17 | | | |
| | | | | | | | | | | | | | | | | |
Indirect auto | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Credit card | — | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | | | |
Total | $ | 34 | | | $ | 2 | | | $ | 1 | | | $ | 5 | | | $ | 6 | | | $ | 2 | | | $ | 3 | | | $ | 53 | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
TDRs
The following table presents a summary of TDRs: | | | | | | | | | | | |
(Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 |
| | | |
Performing TDRs: | | | |
Commercial: | | | |
Commercial and industrial | $ | 104 | | | $ | 147 | |
CRE | 5 | | | 5 | |
Commercial construction | 1 | | | — | |
| | | |
Consumer: | | | |
Residential mortgage | 866 | | | 692 | |
Residential home equity and direct | 91 | | | 98 | |
Indirect auto | 392 | | | 389 | |
Indirect other | 6 | | | 7 | |
Student | 25 | | | 25 | |
Credit card | 25 | | | 27 | |
Total performing TDRs | 1,515 | | | 1,390 | |
Nonperforming TDRs | 189 | | | 152 | |
Total TDRs | $ | 1,704 | | | $ | 1,542 | |
ALLL attributable to TDRs | $ | 87 | | | $ | 102 | |
| | | | | | | |
(Dollars in millions) | | | Dec 31, 2022 |
Performing TDRs: | | | |
Commercial: | | | |
Commercial and industrial | | | $ | 136 | |
CRE | | | 5 | |
Commercial construction | | | 1 | |
| | | |
Consumer: | | | |
Residential mortgage | | | 1,252 | |
Home equity | | | 51 | |
Indirect auto | | | 462 | |
Other consumer | | | 31 | |
Student | | | 30 | |
Credit card | | | 18 | |
Total performing TDRs | | | 1,986 | |
Nonperforming TDRs | | | 214 | |
Total TDRs | | | $ | 2,200 | |
ALLL attributable to TDRs | | | $ | 152 | |
Truist Financial Corporation 17
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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| As of / For the Three Months Ended March 31, 2022 | | |
(Dollars in millions) | Type of Modification | | Prior Quarter Loan Balance | | ALLL at Period End | | | | | | |
Rate | | Structure | | | | | | | | |
Newly designated TDRs: | | | | | | | | | | | | | | |
Commercial | $ | — | | | $ | 8 | | | $ | 10 | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 148 | | | 191 | | | 329 | | | 15 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Credit card | 2 | | | — | | | 2 | | | 1 | | | | | | | | | |
Re-modification of previously designated TDRs | 21 | | | 11 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| As of / For the Three Months Ended March 31, 2021 | | |
| Type of Modification | | Prior Quarter Loan Balance | | ALLL at Period End | | | | | | |
(Dollars in millions) | Rate | | Structure | | | | | | | | |
Newly designated TDRs: | | | | | | | | | | | | | | | |
Commercial | $ | 27 | | | $ | 103 | | | $ | 147 | | | $ | 13 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | 75 | | | 155 | | | 233 | | | 13 | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Credit card | 4 | | | — | | | 4 | | | 2 | | | | | | | | | |
Re-modification of previously designated TDRs | 14 | | | 14 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
20 Truist Financial Corporation
Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented. The amount of modified loans that were classified as TDRs during the previous 12 months and experienced a payment default for three months ended March 31, 2022 and 2021 was immaterial. Payment default is defined as movement of the TDR to nonperforming status, foreclosure, or charge-off, whichever occurs first. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | |
| | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | As of / For the Three Months Ended March 31, 2022 |
| | | | | | | Type of Modification | | Prior Quarter Loan Balance | | Related ALLL at Period End |
(Dollars in millions) | | | | | | | Rate | | Structure | | |
Newly designated TDRs: | | | | | | | | | | | | | | | |
Commercial | | | | | | | | | $ | — | | | $ | 8 | | | $ | 10 | | | $ | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Consumer | | | | | | | | | 148 | | | 191 | | | 329 | | | 15 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Credit card | | | | | | | | | 2 | | | — | | | 2 | | | 1 | |
Re-modification of previously designated TDRs | | | | | | | | | 21 | | | 11 | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
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) | Mar 31, 2022 | | Dec 31, 2021 | | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 | |
| Unearned income, discounts, and net deferred loan fees and costs | Unearned income, discounts, and net deferred loan fees and costs | $ | 537 | | | $ | 849 | | | Unearned income, discounts, and net deferred loan fees and costs | $ | 299 | | | $ | 269 | | |
18 Truist Financial Corporation
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, 2021 quantitative2022 qualitative impairment test, concludingtest. Truist concluded 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 March 31, 2022,2023, and therefore no triggering event occurred that required a quantitative goodwill impairment test. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20212022 for additional information.
The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. Activity during 2023 relates to the reorganization of Prime Rate Premium Finance Corporation. Activity during 2022 reflects the acquisition of BankDirect Capital Finance, 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, 20212022 for additional information on the acquisitions and “Note 18. Operating Segments” for additional information on segments. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
(Dollars in millions) | CB&W | | C&CB | | IH | | Total | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
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 | — | | | — | | | 187 | | | 187 | | | | | |
Adjustments and other | (1) | | | — | | | — | | | (1) | | | | | |
Goodwill, March 31, 2022 | $ | 16,869 | | | $ | 6,149 | | | $ | 3,266 | | | $ | 26,284 | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
(Dollars in millions) | CB&W | | C&CB | | IH | | Total | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Goodwill, January 1, 2022 | $ | 16,870 | | | $ | 6,149 | | | $ | 3,079 | | | $ | 26,098 | | | | | |
Mergers and acquisitions | — | | | — | | | 912 | | | 912 | | | | | |
Adjustments and other | (5) | | | 5 | | | 3 | | | 3 | | | | | |
Goodwill, December 31, 2022 | 16,865 | | | 6,154 | | | 3,994 | | | 27,013 | | | | | |
| | | | | | | | | | | |
Adjustments and other | — | | | 216 | | | (215) | | | 1 | | | | | |
Goodwill, March 31, 2023 | $ | 16,865 | | | $ | 6,370 | | | $ | 3,779 | | | $ | 27,014 | | | | | |
| | | | | | | | | | | |
The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets: | | | | March 31, 2022 | | December 31, 2021 | | | March 31, 2023 | | December 31, 2022 |
(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 | | | $ | (1,267) | | | $ | 1,296 | | | $ | 2,563 | | | $ | (1,190) | | | $ | 1,373 | | CDI | | $ | 2,473 | | | $ | (1,465) | | | $ | 1,008 | | | $ | 2,473 | | | $ | (1,403) | | | $ | 1,070 | |
Other, primarily client relationship intangibles | Other, primarily client relationship intangibles | | 3,531 | | | (1,134) | | | 2,397 | | | 3,116 | | | (1,081) | | | 2,035 | | Other, primarily client relationship intangibles | | 3,802 | | | (1,275) | | | 2,527 | | | 3,812 | | | (1,210) | | | 2,602 | |
Total | Total | | $ | 6,094 | | | $ | (2,401) | | | $ | 3,693 | | | $ | 5,679 | | | $ | (2,271) | | | $ | 3,408 | | Total | | $ | 6,275 | | | $ | (2,740) | | | $ | 3,535 | | | $ | 6,285 | | | $ | (2,613) | | | $ | 3,672 | |
|
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 relations, including relations 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 economic benefits received.
Truist Financial Corporation 1921
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 other consumer loans. Servicing rights are capitalized by the Company as Loan servicing rights on the Consolidated Balance Sheets. Income earned by the Company on its loan 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:
| | | | (Dollars in millions) | (Dollars in millions) | | Mar 31, 2022 | | Dec 31, 2021 | | (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 | |
UPB of residential mortgage loan servicing portfolio | UPB of residential mortgage loan servicing portfolio | | $ | 246,664 | | | $ | 246,727 | | | UPB of residential mortgage loan servicing portfolio | | $ | 272,323 | | | $ | 274,028 | | |
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | | 195,737 | | | 196,011 | | | UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate | | 214,830 | | | 217,046 | | |
Mortgage loans sold with recourse | Mortgage loans sold with recourse | | 221 | | | 244 | | | Mortgage loans sold with recourse | | 200 | | | 200 | | |
Maximum recourse exposure from mortgage loans sold with recourse liability | Maximum recourse exposure from mortgage loans sold with recourse liability | | 137 | | | 155 | | | Maximum recourse exposure from mortgage loans sold with recourse liability | | 128 | | | 127 | | |
Indemnification, recourse and repurchase reserves | Indemnification, recourse and repurchase reserves | | 73 | | | 74 | | | Indemnification, recourse and repurchase reserves | | 55 | | | 56 | | |
| As of / For the Three Months Ended March 31, (Dollars in millions) | As of / For the Three Months Ended March 31, (Dollars in millions) | | 2022 | | 2021 | | As of / For the Three Months Ended March 31, (Dollars in millions) | | 2023 | | 2022 | |
UPB of residential mortgage loans sold from LHFS | UPB of residential mortgage loans sold from LHFS | | $ | 8,818 | | | $ | 9,489 | | | UPB of residential mortgage loans sold from LHFS | | $ | 2,507 | | | $ | 8,818 | | |
Pre-tax gains recognized on mortgage loans sold and held for sale | Pre-tax gains recognized on mortgage loans sold and held for sale | | 39 | | | 119 | | | Pre-tax gains recognized on mortgage loans sold and held for sale | | 16 | | | 39 | | |
Servicing fees recognized from mortgage loans serviced for others | Servicing fees recognized from mortgage loans serviced for others | | 145 | | | 141 | | | Servicing fees recognized from mortgage loans serviced for others | | 163 | | | 145 | | |
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.31 | % | | 0.31 | % | | Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others | | 0.27 | % | | 0.31 | % | |
Weighted average interest rate on mortgage loans serviced for others | Weighted average interest rate on mortgage loans serviced for others | | 3.41 | | | 3.76 | | | Weighted average interest rate on mortgage loans serviced for others | | 3.52 | | | 3.41 | | |
The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value: | | | | | | | | | | | | | | | | |
| | | | | | |
Three Months Ended March 31, (Dollars in millions) | | 2022 | | 2021 | | |
Residential MSRs, carrying value, January 1 | | $ | 2,305 | | | $ | 1,778 | | | |
| | | | | | |
Additions | | 147 | | | 174 | | | |
Change in fair value due to changes in valuation inputs or assumptions: | | | | | | |
Prepayment speeds | | 376 | | | 219 | | | |
OAS | | (26) | | | 141 | | | |
| | | | | | |
Realization of expected net servicing cash flows, passage of time and other | | (110) | | | (209) | | | |
Residential MSRs, carrying value, March 31 | | $ | 2,692 | | | $ | 2,103 | | | |
| | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | |
Three Months Ended March 31, | | | | | | |
(Dollars in millions) | | 2023 | | 2022 | | |
Residential MSRs, carrying value, January 1 | | $ | 3,428 | | | $ | 2,305 | | | |
| | | | | | |
Additions | | 44 | | | 147 | | | |
Sales | | (428) | | | — | | | |
Change in fair value due to changes in valuation inputs or assumptions(1) | | (1) | | | 350 | | | |
| | | | | | |
| | | | | | |
Realization of expected net servicing cash flows, passage of time, and other | | (57) | | | (110) | | | |
Residential MSRs, carrying value, March 31 | | $ | 2,986 | | | $ | 2,692 | | | |
| | | | | | |
(1)The first quarter of 2023 includes realized gains on the portfolio sale of excess servicing.
The sensitivity of the fair value of the Company’s residential MSRs to changes in key assumptions is presented in the following table: | | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | 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 | 10.0 | % | | 12.8 | % | | 11.1 | % | | 11.4 | % | | 15.3 | % | | 13.8 | % | Prepayment speed | 7.7 | % | | 14.0 | % | | 8.3 | % | | 8.6 | % | | 12.5 | % | | 9.0 | % |
Effect on fair value of a 10% increase | Effect on fair value of a 10% increase | | $ | (104) | | | $ | (113) | | Effect on fair value of a 10% increase | | $ | (87) | | | $ | (110) | |
Effect on fair value of a 20% increase | Effect on fair value of a 20% increase | | (199) | | | (216) | | Effect on fair value of a 20% increase | | (167) | | | (211) | |
OAS | OAS | 1.2 | % | | 11.2 | % | | 4.3 | % | | 1.5 | % | | 10.7 | % | | 4.2 | % | OAS | 1.7 | % | | 12.1 | % | | 4.6 | % | | 1.2 | % | | 11.4 | % | | 4.0 | % |
Effect on fair value of a 10% increase | Effect on fair value of a 10% increase | | $ | (44) | | | $ | (37) | | Effect on fair value of a 10% increase | | $ | (57) | | | $ | (55) | |
Effect on fair value of a 20% increase | Effect on fair value of a 20% increase | | (87) | | | (73) | | Effect on fair value of a 20% increase | | (111) | | | (108) | |
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 | | 99.3 | % | | 99.3 | % | Fixed-rate residential mortgage loans | | 99.5 | % | | 99.5 | % |
Adjustable-rate residential mortgage loans | Adjustable-rate residential mortgage loans | | 0.7 | | | 0.7 | | Adjustable-rate residential mortgage loans | | 0.5 | | | 0.5 | |
Total | Total | | | | | 100.0 | % | | | | | | 100.0 | % | Total | | | | | 100.0 | % | | | | | | 100.0 | % |
Weighted average life | Weighted average life | | | | | 6.0 years | | | | | | 5.2 years | Weighted average life | | | | | 7.1 years | | | | | | 6.8 years |
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.
2022 Truist Financial Corporation
Commercial Mortgage Activities
The following table summarizes commercial mortgage servicing activities: | | | | | | | | | | | |
| As of/Year-to-Date Ended |
(Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 |
| | | |
UPB of CRE mortgages serviced for others | $ | 37,397 | | | $ | 37,960 | |
CRE mortgages serviced for others covered by recourse provisions | 9,938 | | | 10,243 | |
Maximum recourse exposure from CRE mortgages sold with recourse liability | 2,861 | | | 2,958 | |
Recorded reserves related to recourse exposure | 15 | | | 16 | |
CRE mortgages originated during the year-to-date period | 1,557 | | | 9,380 | |
Commercial MSRs at fair value | 280 | | | 280 | |
| | | |
| | | |
| | | |
Other Servicing Activities
The Company had $41 million and $48 million of other loan servicing rights at fair value as of March 31, 2022 and December 31, 2021, respectively. | | | | | | | | | | | |
| |
(Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 |
UPB of CRE mortgages serviced for others | $ | 36,245 | | | $ | 36,622 | |
CRE mortgages serviced for others covered by recourse provisions | 9,829 | | | 9,955 | |
Maximum recourse exposure from CRE mortgages sold with recourse liability | 2,820 | | | 2,861 | |
Recorded reserves related to recourse exposure | 16 | | | 17 | |
CRE mortgages originated during the year-to-date period | 1,041 | | | 7,779 | |
Commercial MSRs at fair value | 291 | | | 301 | |
| | | |
| | | |
| | | |
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: | | | March 31, 2022 | | December 31, 2021 | |
(Dollars in millions) | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases | |
ROU assets | $ | 1,126 | | | $ | 22 | | | $ | 1,168 | | | $ | 22 | | |
Lease liabilities | 1,529 | | | 26 | | | 1,600 | | | 26 | | |
Weighted average remaining term | 6.5 years | | 6.2 years | | 6.6 years | | 6.4 years | |
Weighted average discount rate | 2.3 | % | | 3.4 | % | | 2.3 | % | | 3.5 | % | |
| | | | | March 31, 2023 | | December 31, 2022 |
| | (Dollars in millions) | | (Dollars in millions) | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
ROU assets | | ROU assets | $ | 1,151 | | | $ | 19 | | | $ | 1,193 | | | $ | 20 | |
| | Total lease liabilities | | Total lease liabilities | 1,498 | | | 22 | | | 1,545 | | | 23 | |
Weighted average remaining term | | Weighted average remaining term | 6.4 years | | 5.4 years | | 6.6 years | | 5.6 years |
Weighted average discount rate | | Weighted average discount rate | 2.8 | % | | 3.4 | % | | 2.7 | % | | 3.4 | % |
| | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | (Dollars in millions) | | 2023 | | 2022 | |
| Operating lease costs | Operating lease costs | | $ | 85 | | | $ | 85 | | | Operating lease costs | | $ | 82 | | | $ | 85 | | |
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) | | | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | | | Mar 31, 2023 | | Dec 31, 2022 |
| Assets held under operating leases (1) | Assets held under operating leases (1) | | | $ | 2,034 | | | $ | 2,110 | | Assets held under operating leases(1) | | | $ | 2,090 | | | $ | 2,090 | |
| Accumulated depreciation | Accumulated depreciation | | | (524) | | | (539) | | Accumulated depreciation | | | (554) | | | (550) | |
Net | Net | | | $ | 1,510 | | | $ | 1,571 | | Net | | | $ | 1,536 | | | $ | 1,540 | |
(1) Includes certain land parcels subject to operating leases that have indefinite lives.
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 $7.5$7.7 billion at March 31, 20222023 and $7.3$7.6 billion at December 31, 2021.2022.
Truist Financial Corporation 2123
NOTE 9. Borrowings
The following table presents a summary of short-term borrowings: | (Dollars in millions) | (Dollars in millions) | | Mar 31, 2022 | | Dec 31, 2021 | | (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 | |
| | FHLB advances | | FHLB advances | | $ | 18,900 | | | | $ | 18,900 | | |
Securities sold under agreements to repurchase | Securities sold under agreements to repurchase | | $ | 2,367 | | | | $ | 2,435 | | | Securities sold under agreements to repurchase | | 2,122 | | | | 2,128 | | |
| Securities sold short | | Securities sold short | | 1,789 | | | | 1,551 | | |
Collateral in excess of derivative exposures | Collateral in excess of derivative exposures | | 380 | | | | 318 | | | Collateral in excess of derivative exposures | | 455 | | | | 403 | | |
Master notes | Master notes | | 683 | | | | 808 | | | Master notes | | 310 | | | | 370 | | |
Securities sold short | | 1,717 | | | | 1,731 | | | |
| Other short-term borrowings | | Other short-term borrowings | | 102 | | | | 70 | | |
Total short-term borrowings | Total short-term borrowings | | $ | 5,147 | | | | $ | 5,292 | | | Total short-term borrowings | | $ | 23,678 | | | | $ | 23,422 | | |
|
The following table presents a summary of long-term debt: | | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | | | | | | | | | | Mar 31, 2022 | | Dec 31, 2021 |
| | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | |
Truist Financial Corporation: | | | | | | | | | | | | | |
Fixed rate senior notes (1) | | | | | | | | | | | $ | 12,038 | | | $ | 13,271 | |
Floating rate senior notes (1) | | | | | | | | | | | 999 | | | 1,348 | |
Fixed rate subordinated notes (2) | | | | | | | | | | | 927 | | | 1,254 | |
Capital notes (2) | | | | | | | | | | | 621 | | | 620 | |
Structured notes (3) | | | | | | | | | | | 11 | | | 11 | |
Truist Bank: | | | | | | | | | | | | | |
Fixed rate senior notes (1) | | | | | | | | | | | 9,442 | | | 9,545 | |
Floating rate senior notes (1) | | | | | | | | | | | 2,398 | | | 2,399 | |
Fixed rate subordinated notes (2) | | | | | | | | | | | 4,908 | | | 5,043 | |
| | | | | | | | | | | |
FHLB advances | | | | | | | | | | | 860 | | | 863 | |
| | | | | | | | | | | | | |
Other long-term debt (4) | | | | | | | | | | | 1,275 | | | 1,263 | |
Nonbank subsidiaries: | | | | | | | | | | | | | |
Other long-term debt (5) | | | | | | | | | | | 294 | | | 296 | |
Total long-term debt | | | | | | | | | | | $ | 33,773 | | | $ | 35,913 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | | | | | | | | | | Mar 31, 2023 | | Dec 31, 2022 |
| | | | | | | | | | |
| | | | | | | |
Truist Financial Corporation: | | | | | | | | | | | | | |
Fixed rate senior notes | | | | | | | | | | | $ | 16,059 | | | $ | 14,107 | |
Floating rate senior notes | | | | | | | | | | | 999 | | | 999 | |
Fixed rate subordinated notes(1) | | | | | | | | | | | 1,895 | | | 1,882 | |
Capital notes(1) | | | | | | | | | | | 626 | | | 625 | |
Structured notes(2) | | | | | | | | | | | 12 | | | 12 | |
Truist Bank: | | | | | | | | | | | | | |
Fixed rate senior notes | | | | | | | | | | | 5,246 | | | 6,982 | |
Floating rate senior notes | | | | | | | | | | | 1,249 | | | 1,749 | |
Fixed rate subordinated notes(1) | | | | | | | | | | | 4,795 | | | 4,767 | |
Fixed rate FHLB advances | | | | | | | | | | | 2 | | | 2 | |
Floating rate FHLB advances | | | | | | | | | | | 37,800 | | | 10,800 | |
Other long-term debt(3) | | | | | | | | | | | 1,212 | | | 1,278 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total long-term debt | | | | | | | | | | | $ | 69,895 | | | $ | 43,203 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(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)(2)Consist of notes with various terms that include fixed or floating rate interest or returns that are linked to an equity index.
(4)(3)Includes debt associated with finance leases, tax credit investments, and other.
(5)Includes debt associated with structured real estate leases.
24 Truist Financial Corporation
NOTE 10. Shareholders’ Equity
Common Stock
The following table presents total dividends declared per share of common stock: | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | |
| | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2022 | | 2021 | | |
| | | | | | | | | | |
| | | | | | | | | | |
Cash dividends declared per share | | | | | | $ | 0.48 | | | $ | 0.45 | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 | | |
Cash dividends declared per share | | | | | | $ | 0.52 | | | $ | 0.48 | | | |
Share Repurchase Activity
The Board of Directors has authorized the repurchase of up to $4.2 billion of the Company’s common stock through September 30, 2022. At March 31, 2022, Truist had remaining authorization to repurchase $2.6 billion of common stock under the Board approved repurchase plan. The amount of share repurchases is dependent on capital deployment through organic growth and acquisitions, giving consideration to economic and regulatory conditions.
22 Truist Financial Corporation
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 March 31, 2022 and 2021 (Dollars in millions) | Pension and OPEB Costs | | Cash Flow Hedges | | AFS Securities | | HTM Securities | | Other, net | | Total | |
AOCI balance, January 1, 2021 | $ | (875) | | | $ | (64) | | | $ | 1,654 | | | $ | — | | | $ | 1 | | | $ | 716 | | |
OCI before reclassifications, net of tax | 28 | | | — | | | (2,408) | | | — | | | 1 | | | (2,379) | | |
Amounts reclassified from AOCI: | | | | | | | | | | |
Before tax | 9 | | | 47 | | | 136 | | | — | | | — | | | 192 | | |
Tax effect | 2 | | | 11 | | | 32 | | | — | | | — | | | 45 | | |
Amounts reclassified, net of tax | 7 | | | 36 | | | 104 | | | — | | | — | | | 147 | | |
Total OCI, net of tax | 35 | | | 36 | | | (2,304) | | | — | | | 1 | | | (2,232) | | |
AOCI balance, March 31, 2021 | $ | (840) | | | $ | (28) | | | $ | (650) | | | $ | — | | | $ | 2 | | | $ | (1,516) | | |
| (Dollars in millions) | | (Dollars in millions) | Pension and OPEB Costs | | Cash Flow Hedges | | AFS Securities | | HTM Securities | | Other, net | | Total |
AOCI balance, January 1, 2022 | AOCI balance, January 1, 2022 | $ | (86) | | | $ | (9) | | | $ | (1,510) | | | $ | — | | | $ | 1 | | | $ | (1,604) | | 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 | | | — | | | (5,036) | | | — | | | 1 | | | (5,033) | | OCI before reclassifications, net of tax | 2 | | | — | | | (5,036) | | | — | | | 1 | | | (5,033) | |
AFS Securities transferred to HTM, net of tax | AFS Securities transferred to HTM, net of tax | — | | | — | | | 2,872 | | | (2,872) | | | — | | | — | | AFS Securities transferred to HTM, net of tax | — | | | — | | | 2,872 | | | (2,872) | | | — | | | — | |
Amounts reclassified from AOCI: | Amounts reclassified from AOCI: | | | | | | | | | | Amounts reclassified from AOCI: | | | | | | | | | |
Before tax | Before tax | 8 | | | 6 | | | 61 | | | 57 | | | — | | | 132 | | Before tax | 8 | | | 6 | | | 61 | | | 57 | | | — | | | 132 | |
Tax effect | Tax effect | 2 | | | 1 | | | 14 | | | 13 | | | — | | | 30 | | Tax effect | 2 | | | 1 | | | 14 | | | 13 | | | — | | | 30 | |
Amounts reclassified, net of tax | Amounts reclassified, net of tax | 6 | | | 5 | | | 47 | | | 44 | | | — | | | 102 | | Amounts reclassified, net of tax | 6 | | | 5 | | | 47 | | | 44 | | | — | | | 102 | |
Total OCI, net of tax | Total OCI, net of tax | 8 | | | 5 | | | (4,989) | | | 44 | | | 1 | | | (4,931) | | Total OCI, net of tax | 8 | | | 5 | | | (4,989) | | | 44 | | | 1 | | | (4,931) | |
AOCI balance, March 31, 2022 | AOCI balance, March 31, 2022 | $ | (78) | | | $ | (4) | | | $ | (3,627) | | | $ | (2,828) | | | $ | 2 | | | $ | (6,535) | | AOCI balance, March 31, 2022 | $ | (78) | | | $ | (4) | | | $ | (3,627) | | | $ | (2,828) | | | $ | 2 | | | $ | (6,535) | |
AOCI balance, January 1, 2023 | | AOCI balance, January 1, 2023 | $ | (1,535) | | | $ | (78) | | | $ | (9,395) | | | $ | (2,588) | | | $ | (5) | | | $ | (13,601) | |
OCI before reclassifications, net of tax | | OCI before reclassifications, net of tax | (26) | | | 125 | | | 903 | | | — | | | 1 | | | 1,003 | |
| Amounts reclassified from AOCI: | | Amounts reclassified from AOCI: | | | | | | | | | |
Before tax | | Before tax | 16 | | | — | | | (65) | | | 70 | | | — | | | 21 | |
Tax effect | | Tax effect | 4 | | | — | | | (15) | | | 15 | | | — | | | 4 | |
Amounts reclassified, net of tax | | Amounts reclassified, net of tax | 12 | | | — | | | (50) | | | 55 | | | — | | | 17 | |
Total OCI, net of tax | | Total OCI, net of tax | (14) | | | 125 | | | 853 | | | 55 | | | 1 | | | 1,020 | |
AOCI balance, March 31, 2023 | | AOCI balance, March 31, 2023 | $ | (1,549) | | | $ | 47 | | | $ | (8,542) | | | $ | (2,533) | | | $ | (4) | | | $ | (12,581) | |
| | 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 | | 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 | |
|
Truist Financial Corporation 25
NOTE 12. Income Taxes
For the three months ended March 31, 20222023 and 2021,2022, the provision for income taxes was $330$394 million and $351$330 million, respectively, representing effective tax rates of 18.9%20.6% and 19.2%18.9%, respectively. The lowerhigher effective tax rate for the three months ended March 31, 20222023 was primarily due to higher income before taxes, discrete tax expenses resulting from the divestiture of certain businessesexpense recognized in the prior year.current quarter compared to discrete tax benefits recognized in the three months ended March 31, 2022, and the adoption of the Investments in Tax Credit Structures accounting standard related to the proportional amortization of tax credit investments in the current quarter. Refer to “Note 1. Basis of Presentation” for additional information on the adoption of this guidance. 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.
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 March 31, | | | Three Months Ended March 31, | |
(Dollars in millions) | (Dollars in millions) | Income Statement Location | 2022 | | 2021 | | (Dollars in millions) | Income Statement Location | 2023 | | 2022 | |
Service cost | Service cost | Personnel expense | $ | 139 | | | $ | 158 | | | Service cost | Personnel expense | $ | 93 | | | $ | 139 | | |
Interest cost | Interest cost | Other expense | 88 | | | 79 | | | Interest cost | Other expense | 111 | | | 88 | | |
Estimated return on plan assets | Estimated return on plan assets | Other expense | (269) | | | (249) | | | Estimated return on plan assets | Other expense | (228) | | | (269) | | |
Amortization and other | Amortization and other | Other expense | 8 | | | 8 | | | Amortization and other | Other expense | 20 | | | 8 | | |
Net periodic (benefit) cost | Net periodic (benefit) cost | | $ | (34) | | | $ | (4) | | | Net periodic (benefit) cost | | $ | (4) | | | $ | (34) | | |
Truist makes contributions to the qualified pension plans up to the maximum amount deductible for federal income tax purposes. Discretionary contributions totaling $351 million$1.3 billion were made to the Truist pension plan during the three months ended March 31, 2022. There are no required contributions for 2022.2023.
26 Truist Financial Corporation 23
NOTE 14. Commitments and Contingencies
Truist utilizes a variety of financial instruments to mitigate exposure to risks and meet the financing needs and provide investment opportunities for clients. These financial instruments include commitments to extend credit, letters of credit and financial guarantees, derivatives, and 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 as a limited partner in certain projects through the New Market Tax Credit program, which is a Federal financial program aimed to stimulate business and real estate investment in underserved communities via a Federal tax credit. Following the first quarter of 2023 adoption of the Investments in Tax Credit Structures accounting standard, these tax credits, referred to as “Other qualified tax credits” below, qualify for the proportional amortization method. Refer to “Note 1. Basis of Presentation” for additional information.
The following table summarizes certain tax credit and certain equity investments: | (Dollars in millions) | (Dollars in millions) | Balance Sheet Location | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | Balance Sheet Location | Mar 31, 2023 | | Dec 31, 2022 |
| Investments in affordable housing projects: | | | | | |
Investments in affordable housing projects and other qualified tax credits: | | Investments in affordable housing projects and other qualified tax credits: | | | | |
Carrying amount | Carrying amount | Other assets | $ | 4,133 | | | $ | 4,107 | | Carrying amount | Other assets | $ | 5,765 | | | $ | 5,869 | |
Amount of future funding commitments included in carrying amount | Amount of future funding commitments included in carrying amount | Other liabilities | 1,346 | | | 1,285 | | Amount of future funding commitments included in carrying amount | Other liabilities | 1,726 | | | 1,762 | |
Lending exposure | Lending exposure | Loans and leases for funded amounts | 942 | | | 763 | | Lending exposure | Loans and leases for funded amounts | 1,625 | | | 1,547 | |
| Renewable energy investments: | Renewable energy investments: | | Renewable energy investments: | |
Carrying amount | Carrying amount | Other assets | 199 | | | 257 | | Carrying amount | Other assets | 272 | | | 264 | |
Amount of future funding commitments not included in carrying amount | Amount of future funding commitments not included in carrying amount | NA | 70 | | | 71 | | Amount of future funding commitments not included in carrying amount | NA | 444 | | | 361 | |
Private equity and certain other equity method investments: | | |
SBIC and certain other equity method investments: | | SBIC and certain other equity method investments: | |
Carrying amount | Carrying amount | Other assets | 1,925 | | | 1,822 | | Carrying amount | Other assets | 597 | | | 596 | |
Amount of future funding commitments not included in carrying amount | Amount of future funding commitments not included in carrying amount | NA | 435 | | | 411 | | Amount of future funding commitments not included in carrying amount | NA | 597 | | | 532 | |
The following table presents a summary of tax credits and amortization associated with the Company’s tax credit investment activity:activity. Activity related to the Company’s renewable energy investments was immaterial. | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, | | |
(Dollars in millions) | Income Statement Location | | | | | 2022 | | 2021 | | |
| | | | | | | | | | |
Tax credits: | | | | | | | | | | |
Investments in affordable housing projects | Provision for income taxes | | | | | $ | 127 | | | $ | 120 | | | |
Other community development investments | Provision for income taxes | | | | | 23 | | | 23 | | | |
Renewable energy investments | NA (1) | | | | | 37 | | | 39 | | | |
Amortization and other changes in carrying amount: | | | | | | | | | | |
Investments in affordable housing projects | Provision for income taxes | | | | | $ | 124 | | | $ | 119 | | | |
Other community development investments | Other noninterest income | | | | | 19 | | | 19 | | | |
Renewable energy investments | Other noninterest income | | | | | 4 | | | — | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
(Dollars in millions) | Income Statement Location | | | | | 2023 | | 2022 | | |
Tax credits: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Investments in affordable housing projects, other qualified tax credits, and other community development investments | Provision for income taxes | | | | | $ | 157 | | | $ | 150 | | | |
| | | | | | | | | | |
Amortization and other changes in carrying amount: | | | | | | | | | | |
Investments in affordable housing projects and other qualified tax credits(1) | Provision for income taxes | | | | | $ | 148 | | | $ | 124 | | | |
Other community development investments(1) | Other noninterest income | | | | | 2 | | | 19 | | | |
| | | | | | | | | | |
(1)In the first quarter of 2023, the Company adopted the Investments in Tax Credit Structures accounting standard. As a result, amortization related to these tax credits receivedstarted being recognized in the Provision for these investments are recordedincome taxes as a reductionof the adoption of this standard. This activity was previously recognized in Other income. Refer to the carrying value“Note 1. Basis of these investments.Presentation” for additional information.
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) | Mar 31, 2022 | Dec 31, 2021 | (Dollars in millions) | Mar 31, 2023 | Dec 31, 2022 |
| Commitments to extend, originate, or purchase credit | $ | 202,695 | | | $ | 198,658 | | |
Commitments to extend, originate, or purchase credit and other commitments | | Commitments to extend, originate, or purchase credit and other commitments | $ | 215,998 | | | $ | 216,838 | |
Residential mortgage loans sold with recourse | Residential mortgage loans sold with recourse | 221 | | | 244 | | Residential mortgage loans sold with recourse | 200 | | | 200 | |
CRE mortgages serviced for others covered by recourse provisions | CRE mortgages serviced for others covered by recourse provisions | 9,938 | | | 10,243 | | CRE mortgages serviced for others covered by recourse provisions | 9,829 | | | 9,955 | |
Other loans serviced for others covered by recourse provisions | Other loans serviced for others covered by recourse provisions | 594 | | | 588 | | Other loans serviced for others covered by recourse provisions | 759 | | | 723 | |
Letters of credit | Letters of credit | 5,818 | | | 5,568 | | Letters of credit | 6,158 | | | 6,030 | |
|
24 Truist Financial Corporation 27
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 partythird-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) | (Dollars in millions) | | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 |
Total return swaps: | Total return swaps: | | Total return swaps: | |
VIE assets | VIE assets | | $ | 1,627 | | | $ | 1,519 | | VIE assets | | $ | 1,880 | | | $ | 1,830 | |
Trading loans and bonds | Trading loans and bonds | | 1,602 | | | 1,491 | | Trading loans and bonds | | 1,801 | | | 1,790 | |
VIE liabilities | VIE liabilities | | 104 | | | 50 | | VIE liabilities | | 118 | | | 163 | |
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, thatwhich could potentially be significant. 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 partythird-party clients via the TRS contracts. For additional information on TRS contracts and the related VIEs, see “Note 16. Derivative Financial Instruments.”
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 nonqualified 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) | | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 |
| Pledged securities | Pledged securities | | $ | 28,614 | | | $ | 29,678 | | Pledged securities | | $ | 71,890 | | | $ | 38,012 | |
| Pledged loans: | Pledged loans: | | Pledged loans: | |
FRB | FRB | | 70,815 | | | 73,349 | | FRB | | 75,018 | | | 71,234 | |
FHLB | FHLB | | 60,151 | | | 64,698 | | FHLB | | 70,766 | | | 68,988 | |
Unused borrowing capacity: | Unused borrowing capacity: | | Unused borrowing capacity: | |
FRB | FRB | | 51,876 | | | 52,170 | | FRB | | 53,291 | | | 49,250 | |
FHLB | FHLB | | 45,961 | | | 49,244 | | FHLB | | 24,678 | | | 20,770 | |
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 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 many class members and can involve claims for substantial 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, 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, 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.
28 Truist Financial Corporation 25
The Company estimates reasonably possible losses, in excess of amounts accrued, of up to approximately $200 million as of March 31, 2022.2023. This estimate does 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 involve 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.
For certain matters, Truist may be unable to estimate the loss or range of loss, even if it believes that a loss is probable or reasonably possible, until developments in the case provide additional information sufficient to support such an estimate. Such matters are not accrued for and are not reflected in the estimate 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, 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.ongoing, is completed. Trial is presently set to commence on April 29, 2024. 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 that it infringes any of the patents at issue in the lawsuit and asserting that USAA’s patents are invalid or unenforceable. On December 30, 2022, the Company filed a motion for leave to amend its answer to assert counterclaims seeking damages as well as injunctive relief against USAA for infringing certain patents owned by the Company and practiced by USAA’s mobile remote deposit capture systems, which motion was granted on April 8, 2023. On March 20, 2023, USAA filed a motion for leave to file an amended complaint which would add a claim that the Company’s mobile remote deposit capture systems infringe an additional USAA patent. On April 14, 2023, USAA filed a motion seeking to sever Truist’s counterclaims from the case. USAA’s motions above are both pending. Discovery in the district court proceedings is ongoing, and trial is presently set to commence on March 18, 2024.
At the Patent Trial and Appeal Board, the Company filed separate petitions for inter partes review on October 11, November 7, and November 15, 2022 challenging the validity of each of the three patents asserted by USAA in the lawsuit. In addition, on April 13, 2023, the Company filed a petition for inter partes review challenging the validity of the fourth patent USAA is seeking to add to the lawsuit. If institution of any of the petitions for inter partes review is granted, the Patent Trial and Appeal Board will review the validity of the claims in the applicable patent(s).
26 Truist Financial Corporation 29
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 levelthree-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: | March 31, 2022 (Dollars in millions) | | Total | | Level 1 | | Level 2 | | Level 3 | | Netting Adjustments (1) | | |
March 31, 2023 (Dollars in millions) | | March 31, 2023 (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 | | $ | 965 | | | $ | — | | | $ | 965 | | | $ | — | | | $ | — | | | U.S. Treasury | | $ | 120 | | | $ | — | | | $ | 120 | | | $ | — | | | $ | — | | |
GSE | GSE | | 391 | | | — | | | 391 | | | — | | | — | | | GSE | | 112 | | | — | | | 112 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 1,164 | | | — | | | 1,164 | | | — | | | — | | | Agency MBS - residential | | 797 | | | — | | | 797 | | | — | | | — | | |
Agency MBS - commercial | | 52 | | | — | | | 52 | | | — | | | — | | | |
| States and political subdivisions | States and political subdivisions | | 69 | | | — | | | 69 | | | — | | | — | | | States and political subdivisions | | 293 | | | — | | | 293 | | | — | | | — | | |
| Corporate and other debt securities | Corporate and other debt securities | | 1,023 | | | — | | | 1,023 | | | — | | | — | | | Corporate and other debt securities | | 1,118 | | | — | | | 1,118 | | | — | | | — | | |
Loans | Loans | | 1,933 | | | — | | | 1,933 | | | — | | | — | | | Loans | | 1,869 | | | — | | | 1,869 | | | — | | | — | | |
Other | Other | | 323 | | | 273 | | | 50 | | | — | | | — | | | Other | | 292 | | | 260 | | | 32 | | | — | | | — | | |
Total trading assets | Total trading assets | | 5,920 | | | 273 | | | 5,647 | | | — | | | — | | | Total trading assets | | 4,601 | | | 260 | | | 4,341 | | | — | | | — | | |
AFS securities: | AFS securities: | | | | | AFS securities: | | | | |
U.S. Treasury | U.S. Treasury | | 9,412 | | | — | | | 9,412 | | | — | | | — | | | U.S. Treasury | | 10,441 | | | — | | | 10,441 | | | — | | | — | | |
GSE | GSE | | 245 | | | — | | | 245 | | | — | | | — | | | GSE | | 301 | | | — | | | 301 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 68,238 | | | — | | | 68,238 | | | — | | | — | | | Agency MBS - residential | | 55,175 | | | — | | | 55,175 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 2,659 | | | — | | | 2,659 | | | — | | | — | | | Agency MBS - commercial | | 2,398 | | | — | | | 2,398 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 370 | | | — | | | 370 | | | — | | | — | | | States and political subdivisions | | 425 | | | — | | | 425 | | | — | | | — | | |
Non-agency MBS | Non-agency MBS | | 3,803 | | | — | | | 3,803 | | | — | | | — | | | Non-agency MBS | | 3,098 | | | — | | | 3,098 | | | — | | | — | | |
Other | Other | | 26 | | | — | | | 26 | | | — | | | — | | | Other | | 20 | | | — | | | 20 | | | — | | | — | | |
Total AFS securities | Total AFS securities | | 84,753 | | | — | | | 84,753 | | | — | | | — | | | Total AFS securities | | 71,858 | | | — | | | 71,858 | | | — | | | — | | |
LHFS at fair value | LHFS at fair value | | 3,364 | | | — | | | 3,364 | | | — | | | — | | | LHFS at fair value | | 1,911 | | | — | | | 1,911 | | | — | | | — | | |
Loans and leases | Loans and leases | | 21 | | | — | | | — | | | 21 | | | — | | | Loans and leases | | 17 | | | — | | | — | | | 17 | | | — | | |
Loan servicing rights at fair value | Loan servicing rights at fair value | | 3,013 | | | — | | | — | | | 3,013 | | | — | | | Loan servicing rights at fair value | | 3,303 | | | — | | | — | | | 3,303 | | | — | | |
Other assets: | Other assets: | | | Other assets: | | |
Derivative assets | Derivative assets | | 2,113 | | | 739 | | | 2,989 | | | 7 | | | (1,622) | | | Derivative assets | | 692 | | | 625 | | | 1,816 | | | 13 | | | (1,762) | | |
Equity securities | Equity securities | | 1,024 | | | 812 | | | 212 | | | — | | | — | | | Equity securities | | 857 | | | 757 | | | 100 | | | — | | | — | | |
| Total assets | Total assets | | $ | 100,208 | | | $ | 1,824 | | | $ | 96,965 | | | $ | 3,041 | | | $ | (1,622) | | | Total assets | | $ | 83,239 | | | $ | 1,642 | | | $ | 80,026 | | | $ | 3,333 | | | $ | (1,762) | | |
Liabilities: | Liabilities: | | | | | | | | | | | Liabilities: | | | | | | | | | | |
Derivative liabilities | Derivative liabilities | | $ | 1,482 | | | $ | 360 | | | $ | 4,128 | | | $ | 81 | | | $ | (3,087) | | | Derivative liabilities | | $ | 2,589 | | | $ | 394 | | | $ | 3,971 | | | $ | 31 | | | $ | (1,807) | | |
Securities sold short | Securities sold short | | 1,717 | | | 13 | | | 1,704 | | | — | | | — | | | Securities sold short | | 1,789 | | | 113 | | | 1,676 | | | — | | | — | | |
Total liabilities | Total liabilities | | $ | 3,199 | | | $ | 373 | | | $ | 5,832 | | | $ | 81 | | | $ | (3,087) | | | Total liabilities | | $ | 4,378 | | | $ | 507 | | | $ | 5,647 | | | $ | 31 | | | $ | (1,807) | | |
| |
30 Truist Financial Corporation 27
| December 31, 2021 (Dollars in millions) | | Total | | Level 1 | | Level 2 | | Level 3 | | Netting Adjustments (1) | | |
December 31, 2022 (Dollars in millions) | | December 31, 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 | | $ | 125 | | | $ | — | | | $ | 125 | | | $ | — | | | $ | — | | | U.S. Treasury | | $ | 137 | | | $ | — | | | $ | 137 | | | $ | — | | | $ | — | | |
GSE | GSE | | 306 | | | — | | | 306 | | | — | | | — | | | GSE | | 457 | | | — | | | 457 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 1,016 | | | — | | | 1,016 | | | — | | | — | | | Agency MBS - residential | | 804 | | | — | | | 804 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 13 | | | — | | | 13 | | | — | | | — | | | Agency MBS - commercial | | 62 | | | — | | | 62 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 91 | | | — | | | 91 | | | — | | | — | | | States and political subdivisions | | 422 | | | — | | | 422 | | | — | | | — | | |
| Corporate and other debt securities | Corporate and other debt securities | | 738 | | | — | | | 738 | | | — | | | — | | | Corporate and other debt securities | | 761 | | | — | | | 761 | | | — | | | — | | |
Loans | Loans | | 1,791 | | | — | | | 1,791 | | | — | | | — | | | Loans | | 1,960 | | | — | | | 1,960 | | | — | | | — | | |
Other | Other | | 343 | | | 285 | | | 58 | | | — | | | — | | | Other | | 302 | | | 261 | | | 41 | | | — | | | — | | |
Total trading assets | Total trading assets | | 4,423 | | | 285 | | | 4,138 | | | — | | | — | | | Total trading assets | | 4,905 | | | 261 | | | 4,644 | | | — | | | — | | |
AFS securities: | AFS securities: | | | | | | | | | | | AFS securities: | | | | | | | | | | |
U.S. Treasury | U.S. Treasury | | 9,795 | | | — | | | 9,795 | | | — | | | — | | | U.S. Treasury | | 10,295 | | | — | | | 10,295 | | | — | | | — | | |
GSE | GSE | | 1,698 | | | — | | | 1,698 | | | — | | | — | | | GSE | | 303 | | | — | | | 303 | | | — | | | — | | |
Agency MBS - residential | Agency MBS - residential | | 134,042 | | | — | | | 134,042 | | | — | | | — | | | Agency MBS - residential | | 55,225 | | | — | | | 55,225 | | | — | | | — | | |
Agency MBS - commercial | Agency MBS - commercial | | 2,882 | | | — | | | 2,882 | | | — | | | — | | | Agency MBS - commercial | | 2,424 | | | — | | | 2,424 | | | — | | | — | | |
States and political subdivisions | States and political subdivisions | | 420 | | | — | | | 420 | | | — | | | — | | | States and political subdivisions | | 416 | | | — | | | 416 | | | — | | | — | | |
Non-agency MBS | Non-agency MBS | | 4,258 | | | — | | | 4,258 | | | — | | | — | | | Non-agency MBS | | 3,117 | | | — | | | 3,117 | | | — | | | — | | |
Other | Other | | 28 | | | — | | | 28 | | | — | | | — | | | Other | | 21 | | | — | | | 21 | | | — | | | — | | |
Total AFS securities | Total AFS securities | | 153,123 | | | — | | | 153,123 | | | — | | | — | | | Total AFS securities | | 71,801 | | | — | | | 71,801 | | | — | | | — | | |
LHFS at fair value | LHFS at fair value | | 3,544 | | | — | | | 3,544 | | | — | | | — | | | LHFS at fair value | | 1,065 | | | — | | | 1,065 | | | — | | | — | | |
Loans and leases | Loans and leases | | 23 | | | — | | | — | | | 23 | | | ��� | | | Loans and leases | | 18 | | | — | | | — | | | 18 | | | — | | |
Loan servicing rights at fair value | Loan servicing rights at fair value | | 2,633 | | | — | | | — | | | 2,633 | | | — | | | Loan servicing rights at fair value | | 3,758 | | | — | | | — | | | 3,758 | | | — | | |
Other assets: | Other assets: | | | | | | | | | | | Other assets: | | | | | | | | | | |
Derivative assets | Derivative assets | | 2,370 | | | 887 | | | 3,110 | | | 30 | | | (1,657) | | | Derivative assets | | 684 | | | 472 | | | 1,980 | | | 1 | | | (1,769) | | |
Equity securities | Equity securities | | 1,066 | | | 967 | | | 99 | | | — | | | — | | | Equity securities | | 898 | | | 796 | | | 102 | | | — | | | — | | |
| Total assets | Total assets | | $ | 167,182 | | | $ | 2,139 | | | $ | 164,014 | | | $ | 2,686 | | | $ | (1,657) | | | Total assets | | $ | 83,129 | | | $ | 1,529 | | | $ | 79,592 | | | $ | 3,777 | | | $ | (1,769) | | |
Liabilities: | Liabilities: | | | | | | | | | | | Liabilities: | | | | | | | | | | |
Derivative liabilities | Derivative liabilities | | $ | 586 | | | $ | 438 | | | $ | 3,056 | | | $ | 42 | | | $ | (2,950) | | | Derivative liabilities | | $ | 2,971 | | | $ | 364 | | | $ | 4,348 | | | $ | 37 | | | $ | (1,778) | | |
Securities sold short | Securities sold short | | 1,731 | | | 8 | | | 1,723 | | | — | | | — | | | Securities sold short | | 1,551 | | | 114 | | | 1,437 | | | — | | | — | | |
Total liabilities | Total liabilities | | $ | 2,317 | | | $ | 446 | | | $ | 4,779 | | | $ | 42 | | | $ | (2,950) | | | Total liabilities | | $ | 4,522 | | | $ | 478 | | | $ | 5,785 | | | $ | 37 | | | $ | (1,778) | | |
|
(1)Refer to “Note 16. Derivative Financial Instruments” for additional discussion on netting adjustments.
At March 31, 20222023 and December 31, 2021,2022, investments totaling $495$367 million and $440$385 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, 2021.2022.
28 Truist Financial Corporation
Activity for Level 3 assets and liabilities is summarized below: | | Three Months Ended March 31, 2023 and 2022 (Dollars in millions) | | Three Months Ended March 31, 2023 and 2022 (Dollars in millions) | | Loans and Leases | | Loan Servicing Rights | | Net Derivatives | |
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 | | — | | | 357 | | | (170) | | |
| Issuances | | Issuances | | — | | | 158 | | | 17 | | |
| Settlements | | Settlements | | — | | | (135) | | | 91 | | |
| Transfers out of level 3 and other | | Transfers out of level 3 and other | | (2) | | | — | | | — | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | | $ | 21 | | | $ | 3,013 | | | $ | (74) | | |
Balance at January 1, 2023 | | Balance at January 1, 2023 | | $ | 18 | | | $ | 3,758 | | | $ | (36) | | |
Total realized and unrealized gains (losses): | | Total realized and unrealized gains (losses): | | | |
Included in earnings | | Included in earnings | | — | | | (5) | | | (2) | | |
| Issuances | | Issuances | | — | | | 48 | | | (2) | | |
Sales | | Sales | | — | | | (428) | | | — | | |
Settlements | | Settlements | | (1) | | | (70) | | | 22 | | |
| Balance at March 31, 2023 | | Balance at March 31, 2023 | | $ | 17 | | | $ | 3,303 | | | $ | (18) | | |
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2023 | | Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2023 | | $ | — | | | $ | (54) | | | $ | (5) | | |
| | Three Months Ended March 31, 2022 and 2021 (Dollars in millions) | | Loans and Leases | | Loan Servicing Rights | | Net Derivatives | | |
| Balance at January 1, 2021 | | $ | — | | | $ | 2,023 | | | $ | 172 | | | |
Total realized and unrealized gains (losses): | | | | | |
Included in earnings | | — | | | 374 | | | (164) | | | |
| Issuances | | — | | | 192 | | | 96 | | | |
| Settlements | | — | | | (224) | | | (114) | | | |
| Balance at March 31, 2021 | | $ | — | | | $ | 2,365 | | | $ | (10) | | | |
Balance at January 1, 2022 | | $ | 23 | | | $ | 2,633 | | | $ | (12) | | | |
Total realized and unrealized gains (losses): | | | | |
Included in earnings | | — | | | 357 | | | (170) | | | |
| Issuances | | — | | | 158 | | | 17 | | | |
| Settlements | | — | | | (135) | | | 91 | | | |
| Other | | (2) | | | — | | | — | | | |
Balance at March 31, 2022 | | $ | 21 | | | $ | 3,013 | | | $ | (74) | | | |
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2022 | | $ | — | | | $ | 357 | | | $ | (45) | | | |
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 | | |
Truist Financial Corporation 31
Fair Value Option
The following table details the fair value and UPB of certain loans that were elected to be measured at fair value: | | | | March 31, 2022 | | December 31, 2021 | | | March 31, 2023 | | December 31, 2022 |
(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 | | $ | 1,933 | | | $ | 1,944 | | | $ | (11) | | | $ | 1,791 | | | $ | 1,784 | | | $ | 7 | | Trading loans | | $ | 1,869 | | | $ | 1,989 | | | $ | (120) | | | $ | 1,960 | | | $ | 2,101 | | | $ | (141) | |
Loans and leases | Loans and leases | | 21 | | | 23 | | | (2) | | | 23 | | | 35 | | | (12) | | Loans and leases | | 17 | | | 19 | | | (2) | | | 18 | | | 20 | | | (2) | |
LHFS at fair value | LHFS at fair value | | 3,364 | | | 3,405 | | | (41) | | | 3,544 | | | 3,450 | | | 94 | | LHFS at fair value | | 1,911 | | | 1,883 | | | 28 | | | 1,065 | | | 1,056 | | | 9 | |
|
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) | | Mar 31, 2022 | | | Dec 31, 2021 | | (Dollars in millions) | | Mar 31, 2023 | | | Dec 31, 2022 | |
Carrying value: | Carrying value: | | | | | Carrying value: | | | | |
LHFS | LHFS | | $ | 141 | | | | $ | 101 | | | LHFS | | $ | 127 | | | | $ | 271 | | |
Loans and leases | Loans and leases | | 429 | | | | 443 | | | Loans and leases | | 434 | | | | 500 | | |
Other | Other | | 52 | | | | 100 | | | Other | | 98 | | | | 120 | | |
|
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. | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | (Dollars in millions) | | 2023 | | 2022 | |
Valuation adjustments: | Valuation adjustments: | | | Valuation adjustments: | | |
LHFS | LHFS | | $ | (3) | | | $ | (16) | | | LHFS | | $ | — | | | $ | (3) | | |
Loans and leases | Loans and leases | | (97) | | | (154) | | | Loans and leases | | (166) | | | (97) | | |
Other(1) | Other(1) | | (139) | | | (95) | | | Other(1) | | (44) | | | (29) | | |
(1)Prior period amounts were revised.
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 LOCOM. The table above excludes $662$122 million and $1.2 billion$108 million of LHFS carried at cost at March 31, 20222023 and December 31, 2021,2022, respectively, that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. LHFS that were classified as nonperforming and LHFS that were 90 days or more past due and still accruing interest were not material at March 31, 2022 and December 31, 2021.
Truist Financial Corporation 29
Loans and leases consistsconsist of larger commercial loans and leases that are 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 primarily recorded in the Provision for credit losses in the Consolidated statementStatement of income.Income. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20212022 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 LOCOM, less costs to sell.
32 Truist Financial Corporation
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: | | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(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 | | $ | 61,662 | | | $ | 59,124 | | | $ | 1,494 | | | $ | 1,495 | | HTM securities | Level 2 | | $ | 56,932 | | | $ | 48,097 | | | $ | 57,713 | | | $ | 47,791 | |
Loans and leases HFI, net of ALLL | Loans and leases HFI, net of ALLL | Level 3 | | 285,890 | | | 282,709 | | | 285,055 | | | 284,914 | | Loans and leases HFI, net of ALLL | Level 3 | | 323,177 | | | 312,107 | | | 321,596 | | | 308,738 | |
Financial liabilities: | Financial liabilities: | | | | | | Financial liabilities: | | | | | |
Time deposits | Time deposits | Level 2 | | 14,476 | | | 14,582 | | | 15,886 | | | 16,017 | | Time deposits | Level 2 | | 32,326 | | | 32,140 | | | 23,474 | | | 23,383 | |
Long-term debt | Long-term debt | Level 2 | | 33,773 | | | 33,275 | | | 35,913 | | | 36,251 | | Long-term debt | Level 2 | | 69,895 | | | 65,114 | | | 43,203 | | | 40,951 | |
|
The carrying value of the RUFC, which approximates the fair value of unfunded commitments, was $253$282 million and $260$272 million at March 31, 20222023 and December 31, 2021,2022, respectively.
30 Truist Financial Corporation 33
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 March 31, 2022 and December 31, 2021.Company: | | | March 31, 2022 | | December 31, 2021 | | | March 31, 2023 | | December 31, 2022 | |
| | 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 | $ | 19,400 | | | $ | — | | | $ | — | | | $ | 16,650 | | | $ | — | | | $ | — | | |
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 | $ | 7,043 | | | $ | — | | | $ | (34) | | | $ | 12,690 | | | $ | — | | | $ | (6) | | | Swaps hedging long-term debt | 16,018 | | | — | | | (53) | | | 16,393 | | | — | | | (68) | | |
| Swaps hedging AFS securities | Swaps hedging AFS securities | 7,098 | | | — | | | — | | | 12,711 | | | — | | | (2) | | | Swaps hedging AFS securities | 7,097 | | | — | | | — | | | 7,097 | | | — | | | — | | |
| Total | Total | 14,141 | | | — | | | (34) | | | 25,401 | | | — | | | (8) | | | Total | 23,115 | | | — | | | (53) | | | 23,490 | | | — | | | (68) | | |
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 | 153,378 | | | 733 | | | (1,320) | | | 150,223 | | | 1,716 | | | (733) | | | Swaps | 160,381 | | | 625 | | | (2,169) | | | 155,670 | | | 579 | | | (2,665) | | |
| Options | Options | 30,904 | | | 113 | | | (95) | | | 23,659 | | | 43 | | | (30) | | | Options | 42,648 | | | 171 | | | (166) | | | 29,840 | | | 172 | | | (192) | | |
Forward commitments | Forward commitments | 4,118 | | | 29 | | | (14) | | | 2,404 | | | 2 | | | (5) | | | Forward commitments | 791 | | | 2 | | | (10) | | | 1,495 | | | 8 | | | (2) | | |
Other | Other | 2,572 | | | — | | | (1) | | | 2,927 | | | — | | | — | | | Other | 3,092 | | | 8 | | | (7) | | | 3,823 | | | 1 | | | — | | |
Equity contracts | Equity contracts | 39,530 | | | 1,275 | | | (1,630) | | | 34,232 | | | 1,582 | | | (2,089) | | | Equity contracts | 34,979 | | | 727 | | | (1,109) | | | 33,185 | | | 644 | | | (901) | | |
Credit contracts: | Credit contracts: | | | Credit contracts: | | |
Trading assets | | Trading assets | 160 | | | — | | | — | | | 140 | | | — | | | — | | |
Loans and leases | Loans and leases | 630 | | | — | | | (1) | | | 570 | | | — | | | (2) | | | Loans and leases | 780 | | | — | | | (1) | | | 394 | | | — | | | — | | |
Risk participation agreements | Risk participation agreements | 7,330 | | | — | | | (3) | | | 8,145 | | | — | | | (4) | | | Risk participation agreements | 7,156 | | | — | | | (3) | | | 6,824 | | | — | | | (3) | | |
Total return swaps | Total return swaps | 1,515 | | | 8 | | | (5) | | | 1,445 | | | 3 | | | (19) | | | Total return swaps | 1,793 | | | 71 | | | (6) | | | 1,729 | | | 81 | | | (2) | | |
| Foreign exchange contracts | Foreign exchange contracts | 18,663 | | | 207 | | | (204) | | | 16,102 | | | 160 | | | (156) | | | Foreign exchange contracts | 21,527 | | | 300 | | | (304) | | | 19,022 | | | 364 | | | (380) | | |
Commodity | Commodity | 6,338 | | | 1,152 | | | (1,144) | | | 4,641 | | | 475 | | | (468) | | | Commodity | 7,534 | | | 454 | | | (450) | | | 4,881 | | | 444 | | | (447) | | |
| Total | Total | 264,978 | | | 3,517 | | | (4,417) | | | 244,348 | | | 3,981 | | | (3,506) | | | Total | 280,841 | | | 2,358 | | | (4,225) | | | 257,003 | | | 2,293 | | | (4,592) | | |
Mortgage banking: | Mortgage banking: | | | | | | | | | | | | | Mortgage banking: | | | | | | | | | | | | |
Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | |
Swaps | Swaps | 1,016 | | | 3 | | | — | | | 441 | | | — | | | — | | | Swaps | 227 | | | — | | | — | | | 115 | | | — | | | — | | |
| Interest rate lock commitments | Interest rate lock commitments | 3,911 | | | 7 | | | (51) | | | 4,163 | | | 30 | | | (7) | | | Interest rate lock commitments | 1,837 | | | 12 | | | (12) | | | 999 | | | 1 | | | (17) | | |
When issued securities, forward rate agreements and forward commitments | When issued securities, forward rate agreements and forward commitments | 7,129 | | | 147 | | | (1) | | | 6,913 | | | 7 | | | (15) | | | When issued securities, forward rate agreements and forward commitments | 3,470 | | | 15 | | | (17) | | | 2,128 | | | 25 | | | (6) | | |
Other | Other | 357 | | | 2 | | | — | | | 424 | | | 1 | | | — | | | Other | 243 | | | 1 | | | — | | | 140 | | | 1 | | | — | | |
| Total | Total | 12,413 | | | 159 | | | (52) | | | 11,941 | | | 38 | | | (22) | | | Total | 5,777 | | | 28 | | | (29) | | | 3,382 | | | 27 | | | (23) | | |
MSRs: | MSRs: | | | | | | | | | | | | | MSRs: | | | | | | | | | | | | |
Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | | | |
Swaps | Swaps | 19,634 | | | 1 | | | — | | | 12,837 | | | — | | | — | | | Swaps | 14,329 | | | — | | | — | | | 14,566 | | | — | | | — | | |
| Options | Options | 5,237 | | | 39 | | | — | | | 101 | | | 1 | | | — | | | Options | 15,089 | | | 53 | | | (85) | | | 13,930 | | | 122 | | | (48) | | |
When issued securities, forward rate agreements and forward commitments | When issued securities, forward rate agreements and forward commitments | 2,856 | | | 19 | | | (66) | | | 3,927 | | | 7 | | | — | | | When issued securities, forward rate agreements and forward commitments | 2,184 | | | 14 | | | (3) | | | 2,459 | | | 11 | | | (15) | | |
Other | Other | 1,273 | | | — | | | — | | | 2,017 | | | — | | | — | | | Other | 2,268 | | | 1 | | | (1) | | | 1,532 | | | — | | | (3) | | |
Total | Total | 29,000 | | | 59 | | | (66) | | | 18,882 | | | 8 | | | — | | | Total | 33,870 | | | 68 | | | (89) | | | 32,487 | | | 133 | | | (66) | | |
Total derivatives not designated as hedges | Total derivatives not designated as hedges | 306,391 | | | 3,735 | | | (4,535) | | | 275,171 | | | 4,027 | | | (3,528) | | | Total derivatives not designated as hedges | 320,488 | | | 2,454 | | | (4,343) | | | 292,872 | | | 2,453 | | | (4,681) | | |
Total derivatives | Total derivatives | $ | 320,532 | | | 3,735 | | | (4,569) | | | $ | 300,572 | | | 4,027 | | | (3,536) | | | Total derivatives | $ | 363,003 | | | 2,454 | | | (4,396) | | | $ | 333,012 | | | 2,453 | | | (4,749) | | |
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 | | (1,290) | | | 1,290 | | | | | (1,312) | | | 1,312 | | | Amounts subject to master netting arrangements | | (1,251) | | | 1,251 | | | | | (1,223) | | | 1,223 | | |
Cash collateral (received) posted for amounts subject to master netting arrangements | Cash collateral (received) posted for amounts subject to master netting arrangements | | | (332) | | | 1,797 | | | | | (345) | | | 1,638 | | | Cash collateral (received) posted for amounts subject to master netting arrangements | | | (511) | | | 556 | | | | | (546) | | | 555 | | |
| Net amount | Net amount | | | $ | 2,113 | | | $ | (1,482) | | | | | $ | 2,370 | | | $ | (586) | | | Net amount | | | $ | 692 | | | $ | (2,589) | | | | | $ | 684 | | | $ | (2,971) | | |
|
34 Truist Financial Corporation 31
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: | March 31, 2022 (Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount | |
March 31, 2023 (Dollars in millions) | | March 31, 2023 (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 | $ | 2,787 | | | $ | (1,270) | | | $ | 1,517 | | | $ | — | | | $ | 1,517 | | Derivatives subject to master netting arrangement or similar arrangement | $ | 1,722 | | | $ | (1,370) | | | $ | 352 | | | $ | — | | | $ | 352 | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | 209 | | | — | | | 209 | | | — | | | 209 | | Derivatives not subject to master netting arrangement or similar arrangement | 107 | | | — | | | 107 | | | — | | | 107 | |
Exchange traded derivatives | Exchange traded derivatives | 739 | | | (352) | | | 387 | | | — | | | 387 | | Exchange traded derivatives | 625 | | | (392) | | | 233 | | | — | | | 233 | |
Total derivative assets | Total derivative assets | $ | 3,735 | | | $ | (1,622) | | | $ | 2,113 | | | $ | — | | | $ | 2,113 | | Total derivative assets | $ | 2,454 | | | $ | (1,762) | | | $ | 692 | | | $ | — | | | $ | 692 | |
Derivative liabilities: | Derivative liabilities: | | Derivative liabilities: | |
Derivatives subject to master netting arrangement or similar arrangement | Derivatives subject to master netting arrangement or similar arrangement | $ | (3,819) | | | $ | 2,735 | | | $ | (1,084) | | | $ | 64 | | | $ | (1,020) | | Derivatives subject to master netting arrangement or similar arrangement | $ | (3,431) | | | $ | 1,415 | | | $ | (2,016) | | | $ | 95 | | | $ | (1,921) | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | (390) | | | — | | | (390) | | | — | | | (390) | | Derivatives not subject to master netting arrangement or similar arrangement | (572) | | | — | | | (572) | | | — | | | (572) | |
Exchange traded derivatives | Exchange traded derivatives | (360) | | | 352 | | | (8) | | | — | | | (8) | | Exchange traded derivatives | (393) | | | 392 | | | (1) | | | — | | | (1) | |
Total derivative liabilities | Total derivative liabilities | $ | (4,569) | | | $ | 3,087 | | | $ | (1,482) | | | $ | 64 | | | $ | (1,418) | | Total derivative liabilities | $ | (4,396) | | | $ | 1,807 | | | $ | (2,589) | | | $ | 95 | | | $ | (2,494) | |
| December 31, 2021 (Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount | |
December 31, 2022 (Dollars in millions) | | December 31, 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 | $ | 2,752 | | | $ | (1,221) | | | $ | 1,531 | | | $ | (1) | | | $ | 1,530 | | Derivatives subject to master netting arrangement or similar arrangement | $ | 1,895 | | | $ | (1,408) | | | $ | 487 | | | $ | — | | | $ | 487 | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | 388 | | | — | | | 388 | | | — | | | 388 | | Derivatives not subject to master netting arrangement or similar arrangement | 86 | | | — | | | 86 | | | — | | | 86 | |
Exchange traded derivatives | Exchange traded derivatives | 887 | | | (436) | | | 451 | | | — | | | 451 | | Exchange traded derivatives | 472 | | | (361) | | | 111 | | | — | | | 111 | |
Total derivative assets | Total derivative assets | $ | 4,027 | | | $ | (1,657) | | | $ | 2,370 | | | $ | (1) | | | $ | 2,369 | | Total derivative assets | $ | 2,453 | | | $ | (1,769) | | | $ | 684 | | | $ | — | | | $ | 684 | |
Derivative liabilities: | Derivative liabilities: | | Derivative liabilities: | |
Derivatives subject to master netting arrangement or similar arrangement | Derivatives subject to master netting arrangement or similar arrangement | $ | (2,873) | | | $ | 2,514 | | | $ | (359) | | | $ | 66 | | | $ | (293) | | Derivatives subject to master netting arrangement or similar arrangement | $ | (3,688) | | | $ | 1,417 | | | $ | (2,271) | | | $ | 43 | | | $ | (2,228) | |
Derivatives not subject to master netting arrangement or similar arrangement | Derivatives not subject to master netting arrangement or similar arrangement | (225) | | | — | | | (225) | | | — | | | (225) | | Derivatives not subject to master netting arrangement or similar arrangement | (697) | | | — | | | (697) | | | — | | | (697) | |
Exchange traded derivatives | Exchange traded derivatives | (438) | | | 436 | | | (2) | | | — | | | (2) | | Exchange traded derivatives | (364) | | | 361 | | | (3) | | | — | | | (3) | |
Total derivative liabilities | Total derivative liabilities | $ | (3,536) | | | $ | 2,950 | | | $ | (586) | | | $ | 66 | | | $ | (520) | | Total derivative liabilities | $ | (4,749) | | | $ | 1,778 | | | $ | (2,971) | | | $ | 43 | | | $ | (2,928) | |
|
The following table presents the carrying value of hedged items in fair value hedging relationships: | | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | | 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) | | $ | 48,429 | | | $ | (441) | | | $ | (5) | | | $ | 108,758 | | | $ | (400) | | | $ | (150) | | AFS securities(1) | | $ | 38,761 | | | $ | (534) | | | $ | (4) | | | $ | 38,773 | | | $ | (630) | | | $ | (4) | |
Loans and leases | Loans and leases | | 377 | | | — | | | 12 | | | 382 | | | — | | | 12 | | Loans and leases | | 350 | | | — | | | 9 | | | 353 | | | — | | | 10 | |
| Long-term debt | Long-term debt | | 24,562 | | | (355) | | | 361 | | | 27,361 | | | (137) | | | 629 | | Long-term debt | | 27,385 | | | (303) | | | (134) | | | 25,378 | | | (780) | | | 218 | |
|
(1)The amortized cost of AFS securities was $51.3$45.5 billion at March 31, 20222023 and $110.6$46.2 billion at December 31, 2021.2022.
32 Truist Financial Corporation 35
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 March 31, |
(Dollars in millions) | | | | | 2022 | | 2021 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Pre-tax gain (loss) reclassified from AOCI into interest expense: | | | | | | | | | |
| | | | | | | | | |
Deposits | | | | | $ | — | | | $ | (1) | | | |
Short-term borrowings | | | | | — | | | (5) | | | |
Long-term debt | | | | | (6) | | | (5) | | | |
Total | | | | | $ | (6) | | | $ | (11) | | | |
Pre-tax gain (loss) reclassified from AOCI into other expense: (1) | | | | | | | | | |
Deposits | | | | | $ | — | | | $ | (12) | | | |
Short-term borrowings | | | | | — | | | (20) | | | |
Long-term debt | | | | | — | | | (4) | | | |
Total | | | | | $ | — | | | $ | (36) | | | |
| | | | | | | | | |
(1)Represents the accelerated amortization of amounts reclassified from AOCI, where management determined that the forecasted transaction is probable of not occurring. | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(Dollars in millions) | | | | | 2023 | | 2022 | | |
Pre-tax gain (loss) recognized in OCI: | | | | | | | | | |
Commercial loans | | | | | $ | 163 | | | $ | — | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Pre-tax gain (loss) reclassified from AOCI into interest expense: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Long-term debt | | | | | $ | — | | | $ | (6) | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
The following table summarizes the impact on net interest income related to fair value hedges: | | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, | |
(Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | (Dollars in millions) | | 2023 | | 2022 | |
| AFS securities: | | | | |
Investment securities: | | Investment securities: | | | |
Amounts related to interest settlements | Amounts related to interest settlements | | $ | (5) | | | $ | (11) | | | Amounts related to interest settlements | | $ | 76 | | | $ | (5) | | |
Recognized on derivatives | Recognized on derivatives | | 414 | | | 524 | | | Recognized on derivatives | | (95) | | | 414 | | |
Recognized on hedged items | Recognized on hedged items | | (402) | | | (526) | | | Recognized on hedged items | | 106 | | | (402) | | |
Net income (expense) recognized | | 7 | | | (13) | | | |
Net income (expense) recognized(1) | | Net income (expense) recognized(1) | | 87 | | | 7 | | |
Loans and leases: | Loans and leases: | | | | Loans and leases: | | | |
Amounts related to interest settlements | | — | | | — | | | |
Recognized on derivatives | | — | | | — | | | |
| Recognized on hedged items | Recognized on hedged items | | (1) | | | (1) | | | Recognized on hedged items | | (1) | | | (1) | | |
Net income (expense) recognized | Net income (expense) recognized | | (1) | | | (1) | | | Net income (expense) recognized | | (1) | | | (1) | | |
| Long-term debt: | Long-term debt: | | | | Long-term debt: | | | |
Amounts related to interest settlements | Amounts related to interest settlements | | 16 | | | — | | | Amounts related to interest settlements | | (46) | | | 16 | | |
Recognized on derivatives | Recognized on derivatives | | (429) | | | — | | | Recognized on derivatives | | 156 | | | (429) | | |
Recognized on hedged items | Recognized on hedged items | | 486 | | | 79 | | | Recognized on hedged items | | (142) | | | 486 | | |
Net income (expense) recognized | Net income (expense) recognized | | 73 | | | 79 | | | Net income (expense) recognized | | (32) | | | 73 | | |
Net income (expense) recognized, total | Net income (expense) recognized, total | | $ | 79 | | | $ | 65 | | | Net income (expense) recognized, total | | $ | 54 | | | $ | 79 | | |
(1)Includes $10 million and $8 million of income recognized for the three months ended March 31, 2023 and 2022, respectively, from securities with terminated hedges that were reclassified to HTM. The income recognized was offset by the amortization of the fair value mark.
36 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) | | Mar 31, 2022 | | Dec 31, 2021 | | (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 | |
| 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) | | $ | (4) | | | $ | (9) | | | |
Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months | | (4) | | | (9) | | | |
| Net unrecognized after-tax gain (loss) on active hedges recorded in AOCI | | Net unrecognized after-tax gain (loss) on active hedges recorded in AOCI | | $ | 6 | | | $ | (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) | | 41 | | | 40 | | |
Estimated portion of net after-tax gain (loss) on active and terminated hedges to be reclassified from AOCI into earnings during the next 12 months | | Estimated portion of net after-tax gain (loss) on active and terminated hedges to be reclassified from AOCI into earnings during the next 12 months | | (54) | | | (31) | | |
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 | | 6 years | | 6 years | |
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 2030) (1) | | $ | 856 | | | $ | 767 | | | |
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2033)(1) | | Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2033)(1) | | $ | 308 | | | $ | 669 | | |
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 | | 216 | | | 231 | | | Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months | | 52 | | | 163 | | |
|
(1)Includes deferred gains that are recorded in AOCI as a result of the reclassification to HTM of previously hedged securities of $502$447 million at March 31, 2023 and $457 million at December 31, 2022.
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.
Truist Financial Corporation 33
The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges: | | | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(Dollars in millions) | (Dollars in millions) | Income Statement Location | | 2022 | | 2021 | | (Dollars in millions) | Income Statement Location | | 2023 | | 2022 | |
| 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 | | $ | 56 | | | $ | 102 | | | Interest rate contracts | Investment banking and trading income and other income | | $ | 34 | | | $ | 56 | | |
Foreign exchange contracts | Foreign exchange contracts | Investment banking and trading income and other income | | 32 | | | 26 | | | Foreign exchange contracts | Investment banking and trading income and other income | | (3) | | | 32 | | |
Equity contracts | Equity contracts | Investment banking and trading income and other income | | 5 | | | (8) | | | Equity contracts | Investment banking and trading income and other income | | 2 | | | 5 | | |
Credit contracts | Credit contracts | Investment banking and trading income and other income | | 8 | | | (34) | | | Credit contracts | Investment banking and trading income and other income | | (33) | | | 8 | | |
Commodity contracts | Commodity contracts | Investment banking and trading income | | 5 | | | 2 | | | Commodity contracts | Investment banking and trading income | | 10 | | | 5 | | |
Mortgage banking: | Mortgage banking: | | | | | | | Mortgage banking: | | | | | | |
Interest rate contracts | Residential mortgage income | | 261 | | | 91 | | | |
Interest rate contracts | Commercial mortgage income | | (1) | | | (1) | | | |
Interest rate contracts - residential | | Interest rate contracts - residential | Mortgage banking income | | (1) | | | 261 | | |
Interest rate contracts - commercial | | Interest rate contracts - commercial | Mortgage banking income | | 1 | | | (1) | | |
MSRs: | MSRs: | | | | | | | MSRs: | | | | | | |
Interest rate contracts | Residential mortgage income | | (349) | | | (333) | | | |
Interest rate contracts | Commercial mortgage income | | (9) | | | (12) | | | |
Interest rate contracts - residential | | Interest rate contracts - residential | Mortgage banking income | | 1 | | | (349) | | |
Interest rate contracts - commercial | | Interest rate contracts - commercial | Mortgage banking income | | 3 | | | (9) | | |
Total | Total | | | $ | 8 | | | $ | (167) | | | Total | | | $ | 14 | | | $ | 8 | | |
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 March 31, 2022,2023, the remaining terms on these risk participations ranged from less than one year to 1615 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.
The Company has also entered into TRS contracts on 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.”
Truist Financial Corporation 37
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) | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 |
| Risk participation agreements: | Risk participation agreements: | | Risk participation agreements: | |
| Maximum potential amount of exposure | Maximum potential amount of exposure | $ | 327 | | | $ | 521 | | Maximum potential amount of exposure | $ | 618 | | | $ | 575 | |
Total return swaps: | Total return swaps: | | Total return swaps: | |
| Cash collateral held | Cash collateral held | 323 | | | 290 | | Cash collateral held | 473 | | | 453 | |
34 Truist Financial Corporation
The following table summarizes collateral positions with counterparties: | (Dollars in millions) | (Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 |
| 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 | $ | 332 | | | $ | 346 | | Cash and other collateral received from counterparties | $ | 511 | | | $ | 542 | |
Derivatives in a net gain position secured by collateral received | Derivatives in a net gain position secured by collateral received | 450 | | | 506 | | Derivatives in a net gain position secured by collateral received | 586 | | | 618 | |
Unsecured positions in a net gain with counterparties after collateral postings | Unsecured positions in a net gain with counterparties after collateral postings | 79 | | | 143 | | Unsecured positions in a net gain with counterparties after collateral postings | 75 | | | 76 | |
Cash collateral posted to counterparties | Cash collateral posted to counterparties | 1,861 | | | 1,704 | | Cash collateral posted to counterparties | 636 | | | 590 | |
Derivatives in a net loss position secured by collateral | Derivatives in a net loss position secured by collateral | 2,196 | | | 2,591 | | Derivatives in a net loss position secured by collateral | 809 | | | 692 | |
Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade | 2 | | | 3 | | |
| Central counterparties clearing: | Central counterparties clearing: | | Central counterparties clearing: | |
Cash collateral, including initial margin, received from central clearing parties | | Cash collateral, including initial margin, received from central clearing parties | — | | | 4 | |
Cash collateral, including initial margin, posted to central clearing parties | Cash collateral, including initial margin, posted to central clearing parties | — | | | 31 | | Cash collateral, including initial margin, posted to central clearing parties | 85 | | | 45 | |
Derivatives in a net loss position | Derivatives in a net loss position | 7 | | | 18 | | Derivatives in a net loss position | 19 | | | 13 | |
Derivatives in a net gain position | Derivatives in a net gain position | 86 | | | — | | Derivatives in a net gain position | 1 | | | 12 | |
Securities pledged to central counterparties clearing | Securities pledged to central counterparties clearing | 797 | | | 904 | | Securities pledged to central counterparties clearing | 933 | | | 639 | |
NOTE 17. Computation of EPS
Basic and diluted EPS calculations are presented in the following table: | | | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(Dollars in millions, except per share data, shares in thousands) | (Dollars in millions, except per share data, shares in thousands) | | 2022 | | 2021 | | (Dollars in millions, except per share data, shares in thousands) | | 2023 | | 2022 | |
| Net income available to common shareholders | Net income available to common shareholders | | $ | 1,327 | | | $ | 1,334 | | | Net income available to common shareholders | | $ | 1,410 | | | $ | 1,327 | | |
Weighted average number of common shares | Weighted average number of common shares | | 1,329,037 | | | 1,345,666 | | | Weighted average number of common shares | | 1,328,602 | | | 1,329,037 | | |
Effect of dilutive outstanding equity-based awards | Effect of dilutive outstanding equity-based awards | | 12,526 | | | 13,266 | | | Effect of dilutive outstanding equity-based awards | | 10,878 | | | 12,526 | | |
Weighted average number of diluted common shares | Weighted average number of diluted common shares | | 1,341,563 | | | 1,358,932 | | | Weighted average number of diluted common shares | | 1,339,480 | | | 1,341,563 | | |
Basic EPS | Basic EPS | | $ | 1.00 | | | $ | 0.99 | | | Basic EPS | | $ | 1.06 | | | $ | 1.00 | | |
Diluted EPS | Diluted EPS | | $ | 0.99 | | | $ | 0.98 | | | Diluted EPS | | $ | 1.05 | | | $ | 0.99 | | |
Anti-dilutive awards | Anti-dilutive awards | | — | | | 376 | | | Anti-dilutive awards | | 621 | | | — | | |
NOTE 18. Operating Segments
Truist operates and measures business activity across 3three segments: CB&W, C&CB, and IH, with functional activities included in 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, 2021.2022.
During the first quarter of 2023, Truist reorganized Prime Rate Premium Finance Corporation, which includes AFCO Credit Corporation and CAFO Holding Company, into the C&CB segment from the IH segment. Prior period results have been revised to conform to the current presentation.
38 Truist Financial Corporation 35
The following table presents results by segment: | Three Months Ended March 31, (Dollars in millions) | Three Months Ended March 31, (Dollars in millions) | CB&W | | C&CB | | IH | | OT&C (1) | | Total | | Three Months Ended March 31, (Dollars in millions) | CB&W | | C&CB | | IH | | OT&C(1) | | Total | |
2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | |
Net interest income (expense) | Net interest income (expense) | $ | 1,529 | | | $ | 1,753 | | | $ | 1,093 | | | $ | 1,208 | | | $ | 24 | | | $ | 24 | | | $ | 537 | | | $ | 300 | | | $ | 3,183 | | | $ | 3,285 | | | Net interest income (expense) | $ | 1,601 | | | $ | 1,528 | | | $ | 2,308 | | | $ | 1,118 | | | $ | 1 | | | $ | 1 | | | $ | (42) | | | $ | 536 | | | $ | 3,868 | | | $ | 3,183 | | |
Net intersegment interest income (expense) | Net intersegment interest income (expense) | 649 | | | 231 | | | 156 | | | 72 | | | — | | | — | | | (805) | | | (303) | | | — | | | — | | | Net intersegment interest income (expense) | 1,139 | | | 656 | | | (556) | | | 171 | | | 13 | | | 2 | | | (596) | | | (829) | | | — | | | — | | |
Segment net interest income | Segment net interest income | 2,178 | | | 1,984 | | | 1,249 | | | 1,280 | | | 24 | | | 24 | | | (268) | | | (3) | | | 3,183 | | | 3,285 | | | Segment net interest income | 2,740 | | | 2,184 | | | 1,752 | | | 1,289 | | | 14 | | | 3 | | | (638) | | | (293) | | | 3,868 | | | 3,183 | | |
Allocated provision for credit losses | Allocated provision for credit losses | 74 | | | 100 | | | (150) | | | (35) | | | — | | | 1 | | | (19) | | | (18) | | | (95) | | | 48 | | | Allocated provision for credit losses | 274 | | | 74 | | | 232 | | | (150) | | | — | | | — | | | (4) | | | (19) | | | 502 | | | (95) | | |
Segment net interest income after provision | Segment net interest income after provision | 2,104 | | | 1,884 | | | 1,399 | | | 1,315 | | | 24 | | | 23 | | | (249) | | | 15 | | | 3,278 | | | 3,237 | | | Segment net interest income after provision | 2,466 | | | 2,110 | | | 1,520 | | | 1,439 | | | 14 | | | 3 | | | (634) | | | (274) | | | 3,366 | | | 3,278 | | |
Noninterest income | Noninterest income | 950 | | | 920 | | | 619 | | | 692 | | | 737 | | | 633 | | | (164) | | | (48) | | | 2,142 | | | 2,197 | | | Noninterest income | 873 | | | 910 | | | 630 | | | 656 | | | 817 | | | 733 | | | (86) | | | (157) | | | 2,234 | | | 2,142 | | |
Amortization of intangibles | Amortization of intangibles | 73 | | | 79 | | | 33 | | | 38 | | | 31 | | | 27 | | | — | | | — | | | 137 | | | 144 | | | Amortization of intangibles | 69 | | | 73 | | | 31 | | | 33 | | | 36 | | | 30 | | | — | | | 1 | | | 136 | | | 137 | | |
Other noninterest expense | Other noninterest expense | 1,846 | | | 1,836 | | | 724 | | | 737 | | | 529 | | | 453 | | | 438 | | | 440 | | | 3,537 | | | 3,466 | | | Other noninterest expense | 1,900 | | | 1,812 | | | 812 | | | 755 | | | 648 | | | 516 | | | 195 | | | 454 | | | 3,555 | | | 3,537 | | |
Income (loss) before income taxes | Income (loss) before income taxes | 1,135 | | | 889 | | | 1,261 | | | 1,232 | | | 201 | | | 176 | | | (851) | | | (473) | | | 1,746 | | | 1,824 | | | Income (loss) before income taxes | 1,370 | | | 1,135 | | | 1,307 | | | 1,307 | | | 147 | | | 190 | | | (915) | | | (886) | | | 1,909 | | | 1,746 | | |
Provision (benefit) for income taxes | Provision (benefit) for income taxes | 271 | | | 208 | | | 276 | | | 266 | | | 49 | | | 43 | | | (266) | | | (166) | | | 330 | | | 351 | | | Provision (benefit) for income taxes | 326 | | | 274 | | | 273 | | | 284 | | | 36 | | | 47 | | | (241) | | | (275) | | | 394 | | | 330 | | |
Segment net income (loss) | Segment net income (loss) | $ | 864 | | | $ | 681 | | | $ | 985 | | | $ | 966 | | | $ | 152 | | | $ | 133 | | | $ | (585) | | | $ | (307) | | | $ | 1,416 | | | $ | 1,473 | | | Segment net income (loss) | $ | 1,044 | | | $ | 861 | | | $ | 1,034 | | | $ | 1,023 | | | $ | 111 | | | $ | 143 | | | $ | (674) | | | $ | (611) | | | $ | 1,515 | | | $ | 1,416 | | |
| Identifiable assets (period end) | Identifiable assets (period end) | $ | 160,220 | | | $ | 159,541 | | | $ | 184,834 | | | $ | 183,241 | | | $ | 10,292 | | | $ | 8,062 | | | $ | 188,633 | | | $ | 166,693 | | | $ | 543,979 | | | $ | 517,537 | | | Identifiable assets (period end) | $ | 168,701 | | | $ | 159,939 | | | $ | 213,143 | | | $ | 188,806 | | | $ | 7,263 | | | $ | 6,494 | | | $ | 185,247 | | | $ | 188,740 | | | $ | 574,354 | | | $ | 543,979 | | |
| | | | | | |
(1)Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure.
36 Truist Financial Corporation 39
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, 2021.2022.
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, 2022.
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, 20212022 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, 20212022 for additional disclosures.
In March 2022,2023, the FRB created the Bank Term Funding Program to support American businesses and households by making additional funding available to eligible depository institutions. This program offers loans up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the FRB in open market operations, such as U.S. enacted federal legislationTreasuries, U.S. agency securities, and U.S. agency mortgage-backed securities. These assets will be valued at par.
In the aftermath of the recent bank failures, we expect that the banking agencies will propose certain actions, including reforms that may impose different capital and liquidity requirements, including increased requirements to issue long term debt. In addition, there may be special assessments to repay losses to the FDIC’s Deposit Insurance Fund. It is intendednot yet possible 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 inquantify the statute. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provisionimpact of any state or local law, statute, rule, regulation, or standard.these potential actions.
Executive Overview
TheIn a challenging and unique quarter for the banking industry, Truist demonstrated strength and leadership that reflects our diverse business model, granular and relationship-oriented deposit base, and strong capital and liquidity position. Truist has significant access to liquidity and a very robust liquidity management process that includes internal and external stress testing, as well as real-time monitoring of our liquidity position. We also closed on the sale of a 20% minority stake in Truist Insurance Holdings, LLC on April 3, 2023, which provides strategic and financial flexibility for both Truist and Truist Insurance Holdings.
We continued to experience the benefits of our shift from integrating to operating, including improving organic production and integrated relationship management momentum, although these benefits were offset by higher-than-expected funding costs. Asset quality metrics remain strong, and we prudently increased our ALLL ratio by three basis points to reflect increased economic uncertainty.
Our focus on clients was unwavering during the first quarter of 2022 marked2023. Our teammates continue to care for our clients and stakeholders and live our purpose to inspire and build better lives and communities. Truist continues to be a pivotal turning pointsource of strength and stability for our clients and communities.
Truist asmade a $1 billion uninsured time deposit in First Republic Bank during the first quarter joining the nation’s largest financial intuitions to show support for the U.S. banking system and the economy. On Monday, May 1, 2023, JPMorgan Chase Bank, National Association assumed all of the deposits and purchased the substantial majority of assets of First Republic Bank from the FDIC. JPMorgan Chase Bank, National Association has indicated that the deposit Truist made at First Republic Bank will be repaid post-closing of the transaction.
Detailed below are actions that we completedhave taken to fulfill our final core bank conversionpurpose to inspire and are positioned to focus on executional excellence. Ourbuild better lives and communities, followed by a discussion of our financial results for the first quarter of 2022 were solid, though underlying results were mixed in light of market volatility and geopolitical uncertainty. The continued favorable credit environment also led to a strong credit performance and a benefit from the provision for credit losses. Revenues were lower as a result of a challenging environment for investment banking and mortgage, but we remain confident in our outlook given expectations for higher interest rates, our diverse business model, and continued expense discipline. At the same time, we acknowledge the increasing uncertainty presented by a range of geopolitical and economic risks. See below for further updates on our final integration and ESG efforts and a more detailed discussion of our first quarter financial performance.
Merger Integration
Truist completed our largest conversion event during the first quarter of 2022, transitioning nearly seven million clients to the Truist ecosystem and rebranding more than 6,000 signs at branches, ATMs, and other locations. We now operate officially as one brand and one bank to our clients. This accomplishment was possible because of the expertise, purposeful commitment, and hard work of thousands of teammates. We remain guided by our purpose as we continue supporting our clients through the transition and look forward to shifting our focus to executional excellence and purposeful growth throughout this year.
ESG
Environmental2023.
•Made meaningful improvement in our client experience, with Voice of the Client metrics rising since the second quarter of 2022, and continued positive momentum with branch satisfaction scores in the first quarter of 2023
•Opened T3 Accelerator Lab in the Innovation & Technology Center where we’re redefining the client and teammate experience, putting feedback and ideas to the test in real-world scenarios before rolling out to clients
40 Truist has joined the PartnershipFinancial Corporation
•Continued growth for Carbon Accounting Financials,Truist Momentum, Truist’s financial wellness program
•Published 2022 Corporate Responsibility Report, TCFD Report, and set 2030 goals to reduceESG Disclosure Summary, highlighting our progress across multiple dimensions including community, financial inclusion, DEI, and climate and energy
◦We made important progress on our sustainability commitments through 2022, including our goal of achieving a 35% reduction in both Scope 1 and Scope 2 emissions by 35% each,2030 from our baseline year of 2019. We reduced Scope 1 emissions by 17% and Scope 2 emissions by 26%.
•Successfully migrated certain consumer and small business credit cards to reduce water consumptiona new processing platform
•Announced a new goal to increase female and ethnically diverse representation in leadership roles by 25%15% and 20%, relativerespectively, by 2025
•Committed $282 million from Truist Community Capital to 2019.support affordable housing and job creation in underserved communities and $22 million through Truist Foundation for a multiyear program to strengthen small businesses and create career pathways for ethnically diverse individuals and entrepreneurs
•We announcedare also in the process of realigning our LightStream platforms with our broader consumer business, with the goal to achieve net zero greenhouse gas emissions by 2050, supporting our clients’ transition to a low-carbon economy.
Truist Financial Corporation 37
Social
•Truist continued to be ahead of schedule with regard to our $60 billion Community Benefits Plan commitment.
•In January 2022, Truist announced Truist One Banking, a first-of-its-kind approachbringing the innovation, digital capabilities, efficiencies, and certain cloud-based infrastructure of LightStream to the checking account experience, designed to address clients’ direct feedback.broader Truist One Banking will be available to clients beginning in the summer of 2022. The Truist One checking account features will include: no overdraft fees; a $100 negative balance buffer for qualifying clients; an easily accessible, deposit-based line of credit of up to $750; and premium rewards that instantly recognize relationships and honor loyalty. In addition, Truist will offer an alternative checking account product created for clients who are new to credit and want simplicity and control without overdraft fees. It will help clients avoid high fees from check-cashing and payday lenders, bring many more households into mainstream banking, and create a pathway to upgrade to a Truist One checking account.
•In March 2022, Truist issued its first Social Bond Impact Report, which details the investments made from the bond proceeds and underscores the Company's commitment to advancing its ESG goals.
•In March 2022, Truist partnered with Connect Humanity to provide internet connectivity to historically marginalized communities.
Governance
•Truist made several leadership changes during 2022 as we continued to execute on the strategy first agreed upon in the Merger. Effective March 12, 2022, William H. Rogers, Jr. was appointed chairman of the board and Thomas E. Skains was appointed lead independent director. Rogers succeeds Kelly S. King, who stepped down from the role of chairman as previously announced. Skains succeeds David M. Ratcliffe. Both King and Ratcliffe remain on the board.
•In March 2022, Truist appointed Dontá L. Wilson to lead Retail and Small Business Banking. In his new role, Wilson will oversee Truist's branches across the Southeast, Mid-Atlantic, and Texas; ATMs; mortgage; card-based services; retail payments; deposit and loan products; small business delivery; retail loan approval channels; and brand, sports, performance, and digital marketing. Wilson assumes these responsibilities from Brant J. Standridge, who left Truist to pursue a new opportunity.
•In January 2022, Truist appointed Denise M. DeMaio as Chief Audit Officer, effective February 28, 2022. Denise joined the Executive Leadership team, leading Truist’s internal audit function, and providing counsel to senior management on emerging risk trends from the vantage points of governance, processes, technologies and reporting.client base
Financial Results
Net income available to common shareholders for the first quarter of 20222023 of $1.3$1.4 billion was relatively stableup 6.3% compared with the first quarter of 2021.2022. On a diluted per common share basis, earnings for the first quarter of 20222023 were $0.99,$1.05, an increase of $0.01$0.06, or 6.1%, compared to the first quarter of 2021.2022. Truist’s results of operations for the first quarter of 20222023 produced an annualized return on average assets of 1.07%1.10% and an annualized return on average common shareholders’ equity of 9.0%10.3% compared to prior year returns of 1.17%1.07% and 8.7%9.0%, respectively.
•Results for the first quarter of 2023 included merger-related and restructuring charges of $63 million ($48 million after-tax, or $0.04 per share).
•Results for the first quarter of 2022 included merger-related and restructuring charges of $216 million ($166 million after-tax),after-tax, or $0.12 per share) of merger-related and restructuring charges, $202 million ($155 million after-tax, or $0.12 per share) of incremental operating expenses related to the Merger, of $202 million ($155 million after-tax), a gain on the redemption of noncontrolling equity interest of $74 million($ ($57 million after-tax)after-tax, or $0.04 per share) related to the acquisition of certain merchant services relationships, and net losses on the sales of securities of $69 million ($53 million after-tax). Results for the first quarter of 2021 included $141 million ($108 million after-tax) of merger-related and restructuring charges, $175 million ($134 million after-tax) of incremental operating expenses related to the Merger, and an acceleration of loss recognition related to certain terminated cash flow hedges of $36 million ($28 million after-tax)after-tax, or $0.04 per share).
On a TE basis, revenue was $5.4 billion for the first quarter of 2022, a decrease of $159 million, or 2.9%, compared to the same period in 2021. TETaxable-equivalent net interest income for the first quarter of 20222023 was down $104up $710 million, or 3.1%22%, compared to the earlierfirst quarter of 2022 primarily due to higher short-term interest rates and strong loan growth, alongside well controlled deposit costs. These increases were partially offset by lower purchase accounting accretion lowerand PPP fees, and a decrease in loan balances. These decreases were partially offset by growth in the securities portfolio and lower funding costs. Average earning assets increased $26.0 billion, or 5.9%, compared to the earlier quarter. The increase in average earning assets reflects a $30.4 billion, or 25%, increase in average securities, a $1.5 billion, or 8.7%, increase in average other earning assets, and a $1.1 billion, or 23%, increase in average interest earning trading assets, while average total loans and leases decreased $7.1 billion, or 2.4%. The growth in average earning assets is a result of the deployment of strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $32.1 billion, or 8.4%, compared to the earlier quarter, while average long-term debt decreased $2.5 billion, or 6.6%.
revenue. Net interest margin was 2.76%3.17%, down 25up 41 basis points compared to the earlier quarter. points.
•The yield on the total loan portfolio for the first quarter of 2022 was 3.69%5.81%, down 40up 212 basis points, compared to the earlier quarter,primarily reflecting the impact ofhigher market interest rates, partially offset by lower purchase accounting accretion lowerand PPP fees, and the ongoing impact of the lower rate environment.revenue. The yield on the average securities portfolio was 1.68%2.14%, up 2346 basis points compared to the earlier quarter primarily due to the higher yieldsrate environment. The average cost of total deposits was 1.12%, up 109 basis points.
•The average cost of short-term borrowings was 4.69%, up 409 basis points. The average cost of long-term debt was 4.05%, up 255 basis points. The increase in rates on new purchasesdeposits and lower premium amortization.other funding sources was largely attributable to the higher rate environment.
38 Truist Financial Corporation
The provision for credit lossesNoninterest income was a benefit of $95up $92 million, or 4.3%, compared to a cost of $48 million for the earlier quarter. The current quarter includes a reserve release due to the continued favorable credit environment. Net charge-offs for the first quarter of 2022 totaled $178 million compareddue to $238 million12% growth in the earlier quarter. The net charge-off ratio for the current quarter of 0.25% was down eight basis points compared to the earlier quarter.
Noninterestinsurance income, for the first quarter of 2022 decreased $55 million, or 2.5%, compared to the earlier quarter.higher mortgage banking income, higher fees from lending-related activities and card and payment related activities. These items were partially offset by lower other income. The first quarter of 2022 includes netincluded $69 million of securities losses of $69and a $74 million and the gain on the redemption of noncontrolling equity interest (other(included in other income) of $74 million. The earlier quarter included a gain of $37 million from the divestiture of certain businesses (other income). Excluding the aforementioned items, noninterest income was down $23 million, or 1.1%. Insurance income increased $101 million, or 16%, due to continued organic growth and acquisitions. Investment banking and trading income decreased $85 million, or 25%, due to lower high yield bond and equity originations fees, lower core trading income, and lower CVA gains, partially offset by higher structured real estate fees. Residential mortgage income decreased $11 million, or 11%, as lower production income (due to margins and refinance volumes) was largely offset by higher servicing income (due to lower prepayments). Excluding the gain on the redemption of noncontrolling equity interest, the gain in the earlier quarter from the divestiture of certain businesses and a $67 million decrease for assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, other income increased $56 million, due to higher investment income from the Company's SBIC and other investments.
Noninterest expense forwas up $17 million, or 0.5%, compared to the first quarter of 2022 was up $64 million, or 1.8%, compareddue to the earlier quarter.higher personnel expense, other expense, and regulatory costs. These increases were partially offset by lower merger-related and restructuring charges and professional fees and outside processing expenses. Merger-related and restructuring charges increased $75 million due to costs for client day one conversions. Incrementaland incremental operating expenses related to the Merger increased $27merger decreased $153 million primarily reflected in net occupancy expense in connection with updatingand $202 million, respectively, due to the branch network to incorporate the Truist brand. The prior quarter also includes $36 millioncompletion of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges and a small gain on the extinguishment of debt. Excluding the aforementioned itemsintegration-related activities. Adjusted noninterest expenses, which exclude merger-related costs and the amortization of intangibles adjusted noninterest expense was relatively stable compared to the earlier quarter. Personnel expense decreased $91increased $373 million, or 4.2%, due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits, lower incentives (due to declines in noninterest income), and lower salaries driven by fewer FTEs. Additionally, other expense increased $29 million due to increased operational losses, software expense increased $22 million, and marketing and customer development expense increased $18 million due to increased branding efforts.12%.
The provision for income taxes was $330$394 million for the first quarter of 2022,2023, compared to $351$330 million for the earlier quarter. The effective tax rate for the first quarter of 20222023 was 18.9%20.6%, compared to 19.2%18.9% for the earlier quarter, primarily due to discrete tax expenses resulting from the divestiture of certain businesses in the prior year.
Truist’s total assets at March 31, 2022 were $544.0 billion, an increase of $2.7 billion, or 0.5%, compared to December 31, 2021. Total deposits at March 31, 2022 were $428.3 billion, an increase of $11.8 billion, or 2.8%, compared to December 31, 2021. In April 2022, Truist redeemed $800 million notional of FHLB advances, which resulted in a gain on early extinguishment of long-term debt of $39 million.
Truist transferred $59.4 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies.quarter.
Asset quality remains excellent, reflecting Truist’s prudent risk culture and diverse portfolio,portfolio. Nonperforming loans and the continued favorable credit environment.leases held for investment were 0.36% of loans and leases held for investment at March 31, 2023, flat compared to December 31, 2022.
Truist maintainedFinancial Corporation 41
•The allowance for credit losses was $4.8 billion and includes $4.5 billion for the allowance for loan and lease losses and $282 million for the reserve for unfunded commitments. The ALLL ratio was 1.37%, up three basis points compared with December 31, 2022 primarily due to increased economic uncertainty.
•The provision for credit losses was $502 million compared to a benefit of $95 million for the first quarter of 2022. The increase in the current quarter provision expense primarily reflects increased economic uncertainty in the current period, whereas the earlier quarter included a reserve release due to the improving credit environment during that period.
•The net charge-off ratio was 37 basis points, up 12 basis points compared to the first quarter of 2022 driven by higher charge-offs in the indirect auto and other consumer portfolios due to normalizing trends, as well as an increase in the commercial and industrial portfolio.
Capital and liquidity remained strong capital and liquidity. Ascompared to the regulatory requirements for well capitalized banks.
•Truist CET1 ratio was 9.1% as of March 31, 2023. The increase since December 31, 2022 represents organic capital generation, partially offset by the CET1 ratio was 9.4% andCECL phase-in.
•Truist closed the average LCR was 111%. The 20sale of the minority stake in TIH on April 3, 2023, which adds 30 basis point decline comparedpoints to the fourth quarter 2021 CET1 ratio reflectsrisk-based regulatory capital deployed through the acquisition of Kensington Vanguard National Land Services, the acquisition of certain merchant services relationships, an increase in risk-weighted assets, and the impact from the phase-in of the CECL transition relief. Additionally, the Company had $1.7 billion of senior long-term debt maturities and redemptions. ratios.
•Truist declared common dividends of $0.48$0.52 per share during the first quarter of 2023. The dividend payout ratio for the first quarter of 2023 was 49%. Truist did not repurchase any shares in the first quarter of 2022, resulting2023.
•Truist’s average consolidated LCR was 113% for the three months ended March 31, 2023, compared to the regulatory minimum of 100%.
•Truist has significant and strong access to liquidity with $166 billion of available liquidity as of March 31, 2023.
•Truist increased its cash position in dividend and total payout ratios of 48%.response to market events.
Truist Financial Corporation 39•AOCI improved by $1.0 billion, or 7.5%, since December 31, 2022.
Analysis of Results of Operations
Net Interest Income and NIM
First Quarter 2022 compared to First Quarter 2021
NetTaxable-equivalent net interest income for the first quarter of 20222023 was down $104up $710 million, or 3.1%22%, compared to the earlierfirst quarter of 2022 primarily due to higher short-term interest rates and strong loan growth, alongside well controlled deposit costs. These increases were partially offset by lower purchase accounting accretion lowerand PPP fees, and a decrease in loan balances. These decreases were partially offset by growth in the securities portfolio and lower funding costs. revenue. Net interest margin was 3.17%, up 41 basis points.
•Average earning assets increased $26.0$29.2 billion, or 5.9%6.2%, comparedprimarily due to the earlier quarter. Thegrowth in average total loans of $35.1 billion, or 12%, and growth in other earning assets of $6.7 billion, or 35%, primarily due to an increase in average earning assets reflectsbalances held at the Federal Reserve to support liquidity build, partially offset by a $30.4 billion, or 25%, increasedecrease in average securities a $1.5of $12.1 billion, or 8.7%, increase in average other earning assets, and a $1.1 billion, or 23%, increase in average interest earning trading assets, while average total loans and leases decreased $7.1 billion, or 2.4%7.9%. The growth in average earning assets is a result of the deployment of strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $32.1 billion, or 8.4%, compared to the earlier quarter, while average long-term debt decreased $2.5 billion, or 6.6%.
•
Net interest margin was 2.76%, down 25 basis points compared to the earlier quarter. The yield on the total loan portfolio for the first quarter of 2022 was 3.69%5.81%, down 40up 212 basis points, compared to the earlier quarter,primarily reflecting the impact ofhigher market interest rates, partially offset by lower purchase accounting accretion lowerand PPP fees, and the ongoing impact of the lower rate environment.revenue. The yield on the average securities portfolio was 1.68%2.14%, up 2346 basis points compared to the earlier quarter primarily due to the higher yields on new purchases and lower premium amortization.rate environment.
•Average deposits decreased $6.8 billion, or 1.6%, average short-term borrowings increased $17.1 billion, and average long-term debt increased $15.7 billion, or 44.5%.
•The average cost of total deposits was 0.03%1.12%, down twoup 109 basis points compared to the earlier quarter.points. The average cost of short-term borrowings was 0.60%4.69%, down 22up 409 basis points compared to the earlier quarter.points. The average cost of long-term debt was 1.50%4.05%, down sevenup 255 basis points comparedpoints. The increase in rates on deposits and other funding sources was largely attributable to the earlier quarter. The lower rates on interest-bearing liabilities reflect the impact of repricing of liabilities at lower rates.higher rate environment.
As of March 31, 2023, the remaining unamortized fair value marks on the loan and lease portfolio and long-term debt were $673 million and $69 million, respectively. As of December 31, 2022, the remaining unamortized fair value marks on the loan and lease portfolio deposits, and long-term debt were $1.1 billion, $5$741 million and $122 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 $1.3 billion, $7 million, and $139$81 million, respectively.
The remaining unamortized purchase accounting fair value mark on loans and leases consistconsists of $624$447 million for consumer loans and leases, and $495$226 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.
4042 Truist Financial Corporation
| | Table 1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1) | |
| Table 1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis | | Table 1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis |
Three Months Ended March 31, (Dollars in millions) | Three Months Ended March 31, (Dollars in millions) | Average Balances (5) | | Annualized Yield/Rate | | Income/Expense | | Incr. (Decr.) | | Change due to | Three Months Ended March 31, (Dollars in millions) | Average Balances(1) | | Annualized Yield/Rate(2) | | Income/Expense | | Incr. (Decr.) | | Change due to |
2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | Rate | | Volume | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | Rate | | Volume |
Assets | Assets | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | |
Total securities, at amortized cost: (2) | | | | | | | | | | | | | | | | | | |
AFS and HTM securities at amortized cost: | | AFS and HTM securities at amortized cost: | | | | | | | | | | | | | | | | | |
U.S. Treasury | U.S. Treasury | $ | 9,890 | | | $ | 1,759 | | | 0.72 | % | | 0.89 | % | | $ | 18 | | | $ | 4 | | | $ | 14 | | | $ | (1) | | | $ | 15 | | U.S. Treasury | $ | 11,117 | | | $ | 9,890 | | | 1.07 | % | | 0.72 | % | | $ | 30 | | | $ | 18 | | | $ | 12 | | | $ | 10 | | | $ | 2 | |
GSE | GSE | 1,120 | | | 1,839 | | | 2.13 | | | 2.33 | | | 6 | | | 11 | | | (5) | | | (1) | | | (4) | | GSE | 335 | | | 1,120 | | | 2.86 | | | 2.13 | | | 2 | | | 6 | | | (4) | | | 2 | | | (6) | |
Agency MBS | Agency MBS | 137,052 | | | 118,171 | | | 1.72 | | | 1.44 | | | 590 | | | 426 | | | 164 | | | 90 | | | 74 | | Agency MBS | 124,746 | | | 137,052 | | | 2.23 | | | 1.72 | | | 694 | | | 590 | | | 104 | | | 160 | | | (56) | |
States and political subdivisions | States and political subdivisions | 374 | | | 444 | | | 3.72 | | | 3.52 | | | 3 | | | 4 | | | (1) | | | — | | | (1) | | States and political subdivisions | 425 | | | 374 | | | 4.07 | | | 3.72 | | | 4 | | | 3 | | | 1 | | | — | | | 1 | |
Non-agency MBS | Non-agency MBS | 4,224 | | | — | | | 2.25 | | | — | | | 24 | | | — | | | 24 | | | — | | | 24 | | Non-agency MBS | 3,907 | | | 4,224 | | | 2.34 | | | 2.25 | | | 23 | | | 24 | | | (1) | | | 1 | | | (2) | |
Other | Other | 27 | | | 33 | | | 2.04 | | | 1.92 | | | — | | | — | | | — | | | — | | | — | | Other | 21 | | | 27 | | | 5.30 | | | 2.04 | | | — | | | — | | | — | | | — | | | — | |
| Total securities | Total securities | 152,687 | | | 122,246 | | | 1.68 | | | 1.45 | | | 641 | | | 445 | | | 196 | | | 88 | | | 108 | | Total securities | 140,551 | | | 152,687 | | | 2.14 | | | 1.68 | | | 753 | | | 641 | | | 112 | | | 173 | | | (61) | |
Interest earning trading assets | Interest earning trading assets | 5,837 | | | 4,742 | | | 3.04 | | | 2.79 | | | 43 | | | 32 | | | 11 | | | 3 | | | 8 | | Interest earning trading assets | 5,462 | | | 5,837 | | | 6.09 | | | 3.04 | | | 83 | | | 43 | | | 40 | | | 43 | | | (3) | |
Other earning assets (3) | Other earning assets (3) | 18,932 | | | 17,417 | | | 0.63 | | | 0.37 | | | 30 | | | 16 | | | 14 | | | 13 | | | 1 | | Other earning assets(3) | 25,589 | | | 18,932 | | | 4.67 | | | 0.63 | | | 295 | | | 30 | | | 265 | | | 251 | | | 14 | |
Loans and leases, net of unearned income: (4) | | | | | | | | | | | | | | | | | |
Loans and leases, net of unearned income: | | Loans and leases, net of unearned income: | | | | | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | 138,872 | | | 141,026 | | | 2.88 | | | 3.14 | | | 987 | | | 1,093 | | | (106) | | | (90) | | | (16) | | Commercial and industrial | 165,095 | | | 138,872 | | | 5.98 | | | 2.88 | | | 2,436 | | | 987 | | | 1,449 | | | 1,233 | | | 216 | |
CRE | CRE | 23,555 | | | 26,211 | | | 2.84 | | | 2.90 | | | 168 | | | 189 | | | (21) | | | (4) | | | (17) | | CRE | 22,689 | | | 23,555 | | | 6.32 | | | 2.84 | | | 355 | | | 168 | | | 187 | | | 193 | | | (6) | |
Commercial Construction | Commercial Construction | 5,046 | | | 6,557 | | | 3.05 | | | 3.04 | | | 35 | | | 48 | | | (13) | | | — | | | (13) | | Commercial Construction | 5,863 | | | 5,046 | | | 7.14 | | | 3.05 | | | 101 | | | 35 | | | 66 | | | 59 | | | 7 | |
| Residential mortgage | Residential mortgage | 47,976 | | | 45,823 | | | 3.57 | | | 4.42 | | | 428 | | | 507 | | | (79) | | | (102) | | | 23 | | Residential mortgage | 56,422 | | | 47,976 | | | 3.73 | | | 3.57 | | | 526 | | | 428 | | | 98 | | | 20 | | | 78 | |
Residential home equity and direct | 24,883 | | | 25,658 | | | 5.38 | | | 5.81 | | | 330 | | | 368 | | | (38) | | | (27) | | | (11) | | |
Home equity | | Home equity | 10,735 | | | 10,822 | | | 6.80 | | | 4.33 | | | 180 | | | 116 | | | 64 | | | 65 | | | (1) | |
Indirect auto | Indirect auto | 26,088 | | | 26,363 | | | 5.56 | | | 6.56 | | | 357 | | | 426 | | | (69) | | | (65) | | | (4) | | Indirect auto | 27,743 | | | 26,088 | | | 5.82 | | | 5.56 | | | 398 | | | 357 | | | 41 | | | 17 | | | 24 | |
Indirect other | 10,860 | | | 10,848 | | | 6.32 | | | 6.98 | | | 169 | | | 187 | | | (18) | | | (18) | | | — | | |
Other consumer | | Other consumer | 27,559 | | | 24,921 | | | 6.76 | | | 6.24 | | | 459 | | | 383 | | | 76 | | | 33 | | | 43 | |
Student | Student | 6,648 | | | 7,519 | | | 3.86 | | | 3.96 | | | 63 | | | 73 | | | (10) | | | (2) | | | (8) | | Student | 5,129 | | | 6,648 | | | 7.04 | | | 3.86 | | | 89 | | | 63 | | | 26 | | | 43 | | | (17) | |
Credit card | Credit card | 4,682 | | | 4,645 | | | 8.97 | | | 9.24 | | | 104 | | | 106 | | | (2) | | | (3) | | | 1 | | Credit card | 4,785 | | | 4,682 | | | 11.43 | | | 8.97 | | | 136 | | | 104 | | | 32 | | | 30 | | | 2 | |
| Total loans and leases HFI | Total loans and leases HFI | 288,610 | | | 294,650 | | | 3.70 | | | 4.11 | | | 2,641 | | | 2,997 | | | (356) | | | (311) | | | (45) | | Total loans and leases HFI | 326,020 | | | 288,610 | | | 5.81 | | | 3.70 | | | 4,680 | | | 2,641 | | | 2,039 | | | 1,693 | | | 346 | |
LHFS | LHFS | 3,874 | | | 4,891 | | | 2.87 | | | 2.59 | | | 28 | | | 32 | | | (4) | | | 3 | | | (7) | | LHFS | 1,527 | | | 3,874 | | | 6.71 | | | 2.87 | | | 25 | | | 28 | | | (3) | | | 21 | | | (24) | |
Total loans and leases | Total loans and leases | 292,484 | | | 299,541 | | | 3.69 | | | 4.09 | | | 2,669 | | | 3,029 | | | (360) | | | (308) | | | (52) | | Total loans and leases | 327,547 | | | 292,484 | | | 5.81 | | | 3.69 | | | 4,705 | | | 2,669 | | | 2,036 | | | 1,714 | | | 322 | |
Total earning assets | Total earning assets | 469,940 | | | 443,946 | | | 2.90 | | | 3.20 | | | 3,383 | | | 3,522 | | | (139) | | | (204) | | | 65 | | Total earning assets | 499,149 | | | 469,940 | | | 4.72 | | | 2.90 | | | 5,836 | | | 3,383 | | | 2,453 | | | 2,181 | | | 272 | |
Nonearning assets | Nonearning assets | 66,041 | | | 64,887 | | | | | | | | | | | | | | | Nonearning assets | 60,478 | | | 66,041 | | | | | | | | | | | | | | |
Total assets | Total assets | $ | 535,981 | | | $ | 508,833 | | | | | | | | | | | | | | | Total assets | $ | 559,627 | | | $ | 535,981 | | | | | | | | | | | | | | |
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 | $ | 112,159 | | | $ | 104,744 | | | 0.05 | | | 0.06 | | | 14 | | | 15 | | | (1) | | | (2) | | | 1 | | Interest-checking | $ | 108,886 | | | $ | 112,159 | | | 1.60 | | | 0.05 | | | 430 | | | 14 | | | 416 | | | 416 | | | — | |
Money market and savings | Money market and savings | 141,500 | | | 129,303 | | | 0.03 | | | 0.03 | | | 11 | | | 10 | | | 1 | | | — | | | 1 | | Money market and savings | 139,802 | | | 141,500 | | | 1.38 | | | 0.03 | | | 476 | | | 11 | | | 465 | | | 465 | | | — | |
Time deposits | Time deposits | 15,646 | | | 20,559 | | | 0.18 | | | 0.44 | | | 7 | | | 22 | | | (15) | | | (11) | | | (4) | | Time deposits | 28,671 | | | 15,646 | | | 3.10 | | | 0.18 | | | 219 | | | 7 | | | 212 | | | 202 | | | 10 | |
| Total interest-bearing deposits (6) | 269,305 | | | 254,606 | | | 0.05 | | | 0.07 | | | 32 | | | 47 | | | (15) | | | (13) | | | (2) | | |
Total interest-bearing deposits | | Total interest-bearing deposits | 277,359 | | | 269,305 | | | 1.64 | | | 0.05 | | | 1,125 | | | 32 | | | 1,093 | | | 1,083 | | | 10 | |
Short-term borrowings | Short-term borrowings | 6,944 | | | 6,731 | | | 0.60 | | | 0.82 | | | 10 | | | 14 | | | (4) | | | (4) | | | — | | Short-term borrowings | 24,056 | | | 6,944 | | | 4.69 | | | 0.60 | | | 278 | | | 10 | | | 268 | | | 197 | | | 71 | |
Long-term debt | Long-term debt | 35,337 | | | 37,820 | | | 1.50 | | | 1.57 | | | 132 | | | 148 | | | (16) | | | (6) | | | (10) | | Long-term debt | 51,057 | | | 35,337 | | | 4.05 | | | 1.50 | | | 514 | | | 132 | | | 382 | | | 303 | | | 79 | |
Total interest-bearing liabilities | Total interest-bearing liabilities | 311,586 | | | 299,157 | | | 0.22 | | | 0.28 | | | 174 | | | 209 | | | (35) | | | (23) | | | (12) | | Total interest-bearing liabilities | 352,472 | | | 311,586 | | | 2.20 | | | 0.22 | | | 1,917 | | | 174 | | | 1,743 | | | 1,583 | | | 160 | |
Noninterest-bearing deposits (6) | 145,933 | | | 128,579 | | | | | | | | | | | | | | | | |
Noninterest-bearing deposits | | Noninterest-bearing deposits | 131,099 | | | 145,933 | | | | | | | | | | | | | | | |
Other liabilities | Other liabilities | 11,664 | | | 11,050 | | | | | | | | | | | | | | | | Other liabilities | 13,979 | | | 11,664 | | | | | | | | | | | | | | | |
Shareholders’ equity | Shareholders’ equity | 66,798 | | | 70,047 | | | | | | | | | | | | | | | | Shareholders’ equity | 62,077 | | | 66,798 | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 535,981 | | | $ | 508,833 | | | | | | | | | | | | | | | | Total liabilities and shareholders’ equity | $ | 559,627 | | | $ | 535,981 | | | | | | | | | | | | | | | |
Average interest-rate spread | Average interest-rate spread | | | | | 2.68 | % | | 2.92 | % | | | | | | | | | | | Average interest-rate spread | | | | | 2.52 | % | | 2.68 | % | | | | | | | | | | |
NIM/net interest income - taxable equivalent | NIM/net interest income - taxable equivalent | | | | | 2.76 | % | | 3.01 | % | | $ | 3,209 | | | $ | 3,313 | | | $ | (104) | | | $ | (181) | | | $ | 77 | | NIM/net interest income - taxable equivalent | | | | | 3.17 | % | | 2.76 | % | | $ | 3,919 | | | $ | 3,209 | | | $ | 710 | | | $ | 598 | | | $ | 112 | |
Taxable-equivalent adjustment | Taxable-equivalent adjustment | | | | | | | | | $ | 26 | | | $ | 28 | | | | | | | | Taxable-equivalent adjustment | | | | | | | | | $ | 51 | | | $ | 26 | | | | | | | |
Memo: Total deposits | | Memo: Total deposits | $ | 408,458 | | | $ | 415,238 | | | 1.12 | % | | 0.03 | % | | $ | 1,125 | | | $ | 32 | | | $ | 1,093 | | |
(1)Represents daily average balances. Excludes basis adjustments for fair value hedges.
(2)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% and 0.05% for the three months ended March 31, 2022 and 2021, respectively.
Truist Financial Corporation 4143
Provision for Credit Losses
First Quarter 2022 compared to First Quarter 2021
The provision for credit losses was $502 million compared to a benefit of $95 million for the first quarter of 2022. The net charge-off ratio was 37 basis points, up 12 basis points compared to a costthe first quarter of $48 million for2022.
•The increase in the current quarter provision expense primarily reflects increased economic uncertainty in the current period, whereas the earlier quarter. The current quarter includesincluded a reserve release due to the continued favorableimproving credit environment. Net charge-offs forenvironment during that period.
•The net charge-off ratio was up compared to the first quarter of 2022 totaled $178 million compared to $238 milliondriven by higher charge-offs in the earlier quarter. The net charge-off ratio forindirect auto and other consumer portfolios due to normalizing trends, as well as an increase in the current quarter of 0.25% was down eight basis points compared to the earlier quarter.commercial and industrial portfolio.
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. The following table provides a breakdown of Truist’s noninterest income: | | Table 2: Noninterest Income | Table 2: Noninterest Income | | Table 2: Noninterest Income | |
| | | Three Months Ended March 31, | | | | Three Months Ended March 31, | |
| (Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | | % Change | | (Dollars in millions) | | 2023 | | 2022 | | | % Change | |
| | Insurance income | Insurance income | | $ | 727 | | | $ | 626 | | | | 16.1 | % | | Insurance income | | $ | 813 | | | $ | 727 | | | | 11.8 | % | |
Wealth management income | | Wealth management income | | 339 | | | 343 | | | | (1.2) | | |
Investment banking and trading income | Investment banking and trading income | | 261 | | | 346 | | | | (24.6) | | | Investment banking and trading income | | 261 | | | 261 | | | | — | | |
Wealth management income | | 343 | | | 341 | | | | 0.6 | | | |
Service charges on deposits | Service charges on deposits | | 252 | | | 258 | | | | (2.3) | | | Service charges on deposits | | 249 | | | 252 | | | | (1.2) | | |
Card and payment related fees | Card and payment related fees | | 212 | | | 200 | | | | 6.0 | | | Card and payment related fees | | 230 | | | 212 | | | | 8.5 | | |
Residential mortgage income | | 89 | | | 100 | | | | (11.0) | | | |
Mortgage banking income | | Mortgage banking income | | 142 | | | 121 | | | | 17.4 | | |
Lending related fees | Lending related fees | | 85 | | | 100 | | | | (15.0) | | | Lending related fees | | 106 | | | 85 | | | | 24.7 | | |
Operating lease income | Operating lease income | | 58 | | | 68 | | | | (14.7) | | | Operating lease income | | 67 | | | 58 | | | | 15.5 | | |
Commercial mortgage income | | 32 | | | 33 | | | | (3.0) | | | |
Income from bank-owned life insurance | | 51 | | | 50 | | | | 2.0 | | | |
Securities gains (losses) | Securities gains (losses) | | (69) | | | — | | | | NM | | Securities gains (losses) | | — | | | (69) | | | | NM | |
Other income | Other income | | 101 | | | 75 | | | | 34.7 | | | Other income | | 27 | | | 152 | | | | (82.2) | | |
Total noninterest income | Total noninterest income | | $ | 2,142 | | | $ | 2,197 | | | | (2.5) | | | Total noninterest income | | $ | 2,234 | | | $ | 2,142 | | | | 4.3 | | |
|
First Quarter 2022Noninterest income was up $92 million, or 4.3%, compared to First Quarter 2021
Noninterest income for the first quarter of 2022 decreased $55 million, or 2.5%, compareddue to the earlier quarter.12% growth in insurance income, higher mortgage banking income, higher fees from lending-related activities and card and payment related activities. These items were partially offset by lower other income. The first quarter of 2022 includes netincluded $69 million of securities losses of $69and a $74 million and the gain on the redemption of noncontrolling equity interest (other(included in other income) of $74 million. The earlier quarter included a gain of $37 million from the divestiture of certain businesses (other income). Excluding the aforementioned items, noninterest income was down $23 million, or 1.1%.
•Insurance income increased $101 million, or 16%,primarily due to continuedacquisitions and 4.7% organic growth and acquisitions. Investmentgrowth.
•Mortgage banking and trading income decreased $85 million, or 25%,increased due to lower high yield bond and equity originations fees, lower core trading income, and lower CVA gains,a gain on the sale of a servicing portfolio, partially offset by mortgage servicing rights valuation adjustments in the current quarter.
•Lending related fees increased primarily due to higher structured real estateunused commitment fees. Residential mortgage
•Card and payment related fees increased due to higher volumes and the acquisition of a merchant portfolio.
•Other income decreased $11 million, or 11%, as lower production income (duedue to lower margins and refinance volumes) was largely offset by higher servicing income (due to lower prepayments). Excluding the gain on the redemption of noncontrolling equity interest, theaforementioned gain in the earlieryear ago quarter, from the divestiture of certain businesses and a $67 million decrease for assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, other income increased $56 million, due to higher investment income from the Company’s SBIC and other investments.investments, partially offset by higher income from investments held for certain post-retirement benefits (which is primarily offset by higher personnel expense).
4244 Truist Financial Corporation
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 March 31, | | Three Months Ended March 31, | |
| (Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | | % Change | | (Dollars in millions) | 2023 | | 2022 | | % Change | |
| | | Personnel expense | Personnel expense | | $ | 2,051 | | | $ | 2,142 | | | | (4.2) | % | | Personnel expense | $ | 2,181 | | | $ | 2,051 | | | 6.3 | % | |
Professional fees and outside processing | Professional fees and outside processing | | 363 | | | 350 | | | | 3.7 | | | Professional fees and outside processing | 314 | | | 363 | | | (13.5) | | |
Software expense | Software expense | | 232 | | | 210 | | | | 10.5 | | | Software expense | 214 | | | 232 | | | (7.8) | | |
Net occupancy expense | Net occupancy expense | | 208 | | | 209 | | | | (0.5) | | | Net occupancy expense | 183 | | | 208 | | | (12.0) | | |
Amortization of intangibles | Amortization of intangibles | | 137 | | | 144 | | | | (4.9) | | | Amortization of intangibles | 136 | | | 137 | | | (0.7) | | |
Equipment expense | Equipment expense | | 118 | | | 113 | | | | 4.4 | | | Equipment expense | 110 | | | 118 | | | (6.8) | | |
Marketing and customer development | Marketing and customer development | | 84 | | | 66 | | | | 27.3 | | | Marketing and customer development | 78 | | | 84 | | | (7.1) | | |
Operating lease depreciation | Operating lease depreciation | | 48 | | | 50 | | | | (4.0) | | | Operating lease depreciation | 46 | | | 48 | | | (4.2) | | |
Loan-related expense | | 44 | | | 54 | | | | (18.5) | | | |
Regulatory costs | Regulatory costs | | 35 | | | 25 | | | | 40.0 | | | Regulatory costs | 75 | | | 35 | | | 114.3 | | |
Merger-related and restructuring charges | Merger-related and restructuring charges | | 216 | | | 141 | | | | 53.2 | | | Merger-related and restructuring charges | 63 | | | 216 | | | (70.8) | | |
Loss (gain) on early extinguishment of debt | | — | | | (3) | | | | (100.0) | | | |
| Other expense | Other expense | | 138 | | | 109 | | | | 26.6 | | | Other expense | 291 | | | 182 | | | 59.9 | | |
Total noninterest expense | Total noninterest expense | | $ | 3,674 | | | $ | 3,610 | | | | 1.8 | | | Total noninterest expense | $ | 3,691 | | | $ | 3,674 | | | 0.5 | | |
|
First Quarter 2022Noninterest expense was up $17 million, or 0.5%, compared to First Quarter 2021
Noninterest expense for the first quarter of 2022 was up $64 million, or 1.8%, compareddue to the earlier quarter.higher personnel expense, other expense, and regulatory costs. These increases were partially offset by lower merger-related and restructuring charges and professional fees and outside processing expenses. Merger-related and restructuring charges increased $75 million due to costs for client day one conversions. Incrementaland incremental operating expenses related to the merger increased $27decreased $153 million primarily reflected in net occupancy expense in connection with updatingand $202 million, respectively, due to the branch network to incorporate the Truist brand. The prior quarter also includes $36 millioncompletion of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges and a small gain on the extinguishment of debt. Excluding the aforementioned itemsintegration-related activities. Adjusted noninterest expenses, which exclude merger-related costs and the amortization of intangibles adjusted noninterest expense was relatively stable compared to the earlier quarter. increased $373 million, or 12%.
•Personnel expense increased due to investments in teammates by increasing Truist’s minimum wage, the impact from acquisitions, investments in revenue producing businesses and enterprise technology, and higher other post-retirement benefit expense (which is almost entirely offset by higher other income), partially offset by lower pension expenses.
•Other expense increased primarily due to higher pension expense (driven primarily by lower plan assets) and higher operating losses.
•Regulatory costs increased primarily due to an increase in the FDIC’s deposit insurance assessment rate.
•Professional fees and outside processing expenses decreased $91 million, or 4.2%, due to lower other employee benefits as a result of the decrease in noninterest incomeproject spend for post-retirement benefits, lower incentives (due to declines in noninterest income), and lower salaries drivenmerger-related activities, partially offset by fewer FTEs. Additionally, other expense increased $29 million due to increased operational losses, software expense increased $22 million, and marketing and customer development expense increased $18 million due to increased branding efforts.enterprise technology investments.
Merger-Related and Restructuring Charges
The following table presents a summary of merger-related and restructuring charges and the related accruals. The 2022 and 20212023 merger-related and restructuring costs primarily reflect charges as a result of the Merger,restructuring activities, 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 March 31, 2022 | | |
| (Dollars in millions) | (Dollars in millions) | | | Accrual at Jan 1, 2022 | | Expense | | Utilized | | Accrual at Mar 31, 2022 | | (Dollars in millions) | Accrual at Jan 1, 2023 | | Expense | | Utilized | | Accrual at Mar 31, 2023 | |
Severance and personnel-related | Severance and personnel-related | | | $ | 77 | | | $ | 37 | | | $ | (72) | | | $ | 42 | | | Severance and personnel-related | $ | 9 | | | $ | 39 | | | $ | (31) | | | $ | 17 | | |
Occupancy and equipment | Occupancy and equipment | | | — | | | 98 | | | (98) | | | — | | | Occupancy and equipment | — | | | 19 | | | (19) | | | — | | |
Professional services | Professional services | | | 37 | | | 64 | | | (64) | | | 37 | | | Professional services | 12 | | | 1 | | | (12) | | | 1 | | |
Systems conversion and related costs | | | — | | | 20 | | | (17) | | | 3 | | | |
| Other | Other | | | 12 | | | (3) | | | (2) | | | 7 | | | Other | 5 | | | 4 | | | (5) | | | 4 | | |
Total (1) | | | $ | 126 | | | $ | 216 | | | $ | (253) | | | $ | 89 | | | |
Total | | Total | $ | 26 | | | $ | 63 | | | $ | (67) | | | $ | 22 | | |
|
(1)
Provision for Income Taxes
Related to the Merger, the Company recognized $208
The provision for income taxes was $394 million for the three months ended March 31, 2022. At March 31,first quarter of 2023, compared to $330 million for the earlier quarter. The effective tax rate for the first quarter of 2023 was 20.6%, compared to 18.9% for the earlier quarter.
•The effective tax rate increased compared to the first quarter of 2022 primarily driven by higher income before taxes, discrete tax expense recognized in the Company had an accrualcurrent quarter compared to discrete tax benefits recognized in the prior quarter, and the adoption of $81 millionthe Investments in Tax Credit Structures accounting standard related to the Merger.proportional amortization of tax credit investments in the current quarter. This guidance resulted in an increase in other income and an increase in tax expense of $17 million for the first quarter of 2023 with no impact to net income. The remaining expenseguidance was adopted prospectively and accrual relatehad no impact on prior periods results. Refer to other restructuring activities.“Note 1. Basis of Presentation” for additional information on the adoption of this guidance.
Truist Financial Corporation 4345
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. During the first quarter of 2023, Truist reorganized Prime Rate Premium Finance Corporation, which includes AFCO Credit Corporation and CAFO Holding Company, into the C&CB segment from the IH segment. Prior period results have been revised to conform to the current presentation.
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, 20212022 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 5: Net Income by Reportable Segment |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | Three Months Ended March 31, | | | | | | | | | | | | | | |
(Dollars in millions) | | | | | | | | | 2022 | | 2021 | | | | % Change | | | | | | | | | | | | | | |
Consumer Banking and Wealth | | | | | | | | | $ | 864 | | | $ | 681 | | | | | 26.9 | % | | | | | | | | | | | | | | |
Corporate and Commercial Banking | | | | | | | | | 985 | | | 966 | | | | | 2.0 | | | | | | | | | | | | | | | |
Insurance Holdings | | | | | | | | | 152 | | | 133 | | | | | 14.3 | | | | | | | | | | | | | | | |
Other, Treasury & Corporate | | | | | | | | | (585) | | | (307) | | | | | (90.6) | | | | | | | | | | | | | | | |
Truist Financial Corporation | | | | | | | | | $ | 1,416 | | | $ | 1,473 | | | | | (3.9) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 5: Net Income by Reportable Segment |
| Three Months Ended March 31, | | | | | | | | | | |
(Dollars in millions) | 2023 | | 2022 | | | | % Change | | | | | | | | | | | | | | | | | | | | | | |
Consumer Banking and Wealth | $ | 1,044 | | | $ | 861 | | | | | 21.3 | % | | | | | | | | | | | | | | | | | | | | | | |
Corporate and Commercial Banking | 1,034 | | | 1,023 | | | | | 1.1 | | | | | | | | | | | | | | | | | | | | | | | |
Insurance Holdings | 111 | | | 143 | | | | | (22.4) | | | | | | | | | | | | | | | | | | | | | | | |
Other, Treasury & Corporate | (674) | | | (611) | | | | | (10.3) | | | | | | | | | | | | | | | | | | | | | | | |
Truist Financial Corporation | $ | 1,515 | | | $ | 1,416 | | | | | 7.0 | | | | | | | | | | | | | | | | | | | | | | | |
First Quarter 2022 compared to First Quarter 2021
Consumer Banking and Wealth
CB&W net income was $864 million$1.0 billion for the first quarter of 2022,2023, an increase of $183 million compared to the earlier quarter. first quarter of 2022.
•Segment net interest income increased $194$556 million primarily driven by higher interest rates, favorable funding credit on deposits attributable to the higher rate environment and increased deposithigher average loan balances, partially offset by higher funding costs, lower average deposits, and lower purchase accounting accretion.
•The allocated provision for credit losses decreased $26increased $200 million reflecting increased economic uncertainty in the impact of a larger allowance release than the earliercurrent quarter as well as lowerhigher charge offs. offs in the indirect auto and other consumer portfolios and a reserve release in the earlier quarter.
•Noninterest income increased $30decreased $37 million compared to the earlier quarter primarily due to thea gain on the redemption of noncontrolling equity interest in the currentearlier quarter, as well as an increase in card and payment fees driven by increased sales volume, partially offset by a gain from the divestiture of certain businesseshigher mortgage banking income in the earlier quarter and lower residential mortgage income. current quarter.
•Noninterest expense was flatincreased $84 million compared to the earlier quarter.quarter primarily driven primarily by higher corporate technology, risk, and operations support expenses along with increased salaries expense, partially offset by lower marketing and customer development and incentives expense.
CB&W average loans and leases held for investment decreased $1.8increased $11.2 billion, or 1.4%8.5%, for the first quarter of 20222023 compared to the earlierfirst quarter of 2022, primarily driven by loweran increase in residential mortgage warehouse balances home equitydue to slower run-off and other direct consumer lending as well as lower student lendingincreased correspondent production, along with lower partnership balances net ofincreased Service Finance balances resulting from acquisition,and Dealer Finance loans, partially offset by increased residential mortgage balanceslower Student and recreational lending. Average mortgage warehouse loans, home equity and other direct consumer loans, student lending balances, and partnership balances net of Service Finance balances resulting from acquisition declined $2.7 billion, or 51%, $947 million, or 5.2%, $871 million, or 12%, and $211 million, or 6.0%, respectively, while residential mortgage and recreational lending balances increased $2.1 billion, or 4.7%, and $193 million, or 6.6%, respectively.Partnership loans.
Average total deposits increased $22.6decreased $14.4 billion, or 9.8%5.7%, for the first quarter of 20222023 compared to the earlierfirst quarter of 2022, primarily driven by the impact of fiscal and monetary stimulus. Averagedecreases in interest bearing checking, money market and savings, accounts, interest checking accounts, and noninterest-bearing deposits increased $10.1 billion, or 10%, $8.5 billion, or 17%, and $8.3 billion, or 13%, respectively, partially offset by a decline in time deposits of $4.3 billion, or 23%.noninterest bearing deposits.
Corporate and Commercial Banking
C&CB net income was $985 million$1.0 billion for the first quarter of 2022,2023, an increase of $19$11 million compared to the earlier quarter. first quarter of 2022.
•Segment net interest income decreased $31increased $463 million primarily due to lower fee income associated with PPP loan forgiveness and lower purchase accounting accretion, partially offset by higher funding credit on deposits and increases to noninterest-bearing deposit balances. higher average loan balances, partially offset by lower purchase accounting accretion and lower PPP revenue.
•The allocated provision for credit losses decreased $115increased $382 million primarily reflecting a reserve release due to continued favorable credit environmentwhich reflects an increase in reserves driven by increased economic uncertainty and lower charge offsloan growth in the current quarter as well as an allowance release in the earlier quarter.
•Noninterest income decreased $73$26 million compared to the earlier quarter primarily due to lower high yield bond and equity originations fees, lower credit trading income, and lower CVA mark to market gains, partially offset by higher structured real estate fees as well as higher investment income from the Company’s SBIC and other investments. investments, lower structured real estate fees, and commercial mortgage income, partially offset by increases in lending related fees, core trading revenues, and merger and acquisition fees.
•Noninterest expense decreased $18increased $55 million driven by lower professional fees and intangible amortization expense in the current quarter.
C&CB average loans held for investment decreased $3.7 billion, or 2.4%, for the first quarter of 2022 compared to the earlier quarter primarily due to PPP loan forgiveness. Excluding PPP loans, Corporatehigher personnel expenses, and Commercial Banking average loans held for investment increased $4.6 billion, or 3.1%.merger-related and restructuring charges.
4446 Truist Financial Corporation
Average total depositsC&CB average loans held for investment increased $7.8$26.7 billion, or 5.4%17%, for the first quarter of 20222023 compared to the earlierfirst quarter of 2022, primarily due to the impact of fiscalincreases in commercial and monetary stimulus. industrial loans, partially offset by decreases in average PPP loans (commercial and industrial) and average commercial real estate.
Average noninterest-bearingtotal deposits increased $9.0decreased $11.4 billion, or 14%7.5%, while interestfor the first quarter of 2023 compared to the first quarter of 2022, primarily due to declines in average noninterest bearing deposits, decreased $1.2 billion, or 1.5%.partially offset by increases in money market and savings.
Insurance Holdings
IH net income was $152$111 million for the first quarter of 2022, an increase2023, a decrease of $19$32 million compared to the earlier quarter. first quarter of 2022.
•Segment net interest income increased $11 million driven primarily by favorable funding credits.
•Noninterest income increased $104$84 million primarily due to continued organic growth and acquisitions.
•Noninterest expense increased $80$138 million primarily due to the impact of acquisitions, investments in new hires and teammates, performance-driven incentive expense, and higher performance-based incentives and salaries.operational loss reserves.
Other, Treasury & Corporate
OT&C generated a net loss of $585$674 million in the first quarter of 2022,2023, compared to a net loss of $307$611 million in the earlier quarter. first quarter of 2022.
•Net interest income decreased $265$345 million primarily due to higher funding credit on deposits to other segments, partially offset by higher earnings infunding charges to other segments from the securities portfolio from higher yields on new purchases and lower premium amortization. rate environment.
•The allocated provision for credit losses was flatincreased $15 million due to increased economic uncertainty in the current quarter.
•Noninterest income increased $71 million primarily due to losses on the sale of securities in the earlier quarter.
•Noninterest expense decreased $260 million compared to the earlier quarter. Noninterest income decreased $116 millionquarter primarily due to securities lossesa decrease in incremental operating expenses related to the current quarter and valuation changes from assets held for certain post-retirement benefits, which is primarilymerger, partially offset by lower personnel expense. Noninterest expense was flat compared to the earlier quarter.an increase in professional fees and outside processing, salaries, and regulatory costs.
Truist Financial Corporation 47
Analysis of Financial Condition
Investment Activities
The securities portfolio totaled $146.4$128.8 billion at March 31, 2022,2023, compared to $154.6$129.5 billion at December 31, 2021. The decrease was due primarily to declines in residential agency MBS and GSE securities as a result of prepayment activity. 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 March 31, 2022, approximately 5.6% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 4.6% as of December 31, 2021. The effective duration of the securities portfolio was 6.9 years at March 31, 2022, compared to 5.8 years at December 31, 2021, excluding the impact of unsettled security purchases at period end.
2022. U.S. Treasury, GSE, and Agency MBS represents 97% of the total securities portfolio as of March 31, 20222023 and December 31, 2021.2022. 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.
•The decrease includes paydowns and maturities of $2.1 billion, partially offset by unrealized gains of $1.1 billion during the quarter.
•As of March 31, 2023, 41% of the investment securities portfolio was classified as held-to-maturity based on amortized cost.
•As of March 31, 2023 and December 31, 2022, approximately 5.6% of the securities portfolio was variable rate, excluding the impact of swaps.
•The effective duration of the securities portfolio was 6.7 years at March 31, 2023 and December 31, 2022.
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) | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | For the Three Months Ended (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | | $ | 138,872 | | | $ | 134,804 | | | $ | 134,942 | | | $ | 138,539 | | | $ | 141,026 | | Commercial and industrial | | $ | 165,095 | | | $ | 159,308 | | | $ | 152,123 | | | $ | 145,558 | | | $ | 138,872 | |
CRE | CRE | | 23,555 | | | 24,396 | | | 24,849 | | | 25,645 | | | 26,211 | | CRE | | 22,689 | | | 22,497 | | | 22,245 | | | 22,508 | | | 23,555 | |
Commercial construction | Commercial construction | | 5,046 | | | 5,341 | | | 5,969 | | | 6,359 | | | 6,557 | | Commercial construction | | 5,863 | | | 5,711 | | | 5,284 | | | 5,256 | | | 5,046 | |
| Consumer: | Consumer: | | Consumer: | |
Residential mortgage | Residential mortgage | | 47,976 | | | 47,185 | | | 45,369 | | | 43,605 | | | 45,823 | | Residential mortgage | | 56,422 | | | 56,292 | | | 53,271 | | | 49,237 | | | 47,976 | |
Residential home equity and direct | | 24,883 | | | 25,146 | | | 25,242 | | | 25,238 | | | 25,658 | | |
Home equity | | Home equity | | 10,735 | | | 10,887 | | | 10,767 | | | 10,677 | | | 10,822 | |
Indirect auto | Indirect auto | | 26,088 | | | 26,841 | | | 26,830 | | | 26,444 | | | 26,363 | | Indirect auto | | 27,743 | | | 28,117 | | | 28,057 | | | 26,496 | | | 26,088 | |
Indirect other | | 10,860 | | | 10,978 | | | 11,112 | | | 10,797 | | | 10,848 | | |
Other consumer | | Other consumer | | 27,559 | | | 27,479 | | | 26,927 | | | 25,918 | | | 24,921 | |
Student | Student | | 6,648 | | | 6,884 | | | 7,214 | | | 7,396 | | | 7,519 | | Student | | 5,129 | | | 5,533 | | | 5,958 | | | 6,331 | | | 6,648 | |
Credit card | Credit card | | 4,682 | | | 4,769 | | | 4,632 | | | 4,552 | | | 4,645 | | Credit card | | 4,785 | | | 4,842 | | | 4,755 | | | 4,728 | | | 4,682 | |
| Total average loans and leases HFI | Total average loans and leases HFI | | $ | 288,610 | | | $ | 286,344 | | | $ | 286,159 | | | $ | 288,575 | | | $ | 294,650 | | Total average loans and leases HFI | | $ | 326,020 | | | $ | 320,666 | | | $ | 309,387 | | | $ | 296,709 | | | $ | 288,610 | |
Average loans and leases held for investment for the first quarter of 2022 were $288.6 billion, up $2.3increased $5.4 billion, or 0.8%1.7%, compared to the fourthprior quarter primarily due to momentum from the prior quarter within the commercial portfolio and the impact of 2021. Excluding a $1.1 billion decreasethe BankDirect acquisition. Loan growth moderated during the quarter as production in average PPPlower return portfolios was reduced with end of period loans average loans held for investment were up $3.3 billion, or 1.2%.0.5% compared to December 31, 2022.
Truist Financial Corporation 45
Average commercial loans increased $2.9 billion, or 1.8%, as a result of $6.5 billion, or 5.1%,3.3% due to broad-based growth within the commercial and industrial portfolio excluding PPP and mortgage warehouse lending. Thisthe BankDirect acquisition. The BankDirect acquisition contributed approximately $900 million of average loan growth was partially offset by a $1.4 billion decrease in mortgage warehouse lending (commercial and industrial), a $1.1 billion decrease in average PPP loans (commercial and industrial), an $841 million decrease in average CRE loans, and a $295 million decrease in average commercial construction loans.compared to the fourth quarter of 2022.
•
Average consumer loans decreased $579 million, or 0.5%0.6% due to a $753 million decreaserunoff in student loans and partnership lending, as well as lower indirect auto due to market dynamics and the competitive environment, a $263 million decrease in residential home equity and direct, and a $236 million decrease in student loans. The decreases were partially offset by a $791 million increase in residential mortgages due to the continued strategy to put certain correspondent channel production onto the balance sheet and lower prepayments.production.
At March 31, 20222023 and December 31, 2021, 52%2022, 53% of loans and leases HFI were variable rate.
4648 Truist Financial Corporation
Asset Quality
The following tables summarize asset quality information:
| | Table 7: Asset Quality | Table 7: Asset Quality | | Table 7: Asset Quality | |
| (Dollars in millions) | (Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | |
NPAs: | NPAs: | | | NPAs: | | |
NPLs: | NPLs: | | | NPLs: | | |
Commercial and industrial | Commercial and industrial | $ | 330 | | | $ | 394 | | | $ | 423 | | | $ | 402 | | | $ | 474 | | | Commercial and industrial | $ | 394 | | | $ | 398 | | | $ | 443 | | | $ | 393 | | | $ | 330 | | |
CRE | CRE | 27 | | | 29 | | | 20 | | | 25 | | | 58 | | | CRE | 117 | | | 82 | | | 5 | | | 19 | | | 27 | | |
Commercial construction | Commercial construction | — | | | 7 | | | 7 | | | 12 | | | 13 | | | Commercial construction | 1 | | | — | | | — | | | — | | | — | | |
| Residential mortgage | Residential mortgage | 315 | | | 296 | | | 306 | | | 302 | | | 290 | | | Residential mortgage | 233 | | | 240 | | | 227 | | | 269 | | | 315 | | |
Residential home equity and direct | 141 | | | 141 | | | 146 | | | 165 | | | 172 | | | |
Home equity | | Home equity | 132 | | | 135 | | | 132 | | | 133 | | | 122 | | |
Indirect auto | Indirect auto | 227 | | | 218 | | | 172 | | | 148 | | | 158 | | | Indirect auto | 270 | | | 289 | | | 260 | | | 244 | | | 227 | | |
Indirect other | 4 | | | 5 | | | 6 | | | 6 | | | 6 | | | |
Other consumer | | Other consumer | 45 | | | 44 | | | 39 | | | 32 | | | 23 | | |
| Total NPLs HFI | Total NPLs HFI | 1,044 | | | 1,090 | | | 1,080 | | | 1,060 | | | 1,171 | | | Total NPLs HFI | 1,192 | | | 1,188 | | | 1,106 | | | 1,090 | | | 1,044 | | |
Loans held for sale | Loans held for sale | 39 | | | 22 | | | 76 | | | 78 | | | 72 | | | Loans held for sale | — | | | — | | | 72 | | | 33 | | | 39 | | |
Total nonaccrual loans and leases | Total nonaccrual loans and leases | 1,083 | | | 1,112 | | | 1,156 | | | 1,138 | | | 1,243 | | | Total nonaccrual loans and leases | 1,192 | | | 1,188 | | | 1,178 | | | 1,123 | | | 1,083 | | |
Foreclosed real estate | Foreclosed real estate | 3 | | | 8 | | | 9 | | | 13 | | | 18 | | | Foreclosed real estate | 3 | | | 4 | | | 4 | | | 3 | | | 3 | | |
Other foreclosed property | Other foreclosed property | 49 | | | 43 | | | 39 | | | 41 | | | 38 | | | Other foreclosed property | 66 | | | 58 | | | 58 | | | 47 | | | 49 | | |
Total nonperforming assets | Total nonperforming assets | $ | 1,135 | | | $ | 1,163 | | | $ | 1,204 | | | $ | 1,192 | | | $ | 1,299 | | | Total nonperforming assets | $ | 1,261 | | | $ | 1,250 | | | $ | 1,240 | | | $ | 1,173 | | | $ | 1,135 | | |
TDRs: | | | |
Performing TDRs: | | | |
| Loans 90 days or more past due and still accruing: | | Loans 90 days or more past due and still accruing: | | |
Commercial and industrial | Commercial and industrial | $ | 104 | | | $ | 147 | | | $ | 200 | | | $ | 202 | | | $ | 201 | | | Commercial and industrial | $ | 35 | | | $ | 49 | | | $ | 44 | | | $ | 27 | | | $ | 22 | | |
CRE | CRE | 5 | | | 5 | | | 8 | | | 24 | | | 47 | | | CRE | — | | | 1 | | | 1 | | | 3 | | | — | | |
Commercial construction | Commercial construction | 1 | | | — | | | — | | | — | | | — | | | Commercial construction | — | | | — | | | — | | | 3 | | | — | | |
| Residential mortgage - government guaranteed | Residential mortgage - government guaranteed | 622 | | | 480 | | | 507 | | | 520 | | | 535 | | | Residential mortgage - government guaranteed | 649 | | | 759 | | | 808 | | | 884 | | | 996 | | |
Residential mortgage - nonguaranteed | Residential mortgage - nonguaranteed | 244 | | | 212 | | | 205 | | | 207 | | | 198 | | | Residential mortgage - nonguaranteed | 25 | | | 27 | | | 26 | | | 27 | | | 31 | | |
Residential home equity and direct | 91 | | | 98 | | | 105 | | | 107 | | | 109 | | | |
Home equity | | Home equity | 10 | | | 12 | | | 9 | | | 8 | | | 9 | | |
Indirect auto | Indirect auto | 392 | | | 389 | | | 390 | | | 389 | | | 399 | | | Indirect auto | — | | | 1 | | | 1 | | | 1 | | | 1 | | |
Indirect other | 6 | | | 7 | | | 7 | | | 7 | | | 7 | | | |
| Student - nonguaranteed | 25 | | | 25 | | | 23 | | | 13 | | | 8 | | | |
Credit card | 25 | | | 27 | | | 30 | | | 32 | | | 35 | | | |
Total performing TDRs | 1,515 | | | 1,390 | | | 1,475 | | | 1,501 | | | 1,539 | | | |
Nonperforming TDRs | 189 | | | 152 | | | 159 | | | 190 | | | 207 | | | |
Total TDRs | $ | 1,704 | | | $ | 1,542 | | | $ | 1,634 | | | $ | 1,691 | | | $ | 1,746 | | | |
Loans 90 days or more past due and still accruing: | | | |
Commercial and industrial | $ | 22 | | | $ | 13 | | | $ | 18 | | | $ | 14 | | | $ | 14 | | | |
| Residential mortgage - government guaranteed | 996 | | | 978 | | | 823 | | | 929 | | | 935 | | | |
Residential mortgage - nonguaranteed | 31 | | | 31 | | | 29 | | | 47 | | | 40 | | | |
Residential home equity and direct | 12 | | | 9 | | | 7 | | | 7 | | | 11 | | | |
Indirect auto | 1 | | | 1 | | | 2 | | | 2 | | | 2 | | | |
Indirect other | 2 | | | 3 | | | 2 | | | 1 | | | 1 | | | |
Other consumer | | Other consumer | 10 | | | 13 | | | 9 | | | 5 | | | 5 | | |
Student - government guaranteed | Student - government guaranteed | 818 | | | 864 | | | 965 | | | 1,043 | | | 1,033 | | | Student - government guaranteed | 590 | | | 702 | | | 770 | | | 796 | | | 818 | | |
Student - nonguaranteed | Student - nonguaranteed | 4 | | | 4 | | | 3 | | | 3 | | | 4 | | | Student - nonguaranteed | 4 | | | 4 | | | 5 | | | 5 | | | 4 | | |
Credit card | Credit card | 28 | | | 27 | | | 23 | | | 22 | | | 32 | | | Credit card | 38 | | | 37 | | | 36 | | | 28 | | | 28 | | |
| Total loans 90 days or more past due and still accruing | Total loans 90 days or more past due and still accruing | $ | 1,914 | | | $ | 1,930 | | | $ | 1,872 | | | $ | 2,068 | | | $ | 2,072 | | | Total loans 90 days or more past due and still accruing | $ | 1,361 | | | $ | 1,605 | | | $ | 1,709 | | | $ | 1,787 | | | $ | 1,914 | | |
Loans 30-89 days past due and still accruing: | Loans 30-89 days past due and still accruing: | | | Loans 30-89 days past due and still accruing: | | |
Commercial and industrial | Commercial and industrial | $ | 280 | | | $ | 130 | | | $ | 135 | | | $ | 146 | | | $ | 152 | | | Commercial and industrial | $ | 125 | | | $ | 256 | | | $ | 162 | | | $ | 223 | | | $ | 280 | | |
CRE | CRE | 13 | | | 20 | | | 4 | | | 7 | | | 9 | | | CRE | 34 | | | 25 | | | 15 | | | 10 | | | 13 | | |
Commercial construction | Commercial construction | 1 | | | 2 | | | 2 | | | 1 | | | 4 | | | Commercial construction | 3 | | | 5 | | | 3 | | | 4 | | | 1 | | |
| Residential mortgage - government guaranteed | Residential mortgage - government guaranteed | 216 | | | 256 | | | 264 | | | 307 | | | 330 | | | Residential mortgage - government guaranteed | 232 | | | 268 | | | 234 | | | 233 | | | 216 | | |
Residential mortgage - nonguaranteed | Residential mortgage - nonguaranteed | 326 | | | 258 | | | 231 | | | 236 | | | 247 | | | Residential mortgage - nonguaranteed | 259 | | | 346 | | | 300 | | | 302 | | | 326 | | |
Residential home equity and direct | 142 | | | 107 | | | 81 | | | 73 | | | 82 | | | |
Home equity | | Home equity | 65 | | | 68 | | | 67 | | | 68 | | | 80 | | |
Indirect auto | Indirect auto | 529 | | | 607 | | | 560 | | | 428 | | | 328 | | | Indirect auto | 511 | | | 646 | | | 591 | | | 584 | | | 529 | | |
Indirect other | 65 | | | 64 | | | 53 | | | 47 | | | 45 | | | |
Other consumer | | Other consumer | 164 | | | 187 | | | 152 | | | 166 | | | 127 | | |
Student - government guaranteed | Student - government guaranteed | 476 | | | 549 | | | 451 | | | 543 | | | 551 | | | Student - government guaranteed | 350 | | | 396 | | | 375 | | | 447 | | | 476 | | |
Student - nonguaranteed | Student - nonguaranteed | 6 | | | 6 | | | 5 | | | 5 | | | 5 | | | Student - nonguaranteed | 6 | | | 6 | | | 6 | | | 6 | | | 6 | | |
Credit card | Credit card | 47 | | | 45 | | | 37 | | | 31 | | | 35 | | | Credit card | 56 | | | 64 | | | 52 | | | 48 | | | 47 | | |
| Total loans 30-89 days past due and still accruing | Total loans 30-89 days past due and still accruing | $ | 2,101 | | | $ | 2,044 | | | $ | 1,823 | | | $ | 1,824 | | | $ | 1,788 | | | Total loans 30-89 days past due and still accruing | $ | 1,805 | | | $ | 2,267 | | | $ | 1,957 | | | $ | 2,091 | | | $ | 2,101 | | |
Truist Financial Corporation 47
Nonperforming assets totaled $1.1$1.3 billion at March 31, 2022, down $28 million2023, relatively stable compared to December 31, 2021 due to declines in the commercial and industrial portfolio.2022. Nonperforming loans and leases held for investment were 0.36% of loans and leases held for investment at March 31, 2022, down two basis points2023, unchanged compared to December 31, 2021.
Performing TDRs were up $125 million compared to the prior quarter primarily due to an increase in government guaranteed residential mortgages.2022.
Loans 90 days or more past due and still accruing totaled $1.9$1.4 billion at March 31, 2022,2023, down $16$244 million, compared to the prior quarter. The ratio of loans 90 days or more past due and still accruingseven basis points as a percentage of loans and leases, was 0.66% at March 31, 2022, down one basis point fromcompared with the prior quarter.quarter primarily due to declines in government guaranteed student loans and government guaranteed residential 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 0.04% at March 31, 2022, up one basis point2023, flat from December 31, 2021.2022.
Loans 30-89 days past due and still accruing of $2.1$1.8 billion at March 31, 20222023 were up onedown $462 million, or 15 basis pointpoints as a percentage of loans and leases, compared to the prior quarter primarily due to an increasea seasonal decrease in the consumer portfolios coupled with a decline in the commercial and industrial portfolio, partially offset by seasonal declines in the indirect auto portfolio and a decline in the student portfolio.
Truist Financial Corporation 49
Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 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 8: Asset Quality Ratios | Table 8: Asset Quality Ratios | | Table 8: Asset Quality Ratios | |
| | | Mar 31, 2022 | | Dec 31, 2021 | | | Mar 31, 2023 | | Dec 31, 2022 | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | |
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.72 | % | | 0.71 | % | | Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI | 0.55 | % | | 0.70 | % | | 0.62 | % | | 0.69 | % | | 0.72 | % | |
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.66 | | | 0.67 | | | Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI | 0.42 | | | 0.49 | | | 0.54 | | | 0.59 | | | 0.66 | | |
NPLs as a percentage of loans and leases HFI | NPLs as a percentage of loans and leases HFI | 0.36 | | | 0.38 | | | NPLs as a percentage of loans and leases HFI | 0.36 | | | 0.36 | | | 0.35 | | | 0.36 | | | 0.36 | | |
NPLs as a percentage of total loans and leases (1) | NPLs as a percentage of total loans and leases (1) | 0.37 | | | 0.38 | | | NPLs as a percentage of total loans and leases(1) | 0.36 | | | 0.36 | | | 0.37 | | | 0.37 | | | 0.37 | | |
NPAs as a percentage of: | NPAs as a percentage of: | | | NPAs as a percentage of: | | |
Total assets (1) | Total assets (1) | 0.21 | | | 0.21 | | | Total assets(1) | 0.22 | | | 0.23 | | | 0.23 | | | 0.22 | | | 0.21 | | |
Loans and leases HFI plus foreclosed property | Loans and leases HFI plus foreclosed property | 0.38 | | | 0.39 | | | Loans and leases HFI plus foreclosed property | 0.38 | | | 0.38 | | | 0.37 | | | 0.38 | | | 0.38 | | |
| ALLL as a percentage of loans and leases HFI | ALLL as a percentage of loans and leases HFI | 1.44 | | | 1.53 | | | ALLL as a percentage of loans and leases HFI | 1.37 | | | 1.34 | | | 1.34 | | | 1.38 | | | 1.44 | | |
| Ratio of ALLL to NPLs | Ratio of ALLL to NPLs | 3.99x | | 4.07x | | Ratio of ALLL to NPLs | 3.8x | | 3.7x | | 3.8x | | 3.8x | | 4.0x | |
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 | % | | 0.03 | % | | |
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding government guaranteed(2) | | Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding government guaranteed(2) | 0.04 | % | | 0.04 | % | | 0.04 | % | | 0.04 | % | | 0.04 | % | |
| | |
(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 because collection of principal 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) | Table 9: Asset Quality Ratios (Continued) | | Table 9: Asset Quality Ratios (Continued) | |
| | | Quarter Ended | |
For the Three Months Ended | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | |
| | | | Mar 31, 2023 | | Dec 31, 2022 | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | |
Net charge-offs as a percentage of average loans and leases HFI: | Net charge-offs as a percentage of average loans and leases HFI: | | Net charge-offs as a percentage of average loans and leases HFI: | |
Commercial: | Commercial: | | | Commercial: | | |
Commercial and industrial | Commercial and industrial | | 0.04 | % | | 0.09 | % | | 0.04 | % | | 0.09 | % | | 0.17 | % | | Commercial and industrial | | 0.15 | % | | 0.08 | % | | 0.02 | % | | 0.01 | % | | 0.04 | % | |
CRE | CRE | | 0.01 | | | 0.07 | | | — | | | (0.05) | | | 0.04 | | | CRE | | 0.09 | | | 0.19 | | | (0.01) | | | (0.10) | | | 0.01 | | |
Commercial construction | Commercial construction | | (0.02) | | | (0.10) | | | (0.06) | | | (0.06) | | | 0.08 | | | Commercial construction | | (0.04) | | | (0.06) | | | (0.10) | | | (0.08) | | | (0.02) | | |
| Consumer: | Consumer: | | | Consumer: | | |
Residential mortgage | Residential mortgage | | (0.03) | | | (0.02) | | | 0.04 | | | (0.01) | | | 0.08 | | | Residential mortgage | | — | | | (0.02) | | | 0.01 | | | (0.02) | | | (0.03) | | |
Residential home equity and direct | | 0.61 | | | 0.49 | | | 0.49 | | | 0.59 | | | 0.58 | | | |
Home equity | | Home equity | | (0.15) | | | (0.01) | | | (0.13) | | | (0.17) | | | (0.12) | | |
Indirect auto | Indirect auto | | 1.23 | | | 1.01 | | | 0.75 | | | 0.63 | | | 1.28 | | | Indirect auto | | 1.47 | | | 1.52 | | | 1.15 | | | 0.77 | | | 1.23 | | |
Indirect other | | 0.48 | | | 0.39 | | | 0.26 | | | 0.17 | | | 0.39 | | | |
Other consumer | | Other consumer | | 1.29 | | | 1.11 | | | 1.31 | | | 1.27 | | | 0.87 | | |
Student | Student | | 0.33 | | | 0.65 | | | 0.31 | | | 0.16 | | | 0.16 | | | Student | | 0.42 | | | 0.34 | | | 0.40 | | | 0.30 | | | 0.33 | | |
Credit card | Credit card | | 2.77 | | | 2.31 | | | 1.90 | | | 2.75 | | | 2.74 | | | Credit card | | 3.54 | | | 3.68 | | | 2.80 | | | 2.63 | | | 2.77 | | |
Total | Total | | 0.25 | | | 0.25 | | | 0.19 | | | 0.20 | | | 0.33 | | | Total | | 0.37 | | | 0.34 | | | 0.27 | | | 0.22 | | | 0.25 | | |
| Ratio of ALLL to net charge-offs | Ratio of ALLL to net charge-offs | | 5.78x | | 6.14x | | 8.79x | | 8.98x | | 5.87x | | Ratio of ALLL to net charge-offs | | 3.7x | | 4.1x | | 5.0x | | 6.5x | | 5.8x | |
Ratios are annualized, as applicable.
48 Truist Financial Corporation
The following table presents activity related to NPAs: | Table 10: Rollforward of NPAs | Table 10: Rollforward of NPAs | | Table 10: Rollforward of NPAs | |
(Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | (Dollars in millions) | | 2023 | | 2022 | |
Balance, January 1 | Balance, January 1 | | $ | 1,163 | | | $ | 1,387 | | | Balance, January 1 | | $ | 1,250 | | | $ | 1,163 | | |
New NPAs | New NPAs | | 395 | | | 563 | | | New NPAs | | 621 | | | 395 | | |
Advances and principal increases | Advances and principal increases | | 108 | | | 102 | | | Advances and principal increases | | 214 | | | 108 | | |
Disposals of foreclosed assets (1) | Disposals of foreclosed assets (1) | | (112) | | | (112) | | | Disposals of foreclosed assets(1) | | (147) | | | (112) | | |
Disposals of NPLs (2) | Disposals of NPLs (2) | | (37) | | | (41) | | | Disposals of NPLs(2) | | (3) | | | (37) | | |
Charge-offs and losses | Charge-offs and losses | | (115) | | | (112) | | | Charge-offs and losses | | (204) | | | (115) | | |
Payments | Payments | | (180) | | | (300) | | | Payments | | (306) | | | (180) | | |
Transfers to performing status | Transfers to performing status | | (101) | | | (183) | | | Transfers to performing status | | (160) | | | (101) | | |
Other, net | Other, net | | 14 | | | (5) | | | Other, net | | (4) | | | 14 | | |
Ending balance, March 31 | Ending balance, March 31 | | $ | 1,135 | | | $ | 1,299 | | | Ending balance, March 31 | | $ | 1,261 | | | $ | 1,135 | | |
(1)Includes charge-offs and losses recorded upon sale of $29$42 million and $46$29 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
(2)Includes gains, net of charge-offs recorded upon sale of $5 million and charge-offs and losses recorded upon sale of $3 million and $5 million for the three months ended March 31, 20222023 and 2021,2022, 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. For loan modification programs in response to the COVID-19 pandemic, Truist applied the relief from TDR accounting described in the CARES Act. Payment relief assistance provided by Truist includes forbearance, deferrals, extension, and re-aging programs, along with certain other modification strategies. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for the policies related to TDRs and COVID-19 loan modifications. The following table provides a summary of performing TDR activity: | | | | | | | | | | | | | | | |
Table 11: Rollforward of Performing TDRs | |
(Dollars in millions) | | 2022 | | 2021 | |
Balance, January 1 | | $ | 1,390 | | | $ | 1,361 | | |
Inflows | | 306 | | | 294 | | |
Payments and payoffs (1) | | (60) | | | (57) | | |
Charge-offs | | (9) | | | (13) | | |
Transfers to nonperforming TDRs (2) | | (19) | | | (13) | | |
Removal due to the passage of time | | (71) | | | (7) | | |
Non-concessionary re-modifications | | (1) | | | (12) | | |
| | | | | |
| | | | | |
Transferred to LHFS, sold and other | | (21) | | | (14) | | |
Balance, March 31 | | $ | 1,515 | | | $ | 1,539 | | |
| | | | | |
(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.
50 Truist Financial Corporation 49
CRE and Commercial Construction
The following table provides further details regarding
Truist has noted that the
payment statusCRE and commercial construction portfolios have the potential for heightened risk in the current environment. Truist maintains a high-quality portfolio through disciplined risk management and prudent client selection. In addition, the Company’s exposure to large CRE tends to have more institutional sponsorship and the Company has reduced exposure to smaller CRE. Truist’s CRE and commercial construction portfolios was $28.6 billion as of
TDRs outstanding at March 31,
2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 12: Payment Status of TDRs (1) |
March 31, 2022 (Dollars in millions) | Current | | Past Due 30-89 Days | | Past Due 90 Days Or More | | Total |
Performing TDRs: | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 102 | | | 98.1 | % | | $ | 2 | | | 1.9 | % | | $ | — | | | — | % | | $ | 104 | |
CRE | 5 | | | 100.0 | | | — | | | — | | | — | | | — | | | 5 | |
Commercial construction | 1 | | | 100.0 | | | — | | | — | | | — | | | — | | | 1 | |
| | | | | | | | | | | | | |
Consumer: | | | | | | | | | | | | | |
Residential mortgage - government guaranteed | 290 | | | 46.6 | | | 58 | | | 9.3 | | | 274 | | | 44.1 | | | 622 | |
Residential mortgage - nonguaranteed | 210 | | | 86.1 | | | 25 | | | 10.2 | | | 9 | | | 3.7 | | | 244 | |
Residential home equity and direct | 85 | | | 93.4 | | | 6 | | | 6.6 | | | — | | | — | | | 91 | |
Indirect auto | 336 | | | 85.7 | | | 56 | | | 14.3 | | | — | | | — | | | 392 | |
Indirect other | 5 | | | 83.3 | | | 1 | | | 16.7 | | | — | | | — | | | 6 | |
| | | | | | | | | | | | | |
Student - nonguaranteed | 22 | | | 88.0 | | | 2 | | | 8.0 | | | 1 | | | 4.0 | | | 25 | |
Credit card | 22 | | | 88.0 | | | 2 | | | 8.0 | | | 1 | | | 4.0 | | | 25 | |
Total performing TDRs | 1,078 | | | 71.2 | | | 152 | | | 10.0 | | | 285 | | | 18.8 | | | 1,515 | |
Nonperforming TDRs | 57 | | | 30.2 | | | 24 | | | 12.7 | | | 108 | | | 57.1 | | | 189 | |
Total TDRs | $ | 1,135 | | | 66.6 | | | $ | 176 | | | 10.3 | | | $ | 393 | | | 23.1 | | | $ | 1,704 | |
2023. (1)
Past due performing TDRs are included
Our office portfolio, which makes up approximately 18% of total CRE and commercial construction loans, is weighted towards Class A properties as of March 31, 2023. Nonperforming loans and criticized loans in past due disclosuresthis portfolio have trended higher in recent months.
| | | | | | | | | | | | | | | | | | | | | | | |
Table 11: CRE and Commercial Construction by Type | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
(Dollars in millions) | LHFI | | NPL | | LHFI | | NPL |
CRE and commercial construction: | | | | | | | |
Multifamily | $ | 8,085 | | | $ | 2 | | | $ | 7,762 | | | $ | — | |
Office | 5,151 | | | 109 | | | 5,258 | | | 75 | |
Retail | 4,582 | | | 3 | | | 4,668 | | | 2 | |
Industrial | 4,550 | | | — | | | 4,329 | | | — | |
Hotel | 2,827 | | | — | | | 2,965 | | | — | |
Other | 3,426 | | | 4 | | | 3,543 | | | 5 | |
Total | $ | 28,621 | | | $ | 118 | | | $ | 28,525 | | | $ | 82 | |
| | | | | | | |
| | | | | | | |
See additional information on the CRE and nonperforming TDRs are includedcommercial construction portfolios in NPL disclosures.“Note 5. Loans and ACL,” including loans by origination year and credit quality indicator.
50 Truist Financial Corporation 51
ACL
Activity related to the ACL is presented in the following tables: | Table 13: Activity in ACL | | |
For the Three Months Ended (Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | | |
Balance, beginning of period | $ | 4,695 | | | $ | 4,978 | | | $ | 5,436 | | | $ | 6,011 | | | $ | 6,199 | | | |
Table 12: Activity in ACL | | Table 12: Activity in ACL | |
| | | For the Three Months Ended | |
(Dollars in millions) | | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 | |
Balance, beginning of period(1) | | Balance, beginning of period(1) | $ | 4,649 | | | $ | 4,455 | | | $ | 4,434 | | | $ | 4,423 | | | $ | 4,695 | | |
| Provision for credit losses | Provision for credit losses | (95) | | | (103) | | | (324) | | | (434) | | | 48 | | | Provision for credit losses | 482 | | | 467 | | | 234 | | | 171 | | | (95) | | |
| Charge-offs: | Charge-offs: | | | | | | | | | | | Charge-offs: | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | (31) | | | (54) | | | (57) | | | (53) | | | (79) | | | Commercial and industrial | (75) | | | (44) | | | (51) | | | (17) | | | (31) | | |
CRE | CRE | (1) | | | (5) | | | (1) | | | — | | | (4) | | | CRE | (6) | | | (11) | | | — | | | (1) | | | (1) | | |
Commercial construction | Commercial construction | (1) | | | — | | | — | | | — | | | (2) | | | Commercial construction | — | | | — | | | — | | | — | | | (1) | | |
| Residential mortgage | Residential mortgage | (2) | | | (1) | | | (7) | | | (4) | | | (11) | | | Residential mortgage | (1) | | | (1) | | | (4) | | | (2) | | | (2) | | |
Residential home equity and direct | (58) | | | (51) | | | (51) | | | (57) | | | (55) | | | |
Home equity | | Home equity | (2) | | | (6) | | | (3) | | | (3) | | | (1) | | |
Indirect auto | Indirect auto | (102) | | | (89) | | | (73) | | | (69) | | | (105) | | | Indirect auto | (127) | | | (129) | | | (103) | | | (77) | | | (102) | | |
Indirect other | (19) | | | (16) | | | (13) | | | (11) | | | (17) | | | |
Other consumer | | Other consumer | (105) | | | (96) | | | (109) | | | (100) | | | (76) | | |
Student | Student | (6) | | | (12) | | | (6) | | | (3) | | | (3) | | | Student | (5) | | | (5) | | | (7) | | | (4) | | | (6) | | |
Credit card | Credit card | (41) | | | (37) | | | (31) | | | (42) | | | (40) | | | Credit card | (51) | | | (53) | | | (42) | | | (40) | | | (41) | | |
| Total charge-offs | Total charge-offs | (261) | | | (265) | | | (239) | | | (239) | | | (316) | | | Total charge-offs | (372) | | | (345) | | | (319) | | | (244) | | | (261) | | |
Recoveries: | Recoveries: | | | | | | | | | | | Recoveries: | | | | | | | | | | |
Commercial and industrial | Commercial and industrial | 17 | | | 23 | | | 42 | | | 23 | | | 19 | | | Commercial and industrial | 13 | | | 14 | | | 43 | | | 13 | | | 17 | | |
CRE | CRE | 1 | | | — | | | 1 | | | 4 | | | 1 | | | CRE | 1 | | | 1 | | | — | | | 6 | | | 1 | | |
Commercial construction | Commercial construction | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | Commercial construction | 1 | | | 1 | | | 2 | | | 1 | | | 1 | | |
| Residential mortgage | Residential mortgage | 6 | | | 2 | | | 3 | | | 5 | | | 2 | | | Residential mortgage | 2 | | | 3 | | | 3 | | | 4 | | | 6 | | |
Residential home equity and direct | 20 | | | 21 | | | 20 | | | 20 | | | 18 | | | |
Home equity | | Home equity | 6 | | | 6 | | | 8 | | | 6 | | | 5 | | |
Indirect auto | Indirect auto | 23 | | | 21 | | | 22 | | | 27 | | | 22 | | | Indirect auto | 26 | | | 21 | | | 21 | | | 26 | | | 23 | | |
Indirect other | 6 | | | 6 | | | 5 | | | 7 | | | 6 | | | |
Other consumer | | Other consumer | 17 | | | 17 | | | 21 | | | 20 | | | 21 | | |
Student | Student | — | | | — | | | 1 | | | — | | | — | | | Student | — | | | 1 | | | — | | | — | | | — | | |
Credit card | Credit card | 9 | | | 9 | | | 9 | | | 10 | | | 9 | | | Credit card | 9 | | | 8 | | | 8 | | | 9 | | | 9 | | |
Total recoveries | Total recoveries | 83 | | | 83 | | | 104 | | | 97 | | | 78 | | | Total recoveries | 75 | | | 72 | | | 106 | | | 85 | | | 83 | | |
Net charge-offs | Net charge-offs | (178) | | | (182) | | | (135) | | | (142) | | | (238) | | | Net charge-offs | (297) | | | (273) | | | (213) | | | (159) | | | (178) | | |
Other | 1 | | | 2 | | | 1 | | | 1 | | | 2 | | | |
Other(2) | | Other(2) | (73) | | | — | | | — | | | (1) | | | 1 | | |
Balance, end of period | Balance, end of period | $ | 4,423 | | | $ | 4,695 | | | $ | 4,978 | | | $ | 5,436 | | | $ | 6,011 | | | Balance, end of period | $ | 4,761 | | | $ | 4,649 | | | $ | 4,455 | | | $ | 4,434 | | | $ | 4,423 | | |
| ACL: | | | |
| ACL:(1) | | ACL:(1) | | |
ALLL | ALLL | $ | 4,170 | | | $ | 4,435 | | | $ | 4,702 | | | $ | 5,121 | | | $ | 5,662 | | | ALLL | $ | 4,479 | | | $ | 4,377 | | | $ | 4,205 | | | $ | 4,187 | | | $ | 4,170 | | |
RUFC | RUFC | 253 | | | 260 | | | 276 | | | 315 | | | 349 | | | RUFC | 282 | | | 272 | | | 250 | | | 247 | | | 253 | | |
Total ACL | Total ACL | $ | 4,423 | | | $ | 4,695 | | | $ | 4,978 | | | $ | 5,436 | | | $ | 6,011 | | | Total ACL | $ | 4,761 | | | $ | 4,649 | | | $ | 4,455 | | | $ | 4,434 | | | $ | 4,423 | | |
(1)Excludes provision for credit losses and allowances related to other financial assets at amortized cost.
(2)The first quarter of 2023 includes the impact from the adoption of the Troubled Debt Restructurings and Vintage Disclosures accounting standard.
Net charge-offs during the first quarter totaled $178 million, or 0.25% as a percentage of average loans, and was stable compared to the prior quarter.
The allowance for credit losses was $4.4$4.8 billion and includes $4.2$4.5 billion for the allowance for loan and lease losses and $253$282 million for the reserve for unfunded commitments. The ALLL ratio was 1.44%1.37%, up three basis points compared to 1.53% atwith December 31, 2021. The decrease reflects a continued favorable credit environment tempered by uncertainty associated with inflation, supply chain disruption, rising rates, and geopolitical events.2022 primarily due to increased economic uncertainty. The ALLL covered nonperforming loans and leases held for investment 3.99X3.8X compared to 4.07X3.7X at December 31, 2021.2022. At March 31, 2022,2023, the ALLL was 5.78X3.7X annualized net charge-offs, compared to 6.14X4.1X at December 31, 2021.2022.
52 Truist Financial Corporation 51
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 14: Allocation of ALLL by Category | |
| March 31, 2022 | | December 31, 2021 | |
Table 13: Allocation of ALLL by Category | | Table 13: Allocation of ALLL by Category |
| | | March 31, 2023 | | December 31, 2022 |
(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 | $ | 1,319 | | | 31.6 | % | | 48.6 | % | | $ | 1,426 | | | 32.2 | % | | 47.9 | % | Commercial and industrial | $ | 1,497 | | | 33.5 | % | | 51.1 | % | | $ | 1,409 | | | 32.3 | % | | 50.3 | % |
CRE | CRE | 283 | | | 6.8 | | | 7.9 | | | 350 | | | 7.9 | | | 8.3 | | CRE | 251 | | | 5.6 | | | 6.9 | | | 224 | | | 5.1 | | | 7.0 | |
Commercial construction | Commercial construction | 53 | | | 1.3 | | | 1.8 | | | 52 | | | 1.2 | | | 1.7 | | Commercial construction | 87 | | | 1.9 | | | 1.8 | | | 46 | | | 1.1 | | | 1.8 | |
| Residential mortgage | Residential mortgage | 310 | | | 7.4 | | | 16.6 | | | 308 | | | 6.9 | | | 16.5 | | Residential mortgage | 332 | | | 7.4 | | | 17.2 | | | 399 | | | 9.1 | | | 17.4 | |
Residential home equity and direct | 574 | | | 13.8 | | | 8.6 | | | 615 | | | 13.9 | | | 8.7 | | |
Home equity | | Home equity | 87 | | | 1.9 | | | 3.2 | | | 90 | | | 2.0 | | | 3.3 | |
Indirect auto | Indirect auto | 957 | | | 22.9 | | | 8.9 | | | 1,022 | | | 23.0 | | | 9.1 | | Indirect auto | 993 | | | 22.2 | | | 8.3 | | | 981 | | | 22.4 | | | 8.6 | |
Indirect other | 211 | | | 5.1 | | | 3.8 | | | 195 | | | 4.4 | | | 3.8 | | |
Other consumer | | Other consumer | 779 | | | 17.4 | | | 8.5 | | | 770 | | | 17.6 | | | 8.5 | |
Student | Student | 115 | | | 2.8 | | | 2.2 | | | 117 | | | 2.6 | | | 2.3 | | Student | 98 | | | 2.2 | | | 1.5 | | | 98 | | | 2.2 | | | 1.6 | |
Credit card | Credit card | 348 | | | 8.3 | | | 1.6 | | | 350 | | | 7.9 | | | 1.7 | | Credit card | 355 | | | 7.9 | | | 1.5 | | | 360 | | | 8.2 | | | 1.5 | |
Total ALLL | Total ALLL | 4,170 | | | 100.0 | % | | 100.0 | % | | 4,435 | | | 100.0 | % | | 100.0 | % | Total ALLL | 4,479 | | | 100.0 | % | | 100.0 | % | | 4,377 | | | 100.0 | % | | 100.0 | % |
RUFC | RUFC | 253 | | | | | 260 | | | | RUFC | 282 | | | | | 272 | | | |
Total ACL | Total ACL | $ | 4,423 | | | | | $ | 4,695 | | | | Total ACL | $ | 4,761 | | | | | $ | 4,649 | | | |
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 March 31, 2022,2023, Truist held or serviced the first lien on 32% of its second lien positions.
Other Assets
The components of other assets are presented in the following table: | Table 15: Other Assets as of Period End | | | |
Table 14: Other Assets as of Period End | | Table 14: Other Assets as of Period End | | |
(Dollars in millions) | (Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 | | (Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 | |
| Bank-owned life insurance | Bank-owned life insurance | $ | 7,545 | | | $ | 7,281 | | | Bank-owned life insurance | $ | 7,651 | | | $ | 7,618 | | |
Tax credit and other private equity investments | Tax credit and other private equity investments | 6,352 | | | 6,309 | | | Tax credit and other private equity investments | 6,730 | | | 6,825 | | |
Prepaid pension assets | Prepaid pension assets | 6,348 | | | 5,938 | | | Prepaid pension assets | 5,885 | | | 4,539 | | |
Derivative assets | 2,113 | | | 2,370 | | | |
DTAs | | DTAs | 2,393 | | | 3,027 | | |
Accounts receivable | Accounts receivable | 2,323 | | | 2,244 | | | Accounts receivable | 2,763 | | | 2,682 | | |
Accrued income | | Accrued income | 2,429 | | | 2,265 | | |
Leased assets and related assets | Leased assets and related assets | 2,162 | | | 2,092 | | | Leased assets and related assets | 2,059 | | | 2,082 | | |
Accrued income | 1,875 | | | 1,791 | | | |
FHLB stock | | FHLB stock | 2,426 | | | 1,279 | | |
ROU assets | ROU assets | 1,126 | | | 1,168 | | | ROU assets | 1,151 | | | 1,193 | | |
Prepaid expenses | Prepaid expenses | 1,174 | | | 1,152 | | | Prepaid expenses | 1,177 | | | 1,162 | | |
Equity securities at fair value | Equity securities at fair value | 1,024 | | | 1,066 | | | Equity securities at fair value | 857 | | | 898 | | |
| Derivative assets | | Derivative assets | 692 | | | 684 | | |
Other | Other | 1,428 | | | 738 | | | Other | 792 | | | 874 | | |
Total other assets | Total other assets | $ | 33,470 | | | $ | 32,149 | | | Total other assets | $ | 37,005 | | | $ | 35,128 | | |
|
Truist Financial Corporation 53
Funding Activities
Deposits
The following table presents average deposits: | Table 16: Average Deposits | |
Table 15: Average Deposits | | Table 15: Average Deposits |
Three Months Ended (Dollars in millions) | Three Months Ended (Dollars in millions) | | Mar 31, 2022 | | Dec 31, 2021 | | Sep 30, 2021 | | Jun 30, 2021 | | Mar 31, 2021 | Three Months Ended (Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 | | Sep 30, 2022 | | Jun 30, 2022 | | Mar 31, 2022 |
Noninterest-bearing deposits | Noninterest-bearing deposits | | $ | 145,933 | | | $ | 146,492 | | | $ | 141,738 | | | $ | 137,892 | | | $ | 128,579 | | Noninterest-bearing deposits | | $ | 131,099 | | | $ | 141,032 | | | $ | 146,041 | | | $ | 148,610 | | | $ | 145,933 | |
Interest checking | Interest checking | | 112,159 | | | 110,506 | | | 107,802 | | | 106,121 | | | 104,744 | | Interest checking | | 108,886 | | | 110,001 | | | 111,645 | | | 112,375 | | | 112,159 | |
Money market and savings | Money market and savings | | 141,500 | | | 137,676 | | | 136,094 | | | 134,029 | | | 129,303 | | Money market and savings | | 139,802 | | | 144,730 | | | 147,659 | | | 148,632 | | | 141,500 | |
Time deposits | Time deposits | | 15,646 | | | 16,292 | | | 17,094 | | | 18,213 | | | 20,559 | | Time deposits | | 28,671 | | | 17,513 | | | 14,751 | | | 14,133 | | | 15,646 | |
| Total average deposits | Total average deposits | | $ | 415,238 | | | $ | 410,966 | | | $ | 402,728 | | | $ | 396,255 | | | $ | 383,185 | | Total average deposits | | $ | 408,458 | | | $ | 413,276 | | | $ | 420,096 | | | $ | 423,750 | | | $ | 415,238 | |
52 Truist Financial Corporation
Average deposits for the first quarter of 20222023 were $415.2$408.5 billion, an increasea decrease of $4.3$4.8 billion, or 1.0%1.2%, compared to the prior quarter. The decrease in deposits was primarily driven by the impacts of monetary tightening and higher-rate alternatives.
Average noninterest bearingnoninterest-bearing deposits declined 0.4%decreased 7.0% compared to the prior quarter and represented 35.1%32.1% of total deposits for the first quarter of 2022,2023 compared to 35.6%34.1% for the priorfourth quarter of 2022 and 35.1% compared to the year ago quarter. Noninterest-bearing deposits declined primarily due to clients seeking high-rate alternatives. Average interest checking and money market and savings grew 1.5% and 2.8%interest checking declined 3.4% and 1.0%, respectively, compared to the prior quarter. Average time deposits decreased 4.0% primarilyincreased 64% due to an increase in wholesale funding and retail-client time deposits.
Truist has a very granular and relationship-based deposit franchise. Approximately 63% of deposits are insured or collateralized. Truist deposit accounts are typically based on long-term relationships and include multiple products and services. Truist has strong market share in many of the maturityfastest-growing markets in the United States. Truist currently ranks 1st, 2nd, or 3rd in deposit share in 17 of our top 20 markets, including Atlanta, Charlotte, DC, Miami, Tampa, Orlando, and Raleigh-Durham, among others. Truist’s commercial deposits are diversified across 21 industry groups, with no one sector representing more than 10% of Corporate and Commercial Banking deposits.
The estimated amount of deposits that are uninsured was $175.9 billion and $189.6 billion as of March 31, 2023 and December 31, 2022, respectively, calculated using the same methodology as the Call Report for Truist Bank. The decrease in uninsured deposits was largely due to commercial clients that chose to diversify into money market mutual funds or across multiple banks. These outflows were primarily higher-cost, accounts.non-operational deposits.
Borrowings
At March 31, 2022,2023, short-term borrowings totaled $5.1$23.7 billion, a decreasean increase of $145$256 million compared to December 31, 2021.2022. Average short-term borrowings were $6.9$24.1 billion, or 1.5%5.0% of total funding, for the first quarter of 2022,three months ended March 31, 2023, as compared to $6.7$6.9 billion, or 1.6%1.5%, for the same period in the prior year.
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 $33.8$69.9 billion at March 31, 2022, a decrease2023, an increase of $2.1$26.7 billion compared to December 31, 2021.2022. This funding increase was largely to increase our cash position in response to market events. During 2022,the three months ended March 31, 2023, the Company had $1.4had:
•Maturities and redemptions of $3.5 billion of senior notes.
•Issued $1.5 billion fixed-to-floating rate senior notes with an interest rate of 4.87% due January 26, 2029 and $300 million$1.5 billion fixed-to-floating rate senior notes with an interest rate of subordinated long-term debt redemptions.5.12% due January 26, 2034.
•Issued $27.0 billion notional, net, of prepayable FHLB floating rate advances represented 2.5%with interest rates of total outstanding long-term debt at5.05% to 5.07% due April 10, 2024 to March 31, 2022, compared to 2.4% at December 31, 2021. 13, 2025.
The average cost of long-term debt was 1.50%4.05% for the three months ended March 31, 2022, down seven2023, up 255 basis points compared to the same period in 2021.
In April 2022, Truist redeemed $800 million of FHLB advances, which resulted in a gain on early extinguishment of long-term debt of $39 million. Additionally, Truist redeemed $1.4 billion of fixed rate senior notes and $650 million of floating rate senior notes that were due in May 2022.
54 Truist Financial Corporation
Shareholders’ Equity
Truist’s book value per common share and TBVPS are presented in the following table: | | | | | | | | | | | | | | |
Table 16: Book Value per Common Share |
(Dollars in millions, except per share data, shares in thousands) | | Mar 31, 2023 | | Dec 31, 2022 |
Common equity per common share | | $ | 41.82 | | | $ | 40.58 | |
Non-GAAP capital measure:(1) | | | | |
Tangible common equity per common share | | $ | 19.45 | | | $ | 18.04 | |
Calculation of tangible common equity:(1) | | | | |
Total shareholders’ equity | | $ | 62,394 | | | $ | 60,537 | |
Less: | | | | |
Preferred stock | | 6,673 | | | 6,673 | |
Noncontrolling interests | | 22 | | | 23 | |
Goodwill and intangible assets, net of deferred taxes | | 29,788 | | | 29,908 | |
Tangible common equity | | $ | 25,911 | | | $ | 23,933 | |
| | | | |
Common shares outstanding at end of period | | 1,331,918 | | | 1,326,829 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
(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 profitability, returns relative to balance sheet risk, and shareholder value.
Total shareholders’ equity was $65.0$62.4 billion at March 31, 2022, a decrease2023, an increase of $4.2$1.9 billion from December 31, 2021.2022. This decreaseincrease includes a decrease of $4.9$1.5 billion in AOCI, $725 millionnet income and a $1.0 billion increase in dividends,AOCI, partially offset by $1.4 billion$794 million in net income.common and preferred dividends. Truist’s book value per common share at March 31, 20222023 was $43.82,$41.82, compared to $47.14$40.58 at December 31, 2021.2022. Truist TBVPS of $19.45 at March 31, 2023, increased 7.8% compared to December 31, 2022 due to increases in AOCI, primarily related to AFS securities, and retained earnings.
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 taxonomyframework 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 conversationsmeasurement and monitoring 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 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 aTruist’s compensation plans are designed to consider 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 employs a comprehensive change management program to manage the residual risks associated with integrating heritage BB&T and heritage SunTrust. While integration activities are largely complete, the Board and Executive Leadership oversee the change management program, which is designed to ensure appropriate oversight of application and data center decommissioning and residual integration activities, achieved through Truist’s risk management process.
Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 20212022 for additional disclosures under the section titled “Risk Management.”
Truist Financial Corporation 53
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.
Truist Financial Corporation 55
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 from assets, liabilities, and 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. 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, 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 deposit beta assumptions to non-maturity interest-bearing deposit accounts that are not contractually tied to an index 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. The deposit beta assumptions are reduced when interest rates are exceptionally low and competition for interest-bearing deposits is commensurately low. 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. Truist applies an average deposit beta of approximately 25% for the first 100 basis point increase in the Federal funds50% to its non-maturity interest-bearing accounts when determining its interest rate approximately 35% for the second 100 basis point increase, and approximately 50% for any additional increases.sensitivity. 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.
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 17: 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 | |
| Mar 31, 2022 | | Mar 31, 2021 | | Mar 31, 2022 | | Mar 31, 2021 | | Mar 31, 2023 | | Mar 31, 2022 | | Mar 31, 2023 | | Mar 31, 2022 |
Up 100 | Up 100 | | 4.50 | % | | 4.25 | % | | 4.27 | % | | 3.74 | % | Up 100 | | 9.00 | % | | 4.50 | % | | (0.29) | % | | 4.27 | % |
Up 50 | Up 50 | | 4.00 | | | 3.75 | | | 3.29 | | | 2.92 | | Up 50 | | 8.50 | | | 4.00 | | | (0.11) | | | 3.29 | |
No Change | No Change | | 3.50 | | | 3.25 | | | — | | | — | | No Change | | 8.00 | | | 3.50 | | | — | | | — | |
Down 25 (1) | | 3.25 | | | 3.00 | | | (2.48) | | | (1.32) | | |
Down 50 (1) | Down 50 (1) | | 3.00 | | | 2.75 | | | (3.46) | | | (1.75) | | Down 50(1) | | 7.50 | | | 3.00 | | | (0.58) | | | (3.46) | |
Down 100(1) | | Down 100(1) | | 7.00 | | | 2.50 | | | (0.70) | | | (3.64) | |
(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 a change tohigher starting rates, higher deposit betas as rates increase and move into the Company’s deposithighest beta assumptions, partially offset by an increase intiers, and the investment securities portfolio.
54 Truist Financial Corporation
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 beenwas very strong during the current economic cycle. Much of this liquidity increase haspost-COVID-19, which resulted in growth in noninterest-bearing demand deposits. ConsistentHowever, with the industry, Truist has seen a significant increase in this funding source. The behaviorrates in 2022 and the first quarter of these2023, noninterest-bearing deposits have begun to shift to interest-bearing accounts. Additional movement above what 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 futurecurrently projected would reduce the asset sensitivity of Truist’s balance sheet because the Company may increase interest-bearing funds to offset the loss of thisthese advantageous funding source.noninterest-bearing deposits. 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 behavior of these noninterest-bearing deposits is one of the most important assumptions used in determining the interest rate risk position of Truist.
56 Truist Financial Corporation
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 18: 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 March 31, 2022 (1) | | Results Assuming a Decrease in Noninterest-Bearing Demand Deposits | Gradual Change in Rates (bps) | | Base Scenario at March 31, 2023(1) | | Results Assuming a Decrease in Noninterest-Bearing Demand Deposits |
| td0 Billion | | $40 Billion | | td0 Billion | | $40 Billion |
Up 100 | Up 100 | | 4.27 | % | | 3.45 | % | | 2.63 | % | Up 100 | | (0.29) | % | | (1.01) | % | | (1.72) | % |
Up 50 | Up 50 | | 3.29 | | | 2.69 | | | 2.10 | | Up 50 | | (0.11) | | | (0.63) | | | (1.15) | |
(1)The base scenario is equal to the annualized hypothetical percentage change in net interest income at March 31, 20222023 as presented in the preceding table.
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. Truist has utilized derivatives to facilitate transactions on behalf of its clients and as part of associated hedging activities. As of March 31, 2022,2023, Truist had derivative financial instruments outstanding with notional amounts totaling $320.5 billion, with an associated net fair value of $631 million.$363.0 billion. See “Note 16. Derivative Financial Instruments” for additional disclosures.
LIBOR Transition
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, ceased publication at December 31, 2021, based on the October 20, 2021 interagency Joint Statement on Managing the LIBOR 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 or multiple indices and provides updates to Executive Leadership and the Board. As of March 31, 2022,2023, Truist had outstanding LIBOR-based instruments that mature after June 30, 2023, including:including loan and lease exposures totaling approximately $159$98 billion, notional derivative exposure totaling approximately $135$131 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 has largely been reviewed and certain contracts will require amendments to support the transition away from LIBOR. For impactedImpacted lines of business the Company hashave started remediating these contracts to include standardized fallback language.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, where appropriate.which will transition loans to a SOFR based rate after June 30, 2023.
The progress and approach to remediation will varyvaries 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 requirerequired client outreach and remediation. Through mid-2022, the Company’s primary focus was supporting new loan production using SOFR and other alternative reference rates as well as transitioning any renewing LIBOR based contracts to alternative reference rates. Efforts have shifted to amend and remediate contracts, excluding mortgage and student loans, that mature post June 30, 2023 ($14890 billion), which will continue to be the focus during 2023. Of the contracts remaining on LIBOR that have not yet been remediated or modified to a new reference rate, Truist’s intends to add updated fallback language or move these contracts to new reference rates prior to cessation. A significant portion of these contracts contain existing fallback language that will transition the contract to a Prime based rate if not remediated, while a smaller population contains no historical fallback language. Should the institution be unable to remediate all contracts, those based on Prime will be accelerated in 2022.prioritized to provide a more consistent client experience with the “hardwired fallback” transition to SOFR. If there are remaining contracts without fallback language, Truist has determined that adjustable ratemay leverage the LIBOR Act and corresponding safe harbor provision to transition these loans to SOFR.
Truist’s adjustable-rate mortgage products ($4.03.4 billion) have consistent and adequate fallback language to transition away from LIBOR in line with industry expectations; therefore, these contracts willdo not require remediation. Remediation of student loans ($5.84.4 billion) will depend onfollow recent 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,” including SOFRin the private student loan portfolio, where LIBOR is used directly. Based on the recent guidance, these portfolios will transition to rates based on SOFR.
Upon the discontinuation of LIBOR, derivatives that reference LIBOR will transition to a SOFR-based replacement rate as set forth in the ISDA protocol addressing LIBOR fallbacks through bilateral amendments, or Prime.as established under the LIBOR Act and rules promulgated thereunder by the FRB. Certain derivatives without a clearly defined or practicable replacement benchmark rate will use the recent Federal legislationLIBOR Act to replace LIBOR with a SOFR-based rate that will be established by FRB rulemaking.rulemaking and follow 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.language and have not yet been remediated, providing a remediation path to a SOFR based rate.
Truist Financial Corporation 5557
In addition, the transition from LIBOR to an alternative reference rate, such as SOFR, for the Company’s preferred stock and the Company’s and Truist Bank’s floating rate notes is dependent on a number of factors, including the fallback language for the applicable series of preferred stock or notes, the application of the LIBOR Act and the rules promulgated thereunder by the FRB, determinations to be made by third-party calculation or paying agents rather than the Company or Truist Bank as to the replacement rates, and the impact of any publication of a synthetic U.S. dollar LIBOR as currently proposed by the Financial Conduct Authority. With the most recent information available on these factors, Truist expects preferred stock issuances to utilize LIBOR to transition to SOFR. See “Note 12. Shareholders’ Equity” for information about preferred stock using LIBOR.
Training has been provided for impacted teammates and will continue during 2022.2023. 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 to support the transition.
As of December 31, 2021, Truist ceased entering into new contracts with a LIBOR reference rate for all product offerings, except on a limited basis, as permissible. Market risks associated with this change are dependent on the alternative reference rates available and market conditions as of the transition. The Company is actively using SOFR as a reference rate and has originated approximately $30$124 billion of loans, issued $5$12.4 billion of long-term debt,senior and subordinated notes, including fixed rate notes that convert to SOFR in the future, and has $50$108 billion in notional derivative exposure using this alternative reference rate as of March 31, 2022.2023. 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 2022.2022 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 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, 2021.2022.
Market riskRisk from trading activitiesTrading 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.
Securitizations
As of March 31, 2022,2023, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule was $33$18 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 March 31, 2022.
2023.
5658 Truist Financial Corporation
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 ended March 31, 20222023 and 2021.2022. Average one and ten dayten-day VaR measures declinedfor the year ended March 31, 2023 decreased from the same period of last year, as heightenedprimarily driven by lower market volatility experienced during March 2020 aged out of the 12-month VaR look-back window. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 19: VaR-based Measures | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
| | | | | | | | | | | |
(Dollars in millions) | | | | | | | | | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period |
VaR-based Measures: | | | | | | | | | | | | | | | |
Maximum | | | | | | | | | $ | 38 | | | $ | 14 | | | $ | 68 | | | $ | 16 | |
Average | | | | | | | | | 18 | | | 6 | | | 39 | | | 10 | |
Minimum | | | | | | | | | 9 | | | 3 | | | 3 | | | 3 | |
Period-end | | | | | | | | | 15 | | | 4 | | | 5 | | | 3 | |
VaR by Risk Class: | | | | | | | | | | | | | | | |
Interest Rate Risk | | | | | | | | | | | 4 | | | | | 2 | |
Credit Spread Risk | | | | | | | | | | | 4 | | | | | 4 | |
Equity Price Risk | | | | | | | | | | | 4 | | | | | 1 | |
Foreign Exchange Risk | | | | | | | | | | | — | | | | | — | |
Portfolio Diversification | | | | | | | | | | | (8) | | | | | (5) | |
Period-end | | | | | | | | | | | 4 | | | | | 3 | |
making inventory. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 19: VaR-based Measures | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
(Dollars in millions) | | | | | | | | | 10-Day Holding Period | | 1-Day Holding Period | | 10-Day Holding Period | | 1-Day Holding Period |
VaR-based Measures: | | | | | | | | | | | | | | | |
Maximum | | | | | | | | | $ | 22 | | | $ | 9 | | | $ | 38 | | | $ | 14 | |
Average | | | | | | | | | 15 | | | 6 | | | 18 | | | 6 | |
Minimum | | | | | | | | | 10 | | | 4 | | | 9 | | | 3 | |
Period-end | | | | | | | | | 22 | | | 9 | | | 15 | | | 4 | |
VaR by Risk Class: | | | | | | | | | | | | | | | |
Interest Rate Risk | | | | | | | | | | | 8 | | | | | 4 | |
Credit Spread Risk | | | | | | | | | | | 7 | | | | | 4 | |
Equity Price Risk | | | | | | | | | | | 1 | | | | | 4 | |
| | | | | | | | | | | | | | | |
Portfolio Diversification | | | | | | | | | | | (9) | | | | | (8) | |
Period-end | | | | | | | | | | | 8 | | | | | 4 | |
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 20: Stressed VaR-based Measures - 10 Day Holding Period | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
(Dollars in millions) | | | | | 2022 | | 2021 |
Maximum | | | | | $ | 109 | | | $ | 72 | |
Average | | | | | 76 | | | 54 | |
Minimum | | | | | 59 | | | 26 | |
Period-end | | | | | 72 | | | 64 | |
| | | | | | | | | | | | | | | |
Table 20: Stressed VaR-based Measures - 10 Day Holding Period | | | | | | |
| | | Three Months Ended March 31, |
(Dollars in millions) | | | | | 2023 | | 2022 |
Maximum | | | | | $ | 77 | | | $ | 109 | |
Average | | | | | 44 | | | 76 | |
Minimum | | | | | 25 | | | 59 | |
Period-end | | | | | 31 | | | 72 | |
Compared to the prior year, stressedStressed VaR measures increased in 2022decreased primarily due to the normalization oflower market making inventory levels this year.in 2023.
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.
Truist Financial Corporation 5759
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, VaR measures briefly increased in the first quarter of 2022 due to the increase in market volatility that normalized towards the end of the quarter. Therethere were no Company-wide VaR backtesting exceptions during the twelve months ended March 31, 2022.2023. 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.
![tfc-20220331_g1.jpg](https://files.docoh.com/10-Q/0000092230-22-000057/tfc-20220331_g1.jpg)
![15708](/files/10-Q/0000092230-23-000047/tfc-20230331_g1.jpg)
Model Risk ManagementOversight
MRMMRO 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 MRMMRO 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.
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.
5860 Truist Financial Corporation
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.
Internal Liquidity Stress Testing
Liquidity stress testing is designed to ensure that Truist and Truist Bank have sufficient liquidity for a variety of institution-specific and 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 liquidity buffer is substantially the same in composition to what qualifies as HQLA under the LCR Rule.
Contingency Funding Plan
Truist has a contingency funding plan designed to ensure that liquidity sources are sufficient to meet ongoing obligations and commitments, particularly in the event of a liquidity contraction. This plan is designed to examine and 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 critical 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 requires that Truist and Truist Bank maintain an amount of eligible HQLA that is sufficient to meet its estimated total net cash outflows over 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. Truist and Truist Bank are subject to the Category III reduced LCR requirements. Truist held average weighted eligible HQLA of $83.9$87.4 billion and Truist’s average LCR was 111%113% for the three months ended March 31, 2022.2023.
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 March 31, 2022,2023, the Company was compliant with this requirement.
Sources of Funds
Management 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 stability of Truist Bank and its 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 from the capital markets through the issuance of senior or subordinated bank notes, institutional CDs, overnight and term Federal funds markets, and retail brokered CDs. Truist Bank also maintains access to secured borrowing sources including FHLB advances, repurchase agreements, and the FRB 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 FRB:
| | | | | | | | | | | |
Table 21: Selected Liquidity Sources | | |
(Dollars in millions) | Mar 31, 2023 | | Dec 31, 2022 |
Unused borrowing capacity: | | | |
FRB | $ | 53,291 | | | $ | 49,250 | |
FHLB | 24,678 | | | 20,770 | |
Available investment securities (after haircuts) | 56,626 | | | 85,401 | |
Available secured borrowing capacity | 134,595 | | | 155,421 | |
Eligible cash at the FRB | 31,544 | | | 15,556 | |
Total | $ | 166,139 | | | $ | 170,977 | |
Truist Financial Corporation 5961
| | | | | | | | | | | |
Table 21: Liquidity Sources | | |
(Dollars in millions) | Mar 31, 2022 | | Dec 31, 2021 |
Unused borrowing capacity: | | | |
FRB | $ | 51,876 | | | $ | 52,170 | |
FHLB | 45,961 | | | 49,244 | |
Available investment securities (after haircuts) | 110,327 | | | 116,600 | |
Available secured borrowing capacity | 208,164 | | | 218,014 | |
Eligible cash at the FRB | 23,060 | | | 14,714 | |
Total | $ | 231,224 | | | $ | 232,728 | |
At March 31, 2022,2023, Truist Bank’s available secured borrowing capacity represented approximately 7.43.6 times the amount of wholesale funding maturities in one-year or less. Truist additionally has the ability to increase sources of funding by pledging available investment securities without a haircut on fair value under the FRB Bank Term Funding Program.
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. See “Note 22. Parent Company Financial Information” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20212022 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 March 31, 20222023 and December 31, 2021,2022, the Parent Company had 3045 months and 3537 months, respectively, of cash on hand to satisfy projected cash outflows, and 1926 months and 1922 months, respectively, when including the payment of common stock dividends.
Credit Ratings
Credit ratings are forward-looking opinions of rating agencies as to the Company’s ability to meet its financial 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. The Company’s credit ratings are continuously monitored by the rating agencies and 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 business updates and to discuss current outlooks and trends. See Item 1A, “Risk Factors” in Truist’s Annual Report on Form 10-K for the year ended December 31, 20212022 for additional information regarding factors that influence credit ratings and potential risks that could materialize in the event of downgrade in the Company’s credit ratings.ratings: Recent changes in the Company’s credit ratings and outlooks include:
The creditOn March 31,2023, S&P Global Ratings affirmed the ratings and outlooks of Truist and Truist Bank are unchangedand revised the outlook on those ratings to “stable” from those presented“positive,” citing heightened market volatility in the Company’s 2021 Annual Reportwake of recent bank failures and, with inflation still elevated, higher uncertainty, and greater downside risk in the economic outlook. The change in outlook was part of a broader action by S&P Global Ratings whereby the “positive” outlook on Form 10-K.three other large U.S. banks was revised to “stable.”
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.
6062 Truist Financial Corporation
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,limits, which are above the regulatory “well capitalized” minimums. Management evaluateshas implemented internal stress capital ratio minimums 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.internal minimums. Breaches of minimum targetsinternal stressed minimums prompt a review of the planned capital actions included in Truist’s capital plan. | Table 22: 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 | % | | 7.0 | % | | CET1 | 4.5 | % | | NA | 6.5 | % | | 7.0 | % | |
Tier 1 capital | Tier 1 capital | 6.0 | | | 6.0 | % | | 8.0 | | | 8.5 | | | Tier 1 capital | 6.0 | | | 6.0 | % | | 8.0 | | | 8.5 | | |
Total capital | Total capital | 8.0 | | | 10.0 | | | 10.0 | | | 10.5 | | | 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 | |
|
(1)Reflects a SCB requirement of 2.5% applicable to Truist as of March 31, 2022.2023. Truist’s SCB requirement, received in the 20212022 CCAR process, is effective from October 1, 20212022 to September 30, 2022.2023. Truist will receive a new preliminary SCB requirement, to become effective October 1, 2023, following the release of CCAR 2023 results in late June 2023.
Truist’s capital ratios are presented in the following table: | | | | | | | | | | | | | | |
| | | | |
| | | | |
Table 23: Capital Ratios - Truist Financial Corporation |
| | | | |
(Dollars in millions, except per share data, shares in thousands) | | Mar 31, 2022 | | Dec 31, 2021 |
Risk-based: | | (preliminary) | | |
CET1 capital to risk-weighted assets | | 9.4 | % | | 9.6 | % |
Tier 1 capital to risk-weighted assets | | 11.0 | | | 11.3 | |
Total capital to risk-weighted assets | | 13.0 | | | 13.2 | |
Leverage ratio | | 8.6 | | | 8.7 | |
Supplementary leverage ratio | | 7.3 | | | 7.4 | |
Non-GAAP capital measure (1): | | | | |
Tangible common equity per common share | | $ | 21.87 | | | $ | 25.47 | |
Calculation of tangible common equity (1): | | | | |
Total shareholders’ equity | | $ | 65,044 | | | $ | 69,271 | |
Less: | | | | |
Preferred stock | | 6,673 | | | 6,673 | |
Noncontrolling interests | | 23 | | | — | |
Goodwill and intangible assets, net of deferred taxes | | 29,229 | | | 28,772 | |
Tangible common equity | | $ | 29,119 | | | $ | 33,826 | |
Risk-weighted assets | | $ | 397,611 | | | $ | 390,886 | |
Common shares outstanding at end of period | | 1,331,414 | | | 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. | | | | | | | | | | | | | | |
Table 23: Capital Ratios - Truist Financial Corporation |
(Dollars in millions) | | Mar 31, 2023 | | Dec 31, 2022 |
Risk-based: | | (preliminary) | | |
CET1 | | 9.1 | % | | 9.0 | % |
Tier 1 capital | | 10.6 | | | 10.5 | |
Total capital | | 12.6 | | | 12.4 | |
Leverage ratio | | 8.5 | | | 8.5 | |
Supplementary leverage ratio | | 7.3 | | | 7.3 | |
Risk-weighted assets | | $ | 436,549 | | | $ | 434,413 | |
Capital ratios remained strong compared to the regulatory requirements for well capitalized banks. ForTruist declared common dividends of $0.52 per share during the three months ended March 31, 2022, Truist paid $637 million in common stock dividends or $0.48 per share.first quarter of 2023. The dividend and total payout ratiosratio for the three months ended March 31, 2022 were 48%first quarter of 2023 was 49%. Truist did not repurchase any shares in the first quarter of 2023 outside of standard activity related to equity compensation plans.
Truist CET1 ratio was 9.4%9.1% as of March 31, 2022.2023. The 20increase since December 31, 2022 represents organic capital generation, partially offset by the CECL phase-in. Truist closed the sale of the minority stake in Truist Insurance Holdings on April 3, 2023, which adds 30 basis point decline comparedpoints and 24 basis points to the fourth quarter 2021 CET1 ratio reflectsrisk-based regulatory capital deployed through the acquisition of Kensington Vanguard National Land Services, the acquisition of certain merchant services relationships, an increase in risk-weighted assets,ratios and the impact from the phase in of the CECL transition relief.leverage ratios, respectively.
Truist Financial Corporation 61
Share Repurchase Activity
Share Repurchase Activity | Table 24: Share Repurchase Activity | Table 24: Share Repurchase Activity | Table 24: Share Repurchase Activity |
(Dollars in millions, except per share data, shares in thousands) | (Dollars in millions, except per share data, shares in thousands) | Total Shares Repurchased (1) | | Average Price Paid Per Share (2) | | Total Shares Repurchased Pursuant to Publicly-Announced Plan (3) | | Maximum Remaining Dollar Value of Shares Available for Repurchase Pursuant to Publicly-Announced Plan | (Dollars in millions, except per share data, shares in thousands) | Total Number of Shares Purchased(1) | | Average Price Paid Per Share(2) | | Total Number of Shares Purchased as part of Publicly Announced Plans(3) | | Approximate Dollar Value of Shares that may yet be Purchased Under the Plans(3) |
January 2022 | — | | | $ | — | | | — | | | $ | 2,565 | | |
February 2022 | — | | | — | | | — | | | 2,565 | | |
March 2022 | 47 | | | 58.02 | | | — | | | 2,565 | | |
January 1, 2023 to January 31, 2023 | | January 1, 2023 to January 31, 2023 | — | | | $ | — | | | — | | | $ | 4,100 | |
February 1, 2023 to February 28, 2023 | | February 1, 2023 to February 28, 2023 | 2 | | | 48.84 | | | — | | | 4,100 | |
March 1, 2023 to March 31, 2023 | | March 1, 2023 to March 31, 2023 | 31 | | | 32.10 | | | — | | | 4,100 | |
Total | Total | 47 | | | 58.02 | | | — | | | Total | 33 | | | $ | 33.09 | | | — | | |
(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, authorizing up to $2.0 billion of share repurchases beginning in the first quarter of 2021. 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 $2.6 billion remaining for share repurchases.2023.
Truist Financial Corporation 63
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. Material estimates that are particularly susceptible to significant change include the determination of the ACL; determination of fair value for securities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other intangible assets; income taxes; and pension and postretirement benefit 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, 2021.2022. 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, 2021.2022. Disclosures regarding the effects of new accounting pronouncements are included in the “Note 1. Basis of Presentation” in this report. There have been no changes to the significant accounting policies during 2022.2023.
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.
During the first quarter of 2022, Truist completed platform conversions related to its commercial, direct-to-consumer and mortgage lending portfolios, as well as platform conversions related to its deposits and payment processing systems. In connection with these activities, Truist fully integrated certain surviving applications into its general ledger accounting system. Internal controls and processes have been appropriately modified to address changes in key business applications and financial processes as a result of these implementations.
There were no other 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 March 31, 20222023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
62 Truist Financial Corporation
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, 2021.2022. 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.
64 Truist Financial Corporation
ITEM 6. EXHIBITS | | | | | | | | | | | | | | | |
| Exhibit No. | | Description | | Location |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| 3.1 | | Amended and Restated Bylaws of Truist Financial Corporation | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| 10.110.1* | | Form of Restricted Stock Unit Agreement (Senior Executive – 60/5 Retirement) for the Truist Financial Corporation 2022 Incentive Plan | | |
| 10.2 | | Letter to the Board of Directors from William H. Rogers Jr. dated, April 14, 2022, waiving certain rights under his employment agreementPlan. | | |
| 10.310.2* | | Form of Employee Restricted StockPerformance Unit Award Agreement (Senior Executive – 60/5 Retirement) for the Truist Financial Corporation 2022 Incentive PlanPlan. | | |
| 10.3* | | Form of Performance Unit Award Agreement (Senior Executive – 60/10 Retirement) for the Truist Financial Corporation 2022 Incentive Plan. | | |
| 10.4* | | Form of LTIP Award Agreement (Senior Executive – 60/5 Retirement) for the Truist Financial Corporation 2022 Incentive Plan. | | |
| 10.5* | | Form of LTIP Award Agreement (Senior Executive – 60/10 Retirement) for the Truist Financial Corporation 2022 Incentive Plan. | | |
| 10.6* | | 2023 Employment Agreement by and between Truist Insurance Holdings, Inc. and John Howard. | | |
| 11 | | Statement re computation of earnings per share. | | |
| | | | | |
| | | | | |
| | | | | |
| 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. |
| |
| * Management compensatory plan or arrangement. |
Truist Financial Corporation 6365
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) |
| | | | |
Date: | May 4, 20221, 2023 | | By: | /s/ Daryl N. BibleMichael B. Maguire |
| | | | Daryl N. BibleMichael B. Maguire |
| | | | Senior Executive Vice President and Chief Financial Officer |
| | | | (Principal Financial Officer) |
| | | | |
Date: | May 4, 20221, 2023 | | By: | /s/ Cynthia B. Powell |
| | | | Cynthia B. Powell |
| | | | Executive Vice President and Corporate Controller |
| | | | (Principal Accounting Officer) |
6466 Truist Financial Corporation