Exhibit 99.1
TRUIST FINANCIAL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On February 20, 2024, Truist Financial Corporation (the “Company” or “TFC”) entered into an Equity Interest Purchase Agreement to sell its remaining equity interests in Truist Insurance Holdings LLC (“Truist Insurance”) to an investor group led by Stone Point Capital LLC, Clayton, Dubilier & Rice, LLC and Mubadala Investment Company (the “Transaction”).
On May 6, 2024, the Company completed the Transaction, which resulted in after-tax cash proceeds to the Company of approximately $10.1 billion, reflecting certain adjustments for, and subject to further adjustments for, cash, debt and debt-like items, working capital, transaction expenses and other matters.
The following unaudited pro forma consolidated financial information and related notes are based on and should be read in conjunction with:
a. | the historical audited consolidated financial statements of the Company and the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Form 10-K for the fiscal year ended December 31, 2023 filed on February 27, 2024; |
b. | the recast historical audited consolidated financial statements of the Company and the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2023 included in the Company’s Form 8-K filed on May 10, 2024; and |
c. | the historical unaudited consolidated financial statements of the Company and the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2024 filed on May 9 2024. |
The unaudited pro forma consolidated financial information is provided for illustrative information purposes only and has been derived from the historical consolidated financial statements of the Company, and is presented based on available information and certain assumptions that management believes are reasonable. The unaudited pro forma consolidated financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the Transaction been completed as of the dates indicated or that may be achieved in the future. The pro forma financial information has been prepared by the Company in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures About Acquired and Disposed Businesses, as adopted by the SEC on May 21, 2020.
The unaudited pro forma consolidated statement of income for the year ended December 31, 2023 has been prepared with the assumption that the Transaction was completed as of January 1, 2023. No pro forma consolidated statement of income is presented for the three months ended March 31, 2024, as no pro forma adjustments were required (the pro forma adjustments booked in 2023 are already reflected in the historical results in 2024 that were presented in the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2024). The unaudited pro forma consolidated balance sheet as of March 31, 2024 has been prepared with the assumption that the Transaction was completed as of that date.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
As of March 31, 2024 | ||||||||||||
(Dollars in millions, except per share data, shares in thousands) | Historical Consolidated Note 1 | Pro Forma Adjustments | Pro Forma Continuing Operations | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 5,040 | $ | 12,500 | (a) | $ | 17,540 | |||||
Interest-bearing deposits with banks | 29,510 | — | 29,510 | |||||||||
Securities borrowed or purchased under agreements to resell | 2,091 | — | 2,091 | |||||||||
Trading assets at fair value | 5,268 | — | 5,268 | |||||||||
AFS securities at fair value | 66,050 | — | 66,050 | |||||||||
HTM securities (fair value of $43,041 and $44,630, respectively) | 53,369 | — | 53,369 | |||||||||
LHFS (including $1,201 and $852 at fair value, respectively) | 1,253 | — | 1,253 | |||||||||
Loans and leases (including $14 and $15 at fair value, respectively) | 307,224 | — | 307,224 | |||||||||
ALLL | (4,803 | ) | — | (4,803 | ) | |||||||
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Loans and leases, net of ALLL | 302,421 | — | 302,421 | |||||||||
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Premises and equipment | 3,274 | — | 3,274 | |||||||||
Goodwill | 17,157 | — | 17,157 | |||||||||
CDI and other intangible assets | 1,816 | — | 1,816 | |||||||||
Loan servicing rights at fair value | 3,417 | — | 3,417 | |||||||||
Other assets (including $1,359 and $1,311 at fair value, respectively) | 36,521 | 184 | (b) | 36,705 | ||||||||
Assets of discontinued operations | 7,772 | (7,772 | ) (c) | — | ||||||||
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Total assets | $ | 534,959 | $ | 4,912 | $ | 539,871 | ||||||
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Liabilities | ||||||||||||
Noninterest-bearing deposits | $ | 110,901 | $ | — | $ | 110,901 | ||||||
Interest-bearing deposits (including $23 and $0 at fair value, respectively) | 283,364 | 1,202 | (d) | 284,566 | ||||||||
Short-term borrowings (including $2,034 and $1,625 at fair value, respectively) | 26,329 | — | 26,329 | |||||||||
Long-term debt | 39,071 | — | 39,071 | |||||||||
Other liabilities (including $2,990 and $2,597 at fair value, respectively) | 13,119 | 2,376 | (e) | 15,495 | ||||||||
Liabilities of discontinued operations | 3,122 | (3,122 | ) (c) | — | ||||||||
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Total liabilities | 475,906 | 456 | 476,362 | |||||||||
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Shareholders’ Equity | ||||||||||||
Preferred stock | 6,673 | — | 6,673 | |||||||||
Common stock, $5 par value | 6,690 | — | 6,690 | |||||||||
Additional paid-in capital | 36,197 | — | 36,197 | |||||||||
Retained earnings | 22,483 | 4,688 | (a),(f) | 27,171 | ||||||||
AOCI, net of deferred income taxes | (13,222 | ) | — | (13,222 | ) | |||||||
Noncontrolling interests | 232 | (232 | ) (f) | — | ||||||||
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Total shareholders’ equity | 59,053 | 4,456 | 63,509 | |||||||||
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Total liabilities and shareholders’ equity | $ | 534,959 | $ | 4,912 | $ | 539,871 | ||||||
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Common shares outstanding | 1,338,096 | — | 1,338,096 | |||||||||
Common shares authorized | 2,000,000 | — | 2,000,000 | |||||||||
Preferred shares outstanding | 223 | — | 223 | |||||||||
Preferred shares authorized | 5,000 | — | 5,000 |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial information.
CONSOLIDATED STATEMENT OF INCOME
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Year Ended December 31, 2023 | ||||||||||||
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(Dollars in millions, except per share data, shares in thousands) | Historical Consolidated Note 1 | Pro Forma Adjustments | Pro Forma Continuing Operations | |||||||||
Interest Income | ||||||||||||
Interest and fees on loans and leases | $ | 19,518 | $ | — | $ | 19,518 | ||||||
Interest on securities | 3,066 | — | 3,066 | |||||||||
Interest on other earning assets | 1,868 | — | 1,868 | |||||||||
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Total interest income | 24,452 | — | 24,452 | |||||||||
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Interest Expense | ||||||||||||
Interest on deposits | 6,427 | 26 | (g) | 6,453 | ||||||||
Interest on long-term debt | 2,215 | — | 2,215 | |||||||||
Interest on other borrowings | 1,286 | — | 1,286 | |||||||||
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Total interest expense | 9,928 | 26 | 9,954 | |||||||||
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Net Interest Income | 14,524 | (26 | ) | 14,498 | ||||||||
Provision for credit losses | 2,109 | — | 2,109 | |||||||||
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Net Interest Income After Provision for Credit Losses | 12,415 | (26 | ) | 12,389 | ||||||||
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Noninterest Income | ||||||||||||
Wealth management income | 1,358 | — | 1,358 | |||||||||
Investment banking and trading income | 822 | — | 822 | |||||||||
Card and payment related fees | 936 | — | 936 | |||||||||
Service charges on deposits | 873 | — | 873 | |||||||||
Mortgage banking income | 437 | — | 437 | |||||||||
Lending related fees | 447 | — | 447 | |||||||||
Operating lease income | 254 | — | 254 | |||||||||
Securities gains (losses) | — | — | — | |||||||||
Other income | 371 | 19 | (h) | 390 | ||||||||
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Total noninterest income | 5,498 | 19 | 5,517 | |||||||||
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Noninterest Expense | ||||||||||||
Personnel expense | 6,516 | — | 6,516 | |||||||||
Professional fees and outside processing | 1,192 | — | 1,192 | |||||||||
Software expense | 868 | — | 868 | |||||||||
Net occupancy expense | 658 | — | 658 | |||||||||
Amortization of intangibles | 395 | — | 395 | |||||||||
Equipment expense | 381 | — | 381 | |||||||||
Marketing and customer development | 260 | — | 260 | |||||||||
Operating lease depreciation | 175 | — | 175 | |||||||||
Regulatory costs | 824 | — | 824 | |||||||||
Merger-related and restructuring charges | 320 | — | 320 | |||||||||
Goodwill impairment | 6,078 | — | 6,078 | |||||||||
Other expense | 1,011 | — | 1,011 | |||||||||
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Total noninterest expense | 18,678 | — | 18,678 | |||||||||
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Earnings | ||||||||||||
Income (loss) before income taxes | (765 | ) | (7 | ) | (772 | ) | ||||||
Provision for income taxes | 738 | (2 | ) (i) | 736 | ||||||||
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Net income (loss) from continuing operations | (1,503 | ) | (5 | ) | (1,508 | ) | ||||||
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Preferred stock dividends and other | 361 | — | 361 | |||||||||
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Net income (loss) from continuing operations available to common shareholders | $ | (1,864 | ) | $ | (5 | ) | $ | (1,869 | ) | |||
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Basic earnings from continuing operations | $ | (1.40 | ) | $ | — | $ | (1.40 | ) | ||||
Diluted earnings from continuing operations | (1.40 | ) | — | (1.40 | ) | |||||||
Basic weighted average shares outstanding | 1,331,963 | — | 1,331,963 | |||||||||
Diluted weighted average shares outstanding | 1,331,963 | — | 1,331,963 |
The accompanying notes are an integral part of the unaudited pro forma consolidated financial information.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
Historical consolidated amounts in the unaudited pro forma consolidated balance sheet as of March 31, 2024 represent historical amounts as presented in the Company’s 10-Q filing for the first quarter of 2024. Historical consolidated amounts in the unaudited pro forma consolidated statement of loss for the year ended December 31, 2023 represent recast historical amounts, whereby balances relating to Truist Insurance are presented in net income from discontinued operations in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on May 10, 2024.
Note 2. Adjustments to the Unaudited Pro Forma Consolidated Balance Sheet
The following adjustments have been reflected in the unaudited pro forma consolidated balance sheet related to the Transaction.
a. | Reflects cash consideration received and settlement of transaction costs accrued as of March 31, 2024. |
Cash consideration received | $ | 12,563 | ||
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Transactions costs incurred and settled (recorded in Other liabilities) | (63 | ) | ||
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Net Cash Received | $ | 12,500 | ||
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b. | Reflects the removal of deferred taxes related to TIH of $184 million. |
c. | Reflects the sale of all assets and liabilities of Truist Insurance. |
d. | Reflects the establishment of the deposit liability relating to Truist Insurance’s interest-bearing cash deposits held at Truist Bank, for which the deposit liability was previously eliminated upon consolidation. The depository relationship between Truist Bank and Truist Insurance is expected to continue after the Transaction is complete. |
e. | Reflects the addition of a current tax liability of $2.4 billion related to the gain on sale. |
f. | Reflects the impact to the Company’s total shareholders’ equity from the estimated gain on sale, net of tax. |
Cash consideration received | $ | 12,563 | ||
Less: Transactions costs incurred and settled at Transaction close | (63 | ) | ||
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Net Cash Received | 12,500 | |||
Carrying value of NCI | 232 | |||
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Total | 12,732 | |||
Assets of discontinued operations | 7,772 | |||
Cash deposits held at Truist Bank previously eliminated in consolidation | 1,202 | |||
Total assets of discontinued operations | 8,974 | |||
Liabilities of discontinued operations | (3,122 | ) | ||
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Carrying value of Truist Insurance net assets (including goodwill) | 5,852 | |||
Gain on interest sold | 6,880 | |||
Less: Tax on gain including removal of deferred taxes related to TIH | (2,192 | ) | ||
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Gain on interest sold, net of tax | $ | 4,688 | ||
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Note 3. Adjustments to the Unaudited Pro Forma Consolidated Statement of Income
The following adjustments have been reflected in the unaudited pro forma consolidated statement of income related to the Transaction.
g. | Reflects the addition of three months of interest expense relating to Truist Insurance’s cash deposits held at Truist Bank. The deposits initially became interest-bearing in April of 2023. As the depository relationship between Truist Bank and Truist Insurance is expected to continue after the Transaction is complete, the recast historical consolidated amounts presented in Interest on deposits already reflect interest expense accrued by the Company from April 2023 onwards. The Company therefore recorded interest expense for the first three months of 2023 in this adjustment to reflect pro forma interest expense representative of a full year. |
h. | Reflects the addition of three months of other income relating to the transition services agreements between TFC and Truist Insurance. TFC entered into an initial Transition Services Agreement with Truist Insurance beginning in April of 2023 in connection with the sale of a 20% stake in Truist Insurance and has entered into a new Transition Services Agreement in connection with the sale of the remaining 80% stake in Truist Insurance. The recast historical consolidated amounts presented in Other income already reflect the related income earned by the Company from April 2023 onwards. The Company therefore recorded other income related to transition services for the first three months of 2023, to reflect pro forma other income representative of a full year. |
i. | The tax effect of the above adjustments was computed using the Company’s statutory tax rate of 23.5%. |