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Truist Financial Corporation
TFC
#361
Rank
$66.39 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$51.90
Share price
0.68%
Change (1 day)
11.83%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Truist Financial Corporation
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2021 Q3

Truist Financial Corporation - 10-Q quarterly report FY2021 Q3


Text size:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
_____________________________________________

☒ Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 2021
Commission File Number: 1-10853
_____________________________
TRUIST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
_____________________________________________
North Carolina56-0939887
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
214 North Tryon Street
Charlotte,North Carolina28202
(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 classTrading SymbolName of each exchange on which registered
Common Stock, $5 par valueTFCNew York Stock Exchange
Depositary Shares each representing 1/4,000th interest in a share of Series I Perpetual Preferred StockTFC.PINew 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 StockTFC.PJNew York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred StockTFC.PONew York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series R Non-Cumulative Perpetual Preferred StockTFC.PRNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At September 30, 2021, 1,334,891,526 shares of the registrant’s common stock, $5 par value, were outstanding.

TABLE OF CONTENTS
TRUIST FINANCIAL CORPORATION
FORM 10-Q
September 30, 2021
Page No.
PART I - Financial Information
Glossary of Defined Terms
1
Forward-Looking Statements
3
Item 1.Financial Statements
Consolidated Balance Sheets (Unaudited)
4
Consolidated Statements of Income (Unaudited)
5
Consolidated Statements of Comprehensive Income (Unaudited)
6
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
7
Consolidated Statements of Cash Flows (Unaudited)
8
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
9
Note 2. Business Combinations
9
Note 3. Securities Financing Activities
10
Note 4. Investment Securities
10
Note 5. Loans and ACL
12
Note 6. Goodwill and Other Intangible Assets
19
Note 7. Loan Servicing
20
Note 8. Other Assets and Liabilities
21
Note 9. Borrowings
22
Note 10. Shareholders’ Equity
23
Note 11. AOCI
24
Note 12. Income Taxes
25
Note 13. Benefit Plans
25
Note 14. Commitments and Contingencies
25
Note 15. Fair Value Disclosures
28
Note 16. Derivative Financial Instruments
33
Note 17. Computation of EPS
37
Note 18. Operating Segments
37
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
Item 3.Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management in MD&A)
60
Item 4.Controls and Procedures
70
PART II - Other Information
Item 1.Legal Proceedings
70
Item 1A.Risk Factors
70
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
70
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
71



Glossary of Defined Terms
The following terms may be used throughout this report, including the consolidated financial statements and related notes.
TermDefinition
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)
BoardTruist’s Board of Directors
C&CB
Corporate and Commercial Banking, an operating segment
CARES ActThe 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
CECLCurrent expected credit loss model
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CET1
Common equity tier 1
Company
Truist Financial Corporation and its subsidiaries (interchangeable with “Truist” below), formerly BB&T Corporation
COVID-19Coronavirus disease 2019
CRA
Community Reinvestment Act of 1977
CRE
Commercial real estate
CRO
Chief Risk Officer
CVACredit valuation adjustment
EPS
Earnings per common share
EVE
Economic value of equity
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
FTE
Full-time equivalent employee
GAAP
Accounting principles generally accepted in the United States of America
GDPGross Domestic Product
Grandbridge
Grandbridge Real Estate Capital, LLC
GSE
U.S. government-sponsored enterprise
HFI
Held for investment
IH
Insurance Holdings, an operating segment
LCR
Liquidity Coverage Ratio
LHFS
Loans held for sale
LIBOR
London Interbank Offered Rate
Market Risk Rule
Market risk capital requirements issued jointly by the OCC, U.S. Treasury, FRB, and FDIC
MBS
Mortgage-backed securities
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MergerMerger of BB&T and SunTrust effective December 6, 2019
MRM
Model Risk Management
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
OAS
Option adjusted spread
OCCOffice of the Comptroller of the Currency
Truist Financial Corporation 1

TermDefinition
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
PCI
Purchased credit impaired loans
PPPPaycheck Protection Program, established by the CARES Act
Re-REMICsRe-securitizations of Real Estate Mortgage Investment Conduits
ROU assets
Right-of-use assets
RUFC
Reserve for unfunded lending commitments
SBIC
Small Business Investment Company
SCBStress Capital Buffer
SOFR
Secured Overnight Financing Rate
SunTrust
SunTrust Banks, Inc.
TDR
Troubled debt restructuring
TE
Taxable-equivalent
TRSTotal Return Swap
Truist
Truist Financial Corporation and its subsidiaries (interchangeable with the “Company” above), formerly BB&T Corporation
Truist BankTruist 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
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, 2020:

•risks and uncertainties relating to the Merger of heritage BB&T and heritage SunTrust, including the ability to successfully integrate the companies or to realize the anticipated benefits of the Merger;
•expenses relating to the Merger and integration of heritage BB&T and heritage SunTrust;
•deposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
•the COVID-19 pandemic disrupted the global economy and adversely impacted Truist’s financial condition and results of operations, including through increased expenses, reduced fee income and net interest margin, and increases in the allowance for credit losses; the resurgence of the pandemic in recent months could reintroduce or prolong these negative impacts and also adversely affect Truist’s capital and liquidity position or cost of capital, impair the ability of borrowers to repay outstanding loans, cause an outflow of deposits, and impair goodwill or other assets;
•Truist is subject to credit risk by lending or committing to lend money, and may have more credit risk and higher credit losses to the extent that loans are concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;
•changes in the interest rate environment, including the replacement of LIBOR as an interest rate benchmark and potentially negative interest rates, which could adversely affect Truist’s revenue and expenses, the value of assets and obligations, and the availability and cost of capital, cash flows, and liquidity;
•inability to access short-term funding or liquidity, loss of client deposits or changes in Truist’s credit ratings, which could increase the cost of funding or limit access to capital markets;
•risk management oversight functions may not identify or address risks adequately, and management may not be able to effectively manage credit risk;
•risks resulting from the extensive use of models in Truist’s business, which may impact decisions made by management and regulators;
•failure to execute on strategic or operational plans, including the ability to successfully complete or integrate mergers and acquisitions;
•increased competition, including from (i) new or existing competitors that could have greater financial resources or be subject to different regulatory standards, and (ii) products and services offered by non-bank financial technology companies, may reduce Truist’s client base, cause Truist to lower prices for its products and services in order to maintain market share or otherwise adversely impact Truist’s businesses or results of operations;
•failure to maintain or enhance Truist’s competitive position with respect to new products, services and technology, whether it fails to anticipate client expectations or because its technological developments fail to perform as desired or do not achieve market acceptance or regulatory approval or for other reasons, may cause Truist to lose market share or incur additional expense;
•negative public opinion, which could damage Truist’s reputation;
•increased scrutiny regarding Truist’s consumer sales practices, training practices, incentive compensation design, and governance;
•regulatory matters, litigation or other legal actions, which may result in, among other things, costs, fines, penalties, restrictions on Truist’s business activities, reputational harm, negative publicity, or other adverse consequences;
•evolving legislative, accounting and regulatory standards, including with respect to capital and liquidity requirements, and results of regulatory examinations may adversely affect Truist’s financial condition and results of operations;
•the monetary and fiscal policies of the federal government and its agencies could have a material adverse effect on profitability;
•accounting policies and processes require management to make estimates about matters that are uncertain, including the potential write down to goodwill if there is an elongated period of decline in market value for Truist’s stock and adverse economic conditions are sustained over a period of time;
•general economic or business conditions, either globally, nationally or regionally, may be less favorable than expected, and instability in global geopolitical matters or volatility in financial markets could result in, among other things, slower deposit or asset growth, a deterioration in credit quality, or a reduced demand for credit, insurance, or other services;
•risks related to originating and selling mortgages, including repurchase and indemnity demands from purchasers related to representations and warranties on loans sold, which could result in an increase in the amount of losses for loan repurchases;
•risks relating to Truist’s role as a loan servicer, including an increase in the scope or costs of the services Truist is required to perform, without any corresponding increase in servicing fees or a breach of Truist’s obligations as servicer;
•Truist’s success depends on hiring and retaining key personnel, 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 as Truist continues to integrate the management teams of heritage BB&T and heritage SunTrust;
•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, 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)		September 30, 2021December 31, 2020
Assets
Cash and due from banks$4,656 $5,029 
Interest-bearing deposits with banks15,171 13,839 
Securities borrowed or purchased under resale agreements1,919 1,745 
Trading assets at fair value6,972 3,872 
AFS securities at fair value151,038 120,788 
LHFS (including $4,799 and $4,955 at fair value, respectively)5,133 6,059 
Loans and leases285,522 299,734 
ALLL(4,702)(5,835)
Loans and leases, net of ALLL280,820 293,899 
Premises and equipment3,719 3,870 
Goodwill24,891 24,447 
CDI and other intangible assets2,930 2,984 
MSRs at fair value2,584 2,023 
Other assets (including $4,002 and $4,891 at fair value, respectively)30,051 30,673 
Total assets$529,884 $509,228 
Liabilities
Noninterest-bearing deposits$143,595 $127,629 
Interest-bearing deposits262,262 253,448 
Short-term borrowings (including $1,735 and $1,115 at fair value, respectively)5,226 6,092 
Long-term debt37,837 39,597 
Other liabilities (including $601 and $555 at fair value, respectively)12,064 11,550 
Total liabilities460,984 438,316 
Shareholders’ Equity
Preferred stock6,673 8,048 
Common stock, $5 par value6,674 6,745 
Additional paid-in capital34,977 35,843 
Retained earnings22,114 19,455 
AOCI, net of deferred income taxes(1,538)716 
Noncontrolling interests— 105 
Total shareholders’ equity68,900 70,912 
Total liabilities and shareholders’ equity$529,884 $509,228 
Common shares outstanding1,334,892 1,348,961 
Common shares authorized2,000,000 2,000,000 
Preferred shares outstanding223 280 
Preferred shares authorized5,000 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 September 30,Nine Months Ended September 30,
2021202020212020
Interest Income    
Interest and fees on loans and leases$2,825 $3,174 $8,728 $10,327 
Interest on securities548 393 1,488 1,331 
Interest on other earning assets53 56 147 279 
Total interest income3,426 3,623 10,363 11,937 
Interest Expense    
Interest on deposits33 96 116 718 
Interest on long-term debt151 152 446 635 
Interest on other borrowings9 13 38 124 
Total interest expense193 261 600 1,477 
Net Interest Income3,233 3,362 9,763 10,460 
Provision for credit losses(324)421 (710)2,158 
Net Interest Income After Provision for Credit Losses3,557 2,941 10,473 8,302 
Noninterest Income    
Insurance income645 518 1,961 1,648 
Wealth management income356 324 1,042 945 
Service charges on deposits276 247 787 754 
Residential mortgage income179 221 396 807 
Investment banking and trading income301 244 958 636 
Card and payment related fees225 200 650 558 
Lending related fees74 77 268 210 
Operating lease income57 72 191 232 
Commercial real estate related income78 55 259 148 
Income from bank-owned life insurance43 46 139 135 
Securities gains (losses)— 104 — 402 
Other income131 102 316 119 
Total noninterest income2,365 2,210 6,967 6,594 
Noninterest Expense    
Personnel expense2,187 2,058 6,536 6,038 
Professional fees and outside processing372 323 1,063 859 
Net occupancy expense187 233 578 697 
Software expense251 221 707 647 
Amortization of intangibles145 170 431 513 
Equipment expense154 127 389 363 
Marketing and customer development94 75 226 215 
Operating lease depreciation47 56 144 204 
Loan-related expense52 59 161 177 
Regulatory costs43 34 99 93 
Merger-related and restructuring charges172 236 610 552 
Loss (gain) on early extinguishment of debt— — (3)235 
Other expense91 163 475 471 
Total noninterest expense3,795 3,755 11,416 11,064 
Earnings    
Income before income taxes2,127 1,396 6,024 3,832 
Provision for income taxes423 255 1,189 670 
Net income1,704 1,141 4,835 3,162 
Noncontrolling interests— 3 (3)9 
Net income available to the bank holding company1,704 1,138 4,838 3,153 
Preferred stock dividends and other88 70 329 197 
Net income available to common shareholders$1,616 $1,068 $4,509 $2,956 
Basic EPS$1.21 $0.79 $3.37 $2.20 
Diluted EPS1.20 0.79 3.34 2.18 
Basic weighted average shares outstanding1,334,825 1,347,916 1,339,558 1,346,605 
Diluted weighted average shares outstanding1,346,854 1,358,122 1,351,712 1,357,174 

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)		Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$1,704 $1,141 $4,835 $3,162 
OCI, net of tax:    
Net change in net pension and postretirement costs(55)(11)(22)18 
Net change in cash flow hedges5 8 51 30 
Net change in AFS securities(438)(375)(2,283)1,267 
Other, net(2)1 — (1)
Total OCI, net of tax(490)(377)(2,254)1,314 
Total comprehensive income$1,214 $764 $2,581 $4,476 
Income Tax Effect of Items Included in OCI:
Net change in net pension and postretirement costs$(13)$(4)$(3)$5 
Net change in cash flow hedges2 2 16 9 
Net change in AFS securities(133)(114)(701)389 
Total income taxes related to OCI$(144)$(116)$(688)$403 

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)		Shares of Common StockPreferred StockCommon StockAdditional Paid-In CapitalRetained EarningsAOCINoncontrolling InterestsTotal Shareholders’ Equity
Balance, July 1, 20201,347,609 $7,143 $6,738 $35,676 $18,373 $847 $106 $68,883 
Net income— — — — 1,138 — 3 1,141 
OCI— — — — — (377)— (377)
Issued in connection with equity awards, net509 — 3 (6)— — — (3)
Issued in connection with preferred stock offerings— 905 — — — — — 905 
Cash dividends declared on common stock— — — — (607)— — (607)
Cash dividends declared on preferred stock— — — — (70)— — (70)
Equity-based compensation expense— — — 104 — — — 104 
Other, net— — — — — — (3)(3)
Balance, September 30, 20201,348,118 $8,048 $6,741 $35,774 $18,834 $470 $106 $69,973 
Balance, July 1, 20211,334,770 $6,673 $6,674 $34,898 $21,139 $(1,048)$— $68,336 
Net income— — — — 1,704 — — 1,704 
OCI— — — — — (490)— (490)
Issued in connection with equity awards, net122 — — (4)(1)— — (5)
Cash dividends declared on common stock— — — — (640)— — (640)
Cash dividends declared on preferred stock— — — — (88)— — (88)
Equity-based compensation expense— — — 83 — — — 83 
Balance, September 30, 20211,334,892 $6,673 $6,674 $34,977 $22,114 $(1,538)$— $68,900 
Balance, January 1, 20201,342,166 $5,102 $6,711 $35,609 $19,806 $(844)$174 $66,558 
Net income— — — — 3,153 — 9 3,162 
OCI— — — — — 1,314 — 1,314 
Issued in connection with equity awards, net5,952 — 30 (115)(2)— — (87)
Issued in connection with preferred stock offerings— 3,449 — — — — — 3,449 
Redemption of preferred stock— (503)— — 3 — — (500)
Cash dividends declared on common stock— — — — (1,817)— — (1,817)
Cash dividends declared on preferred stock— — — — (200)— — (200)
Equity-based compensation expense— — — 280 — — — 280 
Cumulative effect adjustment for new accounting standards— — — — (2,109)— — (2,109)
Other, net— — — — — — (77)(77)
Balance, September 30, 20201,348,118 $8,048 $6,741 $35,774 $18,834 $470 $106 $69,973 
Balance, January 1, 20211,348,961 $8,048 $6,745 $35,843 $19,455 $716 $105 $70,912 
Net income— — — — 4,838 — (3)4,835 
OCI— — — — — (2,254)— (2,254)
Issued in connection with equity awards, net5,719 — 28 (118)(3)— — (93)
Repurchase of common stock(19,788)— (99)(1,017)— — — (1,116)
Redemption of preferred stock— (1,375)— — (40)— — (1,415)
Cash dividends declared on common stock— — — — (1,847)— — (1,847)
Cash dividends declared on preferred stock— — — — (289)— — (289)
Equity-based compensation expense— — — 269 — — — 269 
Other, net— — — — — — (102)(102)
Balance, September 30, 20211,334,892 $6,673 $6,674 $34,977 $22,114 $(1,538)$— $68,900 

The accompanying notes are an integral part of these consolidated financial statements.
Truist Financial Corporation 7

CONSOLIDATED STATEMENTS OF CASH FLOWS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
Nine Months Ended September 30,
(Dollars in millions)		20212020
Cash Flows From Operating Activities:  
Net income$4,835 $3,162 
Adjustments to reconcile net income to net cash from operating activities:  
Provision for credit losses(710)2,158 
Depreciation610 694 
Amortization of intangibles431 513 
Equity-based compensation expense269 280 
Securities (gains) losses— (402)
Net change in operating assets and liabilities:  
LHFS156 1,144 
MSRs(206)639 
Pension asset(456)(417)
Derivative assets and liabilities905 (3,064)
Trading assets(3,100)1,063 
Other assets and other liabilities896 (299)
Other, net(545)(442)
Net cash from operating activities3,085 5,029 
Cash Flows From Investing Activities:  
Proceeds from sales of AFS securities137 5,219 
Proceeds from maturities, calls and paydowns of AFS securities25,424 14,917 
Purchases of AFS securities(59,578)(28,242)
Originations and purchases of loans and leases, net of sales and principal collected14,503 (4,328)
Net cash received (paid) for FHLB stock116 599 
Net cash paid for premises and equipment(314)(716)
Net cash received (paid) for mergers, acquisitions and divestitures390 (1,811)
Other, net(600)275 
Net cash from investing activities(19,922)(14,087)
Cash Flows From Financing Activities:
Net change in deposits24,790 38,263 
Net change in short-term borrowings(866)(11,972)
Proceeds from issuance of long-term debt4,626 26,570 
Repayment of long-term debt(5,873)(27,667)
Repurchase of common stock(1,116)— 
Net proceeds from preferred stock issued— 3,449 
Redemption of preferred stock(1,415)(500)
Cash dividends paid on common stock(1,847)(1,817)
Cash dividends paid on preferred stock(289)(200)
Net cash received (paid) for hedge unwinds— 1,111 
Other, net(214)(136)
Net cash from financing activities17,796 27,101 
Net Change in Cash and Cash Equivalents959 18,043 
Cash and Cash Equivalents, January 118,868 19,065 
Cash and Cash Equivalents, September 30$19,827 $37,108 
Supplemental Disclosure of Cash Flow Information:
Net cash paid (received) during the period for:
Interest expense$655 $1,555 
Income taxes745 94 

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, 2020 should be referred to in connection with these unaudited interim consolidated financial statements. There were no significant changes to the Company’s accounting policies from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 that could have a material effect on the Company’s financial statements.

Reclassifications

Certain amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL; determination of fair value for financial instruments; valuation of MSRs; goodwill, intangible assets and other purchase accounting related adjustments; benefit plan obligations and expenses; and tax assets, liabilities, and expense.

Changes in Accounting Principles and Effects of New Accounting Pronouncements

There were no standards adopted during the current year that had a material effect on the Company’s financial statements, and no standards not yet adopted by the Company that are expected to have a material effect on the Company’s financial statements.

NOTE 2. Business Combinations

On July 1, 2021, Truist acquired Constellation Affiliated Partners, which resulted in approximately $543 million of goodwill and $418 million of identifiable intangible assets in the IH segment. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The intangible assets are being amortized on an accelerated basis over a term of 15.0 years based upon the estimated economic benefits received. Goodwill of $456 million and identifiable intangible assets of $277 million are deductible for tax purposes.

On August 10, 2021, Truist announced it will acquire Service Finance, LLC for $2.0 billion in cash consideration, which is expected to close in the fourth quarter of 2021.

Truist Financial Corporation 9

NOTE 3. Securities Financing Activities

Securities purchased under resale agreements are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently sold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. At September 30, 2021 and December 31, 2020, the total market value of collateral held was $1.9 billion and $1.7 billion, of which $188 million and $27 million was repledged, respectively. The following table presents securities borrowed or purchased under resale agreements:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Securities purchased under resale agreements$1,302 $1,158 
Securities borrowed617 587 
Total securities borrowed or purchased under resale agreements$1,919 $1,745 

For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions. Refer to “Note 14. Commitments and Contingencies” for additional information related to pledged securities. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:
September 30, 2021December 31, 2020
(Dollars in millions)Overnight and ContinuousUp to 30 daysTotalOvernight and ContinuousUp to 30 daysTotal
U.S. Treasury$1,533 $7 $1,540 $305 $31 $336 
GSE98 32 130 45 9 54 
Agency MBS - residential473 173 646 442 6 448 
Corporate and other debt securities172 112 284 204 179 383 
Total securities sold under agreements to repurchase$2,276 $324 $2,600 $996 $225 $1,221 

There were no securities financing transactions subject to legally enforceable master netting arrangements that were eligible for balance sheet netting for the periods presented.

NOTE 4. Investment Securities

The following tables summarize the Company’s AFS securities:
September 30, 2021
(Dollars in millions)		Amortized CostGross UnrealizedFair Value
GainsLosses
AFS securities:    
U.S. Treasury$9,700 $18 $21 $9,697 
GSE1,829 47 2 1,874 
Agency MBS - residential133,933 954 1,826 133,061 
Agency MBS - commercial3,083 30 40 3,073 
States and political subdivisions422 38 2 458 
Non-agency MBS2,856 1 11 2,846 
Other29 — — 29 
Total AFS securities$151,852 $1,088 $1,902 $151,038 
December 31, 2020
(Dollars in millions)		Amortized CostGross UnrealizedFair Value
GainsLosses
AFS securities:    
U.S. Treasury$1,721 $25 $— $1,746 
GSE1,840 77 — 1,917 
Agency MBS - residential111,589 1,975 23 113,541 
Agency MBS - commercial2,987 72 2 3,057 
States and political subdivisions447 47 1 493 
Other34 — — 34 
Total AFS securities$118,618 $2,196 $26 $120,788 

10 Truist Financial Corporation

Certain securities issued by FNMA and FHLMC exceeded 10% of shareholders’ equity at September 30, 2021. The FNMA investments had total amortized cost and fair value of $42.1 billion and $41.7 billion, respectively. The FHLMC investments had total amortized cost and fair value of $44.8 billion and $44.2 billion, respectively.

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 CostFair Value
September 30, 2021
(Dollars in millions)		Due in one year or lessDue after one year through five yearsDue after five years through ten yearsDue after ten yearsTotalDue in one year or lessDue after one year through five yearsDue after five years through ten yearsDue after ten yearsTotal
AFS securities:
U.S. Treasury$276 $8,446 $978 $— $9,700 $276 $8,441 $980 $— $9,697 
GSE432 1,237 — 160 1,829 437 1,274 — 163 1,874 
Agency MBS - residential— 1 317 133,615 133,933 — 1 327 132,733 133,061 
Agency MBS - commercial— 1 23 3,059 3,083 — 1 23 3,049 3,073 
States and political subdivisions38 95 118 171 422 39 98 135 186 458 
Non-agency MBS— — — 2,856 2,856 — — — 2,846 2,846 
Other1 6 — 22 29 1 6 — 22 29 
Total AFS securities$747 $9,786 $1,436 $139,883 $151,852 $753 $9,821 $1,465 $138,999 $151,038 

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 months12 months or moreTotal
September 30, 2021
(Dollars in millions)		Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
AFS securities:      
U.S. Treasury$6,247 $21 $— $— $6,247 $21 
GSE95 2 — — 95 2 
Agency MBS - residential95,852 1,812 443 14 96,295 1,826 
Agency MBS - commercial1,943 34257 6 2,200 40 
States and political subdivisions24 1 22 1 46 2 
Non-agency MBS2,183 11 — — 2,183 11 
Other22 — — — 22 — 
Total$106,366 $1,881 $722 $21 $107,088 $1,902 
Less than 12 months12 months or moreTotal
December 31, 2020
(Dollars in millions)		Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
AFS securities:      
U.S. Treasury$17 $— $— $— $17 $— 
Agency MBS - residential4,028 21 203 2 4,231 23 
Agency MBS - commercial463 2 4 — 467 2 
States and political subdivisions20 — 32 1 52 1 
Other6 — — — 6 — 
Total$4,534 $23 $239 $3 $4,773 $26 

At September 30, 2021 and December 31, 2020, no ACL was established for AFS securities. Substantially all of the unrealized losses on the securities portfolio 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.

The following table presents gross securities gains and losses recognized in earnings:
(Dollars in millions)Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Gross realized gains$— $104 $— $404 
Gross realized losses— — — (2)
Securities gains (losses), net$— $104 $— $402 

Truist Financial Corporation 11

NOTE 5. Loans and ACL

The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonaccrual 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
September 30, 2021
(Dollars in millions)		Current30-89 Days Past Due90 Days Or More Past DueNonperformingTotal
Commercial:     
Commercial and industrial$128,448 $131 $2 $411 $128,992 
CRE24,285 4 — 20 24,309 
Commercial construction5,680 2 — 7 5,689 
Lease financing4,767 4 16 12 4,799 
Consumer:
Residential mortgage45,038 495 852 306 46,691 
Residential home equity and direct24,988 81 7 146 25,222 
Indirect auto26,189 560 2 172 26,923 
Indirect other11,094 53 2 6 11,155 
Student5,635 456 968 — 7,059 
Credit card4,623 37 23 — 4,683 
Total$280,747 $1,823 $1,872 $1,080 $285,522 
Accruing
December 31, 2020
(Dollars in millions)		Current30-89 Days Past Due90 Days Or More Past DueNonperformingTotal
Commercial:     
Commercial and industrial$137,726 $83 $13 $532 $138,354 
CRE26,506 14 — 75 26,595 
Commercial construction6,472 5 — 14 6,491 
Lease financing5,206 6 — 28 5,240 
Consumer:    
Residential mortgage45,333 782 841 316 47,272 
Residential home equity and direct25,751 98 10 205 26,064 
Indirect auto25,498 495 2 155 26,150 
Indirect other11,102 68 2 5 11,177 
Student5,823 618 1,111 — 7,552 
Credit card4,759 51 29 — 4,839 
Total$294,176 $2,220 $2,008 $1,330 $299,734 

12 Truist Financial Corporation

The following table presents the amortized cost basis of loans by origination year and credit quality indicator:
September 30, 2021
(Dollars in millions)		Amortized Cost Basis by Origination YearRevolving Credit Loans Converted to TermOther (1)
20212020201920182017Prior Total
Commercial:    
Commercial and industrial:
Pass$25,433 $17,587 $14,278 $9,315 $5,670 $10,042 $41,570 $— $(390)$123,505 
Special mention186 231 402 253 97 92 973 — — 2,234 
Substandard302 314 493 213 71 289 1,160 — — 2,842 
Nonperforming36 26 70 46 18 59 157 — (1)411 
Total25,957 18,158 15,243 9,827 5,856 10,482 43,860 — (391)128,992 
CRE:
Pass2,825 3,405 5,516 3,794 2,051 2,442 671 — (61)20,643 
Special mention57 107 486 317 51 129 — — — 1,147 
Substandard305 310 633 551 402 298 — — — 2,499 
Nonperforming2 1 — 2 3 12 — — — 20 
Total3,189 3,823 6,635 4,664 2,507 2,881 671 — (61)24,309 
Commercial construction:
Pass836 1,125 1,676 681 138 99 661 — 7 5,223 
Special mention— 26 140 102 — — — — — 268 
Substandard6 6 40 74 65 — — — — 191 
Nonperforming— 1 1 — 4 — — — 1 7 
Total842 1,158 1,857 857 207 99 661 — 8 5,689 
Lease financing:
Pass970 1,232 811 525 528 707 — — (62)4,711 
Special mention1 — — — 3 2 — — — 6 
Substandard— 1 29 2 2 36 — — — 70 
Nonperforming— 2 3 4 — 2 — — 1 12 
Total971 1,235 843 531 533 747 — — (61)4,799 
Consumer:
Residential mortgage:
Performing12,741 7,355 4,360 2,237 2,719 16,872 — — 101 46,385 
Nonperforming— 3 22 27 22 232 — — — 306 
Total12,741 7,358 4,382 2,264 2,741 17,104 — — 101 46,691 
Residential home equity and direct:
Performing4,061 3,028 2,015 829 241 482 10,946 3,405 69 25,076 
Nonperforming1 3 4 2 1 7 50 78 — 146 
Total4,062 3,031 2,019 831 242 489 10,996 3,483 69 25,222 
Indirect auto:
Performing8,950 7,705 5,106 2,612 1,426 778 — — 174 26,751 
Nonperforming9 37 54 38 21 18 — — (5)172 
Total8,959 7,742 5,160 2,650 1,447 796 — — 169 26,923 
Indirect other:
Performing3,747 3,083 1,901 1,086 527 779 — — 26 11,149 
Nonperforming— 3 2 — — 1 — — — 6 
Total3,747 3,086 1,903 1,086 527 780 — — 26 11,155 
Student— 22 94 79 66 6,765 — — 33 7,059 
Credit card— — — — — — 4,653 30 — 4,683 
Total$60,468 $45,613 $38,136 $22,789 $14,126 $40,143 $60,841 $3,513 $(107)$285,522 
Truist Financial Corporation 13

December 31, 2020
(Dollars in millions)		Amortized Cost Basis by Origination YearRevolving CreditLoans Converted to TermOther (1)
20202019201820172016PriorTotal
Commercial:
Commercial and industrial:
Pass$34,858 $18,881 $13,312 $7,713 $5,174 $8,888 $42,780 $231 $(579)$131,258 
Special mention471 434 343 98 120 157 1,808 5 (1)3,435 
Substandard461 445 339 121 144 256 1,353 12 (2)3,129 
Nonperforming38 92 48 29 25 61 233 4 2 532 
Total35,828 19,852 14,042 7,961 5,463 9,362 46,174 252 (580)138,354 
CRE:
Pass4,563 6,600 4,427 2,752 1,473 2,096 617 — (69)22,459 
Special mention171 599 585 116 77 141 — — — 1,689 
Substandard410 776 438 281 182 280 5 — — 2,372 
Nonperforming1 15 1 9 6 43 — — — 75 
Total5,145 7,990 5,451 3,158 1,738 2,560 622 — (69)26,595 
Commercial construction:
Pass1,052 2,141 1,889 232 27 110 534 — 2 5,987 
Special mention— 108 64 1 — — 2 — — 175 
Substandard70 106 73 59 6 1 — — — 315 
Nonperforming1 3 — 7 — — — 3 — 14 
Total1,123 2,358 2,026 299 33 111 536 3 2 6,491 
Lease financing:
Pass1,377 1,139 775 746 241 760 — — 27 5,065 
Special mention1 39 20 5 — 7 — — — 72 
Substandard— 34 3 4 3 31 — — — 75 
Nonperforming2 5 3 9 4 5 — — — 28 
Total1,380 1,217 801 764 248 803 — — 27 5,240 
Consumer:
Residential mortgage:
Performing8,197 6,729 3,735 4,374 5,424 18,333 — — 164 46,956 
Nonperforming3 13 16 13 14 257 — — — 316 
Total8,200 6,742 3,751 4,387 5,438 18,590 — — 164 47,272 
Residential home equity and direct:
Performing4,513 3,126 1,416 481 214 557 13,886 1,619 47 25,859 
Nonperforming1 4 2 1 1 7 87 101 1 205 
Total4,514 3,130 1,418 482 215 564 13,973 1,720 48 26,064 
Indirect auto:
Performing10,270 7,436 4,015 2,401 1,220 506 — — 147 25,995 
Nonperforming13 50 44 27 15 12 — — (6)155 
Total10,283 7,486 4,059 2,428 1,235 518 — — 141 26,150 
Indirect other:
Performing4,433 3,019 1,706 826 431 718 — — 39 11,172 
Nonperforming1 1 1 — — 2 — — — 5 
Total4,434 3,020 1,707 826 431 720 — — 39 11,177 
Student22 110 95 81 64 7,185 — — (5)7,552 
Credit card— — — — — — 4,802 37 — 4,839 
Total$70,929 $51,905 $33,350 $20,386 $14,865 $40,413 $66,107 $2,012 $(233)$299,734 
(1)Includes certain deferred fees and costs, unapplied payments, and other adjustments.

14 Truist Financial Corporation

ACL

The following tables present activity in the ACL:
(Dollars in millions)Balance at Jul 1, 2020Charge-OffsRecoveriesProvision (Benefit)Other (2)Balance at Sep 30, 2020
Commercial:     
Commercial and industrial$2,137 $(112)$20 $140 $— $2,185 
CRE391 (44)— 155 — 502 
Commercial construction134 (19)2 17 — 134 
Lease financing59 (44)4 34 — 53 
Consumer:
Residential mortgage431 (4)3 (6)— 424 
Residential home equity and direct697 (52)16 43 — 704 
Indirect auto1,190 (72)22 49 — 1,189 
Indirect other213 (8)4 13 — 222 
Student123 (6)— 11 2 130 
Credit card327 (44)8 29 — 320 
ALLL5,702 (405)79 485 2 5,863 
RUFC431 — — (64)(1)366 
ACL$6,133 $(405)$79 $421 $1 $6,229 
(Dollars in millions)Balance at Jul 1, 2021 Charge-OffsRecoveriesProvision (Benefit)Other (2)Balance at Sep 30, 2021
Commercial: 
Commercial and industrial$1,757 $(57)$21 $(180)$— $1,541 
CRE440 (1)1 (70)— 370 
Commercial construction69 — 1 (11)— 59 
Lease financing47 — 21 (37)— 31 
Consumer:
Residential mortgage321 (7)3 (6)— 311 
Residential home equity and direct694 (51)20 (18)— 645 
Indirect auto1,116 (73)22 6 — 1,071 
Indirect other181 (13)5 21 — 194 
Student129 (6)1 1 1 126 
Credit card367 (31)9 9 — 354 
ALLL5,121 (239)104 (285)1 4,702 
RUFC315 — — (39)— 276 
ACL$5,436 $(239)$104 $(324)$1 $4,978 
(Dollars in millions)Balance at Jan 1, 2020 (1)Charge-OffsRecoveriesProvision (Benefit)Other (2)Balance at Sep 30, 2020
Commercial:      
Commercial and industrial$560 $(274)$58 $937 $904 $2,185 
CRE150 (59)4 325 82 502 
Commercial construction52 (22)10 78 16 134 
Lease financing10 (50)4 (5)94 53 
Consumer:     
Residential mortgage176 (50)7 26 265 424 
Residential home equity and direct107 (185)46 282 454 704 
Indirect auto304 (294)63 298 818 1,189 
Indirect other60 (46)18 40 150 222 
Student— (20)1 24 125 130 
Credit card122 (147)22 148 175 320 
PCI8 — — — (8)— 
ALLL1,549 (1,147)233 2,153 3,075 5,863 
RUFC340 — — 5 21 366 
ACL$1,889 $(1,147)$233 $2,158 $3,096 $6,229 
Truist Financial Corporation 15

(Dollars in millions)Balance at Jan 1, 2021Charge-OffsRecoveriesProvision (Benefit)Other (2)Balance at Sep 30, 2021
Commercial:      
Commercial and industrial$2,156 $(181)$60 $(494)$— $1,541 
CRE573 (5)6 (204)— 370 
Commercial construction81 (2)3 (23)— 59 
Lease financing48 (8)24 (33)— 31 
Consumer:     
Residential mortgage368 (22)10 (45)— 311 
Residential home equity and direct714 (163)58 36 — 645 
Indirect auto1,198 (247)71 49 — 1,071 
Indirect other208 (41)18 9 — 194 
Student130 (12)1 3 4 126 
Credit card359 (113)28 80 — 354 
ALLL5,835 (794)279 (622)4 4,702 
RUFC364 — — (88)— 276 
ACL$6,199 $(794)$279 $(710)$4 $4,978 
(1)Balance is prior to the adoption of CECL.
(2)Includes the adoption of CECL, the ALLL for PCD acquisitions, and other activity.

The commercial ALLL decreased $312 million and $857 million for the three and nine months ended September 30, 2021, respectively. The decreases for both the three and nine month periods are due to an improving economic outlook and lower loan balances.

The consumer ALLL decreased $94 million and $271 million for the three and nine months ended September 30, 2021, respectively. The decrease for the three-month period reflects an improving economic outlook slightly offset by loan growth primarily in the residential mortgage portfolio. The decrease for the nine-month period reflects an improving economic outlook and lower loan balances primarily in the residential mortgage and home equity and direct portfolios.

The RUFC decreased $39 million and $88 million for the three and nine months ended September 30, 2021, respectively. The decreases reflect an improving economic outlook.

The quantitative models have been designed to estimate losses using macro-economic forecasts over a reasonable and supportable forecast period of two years, followed by a reversion to long-term historical loss conditions over a one-year period. These macro-economic forecasts include a number of key economic variables utilized in loss forecasting that include, but are not limited to, unemployment trends, US real GDP, corporate credit spreads, rental rates, property values, the primary 30-year mortgage rate, home price indices, and used car prices.

The primary economic forecast incorporates a third-party baseline forecast that is adjusted to reflect Truist’s interest rate outlook. Management also considers optimistic and pessimistic third-party macro-economic forecasts in order to capture uncertainty in the economic environment. These forecasts, along with the primary economic forecast, are weighted 40% baseline, 30% optimistic and 30% pessimistic in the September 30, 2021 ACL. The primary economic forecast shaping the ACL estimate at September 30, 2021 included GDP growth in the high single digits through 2021, then slowing to the low single digits in 2022, and an improving unemployment rate to the mid single digits through the end of 2021 followed by continued improvement through the remainder of the reasonable and supportable period.

Quantitative models have certain limitations with respect to estimating expected losses, particularly in times of rapidly changing macro-economic conditions and forecasts. As a result, management believes that the qualitative component of the ACL, which incorporates management’s expert judgment related to expected future credit losses, will continue to be an important component of the ACL for the foreseeable future. The September 30, 2021 ACL estimate includes adjustments to address risks not captured by the loss forecasting models including imprecision in future economic forecasts, uncertainty around the return of consumer and business confidence once stimulus ceases, and the impact of government relief programs and client accommodations on expected losses.

16 Truist Financial Corporation

PCD Loan Activity

For PCD loans, the initial estimate of expected credit losses is recognized in the ALLL on the date of acquisition using the same methodology as other loans held for investment. The following table provides a summary of purchased student loans with credit deterioration at acquisition:
Nine Months Ended September 30, 2021
(Dollars in millions)
Par value$286 
ALLL at acquisition(4)
Non-credit premium (discount)1 
Purchase price$283 

NPAs

The following table provides a summary of nonperforming loans, excluding LHFS. Interest income recognized on nonperforming loans HFI was immaterial for the nine months ended September 30, 2021 and 2020, respectively.
September 30, 2021December 31, 2020
Recorded InvestmentRecorded Investment
(Dollars in millions)Without an ALLLWith an ALLLWithout an ALLLWith an ALLL
Commercial: 
Commercial and industrial$129 $282 $82 $450 
CRE1 19 63 12 
Commercial construction4 3 — 14 
Lease financing— 12 — 28 
Consumer:
Residential mortgage4 302 4 312 
Residential home equity and direct3 143 2 203 
Indirect auto7 165 1 154 
Indirect other— 6 — 5 
Total$148 $932 $152 $1,178 

The following table presents a summary of nonperforming assets and residential mortgage loans in the process of foreclosure.
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Nonperforming loans and leases HFI$1,080 $1,330 
Nonperforming LHFS76 5 
Foreclosed real estate9 20 
Other foreclosed property39 32 
Total nonperforming assets$1,204 $1,387 
Residential mortgage loans in the process of foreclosure$157 $140 

Truist Financial Corporation 17

TDRs

The following table presents a summary of TDRs:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Performing TDRs:  
Commercial:  
Commercial and industrial$144 $78 
CRE8 47 
Lease financing56 60 
Consumer:
Residential mortgage712 648 
Residential home equity and direct105 88 
Indirect auto390 392 
Indirect other7 6 
Student23 5 
Credit card30 37 
Total performing TDRs1,475 1,361 
Nonperforming TDRs159 164 
Total TDRs$1,634 $1,525 
ALLL attributable to TDRs$108 $132 

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 September 30, 2021As of / For the Nine Months Ended September 30, 2021
(Dollars in millions)Type of ModificationPrior Quarter Loan BalanceALLL at Period EndType of ModificationPrior Quarter Loan BalanceALLL at Period End
RateStructureRateStructure
Newly designated TDRs:
Commercial:   
Commercial and industrial$8 $17 $27 $3 $35 $116 $168 $15 
CRE— — — — — 10 12 1 
Lease financing— 3 3 1 — 3 3 1 
Consumer:
Residential mortgage33 24 57 3 122 163 285 12 
Residential home equity and direct2 8 10 — 6 41 48 2 
Indirect auto39 8 48 4 82 53 142 16 
Indirect other— 1 1 — 2 2 3 — 
Student— 10 10 — — 18 18 — 
Credit card3 — 3 1 9 — 10 4 
Re-modification of previously designated TDRs23 9 51 37 
As of / For the Three Months Ended September 30, 2020As of / For the Nine Months Ended September 30, 2020
Type of ModificationPrior Quarter Loan BalanceALLL at Period EndType of ModificationPrior Quarter Loan BalanceALLL at Period End
(Dollars in millions)RateStructureRateStructure
Newly designated TDRs:
Commercial:
Commercial and industrial$13 $49 $70 $9 $46 $53 $118 $12 
CRE4 10 15 2 28 11 32 4 
Lease financing— — — — 1 — 1 — 
Consumer:
Residential mortgage157 17 174 8 297 58 359 17 
Residential home equity and direct3 3 6 — 31 13 45 1 
Indirect auto20 4 25 5 98 26 129 17 
Indirect other1 1 1 — 3 1 3 — 
Student— 1 1 — — 5 5 — 
Credit card6 — 6 2 24 — 23 8 
Re-modification of previously designated TDRs10 5 36 11 
Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented.
18 Truist Financial Corporation


The amount of modified loans that were classified as TDRs during the previous 12 months and experienced a payment default for the three and nine months ended September 30, 2021 and 2020 was immaterial. Payment default is defined as movement of the TDR to nonperforming status, foreclosure, or charge-off, whichever occurs first.

Unearned Income, Discounts and Net Deferred Loan Fees and Costs

The following table presents additional information about loans and leases:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Unearned income, discounts and net deferred loan fees and costs$1,142 $2,219 

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, 2020 quantitative impairment test, concluding that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of September 30, 2021, and therefore no triggering event occurred that required a quantitative goodwill impairment test. See “Note 1. Basis of Presentation” and “Note 7. Goodwill and Other Intangible Assets” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.

The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. The adjustments for 2021 to CB&W reflect the divestiture of certain businesses. Refer to “Note 18. Operating Segments” for additional information on segments.
(Dollars in millions)CB&WC&CBIHTotal
Goodwill, January 1, 2020$14,040 $8,125 $1,989 $24,154 
Mergers and acquisitions— — 450 450 
Adjustments and other1,801 (1,958)— (157)
Goodwill, December 31, 202015,841 6,167 2,439 24,447 
Mergers and acquisitions— — 556 556 
Adjustments and other(139)(18)45 (112)
Goodwill, September 30, 2021$15,702 $6,149 $3,040 $24,891 

The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets:
 September 30, 2021December 31, 2020
(Dollars in millions)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
CDI$2,563 $(1,097)$1,466 $2,600 $(852)$1,748 
Other, primarily client relationship intangibles
2,499 (1,035)1,464 2,217 (981)1,236 
Total$5,062 $(2,132)$2,930 $4,817 $(1,833)$2,984 


Truist Financial Corporation 19

NOTE 7. Loan Servicing

The Company acquires servicing rights, and retains servicing rights related to certain of its sales or securitizations of residential mortgages and commercial mortgage loans. Servicing rights on residential and commercial mortgages are capitalized by the Company as MSRs on the Consolidated Balance Sheets. Income earned by the Company on its residential MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs. Income earned by the Company on its commercial mortgage servicing rights is derived primarily from contractually specified servicing fees and other ancillary fees.

Residential Mortgage Activities
The following tables summarize residential mortgage servicing activities:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
UPB of residential mortgage loan servicing portfolio$248,546 $239,034 
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate
198,119 188,341 
Mortgage loans sold with recourse269 328 
Maximum recourse exposure from mortgage loans sold with recourse liability171 201 
Indemnification, recourse and repurchase reserves89 93 
As of / For the Nine Months Ended September 30,
(Dollars in millions)		20212020
UPB of residential mortgage loans sold from LHFS$30,148 $36,069 
Pre-tax gains recognized on mortgage loans sold and held for sale347 828 
Servicing fees recognized from mortgage loans serviced for others437 480 
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others
0.31 %0.32 %
Weighted average interest rate on mortgage loans serviced for others3.49 3.92 

The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:
Nine Months Ended September 30,
(Dollars in millions)		20212020
Residential MSRs, carrying value, January 1$1,778 $2,371 
Acquired355 — 
Additions476 490 
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds12 (612)
OAS238 53 
Realization of expected net servicing cash flows, passage of time and other(550)(539)
Residential MSRs, carrying value, September 30$2,309 $1,763 


The sensitivity of the fair value of the Company’s residential MSRs to changes in key assumptions is presented in the following table:
September 30, 2021December 31, 2020
RangeWeighted AverageRangeWeighted Average
(Dollars in millions)MinMaxMinMax
Prepayment speed11.3 %15.3 %14.2 %12.8 %30.8 %15.4 %
Effect on fair value of a 10% increase$(119)$(89)
Effect on fair value of a 20% increase(228)(171)
OAS1.8 %10.1 %4.0 %3.5 %13.7 %7.3 %
Effect on fair value of a 10% increase$(36)$(45)
Effect on fair value of a 20% increase(71)(88)
Composition of loans serviced for others:   
Fixed-rate residential mortgage loans99.2 %98.8 %
Adjustable-rate residential mortgage loans
0.8 1.2 
Total  100.0 %  100.0 %
Weighted average life  5.1 years  4.8 years

20 Truist Financial Corporation

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of an adverse variation in one assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one factor may result in changes in another, which may magnify or counteract the effect of the change. See “Note 15. Fair Value Disclosures” for additional information on the valuation techniques used.

Commercial Mortgage Activities

The following table summarizes commercial mortgage servicing activities for the periods presented:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
UPB of CRE mortgages serviced for others$37,437 $36,670 
CRE mortgages serviced for others covered by recourse provisions10,146 9,019 
Maximum recourse exposure from CRE mortgages sold with recourse liability2,922 2,624 
Recorded reserves related to recourse exposure18 18 
CRE mortgages originated during the year-to-date period6,490 6,739 
Commercial MSRs at fair value275 245 

NOTE 8. Other Assets and Liabilities

Lessee Operating and Finance Leases

The Company leases certain assets, consisting primarily of real estate, and assesses at contract inception whether a contract is, or contains, a lease. The following tables present additional information on leases, excluding leases related to the lease financing businesses:
September 30, 2021December 31, 2020
(Dollars in millions)Operating LeasesFinance LeasesOperating LeasesFinance Leases
ROU assets$1,207 $25 $1,333 $36 
Lease liabilities1,694 31 1,896 42 
Weighted average remaining term6.7 years6.4 years6.9 years6.3 years
Weighted average discount rate2.4 %3.6 %2.4 %4.8 %
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
Operating lease costs$71 $87 $241 $280 

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)Sep 30, 2021Dec 31, 2020
Assets held under operating leases (1)$1,932 $2,144 
Accumulated depreciation (405)(517)
Net$1,527 $1,627 
(1) Includes certain land parcels subject to operating leases that have indefinite lives.

The carrying value of assets previously under operating leases was immaterial.

Bank-Owned Life Insurance

Bank-owned life insurance consists of life insurance policies held on certain teammates for which the Company is the beneficiary. These policies provide the Company an efficient form of funding for retirement and other employee benefits costs. The carrying value of bank-owned life insurance was $6.5 billion at September 30, 2021 and December 31, 2020.

Truist Financial Corporation 21

NOTE 9. Borrowings

The following table presents a summary of short-term borrowings:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Federal funds purchased$8 $79 
Securities sold under agreements to repurchase2,600 1,221 
FHLB advances— 2,649 
Collateral in excess of derivative exposures
310 385 
Master notes573 621 
Other short-term borrowings1,735 1,137 
Total short-term borrowings$5,226 $6,092 

The following table presents a summary of long-term debt:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Truist Financial Corporation:
Fixed rate senior notes$14,365 $15,984 
Floating rate senior notes1,348 900 
Fixed rate subordinated notes1,266 1,283 
Capital notes619 615 
Structured notes (1)84 108 
Truist Bank:
Fixed rate senior notes10,604 11,907 
Floating rate senior notes2,400 1,567 
Fixed rate subordinated notes5,099 5,142 
FHLB advances
867 878 
Other long-term debt (2)1,185 1,014 
Nonbank subsidiaries:
Other long-term debt (3)— 199 
Total long-term debt$37,837 $39,597 
(1)Consist of notes with various terms that include fixed or floating rate interest or returns that are linked to an equity index.
(2)Includes debt associated with finance leases, tax credit investments, and other.
(3)Includes debt associated with structured real estate leases.

The Company does not consolidate certain wholly-owned trusts which were formed for the sole purpose of issuing trust preferred securities. The proceeds from the trust preferred securities issuances were invested in capital notes of the Parent Company. The Parent Company’s obligations constitute a full and unconditional guarantee of the trust preferred securities.

22 Truist Financial Corporation

NOTE 10. Shareholders’ Equity

Common Stock

The following table presents the dividends declared per share of common stock:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Cash dividends declared per share$0.48 $0.45 $1.38 $1.35 

Share Repurchase Activity

As of September 30, 2021, the Board of Directors had authorized the repurchase of up to $4.2 billion of the Company’s common stock through September 30, 2022. For the nine months ended September 30, 2021, the Company repurchased $1.1 billion of common stock, which represented 19.8 million shares. Repurchased shares revert to the status of authorized and unissued shares. At September 30, 2021, Truist had remaining authorization to repurchase $3.1 billion of common stock under the Board approved repurchase plan. The amount of share repurchases is dependent on capital deployment through organic growth and acquisitions, giving consideration to economic and regulatory conditions.

Preferred Stock

During the first quarter of 2021, the Company redeemed all 18,000 outstanding shares of its perpetual preferred stock series F and the corresponding depositary shares representing fractional interests in such series for $450 million, and all 20,000 outstanding shares of its perpetual preferred stock series G and the corresponding depositary shares representing fractional interests in such series for $500 million.

During the second quarter of 2021, the Company redeemed all 18,600 outstanding shares of its perpetual preferred stock series H and the corresponding depositary shares representing fractional interests in such series for $465 million.

Truist Financial Corporation 23

NOTE 11. AOCI

AOCI includes the after-tax change in unrecognized net costs related to defined benefit pension and OPEB plans as well as unrealized gains and losses on cash flow hedges and AFS securities.
Three Months Ended September 30, 2021 and 2020
(Dollars in millions)		Pension and OPEB CostsCash Flow HedgesAFS SecuritiesOther, netTotal
AOCI balance, July 1, 2020$(1,093)$(79)$2,022 $(3)$847 
OCI before reclassifications, net of tax(25)— (380)1 (404)
Amounts reclassified from AOCI:     
Before tax18 10 7 — 35 
Tax effect4 2 2 — 8 
Amounts reclassified, net of tax14 8 5 — 27 
Total OCI, net of tax(11)8 (375)1 (377)
AOCI balance, September 30, 2020$(1,104)$(71)$1,647 $(2)$470 
AOCI balance, July 1, 2021$(842)$(18)$(191)$3 $(1,048)
OCI before reclassifications, net of tax(59)— (496)(2)(557)
Amounts reclassified from AOCI:     
Before tax6 7 75 — 88 
Tax effect2 2 17 — 21 
Amounts reclassified, net of tax4 5 58 — 67 
Total OCI, net of tax(55)5 (438)(2)(490)
AOCI balance, September 30, 2021$(897)$(13)$(629)$1 $(1,538)
Nine Months Ended September 30, 2021 and 2020
(Dollars in millions)		Pension and OPEB CostsCash Flow HedgesAFS SecuritiesOther, netTotal
AOCI balance, January 1, 2020$(1,122)$(101)$380 $(1)$(844)
OCI before reclassifications, net of tax(26)— 1,411 (1)1,384 
Amounts reclassified from AOCI:     
Before tax58 39 (189)— (92)
Tax effect14 9 (45)— (22)
Amounts reclassified, net of tax44 30 (144)— (70)
Total OCI, net of tax18 30 1,267 (1)1,314 
AOCI balance, September 30, 2020(1,104)(71)1,647 (2)470 
AOCI balance, January 1, 2021$(875)$(64)$1,654 $1 $716 
OCI before reclassifications, net of tax(40)— (2,510)— (2,550)
Amounts reclassified from AOCI:     
Before tax24 67 296 — 387 
Tax effect6 16 69 — 91 
Amounts reclassified, net of tax18 51 227 — 296 
Total OCI, net of tax(22)51 (2,283)— (2,254)
AOCI balance, September 30, 2021$(897)$(13)$(629)$1 $(1,538)
Primary income statement location of amounts reclassified from AOCI
Other expenseNet interest income and Other expenseSecurities gains (losses) and Net interest income Net interest income

24 Truist Financial Corporation

NOTE 12. Income Taxes

For the three months ended September 30, 2021 and 2020, the provision for income taxes was $423 million and $255 million, respectively, representing effective tax rates of 19.9% and 18.3%, respectively. For the nine months ended September 30, 2021 and 2020, the provision for income taxes was $1.2 billion and $670 million, respectively, representing effective tax rates of 19.7% and 17.5%, respectively. The higher effective tax rate for the three and nine months ended September 30, 2021 was primarily due to higher pre-tax income without a corresponding increase in beneficial tax items. 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 September 30,Nine Months Ended September 30,
(Dollars in millions)Income Statement Location2021202020212020
Service costPersonnel expense$148 $141 $463 $377 
Interest costOther expense80 78 239 234 
Estimated return on plan assetsOther expense(250)(217)(748)(650)
Amortization and otherOther expense9 20 26 58 
Net periodic (benefit) cost$(13)$22 $(20)$19 

Truist makes contributions to the qualified pension plans in amounts between the minimum required for funding and the maximum deductible for federal income tax purposes. Discretionary contributions totaling $403 million were made to the Truist pension plan during the nine months ended September 30, 2021. There are no required contributions for the remainder of 2021.

NOTE 14. Commitments and Contingencies

Truist utilizes a variety of financial instruments to meet the financing needs of clients and to mitigate exposure to risks. These financial instruments include commitments to extend credit, letters of credit and financial guarantees and derivatives. Truist also has commitments to fund certain affordable housing investments and contingent liabilities related to certain sold loans.

Tax Credit and Certain Equity Investments

The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. Truist receives tax credits related to these investments, for which the Company typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. The following table summarizes certain tax credit and certain equity investments:
(Dollars in millions)Balance Sheet LocationSep 30, 2021Dec 31, 2020
Investments in affordable housing projects:  
Carrying amountOther assets$3,911 $3,823 
Amount of future funding commitments included in carrying amountOther liabilities1,157 1,057 
Lending exposureNA580 546 
Renewable energy investments:
Carrying amountOther assets215 167 
Amount of future funding commitments not included in carrying amountNA189 76 
Private equity and certain other equity method investments:
Carrying amountOther assets1,758 1,574 
Amount of future funding commitments not included in carrying amountNA474 471 

Truist Financial Corporation 25

The following table presents a summary of tax credits and amortization associated with the Company’s tax credit investment activity:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)Income Statement Location2021202020212020
Tax credits:
Investments in affordable housing projectsProvision for income taxes$121 $116 $360 $347 
Other community development investmentsProvision for income taxes24 23 70 68 
Renewable energy investmentsNA (1)36 32 96 134 
Amortization and other changes in carrying amount:
Investments in affordable housing projectsProvision for income taxes$117 $119 $353 $346 
Other community development investmentsOther noninterest income21 19 59 57 
Renewable energy investmentsOther noninterest income1 1 3 3 
(1)Tax credits received for these investments are recorded as a reduction to the carrying value of these investments.

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)September 30, 2021December 31, 2020
Commitments to extend, originate, or purchase credit$202,167 $186,731 
Residential mortgage loans sold with recourse269 328 
CRE mortgages serviced for others covered by recourse provisions10,146 9,019 
Letters of credit5,074 5,066 

Total Return Swaps

The Company facilitates matched book TRS transactions on behalf of clients, whereby a VIE purchases reference assets identified by a client and the Company enters into a TRS with the VIE, with a mirror-image TRS facing the client. The Company provides senior financing to the VIE in the form of demand notes to fund the purchase of the reference assets. Reference assets are typically fixed income instruments primarily composed of syndicated bank loans. The TRS contracts pass through interest and other cash flows on the reference assets to the third party clients, along with exposing those clients to decreases in value on the assets and providing them with the rights to appreciation on the assets. The terms of the TRS contracts require the third parties to post initial margin collateral, as well as ongoing margin as the fair values of the underlying reference assets change.

The Company concluded that the associated VIEs should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, that could potentially be significant. At September 30, 2021, the Company’s Consolidated Balance Sheet reflected $1.6 billion of assets and $133 million of other liabilities of the VIEs. At December 31, 2020, the Company’s Consolidated Balance Sheet reflected $1.3 billion of assets and $41 million of other liabilities of the VIEs. VIE assets include trading loans and bonds totaling $1.5 billion and $1.3 billion at September 30, 2021 and December 31, 2020, respectively. The activities of the VIEs are restricted to buying and selling the reference assets and the risks/benefits of any such assets owned by the VIEs are passed to the third party clients via the TRS contracts. For additional information on TRS contracts and the related VIEs, see “Note 16. Derivative Financial Instruments.”

26 Truist Financial Corporation

Pledged Assets

Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, certain derivative agreements, and borrowings or borrowing capacity, as well as 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 obtains secured financing 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 employee 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)Sep 30, 2021Dec 31, 2020
Pledged securities$25,914 $24,974 
Pledged loans:
FRB72,030 75,615 
FHLB66,040 69,994 
Unused borrowing capacity:
FRB51,457 52,831 
FHLB52,459 52,274 

Litigation and Regulatory Matters

Truist and/or its subsidiaries are routinely parties to numerous legal proceedings, including private, civil litigation, and regulatory investigations, 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 multiple class members and can involve claims for substantial amounts. Investigations involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations. 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 is uncertain and inherently difficult to predict. It is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations, or consolidated cash flows of Truist.

Truist establishes accruals for legal matters when potential losses associated with the actions become probable and the amount of loss can be reasonably estimated. There is no assurance that the ultimate resolution of these matters will not significantly exceed the amounts that Truist has accrued. Accruals for legal matters are based on management’s best judgment after consultation with counsel and others.

The Company estimates reasonably possible losses, in excess of amounts accrued, of up to approximately $200 million as of September 30, 2021. This estimate is based upon currently available information and involves considerable judgment, given that claims often include significant legal uncertainties, damages alleged by plaintiffs are often unspecified or overstated, discovery may not have started or may not be complete and material facts may be disputed or unsubstantiated, among other factors. In addition, the matters underlying this estimate will change from time to time and actual losses may vary significantly from this estimate. As a result, the Company does not believe that an estimate of reasonably possible losses can be made for certain matters. Such matters are not reflected in the estimate provided herein.

The following is a description of a certain legal proceeding 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. 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, the Company filed a motion seeking to narrow the scope of this class, and on May 29, 2020, it filed a renewed motion to compel arbitration of the claims of some of the class members. On February 9, 2021, the trial court denied both motions as premature but held that the issues could be raised again after the conclusion of discovery, which is currently underway. The Company believes that the claims are without merit.

Truist Financial Corporation 27

NOTE 15. Fair Value Disclosures

Recurring Fair Value Measurements

Accounting standards define fair value as the price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level measurement hierarchy:

•Level 1: Quoted prices for identical instruments in active markets
•Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets
•Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable

The following tables present fair value information for assets and liabilities measured at fair value on a recurring basis:
September 30, 2021
(Dollars in millions)		TotalLevel 1Level 2Level 3Netting Adjustments (1)
Assets:    
Trading assets:
U.S. Treasury$2,414 $— $2,414 $— $— 
GSE184 — 184 — — 
Agency MBS - residential973 — 973 — — 
Agency MBS - commercial5 — 5 — — 
States and political subdivisions67 — 67 — — 
Corporate and other debt securities1,031 — 1,031 — — 
Loans1,943 — 1,943 — — 
Other355 294 61 — — 
Total trading assets6,972 294 6,678 — — 
AFS securities: 
U.S. Treasury9,697 — 9,697 — — 
GSE1,874 — 1,874 — — 
Agency MBS - residential133,061 — 133,061 — — 
Agency MBS - commercial3,073 — 3,073 — — 
States and political subdivisions458 — 458 — — 
Non-agency MBS2,846 — 2,846 — — 
Other29 — 29 — — 
Total AFS securities151,038 — 151,038 — — 
LHFS at fair value4,799 — 4,799 — — 
MSRs at fair value2,584 — — 2,584 — 
Other assets:
Derivative assets2,976 676 3,893 38 (1,631)
Equity securities1,026 940 86 — — 
Total assets$169,395 $1,910 $166,494 $2,622 $(1,631)
Liabilities:    
Derivative liabilities$601 $304 $3,132 $28 $(2,863)
Securities sold short1,735 12 1,723 — — 
Total liabilities$2,336 $316 $4,855 $28 $(2,863)
28 Truist Financial Corporation

December 31, 2020
(Dollars in millions)		TotalLevel 1Level 2Level 3Netting Adjustments (1)
Assets:    
Trading assets:
U.S. Treasury$793 $— $793 $— $— 
GSE164 — 164 — — 
Agency MBS - residential599 — 599 — — 
Agency MBS - commercial21 — 21 — — 
States and political subdivisions34 — 34 — — 
Corporate and other debt securities545 — 545 — — 
Loans1,586 — 1,586 — — 
Other130 123 7 — — 
Total trading assets3,872 123 3,749 — — 
AFS securities:    
U.S. Treasury1,746 — 1,746 — — 
GSE1,917 — 1,917 — — 
Agency MBS - residential113,541 — 113,541 — — 
Agency MBS - commercial3,057 — 3,057 — — 
States and political subdivisions493 — 493 — — 
Other34 — 34 — — 
Total AFS securities120,788 — 120,788 — — 
LHFS at fair value4,955 — 4,955 — — 
MSRs at fair value2,023 — — 2,023 — 
Other assets:    
Derivative assets3,837 752 4,903 186 (2,004)
Equity securities1,054 996 58 — — 
Total assets$136,529 $1,871 $134,453 $2,209 $(2,004)
Liabilities:    
Derivative liabilities$555 $386 $3,263 $14 $(3,108)
Securities sold short1,115 3 1,112 — — 
Total liabilities$1,670 $389 $4,375 $14 $(3,108)
(1)Refer to “Note 16. Derivative Financial Instruments” for additional discussion on netting adjustments.

At September 30, 2021 and December 31, 2020, investments totaling $490 million and $387 million, respectively, have been excluded from the table above as they are valued based on net asset value as a practical expedient. These investments primarily consist of certain SBIC funds.

For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see “Note 18. Fair Value Disclosures” of the Annual Report on Form 10-K for the year ended December 31, 2020.

Truist Financial Corporation 29

Activity for Level 3 assets and liabilities is summarized below:
Three Months Ended September 30, 2021 and 2020
(Dollars in millions)		Non-agency MBSMSRsNet DerivativesPrivate Equity Investments
Balance at July 1, 2020$— $2,077 $203 $— 
Total realized and unrealized gains (losses):
Included in earnings— (54)128 — 
Issuances— 192 229 — 
Settlements— (224)(346)— 
Balance at September 30, 2020$— $1,991 $214 $— 
Balance at July 1, 2021$— $2,231 $38 $— 
Total realized and unrealized gains (losses):
Included in earnings— 78 6 — 
Purchases— 303 — — 
Issuances— 145 77 — 
Sales— (1)— — 
Settlements— (172)(111)— 
Balance at September 30, 2021$— $2,584 $10 $— 
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2021$— $78 $21 $— 
Nine Months Ended September 30, 2021 and 2020
(Dollars in millions)		Non-agency MBSMSRsNet DerivativesPrivate Equity Investments
Balance at January 1, 2020$368 $2,618 $19 $440 
Total realized and unrealized gains (losses):   
Included in earnings306 (616)365 2 
Included in unrealized net holding gains (losses) in OCI(178)— — — 
Purchases— — — 27 
Issuances— 523 655 — 
Sales(481)— — — 
Settlements(15)(534)(825)(21)
Transfers out of level 3 and other— — — (448)
Balance at September 30, 2020$— $1,991 $214 $— 
Balance at January 1, 2021$— $2,023 $172 $— 
Total realized and unrealized gains (losses):
Included in earnings— 260 (77)— 
Purchases— 355 — — 
Issuances— 532 254 — 
Sales— (1)— — 
Settlements— (585)(339)— 
Balance at September 30, 2021$— $2,584 $10 $— 
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2021$— $260 $16 $— 
Primary income statement location of realized gains (losses) included in earnings
Securities gains (losses)Residential mortgage income and Commercial real estate related incomeResidential mortgage income and Commercial real estate related incomeOther income

During 2020, Truist sold non-agency MBS previously categorized as Level 3 that represented ownership interests in various tranches of Re-REMIC trusts. Additionally during 2020, as a result of a change in control of the funds’ manager, the Company deconsolidated certain SBIC funds for which it had previously concluded that it was the primary beneficiary.

Refer to “Note 7. Loan Servicing” for additional information on valuation techniques and inputs for MSRs.
30 Truist Financial Corporation


Fair Value Option

The following table details the fair value and UPB of LHFS that were elected to be measured at fair value. Trading loans, included in other trading assets, were also elected to be measured at fair value.
 September 30, 2021December 31, 2020
(Dollars in millions)Fair ValueUPBDifferenceFair ValueUPBDifference
Trading loans$1,943 $1,912 $31 $1,586 $1,619 $(33)
LHFS at fair value4,799 4,700 99 4,955 4,736 219 

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)Sep 30, 2021Dec 31, 2020
Carrying value:
LHFS$255 $979 
Loans and leases122 142 
Other102 92 

The following table provides information about valuation adjustments for certain assets measured at fair value on a nonrecurring basis. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end.
Nine Months Ended September 30,
(Dollars in millions)		20212020
Valuation adjustments:
LHFS$(27)$(52)
Loans and leases(41)(38)
Other(156)(137)

LHFS with valuation adjustments in the table above consisted primarily of residential mortgages and commercial loans that were valued using market prices and measured at the lower of cost or market. LHFS as of December 31, 2020 includes the small ticket loan and lease portfolio that was sold during the first quarter of 2021. The table above excludes $79 million and $125 million of LHFS carried at cost at September 30, 2021 and December 31, 2020, respectively, that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. The Company held $76 million in nonperforming LHFS at September 30, 2021 and $5 million of nonperforming LHFS at December 31, 2020. LHFS that were 90 days or more past due and still accruing interest were not material at September 30, 2021.

Loans and leases consists of larger commercial loans and leases that do not share similar risk characteristics. These loans and leases are collateral dependent and may be subject to liquidity adjustments. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional discussion of individually evaluated loans and leases.

Other includes foreclosed real estate, other foreclosed property, ROU assets, premises and equipment, and OREO, and consists primarily of residential homes, commercial properties, vacant lots, and automobiles. ROU assets are measured based on the fair value of the assets, which considers the potential for sublease income. The remaining assets are measured at the lower of cost or fair value, less costs to sell.

Truist Financial Corporation 31

Financial Instruments Not Recorded at Fair Value

For financial instruments not recorded at fair value, estimates of fair value are based on relevant market data and information about the instruments. Values obtained relate to trading without regard to any premium or discount that may result from concentrations of ownership, possible tax ramifications, estimated transaction costs that may result from bulk sales or the relationship between various instruments.

An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets. In addition, changes in assumptions could significantly affect these fair value estimates. Financial assets and liabilities not recorded at fair value are summarized below:
September 30, 2021December 31, 2020
(Dollars in millions)Fair Value HierarchyCarrying AmountFair ValueCarrying AmountFair Value
Financial assets:    
Loans and leases HFI, net of ALLLLevel 3$280,820 $281,198 $293,899 $295,461 
Financial liabilities:  
Time depositsLevel 216,675 16,810 21,941 22,095 
Long-term debtLevel 237,837 38,491 39,597 40,864 

The carrying value of the RUFC, which approximates the fair value of unfunded commitments, was $276 million and $364 million at September 30, 2021 and December 31, 2020, respectively.

32 Truist Financial Corporation

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 no cash flow hedges as of September 30, 2021 and December 31, 2020.
 September 30, 2021December 31, 2020
 Notional AmountFair ValueNotional AmountFair Value
(Dollars in millions)AssetsLiabilitiesAssetsLiabilities
Fair value hedges:   
Interest rate contracts:   
Swaps hedging AFS securities$24,006 $— $(4)$17,765 $— $— 
Not designated as hedges:      
Client-related and other risk management:      
Interest rate contracts:      
Swaps149,428 2,103 (731)156,338 3,399 (862)
Options24,939 36 (21)25,386 45 (18)
Forward commitments8,426 7 (9)4,847 9 (11)
Other2,582 — — 2,573 — — 
Equity contracts30,431 1,484 (1,779)31,152 1,856 (2,297)
Credit contracts:
Loans and leases815 — (2)1,056 — (5)
Risk participation agreements8,413 1 (4)7,802 1 (13)
Total return swaps1,424 1 (27)1,296 13 (33)
Foreign exchange contracts16,224 175 (145)12,066 189 (219)
Commodity4,536 697 (689)2,872 130 (124)
Total247,218 4,504 (3,407)245,388 5,642 (3,582)
Mortgage banking:      
Interest rate contracts:      
Swaps634 — — 687 — — 
Interest rate lock commitments4,928 38 (16)8,609 186 (3)
When issued securities, forward rate agreements and forward commitments
9,082 63 (2)11,691 6 (73)
Other308 1 — 466 — — 
Total14,952 102 (18)21,453 192 (76)
MSRs:      
Interest rate contracts:      
Swaps38,329 — (3)36,161 — (5)
Options101 1 — 101 — — 
When issued securities, forward rate agreements and forward commitments
3,644 — (32)1,314 7 — 
Other1,682 — — 760 — — 
Total43,756 1 (35)38,336 7 (5)
Total derivatives not designated as hedges305,926 4,607 (3,460)305,177 5,841 (3,663)
Total derivatives$329,932 4,607 (3,464)$322,942 5,841 (3,663)
Gross amounts in the Consolidated Balance Sheets:    
Amounts subject to master netting arrangements
(1,314)1,314  (1,561)1,561 
Cash collateral (received) posted for amounts subject to master netting arrangements
 (317)1,549  (443)1,547 
Net amount $2,976 $(601) $3,837 $(555)

Truist Financial Corporation 33

The following table presents the offsetting of derivative instruments including financial instrument collateral related to legally enforceable master netting agreements and amounts held or pledged as collateral. U.S. GAAP does not permit netting of non-cash collateral balances in the Consolidated Balance Sheets:
September 30, 2021
(Dollars in millions)		Gross AmountAmount OffsetNet Amount in Consolidated Balance SheetsHeld/Pledged Financial InstrumentsNet Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement$3,714 $(1,631)$2,083 $(3)$2,080 
Derivatives not subject to master netting arrangement or similar arrangement521 — 521 — 521 
Exchange traded derivatives372 — 372 — 372 
Total derivative assets$4,607 $(1,631)$2,976 $(3)$2,973 
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement$(3,221)$2,863 $(358)$53 $(305)
Derivatives not subject to master netting arrangement or similar arrangement(242)— (242)— (242)
Exchange traded derivatives(1)— (1)— (1)
Total derivative liabilities$(3,464)$2,863 $(601)$53 $(548)
December 31, 2020
(Dollars in millions)		Gross AmountAmount OffsetNet Amount in Consolidated Balance SheetsHeld/Pledged Financial InstrumentsNet Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement$4,383 $(1,618)$2,765 $(2)$2,763 
Derivatives not subject to master netting arrangement or similar arrangement705 — 705 (1)704 
Exchange traded derivatives753 (386)367 — 367 
Total derivative assets$5,841 $(2,004)$3,837 $(3)$3,834 
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement$(3,103)$2,722 $(381)$35 $(346)
Derivatives not subject to master netting arrangement or similar arrangement(174)— (174)— (174)
Exchange traded derivatives(386)386 — — — 
Total derivative liabilities$(3,663)$3,108 $(555)$35 $(520)

The following table presents the carrying value of hedged items in fair value hedging relationships:
September 30, 2021December 31, 2020
Hedge Basis AdjustmentHedge Basis Adjustment
(Dollars in millions)Hedged Asset / Liability BasisItems Currently DesignatedDiscontinued HedgesHedged Asset / Liability BasisItems Currently DesignatedDiscontinued Hedges
AFS securities (1)$116,770 $(495)$43 $100,988 $(33)$50 
Loans and leases394 — 16 470 — 18 
Long-term debt22,490 — 700 27,725 — 930 
(1)The amortized cost of AFS securities was $117.8 billion at September 30, 2021 and $99.4 billion at December 31, 2020.
34 Truist Financial Corporation

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.
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
Pre-tax gain (loss) reclassified from AOCI into interest expense:
Deposits$— $(2)$(2)$(8)
Short-term borrowings— (5)(12)(13)
Long-term debt(7)(3)(17)(18)
Total$(7)$(10)$(31)$(39)
Pre-tax gain (loss) reclassified from AOCI into other expense: (1)
Deposits$— $— $(12)$— 
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.

The following table summarizes the impact on net interest income related to fair value hedges:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
AFS securities:
Amounts related to interest settlements$(15)$— $(39)$— 
Recognized on derivatives81 — 442 — 
Recognized on hedged items
(83)(3)(448)(7)
Net income (expense) recognized(17)(3)(45)(7)
Loans and leases:
Amounts related to interest settlements— (1)— (1)
Recognized on derivatives— — — (3)
Recognized on hedged items
(1)— (2)1 
Net income (expense) recognized(1)(1)(2)(3)
Long-term debt:
Amounts related to interest settlements— 78 — 182 
Recognized on derivatives— (99)— 831 
Recognized on hedged items
73 112 227 (817)
Net income (expense) recognized73 91 227 196 
Net income (expense) recognized, total
$55 $87 $180 $186 

The following table presents information about the Company’s terminated cash flow and fair value hedges:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Cash flow hedges:
Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2022)
$(13)$(64)
Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months
(13)(42)
Fair value hedges:
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2029)
$641 $862 
Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months
223 292 


Truist Financial Corporation 35

Derivatives Not Designated as Hedging Instruments under GAAP

The Company also enters into derivatives that are not designated as accounting hedges under GAAP to economically hedge certain risks as well as in a trading capacity with its clients.

The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)Income Statement Location2021202020212020
Client-related and other risk management:  
Interest rate contractsInvestment banking and trading income and other income$28 $14 $142 $(13)
Foreign exchange contractsInvestment banking and trading income and other income73 (50)107 31 
Equity contractsInvestment banking and trading income and other income2 3 (18)(4)
Credit contractsInvestment banking and trading income and other income13 (68)(48)238 
Commodity contractsInvestment banking and trading income1 1 6 5 
Mortgage banking:  
Interest rate contractsResidential mortgage income(18)(137)(15)(285)
Interest rate contractsCommercial real estate related income— 1 (1)1 
MSRs:  
Interest rate contractsResidential mortgage income(48)(3)(162)534 
Interest rate contractsCommercial real estate related income(1)— (8)22 
Total$50 $(239)$3 $529 

Credit Derivative Instruments

As part of the Company’s corporate investment banking business, the Company enters into contracts that are, in form or substance, written guarantees; specifically, risk participations, TRS, and credit default swaps. The Company accounts for these contracts as derivatives.

Truist has entered into risk participation agreements to share the credit exposure with other financial institutions on client-related interest rate derivative contracts. Under these agreements, the Company has guaranteed payment to a dealer counterparty in the event the counterparty experiences a loss on the derivative due to a failure to pay by the counterparty’s client. The Company manages its payment risk on its risk participations by monitoring the creditworthiness of the underlying client through the normal credit review process that the Company would have performed had it entered into a derivative directly with the obligors. At September 30, 2021, the remaining terms on these risk participations ranged from less than one year to 10 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. To mitigate its credit risk, the Company typically receives initial margin from the counterparty upon entering into the TRS and variation margin if the fair value of the underlying reference assets deteriorates. For additional information on the Company’s TRS contracts, see “Note 14. Commitments and Contingencies.”

The Company enters into credit default swaps to hedge credit risk associated with certain loans and leases. The Company accounts for these contracts as derivatives, and accordingly, recognizes these contracts at fair value.

The following table presents additional information related to interest rate derivative risk participation agreements and total return swaps:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Risk participation agreements:
Maximum potential amount of exposure
$563 $530 
Total return swaps:
Cash collateral held292 374 

36 Truist Financial Corporation

The following table summarizes collateral positions with counterparties:
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Dealer and other counterparties:  
Cash and other collateral received from counterparties$319 $446 
Derivatives in a net gain position secured by collateral received474 585 
Unsecured positions in a net gain with counterparties after collateral postings
155 49 
Cash collateral posted to dealer counterparties1,603 1,524 
Derivatives in a net loss position secured by collateral1,703 1,604 
Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade
5 3 
Central counterparties clearing:
Cash collateral, including initial margin, posted to central clearing parties37 172 
Derivatives in a net loss position32 90 
Derivatives in a net gain position18 5 
Securities pledged to central counterparties clearing1,193 1,281 

NOTE 17. Computation of EPS

Basic and diluted EPS calculations are presented in the following table:
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except per share data, shares in thousands)2021202020212020
Net income available to common shareholders$1,616 $1,068 $4,509 $2,956 
Weighted average number of common shares1,334,825 1,347,916 1,339,558 1,346,605 
Effect of dilutive outstanding equity-based awards12,029 10,206 12,154 10,569 
Weighted average number of diluted common shares1,346,854 1,358,122 1,351,712 1,357,174 
Basic EPS$1.21 $0.79 $3.37 $2.20 
Diluted EPS$1.20 $0.79 $3.34 $2.18 
Anti-dilutive awards5 1,647 3 3,267 

NOTE 18. Operating Segments

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. For additional information, see “Note 21. Operating Segments” of the Annual Report on Form 10-K for the year ended December 31, 2020.

Truist Financial Corporation 37

The following table presents results by segment:
Three Months Ended September 30,
(Dollars in millions)		CB&WC&CBIHOT&C (1)Total
2021202020212020202120202021202020212020
Net interest income (expense)$1,667 $1,858 $1,124 $1,234 $27 $31 $415 $239 $3,233 $3,362 
Net intersegment interest income (expense)369 333 49 49 (2)(7)(416)(375)— — 
Segment net interest income2,036 2,191 1,173 1,283 25 24 (1)(136)3,233 3,362 
Allocated provision for credit losses(5)181 (264)311 1 — (56)(71)(324)421 
Segment net interest income after provision2,041 2,010 1,437 972 24 24 55 (65)3,557 2,941 
Noninterest income1,032 997 753 608 652 524 (72)81 2,365 2,210 
Amortization of intangibles78 103 37 45 30 17 — 5 145 170 
Other noninterest expense1,855 1,834 783 800 507 429 505 522 3,650 3,585 
Income (loss) before income taxes1,140 1,070 1,370 735 139 102 (522)(511)2,127 1,396 
Provision (benefit) for income taxes268 252 295 149 34 25 (174)(171)423 255 
Segment net income (loss)$872 $818 $1,075 $586 $105 $77 $(348)$(340)$1,704 $1,141 
Identifiable assets (period end)$161,116 $166,640 $177,578 $191,625 $9,454 $6,999 $181,736 $133,919 $529,884 $499,183 
Nine Months Ended September 30,
(Dollars in millions)		CB&WC&CBIHOT&C (1)Total
2021202020212020202120202021202020212020
Net interest income (expense)$5,110 $5,564 $3,511 $4,116 $76 $99 $1,066 $681 $9,763 $10,460 
Net intersegment interest income (expense)1,162 1,033 115 (207)(10)(28)(1,267)(798)— — 
Segment net interest income6,272 6,597 3,626 3,909 66 71 (201)(117)9,763 10,460 
Allocated provision for credit losses91 887 (698)1,244 1 7 (104)20 (710)2,158 
Segment net interest income after provision6,181 5,710 4,324 2,665 65 64 (97)(137)10,473 8,302 
Noninterest income2,877 3,074 2,254 1,684 1,983 1,679 (147)157 6,967 6,594 
Amortization of intangibles236 316 113 130 80 53 2 14 431 513 
Other noninterest expense5,544 5,584 2,324 2,481 1,451 1,280 1,666 1,206 10,985 10,551 
Income (loss) before income taxes3,278 2,884 4,141 1,738 517 410 (1,912)(1,200)6,024 3,832 
Provision (benefit) for income taxes768 680 896 330 125 102 (600)(442)1,189 670 
Segment net income (loss)$2,510 $2,204 $3,245 $1,408 $392 $308 $(1,312)$(758)$4,835 $3,162 
Identifiable assets (period end)$161,116 $166,640 $177,578 $191,625 $9,454 $6,999 $181,736 $133,919 $529,884 $499,183 
(1)Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure.

38 Truist Financial Corporation

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A is intended to assist readers in their analysis of the accompanying Consolidated Financial Statements and supplemental financial information. It should be read in conjunction with the Consolidated Financial Statements, the accompanying Notes to the Consolidated Financial Statements in this Form 10-Q, other information contained in this document, as well as with Truist’s Annual Report on Form 10-K for the year ended December 31, 2020.

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, 2020 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, 2020 for additional disclosures.

Supplementary Leverage Ratio

The temporary exclusion of U.S. Treasury securities and deposits at the FRB from the calculation of the supplementary leverage ratio expired as scheduled on March 31, 2021. This temporary relief previously benefited the Company’s supplementary leverage ratio by approximately 20 basis points. The FRB also announced plans to invite public comment on several potential supplementary leverage ratio modifications to ensure that the supplementary leverage ratio remains effective in an environment of higher reserves, though such proposal had not been published as of the date of this report.

Stress Capital Buffer

The FRB assigned Truist an SCB of 2.5%, which is effective from October 1, 2021 to September 30, 2022, at which point a revised SCB will be calculated and provided to Truist.

The FRB has lifted the restrictions on capital distributions for large banking organizations, including Truist, that had been in place due to the uncertainty caused by the COVID-19 pandemic. Going forward, Truist is subject to the normal restrictions on capital distributions under the SCB framework and applicable law.

Security-Based Swap Dealer Registration

In November 2021, Truist Bank conditionally registered with the SEC as a security-based swap dealer. As a result, Truist Bank’s security-based swaps business is now subject to requirements that are similar to the CFTC rules applicable to swap dealers, including trade reporting, business conduct standards, recordkeeping, margin, and potentially mandatory clearing and exchange trading requirements.

Resolution Plans

The FDIC issued a policy statement in June 2021 announcing that it will resume requiring bank level resolution plans for large banks, including Truist Bank, and bank-level resolution plans will have more streamlined content requirements. Truist Bank will be required to submit a bank-level resolution plan every three years. During the third quarter, Truist Bank was informed by the FDIC that its next resolution plan will be due on or before December 1, 2022. The FDIC also clarified the content requirements of the next resolution plan Truist Bank is required to submit.

Truist submitted its inaugural resolution plan to the FRB and FDIC in September 2021, which is currently under review.

Lifting of Consent Order

In June 2021, the FDIC terminated the consent order between SunTrust Bank and the FRB relating to certain identified legacy compliance issues. Truist Bank, as successor to SunTrust Bank, committed to comply with the obligations in the order in connection with the FDIC’s and FRB’s approval of the Merger.

Truist Financial Corporation 39

Executive Overview

Truist had solid financial performance in the third quarter of 2021 that was driven by strong fee income from a diverse business mix - including wealth, insurance brokerage, investment banking, and positive trends in a number of other businesses given improving economic conditions. Improving economic conditions also led to strong credit performance and a benefit from the provision for credit losses. The Company achieved a significant milestone in early October with the successful migration of approximately 7 million clients (primarily heritage BB&T) to the new Truist technology ecosystem. In addition, Truist completed the retail mortgage origination conversion and accelerated the roll-out of the new Truist digital app during the third quarter of 2021. Truist continues to reaffirm its commitment to achieving $1.6 billion in net cost saves on a run rate basis by the fourth quarter of 2022. Truist also continues to closely monitor the COVID-19 pandemic and its effects on stakeholders and the financial markets and is actively supporting teammates, clients, and communities.

Integration Efforts

Major milestones during 2021 include:

•Completed the Wealth brokerage and trust transitions.
•Completed the mortgage systems transition, enabling clients to get the best of both heritage SunTrust and heritage BB&T to meet their homeownership needs.
•Continued to activate the Integrated Relationship Management approach. Truist’s Integrated Relationship Management approach is designed to deepen client relationships and bring the full breadth and depth of Truist’s products and services to meet clients’ financial needs.
•Introduced the new Truist digital app; migrated approximately 7 million clients to the new Truist digital banking experience, with nearly half of clients beginning to use the app
•Converted heritage BB&T retail and commercial clients to the new Truist technology ecosystem, the most significant milestone to date.

Supporting Clients

Truist continues to work closely with clients as they navigate through the continuing challenges from the COVID-19 pandemic. Truist supported clients by being the sixth largest amongst commercial banks in the second round of PPP funding, assisting clients with the forgiveness process, and continuing to support clients as they transition from payment relief programs. Truist originated approximately $17 billion of PPP loans. As of September 30, 2021, Truist had $3.5 billion of PPP loans outstanding.

Supporting Teammates

Truist offered a voluntary separation and retirement program to eligible teammates in June 2021. Nearly 2,000 teammates elected to participate in the voluntary program designed to provide tenured teammates flexibility on how they want to manage their career. Approximately 50% of those that elected to participate had separation dates of September 30, 2021. While Truist is hiring in some areas and rightsizing in others through natural attrition, planned staffing reductions, and the voluntary separation and retirement program, Truist is actively supporting all teammates affected by reductions with opportunities and tools for internal placement, severance payments, and outplacement assistance and coaching. The Company recognized $189 million of merger-related and restructuring charges in 2021 related to the voluntary separation and retirement program.

Truist has made progress towards the commitment to increase racially and ethnically diverse teammates among senior leadership roles to more than 15% by 2023 with current progress at 14.2% as of September 30, 2021. For early career program hiring in 2021, 54% of seats at Truist were filled by candidates from various diverse backgrounds. Truist teammates have received $24 million through Truist Momentum, a workplace financial wellness program that educates, equips, and inspires teammates to manage their money based on what matters most to them.

Supporting Communities

Truist continued to fulfill its purpose in meaningful ways in the community in the third quarter through a number of unique and creative initiatives. Truist expanded its partnership with EVERFI bringing literacy tools to elementary schools across the nation. Truist showed leadership as the first top-10 bank to join BlackRock’s philanthropic Emergency Savings Initiative. Truist Community Capital provided over $300 million in equity in the third quarter to support communities through investments in affordable housing, access to healthy foods and education, and investments in job creation and small businesses. Truist continued to make solid progress towards the Company’s $60 billion Community Benefits Plan, ending August 2021 at 112% of the annual target. In July, Truist also released its second annual Corporate Social Responsibility and Environmental, Social and Governance report to outline its advancements and commitments with regard to diversity, equity, and inclusion; environmental sustainability and climate change; governance; community involvement; and financial inclusion.

40 Truist Financial Corporation

Executive Leadership changes

During the third quarter Truist announced its new executive leadership structure effective September 1, 2021. As previously announced as part of the Merger, William H. Rogers, Jr. succeeded Kelly S. King as CEO on September 12, 2021 and Kelly S. King transitioned to the role of executive chairman through March 12, 2022. The other members of the executive leadership team and their roles are:

Daryl N. Bible - Chief Financial Officer
Scott Case - Chief Information Officer
Hugh S. (Beau) Cummins, III - Vice Chair
Ellen M. Fitzsimmons - Chief Legal Officer and Head of Public Affairs
John Howard - Chief Insurance Officer
Michael B. Maguire - Chief National Consumer Finance Services and Payments Officer
Kimberly Moore-Wright - Chief Teammate Officer and Head of Enterprise Diversity
Brant J. Standridge - Chief Retail Community Banking Officer
Clarke R. Starnes III - Chief Risk Officer
Joseph M. Thompson - Chief Wealth Officer
David H. Weaver - Chief Commercial Community Banking Officer
Dontá L. Wilson - Chief Digital and Client Experience Officer

Financial Results

Net income available to common shareholders for the third quarter of 2021 totaled $1.6 billion, up 51%, compared with the third quarter of last year. On a diluted per common share basis, earnings for the third quarter of 2021 were $1.20, an increase of $0.41 compared to the third quarter of 2020. Truist’s results of operations for the third quarter of 2021 produced an annualized return on average assets of 1.28% and an annualized return on average common shareholders’ equity of 10.2% compared to prior year returns of 0.91% and 6.9%, respectively. Results for the third quarter of 2021 included merger-related and restructuring charges of $172 million ($132 million after-tax), incremental operating expenses related to the Merger of $191 million ($147 million after-tax), and a one-time professional fee expense of $30 million ($23 million after-tax). Results for the third quarter of 2020 included $236 million ($181 million after-tax) of merger-related and restructuring charges, $152 million ($115 million after-tax) of incremental operating expenses related to the Merger, securities gains of $104 million ($80 million after-tax), and a charitable contribution of $50 million ($38 million after-tax).

Truist’s revenue for the third quarter of 2021 was $5.6 billion. On a TE basis, revenue was also $5.6 billion for the third quarter of 2021, an increase of $25 million, or 0.4%, compared to the same period in 2020. Excluding securities gains of $104 million from the third quarter of 2020, adjusted taxable equivalent revenues increased $129 million, or 2.3%, compared to the earlier quarter.

TE net interest income for the third quarter of 2021 was down $130 million, or 3.8%, compared to the earlier quarter due to lower purchase accounting accretion, lower rates on earning assets, and a decrease in loans. These decreases were partially offset by growth in the securities portfolio, lower funding costs, higher fees on PPP loans, and fewer interest deferrals on COVID-19 loan accommodations. Average earning assets increased $26.4 billion, or 6.1%, compared to the earlier quarter. The increase in average earning assets reflects a $66.4 billion, or 83%, increase in average securities, while average total loans and leases decreased $25.4 billion, or 8.0%, and average other earning assets decreased $16.5 billion, or 46%. The growth in average earning assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $30.5 billion, or 8.2%, compared to the earlier quarter, while average long-term debt and short-term borrowings decreased $3.6 billion, or 8.8%, and $849 million, or 14%, respectively.

Net interest margin was 2.81%, down 29 basis points compared to the same period in 2020. The yield on the total loan portfolio for the third quarter of 2021 was 3.90%, down 14 basis points compared to the earlier quarter, reflecting the impact of lower purchase accounting accretion and a lower rate environment. The yield on the average securities portfolio was 1.50%, down 47 basis points compared to the earlier quarter primarily due to lower yields on new purchases.

The provision for credit losses was a benefit of $324 million, compared to a cost of $421 million for the same period in 2020. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includes a reserve release due to the improving economic outlook. Net charge-offs for the third quarter of 2021 totaled $135 million compared to $326 million in the earlier quarter. The third quarter of 2020 included $97 million of charge-offs related to the implementation of CECL, which required a gross up of loan carrying values in connection with the establishment of an allowance on PCD loans. The net charge-off ratio for the current quarter of 0.19% was down 23 basis points compared to the third quarter 2020, due primarily to the additional losses on PCD loans taken in the earlier quarter and lower actual net losses in the commercial portfolio.

Truist Financial Corporation 41

Noninterest income for the third quarter of 2021 increased $155 million, or 7.0%, compared to the same period in 2020. Noninterest income for the third quarter of 2020 included $104 million of securities gains on available-for-sale securities. Excluding securities gains, noninterest income increased $259 million, or 12%, compared to the earlier quarter. Insurance income increased $127 million due to acquisitions, as well as organic growth. Investment banking and trading income increased $57 million due to strong merger and acquisition activity and loan syndications. Wealth management income increased $32 million due to higher valuations of assets under management. Residential mortgage banking income decreased $42 million primarily due to lower production related revenues as a result of lower gain on sale margins and volumes, partially offset by higher servicing income due to increases in the valuation of mortgage servicing rights and lower prepayment rates. Additionally, there were increases in service charges on deposit accounts, other income, and card and payment related fees due to improved economic activity.

Noninterest expense for the third quarter of 2021 was up $40 million, or 1.1%, compared to the same period in 2020. Merger-related and restructuring charges decreased $64 million primarily due to facilities impairments in the earlier quarter, while incremental operating expenses related to the Merger increased $39 million, primarily reflected in professional fees and outside processing. The current quarter also includes a $30 million professional fee to develop an ongoing program to identify, prioritize, and roadmap teammate generated revenue growth and expense savings opportunities beyond the Merger. The earlier quarter included $50 million for charitable contributions to the Truist Charitable Fund (other expense). Excluding the aforementioned items and changes in amortization of intangibles, adjusted noninterest expense was up $110 million, or 3.5%, compared to the earlier quarter. Additionally, increases in personnel expense of $129 million were partially offset by a decline in net occupancy expense of $46 million and other expense of $72 million.

The provision for income taxes was $423 million for the third quarter of 2021, compared to $255 million for the same period in 2020. This produced an effective tax rate for the third quarter of 2021 of 19.9%, compared to 18.3% for the earlier quarter. The higher effective tax rate is primarily due to higher pre-tax income in the current quarter without a corresponding increase in beneficial tax items.

Truist’s total assets at September 30, 2021 were $529.9 billion, an increase of $20.7 billion, or 4.1%, compared to December 31, 2020. The increase in total assets was primarily a result of strong deposit growth, the deployment of which led to an increase in AFS securities of $30.3 billion, which was partially offset by a $15.1 billion decline in total loans and leases.

Total deposits at September 30, 2021 were $405.9 billion, an increase of $24.8 billion, or 6.5%, compared to December 31, 2020. Deposit growth was strong during the first nine months of 2021 resulting from fiscal and monetary stimulus, partially offset by the maturity of higher-cost personal accounts.

Asset quality remains excellent, reflecting Truist’s prudent risk culture, diverse portfolio, improving economic conditions, and the ongoing effects of government stimulus. As of September 30, 2021, nonperforming assets were 0.23% of total assets, down four basis points from December 31, 2020. The allowance for loan and lease loss coverage ratio was 4.35x nonperforming loans and leases held for investment, compared to 4.39x at December 31, 2020.

Truist maintained strong capital and liquidity. As of September 30, 2021, the CET1 ratio was 10.1% and the average LCR was 114%. For the nine months ended September 30, 2021, Truist completed $1.1 billion of share repurchases and redeemed $1.4 billion of preferred stock. Additionally, the Company had $5.8 billion of senior long term debt maturities and redemptions, partially offset by $4.5 billion of issuances. Truist increased the common dividend 7% during the third quarter to $0.48 per share, resulting in dividend and total payout ratios for the third quarter of 2021 of 40%. In October 2021, Truist declared common dividends of $0.48 per share for the fourth quarter of 2021.

Truist continues to target a CET1 ratio of approximately 9.75% over the near-term. As previously communicated, the Company expects to be able to, with appropriate approvals from its Board of Directors, deploy approximately $4 billion to $5 billion of capital (either in the form of share repurchases or acquisitions) between 3Q21 and 3Q22. During the third quarter of 2021, Truist completed the acquisition of Constellation Affiliated Partners and announced the acquisition of Service Finance, LLC, reducing the amount of capital deployment available for acquisitions or share repurchases to approximately $1 billion to $2 billion through 3Q22. Truist resumed repurchasing shares and expects to consume approximately $500 million of this capacity via share repurchases in the fourth quarter of 2021 reflecting the Company’s strong capital position, and the reduced integration risk with successful migration of heritage BB&T retail and commercial clients to the Truist ecosystem.

42 Truist Financial Corporation

Analysis of Results of Operations

Net Interest Income and NIM

Third Quarter 2021 compared to Third Quarter 2020

Net interest income for the third quarter of 2021 was down $130 million, or 3.8%, compared to the earlier quarter due to lower purchase accounting accretion, lower rates on earning assets, and a decrease in loans. These decreases were partially offset by growth in the securities portfolio, lower funding costs, higher fees on Payroll Protection Program loans, and fewer interest deferrals on COVID-19 loan accommodations. Average earning assets increased $26.4 billion, or 6.1%, compared to the earlier quarter. The increase in average earning assets reflects a $66.4 billion, or 83%, increase in average securities, while average total loans and leases decreased $25.4 billion, or 8.0%, and average other earning assets decreased $16.5 billion, or 46%. The growth in average earning assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $30.5 billion, or 8.2%, compared to the earlier quarter, while average long-term debt and short-term borrowings decreased $3.6 billion, or 8.8%, and $849 million, or 14%, respectively.

Net interest margin was 2.81%, down 29 basis points compared to the earlier quarter. The yield on the total loan portfolio for the third quarter of 2021 was 3.90%, down 14 basis points compared to the earlier quarter, reflecting the impact of lower purchase accounting accretion and a lower rate environment. The yield on the average securities portfolio was 1.50%, down 47 basis points compared to the earlier quarter primarily due to lower yields on new purchases.

The average cost of total deposits was 0.03%, down seven basis points compared to the earlier quarter. The average rate on short-term borrowings was 0.68%, down 17 basis points compared to the earlier quarter. The average rate on long-term debt was 1.61%, up 13 basis points compared to the earlier quarter. The lower rates on deposits and short-term borrowings reflect the lower rate environment. The higher rates on long-term debt was due to the runoff of lower rate FHLB advances.

Nine Months of 2021 compared to Nine Months of 2020

Net interest income for the nine months ended September 30, 2021 was down $710 million, or 6.7%, compared to the prior period due to lower purchase accounting accretion, lower rates on earning assets, and a decrease in loans. These decreases were partially offset by growth in the securities portfolio, lower funding costs, higher fees on Payroll Protection Program loans, and fewer interest deferrals on COVID-19 loan accommodations. Average earning assets increased $21.8 billion, or 5.0%, compared to the prior period. The increase in average earning assets reflects a $57.9 billion, or 75%, increase in average securities, while average total loans and leases decreased $22.4 billion, or 7.1%, and average other earning assets decreased $14.3 billion, or 42%. The growth in average earning assets is a result of an increase in investment securities driven by strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $34.9 billion, or 9.7%, compared to the prior period, while average long-term debt and short-term borrowings decreased $10.3 billion, or 22%, and $5.3 billion, or 46%, respectively.

Net interest margin was 2.90% for the nine months ended September 30, 2021, down 36 basis points compared to the prior period. The yield on the total loan portfolio for the nine months ended September 30, 2021 was 4.00%, down 39 basis points compared to the prior period, reflecting the impact of lower purchase accounting accretion and the lower rate environment. The yield on the average securities portfolio was 1.48% for the nine months ended September 30, 2021, down 83 basis points compared to the prior period primarily due to lower yields on new purchases and premium amortization.

The average cost of total deposits was 0.04% for the nine months ended September 30, 2021, down 23 basis points compared to the prior period. The average rate on short-term borrowings was 0.84% for the nine months ended September 30, 2021, down 62 basis points compared to the prior period. The average rate on long-term debt was 1.59% for the nine months ended September 30, 2021, down 19 basis points compared to the prior period. The lower rates on interest-bearing liabilities reflect the lower rate environment.

As of September 30, 2021, the remaining unamortized fair value marks on the loan and lease portfolio, deposits, and long-term debt were $1.5 billion, $9 million, and $157 million, respectively. As of December 31, 2020, the remaining unamortized fair value marks on the loan and lease portfolio, deposits and long-term debt were $2.4 billion, $19 million, and $216 million, respectively.

The remaining unamortized fair value mark on loans and leases consists of $807 million for consumer loans and leases, and $733 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.
Truist Financial Corporation 43

Table 1-1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1)
Three Months Ended September 30,
(Dollars in millions)		Average Balances (5)Annualized Yield/RateIncome/ExpenseIncr.
(Decr.)		Change due to
202120202021202020212020RateVolume
Assets         
Total securities, at amortized cost: (2)         
U.S. Treasury$9,699 $2,218 0.72 %1.78 %$18 $10 $8 $(9)$17 
GSE1,830 1,842 2.31 2.33 10 10 — — — 
Agency MBS132,890 75,232 1.53 1.95 509 366 143 (93)236 
States and political subdivisions425 499 3.52 5.03 4 7 (3)(2)(1)
Non-agency MBS1,398 — 2.20 — 8 — 8 — 8 
Other30 37 1.90 1.99 — 1 (1)— (1)
Total securities146,272 79,828 1.50 1.97 549 394 155 (104)259 
Interest earning trading assets5,809 4,056 2.81 3.23 41 32 9 (5)14 
Other earning assets (3)19,331 35,819 0.25 0.26 13 24 (11)(1)(10)
Loans and leases, net of unearned income: (4)        
Commercial and industrial130,025 143,452 3.00 3.02 981 1,087 (106)(7)(99)
CRE24,849 27,761 2.86 2.88 181 203 (22)(1)(21)
Commercial Construction5,969 6,861 2.96 3.26 42 55 (13)(5)(8)
Lease financing4,917 5,626 3.39 3.71 42 52 (10)(4)(6)
Residential mortgage45,369 51,500 3.96 4.47 450 576 (126)(62)(64)
Residential home equity and direct25,242 26,726 5.67 5.86 360 394 (34)(13)(21)
Indirect auto26,830 24,732 5.99 6.51 405 405 — (33)33 
Indirect other11,112 11,530 6.54 7.05 183 204 (21)(14)(7)
Student7,214 7,446 4.02 4.30 74 80 (6)(4)(2)
Credit card4,632 4,810 9.01 9.03 105 109 (4)— (4)
Total loans and leases HFI286,159 310,444 3.92 4.06 2,823 3,165 (342)(143)(199)
LHFS4,179 5,247 2.69 2.78 28 37 (9)(1)(8)
Total loans and leases290,338 315,691 3.90 4.04 2,851 3,202 (351)(144)(207)
Total earning assets461,750 435,394 2.98 3.34 3,454 3,652 (198)(254)56 
Nonearning assets64,935 65,432       
Total assets$526,685 $500,826       
Liabilities and Shareholders’ Equity        
Interest-bearing deposits:        
Interest-checking$107,802 $96,707 0.05 0.06 14 15 (1)(3)2 
Money market and savings136,094 123,598 0.03 0.06 9 19 (10)(12)2 
Time deposits17,094 27,940 0.23 0.89 10 62 (52)(34)(18)
Total interest-bearing deposits (6)260,990 248,245 0.05 0.15 33 96 (63)(49)(14)
Short-term borrowings5,360 6,209 0.68 0.85 9 13 (4)(2)(2)
Long-term debt37,329 40,919 1.61 1.48 151 152 (1)13 (14)
Total interest-bearing liabilities303,679 295,373 0.25 0.35 193 261 (68)(38)(30)
Noninterest-bearing deposits (6)141,738 123,966        
Other liabilities11,915 11,853        
Shareholders’ equity69,353 69,634        
Total liabilities and shareholders’ equity$526,685 $500,826        
Average interest-rate spread  2.73 %2.99 %     
NIM/net interest income - taxable equivalent  2.81 %3.10 %$3,261 $3,391 $(130)$(216)$86 
Taxable-equivalent adjustment    $28 $29    
(1) Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs, and dividends.
(2) Total securities include AFS 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) Excludes basis adjustments for fair value hedges.
(6) Total deposit costs were 0.03% and 0.10% for the three months ended September 30, 2021 and 2020, respectively.
44 Truist Financial Corporation

Table 1-2: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1)
Nine Months Ended September 30,
(Dollars in millions)		Average Balances (5)Annualized Yield/RateIncome/ExpenseIncr.
(Decr.)		Change due to
202120202021202020212020RateVolume
Assets         
Total securities, at amortized cost: (2)         
U.S. Treasury$6,872 $2,243 0.74 %1.86 %$38 $31 $7 $(28)$35 
GSE1,837 1,847 2.32 2.33 32 32 — — — 
Agency MBS125,157 72,152 1.49 2.29 1,401 1,240 161 (533)694 
States and political subdivisions435 512 3.53 4.04 12 16 (4)(2)(2)
Non-agency MBS477 115 2.18 16.78 8 15 (7)(21)14 
Other32 37 1.90 2.44 — 1 (1)(1)— 
Total securities134,810 76,906 1.48 2.31 1,491 1,335 156 (585)741 
Interest earning trading assets5,208 4,695 2.80 3.85 110 135 (25)(39)14 
Other earning assets (3)19,453 33,708 0.26 0.57 38 144 (106)(60)(46)
Loans and leases, net of unearned income: (4)   
Commercial and industrial133,218 142,731 3.06 3.47 3,045 3,710 (665)(425)(240)
CRE25,563 27,538 2.86 3.46 553 717 (164)(116)(48)
Commercial Construction6,293 6,673 2.98 3.92 135 192 (57)(46)(11)
Lease financing4,928 5,872 3.86 4.24 143 187 (44)(16)(28)
Residential mortgage44,931 52,288 4.25 4.53 1,431 1,778 (347)(106)(241)
Residential home equity and direct25,378 27,161 5.74 6.08 1,089 1,237 (148)(68)(80)
Indirect auto26,547 24,809 6.25 6.68 1,240 1,240 — (83)83 
Indirect other10,920 11,255 6.79 7.19 555 606 (51)(33)(18)
Student7,375 7,622 3.96 4.75 219 271 (52)(43)(9)
Credit card4,610 5,097 8.99 9.34 310 356 (46)(13)(33)
Total loans and leases HFI289,763 311,046 4.02 4.42 8,720 10,294 (1,574)(949)(625)
LHFS4,485 5,575 2.61 3.00 88 126 (38)(15)(23)
Total loans and leases294,248 316,621 4.00 4.39 8,808 10,420 (1,612)(964)(648)
Total earning assets453,719 431,930 3.08 3.72 10,447 12,034 (1,587)(1,648)61 
Nonearning assets64,444 65,780        
Total assets$518,163 $497,710        
Liabilities and Shareholders’ Equity         
Interest-bearing deposits:         
Interest-checking$106,234 $93,205 0.06 0.28 44 199 (155)(178)23 
Money market and savings133,167 123,536 0.03 0.27 27 254 (227)(245)18 
Time deposits18,609 32,157 0.32 1.10 45 265 (220)(138)(82)
Total interest-bearing deposits (6)258,010 248,898 0.06 0.39 116 718 (602)(561)(41)
Short-term borrowings6,081 11,350 0.84 1.46 38 124 (86)(41)(45)
Long-term debt37,339 47,643 1.59 1.78 446 635 (189)(63)(126)
Total interest-bearing liabilities301,430 307,891 0.27 0.64 600 1,477 (877)(665)(212)
Noninterest-bearing deposits (6)136,118 110,375        
Other liabilities11,262 12,133        
Shareholders’ equity69,353 67,311        
Total liabilities and shareholders’ equity$518,163 $497,710        
Average interest-rate spread  2.81 %3.08 %     
NIM/net interest income - taxable equivalent  2.90 %3.26 %$9,847 $10,557 $(710)$(983)$273 
Taxable-equivalent adjustment    $84 $97    
(1)Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs and dividends.
(2)Total securities include AFS 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)Excludes basis adjustments for fair value hedges.
(6)Total deposit costs were 0.04% and 0.27% for the nine months ended September 30, 2021 and 2020, respectively.
Truist Financial Corporation 45

Provision for Credit Losses

Third Quarter 2021 compared to Third Quarter 2020

The provision for credit losses was a benefit of $324 million, compared to a cost of $421 million for the earlier quarter. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includes a reserve release due to the improving economic outlook. Net charge-offs for the third quarter of 2021 totaled $135 million compared to $326 million in the earlier quarter. The third quarter of 2020 included $97 million of charge-offs related to the implementation of CECL, which required a gross up of loan carrying values in connection with the establishment of an allowance on PCD loans. The net charge-off ratio for the current quarter of 0.19% was down 23 basis points compared to the third quarter 2020, due primarily to the additional losses on PCD loans taken in the earlier quarter and lower actual net losses in the commercial portfolio.

Nine Months of 2021 compared to Nine Months of 2020

The provision for credit losses was a benefit of $710 million for the nine months ended September 30, 2021, compared to a cost of $2.2 billion for the prior period. The prior period included significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current period includes reserve releases due to the improving economic outlook. Net charge-offs for the nine months ended September 30, 2021 totaled $515 million compared to $914 million in the earlier period. The 2020 period included the previously mentioned $97 million of charge-offs related to the implementation of CECL. The net charge-off ratio for the current year of 0.24% was down 15 basis points compared to the prior period, primarily driven by lower losses across all portfolios, partially driven by additional losses on PCD loans taken in 2020, combined with higher recoveries.

Noninterest Income

Noninterest income is a significant contributor to Truist’s financial results. Management focuses on diversifying its sources of revenue to reduce Truist’s reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates.
Table 2: Noninterest Income
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)20212020% Change20212020% Change
Insurance income$645 $518 24.5 %$1,961 $1,648 19.0 %
Wealth management income356 324 9.9 1,042 945 10.3 
Service charges on deposits276 247 11.7 787 754 4.4 
Residential mortgage income179 221 (19.0)396 807 (50.9)
Investment banking and trading income301 244 23.4 958 636 50.6 
Card and payment related fees225 200 12.5 650 558 16.5 
Lending related fees74 77 (3.9)268 210 27.6 
Operating lease income57 72 (20.8)191 232 (17.7)
Commercial real estate related income78 55 41.8 259 148 75.0 
Income from bank-owned life insurance43 46 (6.5)139 135 3.0 
Securities gains (losses)— 104 NM— 402 NM
Other income131 102 28.4316 119 165.5
Total noninterest income$2,365 $2,210 7.0 $6,967 $6,594 5.7 

Third Quarter 2021 compared to Third Quarter 2020

Noninterest income for the third quarter of 2021 increased $155 million, or 7.0%, compared to the earlier quarter. Noninterest income for the third quarter of 2020 included $104 million of securities gains on available-for-sale securities. Excluding securities gains, noninterest income increased $259 million, or 12%, compared to the earlier quarter. Insurance income increased $127 million due to acquisitions, as well as organic growth. Investment banking and trading income increased $57 million due to strong merger and acquisition activity and loan syndications. Wealth management income increased $32 million due to higher valuations of assets under management. Service charges on deposit accounts and card and payment related fees increased $29 million and $25 million, respectively, due to increased economic activity. Residential mortgage banking income decreased $42 million primarily due to lower production related revenues as a result of lower gain on sale margins and volumes, partially offset by higher servicing income due to increases in the valuation of mortgage servicing rights and lower prepayment rates. Other income increased $29 million primarily due to investment income (primarily valuation gains) from the Company’s SBIC investments.

46 Truist Financial Corporation

Nine Months of 2021 compared to Nine Months of 2020

Noninterest income for the nine months ended September 30, 2021 increased $373 million, or 5.7%, compared to the prior period. Other income for the nine months ended September 30, 2021 includes a $37 million gain from the divestiture of certain businesses, whereas noninterest income for the nine months ended September 30, 2020 included $402 million of securities gains on available-for-sale securities. Excluding securities gains and the divestiture gain, noninterest income increased $738 million, or 12%, compared to the prior period. Investment banking and trading income increased $322 million due to strong investment banking income from loan syndications and merger and acquisition fees, as well as the impact from CVA recoveries in the current period compared to losses in the earlier period. Insurance income increased $313 million due to acquisitions, as well as organic growth. Other income increased $197 million primarily due to higher valuations of $96 million for assets held for certain post-retirement benefits, which is largely offset by higher benefits expense included in personnel expense. In addition, other income increased $94 million related to increased investment income (primarily valuations gains) from the Company’s SBIC and Truist Ventures investments. Commercial real-estate related income increased $111 million primarily due to client-related structured real estate transactions. Wealth management increased $97 million due to higher valuations of assets under management. Card and payment related fees and service charges on deposits increased $92 million and $33 million, respectively, due to increased economic activity. Lending related fees increased $58 million due to gains from the sale of finance leases and noninterest loan fees due to higher unused line fees. Residential mortgage banking income decreased $411 million primarily due to lower production related revenues as a result of lower gain on sale margins and volumes, partially offset by higher servicing income due to an increase in the valuation of mortgage servicing rights. Operating lease income decreased $41 million due to declines in the lease portfolio.

Noninterest Expense

The following table provides a breakdown of Truist’s noninterest expense:
Table 3: Noninterest Expense
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)20212020% Change20212020% Change
Personnel expense$2,187 $2,058 6.3 %$6,536 $6,038 8.2 %
Professional fees and outside processing372 323 15.2 1,063 859 23.7 
Net occupancy expense187 233 (19.7)578 697 (17.1)
Software expense251 221 13.6 707 647 9.3 
Amortization of intangibles145 170 (14.7)431 513 (16.0)
Equipment expense154 127 21.3 389 363 7.2 
Marketing and customer development94 75 25.3 226 215 5.1 
Operating lease depreciation47 56 (16.1)144 204 (29.4)
Loan-related expense52 59 (11.9)161 177 (9.0)
Regulatory costs43 34 26.5 99 93 6.5 
Merger-related and restructuring charges172 236 (27.1)610 552 10.5 
Loss (gain) on early extinguishment of debt— — — (3)235 (101.3)
Other expense91 163 (44.2)475 471 0.8 
Total noninterest expense$3,795 $3,755 1.1 $11,416 $11,064 3.2 

Third Quarter 2021 compared to Third Quarter 2020

Noninterest expense for the third quarter of 2021 was up $40 million, or 1.1%, compared to the earlier quarter. Merger-related and restructuring charges decreased $64 million primarily due to facilities impairments in the earlier quarter, while incremental operating expenses related to the Merger increased $39 million, primarily reflected in professional fees and outside processing. The current quarter also includes a $30 million professional fee to develop an ongoing program to identify, prioritize, and roadmap teammate generated revenue growth and expense savings opportunities beyond the Merger. The earlier quarter included $50 million for charitable contributions to the Truist Charitable Fund (other expense). Excluding the aforementioned items and changes in amortization of intangibles, adjusted noninterest expense was up $110 million, or 3.5%, compared to the earlier quarter. Personnel expense increased $129 million primarily due to higher incentive expenses due to variable compensation from higher revenues and improved overall performance relative to targets, higher medical insurance claims, and personnel cost related to acquired companies, partially offset by lower equity based compensation. Additionally, net occupancy expense decreased $46 million primarily due to branch and property consolidations. Other expense also includes a decrease of $42 million for non-service-related pension cost components.

Truist Financial Corporation 47

Nine Months of 2021 compared to Nine Months of 2020

Noninterest expense for the nine months ended September 30, 2021 was up $352 million, or 3.2%, compared to the earlier period. Merger-related and restructuring charges increased $58 million and other incremental operating expenses related to the Merger increased $201 million. The current period also includes $200 million for charitable contributions to the Truist Foundation and the Truist Charitable Fund, $36 million of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges, the previously mentioned $30 million professional fee expense and a small gain on the early extinguishment of debt, whereas the earlier period included a $235 million loss on the early extinguishment of debt and a $50 million charitable contribution. Excluding the aforementioned items and changes in amortization of intangibles, noninterest expense increased $197 million, or 2.1%, compared to the earlier period. Personnel expense increased $498 million primarily driven by higher incentive expenses due to variable compensation from higher revenues and improved overall performance relative to targets, higher other employee benefits due to the previously mentioned increase in noninterest income, higher medical insurance claims, and personnel cost related to acquired companies. These increases in personnel expense were partially offset by lower salaries due to fewer FTEs. Software expense increased $60 million due to higher spending on certain projects. Other expense includes decreases of $125 million for non-service-related pension cost components. There was also a decrease of $119 million from net occupancy expense primarily due to branch and property consolidations and a decrease in operating lease depreciation of $60 million due to valuation adjustments taken in the prior year.

Merger-Related and Restructuring Charges

The following table presents a summary of merger-related and restructuring charges and the related accruals:
Table 4: Merger-Related and Restructuring Accrual Activity
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
(Dollars in millions)Accrual at Jul 1, 2021ExpenseUtilizedAccrual at Sep 30, 2021Accrual at Jan 1, 2021ExpenseUtilizedAccrual at Sep 30, 2021
Severance and personnel-related (1)$152 $77 $(154)$75 $36 $269 $(230)$75 
Occupancy and equipment5 3 (8)— — 110 (110)— 
Professional services28 79 (69)38 16 197 (175)38 
Systems conversion and related costs
— 9 (9)— — 22 (22)— 
Other10 4 (4)10 11 12 (13)10 
Total (2)$195 $172 $(244)$123 $63 $610 $(550)$123 
(1)Includes $189 million of restructuring charges for the nine months ended September 30, 2021 related to the Company’s voluntary separation and retirement program.
(2)Related to the Merger, the Company recognized $170 million of expenses for the three months ended September 30, 2021 and $578 million for the nine months ended September 30, 2021. At September 30, 2021, the Company had an accrual of $117 million related to the Merger. The remaining expense and accrual relate to other restructuring activities.

Segment Results

Truist operates and measures business activity across three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings, with functional activities included in Other, Treasury and Corporate. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. See “Note 18. Operating Segments” herein and “Note 21. Operating Segments” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 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 September 30,Nine Months Ended September 30,
(Dollars in millions)20212020% Change20212020% Change
Consumer Banking and Wealth$872 $818 6.6 %$2,510 $2,204 13.9 %
Corporate and Commercial Banking1,075 586 83.43,245 1,408 130.5 
Insurance Holdings105 77 36.4 392 308 27.3 
Other, Treasury & Corporate(348)(340)2.4 (1,312)(758)73.1 
Truist Financial Corporation$1,704 $1,141 49.3 $4,835 $3,162 52.9 

48 Truist Financial Corporation

Third Quarter 2021 compared to Third Quarter 2020

Consumer Banking and Wealth

CB&W net income was $872 million for the third quarter of 2021, an increase of $54 million compared to the earlier quarter. Segment net interest income decreased $155 million primarily due to a decline in the funding credit provided on deposits, lower purchase accounting accretion, and a decline in average loans. The allocated provision for credit losses decreased $186 million which reflects the impact of an allowance release during the current quarter and an allowance build during the earlier quarter. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includes a reserve release due to the improving economic outlook. Noninterest income increased $35 million due to increases in wealth management income due to favorable market conditions in the current quarter, card and related fee income, and service charges on deposits, partially offset by lower residential mortgage income driven by lower gain on sale margins and volumes. Noninterest expense was stable compared to earlier quarter.

CB&W average loans held for investment decreased $6.8 billion, or 4.9%, for the third quarter of 2021 compared to the earlier quarter, primarily driven by lower residential mortgage and home equity lending, partially offset by increased indirect auto lending. Average total deposits increased $23 billion, or 10.4%, for the third quarter of 2021 compared to the earlier quarter primarily due to the impact of fiscal and monetary stimulus.

Corporate and Commercial Banking

C&CB net income was $1.1 billion for the third quarter of 2021, an increase of $489 million compared to the earlier quarter. Segment net interest income decreased $110 million primarily due to reduced funding credit on deposits, lower purchase accounting accretion, and a decline in average loans, partially offset by higher spreads on loans. The allocated provision for credit losses decreased $575 million primarily reflecting an allowance release in the current quarter, whereas the earlier quarter included an allowance build. The earlier quarter reflected significant uncertainty related to the economic impacts resulting from the pandemic, whereas the current quarter includes a reserve release due to the improving economic outlook. Noninterest income increased $145 million driven by investment banking income, commercial real estate income, and higher investment income (primarily valuation gains) from SBIC investments. Noninterest expense decreased $25 million primarily due to lower operating losses, operating lease depreciation, and lower allocated corporate expenses in the current quarter, partially offset by higher restructuring charges in the current quarter.

C&CB average loans held for investment decreased $17.6 billion, or 10.5%, for the third quarter of 2021 compared to the earlier quarter, primarily due to PPP loan forgiveness and lower line utilization in commercial loans, commercial real estate, and dealer floor plan. Average total deposits increased $8.8 billion, or 6.2%, for the third quarter of 2021 compared to the earlier quarter, primarily due to the impact of fiscal and monetary stimulus.

Insurance Holdings

IH net income was $105 million for the third quarter of 2021, an increase of $28 million compared to the earlier quarter. Noninterest income increased $128 million primarily due to acquisitions and higher property and casualty insurance production from strong organic growth. Noninterest expense increased $91 million primarily due to higher performance-based incentives and amortization of intangibles related to acquisitions.

Other, Treasury & Corporate

OT&C generated a net loss of $348 million in the third quarter of 2021, compared to a net loss of $340 million in the earlier quarter. Segment net interest income increased $135 million primarily due to lower net funding credits on liabilities to other segments and higher earnings in the securities portfolio from purchases to utilize excess liquidity. The allocated provision for credit losses increased $15 million which primarily reflects a smaller release in the reserve for unfunded commitments in the current quarter compared to the earlier quarter. Noninterest income decreased $153 million primarily due to a gain on sale of securities in the earlier quarter. Noninterest expense decreased $22 million primarily due to lower merger related charges in the current quarter and charitable contributions to the Truist Foundation and the Truist Charitable Fund in the earlier quarter, partially offset by higher incentive expense driven by executive incentive compensation and higher accruals reflecting the job regrading project in the fourth quarter 2020.

Truist Financial Corporation 49

Nine Months of 2021 compared to Nine Months of 2020

Consumer Banking and Wealth

CB&W net income was $2.5 billion for the nine months ended September 30, 2021, an increase of $306 million compared to the same period of the prior year. Segment net interest income decreased $325 million primarily due to reduced funding credit on deposits, lower purchase accounting accretion, and a decline in average loans. The allocated provision for credit losses decreased $796 million primarily due to an allowance release that was primarily driven by an improving economic outlook and lower net charge offs in the auto, home equity, card, and mortgage portfolios as well as lower loan balances. Noninterest income decreased $197 million, due to lower residential mortgage income driven by lower gain on sale margins and volumes, partially offset by increased revenues in wealth management and card and payment related activities resulting from improving economic conditions as well as gains from the divestiture of certain businesses. Noninterest expense decreased $120 million primarily due to lower salary expense, pension costs, amortization of intangibles, and occupancy expenses, partially offset by increased incentives tied to performance and related benefits expense in the current year.

CB&W average loans and leases decreased $7.6 billion, or 5.4%, at September 30, 2021, compared to the same period of the prior year, primarily due to lower residential mortgage loans and home equity lending, partially offset by increased mortgage warehouse and indirect auto lending. Average total deposits were up $25.7 billion, or 12%, at September 30, 2021, compared to the same period of the prior year, primarily due to the impact of fiscal and monetary stimulus.

Corporate and Commercial Banking

C&CB net income was $3.2 billion for the nine months ended September 30, 2021, an increase of $1.8 billion compared to the same period of the prior year. Segment net interest income decreased $283 million primarily due to reduced funding credit on deposits, lower purchase accounting accretion, and a decline in average loans. The allocated provision for credit losses decreased $1.9 billion which reflects an allowance release driven by an improving economic outlook, lower net charge offs primarily in the commercial and industrial portfolio as well as lower loan balances. Noninterest income increased $570 million due to strong investment banking and trading income, commercial real-estate related income, increased lending related fees, income from strategic investments, and increased service charges on deposits. Noninterest expense decreased $174 million primarily due to lower operating lease depreciation, lower allocated corporate expenses, a reduction in LIHTC liability mark accretion, and reduced salary and equity based compensation expense, partially offset by higher incentives tied to performance and increased professional fees and outside processing expense.

C&CB average loans and leases decreased $14 billion, or 8.3%, at September 30, 2021, compared to the same period of the prior year, primarily due to lower line utilization in commercial loans, commercial real estate, and dealer floor plan. Average total deposits were up $12.5 billion, or 9.3%, at September 30, 2021, compared to the same period of the prior year, primarily due to the impact of fiscal and monetary stimulus.

Insurance Holdings

IH net income was $392 million for the nine months ended September 30, 2021, an increase of $84 million compared to the same period of the prior year. Noninterest income increased $304 million primarily due to higher property and casualty insurance production as well as acquisitions. Noninterest expense increased $198 million primarily due to commissions on higher production in the current year.

Other, Treasury and Corporate

OT&C generated a net loss of $1.3 billion in the nine months ended September 30, 2021, compared to a net loss of $758 million in the same period of the prior year. Segment net interest income decreased $84 million primarily due to lower net funding credits to other segments due to lower market rates partially offset by lower interest expense on borrowings. The allocated provision for credit losses decreased $124 million which primarily reflects changes in the reserve for unfunded commitments as well as an allowance release in the current year resulting from the improving economic outlook. Noninterest income decreased $304 million primarily due to a gain on the sale of non-agency MBS in the same period of the prior year, partially offset by income from assets held for certain post-employment benefits. Noninterest expense increased $448 million primarily due to charitable contributions to the Truist Foundation and the Truist Charitable Fund, as well as higher incremental operating expenses related to the Merger and higher restructuring charges in the current year, partially offset by the loss on early extinguishment of long-term debt in the same period of the prior year.

50 Truist Financial Corporation

Analysis of Financial Condition

Investment Activities

The securities portfolio totaled $151.0 billion at September 30, 2021, compared to $120.8 billion at December 31, 2020. The increase was due primarily to increases in U.S. Treasury securities and MBS resulting from strong deposit growth resulting from fiscal and monetary stimulus.

As of September 30, 2021, approximately 2.9% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 1.9% as of December 31, 2020. The effective duration of the securities portfolio was 5.6 years at September 30, 2021, compared to 4.0 years at December 31, 2020.

U.S. Treasury, GSE, and Agency MBS represents 98% of the total securities portfolio as of September 30, 2021 and more than 99% at December 31, 2020.

Lending Activities

The following table presents the composition of average loans and leases:
Table 6: Average Loans and Leases
For the Three Months Ended
(Dollars in millions)
Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020
Commercial:
Commercial and industrial$130,025 $133,646 $136,051 $139,223 $143,452 
CRE24,849 25,645 26,211 27,030 27,761 
Commercial construction5,969 6,359 6,557 6,616 6,861 
Lease financing4,917 4,893 4,975 5,401 5,626 
Consumer:
Residential mortgage45,369 43,605 45,823 48,847 51,500 
Residential home equity and direct25,242 25,238 25,658 26,327 26,726 
Indirect auto26,830 26,444 26,363 25,788 24,732 
Indirect other11,112 10,797 10,848 11,291 11,530 
Student7,214 7,396 7,519 7,519 7,446 
Credit card4,632 4,552 4,645 4,818 4,810 
Total average loans and leases HFI$286,159 $288,575 $294,650 $302,860 $310,444 

Average loans and leases held for investment for the third quarter of 2021 were $286.2 billion, down $2.4 billion, or 0.8%, compared to the second quarter of 2021.

Average commercial loans decreased $4.8 billion, or 2.8%, as $1.5 billion of average growth within the core commercial and industrial portfolio was more than offset by a $4.0 billion decrease in average Paycheck Protection Program loans (commercial and industrial), a $1.1 billion decrease in average dealer floor plan loans (commercial and industrial), a $796 million decrease in average CRE loans, and a $390 million decrease in average commercial construction loans. Approximately $600 million of senior care facility loans were transferred primarily from CRE to commercial and industrial at the beginning of August, which impacted the variances noted above.

Average consumer loans increased $2.3 billion, or 2.0%, primarily due to a $1.8 billion increase in residential mortgages due to increased capacity, lower prepayments, and the decision to balance sheet certain production from the correspondent channel, a $386 million increase in indirect auto loans primarily due to solid growth in the prime automobile segment, and a $315 million increase in other indirect loans primarily due to growth in recreational and power sports lending. Residential home equity and direct loans were up slightly due to solid growth from LightStream more than offsetting the decline in home equity lines of credit.
Truist Financial Corporation 51

COVID-19 Lending Activities

The CARES Act created the PPP, which has temporarily expanded the Small Business Administration’s business loan guarantee program. The carrying value of PPP loans was $3.5 billion as of September 30, 2021. The CARES Act additionally includes provisions that were designed to encourage financial institutions to support borrowers impacted by COVID-19. These modifications are generally not considered a TDR. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures related to modifications and TDRs. Payment relief assistance includes forbearance, deferrals, extension and re-aging programs, along with certain other modification strategies. The following table provides a summary of accommodations as of September 30, 2021:
Table 7: Client Accommodations (1)
Active AccommodationsExited Accommodations
September 30, 2021
(Dollars in millions)		Total CountOutstanding BalanceOutstanding Balance% Paid-off or Current (2)Types of Accommodations
Commercial
324 $4 $17,297 98 %Clients may elect to defer loan or lease payments for up to 90 days without late fees being incurred but with finance charges continuing to accrue.
Consumer
13,715 553 8,292 87 
Clients may elect to defer loan payments for time periods that generally range from 30 to 90 days without late fees being incurred but with finance charges generally continuing to accrue. The Company’s residential mortgage forbearance program generally provides up to 180 days of relief. Additional relief may be provided in certain circumstances.
Credit card
454 2 156 88 Clients may elect to defer payments for up to 90 days without late fees being incurred but with finance charges accruing. In addition, Truist provided credit card clients with 5% cash back on qualifying card purchases for certain important basic needs.
Total14,493 $559 $25,745 
(1)Excludes approximately 9,000 client accommodations related to government guaranteed loans totaling approximately $1.2 billion.
(2)Calculated based on accommodation count; includes loans that are less than 30 days past due.

The following table provides a summary of the Company’s exposure related to loans that have exited accommodations:
Table 8: Accommodations Exposure
September 30, 2021
(Dollars in millions)		Exposure
Current
$24,513 
Past due and still accruing
492 
Nonperforming
740 
Total
$25,745 

The following table provides a summary of exposure to industries that management believes were more vulnerable during the COVID-19 pandemic. These selected industry exposures represent 8.8% of loans held for investment at September 30, 2021. Truist is actively managing these portfolios and will continue to make underwriting or risk acceptance adjustments as appropriate.
Table 9: Selected Credit Exposures
September 30, 2021
(Dollars in billions)		Outstanding BalancePercentage of Loans HFI
Senior Care$6.7 2.4 %
Hotels, Resorts & Cruise Lines5.7 2.0 
Acute Care Facilities4.9 1.7 
Oil & Gas Portfolio3.8 1.3 
Restaurants2.4 0.8 
Sensitive Retail1.7 0.6 
Total$25.2 8.8 %

52 Truist Financial Corporation

Asset Quality

The following tables summarize asset quality information:
Table 10: Asset Quality
(Dollars in millions)Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020
NPAs:     
NPLs:     
Commercial and industrial$411 $397 $451 $532 $507 
CRE20 25 58 75 52 
Commercial construction7 12 13 14 7 
Lease financing12 5 23 28 32 
Residential mortgage306 302 290 316 205 
Residential home equity and direct146 165 172 205 180 
Indirect auto172 148 158 155 137 
Indirect other6 6 6 5 4 
Total NPLs HFI1,080 1,060 1,171 1,330 1,124 
Loans held for sale76 78 72 5 130 
Total nonaccrual loans and leases1,156 1,138 1,243 1,335 1,254 
Foreclosed real estate9 13 18 20 30 
Other foreclosed property39 41 38 32 30 
Total nonperforming assets$1,204 $1,192 $1,299 $1,387 $1,314 
TDRs:     
Performing TDRs:
Commercial and industrial$144 $144 $142 $78 $84 
CRE8 24 47 47 36 
Commercial construction— — — — 1 
Lease financing56 58 59 60 1 
Residential mortgage712 727 733 648 640 
Residential home equity and direct105 107 109 88 71 
Indirect auto390 389 399 392 336 
Indirect other7 7 7 6 5 
Student23 13 8 5 5 
Credit card30 32 35 37 38 
Total performing TDRs1,475 1,501 1,539 1,361 1,217 
Nonperforming TDRs159 190 207 164 140 
Total TDRs$1,634 $1,691 $1,746 $1,525 $1,357 
Loans 90 days or more past due and still accruing: (1)
Commercial and industrial$2 $14 $14 $13 $6 
CRE— — — — 8 
Lease financing16 — — — — 
Residential mortgage852 976 975 841 573 
Residential home equity and direct7 7 11 10 5 
Indirect auto2 2 2 2 8 
Indirect other2 1 1 2 3 
Student968 1,046 1,037 1,111 570 
Credit card23 22 32 29 24 
Total loans 90 days or more past due and still accruing$1,872 $2,068 $2,072 $2,008 $1,197 
Loans 30-89 days past due and still accruing: (1)     
Commercial and industrial$131 $128 $117 $83 $155 
CRE4 7 9 14 7 
Commercial construction2 1 4 5 — 
Lease financing4 18 35 6 9 
Residential mortgage495 543 577 782 796 
Residential home equity and direct81 73 82 98 103 
Indirect auto560 428 328 495 321 
Indirect other53 47 45 68 52 
Student456 548 556 618 666 
Credit card37 31 35 51 39 
Total loans 30-89 days past due and still accruing$1,823 $1,824 $1,788 $2,220 $2,148 
(1)The past due status of loans that received a deferral under the CARES Act is generally frozen during the deferral period.
Truist Financial Corporation 53

Nonperforming assets totaled $1.2 billion at September 30, 2021, up $12 million compared to June 30, 2021. Nonperforming loans and leases represented 0.40% of total loans and leases, up one basis point compared to June 30, 2021.

Performing TDRs were down $26 million compared to the prior quarter primarily due to declines in the residential mortgage and CRE portfolios.

Loans 90 days or more past due and still accruing totaled $1.9 billion at September 30, 2021, down $196 million compared to the prior quarter. The ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.66% at September 30, 2021, down six basis points from the prior quarter. The decline in loans 90 days or more past due and still accruing was primarily in residential mortgages and student loans. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.03% at September 30, 2021, down one basis point from June 30, 2021.

Loans 30-89 days past due and still accruing of $1.8 billion at September 30, 2021 were stable compared to the prior quarter.

Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 10. 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 additional disclosures related to these potential problem loans.
Table 11: Asset Quality Ratios
As of / For the Three Months EndedSep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI
0.64 %0.64 %0.61 %0.74 %0.70 %
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI
0.66 0.72 0.71 0.67 0.39 
NPLs as a percentage of loans and leases HFI
0.38 0.37 0.40 0.44 0.37 
NPLs as a percentage of total loans and leases (1)0.40 0.39 0.42 0.44 0.40 
NPAs as a percentage of:
Total assets (1)
0.23 0.23 0.25 0.27 0.26 
Loans and leases HFI plus foreclosed property
0.40 0.39 0.42 0.46 0.39 
Net charge-offs as a percentage of average loans and leases HFI
0.19 0.20 0.33 0.27 0.42 
ALLL as a percentage of loans and leases HFI
1.65 1.79 1.94 1.95 1.91 
Ratio of ALLL to:
Net charge-offs8.79x8.98x5.87x7.15x4.52x
NPLs4.35x4.83x4.84x4.39x5.22x
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding PPP and other government guaranteed (2)
0.03 %0.04 %0.04 %0.04 %0.03 %
Applicable ratios are annualized.
(1)Includes LHFS.
(2)This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage, student, and PPP loans. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio such that it might not be reflective of asset collectability or might not be comparable to other periods presented or to other portfolios that do not have government guarantees.

54 Truist Financial Corporation

The following table presents activity related to NPAs:
Table 12: Rollforward of NPAs
(Dollars in millions)20212020
Balance, January 1$1,387 $684 
New NPAs (1)1,580 2,467 
Advances and principal increases280 255 
Disposals of foreclosed assets (2)(297)(333)
Disposals of NPLs (3)(203)(521)
Charge-offs and losses(279)(443)
Payments(775)(553)
Transfers to performing status(445)(258)
Other, net(44)16 
Ending balance, September 30$1,204 $1,314 
(1)For 2020, includes approximately $500 million of loans previously classified as PCI that would have otherwise been nonperforming as of December 31, 2019.
(2)Includes charge-offs and losses recorded upon sale of $95 million and $99 million for the nine months ended September 30, 2021 and 2020, respectively.
(3)Includes charge-offs and losses recorded upon sale of $1 million and $126 million for the nine months ended September 30, 2021 and 2020, respectively.

TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near term and a concession has been granted to the borrower. As a result, Truist works with borrowers to prevent further difficulties and to improve the likelihood of recovery on a loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR. In accordance with the CARES Act, Truist implemented loan modification programs in response to the COVID-19 pandemic in order to provide borrowers with flexibility with respect to repayment terms. Payment relief assistance provided by Truist includes forbearance, deferrals, extension, and re-aging programs, along with certain other modification strategies. The Company adopted certain provisions of the CARES Act and other regulatory guidance that provide relief from the requirement to apply TDR accounting to (1) certain modifications of federally backed mortgages upon request from the borrower, and (2) certain modifications of other non-federally backed mortgages for borrowers impacted by the COVID-19 pandemic that were less than 30 days past due at December 31, 2019. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for the policies related to TDRs and COVID-19 loan modifications.

TDRs identified by SunTrust prior to the Merger date are not included in Truist’s TDR disclosure because all such loans were recorded at fair value and a new accounting basis was established as of the Merger date. Subsequent modifications are evaluated for potential treatment as TDRs in accordance with Truist’s accounting policies.

The following table provides a summary of performing TDR activity:
Table 13: Rollforward of Performing TDRs
(Dollars in millions)20212020
Balance, January 1$1,361 $980 
Inflows548 599 
Payments and payoffs (1)(283)(113)
Charge-offs(33)(34)
Transfers to nonperforming TDRs (2)(31)(66)
Removal due to the passage of time(10)(6)
Non-concessionary re-modifications(15)(2)
Transferred to LHFS, sold and other(62)(141)
Balance, September 30$1,475 $1,217 
(1)Includes scheduled principal payments, prepayments, and payoffs of amounts outstanding.
(2)Represent loans that no longer meet the requirements necessary to reflect the loan in accruing status.
Truist Financial Corporation 55

The following table provides further details regarding the payment status of TDRs outstanding at September 30, 2021:
Table 14: Payment Status of TDRs (1)
September 30, 2021
(Dollars in millions)		CurrentPast Due 30-89 DaysPast Due 90 Days Or MoreTotal
Performing TDRs:       
Commercial:
Commercial and industrial$144 100.0 %$— — %$— — %$144 
CRE8 100.0 — — — — 8 
Lease financing56 100.0 — — — — 56 
Consumer:
Residential mortgage482 67.7 81 11.4 149 20.9 712 
Residential home equity and direct101 96.2 4 3.8 — — 105 
Indirect auto320 82.1 70 17.9 — — 390 
Indirect other6 85.7 1 14.3 — — 7 
Student22 95.7 1 4.3 — — 23 
Credit card26 86.7 3 10.0 1 3.3 30 
Total performing TDRs1,165 78.9 160 10.9 150 10.2 1,475 
Nonperforming TDRs49 30.8 17 10.7 93 58.5 159 
Total TDRs$1,214 74.3 $177 10.8 $243 14.9 $1,634 
(1)Past due performing TDRs are included in past due disclosures and nonperforming TDRs are included in NPL disclosures.

56 Truist Financial Corporation

ACL

Activity related to the ACL is presented in the following tables:
Table 15: Activity in ACL
For the Three Months EndedFor the Nine Months Ended

(Dollars in millions)		Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 202020212020
Balance, beginning of period$5,436 $6,011 $6,199 $6,229 $6,133 $6,199 $1,889 
CECL adoption - impact to retained earnings before tax— — — — — — 2,762 
CECL adoption - reserves on PCD assets— — — — — — 378 
Provision for credit losses(324)(434)48 177 421 (710)2,158 
Charge-offs:       
Commercial and industrial(57)(51)(73)(84)(112)(181)(274)
CRE(1)— (4)(19)(44)(5)(59)
Commercial construction— — (2)(8)(19)(2)(22)
Lease financing— (2)(6)(4)(44)(8)(50)
Residential mortgage(7)(4)(11)(6)(4)(22)(50)
Residential home equity and direct(51)(57)(55)(46)(52)(163)(185)
Indirect auto(73)(69)(105)(84)(72)(247)(294)
Indirect other(13)(11)(17)(14)(8)(41)(46)
Student(6)(3)(3)(3)(6)(12)(20)
Credit card(31)(42)(40)(35)(44)(113)(147)
Total charge-offs(239)(239)(316)(303)(405)(794)(1,147)
Recoveries:       
Commercial and industrial21 20 19 34 20 60 58 
CRE1 4 1 1 — 6 4 
Commercial construction1 1 1 1 2 3 10 
Lease financing21 3 — — 4 24 4 
Residential mortgage3 5 2 3 3 10 7 
Residential home equity and direct20 20 18 20 16 58 46 
Indirect auto22 27 22 24 22 71 63 
Indirect other5 7 6 5 4 18 18 
Student1 — — — — 1 1 
Credit card9 10 9 10 8 28 22 
Total recoveries104 97 78 98 79 279 233 
Net charge-offs(135)(142)(238)(205)(326)(515)(914)
Other1 1 2 (2)1 4 (44)
Balance, end of period$4,978 $5,436 $6,011 $6,199 $6,229 $4,978 $6,229 
ALLL (excluding PCD loans)$4,577 $4,979 $5,506 $5,668 $5,675 
ALLL for PCD loans125 142 156 167 188 
RUFC276 315 349 364 366 
Total ACL$4,978 $5,436 $6,011 $6,199 $6,229 

Net charge-offs during the third quarter totaled $135 million, down $7 million compared to the prior quarter. The net charge-off ratio was 0.19%, down one basis point compared to the prior quarter.

The allowance for credit losses was $5.0 billion and includes $4.7 billion for the allowance for loan and lease losses and $276 million for the reserve for unfunded commitments. The ALLL ratio was 1.65% compared to 1.79% at June 30, 2021. The ALLL covered nonperforming loans and leases held for investment 4.35X compared to 4.83X at June 30, 2021. At September 30, 2021, the ALLL was 8.79X annualized net charge-offs, compared to 8.98X at June 30, 2021.

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The following table presents an allocation of the ALLL. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases.
Table 16: Allocation of ALLL by Category
September 30, 2021December 31, 2020
(Dollars in millions)Amount% ALLL in Each Category% Loans in Each CategoryAmount% ALLL in Each Category% Loans in Each Category
Commercial and industrial$1,541 32.7 %45.2 %$2,156 37.0 %46.2 %
CRE370 7.9 8.5 573 9.8 8.9 
Commercial construction59 1.3 2.0 81 1.4 2.2 
Lease financing31 0.7 1.7 48 0.8 1.7 
Residential mortgage311 6.6 16.4 368 6.3 15.8 
Residential home equity and direct645 13.7 8.8 714 12.2 8.7 
Indirect auto1,071 22.8 9.4 1,198 20.5 8.7 
Indirect other194 4.1 3.9 208 3.6 3.7 
Student126 2.7 2.5 130 2.2 2.5 
Credit card354 7.5 1.6 359 6.2 1.6 
Total ALLL4,702 100.0 %100.0 %5,835 100.0 %100.0 %
RUFC276  364  
Total ACL$4,978  $6,199  

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 second lien loans where the first lien is delinquent based on historical experience; the increased risk of loss on these credits is reflected in the ALLL. As of September 30, 2021, Truist held or serviced the first lien on 30% of its second lien positions.

Other Assets

The components of other assets are presented in the following table:
Table 17: Other Assets as of Period End
(Dollars in millions)September 30, 2021December 31, 2020
Bank-owned life insurance$6,512 $6,479 
Tax credit and other private equity investments6,012 5,685 
Prepaid pension assets4,814 4,358 
Derivative assets2,976 3,837 
Accrued income1,841 1,934 
Accounts receivable1,910 1,833 
Leased assets and related assets1,846 1,810 
ROU assets1,207 1,333 
Prepaid expenses1,091 1,247 
Equity securities at fair value1,026 1,054 
Structured real estate322 390 
FHLB stock48 164 
Other446 549 
Total other assets$30,051 $30,673 

58 Truist Financial Corporation

Funding Activities

Deposits

The following table presents average deposits:
Table 18: Average Deposits
Three Months Ended
(Dollars in millions)
Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020
Noninterest-bearing deposits$141,738 $137,892 $128,579 $127,103 $123,966 
Interest checking107,802 106,121 104,744 99,866 96,707 
Money market and savings136,094 134,029 129,303 124,692 123,598 
Time deposits17,094 18,213 20,559 23,605 27,940 
Total average deposits$402,728 $396,255 $383,185 $375,266 $372,211 

Average deposits for the third quarter of 2021 were $402.7 billion, an increase of $6.5 billion, or 1.6%, compared to the prior quarter. Average noninterest bearing deposits grew 2.8% compared to the prior quarter and represented 35.2% of total deposits for the third quarter of 2021, compared to 34.8% for the prior quarter. Average interest checking and money market and savings grew 1.6% and 1.5%, respectively, compared to the prior quarter.

Average time deposits decreased 6.1% primarily due to the maturity of higher-cost personal accounts.

Borrowings

At September 30, 2021, short-term borrowings totaled $5.2 billion, a decrease of $866 million compared to December 31, 2020, due primarily to a decrease of $2.6 billion in short-term FHLB advances, partially offset by an increase of $1.4 billion in securities sold under agreements to repurchase.

Average short-term borrowings were $5.4 billion or 1.2% of total funding for the third quarter of 2021, as compared to $6.2 billion or 1.5% for the prior year. Average short-term borrowings decreased as a percentage of funding sources due to strong deposit growth. Long-term debt provides funding and, to a lesser extent, regulatory capital, and primarily consists of senior and subordinated notes issued by Truist and Truist Bank. Long-term debt totaled $37.8 billion at September 30, 2021, a decrease of $1.8 billion compared to December 31, 2020. During 2021, the Company had $5.8 billion of senior long term debt maturities and redemptions, partially offset by $2.3 billion of issuances of fixed rate senior notes with an interest rate of 1.27% to 1.89% maturing between 2027 to 2029 and issuances of $2.3 billion in variable rate senior notes maturing between 2024 and 2025. FHLB advances represented 2.3% of total outstanding long-term debt at September 30, 2021, compared to 2.2% at December 31, 2020. The average cost of long-term debt was 1.59% for the nine months ended September 30, 2021, down 19 basis points compared to the same period in 2020.

Shareholders’ Equity

Total shareholders’ equity was $68.9 billion at September 30, 2021, a decrease of $2.0 billion from December 31, 2020. This decrease includes a decrease of $2.3 billion in AOCI, redemptions of $1.4 billion in preferred stock for Series F, G, and H, $2.1 billion in dividends, and $1.1 billion in repurchases of common stock, partially offset by $4.8 billion in net income. Truist’s book value per common share at September 30, 2021 was $46.62, compared to $46.52 at December 31, 2020.

Refer to “Note 10. Shareholders’ Equity” for additional disclosures related to preferred stock redemptions.

Risk Management

Truist maintains a comprehensive risk management framework supported by people, processes, and systems to identify, measure, monitor, manage, and report significant risks arising from its exposures and business activities. Effective risk management involves optimizing risk and return while operating in a safe and sound manner, and promoting compliance with applicable laws and regulations. The Company’s risk management framework promotes the execution of business strategies and objectives in alignment with its risk appetite.

Truist has developed and employs a risk taxonomy that further guides business functions in identifying, measuring, responding to, monitoring, and reporting on possible exposures to the organization. The risk taxonomy drives internal risk conversations and enables Truist to clearly and transparently communicate to stakeholders the level of potential risk the Company faces, both presently and in the future, and the Company’s position on managing risk to acceptable levels.

Truist Financial Corporation 59

Truist is committed to fostering a culture that supports identification and escalation of risks across the organization. All teammates are responsible for upholding the Company’s purpose, mission, and values, and are encouraged to speak up if there is any activity or behavior that is inconsistent with the Company’s culture. The Truist code of ethics guides the Company’s decision making and informs teammates on how to act in the absence of specific guidance.

Truist seeks an appropriate return for the risk taken in its business operations. Risk-taking activities are evaluated and prioritized to identify those that present attractive risk-adjusted returns, while preserving asset value and capital.

Compensation decisions take into account a teammate’s adherence to and successful implementation of Truist’s risk values and associated policies and procedures. The Company’s compensation structure supports its core values and sound risk management practices in an effort to promote judicious risk-taking behavior.

Truist employs a comprehensive change management program to manage the risks associated with integrating heritage BB&T and heritage SunTrust. The Board and Executive Leadership oversee the change management program, which is designed to ensure key decisions are reviewed and that there is appropriate oversight of integration activities.

Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional disclosures under the section titled “Risk Management.”

Market Risk

Market risk is the risk to current or anticipated earnings, capital, or economic value arising from changes in the market value of portfolios, securities, or other financial instruments. Market risk results from changes in the level, volatility, or correlations among financial market risk factors or prices, including interest rates, credit spreads, foreign exchange rates, equity, and commodity prices.

Effective management of market risk is essential to achieving Truist’s strategic financial objectives. Truist’s most significant market risk exposure is to interest rate risk in its balance sheet; however, market risk also results from underlying product liquidity risk, price risk, and volatility risk in Truist’s business units. Interest rate risk results from differences between the timing of rate changes and the timing of cash flows associated with assets and liabilities (re-pricing risk); from changing rate relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest-related options inherently embedded in bank products (options risk).

The primary objectives of effective market risk management are to minimize adverse effects from changes in market risk factors on net interest income, net income, and capital, and to offset the risk of price changes for certain assets and liabilities recorded at fair value. At Truist, market risk management also includes the enterprise-wide IPV function.

Interest Rate Market Risk

As a financial institution, Truist is exposed to interest rate risk both on its assets and on its liabilities. Truist actively manages its interest rate risk exposure through the strategic repricing of its assets and liabilities, taking into account the volumes, maturities, and mix, with the goal of keeping net interest margin as stable as possible. Truist primarily uses three methods to measure and monitor its interest rate risk: (i) simulations of possible changes to net interest income over the next two years based on gradual changes in interest rates; (ii) analysis of interest rate shock scenarios; and (iii) analysis of economic value of equity based on changes in interest rates.

The Company’s simulation model takes into account assumptions related to prepayment trends, using a combination of market data and internal historical experiences for deposits and loans, as well as scheduled maturities and payments, and the expected outlook for the economy and interest rates. These assumptions are reviewed and adjusted monthly to reflect changes in current interest rates compared to the rates applicable to Truist’s assets and liabilities. The model also considers Truist’s current and prospective liquidity position, current balance sheet volumes, and projected growth and/or contractions, accessibility of funds for short-term needs and capital maintenance.

Deposit betas are an important assumption in the interest rate risk modeling process. Truist applies an average deposit beta (the sensitivity of deposit rate changes relative to market rate changes) of approximately 50% to its non-maturity interest-bearing deposit accounts when determining its interest rate sensitivity. Non-maturity, interest-bearing deposit accounts include interest checking accounts, savings accounts, and money market accounts that do not have a contractual maturity. Truist 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.

60 Truist Financial Corporation

The following table shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next 12 months assuming a gradual change in interest rates as described below.
Table 19: Interest Sensitivity Simulation Analysis
Interest Rate ScenarioAnnualized Hypothetical Percentage Change in Net Interest Income
Gradual Change in Prime Rate (bps)Prime Rate
Sep 30, 2021Sep 30, 2020Sep 30, 2021Sep 30, 2020
Up 1004.25 %4.25 %4.08 %3.43 %
Up 503.75 3.75 3.15 2.68 
No Change3.25 3.25 — — 
Down 25 (1)3.00 3.00 (1.22)(1.62)
Down 50 (1)2.75 2.75 (1.71)(1.94)
(1)The Down 25 and 50 rates are floored at one basis point and may not reflect Down 25 and 50 basis points for all rate indices.

Rate sensitivity increased compared to prior periods, primarily driven by excess liquidity and hedging changes partially offset by an increase in the investment securities portfolio.

Management considers how the interest rate risk position could be impacted by changes in balance sheet mix. Liquidity in the banking industry has been very strong during the current economic cycle. Much of this liquidity increase has resulted in growth in noninterest-bearing demand deposits. Consistent with the industry, Truist has seen a significant increase in this funding source. The behavior of these deposits is one of the most important assumptions used in determining the interest rate risk position of Truist. A decrease in the amount of these deposits in the future would reduce the asset sensitivity of Truist’s balance sheet because the Company would increase interest-bearing funds to offset the loss of this advantageous funding source.

The following table shows the results of Truist’s interest-rate sensitivity position assuming the loss of demand deposits and an associated increase in managed rate deposits under various scenarios. For purposes of this analysis, Truist modeled the incremental beta of managed rate deposits for the replacement of the demand deposits at 100%.
Table 20: Deposit Mix Sensitivity Analysis
Gradual Change in Rates (bps)Base Scenario at September 30, 2021 (1)Results Assuming a Decrease in Noninterest-Bearing Demand Deposits
$20 Billion$40 Billion
Up 1004.08 %3.22 %2.37 %
Up 503.15 2.52 1.90 
(1)The base scenario is equal to the annualized hypothetical percentage change in net interest income at September 30, 2021 as presented in the preceding table.

Truist also uses an EVE analysis to focus on longer-term projected changes in asset and liability values given potential changes in interest rates. This measure allows Truist to analyze interest rate risk that falls outside the net interest income simulation period. The EVE model is a discounted cash flow of the portfolio of assets, liabilities, and derivative instruments. The difference in the present value of assets minus the present value of liabilities is defined as EVE.

The following table shows the effect that the indicated changes in interest rates would have on EVE:
Table 21: EVE Simulation Analysis
Change in Interest Rates (bps)Hypothetical Percentage Change in EVE
Sep 30, 2021Sep 30, 2020
Up 100(5.1)%7.4 %
No Change— — 
Down 100(3.5)(6.8)

Truist uses financial instruments including derivatives to manage interest rate risk related to securities, commercial loans, MSRs, and mortgage banking operations, long-term debt, and other funding sources. Truist hedges a portion of its AFS securities to reduce mark-to-market volatility within AOCI and also to increase its overall asset sensitivity position. As of September 30, 2021, the Company had $24.0 billion of pay-fixed swaps associated with this hedging program that are accounted for as fair value hedges. In the third quarter of 2021, this hedging program reduced net interest income by $17 million. Truist also uses derivatives to facilitate transactions on behalf of its clients and as part of associated hedging activities. As of September 30, 2021, Truist had derivative financial instruments outstanding with notional amounts totaling $329.9 billion, with an associated net fair value of $2.4 billion. See “Note 16. Derivative Financial Instruments” for additional disclosures.

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LIBOR in its current form will no longer be available after 2021. For most tenors of U.S. dollar LIBOR, the administrator of LIBOR extended publication until June 30, 2023. Tenors used infrequently by Truist, including one week and two month U.S. dollar LIBOR and all non-U.S. dollar LIBOR, will cease publication at December 31, 2021, based on this guidance. Truist has U.S. dollar LIBOR-based contracts that extend beyond June 30, 2023. In accordance with regulatory guidance, production of new U.S. dollar LIBOR contracts will cease before the end of 2021. To prepare for the transition to an alternative reference rate, management formed a cross-functional project team to address the LIBOR transition. The project team performed an assessment to identify the potential risks related to the transition from LIBOR to a new index. The project team provides updates to Executive Leadership and the Board.

Contract fallback language for existing loans and leases is under review and certain contracts will need updated provisions for the transition. The Company has plans for impacted lines of business to remediate these contracts, train impacted teammates, and provide timely notice to impacted clients. Current fallback language used for new, renewed, and modified contracts is generally consistent with ARRC recommendations and includes use of “hardwired fallback” language, where appropriate. 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 for the transition. Market risks associated with this change are dependent on the alternative reference rates available and market conditions at transition. In 2020, Truist began offering SOFR-based lending solutions to wholesale and consumer clients and entered into SOFR-based derivative contracts. The Company has actively been using SOFR as a reference rate in various loan contracts and has originated approximately $3 billion of loans as of September 30, 2021 using this alternative reference rate. Truist expects SOFR to become a more commonly-used pricing benchmark across the industry and will offer additional SOFR based products during 2021. Other alternative reference rates, such as emerging credit sensitive rates, will be evaluated as additional alternatives for LIBOR. For a further discussion of the various risks associated with the potential cessation of LIBOR and the transition to alternative reference rates, refer to the section titled “Item1A. Risk Factors” in the Form 10-K for the year ended December 31, 2020.

Market risk from trading activities

As a financial intermediary, Truist provides its clients access to derivatives, foreign exchange and securities markets, which generate market risks. Trading market risk is managed using a comprehensive risk management approach, which includes measuring risk using VaR, stress testing, and sensitivity analysis. Risk metrics are monitored against a suite of limits on a daily basis at both the trading desk level and at the aggregate portfolio level, which is intended to ensure that exposures are in line with Truist’s risk appetite.

Truist is also subject to risk-based capital guidelines for market risk under the Market Risk Rule.

Covered Trading Positions

Covered positions subject to the Market Risk Rule include trading assets and liabilities, specifically those held for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements or to lock in arbitrage profits. Truist’s trading portfolio of covered positions results primarily from market making and underwriting services for the Company’s clients, as well as associated risk mitigating hedging activity. The trading portfolio, measured in terms of VaR, consists primarily of four sub-portfolios of covered positions: (i) credit trading, (ii) fixed income securities, (iii) interest rate derivatives, and (iv) equity derivatives. As a market maker across different asset classes, Truist’s trading portfolio also contains other sub-portfolios, including foreign exchange, loan trading, and commodity derivatives; however, these portfolios do not generate material trading risk exposures.

Valuation policies and methodologies exist for all trading positions. Additionally, these positions are subject to independent price verification. See “Note 16. Derivative Financial Instruments,” “Note 15. Fair Value Disclosures,” and “Critical Accounting Policies” herein for discussion of valuation policies and methodologies.

Securitizations

As of September 30, 2021, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule was $38 million, all of which were non-agency asset backed securities positions. Consistent with the Market Risk Rule requirements, the Company performs pre-purchase due diligence on each securitization position to identify the characteristics including, but not limited to, deal structure and the asset quality of the underlying assets, that materially affect valuation and performance. Securitization positions are subject to Truist’s comprehensive risk management framework, which includes daily monitoring against a suite of limits. There were no off-balance sheet securitization positions during the reporting period.

Correlation Trading Positions

The trading portfolio of covered positions did not contain any correlation trading positions as of September 30, 2021.

62 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 and nine months ended September 30, 2021 and 2020. In the third quarter of 2021, one and ten day VaR measures declined from the same period of last year as heightened market volatility experienced during March 2020 aged out of the 12-month VaR look-back window.
Table 22: VaR-based Measures
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(Dollars in millions)10-Day Holding Period1-Day Holding Period10-Day Holding Period1-Day Holding Period10-Day Holding Period1-Day Holding Period10-Day Holding Period1-Day Holding Period
VaR-based Measures:
Maximum$6 $3 $65 $11 $68 $16 $65 $11 
Average5 2 31 6 16 5 23 5 
Minimum3 2 13 3 3 1 3 1 
Period-end6 3 46 8 6 3 46 8 
VaR by Risk Class:
Interest Rate Risk2 1 2 1 
Credit Spread Risk4 10 4 10 
Equity Price Risk2 2 2 2 
Foreign Exchange Risk— — — — 
Portfolio Diversification(5)(6)(5)(6)
Period-end3 8 3 8 

Stressed VaR-based measures

Stressed VaR, another component of market risk capital, is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio. The following table summarizes Stressed VaR-based measures:
Table 23: Stressed VaR-based Measures - 10 Day Holding Period
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
Maximum$82 $65 $91 $65 
Average52 31 55 31 
Minimum31 14 26 13 
Period-end57 46 57 46 

Compared to the prior year periods, stressed VaR measures increased in the third quarter of 2021 primarily due to the normalization of market making inventory levels this year compared to the same periods of 2020 when inventory levels were lower due to the market volatility.

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Specific Risk Measures

Specific risk is a measure of idiosyncratic risk that could result from risk factors other than broad market movements (e.g. default, event risks). The Market Risk Rule provides fixed risk weights under a standardized measurement method while also allowing a model-based approach, subject to regulatory approval. Truist utilizes the standardized measurement method to calculate the specific risk component of market risk regulatory capital. As such, incremental risk capital requirements do not apply.

VaR Model Backtesting

In accordance with the Market Risk Rule, the Company evaluates the accuracy of its VaR model through daily backtesting by comparing aggregate daily trading gains and losses (excluding fees, commissions, reserves, net interest income, and intraday trading) from covered positions with the corresponding daily VaR-based measures generated by the model. As illustrated in the following graph, there were no Company-wide VaR backtesting exceptions during the twelve months ended September 30, 2021. 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-20210930_g1.jpg
Model Risk Management

MRM is responsible for the independent model validation of all decision tools and models including trading market risk models. The validation activities are conducted in accordance with MRM policy, which incorporates regulatory guidance related to the evaluation of model conceptual soundness, ongoing monitoring, and outcomes analysis. As part of ongoing monitoring efforts, the performance of all trading risk models are reviewed regularly to preemptively address emerging developments in financial markets, assess evolving modeling approaches, and to identify potential model enhancement.

Stress Testing

The Company uses a comprehensive range of stress testing techniques to help monitor risks across trading desks and to augment standard daily VaR and other risk limits reporting. The stress testing framework is designed to quantify the impact of extreme, but plausible, stress scenarios that could lead to large unexpected losses. Stress tests include simulations for historical repeats and hypothetical risk factor shocks. All trading positions within each applicable market risk category (interest rate risk, equity risk, foreign exchange rate risk, credit spread risk, and commodity price risk) are included in the Company’s comprehensive stress testing framework. Management reviews stress testing scenarios on an ongoing basis and makes updates, as necessary, which is intended to ensure that both current and emerging risks are captured appropriately. Management also utilizes stress analyses to support the Company’s capital adequacy assessment standards. See the “Capital” section of MD&A for additional discussion of capital adequacy.

64 Truist Financial Corporation

Liquidity

Liquidity represents the continuing ability to meet funding needs, including deposit withdrawals, repayment of borrowings and other liabilities, and funding of loan commitments. In addition to the level of liquid assets, such as cash, cash equivalents, and AFS securities, other factors affect the ability to meet liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity, growing core deposits, loan repayment, and the ability to securitize or package loans for sale.

Truist monitors the ability to meet client demand for funds under both normal and stressed market conditions. In considering its liquidity position, management evaluates Truist’s funding mix based on client core funding, client rate-sensitive funding and national markets funding. In addition, management evaluates exposure to rate-sensitive funding sources that mature in one year or less. Management also measures liquidity needs against 30 days of stressed cash outflows for Truist and Truist Bank. To ensure a strong liquidity position and compliance with regulatory requirements, management maintains a liquid asset buffer of cash on hand and highly liquid unencumbered securities. As of September 30, 2021 and December 31, 2020, Truist’s liquid asset buffer, as a percent of total assets, was 24.5% and 20.2%, respectively.

The LCR rule directs large U.S. banking organizations to hold unencumbered high-quality liquid assets sufficient to withstand projected 30-day total net cash outflows, as defined under the LCR rule. As of January 1, 2020, Truist is subject to the Category III reduced LCR requirements. Truist’s average LCR was 114% for the three months ended September 30, 2021, well above the regulatory minimum of 100%.

Effective July 2021, Truist became subject to final rules implementing the NSFR, which are designed to ensure that banking organizations maintain a stable, long-term funding profile in relation to their asset composition and off-balance sheet activities. At September 30, 2021, the Company was compliant with this requirement.

The ability to raise funding at competitive prices is affected by the rating agencies’ views of the Parent Company’s and Truist Bank’s credit quality, liquidity, capital, and earnings. Management meets with the rating agencies on a regular basis to discuss current outlooks. During the nine months ended September 30, 2021, Fitch Ratings, S&P Global Ratings, DBRS Morningstar, and Moody’s Investors Service all affirmed their ratings and provided updates to their rating outlooks for the Company and the Bank as further detailed below.

On May 7, 2021, Fitch Ratings affirmed the ratings of the Parent Company and Truist Bank, and revised the rating outlook to “stable” from “negative.” The revision to the rating outlook reflects the rating agency’s view that the Company’s diverse business model and strategy execution will drive stable earnings performance that supports its credit ratings. The revised rating outlook also reflects increased confidence in a U.S. economic recovery, which reduces the likelihood of the downside scenario that was contemplated when Fitch Ratings revised the ratings outlook to “negative” in April 2020.

On May 24, 2021, S&P Global Ratings affirmed the ratings of the Parent Company and Truist Bank, and revised the rating outlook to “positive” from “stable”, citing the stabilization in U.S. economic trends and the easing industry risk in the U.S. banking system. The rating agency also noted that the positive outlook reflects the view that, as a merged entity, Truist’s better geographic diversity, increased market position, improved earnings power, and higher technology spending provide a sustainable competitive advantage, and that the financial and credit positives of the merged entity could outweigh the operational risks of integrating two large regional banks.

On June 10, 2021, DBRS Morningstar confirmed the ratings of the Parent Company and Truist Bank and revised the trend for all ratings to “positive” from “stable,” citing substantial progress to date with the Merger integration and the rating agency’s view that the impact of the economic fallout from the coronavirus pandemic on Truist’s asset quality and capital will continue to be manageable.

On July 12, 2021, Moody’s Investors Service upgraded Truist Bank’s long-term subordinated debt rating to A2 from A3, and downgraded Truist Bank’s long-term bank deposit rating to Aa3 from Aa2. The rating actions were driven by revisions to the rating agency’s advanced loss given failure analysis within its updated methodology published on July 9, 2021.

See the “Liquidity” section of MD&A in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding credit ratings.
Parent Company

The Parent Company serves as the primary source of capital for the operating subsidiaries. The Parent Company’s assets consist primarily of cash on deposit with Truist Bank, equity investments in subsidiaries, advances to subsidiaries, and notes receivable from subsidiaries. The principal obligations of the Parent Company are payments on long-term debt. The main sources of funds for the Parent Company are dividends and management fees from subsidiaries, repayments of advances to subsidiaries, and proceeds from the issuance of equity and long-term debt. The primary uses of funds by the Parent Company are investments in subsidiaries, advances to subsidiaries, dividend payments to common and preferred shareholders, repurchases of common stock, and payments on long-term debt.

Truist Financial Corporation 65

See “Note 22. Parent Company Financial Information” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding dividends from subsidiaries and debt transactions.

Access to funding at the Parent Company is more sensitive to market disruptions. Therefore, Truist prudently manages cash levels at the Parent Company to cover a minimum of one year of projected cash outflows which includes unfunded external commitments, debt service, common and preferred dividends and scheduled debt maturities, without the benefit of any new cash inflows. Truist maintains a significant buffer above the projected one year of cash outflows. In determining the buffer, Truist considers cash requirements for common and preferred dividends, unfunded commitments to affiliates, serving as a source of strength to Truist Bank, and being able to withstand sustained market disruptions that could limit access to the capital markets. At September 30, 2021 and December 31, 2020, the Parent Company had 36 months and 43 months, respectively, of cash on hand to satisfy projected cash outflows, and 20 months and 22 months, respectively, when including the payment of common stock dividends.

Truist Bank

Truist carefully manages liquidity risk at Truist Bank. 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. The following table presents a summary of Truist Bank’s available secured borrowing capacity and eligible cash at the FRB:
Table 24: Liquidity Sources
(Dollars in millions)Sep 30, 2021Dec 31, 2020
Unused borrowing capacity:
FRB$51,457 $52,831 
FHLB52,459 52,274 
AFS securities120,462 93,623 
Available secured borrowing capacity224,378 198,728 
Eligible cash at the FRB14,674 13,437 
Total$239,052 $212,165 

At September 30, 2021, Truist Bank’s available secured borrowing capacity represented approximately 10.8 times the amount of wholesale funding maturities in one-year or less.

66 Truist Financial Corporation

Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements

Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 2020 for discussion with respect to Truist’s quantitative and qualitative disclosures about its fixed and determinable contractual obligations. Truist’s commitments include investments in affordable housing projects throughout its market area, renewable energy credits, private equity funds, derivative contracts to manage various financial risks, as well as other commitments. Refer to “Note 14. Commitments and Contingencies,” “Note 15. Fair Value Disclosures,” and “Note 16. Derivative Financial Instruments” in this Form 10-Q, and “Note 16. Commitments and Contingencies” of the Annual Report on Form 10-K for further discussion of these commitments.

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, and provide a competitive return to shareholders. Risk-based capital ratios, which include CET1 capital, Tier 1 capital, and Total capital are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

Truist regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plans and stress testing results to the banking regulators. Management regularly monitors the capital position of Truist on both a consolidated and bank-level basis. In this regard, management’s overriding policy is to maintain capital at levels that are in excess of internal capital targets, which are above the regulatory “well capitalized” minimums. Management evaluates whether capital ratios calculated after the effect of alternative capital actions are likely to remain above minimums specified by the FRB for the annual CCAR process. Breaches of minimum targets prompt a review of the planned capital actions included in Truist’s capital plan.
Table 25: Capital Requirements
 Minimum CapitalWell CapitalizedMinimum Capital Plus Stress Capital Buffer (1)
 TruistTruist Bank
CET1
4.5 %NA6.5 %7.2 %
Tier 1 capital6.0 6.0 %8.0 8.7 
Total capital8.0 10.0 10.0 10.7 
Leverage ratio4.0 NA5.0 NA
Supplementary leverage ratio3.0 NANANA
(1)Reflects a SCB of 2.7% applicable to Truist through September 30, 2021.

Truist completed the 2021 CCAR process and received a SCB of 2.5% for the period October 1, 2021 to September 30, 2022. Truist increased the common dividend 7% during the third quarter of 2021 to $0.48 per share. Truist continues to target a CET1 ratio of approximately 9.75% over the near-term. As previously communicated, the Company expects to be able to, with appropriate approvals from its Board of Directors, deploy approximately $4 billion to $5 billion of capital (either in the form of share repurchases or acquisitions) between 3Q21 and 3Q22. During the third quarter of 2021, Truist completed the acquisition of Constellation Affiliated Partners and announced the acquisition of Service Finance, LLC, reducing the amount of capital deployment available for acquisitions or share repurchases to approximately $1 billion to $2 billion through 3Q22. Truist resumed repurchasing shares and expects to consume approximately $500 million of this capacity via share repurchases in the fourth quarter of 2021 reflecting the Company’s strong capital position, and the reduced integration risk with successful migration of heritage BB&T retail and commercial clients to the Truist ecosystem.

Truist Financial Corporation 67

Truist’s capital ratios are presented in the following table:
Table 26: Capital Ratios - Truist Financial Corporation
(Dollars in millions, except per share data, shares in thousands)Sep 30, 2021Dec 31, 2020
Risk-based:(preliminary) 
CET1 capital to risk-weighted assets10.1 %10.0 %
Tier 1 capital to risk-weighted assets11.9 12.1 
Total capital to risk-weighted assets13.9 14.5 
Leverage ratio9.0 9.6 
Supplementary leverage ratio7.8 8.7 
Non-GAAP capital measure (1):  
Tangible common equity per common share$26.34 $26.78 
Calculation of tangible common equity (1):  
Total shareholders’ equity$68,900 $70,912 
Less:  
Preferred stock6,673 8,048 
Noncontrolling interests— 105 
Goodwill and intangible assets, net of deferred taxes27,066 26,629 
Tangible common equity$35,161 $36,130 
Risk-weighted assets$383,073 $379,153 
Common shares outstanding at end of period1,334,892 1,348,961 
(1)Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses these measures to assess the quality of capital and returns relative to balance sheet risk. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.

Capital ratios remained strong compared to the regulatory requirements for well capitalized banks. For the nine months ended September 30, 2021,Truist paid $1.8 billion in common stock dividends or $1.38 per share, and completed $1.1 billion in common share repurchases. The dividend and total payout ratios for the nine months ended September 30, 2021 were 41% and 66%, respectively. Truist also redeemed $1.4 billion of preferred stock to optimize the Company’s capital position.

Share Repurchase Activity
Table 27: Share Repurchase Activity
(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
July 2021— $— — $3,065 
August 2021— — — 3,065 
September 2021— — — 3,065 
Total— — — 
(1)Includes shares exchanged or surrendered in connection with the exercise of equity-based awards under equity-based compensation plans.
(2)Excludes commissions.
(3)Pursuant to the 2020 Repurchase Plan, announced in December 2020, authorizing up to $2.0 billion of share repurchases beginning in the first quarter of 2021. In June 2021, the Board of Directors increased, effective July 1, 2021, the previous repurchase authority to effectuate repurchases up to an additional $2.2 billion in shares of the Company’s common stock through September 30, 2022 (up to $4.2 billion in aggregate amount). With the additional authorization, the Company has $3.1 billion remaining for share repurchases.

68 Truist Financial Corporation

Critical Accounting Policies

The accounting and reporting policies of Truist are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Truist’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities, and amounts reported for revenues and expenses. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations, and related disclosures. The more critical policies include accounting for the ACL, determining fair value of financial instruments, intangible assets, income taxes, and benefit obligations associated with pension and postretirement benefit plans. Understanding Truist’s accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. The critical accounting policies are discussed in MD&A in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1. Basis of Presentation” in Form 10-K for the year ended December 31, 2020. Disclosures regarding the effects of new accounting pronouncements are included in the “Note 1. Basis of Presentation” in this report. Except for the item noted below, there have been no other changes to the significant accounting policies during 2021.

Intangible Assets

The Company performed a qualitative assessment of current events and circumstances, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, and a comparison of management’s forecast and assumptions to those used in its October 1, 2020 quantitative impairment test, concluding that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of September 30, 2021, and therefore no triggering event occurred that required a quantitative goodwill impairment test. If economic conditions deteriorate, or the COVID-19 pandemic’s effects prolong or worsen, it may be more-likely-than-not that the fair value of one or more of Truist’s reporting units falls below its respective carrying amount, which would require a quantitative goodwill impairment test.

Truist Financial Corporation 69

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the management of the Company, under the supervision and with the participation of the Company’s CEO and CFO, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

Management of Truist is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2021 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to the Litigation and Regulatory Matters section in “Note 14. Commitments and Contingencies,” which is incorporated by reference into this item.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Truist’s Annual Report on Form 10-K for the year ended December 31, 2020. Additional risks and uncertainties not currently known to Truist or that management has deemed to be immaterial also may materially adversely affect Truist’s business, financial condition, or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Refer to the Share Repurchase Activity section in the MD&A, which is incorporated by reference into this item.

70 Truist Financial Corporation

ITEM 6. EXHIBITS
Exhibit No.DescriptionLocation
3.1Amended and Restated Bylaws of Truist Financial Corporation.
3.2Amended and Restated Bylaws of Truist Financial Corporation.
10.1Employment Agreement by and between BB&T Insurance Holdings, Inc. and John Howard.
10.2First Amendment to Employment Agreement with John Howard.
11Statement re computation of earnings per share.
31.1Certification 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.
31.2Certification 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.
32Certification 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.INSXBRL 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.SCHXBRL Taxonomy Extension Schema.Filed herewith.
101.CALXBRL Taxonomy Extension Calculation Linkbase.Filed herewith.
101.LABXBRL Taxonomy Extension Label Linkbase.Filed herewith.
101.PREXBRL Taxonomy Extension Presentation Linkbase.Filed herewith.
101.DEFXBRL Taxonomy Definition Linkbase.Filed herewith.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits101).Filed herewith.

Truist Financial Corporation 71

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
TRUIST FINANCIAL CORPORATION
(Registrant)
Date:November 1, 2021By:/s/ Daryl N. Bible
  Daryl N. Bible
Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date:November 1, 2021By:/s/ Cynthia B. Powell
  Cynthia B. Powell
Executive Vice President and Corporate Controller
(Principal Accounting Officer)

72 Truist Financial Corporation

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