TFC 10-Q Quarterly Report March 31, 2022 | Alphaminr
TRUIST FINANCIAL CORP
ALPHAMINR

TFC 10-Q Quarter ended March 31, 2022

Balance Sheet
Cash Flow
Income Statement
Debt
TRUIST FINANCIAL CORP
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tfc-20220331
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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: March 31, 2022
Commission File Number: 1-10853

TRUIST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
_________________________________________________________________
North Carolina 56-0939887
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
214 North Tryon Street
Charlotte, North Carolina 28202
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (336) 733-2000
_________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $5 par value TFC New York Stock Exchange
Depositary Shares each representing 1/4,000th interest in a share of Series I Perpetual Preferred Stock TFC.PI New York Stock Exchange
5.853% Fixed-to-Floating Rate Normal Preferred Purchase Securities each representing 1/100th interest in a share of Series J Perpetual Preferred Stock TFC.PJ New York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series O Non-Cumulative Perpetual Preferred Stock TFC.PO New York Stock Exchange
Depositary Shares each representing 1/1,000th interest in a share of Series R Non-Cumulative Perpetual Preferred Stock TFC.PR New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At March 31, 2022, 1,331,413,896 shares of the registrant’s common stock, $5 par value, were outstanding.

TABLE OF CONTENTS
TRUIST FINANCIAL CORPORATION
FORM 10-Q
March 31, 2022
Page No.
PART I - Financial Information
Glossary of Defined Terms
Forward-Looking Statements
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
Consolidated Statements of Income (Unaudited)
Consolidated Statements of Comprehensive Income (Unaudited)
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
Consolidated Statements of Cash Flows (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
Note 2. Business Combinations
Note 3. Securities Financing Activities
Note 4. Investment Securities
Note 5. Loans and ACL
Note 6. Goodwill and Other Intangible Assets
Note 7. Loan Servicing
Note 8. Other Assets and Liabilities
Note 9. Borrowings
Note 10. Shareholders’ Equity
Note 11. AOCI
Note 12. Income Taxes
Note 13. Benefit Plans
Note 14. Commitments and Contingencies
Note 15. Fair Value Disclosures
Note 16. Derivative Financial Instruments
Note 17. Computation of EPS
Note 18. Operating Segments
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk (see Market Risk Management in MD&A)
Item 4. Controls and Procedures
PART II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities - (none)
Item 4. Mine Safety Disclosures - (not applicable)
Item 5. Other Information - (none to be reported)
Item 6. Exhibits



Glossary of Defined Terms
The following terms may be used throughout this report, including the consolidated financial statements and related notes.
Term Definition
ACL
Allowance for credit losses
AFS
Available-for-sale
Agency MBS
Mortgage-backed securities issued by a U.S. government agency or GSE
ALLL
Allowance for loan and lease losses
ARRC
Alternative Reference Rates Committee of the FRB and the Federal Reserve Bank of New York
AOCI
Accumulated other comprehensive income (loss)
BB&T
BB&T Corporation and subsidiaries (changed to “Truist Financial Corporation” effective with the Merger)
Board Truist’s Board of Directors
C&CB
Corporate and Commercial Banking, an operating segment
CARES Act The Coronavirus Aid, Relief, and Economic Security Act
CB&W
Consumer Banking and Wealth, an operating segment
CCAR
Comprehensive Capital Analysis and Review
CDI
Core deposit intangible
CECL Current expected credit loss model
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CET1
Common equity tier 1
CFPB
Consumer Financial Protection Bureau
Company
Truist Financial Corporation and its subsidiaries (interchangeable with “Truist” below)
COVID-19 Coronavirus disease 2019
CRE
Commercial real estate
CRO
Chief Risk Officer
CVA Credit valuation adjustment
EPS
Earnings per common share
ESG Environmental, Social, and Governance
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
FHLB
Federal Home Loan Bank
FHLMC
Federal Home Loan Mortgage Corporation
FNMA
Federal National Mortgage Association
FRB
Board of Governors of the Federal Reserve System
GAAP
Accounting principles generally accepted in the United States of America
GDP Gross Domestic Product
GSE
U.S. government-sponsored enterprise
HFI
Held for investment
HQLA
High-quality liquid assets
HTM
Held-to-maturity
IH
Insurance Holdings, an operating segment
IPV
Independent price verification
ISDA
International Swaps and Derivatives Association, Inc.
LCR
Liquidity Coverage Ratio
LHFS
Loans held for sale
LIBOR
London Interbank Offered Rate
LOCOM Lower of cost or market
Market Risk Rule Market risk capital requirements issued jointly by the OCC, U.S. Treasury, FRB, and FDIC
MBS
Mortgage-backed securities
MD&A Management’s Discussion and Analysis of Financial Condition and Results of Operations
Merger Merger of BB&T and SunTrust effective December 6, 2019
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
NYSE
New York Stock Exchange
OAS
Option adjusted spread
OCC Office of the Comptroller of the Currency
OCI
Other comprehensive income (loss)
OPEB
Other post-employment benefit
OREO
Other real estate owned
OT&C
Other, Treasury and Corporate
Parent Company
Truist Financial Corporation, the parent company of Truist Bank and other subsidiaries
PCD
Purchased credit deteriorated loans
PPP Paycheck Protection Program, established by the CARES Act
ROU assets
Right-of-use assets
Truist Financial Corporation 1

Term Definition
RUFC
Reserve for unfunded lending commitments
S&P
Standard & Poor’s
SBIC
Small Business Investment Company
SCB Stress Capital Buffer
SEC
Securities and Exchange Commission
SOFR
Secured Overnight Financing Rate
SunTrust
SunTrust Banks, Inc.
TDR
Troubled debt restructuring
TE
Taxable-equivalent
TRS Total Return Swap
Truist
Truist Financial Corporation and its subsidiaries (interchangeable with the “Company” above)
Truist Bank Truist Bank, formerly Branch Banking and Trust Company
U.S.
United States of America
U.S. Treasury
United States Department of the Treasury
UPB
Unpaid principal balance
VaR
Value-at-risk
VIE
Variable interest entity
2 Truist Financial Corporation

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of Truist. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” “would,” “could,” and other similar expressions are intended to identify these forward-looking statements.

Forward-looking statements are not based on historical facts but instead represent management’s expectations and assumptions regarding Truist’s business, the economy, and other future conditions. Such statements involve inherent uncertainties, risks, and changes in circumstances that are difficult to predict. As such, Truist’s actual results may differ materially from those contemplated by forward-looking statements. While there can be no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those contemplated by forward-looking statements include the following, without limitation, as well as the risks and uncertainties more fully discussed in Part I, Item 1A-Risk Factors in Truist’s Form 10-K for the year ended December 31, 2021:

• residual risks and uncertainties relating to the Merger of heritage BB&T and heritage SunTrust, including the ability to realize the anticipated benefits of the Merger;
• expenses relating to the Merger and application and data center decommissioning;
• deposit attrition, client loss or revenue loss following completed mergers or acquisitions may be greater than anticipated;
• the COVID-19 pandemic disrupted the global economy and adversely impacted Truist’s financial condition and results of operations, including through increased expenses, reduced fee income and net interest margin, decreased demand for certain types of loans, and increases in the allowance for credit losses; a resurgence of the pandemic, whether due to new variants of the coronavirus or other factors, 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, which could adversely affect Truist’s revenue and expenses, the value of assets and obligations, and the availability and cost of capital, cash flows, and liquidity;
• inability to access short-term funding or liquidity, loss of client deposits or changes in Truist’s credit ratings, which could increase the cost of funding or limit access to capital markets;
• risk management oversight functions may not identify or address risks adequately, and management may not be able to effectively manage credit risk;
• risks resulting from the extensive use of models in Truist’s business, which may impact decisions made by management and regulators;
• failure to execute on strategic or operational plans, including the ability to successfully complete or integrate mergers and acquisitions;
• increased competition, including from (i) new or existing competitors that could have greater financial resources or be subject to different regulatory standards, and (ii) products and services offered by non-bank financial technology companies, may reduce Truist’s client base, cause Truist to lower prices for its products and services in order to maintain market share or otherwise adversely impact Truist’s businesses or results of operations;
• failure to maintain or enhance Truist’s competitive position with respect to new products, services and technology, whether it fails to anticipate client expectations or because its technological developments fail to perform as desired or do not achieve market acceptance or regulatory approval or for other reasons, may cause Truist to lose market share or incur additional expense;
• negative public opinion, which could damage Truist’s reputation;
• increased scrutiny regarding Truist’s consumer sales practices, training practices, incentive compensation design, and governance;
• regulatory matters, litigation or other legal actions, which may result in, among other things, costs, fines, penalties, restrictions on Truist’s business activities, reputational harm, negative publicity, or other adverse consequences;
• evolving legislative, accounting and regulatory standards, including with respect to climate, capital, and liquidity requirements, and results of regulatory examinations may adversely affect Truist’s financial condition and results of operations;
• the monetary and fiscal policies of the federal government and its agencies, including in response to rising inflation, could have a material adverse effect on 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 teammates, and if these individuals leave or change roles without effective replacements, Truist’s operations and integration activities could be adversely impacted, which could be exacerbated in the increased work-from-home environment caused by the COVID-19 pandemic as job markets may be less constrained by physical geography;
• 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, which have increased in frequency with current geopolitical tensions, identity theft, ransomware attacks, and physical security risks, such as natural disasters, environmental conditions, and intentional acts of destruction, could result in the disclosure of confidential information, adversely affect Truist’s business or reputation or create significant legal or financial exposure; and
• widespread outages of operational, communication, or other systems, whether internal or provided by third parties, natural or other disasters (including acts of terrorism and pandemics), and the effects of climate change, including physical risks, such as more frequent and intense weather events, and risks related to the transition to a lower carbon economy, such as regulatory or technological changes or shifts in market dynamics or consumer preferences, could have an adverse effect on Truist’s financial condition and results of operations, lead to material disruption of Truist’s operations or the ability or willingness of clients to access Truist’s products and services.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, Truist undertakes no obligation to revise or update any forward-looking statements.
Truist Financial Corporation 3

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions, except per share data, shares in thousands) 		Mar 31, 2022 Dec 31, 2021
Assets
Cash and due from banks $ 5,516 $ 5,085
Interest-bearing deposits with banks 23,606 15,210
Securities borrowed or purchased under agreements to resell 2,322 4,028
Trading assets at fair value 5,920 4,423
AFS securities at fair value 84,753 153,123
HTM securities (fair value of $59,124 and $1,495 at fair value, respectively) 61,662 1,494
LHFS (including $3,364 and $3,544 at fair value, respectively) 4,167 4,812
Loans and leases (including $21 and $23 at fair value, respectively) 290,081 289,513
ALLL ( 4,170 ) ( 4,435 )
Loans and leases, net of ALLL 285,911 285,078
Premises and equipment 3,662 3,700
Goodwill 26,284 26,098
CDI and other intangible assets 3,693 3,408
Loan servicing rights at fair value 3,013 2,633
Other assets (including $3,137 and $3,436 at fair value, respectively) 33,470 32,149
Total assets $ 543,979 $ 541,241
Liabilities
Noninterest-bearing deposits $ 150,446 $ 145,892
Interest-bearing deposits 277,882 270,596
Short-term borrowings (including $1,717 and $1,731 at fair value, respectively) 5,147 5,292
Long-term debt 33,773 35,913
Other liabilities (including $1,482 and $586 at fair value, respectively) 11,687 14,277
Total liabilities 478,935 471,970
Shareholders’ Equity
Preferred stock 6,673 6,673
Common stock, $5 par value 6,657 6,639
Additional paid-in capital 34,539 34,565
Retained earnings 23,687 22,998
AOCI, net of deferred income taxes ( 6,535 ) ( 1,604 )
Noncontrolling interests 23 —
Total shareholders’ equity 65,044 69,271
Total liabilities and shareholders’ equity $ 543,979 $ 541,241
Common shares outstanding 1,331,414 1,327,818
Common shares authorized 2,000,000 2,000,000
Preferred shares outstanding 223 223
Preferred shares authorized 5,000 5,000

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

CONSOLIDATED STATEMENTS OF INCOME
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions, except per share data, shares in thousands) 		Three Months Ended March 31,
2022 2021
Interest Income
Interest and fees on loans and leases $ 2,644 $ 3,002
Interest on securities 640 443
Interest on other earning assets 73 49
Total interest income 3,357 3,494
Interest Expense
Interest on deposits 32 47
Interest on long-term debt 132 148
Interest on other borrowings 10 14
Total interest expense 174 209
Net Interest Income 3,183 3,285
Provision for credit losses ( 95 ) 48
Net Interest Income After Provision for Credit Losses 3,278 3,237
Noninterest Income
Insurance income 727 626
Investment banking and trading income 261 346
Wealth management income 343 341
Service charges on deposits 252 258
Card and payment related fees 212 200
Residential mortgage income 89 100
Lending related fees 85 100
Operating lease income 58 68
Commercial mortgage income 32 33
Income from bank-owned life insurance 51 50
Securities gains (losses) (69) —
Other income 101 75
Total noninterest income 2,142 2,197
Noninterest Expense
Personnel expense 2,051 2,142
Professional fees and outside processing 363 350
Software expense 232 210
Net occupancy expense 208 209
Amortization of intangibles 137 144
Equipment expense 118 113
Marketing and customer development 84 66
Operating lease depreciation 48 50
Loan-related expense 44 54
Regulatory costs 35 25
Merger-related and restructuring charges 216 141
Loss (gain) on early extinguishment of debt — ( 3 )
Other expense 138 109
Total noninterest expense 3,674 3,610
Earnings
Income before income taxes 1,746 1,824
Provision for income taxes 330 351
Net income 1,416 1,473
Noncontrolling interests 1 ( 4 )
Net income available to the bank holding company 1,415 1,477
Preferred stock dividends and other 88 143
Net income available to common shareholders $ 1,327 $ 1,334
Basic EPS $ 1.00 $ 0.99
Diluted EPS 0.99 0.98
Basic weighted average shares outstanding 1,329,037 1,345,666
Diluted weighted average shares outstanding 1,341,563 1,358,932

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 March 31,
2022 2021
Net income $ 1,416 $ 1,473
OCI, net of tax:
Net change in net pension and postretirement costs 8 35
Net change in cash flow hedges 5 36
Net change in AFS securities ( 4,989 ) ( 2,304 )
Net change in HTM securities 44 —
Other, net 1 1
Total OCI, net of tax ( 4,931 ) ( 2,232 )
Total comprehensive income $ ( 3,515 ) $ ( 759 )
Income Tax Effect of Items Included in OCI:
Net change in net pension and postretirement costs $ 2 $ 11
Net change in cash flow hedges 1 11
Net change in AFS securities ( 1,513 ) ( 707 )
Net change in HTM securities 13 —
Other, net — —
Total income taxes related to OCI $ ( 1,497 ) $ ( 685 )

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 Stock Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings AOCI Noncontrolling Interests Total Shareholders’ Equity
Balance, January 1, 2021 1,348,961 $ 8,048 $ 6,745 $ 35,843 $ 19,455 $ 716 $ 105 $ 70,912
Net income — — — — 1,477 — ( 4 ) 1,473
OCI — — — — — ( 2,232 ) — ( 2,232 )
Issued in connection with equity awards, net 5,388 — 27 ( 111 ) — — — ( 84 )
Repurchase of common stock ( 9,504 ) — ( 48 ) ( 458 ) — — — ( 506 )
Redemption of preferred stock — ( 924 ) — — ( 26 ) — — ( 950 )
Cash dividends declared on common stock — — — — ( 605 ) — — ( 605 )
Cash dividends declared on preferred stock — — — — ( 117 ) — — ( 117 )
Equity-based compensation expense — — — 86 — — — 86
Other, net — — — — — — ( 101 ) ( 101 )
Balance, March 31, 2021 1,344,845 $ 7,124 $ 6,724 $ 35,360 $ 20,184 $ ( 1,516 ) $ — $ 67,876
Balance, January 1, 2022 1,327,818 $ 6,673 $ 6,639 $ 34,565 $ 22,998 $ ( 1,604 ) $ — $ 69,271
Net income — — — — 1,415 — 1 1,416
OCI — — — — — ( 4,931 ) — ( 4,931 )
Issued in connection with equity awards, net 3,596 — 18 ( 106 ) ( 1 ) — — ( 89 )
Cash dividends declared on common stock — — — — ( 637 ) — — ( 637 )
Cash dividends declared on preferred stock — — — — ( 88 ) — — ( 88 )
Equity-based compensation expense — — — 80 — — — 80
Other, net — — — — — — 22 22
Balance, March 31, 2022 1,331,414 $ 6,673 $ 6,657 $ 34,539 $ 23,687 $ ( 6,535 ) $ 23 $ 65,044

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
TRUIST FINANCIAL CORPORATION AND SUBSIDIARIES
Unaudited
(Dollars in millions) 		Three Months Ended March 31,
2022 2021
Cash Flows From Operating Activities:
Net income $ 1,416 $ 1,473
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses ( 95 ) 48
Depreciation 195 201
Amortization of intangibles 137 144
Securities (gains) losses 69 —
Net change in operating assets and liabilities:
LHFS 180 ( 510 )
Loan servicing rights ( 380 ) ( 342 )
Pension asset ( 410 ) ( 452 )
Derivative assets and liabilities 986 1,060
Trading assets ( 1,497 ) ( 1,222 )
Other assets and other liabilities ( 558 ) ( 915 )
Other, net ( 231 ) 482
Net cash from operating activities ( 188 ) ( 33 )
Cash Flows From Investing Activities:
Proceeds from sales of AFS securities 3,127 60
Proceeds from maturities, calls and paydowns of AFS securities 5,259 8,862
Purchases of AFS securities ( 7,219 ) ( 15,601 )
Proceeds from maturities, calls and paydowns of HTM securities 857 —
Purchases of HTM securities ( 3,020 ) —
Originations and purchases of loans and leases, net of sales and principal collected ( 134 ) 8,249
Net cash received (paid) for securities borrowed or purchased under agreements to resell 1,706 396
Net cash received (paid) for asset acquisitions, business combinations, and divestitures ( 488 ) 1,130
Other, net ( 122 ) 23
Net cash from investing activities ( 34 ) 3,119
Cash Flows From Financing Activities:
Net change in deposits 11,842 14,489
Net change in short-term borrowings ( 145 ) ( 203 )
Proceeds from issuance of long-term debt 66 1,299
Repayment of long-term debt ( 1,699 ) ( 3,032 )
Repurchase of common stock — ( 506 )
Redemption of preferred stock — ( 950 )
Cash dividends paid on common stock ( 637 ) ( 605 )
Cash dividends paid on preferred stock ( 88 ) ( 117 )
Net cash received (paid) for hedge unwinds ( 198 ) —
Other, net ( 92 ) ( 197 )
Net cash from financing activities 9,049 10,178
Net Change in Cash and Cash Equivalents 8,827 13,264
Cash and Cash Equivalents, January 1 20,295 18,868
Cash and Cash Equivalents, March 31 $ 29,122 $ 32,132
Supplemental Disclosure of Cash Flow Information:
Net cash paid (received) during the period for:
Interest expense $ 156 $ 248
Income taxes 40 28
Noncash investing activities:
Transfer of AFS securities to HTM 59,436 —

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

NOTE 1. Basis of Presentation

General

See the Glossary of Defined Terms at the beginning of this Report for terms used herein. These consolidated financial statements and notes are presented in accordance with the instructions for Form 10-Q, and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flow activity required in accordance with GAAP. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the consolidated financial position and consolidated results of operations have been made. The year-end consolidated balance sheet data was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The information contained in the financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2021 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, 2021 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 during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the ACL; determination of fair value for securities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other intangible assets; income taxes; and pension and postretirement benefit obligations.

Changes in Accounting Principles and Effects of New Accounting Pronouncements
Standard / Adoption Date Description Effects on the Financial Statements
Standards Not Yet Adopted
Troubled Debt Restructurings and Vintage Disclosures
January 1, 2023
Eliminates the accounting guidance for TDRs, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Additionally, requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases.
Truist is evaluating this standard. Upon adoption, Truist expects the newly required disclosures to be included in the Loans and ACL footnote.
Fair Value Hedging – Portfolio Layer Method
January 1, 2023
Introduces the portfolio layer method, which expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method (previously named, last-of-layer method).

Additionally, expands the scope of the portfolio layer method to include non-prepayable assets, specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, and specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio.
Truist is evaluating the use of the portfolio layer method in its hedging programs.

Truist Financial Corporation 9

NOTE 2. Business Combinations

On March 1, 2022, Truist acquired Kensington Vanguard National Land Services, one of the country's largest independent full-service national title insurance agencies, which resulted in approximately $ 187 million of goodwill and $ 148 million of identifiable intangible assets in the IH segment. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The intangible assets are being amortized over a term of 15 years based upon the estimated economic benefits received. Goodwill of $ 129 million and identifiable intangible assets of $ 110 million are deductible for tax purposes.

NOTE 3. Securities Financing Activities

Securities purchased under agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently sold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. The following table presents securities borrowed or purchased under agreements to resell:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Securities purchased under agreements to resell $ 1,678 $ 3,460
Securities borrowed 644 568
Total securities borrowed or purchased under agreements to resell $ 2,322 $ 4,028
Fair value of collateral held available to be resold or repledged $ 2,316 $ 4,005
Fair value of securities repledged 342 1,141

For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions. Refer to “Note 14. Commitments and Contingencies” for additional information related to pledged securities. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:
March 31, 2022 December 31, 2021
(Dollars in millions) Overnight and Continuous Up to 30 days Total Overnight and Continuous Up to 30 days Total
U.S. Treasury $ 439 $ 41 $ 480 $ 749 $ 409 $ 1,158
GSE 81 31 112 53 25 78
Agency MBS - residential 973 338 1,311 720 141 861
Corporate and other debt securities 150 314 464 213 125 338
Total securities sold under agreements to repurchase $ 1,643 $ 724 $ 2,367 $ 1,735 $ 700 $ 2,435

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

10 Truist Financial Corporation

NOTE 4. Investment Securities

The following tables summarize the Company’s AFS and HTM securities:
March 31, 2022
(Dollars in millions) 		Amortized Cost Gross Unrealized Fair Value
Gains Losses
AFS securities:
U.S. Treasury $ 9,891 $ — $ 479 $ 9,412
GSE 257 — 12 245
Agency MBS - residential 71,956 37 3,755 68,238
Agency MBS - commercial 2,831 2 174 2,659
States and political subdivisions 366 19 15 370
Non-agency MBS 4,149 — 346 3,803
Other 26 — — 26
Total AFS securities $ 89,476 $ 58 $ 4,781 $ 84,753
HTM securities:
Agency MBS - residential $ 61,662 $ — $ 2,538 $ 59,124
December 31, 2021
(Dollars in millions) 		Amortized Cost Gross Unrealized Fair Value
Gains Losses
AFS securities:
U.S. Treasury $ 9,892 $ 9 $ 106 $ 9,795
GSE 1,667 33 2 1,698
Agency MBS - residential 135,886 656 2,500 134,042
Agency MBS - commercial 2,928 18 64 2,882
States and political subdivisions 382 39 1 420
Non-agency MBS 4,305 — 47 4,258
Other 28 — — 28
Total AFS securities $ 155,088 $ 755 $ 2,720 $ 153,123
HTM securities:
Agency MBS - residential $ 1,494 $ 1 $ — $ 1,495

In the first quarter of 2022, Truist transferred $59.4 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies. Management determined that it has both the positive intent and ability to hold these securities to maturity. On the date of transfer, the difference between the par value and the fair value of these securities, which was recorded as a loss in AOCI, resulted in a net discount of $ 3.7 billion, inclusive of $ 510 million of basis adjustment gains from terminated fair value hedges attributable to the transferred securities. The discount will be accreted and unrealized loss in AOCI will be amortized, offsetting within interest income over the remaining life of the securities using the interest method. There were no gains or losses recognized as a result of this transfer.

Certain MBS securities issued by FNMA and FHLMC exceeded 10% of shareholders’ equity at March 31, 2022. The FNMA investments had total amortized cost and fair value of $ 45.2 billion and $ 43.0 billion, respectively. The FHLMC investments had total amortized cost and fair value of $ 45.7 billion and $ 43.4 billion, respectively.

The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table. The expected life of MBS may be shorter than the contractual maturities because borrowers may have the right to prepay their obligations with or without penalties.
Amortized Cost Fair Value
March 31, 2022
(Dollars in millions) 		Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Total Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Total
AFS securities:
U.S. Treasury $ 309 $ 8,602 $ 980 $ — $ 9,891 $ 307 $ 8,188 $ 917 $ — $ 9,412
GSE — — — 257 257 — — — 245 245
Agency MBS - residential — 1 633 71,322 71,956 — 1 624 67,613 68,238
Agency MBS - commercial — 8 15 2,808 2,831 — 8 14 2,637 2,659
States and political subdivisions 15 76 124 151 366 15 76 129 150 370
Non-agency MBS — — — 4,149 4,149 — — — 3,803 3,803
Other — 6 — 20 26 — 6 — 20 26
Total AFS securities $ 324 $ 8,693 $ 1,752 $ 78,707 $ 89,476 $ 322 $ 8,279 $ 1,684 $ 74,468 $ 84,753
HTM securities:
Agency MBS - residential $ — $ — $ — $ 61,662 $ 61,662 $ — $ — $ — $ 59,124 $ 59,124

Truist Financial Corporation 11

The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position:
Less than 12 months 12 months or more Total
March 31, 2022
(Dollars in millions) 		Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
AFS securities:
U.S. Treasury $ 8,793 $ 431 $ 602 $ 48 $ 9,395 $ 479
GSE 209 12 — — 209 12
Agency MBS - residential 54,565 2,940 9,386 815 63,951 3,755
Agency MBS - commercial 909 40 1,672 134 2,581 174
States and political subdivisions 206 13 21 2 227 15
Non-agency MBS 3,803 346 — — 3,803 346
Other 21 — — — 21 —
Total $ 68,506 $ 3,782 $ 11,681 $ 999 $ 80,187 $ 4,781
HTM securities:
Agency MBS - residential $ 39,486 $ 1,388 $ 19,638 $ 1,150 $ 59,124 $ 2,538
Less than 12 months 12 months or more Total
December 31, 2021
(Dollars in millions) 		Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
AFS securities:
U.S. Treasury $ 8,412 $ 88 $ 582 $ 18 $ 8,994 $ 106
GSE 104 2 — — 104 2
Agency MBS - residential 101,262 2,377 2,638 123 103,900 2,500
Agency MBS - commercial 1,749 50 413 14 2,162 64
States and political subdivisions — — 22 1 22 1
Non-agency MBS 4,258 47 — — 4,258 47
Other 6 — — — 6 —
Total $ 115,791 $ 2,564 $ 3,655 $ 156 $ 119,446 $ 2,720

At March 31, 2022 and December 31, 2021, no ACL was established for AFS or HTM securities. Substantially all of the unrealized losses on the securities portfolio, including non-agency MBS, were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. HTM debt securities consists of residential agency MBS. Accordingly, the Company does not expect to incur any credit losses on HTM investment securities.

The following table presents gross securities gains and losses recognized in earnings:
(Dollars in millions) Three Months Ended March 31,
2022 2021
Gross realized gains $ 13 $ —
Gross realized losses ( 82 ) —
Securities gains (losses), net $ ( 69 ) $ —

12 Truist Financial Corporation

NOTE 5. Loans and ACL

The following tables present loans and leases HFI by aging category. Government guaranteed loans are not placed on nonperforming status regardless of delinquency because collection of principal and interest is reasonably assured. The past due status of loans that received a deferral under the CARES Act is generally frozen during the deferral period. In certain limited circumstances, accommodation programs result in the delinquency status being reset to current.
Accruing
March 31, 2022
(Dollars in millions) 		Current 30-89 Days Past Due 90 Days Or More Past Due (1) Nonperforming Total
Commercial:
Commercial and industrial $ 140,428 $ 280 $ 22 $ 330 $ 141,060
CRE 22,734 13 — 27 22,774
Commercial construction 5,219 1 — — 5,220
Consumer:
Residential mortgage 46,287 542 1,027 315 48,171
Residential home equity and direct 24,558 142 12 141 24,853
Indirect auto 24,999 529 1 227 25,756
Indirect other 10,972 65 2 4 11,043
Student 5,210 482 822 — 6,514
Credit card 4,615 47 28 — 4,690
Total $ 285,022 $ 2,101 $ 1,914 $ 1,044 $ 290,081
(1) Includes government guaranteed loans of $ 996 million in the residential mortgage portfolio and $ 818 million in the student portfolio.
Accruing
December 31, 2021
(Dollars in millions) 		Current 30-89 Days Past Due 90 Days Or More Past Due (1) Nonperforming Total
Commercial:
Commercial and industrial $ 138,225 $ 130 $ 13 $ 394 $ 138,762
CRE 23,902 20 — 29 23,951
Commercial construction 4,962 2 — 7 4,971
Consumer:
Residential mortgage 46,033 514 1,009 296 47,852
Residential home equity and direct 24,809 107 9 141 25,066
Indirect auto 25,615 607 1 218 26,441
Indirect other 10,811 64 3 5 10,883
Student 5,357 555 868 — 6,780
Credit card 4,735 45 27 — 4,807
Total $ 284,449 $ 2,044 $ 1,930 $ 1,090 $ 289,513
(1) Includes government guaranteed loans of $ 978 million in the residential mortgage portfolio and $ 864 million in the student portfolio.

Truist Financial Corporation 13

The following tables present the amortized cost basis of loans by origination year and credit quality indicator:
March 31, 2022
(Dollars in millions) 		Amortized Cost Basis by Origination Year Revolving Credit Loans Converted to Term Other (1)
2022 2021 2020 2019 2018 Prior Total
Commercial:
Commercial and industrial:
Pass $ 10,993 $ 30,955 $ 15,100 $ 11,947 $ 7,874 $ 13,160 $ 46,584 $ — $ ( 65 ) $ 136,548
Special mention 104 227 303 212 279 100 530 — — 1,755
Substandard 98 334 361 375 238 256 765 — — 2,427
Nonperforming 4 42 11 62 10 43 158 — — 330
Total 11,199 31,558 15,775 12,596 8,401 13,559 48,037 — ( 65 ) 141,060
CRE:
Pass 971 4,396 2,744 4,951 3,093 3,405 882 — ( 50 ) 20,392
Special mention 9 37 93 140 164 99 — — — 542
Substandard 64 212 207 463 450 417 — — — 1,813
Nonperforming 1 1 1 11 1 12 — — — 27
Total 1,045 4,646 3,045 5,565 3,708 3,933 882 — ( 50 ) 22,774
Commercial construction:
Pass 417 1,219 1,124 896 346 164 832 — — 4,998
Special mention 4 — 14 66 — — — — — 84
Substandard 1 4 22 33 61 17 — — — 138
Nonperforming — — — — — — — — — —
Total 422 1,223 1,160 995 407 181 832 — — 5,220
Consumer:
Residential mortgage:
Current $ 2,066 $ 17,749 $ 6,519 $ 3,238 $ 1,621 $ 15,094 $ — $ — $ — $ 46,287
30 - 89 days past due 10 66 43 35 35 353 — — — 542
90 days or more past due 1 4 52 93 128 749 — — — 1,027
Nonperforming — 4 7 21 27 256 — — — 315
Total 2,077 17,823 6,621 3,387 1,811 16,452 — — — 48,171
Residential home equity and direct:
Current 1,481 4,361 2,268 1,447 560 476 10,534 3,446 ( 15 ) 24,558
30 - 89 days past due 1 12 8 9 3 4 67 38 — 142
90 days or more past due — 1 — — — — 6 5 — 12
Nonperforming — 3 3 4 1 7 42 81 — 141
Total 1,482 4,377 2,279 1,460 564 487 10,649 3,570 ( 15 ) 24,853
Indirect auto:
Current 2,369 9,794 5,938 3,775 1,860 1,263 — — — 24,999
30 - 89 days past due 5 139 116 116 75 78 — — — 529
90 days or more past due — 1 — — — — — — — 1
Nonperforming — 42 51 60 39 35 — — — 227
Total 2,374 9,976 6,105 3,951 1,974 1,376 — — — 25,756
Indirect other:
Current 1,433 3,869 2,405 1,424 812 1,029 — — — 10,972
30 - 89 days past due 2 18 16 13 8 8 — — — 65
90 days or more past due — 1 1 — — — — — — 2
Nonperforming — — — 3 — 1 — — — 4
Total 1,435 3,888 2,422 1,440 820 1,038 — — — 11,043
Student:
Current — — 20 82 66 5,041 — — 1 5,210
30 - 89 days past due — — — — 1 481 — — — 482
90 days or more past due — — — — 1 821 — — — 822
Total — — 20 82 68 6,343 — — 1 6,514
Credit card:
Current 4,591 21 3 4,615
30 - 89 days past due 45 2 — 47
90 days or more past due 27 1 — 28
Total — — — — — — 4,663 24 3 4,690
Total $ 20,034 $ 73,491 $ 37,427 $ 29,476 $ 17,753 $ 43,369 $ 65,063 $ 3,594 $ ( 126 ) $ 290,081
14 Truist Financial Corporation

December 31, 2021
(Dollars in millions) 		Amortized Cost Basis by Origination Year Revolving Credit Loans Converted to Term Other (1)
2021 2020 2019 2018 2017 Prior Total
Commercial:
Commercial and industrial:
Pass $ 35,530 $ 17,430 $ 14,105 $ 8,994 $ 5,633 $ 9,424 $ 43,035 $ — $ ( 169 ) $ 133,982
Special mention 195 221 326 317 46 70 691 — — 1,866
Substandard 352 356 395 197 91 335 794 — — 2,520
Nonperforming 50 19 49 42 16 34 184 — — 394
Total 36,127 18,026 14,875 9,550 5,786 9,863 44,704 — ( 169 ) 138,762
CRE:
Pass 4,836 2,946 5,109 3,201 1,774 2,131 762 — ( 61 ) 20,698
Special mention 13 118 483 247 44 83 — — — 988
Substandard 321 264 523 528 321 279 — — — 2,236
Nonperforming 1 1 11 — 9 7 — — — 29
Total 5,171 3,329 6,126 3,976 2,148 2,500 762 — ( 61 ) 23,951
Commercial construction:
Pass 1,113 1,179 1,259 419 44 95 558 — 12 4,679
Special mention — 14 72 50 — — — — — 136
Substandard 7 13 45 67 17 — — — — 149
Nonperforming — — 1 — 5 — — — 1 7
Total 1,120 1,206 1,377 536 66 95 558 — 13 4,971
Consumer:
Residential mortgage:
Current 17,271 6,798 3,642 1,753 2,237 14,240 — — 92 46,033
30 - 89 days past due 58 31 32 40 31 322 — — — 514
90 or more days past due 3 44 91 133 95 643 — — — 1,009
Nonperforming 1 5 18 27 20 226 — — ( 1 ) 296
Total 17,333 6,878 3,783 1,953 2,383 15,431 — — 91 47,852
Residential home equity and direct:
Current 4,962 2,630 1,717 691 189 425 10,757 3,388 50 24,809
30 - 89 days past due 8 8 10 3 1 3 53 21 — 107
90 days or more past due — — — — — — 5 4 — 9
Nonperforming 2 3 4 1 — 7 48 75 1 141
Total 4,972 2,641 1,731 695 190 435 10,863 3,488 51 25,066
Indirect auto:
Current 10,699 6,691 4,293 2,158 1,081 504 — — 189 25,615
30 - 89 days past due 119 138 145 97 56 52 — — — 607
90 days or more past due — — — — — 1 — — — 1
Nonperforming 28 48 61 41 21 19 — — — 218
Total 10,846 6,877 4,499 2,296 1,158 576 — — 189 26,441
Indirect other:
Current 4,333 2,724 1,638 937 455 691 — — 33 10,811
30 - 89 days past due 14 15 15 12 4 4 — — — 64
90 days or more past due 1 1 1 — — — — — — 3
Nonperforming 1 1 1 — — 2 — — — 5
Total 4,349 2,741 1,655 949 459 697 — — 33 10,883
Student:
Current — 21 88 73 61 5,122 — — ( 8 ) 5,357
30 - 89 days past due — — 1 1 1 552 — — — 555
90 days or more past due — — — — 1 867 — — — 868
Total — 21 89 74 63 6,541 — — ( 8 ) 6,780
Credit card:
Current 4,711 24 — 4,735
30 - 89 days past due 43 2 — 45
90 days or more past due 26 1 — 27
Total — — — — — — 4,780 27 — 4,807
Total $ 79,918 $ 41,719 $ 34,135 $ 20,029 $ 12,253 $ 36,138 $ 61,667 $ 3,515 $ 139 $ 289,513
(1) Includes certain deferred fees and costs, unapplied payments, and other adjustments.

Truist Financial Corporation 15

ACL

The following tables present activity in the ACL:
(Dollars in millions) Balance at Jan 1, 2021 Charge-Offs Recoveries Provision (Benefit) Other (1) Balance at Mar 31, 2021
Commercial:
Commercial and industrial $ 2,204 $ ( 79 ) $ 19 $ ( 8 ) $ — $ 2,136
CRE 573 ( 4 ) 1 ( 26 ) — 544
Commercial construction 81 ( 2 ) 1 ( 3 ) — 77
Consumer:
Residential mortgage 368 ( 11 ) 2 ( 16 ) — 343
Residential home equity and direct 714 ( 55 ) 18 30 — 707
Indirect auto 1,198 ( 105 ) 22 61 — 1,176
Indirect other 208 ( 17 ) 6 ( 10 ) — 187
Student 130 ( 3 ) — 2 2 131
Credit card 359 ( 40 ) 9 33 — 361
ALLL 5,835 ( 316 ) 78 63 2 5,662
RUFC 364 — — ( 15 ) — 349
ACL $ 6,199 $ ( 316 ) $ 78 $ 48 $ 2 $ 6,011
(Dollars in millions) Balance at Jan 1, 2022 Charge-Offs Recoveries Provision (Benefit) Other (1) Balance at Mar 31, 2022
Commercial:
Commercial and industrial $ 1,426 $ ( 31 ) $ 17 $ ( 93 ) $ — $ 1,319
CRE 350 ( 1 ) 1 ( 67 ) — 283
Commercial construction 52 ( 1 ) 1 1 — 53
Consumer:
Residential mortgage 308 ( 2 ) 6 ( 2 ) — 310
Residential home equity and direct 615 ( 58 ) 20 ( 3 ) — 574
Indirect auto 1,022 ( 102 ) 23 14 — 957
Indirect other 195 ( 19 ) 6 29 — 211
Student 117 ( 6 ) — 3 1 115
Credit card 350 ( 41 ) 9 30 — 348
ALLL 4,435 ( 261 ) 83 ( 88 ) 1 4,170
RUFC 260 — — ( 7 ) — 253
ACL $ 4,695 $ ( 261 ) $ 83 $ ( 95 ) $ 1 $ 4,423
(1) Includes the amounts for the ALLL for PCD acquisitions, and other activity.

The commercial ALLL decreased $ 173 million and the consumer ALLL decreased $ 90 million for the three months ended March 31, 2022. The decrease reflects a continued favorable credit environment tempered by uncertainty associated with inflation, supply chain disruption, rising rates, and geopolitical events.

The RUFC decreased $ 7 million for the three months ended March 31, 2022. The decrease reflects a continued favorable credit environment.

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 March 31, 2022 ACL, unchanged since December 31, 2021. The primary economic forecast shaping the ACL estimate at March 31, 2022 included GDP growth in the mid-single digits followed by a decline to the low-single digits through the end of 2022 and an unemployment rate starting in the low-single digits with improvement through the end of the reasonable and supportable period.

16 Truist Financial Corporation

Quantitative models have certain limitations with respect to estimating expected losses, particularly in times of rapidly changing macro-economic conditions and forecasts. As a result, management believes that the qualitative component of the ACL, which incorporates management’s expert judgment related to expected future credit losses, will continue to be an important component of the ACL for the foreseeable future. The March 31, 2022 ACL estimate includes adjustments to consider the impact of current and expected events or risks not captured by the loss forecasting models, the outcomes of which are uncertain and may not be completely considered by quantitative models. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

NPAs

The following table provides a summary of nonperforming loans, excluding LHFS. Interest income recognized on nonperforming loans HFI was immaterial for the three months ended March 31, 2022 and 2021, respectively.
March 31, 2022 December 31, 2021
Recorded Investment Recorded Investment
(Dollars in millions) Without an ALLL With an ALLL Without an ALLL With an ALLL
Commercial:
Commercial and industrial $ 139 $ 191 $ 125 $ 269
CRE 18 9 12 17
Commercial construction — — — 7
Consumer:
Residential mortgage 5 310 4 292
Residential home equity and direct 3 138 3 138
Indirect auto 3 224 1 217
Indirect other — 4 — 5
Total $ 168 $ 876 $ 145 $ 945

The following table presents a summary of nonperforming assets and residential mortgage loans in the process of foreclosure.
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Nonperforming loans and leases HFI $ 1,044 $ 1,090
Nonperforming LHFS 39 22
Foreclosed real estate 3 8
Other foreclosed property 49 43
Total nonperforming assets $ 1,135 $ 1,163
Residential mortgage loans in the process of foreclosure $ 208 $ 135

TDRs

The following table presents a summary of TDRs:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Performing TDRs:
Commercial:
Commercial and industrial $ 104 $ 147
CRE 5 5
Commercial construction 1 —
Consumer:
Residential mortgage 866 692
Residential home equity and direct 91 98
Indirect auto 392 389
Indirect other 6 7
Student 25 25
Credit card 25 27
Total performing TDRs 1,515 1,390
Nonperforming TDRs 189 152
Total TDRs $ 1,704 $ 1,542
ALLL attributable to TDRs $ 87 $ 102

Truist Financial Corporation 17

The primary type of modification for newly designated TDRs is summarized in the tables below. New TDR balances represent the recorded investment at the end of the quarter in which the modification was made. The prior quarter balance represents recorded investment at the beginning of the quarter in which the modification was made. Rate modifications consist of TDRs made with below market interest rates, including those that also have modifications of loan structures.
As of / For the Three Months Ended March 31, 2022
(Dollars in millions) Type of Modification Prior Quarter Loan Balance ALLL at Period End
Rate Structure
Newly designated TDRs:
Commercial $ — $ 8 $ 10 $ —
Consumer 148 191 329 15
Credit card 2 — 2 1
Re-modification of previously designated TDRs 21 11
As of / For the Three Months Ended March 31, 2021
Type of Modification Prior Quarter Loan Balance ALLL at Period End
(Dollars in millions) Rate Structure
Newly designated TDRs:
Commercial $ 27 $ 103 $ 147 $ 13
Consumer 75 155 233 13
Credit card 4 — 4 2
Re-modification of previously designated TDRs 14 14

Charge-offs and forgiveness of principal and interest for TDRs were immaterial for all periods presented. The amount of modified loans that were classified as TDRs during the previous 12 months and experienced a payment default for three months ended March 31, 2022 and 2021 was immaterial. Payment default is defined as movement of the TDR to nonperforming status, foreclosure, or charge-off, whichever occurs first.

Unearned Income, Discounts, and Net Deferred Loan Fees and Costs

The following table presents additional information about loans and leases:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Unearned income, discounts, and net deferred loan fees and costs $ 537 $ 849

18 Truist Financial Corporation

NOTE 6. Goodwill and Other Intangible Assets

The Company performed a qualitative assessment of current events and circumstances, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, and a comparison of management’s forecast and assumptions to those used in its October 1, 2021 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 March 31, 2022, and therefore no triggering event occurred that required a quantitative goodwill impairment test. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

The changes in the carrying amount of goodwill attributable to operating segments are reflected in the table below. Activity during 2022 reflects the acquisition of Kensington Vanguard National Land Services. Activity during 2021 primarily reflects the acquisitions of Service Finance, LLC, and Constellation Affiliated Partners. Refer to “Note 2. Business Combinations” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on the acquisitions and “Note 18. Operating Segments” for additional information on segments.
(Dollars in millions) CB&W C&CB IH Total
Goodwill, January 1, 2021 $ 15,841 $ 6,167 $ 2,439 $ 24,447
Mergers and acquisitions 1,168 — 556 1,724
Adjustments and other ( 139 ) ( 18 ) 84 ( 73 )
Goodwill, December 31, 2021 16,870 6,149 3,079 26,098
Mergers and acquisitions — — 187 187
Adjustments and other ( 1 ) — — ( 1 )
Goodwill, March 31, 2022 $ 16,869 $ 6,149 $ 3,266 $ 26,284

The following table, which excludes fully amortized intangibles, presents information for identifiable intangible assets:
March 31, 2022 December 31, 2021
(Dollars in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
CDI $ 2,563 $ ( 1,267 ) $ 1,296 $ 2,563 $ ( 1,190 ) $ 1,373
Other, primarily client relationship intangibles
3,531 ( 1,134 ) 2,397 3,116 ( 1,081 ) 2,035
Total $ 6,094 $ ( 2,401 ) $ 3,693 $ 5,679 $ ( 2,271 ) $ 3,408

Truist redeemed a noncontrolling equity interest in SunTrust Merchant Services, LLC, and paid cash of $ 175 million in exchange for the rights to certain merchant banking relations, including relations previously referred by Truist to SunTrust Merchant Services, LLC. Upon completion of this transaction, Truist recognized a gain on the redemption of noncontrolling equity interest of $ 74 million and $ 282 million of other intangibles representing the fair value of acquired contractual relationships as of the transaction date. The intangible assets are being amortized over a term of 12 years based upon the estimated economic benefits received.
Truist Financial Corporation 19

NOTE 7. Loan Servicing

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

Residential Mortgage Activities
The following tables summarize residential mortgage servicing activities:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
UPB of residential mortgage loan servicing portfolio $ 246,664 $ 246,727
UPB of residential mortgage loans serviced for others, primarily agency conforming fixed rate
195,737 196,011
Mortgage loans sold with recourse 221 244
Maximum recourse exposure from mortgage loans sold with recourse liability 137 155
Indemnification, recourse and repurchase reserves 73 74
As of / For the Three Months Ended March 31,
(Dollars in millions) 		2022 2021
UPB of residential mortgage loans sold from LHFS $ 8,818 $ 9,489
Pre-tax gains recognized on mortgage loans sold and held for sale 39 119
Servicing fees recognized from mortgage loans serviced for others 145 141
Approximate weighted average servicing fee on the outstanding balance of residential mortgage loans serviced for others
0.31 % 0.31 %
Weighted average interest rate on mortgage loans serviced for others 3.41 3.76

The following table presents a roll forward of the carrying value of residential MSRs recorded at fair value:
Three Months Ended March 31,
(Dollars in millions) 		2022 2021
Residential MSRs, carrying value, January 1 $ 2,305 $ 1,778
Additions 147 174
Change in fair value due to changes in valuation inputs or assumptions:
Prepayment speeds 376 219
OAS ( 26 ) 141
Realization of expected net servicing cash flows, passage of time and other ( 110 ) ( 209 )
Residential MSRs, carrying value, March 31 $ 2,692 $ 2,103

The sensitivity of the fair value of the Company’s residential MSRs to changes in key assumptions is presented in the following table:
March 31, 2022 December 31, 2021
Range Weighted Average Range Weighted Average
(Dollars in millions) Min Max Min Max
Prepayment speed 10.0 % 12.8 % 11.1 % 11.4 % 15.3 % 13.8 %
Effect on fair value of a 10% increase $ ( 104 ) $ ( 113 )
Effect on fair value of a 20% increase ( 199 ) ( 216 )
OAS 1.2 % 11.2 % 4.3 % 1.5 % 10.7 % 4.2 %
Effect on fair value of a 10% increase $ ( 44 ) $ ( 37 )
Effect on fair value of a 20% increase ( 87 ) ( 73 )
Composition of loans serviced for others:
Fixed-rate residential mortgage loans 99.3 % 99.3 %
Adjustable-rate residential mortgage loans
0.7 0.7
Total 100.0 % 100.0 %
Weighted average life 6.0 years 5.2 years

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

20 Truist Financial Corporation

Commercial Mortgage Activities

The following table summarizes commercial mortgage servicing activities:
As of/Year-to-Date Ended
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
UPB of CRE mortgages serviced for others $ 37,397 $ 37,960
CRE mortgages serviced for others covered by recourse provisions 9,938 10,243
Maximum recourse exposure from CRE mortgages sold with recourse liability 2,861 2,958
Recorded reserves related to recourse exposure 15 16
CRE mortgages originated during the year-to-date period 1,557 9,380
Commercial MSRs at fair value 280 280

Other Servicing Activities

The Company had $ 41 million and $ 48 million of other loan servicing rights at fair value as of March 31, 2022 and December 31, 2021, respectively.

NOTE 8. Other Assets and Liabilities

Lessee Operating and Finance Leases

The Company leases certain assets, consisting primarily of real estate, and assesses at contract inception whether a contract is, or contains, a lease. The following tables present additional information on leases, excluding leases related to the lease financing businesses:
March 31, 2022 December 31, 2021
(Dollars in millions) Operating Leases Finance Leases Operating Leases Finance Leases
ROU assets $ 1,126 $ 22 $ 1,168 $ 22
Lease liabilities 1,529 26 1,600 26
Weighted average remaining term 6.5 years 6.2 years 6.6 years 6.4 years
Weighted average discount rate 2.3 % 3.4 % 2.3 % 3.5 %
Three Months Ended March 31,
(Dollars in millions) 2022 2021
Operating lease costs $ 85 $ 85

Lessor Operating Leases

The Company’s two primary lessor businesses are equipment financing and structured real estate with income recorded in Operating lease income on the Consolidated Statements of Income. The following table presents a summary of assets under operating leases and activity related to assets under operating leases. This table excludes subleases on assets included in premises and equipment.
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Assets held under operating leases (1) $ 2,034 $ 2,110
Accumulated depreciation ( 524 ) ( 539 )
Net $ 1,510 $ 1,571
(1) Includes certain land parcels subject to operating leases that have indefinite lives.

Bank-Owned Life Insurance

Bank-owned life insurance consists of life insurance policies held on certain teammates for which the Company is the beneficiary. These policies provide the Company an efficient form of funding for retirement and other employee benefits costs. The carrying value of bank-owned life insurance was $ 7.5 billion at March 31, 2022 and $ 7.3 billion December 31, 2021.
Truist Financial Corporation 21

NOTE 9. Borrowings

The following table presents a summary of short-term borrowings:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Securities sold under agreements to repurchase $ 2,367 $ 2,435
Collateral in excess of derivative exposures
380 318
Master notes 683 808
Securities sold short 1,717 1,731
Total short-term borrowings $ 5,147 $ 5,292

The following table presents a summary of long-term debt:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Truist Financial Corporation:
Fixed rate senior notes (1) $ 12,038 $ 13,271
Floating rate senior notes (1) 999 1,348
Fixed rate subordinated notes (2) 927 1,254
Capital notes (2) 621 620
Structured notes (3) 11 11
Truist Bank:
Fixed rate senior notes (1) 9,442 9,545
Floating rate senior notes (1) 2,398 2,399
Fixed rate subordinated notes (2) 4,908 5,043
FHLB advances
860 863
Other long-term debt (4) 1,275 1,263
Nonbank subsidiaries:
Other long-term debt (5) 294 296
Total long-term debt $ 33,773 $ 35,913
(1) Prior period was revised to reclassify certain floating rate senior notes that were reported as fixed rate senior notes at December 31, 2021.
(2) Subordinated and capital notes with a remaining maturity of one year or greater qualify under the risk-based capital guidelines as Tier 2 supplementary capital, subject to certain limitations.
(3) Consist of notes with various terms that include fixed or floating rate interest or returns that are linked to an equity index.
(4) Includes debt associated with finance leases, tax credit investments, and other.
(5) Includes debt associated with structured real estate leases.

NOTE 10. Shareholders’ Equity

Common Stock

The following table presents total dividends declared per share of common stock:
Three Months Ended March 31,
2022 2021
Cash dividends declared per share $ 0.48 $ 0.45

Share Repurchase Activity

The Board of Directors has authorized the repurchase of up to $ 4.2 billion of the Company’s common stock through September 30, 2022. At March 31, 2022, Truist had remaining authorization to repurchase $ 2.6 billion of common stock under the Board approved repurchase plan. The amount of share repurchases is dependent on capital deployment through organic growth and acquisitions, giving consideration to economic and regulatory conditions.

22 Truist Financial Corporation

NOTE 11. AOCI

AOCI includes the after-tax change in unrecognized net costs related to defined benefit pension and OPEB plans as well as unrealized gains and losses on cash flow hedges, AFS securities, and HTM securities transferred from AFS securities.
Three Months Ended March 31, 2022 and 2021
(Dollars in millions) 		Pension and OPEB Costs Cash Flow Hedges AFS Securities HTM Securities Other, net Total
AOCI balance, January 1, 2021 $ ( 875 ) $ ( 64 ) $ 1,654 $ — $ 1 $ 716
OCI before reclassifications, net of tax 28 — ( 2,408 ) — 1 ( 2,379 )
Amounts reclassified from AOCI:
Before tax 9 47 136 — — 192
Tax effect 2 11 32 — — 45
Amounts reclassified, net of tax 7 36 104 — — 147
Total OCI, net of tax 35 36 ( 2,304 ) — 1 ( 2,232 )
AOCI balance, March 31, 2021 $ ( 840 ) $ ( 28 ) $ ( 650 ) $ — $ 2 $ ( 1,516 )
AOCI balance, January 1, 2022 $ ( 86 ) $ ( 9 ) $ ( 1,510 ) $ — $ 1 $ ( 1,604 )
OCI before reclassifications, net of tax 2 — ( 5,036 ) — 1 ( 5,033 )
AFS Securities transferred to HTM, net of tax — — 2,872 ( 2,872 ) — —
Amounts reclassified from AOCI:
Before tax 8 6 61 57 — 132
Tax effect 2 1 14 13 — 30
Amounts reclassified, net of tax 6 5 47 44 — 102
Total OCI, net of tax 8 5 ( 4,989 ) 44 1 ( 4,931 )
AOCI balance, March 31, 2022 $ ( 78 ) $ ( 4 ) $ ( 3,627 ) $ ( 2,828 ) $ 2 $ ( 6,535 )
Primary income statement location of amounts reclassified from AOCI
Other expense Net interest income and Other expense Securities gains (losses) and Net interest income Net interest income Net interest income

NOTE 12. Income Taxes

For the three months ended March 31, 2022 and 2021, the provision for income taxes was $ 330 million and $ 351 million, respectively, representing effective tax rates of 18.9 % and 19.2 %, respectively. The lower effective tax rate for the three months ended March 31, 2022 was primarily due to discrete tax expenses resulting from the divestiture of certain businesses in the prior year. The Company calculated the provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period.

NOTE 13. Benefit Plans

The components of net periodic (benefit) cost for defined benefit pension plans are summarized in the following table:
Three Months Ended March 31,
(Dollars in millions) Income Statement Location 2022 2021
Service cost Personnel expense $ 139 $ 158
Interest cost Other expense 88 79
Estimated return on plan assets Other expense ( 269 ) ( 249 )
Amortization and other Other expense 8 8
Net periodic (benefit) cost $ ( 34 ) $ ( 4 )

Truist makes contributions to the qualified pension plans up to the maximum deductible for federal income tax purposes. Discretionary contributions totaling $ 351 million were made to the Truist pension plan during the three months ended March 31, 2022. There are no required contributions for 2022.

Truist Financial Corporation 23

NOTE 14. Commitments and Contingencies

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

Tax Credit and Certain Equity Investments

The following table summarizes certain tax credit and certain equity investments:
(Dollars in millions) Balance Sheet Location Mar 31, 2022 Dec 31, 2021
Investments in affordable housing projects:
Carrying amount Other assets $ 4,133 $ 4,107
Amount of future funding commitments included in carrying amount Other liabilities 1,346 1,285
Lending exposure Loans and leases for funded amounts 942 763
Renewable energy investments:
Carrying amount Other assets 199 257
Amount of future funding commitments not included in carrying amount NA 70 71
Private equity and certain other equity method investments:
Carrying amount Other assets 1,925 1,822
Amount of future funding commitments not included in carrying amount NA 435 411

The following table presents a summary of tax credits and amortization associated with the Company’s tax credit investment activity:
Three Months Ended March 31,
(Dollars in millions) Income Statement Location 2022 2021
Tax credits:
Investments in affordable housing projects Provision for income taxes $ 127 $ 120
Other community development investments Provision for income taxes 23 23
Renewable energy investments NA (1) 37 39
Amortization and other changes in carrying amount:
Investments in affordable housing projects Provision for income taxes $ 124 $ 119
Other community development investments Other noninterest income 19 19
Renewable energy investments Other noninterest income 4 —
(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) Mar 31, 2022 Dec 31, 2021
Commitments to extend, originate, or purchase credit $ 202,695 $ 198,658
Residential mortgage loans sold with recourse 221 244
CRE mortgages serviced for others covered by recourse provisions 9,938 10,243
Other loans serviced for others covered by recourse provisions 594 588
Letters of credit 5,818 5,568

24 Truist Financial Corporation

Total Return Swaps

The Company facilitates matched book TRS transactions on behalf of clients, whereby a VIE purchases reference assets identified by a client and the Company enters into a TRS with the VIE, with a mirror-image TRS facing the client. The Company provides senior financing to the VIE in the form of demand notes to fund the purchase of the reference assets. Reference assets are typically fixed income instruments primarily composed of syndicated bank loans. The TRS contracts pass through interest and other cash flows on the reference assets to the third party clients, along with exposing those clients to decreases in value on the assets and providing them with the rights to appreciation on the assets. The terms of the TRS contracts require the third parties to post initial margin collateral, as well as ongoing margin as the fair values of the underlying reference assets change. The following table provides a summary of the TRS transactions with VIE purchases. VIE assets include trading loans and bonds:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Total return swaps:
VIE assets $ 1,627 $ 1,519
Trading loans and bonds 1,602 1,491
VIE liabilities 104 50

The Company concluded that the associated VIEs should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, that could potentially be significant. 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.”

Pledged Assets

Certain assets were pledged to secure municipal deposits, securities sold under agreements to repurchase, certain derivative agreements, and borrowings or borrowing capacity, as well as to fund certain obligations related to nonqualified defined benefit and defined contribution retirement plans and for other purposes as required or permitted by law. Assets pledged to the FHLB and FRB are subject to applicable asset discounts when determining borrowing capacity. The Company 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 nonqualified benefit plans, the majority of the agreements governing the pledged assets do not permit the other party to sell or repledge the collateral. The following table provides the total carrying amount of pledged assets by asset type:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Pledged securities $ 28,614 $ 29,678
Pledged loans:
FRB 70,815 73,349
FHLB 60,151 64,698
Unused borrowing capacity:
FRB 51,876 52,170
FHLB 45,961 49,244

Litigation and Regulatory Matters

Truist and/or its subsidiaries are routinely named as defendants in or parties to numerous actual or threatened legal proceedings, including civil litigation and regulatory investigations or enforcement matters, arising from the ordinary conduct of its regular business activities. The matters range from individual actions involving a single plaintiff to class action lawsuits with many class members and can involve claims for substantial or indeterminate alleged damages or for injunctive or other relief. Investigations may involve both formal and informal proceedings, by both governmental agencies and self-regulatory organizations, and could result in fines, penalties, restitution, and/or alterations in Truist’s business practices. These legal proceedings are at varying stages of adjudication, arbitration, or investigation and may consist of a variety of claims, including common law tort and contract claims, as well as statutory antitrust, securities, and consumer protection claims. The ultimate resolution of any proceeding and the timing of such resolution is uncertain and inherently difficult to predict. It is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations, or consolidated cash flows of Truist, or cause significant reputational consequences.

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

Truist Financial Corporation 25

The Company estimates reasonably possible losses, in excess of amounts accrued, of up to approximately $ 200 million as of March 31, 2022. This estimate does not represent Truist’s maximum loss exposure, and actual losses may vary significantly. In addition, the matters underlying this estimate will change from time to time. Estimated losses are based upon currently available information and involve considerable judgment, given that claims often include significant legal uncertainties, damages alleged by plaintiffs are often unspecified or overstated, discovery may not have started or may not be complete, and material facts may be disputed or unsubstantiated, among other factors.

For certain matters, Truist may be unable to estimate the loss or range of loss, even if it believes that a loss is probable or reasonably possible, until developments in the case provide additional information sufficient to support such an estimate. Such matters are not accrued for and are not reflected in the estimate of reasonably possible losses.

The following is a description of a certain legal 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, and seeks damages on a class-wide basis, including refunds of challenged overdraft fees and pre-judgment interest. On October 6, 2017, the trial court granted plaintiff’s motion for class certification and defined the class as “Every Georgia citizen who had or has one or more accounts with SunTrust Bank and who, from July 12, 2006, to October 6, 2017 (i) had at least one overdraft of $500.00 or less resulting from an ATM or debit card transaction (the “Transaction”); (ii) paid any Overdraft Fees as a result of the Transaction; and (iii) did not receive a refund of those Fees,” and the granting of a certified class was affirmed on appeal. On April 8, 2020, 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.

26 Truist Financial Corporation

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:
March 31, 2022
(Dollars in millions) 		Total Level 1 Level 2 Level 3 Netting Adjustments (1)
Assets:
Trading assets:
U.S. Treasury $ 965 $ — $ 965 $ — $ —
GSE 391 — 391 — —
Agency MBS - residential 1,164 — 1,164 — —
Agency MBS - commercial 52 — 52 — —
States and political subdivisions 69 — 69 — —
Corporate and other debt securities 1,023 — 1,023 — —
Loans 1,933 — 1,933 — —
Other 323 273 50 — —
Total trading assets 5,920 273 5,647 — —
AFS securities:
U.S. Treasury 9,412 — 9,412 — —
GSE 245 — 245 — —
Agency MBS - residential 68,238 — 68,238 — —
Agency MBS - commercial 2,659 — 2,659 — —
States and political subdivisions 370 — 370 — —
Non-agency MBS 3,803 — 3,803 — —
Other 26 — 26 — —
Total AFS securities 84,753 — 84,753 — —
LHFS at fair value 3,364 — 3,364 — —
Loans and leases 21 — — 21 —
Loan servicing rights at fair value 3,013 — — 3,013 —
Other assets:
Derivative assets 2,113 739 2,989 7 ( 1,622 )
Equity securities 1,024 812 212 — —
Total assets $ 100,208 $ 1,824 $ 96,965 $ 3,041 $ ( 1,622 )
Liabilities:
Derivative liabilities $ 1,482 $ 360 $ 4,128 $ 81 $ ( 3,087 )
Securities sold short 1,717 13 1,704 — —
Total liabilities $ 3,199 $ 373 $ 5,832 $ 81 $ ( 3,087 )
Truist Financial Corporation 27

December 31, 2021
(Dollars in millions) 		Total Level 1 Level 2 Level 3 Netting Adjustments (1)
Assets:
Trading assets:
U.S. Treasury $ 125 $ — $ 125 $ — $ —
GSE 306 — 306 — —
Agency MBS - residential 1,016 — 1,016 — —
Agency MBS - commercial 13 — 13 — —
States and political subdivisions 91 — 91 — —
Corporate and other debt securities 738 — 738 — —
Loans 1,791 — 1,791 — —
Other 343 285 58 — —
Total trading assets 4,423 285 4,138 — —
AFS securities:
U.S. Treasury 9,795 — 9,795 — —
GSE 1,698 — 1,698 — —
Agency MBS - residential 134,042 — 134,042 — —
Agency MBS - commercial 2,882 — 2,882 — —
States and political subdivisions 420 — 420 — —
Non-agency MBS 4,258 — 4,258 — —
Other 28 — 28 — —
Total AFS securities 153,123 — 153,123 — —
LHFS at fair value 3,544 — 3,544 — —
Loans and leases 23 — — 23 —
Loan servicing rights at fair value 2,633 — — 2,633 —
Other assets:
Derivative assets 2,370 887 3,110 30 ( 1,657 )
Equity securities 1,066 967 99 — —
Total assets $ 167,182 $ 2,139 $ 164,014 $ 2,686 $ ( 1,657 )
Liabilities:
Derivative liabilities $ 586 $ 438 $ 3,056 $ 42 $ ( 2,950 )
Securities sold short 1,731 8 1,723 — —
Total liabilities $ 2,317 $ 446 $ 4,779 $ 42 $ ( 2,950 )
(1) Refer to “Note 16. Derivative Financial Instruments” for additional discussion on netting adjustments.

At March 31, 2022 and December 31, 2021, investments totaling $ 495 million and $ 440 million, respectively, have been excluded from the table above as they are valued based on net asset value as a practical expedient. These investments primarily consist of certain SBIC funds.

For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see “Note 18. Fair Value Disclosures” of the Annual Report on Form 10-K for the year ended December 31, 2021.

28 Truist Financial Corporation

Activity for Level 3 assets and liabilities is summarized below:
Three Months Ended March 31, 2022 and 2021
(Dollars in millions) 		Loans and Leases Loan Servicing Rights Net Derivatives
Balance at January 1, 2021 $ — $ 2,023 $ 172
Total realized and unrealized gains (losses):
Included in earnings — 374 ( 164 )
Issuances — 192 96
Settlements — ( 224 ) ( 114 )
Balance at March 31, 2021 $ — $ 2,365 $ ( 10 )
Balance at January 1, 2022 $ 23 $ 2,633 $ ( 12 )
Total realized and unrealized gains (losses):
Included in earnings — 357 ( 170 )
Issuances — 158 17
Settlements — ( 135 ) 91
Other ( 2 ) — —
Balance at March 31, 2022 $ 21 $ 3,013 $ ( 74 )
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2022 $ — $ 357 $ ( 45 )
Primary income statement location of realized gains (losses) included in earnings
Other income Residential mortgage income and Commercial mortgage income Residential mortgage income and Commercial mortgage income

Fair Value Option

The following table details the fair value and UPB of certain loans that were elected to be measured at fair value:
March 31, 2022 December 31, 2021
(Dollars in millions) Fair Value UPB Difference Fair Value UPB Difference
Trading loans $ 1,933 $ 1,944 $ ( 11 ) $ 1,791 $ 1,784 $ 7
Loans and leases 21 23 ( 2 ) 23 35 ( 12 )
LHFS at fair value 3,364 3,405 ( 41 ) 3,544 3,450 94

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) Mar 31, 2022 Dec 31, 2021
Carrying value:
LHFS $ 141 $ 101
Loans and leases 429 443
Other 52 100

The following table provides information about valuation adjustments for certain assets measured at fair value on a nonrecurring basis. The valuation adjustments represent the amounts recorded during the period regardless of whether the asset is still held at period end.
Three Months Ended March 31,
(Dollars in millions) 2022 2021
Valuation adjustments:
LHFS $ ( 3 ) $ ( 16 )
Loans and leases ( 97 ) ( 154 )
Other ( 139 ) ( 95 )

LHFS with valuation adjustments in the table above consisted primarily of residential mortgages and commercial loans that were valued using market prices and measured at LOCOM. The table above excludes $ 662 million and $ 1.2 billion of LHFS carried at cost at March 31, 2022 and December 31, 2021, respectively, that did not require a valuation adjustment during the period. The remainder of LHFS is carried at fair value. LHFS that were classified as nonperforming and LHFS that were 90 days or more past due and still accruing interest were not material at March 31, 2022 and December 31, 2021.

Truist Financial Corporation 29

Loans and leases consists of larger commercial loans and leases that are collateral-dependent and other secured loans and leases that have been charged-off to the fair value of the collateral. Valuation adjustments for loans and leases are primarily recorded in the Provision for credit losses in the Consolidated statement of income. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional discussion of individually evaluated loans and leases.

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

Financial Instruments Not Recorded at Fair Value

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

An active market does not exist for certain financial instruments. Fair value estimates for these instruments are based on current economic conditions and interest rate risk characteristics, loss experience and other factors. Many of these estimates involve uncertainties and matters of significant judgment and cannot be determined with precision. Therefore, the fair value estimates in many instances cannot be substantiated by comparison to independent markets. In addition, changes in assumptions could significantly affect these fair value estimates. Financial assets and liabilities not recorded at fair value are summarized below:
March 31, 2022 December 31, 2021
(Dollars in millions) Fair Value Hierarchy Carrying Amount Fair Value Carrying Amount Fair Value
Financial assets:
HTM securities Level 2 $ 61,662 $ 59,124 $ 1,494 $ 1,495
Loans and leases HFI, net of ALLL Level 3 285,890 282,709 285,055 284,914
Financial liabilities:
Time deposits Level 2 14,476 14,582 15,886 16,017
Long-term debt Level 2 33,773 33,275 35,913 36,251

The carrying value of the RUFC, which approximates the fair value of unfunded commitments, was $ 253 million and $ 260 million at March 31, 2022 and December 31, 2021, respectively.
30 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 March 31, 2022 and December 31, 2021.
March 31, 2022 December 31, 2021
Notional Amount Fair Value Notional Amount Fair Value
(Dollars in millions) Assets Liabilities Assets Liabilities
Fair value hedges:
Interest rate contracts:
Swaps hedging long-term debt $ 7,043 $ — $ ( 34 ) $ 12,690 $ — $ ( 6 )
Swaps hedging AFS securities 7,098 — — 12,711 — ( 2 )
Total 14,141 — ( 34 ) 25,401 — ( 8 )
Not designated as hedges:
Client-related and other risk management:
Interest rate contracts:
Swaps 153,378 733 ( 1,320 ) 150,223 1,716 ( 733 )
Options 30,904 113 ( 95 ) 23,659 43 ( 30 )
Forward commitments 4,118 29 ( 14 ) 2,404 2 ( 5 )
Other 2,572 — ( 1 ) 2,927 — —
Equity contracts 39,530 1,275 ( 1,630 ) 34,232 1,582 ( 2,089 )
Credit contracts:
Loans and leases 630 — ( 1 ) 570 — ( 2 )
Risk participation agreements 7,330 — ( 3 ) 8,145 — ( 4 )
Total return swaps 1,515 8 ( 5 ) 1,445 3 ( 19 )
Foreign exchange contracts 18,663 207 ( 204 ) 16,102 160 ( 156 )
Commodity 6,338 1,152 ( 1,144 ) 4,641 475 ( 468 )
Total 264,978 3,517 ( 4,417 ) 244,348 3,981 ( 3,506 )
Mortgage banking:
Interest rate contracts:
Swaps 1,016 3 — 441 — —
Interest rate lock commitments 3,911 7 ( 51 ) 4,163 30 ( 7 )
When issued securities, forward rate agreements and forward commitments
7,129 147 ( 1 ) 6,913 7 ( 15 )
Other 357 2 — 424 1 —
Total 12,413 159 ( 52 ) 11,941 38 ( 22 )
MSRs:
Interest rate contracts:
Swaps 19,634 1 — 12,837 — —
Options 5,237 39 — 101 1 —
When issued securities, forward rate agreements and forward commitments
2,856 19 ( 66 ) 3,927 7 —
Other 1,273 — — 2,017 — —
Total 29,000 59 ( 66 ) 18,882 8 —
Total derivatives not designated as hedges 306,391 3,735 ( 4,535 ) 275,171 4,027 ( 3,528 )
Total derivatives $ 320,532 3,735 ( 4,569 ) $ 300,572 4,027 ( 3,536 )
Gross amounts in the Consolidated Balance Sheets:
Amounts subject to master netting arrangements
( 1,290 ) 1,290 ( 1,312 ) 1,312
Cash collateral (received) posted for amounts subject to master netting arrangements
( 332 ) 1,797 ( 345 ) 1,638
Net amount $ 2,113 $ ( 1,482 ) $ 2,370 $ ( 586 )

Truist Financial Corporation 31

The following table presents the offsetting of derivative instruments including financial instrument collateral related to legally enforceable master netting agreements and amounts held or pledged as collateral. U.S. GAAP does not permit netting of non-cash collateral balances in the Consolidated Balance Sheets:
March 31, 2022
(Dollars in millions) 		Gross Amount Amount Offset Net Amount in Consolidated Balance Sheets Held/Pledged Financial Instruments Net Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement $ 2,787 $ ( 1,270 ) $ 1,517 $ — $ 1,517
Derivatives not subject to master netting arrangement or similar arrangement 209 — 209 — 209
Exchange traded derivatives 739 ( 352 ) 387 — 387
Total derivative assets $ 3,735 $ ( 1,622 ) $ 2,113 $ — $ 2,113
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement $ ( 3,819 ) $ 2,735 $ ( 1,084 ) $ 64 $ ( 1,020 )
Derivatives not subject to master netting arrangement or similar arrangement ( 390 ) — ( 390 ) — ( 390 )
Exchange traded derivatives ( 360 ) 352 ( 8 ) — ( 8 )
Total derivative liabilities $ ( 4,569 ) $ 3,087 $ ( 1,482 ) $ 64 $ ( 1,418 )
December 31, 2021
(Dollars in millions) 		Gross Amount Amount Offset Net Amount in Consolidated Balance Sheets Held/Pledged Financial Instruments Net Amount
Derivative assets:
Derivatives subject to master netting arrangement or similar arrangement $ 2,752 $ ( 1,221 ) $ 1,531 $ ( 1 ) $ 1,530
Derivatives not subject to master netting arrangement or similar arrangement 388 — 388 — 388
Exchange traded derivatives 887 ( 436 ) 451 — 451
Total derivative assets $ 4,027 $ ( 1,657 ) $ 2,370 $ ( 1 ) $ 2,369
Derivative liabilities:
Derivatives subject to master netting arrangement or similar arrangement $ ( 2,873 ) $ 2,514 $ ( 359 ) $ 66 $ ( 293 )
Derivatives not subject to master netting arrangement or similar arrangement ( 225 ) — ( 225 ) — ( 225 )
Exchange traded derivatives ( 438 ) 436 ( 2 ) — ( 2 )
Total derivative liabilities $ ( 3,536 ) $ 2,950 $ ( 586 ) $ 66 $ ( 520 )

The following table presents the carrying value of hedged items in fair value hedging relationships:
March 31, 2022 December 31, 2021
Hedge Basis Adjustment Hedge Basis Adjustment
(Dollars in millions) Hedged Asset / Liability Basis Items Currently Designated Discontinued Hedges Hedged Asset / Liability Basis Items Currently Designated Discontinued Hedges
AFS securities (1) $ 48,429 $ ( 441 ) $ ( 5 ) $ 108,758 $ ( 400 ) $ ( 150 )
Loans and leases 377 — 12 382 — 12
Long-term debt 24,562 ( 355 ) 361 27,361 ( 137 ) 629
(1) The amortized cost of AFS securities was $ 51.3 billion at March 31, 2022 and $ 110.6 billion at December 31, 2021.

32 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 March 31,
(Dollars in millions) 2022 2021
Pre-tax gain (loss) reclassified from AOCI into interest expense:
Deposits $ — $ ( 1 )
Short-term borrowings — ( 5 )
Long-term debt ( 6 ) ( 5 )
Total $ ( 6 ) $ ( 11 )
Pre-tax gain (loss) reclassified from AOCI into other expense: (1)
Deposits $ — $ ( 12 )
Short-term borrowings — ( 20 )
Long-term debt — ( 4 )
Total $ — $ ( 36 )
(1) Represents the accelerated amortization of amounts reclassified from AOCI, where management determined that the forecasted transaction is probable of not occurring.

The following table summarizes the impact on net interest income related to fair value hedges:
Three Months Ended March 31,
(Dollars in millions) 2022 2021
AFS securities:
Amounts related to interest settlements $ ( 5 ) $ ( 11 )
Recognized on derivatives 414 524
Recognized on hedged items
( 402 ) ( 526 )
Net income (expense) recognized 7 ( 13 )
Loans and leases:
Amounts related to interest settlements — —
Recognized on derivatives — —
Recognized on hedged items
( 1 ) ( 1 )
Net income (expense) recognized ( 1 ) ( 1 )
Long-term debt:
Amounts related to interest settlements 16 —
Recognized on derivatives ( 429 ) —
Recognized on hedged items
486 79
Net income (expense) recognized 73 79
Net income (expense) recognized, total
$ 79 $ 65

The following table presents information about the Company’s terminated cash flow and fair value hedges:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Cash flow hedges:
Net unrecognized after-tax gain (loss) on terminated hedges recorded in AOCI (to be recognized in earnings through 2022)
$ ( 4 ) $ ( 9 )
Estimated portion of net after-tax gain (loss) on terminated hedges to be reclassified from AOCI into earnings during the next 12 months
( 4 ) ( 9 )
Fair value hedges:
Unrecognized pre-tax net gain (loss) on terminated hedges (to be recognized as interest primarily through 2030) (1)
$ 856 $ 767
Portion of pre-tax net gain (loss) on terminated hedges to be recognized as a change in interest during the next 12 months
216 231
(1) Includes deferred gains that are recorded in AOCI as a result of the reclassification to HTM of previously hedged securities of $ 502 million at March 31, 2022.

Derivatives Not Designated as Hedging Instruments under GAAP

The Company also enters into derivatives that are not designated as accounting hedges under GAAP to economically hedge certain risks as well as in a trading capacity with its clients.
Truist Financial Corporation 33


The following table presents pre-tax gain (loss) recognized in income for derivative instruments not designated as hedges:
Three Months Ended March 31,
(Dollars in millions) Income Statement Location 2022 2021
Client-related and other risk management:
Interest rate contracts Investment banking and trading income and other income $ 56 $ 102
Foreign exchange contracts Investment banking and trading income and other income 32 26
Equity contracts Investment banking and trading income and other income 5 ( 8 )
Credit contracts Investment banking and trading income and other income 8 ( 34 )
Commodity contracts Investment banking and trading income 5 2
Mortgage banking:
Interest rate contracts Residential mortgage income 261 91
Interest rate contracts Commercial mortgage income ( 1 ) ( 1 )
MSRs:
Interest rate contracts Residential mortgage income ( 349 ) ( 333 )
Interest rate contracts Commercial mortgage income ( 9 ) ( 12 )
Total $ 8 $ ( 167 )

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 March 31, 2022, the remaining terms on these risk participations ranged from less than one year to 16 years. The potential future exposure represents the Company’s maximum estimated exposure to written risk participations, as measured by projecting a maximum value of the guaranteed derivative instruments based on scenario simulations and assuming 100% default by all obligors on the maximum value.

The Company has also entered into TRS contracts on loans and bonds. To mitigate its credit risk, the Company typically receives initial margin from the counterparty upon entering into the TRS and variation margin if the fair value of the underlying reference assets deteriorates. For additional information on the Company’s TRS contracts, see “Note 14. Commitments and Contingencies.”

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) Mar 31, 2022 Dec 31, 2021
Risk participation agreements:
Maximum potential amount of exposure
$ 327 $ 521
Total return swaps:
Cash collateral held 323 290

34 Truist Financial Corporation

The following table summarizes collateral positions with counterparties:
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Dealer and other counterparties:
Cash and other collateral received from counterparties $ 332 $ 346
Derivatives in a net gain position secured by collateral received 450 506
Unsecured positions in a net gain with counterparties after collateral postings
79 143
Cash collateral posted to counterparties 1,861 1,704
Derivatives in a net loss position secured by collateral 2,196 2,591
Additional collateral that would have been posted had the Company’s credit ratings dropped below investment grade
2 3
Central counterparties clearing:
Cash collateral, including initial margin, posted to central clearing parties — 31
Derivatives in a net loss position 7 18
Derivatives in a net gain position 86 —
Securities pledged to central counterparties clearing 797 904

NOTE 17. Computation of EPS

Basic and diluted EPS calculations are presented in the following table:
Three Months Ended March 31,
(Dollars in millions, except per share data, shares in thousands) 2022 2021
Net income available to common shareholders $ 1,327 $ 1,334
Weighted average number of common shares 1,329,037 1,345,666
Effect of dilutive outstanding equity-based awards 12,526 13,266
Weighted average number of diluted common shares 1,341,563 1,358,932
Basic EPS $ 1.00 $ 0.99
Diluted EPS $ 0.99 $ 0.98
Anti-dilutive awards — 376

NOTE 18. Operating Segments

Truist operates and measures business activity across three segments: CB&W, C&CB, and IH, with functional activities included in OT&C. The Company’s business segment structure is based on the manner in which financial information is evaluated by management as well as the products and services provided or the type of client served. For additional information, see “Note 21. Operating Segments” of the Annual Report on Form 10-K for the year ended December 31, 2021.

Truist Financial Corporation 35

The following table presents results by segment:
Three Months Ended March 31,
(Dollars in millions) 		CB&W C&CB IH OT&C (1) Total
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
Net interest income (expense) $ 1,529 $ 1,753 $ 1,093 $ 1,208 $ 24 $ 24 $ 537 $ 300 $ 3,183 $ 3,285
Net intersegment interest income (expense) 649 231 156 72 — — ( 805 ) ( 303 ) — —
Segment net interest income 2,178 1,984 1,249 1,280 24 24 ( 268 ) ( 3 ) 3,183 3,285
Allocated provision for credit losses 74 100 ( 150 ) ( 35 ) — 1 ( 19 ) ( 18 ) ( 95 ) 48
Segment net interest income after provision 2,104 1,884 1,399 1,315 24 23 ( 249 ) 15 3,278 3,237
Noninterest income 950 920 619 692 737 633 ( 164 ) ( 48 ) 2,142 2,197
Amortization of intangibles 73 79 33 38 31 27 — — 137 144
Other noninterest expense 1,846 1,836 724 737 529 453 438 440 3,537 3,466
Income (loss) before income taxes 1,135 889 1,261 1,232 201 176 ( 851 ) ( 473 ) 1,746 1,824
Provision (benefit) for income taxes 271 208 276 266 49 43 ( 266 ) ( 166 ) 330 351
Segment net income (loss) $ 864 $ 681 $ 985 $ 966 $ 152 $ 133 $ ( 585 ) $ ( 307 ) $ 1,416 $ 1,473
Identifiable assets (period end) $ 160,220 $ 159,541 $ 184,834 $ 183,241 $ 10,292 $ 8,062 $ 188,633 $ 166,693 $ 543,979 $ 517,537
(1) Includes financial data from business units below the quantitative and qualitative thresholds requiring disclosure.

36 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, 2021.

Regulatory Considerations

The regulatory framework applicable to banking organizations is intended primarily for the protection of depositors and the stability of the financial system, rather than for the protection of shareholders and creditors. Truist is subject to banking laws and regulations, and various other laws and regulations, which affect the operations and management of Truist and its ability to make distributions to shareholders. Truist and its subsidiaries are also subject to supervision and examination by multiple regulators. The descriptions below summarize updates since the filing of the Annual Report on Form 10-K for the year ended December 31, 2021 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, 2021 for additional disclosures.

In March 2022, the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain contracts under certain circumstances with a SOFR-based rate to be established in a forthcoming FRB rule that incorporates a spread adjustment specified in the statute. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provision of any state or local law, statute, rule, regulation, or standard.

Executive Overview

The first quarter of 2022 marked a pivotal turning point for Truist as we completed our final core bank conversion and are positioned to focus on executional excellence. Our financial results for the first quarter of 2022 were solid, though underlying results were mixed in light of market volatility and geopolitical uncertainty. The continued favorable credit environment also led to a strong credit performance and a benefit from the provision for credit losses. Revenues were lower as a result of a challenging environment for investment banking and mortgage, but we remain confident in our outlook given expectations for higher interest rates, our diverse business model, and continued expense discipline. At the same time, we acknowledge the increasing uncertainty presented by a range of geopolitical and economic risks. See below for further updates on our final integration and ESG efforts and a more detailed discussion of our first quarter financial performance.

Merger Integration

Truist completed our largest conversion event during the first quarter of 2022, transitioning nearly seven million clients to the Truist ecosystem and rebranding more than 6,000 signs at branches, ATMs, and other locations. We now operate officially as one brand and one bank to our clients. This accomplishment was possible because of the expertise, purposeful commitment, and hard work of thousands of teammates. We remain guided by our purpose as we continue supporting our clients through the transition and look forward to shifting our focus to executional excellence and purposeful growth throughout this year.

ESG

Environmental

• Truist has joined the Partnership for Carbon Accounting Financials, and set 2030 goals to reduce Scope 1 and Scope 2 emissions by 35% each, and to reduce water consumption by 25%, relative to 2019.
• We announced our goal to achieve net zero greenhouse gas emissions by 2050, supporting our clients’ transition to a low-carbon economy.

Truist Financial Corporation 37

Social

• Truist continued to be ahead of schedule with regard to our $60 billion Community Benefits Plan commitment.
• In January 2022, Truist announced Truist One Banking, a first-of-its-kind approach to the checking account experience, designed to address clients’ direct feedback. Truist One Banking will be available to clients beginning in the summer of 2022. The Truist One checking account features will include: no overdraft fees; a $100 negative balance buffer for qualifying clients; an easily accessible, deposit-based line of credit of up to $750; and premium rewards that instantly recognize relationships and honor loyalty. In addition, Truist will offer an alternative checking account product created for clients who are new to credit and want simplicity and control without overdraft fees. It will help clients avoid high fees from check-cashing and payday lenders, bring many more households into mainstream banking, and create a pathway to upgrade to a Truist One checking account.
• In March 2022, Truist issued its first Social Bond Impact Report, which details the investments made from the bond proceeds and underscores the Company's commitment to advancing its ESG goals.
• In March 2022, Truist partnered with Connect Humanity to provide internet connectivity to historically marginalized communities.

Governance

• Truist made several leadership changes during 2022 as we continued to execute on the strategy first agreed upon in the Merger. Effective March 12, 2022, William H. Rogers, Jr. was appointed chairman of the board and Thomas E. Skains was appointed lead independent director. Rogers succeeds Kelly S. King, who stepped down from the role of chairman as previously announced. Skains succeeds David M. Ratcliffe. Both King and Ratcliffe remain on the board.
• In March 2022, Truist appointed Dontá L. Wilson to lead Retail and Small Business Banking. In his new role, Wilson will oversee Truist's branches across the Southeast, Mid-Atlantic, and Texas; ATMs; mortgage; card-based services; retail payments; deposit and loan products; small business delivery; retail loan approval channels; and brand, sports, performance, and digital marketing. Wilson assumes these responsibilities from Brant J. Standridge, who left Truist to pursue a new opportunity.
• In January 2022, Truist appointed Denise M. DeMaio as Chief Audit Officer, effective February 28, 2022. Denise joined the Executive Leadership team, leading Truist’s internal audit function, and providing counsel to senior management on emerging risk trends from the vantage points of governance, processes, technologies and reporting.

Financial Results

Net income available to common shareholders for the first quarter of 2022 of $1.3 billion was relatively stable compared with the first quarter of 2021. On a diluted per common share basis, earnings for the first quarter of 2022 were $0.99, an increase of $0.01 compared to the first quarter of 2021. Truist’s results of operations for the first quarter of 2022 produced an annualized return on average assets of 1.07% and an annualized return on average common shareholders’ equity of 9.0% compared to prior year returns of 1.17% and 8.7%, respectively. Results for the first quarter of 2022 included merger-related and restructuring charges of $216 million ($166 million after-tax), incremental operating expenses related to the Merger of $202 million ($155 million after-tax), a gain on the redemption of noncontrolling equity interest of $74 million ($57 million after-tax) related to the acquisition of certain merchant services relationships, and net losses on the sales of securities of $69 million ($53 million after-tax). Results for the first quarter of 2021 included $141 million ($108 million after-tax) of merger-related and restructuring charges, $175 million ($134 million after-tax) of incremental operating expenses related to the Merger, and an acceleration of loss recognition related to certain terminated cash flow hedges of $36 million ($28 million after-tax).

On a TE basis, revenue was $5.4 billion for the first quarter of 2022, a decrease of $159 million, or 2.9%, compared to the same period in 2021. TE net interest income for the first quarter of 2022 was down $104 million, or 3.1%, compared to the earlier quarter due to lower purchase accounting accretion, lower PPP fees, and a decrease in loan balances. These decreases were partially offset by growth in the securities portfolio and lower funding costs. Average earning assets increased $26.0 billion, or 5.9%, compared to the earlier quarter. The increase in average earning assets reflects a $30.4 billion, or 25%, increase in average securities, a $1.5 billion, or 8.7%, increase in average other earning assets, and a $1.1 billion, or 23%, increase in average interest earning trading assets, while average total loans and leases decreased $7.1 billion, or 2.4%. The growth in average earning assets is a result of the deployment of strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $32.1 billion, or 8.4%, compared to the earlier quarter, while average long-term debt decreased $2.5 billion, or 6.6%.

Net interest margin was 2.76%, down 25 basis points compared to the earlier quarter. The yield on the total loan portfolio for the first quarter of 2022 was 3.69%, down 40 basis points compared to the earlier quarter, reflecting the impact of lower purchase accounting accretion, lower PPP fees, and the ongoing impact of the lower rate environment. The yield on the average securities portfolio was 1.68%, up 23 basis points compared to the earlier quarter primarily due to higher yields on new purchases and lower premium amortization.

38 Truist Financial Corporation

The provision for credit losses was a benefit of $95 million, compared to a cost of $48 million for the earlier quarter. The current quarter includes a reserve release due to the continued favorable credit environment. Net charge-offs for the first quarter of 2022 totaled $178 million compared to $238 million in the earlier quarter. The net charge-off ratio for the current quarter of 0.25% was down eight basis points compared to the earlier quarter.

Noninterest income for the first quarter of 2022 decreased $55 million, or 2.5%, compared to the earlier quarter. The first quarter of 2022 includes net securities losses of $69 million and the gain on the redemption of noncontrolling equity interest (other income) of $74 million. The earlier quarter included a gain of $37 million from the divestiture of certain businesses (other income). Excluding the aforementioned items, noninterest income was down $23 million, or 1.1%. Insurance income increased $101 million, or 16%, due to continued organic growth and acquisitions. Investment banking and trading income decreased $85 million, or 25%, due to lower high yield bond and equity originations fees, lower core trading income, and lower CVA gains, partially offset by higher structured real estate fees. Residential mortgage income decreased $11 million, or 11%, as lower production income (due to margins and refinance volumes) was largely offset by higher servicing income (due to lower prepayments). Excluding the gain on the redemption of noncontrolling equity interest, the gain in the earlier quarter from the divestiture of certain businesses and a $67 million decrease for assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, other income increased $56 million, due to higher investment income from the Company's SBIC and other investments.

Noninterest expense for the first quarter of 2022 was up $64 million, or 1.8%, compared to the earlier quarter. Merger-related and restructuring charges increased $75 million due to costs for client day one conversions. Incremental operating expenses related to the Merger increased $27 million, primarily reflected in net occupancy expense in connection with updating the branch network to incorporate the Truist brand. The prior quarter also includes $36 million of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges and a small gain on the extinguishment of debt. Excluding the aforementioned items and the amortization of intangibles, adjusted noninterest expense was relatively stable compared to the earlier quarter. Personnel expense decreased $91 million, or 4.2%, due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits, lower incentives (due to declines in noninterest income), and lower salaries driven by fewer FTEs. Additionally, other expense increased $29 million due to increased operational losses, software expense increased $22 million, and marketing and customer development expense increased $18 million due to increased branding efforts.

The provision for income taxes was $330 million for the first quarter of 2022, compared to $351 million for the earlier quarter. The effective tax rate for the first quarter of 2022 was 18.9%, compared to 19.2% for the earlier quarter, primarily due to discrete tax expenses resulting from the divestiture of certain businesses in the prior year.

Truist’s total assets at March 31, 2022 were $544.0 billion, an increase of $2.7 billion, or 0.5%, compared to December 31, 2021. Total deposits at March 31, 2022 were $428.3 billion, an increase of $11.8 billion, or 2.8%, compared to December 31, 2021. In April 2022, Truist redeemed $800 million notional of FHLB advances, which resulted in a gain on early extinguishment of long-term debt of $39 million.

Truist transferred $59.4 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies.

Asset quality remains excellent, reflecting Truist’s prudent risk culture, diverse portfolio, and the continued favorable credit environment.

Truist maintained strong capital and liquidity. As of March 31, 2022, the CET1 ratio was 9.4% and the average LCR was 111%. The 20 basis point decline compared to the fourth quarter 2021 CET1 ratio reflects capital deployed through the acquisition of Kensington Vanguard National Land Services, the acquisition of certain merchant services relationships, an increase in risk-weighted assets, and the impact from the phase-in of the CECL transition relief. Additionally, the Company had $1.7 billion of senior long-term debt maturities and redemptions. Truist declared common dividends of $0.48 per share in the first quarter of 2022, resulting in dividend and total payout ratios of 48%.
Truist Financial Corporation 39

Analysis of Results of Operations

Net Interest Income and NIM

First Quarter 2022 compared to First Quarter 2021

Net interest income for the first quarter of 2022 was down $104 million, or 3.1%, compared to the earlier quarter due to lower purchase accounting accretion, lower PPP fees, and a decrease in loan balances. These decreases were partially offset by growth in the securities portfolio and lower funding costs. Average earning assets increased $26.0 billion, or 5.9%, compared to the earlier quarter. The increase in average earning assets reflects a $30.4 billion, or 25%, increase in average securities, a $1.5 billion, or 8.7%, increase in average other earning assets, and a $1.1 billion, or 23%, increase in average interest earning trading assets, while average total loans and leases decreased $7.1 billion, or 2.4%. The growth in average earning assets is a result of the deployment of strong deposit growth resulting from fiscal and monetary stimulus. Average deposits increased $32.1 billion, or 8.4%, compared to the earlier quarter, while average long-term debt decreased $2.5 billion, or 6.6%.

Net interest margin was 2.76%, down 25 basis points compared to the earlier quarter. The yield on the total loan portfolio for the first quarter of 2022 was 3.69%, down 40 basis points compared to the earlier quarter, reflecting the impact of lower purchase accounting accretion, lower PPP fees, and the ongoing impact of the lower rate environment. The yield on the average securities portfolio was 1.68%, up 23 basis points compared to the earlier quarter primarily due to higher yields on new purchases and lower premium amortization.

The average cost of total deposits was 0.03%, down two basis points compared to the earlier quarter. The average cost of short-term borrowings was 0.60%, down 22 basis points compared to the earlier quarter. The average cost of long-term debt was 1.50%, down seven basis points compared to the earlier quarter. The lower rates on interest-bearing liabilities reflect the impact of repricing of liabilities at lower rates.

As of March 31, 2022, the remaining unamortized fair value marks on the loan and lease portfolio, deposits, and long-term debt were $1.1 billion, $5 million, and $122 million, respectively. As of December 31, 2021, the remaining unamortized fair value marks on the loan and lease portfolio, deposits and long-term debt were $1.3 billion, $7 million, and $139 million, respectively.

The remaining unamortized fair value mark on loans and leases consist of $624 million for consumer loans and leases, and $495 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.
40 Truist Financial Corporation

Table 1: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis (1)
Three Months Ended March 31,
(Dollars in millions) 		Average Balances (5) Annualized Yield/Rate Income/Expense Incr.
(Decr.) 		Change due to
2022 2021 2022 2021 2022 2021 Rate Volume
Assets
Total securities, at amortized cost: (2)
U.S. Treasury $ 9,890 $ 1,759 0.72 % 0.89 % $ 18 $ 4 $ 14 $ (1) $ 15
GSE 1,120 1,839 2.13 2.33 6 11 (5) (1) (4)
Agency MBS 137,052 118,171 1.72 1.44 590 426 164 90 74
States and political subdivisions 374 444 3.72 3.52 3 4 (1) — (1)
Non-agency MBS 4,224 — 2.25 — 24 — 24 — 24
Other 27 33 2.04 1.92 — — — — —
Total securities 152,687 122,246 1.68 1.45 641 445 196 88 108
Interest earning trading assets 5,837 4,742 3.04 2.79 43 32 11 3 8
Other earning assets (3) 18,932 17,417 0.63 0.37 30 16 14 13 1
Loans and leases, net of unearned income: (4)
Commercial and industrial 138,872 141,026 2.88 3.14 987 1,093 (106) (90) (16)
CRE 23,555 26,211 2.84 2.90 168 189 (21) (4) (17)
Commercial Construction 5,046 6,557 3.05 3.04 35 48 (13) — (13)
Residential mortgage 47,976 45,823 3.57 4.42 428 507 (79) (102) 23
Residential home equity and direct 24,883 25,658 5.38 5.81 330 368 (38) (27) (11)
Indirect auto 26,088 26,363 5.56 6.56 357 426 (69) (65) (4)
Indirect other 10,860 10,848 6.32 6.98 169 187 (18) (18) —
Student 6,648 7,519 3.86 3.96 63 73 (10) (2) (8)
Credit card 4,682 4,645 8.97 9.24 104 106 (2) (3) 1
Total loans and leases HFI 288,610 294,650 3.70 4.11 2,641 2,997 (356) (311) (45)
LHFS 3,874 4,891 2.87 2.59 28 32 (4) 3 (7)
Total loans and leases 292,484 299,541 3.69 4.09 2,669 3,029 (360) (308) (52)
Total earning assets 469,940 443,946 2.90 3.20 3,383 3,522 (139) (204) 65
Nonearning assets 66,041 64,887
Total assets $ 535,981 $ 508,833
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
Interest-checking $ 112,159 $ 104,744 0.05 0.06 14 15 (1) (2) 1
Money market and savings 141,500 129,303 0.03 0.03 11 10 1 — 1
Time deposits 15,646 20,559 0.18 0.44 7 22 (15) (11) (4)
Total interest-bearing deposits (6) 269,305 254,606 0.05 0.07 32 47 (15) (13) (2)
Short-term borrowings 6,944 6,731 0.60 0.82 10 14 (4) (4) —
Long-term debt 35,337 37,820 1.50 1.57 132 148 (16) (6) (10)
Total interest-bearing liabilities 311,586 299,157 0.22 0.28 174 209 (35) (23) (12)
Noninterest-bearing deposits (6) 145,933 128,579
Other liabilities 11,664 11,050
Shareholders’ equity 66,798 70,047
Total liabilities and shareholders’ equity $ 535,981 $ 508,833
Average interest-rate spread 2.68 % 2.92 %
NIM/net interest income - taxable equivalent 2.76 % 3.01 % $ 3,209 $ 3,313 $ (104) $ (181) $ 77
Taxable-equivalent adjustment $ 26 $ 28
(1) Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs, and dividends.
(2) Total securities include AFS and HTM securities.
(3) Includes cash equivalents, interest-bearing deposits with banks, FHLB stock and other earning assets.
(4) Fees, which are not material for any of the periods shown, are included for rate calculation purposes. NPLs are included in the average balances.
(5) Represents daily average balances. Excludes basis adjustments for fair value hedges.
(6) Total deposit costs were 0.03% and 0.05% for the three months ended March 31, 2022 and 2021, respectively.
Truist Financial Corporation 41

Provision for Credit Losses

First Quarter 2022 compared to First Quarter 2021

The provision for credit losses was a benefit of $95 million, compared to a cost of $48 million for the earlier quarter. The current quarter includes a reserve release due to the continued favorable credit environment. Net charge-offs for the first quarter of 2022 totaled $178 million compared to $238 million in the earlier quarter. The net charge-off ratio for the current quarter of 0.25% was down eight basis points compared to the earlier quarter.

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 March 31,
(Dollars in millions) 2022 2021 % Change
Insurance income $ 727 $ 626 16.1 %
Investment banking and trading income 261 346 (24.6)
Wealth management income 343 341 0.6
Service charges on deposits 252 258 (2.3)
Card and payment related fees 212 200 6.0
Residential mortgage income 89 100 (11.0)
Lending related fees 85 100 (15.0)
Operating lease income 58 68 (14.7)
Commercial mortgage income 32 33 (3.0)
Income from bank-owned life insurance 51 50 2.0
Securities gains (losses) (69) — NM
Other income 101 75 34.7
Total noninterest income $ 2,142 $ 2,197 (2.5)

First Quarter 2022 compared to First Quarter 2021

Noninterest income for the first quarter of 2022 decreased $55 million, or 2.5%, compared to the earlier quarter. The first quarter of 2022 includes net securities losses of $69 million and the gain on the redemption of noncontrolling equity interest (other income) of $74 million. The earlier quarter included a gain of $37 million from the divestiture of certain businesses (other income). Excluding the aforementioned items, noninterest income was down $23 million, or 1.1%. Insurance income increased $101 million, or 16%, due to continued organic growth and acquisitions. Investment banking and trading income decreased $85 million, or 25%, due to lower high yield bond and equity originations fees, lower core trading income, and lower CVA gains, partially offset by higher structured real estate fees. Residential mortgage income decreased $11 million, or 11%, as lower production income (due to lower margins and refinance volumes) was largely offset by higher servicing income (due to lower prepayments). Excluding the gain on the redemption of noncontrolling equity interest, the gain in the earlier quarter from the divestiture of certain businesses and a $67 million decrease for assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense, other income increased $56 million, due to higher investment income from the Company’s SBIC and other investments.

42 Truist Financial Corporation

Noninterest Expense

The following table provides a breakdown of Truist’s noninterest expense:
Table 3: Noninterest Expense
Three Months Ended March 31,
(Dollars in millions) 2022 2021 % Change
Personnel expense $ 2,051 $ 2,142 (4.2) %
Professional fees and outside processing 363 350 3.7
Software expense 232 210 10.5
Net occupancy expense 208 209 (0.5)
Amortization of intangibles 137 144 (4.9)
Equipment expense 118 113 4.4
Marketing and customer development 84 66 27.3
Operating lease depreciation 48 50 (4.0)
Loan-related expense 44 54 (18.5)
Regulatory costs 35 25 40.0
Merger-related and restructuring charges 216 141 53.2
Loss (gain) on early extinguishment of debt — (3) (100.0)
Other expense 138 109 26.6
Total noninterest expense $ 3,674 $ 3,610 1.8

First Quarter 2022 compared to First Quarter 2021

Noninterest expense for the first quarter of 2022 was up $64 million, or 1.8%, compared to the earlier quarter. Merger-related and restructuring charges increased $75 million due to costs for client day one conversions. Incremental operating expenses related to the merger increased $27 million, primarily reflected in net occupancy expense in connection with updating the branch network to incorporate the Truist brand. The prior quarter also includes $36 million of expense associated with an acceleration of loss recognition related to certain terminated cash flow hedges and a small gain on the extinguishment of debt. Excluding the aforementioned items and the amortization of intangibles, adjusted noninterest expense was relatively stable compared to the earlier quarter. Personnel expense decreased $91 million, or 4.2%, due to lower other employee benefits as a result of the decrease in noninterest income for post-retirement benefits, lower incentives (due to declines in noninterest income), and lower salaries driven by fewer FTEs. Additionally, other expense increased $29 million due to increased operational losses, software expense increased $22 million, and marketing and customer development expense increased $18 million due to increased branding efforts.

Merger-Related and Restructuring Charges

The following table presents a summary of merger-related and restructuring charges and the related accruals. The 2022 and 2021 merger-related and restructuring costs primarily reflect charges as a result of the Merger, including costs for severance and other benefits, costs related to exiting facilities, and other restructuring initiatives.
Table 4: Merger-Related and Restructuring Accrual Activity
Three Months Ended March 31, 2022
(Dollars in millions) Accrual at Jan 1, 2022 Expense Utilized Accrual at Mar 31, 2022
Severance and personnel-related $ 77 $ 37 $ (72) $ 42
Occupancy and equipment — 98 (98) —
Professional services 37 64 (64) 37
Systems conversion and related costs
— 20 (17) 3
Other 12 (3) (2) 7
Total (1) $ 126 $ 216 $ (253) $ 89
(1) Related to the Merger, the Company recognized $208 million for the three months ended March 31, 2022. At March 31, 2022, the Company had an accrual of $81 million related to the Merger. The remaining expense and accrual relate to other restructuring activities.

Truist Financial Corporation 43

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, 2021 for additional disclosures related to Truist’s reportable business segments, including additional details related to results of operations. Fluctuations in noninterest income and noninterest expense are more fully discussed in the Noninterest Income and Noninterest Expense sections above.
Table 5: Net Income by Reportable Segment
Three Months Ended March 31,
(Dollars in millions) 2022 2021 % Change
Consumer Banking and Wealth $ 864 $ 681 26.9 %
Corporate and Commercial Banking 985 966 2.0
Insurance Holdings 152 133 14.3
Other, Treasury & Corporate (585) (307) (90.6)
Truist Financial Corporation $ 1,416 $ 1,473 (3.9)

First Quarter 2022 compared to First Quarter 2021

Consumer Banking and Wealth

CB&W net income was $864 million for the first quarter of 2022, an increase of $183 million compared to the earlier quarter. Segment net interest income increased $194 million primarily driven by higher interest rates, favorable funding credit on deposits, and increased deposit balances, partially offset by lower purchase accounting accretion. The allocated provision for credit losses decreased $26 million reflecting the impact of a larger allowance release than the earlier quarter as well as lower charge offs. Noninterest income increased $30 million compared to the earlier quarter primarily due to the gain on the redemption of noncontrolling equity interest in the current quarter as well as an increase in card and payment fees driven by increased sales volume, partially offset by a gain from the divestiture of certain businesses in the earlier quarter and lower residential mortgage income. Noninterest expense was flat compared to the earlier quarter.

CB&W average loans and leases held for investment decreased $1.8 billion, or 1.4%, for the first quarter of 2022 compared to the earlier quarter, primarily driven by lower mortgage warehouse balances, home equity and other direct consumer lending as well as lower student lending along with lower partnership balances net of Service Finance balances resulting from acquisition, partially offset by increased residential mortgage balances and recreational lending. Average mortgage warehouse loans, home equity and other direct consumer loans, student lending balances, and partnership balances net of Service Finance balances resulting from acquisition declined $2.7 billion, or 51%, $947 million, or 5.2%, $871 million, or 12%, and $211 million, or 6.0%, respectively, while residential mortgage and recreational lending balances increased $2.1 billion, or 4.7%, and $193 million, or 6.6%, respectively.

Average total deposits increased $22.6 billion, or 9.8%, for the first quarter of 2022 compared to the earlier quarter, primarily driven by the impact of fiscal and monetary stimulus. Average money market and savings accounts, interest checking accounts, and noninterest-bearing deposits increased $10.1 billion, or 10%, $8.5 billion, or 17%, and $8.3 billion, or 13%, respectively, partially offset by a decline in time deposits of $4.3 billion, or 23%.

Corporate and Commercial Banking

C&CB net income was $985 million for the first quarter of 2022, an increase of $19 million compared to the earlier quarter. Segment net interest income decreased $31 million primarily due to lower fee income associated with PPP loan forgiveness and lower purchase accounting accretion, partially offset by higher funding credit on deposits and increases to noninterest-bearing deposit balances. The allocated provision for credit losses decreased $115 million primarily reflecting a reserve release due to continued favorable credit environment and lower charge offs in the current quarter. Noninterest income decreased $73 million compared to the earlier quarter due to lower high yield bond and equity originations fees, lower credit trading income, and lower CVA mark to market gains, partially offset by higher structured real estate fees as well as higher investment income from the Company’s SBIC and other investments. Noninterest expense decreased $18 million driven by lower professional fees and intangible amortization expense in the current quarter.

C&CB average loans held for investment decreased $3.7 billion, or 2.4%, for the first quarter of 2022 compared to the earlier quarter, primarily due to PPP loan forgiveness. Excluding PPP loans, Corporate and Commercial Banking average loans held for investment increased $4.6 billion, or 3.1%.

44 Truist Financial Corporation

Average total deposits increased $7.8 billion, or 5.4%, for the first quarter of 2022 compared to the earlier quarter, primarily due to the impact of fiscal and monetary stimulus. Average noninterest-bearing deposits increased $9.0 billion, or 14%, while interest bearing deposits decreased $1.2 billion, or 1.5%.

Insurance Holdings

IH net income was $152 million for the first quarter of 2022, an increase of $19 million compared to the earlier quarter. Noninterest income increased $104 million primarily due to continued organic growth and acquisitions. Noninterest expense increased $80 million primarily due to higher performance-based incentives and salaries.

Other, Treasury & Corporate

OT&C generated a net loss of $585 million in the first quarter of 2022, compared to a net loss of $307 million in the earlier quarter. Net interest income decreased $265 million primarily due to higher funding credit on deposits to other segments, partially offset by higher earnings in the securities portfolio from higher yields on new purchases and lower premium amortization. The allocated provision for credit losses was flat compared to the earlier quarter. Noninterest income decreased $116 million primarily due to securities losses in the current quarter and valuation changes from assets held for certain post-retirement benefits, which is primarily offset by lower personnel expense. Noninterest expense was flat compared to the earlier quarter.

Analysis of Financial Condition

Investment Activities

The securities portfolio totaled $146.4 billion at March 31, 2022, compared to $154.6 billion at December 31, 2021. The decrease was due primarily to declines in residential agency MBS and GSE securities as a result of prepayment activity. In the first quarter of 2022, Truist transferred $59.4 billion of AFS securities to HTM as the Company continues to execute upon its asset-liability management strategies.

As of March 31, 2022, approximately 5.6% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 4.6% as of December 31, 2021. The effective duration of the securities portfolio was 6.9 years at March 31, 2022, compared to 5.8 years at December 31, 2021, excluding the impact of unsettled security purchases at period end.

U.S. Treasury, GSE, and Agency MBS represents 97% of the total securities portfolio as of March 31, 2022 and December 31, 2021. While the overwhelming majority of the portfolio remains in agency MBS securities, the Company also holds AAA rated non-agency MBS as the risk adjusted returns for these securities are more attractive than agency MBS.

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)
Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021
Commercial:
Commercial and industrial $ 138,872 $ 134,804 $ 134,942 $ 138,539 $ 141,026
CRE 23,555 24,396 24,849 25,645 26,211
Commercial construction 5,046 5,341 5,969 6,359 6,557
Consumer:
Residential mortgage 47,976 47,185 45,369 43,605 45,823
Residential home equity and direct 24,883 25,146 25,242 25,238 25,658
Indirect auto 26,088 26,841 26,830 26,444 26,363
Indirect other 10,860 10,978 11,112 10,797 10,848
Student 6,648 6,884 7,214 7,396 7,519
Credit card 4,682 4,769 4,632 4,552 4,645
Total average loans and leases HFI $ 288,610 $ 286,344 $ 286,159 $ 288,575 $ 294,650

Average loans and leases held for investment for the first quarter of 2022 were $288.6 billion, up $2.3 billion, or 0.8%, compared to the fourth quarter of 2021. Excluding a $1.1 billion decrease in average PPP loans, average loans held for investment were up $3.3 billion, or 1.2%.

Truist Financial Corporation 45

Average commercial loans increased $2.9 billion, or 1.8%, as a result of $6.5 billion, or 5.1%, growth within the commercial and industrial portfolio, excluding PPP and mortgage warehouse lending. This growth was partially offset by a $1.4 billion decrease in mortgage warehouse lending (commercial and industrial), a $1.1 billion decrease in average PPP loans (commercial and industrial), an $841 million decrease in average CRE loans, and a $295 million decrease in average commercial construction loans.

Average consumer loans decreased $579 million, or 0.5% due to a $753 million decrease in indirect auto due to market dynamics and the competitive environment, a $263 million decrease in residential home equity and direct, and a $236 million decrease in student loans. The decreases were partially offset by a $791 million increase in residential mortgages due to the continued strategy to put certain correspondent channel production onto the balance sheet and lower prepayments.

At March 31, 2022 and December 31, 2021, 52% of loans and leases HFI were variable rate.
46 Truist Financial Corporation

Asset Quality

The following tables summarize asset quality information:
Table 7: Asset Quality
(Dollars in millions) Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021
NPAs:
NPLs:
Commercial and industrial $ 330 $ 394 $ 423 $ 402 $ 474
CRE 27 29 20 25 58
Commercial construction — 7 7 12 13
Residential mortgage 315 296 306 302 290
Residential home equity and direct 141 141 146 165 172
Indirect auto 227 218 172 148 158
Indirect other 4 5 6 6 6
Total NPLs HFI 1,044 1,090 1,080 1,060 1,171
Loans held for sale 39 22 76 78 72
Total nonaccrual loans and leases 1,083 1,112 1,156 1,138 1,243
Foreclosed real estate 3 8 9 13 18
Other foreclosed property 49 43 39 41 38
Total nonperforming assets $ 1,135 $ 1,163 $ 1,204 $ 1,192 $ 1,299
TDRs:
Performing TDRs:
Commercial and industrial $ 104 $ 147 $ 200 $ 202 $ 201
CRE 5 5 8 24 47
Commercial construction 1 — — — —
Residential mortgage - government guaranteed 622 480 507 520 535
Residential mortgage - nonguaranteed 244 212 205 207 198
Residential home equity and direct 91 98 105 107 109
Indirect auto 392 389 390 389 399
Indirect other 6 7 7 7 7
Student - nonguaranteed 25 25 23 13 8
Credit card 25 27 30 32 35
Total performing TDRs 1,515 1,390 1,475 1,501 1,539
Nonperforming TDRs 189 152 159 190 207
Total TDRs $ 1,704 $ 1,542 $ 1,634 $ 1,691 $ 1,746
Loans 90 days or more past due and still accruing:
Commercial and industrial $ 22 $ 13 $ 18 $ 14 $ 14
Residential mortgage - government guaranteed 996 978 823 929 935
Residential mortgage - nonguaranteed 31 31 29 47 40
Residential home equity and direct 12 9 7 7 11
Indirect auto 1 1 2 2 2
Indirect other 2 3 2 1 1
Student - government guaranteed 818 864 965 1,043 1,033
Student - nonguaranteed 4 4 3 3 4
Credit card 28 27 23 22 32
Total loans 90 days or more past due and still accruing $ 1,914 $ 1,930 $ 1,872 $ 2,068 $ 2,072
Loans 30-89 days past due and still accruing:
Commercial and industrial $ 280 $ 130 $ 135 $ 146 $ 152
CRE 13 20 4 7 9
Commercial construction 1 2 2 1 4
Residential mortgage - government guaranteed 216 256 264 307 330
Residential mortgage - nonguaranteed 326 258 231 236 247
Residential home equity and direct 142 107 81 73 82
Indirect auto 529 607 560 428 328
Indirect other 65 64 53 47 45
Student - government guaranteed 476 549 451 543 551
Student - nonguaranteed 6 6 5 5 5
Credit card 47 45 37 31 35
Total loans 30-89 days past due and still accruing $ 2,101 $ 2,044 $ 1,823 $ 1,824 $ 1,788

Truist Financial Corporation 47

Nonperforming assets totaled $1.1 billion at March 31, 2022, down $28 million compared to December 31, 2021 due to declines in the commercial and industrial portfolio. Nonperforming loans and leases held for investment were 0.36% of loans and leases held for investment at March 31, 2022, down two basis points compared to December 31, 2021.

Performing TDRs were up $125 million compared to the prior quarter primarily due to an increase in government guaranteed residential mortgages.

Loans 90 days or more past due and still accruing totaled $1.9 billion at March 31, 2022, down $16 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 March 31, 2022, down one basis point from the prior quarter. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases was 0.04% at March 31, 2022, up one basis point from December 31, 2021.

Loans 30-89 days past due and still accruing of $2.1 billion at March 31, 2022 were up one basis point compared to the prior quarter due to an increase in the commercial and industrial portfolio, partially offset by seasonal declines in the indirect auto portfolio and a decline in the student portfolio.

Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 7. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to “Note 5. Loans and ACL” for additional disclosures related to these potential problem loans.
Table 8: Asset Quality Ratios
Mar 31, 2022 Dec 31, 2021
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI
0.72 % 0.71 %
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI
0.66 0.67
NPLs as a percentage of loans and leases HFI
0.36 0.38
NPLs as a percentage of total loans and leases (1) 0.37 0.38
NPAs as a percentage of:
Total assets (1)
0.21 0.21
Loans and leases HFI plus foreclosed property
0.38 0.39
ALLL as a percentage of loans and leases HFI
1.44 1.53
Ratio of ALLL to NPLs
3.99x 4.07x
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding PPP and other government guaranteed (2)
0.04 % 0.03 %
(1) Includes LHFS.
(2) This asset quality ratio has been adjusted to remove the impact of government guaranteed mortgage, student, and PPP loans. Management believes the inclusion of such assets in this asset quality ratio results in distortion of this ratio because collection of principal and interest is reasonably assured or the ratio might not be comparable to other periods presented or to other portfolios that do not have government guarantees.

Table 9: Asset Quality Ratios (Continued)
For the Three Months Ended Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021
Net charge-offs as a percentage of average loans and leases HFI:
Commercial:
Commercial and industrial 0.04 % 0.09 % 0.04 % 0.09 % 0.17 %
CRE 0.01 0.07 — (0.05) 0.04
Commercial construction (0.02) (0.10) (0.06) (0.06) 0.08
Consumer:
Residential mortgage (0.03) (0.02) 0.04 (0.01) 0.08
Residential home equity and direct 0.61 0.49 0.49 0.59 0.58
Indirect auto 1.23 1.01 0.75 0.63 1.28
Indirect other 0.48 0.39 0.26 0.17 0.39
Student 0.33 0.65 0.31 0.16 0.16
Credit card 2.77 2.31 1.90 2.75 2.74
Total 0.25 0.25 0.19 0.20 0.33
Ratio of ALLL to net charge-offs 5.78x 6.14x 8.79x 8.98x 5.87x
Ratios are annualized, as applicable.
48 Truist Financial Corporation

The following table presents activity related to NPAs:
Table 10: Rollforward of NPAs
(Dollars in millions) 2022 2021
Balance, January 1 $ 1,163 $ 1,387
New NPAs 395 563
Advances and principal increases 108 102
Disposals of foreclosed assets (1) (112) (112)
Disposals of NPLs (2) (37) (41)
Charge-offs and losses (115) (112)
Payments (180) (300)
Transfers to performing status (101) (183)
Other, net 14 (5)
Ending balance, March 31 $ 1,135 $ 1,299
(1) Includes charge-offs and losses recorded upon sale of $29 million and $46 million for the three months ended March 31, 2022 and 2021, respectively.
(2) Includes charge-offs and losses recorded upon sale of $3 million and $5 million for the three months ended March 31, 2022 and 2021, respectively.

TDRs occur when a borrower is experiencing, or is expected to experience, financial difficulties in the near term and a concession has been granted to the borrower. As a result, Truist works with borrowers to prevent further difficulties and to improve the likelihood of recovery on a loan. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted, resulting in classification of the loan as a TDR. For loan modification programs in response to the COVID-19 pandemic, Truist applied the relief from TDR accounting described in the CARES Act. Payment relief assistance provided by Truist includes forbearance, deferrals, extension, and re-aging programs, along with certain other modification strategies. Refer to “Note 1. Basis of Presentation” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for the policies related to TDRs and COVID-19 loan modifications. The following table provides a summary of performing TDR activity:
Table 11: Rollforward of Performing TDRs
(Dollars in millions) 2022 2021
Balance, January 1 $ 1,390 $ 1,361
Inflows 306 294
Payments and payoffs (1) (60) (57)
Charge-offs (9) (13)
Transfers to nonperforming TDRs (2) (19) (13)
Removal due to the passage of time (71) (7)
Non-concessionary re-modifications (1) (12)
Transferred to LHFS, sold and other (21) (14)
Balance, March 31 $ 1,515 $ 1,539
(1) Includes scheduled principal payments, prepayments, and payoffs of amounts outstanding.
(2) Represent loans that no longer meet the requirements necessary to reflect the loan in accruing status.

Truist Financial Corporation 49

The following table provides further details regarding the payment status of TDRs outstanding at March 31, 2022:
Table 12: Payment Status of TDRs (1)
March 31, 2022
(Dollars in millions) 		Current Past Due 30-89 Days Past Due 90 Days Or More Total
Performing TDRs:
Commercial:
Commercial and industrial $ 102 98.1 % $ 2 1.9 % $ — — % $ 104
CRE 5 100.0 — — — — 5
Commercial construction 1 100.0 — — — — 1
Consumer:
Residential mortgage - government guaranteed 290 46.6 58 9.3 274 44.1 622
Residential mortgage - nonguaranteed 210 86.1 25 10.2 9 3.7 244
Residential home equity and direct 85 93.4 6 6.6 — — 91
Indirect auto 336 85.7 56 14.3 — — 392
Indirect other 5 83.3 1 16.7 — — 6
Student - nonguaranteed 22 88.0 2 8.0 1 4.0 25
Credit card 22 88.0 2 8.0 1 4.0 25
Total performing TDRs 1,078 71.2 152 10.0 285 18.8 1,515
Nonperforming TDRs 57 30.2 24 12.7 108 57.1 189
Total TDRs $ 1,135 66.6 $ 176 10.3 $ 393 23.1 $ 1,704
(1) Past due performing TDRs are included in past due disclosures and nonperforming TDRs are included in NPL disclosures.
50 Truist Financial Corporation

ACL

Activity related to the ACL is presented in the following tables:
Table 13: Activity in ACL
For the Three Months Ended
(Dollars in millions) 		Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021
Balance, beginning of period $ 4,695 $ 4,978 $ 5,436 $ 6,011 $ 6,199
Provision for credit losses (95) (103) (324) (434) 48
Charge-offs:
Commercial and industrial (31) (54) (57) (53) (79)
CRE (1) (5) (1) — (4)
Commercial construction (1) — — — (2)
Residential mortgage (2) (1) (7) (4) (11)
Residential home equity and direct (58) (51) (51) (57) (55)
Indirect auto (102) (89) (73) (69) (105)
Indirect other (19) (16) (13) (11) (17)
Student (6) (12) (6) (3) (3)
Credit card (41) (37) (31) (42) (40)
Total charge-offs (261) (265) (239) (239) (316)
Recoveries:
Commercial and industrial 17 23 42 23 19
CRE 1 — 1 4 1
Commercial construction 1 1 1 1 1
Residential mortgage 6 2 3 5 2
Residential home equity and direct 20 21 20 20 18
Indirect auto 23 21 22 27 22
Indirect other 6 6 5 7 6
Student — — 1 — —
Credit card 9 9 9 10 9
Total recoveries 83 83 104 97 78
Net charge-offs (178) (182) (135) (142) (238)
Other 1 2 1 1 2
Balance, end of period $ 4,423 $ 4,695 $ 4,978 $ 5,436 $ 6,011
ACL:
ALLL $ 4,170 $ 4,435 $ 4,702 $ 5,121 $ 5,662
RUFC 253 260 276 315 349
Total ACL $ 4,423 $ 4,695 $ 4,978 $ 5,436 $ 6,011

Net charge-offs during the first quarter totaled $178 million, or 0.25% as a percentage of average loans, and was stable compared to the prior quarter.

The allowance for credit losses was $4.4 billion and includes $4.2 billion for the allowance for loan and lease losses and $253 million for the reserve for unfunded commitments. The ALLL ratio was 1.44% compared to 1.53% at December 31, 2021. The decrease reflects a continued favorable credit environment tempered by uncertainty associated with inflation, supply chain disruption, rising rates, and geopolitical events. The ALLL covered nonperforming loans and leases held for investment 3.99X compared to 4.07X at December 31, 2021. At March 31, 2022, the ALLL was 5.78X annualized net charge-offs, compared to 6.14X at December 31, 2021.

Truist Financial Corporation 51

The following table presents an allocation of the ALLL. The entire amount of the allowance is available to absorb losses occurring in any category of loans and leases.
Table 14: Allocation of ALLL by Category
March 31, 2022 December 31, 2021
(Dollars in millions) Amount % ALLL in Each Category % Loans in Each Category Amount % ALLL in Each Category % Loans in Each Category
Commercial and industrial $ 1,319 31.6 % 48.6 % $ 1,426 32.2 % 47.9 %
CRE 283 6.8 7.9 350 7.9 8.3
Commercial construction 53 1.3 1.8 52 1.2 1.7
Residential mortgage 310 7.4 16.6 308 6.9 16.5
Residential home equity and direct 574 13.8 8.6 615 13.9 8.7
Indirect auto 957 22.9 8.9 1,022 23.0 9.1
Indirect other 211 5.1 3.8 195 4.4 3.8
Student 115 2.8 2.2 117 2.6 2.3
Credit card 348 8.3 1.6 350 7.9 1.7
Total ALLL 4,170 100.0 % 100.0 % 4,435 100.0 % 100.0 %
RUFC 253 260
Total ACL $ 4,423 $ 4,695

Truist monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. Truist also receives notification when the first lien holder, whether Truist or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, Truist obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.

Truist has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by Truist. Truist estimates second lien loans where the first lien is delinquent based on historical experience; the increased risk of loss on these credits is reflected in the ALLL. As of March 31, 2022, Truist held or serviced the first lien on 32% of its second lien positions.

Other Assets

The components of other assets are presented in the following table:
Table 15: Other Assets as of Period End
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Bank-owned life insurance $ 7,545 $ 7,281
Tax credit and other private equity investments 6,352 6,309
Prepaid pension assets 6,348 5,938
Derivative assets 2,113 2,370
Accounts receivable 2,323 2,244
Leased assets and related assets 2,162 2,092
Accrued income 1,875 1,791
ROU assets 1,126 1,168
Prepaid expenses 1,174 1,152
Equity securities at fair value 1,024 1,066
Other 1,428 738
Total other assets $ 33,470 $ 32,149

Funding Activities

Deposits

The following table presents average deposits:
Table 16: Average Deposits
Three Months Ended
(Dollars in millions)
Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021
Noninterest-bearing deposits $ 145,933 $ 146,492 $ 141,738 $ 137,892 $ 128,579
Interest checking 112,159 110,506 107,802 106,121 104,744
Money market and savings 141,500 137,676 136,094 134,029 129,303
Time deposits 15,646 16,292 17,094 18,213 20,559
Total average deposits $ 415,238 $ 410,966 $ 402,728 $ 396,255 $ 383,185

52 Truist Financial Corporation

Average deposits for the first quarter of 2022 were $415.2 billion, an increase of $4.3 billion, or 1.0%, compared to the prior quarter. Average noninterest bearing deposits declined 0.4% compared to the prior quarter and represented 35.1% of total deposits for the first quarter of 2022, compared to 35.6% for the prior quarter. Average interest checking and money market and savings grew 1.5% and 2.8%, respectively, compared to the prior quarter. Average time deposits decreased 4.0% primarily due to the maturity of higher-cost accounts.

Borrowings

At March 31, 2022, short-term borrowings totaled $5.1 billion, a decrease of $145 million compared to December 31, 2021. Average short-term borrowings were $6.9 billion or 1.5% of total funding for the first quarter of 2022, as compared to $6.7 billion or 1.6% for the prior year.

Long-term debt provides funding and, to a lesser extent, regulatory capital, and primarily consists of senior and subordinated notes issued by Truist and Truist Bank. Long-term debt totaled $33.8 billion at March 31, 2022, a decrease of $2.1 billion compared to December 31, 2021. During 2022, the Company had $1.4 billion of senior and $300 million of subordinated long-term debt redemptions. FHLB advances represented 2.5% of total outstanding long-term debt at March 31, 2022, compared to 2.4% at December 31, 2021. The average cost of long-term debt was 1.50% for the three months ended March 31, 2022, down seven basis points compared to the same period in 2021.

In April 2022, Truist redeemed $800 million of FHLB advances, which resulted in a gain on early extinguishment of long-term debt of $39 million. Additionally, Truist redeemed $1.4 billion of fixed rate senior notes and $650 million of floating rate senior notes that were due in May 2022.

Shareholders’ Equity

Total shareholders’ equity was $65.0 billion at March 31, 2022, a decrease of $4.2 billion from December 31, 2021. This decrease includes a decrease of $4.9 billion in AOCI, $725 million in dividends, partially offset by $1.4 billion in net income. Truist’s book value per common share at March 31, 2022 was $43.82, compared to $47.14 at December 31, 2021.

Risk Management

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

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

Truist 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 residual risks associated with integrating heritage BB&T and heritage SunTrust. While integration activities are largely complete, the Board and Executive Leadership oversee the change management program, which is designed to ensure appropriate oversight of application and data center decommissioning and residual integration activities, achieved through Truist’s risk management process.

Refer to Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional disclosures under the section titled “Risk Management.”

Truist Financial Corporation 53

Market Risk

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

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

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

Interest Rate Market Risk

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

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

Deposit betas (the sensitivity of deposit rate changes relative to market rate changes) are an important assumption in the interest rate risk modeling process. Truist applies deposit beta assumptions to non-maturity interest-bearing deposit accounts that are not contractually tied to an index when determining its interest rate sensitivity. Non-maturity, interest-bearing deposit accounts include interest checking accounts, savings accounts, and money market accounts that do not have a contractual maturity. Truist utilizes a tiered deposit beta assumption framework that accounts for historically observed behaviors of clients and the Company. The deposit beta assumptions are reduced when interest rates are exceptionally low and competition for interest-bearing deposits is commensurately low. As interest rates rise, the deposit beta assumptions also rise to reflect increasing competition among banks as well as increased client demand for interest-bearing deposits. Truist applies an average deposit beta of approximately 25% for the first 100 basis point increase in the Federal funds rate, approximately 35% for the second 100 basis point increase, and approximately 50% for any additional increases. Truist also regularly conducts sensitivity analyses on other key variables, including noninterest-bearing deposits, to determine the impact these variables could have on the Company’s interest rate risk position. The predictive value of the simulation model depends upon the accuracy of the assumptions, but management believes that it provides helpful information for the management of interest rate risk.

The following table shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next 12 months assuming a gradual change in interest rates as described below.
Table 17: Interest Sensitivity Simulation Analysis
Interest Rate Scenario Annualized Hypothetical Percentage Change in Net Interest Income
Gradual Change in Prime Rate (bps) Prime Rate
Mar 31, 2022 Mar 31, 2021 Mar 31, 2022 Mar 31, 2021
Up 100 4.50 % 4.25 % 4.27 % 3.74 %
Up 50 4.00 3.75 3.29 2.92
No Change 3.50 3.25 — —
Down 25 (1) 3.25 3.00 (2.48) (1.32)
Down 50 (1) 3.00 2.75 (3.46) (1.75)
(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 a change to the Company’s deposit beta assumptions, partially offset by an increase in the investment securities portfolio.
54 Truist Financial Corporation


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 may increase interest-bearing funds to offset the loss of this advantageous funding source. Alternatively, the Company may reduce the size of its investment portfolio to offset the loss of noninterest-bearing demand deposits to limit the impact on the balance sheet’s asset sensitivity.

The following table shows the results of Truist’s interest-rate sensitivity position assuming the loss of additional demand deposits and an associated increase in managed rate deposits versus current projections under various interest rate scenarios. For purposes of this analysis, Truist modeled the incremental beta of managed rate deposits for the replacement of the demand deposits at 100%.
Table 18: Deposit Mix Sensitivity Analysis
Gradual Change in Rates (bps) Base Scenario at March 31, 2022 (1) Results Assuming a Decrease in Noninterest-Bearing Demand Deposits
$20 Billion $40 Billion
Up 100 4.27 % 3.45 % 2.63 %
Up 50 3.29 2.69 2.10
(1) The base scenario is equal to the annualized hypothetical percentage change in net interest income at March 31, 2022 as presented in the preceding table.

Truist uses financial instruments including derivatives to manage interest rate risk related to securities, commercial loans, MSRs, and mortgage banking operations, long-term debt, and other funding sources. Truist hedges a portion of its AFS securities to reduce mark-to-market volatility within AOCI and also to increase its overall asset sensitivity position. Truist has utilized derivatives to facilitate transactions on behalf of its clients and as part of associated hedging activities. As of March 31, 2022, Truist had derivative financial instruments outstanding with notional amounts totaling $320.5 billion, with an associated net fair value of $631 million. See “Note 16. Derivative Financial Instruments” for additional disclosures.

LIBOR Transition

For most tenors of U.S. dollar LIBOR, the administrator of LIBOR extended publication until June 30, 2023. Tenors used infrequently by Truist, including one week and two month U.S. dollar LIBOR and all non-U.S. dollar LIBOR, ceased publication at December 31, 2021, based on the October 20, 2021 interagency Joint Statement on Managing the LIBOR transition. To prepare for the transition to an alternative reference rate, management formed a cross-functional project team to address the LIBOR transition. The project team performed an assessment to identify the potential risks related to the transition from LIBOR to a new index or multiple indices and provides updates to Executive Leadership and the Board. As of March 31, 2022, Truist had outstanding LIBOR-based instruments that mature after June 30, 2023, including: loan and lease exposures totaling approximately $159 billion, notional derivative exposure totaling approximately $135 billion, long-term debt of $1.1 billion, and preferred stock of $1.5 billion. These amounts are inclusive of remediated contracts, which contain adequate fallback language for the transition.

Contract fallback language for existing loans and leases has largely been reviewed and certain contracts will require amendments to support the transition away from LIBOR. For impacted lines of business, the Company has started remediating these contracts to include standardized fallback language. 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.

The progress and approach to remediation will vary based on the type of contract and existing language used in the agreement. For commercial lending and general consumer lending, a significant number of remaining LIBOR contracts will require client outreach and remediation. Efforts to amend and remediate contracts, excluding mortgage and student loans, that mature post June 30, 2023 ($148 billion) will be accelerated in 2022. Truist has determined that adjustable rate mortgage products ($4.0 billion) have consistent and adequate fallback language to transition away from LIBOR in line with industry expectations; therefore, these contracts will not require remediation. Remediation of student loans ($5.8 billion) will depend on guidance from the Department of Education and recent guidance from the CFPB to allow transition to “comparable rates,” including SOFR or Prime. Certain derivatives without a clearly defined or practicable replacement benchmark rate will use the recent Federal legislation to replace LIBOR with a SOFR-based rate that will be established by FRB rulemaking. This legislation will also provide additional administrative benefit for a small portion of the commercial and consumer lending portfolios where contracts do not contain fallback language.

Truist Financial Corporation 55

Training has been provided for impacted teammates and will continue during 2022. Truist will continue to provide timely notices and information to impacted clients about the transition during 2022 and the first half of 2023. Truist continues to manage the impact of these contracts and other financial instruments, systems implications, hedging strategies, and related operational and market risks on established project plans for business and operational readiness to support the transition.

As of December 31, 2021, Truist ceased entering into new contracts with a LIBOR reference rate for all product offerings, except on a limited basis, as permissible. Market risks associated with this change are dependent on the alternative reference rates available and market conditions as of the transition. The Company is actively using SOFR as a reference rate and has originated approximately $30 billion of loans, issued $5 billion of long-term debt, and has $50 billion in notional derivative exposure using this alternative reference rate as of March 31, 2022. Truist expects SOFR to become a more commonly-used pricing benchmark across the industry and will continue to offer additional SOFR based products during 2022. Additional alternative reference rates, such as Bloomberg Short Term Bank Yield will be supported based on market demand. Other emerging credit sensitive rates will be evaluated as additional alternatives for LIBOR based on market developments. For a further discussion of the various risks associated with the potential cessation of LIBOR and the transition to alternative reference rates, refer to the section titled “Item1A. Risk Factors” in the Form 10-K for the year ended December 31, 2021.

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 March 31, 2022, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule was $33 million, all of which were non-agency asset backed securities positions. Consistent with the Market Risk Rule requirements, the Company performs pre-purchase due diligence on each securitization position to identify the characteristics including, but not limited to, deal structure and the asset quality of the underlying assets, that materially affect valuation and performance. Securitization positions are subject to Truist’s comprehensive risk management framework, which includes daily monitoring against a suite of limits. There were no off-balance sheet securitization positions during the reporting period.

Correlation Trading Positions

The trading portfolio of covered positions did not contain any correlation trading positions as of March 31, 2022.

56 Truist Financial Corporation

VaR-Based Measures

VaR measures the potential loss of a given position or portfolio of positions at a specified confidence level and time horizon. Truist utilizes a historical VaR methodology to measure and aggregate risks across its covered trading positions. For risk management purposes, the VaR calculation is based on a historical simulation approach and measures the potential trading losses using a one-day holding period at a one-tail, 99% confidence level. For Market Risk Rule purposes, the Company calculates VaR using a 10-day holding period and a 99% confidence level. Due to inherent limitations of the VaR methodology, such as the assumption that past market behavior is indicative of future market performance, VaR is only one of several tools used to measure and manage market risk. Other tools used to actively manage market risk include stress testing, scenario analysis, and stop loss limits.

The trading portfolio’s VaR profile is influenced by a variety of factors, including the size and composition of the portfolio, market volatility, and the correlation between different positions. A portfolio of trading positions is typically less risky than the sum of the risk from each of the individual sub-portfolios, because, under normal market conditions, risk within each category partially offsets the exposure to other risk categories. The following table summarizes certain VaR-based measures for the three months ended March 31, 2022 and 2021. Average one and ten day VaR measures declined from last year as heightened market volatility experienced during March 2020 aged out of the 12-month VaR look-back window.
Table 19: VaR-based Measures
Three Months Ended March 31,
2022 2021
(Dollars in millions) 10-Day Holding Period 1-Day Holding Period 10-Day Holding Period 1-Day Holding Period
VaR-based Measures:
Maximum $ 38 $ 14 $ 68 $ 16
Average 18 6 39 10
Minimum 9 3 3 3
Period-end 15 4 5 3
VaR by Risk Class:
Interest Rate Risk 4 2
Credit Spread Risk 4 4
Equity Price Risk 4 1
Foreign Exchange Risk — —
Portfolio Diversification (8) (5)
Period-end 4 3

Stressed VaR-based measures

Stressed VaR, another component of market risk capital, is calculated using the same internal models as used for the VaR-based measure. Stressed VaR is calculated over a ten-day holding period at a one-tail, 99% confidence level and employs a historical simulation approach based on a continuous twelve-month historical window selected to reflect a period of significant financial stress for the Company’s trading portfolio. The following table summarizes Stressed VaR-based measures:
Table 20: Stressed VaR-based Measures - 10 Day Holding Period
Three Months Ended March 31,
(Dollars in millions) 2022 2021
Maximum $ 109 $ 72
Average 76 54
Minimum 59 26
Period-end 72 64

Compared to the prior year, stressed VaR measures increased in 2022 primarily due to the normalization of market making inventory levels this year.

Specific Risk Measures

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

Truist Financial Corporation 57

VaR Model Backtesting

In accordance with the Market Risk Rule, the Company evaluates the accuracy of its VaR model through daily backtesting by comparing aggregate daily trading gains and losses (excluding fees, commissions, reserves, net interest income, and intraday trading) from covered positions with the corresponding daily VaR-based measures generated by the model. As illustrated in the following graph, VaR measures briefly increased in the first quarter of 2022 due to the increase in market volatility that normalized towards the end of the quarter. There were no Company-wide VaR backtesting exceptions during the twelve months ended March 31, 2022. The total number of Company-wide VaR backtesting exceptions over the preceding twelve months is used to determine the multiplication factor for the VaR-based capital requirement under the Market Risk Rule. The capital multiplication factor increases from a minimum of three to a maximum of four, depending on the number of exceptions. All Company-wide VaR backtesting exceptions are thoroughly reviewed in the context of VaR model use and performance. There was no change in the capital multiplication factor over the preceding twelve months.
tfc-20220331_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.

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.

58 Truist Financial Corporation

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

Internal Liquidity Stress Testing

Liquidity stress testing is designed to ensure that Truist and Truist Bank have sufficient liquidity for a variety of institution-specific and market-wide adverse scenarios. Each liquidity stress test scenario applies defined assumptions to execute sources and uses of liquidity over varying planning horizons. The types of expected liquidity uses during a stressed event may include deposit attrition, contractual maturities, reductions in unsecured and secured funding, and increased draws on unfunded commitments. To mitigate liquidity outflows, Truist has identified sources of liquidity; however, access to these sources of liquidity could be affected within a stressed environment.

Truist maintains a liquidity buffer of cash on hand and highly liquid unencumbered securities that is sufficient to meet the projected net stressed cash-flow needs and maintain compliance with regulatory requirements. The liquidity buffer consists of unencumbered highly liquid assets and Truist’s liquidity buffer is substantially the same in composition to what qualifies as HQLA under the LCR Rule.

Contingency Funding Plan

Truist has a contingency funding plan designed to ensure that liquidity sources are sufficient to meet ongoing obligations and commitments, particularly in the event of a liquidity contraction. This plan is designed to examine and quantify the organization’s liquidity under the various internal liquidity stress scenarios and is periodically tested to assess the plan’s reliability. Additionally, the plan provides a framework for management and other critical teammates to follow in the event of a liquidity contraction or in anticipation of such an event. The plan addresses authority for activation and decision making, liquidity options, and the responsibilities of key departments in the event of a liquidity contraction.

LCR and HQLA

The LCR rule requires that Truist and Truist Bank maintain an amount of eligible HQLA that is sufficient to meet its estimated total net cash outflows over a prospective 30 calendar-day period of stress. Eligible HQLA, for purposes of calculating the LCR, is the amount of unencumbered HQLA that satisfy operational requirements of the LCR rule. Truist and Truist Bank are subject to the Category III reduced LCR requirements. Truist held average weighted eligible HQLA of $83.9 billion and Truist’s average LCR was 111% for the three months ended March 31, 2022.

Effective July 2021, Truist became subject to final rules implementing the NSFR, which are designed to ensure that banking organizations maintain a stable, long-term funding profile in relation to their asset composition and off-balance sheet activities. At March 31, 2022, the Company was compliant with this requirement.

Sources of Funds

Management believes current sources of liquidity are sufficient to meet Truist’s on- and off-balance sheet obligations. Truist funds its balance sheet through diverse sources of funding including client deposits, secured and unsecured capital markets funding, and shareholders’ equity. Truist Bank’s primary source of funding is client deposits. Continued access to client deposits is highly dependent on public confidence in the stability of Truist Bank and its ability to return funds to clients when requested.

Truist Bank maintains a number of diverse funding sources to meet its liquidity requirements. These sources include unsecured borrowings from the capital markets through the issuance of senior or subordinated bank notes, institutional CDs, overnight and term Federal funds markets, and retail brokered CDs. Truist Bank also maintains access to secured borrowing sources including FHLB advances, repurchase agreements, and the FRB discount window. The following table presents a summary of Truist Bank’s available secured borrowing capacity and eligible cash at the FRB:
Truist Financial Corporation 59

Table 21: Liquidity Sources
(Dollars in millions) Mar 31, 2022 Dec 31, 2021
Unused borrowing capacity:
FRB $ 51,876 $ 52,170
FHLB 45,961 49,244
Available investment securities (after haircuts)
110,327 116,600
Available secured borrowing capacity 208,164 218,014
Eligible cash at the FRB 23,060 14,714
Total $ 231,224 $ 232,728

At March 31, 2022, Truist Bank’s available secured borrowing capacity represented approximately 7.4 times the amount of wholesale funding maturities in one-year or less.

Parent Company

The Parent Company serves as the primary source of capital for the operating subsidiaries. The Parent Company’s assets consist primarily of cash on deposit with Truist Bank, equity investments in subsidiaries, advances to subsidiaries, and notes receivable from subsidiaries. The principal obligations of the Parent Company are payments on long-term debt. The main sources of funds for the Parent Company are dividends and management fees from subsidiaries, repayments of advances to subsidiaries, and proceeds from the issuance of equity and long-term debt. The primary uses of funds by the Parent Company are investments in subsidiaries, advances to subsidiaries, dividend payments to common and preferred shareholders, repurchases of common stock, and payments on long-term debt. See “Note 22. Parent Company Financial Information” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding dividends from subsidiaries and debt transactions.

Access to funding at the Parent Company is more sensitive to market disruptions. Therefore, Truist prudently manages cash levels at the Parent Company to cover a minimum of one year of projected cash outflows which includes unfunded external commitments, debt service, common and preferred dividends and scheduled debt maturities, without the benefit of any new cash inflows. Truist maintains a significant buffer above the projected one year of cash outflows. In determining the buffer, Truist considers cash requirements for common and preferred dividends, unfunded commitments to affiliates, serving as a source of strength to Truist Bank, and being able to withstand sustained market disruptions that could limit access to the capital markets. At March 31, 2022 and December 31, 2021, the Parent Company had 30 months and 35 months, respectively, of cash on hand to satisfy projected cash outflows, and 19 months and 19 months, respectively, when including the payment of common stock dividends.

Credit Ratings

Credit ratings are forward-looking opinions of rating agencies as to the Company’s ability to meet its financial commitments and repay its securities and obligations in accordance with their terms of issuance. Credit ratings influence both borrowing costs and access to the capital markets. The Company’s credit ratings are continuously monitored by the rating agencies and are subject to change at any time. As Truist seeks to maintain high-quality credit ratings, management meets with the major rating agencies on a regular basis to provide financial and business updates and to discuss current outlooks and trends. See Item 1A, “Risk Factors” in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding factors that influence credit ratings and potential risks that could materialize in the event of downgrade in the Company’s credit ratings.

The credit ratings and outlooks of Truist and Truist Bank are unchanged from those presented in the Company’s 2021 Annual Report on Form 10-K.

Capital

The maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. Truist’s principal goals related to the maintenance of capital are to provide adequate capital to support Truist’s risk profile consistent with the Board-approved risk appetite, provide financial flexibility to support future growth and client needs, comply with relevant laws, regulations, and supervisory guidance, achieve optimal credit ratings for Truist and its subsidiaries, remain a source of strength for its subsidiaries, and provide a competitive return to shareholders. Risk-based capital ratios, which include CET1 capital, Tier 1 capital, and Total capital are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

60 Truist Financial Corporation

Truist regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plans and stress testing results to the banking regulators. Management regularly monitors the capital position of Truist on both a consolidated and bank-level basis. In this regard, management’s overriding 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 22: Capital Requirements
Minimum Capital Well Capitalized Minimum Capital Plus Stress Capital Buffer (1)
Truist Truist Bank
CET1
4.5 % NA 6.5 % 7.0 %
Tier 1 capital 6.0 6.0 % 8.0 8.5
Total capital 8.0 10.0 10.0 10.5
Leverage ratio 4.0 NA 5.0 NA
Supplementary leverage ratio 3.0 NA NA NA
(1) Reflects a SCB of 2.5% applicable to Truist as of March 31, 2022. Truist’s SCB, received in the 2021 CCAR process, is effective from October 1, 2021 to September 30, 2022.

Truist’s capital ratios are presented in the following table:
Table 23: Capital Ratios - Truist Financial Corporation
(Dollars in millions, except per share data, shares in thousands) Mar 31, 2022 Dec 31, 2021
Risk-based: (preliminary)
CET1 capital to risk-weighted assets 9.4 % 9.6 %
Tier 1 capital to risk-weighted assets 11.0 11.3
Total capital to risk-weighted assets 13.0 13.2
Leverage ratio 8.6 8.7
Supplementary leverage ratio 7.3 7.4
Non-GAAP capital measure (1):
Tangible common equity per common share $ 21.87 $ 25.47
Calculation of tangible common equity (1):
Total shareholders’ equity $ 65,044 $ 69,271
Less:
Preferred stock 6,673 6,673
Noncontrolling interests 23 —
Goodwill and intangible assets, net of deferred taxes 29,229 28,772
Tangible common equity $ 29,119 $ 33,826
Risk-weighted assets $ 397,611 $ 390,886
Common shares outstanding at end of period 1,331,414 1,327,818
(1) Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses these measures to assess the quality of capital and returns relative to balance sheet risk. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies.

Capital ratios remained strong compared to the regulatory requirements for well capitalized banks. For the three months ended March 31, 2022, Truist paid $637 million in common stock dividends or $0.48 per share. The dividend and total payout ratios for the three months ended March 31, 2022 were 48%.

Truist CET1 ratio was 9.4% as of March 31, 2022. The 20 basis point decline compared to the fourth quarter 2021 CET1 ratio reflects capital deployed through the acquisition of Kensington Vanguard National Land Services, the acquisition of certain merchant services relationships, an increase in risk-weighted assets, and the impact from the phase in of the CECL transition relief.

Truist Financial Corporation 61

Share Repurchase Activity
Table 24: 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
January 2022 — $ — — $ 2,565
February 2022 — — — 2,565
March 2022 47 58.02 — 2,565
Total 47 58.02 —
(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 $2.6 billion remaining for share repurchases.

Critical Accounting Policies

The accounting and reporting policies of Truist are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Truist’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities, and amounts reported for revenues and expenses. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations, and related disclosures. Material estimates that are particularly susceptible to significant change include the determination of the ACL; determination of fair value for securities, MSRs, LHFS, trading loans, and derivative assets and liabilities; goodwill and other intangible assets; income taxes; and pension and postretirement benefit obligations. Understanding Truist’s accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. The critical accounting policies are discussed in MD&A in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021. Significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in “Note 1. Basis of Presentation” in Form 10-K for the year ended December 31, 2021. Disclosures regarding the effects of new accounting pronouncements are included in the “Note 1. Basis of Presentation” in this report. There have been no changes to the significant accounting policies during 2022.

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.

During the first quarter of 2022, Truist completed platform conversions related to its commercial, direct-to-consumer and mortgage lending portfolios, as well as platform conversions related to its deposits and payment processing systems. In connection with these activities, Truist fully integrated certain surviving applications into its general ledger accounting system. Internal controls and processes have been appropriately modified to address changes in key business applications and financial processes as a result of these implementations.

There were no other changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
62 Truist Financial Corporation


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Truist’s Annual Report on Form 10-K for the year ended December 31, 2021. 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.

ITEM 6. EXHIBITS
Exhibit No. Description Location
3.1
Amended and Restated Bylaws of Truist Financial Corporation
10.1
Truist Financial Corporation 2022 Incentive Plan
10.2
Letter to the Board of Directors from William H. Rogers Jr. dated, April 14, 2022, waiving certain rights under his employment agreement
10.3
Form of Employee Restricted Stock Unit Agreement for the Truist Financial Corporation 2022 Incentive Plan
11 Statement re computation of earnings per share.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. Filed herewith.
101.SCH XBRL Taxonomy Extension Schema. Filed herewith.
101.CAL XBRL Taxonomy Extension Calculation Linkbase. Filed herewith.
101.LAB XBRL Taxonomy Extension Label Linkbase. Filed herewith.
101.PRE XBRL Taxonomy Extension Presentation Linkbase. Filed herewith.
101.DEF XBRL Taxonomy Definition Linkbase. Filed herewith.
104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits101). Filed herewith.
Truist Financial Corporation 63

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TRUIST FINANCIAL CORPORATION
(Registrant)
Date: May 4, 2022 By: /s/ Daryl N. Bible
Daryl N. Bible
Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 4, 2022 By: /s/ Cynthia B. Powell
Cynthia B. Powell
Executive Vice President and Corporate Controller
(Principal Accounting Officer)

64 Truist Financial Corporation
TABLE OF CONTENTS
Item 1. Financial StatementsprintNote 1. Basis Of PresentationprintNote 2. Business CombinationsprintNote 3. Securities Financing ActivitiesprintNote 4. Investment SecuritiesprintNote 5. Loans and AclprintNote 6. Goodwill and Other Intangible AssetsprintNote 7. Loan ServicingprintNote 8. Other Assets and LiabilitiesprintNote 9. BorrowingsprintNote 10. Shareholders EquityprintNote 11. AociprintNote 12. Income TaxesprintNote 13. Benefit PlansprintNote 14. Commitments and ContingenciesprintNote 15. Fair Value DisclosuresprintNote 16. Derivative Financial InstrumentsprintNote 17. Computation Of EpsprintNote 18. Operating SegmentsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 4. Controls and ProceduresprintPart II. Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 6. Exhibitsprint

Exhibits

3.1 Amended and Restated Bylaws of Truist Financial Corporation Incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K, filed April 14, 2022. 10.2 Letter to the Board of Directors from William H. Rogers Jr. dated, April 14, 2022, waiving certain rights under his employment agreement Filed herewith. 10.3 Form of Employee Restricted Stock Unit Agreement for the Truist Financial Corporation 2022 Incentive Plan Filed herewith. 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.