TFC 10-K diff: FY 2023-12-31 → FY 2024-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+145 paragraphs −142 paragraphs ~142 changed
FY 2023-12-31 (earlier)
ITEM 1A. RISK FACTORS
Summary of Risk Factors
Market Risks• The levels of or changes in interest rates could affect our results of operations and financial condition.• The Company’s hedging strategies may not be successful in mitigating our interest rate, foreign exchange, and market risks, which could adversely affect our financial results.• The political environment and monetary and fiscal policies could adversely affect us.
• Inflation could negatively impact our business and financial results.• Financial results, lending, and other business activities could be adversely affected by weak or deteriorating economic conditions.• Geopolitical conditions, military conflicts, acts or threats of terrorism, and related volatility and instability in global economic and market conditions could adversely affect us.Credit Risks• The Company is subject to credit risk by lending, committing to lend money, and entering into letters of credit and other types of contracts with counterparties and the Company’s allowance for loan losses may not be adequate to cover actual losses.
• The Company may have more credit risk and higher credit losses if our underwriting standards and practices are inadequate, we adopt more liberal underwriting standards for competitive or other reasons, or our concentration and other risk limits are not well calibrated.• The Company may suffer losses if the value of collateral declines in weak, deteriorating, or stressed economic or market conditions.
Liquidity Risks
• Our inability to retain and grow deposits or a change in deposit costs or mix could negatively impact our funding strategy and financial results.
• Truist’s liquidity could be impaired by an inability to access short-term funding, an unforeseen outflow of cash, or an inability to monetize liquid assets.
• A disruption in our access to the mortgage secondary market and GSEs for liquidity could negatively affect us.
• The Company’s cost of funding or access to the banking and capital markets could be adversely affected if our credit ratings are downgraded or otherwise fail to meet investor expectations.
• The Parent Company could have less access to funding sources and its liquidity could be constrained if the Bank becomes unable to pay dividends.
• The financial system is highly interrelated, and financial or systemic shocks or the failure of even a single financial institution or other participant in the financial system could adversely impact us.
Technology Risks• The Company and its suppliers face a wide array of cybersecurity risks, including risks of insider threats and third-party cybersecurity incidents, which could result in the loss of operational capabilities or the disclosure of confidential, proprietary, personal, and other sensitive information, which could have an adverse impact on the Company’s operations, financial condition, and prospects, as well as cause significant reputational damage and legal and financial exposure.
• The Company’s operating systems and infrastructure, as well as operational capabilities managed or supplied by third parties on whom we rely, could fail or be interrupted, compromised, or breached, which could disrupt the Company’s business and adversely impact the Company’s operations, financial condition, and prospects, as well as cause significant reputational damage and legal and financial exposure.
• Truist is heavily reliant on technology, and a failure to effectively anticipate, develop, and implement new technology could harm us.• The Company faces risks associated with the quality, availability, and retention of key data for operational, strategic, regulatory, and compliance purposes.Truist Financial Corporation 19Other External Risks
• Physical, transition, and other risks associated with climate change, together with governmental responses to them, may negatively impact our business, operations, reputation, and clients.
• The Company is at risk of increased losses from fraud.
• Natural disasters, pandemics, and other catastrophic events could adversely impact us.• An outbreak or escalation of hostilities between countries or within a country or region could have an adverse effect on the U.S. economy and on Truist’s business operations and key external parties.Compliance Risks
• Truist is subject to extensive and evolving government regulation and supervision, which could adversely affect our business, financial condition, results of operations, and prospects.
• Regulatory capital and liquidity standards and future revisions to them may negatively impact our business and financial results.
• Truist is subject to risks related to originating and selling loans, including repurchase and indemnification obligations.
• Truist faces risks as a servicer of loans.
• Truist faces substantial risks in safeguarding personal and other sensitive information.
• Differences in regulation and supervision can affect the Company’s ability to compete effectively.• The Company can face risks of non-compliance and incur additional operational and compliance costs under laws relating to anti-money laundering, economic sanctions, embargo programs, and anti-corruption.Regulatory and Legal Risks• The Company may incur damages, fines, penalties, and other negative consequences from past, current, or future regulatory or other legal violations, including inadvertent or unintentional violations.• Pending or threatened legal proceedings and other matters may adversely affect the Company’s business, financial condition, results of operations, and reputation.
Strategic Risks
• Ineffective execution of strategic initiatives could adversely affect investor sentiment and our business and financial results.
• Competition may reduce Truist’s client base or cause Truist to modify the pricing or other terms for products and services, which could have an adverse impact on our business and financial results.
• Acquisitions, mergers, and divestitures introduce a broad range of anticipated and unanticipated risks, including unforeseen or negative consequences from supervisory or regulatory action that may limit Truist’s ability to pursue and complete them.
• Truist has businesses other than banking that are subject to a variety of risks.
Reputational Risks
• Negative public opinion, whether real or perceived, or our failure to successfully manage it could damage the Company’s reputation and adversely impact our business, financial condition, results of operations, and prospects.• Truist may face reputational risks arising out of Truist’s sales, training, incentive compensation or business practices, products or services, or other activities of its teammates, representatives, or business partners.Talent Management Risks• Truist depends on the experience and expertise of key teammates. If these individuals were to leave or change their roles without effective replacements, our business and operations may suffer.• We could be harmed by an inability to attract, develop, retain, and motivate qualified teammates while effectively managing recruiting and compensation costs amid highly competitive and rapidly changing market conditions.• The Company’s operations rely on its ability, and the ability of key external parties, to maintain appropriately staffed workforces and on the competence, trustworthiness, health, and safety of employees.
20 Truist Financial CorporationRisks Related to Estimates and Assumptions
• Our business and operations make extensive use of models, and we could be adversely affected if our design, implementation, or use of models is flawed.
• We use estimates and assumptions in determining the value or amount of many of our assets and liabilities, and our business, financial condition, results of operations, and prospects could be adversely affected if these prove to be incorrect.
• Depressed market values for the Company’s stock and adverse economic conditions sustained over a period of time may require the Company to write down all or some portion of the Company’s goodwill.
Operational Risks• Truist relies extensively on other companies to provide key components of the Company’s business infrastructure, and their failure to perform to our standards or other issues of concern with them could harm us.
• The Company’s framework for managing risks and mitigating losses may not be effective.
• In deciding whether to extend credit or enter into other transactions with clients and counterparties, Truist depends on the accuracy and completeness of information about clients and counterparties.• Truist can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services, and delivery platforms.• Enhanced regulatory and other standards for the oversight of vendors and other service providers can result in higher costs and other potential exposures.The following discussion sets forth some of the more important risk factors that could materially affect Truist’s financial condition and operations. When a risk factor spans several risk categories, the risks have been listed by their primary risk category. The risks described are not all inclusive. Additional risks that are not presently known or risks deemed immaterial may have an adverse effect on Truist’s financial condition, results of operations, business, and prospects.
Market RisksThe levels of or changes in interest rates could affect our results of operations and financial condition.
We are highly dependent on net interest income, which is the difference between interest income on earning assets, such as loans and investments, and interest expense on deposits and borrowings. Net interest income is significantly affected by market rates of interest, which in turn are influenced by monetary and fiscal policies, general economic and market conditions, including high or increasing levels of inflation, the political and regulatory environments, business and consumer sentiment, competitive pressures, and expectations about the future, including future changes in interest rates. We may be adversely affected by policies, laws, and events that have the effect of flattening or inverting the yield curve (that is, the difference between long-term and short-term interest rates), depressing the interest rates associated with our earning assets to levels near the rates associated with our interest expense, increasing the volatility of market rates of interest, including the rate of change, or changing the spreads among different interest rate indices.
The levels of or changes in interest rates could adversely affect us beyond our net interest income, including by increasing the cost or decreasing the availability of deposits or other variable-rate funding instruments, reducing the return on or demand for loans or increasing the prepayment speed of loans, increasing client or counterparty delinquencies or defaults and reducing the value of our loans, retained interests in securitizations, and fixed-income securities in our investment portfolio and the efficacy of our hedging strategies. Certain investment securities, notably MBS, are very sensitive to changes in rates. Generally, when rates rise, market values will decline, prepayments will decrease and the duration of MBS will increase. Conversely, when rates fall, market values will rise, prepayments of principal and interest will increase and the duration of MBS will decrease.
The level of and changes in market rates of interest and, as a result, these risks and uncertainties, are beyond our control. The dynamics among these risks and uncertainties are also challenging to assess and manage. For example, while an accommodative monetary policy may benefit us to some degree by spurring economic activity among our clients, such a policy may ultimately cause us more harm by inhibiting our ability to grow or sustain net interest income. A rising interest rate environment can pose different challenges, such as potentially slowing the demand for credit, increasing delinquencies and defaults, and reducing the values of our loans and fixed income securities. Market volatility in interest rates, including the rate of change, can create particularly difficult conditions. Refer to the “Market Risk” section of the MD&A and “Note 19. Derivative Financial Instruments.”
Truist Financial Corporation 21The Company’s hedging strategies may not be successful in mitigating our interest rate, foreign exchange, and market risks, which could adversely affect our financial results.The Company employs various hedging strategies to mitigate the interest rate, foreign exchange, and market risks inherent in many of our assets and liabilities. The Company’s hedging strategies rely considerably on assumptions and projections regarding our assets and liabilities as well as general market factors. If any of these assumptions or projections prove to be incorrect or our hedges do not adequately mitigate the impact of changes in interest rates, foreign exchange rates, and other market factors, the Company may experience volatility in our earnings that could adversely affect our profitability and financial condition. In addition, the Company may not be able to find market participants that are willing to act as its hedging counterparties on acceptable terms or at all, which could have an adverse effect on the success of ours hedging strategies. The Company’s hedging strategies are not designed to eliminate all interest rate, foreign exchange, and market risks.
The political environment and monetary and fiscal policies could adversely affect us.
A fractious or volatile political environment in the U.S., including any related social unrest, could negatively impact business and market conditions, economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of which in turn could cause our business and financial results to suffer. In addition, disruptions in the foreign relations of the United States could adversely affect industries and markets on which our business depends. We also could be negatively impacted by political scrutiny of the financial-services industry in general or our business or operations in particular, whether or not warranted, and by an environment where criticizing financial-services providers or their activities is politically advantageous.
Changes in monetary and fiscal policies, including FRB policies, can adversely affect every facet of our business and operations—for example, the conditions for commercial and consumer lending, the creditworthiness of our clients, the cost of our deposits and other interest-bearing liabilities, and the yield on our earning assets— and cannot be controlled or predicted by the Company. FRB policies can:
• meaningfully influence the availability and demand for loans and deposits, the rates and other terms for loans and deposits, and the conditions in equity, fixed-income, currency, and other markets;
• significantly impact the cost of funds, as well as the return on assets, both of which can have an impact on interest income;
• adversely affect the value of financial assets and liabilities;
• adversely affect borrowers through higher debt servicing costs and potentially increase the risk that they may fail to repay their loan obligations; and
• artificially inflate asset values during prolonged periods of accommodative policy, which could in turn cause volatile markets and rapidly declining collateral values during times of restrictive monetary and fiscal policies.
During 2022 and 2023, the FRB raised interest rates significantly and shrank its balance sheet in response to inflation measures that were well above the FRB’s two percent target. Sustained higher interest rates and continued FRB asset reductions may adversely affect market stability, market liquidity and the Company’s financial performance and condition. Truist cannot predict the nature or timing of future changes in monetary policies or the precise effects such changes may have on the Company’s activities and financial results.
In addition, tax and other fiscal policies impact not only general economic and market conditions but also give rise to incentives and disincentives that affect how we and our clients prioritize objectives, deploy resources, and run households and operate businesses. For example, developments related to the U.S. federal debt ceiling, including the possibility of a government shutdown, default by the U.S. government on its debt obligations, or related credit-rating downgrades, could have adverse effects on the broader economy, disrupt access to capital markets, and contribute to, or worsen, an economic recession.
Inflation could negatively impact our business and financial results.
Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention. Additionally, inflation may lead to a decrease in consumer and clients’ purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses which could decrease our appetite for new credit extensions. These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer.22 Truist Financial CorporationFinancial results, lending, and other business activities could be adversely affected by weak or deteriorating economic conditions.Our businesses are driven by robust economic and market activity, monetary and fiscal stability, and positive investor, business, and consumer sentiment. A prolonged period of slow growth in the U.S. economy as a whole or in any regional markets that Truist serves, or any deterioration in economic conditions or the financial markets may disrupt or dampen the economy, which could adversely affect the Company’s financial condition and results.
If economic conditions deteriorate, the Company may see lower demand for loans by creditworthy clients, reducing the Company’s interest income. In addition, if unemployment levels increase or if real estate prices decrease, the Company could incur higher charge-offs and may incur higher expenses in connection with adverse conditions in the reasonable and supportable forecasts used to estimate the allowance for credit losses in accordance with CECL requirements. These conditions may adversely affect not only consumer borrowers but also commercial and industrial and commercial real estate borrowers, especially for those businesses that rely on the health of industries or properties that may suffer from deteriorating economic conditions. The ability of these borrowers to repay their loans may be reduced, causing the Company to incur higher credit losses.
The deterioration of economic conditions also could adversely affect financial results for the Company’s fee-based businesses. Truist earns fee income from, among other activities, managing assets for clients, and providing brokerage and other investment advisory and wealth management services. Investment management fees are often based on the value of assets under management and a decrease in the market prices of those assets could reduce the Company’s fee income. Changes in stock or fixed income market prices or client preferences could affect the trading activity of investors, reducing commissions and other fees earned from the Company’s brokerage business. Poor economic conditions and volatile or unstable financial markets would likely adversely affect the Company’s capital markets-related businesses.
In addition, recent events impacting the banking industry, including the bank failures in the first half of 2023, have resulted in significant disruption and volatility in the capital markets, reduced current valuations of securities portfolios and bank stocks, and decreased confidence in banks among depositors and other counterparties as well as investors. These events occurred in the context of rapidly rising interest rates which, among other things, have resulted in unrealized losses in longer duration debt securities and loans held by banks, increased competition for deposits and potentially increased the risk of a recession. A decrease in the supply of deposits or significant increase in competition for deposits could result in substantial increases in costs to retain and service deposits. Increased adoption of consumer banking technology can result in reduced deposit demand due to the relative ease with which depositors may transfer deposits to a different depository institution in the event that the Bank’s products and services are less competitive or confidence is lost in the Bank. The cost of resolving the recent bank failures has also prompted the FDIC to issue a special assessment to recover costs to the DIF. Refer to the “Regulatory Considerations” section in Item 1 “Business” for additional details related to the FDIC’s special assessment.
Geopolitical conditions, military conflicts, acts or threats of terrorism, and related volatility and instability in global economic and market conditions could adversely affect us.
Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have an adverse effect on the Company’s results of operations and financial condition. The macroeconomic environment in the United States is susceptible to global events and volatility in financial markets. For example, trade negotiations between the U.S. and other nations remain uncertain and could adversely impact economic and market conditions for the Company and its clients and counterparties. Global conflicts present destabilizing forces, including higher and more volatile commodity and food prices, which may cause international and domestic economic deterioration. Financial markets may be adversely affected by the current or anticipated impact of military or global conflicts, terrorism, or other geopolitical events. This could magnify inflationary pressure and extend any prolonged period of higher inflation.
Credit Risks
The Company is subject to credit risk by lending, committing to lend money, and entering into letters of credit and other types of contracts with counterparties and the Company’s allowance for loan losses may not be adequate to cover actual losses.
Truist incurs credit risk, which is the risk to current or anticipated earnings or capital arising from the default, unwillingness or inability of a borrower, obligor, or counterparty such that an obligation will not be repaid on time or in full, or otherwise according to the terms of the contract. A number of products expose the Company to credit risk, including loans and leases, lending commitments, derivatives, trading assets, and investment securities. Changes in credit quality can have a significant impact on the Company’s earnings and capital position. The Company estimates and establishes contractual lifetime reserves for credit risks and credit losses inherent in its determination of credit exposure. This process, which is critical to the Company’s financial results and condition, requires complex calculations and extensive use of judgment, considering both external and borrower-specific factors that might impair the ability of borrowers to repay their loans. As is the case with any such assessments, there is always the chance that the Company will fail to identify all pertinent factors or that the Company will fail to accurately estimate the impacts of factors identified and that its allowance for loan losses may not be adequate to cover actual losses.Truist Financial Corporation 23Credit losses may exceed the amount of the Company’s reserves due to changing economic conditions, falling real estate prices, falling commodity prices, higher unemployment, or other factors such as changes in borrower behavior. There is no assurance that reserves will be sufficient to cover all credit losses. In the event of significant deterioration in current or projected future economic conditions, the Company may be required to increase reserves in future periods, which would reduce the Company’s earnings and potentially impact its capital.
The Company may have more credit risk and higher credit losses if our underwriting standards and practices are inadequate, we adopt more liberal underwriting standards for competitive or other reasons, or our concentration and other risk limits are not well calibrated.
The Company’s credit risk and credit losses can increase if the Company’s loans are concentrated in borrowers engaged in the same or similar activities or in borrowers who as a group may be uniquely or disproportionately affected by economic conditions, market conditions, or climate change. Increased delinquencies or defaults could also result from our failing to appropriately underwrite loans and other products that we originate or purchase or from our adopting—for strategic, competitive, or other reasons—more liberal underwriting standards. There can be no assurance that our forecasts of economic conditions, our assessments and monitoring of credit risk, and our efforts to mitigate credit risk through risk-based pricing, appropriate underwriting and investment policies, loss-mitigation strategies, and diversification are or will be sufficient to prevent an adverse impact to our business and financial results.
Deterioration in economic conditions, housing conditions, or real estate values, including as a result of climate change or natural disasters, in the markets in which the Company operates could result in higher credit losses. The Company is also subject to physical risks of climate change, which could manifest in the form of asset quality deterioration and could be exacerbated by specific portfolio concentrations, and transition risks of climate change, which could manifest through longer-term shifts in market dynamics and consumer preferences, and could be exacerbated in specific industries that may be more sensitive or vulnerable to a transition to a low carbon economy.The Company may suffer losses if the value of collateral declines in weak, deteriorating, or stressed economic or market conditions.During periods of market stress or illiquidity, the Company’s credit risk may be further increased if it fails to realize the expected value of the collateral it holds; collateral is liquidated at prices that are not sufficient to recover the full amount owed to Truist; or counterparties are unable to post collateral, whether for operational or other reasons. Furthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility or illiquidity, and Truist could suffer losses during these periods if it is unable to realize the expected value of collateral or to manage declines in the value of collateral.Liquidity Risks
Our inability to retain and grow deposits or a change in deposit costs or mix could negatively impact our funding strategy and financial results.Deposits are a relatively low cost and stable source of funding. Truist competes with banks and other financial institutions for deposits and as a result, the Company could lose deposits in the future, clients may shift their deposits into higher cost products, or the Company may need to raise interest rates to avoid deposit attrition. Funding costs may also increase if deposits lost are replaced with wholesale funding. Higher funding costs reduce Truist’s net interest margin, net interest income, and net income. In the current environment, maintaining and growing deposits has become more challenging as the FRB reduced the size of its balance sheet through quantitative tightening and increased interest rates giving clients an incentive to move deposits to money market funds and other higher-yielding alternatives. In addition, our ability to maintain, grow, or favorably price deposits may be constrained by gaps in our product and service offerings, changes in consumer trends, our scale relative to other financial institutions, competition from fintech companies and emerging financial-services providers, any failures or deterioration in our client service, or any loss of confidence in our brand or our business.
24 Truist Financial CorporationTruist’s liquidity could be impaired by an inability to access short-term funding, an unforeseen outflow of cash, or an inability to monetize liquid assets.Liquidity is the ability to fund increases in assets and meet obligations as they come due, all without incurring unacceptable losses. Banks are especially vulnerable to liquidity risk because of their role in the maturity transformation of demand or short-term deposits into longer-term loans or other extensions of credit. We, like other financial-services companies, rely to a significant extent on external sources of funding, such as deposits and borrowings, for the liquidity needed to conduct our business and operations. A number of factors beyond our control, however, could have a detrimental impact on the availability or cost of that funding and thus on our liquidity. When volatility or disruptions occur in the wholesale funding markets, the Company’s ability to access short-term liquidity could be impaired. In addition, idiosyncratic factors, including realization of other risks described herein, as well as other factors outside of the Company’s control, such as a general market disruption or an operational problem that affects third parties, could impair the Company’s ability to access short-term or contingent funding, sources or create an unforeseen outflow of cash due to, among other factors, draws on unfunded commitments or deposit attrition. The Company’s inability to monetize liquid assets without unacceptable losses or to access short-term funding or capital markets could constrain the Company’s ability to make new loans or meet existing lending commitments and could ultimately jeopardize the Company’s overall liquidity and capitalization. While our policies and controls are designed to enable us to maintain adequate liquidity to conduct our business in the ordinary course even in a stressed environment, there is no guarantee that our liquidity position will never become compromised. Such an event could damage the performance and value of our business, prompt regulatory intervention and private litigation, harm our reputation, and cause a loss of client and investor confidence, and if the condition were to persist for any appreciable period of time, our viability as a going concern could be threatened.A disruption in our access to the mortgage secondary market and GSEs for liquidity could negatively affect us.Truist sells a portion of the mortgage loans that it originates to reduce the Company’s retained credit risk and to provide funding capacity for originating additional loans. GSEs could limit their purchases of conforming loans due to capital constraints or other changes in their criteria for conforming loans (e.g., maximum loan amount or borrower eligibility). This potential reduction in purchases could limit the Company’s ability to fund new loans.Proposals have been presented to reform the housing finance market in the U.S., including the role of the GSEs in the housing finance market. The extent and timing of any such regulatory reform of the housing finance market and the GSEs, as well as any effect on the Company’s business and financial results, are uncertain.
The Company’s cost of funding or access to the banking and capital markets could be adversely affected if our credit ratings are downgraded or otherwise fail to meet investor expectations.Credit ratings are influenced by many factors, including the Company’s profitability, asset quality, capital levels, liquidity, business mix, operations, and risk management practices. Credit ratings may also be influenced by other factors, some of which are outside the Company’s control, such as recent and anticipated economic trends, geopolitical risk, legislative and regulatory developments, including implied levels of government support during a crisis, environmental, social, and governance considerations, and litigation, as well as changes to the rating agencies’ methodologies, among others. Truist’s failure to maintain credit ratings could adversely affect funding costs and increase the Company’s cost of capital. A downgrade to Truist’s credit ratings might also adversely impact the Company’s ability to conduct derivatives business with certain clients and counterparties and could trigger obligations to make cash or collateral payments to certain clients and counterparties. Additionally, a ratings downgrade could affect the Company’s ability to attract or retain funding, including deposits from commercial and corporate clients.
The Parent Company could have less access to funding sources and its liquidity could be constrained if the Bank becomes unable to pay dividends.
The Parent Company relies upon capital markets access and dividends from affiliates for funding and has less access to contingent funding sources than the Bank. If the Bank were subject to a financial stress, its dividends to the Parent Company could be reduced or eliminated in order to support Bank capital ratios or other regulatory requirements. This would increase the Parent Company’s reliance on capital markets at a time when spreads and funding costs are likely elevated due to the stress impacting the Bank and would also impair the Parent Company’s ability to serve as a source of strength to its subsidiaries.Truist Financial Corporation 25The financial system is highly interrelated, and financial or systemic shocks or the failure of even a single financial institution or other participant in the financial system could adversely impact us.Adverse developments affecting the overall strength and soundness of other financial institutions, the financial services industry as a whole and the general economic climate and the U.S. Treasury market could have a negative impact on perceptions about the strength and soundness of our business even if we are not subject to the same adverse developments. In addition, adverse developments with respect to third parties with whom we have important relationships could also negatively impact perceptions about us. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we face.
Truist may be impacted by actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets and increased expenses, including FDIC insurance premiums, and could affect our ability to attract and retain depositors and to borrow or raise capital. For example, during 2023 the FDIC took control and was appointed receiver of Silicon Valley Bank, Signature Bank, and First Republic Bank. The failure of other banks and financial institutions and the measures taken by governments, businesses, and other organizations in response to these events could adversely impact the Company’s business, financial condition and results of operations.
The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. Truist has exposure to many different industries and counterparties and routinely executes transactions with counterparties in the financial industry, including brokers and dealers, central counterparties, commercial banks, investment banks, mutual and hedge funds and other institutional investors and clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions or the financial services industry generally, in the past have led to market-wide liquidity problems and could lead to losses or defaults by Truist or by other institutions. Many of these transactions expose the Company to credit risk in the event of default of the Company’s counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by Truist cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the Company’s exposure. Any such losses could adversely affect the Company’s results of operations and financial condition.Technology RisksThe Company and its suppliers face a wide array of cybersecurity risks, including risks of insider threats and third-party cybersecurity incidents, which could result in the loss of operational capabilities or the disclosure of confidential, proprietary, personal, and other sensitive information, which could have an adverse impact on the Company’s operations, financial condition, and prospects, as well as cause significant reputational damage and legal and financial exposure.
The Company’s computer systems and network infrastructure and those of third parties are targeted in cyberattacks and vulnerable to damage or interruption from, among other things, software bugs, server malfunctions, software or hardware failure, human error, fraud, denial of service attacks, social engineering schemes (such as phishing), hacking, malware or ransomware intrusion, data corruption attempts, terrorist activities, or identity theft. The Company’s business relies on the secure collection, transmission, storage, use, retrieval, and other processing of confidential, proprietary, and other sensitive information in the Company’s information systems, networks and those of third parties. In addition, to access the Company’s systems, networks, products, and services, the Company’s clients and other third parties may use personal mobile devices or computing devices that are outside of the Company’s control and network environment and can introduce added cybersecurity risks.
Truist and Truist’s clients, regulators, vendors, service providers, and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to and are likely to continue to be the target of cyberattacks and other similar incidents. Such incidents may expose security vulnerabilities in the Company’s systems, networks, or other security measures, or those of third parties, that could result in the unauthorized access, gathering, monitoring, misuse, release, loss, or destruction of confidential, proprietary, or other sensitive information, including personal information. Such incidents could also damage the Company’s systems and networks by introducing material disruptions to the Company’s or the Company’s clients’ or other third parties’ network access or business operations. As cybersecurity risks continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance the Company’s protective measures or to investigate and remediate any cybersecurity vulnerabilities or incidents. Despite efforts to ensure the integrity of the Company’s systems and networks and implement controls, processes, policies and other protective measures, the Company may not be able to anticipate all security breaches, nor may the Company be able to implement sufficient preventive measures against such security breaches, which may result in adverse consequences to Truist.26 Truist Financial CorporationCybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies to facilitate and conduct financial transactions. For example, cybersecurity risks may increase in the future as Truist continues to evolve its internal and external digital offerings and capabilities. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, state-sponsored actors, disgruntled teammates or vendors, hackers, activists and other external parties, including those involved in corporate espionage, any of which may see their effectiveness enhanced by the use of artificial intelligence, including the use of generative artificial intelligence to conduct more sophisticated social engineering attacks on the Company or clients. Even the most advanced internal control environment may be vulnerable to compromise. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cybersecurity threat actors change frequently and may not be recognized until launched or well after a breach has occurred. In addition, the existence of cyberattacks or security breaches at third-party vendors and service providers with access to the Company’s data may not be disclosed to the Company in a timely manner.
The Company also faces indirect technology, cybersecurity and other operational risks relating to clients and other third parties that the Company relies upon to facilitate or enable business activities, including, financial counterparties, regulators, vendors, service providers, and providers of critical infrastructure such as internet access and electrical power. While the Company performs cybersecurity due diligence on its key vendors and service providers, because the Company does not control its vendors or service providers and its ability to monitor their cybersecurity is limited, the Company cannot ensure the cybersecurity measures they take will be sufficient to protect any information the Company shares with them or prevent any disruption arising from a technology failure, cyberattack or other information or security breach. As a result of increasing consolidation, interdependence, and complexity of financial entities and technology systems and networks, a technology failure, cyberattack or other information or security breach that significantly degrades, deletes, or compromises the systems, networks, or data of one or more financial entities could have an adverse impact on counterparties or other market participants. This consolidation, interconnectivity, and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, cyberattack, other information or security breach, termination, or constraint could, among other things, adversely affect the Company’s ability to conduct transactions, service the Company’s clients, manage the Company’s exposure to risk or expand the Company’s business.
A successful penetration or circumvention of system or network security could cause serious negative consequences, including loss of clients and business opportunities; costs associated with maintaining business relationships after a cyberattack or security breach; significant disruption to the Company’s operations and business; misappropriation, exposure or destruction of the Company’s confidential, proprietary, and other sensitive information, including personal information, and funds and those of the Company’s clients; damage to the Company’s or the Company’s clients’ or third parties’ computers, systems, or networks; or a violation of applicable laws and regulations, including those related to data privacy, data protection, and cybersecurity. This could result in litigation exposure, regulatory fines, penalties, loss of confidence in the Company’s security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, which could adversely impact the Company’s results of operations, liquidity, and financial condition. In addition, the Company may not have adequate insurance coverage, if any, to compensate for losses from any of the foregoing, and we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or at all, or that our insurers will not deny coverage as to any future claim.
Cybersecurity and data-privacy risks have received heightened legislative, regulatory, and supervisory attention. Legislation and regulations on cybersecurity and data privacy, as well as related supervisory expectations, can compel us to enhance or modify our systems and infrastructure, invest in new systems and infrastructure, change our service providers, augment our scenario and vulnerability testing, and alter our business practices or our policies on security, data governance, and privacy. Any of these, in turn, can cause a significant increase in the complexity and costs of our operations and expose us to enforcement and other supervisory actions, related litigation by private plaintiffs, reputational damage, and a loss of client or investor confidence.
Truist Financial Corporation 27
The Company’s operating systems and infrastructure, as well as operational capabilities managed or supplied by third parties on whom we rely, could fail or be interrupted, compromised, or breached, which could disrupt the Company’s business and adversely impact the Company’s operations, financial condition, and prospects, as well as cause significant reputational damage and legal and financial exposure.
The potential for operational risk exposure exists throughout the Company’s business and, as a result of the Company’s interactions with and reliance on third parties, is not limited to the Company’s own internal operational functions. The Company’s operational and security systems, networks, and infrastructure, including computer systems and networks, data management and internal processes, as well as those of third parties, are integral to the Company’s performance. Truist relies on numerous third-party vendors and service providers to conduct aspects of its business operations and faces operational risks relating to them. Third-party cybersecurity incidents, such as system breakdowns or failures, misconduct by the employees of such parties, or cyberattacks, including ransomware, and supply-chain compromises, could affect their ability to deliver a product or service to the Company or result in lost or compromised information of the Company or its clients. Truist cannot be certain that it will receive timely notification of such cyberattacks or other security breaches or be able to exert any meaningful control or influence over how and when the breach is addressed. Like other large enterprises, Truist is subject to malicious cybersecurity risks and threats directed at its vendors, service providers, and other third parties. There is no guarantee that the measures the Company takes will provide absolute security or recoverability given that the techniques used in cyberattacks are complex and frequently change and are difficult to anticipate. Truist’s vendors, service providers, and other third parties may expose the Company to risk as a result of human error, misconduct, malfeasance, or a failure or breach of systems, networks, and infrastructure. For example, the Company’s ability to conduct business may be adversely affected by any significant disruptions to third parties with whom the Company interacts or relies upon.
Truist is heavily reliant on technology, and a failure to effectively anticipate, develop, and implement new technology could harm us.
The financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those related to artificial intelligence. Truist has invested in technology to automate functions previously performed manually, to facilitate the ability of clients to engage in financial transactions and otherwise to enhance the client experience with respect to the Company’s products and services.
Truist expects to make additional investments in innovation and technology to address technological disruption in the industry and improve client offerings and service. These changes are designed to allow the Company to better serve the Company’s clients and to reduce costs. Many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial financial, human, and other resources. Although we take steps to mitigate the risks and uncertainties associated with these initiatives, they are not always implemented on time, within budget, or without negative financial, operational, or client impact and do not always perform as we or our clients expect. No assurance can be provided that initiatives in the future will be or will do so.
The Company’s continued success depends, in part, upon the Company’s ability to address clients’ needs by using technology to provide products and services that satisfy client demands, including demands for faster and more secure payment services, to create efficiencies in the Company’s operations and to integrate those offerings with legacy platforms or to update those legacy platforms. A failure to maintain or enhance the Company’s competitive position with respect to technology, whether because of a failure to anticipate client expectations, a failure in the performance of technological developments or an untimely roll out of developments, may cause the Company to lose market share or incur additional expense.
Our use of systems and other technologies also depends on rights or interests in the underlying intellectual property, which we or our service providers may own or license. If we or a service provider were alleged or found to be infringing on the intellectual-property rights of another person or entity, we could be liable for significant damages for past infringement, substantial fees for continued use, and deprivation of access for limited or extended periods of time without the practical availability of an alternative.The Company faces risks associated with the quality, availability, and retention of key data for operational, strategic, regulatory, and compliance purposes.The Company’s financial and regulatory reporting, public disclosures, and key business decisions are reliant on the quality, availability, and retention of data, including personal information. While Truist has a data risk management control framework to mitigate the risks associated with such data while at rest, in motion, and in use, this framework cannot guarantee that we will effectively mitigate risk and limit negative impacts on our business and operations. A control failure, for example, may lead to data breaches, data loss, data misuse, and data integrity and quality risks. These failures may ultimately result in inaccuracies in financial and regulatory reports, inhibited management decision-making, financial loss, reputational risk, and regulatory compliance risk, including data privacy, data protection, and cybersecurity compliance risks. We also can experience enforcement and other supervisory actions, damage to our reputation, and private litigation.28 Truist Financial Corporation
Other External Risks
Physical, transition, and other risks associated with climate change, together with governmental responses to them, may negatively impact our business, operations, reputation, and clients.There is an increasing concern over the risks of climate change and related environmental sustainability matters. Climate change presents (i) physical risks from the direct impacts of changing climate patterns and acute weather events, such as damage to physical assets and service disruptions, and (ii) transition risks from changes in regulations, disruptive technologies, and shifting market dynamics towards a lower carbon economy. The physical risks of climate change include discrete events, such as flooding, hurricanes, tornadoes, and wildfires, and longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought. Physical risks may alter the Company’s strategic direction in order to mitigate certain financial risks. Such events could also disrupt the Company’s operations or those of its clients or third parties the Company relies on, not only through direct damage to assets, but also from indirect impacts due to supply chain disruption and market volatility.
Transition risks, including changes in consumer preferences, additional regulatory requirements or taxes and additional counterparty or client requirements, could have an adverse impact on asset values and the financial performance of Truist’s businesses, and those of its clients. Climate change could also present incremental risks to the execution of the Company’s long-term strategy. While material impact from climate change is expected to occur over a longer time horizon, the acceleration of a transition to a low-carbon economy could present idiosyncratic risks for individual companies. Additionally, transitioning to a low-carbon economy will entail extensive policy, legal, technology, and market initiatives.
Governments are intensely focused on the effects of climate change and environmental issues, and how they act to mitigate related risks could have an adverse effect on our business and financial results. For example, the FRB has announced its development of a program of scenario analysis to evaluate the potential economic and financial risks posed by different climate outcomes, and this could have the effect of directly or indirectly compelling us to alter our businesses or operations in ways that would be detrimental to our results of operations and prospects. Such a program, moreover, could be followed by an incorporation of climate and related environmental risks into the FRB’s supervisory stress tests, which may negatively impact us and our future capital plans. Further, we may be compelled to change or cease some of our business or operational practices or to incur additional capital, compliance, and other costs because of climate- or environmental-driven changes in applicable law or supervisory expectations or due to related political, social, market, or similar pressure.
Additionally, the Company faces potential reputational risks as a result of its practices related to climate change, including as a result of the Company’s direct or indirect involvement in certain industries, as well as any decisions management makes in response to managing climate risk, especially as views on climate-related matters become subject to increased polarization. Further, there is increased scrutiny of climate change-related policies, goals, and disclosures, which could result in litigation and regulatory investigations and actions. We may incur additional costs and require additional resources as we evolve our strategy, practices, and related disclosures with respect to these matters.
As climate risk is interconnected with all key risk types, Truist continues to embed climate risk considerations into risk management strategies. Due to the level of uncertainty around the future path of climate change, the Company’s risk management strategies may not be effective in fully mitigating climate risk exposures.The Company is at risk of increased losses from fraud.Fraud attacks across the banking sector have significantly increased in recent years. Bad actors have industrialized the execution of fraud attacks with ever increasing sophistication and speed. Bad actors increasingly use sophisticated applications and techniques to perpetrate the fraud. In some cases, these individuals are associated with large criminal organizations that share tactics and strategies. Fraud schemes are wide ranging, including: counterfeit and forged checks; debit and credit card fraud; social engineering; ATM attacks through the use of skimmers to obtain client data; and phishing to obtain client account credentials. These schemes make use of a variety of products and services to steal funds, such as real-time payments, ACH, and wire transfers. Bad actors perpetuate fraudulent activity by impersonating real clients with stolen identities and account credentials, use other individuals, known as mules, to interact with Truist, or create new identities, referred to as synthetic identities. In some instances, the fraud is committed by existing clients.Truist Financial Corporation 29
Natural disasters, pandemics, and other catastrophic events could adversely impact us.The occurrence of natural disasters, extreme weather events, health crises, the occurrence or worsening of disease outbreaks or pandemics, such as COVID-19, or other catastrophic events, as well as government actions or other restrictions in connection with such events, could adversely affect the Company’s financial condition or results of operations. Truist has significant operations and clients along the Gulf and Atlantic coasts as well as other regions of the U.S., which could be adversely impacted by hurricanes, tornadoes and other severe weather in those areas. Truist and its clients could also be disrupted by the physical effects of climate change, which may become more frequent and severe. Natural and other types of disasters, including as a result of climate change, could have an adverse impact on Truist’s businesses in that such events could disrupt the Company’s operations or the ability or willingness of the Company’s clients to access the financial services offered by Truist, including adverse impacts on the Company’s borrowers to timely repay their loans and the value of any collateral held. These events could reduce the Company’s earnings and cause volatility in the Company’s financial results for any fiscal quarter or year and have an adverse effect on the Company’s financial condition and results of operations.
Although Truist has business continuity plans and other safeguards in place, the Company’s operations and communications may be adversely affected by natural disasters or other catastrophic events, and there can be no assurance that such business continuity plans will be effective.
An outbreak or escalation of hostilities between countries or within a country or region could have an adverse effect on the U.S. economy and on Truist’s business operations and key external parties.
Aggressive actions by hostile governments or groups, including armed conflict or intensified cyberattacks, could expand in unpredictable ways by drawing in other countries or escalating into full-scale war with potentially catastrophic consequences, particularly if one or more of the combatants possess nuclear weapons. Depending on the scope of the conflict, the hostilities could result in worldwide economic disruption, heightened volatility in financial markets, severe declines in asset values, disruption of global trade and supply chains, and diminished consumer, business and investor confidence. Any of the above consequences could have significant negative effects on the U.S. economy, and, as a result, Truist’s operations and earnings. Truist, its service providers, and participants in the financial system could also experience increasing levels and more aggressive cyberattacks launched by or under the sponsorship of one or more of the adversaries in such a conflict.Compliance Risks
Truist is subject to extensive and evolving government regulation and supervision, which could adversely affect our business, financial condition, results of operations, and prospects.The banking and financial services industries are highly regulated. Truist is subject to supervision, regulation, and examination by regulators, including the FRB, FDIC, NCCOB, SEC, CFTC, CFPB, FINRA, MSRB, NFA, and various other federal and state regulatory agencies. The regulatory and supervisory framework applicable to banking organizations is intended primarily for the protection of depositors and other clients, the DIF, the broader economy, and the stability of the U.S. financial system, rather than for the protection of shareholders and non-deposit creditors. In addition to banking laws and regulations, Truist is subject to various other laws and regulations, all of which directly or indirectly affect the operations and management of Truist and its ability to make distributions to shareholders. Truist is also subject to heightened requirements under the enhanced prudential standards and expects increased supervisory scrutiny, including, for example, single counterparty credit limits, heightened expectations with respect to governance, risk management and internal controls and additional capital and liquidity requirements. Reform of the financial services industry resulting from the Dodd-Frank Act, including the EGRRCPA and other legislative and regulatory changes, affect the Company’s operations.
These compliance risks relate to a wide variety of laws, rules, and regulations varying across Truist’s lines of business, corporate functions, and jurisdictions, and include risks related to financial products and services, relationships and interactions with clients, and teammate activities. Compliance risks include those associated with anti-money laundering compliance, trading activities, market conduct, and the laws, rules, and regulations related to the offering of products and services across jurisdictional borders. Compliance risk is also inherent in Truist’s fiduciary activities, including the failure to exercise the applicable standard of care to act in the best interest of fiduciary clients or to treat fiduciary clients fairly.
These laws and regulations and Truist’s inability to act in certain instances without receiving prior regulatory approval affect Truist’s lending practices, capital structure, investment practices, dividend policy, ability to repurchase common stock and ability to pursue strategic acquisitions, among other activities. Changes to statutes, regulations or regulatory policies or their interpretation or implementation and the continued heightening of regulatory requirements could affect Truist in substantial and unpredictable ways. Federal and state banking regulators also possess broad powers to take supervisory actions as they deem appropriate. These supervisory actions may result in higher capital requirements, higher deposit insurance premiums, higher compliance expenses, and limitations on the Company’s activities that could have an adverse effect on operations or profitability.30 Truist Financial CorporationTruist has elected to be treated as an FHC, which permits us to engage in a number of financial and related activities beyond banking, including securities, advisory, insurance, and merchant-banking activities. Truist and Truist Bank are subject to ongoing requirements for Truist to qualify as an FHC. If a BHC or any of its insured depository institutions were found not to be well capitalized or well managed, as defined under applicable law, the BHC can be restricted from engaging in the broader range of financial and related activities permitted for FHCs, including the ability to acquire companies engaged in those activities, and can be required to discontinue these activities or even divest any of its insured depository institutions. In addition, if an insured-depository-institution subsidiary of a BHC were to fail to achieve a satisfactory or better rating under the CRA, the ability of the BHC to expand its financial and related activities or make acquisitions could be restricted.
Financial regulators’ prudential and supervisory authority gives them broad power and discretion to direct Truist’s actions, and they have assumed an active oversight, examination, and enforcement role across the financial services industry on both the federal and state levels. Areas of focus in the recent past have been with respect to climate, deposits, interest-rate risk management, commercial real estate, risk governance and controls, capital, liquidity, long-term debt requirements, mortgage-related practices, auto lending practices, complaints management, sales practices and related incentive compensation programs, data privacy, data protection, cybersecurity, fair banking, overdraft and other fees, retention and recordkeeping of electronic communications, and other compliance matters.
Truist continues to be subject to examinations and ongoing monitoring to assess compliance with BSA/AML and OFAC laws and regulations. These laws and regulations are designed to protect the financial system, consumers and financial institutions from bad actors and illicit activities by requiring financial institutions to develop and implement BSA/AML programs designed to deter and when possible detect and prevent the use of the financial system to facilitate the funding of criminal activities. In addition, Truist is also prohibited from engaging in financial transactions with certain individuals, entities, and countries under programs administered by the OFAC of the U.S. Treasury. Additionally, actual or alleged misconduct by teammates, including unethical, fraudulent, improper, or illegal conduct, or unfair, deceptive, abusive, or discriminatory practices, can result in litigation, or government investigations and enforcement actions, and cause significant reputational harm to Truist, even if allegations are ultimately unsubstantiated.
The Company and other large financial institutions have become subject to increased scrutiny, more intense supervision and regulation, and more supervisory findings and actions, with increased operational costs, as well as impacts on geographic expansion and acquisitions, which we expect to continue. The financial services industry also continues to face a stricter and more aggressive enforcement of laws at federal, state, and local levels—particularly in connection with business and other practices that may harm or appear to harm consumers or affect the financial system more broadly. Financial institutions often are less inclined to litigate with governmental authorities because of the regulatory and supervisory framework. Truist expects that its businesses will remain subject to extensive regulation and supervision. Any potential new regulations or modifications to existing regulations would likely necessitate changes to Truist’s existing regulatory compliance and risk management infrastructure.
Our regulatory and supervisory environments, whether at federal, state, or local levels, are not static. No assurance can be given that applicable statutes, regulations, and other laws will not be amended or construed differently, that new laws will not be adopted, or that any of these laws will not be enforced more aggressively. Truist could become subject to future legislation and regulatory requirements beyond those currently proposed, adopted, or contemplated in the U.S. or abroad, including policies and rulemaking related to the Dodd-Frank Act, limits on acquisitions, more stringent capital and liquidity requirements, policies and rulemaking related to emerging technologies, cybersecurity and data, and climate risk management and ESG governance and reporting, including emissions and sustainability disclosure. In addition, concerns over climate change may prompt changes in regulations that, in turn, could have an adverse impact on asset values and the financial performance of Truist’s businesses and its clients. The cumulative effect of such legislation and regulations on Truist’s business, operations, and profitability cannot be accurately predicted. Such regulatory changes may reduce Truist’s revenues, limit the types of financial services and products it may offer, alter the investments it makes, affect the manner in which it operates its businesses, increase its litigation and regulatory costs and increase the ability of non-banks to offer competing financial services and products. Further, our noncompliance with applicable laws, whether as a result of changes in interpretation or enforcement, system or human errors, or otherwise and, in some cases, regardless of whether noncompliance was inadvertent, can result in the suspension or revocation of licenses or registrations that we need to operate and in the initiation of enforcement and other supervisory actions or private litigation.Truist also relies upon third parties who may expose the Company to compliance and legal risk. New or existing legal requirements also could heighten the reputational impact of perceived misuses of client data by the Company and third parties. See additional disclosures in the “Regulatory Considerations” section in Item 1 “Business.”Truist Financial Corporation 31Regulatory capital and liquidity standards and future revisions to them may negatively impact our business and financial results.
Truist is subject to regulatory capital and liquidity requirements established by the FRB and the FDIC. These regulatory capital and liquidity requirements are typically developed at an international level by the BCBS and then applied, with adjustments, in each country by the appropriate domestic regulatory bodies. Domestic regulatory agencies have the ability to apply stricter capital and liquidity standards than those developed by the BCBS. In several instances, the U.S. banking agencies have done so with respect to U.S. banking organizations.Requirements to maintain specified levels of capital and liquidity and regulatory expectations as to the quality of the Company’s capital and liquidity may prevent the Company from taking advantage of opportunities in the best interest of shareholders or force the Company to take actions contrary to their interests. For example, Truist may be limited in its ability to pay or increase dividends or otherwise return capital to shareholders. In addition, these requirements may impact the amount and type of loans the Company is able to make. Truist may be constrained in its ability to expand, either organically or through mergers and acquisitions. These requirements may cause the Company to sell or refrain from acquiring assets where the capital requirements appear inconsistent with the assets’ underlying risks. In addition, liquidity standards require the Company to maintain holdings of highly liquid investments, thereby reducing the Company’s ability to invest in less liquid assets, even if more desirable from a balance sheet return or interest rate risk management perspective. As a Category III banking organization, Truist is subject to additional capital and liquidity requirements. For example, Truist is subject to a requirement to submit capital plans to the Federal Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock. As part of the capital planning and stress testing processes, our capital actions are assessed against our ability to satisfy applicable capital requirements in the event of a stressed market environment. If we fail to satisfy applicable capital requirements, including the SCB, our ability to undertake capital actions may be restricted.The liquidity standards applicable to large U.S. banking organizations have been supplemented in recent years. The NSFR rule, which is designed to ensure that banking organizations maintain a stable funding profile in relation to their asset composition and off-balance sheet activities, became effective on July 1, 2021. Public disclosure of the NSFR began in 2023.In addition to the regulatory capital and liquidity requirements applicable to Truist and Truist Bank, the Company’s broker-dealer subsidiaries are subject to capital requirements established by the SEC.
Regulatory capital and liquidity requirements receive periodic review and revision by the BCBS and the U.S. banking agencies. Proposed changes to applicable capital and liquidity requirements, such as the Basel III proposal and the long-term debt proposal, could result in increased expenses or cost of funding, which could negatively affect our financial results or our ability to pay dividends and engage in share repurchases. For more information concerning our legal and regulatory obligations with respect to Basel III and long-term debt requirements, please see “Regulatory Considerations” in Item 1 “Business.”
Truist is subject to risks related to originating and selling loans, including repurchase and indemnification obligations.When loans are sold or securitized, it is customary to make representations and warranties to the purchaser about the loans, including the manner in which they were originated. These agreements generally require the repurchase of loans or indemnification in the event of a breach of these representations or warranties. An increase in the number of repurchase and indemnity demands from purchasers related to representations and warranties on sold loans could result in an increase in the amount of losses for loan repurchases. Truist also bears a risk of loss from borrower defaults for multi-family commercial mortgage loans sold to FNMA.
In addition to repurchase claims from GSEs, Truist could be subject to indemnification claims from non-GSE purchasers of the Company’s mortgage loans. Claims could be made if the loans sold fail to conform to statements about their quality, the manner in which the loans were originated and underwritten or their compliance with state and federal law.
Additional factors affecting the extent to which we may securitize loans and receivables in the future include the overall credit quality of our loans and receivables, the costs of securitizing our loans and receivables, the demand for consumer asset-backed securities and the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally.
32 Truist Financial CorporationTruist faces risks as a servicer of loans.The Company acts as servicer for a range of assets and products and primarily for loans in securitizations and unsecuritized loans owned by investors. As servicer for loans, the Company has certain contractual obligations to the securitization trusts, investors, or other third parties. As a servicer, Truist’s obligations include foreclosing on defaulted loans or, to the extent consistent with the applicable securitization or other investor agreement, considering alternatives to foreclosure such as loan modifications or short sales. Generally, the Company’s servicing obligations are set by contract, for which the Company receives a contractual fee. However, GSEs can amend their servicing guidelines unilaterally for certain government guaranteed mortgages, which can increase the scope or costs of the services required without any corresponding increase in the Company’s servicing fee. Further, the CFPB has implemented national servicing standards, which have increased the scope and cost of services that the Company is required to perform. In addition, there has been a significant increase in state laws that impose additional servicing requirements that increase the scope and cost of the Company’s servicing obligations. As a servicer, the Company also advances expenses on behalf of investors, which it may be unable to collect.
A material breach of the Company’s obligations as servicer may result in contract termination if the breach is not cured within a specified period of time following notice, which can generally be given by the securitization trustee or a specified percentage of security holders, causing the Company to lose servicing income. In addition, the Company may be required to indemnify the securitization trustee against losses from any failure by the Company, as a servicer, to perform the Company’s servicing obligations or any act or omission on the Company’s part that involves willful misfeasance, bad faith, or gross negligence. For certain investors and certain transactions, Truist may be contractually obligated to repurchase a loan or reimburse the investor for credit losses incurred on the loan as a remedy for servicing errors with respect to the loan. The Company may be subject to increased repurchase obligations as a result of claims made that the Company did not satisfy its obligations as a servicer. The Company may also experience increased loss severity on repurchases, which may require a material increase to the Company’s repurchase reserve.
The Company has and may continue to receive indemnification requests related to the Company’s servicing of loans owned or insured by other parties, primarily GSEs. Typically, such a claim seeks to impose a compensatory fee on the Company for departures from GSE service levels. In most cases, this is related to delays in the foreclosure process. Additionally, the Company has received indemnification requests where an investor or insurer has suffered a loss due to a breach of the servicing agreement. While the number of such claims has been small, these could increase in the future.Truist faces substantial risks in safeguarding personal and other sensitive information.
Truist’s businesses are subject to complex and evolving laws, rules, and regulations governing data privacy, data protection, and cybersecurity, particularly with respect to the privacy and protection of personal information of individuals. Individuals whose personal information may be protected by law can include the Company’s clients (and in some cases its clients’ clients), prospective clients, job applicants, teammates, and the employees of the Company’s vendors, and other third parties. Complying with the laws, rules, and regulations applicable to the Company’s disclosure, collection, use, sharing, storage, and other processing of personal information can increase operating costs, impact the development of new products or services, and reduce operational efficiency. Any mishandling or misuse of personal information by the Company or a third-party affiliated with the Company could expose the Company to litigation or regulatory fines, penalties, or other sanctions.Additional risks could arise from the failure of the Company or third parties to provide adequate disclosure or transparency to the Company’s clients about the personal information collected from them and the use of such information; to receive, document, and honor the privacy preferences expressed by the Company’s clients; to protect personal information from unauthorized disclosure; or to maintain proper training on data privacy, data protection, or cybersecurity practices for all teammates or third parties who have access to personal information. Concerns regarding the effectiveness of Truist’s measures to safeguard personal information, or even the perception that those measures are inadequate, could cause Truist to lose existing or potential clients, and thereby reduce Truist’s revenues. Furthermore, any failure or perceived failure by the Company to comply with applicable data privacy, data protection, or cybersecurity laws, rules, or regulations may subject it to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices, significant liabilities or regulatory fines, penalties, or other sanctions. Any of these could damage Truist’s reputation and otherwise adversely affect its businesses.
Truist Financial Corporation 33
In recent years, well-publicized incidents involving the inappropriate disclosure, collection, use, sharing, storage, and other processing of personal information have led to expanded governmental scrutiny of practices relating to the safeguarding of personal information by companies. That scrutiny has in some cases resulted in, and could in the future lead to, the adoption of stricter laws, rules and regulations relating to the disclosure, collection, use, sharing, storage, and other processing of personal information. Truist will likely be subject to new and evolving data privacy, data protection, and cybersecurity laws, rules and regulations in the U.S. and abroad, which could result in additional costs of compliance, litigation, regulatory fines, and enforcement actions. These types of laws, rules and regulations could prohibit or significantly restrict financial services firms such as Truist from sharing information among affiliates or with third parties such as vendors, and thereby increase compliance costs, or could restrict Truist’s use of personal information when developing or offering products or services to clients. These restrictions could also inhibit Truist’s development or marketing of certain products or services or increase the costs of offering them to clients.For more information concerning our legal and regulatory obligations with respect to data privacy, data protection, and cybersecurity, please see “Privacy, Data Protection, and Cybersecurity” in Item 1 “Business.”
Differences in regulation and supervision can affect the Company’s ability to compete effectively.
The content and application of laws and regulations affecting financial services firms sometimes vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. Large institutions, such as the Company, often are subject to more stringent regulatory requirements and supervision than smaller institutions. In addition, financial technology companies and other non-traditional competitors may not be subject to banking regulation or may be supervised by a national or state regulatory agency that does not have the same regulatory priorities or supervisory requirements as the Company’s regulators. These differences in regulation can impair the Company’s ability to compete effectively with competitors that are less regulated and do not have similar compliance costs.The Company can face risks of non-compliance and incur additional operational and compliance costs under laws relating to anti-money laundering, economic sanctions, embargo programs, and anti-corruption.
Truist must comply with laws and regulations relating to anti-money laundering, economic sanctions, embargo programs and anti-corruption, which can increase its risks of non-compliance and costs associated with the implementation and maintenance of complex compliance programs. A violation of any of these legal and regulatory requirements could subject Truist or individual employees to regulatory enforcement actions as well as significant civil and criminal penalties.Regulatory and Legal RisksThe Company may incur damages, fines, penalties, and other negative consequences from past, current, or future regulatory or other legal violations, including inadvertent or unintentional violations.
Truist maintains systems and procedures designed to ensure that it complies with applicable laws and regulations, but there can be no assurance that these will be effective. In addition to fines and penalties, the Company may suffer other negative consequences from regulatory violations including restrictions on certain activities and damage to the Company’s reputation, which in turn might adversely affect the Company’s business and results of operations.
Federal and state law grants substantial enforcement powers to federal and state banking regulators and law enforcement agencies. This enforcement authority includes, among other things, the ability to assess significant civil or criminal monetary penalties, fines, or restitution; to issue cease and desist or removal orders; and to initiate injunctive actions against banking organizations and institution-affiliated parties. These enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Any future enforcement action could have an adverse impact. In addition, governmental authorities have, at times, sought criminal penalties against companies in the financial services sector for violations, and, at times, have required an admission of wrongdoing, criminal pleas or other extraordinary terms from financial institutions in connection with resolving such matters. Criminal convictions or criminal pleas or admissions of wrongdoing in a settlement with the government can lead to greater exposure in civil litigation, reputational harm, and other significant collateral consequences such as restrictions on engaging in new activities or acquisitions, loss of clients, restrictions on the ability to access the capital markets and the inability to operate certain businesses or offer certain products for a period of time.
Failures to comply with law, regulatory requirements, or supervisory expectations expose the Company to fines, regulatory penalties, significant remediation actions and other costs, reputational damage, civil litigation, restrictions on returning capital to shareholders through share repurchases or dividends, constraints on existing activities, and regulatory or enforcement actions which, in turn, frequently result in limitations on engaging in new activities, expanding geographically, or pursuing acquisitions or other growth opportunities and lead to higher operational and compliance costs. Violations of laws and regulations or deemed deficiencies in risk management, consumer compliance, or other practices also may be incorporated into Truist’s confidential supervisory ratings with associated adverse effects.
34 Truist Financial Corporation
Federal law grants substantial enforcement powers to federal financial institution regulators, OFAC and the U.S. Department of Justice, among other government agencies with respect to AML and OFAC laws and regulations. This enforcement authority includes, among other things, the ability to assess significant civil or criminal monetary penalties, fines, or restitution; to issue cease and desist or prohibition orders; and to initiate injunctive actions against financial institutions and institution-affiliated parties. These enforcement actions may be initiated for violations of laws and regulations or unsafe and unsound practices.Pending or threatened legal proceedings and other matters may adversely affect the Company’s business, financial condition, results of operations, and reputation.In the ordinary course of its business, the Company is subject to lawsuits, claims, and formal and informal enforcement activity, including regulatory investigations. The volume of legal proceedings against participants in the financial services industry, including the Company, is substantial, and enforcement actions by regulatory authorities are becoming more common in the current regulatory environment. Legal proceedings against financial services firms may increase depending on factors such as market downturn, changes in law and increased regulatory scrutiny.
Heightened regulatory scrutiny or the results of an investigation or examination may lead to additional regulatory investigations or enforcement actions. There is no assurance that those actions will not result in regulatory settlements or other enforcement actions against Truist. Furthermore, a single event involving a potential violation of law or regulation may give rise to numerous and overlapping investigations and proceedings by multiple federal and state agencies and officials. In addition, if one or more financial institutions are found to have violated a law or regulation relating to certain business activities, this could lead to investigations by regulators or other governmental agencies of the same or similar activities by other financial institutions, including Truist, and large fines and remedial measures that may have been imposed in resolving earlier investigations for the same or similar activities at other financial institutions may be used as the basis for future settlements.
Claims and legal actions, including class action lawsuits and enforcement proceedings, could involve large monetary amounts, significant defense costs, and result in settlements, judgments, penalties, fines, injunctions, or other forms of relief that are adverse to the Company. Responding to inquiries, investigations, lawsuits, and other proceedings is time-consuming and expensive and can divert senior management attention from Truist’s business.
The outcome of any such legal proceedings, as well as the timing of any ultimate resolutions, may be difficult to predict or estimate. Actual legal and other costs arising from claims and legal actions may be greater than the Company’s legal accruals. Further, the Company may not have accruals for all legal proceedings where we face a risk of loss. The ultimate resolution of a pending legal proceeding or significant regulatory or government action against the Company could adversely affect the Company’s results of operations and financial condition or cause significant reputational harm, which may adversely impact the Company’s business prospects. Further, the Company may be exposed to substantial uninsured liabilities, which could adversely affect the Company’s results of operations and financial condition. Refer to the Legal Proceedings and Other Matters section in “Note 16. Commitments and Contingencies” for additional information.Strategic Risks
Ineffective execution of strategic initiatives could adversely affect investor sentiment and our business and financial results.There is no guarantee that our strategic initiatives, including our current initiatives to streamline and simplify our business, reduce expenses, as well as, to increase digitization, will ultimately be successful. Our execution of strategic initiatives may be impacted by internal factors, such as maintaining a level of earnings appropriate to support growth objectives, the ability to maintain dividends in various economic cycles, or the successful delivery of innovative and technology strategies. In addition, our execution of our strategies may be impacted by our response to external factors, including geopolitical, macroeconomic, social, cultural, competitive, and regulatory factors. To the extent we are impeded or unable to execute effective strategic initiatives, our prospects for growth, earnings, capital levels, and stock price as well as stakeholder confidence in Truist could be adversely affected.
Truist Financial Corporation 35Competition may reduce Truist’s client base or cause Truist to modify the pricing or other terms for products and services, which could have an adverse impact on our business and financial results.Truist operates in a highly competitive industry that could become even more competitive with growth in areas such as neo-banks, fintechs, and other non-bank platforms. Increased competition could arise from technological advancements, legislative and regulatory changes, as well as competition from other financial services companies, some of which may be subject to less extensive regulation than Truist. The Company’s success depends, in part, on the Company’s ability to adapt its offering of products and services to evolving industry standards and client expectations. The widespread adoption of new technologies has required and will continue to require substantial investments to modify existing products and services or to develop new products and services. In addition, there is increasing pressure to provide products and services at lower prices further reducing contribution margins. The Company may not be successful in introducing new products and services in response to industry trends or developments in technology or those new products may not achieve market acceptance.
Truist also competes with nonbank companies inside and outside of the Company’s market area and, in some cases, with companies other than those traditionally considered financial sector participants. In particular, technology companies are increasingly focusing on the financial sector, either in partnership with competitor banking organizations or on their own. These companies generally are not subject to the same regulatory oversight as main street financial institutions and may accordingly realize certain cost strategies and offer products and services at more favorable rates and with greater convenience to the client. This competition could result in the loss of clients and revenue in areas where fintechs are operating. As the pace of technology and change advance, continuous innovation is expected to exert long-term pressure on the financial services industry.
The adoption of new technologies by competitors, including internet banking services, mobile applications, advanced ATM functionality, artificial intelligence, and cryptocurrencies, could require the Company to make substantial investments to modify or adapt the Company’s existing products and services or even radically alter the way Truist conducts business. These and other capital investments in the Company’s business may not produce expected growth in earnings anticipated at the time of the expenditure.Acquisitions, mergers, and divestitures introduce a broad range of anticipated and unanticipated risks, including unforeseen or negative consequences from supervisory or regulatory action that may limit Truist’s ability to pursue and complete them.
We may from time to time seek to acquire other financial-services companies or businesses. Acquisitions involve numerous risks and uncertainties, including inaccurate financial and operational assumptions, incomplete or failed due diligence, lower than expected performance, higher than expected costs, difficulties related to integration, diversion of management’s attention from other business activities, adverse market or other reactions, changes in relationships with clients or counterparties, the potential loss of key personnel, and the possibility of litigation and other disputes. An acquisition also could be dilutive to our existing shareholders if we were to issue common stock to fully or partially pay or fund the purchase price. We, moreover, may not be successful in identifying appropriate acquisition candidates, integrating acquired companies or businesses, or realizing expected value from acquisitions. There is significant competition for valuable acquisition targets, and we may not be able to acquire other companies or businesses on attractive terms. No assurance can be given that we will pursue future acquisitions, and our ability to grow and successfully compete may be impaired if we choose not to pursue or are unable to successfully make acquisitions.The Company must satisfy a number of meaningful conditions before completing an acquisition of another bank or BHC, including federal and state regulatory approvals. In determining whether to approve a proposed bank or BHC acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition; financial condition and future prospects, including current and projected capital ratios and levels; the competence, experience and integrity of management; the supervisory relationship; record of compliance with laws and regulations; the convenience and needs of the communities to be served, including the acquiring institution’s record of compliance under the CRA; the effectiveness of the acquiring institution in combating money laundering activities; and public comments from various stakeholders. In addition, U.S. regulators must take systemic risk to the U.S. financial system into account when evaluating whether to approve a potential acquisition transaction involving a large financial institution like Truist. There is no certainty as to when or if or on what terms and conditions, any required regulatory approvals will be granted for any potential acquisition. In specific cases, Truist may be required to sell banks or branches or take other actions as a condition to receiving regulatory approval. An inability to satisfy other conditions necessary to consummate an acquisition transaction, such as third-party litigation, a judicial order blocking the transaction or lack of shareholder approval, could also prevent the Company from completing an announced acquisition. There has been increased scrutiny of bank and financial institution acquisitions from regulators and government entities in recent years. Refer to the “Acquisitions” section within Item 1 “Business” for additional discussion.
36 Truist Financial Corporation
In addition, we may decide to divest certain businesses or assets. For example, we entered into an equity interest purchase agreement for the sale of our remaining equity interests in TIH on February 20, 2024. Purchases or divestitures of businesses involve a number of risks, including significant costs and expenses, and any divestiture we undertake could adversely affect our business, financial condition, results of operations and cash flows. Divestitures may involve significant uncertainty and execution complexity, which may cause us not to achieve our strategic objectives, realize expected cost savings, or obtain other benefits from the divestiture. The significant risks and uncertainties involved in divestitures may include:• the inability to sell such businesses or assets on satisfactory price and terms and in a timely manner, including potentially long and costly sales processes and unsuccessful attempts by a buyer to receive required regulatory approvals, satisfy other conditions to closing, or obtain equity or debt financing in order to satisfy its payment obligations related to the transaction,
• disruption to other parts of our business and distraction of management,
• loss of key teammates or clients,
• exposure to contingencies, including, among other things, those arising from representations and warranties made to a buyer regarding the businesses being sold, or
• ongoing obligations to support the businesses following such divestitures, including through transition services arrangements, and other adverse financial impacts.
Whether such divestitures are completed or not, their pendency could have a number of negative effects on our current business, including potentially disrupting our regular operations and diverting the attention of our workforce and management team. It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate our business. In the event of a termination of a divestiture transaction before it is consummated, the payment of a termination fee may not fully compensate us for our losses.
Truist has businesses other than banking that are subject to a variety of risks.Truist is a diversified financial services company. This diversity subjects the Company’s earnings to a broader variety of risks and uncertainties. Other businesses in addition to banking that the Company operates include insurance brokerage, investment banking, securities underwriting and market making, loan syndications, investment management and advice and retail and wholesale brokerage services offered through the Company’s subsidiaries. These businesses entail significant market, operational, credit, compliance, technology, legal and other risks that could adversely impact the Company’s results of operations.Reputational Risks
Negative public opinion, whether real or perceived, or our failure to successfully manage it could damage the Company’s reputation and adversely impact our business, financial condition, results of operations, and prospects.Truist’s earnings, capital, and stock price are subject to risks associated with negative public opinion. Negative public opinion could result from the Company’s actual or alleged conduct in any number of activities, including lending, sales and other operating practices, corporate governance, acquisitions, a breach of client or teammate information, the failure of any product or service sold to meet clients’ expectations or applicable regulatory requirements. In addition, the public perception that a cyberattack on the Company’s systems has been successful, whether or not this perception is correct, may damage the Company’s reputation with clients and third parties with whom the Company does business. The compromise of personal information, in particular, could result in identity theft and cause serious reputational harm. Any cybersecurity breaches, attacks and other similar incidents could significantly harm Truist’s reputation, which could adversely affect the Company’s financial condition and results of operation.
Negative public opinion could also result from increased polarization of environmental and social considerations that may affect Truist and clients of Truist. The proliferation of social media may increase the likelihood that negative public opinion from any of the real or perceived events discussed above could impact our reputation and business. Negative public opinion could adversely affect the Company’s ability to attract and retain clients and teammates and can result in litigation and regulatory actions. Actual or alleged conduct by one of the Company’s businesses can result in negative public opinion about the Company’s other businesses. Actual or alleged conduct by another financial services company can result in negative public opinion about the financial services industry in general and, as a result, adversely affect Truist.Our efforts to identify, measure and monitor reputational risk and communicate, internally and externally, such risks to key stakeholders, may be ineffective, untimely, or otherwise result in adverse effects on the Company.Truist Financial Corporation 37
Truist may face reputational risks arising out of Truist’s sales, training, incentive compensation or business practices, products or services, or other activities of its teammates, representatives, or business partners.
The Company may face increased scrutiny of its sales and other business practices, training practices, incentive compensation design and governance, and quality assurance and client complaint resolution practices. There can be no assurance that the Company’s processes and actions will meet regulatory standards or expectations. Findings from self-identified or regulatory reviews may require responsive actions, including increased investments in compliance systems and teammates or the payment of fines, penalties, increased regulatory assessments or client redress and may increase legal or reputational risk exposures.Talent Management RisksTruist depends on the experience and expertise of key teammates. If these individuals were to leave or change their roles without effective replacements, our business and operations may suffer.
The Company’s success depends, to a large degree, on the continued services of executive officers and other key teammates who have extensive experience in the industry. The Company’s business could be adversely impacted from the loss of key persons or failure to manage a smooth transition to new teammates.We could be harmed by an inability to attract, develop, retain, and motivate qualified teammates while effectively managing recruiting and compensation costs amid highly competitive and rapidly changing market conditions.The Company’s success depends upon the ability to attract, develop, and retain high performing, diverse and well-qualified teammates. The Company faces significant competition in the recruitment of highly motivated teammates who can deliver Truist’s purpose, mission, and values. Changes in employee preferences for work environments, in particular the desire of teammates to work remotely for many or all of their hours, may impact our ability to attract and retain qualified teammates in those areas of our operations that require a concentration of onsite personnel (e.g., call centers). The Company’s ability to execute its business strategy and provide high quality service may suffer if the Company is unable to recruit, develop, or retain a sufficient number of qualified teammates or if the costs of employee compensation or benefits increase substantially. The U.S. banking agencies have jointly issued comprehensive guidance designed to ensure that incentive compensation policies do not undermine the safety and soundness of banking organizations by encouraging teammates to take imprudent risks. This guidance significantly affects the amount, form, and context of incentive compensation that may be provided to teammates and could negatively affect Truist’s ability to compete for talent relative to non-banking companies. The SEC finalized its incentive compensation clawback rule which may result in additional costs and restrictions on the form of the Company’s incentive compensation.
The Company’s operations rely on its ability, and the ability of key external parties, to maintain appropriately staffed workforces and on the competence, trustworthiness, health, and safety of employees.
Truist’s ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, integrity, health, and safety of its teammates. Truist is similarly dependent on the workforces of other parties on which its operations rely, including vendors and other service providers. Truist’s businesses could be adversely affected by the ineffective implementation of business decisions; any failure to institute controls that appropriately address risks associated with business activities; or to appropriately train teammates with respect to those risks and controls; or staffing shortages, particularly in tight labor markets. Changes in law or regulation in jurisdictions in which our operations are located that affect employees may also adversely affect our ability to hire, develop, and retain qualified teammates in those jurisdictions. In addition, the Company’s business could be adversely impacted by a significant operational breakdown or failure, theft, fraud or other unlawful conduct, or other negative outcomes caused by human error or misconduct by a teammate of Truist or an employee of another party on which Truist’s operations depend. Truist’s operations could also be impaired if the measures taken by it or by governmental authorities to help ensure the health and safety of its teammates are ineffective, or if any external party on which Truist relies fails to take appropriate and effective actions to protect the health and safety of its employees.Risks Related to Estimates and Assumptions
Our business and operations make extensive use of models, and we could be adversely affected if our design, implementation, or use of models is flawed.
Truist relies on models to measure risks, estimate certain financial values, and inform certain business decisions. Models may be used in such processes as determining the pricing of various products, grading loans and extending credit, measuring interest rate and other market risks, predicting or estimating losses, assessing capital adequacy and calculating economic and regulatory capital levels, as well as estimating the value of financial instruments and balance sheet items.38 Truist Financial Corporation
Poorly designed, implemented, or incorrectly used models present the risk that certain Truist business decisions may be adversely affected by inappropriate model output. In addition, models based on historical data may degrade over time due to limited historical patterns, extreme or unanticipated market movements or client behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events). Also, information Truist provides to the public or to its regulators based on poorly designed, implemented, or incorrectly used models could be inaccurate or misleading. Certain decisions that the regulators make, including those related to capital distributions to Truist’s shareholders, could be adversely affected due to the perception of insufficient model quality or incorrect model use.We use estimates and assumptions in determining the value or amount of many of our assets and liabilities, and our business, financial condition, results of operations, and prospects could be adversely affected if these prove to be incorrect.
Accounting policies and processes are fundamental to how the Company records and reports its financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the value of the Company’s assets or liabilities and financial results. Several of the Company’s accounting policies are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If assumptions or estimates underlying the Company’s financial statements are incorrect or are adjusted periodically, the Company may experience material losses.Management has identified certain accounting policies as being critical because they require management’s judgment to ascertain the valuations of assets, liabilities, commitments, and contingencies. A variety of factors could affect the realization of income and expense or the recognition of assets and liabilities in the Company’s financial statements. Truist has established detailed policies and procedures that are intended to ensure these critical accounting estimates and judgments are well controlled and applied consistently. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. Due to the uncertainty surrounding the Company’s judgments and the estimates pertaining to these matters, the Company cannot guarantee that adjustments to accounting policies or restatement of prior period financial statements will not be required.
Further, from time to time, the FASB and SEC change the financial accounting and reporting standards that govern the preparation of the Company’s financial statements. In addition, accounting standard setters and those who interpret the accounting standards may change or even reverse their previous interpretations or positions on how these standards should be applied. Changes in financial accounting and reporting standards and changes in current interpretations may be beyond the Company’s control, can be hard to predict and could materially affect how the Company reports its financial results and condition. In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.Depressed market values for the Company’s stock and adverse economic conditions sustained over a period of time may require the Company to write down all or some portion of the Company’s goodwill.Goodwill is periodically tested for impairment by comparing the fair value of each reporting unit to its carrying amount. If the fair value is greater than the carrying amount, then the reporting unit’s goodwill is deemed not to be impaired. The fair value of a reporting unit is impacted by the reporting unit’s expected financial performance and susceptibility to adverse economic, regulatory, and legislative changes. Based on the Company’s annual impairment test of goodwill, it was determined for the CB&W and C&CB reporting units that the respective reporting units’ carrying value was in excess of its respective fair value as of October 1, 2023, resulting in a $6.1 billion non-cash, non-tax-deductible goodwill impairment charge for the year ended December 31, 2023. Future adverse changes in economic conditions or expected financial performance may cause the fair value of a reporting unit to be below its carrying amount, resulting in an additional goodwill impairment charge. The estimated fair values of the individual reporting units are assessed for reasonableness by reviewing a variety of indicators, including comparing these estimated fair values to the Company’s market capitalization over a reasonable period of time. While this comparison provides some relative market information about the estimated fair value of the reporting units, it is not determinative and needs to be evaluated in the context of the current economic environment. However, significant and sustained declines in the Company’s market capitalization could be an indication of potential goodwill impairment. Refer to the “Critical Accounting Policies” section for additional details related to the Company’s intangible assets and goodwill.
Truist Financial Corporation 39Operational RisksTruist relies extensively on other companies to provide key components of the Company’s business infrastructure, and their failure to perform to our standards or other issues of concern with them could harm us.
Third parties provide key components of the Company’s business infrastructure, such as banking services, data processing, business processes, internet connections, and network access. While we have implemented a supplier risk management program and can exert varying degrees of influence over our service providers, we do not control them, their actions, or their businesses. Our contracts with service providers, moreover, may not require or sufficiently incent them to perform at levels and in ways that we would choose to act on our own. Despite our supplier-risk-management program, service providers have not always met our requirements and expectations, and no assurance can be provided that in the future they will perform to our standards, adequately represent our brand, comply with applicable law, appropriately manage their own risks, including cybersecurity, remain financially or operationally viable, abide by their contractual obligations, or continue to provide us with the services that we require. Disruption in services provided by these third parties or any failure of these third parties to handle current or higher volumes of use could adversely affect the Company’s ability to deliver products and services to clients, to support teammates and otherwise to conduct business. Technological or financial difficulties of a third-party service provider could adversely affect the Company’s business to the extent those difficulties result in the interruption or discontinuation of services provided by that party. Further, in some instances, the Company may be responsible for failures of such third parties to comply with government regulations. We may need to incur substantial expenses to address issues with a service provider, and if the issues cannot be acceptably resolved, we may not be able to timely or effectively replace the service provider due to contractual restrictions, the unavailability of acceptable alternative providers, or other reasons. Further, regardless of how much we can influence our service providers, issues of concern with them could result in supervisory actions and private litigation against us and could harm our reputation, business, and financial results.
The Company is not insured against all types of losses as a result of third-party failures, and the insurance coverage that does exist may be inadequate to protect the Company from all losses resulting from system failures or other disruptions. Failures in the Company’s business infrastructure could interrupt its operations or increase the costs of doing business.
The Company’s framework for managing risks and mitigating losses may not be effective.
The Company’s risk management framework seeks to mitigate risk and loss. Truist has established policies, processes, and procedures intended to identify, measure, monitor, report, and analyze the types of risk to which the Company is subject, including liquidity, credit, market, operational, technology, reputational, strategic, and compliance risk, among others. We continuously improve the risk-management framework in response to internal reviews and assessments, evolving industry practices, and changes in business and regulatory expectations. Even with these improvements, however, the framework cannot guarantee that we will effectively mitigate risk and limit losses in our business and operations. For example, the Company’s risk management measures may not be fully effective in identifying and mitigating the Company’s risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated, even if the frameworks for assessing risk are properly designed and implemented. Some of the Company’s methods of managing risk are based upon the Company’s use of observed historical market behavior and management’s judgment. These methods may not accurately predict future exposures, which could be significantly greater than historical measures indicate. If the Company’s risk management framework proves ineffective, it could suffer unexpected losses and could be adversely affected.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, Truist depends on the accuracy and completeness of information about clients and counterparties.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, Truist relies on the completeness and accuracy of representations made by and information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. If the information provided is not accurate or complete, the Company’s decisions about extending credit or entering into other transactions with clients or counterparties could be adversely affected, and the Company could suffer defaults, credit losses or other negative consequences as a result.
40 Truist Financial CorporationTruist can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services, and delivery platforms.When Truist launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business or makes changes to an existing product, service or delivery platform, it may not fully appreciate or identify new operational risks that may arise from those changes, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish Truist’s ability to operate one or more of its businesses or result in potential liability to clients and counterparties, and result in increased operating expenses. The Company could also experience higher litigation costs, including regulatory fines, penalties and other sanctions, reputational damage, impairment of Truist’s liquidity, regulatory intervention, or weaker competitive standing. Any of the foregoing consequences could and adversely affect Truist’s businesses and results of operations.
Enhanced regulatory and other standards for the oversight of vendors and other service providers can result in higher costs and other potential exposures.
The Company must comply with enhanced regulatory and other standards associated with doing business with vendors and other service providers, including standards relating to the outsourcing of functions as well as the performance of significant banking and other functions by subsidiaries. Truist incurs significant costs and expenses in connection with its initiatives to address the risks associated with oversight of its internal and external service providers. Truist’s failure to appropriately assess and manage these relationships, especially those involving significant banking functions, shared services or other critical activities, could adversely affect Truist. Specifically, any such failure could result in: potential harm to clients, and any liability associated with that harm; regulatory fines, penalties or other sanctions; lower revenues, and the opportunity cost from lost revenues; increased operational costs, or harm to Truist’s reputation.ITEM 1C. CYBERSECURITYRefer to the Risk Management section of MD&A for a discussion of cybersecurity risk, which is incorporated by reference into this item.
FY 2024-12-31 (later)
ITEM 1A. RISK FACTORS
Summary of Risk Factors
Market Risks• The levels of or changes in interest rates could adversely affect our results of operations and financial condition.• The Company’s hedging strategies may not be successful in mitigating our interest rate, foreign exchange, and market risks, which could adversely affect our financial results.• Changes in monetary, fiscal, and other policies, and changes in the U.S. political environment, could adversely affect us.• Financial results, lending, and other business activities could be adversely affected by weak or deteriorating economic conditions.• Geopolitical conditions, the outbreak or escalation of hostilities, acts or threats of terrorism, and related volatility and instability in global economic and market conditions could adversely affect us.Credit Risks• The Company is subject to credit risk, and the Company’s allowance for credit losses may not be adequate to cover realized and future losses.
• The Company could have more credit risk and higher credit losses if our underwriting standards and practices are inadequate, we adopt more liberal underwriting standards for competitive or other reasons, or our concentration and other risk limits are not well calibrated.• The Company may suffer losses if the value of collateral declines in weak, deteriorating, or stressed economic or market conditions.
Liquidity Risks
• Our inability to retain and grow deposits or a change in deposit costs or mix could negatively impact our funding strategy and financial results.
• Truist’s liquidity could be impaired by an inability to access short-term funding, an unforeseen outflow of cash, or an inability to monetize liquid assets.
• A disruption in our access to the mortgage secondary market and GSEs for liquidity could negatively affect us.
• The Company’s cost of funding or access to the banking and capital markets could be adversely affected if our credit ratings are downgraded or otherwise fail to meet investor expectations.
• The Parent Company could have less access to funding sources and its liquidity could be constrained if the Bank becomes unable to pay dividends.
• The financial system is highly interrelated, and financial or systemic shocks or the failure of even a single financial institution or other participant in the financial system could adversely impact us.
Technology Risks• The Company’s operating systems and infrastructure, as well as operational capabilities managed or supplied by third parties on whom we rely, could fail or be interrupted, which could disrupt the Company’s business and adversely impact the Company’s operations, financial condition, prospects, and reputation, and cause significant legal and financial exposure.
• Truist is heavily reliant on technology, and a failure to effectively anticipate, develop, and implement new technology could negatively impact our financial results, business, operations, or security.• The Company faces risks associated with the quality, availability, and retention of key data for operational, strategic, regulatory, and compliance purposes.• The Company and its suppliers and service providers face a wide array of cybersecurity risks, which could result in the loss, alteration, or disclosure of confidential, proprietary, personal, and other sensitive information; adversely impact the Company’s operations, financial condition, prospects, and reputation; and cause significant legal and financial exposure.Other External Risks
• Physical, transition, and other risks associated with climate change, together with governmental responses to them, may negatively impact our business, operations, reputation, and clients.
• The Company is at risk of increased losses from fraud.
• Natural disasters, pandemics, and other catastrophic events could adversely impact us.20 Truist Financial CorporationCompliance Risks
• Truist is subject to extensive and evolving government regulation and supervision, which could adversely affect our business, financial condition, results of operations, and prospects.
• Regulatory capital and liquidity standards and future revisions to them may negatively impact our business and financial results.
• Truist is subject to risks related to originating and selling loans, including repurchase and indemnification obligations.
• Truist faces risks as a servicer of loans.
• Truist faces substantial risks in safeguarding personal and other sensitive information.
• Differences in regulation and supervision can affect the Company’s ability to compete effectively.Regulatory and Legal Risks• The Company may incur damages, fines, penalties, and other negative consequences from past, current, or future supervisory actions and regulatory or other legal violations, including inadvertent or unintentional violations.• Pending or threatened legal proceedings and other matters may adversely affect the Company’s business, financial condition, results of operations, and reputation.
Strategic Risks
• Ineffective execution of strategic initiatives could adversely affect investor sentiment and our business and financial results.
• Competition may reduce Truist’s client base or cause Truist to modify the pricing or other terms for products and services, which could have an adverse impact on our business and financial results.
• Acquisitions, mergers, and divestitures introduce a broad range of anticipated and unanticipated risks, including unforeseen or negative consequences from supervisory or regulatory action that may limit Truist’s ability to pursue and complete them.
• Truist has businesses other than banking that are subject to a variety of risks.
Reputational Risks
• Negative public opinion, whether real or perceived, or our failure to successfully manage it could damage the Company’s reputation and adversely impact our business, financial condition, results of operations, and prospects.Talent Management Risks• We could be harmed by an inability to attract, develop, retain, and motivate qualified teammates while effectively managing recruiting and compensation costs amid highly competitive and rapidly changing market conditions.• The Company’s operations rely on its ability, and the ability of key external parties, to maintain appropriately staffed workforces and on the competence, trustworthiness, health, and safety of teammates.Risks Related to Estimates and Assumptions
• Our business and operations make extensive use of models, and we could be adversely affected if our design, implementation, or use of models is flawed.
• We use estimates and assumptions in determining the value or amount of many of our assets and liabilities, and our business, financial condition, results of operations, and prospects could be adversely affected if these prove to be incorrect.
• Depressed market values for the Company’s stock and adverse economic conditions sustained over a period of time may require the Company to write down all or some portion of the Company’s goodwill.
Operational Risks• Truist relies extensively on third parties to provide key components of the Company’s business infrastructure, and their failure to perform to our standards or our failure to appropriately assess and manage these relationships could adversely affect us.
• The Company’s risk management framework may fail to identify and manage the risks that we face.
• In deciding whether to extend credit or enter into other transactions with clients and counterparties, Truist depends on the accuracy and completeness of information about clients and counterparties, and Truist could be negatively impacted if the information is not accurate or complete.• Truist can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services, and delivery platforms.Truist Financial Corporation 21
Risk FactorsThe following discussion sets forth some of the more important risk factors that could materially affect Truist’s financial condition and operations. When a risk factor spans several risk categories, the risks have been listed by their primary risk category. The risks described are not all inclusive. Additional risks that are not presently known or risks deemed immaterial may have an adverse effect on Truist’s financial condition, results of operations, business, and prospects.
Market RisksThe levels of or changes in interest rates could adversely affect our results of operations and financial condition.
We are highly dependent on net interest income, which is the difference between interest income on earning assets, such as loans and investments, and interest expense on deposits and borrowings. Net interest income is significantly affected by market rates of interest, which in turn are influenced by monetary and fiscal policies, general economic and market conditions, including heightened levels of inflation, the political and regulatory environments, business and consumer sentiment, competitive pressures, and expectations about the future, including future changes in interest rates and the frequency and timing of such changes. Refer to the later risk factor titled Changes in monetary, fiscal, and other policies, and changes in the U.S. political environment, could adversely affect us. Our net interest income has in the past been adversely affected and could in the future be adversely affected by policies, laws, and events that have the effect of flattening or inverting the yield curve (that is, the difference between long-term and short-term interest rates), depressing the interest rates associated with our earning assets to levels near the rates associated with our interest expense, increasing the volatility of market rates of interest, including the rate of change, or changing the spreads among different interest rate indices.
The levels of or changes in interest rates could adversely affect us beyond our net interest income, including by increasing the cost or decreasing the availability of deposits or other variable-rate funding instruments, reducing the yield on or demand for loans or increasing the prepayment speed of loans, increasing client or counterparty delinquencies or defaults, and reducing the value of our loans, retained interests in securitizations, and fixed-income securities in our investment portfolio and the efficacy of our hedging strategies. Certain of our investment securities, notably MBS, are sensitive to changes in rates. Generally, when rates rise, market values will decline, prepayments of principal will decrease and the duration of MBS will increase. Conversely, when rates fall, market values will rise, prepayments of principal will increase and the duration of MBS will decrease.
The levels of and changes in market rates of interest, and the related risks and uncertainties, are beyond our control. The dynamics among these risks and uncertainties are also challenging to assess and manage. For example, while an accommodative monetary policy may benefit us to some degree by spurring economic activity among our clients, such a policy may ultimately cause us more harm by inhibiting our ability to grow or sustain net interest income. A heightened interest rate environment, which we have experienced in recent years and may continue to experience, can pose different challenges, such as potentially slowing the demand for credit, increasing delinquencies and defaults, and reducing the values of our loans and fixed income securities. Market volatility in interest rates, including the rate of change, can create particularly difficult conditions. Refer to the “Market Risk” section of the MD&A and “Note 19. Derivative Financial Instruments.”The Company’s hedging strategies may not be successful in mitigating our interest rate, foreign exchange, and market risks, which could adversely affect our financial results.The Company employs various hedging strategies to mitigate the interest rate, foreign exchange, and market risks inherent in many of our assets and liabilities. The Company’s hedging strategies rely considerably on assumptions and projections regarding our assets and liabilities as well as general market factors. If any of these assumptions or projections prove to be incorrect or our hedges do not adequately mitigate the impact of changes in interest rates, foreign exchange rates, and other market factors, the Company may experience volatility in our earnings that could adversely affect our profitability and financial condition. In addition, the Company may not be able to find market participants that are willing to act as its hedging counterparties on acceptable terms or at all, which could have an adverse effect on the success of our hedging strategies. The Company’s hedging strategies are not designed to eliminate all interest rate, foreign exchange, and market risks.22 Truist Financial CorporationChanges in monetary, fiscal, and other policies, and changes in the U.S. political environment, could adversely affect us.
Changes in monetary and fiscal policies, including those established by the FRB and other central banks, and uncertainty concerning the future path of interest rates, government shutdowns, debt ceilings or funding for the government, and tariffs and other trade policies, can cause volatility in the financial markets and adversely affect our business and operations—for example, the conditions for commercial and consumer lending, the creditworthiness of our clients, the cost of our deposits and other interest-bearing liabilities, and the yield on our earning assets. Truist cannot control or predict the nature or timing of future changes in monetary, fiscal, or other policies or the precise effects such changes may have on the Company’s activities and financial results. These policies can:
• Meaningfully influence the availability and demand for loans and deposits, the rates and other terms for loans and deposits, and the conditions in equity, fixed-income, currency, and other markets;
• Significantly impact the cost of funds, as well as the return on assets, both of which can have an impact on interest income;
• Adversely affect borrowers through higher debt servicing costs and potentially increase the risk they may fail to repay their loan obligations; and
• Artificially inflate asset values during prolonged periods of accommodative policy, which could in turn cause volatile markets and rapidly declining collateral values during times of restrictive monetary and fiscal policies.
A fractious or volatile political environment in the U.S., including any related social unrest, could negatively impact business and market conditions, economic growth, financial stability, and business, consumer, investor, and regulatory sentiments, any one or more of which in turn could cause our business and financial results to suffer. We also could be negatively impacted by political scrutiny of the financial services industry in general or our business or operations in particular.Financial results, lending, and other business activities could be adversely affected by weak or deteriorating economic conditions.Our businesses are driven by robust economic and market activity, monetary and fiscal stability, and positive investor, business, and consumer sentiment. A prolonged period of slow growth in the U.S. economy as a whole or in any regional markets that Truist serves, or any deterioration in economic conditions or the financial markets, may disrupt or dampen the economy, which could adversely affect the Company’s financial condition and results.
If economic conditions deteriorate, the Company could see lower demand for loans by creditworthy clients, reducing the Company’s interest income. In addition, if unemployment levels increase or if real estate prices decrease, the Company could incur higher charge-offs and could incur higher expenses due to increased credit loss provisions. These conditions may adversely affect not only consumer borrowers but also commercial and industrial and commercial real estate borrowers, especially for those businesses that rely on the health of industries or properties that may suffer from deteriorating economic conditions. The ability of these borrowers to repay their loans may be reduced, causing the Company to incur higher credit losses. In addition, inflation may lead to a decrease in consumer and clients’ purchasing power, and adversely affect demand for our products and services, reducing the Company’s income.
A weakening or deterioration of economic conditions also could adversely affect financial results for the Company’s fee-based businesses. Truist earns fee income from, among other activities, investment banking, managing assets for clients, and providing brokerage and other investment advisory and wealth management services. Investment management fees are often based on the value of assets under management and a decrease in the market prices of those assets could reduce the Company’s fee income. Changes in stock or fixed income market prices or client preferences could affect the trading activity of investors, reducing commissions and other fees earned from the Company’s brokerage business. Poor economic conditions and volatile or unstable financial markets would likely adversely affect the Company’s financial advisory and capital markets-related businesses.
In addition, the bank failures in 2023 focused market attention on the industry’s interest rate and deposit risks due to rapidly rising interest rates, which, among other things, resulted in unrealized losses on longer duration securities and loans held by banks. A decrease in the supply of deposits or significant increase in competition for deposits could result in substantial increases in costs to retain and service deposits. Increased adoption of consumer banking technology can result in reduced deposit demand due to the relative ease with which depositors may transfer deposits to a different depository institution in the event that the Bank’s products and services are less competitive or confidence is lost in the Bank. The cost of resolving the bank failures in 2023 also prompted the FDIC to issue a special assessment to recover costs to the DIF. Refer to the “Regulatory Considerations” section in Item 1 “Business” for additional details related to the FDIC’s special assessment.Truist Financial Corporation 23Geopolitical conditions, the outbreak or escalation of hostilities, acts or threats of terrorism, and related volatility and instability in global economic and market conditions could adversely affect us.
Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have an adverse effect on the Company’s results of operations and financial condition. In addition, disruptions in foreign relations of the U.S. could adversely affect industries and markets on which our business depends. The macroeconomic environment in the U.S. is susceptible to geopolitical events and volatility in financial markets. For example, trade and other negotiations between the U.S. and other nations remain uncertain and could adversely impact economic and market conditions for the Company and its clients and counterparties.
Geopolitical conditions, including tensions in foreign relations of the U.S., the outbreak or escalation of hostilities between countries or within a country or region, and acts or threats of terrorism, could have an adverse effect on the global economy, financial markets, and on Truist’s business operations. Aggressive actions by hostile governments or groups, including armed conflict or intensified cyberattacks, could expand or escalate in unpredictable ways, with potentially catastrophic consequences. Geopolitical events and instability could result in worldwide economic disruption, heightened volatility in financial markets, severe declines in asset values, disruption of global trade and supply chains, higher and more volatile commodity and food prices, and diminished consumer, business, and investor confidence. Any of the above consequences could have significant negative effects on the U.S. economy, and, as a result, Truist’s operations and earnings. Truist, its service providers, and participants in the financial system could also experience increasing levels and more aggressive cyberattacks launched by or under the sponsorship of one or more of the adversaries in such a conflict.
Credit Risks
The Company is subject to credit risk, and the Company’s allowance for credit losses may not be adequate to cover realized and future losses.
Truist incurs credit risk, which is the risk to current or anticipated earnings or capital arising when a borrower, obligor, issuer, or counterparty does not meet its financial obligations to us. Credit risk is primarily incurred through lending activities in the Company’s WB and CSBB operating segments. A number of products expose the Company to credit risk, including loans and leases, lending commitments, derivatives, trading assets, and investment securities. Changes in credit quality can have a significant impact on the Company’s earnings and capital position. The Company estimates and establishes contractual lifetime reserves for credit risks and credit losses inherent in its determination of credit exposure. This process, which is critical to the Company’s financial results and condition, requires complex calculations and extensive use of judgment, considering both external and borrower-specific factors that might impair the ability of borrowers to repay their loans. If the Company fails to identify all pertinent factors, or fails to accurately estimate the impacts of factors identified, the Company’s allowance for credit losses may not be adequate to cover realized and future losses.
Credit losses may exceed the amount of the Company’s reserves due to changing economic conditions, falling collateral values, falling commodity prices, higher unemployment, losses on a client / sector where Truist has an outsized exposure, or other factors such as changes in borrower behavior. There is no assurance that reserves will be sufficient to cover all credit losses. In the event of significant deterioration in current or projected future economic conditions, the Company could experience reduced demand for credit and increased delinquencies or defaults. In addition, the Company could be required to increase reserves in future periods, which would reduce the Company’s earnings and potentially impact its capital.
The Company could have more credit risk and higher credit losses if our underwriting standards and practices are inadequate, we adopt more liberal underwriting standards for competitive or other reasons, or our concentration and other risk limits are not well calibrated.
The Company’s credit risk and credit losses can increase if the Company’s loans are concentrated in borrowers engaged in the same or similar activities or in borrowers who as a group may be uniquely or disproportionately affected by economic conditions or market conditions, including as a result of climate change or natural disasters. Increased delinquencies or defaults could also result from our failing to appropriately underwrite loans and other products that we originate or purchase or from our adopting—for strategic, competitive, or other reasons—more liberal underwriting standards. There can be no assurance that our forecasts of economic conditions, our assessments and monitoring of credit risk, and our efforts to mitigate credit risk through risk-based pricing, appropriate underwriting and investment policies, loss-mitigation strategies, and diversification are or will be sufficient to prevent an adverse impact to our business and financial results.The Company may suffer losses if the value of collateral declines in weak, deteriorating, or stressed economic or market conditions.During periods of market stress or illiquidity, the Company’s credit risk may be further increased if it fails to realize the expected value of the collateral it holds, collateral is liquidated at prices that are not sufficient to recover the full amount owed to Truist, or counterparties are unable to post collateral, whether for operational or other reasons. Furthermore, disputes with counterparties concerning the valuation of collateral may increase in times of significant market stress, volatility, or illiquidity, and Truist could suffer losses during these periods if it is unable to obtain additional collateral from counterparties, manage declines in the value of collateral, or realize the expected value of collateral.
24 Truist Financial CorporationLiquidity Risks
Our inability to retain and grow deposits or a change in deposit costs or mix could negatively impact our funding strategy and financial results.Deposits are a relatively low cost and stable source of funding. Truist competes with banks and other financial institutions for deposits and as a result, the Company could lose deposits in the future, clients may shift their deposits into higher yielding or alternate savings vehicles, or the Company may need to raise interest rates to avoid deposit attrition. Funding costs may also increase if deposits lost are replaced with wholesale funding. Higher funding costs reduce Truist’s net interest margin, net interest income, and net income. For example, in 2024, maintaining and growing deposits continued to be challenging with the FRB continuing to reduce the size of its balance sheet through quantitative tightening and sustained increased interest rates giving clients an incentive to move deposits to money market funds and other higher-yielding alternatives. In addition, our ability to maintain, grow, or favorably price deposits may be constrained by gaps in our product and service offerings, changes in consumer trends, our scale relative to other financial institutions, competition from fintech companies and emerging financial-services providers, any failures or deterioration in our client service, or any loss of confidence in our brand or our business.Truist’s liquidity could be impaired by an inability to access short-term funding, an unforeseen outflow of cash, or an inability to monetize liquid assets.Liquidity is the ability to fund increases in assets and meet obligations as they come due, all without incurring unacceptable costs. Banks are especially vulnerable to liquidity risk because of their reliance on demand or short-term deposits to fund longer-term loans or other extensions of credit. We, like other financial-services companies, rely to a significant extent on external sources of funding, such as deposits and borrowings, for the liquidity needed to conduct our business and operations. A number of factors beyond our control, however, could have a detrimental impact on the availability or cost of that funding and thus on our liquidity. When volatility or disruptions occur in the wholesale funding markets, the Company’s ability to access short-term liquidity could be impaired. In addition, idiosyncratic factors, including realization of other risks described herein, as well as other factors outside of the Company’s control, such as a general market disruption or an operational problem that affects third parties, could impair the Company’s ability to access short-term or contingent funding sources or create an unforeseen outflow of cash due to, among other factors, draws on unfunded commitments or deposit attrition. The Company’s inability to monetize liquid assets without unacceptable losses or to access short-term funding or capital markets could constrain the Company’s ability to make new loans or meet existing lending commitments and could ultimately jeopardize the Company’s overall liquidity and capitalization. While our policies and controls are designed to enable us to maintain adequate liquidity to conduct our business in the ordinary course even in a stressed environment, our liquidity position could still become compromised. Such an event could damage the performance and value of our business, prompt regulatory intervention and private litigation, harm our reputation, and cause a loss of client and investor confidence, and if the condition were to persist for any appreciable period of time, our viability as a going concern could be threatened.A disruption in our access to the mortgage secondary market and GSEs for liquidity could negatively affect us.Truist sells a portion of the mortgage loans that it originates to reduce the Company’s retained credit risk and to provide funding capacity for originating additional loans. The GSEs could limit their purchases of conforming loans due to capital constraints or other changes in their eligibility criteria for conforming loans (e.g., maximum loan amount or borrower eligibility). This potential reduction in purchases could limit the Company’s ability to fund new loans.Proposals have been presented to reform the housing finance market in the U.S., including the role of the GSEs in the housing finance market. The extent and timing of any such regulatory reform of the housing finance market and the GSEs, as well as any effect on the Company’s business and financial results, are uncertain.
The Company’s cost of funding or access to the banking and capital markets could be adversely affected if our credit ratings are downgraded or otherwise fail to meet investor expectations.Credit ratings are influenced by many factors, including the Company’s profitability, asset quality, capital levels, liquidity, business mix, operations, and risk management practices. Credit ratings may also be influenced by other factors, some of which are outside the Company’s control, such as recent and anticipated economic trends, geopolitical risk, legislative and regulatory developments, including implied levels of government support during a crisis, environmental, social, and governance considerations, and litigation, as well as changes to the rating agencies’ methodologies. There can be no assurance we will be able to maintain our current ratings and outlooks. Truist’s failure to maintain credit ratings could adversely affect funding costs and increase the Company’s cost of capital. A ratings downgrade could affect the Company’s ability to attract or retain funding, including deposits from commercial and corporate clients. Additionally, a downgrade to Truist’s credit ratings might also adversely impact the Company’s ability to conduct derivatives business with certain clients and counterparties and could trigger obligations to make cash or collateral payments to certain clients and counterparties.Truist Financial Corporation 25The Parent Company could have less access to funding sources and its liquidity could be constrained if the Bank becomes unable to pay dividends.
The Parent Company relies upon capital markets access and dividends from affiliates for funding and has less access to contingent funding sources than the Bank. If the Bank were subject to a financial stress, its dividends to the Parent Company could be reduced or eliminated in order to support Bank capital ratios or other regulatory requirements. This would increase the Parent Company’s reliance on capital markets at a time when credit spreads and funding costs are likely elevated due to the stress impacting the Bank and would also impair the Parent Company’s ability to serve as a source of strength to its subsidiaries.The financial system is highly interrelated, and financial or systemic shocks or the failure of even a single financial institution or other participant in the financial system could adversely impact us.Adverse developments affecting the overall strength and soundness of other financial institutions, the financial services industry as a whole, the macroeconomic climate, and the U.S. Treasury market could have a negative impact on perceptions about the strength and soundness of our business even if we are not subject to the same adverse developments. In addition, adverse developments with respect to third parties with whom we have important relationships could also negatively impact perceptions about us. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we face.
Truist may be impacted by actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets and increased expenses, including FDIC insurance premiums or special assessments, and could affect our ability to attract and retain depositors and to borrow or raise capital. The failure of other banks and financial institutions and the measures taken by governments, businesses, and other organizations in response to these events could adversely impact the Company’s business, financial condition, and results of operations.
The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, and other relationships. Truist has exposure to many different industries and counterparties and routinely executes transactions with counterparties in the financial industry, including brokers and dealers, central counterparties, commercial banks, investment banks, mutual and hedge funds, and other institutional investors and clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions or the financial services industry generally, in the past have led to market-wide liquidity problems and could lead to losses or defaults by Truist or by other institutions. Many of these transactions expose the Company to credit risk in the event of default of the Company’s counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by Truist cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the Company’s exposure. Any such losses could adversely affect the Company’s results of operations and financial condition.Technology RisksThe Company’s operating systems and infrastructure, as well as operational capabilities managed or supplied by third parties on whom we rely, could fail or be interrupted, which could disrupt the Company’s business and adversely impact the Company’s operations, financial condition, prospects, and reputation, and cause significant legal and financial exposure.
The Company’s operational and security systems, networks, and infrastructure, including computer systems and networks, data management, and internal processes, as well as those of third parties, are integral to the Company’s performance. The Company’s business relies on the secure collection, transmission, storage, use, retrieval, and other processing of confidential, proprietary, and other sensitive information in the Company’s information systems, networks and those of third parties. In addition, to access the Company’s systems, networks, products, and services, the Company’s clients and other third parties may use personal mobile devices or computing devices that are outside of the Company’s control and network environments. The Company’s operating systems and infrastructure are vulnerable to damage or interruption from, among other things, software bugs, server malfunctions, software or hardware failure, and human error. These risks may increase in the future as Truist continues to evolve its internal and external operating systems and infrastructure.26 Truist Financial CorporationThe potential for operational risk exposure exists throughout the Company’s business, and because of the Company’s interactions with and reliance on third parties, is not limited to the Company’s own internal operational functions. Truist’s vendors, service providers, and other third parties may expose the Company to risk as a result of human error, misconduct, malfeasance, or a failure or breach of systems, networks, and infrastructure. In addition, third-party system breakdowns or failures, could affect their ability to deliver a product or service to the Company or result in lost or compromised information of the Company or its clients. Truist cannot be certain that it will receive timely notification of such incidents or be able to exert any meaningful control or influence over how and when they are addressed. The Company’s ability to conduct business may be adversely affected by any such significant disruptions to third parties with whom the Company interacts or relies upon.
In addition, as a result of increasing consolidation, interdependence, and complexity of financial entities and technology systems and networks, a technology failure that significantly degrades, deletes, or compromises the systems, networks, or data of one or more financial entities could have an adverse impact on counterparties or other market participants. This consolidation, interconnectivity, and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, other information or security breach, termination, or constraint could, among other things, adversely affect the Company’s ability to conduct transactions, service the Company’s clients, manage the Company’s exposure to risk, or expand the Company’s business.
Truist is heavily reliant on technology, and a failure to effectively anticipate, develop, and implement new technology could negatively impact our financial results, business, operations, or security.
The financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those related to AI and migration to the cloud. Truist has invested in technology to automate functions previously performed manually, to facilitate the ability of clients to engage in financial transactions and otherwise to enhance the client experience with respect to the Company’s products and services.
Truist expects to make additional investments in innovation and technology to address technological disruption in the industry and improve client offerings and service. Although changes are designed to allow the Company to better serve the Company’s clients and to reduce costs, many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial financial, human, and other resources. Although we take steps to mitigate the risks and uncertainties associated with these initiatives, they are not always implemented, and may not in the future be implemented, on time, within budget, or without negative financial, operational, or client impact. In addition, these initiatives do not always perform, and may not in the future perform, as we or our clients expect.
The Company’s continued success depends, in part, upon the Company’s ability to address clients’ needs by using technology to provide products and services that satisfy client demands, including demands for faster, simpler, and more secure payment services, to create efficiencies in the Company’s operations, and to integrate those offerings with legacy platforms or to update those legacy platforms. A failure to maintain or enhance the Company’s competitive position with respect to technology, whether because of a failure to anticipate client expectations or keep pace with new or enhanced product or service offerings by competitors, a failure in the performance of technological developments, or an untimely roll out of developments, may cause the Company to lose market share or incur additional expense.
Our use of systems and other technologies also depends on rights or interests in the underlying intellectual property, which we or our service providers may own or license. If we or a service provider were alleged or found to be infringing on the intellectual-property rights of another person or entity, we could be liable for significant damages for past infringement, substantial fees for continued use, and deprivation of access to or use of such intellectual property for limited or extended periods of time without the practical availability of an alternative, or we could enter into a settlement agreement to resolve such claims. For example, in 2023 we settled a lawsuit brought by another financial institution alleging that our mobile remote deposit capture systems infringed patents owned by the other financial institution.The Company faces risks associated with the quality, availability, and retention of key data for operational, strategic, regulatory, and compliance purposes.The Company’s financial and regulatory reporting, public disclosures, and key business decisions are reliant on the quality, availability, and retention of data, including personal information. A control failure, for example, may lead to data breaches, data loss, data misuse, and data integrity and quality risks. These failures may result in inaccuracies in financial and regulatory reports, inhibited management decision-making, financial loss, reputational risk, and regulatory compliance risk, including data privacy, data protection, and cybersecurity compliance risks. We also can experience enforcement and other supervisory actions, damage to our reputation, and private litigation as a result of these failures.
Truist Financial Corporation 27
The Company and its suppliers and service providers face a wide array of cybersecurity risks, which could result in the loss, alteration, or disclosure of confidential, proprietary, personal, and other sensitive information; adversely impact the Company’s operations, financial condition, prospects, and reputation; and cause significant legal and financial exposure.
The Company’s computer systems and network infrastructure and those of its suppliers and service providers are continuously targeted in cyberattacks and vulnerable to damage or interruption from, among other things, fraud, denial of service attacks, social engineering schemes (such as phishing), hacking, malware or ransomware intrusion, data corruption attempts, terrorist activities, or identity theft. Such incidents have exposed and may continue to expose security vulnerabilities in the Company’s systems, networks, or other security measures, or those of third parties, and have resulted and could result in the unauthorized access, gathering, monitoring, misuse, release, loss, or destruction of confidential, proprietary, or other sensitive information, including personal information. Such incidents could also damage the Company’s systems and networks by introducing material disruptions to the network access or business operations of the Company, its clients, or other third parties.
In addition, Truist’s clients, regulators, and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to and will continue to be the target of cyberattacks and other similar incidents. The Company also faces cybersecurity risks relating to partners and other third parties that the Company relies upon to facilitate or enable business activities, including vendors, service providers, and providers of critical infrastructure such as internet access and electrical power. While the Company performs cybersecurity due diligence on its vendors and service providers, the Company does not control its vendors or service providers and its ability to monitor their cybersecurity is limited. Therefore, the Company cannot ensure that the cybersecurity measures they take will be sufficient to protect information the Company shares with them or prevent disruption arising from a cyberattack. In addition, the existence of cyberattacks or security breaches at third-party vendors and service providers with access to the Company’s data and systems may not be disclosed to the Company in a timely manner.
Cybersecurity risks for financial institutions have significantly increased in recent years and will likely continue to increase, in part because of the proliferation of new technologies to facilitate and conduct financial transactions. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, state-sponsored actors, disgruntled teammates or vendors, hackers, activists, and other external parties, including those involved in corporate espionage, any of which may see their effectiveness enhanced by the use of AI, including the use of generative AI to conduct more sophisticated social engineering attacks on the Company or its clients. Even the most advanced internal control environment may be vulnerable to compromise. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cybersecurity threat actors change frequently and may not be recognized until launched or well after a breach has occurred.
A successful penetration or circumvention of system or network security could cause serious negative consequences, including loss of clients and business opportunities; costs associated with maintaining business relationships after a cyberattack or security breach; significant disruption to the Company’s operations and business; misappropriation, exposure or destruction of the Company’s confidential, proprietary, and other sensitive information, including personal information, and funds and those of the Company’s clients; damage to the Company’s or the Company’s clients’ or third parties’ computers, systems, or networks; and a violation of applicable laws and regulations, including those related to data privacy, data protection, and cybersecurity. This could result in litigation exposure, regulatory fines, penalties, loss of confidence in the Company’s security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, which could adversely impact the Company’s results of operations, liquidity, and financial condition. In addition, we may not have adequate insurance coverage to compensate for losses from any of the foregoing, our existing insurance coverage may not continue to be available on acceptable terms or at all, and our insurers may deny coverage as to any future claims.
In addition, cybersecurity and data-privacy risks have received heightened legislative, regulatory, and supervisory attention. Legislation and regulations on cybersecurity and data privacy, as well as related supervisory expectations, can compel us to enhance or modify our systems and infrastructure, invest in new systems and infrastructure, change our service providers, augment our scenario and vulnerability testing, and alter our business practices or our policies on security, data governance, and privacy. Any of these, in turn, can cause a significant increase in the complexity and costs of our operations and expose us to enforcement and other supervisory actions, related litigation by private plaintiffs, reputational damage, and a loss of client or investor confidence.28 Truist Financial Corporation
Other External Risks
Physical, transition, and other risks associated with climate change, together with governmental responses to them, may negatively impact our business, operations, reputation, and clients.Climate change presents physical risks from the direct impacts of changing climate patterns and acute weather events, such as damage to physical assets and service disruptions, and transition risks from changes in regulations, disruptive technologies, and shifting market dynamics towards a lower carbon economy. The physical risks of climate change include discrete events, such as flooding, hurricanes, tornadoes, and wildfires, and longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought. Physical risks may alter the Company’s strategic direction in order to mitigate certain financial risks. Such events could also disrupt the Company’s operations or those of its clients or third parties the Company relies on, not only through direct damage to assets, but also from indirect impacts due to supply chain disruption and market volatility. Physical risks ultimately could result in declines in asset values (which could be exacerbated by specific portfolio or geographic concentrations), reduced availability and therefore increased costs of insurance for our clients and third parties, interruptions of supply chains and business operations, and population migration or depressed economies and increased unemployment in affected regions, any or all of which could result in increased credit risk to Truist or have other negative impacts.
Transition risks, including changes in consumer preferences, longer-term shifts in market dynamics, additional regulatory requirements or taxes, and additional counterparty or client requirements, could have an adverse impact on asset values and the financial performance of Truist’s businesses, and those of its clients, and could be exacerbated in specific industries that may be more sensitive or vulnerable to a transition to a low carbon economy. Climate change could also present incremental risks to the execution of the Company’s long-term strategy. While material impact from climate change is expected to occur over a longer time horizon, the acceleration of a transition to a low-carbon economy could present idiosyncratic risks for individual companies. Additionally, transitioning to a low-carbon economy will entail extensive policy, legal, technology, and market initiatives. Transition risks could result in the sudden devaluation of assets, increased costs for energy and operations, and therefore could have unforeseen and negative consequences on business models for us, our clients and other third parties.
Governments have been focused on the effects of climate change and environmental issues, and how they act to mitigate related risks could have an adverse effect on our business and financial results. This focus could ultimately result in legislation or regulations that could, among other things: directly or indirectly compel us to alter our businesses or operations in ways that would be detrimental to our results of operations and prospects; negatively impact our capital plans; or cause us to incur additional capital, compliance, and other costs.
Additionally, the Company faces potential reputational risks as a result of its practices related to climate change, including as a result of the Company’s direct or indirect involvement, or lack of involvement, in certain industries, as well as any decisions management makes in response to managing climate risk, especially as views on climate-related matters become subject to increased polarization. Further, there is increased scrutiny of climate change-related policies, goals, and disclosures, which could result in litigation and regulatory investigations and actions or reputational damage. We may incur additional costs and require additional resources as we evolve our strategy, practices, and related disclosures with respect to these matters.The Company is at risk of increased losses from fraud.Increased and evolving activity perpetrated by bad actors intending to defraud, misappropriate property, or circumvent the law using different channels, products. and means may outpace and outmaneuver the Truist control environment and monitoring activities impacting clients, teammates, and stakeholders. Fraud attacks in the banking sector have surged in recent years, driven by increasingly sophisticated and rapid techniques. Many bad actors, often linked to large criminal organizations, share strategies to execute schemes, such as debit and credit card fraud, peer-to-peer payment fraud, counterfeit checks, social engineering, ATM skimming, and phishing, and recent advances in artificial intelligence may make it more difficult to detect fraud. Fraudulent schemes exploit products like real-time payments, ACH, and wire transfers to steal funds. Fraudsters impersonate legitimate clients using stolen identities, employ other individuals to interact with Truist, or create fraudulent identities. In some cases, fraud is even committed by existing clients. A failure to detect, prevent, and address fraud could result in financial loss to the Company or its clients, loss of confidence in the Company’s security measures, client dissatisfaction, litigation exposure, regulatory investigations, fines, penalties or intervention, reimbursement, or other compensatory costs (including the costs of credit monitoring services), additional compliance costs, and harm to the Company’s reputation, all of which could adversely affect the Company.Truist Financial Corporation 29
Natural disasters, pandemics, and other catastrophic events could adversely impact us.The occurrence of, or increased severity and frequency of, natural disasters, extreme weather events, health crises, disease outbreaks or pandemics, or other catastrophic events, as well as government actions or other restrictions in connection with such events, could adversely affect the Company’s financial condition or results of operations. Truist has significant operations and clients along the Gulf and Atlantic coasts as well as other regions of the U.S., which could be adversely impacted by hurricanes, wildfires, flooding, tornadoes, and other severe weather in those areas. Rising insurance costs as well as decreasing insurance provider options resulting from natural disasters, extreme weather events, and other catastrophic events could cause supply chain issues, population migration, or the weakening of economic conditions in certain regions. In addition, natural and other types of disasters, including as a result of climate change, could disrupt the Company’s operations or the ability or willingness of the Company’s clients to access the financial services offered by Truist, and could adversely impact Company borrowers’ ability to timely repay their loans and the value of any collateral held. These events could reduce the Company’s earnings and cause volatility in the Company’s financial results for any fiscal quarter or year and have an adverse effect on the Company’s business, financial condition and results of operations. Although Truist has business continuity plans and other safeguards in place, there can be no assurance that such business continuity plans will be effective.Compliance Risks
Truist is subject to extensive and evolving government regulation and supervision, which could adversely affect our business, financial condition, results of operations, and prospects.The banking and financial services industries are highly regulated. Truist is subject to supervision, regulation, and examination by regulators, including the FRB, FDIC, NCCOB, SEC, CFTC, CFPB, FINRA, MSRB, NFA, and various other federal and state regulatory agencies. The regulatory and supervisory framework applicable to banking organizations is intended primarily for the protection of depositors and other customers, the DIF, the broader economy, and the stability of the U.S. financial system, rather than for the protection of shareholders and non-deposit creditors. In addition to banking statutes, regulations, and other laws, Truist is subject to various other laws that directly or indirectly affect its business and operations, including its ability to make distributions to shareholders. Governmental agencies and self-regulatory organizations also issue policy statements, interpretive letters, guidance, and other documents and communications that similarly impact Truist. The scope, complexity, intensity, and interpretation of these laws, documents, communications, and actions can vary based on such factors as the state of the economy, the prevailing political environment, and the performance of business and operations by us and other financial institutions.
Truist is also subject to heightened requirements under the enhanced prudential standards and increased supervisory scrutiny, including, for example, single counterparty credit limits, heightened expectations with respect to governance, risk management and internal controls, and additional capital and liquidity requirements.
These compliance risks relate to a wide variety of laws, rules, and regulations varying across Truist’s lines of business, corporate functions, and jurisdictions, and include risks related to financial products and services, relationships and interactions with clients, and teammate activities. Compliance risks include those associated with anti-money laundering compliance, trading activities, market conduct, and the laws, rules, and regulations related to the offering of financial products and services. Compliance risk is also inherent in Truist’s fiduciary activities, including the failure to exercise the applicable standard of care to act in the best interest of fiduciary clients or to treat fiduciary clients fairly.
The regulation and supervision of Truist significantly affects the way that we conduct our business and operations. Laws and regulations that are applicable to us, and Truist’s inability to act in certain instances without receiving prior regulatory approval, affect Truist’s lending practices, capital structure, investment practices, dividend policy, ability to repurchase common stock, and ability to pursue strategic acquisitions, among other activities. Changes to statutes, regulations, or regulatory policies or their interpretation or implementation and the continued heightening of regulatory requirements could affect Truist in substantial and unpredictable ways. Federal and state banking regulators also possess broad powers to take supervisory actions as they deem appropriate. These supervisory actions may result in higher capital and liquidity requirements, higher deposit insurance premiums, higher compliance expenses, changes to our business or operations, and monetary penalties. These actions could also negatively impact the products and services that we offer and our ability to engage in business opportunities. The restrictions imposed by any of these actions could have an adverse effect on our operations, strategy, profitability, and reputation.
Truist has elected to be treated as an FHC, which permits us to engage in a number of financial and related activities beyond banking, including securities, advisory, and merchant banking activities. Truist and Truist Bank are subject to ongoing requirements for Truist to qualify as an FHC. If a BHC or any of its insured depository institutions were found not to be well capitalized or well managed, as defined under applicable law, the BHC can be restricted from engaging in the broader range of financial and related activities permitted for FHCs, including the ability to acquire companies engaged in those activities, and can be required to discontinue these activities or even divest any of its insured depository institutions. In addition, if an insured-depository-institution subsidiary of a BHC were to fail to achieve a satisfactory or better rating under the CRA, the ability of the BHC to expand its financial and related activities or make acquisitions could be restricted.30 Truist Financial CorporationFinancial regulators’ prudential and supervisory authority gives them broad power and discretion to direct Truist’s actions, and they have assumed an active oversight, examination, and enforcement role across the financial services industry on both the federal and state levels. Areas of focus in the recent past have been with respect to climate change, deposits, interest-rate risk management, commercial real estate, risk governance and controls, capital, liquidity, long-term debt requirements, consumer loan practices, data privacy, data protection, cybersecurity, overdraft and other fees, retention and recordkeeping of electronic communications, reimbursement for fraudulent transactions, and other compliance matters.
Truist must comply with laws and regulations relating to AML, economic sanctions, embargo programs, and anti-corruption, which can increase its risks of non-compliance and costs associated with the implementation and maintenance of complex compliance programs. These laws and regulations are designed to protect the financial system, consumers, and financial institutions from bad actors and illicit activities by requiring financial institutions to develop and implement programs designed to deter and when possible detect and prevent the use of the financial system to facilitate the funding of criminal activities. Federal law grants substantial enforcement powers to federal financial institution regulators, OFAC, and the U.S. DOJ, among other government agencies, with respect to these laws and regulations. This enforcement authority includes, among other things, the ability to: assess significant civil or criminal monetary penalties, fines, or restitution; issue cease and desist or prohibition orders; and initiate injunctive actions against financial institutions and institution-affiliated parties, including individual teammates. These enforcement actions may be initiated for violations of laws and regulations or unsafe and unsound practices. Additionally, actual or alleged misconduct by teammates, including unethical, fraudulent, improper, or illegal conduct, or unfair, deceptive, abusive, or discriminatory practices, can result in litigation, or government investigations and enforcement actions, and cause significant reputational harm to Truist, even if allegations are ultimately unsubstantiated.
The Company and other large financial institutions have become subject to increased scrutiny, more intense supervision and regulation, and more supervisory findings and actions, with increased operational and compliance costs, as well as impacts on geographic expansion and acquisitions, which may continue. The financial services industry has faced and may continue to face a stricter and more aggressive enforcement of laws at federal, state, and local levels—particularly in connection with business and other practices that may harm or appear to harm consumers or affect the financial system more broadly. Truist expects to remain subject to extensive regulation and supervision. Any potential new regulations or modifications to existing regulations would likely necessitate changes to Truist’s existing regulatory compliance and risk management infrastructure and could result in increased compliance costs.
Our regulatory and supervisory environments, whether at federal, state, or local levels, are not static. No assurance can be given that applicable statutes, regulations, and other laws will not be amended or construed differently, that new laws will not be adopted, or that any of these laws will not be enforced more aggressively, including as a result of changes to control of branches of the U.S. government. Truist could become subject to future legislation and regulatory requirements beyond those currently proposed, adopted, or contemplated in the U.S. or abroad, including limits on acquisitions, more stringent capital and liquidity requirements, policies and rulemaking related to emerging technologies, cybersecurity, and data, and climate risk management, governance, and reporting, including emissions and sustainability disclosure. In addition, concerns over climate change may prompt changes in regulations that, in turn, could have an adverse impact on asset values and the financial performance of Truist’s businesses and its clients. The cumulative effect of such legislation and regulations on Truist’s business, operations, and profitability cannot be accurately predicted. Such regulatory changes may reduce Truist’s revenues, limit the types of financial services and products it may offer, alter the investments it makes, affect the manner in which it operates its businesses, increase its litigation and regulatory costs, and increase the ability of nonbanks to offer competing financial services and products. Further, our noncompliance with applicable laws, whether as a result of changes in interpretation or enforcement, system or human errors, or otherwise and, in some cases, regardless of whether noncompliance was inadvertent, can result in the suspension or revocation of authority to conduct business operations and in the initiation of supervisory actions, enforcement proceedings, or private litigation.Truist also relies upon third parties who may expose the Company to compliance and legal risk. New or existing legal requirements also could heighten the reputational impact of perceived misuses of client data by the Company and third parties. See additional disclosures in the “Regulatory Considerations” section in Item 1 “Business.”Regulatory capital and liquidity standards and future revisions to them may negatively impact our business and financial results.
Truist is subject to regulatory capital and liquidity requirements established by the FRB and the FDIC. These regulatory capital and liquidity requirements are typically developed at an international level by the BCBS and then applied, with adjustments, in each country by the appropriate domestic regulatory bodies. Domestic regulatory agencies have the ability to apply stricter capital and liquidity standards than those developed by the BCBS. In several instances, the U.S. banking agencies have done so with respect to U.S. banking organizations.Truist Financial Corporation 31Requirements to maintain specified levels of capital and liquidity and regulatory expectations as to the quality of the Company’s capital and liquidity may prevent the Company from taking advantage of opportunities in the best interest of shareholders or force the Company to take actions contrary to their interests. For example, Truist may be limited in its ability to pay or increase dividends or otherwise return capital to shareholders. In addition, these requirements may impact the amount and type of loans the Company is able to make. Truist may be constrained in its ability to expand, either organically or through mergers and acquisitions. These requirements may cause the Company to sell or refrain from acquiring assets where the capital requirements appear inconsistent with the assets’ underlying risks. In addition, liquidity standards require the Company to maintain holdings of highly liquid investments, thereby reducing the Company’s ability to invest in less liquid assets, even if more desirable from a balance sheet return or interest rate risk management perspective. As a Category III banking organization, Truist is subject to additional capital and liquidity requirements. For example, Truist is subject to a requirement to submit capital plans to the Federal Reserve for review that include, among other things, projected dividend payments and repurchases of capital stock. As part of the capital planning and stress testing processes, our capital actions are assessed against our ability to satisfy applicable capital requirements in the event of a stressed market environment. If we fail to satisfy applicable capital requirements, including the SCB, our ability to undertake capital actions may be restricted.In addition to the regulatory capital and liquidity requirements applicable to Truist and Truist Bank, the Company’s broker-dealer subsidiaries are subject to capital requirements established by the SEC.
Regulatory capital and liquidity requirements receive periodic review and revision by the BCBS and the U.S. banking agencies. Proposed changes to applicable capital and liquidity requirements, such as the Basel III proposal and the long-term debt proposal, could result in increased expenses or cost of funding, which could negatively affect our financial results or our ability to pay dividends and engage in share repurchases. For more information concerning our legal and regulatory obligations with respect to Basel III and long-term debt requirements, please see “Regulatory Considerations” in Item 1 “Business.”
Truist is subject to risks related to originating and selling loans, including repurchase and indemnification obligations.When loans are sold or securitized, it is customary to make representations and warranties to the purchaser about the loans, including the manner in which they were originated, and to agree to repurchase the loans or indemnify the buyer in the event of a breach of the sale agreement, including a breach of these representations or warranties. An increase in the number of repurchase and indemnity demands from purchasers related to representations and warranties on sold loans could result in an increase in the amount of losses for loan repurchases. Truist also bears a risk of loss from borrower defaults for multi-family commercial mortgage loans sold to FNMA.
In addition to repurchase claims from GSEs, Truist could be subject to indemnification claims from non-GSE purchasers of the Company’s loans. Claims could be made if the loans sold fail to conform to statements about their quality, the manner in which the loans were originated and underwritten, or their compliance with state and federal law.
Additional factors affecting the extent to which we may securitize loans and receivables in the future include the overall credit quality of our loans and receivables, the costs of securitizing our loans and receivables, the demand for consumer asset-backed securities and the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally. In addition, proposals regarding reform to the U.S. housing finance market could impact our decisions regarding which loans should be securitized in the future.Truist faces risks as a servicer of loans.The Company acts as servicer for a range of assets and products, primarily for loans in securitizations and unsecuritized loans owned by investors. As servicer for loans, the Company has certain contractual obligations to the securitization trusts, investors, or other third parties, including foreclosing on defaulted loans or, to the extent consistent with the applicable securitization or other investor agreement, considering alternatives to foreclosure such as loan modifications or short sales. Generally, the Company’s servicing obligations are set by contract, for which the Company receives a contractual fee. However, GSEs can amend their servicing guidelines unilaterally for certain government guaranteed mortgages, which can increase the scope or costs of the services required without any corresponding increase in the Company’s servicing fee. Federal and state laws that impose additional servicing requirements could increase the scope and cost of the Company’s servicing obligations. As a servicer, the Company also advances expenses on behalf of investors, which it may be unable to collect.
32 Truist Financial Corporation
A material breach of the Company’s obligations as servicer may result in contract termination if the breach is not cured within a specified period of time following notice, causing the Company to lose servicing income. In addition, the Company may be required to indemnify the securitization trustee or other holder of the loan against losses from any failure by the Company, as a servicer, to perform the Company’s servicing obligations or any act or omission on the Company’s part that involves willful misfeasance, bad faith, or gross negligence. For certain investors and certain transactions, Truist may be contractually obligated to repurchase a loan or reimburse the investor for credit losses incurred on the loan as a remedy for servicing errors with respect to the loan. The Company may be subject to increased repurchase or indemnity obligations as a result of claims made that the Company did not satisfy its obligations as a servicer. The Company may also experience increased loss severity on repurchases, which may require a material increase to the Company’s repurchase reserve. While the number of such indemnification claims has been small, these could increase in the future.Truist faces substantial risks in safeguarding personal and other sensitive information.
Truist’s businesses are subject to complex and evolving laws, rules, and regulations governing data privacy, data protection, and cybersecurity, particularly with respect to the privacy and protection of personal information of individuals. Individuals whose personal information may be protected by law can include the Company’s clients (and in some cases its clients’ clients), prospective clients, job applicants, teammates, and the employees of the Company’s vendors, and other third parties. Complying with the laws, rules, and regulations applicable to the Company’s disclosure, collection, use, sharing, storage, and other processing of personal information can increase operating costs, impact the development of new products or services, and reduce operational efficiency. Any mishandling or misuse of personal information by the Company or a third-party affiliated with the Company could expose the Company to litigation or regulatory fines, penalties, or other sanctions.Additional risks could arise from the failure of the Company or third parties to provide adequate disclosure or transparency to the Company’s clients about the personal information collected from them and the use of such information; to receive, document, and honor the privacy preferences expressed by the Company’s clients; to protect personal information from unauthorized disclosure; or to maintain training on data privacy, data protection, or cybersecurity practices for all teammates or third parties who have access to personal information. Concerns regarding the effectiveness of Truist’s measures to safeguard personal information, or even the perception that those measures are inadequate, could cause Truist to lose existing or potential clients, and thereby reduce Truist’s revenues. Furthermore, any failure or perceived failure by the Company to comply with applicable data privacy, data protection, or cybersecurity laws, rules, or regulations may subject it to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices, significant liabilities or regulatory fines, penalties, or other sanctions. Any of these could damage Truist’s reputation and otherwise adversely affect its businesses.
In recent years, well-publicized incidents involving the inappropriate disclosure, collection, use, sharing, storage, and other processing of personal information have led to expanded governmental scrutiny of practices relating to the safeguarding of personal information by companies. That scrutiny has in some cases resulted in, and could in the future lead to, the adoption of stricter laws, rules, and regulations relating to the disclosure, collection, use, sharing, storage, and other processing of personal information. Truist will likely be subject to new and evolving data privacy, data protection, and cybersecurity laws, rules, and regulations in the U.S. and abroad, which could result in additional costs of compliance, litigation, regulatory fines, and enforcement actions. These types of laws, rules, and regulations could prohibit or significantly restrict financial services firms such as Truist from sharing information among affiliates or with third parties such as vendors, and thereby increase compliance costs, or could restrict Truist’s use of personal information when developing or offering products or services to clients. These restrictions could also inhibit Truist’s development or marketing of certain products or services or increase the costs of offering them to clients.For more information concerning our legal and regulatory obligations with respect to data privacy, data protection, and cybersecurity, please see “Privacy, Data Protection, and Cybersecurity” in Item 1 “Business.”
Differences in regulation and supervision can affect the Company’s ability to compete effectively.
The content and application of laws and regulations affecting financial services firms sometimes vary according to factors such as the size of the firm, the jurisdiction in which it is organized or operates, and other criteria. Large institutions, such as the Company, often are subject to more stringent regulatory requirements and supervision than smaller institutions. In addition, financial technology companies and other non-traditional competitors may not be subject to banking regulation or may be supervised by a national or state regulatory agency that does not have the same regulatory priorities or supervisory requirements as the Company’s regulators. These differences in regulation can impair the Company’s ability to compete effectively with competitors that are less regulated and do not have similar compliance costs.Truist Financial Corporation 33Regulatory and Legal RisksThe Company may incur damages, fines, penalties, and other negative consequences from past, current, or future supervisory actions and regulatory or other legal violations, including inadvertent or unintentional violations.
Truist maintains systems and procedures designed to support its compliance with applicable laws and regulations, but there can be no assurance that these will be effective. In addition to fines and penalties, the Company may suffer other negative consequences from supervisory actions and regulatory violations, including restrictions on certain activities and damage to the Company’s reputation, which in turn might adversely affect the Company’s business and results of operations.
Federal and state law grants substantial enforcement and supervisory powers to federal and state banking regulators and law enforcement agencies if the regulated entities fail to comply with applicable laws or to maintain a risk and control environment that meets the standards and expectations of the regulators. This enforcement and supervisory authority includes, among other things, the ability to assess significant civil or criminal monetary penalties, fines, or restitution; to issue cease and desist or removal orders; to issue formal and informal enforcement orders; and to initiate injunctive actions against banking organizations and institution-affiliated parties. These enforcement and supervisory actions may be initiated for violations of laws and regulations or unsafe and unsound practices. In addition, governmental authorities have, at times, sought criminal penalties against companies in the financial services sector for violations, and, at times, have required an admission of wrongdoing, criminal pleas or other extraordinary terms from financial institutions in connection with resolving such matters. Criminal convictions or criminal pleas or admissions of wrongdoing in a settlement with the government can lead to greater exposure in civil litigation, reputational harm, and other significant collateral consequences, such as restrictions on engaging in new activities or acquisitions, loss of clients, restrictions on the ability to access the capital markets, and the inability to operate certain businesses or offer certain products for a period of time.
The Company could become subject to a significant regulatory investigation or supervisory action and be unable to disclose specific information concerning it to the public if such a disclosure would violate the Company’s obligations under applicable rules and regulations to maintain the confidentiality of confidential supervisory information. Regulatory investigations, examinations or other initiatives by governmental authorities may subject the Company to litigation, settlements, fines, penalties or other sanctions, and may require the Company to engage in remediation, provide restitution to customers or to restructure its operations and activities or to cease offering certain products or services. Any of these potential outcomes could harm the Company’s business, results of operations, financial condition, prospects or reputation or could result in collateral or ancillary consequences. In addition, our exposure to legal and regulatory matters can be unpredictable and could, in some cases, exceed the Company’s accruals for those matters.Pending or threatened legal proceedings and other matters may adversely affect the Company’s business, financial condition, results of operations, and reputation.In the ordinary course of its business, the Company is subject to lawsuits, claims, and formal and informal enforcement activity, including regulatory investigations, either directly or indirectly through our ownership interests in other entities. The volume of legal proceedings against participants in the financial services industry, including the Company, is substantial, and enforcement actions by regulatory authorities are becoming more common in the current regulatory environment. Legal proceedings against financial services firms may increase depending on factors such as market downturns, changes in law, and increased regulatory scrutiny.
Heightened regulatory scrutiny or the results of an investigation or examination may lead to additional regulatory investigations or enforcement actions. Those actions could result in regulatory settlements or other enforcement actions against Truist. Furthermore, a single event involving a potential violation of law or regulation may give rise to numerous and overlapping investigations and proceedings by multiple federal and state agencies and officials. In addition, if one or more financial institutions are found to have violated a law or regulation relating to certain business activities, this could lead to investigations by regulators or other governmental agencies of the same or similar activities by other financial institutions, including Truist, and large fines and remedial measures that may have been imposed in resolving earlier investigations for the same or similar activities at other financial institutions may be used as the basis for future settlements.
Truist can also be subject to lawsuits, claims, and enforcement activity indirectly through its ownership of interests in other entities. These other entities can themselves be subject to government regulation, supervision, and examination, and their failure to comply with applicable laws, rules, regulations, or regulatory requirements or expectations could have negative consequences for Truist, including a decrease in the value of Truist’s investment in the other entity, damage to Truist’s reputation from being an owner or otherwise associated with the other entity, or a requirement for Truist and the other owners to contribute funds to pay for judgments, settlements, fines, or client redress arising from the lawsuits, claims, or enforcement activity. Failure by another entity in which Truist has an ownership stake to comply with applicable laws, rules, regulations, or regulatory requirements or expectations could also lead to lawsuits, claims, or enforcement activity directly against the owners of the other entity, including Truist.
34 Truist Financial Corporation
Claims and legal actions, including class action lawsuits and enforcement proceedings, could involve large monetary amounts, significant defense costs, and result in settlements, judgments, or orders that include penalties, fines, injunctions, or other forms of relief that are adverse to the Company. Responding to inquiries, investigations, lawsuits, and other proceedings is time-consuming and expensive and can divert senior management attention from Truist’s business.
The outcome of any such legal proceedings, as well as the timing of any ultimate resolutions, may be difficult to predict or estimate. Actual legal and other costs arising from claims and legal actions may be greater than the Company’s accruals. Further, the Company may not have accruals for all legal proceedings where we face a risk of significant loss. The ultimate resolution of a pending legal proceeding or significant regulatory or government action against the Company could adversely affect the Company’s results of operations and financial condition or cause significant reputational harm, which may adversely impact the Company’s business prospects. Further, the Company may be exposed to substantial uninsured liabilities, which could adversely affect the Company’s results of operations and financial condition. Refer to the Legal Proceedings and Other Matters section in “Note 16. Commitments and Contingencies” for additional information.Strategic Risks
Ineffective execution of strategic initiatives could adversely affect investor sentiment and our business and financial results.There is no guarantee that our strategic initiatives, including initiatives to drive focused growth, achieve operational excellence and efficiency, and leverage modern and scalable technology, will be successful and improve profitability or allow us to return capital to shareholders. Our execution of strategic initiatives may be impacted by internal factors, such as maintaining a level of earnings appropriate to support growth objectives, the ability to maintain dividends in various economic cycles, or the successful delivery of innovation and technology strategies. In addition, our execution of our strategies may be impacted by our response to external factors, including geopolitical, macroeconomic, social, cultural, competitive, and regulatory factors. To the extent we are impeded or unable to execute effective strategic initiatives, our prospects for growth, earnings, capital levels, and stock price, as well as stakeholder confidence in Truist, could be adversely affected.Competition may reduce Truist’s client base or cause Truist to modify the pricing or other terms for products and services, which could have an adverse impact on our business and financial results.Truist operates in a highly competitive industry that could become even more competitive with growth in areas such as digital financial service providers and other nonbank platforms. Increased competition could arise from technological advancements, legislative and regulatory changes, as well as competition from other financial services companies, some of which may be subject to less extensive regulation than Truist. The Company’s success depends, in part, on the Company’s ability to adapt its offering of products and services to evolving industry standards and client expectations. The widespread adoption of new technologies has required and will continue to require substantial investments to modify existing products and services or to develop new products and services. In addition, there is increasing pressure to provide products and services at lower prices further reducing contribution margins. The Company may not be successful in introducing new products and services in response to industry trends or developments in technology or those new products may not achieve market acceptance.
Truist also competes with nonbank companies and, in some cases, with companies other than those traditionally considered financial sector participants. In particular, technology companies are increasingly focusing on the financial sector, either in partnership with competitor banking organizations or on their own. These companies generally are not subject to the same regulatory oversight as main street financial institutions and may accordingly realize certain cost strategies and offer products and services at more favorable rates and with greater convenience to the client. This competition could result in the loss of clients and revenue in areas where fintechs are operating. As the pace of technology and change advance, continuous innovation is expected to exert long-term pressure on the financial services industry.
The adoption of new technologies by competitors, including internet banking services, mobile applications, advanced ATM functionality, AI, and cryptocurrencies, could require the Company to make substantial investments to modify or adapt the Company’s existing products and services or even radically alter the way Truist conducts business. These and other capital investments in the Company’s business may not produce expected growth in earnings anticipated at the time of the expenditure.
Truist Financial Corporation 35Acquisitions, mergers, and divestitures introduce a broad range of anticipated and unanticipated risks, including unforeseen or negative consequences from supervisory or regulatory action that may limit Truist’s ability to pursue and complete them.
We may from time to time seek to acquire other financial-services companies or businesses. Acquisitions involve numerous risks and uncertainties, including inaccurate financial and operational assumptions, incomplete or failed due diligence, lower than expected performance, higher than expected costs, difficulties related to integration, diversion of management’s attention from other business activities, adverse market or other reactions, changes in relationships with clients or counterparties, the potential loss of key personnel, and the possibility of litigation and other disputes. An acquisition also could be dilutive to our existing shareholders if we were to issue common stock to fully or partially pay or fund the purchase price. We, moreover, may not be successful in identifying appropriate acquisition candidates, integrating acquired companies or businesses, or realizing expected value from acquisitions. There is significant competition for valuable acquisition targets, and we may not be able to acquire other companies or businesses on attractive terms. No assurance can be given that we will pursue future acquisitions, and our ability to grow and successfully compete may be impaired if we choose not to pursue or are unable to successfully make acquisitions.The Company must satisfy a number of meaningful conditions before completing an acquisition of another bank or BHC, including federal and state regulatory approvals. In determining whether to approve a proposed bank or BHC acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition; financial condition and future prospects, including current and projected capital ratios and levels; the competence, experience, and integrity of management; the supervisory relationship; record of compliance with laws and regulations; the convenience and needs of the communities to be served, including the acquiring institution’s record of compliance under the CRA; the effectiveness of the acquiring institution in combating money laundering activities; and public comments. In addition, U.S. regulators must take systemic risk to the U.S. financial system into account when evaluating whether to approve a potential acquisition transaction involving a large financial institution like Truist. There is no certainty as to when or if or on what terms and conditions, any required regulatory approvals will be granted for any potential acquisition. In specific cases, Truist may be required to divest certain operations, including branches, or take other actions as a condition to receiving regulatory approval. An inability to satisfy other conditions necessary to consummate an acquisition transaction, such as third-party litigation, a judicial order blocking the transaction, or lack of shareholder approval, could also prevent the Company from completing an announced acquisition.
In addition, we may decide to divest certain businesses or assets. Divestitures of businesses involve a number of risks, including significant costs and expenses, and any divestiture we undertake could adversely affect our business, financial condition, results of operations, and cash flows. Divestitures may involve significant uncertainty and execution complexity, which may cause us not to achieve our strategic objectives, realize expected cost savings, or obtain other benefits from the divestiture. The significant risks and uncertainties involved in divestitures may include:• the inability to sell such businesses or assets on satisfactory price and terms and in a timely manner, including potentially long and costly sales processes and unsuccessful attempts by a buyer to receive required regulatory approvals, satisfy other conditions to closing, or obtain equity or debt financing in order to satisfy its payment obligations related to the transaction,
• disruption to other parts of our business and distraction of management,
• loss of key teammates or clients,
• exposure to contingencies, including, among other things, those arising from representations and warranties made to a buyer regarding the businesses being sold, or
• ongoing obligations to support the businesses following such divestitures, including through transition services arrangements, and other adverse financial impacts.
Whether such divestitures are completed or not, their pendency could have a number of negative effects on our current business, including potentially disrupting our regular operations and diverting the attention of our workforce and management team. It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate our business. In the event of a termination of a divestiture transaction before it is consummated, the payment of a termination fee may not fully compensate us for our losses.
Truist has businesses other than banking that are subject to a variety of risks.Truist is a diversified financial services company. This diversity subjects the Company’s earnings to a broader variety of risks and uncertainties. Other businesses in addition to banking that the Company operates include investment banking, securities underwriting and market making, loan syndications, investment management and advice, and retail and wholesale brokerage services offered through the Company’s subsidiaries. These businesses entail significant market, operational, credit, compliance, technology, legal, and other risks that could adversely impact the Company’s results of operations.
36 Truist Financial CorporationReputational Risks
Negative public opinion, whether real or perceived, or our failure to successfully manage it could damage the Company’s reputation and adversely impact our business, financial condition, results of operations, and prospects.Truist’s earnings, capital, and stock price are subject to risks associated with negative public opinion. Negative public opinion could result from the Company’s actual or alleged conduct in any number of activities, including lending, sales, training, quality assurance, client complaint resolution, and other operating practices, incentive compensation design and governance, corporate governance, acquisitions, a data breach of client or teammate information, or the failure of any product or service sold to meet clients’ expectations or applicable regulatory requirements. There can be no assurance that the Company’s processes and actions will meet regulatory or other stakeholders’ standards or expectations. Findings from self-identified or regulatory reviews require responsive actions, which may include increased investments in compliance systems and teammates or the payment of fines, penalties, increased regulatory assessments, or client redress and may increase legal or reputational risk exposures. In addition, the public perception that a cyberattack on the Company’s systems has been successful, whether or not this perception is correct, may damage the Company’s reputation with clients and third parties with whom the Company does business. Any cybersecurity breaches, attacks, and other similar incidents, including the compromise of personal information, could significantly harm Truist’s reputation, which could adversely affect the Company’s financial condition and results of operation.
Negative public opinion could also result from heightened and differing stakeholder expectations regarding environmental and social considerations that may affect Truist and clients of Truist. The proliferation of social media may increase the likelihood that negative public opinion from any of the real or perceived events discussed above could impact our reputation and business. Negative public opinion could adversely affect the Company’s ability to attract and retain clients and teammates and can result in litigation and regulatory actions. Actual or alleged conduct by one of the Company’s businesses can result in negative public opinion about the Company’s other businesses. Actual or alleged conduct by another financial services company can result in negative public opinion about the financial services industry in general and, as a result, adversely affect Truist.Our efforts to identify, measure and monitor reputational risk and communicate, internally and externally, such risks to key stakeholders, may be ineffective, untimely, or otherwise result in adverse effects on the Company.Talent Management RisksWe could be harmed by an inability to attract, develop, retain, and motivate qualified teammates while effectively managing recruiting and compensation costs amid highly competitive and rapidly changing market conditions.The Company’s success depends, to a large degree, upon the continued services of executive officers and other key teammates who have extensive experience and expertise in the industry, and the Company’s ability to attract, develop, and retain high performing, and well-qualified teammates. The Company faces significant competition in the recruitment of highly motivated teammates who can deliver Truist’s purpose, mission, and values. Changes in teammate preferences for work environments, in particular the desire of teammates to work remotely for many or all of their hours, may impact our ability to attract and retain qualified teammates. The Company’s business or its ability to execute its business strategy and provide high quality service may suffer: due to the loss of key or highly-skilled teammates or a failure to successfully transition key roles; if the Company is unable to recruit, develop, or retain a sufficient number of qualified teammates; or if the costs of teammate compensation or benefits increase substantially. The U.S. banking agencies have jointly issued comprehensive guidance to support incentive compensation policies and practices that do not undermine the safety and soundness of banking organizations by encouraging teammates to take imprudent risks. This guidance significantly affects the amount, form, and context of incentive compensation that may be provided to teammates and could negatively affect Truist’s ability to compete for talent relative to non-banking companies.
Truist Financial Corporation 37
The Company’s operations rely on its ability, and the ability of key external parties, to maintain appropriately staffed workforces and on the competence, trustworthiness, health, and safety of teammates.
Truist’s ability to operate its businesses efficiently and profitably, to offer products and services that meet the expectations of its clients, and to maintain an effective risk management framework is highly dependent on its ability to staff its operations appropriately and on the competence, integrity, health, and safety of its teammates. Truist is similarly dependent on the workforces of other parties on which its operations rely, including vendors and other service providers. Truist’s businesses could be adversely affected by the ineffective implementation of business decisions; any failure to institute controls that appropriately address risks associated with business activities, or to appropriately train teammates with respect to those risks and controls; or staffing shortages, particularly in tight labor markets. Changes in law or regulation in jurisdictions in which our operations are located that affect teammates may also adversely affect our ability to hire, develop, and retain qualified teammates in those jurisdictions. In addition, the Company’s business could be adversely impacted by a significant operational breakdown or failure, theft, fraud, or other unlawful conduct, or other negative outcomes caused by human error or misconduct by a teammate of Truist or a teammate of another party on which Truist’s operations depend. Truist’s operations could also be impaired if the measures taken by it or by governmental authorities to support the health and safety of its teammates are ineffective, or if any external party on which Truist relies fails to take appropriate and effective actions to protect the health and safety of its teammates.Risks Related to Estimates and Assumptions
Our business and operations make extensive use of models, and we could be adversely affected if our design, implementation, or use of models is flawed.
Truist relies on models to measure risks, estimate certain financial values, and inform certain business decisions. Models may be used in such processes as determining the pricing of various products, grading loans and extending credit, measuring interest rate and other market risks, predicting or estimating losses, assessing capital adequacy and calculating economic and regulatory capital levels, as well as estimating the value of financial instruments and balance sheet items.Poorly designed, implemented, or incorrectly used models present the risk that certain Truist business decisions may be adversely affected by inappropriate model output. In addition, models based on historical data may degrade over time due to limited historical patterns, extreme or unanticipated market movements, or client behavior and liquidity, especially during severe market downturns or stress events (e.g., geopolitical or pandemic events). Also, information Truist provides to the public or to its regulators based on poorly designed, implemented, or incorrectly used models could be inaccurate or misleading. Certain decisions that the regulators make, including those related to capital distributions to Truist’s shareholders, could be adversely affected due to the perception of insufficient model quality or incorrect model use.We use estimates and assumptions in determining the value or amount of many of our assets and liabilities, and our business, financial condition, results of operations, and prospects could be adversely affected if these prove to be incorrect.
Accounting policies and processes are fundamental to how the Company records and reports its financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the value of the Company’s assets or liabilities and financial results. Several of the Company’s accounting policies are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If assumptions or estimates underlying the Company’s financial statements are incorrect or are adjusted periodically, the Company may experience material losses.Management has identified certain accounting policies as being critical because they require management’s judgment to ascertain the valuations of assets, liabilities, commitments, and contingencies. A variety of factors could affect the realization of income and expense or the recognition of assets and liabilities in the Company’s financial statements. Truist has established policies and procedures that are intended to provide for these critical accounting estimates and judgments to be well controlled and applied consistently. In addition, the policies and procedures are intended to establish a process for changing methodologies in an appropriate manner. Due to the uncertainty surrounding the Company’s judgments and the estimates pertaining to these matters, the Company cannot guarantee that adjustments to accounting policies or restatement of prior period financial statements will not be required.
Further, from time to time, the FASB and SEC adopt new accounting standards or change existing financial accounting and reporting standards that govern the preparation of the Company’s financial statements. In addition, accounting standard setters and those who interpret the accounting standards may change or even reverse their previous interpretations or positions on how these standards should be applied. Changes in financial accounting and reporting standards and changes in current interpretations may be beyond the Company’s control, can be hard to predict and could materially affect how the Company reports its financial results and condition. In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.
38 Truist Financial CorporationDepressed market values for the Company’s stock and adverse economic conditions sustained over a period of time may require the Company to write down all or some portion of the Company’s goodwill.Goodwill is periodically tested for impairment by comparing the fair value of each reporting unit to its carrying amount. If the fair value is greater than the carrying amount, then the reporting unit’s goodwill is deemed not to be impaired. The fair value of a reporting unit is impacted by the reporting unit’s expected financial performance and susceptibility to adverse economic, regulatory, and legislative changes. Based on the Company’s annual impairment test of goodwill as of October 1, 2023, the Company incurred a $6.1 billion non-cash, non-tax deductible goodwill impairment charge for the year ended December 31, 2023 based on the carrying values of certain reporting units being in excess of their respective fair values. Future adverse changes in economic conditions or expected financial performance, a sustained decrease in Truist’s stock price, a decline in industry peer multiples, an increase in the applicable discount rate, or a deterioration in a reporting unit’s forecast may cause the fair value of a reporting unit to be below its carrying amount, resulting in an additional goodwill impairment charge. The estimated fair values of the individual reporting units are assessed for reasonableness by reviewing a variety of indicators, including comparing these estimated fair values to the Company’s market capitalization over a reasonable period of time. While this comparison provides some relative market information about the estimated fair value of the reporting units, it is not determinative and needs to be evaluated in the context of the current economic environment. However, significant and sustained declines in the Company’s market capitalization could be an indication of potential goodwill impairment. Refer to the “Critical Accounting Policies” section for additional details related to the Company’s intangible assets and goodwill.Operational RisksTruist relies extensively on third parties to provide key components of the Company’s business infrastructure, and their failure to perform to our standards or our failure to appropriately assess and manage these relationships could adversely affect us.
Third parties provide key components of the Company’s business infrastructure and while we have implemented a supplier risk management program, we do not control third-party service providers, their actions, or their businesses. No assurance can be provided that third-party service providers will perform to our standards, adequately represent our brand, comply with applicable law, appropriately manage their own risks, including cybersecurity, remain financially or operationally viable, abide by their contractual obligations, or continue to provide us with the services that we require.
Our use of third-party service providers exposes us to the risk that such third parties may not comply with their servicing and other contractual obligations and to the risk that we may not satisfy applicable regulatory responsibilities regarding the management and oversight of third parties. We may need to incur substantial expenses to address risks or issues with a service provider, and if such risks or issues cannot be acceptably resolved, we may not be able to timely or effectively replace the service provider due to contractual restrictions, the unavailability of acceptable alternative providers, or other reasons. In addition, a failure to appropriately assess and manage our relationships with third parties, especially those involving significant banking functions, shared services, or other critical activities, could adversely affect Truist by resulting in potential harm to clients, and any liability associated with that harm; supervisory actions, regulatory fines, penalties or other sanctions; lower revenues, and the opportunity cost from lost revenues; increased operational costs; or harm to Truist’s reputation.
The Company is not insured against all types of losses as a result of third-party-related failures, and the insurance coverage that does exist may be inadequate to protect the Company from all losses resulting from system failures or other disruptions. Failures in the Company’s business infrastructure could interrupt its operations or increase the costs of doing business.
The Company’s risk management framework may fail to identify and manage the risks that we face.
Truist has policies, processes, and procedures intended to identify, measure, monitor, report, and analyze the types of risk to which the Company is subject, including liquidity, credit, market, operational, technology, reputational, strategic, and compliance risk, among others. Notwithstanding such risk management framework, however, we cannot guarantee that we adequately or effectively identify and manage the risks in our business and operations currently, or that we will adequately or effectively identify and manage such risks in the future. For example, some of the Company’s methods of identifying and managing risk are based upon the Company’s use of observed historical market behavior and management’s judgment. These methods may not accurately predict future exposures, which could be significantly greater than historical measures indicate. Moreover, as the risks that we face continue to evolve, despite our ongoing efforts to improve the design and implementation of our risk-management framework, those efforts may not be adequate or effective. If the Company’s risk management framework fails to identify and manage the risks that we face, we could suffer unexpected losses and our financial condition and results of operations could be materially and adversely affected.
Truist Financial Corporation 39
In deciding whether to extend credit or enter into other transactions with clients and counterparties, Truist depends on the accuracy and completeness of information about clients and counterparties, and Truist could be negatively impacted if the information is not accurate or complete.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, Truist relies on the completeness and accuracy of representations made by and information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. If the information provided is not accurate or complete, the Company’s decisions about extending credit or entering into other transactions with clients or counterparties could be adversely affected, and the Company could suffer defaults, credit losses, or other negative consequences as a result.Truist can be negatively affected if it fails to identify and address operational risks associated with the introduction of or changes to products, services, and delivery platforms.When Truist launches a new product or service, introduces a new platform for the delivery or distribution of products or services (including mobile connectivity, electronic trading and cloud computing), acquires or invests in a business or makes changes to an existing product, service or delivery platform, it may not fully appreciate or identify new operational risks that may arise from those changes, or may fail to implement adequate controls to mitigate the risks associated with those changes. Any significant failure in this regard could diminish Truist’s ability to operate one or more of its businesses or result in potential liability to clients and counterparties, and result in increased operating expenses. The Company could also experience higher litigation costs, including regulatory fines, penalties and other sanctions, reputational damage, impairment of Truist’s liquidity, regulatory intervention, or weaker competitive standing. Any of the foregoing consequences could adversely affect Truist’s businesses and results of operations.
40 Truist Financial CorporationITEM 1C. CYBERSECURITYThe following is a discussion of Truist’s cybersecurity risk management strategy and governance. Refer to the “Risk Management” section of Part II, Item 7 for additional discussion.
Cybersecurity risk management and strategy
Like other financial services firms, Truist faces an increasingly complex and evolving cybersecurity threat environment. See Item 1A, “Risk Factors” for information on risks from cybersecurity threats. We maintain a risk-based cybersecurity framework that is part of our ERM Framework. It is implemented through people, processes, and technology, whereby we assess, identify, and manage material risks from cybersecurity threats, and seek to adapt our risk mitigation activities accordingly.
Foundationally, our cybersecurity framework is based upon the National Institute of Standards and Technology for Improving Critical Infrastructure Cybersecurity and is also designed to incorporate elements from additional industry standards, such as those of the Federal Financial Institutions Examination Council, to better suit the Company’s cyber risk profile. In addition, our cybersecurity framework incorporates internal and third-party capabilities that drive the development and implementation of our data security strategy, which is designed to reduce cybersecurity risk while enabling Truist’s corporate business objectives.
Processes for assessing, identifying, and managing material risks from cybersecurity threats
We maintain an Information Security Program that specifies how we execute our cybersecurity framework. The Information Security Program is designed to assess, identify, and manage risks arising from the cybersecurity threats facing Truist. Truist maintains cybersecurity and information security policies, procedures, and technologies that are intended to protect our clients’, teammates’ and our own data against unauthorized disclosure, modification, and misuse. These policies, procedures, and technologies cover a broad range of areas, including identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning.
For example, to further mitigate the risks presented by an evolving cyber threat landscape, Truist:
• provides data protection guidance to clients;
• promotes data protection awareness and accountability through mandatory teammate training; and
• conducts scenario-driven test exercises simulating impacts and consequences developed through analysis of real-world incidents as well as known and anticipated cyber threats. These exercises are designed to assess the viability of Truist’s crisis response and management programs and provide the basis for improvement.
In addition, as a key part of the Company’s Information Security Program, Truist participates in the federally recognized Financial Services Information Sharing and Analysis Center, as well as other industry organizations and initiatives that promote industry best practices, such as harmonized cybersecurity standards, cyber readiness, and secure consumer financial data sharing.
Our Cyber Incident Response Team is responsible for identifying, triaging, and containing cybersecurity threats and incidents, including, to the extent possible, those experienced by third-party service providers. Incidents with potential for higher impacts are routed to an enterprise response function that coordinates the response activities across impacted resource groups and business stakeholders. Through this structure, Truist manages its cyber, business, and legal obligations, including escalation to executive management and the Board, as appropriate, client and regulatory notifications, and remediation activities.
Our Information Security Program is also designed to help oversee, identify, and mitigate cybersecurity risks associated with our use of third-party service providers. Following an initial assessment of the level of enterprise risk potentially posed by use of the third party, the service provider is then subject to further risk-based assessments on its operational resilience and cybersecurity practices, including disaster recovery and business continuity plans that specify the time frame to resume activities and recover data. In its agreements with third-party service providers, Truist requires service providers to adhere to Truist’s relevant cybersecurity and operational resilience standards, subject to certain exceptions that are managed on a case-by-case basis.
Our Information Security Program is assessed periodically to test the effectiveness of key controls through cybersecurity maturity measurements, technology risk oversight, compliance risk management testing and monitoring, internal audit review, and regulatory oversight.
In addition, Truist maintains disaster recovery plans that are reviewed, modified, and approved annually.
Truist Financial Corporation 41
Management’s role in assessing and managing material risks from cybersecurity threats
Truist’s Information Security Program is operated and maintained by management, including the CIO, interim CISO, and CRO. These senior officers are responsible for assessing and managing Truist’s cybersecurity risks. Our Information Security Program also includes processes for escalating and considering the materiality of incidents that impact Truist, including escalation to executive management and the Board, which are periodically tested through tabletop exercises to assess Truist’s preparedness. Our cybersecurity framework strategy, which is overseen by the interim CISO, is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing.
In addition, various management committees assess and manage Truist’s cybersecurity risks. These committees promote visibility and awareness of cybersecurity risks and drive action and escalation as needed. The primary management committees involved in Truist’s Information Security Program are the Enterprise Technology Risk Committee and the Technology Risk Oversight Committee, each of which is a sub-committee of the ERC. Truist’s cybersecurity teams that implement the Information Security Program and the risk partners who oversee the program leverage these committees to report on and escalate current or emerging cybersecurity risks or other changes in the business environment which could affect Truist’s risk profile or control environment.
As discussed in more detail in the “Risk Management” section of Part II, Item 7, the ERC is a cross-functional executive forum to promote awareness and dialogue on risk matters across the enterprise, including cybersecurity risks, oversee the execution of risk program requirements and sound risk management activities, and enact delegated decision-making authority and oversight routines from the BRC. Our CRO and CIO are members of the ERC. The interim CISO provides updates at every ERC meeting on cybersecurity and information security risk.
The Enterprise Technology Risk Committee provides business unit oversight of key management activities, including the Company’s Information Security Program. The Technology Risk Oversight Committee provides oversight of key risk management activities to identify, assess, monitor, mitigate, and report on technology (including core technology, data and cybersecurity) risk across the enterprise. These sub-committees serve as governing forums for monitoring and escalating significant cybersecurity as well as other technology risk matters to the ERC.
The members of management that lead our Information Security Program and strategy have extensive experience in technology, cybersecurity, and information security. Our CRO previously served as our interim CIO and has more than 20 years of banking experience spanning a variety of roles in both the commercial and consumer segments, including credit risk, portfolio risk management, model management, acquisition integrations, technology, and vertically integrated operations for revenue producing businesses, including leading operational services across Truist for deposits, payments, credit card, capital markets, consumer and wholesale lending, fraud, and care centers across all products. Our CIO has over 25 years of experience leading technology teams at financial institutions, including in the areas of application development, infrastructure, information technology strategy, risk management, and information security. Following the departure of our CISO in November 2024, the CIO is serving as our interim CISO while our search for a permanent CISO continues. The CIO’s direct reports have on average over 20 years of experience with technology management and information security at financial institutions, including in the areas of governance, operations, application and data protection, access management, and business information security.
Board of Directors’ oversight of risks from cybersecurity threats
Our Board has primary responsibility for the oversight of our enterprise risk management and exercises its oversight function in respect of cybersecurity risk through the BRC. The BRC is responsible for overseeing Truist’s risk management function, including approving and reviewing Truist’s risk management framework and policies, and overseeing management’s implementation of such framework and policies. The oversight responsibility of our Board and the BRC is facilitated through management-reporting processes designed to provide visibility to the Board on cybersecurity matters. For example, members of the BRC receive regular reports from our CRO and interim CISO related to information technology and cybersecurity risks to Truist. The BRC meets periodically with risk management advisors and discusses with executive management any cybersecurity recommendations received. Management also discusses urgent cybersecurity developments with the Chairs of the BRC and BTC between Board and committee meetings, as appropriate. The Board annually reviews and approves our Information Security Program and Information Security Policy. Additionally, the BTC provides oversight of Truist’s technology strategy, including elements of it that involve cybersecurity.
Truist provides ongoing development and education to its directors with respect to cybersecurity, including presentations at Board meetings on special topics, such as updates on cybersecurity legislation and regulation. The Board also conducts a cybersecurity tabletop exercise at least every other year to simulate Truist’s analysis and response to hypothetical cybersecurity incidents. In addition, Truist provides directors with a Board Cybersecurity Handbook that provides details on key Truist practices, resources, and protocols relating to cybersecurity protection, response, and preparedness. Finally, as required by the Gramm-Leach-Bliley Act, the Board receives an update at least annually on Truist’s Information Security Program.
42 Truist Financial Corporation
Item 7 · Management's Discussion & Analysis
+748 paragraphs −696 paragraphs ~696 changed
FY 2023-12-31 (earlier)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSMD&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-K, and other information contained in this document. For discussion of 2022 results as compared to 2021 results, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2022.A description of certain factors that may affect our future results and risk factors is set forth in Part I, Item 1A-Risk Factors of this report.
Executive OverviewUnderlying results were positive for 2023 despite economic uncertainty stemming from bank failures in the first half of 2023. Truist withstood the market stress by leaning on its strong core deposit base, ample liquidity, and diverse revenue streams across multiple businesses. Results for 2023 included several discrete items, including a non-cash goodwill impairment charge that has no impact on our regulatory capital ratios, liquidity, ability to pay the common dividend, or service our clients.
We grew the number of new consumer and business checking accounts, experienced another strong year of growth in our insurance business, gained share in capital markets, and deepened our relationships with clients through Integrated Relationship Management, Business Lifecycle Advisory, and digital channels.
We also committed nearly $2.1 billion to support more than 15,000 units of affordable housing through Truist Community Capital, which helped create more than 15,000 jobs, and serve more than 130,000 people in low- and moderate-income communities in 2023. Teammates impacted 5,300 organizations and causes through their charitable giving and more than 62,000 hours of volunteer service. In addition, we started a Small Business Community Heroes initiative which empowers our branch teammates to proactively connect via caring conversations with small business owners who work tirelessly to serve our neighbors, create jobs, build our communities, and help drive our economy.
In addition, we unveiled an organizational simplification and cost savings plan in September 2023 aimed at limiting expenses in 2024 and beyond and simplifying our organization to gain efficiencies that will improve the client experience. Our transformation is centered on improving efficiency as an organization and realigning certain aspects of our leadership and operating model within our operating segments to increase efficiency and drive revenue opportunities. We made strong progress on our plan in the second half of 2023 as evidenced by a reduction in our headcount and the consolidation of several key business lines.
We accomplished all of this in 2023, while also strengthening our balance sheet. We added 110 basis points of CET1 to finish the year with a CET1 ratio of 10.1% through a combination of organic capital generation and the minority stake sale in our insurance business, partially offset by the CECL phase in. Although we are committed to building capital, our balance sheet remains open to core clients as our primary capital priorities are supporting the financial needs of new and existing clients and the payment of our common dividend. Asset quality continues to normalize, but remains in-line relative to our expectations and allowance coverage ratios.
On October 2, 2023, Truist announced changes to its Board of Directors. On December 31, 2023, directors Kelly S. King, Nido R. Qubein, David M. Ratcliffe and Thomas N. Thompson retired due to these directors reaching Truist’s mandatory retirement age. In addition, Board members Anna R. Cablik, Paul D. Donahue, Easter A. Maynard and Frank P. Scruggs, Jr. decided to conclude their service as directors effective as of December 31, 2023. The Board and Truist’s management express their deep appreciation to these directors for their dedicated service and many significant contributions to Truist.
Effective January 2024, several business activities were realigned within the segments. First, the CB&W segment was renamed Consumer and Small Business Banking and the C&CB segment was renamed Wholesale Banking. Second, the Wealth business was repositioned into a component of the Wholesale Banking segment from the CB&W segment. Third, certain small business banking functions were repositioned into a component of the Consumer and Small Business Banking segment from the C&CB segment.
Truist Financial Corporation 45
On February 20, 2024, the Company entered into an agreement to sell the remaining 80% stake of the common equity in TIH to an investor group led by Stone Point Capital LLC for a purchase price that implies an enterprise value for TIH of $15.5 billion, and is expected to result in cash proceeds to Truist of approximately $10.1 billion after-tax, reflecting certain closing adjustments for cash, debt and debt-like items, including the settlement of certain previously granted TIH awards, working capital, transaction expenses and an investor return amount associated with the originally sold 20% stake. The transaction improves Truist’s relative capital position and allows Truist to maintain strategic flexibility. The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions and regulatory approvals. Upon closing, the transaction will result in a full deconsolidation of the TIH subsidiary from Truist, and an expected gain equal to the excess of after-tax cash proceeds over Truist’s approximate $5.4 billion investment in its TIH subsidiary.Key Areas of FocusTruist’s business is dynamic and complex. Consequently, management annually evaluates and, as necessary, adjusts the Company’s business strategy in the context of the current operating environment. During this process, management considers the current financial condition and performance of the Company and its expectations for future economic activity from both a national and local market perspective. Achieving key strategic objectives and long-term financial goals is subject to many uncertainties and challenges. In the opinion of management, the following are the key areas of focus most likely to impact Truist’s near to medium term performance:
• Completing our transformation into a simpler, more efficient, and client-centric organization with leading financial results;
• Leveraging our existing platforms and increasing our efficiencies to gain market share;
• Focusing on integrated relationship management to deepen relationships with core clients, improve client experiences, and deliver the bank as One Team;
• Digitizing the enterprise through our “T3 strategy” to create a world-class client experience and streamline, simplify, and automate processes and operations; and
• Building capital and maintaining strong risk controls and asset quality metrics.
In addition, certain challenges and unforeseen events could have a near term impact on Truist’s financial condition and results of operations. See the sections titled “Forward-Looking Statements” and “Risk Factors” for additional examples of such challenges.Financial ResultsNet loss to common shareholders totaled $1.5 billion, or $1.09 per share, for 2023, compared to net income available to common shareholders of $5.9 billion, or $4.43 per share, from the prior year.
• Results for 2023 included a non-cash goodwill impairment charge of $6.1 billion ($4.56 per share) which has no impact on our liquidity, regulatory capital ratios, or our ability to pay our common dividend and service our clients’ financial needs; the FDIC special assessment of $507 million ($387 million after-tax, or $0.29 per share); merger-related and restructuring charges of $375 million ($286 million after-tax, or $0.21 per share); and a discrete tax benefit of $204 million ($0.15 per share).
• Results for 2022 included merger-related and restructuring charges of $513 million ($393 million after-tax, or $0.29 per share); incremental operating expenses related to the Merger of $465 million ($356 million after-tax, or $0.27 per share); a gain on the redemption of noncontrolling equity interest of $74 million ($57 million after-tax, or $0.04 per share) related to the acquisition of certain merchant services relationships; net losses on the sales of securities of $71 million ($54 million after-tax, or $0.04 per share); and a gain on the early extinguishment of long-term debt of $39 million ($30 million after-tax, or $0.02 per share).Table 8: Earnings Highlights
Year Ended December 31, (Dollars in millions) Change2023 2022 2021 2023 vs. 2022 2022 vs. 2021
Net income (loss) available to common shareholders $ (1,452) $ 5,927 $ 6,033 $ (7,379) $ (106)
Diluted earnings per common share (1.09) 4.43 4.47 (5.52) (0.04)
Net interest income - taxable equivalent $ 14,820 $ 14,458 $ 13,114 $ 362 $ 1,344
Noninterest income 8,790 8,719 9,290 71 (571)
Total taxable-equivalent revenue $ 23,610 $ 23,177 $ 22,404 $ 433 $ 773
Less taxable-equivalent adjustment 220 142 108
Total revenue $ 23,390 $ 23,035 $ 22,296
Return on average assets (0.19) % 1.15 % 1.23 % (1.34) % (0.08) %
Return on average common shareholders’ equity (2.6) 10.4 9.7 (13.0) 0.7
Net interest margin - taxable equivalent 3.00 3.01 2.86 (0.01) 0.15
46 Truist Financial Corporation
Truist’s revenue for 2023 was $23.4 billion. On a TE basis, revenue was $23.6 billion, which represents an increase of $433 million compared to 2022. Net interest income on a TE basis was $14.8 billion, up $362 million, or 2.5%, primarily due to higher market interest rates and higher average loans. These increases were partially offset by higher funding costs and lower purchase accounting accretion.
• Average earning assets increased $13.5 billion, or 2.8%, compared to the prior year primarily due to growth in average total loans of $15.5 billion, or 5.1%, and growth in other earning assets of $9.3 billion, or 46%, primarily due to an increase in balances held at the Federal Reserve to support liquidity build, partially offset by a $10.3 billion, or 7.0%, decrease in average securities.
• Average deposits decreased $17.0 billion, or 4.1%, compared to the prior year while average short-term borrowings increased $9.5 billion, or 64%, and average long-term debt increased $15.5 billion, or 45%.
Noninterest income was up $71 million, or 0.8%, for the year ended December 31, 2023 compared to 2022 due to higher insurance income and lending related fees, partially offset by lower investment banking and trading income, service charges on deposits and other income. The prior year included $71 million of securities losses and a $74 million gain on the redemption of noncontrolling equity interest (other income).
NIM was 3.00% for 2023, down one basis point compared to the prior year. NIM was negatively impacted by lower purchase accounting accretion, which benefited NIM by 5 basis points in 2023 compared to 13 basis points in 2022, partially offset by higher rates.
• The yield on the average total loan portfolio was 6.12% for 2023, up 176 basis points, compared to the prior year primarily reflecting higher market interest rates, partially offset by lower purchase accounting accretion. The yield on the average securities portfolio was 2.24% for 2023, up 36 basis points compared to the prior year.
• The average cost of total deposits was 1.58% for 2023, up 131 basis points compared to the prior year. The average cost of short-term borrowings was 5.25% for 2023, up 267 basis points compared to the prior year. The average cost on long-term debt was 4.46% for 2023, up 215 basis points compared to the prior year. The increases in rates on deposits and other funding sources was largely attributable to the higher rate environment.
The provision for credit losses was $2.1 billion for the year ended December 31, 2023 compared to $777 million in 2022. The net charge-off ratio for the current year of 0.50% was up 23 basis points compared to the prior year.
• The increase in the current period provision expense primarily reflects an allowance build and higher net charge-offs.
• The net charge-off ratio was up compared to the prior year driven by higher charge-offs in the commercial and industrial, CRE, indirect auto, other consumer, and credit card portfolios as well as the sale of the student loan portfolio.
Noninterest expense was up $6.9 billion for the year ended December 31, 2023 compared to 2022 due to goodwill impairment of $6.1 billion, higher regulatory costs primarily due to the FDIC special assessment of $507 million, higher other expense, and higher personnel expense, partially offset by lower merger-related and restructuring charges, professional fees and outside processing expenses, equipment expense, marketing and customer development expense, and amortization of intangibles. Merger-related and restructuring charges and incremental operating expenses related to the merger decreased $138 million and $465 million, respectively, due to the completion of integration-related activities. Merger-related and restructuring charges for the current year include increased severance charges due to the ongoing transformation efforts as well as the continuation of specific facilities optimization costs. The prior period also included a gain on the redemption of FHLB advances of $39 million (other expense). Adjusted noninterest expenses, which exclude goodwill impairment, the FDIC special assessment, merger-related costs, the amortization of intangibles, and gains and losses on the early extinguishment of debt, increased $908 million, or 6.9%.
The provision for income taxes was $862 million for 2023, compared to $1.4 billion to 2022. The decrease in the provision for income taxes was primarily driven by lower pre-tax earnings, which includes a non-deductible goodwill impairment, and a discrete tax benefit of $204 million.
Truist’s total assets at December 31, 2023 were $535.3 billion, a decrease of $19.9 billion, or 3.6%, compared to December 31, 2022 as loans and leases, net of ALLL, decreased $14.4 billion, or 4.5%, total securities decreased $8.0 billion, or 6.2%, reflecting our ongoing balance sheet optimization efforts, as well as the aforementioned goodwill impairment, partially offset by an increase of $9.5 billion, or 59.4%, in interest-bearing deposits with banks.
Total liabilities at December 31, 2023 were $476.1 billion, a decrease of $18.6 billion, or 3.8%, from the prior year, reflecting a decrease of $17.6 billion, or 4.3%, in deposits and a decrease of $4.3 billion, or 9.9%, in long-term debt, partially offset by an increase of $1.4 billion, or 6.0%, in short-term borrowings.
Truist Financial Corporation 47
Total shareholders’ equity was $59.3 billion at December 31, 2023, a decrease of $1.3 billion from December 31, 2022. This decrease includes $3.1 billion in common and preferred dividends and a $1.0 billion net loss, partially offset by $1.4 billion received in connection with the TIH minority stake sale, net of tax, and $1.1 billion in OCI. Truist’s book value per common share at December 31, 2023 was $39.31, compared to $40.58 at December 31, 2022. Truist’s TBVPS of $21.83 at December 31, 2023, increased 21% compared to December 31, 2022.
Asset quality reflects normalization and modest deterioration in commercial portfolios.
• Nonperforming loans and leases held for investment were 0.44% of loans and leases held for investment at December 31, 2023, up eight basis points compared to December 31, 2022.
• The allowance for credit losses was $5.1 billion and includes $4.8 billion for the allowance for loan and lease losses and $295 million for the reserve for unfunded commitments. The ALLL ratio was 1.54%, up 20 basis points compared with December 31, 2022.
Capital strengthened during 2023.
• Truist’s CET1 ratio was 10.1% as of December 31, 2023. The 110 basis point increase since December 31, 2022 resulted from organic capital generation and the minority stake sale in TIH, partially offset by the CECL phase in.
• Truist declared common dividends of $2.08 per share during 2023. Truist did not repurchase any shares in 2023.
• Truist’s average consolidated LCR was 112% for the three months ended December 31, 2023, compared to the regulatory minimum of 100%.Analysis of Results of Operations
Net Interest Income and NIMTaxable-equivalent net interest income for the year ended December 31, 2023 was up $362 million, or 2.5%, compared to 2022 primarily due to higher market interest rates and higher average loans. These increases were partially offset by higher funding costs and lower purchase accounting accretion. Net interest margin was 3.00% for 2023, down one basis point compared to the prior year. NIM was negatively impacted by lower purchase accounting accretion, which benefited NIM by 5 basis points in 2023 compared to 13 basis points in 2022, partially offset by higher rates.
• Average earning assets increased $13.5 billion, or 2.8%, compared to the prior year primarily due to growth in average total loans of $15.5 billion, or 5.1%, and growth in other earning assets of $9.3 billion, or 46%, primarily due to an increase in balances held at the Federal Reserve to support liquidity build, partially offset by a $10.3 billion, or 7.0%, decrease in average securities.
• The yield on the average total loan portfolio was 6.12% for 2023, up 176 basis points, compared to the prior year primarily reflecting higher market interest rates, partially offset by lower purchase accounting accretion. The yield on the average securities portfolio was 2.24% for 2023, up 36 basis points compared to the prior year.
• Average deposits decreased $17.0 billion, or 4.1%, compared to the prior year while average short-term borrowings increased $9.5 billion, or 64%, and average long-term debt increased $15.5 billion, or 45%.
• The average cost of total deposits was 1.58% for 2023, up 131 basis points compared to the prior year. The average cost of short-term borrowings was 5.25% for 2023, up 267 basis points compared to the prior year. The average cost on long-term debt was 4.46% for 2023, up 215 basis points compared to the prior year. The increases in rates on deposits and other funding sources was largely attributable to the higher rate environment.
As of December 31, 2023, the remaining unamortized fair value marks on the loan and lease portfolio and long-term debt were $477 million and $39 million, respectively. As of December 31, 2022, the remaining unamortized fair value marks on the loan and lease portfolio and long-term debt were $741 million and $81 million, respectively.
The remaining unamortized purchase accounting fair value mark on loans and leases consists of $349 million for consumer loans and leases, and $128 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.48 Truist Financial CorporationTable 9: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis2023 vs. 2022 2022 vs. 2021Year Ended December 31, (Dollars in millions) Average Balances (1)
Annualized Yield/Rate (2)Income/Expense Incr. (Decr.) Change due to Incr. (Decr.) Change due to
2023 2022 2021 2023 2022 2021 2023 2022 2021 Rate Volume Rate VolumeAssets
AFS and HTM securities at amortized cost:U.S. Treasury $ 11,021 $ 10,591 $ 7,633 1.20 % 0.88 % 0.73 % $ 132 $ 93 $ 56 $ 39 $ 35 $ 4 $ 37 $ 13 $ 24
GSE 348 498 1,799 2.94 2.24 2.29 10 11 41 (1) 3 (4) (30) (1) (29)
Agency MBS 121,313 131,669 128,306 2.32 1.94 1.52 2,821 2,552 1,953 269 478 (209) 599 547 52
States and political subdivisions 424 392 429 4.13 3.88 3.55 18 15 15 3 1 2 — 1 (1)
Non-agency MBS 3,816 4,072 1,299 2.34 2.30 2.20 89 94 28 (5) 2 (7) 66 1 65
Other 20 44 31 5.37 3.60 1.90 1 2 1 (1) 1 (2) 1 1 —
Total securities 136,942 147,266 139,497 2.24 1.88 1.50 3,071 2,767 2,094 304 520 (216) 673 562 111
Interest earning trading assets 4,739 5,767 5,602 6.64 4.15 2.78 314 239 156 75 124 (49) 83 78 5Other earning assets (3)29,765 20,429 19,498 5.24 1.88 0.24 1,561 384 48 1,177 938 239 336 334 2Loans and leases, net of unearned income:Commercial and industrial 163,983 149,030 137,304 6.34 3.91 3.04 10,389 5,823 4,174 4,566 3,931 635 1,649 1,270 379
CRE 22,741 22,697 25,269 6.71 4.01 2.85 1,535 920 728 615 613 2 192 271 (79)
Commercial Construction 6,125 5,326 6,053 7.62 4.46 2.98 459 228 173 231 191 40 55 79 (24)
Residential mortgage 56,131 51,721 45,500 3.78 3.60 4.14 2,121 1,860 1,884 261 96 165 (24) (263) 239
Home equity 10,388 10,788 11,136 7.36 5.01 5.69 765 540 506 225 246 (21) 34 27 7
Indirect auto 25,621 27,197 26,621 6.10 5.50 6.12 1,563 1,497 1,629 66 156 (90) (132) (167) 35
Other consumer 28,412 26,320 25,118 7.25 6.23 6.70 2,061 1,640 1,666 421 284 137 (26) (111) 85
Student 2,453 6,114 7,251 6.91 4.97 3.99 170 304 289 (134) 91 (225) 15 65 (50)
Credit card 4,876 4,753 4,650 11.59 9.57 8.92 565 455 415 110 98 12 40 31 9
Total loans and leases HFI 320,730 303,946 288,902 6.12 4.36 3.97 19,628 13,267 11,464 6,361 5,706 655 1,803 1,202 601
LHFS 1,605 2,889 4,546 6.37 4.23 2.63 102 122 120 (20) 47 (67) 2 56 (54)
Total loans and leases 322,335 306,835 293,448 6.12 4.36 3.95 19,730 13,389 11,584 6,341 5,753 588 1,805 1,258 547
Total earning assets 493,781 480,297 458,045 5.00 3.49 3.03 24,676 16,779 13,882 7,897 7,335 562 2,897 2,232 665
Nonearning assets 59,351 63,533 64,340
Total assets $ 553,132 $ 543,830 $ 522,385Liabilities and Shareholders’ Equity
Interest-bearing deposits:Interest-checking $ 103,465 $ 111,539 $ 107,311 2.04 0.47 0.05 2,112 519 59 1,593 1,634 (41) 460 458 2
Money market and savings 138,841 145,645 134,303 2.04 0.37 0.03 2,834 536 35 2,298 2,324 (26) 501 497 4
Time deposits 36,803 15,514 18,025 3.83 0.58 0.30 1,409 90 54 1,319 1,059 260 36 44 (8)
Total interest-bearing deposits 279,109 272,698 259,639 2.28 0.42 0.06 6,355 1,145 148 5,210 5,017 193 997 999 (2)
Short-term borrowings 24,478 14,957 6,170 5.25 2.58 0.76 1,286 385 47 901 558 343 338 212 126
Long-term debt 49,678 34,172 37,410 4.46 2.31 1.53 2,215 791 573 1,424 958 466 218 271 (53)
Total interest-bearing liabilities 353,265 321,827 303,219 2.79 0.72 0.25 9,856 2,321 768 7,535 6,533 1,002 1,553 1,482 71
Noninterest-bearing deposits 122,018 145,392 138,733
Other liabilities 14,750 12,794 11,300
Shareholders’ equity 63,099 63,817 69,133
Total liabilities and shareholders’ equity $ 553,132 $ 543,830 $ 522,385
Average interest-rate spread 2.21 % 2.77 % 2.78 %
NIM/net interest income - taxable equivalent 3.00 % 3.01 % 2.86 % $ 14,820 $ 14,458 $ 13,114 $ 362 $ 802 $ (440) $ 1,344 $ 750 $ 594
Taxable-equivalent adjustment $ 220 $ 142 $ 108
Memo: Total deposits $ 401,127 $ 418,090 $ 398,372 1.58 % 0.27 % 0.04 % $ 6,355 $ 1,145 $ 148 $ 5,210 $ 997
(1) Represents daily average balances. Excludes basis adjustments for fair value hedges.
(2) Yields are stated on a TE basis utilizing federal tax rate. The change in interest not solely due to changes in rate or volume has been allocated based on the pro-rata absolute dollar amount of each. Interest income includes certain fees, deferred costs, and dividends.
(3) Includes cash equivalents, interest-bearing deposits with banks, FHLB stock and other earning assets.
Truist Financial Corporation 49Provision for Credit LossesThe provision for credit losses was $2.1 billion for the year ended December 31, 2023 compared to $777 million in 2022. The net charge-off ratio for the current year of 0.50% was up 23 basis points compared to the prior year.
• The increase in the current period provision expense primarily reflects an allowance build and higher net charge-offs.
• The net charge-off ratio was up compared to the prior year driven by higher charge-offs in the commercial and industrial, CRE, indirect auto, other consumer, and credit card portfolios as well as the sale of the student loan portfolio.Refer to “Note 5. Loans and ACL” for additional discussion of the ACL.
Noninterest Income
Noninterest income is a significant contributor to Truist’s financial results. Management focuses on diversifying its sources of revenue to reduce Truist’s reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates. The following table provides a breakdown of Truist’s noninterest income:
Table 10: Noninterest Income
Year Ended December 31, % Change(Dollars in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021
Insurance income $ 3,354 $ 3,043 $ 2,627 10.2 % 15.8 %
Wealth management income 1,358 1,338 1,392 1.5 (3.9)
Investment banking and trading income 822 995 1,441 (17.4) (31.0)
Card and payment related fees 936 944 874 (0.8) 8.0
Service charges on deposits 869 1,026 1,060 (15.3) (3.2)
Mortgage banking income 437 460 734 (5.0) (37.3)
Lending related fees 447 375 349 19.2 7.4
Operating lease income 254 258 262 (1.6) (1.5)
Securities gains (losses) — (71) — NM NM
Other income 313 351 551 (10.8) (36.3)
Total noninterest income $ 8,790 $ 8,719 $ 9,290 0.8 (6.1)
Noninterest income was up $71 million, or 0.8%, for the year ended December 31, 2023 compared to 2022 due to higher insurance income and lending related fees, partially offset by lower investment banking and trading income, service charges on deposits and other income. The prior year included $71 million of securities losses and a $74 million gain on the redemption of noncontrolling equity interest (other income).
• Insurance income increased primarily due to organic growth and acquisitions.
• Lending related fees increased due to higher leasing-related gains.
• Investment banking and trading income decreased due to lower structured real estate income, partially offset by higher merger and acquisition fees as well as higher bond and equity originations.
• Service charges on deposits decreased primarily due to changes in service fee protocols, as well as reduced overdraft fees as a result of continued growth of Truist One Banking.
• Other income decreased primarily due to higher derivative collateral related costs and the aforementioned gain on the redemption of noncontrolling equity in the prior period, partially offset by higher income from investments held for certain post-retirement benefits (which is primarily offset by higher personnel expense).
50 Truist Financial CorporationNoninterest Expense
The following table provides a breakdown of Truist’s noninterest expense:
Table 11: Noninterest Expense
Year Ended December 31, % Change(Dollars in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021
Personnel expense $ 8,654 $ 8,467 $ 8,632 2.2 % (1.9) %
Professional fees and outside processing 1,341 1,411 1,442 (5.0) (2.1)
Software expense 929 932 945 (0.3) (1.4)
Net occupancy expense 715 744 764 (3.9) (2.6)
Amortization of intangibles 527 583 574 (9.6) 1.6
Equipment expense 409 478 513 (14.4) (6.8)
Marketing and customer development 297 352 294 (15.6) 19.7
Operating lease depreciation 175 184 190 (4.9) (3.2)
Regulatory costs 824 183 137 NM 33.6
Merger-related and restructuring charges 375 513 822 (26.9) (37.6)
Goodwill impairment 6,078 — — NM NM
Other expense 1,142 742 803 53.9 (7.6)
Total noninterest expense $ 21,466 $ 14,589 $ 15,116 47.1 (3.5)
Noninterest expense was up $6.9 billion, or 47.1%, for the year ended December 31, 2023 compared to 2022 due to goodwill impairment of $6.1 billion, higher regulatory costs primarily due to the FDIC special assessment of $507 million, higher other expense, and higher personnel expense, partially offset by lower merger-related and restructuring charges, professional fees and outside processing expenses, equipment expense, marketing and customer development expense, and amortization of intangibles. Merger-related and restructuring charges and incremental operating expenses related to the Merger decreased $138 million and $465 million, respectively, due to the completion of integration-related activities in 2022. Merger-related and restructuring charges for the current year include increased severance charges due to the ongoing transformation efforts as well as the continuation of specific facilities optimization costs. The prior period also included a gain on the redemption of FHLB advances of $39 million (other expense).
Adjusted noninterest expenses, which exclude goodwill impairment, the FDIC special assessment, merger-related costs, the amortization of intangibles, and gains and losses on the early extinguishment of debt, increased $908 million, or 6.9%.
• Other expense, excluding the aforementioned gain on FHLB advances, increased primarily due to higher pension expense (driven primarily by lower plan assets) and higher operating losses, including $70 million of costs associated with changes in service fee protocols as well as settlement of certain litigation matters, including a settlement and patent licensing agreement that resolved the USAA remote deposit capture patent infringement lawsuit.
• Personnel expense increased due to investments in teammates by increasing Truist’s minimum wage, the impact from acquisitions, and investments in revenue producing businesses and enterprise technology, and higher other post-retirement benefit expense (which is almost entirely offset by higher other income), partially offset by lower pension expenses and lower incentives as well as reduced headcount in the second half of 2023, in part due to our ongoing transformation into a more efficient organization.
• Regulatory costs, excluding the aforementioned FDIC special assessment, increased primarily due to an increase in the FDIC’s deposit insurance assessment rate.
• Professional fees and outside processing expense decreased due to prior period incremental operating expenses related to the Merger, partially offset by higher enterprise technology and other investments.
• Equipment expense decreased due to retirement of certain technology related equipment and higher laptop purchases in 2022.
• Marketing and customer development expenses decreased due to reduced marketing compared to the prior year.
Merger-Related and Restructuring Charges
Truist has incurred certain merger-related and restructuring charges, which include:• severance and personnel-related costs or credits;• occupancy and equipment charges or credits, which relate to costs or gains associated with lease terminations, obsolete equipment write-offs and the sale of duplicate facilities and equipment;
• professional services, which relate to legal and investment banking advisory fees and other consulting services pertaining to restructuring initiatives or transactions;
• systems conversion and related charges, which represent costs to integrate the entity’s information technology systems;
Truist Financial Corporation 51
• costs for integration of mergers and acquisitions and other restructuring charges or credits, which include expenses necessary to convert and combine the acquired branches and operations of merged companies, direct media advertising related to the mergers and acquisitions, asset and supply inventory write-offs, and other similar charges; and• write-offs related to exiting certain businesses.Merger-related and restructuring accruals are established when the costs are incurred or once all requirements for a plan to dispose of or outsource certain business functions have been approved by management. Merger and restructuring accruals are re-evaluated periodically and adjusted as necessary. The remaining accruals at December 31, 2023 are generally expected to be utilized within one year, unless they relate to specific contracts that expire later.
The following table presents a summary of merger-related and restructuring charges and the related accruals. The 2023 merger-related and restructuring costs predominately reflect various restructuring initiatives, including costs for severance and other benefits and costs related to exiting facilities.
Table 12: Merger-Related and Restructuring Accrual Activity
(Dollars in millions) Accrual at Jan 1, 2022 Expense Utilized Accrual at Dec 31, 2022 Expense Utilized Accrual at Dec 31, 2023
Severance and personnel-related $ 77 $ 92 $ (160) $ 9 $ 276 $ (265) $ 20
Occupancy and equipment — 175 (175) — 67 (67) —
Professional services 37 142 (167) 12 10 (20) 2
Systems conversion and related costs
— 60 (60) — — — —
Other 12 44 (51) 5 22 (25) 2
Total (1)
$ 126 $ 513 $ (613) $ 26 $ 375 $ (377) $ 24
(1) The Company recognized $368 million of expense related to the Merger for the year ended December 31, 2022. Merger integration activities were completed in 2022.Segment ResultsThrough December 31, 2023, Truist operated and measured business activities across three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings, with functional activities included in Other, Treasury, and Corporate.
In 2023, Truist realigned Prime Rate Premium Finance Corporation, which includes AFCO Credit Corporation and CAFO Holding Company, into the C&CB segment from the IH segment. Prior period results have been revised to conform to the current presentation. Additionally, Truist updated its segment cost allocation methodology. Results for 2023 have been revised to conform to the current presentation. Management concluded the impact to 2022 was not material.
Effective January 2024, several business activities were realigned within the segments. First, the CB&W segment was renamed Consumer and Small Business Banking and the C&CB segment was renamed Wholesale Banking. Second, the Wealth business was repositioned into a component of the Wholesale Banking segment from the CB&W segment. Third, certain small business banking functions were repositioned into a component of the Consumer and Small Business Banking segment from the C&CB segment. 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.
The segment results are presented based on internal management methodologies that were designed to support these strategic objectives. Unlike financial accounting, there is no comprehensive authoritative body of guidance for management accounting equivalent to GAAP. The application and development of management reporting methodologies is an active process and undergoes periodic enhancements. The implementation of these enhancements to the internal management reporting methodology may materially affect the results disclosed for each segment, with no impact on consolidated results. When significant changes to management reporting methodologies take place, the impact of these changes is quantified and prior period information is revised.
In conjunction with the Company’s April 3, 2023 sale of a 20% stake of the common equity in TIH, TIH issued $5 billion of 8.25% mandatorily redeemable preferred units to the Company, with the related interest expense, which is fully allocable to the Company, reported in Net intersegment interest income (expense). TIH is the principal legal entity of the IH segment.
Also related to the same transaction, TIH was recapitalized from a corporate entity to an LLC, such that each member is allocated its share of TIH’s income before taxes, and beginning in the second quarter of 2023 the Company recognizes its associated income tax provision through OT&C. The Company elected not to restate prior periods for this change based on TIH’s previous status as a corporate entity. The Company recognized $110 million for the twelve months ended December 31, 2023 of tax provision related to IH in OT&C. IH continues to recognize certain state jurisdictions that impose income taxes on partnerships and LLCs.
52 Truist Financial Corporation
See “Note 21. Operating Segments” for additional disclosures related to Truist’s operating segments, including the internal accounting and reporting practices used to manage these segments.
Table 13: Net Income by Reportable SegmentYear Ended December 31, % Change(Dollars in millions) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021
Consumer Banking and Wealth $ 178 $ 3,866 $ 3,827 (95.4) % 1.0 %
Corporate and Commercial Banking 755 4,421 4,818 (82.9) (8.2)
Insurance Holdings 282 506 488 (44.3) 3.7
Other, Treasury & Corporate (2,262) (2,526) (2,696) (10.5) (6.3)
Truist Financial Corporation $ (1,047) $ 6,267 $ 6,437 (116.7) (2.6)
2023 compared to 2022
Consumer Banking and Wealth
CB&W net income was $178 million for the year ended December 31, 2023, a decrease of $3.7 billion compared to the prior year.
• Segment net interest income increased $614 million driven by favorable funding credit on deposits attributable to the higher rate environment and higher average loans, partially offset by higher funding costs, lower average deposits, and lower purchase accounting accretion.
• The provision for credit losses increased $226 million reflecting higher charge offs primarily in the indirect auto and other consumer portfolios, partially offset by a reserve release in the current period.
• Noninterest income decreased $108 million primarily due to decreased service charge fees on deposits driven by changes in service fee protocols in the current period and a gain on the redemption of noncontrolling equity interest in the earlier period, partially offset by higher residential mortgage banking income in the current period.
• Noninterest expense increased $4.1 billion primarily driven by a goodwill impairment charge. Excluding goodwill impairment, noninterest expense increased $692 million due to higher corporate technology costs, the FDIC special assessment, and corporate operating and risk support expenses, partially offset by lower marketing and customer development, professional fees and outside processing, and amortization of intangibles.
CB&W average loans and leases held for investment increased $1.6 billion, or 1.2%, for the year ended December 31, 2023 compared to the prior year driven primarily by an increase in residential mortgage and Service Finance loans, partially offset by the sale of the student loan portfolio in second quarter 2023 and a decrease in indirect auto loans.
CB&W average total deposits decreased $15.7 billion, or 6.2%, for the year ended December 31, 2023 compared to the prior year primarily due to decreases in average interest-bearing checking, money market and savings, and noninterest-bearing deposits, partially offset by an increase in time deposits.
CB&W had 2,001 banking offices at December 31, 2023, a decrease of 122 offices, or 5.7%, compared to December 31, 2022 due to continued branch network optimization.
Truist Wealth had assets under management of $199 billion as of December 31, 2023, an increase of $19 billion, or 10%, compared to the prior year primarily due to higher markets and positive net asset flows.
Corporate and Commercial Banking
C&CB net income was $755 million for the year ended December 31, 2023, a decrease of $3.7 billion compared to the prior year.
• Segment net interest income increased $617 million primarily due to higher funding credit on deposits and higher average loan balances, partially offset by lower purchase accounting accretion.
• The provision for credit losses increased $1.1 billion which reflects an allowance build, higher charge offs, and loan growth in the current period as well as an allowance release in the earlier period.
• Noninterest income decreased $324 million primarily due to lower structured real estate fee income, higher derivative collateral related costs, lower commercial mortgage income, and lower trading income, partially offset by increases in lending related fees, merger and acquisition fees, and bond originations.
• Noninterest expense increased $3.2 billion primarily due to a goodwill impairment charge. Excluding goodwill impairment, noninterest expense increased $483 million driven by the FDIC special assessment, higher corporate technology expenses, and merger-related and restructuring charges, partially offset by lower corporate marketing expense and lower incentive expense.
Truist Financial Corporation 53
C&CB average loans and leases held for investment increased $15.1 billion, or 9.1%, for the year ended December 31, 2023 compared to the prior year driven by an increase in the commercial and industrial portfolio.
C&CB average total deposits decreased $14.7 billion, or 10%, for the year ended December 31, 2023 compared to the prior year primarily due to a decrease in average noninterest-bearing deposits, partially offset by an increase in money market and savings.
Insurance Holdings
IH net income was $282 million for the year ended December 31, 2023, a decrease of $224 million, or 44%, compared to the prior year.
• Segment net interest income decreased $267 million driven primarily by interest expense accruals on new intercompany mandatorily redeemable preferred units resulting from the recapitalization of IH.
• Noninterest income increased $306 million primarily due to continued organic growth and acquisitions.
• Noninterest expense increased $389 million primarily due to the impact of acquisitions, investments in new hires and teammates, independence readiness expenses, performance-driven incentive expense, and higher operational loss reserves.
Other, Treasury, and Corporate
OT&C generated a net loss of $2.3 billion for the year ended December 31, 2023, compared to a net loss of $2.5 billion in the prior year.
• Segment net interest income decreased $680 million due to higher funding credit on deposits to other segments and higher rates, partially offset by higher funds transfer charges to other segments for loans and higher earnings on cash balances and in the securities portfolio driven by the higher rate environment.
• Noninterest income increased $197 million primarily due to valuation changes from assets held for certain post-retirement benefits in the current period, which is primarily offset by higher personnel expense, and losses on the sale of securities in the earlier period.
• Noninterest expense decreased $765 million primarily due to a decrease in incremental operating expenses related to the Merger and credit from other segments for corporate technology project support, partially offset by an increase in operating charge-offs due to costs associated with changes in deposit service fee protocols as well as settlement of certain litigation matters, including a settlement and patent licensing agreement that resolved the USAA remote deposit capture patent infringement lawsuit, and a gain on the redemption of FHLB advances in the prior year.54 Truist Financial CorporationAnalysis of Financial Condition
Investment ActivitiesTruist’s Board-approved investment policy is carried out by the MRLCC, which meets regularly to review the economic environment and establish investment strategies. The MRLCC also has much broader responsibilities, which are discussed in the “Market Risk” section in MD&A.
Investment strategies are reviewed by the MRLCC based on the interest rate environment, balance sheet mix, actual and anticipated loan demand, funding opportunities and the overall interest rate sensitivity of the Company. In general, the goals of the investment portfolio are: (i) to provide sufficient liquid assets to meet unanticipated deposit and loan fluctuations and overall funds management objectives; (ii) to provide eligible securities to secure public funds, trust deposits and other borrowings; and (iii) to earn an optimal return on funds invested commensurate with meeting the requirements of (i) and (ii) and consistent with the Company’s risk appetite.Truist Bank invests in securities allowable under bank regulations. These securities may include obligations of the U.S. Treasury, U.S. government agencies, GSEs (including MBS), bank eligible obligations of any state or political subdivision, non-agency MBS, structured notes, bank eligible corporate obligations (including corporate debentures), commercial paper, negotiable CDs, bankers’ acceptances, mutual funds, and limited types of equity securities.
Table 14: Composition of Securities Portfolio(Dollars in millions) Dec 31, 2023 Dec 31, 2022AFS securities (at fair value):U.S. Treasury $ 10,041 $ 10,295
GSE 362 303
Agency MBS - residential 51,289 55,225
Agency MBS - commercial 2,248 2,424
States and political subdivisions 425 416
Non-agency MBS 2,981 3,117
Other 20 21
Total AFS securities 67,366 71,801HTM securities (at amortized cost):Agency MBS - residential 54,107 57,713
Total securities $ 121,473 $ 129,514
The securities portfolio totaled $121.5 billion at December 31, 2023, compared to $129.5 billion at December 31, 2022. U.S. Treasury, GSE, and Agency MBS represents 97% of the total securities portfolio as of December 31, 2023 and December 31, 2022. While the overwhelming majority of the portfolio remains in agency MBS securities, the Company also holds AAA rated non-agency MBS as the risk adjusted returns for these securities are more attractive than agency MBS.
• The decrease in 2023 includes paydowns and maturities of $13.9 billion, partially offset by $4.2 billion in purchases as well as an increase in the fair value of AFS securities.
• As of December 31, 2023, 41% of the investment securities portfolio was classified as held-to-maturity based on amortized cost.
• As of December 31, 2023, approximately 5.7% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 5.6% as of December 31, 2022.
• The effective duration of the AFS securities portfolio was 6.1 years at December 31, 2023 and 6.2 years at December 31, 2022, excluding the impact of swaps, or 4.0 years at December 31, 2023 and 6.0 years at December 31, 2022, including the impact of swaps. The effective duration of the HTM securities portfolio was 7.3 years at December 31, 2023 and 2022.
Truist Financial Corporation 55The following table presents the securities portfolio by major category of security holdings with ranges of maturities and average yields:
Table 15: Securities Yields by Major Category and MaturityDecember 31, 2023 (Dollars in millions) AFS HTMFair Value Effective Yield (1)
Amortized Cost Effective Yield (1)
U.S. Treasury:Within one year $ 3,567 1.67 % $ — — %
One to five years 6,436 1.27 — —
Five to ten years 13 2.76 — —
After ten years 25 3.02 — —
Total 10,041 1.42 — —GSE:One to five years 7 2.91 — —
Five to ten years 10 3.06 — —
After ten years 345 3.54 — —
Total 362 3.52 — —
Agency MBS - residential: (2)
One to five years 123 2.43 — —
Five to ten years 427 2.79 — —
After ten years 50,739 2.58 54,107 1.79
Total 51,289 2.59 54,107 1.79
Agency MBS - commercial: (2)Within one year — — — —One to five years — — — —
Five to ten years 67 3.50 — —
After ten years 2,181 1.78 — —
Total 2,248 1.83 — —States and political subdivisions:Within one year 28 5.18 — —
One to five years 68 2.51 — —
Five to ten years 177 4.63 — —
After ten years 152 4.30 — —
Total 425 4.21 — —
Non-agency MBS: (2)
Five to ten years 169 2.03 — —
After ten years 2,812 2.36 — —
Total 2,981 2.34 — —Other:Within one year — — — —
One to five years 8 2.88 — —
Five to ten years 12 7.04 — —
Total 20 5.46 — —
Total securities $ 67,366 2.39 $ 54,107 1.79
(1) Yields represent interest computed under the effective interest method on a TE basis using the federal income tax rate and the amortized cost of the securities.
(2) For purposes of the maturity table, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans.
56 Truist Financial CorporationLending ActivitiesTruist strives to meet the credit needs of its clients while pursuing a balanced strategy of loan profitability, loan growth, and loan quality. Management believes that this purpose can best be accomplished by building strong client relationships over time and developing in-depth local market knowledge. The Company employs strict underwriting criteria governing the degree of risk assumed and the diversity of the loan portfolio in terms of type, industry, and geographical concentration.
Truist lends to a diverse client base that is geographically dispersed to mitigate concentration risk arising from local and regional economic downturns. The following discussion provides additional information on the Company’s loan and lease portfolios. Refer to the “Risk Management” section for a discussion of the credit risk management policies used to manage the portfolios.Commercial Loan and Lease PortfolioCommercial loans and leases represent the largest category of the Company’s loan and lease portfolio. Commercial Community Banking and small business banking generally target small-to-middle market businesses with annual sales between $2 million and $500 million, while CIB provides lending solutions to large corporate clients. The commercial loan and lease portfolio consists of lending to public and private business clients and is composed of commercial and industrial, owner occupied, equipment leasing and financing, commercial real estate, government and institutional financing, premium financing, and dealer floor plan financing.In accordance with the Company’s lending policy, each commercial loan undergoes a detailed underwriting process. Commercial loans are typically priced with an interest rate tied to market indices, such as the prime rate or SOFR and are individually monitored and reviewed for deterioration in the ability of the client to repay the loan. The majority of Truist’s commercial loans are secured by real estate, business equipment, inventories, and other types of collateral.
Residential Mortgage Loan PortfolioTruist primarily originates conforming mortgage loans, loans under FHA, U.S. Department of Veterans Affairs, or U.S. Department of Agriculture programs, and higher quality jumbo and construction-to-permanent loans for 1-4 family residential properties. Conforming loans are loans that are underwritten in accordance with the underwriting standards set forth by FNMA and FHLMC. They are generally collateralized by one-to-four-family residential real estate, typically have loan-to-collateral value ratios of 80% or less at origination, or have mortgage insurance as required by investors and are made to borrowers in good credit standing.
Risks associated with mortgage lending include interest rate risk, which is mitigated through the sale of a substantial portion of conforming fixed-rate loans in the secondary mortgage market and an effective MSR hedging process. Credit risk is managed through rigorous underwriting procedures and mortgage insurance. The right to service the loans and receive servicing income is generally retained when conforming loans are sold. Management believes that the retention of mortgage servicing diversifies income while enabling Truist to build long-term client relationships and offer high quality client service. Truist also purchases residential mortgage loans from correspondent originators. The loans purchased from third-party originators are subject to substantially the same underwriting and risk-management criteria as loans originated internally.Home Equity Loan Portfolio
The home equity portfolio is composed of loans offered through Truist’s branch network. These include home equity loans and revolving home equity lines of credit secured by first or second liens on residential real estate in Truist’s market areas.
Indirect Auto Loan PortfolioThe indirect auto portfolio primarily includes secured indirect installment loans to consumers for the purchase of new and used automobiles. The indirect auto portfolio also includes nonprime and near prime automobile finance. Such loans are originated through approved franchised and independent dealers throughout the Truist market area and nationally through Regional Acceptance Corporation. These loans are homogeneous, and no single loan is individually significant in terms of its size and potential risk of loss. Indirect auto loans are subject to rigorous lending policies and procedures and are underwritten with note amounts and credit limits that are consistent with the Company’s risk philosophy. In addition to its normal underwriting due diligence, Truist uses application systems and scoring systems to help underwrite and manage the credit risk in its indirect auto portfolio.
Truist Financial Corporation 57Other Consumer Loan PortfolioThe other consumer portfolio includes loans originated through the Truist branch network, as well as loans originated by Truist’s national online consumer lending division. Loans originated through the Truist branch network include secured and unsecured lending marketed to qualifying clients and other creditworthy candidates in Truist’s market areas. Truist provides fixed-rate, unsecured lending to consumers with strong credit through its proprietary online loan origination system. The other consumer portfolio includes secured indirect installment loans to consumers for the purchase of new and used boats and recreational vehicles. The other consumer portfolio includes Sheffield, a small ticket consumer lending division related to the purchase of power sports and outdoor power equipment, and trailers. These loans are homogeneous, and no single loan is individually significant in terms of its size and potential risk of loss. These loans are subject to similar rigorous lending policies and procedures as the indirect auto loan portfolio. The other consumer loan portfolio also includes other indirect and point-of-sale lending to consumers, including through Service Finance, to finance home improvements, furniture purchases, certain elective health-care services, and other consumer products segments. These loans are originated in accordance with strict underwriting criteria as determined by Truist.
Student Loan Portfolio
The student loan portfolio, which was sold in 2023, was primarily composed of government guaranteed student loans and additionally included certain private student loans originated by third parties. The government guarantee mitigated substantially all of the risk related to principal and interest repayment for this component of the portfolio.Credit Card Loan PortfolioThe credit card portfolio consists of the outstanding balances on credit cards. Truist markets credit cards to its existing client base and does not solicit cardholders through nationwide programs or other forms of mass marketing. Such balances are generally unsecured and actively managed.Refer to “Note 5. Loans and ACL” for additional information.
The following table summarizes the loan portfolio:
Table 16: Loans and Leases as of Period End(Dollars in millions) Dec 31, 2023 Dec 31, 2022Commercial:Commercial and industrial $ 160,788 $ 164,307
CRE 22,570 22,676
Commercial construction 6,683 5,849Consumer:Residential mortgage 55,492 56,645
Home equity 10,053 10,876
Indirect auto 22,727 27,951
Other consumer 28,647 27,533
Student — 5,287
Credit card 5,101 4,867
Total loans and leases HFI 312,061 325,991
LHFS 1,280 1,444
Total loans and leases $ 313,341 $ 327,435
Loans and leases HFI were $312.1 billion at December 31, 2023, down $13.9 billion compared to 2022 primarily due to the sale of the student loan portfolio at the end of the second quarter of 2023 and balance sheet optimization. Excluding the student loan sale, loans HFI declined 2.7% compared to the prior year.
Commercial loans decreased $2.8 billion during 2023 primarily due to a $3.5 billion decline in the commercial and industrial portfolio, partially offset by an $834 million increase in the commercial construction portfolio.
Consumer loans and credit cards, excluding the student loan portfolio, decreased $5.9 billion during 2023 primarily due to a $5.2 billion decrease in indirect auto primarily due to lower production, a $1.2 billion decrease in residential mortgages due to lower correspondent channel production, and an $823 million decrease in home equity, partially offset by a $1.1 billion increase in other consumer primarily due to growth of higher-return point-of-sale lending portfolios (Service Finance and Sheffield).
58 Truist Financial Corporation
The following table presents a summary of the loans and leases by scheduled repayment period and interest rate terms. Determinations of maturities are based on scheduled repayments, except when rollovers or extensions are included for purposes of measuring the ACL. Truist’s credit policy typically does not permit automatic renewal of loans. At the scheduled maturity date (including balloon payment date), the client generally must request a new loan to replace the matured loan and execute either a new note or note modification with rate, terms and conditions negotiated at that time.Table 17: Loan MaturitiesDecember 31, 2023 (Dollars in millions) 1 Year or Less 1 to 5 Years 5 to 15 Years After 15 Years TotalFixed rate:
Commercial:Commercial and industrial $ 10,759 $ 15,635 $ 11,656 $ 2,395 $ 40,445
CRE 669 2,493 823 3 3,988
Commercial construction 38 58 27 16 139
Total commercial 11,466 18,186 12,506 2,414 44,572Consumer:Residential mortgage 1,579 6,394 16,886 24,463 49,322
Home equity 339 1,033 1,756 469 3,597
Indirect auto 5,474 16,192 1,061 — 22,727
Other consumer 5,459 13,429 6,219 857 25,964
Total consumer 12,851 37,048 25,922 25,789 101,610
Credit card 282 — — — 282
Total fixed rate 24,599 55,234 38,428 28,203 146,464Variable rate:
Commercial:Commercial and industrial 30,579 77,740 9,855 2,169 120,343
CRE 4,216 12,479 1,877 10 18,582
Commercial construction 1,632 4,742 117 53 6,544
Total commercial 36,427 94,961 11,849 2,232 145,469Consumer:Residential mortgage 173 754 2,206 3,037 6,170
Home equity 585 2,355 3,503 13 6,456
Other consumer 282 1,930 462 9 2,683
Total consumer 1,040 5,039 6,171 3,059 15,309
Credit card 4,819 — — — 4,819
Total variable rate 42,286 100,000 18,020 5,291 165,597
Total loans and leases HFI $ 66,885 $ 155,234 $ 56,448 $ 33,494 $ 312,061
Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. The outstanding balances of variable rate residential mortgage loans in the interest-only phase were approximately $317 million and $342 million at December 31, 2023 and December 31, 2022, respectively.
Truist Financial Corporation 59The following table presents the composition of average loans and leases:
Table 18: Average Loans and Leases
Three Months Ended(Dollars in millions) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022Commercial:Commercial and industrial $ 160,278 $ 164,022 $ 166,588 $ 165,095 $ 159,308
CRE 22,755 22,812 22,706 22,689 22,497
Commercial construction 6,515 6,194 5,921 5,863 5,711Consumer:Residential mortgage 55,658 56,135 56,320 56,422 56,292
Home equity 10,104 10,243 10,478 10,735 10,887
Indirect auto 23,368 24,872 26,558 27,743 28,117
Other consumer 28,913 28,963 28,189 27,559 27,479
Student — — 4,766 5,129 5,533
Credit card 4,996 4,875 4,846 4,785 4,842
Total average loans and leases HFI $ 312,587 $ 318,116 $ 326,372 $ 326,020 $ 320,666
Average loans held for investment decreased $5.5 billion, or 1.7%, compared to the prior quarter.
• Average commercial loans decreased 1.8% due to a decline in the commercial and industrial portfolio, partially offset by an increase in commercial construction loans.
• Average consumer loans decreased 1.8% primarily due to declines in the indirect auto and mortgage portfolios.
60 Truist Financial CorporationAsset Quality
The following tables summarize asset quality information:
Table 19: Asset Quality(Dollars in millions) Dec 31, 2023 Dec 31, 2022NPAs:
NPLs:Commercial and industrial $ 470 $ 398
CRE 284 82
Commercial construction 24 —
Residential mortgage 153 240
Home equity 122 135
Indirect auto 268 289
Other consumer 59 44
Total NPLs HFI 1,380 1,188
Loans held for sale 51 —
Total nonaccrual loans and leases 1,431 1,188
Foreclosed real estate 3 4
Other foreclosed property 54 58
Total nonperforming assets $ 1,488 $ 1,250Loans 90 days or more past due and still accruing:Commercial and industrial $ 7 $ 49
CRE — 1
Commercial construction 1 —
Residential mortgage - government guaranteed 418 759
Residential mortgage - nonguaranteed 21 27
Home equity 11 12
Indirect auto 2 1
Other consumer 21 13
Student - government guaranteed — 702
Student - nonguaranteed — 4
Credit card 53 37
Total loans 90 days or more past due and still accruing $ 534 $ 1,605Loans 30-89 days past due and still accruing:Commercial and industrial $ 230 $ 256
CRE 5 25
Commercial construction — 5
Residential mortgage - government guaranteed 326 268
Residential mortgage - nonguaranteed 313 346
Home equity 70 68
Indirect auto 669 646
Other consumer 271 187
Student - government guaranteed — 396
Student - nonguaranteed — 6
Credit card 87 64
Total loans 30-89 days past due and still accruing $ 1,971 $ 2,267
Nonperforming assets totaled $1.5 billion at December 31, 2023, up $238 million compared to December 31, 2022 due to increases in the CRE and commercial and industrial portfolios, partially offset by a decrease in the residential mortgage portfolio. Nonperforming loans and leases represented 0.44% of total loans and leases HFI, up 8 basis points compared to December 31, 2022.
Loans 90 days or more past due and still accruing totaled $534 million at December 31, 2023, down $1.1 billion compared to the prior year primarily due to the sale of the student loan portfolio and a decline in government guaranteed residential mortgages. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases HFI was 0.04% at December 31, 2023 and 2022.
Loans 30-89 days past due and still accruing totaled $2.0 billion at December 31, 2023, down $296 million compared to the prior year due to the sale of the student portfolio and a decrease in nonguaranteed residential mortgages, partially offset by increases in the other consumer portfolio and guaranteed residential mortgages. The ratio of loans 30-89 days or more past due and still accruing as a percentage of loans and leases HFI was 0.63% at December 31, 2023, down seven basis points compared to the prior year.
Truist Financial Corporation 61Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 19. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to “Note 5. Loans and ACL” for the amortized cost basis of loans by origination year and credit quality indicator as well as additional disclosures related to NPLs.
Table 20: Asset Quality RatiosDec 31, 2023 Dec 31, 2022Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI0.63 % 0.70 %Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI0.17 0.49NPLs as a percentage of loans and leases HFI0.44 0.36NPLs as a percentage of total loans and leases (1)0.46 0.36NPAs as a percentage of:
Total assets (1)0.28 0.23Loans and leases HFI plus foreclosed property0.46 0.38ALLL as a percentage of loans and leases HFI1.54 1.34Ratio of ALLL to NPLs3.5x 3.7xLoans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding government guaranteed (2)0.04 % 0.04 %(1) Includes LHFS.
(2) This asset quality ratio has been adjusted to remove the impact of government guaranteed 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 21: Asset Quality Ratios (Continued)
Year Ended December 31,2023 2022 2021Net charge-offs as a percentage of average loans and leases HFI:
Commercial:Commercial and industrial 0.20 % 0.04 % 0.10 %
CRE 0.71 0.02 0.01
Commercial construction 0.04 (0.07) (0.03)Consumer:Residential mortgage 0.01 (0.01) 0.02
Home equity (0.12) (0.11) (0.11)
Indirect auto 1.66 1.17 0.92
Other consumer 1.40 1.14 0.72
Student 4.39 0.34 0.31
Credit card 3.85 2.98 2.42
Total 0.50 0.27 0.24
Ratio of ALLL to net charge-offs 3.0x 5.3x 6.4xThe following table presents activity related to NPAs:
Table 22: Rollforward of NPAs(Dollars in millions) 2023 2022
Balance, January 1 $ 1,250 $ 1,163
New NPAs 3,055 1,983
Advances and principal increases 842 662Disposals of foreclosed assets (1)(603) (471)Disposals of NPLs (2)(237) (129)
Charge-offs and losses (1,013) (494)
Payments (1,357) (917)
Transfers to performing status (440) (560)
Other, net (9) 13
Ending balance, December 31 $ 1,488 $ 1,250
(1) Includes charge-offs and losses recorded upon sale of $196 million and $130 million for the year ended December 31, 2023 and 2022, respectively.
(2) Includes charge-offs and losses recorded upon sale of $30 million and gains, net of charge-offs recorded upon sale of $2 million for the year ended December 31, 2023 and 2022, respectively.
62 Truist Financial Corporation
CRE and Commercial Construction
Truist has noted that the CRE and commercial construction portfolios have the potential for heightened risk in the current environment. Truist maintains a high-quality portfolio through disciplined risk management and prudent client selection. In addition, the Company’s exposure to large CRE tends to have more institutional sponsorship and the Company has reduced exposure to smaller CRE. Truist’s CRE and commercial construction portfolios totaled $29.3 billion as of December 31, 2023, which includes 33% related to multifamily residential, 17% related to office, 17% related to industrial, 14% related to retail, and the remainder composed of hotel and other commercial real estate.
Our office and medical portfolios are primarily composed of Class A, multi-tenant properties located within Truist bank’s footprint. As of December 31, 2023, approximately 97% of these properties are multi-tenant or medical, and within our top 10 markets 64% and 25% of these exposures represent Class A and Class B properties, respectively. Approximately 26% and 25% of these exposures are scheduled to mature in 2024 and 2025, respectively, with the remainder scheduled to mature in 2026 and beyond. Truist maintains rigorous credit risk management surveillance routines across all loan portfolios. During 2023, Truist performed multiple reviews of the CRE office portfolio, which resulted in an increase in the ALLL for this portfolio.
Table 23: CRE and Commercial Construction by Type
December 31, 2023 December 31, 2022
(Dollars in millions) LHFI NPL LHFI NPL
CRE and commercial construction:
Multifamily $ 9,599 $ 27 $ 7,762 $ —
Industrial 4,931 3 4,329 —
Office 4,920 265 5,258 75
Retail 4,290 9 4,668 2
Hotel 2,480 — 2,965 —
Other (1)
3,033 4 3,543 5
Total $ 29,253 $ 308 $ 28,525 $ 82
(1) Includes $554 million and $590 million medical portfolio balances at December 31, 2023 and 2022, respectively. There were no NPLs at either period-end.
See additional information on the CRE and commercial construction portfolios in “Note 5. Loans and ACL,” including loans by origination year and credit quality indicator.Truist Financial Corporation 63ACL
Activity related to the ACL is presented in the following tables:Table 24: Activity in ACLYear Ended December 31,(Dollars in millions) 2023 2022 2021Balance, beginning of period (1)$ 4,649 $ 4,695 $ 6,199
Provision for credit losses 2,109 777 (813)Charge-offs:Commercial and industrial (390) (143) (243)
CRE (166) (13) (10)
Commercial construction (5) (1) (2)
Residential mortgage (10) (9) (23)
Home equity (10) (13) (16)
Indirect auto (531) (411) (336)
Other consumer (477) (381) (255)
Student (108) (22) (24)
Credit card (223) (176) (150)
Total charge-offs (1,920) (1,169) (1,059)Recoveries:Commercial and industrial 70 87 107
CRE 3 8 6
Commercial construction 3 5 4
Residential mortgage 6 16 12
Home equity 23 25 29
Indirect auto 107 91 92
Other consumer 78 79 74
Student — 1 1
Credit card 35 34 37
Total recoveries 325 346 362
Net charge-offs (1,595) (823) (697)Other (2)(70) — 6
Balance, end of period $ 5,093 $ 4,649 $ 4,695ACL: (1)ALLL 4,798 4,377 4,435
RUFC 295 272 260
Total ACL $ 5,093 $ 4,649 $ 4,695(1) Excludes provision for credit losses and allowances related to other financial assets at amortized cost.
(2) 2023 includes the impact from the adoption of the Troubled Debt Restructurings and Vintage Disclosures accounting standard.Net charge-offs during 2023 totaled $1.6 billion, or 0.50% as a percentage of average loans, and were up twenty-three basis points compared to the prior year, primarily driven by higher charge-offs in the commercial and industrial, CRE, indirect auto, other consumer, and credit card portfolios as well as the sale of the student loan portfolio.
The allowance for credit losses was $5.1 billion and includes $4.8 billion for the allowance for loan and lease losses and $295 million for the reserve for unfunded commitments. The ALLL ratio was 1.54%, compared to 1.34% at December 31, 2022. The increase in the ALLL ratio primarily reflects an increase in reserves related to the CRE and commercial construction portfolios, loan growth in the other consumer portfolio, partially offset by the sale of the student portfolio. The ALLL covered nonperforming loans and leases held for investment 3.5x compared to 3.7x at December 31, 2022. At December 31, 2023, the ALLL was 3.0x annualized net charge-offs, compared to 5.3x at December 31, 2022.
64 Truist Financial CorporationThe 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 25: Allocation of ALLL by Category
December 31, 2023 December 31, 2022(Dollars in millions) Amount % ALLL in Each Category % Loans in Each Category Amount % ALLL in Each Category % Loans in Each CategoryCommercial and industrial $ 1,404 29.4 % 51.6 % $ 1,409 32.3 % 50.3 %
CRE 616 12.8 7.2 224 5.1 7.0
Commercial construction 174 3.6 2.1 46 1.1 1.8
Residential mortgage 298 6.2 17.8 399 9.1 17.4
Home equity 89 1.9 3.2 90 2.0 3.3
Indirect auto 942 19.6 7.3 981 22.4 8.6
Other consumer 890 18.5 9.2 770 17.6 8.5
Student — — — 98 2.2 1.6
Credit card 385 8.0 1.6 360 8.2 1.5
Total ALLL 4,798 100.0 % 100.0 % 4,377 100.0 % 100.0 %
RUFC 295 272
Total ACL $ 5,093 $ 4,649Truist monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. Truist also receives notification when the first lien holder, whether Truist or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, Truist obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.Truist has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by Truist. Truist estimates credit losses on second lien loans where the first lien is delinquent based on historical experience; the increased risk of loss on these credits is reflected in the ALLL. As of December 31, 2023, Truist held or serviced the first lien on 32% of its second lien positions.Other Assets
The components of other assets are presented in the following table:Table 26: Other Assets as of Period End
(Dollars in millions) Dec 31, 2023 Dec 31, 2022
Tax credit and other private equity investments $ 7,898 $ 6,825
Bank-owned life insurance 7,716 7,618
Prepaid pension assets 6,563 4,539
DTAs, net 3,037 3,027
Accounts receivable 2,723 2,682
Accrued income 2,345 2,265
Leased assets and related assets 1,647 2,082
FHLB stock 1,198 1,279
Prepaid expenses 1,130 1,162
ROU assets 1,069 1,193
Derivative assets 951 684
Equity securities at fair value 360 898
Other 533 874
Total other assets $ 37,170 $ 35,128
Truist Financial Corporation 65Funding ActivitiesDeposits are the primary source of funds for the Company’s lending and investing activities. Scheduled payments and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, Federal funds purchased and other short-term borrowed funds, as well as long-term debt issued through the capital markets, all provide supplemental liquidity sources. Funding activities are monitored and governed through Truist’s overall ALM process under the governance and oversight of the MRLCC, which is further discussed in the “Market Risk” section in MD&A. The following section provides a brief description of the various sources of funds.DepositsDeposits are obtained principally from individuals and businesses within Truist’s geographic area and include noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market deposit accounts, CDs, and IRAs. Deposit account terms vary with respect to the minimum balance required, the time period the funds must remain on deposit and service charge schedules. Interest rates paid on specific deposit types are determined based on (i) competitor deposit rates, (ii) the anticipated amount and timing of funding needs, (iii) the availability and cost of alternative sources of funding, and (iv) anticipated future economic conditions and interest rates. Deposits are attractive sources of funding because of their stability and relative cost.The following table presents a summary of deposits:Table 27: Deposits as of Period End
(Dollars in millions) Dec 31, 2023 Dec 31, 2022
Noninterest-bearing deposits $ 111,624 $ 135,742
Interest checking 104,757 110,464
Money market and savings 135,923 143,815
Time deposits 43,561 23,474
Total deposits $ 395,865 $ 413,495
Deposits totaled $395.9 billion at December 31, 2023, a decrease of $17.6 billion from December 31, 2022. The decline in deposits reflects the impacts of monetary tightening, inflation, and higher interest rate alternatives, partially offset by growth in time deposits, which reflects increases in various wholesale deposit products to support funding. Brokered deposits were $31.3 billion at December 31, 2023 compared to $22.4 billion at December 31, 2022.
Truist has a very granular and relationship-based deposit franchise. Approximately 62% of deposits are insured or collateralized at December 31, 2023, compared to 61% at December 31, 2022. Truist deposit accounts are typically based on long-term relationships and include multiple products and services. The amount of deposits above the FDIC’s limit of $250,000 was $175.1 billion and $189.6 billion as of December 31, 2023 and 2022, respectively, calculated using the same methodology as the Call Report for Truist Bank. The decrease in uninsured deposits from December 31, 2022 to December 31, 2023 was largely due to commercial clients that chose to diversify into money market mutual funds or across multiple banks (primarily higher-cost, non-operational deposits) and the maturity of large denominated negotiable certificates of deposit.The following table summarizes the maturities of time deposit accounts above $250,000:Table 28: Scheduled Maturities of Time Deposits $250,000 and Greater
December 31, 2023 (Dollars in millions)
Three months or less $ 7,531
Over three through six months 1,225
Over six through twelve months 1,592
Over twelve months 74
Total $ 10,422The following table presents average deposits:Table 29: Average DepositsThree Months Ended(Dollars in millions) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022
Noninterest-bearing deposits $ 114,555 $ 118,905 $ 123,728 $ 131,099 $ 141,032
Interest checking 101,722 101,252 102,105 108,886 110,001
Money market and savings 137,464 139,961 138,149 139,802 144,730
Time deposits 41,592 40,920 35,844 28,671 17,513
Total average deposits $ 395,333 $ 401,038 $ 399,826 $ 408,458 $ 413,276
66 Truist Financial Corporation
Average deposits for the fourth quarter of 2023 were $395.3 billion, a decrease of $5.7 billion, or 1.4%, compared to the prior quarter.
Average noninterest-bearing deposits decreased 3.7% compared to the prior quarter and represented 29.0% of total deposits for the fourth quarter of 2023 compared to 29.6% for the third quarter of 2023 and 34.1% compared to the year ago quarter. Average money market and savings accounts decreased 1.8%. Average time deposits increased 1.6% due to increases in retail client time deposits, primarily due to migration from other deposit products, partially offset by a $2.1 billion decline in brokered time deposits.Borrowings
The types of short-term borrowings that have been, or may be, used by the Company include Federal funds purchased, securities sold under repurchase agreements, master notes, commercial paper, short-term bank notes, and short-term FHLB advances. Short-term borrowings fluctuate based on the Company’s funding needs. While deposits remain the primary source for funding loan originations, management uses short-term borrowings as a supplementary funding source for loan growth and other balance sheet management purposes. The following table summarizes certain information for the past three years with respect to short-term borrowings excluding trading liabilities, hedges, and collateral in excess of derivative exposure:Table 30: Short-Term BorrowingsAs Of / For The Year Ended December 31,(Dollars in millions) 2023 2022 2021Securities sold under agreements to repurchase:Maximum outstanding at any month-end during the year $ 4,120 $ 6,033 $ 3,279
Balance outstanding at end of year 2,427 2,128 2,435
Average outstanding during the year 2,472 2,670 2,382
Average interest rate during the year 5.18 % 1.33 % 0.07 %
Average interest rate at end of year 5.39 4.36 0.01Federal funds purchased and short-term borrowed funds:Maximum outstanding at any month-end during the year $ 26,453 $ 22,324 $ 6,244
Balance outstanding at end of year 22,401 19,340 808
Average outstanding during the year 22,007 10,135 1,936
Average interest rate during the year 5.26 % 2.79 % 0.12 %
Average interest rate at end of year 5.15 4.38 0.08
At December 31, 2023, short-term borrowings totaled $24.8 billion, an increase of $1.4 billion compared to December 31, 2022. Average short-term borrowings were $24.5 billion, or 5.2% of total funding, for the year ended December 31, 2023, as compared to $15.0 billion, or 3.2%, 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 $38.9 billion at December 31, 2023, a decrease of $4.3 billion compared to December 31, 2022. During the year ended December 31, 2023, the Company had:
• Maturities and redemptions of $5.5 billion of senior notes.
• Issued $8.0 billion fixed-to-floating rate senior notes with interest rates between 4.87% and 7.161% due from June 8, 2027 to June 8, 2034.
• Net redemptions of $6.6 billion of FHLB floating rate advances as issuances in the first quarter of 2023 were more than offset by redemptions throughout the rest of 2023.
Truist Financial Corporation 67Shareholders’ Equity
Truist’s book value per common share and TBVPS are presented in the following table:Table 31: Book Value per Common Share
(Dollars in millions, except per share data, shares in thousands) Dec 31, 2023 Dec 31, 2022
Common equity per common share $ 39.31 $ 40.58Non-GAAP capital measure: (1)Tangible common equity per common share $ 21.83 $ 18.04Calculation of tangible common equity: (1)Total shareholders’ equity $ 59,253 $ 60,537Less:Preferred stock 6,673 6,673
Noncontrolling interests 152 23
Goodwill and intangible assets, net of deferred taxes 23,306 29,908
Tangible common equity $ 29,122 $ 23,933
Common shares outstanding at end of period 1,333,743 1,326,829(1) Tangible common equity is a non-GAAP measure that excludes the impact of intangible assets, net of deferred taxes. This measure is useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses this measure to assess balance sheet risk and shareholder value.Total shareholders’ equity was $59.3 billion at December 31, 2023, a decrease of $1.3 billion from December 31, 2022. This decrease includes $3.1 billion in common and preferred dividends and a $1.0 billion net loss, partially offset by $1.4 billion received in connection with the TIH minority stake sale, net of tax, and $1.1 billion in OCI. Truist’s book value per common share at December 31, 2023 was $39.31, compared to $40.58 at December 31, 2022. Truist’s TBVPS of $21.83 at December 31, 2023, increased 21% compared to December 31, 2022.Risk ManagementTruist seeks to maintain 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 is designed to promote the execution of business strategies and objectives in alignment with its risk appetite.
Truist has developed and employs a risk framework that further guides business functions in identifying, measuring, responding to, monitoring, and reporting on possible exposures to the organization. Truist has developed a risk taxonomy designed to drive internal risk measurement and monitoring and enable Truist to clearly and transparently communicate to stakeholders the level of potential risk the Company faces 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 must be evaluated and prioritized to identify those that present attractive risk-adjusted returns, while preserving asset value and capital.Truist’s compensation plans are designed to consider teammate’s adherence to and successful implementation of Truist’s risk values and associated policies and procedures. The Company’s compensation structure is designed to support its core values and sound risk management practices in an effort to promote judicious risk-taking behavior.
Truist’s purpose, mission, and values are the foundation for the risk management framework utilized at Truist and therefore serve as the basis on which the risk appetite and risk strategy are built. Truist’s RMO provides independent oversight and guidance for risk-taking across the enterprise. In keeping with the belief that consistent values drive long-term behaviors, Truist’s RMO has established the following risk values which are intended to guide teammates’ day-to-day activities:
• Managing risk is the responsibility of every teammate.
• Proactively identifying risk and managing the inherent risks of their businesses is the responsibility of the business units.
• Managing risk with a balanced approach which includes quality, profitability, and growth.
• Utilizing sound and consistent risk management practices.
68 Truist Financial Corporation
• Thoroughly analyzing risk quantitatively and qualitatively.
• Realizing lower cost of capital from high quality risk management.
Truist places significant emphasis on risk management oversight and maintains a separate Board-level Risk Committee, which assists the Board in its oversight of the Company’s risk management function. The Committee is responsible for approving and periodically reviewing the Company’s risk management framework and risk management policies as well as monitoring the Company’s risk profile, approving risk appetite statements, and providing input to management regarding Truist’s risk appetite and risk profile.The RMO is led by the CRO and is responsible for overseeing the identification, measurement, monitoring, management, and reporting of risk. The CRO has direct access to the Board to communicate any risk issues (current or emerging) as well as the performance of the risk management activities throughout the enterprise.As illustrated below, the risk management framework is supported by three lines of defense. The following figure describes the roles of the three lines of defense:
Truist’s Risk Governance framework is designed to provide comprehensive Board and management risk oversight, maintaining a committee governance structure that is designed to ensure alignment and execution of the risk management framework. The committee structure provides a mechanism to allow for efficient aggregation and escalation of risk information from the business units up to the risk programs, management and ultimately the Board. The GCO standardizes first-line risk execution and ownership across the company in partnership with the business units and enterprise functions. As part of the first-line of defense, the GCO provides risk advice and effective challenge, issues management, testing, reporting, and business continuity expertise to first-line execution efforts. The GCO coordinates closely with the RMO to ensure proper program execution and regulatory compliance.
Truist Financial Corporation 69
Truist maintains a robust and comprehensive management committee structure reporting to the Truist Board of Directors, or Board committees thereof, that are responsible for providing independent risk oversight of each of Truist’s primary risk types and comprehensive coverage of Truist’s strategy, risk-taking and execution activities. Examples of such committees include the ERC and Management Compensation Oversight Committee.
The ERC serves as the enterprise-wide risk governance body authorized by the Risk Committee of the Board of Directors with responsibility for broad strategic oversight of all risk types and establishing a fully integrated view of risks across Truist at the enterprise level. The ERC is responsible for maintaining an effective risk management framework and monitoring its adoption and execution across the enterprise. The ERC is chaired by the Vice Chair and Chief Risk Officer and its membership includes the Chief Executive Officer, Vice Chair and Chief Operating Officer, Chief Audit Officer, and other designated members of Truist management.Principal types of inherent risk include market, credit, liquidity, technology, compliance, strategic, reputational, and operational risks. The following is a discussion of these risks.
Market RiskMarket 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 RiskAs a financial institution, Truist is exposed to interest rate risk from assets, liabilities, and off-balance sheet positions. Truist primarily monitors this risk through two measurement types, (i) net interest income at risk and (ii) economic value of equity, and manages this risk with securities, derivatives, and broader asset liability management activities.
70 Truist Financial Corporation
Net interest income at risk measures changes in net interest income in alternate interest rate scenarios relative to Truist’s baseline scenario, which relies on assumptions including expectations of the economy and interest rates – which are influenced by market conditions, new business volume, pricing, and client behavior. In measuring net interest income at risk, Truist assumes that changes in key factors, such as prepayments and deposit pricing (betas), largely move in line with those it has experienced in prior rate cycles. However, future behavior of key factors used in this measurement may vary. Net interest income at risk measurement assumes, when applicable, that U.S. interest rates will not fall below zero.
Truist evaluates a wide range of alternate scenarios including instantaneous and gradual as well as parallel and non-parallel changes in interest rates. The following table provides additional information on the estimated change to net interest income over the following 12 months for select parallel alternate scenarios, expressed as a percentage change relative to baseline net interest income.
Table 32: Interest Sensitivity Simulation Analysis
Dec 31, 2023
Up 200bps gradual change in interest rates (1.46) %
Up 50bps instantaneous change in interest rates (0.36)Down 50bps instantaneous change in interest rates(0.10)Down 200bps gradual change in interest rates(0.30)
Estimated changes to net interest income in the previous table assume no change in deposit balances or mix relative to the baseline scenario. In an increasing rate scenario, rotation from non-interest-bearing into interest bearing deposits would reduce net interest income. Conversely, in a down rate scenario, rotation from higher yielding to lower yielding deposits would benefit net interest income. Truist performs and monitors sensitivity tests of deposit and other key assumptions used in interest rate risk.
Economic value of equity measures changes in economic value of Truist’s current balance sheet and off-balance sheet hedges under alternate rate scenarios relative to starting economic value. Truist uses economic value of equity as a longer-term measure of interest rate risk.
LIBOR Transition
The remaining tenors of U.S. dollar LIBOR ceased publication of representative rates on June 30, 2023, with only select tenors receiving a synthetic publication through September 30, 2024. Truist provided timely notices and information to impacted clients about the transition to new interest rates post cessation and had minimal use of synthetic LIBOR to support the transition. Most contracts were transitioned to new rates in July and August 2023, in accordance with fallback language. A small number of contracts utilize longer tenor LIBOR rates and will transition by early 2024 (6-month and 12-month LIBOR) based on contractual agreements. Truist has materially completed LIBOR transition efforts, primarily utilizing SOFR replacement rates, and closed formal project efforts as of September 2023.
Fallback language used to remediate loan agreements was generally consistent with ARRC recommendations and included use of “hardwired fallback” language, which transitioned loans to a SOFR based rate after June 30, 2023. For a small number of wholesale contracts remaining without fallback language, Truist leveraged the LIBOR Act and corresponding safe harbor provision to transition these loans to SOFR. Truist’s consumer lending portfolios included fallback language to transition to SOFR, based on lender discretion and as supported by the LIBOR Act; therefore, these contracts did not require remediation and also benefit from the safe harbor provisions of the LIBOR Act.
Derivatives that reference LIBOR transitioned to a SOFR-based replacement rate as set forth in the ISDA protocol addressing LIBOR fallbacks between the Company and its counterparties which have adhered to the protocol, through bilateral amendments between the Company and each of its counterparties, or as established under the LIBOR Act and rules promulgated thereunder by the FRB. Fallback language used to remediate LIBOR based derivatives was generally consistent with ISDA publications.
The Company’s preferred securities and the Company’s and Truist Bank’s floating rate notes that reference LIBOR transitioned to a SOFR based rate utilizing application of the LIBOR Act and the rules promulgated thereunder by the FRB. Truist announced that these securities would move to a 3-month adjusted Term SOFR in accordance with the LIBOR Act. See “Note 12. Shareholders’ Equity” for information about preferred stock using LIBOR.Market Risk from Trading ActivitiesAs 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 Financial Corporation 71Truist 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 19. Derivative Financial Instruments,” “Note 18. Fair Value Disclosures,” and “Critical Accounting Policies” herein for discussion of valuation policies and methodologies.
SecuritizationsAs of December 31, 2023, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule, which were non-agency asset backed securities positions, was $49 million. 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 PositionsThe trading portfolio of covered positions did not contain any correlation trading positions as of December 31, 2023.VaR-Based MeasuresVaR 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 12 months ended December 31, 2023 and 2022.
72 Truist Financial Corporation
Table 33: VaR-based MeasuresYear Ended December 31,2023 2022(Dollars in millions) 10-Day Holding Period 1-Day Holding Period 10-Day Holding Period 1-Day Holding Period
VaR-based Measures:Maximum $ 30 $ 14 $ 38 $ 14
Average 17 7 17 5
Minimum 10 4 6 3
Period-end 23 11 20 6VaR by Risk Class:Interest Rate Risk 5 6
Credit Spread Risk 2 8
Equity Price Risk 5 1
Foreign Exchange Risk 1 —
Portfolio Diversification (2) (9)
Period-end 11 6Stressed 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 34: Stressed VaR-based Measures - 10 Day Holding PeriodYear Ended December 31,(Dollars in millions) 2023 2022
Maximum $ 164 $ 109
Average 76 70
Minimum 25 40
Period-end 79 77
Compared to the prior year, Stressed VaR measures were generally higher, primarily due to higher market making inventory and lower diversification benefits in 2023.Specific Risk Measures
Specific risk is a measure of idiosyncratic risk that could result from risk factors other than broad market movements (e.g., default or event risks). The Market Risk Rule provides fixed risk weights under a standardized measurement method while also allowing a model-based approach, subject to regulatory approval. Truist utilizes the standardized measurement method to calculate the specific risk component of market risk regulatory capital. As such, incremental risk capital requirements do not apply.
VaR Model BacktestingIn accordance with the Market Risk Rule, the Company evaluates the accuracy of its VaR model through daily backtesting by comparing aggregate daily trading gains and losses (excluding fees, commissions, reserves, net interest income, and intraday trading) from covered positions with the corresponding daily VaR-based measures generated by the model. As illustrated in the following graph, there were no Company-wide VaR backtesting exceptions during the twelve months ended December 31, 2023. The total number of Company-wide VaR backtesting exceptions over the preceding twelve months is used to determine the multiplication factor for the VaR-based capital requirement under the Market Risk Rule. The capital multiplication factor increases from a minimum of three to a maximum of four, depending on the number of exceptions. All Company-wide VaR backtesting exceptions are thoroughly reviewed in the context of VaR model use and performance. There was no change in the capital multiplication factor over the preceding twelve months.
Truist Financial Corporation 73Model Risk OversightMRO 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 MRO 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 identify potential model enhancement.Stress TestingThe 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 risk factor sensitivities, historical repeats and hypothetical scenarios with varying liquidity horizons of key risk factors. 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.Credit RiskCredit risk is the risk to current or anticipated earnings or capital arising from the default, unwillingness or inability of a borrower, obligor, or counterparty such that an obligation will not be repaid on time and/or in full or the client and/or counterparty will fail to perform on an obligation to the Company or its affiliates. Credit risk exists in all activities where success depends on the performance of a borrower, obligor, or counterparty. Credit risk arises when Truist funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether on or off-balance sheet. Credit risk increases when the credit quality of an issuer whose securities or other instruments the Company or its affiliates holds has deteriorated.Truist has established the following general practices to manage credit risk:
• limiting the amount of credit that individual lenders may extend to a borrower;
• establishing a process for credit approval accountability;
• careful initial underwriting and analysis of borrower, transaction, market, and collateral risks;
• ongoing servicing and monitoring of individual loans and lending relationships;
• maintaining collections and asset resolution teams;74 Truist Financial Corporation• continuous monitoring of the portfolio, concentration and transactional limits, emerging risks, market dynamics and the economy; and
• periodically reevaluating the Company’s strategy and overall exposure as economic, market and other relevant conditions change.The following discussion describes the underwriting procedures and overall risk management of Truist’s lending function.
Underwriting Approach
The loan portfolio is a primary source of profitability and risk; therefore, proper loan underwriting is critical to Truist’s long-term financial success. Truist’s underwriting approach is designed to define acceptable combinations of specific risk-mitigating features that promote credit relationships that conform to Truist’s risk philosophy. Provided below is a summary of the most significant underwriting criteria used to evaluate new loans and loan renewals:
• Cash flow and debt service coverage - cash flow adequacy is a necessary condition of creditworthiness, meaning that loans must either be clearly supported by a borrower’s cash flow or, if not, must be justified by secondary repayment sources.
• Secondary sources of repayment - alternative repayment funds are a significant risk-mitigating factor as long as they are liquid, can be easily accessed, and provide adequate resources to supplement the primary cash flow source.• Value of any underlying collateral - loans are generally secured by the asset being financed. Because an analysis of the primary and secondary sources of repayment is the most important factor, collateral, unless it is liquid, does not justify loans that cannot be serviced by the borrower’s normal cash flows.• Overall creditworthiness of the client, taking into account the client’s relationships, both past and current, with Truist and other lenders - Truist’s success depends on building lasting and mutually beneficial relationships with clients, which involves assessing their financial position and background.
• Level of equity invested in the transaction - in general, borrowers are required to contribute or invest a portion of their own funds prior to any loan advances.
Refer to the “Lending Activities” section in MD&A for a discussion of each loan and lease portfolio.
Liquidity RiskLiquidity risk is the risk that (i) Truist will be unable to meet its obligations as they come due because of an inability to obtain adequate funding (funding liquidity risk), or (ii) Truist cannot easily monetize assets without significantly lowering market prices because of inadequate market depth or market disruptions (market liquidity risk). Refer to the “Liquidity” section in MD&A for additional discussion.Technology RiskTechnology risk is the business risk associated with the use, ownership, operation, involvement, influence, and adoption of information technology across the Company. Truist has defined and adopted a technology risk framework that provides the foundation for technology risk strategy, program, and oversight and defines key objectives, operating model components, risk domains, and capabilities to manage this risk.
Cybersecurity risk management and strategy
Like other financial services firms, Truist faces an increasingly complex and evolving cybersecurity threat environment. See Item 1A, “Risk Factors” for information on risks from cybersecurity threats. We maintain a risk-based cybersecurity framework that is part of our enterprise-wide risk management framework. It is implemented through people, processes, and technology, whereby we assess, identify, and manage material risks from cybersecurity threats, and seek to continually adapt our risk mitigation activities accordingly.
Our cybersecurity framework is aligned with industry standards such as those of the National Institute of Standards and Technology and the Federal Financial Institutions Examination Council, and is designed to conform to the requirements and guidance from applicable regulatory authorities. In addition, our cybersecurity framework includes internally and third-party focused capabilities that drive the development and implementation of our data security strategy, which is designed to reduce cybersecurity risk while enabling Truist’s corporate business objectives. Truist’s cybersecurity strategy is enabled by Truist’s multilayered defenses, including capabilities that are designed for early and rapid cyber threat identification, detection, protection, response, and recovery.
Truist Financial Corporation 75
Processes for assessing, identifying, and managing material risks from cybersecurity threats
As part of our enterprise risk management framework, we have implemented and maintain a program to assess, identify, and manage risks arising from the cybersecurity threats facing Truist. Truist maintains cybersecurity and information security policies, procedures, and technologies that are designed to address regulatory requirements and protect our clients’, teammates’ and our own data against unauthorized disclosure, modification, and misuse. These policies, procedures, and technologies cover a broad range of areas, including: identification of internal and external threats, access control, data security, protective controls, detection of malicious or unauthorized activity, incident response, and recovery planning.
Truist participates in the federally recognized Financial Services Information Sharing and Analysis Center as a key part of the Company’s cyber threat intelligence and response programs, as well as other industry organizations and initiatives that promote industry best practices such as harmonized cybersecurity standards, cyber readiness, and secure consumer financial data sharing. To further mitigate the risks presented by an evolving cyber threat landscape, Truist provides data protection guidance to clients and promotes data protection awareness and accountability through mandatory teammate training. Truist conducts scenario-driven test exercises simulating impacts and consequences developed through analysis of real-world technology incidents as well as known and anticipated cyber threats. These exercises are designed to assess the viability of Truist’s crisis response and management programs and provide the basis for continuous improvement. Where a potential cybersecurity threat is identified in our environment, our Cyber Incident Response Team evaluates the potential impact to Truist and coordinates remediation where required. Our Cyber Incident Response Team also manages significant cyber-specific events, with escalation to executive management and the Board, as appropriate.
Our cybersecurity framework is also designed to help oversee, identify, and mitigate cybersecurity risks associated with our use of third-party service providers. Following an initial assessment of the level of enterprise risk potentially posed by use of the third-party, the service provider is then subject to further risk-based assessments on its operational resilience and cybersecurity practices, including disaster recovery and business continuity plans that specify the time frame to resume activities and recover data. In its agreements with third-party service providers, Truist then requires service providers to adhere to Truist’s relevant cybersecurity and operational resilience standards, subject to certain exceptions that are managed on a case-by-case basis.
Our cybersecurity framework is routinely assessed to ensure the effectiveness of key controls through third-party cybersecurity maturity measurements, technology risk oversight, compliance risk management testing and monitoring, internal audit review, and regulatory oversight.
In addition, Truist continues to strengthen its cross-functional, holistic approach to enterprise resilience by addressing potential amplification of risks from significant technology, cybersecurity and data incidents. As part of these efforts, Truist is deepening capabilities for both disaster recovery and restoration, along with the implementation of other resilience measures.
Management’s role in assessing and managing material risks from cybersecurity threats
Truist’s cybersecurity framework is operated and maintained by management, including the CIO, CISO, CRO and CTRO. These senior officers are responsible for assessing and managing Truist’s cybersecurity risks. Our cybersecurity framework strategy, which is overseen by CISO, is informed by various risk and control assessments, control testing, external assessments, threat intelligence, and public and private information sharing. Our cybersecurity framework also includes processes for escalating and considering the materiality of incidents that impact Truist, including escalation to executive management and the Board, which are periodically tested through tabletop exercises to test Truist’s preparedness.
In addition, our Technology Management Committee is an internal committee created to ensure that members of executive management overseeing multiple business units understand pertinent technology-related topics, including cybersecurity and information security, and associated risks. The Technology Management Committee provides additional oversight of cybersecurity and information security strategy, including understanding and prioritizing cybersecurity and information security capabilities and associated risks.
The members of management that lead our Cybersecurity Program and strategy have extensive experience in technology, cybersecurity, and information security. Our CIO of has over 25 years of experience leading cybersecurity teams at financial institutions, including in the areas of information technology strategy, risk management, and information security. Following the departure of our CISO in January 2024, we have appointed an interim CISO while our search for a permanent CISO continues. Our interim CISO has over 20 years of experience as a technology and information security executive in the financial services industry, including serving as CISO at two different financial institutions and as a supervising examiner for the Federal Reserve Bank of New York.
76 Truist Financial Corporation
Board of Directors’ oversight of risks from cybersecurity threats
Our Board has primary responsibility for the oversight of our enterprise risk management, and exercises its oversight function in respect of cybersecurity risk through two of its committees. The Risk Committee of the Board is responsible for oversight of Truist’s risk management function, involving approving and reviewing Truist’s risk management framework and policies as well as overseeing management’s implementation of Truist’s risk management framework and significant risk policies. In addition, the Technology Committee of the Board assists the Board and the Risk Committee in oversight of Truist’s technology risks.
The oversight responsibility of our Board and its committees is facilitated through management-reporting processes designed to provide visibility to the Board and its committees on the processes for the identification, assessment, prioritization and management of critical risks and management’s risk mitigation strategies. For example, members of the Risk Committee receive regular reports from our CRO and CTRO related to information technology and cybersecurity risks to Truist. The Risk Committee may also meet throughout the year with risk management advisors and discuss with executive management any recommendations received. In addition, the Technology Committee receives reports from management regarding Truist’s practices, management, and functioning of technology operations and cybersecurity and information security risks, and reviews and discusses Truist’s technology policies, standards and controls. On at least a semi-annual basis, the Technology Committee reports to the Risk Committee the significant activities undertaken by the Technology Committee involving oversight of technology risks in support of the Risk Committee’s overall responsibility and oversight of Truist’s risk management framework. The CISO provides updates at every Technology Committee meeting on cybersecurity and information security risk, and the Board annually reviews and approves our Information Security Program and Information Security Policy.
Truist provides ongoing development and education to its directors with respect to cybersecurity, including presentations at Board meetings on special topics, such as updates on cybersecurity legislation and regulation, as well as making available written materials and video presentations to directors for review at their own pace. The Board also conducts a cybersecurity tabletop exercise at least every other year to simulate Truist’s analysis and response to hypothetical cybersecurity incidents. In addition, Truist provides directors with a Board Cybersecurity Handbook that provides details on key Truist practices, resources and protocols relating to cybersecurity protection, response and preparedness. Finally, as required by the Gramm-Leach-Bliley Act, the Board receives an update at least annually on Truist’s information security program.
Data Risk
Truist is subject to risk that data may be negatively impacted by integrity, quality, availability, and privacy, which could potentially impact regulatory and management reporting, public disclosures, and business decisions. Truist recognizes the importance of maintaining accurate and reliable data and maintains a formal data risk management program to mitigate risks related to data fidelity. Through active data risk monitoring and accuracy testing, Truist provides reasonable assurance over the quality and retention of key data used for operational, strategic, regulatory, and compliance purposes. Management and the Board provide oversight of the data risk management program and receive regular updates from the Chief Data Risk Officer. While the current data risk management program identifies and mitigates data risk, the data risk program must be dynamic and is actively expanding oversight to enhance data risk management capabilities to achieve the data risk management objectives defined in the strategic plan.Compliance RiskCompliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules, or regulations, or from non-conformance with prescribed practices, internal policies, and procedures or ethical standards. This risk exposes Truist to fines, civil monetary penalties, payment of damages, and the voiding of contracts. Compliance risk can result in diminished reputation, reduced franchise or enterprise value, limited business opportunities, increased costs and expenses, and lessened expansion potential.Strategic RiskStrategic risk is the risk to earnings, capital, stock price, diminished stakeholder confidence, or negative impact to human capital resulting from ineffective strategy and execution, adverse business decisions, or lack of responsiveness to changes in the banking industry and operating environment. Truist is committed to fulfilling its overall strategic objectives by setting and successfully executing established business strategies to deliver on earnings growth and maintaining strong confidence and trust with key stakeholder constituencies.
Truist Financial Corporation 77Reputational RiskTruist manages reputational risk under an established risk management framework that includes established policies and procedures embedded within its existing business and risk management processes. The Company proactively monitors, identifies, and internally escalates potential reputational risk events and endeavors to mitigate such reputational risks in a timely manner. Truist takes pride with ensuring transparent and accurate communication, both internally and externally, to respond to key stakeholders on issues or events that give rise to potential reputational risk. Truist utilizes an established risk taxonomy that is used to help identify, measure, and monitor reputational risk that enables clear transparently communication to stakeholders on the level of potential risk faced by the Company which in turn allows for effective management of risk to acceptable levels.
Truist is committed to operating in a manner that reflects the Company’s stated Purpose, Mission, and Values and seeks to protect its reputation, public confidence, and resilience by identifying and evaluating associated risks that conflict with the expectations of the Company’s internal and external stakeholders, including clients, teammates, investors, regulators, and communities.Operational RiskOperational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes, people, and systems or from external events. It includes legal risk, which is the risk of loss arising from defective transactions, litigation or claims made, or the failure to adequately protect company-owned assets. An operational loss occurs when an event results in a loss or reserve originating from operational risk.Model RiskModel risk is the risk to current or anticipated earnings or capital from decisions based on incorrect or misused model outputs. Truist uses models for many purposes, including the valuation of financial positions, estimation of credit losses, and the measurement of risk. Valuation models are used to value certain financial instruments for which quoted prices may not be readily available. Valuation models are also used as inputs for VaR, the estimation of VaR itself, regulatory capital, stress testing, and the ACL. Models are owned by the applicable BUs, who are responsible for the development, implementation, and use of their models. Oversight of these functions is performed by the MRO, which is a component of the RMO. Once models have been approved, model owners are responsible for the maintenance of an appropriate operating environment and must monitor and evaluate the performance of the models on a recurring basis. Models are updated in response to changes in portfolio composition, industry and economic conditions, technological capabilities, and other developments.
MRO manages model risk in a holistic manner through a suite of model governance and model validation activities. The risk of each model is assessed and classified into various risk tiers. Additionally, MRO maintains an enterprise-wide model inventory containing relevant model information. Regarding model validation, MRO utilizes internal validation analysts and managers with skill sets in predictive modeling to perform detailed reviews of model development, implementation, and conceptual soundness. On certain occasions, the MRO will also engage external parties to assist with validation efforts. Once in a production environment, MRO assesses a model’s performance on a periodic basis through ongoing monitoring reviews. MRO tracks issues that have been identified during model validation or through ongoing monitoring and engages with model owners to ensure their timely remediation. MRO gauges model risk utilizing a collection of key risk indicators, which are periodically reported to relevant committees, including but not limited to, the Model Risk Management Committee and the ERC. MRO will also present model risk topics to the Board Risk Committee as necessary.LiquidityLiquidity represents the continuing ability to meet funding needs, including deposit withdrawals, repayment of borrowings and other liabilities, and funding of loan commitments. In addition to the level of liquid assets, such as cash, cash equivalents, and AFS securities, other factors affect the ability to meet liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity, growing core deposits, loan repayment, and the ability to securitize or package loans for sale.
Truist monitors the ability to meet client demand for funds under both normal and stressed market conditions. In considering its liquidity position, management evaluates Truist’s funding mix based on client core funding, client rate-sensitive funding, and national markets funding. In addition, management evaluates exposure to rate-sensitive funding sources that mature in one year or less. Management also measures liquidity needs against 30 days of stressed cash outflows for Truist and Truist Bank. To ensure a strong liquidity position and compliance with regulatory requirements, management maintains a liquid asset buffer of cash on hand and highly liquid unencumbered securities.
78 Truist Financial CorporationInternal Liquidity Stress TestingLiquidity 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 PlanTruist 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 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 $84.9 billion and Truist’s average LCR was 112% for the three months ended December 31, 2023.
Effective July 2021, Truist became subject to final rules implementing the NSFR, which are designed to ensure that banking organizations maintain a stable, long-term funding profile in relation to their asset composition and off-balance sheet activities. At December 31, 2023, Truist was compliant with this requirement.Sources of FundsManagement believes current sources of liquidity are sufficient to meet Truist’s on- and off-balance sheet obligations. Truist funds its balance sheet through diverse sources of funding including client deposits, secured and unsecured capital markets funding, and shareholders’ equity. Truist Bank’s primary source of funding is client deposits. Continued access to client deposits is highly dependent on public confidence in the stability of Truist Bank and its ability to return funds to clients when requested.
Truist Bank maintains a number of diverse funding sources to meet its liquidity requirements. These sources include unsecured borrowings from the capital markets through the issuance of senior or subordinated bank notes, institutional CDs, overnight and term Federal funds markets, and retail brokered CDs. Truist Bank also maintains access to secured borrowing sources including FHLB advances, repurchase agreements, and the FRB discount window. Available investment securities could be pledged to create additional secured borrowing capacity. The following table presents a summary of Truist Bank’s available secured borrowing capacity and eligible cash at the FRB:
Table 35: Selected Liquidity Sources
(Dollars in millions) Dec 31, 2023 Dec 31, 2022Unused borrowing capacity:FRB $ 55,252 $ 49,250
FHLB 24,712 20,770
Available investment securities (after haircuts)
74,717 85,401
Available secured borrowing capacity 154,681 155,421
Eligible cash at the FRB 25,085 15,556
Total $ 179,766 $ 170,977
At December 31, 2023, Truist Bank’s available secured borrowing capacity represented approximately 3.4 times the amount of wholesale funding maturities in one-year or less. Truist additionally has the ability to increase sources of funding by pledging available investment securities to receive the par value of the collateral under the FRB Bank Term Funding Program.
Truist Financial Corporation 79Parent CompanyThe 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 and, from time-to-time, potential repurchases or redemptions of a portion of an outstanding tranche of the long-term debt of the Parent Company (as may be permitted by the terms of each respective series). See “Note 22. Parent Company Financial Information” 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 December 31, 2023 and December 31, 2022, the Parent Company had 48 months and 37 months, respectively, of cash on hand to satisfy projected cash outflows, and 30 months and 22 months, respectively, when including the payment of common stock dividends.Credit RatingsCredit 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” 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 following table presents the credit ratings and outlooks of Truist and Truist Bank as of December 31, 2023:
Table 36: Credit Ratings of Truist Financial Corporation and Truist BankMoody’s S&P Fitch DBRS Morningstar
Truist Financial Corporation:Issuer A3 A- / A-2 A+ / F1 AAL / R-1M
Senior unsecured A3 A- A AAL
Subordinated A3 BBB+ A- AH
Preferred stock Baa2(hyb) BBB- BBB ALTruist Bank:Issuer A2 A / A-1 A+ / F1 AA / R-1H
Senior unsecured A2 A A+ AA
Deposits Aa3 / P-1 NA AA- / F1+ AA
Subordinated (P) A2 A- A AALRatings outlook:Credit trend Negative Stable Negative Stable
Changes in the Company’s credit ratings and outlooks during 2023 include:
• On March 31, 2023, S&P Global Ratings affirmed the ratings of Truist and Truist Bank and revised the outlook on those ratings to “stable” from “positive,” citing heightened market volatility in the wake of bank failures in the first half of 2023 and, with inflation still elevated, higher uncertainty, and greater downside risk in the economic outlook. The change in outlook was part of a broader action by S&P Global Ratings whereby the “positive” outlook on three other large U.S. banks was revised to “stable.”
• On August 7, 2023, Moody’s Investors Service placed the long-term ratings and certain short-term ratings of Truist and Truist Bank “under review for downgrade,” citing Truist’s comparatively low, though improving, level of capitalization, along with weaknesses in asset-liability management. The review also reflects the view of Moody’s Investor Service that the stability of U.S. banks’ deposit funding has declined, as reflected in the agency’s decision to lower the U.S. macro profile.
80 Truist Financial Corporation
• On August 11, 2023, DBRS, Inc. affirmed the ratings of Truist and Truist Bank and maintained a “stable” ratings outlook, citing Truist’s highly scaled and diversified regional banking franchise, conservative risk profile, and sound liquidity management and capital levels. In affirming the ratings, DBRS, Inc. also noted the ratings take into account the more challenging operating environment and the expectation that funding costs and asset quality metrics could worsen from current levels, providing some pressure to earnings, and that credit deterioration associated with normalization of the credit cycle would be manageable.
• On August 21, 2023, S&P Global Ratings affirmed the ratings of Truist and Truist Bank and maintained a “stable” ratings outlook, citing Truist’s strong market position and diversified business model as a substantial offset to deposit and margin pressures. S&P Global Ratings viewed Truist’s capital ratios unfavorably after considering unrealized losses on securities but also wrote that Truist has the earnings capacity to build its capital ratios and support franchise growth over time.
• On October 16, 2023, Fitch Ratings affirmed the ratings of Truist and Truist Bank and revised the ratings outlook to “negative” from “stable.” In affirming Truist’s ratings, Fitch Ratings cited the company’s diverse revenue model, solid asset quality, and expected capital build over the rating horizon; however, the “negative” ratings outlook reflects the view of Fitch Ratings that Truist currently has less “headroom” to face increasing earnings pressures than similarly-rated peers.
• On November 1, 2023, Moody’s Investors Service affirmed the ratings of Truist and Truist Bank and revised the outlook on those ratings to “negative” from “rating under review for downgrade.” The confirmation of Truist’s ratings reflects Moody’s Investor Service’s view that Truist should be able to continue to grow its capital ratios through earnings retention and balance sheet optimization activities, and also maintain adequate control of its asset liability management risks, including rising funding costs and its sizeable holdings of low-yielding, fixed-rate assets.
• On February 20, 2024, Moody’s Investors Service placed the long-term ratings and certain short-term ratings of Truist and Truist Bank “under review for downgrade,” citing that even though its capitalization will improve materially, Truist will be less diversified and will have greater reliance on net interest income, and as a consequence of these factors, it will likely have greater earnings volatility following the sale of TIH.
• On February 20, 2024, Fitch Ratings downgraded the ratings of Truist and Truist Bank to ‘A’ from ‘A+’ following the announced sale of TIH. Fitch has also downgraded TFC and Truist Bank’s viability rating to ‘a’ from ‘a+.’ The rating outlook is “stable.” Fitch Ratings cited: (i) TIH as largest source of fee income; (ii) the segment has grown faster than rest of the bank and benefited from higher inflation in recent years; and (iii) the sale will result in a less diverse business mix than similarly-rated peers.
• On February 20, 2024, DBRS, Inc. affirmed the ratings of Truist and Truist Bank and maintained a “stable” ratings outlook, citing the sale of the remaining stake in TIH has no impact on the Company’s credit ratings.
• On February 22, 2024, S&P Global Ratings affirmed its ‘A-/A-2’ issuer credit ratings on Truist and its ‘A/A-1’ ratings on Truist Bank, citing that the TIH sale will significantly boost Truist’s regulatory capital ratios, enhance Truist’s liquidity, and help fund continued organic growth in its core banking businesses. The outlook on the long-term ratings is stable.
Management believes current sources of liquidity are adequate to meet Truist’s current requirements and plans for continued growth. As of December 31, 2023, the Company had $2.3 billion in obligations to purchase goods or services that are enforceable and legally binding. Many of the purchase obligations have terms that are not fixed and determinable and are included in the total amount of obligations based upon the estimated timing and amount of payment. In addition, certain of the purchase agreements contain clauses that would allow Truist to cancel the agreement with specified notice; however, that impact is not included in determining the total amount of obligations. See “Note 9. Other Assets and Liabilities,” “Note 11. Borrowings,” and “Note 16. Commitments and Contingencies” for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.CapitalThe maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. Truist’s principal goals related to the maintenance of capital are to provide adequate capital to support Truist’s risk profile consistent with the Board-approved risk appetite, provide financial flexibility to support future growth and client needs, comply with relevant laws, regulations, and supervisory guidance, achieve optimal credit ratings for Truist and its subsidiaries, remain a source of strength for its subsidiaries, and provide a competitive return to shareholders. Risk-based capital ratios, which include CET1 capital, Tier 1 capital, and Total capital are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.
Truist Financial Corporation 81
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 objective is to maintain capital at levels that are in excess of internal capital limits, which are above the regulatory “well-capitalized” minimums. Management has implemented internal stress capital ratio minimums to evaluate whether capital ratios calculated after the effect of alternative capital actions are likely to remain above internal minimums. Breaches of internal stressed minimums prompt a review of the planned capital actions included in Truist’s capital plan.
Table 37: Capital RequirementsMinimum Capital Well-Capitalized Minimum Capital Plus Stress Capital Buffer (1)
Truist Truist Bank
CET14.5 % NA 6.5 % 7.4 %
Tier 1 capital 6.0 6.0 % 8.0 8.9
Total capital 8.0 10.0 10.0 10.9Leverage ratio 4.0 NA 5.0 NA
Supplementary leverage ratio 3.0 NA NA NA(1) Reflects a SCB requirement of 2.9% applicable to Truist as of December 31, 2023. Truist’s SCB requirement, received in the 2023 CCAR process, is effective from October 1, 2023 to September 30, 2024.
Payments of cash dividends and repurchases of common shares are the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company’s double leverage ratio (investments in subsidiaries as a percentage of shareholders’ equity). The active management of the subsidiaries’ equity capital is the process used to manage this important driver of Parent Company liquidity and is a key element in the management of Truist’s capital position.
Management intends to maintain capital at Truist Bank at levels that exceed the minimum capital plus CCB. This will also result in Truist Bank being “well-capitalized” for regulatory purposes. Secondarily, it is management’s intent to maintain Truist Bank’s capital at levels that result in regulatory risk-based capital ratios that are generally comparable with peers of similar size, complexity, and risk profile. If the capital levels of Truist Bank increase above these guidelines, excess capital may be transferred to the Parent Company in the form of special dividend payments, subject to regulatory and other operating considerations.Management’s capital deployment plan in order of preference is to focus on (i) organic growth, (ii) dividends, (iii) strategic opportunities and acquisitions, and (iv) share repurchases if excess capital is available.Truist Bank’s capital ratios are presented in the following table:Table 38: Capital Ratios - Truist Bank
Dec 31, 2023 Dec 31, 2022
CET1 11.7 % 10.6 %
Tier 1 capital 11.7 10.6
Total capital 13.3 12.1
Leverage ratio 9.2 8.5
Supplementary leverage ratio 7.9 7.3
Truist’s capital ratios are presented in the following table:
Table 39: Capital Ratios - Truist Financial Corporation
(Dollars in millions) Dec 31, 2023 Dec 31, 2022Risk-based:CET1 10.1 % 9.0 %
Tier 1 capital 11.6 10.5
Total capital 13.7 12.4
Leverage ratio 9.3 8.5
Supplementary leverage ratio 7.9 7.3
Risk-weighted assets $ 423,705 $ 434,413
Truist’s capital level at December 31, 2023 remains strong compared to the regulatory levels for well-capitalized banks. Truist’s CET1 ratio was 10.1% as of December 31, 2023. The 110 basis point increase since December 31, 2022 resulted from organic capital generation and the minority stake sale in TIH, partially offset by the CECL phase in. The remaining CECL phase in will be amortized ratably in the first quarters of 2024 and 2025.
Truist paid $2.8 billion in common stock dividends, or $2.08 per share, during 2023, compared to $2.7 billion, or $2.00 per share, for 2022. Truist did not have any share repurchases for 2023 and repurchased $250 million in common stock in 2022. In early 2024, Truist declared common dividends of $0.52 per share for the first quarter of 2024.
82 Truist Financial CorporationReclassifications
In certain circumstances, reclassifications have been made to prior period information to conform to the current presentation. Such reclassifications had no effect on previously reported shareholders’ equity or net income. Refer to “Note 1. Basis of Presentation” for additional discussion regarding reclassifications.
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. The 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. Understanding Truist’s accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. Accordingly, Truist’s significant accounting policies and effects of new accounting pronouncements are discussed in detail in “Note 1. Basis of Presentation.”
The following is a summary of Truist’s critical accounting policies that are highly dependent on estimates, assumptions, and judgments. These critical accounting policies are reviewed with the Audit Committee of the Board of Directors on a periodic basis.ACLTruist’s ACL represents management’s best estimate of expected future credit losses related to the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. Estimates of expected future loan and lease losses are determined by using statistical models and management’s judgement. The ACL estimation process includes both quantitatively calculated components as well as qualitative components. Quantitative models are designed to forecast probability of default, exposure at default and loss given default by correlating certain macroeconomic forecast data to historical experience. The models are generally applied at the portfolio level to pools of loans with similar risk characteristics. Certain loans or leases that do not have similar risk characteristics are individually evaluated when establishing an allowance for expected credit losses. The macroeconomic forecast data used in the models is based on forecasted variables for the reasonable and supportable period of two years. Beyond this forecast period the models gradually revert to long-term historical loss conditions over a one-year period. As a means of addressing uncertainty related to future economic conditions, the quantitative allowance components include an adjustment that reflects model outputs calculated using a range of potential future economic conditions. Expected losses are estimated through contractual maturity, giving appropriate consideration to expected prepayments unless the borrower has a right to renew that is not cancellable or to capture the losses expected at the balance sheet date or prior to January 1, 2023 it is reasonably expected that the loan will be modified as a TDR.The qualitative components of the ACL incorporate management’s judgment in determining qualitative adjustments where model outputs are inconsistent with management’s expectations with respect to expected credit losses. The qualitative components are used to adjust for limitations in modeled results related to current economic conditions, and considerations with respect to the impact of current and expected events or risks, the outcomes of which are uncertain and may not be completely considered by quantitative models.Management considers a range of macroeconomic forecast data in connection with the allowance estimation process. Under the range of scenarios considered as of December 31, 2023, use of the Company’s pessimistic scenario would have resulted in an increase to the modeled allowance results of approximately $2.2 billion. This estimate reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data but does not consider other qualitative adjustments that could increase or decrease modeled loss estimates calculated using this alternative economic scenario.
The Company individually evaluates expected credits losses related to loans and leases that do not share similar risk characteristics and prior to January 1, 2023 loans that have been classified as a TDR. For individually evaluated loans, the ALLL is determined through review of data specific to the borrower and related collateral, if any, while prior to January 1, 2023 for TDRs, default expectations and estimated prepayment speeds that are specific to each of the restructured loan populations are incorporated in the determination of the ALLL.The methodology used to determine an estimate for the RUFC is similar to that used to determine the funded component of the ALLL and is measured over the period there is a contractual obligation to extend credit that is not unconditionally cancellable. The RUFC is adjusted for factors specific to binding commitments, including the probability of funding and exposure at default. A detailed discussion of the methodology used in determining the ACL is included in “Note 1. Basis of Presentation.”Truist Financial Corporation 83Fair Value of Financial InstrumentsThe vast majority of assets and liabilities measured at fair value on a recurring basis are based on either quoted market prices or market prices for similar instruments. Refer to “Note 18. Fair Value Disclosures” for additional disclosures regarding the fair value of financial instruments and “Note 2. Business Combinations, Divestitures, and Noncontrolling Interests” for additional disclosures regarding business combinations.SecuritiesTruist generally utilizes a third-party pricing service in determining the fair value of its AFS investment securities, whereas trading securities are priced internally. Fair value measurements for investment securities are derived from market-based pricing matrices that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers, bids, issuer spreads, and broker quotes. Management performs procedures to evaluate the fair values provided by the third-party service provider. These procedures, which are performed independent of the responsible business unit, include comparison of pricing information received from the third-party pricing service to other third-party pricing sources, review of additional information provided by the third-party pricing service and other third-party sources for selected securities and back-testing to compare the price realized on security sales to the daily pricing information received from the third-party pricing service. The Enterprise Valuation Committee, which provides oversight to Truist’s enterprise-wide IPV function, is responsible for the comparison of pricing information received from the third-party pricing service or internally to other third-party pricing sources, approving tolerance limits determined by IPV for price comparison exceptions, reviewing significant changes to pricing and valuation policies and reviewing and approving the pricing decisions made on any illiquid and hard-to-price securities. When market observable data is not available, which generally occurs due to the lack of liquidity or inactive markets for certain securities, the valuation of the security is subjective and may involve substantial judgment by management to reflect unobservable input assumptions.MSRs
Truist’s primary class of MSRs for which it separately manages the economic risks relates to residential mortgages. Residential MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available. Accordingly, Truist estimates the fair value of residential MSRs using a stochastic OAS valuation model to project residential MSR cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates. The OAS model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. Truist reassesses and periodically adjusts the underlying inputs and assumptions in the OAS model to reflect market conditions and assumptions that a market participant would consider in valuing the residential MSR asset.Fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and, when available, observable market data. Due to the nature of the valuation inputs, residential MSRs are classified within Level 3 of the valuation hierarchy. The value of residential MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining interest rates, the value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. Conversely, during periods of rising interest rates, the value of residential MSRs generally increases due to reduced refinance activity. Truist typically hedges against market value changes in the residential MSRs. Refer to “Note 8. Loan Servicing” for quantitative disclosures reflecting the effect that changes in management’s assumptions would have on the fair value of residential MSRs.
LHFS
Truist originates certain residential and commercial mortgage loans for sale to investors that are measured at fair value. The fair value is primarily based on quoted market prices for securities backed by similar types of loans. Changes in the fair value are recorded as components of Mortgage banking income, while the related origination costs are generally recognized in Personnel expense when incurred. The changes in fair value are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the LHFS. Truist uses various derivative instruments to mitigate the economic effect of changes in fair value of the underlying loans. LHFS also includes certain loans, generally carried at LOCOM, where management has committed to a formal plan of sale and the loans are available for immediate sale. Adjustments to reflect unrealized gains and losses resulting from changes in fair value, up to the original carrying amount, and realized gains and losses upon ultimate sale are classified as noninterest income. The fair value of these loans is estimated using observable market prices when available. When observable market prices are not available, the Company uses judgment and estimates fair value using internal models that reflect assumptions consistent with those that would be used by a market participant in estimating fair value. Refer to “Note 1. Basis of Presentation” for further description of the Company’s accounting for LHFS.
84 Truist Financial Corporation
Trading Loans
Truist elects to measure certain loans at fair value for financial reporting where fair value aligns with the underlying business purpose. Specifically, loans included within this classification include trading loans that are (i) purchased in connection with the Company’s TRS business, (ii) part of the loan sales and trading business within the C&CB segment, or (iii) backed by the SBA. Refer to “Note 16. Commitments and Contingencies,” and “Note 19. Derivative Financial Instruments,” for further discussion of the Company’s TRS business. The loans purchased in connection with the Company’s TRS and sales and trading businesses are primarily commercial and corporate leveraged loans valued based on quoted prices for identical or similar instruments in markets that are not active by a third-party pricing service. SBA loans are fully guaranteed by the U.S. government as to contractual principal and interest and there is sufficient observable trading activity upon which to base the estimate of fair value.Derivative Assets and Liabilities
Truist uses derivatives to manage various financial risks and in a dealer capacity to facilitate client transactions. Truist mitigates credit risk by subjecting counterparties to credit reviews and approvals similar to those used in making loans and other extensions of credit. In addition, certain counterparties are required to provide collateral to Truist when their unsecured loss positions exceed certain negotiated limits. The fair values of derivative financial instruments are determined based on quoted market prices and internal pricing models that use market observable data for interest rates, foreign exchange, equity, and credit. The fair value of interest rate lock commitments, which are related to mortgage loan commitments, is based on quoted market prices adjusted for commitments that Truist does not expect to fund and includes the value attributable to the net servicing fee. Refer to “Note 19. Derivative Financial Instruments” for further information on the Company’s derivatives.
Goodwill and Other Intangible Assets
The acquisition method of accounting requires that assets acquired and liabilities assumed in business combinations are recorded at their fair values. This often involves estimates based on third-party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, which are inherently subjective. The amortization of definite-lived intangible assets is based upon the estimated economic benefits to be received, which is also subjective. Business combinations also typically result in goodwill, which is subject to ongoing periodic impairment tests based on the fair values of the reporting units to which the acquired goodwill relates. Refer to “Note 1. Basis of Presentation” for a description of the impairment testing process.At December 31, 2023, Truist’s reporting units with goodwill balances were CB&W, C&CB, and IH. Management performs a goodwill impairment analysis on an annual basis as of October 1 or more often if events or circumstances indicate that it is more-likely-than not that the fair value of a reporting unit is below its carrying value. For its annual impairment review, Truist performed a quantitative test of each of its reporting units. The quantitative impairment test estimates the fair value of the reporting units using the income approach and a market-based approach, weighted 50% and 50%, respectively. The inputs and assumptions specific to each reporting unit are incorporated in the valuations, including projections of future cash flows, discount rates, and applicable valuation multiples based on the comparable public company information. The income approach utilizes a discounted cash flow analysis of multi-year financial forecasts developed for each reporting unit by considering several inputs and assumptions such as net interest margin, expected credit losses, noninterest income, noninterest expense, and required capital. The market based approach utilizes comparable public company information, key valuation multiples, and considers a market control premium associated with cost synergies and other cash flow benefits that arise from obtaining control over a reporting unit, and guideline transactions, when applicable.
Truist also assesses the reasonableness of the aggregate estimated fair value of the reporting units by comparison to its market capitalization over a reasonable period of time, including consideration of expected acquirer expense synergies, historic bank control premiums, and the current market.
The projection of net interest margin and noninterest expense are the most significant inputs to the financial projections of the CB&W and C&CB reporting units. The long-term growth rate used in determining the terminal value of each reporting unit was 3% as of October 1, 2023, based on management’s assessment of the minimum expected terminal growth rate of each reporting unit. Discount rates are estimated based on the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, beta, and unsystematic risk adjustments specific to a particular reporting unit. The discount rates are also calibrated based on risks related to the projected cash flows of each reporting unit. The discount rates utilized for the CB&W, C&CB, and IH reporting units as of October 1, 2023 were 13.5%, 12.5%, and 11.0%, respectively.Truist Financial Corporation 85Based on the Company’s annual impairment test of goodwill, it was determined for the CB&W and C&CB reporting units that the respective reporting units’ carrying value was in excess of its respective fair value as of October 1, 2023, resulting in a non-cash, non-tax-deductible goodwill impairment charge of $6.1 billion for the year ended December 31, 2023. The goodwill impairment was primarily due to the continued impact of higher interest rates and discount rates on the CB&W and C&CB reporting units, and a sustained decline in banking industry share prices, including Truist’s. For the IH reporting unit, it was determined that the reporting unit’s fair value was in excess of its respective carrying value as of October 1, 2023.
The estimated fair value of a reporting unit is highly sensitive to changes in management’s estimates and assumptions; therefore, in some instances, changes in these assumptions could impact whether the fair value of a reporting unit is greater than its carrying value. Circumstances that could negatively impact the fair value of Truist’s reporting units in the future include a sustained decrease in Truist’s stock price, continued decline in industry peer multiples, an increase in the applicable discount rate and further deterioration in the reporting units’ forecasts. Additionally, a reporting unit’s carrying value could change based on market conditions, change in the underlying makeup of the reporting unit, or the risk profile of those reporting units, which could impact whether the fair value of a reporting unit is less than carrying value.
The Company monitored events and circumstances during the period from October 1, 2023 through December 31, 2023, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, a comparison of management’s forecast and assumptions to those used in its October 1, 2023 quantitative impairment test, and the sensitivity of the October 1, 2023 quantitative test results to changes in assumptions through December 31, 2023. Based on these considerations, management concluded that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of December 31, 2023.Income Taxes
Truist is subject to income tax laws of the U.S., its states, and the municipalities in which the Company conducts business. In estimating the net amount due to or to be received from tax jurisdictions either currently or in the future, the Company assesses the appropriate tax treatment of transactions and filing positions after considering statutes, regulations, judicial precedent, and other pertinent information. The income tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. Significant judgment is required in determining the tax accruals and in evaluating the Company’s tax positions, including evaluating uncertain tax positions. Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws and new judicial guidance, the status of examinations by the tax authorities, and newly enacted statutory and regulatory guidance that could impact the relative merits and risks of tax positions. These changes, when they occur, impact tax expense and can materially affect operating results. Truist reviews tax positions quarterly and adjusts accrued taxes as new information becomes available.
Deferred income tax assets represent amounts available to reduce income taxes payable in future years. Such assets arise due to temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from NOL and tax credit carryforwards. The Company regularly evaluates the ability to realize DTAs, recognizing a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not that some portion or all of the DTA will not be realized. In determining whether a valuation allowance is necessary, the Company considers the level of taxable income in prior years to the extent that carrybacks are permitted under current tax laws, as well as estimates of future pre-tax and taxable income and tax planning strategies that would, if necessary, be implemented. Truist currently maintains a valuation allowance for certain state carryforwards. For additional income tax information, refer to “Note 1. Basis of Presentation” and “Note 14. Income Taxes.”
Pension and Postretirement Benefit Obligations
Truist offers various pension plans and postretirement benefit plans to teammates. Calculation of the obligations and related expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management judgment and may differ significantly if different assumptions are used. The discount rate assumption used to measure the postretirement benefit obligations is set by reference to an AA Above Median corporate bond yield curve and the individual characteristics of the plans such as projected cash flow patterns and payment durations.Management also considered the sensitivity that changes in the expected return on plan assets and the discount rate would have on pension expense. For the Company’s qualified plans, a decrease of 25 basis points in the discount rate would result in additional pension expense of approximately $29 million for 2024, while a decrease of 100 basis points in the expected return on plan assets would result in an increase of approximately $145 million in pension expense for 2024. This estimate reflects the sensitivity of certain factors considered in calculation of pension expense but does not consider all factors that could increase or decrease estimates calculated.Refer to “Note 15. Benefit Plans” for disclosures related to the benefit plans.86 Truist Financial Corporation
FY 2024-12-31 (later)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSMD&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-K, and other information contained in this document. For discussion of 2023 results as compared to 2022 results, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2023, which was updated by Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on May 10, 2024, to reflect the discontinued operations of TIH and the segment realignment. Refer to “Note 21. Operating Segments” for additional disclosures related to Truist’s operating segments and “Note 2. Discontinued Operations” for additional information related to discontinued operations.A description of certain factors that may affect our future results and risk factors is set forth in Part I, Item 1A-Risk Factors of this report.
Executive Overview2024 was an important year for Truist. We added new clients and deepened existing relationships, invested in our core banking business, made enhancements to our technology and risk infrastructure, and maintained our credit and expense discipline.
We executed on several important strategic initiatives, including the sale of TIH and the repositioning of our balance sheet. On May 6, 2024, we completed the divestiture of TIH. Refer to “Note 2. Discontinued Operations” for additional information. Following the sale of TIH, Truist executed a strategic balance sheet repositioning of a portion of its AFS investment securities portfolio by selling lower-yielding investment securities, resulting in an after-tax loss of $5.1 billion in 2024, allowing Truist to reinvest a portion of the proceeds in higher yielding securities.
These actions increased our capital and further enhanced our ability to support the growth needs of clients, while also returning capital to shareholders. We returned $3.8 billion of capital to our common shareholders through $2.8 billion of common stock dividends and $1.0 billion of common share repurchases during 2024. As of December 31, 2024, we have $4.0 billion remaining under our $5.0 billion common share repurchase authorization through the end of 2026.
In addition, Truist redeemed all outstanding shares of its perpetual preferred stock series L and the corresponding depositary shares representing fractional interests in such series for $750 million.
In July 2024, we successfully completed the sale of Sterling Capital Management LLC, an asset management business. Cash proceeds and the gain recognized on the sale were not material.
Clarke R. Starnes III retired from his position as CRO and Vice Chair. Brad Bender, a 20-year Truist veteran who previously served as Truist’s Head of Enterprise Operational Services and interim Chief Information Officer, succeeded Starnes as CRO.
Hugh S. “Beau” Cummins III, Vice Chair and Chief Operating Officer of Truist, resigned from his position, effective January 13, 2025. Following Mr. Cummins’ departure, management of the enterprise payments business transitioned to Kristin Lesher, Senior Executive Vice President and Chief Wholesale Banking Officer. Mr. Cummins’ remaining responsibilities, including leading teams responsible for enterprise operational services, enterprise corporate services, the strategy, transformation, and performance office, and the governance and controls organization, transitioned to Michael B. Maguire, Senior Executive Vice President and CFO.
We launched Truist Cares for Western North Carolina, a three-year, $725 million commitment to support and sustain hurricane recovery and resiliency through dedicated capital to support rebuilding and resiliency, loans or investments in Community Development Financial Institutions, philanthropic grants to local and national nonprofit organizations, and community service hours.
Truist Financial Corporation 47Key Areas of FocusOur strategic direction is to build the top super regional bank that grows with our clients with care. Our 2025 strategic objectives are to:
• Leverage our capital position by growing and capturing additional share within our high growth markets and existing client base in key focus areas in WB and CSBB and in areas, markets, and client solutions where we have invested significantly and have momentum.
• In WB, deepen and grow existing client relationships in areas like Payments and Wealth, enhance the client digital experience, continue our momentum in Investment Banking and Trading, and capture more share of the commercial middle market.
• In CSBB, grow core deposits, deepen existing relationships with Premier clients, enhance the client digital experience, and drive additional fee and loan growth through our differentiated consumer lending solutions.
• Continue to invest in important areas like new and existing talent, technology, risk, and cybersecurity, while maintaining our expense discipline with a goal of driving positive operating leverage.
• Maintain our credit and risk discipline.
• Return capital to shareholders through our common stock dividend and share repurchase authorization.Financial ResultsNet income to common shareholders totaled $4.5 billion, or $3.36 per share, for 2024, compared to a net loss available to common shareholders of $1.5 billion, or $1.09 per share, from the prior year.
• Results from continuing operations for 2024 included securities losses of $6.7 billion ($5.1 billion after-tax or $3.82 per share) from the balance sheet repositioning, a charitable contribution to the Truist Foundation of $150 million ($115 million after-tax, or $0.09 per share), restructuring charges of $120 million ($92 million after-tax, or $0.07 per share), and the FDIC special assessment adjustment of $64 million ($49 million after-tax, or $0.04 per share).
• Results from continuing operations for 2023 included a non-cash goodwill impairment charge of $6.1 billion ($4.56 per share), the FDIC special assessment of $507 million ($387 million after-tax, or $0.29 per share), restructuring charges of $320 million ($244 million after-tax, or $0.18 per share), and a discrete tax benefit of $204 million ($0.15 per share).
Net income from discontinued operations was $4.9 billion for 2024, compared to $456 million for 2023.
• Results from discontinued operations for 2024 included a gain on the sale of TIH of $6.9 billion ($4.8 billion after-tax, or $3.64 per share), the accelerated recognition of TIH equity compensation expense for certain event-driven awards of $99 million ($76 million after tax, or $0.06 per share), and restructuring charges of $82 million ($62 million after-tax, or $0.05 per share).
• Results from discontinued operations for 2023 included restructuring charges of $55 million ($42 million after-tax, or $0.03 per share).Table 8: Earnings Highlights
Year Ended December 31, (Dollars in millions) Change2024 2023 2022 2024 vs. 2023 2023 vs. 2022
Net income (loss) available to common shareholders $ 4,469 $ (1,452) $ 5,927 $ 5,921 $ (7,379)
Diluted earnings per common share 3.36 (1.09) 4.43 4.45 (5.52)
Net interest income - TE $ 14,303 $ 14,744 $ 14,455 $ (441) $ 289
Noninterest income (813) 5,498 5,660 (6,311) (162)
Total taxable-equivalent revenue $ 13,490 $ 20,242 $ 20,115 $ (6,752) $ 127
Less taxable-equivalent adjustment 212 220 142
Total revenue $ 13,278 $ 20,022 $ 19,973
Return on average assets 0.92 % (0.19) % 1.15 % 1.11 % (1.34) %
Return on average common shareholders’ equity 8.0 (2.6) 10.4 10.6 (13.0)
Net interest margin - TE 3.03 2.98 3.01 0.05 (0.03)
48 Truist Financial Corporation
Truist’s TE revenue for 2024 was $13.5 billion. Excluding securities losses, TE revenue was $20.1 billion, representing a decrease of $101 million compared to 2023. Net interest income on a TE basis was $14.3 billion, down $441 million, or 3.0%, from the prior year primarily as a result of having a smaller more efficient balance sheet after the repositioning improving NIM by five basis points.
• Average earning assets decreased $21.6 billion, or 4.4%, compared to the prior year primarily due to declines in average total loans of $15.8 billion, or 4.9%, and average securities of $13.7 billion, or 10.0%, partially offset by an increase in other earning assets of $7.3 billion, or 25%. The change in average securities was driven by maturities and the balance sheet repositioning. The change in other earning assets (increase in balances held at the Federal Reserve) was driven by the balance sheet repositioning.
• Average deposits decreased $13.3 billion, or 3.3%, average short-term borrowings were flat, and average long-term debt decreased $13.0 billion, or 26% as a result of the smaller more efficient balance sheet.
NIM was 3.03% for 2024, up five basis points compared to the prior year.
• The yield on the average total loan portfolio was 6.34% for 2024, up 22 basis points, compared to the prior year primarily reflecting higher market interest rates. The yield on the average securities portfolio was 2.83% for 2024, up 60 basis points compared to the prior year, reflecting the balance sheet repositioning and reinvesting cash flows into higher yielding securities.
• The average cost of total deposits was 2.02% for 2024, up 42 basis points compared to the prior year. The average cost of short-term borrowings was 5.36% for 2024, up 11 basis points compared to the prior year. The average cost of long-term debt was 4.94% for 2024, up 48 basis points compared to the prior year. The increases in rates on deposits and other funding sources was largely attributable to the repricing of lower cost funding sources.
The provision for credit losses was $1.9 billion for the year ended December 31, 2024 compared to $2.1 billion for the year ended December 31, 2023. The net charge-off ratio for the current year of 0.59% was up 9 basis points compared to the prior year.
• The decrease in the current year provision expense primarily reflects a lower allowance build.
• The net charge-off ratio was up compared to the prior year driven by higher net charge-offs in the CRE, other consumer, credit card, and indirect auto portfolios, partially offset by higher recoveries in the commercial and industrial portfolio. Additionally, the prior year included $98 million of charge-offs related to the sale of the student loan portfolio.
Noninterest income was down $6.3 billion for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to $6.7 billion of securities losses resulting from the balance sheet repositioning, lower lending related fees, operating lease income, and card and payment related fees, partially offset by higher investment banking and trading income, wealth management income, service charges on deposits, and other income. Excluding securities losses, noninterest income was up $340 million, or 6.2%, compared to the prior year.
Noninterest expense was down $6.7 billion, or 36%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the 2023 goodwill impairment of $6.1 billion, lower regulatory charges due to the FDIC special assessment and related adjustments ($64 million in 2024 compared to $507 million in 2023), lower other expense, excluding the charitable contribution to the Truist Foundation, lower amortization of intangibles, and operating lease depreciation, partially offset by a $150 million charitable contribution to the Truist Foundation (other expense) and higher professional fees and outside processing expense. Restructuring charges decreased $200 million; both periods included restructuring charges for severance charges as well as facilities optimization costs. Noninterest expenses excluding the charitable contribution, the amortization of intangibles, the FDIC special assessment adjustment, restructuring charges, and a small loss on the early extinguishment of debt, decreased $44 million, or 0.4%.
Truist had a benefit from income taxes of $556 million for 2024, compared to a provision for income taxes of $738 million in 2023. The provision for income taxes for 2023 reflects a pre-tax loss, which includes a non-deductible goodwill impairment charge, partially offset by a discrete tax benefit in the fourth quarter of 2023.
Truist’s total assets at December 31, 2024 were $531.2 billion, a decrease of $4.2 billion, or 0.8%, compared to December 31, 2023 as loans and leases, net of ALLL, decreased $5.7 billion, or 1.9%, total securities decreased $3.4 billion, or 2.8%, partially offset by an increase of $8.7 billion, or 35%, in interest-bearing deposits with banks.
Total liabilities at December 31, 2024 were $467.5 billion, a decrease of $8.6 billion, or 1.8%, from the prior year, reflecting a decrease of $5.3 billion, or 1.3%, in deposits and a decrease of $4.0 billion, or 10.2%, in long-term debt, partially offset by an increase of $4.4 billion, or 17.6%, in short-term borrowings.
Truist Financial Corporation 49
Total shareholders’ equity was $63.7 billion at December 31, 2024, an increase of $4.4 billion from December 31, 2023. This increase includes $4.8 billion in net income and $4.3 billion in OCI, partially offset by $3.1 billion in common and preferred dividends, $1.0 billion in common share repurchases, and $750 million for the redemption of series L preferred stock. Truist’s book value per common share at December 31, 2024 was $43.90, compared to $39.31 at December 31, 2023. Truist’s TBVPS of $30.01 at December 31, 2024 increased 37% compared to December 31, 2023.
Asset quality remained stable.
• Nonperforming loans and leases held for investment totaled $1.4 billion or 0.47% of loans and leases held for investment at December 31, 2024, up three basis points compared to December 31, 2023.
• Loans 90 days or more past due and still accruing totaled $587 million or 0.19% of loans and leases held for investment at December 31, 2024, up two basis point as a percentage of loans and leases compared with December 31, 2023. 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 0.05% at December 31, 2024, up one basis point from December 31, 2023.
• The allowance for credit losses was $5.2 billion and includes $4.9 billion for the allowance for loan and lease losses and $304 million for the reserve for unfunded commitments. The ALLL ratio was 1.59%, up five basis points compared with December 31, 2023.
Capital strengthened during 2024.
• Truist’s CET1 ratio was 11.5% as of December 31, 2024, up 140 basis points since December 31, 2023 from the sale of TIH and organic capital generation, partially offset by the balance sheet repositioning, common dividends, and share repurchases.
• Truist returned $3.8 billion to common shareholders through declared common dividends of $2.8 billion or $2.08 per share during 2024 and repurchases of $1.0 billion of common stock, resulting in a dividend payout ratio of 62% and total payout ratio of 85%.
• Truist redeemed all outstanding shares of its perpetual preferred stock series L and the corresponding depositary shares representing fractional interests in such series for $750 million.
• Truist’s average consolidated LCR was 109% for the three months ended December 31, 2024, compared to the regulatory minimum of 100%.Analysis of Results of Operations
Net Interest Income and NIMTaxable-equivalent net interest income for the year ended December 31, 2024 was down $441 million, or 3.0%, compared to the year ended December 31, 2023 primarily as a result of having a smaller more efficient balance sheet after the repositioning. Net interest margin was 3.03%, up five basis points compared to the prior year.
• Average earning assets decreased $21.6 billion, or 4.4%, compared to the prior year primarily due to declines in average total loans of $15.8 billion, or 4.9%, and average securities of $13.7 billion, or 10.0%, partially offset by an increase in other earning assets of $7.3 billion, or 25%. The change in average securities was driven by maturities and the balance sheet repositioning. The change in other earning assets (increase in balances held at the Federal Reserve) was driven by the balance sheet repositioning.
• The yield on the average total loan portfolio was 6.34% for 2024, up 22 basis points, compared to the prior year primarily reflecting higher market interest rates. The yield on the average securities portfolio was 2.83% for 2024, up 60 basis points compared to the prior year, reflecting the balance sheet repositioning and reinvesting cash flows into higher yielding securities.
• Average deposits decreased $13.3 billion, or 3.3%, average short-term borrowings were flat, and average long-term debt decreased $13.0 billion, or 26% due to decreased funding needs.
• The average cost of total deposits was 2.02% for 2024, up 42 basis points compared to the prior year. The average cost of short-term borrowings was 5.36% for 2024, up 11 basis points compared to the prior year. The average cost of long-term debt was 4.94% for 2024, up 48 basis points compared to the prior year. The increases in rates on deposits and other funding sources was largely attributable to the repricing of lower cost funding sources.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.50 Truist Financial CorporationTable 9: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis2024 vs. 2023 2023 vs. 2022Year Ended December 31, (Dollars in millions) Average Balances (1)
Annualized Yield/Rate (2)Income/Expense (2)
Incr. (Decr.) Change due to Incr. (Decr.) Change due to
2024 2023 2022 2024 2023 2022 2024 2023 2022 Rate Volume Rate VolumeAssets
AFS and HTM securities at amortized cost:U.S. Treasury $ 12,100 $ 11,021 $ 10,591 4.01 % 1.20 % 0.88 % $ 485 $ 132 $ 93 $ 353 $ 339 $ 14 $ 39 $ 35 $ 4
GSE 390 348 498 3.38 2.94 2.24 13 10 11 3 2 1 (1) 3 (4)
Agency MBS 109,652 121,923 132,222 2.70 2.31 1.93 2,958 2,821 2,552 137 441 (304) 269 477 (208)
States and political subdivisions 417 424 392 4.14 4.13 3.88 17 18 15 (1) — (1) 3 1 2
Non-agency MBS 1,282 3,816 4,072 2.85 2.34 2.30 37 89 94 (52) 16 (68) (5) 2 (7)
Other 17 20 44 5.25 5.37 3.60 1 1 2 — — — (1) 1 (2)
Total securities 123,858 137,552 147,819 2.83 2.23 1.87 3,511 3,071 2,767 440 798 (358) 304 519 (215)
Interest earning trading assets 5,320 4,739 5,767 6.12 6.64 4.15 326 314 239 12 (26) 38 75 124 (49)Other earning assets (3)36,622 29,335 19,886 5.48 5.31 1.92 2,008 1,557 381 451 51 400 1,176 927 249Loans and leases, net of unearned income:Commercial and industrial 155,674 163,983 149,030 6.36 6.34 3.91 9,897 10,389 5,823 (492) 33 (525) 4,566 3,931 635
CRE 21,585 22,741 22,697 6.81 6.71 4.01 1,480 1,535 920 (55) 22 (77) 615 613 2
Commercial Construction 7,729 6,125 5,326 7.67 7.62 4.46 583 459 228 124 3 121 231 191 40
Residential mortgage 54,486 56,131 51,721 3.88 3.78 3.60 2,114 2,121 1,860 (7) 55 (62) 261 96 165
Home equity 9,778 10,388 10,788 7.94 7.36 5.01 776 765 540 11 57 (46) 225 246 (21)
Indirect auto 22,326 25,621 27,197 7.00 6.10 5.50 1,563 1,563 1,497 — 215 (215) 66 156 (90)
Other consumer 28,748 28,412 26,320 8.18 7.25 6.23 2,351 2,061 1,640 290 265 25 421 284 137
Student — 2,453 6,114 — 6.91 4.97 — 170 304 (170) (85) (85) (134) 91 (225)
Credit card 4,907 4,876 4,753 11.96 11.59 9.57 587 565 455 22 18 4 110 98 12
Total loans and leases HFI 305,233 320,730 303,946 6.34 6.12 4.36 19,351 19,628 13,267 (277) 583 (860) 6,361 5,706 655
LHFS 1,305 1,605 2,889 6.31 6.37 4.23 82 102 122 (20) (1) (19) (20) 47 (67)
Total loans and leases 306,538 322,335 306,835 6.34 6.12 4.36 19,433 19,730 13,389 (297) 582 (879) 6,341 5,753 588
Total earning assets 472,338 493,961 480,307 5.35 4.99 3.49 25,278 24,672 16,776 606 1,405 (799) 7,896 7,323 573
Nonearning assets 51,185 51,554 56,666
Assets of discontinued operations 2,542 7,617 6,857
Total assets $ 526,065 $ 553,132 $ 543,830Liabilities and Shareholders’ Equity
Interest-bearing deposits:Interest-checking $ 104,606 $ 103,465 $ 111,539 2.68 2.11 0.47 2,802 2,184 519 618 594 24 1,665 1,706 (41)
Money market and savings 136,217 138,841 145,645 2.54 2.04 0.37 3,457 2,834 536 623 677 (54) 2,298 2,324 (26)
Time deposits 39,406 36,803 15,514 4.04 3.83 0.58 1,590 1,409 90 181 79 102 1,319 1,059 260
Total interest-bearing deposits 280,229 279,109 272,698 2.80 2.30 0.42 7,849 6,427 1,145 1,422 1,350 72 5,282 5,089 193
Short-term borrowings 24,499 24,478 14,957 5.36 5.25 2.58 1,313 1,286 385 27 26 1 901 558 343
Long-term debt 36,713 49,678 34,172 4.94 4.46 2.31 1,813 2,215 791 (402) 220 (622) 1,424 958 466
Total interest-bearing liabilities 341,441 353,265 321,827 3.21 2.81 0.72 10,975 9,928 2,321 1,047 1,596 (549) 7,607 6,605 1,002
Noninterest-bearing deposits 107,639 122,018 145,392
Other liabilities 13,343 11,560 9,994
Liabilities of discontinued operations 1,049 3,190 2,800
Shareholders’ equity 62,593 63,099 63,817
Total liabilities and shareholders’ equity $ 526,065 $ 553,132 $ 543,830
Average interest-rate spread 2.14 % 2.18 % 2.77 %
NIM/net interest income - TE 3.03 % 2.98 % 3.01 % $ 14,303 $ 14,744 $ 14,455 $ (441) $ (191) $ (250) $ 289 $ 718 $ (429)
Taxable-equivalent adjustment $ 212 $ 220 $ 142
Memo: Total deposits $ 387,868 $ 401,127 $ 418,090 2.02 % 1.60 % 0.27 % $ 7,849 $ 6,427 $ 1,145 $ 1,422 $ 5,282
(1) Represents daily average balances. Unrealized gains and losses on available-for-sale securities are included in nonearning assets. Active hedge basis adjustments for fair value hedges are included in nonearning assets and other liabilities. In 2024, Truist revised its presentation of active hedge basis adjustments for fair value hedges on securities to be included in nonearning assets for all periods presented.
(2) Yields are stated on a TE basis utilizing a federal tax rate of 21%. Interest income includes certain fees, deferred costs, and dividends. 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.
(3) Includes cash equivalents, interest-bearing deposits with banks, FHLB stock, and other earning assets.
Truist Financial Corporation 51Provision for Credit LossesThe provision for credit losses was $1.9 billion for the year ended December 31, 2024 compared to $2.1 billion for the year ended December 31, 2023. The net charge-off ratio for the current year of 0.59% was up 9 basis points compared to the prior year.
• The decrease in the current year provision expense primarily reflects a lower allowance build.
• The net charge-off ratio was up compared to the prior year driven by higher net charge-offs in the CRE, other consumer, credit card, and indirect auto portfolios, partially offset by higher recoveries in the commercial and industrial portfolio. Additionally, the prior year included $98 million of charge-offs related to the sale of the student loan portfolio.Refer to “Note 5. Loans and ACL” for additional discussion of the ACL.
Noninterest Income
Noninterest income is a significant contributor to Truist’s financial results. Management focuses on diversifying its sources of revenue to reduce Truist’s reliance on traditional spread-based interest income, as certain fee-based activities are a relatively stable revenue source during periods of changing interest rates. The following table provides a breakdown of Truist’s noninterest income:
Table 10: Noninterest Income
Year Ended December 31, % Change(Dollars in millions) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022
Wealth management income $ 1,412 $ 1,358 $ 1,338 4.0 % 1.5 %
Investment banking and trading income 1,203 822 995 46.4 (17.4)
Card and payment related fees 907 936 944 (3.1) (0.8)
Service charges on deposits 915 873 1,028 4.8 (15.1)
Mortgage banking income 432 437 460 (1.1) (5.0)
Lending related fees 366 447 375 (18.1) 19.2
Operating lease income 205 254 258 (19.3) (1.6)
Securities gains (losses) (6,651) — (71) NM NM
Other income 398 371 333 7.3 11.4
Total noninterest income $ (813) $ 5,498 $ 5,660 (114.8) (2.9)
Noninterest income was down $6.3 billion for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to $6.7 billion of securities losses resulting from the balance sheet repositioning, lower lending related fees, operating lease income, and card and payment related fees, partially offset by higher investment banking and trading income, wealth management income, service charges on deposits, and other income. Excluding securities losses, noninterest income was up $340 million, or 6.2%, compared to the prior year.
• Investment banking and trading income increased due to higher bond and equity originations, structured real estate income, loan syndication fees, and merger and acquisition fees, partially offset by lower trading income.
• Wealth management income increased due to higher assets under management, partially offset by the impact of the sale of Sterling Capital Management LLC in 2024.
• Service charges on deposits increased due to a prior period reduction in deposit service charge fees for client refund accruals resulting from a revision in deposit service fee protocols, partially offset by a decline as a result of continued growth of Truist One checking.
• Other income increased due to higher derivative income and the gain on the sale of Sterling Capital Management LLC, partially offset by lower equity investment income due to gains in 2023 and a valuation decrease for derivatives related to Visa shares.
• Lending related fees decreased due to lower leasing-related gains.
• Operating lease income decreased due to the runoff of operating lease balances.
• Card and payment related fees decreased due to lower interchange rates, higher rebates, and lower volumes.
52 Truist Financial CorporationNoninterest Expense
The following table provides a breakdown of Truist’s noninterest expense:
Table 11: Noninterest Expense
Year Ended December 31, % Change(Dollars in millions) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022
Personnel expense $ 6,506 $ 6,516 $ 6,558 (0.2) % (0.6) %
Professional fees and outside processing 1,337 1,192 1,322 12.2 (9.8)
Software expense 896 868 887 3.2 (2.1)
Net occupancy expense 656 658 690 (0.3) (4.6)
Equipment expense 373 381 449 (2.1) (15.1)
Amortization of intangibles 345 395 455 (12.7) (13.2)
Marketing and customer development 268 260 321 3.1 (19.0)
Operating lease depreciation 144 175 184 (17.7) (4.9)
Regulatory costs 344 824 183 (58.3) NM
Restructuring charges 120 320 466 (62.5) (31.3)
Goodwill impairment — 6,078 — (100.0) NM
Other expense 1,020 1,011 652 0.9 55.1
Total noninterest expense $ 12,009 $ 18,678 $ 12,167 (35.7) 53.5
Restructuring Charges
Noninterest expense was down $6.7 billion, or 36%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the 2023 goodwill impairment of $6.1 billion, lower regulatory charges due to the FDIC special assessment and related adjustments ($64 million in 2024 compared to $507 million in 2023), lower other expense, excluding the charitable contribution to the Truist Foundation, lower amortization of intangibles, and operating lease depreciation, partially offset by a $150 million charitable contribution to the Truist Foundation (other expense) and higher professional fees and outside processing expense. Restructuring charges decreased $200 million; both periods included restructuring charges for severance charges as well as facilities optimization costs. Noninterest expenses excluding the charitable contribution, the amortization of intangibles, the FDIC special assessment adjustment, restructuring charges, and a small loss on the early extinguishment of debt, decreased $44 million, or 0.4%.
• Other expense, excluding the aforementioned charitable contribution to the Truist Foundation, decreased primarily due to lower pension expense, the prior period costs associated with a revision in deposit service fee protocols, and the prior period resolution of the USAA remote deposit capture patent infringement lawsuit.
• Operating lease depreciation decreased due to the runoff of operating lease balances.
• Professional fees and outside processing expense increased due to higher investments in technology and risk infrastructure.
Truist has incurred certain restructuring charges, which include:• severance and personnel-related costs or credits;• occupancy and equipment charges or credits, which relate to costs or gains associated with lease terminations, obsolete equipment write-offs, and the sale of duplicate facilities and equipment;
• professional services, which relate to legal and investment banking advisory fees and other consulting services pertaining to restructuring initiatives or transactions; and• write-offs related to exiting certain businesses.Restructuring accruals are established when the costs are incurred or once all requirements for a plan to dispose of or outsource certain business functions have been approved by management. Restructuring accruals are re-evaluated periodically and adjusted as necessary. The remaining accruals at December 31, 2024 are generally expected to be utilized within one year, unless they relate to specific contracts that expire later.
Truist Financial Corporation 53
The following table presents a summary of restructuring charges and the related accruals. The 2024 and 2023 restructuring charges predominantly include costs for severance and other benefits and costs related to exiting facilities.
Table 12: Restructuring Accrual Activity
(Dollars in millions) Accrual at Jan 1, 2023 Expense Utilized Accrual at Dec 31, 2023 Expense Utilized Accrual at Dec 31, 2024
Severance and personnel-related $ 6 $ 249 $ (247) $ 8 $ 80 $ (88) $ —
Occupancy and equipment — 52 (52) — 31 (31) —
Professional services 11 2 (13) — 6 (5) 1
Other 2 17 (19) — 3 (3) —
Total $ 19 $ 320 $ (331) $ 8 $ 120 $ (127) $ 1Segment ResultsTruist operates and measures business activity across two segments: CSBB and WB, 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.
Effective January 1, 2024, several business activities were realigned reflecting updates to the Company’s operating structure. First, the CB&W segment was renamed CSBB and the C&CB segment was renamed WB. Second, the Wealth business was realigned into the WB segment from the CSBB segment, representing a separate reporting unit in that segment. Third, the small business banking client segmentation was realigned into the CSBB segment from the WB segment.
On February 20, 2024, the Company entered into an agreement to sell the remaining stake of the common equity in TIH to an investor group, representing substantially all of the Company’s IH segment, which represented a material strategic shift for the Company, and as a result, the Company recast results for all periods presented under the discontinued operations basis of presentation. On May 6, 2024, the Company completed the sale of its remaining equity interests in TIH. TIH was the principal legal entity of the IH segment. As the operations of TIH were included in discontinued operations prior to the sale of TIH, the Company no longer presents the IH segment as one of its reportable segments. Refer to “Note 2. Discontinued Operations” for additional information related to discontinued operations.
Effective October 1, 2024, the Company’s corporate expense allocation methodology was enhanced to allocate certain overhead or functional expenses based on actual OT&C noninterest expense performance. Prior period results have been revised for the CSBB, WB, and OT&C segments to conform to the current allocation methodology.
As a result of the methodology change, CSBB noninterest expense increased $267 million and $639 million for the years ended December 31, 2023 and 2022, respectively, with an off-setting decrease in OT&C noninterest expense. For the same reason, WB noninterest expense increased $325 million and $101 million for the years ended December 31, 2023 and 2022, respectively, with an off-setting decrease in OT&C noninterest expense.
Table 13: Net Income from Continuing Operations by Reportable SegmentYear Ended December 31, % Change(Dollars in millions) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022
Consumer and Small Business Banking $ 3,490 $ 126 $ 3,228 NM (96.1) %
Wholesale Banking 3,984 346 4,446 NM (92.2)
Other, Treasury & Corporate (7,519) (1,975) (1,895) NM 4.2
Truist Financial Corporation $ (45) $ (1,503) $ 5,779 (97.0) (126.0)54 Truist Financial Corporation2024 compared to 2023
Consumer and Small Business Banking
CSBB net income was $3.5 billion for the year ended December 31, 2024, an increase of $3.4 billion compared to the prior year.
• Segment net interest income decreased $106 million primarily driven by lower loan and deposit balances, partially offset by higher funding credit on deposits.
• The allocated provision for credit losses increased $192 million primarily reflecting higher charge-offs in the other consumer, credit card, and indirect auto portfolios and an allowance build in the current period compared to same period last year.
• Noninterest income increased $30 million primarily due to increased service charges on deposits, partially offset by lower card and payment related fees in the current period.
• Noninterest expense decreased $3.6 billion including the goodwill impairment in the prior year. Excluding the goodwill impairment, noninterest expense decreased $271 million due to lower personnel expenses, FDIC assessment cost, restructuring charges, pension costs, and technology project costs, as well as lower foreclosed property expense, partially offset by higher enterprise operations, marketing, and finance support expenses.
CSBB average loans and leases held for investment decreased $8.0 billion, or 6.0%, for the year ended December 31, 2024 compared to the prior year driven primarily by a decrease in indirect auto loans, the sale of the student loan portfolio in the second quarter of 2023, and lower mortgage loan balances as well as a decrease in LightStream loans and home equity lending, partially offset by increases in Service Finance and Sheffield loans.
CSBB average total deposits decreased $7.3 billion, or 3.3%, for the year ended December 31, 2024 compared to the prior year primarily due to decreases in average interest-bearing checking, noninterest-bearing deposits, and money market and savings, partially offset by an increase in time deposits.
Wholesale Banking
WB net income was $4.0 billion for the year ended December 31, 2024, an increase of $3.6 billion compared to the prior year.
• Segment net interest income decreased $354 million primarily due to lower deposit and loan balances combined with higher cost of deposits and lower loan yields, partially offset by higher funding credit on deposits.
• The allocated provision for credit losses decreased $437 million, which primarily reflects a decrease in the allowance build compared to the earlier period, partially offset by an increase in net charge-offs.
• Noninterest income increased $451 million primarily due to increases in investment banking income across all products, income from tax credit activity, and wealth management related income, partially offset by lower lending related fees, operating lease income, and income from strategic investments.
• Noninterest expense decreased $3.4 billion including the goodwill impairment in the prior year. Excluding the goodwill impairment, noninterest expense decreased $654 million primarily due to lower FDIC assessment cost, restructuring expense, pension costs, and personnel expenses as well as lower marketing and finance support expenses.
WB average loans and leases held for investment decreased $7.5 billion, or 4.0%, for the year ended December 31, 2024 compared to the prior year driven by decreases in the commercial and industrial portfolio.
WB average total deposits decreased $6.4 billion, or 4.3%, for the year ended December 31, 2024 compared to the prior year primarily due to decreases in average noninterest-bearing deposits and money market and savings, partially offset by an increase in interest-bearing checking balances.
Other, Treasury, and Corporate
OT&C generated a net loss of $7.5 billion for the year ended December 31, 2024, compared to a net loss of $2.0 billion in the prior year.
• Segment net interest income increased $27 million due to funding charges primarily on loans to other segments, the balance sheet repositioning, and lower average long-term debt, partially offset by the funding credit on deposits to other segments.
• Noninterest income decreased $6.8 billion primarily due to securities losses resulting from the balance sheet repositioning.
• Noninterest expense increased $334 million primarily driven by higher incentive expense, higher donations and contributions expense due to a charitable contribution to the Truist Foundation, and increased professional fees and outside processing expense, partially offset by lower pension costs and increased credit from other segments for enterprise operations.
Truist Financial Corporation 55Analysis of Financial Condition
Investment ActivitiesTruist’s investment policy is approved and carried out by ALCO, which meets regularly to review the economic environment and establish investment strategies. The ALCO also has much broader responsibilities, which are discussed in the “Market Risk” section in MD&A.
Investment strategies are reviewed by the ALCO based on the interest rate environment, balance sheet mix, actual and anticipated loan demand, funding opportunities, and the overall interest rate sensitivity of the Company. In general, the goals of the investment portfolio are: (i) to provide sufficient liquid assets to meet unanticipated deposit and loan fluctuations and overall corporate treasury objectives; (ii) to provide eligible securities to secure public funds, trust deposits, and other borrowings; and (iii) to earn an optimal return on funds invested commensurate with meeting regulatory requirements, consistent with the Company’s risk appetite.Truist Bank invests in securities allowable under bank regulations. These securities may include obligations of the U.S. Treasury, U.S. government agencies, GSEs (including MBS), bank eligible obligations of any state or political subdivision, non-agency MBS, structured notes, bank eligible corporate obligations (including corporate debentures), commercial paper, negotiable CDs, bankers’ acceptances, mutual funds, and limited types of equity securities.
Table 14: Composition of Securities Portfolio(Dollars in millions) Dec 31, 2024 Dec 31, 2023AFS securities (at fair value):U.S. Treasury $ 14,411 $ 10,041
GSE 403 362
Agency MBS – residential 49,959 51,289
Agency MBS – commercial 2,293 2,248
States and political subdivisions 382 425
Non-agency MBS — 2,981
Other 16 20
Total AFS securities 67,464 67,366HTM securities (at amortized cost):Agency MBS – residential 50,640 54,107
Total securities $ 118,104 $ 121,473
The securities portfolio totaled $118.1 billion at December 31, 2024, compared to $121.5 billion at December 31, 2023. U.S. Treasury, GSE, and Agency MBS represented 99.7% and 97.2% of the total securities portfolio as of December 31, 2024 and December 31, 2023, respectively. The overwhelming majority of the portfolio is in agency MBS securities.
• The decrease in 2024 includes sales of $28.1 billion and maturities and paydowns of $18.7 billion, partially offset by $44.7 billion in purchases. The purchases and sales were primarily related to the balance sheet repositioning.
◦ Following the sale of TIH, which resulted in after-tax cash proceeds to Truist of approximately $10.1 billion, Truist executed a strategic balance sheet repositioning of a portion of its AFS investment securities portfolio by selling $27.7 billion of lower-yielding investment securities, resulting in an after-tax loss of $5.1 billion in the second quarter of 2024. The investment securities that were sold had a book value of $34.4 billion and a weighted average book yield of 2.80% for the remainder of 2024 including the impact of hedges and based on the Federal Funds futures curve at the time. Including the tax benefit, the repositioning generated $29.3 billion available for reinvestment.
◦ Truist invested approximately $18.7 billion of the $39.4 billion available, including the $10.1 billion after-tax proceeds from the sale of TIH, in shorter duration investment securities yielding 5.27%. The remaining $20.7 billion was invested in cash. The blended reinvestment rate on the new investment securities purchased and cash was 5.22% for the remainder of 2024 including the impact of hedges and based on the Federal Funds futures curve at the time.
• As of December 31, 2024 and December 31, 2023, 41% of the investment securities portfolio was classified as held-to-maturity based on amortized cost, excluding portfolio level basis adjustments.
• As of December 31, 2024, approximately 3.0% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 5.7% as of December 31, 2023.
• The effective duration of the AFS securities portfolio was 5.0 years at December 31, 2024 and 6.1 years at December 31, 2023, excluding the impact of swaps, or 3.3 years at December 31, 2024 and 4.0 years at December 31, 2023, including the impact of swaps. The effective duration of the HTM securities portfolio was 7.0 years at December 31, 2024 and 7.3 years at December 31, 2023.
56 Truist Financial CorporationThe following table presents the securities portfolio by major category of security holdings with ranges of maturities and average yields:
Table 15: Securities Yields by Major Category and MaturityDecember 31, 2024 (Dollars in millions) AFS HTMFair Value Effective Yield (1)
Amortized Cost Effective Yield (1)
U.S. Treasury:Within one year $ 4,512 4.84 % $ — — %
One to five years 9,480 4.45 — —
Five to ten years 397 3.60 — —
After ten years 22 3.02 — —
Total 14,411 4.55 — —GSE:Within one year 2 3.00 — —
One to five years 5 2.88 — —
Five to ten years 11 3.05 — —
After ten years 385 3.78 — —
Total 403 3.74 — —
Agency MBS – residential: (2)
One to five years 88 2.44 — —
Five to ten years 365 2.88 — —
After ten years 49,506 3.90 50,640 1.79
Total 49,959 3.89 50,640 1.79
Agency MBS – commercial: (2)Within one year — — — —One to five years 9 4.40 — —
Five to ten years 78 3.69 — —
After ten years 2,206 1.99 — —
Total 2,293 2.05 — —States and political subdivisions:Within one year 41 6.80 — —
One to five years 68 6.84 — —
Five to ten years 146 6.60 — —
After ten years 127 5.45 — —
Total 382 6.28 — —Other:One to five years 7 2.87 — —
Five to ten years 9 6.51 — —
Total 16 4.88 — —
Total securities $ 67,464 3.98 $ 50,640 1.79
(1) Yields represent interest computed using the effective interest method on the amortized cost of securities inclusive of amortization of premiums or accretion of discounts, excluding the impact of hedging. Weighted yield is represented on a TE basis with the exception of obligations of state and political subdivisions which are presented on a tax-effected basis.
(2) For purposes of the maturity, MBS, which are not due at a single maturity date, have been included in maturity groupings based on the contractual maturity. The expected life of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans with or without call or prepayment penalties.Lending ActivitiesTruist strives to meet the credit needs of its clients while pursuing a balanced strategy of loan profitability, loan growth, and loan quality. Management believes that this purpose can best be accomplished by building strong client relationships over time and developing in-depth local market knowledge. The Company employs underwriting criteria governing the degree of risk assumed and the diversity of the loan portfolio in terms of type, industry, and geographical concentration.
Truist lends to a diverse client base that is managed to be geographically dispersed to mitigate concentration risk arising from local and regional economic downturns. The following discussion provides additional information on the Company’s loan and lease portfolios. Refer to the “Risk Management” section for a discussion of the credit risk management policies used to manage the portfolios.
Truist Financial Corporation 57Commercial Loan and Lease PortfolioCommercial loans and leases represent the largest category of the Company’s loan and lease portfolio. Commercial Community Banking and small business banking generally target small-to-middle market businesses with annual sales between $2 million and $500 million, while Investment Banking and Capital Markets (formerly Corporate and Investment Banking) provides lending solutions to large corporate clients. The commercial loan and lease portfolio consists of lending to public and private business clients and includes commercial and industrial, owner occupied, equipment leasing and financing, CRE, government and institutional financing, premium financing, and dealer floor plan financing.In accordance with the Company’s lending policy, each commercial loan undergoes a detailed underwriting process. Commercial loans are typically priced with an interest rate tied to market indices, such as the prime rate or SOFR and are individually monitored and reviewed for deterioration in the ability of the client to repay the loan. The majority of Truist’s commercial loans are secured by real estate, business equipment, inventories, and other types of collateral.
Residential Mortgage Loan PortfolioTruist primarily originates conforming mortgage loans, loans under FHA, U.S. Department of Veterans Affairs, or U.S. Department of Agriculture programs, and higher quality jumbo and construction-to-permanent loans for 1-4 family residential properties. Conforming loans are loans that are underwritten in accordance with the underwriting standards set forth by FNMA and FHLMC. They are generally collateralized by one-to-four-family residential real estate, typically have loan-to-collateral value ratios of 80% or less at origination, or have mortgage insurance as required by investors and are made to borrowers that meet Truist’s credit standards.
Risks associated with mortgage lending include interest rate risk, which is mitigated through the sale of a substantial portion of conforming fixed-rate loans in the secondary mortgage market and an effective MSR hedging process. Credit risk is managed through underwriting procedures and mortgage insurance. The right to service the loans and receive servicing income is generally retained when conforming loans are sold. Management believes that the retention of mortgage servicing diversifies income while enabling Truist to build long-term client relationships and offer high quality client service. Truist also purchases residential mortgage loans from correspondent originators. The loans purchased from third-party originators are subject to substantially the same underwriting and risk-management criteria as loans originated internally.Home Equity Loan Portfolio
The home equity portfolio is composed of loans offered through Truist’s branch network. These include home equity loans and revolving home equity lines of credit secured by first or second liens on residential real estate in Truist’s market areas.
Indirect Auto Loan PortfolioThe indirect auto portfolio primarily includes secured indirect installment loans to consumers for the purchase of new and used automobiles. The indirect auto portfolio also includes nonprime and near prime automobile finance. Such loans are originated through approved franchised and independent dealers throughout the Truist market area and nationally through Regional Acceptance Corporation. These loans are homogeneous, and no single loan is individually significant in terms of its size and potential risk of loss. Indirect auto loans are subject to lending policies and procedures and are underwritten with note amounts and credit limits that are consistent with the Company’s risk philosophy. In addition to its normal underwriting due diligence, Truist uses application systems and scoring systems to help underwrite and manage the credit risk in its indirect auto portfolio.Other Consumer Loan PortfolioThe other consumer portfolio includes loans originated through the Truist branch network, as well as loans originated by Truist’s national online consumer lending platforms. The other consumer loan portfolio includes: secured and unsecured loans originated through the Truist branch network marketed to qualifying clients and other creditworthy candidates in Truist’s market areas; LightStream, an online platform which originates fixed-rate, unsecured lending to consumers with strong credit; secured indirect installment loans to consumers for the purchase of new and used boats and recreational vehicles; Sheffield, a small ticket consumer lending division related to the purchase of power sports and outdoor power equipment; other indirect and point-of-sale lending to consumers, including through Service Finance, to finance home improvements, furniture purchases, certain elective health-care services; and unsecured loans originated via third-party partnerships, which are in run-off. These loans are homogeneous, and no single loan is individually significant in terms of its size and potential risk of loss. These loans are originated in accordance with underwriting criteria as determined by Truist.
58 Truist Financial CorporationCredit Card Loan PortfolioThe credit card portfolio consists of the outstanding balances on credit cards for commercial and consumer clients. Truist markets credit cards to its existing client base and does not solicit cardholders through nationwide programs or other forms of mass marketing. Such balances are generally unsecured and actively managed.Refer to “Note 5. Loans and ACL” for additional information.
The following table summarizes the loan portfolio:
Table 16: Loans and Leases as of Period End(Dollars in millions) Dec 31, 2024 Dec 31, 2023Commercial:Commercial and industrial $ 154,848 $ 160,788
CRE 20,363 22,570
Commercial construction 8,520 6,683Consumer:Residential mortgage 55,599 55,492
Home equity 9,642 10,053
Indirect auto 23,089 22,727
Other consumer 29,395 28,647
Credit card 4,927 5,101
Total loans and leases HFI 306,383 312,061
LHFS 1,388 1,280
Total loans and leases $ 307,771 $ 313,341
Loans and leases HFI were $306.4 billion at December 31, 2024, down $5.7 billion compared to 2023.
Commercial loans decreased $6.3 billion during 2024 primarily due to declines of $5.9 billion in the commercial and industrial portfolio and $2.2 billion in the CRE portfolio due to lower production, partially offset by an increase in the commercial construction portfolio of $1.8 billion.
Consumer loans and credit cards increased $632 million during 2024 primarily due to a $748 million increase in other consumer primarily due to growth of higher-return point-of-sale lending portfolios (Service Finance and Sheffield), and a $362 million increase in indirect auto primarily due to higher production, partially offset by a $411 million decrease in home equity.
Truist Financial Corporation 59
The following table presents a summary of the loans and leases by scheduled repayment period and interest rate terms. Determinations of maturities are based on scheduled repayments, except when rollovers or extensions are included for purposes of measuring the ACL. Truist’s credit policy typically does not permit automatic renewal of loans. At the scheduled maturity date (including balloon payment date), the client generally must request a new loan to replace the matured loan and execute either a new note or note modification with rate, terms, and conditions negotiated at that time.Table 17: Loan MaturitiesDecember 31, 2024 (Dollars in millions) 1 Year or Less 1 to 5 Years 5 to 15 Years After 15 Years TotalFixed rate:
Commercial:Commercial and industrial $ 11,084 $ 14,377 $ 10,589 $ 2,111 $ 38,161
CRE 858 2,161 401 3 3,423
Commercial construction 19 42 22 38 121
Total commercial 11,961 16,580 11,012 2,152 41,705Consumer:Residential mortgage 1,560 6,276 17,113 23,743 48,692
Home equity 313 956 1,604 409 3,282
Indirect auto 5,514 15,958 1,617 — 23,089
Other consumer 5,580 13,784 6,611 857 26,832
Total consumer 12,967 36,974 26,945 25,009 101,895
Credit card 266 — — — 266
Total fixed rate 25,194 53,554 37,957 27,161 143,866Variable rate:
Commercial:Commercial and industrial 32,888 73,617 8,234 1,948 116,687
CRE 5,139 10,982 813 6 16,940
Commercial construction 3,321 4,956 121 1 8,399
Total commercial 41,348 89,555 9,168 1,955 142,026Consumer:Residential mortgage 175 776 2,348 3,608 6,907
Home equity 623 2,261 3,459 17 6,360
Indirect auto — — — — —
Other consumer 396 1,813 351 3 2,563
Total consumer 1,194 4,850 6,158 3,628 15,830
Credit card 4,661 — — — 4,661
Total variable rate 47,203 94,405 15,326 5,583 162,517
Total loans and leases HFI $ 72,397 $ 147,959 $ 53,283 $ 32,744 $ 306,383
Certain residential mortgage loans have an initial period where the borrower is only required to pay the periodic interest. After the interest-only period, the loan will require the payment of both interest and principal over the remaining term. The outstanding balances of variable rate residential mortgage loans in the interest-only phase were approximately $647 million and $317 million at December 31, 2024 and December 31, 2023, respectively.
60 Truist Financial CorporationThe following table presents the composition of average loans and leases:
Table 18: Average Loans and Leases
Three Months Ended(Dollars in millions) Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023Commercial:Commercial and industrial $ 153,209 $ 154,102 $ 157,043 $ 158,385 $ 160,278
CRE 20,504 21,481 21,969 22,400 22,755
Commercial construction 8,261 7,870 7,645 7,134 6,515Consumer:Residential mortgage 54,390 53,999 54,490 55,070 55,658
Home equity 9,675 9,703 9,805 9,930 10,104
Indirect auto 22,790 22,121 22,016 22,374 23,368
Other consumer 29,355 29,015 28,326 28,285 28,913
Credit card 4,926 4,874 4,905 4,923 4,996
Total average loans and leases HFI $ 303,110 $ 303,165 $ 306,199 $ 308,501 $ 312,587
Average loans and leases HFI were flat compared to the prior quarter.
• Average commercial loans decreased 0.8% due to declines in the commercial and industrial and CRE portfolios.
• Average consumer loans and credit cards increased 1.2% due to growth in the indirect auto, residential mortgage, and other consumer portfolios.
Truist Financial Corporation 61Asset Quality
The following tables summarize asset quality information:
Table 19: Asset Quality(Dollars in millions) Dec 31, 2024 Dec 31, 2023NPAs:
NPLs:Commercial and industrial $ 521 $ 470
CRE 298 284
Commercial construction 3 24
Residential mortgage 166 153
Home equity 116 122
Indirect auto 259 268
Other consumer 66 59
Total NPLs HFI 1,429 1,380
Loans held for sale — 51
Total nonperforming loans and leases 1,429 1,431
Foreclosed real estate 3 3
Other foreclosed property 45 54
Total nonperforming assets $ 1,477 $ 1,488Loans 90 days or more past due and still accruing:Commercial and industrial $ 19 $ 7
CRE 1 —
Commercial construction — 1
Residential mortgage – government guaranteed 430 418
Residential mortgage – nonguaranteed 51 21
Home equity 9 11
Indirect auto — 2
Other consumer 23 21
Credit card 54 53
Total loans 90 days or more past due and still accruing $ 587 $ 534Loans 30-89 days past due and still accruing:Commercial and industrial $ 168 $ 230
CRE 60 5
Commercial construction 3 —
Residential mortgage – government guaranteed 318 326
Residential mortgage – nonguaranteed 401 313
Home equity 60 70
Indirect auto 622 669
Other consumer 236 271
Credit card 81 87
Total loans 30-89 days past due and still accruing $ 1,949 $ 1,971
Nonperforming assets totaled $1.5 billion at December 31, 2024, down $11 million compared to December 31, 2023 due to a decline in the LHFS portfolio, partially offset by an increase in the commercial and industrial portfolio. Nonperforming loans and leases represented 0.47% of total loans and leases HFI, up three basis points compared to December 31, 2023.
Loans 90 days or more past due and still accruing totaled $587 million at December 31, 2024, up $53 million compared to the prior year primarily due to an increase in the residential mortgage portfolio. Excluding government guaranteed loans, the ratio of loans 90 days or more past due and still accruing as a percentage of loans and leases HFI was 0.05% at December 31, 2024, up one basis point compared to December 31, 2023.
Loans 30-89 days past due and still accruing totaled $1.9 billion at December 31, 2024, down $22 million compared to the prior year due to declines in the commercial and industrial, indirect auto, and other consumer portfolios, partially offset by increases in the residential mortgage and CRE portfolios. The ratio of loans 30-89 days or more past due and still accruing as a percentage of loans and leases HFI was 0.64% at December 31, 2024, up one basis point compared to the prior year.
62 Truist Financial CorporationProblem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 19. In addition, for the commercial portfolio segment, loans that are rated special mention or substandard performing are closely monitored by management as potential problem loans. Refer to “Note 5. Loans and ACL” for the amortized cost basis of loans by origination year and credit quality indicator as well as additional disclosures related to NPLs.
Table 20: Asset Quality RatiosDec 31, 2024 Dec 31, 2023Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI0.64 % 0.63 %Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI0.19 0.17NPLs as a percentage of loans and leases HFI0.47 0.44NPLs as a percentage of total loans and leases (1)0.46 0.46NPAs as a percentage of:
Total assets (1)0.28 0.28Loans and leases HFI plus foreclosed property0.48 0.46ALLL as a percentage of loans and leases HFI1.59 1.54Ratio of ALLL to NPLs3.4x 3.5xLoans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding government guaranteed (2)0.05 % 0.04 %(1) Includes LHFS.
(2) This asset quality ratio has been adjusted to remove the impact of government guaranteed 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 21: Asset Quality Ratios (Continued)
Year Ended December 31,2024 2023 2022Net charge-offs as a percentage of average loans and leases HFI:
Commercial:Commercial and industrial 0.20 % 0.20 % 0.04 %
CRE 1.31 0.71 0.02
Commercial construction (0.03) 0.04 (0.07)Consumer:Residential mortgage (0.01) 0.01 (0.01)
Home equity (0.07) (0.12) (0.11)
Indirect auto 2.11 1.66 1.17
Other consumer 1.73 1.40 1.14
Student — 4.39 0.34
Credit card 5.26 3.85 2.98
Total 0.59 0.50 0.27
Ratio of ALLL to net charge-offs 2.7x 3.0x 5.3xThe following table presents activity related to NPAs:
Table 22: Rollforward of NPAs(Dollars in millions) 2024 2023
Balance, January 1 $ 1,488 $ 1,250
New NPAs 3,331 3,055
Advances and principal increases 454 842Disposals of foreclosed assets (1)(616) (603)Disposals of NPLs (2)(223) (237)
Charge-offs and losses (1,313) (1,013)
Payments (1,308) (1,357)
Transfers to performing status (309) (440)
Other, net (27) (9)
Ending balance, December 31 $ 1,477 $ 1,488
(1) Includes charge-offs and losses recorded upon sale of $260 million and $196 million for the years ended December 31, 2024 and 2023, respectively.
(2) Includes gains, net of charge-offs and losses recorded upon sale of $14 million for the year ended December 31, 2024, and charge-offs and losses recorded upon sale of $30 million for the year ended December 31, 2023.Truist Financial Corporation 63Commercial Credit Concentrations
Truist has established the following general practices to manage commercial credit risk:
• limiting the amount of credit that Truist may extend to a borrower;
• establishing a process for credit approval accountability;
• initial underwriting and analysis of borrower, transaction, market, and collateral risks;
• evaluating the diversity of the loan portfolio in terms of type, industry, and geographical concentration;
• ongoing servicing and monitoring of individual loans and lending relationships;
• continuous monitoring of the portfolio, market dynamics, and the economy; and
• periodically reevaluating the Company’s strategy and overall exposure as economic, market, and other relevant conditions change.
Truist monitors various segments of its credit portfolios to assess potential concentration risks. Management is involved in the credit approval and review process, and risk acceptance criteria are adjusted as needed to reflect the Company’s risk appetite. Consistent with established risk management objectives, the Company utilizes various risk mitigation techniques, including collecting collateral and security interests, obtaining guarantees, and, to a limited extent, through the purchase of credit loss protection via third-party insurance or use of credit derivatives such as credit default swaps.
In the commercial portfolio, risk concentrations are evaluated regularly on both an aggregate portfolio level and on an individual client basis. The Company manages its commercial exposure through portfolio targets, limits, and transactional risk acceptance criteria as well as other techniques, including loan syndications/participations, loan sales, collateral, structure, covenants, and other risk reduction techniques.
The following tables provide industry distribution by major types of commercial credit exposure and the geographical distribution of commercial exposures. Industry classification for commercial and industrial loans is based on the North American Industry Classification System. CRE loans are classified based on type of property. For the geographic disclosures, amounts are generally assigned to a state based on the physical billing address of the client or physical property address.
64 Truist Financial Corporation
Table 23: Commercial and Industrial Portfolio Industry and Geography
December 31, 2024 December 31, 2023
(Dollars in millions) LHFI % of Total NPL LHFI % of Total NPL
Industry: (1)
Finance and insurance $ 24,271 15.7 % $ 28 $ 21,929 13.6 % $ 40
Retail trade 12,488 8.1 66 12,368 7.7 89
Manufacturing 12,298 7.9 62 14,090 8.8 65
Health care and social assistance 12,154 7.8 129 13,078 8.1 46
Real estate and rental and leasing 11,354 7.3 3 11,001 6.8 16
Public administration 8,860 5.7 — 9,280 5.8 —
Wholesale trade 7,428 4.8 45 7,471 4.6 3
Information 5,235 3.4 66 5,727 3.6 —
Transportation and warehousing 4,634 3.0 34 5,707 3.5 8
Educational services 4,478 2.9 — 5,362 3.3 31
Professional, scientific, and technical services 4,125 2.7 8 4,445 2.8 26
Utilities 4,096 2.6 — 4,577 2.8 —
Arts, entertainment, and recreation 3,599 2.3 6 3,250 2.0 —
Other services (except public administration) 3,072 2.0 2 3,308 2.1 1
Administrative and support and waste management and remediation services 3,022 2.0 — 3,652 2.3 49
Accommodation and food services 2,935 1.9 9 2,925 1.8 13
Other (2)
11,746 7.6 31 11,913 7.5 41
Subtotal 135,795 87.7 489 140,083 87.1 428
Business owner occupied
19,053 12.3 32 20,705 12.9 42
Total commercial and industrial $ 154,848 100.0 % $ 521 $ 160,788 100.0 % $ 470
Geography:
Florida $ 18,258 11.8 % $ 172 $ 18,947 11.8 % $ 228
Texas 14,728 9.5 47 15,374 9.6 24
North Carolina 12,167 7.9 16 12,959 8.1 11
New York 11,379 7.3 50 10,336 6.4 3
Georgia 11,240 7.3 10 12,167 7.6 32
Virginia 9,343 6.0 7 9,724 6.0 35
California 8,115 5.2 8 9,115 5.7 1
Maryland 6,781 4.4 3 6,668 4.1 6
Pennsylvania 6,466 4.2 9 7,423 4.6 4
Tennessee 5,729 3.7 51 5,852 3.6 43
South Carolina 4,151 2.7 23 4,134 2.6 1
New Jersey 3,947 2.5 5 3,754 2.3 36
Illinois 3,639 2.4 20 3,892 2.4 10
Ohio 3,482 2.2 1 3,220 2.0 6
Other (3)
35,423 22.9 99 37,223 23.2 30
Total commercial and industrial
$ 154,848 100.0 % $ 521 $ 160,788 100.0 % $ 470
(1) The Company adjusted certain NAICS code assignments in connection with the implementation of new guidance related to non-depository financial institutions. This change primarily impacted the industry assignment related to asset securitization facilities and family office obligations. Prior periods were reclassified to conform to the current presentation.
(2) Represents other remaining industries that are deemed to be individually insignificant.
(3) Includes non-U.S. loans of $4.1 billion and $5.1 billion at December 31, 2024 and December 31, 2023, respectively. The remainder represents other remaining states that are deemed to be individually insignificant.
Truist has noted that the CRE and commercial construction portfolios have the potential for heightened risk in the current environment. Truist seeks to maintain a high-quality portfolio through disciplined risk management and prudent client selection.
Truist’s CRE and commercial construction portfolios totaled $28.9 billion as of December 31, 2024, which includes 36% related to multifamily residential, 21% related to industrial, 14% related to office, 13% related to retail, and the remainder composed of hotel and other commercial real estate.
Truist Financial Corporation 65
Our combined CRE and commercial construction office portfolio is primarily composed of multi-tenant, non-gateway properties located within Truist Bank’s footprint. As of December 31, 2024, approximately 97% of these properties are multi-tenant or medical. Additionally, as of December 31, 2024, 34% and 19% of these exposures are scheduled to mature in 2025 and 2026, respectively, with the remainder scheduled to mature in 2027 and beyond.
Table 24: CRE Portfolio Property Type and Geography
December 31, 2024 December 31, 2023
(Dollars in millions) LHFI % of Total NPL LHFI % of Total NPL
Industry:
Multifamily $ 5,508 27.0 % $ 27 $ 5,731 25.4 % $ 3
Industrial 4,303 21.1 3 4,054 18.0 3
Retail 3,530 17.3 33 4,172 18.5 9
Office 3,459 17.0 228 4,286 19.0 264
Hotel 1,891 9.3 — 2,445 10.8 —
Other (1)
1,672 8.3 7 1,882 8.3 5
Total CRE $ 20,363 100.0 % $ 298 $ 22,570 100.0 % $ 284
Geography:
Florida $ 2,594 12.7 % $ 26 $ 2,481 11.0 % $ 5
North Carolina 2,212 10.9 10 2,726 12.1 1
Georgia 2,010 9.9 80 2,532 11.2 120
California 1,683 8.3 — 1,709 7.6 81
Texas 1,599 7.9 6 1,611 7.1 —
New York 1,491 7.3 2 1,574 7.0 3
Pennsylvania 1,218 6.0 1 1,403 6.2 —
Virginia 1,108 5.4 3 1,276 5.7 —
Massachusetts 860 4.2 27 698 3.1 —
District of Columbia 827 4.1 45 1,043 4.6 —
Tennessee 715 3.5 1 810 3.6 1
Other (2)
4,046 19.8 97 4,707 20.8 73
Total CRE $ 20,363 100.0 % $ 298 $ 22,570 100.0 % $ 284
(1) Represents other remaining property types that are deemed to be individually insignificant.
(2) Includes non-U.S. loans of $54 million and $73 million at December 31, 2024 and December 31, 2023, respectively. The remainder represents other remaining states that are deemed to be individually insignificant.
Table 25: Commercial Construction Portfolio Property Type and Geography
December 31, 2024 December 31, 2023
(Dollars in millions) LHFI % of Total NPL LHFI % of Total NPL
Industry:
Multifamily $ 4,918 57.7 % $ — $ 3,868 57.9 % $ 23
Industrial 1,680 19.7 — 877 13.1 —
Single Family - CP 664 7.8 2 819 12.3 —
Office 627 7.4 — 634 9.5 1
Single Family - AD and CL 187 2.2 1 196 2.9 —
Other (1)
444 5.2 — 289 4.3 —
Total commercial construction $ 8,520 100.0 % $ 3 $ 6,683 100.0 % $ 24
Geography:
Texas $ 1,345 15.8 $ — $ 956 14.3 $ 23
Georgia 1,294 15.2 — 1,059 15.8 —
Florida 1,138 13.4 — 741 11.1 —
North Carolina 992 11.6 1 777 11.6 —
California 492 5.8 — 512 7.7 —
Other (2)
3,259 38.2 2 2,638 39.5 1
Total commercial construction $ 8,520 100.0 % $ 3 $ 6,683 100.0 % $ 24
(1) Represents other remaining property types that are deemed to be individually insignificant.
(2) Includes an immaterial amount of non-U.S. loans at December 31, 2024 and $16 million at December 31, 2023. The remainder represents other remaining states that are deemed to be individually insignificant.
See additional information on the commercial portfolios in “Note 5. Loans and ACL,” including loans by origination year and credit quality indicator.
66 Truist Financial CorporationACL
Activity related to the ACL is presented in the following tables:Table 26: Activity in ACLYear Ended December 31,(Dollars in millions) 2024 2023 2022Balance, beginning of period (1)$ 5,093 $ 4,649 $ 4,695
Provision for credit losses 1,870 2,109 777Charge-offs:Commercial and industrial (395) (390) (143)
CRE (316) (166) (13)
Commercial construction — (5) (1)
Residential mortgage (3) (10) (9)
Home equity (9) (10) (13)
Indirect auto (591) (531) (411)
Other consumer (606) (477) (381)
Student — (108) (22)
Credit card (296) (223) (176)
Total charge-offs (2,216) (1,920) (1,169)Recoveries:Commercial and industrial 87 70 87
CRE 34 3 8
Commercial construction 2 3 5
Residential mortgage 6 6 16
Home equity 16 23 25
Indirect auto 120 107 91
Other consumer 110 78 79
Student — — 1
Credit card 38 35 34
Total recoveries 413 325 346
Net charge-offs (1,803) (1,595) (823)Other (2)1 (70) —
Balance, end of period $ 5,161 $ 5,093 $ 4,649ACL: (1)ALLL 4,857 4,798 4,377
RUFC 304 295 272
Total ACL $ 5,161 $ 5,093 $ 4,649(1) Excludes provision for credit losses and allowances related to other financial assets at amortized cost.
(2) 2023 includes the impact from the adoption of the Troubled Debt Restructurings and Vintage Disclosures accounting standard.Net charge-offs during 2024 totaled $1.8 billion, or 0.59% as a percentage of average loans, and were up nine basis points compared to the prior year, primarily driven by higher charge-offs in the CRE, other consumer, credit card, and indirect auto portfolios, partially offset by the sale of the student loan portfolio in the prior year.
The allowance for credit losses was $5.2 billion and includes $4.9 billion for the allowance for loan and lease losses and $304 million for the reserve for unfunded commitments. The ALLL ratio was 1.59%, compared to 1.54% at December 31, 2023. The increase in the ALLL ratio primarily reflects increases in reserves related to the CRE, commercial construction, and certain consumer non-real estate portfolios, as well as declines in commercial and industrial balances. The ALLL covered nonperforming loans and leases held for investment 3.4x compared to 3.5x at December 31, 2023. At December 31, 2024, the ALLL was 2.7x annualized net charge-offs, compared to 3.0x at December 31, 2023.
Truist Financial Corporation 67The 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 27: Allocation of ALLL by Category
December 31, 2024 December 31, 2023(Dollars in millions) Amount % ALLL in Each Category % Loans in Each Category Amount % ALLL in Each Category % Loans in Each CategoryCommercial and industrial $ 1,284 26.4 % 50.7 % $ 1,404 29.4 % 51.6 %
CRE 643 13.2 6.6 616 12.8 7.2
Commercial construction 257 5.3 2.8 174 3.6 2.1
Residential mortgage 204 4.2 18.1 298 6.2 17.8
Home equity 89 1.8 3.1 89 1.9 3.2
Indirect auto 955 19.7 7.5 942 19.6 7.3
Other consumer 994 20.5 9.6 890 18.5 9.2
Credit card 431 8.9 1.6 385 8.0 1.6
Total ALLL 4,857 100.0 % 100.0 % 4,798 100.0 % 100.0 %
RUFC 304 295
Total ACL $ 5,161 $ 5,093Truist monitors the performance of its home equity loans and lines secured by second liens similarly to other consumer loans and utilizes assumptions specific to these loans in determining the necessary ALLL. Truist also receives notification when the first lien holder, whether Truist or another financial institution, has initiated foreclosure proceedings against the borrower. When notified that the first lien is in the process of foreclosure, Truist obtains valuations to determine if any additional charge-offs or reserves are warranted. These valuations are updated at least annually thereafter.Truist has limited ability to monitor the delinquency status of the first lien, unless the first lien is held or serviced by Truist. Truist estimates credit losses on second lien loans where the first lien is delinquent based on historical experience; the increased risk of loss on these credits is reflected in the ALLL. As of December 31, 2024, Truist held or serviced the first lien on 33% of its second lien positions.Other Assets
The components of other assets are presented in the following table:Table 28: Other Assets as of Period End
(Dollars in millions) Dec 31, 2024 Dec 31, 2023
Tax credit and other private equity investments $ 9,303 $ 7,898
Bank-owned life insurance 7,801 7,716
Prepaid pension assets 7,238 6,563
Accrued income 2,069 2,085
DTAs, net 1,945 3,037
Accounts receivable 1,904 997
Leased assets and related assets 1,352 1,647
Prepaid expenses 1,061 1,083
ROU assets 1,015 1,057
Derivative assets 966 951
FHLB stock 965 1,198
Other 1,513 765
Total other assets $ 37,132 $ 34,997
68 Truist Financial CorporationFunding ActivitiesDeposits are the primary source of funds for the Company’s lending and investing activities. Scheduled payments and maturities from portfolios of loans and investment securities also provide a stable source of liquidity. FHLB advances, other secured borrowings, Federal funds purchased and other short-term borrowed funds, as well as long-term debt issued through the capital markets, all provide supplemental liquidity sources. Funding activities are monitored and governed through Truist’s overall ALM process under the governance and oversight of the ALCO, which is further discussed in the “Market Risk” section in MD&A. The following section provides a brief description of the various sources of funds.DepositsDeposits are obtained principally from individuals and businesses within Truist’s geographic area and include noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market deposit accounts, CDs, and IRAs. Deposit account terms vary with respect to the minimum balance required, the time period the funds must remain on deposit, and service charge schedules. Interest rates paid on specific deposit types are determined based on (i) competitor deposit rates, (ii) the anticipated amount and timing of funding needs, (iii) the availability and cost of alternative sources of funding, and (iv) anticipated future economic conditions and interest rates. Deposits are attractive sources of funding because of their stability and relative cost.The following table presents a summary of deposits:Table 29: Deposits as of Period End
(Dollars in millions) Dec 31, 2024 Dec 31, 2023
Noninterest-bearing deposits $ 107,451 $ 111,624
Interest checking 109,042 104,757
Money market and savings 137,307 135,923
Time deposits 36,724 43,561
Total deposits $ 390,524 $ 395,865
Deposits totaled $390.5 billion at December 31, 2024, a decrease of $5.3 billion from December 31, 2023. Brokered deposits were $28.1 billion at December 31, 2024 compared to $31.3 billion at December 31, 2023.
Approximately 60% of deposits are insured or collateralized at December 31, 2024, compared to 62% at December 31, 2023. Truist deposit accounts are typically based on long-term relationships that include multiple products and services. The amount of deposits above the FDIC’s limit of $250,000 was $179.1 billion and $175.1 billion as of December 31, 2024 and 2023, respectively, calculated using the same methodology as the Call Report for Truist Bank.The following table summarizes the maturities of time deposit accounts above $250,000:Table 30: Scheduled Maturities of Time Deposits $250,000 and Greater
December 31, 2024 (Dollars in millions)
Three months or less $ 4,621
Over three through six months 3,122
Over six through twelve months 2,182
Over twelve months 116
Total $ 10,041
Truist Financial Corporation 69The following table presents average deposits:Table 31: Average DepositsThree Months Ended(Dollars in millions) Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023
Noninterest-bearing deposits $ 107,968 $ 106,080 $ 107,634 $ 108,888 $ 114,555
Interest checking 107,075 103,899 103,894 103,537 101,722
Money market and savings 138,242 136,639 135,264 134,696 137,464
Time deposits 36,757 37,726 41,250 41,937 41,592
Total average deposits $ 390,042 $ 384,344 $ 388,042 $ 389,058 $ 395,333
Average deposits for the fourth quarter of 2024 were $390.0 billion, an increase of $5.7 billion, or 1.5%, compared to the prior quarter.
Average noninterest-bearing deposits increased 1.8% compared to the prior quarter and represented 27.7% of total deposits for the fourth quarter of 2024 compared to 27.6% for the third quarter of 2024. Average interest checking increased 3.1%. Average money market and savings accounts increased 1.2%. Average time deposits decreased 2.6%.Borrowings
The types of short-term borrowings that have been, or may be, used by the Company include Federal funds purchased, securities sold under repurchase agreements, master notes, commercial paper, short-term bank notes, and short-term FHLB advances. Short-term borrowings fluctuate based on the Company’s funding needs. While deposits remain the primary source for funding loan originations, management uses short-term borrowings as a supplementary funding source for loan growth and other balance sheet management purposes. The following table summarizes certain information for the past three years with respect to short-term borrowings excluding trading liabilities, hedges, and collateral in excess of derivative exposure:Table 32: Short-Term BorrowingsAs Of / For The Year Ended December 31,(Dollars in millions) 2024 2023 2022Securities sold under agreements to repurchase:Maximum outstanding at any month-end during the year $ 9,675 $ 4,120 $ 6,033
Balance outstanding at end of year 9,675 2,427 2,128
Average outstanding during the year 2,947 2,472 2,670
Average interest rate during the year 5.13 % 5.18 % 1.33 %
Average interest rate at end of year 4.42 5.39 4.36Federal funds purchased and short-term borrowed funds:Maximum outstanding at any month-end during the year $ 28,218 $ 26,453 $ 22,324
Balance outstanding at end of year 19,530 22,401 19,340
Average outstanding during the year 21,552 22,007 10,135
Average interest rate during the year 5.39 % 5.26 % 2.79 %
Average interest rate at end of year 4.04 5.15 4.38
At December 31, 2024, short-term borrowings totaled $29.2 billion, an increase of $4.4 billion compared to December 31, 2023. Average short-term borrowings were $24.5 billion for the years ended December 31, 2024 and 2023, representing 5.5% and 5.2% of total funding, respectively.
Long-term debt provides funding and, to a lesser extent, regulatory capital, and primarily consists of senior and subordinated notes issued by the Parent Company and Truist Bank. Long-term debt totaled $35.0 billion at December 31, 2024, a decrease of $4.0 billion compared to December 31, 2023. During the year ended December 31, 2024, the Company had:
• Net redemptions of $1.8 billion of floating rate FHLB advances.
• Maturities and redemptions of $6.9 billion of senior notes.
• Issuances of $4.5 billion of fixed-to-floating rate senior notes with interest rates between 5.15% and 5.71% due from January 24, 2030 to January 24, 2035.
70 Truist Financial CorporationShareholders’ Equity
Truist’s book value per common share and TBVPS are presented in the following table:Table 33: Book Value per Common Share
(Dollars in millions, except per share data, shares in thousands) Dec 31, 2024 Dec 31, 2023
Common equity per common share $ 43.90 $ 39.31Non-GAAP capital measure: (1)Tangible common equity per common share $ 30.01 $ 21.83Calculation of tangible common equity: (1)Total shareholders’ equity $ 63,679 $ 59,253Less:Preferred stock 5,907 6,673
Noncontrolling interests — 152
Goodwill and intangible assets, net of deferred taxes 18,274 23,306
Tangible common equity $ 39,498 $ 29,122
Common shares outstanding at end of period 1,315,936 1,333,743(1) Tangible common equity is a non-GAAP measure that excludes the impact of intangible assets, net of deferred taxes. This measure is useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses this measure to assess balance sheet risk and shareholder value.Total shareholders’ equity was $63.7 billion at December 31, 2024, an increase of $4.4 billion from December 31, 2023. This increase includes $4.8 billion in net income and $4.3 billion in OCI, partially offset by $3.1 billion in common and preferred dividends,$1.0 billion in common share repurchases, and $750 million for the redemption of series L preferred stock. For 2024, the dividend payout ratio was 62% and the total payout ratio was 85%.Truist’s book value per common share at December 31, 2024 was $43.90, compared to $39.31 at December 31, 2023. Truist’s TBVPS of $30.01 at December 31, 2024, increased 37% compared to December 31, 2023.
Truist Financial Corporation 71Risk ManagementTruist seeks to maintain 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. A key objective of the Company’s risk management framework is to promote the execution of strategic goals and objectives in alignment with its risk appetite.
Truist has developed a risk management taxonomy to provide for the identification and classification of risk elements at Truist. The objective of the risk management taxonomy is to define enterprise-wide categorization for elements used in risk management activities, establish consistently applied language, and enable data analysis, aggregation, and reporting.
Truist is committed to fostering a culture that supports the 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 must be evaluated and prioritized to identify those that present attractive risk-adjusted returns, while preserving asset value and capital.Truist’s compensation plans are designed to consider teammates’ adherence to and successful implementation of Truist’s risk values and associated policies and procedures. The Company’s compensation structure is designed to support its core values and sound risk management practices in an effort to promote judicious risk-taking behavior.
Truist’s risk appetite is defined as the level of risk exposure Truist is willing to assume to realize its purpose, mission, and values, as well as achieve its strategic objectives, deliver shareholder returns, and maintain the safety and soundness of Truist. Truist’s RMO provides independent oversight and guidance for risk-taking across the enterprise. In keeping with the belief that consistent values drive long-term behaviors, Truist’s RMO has established four key behaviors all teammates are expected to practice daily – regardless of role:
• Awareness: demonstrate an appropriate understanding of enterprise and business unit risks and the controls required to mitigate them. Complete required risk and compliance training within deadlines. Comply with risk related applicable Truist policies.
• Identification: proactively recognize business concerns, issues, risks, or emerging risks as they arise in day-to-day activities.
• Escalation: speak up, report, and elevate concerns, issues, and risks as soon as possible to appropriate parties.
• Mitigation: consistently execute risk related applicable procedures and processes as designed for day-to-day activities. Maintain and execute effective controls to manage risk within risk appetite. As applicable, complete successful and timely remediation of assigned issues.
The BRC assists the Board in its oversight of the Company’s risk management function. The BRC is responsible for approving and periodically reviewing the Company’s risk management framework and risk management policies as well as monitoring the Company’s risk profile, approving risk appetite statements, and providing input to management regarding Truist’s risk appetite and risk profile.The RMO is led by the CRO and is responsible for overseeing the identification, measurement, monitoring, management, and reporting of risk. The CRO has direct access to the Board to communicate any risk issues (current or emerging) as well as the performance of the risk management activities throughout the enterprise.The risk management framework is supported by a three-lines-of-defense structure with unique roles and responsibilities for executing risk management activities, maintaining independent oversight, and providing independent assurance. The 1st line of defense (1LOD) includes the business units which originate and own the risk and GCO, which is described below. The 2nd line of defense (2LOD) is the independent risk management function provided by the RMO. The 3rd line of defense (3LOD) is the independent assurance function provided by Truist Audit Services.
The GCO standardizes first-line risk execution and ownership across the Company in partnership with the business units and enterprise functions. As part of the first-line of defense, the GCO provides risk advice and oversight, issues management, testing, reporting, and business continuity expertise to first-line execution efforts. The GCO coordinates closely with the RMO in executing these responsibilities.
72 Truist Financial Corporation
Truist’s Committee and Risk Reporting Governance Program is designed to provide comprehensive Board and management risk oversight, maintaining a committee governance structure that supports alignment and execution of the risk management framework. The committee structure provides a mechanism to allow for efficient aggregation and escalation of risk information from the business units up to management and ultimately the Board. Truist’s committee structure is broken down into three levels of committees:
• Level I committees: Board committees established by the Board to assist in its oversight of the Company. Level I committees are subject to governance directly by the Board, the respective Board committee charters, the bylaws of Truist, and the Truist corporate governance guidelines.
• Level II committees: appointed by a Level I committee with a direct reporting relationship and with the annual review and approval of its charter by the appointing Level I committee.
• Level III committees: appointed by a Level I, II, or III committee with a direct reporting relationship with, and the annual review and approval of its charter by, the appointing “parent” Level I, II, or III committee.
This committee structure includes management committees that are responsible for providing independent risk oversight of each of Truist’s primary risk types and comprehensive coverage of Truist’s strategy, risk-taking and execution activities. Examples of such committees include the ERC and Management Compensation Oversight Committee.
The ERC serves as the enterprise-wide risk governance body authorized by the BRC with responsibility for broad strategic oversight of all risk types and establishing an integrated view of risks across Truist at the enterprise level. The ERC is responsible for maintaining a risk management framework and monitoring its adoption and execution across the enterprise. The ERC is chaired by the CRO and its membership includes the CEO, CFO, Chief Audit Officer, and other designated members of Truist management.Principal types of inherent risk include market, credit, liquidity, technology, compliance, strategic, reputational, and operational risks. The following is a discussion of these risks.
Market RiskMarket risk is the risk to current or anticipated earnings, capital, or economic value arising from changes in interest rates, spreads, or prices of financial instruments, and the corresponding impact on the composition of the balance sheet or trading and fair value positions. Market risk results from changes in the level, volatility, or correlations among financial market risk factors or prices, including interest rates, credit spreads, foreign exchange rates, equity, and commodity prices.
Truist’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 of instruments held 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); changing rate relationships among different yield curves affecting bank activities (basis risk); changing rate relationships across the spectrum of maturities (yield curve risk); and interest-related options inherently embedded in bank products (options risk).
The primary objectives of 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 RiskAs a financial institution, Truist is exposed to interest rate risk from assets, liabilities, and off-balance sheet positions. Truist primarily monitors this risk through two measurement types, (i) NII at risk and (ii) economic value of equity. Truist manages this risk with securities, derivatives, and broader asset liability management activities. Truist uses derivatives to hedge interest income variability of floating rate loans and to hedge valuation changes of long-term debt and investment securities.
IRR measurement is reported monthly through the ALCO. Monthly IRR reporting includes exposure and historical trends relative to risk limit scenarios, impacts to a wide range of rate scenarios, and sensitivity tests of key assumptions. IRR reporting is provided to the BRC quarterly.
Truist Financial Corporation 73
IRR measurement is influenced by data, assumptions, and models. Due to their high sensitivity to market rates, mortgage (loan and security) prepayments leverage an industry model that results in varying prepayment speeds across rate scenarios. Prepayments for non-mortgage loans leverage a mix of dynamic models (varying results based on market rates) and static prepayment assumptions based on historical experience. Prior to December 2024, interest-bearing-deposit rate paid was projected to move at a constant ratio (deposit beta) of market rates, primarily the Federal Funds Rate, aligned to historical through the cycle experience, and deposit balances in alternate scenarios were aligned to the Truist baseline scenario. In December 2024, we enhanced our deposit methodology to more dynamically incorporate client deposit balance levels, the mix across product types, and deposit rate paid across alternate rate scenarios based on modeled changes in customer and bank behavior.
NII at risk measures the change in NII under alternate interest rate scenarios relative to Truist’s baseline scenario, which incorporates Truist’s current balance sheet and off-balance sheet hedges as well as expectations for new business over the forecast horizon. Truist’s baseline scenario relies on assumptions including expectations of the economy and interest rates – which are influenced by market conditions, new business volume, pricing, and customer behavior. In measuring NII at risk, Truist assumes that changes in key factors, such as prepayments and deposit pricing (betas), largely move in line with those it has experienced in prior rate cycles. However, future behavior of key factors may vary from Truist’s assumptions. NII at risk measurement assumes, when applicable, that U.S. interest rates floor at zero and Truist does not take any balance sheet or hedging actions in response to the rate scenarios.
Truist evaluates a wide range of alternate scenarios including instantaneous and gradual as well as parallel and non-parallel changes in interest rates. The table below presents the estimated change to NII over the following 12 months for select parallel alternate scenarios, expressed as a percentage change relative to baseline NII.
The change in simulation analysis results from December 31, 2023 to December 31, 2024 in the table below was primarily due to the aforementioned enhanced deposit methodology. The use of dynamic deposit balance models results in rotation to higher cost funding products (e.g., CDs) when market rates increase and to lower cost funding products (e.g., non-maturity deposits) when market rates decrease. The use of dynamic rate paid models results in varying deposit betas based on the timing and conditions within market rate cycles but generally result in lower betas in the simulation analysis results than the prior methodology due to beta lag effects relative to changes in market rates. These updates were made to better reflect expected deposit behavior and Truist’s NII rate sensitivity to changes in market rates. Together, the incorporation of dynamic deposit balances and dynamic rate paid resulted in adding NII in up rate scenarios and reducing NII in down rate scenarios.
Table 34: Interest Sensitivity Simulation Analysis
Dec 31, 2024 Dec 31, 2023
Up 200bps gradual change in interest rates 1.1 % (1.5) %
Up 50bps instantaneous change in interest rates 0.6 (0.4)Down 50bps instantaneous change in interest rates(0.8) (0.1)Down 200bps gradual change in interest rates(2.1) (0.3)
Truist performs and monitors sensitivity tests of key assumptions used in NII risk including:
• Asset prepayment speeds
• New loan volume pricing spreads
• Interest-bearing deposit betas
• Non-interest-bearing demand deposit balance runoff, replaced by market funding
EVE measures changes in the economic value of Truist’s current balance sheet and off-balance sheet hedges under alternate rate scenarios relative to starting economic value. Truist uses EVE as a longer-term measure of interest rate risk. Truist performs and monitors sensitivity tests of key assumptions used in EVE including:
• Asset prepayment speeds
• Mortgage spreads (mortgage loan and security valuations)
• Interest-bearing deposit beta
• Deposit runoff / decay
Key assumption tests are generally performed by increasing and decreasing the assumption, whether static or dynamically modeled, relative to their respective starting values and then measuring the resulting impact to NII and EVE under baseline and alternate rate scenarios.
The identification and testing of key assumptions are influenced by market conditions and management views of key risks. The results of key assumption sensitivity tests are reported to ALCO and BRC at least quarterly. Key assumptions and their associated sensitivity tests are reviewed with ALCO and BRC at least annually.
74 Truist Financial CorporationMarket Risk from Trading ActivitiesAs 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 multi-faceted 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.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 19. Derivative Financial Instruments,” “Note 18. Fair Value Disclosures,” and “Critical Accounting Policies” herein for discussion of valuation policies and methodologies.
SecuritizationsAs of December 31, 2024, the aggregate market value of on-balance sheet securitization positions subject to the Market Risk Rule, which were non-agency asset backed securities positions, was $100 million. Consistent with the Market Risk Rule requirements, the Company performs pre-purchase due diligence on each securitization position to identify the characteristics including deal structure and the asset quality of the underlying assets, that materially affect valuation and performance. Securitization positions are subject to Truist’s 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 PositionsThe trading portfolio of covered positions did not contain any correlation trading positions as of December 31, 2024.VaR-Based MeasuresVaR 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 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 year ended December 31, 2024 and 2023.
Truist Financial Corporation 75
Table 35: VaR-based MeasuresYear Ended December 31,2024 2023(Dollars in millions) 10-Day Holding Period 1-Day Holding Period 10-Day Holding Period 1-Day Holding Period
VaR-based Measures:Maximum $ 28 $ 12 $ 30 $ 14
Average 21 7 17 7
Minimum 12 4 10 4
Period-end 16 6 23 11VaR by Risk Class:Interest Rate Risk 6 5
Credit Spread Risk 6 2
Equity Price Risk 6 5
Foreign Exchange Risk 1 1
Portfolio Diversification (12) (2)
Period-end 6 11Stressed 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 36: Stressed VaR-based Measures - 10 Day Holding PeriodYear Ended December 31,(Dollars in millions) 2024 2023
Maximum $ 234 $ 164
Average 145 76
Minimum 69 25
Period-end 105 79
Compared to the same period of the prior year, Stressed VaR measures were higher, primarily due to higher market making inventory.Specific Risk Measures
Specific risk is a measure of idiosyncratic risk that could result from risk factors other than broad market movements (e.g., default or event risks). The Market Risk Rule provides fixed risk weights under a standardized measurement method while also allowing a model-based approach, subject to regulatory approval. Truist utilizes the standardized measurement method to calculate the specific risk component of market risk regulatory capital. As such, incremental risk capital requirements do not apply.
VaR Model BacktestingIn accordance with the Market Risk Rule, the Company evaluates the accuracy of its VaR model through daily backtesting by comparing aggregate daily trading gains and losses (excluding fees, commissions, reserves, net interest income, and intraday trading) from covered positions with the corresponding daily VaR-based measures generated by the model. As illustrated in the following graph, there were no Company-wide VaR backtesting exceptions during the twelve months ended December 31, 2024. 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.
76 Truist Financial CorporationModel Risk OversightMRO is responsible for the independent model validation of all decision models, including trading market risk models. As part of ongoing monitoring efforts, the performance of all trading risk models is reviewed regularly to evaluate model performance with emerging developments in financial markets, assess evolving modeling approaches, and identify potential model enhancement.Stress TestingThe Company uses a 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 risk factor sensitivities, historical repeats, and hypothetical scenarios with varying liquidity horizons of key risk factors. All trading positions within each applicable market risk category (i.e., interest rate risk, equity risk, foreign exchange rate risk, credit spread risk, and commodity price risk) are included in the Company’s stress testing framework. Management reviews stress testing scenarios and makes updates on an ongoing basis. 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.Credit RiskCredit risk is the risk to current or anticipated earnings or capital arising when a borrower, obligor, issuer, or counterparty does not meet its financial obligations to us. Credit risk is primarily incurred through lending activities in the Company’s WB and CSBB operating segments. A number of products expose the Company to credit risk, including loans and leases, lending commitments, derivatives, trading assets, and investment securities. Changes in credit quality can have a significant impact on the Company’s earnings and capital position.Truist has established the following general practices to manage credit risk:
• limiting the amount of credit that individual lenders may extend to a borrower;
• establishing a process for credit approval accountability;
• careful initial underwriting and analysis of borrower, transaction, market, and collateral risks;
• ongoing servicing and monitoring of individual loans and lending relationships;
• maintaining collections and asset resolution teams;• continuous monitoring of the portfolio, concentration and transactional limits, emerging risks, market dynamics and the economy; and
• periodically reevaluating the Company’s strategy and overall exposure as economic, market and other relevant conditions change.Truist Financial Corporation 77The following discussion describes the underwriting procedures and overall risk management of Truist’s lending function.
Underwriting Approach
The loan portfolio is a primary source of profitability and risk; therefore, proper loan underwriting is critical to Truist’s long-term financial success. Truist’s underwriting approach is designed to define acceptable combinations of specific risk-mitigating features that promote credit relationships that conform to Truist’s risk philosophy. Provided below is a summary of the most significant underwriting criteria used to evaluate new loans and loan renewals:
• Cash flow and debt service coverage - cash flow adequacy is a necessary condition of creditworthiness, meaning that loans must either be clearly supported by a borrower’s cash flow or, if not, must be justified by secondary repayment sources.
• Secondary sources of repayment - alternative repayment funds are a significant risk-mitigating factor as long as they are liquid, can be easily accessed, and provide adequate resources to supplement the primary cash flow source.• Value of any underlying collateral - loans are generally secured by the asset being financed. Because an analysis of the primary and secondary sources of repayment is the most important factor, collateral, unless it is liquid, does not justify loans that cannot be serviced by the borrower’s primary and secondary cash flows.• Overall creditworthiness of the client, taking into account the client’s relationships, both past and current, with Truist and other lenders - Truist’s success depends on building lasting and mutually beneficial relationships with clients, which involves assessing their financial position and background.
• Level of equity invested in the transaction - in general, borrowers are required to contribute or invest a portion of their own funds prior to any loan advances.
Refer to the “Lending Activities” section in MD&A for a discussion of each loan and lease portfolio.
Liquidity RiskLiquidity risk is the risk that Truist will be unable, or that market participants may perceive Truist to be unable, to fund increases in its assets and meet its financial obligations at a reasonable cost and in a timely manner. Refer to the “Liquidity” section in MD&A for additional discussion.Technology RiskTechnology risk is the risk associated with the disruption or failure of technology that negatively impacts business operations. Truist has defined and adopted a technology risk framework that provides the foundation for its technology risk strategy, program, and oversight and defines key objectives, operating model components, risk domains, and capabilities to manage this risk.
Refer to Item 1C, “Cybersecurity” for a discussion regarding Truist’s cybersecurity risk management, strategy, and governance.
Data Analytics, AI, and Generative AI Risks
Data risk is the risk to current or projected financial condition, operations, strategic objectives, and regulatory compliance arising from inadequate data accuracy, completeness, consistency, timeliness, relevance, integrity, and validity (i.e., data fidelity). Inadequate data fidelity can negatively impact regulatory and management reporting, public disclosures, and business decisions.
Truist recognizes the importance of maintaining accurate and reliable data and maintains a formal data risk management program that is designed to mitigate risks related to data fidelity. Through active data risk monitoring and accuracy testing, Truist seeks to provide reasonable assurance over data-related processes, risks, and controls, as well as the quality and retention of key data used for operational, strategic, regulatory, and compliance purposes. Management and the Board provide oversight of the data risk management program and receive regular updates from the RMO.
Truist’s AI program is foundationally based on the National Institute of Standards and Technology AI Risk Management Framework Core, which provides outcomes and actions that enable dialogue, understanding, and activities to manage AI risks and develop trustworthy AI systems.
78 Truist Financial CorporationCompliance RiskCompliance risk is the risk of legal or regulatory sanctions, financial loss, or damage to reputation as a result of noncompliance with (i) applicable laws, regulations, rules or other regulatory requirements (for example, the risk of consumer or wholesale clients experiencing economic loss or other legal harm as a result of noncompliance with relevant laws, requirements or regulations, such as the BSA and its related laws and regulations); (ii) internal policies and procedures, standards of best practice or codes of conduct; and (iii) principles of integrity and fair dealing applicable to Truist’s activities and functions.Strategic RiskStrategic risk is the risk to earnings, capital, franchise value, stakeholder confidence, and human capital arising from ineffective strategy, inability to adapt to changes in operating environment, adverse business decisions, or improper execution of strategic initiatives.Reputational RiskReputational risk is the risk to current or future earnings, capital and resilience arising from negative publicity or stakeholder opinion, whether real or perceived, regarding Truist’s business practices, products, services, transactions, or other activities undertaken by Truist, its representatives, or its partners that may adversely impair Truist’s brand and public confidence, relationship with clients, teammates, stakeholders, or communities. The Company monitors, identifies, and internally escalates potential reputational risk events and endeavors to mitigate such reputational risks in a timely manner. Truist seeks to provide transparent and accurate communication, both internally and externally, to respond to key stakeholders on issues or events that could give rise to potential reputational risk. Truist utilizes an established risk taxonomy that is used to help identify, measure, and monitor reputational risk that enables clear transparently communication to stakeholders on the level of potential risk faced by the Company which in turn allows for effective management of risk to acceptable levels.
Truist is committed to operating in a manner that reflects the Company’s stated purpose, mission, and values and seeks to protect its reputation, public confidence, and resilience by identifying and evaluating associated risks that conflict with the expectations of the Company’s internal and external stakeholders, including clients, teammates, investors, regulators, and communities.Operational RiskOperational risk is the risk of loss associated with inadequate or failed internal processes, people, systems, or from external events. It includes legal risk, which is the risk of loss arising from defective transactions, litigation or claims made, or the failure to adequately protect company-owned assets. An operational loss occurs when an event results in a loss or reserve originating from operational risk.Model RiskModel risk is the risk to current or anticipated earnings or capital from decisions based on incorrect or misused model outputs. Truist uses models for many purposes, including the valuation of financial positions, estimation of credit losses, and the measurement of risk. Valuation models are used to value certain financial instruments for which quoted prices may not be readily available. Valuation models are also used as inputs for VaR, the estimation of VaR itself, regulatory capital, stress testing, and the ACL. Models are owned by the applicable business units, which are responsible for the development, implementation, and use of their models. Oversight of these functions is performed by the MRO, which is a component of the RMO. Once models have been approved by MRO, model owners are responsible for the maintenance of an appropriate operating environment and must monitor and evaluate the performance of the models on a recurring basis. Models are updated in response to changes in portfolio composition, industry and economic conditions, technological capabilities, and other developments.
MRO seeks to manage model risk through a suite of model governance and model validation activities. The risk of each model is assessed and classified into various risk tiers. Additionally, MRO maintains an enterprise-wide model inventory containing relevant model information. Regarding model validation, MRO utilizes internal validation analysts and managers with skill sets in predictive modeling to perform detailed reviews of model development, implementation, and conceptual soundness. On certain occasions, the MRO will also engage external parties to assist with validation efforts. Once in a production environment, MRO assesses a model’s performance on a periodic basis through ongoing monitoring reviews. MRO tracks issues that have been identified during model validation or through ongoing monitoring and engages with model owners to drive timely remediation. MRO gauges model risk utilizing a collection of key risk indicators, which are periodically reported to relevant committees, including the Model Risk Management Committee and the ERC. MRO will also present model risk topics to the BRC as necessary.
Truist Financial Corporation 79LiquidityLiquidity is the ability to fund increases in assets and meet obligations as they come due, all without incurring unacceptable costs. In addition to the level of liquid assets, such as cash, cash equivalents, and highly liquid unencumbered securities, other factors affect the ability to meet liquidity needs, including access to a variety of funding sources, maintaining borrowing capacity, growing core deposits, loan repayment, and the ability to securitize or package loans for sale.
Truist has a liquidity risk management process designed to identify, measure, and monitor key liquidity risks to assess whether Truist is operating within its liquidity risk appetite. The liquidity risk appetite is outlined using a qualitative statement and more granular detailed risk appetite statements aligned to Truist’s risk taxonomy; risk statements form the basis for aligning risk appetite with risk management goals and strategy. Using the risk appetite statements, key risk indicators are developed that represent quantitative metrics which measure current risk exposure relative to Truist’s risk appetite, which help the Board and management monitor liquidity risk taking activity. Truist’s key risk indicators are designed to support the following objectives:
• maintain (i) a diversified, but customer deposit centric, funding base, (ii) a level of liquid, readily monetized assets sufficient to satisfy business as usual and stressed cash flow needs across multiple liquidity horizons, and (iii) an appropriate level of contingent funding to meet any unexpected needs;
• limit concentration risk from individual, correlated counterparties, and funding concentrations in tenors that may negatively impact Truist from an unforeseen idiosyncratic or market event; and
• maintain sufficient liquidity in the holding company to serve as a source of strength to its subsidiaries.Internal Liquidity Stress TestingLiquidity stress testing is conducted for Truist and Truist Bank using 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, increased draws on unfunded commitments, and the potential need to post additional collateral for derivatives. 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 designed to meet the projected 30-day net stressed cash-flow needs. Truist’s liquidity buffer is substantially the same in composition to what qualifies as HQLA under the LCR Rule. Truist periodically monetizes a representative sample of the liquidity buffer to assess operational readiness through available monetization channels.Contingency Funding PlanTruist has a contingency funding plan designed to address 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 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. On a quarterly basis, Truist conducts testing of market access for alternative sources of funds (e.g. discount window, standing repo facility, etc.) to test operational readiness. On an periodic basis, Truist conducts a table-top test of the Contingency Funding Plan to assess reliability of the plan during liquidity stress events and to simulate the operational elements of the plan such as communications, coordination, and decision-making.
LCR, NSFR, and HQLA
The LCR rule requires that Truist and Truist Bank maintain an amount of eligible HQLA that is sufficient within the parameters of the rule to meet their 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 $89.6 billion and Truist’s average LCR was 109% for the three months ended December 31, 2024.
The NSFR rule defines a minimum amount of stable, long-term funding that Truist and Truist Bank must maintain in relation to their asset composition and off-balance sheet activities. Truist and Truist Bank are subject to the Category III reduced NSFR requirements. At December 31, 2024, Truist was compliant with this requirement.
80 Truist Financial CorporationSources of FundsTruist funds its balance sheet through diverse sources of funding including client deposits, secured and unsecured capital markets funding, and shareholders’ equity. Truist Bank’s primary source of funding is client deposits. Continued access to client deposits is highly dependent on public confidence in the stability of Truist Bank and its ability to return funds to clients when requested.
Truist Bank maintains a number of diverse funding sources to meet its liquidity requirements. These sources include unsecured borrowings from the capital markets through the issuance of senior or subordinated bank notes, institutional CDs, overnight and term Federal funds markets, and retail brokered CDs. Truist Bank also maintains access to secured borrowing sources, including FHLB advances, repurchase agreements, and the FRB discount window. Available investment securities could be pledged to create additional secured borrowing capacity. The following table presents a summary of Truist Bank’s available secured borrowing capacity and eligible cash at the FRB:
Table 37: Selected Liquidity Sources
(Dollars in millions) Dec 31, 2024 Dec 31, 2023Unused borrowing capacity:FRB $ 72,040 $ 55,252
FHLB 31,411 24,712
Available investment securities (at fair value) 68,212 77,029
Available secured borrowing capacity 171,663 156,993
Eligible cash at the FRB 33,717 25,085
Total $ 205,380 $ 182,078
At December 31, 2024, Truist Bank’s available secured borrowing capacity represented approximately 4.4 times the amount of wholesale funding maturities in one-year or less.
As of December 31, 2024, the Company had $1.7 billion in obligations to purchase goods or services that are enforceable and legally binding. Many of the purchase obligations have terms that are not fixed and determinable and are included in the total amount of obligations based upon the estimated timing and amount of payment. In addition, certain of the purchase agreements contain clauses that would allow Truist to cancel the agreement with specified notice; however, that impact is not included in determining the total amount of obligations. See “Note 9. Other Assets and Liabilities,” “Note 11. Borrowings,” and “Note 16. Commitments and Contingencies” for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.Parent CompanyThe Parent Company serves as the primary source of capital for its 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, payments on and, from time-to-time, potential repurchases or redemptions of a portion of an outstanding tranche of the long-term debt of the Parent Company (as may be permitted by the terms of each respective series), and the redemption of preferred stock. See “Note 22. Parent Company Financial Information” 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 manages cash levels at the Parent Company to exceed a minimum of 12 months of projected 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 December 31, 2024, the Parent Company held cash on hand to meet these requirements.Credit RatingsCredit 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” 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.
Truist Financial Corporation 81
The following table presents the credit ratings and outlooks of the Parent Company and Truist Bank as of December 31, 2024:
Table 38: Credit Ratings of Truist Financial Corporation and Truist BankMoody’s S&P Fitch DBRS Morningstar
Truist Financial Corporation:Issuer Baa1 A- / A-2 A / F1 AAL / R-1M
Senior unsecured Baa1 A- A- AAL
Subordinated Baa1 BBB+ BBB+ AH
Preferred stock Baa3(hyb) BBB- BBB- ALTruist Bank:Issuer A3 A / A-1 A / F1 AA / R-1H
Senior unsecured A3 A A AA
Deposits A1/P-1 NA A+ / F1 AA
Subordinated (P) A3 A- A- AALRatings outlook:Credit trend Stable Stable Stable StableCapitalThe 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, for the Parent Company to remain a source of strength for the Parent Company’s 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.
Management regularly monitors the capital position of Truist on both a consolidated and bank-level basis. In this regard, management’s objective is to maintain capital at levels that are in excess of internal capital limits, which are above the regulatory “well-capitalized” minimums. Truist also 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 has implemented internal stress capital ratio minimums that serve as limits which are measured under internally-developed stress testing scenarios to evaluate whether capital ratios calculated under hypothetical stress, and after the effect of alternative capital actions, are likely to remain above internal stressed minimums. Breaches of internal capital limits or projected breaches of internal stress capital ratio minimums under hypothetical stress result in the activation of Truist’s capital contingency plan.
Table 39: Capital RequirementsMinimum Capital Well-Capitalized Minimum Capital Plus Stress Capital Buffer (1)
Truist Truist Bank
CET14.5 % NA 6.5 % 7.3 %
Tier 1 capital 6.0 6.0 % 8.0 8.8
Total capital 8.0 10.0 10.0 10.8Leverage ratio 4.0 NA 5.0 NA
Supplementary leverage ratio 3.0 NA NA NA(1) Reflects a SCB requirement of 2.8% applicable to Truist as of December 31, 2024. Truist’s SCB requirement, received in the 2024 CCAR process, is effective from October 1, 2024 to September 30, 2025.
Truist completed the 2024 CCAR process and received a SCB requirement of 2.8% for the period October 1, 2024 to September 30, 2025, down 10 basis points from the SCB requirement for the period October 1, 2023 to September 30, 2024.
Payments of cash dividends and repurchases of common shares are among the methods used to manage any excess capital generated. In addition, management closely monitors the Parent Company’s double leverage ratio (investments in subsidiaries as a percentage of shareholders’ equity). The active management of the subsidiaries’ equity capital is the process used to manage this important driver of Parent Company liquidity and is a key element in the management of Truist’s capital position.
Management intends to maintain capital at Truist Bank at levels that exceed the minimum capital plus CCB. This will also result in Truist Bank being “well-capitalized” for regulatory purposes.Management’s capital deployment plan in order of preference is to focus on (i) organic growth, (ii) dividends, (iii) strategic opportunities and acquisitions, and (iv) share repurchases if excess capital is available.82 Truist Financial CorporationTruist Bank’s capital ratios are presented in the following table:Table 40: Capital Ratios - Truist Bank
Dec 31, 2024 Dec 31, 2023
CET1 12.6 % 11.7 %
Tier 1 capital 12.6 11.7
Total capital 14.3 13.3
Leverage ratio 10.1 9.2
Supplementary leverage ratio 8.5 7.9
The Parent Company’s capital ratios are presented in the following table:
Table 41: Capital Ratios - Truist Financial Corporation
(Dollars in millions) Dec 31, 2024 Dec 31, 2023Risk-based:CET1 11.5 % 10.1 %
Tier 1 capital 12.9 11.6
Total capital 15.0 13.7
Leverage ratio 10.5 9.3
Supplementary leverage ratio 8.8 7.9
Risk-weighted assets $ 418,337 $ 423,705
Truist’s capital level at December 31, 2024 remains strong compared to the regulatory levels for well-capitalized banks. Truist’s CET1 ratio was 11.5% as of December 31, 2024, up 140 basis points since December 31, 2023 from the sale of TIH and organic capital generation, partially offset by common dividends, share repurchases, and the impact of the CECL phase-in under U.S. banking agencies rules. The remaining CECL phase-in will be amortized in the first quarter of 2025.
Truist paid $2.8 billion in common stock dividends, or $2.08 per share, during 2024 and for 2023. Truist repurchased $1.0 billion in common stock for 2024 and had no share repurchases for 2023. In early 2025, Truist declared common dividends of $0.52 per share for the first quarter of 2025.
Capital Contingency Plan
In the event of a realized or potential capital shortfall, Truist has a capital contingency plan that is designed to facilitate improvement of the Company’s capital position through the execution of specific contingency actions which either increase capital, decrease risk-weighted assets, or both. The plan provides a framework designed to monitor for the occurrence of these events by establishing mechanisms to detect capital contraction, including market and economic stress that could adversely impact the Company’s capital position. The plan also establishes governance protocols for activation or deactivation and decision making, list capital contingency options and associated key information, and addresses the responsibilities of key departments.Reclassifications
In certain circumstances, reclassifications have been made to prior period information to conform to the current presentation. Such reclassifications had no effect on previously reported shareholders’ equity or net income. Refer to “Note 1. Basis of Presentation” for additional discussion regarding reclassifications.
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. The 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. Understanding Truist’s accounting policies is fundamental to understanding the consolidated financial position and consolidated results of operations. Accordingly, Truist’s significant accounting policies and effects of new accounting pronouncements are discussed in detail in “Note 1. Basis of Presentation.”
The following is a summary of Truist’s critical accounting policies that are highly dependent on estimates, assumptions, and judgments. These critical accounting policies are reviewed with the Audit Committee of the Board of Directors on a periodic basis.Truist Financial Corporation 83ACLTruist’s ACL represents management’s best estimate of expected future credit losses related to the loan and lease portfolios and off-balance sheet lending commitments at the balance sheet date. Estimates of expected future loan and lease losses are determined by using statistical models and management’s judgement. The ACL estimation process includes both quantitatively calculated components as well as qualitative components. Quantitative models are designed to forecast probability of default, exposure at default and loss given default by correlating certain macroeconomic forecast data to historical experience. The models are generally applied at the portfolio level to pools of loans with similar risk characteristics. Certain loans or leases that do not have similar risk characteristics are individually evaluated when establishing an allowance for expected credit losses. The macroeconomic forecast data used in the models is based on forecasted variables for the reasonable and supportable period of two years. Beyond this forecast period the models gradually revert to long-term historical loss conditions over a one-year period. As a means of addressing uncertainty related to future economic conditions, the quantitative allowance components include an adjustment that reflects model outputs calculated using a range of potential future economic conditions. Expected losses are estimated through contractual maturity, giving appropriate consideration to expected prepayments unless the borrower has a right to renew that is not cancellable or to capture the losses expected at the balance sheet date or prior to January 1, 2023 it was reasonably expected that the loan will be modified as a TDR.The qualitative components of the ACL incorporate management’s judgment in determining qualitative adjustments where model outputs are inconsistent with management’s expectations with respect to expected credit losses. The qualitative components are used to adjust for limitations in modeled results related to current economic conditions, and considerations with respect to the impact of current and expected events or risks, the outcomes of which are uncertain and may not be completely considered by quantitative models.Management considers a range of macroeconomic forecast data in connection with the allowance estimation process. Under the range of scenarios considered as of December 31, 2024, use of the Company’s pessimistic scenario would have resulted in an increase to the modeled allowance results of approximately $2.2 billion. This estimate reflects the sensitivity of the modeled allowance estimate to macroeconomic forecast data but does not consider other qualitative adjustments that could increase or decrease modeled loss estimates calculated using this alternative economic scenario.The methodology used to determine an estimate for the RUFC is similar to that used to determine the funded component of the ALLL and is measured over the period there is a contractual obligation to extend credit that is not unconditionally cancellable. The RUFC is adjusted for factors specific to binding commitments, including the probability of funding and exposure at default. A detailed discussion of the methodology used in determining the ACL is included in “Note 1. Basis of Presentation.”Fair Value of Financial InstrumentsThe vast majority of assets and liabilities measured at fair value on a recurring basis are based on either quoted market prices or market prices for similar instruments. Refer to “Note 18. Fair Value Disclosures” for additional disclosures regarding the fair value of financial instruments.SecuritiesTruist generally utilizes a third-party pricing service in determining the fair value of its AFS investment securities, whereas trading securities are priced internally. Fair value measurements for investment securities are derived from market-based pricing matrices that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers, bids, issuer spreads, and broker quotes. Management performs procedures to evaluate the fair values provided by the third-party service provider. These procedures, which are performed independent of the responsible business unit, include comparison of pricing information received from the third-party pricing service to other third-party pricing sources, review of additional information provided by the third-party pricing service and other third-party sources for selected securities and back-testing to compare the price realized on security sales to the daily pricing information received from the third-party pricing service. The Enterprise Valuation Committee provides oversight to Truist’s enterprise-wide IPV function, which is responsible for the comparison of pricing information received from the third-party pricing service or internally to other third-party pricing sources, approving tolerance limits determined by IPV for price comparison exceptions, reviewing significant changes to pricing and valuation policies and reviewing and approving the pricing decisions made on any illiquid and hard-to-price securities. When market observable data is not available, which generally occurs due to the lack of liquidity or inactive markets for certain securities, the valuation of the security is subjective and may involve substantial judgment by management to reflect unobservable input assumptions.
84 Truist Financial CorporationMSRs
Truist’s primary class of MSRs for which it separately manages the economic risks relates to residential mortgages. Residential MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available. Accordingly, Truist estimates the fair value of residential MSRs using a stochastic OAS valuation model to project residential MSR cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates. The OAS model considers portfolio characteristics, contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. Truist reassesses and periodically adjusts the underlying inputs and assumptions in the OAS model to reflect market conditions and assumptions that a market participant would consider in valuing the residential MSR asset.Fair value estimates and assumptions are compared to industry surveys, recent market activity, actual portfolio experience and, when available, observable market data. Truist’s enterprise-wide IPV function also compares market data, when available, and information received from certain third-party pricing sources, to MSR fair value estimates, approving tolerance limits determined by IPV for price comparison exceptions, and reviewing significant changes to pricing and valuation policies. Due to the nature of the valuation inputs, residential MSRs are classified within Level 3 of the valuation hierarchy. The value of residential MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining interest rates, the value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. Conversely, during periods of rising interest rates, the value of residential MSRs generally increases due to reduced refinance activity. Truist typically hedges against market value changes in the residential MSRs. Refer to “Note 8. Loan Servicing” for quantitative disclosures reflecting the effect that changes in management’s assumptions would have on the fair value of residential MSRs.
Trading Assets and Liabilities
Fair value measurements for trading securities and securities sold short are derived from observable market-based information including overall market conditions, recent trades, comparable securities, broker quotes and FINRA’s Trade Reporting and Compliance Engine data when determining the value of a position. Security prices are also validated through actual cash settlement upon the sale of a security. When observable market prices are not available, the Company uses judgment and estimates fair value using internal models that reflect assumptions consistent with those that would be used by a market participant in estimating fair value. Refer to “Note 18. Fair Value Disclosures” for further information on the Company’s trading securities and securities sold short.
Truist elects to measure certain loans at fair value for financial reporting where fair value aligns with the underlying business purpose. Trading loans include loans held in connection with the Company’s trading business primarily consisting of commercial and corporate leveraged loans and loans made or acquired in connection with the Company’s TRS business. Other trading liabilities include loans sold, but not yet purchased primarily consisting of commercial and corporate leveraged loans. Trading loans and loans sold, but not yet purchased are valued primarily using quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active by a third-party pricing service. Refer to “Note 18. Fair Value Disclosures” for further information on the Company’s trading loans and other trading liabilities. Refer to “Note 16. Commitments and Contingencies,” and “Note 19. Derivative Financial Instruments,” for further discussion of the Company’s TRS business.Derivative Assets and Liabilities
Truist uses derivatives to manage various financial risks and in a dealer capacity to facilitate client transactions. Truist mitigates credit risk by subjecting counterparties to credit reviews and approvals similar to those used in making loans and other extensions of credit. In addition, certain counterparties are required to provide collateral to Truist when their unsecured loss positions exceed certain negotiated limits. The fair values of derivative financial instruments are determined based on quoted market prices and internal pricing models that use market observable data for interest rates, foreign exchange, equity, and credit. The fair value of interest rate lock commitments, which are related to mortgage loan commitments, is based on quoted market prices adjusted for commitments that Truist does not expect to fund and includes the value attributable to the net servicing fee. Refer to “Note 19. Derivative Financial Instruments” for further information on the Company’s derivatives.
Goodwill and Other Intangible Assets
The acquisition method of accounting requires that assets acquired and liabilities assumed in business combinations are recorded at their fair values. This often involves estimates based on third-party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, which are inherently subjective. The amortization of definite-lived intangible assets is based upon the estimated economic benefits to be received, which is also subjective. Business combinations also typically result in goodwill, which is subject to ongoing periodic impairment tests based on the fair values of the reporting units to which the acquired goodwill relates. Refer to “Note 1. Basis of Presentation” for a description of the impairment testing process.Truist Financial Corporation 85Effective January 1, 2024, several business activities were realigned reflecting updates to the Company’s operating structure. First, the CB&W segment was renamed CSBB and the C&CB segment was renamed WB. Second, the Wealth business was realigned into the WB segment from the CSBB segment, representing a separate reporting unit in that segment. Third, the small business banking client segmentation was realigned into the CSBB segment from the WB segment. Further, TIH was the principal legal entity of the IH segment. As the operations of TIH were included in discontinued operations prior to the sale of TIH, the Company no longer presents the IH segment as one of its reportable segments.
Following the realignment of these business activities, the Company’s three reporting units with goodwill balances are CSBB, WB excluding Wealth, and Wealth. In conjunction with these realignments, goodwill of $1.7 billion was realigned to Wealth, residing within the WB segment, from CSBB based on the relative fair value of CSBB and Wealth, and goodwill of $220 million was realigned to CSBB from the WB reporting unit based on the relative fair value of the WB reporting unit and the realigned small business banking client segmentation. In addition, the Company completed an assessment of any potential goodwill impairment for all impacted reporting units immediately prior and subsequent to the realignments and determined that no impairment existed. The quantitative valuation of the WB reporting unit performed in conjunction with these goodwill realignments indicated that as of January 1, 2024, the fair value of the WB reporting unit exceeded its carrying value by less than 10%, indicating at the time of the realignments that the goodwill of the WB reporting unit may be at risk of impairment.
Management performs a goodwill impairment analysis on an annual basis as of October 1 or more often if events or circumstances indicate that it is more-likely-than not that the fair value of a reporting unit is below its carrying value. For its annual impairment review, Truist performed a quantitative test of each of its reporting units. The quantitative impairment test estimates the fair value of the reporting units using the income approach and a market-based approach, weighted 50% and 50%, respectively. The inputs and assumptions specific to each reporting unit are incorporated in the valuations, including projections of future cash flows, discount rates, and applicable valuation multiples based on the comparable public company information. The income approach utilizes a discounted cash flow analysis of multi-year financial forecasts developed for each reporting unit by considering several inputs and assumptions such as net interest margin, expected credit losses, noninterest income, noninterest expense, and required capital. The market-based approach utilizes comparable public company information, key valuation multiples, and considers a market control premium associated with cost synergies and other cash flow benefits that arise from obtaining control over a reporting unit, and guideline transactions, when applicable.
Truist also assesses the reasonableness of the aggregate estimated fair value of the reporting units by comparison to its market capitalization over a reasonable period of time, including consideration of expected acquirer expense synergies, historic bank control premiums, and the current market.
The projection of net interest margin is the most significant input to the financial projections of the CSBB and WB reporting units, while noninterest income is the most significant input to the financial projections of the Wealth reporting unit. The long-term growth rate used in determining the terminal value of each reporting unit was 3% as of October 1, 2024, based on management’s assessment of the minimum expected terminal growth rate of each reporting unit. Discount rates are estimated based on the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, beta, and unsystematic risk adjustments specific to a particular reporting unit. The discount rates are also calibrated based on risks related to the projected cash flows of each reporting unit. The discount rates utilized for the CSBB, Wealth, and WB reporting units as of October 1, 2024 were 12.5%, 12.0%, and 10.5%, respectively.
Based on the results of the Company’s annual impairment analyses, the Company concluded that the fair values of the CSBB, WB and Wealth reporting units exceeded their respective carrying values; therefore, there was no goodwill impairment. However, for the WB reporting unit, the fair value of the reporting unit exceeded its carrying value by approximately 10%, indicating that the goodwill of the WB reporting unit may remain at risk of impairment. Circumstances that could negatively impact the fair value for the WB reporting unit in the future include a sustained decrease in Truist’s stock price, a decline in industry peer multiples, an increase in the applicable discount rate, and deterioration in the reporting unit’s forecast.
The estimated fair value of a reporting unit is highly sensitive to changes in management’s estimates and assumptions; therefore, in some
instances, changes in these assumptions could impact whether the fair value of a reporting unit is greater than its carrying value. The valuation of the WB reporting unit as of October 1, 2024 indicated that if the discount rate were increased more than 100 basis points, with other cash flow assumptions unchanged, the reporting unit’s fair value would be less than its carrying value, indicating a goodwill impairment under the income approach. Ultimately, future potential changes in management’s assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below its carrying value. Additionally, a reporting unit’s carrying value could change based on market conditions, change in the underlying makeup of the reporting unit, or the risk profile of those reporting units, which could impact whether the fair value of a reporting unit is less than carrying value.
86 Truist Financial Corporation
The Company monitored events and circumstances during the period from October 1, 2024 to December 31, 2024, including macroeconomic and market factors, industry and banking sector events, Truist specific performance indicators, a comparison of management’s forecast and assumptions to those used in its October 1, 2024 quantitative valuations, and the sensitivity of the October 1, 2024 quantitative results to changes in assumptions as of December 31, 2024. Based on these considerations, Truist concluded that it was not more-likely-than-not that the fair value of one or more of its reporting units is below its respective carrying amount as of December 31, 2024.
Prior to the January 1, 2024 realignment of certain business activities described above, the Company also performed quantitative goodwill impairment analyses for its former CB&W and C&CB reporting units as of October 1, 2023. Based on the results of the prior year impairment analyses, the Company concluded as of October 1, 2023 that the carrying values of the former CB&W and C&CB reporting units exceeded their respective fair values, which resulted in a non-cash, non-tax-deductible goodwill impairment charge of $6.1 billion for the year ended December 31, 2023. This prior year goodwill impairment charge was primarily due to the continued impact of higher interest rates and discount rates on the former CB&W and C&CB reporting units, and a sustained decline in the banking industry share prices, including Truist’s through the October 1, 2023 date of the prior year quantitative analyses.
For additional goodwill information, refer to “Note 1. Basis of Presentation” and “Note 7. Goodwill and Other Intangible Assets.”Income Taxes
Truist is subject to income tax laws of the U.S., its states, and the municipalities in which the Company conducts business. In estimating the net amount due to or to be received from tax jurisdictions either currently or in the future, the Company assesses the appropriate tax treatment of transactions and filing positions after considering statutes, regulations, judicial precedent, and other pertinent information. The income tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. Significant judgment is required in determining the tax accruals and in evaluating the Company’s tax positions, including evaluating uncertain tax positions. Changes in the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws and new judicial guidance, the status of examinations by the tax authorities, and newly enacted statutory and regulatory guidance that could impact the relative merits and risks of tax positions. These changes, when they occur, impact tax expense and can materially affect operating results. Truist reviews tax positions quarterly and adjusts accrued taxes as new information becomes available.
Deferred income tax assets represent amounts available to reduce income taxes payable in future years. Such assets arise due to temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from NOL and tax credit carryforwards. The Company regularly evaluates the ability to realize DTAs, recognizing a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not that some portion or all of the DTA will not be realized. In determining whether a valuation allowance is necessary, the Company considers the level of taxable income in prior years to the extent that carrybacks are permitted under current tax laws, as well as estimates of future pre-tax and taxable income and tax planning strategies that would, if necessary, be implemented. Truist currently maintains a valuation allowance for certain state carryforwards. For additional income tax information, refer to “Note 1. Basis of Presentation” and “Note 14. Income Taxes.”
Pension and Postretirement Benefit Obligations
Truist offers various pension plans and postretirement benefit plans to teammates. Calculation of the obligations and related expenses under these plans requires the use of actuarial valuation methods and assumptions, which are subject to management judgment and may differ significantly if different assumptions are used. The discount rate assumption used to measure the postretirement benefit obligations is set by reference to an AA Above Median corporate bond yield curve and the individual characteristics of the plans such as projected cash flow patterns and payment durations.Management also considered the sensitivity that changes in the expected return on plan assets and the discount rate would have on pension expense. For the Company’s qualified plans, a decrease of 50 basis points in the discount rate would result in additional pension expense of approximately $20 million for 2025, while a decrease of 50 basis points in the expected return on plan assets would result in an increase of approximately $73 million in pension expense for 2025. This estimate reflects the sensitivity of certain factors considered in calculation of pension expense but does not consider all factors that could increase or decrease estimates calculated.Refer to “Note 15. Benefit Plans” for disclosures related to the benefit plans.Truist Financial Corporation 87