TFC 10-K diff: FY 2023-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+190 paragraphs −204 paragraphs ~190 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 RisksThe 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 Corporation
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 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 25
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 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 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 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 27The 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 CorporationOther 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 29Natural 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 33In 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 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.
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 CorporationFederal 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 CorporationIn 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 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.
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 AssumptionsOur 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 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.
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. CYBERSECURITY
Refer to the Risk Management section of MD&A for a discussion of cybersecurity risk, which is incorporated by reference into this item.
FY 2025-12-31 (later)
ITEM 1A. RISK FACTORS
Summary of Risk Factors
Market Risks• Changes in monetary, fiscal, and other policies, and changes in the U.S. political environment, could adversely affect us.
• Our financial results, the value of loans and debt securities we hold, and lending and other business activities have in the past, and may in the future, 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.
• Changes in interest rates have affected our net interest income and other financial results in the past and could in the future adversely affect us.
• The Company’s hedging strategies may not be successful in mitigating our interest rate, foreign exchange, and market risks, which could adversely affect our results of operations and financial condition.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, information provided to us by clients and counterparties is inaccurate, 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 relies on dividends from Truist Bank for its liquidity needs, the payment of which is limited by statutes and regulations, and the Parent Company could have less access to funding sources and its liquidity could be constrained if Truist 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 and Data Risks
• The Company’s applications, 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 adversely impact the Company’s business, 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 or enhanced technology could negatively impact our financial results, business, operations, security, or ability to compete effectively.
• The Company and its clients, suppliers, service providers, and other third parties 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 business, operations, financial condition, results of operations, prospects, and reputation; and cause significant legal and financial exposure.
• The Company faces risks associated with the privacy, quality, availability, and retention of key data for operational, strategic, regulatory, and compliance purposes.
• Truist faces substantial risks in safeguarding personal and other sensitive information, which may negatively impact the Company’s business, financial condition, results of operations, prospects, or reputation.
• The use of AI in our products and services, as well as our business and the industry more broadly, may negatively impact our business, operations, financial condition, results of operations, prospects, and reputation.Truist Financial Corporation 19Operational Risks
• Truist relies on third parties to support key components of the Company’s business and operational 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 and control framework may fail to identify, assess, monitor, and mitigate the risks we face and cause us to suffer unexpected losses that could adversely affect our business, financial condition, results of operations, prospects, and reputation.
• Truist can be negatively affected if it fails to identify and address operational and compliance risks associated with the introduction of or changes to products, services, and delivery platforms.
• Truist is subject to risks related to originating and selling loans, including repurchase and indemnification obligations, which may adversely affect our business, results of operations, and financial condition.
• Truist faces loan servicing risks that could adversely impact the Company’s business, operations, liquidity, and results of operations.
Compliance, Regulatory, and Legal 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 Company may incur damages, fines, and penalties and face other negative consequences from 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, prospects, and reputation.
• Regulatory capital and liquidity standards applicable to large banking organizations and future revisions to existing standards may negatively impact our business, financial results, financial condition, growth, profitability, or our ability to return capital to shareholders.
• Differences in, or changes to, regulation and supervision and industry disruption can affect the Company’s ability to compete effectively, which may adversely affect our business, financial condition, financial results, or growth.
• Truist faces risks of non-compliance and may incur additional operational and compliance costs under laws relating to anti-money laundering, economic sanctions, embargo programs, anti-bribery, and anti-corruption.Strategic Risks• Ineffective execution of strategic initiatives could adversely affect investor sentiment and the Company’s business, financial condition, results of operations, prospects, and reputation.
• Competition may reduce Truist’s client base or cause Truist to modify the pricing or other terms for products and services, or require significant investments to maintain competitiveness, 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, which may impair the Company’s ability to expand or grow its client base, or execute on its strategic initiatives and compete effectively.
• Truist has businesses other than banking that are subject to a variety of risks that may affect our financial condition and results of operations.Risks Related to Estimates and Assumptions• Truist’s business and operations rely significantly on the use of models, and any deficiencies in the design, implementation, or use of models could adversely affect our business, results of operations, and financial condition.
• Truist employs estimates and assumptions to determine the value or amount of many of our assets and liabilities, and if these estimates or assumptions prove inaccurate, our business, financial condition, results of operations, and prospects could be adversely affected.• 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.Additional Risks
• Negative public opinion, whether or not warranted, could damage the Company’s brand in the market and relationships with stakeholders, and adversely impact our business, financial condition, results of operations, and prospects.
• 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 relies 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.
• The Company is at risk of losses from fraud which could result in financial loss and reputational harm.
• Physical, transition, and other risks associated with climate change, together with governmental responses to such risks, may negatively impact our business, financial condition, operations, reputation, and clients.
• Natural disasters, pandemics, extreme weather events, and other catastrophic events could adversely affect our financial condition and results of operations.
20 Truist Financial Corporation
Risk Factors
The following discussion sets forth material risk factors that could affect Truist’s financial condition, results of operations, business, or prospects. When a risk factor spans more than one risk category, the risk factor has been listed by its primary risk category. Any of the risk factors discussed below, either by itself or together with other risk factors, could materially and adversely affect Truist’s financial condition, results of operations, business, prospects, or reputation. These risk factors do not identify all risks that we face; additional risks that are not presently known to us or risks that we currently deem immaterial may have an adverse effect on Truist’s financial condition, results of operations, business, prospects, or reputation.Market RisksChanges 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 monetary policies established by the Federal Reserve System 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 dislocations and volatility in the financial markets and adversely affect our business and operations—including, 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 make firm predictions with respect to 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 business, financial results, and financial condition. 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 and, 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, financial results, and financial condition to suffer. Concern about the ability of the U.S. government to effectively respond to high and rising debt levels and other budgetary matters also can have adverse economic consequences and create market volatility with potential adverse consequences to our business and financial performance. We could be negatively impacted as well by political scrutiny of the financial services industry in general, such as criticisms involving fair access to financial services and the affordability of financial products and services, or our business or operations in particular.
Our financial results, the value of loans and debt securities we hold, and lending and other business activities have in the past, and may in the future, 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. Any 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 has in the past and may in the future adversely affect the Company’s business, financial results, and financial condition.
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 or underemployment 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 reliant on industries or properties that 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 the purchasing power of clients and their customers and adversely affect demand for our products and services, reducing the Company’s income.Truist Financial Corporation 21A weakening or deterioration of economic conditions has in the past and may in the future 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 investor trading activity, reducing commissions and other fees earned from the Company’s brokerage businesses. Poor economic conditions and volatile or unstable financial markets would likely adversely affect the Company’s financial advisory and capital markets-related businesses. Sustained market weakness and lower client activity could adversely affect our financial condition, results of operations, and prospects.
In addition, the large bank failures in 2023 focused market attention on the industry’s interest rate and deposit risks due to rapidly rising interest rates in an inflationary environment, which, among other things, resulted in unrealized losses on longer duration securities and loans held by banks. When weak or deteriorating economic conditions result in a decrease in the supply of deposits or significant increase in competition for deposits, substantial increases in our costs to retain and service deposits have in the past and may in the future arise. Such an impact can be exacerbated by the continued adoption of banking technology that enables deposits to be transferred with relative ease to a different depository institution or other competitor if Truist Bank’s products and services are less competitive or confidence is lost in Truist Bank. These dynamics could constrain lending and other business activities, adversely affecting our financial condition and results of operations. The cost of resolving the large bank failures in 2023 also prompted the FDIC to issue a special assessment to recover costs to the DIF. Refer to the “Regulatory and Supervisory Considerations” section in “Item 1. Business” for additional details related to the FDIC’s special assessment.
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.
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, financial condition, business, and prospects. 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, counterparties, and service providers.
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 Truist’s business and operations. Aggressive actions by hostile governments or groups, including armed conflict or intensified cyber-attacks, could expand or escalate in unpredictable ways, with potentially catastrophic consequences, particularly if one or more combatants possess nuclear weapons. 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 these consequences could have significant negative effects on the economy and, as a result, Truist’s operations and earnings. Truist, its service providers, and participants in the financial system could also experience more aggressive and increasing levels of cyber-attacks launched by or under the sponsorship of one or more of the adversaries in a conflict.
Changes in interest rates have affected our net interest income and other financial results in the past and could in the future adversely affect us.
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 interest rates, which in turn are influenced by monetary and fiscal policies, general economic and market conditions, including inflation levels, 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. Our net interest income and other financial results have been in the past and could be in the future 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.
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.22 Truist Financial CorporationThe levels of and changes in market interest rates, 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 have an adverse effect on us by inhibiting our ability to grow or sustain net interest income. A restrictive monetary policy 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. Interest rate volatility, including the rate of change, can create particularly difficult conditions. Refer to the “Market Risk” section in 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 results of operations and financial condition.
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.Credit RisksThe 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 has a decline in creditworthiness or 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. The Company may have higher credit risk, or experience higher credit losses, to the extent its loan exposures increase or are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral, including with respect to any increase in its nonbank financial institution lending activities. 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 or sector where Truist has an outsized exposure, or other factors such as changes in borrower behavior or borrower composition. We have a significant consumer loan portfolio, including indirect auto and credit card loans, which may present higher credit risks during economic downturns and market fluctuations. 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.Truist Financial Corporation 23The 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, information provided to us by clients and counterparties is inaccurate, 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 or market conditions, including as a result of climate change or natural disasters or their particular industries. 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. Additionally, in deciding whether to extend credit or enter into other transactions with clients and counterparties, the Company 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 complete or accurate, the Company could make misjudgments about extending credit or entering into other transactions with clients or counterparties, and the Company could suffer defaults, credit losses, or other negative consequences as a result.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 or contractual agreements may increase in times of significant market stress, volatility, or illiquidity, and Truist could suffer losses during these periods if it is unable to effectively handle counterparty disputes, obtain additional collateral from counterparties, manage declines in the value of collateral, or realize the expected 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 for deposit funding with banks and other financial institutions and with money market funds and other providers of deposit equivalents. If we are unable to compete effectively, deposits can be lost. In addition, our funding costs can increase if we are required to raise interest rates to avoid deposit attrition or to replace deposits with wholesale funding. Higher funding costs reduce Truist’s net interest margin, net interest income, and net income. For example, in 2025, maintaining and growing client deposits continued to be challenging as the Federal Reserve System reduced the size of its balance sheet through quantitative tightening. The future direction of the Federal Reserve System balance sheet and the level of excess reserves in the banking system may have implications for deposit gathering and competition. Our ability to maintain, grow, or favorably price deposits also may be constrained by gaps in our product and service offerings, changes in client trends, our scale relative to other financial institutions, competition from financial technology 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. For example, deposits and other traditional banking products could be significantly disrupted by an increase in the adoption and use of digital assets, stablecoins, cryptocurrencies, tokenization, and similar products, services, and technologies that enable financial services and transactions without or with less intermediation by commercial banks.24 Truist Financial Corporation
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 affecting the Company, 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 service providers or intermediaries, 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 attrition of non-FDIC-insured and other deposits. Refer to the “Funding Activities“ section in MD&A for additional discussion of deposits. 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, such as maximum loan amounts or borrower eligibility. This potential reduction in purchases could limit the Company’s ability to fund new loans and other financial products and services.
Proposals are presented from time to time 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, perceptions of the banking industry and U.S. financial stability, environmental, social, and governance considerations, litigation, and changes to the rating agency methodologies. There can be no assurance we will be able to maintain our current credit 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 may 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.
The Parent Company relies on dividends from Truist Bank for its liquidity needs, the payment of which is limited by statutes and regulations, and the Parent Company could have less access to funding sources and its liquidity could be constrained if Truist Bank becomes unable to pay dividends.
The Parent Company relies upon capital markets access and dividends from subsidiaries for funding and has less access to contingent funding sources than Truist Bank. If Truist Bank were subject to financial stress, its dividends to the Parent Company could be reduced or eliminated in order to support Truist Bank’s capital position or its satisfaction of other regulatory requirements. This would increase the Parent Company’s reliance on capital markets and other wholesale funding at a time when credit spreads and funding costs are likely to be elevated due to the stress impacting Truist Bank and would also impair the Parent Company’s ability to serve as a source of strength to its subsidiaries.Truist Financial Corporation 25
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 Truist even if we are not subject to the same adverse developments. In addition, adverse developments with respect to counterparties, intermediaries, and other third parties with whom we have important relationships could also negatively impact perceptions about us. These perceptions about us could cause our business and operations to be negatively affected and exacerbate the other risks that we face.
Truist may be impacted by the 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. Such an event may negatively affect our financial results due to increased expenses, including FDIC insurance assessments or special assessments, and challenges in attracting and retaining funding from depositors, the capital markets, and other sources. The measures taken by governments, businesses, and other organizations in response to such an event also 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 institutions are interrelated as a result of trading, clearing, counterparty, and other relationships. Truist routinely executes transactions with brokers and dealers, central counterparties, commercial banks, investment banks, mutual and hedge funds, and other counterparties in the financial industry. Defaults by or even rumors or questions about the soundness of one or more of these counterparties or the financial services industry generally have led to market-wide liquidity constraints and could lead to losses or defaults by Truist or other financial institutions. These liquidity challenges and credit losses, together with related consequences, could adversely affect the Company.
Technology and Data Risks
The Company’s applications, 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 adversely impact the Company’s business, operations, financial condition, prospects, and reputation and cause significant legal and financial exposure.
The Company’s ability to perform and succeed depends on applications, operating systems, and infrastructure, including computer systems and networks, software, security systems, data management, and internal processes. These may be owned or controlled by the Company or by clients, suppliers, service providers, or other third parties. We rely on the secure collection, transmission, storage, use, retrieval, and other processing of confidential, proprietary, personal, and other sensitive information in the Company’s systems and networks as well as those of its clients and other third parties. To access the Company’s systems, networks, products, and services, the Company’s clients and other third parties may use personal devices or other 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 that originate inside or outside its control and network environment. These risks may increase in the future as Truist continues to evolve its use of, interactions with, and dependence on internal and external operating systems and infrastructure.
The Company has experienced, and may continue to experience, failures and disruptions affecting the stability, performance, security, and availability of its applications, operating systems, and infrastructure. These include degraded processing performance, data quality issues, loss of network connectivity, software malfunctions and misconfigurations, and interruptions in the availability and reliability of cloud-based and other third-party systems and services. The Company’s substantial and increasing reliance on cloud service providers and other external technology vendors heightens exposure to risks outside of its control, including system outages, downtime, cyber-attacks, and adverse financial and operating conditions at those providers and vendors. The Company’s expanding use of AI tools and related technologies introduces additional operational risks, including reliance on data integrity and model performance as well as third-party AI services that may fail, degrade, or produce inaccurate or unexpected outputs.
The Company regularly updates and modifies its applications, operating systems, and infrastructure to support business and operations, including growth initiatives and regulatory compliance requirements. These activities involve significant costs and create additional risks related to the implementation, integration, and effectiveness of new or modified applications, systems, and infrastructure. The introduction, updating, or retraining of AI models and other methods of automation may amplify these risks. Changes in model behavior or configuration may produce unintended outcomes, increase susceptibility to operational errors, or reduce the effectiveness of existing controls. Failures associated with upgrades, configuration changes, system conversions, AI model deployment, integration efforts, and related activities may result in operational interruptions, system failures, or reduced control effectiveness.26 Truist Financial CorporationFailures to properly maintain, upgrade, or secure applications, operating systems, and infrastructure may increase the Company’s susceptibility to cybersecurity threats, including supply chain attacks, and may impair the Company’s ability to meet business continuity and resiliency objectives. AI-enabled technologies may further expand the cyber-attack surface and velocity, including exposure to adversarial manipulation, data poisoning, and vulnerabilities in third-party AI and other platforms. These events have resulted in adverse client impacts, including the inability to access account information or conduct transactions through ATM, online, or mobile channels, the exposure of confidential, proprietary, personal, and other sensitive information, the posting of duplicative or delayed transactions, and delays in obtaining assistance through call centers. The Company cannot assure that similar or more severe operational or technology failures and disruptions, including AI-related failures or third-party service interruptions, will not occur in the future or that their effects can be prevented, contained, or remediated in a timely manner.
The potential for operational risk exposure exists throughout the Company 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 clients, service providers, intermediaries, and other third parties may expose the Company to risk as a result of human error, misconduct, malfeasance, or a failure or breach of applications, systems, and infrastructure. In addition, third-party breakdowns or failures could affect their ability to deliver a product or service to the Company or its clients 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 its business and operations may be adversely affected by these kinds of disruptions to third parties whom the Company interacts with or relies upon.
In addition, as a result of increasing consolidation, interconnectivity, and complexity of financial entities and operating systems and infrastructure, a technology failure that significantly degrades, deletes, or compromises the applications, systems, infrastructure, 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, for transactions and other business to be conducted in the ordinary course. 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 and other business, service the Company’s clients, manage the Company’s exposure to risk, or expand the Company’s business. Such an event affecting the Company could likewise negatively impact its counterparties and other market participants and, as a result, create reputational damage as well as legal and financial exposure.
Truist is heavily reliant on technology, and a failure to effectively anticipate, develop, and implement new or enhanced technology could negatively impact our financial results, business, operations, security, or ability to compete effectively.
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 cloud migration as well as blockchain and other distributed ledger technologies such as those underpinning digital assets, tokenization, cryptocurrencies, and stablecoins. 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. As a result of these developments and investments, Truist is heavily reliant on technology, and any inability to effectively anticipate, develop, or implement new or enhanced technology could have an adverse effect on Truist’s business.
Truist expects to make additional investments in innovation and technology to address technological disruption in the industry, improve client offerings and service, and streamline and automate operations. Although these and future investments are designed to enable the Company to better serve its 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 have not been in the past and may not be in the future implemented on time, within budget, or without negative financial, operational, or client impact. In addition, these initiatives have not in the past and may not in the future always perform as we or our clients expect. Changes in our business, including the use of new technologies, may require us to modify our workforce strategies and training programs, which could negatively impact our ability to attract, develop, retain, and motivate qualified teammates and ultimately our operations and financial results.
The Company’s continued success depends, in part, upon its ability to use technology to provide products and services that satisfy client needs and preferences, including demands for faster, simpler, more cost-effective, and more secure payment services and settlement, to create efficiencies in the Company’s operations, and to integrate new or enhanced client 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 or reception of technological enhancements, or an untimely rollout of technological enhancements, may cause the Company to lose market share, miss growth opportunities, or adversely affect our financial results.Truist Financial Corporation 27Our 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 incur significant damages for past infringement, substantial fees for continued use, 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 considerable expense to settle or otherwise resolve the matter. 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 and its clients, suppliers, service providers, and other third parties 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 business, operations, financial condition, results of operations, prospects, and reputation; and cause significant legal and financial exposure.
The Company’s applications, operating systems, and infrastructure and those of its clients, suppliers, service providers, and other third parties are continuously targeted in cyber-attacks and vulnerable to damage or interruption from, among other things, fraud, denial of service attacks, social engineering schemes (such as phishing and smishing), hacking, malware or ransomware intrusion, data corruption attempts, terrorist activities, or identity theft. Such incidents have in the past exposed and may in the future expose security vulnerabilities in the Company’s applications, systems, and infrastructure and those of third parties, resulting 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 applications, systems, and infrastructure by significantly disrupting access or the business or operations of the Company or third parties.
In addition, Truist’s clients, regulators, and other third parties, including other financial institutions and companies engaged in data processing, have been subject to and will continue to be the target of cyber-attacks and similar incidents. As our clients regularly transact using our Truist-issued debit and credit cards, data is distributed across multiple platforms and networks, and card and other information is stored on these external platforms and networks. When these external platforms and networks are compromised, our clients’ information and accounts may be exposed to fraud and other data security and privacy-related issues. As a result, the Company has incurred, and expects to continue to incur, losses related to the reimbursement of clients for fraudulent transactions and other costs associated with data security incidents affecting these platforms and networks. The Company also faces cybersecurity risks relating to third parties that the Company relies upon to facilitate or enable business activities, including vendors, providers of outsourced software, services, and infrastructure, payment networks, card processors, merchants, and providers of critical infrastructure such as internet access and electrical power. While the Company performs varying degrees of cybersecurity due diligence on many of these third parties, the Company does not control third parties and our 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 cyber-attack. In addition, the existence, nature, or extent of cyber-attacks or security breaches at third parties 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 and 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 third parties, including those involved in corporate espionage. The risk of a security breach due to a cyber-attack could increase in the future due to factors such as the financial industry’s ongoing expansion of digital banking and other internet-based client offerings and the internal use of internet-based products and applications, including those that use cloud computing services; advances in AI, such as the use of machine learning, generative AI, and quantum computing by malicious actors to develop more advanced social engineering attacks on the Company or its clients, including targeted phishing and smishing attacks; the inability to maintain the security of information transmitted by financial institutions due to advances in quantum computing and other technology that may counteract or nullify existing information protections; and the acquisition and integration of new businesses. 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.28 Truist Financial CorporationA successful penetration or circumvention of the security for our applications, operating systems, or infrastructure or those of third parties could cause serious negative consequences, including loss of clients and business opportunities; costs associated with maintaining client and business relationships after a cyber-attack or security breach; a loss of investor confidence; 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 the funds of the Company and its clients; damage to the Company’s or third-parties’ computers, systems, or networks; and a violation of applicable statutes and regulations, including those related to data privacy, data protection, and cybersecurity. Additional impacts include litigation exposure, regulatory fines, penalties, loss of confidence in the Company’s security measures, significant investment of management time, reputational damage, reimbursement or other compensatory costs, and additional compliance costs. Any of these consequences or impacts could adversely impact the Company’s business, operations, financial condition, results of operations, prospects, and reputation. In addition, the Company may not have adequate insurance coverage to compensate for losses from any of the foregoing, its existing insurance coverage may not continue to be available on acceptable terms or at all, and its insurers may deny coverage as to any future claims.
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 applications, systems, and infrastructure, invest in new applications, 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.
The Company faces risks associated with the privacy, 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, brand and stakeholder risk, and regulatory compliance risk, including data privacy, data protection, and cybersecurity compliance risks. We also can experience enforcement and supervisory actions, damage to our reputation, and private litigation as a result of these failures.
Truist faces substantial risks in safeguarding personal and other sensitive information, which may negatively impact the Company’s business, financial condition, results of operations, prospects, or reputation.
Truist’s businesses are subject to complex and evolving statutes, 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 statutes, 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 reputational damage, 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 negatively affect its business, financial results, and prospects. Furthermore, any failure or perceived failure by the Company to comply with applicable data privacy, data protection, or cybersecurity statutes, 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 business, financial results, and financial condition.Truist Financial Corporation 29In 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 statutes, 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 statutes, 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 statutes, rules, and regulations could prohibit or significantly restrict financial services firms such as Truist from sharing information among affiliates or with third parties or could restrict Truist’s use of personal information when developing, offering, or marketing products or services 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.”
The use of AI in our products and services, as well as our business and the industry more broadly, may negatively impact our business, operations, financial condition, results of operations, prospects, and reputation.
Our industry is subject to rapid and significant technological change. To compete effectively, the Company uses new and evolving technologies, including AI, to help improve our marketing, referrals, products, services, and client service, to increase productivity for internal code and software development and testing, and to automate certain business decisions and risk management practices, such as fraud identification. The Company's use of AI is subject to risks that models, prompts, algorithms, and datasets, as well as related decisions, predictions, analysis, and other output, are flawed, inaccurate, of poor quality, insufficient, biased, or otherwise erroneous or inadequate, any of which may not be easily detectable. In addition, the models and processes relating to AI are not always transparent, which could increase the risk of unintended deficiencies. Ineffective implementation of AI by us or our third-party providers could subject us to additional risks that we cannot adequately predict or mitigate. Further, inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI and machine learning, could impair the acceptance and use of AI. If any of these risks are realized, we could suffer business and operational disruptions, operational inefficiencies, competitive harm, legal liability, increased regulatory scrutiny, reputational harm, or other consequences that the Company cannot predict, any of which could negatively affect the Company's financial condition and results of operations.
Regulatory and other legal frameworks surrounding AI continue to evolve and remain uncertain. If we do not have sufficient rights to use models, prompts, algorithms, and datasets on which our AI technologies rely or the related decisions, predictions, analysis, or other output, we could incur significant damages, substantial fees, deprivation of access, or considerable expense through a violation of applicable law, third-party intellectual property, privacy, or other rights, or other violations. New or changing statutes, regulations, or industry standards and practices may increase costs, restrict use cases, or require significant changes to our deployment or our existing systems and controls. If we fail to appropriately respond to changes within the AI landscape, including changing public sentiment, we could face legal, regulatory, or brand and stakeholder risk that may negatively impact our business, operations, financial results, financial condition, or reputation. In addition, the use of AI by companies has resulted in, and may in the future result in, cybersecurity breaches, attacks, and other similar incidents as well as data privacy violations.
Operational Risks
Truist relies on third parties to support key components of the Company’s business and operational 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 support key components of the Company’s business and operational infrastructure, including certain aspects of our technology functions, and while we have implemented a third-party risk management program designed to identify, assess, monitor, and mitigate third-party risks, we do not control our 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 contractual obligations to us 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 supporting 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.30 Truist Financial CorporationThe 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 resulting losses, including business or operational interruptions or increased costs of doing business.
The Company’s risk and control framework may fail to identify, assess, monitor, and mitigate the risks we face and cause us to suffer unexpected losses that could adversely affect our business, financial condition, results of operations, prospects, and reputation.
Truist has policies, processes, and procedures intended to identify, assess, monitor, and mitigate risks impacting the Company and to evaluate mitigating controls in place. Our risk and control framework, however, cannot guarantee that we will adequately or effectively identify, assess, monitor, and mitigate current business, operational, or other risks, or that we will adequately or effectively identify, assess, monitor, and mitigate such risks in the future. For example, some of the Company’s methods of identifying, assessing, monitoring, and mitigating risk are based upon the Company’s use of observed 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 we face continue to evolve, despite our ongoing efforts to improve the design and implementation of our risk framework, those efforts may not be adequate or effective. If the Company’s risk and control framework fails to enable us to identify, assess, monitor, and mitigate the risks we face, we could suffer unexpected losses and our business, financial condition, results of operations, prospects, and reputation could be materially and adversely affected.
Truist can be negatively affected if it fails to identify and address operational and compliance risks associated with the introduction of or changes to products, services, and delivery platforms.
When Truist launches a new product or service (including digital offerings), 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 and compliance 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, increased operating expenses, or lost revenue. The Company could also experience higher compliance or litigation costs, including regulatory fines, penalties and other sanctions, reputational harm, impairment of its financial condition, regulatory scrutiny, or weaker competitive standing. Any of the foregoing consequences could adversely affect Truist’s business and results of operations.
Truist is subject to risks related to originating and selling loans, including repurchase and indemnification obligations, which may adversely affect our business, results of operations, and financial condition.
When loans are sold or securitized, including to GSEs, it is customary to make representations and warranties to the purchaser about the loans—including their quality, the manner in which they were originated and underwritten, and compliance with applicable law—and to agree to repurchase the loans or indemnify the purchaser in the event of a breach of the representations or warranties or other provisions of the sale agreement. An increase in the number of repurchase and indemnity demands from purchasers on sold loans could result in an increase in the amount of losses for loan repurchases, which may adversely affect our business, results of operations, and financial condition. Truist also bears a risk of loss from borrower defaults for multi-family commercial mortgage loans sold to FNMA.
The ability to manage these risks is expected to affect whether Truist sells and securitizes loans and receivables in the future. Other factors influencing such a decision may include the overall credit quality of its loans and receivables, the costs of selling or securitizing its loans and receivables, the demand for bulk sales and asset-backed securities, and the legal, regulatory, accounting, or tax rules affecting these transactions. In addition, proposals regarding reform to the U.S. housing finance market could impact our decisions regarding which loans should be sold or securitized in the future.
Truist faces loan servicing risks that could adversely impact the Company’s business, operations, liquidity, and results of operations.
The Company acts as servicer for a range of assets, primarily 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 collateral that secure 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 securitization trusts and investors, which it may be unable to collect. Any increase in servicing obligations without a corresponding increase in servicing fees or required advances of expenses that are not reimbursed could reduce liquidity and increase operational strain.Truist Financial Corporation 31A 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 trust or other holder of the loan against losses from any failure by the Company to perform its servicing obligations or any act or omission on the Company’s part that involves willful misfeasance, bad faith, or gross negligence. For certain securitization trusts or investors and certain transactions, Truist may be contractually obligated to repurchase a loan or reimburse the securitization trust or the investor for credit losses incurred on the loan as a remedy for servicing errors with respect to the loan. Such indemnification or repurchase obligations could require significant cash outflows, reduce liquidity, and increase earnings volatility. 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 significant increase to the Company’s repurchase reserve and negatively affect results of operations. While the number of such indemnification claims has been small, these could increase in the future.
Compliance, Regulatory, and Legal 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 the FRB, the FDIC, the NCCOB, the SEC, the CFTC, the CFPB, FINRA, the MSRB, the 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, and the role and stability of the U.S. financial system, rather than for the protection of shareholders and non-deposit creditors. In addition to banking statutes and regulations, Truist is subject to various other laws that directly or indirectly affect its business and operations, including the products and services it may offer and the manner in which it may offer them and its ability to make distributions to shareholders.
The regulation and supervision of Truist significantly affects the way that we conduct our business and operations. Statutes 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 and deposit practices, capital structure, investment practices, dividend policy, ability to repurchase common stock, ability to pursue strategic acquisitions, and other activities. Regulatory policies and supervisory expectations can have this effect as well. Changes to statutes, regulations, or regulatory policies or their interpretation or implementation by supervisors or other governmental authorities can affect Truist in substantial and unpredictable ways. We have in the past and may in the future be subject to formal or informal enforcement or supervisory actions as a result of one or more of our supervisors determining that we have failed to comply with applicable law, comport with safe and sound practices, or meet supervisory expectations. These actions, some of which are considered confidential supervisory information, can 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 also can 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 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 such as securities underwriting and merchant banking. FHCs and their IDI subsidiaries are subject to ongoing requirements to continue to qualify as an FHC. If an FHC or any of its IDIs were found not to be well-capitalized or well managed as defined by applicable law, the FRB may impose corrective capital and managerial requirements on the FHC, which could impact resources and limit amounts otherwise available to creditors and shareholders. In such a situation, the FRB may also place limitations on the ability of the FHC to conduct certain business activities that FHCs are generally permitted to conduct as well as the FHC’s ability to make certain acquisitions. If the failure to meet these standards persists, the FHC may be required to divest its IDI subsidiaries or cease all activities other than those activities that may be conducted by BHCs that are not FHCs. Furthermore, if an IDI subsidiary of an FHC has not maintained a satisfactory CRA rating, the FHC would not be able to commence any new financial activities or acquire a company that engages in such activities, although the FHC would still be allowed to engage in activities closely related to banking and make investments in the ordinary course of conducting banking activities.
U.S. BHCs, including Truist, are subject to a range of prudential standards and requirements based on their size and complexity. Truist is subject to more stringent liquidity and capital requirements, leverage limits, internal and supervisory stress testing requirements, single-counterparty credit limits, resolution planning requirements, and enhanced risk management standards compared to smaller institutions, while certain larger or more complex banking organizations are subject to even more stringent prudential standards and requirements than Truist. These differing standards and requirements can put Truist at a competitive disadvantage compared to other banking organizations.32 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 included fair access to banking, 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.
The content of the regulatory framework and the intensity of supervision have in the past and are likely in the future to vary over time based on factors such as prevailing economic and political conditions, the policy preferences of the relevant government agencies, the perceived performance of the financial services industry, the size of the company, and the jurisdiction in which a company is organized or operates. This variation has in the recent past and may in the future be frequent and volatile. In times of heightened legislative, regulatory, or supervisory focus on the financial services industry, the Company and other large financial institutions are 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 business and geographic expansion and acquisitions. The financial services industry also has faced and may continue to face varying degrees of 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. Our regulatory and supervisory environments, whether at federal, state, or local levels, are not static. No assurance can be given that applicable laws and policies will not be amended or construed differently, that new laws and policies will not be adopted, or that any of these laws and policies will not be enforced more aggressively, including as a result of changes to control of branches of the U.S. government. Moreover, political and policy goals of elected and appointed officials may change over time, which could impact the rulemaking, supervision, examination, and enforcement priorities of federal and state regulators. It is possible that expected changes in law and policy do not occur or are reversed subsequently or that the regulatory measures ultimately adopted deliver fewer or no competitive advantages to us and significant competitive advantages to financial services providers that are larger or smaller, are structured differently, or serve different markets than us. 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, and policies and rulemaking related to emerging technologies such as stablecoins and digital assets, cybersecurity, and AI and data. The cumulative effect of such legislation and regulations on Truist’s business, operations, and profitability cannot be accurately predicted, but any of these impacts would likely necessitate changes to Truist’s existing regulatory compliance and risk management infrastructure and could result in increased compliance costs. Such legislation and regulation also 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 enhance the ability of nonbanks to offer competitive 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.
The Company may incur damages, fines, and penalties and face other negative consequences from supervisory actions and regulatory or other legal violations, including inadvertent or unintentional violations.
Truist’s compliance risks relate to a wide variety of statutes, rules, regulations, and other laws spanning its lines of business, corporate functions, and jurisdictions, including risks related to financial products and services, relationships and interactions with clients, teammate activities, anti-money laundering compliance, trading activities, and market conduct. Compliance risk is also inherent in Truist’s fiduciary activities, including applicable requirements to act in the best interest of fiduciary clients and to treat fiduciary clients fairly.
Truist maintains systems and procedures designed to support its compliance with applicable statutes, regulations, and other laws, but there can be no assurance that these systems and procedures 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.Truist Financial Corporation 33Federal and state law grants substantial enforcement and supervisory powers to federal and state regulators and law enforcement agencies if they determine that regulated entities have failed to comply with applicable law, comport with safe and sound practices, or meet supervisory expectations. This enforcement and supervisory authority includes 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. 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, government investigations, and enforcement actions and cause significant reputational harm to Truist, even if allegations are ultimately unsubstantiated. 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 is regularly subject to regulatory investigations, examinations, and other initiatives by governmental authorities that, if adversely determined against the Company, may subject us to litigation, settlements, fines, penalties, or other sanctions and may require us to engage in remediation, provide restitution to clients, restructure our operations and activities, or cease offering certain products or services. Any of these potential outcomes could harm the Company’s business, financial condition, results of operations, 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, prospects, 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 can vary with the regulatory environment. Legal proceedings against financial services firms may increase depending on factors such as prevailing economic and political conditions, the policy preferences of the relevant government agencies, and changes in law.
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 enforcement orders against Truist. Furthermore, a single event involving a potential violation of law 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 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 determinations that they have failed to comply with applicable law, comport with safe and sound practices, or meet supervisory 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. In addition, these determinations could lead to lawsuits, claims, or enforcement activity directly against the owners of the other entity, including Truist.
Claims and legal actions, including class action lawsuits and enforcement proceedings, could involve large monetary amounts and significant defense costs and could 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 management attention from Truist’s business and operations.
The outcome of any claims and legal actions, 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 claims and legal actions where we face a risk of significant loss. The ultimate resolution of a pending claim or legal action 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 and 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 Legal Matters” section in “Note 16. Commitments and Contingencies” for additional information.34 Truist Financial CorporationRegulatory capital and liquidity standards applicable to large banking organizations and future revisions to existing standards may negatively impact our business, financial results, financial condition, growth, profitability, or our ability to return capital to shareholders.
Truist and Truist Bank are subject to risk-based and leverage regulatory capital requirements, which are established by the FRB for Truist and by the FDIC for Truist Bank. Failure of an FHC or an IDI to be well-capitalized as defined by applicable law or to meet minimum capital requirements can result in enforcement and other supervisory actions and have a significantly adverse impact on the institution’s business and operations. Certain BHCs and their bank subsidiaries, including Truist and Truist Bank, are subject to a minimum LCR and NSFR.
The U.S. risk-based regulatory capital rules are based on the Basel Framework developed by the BCBS for strengthening the regulation, supervision, and risk management of banks as well as certain provisions of the Dodd-Frank Act. These rules prescribe minimum capital levels and allow the FRB and the FDIC to impose incremental capital requirements on a banking organization based on its size, complexity, or risk profile to enhance its ability to operate in a safe and sound manner. In several instances, the U.S. banking agencies have applied stricter capital and liquidity standards 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 required to take steps to increase its capital, increase its investment security holdings, or otherwise change aspects of its capital or liquidity measures, including in ways that could be dilutive to shareholders or could limit our ability to pay or increase dividends or to engage in share repurchases. In addition, these requirements may impact the amount and type of loans the Company is able to make. Truist may also 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 FRB 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 planned capital actions are assessed against our projected ability to satisfy applicable capital requirements under a hypothetical scenario reflecting severe stress in the broader economy. If we are projected to fail to satisfy applicable capital requirements over the stress test horizon, 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.
Differences in, or changes to, regulation and supervision and industry disruption can affect the Company’s ability to compete effectively, which may adversely affect our business, financial condition, financial results, or growth.
Because prudential standards and requirements are typically based on the size and complexity of the firm, large institutions, such as the Company, often are subject to more stringent regulatory requirements and supervision than smaller and less complex institutions. Changes in capital requirements, including any easing of capital requirements for our larger bank competitors, may result in increased competition and challenge our ability to execute on our growth strategies and branch expansion.
Competition is arising from limited purpose banks and nonbanks involved in digital assets, stablecoins, cryptocurrencies, tokenization, and similar products, services, and technologies that enable financial services and transactions without or with less intermediation by commercial banks. Stablecoins, digital assets, and distributed ledger technologies are being designed to enable lower-cost payments and transactions, with quicker settlement, that may shift deposits, lending, and payment flows to limited purpose banks and nonbanks. These limited purpose bank and nonbank competitors may not be subject to banking regulation, may be subject to less stringent regulation, or may be supervised by a federal 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.
Actions or initiatives by federal and state governmental authorities, including the U.S. banking agencies, may also provide competitors with increased opportunities to derive competitive advantages and may create new competitors. These actions or initiatives may include more accommodative positions on the processing and approval of traditional bank charters and deposit insurance, expanded access to the banking and payments systems through the approval of competitors, including competitors with novel business models, to hold specialized charters, or more accommodative positions on novel activities performed by banks or nonbanks.Truist Financial Corporation 35Truist faces risks of non-compliance and may incur additional operational and compliance costs under laws relating to anti-money laundering, economic sanctions, embargo programs, anti-bribery, and anti-corruption.
Truist must comply with statutes and regulations relating to anti-money laundering, economic sanctions, embargo programs, anti-bribery, and anti-corruption, which increases the risk of non-compliance with applicable law and costs associated with the implementation and maintenance of complex compliance programs. The rapid evolution of technology, including the growth of digital assets, stablecoins, cryptocurrencies, tokenization, and blockchain and other distributed ledger technologies, introduce additional challenges to traditional client due diligence, transaction monitoring, and suspicious activity reporting required by applicable law. The BSA, as amended by the Patriot Act, and its implementing regulations require financial institutions, including IDIs such as Truist Bank, broker-dealers, and other financial institutions, to develop and implement BSA/AML compliance programs that detect and report financial crimes. The BSA and its implementing regulations also strengthen the ability of U.S. law enforcement agencies and the intelligence community to disrupt and prevent money laundering, the financing of terrorism, and related crimes. In addition, U.S. persons, including entities like Truist, must comply with sanctions programs administered by OFAC and the U.S. Department of State. These sanctions programs prohibit, among other things, financial transactions involving certain individuals, entities, countries, and territories that are the subject of U.S. economic sanctions and impose other restrictions on certain investments and dealings, including requirements to block assets.
Federal law grants substantial enforcement powers to U.S. banking agencies, FinCEN, OFAC, the U.S. DOJ, and other government agencies with respect to BSA and OFAC compliance, including through examination and ongoing monitoring. This enforcement authority includes the ability to assess significant civil and criminal monetary penalties, fines, and restitution; to issue cease and desist or prohibition orders; to initiate injunctive actions against financial institutions and institution-affiliated parties; and to impose restrictions on business, including bank and BHC mergers and acquisitions. These enforcement actions may be initiated for violations of statutes and regulations or for unsafe and unsound practices and could result in substantial negative shareholder reaction, reputational damage, and adverse effects on our financial condition and results. Given the rapid development and cross-border nature of these criminal activities that are enabled by evolving technologies, any failure to adapt and modernize our BSA/AML compliance program, processes, and procedures may result in material compliance gaps, adverse enforcement actions, and civil and legal penalties.
Strategic Risks
Ineffective execution of strategic initiatives could adversely affect investor sentiment and the Company’s business, financial condition, results of operations, prospects, and reputation.
There is no guarantee that our strategic initiatives, including initiatives to drive focused growth, deepen relationships with clients, increase client acquisition, and enhance digital engagement with clients, 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, the 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 business, results of operations, financial condition, prospects, and reputation 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, or require significant investments to maintain competitiveness, which could have an adverse impact on our business and financial results.
Truist operates in a highly competitive industry that is expected to become even more competitive with growth in areas such as digital financial service providers and other nonbank platforms. In many cases, Truist competes against larger banks with greater scale and deposits than Truist. These advantages can enable competitors to more aggressively price, reduce costs, and invest in new technology. Increased competition also arises 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, including with respect to digital offerings and assets, such as stablecoins, cryptocurrencies, and tokenized assets more broadly. 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.36 Truist Financial CorporationTruist also competes with nonbank companies and, in some cases, with companies other than those traditionally considered financial sector participants. In particular, fintechs are increasingly focusing on the financial sector, either in partnership with competitor banking organizations or on their own, including potentially through limited-purpose bank or trust company subsidiaries, and competition from such companies has grown in recent years and is expected to continue growing. In some cases, fintechs have and may continue to offer bank-like products. These companies generally are not subject to the same regulatory oversight as main street financial institutions and may accordingly realize certain cost efficiencies and offer bank and bank-like products and services at more favorable rates and with greater convenience to the client. This competition could result in the loss of clients, deposits, 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, digital assets, tokenization, stablecoins and cryptocurrencies, and similar products, services, and technologies that enable financial services and transactions without or with less intermediation by commercial banks, is likely to 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. If we are unable to successfully adopt and implement new technologies in a way that meets customer and industry demand, we may lose market share or deposits, including as a result of financial disintermediation.
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, which may impair the Company’s ability to expand or grow its client base, or execute on its strategic initiatives and compete effectively.
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 or synergies, 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.
Under the BHCA, a BHC may not directly or indirectly acquire ownership or control of more than 5% of the voting shares or substantially all of the assets of any BHC or bank or merge or consolidate with another BHC without the prior approval of the FRB. The BHCA and other federal laws enumerate the factors the FRB must consider when reviewing the merger of BHCs, the acquisition of banks, or the acquisition of voting securities of a bank or BHC. These factors include the competitive effects of the transaction in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the transaction; the effect of the transaction on the financial stability of the U.S.; the organizations’ compliance with anti-money laundering statutes and regulations; the convenience and needs of the communities to be served; and the records of performance under the CRA of the IDIs involved in the transaction. 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. The standards by which bank and financial institution acquisitions are evaluated may be subject to change, and it may be unclear how revised guidelines and frameworks for reviewing such acquisitions will be applied. Refer to the “Regulatory and Supervisory Considerations” section in “Item 1. Business” for additional details related to other factors and limitations related to potential BHC acquisitions. 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.
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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 at satisfactory prices 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. Divestitures 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. If a divestiture transaction is terminated before it is consummated, the payment of a termination fee by the purchaser may not fully compensate us for our losses.
Truist has businesses other than banking that are subject to a variety of risks that may affect our financial condition and results of operations.
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 financial condition and results of operations.Risks Related to Estimates and AssumptionsTruist’s business and operations rely significantly on the use of models, and any deficiencies in the design, implementation, or use of models could adversely affect our business, results of operations, and financial condition.
Truist relies on models to measure risks, estimate certain financial values, and inform certain business decisions, including AI models. 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.
Models involve significant judgment and have inherent limitations. Poorly designed, implemented, monitored, used, or interpreted models have in the past and may in the future negatively affect our business and results of operations. For example, models can be ineffective due to erroneous or inadequate data, flawed formulas or algorithms, limited or inapt historical patterns, changes in correlations, extreme or unanticipated market movements, or unexpected client behavior or illiquidity, 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.
Truist employs estimates and assumptions to determine the value or amount of many of our assets and liabilities, and if these estimates or assumptions prove inaccurate, our business, financial condition, results of operations, and prospects could be adversely affected.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.38 Truist Financial Corporation
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.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, among other factors, the reporting unit’s expected financial performance and susceptibility to adverse economic, regulatory, and legislative changes. The Company incurred a $6.1 billion non-cash, nondeductible 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 in MD&A for additional details related to the Company’s intangible assets and goodwill.
Additional Risks
Negative public opinion, whether or not warranted, could damage the Company’s brand in the market and relationships with stakeholders, 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 or activities, including lending, sales, training, quality assurance, client complaint resolution, and other operating practices, incentive compensation design and governance, corporate governance, acquisitions, the disclosure, collection, use, sharing, storage, and other processing of client or teammate information, client expectations regarding any product or service provided by the Company, and the Company’s ability to comply with applicable statutes or regulatory requirements or related to new or changed business activities. There can be no assurance that the Company’s conduct and activities will meet regulatory or other stakeholders’ standards or expectations. Negative public opinion could result based on allegations that are factually incorrect or arise from isolated incidents.
In addition, the public perception that a cyber-attack 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 operations.
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. Standards and expectations relating to environmental and social matters are evolving and often inconsistent across regulators, investors, clients, and other stakeholders. Actions taken by the Company in these areas may be viewed favorably by some groups and criticized by others, creating tradeoffs that increase compliance, legal, and regulatory risk or cause reputational harm.Truist Financial Corporation 39The proliferation of social media and the speed at which information spreads on social media may increase the likelihood that negative public opinion from any real or perceived events relating to the Company 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 brand and stakeholder risk and communicate, internally and externally, such risks to key stakeholders may be ineffective, untimely, or otherwise result in adverse effects on the Company.
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, 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, particularly those in critical, high-demand roles or possessing specialized skills. The Company faces significant competition in the recruitment of highly motivated teammates who can deliver Truist’s purpose, mission, and values. Changes in Truist’s expectations regarding workstyles and teammate preferences for work environments, including the desire of some teammates to work remotely for some or all of their hours, have been associated with and may continue to be associated with challenges in attracting and retaining teammates. The Company’s business or its ability to execute its strategic initiatives 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 other terms of incentive compensation that may be provided to teammates and could negatively affect Truist’s ability to compete for talent relative to nonbanking companies or those with different applicable regulations.
In addition, advances in technology, such as automation and AI, may lead us to modify our workforce strategy. This could require Truist to invest in additional teammate training, manage impacts on morale and retention, and compete for candidates who possess more advanced technological skills, all of which could have a negative impact on Truist’s business and operations.
The Company relies 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 which support its operations, including vendors and other service providers. Changes in law 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 which supports Truist’s operations. 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 which supports Truist fails to take appropriate and effective actions to protect the health and safety of its teammates.40 Truist Financial CorporationThe Company is at risk of losses from fraud which could result in financial loss and reputational harm.
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 attacks (such as phishing and smishing), and ATM skimming, and recent advances in AI may make it easier to engage in such schemes and 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. The increasing sophistication of AI technologies poses heightened risk of identity fraud as malicious actors may exploit AI to create convincing false identities or manipulate verification processes. A failure to detect, prevent, and address fraud has in the past and could in the future 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.
Physical, transition, and other risks associated with climate change, together with governmental responses to such risks, may negatively impact our business, financial condition, 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, changes in or 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 lower-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 lower-carbon economy could present idiosyncratic risks for individual companies. Additionally, transitioning to a lower-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 brand and stakeholder 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, in particular those involved in fossil fuels, 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. Conflicting state-level regulation, including with respect to fair access laws, could increase Truist’s compliance costs or risks of non-compliance. 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. Truist may incur additional costs and require additional resources as it evolves its strategy, practices, and related disclosures with respect to these matters.
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Natural disasters, pandemics, extreme weather events, and other catastrophic events could adversely affect our financial condition and results of operations.
Natural disasters, pandemics, extreme weather events, and other catastrophic events, as well as government actions or other restrictions in connection with such events, could adversely affect the Company’s financial condition and results of operations. The frequency and severity of natural disasters, pandemics, extreme weather events, and other catastrophic events could interrupt Truist’s operations, damage facilities, impair technology and data availability, disrupt third parties and service providers, or limit client access to services. Such events may also strain critical dependencies, including power, telecommunications, transportation, and workforce ability, and reduce loan performance or collateral values. 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. Rising insurance costs, as well as decreasing insurance provider options and insurance program coverage resulting from natural disasters, extreme weather events, and other catastrophic events could also lead to population migration, or the weakening of economic conditions in certain regions. These events could reduce the Company’s earnings and cause volatility in the Company’s financial results and have an adverse effect on the Company’s business, financial condition, and results of operations. While Truist maintains an enterprise resilience program and other safeguards designed to mitigate the impact of natural disasters, pandemics, extreme weather events, and other catastrophic events, no resilience measures can fully eliminate risk or assure uninterrupted operations during such events.
Item 7 · Management's Discussion & Analysis
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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) Change
2023 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 OperationsNet Interest Income and NIM
Taxable-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 Corporation
Table 9: Taxable-Equivalent Net Interest Income and Rate / Volume Analysis
2023 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 IncomeYear 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 ExpenseYear 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 CorporateOT&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 Maturity
December 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 Maturities
December 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 LeasesThree 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 $ 49CRE — 1Commercial 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 61
Problem 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 Ratios
Dec 31, 2023 Dec 31, 2022
Loans 30-89 days past due and still accruing as a percentage of loans and leases HFI
0.63 % 0.70 %
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI
0.17 0.49
NPLs as a percentage of loans and leases HFI
0.44 0.36NPLs as a percentage of total loans and leases (1)0.46 0.36NPAs as a percentage of:
Total assets (1)0.28 0.23
Loans and leases HFI plus foreclosed property
0.46 0.38
ALLL as a percentage of loans and leases HFI
1.54 1.34
Ratio of ALLL to NPLs
3.5x 3.7x
Loans 90 days or more past due and still accruing as a percentage of loans and leases HFI, excluding government guaranteed (2)
0.04 % 0.04 %(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 2021
Net 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 2021
Balance, 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 $ 4,695
ACL: (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
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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.BorrowingsThe 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’ EquityTruist’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 $ 40.58
Non-GAAP capital measure: (1)
Tangible common equity per common share $ 21.83 $ 18.04
Calculation of tangible common equity: (1)
Total shareholders’ equity $ 59,253 $ 60,537
Less:
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 Risk
As 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 Activities
As a financial intermediary, Truist provides its clients access to derivatives, foreign exchange and securities markets, which generate market risks. Trading market risk is managed using a comprehensive risk management approach, which includes measuring risk using VaR, stress testing, and sensitivity analysis. Risk metrics are monitored against a suite of limits on a daily basis at both the trading desk level and at the aggregate portfolio level, which is intended to ensure that exposures are in line with Truist’s risk appetite.
Truist Financial Corporation 71
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, 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 Risk
Credit 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;
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• 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 Risk
Technology 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.
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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.
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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 Risk
Compliance 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.
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Reputational Risk
Truist 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.
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• 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.
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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 PoliciesThe 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.
ACL
Truist’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.
Securities
Truist 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 LiabilitiesTruist 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 AssetsThe 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 85
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 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 ObligationsTruist 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 2025-12-31 (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 the accompanying Notes to the Consolidated Financial Statements. It should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements in this Form 10-K, and other information contained in this document. For discussion of 2024 results as compared to 2023 results, refer to MD&A in the Annual Report on Form 10-K for the year ended December 31, 2024.
A description of certain factors that may affect our future results and risk factors is set forth in “Item 1A. Risk Factors.”Executive OverviewDuring 2025, we focused on delivering strong, purpose-driven performance by deepening client relationships, enhancing operational efficiency, investing in talented teammates and innovative technology, and increasing capital return to shareholders. Through disciplined risk management and sound governance, we believe we strengthened our foundation and positioned Truist for sustainable growth.
During 2025, we returned $5.2 billion of capital to our common shareholders through $2.7 billion of common stock dividends and $2.5 billion in common share repurchases. In December 2025, we announced that the Board authorized the repurchase of up to $10.0 billion of common stock effective immediately with no expiration date, replacing the previous repurchase authority, as part of Truist’s overall capital distribution strategy.Key Areas of FocusIn 2025, our work centered around five core strategic priorities:
• Execute strategic growth and profitability initiatives in both WB and CSBB including:
◦ In WB, capture more of the commercial middle market with an industry banking strategy, continue momentum in Investment Banking and Capital Markets, generate additional fee income from existing clients in Wealth, and deepen and grow existing client relationships in Wholesale Payments.
◦ In CSBB, grow deposits with a focus on Premier clients, increase client acquisition, deepen client relationships, and drive digital acquisition and client engagement.
• Drive positive operating leverage through revenue growth and expense discipline.
• Invest in talent, technology, and our risk infrastructure.
• Maintain our credit and risk discipline.
• Return capital to shareholders through our common stock dividend and share repurchases.
Looking ahead, our strategic priorities remain unchanged. By successfully executing on them, we seek to accelerate revenue growth, drive greater positive operating leverage, and return more capital to shareholders, all while maintaining our risk discipline. These outcomes are central to driving improved profitability.Financial ResultsNet income to common shareholders totaled $5.0 billion, or $3.82 per share, for 2025, compared to $4.5 billion, or $3.36 per share, for the prior year.
• Results from continuing operations for 2025 included charges primarily related to severance of $156 million ($119 million after-tax, or $0.09 per share), an incremental accrual related to executing a settlement agreement in a specific legal matter of $130 million ($99 million after-tax, or $0.08 per share), and securities losses of $19 million ($15 million after-tax or $0.01 per share).
• Results from continuing operations for 2024 included securities losses of $6.7 billion ($5.1 billion after-tax or $3.82 per share) from a balance sheet repositioning executed in connection with the TIH sale, a charitable contribution to the Truist Foundation of $150 million ($115 million after-tax, or $0.09 per share), and charges primarily related to severance of $120 million ($92 million after-tax, or $0.07 per share).
• Results from discontinued operations of $4.9 billion 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). Truist did not have discontinued operations in 2025.
Truist Financial Corporation 49
Table 6: Earnings Highlights
(Dollars in millions) As of / for the Year Ended December 31, Change
2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Net interest income $ 14,423 $ 14,091 $ 14,524 $ 332 $ (433)
TE adjustment (1)
196 212 220
Net interest income - TE (1)
14,619 14,303 14,744 316 (441)
Noninterest income 5,896 (813) 5,498 6,709 (6,311)
Total revenue 20,319 13,278 20,022 7,041 (6,744)
Total revenue-TE (1)
20,515 13,490 20,242 7,025 (6,752)
Noninterest expense 12,076 12,009 18,678 67 (6,669)
Income (loss) before income taxes 6,349 (601) (765) 6,950 164
Provision (benefit) for income taxes 1,042 (556) 738 1,598 (1,294)
Net income (loss) from continuing operations 5,307 (45) (1,503) 5,352 1,458
Net income from discontinued operations — 4,885 456 (4,885) 4,429
Net income (loss) 5,307 4,840 (1,047) 467 5,887
Net income (loss) available to common shareholders 4,974 4,469 (1,452) 505 5,921
Diluted earnings per common share $ 3.82 $ 3.36 $ (1.09) $ 0.46 $ 4.45
Common shareholders’ equity per common share 47.74 43.90 3.84
TBVPS (1)
33.48 30.01 3.47
Return on average common shareholders’ equity 8.4 % 8.0 % (2.6) % 40 bps NM
ROTCE (1)
12.7 13.3 18.9 (60) bps (560) bps
Net interest margin - TE (1)
3.03 3.03 2.98 — bps 5 bps
(1) Represents a non-GAAP measure. A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is included within the table above or in the “Non-GAAP Financial Measures” section in this report.
Net interest income - TE for the year ended December 31, 2025 was up $316 million, or 2.2%, compared to the year ended December 31, 2024 primarily due to loan and deposit growth, fixed-rate asset repricing, and the balance sheet repositioning in the second quarter of 2024, partially offset by the impact of reductions in interest rates throughout 2025. Net interest margin - TE was 3.03%, flat compared to the prior year.
• The yield on the average total loan portfolio was 5.96% for 2025, down 38 basis points, compared to the prior year, primarily due to the impact of variable-rate loans repricing, partially offset by fixed-rate loan repricing. The yield on the average securities portfolio was 3.13% for 2025, up 30 basis points compared to the prior year, reflecting the impact of balance sheet repositioning in 2024 and the reinvestment of cash flows into higher yielding securities.
• The average cost of total deposits was 1.78% for 2025, down 24 basis points compared to the prior year. The average cost of short-term borrowings was 4.36% for 2025, down 100 basis points compared to the prior year. The average cost of long-term debt was 5.01% for 2025, stable compared to the prior year. The decline in the cost of deposits and short-term borrowings was driven by the impact of reductions in interest rates.
The provision for credit losses was $1.9 billion for the year ended December 31, 2025, up $24 million, or 1.3%, compared to the year ended December 31, 2024. The net charge-off ratio for the year ended December 31, 2025 was 0.54%, down five basis points compared to the prior year.
• The provision for credit losses for the year ended December 31, 2025 reflected a higher allowance build and lower net charge-offs compared to the prior year.
• The net charge-off ratio was down compared to the prior year driven by lower net charge-offs combined with growth in average loans and leases. Net charge-offs were lower in the CRE and credit card portfolios, partially offset by increases in the commercial and industrial, indirect auto, and other consumer portfolios.
Noninterest income was up $6.7 billion for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to securities losses resulting from the balance sheet repositioning in 2024, as well as higher other income and card and treasury management fees, partially offset by lower investment banking and trading income.
Noninterest expense was up $67 million, or 0.6%, for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to higher personnel expense, professional fees and outside processing, software expense, and marketing and customer development, partially offset by lower regulatory costs, other expense, and amortization of intangibles.
Truist had a provision for income taxes of $1.0 billion for 2025, compared to a benefit from income taxes of $556 million in 2024. The 2024 benefit from income taxes was driven by the discrete impact of the balance sheet repositioning of securities.
50 Truist Financial Corporation
Truist’s total assets at December 31, 2025, were $547.5 billion, an increase of $16.4 billion, or 3.1%, compared to December 31, 2024, as loans and leases, net of ALLL, increased $22.0 billion, or 7.3%, partially offset by a decrease of $5.9 billion, or 5.0%, in total securities.
• Average earning assets increased $9.6 billion, or 2.0%, compared to the prior year primarily due to an increase in average total loans of $11.1 billion, or 3.6%, and an increase in other earning assets of $1.2 billion, or 3.3%, partially offset by a decline in average securities of $3.2 billion, or 2.6%. The increase in average other earning assets and decrease in average securities primarily reflect the impact of the balance sheet repositioning in the second quarter of 2024.
Total liabilities at December 31, 2025, were $482.3 billion, an increase of $14.9 billion, or 3.2%, compared to December 31, 2024, reflecting an increase of $9.9 billion, or 2.5%, in deposits and an increase of $7.0 billion, or 20%, in long-term debt, partially offset by a decrease of $1.4 billion, or 4.7%, in short-term borrowings.
• Average deposits increased $8.5 billion, or 2.2%, average short-term borrowings increased $3.6 billion, or 15%, and average long-term debt increased $125 million, or 0.3%, compared to the prior year.
Total shareholders’ equity was $65.2 billion at December 31, 2025, an increase of $1.5 billion from December 31, 2024. This increase includes $5.3 billion in net income and $2.4 billion in OCI, partially offset by $3.0 billion in common and preferred dividends, $2.5 billion in common share repurchases, and $1.0 billion for the redemption of series P preferred stock. Truist’s book value per common share at December 31, 2025, was $47.74, compared to $43.90 at December 31, 2024. Truist’s TBVPS of $33.48 at December 31, 2025, increased 12% compared to December 31, 2024. Refer to the “Non-GAAP Financial Measures“ section in MD&A for additional information on TBVPS, which is a non-GAAP measure.
Asset quality was solid for the year ended December 31, 2025.
• Nonperforming loans and leases held for investment totaled $1.6 billion or 0.48% of loans and leases held for investment at December 31, 2025, up one basis point compared to December 31, 2024.
• Loans 90 days or more past due and still accruing totaled $684 million or 0.21% of loans and leases held for investment at December 31, 2025, up two basis points as a percentage of loans and leases compared with December 31, 2024. 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, 2025, flat compared to December 31, 2024.
• The allowance for credit losses at December 31, 2025, was $5.3 billion and included $5.0 billion for the allowance for loan and lease losses and $317 million for the reserve for unfunded commitments. The ALLL ratio was 1.53% at December 31, 2025, down six basis points compared with December 31, 2024.
Capital and liquidity ratios remained strong during 2025.
• Truist’s CET1 ratio was 10.8% as of December 31, 2025, down 70 basis points since December 31, 2024, as capital was returned to shareholders and an increase in risk-weighted assets outpaced current year earnings.
• Truist returned $5.2 billion to common shareholders through declared common dividends of $2.7 billion, or $2.08 per share, during 2025 and repurchases of $2.5 billion of common stock, resulting in a dividend payout ratio of 54% and total payout ratio of 104%.
• Truist redeemed all outstanding shares of its perpetual preferred stock series P and the corresponding depositary shares representing fractional interests in such series for $1.0 billion.
• Truist’s average consolidated LCR was 111% for the three months ended December 31, 2025, compared to the regulatory minimum of 100%.
Truist Financial Corporation 51Analysis of Results of OperationsNet Interest Income and NIM - TE
Net interest income - TE for the year ended December 31, 2025 was up $316 million, or 2.2%, compared to the year ended December 31, 2024 primarily due to loan and deposit growth, fixed-rate asset repricing, and the balance sheet repositioning in the second quarter of 2024, partially offset by the impact of reductions in interest rates throughout 2025. Net interest margin - TE was 3.03%, flat compared to the prior year.
• The yield on the average total loan portfolio was 5.96% for 2025, down 38 basis points, compared to the prior year, primarily due to the impact of variable-rate loans repricing, partially offset by fixed-rate loan repricing. The yield on the average securities portfolio was 3.13% for 2025, up 30 basis points compared to the prior year, reflecting the impact of balance sheet repositioning in 2024 and the reinvestment of cash flows into higher yielding securities.
• The average cost of total deposits was 1.78% for 2025, down 24 basis points compared to the prior year. The average cost of short-term borrowings was 4.36% for 2025, down 100 basis points compared to the prior year. The average cost of long-term debt was 5.01% for 2025, up seven basis points compared to the prior year. The decline in the cost of deposits and short-term borrowings was driven by the impact of reductions in interest rates.
• Average earning assets increased $9.6 billion, or 2.0%, compared to the prior year primarily due to an increase in average total loans of $11.1 billion, or 3.6%, and an increase in other earning assets of $1.2 billion, or 3.3%, partially offset by a decline in average securities of $3.2 billion, or 2.6%. The increase in average other earning assets and decrease in average securities primarily reflect the impact of the balance sheet repositioning in the second quarter of 2024.
• Average deposits increased $8.5 billion, or 2.2%, average short-term borrowings increased $3.6 billion, or 15%, and average long-term debt increased $125 million, or 0.3%, compared to the prior year.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.52 Truist Financial Corporation
Table 7: Taxable-Equivalent Net Interest Income and Rate / Volume AnalysisYear 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
2025 2024 2023 2025 2024 2023 2025 2024 2023 Rate Volume Rate VolumeAssets
AFS and HTM securities at amortized cost:U.S. Treasury $ 13,876 $ 12,100 $ 11,021 5.10 % 4.01 % 1.20 % $ 708 $ 485 $ 132 $ 223 $ 145 $ 78 $ 353 $ 339 $ 14
GSE 465 390 348 3.78 3.38 2.94 17 13 10 4 2 2 3 2 1
Agency MBS 105,955 109,652 121,923 2.87 2.70 2.31 3,036 2,958 2,821 78 181 (103) 137 441 (304)
States and political subdivisions 362 417 424 4.21 4.14 4.13 15 17 18 (2) — (2) (1) — (1)
Non-agency MBS — 1,282 3,816 — 2.85 2.34 — 37 89 (37) (18) (19) (52) 16 (68)
Other 15 17 20 4.55 5.25 5.37 1 1 1 — — — — — —
Total securities 120,673 123,858 137,552 3.13 2.83 2.23 3,777 3,511 3,071 266 310 (44) 440 798 (358)
Interest earning trading assets 5,884 5,320 4,739 5.69 6.12 6.64 336 326 314 10 (24) 34 12 (26) 38Other earning assets (3)37,818 36,622 29,335 4.42 5.48 5.31 1,693 2,008 1,557 (315) (382) 67 451 51 400Loans and leases, net of unearned income:Commercial and industrial 160,004 155,674 163,983 5.64 6.36 6.34 9,025 9,897 10,389 (872) (1,142) 270 (492) 33 (525)
CRE 20,984 21,585 22,741 6.14 6.81 6.71 1,300 1,480 1,535 (180) (140) (40) (55) 22 (77)
Commercial Construction 8,403 7,729 6,125 6.76 7.67 7.62 557 583 459 (26) (75) 49 124 3 121
Residential mortgage 56,812 54,486 56,131 4.10 3.88 3.78 2,328 2,114 2,121 214 122 92 (7) 55 (62)
Home equity 9,606 9,778 10,388 7.42 7.94 7.36 713 776 765 (63) (50) (13) 11 57 (46)
Indirect auto 24,510 22,326 25,621 7.27 7.00 6.10 1,781 1,563 1,563 218 62 156 — 215 (215)
Other consumer 30,904 28,748 28,412 8.35 8.18 7.25 2,581 2,351 2,061 230 50 180 290 265 25
Student — — 2,453 — — 6.91 — — 170 — — — (170) (85) (85)
Credit card 4,903 4,907 4,876 11.39 11.96 11.59 559 587 565 (28) (28) — 22 18 4
Total loans and leases HFI 316,126 305,233 320,730 5.96 6.34 6.12 18,844 19,351 19,628 (507) (1,201) 694 (277) 583 (860)
LHFS 1,483 1,305 1,605 5.94 6.31 6.37 88 82 102 6 (5) 11 (20) (1) (19)
Total loans and leases 317,609 306,538 322,335 5.96 6.34 6.12 18,932 19,433 19,730 (501) (1,206) 705 (297) 582 (879)
Total earning assets 481,984 472,338 493,961 5.13 5.35 4.99 24,738 25,278 24,672 (540) (1,302) 762 606 1,405 (799)
Nonearning assets 56,244 51,185 51,554
Assets of discontinued operations — 2,542 7,617
Total assets $ 538,228 $ 526,065 $ 553,132Liabilities and Shareholders’ Equity
Interest-bearing deposits:Interest-checking $ 111,741 $ 104,606 $ 103,465 2.38 2.68 2.11 2,661 2,802 2,184 (141) (325) 184 618 594 24
Money market and savings 136,786 136,217 138,841 2.14 2.54 2.04 2,926 3,457 2,834 (531) (545) 14 623 677 (54)
Time deposits 41,839 39,406 36,803 3.49 4.04 3.83 1,461 1,590 1,409 (129) (224) 95 181 79 102
Total interest-bearing deposits 290,366 280,229 279,109 2.43 2.80 2.30 7,048 7,849 6,427 (801) (1,094) 293 1,422 1,350 72
Short-term borrowings 28,117 24,499 24,478 4.36 5.36 5.25 1,227 1,313 1,286 (86) (264) 178 27 26 1
Long-term debt 36,838 36,713 49,678 5.01 4.94 4.46 1,844 1,813 2,215 31 25 6 (402) 220 (622)
Total interest-bearing liabilities 355,321 341,441 353,265 2.85 3.21 2.81 10,119 10,975 9,928 (856) (1,333) 477 1,047 1,596 (549)
Noninterest-bearing deposits 105,969 107,639 122,018
Other liabilities 12,270 13,343 11,560
Liabilities of discontinued operations — 1,049 3,190
Shareholders’ equity 64,668 62,593 63,099
Total liabilities and shareholders’ equity $ 538,228 $ 526,065 $ 553,132
Average interest-rate spread 2.28 % 2.14 % 2.18 %
NIM/net interest income - TE (2)
3.03 % 3.03 % 2.98 % $ 14,619 $ 14,303 $ 14,744 $ 316 $ 31 $ 285 $ (441) $ (191) $ (250)
Less: TE adjustment (2)
196 212 $ 220
Net interest income $ 14,423 $ 14,091
Memo: Total deposits $ 396,335 $ 387,868 $ 401,127 1.78 % 2.02 % 1.60 % $ 7,048 $ 7,849 $ 6,427 $ (801) $ 1,422
(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.
(2) Yields are stated on a TE basis, which represents a non-GAAP measure, 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 53Provision for Credit LossesThe provision for credit losses was $1.9 billion for the year ended December 31, 2025, up $24 million, or 1.3%, compared to the year ended December 31, 2024. The net charge-off ratio for the year ended December 31, 2025 was 0.54%, down five basis points compared to the prior year.
• The provision for credit losses for the year ended December 31, 2025 reflects a higher allowance build and lower net charge-offs compared to the prior year.
• The net charge-off ratio was down compared to the prior year driven by lower net charge-offs and growth in average loans and leases. Net charge-offs were lower in the CRE and credit card portfolios, partially offset by increases in the commercial and industrial, indirect auto, and other consumer portfolios.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 8: Noninterest IncomeYear Ended December 31, % Change(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Wealth management income $ 1,431 $ 1,412 $ 1,358 1.3 % 4.0 %
Card and treasury management fees (1)(2)
1,360 1,311 1,316 3.7 (0.4)
Investment banking and trading income 1,136 1,203 822 (5.6) 46.4
Other deposit revenue (1)(3)
471 511 493 (7.8) 3.7
Mortgage banking income 452 432 437 4.6 (1.1)
Lending related fees 395 366 447 7.9 (18.1)
Securities gains (losses) (19) (6,651) — (99.7) NM
Other income (4)
670 603 625 11.1 (3.5)
Total noninterest income $ 5,896 $ (813) $ 5,498 NM (114.8)
(1) Effective December 31, 2025, Truist reclassified treasury management fees to ‘Card and treasury management fees’ from ‘Other deposit revenue.’ Prior period balances have been conformed to current period presentation.
(2) Renamed from ‘Card and payment related fees.’
(3) Renamed from ‘Service charges on deposits.’
(4) Effective December 31, 2025, Truist reclassified operating lease income into ‘Other income.’ Prior period balances have been conformed to current period presentation.
Noninterest income was up $6.7 billion for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to securities losses resulting from the balance sheet repositioning in 2024 as well as higher other income and card and treasury management fees, partially offset by lower investment banking and trading income.
• Other income increased primarily due to higher income from certain solar and other investments, partially offset by the 2024 gain on the sale of Sterling Capital Management LLC.
• Card and treasury management fees increased primarily due to higher treasury management fees.
• Investment banking and trading income decreased due to lower trading income, merger and acquisition fees, and capital markets activity.
54 Truist Financial CorporationNoninterest Expense
The following table provides a breakdown of Truist’s noninterest expense:Table 9: Noninterest ExpenseYear Ended December 31, % Change(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Personnel expense (1)
$ 6,848 $ 6,587 $ 6,765 4.0 % (2.6) %
Professional fees and outside processing (1)
1,420 1,342 1,194 5.8 12.4
Software expense 936 896 868 4.5 3.2
Net occupancy expense (1)
710 695 732 2.2 (5.1)
Equipment expense 351 373 381 (5.9) (2.1)
Marketing and customer development 299 268 260 11.6 3.1
Amortization of intangibles 290 345 395 (15.9) (12.7)
Regulatory costs 163 344 824 (52.6) (58.3)
Goodwill impairment — — 6,078 — (100.0)
Other expense (1)(2)
1,059 1,159 1,181 (8.6) (1.9)
Total noninterest expense $ 12,076 $ 12,009 $ 18,678 0.6 (35.7)
(1) Effective December 31, 2025, Truist reclassified the underlying activities of restructuring charges, which were previously reported in a separate financial statement caption, to their natural expense categories of ‘Personnel,’ ‘Net occupancy,’ ‘Professional fees and outside processing,’ and ‘Other expense.’ Prior period balances have been conformed to current period presentation.
(2) Effective December 31, 2025, Truist reclassified operating lease depreciation into ‘Other expense.’ Prior period balances have been conformed to current period presentation.
Noninterest expense was up $67 million, or 0.6%, for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to higher personnel expense, professional fees and outside processing, software expense, and marketing and customer development, partially offset by lower regulatory costs, other expense, and amortization of intangibles.
• Personnel expense increased due to higher investments in talent in revenue producing businesses as well as the technology and risk infrastructure organizations, incentives, insurance costs, and severance charges, partially offset by lower expenses for other employee benefits.
• Professional fees and outside processing expense increased due to higher investments in technology and risk infrastructure.
• Software expense increased primarily due to higher spending on certain projects.
• Marketing and customer development expense increased primarily due to marketing initiatives.
• Regulatory costs decreased primarily due to the additional accrual for the FDIC special assessment in 2024, and related adjustments to the special assessment in 2025.
• Other expense decreased primarily due to a charitable contribution in 2024 and lower operating losses in 2025, partially offset by a $130 million incremental accrual related to executing a settlement agreement in a specific legal matter.
• Amortization of intangibles decreased primarily due to the scheduled amortization for certain assets.
Truist Financial Corporation 55Segment ResultsTruist operates and measures business activity across two reportable segments: Consumer and Small Business Banking (CSBB) and Wholesale Banking (WB), with functional activities included in Other, Treasury, and Corporate (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. Refer to “Note 21. Operating Segments” for additional information on the Company’s reportable segments.
Table 10: Net Income from Continuing Operations by Reportable SegmentYear Ended December 31, % Change(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Consumer and Small Business Banking $ 2,529 $ 3,075 $ (36) (17.8) % NM
Wholesale Banking 4,102 3,856 169 6.4 NM
Other, Treasury & Corporate (1,324) (6,976) (1,636) 81.0 NM
Truist Financial Corporation $ 5,307 $ (45) $ (1,503) NM (97.0)
Consumer and Small Business Banking
CSBB net income was $2.5 billion for the year ended December 31, 2025, a decrease of $546 million compared to the prior year.
• Segment net interest income decreased $395 million primarily driven by lower funding credit on deposits.
• The allocated provision for credit losses increased $223 million primarily reflecting a net reserve build in the current year.
• Noninterest income increased $29 million primarily due to increased residential mortgage income, partially offset by lower deposit related revenue.
• Noninterest expense increased $113 million primarily driven by higher enterprise technology and payments support charges, partially offset by lower operating charge-offs.
CSBB average loans and leases held for investment increased $6.3 billion, or 5.0%, for the year ended December 31, 2025 compared to the prior year, primarily due to higher indirect lending in the prime auto and Service Finance portfolios, and increased real estate lending driven by the mortgage portfolio.
CSBB average total deposits increased $1.7 billion, or 0.8%, for the year ended December 31, 2025 compared to the prior year, primarily due to higher average money market and savings and noninterest-bearing deposits, partially offset by lower average interest-bearing checking deposits.
Wholesale Banking
WB net income was $4.1 billion for the year ended December 31, 2025, an increase of $246 million compared to the prior year.
• Segment net interest income increased $207 million primarily due to lower cost of deposits and higher funding credit on higher deposit balances, partially offset by lower loan yields.
• The allocated provision for credit losses decreased $196 million, which reflected a decrease in net charge-offs as well as an increase in the net reserve release compared to the prior year.
• Noninterest income increased $121 million primarily due to higher income from certain strategic investments, tax credit related investments, higher card and treasury management fees, and lending related fees, partially offset by lower income from investment banking and trading.
• Noninterest expense increased $165 million primarily due to higher charges for enterprise functional support and enterprise operations as well as increased personnel expenses driven by incentives expense, partially offset by lower regulatory costs.
WB average loans and leases held for investment increased $4.6 billion, or 2.6%, for the year ended December 31, 2025 compared to the prior year, primarily driven by higher balances in the commercial and industrial loan portfolio, partially offset by lower commercial real estate balances.
WB average total deposits increased $3.8 billion, or 2.7%, for the year ended December 31, 2025 compared to the prior year, primarily due to higher average interest-bearing checking balances, partially offset by lower average noninterest-bearing deposits and money market and savings balances.
56 Truist Financial CorporationOther, Treasury, and CorporateOT&C generated a net loss of $1.3 billion for the year ended December 31, 2025, compared to a net loss of $7.0 billion in the prior year.
• OT&C net interest income increased $520 million primarily due to lower inter-segment funding costs for deposits, the balance sheet repositioning in 2024, and reinvesting cash flows into higher yielding securities, partially offset by the lower funding charges primarily on loans to other segments.
• Noninterest income increased $6.6 billion primarily due to the securities losses from the balance sheet repositioning in 2024.
• Noninterest expense decreased $211 million primarily driven by recoveries received from the business segments for enterprise functional, technology, and operations support expenses, as well as lower other expense due to a charitable contribution to the Truist Foundation in 2024, partially offset by increased salaries driven by higher investments in talent for technology and risk infrastructures and an increase in non-fraud operational charge-offs.
Truist Financial Corporation 57Analysis of Financial Condition
Investment ActivitiesTruist’s investment policy is approved and carried out by the ALCO, which meets regularly to review the economic environment and establish investment strategies. The ALCO also has 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, structured notes, bank eligible corporate obligations (including corporate debentures), commercial paper, negotiable CDs, bankers’ acceptances, mutual funds, and limited types of equity securities.
Table 11: Composition of Securities Portfolio
(Dollars in millions) Dec 31, 2025 Dec 31, 2024AFS securities (at fair value):U.S. Treasury $ 12,792 $ 14,411
GSE 460 403
Agency MBS – residential 48,226 49,959
Agency MBS – commercial 3,200 2,293
States and political subdivisions 350 382
Other 14 16
Total AFS securities 65,042 67,464HTM securities (at amortized cost):Agency MBS – residential 47,186 50,640
Total securities $ 112,228 $ 118,104
The securities portfolio totaled $112.2 billion at December 31, 2025, compared to $118.1 billion at December 31, 2024. U.S. Treasury, GSE, and agency MBS represented 99.7% of the total securities portfolio as of December 31, 2025 and December 31, 2024. The majority of the portfolio is agency MBS.
• The decrease in 2025 was driven by paydowns and maturities of $20.2 billion and sales of $2.7 billion, partially offset by purchases of $14.5 billion as well as an increase in the fair value of AFS securities.
• As of December 31, 2025, and December 31, 2024, 41% of the investment securities portfolio was classified as held-to-maturity at amortized cost, excluding portfolio-level basis adjustments associated with certain AFS securities.
• As of December 31, 2025, approximately 3.7% of the securities portfolio was variable rate, excluding the impact of swaps, compared to 3.0% as of December 31, 2024.
• The effective duration of the AFS securities portfolio was 4.4 years at December 31, 2025, and 5.0 years at December 31, 2024, excluding the impact of swaps, or 2.9 years at December 31, 2025 and 3.3 years at December 31, 2024, including the impact of swaps. The effective duration of the HTM securities portfolio was 7.5 years at December 31, 2025, and 7.0 years at December 31, 2024.
58 Truist Financial CorporationThe following table presents the securities portfolio by major category of security holdings with ranges of maturities and average yields:Table 12: Securities Yields by Major Category and Maturity
December 31, 2025 (Dollars in millions) AFS HTMFair Value Effective Yield (1)
Amortized Cost Effective Yield (1)
U.S. Treasury:Within one year $ 4,752 4.41 % $ — — %
One to five years 7,091 4.27 — —
Five to ten years 228 3.61 — —
After ten years 721 4.64 — —
Total 12,792 4.33 — —GSE:Five to ten years 3 2.78 — —
After ten years 457 4.04 — —
Total 460 4.03 — —
Agency MBS – residential: (2)
Five to ten years 39 5.26 — —
After ten years 48,187 3.88 47,186 1.79
Total 48,226 3.88 47,186 1.79
Agency MBS – commercial: (2)
One to five years 538 4.31 — —
Five to ten years 421 4.36 — —
After ten years 2,241 2.05 — —
Total 3,200 2.73 — —States and political subdivisions:Within one year 2 4.80 — —
One to five years 83 6.87 — —
Five to ten years 173 6.46 — —
After ten years 92 5.17 — —
Total 350 6.21 — —Other:Within one year 7 2.87 — —
Five to ten years 7 5.84 — —
Total 14 4.31 — —
Total securities $ 65,042 3.93 $ 47,186 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, and 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 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.
Truist Financial Corporation 59Lending 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 aims to lend to a diverse client base that is managed to be geographically dispersed with the goal of mitigating 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 in MD&A 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 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 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 one- to four-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.
60 Truist Financial CorporationOther Consumer Loan PortfolioThe 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 runoff. 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.Credit 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 13: Loans and Leases as of Period End
(Dollars in millions) Dec 31, 2025 Dec 31, 2024Commercial:Commercial and industrial $ 167,808 $ 154,848
CRE 23,720 20,363
Commercial construction 7,783 8,520Consumer:Residential mortgage 56,807 55,599
Home equity 9,719 9,642
Indirect auto 25,659 23,089
Other consumer 32,181 29,395
Credit card 4,918 4,927
Total loans and leases HFI 328,595 306,383
LHFS 1,883 1,388
Total loans and leases $ 330,478 $ 307,771
Loans and leases HFI were $328.6 billion at December 31, 2025, up $22.2 billion compared to 2024.
Commercial loans increased $15.6 billion during 2025 primarily due to an increase of $13.0 billion in the commercial and industrial portfolio and $3.4 billion in the CRE portfolio due to higher production.
Consumer loans and credit cards increased $6.6 billion during 2025 primarily due to a $2.8 billion increase in other consumer portfolio driven by growth of higher-return point-of-sale lending or online portfolios (Service Finance and LightStream), a $2.6 billion increase in indirect auto portfolio primarily due to higher production, and a $1.2 billion increase in residential mortgage portfolio due to additional purchases and correspondent production.
Truist Financial Corporation 61
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 14: Loan Maturities
December 31, 2025 (Dollars in millions) 1 Year or Less 1 to 5 Years 5 to 15 Years After 15 Years TotalFixed rate:
Commercial:Commercial and industrial $ 10,558 $ 13,331 $ 9,153 $ 2,146 $ 35,188
CRE 556 1,646 188 7 2,397
Commercial construction 13 34 21 34 102
Total commercial 11,127 15,011 9,362 2,187 37,687Consumer:Residential mortgage 1,527 6,204 17,327 22,924 47,982
Home equity 282 880 1,412 337 2,911
Indirect auto 5,806 17,630 2,223 — 25,659
Other consumer 6,058 15,198 7,306 891 29,453
Total consumer 13,673 39,912 28,268 24,152 106,005
Credit card 251 — — — 251
Total fixed rate 25,051 54,923 37,630 26,339 143,943Variable rate:
Commercial:Commercial and industrial 39,774 82,733 8,161 1,952 132,620
CRE 4,812 15,869 633 9 21,323
Commercial construction 3,186 4,488 7 — 7,681
Total commercial 47,772 103,090 8,801 1,961 161,624Consumer:Residential mortgage 206 920 2,835 4,864 8,825
Home equity 640 2,129 4,026 13 6,808
Other consumer 1,183 1,267 276 2 2,728
Total consumer 2,029 4,316 7,137 4,879 18,361
Credit card 4,667 — — — 4,667
Total variable rate 54,468 107,406 15,938 6,840 184,652
Total loans and leases HFI $ 79,519 $ 162,329 $ 53,568 $ 33,179 $ 328,595
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 $714 million and $647 million at December 31, 2025 and December 31, 2024, respectively.
62 Truist Financial CorporationThe following table presents the composition of average loans and leases:Table 15: Average Loans and LeasesThree Months Ended(Dollars in millions) Dec 31, 2025 Sep 30, 2025 Jun 30, 2025 Mar 31, 2025 Dec 31, 2024Commercial:Commercial and industrial $ 163,990 $ 162,207 $ 158,491 $ 155,214 $ 153,209
CRE 23,205 21,171 19,687 19,832 20,504
Commercial construction 8,015 8,258 8,613 8,734 8,261Consumer:Residential mortgage 57,100 57,676 56,789 55,658 54,390
Home equity 9,679 9,588 9,586 9,569 9,675
Indirect auto 25,639 24,964 24,158 23,248 22,790
Other consumer 32,181 31,714 30,387 29,291 29,355
Credit card 4,956 4,915 4,890 4,849 4,926
Total average loans and leases HFI $ 324,765 $ 320,493 $ 312,601 $ 306,395 $ 303,110
Average loans and leases HFI were $324.8 billion for fourth quarter of 2025, an increase of $4.3 billion, or 1.3%, compared to the third quarter of 2025.
• Average commercial loans increased 1.9% due to an increase in the commercial and industrial and CRE portfolios.
• Average consumer loans increased 0.5% due to growth in the indirect auto and other consumer portfolios, partially offset by a decline in the residential mortgage portfolio.
Truist Financial Corporation 63Asset Quality
The following tables summarize asset quality information:Table 16: Asset Quality
(Dollars in millions) Dec 31, 2025 Dec 31, 2024NPAs:
NPLs:Commercial and industrial $ 839 $ 521
CRE 47 298
Commercial construction 41 3
Residential mortgage 213 166
Home equity 99 116
Indirect auto 267 259
Other consumer 71 66
Total NPLs HFI 1,577 1,429
Loans held for sale — —
Total nonperforming loans and leases 1,577 1,429
Foreclosed real estate 3 3
Other foreclosed property 53 45
Total nonperforming assets $ 1,633 $ 1,477Loans 90 days or more past due and still accruing:Commercial and industrial $ 3 $ 19CRE — 1Lease financing
Residential mortgage – government guaranteed 532 430
Residential mortgage – nonguaranteed 38 51
Home equity 7 9
Other consumer 28 23
Credit card 76 54
Total loans 90 days or more past due and still accruing $ 684 $ 587Loans 30-89 days past due and still accruing:Commercial and industrial $ 127 $ 168
CRE 25 60
Commercial construction 36 3
Residential mortgage – government guaranteed 329 318
Residential mortgage – nonguaranteed 357 401
Home equity 69 60
Indirect auto 679 622
Other consumer 281 236
Credit card 77 81
Total loans 30-89 days past due and still accruing $ 1,980 $ 1,949
Nonperforming assets totaled $1.6 billion at December 31, 2025, up $156 million compared to December 31, 2024 due to an increase in the commercial and industrial and residential mortgage portfolios, partially offset by a decline in the CRE portfolio. Nonperforming loans and leases represented 0.48% of total loans and leases HFI, up one basis point compared to December 31, 2024.
Effective January 1, 2026, the Company has enhanced its nonaccrual criteria for certain indirect auto loans to prospectively include accounts in which cumulative payment extensions are at or above 12 months. Management expects this change to accelerate the timing of nonaccrual recognition in future periods for such loans, but does not expect a material impact on earnings or cash flows.
Loans 90 days or more past due and still accruing totaled $684 million at December 31, 2025, up $97 million compared to the prior year. 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, 2025, flat compared to December 31, 2024.
Loans 30-89 days past due and still accruing totaled $2.0 billion at December 31, 2025, up $31 million compared to the prior year due to increases in the indirect auto, other consumer, and commercial construction portfolios, partially offset by declines in the commercial and industrial, CRE, and residential mortgage portfolios. The ratio of loans 30-89 days past due and still accruing as a percentage of loans and leases HFI was 0.60% at December 31, 2025, down four basis points compared to the prior year.
64 Truist Financial Corporation
Problem loans include NPLs and loans that are 90 days or more past due and still accruing as disclosed in Table 16. 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 17: Asset Quality Ratios
Dec 31, 2025 Dec 31, 2024
Loans 30-89 days past due and still accruing as a percentage of loans and leases
0.60 % 0.64 %
Loans 90 days or more past due and still accruing as a percentage of loans and leases
0.21 0.19
NPLs as a percentage of loans and leases
0.48 0.47NPLs as a percentage of total loans and leases (1)0.48 0.46NPAs as a percentage of:
Total assets (1)0.30 0.28
Loans and leases plus foreclosed property
0.50 0.48
ALLL as a percentage of loans and leases
1.53 1.59
Ratio of ALLL to nonperforming loans and leases
3.2x 3.4x
Loans 90 days or more past due and still accruing as a percentage of loans and leases, excluding government guaranteed (2)
0.05 % 0.05 %(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 on government guaranteed loans is reasonably assured.
Table 18: Asset Quality RatiosYear Ended December 31,2025 2024 2023
Net charge-offs as a percentage of average loans and leases:Commercial:Commercial and industrial 0.23 % 0.20 % 0.20 %
CRE 0.62 1.31 0.71
Commercial construction (0.03) (0.03) 0.04Consumer:Residential mortgage — (0.01) 0.01
Home equity (0.06) (0.07) (0.12)
Indirect auto 2.00 2.11 1.66
Other consumer 1.66 1.73 1.40
Student — — 4.39
Credit card 4.45 5.26 3.85
Total 0.54 0.59 0.50
Ratio of ALLL to net charge-offs 3.0x 2.7x 3.0xThe following table presents activity related to NPAs:Table 19: Rollforward of NPAs
(Dollars in millions) 2025 2024
Balance, January 1 $ 1,477 $ 1,488
New NPAs 3,298 3,331
Advances and principal increases 390 454Disposals of foreclosed assets (1)(634) (616)Disposals of NPLs (2)(316) (223)
Charge-offs and losses (1,208) (1,313)
Payments (1,109) (1,308)
Transfers to performing status (265) (309)
Other, net — (27)
Ending balance, December 31 $ 1,633 $ 1,477
(1) Includes charge-offs and losses recorded upon sale of $285 million and $260 million for the years ended December 31, 2025 and 2024, respectively.
(2) Includes gains, net of charge-offs and losses recorded upon sale, of $2 million and $14 million for the years ended December 31, 2025 and 2024, respectively.
Truist Financial Corporation 65
Commercial 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.
66 Truist Financial Corporation
Table 20: Commercial and Industrial Portfolio Industry and Geography
December 31, 2025 December 31, 2024
(Dollars in millions) LHFI % of Total NPL LHFI % of Total NPL
Industry:
Finance and insurance $ 30,464 18.2 % $ 2 $ 24,271 15.7 % $ 28
Manufacturing 13,418 8.0 91 12,298 7.9 62
Real estate and rental and leasing 11,993 7.1 1 11,354 7.3 3
Retail trade 11,940 7.1 24 12,488 8.1 66
Health care and social assistance 11,779 7.0 67 12,154 7.8 129
Public administration 8,658 5.2 2 8,860 5.7 —
Wholesale trade 7,655 4.6 212 7,428 4.8 45
Information 7,523 4.5 158 5,235 3.4 66
Utilities 6,582 3.9 — 4,096 2.6 —
Professional, scientific, and technical services 5,043 3.0 5 4,125 2.7 8
Educational services 4,868 2.9 — 4,478 2.9 —
Transportation and warehousing 4,497 2.7 22 4,634 3.0 34
Arts, entertainment, and recreation 4,182 2.5 1 3,599 2.3 6
Construction 3,350 2.0 4 2,607 1.7 10
Administrative and support and waste management and remediation services 3,108 1.9 36 3,022 2.0 —
Accommodation and food services 2,990 1.8 24 2,935 1.9 9Other (1)11,903 7.0 115 12,211 7.9 23
Subtotal 149,953 89.4 764 135,795 87.7 489
Business owner occupied
17,855 10.6 75 19,053 12.3 32
Total commercial and industrial $ 167,808 100.0 % $ 839 $ 154,848 100.0 % $ 521
Geography:
Florida $ 18,532 11.0 % $ 30 $ 18,258 11.8 % $ 172
Texas 17,001 10.1 157 14,728 9.5 47
New York 12,719 7.6 70 11,379 7.3 50
California 12,460 7.4 34 8,115 5.2 8
North Carolina 12,154 7.2 11 12,167 7.9 16
Georgia 11,452 6.8 149 11,240 7.3 10
Virginia 9,061 5.4 3 9,343 6.0 7
Maryland 7,057 4.2 4 6,781 4.4 3
Pennsylvania 6,890 4.1 131 6,466 4.2 9
Tennessee 5,873 3.5 42 5,729 3.7 51
New Jersey 4,743 2.8 5 3,947 2.5 5
South Carolina 4,213 2.5 4 4,151 2.7 23
Illinois 3,970 2.4 12 3,639 2.4 20
Ohio 3,624 2.2 — 3,482 2.2 1
Other (2)
38,059 22.8 187 35,423 22.9 99
Total commercial and industrial
$ 167,808 100.0 % $ 839 $ 154,848 100.0 % $ 521
(1) Represents other remaining industries that are deemed to be individually insignificant.
(2) Represents other remaining states, U.S. territories, and non-U.S. loans that are deemed to be individually insignificant.
The Finance and insurance industry includes various types of nonbank financial institutions, including asset securitization, securities-based lending, and certain REITs, which together comprise approximately 59% of Truist’s funded loans within that industry category. Asset securitization facilities are structured to provide funding to clients based on advance rates that are applied to pools of eligible collateral that generally result in over collateralization of the funded exposures. Securities-based lending arrangements are collateralized by marketable securities that are maintained in a restricted account and monitored by Truist on a daily basis to help determine whether the value of the underlying securities collateral complies with the terms of the margin agreement established with the origination of the loan.
Truist Financial Corporation 67
Table 21: CRE Portfolio Property Type and Geography
December 31, 2025 December 31, 2024
(Dollars in millions) LHFI % of Total NPL LHFI % of Total NPL
Industry:
Multifamily $ 8,055 34.0 % $ 4 $ 5,508 27.0 % $ 27
Industrial 5,521 23.3 — 4,303 21.1 3
Retail 4,244 17.9 5 3,530 17.3 33
Office 2,435 10.3 36 3,459 17.0 228
Hotel 1,558 6.6 — 1,891 9.3 —
Other (1)
1,907 7.9 2 1,672 8.3 7
Total CRE $ 23,720 100.0 % $ 47 $ 20,363 100.0 % $ 298
Geography:
Florida $ 2,668 11.2 % $ 2 $ 2,594 12.7 % $ 26
Georgia 2,586 10.9 1 2,010 9.9 80
Texas 2,411 10.2 1 1,599 7.9 6
North Carolina 2,324 9.8 1 2,212 10.9 10
New York 2,323 9.8 6 1,491 7.3 2
California 1,628 6.9 — 1,683 8.3 —
Pennsylvania 1,566 6.6 — 1,218 6.0 1
Illinois 1,178 5.0 13 624 3.1 —
New Jersey 1,118 4.7 3 439 2.2 35
Virginia 1,034 4.4 — 1,108 5.4 3
Maryland 883 3.7 2 713 3.5 8
Other (2)
4,001 16.8 18 4,672 22.8 127
Total CRE $ 23,720 100.0 % $ 47 $ 20,363 100.0 % $ 298
(1) Represents other remaining property types that are deemed to be individually insignificant.
(2) Represents other remaining states, U.S. territories, and non-U.S. loans that are deemed to be individually insignificant.
Table 22: Commercial Construction Portfolio Property Type and Geography
December 31, 2025 December 31, 2024
(Dollars in millions) LHFI % of Total NPL LHFI % of Total NPL
Industry:
Multifamily $ 3,871 49.7 % $ — $ 4,918 57.7 % $ —
Industrial 1,884 24.2 — 1,680 19.7 —
Single family - construction to permanent 1,070 13.7 — 664 7.8 2
Office 392 5.0 40 627 7.4 —
Single family - acquisition and development and commercial land 208 2.7 — 187 2.2 1
Other (1)
358 4.7 1 444 5.2 —
Total commercial construction $ 7,783 100.0 % $ 41 $ 8,520 100.0 % $ 3
Geography:
Florida $ 1,453 18.7 $ — $ 1,138 13.4 $ —
Georgia 1,188 15.3 — 1,294 15.2 —
Texas 1,088 14.0 — 1,345 15.8 —
North Carolina 748 9.6 — 992 11.6 1
California 431 5.5 — 492 5.8 —
Other (2)
2,875 36.9 41 3,259 38.2 2
Total commercial construction $ 7,783 100.0 % $ 41 $ 8,520 100.0 % $ 3
(1) Represents other remaining property types that are deemed to be individually insignificant.
(2) Represents other remaining states, U.S. territories, and non-U.S. loans that are deemed to be individually insignificant.
Refer to “Note 5. Loans and ACL” for additional information on the commercial portfolios, including loans by origination year and credit quality indicator.
68 Truist Financial CorporationACL
Activity related to the ACL is presented in the following tables:Table 23: Activity in ACLYear Ended December 31,(Dollars in millions) 2025 2024 2023
Balance, beginning of period $ 5,161 $ 5,093 $ 4,649
Provision for credit losses 1,894 1,870 2,109Charge-offs:Commercial and industrial (461) (395) (390)
CRE (147) (316) (166)
Commercial construction — — (5)
Residential mortgage (6) (3) (10)
Home equity (10) (9) (10)
Indirect auto (591) (591) (531)
Other consumer (633) (606) (477)
Student — — (108)
Credit card (260) (296) (223)
Total charge-offs (2,108) (2,216) (1,920)Recoveries:Commercial and industrial 98 87 70
CRE 18 34 3
Commercial construction 2 2 3
Residential mortgage 5 6 6
Home equity 16 16 23
Indirect auto 102 120 107
Other consumer 120 110 78
Credit card 42 38 35
Total recoveries 403 413 325
Net charge-offs (1,705) (1,803) (1,595)
Other (1)
(3) 1 (70)
Balance, end of period $ 5,347 $ 5,161 $ 5,093
ACL:
ALLL 5,030 4,857 4,798
RUFC 317 304 295
Total ACL $ 5,347 $ 5,161 $ 5,093
(1) 2023 includes the impact from the adoption of the Troubled Debt Restructurings and Vintage Disclosures accounting standard.
Net charge-offs during 2025 totaled $1.7 billion, or 0.54% as a percentage of average loans, and were down five basis points compared to the prior year, primarily driven by lower net charge-offs and growth in average loans and leases. Net charge-offs were lower in the CRE and credit card portfolios, partially offset by increases in the commercial and industrial, indirect auto, and other consumer portfolios.
The allowance for credit losses was $5.3 billion at December 31, 2025 and includes $5.0 billion for the allowance for loan and lease losses and $317 million for the reserve for unfunded commitments. The ALLL ratio was 1.53% at December 31, 2025, compared to 1.59% at December 31, 2024. Refer to “Note 5. Loans and ACL.” for additional information on the fluctuations in the ALLL. The ALLL covered nonperforming loans and leases held for investment 3.2x at December 31, 2025 compared to 3.4x at December 31, 2024. At December 31, 2025, the ALLL was 3.0x net charge-offs, compared to 2.7x at December 31, 2024.
Truist Financial Corporation 69The 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 24: Allocation of ALLL by Category
December 31, 2025 December 31, 2024(Dollars in millions) Amount % ALLL in Each Category % Loans in Each Category Amount % ALLL in Each Category % Loans in Each CategoryCommercial and industrial $ 1,326 26.3 % 51.0 % $ 1,284 26.4 % 50.7 %
CRE 476 9.5 7.2 643 13.2 6.6
Commercial construction 246 4.9 2.4 257 5.3 2.8
Residential mortgage 198 3.9 17.3 204 4.2 18.1
Home equity 84 1.7 3.0 89 1.8 3.1
Indirect auto 1,036 20.6 7.8 955 19.7 7.5
Other consumer 1,238 24.6 9.8 994 20.5 9.6
Credit card 426 8.5 1.5 431 8.9 1.6
Total ALLL 5,030 100.0 % 100.0 % 4,857 100.0 % 100.0 %
RUFC 317 304
Total ACL $ 5,347 $ 5,161Truist 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.Other Assets
The components of other assets are presented in the following table:Table 25: Other Assets as of Period End
(Dollars in millions) Dec 31, 2025 Dec 31, 2024
Tax credit and other private equity investments $ 9,882 $ 9,303
Bank-owned life insurance 8,515 7,801
Pension assets, net 7,920 7,238
Accrued income 2,028 2,069
Accounts receivable 1,624 1,904
FHLB stock 1,521 965
DTA 1,507 1,945
Leased assets and related assets 1,359 1,352
Derivative assets 1,343 966
Prepaid expenses 1,075 1,061
ROU assets 1,045 1,015
Other 1,151 1,513
Total other assets $ 38,970 $ 37,132
70 Truist Financial CorporationFunding ActivitiesDeposits are the primary source of funds for the Company’s lending and investing activities. Management also uses short-term borrowings, long-term debt, and scheduled payments and maturities from portfolios of loans and investment securities as a supplementary funding source for loan growth and other balance sheet management purposes. 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 26: Deposits as of Period End
(Dollars in millions) Dec 31, 2025 Dec 31, 2024
Noninterest-bearing deposits $ 105,092 $ 107,451
Interest checking 117,830 109,042
Money market and savings 139,044 137,307
Time deposits 38,432 36,724
Total deposits $ 400,398 $ 390,524
Deposits totaled $400.4 billion at December 31, 2025, an increase of $9.9 billion, or 2.5%, from December 31, 2024 primarily due to increases in interest checking deposits, money market and savings, and time deposits, partially offset by a decline in noninterest-bearing deposits. Brokered deposits were $29.8 billion at December 31, 2025 compared to $28.1 billion at December 31, 2024.
Truist Financial Corporation 71
Approximately 62% of deposits were insured or collateralized at both December 31, 2025 and December 31, 2024. Truist deposit accounts are typically based on long-term relationships that include multiple products and services. The amount of deposits above the FDIC’s insurance limit of $250,000 was $177.6 billion and $170.7 billion as of December 31, 2025 and 2024, 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 27: Scheduled Maturities of Time Deposits $250,000 and Greater
December 31, 2025 (Dollars in millions)
Three months or less $ 8,140
Over three through six months 1,832
Over six through twelve months 617
Over twelve months 416
Total $ 11,005The following table presents average deposits:Table 28: Average DepositsThree Months Ended(Dollars in millions) Dec 31, 2025 Sep 30, 2025 Jun 30, 2025 Mar 31, 2025 Dec 31, 2024
Noninterest-bearing deposits $ 105,552 $ 105,751 $ 106,686 $ 105,895 $ 107,968
Interest checking 112,313 109,244 116,193 109,208 107,075
Money market and savings 138,114 136,515 135,607 136,897 138,242
Time deposits 40,031 45,090 41,997 40,204 36,757
Total average deposits $ 396,010 $ 396,600 $ 400,483 $ 392,204 $ 390,042
Average deposits for the fourth quarter of 2025 were $396.0 billion, flat compared to the third quarter of 2025.
Average noninterest-bearing deposits decreased 0.2% compared to the prior quarter and represented 26.7% of total deposits for both the fourth and third quarters of 2025. Average interest checking deposits increased 2.8%. Average money market and savings accounts increased 1.2%. Average time deposits decreased 11.2%.
72 Truist Financial CorporationBorrowingsThe 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 29: Short-Term BorrowingsAs Of / For The Year Ended December 31,(Dollars in millions) 2025 2024 2023Securities sold under agreements to repurchase:Maximum outstanding at any month-end during the year $ 8,425 $ 9,675 $ 4,120
Balance outstanding at end of year 3,103 9,675 2,427
Average outstanding during the year 5,845 2,947 2,472
Average interest rate during the year 4.36 % 5.13 % 5.18 %
Average interest rate at end of year 3.84 4.42 5.39Federal funds purchased and short-term borrowed funds:Maximum outstanding at any month-end during the year $ 29,332 $ 28,218 $ 26,453
Balance outstanding at end of year 24,736 19,530 22,401
Average outstanding during the year 22,273 21,552 22,007
Average interest rate during the year 4.36 % 5.39 % 5.26 %
Average interest rate at end of year 3.47 4.04 5.15
At December 31, 2025, short-term borrowings totaled $27.8 billion, a decrease of $1.4 billion compared to December 31, 2024. Average short-term borrowings were $28.1 billion and $24.5 billion for the years ended December 31, 2025 and 2024, 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 $42.0 billion at December 31, 2025, an increase of $7.0 billion compared to December 31, 2024. During the year ended December 31, 2025, the Company had:
• Issuances of $7.1 billion of primarily fixed-to-floating rate senior notes with a weighted average interest rate of 4.68% due between May 20, 2027 and October 23, 2036 and $500 million of floating rate senior notes due July 24, 2028.
• Net issuances of $7.1 billion floating rate FHLB advances.
• Maturities and redemptions of $6.7 billion of senior notes and $1.3 billion of subordinated notes.
In January 2026, the Parent Company issued $1.3 billion principal amount of fixed-to-floating rate senior notes with an interest rate of 4.60% due January 27, 2032. Additionally, Truist Bank issued $1.3 billion principal amount of fixed-to-floating rate senior notes with an interest rate of 4.14% due January 27, 2029 and $350 million principal amount of floating rate senior notes due January 27, 2029.
In February 2026, the Parent Company announced that it will redeem $1.3 billion principal amount of senior notes due on March 2, 2027 on the redemption date of March 2, 2026.
Refer to “Note 11. Borrowings” for additional information on short-term borrowings and long-term debt.Shareholders’ EquityTotal shareholders’ equity was $65.2 billion at December 31, 2025, an increase of $1.5 billion from December 31, 2024. This increase includes $5.3 billion in net income and $2.4 billion in OCI, partially offset by $3.0 billion in common and preferred dividends, $2.5 billion in common share repurchases, and $1.0 billion for the redemption of series P preferred stock. Truist’s book value per common share at December 31, 2025 was $47.74, compared to $43.90 at December 31, 2024. Truist’s TBVPS was $33.48 at December 31, 2025, up 12% compared to December 31, 2024.
Truist Financial Corporation 73Risk ManagementTruist seeks to maintain a comprehensive risk management framework supported by people, processes, and systems designed to identify, assess, measure, monitor, control, mitigate, govern, and report on risks arising from exposures and business activities. Truist has developed a risk taxonomy to provide for the identification, measurement, and reporting of primary risk types and classification of risk elements at Truist. Primary risk types are defined across eight categories including credit, market, liquidity, strategic, operational, technology, compliance, and financial crimes.
Truist has established an enterprise risk management framework to enable the execution of strategic goals and objectives in alignment with its risk appetite.
Truist is committed to fostering a culture that prioritizes and 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 influences 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 are within the Company’s risk appetite and 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 and 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 to achieve its strategic objectives, deliver shareholder returns, and maintain the safety and soundness of Truist. The Board oversees the development of, and reviews, approves, and periodically monitors, the Company’s strategy and risk appetite with a long-term perspective on risks and rewards that is consistent with the capacity of Truist’s risk-management framework. The BRC assists the Board in overseeing the stature and performance of the RMO and the Company’s risk management framework and policies, including quantitative and qualitative statements of the Company’s risk appetite and risk limits, thresholds, and other parameters designed to supplement them.
The BRC appoints the CRO to lead the RMO and oversee the identification, assessment, measurement, monitoring, mitigating, and reporting of risks to Truist. The CRO reports functionally to the BRC and administratively to the CEO and has direct access to the Board to escalate risks (current or emerging) and report on the performance of risk management activities across the enterprise.
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 effectively mitigate those risks. Complete required risk and compliance training within deadlines. Comply with applicable risk-related 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 through the appropriate reporting channel. Based on role, escalate and open issues timely.
• Mitigation: consistently execute applicable risk-related procedures and processes as designed for day-to-day activities. Maintain and execute effective controls to manage risk within the Company’s risk appetite. As applicable, complete successful and timely remediation of assigned issues.
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 first line of defense comprises the business units that originate the risks and are responsible for managing them through risk management activities. The second line of defense is the independent risk management oversight and challenge function provided by the RMO. The third line of defense is the independent assurance function provided by Truist Audit Services.
Centralized first-line risk execution and management has been standardized across the Company in partnership with the business units and enterprise functions. Dedicated first line of defense risk partners provide risk advice and oversight, issues management, testing, reporting, and business continuity expertise. First line of defense coordinates closely with the RMO in executing these responsibilities.
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The second line of defense is led by the CRO and is responsible for providing independent risk management, oversight, and effective challenge of the first line of defense. The key responsibilities of the second line of defense include (i) establishing policies and procedures to guide and oversee the execution of risk management framework requirements across Truist, (ii) overseeing first line of defense identification and assessment of current and emerging risks, as well as the effectiveness of governance, processes, and controls to mitigate risks, (iii) controlling the selection of key risk indicators and the establishment of risk limits to measure and monitor risk exposures relative to the Company’s established risk appetite, (iv) independently identifying and escalating issues, including opportunities to strengthen the internal control environment, and (v) acting in a consultative role to assist the first line of defense with identifying, monitoring, and mitigating risks.
As the third line of defense, Truist Audit Services provides independent and objective assurance for Truist. Truist Audit Services independently evaluates the adequacy and effectiveness of Truist's risk management, governance, and oversight, consistent with regulatory expectations and Truist's size, complexity, and risk profile. Truist Audit Services is led by the Chief Audit Officer, who reports functionally to the Audit Committee and administratively to the CEO.
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, Board committee charters, Truist Bylaws, and Corporate Governance Guidelines.
• Level II committees: Management committees appointed by a Level I committee. Level II committees report to the appointing Level I committee. The appointing Level I committee conducts an annual review of the Level II committee and its charter.
• Level III committees: Management committees appointed by a Level I or II committee. Level III committees report to the appointing Level I or II committee. The appointing Level I or II committee conducts an annual review of the Level III committee and its charter.
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 BRC authorized the ERC to provide broad strategic oversight of all risk types and establish 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.
Under our risk management taxonomy, the primary risk types consist of credit, market, liquidity, strategic, operational, technology, compliance, and financial crimes. Truist also uses models as a key component of its risk management activities, which are overseen by the MRO. The following is a discussion of each primary risk type.
Credit Risk
Credit risk is the risk to current or anticipated earnings or capital arising when a borrower, obligor, issuer, or counterparty may not meet its financial obligations. Credit risk is inherent in the financial services business and is primarily incurred through lending activities in the Company’s WB and CSBB operating segments. Several 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 Level II ECRC, established by the BRC, oversees credit risk governance. The ECRC is responsible for maintaining an effective credit risk and portfolio management program. The ECRC utilizes Level III committees to oversee Truist’s WB and CSBB loan portfolios. The BRC reviews and approves the Level I Enterprise Credit Risk Management Policy on an annual basis. That policy authorizes the ECRC and its Level III committees to review, monitor, and approve Truist’s credit policies and key risk indicators, including limits.
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Truist manages credit risk in a manner consistent with Truist’s strategy and risk appetite by:
• establishing credit policies and underwriting requirements that are aligned with our strategy and risk appetite and periodically reevaluated per credit, market, economic and other relevant factors;
• setting portfolio asset quality, concentration and underwriting exception limits and transactional thresholds, as appropriate, in alignment with our risk appetite;
• monitoring current and emerging credit risks, early warning indicators and portfolio performance;
• monitoring criticized exposures and delinquent loans; and
• estimating credit losses and supporting appropriate levels of reserves and credit risk-based capital management.
Underwriting Approach
The loan portfolio is a primary source of profitability and risk. Proper loan underwriting is critical to Truist’s long-term financial success. The most significant underwriting criteria used to evaluate new loans and loan renewals are:
• 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.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.
Market Risk - Interest Rate
As 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 interest rate 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.
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Corporate Treasury is responsible for the management of Truist’s IRR position as part of an integrated balance sheet management strategy. The TMRO team within the RMO monitors Corporate Treasury’s execution of these responsibilities. The ALCO and the BRC approve the policies governing interest rate management and, along with the ERC, receive periodic updates. 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.
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. Our analysis incorporates dynamic client deposit balance levels, the mix across product types, and deposit rate paid across alternate rate scenarios based on modeled changes in client and bank behavior. 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.
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 client 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 Truist 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. From December 31, 2024 to December 31, 2025, the Company’s net interest income sensitivity to changes in interest rates decreased. This change was primarily driven by the addition of interest rate hedging instruments executed as part of Truist’s ongoing interest rate risk management activities.
Table 30: Interest Sensitivity Simulation Analysis
Dec 31, 2025 Dec 31, 2024
Up 200bps gradual change in interest rates (0.9) % 1.1 %
Up 50bps instantaneous change in interest rates (0.1) 0.6Down 50bps instantaneous change in interest rates(0.2) (0.8)Down 200bps gradual change in interest rates(0.3) (2.1)
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’s views on key risks. The results of key assumption sensitivity tests are reported to the ALCO and the BRC at least quarterly. Key assumptions and their associated sensitivity tests are reviewed with the ALCO and the BRC at least annually.
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Market Risk - Trading Activities
As a financial intermediary, Truist provides its clients access to derivatives, foreign exchange, and securities markets, which generate market risks. Trading market risk is managed using a 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 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. The Capital Markets Risk Management team within the RMO selects, calibrates and monitors compliance with key risk indicators and other risk measures, designed to establish risk-taking parameters for the trading desks within WB. The Capital Markets Risk Committee, ERC and BRC establish policies governing trading activities and receive regular updates to support the oversight of those activities.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. Refer to the “Critical Accounting Policies” section in MD&A, “Note 18. Fair Value Disclosures,” and “Note 19. Derivative Financial Instruments” for discussion of valuation policies and methodologies.SecuritizationsAs of December 31, 2025, 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 $94 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, 2025.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. 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 we use to measure and manage market risk. Other tools used to manage market risk include stress testing, scenario analysis, and stop loss limits.
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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 years ended December 31, 2025 and 2024. Average VaR measures in the year ended December 31, 2025 were higher compared to the year ended December 31, 2024, primarily due to elevated market volatility in April 2025.
Table 31: VaR-based MeasuresYear Ended December 31,2025 2024(Dollars in millions) 10-Day Holding Period 1-Day Holding Period 10-Day Holding Period 1-Day Holding Period
VaR-based Measures:Maximum $ 63 $ 15 $ 28 $ 12
Average 22 8 21 7
Minimum 9 4 12 4
Period-end 10 4 16 6VaR by Risk Class:Interest Rate Risk 4 6
Credit Spread Risk 3 6
Equity Price Risk 3 6
Foreign Exchange Risk — 1
Portfolio Diversification (6) (12)
Period-end 4 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 32: Stressed VaR-based Measures - 10 Day Holding PeriodYear Ended December 31,(Dollars in millions) 2025 2024
Maximum $ 287 $ 234
Average 120 145
Minimum 45 69
Period-end 52 105Specific Risk Measures
Specific risk is a measure of idiosyncratic risk that could result from risk factors other than broad market movements (e.g., default or event risks). The Market Risk Rule provides fixed risk weights under a standardized measurement method while also allowing a model-based approach, subject to regulatory approval. Truist utilizes the standardized measurement method to calculate the specific risk component of market risk regulatory capital. As such, incremental risk capital requirements do not apply.Truist Financial Corporation 79VaR 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 was one Company-wide VaR backtesting exception during the twelve months ended December 31, 2025. The backtesting exception was driven by tariff-related market volatility. 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 reviewed in the context of VaR model use and performance. There was no change in the capital multiplication factor over the preceding twelve months.Model Risk OversightThe MRO 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 enhancements.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. Refer to the “Capital” section in MD&A for additional discussion of capital adequacy.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. Corporate Treasury is responsible for Truist’s Liquidity Risk Management as part of an integrated balance sheet management strategy, subject to the oversight of the TMRO team within the RMO. The ALCO, the BRC, and the Board approve the policies governing Liquidity Risk Management and, along with the ERC, receive periodic updates regarding the execution of the Liquidity Risk Management program.
Refer to the “Liquidity” section in MD&A for additional discussion.
80 Truist Financial CorporationStrategic 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 the operating environment, adverse business decisions, or improper execution of strategic initiatives. Truist manages strategic risk through continuous monitoring of several key factors, including the Company’s earnings performance, human capital strength, capital adequacy, progress against strategic objectives, and external conditions such as market dynamics and client sentiment.
Strategic risk is managed by and the responsibility of the Corporate Finance & Strategy team, with governance through the Enterprise Strategy & Execution Committee. Independent oversight is provided by Strategic Risk Oversight within the RMO, with escalation through the Liquidity, Market, and Strategic Risk Committee to the ERC and, ultimately, the BRC.Operational RiskOperational risk is the risk of loss associated with external events or inadequate or failed internal processes, people, or systems. It includes legal risk, which is the risk of loss arising from defective transactions, litigation, claims, 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. The Company executes business activities in diverse markets and relies on the ability of its teammates and systems to process a high number of transactions. Operational risk is inherent in all business activities, and the management of this risk is important to the achievement of the Company’s objectives. Business units and enterprise functions have primary responsibility and accountability for identifying, mitigating, and monitoring operational risks embedded in their business activities, including additional or increased risks created by economic and financial disruptions. Business continuity and disaster recovery planning are critical to effectively managing operational risks. Each business unit and enterprise function is required to develop, maintain, and test these plans at least annually to identify recovery activities that, if needed, can support mission critical functions, including technology, networks and data centers supporting client applications and business operations. While the Company strives to design processes to minimize operational risks, there is no absolute assurance that business disruptions or operational losses will not occur as a result of an external event or internal control breakdown. On an ongoing basis, management makes process changes and investments to enhance Truist’s systems of internal controls and business continuity and disaster recovery plans.Model RiskModel risk is the risk of adverse consequences to earnings, capital, compliance, operations, reputation, or client outcomes arising from decisions based on incorrect or misused model outputs. While model risk is not a primary risk type, Truist uses models for many purposes across our businesses, including the valuation of financial positions, estimation of credit losses, and the measurement of risk. Models also support activities such as pricing and profitability analysis, capital and liquidity planning, stress testing, scenario analysis, customer segmentation, fraud detection, marketing optimization, and strategic decision-making. Given their widespread use, model risk may adversely affect multiple risk areas, including credit, market, liquidity, and operational risks, among others. Models are managed by the applicable business units, which are responsible for their development, implementation, and use. Oversight of these activities is provided by the MRO, which is a component of the RMO. All models must meet pre-established validation criteria and undergo independent model testing prior to approval. Once models have been approved by the MRO, the applicable business units 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.
The MRO manages model risk through a suite of model governance and validation activities. The risk of each model is assessed and classified into risk tiers. Additionally, the MRO maintains an enterprise-wide model inventory containing relevant model lifecycle information. Regarding model validation, the MRO employs internal validation analysts and managers with relevant skill sets and expertise to conduct thorough reviews of model development, conceptual soundness, and implementation. On certain occasions, the MRO will also engage external parties to assist with validation efforts. Once in a production environment, the MRO assesses a model’s performance on a periodic basis through ongoing monitoring reviews. The MRO is also responsible for tracking issues that have been identified during model validation or through ongoing monitoring and engages with the applicable business unit to drive timely remediation. The 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. The MRO also presents model risk topics to the BRC as necessary.
Technology Risk
Technology 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.
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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 regarding 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. Oversight of Truist’s AI program is a regular focus of the Board, the BRC, and the BTC.
Compliance Risk
Compliance 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 consumers experiencing economic loss or other legal harm as a result of noncompliance with consumer protection laws, regulations and requirements); (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. Truist recognizes that these compliance requirements are increasingly complex. Truist’s Compliance and Ethics Risk Management program provides independent oversight of first line of defense activities for compliance with the requirements applicable to the products and services provided by Truist through risk identification and evaluation, monitoring, and independent testing, among other activities. The program also oversees aspects of the Code of Ethics. The ERC and the BRC receive regular reporting from the program.
Financial Crimes Risk
Financial crimes risk is the risk of criminal charges, prosecutions, and penalties, as well as supervisory fines or supervisory actions due to noncompliance with applicable AML, sanctions, and anti-bribery/corruption laws and regulations. This includes the BSA, as amended, and its implementing regulations, Office of Foreign Assets Control prohibitions, and the Foreign Corrupt Practices Act. Key risks involve enforcement actions, monetary penalties, financial losses, reputational damage, and the risks related to mitigating money laundering, the financing of terrorism, engaging in prohibited activity with persons, entities, countries, and territories that are the subject of sanctions, and related illegal activities as required by applicable law. Truist’s AML Program provides risk identification, independent oversight of activities for compliance with BSA requirements, transaction monitoring, independent testing, issues management, training, and the creation and maintenance of compliance policies and procedures. Truist’s Financial Crimes Risk Management team is responsible for oversight of financial crimes risk. This team reports to the CRO and provides periodic updates to the ERC, the BRC, and the Board. The Board approves the appointment of the chief officer in charge of the AML Program, which includes a review of the AML policy on an annual basis.LiquidityLiquidity 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.
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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 oversee and management monitor liquidity risk-taking activity. Truist’s key risk indicators are designed to support the following objectives:
• maintain (i) a diversified, but client 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., FRB, discount window, standing repo facility, etc.) to test operational readiness. On a periodic basis, Truist conducts a tabletop 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 satisfies 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 $91.7 billion and Truist’s average LCR was 111% for the three months ended December 31, 2025.
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, 2025, Truist was compliant with this requirement.Sources 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.
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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 Federal Reserve 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 Federal Reserve:
Table 33: Selected Liquidity Sources
(Dollars in millions) Dec 31, 2025 Dec 31, 2024Unused borrowing capacity:Federal Reserve
$ 84,160 $ 72,040
FHLB 23,464 31,411
Available investment securities (at fair value) 70,150 68,212
Available secured borrowing capacity 177,774 171,663
Eligible cash at the Federal Reserve
29,973 33,717
Total $ 207,747 $ 205,380
At December 31, 2025, Truist Bank’s available secured borrowing capacity represented approximately 4.8 times the amount of wholesale funding maturities in one year or less.
As of December 31, 2025, the Company had $1.3 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. Refer to “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, and advances to subsidiaries, including 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 long-term debt of the Parent Company (as may be permitted by the terms of each respective series), and the redemption of preferred stock. Refer to “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, 2025, 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.
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The following table presents the credit ratings and outlooks of the Parent Company and Truist Bank as of December 31, 2025:
Table 34: 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 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 35: Capital RequirementsMinimum Capital Well-Capitalized Minimum Capital Plus Stress Capital Buffer (1)
Truist Truist Bank
CET14.5 % NA 6.5 % 7.0 %
Tier 1 capital 6.0 6.0 % 8.0 8.5
Total capital 8.0 10.0 10.0 10.5Leverage ratio 4.0 NA 5.0 NA
Supplementary leverage ratio 3.0 NA NA NA(1) Reflects an SCB requirement of 2.5% applicable to Truist as of December 31, 2025. Truist’s SCB requirement, received in the 2025 CCAR process, is effective from October 1, 2025 to September 30, 2027.
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. The CCB is a regulatory requirement for banks to hold a specific amount of capital in addition to the minimum capital requirements. Truist Bank’s CCB is 2.5% of its risk-weighted assets.
Management’s capital deployment plan is to focus on (i) organic growth, (ii) dividends, (iii) share repurchases, and (iv) strategic opportunities and acquisitions.
Truist Financial Corporation 85Truist Bank’s capital ratios are presented in the following table:Table 36: Capital Ratios - Truist Bank
(Dollars in millions) Dec 31, 2025 Dec 31, 2024Risk-based:CET1 11.8 % 12.6 %
Tier 1 capital 11.8 12.6
Total capital 13.3 14.3
Leverage ratio 9.8 10.1
Supplementary leverage ratio 8.2 8.5
Risk-weighted assets $ 434,977 $ 407,778
The Parent Company’s capital ratios are presented in the following table:
Table 37: Capital Ratios - Truist Financial Corporation
(Dollars in millions) Dec 31, 2025 Dec 31, 2024
Risk-based:
CET1 10.8 % 11.5 %
Tier 1 capital 11.9 12.9
Total capital 13.8 15.0
Leverage ratio 10.0 10.5
Supplementary leverage ratio 8.3 8.8
Risk-weighted assets $ 443,257 $ 418,337
Truist’s CET1 ratio was 10.8% as of December 31, 2025, down 70 basis points since December 31, 2024 as capital returned to shareholders and an increase in risk-weighted assets outpaced current year earnings.
Truist paid $2.7 billion in common stock dividends, or $2.08 per share, during 2025 and $2.8 billion, or $2.08 per share, during 2024. Truist repurchased $2.5 billion and $1.0 billion in common stock during 2025 and 2024, respectively. In early 2026, Truist declared common dividends of $0.52 per share for the first quarter of 2026.
In December 2025, Truist announced that the Board authorized the repurchase of up to $10.0 billion of common stock effective immediately with no expiration date, replacing the previous repurchase authority, as part of Truist’s overall capital distribution strategy.
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Non-GAAP Financial Measures
Tangible common equity, average tangible common equity, and related measures, including ROTCE and TBVPS, are non-GAAP measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization and impairment charges. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Truist’s management uses these measures to assess profitability, returns relative to balance sheet risk, and shareholder value. These measures should not be considered in isolation or as a substitute for the related GAAP financial measures presented in this report and are not necessarily comparable to similar non-GAAP financial measures that may be presented by other companies. The following tables reconcile each non-GAAP financial measure to the most directly comparable GAAP financial measure.
Table 38: Reconciliation of ROTCE
Year Ended December 31,
(Dollars in millions) 2025 2024 2023
Calculation of tangible net income available to common shareholders:
Net income available to common shareholders (a) $ 4,974 $ 4,469 $ (1,452)
Goodwill impairment — — 6,078
Amortization of intangibles 290 345 527
Applicable income taxes related to amortization of intangibles (1)
(69) (65) (125)
Tangible net income available to common shareholders (b) $ 5,195 $ 4,749 $ 5,028
Calculation of average tangible common shareholders’ equity:
Average common shareholders’ equity (c) $ 58,902 $ 55,876 $ 56,306
Average intangible assets (18,560) (20,636) (30,441)
Applicable deferred taxes related to intangible assets (1)
416 550 790
Average tangible common shareholders’ equity (d) $ 40,758 $ 35,790 $ 26,655
Return on average common shareholders’ equity (a)/(c) 8.4 % 8.0 % (2.6) %
ROTCE (b)/(d) 12.7 13.3 18.9
(1) Calculated using the applicable marginal tax rate.
Table 39: Reconciliation of Tangible Common Equity
(Dollars in millions, except per share data, shares in thousands) Dec 31, 2025 Dec 31, 2024
Calculation of period end tangible common equity:
Total shareholders’ equity $ 65,189 $ 63,679
Preferred stock (4,916) (5,907)
Common shareholders’ equity (a) $ 60,273 $ 57,772
Intangible assets (18,416) (18,702)
Applicable deferred taxes related to intangible assets (1)
407 428
Tangible common equity (b) $ 42,264 $ 39,498
Common shares outstanding at end of period (c) 1,262,470 1,315,936
Common shareholders’ equity per common share (a)/(c) $ 47.74 $ 43.90
TBVPS (b)/(c) 33.48 30.01
(1) Calculated using the applicable marginal tax rate.
Truist Financial Corporation 87Reclassifications
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 PoliciesThe 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 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 the 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 on a periodic basis.
Allowance for Credit Losses (ACL)
Truist’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 judgment. 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.
The qualitative components of the ACL incorporate management’s judgment in determining adjustments where model outputs are inconsistent with management’s expectations of expected credit losses. The qualitative components are used to adjust for limitations in modeled results related to current economic conditions, as well as 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 the allowance estimation process. Under the range of scenarios considered as of December 31, 2025, use of the Company’s pessimistic scenario would have resulted in an increase to the modeled allowance results of approximately $2.4 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 of the reserve for unfunded commitments (RUFC) is similar to that used to determine the funded component of the ALLL and is measured over the period for which 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. 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. Refer to “Note 18. Fair Value Disclosures” for additional disclosures regarding the fair value of financial instruments.
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Investment Securities
Truist generally utilizes a third-party pricing service in determining the fair value of its AFS investment securities. Fair value measurements 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 independently 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. 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.
Mortgage Servicing Rights
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 valuation model to project residential MSR cash flows over multiple interest rate scenarios, which are then discounted at risk-adjusted rates. The 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 periodically reassesses and adjusts the underlying inputs and assumptions in the 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.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. 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 about the Company’s trading securities and securities sold short.
Truist elects to measure certain loans at fair value when such reporting 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. Trading loans are valued by a third-party pricing service primarily using quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active. 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 LiabilitiesTruist uses derivatives to manage various financial risks and in a dealer capacity to facilitate client transactions. 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 18. Fair Value Disclosures” for information on the significant inputs used to value derivatives, as well as how such values are impacted by changes in those inputs.
Truist Financial Corporation 89Goodwill and Other Intangible AssetsThe 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 testing 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.
The Company’s three reporting units with goodwill balances are CSBB, WB excluding Wealth, and Wealth. Management performs a goodwill impairment analysis on an annual basis as of October 1 st , 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, applicable valuation multiples based on the comparable public company information, and guideline transactions, when applicable. 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 income, 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 income 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, 2025, 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 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, 2025 indicated that if the discount rate increased 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, adverse performance in relation to management’s projections or potential future 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, changes in the underlying makeup of the reporting unit, or changes in the risk profile of the reporting unit, which could impact whether the fair value of a reporting unit is less than its carrying value.
Refer to “Note 1. Basis of Presentation” and “Note 7. Goodwill and Other Intangible Assets” for additional goodwill information.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.90 Truist Financial Corporation
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. Refer to “Note 1. Basis of Presentation” and “Note 14. Income Taxes” for additional income tax information.Pension and Postretirement Benefit ObligationsTruist 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 a high-quality 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 2026, while a decrease of 50 basis points in the expected return on plan assets would result in an increase of approximately $79 million in pension expense for 2026. These estimates reflect 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.